Ownergy

Project assessment

Solar parks require substantial financial investment. Ownergy has developed a comprehensive tool to help site owners, developers and investors understand the performance of the PV system and the financial returns, which it can deliver.

Ownergy's Solar Park performance assessment model

Ownergy's assessment model provides a comprehensive analysis of the performance and financial returns of large-scale PV systems.

Project timetable

The financial model is a full monthly cash-flow projection.

The project is mapped through to commissioning and tariff registration, and all outgoing costs taken at the time they are likely to be incurred.

Capital costs and fees

The capital costs are those projected for the installation. To these are added Ownergy's best assessment of:

  • The fees incurred in the pre-planning stages including grid connection assessments, and prospective landscape assessments. Wildlife, archaeology, and environmental impact assessments are not typically needed so costs are allowed for these only when they have been specified as required.
  • The costs associated with the planning application are included on the assumption that the local authority classes the installation as plant and equipment (this fee is specified in the assessment).
  • A cost is included for the grid connection, and this is detailed in the assessment. It is important to check whether this is an estimate, or a quoted figure from the responsible DNO.

System performance

The system design data is taken from Ownergy's assessment of the size and capacity which the site or roof area can accomodate and is laid out in the Assessment report.

The average performance of this system configuration is calculated based on the European Commission's solar radiation data and output modelling 'PV-GIS'. This derives the anticipated output of the system on a month-by-month basis. It takes into account the orientation of the system (both its tilt angle and any offset from true South).

It includes allowances for the following system operating parameters:

  • The ambient temperature experianced by the solar array (based on meteorological data);
  • Reflectance losses at the surface of the panels;
  • Inverter and power tracking efficiency;
  • Other typical system losses such as cable drops, mismatch losses etc.

In addition, the Ownergy model applies a further contingency margin (of about 2.5%) and makes an allowance for the loss in output due to progressive dust accumulation and surface scouring (typically 8% over 20 years).

Tariff income

The income derived from the system is made up of the three factors inherent in the Feed-In Tariffs regime:

  • The generation tariff for every kWh produced by the system;
  • The export tariff for every kWh not used locally and so exported to the grid; and
  • The avoided cost of that part of the output which is consumed locally.

In deriving the appropriate split between the two latter alternatives, the proportion of on-site consumption is calculated, and this is specified in the assessment.

The generation tariff is calculated at the regulated figure applicable to the size of system.

The export tariff is no less than the regulated floor price of 3p/kWh. However for larger systems it is often possible to negotiate a higher price and the model accounts for this by allowing a fraction of the projected wholesale electricity price.

The avoided cost of electricity imports is calculated based on typical retail electricity prices. The model also calculates what proportion of the energy is generated before 7am so can adjust for daytime and nighttime energy prices too.

Index-linking and inflation

The tariffs are index-linked to the RPI, and adjusted once annually in April. This is taken into account in the model with the long-term inflation rate assumed to be 2%. Short-term inflation (i.e. the estimate to the next April adjustment) is based on recent published figures.

Energy prices are expected to rise in the future, probably at above the rate of igeneral inflation. These are projected in the model based on the future projections made by the energy regulator Ofgem.

Operating and maintenance costs

The model allows for the likely operating costs of the system, including:

  • A rental charge for the site (solar parks only) based on typical figures prevalent in the sector and specified in the assessment;
  • A tariff management contract to include performance monitoring, routine system maintenance and optimisation of export value;
  • Insurance of the system at typical levels.

Additionally the cost of replacement of major equipment (primarily the inverters) during the life of the system is also taken into account.

Taxes and rates are excluded from the mdel and they tend to be owner- and site-specific.

System life, depreciation and residual value

Good PV systems can be expected to last beyond the tariff period of 25 years.

The model therefore assumes that the system continues to operate for typically 40 years. Though no tariff income is taken after 25 years, the output of the system is valued at the ongoing export rate.

This effectively ascribes a modest residual value to the system at the end of the tariff period. Otherwise the analysis - as it is a cash-flow model - makes no other allowance either for depreciation or for valuing the installation at the end of the period.

Financing

The analysis can also show how the returns can be improved by using a proportion of project finance.

The proportion of project finance (which is specified in the assessment) is assumed to be the lower of 70% of the total capital cost, or the level that is covered 1.3 times by the income stream.

The annual repayment level is assumed to be flat over the duration of the loan (typically 15 years), but there are different rates in summer and winter to reflect the seasonal output of the system.

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Ownergy's assessment model provides a comprehensive analysis of the performance and financial returns of large-scale PV systems.

Project timetable

The financial model is a full monthly cash-flow projection.

The project is mapped through to commissioning and tariff registration, and all outgoing costs taken at the time they are likely to be incurred.

Capital costs and fees

The capital costs are those projected for the installation. To these are added Ownergy's best assessment of:

  • The fees incurred in the pre-planning stages including grid connection assessments, and prospective landscape assessments. Wildlife, archaeology, and environmental impact assessments are not typically needed so costs are allowed for these only when they have been specified as required.
  • The costs associated with the planning application are included on the assumption that the local authority classes the installation as plant and equipment (this fee is specified in the assessment).
  • A cost is included for the grid connection, and this is detailed in the assessment. It is important to check whether this is an estimate, or a quoted figure from the responsible DNO.

System performance

The system design data is taken from Ownergy's assessment of the size and capacity which the site or roof area can accomodate and is laid out in the Assessment report.

The average performance of this system configuration is calculated based on the European Commission's solar radiation data and output modelling 'PV-GIS'. This derives the anticipated output of the system on a month-by-month basis. It takes into account the orientation of the system (both its tilt angle and any offset from true South).

It includes allowances for the following system operating parameters:

  • The ambient temperature experianced by the solar array (based on meteorological data);
  • Reflectance losses at the surface of the panels;
  • Inverter and power tracking efficiency;
  • Other typical system losses such as cable drops, mismatch losses etc.

In addition, the Ownergy model applies a further contingency margin (of about 2.5%) and makes an allowance for the loss in output due to progressive dust accumulation and surface scouring (typically 8% over 20 years).

Tariff income

The income derived from the system is made up of the three factors inherent in the Feed-In Tariffs regime:

  • The generation tariff for every kWh produced by the system;
  • The export tariff for every kWh not used locally and so exported to the grid; and
  • The avoided cost of that part of the output which is consumed locally.

In deriving the appropriate split between the two latter alternatives, the proportion of on-site consumption is calculated, and this is specified in the assessment.

The generation tariff is calculated at the regulated figure applicable to the size of system.

The export tariff is no less than the regulated floor price of 3p/kWh. However for larger systems it is often possible to negotiate a higher price and the model accounts for this by allowing a fraction of the projected wholesale electricity price.

The avoided cost of electricity imports is calculated based on typical retail electricity prices. The model also calculates what proportion of the energy is generated before 7am so can adjust for daytime and nighttime energy prices too.

Index-linking and inflation

The tariffs are index-linked to the RPI, and adjusted once annually in April. This is taken into account in the model with the long-term inflation rate assumed to be 2%. Short-term inflation (i.e. the estimate to the next April adjustment) is based on recent published figures.

Energy prices are expected to rise in the future, probably at above the rate of igeneral inflation. These are projected in the model based on the future projections made by the energy regulator Ofgem.

Operating and maintenance costs

The model allows for the likely operating costs of the system, including:

  • A rental charge for the site (solar parks only) based on typical figures prevalent in the sector and specified in the assessment;
  • A tariff management contract to include performance monitoring, routine system maintenance and optimisation of export value;
  • Insurance of the system at typical levels.

Additionally the cost of replacement of major equipment (primarily the inverters) during the life of the system is also taken into account.

Taxes and rates are excluded from the mdel and they tend to be owner- and site-specific.

System life, depreciation and residual value

Good PV systems can be expected to last beyond the tariff period of 25 years.

The model therefore assumes that the system continues to operate for typically 40 years. Though no tariff income is taken after 25 years, the output of the system is valued at the ongoing export rate.

This effectively ascribes a modest residual value to the system at the end of the tariff period. Otherwise the analysis - as it is a cash-flow model - makes no other allowance either for depreciation or for valuing the installation at the end of the period.

Financing

The analysis can also show how the returns can be improved by using a proportion of project finance.

The proportion of project finance (which is specified in the assessment) is assumed to be the lower of 70% of the total capital cost, or the level that is covered 1.3 times by the income stream.

The annual repayment level is assumed to be flat over the duration of the loan (typically 15 years), but there are different rates in summer and winter to reflect the seasonal output of the system.

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