Benefit Cost Analysis of Solar Power over On-Grid Electricity for Residential Systems: Is Photovoltaic Technology Really Effective?

Abstract

In the past two decades, alternative energies have emerged in a more sustainable way to resolve the scarcity issue of natural energy resources. However, project owners’ general perception believes that a one-time high installation cost hampers the adoption of an alternative energy system like solar power. This study investigates the effectiveness of the solar-powered photovoltaic system over the conventional and hybrid systems through a benefit-cost analysis. Benefit and cost components were quantified from the economic and environmental perspectives. An economic sensitivity analysis was then followed with three measurements such benefit-cost ratios, net present values, and profitability indices.

Three case studies demonstrate the applicability of the proposed analysis framework in real-world projects. Benefit-cost ratios, net present values and profitability indices have been used for the analysis. The results of this study will promote a wider adoption of solar power towards green and increase investments from small and medium scale investors.