Economics of renewable electricity supply - A study applicable for private householders in Sweden

Abstract

This thesis serves as an investment guideline for companies and actors contracted by Swedish private householders who consider replacing their conventional electricity contract with a renewable electricity supply. An investigation of the financial implications of three renewable electricity supplies is conducted; green electricity contracts, installation of photovoltaic panels and investments in wind farm shares. A comparison between the three options and the conventional electricity contract reflects the current market situation. The financial decisions are reached by models and economic optimizations, with the objective of minimizing the total net present cost, using HOMER (Hybrid Optimization of Multiple Energy Resources) and Excel. The investigations are realized for each energy system scenario separately. By compiling the main results from these studies the guideline is formed. The study concludes that photovoltaic electricity supply can be the most economically competitive alternative. With the 35% investment subsidy (administrated by Länsstyrelsen) an installation of solar photovoltaic is the most profitable electricity supply. The investment cost will be paid back within 15 years. If the subsidy is discarded, a 10% reduction in investment cost is required to make the investment profitable. Depending on installation costs, this reduction may be achieved with the renovation subsidy (the so called ROT-tax deduction). Otherwise this thesis indicates that electricity supplied through the conventional electricity grid will be the most cost effective solution. Sensitivity analyses of the models show that the results are highly affected by changes in investment cost and electricity price, but also of the real interest rates. The importance for a private customer to select an electricity retailer with favourable agreements is particularly highlighted. The study is conducted for a family household with the prerequisites and market conditions corresponding to bidding area 3 in the Swedish electricity system in year 2014. Yet, the methodology and the overall results are applicable for other regions and system loads.