How to Evaluate a Commercial Solar Proposal

Published April 30, 2026  ·  11 min read  ·  Part of our Commercial Solar series

What a Complete Commercial Solar Proposal Should Include

A complete commercial solar proposal is a financial document as much as it is a technical one. By the time you are comparing installers, you have already determined that solar makes sense in principle. What you are evaluating now is whether this installer has priced the project correctly, modeled the economics honestly, and can deliver what they are promising.

A complete proposal should include: system size and component specifications, a production estimate with methodology disclosed, a full incentive analysis including ITC and MACRS, an itemized cost breakdown, a payback analysis showing both simple and tax-adjusted timelines, a 25-year cash flow projection, and contract terms covering warranties, performance guarantees, and interconnection responsibility. If any of these are missing, ask for them before moving forward.

The sections below walk through each element and explain what to look for and what to push back on.

System Size and Equipment

The proposal should specify system size in kilowatts (kW) DC and kW AC, the panel model and wattage, the inverter type and model, and the racking system. These are not just technical details. They affect production, longevity, and the validity of every financial figure in the proposal.

A few things worth checking on equipment:

• Panel wattage and efficiency affect how much roof area is required and how much production you get per square foot. Higher-efficiency panels cost more per watt but may be necessary if roof space is constrained.
• String inverters are less expensive but can reduce whole-system output when a single panel underperforms due to shading or soiling. Microinverters and DC optimizers mitigate this at higher cost. For a commercial roof with any shading or multiple orientations, ask whether string inverters are appropriate.
• Tier 1 panel manufacturers have established bankability and warranty backing. A proposal featuring unfamiliar panel brands is not automatically a problem, but it is worth researching the manufacturer's track record and warranty terms.

The Production Estimate

The production estimate is the single most important number in the proposal because every savings figure flows from it. An inflated production estimate inflates annual savings, shortens the apparent payback period, and makes 25-year projections look better than they are.

Ask the installer two questions: what tool was used to generate the production estimate, and what annual degradation rate is assumed?

The industry standard tool is NREL PVWatts, which uses actual historical solar irradiance data by location. Other credible options include System Advisor Model (SAM) and Aurora Solar. If the installer cannot name the tool, that is a concern.

Degradation rate refers to the gradual decline in panel output over time. Most modern panels degrade at approximately 0.5% per year. A proposal using a lower degradation rate will show higher production in later years than is realistic. The difference between a 0.3% and 0.5% degradation assumption may seem minor, but compounded over 25 years it produces meaningfully different savings totals.

You can run an independent production estimate using our Commercial Solar ROI Calculator, which uses NREL sun hours by state. If the installer's production figure is more than 10 to 15% higher than your independent estimate, ask for an explanation before accepting it.

The Incentive Analysis

Most installers show the federal Investment Tax Credit accurately. The base rate is 30% of gross installed cost, applied as a direct credit against federal income tax in the year the system is placed in service. Where proposals vary is in two areas: adders and depreciation.

ITC Adders

The domestic content adder and the energy community adder can each raise the ITC by 10 percentage points, bringing the total to 40% or 50%. Many installers do not proactively check for adder eligibility. If you are in an area with fossil fuel industry history or your project involves a brownfield site, ask specifically whether the energy community adder applies. Our Commercial Solar Incentives guide explains how to check both adders.

MACRS Depreciation

This is where proposals diverge most significantly. Some installers model MACRS in full, including 100% bonus depreciation under the One Big Beautiful Bill Act. Some show MACRS but omit the ITC basis reduction, which overstates the depreciable amount. Some omit MACRS entirely.

The correct calculation on a $200,000 system at 30% ITC: ITC is $60,000. The depreciable basis is reduced by 50% of the ITC, so $170,000 is depreciable. With 100% bonus depreciation, the full $170,000 is deducted in Year 1. At a 21% corporate tax rate, that is $35,700 in additional Year 1 tax savings. See our MACRS Depreciation guide for the full worked example.

If a proposal does not show MACRS at all, ask for it. If it does show MACRS but the depreciable basis equals the full system cost rather than the ITC-reduced amount, the depreciation savings are overstated.

The Payback Analysis

A proposal will typically show simple payback: net cost divided by annual savings. This is a useful starting point but not the number that matters most for a business.

Tax-adjusted payback accounts for the ITC and MACRS depreciation as Year 1 cash flows. On a well-structured commercial project, tax-adjusted payback is typically 4 to 6 years even when simple payback (before incentives) would be 9 to 12 years. The difference is not a technicality. It reflects what your actual out-of-pocket recovery timeline looks like.

Ask the installer to show both. If the proposal only shows simple payback, either the installer has not modeled the tax benefits, or they are presenting the less favorable number for some other reason. Neither scenario is encouraging.

Electricity Rate Escalation

Every multi-year savings projection requires an assumption about how electricity rates will change over time. This assumption has an outsized effect on 25-year totals. A proposal assuming 4% annual rate increases will show roughly 30% higher lifetime savings than one assuming 2%, all else equal.

Ask what rate escalation was assumed and compare it to your utility's historical rate history. The EIA electricity data browser shows commercial rate trends by state. A reasonable assumption for most markets is 2 to 3% annually. Anything above 4% deserves scrutiny.

Demand Charges

If your electricity bill includes demand charges, which apply to most commercial and industrial customers, this section of the proposal requires particular attention. Demand charges are based on your peak power draw during a billing period and can represent 30 to 50% of your total bill. Solar alone may not reduce them significantly.

Ask the installer directly: does this proposal account for demand charge savings, and if so, how was the estimate calculated? A proposal that models energy savings only, without addressing demand charges, may be understating or mispresenting the ROI picture for your specific rate structure.

Some installers will propose battery storage alongside solar specifically to address demand charge reduction. If demand charges are a significant portion of your bill, this pairing is worth modeling. Our Commercial ROI Calculator allows you to enter your demand charge separately once that feature is available in the next version.

Warranties and Performance Guarantees

A proposal is not complete without clear warranty terms. At a minimum, look for the following:

• Panel product warranty: Covers manufacturing defects. Standard is 10 to 12 years. Some premium manufacturers offer 25 years.
• Panel performance warranty: Guarantees minimum output at year 10, year 25, or both. Standard guarantees 80% of nameplate output at year 25. Better warranties guarantee 85 to 90%.
• Inverter warranty: String inverters typically carry 10-year warranties with extension options. Microinverters are often 25 years. This matters because inverter replacement is the most common significant cost in a system's life.
• Installer workmanship warranty: Covers installation defects. Minimum acceptable is 5 years. Better installers offer 10 years.
• Production guarantee: Some installers offer a guaranteed annual production figure and will compensate if actual production falls short. This is not universal but is worth asking about, particularly on larger projects.

Contract Terms to Review Before Signing

Before signing any commercial solar contract, have an attorney review it. Several terms deserve particular attention:

Interconnection responsibility. Ask explicitly who is responsible for obtaining utility interconnection approval and what happens if approval is delayed or denied. Interconnection timelines vary significantly by utility and can affect when the system is placed in service, which in turn affects the tax year in which the ITC is claimed.

Change order process. Commercial solar projects regularly encounter conditions during installation that were not anticipated in the proposal: structural issues, roof conditions, electrical panel upgrades, or utility requirements. Ask how change orders are handled and whether the contract caps the total change order exposure.

Permitting responsibility. Confirm whether permit fees are included in the quoted price and who is responsible for pulling permits. In most states, the licensed contractor must pull permits, but the costs are sometimes passed to the customer as a line item.

Payment schedule. Be cautious of proposals requiring more than 30 to 40% upfront. A typical commercial solar payment schedule might be 20 to 30% at contract signing, another 40% at equipment delivery, and the balance at system energization. Large upfront payments before equipment is on-site transfer risk to you.

Comparing Multiple Proposals

Comparing proposals across installers is harder than it sounds because they often use different assumptions, different equipment, and different financial modeling approaches. A few practices that help:

Ask every installer to quote the same system size so you can compare cost per watt directly. If their proposals assume different system sizes, price comparisons are not apples to apples.

Build a simple comparison table with the following fields for each proposal: system size (kW DC), cost per watt, ITC amount, MACRS tax savings, effective net cost after incentives, estimated annual production (kWh), estimated first-year savings, assumed rate escalation, simple payback, and tax-adjusted payback. Laying these out side by side often reveals quickly where proposals are making optimistic assumptions.

Use our Commercial Solar ROI Calculator to run an independent baseline. Enter your state, system size, and cost from each proposal and compare the calculator's output to what the installer is showing. Significant divergences in production estimates or savings figures are worth raising before you sign.

Red Flags to Watch For

Most commercial solar installers are reputable businesses. A few warning signs are worth knowing:

• No written proposal after a site visit. Every serious commercial installer will provide a written proposal with itemized costs and financial projections.
• Production estimates that cannot be traced to a named tool or methodology.
• Payback periods that seem implausibly short. A tax-adjusted payback under 3 years on a standard commercial project without unusually high electricity rates or significant state incentives is worth scrutinizing.
• High-pressure urgency around signing deadlines. The July 4, 2026 safe harbor procurement deadline is real, but a legitimate installer will explain it clearly rather than using it as a pressure tactic.
• Inability or unwillingness to provide references from comparable commercial projects in your region.