Renewable energy microgrids : economic evaluation and decision making for government policies to contribute to affordable and clean energy

Abstract

To contribute to “Affordable and Clean Energy”, Goal 7 of United Nations Sustainable Development Goals, this paper presents an economic evaluation of renewable energy microgrids and offers recommendations for government policy-making. Different from the mainstream single case costing studies in the existing literature, which produces results highly specific to the grid configuration and gives limited reference value for future projects, this paper contributes to the knowledge base by gathering publicly available data from 24 renewable energy microgrids worldwide, then presenting a set of economic performance indicators for general understanding, including life-cycle cost, economies of scale and net present value. The investment cost and operating cost are calculated to be 2135 USD/kW and 0.066 USD/kWh respectively, both figures being higher than those of pulverized-coal and natural gas. It is projected that by 2025 the costs of renewable energy microgrids will begin to be competitive with non-renewable energy generation. The economies of the scale factor is 0.9, which means although savings can still be enjoyed, the effect of economies of scale is weak. The net present value calculation reveals that investment in renewable energy microgrid is not a profitable one. Based on the above results, recommendations for government policy-making are made. It is suggested that investment-based policies delivered by the governments may be more effective than production-based policies, however, the two could complement each other in order to form a welcoming and sustainable renewable energy microgrid market.