Economic Assessment of Renewable Energy Projects

Abstract

The success of Renewable Energy Sources (RES) is strongly dependent on the economics of these projects. RES are currently the preferred source of electricity production mainly because producing electricity from RES is cheaper than the alternatives. The proper assessment of the economic viability of RES projects is a matter of utmost importance. In this chapter, we are concerned with two main aspects of the economic assessment of RES: the electricity production cost and the indexes used to evaluate the economic interest of the projects. Economic models are proposed to compute the Levelized Cost Of Energy (LCOE), the indicator that is used to study the discounted production cost. Economic decisions are based on economic assessment indexes, namely the Net Present Value (NPV) and Internal Rate of Return (IRR). These indicators, together with other less-used ones, are introduced and their application is discussed in this text. To compute the said economic indicators, energy production is necessary. It is more practical that energy production is made independent of the installed capacity. This is achieved by means of the utilization factor and capacity factor. The importance of these technical indicators is highlighted in this chapter.