Electricity produced by solar PV is often touted as significantly cheaper than alternatives like diesel-generated power. However, this perspective can be misleading for those not well-versed in the topic. Solar power’s cost-effectiveness deserves a closer look, especially when we factor in certain constraints.

When we compare solar power plants to diesel power plants, it’s crucial to understand the different source and type of energy that they convert. The solar power plant converts sunlight energy that is available certain times of the day at a different intensity. The diesel power plants convert diesel fuel whose quantity can be modified at while at any time of the day. The difference in the fuel sources is a key factor that impacts the economics of the electricity produced.

The fluctuating nature of solar radiation throughout the day, from zero to peak values, presents a challenge that diesel power plants don’t face. Unlike power plants, solar power plants can’t modulate their energy supply at will. This inability to manage fuel availability is often an overlooked cost.

To illustrate this point, let’s delve into the specifics of producing electricity from solar and from diesel, with a goal to produce 1MW constantly throughout the day in a place, let’s say Lubumbashi, DRC.

Cost of Electricity (COE) from diesel power

A 1MW rated diesel generator can continuously output 1MW throughout the day. Considering a 45% efficiency and a diesel price of $1.14 per liter, the daily fuel cost comes to around $5,700.

Using two diesel gensets of 1MW will ensure an uninterrupted power output of 1MW even during maintenance. The EIA data on construction cost of generators using petroleum products in 2020 gives a price of 795 $/kW as depicted below.

For this exercise we will use of 1,000 USD/kW for the power plant, giving a total CapEx of ˜2 million USD for the power plant. The 2020 World Bank report on increasing access to electricity in DRC, indicate that private equity in DRC operates on a WACC of 20 to 25%. Let’s assume for this exercise a WACC of 15% and a period of 10 years. This gives a cost of money (COM) of 1093 $/day.

Using the 2022 EIA report, we get a cost of 240 USD/day for the O&M of an internal combustion engines.

Adding up the fuel, the COM and the O&M gives a total cost of ˜7,000 USD/day to produce 24MWh per day, equivalent to USD 29.18 c/kWh.

COE of Solar Power

Using the Global Solar Atlas site, a 1MW ground mounted solar PV in Lubumbashi will produce a minimum daily output of 3.9MWh during the month of February. This is equivalent to the solar PV plant producing peak power continuously for only 3.9 hours in a day, equal to a capacity factor (CF) of 16.7%. Using this CF, the solar PV plant must be sized up to at least 6.1MW to produce 24 MWh in a day.

Using he Global Solar Atlas, a 6.1MW solar PV plant in Lubumbashi will produce a total of 10MWh over 13 hours in a day in February when the output is capped at 1MWh per hour. The energy produced in excess of 1MWh per hour is stored to be released later when the solar plant output drops to maintain an overall system output of 1MW.

To maintain a high number of charging cycles the depth of discharge (DOD) of the lithium batteries should not exceed 80%. The BESS should be sized up such that the DOD equals the excess energy to be stores. Furthermore, the solar plant PV will have to be sized up to account for the losses (let’s say 10 %) in storing the excess energy.

Considering the above-mentioned constraints, the solar PV plant was sized up at 6.9MW and the BESS with a capacity of 20MWh and a power of 1MW. The picture below depicts a simulation of the power plant using excel.

The PV output capped at the required demand will deliver ˜10.4 MWh in a day. The additional 13.6 MWh produced by the PV power in a day is stored in the BESS. The BESS will reach its first charge of 20MWh over the first 36 hours, and thereafter will discharge and recharge within an optimum range, not going below a 80%DOD, delivering ˜13.6MWh in a day.

Using data from NREL ATB on solar PV plants and battery storage, we get an overall CapEx of USD 12 million and an O&M cost of 364 USD/day. The actual price for installation in Lubumbashi would be higher. Assuming a WACC of 15% and a recovery period of 10 years, the COM gets to 6,622 USD/day. The total COE is thus USD 29.11 c/kWh.

Overall

The table below summarises the cost to produce electricity constantly at 1MW throughout the day with a solar PV plant + BESS and with a diesel power plant.

Comparing the costs, we find that the COE of solar power + BESS is practically on par with that of diesel power. Notably, diesel costs contribute significantly (80%) to the overall diesel power plant COE, and government tax exemptions could reduce this cost by over 30%.

As per the article of John Fitzgerald Weave, Japanese solar developer, Blue Power, built a 24-hour solar plus energy storage power plant in Japan that can run for 24hours a day at an overall cost of USD 20.6 c/kWh. This COE is based on a WACC of 4% and a recovery period of 10 years. Using a WACC of 15% gives a COE of USD~31 c/kWh in line with our findings.

These findings are based on a high-level analysis that is directionally correct. Notably, we haven’t addressed the substantial dissimilarity in spatial needs for the two power plants. The usual electricity consumption pattern within a community is far from consistent. It tends to exhibit notable surges during early mornings and evenings when the sun’s energy isn’t accessible to fuel the solar PV plant. Attempting to accommodate this consumption profile solely with solar power would intensify the disparity in electricity production costs between the two types of power plants.

Conclusion

The perceived economic benefits of solar power in contrast to diesel power are not what they often make them to be. This is due to substantial distinctions in the nature and limitations of their respective fuel sources. One key divergence lies in the accessibility and adaptability of these fuels, which directly affects their resulting power generation. This exploration has highlighted an essential expense: the cost of flexibility and availability. This expense is often overlooked in the comparison of these energy sources. Ultimately, both solar power and thermal diesel power possess intricate characteristics and different advantages, warranting an awareness and/or mention when assessed and juxtaposed within the broader energy landscape.