A new report from the IEA’s PVPS Task 18 provides planning guidance on how to conduct feasibility studies for off-grid and grid-edge power systems. The optimal system size and specifications vary according to customer priorities. The desired results of the project can be identified with a pure economic analysis (NPV, IRR) or additionally taking into account the level of environmental protection.
Developed by the IEA’s PVPS Task 18, the report aims to provide guidance to stakeholders involved in the planning and development of off-grid solar projects by providing a comprehensive guide to feasibility studies. It is intended to be used as a reference tool in the early stages of the planning and decision-making processes of such projects.
All feasibility studies are different; each project develops in a unique context consisting of different locations, stakeholders, site conditions, goals, constraints and opportunities. Unfortunately, there have been many examples of well-intentioned but ill-conceived projects that have partially or completely failed to live up to their promise and/or potential. The reasons for these failures are many and varied, but in many cases they can be attributed to mistakes and misunderstandings in the initial feasibility phase of the project.
According to the Task 18 report, the key steps for conducting a feasibility study are:
· Identifying project goals: This section provides guidance on how to engage with project stakeholders to determine the desired outcomes of the project. These results can be economic, social and/or environmental.
· Site selection and resource assessment: This section provides guidance on how to select a suitable site for an off-grid solar project and how to assess its solar energy potential. It emphasizes the importance of accurate weather data and solar radiation measurements and provides instructions for making on-site measurements.
· System design: This section provides guidance on designing an off-grid solar PV system that meets project goals and site constraints. It covers key design considerations such as system size, component selection, and system reliability.
· Financial analysis: This section provides guidance on how to conduct a financial analysis of an off-grid solar project, including cost-benefit analysis, cash flow analysis, and project financing options.
The report presents a case study of a remote Indigenous owned and operated cattle station located 10 km off the grid in Australia’s Northern Territory (NT). This cattle station is powered by a diesel production system. The client in this case study required a feasibility assessment to decide whether to continue powering the site as normal (BAU), connect to the grid, or upgrade the power system to a PV/BESS/Diesel hybrid. In addition, if the feasibility study shows that installing a stand-alone hybrid power plant is beneficial, the customer needs to know how different system designs (ie smaller vs. larger systems) affect the economic, social and environmental outcomes of the projects.
· Maximize financial return
· Improve the reliability of the electrical system
· Minimize operating cost volatility
· Improves environmental sustainability
Using these design criteria, the case study aims to understand whether the customer should remain BAU, connect to the grid or develop a PV / BESS / Diesel Hybrid system. The case study develops a full load and supply profile analysis and determines the appropriate capital costs (Capex) and operating costs (Opex) for each option.
The output metrics can then be viewed in different ways to demonstrate to the client the trade-offs that can be made between the identified design criteria. A feasibility study (and thus a case study) uses contour plots (aka topological) for multivariate analysis. For example, if the client wanted to optimize based on Net Present Value (NPV) and Internal Rate of Return (IRR) by varying BESS size and PV system size, the following diagram shows these relationships.
While black dotted lines represent negative NPV, black solid contours represent positive NPV and red contours represent IRR. Based on this multivariate analysis, the optimization can be placed where the NPV and IRR are highest, and this is shown by the blue dot.
However, the above optimization is purely economic, if the customer wants to see as an environmental metric the share of renewable energy (REF), which represents the amount of energy supplied from a renewable source as a percentage of the total energy supply compared to an economic metric, such as e.g. the following contour diagram can be used as NPV.
It can be seen that choosing a different optimization criterion changes the desired sizes of BESS and Solar PV systems.
The IEA’s PVPS Task 18 report shows how stakeholder engagement and diverse, multi-criteria optimization can be used to find the best outcomes for a project. Overall, the report provides a comprehensive guide to conducting feasibility studies for off-grid solar projects. It provides stakeholders with the tools and information needed to make informed decisions throughout the design and development process.
This article is part of the IEA’s PVPS program monthly column. It was facilitated by IEA PVPS Task 18 – Off-Grid and Edge-of-Grid PV Systems. More information can be found in the recent report of Task 18: Plan for Feasibility Studies for Off-Grid and Grid-Edge Power Systems.
By Christopher Martell, GSES, Australia