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Maximizing Returns and Minimizing Risks in Hybrid Renewable Energy Systems: A Stochastic Discounted Cash Flow Analysis of Wind and Photovoltaic Systems in Brazil

Author

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  • Antonio Perrelli

    (Centro Universitário Senai Cimatec, Salvador 41650-010, Brazil
    Eletrobras, Rio de Janeiro 20091-005, Brazil)

  • Eduardo Sodré

    (Eletrobras, Rio de Janeiro 20091-005, Brazil)

  • Vinícius Silva

    (Eletrobras, Rio de Janeiro 20091-005, Brazil)

  • Alex Santos

    (Centro Universitário Senai Cimatec, Salvador 41650-010, Brazil)

Abstract

The use of renewable energy sources has become strategic in the production of electricity worldwide due to global efforts to increase energy efficiency and achieve a net zero carbon footprint. Hybrid systems can maximize stability and reduce costs by combining multiple energy sources. A conventional metric, such as the levelized cost of energy (LCOE), that is appropriate for assessing the cost-effectiveness of an option may not be appropriate when evaluating the economic feasibility of hybrid systems. This study proposes a stochastic discounted cash flow model (DCF) to assess the economic viability of a hybrid renewable energy system (HRES) in Brazil. The objective is to determine the combinations that will provide the highest 50th percentile internal rate of return (IRR) and the lowest coefficient of variation (CV). Model variables include capital expenditures (CAPEX), operation and maintenance (O&M) costs, sectoral charges, taxes, and long-term energy production metrics. The results demonstrate that the synergies modeled contributed to the higher economic outcomes for the HRES obtained by combining both energy sources rather than opting for a stand-alone configuration. A wind-dominant combination of 60% wind was able to increase the 50th percentile of the IRR, while a solar-dominant combination of 65% solar minimized the CV.

Suggested Citation

  • Antonio Perrelli & Eduardo Sodré & Vinícius Silva & Alex Santos, 2023. "Maximizing Returns and Minimizing Risks in Hybrid Renewable Energy Systems: A Stochastic Discounted Cash Flow Analysis of Wind and Photovoltaic Systems in Brazil," Energies, MDPI, vol. 16(19), pages 1-19, September.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:19:p:6833-:d:1248411
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    References listed on IDEAS

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    1. Antonio C. C. Perrelli & Eduardo A. Sodré & André V. R. N. Silva & Caarem D. S. Studzinski & Vinícius F. Silva & Dalton F. G. Filho & Armando T. Neto & Alex A. B. Santos, 2024. "Optimizing Price Markup: The Impact of Power Purchase Agreements and Energy Production Uncertainty on the Economic Performance of Onshore and Offshore Wind Farms," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 211-219, September.

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