The impact on photovoltaic worth of utulity rate and reform and of specific market, financial, and policy variables : a commercialindustrialinstitution sector analysis

Abstract

This work provides an assessment of the economic outlook for photovoltaic systems in the commercial, industrial and institutional sectors in the year 1986. We first summarize the expected cost and performance goals for photovoltaic technology, and then estimate aspects of the market and financial environment pertinent to assessment of a PV investment beginning in that year. Our analysis covers three geographic regions of the U.S., characterized by Boston, Madison, and Phoenix, and examines PV economic performance when operating against five different means for establishing utility backup rates. In addition, we assess the potential of a photovoltaic array to reduce a firm's monthly capacity charge.

Our results break down as follows. For our initial analysis, utilizing a base case set of financial parameters, we find that a peak-shaving credit (reduction in monthly capacity charge) attributed to a photovoltaic array can be significant, but not so much as to prove photovoltaics economic in the commercial sector in 1986. The institutional sector will find photovoltaics profitable if they discount at rates reflective of the returns on long-term government bonds. In our extended analysis, we perform sensitivity studies and examine the impact of combinations of government incentives. We find that photovoltaics will just turn economic in 1986 for the commercial/industrial sector given an optimistic set of incentive policies. We finalize our analysis with an important list of caveats to our conclusions.