Negative Net Present Value, LCOE and other Mysteries

Paul,

I've been working on this rather basic residential system off and on for quite awhile. I feel reasonably confident in all my input data. Although string sizing and inverter matching are subjects that need additional study on my part. Also, need to spend a bit more time improving my skills with creating load data in SAM.

The basic design of my research study is an 8 KW residential PV system modeled in two electric utility service areas using the correct rates and changing the modules and inverters within each rate structure to model the effects of production based incentives offered by the State of Washington. As you may be aware, the incentives in Washington favor the installation of "Made in Washington" components.

I have also set up a parametric analysis to demonstrate the impact of reducing the total installed costs by increments of $0.50/W for each of the four cases.

I relied on baseline cost data from The Open PV Project for a range of systems sizes from 6 KW - 10 KW for the 2012 and 2013 calendar years. Note, the resulting sample size is small when compared to the number of system installations reported by PSE and SnoPUD. When available, more representative installation cost data was used from the utilities. Note one utility has tiered rates while the other has seasonal adjustments; essentially winter versus summer. In both instances I used a flat rate and checked the net metering box with no end of year $ per kWh rate.

However, the results are a bit perplexing. When the base case incentive of $0.15/kWh is used in either utility service area, the cash flow analysis essentially fails; even though I'm modeling a much higher efficiency module. When the "Made in Washington" incentive of $0.54/kWh is used the cash flow passes with flying colors. So much so, that the LCOE becomes a negative value. That strikes me as impossible.

In addition, I'm getting a DC GWh versus DC kWh results in the SAM report model that seem to be somehow tied to the production based incentives. Again, I'm baffled!

If you could review the attached project file and comment that would be most appreciated.

Thank-you for your time.

Hello,

The results of your analysis suggest that the LCOE is very sensitive to the PBI incentive. The negative LCOE values show that the value of the generous $0.54/kWh PBI is higher than the initial project cost at the lower installation costs. Mathematically, the LCOE is negative when the present value of the after-tax cash flows in Years 1 and later is more positive than the Year zero cost is negative -- in other words, when the out-year benefits are more than the initial investment. If you have Microsoft Excel installed on your computer, you can see the calculations by clicking "Cash Flows" on the Results page, and then clicking "Send to Excel with Equations." Is any of that helpful?

You might be able to get away with the 7kW inverter in place of the 8 kW one. If you model the inverter cost in $/Wac (on the system costs page), you would see a cost benefit from the smaller inverter.

I'm not sure what you mean by the "DC GWh versus DC kWh results" issue. Are you seeing an error in the PDF report?

Best regards,
Paul.

Thanks for your reply. With respect to LCOE and incentives I've spent a bit more time noodling this around and it makes sense. Note, I use OpenOffice Calc software which is not compatible with SAM's "send to Excel with Equations command". Perhaps there's some kind of end around solution for that.
What I found surprising was the base case PBI of $0.15/kWh had no economic benefit with all other economic factors being essentially equal. I purposefully specified a higher nominal wattage and more efficient module in Cases 1 & 3. I was trying to examine a higher yield system using out of state components to see if it could compete against Made in Washington product offerings. But the lower incentive level doesn't result in a positive cash flow. Perplexing because these same product lines have been featured on several installer web sites.
The DC GWh vs DC kWh issue results from the Annual Results (in Year 1) section on the System Advisor Model Report. In cases 1 &3 the results are expressed in DC GWh from array at 0.010, whereas in cases 2 & 4 the results are expressed in DC kWh from array at 9,940. So somethings wrong somewhere. I've checked my module, inverter and array input pages and haven't picked up on anything yet. Note this may be the culprit with respect to negative base case cash flow.
Cannot attach a file to this reply format. But will follow up with a separate posting if you want to take a look at these reports.
Thanks again for your assistance.

When you click the Send to Excel with Equations button, SAM creates an .xls file in your Windows Local AppData folder:
C:\Users\[username]\AppData\Local\SAMEXE\SAMEXE-[username]-INST1-2014.1.14
You may be able to find the file there and open it with your spreadsheet software. I have not tested this on a machine without Microsoft Excel, and would be interested to know if that works for you.
In your comparison, the installed cost in $/Wdc is the same for both the made in Washington case and the higher efficiency case with out-of-state components. Is that what you intended? If you haven't already, you might want to compare the two cases without any incentives so that you can isolate the effect of the more efficient components (and potentially different installation cost) on the LCOE.
Now I see the problem in the report -- thanks for the clarification. Here is a custom report template that should correct the problem, and also displays the correct value for the incident solar radiation. To use the custom template, download the custom template (.samreport 72 KB)  and put it in the reports folder of your SAM installation folder, which by default (in Windows) is:
C:\SAM\2014.1.14\exelib\reports
Do not remove or modify any of the other files in the folder. Now when you generate a report for a residential or commercial PV case, SAM will display a window where you choose the template you want to use. Use the custom template to generate a report that fixes those issues. (The default template is designed to work for a range of system capacities, from under a kW to hundreds of megawatts and tries to round numbers and change units automatically. For the DC array output, it switches from kWh to GWh at 10,000 kWh, which is why you saw different units in the reports for the two cases.)
Finally, in theory, you should be able to attach files to your original post above by editing it. It is not possible to attach files to replies to an original post.
Best regards,

Paul.

Tried "Send to Excel with Equations" command and received following pop up messages: "Cannot Obtain CLSID from ProgID" then "Could Not Start Excel". Found C:\Users\User\AppData\Local\SAMEXE folder. I have two folders in that location: SAMEXE-User-INST1-2014-1.14 and SAMEXE-User-INST2-2014-1.14. Each contains a simdata folder with multiple project files; some containing data, some not. Tried searching in INST1 and INST2 folders for *.exe files but nothing was identified.
You're correct in spotting my erroneous thinking with using the same $/W cost for both the higher efficiency cases (1&3) and the made in Washington cases (2&4). I will follow your recommendation and run cases without incentives. Plans also include a conversation with a few local manufacturers and installation firms to obtain more accurate cost estimates. Then running cases with incentives.
The custom template works and the resulting reports reflect the proper capacity and energy rating in all cases.
Will attach sample corrected report(s) to original message and see if that works.
Thanks again for all your help.

It looks like I misspoke about Send to Excel with Equations and Microsoft Excel. SAM requires Excel to generate the file, so it will not work if you do not have Microsoft's software installed on your computer. Sorry for misleading you on that point.

Best regards,
Paul.