R E S E A R CH AR T I C L E

The viability of battery storage for residential photovoltaicsystem in Egypt under different incentive policies

Ahmed Z. Gabr1 | Ahmed A. Helal2 | Nabil H. Abbasy3

1Efficiency and Rationalization of EnergyConsumption, Khalda PetroleumCompany, Cairo, Egypt2Electrical Power Engineering, ArabAcademy for Science, Technology andMaritime Transport, Alexandria, Egypt3Electrical Power Engineering, AlexandriaUniversity, Alexandria, Egypt

CorrespondenceAhmed Z. Gabr, Khalda PetroleumCompany, Cairo, Egypt.Email: eng.ahmed.zakaria.gabr@gmail.com

Handling Editor: Dr. Daniela Proto

Summary

As a global common trend for fossil fuels independence, renewable energy

plays a great role to save a clean source of energy. As a result of the high solar

energy potential in Egypt, successive incentive polices had been introduced by

the Egyptian electricity authority to encourage the deployment of small-scale

residential rooftop photovoltaic (PV) systems. This paper explores the impacts

of installing a grid-connected PV battery system from both technical and eco-

nomic point of view under the existing incentive policy and energy purchasing

and selling price in Egypt. The Egypt case is considered as a case study. The

study investigates the current Egyptian Incentive Policy situation and criteria

for high electricity load profile. The economic evaluation of various sizes of the

PV battery system is carried out based on different economic measures such as

net present value (NPV), self-sufficiency (S-S), and electricity bill savings. The

methodology is based on the assessment of different technical and economical

indices as well as on performing sensitivity analysis. A MATLAB code was pur-

posely developed and implemented to evaluate the economic effect of the

installed system considering the effect of battery capital cost and discount rate

variations. A net energy metering (NEM) incentive policy is suggested to

increase and maximize the financial profits from installing PV battery system

and increase the independency from the utility grid. The results showed that

doubling the sellback power price to $0.089/kWh instead of $0.04/kWh will

decrease the profitable PV system size to the half and will increase the NPV to

the double. Under FiT incentive policy, installing 25 kWp PV system can

achieve 50% of S-S and adding 12.5 kWh of batteries will increase it to 75%,

while under the NEM incentive policy, installing 15 kWp PV system can

achieve 47% of S-S and the 75% S-S can be achieved by adding 15 kWh of

batteries.

KEYWORD S

grid-connected PV, incentive policy, net energy metering, PV battery system, rooftop PV system

List of Symbols and Abbreviations: C0, total initial investment cost; Ct, net cash inflow during the period t; Fit, feed in tariff; LCOE, levelized costof energy; NEM, net energy metering; NPV, net present value; NPC, net present cost; PV, photovoltaic; R, project lifetime; r, real discount rate; S-S,self-sufficiency; SOC, state of charge; T, project total period; t, number of time periods.

Received: 10 September 2020 Revised: 15 November 2020 Accepted: 1 December 2020

DOI: 10.1002/2050-7038.12741

Int Trans Electr Energ Syst. 2021;31:e12741. wileyonlinelibrary.com/journal/etep © 2020 John Wiley & Sons Ltd 1 of 18

https://doi.org/10.1002/2050-7038.12741

1 | INTRODUCTION AND LITERATURE REVIEW

Photovoltaic (PV) systems can help in cost and energy savings in addition to reducing emissions, but this savings variesfrom region to another depending on the PV panels prices, materials, and technology. A notable decrease in the PV sys-tem price in addition to an increase the fossil fuel price that encourage people to use the PV systems as a source ofenergy. Accordingly, a mismatch between the customers and the utility side had been occurred, and it was found thatthe integration of the battery storage systems is one of the best solutions to fill the gap between the customers and theutility.1 There are many economic factors that can be used to evaluate the benefits of installing PV and battery storagesystems.2 These factors like levelized cost of energy (LCOE), net present value (NPV), payback period, and electricitybill saving, which can determine the economic viability of the system. Meanwhile, there are other factors that can deter-mine its technical viability like the load pattern, self-sufficiency and the PV system capacity and number of battery stor-age used. In this study, all these factors are considered and demonstrated to achieve the best profitable design. Manyresearches have been performed to review the recent developments of PVs integrated with battery storage systems andrelated to different incentive policies.3-6 Reference 3 reviewed the previous research in the field of self-consumption ofelectricity from residential PV systems. It summarized use in particular two techniques to increase the self-consump-tion, namely battery storage and demand side management (DSM). It concluded that there is a clear relation betweenthe battery size, normalized by the PV system size, and the increase of self-consumption.

Reference 4 presented a review on the recent developments of PVs integrated with battery storage system andrelated feed-in tariff (FiT) policies applied to various countries. The paper showed that the self-consumption is the keyfactor for the actual incentivization policies; moreover, the paper confirmed that the FiT scheme is still the most effec-tive and widely considered scheme for promoting the integration of storage batteries. It also confirmed that the adop-tion of integrated PV battery systems shows a clear economic advantage especially with lithium-ion type batteries.

Reference 5 introduced an approach that referred as “solar plus.” Solar plus provides value by using batteries andload control devices to increase PV self-use or temporally shift that use to provide end-user benefits. It reviewed theextant literature on the end-user economics of such approach in residential applications. It also concluded that the ratestructures determine how the end-user customers benefit from solar plus approach. Also, customers that use more elec-tricity outside of PV generation periods face higher incentives to invest in solar plus. It was clear that rate structure andregulation structure may be necessary to ensure that increasing solar plus deployment provides both end-user andsystem-level benefits.

Reference 6 investigated when and under which conditions battery storage would be economically viable in residen-tial PV systems without policy support. It developed a techno-economic model that simulates the profitability of batterystorage from 2013 to 2022 under different scenarios for PV investment costs and electricity prices. It was found thatinvestments in battery storage are already profitable for small residential PV systems and the optimal PV system andstorage sizes rise significantly over time. It also concluded that the increasing profitability of integrated PV-storage sys-tems acquires major challenges for electric utilities such as increased investments in technical infrastructure that sup-ports the increase potential toward distributed electricity generation.

The evaluation of PV battery system in the Australian market was studied in many researches.7-10 The impact of PVbattery systems on peak demand and energy consumption, and thus bill savings across households under various elec-tricity tariffs in Australia have been assessed in Reference 7. With the adoption of PV battery systems, the greatest sav-ings occurred at the households on tariff of critical peak pricing retail energy and network capacity charge. It studiedthe variations in electricity cost with PV and battery system under two FiT schemes, tariffs, the size of solar PV and bat-tery storage, and locations. Another Australian study had used a decision support program to investigate the impact ofvarious parameters, including PV/battery installation costs, electricity tariff, FiT, geographic location, and load profile,on the feasibility of grid-connected PV-battery systems.8 It was found that the optimum PV-battery size is sensitive toall these parameters. Within the various price scenarios that had been investigated, adopting battery had a positiveimpact on NPV only at low installation cost.

Reference 9 calculated the payback period of PV with battery for various system configurations. It showed that thepayback depends on factors including the cost of energy storage, the cost of electricity, the price paid for exportedenergy, the power generated by the PV system, and how and when energy is used by the household. It concluded alsothat decreasing FiTs and the decreasing cost of energy storage will lead to increase the potential for energy storage sys-tem (ESS) integration in the near future.

Reference 10 presented a comprehensive framework for conducting economic analysis of a residential house alongwith the integration of solar PV units and battery energy storage systems (BESSs) considering different tariff structures.

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The results showed that the savings in electricity bills are higher for the larger sizes of the PV units and BESSs options,the pay-back periods are shorter for the options with smaller sizes. The net present values (NPV) and discounted pay-back period also clearly indicated that the grid-connected solar PV units with smaller capacities are more viable optionsin terms of making decisions on investments on solar PV systems. It was clearly demonstrated that the consideration ofeither NPV or discounted payback periods are the most useful approaches as these consider the future value of money.Since the FiT rate is declining, the payback period can be improved by selling the excess energy to the neighbors.

In Germany, many references confirmed that the developments of battery storage technology together with(PV) roof-top systems might lead to far-reaching changes in the electricity demand structures and flexibility of house-holds. The results of the reference scenario show positive NPV for PV systems of approx. 500 to 1800 EUR/kWp andNPV for SBS of approx. 150 to 500 EUR/kWh. The main influences are the demand of the households, self-consumptionrates, investment costs, and electricity prices. With further declining system prices for solar energy storage and increas-ing electricity prices, PV systems and SBS can be profitable in Germany from 2018 on even without a guaranteed FiT orsubsidies.11,12

Regarding the US electricity regulations, pairing lithium ion battery storage systems with residential-scale PV sys-tems can improve system performance and economics, and these systems can even be grid competitive with appropriatesizing and currently available financing and incentives. Even without state and local incentives, the grid competitive-ness demonstrated in this work suggests that residential PVs with lithium ion battery storage may be an economicallyviable alternative to bi-directional metering across the United States.13 Another study considers a range of differentelectricity pricing schemes from the consumer regions, including both FIT and net energy metering (NEM) policies inthe US market. It finds that PV is profitable for the majority of consumers with most current pricing scenarios but PV-battery systems are always less profitable. However, batteries can provide very significant increases in self-sufficiencyand we find that a majority of consumers can exceed 70% self-sufficiency with a 20 kW h battery and a PV system thatproduces the equivalent of their consumption. If PV-battery systems are to become better investments than PV-only forthe majority of consumers, retail electricity prices above $0.40/kW h and FIT rates below $0.05/kW h are a likelyrequirement. While the results show that the current generation of residential batteries can make large contributions toconsumer self-sufficiency, they remain too expensive to be a good economic choice for residential PV prosumers.14

In United Kingdom although battery storage is generally considered an effective means for reducing the energy mis-match between PV supply and building demand, it remains unclear when and under which conditions battery storagecan be profitably operated within residential PV systems.15 Many efforts are recently being dedicated to developingmodels that seek to provide insights into the techno-economic benefits of battery storage coupled to PV generation sys-tem in United Kingdom. However, not all models consider the operation of the PV-battery storage system with a FiTincentive, different electricity rates and battery storage unit cost. Reference 16 formulates an optimization problemwhich resulted in a mixed integer linear programming (MILP) problem. The optimization model was developed to solvethe MILP problem and to analyze the benefits considering different electricity tariffs and battery storage in maximizingFiT revenue streams for the existing PV generating system. The results provide insights on the benefit of battery storagefor existing and new PV system benefiting from FiT incentives and under time-varying electricity tariffs.

Reference 17 studied the techno-economics of grid-connected residential PV battery systems in Kyushu, Japan. Theresults show that the self-consumption ratio can be improved by installing a household battery. The customer demandprofile, PV generation, and battery size are the main factors that must be well designed to achieve the best performance.It concluded that the self-consumption ratio is higher when the battery size is bigger and becomes saturated. The opti-mum residential PV battery systems can also reduce grid electricity peaks. It used NPV to compare the effects of directbattery subsidies and found that the subsidies were necessary to increase the economic feasibility of an investment.Moreover, increasing the electricity price and decreasing the PV battery cost could make such an investment moreprofitable.

The NPC and COE values of grid/PV/battery systems for different climate zones in China had been studied.18 Theirvalues are increased as power price increased. The NPC values of grid/PV/battery systems also increased as loaddemand increased, whereas the COE values decreased with load demand increased.

Reference 19 analyzed the effects of component costs, FiTs, and carbon taxes on grid-connected PV systems inthe Malaysian residential sector using the HOMER software. The results showed that grid-connected PV systemswere economically viable with PV array costs of $1120/kW or lower. It also concluded that battery storage is notrecommended for use in grid-connected PV systems as it will increase the systems' NPCs. Meanwhile, the FiTscheme is desirable for lowering the NPCs of grid-connected PV systems, especially if the costs of PV arrays andinverters are high.

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The evaluation of the techno-economic viability of grid-connected solar PV systems for three residential householdsin New Delhi, India, using the HOMER software tool was presented in.20 The results indicated that a grid-connectedPV system without battery storage was both technically and economically a viable option for the system underconsideration.

In the Italian market, a FiT scheme for promoting the integrated PV battery (PV-BES) systems for grid-connectedend users has been discussed was introduced.21 An optimization problem was used to determine the incentive and opti-mal sizes of the PV and BESSs. The results indicate that the FiT scheme and the integrated PV-BES system also allow areduction of the electricity bill in the presence of this radical change in electricity prices. The reduction equals 44.98%when the PV-BES system is adopted, whereas it equals 33.65% when only the PV system is adopted.

Another study from Italy examined the economic feasibility of residential lead-acid ESS combined with PV panelsand the assumptions at which these systems become economically viable. The economic feasibility of PV systems waslinked typically to the share of self-consumption in a developed market, and consequently, ESS could be a solution toincrease this share. The results proved that the increase of the self-consumption ratio is the main critical variable, andconsequently, the break-even point analysis defined the case studies in which the profitability was verified. The profit-ability of integrated PV-ESS was verified in several case studies, but their NPV was lower than one obtained by the samePV plant.22-24

The impact of battery storage and grid electricity price on the cost-effectiveness of the grid-interactive solar PV sys-tem in South Africa is also reported in Reference 25. Simulation results showed that the use of battery storage system isonly beneficial to the system when the FiT is not attractive since the self-consumption of harvested solar energy bymeans of energy storage has to be maximized in order to improve the profitability of the system. With attractive FiTspolicy, battery storage integration will have a negative effect on the profitability of the system. Simulation results alsoshowed that the higher the grid electricity price, the higher the profitability of the system.

Research study from Thailand reported that as battery costs continue to decline, interest in the use of batteriestogether with rooftop PV is growing. The analysis addressed the customer economics of residential PV battery sys-tems in Thailand and included an impact analysis of retail rate subscriptions, battery investment subsidies, batterysizes, and buyback incentives. Because of the high upfront costs of batteries, PV battery investment is still not feasi-ble and PV battery costs are still higher than the grid electricity price. However, with declining PV battery costs andincreasing electricity retail rates, residential PV battery systems are expected to be feasible and able to compete withgrid electricity or PV-only systems. Such a scenario would happen when battery installation costs are about $100/kWh (without any financial support), depending on the current battery costs and the actual declines in the costsper year.26

In terms of optimization objectives, a lot of optimization targets can be achieved according to the system require-ments using different optimization techniques. Reference 27 used a genetic algorithm (GA) optimization method inorder to maximize the electricity self-consumption. A set of PV and BESS combinations and capacities were used toachieve the proper self-consumption target. The study showed that increasing self-consumption can decrease the grossenergy to 80%, but the study did not consider any economic factor in the assessment. Also, Jian Chen et al used the GAtechnique to get the optimal location of PV Battery system while it takes the time value of money in addition to theinvestment period in to considerations. The results showed that the optimum installation location can improve theeconomy of the distribution network.28 Based on the PV power prediction data and in order to maximize the netincome of PV BESS, a particle swarm optimization technique was implemented in Reference 29. Under the currentmarket electricity prices in Australia, an optimization problem was formulated to minimize the total annual cost of thePV BESS by sizing the BESS capacity and maximize the system self-consumption as well. The results showed that theAustralian market needs more support from the decision makers to the customers in order to reduce their electricitybills.30

This paper aims to identify the effect of adding rooftop PV system in addition to battery storage system to the utilitygrid for residential customers who have a high load consumption pattern. The study took into considerations the FiTand NEM incentive policies in order to evaluate the technical and economic indicators for the installation. The techni-cal indicators were represented by the PV size, the battery size, and the system self-sufficiency, while the economic indi-cators were represented by the battery capital installation cost, the nominal discount rate, the energy selling andpurchasing price, the NPV and the annual bill savings. The results were discussed based on a real Egyptian case study.This paper is the first study for the PV battery system for residential sector in Egypt. A MATLAB code was developedand programmed in order to assess and evaluate the technical and economic indicators for the system installation.NEM incentive policy was suggested to maximize the benefits of the system. Variations of the discount rate value and

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the battery capital cost was used as a sensitivity analysis in order to achieve the best practice of the PV battery systemconnected to the utility grid.

The rest of paper is organized as follows: a brief of the Egyptian electricity regulations is illustrated in Section 2.Then, it followed by the case study and the method which used in the analysis. The current Egyptian situation simula-tion results is described in the first part of the fourth section and the effect of adding batteries to the PV system is stud-ied and evaluated. Then, in the second part, a suggested incentive policy NEM is introduced to maximize the gain andprofits from installing the PV battery system. Finally, the paper is concluded in Section 5.

2 | ELECTRICITY REGULATIONS IN EGYPT

In Egypt and based on the latest issued report from the Egyptian electricity holding company, the total power installedcapacity is 55 213 MW with total yearly energy generation of 196 760 GWh and peak demand of 30 800 MW. The totalnew and renewable energy generated is 2871 GWh.31

There are 26.44 million subscribed customers are in the electricity services with total consumed energy of 73.7 bil-lion kWh. The electricity residential retail price in Egypt is subjected to seven block rate structures. Each block has itsown energy purchasing tariff according to the amount of the monthly consumed energy. The highest energy block is forconsumers with demand more than 1000 kWh monthly and its associated tariff is $0.089/kWh.32 There are about200 000 users in this block which represents 0.75% of all electricity customers with 5.6 billion kWh of energy consumed.Most of these customers are located in private residential compounds not in a high rising building, these compoundsare characterized by the availability of large space area per customer which makes it more suitable to install rooftop PVsystem. The energy purchasing price for this load pattern was increasing rapidly since 2014 till 2018. After 2018, thisload tariff pattern has not been subjected to any financial subsidy and so it has not been subject to any further increaseas shown in Figure 1.

Releasing subsidies for the highest load pattern encouraged such customers to invest in PV system to save moneythat allows the government to feed the lower residential sectors, high rising buildings, and the industrial ones.

In order to motivate investments for the PV grid-connected system, Egypt applied NEM and FiT incentive policies.In 2013, the NEM policy was introduced to allow small-scale renewable energy in the residential sector to feed the lowvoltage utility grid. However, this system was limited to low voltages, it was permitted for the customers to connect sys-tems that produces more energy than consumed. In 2014, FiT policy was introduced, and it was committed to purchaseall power from the eligible solar plants through 25 years. These plants would be operated by the distribution companies,and the tariff was varied according to the system size ranged from $0.054/kWh for systems up to 10 kW and $0.062/kWh for systems between 200 and 500 kW. In 2016, a new effective FiT policy was introduced, and the solar power tar-iff was increased between 4.8% and 28.6% in order to sustain the interest in the utility scale PV projects to attract moreinvestors. In 2017, Egypt was back the NEM policy with a committed price for the generated PV power of $0.044/kWh.33

FIGURE 1 Annual increase in highly consumption load

tariff32

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3 | CASE STUDY AND ANALYSIS METHODOLOGY

The case study that implemented in this research is a typical 400 m2 villa in a residential compound in Egypt near toAlexandria governorate (31�030 N and 29�430 E) with average solar radiation of 5.2 kWh/m2/d. The average daily loadpattern for this villa is 35.28 kWh/d as shown in Figure 2. According to the Egyptian Electric Utility and Consumer Pro-tection Regulatory Agency, the available remaining capacity of PV power to be installed for Egypt is 300 MW. Thiscapacity is divided for the country governorates by different ratios with 21 MW for Alexandria governorate.34

The rooftop grid-connected PV battery system consists of PV panels, inverters, batteries, and the utility grid asshown in Figure 3.

The system operation follows some constraints; batteries are not permitted to be charged or discharged from theutility grid and they will be charged if and only if there is a surplus power from the PV panels.

The simulation was implemented using a purposely developed MATLAB code, and it was implemented as per theflow chart shown in Figure 4.

Based on a local market survey, five different sizes of PV units are considered in this paper which are 5, 10, 15, 20,and 25 kWp. Each PV unit has its capital, replacement, operation and maintenance costs as shown in Table 1 and has25 years lifetime. The Inverter sizing was varying according to the PV system size and each inverter is 10 years lifetimeand has its capital, replacement, operation and maintenance costs as shown in Table 2. The overall project lifetime is25 years. The batteries used are Li-ion batteries with 10 years lifetime and each one is 12 V and 200 Ah (2.4 kWh), $530capital cost, $200 with replacement cost, and $5 for the annual maintenance cost.35

The economic feasibility for using the batteries in this PV system is introduced using the net present value (NPV)and the annual bill savings, which are calculated using the following equation36.

FIGURE 2 Annual average daily load profile35

FIGURE 3 Basic topology of the grid-connected photovoltaic

(PV) battery system

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Net present value

This is the difference between the present value of cash inflows and the present value of cash outflows. It is used in toanalyze the profitability of a projected investment or project.6,14,17 A positive net present value indicates that the

FIGURE 4 MATLAB code implementation flow chart

TABLE 1 Photovoltaic (PV) system different sizes and its related costs

PV system size (kWp) Capital cost ($) Replacement cost ($) Operation and maintenance cost ($)

5 2070 1450 10

10 3920 2750 10

15 5660 3960 10

20 7300 5110 10

25 8030 5660 10

TABLE 2 Inverter different sizes and its related costs

Invert size (kWp) Capital cost ($) Replacement cost ($) Operation and maintenance cost ($)

5 1005 705 10

10 1686 1180 10

15 1900 1330 10

20 2233 1563 10

25 2700 1900 10

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projected earnings generated by a project exceed the anticipated costs. It is assumed that an investment with a positiveNPV will be profitable, and an investment with a negative NPV will result in a net loss.

NPV=XT

t=1

Ct

1+ rð Þt −C0, ð1Þ

where Ct is the net cash inflow during the period t, C0 is the total initial investment costs, t is the number of timeperiods, and r is the discount rate. According to the statistics gained from the Central Bank of Egypt, Egypt has 9.75%discount rate.37

Annual bill saving

This index reflects how much money that is saved annually by using the PV system compared to the total consumptionfrom the power grid.

Annual Bill Savings=Electricity bill withoutPVsystem− Energy generated fromPVsystem× energy purchasing priceð Þ½+ energy sold to grid × energy selling priceð Þ�:

ð2Þ

The technical and operational feasibility is studied using the value of self-sufficiency introduced by the batteries.

Self-sufficiency

This is the sum of (PV power which supplied the load and battery power which supplied the load) divided by theannual load12,17,38; it means the ability to supply one's own needs from power without external assistance from the grid.

Self−sufficiency =PV to load+Battery to load

Grid to load+PV to load+Battery to load: ð3Þ

4 | RESULTS AND DISCUSSION

The effect of adding batteries to the PV grid-connected system will be investigated for two different scenarios, the firstone under the current Egyptian incentive policy that used an energy selling price differs from the energy purchasingprice while the second scenario was suggested to make the energy selling and purchasing price to be the same (NEM).

4.1 | Current Egyptian case study

The current policy which is applied in Egypt for the PV residential application is as follows39: the bidirectional energymeter installed by the Egyptian utility will measure both the energy delivered form the consumer (PV output) and con-sumed from the utility.

If the energy delivered from the consumer to the utility within a month (X) is greater than the consumed energyfrom the utility (Y), the net energy (X − Y) will be compromised with the amount of energy which will be consumed inthe next month and the electricity bill will be subjected to the block rate related to the net consumption ($0.089/kWh)and if this surplus energy is repeated in a monthly manner, this energy will be added to the consumer's balance for thenext month of the same year.

At the end of the financial year (end of June each year), if the consumer has a positive balance after compromisingthe energy consumption, the utility will buy this surplus power with a price equivalent to the average power production

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cost according to the latest report that had been issued from the agency ($0.044/kWh) for the year 2019/2020. This pricewill be updated annually for all established and upcoming projects synchronizing with updating the energy productioncost according to the service cost reported in the annual agency report.

The base case for the system under study is to feed the total residential load (35.28 kWh/d) from the utility gridwithout providing neither PV panels nor batteries with $0.089/kWh energy price and it was found from the MATLABcode developed, as per Figure 4, that the NPV is $−10 762 and the total annual cost of energy purchased from the utilityis $1163. Now, connecting PV and batteries to the system will introduce both economical and technical (operational)effect on the base system.

4.1.1 | Economical effect

The effect of adding different PV sizes on the economic indicators (NPV and annual bill saving) is studied and theresults are shown in Figure 5.

As shown in Figure 5, the system will not be profitable until installing 21.4 kWp PV system, as after this size theNPV will be in positive values and the system will begin to achieve profits. On the other hand, since increasing the PVsize will increase the annual bill savings significantly which means that here is a sufficient power from the system to besold to the grid to gain saving.

According to the previous results, using 25 kWp PV system will be the adequate size to gain financial profits. For(35.28 kWh/d) load pattern, ($0.089/kWh) purchasing price, and ($0.044/kWh) selling price, adding 25 kWp PV systemwill achieve $1787 NPV, $4648 of bill savings.

The integration of different size batteries to the 25 kWp PV system will affect its original NPV and annual bill savingvalues as shown in Figure 6.

As shown in Figure 6, increasing the battery size will decrease the NPV for the system because of increasing themain capital cost. The maximum battery size that can be installed that keep the system profitable with positive NPV is5 kWh. On the other hand, increasing the battery size results in a slight reduction in the annual bill savings becausethere is a reduction in the amount of energy which generated from the PV that is sold to the utility grid as it transferredto charge the batteries. In addition, there is not any communication between the batteries and the utility to sell powerfrom the batteries that may enhance the savings.

4.1.2 | Technical and operational effect

Battery integration helps in overcoming the intermittent nature of PV power output and decreases the dependency onthe utility grid. Increasing system self-sufficiency, as defined by Equation (3), is the main advantage of adding batteries

FIGURE 5 Effect of PV size on NPV and annual bill savings

under FiT incentive policy

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to PV systems. The 25 kWp PV base system can achieve 50% self-sufficiency without adding batteries compared to theBelgium case that can achieve only 30% of self-sufficiency without battery installation,38 while adding batteries willincrease the system independency till it reaches 95% self-sufficiency by adding 25 kWh batteries as shown in Figure 7.

Figure 7 also shows that 75% self-sufficiency target could be achieved by installing 12.5 kWh battery. Under suchcondition, the daily average power profile for the whole system could be illustrated as per Figure 8.

As shown in Figure 8, the average total PV energy production is (5.43 kWh/d) with (16.9 kWh/d) maximum and theaverage daily load is (35.76 kWh/d). The average energy purchased from the grid is (8.69 kWh/d), while the averageenergy sold to the grid is (95.7 kWh/d). The battery state of charge ranged from 20% to 95% daily, and the average bat-tery capacity is (77.24 kWh/d).

4.1.3 | Sensitivity analysis

There are two main variables that mostly impact the PV with battery system economical and technical parameters.These variables are battery capital cost and the discount rate.

The battery capital cost represents a major part of the total system capital cost, where there is a common trend toreduce the battery capital cost, the effect of this future reduction was studied as shown in Figure 9.

The battery capital cost reduction was incrementally changed from 1 to 0.2 P.U. from its original value ($220/kWhbattery).

FIGURE 6 Effect of different battery size on NPV and annual

bill saving

FIGURE 7 Effect of battery size variations on self-sufficiency

under FiT incentive policy

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As shown from the previous figure, for any battery size, decreasing the battery capital cost will enhance the NPV ofthe system as it will reduce the total system initial cost. On the other hand, reduction on battery capital cost has noeffect neither on the annual bill savings nor the self-sufficiency as they will remain constant for each battery size as theamount of energy used to feed the load or sold to grid has no relation with such economical variable. In the Egyptiancase study, a battery cost as low as $44.2/kWh is required to make the system profitable while in the Japanese casestudy it requires a reduction in the battery cost to reach $125/kWh in order to make the system competitive to any otherpower generation.40

All the previous results are subjected to the Egyptian economic factors (9.75% discount rate). As an economic pro-gress indicator, changing the discount rate will affect the results of the NPV of the system for different battery sizes asshown in Figure 10.

The discount rate was incrementally decreased from 1 to 0.7 P.U. from its original value (9.75%).As shown from the previous figure and as implemented from the Equation (1), when the discount rate is large, there

will be a large difference between the present value and the future value for the cash flow hence the NPV has an inverserelation with the discount rate and hence decreasing the discount rate value will make the system more profitable byincreasing the NPV.

As a third sensitivity case analysis and as concluded from Figure 7, achieving 75% of self-sufficiency required a12.5 kWh of batteries to be added to 25 kWp of PV system. Figure 11 showed the effect of discount rate variations andbattery capital cost reduction on the NPV for this battery size. The discount rate reduced from 1 to 0.7 P.U. and the bat-tery capital cost decreased from 1 to 0.2 P.U. in order to conclude at which discount rate and battery capital cost the sys-tem will be profitable.

FIGURE 8 Daily average

power profile for 25 kWp PV system

and 12.5 kWh battery size

FIGURE 9 Effect of battery capital cost reduction on NPV for

different battery size under FiT incentive policy

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The figure showed that the system will not be profitable unless reducing the discount rate to 0.7 P.U. (6.82%) andreducing the battery capital cost to 0.8 P.U. ($177/kWh battery). Otherwise, the system will not gain any financialprofits but will achieve 75% of self-sufficiency and $2555 of annual bill savings.

4.2 | Egypt under NEM system

Applying the NEM system means that the selling price will be equal to the purchasing price ($0.089/kWh) to feed thesame residential load (35.28 kWh/d) while maintaining the discount rate at its current value (9.75%). Economic andtechnical (operational) effect of connecting PV and batteries to the system will be introduced in the following sections.

4.2.1 | Economical effect

The effect of adding different PV sizes on the economic indicators (NPV and annual bill saving) is studied and theresults are shown in Figure 12.

As shown from the previous figure, the system will not be profitable until installing 11.67 kWp PV system, as afterthis size the NPV will be in positive values and the system will begin to achieve profits. On the other hand, increasing

FIGURE 10 Effect of discount rate variations on NPV for

different battery sizes

FIGURE 11 Effect of discount rate and battery capital cost

variations for on NPV under FiT incentive policy

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the PV size will increase the annual bill savings significantly that means there is a sufficient power from the system tobe sold to the grid to gain saving.

According to the previous results, using 15 kWp PV system will be the adequate size to gain financial profits. Forthe same load pattern (35.28 kWh/d), ($0.089/kWh) purchasing and selling price, adding 15 kWp PV system willachieve $3617 NPV, $3323 of bill savings.

The integration of different size batteries to the 15 kWp PV system will affect its original NPV and annual bill savingvalues as shown in Figure 13.

As shown from the previous figure, increasing the battery size will decrease the NPV for the system because ofincreasing the main capital cost. The maximum battery size that can be installed that keep the system profitable withpositive NPV is 7 kWh. On the other hand, increasing the battery size will result in a slight reduction in the annual billsavings as described in section 4.1.

4.2.2 | Technical and operational effect

It is clear that adding batteries will lead to an increase in the system self-sufficiency and decrease the dependency onthe utility grid. The 15 kWp PV base system can achieve 47% self-sufficiency without batteries, while adding batteries

FIGURE 12 Effect of PV size on NPV and annual bill savings

under NEM incentive policy

FIGURE 13 Effect of different battery size on NPV and self-

sufficiency

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will increase the system independency till it reaches 77% self-sufficiency by adding 15 kWh batteries as shown inFigure 14.

Targeting 77% self-sufficiency and under such condition the daily average power profile for the whole system couldbe illustrated as per Figure 15.

As shown in Figure 15, the average total PV energy production is (3.26 kWh/d) with (10.4 kWh/d) maximum andthe average daily load is (35.76 kWh/d). The average energy purchased from the grid is (8.39 kWh/d), while the averageenergy sold to the grid is (42.4 kWh/d). The battery state of charge is ranged from 20% to 95% daily and the average bat-tery capacity is (85.79 kWh/d).

4.2.3 | Sensitivity analysis

The battery capital cost and the discount rate are the main parameters that affect the presence of the PV battery system.The major part of the system cost is represented by the battery capital cost and the effect of such battery cost reductionwas studied as shown in Figure 16.

The battery capital cost reductions were ranged from 1 to 0.2 P.U. from its original value ($530/battery).As shown from the previous figure, for any battery size, decreasing the battery capital cost will enhance the NPV of

the system as it will reduce the initial system investment cost. On the other hand, reduction on battery capital cost hasno effect either on the annual bill savings or the self-sufficiency as they will remain constant for each battery size.Unlike the current Egyptian situation, PV battery system will be profitable for a wide range of battery size as shown

FIGURE 14 Effect of battery size variations on self-sufficiency

under NEM incentive policy

FIGURE 15 Daily average

power profile for 15 kWp PV system

and 15 kWh battery size

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from the previous figure. For example, the system still profitable with 15 kWh battery for 0.2 P.U. capital battery cost.In the Egypt case study, a battery cost as high as $176/kWh is required to make the system profitable while in the Japa-nese case study it requires a reduction in the battery cost to reach $125/kWh in order to make the system competitiveto any other power generation,40 using NEM incentive policy.

Results are subjected to the current Egyptian economic factors (9.75% discount rate). As an economic progress indi-cator, changing the discount rate will affect the results of the NPV of the system for different battery sizes as shown inFigure 17.

The discount rate was decreased from 1 to 0.7 P.U. from its original value (9.75%).As implemented from Equation (1), the NPV has an inverse relation with the discount rate, hence decreasing the

discount rate value will make the system more profitable by increasing the NPV.The third sensitivity case analysis and as concluded from Figure 17, achieving 77% of self-sufficiency required a

15 kWh of batteries to be added to 15 kWp of PV system. Figure 18 showed the effect of discount rate variations and bat-tery capital cost reduction on the NPV for this battery size. The discount rate was ranged from 1 to 0.7 P.U. and the bat-tery capital cost reduced from 1 to 0.2 P.U. to conclude at which discount rate and battery capital cost will make thesystem profitable.

As shown from the figure, the system will not be profitable until reducing the discount rate to 0.7 P.U. (6.82%) andreducing the battery capital cost to 0.6 P.U. ($318/battery). Otherwise, the system will only gain $2253 of annual billsavings.

FIGURE 16 Effect of battery capital cost reduction on NPV for

different battery size under NEM incentive policy

FIGURE 17 Effect of discount rate reduction on NPV for

different battery sizes

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5 | CONCLUSIONS

The Egyptian power sector had been discussed with pointing to the old incentive policy used and the method of calcula-tion till 2020. The developed incentive policy was illustrated, and it was found that, for 35.28 kWh/d load profile, thePV system will not be profitable till installing 21.4 kWp and increasing the PV size will increase the gained profits as itwill be a surplus power to be sold the utility grid in addition to achieving 50% of self-sufficiency and $4648 of annualbill savings.

The effect of adding different sizes of batteries to the system was studied in order to clarify the technical and eco-nomic benefits of the system and it was found that, increasing the battery size for the same load and PV size will reducethe NPV and increase the self-sufficiency. This increase will be associated with a small decrease in the annual bill sav-ings as a result of prohibiting the battery to feed the grid or to be charged from the grid and there is an amount of powerwill be used to charge the batteries instead of being sold to the utility grid.

As a world expectations, decreasing the batteries capital cost will affect the economic indicators of the system and itwas found that, decreasing the batteries capital cost will increase the system NPV but without any change neither onthe system self-sufficiency nor the annual bill savings because the amount of power which delivered to the load or tothe grid remains constant without changing.

As an economic progress indication, reduction in the nominal discount rate was studied and it was found that,reducing the discount rate will increase the system NPV and maximize the profits. To achieve 75% self-sufficiency withmeans of financial profits, it was found that the discount rate should be reduced and the battery capital cost as well.

A NEM incentive policy was suggested and it was found that the PV system will not be profitable until installing11.76 kWp which is smaller than the current size 21.4 kWp. Installing a 15 kWp PV system, for the suggested incentivepolicy, the NPV was increased to be $3617 compared to $1787 for the current policy.

Under NEM incentive policy, the system will be profitable when reducing a 7.5 kWh of batteries capital cost to0.8 P.U. from its original value added to 15 kWp of PV system, compared to the FiT incentive policy, at the samebattery size, the battery capital cost has to be decreased to 0.2 P.U. from its original value added to 25 kWp of PVsystem.

Under NEM incentive policy, the system will be profitable when reducing the discount rate for a 10 kWh of batte-ries added to 15 kWp of PV system to 0.8 P.U. from its original value, compared to the FiT incentive policy, at the samebattery size, value added to 25 kWp of PV system, the discount rate has to be decreased to 0.7 P.U. from its originalvalue.

Under the suggested incentive policy, for any battery size with any battery capital cost, installing the PV battery sys-tem will be profitable.

PEER REVIEWThe peer review history for this article is available at https://publons.com/publon/10.1002/2050-7038.12741.

FIGURE 18 Effect of discount rate and battery capital cost

variations for on NPV under NEM incentive policy

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DATA AVAILABILITY STATEMENTThe data that support the findings of this study are available from the corresponding author upon reasonable request.

ORCIDAhmed Z. Gabr https://orcid.org/0000-0003-3910-2365

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How to cite this article: Gabr AZ, Helal AA, Abbasy NH. The viability of battery storage for residentialphotovoltaic system in Egypt under different incentive policies. Int Trans Electr Energ Syst. 2021;31:e12741.https://doi.org/10.1002/2050-7038.12741

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