IMPLANTACIÓN Y CERTIFICACIÓN DEL SISTEMA EN

The LCOE parameters are strongly dependent on the location and size of the PV system and current market policies and prices. There are two main categories: the lifetime finance and the lifetime energy production. For lifetime finance, the parameters include the system installation cost, financial factors (inflation and discount rates), operation and maintenance costs, support mechanisms, insurance, taxes, loans (equity/debt ratio), credits, depreciation, carbon credits, etc. For lifetime energy production the parameters include the irradiation and temperature values, PV system conversion efficiency (dependent on selected technology), PV system electrical and mechanical design, PV system degradation rate, reliability and operational issues (e.g.

shading) etc. These parameters may not all be included in the LCOE formula, but those incorporated should be clearly stated [115]. The formula used to calculate the LCOE values for domestic PV systems in the UK is the following:

𝐿𝐿𝐶𝐶𝐿𝐿𝐸𝐸 =

𝑛𝑛×(1−𝐷𝐷)^𝑛𝑛]

𝑁𝑁𝑛𝑛=0 (4.9)

where C_n is the cost of the system (expressed in £ sterling) (installation, module, electrical equipment, inverter, finance, operation and maintenance (O&M) etc.) in year n. When n=0 the cost is equivalent to the investment cost (C₀). E_n is the energy produced by the system (expressed in kWh) in year n and E0 is energy production in the first year when no degradation is applied. N is the system lifetime (expressed in years), i and d are the inflation and discount rate of the investment (expressed as fractions representing percentage change per annum) and D is the annual degradation rate of the system energy output (expressed as a fraction representing percentage change per annum). The equation developed for the LCOE calculations is presented analytically below:

𝐿𝐿𝐶𝐶𝐿𝐿𝐸𝐸 = 𝐺𝐺 − 𝐺𝐺 − 𝐺𝐺 − 𝑑𝑑

𝐺𝐺 =

∑^𝑁𝑁_𝑛𝑛=0[𝐸𝐸_𝑛𝑛×(1−𝐷𝐷)^𝑛𝑛] (4.11)

𝐺𝐺 =

∑^𝑁𝑁_𝑛𝑛=0[𝐸𝐸𝑛𝑛×(1−𝐷𝐷)^𝑛𝑛] (4.12)

𝐺𝐺 =

∑^𝑁𝑁_𝑛𝑛=0[𝐸𝐸_𝑛𝑛×(1−𝐷𝐷)^𝑛𝑛] (4.13)

𝑑𝑑 =

∑^𝑁𝑁_𝑛𝑛=0[𝐸𝐸_𝑛𝑛×(1−𝐷𝐷)^𝑛𝑛] (4.14)

The equations 4.11-4.14 express the possible cash flows of the investment divided by the lifetime energy of the system in order to be consistent with the LCOE definition. As a PV system could be considered as an investment, when the costs are calculated, the benefits-returns may also be included. Hence, equation 4.10 separates the cost and the benefits of a PV system investment into four different components explained in more detail below. The variable x in equations (4.11-4.14) is equal to (1+i/1+d) and represents the nominal discount rate (combination of inflation and discount rates).

𝑒𝑒 = �

�

A very important choice for the LCOE calculations is the discount rate since it directly affects all the costs of the LCOE, converting them into their present values. Generally, the real discount rate does not include inflation while the nominal discount rate takes

this into account [112]. The methodology of this study considers both discount and inflation rates resulting in the nominal discount rate (eq.4.15). Increasing the nominal discount rate, while leaving the other parameters steady, the present value of the lifetime costs and financial benefits will increase and vice versa. This will affect the LCOE value, as a high nominal discount rate will result in high lifetime costs and benefits. For the case of PV, the investment cost (C₀), which is the greatest cost for a PV system, is not influenced by the nominal discount rate. Hence, the parameters of the LCOE formula are dominated by the financial benefits. Thus, a high nominal discount rate would be more beneficial for the cost of the generated energy. On the contrary, if the LCOE formula does not account for financial benefits, then the lowest possible nominal discount rate, would offer the lowest LCOE values.

The inverter of the system would have to be replaced at least once during the system’s lifetime. Normally, inverters have shorter lifetimes than the PV modules and their lifetime depends on their operating conditions. A realistic assumption that could be used for the inverter lifetime is around 12 years [123]. Hence, the inverter replacement cost (Inv.RC) has been calculated for the 12^th year of its operation, assuming that the basic cost of the inverter is unchanged. Although it is unlikely the basic cost of the inverter to be the same after 12 years, this is a reasonable assumption as the calculation of the inverter replacement cost includes long-term inflation and discount rates based on the countries examined.

The LCOE formula applies mathematical relationships defined for the case of the UK, since India’s residential PV market and policies are not clear yet. However, the formula is slightly modified for the Indian LCOE calculations according to the current Indian status. The modifications are explained in Section 4.5. In equation 4.10, the first term includes all the present values of the lifetime costs of the system divided by the lifetime energy i.e. the net cost/kWh without any benefits. The other three terms are related to the financial benefits that can be gained from a domestic PV system under the current PV supporting policies in the UK. Consistent with the FiT scheme for the grid-connected residential PV systems, half of the energy produced by the system is assumed to be exported into the grid and the other half is consumed in the residence.

This means that half of the generated electricity is transformed into energy savings, which reduce the electricity bills of the household based on the retail electricity cost (Elect.C; eg. 4.12). Additionally, the FiT scheme for the residential PV systems offers a

generation tariff (Gener.T; eg. 4.13) for the generated energy by the PV system and an export tariff (Export.T; eg. 4.14) for the exported energy into the grid. Hence, the second term gives the savings from the electricity consumption throughout the lifetime of the system, the third term gives the lifetime income through the generation tariff, and the fourth term gives the lifetime income through the export tariff. The combinations of these terms resulted in the different scenarios used for this study.