Defining Solar Farm Lifetime From Techno-economic Indicators

Photovoltaic (PV) system design and project viability are conventionally decided based on the assumptions: “end of life at 80% capacity” and “20–25 year system life.” These heuristic assumptions decouple the local financial context from long-term technical performance dynamics, obscuring the technoeconomic optimal in the decision aiding analyses. In this article, we present a technoeconomics driven framework to explain the project lifetime of PV farms. The levelized cost of energy (LCOE) varies with the chosen project lifetime, and we show that there is an optimum operational life of the PV system where LCOE is minimum. We compare the fixed-rate degradation (FRD) model to a realistic degradation (RD) profile to quantify LCOE and optimal project lifetimes. FRD significantly overestimates the optimum lifetime. For a baseline system reaching 80% capacity in 25 years (“technical lifetime”), the FRD model predicts an unrealistic optimum life of 58 years, whereas the RD model yields 32 years at 2.5% interest rate and 2% inflation rate. We study the variation in optimum lifetimes for different interest/discount rates, inflation, and technical lifetime. While optimum lifetime increases as each of these parameters increase, LCOE only goes up with the economic rates. Our results indicate, in certain local conditions, it may be possible that the optimum is lower than the technical lifetime—i.e., it would then be better to set the system decommissioning date even before the warranty. By bridging realistic system performance with LCOE analysis to identify the year of minimum LCOE, our approach provides investors and policymakers with a robust metric to maximize financial returns and decide when to decommission.