University of Science and Technology of Southern Philippines

Alubijid | Cagayan de Oro | Claveria | Jasaan | Oroquieta | Panaon

College of Engineering and Architecture

Techno-Economic Analysis of Grid Connected Solar

In Partial Fulfillment of the Requirements for

RESEARCH

Submitted by:
Phelps Jhowee L. Ocaya

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 Chapter 1

Introduction

1.1 Background of the Study

Nowadays, humans are facing the energy depletion crisis. Non-renewable

resources are less and less, and most of the energy is accompanied by pollution. With

the deterioration of the living environment and the growing of the demand of the

energy, humans must find and use some new energy, such like wind, tidal, solar and

so on. And the most popular new energy is solar power. [1]

South Philippine Union Conference (SPUC) compound was organized in 1951

and reorganized in 1964, it is were one of the headquarter of the Seventh-Day

Adventist Church can be located. The following establishment can be found inside the

compound.

 Headquarter Office

 Hope Channel South Philippines

 Fitness Center

 Guest House

 Food Court

 SPUC Garden Church

 Basketball Court

 Tennis Court

 Household

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The SPUC Compound envisioned for a greener environment and renewable energy

where they can save a lot energy consume from electric utility and from it, they will

be enjoying the benefit of a clean technology solutions.

Figure 1. Aerial view of SPUC Compound

1.2 SPUC metering points

The figure below describe the metering points of SPUC Compound.

Meter
1

CEPALCO

Meter Meter
3 2

Figure 2. Metering Points of SPUC Compound

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METER1 METER2 METER3

Literature Ministry Church School Headquarter Office,

Seminar & Others Parsonage, Garden

Church, Hope Channel

Philippines

Table 1. Facilities Under of Each Metering Points

1.3 Statement of the Problem

Solar energy is one of the renewable energy which can be the ultimate or

alternative energy source in the power generations. Solar PV system is currently

utilized by Cagayan Electric Power And Light Company (CEPALCO) as one of the

system in Cagayan de Oro City that supplies power to the city. Due to a lot of

different establishment inside the compound, the SPUC is currently suffering from a

high cost of electricity bill, specially that the said compound has a Hope Channel

Station South Philippines which is one of the biggest contributor of the high cost of

electricity bill because of the 24/7 production. As for the case of the SPUC

Compound, they also belong to the most energy consumers who wanted to reduced

their electricity bill.

YEAR &
SPUC Meter LMS Meter Church School
MONTH
Dec-16 253805.33 36,827.71 10,085.26
Dec-17 320,430.14 65,555.58 31823.77
Dec-18 369,137.33 56,450.46 31933.61
Total 943372.80 158,833.75 73,842.64
Table 1.1 Electricity Bill of the Month of December From Year 2016 to Year 2018

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1.4 Objectives of the Study

The goal of this study is to investigate the electricity consumption of SPUC

and to determine the viability of installing solar photovoltaic of the building of SPUC

compound. In order to attain this goal, the following objectives must be obtain

 To assess the electricity consumption of SPUC Compound

 To design a Solar PV system for the existing buildings of SPUC

 To determine the financial aspects of the project for viability

1.5 Research Locale and Respondents

The study will be conducted inside the SPUC Compound and the respondents

are the workers and homeowners.

1.6 Theoretical Framework

According to the function and the operation requirements, the configurations

of the components and the ways of the connection that are between equipments and

the other power sources and electrical loads, the solar PV system can be divided into

two main systems, grid connected or utility-interactive systems and stand-alone

systems. The most important component in grid-connected PV system is the inverter,

or power conditioning unit (PCU). The DC power produced by the PV array can be

transformed into AC power by the PCU, the voltage and power quality are in the light

of the requirements of the utility grid, and can stop supplying power to the grid

automatically when the grid is not energized.[1]

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 Fig. 3. Diagram of grid-connected photovoltaic system

1.7 Significance of the Study

The essence of this study is to determine the total consumption of energy of SPUC

Compound and to compare with the total cost of installment of the photovoltaic in SPUC

compound. With this comparison, may be it can find out whether it will invest or not.

1.8 Scope and Limitation

The study covers within the South Philippine Union Conference (SPUC) Compound

located in Upper Carmen, Cagayan de Oro City. The study focused in the financial

calculation and evaluation in placing solar PV system of the existing building of SPUC

compound.

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 CHAPTER II

Review of Related Literature

2.1 Introduction

In this chapter the basic information of the solar photovoltaic system and

Economic components such as Net Present Value (NPV), Payback Period (PBP),

Equivalent Cash Flows, Internal Rate of Return (IRR) and other economic parameters

were being discussed to understand more about the study.

2.1.1 Solar Energy

Solar energy is an alternative to more traditionally used energy sources, such

as Hydro or fossil fuels, it involves using photovoltaic to capture energy from the sun

and convert it to electricity. There are generally two types of solar paneling,

crystalline and amorphous (MrSolar, 2002). Efficiency in this case refers to the

amount of sunlight that reaches the panel’s surface and that is ultimately converted to

electricity.[1]

2.2 Solar Radiation on Earth Surface

Incoming solar radiation (insolation) originates from the sun, is modified as it

travels through the atmosphere, is further modified by topography and surface

features, and is intercepted at the earth’s surface as direct, diffuse, and reflected

components. Direct radiation is intercepted unimpeded, in a direct line from the sun.

Diffuse radiation is scattered by atmospheric constituents, such as clouds and dust.

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Reflected radiation is reflected from surface features. The sum of the direct, diffuse,

and reflected radiation is called total or global.

As the solar radiation reaches the atmosphere of the earth, the Earth’s

atmosphere absorbs the ultraviolet (UV) and infrared radiation and allows only

radiation having wavelength ranging between 0.29 um and 2.3 um, known as short

wavelength radiation. [2]

Figure 4. Path of Solar Radiation

2.3 Solar Insolation Measurement

Industrial grade devices for measuring solar radiation are delicate and

expensive. The “Pyrometer” is basically a flat plate (covered with a transparent dome)

that is coated with an extremely absorptive surface. Pyranometer is a solar radiation

sensor used to measure the broadband solar radiation flux density froma field of view

of 180 degrees. As the sun strikes it, the surfaces gets hot. The temperature of the

surface is measured with a thermopile, giving a output voltage related to the amount

of solar radiation striking the surface.

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 Figure 5. Pyrometer

In PV system design it is essential to know the amount of sunlight available at

a particular location at a given time. The two common methods which characterize

solar radiation are the solar radiance (or radiation) and solar insolation. The solar

radiance is an instantaneous power density in units of kW/m^2. The solar radiance

varies throughout the day from 0 kW/m^2 at night to a maximum of about 1 kW/m^2.

The solar radiance is strongly dependent on location and location and local weather.

Solar radiance measurements consist of global and/or direct radiation measurements

taken periodically throughtout the day. The measurements are taken using either a

pyranometer (measuring global radiation) and/or a pyrheliometer (measuring direct

radiation). [a]

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2.4 Types Photovoltaic Cell

Mono-crystalline silicon Poly-crystalline Flexible amorphous thin film CIGS thin film

Figure 6. Common PV Modules Technologies

Kind of Modules Module Efficiency

Mono-crystalline silicon 15-20%

Poly-crystalline silicon 14-16%

Flexible amorphous silicon 6-9%

Table 2. Conversion of efficiencies of various PV module technologies

2.5 Photovoltaic System

A photovoltaic system, also PV system or solar power system, is a power

system designed to supply usable solar power by means of photovoltaic. It consists of

an arrangement of several components, including solar panels to absorb and convert

sunlight into electricity, a solar inverter to convert the output from direct to alternating

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current, as well as mounting, cabling, and other electrical accessories to set up a

working system.

2.5.1 On-Grid Photovoltaic System

These system are connected to a broader electricity network. The PV system is

connected to the utility grid using a high quality inverter, which converts DC power

from the solar array into AC power that conforms to the grid’s electrical requirements.

During the day, the solar electricity generated by the system is either used

immediately or sold off to electricity generated by the system is either used

immediately or sold off to electricity supply companies. In the evening, when the

system is unable to supply immediate power, electricity can be bought back from the

utility. [b]

Figure 7. Block Diagram of Grid Connected PV System

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2.5.1.1 Two Types of Grid Connected Photovoltaic System

2.5.1.1.1 Grid Connected PV System with Battery Backup

Grid connected PV system with a battery backup have an array and a grid tied

inverter, but included with this is an addition of a battery bank and a charge

controller. Grid connected PV system with Battery backup can provide provide power

in the absence of utility power.

Figure 8. Diagram of Grid Connected Solar PV System with Battery Backup

2.5.1.1.2 Grid Connected PV System without Battery Backup

Grid connected system without battery is system in which when a utility fails

to supply power then there has no way of providing power as the inverter will

automatically disconnect itself from the utility grid

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2.6 Financial Analysis

2.6.1 Initial Cost of the System

Initial cost of an investment is the inclusion of the materials, equipment’s that

are used, and others. In which the researcher will gather data regarding of components

of the system to determine the initial cost of the system.

2.6.2 Net Present Value Method (NPV)

The Net Present Value (NPV) of an investment project is determined by

calculating the present values of the future cash flows generated by this investment,

summing them up and finally subtracting this sum of from the initial outlay for the

investment. As previously explained in the text, future cash flows are discounted

using a discount rate considering time and risk. If the calculated NPV is positive, the

investment should be undertaken. An investment with a negative NPV should not be

accepted. When comparing several exclusive investment projects, the projects with

the highest positive NPV should be accepted. [c]

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If Meaning then

NPV > 0 The investment would add The project is acceptable

value to the firm

NPV < 0 The investment would The project is not

subtract value to the firm acceptable

NPV = 0 The investment would We should be indifferent

neither add or subtract in the decision making

value to the firm whether the project is to be

accepted or reject.

Table 3. Net Present Value Criterion for Decision Making

2.6.3 Operation and Maintenance Cost

Present value is the total sum of annual cost taken as a present worth for

operator’s salaries, equipment inspections, insurance, tax, prepaid maintenance. These

cost here are not reflecting the cost of fuel consumption or replacing major equipment

items. Estimations of personnel costs over the project lifetime, particularly in labor-

intensive projects of long duration can be an important component of any LCC

analysis. Operation and Maintenance costs assumed to be 1% of the initial cost.

Maintenance is assumed to be constant in this study on the lifespan of the module. [d]

2.6.4 Replacement Cost

The entire system of a project does not have the same expectancy of life, at

some point, repair and replacement will occur when the normal duty life of any

system components is shorter than the life expectancy of the entire system. Through

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research, the PV array is guaranteed to last for 25 years or more. Also, inverters are

expected to be replace in every 10 years, by this, periodic replacement of an inverter

is an important consideration of the project to maintain a good efficiency of the

system.

2.6.5 Payback Period (PBP)

The payback period is defined as the length of time required by an investment

project to equal the initial investment outlay with the expected future cash flows. The

shorter the payback period of an investment project the better for the project to be

accepted. Firms may specify payback requirements as accept-reject decision rules for

investment projects, thereby limiting the length of time in which an investment

project shall have earned the initial cash outlay.[c]

2.5.6 Cost Benefit Analysis

A Cost Benefit Analysis (CBA) is a common framework for evaluating the

benefits and drawbacks (costs) associated with any particular project. Cost Benefit

Analysis is used to evaluate the opportunity to implement investment projects by

predicting the cash flows of the project. It is the ratio of the total present value of

benefit of the project to the present value of the cost. A project is accepted for

investment if CBA ratio is greater than or equal to 1, and if not, the investment should

be rejected.

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 Chapter 3

Methodology

3.1 Introduction

This chapter states how the researcher gathers all the necessary data with

regards of financial evaluation of installing PV system project. Also, it represents the

methods and formulas to be used on this study. These methods are mainly for

financial evaluation.

3.2 Location of the Study

The researcher will conduct the study at South Philippines Union Conference

Headquarters (SPUC) Compound, Upper Carmen, Cagayan de Oro City, Philippines.

The said compound is compose of different facilities that are mention in Chapter 1.

3.3 PV Components Data

PV Components data are gathered to evaluate the economics of installing solar

PV system at SPUC compound. The gathered data includes the system sizing, PV

module specifications. Inverter used, cable sizing and the energy calculation.

3.4 Life Cycle Cost (LCC) Analysis of Photovoltaic System

LCC is the sum of all the cost associated with an energy delivery system over

its entire useful life or over a specific period for analysis, taking into account the time

value of money. This concept is slightly modified to consider the revenues generated

by the system as well as the cost, interest rate and inflation, and termed as life cyle

savings or Net Present Value (NPV). Life-Cycle cost analysis is the process of

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calculating whether a particular investment, will generate a positive return on

investment (ROI) over the life of the technology. LCC analysis also considers

inflation. The summary of this analysis is life cycle cost must be equal to the total

energy output.[a]

LCC = C + R + OM

Where:

LCC = Life Cycle Cost of Total life cost

C = Total initial or investment cost

OM = Sum of yearly schedule operational and maintenance cost

R = Replacement cost is the sum of all repair and equipment

3.4.1 PV Module Lifespan

The expected lifespan of a PV module, by research, is 25 years.

3.4.2 Financial Analysis

3.4.2.1 Initial Investment Cost

The initial cost of installing PV system includes the following

 System Design

 Equipments

 Inverter

 Mounting

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  Others

3.4.2.2 PV Module Cost

The cost of a PV module dpends upon the brand, nominal power, efficiency

and module specifications. In PV module, as the efficiency, nominal power or rated

power increases the more the module gets expensive. In this study the comparison of

four different brands of PV module will be considered. Two brands for mono-

crystalline and two for poly-crystalline.

3.4.2.3 PV inverter cost

The cost of an inverter is based on its brand and specifications. The more the

rating and specifications are in good quality, the higher the price.

3.4.3 PV Operation and Maintenance Cost

These cost may include regular inspections, cleaning and other occurring

expenses with regards of OM, and this may be done until to its lifespan of the system.

3.4.4 PV Repair and Replacement Cost

These cost include the repair and replacement of some components of PV with

respect of maintenance. Like inverters, because its only expected to last for 10 years.

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3.4.5 Discount Rate

Discount rate describes the changes of value of money over time. The

researcher assumes an annual discount rate of 10%, 8% and 6% for this study and it is

constant over the life of the system.[a]

3.4.6 Net Present Value

The Net Present Value (NPV) of an investment project is determined by

calculating the present values of the future cash flows generated by this investment,

summing them up and finally subtracting this sum of from the initial outlay for the

investment. As previously explained in the text, future cash flows are discounted

using a discount rate considering time and risk. If the calculated NPV is positive, the

investment should be undertaken. An investment with a negative NPV should not be

accepted. When comparing several exclusive investment projects, the projects with

the highest positive NPV should be accepted. [b]

3.4.7 Cost-Benefit Ratio

A Cost Benefit Analysis (CBA) is a common framework for evaluating the

benefits and drawbacks (costs) associated with any particular project. Cost Benefit

Analysis is used to evaluate the opportunity to implement investment projects by

predicting the cash flows of the project. It is the ratio of the total present value of

benefit of the project to the present value of the cost. A project is accepted for

investment if CBA ratio is greater than or equal to 1, and if not, the investment should

be rejected

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 Figure 2.5.6 Cost Benefit Analysis Formula

3.4.8 Payback Period

It is the length to recover the cost of an investment. The earlier the payback of

an investment the better. The formula is given below.

Figure 2.5.5 Payback Period Formula

3.4.9 Internal Rate of Return

The IRR determines the discount rate for an investment where the sum of the

present values of the expected future cash flows and the initial investment outlay

equals zero. It basically means that the IRR is the discount rate that equates an

investment project’s NPV to zero (Shapiro, 2005). Brealey, 2006, p93 states “The

internal rate of return rule is to accept an investment project if the opportunity cost of

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capital is less than the internal rate of return.” The rational behind this statement is

that an investment project yielding more than its opportunity cost of capital has a

positive NPV, thus it is worthwhile investing. The IRR has some shortcomings that

everyone using it has to be aware of. Multiple rates of return may occur if the sign of

the projected future cash flows change (that is cash inflows and cash outlays) during

the investment project’s lifetime. There may also be instances where NPV and IRR

provide different suggestions when comparing the financials of mutually exclusive

projects. Reasons for these differences may lie in the different timing of the project’s

cash flows (that is when project future cash flows are expected) as well as in the scale

of the investment projects (that is the amount of the initial investment outlay). Just as

it is the case with the NPV, another disadvantage of the IRR is the fact that the model

gives a false sense of accuracy, since the computed present value is based on

estimated and uncertain cash flows.[b]

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3.5 Flow Chart

Data Gathering

PV SYSTEM DESIGN

COSTING

FINANCIAL ANALYSIS

 NET PRESENT VALUE

END

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References:

a. albina

b. Michael Andreas Kindlein

References:

a. Jasvir Singh (July 2010) “Study and design of grid connected solar

photovoltaic system”, Patiala, Punjab

b. Arth bayhon

c. Michael Andreas Kindlein (2007), “Identification of Profitable Projects: A

Survey among Firms in IT and Telecommunications Industry”, Ronneby,

Sweden

d. albina

References:1

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[1] Chen Wang, “SOLAR PHOTOVOLTAIC”. 2016

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