It would be easy to dismiss the value of solar PV now that the incentive schemes have reduced to such a low level but, with battery storage systems, the value proposition is revived. To know why then read on…
The principal incentive scheme for commercial roof-top solar PV systems was the Feed-in Tariff (FiT) scheme. This was once set at a relatively high rate which meant that any organisation with suitable roof-space could achieve an attractive internal rate of return (IRR) by simply installing the largest solar PV system that would fit in the space available. The amount (and value) of electricity generated that was then consumed within the building was incidental. However, with the steep reductions in the Feed-in Tariff rates, this has all changed.
At the time of writing (August 2017) the FiT rate payable for solar PV systems between 50 and 250kW is 1.94p/kWh. Additionally, there is the possibility that any energy exported could be sold back to the Grid at the prevailing wholesale rate. The wholesale rate is variable but typically around 4p/kWh although there are metering costs incurred with this export so devaluing this revenue stream.
As the rate that commercial and industrial energy users pay for electricity (import rate) might range from 8 to 12p/kWh, the better returns are achieved when the amount of electricity generated is wholly consumed within the building (self-consumed) hence saving at the import rate plus the small amount of FiT. The revenue earned by exporting any excess is far smaller and so dilutes the IRR that’s achievable for a system. It, therefore, follows that the best IRR is often achieved by sizing a system for maximum self-consumption and minimal export. To do that there needs to be an understanding of the site’s daily consumption profile.
As an example, in Figure 1, we have the consumption of a business in Oxford for two days, one in April and one in November, to illustrate that consumption varies little throughout the year. The roof of the building occupied by this business could accommodate a 370kW solar PV system but we’ve calculated such a system would be exporting frequently. To achieve near 100% self-consumption of the solar generated electricity the maximum system size is nearer 200kW which is what is illustrated.
Figure 1: Daily consumption with 200kWp solar
We can then calculate the impact of this solar system on electricity charges including Distribution Use of System (DUoS) time of use charges as shown in Figure 2.
Figure 2: Impact on electricity cost
In Figure 2, the pink bar chart is showing electricity charges before the solar. A clear jump can be seen from 4 pm to 7 pm which is the Red DUoS period. The green bars are the charges after solar and, as can be seen, the main impact from the solar is during the lower cost Amber period. So not only have we limited the size of the solar system, its impact is during a cheaper time of day so lower than it otherwise could be. The daily savings delivered by this solar system amount to approximately £65.
Figure 3 now shows the same site but with the full 370kW of solar. We’ve almost eliminated the need to buy any electricity during the day but the impact during the Red DUoS is still not as good as it could be and we are exporting (wasting) as expected.
Figure 3: 370kWp solar showing bigger impact on daytime cost
Add in a battery storage system charged by that excess solar, and programmed to discharge during the Red DUoS period (time shifting), and we’ve just about eliminated all charges for the Red period as well (see Figure 4).
Figure 4: 370kWp solar and a battery
To put this into numbers the savings from the solar plus battery now equate to around £135 per day compared to £65 before. So, we’ve more than doubled the savings without doubling the size of the solar system. Without running through the full arithmetic, that is an obvious improvement in respect of the return on investment.
“Ah but”, those eagle-eyed amongst you might say, I’ve not factored in the cost of the battery storage system in that equation and you’d be correct. The reason I’ve not done so is that the intention is to demonstrate the high-level principle rather than deep-dive into the financials of a carefully chosen example. Furthermore, even without the positive impact on the financials of the solar system, the battery would still create a compelling business case on its own because of the other services/savings/revenues that would be available such as:
- Firm Frequency Response
- Capacity Market
- Transmission Network Use of System (TNUoS) savings (based on TRIADS in November to February when solar output is low)
- Back-Up Power and Power Quality
So, in summary by adding a battery, the solar proposition is improved as we’ve:
- Increased the size of the solar system whilst still maintaining high self-consumption
- Got more solar (and so more “free” low carbon energy) for a lower overall unit CAPEX price (as fixed costs of installation would have been incurred with the smaller system anyway)
- “Time shifted” some of the excess solar electricity to be used during a more expensive time of day thus increasing its value.
The actual benefits will vary from site to site. Rock Clean Energy can work out a bespoke proposition for you, following an initial (informal) discussion. Contact us today.
NB - Discover how to get a free battery and installation with our Battery Energy Storage as a Service or BESaaS.