Assessing the Economic Impacts of Net Metering on Residential Solar Photovoltaic Adoption: A Palestinian Case Study

Abstract

This research evaluates impacts of net metering on residential photovoltaic (PV) adoption in Palestine, focusing on PV systems ranging from 2 to 5 kWp. The analysis considers key factors such as energy generation, self-consumption, self-sufficiency, and economic viability, with PV coverage meeting an annual demand of 6378 kWh. Under the current net-metering scheme, 10% discounted of exported energy, and unused energy is forfeited at year end. The 2 kWp system generated 3405 kWh annually, achieving a self-consumption rate of 63% and covering 35% of household energy needs. Conversely, the 5 kWp system produced 8514 kWh but exhibited a lower self-consumption rate of 31% and a self-sufficiency rate of 43%. In terms of economic performance, the 2 kWp system delivered the highest internal rate of return (IRR) at 23.60% and a discounted payback period (DPP) of 4.95 years. Meanwhile, the 3 kWp and 4 kWp systems demonstrated IRRs of 23.1% and 22.76%, with DPPs of 5.07 and 5.15 years, respectively. Although the 4 kWp system had a higher net present value of $5,626.8 compared to $2968.2 for the 2 kWp system, the latter remained more efficient with a higher IRR of 23.60%, vs. 22.76% for the 4 kWp system, suggesting that the 4 kWp system offers greater overall profit, but the 2 kWp system yields better returns on investment. Nevertheless, the 5 kWp system, despite generating the most energy, had the lowest IRR at 16.72% and the longest DPP of 7.20 years due to discounted and forfeited credits at year end. Therefore, the study recommends that households install PV systems closely aligned with their energy consumption to maximize self-consumption.