7 Items to Compare Solar Power Plant Prices and Electricity Selling Prices

Table of Contents

• Do not judge the price of a solar power plant solely by the feed-in tariff

• Item 1: Check the conditions of the feed-in tariff and its continuity

• Item 2: Multiply actual generation performance by the feed-in tariff

• Item 3: Check the remaining term and the expiration of the tariff conditions

• Item 4: Examine the impact of output limits and shutdown history on revenue

• Item 5: Compare after deducting fixed costs and maintenance costs

• Item 6: Reflect equipment degradation and future repairs in revenue

• Item 7: Link land conditions and on-site risks to the value of the feed-in tariff

• Common mistakes that occur when comparing prices based only on the feed-in tariff

• Summary: Assess the feed-in tariff together with the site's actual generation capability

Do not judge the price of a solar power plant solely by the feed-in tariff.

When considering the purchase or acquisition of a solar power plant, the selling price for electricity is a very conspicuous factor in decision-making. The conditions under which generated electricity can be sold directly affect future revenue from electricity sales, so it is also emphasized when comparing prices. When the selling price is clearly stated in project materials, projects with higher prices may appear more valuable, and projects with lower prices may seem disadvantaged. However, when judging the price of a solar power plant, it is dangerous to draw conclusions based solely on the selling price for electricity.

The business value of a solar power plant is determined by a combination of the feed-in tariff, generation output, remaining term, equipment condition, land conditions, operation and maintenance (O&M) costs, fixed costs, and outage risk. Even if the feed-in tariff is high, electricity sales revenue will not increase if actual generation is low. Even with a strong generation track record, if the remaining term is short, equipment degradation is advanced, repairs are planned, or there are issues with the land’s drainage or shading, the burden after purchase may increase. Conversely, projects that do not stand out when judged by the feed-in tariff alone can be considered solid and easy to operate if generation is stable, equipment and land conditions are good, and O&M costs are predictable.

For practitioners searching "solar power plant price", what matters is not the level of the feed-in tariff but how stably that tariff can be converted into income. The feed-in tariff only has meaning once generation actually occurs. If panels are shaded, vegetation management is inadequate, power conditioners have a history of shutdowns, cables or connection equipment are unreliable, or poor drainage makes the area around equipment prone to damage, then even a high feed-in tariff reduces the likelihood of realizing revenue.

Also, the feed-in tariff needs to be considered together with the remaining term. Even if a high tariff rate remains, if the term is limited the future revenue opportunity is constrained. If major repairs or replacements become necessary during the remaining term, the impact on cash flow will be significant. Therefore, when comparing price and feed-in tariff, it is essential to assess not only the apparent tariff level but also generation performance, the remaining term, costs, and on-site risks.

This article lays out seven items for comparing the cost of solar power plants and unit selling prices, organized for operational practitioners. It does not deal with specific unit prices or price levels; instead, it focuses on the checkpoints you can use before purchase, when comparing options, for internal approval processes, and during price negotiations.

Item 1: Confirm the terms and continuity of the feed-in tariff

The first thing to check is the terms of the feed-in tariff itself and its continuity. It is not sufficient to look only at the feed-in tariff listed in the project documents. You need to confirm which contract those terms are based on, whether they are currently valid, and whether they can be transferred without issue after acquisition. Even if the feed-in tariff looks attractive, any ambiguities in the documents or procedures could affect operations after purchase.

When verifying, cross-check the documents related to power sales contracts, certification-related materials, the start date of operations, equipment information, location, name on the contract, and the status of procedures with the power company. For second-hand solar power plants, past changes of ownership, equipment modifications, or changes in management companies may mean the documentation is outdated. If there are discrepancies in equipment capacity, location, or the name on the contract, you must determine the cause before making a pricing decision.

Whether the feed-in tariff rate can be maintained is also important. If a title transfer or succession procedure is required after purchase, confirm that those procedures can be completed without problems. If there are deficiencies in the procedures, unexpected delays and administrative burdens may arise after the purchase. The higher a project's apparent feed-in tariff rate, the more carefully you need to verify that those conditions can be reliably transferred.

Also consider how much the electricity selling price (feed-in tariff) is factored into the price. Projects with favorable tariff conditions are sometimes priced higher. In such cases, check whether there is power generation performance and a remaining term that justify the higher price. Even if the tariff conditions are good, if generation is unstable or equipment degradation has progressed, the reasonableness of the price decreases.

When comparing price and the feed-in tariff, it is important not to evaluate the tariff figure in isolation but to verify the certainty of the terms, the ease of transfer, the consistency of the documentation, and the continuity of operations. The feed-in tariff is the entry point for revenue, but if that entry is not secure, it becomes a weak basis for a purchasing decision.

Item 2: Multiply the actual power generation by the electricity selling unit price

After checking the feed-in tariff, the next thing to look at is the actual power generation performance. Revenue from selling electricity is not determined by the tariff alone. Income can vary greatly depending on how much electricity is actually generated. In other words, to assess the value of a solar power plant, you need to consider the feed-in tariff and the actual generation performance together.

Even projects that appear to have large installed capacity and a favorable feed-in tariff are not as valuable as expected if actual power generation is not growing. Possible reasons for low generation include shading from surrounding trees, overgrowth of vegetation, dirty panels, stoppage or failure of power conversion equipment, faults in cables and connection equipment, output curtailment, and deterioration of the equipment environment due to poor drainage. The more attractive the tariff, the more carefully the actual generation must be verified.

When evaluating power generation records, the annual total alone is not enough. Even if the annual figure looks stable, monthly data can reveal sharp declines in specific seasons. Possible causes include weeds growing in summer that cast shadows, lower solar elevation in winter that lengthens shadows from surrounding trees, the effects of fallen leaves or snow cover, and equipment stoppages or maintenance shutdowns.

Also check trends over multiple years. Even if a single year’s performance looks good, that year may have benefited from favorable weather. By seeing whether performance is stable over several years, gradually declining, or suddenly dropping from a certain point, you can identify signs of equipment deterioration or inadequate maintenance. Even if the feed‑in tariff is the same, the meaning of the price differs between projects whose power generation declines year by year and those that remain stable.

Differences between power generation simulations and actual performance are also important. If actual output consistently falls short of projected generation, investigate the reasons. Distinguish whether the simulation was overly optimistic, whether on-site shading or output limitations were inadequately accounted for, or whether there are equipment faults. Even if the feed-in tariff is high, annual revenue can appear overstated if the generation assumptions are too optimistic.

When evaluating the price, do not rely only on the projection obtained by multiplying the feed-in tariff by the expected generation; also confirm whether that generation can be sustained in the future. If the reason generation performance is stable is that it is supported by proper inspections, mowing, cleaning, and monitoring, those management costs must also be reflected in the income and expenses. The value of the feed-in tariff can only be assessed together with actual generation performance.

Item 3: Confirm the remaining period and the deadline for the unit price conditions

When evaluating the feed-in tariff, it's a major pitfall to make a decision without checking the remaining contract period. Even if the feed-in tariff appears attractive, the significance of the plant's price changes depending on how much of those terms remain. For operational solar power plants, since a certain period has already elapsed since the start of operations, you need to carefully confirm the remaining period and the revenue opportunities.

Projects with a long remaining term may appear to have many years left to take advantage of the feed-in tariff conditions. However, a long term also means that equipment degradation, repairs, fixed costs, and maintenance expenses will continue to occur during that period. It is necessary to anticipate, over the remaining term, issues such as soiling and degradation of panels, replacement of power conditioners, cable repairs, repairs to mounting structures and foundations, updates to monitoring equipment, and vegetation and drainage management.

For projects with a short remaining term, even if the feed-in tariff is attractive, future income opportunities are limited. You need to confirm whether the system can generate power reliably over the short remaining period, whether major repairs are unlikely to be required, and whether it aligns with loan repayments and investment payback. A short remaining term may be reflected in a lower price, but if there are unaddressed repairs, the actual burden will be even greater.

Check the electricity selling price and the remaining contract period together with the generation performance. Even if the tariff conditions look favorable and there appears to be a remaining period, revenue will not increase if generation output is declining. Conversely, projects that may not stand out based on tariff conditions alone can be expected to deliver steady operation if their generation is stable and the risk of repairs during the remaining period is low.

Also confirm contractual deadlines and change procedures. Check whether the feed-in tariff conditions, operation start date, succession procedures, and equipment information are consistent across documents. If the documents are inconsistent, your understanding of the remaining term or the tariff conditions may be skewed. In second-hand projects, documents can be complicated by past ownership transfers or equipment changes.

When comparing price and the selling unit price of electricity, it's important to check not only the current unit price but also how consistently it can generate revenue over the remaining term. By looking at the expiry of the pricing conditions together with the actual condition of the power plant, you can assess the reasonableness of the price more accurately.

Item 4: Examine the impact of output restrictions and suspension history on revenue

Even projects with attractive feed-in tariffs and generation records that appear stable can lead to incorrect revenue projections if the effects of output curtailment or equipment outages are not checked. A solar power plant may have the capacity to generate electricity but still face restrictions on the opportunities to sell that electricity. In addition, if equipment outages occur, electricity sales revenue will be affected during those periods.

We will check how often output restrictions have occurred in the past and whether they are reflected in the power generation performance and electricity sales revenue. If the revenue projections shown in the project documents do not account for the impact of these restrictions, they may appear better than reality. Even if the electricity selling price is high, if the volume of electricity that can be sold is limited, the value of that price cannot be fully realized.

Equipment downtime history is also important. Confirm which equipment stopped in the past, when and to what extent it stopped, what the cause was, and how long it took to be restored. In particular, malfunctions of power conditioners, monitoring devices, connection equipment, and cables directly affect power generation. A stoppage itself is not necessarily a problem, but caution is required if a system was restored without the cause being identified or if the same malfunction keeps recurring.

When checking monthly power generation performance, you may be able to see the effects of output restrictions or stoppages. If generation is significantly lower in a particular month, check whether not only the weather but also equipment outages, curtailments, maintenance shutdowns, or delayed recovery after disasters are involved. Even with the same feed-in tariff, a plant with frequent stoppages will have less stable annual revenue than one that operates reliably.

We also verify the power generation monitoring and emergency response arrangements. Even if an anomaly is detected, if it is unclear who will verify it and who will arrange on-site response, downtime may be prolonged. For power plants in remote locations or those with poor road access, on-site inspection and recovery may take time. If downtime is prolonged, revenue decreases even if the feed-in tariff is high.

For low-priced projects, output restrictions or a history of shutdowns may be behind the low cost. For high-priced projects, fewer shutdowns and well-established monitoring and recovery systems may be the reason for the higher price. When examining the selling price per unit of electricity, it is important not only to look at the unit price but also to verify the actual amount of electricity that can be sold and the stability of operations.

Item 5: Compare after deducting fixed and maintenance costs

Even if you estimate income from electricity sales based on the feed-in tariff and the amount of electricity generated, you won't know the actual remaining profit unless you subtract fixed costs and maintenance costs. When evaluating the price of a solar power plant, you should look not at the level of the feed-in tariff but at how much profit remains after deducting the necessary expenses.

Fixed costs include land-related burdens, insurance, communications, power generation monitoring, tax and accounting processing, contract management, administrative procedures, and so on. Maintenance costs include regular inspections, verification of electrical equipment, grass cutting, cleaning, drainage channel management, repairs to fences and gates, management of surrounding trees, and on-site response to abnormalities. These are costs that tend to occur regardless of how much power is generated and are often overlooked when comparing electricity selling prices.

Even if past maintenance costs have been low, it is risky to regard that as a positive sign. It may be that costs were low because necessary inspections, grass cutting, and drainage management were not carried out adequately. If you switch to an appropriate management regime after purchase, costs may increase beyond what you anticipated. Conversely, if a certain level of management costs is incurred but has resulted in stable power-generation performance, those costs can be regarded as necessary.

The higher the feed-in tariff for a project, the more you need to be careful about overlooking fixed costs and maintenance expenses. Even if projected income from a high tariff looks large, actual profitability will change if repairs, insurance, management, vegetation control, and drainage management incur costs. Even projects that appear to have low tariffs can be easier to forecast financially if they are easy to manage, have clearly defined fixed costs, and stable generation performance.

When comparing price and the unit price for electricity sales, check the profit after deducting fixed costs and maintenance and management costs, not the total revenue from electricity sales. In internal explanations, it is important to demonstrate that the project remains viable after deducting all relevant expenses, rather than simply saying that a higher unit price is better.

Item 6: Reflect equipment deterioration and future repairs in revenue

Even if the feed-in tariff is high, if equipment degradation and future repairs are not accounted for, the revenue outlook is inadequate. Because solar power plants operate outdoors for long periods, solar panels, power conditioners, cables, connection equipment, mounting structures, foundations, monitoring equipment, fences, drainage facilities, and so on gradually deteriorate. Even if current power generation is good, if repairs or replacements become necessary during the remaining period, it will affect the financial outcome.

For panels, check for dirt, cracks, discoloration, looseness of fixings, and the effects of shading. For power conditioners, check the installation year, shutdown history, replacement history, and repair history. For cables and connection equipment, check for insulation damage, damage to protective conduits, deterioration of connection points, and contact with vegetation. For mounting structures and foundations, check for corrosion, tilting, and scouring or settlement around the foundations.

Inspection reports and repair histories are also important. Check what kinds of defects occurred in the past and how they were addressed. If there are outstanding issues, they should be anticipated as future repairs. Even if something is recorded as repaired, if it is unclear what the scope was and how it was addressed, it becomes difficult to assess the risk of recurrence.

Future repairs are an aspect that is difficult to see when comparing electricity sale prices. Even for projects with high unit prices, if major repairs are needed in the near future, revenues will be squeezed. Conversely, projects that appear to have low unit prices may still provide stable operation if the equipment is in good condition and repair risks are low.

In price assessments, we reflect not only current revenue from power sales but also future repair burdens in the earnings. We check which equipment is likely to require replacement during the remaining period, whether power generation will be interrupted during repairs, and whether surrounding equipment will also need repairs at the same time. Only by reflecting equipment degradation and future repairs can the value of the selling price per unit of electricity be realistically assessed.

Item 7: Linking Land Conditions and On-site Risks to the Value of the Feed-in Tariff

Finally, what I want to confirm is the land conditions and on-site risks. The feed-in tariff is a contractual term, but to actually convert its value into revenue, the power plant needs local conditions that allow it to continue generating power stably. If land conditions are poor and there are problems with shading, drainage, road access, or vegetation management, you may not be able to fully realize the value of the feed-in tariff.

Confirm the land use type. Check whether the land is owned or leased, whether the land-use contract period is sufficient, and what the renewal and termination conditions are. For leased land, it is important that the rights to use the land are stable relative to the power sale period and the planned operation period. If there are uncertainties in the land contract, even a favorable power sale price weakens the basis for long-term operation.

Also confirm the boundaries and the scope of use. Check whether the contractual boundary, the boundary shown on the drawings, the area enclosed by fences, and the area actually being managed all coincide. If the boundary is unclear, it can cause problems with grass cutting, drainage management, fence repairs, and neighbor relations. It is also important to ensure that the power generation equipment fits properly within the site.

Drainage and topography also influence the value of the electricity sale price. On land where drainage channels are prone to clogging, sediment easily flows in, water tends to pool, or slopes are unstable, inspections and repairs after heavy rain are necessary. If poor drainage affects foundations, cables, or maintenance access routes, it can lead to power generation stoppages or repairs.

We also check the risks posed by shadows and vegetation. If surrounding trees grow and cast shade, power output will fall even if the feed-in tariff is high. Weeds can also cast shadows beneath the panels. At plants where mowing and tree management must be carried out frequently, operation and maintenance costs increase. The value of the feed-in tariff is realized only if the site can continue to generate power.

For low-priced projects, land conditions and site-specific risks may underlie the low cost. For higher-priced projects, favorable land conditions and the ability to more easily maintain stable power generation may be part of the value. When evaluating the electricity selling price, always consider land conditions in conjunction with site-specific risks.

Common mistakes that commonly occur when comparing prices based solely on the feed-in tariff

If you compare the price of a solar power plant solely by the feed-in tariff, you are more likely to make several mistakes. The most common is judging a project to be good simply because the tariff is high. Even if the tariff is high, if generation output has declined, there is a history of outages, equipment degradation has progressed, or maintenance and management costs are high, profitability will be weaker than expected.

Next, there is the mistake of underestimating the remaining term. Even if the unit-price terms are favorable, if the remaining term is short, the period during which you can take advantage of those terms is also limited. If major repairs are required during the remaining term, they can have a significant impact on profitability. When examining the electricity selling price, you need to check the remaining term together with future repairs.

Not looking into the details of power generation performance is also risky. If you rely on annual generation figures alone, you may miss monthly drops in generation and seasonal impacts. If generation falls during specific periods, shading, vegetation, equipment outages, or output restrictions may be involved. Even if the unit price is the same, the reasonableness of the price changes when the stability of generation performance differs.

Failing to deduct fixed and maintenance costs can also lead to failure. Even if the electricity selling price is high, expenses for inspections, grass cutting, cleaning, insurance, land management, administrative procedures, and repairs will reduce actual returns. You should not judge by gross income alone; you need to look at what remains after expenses are deducted.

In addition, you should avoid judging on-site risks based solely on documents. Even if drawings and documents appear to show no problems, you may find clogged drainage channels, shading from surrounding trees, overgrown vegetation, poor road access, or unclear boundaries on site. Whether you can take advantage of the feed-in tariff depends on whether stable power generation can be achieved on site.

Summary: Assess the feed-in tariff together with on-site generation capacity

When comparing the price of a solar power plant and the feed-in tariff, it is important to check seven items: the conditions and continuity of the feed-in tariff, actual generation performance, the remaining term, output restrictions and shutdown history, fixed costs and maintenance expenses, equipment degradation and future repairs, and land conditions and local risks. The feed-in tariff is an important factor in decision-making, but it alone does not determine the value of a power plant.

Cheap power plants may have reasons for being cheap. Unstable power output, a short remaining term, equipment deterioration, high fixed costs, uncertain land conditions, and insufficient documentation may be underlying factors. Expensive power plants also have reasons. If, in addition to the selling price, generation performance is stable, equipment condition is good, land conditions are suitable, and the documentation is consistent with on-site findings, then it can be considered an easier project to evaluate in the long term.

For operations personnel, it is important that when the electricity selling price is used in internal explanations, they present the underlying evidence showing how that price translates into actual revenue. By linking and organizing power generation data, selling conditions, remaining period, operation and maintenance costs, inspection reports, repair history, land contracts, and on-site verification results, it becomes easier to explain the reasonableness of the price.

During on-site surveys, it is effective to record checkpoints likely to affect the value of the feed-in tariff along with their location information. Accurately documenting equipment near boundaries, drainage channels, trees causing shade, the extent of vegetation growth, power conditioners, cable damage, fence damage, and candidate repair locations makes it easier to organize the basis for reduced power generation and future costs.

If you want to accurately link a solar power plant's feed-in tariff to its on-site generation, using LRTK (an iPhone-mounted GNSS high-precision positioning device) can also be effective. If you can record equipment locations within the plant, drainage channels, causes of shading, the extent of vegetation, candidate repair locations, and points to watch near boundaries together with high-precision location data, you can reconcile discrepancies between drawings and the site and make it easier for stakeholders to share the on-site conditions that enable the feed-in tariff to be realized. When determining the price of a solar power plant and its feed-in tariff, it is important to build up not only desk-based conditions but also on-site evidence of generation capacity.