at Rex Hill Winery
Management of Rex Hill Winery has been highly concerned about climate change. They have heard about the Solar Sprint campaign to go solar now before the federal tax credit expires at the end of 2016. They also knew about the other incentives available on installation of solar electrical systems. Considering environmental benefits, they desired to install a PV solar panel system at their property. However, they wished to take a final decision on the project based on a feasibility study. As Rex Hill’s consultant, I have been entrusted the job of preparation of a brief feasibility of installing a PV solar panel system at Rex Hill Winery.
Feasibility Report for Solar Panel Installation at Rex Hill Winery
Introduction
The burning of fossil fuel is causing climate change or global warming. Moving from fossil fuel to solar energy for electricity generation helps in reduction of carbon emission, as the production of electricity from solar energy is carbon free. Besides, solar power is renewable and inexhaustible. The cost of installation of solar installations has come down in last five years. Further, financial incentives have made the cost of production of electricity from solar systems competitive in comparison to grid power.
There are two primary ways to consider the economics of solar installation: these include the total cost over the life of the system and payback period. Total cost is calculated by subtracting out any incentives and tax credits from the upfront installed cost. Payback period is determined by calculating the number of years needed to pay off the system cost (Why Go Solar, 2016).
Objectives
Solar energy is only available during daytime and favorable weather conditions. Therefore, it can not replace grid electricity completely. In most cases, photovoltaic (PV) installations help in reduction of electricity demand from the grid. The main objective while designing the PV installation is to supplement the grid supply thus reducing the amount of energy taken from the grid. This ensures substantial saving in the electricity bill and total annual savings may exceed the cost of the capital employed to install the PV system. It may be emphasized that the design of a PV system is critical. While designing the system, all the possible scenarios prevailing during all seasons should be taken into consideration.
REX HILL Winery
REX HILL Winery founded in 1982 is situated at Newberg in the state of Oregon. A to Z Winewoks purchased REX HILL Vineyards and Winery in 2007. The vineyard is situated around the winery. The total area of the estate is 38 acres out of which Pinot Noir is planted on 17 acres as shown below (Rex Hill, n.d.). Biodynamic farming and sustainable business are practiced to achieve a commitment to excellence.
Climate and Solar Energy Data
Newberg, Oregon gets 43 inches of rain per year whereas the US average is 37. Average snowfall during the year is 4 inches against 25 inches of snow for the average US city. There are roughly 150 days when measurable precipitation takes. The average number of sunny days in Newberg, Oregon is 155. Maximum temperature is 80 degrees F in July and minimum is 34 degrees F in January. Climate data of Newberg is enclosed as Annexure-I. Monthly Averaged insolation incident on a horizontal surface around Newberg is 3.55 kWh/m2/day with maximum 6.22 kWh/m2/day in July. The detail parameters for sizing and tilting of solar panels and for solar thermal application around Newberg are included as annexure-II (NASA Surface meteorology and Solar Energy, 2016).
PV Systems
Solar photovoltaic are semiconductor devices that convert energy from solar radiation directly into electricity. They are responsible for the electricity generation of a solar energy system. When sunlight strikes a PV cell, it stimulates electrons and high energy electrons jumps to another layer. By connecting the cell to an external load, movement of electrons or the electric current is made available for use as electric power. PV panels are made of PV cells. An array of PV modules are created by connecting the panels suitably in series and then in parallel to reach the specific voltage and current requirements for the array. The direct current (DC) electricity thus generated by the array is converted by an inverter to usable alternating current (AC). Thus, no moving parts are involved in generation of electricity. The process is also noiseless and environ friendly (Steen, Lisell,& Mosey, 2013, p-5).
The PV modules must be mounted in an unshaded location like rooftops or ground. PV panels are very sensitive to shading as individual cells which fall in the shaded portion and do not receive radiation, act as a resistance to the whole series circuit impeding the current flow and dissipates energy as heat instead of producing it.
Types of PV Systems
Several PV panels and mounting options are available. Each option has different benefits. The energy density values of each type of system are provided below ( Lisell,& Mosey, 2010, p-3):
Solar cells are traditionally made from silicon. They are highly reliable, engineered to withstand extreme temperature, severe winds, and impact. Silicon modules have a life span of in the range of 25 to 30 years. ASTM E1038-05 standard specifies modules to withstand impacts from one-inch hail balls at terminal velocity. Material of construction of thin-film PV cells are amorphous silicon (a-Si) or non-silicon materials such as cadmium telluride (CdTe). Thin film technology is becoming increasingly more cost-effective and has the added advantage that it is less sensitive to the angle of incidence of solar irradiation. The overall energy yield for a fixed installation during a normal day is higher than crystalline solar panel installations of the same rating. However, thin film PV panel arrays take up more space compared to Crystalline solar panels (Lombard, n.d., p-4).
Single-axis tracking systems have a variable tilt so that the systems follow the sun in its path through the sky allowing the solar radiation to strike the panel at an optimum angle for a larger part of the day which is not the case with the fixed-tilt system. This allows a single-axis tracking system to collect nearly 30% more electricity per capacity than can a fixed-tilt tracking system. However, single-axis tracking system requires higher operations and maintenance costs, and greater installed cost ($/DC-Watt) than the fixed-tilt system.
We have considered fixed-tilt systems in our study as operational and maintenance cost for the system is negligible. Moreover, fixed-tilt system is cost effective for small installation in comparison to a single-axis tracking system. The fixed-tilt system is installed at a specified tilt. Newberg is situated at 45.31 N latitudes and -122.96 W longitudes. For the purpose of this analysis, fixed-tilt system has been assumed to be mounted at latitude with a tilt of 45.31 degrees.
PV system can be roof-mounted or ground-mounted. Roof –mounting has advantage as a roof is usually unshaded and out of way. However, this is more expensive than a ground-mounted system. Further, PV systems are installed on roofs that are less than 5 years old or have 30 years of life left ( Lisell,& Mosey, 2010, p-4) .
REX HILL vineyard has sufficient unshaded vacant land for installation and its buildings are more than 5 years old. For our study, ground-mounted PV installation has been considered.
PV System Components
The PV system mainly consists of following components:
PV arrays: The most important part of the system that converts light energy to DC electricity and contributes 90% of the total cost of the project.
Inverters: Converts DC to alternate current at required voltage and number of phases. The output from inverter can be used to run commonly used equipment such as appliances, motor, office equipment, and freezer.
Balance of System components: PV system consists of other parts such as mounting rack and hardware for the panels and wiring for electrical connections, a disconnect switch to cut-off grid power from generating system when required. PV system monitoring equipment increases the reliability of functioning and optimum performance. It may simply produce AC power voltage, daily kilowatt-hours, and cumulative kilowatt-hours locally on an LCD display on the inverter. Sophisticated monitoring systems include environmental data such as module temperature, ambient temperature, solar radiation and wind speed.
Size of PV System
20 kW PV System has been proposed for REX HILL Winery. The average monthly energy use of the facility has been studied. However, actual peak consumption during the day or lean consumption figures was not available. Consumption figures based on individual equipment ratings and energy consumption in wineries of the same size has been ascertained to determine the size of PV system.
Safety and Protection of PV Installations
It is important to follow all safety features during installation to prevent fire and shock hazard. Following requirements should be applied:
Proper earthing of the PV frames and mounting structures
Earth fault detection should be provided
Automatic disconnection and shut-down of inverter under fault conditions
Earth fault indication to facilitate easy and quick fault location
Aluminium to copper connections should be electrically sound
Financial Viability
Determining financial viability of PV installation is a complex exercise because of involvement of different variables. We have made following assumptions for simplifying the exercise.
The project includes installation of a ground-mounted 20-kW solar array along with all accessories. Solar panels will be prepared using Crystalline Silicon and arrays will be fixed-tilt at 45.31 degrees. The offer of Sunbridge Solar, the solar installation company, has only been considered. No other competitive bid has been considered. Sunbridge Solar has undertaken to complete supply, and installation of the project. The capital cost involvement for the project is $82,000. They have agreed to finance the project with a 5-year loan at 6% interest. This comes to monthly payment of $1,585 towards loan amount. They have agreed to 20 years warranty period. Sunbridge Solar has also agreed to provide an energy monitoring system.
The current electric rate at Oregon is 5.77 and 8.87 cents per kWh for industrial and commercial customers respectively (Electric Power Monthly, 2016 June). The project will save around $900 per year on utility cost over the first 5 years. Future increase in electricity rates can not be predicted with certainty. We have considered different scenarios for the electrical rate increase during the remaining period of the project. While calculating financial feasibility, operation and maintenance costs have not been considered as both the cost components are small for solar PV generation plant.
Incentives: Energy Trust of Oregon will provide a first year rebate of $ 20,000. Rex Hill will get state Business Energy Tax Credit worth 50% of the cost of the system which will be evenly spread over the course of 5 years. Rex Hill also qualifies for a Federal Tax Credit worth 30% of the cost of the system spread evenly over the course of 3 years. They will receive tax benefit relating to the rapid depreciation of the equipment allowing them to write off 85% entire cost of the system over 5 years. After consulting with tax advisor, it has been determined actual tax savings for Rex Hill amount to $2,500 per year for the first 5 years.
Analysis: The economics of a potential PV system depend greatly on the cost of electricity. As discussed earlier, future rate of increase is uncertain. The analysis has been done considering 5%, 10%, and 20% yearly rate increase. 5% and 10% rate increase scenario has distinct possibility given the passage of the legislation limiting greenhouse gas emissions. 20% increase scenario is less likely but not impossible (Lisell,& Mosey, 2010, 26). While calculating net present value, 6% discount rate (same as interest rate considered for loan amount) has been considered.
Based on above data, yearly cash flow statement for total life of the PV system has been generated. The result of analysis is tabulated below:
Net Present Value has been calculated by using formula FV/ (1 + Discount Rate)
Where “FV” is the projected cash flow for each year and “n” is the number of periods of the cash flow is from the present.
Conclusion and Recommendation
It may be emphasized that a renewable energy project aligns closely with the vision of management of Rex Hill and generating electricity from green source will enhance their reputation.
Annexure-I
Courtesy: Sperling’s Best Places, Portland, Oregon
Annexure-II
Latitude 45.307 / Longitude -122.96 was chosen.
Parameters for Sizing and Pointing of Solar Panels and for Solar Thermal Applications:
Courtesy: NASA Surface meteorology and Solar Energy
Annexure-III
Loan payment : $1,585 per month: $19,020 per year
Monthly saving on electricity bill: $900 per year
Rebate: $20,000
Tax savings for first 5 years: $2,500 per year
References
Electric Power Monthly (2016, June). U.S. Energy Information Administration, 1000 Independence Ave., Washington, DC. Retrieved July 20 2016, from https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a
How Solar Panel Works. (2016). Dynamic Solar Tech Inc., Ontario, Canada. Retrieved July 20 2016, from http://dynamicsolartech.com/about-us/how-solar-panels-work/
Lombard, F.P. (n.d.). Facts and Figures about the Application and Financial Viability of Photo-Voltaic Power Installations. Retrieved July 20 2016, from http://www.greygreen.co.za/wp-content/uploads/PV-Facts-and-Figures.pdf
Lisell,L., & Mosey, G. (2010, August). Feasibility Study of Economics and Performance of Solar Photovoltaics in Nitro, West Virginia. National Renewable Energy Laboratory (NREL), Denver, Colorado. . Retrieved July 20 2016, from http://www.nrel.gov/docs/fy10osti/48594.pdf
NASA Surface meteorology and Solar Energy. July 21 2016. Atmospheric Science Data Center, NASA, Langley, Washington DC. Retrieved July 21 2016, from https://eosweb.larc.nasa.gov/cgi-bin/sse/grid.cgi?&num=058136&lat=45.307&hgt=100&submit=Submit&veg=17&sitelev=&email=&p=grid_id&step=2&lon=-122.96
Rex Hill. (n.d.) Newberg, Oregon. Retrieved July 20 2016, from http://www.rexhill.com/
Solar Across Oregon and the Globe. (2016). Solar Oregon, Portland. Retrieved July 20 2016, from http://solaroregon.org/why-go-solar/solar-across-oregon-and-the-globe/
Climate. (2016). Sperling’s Best Places, Portland, Oregon. . Retrieved July 20 2016, from http://www.bestplaces.net/climate/city/oregon/newberg
Steen, M., Lisell,L., & Mosey, G. (2013, January). Feasibility Study of Economics and Performance of Solar Photovoltaics at the Atlas Industrial Park in Duluth, Minnesota. National Renewable Energy Laboratory (NREL), Denver, Colorado. . Retrieved July 20 2016, from http://www.nrel.gov/docs/fy13osti/56772.pdf
Why Go Solar. (2016). Solar Oregon, Portland. Retrieved July 20 2016, from http://solaroregon.org/why-go-solar/
