Cost and Finance in Off-Grid Energy Services

Berkeley Rural Energy Group

Daniel Soto

Sonoma State University

21 March 2014

Introduction

I How do we accelerate the pace of energy access, particularlythe adoption of watt-scale devices

I How do we ensure that these devices are accessible to allincome levels?

I Product cost and financing both important

Parallels between US and off-grid

Manhattan blackout

I People exhibit identical behavior in disaster blackouts andoff-grid environments

US Third party financingI Growth in financing options led to an increase rooftop solarI Financing is key to off-grid energy access

Residential and commercial solar

With construction of some of the world’s largest solar power plants, utility-scale solar inthe U.S. has accelerated in the past two years, while the residential and commercialmarkets have experienced a quieter revolution. Declines in component and systempricing have improved the economic drivers for residential and commercial buyers andexpanded the potential market. However, to achieve higher penetration into the U.S.residential and commercial markets, both a renewed focus on total installation costs andnew business models will be required.

Today, suppliers serve the residential and commercial photovoltaic (PV) power marketsthrough four primary channels:

x Direct ownership: whereby individual homeowners or businesses directly purchasePV systems for their properties

x Solar leasing/PPA: whereby a third party installs and owns a PV system at a host(individual or business), and sells the power to the host via a power purchaseagreement, operating lease or capital lease. Often, the third party owner maintainsthe installation and guarantees an annual output for the system

x Community-owned solar power: whereby individuals or companies can “buy-in” tooffsite solar generation through direct ownership or lease of an installation that is notco-located with the end users/owners

x Election into utility-owned PV generation: whereby individuals or companies canelect to buy PV-generated power from utility-owned PV power plants

Top investors target the residential solar leasing model

To address the growing residential opportunity, many of the world’s leading PVmanufacturers have opened new business units and launched financing and hardwareproduct solutions for the market. More importantly, the channel used to serve theresidential market has shifted quickly in the past three years. In H1 2009, third partyownership with leases represented less than 20% of the California residential PVinstallation market, while in H1 2012 solar leasing claimed >70% market share1.

2

1California Solar Initiative, "Current Working Data Set",http://www.californiasolarstatistics.ca.gov/current_data_files/, accessed September 12, 2012, PwC analysis.2 California Solar Initiative, "Current Working Data Set",http://www.californiasolarstatistics.ca.gov/current_data_files/, accessed September 12, 2012.

0%

20%

40%

60%

80%

100%

H1-2007

H2-2007

H1-2008

H2-2008

H1-2009

H2-2009

H1-2010

H2-2010

H1-2011

H2-2011

H1-2012

Third Party Other

Calfornia Solar Initiative Residential Installations

I http://www.pwc.com/cleantech

Outline

I Millennium Villages microgrids

I Pilot projectI Data gatheredI Lessons learned

I Future Work

I AffordabilityI Negative recurring costs for consumers

Millennium Villages pay-as-you-go

I The primary objectives were to

I Demonstrate system for micropayments for electricityI Remove upfront consumer investmentI Demonstrate technical feasibilityI Demonstrate customer acceptance

Typical sites

Millennium Villages Microgrid

Millennium Villages Microgrid

Millennium Villages Microgrid

Millennium Villages Microgrid

Customer education

Data Collected

I Per customer power and energy consumption on 3 secondintervals stored locally

I Hourly data sent via cellphone to a serverI Customer transactions and credit balances recordedI Allows for observation of account balance and payment

regularity

Customer payment behavior

I Accurate reporting on the financial behavior of customersallows for an accurate calculation of risk and return.

Time with positive balance

I 70% of consumers maintained a positive balance over 90% ofthe time

Time with positive balance

0.0 0.2 0.4 0.6 0.8 1.0Percentage of Time With Credit Available

0.0

0.2

0.4

0.6

0.8

1.0Fr

act

ion o

f C

ust

om

ers

2012-02-01 00:00:00 - 2012-03-01 00:00:00

Positive balance and average expenditureMany customers with modest expenditures displayed consistentpayment behavior.

Soto et.al. ICTD 2012

Technical outcomes

I What technical improvements are suggested by theseobservations?

I Low cost metering solutionsI Battery, inverter, generator efficiencyI Reliability

Low-cost metering system

I UCB developed a low-cost metering system for microgridsI Rosa, Madduri, IEEE GHTC 2012I System commercialized by a microgrid startup company

Inverter and generator efficiency

I Inverters and generators must be large enough to safely meetthe highest demand

I Operating below the rated load results in lower efficiencyI What is the financial penalty for lower efficiency?

Load duration curves

0.0 0.2 0.4 0.6 0.8 1.0Fraction of Availability

0

50

100

150

200

250

300

350

400A

vera

ge H

ourl

y P

ow

er

LightingLighting and Freezer

Residential load in Tiby, Mali with and without a refrigerationdevice.

Modeling of improvements

I Clear sky insolation modelI Semi-ideal inverter modelI Choose smallest battery and panel to meet demandI https://github.com/dsoto/pv energy balance

Cost penalty for inverter performance

0  

0.1  

0.2  

0.3  

0.4  

0.5  

0.6  

0.7  

0.8  

0.9  

Day   Night   Constant   Ligh:ng   Freezer  

Cost  (U

SD/kWh)  

Typical  

Flat  

Soto, Modi, IEEE GHTC 2012

Battery comparisons

I Using same model, what is the dependence of system cost onthe battery technology

I Lead acid batteries

I InexpensiveI 1000 cycles of lifeI 80% round trip energy efficiency

I Lithium iron phosphate

I ExpensiveI 10000 cycles of lifeI 92% round trip energy efficiency

System cost by battery technology

Trade off between cost and reliability

I Demanding high reliability as a design point can increase costI Goal is to enable microgrid designers consider reliability in the

design process

Cost and energy shortfall probability (ESP)I Lee, Soto, Modi, In Press, Renewable Energy

Future Work

I Affordability of energy accessI Financing of energy access

Negative recurring cost

I Payback is less important than a reduction in expenditures formany consumers

I If saving is difficult, little ability to pay above existingexpenditures

I Pico-power product is an investment that generates returns inthe form of avoided costs

Payback periods

Device Initial Cost Monthly Revenue Months Payback

Solar Lantern $20 $2.00 10

Battery forphone charging

$150 $15.00 10

Battery sellingelectricity

$150 $3.00 50

Returns and available financing

0 10 20 30 40 50

Life of term (months)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Equiv

ale

nt

rate

of

retu

rn

small lantern

battery in a box

retail electricity

I Microfinance usually shorter than 12 months and above 35%

What are the drivers of finance rate and payback period?

I Perceived riskI Investor demandI Alternative investmentsI Transaction costsI Are there conflicting requirements for donors and recipients

for initial cost and sustainability?

Impact on practitioners

I How do academics communicate with practitioners?

Thank you

Daniel Soto

sotod@sonoma.edu

http://danielrsoto.com