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2016 | OriginalPaper | Chapter

7. Photovoltaic Demand-Side Generation

Authors : Pere Mir-Artigues, Pablo del Río

Published in: The Economics and Policy of Solar Photovoltaic Generation

Publisher: Springer International Publishing

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Abstract

Photovoltaic demand-side generation (PV-DSG) can be defined as the production of electricity by means of panels or arrays (the energy conversion units), which are installed on the customer’s side of the meter (Alanne and Saari 2006).

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previous chapter Support for Research, Development and Demonstration
next chapter Public Support Schemes for the Deployment of Commercial Plants
Footnotes
1
The term self-consumption will not be used in this book as a synonymous of demand-side generation (or customer-sited photovoltaics). On the contrary, the term self-generation (or self-production) will be used. The reason is simple: production always comes along before consumption.
 
2
It should be mentioned that the greater the limit on capacity, the more confusing is the distinction between commercially distributed generation and self-generation. This is why, for many, demand-side generation should only have a few kW (for instance, up to 10 kW for residential plants and up to 25 kW for non-household installations).
 
3
A model to estimate the factors which influence the decision to get involved in solar PV demand-side generation and, thus, its diffusion will not be provided in this chapter (see Payne et al. 2001 and van Blommestein and Daim 2015). The aim is to discuss the basic economic aspects of such generation modality.
 
4
If this condition is imposed, then the installations of prosumers are unlikely to alter the existing distribution grids. This assumption does not prevent the redesign of local distribution grids in order to make them suitable for a large number of prosumers. This issue is beyond the scope of this chapter.
 
5
In this chapter, a restricted definition of net metering is used. Unfortunately, there is a considerable terminological confusion in this context. On the one hand, net metering is used as synonymous of demand-side generation in many books which aim to disseminate knowledge about this technology. On the other hand, in more professional circles, net metering usually refers to the case in which the exchanges of electricity with the grid are valued at the same price (IEA-PVPS 2015). Since the economic conditions of PV-DSG are emphasized, any monetary valuation of those flows has been considered here as a variant of the net billing regime.
 
6
Thus, the concept of demand-side generation does not refer to the physical location of the plant.
 
7
This is an ambiguous point. Off-site plants could be promoted by third-party firms. These firms would find possible shareholders, and they would not care about whether they are residents in the same place and about their final motivation. Thus, the regulatory framework will have to distinguish between the strictly commercial plants and those which fit the definition mentioned in the text.
 
8
This possibility also implies that there is no point in considering an off-site zero net energy option.
 
9
For simplicity, annual average values are assumed for the retail price, buy-back price, FIT and the wholesale market price.
 
10
This comparison has been termed “avoided cost”, that is the “difference between what the customer-generator would have paid the energy supplier without the generation equipment and what is paid with the equipment” (Hughes 2005: 4).
 
11
Most residential plants are subject to leasing contracts in the USA. Two firms cover more than half of this segment (Feldman et al. 2013; MIT 2015: 92–95; IEA-PVPS 2015: 15). In these pages, the PPA contracts with a third-party financing will not be considered.
 
12
By assumption, the promoter pays the upfront investments, and the subsidy is granted before the plant operation begins.
 
13
However, it should not be forgotten that the economic feasibility of on-site generation also depends on the market conditions of solar PV systems. Thus, the amount of investment per W can be different depending on the country, as shown in Seel et al. (2014), who compare the cost of small solar PV plants (<10 kW) in USA and Germany.
 
14
The final price of the kWh makes explicit the amount to be paid for the consumed energy and the use of the grid, as well as other expenditures of the electricity system. Those network tariffs are usually based on peak load (or capacity-based tariffs). Depending on the capacity, they can remain flat, be variable or adjusted to the time-of-use.
 
15
T&D expenditures and other expenses of the electricity system are diluted in the total amount paid under the “energy” concept (which, added to the regulation costs, makes up the final bill).
 
16
This has been a justification for establishing a decoupling rule: utilities claim that rates should be adjusted if their revenues go down due to the diffusion of demand-side generation. This is an important question related to the more general analysis of net costs for ratepayers and the equity impacts of on-site generation (CPUC 2010; Darghouth et al. 2010; Weismann and Johnson 2012; Neuhoff et al. 2013).
 
17
This reduction has been estimated at between 0.25 and 0.75 %, depending on the weight of solar PV generation (CSWD 2015: 3).
 
18
In Portugal, the electricity exported is remunerated at a 90 % of the wholesale price. This is justified on the basis of the costs which its integration implies (CSWD 2015: 8).
 
19
The variation of the solar resource only explains a fraction of the dispersion of the break-even cost points between self-production and the retail electricity price. Denholm et al. (2009) analyse a wide sample of US plants, leading to the conclusion that the dispersion of grid parities is 10 times higher the solar resource. The difference would obviously be lower in a smaller country, but factors such as the financing method or the tariff structure would continue being relevant.
 
20
This assertion excludes the case of second homes: since these houses are empty most of the time, the generation level is higher than consumption and, as a result, net exports are achievable. However, second homes and those unoccupied are normally excluded from demand-side support policies.
 
21
It is estimated that, in Europe, the cost of self-generation was between €cents 9.5–10/kWh at the end of 2014/early 2015 (CSWD 2015: 4).
 
22
The regulation can explicitly prohibit this possibility or discourage it by imposing fees to the electricity being generated.
 
23
A barely studied aspect (a notable exception is Hoen et al. 2011 and 2012) is the creation of the segment of the real estate market made up dwellings and commercial premises with PV-DSG plants. Electricity regulation will have to take into account activities such as rehabilitation, transmission and demolition in those buildings.
 
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Metadata
Title
Photovoltaic Demand-Side Generation
Authors
Pere Mir-Artigues
Pablo del Río
Copyright Year
2016
Book
The Economics and Policy of Solar Photovoltaic Generation

Print ISBN: 978-3-319-29651-7

Electronic ISBN: 978-3-319-29653-1

Copyright Year: 2016

DOI
https://doi.org/10.1007/978-3-319-29653-1_7