Potential residential PV development in Chile: The effect of Net Metering and Net Billing schemes for grid-connected PV systems

In recent years the global photovoltaic (PV) market has expanded rapidly due to a sharp decline in PV prices and increased attention to the importance of sustainable energy. Northern Chile has one of the highest irradiance levels in the world as well as one the highest electricity rates in Latin America. Because of these conditions, Chile is one of very few countries where several PV projects are being developed without government subsidies and consequently, the PV industry is experiencing rapid growth. This paper reviews the opportunity to take advantage of these market conditions within the residential sector, modeling PV arrays across 10 cities in Chile. A detailed modeling of PV systems is performed to achieve an accurate analysis of energy production and electricity cost, using local resource data, optimal array orientation and inclination, and production losses. A review of how Net Metering and Net Billing affect the value of the PV production is applied and a comparison using levelized cost of electricity (LCOE) is conducted. Net Metering is found to be a better policy choice to promote PV systems than Net Billing because energy injected into the electrical network is paid at the complete retail rate. However, in developed countries this kind of policy is unlikely to be supported because of it's economic unfeasibility. Under a Net Billing scheme a consumer will see an advantage when energy is recorded over longer time intervals and when installing a system with smaller capacity relative to household electricity consumption. This prevents excess generation from being injected into the network which would be bought by the utility at lower prices than the retail rate. Payback periods are found to be low, between 6 years in northern areas with high retail rates and 13 years in other areas with lower radiation and retail rates.