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Master of Science Thesis

KTH School of Industrial Engineering and Management

Energy Technology EGI_2017-0072-MSC EKV1198

Division of Heat & Power

SE-100 44 STOCKHOLM

Analysis of photovoltaic business

models competitiveness

Case study in Poitiers, France

Yvonnick COLLIN

Master of Science Thesis EGI_2017-0072-MSC

EKV1198

Analysis of photovoltaic

business models competitiveness:

Case study in Poitiers, France

Yvonnick COLLIN

Approved

2017-08-15

Examiner

Miroslav Petrov - KTH/ITM/EGI

Supervisor

Miroslav Petrov

Commissioner

Technique Solaire, France

Contact person

Abdennour Rahmani

Abstract

Today in France, almost all the electricity production of small and large PV installations is directly sold to

the grid. However, thanks to the constant drop of photovoltaic module costs and the rise of electricity

purchase price, a new business model gains in profitability and seems to become an attractive option to

the classic feed-in to the grid: namely maximum self-consumption at the point of electricity production.

The objective of this thesis work is to study the economic competitiveness of self-consumption as opposed to other common economic models (such as feeding to the grid only, or self-consumption with

overproduction feed-in) in the locality of Poitiers, France, from small-scale electricity consumers (houses

and small offices) to larger ones (large office buildings and supermarkets).

A detailed model is developed in order to assess the profitability of a given PV installation evaluated with

two economic factors: internal return rate and net present value. Through a techno-economic analysis, the

evolution of these variables for each building and each economic model as a function of the PV system

size is analysed. It appears that the main economic model which involves selling all the produced electricity to the grid is not always the most profitable one. Indeed, self-consumption is already economically attractive and even the most profitable scheme for really large consumers with large PV

installations due to high achievable self-consumption share. However, due to attractive feed-in-tariff,

injection business model is still the most profitable one for PV installations below 36 kWp, no matter the

building load profile. Besides, for PV installation with a production larger than the building consumption,

selling all the production to the grid is always the most profitable business model. On the other hand, the

self-consumption with feed-in-tariff business model is almost always the least profitable one. Finally, the techno-economic analysis of rooftop PV systems is complemented with a discussion on the

developed model limitation due to the assumed hypotheses and numerous variable factors influencing the

project profitability. The future seems promising for the self-consumption model. -i-

Contents

1 INTRODUCTION ............................................................................................................................................. 1

1.1 Background .................................................................................................................................................. 1

1.2 Objectives ..................................................................................................................................................... 2

1.3 Methodology ................................................................................................................................................ 2

2 THEORETICAL FRAMEWORK ................................................................................................................... 3

2.1 Photovoltaic overview ................................................................................................................................ 3

2.2 Self-consumption definition ...................................................................................................................... 6

2.3 Photovoltaic business models ................................................................................................................... 7

2.4 Electricity consumer types ......................................................................................................................... 8

3 MODEL DESCRIPTION ................................................................................................................................. 9

3.1 Photovoltaic production .......................................................................................................................... 10

3.1.1 Photovoltaic module efficiency ..................................................................................................... 10

3.1.2 In-plane irradiance ........................................................................................................................... 11

3.1.3 Photovoltaic module temperature ................................................................................................. 13

3.1.4 Other components efficiency......................................................................................................... 14

3.1.5 Overproduction limitation.............................................................................................................. 15

3.2 Electricity consumption ........................................................................................................................... 16

3.3 Economic analysis ..................................................................................................................................... 17

3.3.1 Initial cost .......................................................................................................................................... 17

3.3.2 Operation and maintenance cost ................................................................................................... 17

3.3.3 Financial cost .................................................................................................................................... 18

3.3.4 Revenues and savings ...................................................................................................................... 18

3.3.5 Criteria parameters for economic analysis ................................................................................... 23

4 CASE STUDY .................................................................................................................................................... 24

4.1 Selection of the site and meteorological data ....................................................................................... 24

4.2 Consumption profiles analysis ................................................................................................................ 26

4.2.1 Residential building .......................................................................................................................... 26

4.2.2 Small Office ...................................................................................................................................... 28

4.2.3 Medium Office ................................................................................................................................. 29

4.2.4 Supermarket ...................................................................................................................................... 30

4.3 Components and plant layout ................................................................................................................. 32

4.4 Economic data ........................................................................................................................................... 35

4.4.1 Capital expenditure .......................................................................................................................... 35

4.4.2 Operational expenditure ................................................................................................................. 37

4.4.3 Financial cost .................................................................................................................................... 39

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4.4.4 Incomes and savings ........................................................................................................................ 39

5 RESULTS ............................................................................................................................................................ 41

5.1 Self-consumption and self-sufficiency evolution ................................................................................. 41

5.2 Study of the optimal power limitation ................................................................................................... 43

5.3 Analysis of business models profitability .............................................................................................. 45

6 DISCUSSION .................................................................................................................................................... 49

7 CONCLUSION ................................................................................................................................................. 50

REFERENCES ........................................................................................................................................................... 51

-iii-

SAMMANFATTNING

marknadsplatser). Slutligen kompletteras den tekno-ekonomiska analysen av takmonterade solceller med en -iv-

List of Figures

FIG. 1: PHOTOVOLTAIC MODULE COST PER CUMULATIVE MODEL SHIPMENT .................................................................... 3

FIG. 2: GLOBAL HORIZONTAL IRRADIATION OVER EUROPE ................................................................................................. 4

FIG. 3: MAIN PV INSTALLATION COMPONENTS ...................................................................................................................... 5

FIG. 4: CONNECTED PV POWER YEARLY EVOLUTION ........................................................................................................... 5

FIG. 5: EXAMPLE OF A PRODUCTION AND A CONSUMPTION PROFILE ................................................................................. 7

FIG. 6: GRID CONNECTION FOR INJECTION BUSINESS PLAN ................................................................................................. 7

FIG. 7: GRID CONNECTION FOR SELF-CONSUMPTION BUSINESS PLAN ................................................................................ 8

FIG. 8: GRID CONNECTION FOR SELF-CONSUMPTION WITH FIT BUSINESS PLAN ............................................................... 8

FIG. 9: FLOWCHART OF THE DEVELOPED MODEL .................................................................................................................. 9

FIG. 10: SOLAR ANGLES DEFINITION ...................................................................................................................................... 12

FIG. 11: POSITION OF EUROPEAN METEOROLOGICAL STATIONS ....................................................................................... 14

FIG. 12: 100 KWP PV PLANT HISTOGRAM ............................................................................................................................... 16

FIG. 13: SELF-CONSUMPTION RATE OVERESTIMATION PROCESS ........................................................................................ 16

FIG. 14: PURCHASE PRICE EVOLUTION FOR PV INSTALLATION SMALLER THAN 100 KWP ............................................. 19

FIG. 15: LAUREATES PURCHASE PRICE EVOLUTION FOR PV INSTALLATION BIGGER THAN 100 KWP .......................... 20

FIG. 16: ADDITIONAL REMUNERATION FUNCTION OF THE SELF-CONSUMPTION RATE .................................................. 21

FIG. 17: EFFECT OF THE MAXIMUM POWER INJECTED TO THE GRID ON THE ADDITIONAL REMUNERATION ............. 22

FIG. 18: GLOBAL HORIZONTAL IRRADIATION MAP OF FRANCE .......................................................................................... 24

FIG. 19: HOURLY TEMPERATURE EVOLUTION IN POITIERS ................................................................................................. 25

FIG. 20: HOURLY DIRECT NORMAL IRRADIATION EVOLUTION IN POITIERS .................................................................... 25

FIG. 21: HOURLY GLOBAL HORIZONTAL IRRADIATION EVOLUTION IN POITIERS ........................................................... 25

FIG. 22: HOUSE HOURLY CONSUMPTION DURING WINTER AND SUMMER ......................................................................... 27

FIG. 23: SMALL OFFICE ILLUSTRATION ................................................................................................................................... 28

FIG. 24: SMALL OFFICE HOURLY CONSUMPTION DURING WINTER AND SUMMER ............................................................ 29

FIG. 25: MEDIUM OFFICE ILLUSTRATION ............................................................................................................................... 29

FIG. 26: MEDIUM OFFICE HOURLY CONSUMPTION DURING WINTER AND SUMMER ........................................................ 30

FIG. 27: SUPERMARKET MODEL ILLUSTRATION ..................................................................................................................... 31

FIG. 28: SUPERMARKET HOURLY CONSUMPTION DURING WINTER AND SUMMER ........................................................... 32

FIG. 29: INVERTERS COMBINATION SELECTED FUNCTION OF THE PV PLANT SIZE ........................................................ 34

FIG. 30: UNITARY EQUIPMENT COSTS FUNCTION OF THE PV PLANT SIZE ........................................................................ 37

FIG. 31: UNITARY OPERATIONAL EXPENDITURES FUNCTION OF THE PV PLANT SIZE .................................................... 39

FIG. 32: ELECTRICITY SELLING PRICE DURING THE LAST YEAR .......................................................................................... 40

FIG. 33: SELF-CONSUMPTION RATE AND SELF-SUFFICIENCY RATE EVOLUTION FOR EACH BUILDING TYPE ............... 42

FIG. 34: HOURLY CONSUMPTION AND PV PRODUCTION DURING A SUMMER WEEK FOR THE HOUSE AND THE SUPERMARKET....... 43

FIG. 35: HOURLY CONSUMPTION AND PV PRODUCTION DURING A WINTER WEEK FOR THE HOUSE AND THE SUPERMARKET ....... 43

FIG. 36: EVOLUTION OF THE OPTIMAL POWER LIMITATION FOR THE SMALL OFFICE ..................................................... 44

FIG. 37: EVOLUTION OF THE OPTIMAL POWER LIMITATION FOR THE MEDIUM OFFICE ................................................. 44

FIG. 38: EVOLUTION OF THE OPTIMAL POWER LIMITATION FOR THE SUPERMARKET .................................................... 45

FIG. 39: IRR AND NPV EVOLUTION FOR THE RESIDENTIAL BUILDING MODEL .............................................................. 46

FIG. 40: IRR AND NPV EVOLUTION FOR THE SMALL OFFICE MODEL ............................................................................... 47

FIG. 41: IRR AND NPV EVOLUTION FOR THE MEDIUM OFFICE MODEL ............................................................................ 47

FIG. 42: IRR AND NPV EVOLUTION FOR THE SUPERMARKET MODEL .............................................................................. 47

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List of Tables

TABLE 1: PV MODULE EFFICIENCY COEFFICIENTS ............................................................................................................... 11

TABLE 2: COEFFICIENTS OF THE EQUATION OF TIME ......................................................................................................... 13

TABLE 3: INJECTION TARIFFS AND SELF-CONSUMPTION PREMIUMS FOR PV INSTALLATION SMALLER THAN 100 KWP 19

TABLE 4: AVERAGE AIR TEMPERATURE IN POITIERS AND IN FRANCE .............................................................................. 24

TABLE 5: COMPARISON BETWEEN POITIERS AND TROUTDALE AMBIENT TEMPERATURE AND IRRADIANCE ............. 26

TABLE 6: RESIDENTIAL BUILDING CHARACTERISTIC COMPARISON ................................................................................... 26

TABLE 7: SMALL OFFICE MODEL CHARACTERISTICS ............................................................................................................. 28

TABLE 8: MEDIUM OFFICE MODEL CHARACTERISTICS ......................................................................................................... 30

TABLE 9: SUPERMARKET MODEL CHARACTERISTICS ............................................................................................................ 31

TABLE 10: PV MODULE CHARACTERISTICS ............................................................................................................................ 33

TABLE 11: MAX PV MODULE NUMBER FOR EACH BUILDING TYPE ACCORDING TO THEIR PEAK CONSUMPTION ...... 33

TABLE 12: SELECTED INVERTERS CHARACTERISTICS ........................................................................................................... 33

TABLE 13: MAX PV MODULE NUMBER FOR EACH BUILDING TYPE ACCORDING TO THEIR ROOF SIZE ........................ 35

TABLE 14: INVERTERS COST ..................................................................................................................................................... 36

TABLE 15: UNITARY COST OF PV PLANT EQUIPMENT IN €/WP ......................................................................................... 36

TABLE 16: GRID COUNTING COSTS IN €/YEAR...................................................................................................................... 38

TABLE 17: GRID MANAGEMENT COSTS IN €/YEAR ............................................................................................................... 38

TABLE 18: THE HIGHEST IRR AND NPV FOR HOUSE AND SMALL OFFICE BUILDING TYPE ......................................... 48

TABLE 19: THE HIGHEST IRR AND NPV FOR THE MEDIUM OFFICE AND THE SUPERMARKET BUILDING TYPE ........ 48

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ACKNOWLEDGMENTS

This master thesis has been conducted concurrently with a six-months internship in the French company Technique Solaire which finances, develops, builds and runs big size photovoltaic installations. I would like to firstly express my gratitude to Julien Fleury, Thomas De Moussac and Lionel Themine whom offered me the possibility to do this internship and to discover the real aspect of the photovoltaic field. I would also like to thank my industrial supervisor Abdennour Rahmani and all the persons I have met and worked with throughout these six months in this company.

Thank you for your time and your advices.

Moreover, I am grateful to my supervisor and examiner at KTH Miroslav Petrov, who kindly accepted to follow this master thesis work. More generally, I would like to thank all the teachers and people I have met during my brief pass though this school. Finally, a special thanks to my family for its support during the whole redaction of this study.

You gave me all the motivation I needed.

Thank you everybody.

Yvonnick COLLIN

Poitiers, June 2017

-vii-

To my mother, to my father,

-1-

1INTRODUCTION

1.1Background

The development of human societies is linked to the use and control of different energy sources. Today, energy is a wide topic with an increasing interest all around the world as the humanity is facing new challenges such as electricity access, climate change and shift to renewable energy sources. Sustainable energy is defined as an energy source which is able to meet the growing demand of today's people without compromising the demand of the people that would require it in future. However, renewable energy is more specific and includes only sustainable sources that do not cause any harm to environment and have minimal impact on the surrounding environment such as wind, solar, tidal, biomass and geothermal energy. However, the current worldwide primary energy consumption is mainly based on unsustainable and polluting sources such as oil (32.94 %), coal (29.20 %) and gas (23.85 %) [World Energy Council - World Energy Resources | 2016]. Remainder is mainly composed of sustainable but risky sources such as nuclear (4.44 %) and hydro (6.79 %) which have already led to major human and environmental disasters (McKenna, 2011). It is now admitted that the present global warming is mainly due to human activities and more specifically to the sources of energy that the man uses. This explains why the past 15 years have seen unprecedented change in the consumption of energy resources with high growth in the renewables market in terms of investment and production capacity. France has adopted the European Plan on Climate Change to fight against climate change and has to increase the share of renewable energy on its total energy consumption to 23% by 2020. Regarding the photovoltaic (PV) sector, the objective has been set up to 5,400 MWp. To reach this target, the French government, such as other European ones, has given subsidiaries to develop this sector. As a result, the photovoltaic sector has grown quickly: the share of PV in renewable electricity production has increased from 0% in 2008 to 6.6% in 2014, but the major part of the PV projects was not profitable (Carrier, et al., 2015). However, a report released by the International Renewable Energy Agency (IRENA) states that solar PV module prices have fallen 80% from 2009 to 2015 (Taylor, et al., 2016). In the same time the electricity price on the market has increased regularly. According to a report from the EGS-PV (which bring all the main French photovoltaic actors together), the grid parity has been reached in 2016 in the south of France and should be reached in 2018 in the north (EGS-PV, 2011). This means that PV

installations should now generate power at a levelized cost of electricity that is less than or equal

to the price of the electricity grid. Usually on a photovoltaic installation, 100% of the electricity produced is sold to the grid operator for at a set injection tariff. However, as the grid parity is reaching, a new economic model appears because a part of electricity consumers prefer to cover part of their electricity demand with PV-generated electricity instead of buying all their electricity from the utility. The fact of consuming its own generated electricity is called "self-consumption" and has been recently defined in a French law voted the 15 th of February 2017. Today, investors have to choose between different economic models (self-consumption only, sold on the grid only, and a mix of both of them) which come with different installation costs, electricity prices and technical aspects. -2-

1.2Objectives

The photovoltaic effect was first observed by French physicist A. E. Becquerel and was presented at the Academy of Sciences in 1839. It is an old subject and many studies have investigated technological and economic aspects of PV (Bazilian, et al., 2013) (Ghosh, et al.,

2015). However, the economic potential of self-consumption has not been comprehensively

assessed. Indeed, the majority of studies have focused only on technological aspects, such as optimisation of the self-consumption rate (and so produced electricity share directly consumed on-site) with battery storage (Castillo-Cagigal, et al., 2011) and demand-side management (Sossan, et al., 2013). Studies that assess investments attractiveness has focused only on one specific building type: single-family house (Hoppmann, et al., 2014) or agricultural buildings (Squatrito, et al., 2014). Besides, demand profiles, electricity prices and so self-consumption competitiveness are highly building specific (Stadler, et al., 2018) (Deb Mondol, et al., 2009) and geographically dependent as PV module production is a function of solar irradiance. While these studies indicate the high economic potential of self-consumption, a comparison for different building types and with other economic models such as the traditional grid injection or self-consumption with overproduction injection is still missing. The motivation behind this research is that demonstrating self-consumption potential is essential in order to lower electricity consumers' bill and in a general point of view to foster PV development and decrease fossil-fuel dependence. Thus, the aim of this research is to study the economic competitiveness of self-consumption facing other economic models (injection only or self-consumption with overproduction injection) in France from low electricity consumers like residential buildings or office to larger one such as supermarkets. Is a business model really more profitable than the others? How this profitability evolves with the building type and the PV installation size? Is self-consumption adapted for low energy consumption buildings? The expected outcomes of this master thesis will be a report comprising a techno-economic analysis of PV self-consumption, a dynamic model developed in order to estimate PV production, self-consumption and economic profitability for a given building type and location and finally a guide on the best PV installation configuration for each business model.

1.3Methodology

In order to answer the master thesis question in the allotted time frame, this plan has been followed:

1.Literature review on PV self-consumption, building and PV models

2.Data collection

3.Model development

4.Techno-economic analysis of different building types

5.Discussion on the results

The model is exclusively developed on Microsoft Excel using Visual Basic for Applications language. All equations and data use in this model are described and justified in sections 3 and 4. This model will be used on different building types in order to study, for each one of them, the evolution of electricity production, self-consumption ratio function of the PV installation size. Finally, a cost analysis will be performed to evaluate the profitability each configuration and determined the most profitable ones. -3-

2THEORETICAL FRAMEWORK

The following sections highlight key aspects of a PV installation and the PV sector in France. Moreover, main terms, definitions, economic strategy and other factors essential for the model development are described below.

2.1Photovoltaic overview

The operation of PV cells is based on the photoelectric effect. When the light has a sufficient energy level, it is absorbed by the cells semiconductor material causing excitation of an electron and formation of an electric potential. This effect was first discovered by French physicist Edmond Becquerel in 1839. Since then, numerous discoveries have allowed the development of this technology in various domains such as space (the first solar-powered satellite launched in

1958), building (the first house powered by photovoltaic cells is built at the University Delaware

in the United States in 1973) and ground transportation (the first photovoltaic-powered car travels 4,000 km in Australia in 1983). Several PV technologies exist but in 2015, 93 % of the worldwide total production was silicon- based technologies with respectively 69% of multi-crystalline and 24 % of mono-crystalline technologies. The market share of all thin film technologies amounted to only 7 % of the total annual production (Fraunhofer, 2016). Research and development of PV sector have led to a tremendous drop of globally photovoltaic systems prices in recent years as shown on Fig 1 (ITRPV, 2016). Indeed, average module price is decreasing logarithmic curve also known as Swanson's law (in green). According to the Bloomberg New Energy Finance Report, solar will be the cheapest form of producing electricity with wind in most of the world by the 2030s (Randall, 2016). Fig. 1: Photovoltaic module cost per cumulative model shipment The constant and quick collapse of PV module price and the rise of electricity costs due to an increasing demand and aging electricity grid make the PV module levelized cost of electricity closer and closer to the grid electricity tariff. A projection from 2011 shows that parity should already have taken place in the south of France and should reach the north of France in 2018 (EGS-PV, 2011). -4- However, PV module efficiency is very variable and is a function of many fixed and variable parameters such as: PV module temperature, orientation and tilt but also presence of dust and solar irradiance. Indeed, as it will be explained later, PV module efficiency decreases when its temperature rises. Regarding solar irradiance, even if France receives less solar energy than Spain, Greece or south Italia, it is a moderately sunny country with a global horizontal irradiation average of 1250 kWh/m² as shown on Fig 2. Besides, average temperature is lower in France than in these countries leading to a higher PV module efficiency.

Fig. 2: Global horizontal irradiation over Europe

PV modules are not the only component of a PV installation as shown on Fig. 3. First each module is installed on a mounting system which is the link between the panel and existing roof. Then a PV module produces direct current (DC) which has to be converted into alternative current (AC) by one or several inverters before being self-consumed or sent to the grid. As grid tension is higher than inverter output, produced electricity has to be sent to an existing or a new transformer before reaching the grid. Long cable lengths are required in order to connect all the devices. Besides, a monitoring system is installed in order to record PV production and detect any malfunction. The PV installation is connected to the ground in order to avoid electrical hazards. Moreover, many security devices such as circuit breakers are installed. -5-

Fig. 3: Main PV installation components

By signing the European Plan on Climate Change, France has to increase the share of renewable energy on its total energy consumption to 23% by 2020. By the end of 2015, this share was only

14.9% whereas it should have reached 17% to be in line with the objective. Even if wind and

solar sectors contribute to 91% of the growth of renewable energies in France, the wind sector lags behind fixed goals mainly due to automatic legal proceedings of anti-wind associations. Therefore, investors turn towards photovoltaic sector which has already reached the 2020 goal of

5,400 MWp with 6,772 MWp installed at the end of the year 2016. Overall, 8.5 TWh are

produced yearly by PV installations in France. The French Ministry of the Environment and Energy has recently launched an invitation to tender in this sector, with a total capacity of 150 MWp over three years in order to galvanise it. Indeed, after a rapid rise and a record of 1,706 MWp installed in 2011, the photovoltaic sector has experienced a significant fall and is struggling to throw again as shown on Fig. 4 (RTE, 2017). However, with the grid parity which is reaching,quotesdbs_dbs28.pdfusesText_34

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