The economics of deploying distributed solar photovoltaics in developing countries: Some insights from an analysis for Bangladesh

Abstract

The application of distributed photovoltaics is growing in developing countries due to its declining costs and continued government support. This study analyzes the economics of stylized grid-connected distributed photovoltaics to be implemented in the residential, commercial, and industrial sectors in Bangladesh. An economic model has been developed for the analysis. The model uses hourly data for solar irradiation and potential electricity exchanges between the consumers investing in distributed photovoltaics and the electricity utilities. The study finds that the economics of distributed photovoltaics vary across technology investors/owners, electricity utilities, and society. From consumers' perspective, the economics of distributed photovoltaics depends on the difference in electricity production costs between the photovoltaics technologies implemented and electricity generation technologies used by electricity utilities. The costs of distributed photovoltaics are, however, sensitive to their capital cost, discount rate, and the quality of solar resources. It is also influenced by the size of photovoltaics relative to consumers' electricity load and tariffs to exchange electricity between the electric utilities and the consumers owning distributed photovoltaics. From a national or societal perspective, the deployment of distributed photovoltaics is beneficial even if their environmental benefits are ignored. Considering the improving economics of the technology and the environmental benefits, particularly the climate change and local air quality benefits, countries like Bangladesh, which are endowed with rich solar resources, should enhance the deployment of distributed photovoltaics for their electricity supply.