Assist. Prof. MOHAMMAD AL SAMMAN
Faculty of Engineering and Natural Science, Electrical and
Electronics Engineering, International University of Sarajevo
Power Markets & Economics
◎ Importance of solar energy
◎ Solar energy’s versatility
◎ Solar energy’s drawback
◎ Solar heat collector
◎ Converting Sunlight to Electricity
◎ Climate effects on PV system
◎ Analyzing solar investment
◎ Basic Components of PV System
For further reading, please check R10, chapters: 1, 2, 4, 6, 16 and 18
• Producing energy from conventional sources has many environmental problems.
• Many energy sources are in limited supply.
• Solar shows the most long-term promise for solving the world’s energy problems.
• Solar power works well on both large and small scales.
• To understand the role solar energy can play in your home, you need to have a
good understanding of where your own energy comes from, where it’s used, and
how much pollution each of your energy sources generates.
Importance of solar energy
• Solar power has historically been more expensive than other energy options,
but that’s changing fast because of government investment in technologies, as
well as the simple fact that many more people are investing in solar, which
results in economies of scale.
• Solar energy equipment increases your financial standing in basically two ways:
✓ Savings on your monthly utility bills and
✓ Appreciation of your home’s value
• To compare investments, you need to calculate your payback period.
• Payback period is a measure of how long it takes to recoup your upfront
investment with the costs you save by installing solar equipment.
• If you install a solar water heater system for $4,000 and it saves you $50 a
month on your power bill, the system will pay for itself in 80 months, or 62⁄3
Solar energy’s versatility
• Generate electricity for general use: You can install a solar electric generating
system that allows you to reduce your electric bills to zero.
• Practice passive space heating: The sun can heat your house by strategic use
of blinds, awnings, sunrooms, and the like.
• Heat water: Use solar energy to heat your domestic water supply — or let sun-
warmed water heat your house by pumping it through appropriate plumbing
• Pump water: You can slowly pump water into a tank when the sun is shining and
then get the water back anytime you want.
• Provide indoor lighting: The technological boom in light-emitting diodes (LEDs)
has enabled a number of effective solar lighting systems for in-home use with
very low power requirements. You can light your porches and even rooms in
your house with a small, off-grid photovoltaic system connected to a battery.
Solar energy’s drawback
1. Initial cost
2. Reliability and timing
3. Danger from electric shock
4. Challenge in freezing weather
5. Maintenance and repair
Solar heat collector
Solar heat collectors are designed to collect as much solar radiation as possible.
Not only do you want to maximize surface area, but you also want to orient the
collector in a way that maximizes the amount of solar radiation gathered over the
course of a day.
Solar heat collectors also ought to do the following:
1. Convert that radiation into heat as efficiently as possible. This conversion
almost always entails the use of a black surface, which absorbs radiation most
2. Transfer the heat into a usable medium. In most cases, you want to heat water.
3. Insulate to prevent heat loss. For insulators, you want to use materials that
make for poor conductors.
4. Store a sufficient amount of heat.
Converting Sunlight to Electricity
• A standard PV cell is a thin semiconductor sandwich, with two layers of highly
• Usable PV systems are comprised of all sorts of equipment that protects the
user from electrical shock, stores the electricity in battery banks, and converts
the direct current (DC) into alternating current (AC), which is what people use in
Climate effects on PV system
Climate includes elements that affect the PV system:
3. Cloud cover
5. Air density
8. Frequent fog
Analyzing solar investment
• To determine the efficiency of installing a PV, we need to calculate the payback
— the amount of time it takes to recoup your investment — which help us
evaluate the costs, gains, and risks of solar power.
• An important factor to consider when deciding how much money to earmark
toward a particular investment is the risk profile.
• Some investments entail more risk than others. A bank is much safer than the
stock market, for example.
• When an investment entails more risk, it needs to offer more of a chance for
gain to offset the increased risk.
• Some investors are more risk averse than others, and for these, solar is a better
• The next slides outline a system for analyzing solar investments. The goal is to
compare different investment options using the same criteria of costs, gains,
and risks, and then choose the best one.
Calculating net costs
• The net costs is the total net amount paid for your solar investment.
• These days, most solar investments are eligible for rebates and tax advantages,
which are subtracted from the “retail” cost of a system.
• Net cost is simply the starting cost of a system, minus all the subsidies and
rebates you can get. It’s net cost that you’re most concerned with.
Calculating net costs
• The following cost factors must be considered:
1. Equipment: Sometimes equipment costs are spread out over time —for
example, if you get financing from a supplier or different parts of a system are
delivered at different times.
2. Installation costs: If you’re a do-it-yourselfer, you won’t have to worry about it.
3. Refuse: Add in costs if you’ll pay to have project trash hauled away.
4. Maintenance: Consider the likelihood that you have to pay for servicing once
the system is installed.
5. Taxes, permits, fees: Note when such charges are due, as well as the total
6. Interest: If you finance your equipment, the interest is a cost. If you finance with
a home equity loan, the interest may be tax deductible.
Subtracting estimated gains and discounts
• You may be able to recover some of your expenses right away, so you can
subtract that amount from your costs.
• The appreciation (the value of your home goes up when you install solar)
amount depends on the following:
1. The cost for a homebuyer to put in new equipment on their own: Don’t expect
to get much more than that.
2. The amount of documentable energy savings achieved with the equipment:
Your energy bills provide proof of the energy savings achieved.
3. Changes in energy costs: The more energy costs rise (all energy), the more
your equipment — and thus your property — is worth.
4. Popularity: In some real estate markets, a solar home is worth a lot more than
the same model with conventional energy simply because people like the idea
of solar so much. And the fact that your home is “solar” will attract more buyers.
Figuring out monthly saving
1. Look at your power bills and determine your average monthly energy use (gas
2. Out of that number, estimate how much energy the system you’re replacing
uses and how much energy the new system produces.
3. Multiply your average monthly energy costs by the percentage you found in
Step 2 to figure out how much you save per month.
Figuring out payback
Payback is the amount of time you need to hold on to your investment for it to pay
In the case of solar, almost the entire investment is upfront, meaning you have to
invest cash before you see a single dime of savings.
Payback is measured in years or months. You simply take the net costs of your
solar system (costs minus discounts and appreciation) and divide it by your
anticipated monthly savings.
For example, if you invest $2,000 in a solar water heater that saves $30 a month in
electric costs, here’s your payback period:
$2,000 ÷ $30/month ≈ 67 months, or 5.6 years
Figuring out payback
Repairs and maintenance: Solar equipment is not simple when it’s doing a big job.
And being outdoors all the time is wearing, especially in extreme climates.
Efficiency decreases over time: PV panels may see a 10-percent decline in
production after 10 years of operation.
Lifetime: Eventually, every system will simply not be worth running anymore. PV
systems are warranted up to 25 years. However, it’s not as bad as that, because
what the warranties really cover is guaranteed performance. You will probably be
able to run your systems for much longer than the warranties, but they simply
won’t be putting out the same performance.
Inexperience: If you design and install a system yourself, the performance may not
be as good as you had planned.
Newer, more efficient technologies: People like new things because they’re new.
The bottom line with a solar system is the performance it’s putting out, but it may
be true that a homebuyer simply doesn’t like a system that’s 10 years old simply
because it’s 10 years old. Newer equipment is always more efficient, plus it’s
shinier and may be better looking.
Part A: 10 points
The PV’s system contains the following components: PV module, inverter and
Choose one of these components and:
1. Define this component.
2. Describe how it works.
3. Determine its types and compare them regarding: cost, efficiency, lifetime …
Part B: 5 points (To be announced in Teams on Friday)