Photovoltaic Investment Risk and Uncertainty for Residential Customers

The revenues generated by rooftop photovoltaic (PV) systems have several sources of uncertainty. We use a Monte Carlo framework to explore the sensitivity of PV investment returns to three categories of PV investment uncertainty: 1) interannual solar variability, 2) PV technical performance and maintenance costs, and 3) market risks including future electricity rates and the possibility that retail electricity rates will be restructured for PV customers. We find that PV investment risk and uncertainty is driven by market factors in some U.S. regions (California and Massachusetts) and by the PV technical performance in other U.S. regions (Missouri and Florida). We explore the relative impacts of three methods for reducing PV investment uncertainty: research-and-development-driven performance improvements, system performance guarantees that are common for third-party owned systems, and long-term power purchase contracts. We find that the effectiveness of each risk reduction option varies by region, depending on which factors drive regional PV investment uncertainty.