Quantifying economic risk in photovoltaic power projects

Risk analysis is essential for attracting investment to solar projects. This paper measures risk as the variability in internal rate of return (IRR) and estimates it from the uncertainty in (i) future systems prices, (ii) operations costs and (iii) revenues based on energy yield, irradiance and electricity prices. We quantify these risks for photovoltaic (PV) and concentrated photovoltaic (CPV) projects starting in 2016, 18 and 20 for customers selling solar-generated electricity under a fixed feed-in tariff (FIT) and for large business customers displacing electricity loads that they would pay for according to variable market rates. An international comparison of results is provided. Uncertainty in future systems prices causes on average 45% (PV) and 93% (CPV) variation in IRR, which is important to a developer’s planning process but is resolvable with negotiated system prices from suppliers. Uncertainty in future operations costs impacts the IRR by on average 17% (PV) and 20% (CPV). Uncertainty in revenues impacts the IRR by at most 3.6%. Furthermore, the analysis shows that overall percentage variability in a project’s IRR is much less than the percentage variability in operations costs and revenues, which are the two factors at play once the system is operating.

[1]  Karin Hinzer,et al.  Learning curve analysis of concentrated photovoltaic systems , 2015 .

[2]  Kenneth G. Crowther,et al.  Systems-based modeling of generation variability under alternate geographic configurations of photovoltaic (PV) installations in Virginia , 2011 .

[3]  M. Davison,et al.  Analyzing the impact of environmental variables on the repayment time for solar farms under feed-in tariff , 2013, Environmental Systems Research.

[4]  Krister Aanesen,et al.  Solar power: Darkest before dawn , 2017 .

[5]  Nadejda Komendantova,et al.  De-risking investment into concentrated solar power in North Africa: Impacts on the costs of electricity generation , 2016 .

[6]  Fengqi You,et al.  Assumptions and the levelized cost of energy for photovoltaics , 2011 .

[7]  J. I. Muñoz,et al.  Investment risk and return under renewable decarbonization of a power market , 2013 .

[9]  Kassahun Y. Kebede,et al.  Viability study of grid-connected solar PV system in Ethiopia , 2015 .

[10]  David Sánchez,et al.  A methodology to identify potential markets for small-scale solar thermal power generators , 2016 .

[11]  Ken Zweibel,et al.  Should solar photovoltaics be deployed sooner because of long operating life at low, predictable cost? , 2010 .

[12]  W. Mabee,et al.  Comparing the feed-in tariff incentives for renewable electricity in Ontario and Germany , 2012 .

[13]  J. M. Martínez-Duart,et al.  Analytical model for solar PV and CSP electricity costs: Present LCOE values and their future evolution , 2013 .

[14]  Dolf Gielen,et al.  Re-considering the economics of photovoltaic power , 2013 .

[15]  Andreas Gombert,et al.  Validation of the PVSyst Performance Model for the Concentrix CPV Technology , 2011 .

[16]  Ken Black,et al.  Business Statistics: Contemporary Decision Making , 1994 .

[17]  S. Reichelstein,et al.  The Prospects for Cost Competitive Solar PV Power , 2012 .

[18]  Federica Cucchiella,et al.  Feasibility study of developing photovoltaic power projects in Italy: An integrated approach , 2012 .

[19]  T. Lowder,et al.  Continuing Developments in PV Risk Management: Strategies, Solutions, and Implications , 2013 .

[20]  K. Bhattacharya,et al.  Large-Scale Solar PV Investment Models, Tools, and Analysis: The Ontario Case , 2011, IEEE Transactions on Power Systems.

[21]  Andrej F. Gubina,et al.  An adequate required rate of return for grid-connected PV systems , 2016 .

[22]  K. Hinzer,et al.  Analysis of Present and Future Financial Viability of High-Concentrating Photovoltaic Projects , 2015 .

[23]  Joshua M. Pearce,et al.  A Review of Solar Photovoltaic Levelized Cost of Electricity , 2011 .

[24]  John R. Balfour,et al.  Solar PV O&M Standards and Best Practices – Existing Gaps and Improvement Efforts , 2014 .

[25]  Carlos D. Perez-Segarra,et al.  A Methodology for Determining Optimum Solar Tower Plant Configurations and Operating Strategies to Maximize Profits Based on Hourly Electricity Market Prices and Tariffs , 2015 .

[26]  P. Joskow.  Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies , 2011 .

[27]  P. Denholm,et al.  Relative performance of tracking versus fixed tilt photovoltaic systems in the USA , 2013 .

[28]  Joshua M. Pearce,et al.  Securitization of Residential Solar Photovoltaic Assets: Costs, Risks and Uncertainty , 2014, Energy Policy.

[29]  Aron Dobos,et al.  P50/P90 Analysis for Solar Energy Systems Using the System Advisor Model: Preprint , 2012 .

[30]  Andreas Poullikkas,et al.  Parametric assessment of concentrated photovoltaic parks for the Mediterranean region , 2013 .

[31]  Girolamo Di Francia.  The impact of recycling policies on the photovoltaic Levelized Cost of the Electricity , 2013 .

[32]  C. Tiba,et al.  Identification of potential areas to achieve stable energy production using the SWERA database: A case study of northern Chile , 2015 .

[33]  Andres Fuentes,et al.  Sensitivity analysis of a photovoltaic solar plant in Chile , 2016 .

[34]  S. Pelland,et al.  Estimating the uncertainty in long-term photovoltaic yield predictions , 2013 .

[35]  Jesús Polo,et al.  Comparative analysis of long-term solar resource and CSP production for bankability , 2016 .