Solar Energy Project Finance models

Generated through converting sunlight energy into electricity, solar power is an increasingly important source of electricity. With a focus on renewable energy, solar power is predicted to become a more prominent method of electricity production, whilst also reducing in cost.

There are two major types of solar power technologies:

Photovoltaic System (PV): Using a semiconducting device, a PV system converts light into energy to be used for electricity. The most common type of photovoltaic system device are solar panels.

Concentrated Solar Power: This form of solar power generation involves the use of mirrors or lenses to focus areas of sunlight onto a more concentrated surface area. The most widely known devices for concentrated solar power include the solar power tower, Stirling Dish, parabolic trough and Fresnel reflector.

Why is Solar Power important?

With just 1 hour's sunlight sufficient for providing the world's annual energy needs, solar power has huge potential to replace unsustainable fossil fuels and the harmful effects that nuclear power can generate.

Additionally, after the initial cost of installing the solar power device, running costs are minimal. Therefore it can be useful to use financial models to consider the cost benefits of a solar project - aside from its environment benefits.

What are the types of solar projects?

There are an array of solar project systems that can be implemented to generate electricity. These can include:

Off-Grid Solar Power System / Plant: This type of system uses its own battery to store DC electricity. The system is then able to convert the DC electricity into AC, in order to be used for day-to-day electrical devises. This can be useful for those in remote location to have access to electricity, in a sustainable, cost-effective manner.

On-Grid Solar Power System: On-grid systems produce power when utility power is available. In order for these systems to function, they must have a connection to the grid. Any excess power produced can be transferred back to the grid. This can be quickly cost effective for the user, but are not, however, self-sufficient during power outages, for example.

Other types of solar project that are less well-known are: Hybrid Solar Power System: Combines both on-grid and off-grid solar systems, allowing to offset an unreliable grid, whilst also exporting energy.

Ground Mounted Solar Panel Power Plants: This type of system is largely commercial, and seeks to generate high volumes of electricity in order to sell.

Solar Project Financial Models:

Due to the high initial cost of a solar project, detailed financial modeling is essential. Some important considerations when modeling include:

-System specifications (geographical and technical)

-Cost and Subsidies of the project

-Finance Structures

-Power Tariff

-Tax Savings and depreciation schedule

-Scenario Analysis and Assumptions

If you wish to find out more about solar projects, please visit the sites listed below through the links:

Different types of solar power system

On-grid vs. Off-grid systems

Key elements to solar project financial modeling

If you wish to find out about financial modeling more generally, and access a wide range of financial models, do not hesitate visiting this page:

Financial Modeling