ARC-05-5577 - Adewumi - Cost Benefit Analysis of Solar ...

COST-BENEFIT ANALYSIS OF SOLAR POWER USAGE IN RESIDENTIAL BUILDINGS IN AKURE

ADEWUMI, Ayomikun Solomon

Department of Architecture Federal University of Technology, Akure

M.Tech 1 Course: Applied Climatology (ARC810) Course Lecturer: Prof. O.O Ogunsote Matriculation Number: ARC/05/5577

Abstract

With the persistent state of epileptic power supply in Nigeria coupled with emission of

greenhouse gases, the need to incorporate an alternative means for energy supply can never be

overemphasized in such a time as this. In considering an alternative therefore, one should opt

for one that is clean, environmentally friendly, readily available and renewable with the aim of

conforming to the concept of sustainable development and going green. The only green

alternative that has gained prominence in recent years is the solar power usage which has

found wide application in generating thermal and electrical energies. Other alternatives are

wind and geothermal energies. Considering some determining factors, this paper aims to relate

the cost of solar power usage in residential homes to the benefits it offers in a cost benefit

analysis using Akure- a ‘sun city’ in southwestern Nigeria as the study area. Such benefits

include: Environmental friendliness, reduction in global warming, easy installation, inexpensive

on the long term and low maintenance e.t.c.

Keywords: alternative means, cost-benefit analysis, energy supply, renewable, solar power,

sustainable development

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COST-BENEFIT ANAYSIS OF SOLAR POWER USAGE IN RESIDENTIAL BUILDINGS IN AKURE

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1.0 INTRODUCTION

The sunlight that reaches the earth comprises of up to 50% visible light, 45% infrared

radiation, small amount of ultraviolet and other forms of electromagnetic radiation

(Encyclopædia Britannica, 2009a). This radiation has a strong potential of either been converted

to thermal energy or electrical energy. Encyclopaedia (2009b) defined thermal energy as the

internal energy present in a system in a state of thermodynamics equilibrium by virtue of its

temperature. The flat plate collectors and the concentrating collectors are the two main types

of devices used in capturing and converting solar energy into thermal energy.

Solar energy can be converted directly to electricity by solar cells. It basically works on

the principle that in such cells, a small electric voltage is generated when light strikes the

junction between a metal and a semi-conductor or the junction between two different

semiconductors. The potential of the solar energy is enormous giving an account of generating

almost 200,000 times the world’s daily electricity if only it can be utilized. Further research

submitted that the sun generates more than 10, 000 times the amount of energy the entire

world consumes annually (Green Living Ideas, 2011). Unfortunately, though the solar energy

itself is free, the high cost of its collection, conversion and storage all hinders its exploitation.

Generating electricity from the sun is known for many centuries ago and can be traced

back to ancient Greeks and Romans who used the Sun’s capacity to light and heat indoor spaces

and ending at present times when solar technology has made huge achievements and is ready

not only to compete with other well known energy sources but already even to replace them.

In the 19th century, scientists were attracted and intrigued by solar energy possibilities. From

then till now there have been huge inventions in solar technology sector which led to

spectacular development in this sector. Indeed, some very important inventions were made.

A good example was Albert Einstein who did a research on the photoelectric effect (a

phenomenon central to the generation of electricity through solar cells). William Grylls Adams

also revealed that when light was shined upon selenium, the material shed electrons, thereby

creating electricity. Gerald Pearson, Daryl Chapin and Calvin Fuller invented the first silicon

solar cell capable of generating a measurable electric current in 1953. This invention was


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announced and reported to be as “the beginning of a new era”, leading eventually to the

realization of harnessing the almost boundless and limitless energy of the sun for the uses of

civilization. However, in 1956 the solar photovoltaic panels (PV) were still far from economically

practical. In comparison, electricity from solar cells ran at about $300 per watt while today

market rates are around $5 for a watt of solar PV (Proposed Basic Concept of Energy Chain by

the World Energy Congress, 2004). For achieving such price difference, massive investment in

subsidies and research were done. Lately, in 2002, Japan installed 25,000 solar rooftops and

such large PV orders are creating economies of scale, as a result steadily lowering costs. Worthy

of note is that the PV market is currently growing at 30 percent per year and that gives a

promise of continually decreasing costs.

Nigeria as a country is rich with energy resources such as petroleum, natural gas, coal,

tar sand, and biomass. The country consumes a large amount of liquefied petroleum gas, motor

spirits, kerosene, diesel oil, fuel oil, and gas oil. All of these mentioned energy sources give huge

impact to climate change problems with lots of green-house gasses emissions as well as a rise in

many environmental problems in general. From the perspective of renewable energy therefore,

the country has a massive potential for developing and implementing energy sources such as:

solar, hydro, biomass, and wind energy.

Knowing that Nigeria has an annual average daily solar radiation of about 5.25

kWh/m²/day, varying between 3.5 kWh/m²/day at the coastal areas and 7.0 kWh/m²/day at the

northern boundary, and average sunshine hours all over the country is about 6.5 hours (P. Lloyd

and E. Visagie, 2007) can give us an impression that implementing solar energy strategy is a

great opportunity for Nigeria to get renewable energy at low cost as well as minimize

dependence from fossil fuels; and finally solar energy would give an opportunity to implement

infrastructure where before it seemed to be too hard or too expensive. This paper thus focuses

on the cost-benefit analysis of solar power usage in Residential buildings in Akure.


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2.0 THEORETICAL CONCEPTS

2.1 SOLAR POWER USAGE IN RESIDENTIAL BUILDING

In discussing solar usage in residential premises, two options that readily come to mind

are application for thermal (when a heat pipe are arranged to heat up hot water) and solar

home electricity. By comparison, the solar thermal is more efficient as regards storing and

conserving of energy for future use. Also the largest draw on power use that most family have

after running the refrigerator is hot water for showers and cleaning. A solar power residential

system is a bit technical as necessary information may need to be taken on the actual electricity

usage and the orientation of the house as the system requires a south facing solar panel system

where sunlight can be trapped and converted to electricity (Solar Power Buzz, 2011). This

however depends on how the house was constructed as this may or may not be feasible as the

more the radiation received during the day, the more efficient it is when the need arises.

Required for the set up aside the photovoltaic rays are a power inverter (to convert the

direct current to alternating current), charge controllers and batteries to store power for future

use.

Figure 2.1: Figure showing a solar power usage set up Source: Karolis et al (2008)


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2.2 SOLAR PANELS

These are devices that receive light from the sun and convert it to energy suitable for

home use (Green living ideas, 2011). They are located on the roof of the house and connected

to the heating system. Solar panels serve two major functions in residential buildings which are

to heat water and produce electricity. Solar panels designed to heat water are also known as

thermal solar system while electricity producing panels are called photovoltaic systems.

The method of operation depends on what purpose the solar panels are meant to serve

i.e. either as solar water heating or for electricity. A solar water heating system usually contains

a ‘collector’ to absorb solar radiation and turn it into heat. A heat-conducting liquid then carries

the heat from the collector to the hot water tank.

In an electricity-producing system however, a positively charged layer of silicon is placed

against a negatively charged layer of silicon forming a field of electrical charges to pass through.

The sunlight as it shines on the panel creates these electric charges. A conductive metal is made

available which concentrates the charge into an electric current which can power household

appliances.

2.3 CHARGE CONTROLLERS

These are sold to consumers as separate devices often in conjunction with solar

generators for uses such as RV, boat and off-the-grid home battery storage systems (Wikipedia,

2011a). Charge controllers are also called solar regulators in solar application. They function

majorly to disable further current flow into batteries when they are full. Simple charge

controllers stop charging a battery when they exceed high voltage level and re-enable charging

when battery voltage drops below that level.

2.4 INVERTERS

An inverter is an electrical device that converts direct current (D.C) to alternating

current (A.C). This converted A.C can be at any required voltage and frequency with the use of

appropriate transformers, switching and control circuits (Wikipedia, 2011c).


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A power inverter is a complex device that converts direct current (D.C) power from solar

charged battery into alternating current (A.C) form (Wikipedia, 2011d). It has found wide

application in homes and other domestic situations. A well manufactured inverter is

characterized with high efficiency at all power levels, ruggedness to accommodate multiple

environment, stable (i.e. will not overheat) and will provide the required power and wattage to

operate small appliances (Wal Solar Corporation, 2011a).

3.0 RESEARCH METHODOLOGY

For the purpose of this study, information was gathered both from the primary and

secondary sources of information with more of the information obtained from the secondary

sources. The secondary sources include: existing records and documentation in books, journals,

web materials and other literatures. Information obtained was analyzed using the cost-benefit

analysis

The cost-benefit analysis

The cost-benefit analysis (CBA) also known as benefit cost analysis is an economic

decision-making approach used in the assessment of whether a proposal is worth doing or to

opt for possible alternatives (Wikipedia, 2011b). It basically involves comparing the total

expected benefits to see whether the benefits out weight the cost and by how much. Benefits

and costs are therefore expressed in money terms and are adjustment for the time value of

money.

4.0 THE STUDY AREA

Akure (+7° 15’ N, +5° 11’24’’ E), is the capital city of Ondo State, South-West Nigeria.

Because of its equatorial location and the climatic condition, solar radiation is appreciable for a

good part of the year. The raw data of daily sunshine hours for the period 2001 to 2007 were

obtained from the Akure Airport Meteorological Station and tabulated.

From the tabulation, a statistical mean daily sunshine hour was estimated at 5.21 hours

as shown below. Table 4.0 reveals average highest amplitude of 7.29 hours per day in

November and 2.9 hours in August.


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Table 4.0: Annual Average Sunshine Hours in Akure

Month 2001 2002 2003 2004 2005 2006 2007 Month Average

January 6.20 5.40 5.80 4.50 7.10 7.20 6.80 6.14 February 6.90 6.40 7.20 4.90 7.70 7.90 5.70 6.67 March 6.00 3.70 5.60 6.60 6.00 6.00 5.30 5.60 April 6.10 5.00 6.00 5.20 5.70 5.70 5.50 5.60 May 6.10 5.60 5.60 6.20 6.20 6.20 6.10 6.00 June 5.50 4.60 4.90 5.10 5.90 5.90 5.70 5.37 July 3.00 2.80 2.70 4.30 3.00 3.00 4.40 3.31 August 2.10 2.30 2.90 4.70 2.70 2.70 2.90 2.90 September 3.80 2.90 3.40 3.50 3.40 3.40 3.50 3.41 October 4.50 5.50 5.90 5.60 4.90 4.80 4.70 5.13 November 6.80 6.60 6.60 8.30 7.60 7.60 7.50 7.29 December 6.00 5.00 4.70 5.50 4.80 4.80 4.70 5.07 Year Av. 5.25 4.65 5.11 5.37 5.42 5.43 5.23 5.21

Source: Akure Meteorological Station (2011)

There are two distinct seasons: the rainy season which starts in April and peaks in June

through September and the dry season which begins in November and lasts till April. A large

percentage of her estimated populations of about 350,000 are mainly farmers, traders and

artisans (Aribigbola, 2009).

5.0 FINDINGS AND DISCUSSION

5.1 ESTIMATE COST OF SOLAR POWER USAGE

Melodi O.A and Famakin S.R (2011) in their research on the Assessment of Solar PV-Grid

Parity in Akure came up with estimates on the cost of using solar PV in which the result

obtained will be used in this section of the paper as highlighted below:

The research was carried out on a hypothetical consumer wishing to run the following

domestic appliances on a solar PV system for the average sunshine period of 5.21 hours

available in the study area was considered as follows:

I. 2 X 50W Fans

II. 1 X 75W Fridge


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III. 1 X 100W Television

IV. 1 X 80W Music Set

The capacity of the equipment needed may be estimated as follows:

Inverter output size ≥ sum of the capacities of appliances X Load diversity factor

Mathematically recall as:

where Po.inv is the inverter output size, Papp is appliance capacity, dl is the diversity factor, n is

number of appliances. Using the information given above and taking dl=1,

Po.inv ≥ ((2 X50W) + (75W) + (100W) + (80))

Po.inv ≥ 335W

Since efficiency = Output/ Input, let inverter efficiency= 95% (Sunsteams, 2011)

Then, input into inverter

output / efficiency= 355/0.95= 373.68W

Since the input into the inverter= output from solar PV array

A system of 3 X 125W Solar PV panels amounting to 375W may be deployed. If losses in

inverter are limited to 25W, a 400W inverter may be selected for the duty.

It is also important to consider the cost of other solar equipment. The table below thus shows

the prices of these equipments as of July 2010

Table5.1a: Solar equipment price index as of July 2010 S/No Equipment Price/unit output (USD) Sampled Manufacturers 1 Solar PV modules 4.18/Watt Matrix photowatt, Unisolar, Sunware, Isofoton,

Sanyosolar, Sharp Corporation, Suntech Power, Kaneka Corporation, Sunpower

2 Inverter 0.715/Watt Xantrex Technology inc, Solarix, Studer, Soltek, Powersine, Sharp Electronics, Powerpro

3 Battery 0.207/Watt hour Varta AG, Exide, Optima, Northern Battery, Dyno, Douglas, Concorde, Trojan Battery

4 Charge Controllers 5.87/Amp Morningstar Corporation, Xantrex, Geosolar, Vario, Outback power, Lyncom, Plasmatronics, ICP solar

Source: Solarbuzz (2011)


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Table5.1b: Bill of estimate for the installation of 2Kw Solar PV array.

S/No Description Unit Quantity Rate ($) Amount ($) 1 Solar power W 375 4.18 1, 567.50 2 Inverter capacity W 400 0.715 286.00 3 Solar plates supporting

structure Lot 1 100 100.00

4 Cabling and terminations Lot 1 150 150.00 5 Labour Lot 1 150 150 TOTAL 2,253.50 Source: Melodi O.A and Famakin S.R (2011)

Further research work was carried out in other to predict the future cost of solar power usage in Akure. The result obtained is as shown in the table below:


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Table5.1c: Comparison of Solar PV-PHCN Energy Cost Per Unit in Akure S/No Time (Years Solar PV

Annual Degradation 0.71%/Yr

Solar PV Energy Produced (kWh) Less Annual Cumulative Degradation Energy

Solar PV Unit Cost (N)

Grid Cost/Unit

1 2000 2.60 2 2001 2.60 3 2002 4.00 4 2003 4.00 5 2004 4.00 6 2005 4.00 7 2006 4.00 8 2007 4.00 9 2008 4.00 10 2009 4.40 11 2010 5.90 12 2011 4.79 675.09 675.09 500.71 7.30 13 2012 4.76 670.30 1345.39 251.2005 7.40 14 2013 4.73 665.57 2010.96 168.09 15 2014 4.69 660.84 2671.80 126.52 16 2015 4.66 656.12 3327.92 101.57 17 2016 4.63 651.47 3979.39 84.94 18 2017 4.59 646.87 4626.26 73.07 19 2018 4.56 642.28 5268.54 64.16 20 2019 4.53 637.69 5906.23 57.23 21 2020 4.50 633.16 6539.39 51.69 22 2021 4.46 628.65 7168.04 47.16 23 2022 4.43 624.19 7792.23 43.38 Source: Melodi A.O and Famakin S.R (2011)

5.2 COST ANALYSIS

From the above table and former findings, the following deductions can be made:

I. Grid supply (that is utility supply from P.H.C.N) remains cheaper than Solar PV by

N149.45 and N97.55/kWh in the short and medium term respectively.

II. On the long term, convergence is reached, parity is attained and solar electricity from

that point becomes cheaper than grid supply.


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III. Also, it is only on the long term that parity i.e. point at which alternative means of

generating electricity becomes equal in cost.

IV. The unit cost of the Solar PV continues to tend towards zero within the span of its useful

life.

5.3 BENEFITS OF SOLAR POWER USAGE IN RESIDENTIAL HOMES

Some benefits of solar power usage in residential homes are as stated below:

5.3.1 DEPENDABILITY

Photovoltaic cells were originally developed for use in space where repair obviously is

expensive if not impossible. Till date photovoltaic still power nearly every satellite circling the

earth because it operates reliably for long periods of time with little or maintenance. The

system aside from been maintenance free, it also has the ability of providing electricity for

25years-40years. In fact, most solar panels have 25years manufacturer warranty on the

production.

5.3.2 REDUCTION OF GLOBAL WARMING

Incorporating solar energy in homes reduces the consumption of fossil fuels, which

helps to reduce pollution and green house gases emission. Researchers discovered that a small

solar electric system has a significant environmental impact. In fact 2.5KW solar system reduces

carbon dioxide emissions by an amount similar to that which would occur by planting 1 acre of

trees or the emission by a passenger car driving 7,800 miles per year (Green Living Ideas, 2011).

5.3.3 EXEMPTION FROM FAST CLIMBING ELECTRIC RATES

Solar power aside that it brings about self independence in generating power, it also

exempts one from the utility rate increase. The Nigeria situation is alarming with the gradual

and persistent increase in electricity tariffs. In fact, study shows that electricity rates will

continue to climb faster than inflation.


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5.3.4 CHEAPER THAN THE UTILITY POWER

Solar power system can be akin to preparing for up to 40years of power at a fraction of

the cost been currently paid. The cost/unit of energy paid is more than what is obtained in

solar. As rates increases in future years, this difference will increase leading to more concern as

regards savings over the life of a solar energy system.

Other Benefits Includes:

Environmental Friendliness

Self generation and saving money on utility bills

Easy Installation

Low Maintenance

Long lasting, safe and silent

Generation of clean and inflation proof electricity

Stability in price

5.4 COST-BENEFIT ANALYSIS

From the findings made so far, solar power usage economic benefit can be appreciated

on the long term basis but not on short and medium term basis. However there are

unquantifiable benefits that are derived on this short and medium term basis when the solar PV

is seen to be expensive. For example, how can one value the availability of a clean and inflation

proof electricity or cost the importance of a ‘green’ energy aside other benefits earlier

mentioned? It is worthwhile to note that at a point on the long term, cost per unit of electricity

will be at no tangible cost so far the source remains faithful.

Indeed considering the benefits to be derived on long term basis and the geometrical

increase in electricity tariff in the country as shown in figure 5.4, the solar power usage is still

more of economic benefit with more certainty and reliability attached to it.


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Figure 5.4: Figure showing an increase in tariff rates in the utility supply Source: PHCN (2011)

The pre-paid utility service also charge exorbitantly fixed charges which is almost 50% of

the total amount tendered as shown in the figure.

The table below further explains the cost and benefits of the solar PV in the short,

medium and long term (using table) with the associated benefits.


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Table 5.4: Table showing gradual reduction in cost of solar PV with fixed benefits

Time (Years) Unit Cost (N) Benefits available

2011 500.71 Environmental friendliness, Reduction in global warming, self

generation, Easy installation, Low maintenance, Long lasting,

safe and silent, Generation of clean, inflation proof

electricity, Dependable e.t.c.

2012 251.2005

2013 168.09

2022 47.16

2023 43.38

2026 15.17

Source: Student’s field work (2011)

It should also be noted that the cost of solar PV can be reduced with a drop in the cost

of associated equipments which is not impossible i.e. cost of inverters, solar panels. Also

increase in the number of sunshine hours (if possible) and reduction in the value of degradation

factor which can be achieved through improved solar PV panel design and fabrication

technology will also be of help in reducing the cost.

6.0 RECOMMENDATIONS AND CONCLUSION

Home power generation has increased dramatically both in popularity and practicality

over the last few years and there is no doubt that the momentum will continue to increase

exponentially. With advancement in technology, the costs of building home power generations

have dropped significantly and it is now obvious and certain that affordable, practical solutions

to generating home energy are now available.

The economic benefits that solar power usage carry for a nation like ours are immense

as it does not only help in creating direct and indirect employment opportunities but also assist

on retaining the foreign exchange when the earnings from export are not spend on importation

of various spare parts of generators and e.t.c. Solar power usage will also help in the

development of the micro-enterprise since the enterprises despite the shortage can still

provide the services for its customers without losses.


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Government should therefore embark on Solar PV promotion programmes and promote

the development of new solar PV technologies through enthusiastic support for research and

development works especially in relevant indigenous research institutes and tertiary

institutions.

In conclusion, this paper has analyzed the usage of cost implication of solar power usage

in residential buildings in Akure in a cost-benefit analysis submitting that the solar power usage

is indeed a good option to be considered for residential homes not minding the cost at the

outset if one can afford it but the benefits that it tends to offer on the long term basis.

7.0 REFERENCES

Aribigbola, A. (2009). Institutional Constraints to Achieving the Millennium Development Goals

(MDGs). MDG Workshop (pp. 1-21). Abuja, Nigeria: Federal Ministry of Finance

of Nigeria/Economic Commission for Africa.

Encyclopædia Britannica (2009a). Solar energy. Encyclopædia Britannica 2009 Student and

Home Edition. Chicago: Encyclopædia Britannica.

Encyclopædia Britannica (2009b). Thermal energy. Encyclopædia Britannica 2009 Student and

Home Edition. Chicago: Encyclopædia Britannica.

Green Living Ideas (2011). What are the benefits of Solar Power? Retrieved from

http://greenlivingideas.com/2007/07/08/what-are-the-benefits-of-solar-power/

Guide4home (2011). Solar Panels- Uses, Installation, Advantages. Retrieved from

http://www.guide4home.com/rem-himp/solar-panels.htm

Karolis, K., Rasa, M., Gaisva, R., Vytautas, R.,(2008) “Solar energy implementation in Nigeria”,

A paper at Bachelor level in Business Studies, House 44.2, Roskilde University.

Melodi, A.O and Famakin, S.R (2011). “Assessment of Solar Pv-Grid Parity Akure, South-West

Nigeria”. Journal of Emerging trend in Engineering and Applied Sciences (JETAS) 2(3)

531-536

P. Lloyd and E. Visagie (2007). “The testing of gel fuels, and their comparison to alternative

cooking fuels. In Domestic use of energy conference”.


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Proposed Basic Concept of Energy Chain by the World Energy Congress, Sydney, Australia,

(2004). proposes figure. Retrieved from http://www.worldenergy.org/wecgeis/

congress/abstracts/hamamatsut0904.pdf.

Solar Power Buzz (2011). Cost benefits analysis of solar power. residential use.

Retrieved from http://www.solarpowerbuzzmedia.com/2011/04/cost-

benefit-analysis-of-solar-power.htm? m=1

War Solar Corporation (2011a). Inverters. Retrieved from

http://www.wal-solar.com/Inverters.htm

War Solar Corporation (2011b). Residential solar electric systems. Retrieved from

http://www.war-solar.com/ Residential_systems.htm

Wikipedia (2011a). Charge Controller. Retrieved from http://en.m.wikipedia.org/wiki/charge-

controller

Wikipedia (2011b). Cost-benefit analysis. Retrieved from http://en.m.wikipedia.org/wiki/cost-

benefit-analysis

Wikipedia (2011c). Inverter (electrical). Retrieved from http://en.m.wikipedia.org/wiki/inverter-

(electrical)

Wikipedia (2011d). Solar Inverter. Retrieved from http://en.m.wikipedia.org/wiki/solar_inverter

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