Procedure for Calculating Integration Cost for Grid Interconnection of Prosumers MSDG Installation and Prosumers Monthly Non-refundable Contribution

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Barnaby Bryant
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1 Procedure for Calculating Integration Cost for Grid Interconnection of Prosumers MSDG Installation and Prosumers Monthly Non-refundable Contribution 1.0 Introduction Grid integration of variable electricity generation systems has a serious influence on a power system s power quality and reliability of supply. Prosumers MSDG projects, unless equipped with appropriate technologies, characteristically foist similar effect. To mitigate the impact of the intermittencies of renewable energy sources such as solar and wind, as an alternative, the CEB shall in continuity ramp up and ramp down its generating reserve, while at the same time have sufficient generation capacity to compensate for loss of or reduction in the power generation capacity of MSDG installations. The outcome is an important increase in the cost of operation of the CEB. The resulting cost, which is also created by MSDG Prosumers projects, here, is referred to as the Integration Cost. 2.0 Determining the Integration Cost The methodology for determining the integration cost for grid interconnection of Prosumers MSDG installation is explained hereunder Major Assumptions The major assumptions underlying the calculation of the Integration Cost are as follows: The cost of investment in equivalent firm power generation, which shall compensate reduction in and intermittencies of power output of Prosumers MSDG VRE generation, is estimated at Rs 50,000 per kilowatt. This is equivalent to the 2012 per kilowatt investment cost of the Fort Victoria Power Station redevelopment. The average monthly electricity sales to the Prosumer, which is based on the Prosumer s preceding consecutive twelve months electricity consumption, is adjusted to account for the estimated energy production of the Prosumer MSDG installation. A Connection Agreement for a period of twenty years. A discounting rate of 8% per annum. The estimated Integration Cost shall be shared equally between CEB and the Prosumer.

2 2.2. The Integration Cost Formula The Integration Cost (Rs per kwh), which is calculated so as to fix the non-refundable MONTHLY CONTRIBUTION of the Prosumer, is calculated by the hereunder formula. Where, { ( ) } Tot_Inv n is the value of the total initial investment, which is equal to Rs 50,000 multiply by the capacity (kw) of the MSDG installation. is for period (1,2,3,,20); i.e. the duration of the Connection Agreement which is 20 years. is the estimated annual electricity (kwh) sales, which is the total 12 months electricity consumption, prior to the operation of the MSDG, adjusted by the amount of estimated electricity generation of the MSDG, given by the hereunder formula. { } ( ) Where, m is for period (1 to 12) C is the periodic (monthly) electricity consumption prior to the installation of the MSDG MSDG_Cap is the installed capacity in kilowatt-peak of the MSDG. CUF is the average Capacity Utilisation Factor of solar PV generation in Mauritius, taken as 18%. The CUF for other RE technologies shall be subject for discussion is the total number of hours in a year Note: In case of insufficient consumption data, both parties shall mutually work out and agree an estimated E n. If E n is less than or equal to zero, E n is to be taken as 1. i is the discounting rate, taken as 8%. k is taken as 2 in order to transfer 50% of the integration cost to the CEB. A numerical example is given in Annex to illustrate the application of the formula for calculating the Integration Cost.

3 3.0 The Monthly Contribution Payable by the Prosumer For the purpose of the cost recovery and in the interest of the Prosumer, the 50% of the total Integration Cost, which accrues to the MSDG Prosumer, is converted into a fixed nonrefundable MONTHLY CONTRIBUTION, payable by the Prosumer, by the hereunder formula. n P is for period (1, 2, 3,, 20); i.e. the duration of the Connection Agreement, which is 20 years. is the estimated annual electricity (kwh) sales, given by the formula above. is the total number of electricity consumption periods over the life of the Connection Agreement, taken as 240, i.e. 20 years multiplied by 12 months. Refer to the numerical example in Annex to understand the application of the above formula for calculating the Monthly Contribution Reasons for Converting the Integration Cost into a Fixed Monthly Contribution In the interest of the Prosumer, the Integration Cost is converted into a fixed Monthly Contribution for two reasons, these are as follows: The Integration Cost is dependent on two variables, the average monthly energy consumption and the rate (cost per unit). If the Prosumer s average energy consumption increases, then the payable Integration Cost will increase by default. The second variable, i.e., the rate (cost per unit) of the Integration Cost, which would be embedded in the present Running Charge of the electricity tariff, also exposes the Prosumer to a potential higher payment of the Integration Cost in case the electricity tariff increases. Therefore, to mitigate the above financial risks, the Integration Cost is converted into a fixed Monthly Contribution.

4 ANNEX Numerical Example illustrating the Application of the Formula to Calculate the Integration Cost and the Prosumer Monthly Contribution Suppose a potential Prosumer wishes to install a 10 kw grid-connected solar PV installation with a CUF of 18% and a market discounting rate of 8% for the cost of capital. In addition, the Prosumer monthly electricity consumption for the last consecutive twelve periods, prior to the operation of the MSDG, is as shown in the table below. Period (m) Electricity (kwh) Consumption (C m ) Period (m) Electricity (kwh) Consumption (C m ) 1 4, , , , , , , , , , , ,395 The Integration Cost and the ensuing Monthly Contribution, as remuneration for managing the influence of Prosumers solar PV installations on the CEB grid operation, are calculated as follows: WORKING (1) The total investment (Tot_Inv) = Rs 50,000 * 10 kw = Rs 500,000 (2) Total annual electricity consumption (C m ) = 52,476 kwh (3) The estimated annual electricity sales(e n ), which is calculated by the formula below, is = 52,476 (10 kw *18%* 8760 hours) = 36,708 kwh { } ( ) (4) The total estimated future annual electricity sales ( ) for the duration of the Connection Agreement = E n * 20 years = 36,708 kwh * 20 years = 734,160 kwh

5 (5) Total discounted energy (in kwh) is: ( ) = 360,405 CALCULATING THE PER UNIT INTEGRATION COST USING THE HEREUNDER FORMULA { ( ) } * + ( ) CALCULATING THE PROSUMER MONTHLY CONTRIBUTION USING THE HEREUNDER FORMULA ( )

TAMIL NADU ELECTRICITY REGULATORY COMMISSION. Tariff Order No 1 of 2010 dated

TAMIL NADU ELECTRICITY REGULATORY COMMISSION Tariff Order No 1 of 2010 dated 27.05.2010 Sl.No Description Summary of Regulations 1 Title Tariff order for projects covered by Jawaharlal Nehru National Solar