The increased interest in alternative energy sources, such as solar power, has caused an increase in the construction of new power plant facilities within the industry. There are more and more independent energy providers that are turning to solar energy in order to reduce the amount of environmentally harmful chemical emissions that older power plants produce. With research backing from the United States Department of Energy, more power companies are replacing former “bundled” utilities and opting for cleaner emissions from alternative energy sources. This research has made it easier to build sustainable solar power facilities, and in turn raises the need for owners to fully understand the value of their assets. One of the important elements in determining a solar facility’s worth is to obtain a valuation. There are many complex situations where understanding the value of solar projects is imperative. Private equity firms, state organizations, power companies, law firms and banks all need solar power valuations for purposes such as understanding a facility’s residual value, insurance coverage, and property tax. The value of a solar power facility is also needed for tax reporting purposes and litigation support.
Knowing whether your situation requires a solar power valuation can be difficult, and there are many different complex elements that can be involved when placing value on a solar facility. Appraisal Economics has experience in providing appraisals to businesses from many different industries in a variety of different circumstances, including solar power valuations and other alternative energy appraisals, such as wind project valuations.
Valuing A Solar Project
Determining the value of solar power facilities is a complex process. Therefore, having a proven methodology for valuing solar power projects is necessary to ensure an accurate, supportive analysis. That’s why Appraisal Economics uses a combination of approaches, including the cost, income and market, approaches, when performing a solar power valuation. Our experienced staff begins the valuation process by inspecting the facility. We then review all relevant documents, such as power purchase agreements, construction cost data, income and operating costs, and any relevant consultant reports. The cost approach is employed to estimate facility reproduction costs. This method also takes into consideration the level of physical, functional, and economic obsolescence.
The income approach consists of first analyzing historical financial data. Then we prepare a pro forma cash flow that models the expected earnings from the facility. These earnings will be discounted to the present value, which reflects the fair market value of the facility. If adequate market data is available, we will value the facility using the market approach, where we will consider the comparable sales of similar facilities and make the appropriate adjustments for specific characteristics of the subject. If required, we can also determine the remaining useful life and the residual value of the facility.
INDEPENDENT VALUATION EXPERTS
Appraisal Economics is a trusted industry leader, providing a wide array of services for a variety of businesses across many different industries. We stand out among valuation firms catering to the power industry, because we have the skills and credentials required to support and stand behind our power plant valuations. Our clients expect a high-level of service from our experienced, knowledgeable professionals, and we strive to provide timely and supportive solar power valuations.
Please take a moment to browse our site and view our Photovoltaic Solar Systems presentation (PDF). For more information contact Joseph Kettell at +1 201 265 3333 or JKettell@ae-us.com at any time.