Economic sustainability of renewable energy integration: A comparative cost-benefit analysis using EIRR, NPV, and LCOE across small islands and urban systems

This study evaluates the economic sustainability of renewable energy (RE) integration through a comparative cost-benefit analysis (CBA) using three metrics: the economic internal rate of return (EIRR), net present value (NPV), and levelized cost of energy (LCOE). Focusing on Mauritius as a representative Small Island Developing State (SIDS), the analysis contrasts its RE economics with urban grid systems to assess scale, financing, and policy implications. The paper aims to address how different geographies affect the economic feasibility of RE deployment, a gap often overlooked in conventional financial models. Drawing on secondary data from project reports, policy papers, and utility tariffs, the study applies scenario-based sensitivity testing to compare hybrid solar-wind projects with diesel-backed grids. The results indicate that while small island systems face higher LCOEs and delayed breakeven points, they exhibit competitive EIRRs when factoring in avoided import costs and long-term sustainability gains. The paper concludes that SIDS require tailored economic appraisal models that incorporate externalities, financing constraints, and institutional risks. Policy implications include the adoption of blended finance, viability gap funding, and performance-based procurement to improve RE bankability across constrained grid environments.