Framework for Project Due Diligence of Solar Photovoltaic Installations : Technical and Economical Assessment from a Lender’s Perspective

Abstract: Climate change is no longer a problem of the future. Climate change is global, rapid, and intensifying. A reality. The latest Intergovernmental Panel on Climate Change (IPCC) report highlights the Anthropocene is behind the unprecedent rising temperatures, leading to extreme weather events such as heatwaves, droughts, heavy precipitation, or tropical cyclones. Climate action must be taken. The energy transition plays a fundamental role when considering the wellbeing of the planet. However, renewable energy finance has always been a challenge. To date, the energy transition has been regrettably underfunded. In 2018, the global energy system was below 50 % of the investment required to keep global warming below 1.5 °C and avert the worst consequences of the climate crisis[4]. This staggering statistic clearly shows that financial investment needs to either be redirected to the energy transition, or new financing channels must be open. Seeds Renewables, a California-based startup, has come up with a solution which has the potential to cover a portion of the energy financing deficit by enabling people to invest in renewable energy projects from as little as their spare change. Before allowing their users to invest, Seeds carries out the due diligence of the projects to determine the feasibility of the installation. It is identified that there is a current lack of concise and public literature regarding the process required to determine the technical feasibility and economic profitability of projects. This thesis serves as a guide for lenders, such as Seeds Renewables, who aim to conduct techno-economic assessments on solar photovoltaic installations. This core objectiveis complemented by qualitative checklists for project development and legal due diligence to provide a comprehensive overview of the factors which surround the techno-economic analysis of solar arrays. Furthermore, the optimal software available in the market to carry out an analysis of solarphotovoltaic installation is identified. The thesis covers the background research conducted on solar photovoltaic systems, acompilation of project due diligence best practices, insights on renewable energy project finance anda literature review on photovoltaic analysis software tools which leads to the selection of two softwares. PVsol and PVsyst are compared by means of a Multi-Criteria Analysis. A case study is conducted on a 63.3 kW solar photovoltaic array installed in 2016 to test the selected softwares. The array is located on the roof of Rinaldi Tile in Pajaro, California, United States of America. The array is replicated using PVsol and PVsyst. Consequently, the simulation predictions are compared to the real production data extracted from the system’s inverter. The performance ratio from the real data, PVsol and PVsyst are 82.4 %, 85.9 %, 80.51 % respectively. The real quantity of power produced over a 5-year period of study is average of 82.24 MWh whilethe simulations by PVsol and PVsyst predict 93.49 MWh and 81.30 MWh respectively. The discrepancy between the real data and software results is due to limitations of both tools. After evaluating the accuracy of the solar PV simulation tools, the Multi-Criteria Analysis rates PVsyst as the more desirable tool. Using this study, engineers or investors will have a clear framework to follow when carrying out the project due diligence on a solar photovoltaic installation and a rating of the available softwaresto assess the viability of the solar arrays.