Estimating the diffusion of rooftop PVs: A real estate economics perspective

Abstract

Currently, the economic performance of rooftop photovoltaics (PVs) is predominantly evaluated using the levelized cost of electricity approach. Some researchers have argued that rooftop PVs should be viewed as an investment, where performance is evaluated using relevant investment analysis methods. This article argues that the proper economic value and climate mitigation potential of rooftop PVs can be assessed only if the market mechanisms and characteristics of the underlying building stock are understood better. This paper utilises a customer-driven investment model to examine the feasible market potential of rooftop PVs in an urban environment. The economic returns of PV installations are calculated for 89,000 buildings separately and by comparing them to the underlying spatial property returns, the profitability and adoption years of rooftop PVs for in different locations are estimated. Implications for CO2 emissions and the impact of the net metering (NM) policy on the rate of adoption are calculated. The results imply that even in Finland rooftop solar PVs are already profitable for a third of the residential building stock and will be profitable for a fourth of the commercial building stock by 2025. Finally, the NM could increase substantially the diffusion rate of solar PVs in the coming years.