Evaluating the factors affecting the break-even cost of on-site PV generation at industrial units

Abstract

This paper studies the way in which the regulatory framework and market rules affect the feasibility of on-site PV generation for large industrial units. In most European markets net metering and feed-in tariffs for self-consumed electricity are not possible or are being phased out, providing an incentive to the industry for becoming more flexible in the way electricity is consumed in order to maximise the percentage of the variable electricity generated on-site that is self-consumed. The electricity cost for the industry is the benchmark for PV or any other on-site generation technology and in general on-site solar energy is competitive with that. However, as the regulation develops further, the exemptions of paying the regulated charges for the electricity that is self-consumed are phased out. Also the cost of flexibility required to self-consume all variable on-site generation has to be added to the LCOE of solar electricity, moving it further away from the competitiveness benchmark. Still, as the LCOE of solar electricity reduces continuously mostly due to the reduction of PV system costs, it becomes competitive for more and more users in more and more target markets.