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How to calculate feasibility of solar projects?

Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • Jul 12, 2021
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How to calculate feasibility of solar projects?

A list of residential photovoltaic project sellers presents the savings, year over year for 25 years (typically).

The sum of the savings is then compared to the initial investment. And the result of this calculation shows that the savings are many times the value of the investment.

In theory, then, it would be a spectacular investment!

But...this method is not consistent with discounted cash flows, as it does not take into account interest rates on the investment along the life of the project.

In order to compare correctly, it is necessary to find out what is the monthly costs to amortize the investment considering the interest rate.

The result is way different from what the sales people come up with in their charts.

Rafael Herzberg's picture
Thank Rafael for the Post!
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Dr. Amal Khashab's picture
Dr. Amal Khashab on Jul 12, 2021

What about the net present values ( NPV) of the investment and the sales of electricity along the project's life time , and figuring out the benefit/ cost ratio ? Does it give an accurate indication?

Rafael Herzberg's picture
Rafael Herzberg on Jul 12, 2021

Hi Amal, 

NPV is excatly the translation of my post. I just did not use this term because from time to time people who are not at ease with financial jargons complain!

 

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