Palestinian Solar’s Returns Problem Isn’t About the Sun

Eng. Mohamad AbdelHadi

Palestine sits on one of the better solar resources in the Mediterranean. Developers know it, donors are funding it, and the pipeline of PV projects has grown steadily. The financial logic writes itself: high irradiance, rising electricity costs, concessional capital available. What the project memos tend to skip is the performance data and that data tells a more complicated story. Khatib et al. (2021) measured yields across operational Palestinian PV systems and found figures ranging from 2.8 to 5.2 kWh/kWp/day. In a territory where the solar resource is broadly uniform, that spread has nothing to do with sunlight. It is a maintenance and monitoring story. Systems that get regular attention perform near the top of that range. Systems that do not drift toward the bottom, slowly and invisibly, while their owners assume otherwise. For any investor running a discounted cash flow on a Palestinian PV asset, the range matters enormously. A system operating at 2.8 kWh/kWp/day instead of a projected 4.5 does not just underperform it restructures the entire return profile. Payback periods lengthen. Debt service coverage ratios tighten. What was modeled as a 7-year payback quietly becomes 11, and no alarm goes off because the system is still producing electricity. It just is not producing enough of it. The fault incidence figure from the same study makes this concrete. Roughly 47% of inspected systems carried active technical defects soiling, shading, inverter degradation, wiring failures. Nearly one in two. That is not a quality control outlier; it is a sector-wide pattern, and it has a direct line to financial underperformance. Every undetected fault is a yield reduction that compounds over time, uncontested and unrecovered. The problem starts earlier than operations, though. A substantial share of Palestinian PV projects were designed against modeled irradiance assumptions rather than measured site data (Khatib et al., 2021). In project finance, garbage-in-garbage-out is not a cliché it is a liability. Yield projections built on optimistic irradiance inputs will overstate returns, and when actuals diverge, the shortfall does not disappear. It gets absorbed: by missed savings targets, by development programs that cannot close their impact accounting, by lenders quietly reclassifying assets. Mature solar markets solved this a decade ago. Verified resource data, operational monitoring, and enforceable O&M contracts are standard project requirements in most OECD jurisdictions, and IRENA has recommended them consistently for emerging-market deployments. Palestine has the resource to support a genuinely productive solar sector. What it lacks is the operational discipline that converts resource potential into bankable, auditable financial returns. The opportunity cost of that gap is real. Capital that could be compounding in well-monitored, consistently performing assets is instead spread across a portfolio where nearly half the systems are degraded and nobody is systematically tracking the loss. For the next generation of project sponsors, lenders, and development finance institutions entering this market, the question is not whether Palestinian solar pencils out. Under the right conditions, it does. The question is whether performance monitoring, data integrity, and maintenance accountability will be treated as the financial controls they are or left as footnotes in a commissioning report that nobody reads twice.

References:

Khatib, T., et al. (2021). Palestine Energy Policy for Photovoltaic Generation Current Status and What Should Be Next. Sustainability, 13(7), 3990.

International Renewable Energy Agency. (2023). Renewable Power Generation Costs in 2022. IRENA.

International Energy Agency. (2023). Solar PV Global Supply Chains. IEA.