In a country like Portugal where the sun shines between 2 200 and 3 000 hours per year the ability to produce your own energy through solar radiation is a great opportunity to help the environment and to reduce your energy bills.
From January 2015, this opportunity became a reality through a law published in October 20th of 2014, the DL nº 153/2014, where which allows a final consumer to be able to consume its own energy by installing an (renewable or not) energy system in his building. Before that, the decentralized energy power systems were designed to produce and inject all the energy generated in the national grid.
The consumer evolved to a PROsumer, being able to produce, consume and, in some cases, sell energy that is generated in its own household/building. The new law was intended to be a new measure of energy efficiency once that it was aimed to cost savings and not grid management, which means that the prosumer must be better informed about his own energy profile in order to proper design a power system adequate to its household/building.
Differences between Mini generation and Self-Consumption Systems
Before 2015, it was already possible to have solar panels in a house or in a building. Those were called Mini Generation or Micro Generation Power Systems, being most of them solar based. Those technologies were not self-consumption oriented and the purpose of installing those were more for business-oriented. The projects were designed regardless the building consumptions, where the project is installed, being most of them designed to exceed the capacity required for the building. In this type of systems, all energy generated is sold and directly injected in the national grid, normally at a higher price than the energy bought to be consumed in the related building. The selling price is settled by contract, taking in account the investment payback.
On the other hand, after January of 2015, self-consumption power systems were created to avoid the injection of energy in the grid, having as the main technic goal to fulfill the energy demands just with own energy. To accomplish this it is important to have information about the profile of consumption for the household/building to design the system that does not exceed the energy needs.
The prosumer has the power to decide if he wants to be connected to the grid and also has the possibility to install batteries in order to manage his energy, but he is only allowed to sell energy that is being generated and not consumed. This means that a prosumer cannot store energy during the day to sell it during the night, or at least it should not be possible.
Therefore, we can mention two types of projects: one where solar batteries are included and another where no battery is installed.
The roll of having batteries is crucial in terms of price and project. No batteries imply that there is no possibility to manage or save the electricity generated during the day to be used in the peak hours (usually early morning or night).
The acceptance of this new way to actively participate in the power market was well accepted by few consumers from Low tensions. To be more specific, there were 3500 units installed in 2015 around Portugal and last year that whose number almost doubled to 6067 installations. In terms of installed capacity, the accumulated capacity registered is 50 393 kW.
Taking Advantage of the Self-Consumption
According to the best estimations and already proven results, is possible to reduce an energy bill from 20% to 50% depending of on the consumption profile of the building where the Self-Consumption Power System is installed.
These solutions are well seen by services’ buildings and by some factories, once that their peak hours correspond to daylight hours, taking full advantage of the energy system and avoiding buying part of the electricity needed. In cases like these and depending on the size of the installation, energy bills can overpass the 50% of costs reductions.
On the other hand, houses and residence buildings have different consumption patterns, registering their peak hours during periods of early morning and early night. Once that, most of the Self-Consumption currently adopted are solar based, households cannot enjoy much of the energy produced by its solar panels during the day.
Image 1 – Energy consumption using a self-consumption solar energy system. Decreto Lei 153/2014
Selling vs Storage
According to the law DL nº 153/2014, the owner of the installation has the option to decide if he wants to be connected to the national energy grid or not. Of course, a connection to the grid is always a safety measure to assure that in case of need, the household will never be without electricity. However, this grid connection has a fix cost that must be paid using or not using it and is also necessary to celebrate a contract with an Energy Company (EDP Universal in Portugal) in order to be able to sell the possible excess of energy that can be generated.
The grid connection and the selling contract are sensitive points. The Self-Consumption solution was designed to avoid energy dependence from the grid and should be only used in two occasions:
- Sell the excess of energy that is being generated by the Power system and not being consumed by the building;
- Consume energy when the power generated by the stand-alone system is not sufficient.
Despite the original goal of this law, the same law is ambiguous enough to allow prosumers to take advantage of the system to make money. Before we continue with this thought, it is important to inform that the present law also allows the integration of batteries in the stand-alone power systems in order to store energy that is not use to be consumed on more demanding periods. A great example, and probably the most common is the solar power systems. Normally, a prosumer can store energy generated during daylight, when the energy demand is low and use it in the night. Until here, everything is great! This new approach eases the grid management and less needs for big power plants to generate extra energy to fulfill the peak hours of the national grid. Furthermore, normally these self-consumption systems are based on renewable energy sources avoiding more emissions of CO2 and contribute for a more sustainable country. In terms of costs, the news is are also good since the payback can be around 8 years and the lifecycle of a solar panel can go up to 20 years. Putting some context in this:
According to the calculations showed in the DL nº 153/2014, an example of a System with 2 kW of installed capacity in a home with a 10.35 kVA of installed capacity with an annual consumption of 5.6 MWh, results in an investment of 5 144€ and payback of 10 year. It reports savings of 480€ in the energy bill and reduces the imports from the energy grid from 5.6 MWh/year to 3.5 MWh/year. The solar system installed can generate 3044 kWh/ year, consuming 70% of that energy and injecting the remaining in the grid.
The excess of generation is sold to EDP SU (energy supplier of the regulated market) at a price of 90% of the OMIE (Electricity Iberian spot market) for that day.
The example referred above was picked from the regulation document. However it should be extremely important to inform the consumers that each case has to be studied individually taking into account a group of questions that should be duly answered like:
- How many people live in the house;
- Which equipment exists in the house;
- The location of the house (region and orientation);
- The profile of the consumers
All of this and more information must be gathered and analyzed to design the best stand-alone system for house in question or even, to decide the feasibility of the investment.
Is this the real deal?
The stand-alone systems and the new role of active consumer in the market is going to produce a curious and really interesting change in the Energy Market and on how the business is made. Smart grids are not a dream anymore and are becoming an urgency day by day. Mitigate the peak hours issue work for a more stabilized national network, requesting less secure procedures has power plants in stand-by mode and the need for bigger infrastructures to be able to produce energy to transport from one side to another of the county will become a myth. The self-consumption, along with EV boom and technologies that allow more transparency and security in the market, such as the trendy blockchain will change the bias of the energy market and, maybe (utopically) will be possible to achieve an emissions free energy system free from fossil fuels.
Getting back to the present, this amazing solution can also become a poison to the electricity system if the laws are not more assertive and transparent. The current law states that the main goal of these stand-alone systems is to reduce energy costs, making buildings more efficient, but it does not state any control mechanisms for the energy that is not consumed. For example, in a house hold with these systems that include batteries, the owner can store energy during the day to sell it at peak hours, continuing to demand the same amount of energy from the grid as before. Besides the problem with the peak hours in the national grid, the owner will also take advantage of this opportunity to make more money and to turn this solution into a business. It is important to say that the energy supplier CUR is obligated by law to buy all the energy produced in the special regime.
Self-consumption and decentralized energy production are part of the solution and are part of the path for a more sustainable, clean and transparent world. There is no doubt that this kind of approach to give more “power” to the final consumer is the best way to bring more transparency and competitiveness to the energy market, as well as to give more information and responsibility for the consumers about the energy sector.
Currently, this new path of energy efficiency will show better results in the services and commercial sectors where the goal will pass to consume all the energy generated to reduce the dependence of the grid. On the other hand, the households can see this as a mixed opportunity of paying less to the energy supplier since they are consuming less power from the grid and making money by selling their energy, which will be a bigger part of the energy generated in the households. This is the future and companies like Google are already betting on this new energy market with their Google Project Sunroof. This new platform combines several tools from Google and gives the opportunity to easily go from the idea to the concept in some clicks. Unfortunately, it is only available in U.S.A. and Germany but for sure it will not take longer to spread to other countries like Portugal and Spain.
Of course some regulation should be adapted and rethink to embrace the full potential of this decentralized and environmentally friendly way of energy production but the first steps are taken and the future is bright.
Jorge Seabra | Energy Consultant