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Harnessing solar power in the Alps: A study on the financial viability of mountain PV systems

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  • Đukan, Mak
  • Gut, David
  • Gumber, Anurag
  • Steffen, Bjarne

Abstract

Solar photovoltaics (PV) plays an essential role in decarbonization but faces challenges in regions with seasonal climates, where electricity generation decreases during wintertime, necessitating additional backup capacity or imports. Installing PV plants in the mountains could address this challenge by increasing PV generation in winter when more sunlight reaches higher altitudes. We explore the financial viability of such plants by using Switzerland and its support policies as a case study. Using a mixed-method approach, including interviews and financial modeling, we assess costs, business models, and profitability across 6561 scenarios with varying investment conditions. We find that ground-mounted PV systems have investment costs between 2231 EUR/kW to 4182 EUR/kW and generation costs between 97 and 162 EUR/MWh, respectively. The prevailing business models in Switzerland favor utilities with a customer base, achieving median equity IRRs of 8.6%. Selling electricity at a 79 EUR/MWh 10-year PPA would guarantee profitability only with aggressive electricity price assumptions, sculpted debt repayment, and lower CAPEX. Based on these results, we discuss the structure of the Swiss support regime and potential adaptations.

Suggested Citation

  • Đukan, Mak & Gut, David & Gumber, Anurag & Steffen, Bjarne, 2024. "Harnessing solar power in the Alps: A study on the financial viability of mountain PV systems," Applied Energy, Elsevier, vol. 375(C).
    • Handle: RePEc:eee:appene:v:375:y:2024:i:c:s0306261924014028
    DOI: 10.1016/j.apenergy.2024.124019
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