Tips and tricks for financial modeling of own power consumption

25/03/2021 | Thomas Stahel & Tobias Bitterli, greenmatch AG

Falling investment costs for renewable energy projects and rising electricity purchase costs make it increasingly attractive for industrial companies to produce their own electricity. This article explains the self-consumption of electricity and how this is to be taken into account in financial modeling.

Self-consumption is the term used for electricity that is produced by the consumer and consumed without a diversion via the electricity grid. In addition to private households, this so-called self-consumption is also increasingly used by industrial companies that operate their own power plants. The most frequently used technology for self-consumption is photovoltaic systems, for which production can be forecast relatively well during the course of the day.

Comparison of production and consumption profile

In the case of self-consumption, it is important for the electricity producer that there is as good as possible a match between the energy produced and the individual consumption profile. If more electricity than needed is produced, the surplus is fed into the grid. If the electricity produced is not sufficient to cover one's own consumption, the shortfall is drawn from the grid.

From the energy industry's point of view, companies that rely on self-consumption have the incentive to use as much of the electricity produced as possible directly themselves and thus to maximise the so-called self-consumption quota. The quota shows the share of self-used electricity in relation to the electricity produced. In contrast, the degree of self-sufficiency shows the share of self-produced electricity in total electricity consumption. If the electricity is first fed into the grid and later drawn from the grid again, the operator loses the difference between the purchase price paid by the operator and the electricity sales price. An optimisation of the self-consumption quota can be achieved with additional electricity storage solutions.

Consideration of self-consumption in a financial model

Through self-consumption, the electricity producer does not earn any income, apart from possible bonus payments. On the cost side, however, he saves the electricity procurement costs. This fact must be taken into account in the financial modelling by modelling the saved electricity purchase costs as revenues.

Let us assume, for example, that a photovoltaic system produces the quantity QTot. The self-consumption quota is ρ and the rest (1-ρ) is fed into the electricity grid at the price PSell. The electricity producer receives no income for self-consumption, but saves the electricity purchase costs (PBuy). This results in revenues and savings (R) of:

(1) R = (1-ρ) x QTot x PSell + ρ x QTot x PBuy

Consideration of different electricity purchase tariffs

In a further step, several electricity purchase prices can be taken into account in the financial model. The high tariff (PBuyHT) and the low tariff (PBuyNT) apply. Let us assume that in our example the self-consumption quota (ρ) is divided into self-consumption during the high tariff (ρHT) and self-consumption during the low tariff (ρNT) with ρHT + ρNT = ρ. The revenues or savings (R) are then calculated as follows:

(2) R = (1-ρ) x QTot x PSell + ρHT x PBuyHT + ρNT x PBuyNT

Effects of own power consumption on the financial model

For a project with self-consumption, both the revenues from the sale of electricity and the savings due to the use of the self-produced electricity are taken into account for the yield calculation. In addition to the revenues and cost savings, as always in financial modeling, operating and investment costs, taxes, possible external financing and other inputs are also applied. Based on these inputs, a return can be calculated that shows the advantageousness of an investment in a power plant for self-consumption. Storage solutions can be used to maximise the self-consumption quota and thus also increase the profitability of the investment. In addition, other factors influencing self-consumption (such as lower or completely eliminated grid fees) should be taken into account in the financial model.

Do you need help with the financial modeling of projects with self-consumption of electricity? We will be happy to advise you! Secure your personal consultation with one of our experts today!

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