Tools for the profitability analysis of grid‐connected photovoltaics

Nofuentes, G.; Aguilera, J.; Muñoz, F. J.

doi:10.1002/pip.456

Cited by 35 publications

(18 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The same incentives make MIRRs relatively insensitive to varying system price and non-price parameters. Also, the upfront nature of U.S. incentives can lead to large differences in the economic returns calculated for U.S. systems relative to similar systems located in other countries and discussed in the international PV literature (e.g., Nofuentes et al 2002;Talavera et al 2007;Talavera et al 2010;Audenaert et al 2010).…”

Section: Discussionmentioning

confidence: 99%

“…One challenge is that there are several definitions of PV payback time (Duffie and Beckman 2006), each of which can give a different perception of value. Here, we characterize the sensitivity of PV payback time to several system parameters using both the simple payback time definition (Kastovich et al 1982;Perez et al 2004;Black 2009) and the TNP payback definition (Nofuentes et al 2002;Sidiras and Koukios 2005;Audenaert et al 2010). Although there are several other payback definitions, the relative performance of these two metrics illustrates how different definitions of payback can lead to a large range in payback times and sensitivities.…”

Section: Simple and Time-to-net-positive-cash-flow Paybackmentioning

confidence: 99%

“…Wind investors frequently use IRR-based hurdle rates 7 to characterize project economics (Harper et al 2007) and may apply similar investment criteria to evaluate solar projects. Others have recommended the use of metrics based on NPV, such as PI (Chabot 1998;Nofuentes et al 2002;Audenaert et al 2010). …”

Section: Use Of Different Economic Metrics In the Pv Literaturementioning

confidence: 99%

“…Several recent European studies have recommended using IRRs to characterize PV value (Nofuentes et al 2002;Talavera et al 2007;Talavera et al 2010;Audenaert et al 2010). Wind investors frequently use IRR-based hurdle rates 7 to characterize project economics (Harper et al 2007) and may apply similar investment criteria to evaluate solar projects.…”

Section: Use Of Different Economic Metrics In the Pv Literaturementioning

confidence: 99%

“…• Time-to-net-positive-cash-flow (TNP) payback time-The time required for: (1) the discounted PV revenues to exceed the discounted system costs accrued to that date and (2) the discounted revenues to remain higher than discounted costs for the duration of the investment (Nofuentes et al 2002;Sidiras and Koukios 2005;Audenaert et al 2010). …”

Section: Simple and Time-to-net-positive-cash-flow Paybackmentioning

confidence: 99%

See 4 more Smart Citations

Impact of Different Economic Performance Metrics on the Perceived Value of Solar Photovoltaics

Drury¹,

Denholm²,

Margolis³

2011

View full text Add to dashboard Cite

NOTICEThis report was prepared as an account of work sponsored by an agency of the United States government. Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof. Executive SummaryPhotovoltaic (PV) systems are installed by several types of market participants, ranging from residential customers to large-scale project developers and utilities. Each type of market participant frequently uses a different economic performance metric to characterize PV value because they are looking for different types of returns from a PV investment. We find that different economic performance metrics frequently show different price thresholds for when a PV investment becomes profitable or attractive. Additionally, several project parameters, such as financing terms, can have a significant impact on some metrics [e.g., internal rate of return (IRR), net present value (NPV), and benefit-to-cost (B/C) ratio] while having a minimal impact on other metrics (e.g., simple payback time). As such, we find that the choice of economic performance metric by different customer types can significantly shape each customer's perception of PV investment value and ultimately their adoption decision.In this analysis, we characterize PV economic performance for three ownership types: residential customers who purchase their own PV systems, commercial customers (for-profit companies) who purchase their own PV systems, and residential and commercial customers who lease PV equipment or buy PV electricity from a third-party company. We characterize the differences in PV economics for each customer based on the different tax implications of ownership. We do not characterize PV economics for large-scale PV developers or utilities because they frequently use complex project financing structures (Harper et al. 2007) that are beyond the scope of this analysis.We compare PV economic returns for different PV customers using the following economic performance metrics:• Net present value (NPV)• Profitability index (PI)• Benefit-to-cost (B/C) ratio • Internal rate of return (IRR)• Modified internal rate of return (MIRR)• Simple payback and time-to-net-positive-cash-flow (TNP) payback • Annualized monthly bill savings (MBS)• Levelized cost of energy (LCOE).We characterize relative PV economics for each metric over a range of system characteristics, including PV ...

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Simple and Time-to-net-positive-cash-flow Paybackmentioning

confidence: 99%

Section: Use Of Different Economic Metrics In the Pv Literaturementioning

confidence: 99%

Section: Use Of Different Economic Metrics In the Pv Literaturementioning

confidence: 99%

Section: Simple and Time-to-net-positive-cash-flow Paybackmentioning

confidence: 99%

See 3 more Smart Citations

Impact of Different Economic Performance Metrics on the Perceived Value of Solar Photovoltaics

Drury¹,

Denholm²,

Margolis³

2011

View full text Add to dashboard Cite

show abstract

Multistakeholder assessments of the value of distributed photovoltaics for different retail market arrangements

2021

Intl J of Energy Research

View full text Add to dashboard Cite

Summary The cost fall of solar photovoltaics (PV) in the last decade has driven remarkable deployment of PV worldwide. A proportion of this deployment has occurred within the distribution network, potentially having a significant economic impact on both private industry stakeholders and society as a whole. Hence, the impacts of distributed PV have raised growing concerns on how to maximize PV societal values while managing potential negative impacts on key stakeholders. However, a review, evaluation, and comparison of the societal PV value and the stakeholder private PV values, together with a thorough analysis of their connections and challenges, are still lacking in the literature. In this article, we first propose some clear definitions underpinning the concepts of societal PV value and private PV value, to then review the literature and assess them for different electricity stakeholders and retail market arrangements. From the study of the Australian National Electricity Market, we found significant misalignments and conflicts between societal and private PV values due to a number of market failures, meaning that there are still not appropriate economic incentives for industry stakeholders to maximise the value of PV for society. Moreover, the total value of PV for residential PV customers falls within the possible range of PV values for society, although without the right price signals.

show abstract

Value of net-FiT PV policies for different electricity industry participants considering demand-side response

Oliva

MacGill

2014

Prog. Photovolt: Res. Appl.

View full text Add to dashboard Cite

Net-FiT policies for residential PV have financial implications not only for PV customers but all other electricity industry participants. They may also incentivise households to adjust their daily load patterns to either minimise or maximise PV export depending on the FiT design, and wider retail electricity arrangements. In this paper we study the financial implications of both residential PV systems and such demand-side response (DSR) on the financial returns of PV for households, their retailers and their distribution network service providers (DNSPs). We use half-hourly PV generation and household consumption data for 60 houses in the Australian city of Sydney, and consider two net-FiT designs offering tariffs either significantly higher or lower than retail electricity rates. We use a simple model of DSR which allows households to increase PV exports or self-consumption by moving load between daylight hours and the evening. We find such DSR modestly improve household revenue, but has potentially greater implications for retailers and DNSPs. DSR to increase exports reduces the adverse impacts of PV on retailer and DNSP revenues, whilst increased self-consumption worsens them. Conversely, increased exports might drive DNSP expenditures in constrained network areas while increased self-consumption might help reduce them. The study highlights the importance of designing PV policies with regard to their implications for retailers and DNSPs as well as PV households. Furthermore, the broader policy settings of retail electricity markets will become increasingly important as PV deployment grows, opportunities for DSR expand, and current inadequacies in retail electricity markets become more marked.

show abstract

Tools for the profitability analysis of grid‐connected photovoltaics

Cited by 35 publications

References 14 publications

Impact of Different Economic Performance Metrics on the Perceived Value of Solar Photovoltaics

Impact of Different Economic Performance Metrics on the Perceived Value of Solar Photovoltaics

Multistakeholder assessments of the value of distributed photovoltaics for different retail market arrangements

Value of net-FiT PV policies for different electricity industry participants considering demand-side response

Contact Info

Product

Resources

About