Cost Analysis of Renewable Energy-Based Microgrids for Rural Energy Management

Transcription

1 Proceedings of the 2011 Industrial Engineering Research Conference T. Doolen and E. Van Aken, eds. of Renewable Energy-Based Microgrids for Rural Energy Management Kiran Rangarajan, Department of Engineering Management and Systems Engineering, Missouri University of Science and Technology, Rolla, MO Joe Guggenberger, Department of Geosciences and Geological Engineering, Missouri University of Science and Technology, Rolla, MO Abstract Energy Infrastructure is an intense socio-technical system involving several stakeholders with varied and diversified priorities. Microgrids are gaining importance amongst researchers and practitioners alike. Primarily these microgrids will operate connected with the national power grid, at the same time they have the potential to completely isolate themselves from the power grid and function as a stand alone grid to increase efficiency and local reliability. This paper explores the cost-effectiveness of using renewable energy based microgrids for power generation in rural settings. The study involves analyzing feasibility of wind, photovoltaic, and biomass as renewable sources for generating power in Missouri, Ohio, and Nebraska farms and provides decision strategies for achieving sustainable energy management solutions. 1.0 Introduction Energy Infrastructure is an intense socio-technical system involving several stakeholders with varied and diversified priorities. The North American power grid is an interconnected complex network regulated by sophisticated power-flow control equipment [1]. These power grids are congested and the stress on the transmission and distribution system is continuously amplifying. Incremental development and changes to the power grid is ruled out to be unreliable in a high paced digital world; new infrastructures and innovative operational approaches need to be explored to solve the growing energy crisis [1]. Centralized generating facilities are giving way to distributed generation due to economic, technology, and environmental incentives [2]. Distributed generation has not penetrated to significant levels in the US, but the situation is changing rapidly and researchers and power production companies should now focus their attention on solving issues that are creating a barrier for these distributed generation technologies to enter the market [2]. Distributed generation includes technologies such as microturbines, fuelcells, photovoltaic, wind, and other renewable resources [2,3]. These technologies have the potential to reduce emissions and reduce the overall cost of energy production if used effectively [2]. Microgrids are gaining importance due to its ability to always operate in isolation from large utility grid and also operate effectively when normally connected with a larger grid [1]. This paper explores the cost-effectiveness of using renewable energy based microgrids for power generation in farms to make it self-sustainable. The study involves analyzing feasibility of wind, photovoltaic, and biomass as renewable sources for generating power in Missouri, Ohio, and Nebraska farms. The analysis also includes studying cost benefit completely isolating the microgrids from main lines along with studying the cost benefit of integrating it with the main lines. 2.0 Methodology Cost analyses are performed on corn farms in three distinct locations. These farms are located near Rolla, Missouri, Mead, Nebraska, and Columbus, Ohio. The size of each farm is defined as the average farm size in the state, which is 287 acres in Missouri, 966 acres in Nebraska, and 184 acres in Ohio [4]. The average annual electrical usage of a Missouri corn farm is assumed to be the average of 13 states throughout the Midwestern United States, which is kilowatt-hours (kwh) per acre [5], for a total of 22,136kWh per year. The average annual electrical usage of farms in Nebraska and Ohio are 82 kwh/acre

2 and 41 kwh/acre, respectively [5]. The average Energy costs for Rolla, Missouri are $0.093 per kwh for the first 1,000 kwh of the month, and $0.083 for the remaining kwh of the month [6]. Therefore, the projected annual energy cost of this farm would be $163 monthly or $1,957 annually. The average energy costs for Nebraska and Ohio are $0.075 [7] and $0.095 [8] per kwh, for a projected annual energy cost of $5,957 and $717, respectively. The average yield of a Missouri, Nebraska, and Ohio corn farms are 153 bushels [9], 169 bushels [10], and bushels [11] per acre, respectively with a value of $3.58 per bushel [9]. Therefore, the annual crop value is projected at $547, $605, and $522 per acre for Missouri, Nebraska, and Ohio farms. Cost analysis will be performed to determine the effectiveness of both grid-tied and off-grid renewable energy systems. 2.1 Grid-Tied In the grid tied system, performance characterization is designed to offset all energy costs for each farm, which is fed back into the grid. No excess energy cost returns is assumed to occur during calculations Solar Cost analyses for a grid-tied PV system are presented in Table 1. A PV Watts Version 2 Calculator AC Energy and Cost Savings [12] model was run for locations: Rolla, MO, Mead, NE, and Columbus, OH. Input parameters for each include a DC to AC derate factor of 0.77, a fixed tilt array at an angle of the location latitude, and an array azimuth of 180 degrees. A PV system with a DC rating of 1 kw is shown to produce 1,272 kwh of energy during a given year in Missouri, and 1,175 kwh in Nebraska and Ohio. Therefore, the DC rating on each PV system must have DC ratings of 17 kw, 67 kw, and 6 kw for Missouri, Nebraska, and Ohio, respectively. System pricing was calculated based on a 2.25 kw grid-tied PV system provided by Alt-e Store [13], which includes all necessary solar panels, racking /mounting system, combiner box, DC to AC disconnects, and grid-tie inverter. This system costs $9,003. In order to meet the DC requirement, 8 of these kits must be installed in series in Missouri, 30 in Nebraska, and three in Ohio. Total and final capital costs after tax incentives are presented in Table 2 below. Table 1: Cost Analyses of Grid-Tied PV Systems Number of 2.25 kw Kits Necessary Cost of PV System $72,020 $189,054 $27,008 Tax Incentives 30% 30% 30% Final System Costs $50,414 $132,338 $18,905 Crop Reduction $525 $1,829 $167 O&M ($0.01/kWh) $221 $792 $75 Life of the Project (years) NPV -$43,197 -$107,152 -$15,319 IRR -2.85% -1.02% -1.05% Annual costs of this PV system include crop reduction, O&M, inflation, and an assumed discount rate. Crop reduction calculations are based on the total number of panels (each kit has 11 panels Evergreen ES-A Series solar panels, with dimensions of 37.5 inches by 60 inches) spread out in one large array tilted at the site latitude. Shading calculations are performed, by assuming sunrays are directed at the solar azimuth angle on December 21, which is shown to be 23.5 degrees [14]. The optimal corn height is expected to be 8 feet tall, so the buffer to prevent shading on the array should be approximately 20 feet on the southern, western, and eastern sides. Crop reduction values are found by taking this projected array area with shading relief times the annual crop value. These results are shown in Table 2 above. Annual O&M costs are known

3 to be $0.01 per kwh [15] for each array. Inflation is assumed to be 2.5 percent [16], and the assumed discount rate is 15 percent [17], with an expected life of 25 years [18]. The net present value (NPV) and internal rate of return (IRR) for each array are presented above Wind Wind turbine modeling is based on a Bergey Excel-S Grid-Intertie system [19]. Wind turbine performance model input characteristics are shown in Table 2. The cost analyses of a grid-tied wind system are presented in Table 3. A WindCAD Turbine Performance Model [19] was created based on these input variables for each location. The monthly energy output of one wind turbine in Rolla, MO, Mead, NE, and Columbus, OH are shown to be 186 kwh, 784 kwh, and 641 kwh, respectively. Therefore, the number of wind turbines that must be installed in series in order to meet all energy requirements at Rolla, Mead, and Columbus are 10, 8, and 1 respectively. The cost of a Bergey Excel-S Grid Intertie System is $53,730, which includes the wind turbine, tower, inverter, tower wiring kits, and batteries [20]. Total and final system costs after tax incentives are presented in Table 3 along with NPV and IRR calculations. Table 2: Wind Turbine Input Variables Rolla, MO [21] Mead, NE [22] Columbus, OH [23] Average Wind Speed (m/s) Weibull K Site Altitude (m) Wind Shear Exponent Anemometer Height (m) Tower Height (m) Turbulence Factor 20.0% 20.0% 20.0% The radius of the guy wires of each wind turbine is 60 feet. A five-foot buffer zone must be allowed past the guy to prevent contact; therefore the guy area for each wind turbine is projected to be 16,900 square feet. The annual O&M cost is assumed to be $0.027 per kwh [24]. Inflation is assumed to be 2.5 percent [16], and the assumed discount rate is 15 percent with an expected life of 25 years [25]. Since annual returns do not exceed annual expenditures for Nebraska and Missouri, IRR cannot be calculated. Table 3: Cost Analyses of Grid-Tied Wind Systems Number of Bergey Excel-S Wind Turbines Needed Cost of Wind Turbine System $530,730 $446,856 $49,791 Tax Incentives 30% 30% 30% Final System Costs $371,511 $312,799 $34,853 Crop Reduction $2,125 $1,877 $202 O&M ($0.027/kWh) $598 $2,139 $204 Life of the Project (years) NPV -$377,286 -$298,145 -$32,498 IRR % Biomass The biomass energy system used during our cost analysis is a 225 kw per hour system from Agripower, Incorporated [26]. The cost analyses values are presented in Table 4. This system is designed to power a rural community with a total energy production of 1,577,880 kwh per year. This system is large enough to power 72 farms of equal size in Missouri, 20 farms in Nebraska, and 210 farms in Ohio; therefore it is assumed our projected farm will own 1/72, 1/20, and 1/210 of the total capital and annual costs of the entire

4 biomass system in Missouri, Nebraska, and Ohio respectively. The total cost of the biomass system (minus tax incentives) is projected at $1,500,000. Table 4: Cost Analyses of Grid-Tied Biomass Systems Number of Farms per Biomass System Cost of Biomass System Per Farm $20,833 $75,000 $7,143 Fuel Transportation Costs $49 $178 $17 Livestock Feed Value Lost $1,220 $4,390 $418 Labor $9,859 $35,494 $3,380 Life of the Project (years) NPV -$12,783 -$57,773 -$4,371 IRR 2.87% -1.51% -2.92% Annual costs include variable and fixed O&M costs, fuel transportation costs, livestock feed value lost, labor, inflation, and assumed discount rate. Fuel consumption of the biomass system is 478 pounds per hour, and fuel transportation costs are assumed to be $1.70 per ton. The livestock feed value lost is $41.90 per ton [27]. Labor is assumed to be two heavy equipment operators operating this facility 24 hours a day, seven days a week. Davis-Bacon wage determinations for heavy equipment operators in Phelps County, Missouri [28], labor costs are estimated at $21.40 per hour labor and $19.09 per hour fringe. Inflation is assumed to be 2.5 percent [16], and the assumed discount rate is 15 percent. NPV and IRR calculated values are presented in Table 4 above. 2.2 Off-Grid A cost analysis is performed for off-grid renewable energy systems at each location. This will allow the farm to be completely removed from the grid and have all energy supplied in-house. Off-grid systems examined during this analysis include solar and wind. Since the biomass system supplies much more energy than required by one farm, it is not feasible to use as an off-grid system during this analysis. Since the farm will not be attached to the energy grid, no energy resale will occur during this analysis Solar Cost analyses for a grid-tied PV system are presented in Table 5. A PV Watts Version 2 Calculator AC Energy and Cost Savings [12] model was run for locations: Rolla, MO, Mead, NE, and Columbus, OH using the same input parameters discussed previously. For a performance safety factor, the lowest monthly energy output is assumed for each month. A PV system with a DC rating of 1 kw is shown to produce 919 kwh of energy during a given year in Missouri, 1,011 kwh per year in Nebraska and 743 kwh per year in Ohio. Therefore, the DC rating on each PV system must have DC ratings of 24 kw, 78 kw, and 10 kw for Missouri, Nebraska, and Ohio, respectively. Table 5: Cost Analyses of Off-Grid PV Systems Number of 2.05 kw Kits Necessary Cost of PV System $148,708 $470,908 $61,692 Tax Incentives 30% 30% 30% Final System Costs $104,095 $329,635 $43,373 Crop Reduction $781 $1,749 $314 O&M ($0.01/kWh) $221 $792 $75

5 Life of the Project (years) NPV -$96,885 -$303,854 -$40,897 IRR -6.99% -6.34% -7.99% System pricing was calculated based on a 2.05 kw off-grid residential package by Alt-e Store [13], which includes all necessary solar panels, racking /mounting system, combiner box, DC to AC disconnects, gridtie inverter, and batteries. This system costs $12,392. In order to meet the DC requirement, 12 of these kits must be installed in series in Missouri, 38 in Nebraska, and 5 in Ohio. Total and final capital costs after tax incentives are presented in Table 6 above. Annual costs of this PV system include crop reduction, O&M, inflation, and an assumed discount rate. These results are shown in Table 6 above. Annual O&M costs are known to be $0.01 per kwh [15] for each array. Inflation is assumed to be 2.5 percent [16], and the assumed discount rate is 15 percent [17], with an expected life of 25 years [18]. The NPV and IRR for each array are presented above Wind Wind turbine modeling is based on a Bergey Excel-R Battery Charging system [29]. Wind turbine performance model input characteristics are shown in Table 6. A standard performance safety margin of 20 percent is used to ensure enough energy will be created to offset power interruptions. The cost analyses of a battery charging wind system are presented in Table 7. A WindCAD Turbine Performance Model [29] was created based on these input variables for each location. The monthly energy output of one wind turbine in Rolla, MO, Mead, NE, and Columbus, OH are shown to be 121 kwh, 606 kwh, and 202 kwh, respectively. Therefore, the number of wind turbines that must be installed in series in order to meet all energy requirements at Rolla, Mead, and Columbus are 16, 11, and 2 respectively. The cost of a Bergey Excel-S Grid Intertie System is $48,061, which includes the wind turbine, tower, inverter, tower wiring kits, and batteries [29]. Total and final system costs after tax incentives are presented in Table 7. Since annual returns do not exceed annual expenditures for any location, IRR cannot be calculated. Table 6: Wind Turbine Input Variables Rolla, MO [21] Mead, NE [22] Columbus, OH [23] Average Wind Speed (m/s) Weibull K Site Altitude (m) Wind Shear Exponent Anemometer Height (m) Tower Height (m) Turbulence Factor 20.0% 20.0% 20.0% Performance Safety Margin 20.0% 20.0% 20.0% Table 7: Cost Analyses of Off-Grid Wind Systems Number of Bergey Excel-R Wind Turbines Needed Cost of Wind Turbine System $796,656 $542,360 $103,042 Tax Incentives 30% 30% 30% Final System Costs $557,659 $379,652 $72,190 Crop Reduction $3,400 $2,582 $405 O&M ($0.027/kWh) $598 $2,139 $204 Life of the Project (years)

6 NPV -$568,243 -$370,321 -$71,300 IRR Discussion Renewable alternative is very expensive and might turn out to be infeasible based on the cost effective analysis. The reason for this is multifold. First, the capital cost of these technologies or systems are very high. Second, the incentives for using these technologies are not factored in our analysis due to lack of hard data, and variance in the type of incentives offered. Third, the resource availability for effective use of these renewable technologies is another important parameter that needs to be factored in. The capital cost is high due to the novel nature of the technologies itself. Adoption of these technologies for commercial use is still in its infancy and hence, the economies of scale are yet to be explored making the overall cost high. The incentives provided for the use of these technologies are vague. If the use of these technologies is encouraged from a national interest, incentives need to be provided during its early adoption to balance the high cost incurred. During our analysis we found that there is no repository which contains data regarding various incentives that are available for using these renewable systems. Moreover, the incentives vary from state to state and there are lots of complexities involved in gaining access to these funds. Resource availability plays a very significant role in effective functioning of these renewable resources. In some cases, renewable options may not be feasible at all. If we consider wind energy in our analyses we observe that the lifetime cost incurred is very high and the NPV in all three cases are very low, indicating that wind energy might not be a feasible alternative when it comes to decentralized power generation. We have assumed a high discounted rate of 15% as the use of these technologies is in its infancy and considering the fact that energy is a complex socio-technical system with high uncertainties, higher discounted rate is always necessary to back any unforeseen risks or force majeure. The inflation rate has been assumed to be constant over the lifetime of these renewable options at 2.5%. From these analyses we can observe that biomass seems to be most favorable alternative in all three states with a relatively higher NPV when compared to other renewable options. The IRR analyses indicates that in most of these cases the NPV can never be 0, indicating that revenues cannot offset the cost incurred, except for biomass in Missouri. 4.0 Conclusion The analyses indicate that renewable alternatives are not economically feasible at this point of time for decentralized power generation without incentives from the state and federal government. The initial tax credit is not sufficient to offset the lifetime cost incurred, and incentives need to be provided annually for the use of these options to offset the cost and make these options feasible. There is also a need for a national repository where the information regarding various incentives available for the use of renewable options is available. We also recommend a standardized incentive system such as renewable energy certificates (REC) made available for the use of these renewable options in all the states. The findings indicate that grid-tied systems are much more cost effective and feasible when compared to off-grid systems. This is primarily due to the high cost incurred due to use of battery storage in off-grid systems for backup power in case of emergencies or fault in the primary systems. It is recommended that a continuous improvement method be used to modify these systems from grid-tied to completely isolated offgrid system over time. Even though several researchers and practitioners lobby for innovative approaches, our analyses indicate that grid-tied systems are economically feasible at this point of time. Given, the result of our analysis we would also recommend that parallel model of growth in energy sector is essential when compared to series model. By this we mean that, any one technology or renewable alternative cannot provide solutions to all the problems. Moreover, resources may not be available for all alternatives to be viable. For example, wind energy might not be the feasible in regions where wind velocity is low. Focused investment on developing any one kind of technology to solve energy problems is not a sustainable option, rather a more parallel approach where in developing multiple alternatives on the same scale is imperative.

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