Optimizing Solar Projects to Maximize Return on Investment (ROI)

Bill Elwell, SPG Solar
February 09, 2012 | 20 Comments

The solar industry is facing new realities as the economics of solar are changing. Predicting photovoltaic (PV) panel pricing is 'iffy' at best. The US Treasury 1603 cash grants are history. Optimizing the energy produced and making the most of available land have become increasingly important as investors and project developers look for a viable economic model to maximize ROI. With fossil fuel energy prices on the rise, government incentives for solar wavering, and a solar trade war being waged over the price of Chinese solar panels – delivering innovative, high-performing solar power solutions is more critical now than ever before.

At the end of the day, solar has to make economic sense to be a viable energy solution. There are two primary levers to increase the return on a solar investment and make this economic equation work – either drive down the cost of the solar system hardware or increase productivity, or output, from the installed solar power system.

Cheaper Panels?

Solar PV panels typically represent up to 40% of a project’s overall cost. And the price of solar panels fell 47 percent in 2011, according to Bloomberg. This has made the business case for solar more competitive and is driving the industry towards grid parity. With these lower panel prices, another year of growth is expected for the industry in 2012. However, there is a cloud on the horizon. Should the US impose tariffs on the low cost panels imported from China, US manufacturers will be in a better position to compete, but the overall competitiveness of solar as an energy alternative could be slowed with these lower cost panels from China no longer available. Whatever happens, the availability of cheaper panels cannot be counted on as a solution to the ROI challenge.

Optimized Solar Power Systems

The other way to paint a brighter picture for investors is to optimize solar power systems. By capturing more sun and generating more electricity to bring to market higher returns on the project investment become a reality.

Tracking the Sun

A solar tracking system is an automated racking system which moves the solar panels to follow the trajectory of the sun throughout the course of the day. Solar trackers can increase solar power production by up to 25% compared to a fixed-tilt system. SPG Solar is one of a handful of solar companies worldwide that specializes in building solar systems that utilize single-axis ground mount tracking technology. The larger the project, the greater the impact of today’s tracker technology.

Efficient Power Conversion

Producing more energy from panels with a tracker system is pointless if it can’t be transferred to the grid. The latest inverter technology is keeping pace with the increased power output from PV panels. Inverters boost total power transfer by 5 – 12 percent through high efficiency, localized command and control and higher kilowatt-hours per day. Advances in inverter technology mitigate power loss, and significantly add to a solar power system’s output over its lifespan.

As the solar industry struggles with the uncertainty in panel pricing, it is turning to the optimization of system energy output to make the economic case for solar and attract investment dollars. The focus is no longer on driving down panel and other system hardware costs or on improving the output of the actual cells. Innovation—the industry’s trademark—across the entire value chain will save the day.

Learn More at SOLAR Power Gen

At Solar POWER-GEN 2012 in Long Beach, CA next week there will be a panel of experts addressing ways to improve the return on investment for utility scale PV power generation. The panel, held Wednesday February 12, 2012 includes Bill Elwell of SPG Solar, Brian von Moos of Borrego Solar Systems, John Skibinski of American Electric Technologies, Joseph Mossoba of Satcon Technology Corporation, Mark Rawson of Sacramento Municipal Utility District, Seema Ghosh of Black & Veatch. It will be an open discussion targeting ways to achieve ROI, including system design, module and BOS selection, performance modeling and O&M.

20 Comments

Bill Elwell
February 13, 2012

The intent of this article is around utility scale solar power systems. The economics change when discussing projects at this size verses residential or small commercial. With the larger projects you can get economies of scale to drive down the LCOE. Additionally, with utility scale projects there are benefits for producing energy at certain times of the day, a single axis tracker can lend itself very well to this by optimizing the systems production during "super peak" times which are typically between noon and 6pm. These "super peak" times will often yield a 1.5X to 2X payout for energy produced therefore lowering the levelized cost of the system.

Regarding the comment on why European markets have not adopted the tracker, one reason is weather. Germany and some of the early adopters of solar have harsh winters. In the past, snow and high winds has been a limiting factor for tracking systems. However, we will be launching the next generation SunSeeker Tracker, which is the SunSeeker All-Weather. We have redesigned the system and undergone rigorous testing so that the SunSeeker All-Weather can handle winds of up to 155mph and snow conditions. This does create a new opportunity, not only for Europe but also for the northeast and southeast which are prone to wintery conditions or hurricanes.

ANONYMOUS
February 12, 2012

Trackers seem to be a major trend gaining a lot of momentum in the US. I wonder why the European market hasn't adopted the technology?

ANONYMOUS
February 12, 2012

Trackers are a key ingredient in making PPAs economical. 20% more production for an increase of 3-4% on the initial cost of the system, in many cases, is the only way to make a project feasible. Using a tracker can reduce the cost of a PPA by 2 cents/kWh.

William Fitch
February 11, 2012

Hi:

Solar is cost effective on a roof top. You know, there is a HUGE difference in ROI vs LCOE or total return over the life of the system. Those two "money" concepts do NOT run together...
Best ROI does not produce max LCOE or total return, for those who are doing it for the money side, which I am not. I am tracking to produce as flat a generation as possible over time, from a daily perspective as well as monthly (Winter wind). My end goal is generation matched to load. Of course I can not reach that, but it is still the goal along with off-grid capability and RE elect for EV's...

.....Bill

Gary McCallum
February 11, 2012

Dr Renolds wrote a paper in 2006 but under what perameters were these evaluations made and has the drop in prices today changed those perameters. Also could improvents to design and manufacturing in dual axis tracker's effect the overal costs further and was this considered.
Why does it not pay to put solar on a roof top? Further explanation is needed and again under what circumstances and parameters. If this is true why is it claimed people are profiting or realizing savings from using this technology?
Does this evaluation include areas with feed in tarriff?
If your evaluations are true why is solar growing at such phenominal rates? This is all for a loss?
Your comments confuse me but maybe they are outdated

Walter Kunz
February 11, 2012

Building yourself is excellent, using your brain and only some money.
We compare daily, kWh produced with the size kWSystem.
With tracking, 9 kWh per day per 1 kWSystem is not unusual i.e.:
On a reasonable clear day a 5 kW System can produce 52kWh.
All systems we calculated can be paid off with the power produced within 7 to 9 years including automated 2-axial tracking.
Fix roof mounted facing North (Southern Hem.) can be paid off in about 6 to 7 years.
As electricity prices double about every 15 years, an efficient and maintenance free system that can last for decades (tracking array) can be a good investment. However, anyone has to make its own decision depending on the local conditions.
Walter romex.com

William Fitch
February 10, 2012

Hi:

Tracking it a great option but if you are not doing it yourself, the costs are high. My to be installed 9.2KW system is going on 6 trackers that I designed myself. The cost per tracker looks like it will be around $650. That includes everything. That is of course a very thrifty cost considering most of the same material would still be used even if it was a non tracking ground mount. The AL is the largest cost, stainless second with the 24" sat actuator at about $125 and the sun tracker about $40. I am using 7" x 9" x 102" hard wood creosote soaked railroad ties, new, for the pole. Very cost effective at $15 ea, etc... I started out looking at purchased trackers, and when I saw the cost, well, that was that... much easier and cost effective to design and build your own, if you happen to possess the knowledge and skills to do it right... In my location a duel axes tracker with 9.2KW arrays will yield about 14MW a year. My rolling usage is about 8MW.. I will be adding some wind to add an extra 1 to 2 MW a year in Winter, so I will produce about twice what I use, leaving the extra for EV's down the road... My design is actually East-West active tracking with manual seasonal adjust 3 times a year, which gives you practically speaking duel tracking...

.....Bill

ANONYMOUS
February 10, 2012

It is also worth mentioning the rigorous and time consuming permitting process. Time is money. If we can create more standards around permitting and expedite the process, we will see a far faster pay back period.

Bill Elwell
February 10, 2012

Some great comments. SPG Solar has proven the success and reliability of the single axis tracker both in design and engineering but also with construction and long term operations and maintenance. The main advantages over a dual axis tracker are: a simple, effective design, which helps lower wiring costs and improves system efficiency; lower maintenance since there are fewer moving parts; lower overall installation costs; and fewer points of failure providing a better overall uptime rating. Dual axis tracking systems tend to be more beneficial in northern latitudes where the sun has a broader range through the sky compared to southern latitude regions where the sun is positioned more directly above. With the utility solar market being primarily in the Southwest part of this country this lends itself well to single axis trackers.

Dr. Reynolds, you are right. Panel efficiency cannot be discounted. Efficiency, however is a function of space, and a lower efficient panel does not necessarily produce less kWh; it simply takes more space to produce the same, so we should not rely solely on panel efficiency. Innovation is going on through all aspects of the value chain by improving production and lowering costs. We are launching the latest generation SunSeeker Tracker and have cut down the costs and installation time by requiring fewer posts and materials; engineered a new stow position that removes stress from the driveline, further minimizing maintenance; and produced an innovative design for quick scalability.

Brian Mahar
February 10, 2012

Innovation is going to be a huge need for the U.S. solar industry this year with so much policy uncertainty. Definitely, as Bill mentions, on the technology side to squeeze the most electricity out of a PV system. But also on the installation side and on the financing side to maximize the ITC. And there must be innovative ways to lower the soft costs of solar systems.

ANONYMOUS
February 10, 2012

Tracker increase the production, but also represent a significant increase in Capex and O&M during the operational of the plant, with higher risk of breakage.
Are you sure that it is economically worth, if we consider the expected whole life of the plant?

warren reynolds
February 10, 2012

Sir: In 2006, I wrote about these same topics in a "white paper" for www.energypulse.org The most important factor is efficiency of the panels. It does not pay to put a 14% efficient panel system on expensive land or your roof top. Your roof top is of
limited space and needs 20% or better efficient panels. A 2 or 5 power sun concentrator on the panels is O.K. Anything higher is
not profitable.

The 2-axis tracker is not profitable for the money. A single axis tracker is barely economical and a profit will be realized over the long haul.

Dr. Warren Reynolds

Paul Harford
February 10, 2012

As a lead generator at the Home Depot a while back, our solar contractor put the kaibash on the use of trackers as they are expensive. He suggested just adding an extra panel or two to the array to capture the gain offered through tracking mechanisms.

If free-standing arrays are the target and land use the issue, the tracking concept makes total sense. The problem is as one other poster described it, politics of olden daze.
Bummer

Michael McCoy
February 10, 2012

OPEL Solar is also in the Tracker business providing a complete line of single and dual axis tracking systems.

The TF-800 line of single axis trackers adds 3-5% over the cost of fixed racking while delivering 15-25% more kWh output.
In addition it is easy to install, low maintenance, and it includes wireless electronic controls and monitoring.

Any PV or thin film panels can be used.

This is a simple choice for a big gain in IRR for any project.
Just ask our customers!

Clifford Ho
February 10, 2012

Single- or dual-axis tracking will certainly add to the energy output of a PV system, but what is the added cost and electricity requirements? What is the overall difference in the levelized cost of electricity (annualized cost/annual energy output) with the addition of a tracking system?

Walter Kunz
February 10, 2012

The fully automated Romex dual-axis, array tracking system can improve panel performance by up to:
55% (Northern Hem. South and Southern Hem. North.
80% East or West oriented panels.
www.romex.com

Sam Salamay
February 10, 2012

Same old story. We figure out ways to do solar deals with available tools, only to be taken away by government intervention. Oil lobbyists and Republicans for the most part are the culprits, lining their pockets with dirty oil, coal and gas dollars. Where is our national FIT program, where is our subsidized solar manufacturing deal from our leaders? Same old, same old crap. Innovation will only add other solutions to taketh away what we need the most, clean energy and clean fuels.

Camilo Varas
February 10, 2012

so far very few good experiences with dual-axis trackers...

ANONYMOUS
February 9, 2012

If you are talking about increasing solar power production, why not use a dual-axis tracker? You can increase output by 30 - 40%.

Muller Marissa
February 9, 2012

Great article Bill. I could not agree more. Continual innovation is the way the solar industry is going to adapt and stabilize against policy changes, panel price fluctuation and the general volatility in the market. It seems pretty clear that all ground mount solar power systems should use a tracker to increase production.

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Bill Elwell

With over 10 years of industry experience, Bill Elwell leads the Commercial & Utility Products division at SPG Solar which includes two proprietary products: SPG Solar Sunseeker single-axis tracker and SPG Solar Floatovoltaics. Bill works...