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Cost and Finance in Off-Grid Energy Services
Berkeley Rural Energy Group
Daniel Soto
Sonoma State University
21 March 2014
Introduction
I How do we accelerate the pace of energy access, particularlythe adoption of watt-scale devices
I How do we ensure that these devices are accessible to allincome levels?
I Product cost and financing both important
Parallels between US and off-grid
Manhattan blackout
I People exhibit identical behavior in disaster blackouts andoff-grid environments
US Third party financingI Growth in financing options led to an increase rooftop solarI Financing is key to off-grid energy access
Residential and commercial solar
With construction of some of the world’s largest solar power plants, utility-scale solar inthe U.S. has accelerated in the past two years, while the residential and commercialmarkets have experienced a quieter revolution. Declines in component and systempricing have improved the economic drivers for residential and commercial buyers andexpanded the potential market. However, to achieve higher penetration into the U.S.residential and commercial markets, both a renewed focus on total installation costs andnew business models will be required.
Today, suppliers serve the residential and commercial photovoltaic (PV) power marketsthrough four primary channels:
x Direct ownership: whereby individual homeowners or businesses directly purchasePV systems for their properties
x Solar leasing/PPA: whereby a third party installs and owns a PV system at a host(individual or business), and sells the power to the host via a power purchaseagreement, operating lease or capital lease. Often, the third party owner maintainsthe installation and guarantees an annual output for the system
x Community-owned solar power: whereby individuals or companies can “buy-in” tooffsite solar generation through direct ownership or lease of an installation that is notco-located with the end users/owners
x Election into utility-owned PV generation: whereby individuals or companies canelect to buy PV-generated power from utility-owned PV power plants
Top investors target the residential solar leasing model
To address the growing residential opportunity, many of the world’s leading PVmanufacturers have opened new business units and launched financing and hardwareproduct solutions for the market. More importantly, the channel used to serve theresidential market has shifted quickly in the past three years. In H1 2009, third partyownership with leases represented less than 20% of the California residential PVinstallation market, while in H1 2012 solar leasing claimed >70% market share1.
2
1California Solar Initiative, "Current Working Data Set",http://www.californiasolarstatistics.ca.gov/current_data_files/, accessed September 12, 2012, PwC analysis.2 California Solar Initiative, "Current Working Data Set",http://www.californiasolarstatistics.ca.gov/current_data_files/, accessed September 12, 2012.
0%
20%
40%
60%
80%
100%
H1-2007
H2-2007
H1-2008
H2-2008
H1-2009
H2-2009
H1-2010
H2-2010
H1-2011
H2-2011
H1-2012
Third Party Other
Calfornia Solar Initiative Residential Installations
I http://www.pwc.com/cleantech
Outline
I Millennium Villages microgrids
I Pilot projectI Data gatheredI Lessons learned
I Future Work
I AffordabilityI Negative recurring costs for consumers
Millennium Villages pay-as-you-go
I The primary objectives were to
I Demonstrate system for micropayments for electricityI Remove upfront consumer investmentI Demonstrate technical feasibilityI Demonstrate customer acceptance
Typical sites
Millennium Villages Microgrid
Millennium Villages Microgrid
Millennium Villages Microgrid
Millennium Villages Microgrid
Customer education
Data Collected
I Per customer power and energy consumption on 3 secondintervals stored locally
I Hourly data sent via cellphone to a serverI Customer transactions and credit balances recordedI Allows for observation of account balance and payment
regularity
Customer payment behavior
I Accurate reporting on the financial behavior of customersallows for an accurate calculation of risk and return.
Time with positive balance
I 70% of consumers maintained a positive balance over 90% ofthe time
Time with positive balance
0.0 0.2 0.4 0.6 0.8 1.0Percentage of Time With Credit Available
0.0
0.2
0.4
0.6
0.8
1.0Fr
act
ion o
f C
ust
om
ers
2012-02-01 00:00:00 - 2012-03-01 00:00:00
Positive balance and average expenditureMany customers with modest expenditures displayed consistentpayment behavior.
Soto et.al. ICTD 2012
Technical outcomes
I What technical improvements are suggested by theseobservations?
I Low cost metering solutionsI Battery, inverter, generator efficiencyI Reliability
Low-cost metering system
I UCB developed a low-cost metering system for microgridsI Rosa, Madduri, IEEE GHTC 2012I System commercialized by a microgrid startup company
Inverter and generator efficiency
I Inverters and generators must be large enough to safely meetthe highest demand
I Operating below the rated load results in lower efficiencyI What is the financial penalty for lower efficiency?
Load duration curves
0.0 0.2 0.4 0.6 0.8 1.0Fraction of Availability
0
50
100
150
200
250
300
350
400A
vera
ge H
ourl
y P
ow
er
LightingLighting and Freezer
Residential load in Tiby, Mali with and without a refrigerationdevice.
Modeling of improvements
I Clear sky insolation modelI Semi-ideal inverter modelI Choose smallest battery and panel to meet demandI https://github.com/dsoto/pv energy balance
Cost penalty for inverter performance
0
0.1
0.2
0.3
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0.6
0.7
0.8
0.9
Day Night Constant Ligh:ng Freezer
Cost (U
SD/kWh)
Typical
Flat
Soto, Modi, IEEE GHTC 2012
Battery comparisons
I Using same model, what is the dependence of system cost onthe battery technology
I Lead acid batteries
I InexpensiveI 1000 cycles of lifeI 80% round trip energy efficiency
I Lithium iron phosphate
I ExpensiveI 10000 cycles of lifeI 92% round trip energy efficiency
System cost by battery technology
Trade off between cost and reliability
I Demanding high reliability as a design point can increase costI Goal is to enable microgrid designers consider reliability in the
design process
Cost and energy shortfall probability (ESP)I Lee, Soto, Modi, In Press, Renewable Energy
Future Work
I Affordability of energy accessI Financing of energy access
Negative recurring cost
I Payback is less important than a reduction in expenditures formany consumers
I If saving is difficult, little ability to pay above existingexpenditures
I Pico-power product is an investment that generates returns inthe form of avoided costs
Payback periods
Device Initial Cost Monthly Revenue Months Payback
Solar Lantern $20 $2.00 10
Battery forphone charging
$150 $15.00 10
Battery sellingelectricity
$150 $3.00 50
Returns and available financing
0 10 20 30 40 50
Life of term (months)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Equiv
ale
nt
rate
of
retu
rn
small lantern
battery in a box
retail electricity
I Microfinance usually shorter than 12 months and above 35%
What are the drivers of finance rate and payback period?
I Perceived riskI Investor demandI Alternative investmentsI Transaction costsI Are there conflicting requirements for donors and recipients
for initial cost and sustainability?
Impact on practitioners
I How do academics communicate with practitioners?