ARTICLE:: How Costly is "Expensive"? By Musbaudeen Bamgbopa

By Musbaudeen Bamgbopa

Published on 12 October 2014

PV prices have declined (pv-magazine.com), Solar costs continue to plummet (e360.yale.edu). These are common headlines in renewable energy articles particularly to reemphasize the position of solar PV as a feasible renewable energy system deployment. Also, these articles most often serve as a constant progress metric for the renewable energy community where the target is to compare and surpass the conventional energy systems.

According to the International Renewable Energy Agency (IRENA), the cost of PV fell by 80% from 2008 - 2013, consequently increasing the global installed PV capacity to 137 GW, at the end of 2013. This cost decline contributed to the 85% growth of total renewable power capacity development, in last decade. It is worthy of note that these global statistics are conveniently deduced with a higher confidence level for ‘larger’ scale systems. Therefore, these ‘prices’ are worth putting into perspective for small scale, stand-alone PV systems (of 10 kW or less), which is a proposed solution for rural electrification.

Simply put, the three major factors responsible for this cost reduction and growth are: PV module efficiency improvements, production optimization, and economics of scale. The contribution of economics of scale however outweighs that of the first two factors in the considered time frame. Therefore, the need to visualize the cost implication once this ‘advantage of scale’ is decoupled or relaxed from cost calculations. The three main components of a typical off-grid solar PV power system are; PV module array, battery bank and inverter system (includes other peripheral electronics). Conventionally, the module cost accounts for about 50 - 60 % of total system cost. However, this can be reduced by integrated battery bank-inverter systems. Such manufacturing improvement is partly responsible for the module to non-module percentage of total cost of about (35:65), at the end of 2012.

Busbar (Levelized) cost of solar PV electricity currently ranges from $0.11 to $0.35/kWh depending on the scale of deployment. The cost comparison of focus here is in terms of overnight capital cost for the system rather than busbar or total project costs, which largely vary with a number factors. For example, the 70 MW SunEdison® contracted Javiera solar park in Chile is projected to cost $160 million ($2.3/W). Researchers at NREL (National Renewable Energy Laboratories- U.S) concluded $5.3, $4.6 and $3.4 per Watt for Residential (10 kW of less), Commercial (more than 100 kW) and Utility scale (more than 2 MW) grid connected PV systems respectively, from reported prices (overnight capital) in 2012. Although, factors such as endemic technological advancement, socio-economic environment and government policy on renewable energy will vary the above quoted numbers (e.g. prices are about half in Germany), the trend of prices as a function of scale is noticeably same everywhere.

Being able to quantify or decouple the effect of economics of scale in cost projection models for say- the Nigerian/Sub Sahara African context, would ultimately help to identify an optimum scale (in kW or MW) or level of investment for distributed PV power generation currently encouraged and as proposed by NiFEG. This optimum scale of investment would be obtained in a mix of contradicting trends of; increasing total capital costs, land area costs and yearly savings (with increasing installed capacity), and decreasing total costs, technology import costs and government subsidy (if legislated) - per kilowatt with increasing scale. Typical middle income households in Nigeria procure petrol generators of 3-5 kW as ‘adequate’ for their needs, where capital cost of PV power system (with 8 hours storage capacity) from local suppliers, is around NGN 2 million (for 3 kW; NGN 1 = $ 162) . For such households, with annual income in the same order of magnitude (NGN 1.5 million), a multi-household/community funded solar project could be advantageous in reducing the financial burden on the parties involved. Going forward, such initiatives may require households to make compromises on their energy usage trends once a geography specific optimum scale of investment is identified. Establishing a methodology for this optimization process is one of the objectives of NiFEG’s COMMUNITY SOLAR PROJECT.

By
Musbaudeen Bamgbopa
NiFEG member
view profile