Evaluation and economic analysis of renewable energy support policy options with scenario modelling of grid integration aspects

Abstract

Malta has to reach a 10% renewable energy share of its consumption by the year 2020. The PV capacity makes up 60% of the NREAP electricity target share, which translates to about 169MWp of capacity installed. The study set out to analyse the cost of supporting the targeted PV penetration technology through financial support schemes by 2020 in order to identify least-cost solutions. To this end, the study also takes into account the effect of increased grid integration costs due to the increase in intermittent PV generation. This aim was reached by a thorough evaluation of the technical and economic situation of RES policy in Malta. In this respect, models were designed in MATLAB. Data collection, including primary data obtained from surveys to understand the expectations of investors, RE suppliers and policy makers, were used in combination with a PV assessment tool to define the IRR level expectations through the analysis of past and present support schemes. Different IRR rates were obtained, differing between residential and non-residential sectors and the availability or not of a capital grant scheme. The IRR rates for FIT schemes without a capital grant were found to be within 8.0% and 8.5% for the residential sector and 17% - 17.5% for the non-residential sector. The rates found when a grant scheme is in place are double those obtained for the FIT scheme only. These IRR rates were used in the cost scenario modelling that included variations of tilt and orientation of PV panels in relation to national and residential load curves. Various scenarios have been considered. The Business-As-Usual scenario projected a budget estimate close to €125 million, with the capital grant scheme portion co-financed by the European Union being equivalent to 28% of this budget. The RE optimisation self-consumption scenario based on the residential load profile concluded that a 30 degree West system tilted at 20 degree would result in the highest PV output self-consumption level (42.6%). In the RE optimisation time- iv differentiated scenario, the analysis of the Italian and Sicilian spot market prices did resulted in the market-optimum system being the energy-optimum PV profile (that is, a South-facing PV system tilted at an angle of 30 degrees). Thus, a differentiated feed-in-tariff based on the overall demand profile was designed to give a higher market-value to energy generated in peak hours of the demand profile. The additional government expenditure required to cover the cost of such a tariff structure has been found as varying between €14.71 and € 1,323.70 per kWp over the lifetime of the PV system. This extra expenditure must be balanced out with the PV grid integration costs.