Performing PV system feasibility studies correctly

Learn how to conduct a feasibility study before specifying a solar photovoltaic (PV) system for a building.


Learning objectives

  • Know when solar photovoltaic (PV) systems are an option for the building client.
  • Learn how to calculate the feasibility of specifying PV systems for a building.
  • Calculate return on investment for alternative-energy PV systems.

Figure 1: Solar photovoltaic (PV) system feasibility studies can be a great tool if done correctly. Courtesy: Stanley ConsultantsSolar photovoltaic (PV) system feasibility studies can be a great tool if done correctly (see Figure 1). Many clients would like to reduce their overhead by reducing energy consumption, and it is easy to assume that the bigger the solar PV system, the lower the energy cost will be. Unfortunately, this isn’t necessarily true. Sometimes, smaller results can lead to a better outcome.

The right research and fact-finding efforts are important functions that contribute to a well-done study. Typically, the return on investment (ROI) is where the data comes together to give a true picture of the possible outcome. For many clients, the ROI part of the feasibility study is the deciding factor.

Feasibility studies can be broken into three main parts: investigation, mandated studies, and ROI. Although there are exceptions, almost all studies include these three components. The ROI is where all the pieces of the investigative puzzle come together.


There are comparable issues that must be addressed with every study, including client energy goals, the energy-usage profile, understanding how the energy bill is calculated, connection agreements, restrictions, and installation locations. While investigating the details, it is important to keep the following question in mind: “Can a solar PV system meet the outcome the client wants to achieve?”

Example 1. An office-building owner has a building where 90% of the office space is leased. The owner would like to add a solar PV system to the rooftop to reduce electrical bills. The building has 34,000 sq ft of available roof space to mount solar panels, and the owner would like to install a system that can use as much of the roof space as possible. Because the goal is to reduce the cost of electricity, the study should be focused on electrical energy savings and not just on the effects of a solar PV system.

Example 2. A military entity has lots of open space and wants to install a solar PV system with battery backup. The base is in the desert, where extreme heat requires significant cooling of building electrical loads. The military wants to supply its entire 25-MW electrical load with a solar PV system.

The preliminary estimated solar PV size for Example 2 is about 125 MW. The solar PV has been around for many years and can easily be calculated and estimated. However, energy storage of this magnitude has not revealed itself to the solar utility market. The main thing that stands out, in this case, is the enormous size of energy storage requested. The feasibility study can lead to researching electrical storage at utility-scale sizes. Many dedicated hours would have to be dedicated to research and estimating the possible cost and lifecycle of an energy-storage solution.

As with these scenarios, client goals and needs should be addressed. These variables will lead to various paths in determining if solar is a viable solution for the client. Not only are the clients’ needs important to understand, but so is the energy demand curve profile.

Understanding the energy demand curve profile

Understanding the energy profile is a critical component of a feasibility study. In many cases, most clients do not have information on their energy usage. Most only have the utility bills, which only give a partial picture of how the load is used. A key component is knowing when and how the heaviest electrical loads occur throughout the day.

Some load curves only track the kilovolt amps or kilowatts. But, just knowing those parameters is not enough. Measurements, such as the kilovolt-ampere reactive, kilovolt amp, and power factor, are critical bits of information. They give a picture and understanding of the electrical energy usage profile. These variables can determine how a solar PV system will react to the current power curve and billing statement. The effect that a solar PV system has on the power factor, kilovolt amps, kilowatts, and kilovolt-ampere reactive can have a negative or positive impact on reducing energy cost. It can sway the viability of installing a solar application. By using this information, we can determine if a larger PV system can make the cost of electricity worse or better. As part of understanding the energy load profile is also understanding how the utilities apply charges to these load profile variables.

Understanding how the utility bill is calculated

Understanding the commercial utility bill is another important part of the investigative process. The key is in knowing how, when, and at what level of load application is best suited to manage the reduction of energy bills. The fees charged by the utility can either make or break the feasibility of a PV system.

Every utility company has its own way of applying electric rates. In the commercial billing world, the bills can be complicated; it takes someone who really has a good grasp of power factor. There are typically two main charges that are found on the commercial billing system: one is the per-kilowatt hour charge and the second is demand.

The kilowatt hours charge is the easiest to understand, as it is a straightforward calculation. Basically, this is the amount of actual electricity that is used during a billing cycle. There are no underlying calculations associated with this variable. It is typically charged on an amount per unit, or something like $0.03411/kWh. However, with demand charges, there are several parts involved with the calculation.

The demand charge is more complicated because the power factor ratio comes into play. Demand charges are set up to cover the cost for running peaker unit generators. When high electrical load is drawn from the power grid, peaker units are used to produce additional power to cover load demand. The cost of running a peaker unit generator is relatively expensive when compared against base load unit generators.

A typical demand charge is applied by multiplying the peak measured kilowatts by a fee. Most commercial buildings’ demand fees can be as high as 50% of the electrical bill. So, let’s say that a typical bill might charge $13.02 per kilowatts of measured demand. Typically, the demand is determined by the maximum kilowatts in a 15-minute period of average actual peak kilowatts measured during a billing cycle.

For example, if during the entire billing cycle, the peak was below 100 kW and there were only one 15-minute peak of 200 kW, the demand charge would be 200 kW, doubling the demand charge. As an example, if a building’s electrical load curve profile peaks out in the evening instead of high noon, the solar PV system might not be as effective at reducing the energy cost.

There is also a power factor penalty that is tabulated into the demand charge. Utilities will typically charge additional fees for having a low power factor. Power factor is a ratio of kilowatts divided by kilovolt amps. What does all this mean? Without getting into writing a long dissertation, there are two forms of power. One is kilowatts, known as real power, and the other is known reactive power, or kilovolt-ampere reactive. Kilovolt-ampere reactive is power loss that is typically caused by inductive loads found in things such as electric motors and transformers.

In simple terms, power factor basically tells us how much power is real power, kilowatts. Ideally, the closer the power factor is to 1, the more real power and less reactive power is being used. A power factor of 1 means that all the power being used is efficient. A smaller power factor equates to less efficient use of power. This is because the smaller power factor requires more current to run the same load. Thus, it is best to try and keep the power factor as close to 1 as possible. The utilities are very aware of this and must provide opposing reactive power to counteract the inefficiency. The utilities incur extra cost to correct the power factor and pass this cost to the customer. Most utilities set up a power factor threshold. Any time the average power factor drops below this threshold, power factor penalties will apply.

The power triangle on the left shows the facility had a starting power factor of 93% with a reactive power of 124 kVAR and real power of 309 kW. How does this relate to solar PV? Solar PV produces real power kilowatts with a power factor close to 1. On the customer side of the meter, solar PV systems displace the amount of real power that the utility is supplying. Keep in mind that power factor is a ratio of real power being used. So, if we look at the power factor from the utility side of the meter, the power factor would decrease. If the decrease is enough to pull the power factor below the threshold, a penalty demand charge would be added to the bill. The more real power the PV system displaces, the lower the power factor could be, thus increasing the power factor penalties (see Figure 2).

From the utility side of the meter, the utility would be suppling less real power. And the kilovolt-ampere reactive would remain constant. The meter now measures higher reactive power relative to the real power. From the perspective of the utility, extra measures have to be taken to counteract the lower power factor. So, depending on the power factor, before installing a PV system, the building could have enough power factor margin to avoid power factor penalties.

There is another power factor threshold below the penalty threshold. Utilities also have a minimum allowable tolerable power factor that must be met. If any connected electrical system drops below the minimum power factor, the utility could potentially disconnect power until the power factor problem is corrected. The solar PV system may not pull the power factor down to this level; it is just some information that must be considered. Armed with this information, solutions could be used, such as installing a capacitive bank to help raise the power factor.

Knowing the way utilities charge for electricity can help in producing a better study and assist in determining the best solution that fits the client’s needs. These are not the only factors that contribute to the feasibility study; they are just a few key points. There are other factors that also have a high influence on the bottom line.


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