Solar Energy for Home: Case Study

A homeowner in Jakarta was interested in solar energy / PLTS, but only as his new “toy”. However, when I visited the client’s home, I noticed large electricity usage: lights, fridge, AC, water heater. Could you imagine the electricity costs?

In solving this problem, Inspecro considered a PLTS system to save his costs. Before deciding whether solar energy is a great fit for the client or not, we had to answer 3 core questions:

  1. Is the sun strong enough in the client’s roof?
  2. Is the client’s roof suitable for solar panels?
  3. Will I add any value to the client? (not as a “toy”)

Question 1: Is the sun strong enough in the client’s roof?

We measured the sun radiation profile at the client’s roof. The client’s home has a strong sun radiation of 4.76 kWh/m² day. This is 73% stronger than a house in Berlin, in which solar panels are already widespread. (See Exhibit 1.)

Question 2: Is the client’s roof suitable for solar panels?

We took measurements and mapped roof obstacles. Next, we created two possible design options using guidelines from AS/NZS Standards. (See Exhibit 2.)

To decide which option is more profitable for the client, we asked about the client’s daily lifestyle. Using this information, we chose the smaller option as it better fits the electricity usage pattern.

Question 3: Will I add any value to the client?

Assisted by our NASA solar database, we forecast electricity savings of Rp 1.4 million per month on average. Slight variations occur between months due to panel positioning and sun revolution angles. (See Exhibit 3.)

However, is PLTS more profitable than saving in a bank?

If solar earns less “interest rate”, then there is no point for the client to go forward with solar. To address this issue, we compared the return on both investments. (See Exhibit 4.)

After discussing 3 core questions above, what is your own conclusion?

Hotel Solar Energy: Case Study (Pembangkit Listrik Tenaga Surya / PLTS)

A 3-star hotel consulted us Inspecro when they faced large electricity costs. Meanwhile, they could not reduce electricity usage any further:

  • Sacrificing cooling units would make guests uncomfortable by heat.
  • Reducing water heating would shock guests in cold evening showers.
  • Darkening lighting would destroy the hotel appearance in the eyes of the guests.
  • Hotel has no control over guests using fridge and TV in the guest rooms.

The hotel concluded that to maintain guests comfort would require the same electricity consumption. Then, how could the hotel save electricity costs? Hence, we proposed electricity cost savings with solar energy (or Pembangkit Listrik Tenaga Surya / PLTS).

Here, the manager asked us these 3 questions:

  1. How much are PLTS’s monthly cost savings?
  2. What is PLTS’s lifetime profit?
  3. Is PLTS reliable for 25 years?

A. Monthly Cost Savings

The 64.6 kWp PLTS saves Rp 8.8 millions per month on average. (See Exhibit 1.)

PLTS electricity cost savings in Inspecro hotel case study.

How did we get these numbers?

The solar panels or “panel surya” produces 8.5 MWh of electricity per month on average, after losses such as soiling, clouds / nighttime, and wiring loss. (See Exhibit 2.)

PLTS energy production in Inspecro hotel case study

Next, using 2018 PLN tariff (IDR 1035 per kWh for golongan B3), we can calculate our cost savings: Net Energy x 2018 PLN tariff.

For example, in September:
Cost savings (September) = 9830 kWh x IDR 1035 per kWh
Cost savings (September) = IDR 10.2 millions

Over the year, the hotel saves IDR 106 millions of electricity cost. However, is this saving profitable compared to the initial investment?

B. Lifetime Profit

With cost savings of IDR 106 millions per year, the PLTS generates lifetime profit of IDR 2.6 billions to IDR 7.5 billions. (See Exhibit 3.)

Inspecro delivers a PLTS with a long-term profit

To determine whether PLTS is the most profitable investment, the hotel’s finance team asked about the ROI. (See Exhibit 4.)

Inspecro delivers PLTS with ROI of 15% to 22% per year

But the analysis above assumes 25 years of operation. The manager asked, “How can we be sure that the PLTS would not break down in just 10 years?”. Great question.

C. Reliability

The system is 100% reliable, due to globally known brands, certifications, installation standards, 24/7 online monitoring, and warranty.

Globally known brands. Local brands are not yet proven. Therefore, we use Canadian Solar panels and SMA inverters for this project. (See Exhibit 5.)

Inspecro uses Canadian Solar panels and SMA inverters

Certifications. Ssolar panels are certified with ISO9001, ISO14001, IEC 61215, CEC listed, and UNI 9177.

Installation standards. Inspecro follows Australian / New Zealand Standards (AS/NZS) for absolute safety procedures of the hotel’s solar energy system.

After-sales services. Unlike other installers cleaning their hands after you pay them, Inspecro commits to 24/7 online monitoring and warranty:

  • 24/7 online monitoring. Inspecro and the hotel may observe the system 24/7 via an internet connection. Therefore, if there is any issue, it shall be solved immediately.
  • Warranty. The solar panels have 25 years linear power output warranty.

What were the hotel’s conclusions?

D. Conclusions

The hotel concluded that:

  1. They must not sacrifice electricity usage, otherwise guests will become uncomfortable by feeling hot, showering in cold water, or seeing a gloomy lighted hotel lobby.
  2. PLTS solves their electricity costs by saving Rp 8.8 millions per month on average.
  3. As an investment, PLTS generates profit of Rp 2.6 billions to Rp 7.5 billions over the long-term, with ROI of 15% – 22% per year, depending on PLN tariff growth rate.
  4. PLTS is risk-free with lifetime of 25 years or more. Meanwhile, the system break evens at 6 years. Therefore, solar energy is free for 19 years or more.

If you are a hotel manager facing the same problem, consult with us for free:

081933373789
[email protected]

2 Types of Solar Cells: Monocrystalline vs Polycrystalline

“Monocrystalline? Polycrystalline? Which one should I go for?”

Yes, these might seem overwhelming to you. Let us compare them in Performance, Cost, and Aesthetics.

1.Performance

In solar cells, performance is measured in terms of efficiency. In other words, how much sun energy is converted into electricity. Here, monocrystallines are better than polycrystallines (25% vs 21%). This is because a polycrystalline has crystal boundaries stopping “carriers” like electrons which generate electricity. Therefore for the same area, a polycrystalline generate less electricity.

Verdict: if you have tight roofs/spaces, you should go for monocrystallines

2.Cost

However, monocrystalline cells are more difficult to manufacture. Consequently, polycrystalline cells are much cheaper. This is why polycrystalline cells dominate solar installations today.

Verdict: if you have wide roofs/spaces + want to be economical, you should go for polycrystallines

3. Aesthetics

A monocrystalline cell is solid black in colour, while a polycrystalline cell is blue with some "cracks"

A monocrystalline cell is solid black in colour, while a polycrystalline cell is dark blue with some “cracks”. If you really care about having a stylish roof, then the solid black colour in mono would be a good choice as it blends nicely on your roofs. Otherwise, the polycrystalline’s dark blue is not too ugly either as the “cracks” will not be visible after few meters away.

Verdict: monocrystallines black colour might be more stylish, but it depends on your taste

Conclusion

  • Monocrystalline cells are for you if you have small roofs/spaces, or if you care about being stylish
  • Polycrystalline cells are more economical and therefore they are more widely used in installations

Next, you might want to know how we install these cells in a project study.

Investing in Solar Crowdfunding

Solar energy is growing by 28% annually ¹. Therefore, solar is an attractive investing opportunity. However, building a solar plant normally costs hundreds of thousands or more.

“So, do I have to be a heir to a conglomerate to invest in solar projects?”

The answer is no.

But, how?

1. What is solar crowdfunding investing?

Solar crowdfunding raises small amounts of funds from a large number of people, in order to build a solar energy plant.

A solar crowdfunding platform connects Investors, Consumers, and Installers:

Solar crowdfunding investing platform connects Investors, Consumers, and Installers

2. How does solar crowdfunding investing work?

First, Investors may order any number of solar cells for an open project:

In solar crowdfunding investing, Investors first invest in a Consumer's solar plant by ordering solar cells.

Then, the Investors get return on investment for the energy productions:

In solar crowdfunding investing, Consumers pays monthly fees to Investors based on its solar energy production.

Therefore…

3. Is solar crowdfunding investing safe?

It depends to which platform provider you are investing in.

For example, Inspecro enforces transparency and risk management:

  1. Revealing all project contracts.
  2. Revealing all engineering and economics studies for each project.
  3. Tying the monthly income to the size of energy production in real time.
  4. Appointing Installers to cover technical risks by engineering, design, components manufacturing, and installation. ²
  5. Appointing Consumers to cover theft, loss, damage, and destruction. ³
  6. Helping to arrange site visits for Investors to see their solar cells physically.

Learn more about open projects to participate in solar crowdfunding.

4 Reasons of Going Solar Now in Indonesia

Solar revolution is a rapid disruption. We are seeing 31% annual growth of solar.¹ Similarly, big companies worldwide are going solar. (See Exhibit 1.) For example, Apple has installed 101 MW of solar. This is enough to power around 40,000 houses. Target, a giant department store retailer in the United States, has installed twice as much solar. Likewise, other big brands such as General Motors, LOreal, FedEx, Intel, Amazon, IKEA, and Walmart are following behind. If are unsure on how to react, our report shows the benefits of going solar. (See Exhibit 2.)

1. Electricity savings

Common misconception is that green investments do not bring visible profits. However, solar includes return on investment from energy savings. Electricity price is increasing by 12.8% per year. (See Exhibit 3.) Therefore, installing solar may become a hedging against this risk. As a result, solar projects may experience up to 20% IRR (internal rate of return.) (See Case Study: A Clothing Manufacturer in Central Java, Indonesia)

2. Environment

Global warming is a widespread topic. If this continues, we may see the temperature rising by 4°C in the next 200 years.³ Likewise, Greenland lost 281 billions tons of ice per year.⁴ A major cause of this issue is CO2 emission from conventional energy sources, such as coal. By comparison, solar emits significantly less CO2. (See Exhibit 4.)

3. Regulation alignment

Kepmen ESDM 1567 K/21/MEM/2018. Indonesian Ministry of Energy and Mineral Resources supports the adoption of renewable energy while aiming to avoid the reliance on conventional energy sources.

Peraturan Direksi PT. PLN 0733.K/DIR/2013. Indonesian government has instructed State Electricity Company (PT. PLN) to allow “energy export.” Basically, it allows building owners to sell their solar energy surplus to PLN. This is a great scheme for solar owners, as their surplus energy production is not wasted when unused.

4. Warranty

Many solar installers simply build the project, then stop caring about it once they get paid. However, Inspecro treats each project as a continuing relationship over its lifetime. Therefore, as long as they are not due to the consumer’s errors or force majeure events, we assist in solving technical related problems during the 25 years of lifetime.

For an example of our work, visit our Case Study.

References

¹ International Renewable Energy Agency, “Renewable Capacity Statistics 2018,” 2018.

² Extrapolated from the temperature increasing by 1°C in the last 50 years. NASA, Goddard Institute for Space Studies.

³ NASA, “Ramp-Up in Antarctic Ice Loss Speeds Sea Level Rise,” 2018.

Disruptive Innovation of Solar Energy

1. Defining Disruptive Innovation

What is a disruptive innovation? Disruptive innovation is a term popularized by Clayton Christensen’s widely known book The Innovator’s Dilemma. Christensen pointed that a disruptive innovation delivers currently neglected value metrics which are different from value metrics by mainstream markets. For example, think of Tesla’s automobile value metrics: self-driving and “green”; in contrast with value metrics of traditional automobile: acceleration and top speed.

Hence, is solar energy a disruptive innovation? To answer the big question, let us examine what value metric does the solar energy bring to the table.

2. New Value Metrics of Solar Energy

Mainstream value metrics of the energy sector are:

  • Costs (how cheap is its per kWh of electricity production?)
  • Demand Response (how fast can it satisfy sudden spike in load demand?)

Solar Energy on the other hand, can be used in all parts of the world, including in areas without access to an electricity grid. This new value metric of “location independence” could be observed in off-grid applications globally. (See Exhibit 1.)

Off-Grid Solar PV Capacity increases from 13% of total renewable capacity in 2008, to 41.7% in 2017

Christensen also added that a common pattern of a disruptive innovation is that it would first conquer the new value metric, then proceed to conquer the mainstream value metrics. Hence, our next question is, how is solar PV performing in terms of the mainstream value metrics: costs and demand response?

Mainstream Value Metric 1: Costs

As shown in the graph below, cost of solar PV has been dropping sharply from 0.36 USD/kWh in 2010 to 0.10 USD/kWh in 2017. While solar PV is not the cheapest renewable energy today, it is projected to be the cheapest renewable energy in the near future. This outlook is driven by the 17% annual cost reduction for solar PV while other renewable energy sources are stagnant in costs. (See Exhibit 2.)

Solar PV has experienced 17% annual cost reduction while other renewable energy sources are stagnant in costs

Mainstream Value Metric 2: Demand Response

This is perhaps the area where solar PV is the weakest because its generation is solely reliant on the availability of sunlight, which is not correlated with electricity demand. However, this issue may be mitigated by using a battery storage which can store solar energy and satisfy sudden demand in electricity. In terms of its cost, battery is becoming economical due to the increased productions for electric vehicles batteries, ultimately driving down the learning curve. (See Exhibit 3.)

Energy storage cost has decreased from 1000 USD/kWh in 2010 to 273 USD/kWh in 2016.

3. Conclusion

Solar PV is disruptive due to its new value metric: “location independence”. Additionally, it is getting more competitive in the mainstream value metrics:

  • Cost: Solar PV cost reduces by an average of 17% annually. Continuing its learning curve, solar PV will likely become the cheapest renewable energy source in 2024.
  • Demand Response: Decreasing cost of storage means demand response is more economical as more storage may be deployed in the future.

Therefore, at the point where these two mainstream value metrics reach parity with other energy sources, solar PV disruption will likely proliferate from off-grid applications to on-grid residential and commercial uses. Consequently, utility grids are facing the threat of disruption as consumers defect to solar PV. Unless they find new business models, they will not be able to offset the depreciation costs of installed transmission and distribution systems.

Furthermore, the value metric of “location independence” gives solar the opportunity to rewire our very own capitalism. By solar energy, we can now power decentralized means of productions assisted by IoT and 3D printing. This brings us into the prospect of the solar energy being capable to shift us to a post-capitalism economy.

Learning Curve of Solar Energy

What is a learning curve? Basically, a learning curve describes how a process becomes more efficient as more output is produced. This could be used to predict future cost reduction of solar PV.

1. The Learning Curve

Solar PV is very disruptive to the electricity grid. It is expected to be cheaper by 32.6% for every doubling of installed capacity, based on the learning curve shown in the figure below. As a comparison, the recently trending wind energy is expected to be cheaper by only 15.9% for each doubling of capacity.

Learning Curve of Solar PV and Wind Energy, 2010 to 2017

2. Solar PV Cost Forecast

Assuming there are no unfavorable policies or drastic changes to business models of utility grids, solar PV cumulative capacity is projected to increase to 1,213 GW in 2024 as shown in the figure below. Under the learning curve relationship, solar PV cost is expected to fall to 0.05 USD/kWh.

On the other hand, the price of hydro energy being the cheapest renewable energy, has seemed to be stagnant at 0.05 USD/kWh since 2010. Furthermore, other forms of renewable energy have much weaker learning curves compared to solar PV. Therefore, these developments suggest that in the current trend, solar PV will likely become the cheapest renewable energy in 2024.

Solar Power Plant Valuation

A manufacturing factory consulted Inspecro on electricity cost savings. So, we recommended a 77.5 kW solar power plant / PLTS. Then, the Managing Director asked, “Is this project profitable?”

To answer that, we can calculate the present value of future savings:

This might look confusing. But I promise you it will get easy very shortly.

Electricity cost savings. Our engineering study found that the PLTS will produce 123,100 kWh of electricity, every year. Meanwhile, the 2019 PLN Tariff is Rp 1,035 per kWh. By multiplying the two numbers, we knew the factory will save Rp 127 millions, before any increase in PLN tariff.

Savings growth rate. PLN tariff will not stay the same forever, right? Therefore, isn’t it safe to say the PLN tariff will rise? Let us forecast that PLN tariff increases by 5% per year. However, honest installers will also tell you that solar panels degrade by 0.7% per year. Therefore, the “ethical” savings growth rate is 4.3%.

Opportunity cost of capital. What is the return of your next best investment with similar risk? With a 25 years warranty on solar panels, isn’t the risk extremely low? So, the only investment with the same level of safety is 25 years Indonesian Government Bond, right? (It’s hard for a government to go bankrupt.) At the time of this writing, its yield is 8.5% per year. Therefore, your opportunity cost of capital is 8.5%.

Lifetime years. This one is easy. With a 25 years warranty on solar panels, isn’t the lifetime 25 years as well?

Now the fun part, putting the numbers:

We found that the present value of future savings is Rp 1.9 billion. Meanwhile, the investment is Rp 1 billion. This means, literally just by saying yes to the PLTS, wouldn’t the Managing Director be contributing Rp 900 millions of present value profit to his company?

End of Capitalism by Solar Energy and Decentralized Economy

Is capitalism the prevailing economy today? Yes. Will it continue to be that way? Probably not. Put simply, capitalism is an accumulation of capital to derive profits. This is done by matching supply-demand. However, the irony is that by successfully doing this in a long term, capitalism is nearing its own death. How is this so?

Capitalism Paradox

In his New York Times bestseller The Zero Marginal Cost Society, Jeremy Rifkin pointed that our technological advances have allowed extremely efficient industrial productions. Supply is increasing, opening larger demand as a result. Consequently, marginal cost is pushed to near-zero, making goods and products abundant, to the point of almost free or near-zero prices. When this happens, profit plummets. Therefore, capitalism final destiny is its own end.

Advent of the New Economy

Rifkin added that Collaborative Commons is a logical successor to capitalism. It is an economy which sharing goods or services is prioritized over ownership, and decentralized production over the centralized. Some of the technologies assisting these movements include Internet of Things and 3D printing. However, for these technologies to contribute, they need an important component: energy to drive them in decentralized regions.

Decentralized Energy Source

Not just any energy, though. It has to be a form of energy which can be installed in a smaller scale, therefore allowing it to supply electricity to the decentralized Internet of Things and 3D printing.

  • Coal-fired, nuclear, geothermal and hydro energy sources require large scale installations, therefore inappropriate for the decentralized applications.
  • Wind energy sources can be installed in a somewhat smaller scale, but some regions have inadequate wind resources.
  • Solar energy on the other hand, do not possess those difficulties.

Furthermore, solar energy costs have dropped 73% since 2010 to 2017, making solar energy an increasingly attractive option for our upcoming decentralized economy.

References

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

Renewable Power Generation Costs 2017 by International Renewable Energy Agency (IRENA)

3 Types of Solar Energy Installation

There are three types of solar energy installations:

  1. On-Grid
  2. Off-Grid
  3. Hybrid

How are they different? Let us examine each one.

1. On-Grid System

  • Can be used in parallel with the grid
  • Imagine the grid as a form of battery in this case – surplus of solar energy can be “stored” in the grid,
  • In cloudy days you can withdraw that “stored” energy from the grid.

2. Off-Grid System

  • Used in areas without the grid. Therefore, it requires a (physical) battery as an energy storage.
  • Similar to On-Grid system, surplus of solar energy is stored, but this time in a real battery.
  • The most expensive type of solar installation because of the requirement to get batteries.
  • Battery lifetimes stay only for 8 to 10 years while solar project is usually expected to last for 20 years. This means that the batteries will need to be replaced at least once during the project lifetime.

3. Hybrid System

  • Using diesel generator as backup power.
  • Similar to Off-Grid system, Hybrid system is installed in areas without the grid, therefore it requires batteries as energy storage.
  • However, because there is now a backup diesel generator, the batteries need not be as large as Off-Grid system, meaning lower costs can be achieved. This economics advantage is the reason why Hybrid system is popular in remote areas which are not yet exposed to the grid.