Challenges at project level for microgrid solutions lisbon 2016

November 2016

CSIQ NASDAQ Listed

CHALLENGES AT PROJECT LEVEL

SOLAR/DIESEL MINI-GRIDS

TREVOR DE VRIES

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Reduction in variable cost;

Oil Price at 6 yr low but ……?

Of Total price <50% is retail;

Significant diesel savings over LOM;

8-12 PPA financially viable due to

high cost of Diesel;

Demand for power is growing as

mines ‘dig deeper’;

Reduction in CO2 emissions;

Reduction of O&M costs

• Unstable grid;

• Logistical challenges for Fuel supply;

• Theft & Contamination of fuel;

• Political instability;

• Grid extension prohibitively high;

• >7km access makes Mini-grids feasible;

• Mini-grids will jump the grid like mobile did.!

• Monopolistic conditions causing

price uncertainty;

• Government subsidies aimed at

Gridco;

Why PV/Diesel Mini-grids….?

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Why Mini-grid

PV-Diesel-Hybrid* is already a real business case in high irradiation regions with effective

Diesel cost > 1 USD/liter

* Ref: SMA, 2013

* RE penetration <15%


Mini-Grid Challenges

PV Penetration & Control

Technical

Legacy Retrofit

Project Finance

Financial

Solutions

Other

Challenges

Perceptions

Logistical

Environmental

Community Involvement


Technical Challenges

Design

PV Penetration & Control

Why is this important?

• Solar PV is an intermittent resource;

• Failure could result in electrical system collapse and outages;

• Large thermal power plants are generally made of multiple medium speed generators;

• Medium speed generators may not respond quick enough to the match intermittency;

• High speed generators sized to mirror solar PV capacity due to their fast response.

Degree of Penetration

• <20% - PV regarded as negative load no controller neccessary

• Prolonged PV may cause several DG to switch off affecting system inertia & frequency

fluctuations;

• Requires PV Inverter intelligence;

• >20% - DG Production must match consumption;

• Maintain minimum DG load under large influx of PV energy;

• Load loss – must throttle back PV inverters

• Mechanical Injection - operating at 30% of its rated power consumes 20% more fuel per kilowatt hour

produced compared with a diesel generator under full load.

• This leads to greater engine wear and an increased maintenance requirement due to deposits in the waste

gas system and in the pistons;

• N+1 rule for 110% of estimated load;



Legacy Retrofit

Diesel Generators

• Low Load or Variable Speed engines;

• Minimum Loading will determine RE penetration;

• Option 1: solar design is modified to suit the generators) or

• Option 2: the generators are modified to suit the solar design.

Example impact of diesel engine size on solar penetration (100kW load)

Ref: Solar/Diesel/Grid Handbook

Minimum Load Factor

Spinning Reserve

• Several HS DG running at load level to ramp up faster;

• Spinning reserve can be reduced if PV oversized compared to Inverter;

• Storage will reduce Diesel sizing, load shifting;



• Dropping a large load on a generator in a short timeframe can result in engine stall;

• Management of over-production (curtailment);

• Storage is key;

Illustrative Overview of Hybrid PV/Diesel Load and Generation Profile

Legacy Retrofit

Energy Management Plan

• Inadequate Load curve (15min) and future growth needs + margin;

• Powerhouse…?;

• Existing Diesel assets usually EOL;

• Outdated Diesel control systems;

• Contaminated fuel (Diesel & HFO);

• Adequate reference sites for controller technology;

• Accurate evaluation of DER and controller integration;

Other


Financial Challenges

Project Finance

PV / Diesel Hybrids

• Projects too small for Investors;

• How to secure PPA Risk (LOM, Curtailment, Sovereign, Liquidity, Foreign Exchange);

• Venture Risk with Infrastructure returns…?;

• Parental company guarantee not always available;

• Propriety engineering drives up cost….(MG test centre)

Rural Mini-grids

• No clear standards for technical bankability;

• No confirmed revenue stream; (PAYG, Political Risks and grid expansion;

• No Scalable business model;

• Current projects only exist through large Government subsidies;

• Early development funding:

• Grants;

• Crowdfunding (Sun Exchange. TRINE, Ecoligo);


Financial Challenges

Solutions

• Establishing common features for PPAs;

• Develop industrywide standards.;

• Reduced due diligence costs;

• > $300m threshold;

• Default de-risk;

• MG backed assets to access secondary markets

• Streamline due-diligence process;

• Green Bonds;

• Streamline Operations;

• Need policy change to re-divert subsidies;

• Leverage existing data to match consumption for POC;

• Leverage anchor (commercial) client to subsidise residential tariffs;

Standerdised Contracts

Aggregation

Securitisation

Other


Other Challenges

Logistical

• Remoteness;

• Local logistics partners;

• Country specific Sub-contractor HSE requirements do not match contacting party;

• Special transport requirements (air suspension trucks);

• Very specific packing requirements;

• Permitting for abnormal loads vary considerably (no superlinks !) resulting in additional trips;

• Clearly defined laydown area (goods arrive site not ready!)

• Goods held at port incurring demurrage costs;

• Lack of heavy lifting equipment;

• Identified spares storage for O&M;

• Environmental issues like water onsite for dust & road control;

• Bribery & Theft;

• Inadequate lead time;

• Country specific investment incentives direct subsidise import duties; (up to project developer to provide)

• Custom risks must be well defined;

Environmental

• Risk of diesel spills in-situ and in transit, causing contamination of soil and ground water

• Greenhouse gas emissions from diesel combustion and fuel transportation

Community Involvement


Mini-grid Project Experience Keewaywin

North Spirit Lake McDowell Lake

Deer Lake


Case Study – Fort Severn

400x people, 100 houses, 1x healthcare facility, some offices, church, community hall.


Case Study – Fort Severn

----What did we do?

Proposed a phased-in solar

capacity development plan

Phase I - Installed a grid

connected 24kWdc/20kWac solar

rooftop system.

Gained confidence of community

and utility that renewables would

not have a negative impact.

Phase II – To implement a pilot

Mini-grid including 300kW solar,

10kW wind and 200kW battery to

study the impact on the grid with

diesel as primary.

Phase III – To implement a full

Mini-grid including 600kW solar,

500kW wind and 750kW battery

allowing for diesel-off operation.

----What did we learned?

Logistics in remote locations

is unpredictable.

Shipping BOS materials

was another challenge

Important to triple check and

cross check bills of material.

Necessity of working with

the situations as they arrive

and adapting to a change

on the fly.

----How did it start?

Most remote community in

Ontario.

Highest cost of electricity

generation due to transport

cost of diesel fuel.

Planned community

growth.

Prior – failed – experience

with wind energy.


Mini-Grid Test Centre

Mini-grid Control System

PV system

Wind Turbine

Flywheel

Battery Storage System

Load Banks

Diesel Gensets

Grid Simulator

PV Solar Simulator

Wind Simulator

Forecasting

17 Canadian Solar Inc.

THANK YOU!

November 2016

Presentations & Public Speaking

Challenges at project level for microgrid solutions lisbon 2016