Promoting PV energy through net metering optimization

Promoting PV energy through net metering optimization: The PV-NET project Georgios .C.Christoforidis Technological Education Institute of Western Macedonia, Greece [email protected]

Andreas Chrysochos, Grigoris Papagiannis

Maria Hatzipanayi, George E.Georghiou

Aristotle University of Thessaloniki, Greece [email protected]

University of Cyprus, Nicosia, Cyprus [email protected]

Abstract— As the Feed-in-Tariff (FiT) scheme that was used widely in the past years start to fade away, new schemes and policies are needed to revitalize the Photovoltaic (PV) market, which in danger of stagnation. FiTs have rapidly reduced in most countries mainly due to the sharp decline in PV system costs and the fact that targets set in terms of Wp installed by 2020 have already been reached. One of the schemes proposed is netmetering. This scheme implies that an algebraic deduction is performed between the electrical energy produced by the PV system and the energy consumed. The net result if the energy produced is higher, is fed back to the grid preferably at a certain premium or retail prices. Although net-metering is not widely adopting currently, the combination of PV systems cost decline and increase in electricity prices observed worldwide, will probably make such a scheme attractive to both investors and policy makers. In this context, PV-NET Metering is a project under Europe in the Mediterranean (MED) programme addressing the design of energy policies and strategies in the Mediterranean for cost-optimized utilization of Renewable Energy Sources (RES). It involves involves optimizing smart energy management schemes, in particular net metering, to provide an economically sustainable alternative to government FiT subsidies. This paper presents the initial steps taken in this project and presents an analysis concerning the Levelized Cost of Electricity (LCOE) in four regions – project partners and a grid parity calculation for Greece. Also, the methodology and technical specifications for the pilot installations foreseen are outlined. Keywords-component; net metering, grid parity, photovoltaics (key words)

I.

INTRODUCTION

The feed-in-tariff (FiT) scheme had been widely adopted as a cost-effective measure to increase the number of installed Photovoltaic (PV) systems, at a time when technology was not competitive. A number of EU countries (17 in total), many of which in the Mediterranean region, employed this scheme. Given the high solar resource in the Mediterranean and the fact that the area has already reached solar grid parity, the PV technology is no longer in need of any form of subsidization. In light of this, more effort towards re-evaluation of existing incentives is needed, targeting a faster PV technology uptake. Net-metering scheme [1, 2] on the other hand offers a much more cost-optimum tool for the creation of a self-sustainable market. In fact, it can provide a viable solution for customers

that are currently on a FIT scheme but will see their contracts end in a decade, or even altered during the contract length. Despite the benefits, few countries in the area have adopted net metering, and national energy policies have been slow to adopt legal frameworks needed. The utilities in Europe are at the point where they have started looking at net metering in a more serious way and are trying to prepare for this transition. In addition, the EU Smart Grid technology Platform regards net-metering as one of the key strategies for high PV grid penetration leading to high uptake of the technology. In this context, PV-NET [3] is a Europe in the Mediterranean (MED) project, aiming to pave the way for more efficient RES exploitation in the Mediterranean through a more cost-effective RES incorporation into the energy mix. Therefore, the objectives of the PV-NET project are highly relevant to EU policies [4], targets [5] and guidelines and the activities and results can lead the way towards this transition to cost-effective and energy efficient implementation of RES in the Mediterranean and the EU as a whole. The choice of optimal metering can be impacted by local energy pricing strategies and consumption profiles and for this reason, additional effort is needed to examine metering options in different countries. Also, it is important to demonstrate the viability/economic benefit of adopting the optimized frameworks in order to promote these advantages amongst the public, thereby creating a groundswell of support for these initiatives. The project involves the implementation of pilot installations for a cross-section of building types in the Mediterranean countries. The aim is to collect data useful for improving energy efficiency and informing prosumers. The data analysis will lead to a parameterized model where local conditions (e.g. solar irradiation, electricity prices) will be considered in a successful rollout of smart net meters. A best pricing model will be produced for set of input parameters, resulting in a set of recommendations for best practices per country, driving a wider adoption of PV. The participating countries span the whole of the Mediterranean region from East to West. Such a broad geographical span ensures the whole spectrum of different climatic and morphological aspects is covered, including both continental areas and islands. The involved countries are Cyprus, Slovenia, Portugal, Greece and France. In particular, the partner institutions are: The University of Cyprus, the Instituto Andaluz de Tecnología, the Aristotle University of

Thessaloniki, the University of Maribor, the Regional Agency for Energy and Environment in Algarve, the Cyprus Energy Agency, and the Agency for Energy and Environment in Rhone-Alpes. The outcomes of PV-NET are therefore applicable to the whole Mediterranean area and the plan is to diffuse and transfer them effectively in the region. The paper is organized as follows: In Section II the state of the art concerning PV installations is outlined, whereas in Section III the main objectives and activities related to PVNET project are provided. Section IV presents an initial analysis about PV grid parity in most of the participating Mediterranean regions. Finally, Sections V and VI summarized the methodology adopted for selecting the pilot sites and the pilot technical specifications respectively. II.

STATE OF THE ART

The countries of the Mediterranean have a high potential of solar irradiance, compared to Northern countries and one would have expected a higher penetration of PVs in their energy generation mixture. Moreover, the current situation is that PV generation in the Mediterranean region is highly unevenly distributed. At the end of 2012, Italy leads the production with 16350 MWp followed by Spain with 4500 MWp, France with 4000 MWp and Greece with 2400 MWp (2013 data), while others such as Slovenia (240 MWp) and Cyprus (20 MWp) still lag behind. These figures are much lower compared with the EU leader in PV generation, Germany, which has an installed capacity of almost 32700 MWp, in spite of having a lower solar potential than the Mediterranean. Moreover, in countries like France only around 100 MWp are installed in the Rhône-Alpes region, which is part of the Mediterranean region. These high discrepancies between the Mediterranean countries (and regions within the countries themselves) and countries with lower solar potential can be partly attributed to legal and bureaucratic barriers that exist in these countries but also to the lack of a consumer consciousness about the potential benefits of PV. The promotion of the PV technology relies entirely on the FIT scheme, which is a heavy governmental subsidy. France and Spain constitute examples of countries which have recently successfully demonstrated the need to move away from subsidy schemes to open market conditions so that PV energy can continuous its growth in a sustainable way. Despite the fact that smart net metering can alleviate administrative barriers in the most cost efficient way and make the transition from a subsidized to a market regulated situation, it has been adopted by very few countries (Italy and Spain). The participation of energy agencies in PV-NET project, with utilities and energy regulatory bodies as associate partners, demonstrates their willingness to push towards an implementation of the net metering scheme, once analyzing the outcome of this project. PV-NET aims to provide a push towards achievement of the National Strategic Reference Frameworks [6] strategic objectives for all the participating counties, which include investments in production of their energy from RES.

III.

OBJECTIVES AND ACTIVITIES

The PV-NET project aims to address the issue of low implementation and grid integration of PV technology in the Mediterranean which is already reaching or has reached grid parity. It proposes the study of smart energy management schemes in particular net metering, and their optimization as a means of replacing costly subsidies. The specific objectives of the project are: (i) the promotion of initiatives to ensure that PV is implemented and used in the best cost-efficient way, and without the need for financial support, (ii) the appropriate handling of the energy generated by PV through smart management of supply and demand, (iii) that through this improved knowledge, both the utility and the final users of electricity will be able to better manage the energy generated by PV, (iv) the strengthening of public policy and strategy for PV. Pilot net metering schemes will take place in 3 countries (Cyprus, Slovenia and Portugal) for a cross-section of building types in the Mediterranean countries. This will enable the quantitative analysis of the effect of tested schemes on electricity costs and efficiency. The involvement of electricity utilities, energy regulatory authorities and energy agencies in each country will allow access to consumption/pricing data for the study of economic advantages of different metering strategies and facilitate the network connection of installed PV. Metering schemes will be modeled and optimized using experimental data as feedback. In this way, the pilot installations will enable the demonstration of net metering benefits for both utilities and consumers in adopting optimized frameworks for renewables. The pilot installations will also serve for validation of the different models and help correct previous schemes’ shortcomings. Through stimulating PV uptake in the region, the project is expected to result in a reduction of citizens’ electricity bills, better energy management and RES deployment, and promotion of sustainable development. Moreover, PV-NET will provide significant feedback and important lessons regarding smart net metering applicability to the whole of Europe given that the scheme can be readily implemented in the Mediterranean. PV-NET supports existing initiatives (smart cities, Covenant of Mayors) and EU policy on RES [3] by promoting increased RES deployment in the most cost-efficient way and a distributed, smart-grid electricity generation environment. IV.

PV GRID PARITY ANALYSIS

PV Grid Parity (PVGP) usually is defined as the moment when the Levelized Cost of Electricity (LCOE) from PV generation becomes lower or equal than retail electricity prices, without the use of storage equipment. When this point is reached, investments in PV are generally considered competitive with other technologies without the need for support. Obviously, the key point in realizing whether PVGP is reached is the calculation of the LCOE. This is calculated here for 4 Mediterranean regions that correspond to PV NET project partners, namely Thessaloniki (Greece), Nicosia (Cyprus), Algarve (Portugal) and Ljubljana (Slovenia). Then, the

calculated LCOE is compared against the current electricity tariffs, in order to check if grid parity is reached. A. LCOE Calculation The LCOE is calculated using a slightly modified methodology as the one presented in [7]. Specifically, the LCOE may be determined using the following equation:

Table II summarizes the results from the above parametric analysis in terms of PV system lifespan and power, under the assumption and simplifications discussed. TABLE II.

CALCULATED LCOE IN 4 MEDITERANEAN REGIONS

System Lifespan (years)

25

30

T

Ct (1 + r )t LCOE = T t =1 Et ∑ t t =1 (1 + r ) I +∑

(1)

PV power (kWp)

where: T is the average system lifespan, I is the initial investment, Ct corresponds to the Operation & Maintenance (O&M) costs, Et is the electrical energy produced by the PV system at year t and r is the discount rate.

Thessaloniki (€/kWh) Algarve (€/kWh) Nicosia (€/kWh) Ljulbljana (€/kWh)

The analysis concerns only residential PV installations with peak power within the range 3÷7 kWp. Although the cost of such systems is not the same in the aforementioned regions and power range, it does not differ a lot. Therefore, for simplicity sake, a common value of 1.8 €/Wp for the installation cost is taken. The average system lifespan is varied between 25 and 30 years. The need to replace the inverter is taken into account at the 20th year, which is in line with the projections of EPIA/Greenpeace in [8]. The O&M costs include regular annual maintenance (2 hours per annum) and insurance costs (1.2% of installation cost) subject to inflation rate. The inflation rate is taken to be the European Central Bank’s target, i.e. 2%. The discount rate r is taken as the sum of the historical average inflation rate of the past 5 years (2008-2012) and the risk premium, assumed equal to 3% [7]. The electricity produced by the PV system is estimated using the online tool PV-GIS [9] for the 4 regions. The estimation in this tool takes into account the usual power losses in the overall system and provides an estimate in terms of kWh produced annually per kWp of installed PV power. In addition, an average annual degradation of 1% in the PV energy output is assumed. Since such installations are generally rooftop ones, they are not at optimal angle for maximized energy production. To account for this fact, we take the average estimated PV energy between a horizontal system and an optimally inclined one, as provided by the PV-GIS tool. The following Table I is illustrative. TABLE I.

ESTIMATED PV ANNUAL ENERGY PRODUCTION FOR ROOFTOP PV INSTALLATIONS Region

kWh/kWp

Thessaloniki (GR)

1109

Algarve (PT)

1383

Nicosia (CY)

1332

Ljulbljana (SLO)

943

3

5

7

3

5

7

0.187

0.179

0.176

0.18

0.172

0.168

0.138

0.133

0.131

0.133

0.127

0.125

0.158

0.15

0.147

0.152

0.144

0.141

0.217

0.208

0.204

0.209

0.2

0.196

B. PV Grid Parity Determination In order to determine whether PVGP is reached, the electricity retail prices must be known in each of the regions concerned. However, since the available tariffs are quite different and varied, only the case of Thessaloniki-Greece will be analyzed here. Electricity tariffs in Greece are generally regulated ones. The most common tariff is the residential without time-of-use one. The charges are dependent on the amount of electricity consumed every 4 months. Apart from the energy charge, there exist other surcharges for the transmission and distribution network, for public utility services and various taxes. Taxes include VAT (13%), the special tax for reducing greenhouse gases and the fuel tax. The following Table III shows the final charges including VAT, in terms of actual electricity consumed containing all the aforementioned surcharges. TABLE III.

FINAL ELECTRICITY CHARGES FOR COMMON RESIDENTIAL TARIFF IN GREECE

Consumption Scales (kWh)

€/kWh

0÷800

0.139

801÷1600

0.158

1601÷2000

0.167

2001÷3000

0.204

> 3000

0.209

As it may be easily realized comparing Tables II and III, PV Grid Parity is already reached comfortably in the Thessaloniki region for residential consumers having consumptions above 2MWh per four months. For consumers lying between 1.6 and 2 MWh, PVGP is almost reached if a 7 kWp system is concerned and a 30 year system lifetime.

V.

METHODOLOGY FOR PILOT SITES SELECTION

As was illustrated in the previous section, reaching PVGP and thereby making a PV investment in the residential sector attractive, is strongly dependent on the site location and the actual electricity consumption of the prospective prosumer. PV NET seeks to employ pilot installations in order to show the suitability of the net-metering scheme and thus, site selection is crucial. This section outlines the methodology for selecting the pilot sites. The general idea is that the pilot sites will be chosen from pending applicants for PV system installations who are waiting to join the Feed-in-Tariff scheme (over the quota), but whose application is ranked outside the quota for Feed-in-Tariff (indicatively 3.8 MWp has been approved for 2012 and applications for over 30 MWp have been received). As a result these applicants are more likely to be willing to install a PV system within the timeframe of the project. Adjustment of the installed capacity will be allowed in order to fall within the categories to be chosen for the pilots. Furthermore, it is important that the methodology to be followed for the selection of the pilot sites is in line and in full compliance with national initiatives and priorities concerning PV installations and net metering schemes in the countries where pilots will take place. This will ensure that no bureaucratic, policy or other obstacles impede the implementation of the pilots. The selection will be for domestic urban, domestic rural, single-phase and three-phase consumers from a geographical spread. As a result, a range of different cases is considered, while there is no biasing in our sample. The course of action is summarized in the following steps: 1. Consider applications for PV system installations which exceed the quota for PV power generation using the Feed-in Tariff scheme. 2. The applicants exceeding the quota are notified and are given the option to join the pilot net metering scheme. General information about net metering and the selection criteria for participating in the pilot scheme are provided. 3. The methodology for the selection of the pilot net metering sites is indicated in Fig.1. 4. All interested applicants must inform the selection committee of their decision within 4 weeks from their notification. They need to provide (1) a signed agreement form, (2) electricity bills for the last year, and (3) a revised feasibility/sustainability study for the PV installations. The methodology for the selection of the pilot sites is the following: • Two selection stages will be followed: the first one concerns the choice (via set criteria) of a N number (possibly more than 50) of applicants from the large pool of those exceeding the FIT quota, and the second one concerns the random selection of 5-10 applicants from the N selected in the first stage.

• From the applicants who will accept to participate in the pilot net metering scheme, 65% of them will be chosen to be from urban areas and 35% from rural areas. • All applications selected as pilot net metering sites will have to conform to the relevant law regarding PV installations (Town planning and housing regulations, terms of connecting to the national grid, etc). In order to apply a filtering for the first selection stage, the criteria that will be taken into account for the selection of the N number of PV sites are: I.

The geographic location of each PV system installed

II. The total annual energy generation (labeled G in Fig.1) of each system compared to the total annual consumption (labeled C in Fig.1) at the site. A total of 80% of the sites to be selected will concern total power generation exceeding the total electrical energy consumption (up to 20% in any billing period) whereas 20% will concern cases where the generated electrical energy does not exceed the total consumption of the site (in any billing period). III. The consumption (C) ranges are also a criterion for further filtering and they involve 2 categories: C > 8MWh and 4MWh