Renewable and Sustainable Energy Reviews 56 (2016) 11501157

Contents lists available at ScienceDirect

Renewable and Sustainable Energy Reviews

journal homepage: www.elsevier.com/locate/rser

A new method for cost of renewable energy production

in Algeria: Integrate all benets drawn from fossil fuel savings
Akbi Aminea,n, Noureddine Yassaa a, Rachid Boudjema b, Boualem Aliouat c
a

Centre de dveloppement des nergies renouvelables (CDER), PB.62, route de lObservatoire, Bouzarah, 16340 Algiers, Algeria
Ecole Nationale Suprieure de Statistique et dEconomie Applique (ENSSEA), 11, chemin Doudou Mokhtar, Benaknoun, 16000 Algiers, Algeria
c
MDI Algiers Business School, 19, Mohamed Boudiaf Street, Chraga, 16002 Algiers, Algeria
b

art ic l e i nf o

a b s t r a c t

Article history:
Received 28 April 2015
Received in revised form
18 August 2015
Accepted 1 December 2015
Available online 30 December 2015

The high generation cost of renewable energy is one of the main barriers to their development and large-scale
deployment. This is the case of Algeria, in which despite its signicant renewable energy potential, more than
96% of electricity is generated with gas turbines to cover increasing national demand. This choice is also driven
by the important natural gas reservoirs in Algeria in addition to the low cost of electricity that is generated by
this fossil fuel. The purpose of this paper is to investigate the cost of electricity production from a renewable
source, substituting conventional fossil fuel processes. An economic value can be captured through the trade of
greenhouse gas emissions and the reallocation of fuel savings to export. This approach is particularly well
supported considering the growing local demand for natural gas, threatening the countrys natural gas export
capacity in which the economy of Algeria is tightly dependent. The conventional evaluation of the generation
cost of electricity, using the Levelized Cost Of Electricity (LCOE) and the cost structure of electricity production is
selected for comparing the cost of electricity generation from gas power and photovoltaic plants. The environmental benets and their nancial valuation mechanisms are discussed. To illustrate all these parameters, a
case study of a photovoltaic plant with a capacity of one megawatt (1 MW) installed in Algeria is presented and
the potential benets in terms of fuel savings and CO2 eq emission assessed.
& 2015 Elsevier Ltd. All rights reserved.

Keywords:
LCOE
Renewable electricity generation cost
Fossil fuel savings
CO2 eq emission savings
Photovoltaic plant
Algeria as contingent region

Contents
1.
2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1151
The conventional method of assessing the cost of electricity production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1151
2.1.
The concept of levelized cost and conventional calculation method dened by OECD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1151
2.2.
Structure of the total cost of production costs by different technologies [2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1152
3. The reduction of GHG emissions through renewable energy and its economic valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1153
3.1.
The CO2 emissions from different electricity generation technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1153
3.2.
Economic valuation from reducing greenhouse gas emissions [56] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1153
4. Evaluation of fuel consumption for electricity generation in Algeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1154
5. Evaluation of fuel savings and CO2 eq emissions for a one-megawatt photovoltaic plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1154
5.1.
PVGIS estimates of solar electricity generation [63] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1154
5.2.
Evaluation of saved fuel volume (reference year 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1155
5.3.
Evaluation of carbon emission savings compared to gas power plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1155
5.4.
Financial evaluation of annual CO2 eq and fuel savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1155
6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1155
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1156

Corresponding author. Tel.: +213(0)23189051/+213(0)23189053; fax: +213(0)23189056/+213(0)23189058.

E-mail address: a.akbi@cder.dz (A. Akbi).

http://dx.doi.org/10.1016/j.rser.2015.12.044
1364-0321/& 2015 Elsevier Ltd. All rights reserved.

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

1. Introduction
We are witnessing since over 10 years to a real ination of
studies on the production cost of electricity, particularly on
external costs, with the objective to guide public policies for
alternative energies with CO2 low-emission or for renewable
energies [1]. These studies promote better decision making in
energy and environment, which increasingly needs a better evaluation of the production cost of electricity looking for a standard
for energy efciency or an internalization of external costs.
If the accuracy of these assessments is fundamental to guide public
policies on energy as it allows to make technological choices or set the
necessary incentives or penalties, recent studies do not currently allow
to dene a consensual method for comparing the unit costs of different technologies for electricity generation taking into account
regional contingencies or essential facilities. This paper focuses on
costs for producers, in fact the costs that can be directly attributed to
the investment and operation of power plants, with an energy policies' orientation perspective, more particularly in the specic case of
Algeria, one of the important oil and gas exporting countries. Firstly,
we examine the conventional method of assessing the electricity
production cost, more particularly the concept of the levelized cost
and conventional calculation method , and the structure of the total
cost of production costs by different technologies, as dened by OECD
in 2010 [2]. Secondly, we study the reduction of GHG emissions
through renewable energy and economic valuation, before examining
the precise case of evaluation of fuel consumption for electricity
generation in Algeria and the evaluation of fuel savings and CO2 eq
emissions for a one-megawatt photovoltaic plant to justify recourse to
a composite method taking into account economic specic factors to
different regions of the world as well see it for the specic case of
Algeria characterized by two signicant variables: the income generated due to the reduction of domestic consumption of natural gas for
power generation and the non-null cost of carbon, contributing to the
revenue generated by the emissions saved.
The most used method for comparing the unit costs of different
technologies is a common metric for comparing power-generating
technologies called levelized cost of electricity (LCOE) [2].
However, the generic nature of this method has been criticized in
recent works [3]. Critics focus on the inadequacy of this method to
take into account economic factors specic to different regions of
the world [4], but also for the integration of indirect costs-also
called external costs-related to renewable technologies [4]. These
are two shortcomings of current studies that our research
attempts to rectify in a specic contingent case.
These deciencies lead to wrong estimates, particularly for
renewable generation costs. The integration of the specic economic parameters to the study area appears to be essential to
achieving relevant results. So, the assessment of the energy production cost does not only determine the choice of technology, but
also the deployment of the energy policy to adopt (program
funding, grants, penalties). This is more particularly by this focus
that we study the renewable energies' cost in Algeria. The Algerian
market context is specic to the hydrocarbon exporting countries.
Indeed, the last decade has seen a considerable increase in
national electricity consumption for several reasons: demographic
growth, the increase of the Algerian citizen living standards (more
than 98% of Algerian citizens have access to electricity), the
increase of household comfort, among other reasons. This consumption has almost doubled since 2001, from 7,802 to 15,073 k
toe in 2013 [5,6]. In correlation with this demand, the natural gas
requirements of thermal power plants-where the bulk of domestic
production-will be equally affected. In 2013, the production of
electricity had mobilized more than 40% of domestic consumption
of natural gas. Along with this consumption, domestic natural gas
production will have changed very little from 74,353 k toe in 2001

1151

to 77,058 k toe in 2013, i.e. an increase of 3.63% [5,6]. This has been
reected, in the recent years, in a downward trend in exports of
natural gas. Since 2005, the volume of natural gas exports has
decreased from 37,838 to 30,463 k toe, falling to 19.5% [6,7].
Furthermore, it is recognized that the use of renewable energies can signicantly reduce carbon dioxide or equivalent (CO2 eq)
emissions compared to their fossil equivalents and it is considered
therefore as one of mitigation solutions to keep global warming
under 2 C. There are international mechanisms of pricing carbon,
including those of the United Nations Framework Convention,
which provide an opportunity for developing countries to monetize the quantities of CO2 eq saved by using renewable energies.
These instruments internalize the external costs of climate change
and reduce the investment costs of renewable energy.
In this way, we underline two main features for the Algerian
case that might inuence the evaluation of the actual cost of
electricity production from renewable sources. On the one hand, it
seems that the production of electricity from renewable energy in
Algeria, indirectly generates income, due to the reduction of
domestic consumption of natural gas for power generation, which
will be therefore allocated to the quantities exported-due to the
fact that Algeria is an oil exporting country. So instead of having a
variable fuel cost to zero, it will be replaced by a variable that
quanties the fuel saved.
On the other hand, and complementarily, the variable cost of
carbon becomes non-null, and so should be adapted to express the
revenue generated by the emissions saved.
Thus, in order to better assess the electricity generation costs
from renewable sources, the revision of the conventional method
LCOE seems necessary in the case of Algeria. Such reassessment
may be extended to groups of developing country exporters of
fossil fuels.
Our research focuses on the comparison between gas plant
technology-dominant technology in our case-and photovoltaic
power plants for renewable energy, which is expected to be an
emerging technology in Algeria. It will be addressed according to
the following plan:
First, the calculation method usually used to evaluate the cost of
electricity generation;
Second, the structure of production costs of the two technologies concerned;
Third, the fuel consumption of thermal power plants in Algeria;
Fourth, a case study of a virtual photovoltaic plant with a
simulation on the PV GIS software followed by estimates of fuel
savings and CO2 eq emissions.

2. The conventional method of assessing the cost of electricity

production
2.1. The concept of levelized cost and conventional calculation
method dened by OECD
The concept of levelized cost is the most common tool for
comparing the unit costs of different technologies over their useful
economic life [2]. This method consists of an inventory and evaluates all expenditures to date for the entire life of the project. This
value is divided by the total number of units to be produced
throughout the lifetime of the project.
Specically, the levelized cost of electricity is given by the following equation:
This is transcribed as presented in the OECD report, 2010 [2]:
Electricity t: The amount of electricity produced in year t;
P Electricity: The constant price of electricity;

1152

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

Fig. 1. Structure of the total cost of producing electricity [2].

Source: OECD/IEA-NEA (2010). Adapted from Table: 6.2: Total generation cost structure. Chapter 6: Sensitivity analyses. Projected costs of generating electricity [2].

(1 r)-t: The discount factor for year t;1

Investment t: Investment costs in year t;
O&M t: Operations and maintenance costs in year t;
Fuel t: Fuel costs in year t;
Carbon t: Carbon costs in year t;
Decommissioning t: Decommissioning cost in year t.
t (Electricity t* P Electricity* (1 r)-t)
t ((Investment t O&M t Fuel t Carbon t Decommissioning t)
*(1 r)-t) (1).
From (1) follows that
P Electricity
t ((Investment t O&M t Fuel t Carbon t Decommissioning t)
*(1 r)-t) / (t (Electricity t*(1 r)-t)) (2),
Which is equivalent to
LCOEP Electricity
t ((Investment tO&M tFuel tCarbon t Decommissioning
t)*(1r)-t) / (t (Electricity t*(1 r)-t)) (2).
When it comes to actually assessing the levelized cost of renewable technologies in conventional studies, two main pitfalls are
observed. First, renewable sources being almost free-especially for
wind, solar and geothermal technologies-the cost of fuel appears as
null. Secondly, concerning the cost of carbon, the CO2 emissions are
considerably reduced due to the lack of fossil fuels in the electricity
generation process. Only emissions from construction or manufacturing materials used to persist. Therefore, most studies do not
even mention the carbon cost.
2.2. Structure of the total cost of production costs by different
technologies [2]
Until the early 2000s, the cost of electricity production structure
had incorporated four components: the investment cost, the cost of
dismantling, operating and maintenance costs (O and M), and the cost
of fuel. However, the advent of carbon markets in the early 2000 s
was accompanied by a new component: the cost of carbon. Thus, for
the rst time in 2010 the OECD incorporates this variable in studies
evaluating the cost of electricity generation [2].
1
The interest rate r used for discounting both costs and benets is stable and
does not vary during the lifetime of the project under consideration [2].

The proportions of the components of electricity producing

cost evolve according to the type of technology and to the production place. To analyze the importance of the latter, we based on
the last work of the OECD published in 2010 [2]. The date of the
median case presented here, are from 27 gasred plants, and 17
solar photovoltaic plants of different sources2 (Fig. 1).
The gure above shows the production costs of electricity
structure of both technologies (gas for conventional power plants
and solar photovoltaic for renewable energies) with two discount
rate sets at 5% and 10%, respectively.
In the chart above, we can make the following observations:
The cost structure is not affected by changes in the discount rate.
This is particularly the case of PV solar power plants.
The cost of fuel is critical in the case of gas power plants. It is
between 66.4% and 71.3% of the overall cost of producing
electricity.
The cost of investment seems decisive for solar photovoltaic
power plants: between 91.7% and 94.9% of the electricity
production cost.
For sake of the results interpretation in the context of a natural
gas producer country, we consider Algeria as a case study. The
investment cost of solar power plants is expected remain equally
high; while the investment cost of gas power plants should be,
lower, since the cost of fuel is cheaper. Therefore, the conventional
approach of LCOE, conrms the advantage of gas power plants
over solar power plants.
Nevertheless, this choice does not take into account the
valuation of savings of fuel and CO2 emissions resulted from the
use of renewable energy-as explained previously. That is the focal
topic of our study in this paper.

2
The sources cited are unspecied The study includes 21 countries and gathered cost data for 190 power plants. Data was provided for 111 plants by the participants in the Expert Group representing 16 OECD member countries (), for 20 plants
by 3 non-member countries () and for 39 plants by industry participants []. In
addition, the Secretariat also collected data for 20 plants under construction in China
using both publicly available and ofcial Chinese data sources [2].

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

1153

Fig. 2. Median value of life-cycle of greenhouse gas emissions (g CO2 eq/ kW h).
Source: Open Energy Information (Open EI) [internet]. Available from: http://en.openei.org/apps/LCA/ [854].

3. The reduction of GHG emissions through renewable energy

and its economic valuation

the prize of the tons of carbon experienced its lowest levels during
last decade.

3.1. The CO2 emissions from different electricity generation

technologies

3.2. Economic valuation from reducing greenhouse gas emissions

[56]

Emissions of greenhouse gases associated with the production of

electricity vary depending on the type of technology used. The gure
below represents the CO2 emissions caused by the production of a
kilowatt-hour of the two leading technologies involved-PV plant and
natural gas. The data used are taken from Open Energy Information
(EI) and drawn from over fty publications [854] (Fig. 2).
This chart is a synthesis of a comprehensive review of Lifecycle
assessments (LCA) of energy technologies published in recent
years throughout the world [854].
As we can see from the gure, the median value of equivalent
carbon dioxide (CO2 eq)3 emissions for the production of electricity from photovoltaic plants is 46.85 g CO2 eq/kW h. While the
median value for electricity produced from gas plant amounts to g
CO2 eq 476.8/kW h. Thus, the difference of CO2 eq for the production of a kilowatt hour between the two technologies would be
429.95 g CO2 eq. [854]
We have chosen deliberately to represent only the two technologies that affect our study. According to the chapter 9 of the IPCC
Special Report on Renewable Energy Sources and Climate Change
Mitigation [55], the median values of emission for renewable technologies are between 4 and 46 g CO2 eq/kW h. While for plants using
fossil fuels, CO2 emissions are between 450 and 1000 g CO2 eq/kW h
[55].
In addition to the environmental benets, reducing greenhouse
gas emissions can be paid off through some international
mechanisms. The carbon market under the Kyoto Protocol of the
United Nations Framework Convention on Climate Change
(UNFCCC), or the voluntary trading market or voluntary market; are, all, monetization mechanisms of CO2 eq savings, even if

As we have seen, the production of energy (electricity) from

renewable sources can signicantly reduce emissions of greenhouse
gases, compared to their fossil equivalents [55].
This represents a nancial opportunity for the PV project
through carbon pricing. These come in different guises. One way to
represent the avoided GHG emissions can be reected through an
emission-trading scheme [57]. Indeed, many of these schemes
have emerged from the commitment of the international community in the ght against climate change. Beyond the difculties
that this type of market has caused by their lack of maturity, we
nd two functional market categories:

3
Carbon Dioxide Equivalent (CO2 eq)a metric measure used to compare the
emissions from various greenhouse gases based upon their global warming
potential (GWP). These Carbon dioxide equivalents are commonly expressed as
"million metric tons of carbon dioxide equivalents (MMTCO2 Eq)." The carbon
dioxide equivalent for a gas is derived by multiplying the tons of the gas by the
associated GWP. Glossary of Climate Change Terms US EPA. Available from: http://
www.epa.gov/climatechange/glossary.html

On one hand, mandatory carbon markets under the Kyoto

Protocol by the United Nations Framework Convention on Climate Change (UNFCCC) where the unit exchanged is CERs
(Certied Emission Reduction). The two main markets in this
category are: the international market for carbon trading and
the EU ETS emission allowances (EU ETS). The latter being the
result of the commitment of the European community in the
ght against the climate change; it is the largest trading system
GHG emission credits in the world. In this type of market, the
parties are agreed with commitments to exchange of emission
quotas in the world, thanks to the three mechanisms under the
Kyoto Protocol [56].
In parallel with the mechanism established by the Kyoto Protocol, there is a second category of market called "voluntary
exchange market" or "voluntary market". The latter, whose
mechanism is similar to other mandatory markets, is not governed by international regulations (Kyoto Protocol). Based on a
voluntary approach, the units traded on these markets (Voluntary Emission Reduction) meet the standards developed by the
market authorities (e.g. the Voluntary Gold Standard and the
Voluntary Carbon Standard) to ensure an effective reduction of
greenhouse gas emissions [56].
Basically, and in a simpler way, the nancial contribution of processing gains of CO2 eq emissions for a power plant project using

1154

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

Table 1
Fuel consumption of thermal power plants in Algeria between 2008 and 2013.
Source: Algtableerian Ministry of Energy and Mines. National energy balance (from 2008 to 2013). [6,5862].
2008

2009

2010

2011

2012

2013

11,067
11,824

11,400
12,064

11,411
12,066

12,321
13,038

13,333
14,109

12,817
13,563

11,080
39,705

11,446
42,099

12,176
46,949

13,092
50,258

14,347
56,360

15,012
59,334

 Consumption of power plants

k toe
10^6 m3*

 Thermal Electricity Generation

k toe
GW ha

 Average fuel consumption (natural gas) per unit of electricity produced

 Consumption in cubic meters (m3):


10^6 m3/GW h
10^6 m3/MW h
Consumption MM Btu:
MM Btu/GW h
MM Btu/MW h

0.298
0.000298

0.287
0.000287

0.257
0.000257

0.259
0.000259

0.250
0.000250

0.229
0.000229

10627.56
10.63

10226.66
10.23

9171.73
9.17

9258.06
9.26

8933.87
8.93

8157,68
8.16

Conversion rate:
1 million m3 of natural gas 35,687.347874265 MM Btu.
a

The thermal power expressed in gigawatt hour (GW h) is deducted from the electricity produced from diesel.

renewable energy can be reected as follows: The bearer of a project

of a solar power plant, for example, must acquire certied carbon
credits-whether mandatory or CER for VER carbon markets for
voluntary markets-attesting to the reduction of GHG emissions from
the proposed project. Once the carbon credits acquired, the project
leader sees his account credited with a number of units on the
emissions avoided by the project. Thus, these "carbon credits" are
tradable on the market, so providing an additional source of income
for the project. It is attested, in this way, that the avoided GHG
emissions will gain an economic added value [56].

Online software "Photovoltaic Geographical Information System"

(PVGIS)4 [63] has been used.
The choice of this site is motivated by several reasons: First, the
central location of this region in the vast Algerian territory provides
representative values of the Algerian potential. Secondly, the fact that
this region is not exposed to high temperatures, allows to limit the
photovoltaic modules produce heat-related losses. Finally, the fact that
this region is in the Algerian interconnected network makes it easier
to inject electricity generation in the network.

5.1. PVGIS estimates of solar electricity generation [63]

4. Evaluation of fuel consumption for electricity generation in
Algeria
The most part of the electricity production in Algeria comes from
gas-red power plants (gas turbine, steam turbine, combined cycle
and diesel). In 2013, the share of thermal power accounted for over
99% of the electricity produced [6].
To assess the average amount of fuel used at national level to
produce a megawatt hour, the annual used fuel of thermal power
plants is divided by the quantity produced by them in the same year.
The table below summarizes the data provided in the national energy
balance between 2008 and 2013 [6,5862] (Table 1).
The table below shows the amount of electricity generated by gasred plants and the amount of electricity produced between 2008 and
2013. We present the average annual consumption of fuel for the
production of a megawatt hour. We express it at rst in cubic meters
(m3), then, in million British thermal unit (MMBtu).
Therefore, the fuel consumption for the production of a megawatt/
hour in 2013 was 8.16 MM Btu [6]. Worth noting also that this consumption is steadily declining; it decreased from 10.63 MM Btu in
2008 to 8.16 MM Btu in 2013 [59,6]. This decrease can be attributed to
the modernization of the Algerian production instruments, in particular with integration of combined cycle plants.

5. Evaluation of fuel savings and CO2 eq emissions for a onemegawatt photovoltaic plant
Before assessing savings of fuel and CO2 eq emissions that
could perform a photovoltaic plant, we consider the production of
a photovoltaic power plant in Laghouat (Algeria) for this study. The

Here are the technical characteristics of the photovoltaic plant:

Location: Laghouat Algeria, coordinates: 33 480 300 North, 2 520 2500
East, Elevation: 771 m a.s.l.
Solar radiation database used: PVGIS-CMSAF
PV system nominal power: 1000.0 kW (crystalline silicon)
Estimated losses due to temperature and low irradiance: 12.1%
(using local ambient temperature)
Estimated loss due to angular reectance effects: 2.5%
Other losses (cables, inverter etc.): 14.0%
Combined PV system losses: 26.3% (Table 2)
The results of the above Table can be read as follows. On the
one hand, the rst two columns represent power generation, they
display the monthly average production (Em) and the daily average production per month (Ed). On the other hand, the last two
columns represent the average global irradiation (daily (Hd) and
monthly (Hm)).
Therefore, the generation of electricity from this solar plant is
estimated to 1700 MWh per year. This ssiamount is hence used to
assess the savings of fuel and CO2 emissions.

4
About PVGIS: Photovoltaic Geographical Information System (PVGIS) provides a
map-based inventory of solar energy resource and assessment of the electricity generation from photovoltaic systems in Europe, Africa, and South-West Asia. It is a part of
the SOLAREC action that contributes to the implementation of renewable energy in the
European Union as a sustainable and long-term energy supply by undertaking new
S&T developments in elds where harmonization is required and requested by customers. Available from: http://re.jrc.ec.europa.eu/pvgis/about_pvgis/about_pvgis.
htm

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

Table 2
Renewable electricity generation result.
Source: PVGIS European Communities, 20012012 [63].
Fixed system: inclination 33, orientation  3
Month

Ed

Em

Hd

Hm

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Yearly average
Total for year

4160.00
4630.00
5270.00
5110.00
4920.00
4820.00
4800.00
4820.00
4470.00
4630.00
4290.00
3880.00
4650
1,700,000

129,000
130,000
163,000
153,000
153,000
145,000
149,000
150,000
134,000
144,000
129,000
120,000
141,000

5.26
5.97
7.06
6.93
6.84
6.88
6.97
6.97
6.29
6.30
5.58
4.94
6.34
2310

163
167
219
208
212
206
216
216
189
195
167
153
193

Notes:
Ed: Average daily electricity production from the given system (kW h) Em: Average
monthly electricity production from the given system (kW h) Hd: Average daily sum
of global irradiation per square meter received by the modules of the given system
(kW h/m2) Hm: Average sum of global irradiation per square meter received by the
modules of the given system (kW h/m2).

5.2. Evaluation of saved fuel volume (reference year 2013)

In 2013, the average fuel consumption of thermal power plants
in Algeria was 8.16 MM Btu per megawatt/hour. Thus, if this photovoltaic plant had achieved this production in 2013, it would have
saved:
) 8.16 MM Btu/MW h  1700 MW h13.872 MM Btu.
For an equivalent amount of electricity produced by the PV
plant of this work case study, gas-red power station would have
consumed an average of 13.872 MM Btu natural gas fuels annually.
5.3. Evaluation of carbon emission savings compared to gas power
plants
As we mentioned above, the production of electricity in Algeria
comes essentially from gas power plant. We estimated the difference in emissions between a gas plant and a photovoltaic plant of
429.95 g CO2 eq/kW h. Thus, we can consider that the annual
output of our plant would saves over 730 t of CO2 eq per year
(429.95 g CO2 eq/kW h x1,700,000 kW h 730.915 t CO2 eq).
5.4. Financial evaluation of annual CO2 eq and fuel savings
After quantication of physical values, the purpose of this
section is to provide a nancial value. If we assume the price of
Algerian natural gas export US$ 5/MM Btu5, we can conclude that
the photovoltaic plant considered in this study would have generated US$ 69,360 (equivalent spared fuel) annually.
Also, in this perspective, evaluating the savings on the carbon
market through the Clean Development Mechanism (CDM) for
example or other carbon market mechanisms, attests that CO2 savings
could generate additional income. Therefore, assuming a ton of CO2 eq
5
The authorities do not communicate the export price clearly. Most of Algerian
exports are by pipeline (70%). The contracts are usually long term. Thus, exports do
not obey the spot market prices. To give a value to the price of Algerian gas for
export, we relied on a working paper International Monetary Fund [63].

1155

5 USD annual income [57] would amount to US$3654.5. Thus, the

overall savings amounted to US$73,014.5 annually. This is regardless
the incoming results of the Paris climate negotiation which should
lead to a universal agreement, replacing the Kyoto Protocol and
aiming to reduce carbon emissions, and maintaining global warming
under 2 C. All countries were invited to submit their Intended
Nationally Determined Contributions (INDCs) in order to shape carbon
emissions and green funds. In addition, carbon market mechanisms
are still a matter of negotiations.

6. Conclusion
Due to the national energy situation (fast growing domestic
demand and the contraction in the international supply), we consider
that the fuel economy that generates the production of renewable
electricity should be deducted from the investment cost, in addition to
incomes that could be generated by the economies of carbon dioxide
or equivalent (CO2 eq). Accordingly, we propose to adapt the electricity levelized cost formula when these two variables would be
negative. Then, it will be translated as follows:
P R. Electricity
t ((Investment t O and M t Fuel saved t Carbon saved
t Decommissioning t)*(1 r)  t)/(t (R. Electricity t*(1 r)  t))
R. Electricity t: The amount of renewable electricity produced in
year t;
P R. Electricity: The constant price of renewable electricity;
(1 r) t: The discount factor for year t;
Investment t: Investment costs in year t;
O and M t: Operations and maintenance costs in year t;
Fuel saved t: the fuel savings value relative to the reference conventional technology for the year "t";
Carbon saved t: Carbon spared t: the income generated value
through the valuation of CO2 eq savings during the year "t" (CO2
emissions reduction compared to the reference technology);
Decommissioning t: Decommissioning cost in year t.
Overall, in applying this method to our case study, the fuel
savings over a period of 20 years-the minimum duration of a
photovoltaic plant [64,65] -would be over 1.39 million US$. And
furthermore, the CO2 eq economies could generate 73,500 US$
over the same period. Together, these savings would be US$1.46
million to the minimum period of operation of the plant.
It is important to compare these savings with the overall cost of a
PV system. In 2015, the IRENA report on Renewable power generation costs in 2014 wrote The range of installed costs for small utilityscale projects in 2011 was between USD 3200 and USD 7 600/kW, while
for large-scale utility projects the range was between USD 2200 and USD
7050/kW. By 2014, the range for smaller utility-scale projects had
declined to between USD 1 300 and USD 6800/kW (based on data from
CPUC, 2014 and Photon Consulting, 2014 to supplement the IRENA
Renewable Cost Database) and for larger projects it had declined to
between USD 1300 and USD 5400/kW. [66] (IRENA, 2015).
Obviously, the savings from solar power plants during their
lifetime-the same for all renewable energy plants-can signicantly
reduce their overall cost. Therefore, the results, and consequently the
choice of technology, would be different from the conventional
method.
Ultimately, in contrast to the conventional method, our approach
takes in consideration the fuel and CO2 emissions savings which are
generated by renewable energy technologies. Accordingly, the results
obtained are more representative, and provide a more relevant measure in the technology choices for energy production. This can be used
by economic operators in the process of technological choice, but also
by governments in establishing public policy aiming to support rene

1156

A. Akbi et al. / Renewable and Sustainable Energy Reviews 56 (2016) 11501157

wable energy or to be used as support for the funding of an energy

transition.

[27]
[28]

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