Quantifying economic risk in photovoltaic power projects

Steve Tomosk, Joan E. Haysom and David Wright

Renewable Energy, 2017, vol. 109, issue C, 422-433

Abstract: 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.

Keywords: Photovoltaics; Concentrated photovoltaics; Internal rate of return; Risk; Monte Carlo analysis; Bankability (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0960148117302124
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:109:y:2017:i:c:p:422-433

DOI: 10.1016/j.renene.2017.03.031

Access Statistics for this article

Renewable Energy is currently edited by Soteris A. Kalogirou and Paul Christodoulides

More articles in Renewable Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().