Solar Prosumer Business Models in Sweden

Sam Molavi William Bydén May 2018

Bachelor of Science Thesis KTH School of Industrial Engineering and Management Energy Technology EGI-2018 TRITA-ITM-EX 2018:427 SE-100 44 STOCKHOLM Bachelor of Science Thesis EGI-2018 TRITA-ITM-EX 2018:427

Solar Prosumer Business Models in Sweden

Sam Molavi William Bydén

Approved Examiner Supervisor Björn Laumert Rafael Eduardo Guédez Mata Commissioner Contact person

Abstract In this research, four of the most common business models for Swedish photovoltaic (PV) prosumers were analyzed through a business case study. The costs and revenues related to adopting these prosumer business models for a household were examined and their economic viability was measured using the Net Present Value- and Payback method.

The markets of PV and Battery Energy Storage Systems (BESS) in Sweden were researched in order to provide an overview of the potential for future prosumers in Sweden. Relevant actors and business models have been described and analyzed. Furthermore, Sweden’s energy structure as a whole and its potential transformation to a more decentralized and prosumer friendly system has been discussed.

The business case study results show that the most economically beneficial business model for prosumers today in Sweden is through a Power Purchase Agreement (PPA). The business model where the prosumer owns a PV system proved to be the second best option which also was calculated to be economically beneficial. Leasing a PV system or owning a combined PV- and BESS were proven to not be economically beneficial.

Sammanfattning I den här rapporten har fyra av de vanligaste affärsmodellerna för Svenska solcells-prosumers analyserats genom en business case study. Kostnaderna och intäkterna kopplade till att uppta dessa affärsmodeller för ett hushåll har undersökts och deras ekonomiska duglighet har mätts med nuvärdesmetoden och återbetalningsmetoden.

Marknaderna för solceller och energilagringssystem av batterier i Sverige har undersökts för att ge en översikt av möjligheterna för framtida prosumers i Sverige. Relevanta aktörer och affärsmodeller har beskrivits och analyserats. Vidare har Sveriges energistruktur och dess potentiella övergång till ett mer decentraliserat och prosumervänligt system diskuterats.

Resultaten från vår business case study visar att den mest ekonomiskt lönsamma affärsmodellen för prosumers idag i Sverige är genom ett energiköpeavtal. Affärsmodellen att ha ett egenägt solcellssystem var det näst bästa alternativet och visade sig också vara ekonomiskt lönsamt. Att hyra ett solcellssystem eller att äga ett solcellsystem i kombination med ett energilagringssystem av batterier visade sig vara olönsamma ur ett ekonomiskt perspektiv.

Contents

1 Introduction ...... 8 2 Constraints...... 8 3 Purpose ...... 9 4 Method ...... 9 5 Background ...... 9 5.1 History and overview of electricity market in Sweden ...... 9 5.2 Solar PV ...... 10 5.2.1 History of PV in Sweden ...... 10 5.2.2 The PV market in Sweden today ...... 10 5.2.3 Market and price evolution ...... 11 5.2.4 Relevant actors ...... 12 5.3 BESS - Battery Energy Storage System ...... 12 5.3.1 Batteries ...... 12 5.3.2 BESS - an overview ...... 12 5.3.3 The BESS market in Sweden ...... 13 5.3.4 Relevant actors ...... 13 5.3.5 Capital subsidy for self-produced electricity storage ...... 14 5.4 PV technology ...... 14 5.5 Technical difficulties ...... 14 5.6 Existing prosumer business models ...... 15 5.6.1 Prosumer ownership of a grid connected PV system ...... 15 5.6.2 Power purchase agreement contract ...... 15 5.6.3 Leasing contract ...... 16 5.6.4 Prosumer ownership of a grid connected PV- and BESS ...... 16 5.6.5 Prosumer ownership of a PV- and BESS system not connected to the grid 17 6 Business Case Study ...... 17 6.1 Assumptions ...... 18 6.2 Input ...... 18 6.3 Parameters ...... 19 6.4 Calculation of solar production ...... 20 6.5 Methodology...... 21 7 Results ...... 24 8 Sensitivity Analysis ...... 26

9 Discussion ...... 27 9.1 Non-economic perspective ...... 28 9.2 Possible improvements of the model ...... 28 10 Conclusions ...... 29 11 Suggestions for future research ...... 30 12 List of references ...... 31 12.1 Interviews ...... 31 12.2 Other sources ...... 31 13 Appendices...... 35 13.1 Appendix 1: Household appliances and usage ...... 35 13.2 Appendix 2: Electrical appliance usage pattern on weekdays ...... 36 13.3 Appendix 3: Electrical appliance usage pattern on Saturdays and Sundays . 37

List of figures Figure 1: Percentage of different types of solar connections ...... 10 Figure 2: Cumulative installed PV in Sweden ...... 10 Figure 3: Total costs for PV in America...... 11 Figure 4: Net Present Value of each investment ...... 24 Figure 5: The payback time of an own PV system and an own PV- and BESS...... 25 Figur 6: The NPV of the investments: sensitivity analysis...... 26 Figur 7: Payback time: Sensitivity analysis ...... 26

Nomenclature BESS - Battery Energy Storage System NPV - Net Present Value PPA - Power Purchase Agreement PV - Photovoltaic Prosumer - Entity producing and consuming electricity.

Wp - Solar modules are rated in watt peak and it is defined as the module’s power output during full solar radiation.

1 Introduction

The need for new innovative ways to support environmentally friendly electricity sources has never been as big as now. One of the major technologies looking to disrupt the industry is solar PV (McKinsey, 2014). However as for any new technology, business models need to be developed in order to fully enable it to become functional for mass scale use.

The traditional power production from nuclear and carbon, and co-generation from bio or fossil fuels will gradually be replaced by renewables as wind and solar to a certain extent. The transformation brings both challenges and opportunities for the energy system as a whole.

In Sweden the Photovoltaic (PV) market has grown substantially during the last decade and the Battery Energy Storage System (BESS) market is emerging which will have large impact on the expansion of solar power. Falling prices and new technology are central forces that will play important roles in the transformation. The change of the Swedish energy structure will bring technical challenges in the grid which needs to be addressed to facilitate the energy transformation. A decentralized solar energy production causes a new need for the grid to become more responsive to the PV operating profiles (Frantzis et al, 2018).

The Swedish Government has stated that the country’s electricity production will be provided from 100% renewable sources by 2040 (Swedish Government, 2016). To reach this goal the Swedish Energy Agency has identified three key step for the development of solar energy: establishment, expansion and continued commercial extension. Additionally, the Swedish Energy Agency anticipates the share of solar power to be up to 5-10% of the total electricity mix by 2040 (Swedish Energy Agency, 2016a). The shift towards solar based energy sources calls for new solutions and business models.

The concept “PV prosumer” is relatively new but will play a more important role as time passes as the amount of people having their own solar PV system most likely will grow. What is clear is that the PV network will continue to expand as the technology advances and the costs go down. PV business models with differences in ownership, costs and revenues among other aspects will arise and to give prosumers choice on how they want to implement their solar PV system.

2 Constraints

The focus of this report will be on business models that can be adopted by small scale solar prosumers in Sweden. We will be looking at different solutions provided by the market today and to a certain extent future solutions. We will look at the market for the individual prosumer. Thus we are not interested in solar business models for companies and bigger corporations. The report focuses mainly on the conditions and the market within Sweden.

3 Purpose

This report aims to identify and analyze different business models for solar prosumers in Sweden. Below are the aims in more detail:

● Provide an overview of the PV and BESS market in Sweden. Identify relevant actors and analyze the solutions they provide to end-customer. ● Identify the most prominent business models for solar prosumers that can be adopted on mass scale. ● Research relevant juridical and technical aspects with focus on the prosumer. ● Conduct an analysis of the different business models based on technical and economic advantages for the prosumer. ● Conduct an investment analysis where we present the models in plain numbers with regards to a number of parameters. The most promising ones will be identified based on economic aspects.

4 Method

The background information has mainly been collected through a literature study. The types of sources that have been selected for research are academic reports, news articles and publications from Swedish government agencies. Additionally, interviews have been made with leading experts in the field.

The cost analysis was done by first investigating the most prominent solar prosumer business models and identifying cost and income of said business models if it were to be adopted by the prosumer. The basis of the analysis is that common parameters, such as solar radiation and electricity consumption, remain constant across the business models. We also collected data from SMHI and Nordpool for weather statistics and spot electricity prices. The model was conducted on an hourly basis and for every hour the costs and income was calculated. Some fixed costs that are set by regulatory organs, such as tax benefits, was quoted directly while other costs, such as investment and leasing costs, were taken from respective actors on the market. The business models were compared by economic benefit in relation to the case where no PV or BESS was installed.

Note that we have conducted a comparative study where the benefits of each model are compared to one another. In the model there are many assumptions which give rise to several systematic errors. However, since the model is a comparison the simplifications do not significantly change our conclusions as the study is of comparative nature.

5 Background

5.1 History and overview of electricity market in Sweden

The Swedish electricity market is and has historically been characterized by a few large producers. Electricity generation is a business with enormous economies of scale which has resulted in these few and large electricity producers. On the other hand the number of consumers is very large and their consumption varies significantly concerning peak power and energy use over the course of the year (Amelin & Söder, 2011).

Since the majority of consumers are too small to purchase electricity directly from the producers, these consumers turn to a retailer who acts as a link between the producers and the consumers. Simply put, the retailers will purchase electricity from the producers on behalf of the consumers. Although this might seem as unnecessary, the retailers fuel the market competition and offer additional services like risk taking and stable prices which benefit the end consumer (Amelin & Söder, 2011).

The entrance of the prosumers on the electricity market shifts the traditional structure and poses opportunities and threats to existing players on the market. A decentralized energy market with prosumers will without doubt force the large producers to rethink their business models. Furthermore the installation of more grid-connected PV can cause technical challenges that have to be taken into account.

5.2 Solar PV

5.2.1 History of PV in Sweden

The Swedish PV market has until the early 2000s almost only consisted of small off-grid PV systems for holiday cottages, caravans and marine applications. However, as can be seen in Figure 1 provided by the Swedish Energy Association, since roughly 2005 more grid-connected systems has been installed annually and at the end of 2016 Sweden had 15 times more grid-connected PV capacity compared to off-grid capacity (Swedish Energy Agency, 2016b). The grid-connected market mostly consists of small and medium sized solar cells installed on top of private rooftops or company buildings, namely 32% and 61% respectively (Swedish Energy Agency, Figure SEQ1: PercentageFigure \* ARABIC of different 1: Percentage types of ofdifferent solar typesconnections of solar connections 2016b).

5.2.2 The PV market in Sweden today

The Swedish market for solar panels has grown dramatically in the latest years. The total installed PV-power amounted to 205 MW in the beginning of 2017 which is 0.1 % of the total electricity generation in Sweden (Swedish Energy Agency, 2016a). The increase is due to a number of factors. Firstly, it has become increasingly cheaper to install solar panels on rooftops for consumers. Examples of this include the tax cut of 0.6 SEK/kWh electricity entered into the grid and the subsidies for installing solar PV. Secondly, it has become a lot easier to install solar panels, as clearer Figure 2: Cumulative installed PV in Sweden guidelines are laid out to utilities and governing

organs in the matter. The Swedish Energy Agency has enforced a quality certification for actors who install solar cells. Actors who have this certification have enrolled in courses and examinations regarding installation of solar cells. This brings a great amount of security for the end user as they know that the actor is competent in this field. Another reason behind the increased installation growth is the rapidly declining costs. PV module costs have been driven down by 80% since 2008 mainly due to the rapid expansion of manufacturing in China (Fraunhofer ISE, 2015). This decline caused an oversupply in the market which at the moment is stabilizing. As a result of this the prices for modules are expected to remain stable in the short term but to continue to decline in the medium term.

In 2010 The Swedish Energy Agency was aware of 37 companies that installed or sold PV systems in Sweden while in 2016 around 200 companies were known to either sell, install or both combined, PV modules and/or systems in Sweden (Swedish Energy Agency, 2016a). Thus, the market has seen an enormous increase of PV solutions in just a few years. The companies offer capacities that differ from a few kWp to the MWp range.

As mentioned previously, the market is dominated by grid-connected solar cells that are installed on private or company owned property. The number of centralized solar parks is very small. One reason for this is the lack of regulatory aid for bigger solar farms. The limit for subsidies for installed solar power is 1.2 million SEK per system (Swedish Energy Agency, 2018). However, one outlier in this category is the newly built solar park outside Varberg. The park provided more than 3000 MWh in 2017 which equated to roughly 2% of Sweden’s total solar capacity (Varberg Energy, 2018).

5.2.3 Market and price evolution

The market is moving away from early methods where the prosumer not only were responsible of ownership and financing, but also installation and maintenance. This is called the “Zero- generation PV model”. The market mostly consisted of early adopters, enthusiast who were passionate about the potential of solar cells and were interested in being self-producing. Today it seems that the market and Sweden especially has evolved to 1st generation PV-models. 1st generation business models are characterized by the fact that third party actors are more involved in developing systems which makes the process of becoming a prosumer easier (Frantzis et al., 2008). This evolution is clearly seen in the Swedish PV market. The Swedish solar market mostly consists of a number of resellers who sell complete solar packages to customers. The process of most companies is quite streamlined and they offer services from installing solar panels to when the consumer wants to sell electricity to the grid. Figure 3 SEQ: Total Figure costs \* ARABIC for PV in3: Total costs for PV in America In a report by the National Renewable Energy Laboratory the total America costs of solar PV was analyzed using a bottom-up method cost analysis. They observed that the costs had come down significantly and identified some key drivers of this price decline. Amongst the main drivers were lower module price, lower inverter price, higher module efficiency and Lower

overhead costs. One thing to note is that the total costs of all sectors, Residential, Commercial and Utility owned, has decreased ever since NREL began studying solar PV costs. The total costs for residential solar PV in America are shown in Figure 3 (Fu et al., 2017).

5.2.4 Relevant actors

Vattenfall is a Swedish government owned energy company which produces energy, provides district heating and owns part of the grid. The company is currently investigating the possibilities of creating solar parks in areas where certain infrastructure already is in place and creating services for micro producers to enable energy trading and marketing. Another point of focus for Vattenfall is to provide solutions for private homes to install solar cells on their property. They currently provide complete solar installation for the end user that can be custom made for specific needs. The cost for 16 solar panels, 30 sq. m., is 73 000 SEK (Vattenfall, 2018). This includes installation, solar panels and inverters.

Varberg Energy is a Swedish energy company specialized in renewable energy which offers electricity contracts for wind, water and solar energy. One of the new solutions the company offers is an installation of PV systems on the customer’s roof. The customer signs a contract to pay a monthly fee. The electricity produced is consumed by the individual and the excess is sold on the grid (Varberg Energy, 2018).

Umeå Energy is one of the first companies in the Nordic countries to offer leasing solutions for PV systems. The leasing contracts are available for both residential and commercial use and are paid on a monthly basis (Umeå Energy, 2018).

5.3 BESS - Battery Energy Storage System

5.3.1 Batteries

Batteries can be seen as a type of electrochemical energy storage which creates a flow of electrons due to a difference in charge between two poles. The battery market today is characterized by technologies based on lead, nickel, lithium and sodium. The technologies are in different stages of maturity with Lithium-ion being the most developed. It is used in many daily applications but is rather immature from the viewpoint of power grids (Lindstens, 2017).

5.3.2 BESS - an overview

Compared to traditional power sources, the battery energy storage systems are quite different. First, there is no rotating mass which gives the BESS different characteristics compared to a mechanical, traditional generator which has a rotating mass with a finite up- and down ramp rate (the rate at which a power source can increase or decrease output). Since the BESS lacks inertia it is able to respond to load fluctuations faster compared to a combustion turbine or a start engine in an electric utility system. Second, BESSs are limited by their storage capacity to provide electricity while traditional energy sources in practice have an unlimited supply of fuel. Despite the shortcoming of energy limitation the BESS have operational advantages like silent operation, the absence of point-of-use emissions, and the ability to perform tasks such as frequency- and voltage control and load shifting (Atcitty et al., 2013)

As for the prosumer, the general purpose of a BESS is to store energy when solar power generation is high and use the energy stored in the battery when the solar power generation is low. When one’s production excesses the demand the surplus is stored to be used at a later time or is sold immediately if the current electricity demand is high which as stated above leads to higher prices.

5.3.3 The BESS market in Sweden

In order to allow a substantial penetration of solar energy in the power grid, BESS systems may play an important role. The technology is relatively immature which has prevented the market from growing big but the future of the BESS market is looking bright. In the US the battery-pack costs have dropped from $1,000 to $230 per kilowatt-hour between the years 2010 and 2016 (Frankel and Wagner, 2017) and the trend is similar worldwide.

In Sweden there are a few BESS actors on the market and the products and services they provide are described briefly below.

5.3.4 Relevant actors

The Tesla Powerwall seems to be the best large solar energy storing battery on the market right now, which is why we chose to use it in our model. It can store up to 14 kWh which makes it bigger than many other batteries on the market. The cost for the BESS is 28 000 SEK including subsidies and the installation costs amounts to roughly 10 000 SEK. Tesla Powerwall is easy to setup and is a fully automated system that is integrated with the solar PV-panels and require no maintenance (Tesla, 2018).

One of the largest companies that offer energy storage solution in Sweden is the German energy company Eon. They provide solar batteries from two different manufacturers, the Austrian company Fronius and the German firm Sonnen GmbH. The Fronius battery is connected directly to the PV modules to ensure minimal losses. Further, it is modular which enables customization and the ability to expand the battery system. The Fronius battery solutions starts from 22 343 SEK taking subsidies into account (Eon, 2018). The Sonnen battery is designed for all types of PV systems. It automatically learns the household’s energy use habits and keeps track of weather. The price starts from 33 600 SEK taking subsidies into account (Eon, 2018).

Nordic Green Energy and Kraftringen are two other energy companies that provide batteries from Sonnen with a capacity of 4 kWh. Nordic Green Energy is a Norwegian company which operates in Norway, Sweden and Finland and specializes in offering green energy to its customers. The company has an application for computers and phones which lets the user control whether to save or use the sun energy absorbed. Kraftringen is an energy company located in southern Sweden offering several energy solutions. The price for the battery system installation is 33 000 SEK, including subsidies (Kraftringen, 2018).

5.3.5 Capital subsidy for self-produced electricity storage

In order to stimulate household’s possibility to store their own produced electricity the Swedish government has made it possible to apply for a subsidy of 60% of the installation cost at a maximum of 50 000 SEK (Swedish Energy Agency, 2016c). The criterion for being eligible for the subsidy is that the BESS fulfills the following:

● It is connected to a production system of electricity used for self-consumption of renewable energy. ● It is connected to the grid. ● It helps to store the electricity for use at a later time than the time of the production. ● It should increase the annual share of self-produced electricity within the property.

The state aid will be granted to installations initiated after the 1st of November 2016 and finished before the 31st of December 2019 (Swedish Energy Agency, 2016d).

5.4 PV technology

The technology surrounding solar PV is expected to evolve as the usage of solar PV has risen in the past years in practically every country. Out of the few materials that are used, crystalline silicon cells are the most widely used for solar panels, with a market share of 85% of all solar cells (Energy.gov, 2018). The reason for this is their relatively high efficiency. Under standard test conditions the silicon solar cells achieve roughly 20% efficiency which is significantly more than alternatives in the market (Energy.gov, 2018). Using the concept founded by Utterback and Abernathy, silicon solar cells have evolved to become the dominant design in the market. When it comes to new technologies, in which solar cells could be categorized as, there emerges many different designs in the beginning of the technology lifespan. Many different solutions are tested and as time goes by and the technology matures, a dominant design is found and becomes the industry standard in the field (Utterback and Abernathy, 1975). It could be argued that silicon solar cells have become the dominant design in the solar PV industry. However, there are new technologies that have emerged due to some of the difficulties regarding silicon solar cells. One of the problems is the high production costs. This is regarded as a big problem, as solar PV are less likely to be widely used if they are associated with high costs for the investor; private or government owned. As price is an important factor for if a technology becomes widespread, many researchers are looking into the option of developing new cells to replace the silicon cells.

One option might be thin film silicon technology. The main reason for this is the low cost associated with the technology, as less material is needed and the layers are much thinner, thus reducing the cost compared to monocrystalline silicon cells. The major disadvantage however, is in the core of the technology. As the cells are thinner, there is less photovoltaic material to absorb sunlight, therefore lowering the efficiency to roughly only 4-8% (Chaar et al., 2011).

5.5 Technical difficulties

As most business models create new decentralized types of energy generation one can discuss the eventual problems with such a thing. Traditionally speaking in Sweden, the electricity grid has had a “top-down” structure, where electricity generally is generated in the north and consumed in the

south. As more and more homes install solar power, the nodes and the inputs in the grid increase which could cause problems for the grid as a whole. However, Lennart Söder, professor in electric power systems, state that he cannot see any big challenges by this type of approach, at least in the short term (Söder, 2018). However, power shortage problems could occur in an electrical system consisting of only solar PV. The very nature of solar power is that it is uncertain, meaning that one cannot predict the factors that affect solar production to the certainty that is possible with for example nuclear or hydro power. This becomes a problem when modelling electrical systems in the sense that the probability of a shortage of electricity increases the more we convert to “uncertain” power alternatives such as solar. In practice this means that more backup capacity is needed in the system to prevent loss of power.

5.6 Existing prosumer business models

We have decided to focus on the right-most end of the value chain, which includes installing, financing and ownership of the solar panels. As we shall see below, solar business models for the prosumer are mainly a topic of the time of payment and ownership of the PV system. We have identified five business models that have the potential to be adopted by solar prosumers. Below is an overview of the main business models for solar energy in Sweden today.

5.6.1 Prosumer ownership of a grid connected PV system

The most common business model in Sweden is one where solar cells are installed on the household’s facility, usually on top of the roof. The solar panels are owned by the household. The principle is that the household generates solar power and consumes the electricity generated if the consumption at that given time is greater than the solar production. For times when solar production is not sufficient enough to power the house, electricity is bought directly from the grid via a standard partnership with an electricity company. If the production is greater than the consumption, electricity will be sold to the grid. As stated previously, the demand for solar PV has increased and the trend lies towards more and more grid connected solar solutions in general. The reason for this could be explained in two steps. In a set of interviews, Palm concluded that solar cell used could be categorized in to two groups; those who are solar “early adopters” and those who have solar cells because of its ability to make money (Palm, 2017). This business model supports both of these objectives which is why it is the most widely used in the Swedish market today. There are many companies active within this business model, with Vattenfall being a large player in the prosumer owned solar PV business model.

5.6.2 Power purchase agreement contract

A power purchase agreement contract is signed between two parties, usually between an energy company and an individual or other company. The energy company installs the PV system on the customer’s property and connects it to the building’s energy supply. Under a PPA agreement the prosumer is obliged to buy all the power generated by the PV system. The generated power is typically sold to the prosumer at a lower price than the local utility’s retail rate. The price decrease varies but is usually close to 10% for small solar systems (Eneo, 2018). The lower price ought to give incentive to the customer to invest in a PPA solution and the developer receives the incomes from the generated electricity and also tax credits and other incentives which might be generated from the system. The developer arranges installation, design, financing and permitting of the PV

system at a very low cost or none at all. Maintenance and ownership are handled by the energy company which limits the customer’s costs. At the end of a PPA contract the customer have several options: The PPA can be extended, the PV system can be removed or bought out at a convenient price since the lifetime of the solar cells often are just a few years longer than the contract (SEIA, 2018).

Since the developer is responsible for the system’s performance and operation the customer’s risk is limited. Third party ownership business models for residential PV systems are the dominant style of ownership in the US residential market (Davidson et al., 2015). In Sweden it is an upcoming business model with several companies investigating the prospects of the concept. However, in Sweden we have not found any company offering PPA agreements to households but it is assumed to emerge in Sweden as the business model is widely spread in countries like USA. Eneo Solutions is one of the first energy companies to adopt the PPA solution in Sweden for businesses. The company was the first to provide the PPA to a municipality in Sweden in 2017. Järfälla Municipality signed a contract with Eneo binding the energy company to supply ten properties with a total of 770 kW (Mynewsdesk, 2017).

5.6.3 Leasing contract

Another business model is that a company leases the PV system to the property owner through a leasing contract. The energy company is usually responsible for installation, operation and maintenance. The property owner pays a monthly fee which is calculated by estimating the amount of electricity the system will produce and the contract often runs over 20 years (EnergySage, 2018). The property owner is usually an individual or a housing cooperative. Compared to a PPA contract the individual do not pay for any power that the PV systems generate (SolarPowerRocks, 2014). Instead the energy can be used in the facility or it can be sold to the grid to generate revenue. Several companies who offer leasing contracts give the customer the opportunity to buy out the system after the contract period. From this point of view the business model can be seen as a hire purchase (UK) or an installment plan (US) which means that the customer pays of the PV system on a monthly basis instead of an upfront payment.

5.6.4 Prosumer ownership of a grid connected PV- and BESS

Another option to the grid-installed solar business models is to add batteries to the system. The reason for this, in theory, is that instead of selling the excess electricity generated by the solar cells directly to the grid the electricity is stored in batteries to be used or sold later when the electricity spot price is higher. In some cases in Sweden, the share of electricity that is sold to the grid compared to the electricity used by the household could amount to 75% (Söder, 2018). The main reason for this is the solar climate in Sweden in conjunction with the electricity consumption throughout the day. When the most electricity is generated, usually midday, most households have very little electricity consumption which increases the amount of sold electricity to the grid. This would in theory mean that as the demand is lower midday and in most cases also the prices, a BESS system could store this energy and sell or consume it when the prices increase later.

5.6.5 Prosumer ownership of a PV- and BESS system not connected to the grid

A solar business model that was previously used a lot in Sweden is the off-grid model. An off- grid system is based outside the electricity grid and is thus not able to receive or transmit electricity to the grid. Instead, all electricity being consumed in an off grid system is produced by using solar or other energy sources located near the building. The most popular off grid solar solution is a hybrid model, where solar energy is complemented by another form of energy source. The reason for this is the highly unreliable nature of solar radiation which is the basis of solar energy generation. There have also been cases of standalone solar systems with a storage unit that stores excess energy during high production/low consumption windows.

Concerning battery storage off grid solar systems one of the most important considerations is the compromise between the solar cell area and the battery size together with the load of the system. As initial battery investment cost are quite high it is quite important to manage battery usage to prevent unnecessary damage, and ultimately, costs associated with degenerating batteries.

There are however major drawbacks to this type of solar and battery business model. The investment costs could get very high and the cost of maintenance too, as the life of some batteries could be as low as 3-5 years. This is also accompanied with the cost of buying new batteries. The cost of batteries in a hybrid solar system could amount to 16-20% of the total cost of a solar-PV-diesel hybrid (Yamegueu et al., 2011).

Case studies have been done on the subject of certain PV/battery storage off grid systems. Oko et al. conducted a case study in Port Harcout, Nigeria in which the life cycle cost and design of a standalone, PV/battery business was conducted. They found that the payback time for the system was 6-7 years (Oko et al., 2012), which indicates the investment profitable. However, the authors state that the profitability is highly dependent on meteorological data and the country’s economic index.

As the prerequisites for off grid solar are not really applicable for the average consumer in Sweden, we will not include this business model in our cost analysis. A complete off grid system would probably not be viable due to the low amount of sunlight during extended periods of time in Sweden. Possible use cases would as a complement in weekend cottages, but as the market for this is quite slim we decided to neglect this business model in our analysis.

6 Business Case Study

In order to analyze and compare the different business models a business case study has been made to assess them in terms of economic profitability. The study consists of a comparison of four different scenarios of PV prosumer business model that can be adopted. All data input are taken from the year of 2017. The four scenarios are:

1. The prosumer owns the PV system and pays the initial installation costs 2. Lease the PV system through monthly subscription costs. 3. Lease the PV system through a Power Purchase Agreement (PPA) 4. The prosumer owns the PV system and a BESS and pays the initial installation costs

The main concept of the model is described here. For every hour of the year it calculates the cost and/or income of a household due to electric usage and generated electricity that it is sold. The sun’s radiation is transformed to generate electricity in the PV system. The generated electricity is then used if it is lower than the household’s consumption and if the generation exceeds the

consumption the surplus is sold to the grid. In the case that the generated electricity is lower than the consumption, electricity is bought from the grid. In scenario 4 when the PV system is connected to a BESS the electricity is stored when production exceeds consumption and only sold if the BESS is full.

The fees associated with buying electricity and the economic benefits of selling electricity have been taken into account to calculate the different costs and incomes related to buying and selling electricity. Lastly the Payback Method and Net Present Value Method (NPV) have been used by discounting the net cash flows for each year to today’s value with a discount rate of 6%. The model and its calculations were constructed in Google Sheets.

6.1 Assumptions

● The area of the PV system is 30 m2. ● The cost of a building permit is 5000 SEK. ● The PV system is placed on the roof of a house in Stockholm, Sweden as it is located centrally in the country and is deemed representative for Sweden. ● The only electricity demand that has been taken into account is due to electric consuming products in the house. Electricity needed for heating and hot water has not been taken into account, instead these is supposed to be satisfied with district heating. ● No additional costs for maintenance have been taken into account. ● In the case of leasing the yearly fee is 9672 SEK when leasing through Umeå Energy (Umeå Energy, 2018). This cost is assumed to stay the same during the whole period. ● Regarding the PPA the energy company is supposed to sell the electricity produced by the PV system at a price to the prosumer that is 90 % of the price of the actual price at the Spot Market. The PPA contract is assumed to last for 20 years for the sake of our model, though we are aware that such contracts usually last shorter than 20 years. ● The residual values after 20 years for the PV systems and BESS has been set to 50% of the original value. Banks set the residual value to 15-25% for large scale bank financed PV systems after 35-40 years (McCabe, 2011). ● There is no energy company as an intermediary between the spot market and the consumer. Instead the electricity is assumed to be sold directly to the consumer. ● Data for Spot prices and solar radiation is assumed to be the 2017 year values. ● The degradation for both the solar PV and the BESS is assumed to be zero. We are aware that the efficiency for these systems degrades over the years they are used but we have decided not to include these factors since it is a systematic error across all compared business models. We have also assumed the system efficiency for the BESS to be 100%

6.2 Input

Electricity prices have been retrieved from Nordpool on an hourly basis for the year 2017 in the electricity price area SE3 which includes Stockholm (Nordpool, 2018). These prices do not include costs for Renewable Energy Certificate (elcertifikat), supplement charges, energy tax, and fees for using the electrical grid. Instead these costs have been added on manually in the model.

Global horizontal irradiance (GHI) data has been taken from SMHI (Swedish Meteorological and Hydrological Institute) for every hour of the year 2017 (SMHI, 2018). Global horizontal irradiance can be described as “the total amount of shortwave radiation received from above by a

surface horizontal to the ground” (Vaisala Energy, 2018). Its components are Diffuse Horizontal Irradiance (DIF) and Direct Normal Irradiance (DNI). Global horizontal irradiance is measured in W/m2.

Fictional data for the electrical usage for every hour in a household has been simulated. The hourly usage of different common household appliances has been estimated and the energy used has been calculated by multiplying with the effective output of each appliance. By doing so two electrical consumption patterns have been created, one for weekdays and one for the weekend. See appendix 1, 2 and 3.

The outdoor temperature is of great importance due to its impact on the PV efficiency. A higher temperature leads to a warmer PV which reduces its efficiency and a cooler temperature reversely increases it. Therefore the temperature of every hour of the year in Stockholm has been retrieved to ensure the correlation between the PV system efficiency and the outdoor environment.

6.3 Parameters

Costs for using the electricity grid When using the electricity grid in Sweden one is obliged to pay a fixed subscription fee and a variable transfer fee which varies depending on the usage. These costs depend on the local electricity grid company. The subscription fee for using the grid was set to 4000 SEK/year (Vattenfall, 2018b) and the transfer fee was set to 0.18 SEK/kWh (Vattenfall, 2018b) in the model.

Renewable Energy Certificate Renewable energy certificates are an economic aid which has been granted to producers of renewable energy in Sweden since 2003. For every produced MWh the producer is given a certificate from the Swedish state which can be sold on an open market where the price is set between the seller and buyer. In this model the prosumer is assumed to only buy electricity from renewable energy sources which mean the Renewable Energy Certificate will be a cost in the case when electricity is purchased and an income when the PV produced electricity is sold. In the model the price for the renewable energy certificate was set to 0.1 SEK/kWh which was the month mean value from July 2016 to June 2017 (SolarRegion, 2018).

Energy tax All usage of electricity in Sweden is liable to tax. The energy tax before 1st July 2017 was 29.5 öre/kWh. The tax for energy used between 1st July and 31th December 2017 was 32.5 öre/kWh excluding VAT and 40.63 öre/kWh including VAT (Vattenfall, 2018c). In the model 40.63 öre/kWh including VAT was used for the whole year.

Grid benefit Transporting energy in the national grid is expensive due to the large losses. When an individual provides the grid with electricity a positive grid effect occurs which is rewarded economically. The added electricity means that the individual’s energy company lowers its transfer costs. Thus the energy company pays the individual for the service. The compensation for providing the grid

with electricity varies depending on the energy company but is usually around 3-7 öre/kWh (Solkollen, 2018). The value used for grid benefit in the calculations is 5 öre/kWh.

Tax reduction If a prosumer with a PV system produces more electricity than what is consumed he can under certain circumstances have the right to receive a tax reduction for the excess. The tax reduction amounts to 60 öre/kWh for all electricity supplied to the grid (Swedish Tax Agency, 2018). The maximum amount of money which can be received per year is 18 000 SEK.

Building permit Some municipalities require building permits for installing solar panels on private roofs. Whether or not permits are required depends on a number of different factors, including the angling of the panels, the color and the overall structure of the panels. One must have in mind that installing solar panels without first having an approved building permit can present to be quite costly. Stockholm Stad has released a detailed guideline for how to apply for such a permit.

The requirement of a building permit could be argued to have a negative impact on whether or not private actors install solar panels or not. Therefore, the government has issued a law proposal to remove the need to have a building permit for installing solar panels. The main reasoning for this is to relieve some of the burden from the building committees and reducing the friction for consumers to install solar panels (NyTeknik, 2017). The reduction of hassle gives people more freedom and could incentives people to invest in solar panels (DN, 2018).

As well as the reduction of hassle for the end consumer, there is also the reduction of cost. On average, building permits cost 5000 SEK for solar cells. For the sake of this report, it becomes relevant to discuss the fact that building permits are not paid directly by the consumer in some business models, for example in solar PPA’s.

6.4 Calculation of solar production

As we know, the electricity produced is a function of the global solar radiation which irradiates on the solar cells. One must also consider the efficiency of the solar cells, as not all solar radiation incoming to the cells can be converted to electricity. For the sake of this report, we chose an average efficiency of 20%. However, there are other factors playing into the electricity production. According to Widen the output from a PV system can be determined in every time step k as:

푷(풌) = 푨푰푻(풌)훈퐜(풌) 훈풂풅풅 (ퟏ) (Widen, 2011)

Here A is the surface area of the whole PV system, 푰푻 is the in-plane global radiation, 훈퐜(풌) is the conversion efficiency and 훈퐚퐝퐝 is the representation of further losses regarding array and equipment such as inverters. The conversion efficiency in its turn is dependent on the ambient temperature and the incident radiation according to (2)

훈퐜(풌) = 훈퐜푺푻푪 [ퟏ − 훍 (퐓퐚(풌) − 푻풄푺푻푪 + 푪푰푻(풌))] (ퟐ) (Widen, 2011)

Here 훈퐜푺푻푪 is the conversion efficiency at standard test conditions (STS), 훍 is the solar cells’ temperature coefficient 퐓퐚 is the ambient temperature, 푻풄푺푻푪 is the temperature of the cells at STS and C is a coefficient related to irradiance dependence.

Combining (1) and (2), the final formula for the generated electricity in the PV system becomes:

퐏(퐤) = 푨푰푻(풌)훈퐜푺푻푪 [ퟏ − 훍 (퐓퐚(풌) − 푻풄푺푻푪 + 푪푰푻(풌))] 훈퐚퐝퐝 (ퟑ)

The parameters of the model were set to be representative for a PV system with a standard inverter and solar cells made of crystalline silicon (Widen, 2011) (훈퐚퐝퐝 = 0.8, 훈퐜푺푻푪 = 0.14, 훍 = ∘ ∘ −1 0.4%/∘C, 푻풄푺푻푪 = 25 C, and C = 0.028 Cm2⋅W ).

In our model, the global radiation was measured with a horizontal plate (SMHI, 2014), and as most homes do not have a horizontal roof this would not be an accurate description of the radiation that reaches the solar cells. Instead, we chose to multiply the in-plane solar radiation 푰푻 by 1.18 as the efficiency of an optimally tilted solar panel is roughly 18% more efficient than that of a horizontal solar panel (CivicSolar, 2011). This is a big simplification. In reality, solar radiation can be divided into direct, diffuse and reflected radiation (Günther, 2011) but this was not included in the calculations. In order to have more accurate calculations we must have values of each of these components which we did not find. Therefore the simplification above was used. We are aware that the results are inaccurate due to this simplification but as this is a systematic error that affects all business models we consider the assumption to be reasonable.

6.5 Methodology

Non PV or BESS One standard scenario was made which did not have any PV- or BESS. This scenario was made in order to have a non PV- or BESS state to compare the others with. By doing so it is possible to compare the alternative costs in the non PV- or BESS scenario with the lowered costs in the others.

For every hour the same amount of electric energy as the electrical consumption in the house (see appendix 2,3) was bought from the Nordpool spot market. The costs for the transfer fee, renewable energy certificate and energy tax were then added for every hour in accordance to the amount of electricity purchased the actual hour. To get the total electricity cost for the whole year all the named costs were added together with the yearly grid subscription fee.

Prosumer ownership of a grid connected PV system In the scenario where the PV system was owned by the prosumer the electric generation for every hour of the year was calculated with (3) with the inputs global horizontal irradiance and outdoor temperature. The calculated generated electricity was then compared to the electrical usage in the household. If the generated electricity exceeded the electrical usage the excess was sold and there were no electrical purchase for that hour. In the case that the usage exceeded the generated electricity the difference was bought from the spot market the same way as described in the non PV or BESS scenario with the associated costs, including the yearly subscription fee. The revenue for each hour was calculated by adding the income from the sold electricity to the market with the grid benefit, tax reduction and renewable energy certificate in accordance to the amount of electricity sold. To get the total income for every hour these revenues were added and to get the total income for the whole year the total income for all hours of the year were summarized.

We compare the business models to the case where no PV or BESS is installed. Thus, to get the net marginal benefit of the business model compared to the non PV or BESS case, the yearly result is calculated for the business model, and then we add the result of the non PV or BESS case since that is the alternative cost. To get the yearly economic value of the own PV system investment the yearly costs were subtracted and the yearly alternative costs were added to the yearly income.

Value of investment on an annual basis: (Total revenues for selling electricity) - (Total costs for buying electricity) - (Subscription fee) + (Alternative cost)

The NPV was calculated from the initial payments, the discounted annual value of the investment and the discounted salvage value. The payback period was calculated by dividing the initial payment by the yearly surplus.

Leasing The calculations for the leasing scenario was made much like in the case with the previous scenario with the own PV system. The total costs per year for buying electricity and the total revenues for selling electricity were the same. The important difference in this scenario was the leasing fee for using the PV system. The total value of the investment was calculated the same as in the Own PV scenario but the leasing fee was also subtracted from the yearly net.

Value of investment on an annual basis: (Total revenues for selling electricity) - (Total costs for buying electricity) - (Subscription fee) - (Leasing fee) + (Alternative cost)

The NPV was calculated by discounting the yearly value of the investment. In this scenario there was no payback calculation since there were no initial payments.

PPA In the scenario with the PPA there were two prices for bought electricity: the Nordpool spot price and the reduced fare for buying the generated electricity from the PV system. Every time there was an effect generated in the PV system it was used to cover the electrical usage in the household and it was bought at the reduced price. If there was an excess of electricity produced it was assumed that the energy company sold it to the market and the prosumer did not receive any earnings. When the generated PV electricity not was sufficient to cover the usage the shortage

was bought from the Nordpool spot market the same way as described in the non PV- or BESS scenario.

Value of investment on an annual basis: (Alternative cost) - (Costs for buying electricity)

The NPV was calculated by discounting the yearly monetary surplus. In this scenario there were no initial payments or salvage value. In this scenario there was no payback calculation since there were no initial payments.

Prosumer ownership of a grid connected PV- and BESS The principle of this scenario was that the PV generated electricity would be used as much as possible to cover the household’s usage and store excess energy in the BESS if production was greater than consumption for a given hour. If, for a given hour, production was greater than consumption and the BESS was full the excess energy would be sold to the grid. If there was a shortage of electricity the next hour the energy stored in the BESS would be used first before buying electricity from the Nordpool spot market. The BESSs actual energy storage for every hour was calculated based on current production/consumption and past storage. When there was no PV production and no stored energy in the BESS, electricity was bought from the Nordpool spot market as described in the non PV or BESS scenario.

Value of investment on an annual basis: (Total revenues for selling electricity) - (Total costs for buying electricity) - (Subscription fee) + (Alternative cost)

The NPV was calculated from the initial payments, the discounted annual value of the investment and the discounted salvage value. The payback period was calculated by dividing the initial payment by the yearly surplus.

Discount Cash Flow Calculations and Net Present Value Method In our model, we compared all identified business models with the scenario where there is no solar PV and BESS-systems installed. The basis of the analysis lies in the fact that the business model with the marginal benefit is the most profitable. One difficulty that arises is that investments with different payment options cannot be compared using the payback method, as money today is more valuable than money tomorrow. The way this is handled is by discounting the future payments to today's value using the discount formula:

푭푽 푷푽 = (ퟏ+풊)풏

PV = Present value FV = Future value (money to be received in the future) i = discount rate n = number of periods until FV is received

The basis is that future income and expense are discounted in today's value. The discount rate is based on the prosumer, thus an individual, and was estimated through a historical average of stock market and obligation market. It is however pretty difficult to measure an individual's cost of capital, as personal traits affects the attitude towards money unlike companies where the sole goal is to be as efficient as possible with the money at hand. With this reasoning the 6% figure seems reasonable although a higher cost of capital would have been justified if the individual prosumer was to put the alternative money into an index fund or similar.

We recognize that the NPV might not give an accurate evaluation of the benefit of each business model on its own. However, as we compare several business models the NPV gives a good indication of which of these are the best economically viable alternative.

Payback Method A complementary method to the discount model is the payback method, which we also used to compare the profitability of the business models, of business models that it is applicable on. The payback time is calculated by dividing the initial payment with the annual net result.

One thing to keep in mind when comparing is that some business models imply infinite value creation for the prosumer, as the ownership of solar cells after its payback time basically generates free electricity for as long as the system is able to produce.

7 Results

The yearly net for the non PV or BESS was calculated to -5561 SEK and all results below has this alternative cost included.

Figure 4: Net Present Value of each investment

Figure 5: The payback time of an own PV system and an own PV- and BESS.

Prosumer ownership of a grid connected PV system As can be seen in the table above, the payback times equates to 12.9 years after taking into consideration the fixed and variable costs and the income. The NPV was calculated to 2748 SEK.

Leasing In the case with leasing the PV system the yearly incomes and costs related to selling and buying electricity are the same as if the PV system is owned by the prosumer. The difference between the two models is that leasing can be seen as a form of installment while owning the PV system requires an upfront payment. In other words the cost streams for the two investments differ. Thus is it mainly a question of financing when comparing the two models.

PPA In the scenario with the PPA the yearly savings was calculated to 688 SEK. Since there is no or a very small economical investment for the prosumer the only approach to evaluating the model’s profitability is by assessing the yearly savings. Discounted over a period of 20 years the total value of the PPA investment compared to the non PV or BESS case was calculated to 7890 SEK.

Prosumer ownership of a grid connected PV- and BESS As discussed in the literature study, battery storage for solar could become expensive and this is exactly what our results show. The payback period of a combined PV- and BESS is 20,6 years which is far worse compared to only owning a PV system. The limiting factor seems to be the ratio of cost vs benefit of the added batteries. The NPV of the PV- and BESS investment was calculated to -28391 SEK.

8 Sensitivity Analysis

Figur 6: The NPV of the investments: sensitivity analysis.

Figur 7: Payback time: Sensitivity analysis

Prosumer ownership of PV system In the scenario with the prosumer ownership of the PV system the values for investment costs and tax reduction were altered. For the best case scenario the investment cost was 20% lower and

the tax reduction for selling electricity was 20% higher. This scenario generated a NPV of 18267 SEK and a payback period of 9.2 years. For the worst case scenario the investment cost was 20% higher and the tax reduction for selling electricity was 20% lower. This scenario generated a NPV of -17822 SEK and a payback period of 16.4 years.

Leasing In the leasing scenario the only parameter altered was the leasing cost. It was lowered with 20% in the best case scenario and raised with 20% in the worst case scenario generating a NPV of - 21908 SEK respective -66283 SEK

PPA Regarding the PPA investment it was also only one parameter which was altered. In this case it was the price of electricity bought from the leased PV system. In the best case scenario the price bought from PV system was 70 % of the Nordpool spot market and in the worst case scenario the price was 95 % of the Nordpool spot market. The NPV of these scenarios were 7646 SEK for the worst and 8867 SEK for the best.

Prosumer ownership of PV- and BESS The sensitivity analysis for the prosumer ownership of PV- and BESS was made by altering the investment cost with 20%. In the best case scenario it was lowered with 20% and in the worst case scenario it was raised with 20%. For the best case scenario the NPV was -4671 SEK and the payback period was 15.5 years. In the worst case scenario the NPV was -52110 SEK and the payback period was 25.8 years.

9 Discussion

PPA The results show that the most economically profitable business model a prosumer can adopt today is through a PPA agreement. This is not entirely unexpected since that business model is not associated with high initial investment costs. Since there are no or very small investment costs for the prosumer the risk of large economic losses is nonexistent. While the other business models have large investment- or leasing costs as a premise to enable revenue streams, the PPA model creates value by reducing the existing cost streams. As of today this seems to be the most profitable way of adopting a PV system as a prosumer.

Prosumer ownership of PV system The second most profitable business model for a prosumer was the prosumer ownership PV system model. It is pretty clear that the price of solar cells will continue to decrease as it has the last years. Increased adoption and more maturity in the market will continue to push the prices down. Because of this, it is likely that owning solar cells will become an increasingly better investment as the initial cost gets lower. This creates a great case for solar cells in general and this business model in particular. As investment costs decrease, this business model becomes more affordable for everyday people. One thing to keep in mind is that owning your own solar cells is mostly only applicable for people having their own house and rooftop. For people living in flats this business models becomes irrelevant. However, it can be relevant for housing associations to examine the potential for PV systems.

Leasing The problem with leasing in general is that there always has to be an intermediary that takes a cut. However, as we will discuss later on, there might be advantages that could justify the high costs

for some individuals. Paying more is usually the drawback of having solutions where there is less hassle, but having the leasing fee being more than the spot electricity costs seems too high for it to become widespread. To a certain extent, the transition towards solar PV is not only a matter of saving the environment, but also making the entire energy sector more decentralized to minimize the unnecessary intermediaries that claim huge fees.

Prosumer ownership PV- and BESS The reason for a solar PV- and BESS performing the worst is due to the high costs associated with batteries for their rather disappointing performance. The costs are simply too high for batteries to be viable in this current market. If the trend for solar PV costs is similar to the trend of battery costs, we could expect batteries to be viable in some years. Consequently, there are no economic incentives for a prosumer to invest in a BESS today as the NPV is negative according to our model. However, there might be other factors which would legitimize a BESS investment. For example the ability to have stored energy when there is a power outage is a commodity which some people would be willing to pay for. This function could of course easily be met with a diesel generator but then the ecological aspect would be lost. The environmental aspect is also an important incentive to invest in a BESS. By being able to use the own produced electricity on a wider scale the prosumer becomes more self-reliant and transmission losses decrease.

9.1 Non-economic perspective

Although our model only takes into account the economic aspects of the business models as that is the easiest to quantify, it is important to have other aspect in mind as well when analyzing the benefit of each business model for the prosumer. One aspect that is often neglected is the convenience and the reduction of hassle for each alternative. From this perspective, Leasing and PPA seems to be the easiest of them all as the prosumer does not own the system. As with any technology, the usefulness is important but also the friction to enter the market as well. In order to truly reach the masses, the solar PV market needs to be seamless to enter for the end consumer, which is why leasing or PPA might be a very good option in the future. Another point is the inherent risk of an investment as a whole. With the leasing and PPA business models the prosumer is not responsible of the system and does not own it and thus is not exposed to any eventual risk associated with owning the system.

9.2 Possible improvements of the model

Maintenance costs are disregarded in the model. This has effect on the scenarios where the prosumer owns the PV system and BESS since means that the total costs could be larger in these two cases. In the scenarios with leasing and PPA the energy company owns the PV system and therefore is responsible for the maintenance. Thus it is possible that the model benefits the leasing and PPA business models.

The transformation from global horizontal irradiance to generated electricity by the PV system has been simplified. Global horizontal irradiance consists of both direct and indirect radiation which, for a better accuracy, needs to be evaluated separately in terms of how much electricity can be generated. For example on a cloudy day the global horizontal irradiance might be almost equal to the indirect radiation while on a clear day all global horizontal irradiance consists of direct radiation. In the model the proportions of direct and indirect radiation are not known

which leads to less accurate calculations. However it is a systematic error which affects all scenarios equally and therefore should not have substantial effect on the end result.

Inflation has not been taken into account in the calculations. The prices for electricity for 2017 have been assumed to stay the same for following 20 years which of course is not likely. However, the electricity prices affect both the costs for bought energy and also the revenues for sold energy. Hence, they will cancel out each other to a certain extent.

The consumption pattern for the household’s electrical usage is oversimplified. In the model the usage is assumed to be exactly the same every week. In reality there would be much larger differences in electrical household usage during different time periods. During some periods there would be a large decrease, for example when the family is on vacation. On other occasions there would be an increase, which could occur when there are more people in the house for example. However, this is a systematic error which effects the different scenarios equally which means that it should not have too big of an impact on the results when comparing the models.

Another possible improvement of the model would be to include the fee of the energy companies in the calculations. That is, the energy companies that buys electricity from the producers and sells to the consumers, not to be confounded with the energy companies linked to the prosumer business models. In the current calculations this intermediary was not included which lead to a lower price for bought electricity since the share that the energy company would take is disregarded. This simplification makes the price for bought electricity lower. However, it is a systematic error which means that all scenarios are affected in the same way.

In the BESS case of our model, the energy stored when production is greater than consumption the surplus is stored in the BESS instead of being sold to the grid. The way we constructed the model there is no real value to adding the BESS in the first place as the marginal benefit of storing energy in the battery as opposed to buying from the grid is very low. For the sake of this report, it might have been wiser to include an off-grid case where a battery would become more useful. However, we did not decide to include this since it is difficult to compare on-grid with off-grid.

10 Conclusions

Based on our model of different business models for solar prosumers in Sweden there seems to be evidence that some forms of solar PV adoption can be viable for providing electricity to small house owners.

PPA proved to be the most profitable investment for a prosumer and it has the great benefit of minimal effort for the prosumer since the energy company is responsible for basically everything regarding the PV system. Therefore is likely to assume that this business model will continue to grow in size in Sweden in the near future. Since both the prosumer and the energy company get benefits from the model it has a stable base for expansion. The sensitivity analysis also showed that there is no risk in adopting the model for the prosumer. The only parameter that has effect on the profitability is the percentage of the actual market price of electricity that the prosumer buys the generated electricity from the PV system for, from the energy company. Since this percentage never is larger than 100% the prosumer cannot make a loss adopting the model. The PPA business model is therefore a safe and stable investment which makes this business model low risk and thus is more likely to be adopted by the masses.

The prosumer ownership of a PV system was calculated to be an economically profitable investment but with a large risk. The sensitivity analysis showed that by adopting this business model the prosumer could face both a positive and negative NPV of 18 000 SEK. The economic uncertainty is therefore an obstacle for the growth of this business model since the risk of economic losses generally restrains people from investing. It is more likely that people with a technological interest would adopt this business model at the present moment. In the long term, prices for PV systems will decrease and this model will probably then are adopted more frequently. And since the model was calculated to have a positive NPV today its adoption might be evolving even faster.

Leasing or owning a combined PV- and BESS proved to be an economically bad investment and even in their best case scenarios these business models were not economically beneficial. Hence, these models will probably not be expanding on a large scale in the near future. When the prices for batteries and solar cells drop further these models will probably prove more viable but it is presumably in the longer term.

11 Suggestions for future research

In the not too far future the digitalization will most likely revolutionize the Swedish energy system. The possibility to connect PV- and BESSs to be online will open many doors. By analyzing consumption and production patterns on a large scale for prosumers there will be many ways to make the local PV network more efficient. Prosumer community groups will probably emerge which will allow energy to be shared efficiently among the group’s members (Parag and Sovacool, 2016). In our research we analyzed prosumers from the individual’s perspective, which today is the most common way for prosumers to operate. However, with digitalization new integrated prosumer business models will appear which have to be addressed. Therefore we would recommend future research to be done on how prosumers can cooperate in the most efficient way using digitalization and Big Data.

Another interesting thing to look into further is the selling of stored energy in the batteries. In our model, excess energy was sold directly to the grid which by no means is optimal. By creating an algorithm that recognizes patterns in the spot price, energy could be sold during times when spot prices are at its highest. Looking at our data, peak battery load is usually around midday, while peak electricity usage, and thus often the spot price, is in the early morning and late afternoon. The fact that there are discrepancies between peak load and peak price enables a potential profitable research concept to create an algorithm that could arbitrage electricity.

12 List of references

12.1 Interviews Eneo, Alexander Rudberg, 2018-05-03 Söder Lennart, 2018-04-18 Varberg Energy, Johannes Forsberg, 2018-04-16 Umeå Energy, email correspondence 2018-04-13

12.2 Other sources Amelin & Söder, (2011), Efficient Operation and Planning of Power Systems Atcitty et al., (2013), Battery Energy Storage System, available at https://link.springer.com/chapter/10.1007%2F978-1-4471-5104-3_9, retrieved 2018-04-14 Bydén et al. (2017), ENERGIANVÄNDNING I SMÅHUS, retrieved 2018-04-05 Chaar et al., (2011), Review of photovoltaic technologies, available at https://www.sciencedirect.com/science/article/pii/S1364032111000050, retrieved 2018-04-14 CivicSolar, (2011), Solar Array Tilt Angle and Energy Output, available at https://www.civicsolar.com/support/installer/articles/solar-array-tilt-angle-and-energy-output, retrieved 2018-04-13 Davidson et al., (2015), Exploring the market for third-party-owned residential photovoltaic systems: insights from lease and power-purchase agreement contract structures and costs in California, available at http://iopscience.iop.org/article/10.1088/1748- 9326/10/2/024006/meta, retrieved 2018-04-26 DN, (2018), Regeringen vill slopa bygglov för solceller, available at https://www.di.se/nyheter/regeringen-vill-slopa-bygglov-for-solceller/, retrieved 2018-04-13 Energy.gov, (2018), Crystalline Silicon Photovoltaics Research, https://www.energy.gov/eere/solar/crystalline-silicon-photovoltaics-research, retrieved 2018-04- 26 EnergySage, (2018), Solar Leases & PPAs, available at https://www.energysage.com/solar/financing/solar-leases-and-solar-ppas/, retrieved 2018-04-26 Eon, (2018), Solcellspaket och batterier, available at https://www.eon.se/privat/for- hemmet/solceller/solcellspaket.html, retrieved 2018-04-14 Frankel and Wagner, (2017), Battery storage: The next disruptive technology in the power sector, available at https://www.mckinsey.com/business-functions/sustainability-and-resource- productivity/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector, retrieved 2018-04-14 Frantzis et al., 2008, Photovoltaics Business Models, available at https://www.nrel.gov/docs/fy08osti/42304.pdf, retrieved 2018-04-23 Fraunhofer ISE, (2015), Current and Future Cost of Photovoltaics. Long-term Scenarios for Market Development, System Prices and LCOE of Utility-Scale PV Systems, available at https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/AgoraEn ergiewende_Current_and_Future_Cost_of_PV_Feb2015_web.pdf, retrieved 2018-04-14 Fu et al., (2017), U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017, available at https://www.nrel.gov/docs/fy17osti/68925.pdf, retrieved 2018-04-26

Günther, (2011), Advanced CSP Teaching Materials, available at http://www.energy- science.org/bibliotheque/cours/1361469594Chapter%2002%20radiation.pdf, retrieved 24-05- 2018 Oko et al., (2012), Design and Economic Analysis of a Photovoltaic System: A Case Study, available at https://ejournal.undip.ac.id/index.php/ijred/article/view/4095/3742, retrieved 2018-04-16 Kraftringen, (2018), Lagra elen i ditt eget solcellsbatteri, available at https://www.kraftringen.se/Privat/solceller/solcellsbatteri/, retrieved 2018-04-27 Lindstens, (2017), Study of a battery energy storage system in a weak distribution grid, available at https://uu.diva-portal.org/smash/get/diva2:1112854/FULLTEXT01.pdf, retrieved 2018-05- 24 McCabe, (2011), SALVAGE VALUE OF PHOTOVOLTAIC SYSTEMS, available at https://ases.conference- services.net/resources/252/2859/pdf/SOLAR2012_0783_full%20paper.pdf, retrieved 2018-04- 30 McKinsey, (2014), The disruptive potential of solar power, available at https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our- insights/the-disruptive-potential-of-solar-power, retrieved 2018-05-24 Mynewsdesk, (2017), Järfälla första kommunen att upphandla solceller som tjänst - följer internationell trend, available at http://www.mynewsdesk.com/se/eneo- solutions/pressreleases/jaerfaella-foersta-kommunen-att-upphandla-solceller-som-tjaenst-foeljer- internationell-trend-2120020, retrieved 2018-04-27 Nordpool, (2018), Historical Market Data, available at https://www.nordpoolgroup.com/historical-market-data/, retrieved 2018-04-10 NyTeknik, (2017), Regeringen: Slopa bygglov för solceller, available at https://www.nyteknik.se/energi/regeringen-slopa-bygglov-for-solceller-6833250, retrieved 2018- 04-16 Palm, (2017), Swedish prosumers in a 10-year perspective – what can we learn from a market in transformation?, available at https://www.eceee.org/library/conference_proceedings/eceee_Summer_Studies/2017/9- consumption-and-behaviour/swedish-prosumers-in-a-10-year-perspective-8211-what-can-we- learn-from-a-market-in-transformation/, retrieved 2018-04-19 Parag and Sovacool, (2016), Electricity market design for the prosumer era, available at https://www.nature.com/articles/nenergy201632#three-potential-prosumer-markets, retrieved 2018-05-08 SEIA (Solar Energy Industries Association), (2018), Solar Power Purchase Agreements, available at https://www.seia.org/research-resources/solar-power-purchase-agreements, retrieved 2018-04-26 SMHI, (2018), Strålning, available at https://www.smhi.se/klimatdata/meteorologi/stralning, retrieved 2018-04-10 SMHI, (2014), Hur mäts globalstrålning, available at https://www.smhi.se/kunskapsbanken/meteorologi/hur-mats-globalstralning-1.77050, retrieved 2018-04-13

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13 Appendices

13.1 Appendix 1: Household appliances and usage The table displays the power for different household appliances and their assumed usage per weekday and Saturday/Sunday for a family of four living in a house (Bydén et al., 2017). Power Household appliance (W) Usage. per weekday (h) Usage per Sat/Sun (h) Fridge & freezer 150 24,000 24,000 Toaster 1000 0,083 0,083 Dish washer 1500 1,000 1,000 Food processor 450 0,083 0,083 Coffe maker 400 0,333 0,333 Micro 1500 0,333 0,667 Kitchen fan 150 0,500 0,667 Stove 1500 0,500 0,667 Oven 1500 0,500 0,667 Vacuum cleaner 1000 0,000 1,000 Strykjärn 1000 0,000 1,000 Drier 2000 0,000 1,000 Washing machine 2000 0,000 1,000 LED lamps, 10 100 5,000 5,000 TV, 2 300 1,500 2,000 Hairdryer 1000 0,167 0,167 Sewing machine 75 0,000 0,500 Phone charger, 4 20 8,000 8,000 PC , 4 440 1,000 1,000 PC Standby, 4 30 23,000 23,000

13.2 Appendix 2: Electrical appliance usage pattern on weekdays Assumed electrical appliance usage pattern on weekdays for a family of four living in a house (Bydén et al.,2017).

13.3 Appendix 3: Electrical appliance usage pattern on Saturdays and Sundays Assumed electrical appliance usage pattern on Saturdays and Sundays for a family of four living in a house (Bydén et al., 2017).