1. Solar Rooftop PV Financial impact of SSEG

2. Information/ hardcopies/ software participants will need:
Tariff and customer information for their municipality
GENESIS/GIZ SSEG revenue impact tool

3. SSEG is a financial ‘no brainer’ in many commercial applications
ClearWater mall – phase 1 SSEG of 1.5MW
Source: SolarEff (Project implementer)

4. SSEG generation and commercial load profiles match well
Daytime peaking commercial load profile matches solar daytime generation profile

5. Load profiles and SSEG generation: residential
Source:

6. Residential: variable load profile
Load profile for domestic is typically very peaky, with refrigerators, water heating and and pool pumps switching on and of during the day, for example.

7. Residential: depending on the profile and PV size, reverse feed
can occur
export
(Sunny Day)
PV size 50% of peak demand
Because of load profile peakiness, reverse feed can often take place for residences

8. Residential: factors to be considered in revenue impact assessment

9. In practice residential load profiles vary greatly, and with that PV impact, including self-generation and revenue impact (this is from actual household data logged in NMBMM SSEG installations)

10. PV generation and Megaflex peak times
Other than to some extent in the morning, PV generation does little to reduce peak period Megaflex payments

11. Example of a residential bill
Bill for house without SSEG and one with a reversing meter (as can happen with illegal installations and credit meters) – showing significant revenue loss in the latter case.

12. A more sensible approach…1 2
Better to introduce a suitable SSEG tariff… 1
Solution: Introduce other (fixed) charges to recover parts of the induced loss
Solution: Compensate PV customer at an lower than retail, but fair rate (e.g. avoided ESKOM avoided costs or “cost of supply“) 2

13. Bill with (1) no SSEG, (2) SSEG with no compensation (bi directional metering, not a reversing meter), and (3) with SSEG tariff (fixed charge and export tariff). Case (2) is unfair on the customer, case (3) provides some return for he customer but protects municipal revenue.

14. Commercial & Industrial: factors to be considered in revenue impact assessment
Reduced sales (loss)
PV export compensation (if any)
Reduced bulk (Megaflex) purchase (gain)
Resale of PV export (if any)
Revenue impact calculations need to consider:
ToU customer tariffs
Varying Megaflex rates (ToU, seasonal)
Varying solar output
Reduction in tech losses (small)
(there are no demand charge reductions)

15. Cloudy days and peak demand
PV SSEG has little or no impact on the peak demand charges due to cloudy days

16. Solar radiation: cloudy days
Tshwane example month solar radiation: Jan 2016
Solar radiation Oct 2015 – Oct 2016
Because of cloudy days the peak demand requirements for SSEG users are not reduced

17. SUMMER and WINTER differences:
Residential versus Commercial & Industrial Customers
Winter solar radiation can be around 40% less than in summer (depending on the tilt angle of the PV panels)

18. Revenue impact models
Sustainable Energy Africa (old) PV SSEG and energy efficiency revenue impact model, and the more detailed and specialised GIZ/SALGA/GENESIS PV SSEG revenue impact model

19. SSEG tariff and billing theory
Tariff theory
Net metering
Net billing
Net FIT
Gross FIT
Acknowledgements:

20. Residential tariff elements – Standard consumption tariff
c/kWh
Source: Adapted from GreenCape, Basic Tariff Guiding Principles: Small-scale Embedded Generation (SSEG) tariffs

21. Tariff elements – SSEG residential tariff
Source: Adapted from GreenCape, Basic Tariff Guiding Principles: Small-scale Embedded Generation (SSEG) tariffs

22. Tariffs in place in selected metros
Tariffs vary significantly depending on the objective (i.e. promote or discourage SSEG)
Source: Municipal tariff documents and NERSA approved tariff schedule (all )

23. Net-metering vs Net-billing
Eg. NMBM
Standard bi-directional meter owned by the utility
Export tariff paid by municipality
Metering system captures net-production/consumption
Export tariff = import tariff
Eg. City of Cape Town
Standard bi-directional meter owned by the utility
Export tariff paid by municipality
Metering system captures net-production/consumption
Export tariff < import tariff (export tariff indexed to import tariff)

24. Net-FIT vs Gross FIT Net-FiT Gross-FiT Proposed by CSIR
Standard bi-directional meter owned by the utility
FiT paid by a central off-taker
Metering system captures net-production/consumption
Export tariff is fixed for a 20 year period
Involves a PPA between customer and utility
Standard bi-directional meter owned by the utility +
PPA meter owned by customer
Metering system captures gross production and gross consumption
All SSEG electricity is exported to the grid and compensated via a FiT
Power purchased either by the municipality or Eskom’s single buyer office

25. Using the SALGA-GIZ (GENESIS) revenue Impact Model

26. SALGA-GIZ SSEG revenue impact & tariff model
Brief:
A tool to assist municipalities in cross-checking their SSEG tariffs with regards to impact on revenue and attractiveness to Solar PV customers
Model features:
Generic i.e. usable by all types of municipalities
Simple and easy to use
Data requirements not too onerous
What the model can do:
Generate impact on municipal revenue and VOS (avoided costs) for a given set of SSEG tariffs
Determine if a business case exists for a set of tariffs for the PV customer
SSEG tariffs can be changed and the results analysed to assist in tariff design
What the model can’t do:
Generate the best set of SSEG tariffs

27. Municipality Perspective PV Customer Perspective
Source: From GENESIS revenue Impact Tool Training package

28. … What is the overall impact on municipal revenue with more and more people installing Solar PV?
Source:

29. CASE STUDY: Tshwane Revenue impact
Commercial & Industrial
Revenue impact on tariff categories with existing fixed charge may not be significant
Source (incl following slides): Impact of Small Scale Solar PV Embedded Generation (SSEG) on Tshwane’s Revenue (SEA, GIZ)

30. Revenue impact
Residential….

31. From the customer‘s perspective
Payback times per tariff – Business Case for the customer
Important to balance tariff with reasonable fixed charges and feed-in tariffs (established by a Cost of Supply study)
Assumption: Export tariff (FIT) stays constant over project lifetime

32. Workshop Using the GENESIS Revenue Impact and Business Case tool

33. Modelling results from different Tshwane SSEG tariff options (impact % is for residential tariff category analysed)

34. Modelling results from different Tshwane SSEG tariff options (impact % is for residential tariff category analysed)

35. Revenue impact assessment conclusions for Tshwane
Industrial and Commercial SSEG revenue impact
The impact on CoT revenue from the CoT provided example industrial and commercial customers adopting SSEG is generally between 0.5% and 1% loss
Overall, the revenue impact does not vary greatly with different conditions (seasonality, system size etc) because (1) there is no SSEG export potential due to daytime peaking load profiles, and (2) the existence of a fixed demand charge, which does not change with PV SSEG installation, protects against revenue loss.

36. Revenue impact assessment conclusions for Tshwane (2)
Residential SSEG revenue impact
Residential SSEG results in a large range of revenue impacts, from positive to negative, depending on the specific conditions – system size, season and whether a SSEG tariff is implemented or not.
There is often significant revenue gain for CoT from residential SSEG systems. The main reason for this is that CoT makes a profit from the SSEG power exported, and residential sector SSEG has the potential to result in significant export power, and thus significant revenue for CoT.
Having a 3-part SSEG tariff is the best form of revenue protection for CoT
Reverse feed blocking results in revenue reduction for CoT, because of the potential profit to be made from re-selling SSEG exported power.
The biggest revenue loss takes place with illegal connections (i.e. the meter reverses), effectively paying the customer the full electricity purchase tariff for each PV kWh exported, while the distributor on-sells this power at a loss.

37. References
Impact of Small Scale Solar PV Embedded Generation (SSEG) on Tshwane’s revenue (Revised 30 June 2017). Sustainable Energy Africa, funded by GIZ.
Available on
GIZ/SALGA SSEG impact model (spreadsheet) and Guidelines (Word document) and training presentation (Powerpoint)

38. The future of Municipal Electricity Business Models
A brief introduction to the need to think creatively in fast changing times for municipalities…

39. 
PV prices continue to decline faster than predicted (even with a variable ZAR exchange rate)

40. PV relative cost in 5 or 10 yrs time? PV now
Grid power
PV relative cost in 5 or 10 yrs time?
PV now
Break-even point
Illustrative stand-alone PV payback, with grid defection implications
Source: Sustainable Energy Solutions for Local Government – A Practical Guide (SEA et al)

41. Between 2020 and 2025 the SSEG feasibility landscape will have changed
From Tshwane SoE report (and PV prices are actually decreasing, not constant as shown here)
Source: City of Tshwane State of Energy Report 2017 (SEA)

42. Battery price trends
Batteries are becoming cheaper – these will become part of our power system one way or another, but the danger is that costs decrease to the extent that wealthier users defect from the grid and install stand-alone PV systems. This is disastrous for current municipal business models.

43. Business plans for the future?
Important to have cost reflective tariffs in Commercial & industrial categories
Recover revenue in fixed charges while not destroying the residential business case
When batteries become cheap…
Avoid or reduce grid defection? – how?
Other revenue gathering plans?
Selling PV equipment?
….?

44. Business models Building embedded power systems
Building stand-alone power plants
Procuring from embedded generators
Procuring from an IPP
Playing a trading/aggregating role
Operating a storage facility
Providing electricity services

45. Reference
New Roles for South African Municipalities in Renewable Energy: A Review of Business Models (SAGEN, March 2017)
Available on

46. End

47. Illustration of PV generation on a sunny and cloudy day for a residential situation

48. National load profile
PV doesn’t match the winter demand profile well, but is a slightly better match in summer

49. eThekwini load profile
Summer aircon?
The load profile of different municipalities vary, which affects the revenue impact

50. SSEG tariffs - definition
Compensation mechanism = the instrument designed to reward the Solar PV customer for any generation that is exported to the electricity grid
Compensation mechanisms matter because they influence the value proposition of a Solar PV investment for individual customers i.e. influence the customer’s business case
Important components of any mechanism include:
Contract length
Crediting terms
System caps
No universally accepted definitions of the many types of SSEG tariffs that exist eg. net-metering tariffs, net-billing tariffs, net-FiT tariffs, gross-FiT tariffs
Two types of SSEG tariff discussed:
Net-billing tariffs:
Balance rolls over from month to month (for the 12 month billing period) by ToU period
Customer doesn’t receive payment from the municipality for exports > imports
Export tariff is not fixed (it increases over time in the model)*
Net-FiT tariffs:
Customer can receive payment from the municipality for exports > imports
Export tariff is fixed for a 20 year period
Source: From GENESIS revenue Impact Tool Training package

51. Basic architecture of the financial impact model
Residential
Small business
Medium business
Large business
Reduction in municipal revenue
Determine “original revenue from chosen customers” using no. of customers x original municipal tariffs
Determine the bill for a single SSEG customer using proposed SSEG tariffs
Then determine municipal revenue post introduction of SSEG tariffs in 2 parts:
That from SSEG customers – assume either 1%, 5%, 10% or 20% of customers in the chosen tariff category install Solar PV
That from regular customers – the remaining 99%, 95%, 90% or 80% of customers
Reduction in revenue = original revenue – revenue after introducing SSEG tariffs
Value of Solar
Reduction in bulk electricity purchases = total electricity generated from Solar Eskom rates
Reduction in technical losses = technical losses % X reduction in bulk purchases
Difference between Eskom tariff and export rate X Solar PV electricity fed onto the grid
Net effect
i in municipal revenue + i costs (VOS)

52. Basic architecture of the model – Customer business case
Residential
Small business
Medium business
Large business
Savings on electricity bill
Over the useful life of the system: 25 years
System degradation of 0.5%
Constant consumption
Apply the same method as municipal revenue calculation:
Determine original bill in each year
Determine bill post introduction of SSEG tariffs
Savings = original bill – bill after introducing SSEG tariffs
Discounted net savings
Net present value of savings less capex and opex
Discounted using the WACC calculated using CAPM