Sunday, December 25, 2011

Whole systems appraisal of a UK Building Integrated Photovoltaic (BIPV) system: Energy, environmental, and economic evaluations
Abstract: Energy analysis, environmental life-cycle assessment (LCA) and economic appraisals have been utilised to study the performance of a domestic building integrated photovoltaic (BIPV) system on a ‘whole systems’ basis. Energy analysis determined that the system paid back its embodied energy in just 4.5 years. LCA revealed that the embodied impacts were offset by the electricity generated to provide a net environmental benefit in most categories. Only carcinogens, ecotoxicity and minerals had a small net lifetime burden. A financial analysis was undertaken from the householder's perspective, alongside cost-benefit analysis from a societal perspective. The results of both indicated that the systems are unlikely to pay back their investment over the 25 year lifetime. However, the UK is in an important period (2010/11) of policy transition with a move away from the ‘technology subsidies’ of the Low Carbon Buildings Programme (LCBP) and towards a ‘market development policy’ of feed-in tariffs (FIT's). Representing the next stage on an innovation S-curve this is expected to facilitate rapid PV uptake, as experienced in countries such as Germany, Denmark, and Spain. The results of the present study clearly demonstrate the importance of the new government support scheme to the future uptake of BIPV.

► LCA and economic appraisals of a UK domestic building integrated PV system.
► Energy analysis determined that the system paid back its embodied energy in 4.5 years.
► UK moved towards a market development policy of feed-in tariffs.
► Financial analysis shows the importance of the new FiT scheme to the uptake of PV.

The environmental benefits of monetized human health and ecosystem quality impacts, as measured through the Eco-indicator 99 results and CBA, clearly do not compensate for the excluded support mechanisms. This results in a base case NPV of approx. −£6500 and a corresponding BC ratio of 0.42. The best case scenario, which was estimated with minimum capital costs, maximum electrical output, and upper values of monetised externalities, suggests a NPV of approx. −£4600 and a BC ratio of 0.57.

The financial returns of the BIPV system under the FiT scheme experience a substantial improvement in the BC ratios, enabling a positive return on investment in the mean power output case with minimum capital cost under the ‘high price’ scenario and a positive return for the mean output case with both minimum and mean capital cost scenarios with the ‘high-high price’ assumption. In the most optimistic case the BC ratio rises to 1.25 and 1.31 for the ‘high’ and the ‘high-high’ price assumptions, respectively. This would be the case for a well installed system in the far South West of England and having low capital costs.

The effect of adopting a different discount rate was also investigated for the householder financial appraisal. Two alternative discount rates were applied in the sensitivity analysis for the ‘no support’ and the ‘FiT support’ implications, which were 8% and 3.5% in contrast to the base rate of 5%. The selection of an 8% discount rate effectively deflates future income at a faster rate; consequently the BIPV system becomes less favourable. On the other hand, the selection of a 3.5% discount rate is more generous with future incomes. The conclusions of the ‘no support’ scheme are not affected by a change of discount rate; the BIPV system's BC ratios are well under 1 regardless of the discount rate selected. Under the FiT program, adopting a discount rate of 8% would cause all the capital cost and the power output scenarios to experience a BC ratio of below 1. On the other hand, a 3.5% discount rate would result in BC ratio above 1 for all the mean power output cases (with any capital cost assumption).

One potential benefit known as the ‘double dividend effect’ was not included in the base case. This suggests that a PV system (or any other electricity-generating micro-generator) would induce a drop in total electricity consumption, if accompanied by a monitoring device (Keirstead, 2007). Keirstead (2007) indicated that this effect can lead to a 6% reduction in overall household electricity consumption. However, due to the large variations in UK householders’ electricity consumption, a flat rate percentage reduction in energy consumption would be inappropriate unless further empirical evidence could be obtained. Furthermore, it was considered that this benefit was subjective, and dependent on the habits of the householders in question—it could therefore not be guaranteed. Indeed, the ‘double dividend effect’ leads to many questions such as ‘how long will this effect take place?’, ‘what are the influences of different types of monitoring devices?’, ‘hasn’t the potential of post-PV energy-saving been partially limited by the extensive measures taken by these households before installation’? (Keirstead, 2007). Nevertheless, if the average annual electricity consumption of a UK household is assumed (4000 kWh/annum for standard electricity metering), the double dividend effect entails a reduction of yearly consumption by approximately 240 kWh per annum, or a current saving of about £29 per year (assuming a 12 p/kWh electricity price).

The results of the present study demonstrate the importance of FiTs to the improved finances of BIPV for householders. This was demonstrated by an unfunded NPV of approx. −£8100 and corresponding BC ratio of 0.32, compared with a more favourable NPV of approx. −£500 and BC ratio of 0.96 BC for the new support system of FiTs. Under this scheme the system would have an undiscounted payback period of just 15 years. The results clearly demonstrate the importance of the new government support scheme to the future uptake of BIPV in the UK, along with the need for technical innovation in the next generation of devices, such as improvements in their manufacturing processes and operational efficiencies.

by Geoffrey P. Hammond 1 and 2, Hassan A. Harajlia, 3 Craig I. Jones 1 and Adrian B. Winnetta, 2 and 3
1. Department of Mechanical Engineering, University of Bath, BA2 7AY, UK
2. Institute for Sustainable Energy and the Environment(I.SEE), University of Bath, BA2 7AY, UK
3. Department of Economics and International Development, University of Bath, BA2 7AY, UK
Energy Policy via Elsevier Science Direct
Volume 40; January, 2012; Pages 219-230
Special Issue: Strategic Choices for Renewable Energy Investment
Keywords: Economic appraisal; Environmental Impact; Photovoltaic system

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