Calculating the levelised cost of energy (LCOE) Solar Energy UK Installer Roadshow

Transcription

1 Calculating the levelised cost of energy (LCOE) Solar Energy UK Installer Roadshow Simon Baggaley

2 Definition of Levelised Cost Of Energy LCOE is the average cost of producing a unit of electricity (kwh) over the lifetime of the generating source. It takes into account: -The amount produced by the source (Energy yield) -The costs that went into establishing the source over its lifetime, such as: - Original capital expenditure (CapEx) - Ongoing maintenance costs (O&M) including equipment replacements, monitoring and reporting - Financing costs 2

3 Why lifetime cost matter: A simplified example from the world of cars BMW 5 series Tesla Model S 37,000 53,000 50,000 miles over 4 years (commuting into London) 50,000 miles over 4 years (commuting into London) 43.5 mpg 1.10/litre 295 Wh/mile /kWh (work-home) Warranty 3 years 8 years (drive unit + battery) Cost per mile 0,80 0,70 Initial cost Usage Fuel assumptions 3 Note: Assume residual value of 40% of initial price. Service package for 50,000miles on both cars. No road tax on Tesla

4 In USA, installers providing financing facilitated focus shift from lowest system cost to lowest LCOE Over 2/3 of residential installs are third-party owned systems and the top-10 installers are growing share 4 Note: Top-10 installers per year not the same over time Source: GTM PV Leaderboard

5 Comparisons of a fictitious solar system In the US, the prevalence of third party owners takes the focus off initial capital expenditures and cost and shifts it toward the system that generates the greatest long-term value. A more expensive system can be cheaper over time. Initial Capital Expenditure Lifetime LCOE 5

6 Summarizing the need for using LCOE Installed cost-per-watt accounts only for initial capital expenditure (CapEx) and is not an accurate measure of the long-term value delivered by a solar facility Focusing on CapEx alone ignores two critical elements: OpEx and Performance (Output) Solar installers and solar customers need to take all costs and system performance into account to represent the true value of a solar facility The levelised cost of energy (LCOE) accounts for all costs associated with the working life of a solar facility LCOE (cost / energy) = Net Present Value (NPV) of the Lifetime Cost of Ownership ( ) / Lifetime Energy Output (kwh) 6

7 Key drivers of LCOE for a solar system Initial Capital Expenditure Total upfront cost to install the system Equipment Replacement Cost of replacing equipment, especially inverter, over the lifetime of the system Operations & Maintenance Cost of on-going operations and maintenance, including panel washing and inverter maintenance Output Production over the lifetime of the system (impacted by efficiency, availability, shading) 7

8 Initial capital cost is only one input into determining cost of energy over lifetime of the system As a system, choices about individual pieces of the system have impacts on the rest of the system design Modules Racking Inverter Labor & Installation Engineering & Design Wiring 8

9 Inverters will need to be replaced over the life of the system, and represent a large potential cost faces a significant capital expenditure item approximately 10 years after each system is put into service, when the inverter needs to be replaced* Representative String Inverter Failure Profile by Year *Source: Presale: SolarCity LMC Series III LLC (Series ), S&P Enphase Energy, Inc. Confidential

10 Investors require setting aside savings every year to pay for the eventual expense has a reserve built-up leading up to this expected expense* Annual Set-Aside Prospective Replacement Year Cumulative Set-Aside 1,200 1, Set aside the expected cost of the replacement in equal annual installments, such that money is available for a 1,000 investment in year 11 *Source: Presale: SolarCity LMC Series III LLC (Series ), S&P 10

11 Different technology has a different reserve needs Equipment with extended warranties or different replacement requirements can reduce the impact of the inverter reserve Technology 1 1,000 set aside over 10 years Technology set aside over 20 years 500 1, , , Annual Set-Aside Cumulative Set-Aside Annual Set-Aside Cumulative Set-Aside LCOE: LCOE: kW system in the UK, production factor of 950kWh/kWP/yr 11

12 Wide variance of operations and maintenance needs depending on the technology choice While micro-inverters are not shown here, the available evidence shows a ticket/inverter-year ratio which is 3-4 times lower than that for the string inverters - SunEdison 12 PV System Reliability: An Operator s Perspective 2014 Enphase Energy, Inc. Confidential

13 Preventative maintenance is increasingly being required, either by installer or third party Preventative maintenance is typically only 70% of the total maintenance costs Inverter / AC Wiring Combiner Boxes Modules / Mounting Module Cleaning Other Clean and change air filters & heat sinks Ensure fans & moving parts performing Verify string operation and VOC / IMP testing Visually inspect enclosure and make repairs Visually inspect for damaged modules Perform thermographic scan to identify defects Perform periodic module cleaning Perform additional tests in order to provide insight into system operations Shifting from onsite requirement to remote capability Enphase Energy, Inc. Confidential

14 Small differences in annual maintenance costs create real value for system owners Removing unplanned maintenance results in significant savings over the life of the system LCOE Cheaper Annual O&M System 1: 0.015/Watt / year System 2: 0.020/Watt / year 14

15 Energy production key to LCOE calculation Energy production varies by project factors as well as by technology choice. Each % increase in production is magnified over the lifetime of the system. LCOE Increased Production System 1: 936 kwh/kwp/yr System 2: 900 kwh/kwp/yr 15

16 Conclusion For a true, apples-to-apples comparison of PV systems, one needs to look not at the cost per watt, but the cost per kilowatthour Third-party financiers in the United States have led the way in embracing the concept of PV LCOE LCOE is driven by CapEx, Output, and OpEx including O&M and inverter replacement Small changes to any of these drivers can have a substantial impact on the LCOE and hence the value to the owner The system that provides the lowest LCOE creates the highest long-term value for the system owner 16

17 Product Training from the Leaders in Microinverter Technology Enphase, as part of its commitment to improving the knowledge and profitability of its customers offers PV installers a wide range of Product Training courses covering all aspects of the Enphase solution. What the training covers? - Technology overview of microinverters - Study design and installation of single and three phase applications - Installation and best practices -System activation and registration within Enlighten - Using Enlighten system monitoring 17

18 Enphase Product Training Venues Feb/March Tuesday Sheraton Hotel Athlone, Ireland Friday 20 February Dunston Hall Norwich Wednesday 4 March Sunborn Yacht, Excel Centre London Thursday 12 March Oxford Thames Hotel Oxford Find a venue near you and reserve your spot. Register now and learn what the Enphase solution can do for your business Tel: enphase.com/uk/training Thursday 19 March Village Urban Resort Nottingham Nottingham 18

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