Solar Systems for Manufacturers: Evidence from Northern Cyprus

From the past few decades, the use of fossil fuels has observed a significant increase, causing a serious threat to future resources. Countries have started relying on non renewable resources for energy generation, which has led to the world’s pollution, severe climate changes, and high carbon emissions. This is important and vital in the process of achieving sustainable development. Cyprus, the third-largest island in the Mediterranean, is also facing this issue. Researchers have conducted various studies to determine the financial and operational viability of solar energy and wind for producing energy. The market of solar panels production is constantly growing, owing to increased demand for energy generation sources from renewable resources. Literature analyses showed that fossil fuels have significantly damaged the environment and therefore, many other energy resources are considered to produce electricity for achieving sustainable development. Electricity is argued to be a costly input for the industry in North Cyprus which has negative impacts on the productivity and competitiveness of especially manufacturers. In this thesis we argue that if manufacturers use solar systems to generate electricity, it will help them to reduce one of their input costs. In this respect, feasibility analyses are made for two different projects which are for 2,5 and10 MW capacity of solar power systems. Findings reflect that NPV for 2,5 MW of solar system is positive being 1.280.396 Euros and an IRR higher than discount rate, as 27%. We also carry out a feasibility analysis for 10 MW as well and find that NPV is 5.418.014 Euros and IRR of 28%. These results show that both project are feasible and a profitable investments. As for risk, sensitivity analysis shows that in 2,5 MW project, only when the production of solar systems fall by 40% and more, the NPV will turn to negative. There is no risk for the project in relation to price and other variables. We also find that 10 MW capacity of solar power project has relatively lower risk in relation to production and price. As a whole, the results of the financial analysis for the solar systems show that the non-renewable energy sources do have positive financial implications along with a reduction in the carbon footprints for the corporate world. As for the manufacturers in North Cyprus who consumes around 83.000 MWh yearly, we show with this study that they these projects can supply 5% and 21% of this consumption respectively and can reduce their energy costs significantly. The implications of these findings call for the policy makers and the governments to support and encourage manufacturers to build solar farms. This can be done by providing more convenient financial means and by giving permits to manufacturers.