Hyunji Yoo Yonsei University - Weentechresidential average retail price of electricity by states...

6-Mar-15 Taehoon Hong, Minhyun Lee, and Hyunji Yoo/ Yonsei University 0

FINANCIAL ANALYSIS OF RESIDENTIAL SOLAR PHOTOVOLTAIC SYSTEMS

CONSIDERING SOLAR RENEWABLE ENERGY CERTIFICATES IN THE U.S.

Hyunji Yoo Yonsei University

6-Mar-15 1 Taehoon Hong, Minhyun Lee, and Hyunji Yoo/ Yonsei University

6-Mar-15 3

Rapid growth of solar PV installation

Renewable energy Portfolio Standards (RPS)

Solar PV growth rate in the United States

* REN21

Global Solar PV Capacity, 1995-2012

The solar photovoltaic (PV) market has been rapidly grown over the past decades and the demand for solar PV system is rising all over the world (Hong et al., 2012).

The U.S. is one of the countries leading rapid growth of the solar PV market with its promotion of New Renewable Energy (NRE) and solar policies (DSIRE, 2014).

* SEIA

U.S. Solar PV Capacity, 2010-2014

* Solsystem

Renewable energy Portfolio Standards (RPS) in the U.S.

Renewable energy Portfolio Standard (RPS) : one of the representative NRE policies in the U.S., which mandates electric utilities to supply NRE at a certain percentage of the electricity they generate.

Solar carve-out : imposes an obligation to supply solar energy at a certain percentage of the electricity

Solar Renewable Energy Certificates (SRECs) : used to fulfill the obligation under solar carve-out by electric utilities and issued when electricity is produced by solar system (One SREC = 1 MWh of electricity)

Taehoon Hong, Minhyun Lee, and Hyunji Yoo/ Yonsei University

6-Mar-15 4

The status of residential solar PV system in the U.S.

Benefits of Solar Renewable Energy Certificates (SRECs)

* SEIA

U.S. Solar PV Capacity by Market Segment, 2010-2013

Electric utilities get SREC by generating electricity using their own solar system or buy SREC to fulfill their responsibility under RPS. Residences sell their SREC electric utilities SREC is traded separately from commodity electricity, and residences get benefits both by electricity generation and by sales of SRECs

Benefits by solar PV installations

*Tracking the Sun VI (NBNL)

Installed Price of Residential & Commercial PV According to System Size

Residential solar PV installation is low and the installed price of residential solar PV system is the highest among all segments. ▶ There is a need to encourage the residential solar PV system in the U.S.

▶ SREC policy can be very attractive to residences because they can pay lower electric bill and get additional income through sales of SRECs


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High volatility of SREC price

Uncertainty of the financial value of solar PV system

Various SREC policy by state

*SRECTrade

Solar Renewable Energy Certificates (SRECs) prices by states

SREC policy is established at a state level and they have increasing SREC requirements to imposing electric utilities.

SREC prices are highly volatile and vary with SREC market status.

The economic value of solar PV system highly depends on SREC prices and varies by states.

SREC policy is established at a state level and key factors affecting the economic feasibility of solar PV system (i.e. solar radiation and electricity prices) differ by state in the U.S.

▶ The economic value of solar PV system varies by states and changes according to SREC price

With short history of SREC, SREC prices are highly volatile.

*NREL

Future capacity required in SREC market


6-Mar-15 6

Research Objectives

Research Framework

Step 1 Step 4 Step 5 Step 3 Step 2

Financial analysis of residential solar PV system in the U.S. considering SRECs.

Comparative analysis of the economic value of residential solar PV system by SREC prices in each state

Selection of target states and cities

Electricity generation calculation using

‘RETScreen’

Defining assumptions for life cycle cost (LCC) analysis

Scenario Establishment

considering solar incentives and SREC

prices

Financial analysis of residential solar PV systems through the

LCC analysis

구분

Columbus(OH) Scenario A

(receive CBI) Scenario B

(not receive CBI)

Scenario Ⅰ (SREC not exist)

NPV $ -1,808.48 $ -7,058.48

SIR 0.942 0.774

BEP no BEP no BEP

Scenario Ⅱ (Maximum SREC price)

NPV $ 3,219.97 $ -2,030.03

SIR 1.103 0.935

BEP 18 no BEP

Scenario Ⅲ (Average SREC price)

NPV $ 4,872.29 $ -377.71

SIR 1.156 0.988

BEP 14 no BEP

Scenario Ⅳ (Minimum SREC price)

NPV $ 6,353.88 $ 1,103.88

SIR 1.203 1.035

BEP 10 23


6-Mar-15 8

States with SREC

Selected states and cities

SREC tracking system

*SRECTrade

States with Solar Renewable Energy Certificates (SRECs)

9 states have SREC markets in the U.S. PJM –GATS is a tracking system, through which SREC is retired for solar carve-out obligation. Six states (The District of Columbia, Delaware, Maryland, New Jersey, Ohio, and Pennsylvania) use PJM-GATS PJM-GATS offers SREC prices information of each state.

*PJM

States with PJM-GATS

Selects five states (The District of Columbia, Delaware, Maryland, New Jersey, and Ohio) with SREC markets where the SREC and SACP(the penalty when electric utilities fail to meet an obligation) prices can be accurately determined.

Selects a metropolitan city in each state that has the largest population due to the difference of solar incentives by electric utilities in each city


6-Mar-15 9

States with SREC

PV panel & inverter information

Azimuth of PV panel Weather data

Capacity of solar PV system

Calculation of simulation-based electricity generation by using NRE simulation program called ‘RETScreen’

Classification PV panel PV inverter

Model name SM-200PD0 PV-C350S/H

Power capacity (w) 200 50,000

Efficiency (%) 14 92 Miscellaneous losses

(%) 3 3

Installed capacity → 5kW

Azimuth → 0˚ (south orientation)


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Assumption for LCC analysis SREC price degradation rate

Note: FITC refers to federal income tax credit; PTE refers to property tax exemption; STE refers to sales tax exemption; and CBI refers to capacity-based incentives; SREC refers to solar renewable energy certificates; SACP refers to solar alternatives compliance payment where, d stands for degradation rate of SACP in year t; SACP stands for

SACP price in year t

Categories Descriptions Analysis Period 25years

Analysis Point 2013 Nominal Interest rate 4.21% (FRB, 2014) Inflation Rate 2.38% (USInflation.org, 2014)

Electricity price growth rate based on residential average retail price of electricity by states (EIA, 2014)

Installation Cost $4.91/W (SEIA, 2013)

Maintenance and Insurance Cost (annually) 1% of installation cost (IRENA, 2012)

Inverter Replacement Cost (in year 13) 9.5% of installation cost (Swift, 2012)

Solar incentives FITC, PTE, STE, CBI by states (DSIRE, 2014)

SREC prices solar weighted average price by states (GATS, 2014)

Annual SREC price degradation rate based on SACP price by states (DSIRE, 2014)

Electricity price residential average retail price of electricity by states (EIA, 2014)

*SRECTrade Solar Alternative Compliance Payment (SACP)


Solar Alternative Compliance Payment (SACP) : a penalty imposed to electric utilities when failing to meet solar carve-out obligation SREC price is less likely to exceed SACP price because SACP caps the maximum price of SREC serving as a penalty. Each states plan scheduled SACP prices and SREC price follows the scheduled SACP prices

▶ Reflects SREC price degradation rate by decreasing scheduled SACP prices

6-Mar-15 11


Note: FITC refers to federal income tax credit; PTE refers to property tax exemption; STE refers to sales tax exemption; and CBI refers to capacity-based incentives; SREC refers to solar renewable energy certificates; SACP refers to solar alternatives compliance payment














where, d stands for degradation rate of SACP in year t; SACP stands for SACP price in year t


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Note: FITC refers to federal income tax credit; PTE refers to property tax exemption; STE refers to sales tax exemption; and CBI refers to capacity-based incentives; SREC refers to solar renewable energy certificates; SACP refers to solar alternatives compliance payment












where, d stands for degradation rate of SACP in year t; SACP stands for SACP price in year t




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Scenario for the analysis Financial analysis of residential solar PV system

Capacity based incentives (CBI) are first-come, first-served basis with limited capacity and budget, there is a possibility that they cannot be provided. As discussed, SREC prices are very volatile. ▶ Establishes scenarios based on the existence of CBI and SREC prices in order to consider the uncertainty of solar incentives and SREC prices.

▶ 2 scenarios(CBI)ｘ4 scenarios(SREC prices)ｘ 5 states = 40 scenarios

구분 Columbus(OH)

Scenario A (receive CBI)

Scenario B (not receive CBI)

Scenario Ⅰ (SREC not exist)

NPV $ -1,808.48 $ -7,058.48 SIR 0.942 0.774 BEP no BEP no BEP

Scenario Ⅱ (Minimum SREC price)

NPV $ 3,219.97 $ -2,030.03 SIR 1.103 0.935 BEP 18 no BEP

Scenario Ⅲ (Average SREC price)

NPV $ 4,872.29 $ -377.71 SIR 1.156 0.988 BEP 14 no BEP

Scenario Ⅳ (Maximum SREC price)

NPV $ 6,353.88 $ 1,103.88 SIR 1.203 1.035 BEP 10 23

An LCC analysis was performed using three indexes

Net Present Value (NPV) : the difference between the present value of the total system costs

Saving to Investment Rate (SIR) : the market discount rate that results in zero life cycle savings

Break-Even Point (BEP) : the time needed to recover the initial investment made

( ) ( )∑∑== +

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tn

tt

t

rC

rBNPV

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NPV

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년 25


6-Mar-15 15

Financial analysis results of residential solar PV system considering SRECs

Classification District of Columbia Wilmington (DE) Baltimore (MD) Newark (NJ) Columbus (OH)

Scenario A (CBI-(O))

Scenario B (CBI-(X))









Scenario I (SREC-(X))

NPV ($) $ -2,696 $ -4,446 $ 682 $ -3,693 $ 1,357 $ 657 - $ -892 $ -1,808 $ -7,058 SIR 0.92 0.87 1.02 0.89 1.04 1.02 - 0.97 0.94 0.77

BEP (yrs) no BEP no BEP 24 y no BEP 24 y 25 y - no BEP no BEP no BEP

Scenario II (SREC: Min)

NPV ($) $ 7,885 $ 6,135 $ 5,269 $ 894 $ 5,992 $ 5,292 - $ 6,171 $ 3,220 $ -2,030 SIR 1.24 1.19 1.16 1.03 1.19 1.17 - 1.20 1.10 0.94

BEP (yrs) 13 y 16 y 17 y 24 y 18 y 19 y - 16 y 18 y no BEP

Scenario III (SREC-Avg)

NPV ($) $ 10,623 $ 8,873 $ 9,739 $ 5,364 $ 7,387 $ 6,687 - $ 7,696 $ 4,872 $ -378 SIR 1.32 1.27 1.30 1.16 1.24 1.21 - 1.25 1.16 0.99


Scenario IV (SREC-Max)

NPV ($) $ 12,219 $ 10,469 $ 16,457 $ 12,082 $ 8,674 $ 7,974 - $ 12,426 $ 6,354 $ 1,104 SIR 1.37 1.32 1.50 1.37 1.28 1.26 - 1.40 1.20 1.04

BEP (yrs) 8 y 9 y 7 y 10 y 15 y 16 y - 9 y 10 y 23 y CBI $ 500 - $ 1,250 - $ 1,000 - - - $ 1,500 -

SREC price ($)

Min $ 315 $ 59 $ 127 $ 142 $ 118 Avg $ 396 $ 116 $ 166 $ 173 $ 157 Max $ 444 $ 202 $ 201 $ 268 $ 192

▶ District of Columbia: SREC prices hardly differed and the amount of CBI is low, so the economic values of the residential solar PV systems based on the existence of CBI and SREC prices also hardly differed


6-Mar-15 16














NPV ($) $ -2,696 $ -4,446 $ 682 $ -3,693 $ 1,357 $ 657 - $ -892 $ -1,808 $ -7,058 SIR 0.92 0.87 1.02 0.89 1.04 1.02 - 0.97 0.94 0.77



NPV ($) $ 7,885 $ 6,135 $ 5,269 $ 894 $ 5,992 $ 5,292 - $ 6,171 $ 3,220 $ -2,030 SIR 1.24 1.19 1.16 1.03 1.19 1.17 - 1.20 1.10 0.94



NPV ($) $ 10,623 $ 8,873 $ 9,739 $ 5,364 $ 7,387 $ 6,687 - $ 7,696 $ 4,872 $ -378 SIR 1.32 1.27 1.30 1.16 1.24 1.21 - 1.25 1.16 0.99



NPV ($) $ 12,219 $ 10,469 $ 16,457 $ 12,082 $ 8,674 $ 7,974 - $ 12,426 $ 6,354 $ 1,104 SIR 1.37 1.32 1.50 1.37 1.28 1.26 - 1.40 1.20 1.04


SREC price ($)

Min $ 315 $ 59 $ 127 $ 142 $ 118 Avg $ 396 $ 116 $ 166 $ 173 $ 157 Max $ 444 $ 202 $ 201 $ 268 $ 192

▶ Wilmington (DE): showed a great difference in its minimum, average, and maximum SREC prices, and the amount of its CBI was high, so the economic value of the residential solar PV systems in all the scenarios fluctuated greatly.


6-Mar-15 17














NPV ($) $ -2,696 $ -4,446 $ 682 $ -3,693 $ 1,357 $ 657 - $ -892 $ -1,808 $ -7,058 SIR 0.92 0.87 1.02 0.89 1.04 1.02 - 0.97 0.94 0.77



NPV ($) $ 7,885 $ 6,135 $ 5,269 $ 894 $ 5,992 $ 5,292 - $ 6,171 $ 3,220 $ -2,030 SIR 1.24 1.19 1.16 1.03 1.19 1.17 - 1.20 1.10 0.94



NPV ($) $ 10,623 $ 8,873 $ 9,739 $ 5,364 $ 7,387 $ 6,687 - $ 7,696 $ 4,872 $ -378 SIR 1.32 1.27 1.30 1.16 1.24 1.21 - 1.25 1.16 0.99



NPV ($) $ 12,219 $ 10,469 $ 16,457 $ 12,082 $ 8,674 $ 7,974 - $ 12,426 $ 6,354 $ 1,104 SIR 1.37 1.32 1.50 1.37 1.28 1.26 - 1.40 1.20 1.04


SREC price ($)

Min $ 315 $ 59 $ 127 $ 142 $ 118 Avg $ 396 $ 116 $ 166 $ 173 $ 157 Max $ 444 $ 202 $ 201 $ 268 $ 192

▶ Baltimore (MD): reached its Break-even point in all scenarios because of the high electricity generation and electricity price.


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NPV ($) $ -2,696 $ -4,446 $ 682 $ -3,693 $ 1,357 $ 657 - $ -892 $ -1,808 $ -7,058 SIR 0.92 0.87 1.02 0.89 1.04 1.02 - 0.97 0.94 0.77



NPV ($) $ 7,885 $ 6,135 $ 5,269 $ 894 $ 5,992 $ 5,292 - $ 6,171 $ 3,220 $ -2,030 SIR 1.24 1.19 1.16 1.03 1.19 1.17 - 1.20 1.10 0.94



NPV ($) $ 10,623 $ 8,873 $ 9,739 $ 5,364 $ 7,387 $ 6,687 - $ 7,696 $ 4,872 $ -378 SIR 1.32 1.27 1.30 1.16 1.24 1.21 - 1.25 1.16 0.99



NPV ($) $ 12,219 $ 10,469 $ 16,457 $ 12,082 $ 8,674 $ 7,974 - $ 12,426 $ 6,354 $ 1,104 SIR 1.37 1.32 1.50 1.37 1.28 1.26 - 1.40 1.20 1.04


SREC price ($)

Min $ 315 $ 59 $ 127 $ 142 $ 118 Avg $ 396 $ 116 $ 166 $ 173 $ 157 Max $ 444 $ 202 $ 201 $ 268 $ 192

▶ Newark (NJ): does not have CBI, so Scenario A was excluded from the analysis. Even with the lowest solar incentive benefits, has the highest economic value of the residential solar PV system in all five states.


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NPV ($) $ -2,696 $ -4,446 $ 682 $ -3,693 $ 1,357 $ 657 - $ -892 $ -1,808 $ -7,058 SIR 0.92 0.87 1.02 0.89 1.04 1.02 - 0.97 0.94 0.77



NPV ($) $ 7,885 $ 6,135 $ 5,269 $ 894 $ 5,992 $ 5,292 - $ 6,171 $ 3,220 $ -2,030 SIR 1.24 1.19 1.16 1.03 1.19 1.17 - 1.20 1.10 0.94



NPV ($) $ 10,623 $ 8,873 $ 9,739 $ 5,364 $ 7,387 $ 6,687 - $ 7,696 $ 4,872 $ -378 SIR 1.32 1.27 1.30 1.16 1.24 1.21 - 1.25 1.16 0.99



NPV ($) $ 12,219 $ 10,469 $ 16,457 $ 12,082 $ 8,674 $ 7,974 - $ 12,426 $ 6,354 $ 1,104 SIR 1.37 1.32 1.50 1.37 1.28 1.26 - 1.40 1.20 1.04


SREC price ($)

Min $ 315 $ 59 $ 127 $ 142 $ 118 Avg $ 396 $ 116 $ 166 $ 173 $ 157 Max $ 444 $ 202 $ 201 $ 268 $ 192

▶ Columbus (OH): a difference in the economic value of the residential solar PV systems based on the existence of CBI was significant and it has the lowest residential solar PV system economic value among the five states.


6-Mar-15 21

Contribution

Research summary

Limitation & Future research

In four states (all except Ohio), if there are some benefits from SREC, the existence of CBI did not significantly affect the achievement of the break-even point.

Without the benefits from SREC, all the states, except for Delaware and Maryland, could not reach break-even point. In Delaware and Maryland, the BEP was achieved, but it took 24 to 25 years, so it was difficult to determine if the economic value of the residential solar PV systems was still excellent.

Although Delaware had the lowest SREC prices, the economic value of its solar PV system can be excellent due to its low SREC price degradation rate.

SREC prices and SREC price degradation rate due to SACP have a considerable impact on the economic value of solar PV system.

Predictive analysis on solar PV system considering the fluctuation of SREC price.

Multilateral analysis on the SREC prices in each state based on the SREC market status.

Proposals SREC prices to get the economic feasibility in each state.

Assess the impact of the introduction of solar PV systems based on the fluctuation of SREC prices.

Help potential users of solar PV systems select a region where there are stable SREC market prices.

Provide solar incentive benefits based on SREC prices to policy-makers and help them set SREC-related policies and calculate the SACP.


6-Mar-15 22

Thank you.


Hyunji Yoo Yonsei University - Weentechresidential average retail price of electricity by states...

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