Energy transition

Solar

Utility-scale photovoltaics: rows of panels, a substation and an export line. The cheapest new generation there is, with no fuel and almost no operating cost. Not a regulated network but a low-cost generator: build the array, then earn generation × power price, often against a contracted PPA floor, for decades. Pick a real project below and follow the development, the model and a working returns model.

In focus ·
Example

Drag the sliders to see what earns the money: the capacity built, the power price (or PPA), and the capacity factor that turns sunshine into generation, all against a contracted floor.

300 MWp
Capacity
Generation
Generation revenue
recurring revenue p.a.
EBITDA p.a.

01

What it is & how it works

02

How it earns

Model A · the low-cost contracted generator

Generation × price, against a PPA floor

Utility-scale solar is the cheapest new generation there is: rows of PV panels, a substation and a grid connection, with no fuel and almost no operating cost. The revenue is simple: generation × power price, where generation is capacity × hours × the capacity factor (how much of nameplate the irradiance and tracking realise over a year). Much of the output is typically sold under a power-purchase agreement (PPA or CfD) at a fixed price, a contracted floor, with the rest merchant. Because opex is tiny, the EBITDA margin is very high (often 80–90%): almost all of revenue is margin. The catch on the merchant slice is solar’s own price cannibalisation: when every plant generates at midday, the pool price during sunny hours falls. Returns hinge on the capex per MWp, the capacity factor and the price the power earns.

03

What it costs, and how it's financed

Revenue → operating costs → EBITDAMargin

The capital · panels + grid connection
Financingallocation

    History & framework · key milestones
      04

      Cash flows & returns

      Build & capex

      m
      m
      %
      %

      Revenue regime & tax

      m
      m
      %
      ×

      Financing & hold

      ×
      %
      %
      y
      Unlevered IRR
      asset / project return
      Levered IRR
      return to equity
      Equity multiple
      MOIC over hold
      Payback
      project, undiscounted
      Cash-flow profile, equity invested   returned
      Show the year-by-year schedule
      05

      What drives the return

        See also the Solar farm simulator, which lets you build and run a plant interactively, and the Cash-flow & DCF model.