Investing in Green Energy: Profitability Analysis of Solar Energy for Household Consumption in Albania

Abstract

Exhaustion of conventional non-renewable energy sources together with climate change mitigation presents challenges for policy makers globally. An alternative to address the increased demand for energy with less negative impacts on the environment is using renewable energy sources whose reserves are supplemented by natural ecosystems. Furthermore, EU directives impose actions on Member States for the reduction of pollution from conventional sources. Countries must aim to increase the share of renewable energy sources in energy consumption, as significant measures towards sustainable development. However, several factors affect the succession of green energy adoption, where financial considerations remain key determinants in decision-making by companies, families, and institutions. The study conducts a cost-benefit analysis using methods of capital budgeting to evaluate the profitability of solar energy for household consumption in Albania. The paper aims to provide insights into the potential of green energy investment in Albania, focusing on the solar energy sector and financial factors that are relevant to these investments’ succession. Data analysis and forecasting are conducted for a lifespan of 30 years, assessing average data of electricity prices, the productivity of solar panels, direct costs of investment, interest rates, exchange rates, and inflation rates. The study concludes that investing in solar panels for household consumption in Albania is profitable, as it is reported that discounted benefits exceed the investment cost.