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Design and return

on investment analysis
of residential
solar photovoltaic systems
Duotong Yang, Haniph A. Latchman,
Dave Tingling, and Anim Adrian Amarsingh

D
ue to the increasing cost (PV) systems around the world rose PV installation was highly enhanced
effectiveness of solar pan- from 4.07 GW in 2010 to 10.12 GW by federal energy incentives and util-
els, the growing demand in 2012. As shown in this report, ity rebate programs that reduced the
for renewable energy Europe remains the predominant cost of PV systems. In particular, the
sources, and the U.S. leader in the global PV power market high average sunshine hours in Cali-
government’s financial and possesses a 75% share of new fornia correlate to significant state-
support, the adoption of solar energy installations. The report also illus- wide installations of grid-tied solar
has soared in the past few years. trates that in the United States PV systems.
According to the PV Market Report, approximately 1.8 GW of PV systems Certainly, the key component
presented by the European Photovol- were installed, yielding a cumulative of a PV system is the solar panel,
taic Industry Association, the cumu- total of 214,000 operating systems in which represents more than 50% of
lative installed capacity of photovoltic 2011. The significant growth of solar the overall cost of the PV system. A

image licensed by graphic stock

Digital Object Identifier 10.1109/MPOT.2013.2284602


Date of publication: 20 July 2015


0278-6648/15©2015IEEE IEEE Potentials Jul y/August 2015 n 11
price history provided by IMS Re- 7) system operation, maintenance,
search shows that the prices of so- and troubleshooting instructions.
lar module (US$/W) have dropped 300

Power Output (P)


250
more than 55% from 2009 to 2012, 200 Choosing the key components
due to increased competition and 150 The PV system components (including
100
new manufacturing techniques. 50 inverters, PV panels, mounting sys-
Moreover, the maximum power 0 tems, and cables) are available from a
60
point tracking (MPPT) control 40
0 8 10 wide number of manufacturers.
2 4 6 0
20
strategy applied on PV inverters 0 0
greatly increased the efficiency of Voltage Output (V) Current Output (I) PV panel
PV system output. The PV panel is at the heart of a
fig1 Characteristics of the Suntech
As of 2011, the total capacity of solar system, since it converts solar
STP280-24/Vd solar panel.
PV systems reached over 67.4 GW. power to electrical energy. The PV
Consequently, PV power has become array consists of solar panels wired
the third most important renewable Standards compliance and together. Considering the price and
energy generation technique after approval requirements efficiency of solar panels as well as
hydropower (970 GW) and wind gen- To interconnect a residential PV sys- the extreme temperatures in central
eration schemes (238 GW). tem to the utility grid in the state of Florida, we decided to design the
The majority of solar PV proj- Florida, detailed documentation of PV system with Suntech’s STP280-
ects completed thus far have been the system must be produced. At 24/Vd solar panels. A simulation
installed by licensed contractors. minimum, this documentation must based on parameters in the data
Moreover, O’Flaherty et. al re- include system specifications, parts sheet shows the electrical character-
ported that the feed-in-tariff (FIT) lists, electrical schematics, mechani- istics of the Suntech STP280-24/Vd
scheme reduces the payback pe- cal drawings, and instructions for the solar panel in Fig. 1.
riod from 67 years (without FIT) installation, operation, and mainte-
to 16 years, thus improving the nance of the system. The supplied PV grid-tied inverter with MPPT
return on investment (ROI) of resi- documentation is reviewed to verify Grid-tied inverters are used to
dential PV systems. However, this that the following items are included: convert dc produced by a PV sys-
report did not include the scenario 1) system description and specifica- tem into the ac that is transmitted
in which the PV system was in- tions (mechanical parts) to the utility grid. A MPPT control-
stalled by customers themselves. 2) data sheets for all major compo- ler is used to track the continu-
Furthermore, Monte Carlo simu- nents (modules, inverters, etc. ously changing MPP of a PV array.
lation performed by the North Components should be in compli- In Fig.  2, if the power generated
Carolina Sustainable Energy As- ance with UL 1741 and IEEE 929 from the PV system increases, the
sociation showed that installation standards) voltage increases, and the sys-
site preparation, electrical labor, 3) complete electrical schematics tem’s operating point (point A) will
and hardware labor contributed [electrical parts should satisfy move toward the MPP (point C).
to more than 40% of the installed the requirements of National Simultaneously, to maintain the
system price. Therefore, further Electrical Code (NEC) 90] direction of the operating point,
research on the total investment 4) warranty information on the the inverter system should keep
difference between contractor-in- components and complete system perturbing the system voltage. On
stalled systems and do-it-yourself 5) owners’ manuals for individual the other hand, if the power drawn
(DIY) systems are warranted. major components from the PV system decreases
Furthermore, research has in- 6) system installation and checkout when the voltage increases (from
dicated that most PV DIY projects procedures point C to D), the system’s operat-
did not provide detailed solutions ing point will move away from
on PV system output optimization, MPP. Consequently, the direction
site analysis, and roof space evalu- of system voltage perturbation by
300
ation. Therefore, to illustrate the inverter system will be reversed.
Power Output (P)

250 C
economics of solar energy utiliza- B D
200
tion and the possibility of system A Mounting system
150
installation by customers, we will The mounting system size is
100
present a computer-aided design deter mined by the PV system’s
50
process for a residential solar PV installation site. Further discus-
system. An ROI report is provided 0 sion about site analysis will be
0 5 10 15 20 25 30 35 40 45
to demonstrate the positive eco- Voltage Output (V) presented through a three-dimen-
nomic performance of the DIY sys- sioanl (3-D) model simulation in
tem installation. fig2 The basic concept of the MPPT. the next section.

12 n J u l y / A u g u s t 2 0 1 5 IEEE Potentials
PV system design Prated = 24 # 280 w = 6.7 kW.

Array sizing and wiring Thus, a PV system with


The amount of solar radiation 6.7-kW rated power output
incident on the solar panel is can satisfy the power con-
the most important parameter sumption in this house. Based
which affects performance of on National Electrical Code
the PV system. The position (NEC  90), the electric sche-
and angle of a PV panel are matic is presented in Fig. 4,
the key factors for PV system which specifically shows the
design. Typically, PV systems 24 panels wired in two strings.
installed with solar panel
tracking systems have a high- Site analysis
er performance than PV sys- fig3 A 3-D model for a typical Florida pitched-roof house. The tilt and azimuth angle of a
tems that have a fixed tilt PV panel are key factors that
angle. However, pitched-roof highly affect the solar radi-
houses in most areas of Florida can Since the peak sun hours represent ance levels and eventually determine
only accommodate PV panels with a the number of hours per day where the electric energy output. To maxi-
fixed tilt angle. Therefore, to maxi- solar insolation equals 1,000 W/m2 mize the energy drawn from PV pan-
mize the system performance, a sim- is 5 [15], the average solar insola- els, we should understand the sun’s
ulation was conducted to optimize tion can be shown as: positions relative to the site location.
the PV panel’s number and the A climate report provided by the
array’s orientation. Pavg insolation = 5h # 1000 watts m 2 day Florida Solar Energy Center illus-
#
Fortunately, Sketchup, developed kWh trates the optimum orientation for
=5 m 2 # day.
by Google, enables amateur PV sys-  solar panels. In Fig. 5, we can see
tem designers’ to perform simula- Therefore, the average panel pow- that the best azimuth angle for PV
tions. Sketchup is a free three-dimen- er can be represented as arrays is facing south.
sional (3-D) modeling tool featuring In a study performed by Asowata,
ease of use without input coordinates. day it was reported that the azimuth an-
Pavg panel = Pavg insolation # 24 hours
Instead of a hiring a contractor to de-  gle is the angle clockwise from true
# D # h panel # h inverter,
sign the PV array layouts, Sketchup north that the PV array faces, while
can facilitate panoramic views of the where D represents the dimension the tilt angle is the angle from hori-
PV system for customers. In Fig. 3, a of the panel, h panel denotes the panel zontal of the inclination of the PV ar-
3-D model of the target house is built efficiency, and h inverter is the efficiency ray (horizontal = 0 o vertical = 90 o) .
based on aerial photographs from of the inverter. Thus, we have: Some computer programs use de-
Google Maps. Further simulations in fault azimuth angle value (south
kWh day
this article will be conducted using Pavg panel = 5 2 # 24 hours facing) for houses in the northern
m # day
this initial Sketchup 3-D model. hemisphere. In Fig. 6, there are
1.956 m # 0.992 m
The PV system scale and the num- # panel  three areas facing southeast (SE),
ber of panels were first determined # 14.4% # 95.5% northeast (NE), and northwest (NW)
through an examination of a volun- = 0.056 kW/panel. that we can install the PV panels.
teer’s electric bill. For a typical pitched Through Google Maps street view,
roof house shown in Fig.  3, the en- The number of panels can be cal- it can be seen that the area facing
ergy usage in a billing circle can be culated as: southwest is not available due to the
around 900 kWh. Assuming that the existing pipes and chimney. To max-
Pavg required 1.232 kW
energy drawn from the PV system can N= P = 0.056 kW/panel imize the PV arrays’ electric output,
avg panel 
satisfy the house appliances’ power we should arrange the solar panels
= 23 panels.
consumption, the PV system output layout in these three highlighted ar-
calculation can be written as follows: The SMA’s Sunny Design software eas (SE, NW, and NE).
The average power required for provides a thorough performance re- The PV array on the SE area is
the house is port for Suntech 280 W solar panels, shown in Fig. 7. Its tilt angle is fixed
and it details that there would be is and the azimuth angle for the ar-
900 kWh other energy loss from the dc site to ray is 117.8°. The annual PV system
Pavg_required = month
the ac site, electric power generated output can be calculated using PV
month 
# average hours a month in the dc site needs to be higher than Watt calculator. Likewise, if we ar-
900 month the expected rated power. Therefore, range the PV array with same num-
= month # 730.48 24 solar panels will be installed and ber of solar panels on the NE area
= 1.232 kW. the rated system output is shown in Fig. 8, the system output


IEEE Potentials Jul y/August 2015 n 13
dc
Fuses Positive To
Red Line Bus Disconnect Utility Grid
+ dc
13A 2 plcs
M
SMA SUNY BOY 6,000
- US Grid-Tied Inverter
Negative ac
Bus
PV Circuit Surge ac Output Auxiliary
Combinor Arrestor ac Generation
Disconnect Disconnect
N L1
L1 N
PV Array: Green
24 x Line
Suntech House
STP280 Grounding
24Vd System
Modules
Disconnect Box
Two
Strings

Sub Panel

Surge Arrestor

House Grounding
System

fig4 The electrical schematic for a grid-tied PV system.

Tilt Angle
Sun Path During N
S NW
June SE

NE
N
S 117.8
Sun Path
During
December Azumith Angle

fig5 A sun path for Florida. fig6 Three roof areas for a PV array. fig7 The azimuth angle for PV arrays.

can also be obtained. Figure 9 and area) should be considered along investment with a high ROI will be
Table 1 illustrate the power energy with the corresponding PV watt out- more attractive. In this section, a ROI
drawn from PV arrays on different put computations. In our case, com- report is developed to illustrate the
roof areas. paring the total amount of PV sys- advantages of investing in solar PV
Moreover, the Sketchup simula- tem output per configuration, the SE systems and to compare the ROI
tion shown in Fig. 8 demonstrates area would be the best choice for the between PV systems installed by cus-
that the number of solar panels that PV system installation. tomers versus those installed by
can be installed on the NE area is licensed contractors. The formulas for
fewer than the number of panels ROI calculating ROI can be simplified as
possible on the SE area. The possible ROI is an economic performance
variations of array configurations measure for evaluating the efficiency Net profit
(due to the available roof surface of an investment. Certainly, an ROI = Total Investment .

14 n J u l y / A u g u s t 2 0 1 5 IEEE Potentials
Since the estimated payback periods Net profit = P # (r + w) + Tax

are fewer than ten years, we would - C OM = USW906.72.
not consider the effect of inflation.
Also, we assume that the annual SE Solar PV system incentives
electric output of PV system and the and rebates
NE
incentives policies do not change. In Gainesville, GRU provides the
Solar Electric System FIT program to
Cost of the solar PV system PV system owners. According to the
The rough price for the whole system Solar Energy Purchase Agreement,
fig8 PV arrays on both areas SE and NE.
is illustrated in Table 2. this is a contract between the PV
The total expenditure of the PV system owner and GRU. It was
system C = US$12, 717.52. 1,000 designed to encourage investment in
The electricity consumption of 900 renewable energy by requiring utili-

PV Array Output
the aforementioned residence is as- 800 SE ties to buy renewable electricity from
sumed to be 900 kWh per month. 700 NE customers at fixed prices. In Gaines-
600
As stated in the Gainesville Regional ville, customers sell 100% of the
500
Utilities (GRU) residential electricity NW power drawn from the solar system
400
bill calculation methods, the retail 300 to GRU at the price of US$0.21/kWh
price is US$0.115/kWh , which con- 200 when the system capacity is equal or
0 2 4 6 8 10 12
sists of the electric retail price and less than 10 kW.
Month
electric fuel adjustment. Supposing Customers can also apply for the
that the solar PV system has started fig9 An annual PV array output. Solar Electric System Rebate Pro-
to generate electricity and all of the gram from GRU. Participants will
power drawn from the PV system is be reimbursed a rate per watt based
consumed by the customer, the an- Table 1. Enery drawn from on the amount of direct or diffused
the PV system.
nual net profit can be represented as sunlight available based on a PV
AC energy Energy Value system’s location. However, the pur-
Net profit = P # (r + w) + Tax - C OM ,
Areas (kWh/year) (US$0.115/kWh) chase agreement shows that cus-
where P is the system’s total annual SE 8,628 992.22 tomers who receive the Solar Electric
output that equals 8,628 kWh, r is NW 6,612 760.38 System Rebate are not eligible to ap-
the electric retail price, and w is  the ply for the FIT program.
NE 6,812 783.38
electric fuel adjustment. r + w = The rebate rates are shown as
0.064 + 0.051 = USW0.115/kWh.C OM follows.
represents the cost of operation and Therefore, the total Tax charge 1) US$1/W for a solar window of
maintenance, which equals 6.72kW # will be 80% or greater
US$25/kW - yr = US$168/yr.   T h e Tax = Tax1 + Tax2 2) a rebate would be available for
tax calculation is shown as follows. = 24.8 + 57.7  solar windows 79% or lower
There are two taxes that would = USW82.5. Before applying the rebate pro-
be charged on electricity bills when We can have the annual net gram, the capacity of the system
residents are living inside the city of profit as needs to be calculated. The system
Gainesville. The Florida Gross Re-
ceipts Tax, represented as Tax1, is the
tax on GRU’s nontax revenue received Table 2. The cost of the whole system.
for electric energy, which is 2.5%. Price
Tax1 = [P # (r + w) # 2.5%] Quantity Components (US$) Total Price (US$)
= 8, 628 # 0.115 # 0.025  24 Suntech 280 W 308 7,392
= USW24.8.
2 Solar panel cable 43.86 87.72
In addition, the Gainesville Elec-
2 Fuse holder 5.4 10.8
tric Utility Tax Electric Surcharge,
represented as Tax2, will charge 1 Grid-tied inverter SMA 2,647 2,647
the sum of the electricity charge 2 Lightning arrestor 40 80
and the Florida Gross Receipts at 1 Combiner box 330 330
the rate of 10%.
1 dc disconnect 170 170
Tax1 = [P # r + Tax1] # 0.1 1 Mounting system 2,000 2,000
= [8, 628 # 0.064 + 24.8] # 0.1 Total 12,717.52
= USW57.7.


IEEE Potentials Jul y/August 2015 n 15
Research has indicated that most PV DIY projects did program. Hence, the tax can be recog-
nized as part of the net profit. Accord-
not provide detailed solutions on PV system output ing to Table 2, the cost for the whole
optimization, site analysis, and roof space evaluation. system is US$12,717 and the federal
tax credit can be represented as

Tax credit = 0.3 # cos t = USW3, 815 .


output on the ac side can be repre- immediately when a project is placed
sented as in service. The tax credits can be ap- Consequently, the return on invest-
plied to the federal income tax for ment of the installed system with the
PAC (w) = PTC (w) # N (panels#) individual taxpayers to offset the al- FIT program and the federal credits

# I (inverter efficiency), ternative minimum tax liability. The can be written as
tax credit incentive has been proven
where PTC is the solar panel perfor- to be popular with investors for both Net profit = P # f + Tax - C OM
mance under Photovoltaics for Utili- residential and utility solar PV sys- = 8, 628 # 0.21 + 82.5 - 168
ty Scale Applications test conditions. tems, since banks could choose to in-  = USW1, 726.4.
I n ou r c a se, PAC (w) = 280 # 24 # vest in energy ITC facilities for earn- Netprofit
ROI = Cost - Taxcredit
95.5% = 6417.6 w . ing attractive rates of return, and
1726.4
Besides the FIT and GRU rebate thus all the rebates aforementioned = 12717 - 3815 = 0.19.
programs, the federal energy invest- would highly reduce the investment
ment tax credit (ITC) incentive au- more than we expected. For systems with solar electric rebate
thorized under 26 USC 48 provides a and federal credits, the rebates are
30% tax credit on the installed cost of ROI calculation denoted as
off-grid or grid-tied solar power sys- Suppose the solar PV system is spon- Rebate = Solar Rebate + Tax credit
tems. Typically, an energy ITC pro- sored by the FIT program and the res-
= USW1 # PAC (W) + USW3815
gram reduces federal income taxes by idents sell their electric power to the 
= 6, 417.6 + 3, 815
offering a 30% tax credit to owners or grid at the rate of US$0.21/kWh.
= USW10, 232.
long-term lessees for qualified prop- Accordingly, the net profit from the
erty including panels, mounting, and PV system can be denoted as PAC (w) is the system output on the
inverters that meets the performance ac side of the inverter.
Net profit = P # f + Tax - C OM ,
and quality standards. For instance, The net profit of the PV system is
if equipment costs US$100,000, the where f is the rate of the FIT pro- the payment to the tax and the elec-
energy ITC would be 30% of the cost gram which equals US$0.21 and P is tric retail price, which is saved if all
basis of US$100,000, or US$30,000. the annual system output, which of the power generated from the sys-
Moreover, the cap on solar electric equals 8,628 kWh. C OM represents tem is sold to the utility company.
property expenditures (US$2,000) the annual operation and mainte-
was removed in 2008. The full nance cost. The payment for tax is Net profit = P # f + Tax - C OM

value of the energy ITC is earned saved through applying to the FIT = USW906.72.

Table 3. The ROI for a PV system with different rebate programs.

Installed by
Installed by Contractor with Solar
FIT and Federal Solar Electric Rebate Contractor with FIT Electric Rebate and
Credits and Federal Credits and Federal Credits Federal Credits

PV system output P 8,628 kWh/year 8,628 kWh/year 8,628 kWh/year 8,628 kWh/year
Net profit US$1,726.4/year US$906.72/year US$1,726.4/year US$906.72/year
with FIT without FIT with FIT without FIT
Cost US$12,717 US$12,717 US$25,200 (Average US$25,200 (Average price
price in Gainesville) in Gainesville)
30% federal credits US$3,815 US$3,815 US$7,560 US$7,560
US$1/W for solar rebate None US$6,417.6 None US$6,417.6
program
Total rebate R US$3,815 US$10,232 US$7,560 US$14,261
ROI 0.19 0.36 0.098 0.082
Period for ROI (i.e., 1/ROI) 5.26 years 2.77 years 10.2 years 12 years

16 n J u l y / A u g u s t 2 0 1 5 IEEE Potentials
Net profit ing a residential PV system. With the ••B. Marion and M. Anderberg,
ROI = Cost - Tax credit
incentive programs, the payback pe- “PVWATT version 2-enhanced spa-
906.72 riod of a grid-tied PV system would tial resolution for calculating grid-
= 12717 - 10232 
be only two to six years. In addition, connected PV performance,” in
= 0.36.
the PV systems with FIT programs Proc. NCPV Program Reviewing
provide approximately US$1,800 in Meeting, Lakewood, CO, Oct. 2001,
The payback periods can be writ- revenue per year. Thus, DIY instal- pp. 14–17.
ten as lation of a solar system provides an ••Calculating Your Electricity Bill,
Total Investment attractive means for reducing energy Gainesville Regional Utilities,
Payback Period = costs and air pollution. Gainesville, FL, Sept. 2011.
Net profit

1
= ROI .
••Solar Energy Purchase Agree-
Read more about it ment, Gaeinsville Regional Utilities,
The ROIs of PV systems on different ••Q. Zhao, P. Wang, and L. Goel, Gainesville, FL, Jan. 2012.
scenarios are illustrated in Table 3. “Optimum PV panel tilt angle based
on solar radiation prediction,” in About the authors
Interpretation of the ROI results Proc. IEEE 11th Int. Conf. Probabilis- Duotong Yang (yangduotong@ufl.
The ROI estimation presented in tic Methods Applied Power Systems, edu) graduated with his B.Sc. degree
Table 3 can be summarized as fol- Singapore, June 2010, pp. 425–430. in electrical engineering from North
lows: For projects with a licensed ••F. O’Flaherty, J. Pinder, and C. China Electric Power University in
contractor, the payback periods for Jackson, “Determination of payback 2011. He earned his M.S. degree in
the two contractor-installed projects periods for photovoltaic systems in electrical and computer engineering
in Table 3 are 10.2 years and 12 domestic properties,” in Proc. Retrofit, from the University of Florida in May
years, respectively. Salford, U.K., Jan. 2012, pp. 24–26. 2013. He is pursuing his Ph.D.
The payback period for a system ••NC Sustainable Energy Associ- degree in electrical engineering at
installed with the solar electric re- ation. (2013, Jan.). Levelized cost of Virginia Polytechnic Institute and
bate and federal credits is the short- solar photovoltaics in North Caroli- State University.
est—2.77 years. Compared with the na. [Online]. Available: http://energ- Haniph A. Latchman (latchman@
contractor-installed projects, the ync.org/assets/files/LCOE%20of% list.ufl.edu) earned his Ph.D. degree
payback periods are much shorter, 20Solar%20PV%20in%20North%20 from Oxford University (Rhodes
which highly enhances the econom- Carolina-FINAL.pdf Scholar) in 1986 and his B.Sc. degree
ic performance of the investments. ••K. H. Hussein, I. Muta, T. from the University of the West Indies–
Therefore, if possible, it would be de- Hoshino, and M. Osakada, “Maxi- Trinidad and Tobago in 1981. He is a
sirable for customers to design and mum photovoltaic power tracking: professor of electrical and computer
install the PV system by themselves. An algorithm for rapidly change engineering at the University of Flor-
atmospheric conditions,” IEEE Proc. ida and director of the Laboratory for
Conclusion Generation, Transmission, Distribu- Information Systems and Telecom-
From the presented design process, tion, vol. 142, pp. 59–64, Jan. 1995. munications.
we can see that without the coopera- •• S. J. Steffel, “Distribution grid Dave Tingling (dave@stream-
tion of licensed contractors, home- consideration for large scale solar lines.biz) has been an information
owners can prepare documentation and wind installation,” in Proc. IEEE technology practitioner, systems in-
requirements for a residential solar T ransmission Distribution Conf. tegrator, and independent contractor
PV system. Sophisticated computer Expo., New Orleans, LA, June 2010, since 1993. He is the systems opera-
software such as Sketchup, SMA pp. 1–3. tions administrator at the Depart-
Sunny Design, and PVWatt, among ••National Energy Education ment of Fire and Emergency Servic-
others, provides customers with Development Project. (2013). Photovol- es in Richmond, Virginia.
solutions for PV system sizing, site taics student guide. [Online]. Available: Anim Adrian Amarsingh (ani-
analysis, PV system performance http://www.fi.edu/PECO/photo- mamarsingh@uf l.edu) graduated
optimization, and roof space evalua- guide-family.pdf with his B.Sc. degree in electrical
tion. If customers are able to design ••SMA. (2013). Sunny Design engineering (Summa Cum Laude)
their own systems, contractors can Web. [Online]. Available: http:// from Morgan State University in
simply analyze customer-prepared www.sunnydesignweb.com/sdweb/ 2011. He earned his M.S. degree in
designs and charge a lower rate. SunnyDesign/Home electrical and computer engineer-
Reducing the cost of hiring a con- ••O. Asowata, “Optimum tilt and ing from the University of Florida
tractor would make solar panels orientation angles for photovoltaic in May 2013. He is currently an
more attractive for wide-scale panels in the vaal triangle,” in Proc. electrical engineer with the Pe-
deployment in residential areas. Asia-Pacific Power Energy Engineer- troleum Company of Trinidad and
The ROI report illustrates the ad- ing Conf., Shanghai, China, Mar. Tobago.
vantages of planning and document- 2012, pp. 1–5. 


IEEE Potentials Jul y/August 2015 n 17