Capital budgeting for renewable energy plants

Autores UPV
CONGRESO Capital budgeting for renewable energy plants


Engineering students require some basic knowledge of economic analysis techniques to complete their education and meet the multidisciplinary labour market demands. Apart from pure engineering techniques, project design usually involves economic valuation and profitability analysis. In this study we use both capital budgeting and energy production techniques for photovoltaic power plants. First of all, we describe the technical characteristics for a solar installation oriented to electricity production and we estimate the energy output, which depends on the solar irradiation hitting the solar modules. According to energy production results we apply capital budgeting techniques to assess the profitability of the investment. Regarding economics we describe the main concepts: the net present value, the internal rate of return and the payback. The former parameters are estimated for a photovoltaic power plant located in Spain and that starts the activity at present without any kind of economic incentive. These are standard viability indicators to assess the profits and assist the investor in business decisions. Indeed the addition of capital budgeting techniques expands the success chances in renewable energy projects.