PV-GENERATION POTENTIAL
ANNEX 1: Glossary
EIA U.S. Energy Information Administration. It is the principal energy agency of the U.S. Federal Statistical System and a part of U.S. Department of Energy responsible for collecting, analysing and disseminating information.
Equity IRR Rate of return on equity invested in the project. When using the Equity IRR as a discount rate, the Net present Value of the equity cash flows would equal 0.
Feed-in-Tariff (FiT) A policy mechanism designed to accelerate investment in renewable energy technologies. It offers long-term contracts to renewable energy producers, typically based on the cost of generation of each technology.
Financial LCOE Financial Levelised Cost of Electricity that does not consider costs of carbon emissions over the investment lifetime.
Financial viability It considers the perspective of equity investors and commercial lenders, i.e.
whether the respective project presents an attractive investment/lending opportunity. Financial viability depends inter alia on stability/riskiness of cash flows, achievable revenues/returns and payback periods of the project.
Fully-fledged financial model
A comprehensive excel based financial model that assesses the viability of a hybrid project. The model analyses how a hybrid project will react to different economic situations or events, and estimates the outcome of financial decisions.
It includes cash flow projections, depreciation schedules, debt service, balance sheet, income statement, growth scenarios etc. over the lifetime of the project. It provides all the key assumptions and allows the user to run sensitivity analysis by changing one or several assumptions at one time and see the overall results on the projected numbers.
HOMER Hybrid optimisation modelling software, developed by National Renewable Energy Laboratory (NREL), USA.
Hybridisation The 'Hybridisation' combines at least two different kinds of technologies for power generation and distributes electricity to several customers through an independent grid. Thus, the hybrid technology is supplied by a mix of renewable energy sources, and a generator, generally supplied with diesel, used as a back-up/base load.
IPP Independent Power Producer, a company owning and operation electricity generation facilities and selling the output to the local utility or the end users.
A N N E X
Investment lifetime The total lifetime of the project starting from construction until end of operation. In this study the investment lifetime of a hybridisation project is assumed to be 20 years.
Levelised Cost Of Electricity (LCOE)
The LCOE is the total capital, operating (incl. fuel) costs and financing cost per unit generated electricity, discounted over the investment lifetime. Typically, the discount factor is the Weighted Average Costs of Capital (WACC). In the financial model used in this study, the LCOE is calculated with a goal seek on the required revenues per unit of electricity to reach a certain equity IRR. Thus the financing structure is reflected much more accurate than in the “traditional” LCOE calculation.
The LCOE is the price per unit electricity that makes an investment break even, i.e. if the revenues per unit electricity is below the LCOE, the owner of the facility will not be able to recover its cost from the electricity production without subsidies.
LCOE produced The levelised cost of produced electricity i.e. total capital and operating costs per unit generated electricity over the investment lifetime. Excess electricity is includ- ed here. Thus the LCOE per kWh produced is lower that the LCOE per kWh sold.
LCOE sold The levelised cost of sold electricity i.e. total capital and operating costs per unit sold electricity over the investment lifetime. Excess electricity which cannot be sold, is exluded here. Thus the LCOE per kWh sold is higher than the LCOE per kWh produced.
Load pattern It exhibits electricity consumption behaviour into various customer classes (residential, commercial, and industrial).
Load profile Total energy demanded from a power system over a specific period of time (e.g. hours, days, etc).
Load shedding A power blackout/failure condition that occurs when the site is forced to shut down due to limitations in fuel supply, maintenance of the generators, or inad- equate supply of power demand.
PPA Power Purchase Agreement. It is a contract defining the terms of electricity sale between the buyer and seller of electricity.
PV mean output Average power output from a PV system at the given solar radiations over the year (8760 hours).
PV penetration It is defined as the ratio of total peak PV power to the peak load power of the grid.
Suppressed demand Unmet power demand caused by the enforcement of load shedding by the power utility.
System integration Electrical systems with multi-functional features that control voltage, frequency, power of a grid and regulate operation of the energy sources (PV, generator, battery) in it. It continuously monitors the grid, determines the cost-optimal working condition for each energy source and gives the necessary set points, calculates necessary operating reserve and allocates this to the different energy sources.
Weighted Average Costs of Capital (WACC)
It is defined as the sum of the cost of each capital component (debt, equity) multiplied by its proportional weight and adjusted by the tax shield on debt. It is the average expected return on the entire project.
7 8