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Purpose: The purpose of this paper is to provide a tentative model to assist a business in South Africa in determining the present cost of producing electricity using a solar photovoltaic (PV) system. This cost can then be compared to the cost of purchasing electricity as most businesses do, i.e. off the power grid from ESKOM. This model is intended to assist the business in perfoming a cost comparison and deciding how it will meet its electricity demands. What is the levelized cost of electricity for a solar PV system in South Africa?Are solar PV systems economically feasible for businesses in South Africa? Methodology and Approach: The two most prominent methodologies used to determine the cost of producing electricity using a solar PV system are using a levelized cost of electricity (LCOE) calculation and using a computer application.This paper adopts the LCOE methodology as this approach allows for more transparent calculations as the formulas used are presented and analysed. The underlying assumptions are also presented when using the LCOE methodology, which allows for the assumptions to be critically analysed. Findings: The present cost of producing electricity from a solar PV system is determined by calculating the levelized cost of electricity (LCOE). The results of a scenario analysis performed on the levelized cost of electricity calculation used in this paper resulted in a reasonable range for the cost of producing electricity using a solar PV system to be between R0.914678 and R2.07 per kilowatt hour (kWh). This result implies that there is currently potential for a solar PV system to be economically feasible for a South African business. The economic feasibility of a solar PV system is determined by the specific circumstances a business faces. These circumstances are represented by the variables in the LCOE formula. The results of the sensitivity analysis performed on the LCOE calculation indicates that the cost of producing electricity using a solar PV system is most sensitive to changes in the discount rate, the level of insolation at the location the panels will be placed, the initial cost of the system and the efficiency of the panel. As a result of this the economic feasibility of a solar PV system for an individual business will be determined by the values assigned to these variables by that business given its unique circumstances.

The Levelized Cost of Electricity for a Small Scale Solar PV System in South Africa