Levelized profits for residential PV-battery systems and the role of regulatory and fiscal aspects in Germany

Abstract

BackgroundThe levelized cost of electricity (LCOE), expressing the price per unit that a technology must receive over its lifetime to break even, is a useful indicator, but insufficient for a comprehensive investment appraisal of PV-battery (PV-BES) projects. For household PV-BES systems, aimed at prosumers in the German context, our paper seeks to look at the revenue side in addition to the costs side of the investment decision. We extend the LROE (levelized revenue of electricity) to consider the impact of different fiscal options available to households seeking to install PV-BES systems. From this, we calculate the levelized profit of electricity (LPOE), linking the cost-focused and revenue-focused perspectives of prosumers facing investment options. We calculate the LPOE for six different fiscal options available to prosumers, four household types with different socio-economic characteristics and for different sizes of PV-BES systems.ResultsIn terms of preliminary results, we identify the most advantageous fiscal option and the drivers of LPOE in relation to PV-BES systems in Germany. We find that the switching from the standard to small business tax setup is the optimal fiscal option for all households and all technology combinations, but the optimal income tax decision depends on the present value of revenues compared to tax deductibles. The LPOE is particularly sensitive to changes in CAPEX and retail electricity prices, with the FiT rate, VAT rate and Income Tax rate being somewhat influential. From an LPOE perspective, self-consumption is incentivized through lower FiT rates and higher electricity prices, whereas the abolition of the EEG contribution and low FiT rate adversely affect the LPOE of different options. Stand-alone PV remains the most attractive option, with bundles with storage showing weaker profitability performance.ConclusionsLPOE complements the LCOE and LROE indicators and offers a comprehensive investment analysis, integrating fiscal considerations. Moreover, it offers greater guidance as to the relative attractiveness of different technology configurations and technology sizing. Mechanisms could be implemented to enhance the profitability of residential PV-BES systems in line with energy policy objectives.