Evaluation of cost competitiveness and payback period of grid-connected photovoltaic systems in Sri Lanka

Abstract: During the Paris climate conference in December 2015, 195 countries approved a global agreement on reducing climate change, indicating that immediate action is needed. Current research is focusing on what barriers there are for implementing renewable energy technologies, both from the perspective of households and the society, especially stressing the importance of the financial barriers cost competitiveness and payback period. Sri Lanka, a country situated on an island close to the equator, receives a significant supply of solar irradiation all year round, yielding a substantial potential for solar energy. In 2010, an initiative taken in Sri Lanka was to allow households to connect residential renewable energy systems, such as solar panels, to the grid, thereby giving households the opportunity to contribute to the generation of electricity from renewable energy sources. The potential of the system is, however, still uncertain. The purpose of this study was to increase the understanding of two of the barriers that prevent Sri Lankan households from investing in grid-connected solar photovoltaic systems: costcompetitiveness and payback period. By increasing the understanding of the photovoltaic system and its barriers this study contributes to the research on whether grid-connected photovoltaic systems provide a renewable energy solution to the energy generation challenges of Sri Lanka and facilitates potential investor’s evaluation of the system. In order to fulfill the purpose, a case study that evaluated if a system installed in a Sri Lankan household was cost competitive and determined the payback period of the system was conducted. In order to deepen the analysis, several system capacities and two different levels of consumption were analyzed. In addition, an electricity consumption analysis was carried out that determined what electricity consumption a Sri Lankan household needed for the grid-connected photovoltaic system to be cost competitive and for the household’s requirements on payback period to be fulfilled. In case of low consumption, only the system with a capacity of 2 kilowatts achieved cost competitiveness, while all systems achieved cost competitiveness if the household had a high electricity consumption. The payback period was 3.82 to 3.43 years in the case of high consumption and 8.23 to 13.72 years with low consumption. The result of the electricity consumption analysis was that a consumption of 276 kilowatt-hours was required for the system to be cost competitive and meet the requirements on payback period, indicating that the system is only viable for a small part of the Sri Lankan households. The sensitivity analysis showed that the examined parameters had large impact on the result and that certain parameters therefore needed to be carefully determined. To be able to fully answer whether grid-connected photovoltaic systems provide a renewable energy solution for the energy generation challenges in Sri Lanka and to further increase the understanding of the barriers, further research is warranted.