Solar Bankability Webinar 22 November 2016 PV Investments Cost Benchmarking & Gap Analysis LCOE Simulation & Sensitivity Analysis Mauricio Richter, Caroline Tjengdrawira (3E) Funded by the Horizon 2020 Framework Programme of the European Union
Project Overview European Union Horizon 2020 Work Programme 24 months (March 2015 February 2017) Main Objective: Develop and establish a common practice for professional risk assessment which will serve to reduce the technical risks associated with investments in PV projects 5 consortium partners 2
Presentation Outline Data and results: Benchmarking current practices and gap analysis Risk ranking and LCOE sensitivity analysis 3
Deliverable 3.1 Highlights Task 3.1 Surveys on Benchmarking Current Practices 18 survey financial models Ground-mounted PV plants FR, UK, DE, IT Developed between 2011 and 2015 8 EPC and O&M contracts Ground-mounted and rooftop PV projects FR, UK, IT and NL Developed between 2014 and 2016 7 LTYA reports and scientific literature 11 Observations on current practices Summary of technical assumptions in present-day financial models for PV 1. For PV LCOE, the CAPEX contributes to a significantly larger portion (~75-90%) to the lifecycle costs than the OPEX. 2. There is neither a unified method nor a commonly accepted practice for translating the technical parameters of plant components, performance and reliability into lifecycle costs. 3. The EPC and O&M costs make up to a large portion of the CAPEX and OPEX (70-90% and 30-70%, respectively); the technical details in the EPC and O&M are decisive for managing the technical risks in PV project investment. 4. Risk mitigation measures should be selected with an objective to minimize the LCOE by optimizing the balance between the CAPEX and OPEX. 5. The overall uncertainty on estimated lifetime energy yield is typically assumed to be between ±5% and ±10%. 6. The solar resource variability is one main technical source of uncertainty impacting mainly the risk assessment associated with the cash flow during a single year. 7. PV systems are often not built according to the design used for the initial yield assessment study overthrowing the initial project risk assessment. 8. The use of in-house developed PV modeling tools may lead to flaws in lifetime energy yield calculations. 9. The degradation rate is commonly assumed constant over time although this may not be the case and thus can lead to unexpected deviation in cash flow over the years. 10. Exceedance probabilities (e.g. P90) are typically calculated by assuming a normal probability distribution of e.g. annual irradiation around the expected value; the use of a cumulative distribution function based on long-term resource measurements may be more appropriate in this case. 11. Not all technical risks should be mitigated through technical measures. Financial or legal mitigations should be considered as alternatives. 4
Deliverable 3.1 Highlights Task 3.2 Gap Analysis of Current Practices 20 Identified technical gaps in different project phases Comparing current practices to: State-of-the-art scientific data; Top 20 technical risks identified in WP1 and WP2. See full report here Risk Phase/field Identified critical technical gaps Year-0 Risks during operation Procurement/ product selection and testing Planning/ lifetime energy yield estimation 1. Insufficient EPC technical specifications to ensure that selected components are suitable for use in the specific PV plant environment of application. 2. Inadequate component testing to check for product manufacturing deviations. 3. Absence of adequate independent product delivery acceptance test and criteria. 4. The effect of long-term trends in the solar resource is not fully accounted for. 5. Exceedance probabilities (e.g. P90) are often calculated for risk assessment assuming a normal distribution for all elements contributing to the overall uncertainty. 6. Incorrect degradation rate and behavior over time assumed in the yield estimation. 7. Incorrect availability assumption to calculate the initial yield for project investment financial model (vs O&M plant availability guarantee). Transportation 8. Absence of standardized transportation and handling protocol. Installation/ construction Installation/ provisional and final acceptance Operation Maintenance 9. Inadequate quality procedures in component un-packaging and handling during construction by workers. 10. Missing intermediate construction monitoring. 11. Inadequate protocol or equipment for plant acceptance visual inspection. 12. Missing short-term performance (e.g. PR) check at provisional acceptance test, including proper correction for temperature and other losses. 13. Missing final performance check and guaranteed performance. 14. Incorrect or missing specification for collecting data for PR or availability evaluations: incorrect measurement sensor specification, incorrect irradiance threshold to define time window of PV operation for PR/availability calculation. 15. Selected monitoring system is not capable of advanced fault detection and identification. 16. Inadequate or absence of devices for visual inspection to catch invisible defects/faults. 17. Missing guaranteed key performance indicators (PR, availability or energy yield). 18. Incorrect or missing specification for collecting data for PR or availability evaluations: incorrect measurement sensor specification, incorrect irradiance threshold to define time window of PV operation for PR/availability calculation. 19. Missing or inadequate maintenance of the monitoring system. 20. Module cleaning missing or frequency too low. 5
Deliverable 3.1 Highlights Task 3.2 Gap Analysis of Current Practices Site adaptation: Extrapolating short-term measured datasets MCP methodology can yield high accuracy below 2% (bias) if reference period > 12 months 6
Deliverable 3.1 Highlights Task 3.2 Gap Analysis of Current Practices Long-term variability and trends More accurate results 7
Deliverable 3.1 Highlights Task 3.2 Gap Analysis of Current Practices Risk assessment for business case (exceedance probabilities calculation) Under / Over estimation of risk due to normal distribution assumption Cumulative Distribution Function (CDF) for the long-term (58-year) GHI average of 32 meteo stations in the Netherlands 8
Deliverable 3.1 Highlights Task 3.2 Gap Analysis of Current Practices Initial P50 and P90 yield estimates vs actual electricity production for a portfolio of 41 PV plants Plant level: Within expected ranges Lower actual availability Portfolio level: Bias -1.15% Dispersion 4.4% 9
Task 3.3 Highlights Risk Categorization Categorization based on: Risk impacts CAPEX/OPEX/yield Risk mitigation impacts on CAPEX/OPEX/yield Risk flash card with following info: Description of the risk, Phase at which the risk occurs, Key takeaway of the risk, Mitigations, Risk and mitigation impacts on LCOE Risk 1. Insufficient EPC technical specifications to ensure that selected components are suitable for use in the Phase of risk occurrence Risk specific 1. Insufficient Procurement Planning PV plant environment EPC technical of specifications application to ensure Phase of risk occurrence that selected components are suitable for use in the Risk specific 1. Insufficient PV plant environment EPC technical of specifications application to ensure Procurement Phase of risk Planning occurrence that selected components are suitable for use in the O&M Construction Risk specific 1. Insufficient PV plant environment EPC technical of specifications application to ensure Procurement Phase of risk Planning occurrence that selected components are suitable for use in the O&M Construction Key takeaway PV Risk plant component specific specification 1. Insufficient PV plant and environment requirement EPC technical in the of specifications application EPC contract should to ensure be as detail Procurement as Phase of risk Planning occurrence possible to ensure that that the components selected components procured are suited are suitable for the intended for use PV in installation the O&M Construction Key takeaway specific PV application, plant component site and specification environment and requirement in the EPC contract should be as detail Procurement specific PV plant environment of application as Planning possible to ensure that the components procured are suited for the intended PV installation O&M Construction CAPEX OPEX Yield Impact of risk Key takeaway specific LCOE variables PV application, plant impacted component site and by this specification environment risk: and requirement in the EPC contract should be as detail as possible to ensure that the components procured are suited for the intended PV installation O&M Construction Impact of risk Key takeaway specific LCOE variables PV application, plant impacted component site and by this specification environment CAPEX OPEX Yield risk: and requirement in the EPC contract should be as detail as Mitigations Component testing possible to ensure When that the specifying components the procured technical are requirements suited for the for intended PV PV installation Design review + plant components in the EPC contract, in addition to Impact of risk Key takeaway specific LCOE variables PV application, plant impacted component site and by this specification environment risk: and requirement CAPEX in the EPC OPEX contract should Yield be as detail as Mitigations construction Component monitoring testing possible to ensure the component When that the specifying components type and the quantity, procured technical are the requirements suited specifications for the for intended PV PV installation should also include: EPC qualification Design review specific + application, plant site components and environment in the EPC CAPEX contract, in addition OPEX to Yield Impact of risk LCOE variables impacted by this risk: Mitigations construction Component monitoring testing the component When specifying type and the quantity, technical the requirements specifications for PV Advanced monitoring All applicable certifications and conformances (e.g. should also include: EPC qualification Design review + plant components in the EPC CAPEX contract, in addition OPEX to Yield Impact of risk LCOE variables impacted IEC61215, by IEC61730, this risk: IEC61701, IEC62804, IEC61716 Mitigations Basic monitoring construction Component monitoring testing the component When specifying type and the quantity, technical the requirements specifications for PV Advanced monitoring for modules; All applicable IEC62109, certifications IEC61000 and for conformances inverters; CE (e.g. Advanced inspection should also include: EPC qualification Design review + plant components in the EPC contract, in addition to mark IEC61215, of compliance IEC61730, for all IEC61701, electrical components) IEC62804, IEC61716 Mitigations Basic monitoring construction Component monitoring testing the component When specifying type and the quantity, technical the requirements specifications for PV Visual inspection Advanced monitoring for modules; All applicable IEC62109, certifications IEC61000 and for conformances inverters; CE (e.g. Advanced inspection The environmental condition the components will EPC qualification Design review + should plant also components include: in the EPC contract, in addition to Yield/performance test mark IEC61215, of compliance IEC61730, for all IEC61701, electrical components) IEC62804, IEC61716 Basic monitoring construction be monitoring installed in (temperature, the component humidity, type and wind quantity, and the specifications Visual inspection Advanced monitoring for modules; All applicable IEC62109, certifications IEC61000 and for conformances inverters; CE (e.g. Advanced inspection snow The load, environmental any special should chemical also condition include: exposure, the components will EPC qualification Yield/performance test mark IEC61215, of compliance IEC61730, for all IEC61701, electrical components) IEC62804, IEC61716 Basic monitoring corrosion be installed risk etc.) in (temperature, humidity, wind and Visual inspection Advanced monitoring for modules; All applicable IEC62109, certifications IEC61000 and for conformances inverters; CE (e.g. Advanced inspection snow The load, environmental any special chemical condition exposure, the components will For PV modules, module component bill of Yield/performance test mark IEC61215, of compliance IEC61730, for all IEC61701, electrical components) IEC62804, IEC61716 Basic monitoring corrosion be installed risk etc.) in (temperature, humidity, wind and Visual inspection materials and the proof for modules; of IEC certification IEC62109, IEC61000 for inverters; CE Advanced inspection snow The load, environmental any special chemical condition exposure, the components will documents For PV for modules, these materials module component bill of Yield/performance test mark of compliance for all electrical components) corrosion be installed risk etc.) in (temperature, humidity, wind and Visual inspection materials and the proof of IEC certification Impact of LCOE variables impacted by the risk documents For PV CAPEX snow The load, environmental any for modules, these materials module OPEX special chemical condition component Yield exposure, the components will bill of Yield/performance test corrosion be installed risk etc.) in (temperature, humidity, wind and mitigation mitigations: materials and the proof of IEC certification Impact of LCOE variables impacted by the risk documents For PV CAPEX snow load, any for modules, these materials module OPEX special chemical component Yield exposure, bill of corrosion risk etc.) mitigation mitigations: materials and the proof of IEC certification Impact of mitigation LCOE variables impacted by the risk mitigations: documents For PV CAPEX for modules, these materials module OPEX component Yield bill of materials and the proof of IEC certification Impact of mitigation LCOE variables impacted by the risk mitigations: documents CAPEX for these materials OPEX Yield Impact of mitigation LCOE variables impacted by the risk mitigations: CAPEX OPEX Yield 10
Task 3.3 Highlights Risk Flash Card Risk 1. Inadequate component testing to check for product manufacturing deviations Phase of risk occurrence Procurement Planning O&M Construction Key takeaway Comprehensive relevant product testing in the manufacturer s factory should be included as an EPC requirement to minimize issues due to product defects caused by manufacturing deviations Impact of risk LCOE variables impacted by this risk: CAPEX OPEX Yield Mitigations Component testing Design review + construction monitoring EPC qualification Advanced monitoring Basic monitoring Advanced inspection Visual inspection Spare part management Others For critical PV plant components such as modules or inverters, the following product quality control must be included as part of procurement process required from the EPC contractor: Reviewing how the products are tested by the manufacturer in the factory (including checking the pass/fail criteria for the tests) Requesting specific tests to be included in the product test plan in the factory Reviewing the factory test results at the latest upon delivery Impact of mitigation LCOE variables impacted by the risk mitigations: CAPEX OPEX Yield 11
Task 3.3 Highlights LCOE Sensitivity Analysis Dependence of the PV LCOE on CAPEX, OPEX and Yield Residential (up to 5 kwp) Commercial rooftop (< 1 MWp) Commercial/Utility scale ground mounted (> 1 MWp) Use cases (combination of different mitigation measures as in D1.2 & D2.2): Component testing Design review and construction monitoring EPC qualification Advanced monitoring Basic monitoring Advanced inspection Visual inspection Spare part management 12
Task 3.3 Highlights LCOE Sensitivity Analysis PV LCOE calculation (as defined in D3.1) N = PV system life (years) I = total initial investment (CAPEX) ( /kwp) C = annual operation and maintenance expenditures (OPEX) ( /kwp) RV = residual value ( /kwp) r = discount rate (%) Y 0 = initial yield (kwh) D = system degradation rate (%) 13
Task 3.3 Highlights LCOE Sensitivity Analysis LCOE sensitivity analysis 14
Task 3.3 Highlights LCOE Sensitivity Analysis LCOE sensitivity analysis 15
Task 3.3 Highlights LCOE Sensitivity Analysis LCOE sensitivity analysis 16
Task 3.3 Highlights LCOE Sensitivity Analysis LCOE sensitivity analysis tool Inputs from WP1 and WP2 Sensitivity analysis on mitigation measures (D1.2 & D2.2) 17
Task 3.3 Highlights LCOE Sensitivity Analysis (Ongoing work) Sorted relative change in LCOE for 255 MMs for a ground mounted utility scale system 18
Outlook Deliverable D3.2 (available in December 2016) LCOE sensitivity analysis for different market segments and scenarios Case studies Best practice (checklist): EPC contracting Long-term yield assessment O&M contracting 19
Thank you PRESENTED BY Mauricio Richter MRI@3e.eu This project has received funding from the European Union s Horizon 2020 research and innovation programme under grant agreement No 649997. The content of this report reflects only the author s view and the Commission is not responsible for any use that may be made of the information it contains Funded by the Horizon 2020 Framework Programme of the European Union