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Electricity Purchases for Front-of-meter Financial Models
- pgilman
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06 Jan 2022 17:10 #10480
by pgilman
Electricity Purchases for Front-of-meter Financial Models was created by pgilman
As of SAM 2020.12.02, SAM's front-of-meter (FOM) financial models (Single Owner, Partnership Flip, Sale Leaseback, Merchant Plant) require that you specify a retail power price for electricity purchases for the power system's electricity consumption.
We had to make this change to accommodate the levelized cost of storage (LCOS) metric that we introduced in this version of SAM. The Electricity Purchases page is intended to specify the price for power purchased from the grid to meet night-time consumption such as for freeze protection, or for anything that causes generation to be negative in a given time step.
In older versions of SAM, freeze-protection energy (and inverter night-time consumption for PV systems) was deducted from power generated by the system, so it was effectively treated as a reduction in energy that could be sold at the PPA price. That approach was fine for relatively small amounts of this kind of self-consumption, but with battery storage (and the new ETES model) we needed a better way to account for the cost of purchasing power to charge the battery.
SAM now treats the cost of purchasing electricity as a tax-deductible operating expense. On the Electricity Purchases page, you can choose to use the PPA price(s) for this cost, or specify a different retail rate. Unfortunately, if you are using the Specify IRR mode, SAM doesn't know what the PPA price is until after the simulation runs, so the use PPA price option for electricity purchases is not available with Specify IRR.
To use the Specify IRR mode with the PPA price for electricity purchases, choose the "Use retail electricity rate(s)" option on the Electricity Purchases page, and set the buy rate to the PPA price. For time series power pricing, you can check the "Use hourly (subhourly) buy rates instead of TOU rates)" and use the time series PPA prices for the sell rate.
The NPV and other financial results will be a bit different than older versions of SAM because of the treatment as operating cost, but we think this should be more representative of what it would be for a real project.
If you have feedback on this approach, please let us know.
Best regards,
Paul.
We had to make this change to accommodate the levelized cost of storage (LCOS) metric that we introduced in this version of SAM. The Electricity Purchases page is intended to specify the price for power purchased from the grid to meet night-time consumption such as for freeze protection, or for anything that causes generation to be negative in a given time step.
In older versions of SAM, freeze-protection energy (and inverter night-time consumption for PV systems) was deducted from power generated by the system, so it was effectively treated as a reduction in energy that could be sold at the PPA price. That approach was fine for relatively small amounts of this kind of self-consumption, but with battery storage (and the new ETES model) we needed a better way to account for the cost of purchasing power to charge the battery.
SAM now treats the cost of purchasing electricity as a tax-deductible operating expense. On the Electricity Purchases page, you can choose to use the PPA price(s) for this cost, or specify a different retail rate. Unfortunately, if you are using the Specify IRR mode, SAM doesn't know what the PPA price is until after the simulation runs, so the use PPA price option for electricity purchases is not available with Specify IRR.
To use the Specify IRR mode with the PPA price for electricity purchases, choose the "Use retail electricity rate(s)" option on the Electricity Purchases page, and set the buy rate to the PPA price. For time series power pricing, you can check the "Use hourly (subhourly) buy rates instead of TOU rates)" and use the time series PPA prices for the sell rate.
The NPV and other financial results will be a bit different than older versions of SAM because of the treatment as operating cost, but we think this should be more representative of what it would be for a real project.
If you have feedback on this approach, please let us know.
Best regards,
Paul.
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