EVALUATING ALTERNATIVE PROJECT FINANCING MODELS FOR UPSCALING GRID-CONNECTED SOLAR PHOTOVOLTAICS PROCUREMENT IN SINGAPORE PUBLIC BUILDINGS

Abstract

Solar Photovoltaics (PV) have been seen globally as an alternative to fossil fuels and a clean and sustainable source of energy to lower carbon emissions. Singapore’s government through several test bed projects has been exploring the viability of solar generation in Singapore. However as solar PV projects require high capital investments and generate limited revenues, the current financing models used by the public sector are not sustainable for upscaling solar productions and are only suitable for small scale projects. This indicates a need to explore new alternative financing schemes which allow the leveraging of private capital thus allowing the public sector maximize its solar generating potential in the most cost effective manner. This study evaluates and compares the financial feasibility of five project financing models for large scale solar PV installations, namely self-financing, power purchase agreement (PPA), solar leasing, hybrid PPA, and hybrid solar leasing. This study is set in the context of Singapore public housing, using the largest public building owner, the Housing Development Board (HDB), as a case to illustrate the potential implications of all models. The models were evaluated using financial modelling, a process which involved collected data for identified variables, generating cash flow statements for each model, and calculating the financial performance of each model over the projects life using the net present value, internal rate of return and discounted payback period. A sensitivity analysis was lastly conducted to determine the effects of changes in the input variables on the NPV of the project and its stakeholders. From the financial evaluation and sensitivity analysis, it was established that the PPA model and the hybrid-models, are the most financially feasible models for HDB to adopt to upscale its solar PV installations in Singapore. The self-financing model has high capital requirements which financially strain HDB, and similar to the solar leasing model, it was found to expose HDB to greater financial risks. The comparative results can help statutory boards make better decisions to best optimize their capital resources in vibrate economic and market conditions.