Modeling Uncertainty in Rooftop PV Investment Return

Residential energy consumers in the U.S. have shown increased interest in solar-based electricity at home, resulting in increased adoption of photovoltaic (PV) systems on residential rooftops. Empirical research has determined that economic factors are the dominant motivation behind consumers’ decisions to adopt rooftop PV. However, the high degree of uncertainty with respect to return on investment has slowed adoption rates. The factors that drive this uncertainty can be classified as exogenous and endogenous. Exogenous factors include market and environmental factors that are not under the consumers’ control, such as change in net metering policies and future electricity tariffs, and amount of solar irradiance. Endogenous factors involve consumer actions, such as future electricity consumption and moving to another residence. This paper describes an analytical framework that incorporates these factors to evaluate rooftop PV investment return. Monte Carlo simulations using historical datasets for a city in Iowa are used to explore the sensitivity of a consumer’s return on investment to different factor levels. This modeling approach can be used to guide consumers’ rooftop PV adoption decisions, as well as help PV system installers and policymakers to increase the rate of PV system adoption among consumers.