Designing PV Systems for Grid Connection

Renewable Energy 31 (2006) 20422062
Design of grid connected PV systems considering

electrical, economical and environmental aspects:
A practical case
Alberto Ferna ndez-Infantes
a
, Javier Contreras
a,
,
Jose L. Bernal-Agust n
b
a
E.T.S. de Ingenieros Industriales, University of Castilla-La Mancha, Avda. Camilo Jose Cela s/n.,
13071 Ciudad Real, Spain
b
Department of Electrical Engineering, University of Zaragoza, Calle Mara de Luna, 3., 50018 Zaragoza, Spain
Received 5 August 2005; accepted 28 September 2005
Available online 2 November 2005
Abstract
This paper presents the complete design of a photovoltaic installation that may be either used for
internal electric consumption or for sale using the premium subsidy awarded by the Spanish
Government. Electric optimization strategies are detailed in the project, as well as the sizing of the
photovoltaic installation and economic and nancial issues related to it. The project optimizes the
electricity demand, improving reactive power and studying the convenience of hourly discrimination
fees in addition to the design of the photovoltaic installation. A specic computer application for the
automated calculation of all relevant parameters of the installationphysical, electrical, economical
as well as ecologicalhas been developed to make the process of calculating photovoltaic
installations easier and to reduce the design development time. Moreover, the budget of the
photovoltaic installation is included, as well as its corresponding nancial ratios and payback
periods. Finally, the conclusions reached in the technical and economic design of the installation are
shown.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Photovoltaic energy; Power optimization; Renewable energies; Computer application
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www.elsevier.com/locate/renene
0960-1481/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.renene.2005.09.028
Corresponding author. Tel.: +34 926 295464; fax: +34 926 295361.
E-mail address: Javier.Contreras@uclm.es (J. Contreras).
1. A brief history of the project
The project starts as a response to the inquiry placed by the High School Ojos del
Guadiana (Fig. 1) in Daimiel, Ciudad Real, Spain, to the Industrial Engineering School
at Ciudad Real to study the feasibility of a photovoltaic installation within their premises.
Preliminary studies begin in September 2004 and the project is nished in March 2005.
Within these 6 months, the forecasted electric demand, the available surface to place the
solar arrays, overall funding, and other relevant data are exhaustively studied in order to
build a design according to the needs of the Centre. The main innovation of this project
resides in the development of a computer application to design the photovoltaic
installation connected to the grid. This application considers all relevant parameters,
allowing for an interactive design that takes into account all the electric, nancial and
economic data simultaneously. In addition, we have reduced the development time and run
several sensitivity analysis studies to compare different solutions.
2. Proposals for optimizing the electricity consumption
The activities oriented to optimize the electricity consumption have produced the results
described in the following subsections.
2.1. Feasibility study of the electricity demand of the Centre
The results of the preliminary study of the electrical consumption conrm a worrying
increase in the demand: from 32,200 kWh and 23,200 kVArh in year 2000 to 44,070 kWh
and 28,900 kVArh in 2004, as shown in Fig. 2. In 2005, the trend is even sharper. With the
beginning of the construction of a new annex building equipped with 2 classrooms and a
library, demand forecasts are even bigger. The prediction of electric demand for 2005 is
48,100 kWh and 32,000 kVArh. Thus, we plan a strategy based on three key points to
reduce the electricity bill:
1. Optimization of the current electricity consumption studying the possibility of including
reactive compensation equipment and the convenience of signing for different hourly
price discrimination fees.
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Fig. 1. Computer simulation of the High School Ojos del Guadiana building in Daimiel, Ciudad Real, Spain.
A. Fernandez-Infantes et al. / Renewable Energy 31 (2006) 20422062 2043
2. Reduction of the electric demand in the next years, proposing basic rules for saving
energy and the selection of new electrical equipment in the future.
3. Feasibility study of a photovoltaic installation connected to the low voltage network
that would cover part of the annual demand of the Centre with solar energy.
To calculate the demand for each bimonthly period, or even for a monthly period, is a
complex task, due to the presence of seasonality, with peaks during the months of January
and February (corresponding to the March invoice) and troughs during July and August,
in which the Centre is closed (September invoice). The most precise way to adjust all data is
to use a moving averages model of 6 periods (equivalent to 1 year).
To predict the electricity demand for 2005 we proceed to seasonalize and deseasonalize
the consumption data from 2000 to 2005, using the centred and non-centred 6-point
moving averages model [1] as shown below:
Pm
t
=
P
t6
i=t
T
i
6
, (1)
Pmc
t
=
Pm
t
Pm
t1
2
, (2)
IE
t
=
T
t
Pmc
t
, (3)
where T
i
is the demand in the bimonthly period i. Assuming that the active and reactive
energy consumptions for a 2-month period are known, we calculate the moving averages
values for 6 periods, as indicated in (1); later, we nd the centred moving average value,
Pmc
i
, from Pm
i
and Pm
i1
, as shown in (2). And from the moving averaged value centred
in period i and the demand of that period, we obtain the seasonality index of period T
i
,
IE
i
, as shown in (3).
Since the algorithm based on moving averages condenses all the data of the year in a few
values, we use linear interpolation for year 2005 to approximate more accurately. From
available data of the JanuaryFebruary periods for the years 20002004, we extrapolate
the same data for the year 2005, and the same process is repeated for all bimonthly periods.
With the actual data from 2000 to 2004 and the rst forecast for 2005 we proceed to
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0
10000
20000
30000
40000
50000
60000
k
W
h
/
k
V
A
r
h
Active Energy Reactive Energy
2000 2001 2002 2003 2004 2005
Year
Fig. 2. Annual development of the electricity demand of the Centre and future trend obtained using interpolation.
calculate the seasonality indexes for each of the periods. Once this is done, we order the
seasonality indexes in columns and we calculate the seasonality indexes corresponding to
each of the bimonthly periods, so that the sum of all of them is equal to 6, which is the
number of periods considered in a yearly cycle. With this we obtain the factors to weigh the
linear estimation for the complete year (obtained from the overall consumption data in
previous years, as shown in Fig. 3). In this way, we obtain the weighted demand for each of
the bimonthly periods. To approximate the demand prole even more, we have distributed
the result for each bimonthly period between the two months, using a smooth distribution
function that considers the number of working days of the month.
2.2. Compensation of reactive energy
The compensation of reactive energy may result in a 4% bonus in the electricity bill, as
opposed to the current 5% penalty, if it were possible compensate between 90% and 98%
of the total reactive energy demand. Currently, for every billing period, the average value
of the power factor cos j is given by
cos j =
E
a
E
2
a
E
2
r
q , (4)
where E
a
and E
r
are the values of the active and reactive energy demands, respectively,
during the billing period.
Using Eq. (5) we can calculate the penalty or the bonus applied by Spanish law; it is
limited to 47% in case of penalty, and to 4% in case of bonus:
k
r
(%) =
17
cos
2
j
p 21. (5)
In our calculations we specically take this fact into account for the year 2005. Later, we
compare the bills with and without compensation to obtain the annual savings.
Likewise, we calculate the reactive power of the equipment necessary to compensate the
reactive demand, based on the total amount of the demand (with the exception of a base
level demand of the entire year, which is consumed by static equipment and concentrated
within the daily 8 h with the highest demand). Thus, a piece of equipment of 17.5 kVAr
should meet the demand 100% of the time, smaller units ranging from 12.5 to 15 kVAr
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C
o
s

0
2000
4000
6000
8000
10000
12000
Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05
k
V
A
h
/
k
V
A
r
h
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Active Energy Reactive Energy Cos
Fig. 3. Development of the active and reactive electricity demands of the Centre, showing seasonalities.
may be unable to meet the demand sometimes, and the compensation would not be
optimal (98% of reactive demand).
2.3. Reduction of electricity consumption
We present a series of actions for the following years, especially for 2005, where the
demand shows a marked trend to increase. The suggested actions are fundamental to keep
a certain level of independence with respect to the future incomes obtained from
photovoltaic generation. The actions can be reduced to the following ones:
+ Rational use of energy.
+ Replacement of obsolete equipment of high consumption whenever possible.
+ Progressive renewal of current lighting equipment by new equipment with reectors and
electronic ballasts.
+ Discarding the use of electricity for heating (furnaces, convectors, accumulators, etc.),
only allowing it for heat pumps and refrigerators.
+ Adaptation of the computer equipment: selection of moderate consumption feeders and
LCD-type screens.
+ Publicity campaign oriented to the students promoting consumption moderation and
environmental consciousness in public and in private.
+ Periodic reporting of the energy savings results.
3. Photovoltaic installation design method
Once the convenience of having a solar photovoltaic installation has been decided, we have
to consider the limited economic funds available to the Centre. Thus, instead of choosing a
traditional design based on power from generators and inverters we seek a more exible design
method that takes into account all the parameters that can have an inuence on: performance,
production, nancial data, available subsidies, remuneration for selling electricity, taxes
applied to the remuneration, annual quota in concept of repayment once the electricity sales
income is discounted, etc. This custom-made concept is the most innovative feature of this
project; Fig. 4 reects the main differences between both design philosophies.
In this way, our automated calculation of the solar photovoltaic installation generates
numerous advantages compared to a traditional design method:
+ It considers many more parameters, in fact, more than 60.
+ It allows for a better-adjusted design where we can alter parameters such as power,
surface, orientation, production of energy, protability, etc.
+ Fast sensitivity analysis of inuential parameters.
+ Faster design process with many scenarios that reect particular needs.
+ For a quick modication of the parameters we link our application to a database that
includes the main features of the most popular photovoltaic panels and inverters; by
typing the code and the number of units, the application collects all data necessary to
proceed with the calculations.
The main factors considered in our computer application that affect the performance of
the photovoltaic generators are described in following subsections.
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3.1. Solar irradiation data variability
While the Atlas of Solar Radiation in Spain provides the most optimistic data, the most
conservative data come from the NASA web site [2], showing a standard deviation of 3.6%
and a variability greater than 7%. We use data from NASA Surface Meteorology and Solar
Tables (SSE). As shown in Table 1 obtained from [3], it can be observed that actual
readings obtained in the same place by different sources provide results that vary around
10%. Thus, we consider adequate using the most pessimistic available data.
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Fig. 4. Diagram comparing the traditional design process versus our exible calculation method.
Table 1
February and yearly averages of the daily horizontal global irradiation in Algiers, according to different sources
Information source February G
d
(0) (kWh/m
2
) Yearly average (kWh/m
2
)
CDER 3.03 4.23
Capde rou 3.20 4.60
Censolar 3.00 4.37
NASA 2.90 4.45
Meteonorm 3.00 4.52
3.2. Losses due to shading over the PV panels
They can be due to distant shading (trees, posts, nearby buildings, etc.) if shadows
interpose between the sun and the panels during the day, or due to direct shading, if there
are several rows of panels arranged in the same horizontal plane.
Losses can be important, because of that, the location must be carefully chosen to avoid
distant shading as much as possible, whereas, to avoid direct shading, we can opt to split
each row of panels arranged in the same plane, or to elevate them on an inclined surface.
To estimate losses due to distant shading we use the method proposed by the Institute for
diversication and energy savings (IDAE) [4] of Spain, by superposing the prole of visible
obstacles observed from the installation point to a graph of solar trajectories (see Fig. 5).
Each sector of the graph has an associated loss coefcient that varies according to the
orientation and the slope of the panels. We calculate each of the sectors intercepted by the
shading prole and we add up the corresponding coefcients obtained from a table,
depending on the orientation and slope of the panels. This results in a loss percentage for a
particular location. This is the only loss contribution that is not automated in our
program; Fig. 5 shows that there are no obstacles in the solar trajectory and losses are
negligible (0.2%).
On the other hand, losses due direct shading are estimated to be around 2% [4]. Lower
values cannot be considered for a at-grounded placement, even if the distance between
two consecutive rows is greater than the one shown in (6), such that
d
min
=
h
vertical
k
, (6)
where coefcient k is calculated as [tan(611latitude)]
1
. The latitude of the location is 391
05
/
N; therefore coefcient k is: [tan(61139105
/
)]
1
= [tan(21155
/
)]
1
= 2.4855.
We obtain the height of the panel, according to its dimensions and optimal slopes, from
Eq. (7). Also, we can deduce the minimum spacing between rows of modules using Eq. (8).
h
vertical
= L
mod
sin(b) h
sup
, (7)
d
min
= k[L
mod
sin(b) h
sup
] = 2:4855 [1:593 sin(30:67
) 0]
2:55[m], (8)
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Fig. 5. Superposition of the solar trajectories diagram to a panoramic view of the roof for shading calculation.
where b is the inclination angle that turns out to be 30.671, as shown in Section 3.4. See
Fig. 6 for a pictorial description of the calculations.
3.3. Losses due to electric conductors
These losses are important in DC, when the voltage is low. It is crucial to conveniently
size the conductor sections so that the voltage drop is less than 1.5%. It is also important:
to place the generators close to the inverters, to work at the maximum DC voltage that the
panels and the inverters can withstand, to increase the conversion performance, and to
reduce ohmic losses. Depending on the conductor section considered, our computer
application calculates losses due to voltage drop in DC.
3.4. Slope, orientation and glass surface reexivity of the PV panels
Usually, if the PV panels are not perfectly oriented to the south (azimuth 01 in the
northern hemisphere), their orientation can originate a considerable loss of efciency.
Likewise, the slope of the panels should be changed two to four times a year to maximize
the solar absorption, since the optimum slope in the summer is not the same as the
optimum one in the winter.
Glass surface reexivity protects the panels from the accumulation of dirt in the surface;
a dirty glass reects a percentage of energy that increases with the divergence of the
incidence angle with respect to a perpendicular line to the glass surface plane (a glass
reects more light and looks dirtier when you observe it from the side). This causes the
panels to reect part of the direct radiation and the majority of the diffuse radiation
available. Rain can solve this problem, but in the summer season the efciency of the
radiation is signicantly reduced unless the surface of the panels is cleaned on a regular
basis.
We use Eq. (9) to calculate the optimal slope [5]:
b
opt
= 3:7
0:69 f, (9)
where b
opt
is the inclination angle that optimizes the incident radiation over the panel
surface for a year, and f is the latitude of the location point. The optimal angle that is
obtained from Eq. (9) is 30.671.
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Fig. 6. Minimum spacing between two consecutive rows of panels as a function of the geometric parameters.
Provided the optimal angle and the annual irradiation over a horizontal surface, (G
a
(0)),
it is possible to calculate the value of the annual irradiation for the optimal angle b
opt
using
G
a
(b
opt
) =
G
a
(0)
[1 4:46 10
4
b
opt
1:19 10
4
b
2
opt
]
. (10)
Finally, we calculate the incident effective annual irradiation over the generators surface,
denoted by G
eff
(b; a), using Eqs. (11) and (12) proposed in [5], including orientation, slope,
and reexivity due to dirt on the surface of the glass
G
eff
(b; a)
G
a
(b
opt
)
= g
1
(b b
opt
)
2
g
2
(b b
opt
) g
3
, (11)
g
i
= g
1i
[a[
2
g
2i
[a[ g
3i
; i = 1; 2; 3, (12)
where a is the azimuth, and the coefcients g
1i
, g
2i
, g
3i
depend on the degree of dirtiness of
the panel. For a medium-dirtiness case, the values of these coefcients correspond to the
ones shown in Table 2.
3.5. Efciency of the inverters
Despite being electrical equipment of high performance in DC/AC conversion, they
never reach 100% efciency [6]; they reach their optimum performance in the range of
8596% efciency for power values close to the nominal rating, while for the generation of
small amounts of powerin conditions of cloudiness, start-ups, sunrise and sunsetthe
efciency can diminish considerably. Spanish law [7] makes the use of inverters with a
minimum efciency at 25% of the nominal power compulsory, which means selecting good
equipment turns out to be fundamental. Also, the monitoring of the point of maximum
power and the adaptation to the variable conditions of generation involves a small loss of
power during normal operation conditions. For single-phase inverters, the sum of all the
losses can be about 820% of the total energy generated, depending on the quality of the
equipment. The data provided by the manufacturers for each model is included in the
database of the computer application; we also consider a loss factor by monitoring the
Maximum Power Point (MPP) and the start-up/shutdown of the inverters.
3.6. Actual power produced by the PV panels
It is usually lower than the nominal value in catalogues [8]. Spanish law [7] establishes
that the power, measured in standard conditions, cannot be lower than 90% of the
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Table 2
Coefcients used in (11), with 97% transmittance due to dirt
T
dirty
(0)=T
clean
(0) = 0:97
Coefcients i = 1 i = 2 i = 3
g
i1
8 109 3.8 10
7
1.218 10
4
g
i2
4.27 107 8.2 10
6
2.892 10
4
g
i3
2.5 105 1.034 10
4
0.9314
nominal power value in catalogues. A breach of contract could be reason for refund
(almost all the manufacturers freely replace the panels if they do not comply with the
specication of the 90% of power), but one must consider that the standard conditions:
1000 W/m
2
, 25 1C in the surface of the cells and spectral distribution 1.5 AM, in which the
nominal power is measured, do not correspond to the real working conditions.
To reach a temperature of 25 1C in the cells of the panel, it is necessary that the ambient
temperature is, approximately, 5 1C. Provided that the ambient temperature is usually
greater than this value, there can be a decrease in the power delivered by the panels because
the open circuit voltage and the maximum power voltage diminish when the temperature
increases with respect to the nominal condition (25 1C). However, the current delivered by
the panel does not signicantly depend on the temperature. Therefore, the power delivered
by the panels is usually lower than the nominal one.
Our computer application considers the nominal power minus 10%, or the maximum
percentage guaranteed by the manufacturer, if it were smaller. Then, it is multiplied by a
variable coefcient [8] that takes into account: (i) the average temperature at noon for each
month in the considered location and (ii) the decrease of power due to temperature, as
explained above.
The relation between the power output of the panels and the nominal power of the PV is
calculated in
P
real
= P
nom

100 dev
nom
(%)
100

100 DP (25 T
cell
)
100

, (13)
where dev
nom
(%) is the maximum deviation of power guaranteed by the provider [W], DP
is the power variation for each degree increase in the temperature with respect to the 25 1C
nominal value [W/1C], and T
cell
is the average temperature of the cell during operating
conditions (atmospheric temperature while the sun is at its zenith plus an empirical
increment between 8 and 20 1C, depending on the climate).
Note that ageing and degeneration of the modules causes them to slightly decrease their
performance each year: due to UV irradiation, severe temperature changes have a
cumulative effect over the electrical production.
4. Final design of the grid connected PV installation
Once all data described in Section 3 are considered, we proceed to obtain the overall
electricity production for each monthly period, according to the longitude and latitude
data obtained, using Eq. (14) [5].
E
month
= P
nom

G
effect
G
+

F
Shadow
F
eff
kWh
month

, (14)
where P
nom
is the nominal power, as indicated by the manufacturer of the photovoltaic
panels in standard conditions, G
effect
is the effective annual incident irradiation over the
panel surface considering the orientation angle and the panel slope, G
+
is the value of the
irradiation for which P
max
is measured: 1000 W/m
2
, 25 1C, F
Shadow
is a factor that considers
the losses due to shading in the panel, F
eff
is an efciency factor including the losses in the
inverter, the losses in the generators at temperatures greater than 25 1C, and the voltage
drops in the lines.
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With all this, F
eff
oscillates between 0.7and 0.9 for a standard installation, and mainly
depends on the quality of the equipment selected. If F
eff
were lower than 0.7 it would imply
a decient performance of one or several components.
The optimal dimension of the photovoltaic installation that meets all High School
requirements is a plant composed of 72 modules, each module with a peak production of
160 peak power or Wp (total production is 11,520 Wp). The plant is arranged in 12 groups
of 6 modules, where each group produces 960 Wp. The modules are connected in series and
operate at 210 V and 4.55 A in nominal rate. Every 3 groups of 6 modules are also
connected to the inverter through a pair of wires, so each pair of wires (4 pairs in total)
operates at 210 V, 13.65 A and 2880 W (nominal rate). See Fig. 7 for details. The panels are
oriented to the south forming an angle of 11.231 with respect to the main orientation of the
roofs of the building. The modules are manually mounted on inclinable supports to
maximize the electric power generation. The optimum slope in case of xed supports is
30.671, as calculated in Eq. (9).
As shown in Fig. 8, the generation plant is connected to 3 single-phase inverters; two of
them withstand 2600 W during nominal operation, and the other one withstands 4600/
5200 W. The latter can be connected either to 5 or to 6 basic groups of 6 photovoltaic
modules to reduce total investment without modifying the optimal performance
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Fig. 7. Arrangement and connections of the photovoltaic modules.
conditions. Each inverter comes with its own electrical protections and is connected to one
of the phases (R, S, T) of the low voltage grid, delivering power ranging from 9800 to
10,400 W. To ensure the optimal protection of the electrical equipment and the inverters
from their environment, they are located within a 1.50 2.50 m brick-made shelter placed
beside the High Schools gym, conveniently insulated against rain and humidity and
adequately ventilated. See Fig. 9 for an overall 3D view of the installation, including the
inverters shelter, and Fig. 10 for a detailed view of the solar panels.
The power ratio (P
Generator
=P
Inverters
) is near 1.10. The efciency of the inverters is
typically 94% (maximum efciency is 96%). The section of the cables has been enlarged by
design to reduce DC losses, and the location of the power lines and inverters has been
chosen to reduce the distance to the MV/LV transformer substation. The lines from the
modules to the inverters are aerial, whereas the three-phase line to the main grid is buried
underground.
The electrical production of the installation would approximately meet 29% of the
estimated demand for 2005, as shown in Fig. 11, but it would have met 43% of it in the
year 2000, 42% in 2001, 35% in 2002, and 32% in 2003. That is why it is equally important
to take actions to also reduce the electric consumption, as detailed in Section 3.2. The
calculation of the photovoltaic power production is automated in our computer
application from data inputs. Fig. 12 compares the forecast of the photovoltaic generated
energy versus the forecast of electrical demand of the High School per month. The energy
produced per kWp in such conditions is about 1207 kWh per year. This data is far from the
optimistic forecasts of many photovoltaic manufacturers, who predict values between 1300
and 1500 kWh per year. Note that our installation is optimized for normal operation and
does not have shading effects [9].
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Fig. 8. One-line diagram of the proposed photovoltaic plant.
5. Environmental analysis
The nal design has resulted in an electric power plant composed of photovoltaic
modules based on polycrystalline silicon technology with a peak power of 11,520 Wp and 3
single-phase inverters, one of 5200 W and two of 2600 W, totaling 10,400 W in nominal
operation. Each inverter injects its current to one of the phases (R, S, T) of the low voltage
grid. The area of each photovoltaic module is 1.26 m
2
(1.16 m
2
of active area) so that the 72
projected modules add up to a collector area of 90.57 m
2
, whose active area is
approximately 83.61 m
2
.
The estimated electrical efciency of the modules is approximately 13.5%, losses related
to orientation, slope and dirt of the modules are estimated around 6.88%, losses due to
indirect shading are negligible and direct shading losses are around 2%. In addition, power
losses due to temperature are around 4.42%, assuming that the cells surface temperature is
12 1C higher than the monthly average temperature when the sun is at its zenith. Power
losses due to voltage drops are estimated around 1%, due to oversized cable sections. All
things considered, the power plant generates an average of 1.287 MWh each month, as
shown in detail in Table 3.
On average, 1.158 MWh are injected to the grid per month, considering all types of
losses, with an 85% efciency factor. Compared to the thermal data, the electric
production is equivalent to the combustion of 1.195 Tons of Oil Equivalents (TOE) or 1.708
Tons of Coal Equivalents (TCE), even after assuming a 100% efciency factor in
generation, transformation and distribution of the electric power. Considering a more
realistic scenario and assuming that:
(1) The electricity would be generated from a combined cycle or an equivalent technology
whose efciency factor could be around 50% on the average.
(2) A 95% efciency factor in each successive voltage adjustment: from 12,000 V-
250,000 V, from 250,000 V-20,000 V and from 20,000 V-380 V.
(3) Additional losses of 5% in low voltage distribution, then, we would have an
approximate overall efciency factor of 40%.
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Fig. 9. 3D view of the installation showing the DC circuit and the location of the inverters shelter.
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August 3%
July 4%
June 4%
May 3%
April 3%
March 2%
February 2%
Forecast 71%
September 3%
October 2%
December 1%
November 1%
January 1%
Fig. 11. Monthly PV generation forecast vs. annual electric demand of the Centre.
Fig. 10. 3D detail view of the solar panels arrangement on the roof.
So, to generate the same electric power using fossil fuel [10], it would be necessary to
burn up to 2.934 TOE or up to 4.197 TCE every year, even without considering the cost
and power needed to extract, rene and deliver the fuel, which would increase prices even
more.
All of this implies that, throughout a life-span of 25 years for the entire installation, the
photovoltaic modules would produce the same power as 73.35 tons of oil or 104.93 tons of
coal, with the subsequent reduction in emissions of CO
2
, NO
X
and SO
X
. So, the
consideration of the environmental impact changes the global appreciation of the
installation [11], especially if we take into account the relatively small dimensions and
the power produced in the plant.
6. Complete budget of the PV installation: economic and nancial case studies
We show in Table 4 the complete budget of the PV installation.
Current legislation in Spain [12] regarding the production of electrical energy originated
from renewable energy sources, waste and cogeneration, allows all the energy generated by
the PV system to be injected into the grid. In addition, the energy consumed by the PV
system can be bought back at a much lower price than the one paid to the PV system for its
production.
For installations with less than 100 kW of installed power, the energy tariff is established
at 575% of the average electric tariff, or the reference tariff (updated yearly) for the rst 25
years of the installation, decreasing to 460% in the following years.
We carry out two different economic and nancial case studies using the methodology
in [10]. In the rst case study we assume that the investment is nanced through a loan
of 90% of the total value, and the remaining 10% comes from the Centres own funds. In
the second case study, the investment is completely nanced with external funds from
a loan that covers the part of the investment that is not subsidized by the Spanish
Government [13].
Next, we present the nancial parameters:
+ Required investment without Value Added Tax (VAT): 64,577 h.
+ VAT: 16% (10,332 h). Taxes not related to subsidies are 8472 h, they are refundable a
year later.
ARTICLE IN PRESS
0
1000
2000
3000
4000
5000
6000
7000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
[
k
W
h
/
m
o
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t
h
]
PV Generation
Electric Demand
Fig. 12. Monthly PV generation forecast vs. monthly electric demand of the Centre.
ARTICLE IN PRESS
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+ Depreciation period of the investment: 20 consecutive years.
+ Total electrical power produced by the photovoltaic modules: 11,520 Wp.
+ Inverter estimated production: 10,400 W.
+ Photovoltaic estimated production: 13,904 kWh/year.
+ Electric reference tariff (ERT): 0.083728 h/kWh, as shown in the Ofcial State Bulletin
of Spain, BOE (12/31/2004).
+ Electric remuneration (h/kWh): 575% of the ERT during 25 years; 460% of the ERT
until the end-of-life of the installation.
+ EURIBOR interest rate for a 6 months loan (%): 2.5% yearly.
+ Period to pay back the subsidized loan: 7 years.
+ Amount of the subsidized loan: 57,494 h (90% of total investment minus the total value of a
diesel-engine alternator which could generate the same power for 8000h of use/year).
+ Non-recoverable subsidy given by IDAE: 20% of the subsidized amount, or 11,499 h.
+ Inter-annual ination: 2.5%.
+ Inter-annual energy ination: 2%.
+ Self-nanced investment: 6457 h.
+ VAT return: 8472 h.
+ Period to return the VAT of the installation: 7 years.
+ Economic Activity Tax (EAT): 0.7212 h/installed kWp; nevertheless, the installation
would be free of this tax since it would not reach 37.24 h (corresponding to a 51 kWp
installation).
+ State taxes: 35% of net prot (excluding depreciation of equipment+VAT).
+ Estimated maintenance costs: 0.018 h/generated kWh.
+ Insurance cost to cover defective equipment: 0.4% of the installation value each year.
+ Investment required to generate an equivalent amount of electric power using a diesel-
engine alternator: 801 h for a 1.74 kW engine working 8000 h/year.
+ Depreciation of the equipment: Although it is expected that the photovoltaic modules
can be operative after 25 years of use, its salvage value is 0 h.
+ Considering all the costs involved, earnings from electricity sales (after taxes) for the
two studied cases are shown as follows.
Scenario 1: mixed nancing: 10% self-funding, 90% external funding.
+ Internal rate of return (IRR): 14.65%.
+ Payback period: 6 years and 6 months.
ARTICLE IN PRESS
Table 4
Complete budget of the PV installation
Description Total (h)
Photovoltaic modules, supports and accessories 49,720.08
DC circuit, connection to the grid and grounding 883.70
Inverters and related devices 6980.95
Civil engineering project work 2593.80
Labor costs and equipment installation 2060.30
Civil engineering project management work 1805.36
Total 64,044.41
+ Aggregate prot: 110,916.80 h.
+ Net Present Value (NPV): 73,696.31 h.
+ Costbenet ratio: 0.46 in 10 years, 1.24 in 15 years, 2.08 in 20 years, and 2.85 in 25
years.
Scenario 2: 100% external nancing.
+ Internal rate of return (IRR): 16.00%.
+ Payback period: 7 years and 2 months.
+ Aggregate prot: 109,561.07 h.
+ Net present value (NPV): 73,079.76 h.
+ Costbenet ratio: 0.42 in 10 years, 1.20 in 15 years, 2.05 in 20 years, and 2.82 in 25 years.
In the second case study, the cash ow is basically the same as in the rst one; only the
development of the income varies: the aggregate prot during the payback period (rst 7
years) is less positive compared to the rst case. Also, the IRR has a higher value because
the interest of the loan (subsidized by IDAE) is not affected by ination; in addition, the
interest of the consumer credit does not affect the NPV and the aggregate prot value,
since high interest rates of up to 20% have been tested without signicant variation in the
aggregate prot.
To conclude, Fig. 13 depicts the annual cash ow for scenarios 1 and 2, which is almost
identical in both cases. Figs. 14 and 15 present the development of the annual incomes for
scenarios 1 and 2, respectively.
7. Conclusions
After calculating the dimensions of the PV installation, the estimated power production,
the total budget and two nancial case studies, these are the main conclusions that we have
reached:
+ The installation requires an initial investment several times greater than the cost
of diesel-engine alternator equipment that can generate the same amount of power in
1 year.
+ Economic incentives, like subsidies for part of the investment, and the chance to sell all
the electricity generated at 6 times its market price, are required to make a photovoltaic
installation protable.
+ An even greater investment is necessary to generate the electricity required to meet the
demand of the Centre completely only using photovoltaic energy, since the installation
can only meet 30% of the annual electrical demand. Nevertheless, the income from sales
of the electricity generated is greater than the amount of the electricity bills.
+ Developing an installation of this type promotes the use of environmentally conscious
sources of energy and motivates students to use renewable energies.
+ With the subsidized loans given by the IDAE, the installation becomes viable in a
reasonable period (nearly 8 years) and generates prots from the beginning; these prots
can be used to partially pay the Centres electric bills. Once the investment has been
repaid, the annual earnings from PV electric generation can fully compensate the
electricity bill, which would allow for considerable budget savings.
ARTICLE IN PRESS
+ The remuneration given to PV electric generation in Spain (575% of the ERT
established by law for a 25 years period) allows making a prot from the investment in
the long term. Also, non-recoverable subsidies reduce the payback period. The actual
cost of this remuneration scheme represents just 2% of the special electricity taxes,
approximately 0.08% of the electricity bill, whereas the nuclear moratorium tax almost
absorbs 40%, or 1.6% of the electricity bill.
+ The aggregate prot in the long term, 2025 years, doubles the initial value of the
installation. The NPV is also positive and the IRR guarantees that an increase in
ination will not affect the protability of the installation.
ARTICLE IN PRESS
-10000
-5000
0
5000
10000
15000
0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Years
Economic ActivityTax
Financing installments
VAT
Electricity income
1
Fig. 13. Annual cash ow components for scenarios 1 and 2.
-8000
-6000
-4000
-2000
0
2000
4000
6000
0 4 3 2 1 5 9 8 7 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Years
Fig. 14. Annual income development for scenario 1 (mixed nancing: 10% self-funding, 90% external-funding).
+ The durability of the equipment guarantees optimal operation for 25 years, except
accidents, for which a specic insurance can be purchased until the installation is totally
repaid in about 8 years, just after the subsidized loans are fully repaid.
+ Finally, the remuneration obtained from the sale of PV-generated electricity can
produce prots that can both repay the necessary loans to get the installation started
and also the electricity bill, even if the electric consumption remains constant during the
following years.
References
[1] Newbold P. Statistics for business and economics, 5th ed. Englewood Cliffs, NJ: Prentice-Hall; 2002.
[2] National Aeronautics and Space Administration. http://www.nasa.gov
[3] Labed S, Lorenzo E. The impact of solar radiation variability and data discrepancy on the design of PV
systems. Renewable Energy 2004;29:100722.
[4] Technical conditions for PV installations connected to the grid [in Spanish]. Report available from the
publication services of the Institute for Diversication and Energy Savings, Spain. http://www.idae.es, 2002.
[5] Lorenzo E. Energy collected and delivered by PV modules. In: Luque A, Hegedus S, editors. Handbook of
photovoltaic science and engineering. West Sussex, UK: Wiley; 2003. p. 90570.
[6] Caaman o E, Lorenzo E. Inverters in PV grid connected systems: an assessment on the proper selection. In:
Proceedings of the 13th European photovoltaic solar energy conference, Nice, France, October 1995.
p. 19001903.
[7] Royal Decree 1663/2000 on the connection of photovoltaic installations to the low voltage network [in
Spanish]. September 29, 2000. Available at http://www.boe.es
[8] Caaman o E. Grid connected photovoltaic buildings: characterisation and analysis. PhD thesis, Polytechnic
University of Madrid, Superior Technical School of Telecommunication Engineers, Madrid, Spain, 1998 [in
Spanish].
[9] Caaman o E, Lorenzo E. Photovoltaics in grid-connected buildings: energy ow and economic aspects. Prog
Photovoltaics: Res Appl 1995;3:13543.
[10] Bernal-Agust n, JL, Dufo-Lo pez, R. Economical and environmental analysis of grid connected photovoltaic
systems in Spain. Renewable Energy, in press, doi:10.1016/j.renene.2005.06.004.
[11] Spiegel RJ, Kern EC, Greenberg DL. Demonstration of the environmental and demand-side management
benets of grid-connected photovoltaic power systems. Sol Energy 1998;62(5):34558.
ARTICLE IN PRESS
-2000
-1000
0
1000
2000
3000
4000
5000
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Years
Fig. 15. Annual income development for scenario 2 (100% external nancing).
[12] Royal Decree 436/2004 establishing the methodology for the update and systematisation of the legal and
economic regime of the activity of production of electrical energy in special regimes [in Spanish]. March 12,
2004. Available at http://www.boe.es
[13] Line of nancing ICO-IDAE for renewable energies and power efciency projects [in Spanish], 2005.
Available at http://www.idae.es
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