Profitability and sustainability of photovoltaic energy plants in Spain

Guaita-Pradas, Inmaculada; Feliu, Inmaculada Bartual-San; Soucase, Bernabé Marí

doi:10.1504/ijse.2015.071141

Cited by 4 publications

(1 citation statement)

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“…In this study, we use betas calculated for the electric power industry. We work with unlevered betas, as obtained by Damodaran [24], and hence, we lever them, taking into account the capital structure of the sector under study.…”

Section: B Cost Of Debtmentioning

confidence: 99%

Analyzing Profitability and Discount Rates for Solar PV Plants. A Spanish Case

Guaita-Pradas

Blasco-Ruiz

2020

Sustainability

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The widespread use of renewable energy sources and the growing concern about climate change, together with Spain’s exceptional weather and solar radiation conditions, have led to an increase in the use of photovoltaics for energy production in the country. Solar power generation has been tightly regulated, although the legal framework has changed frequently over the years. When assessing the potential financial performance of any business venture, legal as well as financial aspects must be considered, but a critical factor is the discount rate used, which must reflect the company’s capital cost. Other factors are the period of interest, the firm’s activity, market risk, and the level of debt of firms in the sector. The main objective of this study is thus to estimate the discount rate for companies using photovoltaics to produce solar power. We calculate it by employing two financial techniques: capital asset pricing model and historical return analysis. We then evaluate the investment in a photovoltaic plant with a capacity of 5000 kW located in eastern Spain, assuming it started its activity in different years which coincide with changes in the regulatory framework. The results show the relevance of the initial outlay costs for the profitability of photovoltaic power plants.

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Section: B Cost Of Debtmentioning

confidence: 99%