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The Impact of PV Panel Degradation Rate, Initial System Efficiency, and Interest Rate on the Levelized Cost of Energy for PV Projects: Saudi Arabia as a Benchmark

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  • Hamoud Alafnan

    (Electrical Engineering Department, College of Engineering, University of Ha’il, Ha’il 55476, Saudi Arabia)

Abstract

As nations worldwide strive for carbon neutrality, Saudi Arabia has set ambitious targets to increase its renewable energy capacity, aiming for 50% of its electricity production to come from renewable sources by 2030. To accurately assess the economic viability of these photovoltaic (PV) projects, it is crucial to consider the levelized cost of energy (LCOE). In this study, we developed a comprehensive model incorporating PV panel annual degradation rate, initial system efficiency, and interest rates to provide a more precise LCOE calculation. The results demonstrate that PV panel annual degradation, initial system efficiency, and interest rate all significantly influence LCOE. In the most favorable scenario with a 0.5% degradation rate, 0.95 initial system efficiency, and a 0% interest rate, the LCOE was USD 0.0156/kWh. However, under the least favorable scenario with a 2.5% degradation rate, 0.75 initial system efficiency, and a 4% interest rate, the LCOE increased to USD 0.0317/kWh, representing a 103.2% increase. These findings underscore the importance of considering these factors when evaluating the economic viability of PV projects. By understanding their impact, investors and policymakers can make informed decisions regarding renewable energy investments and policies.

Suggested Citation

  • Hamoud Alafnan, 2024. "The Impact of PV Panel Degradation Rate, Initial System Efficiency, and Interest Rate on the Levelized Cost of Energy for PV Projects: Saudi Arabia as a Benchmark," Sustainability, MDPI, vol. 16(22), pages 1-20, November.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:22:p:10012-:d:1522514
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    References listed on IDEAS

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    1. Norasikin Ahmad Ludin & Nurfarhana Alyssa Ahmad Affandi & Kathleen Purvis-Roberts & Azah Ahmad & Mohd Adib Ibrahim & Kamaruzzaman Sopian & Sufian Jusoh, 2021. "Environmental Impact and Levelised Cost of Energy Analysis of Solar Photovoltaic Systems in Selected Asia Pacific Region: A Cradle-to-Grave Approach," Sustainability, MDPI, vol. 13(1), pages 1-21, January.
    2. Micheli, Leonardo & Theristis, Marios & Talavera, Diego L. & Almonacid, Florencia & Stein, Joshua S. & Fernandez, Eduardo F., 2020. "Photovoltaic Cleaning Frequency Optimization Under Different Degradation Rate Patterns," MPRA Paper 105008, University Library of Munich, Germany, revised 07 Oct 2020.
    3. Tuhibur Rahman & Ahmed Al Mansur & Molla Shahadat Hossain Lipu & Md. Siddikur Rahman & Ratil H. Ashique & Mohamad Abou Houran & Rajvikram Madurai Elavarasan & Eklas Hossain, 2023. "Investigation of Degradation of Solar Photovoltaics: A Review of Aging Factors, Impacts, and Future Directions toward Sustainable Energy Management," Energies, MDPI, vol. 16(9), pages 1-30, April.
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