Will Sweden Join the Solar Boom? Financial Appraisal of Distributed Photovoltaic Generation in Residential Applications.

Sammanfattning: Residential building sector accounts for significant share of primary energy demand in Sweden. Worldwide, generation from photovoltaic (PV) distributed energy resources is increasing, yet their potential in Sweden has been underdeveloped, in particular due to high system costs. Recent drop in module prices could however trigger more interest in such systems. In this thesis, the financial performance of residential PV plant utilizing the most recent data is carried out. The specific aim is to determine whether private investment into a PV system can be cost-effective. In the analysis, a grid-connected PV microgenerator with nominal power of 5.5 kWp, 34 m2 of arrays and 6 kW inverter is assessed. Expected lifetime of the system is 25 years, where 80% of the electricity output is self-consumed and 20% fed back to the main grid. Discount and escalation rates are utilized to calculate simple payback period, net present value, benefit-cost ratio, cost of conserved energy and internal rate of return (IRR) of the investment. Further, a scenario analysis is worked out to determine the change in the microgenerator’s performance outside of baseline set of parameters. The results are presented both under the default market conditions and with the inclusion of government support mechanisms. The PV plant did not financially perform well under the default conditions. State rebates and tax credit significantly enhanced the results and contributed to the cost-effectiveness of the investment. In the baseline scenario with government support, significant positive results in all the metrics used in the financial appraisal were yielded. The IRR also indicated that loans at various interest rates could be obtained to finance the PV system. The study emphasized the necessity of government support if a faster uptake of distributed PV systems is desired in Sweden. The results of this thesis can be utilized by potential investors (consumers) in their decision-making process, especially when they face an opportunity cost of investment.