PV self-consumption regulation in Spainprofitability analysis and

alternative regulation schemes

Javier López Prol & Karl Steininger

IAEE 2017 Vienna, Sept. 5, 2017

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UNIVERSITY OF GRAZ

1. PV self-consumption

2. Method

3. Profitability analysis

4. Economic impacts of PV self-consumption

5. Conclusions

Outline

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1. PV self consumption

Towards grid parity

€/kWh

t

PV LCOE

Retail electricity price

Variable part of theretail electricity price

Taxes and grid costs

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1. PV self consumption

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1. PV self consumption

Electricity consumption

Electricity generation

Electricity self-consumption

Electricity surplus

How to value the surplus electricity exported to the grid?

Generation and load profiles

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1. PV self consumption

Regulation schemes (Price of surplus electricity):

Self-Consumption (SC): not remunerated

Net Metering (NM): retail price

Net Billing (NB): somewhere between 0 and retail price

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Residential

Commercial

Industrial

• Higher savings potential due to higher electricity prices

• Higher costs (interest rates and system price)

• Lower share of electricity self-consumed

Segments definition

1. PV self consumption

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Price of surplus electricity Backup charge

Self-consumption0

Exemption for systems <10kWHigh otherwise

Net BillingWholesale price

- Generation tax (7%)- Grid access charge

(5€/MWh)

Medium-high

Low

Self-consumption regulation in Spain

1. PV self consumption

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0

5

10

15

20

25

Retail Price PotentialSavings

Retail Price PotentialSavings

Retail Price PotentialSavings

R C I

€c/

kWh backup

savings

Fixed

VAT

Variable

0

5

10

15

20

25

Retail Price PotentialSavings

Retail Price PotentialSavings

Retail Price PotentialSavings

R C I

€c/

kWh backup

savings

Fixed

VAT

Variable

Savings potential in Spain

1. PV self consumption

% self-consumption 33% 41% 75%

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Methodology: Internal Rate of Return (IRR): discount rate at

which the net present value of the investment equals zero

𝑁𝑃𝑉 = 𝑃𝑊 𝐶𝐼𝐹 𝑁 − 𝐿𝐶𝐶𝑢𝑠𝑝 = 0

Revenues Costs

Savings from self-consumed electricity

Income from the electricityexported to the grid

Financing cost

Operation and maintenance

System price

2. Method

PW… Present value LCCusp: life cycle cost from the user standpointCIF…. Cash inflowN……. Project lifetime

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2. Method

ሿ𝐿𝐶𝐶𝑢𝑠𝑝 = 𝑃𝑊 𝑃𝑉𝐼𝑁 + 𝑃𝑊 𝑃𝑉𝑂𝑀 + 𝑃𝑊[𝛿𝑐

1 − 𝛼 ∗ 𝑃𝑉𝐼𝑁 + 𝑃𝑉𝐼𝑁 ∗ 𝛼 ∗ 𝑖 ∗1+𝑖 𝑁𝑙

1+𝑖 𝑁𝑙−1∗1−𝑞𝑁𝑙

1−𝑞

𝑃𝑊 𝐶𝐼𝐹 𝑁 = 𝛽 ∗ 𝐸𝑃𝑉 ∗ 𝑝𝑠 − 𝛿𝑒 ∗ 𝐴𝑠 + 1 − 𝛽 ∗ 𝐸𝑃𝑉 ∗ [ 𝑝𝑔 − 𝛾 ∗ 1 − 𝜆 ሿ ∗ 𝐴𝑔

Self-consumed electricity Electricity exported to the grid

Backup charge Grid-access charge Generation tax

Share externally financed

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Results residential

3. Profitability analysis

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0 5 10 15

IRR

(%

)

Price of exported electricity (€c/kWh)

Residential

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Results commercial

3. Profitability analysis

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0 5 10 15

IRR

(%

)

Price of exported electricity (€c/kWh)

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Results industrial

3. Profitability analysis

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0 5 10 15

IRR

(%

)

Price of exported electricity (€c/kWh)

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Lower PV System Price (€/kWp), higher profitability

2.1 €/Wp (current*)1.9 €/Wp (-10%)

1.5 €/Wp (-30%)

1 €/Wp (-50%)

Declining PV system costs

3. Profitability analysis

-5%

0%

5%

10%

15%

20%

0 5 10 15

IRR

(%

)

Price of exported electricity (c€/kWh)

Base case: own capital without backup charge. *May 2015

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3. Profitability analysis

Sensitivity analysis

Installation costs (system price)

Base case: 80% externally financed with backup charge for C and I

-5%

0%

5%

10%

15%

20%

25%

1 0,9 0,8 0,7 0,6 0,5 0,4 0,3

IRR

(%

)

Installation cost wrt. base case

Residential

Commercial

Industrial

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3. Profitability analysis

Sensitivity analysis

Share of electricity self-consumed

Base case: 80% externally financed with backup charge for C and I

-15%

-10%

-5%

0%

5%

10%

15%

0% 20% 40% 60% 80% 100%

IRR

(%

)

% of electricity self-consumed

Residential

Commercial

Industrial

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3. Profitability analysis

Sensitivity analysis

Retail electricity price (variable part)

Base case: 80% externally financed with backup charge for C and I

-10%

-5%

0%

5%

10%

15%

20%

1 1,5 2 2,5 3

IRR

(%

)

Retail electricity price wrt. base case

Residential

Commercial

Industrial

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4. Economic impacts of self-consumption

On government revenues

At 5% discount rate. € per kWp of installed capacity during the lifetime of the system (25 years)

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4. Economic impacts of self-consumption

On the electricity system*

*comprising generators, suppliers, TSO, DSO, regulators and consumers. € cents per kWh generated by the system.

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Conclusions

5. Conclusions

- This regulation will hinder the difussion of PVSC applications by making them economically infeasible

- It sets inefficient incentives

- Recommended Dynamic Net Billing without backupcharge

- With the current regulation, residential PV self-consumption has a positive impact on both governmentand ´electricity system´ revenues

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Thank you for your attention