Solar photovoltaic feed-in tariffs: viability analysis and policy recommendations

Securing financial support from governments and donors is crucial for promoting renewable energy systems like solar photovoltaic (PV). This support can be provided through mechanisms such as subsidies, quotas, tendering, and feed-in tariffs (FITs). In Ethiopia, the lack of a fully approved FIT policy for solar power generation has hindered independent power producers (IPPs) from participating in the energy market. This study examines FIT estimations and viability analysis for two PV power stations and two utility-scale PV parks. To evaluate the performance of the FIT rate estimations, five key performance indicators (KPIs)—net present value (NPV), levelized cost of electricity (LCOE), payback period (PBP), internal rate of return (IRR), and benefit-cost ratio (BCR)—were employed, along with solar radiation and grid-connected PV system costs. The technical and economic analysis of the proposed system was analyzed using PVGIS and MATLAB tool. Results revealed that a PV power station with an $88,300,000 investment can achieve a net present value (NPV) of $1,462,653,170.76, an IRR of 22%, and a FIT rate of $0.023/kWh, recovering its initial investment within 15.6 years. A PV park with a $428,500 investment can achieve a NPV of $149,401.04, an IRR of 12%, and a payback period of 11.3 years, with a BCR of 1.03. Based on these findings, the adoption of dynamic and market-based FIT policies is recommended to promote renewable energy development and attract IPPs to Ethiopia’s energy sector.