Toward a Comprehensive Economic Comparison Framework for Solar Projects: A Case Study of Utility and Residential Scales

Bowen He (), Han Zheng, Qixiao Zhang, Ava Zhao, Huaizhi Tang, Ping Xi, Laiwei Wei, Muqing Li and Qun Guan
Additional contact information
Bowen He: DFQ Dwellings Co., Ltd., Dover, DE 19901, USA
Han Zheng: Hefei University of Technology Design Institute (Group) Co., Ltd., Hefei 230071, China
Qixiao Zhang: FU Foundation School of Engineering and Applied Science, Columbia University, New York, NY 10027, USA
Ava Zhao: Department of Computer Science, Vanderbilt University, Nashville, TN 37212, USA
Huaizhi Tang: Sungrow Power Supply, Co., Ltd., Hefei 230088, China
Ping Xi: Sungrow Power Supply, Co., Ltd., Hefei 230088, China
Laiwei Wei: Jacobs School of Engineering, University of California San Diego, 9500 Gilman Drive, La Jolla, CA 92093, USA
Muqing Li: Jacobs School of Engineering, University of California San Diego, 9500 Gilman Drive, La Jolla, CA 92093, USA
Qun Guan: College of Civil Engineering, Hefei University of Technology, Hefei 230009, China

Sustainability, 2024, vol. 16, issue 23, 1-25

Abstract: The growing demand for clean energy transitions has become increasingly significant, with solar energy emerging as one of the most prominent clean energy resources contributing to this effort. However, there remains limited knowledge regarding the economic feasibility of solar project development across different geographic locations and scales. This study introduces a comprehensive economic analysis framework to assess the economic viability of residential- and utility-scale solar projects, using California, Tennessee, and Texas as case studies. The economic assessment is conducted through a cost–benefit analysis that adopts a full life-cycle approach, encompassing phases from permitting to demolition for both scales of solar projects. We found that utility-scale solar projects generally offer more favorable investment return ratios (IRRs) compared to residential projects, with IRRs of 0.57 to 0.61 for California, 0.63 to 0.80 for Texas, and 0.11 to 0.52 for Tennessee. Moreover, utility-scale solar projects in Texas were found to exhibit the earliest breakeven point, reaching financial viability by the seventh year. Furthermore, the incorporation of energy storage solutions, such as battery energy storage systems (BESSs), is shown to be essential for improving the efficiency of residential solar energy usage, with efficiency gains of up to 50%. Finally, region-specific strategies, including net-metering policies, electricity retail market structures, and the promotion of solar adoption, play a crucial role in enhancing the financial viability of solar projects for both residential and utility scales.

Keywords: utility solar farms; cost–benefit analysis; economic analysis; life-cycle approach; battery energy storage system (BESS); grid-tie residential solar systems (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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