Solar PV where the sun doesn’t shine: Estimating the economic impacts of support schemes for residential PV with detailed net demand profiling

Abstract

Countries with low irradiation and solar PV adoption rates are increasingly considering policy support for solar PV, though consumer electricity demand and solar generation profiles are often mismatched. This paper presents a methodology for policy makers in countries with such conditions to examine more precisely the financial performance of residential solar PV from the consumer perspective as part of an ex-ante policy assessment. We model a range of prospective policy scenarios and compare policy mechanisms that compensate homeowners for generation, those that reduce their upfront costs, and those that assist with financing, using Ireland as a case study. The results confirm the intuitive notion that more generous financial remuneration schemes provide quicker payback, however, we observe that upfront grants do little to accelerate payback timeframes. We also show the importance of retail tariff structure in consumer payback for a solar PV system, with one-part tariffs generating shorter paybacks than two-part tariff structures, although the latter is more likely to secure revenue for electricity infrastructure investment. Drawing from this analysis, the paper proposes some options for the design of policy supports and tariff structures to deliver a sustainable residential renewable electricity system. IntroductionSolar photovoltaic (PV) technology has experienced a dramatic reduction in installed costs in recent years, falling more than 80% since 2008 (IRENA, 2015. As the technology becomes more competitive with conventional generation sources, deployment has increased sharply, reaching 177 MW total installed capacity worldwide in (REN21, 2015. The majority of deployment thus far has naturally been concentrated in locations with some combination of a strong solar resource or sufficiently generous policy supports, which in some cases have created windfall benefits for asset owners at high public cost, ultimately leading to unstable, 2 boom-and-bust market dynamics (De Boeck et al, 2016). As PV costs continue to fall, policymakers in countries with lower solar irradiation are also beginning to consider whether solar PV might be a viable renewable energy resource and worthy of policy support. In the development of such policies, these late-adopters have significant opportunity to avoid the mistakes of others in the design of policy support mechanisms and pricing through learning from other countries' experiences. Careful analysis is thus required to assess whether solar PV is an appropriate technology justifying policy support in such countries.In carrying out ex-ante solar PV policy assessment, policy makers should consider a range of key factors, including the system value of increasing the share of solar PV on the electricity system, the current and future economics of solar PV for different customers-residential, commercial, and utility-scale-and the environmental and other impacts of increased solar PV electricity generation. Of these, this paper focusses on the assessment of consumer economics ...

What drives the profitability of household PV investments, self-consumption and self-sufficiency?

“…In an Irish context, research on residential PV is scant. While La Monaca & Ryan (2016) analyse the impact of different support schemes for residential PV in Ireland, they do not include storage or a detailed driver analysis into their work. To our knowledge, our paper is the first to analyse drivers and costs of PV-based self-sufficiency in Ireland.…”

Economic Analysis of Grid-Connected PV System Regulations: A Hungarian Case Study

“…Currently, no reliable summarized data are available from Hungary. The most common schemes are various investment supports (IS), the Feed-in-Tariff (FiT) and the net metering system (NS) [42][43][44][45][46].…”

Microgeneration of Electricity Using a Solar Photovoltaic System in Ireland

“…Simulations were also performed to determine the annual electricity yields available for self-consumption and for grid feed-in. The total electricity demand profile of the project is composed of variable hourly loads, the timing of usage varies for each unit due to preferences and behaviours of occupants [35].…”

“…A review of residential solar installers currently active in the Irish market, determined the approximate cost per kWp for a fully installed rooftop solar PV system was €1744 [35]. The Sustainable Energy Authority of Ireland (SEAI) in their payback calculator for domestic solar PV have considered the approximate cost per kWp to be €1900 [45].…”

“…The Net present value of the investment per residential unit in the solar PV project can be calculated [35] using Equation 14:…”