Net Present Value (NPV) Analysis of Solar Microgrids for Off-Grid Rural Schools in the Philippines, integrating Carbon Credit Valuation and Sensitivity Analysis

FEU Institute of Technology, P. Paredes St. Sampaloc, Manila, Philippines 1015

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Abstract

This research investigates the economic feasibility of solar microgrid deployment in five remote off-grid educational facilities across the Philippines—spanning Regions XII, IVB, X, IX, and BARMM— utilizing a multi-criteria financial framework involving Net Present Value (NPV), carbon credit valuation, and sensitivity analysis. The study addresses the critical research gap in transitioning from diesel-dependent paradigms to decentralized renewable energy by quantifying the fiscal barriers to rural electrification. Baseline NPV results across all five sites yielded consistently negative values, confirming that under current market conditions and without external subsidies, standalone solar microgrids remain economically prohibitive for off-grid schools. While carbon credit integration offers a mechanism for quantifying environmental externalities, the current market valuation of P500/ton (approx. USD 8.50/ton) CO2 provides an annual revenue of only P704.3I to P1,408.61, which is an insufficient fiscal offset to achieve break-even points. Stochastic sensitivity analysis identifies the discount rate (8%-14%) and Capital Expenditure (CAPEX)as the most critical determinants of project viability. The findings underscore a systemic “viability gap” that necessitates strategic policy interventions, including grant-based funding, low-interest green financing, and community-led ownership models to bridge the divide between environmental necessity and financial sustainability in developing island nations.