a new financial model and economic feasibility of grid ... amount of solar and biomass energy...

A New Financial Model and Economic

Feasibility of Grid-Connected PV Power Plants

for the Future of Renewable Energy in Turkey

Nurettin Çetinkaya Electrical and Electronics Engineering Department, Selçuk University, Konya, Turkey

Email: [email protected]

Abstract—In this study, the economic feasibility of grid-

connected photovoltaic (PV) power plants is investigated. In

addition, a new financial model for renewable power system

is proposed. The proposed structure of the financial model,

operation and economics has been examined. Other objects

of this study are to win more for both operator and the

investor, and to set out the latest legal regulation for

investment in Turkey’s emerging solar power market and to

provide some guidelines to potential investors who

appreciated country’s huge solar energy potential. Different

options customer owned systems, operation systems, and

other models are evaluated in detail. Feasibility is made for

PV power plant. The proposed financial model is applied to

PV power plant. Conclusions are discussed to find the best

financial model for solar PV power plant systems.

Index Terms—economic feasibility, photovoltaic power plant,

renewable energy support policies

I. INTRODUCTION

Today, energy is the number one problem on the world

and also will be in the future. Because energy is not the

only problem but also the social, economic and

environmental problems are also the other arising

problems. The electricity sector is a major source of the

carbon dioxide emissions that contribute to global climate

change [1]. Many countries and scientists conduct many

researches for a cleaner and more economic energy

sources [2]-[4]. Scientists also research costs of

renewable energy sources and support policies for more

green and clean world [5]-[7]. Market reforms, energy

security and environmental protection are three primary

energy policy goals of Turkish government [8]. Although

fossil fuels have been the most dominant energy resource

in meeting global energy demand for decades, it has been

recognized that these critical energy resources have

severe impacts on climate change and they are ultimately

finite. Widespread and increasing use of fossil fuels in

energy production is considered as the largest source of

anthropogenic carbon dioxide (CO2) emissions, which is

largely blamed for global warming and climate change

[9].

Manuscript received September 1, 2014; revised April 28, 2015.

Support policies in many countries are carrying on for

electrical power generation from renewable sources,

especially solar and wind. In the last decade, the

generation of electricity from solar energy, the thanks to

the support policy has become quite common. The feed-

in-tariff (FiT) policy has proven to be one of the most

effective mechanisms that encourage the deployment of

solar power. Germany is the first country to introduce a

solar FiT and has become the world leader in terms of

both installed PV capacity and solar industry. The success

of Germany gave momentum to many other countries.

Globally, more than 40 countries have adopted some type

of FiT system in order to harness their renewable energy

potential. The installed renewable power capacity has

increased considerably in many of these countries after

the introduction of FiT policy [10].

The FiTs are guaranteed for a reasonably long period

of time in order to ensure security of the investment for

investors and manufacturers [11]. The FiT term is

commonly determined such that income is guaranteed

over the lifetime of the system, i.e. at least 15-20 years.

Turkish renewable FiT is guaranteed for 10 years while

European renewable FiTs are generally guaranteed for a

longer period, i.e. 20 years or more. Turkish solar

industry calculates the return period as ten years if solar

FiT is 18-20$cent/kWh. Therefore, 10 years duration

seems to be insufficient to pay back solar investments

with a FiT of 13.3$cent/kWh [12]. But now, it can be said

that; payback times are down for unit costs are also

reduced.

Turkey is one of the fastest growing economies on the

world with economic recovery. Turkey’s annual primary

energy consumption has increased by about 8% in last

decade. Turkey has an annual electricity consumption of

246 TWh with a nearly 77 million people in 2013 that our

electricity generation was obtained from 43.8% natural

gas, 25.4% coal, 24.8% hydraulic, 2% liquid fuels and

4% renewable sources. Most of renewable resource is the

wind. Most of the resources used to generate electricity

are coal and natural gas. The share of renewable energy

sources is quite low. Moreover, the wind power plants

provide the largest contribution to renewable sources

more than the solar power plants.

International Journal of Electrical Energy, Vol. 3, No. 2, June 2015

©2015 International Journal of Electrical Energy 110doi: 10.12720/ijoee.3.2.110-114

Figure 1. Solar energy potential atlas of Turkey.

II. THE POTENTIAL OF RENEWABLE ENERGY SOURCES

IN TURKEY

The potential of renewable energy sources in Turkey

was estimated by the General Directorate of Renewable

Energy managed by Republic of Turkey Ministry of

Energy and Natural Resources (MENR) [13]. Turkey has

six different renewable and usable economic sources,

namely hydro, wind, geothermal, solar, biomass and

biogas, respectively. While the wind energy potential is

48GW, geothermal energy potential is around 32GW.

Until 2023, Turkey aims to achieve at least 30% of

electricity production obtained from renewable energy

sources [14]. At the end of 2023, 3000MW installed

capacity of solar power plants are planned to be obtained.

Turkey has a high potential for solar energy due to its

advantageous geographical position. Many studies for the

map of the solar energy potential in Turkey have been

made. Solar energy potential atlas (SEPA) of Turkey

prepared from these studies is shown in Fig. 1 [15]. Solar

Potential: It was determined that Turkey’s average period

of sunlight is 2,640 hours per year (7.2 hours per day).

The average annual radiation force amounts to 1,311

kWh/m²-year (3.6kWh/m²-per day). The solar energy

potential was calculated to be 380 billion kWh/year. As

shown in Fig. 1, the provinces of Karaman, Antalya,

Konya, Muğla, Burdur, Mersin and Van have a potential

for solar energy of striking magnitude.

Turkey supports that the renewable energy power

plants to meet the electricity needs. The law on

Electricity Production from Renewable Energy Sources

(No. 6094, Official Newspaper: 8 January 2011, No.

27809). Wind and hydroelectric power plants are

supported with 7.3$cent/kWh, geothermal power plants is

supported by the 10.5$cent/kWh.

The amount of solar and biomass energy support is at

least 13.3$cents/kWh. This support is 15.4$cent/kWh,

when domestic construction and panel manufacture are

added. The fixed ten-year guarantee of purchase price

prevent the rapid fall. The decreasing amounts of the

price support for the ten-year period allow electricity

market balancing. Especially after the fifth year, the price

must be reduced on a regular basis. In this way, the

investor deal with the installation and the operation for

the payback time is below five years.

In this paper, the feasibility studies were performed for

Antalya, Karaman and Konya provinces. The investors

are interested in these provinces due to sunshine

durations. For example, Konya province global radiation

and Konya province sunshine duration data are given in

Fig. 2 and Fig. 3, respectively.

Figure 2. Konya global radiation.

Figure 3. Konya sunshine duration.


©2015 International Journal of Electrical Energy 111

The sunshine durations of Antalya province and

Karaman province are higher than the sunshine durations

of Konya province.

III. PROPOSED FINANCIAL MODEL

In this study, the proposed model has four different

sections and can be referred to briefly as build-operate-

transfer-operate (boto). This model aims to combine the

investor and the operator who do not want to take all the

risks or have not 100% of money for investment. The

proposed model is suitable for the investors who are

landowner and the operators who can make installation.

The sections of the proposed model are shown in Fig. 4.

Figure 4. Sections of the proposed model.

The installation time and the operation transfer

agreement should be made in Section 1 (Build). In this

section, the investors and the operators work together.

Section 2 (Operate) is the period of the operator’s itself

financial guarantee. During this period, the operator is

solely responsible for everything. In Section 3 (Transfer),

the annual minimum power generation agreement should

be made. In Section 4 (Operate), the investors and

operators made a partnership agreement and work

together. The investors and operators are always a partner

in a company. The operator is alone in the first operation

section, but operator and investor work together in the

second operate section.

Some of these sections or different types of renewable

power systems have been proposed previously [16].

Particularly the build-own-operate (boo) and build-own-

operate-transfer (boot) models were considerably applied

[17]. The difference of this study is the investor and

operator carries on their benefits end of the feasible time.

In this way, the risk sharing will occur. The aim is to be

conscious of both sides and to consider the possible risks.

The investor, the source of the money must research

prices and the properties of the PV power plant parts. The

investor and the operator adopt PV power plant together.

A portion of installation costs shall be borne by the

investor. The rate of the installation cost will share

depends on the agreement between the investor and the

operator.

If the credit is used, the principal and the interest

payment times should never exceed the operation time in

boot model. The disadvantages of the boot model are the

service provider should bear the share capital costs and

the performance of system operation at end of life

conditions.

The operation and maintenance will be the part of the

supplier and no risk for investors in boo models. If the

PV power plant is not performing as per the defined

performance level, the financial risk will occur for the

investor.

IV. ECONOMIC FEASIBILITY OF GRID CONNECTED PV

POWER PLANT

The economic feasibility study summarizing the four

different cases is shown in Table I. The characteristics of

PV power plant are shown in Table II.

TABLE I. COMPARISON OF THE CASE STUDIES

case 1 case 2 case 3 case 4

Province Konya Konya Karaman Antalya

Financial model boo, boot boto boto boto

installed power [kWp] 1,000 1,000 1,000 1,000

land [K€] 300 0 0 0

PV panel [K€] 580 580 580 580

inverter [K€] 100 100 100 100

concrete, construct. [K€] 100 100 100 100

design, project [K€] 50 50 50 50

electrical facilities [K€] 100 100 100 100

security, fence [K€] 20 20 20 20

transport., insurance [K€] 20 20 20 20

total investment cost [K€] 1,270 970 970 970

unit cost [€/kWp] 1,270 970 970 970

ann. energy prod.[MWh] 1,480 1,480 1,530 1,590

ann. energy profit [K€/year]

151.5 175.3 181.2 188.3

carbon emissions

[tone/year] 792 792 819 851

carbon profit [€/tone] 0 20 20 20

ann. carbon profit

[K€/year] 0 15.8 16.3 17.0

ann. operation, maintenance [K€/year]

12 12 12 12

ann. land rental fee

[K€/year] 0 20 20 20

ann. net profit [€/year] 139.5 159.1 165.6 173.3

payback time [year] 9.10 6.09 5.86 5.60

The following equations were used for the

calculations in Table I.

payback time [year] = total investment cost [€] /

annual net profit [€/year] (1)

annual net profit [€/year] = annual energy profit [€/year]

+ annual carbon profit [€/year] - annual operation, maint.

[€/year] - annual land rental fee [€/year] (2)

annual energy profit [€/year] = annual energy production

[kWh] * support price [€/kWh] (3)

annual carbon profit [€/year] = carbon emissions

[tone/year] * carbon profit [€/tone] (4)



Konya, Konya, Karaman and Antalya, respectively. The

annual energy productions of the solar power plants were

calculated using the Photovoltaic Geographical

Information System (PVGIS) values [18]. In the case1

study, the land cost has been included and the amount of

support has been taken as 13.3 dollar cents/kWh. The

carbon support has not been taken into consideration. So

case1 study can be considered as the worst case. In this

study, the payback time is the maximum. In case 2, case 3

and case 4; the cost of the land has not been taken into

consideration. The amount of support has been 15.4

dollar cents/kWh and carbon support has been taken into

consideration. So case 4 study can be considered as the

best case. In this study, the payback time is the minimum.

In the calculations, the carbon emission for Turkey is

assumed as 0.535 [kg/kWh]. Euro/dollar parity is taken as

1.3.

TABLE II. CHARACTERISTICS OF PV POWER PLANT

panel power 250 W

panel efficiency 14.50%

efficiency drop 10 years 90% 25 years 80%

operating temperatures -40/+85

inverter power 50 kW

inverter input voltage 1000 VDC

inverter efficiency 98%

total PV plant power 1000 kWp

grounding, lightning protection yes

data recording, remote monitoring yes

construction yes

transformer, switchgears yes

environmental security fence

camera recording system yes

PV plant power is taken as 1MW, because the

unlicensed electricity generation limit is 1MW in Turkey.

The goal of many investors is the 1MW power plants.

Panel power has been selected as 250W. Because, the

panels are less than 250W, the yields are lower. The

inverter power has been selected as the 50kW, because

the voltage drop problem occurs when very high and very

small power inverters are used.

V. CONCLUSION

It is clear that the support time for renewable energy

for Turkey is sufficient, and the support times for

renewable energy in fixed-price support policies

definitely should not exceed 10 years. The installation

costs are not reduced as long as the long-term support.

And the support times for renewable energy in reduced-

price support policies can be increased to 15-20 years. In

this study, the proposed model seems to be more

appropriate because the economic feasibility times are

under 10 years.

Turkey should continue the renewable energy support

policies for to reach year 2023 target. The renewable

energy support should not only be done in time and cost,

but also the panel efficiency or total power system

efficiency must also be added into the support policies.

That will accelerate the transition to more efficient

renewable systems. In this way, more informed investors

and operators will earn more.

The investors, operators, the power system

management and the legislators should work together for

cleaner and more economical power systems.

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[18] Photovoltaic Geographical Information System. [Online]. Available: http://re.jrc.ec.europa.eu/pvgis/apps4/pvest.php



Case1, case 2, case 3 and case 4 studies were made for

.[15] Güneş Enerjisi Potansiyel Atlasi (GEPA). [Online]. Available:

Nurettin Çetinkaya was born in Kayseri in 1972. He graduated from Konya, Selçuk

University electrical and electronics

engineering department in 1993. He received a master’s degree in electrical and electronic

engineering department in 1998. He received the PhD degree from Electrical-Electronics

Engineering, Graduate School of Natural

Sciences, Konya, Turkey in 2005. His research area includes power system planning, power

system control, energy efficiency, renewable energy, power system economics and management.

Until 2005 he worked as a research assistant for 10 years. He worked as

a consultant in Konya organized industrial zone. He is currently working as a lecturer in the Faculty of Engineering, Electrical and

Electronics Engineering Department, Selçuk University, Konya, Turkey. Dr. Çetinkaya received publication awards given by Scientific Research

Projects Coordination Unit and The Scientific and Technological

Research Council of Turkey.



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