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Photovoltaic energy generation in Brazil – Cost analysis using coal-fired power plants as comparison
Renewable Energy 52 (2013) 183e189
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Photovoltaic energy generation in Brazil e Cost analysis using coal-fired power plants as comparison Corrado Lacchini*, João Carlos V. Dos Santos Graduate Program in Engineering: Energy, Environment and Materials (PPGEAM/PPGEMPS), Lutheran University of Brazil, 92425-900 e Canoas/RS, Brazil
a r t i c l e i n f o
a b s t r a c t
Article history: Received 6 October 2011 Accepted 1 October 2012 Available online 23 November 2012
We make a brief analysis of the evolution of photovoltaic systems, highlighting the present situation worldwide and in Brazil. We compare costs of energy generation associated to photovoltaic and to coalfired power plants. Coal-fired generation represents the eligible choice for the Brazilian State of Rio Grande do Sul, where thermal plants may use locally extracted coal. The production cost of the energy generated with coal is evaluated taking in account the effect of the invisible cost represented by externalities that affect human health. The price evolution of Photovoltaic modules is presented, as well as trends on decreasing costs for new installations. We also calculate the production cost of the AC energy generated by three photovoltaic plants, with different power, derived from a model. The model is used to make sensitive analysis based on the adjustment of some factors that directly affect Brazilian costs such as: insolation, module’s custom and transportation taxes, effect of economy of scale, cost of money. A cost comparison is made between the two technologies and some government incentives are proposed to narrow the existing financial gap. Ó 2012 Elsevier Ltd. All rights reserved.
Keywords: Photovoltaic system Hidden costs Externalities Feed in Tariffs
1. Introduction The ongoing development of society reveals its strong dependence on electrical energy to sustain the incremental increase of the annual Gross Domestic Product e GDP. Government planners face the simultaneous challenge of ensuring the sustainable use of natural resources, while providing the necessary conditions for the development of national society. The conversion of natural resources into energy generates collateral effects on the environment, represented by the huge stockpiling of unusable wastes and the diffusion of pollutants that have a profound effect on the quality of life. To avoid the rapid depletion of limited natural resources, the use of renewable sources should be pursued and among them the radiation that the sun delivers to the surface of earth. Many different ways exist for exploring the radiation of the sun; one of them is the photovoltaic technology that transforms the insolation directly into electrical energy with no pollutant effects. When seeking to compete with other established technologies, photovoltaics face the same competitive challenges, in the form of barriers, which must be overcome by any newcomer. Barriers may be political and economic, and the newcomer should formulate and * Corresponding author. Tel.: þ55 51 33381269. E-mail address: [email protected] (C. Lacchini). 0960-1481/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.renene.2012.10.033
propose some perceptible advantages to the prospective market. Photovoltaic technology involves relatively large initial investments and long payback times to recover the initial capital and does not have a record of affordability due to its relative novelty in the market. At this initial stage in its development, photovoltaics have not reached grid parity and the perceptible advantages rely mainly on its potential to support clean decentralized generation. To improve this situation, the governments of different countries worldwide, which believe in this technology and hope for beneficial side effects such as increased employment, provide economic support to the production chain, aiming to the point of selfsustainability where a mature market may guarantee the production flow. Approximately half of the 194 GW new electric capacity, added worldwide in 2010, was based on the use of renewable sources and, out of this, an estimated 17 GW may be attributed to photovoltaic generation, so that PV continued to be the fastest growing energy technology. With that increase, the total existing capacity, in 2010, reached 40 GW, more than 7 times that of five years earlier [1]. Electric energy generation is sustained by several sources, some of them renewables and others not. Fig. 1, which represents the situation in the United States, is a good example of past distribution of the main energy sources and the forecast for the year 2035 [2]. To satisfy energy hunger, coal emerges, therefore, as one of the preferred sources of natural fossil fuel and planners tend to
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billion kWh
Electricity generation by fuel, 2007, 2009 and 2035
2500 2000 1500
2007 2009
1000
2035 500 0 Coal
Natural gas
Nuclear
Renewables Petroleum
Fig. 1. Electricity generation in USA by fuel, past and future.
dedicate financial efforts, subsidies and political support, aiming toward the construction of new coal-fired plants. Unfortunately, some unwanted effects, named externalities, must be considered, since they weigh heavily on the final cost of energy. An analysis made in the United Sates by the National Research Council [3] highlights the costs of diseases linked to the pollutants emitted by the 406 coal-fired energy plants: the cost of medical procedures to recover from related health problems corresponds to 39% of the average cost of kWh to the end user. This is a surplus cost that society does not see but pays in taxes. Moreover, coal-fired plants are located close to the coal mines, to reduce the cost of transportation of raw material to the combustion plants and also the cost of its appropriate conditioning. Since such located coal-fired plants are installed far from the consuming centers, transmission lines are needed to make the energy available. Copper and aluminum conduits used to transmit the energy impede the passage of current, causing energy losses. Photovoltaic generation, on the other hand, is a relatively new technology which is making giant steps in reducing manufacturing costs, developing new materials, optimizing the efficiency of the conversion devices, both from solar to DC current and from DC to AC and to the grid. The great and fast expansion of the market has leveraged the expansion of production with economy of scale and according to Baillie [4], it is foreseen by many authors that the parity with the grid will be reached before the year 2020 in many different locations around the world. Brazil, a continental country, is favored by the existence of great rivers in its territory. In fact, the production mix for electricity generation in Brazil shows that approximately 71% is currently satisfied by renewables, primarily hydro generation small and large, while thermal accounts for approximately 27%. Table 1, updated to the year 2012 [5], shows the situation at the present time, later with the introduction of power plants under construction and in the future after planned construction.
From Table 1 one can see that the next stage will maintain the percentage of 69% for hydro, while thermal will almost remain stable going from 27% to 26%. In the future, hydro will decrease to 63% and thermal increase to almost 29%. Thermal will continue to represent the second biggest slice of the pie. As suggested by Fig. 1, countries with coal reserves assign a great importance to them, for energy production. Brazil’s coal reserves total 7 billion tons [6] concentrated in two states e Santa Catarina and Rio Grande do Sul, accounting respectively for 20 and 80% of the total Brazilian coal [7]. This amount corresponds to a lifeexpectancy of 400 years until its depletion given the present use for thermal fossil generation. Unfortunately, Brazilian coal is low quality, with a heating value of approximately 13,000 kJ/kg as compared to traditional coals used for electricity generation which have an approximate heating value bigger than 25,000 kJ/kg [6]. Despite this weakness, the Brazilian coal-fired plants are supported by the government for several reasons, among them the benefits provided to the social environment of the region and its progress. Support can be described as the purchase of energy at a premium value for some older plants, to equalize the cost of their energy. Among the different technologies presently used in Brazil for the generation of electricity, coal represents one of the highest costs as will be outlined in Fig. 2. Worldwide, PV has the highest cost and it is worth comparing it with coal technology, which, not considering hydro, could be regarded as preferable for Rio Grande do Sul. Besides that, there are two reasons for comparing PV and Coal technologies: a by demonstrating that PV is cheaper than coal, it could be considered as a valid alternative to gas fuel cells, nuclear and coal itself, as shown in Fig. 2; b if it is sound to economically support coal for political reasons, the same could be true for PV which is a fast growing new technology with real possibilities both technically and financially to improve its position toward parity. Other technologies related to renewable sources like Biomass, Wind, Tidal are in their early stages of development and show-up as alternatives for future energy needs. Not discounting the merits of these technologies, this paper focuses on the PV alternative. 2. The potentiality of coal plants and their negative effects Depletion of natural resources, considering the present usage pace, is predicted to happen in a few decades, taking into account that petrol and gas are primarily used for transportation and industrial use [8]. Coal reserves already mapped have an estimated period of availability of 130 years, not considering possible unknown reserves [9] and taking into account the present annual
Table 1 Electricity generation in Brazil per type e present, next and future. Generation type
Present generation
Next generation
Future generation
MW
%
MW
%
MW
%
66.33% 8.16% 17.74% 1.26% 3.43% 1.68% 1.39% 0.00%
18.283 863 4.862 13 578 1.350 1.480
66.66% 3.14% 17.73% 0.05% 2.11% 4.92% 5.40% 0.00%
2.568 1.860 8.043 67 1.822
12.41% 8.99% 38.86% 0.32% 8.80% 0.00% 30.61% 0.00%
Hydro large 79.136 Thermal biomass 9.736 Thermal fossil 21.167 Thermal other 1.505 Hydro small 4.095 Nuclear 2.007 Wind 1.658 Photovoltaic 1 Total 119.305
27.428
6.335 20.695
Fig. 2. Cost comparison between different production technologies.
C. Lacchini, J.C.V. Dos Santos / Renewable Energy 52 (2013) 183e189
extraction pace. A collateral problem, which is connected to the burning process, is the emission of Green House Gases e GHG, which pollute the air, besides contributing to the increase of global temperature. Technology is keeping pace with the production process and different alternatives are made available to remove from coal all the potential polluting components that could be emitted before and during the burning process. On the other hand, fossil burning plants have a useful life of about 30e40 years [10] and the probability that one plant may be updated during its operative life is affected by the consideration that every plant is designed for a specific process and existing contractual clauses impose continuity and delivery assurance. 3. The photovoltaic alternative As an alternative to coal, the sun is an endless source of energy, at no cost, with no foreseeable depletion time. It is hard to find negative effects in this energy generation process, at least in the pollution side effect. The installations of solar plants require areas exposed to solar light and follow two main different paths: (1) use of the structures of residential, commercial, or industrial buildings, covering their roof tops or side walls to expose and hold up the solar modules; (2) use of available lands, degraded or not available for agriculture, in the proximity of medium to high scale users. In both cases, solar modules and inverters, during their average estimated lifetime of 25 years [11e13], do not require heavy maintenance aside from surface cleaning, checking connectors and cables, vandalism correction and the substitution of parts due to mechanical damage. When the photovoltaic industry started in 1954, with solar cells produced by the Bell Labs in the United States, the technology was based on crystal silicon. Today other materials are being used covering different market shares as highlighted in Table 2 updated to the year 2010 [14,15]. Solar cells are connected to form modules with power capacity that may range from 100 to 250 W. Capacity is measured in what is called Standard Test Conditions (STC) which correspond to 1.000 W/m2 irradiance, AM 1.5 solar spectrum and 25 C module temperature. Module efficiency may range from 10% to 20% depending on the technology under consideration e CIGS, CdTe, Amorphous Silicon Thin Film, Crystalline Silicon (c-Si), tandem junctions cells e and also depending on the conversion techniques that focus on minimization of contact areas [16]. The Thin Film technology has the advantage of using smaller amounts of energy and raw material in the production phase; these two characteristics justify production costs 50% lower, per area, than those for c-Si [17]. Besides, amorphous silicon, when deposited as thin film, maintains its power capacity with the increase of operational temperature; this is an important characteristic if one considers that when the insolation is maximum, forcing a higher consumption of energy by air conditioning systems, the module’s temperature also reaches its maximum [17]. Photovoltaic plants may be stand-alone or grid connected. In the latter case, the power injected into the line must be produced with the correct voltage and frequency characteristics. Inverters, connected to the modules, adapt their output to the variable power Table 2 Market deliveries by technology in 2009 and 2010. Technology
2009
2010
Mono and polycrystalline silicon Thin film (amorphous silicon, cadmium telluride and CIGS) Total MWp
83% 17%
87% 13%
7.900
16.000
185
which photovoltaic modules harvest from the inconstant energy irradiated from the sun. Depending on the plant’s total power, the connection to the grid may be made at low (less than 1 kV), intermediate (from 1 kV to less than 69 kV), or high voltage (equal or bigger than 69 kV) [18], complementing the power available in the existing transmission lines. With this strategy the energy losses of transmission lines, the value of which can be estimated at 10% [19], are minimized. 4. Costs associated with thermal energy generation Although thermal electric plants show different values of generation costs, it is normal to consider them as if they were all equal. This is the case for the Brazilian state of Rio Grande do Sul, responsible for more than 80% of the total Brazilian coal production, in which five different coal-fired power plants operate with raw material whose cost may vary five times from one location to the other. The weighted average cost is between 8.1 and 10.0 ¢$/kWh [20], considering the currency exchange rate of the Brazilian Real (R$) to the dollar of 1.6 R$/$. This cost takes into account raw material, cost of investment diluted in the time frame of the concession contract, operation and maintenance, replacement of worn equipment and profits. Fig. 2 shows a comparison between different thermal technologies and their cost components; solar PV is included [21]. Apart from the values shown in Fig. 2, other costs must be considered to create the correct perspective of the real cost of energy. Research conducted by the National Academy of United States [3] substantiates the so-called externalities, secondary effects linked to the production process in coal plants. These byproducts, mainly originated by air pollution, include: particulate matter (fine particles with a dimension of less than 10 microns), sulfuric dioxide (SO2) and nitrogen oxide (NOx). Externalities mainly affect human health causing premature mortality and morbidity. One way to evaluate externalities is to quantify pollutant concentrations with the consequences of exposition and associate them to monetary values. These monetary values estimate the amount of money that the market e the general population e would be willing to pay to avoid the negative effects of pollutants. Damages, originating from externalities associated with 406 coal plants generating electricity in the United States in 2005, were calculated at 62 Billion dollars. Diluting this value over the total energy generated by those plants, the average value of damages was 3.2 cents per kWh [3] and when compared to the cost of electricity in the same year e 8.14 cents per kWh e the hidden cost should increase the total to 39.3% [3], totalizing 11.34 cents per kWh. 5. Costs associated with PV generation The costs of PV generation have decreased steadily as a result of continued technological development and market expansion, which allow economy of scale, supported by vigorous governmental programs. Government action in European countries, the United States, Japan and others are also based on the pressure of society requesting urgent action to correct the alarming degeneration of the habitat and the continuous increase of worldwide average temperature. PV price evolution has shown an almost constant negative slope as highlighted in Fig. 3, showing the weighted average selling price [15] and its exponential tendency curve. Brazil is in its infancy stage with respect to PV generation. Several small projects, especially in universities, are preparing
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Expon. (Wheighted average)
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Price (US$ / Wp)
Wheighted average
10 9 8 7 6 5 4 3 2 1 0
Year Fig. 3. PV selling price evolution and tendency for future years.
human resources for this technology that inevitably will find its place in the country. Projections made by the Ministry of Mines and Energy in 2005 [20], valued the cost of PV energy between 0.58 and 1.16 Dollars per kWh by 2015. This value, if compared to the trend line in Fig. 3, may be considered as being optimistic. As a matter of fact, the PV market is subject to variables that are difficult to control. As an example, research carried out by Photon International magazine [22] has collected prices for complete systems in different countries showing great divergence as seen in Fig. 4. Prices are in Euros per kWp for systems with power bigger than 10 kWp. Brazil does not have a strong database for PV systems; therefore mathematical models must be used to infer the costs of PV installations, with different power, based on imported components and considering the Brazilian economic and financial situation.
The amount of energy produced every year, for 25 years, has been discounted by the following factors: (1) yearly decay of 0.64% on production yield, due to modules aging [23]; (2) overall system performance factor, DC to AC, estimated at 80% and based on two groups of factors: (a) the variability of module power, the uncertainty of solar radiation subject to weather conditions, the voltage drop on module and inverter wiring and connectors and (b) the efficiency of the inverters and transformers; (3) yearly average daily radiation considered as 4.81 kWh/m2/day, for the Brazilian state of Rio Grande do Sul [24]. The unitary cost of energy may then be calculated using Eqs. (1)e(3).
Annual energy ¼ avg: daily radiation 365 mod: efficiency tot: area syst: performance (1)
6. Methodology The analysis model has been used to evaluate the effect of changes in different variables, chasing the minimum cost of kWh, resulting from the sum of total investment plus operation and maintenance, over the amount of AC energy produced during the lifetime of the system. The model has been built based on variables like: solar radiation, nominal power of the system, average annual energy produced, average price of modules, import duties and transportation taxes, total cost of installation, operation and maintenance.
Systems average price by country - Power > 10 kWp
Euro/kWp
4000 3500 3000 2500 2000 Germany
Italy
France
Spain
Portugal
Fig. 4. Systems average price by country. Value in Euros.
USA
Total energy ¼
X
Annual energy ð1 annual decayÞði1Þ
i ¼ 1;.25
(2) Cost per kWh ¼ ½tot: investment þ annual operation & maintenance 25=Total energy
(3)
To calculate the total investment, the average European list price of modules has been charged with freight and insurance costs, calculated at 2.0% of the FOB value, and also charged with the import duties that have been calculated at 50.9% of the CIF value [25]. The product of the two values gives a total increase of 54% for freight, insurance and import duties. The total cost of modules has been doubled to account for the Balance of System e BoS e which corresponds roughly to 50% of the total cost of the system [26]. A second step in the investment analysis determines the conditions for the price decrement of modules, whose value may vary considerably, depending on the quantity purchased. The analysis of one vendor’s invoice has shown that the amount of discount, obtained for quantities of 13,000 modules having unit power of 230 Wp, could reach 21% from the list price; this value has been adopted as a possible discount when modules are purchased in large quantities attending many systems simultaneously. To complete the determination of the total cost of the system, the value of operation, insurance and maintenance has been calculated as 1% of initial cash out, on a yearly basis.
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The resulting cost per kWh has been used to compare with the grid and evaluate the price gap. The investor point of view has also been considered, defining what is needed to ensure an acceptable return on investment. The energy harvested must be sold to consumers using the channel represented by the grid. A minimum selling price should be determined to provide a fair return to the private investor, both in payback time and in return on investment; this selling price is named as Feed in Tariffs e FIT e and is paid by the Grid operator. Different system sizes demand different FIT values since the economy of scale on large sizes allows reduced production cost per watt; the model assumes that for systems with power bigger than 10 kWp the production cost per kWp may be reduced by 5% with respect to smaller systems and for systems with power greater than 100 kWp, the reduction could be 10%. The value of suggested FIT has been calculated iteratively, seeking for an internal return rate e IRR e that could compensate the willingness to invest by private investors: this value has been defined as 10.45% which corresponds to the cost of money of 9.5% e the Brazilian situation in 2010 e inflated by a minimum desirable return of 10%. With this value of IRR imposed, the FIT value has been calculated using the Modified Internal Return Rate formula, available with the Excel Spreadsheet. When comparing photovoltaic and coal-fired plants, other factors must be considered for a fair comparison between the two technologies: (1) the cost of energy produced by coal-fired plants should be proportionally incremented by the effect of externalities; (2) the cost of energy produced by PV systems should be decremented by the effect of transmission losses that do not exist in a decentralized system and by the revenues generated with sales of carbon credits. Carbon credits have been calculated using UNFCCC formulae [27e29]. The base line value considered for the year 2010 and informed by the Brazilian Ministry of Science and Technology [30] defines it as 0.163461 tons of CO2 per MWh of energy produced. Carbon credit value varies depending on market forces and the needs that large production companies have, to compensate their surplus emission of carbon dioxide; the value of V 13.59 has been used [31] to calculate the amount of these credits, taking into account that the PV generation is considered as having zero emission of carbon dioxide [29]. The selling price of energy to the industrial consumers in the state of Rio Grande do Sul, including taxes, is 17.45 dollar cents per kWh [32]. This value, without taxes, has four components: (1) generation, corresponding to 42% of the total; (2) transmission 11%; (3) distribution 37%; (4) contributions specific to the sector 10%. The value of components 2, 3, 4 totals 58% which represents 137.6% over the generation price e component 1. Taxes are calculated as 21% over the selling price or as 27.08% over the sum of components 1e4. The final multiplying factor over the generation price to obtain the selling price with taxes is 174.85%. We have assumed that the selling price of energy generated by PV farms, due to its decentralized nature, should not be charged with the transmission component, should be charged with only
Nominal Power [kWp] Average energy produced [kWh/year] Unitary installation cost [US$/kWp] Total installation cost [US$] Yearly maintenance cost [US$] Cost per kWh produced [US$]
187
25% of the distribution component and charged with all taxes specific to the sector. With this correction, the sum value of components 2e4 totals 19.1% and the burden, with taxes, on the photovoltaic generation price is reduced to 57.71%. 7. Seeking for parity with the grid In accordance with the methodology, the model described has been used to evaluate the cost of energy produced by PV systems with different power and size. Fig. 5 shows the results; prices of imported modules and inverters have been evaluated in Euros, using European average values [22]. The conversion to dollars has been made using a conversion rate of 1.317 Euros per dollar. As defined previously in the methodology, the selling price of energy from the grid is 17.45 dollar cents per kWh. When this energy is generated by coal-fired plants, the burden of externalities, defined as 39.3%, should be added increasing the price to 24.31 dollar cents. From the results shown in Fig. 5, the cost of energy produced by PV systems is 13.7 dollar cents, when the nominal power is more than 100 kWp. This value must be charged with distribution and taxes, corresponding to a total increase of 57.71%, as defined by the methodology, to determine the selling price. The PV price reaches 21.64 dollar cents per kWh, which is 24% higher than the Grid price, but 11% lower than the price corrected coal-fired energy. This interesting result must be considered when the decision is made for selecting the appropriate technology for expansion of the Grid. Moreover, the photovoltaic price is mostly affected by import taxes (54%) and the cost of money (9.5%). The financial reality of Brazil is a macro factor that cannot be easily changed, but as happens in other countries, some political action may and must be adopted to preserve the planet and support green energy. Photovoltaic technology needs support for an estimated 15e20 years, until it gains momentum and self support, due to economy of scale. Countries that have adopted such supporting measures are witnessing a strong consolidation in the complete production chain, which benefits local industry, human resources and energy generation. Citing Germany as an example, in 2007, approximately 40,000 people were working in the photovoltaic industry producing PV cells with a total capacity of 842 MW and 10,000 companies were active in the PV sector [33]. The top 10 markets sorted by power capacity that was installed in 2010, are listed in Fig. 6 that also exhibits the changes in the quantity of kWp connected to the grid in the last three years [34]. Incentives were the main leverage to these results. Incentives transform a system into an enterprise with a reduced risk, where the discounted payback is shorter than the system lifetime, and where revenues continue to add after the payback time, until the final obsolescence of the system. The FIT values paid by the grid operator to purchase the energy are the minimum values that will be attractive to investors.
3
10
100
4,193
13,176
132,324
4,326
3,875
3,629
12,978
38,749
362,926
130
387
3,629
0.155
0.147
0.137
Fig. 5. Energy cost with variable plant size; European average prices converted to Dollar.
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Country Germany Italy Czech Republic Japan USA France China Spain Australia Belgium
2008 1.992.000 338.000 49.000 225.295 338.000 105.000 20.000 2.708.000 22.010 76.900
2009
2010
3.806.700 717.000 411.000 482.976 464.500 250.000 160.000 17.000 83.140 488.396
7.390.922 2.319.000 1.151.000 990.979 918.000 719.000 400.000 392.000 383.300 357.860
Cumulative 17.294.000 3.500.000 1.616.000 3.618.144 2.549.000 1.025.000 650.000 3.807.000 570.930 948.699
Fig. 6. Top 10 solar markets, sorted by the capacity installed in 2010.
Fig. 7. Relationship between values of FIT and MTIR.
Fig. 7 shows graphically the relationship between the Modified Internal Return Rate (MTIR) and the FIT values for three systems with different power capacity. The lower limit of MTIR, defined as 9.5%, represents the threshold of no gain from an investor point of view; the upper limit of 10.45% represents a fair return on investment. The crossing point of every system’s curve with the desirable limit defines the amount of incentive in $/kWh that should be paid for that system to be viable. As a result of the cross point detection, the FIT values have been fixed to the values of 39.8, 37.8 and 35.8 dollar cents per kWh, respectively for systems with 3 kWp, 10 kWp and more than 100 kWp. 8. Conclusion Every new technology that grows up in the capitalist paradigm uses financial resources, endeavoring to obtain adequate return to investors. On the other hand, governments, searching for new solutions to the perennial needs of society, may find the involvement of private capital, with its flexibility and dynamic behavior, a good solution to promote fast and efficient action. The FIT model, in the case of photovoltaic energy generation, represents a way to deliver to the business sector the task of developing new
technology and at the same time, helping to inflate the market toward a condition of self-sustainability. While governments try to define which direction to choose and what innovation to support, science and industry must provide a set of indicators that are in line with society which expects more respect for the environment, health protection and less degradation of air and soil. The PV industry has shown a constant improvement on the grid parity and represents a possible alternative to other technologies, nonpolluting, decentralized, quickly installed and complementing established forms of electricity generation. Brazil highlights the two sides of the coin: the amount of insolation is favorable to an extended use of PV technology, but the capital costs and import taxes do not encourage entrepreneurial action, unless incentives are given to improve the return on investment. The model we used reveals that the present PV cost is still 24% higher than the grid price, but is 11% lower when compared to the coal-fired plants, when considering their systemic side effects, and comes with the additional benefits of being a decentralized system, less dependent on transmission and distribution lines, with the promise of development of a high tech industry generating jobs directly and indirectly.
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[17] Rüther R. Edifícios Solares Fotovoltaicos. Florianópolis: UFSC/Labsolar; 2004. [18] Resolution 395, Conformity to grid voltage values. 1st ed. ANEEL. Available from: www.aneel.gov.br; 2001 [accessed on September 15, 2011]. [19] Araujo ACM. Doctorate thesis. In: Perdas e Inadimplência na Atividade de Distribuição de Energia Elétrica no Brasil. 1st ed. Rio de Janeiro: UFRJ; 2007. [20] Moreira NJH. Geração Distribuída de Energia Elétrica. Perspectivas Energéticas, Econômicas e Ambientais. Presentation at the 4th international congress of bioenergy. ANEEL; August 2009. [21] Flavin C, Kitasei S. The role of natural gas in a low-carbon energy economy. Washington: Worldwatch Institute. Available from: www.worldwacth.org; 2010 [accessed on April 2010]. [22] PHOTON. Photon international. The Solar Power Magazine August 2011. [23] BP SOLAR. 3 series solar panels polycrystalline. Available from: www.bpsolar. us [accessed on June 2010]. [24] CRESESB. Centro de Referência para Energia Solar e Eólica Sergio de Salvo Brito, Potencial Energético Solar e SunData. Available from: www.cresesb. cepel.br [accessed on July 2010]. [25] Lacchini C. Photovoltaic energy in the national context. Master degree paper, Definition of a methodology for analysis, using fired-coal plants as a comparison. Canoas: ULBRA; 2011. [26] RMI. Achieving low-cost PV: industry workshop recommendations for nearterm balance of system cost reduction. Snowmass, Colorado: Rocky Mountain Institute; 2010. [27] UNFCCC. Approved baseline and monitoring methodologies. Available from: http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html [accessed on May 2010]. [28] UNFCCC. Tool to calculate the emission factor for an electricity system. Available from: http://cdm.unfccc.int/methodologies/SSCmethodologies/ approved.html [accessed on May 2010]. [29] UNFCCC. Grid connected renewable electricity generation, AMS ID version 16. Available from: http://cdm.unfccc.int/methodologies/SSCmethodologies/ approved.html [accessed on May 2010]. [30] Ministerio de Ciencias e Tecnologia. Fatores de Emissão de CO2 pela geração de energia elétrica no Sistema Interligado Nacional do Brasil. Brasília: MCT. Available from: www.mct.gov.br/index.php/content/view/72764.html [accessed on August 2010]. [31] POINT CARBON. Carbon market news service. Available from: http://www. pointcarbon.com/productsandservices/carbon/ [accessed on July 2010]. [32] CEEE. Distribuição: Custos e tarifas. Porto Alegre: CEEE. Available from: www. ceee.com.br/pportal/ceee/Component/Controller.aspx?CC¼1782 [accessed on September 2010]. [33] Salamoni I. Um programa residencial de telhados solares para o Brasil: diretrizes de política publicas. Doctorate thesis. Florianópolis: UFSC; 2009. [34] SOLARPLAZA. Top 10 world’s biggest PV markets. Available from: www. solarplaza.com [accessed on August 2011].
Contents lists available at SciVerse ScienceDirect
Renewable Energy journal homepage: www.elsevier.com/locate/renene
Photovoltaic energy generation in Brazil e Cost analysis using coal-fired power plants as comparison Corrado Lacchini*, João Carlos V. Dos Santos Graduate Program in Engineering: Energy, Environment and Materials (PPGEAM/PPGEMPS), Lutheran University of Brazil, 92425-900 e Canoas/RS, Brazil
a r t i c l e i n f o
a b s t r a c t
Article history: Received 6 October 2011 Accepted 1 October 2012 Available online 23 November 2012
We make a brief analysis of the evolution of photovoltaic systems, highlighting the present situation worldwide and in Brazil. We compare costs of energy generation associated to photovoltaic and to coalfired power plants. Coal-fired generation represents the eligible choice for the Brazilian State of Rio Grande do Sul, where thermal plants may use locally extracted coal. The production cost of the energy generated with coal is evaluated taking in account the effect of the invisible cost represented by externalities that affect human health. The price evolution of Photovoltaic modules is presented, as well as trends on decreasing costs for new installations. We also calculate the production cost of the AC energy generated by three photovoltaic plants, with different power, derived from a model. The model is used to make sensitive analysis based on the adjustment of some factors that directly affect Brazilian costs such as: insolation, module’s custom and transportation taxes, effect of economy of scale, cost of money. A cost comparison is made between the two technologies and some government incentives are proposed to narrow the existing financial gap. Ó 2012 Elsevier Ltd. All rights reserved.
Keywords: Photovoltaic system Hidden costs Externalities Feed in Tariffs
1. Introduction The ongoing development of society reveals its strong dependence on electrical energy to sustain the incremental increase of the annual Gross Domestic Product e GDP. Government planners face the simultaneous challenge of ensuring the sustainable use of natural resources, while providing the necessary conditions for the development of national society. The conversion of natural resources into energy generates collateral effects on the environment, represented by the huge stockpiling of unusable wastes and the diffusion of pollutants that have a profound effect on the quality of life. To avoid the rapid depletion of limited natural resources, the use of renewable sources should be pursued and among them the radiation that the sun delivers to the surface of earth. Many different ways exist for exploring the radiation of the sun; one of them is the photovoltaic technology that transforms the insolation directly into electrical energy with no pollutant effects. When seeking to compete with other established technologies, photovoltaics face the same competitive challenges, in the form of barriers, which must be overcome by any newcomer. Barriers may be political and economic, and the newcomer should formulate and * Corresponding author. Tel.: þ55 51 33381269. E-mail address: [email protected] (C. Lacchini). 0960-1481/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.renene.2012.10.033
propose some perceptible advantages to the prospective market. Photovoltaic technology involves relatively large initial investments and long payback times to recover the initial capital and does not have a record of affordability due to its relative novelty in the market. At this initial stage in its development, photovoltaics have not reached grid parity and the perceptible advantages rely mainly on its potential to support clean decentralized generation. To improve this situation, the governments of different countries worldwide, which believe in this technology and hope for beneficial side effects such as increased employment, provide economic support to the production chain, aiming to the point of selfsustainability where a mature market may guarantee the production flow. Approximately half of the 194 GW new electric capacity, added worldwide in 2010, was based on the use of renewable sources and, out of this, an estimated 17 GW may be attributed to photovoltaic generation, so that PV continued to be the fastest growing energy technology. With that increase, the total existing capacity, in 2010, reached 40 GW, more than 7 times that of five years earlier [1]. Electric energy generation is sustained by several sources, some of them renewables and others not. Fig. 1, which represents the situation in the United States, is a good example of past distribution of the main energy sources and the forecast for the year 2035 [2]. To satisfy energy hunger, coal emerges, therefore, as one of the preferred sources of natural fossil fuel and planners tend to
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billion kWh
Electricity generation by fuel, 2007, 2009 and 2035
2500 2000 1500
2007 2009
1000
2035 500 0 Coal
Natural gas
Nuclear
Renewables Petroleum
Fig. 1. Electricity generation in USA by fuel, past and future.
dedicate financial efforts, subsidies and political support, aiming toward the construction of new coal-fired plants. Unfortunately, some unwanted effects, named externalities, must be considered, since they weigh heavily on the final cost of energy. An analysis made in the United Sates by the National Research Council [3] highlights the costs of diseases linked to the pollutants emitted by the 406 coal-fired energy plants: the cost of medical procedures to recover from related health problems corresponds to 39% of the average cost of kWh to the end user. This is a surplus cost that society does not see but pays in taxes. Moreover, coal-fired plants are located close to the coal mines, to reduce the cost of transportation of raw material to the combustion plants and also the cost of its appropriate conditioning. Since such located coal-fired plants are installed far from the consuming centers, transmission lines are needed to make the energy available. Copper and aluminum conduits used to transmit the energy impede the passage of current, causing energy losses. Photovoltaic generation, on the other hand, is a relatively new technology which is making giant steps in reducing manufacturing costs, developing new materials, optimizing the efficiency of the conversion devices, both from solar to DC current and from DC to AC and to the grid. The great and fast expansion of the market has leveraged the expansion of production with economy of scale and according to Baillie [4], it is foreseen by many authors that the parity with the grid will be reached before the year 2020 in many different locations around the world. Brazil, a continental country, is favored by the existence of great rivers in its territory. In fact, the production mix for electricity generation in Brazil shows that approximately 71% is currently satisfied by renewables, primarily hydro generation small and large, while thermal accounts for approximately 27%. Table 1, updated to the year 2012 [5], shows the situation at the present time, later with the introduction of power plants under construction and in the future after planned construction.
From Table 1 one can see that the next stage will maintain the percentage of 69% for hydro, while thermal will almost remain stable going from 27% to 26%. In the future, hydro will decrease to 63% and thermal increase to almost 29%. Thermal will continue to represent the second biggest slice of the pie. As suggested by Fig. 1, countries with coal reserves assign a great importance to them, for energy production. Brazil’s coal reserves total 7 billion tons [6] concentrated in two states e Santa Catarina and Rio Grande do Sul, accounting respectively for 20 and 80% of the total Brazilian coal [7]. This amount corresponds to a lifeexpectancy of 400 years until its depletion given the present use for thermal fossil generation. Unfortunately, Brazilian coal is low quality, with a heating value of approximately 13,000 kJ/kg as compared to traditional coals used for electricity generation which have an approximate heating value bigger than 25,000 kJ/kg [6]. Despite this weakness, the Brazilian coal-fired plants are supported by the government for several reasons, among them the benefits provided to the social environment of the region and its progress. Support can be described as the purchase of energy at a premium value for some older plants, to equalize the cost of their energy. Among the different technologies presently used in Brazil for the generation of electricity, coal represents one of the highest costs as will be outlined in Fig. 2. Worldwide, PV has the highest cost and it is worth comparing it with coal technology, which, not considering hydro, could be regarded as preferable for Rio Grande do Sul. Besides that, there are two reasons for comparing PV and Coal technologies: a by demonstrating that PV is cheaper than coal, it could be considered as a valid alternative to gas fuel cells, nuclear and coal itself, as shown in Fig. 2; b if it is sound to economically support coal for political reasons, the same could be true for PV which is a fast growing new technology with real possibilities both technically and financially to improve its position toward parity. Other technologies related to renewable sources like Biomass, Wind, Tidal are in their early stages of development and show-up as alternatives for future energy needs. Not discounting the merits of these technologies, this paper focuses on the PV alternative. 2. The potentiality of coal plants and their negative effects Depletion of natural resources, considering the present usage pace, is predicted to happen in a few decades, taking into account that petrol and gas are primarily used for transportation and industrial use [8]. Coal reserves already mapped have an estimated period of availability of 130 years, not considering possible unknown reserves [9] and taking into account the present annual
Table 1 Electricity generation in Brazil per type e present, next and future. Generation type
Present generation
Next generation
Future generation
MW
%
MW
%
MW
%
66.33% 8.16% 17.74% 1.26% 3.43% 1.68% 1.39% 0.00%
18.283 863 4.862 13 578 1.350 1.480
66.66% 3.14% 17.73% 0.05% 2.11% 4.92% 5.40% 0.00%
2.568 1.860 8.043 67 1.822
12.41% 8.99% 38.86% 0.32% 8.80% 0.00% 30.61% 0.00%
Hydro large 79.136 Thermal biomass 9.736 Thermal fossil 21.167 Thermal other 1.505 Hydro small 4.095 Nuclear 2.007 Wind 1.658 Photovoltaic 1 Total 119.305
27.428
6.335 20.695
Fig. 2. Cost comparison between different production technologies.
C. Lacchini, J.C.V. Dos Santos / Renewable Energy 52 (2013) 183e189
extraction pace. A collateral problem, which is connected to the burning process, is the emission of Green House Gases e GHG, which pollute the air, besides contributing to the increase of global temperature. Technology is keeping pace with the production process and different alternatives are made available to remove from coal all the potential polluting components that could be emitted before and during the burning process. On the other hand, fossil burning plants have a useful life of about 30e40 years [10] and the probability that one plant may be updated during its operative life is affected by the consideration that every plant is designed for a specific process and existing contractual clauses impose continuity and delivery assurance. 3. The photovoltaic alternative As an alternative to coal, the sun is an endless source of energy, at no cost, with no foreseeable depletion time. It is hard to find negative effects in this energy generation process, at least in the pollution side effect. The installations of solar plants require areas exposed to solar light and follow two main different paths: (1) use of the structures of residential, commercial, or industrial buildings, covering their roof tops or side walls to expose and hold up the solar modules; (2) use of available lands, degraded or not available for agriculture, in the proximity of medium to high scale users. In both cases, solar modules and inverters, during their average estimated lifetime of 25 years [11e13], do not require heavy maintenance aside from surface cleaning, checking connectors and cables, vandalism correction and the substitution of parts due to mechanical damage. When the photovoltaic industry started in 1954, with solar cells produced by the Bell Labs in the United States, the technology was based on crystal silicon. Today other materials are being used covering different market shares as highlighted in Table 2 updated to the year 2010 [14,15]. Solar cells are connected to form modules with power capacity that may range from 100 to 250 W. Capacity is measured in what is called Standard Test Conditions (STC) which correspond to 1.000 W/m2 irradiance, AM 1.5 solar spectrum and 25 C module temperature. Module efficiency may range from 10% to 20% depending on the technology under consideration e CIGS, CdTe, Amorphous Silicon Thin Film, Crystalline Silicon (c-Si), tandem junctions cells e and also depending on the conversion techniques that focus on minimization of contact areas [16]. The Thin Film technology has the advantage of using smaller amounts of energy and raw material in the production phase; these two characteristics justify production costs 50% lower, per area, than those for c-Si [17]. Besides, amorphous silicon, when deposited as thin film, maintains its power capacity with the increase of operational temperature; this is an important characteristic if one considers that when the insolation is maximum, forcing a higher consumption of energy by air conditioning systems, the module’s temperature also reaches its maximum [17]. Photovoltaic plants may be stand-alone or grid connected. In the latter case, the power injected into the line must be produced with the correct voltage and frequency characteristics. Inverters, connected to the modules, adapt their output to the variable power Table 2 Market deliveries by technology in 2009 and 2010. Technology
2009
2010
Mono and polycrystalline silicon Thin film (amorphous silicon, cadmium telluride and CIGS) Total MWp
83% 17%
87% 13%
7.900
16.000
185
which photovoltaic modules harvest from the inconstant energy irradiated from the sun. Depending on the plant’s total power, the connection to the grid may be made at low (less than 1 kV), intermediate (from 1 kV to less than 69 kV), or high voltage (equal or bigger than 69 kV) [18], complementing the power available in the existing transmission lines. With this strategy the energy losses of transmission lines, the value of which can be estimated at 10% [19], are minimized. 4. Costs associated with thermal energy generation Although thermal electric plants show different values of generation costs, it is normal to consider them as if they were all equal. This is the case for the Brazilian state of Rio Grande do Sul, responsible for more than 80% of the total Brazilian coal production, in which five different coal-fired power plants operate with raw material whose cost may vary five times from one location to the other. The weighted average cost is between 8.1 and 10.0 ¢$/kWh [20], considering the currency exchange rate of the Brazilian Real (R$) to the dollar of 1.6 R$/$. This cost takes into account raw material, cost of investment diluted in the time frame of the concession contract, operation and maintenance, replacement of worn equipment and profits. Fig. 2 shows a comparison between different thermal technologies and their cost components; solar PV is included [21]. Apart from the values shown in Fig. 2, other costs must be considered to create the correct perspective of the real cost of energy. Research conducted by the National Academy of United States [3] substantiates the so-called externalities, secondary effects linked to the production process in coal plants. These byproducts, mainly originated by air pollution, include: particulate matter (fine particles with a dimension of less than 10 microns), sulfuric dioxide (SO2) and nitrogen oxide (NOx). Externalities mainly affect human health causing premature mortality and morbidity. One way to evaluate externalities is to quantify pollutant concentrations with the consequences of exposition and associate them to monetary values. These monetary values estimate the amount of money that the market e the general population e would be willing to pay to avoid the negative effects of pollutants. Damages, originating from externalities associated with 406 coal plants generating electricity in the United States in 2005, were calculated at 62 Billion dollars. Diluting this value over the total energy generated by those plants, the average value of damages was 3.2 cents per kWh [3] and when compared to the cost of electricity in the same year e 8.14 cents per kWh e the hidden cost should increase the total to 39.3% [3], totalizing 11.34 cents per kWh. 5. Costs associated with PV generation The costs of PV generation have decreased steadily as a result of continued technological development and market expansion, which allow economy of scale, supported by vigorous governmental programs. Government action in European countries, the United States, Japan and others are also based on the pressure of society requesting urgent action to correct the alarming degeneration of the habitat and the continuous increase of worldwide average temperature. PV price evolution has shown an almost constant negative slope as highlighted in Fig. 3, showing the weighted average selling price [15] and its exponential tendency curve. Brazil is in its infancy stage with respect to PV generation. Several small projects, especially in universities, are preparing
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Expon. (Wheighted average)
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Price (US$ / Wp)
Wheighted average
10 9 8 7 6 5 4 3 2 1 0
Year Fig. 3. PV selling price evolution and tendency for future years.
human resources for this technology that inevitably will find its place in the country. Projections made by the Ministry of Mines and Energy in 2005 [20], valued the cost of PV energy between 0.58 and 1.16 Dollars per kWh by 2015. This value, if compared to the trend line in Fig. 3, may be considered as being optimistic. As a matter of fact, the PV market is subject to variables that are difficult to control. As an example, research carried out by Photon International magazine [22] has collected prices for complete systems in different countries showing great divergence as seen in Fig. 4. Prices are in Euros per kWp for systems with power bigger than 10 kWp. Brazil does not have a strong database for PV systems; therefore mathematical models must be used to infer the costs of PV installations, with different power, based on imported components and considering the Brazilian economic and financial situation.
The amount of energy produced every year, for 25 years, has been discounted by the following factors: (1) yearly decay of 0.64% on production yield, due to modules aging [23]; (2) overall system performance factor, DC to AC, estimated at 80% and based on two groups of factors: (a) the variability of module power, the uncertainty of solar radiation subject to weather conditions, the voltage drop on module and inverter wiring and connectors and (b) the efficiency of the inverters and transformers; (3) yearly average daily radiation considered as 4.81 kWh/m2/day, for the Brazilian state of Rio Grande do Sul [24]. The unitary cost of energy may then be calculated using Eqs. (1)e(3).
Annual energy ¼ avg: daily radiation 365 mod: efficiency tot: area syst: performance (1)
6. Methodology The analysis model has been used to evaluate the effect of changes in different variables, chasing the minimum cost of kWh, resulting from the sum of total investment plus operation and maintenance, over the amount of AC energy produced during the lifetime of the system. The model has been built based on variables like: solar radiation, nominal power of the system, average annual energy produced, average price of modules, import duties and transportation taxes, total cost of installation, operation and maintenance.
Systems average price by country - Power > 10 kWp
Euro/kWp
4000 3500 3000 2500 2000 Germany
Italy
France
Spain
Portugal
Fig. 4. Systems average price by country. Value in Euros.
USA
Total energy ¼
X
Annual energy ð1 annual decayÞði1Þ
i ¼ 1;.25
(2) Cost per kWh ¼ ½tot: investment þ annual operation & maintenance 25=Total energy
(3)
To calculate the total investment, the average European list price of modules has been charged with freight and insurance costs, calculated at 2.0% of the FOB value, and also charged with the import duties that have been calculated at 50.9% of the CIF value [25]. The product of the two values gives a total increase of 54% for freight, insurance and import duties. The total cost of modules has been doubled to account for the Balance of System e BoS e which corresponds roughly to 50% of the total cost of the system [26]. A second step in the investment analysis determines the conditions for the price decrement of modules, whose value may vary considerably, depending on the quantity purchased. The analysis of one vendor’s invoice has shown that the amount of discount, obtained for quantities of 13,000 modules having unit power of 230 Wp, could reach 21% from the list price; this value has been adopted as a possible discount when modules are purchased in large quantities attending many systems simultaneously. To complete the determination of the total cost of the system, the value of operation, insurance and maintenance has been calculated as 1% of initial cash out, on a yearly basis.
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The resulting cost per kWh has been used to compare with the grid and evaluate the price gap. The investor point of view has also been considered, defining what is needed to ensure an acceptable return on investment. The energy harvested must be sold to consumers using the channel represented by the grid. A minimum selling price should be determined to provide a fair return to the private investor, both in payback time and in return on investment; this selling price is named as Feed in Tariffs e FIT e and is paid by the Grid operator. Different system sizes demand different FIT values since the economy of scale on large sizes allows reduced production cost per watt; the model assumes that for systems with power bigger than 10 kWp the production cost per kWp may be reduced by 5% with respect to smaller systems and for systems with power greater than 100 kWp, the reduction could be 10%. The value of suggested FIT has been calculated iteratively, seeking for an internal return rate e IRR e that could compensate the willingness to invest by private investors: this value has been defined as 10.45% which corresponds to the cost of money of 9.5% e the Brazilian situation in 2010 e inflated by a minimum desirable return of 10%. With this value of IRR imposed, the FIT value has been calculated using the Modified Internal Return Rate formula, available with the Excel Spreadsheet. When comparing photovoltaic and coal-fired plants, other factors must be considered for a fair comparison between the two technologies: (1) the cost of energy produced by coal-fired plants should be proportionally incremented by the effect of externalities; (2) the cost of energy produced by PV systems should be decremented by the effect of transmission losses that do not exist in a decentralized system and by the revenues generated with sales of carbon credits. Carbon credits have been calculated using UNFCCC formulae [27e29]. The base line value considered for the year 2010 and informed by the Brazilian Ministry of Science and Technology [30] defines it as 0.163461 tons of CO2 per MWh of energy produced. Carbon credit value varies depending on market forces and the needs that large production companies have, to compensate their surplus emission of carbon dioxide; the value of V 13.59 has been used [31] to calculate the amount of these credits, taking into account that the PV generation is considered as having zero emission of carbon dioxide [29]. The selling price of energy to the industrial consumers in the state of Rio Grande do Sul, including taxes, is 17.45 dollar cents per kWh [32]. This value, without taxes, has four components: (1) generation, corresponding to 42% of the total; (2) transmission 11%; (3) distribution 37%; (4) contributions specific to the sector 10%. The value of components 2, 3, 4 totals 58% which represents 137.6% over the generation price e component 1. Taxes are calculated as 21% over the selling price or as 27.08% over the sum of components 1e4. The final multiplying factor over the generation price to obtain the selling price with taxes is 174.85%. We have assumed that the selling price of energy generated by PV farms, due to its decentralized nature, should not be charged with the transmission component, should be charged with only
Nominal Power [kWp] Average energy produced [kWh/year] Unitary installation cost [US$/kWp] Total installation cost [US$] Yearly maintenance cost [US$] Cost per kWh produced [US$]
187
25% of the distribution component and charged with all taxes specific to the sector. With this correction, the sum value of components 2e4 totals 19.1% and the burden, with taxes, on the photovoltaic generation price is reduced to 57.71%. 7. Seeking for parity with the grid In accordance with the methodology, the model described has been used to evaluate the cost of energy produced by PV systems with different power and size. Fig. 5 shows the results; prices of imported modules and inverters have been evaluated in Euros, using European average values [22]. The conversion to dollars has been made using a conversion rate of 1.317 Euros per dollar. As defined previously in the methodology, the selling price of energy from the grid is 17.45 dollar cents per kWh. When this energy is generated by coal-fired plants, the burden of externalities, defined as 39.3%, should be added increasing the price to 24.31 dollar cents. From the results shown in Fig. 5, the cost of energy produced by PV systems is 13.7 dollar cents, when the nominal power is more than 100 kWp. This value must be charged with distribution and taxes, corresponding to a total increase of 57.71%, as defined by the methodology, to determine the selling price. The PV price reaches 21.64 dollar cents per kWh, which is 24% higher than the Grid price, but 11% lower than the price corrected coal-fired energy. This interesting result must be considered when the decision is made for selecting the appropriate technology for expansion of the Grid. Moreover, the photovoltaic price is mostly affected by import taxes (54%) and the cost of money (9.5%). The financial reality of Brazil is a macro factor that cannot be easily changed, but as happens in other countries, some political action may and must be adopted to preserve the planet and support green energy. Photovoltaic technology needs support for an estimated 15e20 years, until it gains momentum and self support, due to economy of scale. Countries that have adopted such supporting measures are witnessing a strong consolidation in the complete production chain, which benefits local industry, human resources and energy generation. Citing Germany as an example, in 2007, approximately 40,000 people were working in the photovoltaic industry producing PV cells with a total capacity of 842 MW and 10,000 companies were active in the PV sector [33]. The top 10 markets sorted by power capacity that was installed in 2010, are listed in Fig. 6 that also exhibits the changes in the quantity of kWp connected to the grid in the last three years [34]. Incentives were the main leverage to these results. Incentives transform a system into an enterprise with a reduced risk, where the discounted payback is shorter than the system lifetime, and where revenues continue to add after the payback time, until the final obsolescence of the system. The FIT values paid by the grid operator to purchase the energy are the minimum values that will be attractive to investors.
3
10
100
4,193
13,176
132,324
4,326
3,875
3,629
12,978
38,749
362,926
130
387
3,629
0.155
0.147
0.137
Fig. 5. Energy cost with variable plant size; European average prices converted to Dollar.
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Country Germany Italy Czech Republic Japan USA France China Spain Australia Belgium
2008 1.992.000 338.000 49.000 225.295 338.000 105.000 20.000 2.708.000 22.010 76.900
2009
2010
3.806.700 717.000 411.000 482.976 464.500 250.000 160.000 17.000 83.140 488.396
7.390.922 2.319.000 1.151.000 990.979 918.000 719.000 400.000 392.000 383.300 357.860
Cumulative 17.294.000 3.500.000 1.616.000 3.618.144 2.549.000 1.025.000 650.000 3.807.000 570.930 948.699
Fig. 6. Top 10 solar markets, sorted by the capacity installed in 2010.
Fig. 7. Relationship between values of FIT and MTIR.
Fig. 7 shows graphically the relationship between the Modified Internal Return Rate (MTIR) and the FIT values for three systems with different power capacity. The lower limit of MTIR, defined as 9.5%, represents the threshold of no gain from an investor point of view; the upper limit of 10.45% represents a fair return on investment. The crossing point of every system’s curve with the desirable limit defines the amount of incentive in $/kWh that should be paid for that system to be viable. As a result of the cross point detection, the FIT values have been fixed to the values of 39.8, 37.8 and 35.8 dollar cents per kWh, respectively for systems with 3 kWp, 10 kWp and more than 100 kWp. 8. Conclusion Every new technology that grows up in the capitalist paradigm uses financial resources, endeavoring to obtain adequate return to investors. On the other hand, governments, searching for new solutions to the perennial needs of society, may find the involvement of private capital, with its flexibility and dynamic behavior, a good solution to promote fast and efficient action. The FIT model, in the case of photovoltaic energy generation, represents a way to deliver to the business sector the task of developing new
technology and at the same time, helping to inflate the market toward a condition of self-sustainability. While governments try to define which direction to choose and what innovation to support, science and industry must provide a set of indicators that are in line with society which expects more respect for the environment, health protection and less degradation of air and soil. The PV industry has shown a constant improvement on the grid parity and represents a possible alternative to other technologies, nonpolluting, decentralized, quickly installed and complementing established forms of electricity generation. Brazil highlights the two sides of the coin: the amount of insolation is favorable to an extended use of PV technology, but the capital costs and import taxes do not encourage entrepreneurial action, unless incentives are given to improve the return on investment. The model we used reveals that the present PV cost is still 24% higher than the grid price, but is 11% lower when compared to the coal-fired plants, when considering their systemic side effects, and comes with the additional benefits of being a decentralized system, less dependent on transmission and distribution lines, with the promise of development of a high tech industry generating jobs directly and indirectly.
C. Lacchini, J.C.V. Dos Santos / Renewable Energy 52 (2013) 183e189
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