Electricity Bill and Feasibility with Solar Power Plant
With the new regulations published in 2019, it was economical to establish a solar power plant for self-consumption. Although the new regulations and announcements are very good for the investor, the feasibility processes of solar EPC companies and consultancy companies have become difficult. I’m entering a small ad here. I recommend Solar Feasibility Module of our company, in order to make feasibility in full compliance with the legislation. While sometimes Solar Feasibility Module can be used for pre-feasibility, it sometimes complements programs such as PVSyst and PV * Sol. Now let’s get back to our topic.
Solar energy feasibility is a serious engineering job. So far I have contacted more than a hundred solar energy companies. No more than ten of them were doing the correct feasibility. In this article, I will present you the information I have acquired over a long period of time as an extract. The feasibility in this article will be carried out using the method known to the public as 5/1.c, benefiting from a high proportion of the power plants currently installed. In order to make feasibility with solar energy, it is necessary to know the electricity bill. Before this article, you can use this article or the following video tutorial to learn more about the electricity bill. During the article, I will focus on the following topics:
- Settlement method
- Reflection of Settlement on Invoice Items
- The Impact of the Consumption Bar
- Transformer and Cable Losses
- Sale of Surplus
- Summary of the Effect of Production on Electricity Bill
- Electricity Price Forecast
- Operation and Maintenance Costs
- Inflation and Interest
- Supplier Selection
- Tariff Selection
- Contract Power Choice
- Industrial Registration Certificate Selection
1. Settlement Method
With the regulation issued in May 2019, monthly offsetting was started from hourly offsetting. In other words, there is no difference between using the electricity you produce during the day in 1 hour and using it within 1 month. In this way, we can give electricity to the grid and when we need it, we can draw another electricity from the network like the electricity we produce. The grid acts like a battery.
2. Reflection of Settlement on Invoice Items
As I mentioned in my article “Electricity Bill Analysis”, it is obtained by multiplying the active cost, active unit price and consumption. Since the electricity produced is theoretically not purchased from the supplier, the net consumption amount to be invoiced decreases. The active cost is obtained by multiplying the net consumption by the active unit price. This is a standard manufacturing benefit we are talking about. In addition, since electricity is consumed at the place where it is produced, losses are reduced and an additional benefit is provided. This benefit is reflected in the distribution fee item. In production and consumption that are settled monthly, no distribution fee is charged for production. Half of the distribution price is collected for consumption in the allocated portion. How the distribution fee will be reflected can be seen in the example below from the line 1-2-3 of the 11th article.
In addition to the active cost and distribution cost items, solar generation also affects taxes. In other words, TRT, Municipality and Energy tax items decrease with the decrease in active cost. With the decrease in the active cost and the distribution cost together, the VAT also decreases.
3. The Impact of the Consumption Bar
In the above calculation, the electricity produced was thought as if it was given to the network and then used after a certain period of time. However, if the electricity is consumed at the moment it is produced, this electricity will flow from the consumption bar and the network will not be aware of this production. Therefore, an offsetting has not been done here. While this change does not affect the active cost, it decreases the distribution cost. Let’s go from the table above. In the event that production was 100 kWh and consumption was 100 kWh, 50 units of distribution fee would be paid. If 20 kWh of this production were consumed at the same time, the meter would perceive this as 80 kWh generation and 80 kWh consumption. Therefore, the distribution fee in this case is 40 units. As a result, it is important that electricity is consumed when it is produced. Production can be taken out on an hourly basis in programs such as GES-Vis. Consumption is published by EPİAŞ as profile coefficients. An hourly analysis can be done by combining these two data. This brings us closer to instantaneous production-consumption traffic. In this way, we can make more accurate feasibility.
4. Transformer and Cable Losses
There is an additional benefit of consuming the generated electricity before it is supplied to the grid. As I mentioned in my previous article “Electricity Bill Analysis”, an item named “Transformer Loss Coefficient” can be reflected on the electricity bill. In facilities with separate transformers, even if this item is not available, there will be a loss in the transformer and this loss will be reflected in the bill of the facility. If the generated electricity is consumed at the facility instantly, this electricity will not pass through the transformer since it is not supplied to the network. Therefore, the loss of the transformer in the load is reduced. This reduces the operating cost of the transformer, as well as reducing the maintenance and potential new transformer investment cost by making the transformer less old. In addition, some facilities may have a long LV cable between the transformer and the facility. If the electricity produced on the roof is consumed immediately, it will not pass through this cable. Therefore, the loss in this cable is also reduced. Operation, maintenance and investment costs can be reduced. As a result, these loss reductions can be an important parameter. Although transformer and cable loss reductions are not a big factor in most cases, I still wanted to write. Of course, if an ideal feasibility is desired, these should be taken into account with the above profile coefficient method.
5. Sale of Surplus
According to the legislation, if there is a surplus production as a result of monthly offsetting, then the surplus electricity is sold at the price at which the electricity was purchased. This is independent of your supplier and tariff. So if you buy electricity for 1 lira, you sell it for 1 lira. In this case, it may make sense to overproduce for a facility that gets expensive electricity. Here is an interesting situation. Buying electricity at a high price can be good when using solar energy.
6. Summary of the Effect of Production on Electricity Bill
In summary, the unit selling price of electricity produced for self-consumption is, in a sense, the Active Purchase Price + Distribution Price Half of the Unit Price + Taxes (TRT + Municipality + Energy Fund + VAT). I mentioned how taxes are determined in my article “Electricity Bill Analysis”.
If there is surplus electricity, the unit selling price of the surplus electricity is Active Purchase Price + Taxes (TRT + Municipality + Energy Fund + VAT).
In these calculations, I bypassed the consumption bus effect and the effect of transformer and cable losses. As a result, it is more economical to produce for consumption than to sell the electricity you generate.
7. Electricity Price Forecast
So far, we have discussed how solar energy will affect the electricity bill in the current period. However, since solar energy will generate electricity for years, what will be the electricity prices in the next period is important when making feasibility studies. As far as I can see, there are very few companies that take this issue into consideration. Although this issue is of great importance, most companies accept electricity prices as fixed and make feasibility studies. Some companies look at the increase in electricity prices in the past years, take the average and scale them to the next years. Again, this is also a wrong method. Suppose there has been an increase of 10% and 30% in electricity prices in the past two years. These companies say that the average increase is 20%. In this case, he assumes that the electricity price in 8 years will be (1,2 ^ 2) ^ 3 = 3 times the current prices. But it should be (1,1 * 1,3) ^ 3 = 2,9. This is actually a mistake that makes a 6.2-year turnaround time like 6 years. So what is the correct method? It is necessary to estimate the electricity price according to the past electricity prices. In solar energy, since the de facto currency is the dollar, these estimates should also be made based on dollars. Then, according to the determined dollar-based prices, the future electricity bill amounts should be determined.
8. Operation and Maintenance Costs
One of the best things about solar energy is its low operating and maintenance costs. In this way, electricity can be used almost free of charge after the investment cost is deducted. As operating costs, expenses such as insurance and cleaning panels and possible maintenance costs should be included in the feasibility processes.
9. Inflation and Interest
We mentioned that the currency of solar energy is the dollar. For this reason, it would be beneficial for the whole feasibility process to go in dollars. The dollar’s inflation can be assumed to be around 2% per year. With this inflation, the net present value of the savings achieved in the electricity bills for the next years calculated in the previous section can be found. In addition, depending on whether the investment is equity or credit, interests should be taken into account and included in the feasibility process.
10. Supplier Selection
It seems that we have almost completed the feasibility process. Now it is necessary to make some choices in order to get maximum benefit. These will actually be trade offs in English. I do not know the exact equivalent of this word in Turkish. I used this as a choice in Turkish. If you know the exact value, I will be glad if you share it with me. Before solar energy, it was important to buy electricity at the cheapest price we could get, which was important in terms of saving. However, we have seen that sometimes it is not that bad to buy electricity at an expensive price with solar energy. We can sell the surplus production at a more expensive price by purchasing electricity at an expensive price without making bilateral agreements. In addition, supplier companies that do not have EDAŞ require 1-2 invoices as a deposit to guarantee themselves when making bilateral agreements. Normally this was reasonable for you. But now there is solar energy. If you do not want to keep some of your capital here, you can buy electricity from the retail part of the regional distribution company, which is the standard supplier. In addition to this, there are also facilities that think that they can buy electricity from the retail of the region EDAŞ on the account of our guarantee. However, since electricity is cheaper from different suppliers, it ignores the preference for warranties. With solar power, you may not need to do this, you can play for the guarantee. In other words, it would be more accurate if parameters such as buying electricity at an expensive price, deposit and guarantee are included in the feasibility process.
11. Tariff Selection
A facility that is a free consumer gets electricity at a more affordable price than a facility that receives electricity at the national tariff. On the other hand, eligible consumers cannot benefit from three-time tariffs. But for a facility that consumes only at night (such as agricultural irrigation) for savings, a three-time tariff may be more logical. For this reason, this facility wants to benefit from the national tariff. But this calculation can change after solar energy. Because if electricity is produced during the day and consumed during the day, it is a free consumer and a one-time tariff can be more logical. In addition, we mentioned earlier that the double term tariff saves 3-4%. It is necessary to re-evaluate how much this savings will be with solar energy. In other words, it is very important to evaluate which of the 4 tariffs (Single term single time, Single term three time, Double term single time, double term three time) will be more economical with solar energy.
12. Contract Power Choice
You can install solar energy in your facility up to contract power. In other words, the higher the contract power, the more you have permission to install. On the other hand, in the double term tariff, fewer invoices can be paid by reducing the contractual power. As a result, your contracting power for the right feasibility is high enough not to hinder solar energy; You need to make it low enough to make good savings in the binary tariff.
13. Industrial Registration Certificate Selection
As I mentioned in my article “Electricity Bill Analysis”, which we call the industrial registry document, it is a document that enables industrial facilities to buy electricity as an industry instead of buying electricity as a business and save on electricity bills. So far we have worked out that buying electricity at a high cost can be beneficial in some situations in conjunction with solar power. In other words, if a solar power plant is installed in some industrial facilities, a more economical way can be provided when the industrial registration certificate is canceled and the business tariff is switched to. It is also useful to pay attention to this in the feasibility processes on a project basis.
If you can read this far, how happy it is to me. You can request a DEMO by contacting me for our Solar Feasibility program in order to make these calculations in about 2 minutes. I hope the article was helpful. If you think there is incomplete or incorrect information or if you have any additional questions, you can contact me via my e-mail address firstname.lastname@example.org I wish you sunny days.
Samet from solarVis.