Benchmark rate of return for solar power generation

What are the benchmarks for solar installation profitability?

The most common benchmarks of a solar installation profitability are: Levelized Cost of Energy (LCOE), Internal rate of Return (IRR) and Return on Investment (ROI). LCOE) is widely used to define the cost of electricity generated over the lifetime of the solar power plant (typically 25 years).

What is a good IRR rate for a solar project?

While there's no definitive “good” IRR rate, industry benchmarks can provide a general reference point. According to various reports, the average IRR for commercial solar projects in the United States can range from 10% to 15%. The best approach to determining a good IRR for a solar project is to consider the unique circumstances of your project.

How do solar developers calculate IRR?

By inputting all projected costs and electricity sale revenues into the IRR calculation, solar developers can rank competing PV projects by profitability to select the best investments. Tracking actual IRR over time verifies that positive returns meet targets.

How much IRR do solar farms deliver?

Solar farms typically deliver IRRs in the range of 5% to 8%, depending on installation costs, local energy pricing, and tax benefits (LEV, Shasta Power). At Shasta Power, we target a robust 18% IRR across the life of the investment by combining returns from multiple projects, securing PPAs, and maintaining capital efficiency.