Some people say Solar is expensive; some say it is cheap! So which is right?

 

When we share the idea of installing a Solar PV system, most people's first concern is it is expensive! Not financially feasible!

But how expensive is expensive? Or how cheap is cheap?

You can’t find the answer by comparing the System price from various Contractors. right?

Of course, the system price, the equipment brand and warranty is important.

But the quantity of Solar energy that can be generated is also important!

Only by calculating the total cost to generate one unit of Solar energy and comparing it with the cost if you buy one unit of electricity with TNB.

Then only we can know if it is cheap or expensive!

Herewith is the analysis based on an actual case! A 187kWp system installed somewhere in Selangor.

Step 1: Total Cost over the lifetime (25 years)

Solar System Cost:

The total system cost is about RM499,900. 

And only RM59,900 out of it, is the money from the system owner. The rest of the fund are from bank loan

   

Bank loan interest:

Based on 10 years tenure and 8% annual interest rate. The total bank interest incurred is RM215,730.

Operation and maintenance cost (include inflation):

The O&M cost is about RM7,300 per year. And assuming this rate increases by 2% year to year, the total O&M cost for the system for 25 years is about RM233,821

Inverter replacement cost:

The inverter used for this project is Huawei Inverter. The to date cost is about RM43,188.

Assuming we need to replace the Inverter at year 11. The inverter replacement cost shall be RM43,188. 

In fact the inverter cost in next 11 years shall be much lesser. 

All in all, the lifetime cost over 25 years  for owning the PV system, maintenance, and inverter replacement is RM992,638.94

Step 2: Total Energy generated over 25 years

The PV system is able to generate 238,893 kWh in year one. And then the PV system generation shall slightly reduce year by year due to PV Panel degradation.

Thus, the lifetime energy can be generated by the system over 25 years shall be 5,570,096 kWh 

The Answer:

If you divide the lifetime system cost with the lifetime energy can be generated-

RM993,639 / 5,570,096 kWh = RM0.1782 per kWh.

You found that the total cost to generate one unit of Solar Energy in this case is only about RM0.1782.

How much is the PV system owner buying electricity from TNB?

To date, the price he buys from TNB is RM0.441 per kWh. 

Don’t forget he also needs to contribute 1.6% for the RE fund; and ICPT of RM0.037 per kWh.

All in all, he needs to pay TNB RM0.4851 for one unit of electricity he used.

Compared to the cost to generate his own Solar energy, it is about RM0.306 saving for each unit of the energy generated by his Solar PV system.

Lastly, the following are some circumstances used for sensitivity analysis to see the impact on the cost to generate one unit of Solar energy for this case.

For instance in case things went wrong such as the energy that can be generated is lesser than expected; the O&M cost increase or the number of times for inverter replacement increase.

All in all, the cost seems to be lower than when the PV system owner pay for TNB electricity.

And that is compared with the current TNB tariff. 

What if TNB tariff increases in the next 25 years? 

Hopefully now you have a clearer picture on whether Solar PV system is expensive or cheap….

#Solar #TNB #Electricity #investment #ROI #LCOE