Economically Optimal Solar Power Generation

Economically Optimal Solar Power Generation

Sana Badruddin (University of Ottawa, Canada), Cameron Ryan Robertson-Gillis (University of Ottawa, Canada), Janice Ashworth (Ottawa Renewable Energy Cooperative, Canada), and David J. Wright (University of Ottawa, Canada)
Copyright: © 2020 |Pages: 37
DOI: 10.4018/978-1-5225-8559-6.ch010
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The Ottawa Renewable Energy Cooperative is considering installing solar modules on the roofs of two buildings while they stay connected to the public electricity grid. Solar power produced over their own needs would be sent to the public electricity grid for a credit on their electricity bill. When they need more power than they are generating, these buildings would purchase electricity from the grid. In addition to paying for the electricity they purchase, they would be subject to a “demand charge” that applies each month to the hour during which their consumption is at a peak for that month. Any electricity consumed during that peak hour would be charged at a rate about 100 times the rate for other hours. The case addresses three questions: (1) Is it profitable for these organizations to install solar on their roofs? (2) Can profitability be increased by adding a battery? and (3) How sensitive is profitability to uncertainty in future electricity prices? The case shows how the answers to these questions depend on the profile of hourly electricity consumption during the day, which is very different from one building to the other.
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Background Information

This section provides an introduction to solar power and how it is deployed.

Photovoltaic technology, also known as PV, is the conversion of incoming solar radiation into electricity using semiconductor materials, most commonly silicon. Most readers of this case study will be familiar with images of solar panels installed in rows on rooftops and on the ground. A “solar panel” is the popular terminology for a “PV module” and most PV modules are installed in this way. In the Northern hemisphere, solar panels typically are tilted at an angle approximately equal to the latitude and are oriented towards the South since the daily path of the sun is from East to West across the Southern sky. At the equator there is zero tilt, i.e. the modules are horizontal. If PV modules were installed at the North Pole they would be vertical, i.e. tilted at 90°. In Ottawa, the ideal tilt for solar panels is approximately the latitude, 45° (Tomosk et al., 2017).

PV modules generate more electricity when they are pointed directly at the sun and some solar installations use trackers to adjust the angle of the modules, tracking the path of the sun from morning to evening. Other installations avoid the cost of a tracker and accept the fact that they will generate less electricity from a fixed orientation of their PV modules. The use of trackers in PV modules generally implies that the panels will be ground-mounted, as trackers on rooftops cause a lot of strain to the structure of roofs during periods of high wind. Since most buildings are located in an urban setting with very little adjacent land, those looking to install solar typically use rooftops with non-tracked PV.

There are two situations in which PV modules are used:

  • 1.

    Utility-Scale: A large-scale solar installation supplies electric power directly to the public electricity grid in much the same way that electricity is supplied by coal, natural gas or nuclear generating stations.

  • 2.

    Behind-the-Meter: Residences and businesses install solar on their own premises and typically consume most of their solar electricity for their own use. They also stay connected to the public electricity grid which is their source of electricity when there is insufficient solar power, e.g. at night or when it is cloudy.

PV is being deployed on a global scale and is becoming an increasingly popular method of energy production due to its low maintenance and zero carbon emissions. However, power generated from solar energy is limited by the availability of sunlight, which by nature is intermittent and cannot be supplied at will. As such, there is much research interest in the integration of energy storage into a PV system, to increase the capability of providing power as needed to meet customer demand (McLaren et al., 2018). A solar system installed in a commercial building and connected to a battery and to the electrical system of the building is known as a “microgrid.” Microgrids can also include other sources of electricity generation such as small-scale wind and hydro, however all microgrids referred to in this chapter are powered by solar energy. Microgrids incorporate a controller to schedule electric power flow to and from the battery so that sufficient power is available to supply the electrical loads in the building in an economically efficient manner. Such a microgrid can operate as a stand-alone system, not connected to the public electricity grid, e.g. at a mining site in a remote area. However, the case studies covered in this chapter are for buildings in an urban area where the microgrid is connected to the public electricity grid.

Storage technologies used in a solar microgrid include lithium-ion (Li-ion), lead-acid, saltwater, and sodium-sulfur. Batteries can be heavy and are typically installed at ground level even when the solar modules are on a rooftop. Li-ion batteries provide several advantages such as longer lifespans, lower weight, volume and maintenance, and better performance compared to other battery types (Hesse et al., 2017; Raszmann, Baker, Shi & Christensen, 2017) and the analysis in this case study uses Li-ion batteries.

Key Terms in this Chapter

Net Present Value: The value of a future stream of cash flows discounted back to their value today.

Tilt: Angle at which modules are tilted from the horizontal plane.

Azimuth: Orientation, measured as an angle east or west of south in the northern hemisphere and vice versa in southern hemisphere.

Hourly Ontario Energy Price: Wholesale price of electricity in Ontario.

Photovoltaics: Conversion of solar radiation into electricity using semiconductor materials.

Global Adjustment: Difference between HOEP and price guaranteed to certain generators in Ontario. The global adjustment is added as a separate line item to the electricity charges of mid-sized commercial customers.

Feed-in-Tariff: Program guaranteeing certain electricity generators a set rate per unit of energy produced ($/kWh) over a future time horizon of 10 – 25 years.

Demand Charge: Extra charge applied during the hour when customer demand is greatest or at peak for each month. Also called “peak demand charge.” This type of charge applies to the mid-sized commercial buildings analyzed in this case study. By contrast small commercial buildings are subject to a time-of-use charge in which the price of electricity depends on time of day, independent of the customer demand profile.

Microgrid: Small, local energy grid at a customer premises consisting of solar modules, a battery, an inverter, and a controller with a connection to the customer’s electric loads.

Net-Metering: Program where behind-the-meter energy producers may receive a credit on their electricity bill for excess power generated and injected into the public grid.

Internal Rate of Return: Metric used to estimate profitability of a potential investment. It is the discount rate at which the net present value is zero.

State of Charge: The amount of electric energy stored in the battery (kWh).

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