Dec 7, 2012 - As the benefits and lowering costs of solar photovoltaic (PV) technology continue to interest residential property developers in Kenya, tertiary ...
Energy Performance of Grid Connected Solar PV Systems in Kenya- Case Study: Technical, economical and policy analysis of the Strathmore University 10 kW PV System Izael Da Silva, Geoffrey Ronoh, John Ndegwa - Strathmore Energy Research Centre, Strathmore University, Nairobi, Kenya
As the benefits and lowering costs of solar photovoltaic (PV) technology continue to interest residential property developers in Kenya, tertiary education institutions are also beginning to harness the power of the sun for their electricity supply. One such case is at Strathmore University, where a 10kWp system is supplying power to the newly constructed Student Centre on its only campus in Nairobi. Despite the declining costs, PV technology only contributes to less than 1% of the total electricity generated in Kenya. In addition, while discussions on the development of enabling policy frameworks such as national feed-in-tariffs and the different financing options such as green funds from development agencies are on-going, this has not translated into an increased significance of PV in the national energy mix. To incorporate solar PV power into the electricity mix, it is necessary to have reliable methods to predict the energy output and hence to evaluate the economic viability as well as the impact on carbon emissions. In this paper, we use the PV system at Strathmore University as a case study, and use PV system characteristics, insolation data and real-time performance data to analyse system performance and economics and discuss the results in the context of the power needs, policy framework and available financing structures in Kenya. This paper aims at providing practical recommendations. It is desired that, whereas the scope of this paper focussed on a small-size installation, the findings will certainly benefit installations of different sizes being currently disseminated in East Africa. 1. Introduction Kenya’s electricity interconnected capacity stands at 1,672 MW (as at January 2013) against an interconnected peak demand of 1,334 MW. The Vision 2030[1] projects that Kenya will be a middle income country by 2030, with the corresponding required system capacity at 15,000 MW. This capacity growth is expected to be met through large scale geothermal projects to deliver base load and regional interconnection of grids. Small-scale renewable, although currently contributing 3% (50 MW) to the total installed capacity, are expected to grow to 6% (350MW) by 2018 [2]. Solar PV is estimated to generate 500 MW of electricity by the year 2030.
Figure 1 – Current energy and electricity distribution per source The power market in Kenya is characterized by steady and high-demand growth, substantial investment in additional generation capacity during the last decade, persistent power shortages and frequent load shedding, a continuing vulnerability to drought-induced shortfalls in hydro-generation capacity, an increased role of private-sector participation, and a prioritization of large-scale projects (in particular geothermal power generation).
The potential of small-/medium-scale RE power generation remains largely untapped. Specifically, solar PV technology continues to play a peripheral role. While Kenya enjoys a very active PV market, this is mostly limited to the below 50W off-grid solar home systems (SHS). There has been no systematic role played by the Government or industry to move solar to the grid-connected category where 95% of the global PV market is today. Solar resource in Kenya Kenya is located near the equator and has great potential for solar power. The average radiation is 4-6 kWh/m2/day. However, despite its relatively high solar resources, there are significant local and seasonal variations in solar energy distribution. For example, Nairobi experiences high seasonal fluctuations, with periods of relatively high radiation between December and February and low periods between June and September. On the other hand, Kisumu has a very good solar radiation throughout the year.
Figure 2 - Kenya solar resource map Sector reforms In the recent past, Kenya has undertaken substantial and highly encouraging reforms related to the power market: an energy policy was formulated calling for increased private involvement, and paving the way for tapping of enormous Renewable Energy (RE) potentials. In a study sponsored by the Ministry of Energy [3], one of the main recommendations made was to reduce the transactions costs associated with negotiating and signing a Power Purchase Agreement(PPA) for a small renewable generator. This has now been achieved through introducing a Standardised PPA limited to projects of up to 10 MW, connected at distribution voltages as embedded, non-despatchable generators [4].The Standardised PPA lastsfor a period of 20 years from the date of the first commissioning of the solar-based power plant. Under the same study above, Feed-in-Tariffs were revised [5]. While the tariffs offered are technology-specific, the Standardised PPA is technology-neutral (Table 1). The PPA is offered to projects that demonstrate technical and economic viability, meet the grid connection requirements and are able to secure all necessary legal and regulatory approvals and financing.
Table 1 – FiT standards for the different energy sources
Wind 1
Hydro
Biomass Biogas 2 Solar (grid) Solar (Off-grid) 1
Capacity (MW) 0.5-10 0.5 10
Standard FiT (USD/kWh) 0.11 0.105 0.0825
0.5-10 0.2-10 0.5-10 0.5-10
0.10 0.10 0.12 0.20
For values between 0.5-10MW, interpolation shall be applied to determine tariff for hydro. 2 The thermal solar energy encompasses also concentrated solar energy.
In addition, a largely independent regulatory institution was established: Energy Regulatory Commission (ERC), which has proactively and credibly improved the quality and transparency of sector regulation in the short span of its creation. The diagram below shows the present electricity sector institutional landscape in Kenya:
Figure 3 – Kenya Instituional Landscape The latest reform effort, supported by the World Bank, targets a comprehensive overhaul of the regulatory framework for small-scale on-grid RE power generation. Recommendations for a revision of the regulatory framework geared towards accelerated investment identified the regulations or procedures for FiTs as well as electricity banking and net-metering as key priorities. Yet another interesting move by the Ministry of Energy is the study which was commissioned last year on how to replace 33 diesel generators, currently foreseen in the Rural Electrification Master Plan[6], with hybrid solar-diesel or purely solar systems 2. The Strathmore 10 kW system In August 2011, a 10 kW grid-connected PV system (the System) located at the roof of the Student Centre building (the Centre) was commissioned. The choice of the system size was not informed by the load analysis but in as a compliance require of the LEED1 regulations as the Student Centre is designed as a green building. The building housing the Student Centre consists mainly of offices, laboratories, cafeteria and recreational facilities with an average power demand of about 150 kVA. The Centre’s power demand is generally higher on week days than weekends. During the week, the demand increases from around 04:30 hrs and peaks at around 11:15 hrs and records a significant drop at around 20:45hrsdue to diminished student activities. The demand is generally low on weekends, due to minimal student activities around the Centre on Saturdays and while the Centre is typically closed on Sundays.
Figure 4 - the 10 KW grid connected system at Strathmore University System Characteristics
The system array comprises of 4 rows of 10 polycrystalline modules each, each module with a rated capacity of 250W pconnected to the inverter and grid as illustrated in figure 5. Key ABCDEFG-
Inverter – Sungrow 10kW Switch Grid PV array Data logger (not in place? Computer display Inverter display
Figure 5 – Schematic diagram of the 10 kW PV System The system is static with a 15 degrees tilt with reference to a flat surface and, given Nairobi’s closeness to the Equator, it receives close to 10 hours direct radiation. The inverter has a standard LCD screen display where data such as: cumulative energy generated in kWh since installation, daily and monthly energy production, maximum and minimum power generated can be viewed. Although the inverter comes with a standard RS 485 and Ethernet interfaces and computer monitoring software, this has not been activated to date. Hence, data can be obtained by climbing up the roof and reading off the inverter display. The total energy produced since from system commissioning date is 22,416kWhas at 7 December 2012. 3. Economic analysis The costs for PV electricity generation depend on two categories of parameters: the technical assumptions, and the economic / financing assumptions. This section carries outa cost-benefit analysis of the System using PV cash flow modeling techniques taking into account three factors: discount factor; cost; benefits. The System was installed at total costs of US$ 21,000 through debt finance with interest charged at 15% per annum. The discount factor has been assumed at the same rate as the cost of finance.
For the determination of PV benefits, a number of techniques exist including the Annuity Method and the Net Present Value (NPV) used for economic evaluation. In order to compare the benefits of substituting purchase of energy from the utility provider with own-generation, a methodology mirroring the calculation performed regularly by the dispatcher, in order to determine the operational benefits of PV, has been chosen. The formula below shows how the “levelized” costs of electricity (LCOE) of solar PV is calculated: …………………………………………………………………… (1) Where: I0- initial Investment; At - total annual costs in the year t; i-real interest rate in %; M el - electricity produced in the year t; n-years of lifetime; t-current year
In addition, the simple payback period of the investmentover the project lifetime can be used to assess the profitability of an investment. This is the duration at which the value of grid electricity saved outweighs the initial system cost, cumulative annual O&M cost and cumulative debt repayments. It is expressed as the year in which the ratio below is > 1: Cummulative revenues/savings of the PV plant to date (Cost of the PV investment + the cummulative annual costs to date)
Economic assumptions: The assumptions applied are indicated in the Appendix. 4. Results of analysis Predicted system energy production Based on the inverter readings as at 7 December 2012, the System production amounted to 22,416kWh of electricity over a period of approximately 16 months or 1,681 kWh/kWp.a. This compares favourably to existing annual production of installations in similar geographical locations. Over a 25 lifetime period, it is computed that the present value of energy produced amounts to 117,935 kWh (applying a discount factor of 15%, and an annual degradation factor of 0.7%). Operation and maintenance cost O&M cost is computed at 2% of initial cost based on actual expenditure incurred in year 1. The present value of O&M cost (discounted at 15% with an annual inflation factor of 5% on the cost) amounts to US$ 3,768. LCOE Applying the above technical and economic assumptions, the System LCOE computed at US$ 0.26/kWh. This cost of energy is slightly higher to the current tariff rate paid by the University to the utility company. Therefore, it may not be beneficial to invest in on-site generation. However, a sensitivity analysis of the parameters reveals that the LCOE is significantly impacted by the discount factor (cost of finance). A discount factor of 5% brings down the LCOE to 0.14 US$/kWh. In addition, an increase in the System yield by 30% would reduce the LCOE to 0.20 US$/kWh. Payback period Applying the above technical and economic assumptions, the simple payback period of the
System is computed at 9 years. A sensitivity analysis reveals that the payback period is sensitive to the system yield and the discount factor. For example, an increase of system yield will reduce the payback period to 3 years as shown in the diagram below: 5. Conclusions and recommendations It has been shown that solar resource PV is a highly competitive alternative to loads which peak during the day such as in a University building. The LCOE from Solar PV generating plant varies considerably depending on the cost of finance – as such many grid-connected PV plants would not be economically viable at the current FiT rate of 12 US Cent per kWh. A Feed-in-Tariff should cover all costs related to a specific power plant. In addition, the simple payback period of 9 years does may seem attractive; however, it should be reviewed hand-in-hand with discounted cash flow analysis. A policy review in favour in solar PV is, therefore, highly advised. An example of policy mechanisms that can be implemented includes electricity banking (EB). EB is a variant of net metering where no payment is made to the utility for surplus electricity supplied. Surplus of electricity generated is supplied to the grid and accounted in a grid supply meter while any supply deficit is purchased from the Utility at established tariffs. Electricity banking arrangement would make it cost effective to increase the design capacity up to peak demand with all electricity used from renewable energy source. This model is to be tested in Strathmore University through the upcoming 1 MW roof-top PV project to be constructed in 2013 through a green line credit facility to be accessed at a cost of 4%. References 1. Government of Kenya: Kenya Vision 2030, published in 2007 2. Ministry of Energy Kenya: Least Cost Power Development Plan Study Period: 2010 – 2030, published 31st March 2010. 3. Economic Consulting Associates: Technical and Economic Study for the Development of Small Scale Grid Connected Renewable Energy in Kenya, submitted to Ministry of Energy June 2012 4. Ministry of Energy, Kenya: Standardized Power Purchase Agreement for Renewable Energy Generators of less than and including 10 MW; published 12th December 2012 5. Ministry of Energy, Kenya: Feed-in-Tariffs policy on wind, biomass, small-hydro, geothermal, biogas and solar resource generated electricity, 2ndrevision, published December 2012 6. MVV decon GmbH: Rural Electrification Master Plan, Kenya, Published August 2009
