Photovoltaic energy competitiveness and risk assessment for the South African residential sector

Abstract

AbstractThe establishment of new photovoltaic (PV) markets in emerging economies represents a business development opportunity for expansion outside traditional energy markets. Appropriate assessment of PV market competitiveness is thus necessary in order to inform policy and regulatory development, and in order to manage risks related to investment. This paper presents an evaluation of PV energy competitiveness using a case study of the emerging residential PV market in South Africa. Competitiveness is defined in light of the risks associated with the financial performance of domestic grid‐connected rooftop PV considering the current market status together with three proposed business models, namely net‐metering, net‐billing and an energy savings performance contract framework. Financial performance is evaluated in terms of a socket parity evaluation together with a discounted net cash flow analysis. Investment risk assessment was facilitated using a Monte Carlo simulation. The results indicate the highest potential profitability for the energy savings performance contract model, which includes PV system ownership by an energy services company. It is also shown that appropriate application of risk modelling has the potential to inform decisions by investors and policy makers alike that result in improved policy and business solutions that are able to support increased residential PV energy market competitiveness without the need for explicit subsidy frameworks. Copyright © 2016 John Wiley & Sons, Ltd.