PV reaching socket parity Policy implications for distributed generation Cédric Philibert, Simon Müller, Hoël Wiesner Renewable Energy Division Self-consumption business models EPIA & PVPS Workshop 22 September 2014, Amsterdam
USD/MWh Socket parity emerging as potential deployment driver for distributed PV 1 200 1 000 800 600 400 200 LCOE Variable Portion of Residential Rate 0 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 2010 2013 Australia France Germany Italy Korea Mexico Netherlands United Kingdom Economic attractiveness from offsetting electricity bill requires self-using most of the PV electricity Currently limits potential, in particular for households Reaching socket parity is a driver for private actors But PV may still have significant impact on total system costs, in particular depending on allocation of fixed network costs
kw kw kw kw kw Possible self-consumption (SC) varies uction (Residential) 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 Match of PV supply and power demand for a residential/commercial customer in France Day of peak production (Residential) 2.5 2.0 1.5 1.0 0.5 0.0-0.5 Day of peak injection (Residential) 2.5 2.0 1.5 1.0 0.5 0.0-0.5 Day of peak injection (Residential) Consumption Consumption PV Injection-Withdrawal PV Injection-Withdrawal 120.0 100.0 80.0 60.0 40.0 20.0 0.0-20.0-40.0-60.0-80.0-100.0 Week of high production (Office 120.0 building) 100.0 80.0 60.0 40.0 20.0 0.0-20.0-40.0-60.0-80.0-100.0 Week of high production (Office building) Self-consumption higher for: Some office and commerce buildings with high daily consumption, and relatively small systems on multistorey dwellings Self-consumption potentially increased with DSI, storage Source: ETP 2014, EDF
Distributed PV at grid-parity: 3 options 4
120 kw Commercial 3 kw Residential.13 kw Residential Self-use and self-sufficiency Comparison of self-use and self-sufficiency shares by system size and customer Generation 100% self-use Consumption 4% self-sufficiency Generation Consumption 37% self-use 35% self-sufficiency 0 500 1 000 1 500 2 000 2 500 3 000 3 500 Generation 94% self-use Consumption 29% self-sufficiency 0 100 000 200 000 300 000 400 000 500 000 600 000 Annual kwh Consumption from the grid Generation surplus Prosumed
Concerns: grid costs and integration Grid cost concerns T&D costs 30-50% of retail costs, but only 0-15% recovered through fixed payments for efficiency/equity reasons Self-consumers pay less but still benefit from the grid; cross-subsidy! Self-consumption may call for some network tariff changes Preferably toward some time-based grid pricing structure, e.g. California bill adopted in September 2013: small fixed fee introduced, and time-of-use pricing forthcoming Integration concerns Self-consumption and surplus in-feed may increase imbalance of supplier without prosumers paying for this Depending on correlation with system demand: Serving residual demand more/less costly to meet per kwh than average Excess generation more/less valuable than average Tariff-design for injections should reflect value of electricity 6
Conclusions Socket-parity economically relevant, but based on private costs Attractiveness varies with possible share of self consumption (SC) Remuneration of excess power (EP) can be important for economics Reaching socket-parity is not indicator of the point when net avoided system costs (system value of PV) exceeds LCOE This might happen before or after Consumer tariffs reflecting value of electricity in time and location critical for efficiency of self-consumption and net-metering Skewed tariffs can lead to artificially high/low levels of self-consumption Buy-all sell-all is equivalent to a classical FiT Only difference: based on system value, not costs+x Separate network-tariffs based on load-profile of prosumer may be needed Existing frameworks can be adjusted, result is higher fixed charge but variable charge for fixed cost recovery retained for efficiency reasons
Buy-all sell-all and the value of solar VOS: a credit associated to all generation A complex methodology elaborated by the department of commerce of the State of Minnesota for the PUC A theoretical example
Minnesota: a lively debate Other values should be taken in account: voltage control, market price reduction, etc.
The value of PV may evolve over time Compared values of variable PV and on-demand STE in California
California: the «duck» chart 11
Example: California and teaching ducks to fly Source: The Regulatory Assistance Project 12
PV+battery socket parity might be around the corner in Germany EUR/kWh 0,55 0,50 0,45 0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 Prognosis 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 4,90 4,70 4,50 4,30 4,10 3,90 3,70 3,50 3,30 3,10 2,90 2,70 2,50 2,30 2,10 1,90 1,70 1,50 1,30 1,10 0,90 0,70 Electricity price for households [2.5-5 MWh/a] Electricity costs for PV Electricity costs for PV + Battery * SOURCE: Trade and Invest, Germany. Model calculation for rooftop systems, based on 802 kwh/kwp (Frankfurt/Main), 100% financing, 6% interest rate, 20 year term, 2% p.a. O&M costs. Sources: FiTs: BMU 2013; System Prices: BSW 2013; Model Calculation: Deutsche Bank 2010; Electricity Prices 2007-2013: Eurostat 2013.
Concerns: taxes, surcharges, subsidies Forgone tax revenue concerns Less energy sold, less taxes raised Taxation of self-consumption problematic Evaluate taxation framework, avoid double taxation E.g. charging VAT on systems and on excess electricity Forgone renewable energy surcharge concerns Tariffs often contain surcharge for RE A RE surcharge on RE self-consumption? Contributing to learning investment that has lead to socket-parity Forgone cross-subsidy concerns Customers with highest prices have biggest incentive May be due to cross-subsidies to other consumer groups Anticipate impact on overall revenues 14