Understanding the true value of solar electricity
On-site generation of solar power generation is getting much more importance from the industrial clients who install the captive power plants as back up to the DG sets to meet their demand of electricity for captive usage. Unlike wind Solar has advantage that the solar resource is reasonably distributed and can fulfil the onsite generation demand at the point of usage itself and displacing the DG electricity usage which cost about 13 Rs./kWh.
If we consider the true value of solar electricity then we have to add some of the other potential economic benefits of solar electricity which are generally overlooked. These benefits includes the investments avoided in terms of creating the transmission and distribution infrastructure. The valuation of solar electricity is generally done on the basis of average cost of electricity generation, however if we look at the of PV electricity in conjuction with the daily electricity demand profile and the electricity real time price data, the PV generation matches with the peak electricity price. For instance, the actual generation of a typical PV plant in Gujarat as shown in figure simulated for a typical weekday on 27th February 2012.
Daily generation profile of a PV plant mapped with the daily load profile of Gujarat and the real time electricity price for a typical day (27th February 2012).
During the peak time in the day hours, the solar plant electricity generation from PV plants is also at its peak and the typical real- time market price is of the order of Rs. R/kWh. The real time price of solar electricity will be always more than the typical APPC (Average Pooled Power Cost) for the distribution licensee. As the PV market grows and there is a significant contribution from PV to the grid, the electricity generators would like to explore the possibilities of selling their electricity through exchange as a merchant solar power project in order to unlock the true value of their PV electricity. Although the electricity production cost from PV will still remain costlier and the PV generators have to rely on the support mechanisms such as RECs until the solar electricity generation cost reaches to grid parity, but the captive generators who have to off set their DG electricity through solar would always be keen on the profit maximisation through displacing the costilier DG electricity through captive solar option. The market value of solar electricity should be assessed by considering the following aspects:
- Real time market price signals during the solar generation time
- Accounting the value of reduced T&D losses and avoidance the grid infrastructure
- Adjusting the GHG reduction cost of solar electricity
- Accounting the cost of displaced electricity through solar (e.g. DG sets)
Most of the peaking power stations are diesel or gas based power stations which meet the electricity demand in the peak hours, however as the solar electricity meet the load profile during the day time peak demand, it makes solar electricity as an ideal way to meet the peak demand. Solar electricity matches with the demand profile of air conditioners which are used during the summer peak.
From the climate point of view, utilities are facing tremendous challange to reduce their carbon foot print and solar electricity bundled with the coal electricity extends an opportunity to the generators to reduce their carbon footprint.