Optimal sizing of residential photovoltaic systems: a self-consumption-driven framework for long-term profit maximization

This paper addresses the problem of optimal sizing of residential photovoltaic (PV) systems from an economic perspective. While traditional approaches focus on technical indicators such as self-consumption, self-sufficiency, or the average cost of electricity over the PV system’s lifetime, they often overlook the financial feasibility of the investment. To overcome this limitation, we propose an optimization framework that maximizes the ratio between Net Present Value (NPV) and Capital Expenditure (CapEX), providing a balanced trade-off between profitability and initial investment. The proposed method integrates self-consumption into the economic model and evaluates the system’s performance across a wide range of economic scenarios defined by feed-in tariffs, installation costs and electricity prices. The range of prices has been chosen to reflect the typical values encountered in the European Union, ensuring the relevance of the results by also comparing them with another optimization criterion: minimizing the Net Energy Exchange with the Grid. The results, based on high-resolution consumption data, demonstrate significantly higher investment efficiency, with the proposed method achieving a return on investment over twice as favorable as the NEEG-based approach, shorter payback periods and comparable self-consumption values. These findings are directly relevant to the objectives of the European Renewable Energy Directive (RED III, 2023), which mandates an increased share of renewable energy in household consumption: by combining financial attractiveness with local energy utilization. The proposed framework supports policymakers in designing incentive structures that encourage PV adoption while reducing grid dependency.