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Solar glossary
The vocabulary that decides whether a solar quote is a good one. Each entry says what the term means, and — more usefully — why it changes the answer.
- LCOE — levelised cost of energy
- What each kilowatt-hour from your own roof ends up costing you, once you spread the purchase price, maintenance and any replacement parts across everything the system will ever produce.This is the honest comparison number. If your LCOE is below what the utility charges, you are making electricity more cheaply than you can buy it. If it is above, you are not — no matter what the payback period says. NREL Annual Technology Baseline
- NPV — net present value
- All 25 years of savings and costs, converted into what they are worth as a single number today. Money arriving in year 20 counts for less than money arriving next year.A positive NPV means the project beats simply keeping your money and earning the discount rate on it. Negative NPV with a positive payback is possible — and it means the money comes back too slowly to be worth it.
- IRR — internal rate of return
- The annual return the project earns, expressed like an interest rate, so you can hold it up against a savings account or an index fund.A financed system often shows a higher IRR than a cash one. That is leverage, not a better deal — you put less in, so the percentage looks bigger while the total money you keep is smaller.
- Simple payback
- How long until cumulative savings equal what you paid. No discounting, no adjustment for the value of money over time.It is the most quoted number in solar and the least informative. It ignores everything after the break-even point, which is where most of the value actually is. Only a cash purchase really has one.
- Net metering
- The old deal: the meter runs backwards. Every kilowatt-hour you export earns exactly what a kilowatt-hour costs you to buy, and you settle up once a year.Under full net metering the grid is effectively a free battery, and the time of day you produce barely matters. Roughly half the country still works this way. The other half does not.
- Net billing
- The replacement for net metering. Each hour is settled on its own: you are charged retail for what you import and credited a much lower avoided-cost rate for what you export.This is the single biggest change in residential solar economics. In California the gap between the two can be six or seven to one — which is why self-consumption and batteries suddenly matter so much. California PUC
- Avoided cost / the ACC
- What the utility says an exported kilowatt-hour is worth to the grid at that specific hour — essentially what it would have cost them to get that energy somewhere else.California publishes 576 of these values: 12 months × 24 hours, weekday and weekend. Midday exports are worth very little because everyone else’s panels are also running. A September evening can be worth ten times as much.
- Vintage lock
- When you interconnect, your export compensation schedule is frozen at that year’s values for a set period — nine years in California — then reset to whatever the current rules say.Almost no calculator models the reset. In this engine it costs a California system roughly 28% of its export revenue in year 10.
- Time-of-use pricing
- Electricity priced by when you use it. A kilowatt-hour at 6pm on an August weekday can cost several times one at 3am in March.It is why this tool simulates all 8,760 hours instead of multiplying by an average rate. Under time-of-use pricing, an average rate is a number that never actually gets charged to anybody.
- Azimuth
- The compass direction your panels face. 180° is due south, 90° is east, 270° is west.Due south makes the most electricity. Under a 4–9pm peak it often does not make the most money — pointing southwest shifts production into the expensive hours.
- Tilt
- How steeply the panels are pitched, in degrees from flat. On most roofs this is simply your roof pitch — a 5:12 roof is about 23°.Steeper favours winter and reduces summer soiling; shallower favours summer. The difference in annual energy across normal roof pitches is small — usually a few percent.
- Self-consumption
- The share of what your panels make that you use in the house, instead of sending to the grid.Under net metering this barely matters. Under net billing it is close to everything: energy you use yourself is worth full retail, energy you export is worth the avoided-cost rate.
- Specific yield (kWh/kW/yr)
- How many kilowatt-hours each kilowatt of panel produces in a year. Lets you compare a 6 kW system in Boston to a 12 kW one in Phoenix.Roughly 1,000 in Seattle, 1,750 in Las Vegas. Notice that this varies by less than two to one across the whole country, while payback periods on this page vary by more than four to one.
- Performance ratio
- Of the sunlight that actually landed on your panels, what fraction came out of the meter as usable electricity. Strips out location entirely.A healthy residential system runs 0.75–0.85. Below 0.70 means something is wrong. A high capacity factor is a good address; a high performance ratio is a good installer.
- Capacity factor
- Annual output divided by what the system would make running flat out at nameplate every hour of the year.Dominated by geography, not equipment quality — 12% in the Pacific Northwest, 19% in the desert Southwest. Constantly confused with performance ratio, which measures something completely different.
- Degradation
- Panels lose a little output every year. The industry quotes it as a percentage per year.Warranties promise 0.25–0.40%/yr. NREL’s field measurements across more than 11,000 systems find a median of 0.5–0.75%, and up to 0.88% in hot climates. That gap compounds into real money. NREL photovoltaic research
- DC:AC ratio
- Panel capacity divided by inverter capacity. A 1.3 ratio means 30% more panels than the inverter can pass through at once.Oversizing sounds wasteful and usually is not — at the US median of 1.34 you lose only about 1% of annual energy to clipping, because arrays spend very little time near their rating.
- Clipping
- When the panels momentarily produce more than the inverter can convert, the excess is simply lost.It shows up as a flat top on the production curve around solar noon. A little is normal and economically correct. A lot means the inverter is undersized.
- Round-trip efficiency
- Put a kilowatt-hour into a battery and you get less than a kilowatt-hour back out. Round-trip efficiency is how much survives.About 89% for a modern home battery, against roughly 97.5% for using the energy directly. That 8-point gap is the real cost of time-shifting, and most storage calculators quietly ignore it.
- Dealer fee
- Solar lenders offer below-market interest rates and recover the difference through an origination fee, typically 15–30% of the system price, rolled into the amount you finance.It is often not itemised on the quote. A 6.99% loan with a 20% fee costs you more than a 12% loan with none, and it is usually why a "cashflow positive from day one" pitch is not.
- Escalator
- The annual percentage increase written into a lease or power purchase agreement. Common values are 0%, 2.9% and 3.9%.The whole bet. If your escalator outruns what the utility raises rates by, the deal quietly inverts partway through and you end up paying more than grid power.
- PPA — power purchase agreement
- Someone else owns the panels on your roof. You buy the electricity they produce, by the kilowatt-hour, at an agreed rate.They claim the federal credit that homeowners lost at the end of 2025, which is why these took over the market. Watch out under net billing: you pay for every kilowatt-hour produced, including ones the utility only credits at a few cents.
- Solar lease
- Same third-party ownership as a PPA, but you pay a fixed monthly amount rather than per kilowatt-hour.The difference is who carries production risk. With a PPA, a bad year means a smaller bill. With a lease, a bad year means the same payment for less electricity.
- §25D and §48E
- Two different federal tax credits. §25D was the 30% credit homeowners claimed on systems they bought. §48E is the business credit a company claims on systems it owns.§25D expired for expenditures after 31 December 2025. §48E did not. That asymmetry is the single biggest force reshaping the residential market right now. DSIRE incentive database
- Discount rate
- What you assume your money would otherwise earn. It converts future savings into today’s value.Higher discount rate, lower NPV — future savings count for less. 5% is a reasonable default. If you would otherwise pay down an 8% loan, use 8%.
- Plane-of-array irradiance
- The sunlight energy actually striking the tilted surface of your panels, as opposed to a flat horizontal surface.Getting this right requires modelling direct, diffuse and ground-reflected light separately. It is the step where cheap calculators lose several percent of accuracy. pvlib reference implementation
- Soiling
- Dust, pollen, salt and bird droppings on the glass. Rain washes most of it off.2–3% a year in most of the country, over 8% in parts of Arizona. In the Northeast, professional cleaning almost never pays for itself — the recovered energy is worth around $10 a year.
- Demand charge
- A charge based on your single highest moment of consumption in the month, measured in kilowatts, separate from total energy used.Rare on residential rates but not extinct — Salt River Project in Arizona uses one. Solar without storage barely dents it, because your peak often lands after sunset.
- Baseline credit
- A per-kilowatt-hour discount some California utilities apply to a first tranche of usage each month, sized to your climate zone.It lowers your effective rate on the first slice of consumption, which slightly reduces what solar is worth. Included here where the tariff has one.