Advanced Solar (PV) Project Finance Model – With Tariff Optimiser (Brent's Method Algorithm)

Background

As the demand for clean, reliable power rises, utility-scale solar projects have become essential to the global energy transition. Unlike rooftop systems, solar farms deliver electricity directly to the grid, supporting national supply and decarbonisation goals.

With growing investments and supportive policies, the need for clear, credible financial planning is greater than ever. This model was built to meet that need—offering a structured, transparent framework to assess feasibility, optimise returns, and support investment decisions from early-stage development through to financial close.

Model Overview

This Solar PV Financial Model delivers a robust 25-year forecast, capturing key metrics across energy generation, revenue flows, operating costs, and financing obligations. At its core is a detailed energy production module that integrates project-specific solar irradiation data to estimate electricity output and associated revenues.

By incorporating seasonal variations, degradation rates, and probability scenarios (P50, P75, P90, and P99), the model enables developers and investors to assess the bankability, financial viability, and risk-adjusted performance of utility-scale solar projects.

The Excel-based model follows the FAST modelling standard, ensuring clarity, modularity, and auditability. It is structured to cover the full lifecycle of a utility-scale solar project—from energy production and tariff formulation to financial close and equity returns.

Component SummaryProduction

• Models gross annual generation, degradation, availability, curtailment, and grid losses.
  

• Calculates net deliverable energy after technical and operational losses.
  

• Includes generation profiles and probability scenarios.
  

Revenue

• Applies fixed or escalatable tariffs to net energy produced.
  

  • Method 1: User-defined input.
    

  • Method 2: Solver-based calculation to meet a target equity IRR.
    

Operating Costs (Opex)

• Captures all operating costs, escalated by inflation.
  

• Includes expensed DSRA letter of credit (L/C).
  

Working Capital

• Models receivables and payables.
  

• Impacts cash flow and funding requirements.
  

VAT Treatment

• Separately models input VAT recovery and output VAT obligations.
  

• Assumes VAT is refunded during construction.
  

• A VAT facility and related fees are included.
  

Depreciation & Tax

• Models accounting and tax depreciation schedules.
  

• Includes fixed asset summaries and capitalised finance costs.
  

Reserves & Upfront Working Capital

• Models upfront working capital and interest earned on cash balances.
  

• Includes DSRA and DSRA L/C arrangements.
  

Financing StructureDebt

• Models drawdowns, interest, repayments, sculpted cash flows, DSCR monitoring, and related fees.
  

Equity

• Includes paid-up capital and shareholder loans with associated returns and repayments.
  

Drawdown Sequencing

• Configurable as Pari Passu or Equity First.
  

• Circularity breaker aligns tariff, IRR, and Interest During Construction (IDC).
  

Interest Rate Assumptions

The model uses a dummy 3-month interest rate curve to simulate financing cost assumptions over time. This curve:

• Is embedded into the Debt section.
  

• Can be adjusted to reflect short-term market trends or hedging.
  

• Feeds into:
  

  • Interest on senior debt (construction and operation).
    

  • IDC (Interest During Construction).
    

Valuation & Returns

• Calculates project and equity IRRs (pre- and post-tax).
  

• Computes project NPV, equity payback periods, and dividend flows.
  

Outputs & Interface

• Stakeholder-ready Dashboard with KPIs, summary assumptions, and return metrics.
  

• Clean, user-friendly interface suitable for investment committee presentations.
  

Tariff Methodology & Advanced Solver

The model uses a custom-built tariff optimisation engine powered by Brent’s Method to solve for the tariff that achieves a user-defined equity IRR.

Operation

• Re-run the Solve macro (on the Dashboard) whenever material inputs change.
  

  • Method 1: Resolves circularities and updates tariff structure.
    

  • Method 2: Runs full Brent-based tariff optimisation with real-time feedback.
    

Failure to re-run the macro after key changes may lead to inconsistent results.

About Brent’s Method

Brent’s method is a hybrid root-finding algorithm that merges:

• Bisection method
  

• Secant method
  

• Inverse quadratic interpolation
  

It ensures convergence without requiring derivatives, making it ideal for the non-linear, circular cash flows common in project finance models.

Why Brent’s Method?

• Guaranteed convergence under typical project finance conditions.
  

• Superior to Excel’s Goal Seek and GRG Nonlinear Solver.
  

• Handles models with circularities (e.g., IDC, DSRA) more reliably.
  

How the Solver WorksPhase 1 – Feasibility Check

• Scans tariff ranges for a valid, positive IRR.
  

Phase 2 – Anchor Point

• Builds a second IRR calculation to initiate secant approximation.
  

Phase 3 – Iterative Optimisation

• Executes Brent’s method using adaptive secant updates until IRR converges.
  

Real-Time User Interface

• A custom UI form displays tariff and IRR values for each iteration.
  

• Users can observe progress and cancel the run if needed.
  

Circularity Resolution

• Each iteration invokes the ResolveCircularities routine.
  

• Ensures correct resolution of IDC, DSRA, and related interdependencies.
  

Key Solver Features

• User-defined target IRR input
  

• Real-time dashboard updates
  

• Built-in failsafes for undefined IRRs
  

• Adaptive damping, step size, and tolerance
  

• Typical runtime: under 5 minutes
  

Technology Adaptability

While tailored for solar PV, this model can be adapted to:

• Wind
  

• Hydro
  

• Geothermal
  

• PPP/infrastructure projects
  

Note: The model is designed primarily for solar PV, and structural changes are required for other technologies.

What’s Included in Your Purchase

• Excel Model: Fully functional and VBA-enabled
  

• 31-page Model Manual: Detailed methodology and instructions
  

• PDF Printout: Printable version of the model
  

• "Read Me" File: Version history and usage notes
  

Disclaimer

This financial model is the intellectual property of Project Finance Lab and is licensed for commercial use only. Redistribution, resale, or modification without written permission is prohibited.

While the model has been developed for robustness and reliability, no warranties are offered regarding:

• Jurisdictional compliance
  

• Completeness or fitness for purpose
  

Users must input assumptions, exercise professional judgment, and adapt the tool to suit specific legal, technical, and commercial contexts.

Project Finance Lab disclaims liability for losses resulting from model use.

Fair Use Expectations & Support Policy

This model is designed for professionals with a working knowledge of Excel, VBA, and project finance.

• Support Scope: Functional questions only
  

• Exclusions: No training, debugging, or consulting unless arranged separately
  

• Expectations:
  

  • Review product materials before use
    

  • This is a professional tool—not a tutorial or automated app
    

Best Use Cases

This model performs best in low-tariff environments, particularly:

• United States
  

• European Union
  

• United Kingdom
  

• Latin America
  

• MENA
  

Ideal for projects with average tariffs of ~$0.06/kWh, and USD/EUR/GBP-denominated funding structures.