The energy subsidisation policies of Cyprus and their effect on renewable energy systems economics

Renewable Energy 28 (2003) 1711–1728 www.elsevier.com/locate/renene

The energy subsidisation policies of Cyprus and their effect on renewable energy systems economics Soteris A. Kalogirou ∗ Mechanical Engineering Department, Higher Technical Institute, P.O. Box 20423, Nicosia, Cyprus Received 20 September 2002; accepted 8 February 2003

Abstract In this paper, the energy subsidisation policies that are in effect in Cyprus are investigated with respect to their effect on renewable energy systems economics. Two subsidisation policies are investigated, those of renewable energy and fuels. These are contradictory, as one is in favour and the other is against the exploitation of renewable energies on the island, which is the declared Government policy. First, the policy measures are described and their effect on the economic viability of a solar system is investigated by means of an example. This concerns a solar industrial process heat system for which four types of collectors are considered. From the results presented it is clear that renewable energy subsidies create a positive impulse on renewable energies whereas the economic factors improve considerably when the subsidy for fuel is removed, as the expenditure made for the erection of a solar system replaces a more expensive fuel.  2003 Elsevier Science Ltd. All rights reserved. Keywords: Renewable energy subsidisation; Fuel subsidisation; Industrial process heat; Economics

1. Introduction Use of renewable energy and the price of fuels are two opposing factors of the energy structure of any country, especially when both are subsidised. The amount of money given as grant for the erection of a cost-effective renewable energy system and the price set for fuels determines the economic viability of renewable energy ∗

Tel.: +357-22406466; fax: +357-22494953. E-mail address: [email protected] (S.A. Kalogirou).

0960-1481/03/$ - see front matter  2003 Elsevier Science Ltd. All rights reserved. doi:10.1016/S0960-1481(03)00062-4

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Nomenclature ao a1 A bo C Ca Cf Co cp Cs Cv FR G Gtest kat Mj n Qaux Qload Qloss Qrel Qu Ta Ti UA UL V

slope of collector performance curve (m2 °C/W) intercept of collector performance curve collector aperture area (m2) constant of incident angle modifier equation total annual cost (C£) collector area dependent cost (C£/m2) collector area independent cost (C£) operation cost (C£) specific heat capacity (J/kg °C) collector investment cost (C£) cost of storage per m3 of storage volume (C£/m3) heat removal factor global solar radiation (W/m2) flow rate per unit area at test conditions (kg/s-m2) incidence angle modifier mass of fluid in pipe segment j (kg) efficiency the annual auxiliary energy required (kJ) the annual energy required by the load (kJ) the annual energy lost from the storage tank and pipes (kJ) the annual energy relieved from the relief valve (kJ) rate of useful energy (W) ambient temperature (°C) collector inlet temperature (°C) overall loss conductance (W/°C) heat loss coefficient (W/m2°C) storage tank volume (m3)

Greeks ⌬T q ta

temperature difference (Ti⫺Ta) incidence angle (degrees) transmittance-absorptance product

Abbreviations AFP CPC CTC

advanced flat-plate compound parabolic collector cylindrical trough collector

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ETC FPC FLC HFC LCS LFO PDR PTC TI TMY

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evacuated tube collector flat-plate collector fresnel lens collector heliostat field collector life cycle savings fight fuel oil parabolic dish reflector parabolic trough collector transparent insulation typical meteorological year

systems, which is very sensitive to the policy of a country with respect to subsidies. It is therefore very important to investigate the issue of subsidies in the broadened sense of the penetration aimed for renewables. In this paper, the policy of the Government of Cyprus with respect of subsidies offered to the renewable industry, and the fuel subsidies that are in effect for many years, are investigated through the example of an industrial process heat system. Cyprus is the third largest island in the Mediterranean with an area of 9251 km2 and a population of about 650,000. It is located at the Eastern Mediterranean at 35° north. Cyprus has no natural oil resources and relies entirely on imported fuel for its energy demands. The only natural energy resource available is solar energy. The climatic conditions of Cyprus are predominantly very sunny with daily average solar radiation of about 5.4 kWh/m2 on a horizontal surface. In the lowlands, the daily sunshine duration varies from 5.5 h in winter to about 12.5 h in summer. On the mountains, the cloudiest winter months receive an average of 4 h of bright sunshine per day whereas in July this figure reaches 12 h. Mean daily global solar radiation varies from about 2.3 kWh/m2 in the cloudiest months of the year, December and January, to about 7.2 kWh/m2 in July [1]. Statistical analysis shows that all parts of Cyprus enjoy a very sunny climate. The amount of global radiation falling on a horizontal surface with average weather conditions is 1727 kWh/m2 per year [2]. Of this amount, 69.4% reaches the surface as direct radiation (1199 kWh/m2) and the rest, 30.6%, as diffuse radiation (528 kWh/m2). The energy consumption in Cyprus is predominantly oil based. The only other form of commercial energy used is coal, which is used at times for cement production, when its price is competitive to that of heavy oil. Due to the developmental nature of the economy of Cyprus, energy consumption during the last 10 years is increasing at an average annual rate of about 6.9%, which is approximately equal to the rate of increase of the Gross National Product [3]. Cyprus has no natural energy sources except solar energy, the use of which at present covers about 4.5% of the total annual energy requirements. Furthermore, it contributes to a reduction in the atmospheric pollution by approximately 260,000 t of CO2 per year [4]. A few years ago, this figure was 6.5%. The drop in the contri-

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bution is due to the increase in fuel consumption and not due to the lower solar contribution. The increase of fuel consumption is due to the increase of the standard of living, the increase in the number of tourists (most of them rent cars during their stay on the island), and electricity spent for the two large reverse osmosis desalination plants put in operation recently. The energy consumption of various sectors of the economy in tons of oil equivalent (TOE), in terms of type of energy consumed, is shown in Table 1 [5]. This table shows that the agricultural and transport sectors have a low demand for electricity whereas the transport sector is the predominant consumer of fuel oil. The commercial and industrial sectors use primarily fuel oil, mainly for heating purposes and electricity. In the domestic sector, there is an even balance of requirement from the three types of fuels investigated. Solar energy is used almost exclusively (93.5%) by the domestic sector for hot water production. Given Cyprus’ strong dependence on imported energy, the future energy policies of the Government involve further promotion of modern energy technologies and equipment for rational use of energy, maximum exploitation of renewable energy sources and the probable use of clean coal technologies. The low population, the almost exclusive reliance on oil for energy needs, the relatively high cost of electricity, the reasonably high level of technology available in the island, and the population’s acceptance of solar energy make the renewable energy options in Cyprus extremely viable from a technical, social and economic point of view. Compared to other Mediterranean countries and the European Union, Cyprus is in a very good position with respect to the exploitation of solar energy. The estimated park of flat plate solar collectors in working order is 560,000 m2, which corresponds to approximately 0.86 m2 per inhabitant as compared to 0.56 and 0.2 for Israel and Greece respectively (see Fig. 1). The abundance of solar radiation together with a good technological base, has created favourable conditions for the exploitation of solar energy in the island. Cyprus began manufacturing solar water heaters in the early sixties. The number of units in operation today corresponds to one heater for every 3.7 people in the island, which is a world record [3]. Table 1 Energy consumption by different sectors of the economy for 1994 Sector Agricultural Commercial Domestic Industrial Transport Total a

Fuel oil (TOE)a 64,104 107,432 63,612 124,476 611,955 971,579

TOE = tons of oil equivalent = 41.8 GJ.

Electricity (TOE)

Solar (TOE)

5,289 63,859 58,055 38,788 8,727 174,718

— 5,660 80,820 — — 86,480

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Fig. 1.

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Installed flat plate solar collector area per inhabitant, 1994.

Despite the success in solar water heating for domestic applications, there is no commercial application of industrial process heat in Cyprus due to the ‘chicken and egg’ theory, i.e., no entrepreneur will invest in research and development without a sizeable market, and there is no sizeable market until low-cost, proven technology units are available. Perhaps only Government or aid agencies could break this deadlock through renewable energy subsidies. The main cause of this is the uncertainty of the costs involved and of the expected benefits. Therefore, the purpose of this paper is by means of an example to analyse a solar industrial process heat system and examine its financial viability by considering the effect of both renewable energy and fuels subsidies.

2. Subsidisation policies Two such policies affect the economic viability of renewable energy systems namely; renewable energy subsidisation and fuel subsidisation. These are described in this section. Under the policy for the promotion of high technology industries in Cyprus, operated under the Ministry of Commerce, Industry and Tourism, an energy conservation scheme exists. The aim of the scheme is to provide financial incentives in the form of Governmental grants for the materialisation of investments in the field of energy conservation and for the substitution of electrical energy and conventional fuels with renewable energy sources. The beneficiaries are existing enterprises, which operate in the sectors of manufacturing industry, hotels and agriculture. The investments covered by the scheme are those related to energy conservation such as the purchase and installation of new equipment for the recovery of waste energy, the replacement and/or introduction of new materials and equipment for the reduction of energy consumption and energy losses, and the substitution of electrical energy or conventional fuels with renewable energy sources. The grant amount is set at 30% of the total investment cost, with the maximum

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grant not exceeding C£30,0001. For the grant to be approved, interested enterprises should submit to the ministry an application accompanied, where necessary, by an energy audit or/and a techno-economic study. The grant is provided after the installation and operation of the system in question, provided a certificate from an approved energy auditor or consultant is presented certifying that the installed system achieves the indicated percentage of energy conservation or energy production from renewable energy sources, as appropriate, specified in the relevant study. In case of permanent shut down or ineffective operation of the installed system, the percentage of grant for which amortisation has not been made, should be returned to the Government. The price of fuels is determined by the barrel price of oil in the international markets. The present price of the diesel is C£ 0.171/l. However, the present price of the diesel in Cyprus is subsidised by the price of the petrol, which is now C£ 0.461/l. This situation is due to change very soon and diesel is going to be sold at a ‘balanced’ price compared with petrol. A new minimum price of C£ 0.28/l is assumed in the economic analysis. The effect that these two policies have on the economic viability of renewable energy systems is investigated by means of an industrial process heat (IPH) system example. This example is chosen as it is the opinion of the author that this sector of the economy has very good prospects of using renewable energy.

3. Solar industrial process heat system description The central system for heat supply in most factories uses hot water or steam at a pressure corresponding to the highest temperature needed in the different processes. Typical maximum temperatures are about 180–260 °C. Hot water or low pressure steam at medium temperatures (⬍150 °C) can be used either for preheating of water (or other fluids) used for processes (washing, dyeing, etc.), or for steam generation or by direct coupling of the solar system to an individual process working at temperatures lower than that of the central steam supply (Fig. 2). In the case of water preheat-

Fig. 2.

1

Possibilities of combining the solar system with the existing heat supply.

In September 2002 1C£= 1.73.

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ing, higher efficiencies are obtained due to the low input temperature to the solar system, thus low-technology collectors can work effectively and the required load supply temperature has no or little effect on the performance of the solar system. The system needs to be pressurised in order to allow storage at temperatures higher than 100 °C. A diagram of the solar system is shown in Fig. 3. The system consists of an array of collectors, a circulating pump and a storage tank. It includes also the necessary controls and thermal relief valve, which relieves energy when storage tank temperature is above a preset value. The system is once-through, i.e., there is no hot water return to storage, which is what usually happens in many industrial applications, thus the used hot water is replaced by mains water. Mean monthly ground temperature values are used for the mains water temperature in simulations. When the temperature of the stored water is above the required process temperature, this is mixed with mains water to obtain the required temperature. If no water of adequate temperature is available in the storage tank, its temperature is topped-up with an auxiliary heater before use. The basic system considered is one where 2000 kg/h of hot water are used at a temperature of 90 °C (load). The load is required for the first three quarters of each hour. The industry is assumed to work on a single shift basis from 8.00 to 16.00. For the modelling and simulation of the system the well-known program TRNSYS is employed [6]. The optimum collector area, storage tank volume and life cycle savings of the various collector types considered are estimated. A summary of the characteristics of the basic system is shown in Table 2.

4. Characteristics of solar collector types considered A large number of solar collectors are available in the market. A comprehensive list is shown in Table 3. However not all collector types presented in Table 3 are

Fig. 3. Schematic diagram of the solar collector system.

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Table 2 Characteristics of the basic system Parameter

Value/type

Load temperature Load flow rate Use pattern

90 °C 2,000 l/h 5 days a week, 8.00–16.00 hours each day, load used for the first 3/4 of each hour 30 m 20 W/°C 100 °C

Collector to storage distance Piping UA value Relief valve set temperature

suitable for process heat applications as some of them, like the two-axes tracking collectors, are employed for high temperature applications as in power stations. There are two major types of collectors that can be applied for industrial process heat, non-tracking (stationary) collectors and one-axis sun-tracking parabolic trough collectors (PTCs). Only stationary collectors are considered in the present work as follows: 1. Flat plate collectors (FPC) 2. Stationary compound parabolic collectors (CPC) 3. Evacuated tube collectors (ETC) FPCs are by far the most used type of collector. When solar radiation passes through a transparent cover and impinges on the blackened absorber surface of high absorptivity, a large portion of this energy is absorbed by the plate and then transferred to the transport medium in the fluid tubes to be carried away for storage or use. The underside of the absorber plate and the side of casing are well insulated to reduce conduction losses. The operation of the collector depends, to a great extent, on the way the riser tubes are fixed on the absorbing plate. They can be welded to the absorbing plate, or they can be an integral part of the plate. Due to the introduction of highly selective coatings, actual standard flat plate collectors can reach stagnation temperatures of more than 200 °C. With these collectors good efficiencies can be obtained up to temperatures of 100 °C. FPCs are usually permanently fixed in position and require no tracking of the sun. The collectors should be oriented directly towards the equator, facing south in the northern hemisphere and north in the southern. The optimum tilt angle of the collector is equal to the latitude of the location with angle variations of 10–15° depending on the application. The characteristics of the FPC considered in this study are shown in Table 4. Recently, some modern manufacturing techniques have been introduced in the industry such as the use of ultrasonic welding machines, which improve both the speed and the quality of welds. This is used for the welding of risers on fins in order to improve heat conduction. The greatest advantage of this method is that the welding is performed at room temperature thus avoiding deformation of the welded parts.

Flat plate collector (FPC) Evacuated tube collector (ETC) Compound parabolic collector (CPC)

Stationary

Fresnel lens collector (FLC) Parabolic trough collector (PTC) Cylindrical trough collector (CTC) Two-axes tracking Parabolic dish reflector (PDR) Heliostat field collector (HFC)

Single-axis tracking

Collector type

Motion

Table 3 Solar energy collectors

Tubular Tubular Tubular Point Point

Flat Flat Tubular

Absorber type

1 1 1–5 5–15 10–40 15–45 10–50 100–1,000 100–1,500

Concentration ratio

30–80 50–200 60–240 60–300 60–250 60–300 60–300 100–500 150–2,000

Indicative temperature range (°C)

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Table 4 Characteristics of the flat plate collector (FPC) system Parameter

Value

Fixing of risers on the absorber plate Absorber coating Glazing Efficiency mode Gtest—flow rate per unit area at test conditions (kg/s-m2) ao—intercept efficiency a1—negative of the first-order coefficient of the efficiency (W/m2 °C) bo—incidence angle modifier constant Collector slope angle

Embedded Black mat paint Low-iron glass n vs (Ti ⫺Ta)/G 0.015 0.79 6.67 0.1 40°

These collectors are called advance flat plate (AFP) collectors and the characteristics of the type considered in this study are shown in Table 5. Compound parabolic collectors (CPC) are non-imaging concentrators and when a low concentration ratio (up to about 2, corresponding to an acceptance half angle of 30°) is used these collectors can be stationary. A CPC concentrator can be orientated with its long axis along either the north–south or the east–west direction and its aperture is tilted directly towards the equator. When orientated along the north– south direction the collector must track the sun by turning its axis in order to face the sun continuously. As the acceptance angle of the concentrator along its long axis is wide, seasonal tilt adjustment is not necessary. It can also be stationary but radiation will only be received during the hours when the sun is within the collector acceptance angle. The characteristics of the CPC considered in this study are shown in Table 6. The benefits of FPCs are greatly reduced when conditions become unfavourable during cold, cloudy and windy days. ETCs consist of a heat pipe inside a vacuumTable 5 Characteristics of the advanced flat plate (AFP) collector system Parameter

Value

Fixing of risers on the absorber plate Absorber coating Glazing Efficiency mode Gtest—flow rate per unit area at test conditions (kg/s-m2) ao—intercept efficiency a1—negative of the first-order coefficient of the efficiency (W/m2 °C) bo—incidence angle modifier constant Collector slope angle

Ultrasonically welded Chromium selective coating Low-iron glass n vs (Ti ⫺Ta)/G 0.015 0.80 4.78 0.1 40°

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Table 6 Characteristics of the CPC system Parameter

Value

F⬘—collector fin efficiency factor UL—overall loss coefficient of collector per unit aperture area (W/m2 °C) rR—reflectivity of walls of CPC qc—half-acceptance angle of CPC (degrees) hav/h— ratio of truncated to full height of CPC Axis orientation

0.9 1.5

a—absorbtance of absorber plate NG—number of cover plates hR—index of refraction of cover material KL—product of extinction coefficient and the thickness of each cover plate Collector slope angle

0.85 45 0.67 Receiver axis is horizontal and in a plane with a slope of 35° (transverse) 0.95 1 1.526 0.0375 35° (local latitude)

sealed tube. A large number of variations of the absorber shape of ETCs are on the market. Evacuated tubes with CPC-reflectors are also commercialised by several manufacturers. One manufacturer recently presented an all-glass ETC, which may be an important step towards cost reduction and increase of lifetime. ETCs have demonstrated that the combination of a selective surface and an effective convection suppressor can result in good performance at high temperatures. The vacuum envelope reduces convection and conduction losses, so the cylinders can operate at higher temperatures than FPCs. Like FPCs, they collect both direct and diffuse radiation. However, their efficiency is higher at low incidence angles. This effect tends to give ETCs an advantage over FPCs in day-long performance. The characteristics of the ETC considered in this study are shown in Table 7. Various prototypes of transparently insulated FPCs and CPC collectors have been built and tested in the last decade [7,8]. Low cost and high temperature resistant transparent insulating (TI) materials have been developed so that the commercialisation of these collectors becomes feasible. However as no commercial collectors of this type are available in the market, these will not be considered in this study. 4.1. Comparison of the collectors’ efficiency In summary, four representative collector types are considered in this study: 앫 FPC with a slope of 40°. 앫 AFP collector. In this collector, the risers are ultrasonically welded to the absorbing plate, which is also electroplated with chromium selective coating. 앫 Stationary CPC orientated with its long axis in the east-west direction and tilted at local latitude (35°).

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Table 7 Characteristics of the ETC system Parameter

Value

Glass tube diameter Glass thickness Collector length Absorber plate Coating Absorber area for each collector Efficiency mode Gtest—flow rate per unit area at test conditions (kg/s m2) ao—intercept efficiency a1—negative of the first-order coefficient of the efficiency (W/m2 °C) bo—incidence angle modifier constant Collector slope angle

65 mm 1.6 mm 1965 mm Copper Selective 0.1 m2 n vs (Ti ⫺Ta)/G 0.014 0.82 2.19 0.2 40°

앫 (ETC, sloped at 40°. A comparison of the efficiency of the collectors considered, at irradiation levels of 500 and 1000 W/m2, is shown in Fig. 4. As seen the higher the irradiation level the better the efficiency and the higher performance collectors like the CPC and ETC retain high efficiency even at higher collector inlet temperatures.

5. Economic analysis method description A life cycle analysis is performed in order to obtain the total cost (or life cycle cost) and the life cycle savings of the systems. The economic scenario used in this project is that 30% of the initial cost of the solar system is paid at the beginning

Fig. 4.

Comparison of the efficiency of the four collectors considered at two irradiation levels.

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and the rest is paid in equal instalments over 10 years. The period of economic analysis is taken as 20 years (life of the system), whereas the inflation rates of fuel and electricity, used for pumps, are mean values of the last 10 years. Maintenance and parasitic costs are also considered. Light fuel oil (LFO) is assumed to be used for a fuel-only system. From the addition of fuel savings incurred because of the use of the system and the tax savings, the mortgage, maintenance and parasitic costs are subtracted and thus the annual solar savings of the system are estimated which are converted into present worth values of the system. These are added up to obtain the life-cycle savings. A detailed description of the method is given in [9]. It should be noted that both the current and the non-subsidised fuel price and systems with and without renewable energy subsidies are considered in the analysis in order to investigate the effect of these subsidies on the life cycle savings of the IPH system. In the case that renewable energy subsidies are considered, the grant amount that could be obtained through the scheme, described in section 2, is subtracted from the initial investment of the solar system. The investment cost of the stationary solar systems is estimated from: Cs ⫽ Cf ⫹ CaA ⫹ CvV.

(1)

Table 8 shows the estimated costs per square meter of the stationary collectors considered. For the operation cost (Co), maintenance and parasitic cost are considered. The former are estimated to be 1% of the initial investment and are assumed to increase at a rate of 0.5% per year of the system operation. The latter accounts for the energy required (electricity) to drive the solar pump. The total annual cost is given by: C ⫽ Cs ⫹ Co.

(2)

6. Modelling of the system The system was simulated with well-known TRNSYS program [6] using Typical Meteorological Year (TMY) data for Nicosia, Cyprus. TRNSYS Type 1 employing the standard single-order collector performance equation is used in which the intercept (ao) and slope (a1) factors, shown in Eq. (3), are used to model the collector. Table 8 Investment cost parameters for stationary collectors considered in this study Collector type

Collector price (C£/m2)

FPC 110 AFP 120 CPC 180 ETC 250 Prices include collector mountings and field piping

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n ⫽ aokaT⫺a1

⌬T . G

(3)

The following model of incidence angle modifier is used in TRNSYS Type 1: kat ⫽ 1⫺bo

冉

冊

1 ⫺1 . cos(q)

(4)

The factor bo used for each collector considered is indicated in Tables 4, 5and 7. The useful energy extracted from the collectors is given by: Qu ⫽ FRA[kat(ta)G⫺UL(Ti⫺Ta)].

(5)

The total useful energy for the whole year is obtained from:

冘冘 365

Qu,a ⫽

24

Qu

(6)

d ⫽ 1h ⫽ 1

and the annual auxiliary energy required, Qaux is: Qaux ⫽ Qload⫺[Qu,a⫺Qloss⫺Qrel].

(7)

As can be seen from the above equations the energy obtained from the solar collector field depends on the inlet temperature to the collector Ti, which depends on the load pattern and the losses from the storage tank, pipes and the relief valve. The piping distance required to join the collectors with the hot water cylinder is considered to be 30 m. The energy losses from the pipes are estimated by considering each element of the pipe (j) by solving the following differential equation: Mjcp

dTj ⫽ ⫺(UA)j(Tj⫺Ta). dt

(8)

The total energy loss rate to the environment is the summation of the individual losses from each element of pipe given as: Qenv,j ⫽ (UA)(Tj⫺Ta).

(9)

7. Results and discussion The results of the economic analysis obtained after the various systems were simulated with TRNSYS are shown in Table 9. Only the optimum cases are shown for each collector type considered. The optimum system in each case was found by performing a large number of simulations for a range of solar collector areas and storage tank volume sizes. The optimum system is the combination of these two parameters which maximises the life cycle savings (LCS) of the system. LCS are the money saved resulting from setting-up and operating the solar system instead of buying conventional fuel. It should be noted that the systems are optimised without considering any renewable energy subsidy.

500 25 60,000 5,222 34,890 52,048(18,000) 500 30 71,000 6,052 39,570 59,873(21,300) 500 30 96,000 6,642 29,923 57,375(28,800) 400 30 106,000 6,710 23,736 52,376(30,000)

Area (m2) Storage volume (m3) Total solar system cost (C£) First year fuel savings (C£) LCS for no RE-subsidies (C£) LCS for RE-subsidies (C£) Area (m2) Storage volume (m3) Total solar system cost (C£) First year fuel savings (C£) LCS for no RE-subsidies (C£) LCS for RE-subsidies (C£) Area (m2) Storage volume (m3) Total solar system cost (C£) First year fuel savings (C£) LCS for no RE-subsidies (C£) LCS for RE-subsidies (C£) Area (m2) Storage volume (m3) Total solar system cost (C£) First year fuel savings (C£) LCS for no RE-subsidies (C£) LCS for RE-subsidies (C£)

Flat plate (FP)

300 15 36,000 2,327 8,321 18,616(10,800) 300 15 42,000 2,587 7,858 19,868(12,600) 500 30 96,000 4,055 ⫺10,550 16,901(28,800) 400 30 106,000 4,097 ⫺17,444 11,495(30,000)

Results for the subsidised fuel price

a Fuels optimised for the subsidised fuel price. Subsidisation amount estimated according to grant policy. Total solar system cost is estimated without considering subsidisation. Non-subsidised fuel price for all the CPC and ETC collectors considered gives negative LCS therefore system sizes for the subsidised fuel price are used. Numbers in parenthesis represent the renewable energy subsidisation amount.

Evacuated tube collector (ETC)

Compound parabolic collector (CPC)

Advanced flat plate

Results for the non-subsidised fuel price

Parameter

Collector type

Table 9 Results of the economic analysisa

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A general conclusion that can be drawn from Table 9 is that both the removal of fuel subsidisation and the adoption of renewable energy scheme subsidies have positive effects on the economic viability of solar systems. This is reflected by the value of LCS of the system. As the fuel subsidisation need to be removed before Cyprus joins the European Union, which will be done in early 2004, then even the existing renewable energy scheme subsidies would create a large boost for the use of renewable energies on the island. This is because the solar system replaces a more expensive fuel. As can be seen from Table 9 the LCS increase from C£18,616 to C£52,048 for the FPC, from C£19,868 to C£59,873 for the AFP, from C£16,901 to C£57,375 for the CPC and from C£11,495 to C£52,376 for the ETC, all figures with renewable energy (RE) subsidies. Another observation which can be made from the results presented in Table 9 is that the more expensive the collector system is the higher the renewable energy subsidy obtained, e.g., C£18,000 subsidy for the FPC which costs C£60,000 compared to C£28,000 subsidies for the CPC which costs C£96,000, both for the nonsubsidised fuel price. This is because as explained in section 2, the subsidy is proportional to the initial system expenditure with a ceiling of 30% or C£30,000. This top figure was obtained only for the most expensive type of collector considered (ETC) which means that for this system there is a smaller contribution of the renewable energy subsidisation scheme, less than 30% of the initial solar system expenditure. The better the collector with respect to its performance, the higher the first year fuel savings, C£6,710 for the ETC compared to C£5,222 for the FPC, both for the non-subsidised fuel price, but as these collectors are also more expensive the life cycle savings, which is the parameter that determines the viability of a system is not necessarily higher especially for the no-RE subsidy cases, e.g., C£23,736 for the ETC compared to C£34,890 for the FPC. The best collector system, from the ones investigated, is the AFP as it gives in both cases (with renewable energy subsidy and no-subsidy) the highest LSC. From the results presented in Table 9 it can be seen that negative LCS were obtained for the two more expensive types of collectors considered (CPC and ETC) for the subsidised fuel price, therefore, the corresponding collector area and storage tank volume for the non-subsidised fuel price was used for comparison purposes. All the results presented in Table 9 were produced based on systems optimised with respect to no renewable energy subsidy for comparison purposes. By considering the grants that can be obtained from renewable energy subsidisation scheme and finding the optimum systems, somewhat different results are obtained as shown in Table 10, which presents the results for the FPC only. It should be noted however, that although very different results have been produced with respect to optimum collector area and storage tank volume, the LCS are very near to those estimated for the non-optimised systems, e.g., C£54,316 for the optimised system compared to C£52,048 for the non-optimised one, both with RE subsidies and non-subsidised fuel price. Sectors which can be identified as new potential uses of renewable energy besides

Area (m2) Storage volume (m3) Total solar system cost (C£) First year fuel savings (C£) RE-subsidisation (C£) LCS (C£)

Parameter

500 25 60,000 5,222 18,000 52,048

700 40 85,000 6,155 25,500 54,316

300 15 36,000 2,327 10,800 18,616

Non-optimised system (from Table 9)

Non-optimised system (from Table 9)

Optimum system

Subsidised fuel price

Non-subsidised fuel price

Table 10 Comparison of non-optimum and optimum RE subsidised systems (flat plate collectors)

400 25 49,000 2,844 14,700 20,305

Optimum system

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the present industrial process heat application presented here are, water heating in hospitals, schools and hotels and PV applications.

8. Conclusions In this work the energy subsidisation policies that are in effect in Cyprus are investigated. The effect of the renewable energy and fuels subsidisation policies on the economic viability of a solar system is investigated by means of an example. This concerns a solar industrial process heat system for which four types of collectors are considered. From the results presented in this paper is clear that renewable energy subsidies create a positive impulse of renewable energies whereas the LCS of the solar system improve considerably when the subsidies for fuels are removed. This is because the expenditure made for the erection of a solar system replaces a more expensive fuel. It is believed that similar results can be obtained for other solar systems such as large-scale water heating systems applied in hospitals, schools and hotels and various photovoltaic applications.

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