360 Analysis of Solar PV Utility Scale Projects, A Balanced Scorecard Approach
The general accepted approach to analyzing Solar PV Utility Scale projects is by examining the financial data and the different relationships it can generate through the calculation of financial ratios. Seldom, the impact on communities and the environment is considered.
Many times, it is assumed that these projects have a high degree of inclusion and a positive impact on the environment. Notwithstanding, in all large-scale projects you are going to be exposed to positive and negative stakeholders, where their expectations must be satisfied, and it is in the context that a methodology such as 360 balanced scorecard becomes a useful tool.
Developed in the nineties 90s by Robert S, Kaplan and David P. Norton, the balance scorecard has become a very popular tool for performance evaluation and strategy development among Fortune 500 Companies. Adding, the impact on the environment and communities makes it a unique tool used for the evaluation of Utility scale and Distributed Energy Resources.
A 360 Analysis based on a balanced scorecard methodology is predicated on the establishment of a point system that allows the analyst to score the different aspect of the project. On the financial side, we have: Internal Rate of Return, Return on Assets, Return on Equity, Cash Flow and Economic Value Added.
On the environment, you may want to determine the impact on the environment per every dollar spent on the installation, Certificates of Emissions Reductions Contributions, Renewable Credits Contributions, Corporate Sustainability assessment, Carbon Neutral Index, Community Performance Index. However, such an analysis will only be complete once the social element is considered, among the many ratios, we have: Social Return on Investment, Impact Investment.
The process begins when the analyst computes and scores the project in three areas: the economics, its contribution to the environment and its positive impact on the community it is going to service. If an average score of 80 is achieved, the developer is given the thumbs up, however, if the project scores below the average, the analyst explores ways in which he or she can assist the contractor in improving the score so that I becomes an option. By having an iterating process, the developer manages to see the short falls of the project and improve on them, making it a viable option.
The conclusions drawn, is that it captures all aspects and provides an ample view that allows investors to measure profitability and sustainability.
