Question about 'Value of electricity savings' - solar PV model

Paul, can you tell me what's included in the 'Value of electricity savings' inside the cash flow statement for your solar PV model. Does it include the small demand charge reductions that SAM models? Does it include anything else besides the energy (kWh) savings? Please advise.

Thanks in advance, Brian S.

Dear Brian,

The value of electricity savings is the reduction in the building's annual electricity bill due to the renewable energy system. It is affected only by the building load, system output, and electricity rate structure. It is not affected by the project installation, operating, or financing costs.

SAM uses the electric load data and electricity rate structure to calculate what the building's annual electricity bill would be without the renewable energy system, and reports it as "Electricity cost without system." It also calculates the "Electricity cost with system," which is the building's annual electricity bill with the renewable energy system, assuming that the project buys electricity for hours when the load is greater than the renewable energy systems output.

For Year 1, the value of electricity savings is the cost without system minus the cost with system. For Years 2 and later, the value is the Year 1 value adjusted by the inflation rate from the Financial Parameters page and the Electricity cost escalation rate from the Electricity Rates page.

Best regards,
Paul.

Thank you for the explanation, Paul. That's very helpful.

Dear Paul,

would you be able to inform the formula behind "electricity savings" after the first year? I have estimated a 10% increase in energy generation in my system which will alter the electricity savings and my economic analysis (LCOE, NPV, etc). However, I can't figure out how to calculate the new electricity savings accounting adjusted inflation and discount rate. (I use SAM open code which gives me an excel sheet to do the estimate).

Best regards,

Gardenio

Hello,

My explanation above omits the effect of degradation. SAM's electricity bill calculator runs through the entire analysis period and calculates the electric bill for each year based on the system's output with degradation.

You can see those annual values on the Results page's Data Tables tab under "Annual Data." For example you can see the annual energy charge varying from year to year with the degradation rate.

To more clearly see the effect of degradation on the results, set both the inflation rate on the Financial Parameters page and the annual electricity bill escalation rate on the Electricity Rates page to zero.

Best regards,
Paul.