Analyzing the impact of renewable energy incentives and parameter uncertainties on financial feasibility of a campus microgrid

Abstract

The popularity of microgrids is increasing considerably because of their environmental and technical advantages. However, the major challenge in microgrid integration is its financial feasibility due to high capital costs. To address this obstacle, renewable energy incentive programs, which are the motivation of this study, have been proposed in many countries. This paper provides a comprehensive evaluation of the technical and financial feasibility of a campus microgrid based on a techno-economic analysis using the Microgrid Decision Support Tool, which was implemented to support decision-making in the context of microgrid project investment. A method for microgrid design aiming to maximize system profitability is presented. The optimal microgrid configuration is selected depending on financial indices of the project, which directly address the returns on an investment. Most importantly, this analysis captures all the benefits of financial incentives for microgrid projects in California, U.S., which presents a key difference between the California market and other markets. The impact of incentives and uncertain financial parameters on the project investment is verified by sensitivity analysis. The outcomes show that the optimal configuration generates significant electricity savings, and the incentives strongly determine the financial feasibility and the optimal design of a microgrid.