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IEA SHC: Levelised Cost of Heat and the Calculations behind It

Submitted by Baerbel Epp on May 28, 2016
The main objective of IEA SHC Task 52, Solar Thermal in Energy Supply Systems in Urban Environments, is to call attention to both the technical and economic aspects of solar heating and cooling usage in densely populated urban areas. Urban planners and commercial clients want to know the costs compared to the energy output generated by various solar heating technologies. A method to benchmark different solar heat production systems is Levelised Cost of Energy (LCOE). This method is described by the IEA as the “average price that would have to be paid by consumers to repay exactly the investor/operator for the capital, operation and maintenance and fuel expenses, with a rate of return equal to the discount rate”. The chart shows the LCOE for different applications and system sizes in northern / central European climates, taken from the most current Task 52 study Technology and Demonstrators (for further details see table below). The author of the study, Franz Mauthner from Austrian research institute AEE INTEC, contributed to this article, which elaborates on the method and the calculations behind it. 
Chart: Task 52 / Technology and Demonstrators study

Germany: Solar Heat Costs Less than Oil and Gas in Multi-Family Buildings

Submitted by Baerbel Epp on August 11, 2015
Solar thermal is economically viable in Germany in multi-family buildings – that is the clear message of the Excel-based tool which German solar thermal system supplier Remeha, a brand of the BDR Thermea Group, uses to calculate solar water heater performance at multi-family dwellings. The Excel tool was created for installers and planners to support their offers of solar hot water or space heating for blocks of flats. The tool calculates a kWh price, as well as the investment’s Internal Rate of Return. The solar heat produces the most cost-effective kWh with 43.3 EUR/MWh, assuming a 20-year lifetime. During this period, earnings are double as high as investment costs.

Italy: Solar Steam for Cheese Production

Submitted by Baerbel Epp on July 24, 2015
CSP San NicoloDirect steam production, 50,000 litres of diesel saved per year and the advantage of the Italian incentive scheme for renewable heat: All these favourable conditions allowed a small dairy in Sardinia to choose a concentrated solar thermal plant with Fresnel collectors for generating 200 °C steam. The steam is used to supply heat to the industrial processes for cheese production. The investment of EUR 400,000 will have a payback period of about 4 years.
Source: CSP-F Solar

India: Solar Process Heat with less than 18-Month Payback Period

Submitted by Baerbel Epp on July 14, 2015
Sharman Shawls“Where there’s a will, there’s a way” is the slogan at Sharman Shawls, one of India’s leading garment industry and export companies. Based in Punjab state in northern India, Sharman Shawls uses diesel to meet the hot water requirements for dyeing, bleaching and washing garments. The enterprise’s daily consumption is close to 200,000 litres of water and the processes require almost 1,700 litres of diesel per day. 180 flat plate collectors preheat hot water to 80 °C, saving 82 litres of diesel at 300 days a year. Space constraints have limited the diesel saving per day to 5 %.
Photo: Jaideep Malaviya

Italy: First Solar District Heating System, 990 m² big

Submitted by Baerbel Epp on June 1, 2015
VareseFinally, solar district heating has reached Italy too: Utility Varese Risorse, which is part of the environmental multi-utility group A2A, brought its solar thermal plant into operation on 19 May. The idea for this project, which also came about thanks to support from Intelligent Energy Europe project SDHplus, was from 2013 when the utility began to show interest in using solar to lower the natural gas consumption of its district heating grid in summer. Staff members of Varese Risorse took part in the SDHplus training course and benefitted from initial feasibility calculations for the solar plant. The collector field of 990 m² has been set up across eight collector rows, seven of which were mounted onto the ground, and one onto the roof of a small technical building, which also houses the heat exchanger and the control unit (see photo). 
Photo: Riccardo Battisti

Spain: Study Demonstrates Technical and Economic Viability of Barcelona’s Solar District Heating Grid

Submitted by Baerbel Epp on May 5, 2015
IDAE studyThe Spanish Institute for Energy Diversification and Saving (IDAE) has finalised its study on the technical and economic viability of incorporating solar thermal technology into urban district heating and cooling networks. The case study was carried out in Barcelona and concludes that solar thermal is a feasible alternative not only technically but economically as well. Until today, there has only been one district heating plant in operation which integrates solar thermal technology. It is called ParcBit and located at the Technological Innovation Park Balear on Mallorca. According to representatives from IDAE, the new study aims at encouraging further investments in solar district heating in Spain. 
Source: IDAE

Germany: Solar-Heated Gas Pressure Regulating System with 7 % Benefit

Submitted by Baerbel Epp on October 30, 2014
EnertractingEnertracting, located in Kassel, Germany, offers solar heat as an Energy Service Company (ESCO). Its first flagship project has been a gas pressure regulating system, for which the company presented some financial and operational data at a workshop organised by the Thuringian Ministry of Economy, Employment and Technology in Erfurt in June 2014. The project, which is located in the town of Großseelheim in central Germany, has a fixed 15-year heat price of 55 EUR/MWh, which allows for a 7 % benefit for the investor (in this case, Enertracting) and a payback period of seven years. The key factors: a required temperature of between 20 and 40 °C, as well as a 30 % subsidy by the German KfW banking group.
Photo: Enertracting

Germany: Excel-Based IRR Commercial Project Calculations

Submitted by Baerbel Epp on September 25, 2014
IRR cash flow diagrammeGerman Fresnel collector manufacturer Industrial Solar is experiencing an increasing demand from clients all around the world: “Five years ago, we received two requests per month. Now, we receive around 50 each month and the requests are more serious,” Tobias Schwind, who is one of the Managing Directors of the company founded in 2009, confirms. Schwind has begun to notice a shift in the industry: “Whereas payback times of three to four years have, so far, been commonplace, the industry is steering towards five- to six-year periods,” he says and adds: “We, however, try to explain to our clients that they are investing in their infrastructure, and payback time is therefore not really the best criterion.” Industrial Solar offers potential clients a calculation of the Net Present Value (NPV) and the Internal Rate of Return (IRR). According to the managing director, an economic analysis based on these parameters often shows that solar process heat is worth further consideration.

Austria: Solar Process Heat Cheaper than Oil Boiler

Submitted by Baerbel Epp on May 31, 2014
Berger The solar process heat plant at Fleischwaren Berger in Sieghartskirchen, Austria, went into operation in July 2013. With its 1,067 m² of high-temperature flat plate collectors, it pre-heats water for steam and hot water production. According to calculations by Austrian company SOLID, which was responsible for the planning and the turnkey installation, the solar plant can deliver usable heat at lower costs than the existing oil boiler over a 25-year period and with a favourable interest rate. 
Photo: Green Foods

Sweden: High Internal Rates of Return Attract Investors

Submitted by Baerbel Epp on May 28, 2014
Absolicon CalculatorSwedish company Absolicon Solar Concentrator has developed a Solar Energy Calculator to enable commercial clients to determine the Internal Rate of Return (IRR) when purchasing and operating solar thermal systems with collector areas of between 500 and 5,000 m². “We were influenced by the PV sector, where customers are much more used to assessing solar investments based on the cash flow over the economic life of the system than based on the payback period,” CEO Joakim Byström explains. Byström founded Absolicon, a producer of concentrating process heat collectors. According to Byström’s experiences, many projects with long payback periods fare much better if you calculate the IRR. The Solar Energy Calculator, which is available online on the company´s website, has already been used by 70 potential clients from all around the world over the last 10 months.


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