Modeling of Solar Costs and Sensitivity

MSEE/MBA student Mark Hagge with adviser P. Krein

A discounted cash flow model of solar panel installations was built in Excel to provide a direct, readily understood, and open cost analysis of PV systems. It was used to evaluate the current economic state of solar panel adoption across the United States. Using Monte Carlo methods, distributions for a wide variety of inputs, such as operation and maintenance costs, panel degradation, electricity price, and solar exposure were modeled for the lower 48 states. The model output, seen in Figure 1, shows the distribution of the value of ten thousand solar panel installations generated in such a manner. This distribution can be compared to the average price per watt of $3.48 during Q1 of 2015 for residential solar installations in the U.S. From this, one can calculate that over 50% of residential solar installed today in the U.S. is expected to have a positive return on investment over the lifetime of the system. This percentage is expected to increase as the average price has steadily decreased over the past couple decades. Similar analysis was carried out for non-residential entities who could take advantage of various tax advantages as well as economies of scale. Given these advantages and comparing breakeven price to the average non-residential price per watt of $2.20 in 2015 Q1, it is estimated that over 93% of non-residential solar installed today will have a positive return on investment. Future work includes implementing a model of variable pricing and identifying its economic effect on solar panel system ownership. This research is supported by Advanced Research Projects-Energy (ARPA-E), U.S. Department of Energy, under Award Number DE-AR0000217

 

Figure 1 Distribution of modeled breakeven price per watt for residential solar panel installations in the continental U.S. With a Q1 2015 average residential installation price per watt of $3.48, it is expected that over 50% of residential installations installed today will bring positive return on investment for their owner.

Figure 1 Distribution of modeled breakeven price per watt for residential solar panel installations in the continental U.S.
With a Q1 2015 average residential installation price per watt of $3.48, it is expected that over 50% of residential installations installed today will bring positive return on investment for their owner.