Due Diligence (Solar Projects)

Due Diligence in a solar project refers to the comprehensive technical, financial, legal, and operational evaluation performed before investing in, acquiring, financing, or constructing a solar energy system. It ensures that the project is viable, bankable, compliant with regulations, free of hidden risks, and accurately represented in all engineering and financial assumptions.

In the solar industry, due diligence is performed by developers, EPC teams, asset managers, lenders, investors, and utility partners to validate every part of the project—from system design and site feasibility to permitting, grid interconnection, and long-term cashflow projections. Platforms like Solar Designing and analysis tools like Shadow Analysis are frequently used to support technical due diligence and project verification.

Key Takeaways

Due diligence ensures solar projects are technically sound, financially feasible, legally valid, and operationally safe.
Helps prevent design errors, financial miscalculations, and permitting delays.
Involves analyzing layout, shading, electrical design, financing, and compliance.
Essential for lenders, investors, developers, EPCs, and asset owners.
Supported by tools like Solar Designing and Shadow Analysis for technical verification.

What Is Due Diligence in a Solar Project?

Solar due diligence is the structured process of confirming that all project data, assumptions, designs, contracts, risks, costs, and performance expectations are accurate before approval or investment.

It includes verifying:

Solar resource quality
Shading and site suitability
Engineering design accuracy
AHJ and permitting compliance
Electrical and structural feasibility
Inverter and equipment specifications
EPC contracts and warranties
Financial modeling assumptions
O&M requirements and lifecycle costs
Long-term energy production estimates

Performing due diligence prevents project failures, regulatory issues, design flaws, underperformance, and financial loss.

How Due Diligence Works

Solar project due diligence typically involves the following steps:

1. Technical Evaluation

Review of system design, module layout, and string configuration
Verification of irradiance, shading, and production modeling
Structural and electrical reviews
Validation of CAD drawings, SLDs, and equipment specifications

Tools like Solar Designing support this phase.

2. Site & Resource Verification

On-site assessment
Drone or LiDAR surveying
Shading, horizon profile, and POA irradiance checks
Roof condition, soil tests, or geotechnical reports

Depending on project type, Shadow Analysis helps confirm productivity risks.

3. Permitting & AHJ Compliance

Confirming zoning requirements
Ensuring fire setbacks and NEC 690 compliance
Reviewing interconnection requirements
Checking environmental and land-use constraints

See AHJ Compliance.

4. Financial Due Diligence

Validating CAPEX & OPEX assumptions
Reviewing tax incentives (ITC, depreciation)
Checking cashflow projections and PPA terms
Evaluating risk-adjusted return metrics like ROI and IRR

Supporting tools include the Solar ROI Calculator.

5. Legal & Contractual Review

EPC agreements
Interconnection contracts
Lease or land-use agreements
Equipment procurement terms
Performance guarantees and warranties

6. Operational Due Diligence

O&M requirements
Warranty coverage
Spare parts strategy
Remote monitoring plan
Lifecycle degradation assumptions

Types of Due Diligence in Solar Projects

1. Technical Due Diligence

Confirms the engineering design is safe, code-compliant, and realistic.

Includes reviews of:

System layout
Module selection
Structural loads
Electrical designs
Production modeling

2. Financial Due Diligence

Ensures the project returns match projections.

Includes:

CAPEX/OPEX review
Tax credit eligibility
Loan/PPA modeling
Sensitivity analysis

3. Legal Due Diligence

Checks all contracts, permits, and regulatory documents.

4. Environmental Due Diligence

Confirms compliance with:

Land-use laws
Environmental impact reports
Soil contamination checks
Wildlife or protected species evaluations

5. Operational Due Diligence

Assesses long-term maintenance, monitoring systems, and asset performance.

How Due Diligence Is Measured

Key measurements include:

Production Forecast Accuracy (%)

Deviation between predicted and actual energy generation.

Shading Loss (%)

Evaluated using Shading Analysis and horizon mapping.

DC/AC Ratio & System Efficiency

Impacts energy generation reliability.

Structural & Electrical Load Calculations

Measured in kN/m², amperage, voltage, etc.

Economic Metrics

ROI
IRR
Net Savings
Payback period

See Solar ROI Calculator.

Typical Values / Ranges

Practical Guidance for Solar Developers & Installers

1. Always verify production estimates

Validate modeling assumptions using POA irradiance, shading maps, and weather data.

2. Review AHJ & NEC requirements early

Avoid redesign delays—see AHJ Compliance.

3. Validate layout accuracy with real roof/site conditions

Use tools like Solar Designing to cross-check module placement and structural limitations.

4. Ensure inverter and electrical designs are compliant

Refer to Stringing & Electrical Design and Inverter Sizing.

5. Validate all financial assumptions

Use realistic degradation, inflation, utility rate escalation, and O&M costs.

6. Standardize all due diligence checklists

Especially helpful for teams managing multiple projects.

7. Perform onsite verification

Drone imaging, LiDAR scans, and roof inspections reduce risk of major errors.

Real-World Examples

1. Residential Project Due Diligence

A designer verifies shading, roof condition, structural load, and NEC pathways.

A realistic 7.2 kW layout is validated using Shadow Analysis.

2. Commercial Rooftop Due Diligence

The EPC team verifies mechanical equipment spacing, walkway requirements, and layout density.

A 350 kW design is approved after confirming financial projections and interconnection feasibility.

3. Utility-Scale Solar Farm Due Diligence

Developers review land agreements, grid capacity, environmental impact, and transformer sizing.

Technical due diligence validates the 50 MW array design and long-term performance assumptions.