Multi-parameter analysis for the technical and economic assessment of photovoltaic systems in the main European Union countries

Energy Conversion and Management 74 (2013) 117–128

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Multi-parameter analysis for the technical and economic assessment of photovoltaic systems in the main European Union countries Marco Bortolini a, Mauro Gamberi b,⇑, Alessandro Graziani b, Cristina Mora a, Alberto Regattieri a a b

Department of Industrial Engineering, University of Bologna, Viale del Risorgimento, 2, 40136 Bologna, Italy Department of Management and Engineering, University of Padova, Stradella San Nicola, 3, 36100 Vicenza, Italy

a r t i c l e

i n f o

Article history: Received 11 January 2013 Accepted 24 April 2013 Available online 2 June 2013 Keywords: Multi-country analysis Net present value Performance cost model Feed-in-tariff European Union

a b s t r a c t In the last decades, the attention to solar energy as a renewable and nonpolluting energy source increased a lot through scientists, private and public institutions. Several efforts are made to increase the diffusion of such a source and to create the conditions making it competitive for the energy market. Particularly, for the photovoltaic (PV) sector, the module efficiency increase, manufacturing cost reduction and a strong public support, through favorable incentive schemes, generates a significant rise in the installed power, exceeding 40 GWp in 2010. Although the global trend of the PV sector is positive, differences among countries arise out of local peculiarities and evolutions in the national support policies. This paper investigates such issues focusing on the feasibility analysis of PV solar systems for eight relevant countries in the European Union area, i.e. France, Germany, Greece, Italy, Spain, The Netherlands, Turkey and United Kingdom. A multi-country and multi-parameter comparative analysis, based on the net present value and payback capital budget indices, allows to highlight the conditions most affecting the economic feasibility of PV systems. The national support strategies, along with the most relevant technical, environmental, economic and financial parameters, are the key features included and compared in the analysis. The major results deal with the conditions which make PV systems potentially profitable for each country and installation feature. The national support strategies to the PV sector still play a key role for the most of the considered countries and configurations. Germany, Italy and Spain present the most favorable conditions for a profitable installation of PV systems. Furthermore, the initial investment heavily affects the plant profitability of all the studied scenarios. For such a parameter, significant returns to scale lead to an increase in the installed plant power, so that high rated power plants generally outperform the smaller ones. Such evidences, together with further relevant outcomes which can potentially drive the future investments in the solar PV systems in the European Union, are discussed in this paper. Ó 2013 Elsevier Ltd. All rights reserved.

1. Introduction In the last decades, the spread of the renewable energy sources considerably increased due to the permanent rise of the fossil fuel costs and the growing concern for reduction of the environmental emissions from anthropic activities [1]. The guidelines, provided by the most influential international institutions, e.g. the United Nations and the World Bank, emphasize on the need to mark a turning point in the existing trend of the energy source distribution to increase the incidence of the renewable sources actually close to 16% of the global produced energy [2–4] (Fig. 1). Challenging milestones are set in the recent past. The Advisory Group on Energy and Climate Change pointed out two key and

⇑ Corresponding author. Tel.: +39 0444 998735; fax: +39 0444 998888. E-mail addresses: [email protected] (M. Bortolini), mauro.gamberi@ unipd.it (M. Gamberi), [email protected] (A. Graziani), cristina. [email protected] (C. Mora), [email protected] (A. Regattieri). 0196-8904/$ - see front matter Ó 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.enconman.2013.04.035

complementary goals to be achieved by 2030: the reduction of the global energy intensity by 40% and the parallel increase in the access to the energy services for three billion people now excluded [5]. In Europe, the European Council set ambitious energy and climate change objectives by 2020, i.e. to reduce the greenhouse gas emissions by 20%, to increase the share of the renewable energy to 20% and to make a 20% improvement in the energy efficiency [6]. In such a context, photovoltaic (PV) systems represent a great opportunity to achieve the aforementioned targets, due to the enormous theoretic potential of the solar source, which is equal to 3.9 trillion PJ per year [7], and the relevant improvements both in the physics of solar cells and in the module conversion performances [8]. Such strengths push several countries, worldwide, to promote massive investments in technologies to convert solar radiation into electric power energy through the introduction of specific strategies and customized national supporting policies. The European Union (EU) plays a pioneering role since 2001, when

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M. Bortolini et al. / Energy Conversion and Management 74 (2013) 117–128

Fig. 1. Global energy mix split by primary sources, 2010 [3].

it officially started to promote the renewable energy sources as a key measure to contribute to the environmental protection and the sustainable development [9]. Furthermore, in 2003, the EU Commission established the European Photovoltaic Technology Research Advisory Council to spread the development of a global competitive PV industry. As a result of such efforts, since late 2010, EU is the leader in PV installations with 75% of the global generation capacity [3,10] (Fig. 2). An effective strategy for the national institutions and governments to support the spread of the PV technology and to encourage the investors is the adoption of incentive schemes making profitable the energy production from the solar source. Such an energy policy strategy is adopted in almost all the main EU countries, even if differences exist. Dusonchet and Telaretti [11,12] and, recently, Avril et al. [13] review this issue in depth comparing different country’s strategies and legislations. In the literature, a wide set of contributions provides single country analyses of the current PV sector status. As example, Bernal-Agustin and Dufo-Lopez [14], Fernandez-Infantes et al. [15] and Hernàndez et al. [16] present detailed economic studies on PV systems for Spain, while Hammond et al. [17] focus on the United Kingdom context. Furthermore, Focacci [18] review the PV sector for Italy, Audenaert et al. [19] propose an economic evaluation of grid connected PV systems in Flanders, Belgium, and Šály et al. [20] review the status and conditions of PVs in Slovakia. Outside the EU area, several contributions refer to the US, China and other developed countries, e.g. Fthenakis et al. [21], Zhang et al. [22], Becerra-López and Golding [23], or, even, to developing countries

Fig. 2. Distribution of the global installed PV capacity, 2010 [3].

belonging to the sun belt area where the potential of the solar energy is higher than elsewhere. Diarra and Akuffo [24] focus on Mali, Al-Salaymeh et al. [25] consider PV systems located in Jordan, Ghoneim et al. [26] investigate the scenario for Kuwait, Mitscher and Rüther [27] focus on the Brazilian region, while Nässén et al. [28] propose an assessment of solar PVs in northern Ghana. Furthermore, a parallel research field focuses on the comparison among countries considering single aspects of the PV energy sector. Several works discuss the national incentive policies highlighting similarities and differences among current legislations [29–34], while other studies evaluate the trend of the PV cell costs with a long-term horizon correlating the past trend of the PV system costs to the current state of the art of the PV cell manufacturing technologies in different countries [35–39]. The aforementioned contributions provide several analyses on such a topic even if very few studies cross simultaneously a wide range of parameters belonging to different categories, e.g. technical parameters, environmental conditions, national legislations, economic and financial conditions, and extend the analysis to several countries. No existing contributions integrate in one unique model both the country peculiarities and the technical, environmental and economic conditions of several PV system configurations. Starting from a survey of the current status of the national legislations and the incentive schemes for supporting the PV sector and the current market conditions in eight relevant countries of the EU area, i.e. France, Germany, Greece, Italy, Spain, The Netherlands, Turkey and United Kingdom, this paper proposes a multiparameter analysis to investigate the technical and economic features making PV investments potentially profitable. A Performance Cost Model (PCM), based on the Net Present Value (NPV) and PayBack (PB) capital budget indices, allows to quantify the net cash flows through the plant lifetime. The analysis considers a set of parameters potentially affecting the plant profitability with the purpose to highlight those which are the more critical than others. Several scenarios appear and are compared. As a consequence, the proposed multi-country and multi-parameter analysis, including recently updated available data, represents the most innovative contribution of the present paper. According to the defined purpose, the remainder of this paper is organized as follows: Section 2 briefly overviews the current status and the key differences among the eight considered countries with reference to the PV sector, Section 3 presents the adopted PCM for the economic assessment of each considered scenario and provides a full description of the model parameters. The multi-country analysis is introduced in Section 4 and the obtained results are extensively discussed. The last Section 5 concludes the paper providing suggestions for further research.

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2. PV sector overview for the main EU countries The historical trend, from 2005 to 2011, of the PV installed capacity for the eight considered countries clearly highlights three major phenomena about the status of the PV sector in the EU area (Fig. 3). The first is the significant increase of the installed capacity through the years for all countries, i.e. from 2170 MWp operating in 2005 to 46,454 MWp operating in 2011, with an increase higher than twenty times the 2005 level. The second phenomenon is the unequal distribution of the installed capacity among countries. Germany, itself, has the 53.5% of the total amount of the installed capacity followed by Italy (27.5%), Spain (9.0%) and France (6.1%). The other countries represent lower percentages and, together, have the last 3.9% of the total capacity. Finally, the third phenomenon deals with the different gradient of the waveforms of Fig. 3. Particularly, Germany presents a constant annual increase in the installed capacity, i.e. an increase of about 35% over the previous year, while, other countries, like Italy, Spain and United Kingdom, present an erratic behavior. The main cause for such differences lies in the national supporting policies each country actuates and their evolution through the years, e.g. a systematic support to the PV sector with the progressive decrease in the national incentive strategies vs. spot actions followed by the partial or total cut off of such supports. These phenomena further justify the following review of the incentive schemes, the market conditions and the tax levels for each of the eight considered countries, referred to year 2012. Such parameters are the key inputs of the PCM described in Section 3.

2.1. PV sector key-elements for the eight EU countries In the following, details about the incentive schemes for the eight considered countries are proposed. Data refers to year 2012.

2.1.1. France The French government supports PV sector through the Feedin-Tariff (FiT) scheme of Table 1. Incentives are for 20 years and residential plants benefit of a, further, 7% value added tax (VAT) reduction calculated on the PV installation turnkey cost [10,41,42]. 2.1.2. Germany German government applies a FiT to PV systems for 20 years (see Table 2). The FiT decreases every year due to a fixed reduction rate function of the previous year installed capacity. For PV systems installed in 2012, the decrease rate is of 15% [10,41,43,44]. 2.1.3. Greece Greece applies a FiT to energy from PV systems with installed electrical capacity lower than 1 MWp. The FiT is for 20 years for non-integrated and building integrated systems over 10 kWp and of 25 years for building integrated systems up to 10 kWp. FiT grants 0.250 €/kWh for building integrated systems up to 10 kWp. For non-integrated and building integrated systems with rated power lower than 100 kWp the FiT is of 0.225 €/kWh, while it decreases to 0.180 €/kWh for higher power plants [41,45,46]. 2.1.4. Italy Since August 2012, a new incentive scheme is in force in Italy. As in Table 3, an overall FiT for production and sale of PV energy and a premium tariff for self-consumption are introduced. Furthermore, a FiT increase of 10% is applicable if more than 60% of the investment, excluding the labor cost, is from EU producers. Italian legislation, also, provides a 10% VAT reduction to any PV installation. [10,41,43,47–49]. 2.1.5. Spain In Spain, the current FiT for PV systems is of 0.289 €/kWh for building integrated systems with rated power lower than 20 kWp, 0.204 €/kWh for building integrated systems with rated

26000 24000

Installed PV capacity [MWp]

22000 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 France

2005 33

2006 44

2007 75

2008 180

2009 335

2010 1054

2011 2831

Germany

24875

1980

2931

4205

6160

9959

17370

Greece

5

7

9

19

55

205

631

Italy

38

50

120

458

1181

3502

12764

Spain

49

148

705

3463

3523

3915

4214

The Netherlands

51

52

53

57

68

97

118

Turkey

2,3

2,8

3,3

4

5

6

7

UK

11

14

18

23

26

75

1014

Fig. 3. Historical trend of PV sector in the main EU countries [35–40].

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Table 1 FiT for France (€/kWh).

Table 4 United Kingdom PV system incentives (€/kWh).

Plant type

Residential

Industrial

Plant size (kWp)

FiT

Integrated systems <9 kWp Integrated systems 9–36 kWp Simplified integrated systems 0–36 kWp Simplified integrated 36–100 kWp Nonintegrated systems

0.3539 0.3096 – – 0.1051

0.2136 – 0.1842 0.1750 0.1051

<4 4–10 10–50 50–200 >250

0.260 0.210 0.188 0.160 0.105

Table 2 FiT for Germany (€/kWh). Plant type

FiT

Additional FiT based on selfconsumption ratio

Integrated systems <30 kWp

0.244

Integrated systems 30–100 kWp

0.232

Integrated systems 100 kWp–1 MWp

0.220

Integrated systems >1 MWp Nonintegrated systems

0.184 0.179

<30% >30% <30% >30% <30% >30% – –

0.105 0.142 0.094 0.130 0.081 0.118 – –

the entity of the initial investment and the annual revenues and costs. Such data allow to compute the NPV and PB justifying the economic feasibility of the analyzed configuration. PCM results are, further, compared through a multi-parameter analysis to highlight the environmental, economic, financial and technical parameters most affecting the PV system profitability. Focusing on the PCM, Eq. (1) defines the analytic expression for the NPV, while Eq. (2) considers the PB, i.e. the minimum number of years necessary to return on the investment [11,12,14,17– 19,27,67–69].

NPV ¼ C 0 þ

Table 3 FiT for Italy (€/kWh). Plant size (kWp)

1–3 3–20 20–200 200–1000 1000–5000 >5000

C 0 þ Integrated systems

Non-integrated systems

FiT

Premium tariff

FiT

Premium tariff

0.208 0.196 0.175 0.142 0.126 0.119

0.126 0.114 0.093 0.060 0.044 0.037

0.201 0.189 0.168 0.135 0.120 0.113

0.119 0.107 0.086 0.053 0.038 0.031

power between 20 kWp and 2 MWp and 0.135 €/kWh for non-integrated systems [10,41,43,50,51]. 2.1.6. The Netherlands During 2011, the Dutch government promoted the production of renewable energy through the Sustainable Energy Incentive Scheme Plus (SDE+) providing a 15 years FiT of 0.120 €/kWh. From 2012, Dutch government cuts all incentives to energy production from PV systems [41,43,52,53]. 2.1.7. Turkey FiTs in Turkey last for 20 years and they equals to 0.100 €/kWh for PV systems commissioned before the end of 2015. A FiT increase of 0.052 €/kWh is applicable if plant components are manufactured in Turkey [54–56]. 2.1.8. United Kingdom FiT scheme to support PV systems with rated power lower than 50 MWp is shown in Table 4. FiT is granted for 25 years [41,43]. Finally, Table 5 provides further economic and financial data about the current values of the electricity prices, the tax levels and the annual inflation ratios [57–66]. Such parameters are included in the PCM model described in Section 3.

Lt X

Rj  C j

j¼1

ð1 þ OCCÞj

PB X

Rj  C j

j¼1

ð1 þ OCCÞj

ð1Þ

¼0

ð2Þ

where C0 is the outflow for the initial investment. For residential plants the VAT is, already, included (€), Rj is the revenue for year (€/year), Cj is the operative outflow for year j = 1. . .Lt (€/year), OCC is the opportunity cost of capital (%), Lt is the estimated plant lifetime (year). The initial investment, C0, includes all the plant installation costs and the land purchase if the PV system is non-integrated.

 C 0 ¼ Po  cmodule þ w

Po

gmodule  HI;r



 cland ¼ Po  cmodule þ S  cland

ð3Þ

where Po is the nominal plant size measured at standard test conditions, i.e. irradiance of 1000 W/m2, solar spectrum of AM 1.5 and module temperature of 25 °C (kWp), HI,r is the yearly module reference in-plane irradiation, usually assumed equal to 1 kW/m2 (kW/ m2) [70], gmodule is the PV module efficiency (%) [70], S is the required ground area for non-integrated PV systems, necessary for service facilities and to limit module shading effects (m2), w is the ‘‘spacing factor’’ defined as the ratio between the necessary ground   area, S, and the PV module area, g Po HI;r [71], cland is the land cost module

(cland = 0 for integrated PV systems) (€/m2), cmodule is the specific installation cost of the PV system (€/kWp) obtained through a market research for both EU and extra EU manufacturers and considering the two most frequently adopted silicon cell technologies, i.e. amorphous (a-Si) and crystalline (c-Si) solar cells. The following correlation functions between PV installation cost and its rated power express the aforementioned market research outcomes. 0:128 cSi cEU module ¼ 2828:7  P o

ð4Þ

EU cSi cExtra ¼ 2539:9  P 0:139 module o

ð5Þ

0:114 aSI cEU module ¼ 2356:4  P o

ð6Þ

EU aSI cExtra ¼ 2115:8  P 0:126 o module

ð7Þ

3. Performance cost model Fig. 4 shows a flow chart of the proposed approach for the PV system analysis highlighting the technical, environmental, economic and financial data included in the model together with the analysis steps. Starting from the input data, the PCM calculates

The operative outflow for the generic year j = 1. . .Lt, is as follows:

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M. Bortolini et al. / Energy Conversion and Management 74 (2013) 117–128 Table 5 Country economic and financial data: electricity price, tax level and inflation (year 2012). Country

Electricity prices (€/kWh)

France Germany Greece Italy Spain The Netherlands Turkey United Kingdom

Tax levels

Energy sold to the market

Energy bought from the grid (industry)

Energy bought from the grid (residential)

Corporate tax (%)

Value added tax (VAT) (%)

Annual inflation rate (%)

0.0449 0.0623 0.0774 0.0483 0.0535 0.0448 0.0472 0.0740

0.1340 0.1188 0.1565 0.1261 0.0763 0.1149 0.1181 0.0790

0.2781 0.1403 0.2164 0.2154 0.1478 0.1676 0.2202 0.1220

33.33 29.51 25.00 31.40 30.00 25.00 20.00 24.00

19.60 19.00 23.00 21.00 18.00 19.00 18.00 20.00

2.30 2.50 3.10 2.90 3.10 2.50 6.50 2.40

Fig. 4. Flow chart of the proposed PV system analysis.

C j ¼ C OM&I  ð1 þ gÞj1 þ C Dj þ C Ij þ C Tj

ð8Þ

where COM&I is the annual operation and maintenance outflow (€/ year), g is the inflation rate (%), C DJ is the annual outflow for the interest paid to finance the investment (€/year), C Ij is the outflow due to the inverter substitution. For residential plants VAT is, already, included (€/year), C Tj is the annual tax cost, (C Tj ¼ 0 if the net cash flow is negative and for all the residential installations) (€/year). The interest paid to finance the investment, C Dj , occurs for not entirely private equity financed investments and it is calculated through the straight line depreciation approach as in Eq. (9) [69].

" C Dj ¼ r  u  C 0 

j1 X

ð1 þ rÞLt r

z¼1

ð1 þ rÞLt  1

!#  u  C 0  C Dz

ð9Þ

where r is the money interest rate on loan (%), u is the loan percentage (%).

Furthermore, the inverter substitution cost, C Ij , is a common expenditure during the PV plant lifetime. In the present model, a market research drives the computation of such a cost. Eq. (10) expresses the inverter substitution cost as a function of its plant size, while Eq. (11) is the best fit curve correlating the inverter specific cost, i.e. cinverter, to its rated power.

C Ij ¼ cinv erter  Po

ð10Þ

cinv erter ¼ 0:0325  P2o þ 196:25  Po þ 350:95

ð11Þ

The amount of the annual tax cost, C Tj ; is expressed in Eq. (12) adopting the Earning Before Tax (EBT) approach [69].

C Tj ¼ ½Rj  C OM&I  ð1 þ gÞj1  C Dj  C Ij  A  t a

ð12Þ

OCC where A ¼ ð1þOCCÞ  cmodule  P o is the plant amortization rate, supð1þOCCÞa 1 posed constant (€/year), a is the plant amortization period (year), t is the corporate tax level (%).

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The revenue, Rj, which increases the plant NPV, comes from both the energy self-consumption and the national grid sell of the produced energy. In the former case, the users do not buy electricity from the grid, while in the latter the benefits come either from the incentives, if provided, and from the energy selling. The following Eq. (13) introduces the annual revenue expression for year j = 1. . .Lt, while Eqs. (14)–(16) define the annual cost saving due to the energy self-consumption, i.e. Rcj (€/year), and the revenue from the energy sale, i.e. Rsj (€/year).

Rj ¼ Rsj  vsold þ Rcj  ð1  vsold Þ

ð13Þ

h i Rcj ¼ Ec  ð1 þ gÞj1  EA;y  1  ðj  1Þ  gd;y

ð14Þ

Rsj ¼ i  EA;y  ½1  ðj  1Þ  gd;y  if the national FiT is provided

ð15Þ

Rsj ¼ Emp  ð1 þ gÞj1  EA;y  ½1  ðj  1Þ  gd;y  otherwise; i:e: no FiT

ð16Þ

where vsold is the percentage of the produced energy sold to the grid (%), Ec is the electricity price for the energy bought from the grid (see Table 5) (€/kWh), i is the FiT (€/kWh), Emp is the electricity price for the energy sold to the grid (see Table 5) (€/kWh), gd,y is the yearly efficiency system decrease (%) [70], EA,y is the annual yield calculated through the following Eq. (17) (kWh/year) [70].

EA;y ¼ HI;y  Aa  gmodule  gbos

ð17Þ

where HI,y is the total yearly in-plane irradiation (kWh/(m2 year)) [70], Aa ¼ g Po HI;r is the PV module area (m2) [70], gbos is the Balmodule ance of System (BOS) efficiency (%) [70].

Table 6 Values for the PCM input parameters. Parameter

Adopted values

Technical data Po 3, 20, 50, 100, 1000 kWp for industrial PV plants 3–6–9–12– 15 kWp for residential PV plants Lt 20 years vsold 0%, 50%, 100% gmodule 8% (a-Si), 14% (c-Si) gbos 85% gd,y 1% w 3 Environmental data From 800 to 1800 kWh/m2 year, step 50 kWh/m2 year HI,y 1 kW/m2 HI,r Economic data a 10 years cland 9 €/m2 for non-integrated PV plants, 0 €/m2 for integrated PV plants cmodule According to Eqs. (4)–(7) OM&I c Equal to 1% of C0 cinverter According to Eq. (11), cinverter = 0 for j – 7, 14 (inverter replacement occurs two times during the plant lifetime) Ec According to Table 5, columns 3 and 4 Emp According to Table 5, column 2 Financial data g According to Table 5, column 7 i According to the national schemes reviewed in Section 2 OCC 3%, 6% r 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% t According to Table 5, column 5 u 0%, 50%, 100%

4. Multi-country and multi-parameter analysis The introduced PCM is adopted to develop a multi-country and multi-parameter analysis to study the conditions most affecting the profitability of PV systems in the considered EU countries. Several scenarios are assessed. Each of them comes from a specific setting of the PCM input parameters (Fig. 4), while varying such parameters the comparison among different scenarios becomes possible. Particularly, nineteen independent parameters need to be defined to fix each scenario. In Table 6, the boundary conditions for such parameters are presented adopting plausible values or ranges of variation [32,72–78]. For each combination of the aforementioned parameters, i.e. the previously called scenarios, the PCM is applied to compute both the NPV and the PB. A parametric Microsoft ExcelÓ datasheet, developed with Visual Basic for Applications programming language, facilitated the speeding of this process. The following Section 4.1, presents the key outcomes of the analysis. 4.1. Results and discussion Firstly, the impact of the national support schemes and FiT to promote the PV sector are investigated. Residential and industrial plants are studied separately due to the differences in the legislations currently in force. Figs. 5 and 6 propose a relevant subset of the obtained results. In the figure captions the values of the input parameters that are assumed to be constant are provided in brackets. Results highlight the key role played by the national support policies. The incentive scenarios outperform no-incentive scenarios for all the plant sizes and countries, except for The Netherland, in which the results are the same due to the absence of national FiT, and Turkey due to the concurrent low level of the FiT and the high inflation rate rising the electric energy cost through the

years. For several of the presented scenarios the benefit introduced by the FiT marks the difference between convenient, i.e. NPV > 0, and non-convenient, i.e. NPV < 0, investments. Furthermore, a positive correlation between the NPV and the plant size is registered for all no-incentive scenarios, while, if incentives are provided, such a trend is not always experienced due to the progressive reduction of the FiT with the plant size increase. Fig. 6 clearly justifies this evidence. Finally, the comparison between the two graphs points out the higher support introduced by the national incentive schemes to the residential plants toward the industrial applications. As example, for Germany, Italy and Spain the NPVs for the former plant group are higher than 50% respect to the industrial plants, even if the PV plant sizes are lower and relevant scale phenomena exist. Although the annual revenues depend on few parameters, i.e. the electricity prices, Emp and Ec, and the self-consumption ratio, (1  vsold), the negative cash flows are a function of several cost drivers. Consequently, a sensitivity analysis is of interest for such outflows. The average results, among all scenarios, are summarized in Fig. 7. The installation, interest on debt and land purchase drivers are all related to outcomes directly connected to the initial investment, necessary to install and start up the plant, even if the cash flows occur during the whole system lifetime. The percentage impact of such drivers on the total outcomes is between 75% and 80% and few differences exist among the eight countries. Consequently, most of the outflows required to install and manage a PV system occur during the early periods of the investment lifetime. Furthermore, for the industrial plants, four out of six drivers present the same values because of the hypothesis, behind the proposed analysis, of adopting the same PV technologies for all the countries. Differences, in the residential scenario outflows, are due to the VAT levels, specific to each country.

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3200 2800 2400 2000

NPV [ /kWp]

1600 1200 800 400 0 -400 -800 -1200 -1600 -2000 France

Germany

Greece

Italy

Spain

The Turkey Netherlands

United Kingdom

France

Germany

Greece

No incentive scenarios

Italy

Spain

The Turkey Netherlands

United Kingdom

Incentive scenarios

3 kWp

6 kWp

9 kWp

12 kWp

15 kWp

Fig. 5. Incentive vs. no-incentive scenarios for the eight countries and residential rooftop plants (cmodule according to Eq. (7), HI,y = 1400 kWh/m2 year, OCC = 3%, u = 0%, vsold = 50%).

3200 2800 2400 2000 1600 1200 800 400 0 -400 -800 -1200 -1600 -2000 France

Germany Greece

Italy

Spain

NL

Turkey

UK

France

Germany Greece

No Incentive scenarios 3 kWp

20 kWp

Italy

Spain

NL

Turkey

UK

Incentive scenarios 50 kWp

100 kWp

1000 kWp

Fig. 6. Incentive vs. no-incentive scenarios for the eight countries and industrial rooftop plants (cmodule according to Eq. (7), HI,y = 1400 kWh/m2 year, OCC = 3%, u = 0%, vsold = 50%).

A third relevant outcome of the analysis is the impact of the ratio between the self-consumed and the market sold electricity, i.e. the previously introduced vsold parameter. A comparison among the eight countries is in Figs. 8 and 9 for residential and industrial installations, respectively. For no incentive scenarios, vsold = 0% is a necessary condition to generate positive NPVs, i.e. convenient investments. On the other

side, in presence of the national supports to the PV sector, results vary among the countries mainly due to the peculiarities in the legislations currently in force. Two sets of countries presenting opposite trends are identified. On one side, Germany, Italy and Turkey encourage the self-consumption of the produced energy, i.e. vsold = 0% scenarios outperform vsold = 50% and vsold = 100% scenarios, while, on the other side, France, Greece, Spain and United

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M. Bortolini et al. / Energy Conversion and Management 74 (2013) 117–128

100 95 90 85 80 75 70 65

%

60 55 50 45 40 35 30 25 20 15 10 5 0 France

Germany

Greece

Italy

Spain

The Turkey Netherlands

United Kingdom

France

Germany

Greece

Italy

Industrial Installation

Spain

The Turkey Netherlands

United Kingdom

Residential

Interest

Inverter substitutions

Land purchase

O&M

Tax

Fig. 7. Sensitivity analysis of cash outflows.

4400 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 -400 -800 -1200 -1600 -2000 -2400 France

Germany Greece

Italy

Spain

NL

Turkey

UK

France

Germany Greece

No incentive scenarios

χsold = 100%

Italy

Spain

NL

Turkey

UK

Incentive scenarios

χsold = 50%

χsold = 0%

Fig. 8. Impact of vsold on NPV, residential rooftop plants (cmodule according to Eq. (7), Po = 3 kWp, HI,y = 1400 kWh/m2 year, OCC = 3%, u = 0%).

Kingdom, spread the exchange of the PV energy to the electricity market through favorable tariffs and/or tax breaks. Such evidences are coherent with the review proposed in previous Section 2.1. Finally, the described trend is more evident for the residential scenarios (Fig. 8).

Considering the influence of the environmental conditions on the NPV and PB, the irradiation level significantly impacts on the plant profitability. For each country, power size and system installation type, i.e. residential and industrial, a lower economic limit to HI,y exists to mark the difference between convenient

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χsold = 100%

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Fig. 9. Impact of vsold on NPV, industrial rooftop plants (cmodule according to Eq. (7), Po = 100 kWp, HI,y = 1400 kWh/m2 year, OCC = 3%, u = 0%).

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Fig. 10. Impact of the irradiation levels, HI,y, on NPV and country typical ranges (cmodule according to Eq. (7), OCC = 3%, u = 0%, vsold = 50%).

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NPV [ /kWp]

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OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC OCC 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% 3% 6% France

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Fig. 11. Impact of financial parameters on PV plant profitability (cmodule according to Eq. (7), HI,y = 1400 kWh/m2 year, r = 4%, vsold = 50%).

4,00 3,50

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Fig. 12. PV module cost trend from 2001 to 2012 [80].

and inconvenient investments. Fig. 10 presents such results for typical scenarios together with the range of the measured irradiation levels for the country locations in which the 90% of the builtup areas are situated [72,74]. The red1 dashed line marks the convenient and inconvenient regions. The most of the economic lower limits for all the eight countries, except for The Netherlands and United Kingdom, fall in the convenience region, i.e. the correspondent investments present NPV > 0. About the two exceptions: for The Netherlands by replacing vsold = 50% to vsold = 0%, i.e. totally self-consumed electric energy, the economic limits, for all scenarios, decrease and fall in the convenient region. For United Kingdom, favorable results are

1 For interpretation of color in Fig. 10, the reader is referred to the web version of this article.

for vsold = 100% due to the current FiT level promoting the market exchange of energy, as shown in Figs. 8 and 9. A further group of parameters potentially affecting the PV plant profitability is related to the financial structure of the investment to build and run the PV system. Particularly, two major parameters, belonging to such a group, are the loan percentage u, i.e. the percentage of the investment financed through debt, and the opportunity cost of capital, OCC, adopted to discount the net cash flows. A sensitivity analysis for these two parameters is included in the proposed analysis. The key results are in Fig. 11. A negative correlation exists between u, OCC and the NPV. The higher the values of such parameters, the lower the NPV is. This trend is experienced for all countries, plant sizes and installation features so that, a relevant conclusion, is the independence of the financial structure of the investment from the country peculiarities and plant features, i.e. total equity investments and low values of

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the opportunity cost of capital are, always, preferable. For some scenarios, e.g. United Kingdom, the increase in the OCC from 3% to 6% generates the switch from positive to negative values of the NPV. Furthermore, the PB is, also, affected by the financial structure of the investment. Focusing on the convenient scenarios, only, u = 0% configurations present an average PB of 9.3 years for residential plants and 7.7 years for industrial plants, while for no private equity financed investments the PB rises to 13.8 years for residential installations and 11.0 years for industrial plants. Furthermore, given the same investment financial structure, the lower PB values for industrial plants toward residential installations are due to the lower initial investment (see previous Fig. 7) and the fiscal benefit introduced by the plant amortization during the first years of the plant lifetime, i.e. C Tj is low due to the high values of the amortization rate A. Furthermore, the impact on the NPV of the cell technologies, i.e. a-Si vs. c-Si, and module manufacturers, i.e. EU vs. extra EU, is, also, investigated. The results proposed in the previous paragraphs of this section refer to a-Si cells produced by extra EU manufacturers, i.e. Eq. (7). Considering the other alternatives, i.e. Eqs. (4)–(6), the costs generally rise by an approximately constant value generating a consequent NPV decrease between 200 and 400 €/kWp, while the differentials among the scenarios do not change significantly. At last, the gap between rooftop, i.e. integrated, and ground PV plants, i.e. nonintegrated, is positive. The land purchase costs and the lower support offered by national schemes to nonintegrated systems generate worse performances for the last plant group. Several nonintegrated scenarios are not convenient at all, while, if NPV > 0, the average gap between the two installation configurations is close to 25.9%. Final remarks deal with the future perspective of the PV sector. First of all, the spread of the PV systems is still linked to the energy policies adopted by the national governments and institutions even if the increase of the electricity cost, the module efficiency and the parallel decrease of the PV system installation costs may lead the PV systems to the grid parity. The decreasing trend of the PV system installation costs (Fig. 12), represents a favorable condition to ensure the future feasibility of the systems based on the solar source in the EU area despite some uncertainties in the energy policies, e.g. in Germany, Italy and Spain, still exist [79,80].

5. Conclusions and further research This paper investigates the technical and economic feasibility of photovoltaic (PV) solar systems for eight relevant countries in the European Union (EU) area, i.e. France, Germany, Greece, Italy, Spain, The Netherlands, Turkey and United Kingdom. A multicountry and multi-parameter analysis, based on a Performance Cost Model (PCM) computing the Net Present Value (NPV) and Payback (PB) capital budget indices, allows the assessment of the profitability of the investments in the PV plants under several configurations. The proposed analysis includes the main technical, environmental, economic and financial parameters, together with the current support schemes and legislations currently in force to spread the PV plants in the EU area. A large set of scenarios are studied and the results compared to highlight useful trends that can drive future investments in the PV sector. For all countries, the results point out the key role still played by the incentive strategies to support the investments in the PV plants. Particularly, the German, Italian and Spanish scenarios are the most favorable, outperforming all the other countries for most of the investigated plant sizes and installation features. On the contrary, Turkey presents weak support conditions, while several scenarios for The Netherlands present negative NPV values due to the recent cut of all incentives.

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The PV plant cost structure forces relevant investments and cash outflows in the early years of the plant lifetime, i.e. the 75– 80% of the full outflow, while the revenues are, substantially, uniformly distributed through the years. National incentives and tax breaks, provided by country legislations, allow to partially compensate such a misalignment between positive and negative flows, contributing to the reduction in PB and the increase in the economic feasibility of the plants. Furthermore, results highlight a direct dependence of the plant profitability on the plant size, while negative correlations are experienced considering low equity financed investments and high opportunity costs of capital. Finally, the environmental conditions and, particularly, the country’s average irradiation level, should fit to the economic irradiation level, i.e. the minimum value of the solar irradiation making the NPV positive. Results highlight an excellent fit for the French, German, Greek, Italian and Spanish areas, while criticalities occur in The Netherlands and United Kingdom in which gaps of 350 kWh/m2 year and 100 kWh/m2 year exist respectively. Further research deals with the application of the proposed analysis to other geographical areas, e.g. the Far East and the African region, presenting different features, constraints and local conditions. The continuous update of the parameters included in both the PCM and the multi-country and multi-parameter analysis is, also, of interest to study new scenarios, perspectives and opportunities of evolution for the PV renewable energy sector.

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