An adequate required rate of return for grid-connected PV systems

• The required rate of return has been decomposed into separate components.
• The uncertainty of IRR for a grid-connected PV system has been modeled.
• Each component of the required rate of return has been quantitatively estimated.
• The relationship between FIT system and uncertainty of IRR has been studied.
• A formula to calculate the required rate of return has been proposed.

The required rate of return (RROR) is a key input in the calculation of levelized cost of electricity, investment decisions and in policy making. The methodology proposed in this paper determines an adequate RROR for grid-connected photovoltaic (GCPV) systems. A calculation of RROR under market conditions has been carried out for four Eurozone countries as well as the assessment of the impact of feed-in-tariff (FIT) support schemes on risk reduction. Moreover, a formula has been proposed to quickly calculate the RROR for GCPV systems based on country risk, risk-free rate and FIT period length if relevant. The methodology can be further applied to other renewable energy sources and can be used to evaluate different support schemes.

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