Five Elements of PV Revenue: 1MW Distributed PV Investment Budget

The country has recently introduced a series of policies and measures aimed at boosting the development of its photovoltaic (PV) market. In 2014, the installed capacity target was set at 14 GW. However, under the current policy framework, the return on investment remains relatively low, presenting significant challenges for PV developers who must strive for profitability while navigating these conditions. One key issue is how to develop distributed photovoltaics at lower electricity prices and still achieve financial viability. 2014 marked a pivotal year for China’s photovoltaic industry, not only as a period of growth but also as a test of the resilience of developers. The author believes that by focusing on five essential elements—policy, quality, safety, cost, and energy efficiency—developers can overcome these challenges and remain competitive. While discussions around policy implementation and investment risks are widespread, this article focuses specifically on how to effectively manage the photovoltaic power generation system from the perspectives of quality, safety, cost, and energy efficiency, in order to maximize returns. Starting from 2014, the government implemented different online benchmark prices for large-scale PV power plants in various regions. The national unified grid-connected electricity price was adjusted to RMB 0.9/kWh for Type I areas, 0.95/kWh for Type II, and 1.0 yuan/kWh for Type III. Additionally, the incentive model for distributed photovoltaics shifted from initial investment subsidies to electricity subsidies of 0.42 yuan/kWh. This change emphasizes the need for PV systems to not only have low costs but also maintain high quality and efficiency to maximize their benefits. To achieve this goal, the following five aspects are crucial: 1) thoroughly understanding and utilizing existing national policies to mitigate operational risks; 2) strictly controlling the quality of PV components and construction; 3) ensuring the safety of the PV system to prevent major accidents; 4) reducing construction, operation, and generation costs without compromising quality; and 5) improving the performance ratio (PR) through detailed design. **Strictly Control the Quality of the PV System** The quality of a PV system largely depends on the quality of its components and the construction process. To ensure compliance with technical standards, it is essential to verify whether products meet relevant specifications. Technical standards cover photovoltaic modules, inverters, controllers, batteries, off-grid and grid-connected systems, large-scale PV plants, building-integrated PV, solar trackers, and more. Simply having third-party testing certification does not guarantee product quality, as the entire production process and manufacturer management must also be certified. Photovoltaic modules, inverters, and batteries are long-term assets, often lasting decades. Their reliability cannot be assessed merely by appearance or short-term testing. Developers can adopt several strategies to ensure quality and long-term performance: 1) requiring manufacturers to provide authoritative inspection reports and ensure mass-produced products meet the same standards as tested samples; 2) requesting product quality insurance from manufacturers, which helps reduce developer risk; 3) hiring independent third parties for product supervision and sampling inspections before delivery; and 4) conducting re-sampling after one year of operation to monitor early failure rates. In addition to component quality, project design and construction are equally important. Developers should consider entrusting experienced third parties to review and supervise the entire engineering process, including design, installation, and acceptance. These services are already available in the market at low fees and play a critical role in ensuring system quality. Post-assessment of the PV system after one year of operation is also essential, with the Performance Index (PR) serving as a key evaluation metric. **Ensure the Safety of the PV System** Safety is a top priority in any PV system. It includes construction safety, grid safety, electric shock protection, wind resistance, lightning protection, fire and arc protection, anti-theft, and sandstorm prevention. Construction safety involves load-bearing capacity, insulation, and fire protection. For distributed PV integrated with buildings, a safety assessment must be conducted before construction begins. Poor cable quality or improper installation can lead to arcing, potentially causing fires. Arc detection lacks a universal international standard, and conventional current and voltage measurements may not detect arcs. Research is ongoing based on the light and radiation emitted during an arc. Ensuring proper installation at every connection point is crucial to preventing such incidents. Wind resistance must be designed according to local wind conditions over 30 years, balancing factors like array tilt, annual generation, construction load, land use, and shading. Optimizing these elements ensures both safety and efficiency. **Reasonably Reduce PV Power Generation Costs** The cost of a PV system directly affects revenue. It includes construction, operation, and generation costs. Currently, the reasonable construction cost is approximately 9 yuan/Wp. Large-scale projects benefit from economies of scale, but civil engineering and substation costs are high. Distributed systems have lower equipment costs but lower civil and grid access costs, resulting in similar initial investments. For example, a 10MW large-scale plant and a 1MW distributed system have comparable total costs. Photovoltaic modules account for about 49% of the investment, followed by inverters and electrical equipment at 10%, cables and brackets at 10%, and other components at 31%. There is room for cost reduction, especially in specialized applications like small household systems where AC modules can reduce installation complexity and costs to around 7 yuan/Wp. PV systems are static and require minimal maintenance. Operation and maintenance costs are typically 1% for large-scale plants and up to 2% for distributed systems. Regular cleaning is necessary in regions with high dust levels, as soiling losses can exceed 20%. Cleaning a 10MW plant could increase generation by 2%, adding approximately 300,000 kWh and 300,000 yuan in net income annually. Using solar trackers can significantly boost generation without greatly increasing costs, thus lowering the cost per kWh. Tracking systems can increase radiation gain by up to 36.9%, though reliability remains a challenge despite the cost-effectiveness. **Improve PV System Performance Index** Internationally, the performance index (PR) has been used for many years to evaluate PV system efficiency. Early PR values averaged around 65%, rising to 74% in recent years, with few systems reaching 80%. China is working on developing its own “China Efficiency” standard tailored to local conditions. IEC 61724 defines PR as a measure of system performance, accounting for solar resource differences. For instance, a Tibet plant with high irradiation might have a PR of 80%, while a Beijing system with lower irradiation could have a PR of 86%, showing higher efficiency despite fewer hours of generation. Temperature variations also affect PR, necessitating temperature corrections for accurate comparisons. Other factors affecting PR include electrical efficiency, component degradation, shading, MPPT errors, and maintenance levels. Data collection and monitoring systems are essential for accurate PR evaluation, aligning with GB/T 20513 (IEC 61724) guidelines. High-quality data ensures reliable assessments and continuous technological improvement.

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