Business Case For Solar PV (UK)

Published: 25 November 2010

19 pages, 15 figures

EXECUTIVE SUMMARY

This report helps decision makers to assess the financial and environmental business case of investing in solar photovoltaic (PV) electric generation in the UK. The Verdantix model captures the key cost and revenue components of a solar PV installation for seven different system sizes: 4, 10, 50, 100, 250, 500 and 1,000 kilowatt peak (kWp). Based on a transparent set of assumptions that drive a quantitative business case model, Verdantix analysis calculates that investment in a solar PV system generates a positive net present value (NPV) of £19,000 for a 50kWp system increasing to £933,000 for a 1,000kW installation. Additionally, switching to solar PV energy generates Scope 2 carbon savings over the 25 year lifetime of the investment for all system sizes. We performed a full sensitivity analysis on the base case identifying the consumption of generated energy on site, and procurement of quality equipment as key value drivers for the business case. Access to finance and availability of experienced installers are the key risk factors.

TABLE OF CONTENTS

BUSINESS CASE FOR FIRMS INVESTING IN SOLAR PV (UK)
Feed-in Tariffs Reshape UK Market For Solar PV

ASSESSING THE BENEFITS OF INVESTING IN SOLAR PV
Defining The Business Case For Solar PV
Firms Need To Create A 25 Year Financial Business Case
Government Incentives And Cost Savings Drive Business Case Benefits
Environmental Business Case Calculates Carbon Reductions

MAXIMIZING THE BUSINESS BENEFITS OF INVESTING IN SOLAR PV
Investments Generate Positive Returns In The Base Case
Benefits Depend Critically On Equipment Quality And System Positioning
Understanding Solar PV Market Factors Is Essential To Manage Financial Risk

TABLE OF FIGURES

Figure 1. Cost Of Installation Decreases For Larger Solar PV Systems
Figure 2. Tariff Level Depends On Size Of Solar PV System Installed
Figure 3. Five Energy Price Scenarios Over 25 Year Lifetime Of Investment
Figure 4. Carbon Price Floor Set For EU ETS Carbon Price Growth Scenarios
Figure 5. CRC Carbon Price Increases At Beginning Of Each Phase Of Scheme
Figure 6. Base Case Assumptions For Solar PV Investment
Figure 7. Economies Of Scale Improve NPV For Larger Solar PV Installations
Figure 8. Payback Period Is Less Than Eight Years For A 250kW Installation
Figure 9. ROI Ranges From 9% For A 4kWp System To 14% For A 1,000kWp System
Figure 10. Switching To Solar PV Energy Can Reduce Firms’ Carbon Emissions
Figure 11. Consuming Energy On Site Significantly Improves The Business Case
Figure 12. Maintain The Efficiency Of Solar PV System To Maximize Financial Returns
Figure 13. Buyers Must Consider Cost Of Inverter Over 25 Year Lifetime
Figure 14. Energy Price Inflation Is A Key Sensitivity For The Financial Business Case
Figure 15. Planning Costs Vary Depending On Type Of Solar PV Installation 

COMPANIES MENTIONED

35 Degrees, Alpheon Energy, The Co-operative Bank, Bank of England, Birmingham City Council, Cornwall County Council, Department of Environment and Climate Change, Department of Environment Food and Rural Affairs, Ecolution, Ecotricity, Encraft, GB-SOL, HSBC, Kent County Council, KN Renewable Energy, Jones Lang LaSalle, Lockton, The Low Carbon Energy Company, mO3 Power, Mitsubishi, Office of Gas and Electricity Markets, PÖyry, Romag, SANYO, Sharp, Solion, SMA Solar Technology, SRE Technologies, Triodos Bank