Impact of Degradation Rates on Solar PV Financing for Projects Located in the United States

A project's financial viability is, in part, determined using its projected net present value (NPV). The accuracy of the NPV corresponds to the accuracy of several factors, among which is the assumption of photovoltaic (PV) module degradation. This paper utilizes the PV module degradation from two peer-reviewed studies and investigates its impact on project financial viability. In order to quantify the effect, the paper will consider the NPV of a reference project. We calculated annual energy estimates (P50) for a hypothetical 100 MW-AC solar PV project at three geographically distinct locations in the United States. Further, this paper investigated the impact of degradation rates for different geographies on project finance. For all three locations, the NPV with 0.5 percent module degradation was found to be on average 5.4 percent higher than the NPV with 1 percent module degradation. The selection of degradation rates also impacts the operation and maintenance of the solar PV projects. A project with high degradation rates will have lower gross revenue over time and may experience shrinking O&M budgets in the later years of the project.