Deploying collective PV selfconsumption in France: System design, barriers, and policy recommendations

Master of Science Thesis

KTH School of Industrial Engineering and Management Department of Energy Technology

Division of Applied Thermodynamics and Refrigeration SE-100 44 STOCKHOLM

Deploying collective PV self- consumption in France:

System design, barriers, and policy recommendations

Fatou Bintou DIEME

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Master of Science Thesis EGI 2020:71

Deploying collective PV self-

consumption in France: System design, barriers, and policy recommendations

Fatou Bintou DIEME

Approved 2020-04-15

Examiner:

Hatef Madani Larijani

Supervisor:

Nelson Sommerfeldt Commissioner

ENEA Consulting

Contact person Martin Salmon

Key words:

Solar PV

PV system design Self-consumption

Collective self-consumption Tax policy

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Acknowledgments

This thesis was assessed as part of my 6-month internship at ENEA Consulting in Paris, a consulting company on strategy and energy transition. I would like to thank all the teams I work with through different exciting projects. I want to thank especially the team I work with on a mission on collective self- consumption. In particular, Jacques Arbeille my manager for his support and interesting ideas.

I would like to thank Nelson Sommerfeldt for having supervised this work, for his challenging analyses and his suggestions.

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Abstract

A collective self-consumption project defines a community made of different electricity consumers that gather around a decentralized distributed energy generation system in order to supply part of their electric demands through self-consumption of the decentralized electricity produced. Solar photovoltaic (PV) technology is the most used decentralized energy generation system. Thanks to the falling price of renewable energy technologies due to the development of research, and political regulations towards the sustainable development goals, new ways of producing energy have emerged and collective self-consumption projects are part of them. France stands as one of the few Europeans countries having specific regulatory framework for such projects. However, strong barriers prevent from their deployment. These are mainly: a low retail electricity price, high taxes and network tariffs, and a regulation with heavy administrative processes.

Besides, the majority of the studies made on collective self-consumption projects are mostly on blockchain technology for the local energy market created by them. The few techno-economic analyses on collective self-consumption are essentially commercial and not research oriented. Therefore, the aim of this study is first, to analyze typical system designs for a collective self-consumption project and set an example of a reference PV system for such project. The objective is also to find most critical barriers for a collective self- consumption project through an analysis of their impact on the project’s economics. Finally, the aim is to investigate possible policies that could be set by the French Government, regarding its budget, in order to develop PV collective self-consumption projects in the future.

A community made of diverse electricity consumers and located in Montpellier, was defined for the purpose of this study. Each consumer’s annual electric load was directly collected from the national open data platform and the sum constituted an input for the system design and modeling in SAM (System Advisor Model), the software used. Techno-economic optimizations were performed both in SAM and a specific built-in economic tool to find an optimal PV system based on the key performance indicators (KPIs) defined. Two main business models were looked at: prosumer and third-party business models. The former corresponds to the case where the PV system is owned by the community itself. The latter is associated to a situation where a third-party which can be a developer, or a utility owns the PV asset and sells the electricity to the community. The impact of barriers to collective self-consumption on the project’s economics are analyzed through the different business models. Critical barriers are found and an analysis on possible policies favoring State initiatives for collective self-consumption is held.

This study defines a collective self-consumption project with a techno-economic optimized system design based on fixed key performance indicators (KPIs). The most important KPI is the solar fraction (SF) corresponding to the ratio of the local energy self-consumed by the community over its load. A PV system of 35 kWp with a SF of 34% was found for the city of Montpellier. This study also confirms the fact that collective self-consumption projects are not profitable in France. The CSPE is mainly the tax component that prevent such projects from being profitable regardless of the business model. Besides, the VAT on local electricity consumption weakens the project’s profitability in the prosumer business model. In terms of budget, removing the CSPE costs less to the State (with 19 027 €) than subsidizing direct PV investment cost at 638 €/kW (with 22 330 €) for a project having a third-party business model within the found PV system. For a project having a prosumer business model, a subsidy of 511 €/kW on the direct PV investment cost is preferable for the State (with 17 885 €) than removing both the CSPE and the VAT on local electricity consumption which causes a shortfall of 29 732 €.

In conclusion, a collective self-consumption project is not economically profitable in France within the current legislation. To allow the deployment of such projects, the French state should allocate a minimum subsidy of 40% in the direct PV investment (511 €/kW for a PV system of 35 kWp) for projects with a prosumer business model. For the ones with a third-party business model, the CSPE should be removed.

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Sammanfattning

I ett projekt för kollektiv självkonsumtion definieras en gemenskap som består av olika elkonsumenter som samlar sig kring ett decentraliserat system för energiproduktion för att tillgodose en del av sina elbehov genom självkonsumtion av den producerade decentraliserade elen. Solcellsteknik är det mest använda decentraliserade energiproduktionssystemet. Tack vare det sjunkande priset på teknik för förnybar energi på grund av forskningens utveckling och politiska bestämmelser för att uppnå målen för hållbar utveckling har nya sätt att producera energi kommit fram och kollektiva projekt för självkonsumtion ingår i dessa.

Frankrike är ett av de få EU-länder som har särskilda rättsliga ramar för sådana projekt. Stora hinder hindrar dock från att de sätts in. Dessa är huvudsakligen följande: Ett lågt elpris i detaljistledet, höga skatter och nätavgifter och en förordning med tunga administrativa förfaranden. Dessutom handlar de flesta studier som gjorts om projekt för kollektiv självkonsumtion främst om teknik för att blockera den lokala energimarknad som de skapar. De få tekniska-ekonomiska analyserna om kollektiv självkonsumtion är huvudsakligen kommersiella och inte forskningsinriktade. Syftet med denna undersökning är därför först och främst att analysera typiska systemutformningar för ett kollektivt självkonsumtionsprojekt och föregå med gott exempel på ett referenssolcellssystem för sådana projekt. Målet är också att hitta de viktigaste hindren för ett kollektivt projekt för självkonsumtion genom en analys av deras inverkan på projektets ekonomi. Slutligen är syftet att undersöka möjliga politiska åtgärder som den franska regeringen skulle kunna fastställa när det gäller dess budget, för att utveckla kollektiva projekt för solcellsanvändning i framtiden.

I denna studie definierades ett samhälle som består av olika elkonsumenter och som är beläget i Montpellier.

Varje konsuments årliga elbelastning samlades direkt från den nationella öppna dataplattformen och summan utgjorde en inmatning för systemutformning och modellering i SAM (System Advisor Model), den programvara som användes. Teknikekonomiska optimeringar utfördes både i SAM och ett specifikt inbyggt ekonomiskt verktyg för att hitta ett optimalt solcellssystem baserat på de nyckelutförandeindikatorer som definierats. Två huvudsakliga affärsmodeller granskades: företagsmodeller för konsumenter och tredje part.

Det förra motsvarar det fall där solcellssystemet ägs av samhället självt. Det senare är förknippat med en situation där en tredje part som kan vara en utvecklare, eller ett företag äger solcellstillgången och säljer elen till samhället. Effekterna av hinder för kollektiv självkonsumtion på projektets ekonomi analyseras genom de olika affärsmodellerna. Kritiska hinder finns och en analys av möjliga politiska åtgärder som främjar statliga initiativ för kollektiv självkonsumtion genomförs.

I denna studie definieras ett kollektivt projekt för självkonsumtion med en tekniskt-ekonomisk optimerad systemdesign som baseras på nyckelutförandeindikatorer (KPI). Den viktigaste nyckelutförandeindikatorn är den solfraktion (SF) som motsvarar förhållandet mellan lokalbefolkningens egen energiförbrukning och dess belastning. Ett solcellssystem på 35 kWp med en standardtäckningsgrad på 34 % hittades för staden Montpellier. Denna undersökning bekräftar också att kollektiva projekt för självkonsumtion inte är lönsamma i Frankrike. CSPE-bolaget är i huvudsak den skattekomponent som hindrar sådana projekt från att vara lönsamma oavsett affärsmodell. Mervärdesskatten på lokal elförbrukning försvagar dessutom projektets lönsamhet i konsumentens affärsmodell. När det gäller budgeten är det mindre statens kostnader att ta bort CSPE (med 19 027 euro) än att subventionera direkta kostnader för solcellsinvesteringar till 638 euro/kW (med 22 330 €) för ett projekt som har en affärsmodell från tredje part inom det befintliga solcellssystemet. För ett projekt som har en konsumentaffärsmodell är en subvention på 511 euro/kW på kostnaden för direktinvesteringar i solcellssektorn att föredra för staten (med 17 885 euro) än att ta bort både CSPE och momsen på lokal elförbrukning, vilket leder till ett underskott på 29 732 euro.

Sammanfattningsvis är ett kollektivt projekt för självkonsumtion inte ekonomiskt lönsamt i Frankrike inom ramen för den nuvarande lagstiftningen. För att sådana projekt ska kunna genomföras bör den franska staten anslå ett minimibidrag på 40 procent i direktinvesteringen i solcellssektorn (511 euro/kW för ett solcellssystem på 35 kWp) till projekt med en konsumentaffärsmodell. För de som har en affärsmodell från tredje part bör CSPE-bolaget tas bort.

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Table of Contents

Abstract ... 4

1 Introduction ...11

1.1 European Energy Trends Overview ...12

1.2 Deep changes ...12

1.2.1 Falling cost of renewable energy technologies ...13

1.2.2 Sustainable Development Goals (SDG) ...14

1.2.3 Regulatory framework ...14

1.3 Distributed energy generations ...15

1.3.1 Individual Self-Consumption ...15

1.3.2 Collective Self-Consumption ...16

1.4 Technology background ...17

1.4.1 Solar PV system...17

1.4.2 System components ...17

1.5 Feasibility studies on collective self-consumption projects in France ...18

1.6 Barriers to collective self-consumption development in France ...20

1.6.1 Heavy regulation ...20

1.6.2 No exemption for electricity taxes and network tariffs ...21

1.6.3 Lack of government support ...22

1.6.4 Lack of proven, diversified business models ...23

2 Objectives ...24

3 Methodology ...25

3.1 Key assumptions ...27

3.1.1 System description ...27

3.1.2 Electric loads ...28

3.2 Technical parameters ...30

3.2.1 PV modules choice ...30

3.2.2 System design...30

3.2.3 DC/AC ratio...32

3.3 Economical parameters ...33

3.3.1 System costs ...33

3.3.2 Business models ...34

3.3.3 Electricity network tariffs and taxes...35

3.4 Key performance indicators (KPIs) ...38

3.4.1 Solar fraction ...38

3.4.2 Net Present Value (NPV) ...38

3.4.3 Internal Rate of Return (IRR) ...40

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3.4.4 Payback year ...40

4 Results and analysis ...41

4.1 Prosumer business model with 100% equity ...41

4.1.1 Multi-family house rooftop’s PV system design ...41

4.1.2 Commerce and Houses rooftops’ PV system design ...42

4.1.3 Final PV system design for the community ...44

4.2 Prosumer business model with debt/equity ...44

4.3 Third-party business model with debt/equity ...45

4.4 Sensitivity analysis ...45

4.4.1 Electricity network tariffs and taxes...46

4.4.2 Electricity prices ...48

4.4.3 PV costs ...50

4.4.4 Discount rate ...51

4.4.5 Debt fraction ...52

4.5 Policy analysis for collective self-consumption ...52

4.5.1 Tax removal ...52

4.5.2 Subsidies on PV installation investment ...53

5 Discussion & Conclusion ...54

6 References ...56

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List of Figures and Tables

Figure 1: World's electricity generation 2017 (Source WEO 2018) ...12

Figure 2: PV module price trends from 2010 to 2018 (Source IRENA) ...13

Figure 3: Individual self-consumption ...16

Figure 4: Example of collective self-consumption ...16

Figure 5: Residential PV system ...17

Figure 6: Collective self-consumption in France ...20

Figure 7: Share of taxes and levied paid by household costumers for the electricity, first half 2019 (Source Eurostat) ...21

Figure 8: Community loads: total annual, winter day and summer day load profiles...28

Figure 9: Community's total load repartition ...29

Figure 10: Multi-family house rooftop PV system design ...30

Figure 11: Commerce rooftop PV system design, when the modules face the south ...31

Figure 12: Houses' rooftops PV system design ...31

Figure 13: Times of deliveries for network tariff calculations...36

Figure 14: Energy self-consumed by the community - Multi-family house rooftop ...42

Figure 15: Total discounted savings and cost over the project's lifetime, with the final system ...44

Figure 16: The repartition of the total tax paid by the project in year one, with the final system design ...45

Figure 17: Prosumer business model with debt/equity: NPV in the taxes and TURPE sensitivity analysis46 Figure 18: Prosumer business model with debt/equity: IRR in the taxes and TURPE sensitivity analysis .47 Figure 19: Prosumer business model with debt/equity: NPV when the CSPE and VAT on local electricity consumption are cancelled ...47

Figure 20: Prosumer business model: NPV when the discount rate increases ...51

Figure 21: Prosumer business model with debt/equity: NPV when the debt fraction increases ...52

Table 1: Global weighted-average cost of electricity ...14

Table 2: Public support for individual self-consumption projects in France (Source: Legifrance) ...23

Table 3: Collective self-consumption project geographical boundaries ...27

Table 4: Monocrystalline modules chosen ...30

Table 5: PV system costs ...33

Table 6: TURPE specific's tariff structure ...36

Table 7: Possible multi-family house rooftop PV system designs ...41

Table 8: Possible commerce rooftop PV system designs in East orientation ...42

Table 9: Possible commerce PV system designs in South orientation ...43

Table 10: Possible configurations for the shops and houses PV system design ...43

Table 11: KPIs of the third-party business model with debt/equity system design...45

Table 12: Third-party model: KPIs when the total tax amount decreases ...48

Table 13: Prosumer business model with debt/equity: KPIs when the electricity retail price increases ...49

Table 14: Third-party business model: KPIs when the electricity price increases ...49

Table 15: Third-party business model: KPIs when the PPA equals the surplus sale price ...50

Table 16: Prosumer business model with debt/equity: KPIs when the PV direct costs decrease ...50

Table 17: Third-party business model with debt/equity: KPIs when the PV direct costs decrease ...51

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1 Introduction

The European energy sector is facing deep changes regarding the trends of electricity generation and consumption. These changes are essentially caused by the falling cost of renewable energy technologies making solar photovoltaic power more accessible than ever. Besides, the United Nation Sustainable Development Goals coupled with political regulations, are pushing forward the move toward cleaner energy with a high awareness from people. Distributed energy generations lead among the deep changes in the European energy sector. They are essentially using solar PV as main technology.

Different ways of consuming the electricity produced by a decentralized distributed energy system exist.

This can be done individually, where there is only one final consumer benefiting from the system or collectively, where there are multiple consumers. While individually distributed energy generation systems, with only one stakeholder, are relatively deployed and technically mastered, the ones involving many stakeholders are on their premises in France. The low electricity price due to its almost three-fourth electricity coming from nuclear power makes it hard for solar PV system to be profitable. Besides, taxes and network tariffs on the local energy produced, the lack of considerable incentives toward collective self- consumption allied with a rigid regulation are delaying the breakthrough. That is why only few collective self-consumption projects were accomplished hence the necessity to have a specific policy to help deploying such projects in the future.

The objective of this study is first, to add a reference PV system design model for a collective self- consumption project to the limited existing literature. Second, the impact of the listed barriers on the project’s economics will be analyzed. That will help identify the most critical ones on which to focus. Finally, a policy analysis will be assessed on them to find which policies are suitable for the French State in terms of its budget. The results will be used to formulate recommendations for the State in order to encourage collective self-consumption in France.

After a background regarding the European energy sector, deep changes faced by that sector are presented.

New decentralized energy generation systems are defined with a focus on the current situation of PV collective self-consumption in France. Different barriers to the development of collective self-consumption projects in specific are listed after a presentation of a PV system technical background. Then, the objectives are detailed followed by the methodology adopted throughout this work. Besides, results and analyses are respectively displayed and assessed. Finally, the policy analysis is held and recommendations resulting from this work are provided. Moreover, a discussion of the results as well as the methodology used in this study are held.

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1.1 European Energy Trends Overview

The energy market, showing the production and consumption of energy as well as its trading, is very dependent on the area. Different situations exist when looking at different continents or countries.

However, in general, the energy market is deeply evolving and changing regardless of the area even if 65%

of the world’s electricity generation come from fossil fuels (International Energy Agency, 2018).

Figure 1: World's electricity generation 2017 (Source WEO 2018)

In the EU-28, despite their production decrease in the last decade, oil and gas remain the most important energy sources followed by coal. Oil makes up 34.7% of the primary energy consumption, gas 23.8% and solid fossil fuel (largely, coal) 13.6%. However, renewable energies accounted for almost one third (29.9%) of the total primary energy production followed by nuclear with 27.8% share in 2017 (Eurostat, 2019). This difference between primary energy production and consumption shows the dependency of European countries on energy imports.

With no surprise, the final energy consumption was led by oil (37.2%) which is followed by electricity (22.7%). Almost half (49%) of the electricity production came from fossil fuel in 2017, followed by renewable energies (25.8%) and nuclear (25%) (Eurostat, 2019). This is the result of an important decrease in fossil fuel electricity generation and the same trend upward for the renewable energies. Wind and hydro take the lead among the renewable energy sources.

In 2018, the European Union has released its political project toward a clean, affordable, and reliable energy system by 2030: The European Energy Transition 2030. The main objectives are to reduce greenhouse gas emissions by at least 40% below 1990 levels, increase the share of renewable energy by 32% of final energy and to improve efficiency by 32.4%. These objectives imply 57% share of renewable in the electricity demand, reducing energy consumption by 17%, cutting coal by two third and reducing gas by a quarter (Energiewende, 2019). To this end, new trends that will be shaping the future energy system are emerging.

1.2 Deep changes

The energy sector is facing deep changes. New ways of producing electricity have emerged, smarter and more decentralized than traditional energy generation ones. The energy sector’s trilemma: affordability, reliability and sustainability has led to important places for renewable energies which are cost-competitive and sustainable. Oil has become unreliable with huge risks in supply due to political crisis in some producer countries like Venezuela, Saudi Arabia or Iran. Besides, the rise of digital technologies, the falling cost of

38%

23% 4%

10%

16%

6%

3%

Coal Oil Gas Nuclear Hydro Wind and solar PV Other renwables

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renewable technologies have led to new business models in the electricity production and consumption.

Due to the global awareness of climate change, most countries have responded to the United Nation Sustainable Development Goals and new regulatory frameworks allowing the development of actions towards it have emerged. In this study, the focus is on electricity which is considered as energy vector. The switch into decentralized electricity generation has been caused by many drivers.

1.2.1 Falling cost of renewable energy technologies

The recent report of the International Renewable Energy Agency (IRENA) shows that renewable energies have become the cheapest electricity source in many parts in the world. Since 2010, the cost of electricity from hydropower, bioenergy, geothermal, onshore and offshore wind have been in the range of fossil fuel- fired power (IRENA, 2019). Solar costs have witnessed an important decrease in the last decade by falling in the range of fossil fuel-fired power since 2014 and is still expected to keep on decreasing the next years.

The reduction in the levelized cost of electricity from solar power is due to the falling cost of solar photovoltaic (PV) panels making the project financing lower than before. The photovoltaics cells and their manufacture have become much more efficient in converting light into electricity due to research and development, and larger factories have led to an economy of scale. Crystalline silicone modules witnessed a price decline of between 26% to 32% between December 2017 and December 2018 (IRENA, 2019) as shown in Figure 2.

Figure 2: PV module price trends from 2010 to 2018 (Source IRENA)

This falling costs of the PV system technologies for example makes it competitive compared to traditional electricity generation. The levelized cost of electricity (LCOE) becomes lower than the electricity retail price in some countries. Therefore, producing electricity locally through solar PV leads to electricity bill savings.

According to IRENA, 77% of wind and 83% of solar power auctions will be lower than the cheapest fossil fuel-fired power plant among projects due to be commissioned globally by 2020 (IRENA, 2019). Besides, shifting the solar power plants to areas with higher capacity factors has participated to the decrease in the global weighted-average cost of electricity. Therefore, Dubai, Peru, Abu Dhabi, Chile and Saudi Arabia have shown the LCOE for solar power as low as 0.030 USD/kWh (IRENA, 2019).

Table 1 shows the electricity cost from renewable sources trend in 2018. In all sector, there was a decrease in the global weighted-average cost of electricity. The highest decrease was observed in solar CSP with - 26% while solar PV and wind onshore accounted both for -13% with respectively 0.085 USD/kWh and

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0.056 USD/kWh as global weighted-average cost of electricity. This has led to the deployment of renewable energy generation not only on the large scale but on smaller scales especially for the solar PV technology.

Global weighted-average cost of electricity in 2018

(USD/kWh)

Change in the cost of electricity 2017-2018

Bioenergy 0.062 -14%

Geothermal 0.072 -1%

Hydro 0.047 -11%

Solar photovoltaics 0.085 -13%

Concentrated solar power 0.185 -26%

Offshore wind 0.127 -1%

Onshore wind 0.056 -13%

Table 1: Global weighted-average cost of electricity

Solar PV systems are being used the most when it comes to decentralized, distributed energy generation compare to other renewable technologies. Solar PV’s low cost, its relatively rapid commissioning and the fact that a PV system can be installed almost anywhere in urban or rural areas explain than trend. This is not the case for example for wind power.

1.2.2 Sustainable Development Goals (SDG)

In December 2015, the Paris Agreement set 17 goals for a sustainable development worldwide in response to the climate change issue with the aim of limiting the global warming to 1.5 °C. The goals targeted different essential sectors such as education, health, energy etc. In this work, the focus is made on the SGD 7: Ensure access to affordable, reliable, sustainable, and modern energy for all. This goal was set out in response to the large number of people living without electricity (1 billion), without access to clean cooking (3 billion) as well as to the world’s energy rely on fossil fuel (Sustainable Development, 2018). SDG7 is being implemented through the development of off grid solutions in some rural areas with the affordability criteria being of importance. Governments are therefore, putting efforts into the development of cleaner energy sources with cities having specific climate targets. Besides, people are being more aware of the climate issues thanks to global communication and are willing to go for greener electricity.

1.2.3 Regulatory framework

Producing electricity locally from renewable sources requires some permissions. Many countries have developed legislations for distributed energy generation systems. Besides, with the UN SDGs and the world’s global trend towards sustainable energy, many policies and regulatory frameworks have emerged from other countries. Therefore, the possibility of producing electricity was made possible through different countries legislations.

For example, in Germany, the Landlord-to-tenant electricity allows tenants of a residential building to benefit from the landlord’s PV system installed in the building. The new Renewable Energy Sources Act published in 2017 (EEG 17) introduced new regulations aiming for a deeper renewable penetration in the German energy mix. Among them, the landlord-to-tenant electricity act (Mieterstrom) offers a framework for collective self-consumption. The constraint is that the consumers must be living within the building where the rooftop PV is installed or located within close proximity of that building and should be connected directly to the installation and not via the public grid. This act frees tenants from paying some taxes (electricity tax and grid-associated fees) related to power consumption. The service companies (cooperatives or landlords) receive furthermore a premium (tenant electricity premium) for every kWh

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distributed to tenants. This remuneration of about 2.2 to 3.8 ct €/kWh depends on the installation size and the national photovoltaics expansion. The premium is an additional help to make such projects profitable since even with the tax exemption, the costs incurred for the billing, distributing and metering of the electricity lower significantly profitability (BMWi - Federal Ministry for Economic Affairs and Energy, 2017). It is paid for projects which began their operation from 25 July 2017 to date. Besides, the solar capacity that can be added per year at the country level is kept at maximum 500 MW. The Act sets out rules for the duration of the contract governing the supply of electricity from landlord to tenant, bans landlords from making this contract part of the rental agreement and also introduces a cap on self-consumed electricity tariff.

In the US, many schemes such as the Net Energy Metering, Net Billing etc. were set to allow people being able generate electricity in a distributed way. In the net energy metering scheme, electricity surplus is accounted as energy credits to be consumed during the following period (usually month) reducing the billable kWh for that period. In case of monthly periods, electricity surplus at the end of the year is credited to December electricity bill. Besides, the net billing scheme allows dollar credits to be directly deducted from the electricity bill. The sale rate is usually determined by a Feed-in-Tariff. Finally, buy all/ sell all is where all the power generated by the system is sold to the grid at sell rate and all power required to meet the electric load is purchased from the grid. These regulations push people towards adopting new electricity production and consumption models.

1.3 Distributed energy generations

Distributed energy generations can be defined as ways of generating energy locally, directly within a building or small group of buildings. The electricity is consumed locally where it has been produced. In this work, the distributed system that is analyzed aims to not only cover the total electric load through its production, but also ensure that most of that production is being self-consumed.

1.3.1 Individual Self-Consumption

Individual self-consumption is the most common way to self-consume the electricity produced by the PV installation. The installation, illustrated in Figure 3, is directly wired to the private grid of the consumer. The consumer here is a prosumer meaning that it produces and consumes its own electricity and can therefore reduce its electricity bill by consuming a part of its electricity load from the PV system (Smarter Together, 2016). Besides, when all the electricity output from the PV system is not consumed, the surplus electricity can be sold to the grid at a feed-in-tariff (FiT). However, if it is not allowed to inject the surplus into the grid, some drawbacks could be the under-sizing of the prosumer’s PV system relative to its electric load in order to reach a 100% self-consumption, which can be economically unprofitable for the prosumer. A drawback can also be the increase of the prosumer’s electricity consumption to fulfil the PV surplus production if the PV system is not under-sized, or the installation of a storage unit which increases the total cost of the system. It is very easy to implement this system in single-user buildings such as residential homes where the prosumer produces its own electricity from its home rooftop or balcony. For example, in Germany, individual self-consumption is the most common decentralized energy concept with a feed-in tariff associated to the electricity surplus from the PV system (Smarter Together, 2016).

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With collective self-consumption, there is not just one consumer but many consumers benefiting from a PV system. The consumers can be living in the same building in which the PV system is installed on the rooftop and the electricity output is collectively split among the tenants of the building. This split of consumption is called virtual metering. There is a cost reduction by installing just one PV system instead of installing many PV systems for each apartment and connecting them to the private grid. The consumer can also be located in different dwellings with their own system forming therefore, a local energy market.

In this case, pure consumers, illustrated in Figure 4, who are not producing any electricity from their houses can associate to prosumers to form a community where all the electricity produced is consumed locally. That is possible thanks to pure consumers consuming the electricity surplus from prosumers. Like the individual self-consumption, the electricity surplus can be sold to the grid.

Prosumer PV system

Grid Grid

Electricity from the grid Surplus electricity Self-consumed electricity

Figure 3: Individual self-consumption

Figure 4: Example of collective self-consumption

Prosumer Prosumer’s

PV system

Grid

Electricity from the grid Prosumer’s Surplus electricity Prosumer’s Self-consumed electricity

Pure consumer

Electric meter Private grid

Pure consumer’s self-consumed electricity

Prosumer’s PV production

Surplus to the grid

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1.4 Technology background

The distributed energy generation technology studied in this work is the solar PV. This chapter will give a description of a solar PV system.

1.4.1 Solar PV system

In the residential sector, solar PV systems are mostly installed in the houses or buildings rooftops. A solar PV system is composed of solar panels that are disposed in an array and that produce electricity through the photovoltaic effect. The solar panels produce direct current (DC) which is incompatible with the electricity network that works with alternative current (AC). Therefore, an inverter is necessary to convert the DC to AC. One part of the AC is directly used in the household and the surplus is being injected into the grid as illustrated in Figure 5. An electric meter is then used to determine the energy produced by the PV system, self-consumed by the household and the energy coming from the grid as supplement.

1.4.2 System components - Solar panels

The solar panels are responsible for generating electricity from the sunlight. A solar panel or solar module is made of a multiple solar cell. Solar cells are composed of semiconductors which conduct electricity only if a certain energy gap is filled. The energy gap of semiconductor is inferior to 3 eV (electron volt) (Kalogirou, 2009). There are different types of solar panels, but the most common ones are made of crystalline silicon.

Monocrystalline silicon modules are made from pure monocrystalline silicon with no defects or impurities.

Therefore, these modules have high efficiency that can go up to 24.4% (NREL, 2020). However, monocrystalline silicon modules manufacturing process is complicated which makes them expensive with an average cost of 420 €/kWp (IRENA, 2019).

Polycrystalline silicon modules are the most commonly used panels and are produced by blending different grains of monocrystalline silicon. Polycrystalline modules are cheaper than monocrystalline ones because of a simpler manufacturing process with an average price of 306 €/kWp. However, they are less efficient than monocrystalline modules with an efficiency that can go up to 20.4% (NREL, 2020).

Amorphous silicon modules are different from the polycrystalline and monocrystalline in the sense that they are made of silicon atoms in thin layers instead of a crystalline structure. Amorphous silicon modules have

Figure 5: Residential PV system Prosumer

PV system

DC

DC electricity AC electricity

AC Inverter

Grid

Self-consumed electricity Surplus electricity

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lower efficiencies than crystalline silicon ones with a maximum efficiency at 9.8% (NREL, 2020) with a cost of 400 €/kWp (IRENA, 2019).

- Inverters

An inverter has the aim of converting direct current (DC) from the PV system to alternative current (AC) to be feed into the grid. There are different types of inverters and, when it comes to choosing the inverter type, the question of whether or not the modules have the same orientation and shading has to be investigated.

String inverters: Strings are composed of a set of PV modules that are connected each other in series. In that case the power that is tracked by the inverter is the total of all the modules. The different strings are connected in parallel. String inverters are more used in buildings. This is relevant when all the different modules of the string are in the same state meaning that do not have shading, are in a single plane and oriented the same way.

Micro-inverters: They are directly connected at the PV module level. In this case, the aim is to optimize the conversion in each PV panel by tracking the Maximum Power Point (MPP) for each panel. Micro- inverters are more relevant when the different modules do not have the same state. If one module is shaded, it does not affect the whole production if linked by the micro-inverter.

1.5 Feasibility studies on collective self-consumption projects in France

The French energy sector has undergone many changes through history transitioning from coal to oil, then oil to nuclear and gas, and now the ambition is moving towards renewable energies. By the end of 2017, nuclear power represented 71.2 % and renewable energy 18.8% of the total electricity generated (RTE, 2017). Regarding the renewable sector, the main focus is made on solar and wind power. In 2018, the solar park represented 8766 MW reaching 80% of the national multiannual energy program (PPE) in that year (Banja, Jegard, & Jégard, 2019). Among the installed solar PV systems, those with a capacity less than 3 kW represented the majority with 70% of the total solar PV plants. Therefore, small PV installations are larger in number which shows the large deployment of individual self-consumption projects in France. Techno- economic analyses and possible business models than could emerge for an individual self-consumption project in France were already well covered (Collin & Miroslav Petrov, 2017). Besides, an interesting paper tackled the impact of self-consumption projects on the value transfers between different stakeholders in France (Roulot & Raineri, 2018). This study gives a detailed analysis of the French electricity bill components and show how the value could be captured in self-consumption when the prosumer is a household, a commerce or an industry compared to full injection into the grid. It concluded that a self-consumption for a household, commerce or industry will be still beneficial for the Government even though it implies electricity premiums and certain tax shortfalls. However, theses concern individual self-consumption projects.

Collective self-consumption projects are yet, new concepts in France. As of July 2019, 16 collective self- consumption projects were in operation in France (Sia Partner, 2019). Few information is available about these projects regarding their system designs, financing or business models, and their deployment barriers.

Most of the documents on collective self-consumption projects have mainly a communicative and commercial purpose. Scientific literature analyzed on collective self-consumption projects in France were mostly about blockchain technology for local energy markets created by such projects (Stephant, Hassam- Ouari, Abbes, Labrunie, & Robyns, 2018) while others focus on optimization modeling of a collective self- consumption project for a multi-stakeholders decision making (Morriet, Debizet, & Wurtz, 2019). Three relevant commercial papers tackling feasibility analyses on collective self-consumption projects were found:

a white paper from an energy intelligence software and automation company, a feasibility study as part of the PEGASUS project and an economic analysis from a consulting company.

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The first analysis is a white paper from BeeBryte (BeeBryte, 2018) an energy intelligence software and automation company as part of a feasibility study of a collective self-consumption project in a neighborhood of the 19^th district in Paris. The study considered the electric loads of the different neighborhood’s residents (households, banks, shops etc.) and the 13.69 GWh total electric load were that of the collective self- consumption project. The PV system studied is based on available areas in the neighborhood’s buildings, and the way the output data from the PV system is collected is not mentioned nor irradiation potential. The business model used in this study is that of a local producer, as a third-party, selling its electricity to the neighborhood. For each PV system capacity up to 6 MWc, the project’s internal rate of return (IRR) is calculated based on project’s costs and revenues from different PV system electricity sale prices. According to this paper, a collective self-consumption project is economically profitable for both the local producer and the neighborhood’s residents. However, it is to mention that the project’s costs were not detailed, and the study did not consider any tax regarding the locally produced electricity.

The second paper is a feasibility study assessed by NovEner, an engineering company, for a collective self- consumption project pilot in Saint-Julien-en-Quint as part of the PEGASUS project. PEGASUS is a European project promoting such projects in the Mediterranean region. The feasibility study was analyzed for a community of 33 consumers in Saint-Julien-en-Quint. The feasibility study is composed of a technical analysis and an economic analysis both assessed separately. For the technical analysis, the loads were directly collected from the 33 consumers and different scenario were realized to find the capacity of the PV system on which the economic analysis will be done. The modeling seemed to be computed on a built-in tool and no system design of the PV system was mentioned. The irradiation data and the available areas were used to compute the energy production. To reach a fixed self-consumption rate of 85%, the corresponding PV system found has a capacity of 36 kWp. The business model chosen is that of a local producer selling the electricity produced by the PV system and there is no feed-in-tariff for the surplus electricity. The economic analysis showed that electricity bill of the consumers would be increased by 5% if all network tariff and taxes applying to the locally produced electricity were not removed. It can be noted that the economic analysis made a large focus on the network tariff and different tariff structures depending on the consumer power subscription in kVA.

The last study is realized by Sia Partners on the context and perspectives of collective self-consumption projects in France. Two case studies were analyzed: a case where a local producer invests in the PV installation and sells the electricity to consumers, and case where the PV installation is owned by the consumers themselves. In the first case study, the capacity of the PV system and the local producer electricity sale price were determined by ensuring that the investment is profitable for the local producer, and that its clients make savings on their electricity bill. The load profiles were retrieved from the national energy consumption open data platform and a fixed production yield (kWh/kWp) was chosen to compute the annual energy production. The PV capacity of 40 kWp was chosen for the multi-family house of 30 apartments defined in this case study. The local producer sells its electricity to the consumers without network tariff and taxes. These costs are directly considered on the consumers’ side. The study concluded that the case study with a local producer is profitable with a return on investment of 1% for the local producer and 1.4% savings in the clients’ electricity bill. The project profitability increased when tax components were removed or 30% subsidies on investment were considered with respectively 56.6% and 10.2% of ROI for the producer, and 4.4% and 2.8% in bill savings for the clients. However, the removal of specific tax components and the 30% subsidies on investment were not motivated even if it makes the project more profitable. The tax components removed are the Contribution to Public Electricity Service (CSPE) and the Contribution to Final Electricity Consumption (TCFE). In the second case study, a PV system for four public buildings (hospital, school etc.) is studied. The PV system of 64 kWp capacity found, is not profitable with an ROI of -1%. The public buildings retail electricity price is low and cheaper than the residential one. The study shows that the electricity network tariff for such buildings are not suitable for a collective self-consumption project. By adapting the network tariff, the project become profitable with an ROI of 0.8%. Like in the first case study removing tax components or subsidizing the project are

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economically advantageous with respectively 7.9% and 1% for the ROI. It can be noted for both case studies that removing tax components is more suitable than 30% subsidies on investment both for the local producer and the consumers’ side.

In conclusion, it can be noted that there are few self-consumption projects in France. Pilot projects are experimented to find suitable business models and feasibility studies are realized with mainly a business model focus on a local producer selling its electricity to local consumers. Yet, the modeling tools in assessing the PV system capacity size and production are not detailed technically with no realistic PV system design.

Besides, the technical analysis is sometime separated from the economic one instead of a mutual analysis.

These different choices weaken the associated analyses and it can be wondered how a techno-economic analysis of a self-consumption project could be if the PV system were properly designed. Therefore, how would be a detailed techno-economic analysis of a collective self-consumption project? What kind of PV installation system design would fit the most regarding the project’s techno-economic expectations?

Moreover, what are the main barriers to the profitability of collective self-consumption projects thus to their development?

1.6 Barriers to collective self-consumption development in France

Population awareness to climate issues, the falling costs of solar PV technologies and the rise of energy system digitalization have led to the development of distributed energy generation in France. While the number of prosumers participating in individual self-consumption projects is exponentially increasing (+100% since 2007) (Sia Partners, 2019) thanks to those deep changes, collective self-consumption is facing important barriers inhibiting its large deployment in France.

1.6.1 Heavy regulation

The French regulation on collective self-consumption projects is quite new with the set of the legislation through the Energy Transition Law (LTECV, Loi sur la Transition Energétique et la Croissance Verte) in 2015. In France, a self-consumption operation is only possible behind a low voltage public grid network (Legifrance, 2019). The electricity then produced by the installation must be directly fed into the public low voltage grid as illustrated in Figure 6. Since the French electricity distribution network is centralized and operated by the national company (ENEDIS) in most cases, therefore, having groups of communities operating their own distributed PV systems could threaten this monopoly on the electricity distribution network. The electricity produced by the distributed PV system is therefore tracked thanks to a metering system which allows ENEDIS to differentiate the electricity locally produced from the electricity coming from the grid from other suppliers.

Figure 6: Collective self-consumption in France

Prosumer Prosumer Prosumer

Community PV system

Grid Grid

Electricity from the grid Total production from the PV

Self-consumed electricity from the PV

Electric meter

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Besides, any collective self-consumption project must be set up around a Moral Organizer (“Personne Morale Organisatrice, PMO”) which can be an association, a cooperative etc. The Moral Organizer is responsible for the collective self-consumption project management. It also defines the locally produced electricity split between prosumers done at prorata of their electricity consumption. The electricity split is stipulated in the self-consumption contract signed between ENEDIS and the Moral Organizer. The procedure is heavy and involves many administrative papers that would not encourage any action towards the development of collective self-consumption projects. Besides, obliging the injection of the locally produced electricity into the public grid network leads to applying network tariff and taxes onto that electricity.

1.6.2 No exemption for electricity taxes and network tariffs

France has one of the lowest retail electricity prices in Europe with an average price of 17.65 cts €/kWh in the first half of 2019 (Eurostat, 2019). The retail electricity price is composed of the cost of electricity, the taxes, and the network tariff. Each of the three components named has nearly a share of 1/3 in the retail electricity price. Figure 7 shows that taxes accounted for about 36% of the retail electricity in France in the first half of 2019 whereas they reached about 52% and 63% respectively for Germany and Denmark.

Therefore, in terms of electricity bill savings through self-consumption, Germany and Denmark becomes very competitive compared to France provided the electricity bill savings in question concern the total retail electricity price and not the cost of electricity only. In France, the local electricity produced is not exempted from the network tariff and taxes as part of a collective self-consumption project. Therefore, the main savings through a self-consumption are realized on the cost of electricity that comes from the grid.

Figure 7: Share of taxes and levied paid by household costumers for the electricity, first half 2019 (Source Eurostat)

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TURPE (in French Tarif d’Utilisation des Réseaux Publics d’Electricité) is the distribution network tariff applied to the electricity by the French national distribution system operator (ENEDIS). The TURPE has a fixed part and a variable part. The electricity taxes are of four types: CTA (in French Contribution Tarifaire pour l’Acheminement de l’Electricité), CSPE (in French Contribution au Service Public d’Electricité), TCFE (in French Taxe sur la Consommation Finale d’Electricité) and VAT (Value Added Tax). In a collective self-consumption project, all these network tariff and taxes apply to the locally produced electricity.

The CTA corresponds to the tax for the distribution of the electricity and applies on the network tariff (TURPE) with a rate of 27 %. This tax aims to finance the retirement pension of workers in the electric industry. The TCFE is the tax on final electricity consumption and is applied on electricity consumed with a tariff of 0.0096 €/kWh. This tax has two components: a communal tax and a departmental tax. The Value Added Tax applies on the main taxes with 20 % on CSPE, 20 % on the total price of electricity consumed through the project, 5.5% on CTA and 5.5 % on the electricity subscription tariff.

The CSPE, is the Contribution to Public Electricity Service and is applied on the total electricity produced locally by the PV system with a tariff of 0.0225 €/kWh. The revenue generated by the CSPE is allocated to the French state as part of a broader tax: The Interior Tax on the Consumption of Energy Product (TCIPE).

These taxes are allocated to a dedicated budget which aim is to contribute to the future development of renewable energies (Roulot & Raineri, 2018). The CSPE’s main service is to cover the public electric charges of national electricity suppliers such as EDF or independent suppliers when they are obliged to buy, through a feed-in-tariff (FiT), the electricity injected to the grid from local producers. The CSPE covers then, for the electricity suppliers that buy the electricity at a FiT, the difference between the FiT and the price at which that electricity would have been bought by the supplier. The CSPE also helps equalize the electricity prices between the French metropole and its islands and overseas department and territories where the cost of electricity production is higher.

In a collective self-consumption project, these taxes not only apply to the electricity from the grid coming from other suppliers but also to the locally produced electricity. This degrades the economics of such distributed energy generation projects and leads to projects having to be incentivized by local communities or to consumers willing to pay expensive locally produced green electricity. The legal structure of a tax policy concerning collective self-consumption is not well defined and stipulated. The strategy of the Government seems to be, allowing project pilots and based on feedbacks, address a general policy. Before reaching that stage, all taxes and network tariffs still apply on the locally produced electricity for a collective self- consumption project. This choice can be explained by two arguments: maintain the national monopoly on the electricity distribution network and avoid a massive tax shortfall from a sudden removal of all taxes before finding suitable tax policy for collective self-consumption.

Unlike collective self-consumption projects, individual self-consumption ones are exempted from taxes such as the CSPE and the TCFE provided the annual electricity production is inferior to 240 GWh for projects with 100% self-consumption. For individual self-consumption projects with electricity surplus, the taxes are exempted for PV installation capacities inferior to 1 MWp (Photovoltaique.info, 2020). Besides, the variable part of the network tariff is not paid which makes sense since the electricity produced in an individual self-consumption project does not transit to the public network unlike for the collective one.

1.6.3 Lack of government support

Collective self-consumption projects are at their beginning in France. A lot of public support exists when it comes to individual self-consumption projects. For those projects, residential installations up to 100 kW have stated-electricity sale prices and specific subsidies on investment depending on the capacity range of the PV installation as shown in Table 2 (Roulot & Raineri, 2018). Yet, for collective self-consumption ones, no specific electricity surplus sale prices are stated (Legifrance, 2017). This can be understood by the fact that the aim of a collective self-consumption project is not to sell its electricity produced. However, by not having a price for surplus electricity, the project is not getting remunerated for its electricity surplus put in

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the network. Besides, there is no grant allocated to any collective self-consumption project for its investment into a solar PV system as it is the case for individual ones as illustrated in Table 2.

Capacity installed < 3 𝑘𝑊 3 to 9 kW 9 to 36 kW 36 to 99 kW > 100 𝑘𝑊

Grants on

investment

400 €/kW 300 €/kW 200 €/kW 100 €/kW Tendering

procedure Surplus

electricity tariff

10 cts €/kWh 6 cts €/kWh 6 cts €/kWh 6 cts €/kWh Tendering procedure Table 2: Public support for individual self-consumption projects in France (Source: Legifrance)

Projects with capacities higher than 100 kW have to participate to a tendering procedure to be eligible for public support. This applies to collective self-consumption projects as well and the calls for tenders are launched by the French Energy Regulatory Commission (CRE). Therefore, for a collective self-consumption project with an installed capacity higher than 100 kW the surplus sale price is not stated in advance. The surplus electricity could be then injected into the network with no remuneration or be sold to a supplier in a one-on-one contract.

1.6.4 Lack of proven, diversified business models

With the lack of government support towards collective self-consumption projects, most of collective self- consumption projects’ pre-feasibility studies were done by considering a local producer as third-party selling the local electricity to consumers. The local producer is then the owner of the PV assets and the whole point is to find the electricity sale price that would make the project profitable (Remillieux & Poize, 2019).

Another business model found is that of a social landlord owning a solar PV asset and deducting the system initial costs, operation and maintenance costs from the monthly rents and locative charges of the tenants that self-consume the electricity (EDF, 2020). In the end, the tenants benefit from the PV system without important upfront costs. Since the business model looks like a debt reimbursement to the landlord with 0%

interest, the landlord will start making profit after the payback year.

Besides, the displayed business models are not very profitable for corresponding projects with payback years around 24 years or superior to 25 years which is an average PV system lifespan (Sia Partners, 2019). Yet, with the French Energy law promoting the energy transition, many local collectivities and cities are themselves supporting collective self-consumption projects by facilitating the regulatory procedures.

Overall, there are few self-consumption projects where the multiple distributed assets are owned by the consumers themselves as prosumers. At the end of 2019, 16 self-consumption projects have been in operation in France (Collectif Energies Renouvelable pour tous, 2019). Most examples are considering a local producer as a third-party. Therefore, new business models considering consumers as assets owners are of interest. In the rest of the study, business model with a local producer as third-party is referred to “third- party business model” and the one with consumers as prosumers owning the PV system is referred to

“prosumer business model”.