CASH FLOW AT RISK (CFAR) FOR SOLAR PHOTOVOLTAIC (PV) INVESTMENT IN COMMERCIAL BUILDINGS

Abstract

Solar Photovoltaics (PV) has increasingly caught the world’s attention as a substitute to fossil fuels to reduce greenhouse gas. Singapore being a high electricity consumption nation has been exploring the viability of solar generation. Due to land constraint, Building Integrated Photovoltaics (BiPV) is a better option where photovoltaics materials that can be used to replace conventional building materials in parts of the building envelope. However as BiPV projects require capital investments and the revenue is dependent on the PV output, the profitability of which is being questioned. This indicates a need to re-assess the stability and sustainability of electricity generation by BiPV systems in Singapore so as to help project investors to better manage project cash flow. This study aims to find out the key factors that are often neglected, but potentially affecting the BiPV output in Singapore. Upon identification of the key variables, their levels of impact on the project cash flow are assessed and, as the last step, a hypothetical model is established to predict the profitability of the BiPV system over its project life. This study is set in the context of Singapore commercial building, using Zero Energy Building (ZEB) as a case study. The final result is obtained by going through risk assessment and financial assessment processes. In the risk analysis, a functional equation is generated representing the relationship between risk variables and BiPV performance. The financial impact is then calculated based on the predicted electricity price and predicted PV output, and Cash Flow at Risk (CFaR) is generated through incorporating Earnings before interest, tax, depreciation and amortization (EBITDA) technique in the financial assessment.