Maximizing Returns and Minimizing Risks in Hybrid Renewable Energy Systems: A Stochastic Discounted Cash Flow Analysis of Wind and Photovoltaic Systems in Brazil

Antonio Perrelli (), Eduardo Sodré, Vinícius Silva and Alex Santos
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Antonio Perrelli: Centro Universitário Senai Cimatec, Salvador 41650-010, Brazil
Eduardo Sodré: Eletrobras, Rio de Janeiro 20091-005, Brazil
Vinícius Silva: Eletrobras, Rio de Janeiro 20091-005, Brazil
Alex Santos: Centro Universitário Senai Cimatec, Salvador 41650-010, Brazil

Energies, 2023, vol. 16, issue 19, 1-19

Abstract: The use of renewable energy sources has become strategic in the production of electricity worldwide due to global efforts to increase energy efficiency and achieve a net zero carbon footprint. Hybrid systems can maximize stability and reduce costs by combining multiple energy sources. A conventional metric, such as the levelized cost of energy (LCOE), that is appropriate for assessing the cost-effectiveness of an option may not be appropriate when evaluating the economic feasibility of hybrid systems. This study proposes a stochastic discounted cash flow model (DCF) to assess the economic viability of a hybrid renewable energy system (HRES) in Brazil. The objective is to determine the combinations that will provide the highest 50th percentile internal rate of return (IRR) and the lowest coefficient of variation (CV). Model variables include capital expenditures (CAPEX), operation and maintenance (O&M) costs, sectoral charges, taxes, and long-term energy production metrics. The results demonstrate that the synergies modeled contributed to the higher economic outcomes for the HRES obtained by combining both energy sources rather than opting for a stand-alone configuration. A wind-dominant combination of 60% wind was able to increase the 50th percentile of the IRR, while a solar-dominant combination of 65% solar minimized the CV.

Keywords: renewable energy; hybrid systems; HRES; discounted cash flow; wind energy; solar energy; internal rate of return (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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