Irradiation, Location

The sun is sending every day light energy of approximately of 1.000 - 1.200 kWh/mē to the earth. Depending on the location and its specific conditions the irradiation varies. Detailed irradiation information for Europe and Africa you can find at PVGIS. You will also find there, further information on how this energy can be translated into a possible output (yield) of a general PV system.

Yield Projection

To project the yield of a specific PV system, you need to know the location (irradiation, weather data, environment), the materials (modules, inverter, etc.), the elevation and direction the PV modules are mounted, limiting factors like shadows, cable length, miss match of the electrical installation and other details of the system. Best to calculate the system yield is to use one of the widely available software tools or, even better, have a look at other systems in the area.

FIT, PPA

In Europe the main instrument to encourage the implementation of solar energy systems are governmental incentives including feed-in-tariff (FIT) structures. In the US you will mostly find individual negotiated power purchasing agreements (PPA).

EPC, General Contractor

Commercial large scale solar systems are installed by either a general contractor in cooperation with an engineering company or by an EPC company (engineering, procurement, commissioning) depending on the scope of services they are providing.

O&M, Service Structure

Operations & Maintenance services are most vital for achieving the financial outcome as these services are ensuring the operational excellence of the system and guarantee a high uptime of the generation system.

Closed Energy Fund

CEF is a legal structure to make, among others, utility scale solar systems available for groups of independent investors and limit their exposure.

IRR, Internal Rate of Return

As the financial returns of a solar power system is depending on a lot of factors (yield, uptime, funding structure, operational cost, etc.) these systems are not yielding a constant equal return. Therefore the returns are calculated based on the concept of Internal Rates of Return.

Equity Share, Debt Structure

To increase the leverage of an investment in solar power systems the projects are funded by a specific equity-debt structure. Usually the requirements for debt are between 10 and 40%, depending on the projected returns, technical and legal conditions, quality and references of supplier and availability of financial instruments.

Return vs. Risks

Based on the projected yield and the actually outcome of the operation the return of an investment in a solar power system can be determined. As with all investments there is a balance of return vs. risk to be considered. In general the investment in a solar power system is considered as a low risk investment as long as vital legal, technical and operational criteria's are met. Therefore the return is as well comparably low. The available funds for standard public investors are projecting an IRR of 7 to 12 % depending on the geography, financial leverage, term of the investment and local risk considerations.

Return