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Starting from the last decade, the market of PV has grown rapidly. The total installed
PV capacity has grown from 6.1 GW to 291 GW in ten years. There is net increase about 28%
annually on average and also increase about 94% of the total capacity which was installed
between 2006 and 2016.
Even though the PV technology is matured and many countries started to implement
solar PV technology at scale, but there is still having the regional cost differences. The maturity
level of the domestic market, labor cost, manufacturing cost and support policy structure are
the factors that influence competitiveness.
The global average total installed cost decreased by 68% in between 2010 and 2017.
The cost becomes cheaper in the more cost mature markets. Residential PV system total
installed costs have also decreased significantly in many countries since 2010.
The realistic cost analysis is needed to design the PV system to get an expected net
present value and payback times of the investment. This cost is broadly divided into two parts,
which are capital cost and operational and maintenance cost.
Capital Cost
Capital cost is the initial cost of PV system that including the component cost such as
module and inverter price, installation of the system and balance of system (BOS). The BOS
cost includes the additional equipment, installation labor, engineering and environmental study
cost before starting the operation of the system.
PV module cost includes the cost of raw material, cell manufacturing and module
assembly. This is the key component of a PV system and around 30%-40% of total system cost
is covered by this. In recent years, module price has decreased around 80% due to massive
growth and expansion of PV system installation. The cost is varied within technology, module
efficiency, and manufacturer market strategy. In 2015, silicon crystalline based PV module
price decreased around 15% whereas thin film based module price decreased only 4%.
Inverters are the primary power electronics component in a PV system and accounted
for 5% of total installed cost. Therefore, large systems have lower cost in compare to the system
less than 100 kW.
The economic feasibility of batteries depends on the energy capacity and life cycles.
Lithium-ion and lead-acid battery cost is studied in which the lithium-ion battery is found to
cost more than the lead-acid battery as well as having better life cycle and performance. The
BOS installation cost is comprised with the additional component cost. It includes the system
mounting and tracking components, cables, combiner box, site engineering, installation labor
and grid connection cost. It depends on the system sizing and installation area.
Operational and Maintenance Cost
At an earlier time, PV panel operation and maintenance (O&M) costs are not considered
as a major challenge to their economics. But due to the significant drop in PV module and
installation costs over the last five years, the share of O&M costs in the levelized cost of energy
(LCOE) of solar PV in markets has ascended significantly.
Financial Metrics
The return of PV investment depends on price of electricity and revenue sources. The
analysis of investment is varied according to the economic metrics that characterize the
economic performance PV system. The economic parameters which are used to evaluate a PV
system are discussed below.
a) Net Present Value (NPV)
Net present value (NPV) is an important economic parameter used to evaluate the
investment. It calculates the present value of future money by taking account the
discount rate. The outflows cash is negative and the inflows is positive. In addition, the
cash flow in every year is discounted with a discounted rate. By summing up all the
cash flows, NPV can be calculated. Positive NPV means it is a profitable investment
and whereas negative NPV shows the opposite. The formula below is used to determine
the NPV.
𝑁
𝐶
𝑁𝑃𝑉 = −𝐶0 + ∑
(1 + 𝑑)𝑁
0
𝑤ℎ𝑒𝑟𝑒 𝐶 = 𝑡𝑜𝑡𝑎𝑙 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤, 𝐶0 𝑖𝑠 𝑡ℎ𝑒 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡,
𝑑 = 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑟𝑎𝑡𝑒, 𝑁 𝑖𝑠 𝑡ℎ𝑒 𝑝𝑟𝑜𝑗𝑒𝑐𝑡 𝑎𝑛𝑎𝑙𝑦𝑠𝑖𝑠 𝑝𝑒𝑟𝑖𝑜𝑑
Cost Analysis
Cost analysis was carried out using Life Cycle Cost (LCC) analysis.
𝐿𝐶𝐶 = 𝐶𝐶 + 𝑂𝑀 + 𝑅 + 𝑆
CC is the capital cost. M is operation and maintenance cost. R is repair and replacement cost.
S is salvage value, the estimated value of an asset at the end of its useful life.
Table below shows the cost analysis for 20 years carried out by H A Rahman using Kuala
Lumpur’s generated meteorological data in the year of 2017. Annual global irradiation in
Kuala Lumpur is 1655.59, kWh/m2. The net discount rate is 8%. Useful energy generated for
the proposed system is 1828.305 kWh.
Components RM
PV modules 7088.48
Electrolyzer 2213.70
H2 storage tank 24518.63
Inverter 560.70
Module support system installation 4480
Total O&M cost 3892.7
Inverter replacement 259.72
Salvage value 7929.46