Economic evaluations
A decision if it is convenient to install a photovoltaic system depends on the economic advantage of the investment.
A photovoltaic system is an investment, financial commitment, so we attend an adequate benefit, not only economical.
Nevertheless for a common user the most important during the decision of installing of photovoltaic system is an economic benefit in less time possible.
In order to decide the convenience of doing this kind of investment it is necessary to consider the expenses and profits. It is necessary to take into consideration all years because the quantities aren’t the same in the whole period of time. One of the ways commonly used is the method called Actual Net Value ( VAN).
Actual Net Value is an algebraic addition of costs and profits during the time period:
Where I is an initial investment, Rk = is a sum of the profits during the year, is a sum of costs during the year and is a remainder value in that period.
The period considered in the calculation can be of 20 years, which is the period of incentives; but obviously the system lasts many years, so the rest must be considered only the profit.
We can take as an example a system of 1 kWp of power that produces 1600 kWh a year in South Italy. We can have an hypothesis that the energy system is installed in a right way and the incentives are of 0,44 €/kWh in 20 years.
We can suppose that this energy system 7.700 €, with VAT and the annual costs of working and maintenance are of 70 €.
The medium cost of energy bought by an administrator is of 0,21 €/kWh ( VAT included).
The governmental incentive for 20 years can’t be updated ( because is constant), all other items have to be up dated depending on inflation, which is of 2,5% a year.
In this case, in 20° year it would be: (1+i)n = 1,64.
The value of investment is :
I = 7.700 €
The profit of energy production is:
R1 = 0,44 * 1600 = 704 €/year constant in time
The saving of money for not buying of Energy produced and consumed:
R2 = 0,21 * 1600 = 336 €/year depending on the inflation rate
The cost f maintenance:
C = 70 €/year depending on the inflation rate
The VAN value in 20° year is:
VAN20 = 8.749 €
having considered null and void the residual value of energy system.
VAN at 9° year is:
VAN9 = 460 €
In this way we can see that the investment is recovered in 9 years.
Now we can take as an example a system of 1 kWp of power that produces 1400 kWh a year in Central Italy.
The profit of this energy production is:
R1 = 0,44 * 1400 = 616 €/year constant in time
The value of VAN in 20° year is:
VAN20 = 7.722 €
having considered null and void the rest of value of the Energy system.
VAN in 10° year is:
VAN10 = 371 €
From this example we can see that the investment is recovered after 10 years.
We can take as an example an energy system of 1 kWp of power that produces 1100 kWh a year in North Italy.
The profit of energy production is:
R1 = 0,44 * 1100 = 484 €/year constant in time
The value VAN in 20° year is:
VAN20 = 5.165 €
having considered null and void the value of the system.
VAN in 12° year is:
VAN10 = 457 €
We can see that the investment is recovered in 12 years.
We can see also an example of an energy system of 100 kWp of power that produces in South Italy 1600 kWh a year and its installation scope is lucrative.
We can suppose that the system is installed with incentives of 0,36 €/kWh for 20 years.
We can suppose that this type of system costs 600.000 €, without VAT and that the running and the maintenance costs are of 6.000 €.
The profit of energy selling in the market is of 0,96 €/kWh.
The governmental incentive can’t be up- dated in 20 years ( because is constant in time), all other items have to be up dated, taking into consideration the value of capital cost or the rate of productivity, the earnings of energy selling, taking into consideration a 40% of Istat index variation. For the capital cost the value is of a 7% that the investor can accept, taking into account the low margin of risk for this activity.
The investment value is of: I= 600.000 €
The profit for energy production is:
R1 = 0,36 * 1600 * 100 = 57.600 €/year constant in time
The profit for energy selling, not taking into consideration a 40% of Istat index variation:
R2 = 0,096 * 1600 * 100 = 15.360 €/year constant in time
The maintanance cost ( 0,5% a year):
C = 3.000 €/year taking into consideration the inflation rate
The VAN value in 20° year is:
VAN20 = 126.171 €
having considered the remaining value of the energy system null and void.
VAN value is cancelled in 14° year that can be considered the time of recover of investment capital with profit rate of a 7%.
If we consider mere the cash flow during 20 years we have a final value of 799.200 € and the investment is recovered in 7,5 years.
We can see from all analysis mentioned that the realization of photovoltaic system is always convenient, also taking into consideration only economic aspects;it is also evident that for huge systems ( more than 50 kWp) we can take into consideration the production of energy with interesting profits.
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