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The Impact of Performance Degradation Curves on the Profitability of Solar PV Projects
A. Virtuani, L. Morganti
Reliability, Solar, Photovoltaics, Profitability, IRR
Energy Transition – Integration, Storage, Sustainability, Policy, Economics, Energy Poverty, Society
Subtopic: Costs, Economics, Finance and Markets
Event: 8th World Conference on Photovoltaic Energy Conversion
Session: 5DO.15.3
1558 - 1561
ISBN: 3-936338-86-8
Paper DOI: 10.4229/WCPEC-82022-5DO.15.3
0,00 EUR
Document(s): paper, presentation


Recent literature highlights the fact that degradation curves are frequently not linear. This technical knowledge is, however, neglected by the financial world, which continues to use simplified linear degradation rates to assess the profitability of PV projects. In this work we compute the project-IRR (or unleveraged equity IRR) of utilityscale (50 MWp in size) PV projects deployed in different parts of Europe and carry out a sensitivity analysis of how the profitability of the plant is impacted when non-linear performance degradation curves are used in place of constant degradation rates. In general, a 2-step performance loss curve leads to the highest project-IRRs at equal total loss, whereas the lowest IRRs are achieved if module degradation were undergoing a negative logarithmic or exponential degradation trajectory. Further, the sensitivity of profitability to the different degradation trajectories increases at higher latitudes (i.e. in sites with lower solar resources), for which the absolute project-IRR is understandably lower. Finally, based on this analysis, we provide some indications to project developers and investors on how to make more sound and “reliable” BPs. These include, the application of stress test to BPs to assess the risk that non-linear degradation curves may have on the project profitability.