Analyzing the Impact of Renewable Energy Incentives and Parameter Uncertainties on Financial Feasibility of a Campus Microgrid

Abstract

The popularity of microgrids is increasing considerably because of their environmental and technical advantages. However, the major challenge in microgrid integration is its financial feasibility due to high capital costs. To address this obstacle, renewable energy incentive programs, which are the motivation of this study, have been proposed in many countries. This paper provides a comprehensive evaluation of the technical and financial feasibility of a campus microgrid based on a techno-economic analysis using the Microgrid Decision Support Tool, which was implemented to support decision-making in the context of microgrid project investment. A method for microgrid design aiming to maximize system profitability is presented. The optimal microgrid configuration is selected depending on financial indices of the project, which directly address the returns on an investment. Most importantly, this analysis captures all the benefits of financial incentives for microgrid projects in California, U.S., which presents a key difference between the California market and other markets. The impact of incentives and uncertain financial parameters on the project investment is verified by sensitivity analysis. The outcomes show that the optimal configuration generates significant electricity savings, and the incentives strongly determine the financial feasibility and the optimal design of a microgrid.

The Effects of Capital and Energy Subsidies on the Optimal Design of Microgrid Systems

“…Their findings showed that renewable energy incentives, tax reductions, and grid services have a significant impact on the financial feasibility of such systems and on the main economic and technical indicators of the microgrid. In a later study, the authors of [34] used the MDSTool to evaluate the effects of different policy measures on the optimal deployment of a microgrid in California. The objective function of the model maximized the profit of the project over the 25-year expected lifetime of the system.…”

Approximation Algorithm-Based Prosumer Scheduling for Microgrids

“…The direct reciprocity of peer-to-peer (P2P) energy trading by the association of prosumers contributes to a dramatic decrease in transmission losses and the minimization of the operational costs in smart residential communities. However, most studies regarding the productive management of Microgrids have been dedicated merely to economic incentives for financial sustainability and energy interchanges with the Smart Grids [17,18].…”

Advantages of Minimizing Energy Exchange Instead of Energy Cost in Prosumer Microgrids

“…Many studies can be found in literature analyzing microgrids' financial feasibility and the correct sizing of their respective Distributed Energy Resources (DERs) [3,4]. In most of the published works the main objective of the microgrid energy management system is to achieve the highest possible economic benefit by minimizing its operational costs [5,6].…”

“…Generation costs [6] and market prices, for the purchased/sold energy [5], are used to define optimization techniques' objective functions. However, economic incentives and additional costs have a great importance in the microgrids' financial sustainability and they must be considered in their design and operation [3]. Incentives are due to advantages of self-consumption improvement, that lie on empowering consumers by means of their participation in energy management programs, encouraging smarter consumption patterns, reducing peak demand and energy costs, decreasing transmission losses, due to the local generation and consumption, and contributing to finance energy transition [7].…”

“…The role of ESS in microgrids is usually related to peak shaving [3], leading to a reduction of distribution system costs, which are based on the available power capacity instead of the volume of circulating energy. Other classical target is to mitigate fluctuation of PV generation [8] or other intermittent renewable energy source.…”