African businesses negatively impacted by inaccurate solar production estimates

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A new report has revealed that biases in the estimation of solar production in Africa can lead to up to a 20 percent reduction in savings for African businesses.

This is according the Measuring Solar Irradiation in Africa: A case for change by CrossBoundary Energy which adds that such biases also cause between 1 and 2 percent reduction in the internal rate of return for solar developers and investors.

The report also indicates current methods that the solar industry uses for estimating solar production across the continent are unreliable.

Commenting on the report, Lenny Matei, co-author and Senior Project Engineer at CrossBoundary Energy, says that for most commercial and industrial (C&I) clients, a major factor in awarding projects is the electricity tariff and resulting savings offered.

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He added that an often-overlooked factor is the estimated solar irradiation on site – which can have a significant impact forecasted production and, thus, expected savings.

CrossBoundary Energy operates solar plants for businesses in Ghana, Kenya, Nigeria and Rwanda, and has a pipeline of over 300MW of projects across Africa.

An analysis of two operational sites, in Nairobi, Kenya and Accra, Ghana, revealed that actual irradiation – measured by project ground-based measurement systems – deviated 3-5 percent from the satellite data widely accepted as accurate for making production forecasts during solar design.

This translated into an equal deviation of 3-5 percent in solar power production estimates, while all other factors are held constant.

The report also found that sites outside of major cities experience even higher biases.

Due to variable microclimates created by diverse topography, satellite solar irradiation estimates for sites nestled in highlands, valleys, or next to lakes can be biased by up to 20 percent.

The findings are in line with kWh Analytics’ inaugural 2020 Solar Generation Index Report, which found that that 25 percent of U.S. solar projects surveyed missed their 3-year forecasted production targets by over 10 percent.

The American solar risk management firm attributed this result in part to over reliance on biased satellite data for production estimates.

 

Biases also cause between 1 and 2 percent reduction in the internal rate of return for solar developers and investors / CrossBoundary

CrossBoundary Energy’s report goes on to say that, a result of systems under performing their production estimates, C&I clients in African metropolitan areas could fail to realize 4-5 percent of their projected savings from solar, while those outside major cities risk savings reductions up to 20 percent.

The risk is even higher for off-grid solar customers, such as mining companies, which use generators to supplement renewable power and could carry unexpected increases in fuel costs to offset unmet power needs.

For investors, such systemic under performance can reduce the projected IRR by up to 1 percent for urban sites, while diverse portfolios of urban and rural assets could see deviations from projected IRR of greater than 1 percent.

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Phuthi Tsatsi, co-author and Business Development Associate at CrossBoundary Energy, says, “Until we all recognize the shortcomings of how we currently forecast, the growth of the African distributed solar market as a whole – and its promise to neutralize the carbon footprint of the continent’s growing industries – rests on a fractured foundation.”

“By highlighting this issue, we aim to begin a broader conversation about how to raise the C&I industry standard for solar production forecasting to deliver better outcomes for clients.”

The report recommends collaborative actions that African solar developers and data providers can take to improve African irradiation estimates over the long-term, but also practical steps C&I solar buyers and investors can implement on their own to protect themselves against overoptimistic production estimates.

These include ideas such as requiring disclosure of irradiance estimates as part of competitive tenders or investing in on-site weather stations.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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