The availability of energy services is considered as almost important thing for sustainable development in the world. More energy demand leads the developing countries to double their energy demand in response their growth and is highly unlikely that every person in the developing world will achieve the level of consumption of the average person in the developed world by 2035 [1]. Renewable energy, in particular photovoltaic (PV) technology, offers a clean and alternative energy source that can abate energy-related emissions from conventional fossil fuel. PV rooftop-mounted system has demonstrated to be an economical and technically feasible approach to supply sustainable energy for residential, commercial and governmental buildings [2].

During last year, PV systems with net-metering scheme have been adopted in many countries around the world [3]. Net-metering concept specifies that electricity delivered to the grid from a net metering customer is compensated on a one-to-one basis for electricity purchased from the grid [4]. Particularly, net metering can lead to reduction of maximum demand charges and the overall electricity bill for commercial buildings [5].

The profitability and economic aspects of PV systems are evaluated by calculating the Net Present Value (NPV), Simple Payback Period (SPP), Internal Rate of Return (IRR) and the Profitability Index (PI) [2]. Comparing the economic feasibility of a 3 kWp PV system with different electricity loads that cover main consumer demands in Jordan showed that the best payback period is obtained in systems with an energy consumption of more than 1000 kWh [6]. In the same country, Jordan, the income from installing a residential PV system will be highly feasible and competitive if incentive tariff is applying [7]. Installment of 1 MW rooftop PV system in India is feasible both technically and economically with a saving yearly around 17% of the total investment cost of the system; i.e. the Simple Payback Period is about 7 years [8].

A positive NPV is achievable and payback period was less than PV panels’ lifespan of a PV system used to reduce peak electrical demand of Engineering Faculty building in Indonesia [9]. PV systems would be economically viable in more than 40% of all Brazilian distribution networks [10] if a 20% reduction of the specific investment costs and a 5% discount rate were possible. Under net-metering scheme, [11] showed the LCOE of 25 kW PV rooftop system was found to be $0.107 per kWh and could be considered as an economically and technically attractive power generation at UAE.

Solar rooftop sizes of less than 10 kW in Thailand with solar irradiation average 18 - 19 MJ/m² per day can provide the same DPP, IRR, and PI of 6.1 years, 15%, and 2.57 respectively [12] and as a result, regions with higher solar radiation having the potential to produce electrical power from solar energy will be suitable for investment in solar systems. The techno-economic feasibility evaluation for a rooftop PV system of a typical residential building in Saudi Arabia showed that the proposed system of 12.25 kW can generate 87% of the electricity needs of an apartment and the levelized cost of energy and net present value revealed competitive figures of 0.0382 $/kWh and $4378, respectively which indicate that residential PV installations are an effective option for energy management [13].

In Iraq, the electrical distribution general companies receive the generated power from generation plants with voltage levels (33 kV and 11 kV) and distributed through overhead and underground distribution grid to the participants. The residential, governmental and industrial sectors make up 42%, 26% and 23% respectively of the electricity energy consumption [14]. This study is an attempt to understand the feasibility of PV net-metering installations for the above distribution sectors in Iraq. The common parameters, Net Present Value and the Pay-Back Period, are used to determine the profitability of install PV systems.

This study consists of two parts, background about the electricity distribution in Iraq is discussed at first with details concerning with status of the utility grid, and then case studies of implementation of PV solar net-metering scheme in the residential, governmental and industrial sectors are conducted to investigate the feasibility of install PV systems in Iraq.

A Case study of install 5 kWp PV system conducted at first to show the annual savings in the electricity bill for residential sector with different annual consumption. Then, Net Present Value (NPV) and Internal Rate of Return (IRR) which are commonly parameters, used to evaluate the economic feasibility of install PV net-metering system for residential, commercial, government and industrial consumers [15]. The decision making on the investment depends on the value of NPV. If NPV > 0, the investment would add value to the investor and that the project may be accepted. If NPV < 0, it means that the investment would subtract value from the investor and then the project should be rejected [16]. Equation (1) used to calculate NPV [17]:

N P V = ∑ 0 n C n ( 1 + i ) n − C 0 (1)

where:

NPV = Net present value (USD);

C₀ = Initial capital cost (USD);

C_n = Annual cash flow at time n (USD);

i = Discount rate (%);

n = Period of analysis (25 years).

IRR refers to the discount rate value at which the net present value of the cash flow of a particular investment is zero and high IRR indicates that the investment opportunity is favorable [13]; IRR is given by [2]:

∑ 0 n C n ( 1 + I R R ) n − C 0 = 0 (2)

The weighted average cost of capital (WACC) is a common topic in the financial assessment. WACC is calculated as follows [18]:

W A C C = E E + D × k E + D E + D × k D . (3)

where;

E = Amount of equity;

k_E = Equity rate of return;

D = Amount of debt;

k_D = Debt interest rate.

In this study, the size of the PV system is assumed to be 24 kWp and the electricity tariff is established as in next section for each sector with no development in this tariff along the period of investment. The expected annual energy output produced from the proposed PV system is 27,000 kWh/year. The interest rate is assumed to be (8%) with 8 years’ repayment period.

There are three aspects relevant to PV net metering scheme that have to be addressed in more details:

Net-metering applies for both governmental and commercial sectors, where the tariff is flat rate with a value of 8.58 and 10.29 US$c/kWh, the following saving achieves for a system of 5 kWp capacity.

As shown in Table 3, if the tariff increases by 11.2% for the commercial sector before switching to net metering, the system will payback for itself, without a need to pay additional money. The remaining period after the payment of the loan will enjoy free energy generated from the system. In case of the governmental sector, the tariff needs to increase by 35.1% to reach breakeven. By applying

the equations that mentioned in section 2 in the developed financial model, the results of feasibility study of implementation of PV net-metering scheme with 24 kWp in residential, commercial, governmental and industrial sectors are summarized in Tables 4-7 respectively, as well as, the annual savings in bills are shown in Figures 4-7.

Net-metering scheme would yield IRRs of 24% and 13% for residential and commercial sectors respectively. These are higher than WACC of 10.10%. It is clear the effect of the fixed electricity tariff value in the governmental and industrial sectors, compared with the residential and commercial sectors. This requires two things, the first is that increasing the capacity of the solar system in houses and commercial buildings will lead to a profitable investment return for these sectors, and the second is the need to increase the electrical tariff for the governmental and industrial sectors in order to encourage adopting such projects.

A financial model has been developed in this study to investigate the feasibility of implementation PV solar net-metering system in different sectors in Iraq. Based on the above-mentioned analysis, it can be concluded that the breakeven point that may make the PV net-metering projects feasible is very close to the tariff applied for the commercial sector (10.29 $c/kWh) since the achieved return on equity is 16% which is very close the target 15%. The results also showed that increasing the capacity of the solar system in houses and commercial buildings has a profitable effect and that it is necessary to increase the electricity tariff for the government and industrial sectors by a percentage. In Iraq, PV could be the optimal alternative to overcome existing power sector challenges and it is recommended

to resort to a net-metering mechanism that would rely mainly on electricity balance settlements rather than financial transactions.

The authors would like to thanks the Information Center and Renewable Energy department, Ministry of Electricity, Iraq for helpful to get the required data and for encouragement and support to complete this work.

The authors declare no conflicts of interest regarding the publication of this paper.

Hunehen, Q.K., Mohsin, R.I. and Talib, A.-S.M. (2020) Feasibility Study of Installing Rooftop PV System with Net-Metering Scheme in Iraq. Journal of Power and Energy Engineering, 8, 55-65. https://doi.org/10.4236/jpee.2020.810005