Economic Assessment of Distributed Generation Technologies: A Feasibility Study and Comparison with the Literature

Abstract

With the negative climate impact of fossil fuel power generation and the requirement of global policy to shift towards a green mix of energy production, the investment in renewable energy is an opportunity in developing countries. However, poor economy associated with limited income, funds availability, and regulations governing project funding and development are key factors that challenge investors in the energy sector. Given the various power generation resources, including renewables, it is necessary to evaluate the possible power generation investment options from an economic perspective. To realize this objective, solar PV, wind and diesel power generations are economically compared, considering the incremental rate of return and incremental benefit to cost ratio techniques. The alternative investment options of distributed generation technologies are evaluated for Maharashtra, India under different depreciation methods, and the effect of the latter on selecting the best investment candidate is investigated. The paper also conducts sensitivity analysis to examine the impact of capital cost, operation and maintenance cost, and fuel cost variations on the selection decision considering a comparison of the different general projects’ cash flow structures discussed in the literature. The economic aspects of selecting a project among possible alternatives for an investment in the power sector are analyzed, and the presented review provides comprehensive comparisons with respect to the literature approaches. The results reveal that, in the benchmark case study, the PV project is rejected and disregarded from further comparisons with other candidate projects since its equity internal rate of return (10.25%) is less than the minimum accepted rate of return, leaving the selection between wind and diesel energy projects. The study reveals that the incremental rates of return under such a comparison are 37.88%, 45.94% and 37.50% when MACRS, declining balance and straight line depreciations techniques are applied, respectively. Thus, the wind energy project is the favored option in this case. For the economic assessment of other case studies, the application of both sensitivity analysis on the capital cost and operation and maintenance cost and literature approaches to structure the projects reveal that wind energy for Maharashtra, India is a more attractive and feasible option compared to other distribution generation projects, while diesel is only considered to be a good option when its fuel cost is reduced by 5%. Finally, the paper highlights policy implications that can influence the decision to move towards investment in distributed generation technologies as a future research direction.

Comparative analysis for distributed generation using ultra‐low head hydro, solar and wind energies

“…Considering other markets around the world, a comparative study between SPV, WP and a fossil source (diesel) was developed by Al-Sumaiti et al 68 Considering the Indian market, they point out the disadvantages of SPV, even ruling out its possibility of implementation, since the IRR was lower than the attractiveness rate proposed for the study, and the WP, once again, was the one with the best return on investment, also in that country.…”

An Improved Crow Search Algorithm Applied to the Phase Swapping Problem in Asymmetric Distribution Systems

“…Once the crows' positions are modified, the memory of each crow is updated based on the objective function values of the new spots. So, if the objective function of the new location is better than the objective function of the memorized position, the crows update their memory to the new area, as shown in Equation (17).…”

“…These strategies can significantly help distribution companies to reduce the number of power losses. However, the first two approaches involve significant investments since they integrate new devices into the distribution network [17]. The third approach requires less investment since few distribution lines need to be constructed to realize the optimal network reconfiguration [18].…”

Optimal investment and operation of a microgrid to provide electricity and heat

“…The investment cost is presented in Equation (). [2] and [13] are good references about boilers models. …”