Financial analysis in Aurora translates your system design into the numbers that matter to your customer: how much they'll save, how long it will take to break even, and whether the investment makes financial sense. Aurora runs all calculations automatically once the required inputs are in place, displaying outputs in Sales Mode and in the customer proposal.
This article explains what financial analysis is, what you need before it runs, what each output means, and how to read the cashflow chart.
In this article:
- Before you begin
- What financial analysis shows
- Key financial outputs explained
- Reading the cashflow chart
- How financial analysis differs between Design Mode and Sales Mode
- Factors that affect your results
- Financial analysis for storage systems
- Commercial financial analysis
- FAQ
Before you begin
Financial analysis outputs — payback period, NPV, lifetime savings, LCOE, and the cashflow chart — will not populate unless all four of the following are complete:
- Energy consumption modeling — the customer's pre-solar utility usage must be entered on the project. Without this, Aurora cannot calculate bill savings.
- System design — a completed solar (and optionally storage) design must exist in the project.
- Pricing — system cost must be set on the Pricing page in Sales Mode or Design Mode.
- Financing product selected — a loan, lease, PPA, or cash financing product must be selected on the Financing page in Sales Mode.
If any of these are missing, the financial output fields will appear blank or will show placeholder dashes. Complete all four steps in order before reviewing financial analysis.
In addition to these four steps, accurate financial analysis depends on the following account-level defaults being configured by your admin:
- Utility escalation rate (Settings > Utility and tax rates)
- Discount rate (Settings > Financing)
- Project life, degradation, and inverter replacement cost (Settings > Financing)
These defaults are copied to each project at creation. Changes to account defaults do not retroactively update existing projects — to apply updated settings to an older project, duplicate it.
What financial analysis shows
Financial analysis in Aurora models your customer's financial position over the lifetime of the solar system — typically 25 years. It compares two scenarios: what the customer would spend on electricity without solar, versus what they spend (and save) with solar, taking into account system cost, incentives, financing charges, panel degradation, and utility rate escalation.
The key outputs appear on the Financing page in Sales Mode and can be included in the Web Proposal.
Key financial outputs explained
Utility bill savings
Utility bill savings is the difference between the customer's projected electricity bill before solar and after solar, calculated year by year over the project lifetime. It is the most direct measure of how much solar reduces the customer's monthly and annual electricity costs.
Aurora calculates utility bill savings using an hourly simulation — not a simple annual average multiplied by an escalation rate. Each hour of the year is modeled against the customer's utility rate, consumption profile, system production, net metering rules, and export rate. This is why the calculated savings cannot always be reverse-engineered from a single escalation rate formula.
Key drivers of utility bill savings:
- Electricity rate and rate structure (flat, tiered, time-of-use)
- Export rate and net metering policy
- True-up period and billing frequency
- System production (affected by panel placement, shading, and orientation)
- Utility escalation rate
- Panel degradation (production declines approximately 0.5% per year)
Lifetime savings
Lifetime savings is the total net financial benefit of going solar over the project lifetime. Aurora calculates two versions, both available as Sales Mode proposal variables:
- Lifetime Savings (Nominal) — cumulative savings over the project life expressed in nominal (undiscounted) dollars. This is the larger, simpler figure often shown on proposals.
- Lifetime Savings (NPV) — the same savings adjusted to present-day dollars using the discount rate, accounting for the time value of money. This is a more conservative figure.
Both figures take into account utility bill savings, incentives received, system cost, financing costs, and ongoing O&M expenses. The key difference is whether future cash flows are discounted back to today's value.
⚠️ Lifetime savings and utility bill savings are different figures. A customer's utility bill savings over 25 years represents gross electricity cost reduction. Lifetime savings subtracts the system investment, financing charges, and other costs to show the net value of going solar. Always clarify which figure you are presenting to a customer.
Net present value (NPV)
NPV is the total present-day value of all cash flows associated with the solar investment — both the upfront cost (negative cash flow) and the stream of future savings and incentive payments (positive cash flows), all discounted to today's dollars.
A positive NPV means the investment is expected to generate more value than it costs. A negative NPV does not necessarily mean solar is a bad choice — it can occur when the discount rate is set high relative to the expected return, or when the customer's electricity rate is low.
NPV is the most comprehensive single financial metric for a cash purchase. For financed deals, lifetime savings is typically a more useful customer-facing metric than NPV, since NPV for a loan depends heavily on how loan payments are treated in the cashflow model.
Payback period
The payback period is the number of years it takes for the customer's cumulative utility bill savings to equal the net system cost (after incentives).
Formula: Net system cost ÷ Annual utility bill savings = Simple payback period (years)
⚠️ Payback period is most meaningful for cash purchases. For loan-financed systems, the calculation is less intuitive — a customer who puts no money down has no upfront cost to recover, which can produce misleadingly short or undefined payback values. For financed deals, direct customers to lifetime savings and the cashflow chart instead.
Typical residential payback periods range from 5–12 years depending on system cost, electricity rates, incentives, and location. After the payback point, the customer generates savings with no additional cost.
LCOE (Levelized Cost of Energy)
LCOE is the average cost per kilowatt-hour (kWh) of electricity generated by the solar system over its lifetime, expressed in dollars per kWh. It represents the effective "solar rate" — the equivalent price the customer pays for solar electricity when all costs are spread across total lifetime production.
Formula: Net lifetime system cost ÷ Lifetime kWh produced = LCOE ($/kWh)
When the LCOE is lower than the customer's utility rate, solar is generating electricity more cheaply than the grid. The gap between LCOE and the utility rate represents ongoing savings per kilowatt-hour.
Aurora's LCOE calculation includes performance-based incentives (such as SRECs) in the numerator, which lowers the LCOE figure compared to calculations that exclude PBIs. This means Aurora's LCOE is typically more favorable than LCOE values generated by other tools.
IRR (Internal Rate of Return)
IRR is the annualized return rate at which the NPV of all cash flows equals zero — effectively, the compound annual return the solar investment delivers compared to putting that same money elsewhere.
IRR is most useful for cash purchases and commercial projects where the customer is evaluating solar as a financial investment against alternatives. A solar IRR higher than the customer's discount rate indicates solar is a better use of capital. Typical residential solar IRR ranges from 10–20% depending on market conditions.
IRR is not meaningful for zero-down loan deals where the customer makes no upfront investment. In those cases, the concept of a "return on investment" does not apply in the traditional sense.
Reading the cashflow chart
The cashflow chart in Sales Mode visualizes the project's financial position over time. There are two views: annual cashflow (bars showing each year's net financial result) and cumulative cashflow (a line that tracks the running total of all cash flows from year 0 onward).
What you're seeing
- Year 0: The chart starts negative, at the full net system cost (system price minus year-0 cash grant incentives). This is the initial investment.
- Years 1–25: Each year, the customer's annual utility bill savings (and any ongoing incentive payments) are added. The line climbs as savings accumulate.
- Breakeven / payback point: The year the cumulative line crosses zero. This is when total savings have recovered the initial investment.
- Years after breakeven: Pure savings — the customer is ahead of where they would have been without solar.
Why the chart and the payback period number may differ
The payback period shown as a metric uses a simplified formula (net cost ÷ annual savings). The cashflow chart uses the full year-by-year modeled cash flows, including escalating utility rates, panel degradation, and financing costs. For this reason, the breakeven point on the chart and the payback period metric will not always match exactly — the chart is the more accurate representation.
Annual vs. cumulative cashflow toggle
Switching to the annual view shows whether each individual year is net positive or net negative. For a cash purchase, year 0 is strongly negative (the investment) and every subsequent year is positive. For a financed deal, the annual bars show net savings after loan payments — which may be small in early years when interest costs are highest.
What the chart accounts for
- Utility rate escalation (set via your utility escalation rate default or project override)
- Panel degradation (set in Advanced financing settings — default approximately 0.5% per year)
- Incentive payments (applied in the year they are received)
- Financing costs for loan deals (interest and principal payments)
- O&M costs including inverter replacement (commercial projects only)
The final year of the cumulative cashflow table in Sales Mode may show a slightly different value than the "Lifetime Savings (Nominal)" variable. This is expected — the cashflow table runs to year 24, while lifetime savings is calculated over the full 25-year project life.
How financial analysis differs between Design Mode and Sales Mode
Design Mode and Sales Mode display related but different financial figures. This is a common source of confusion when the numbers appear inconsistent between the two views.
| In Design Mode... | |
| Energy offset displayed | Both % energy offset (kWh produced ÷ kWh consumed) AND % bill savings (1 − post-solar bill ÷ pre-solar bill) |
| Financial analysis | Simplified — optimized for design speed, not full financial modeling |
| Incentives applied | Not applied in Design Mode financial view |
| Financing product | Not applied in Design Mode financial view |
| In Sales Mode... | |
| Energy offset displayed | % energy offset only |
| Financial analysis | Full modeling — discount rate, incentives, financing, degradation, escalation all applied |
| Incentives applied | Yes — manually applied by the rep on the Pricing/Incentives page |
| Financing product | Yes — selected on the Financing page |
A system that shows 100% energy offset in Design Mode may still show a residual post-solar utility bill in Sales Mode, because Sales Mode accounts for fixed utility charges, time-of-use mismatches, and true-up period rules that Design Mode simplifies.
The financial analysis numbers in Sales Mode are the authoritative figures to use for customer proposals.
Factors that affect your results
The following settings have the largest impact on financial analysis outputs. Links lead to dedicated articles for each.
- Discount rate — higher discount rate lowers NPV and lifetime savings. See: Discount rate.
- Utility escalation rate — higher escalation rate increases projected savings. See: Utility and Tax Rates: Account Configuration.
- Incentives — the type, timing, and amount of incentives applied significantly affect net cost, payback period, and NPV. See: Incentives.
- Financing product — loan interest rate, dealer fee, and term affect monthly payments and total cost. See: Loan Modeling Overview.
- Panel degradation, inverter replacement, and project life — see: Advanced financing settings.
- Utility rate and export/net metering settings — see: Working with Utility Rates in Aurora.
Financial analysis for storage systems
When a battery is included in the design, Aurora incorporates the storage system into the full financial analysis. The battery cost is added to the system cost, and storage incentives (such as SGIP, storage demand response programs, or storage fixed grants) are applied separately on the Pricing > Incentives page.
A solar + storage system's financial outputs reflect the combined economics of both the solar and battery components. Adding storage typically increases the system cost and extends the payback period, but storage can improve savings in specific scenarios:
- Time-of-use (TOU) rates with high peak pricing — the battery stores solar energy and discharges during expensive evening peak hours, maximizing the value of each kWh generated.
- Low export rates (such as California NEM 3.0) — when the grid pays little for exported solar, storing excess generation for self-consumption increases savings.
- Demand response / BYOB programs — utilities in some markets pay customers for grid access to their battery.
Battery storage adds resilience value (backup power during outages) that is not captured in Aurora's financial analysis. Payback period and NPV reflect only the monetizable savings, not the value of energy security.
Aurora requires a completed performance simulation (including storage simulation) before financial analysis will run for solar + storage systems.
Commercial financial analysis
Commercial projects in Aurora include additional financial modeling inputs not available for residential projects:
- Depreciation (MACRS, straight-line, or none) — solar installations are long-term assets that businesses depreciate for tax and accounting purposes. See: Depreciation: Overview and configuration.
- O&M costs (fixed and variable) — ongoing operation and maintenance expenses, modeled annually over the project life.
- National and local tax rates — required for depreciation calculations and for modeling the after-tax value of savings and incentives.
The commercial financial analysis is accessible via the Advanced financing settings panel (gear icon) on the Financing page in Sales Mode. A full breakdown of depreciation benefits can be exported as an XLSX file from the Financing page.
For commercial projects, IRR and NPV are typically the primary metrics. Payback period is less commonly used in commercial financial analysis because commercial buyers evaluate solar as a capital investment, not a utility bill reduction.
FAQ
Why are my financial analysis outputs blank?
Financial analysis requires four completed inputs: energy consumption, a system design, pricing, and a selected financing product. Check that all four are complete. See Before you begin above.
Why does Sales Mode show a different savings number than Design Mode?
Design Mode and Sales Mode calculate savings differently. Design Mode shows a simplified estimate; Sales Mode applies the full financial model including incentives, financing product, discount rate, and net metering rules. Sales Mode is the authoritative figure for proposals.
Why does my customer still have a utility bill after going solar?
A residual post-solar utility bill is normal and expected in most cases. Common causes include: fixed monthly utility charges that solar cannot offset; a system sized below 100% energy offset; time-of-use rates where evening consumption costs more than daytime solar credits; and true-up period rules. See How can I improve savings on my project? for troubleshooting steps.
Why is NPV negative even though the project shows positive lifetime savings?
This typically happens when the discount rate is set high relative to the project's returns. NPV discounts future savings heavily, so a high discount rate can produce a negative NPV even when total undiscounted savings exceed the system cost. Consider whether the discount rate accurately reflects your customer's financial situation, and review the discount rate article for guidance.
Why is payback period undefined or very short on a loan deal?
Payback period is designed for cash purchases. For a loan with no down payment, the customer has no upfront cost to recover, which makes payback period mathematically undefined or misleadingly short. Use lifetime savings and the cashflow chart to communicate value for financed deals.
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