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Solar Farms Work in Ireland

2017-01-11

Some updated numbers about solar energy in Ireland; solar plants selling wholesale electricity seem to make sense.

The conclusions are: (i) that it seems possible to build a solar plant selling wholesale electricity in Ireland though the margin is slim; (ii) there seems to be an immediate business opportunity for private use, i.e. offsetting grid power; (iii) if installed panel prices can be pushed down further, a further opportunity opens up.

The usual cautions apply.

Set-up and Assumptions

Numbers were estimated for the following set-up and with assumptions:

• Solar panels occupy half the available area - in line with state of the art.
• A 5 MW+ installation requires 5,000 x 2 x 10 m² = 100,000 m² or about 25 acres. (1 acre is close to 4,000 m².)
• Calculations performed for an area of 30 acres / 121,410 m² is approx. 350 m x 350 m.
• Total number of 1 m² panels in 121,410 m²: 60,705.
• Average insolation in Ireland is about 2.75 kWh m^-2 day^-1.
• Annual net income takes account of a land cost of 600 euro per acre per year for 20 years. No other costs are included.
• Case 1/2 possible in Irish conditions with standard panels. Experience indicates that 1 kW typical panels installed in Ireland yields between 750 kWh and 950 kWh per annum.

Case 1

• Equivalent overall panel efficiency: 10%.
• 6,093,264 kWh AEP.
• 700 kW avg. output for 6 MW install.
• 1,000 kWh per 1 kW installed.

Case 2

• Equivalent overall panel efficiency: 8.5%.
• 5,179,274 kWh AEP.
• 600 kW avg. output for 6 MW install.
• 860 kWh per 1 kW installed.

Case 3

• Equivalent overall panel efficiency: 13%.
• 7,921,243 kWh AEP.
• 904 kW avg. output for 6 MW install.
• 1,320 kWh per 1 kW installed.

Internal Rate of Return (IRR)

Below, internal rate of return contours (ratio), energy price (y), panel price (x). Panel price x is assumed to be the total installed cost per watt. Internal rate of return includes solar panel installation capital and annual income less modest land costs. It does not include salaries. A detailed study is required.

Case 1 (10%)

Case 2 (8.5%)

Case 3 (13%)

Interpretation

IRR - Alternative Visualisation

Below, the internal rate of return against the panel price (x). Each curved line respresents a different value of power produced (euro / kWh). The left-most curved line is 0.05 euro / kWh. The value of power increments by 0.01 euro / kWh, moving to the right.

Case 1 (10%)

Case 2 (8.5%)

Case 3 (13%)

Simple Pay-back Period of Capital

Below, capital simple pay-back period countours (years), energy price (y), panel price (x).

Case 1 (10%)

Case 2 (8.5%)

Case 3 (13%)

Summary and Conclusions

• At current wholesale electricity prices (up to 0.08 euro / kWh inc. all payments), solar energy is viable in Ireland for wholesale supply with a returns over the project lifetime of 3.5% and 1.7% for Cases 1/2, with a reference panel cost of 1.10 euro per watt installed.
• For private use (offset commercial rate, about 0.12 euro / kWh), the rate of return is higher, i.e 7% - 8%. A small increase in energy prices increases this return.
• If a feed-in tariff is introduced, the economics of the wholesale / SEM option may change.
• If the installed cost of solar panels is below 1.10 euro per watt installed, the economics change rapidly.
• If the value of electricity supplied increases, the economics change rapidly.
• These calculations neglect ongoing operational expenses that may be attached to the project, e.g. maintenance, salaries and so on.

So:

• It seems possible to build a solar plant selling wholesale electricity in Ireland. The margin is slim.
• It seems that there may be an immediate business opportunity for private use.
• If an adequate FIT is introduced, this may be a second opportunity.
• If panel installed prices can be pushed down further or if power prices increase, a further opportunity opens up.

References

• Are Solar Farms Viable in Ireland?
• Measured performance of a rooftop photovoltaic system in Ireland
• ESB Networks (Distribution System Operator) - Standard Pricing, 2015
• Useful thread with Quentin Gargan
• Which Solar Panels Are Most Efficient? (Cleantechnica)
• ESRI numbers for Irish wholesale electricity
• How Cheap Can Solar Get?
• Ireland electricity consumption (Wolfram Alpha)
• Ireland electricity consumption (Index Mundi)
• Useful irradiance tool
• EIA forecasts

  Electricity prices increase with rising fuel costs and expenditures on electric transmission and distribution infrastructure. In the AEO2015 Reference case, increasing costs of electric power generation and transmission and distribution, coupled with relatively slow growth of electricity sales (averaging 0.7%/year), result in an 18% increase in the average retail price of electricity (in real 2013 dollars) over the projection period. In the Reference case, prices increase from 10.1 cents/kilowatthour (kWh) in 2013 to 11.8 cents/kWh in 2040. In comparison, over the same period, the largest increase in retail electricity prices (28%) is in the High Oil Price case (to 12.9 cents/kWh in 2040), and the smallest increase (2%) is in the High Oil and Gas Resource case (to 10.3 cents/kWh in 2040).

• Breakdown of sectors using electricity (SEAI). See Page 10
• Irish business prices, page 23. 16 c per kWh
• Irish and British historical electricity prices and implications for the future

  This paper compares retail and wholesale electricity prices in SEM, the market of the island of Ireland, and BETTA in Great Britain. Wholesale costs are much lower in BETTA. We show that this is mostly because the wholesale price in BETTA is set too low to cover generation costs, although it is compensated by large retail margins. The substantial need for new investment in generation in Great Britain suggests that returns to generators will have to increase. Developing a market mechanism to compensate generators fairly while simultaneously reducing retail revenue will help in achieving this goal.

• Transforming Ireland's Energy System:The Role of Electricity. Background Paper No. 5.
• Ireland's 2020 commitments
• Levelized Cost of Energy. Renewable Energy Technologies. Wind == Gas (CCGT), more or less.

Appendix

Rate of Return - Specific Examples

Taking a specific pricing:

• Assume panel cost of 1.10 euro per watt installed.
• Total cost of purchasing and installing panels: 6,677,550 euro

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