2023 SAUPEC Conference, Johannesburg, South Africa, January 24-26, 2023.

An Economic Feasibility Study for Off-Grid Hybrid

Renewable Energy Resources
Emmanuel Idowu Ogunwole and Senthil Krishnamurthy
Department of Electrical, Electronic, and Computer Engineering,
Center for Substation Automation and Energy Management Systems
Cape Peninsula University of Technology,
PO BOX 1906, Symphonyway, Bellville, Cape Town, South Africa - 7535
1emmanuelidowu18@gmail.com

2KrishnamurthyS@cput.ac.za
2023 31st Southern African Universities Power Engineering Conference (SAUPEC) | 979-8-3503-3186-8/23/$31.00 ©2023 IEEE | DOI: 10.1109/SAUPEC57889.2023.10057767

Abstract—Renewable energy resources (RES) are gaining
popularity worldwide. As a result, renewable energy sources
(RES) are now considered an alternative source of electric
power generation in many communities. Furthermore, using
renewable energy sources reduces pollution caused by coal and
the release of carbon into the atmosphere by power plants.
This article focuses on the economic feasibility of renewable
energy resources since it is one of the obstacles in building and
executing effective and efficient power generation with RES.
An optimizer function of HOMER Pro software was employed
in this study to develop a cost-effective power-generating RES
configuration. The system uses an IEEE 14-Bus load demand
of 259 MW supplied by five generators tested the design system
in an IEEE 14-Bus test system with a total load demand of 259
MW supplied by five generators. The loads were classified as
critical or non-critical. Three case studies were considered: 1. a
case in which all five generators supplied the loads, 2. a case in
which one generator was replaced by solar PV with the same
generating capacity, and 3. a case in which two generators
were replaced by both solar PV and wind turbine respectively.
The decrease in net present cost (NPC), Levelized cost (COE),
and operating cost (OC) demonstrate the efficacy of the
proposed system topologies with various forms of RES.
Keywords—Economic feasibility study, sensitivity analysis,
Renewable energy resources, solar PV, wind turbine, batteries,
converters, cost optimization, grid-connected and islanded mode.
I. INTRODUCTION
Due to global warming, population growth, and
industrialization, resulting in increased power demand,
renewable energy resources (RES) have attracted much
attention worldwide. As a result, renewable energy resources
are now being evaluated as an alternative source of
electricity generation in several communities. With the
crucial function of electric energy (electricity) in our modern
rural and urban environments, electricity has contributed
significantly and substantially to social, economic, and
environmental growth [1].
Over the years, renewable energy investment has grown
in popularity, significantly increasing billions of dollars in
many industrialized nations such as Japan, the United States
of America, and China, with African countries not far
behind. South Africa is one of the African countries that has
accepted and invested heavily in a renewable energy mix.
The mixed energy consumption situation in South Africa in
2020 is depicted in Fig. 1. Many research projects are still in
the works by academics to create more energy from existing
resources to fulfill societal demand and to determine which
one is more cost-effective and does not contribute to climate
change or have any negative impact.
With a desperate need for more energy generation
capacity in South Africa due to the epileptic generation
capacity of electricity that the country is currently
experiencing, which leads to frequent load-shedding in the
country. The South African government has concluded a deal
of three projects and 420 MW of wind power in the
Renewable Energy Independent Power Producer
Procurement Programme (REIPPPP). The projects will offer
onshore wind energy technologies and will be able to sell
power to ESKOM (a South African Utility company) for 20
years.
Integrating renewable energy sources (IRES) has been
widely employed for clean/consistent energy supply and cost
reduction in energy consumption tariffs. Furthermore, IRES
contribute significantly to social amenities and rural
development since many rural regions, particularly in Africa,
suffer from insufficient electricity supply [2], [3].
Due to the inevitable causal link between electric energy
and social and economic growth and carbon emission
reduction, the government and several commercial
parastatals are concentrating increasing attention on
integrating renewable energy for a continuous and
uninterrupted supply of electric power [4]. Thus, renewable
energy (RE) participates in various factors that provide an
economical, efficient, and long-term source of energy in the
environment. Furthermore, using renewable energy reduces
pollution caused by coal and the release of carbon into the
atmosphere by power plants. Solar Home Systems (SHSs)
provide abundant RES in remote areas. However, the real
downside of SHSs is that the power generated by SHSs,
combined with their short supply duration, prevents
customers from realizing the rewards of modern electricity
[5].

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 Fig. 1. Sum of Primary Energy consumption in South
Africa, 2020 [6].
This research provides an efficient economic feasibility
assessment to address the problem of power deficiency and
cost, one of the primary problems that hybrid renewable
energy designers confront. The approach known as Loss of
Power Supply Probability was developed to address the issue
of power shortfall and expense (LPSP). The LPSP technique,
which is the ratio of all unmet loads to total electric load
demand, is a worldwide used statistic to quantify the stability
of HRES on an annual basis. The proposed solution was
implemented in HOMER Pro software utilizing the HOMER
cost optimization function.
II. RESEARCH METHODOLOGY
A. Proposed system mathematical formulation
In this study, the research approach covers three
scenarios of sensitivity optimization on fuel costs. Under
each scenario, we have three options based on system
configuration and fuel cost sensitivity analysis. Fig. 2 and 3
below depicts the proposed system architecture and method
used under consideration.
Non-critical Load
Diesel Gen. AC Bus
DC Bus
Wind Critical Load
Turbine
Converter
Fig. 2. Proposed system architecture
The chosen system design is optimized for sensitivity
analysis depending on the three fuel costs. Furthermore,
each sensitivity optimization scenario is further subdivided
into three options, each consisting of a mix of energy-
generating sources with different fuel costs. Equations (1)–
(3) are the proposed equations for the sensitivity
optimization for scenario 1 for each option.
𝑆𝑂𝐶1−𝑜𝑝𝑡𝑖𝑜𝑛1 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝐺𝐸𝑁5 @ 0.5 ($/𝐿) (1)
𝑆𝑂𝐶1−𝑜𝑝𝑡𝑖𝑜𝑛2 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝐺𝐸𝑁5 @ 1.0 ($/𝐿) (2)
𝑆𝑂𝐶1−𝑜𝑝𝑡𝑖𝑜𝑛3 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝐺𝐸𝑁5 @ 1.5 ($/𝐿) (3)
SOC: Sensitivity Optimization Case
In scenario 2, one of the five generators has been
replaced with solar PV and a storage system of the same
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capacity (battery). The solar PV and battery are the system's
backup in the event of a false outage or the need for repair
on any of the generators. Different fuel costs are often
utilized to do sensitivity analysis on the specified system.
Each sensitivity optimization scenario is further subdivided
into three options, each consisting of mixed energy
resources with different fuel costs. Equations (4)–(6) are the
proposed equations for the sensitivity optimization
examined in this scenario for each option.
𝑆𝑂𝐶2−𝑜𝑝𝑡𝑖𝑜𝑛1 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 0.5 ($/𝐿) (4)
𝑆𝑂𝐶2−𝑜𝑝𝑡𝑖𝑜𝑛2 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 1.0 ($/𝐿) (5)
𝑆𝑂𝐶2−𝑜𝑝𝑡𝑖𝑜𝑛3 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝐺𝐸𝑁4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 1.5 ($/𝐿) (6)
In scenario 3, two generators were replaced with a wind
turbine system and solar PV, integrating two renewable
energy resources (PV and wind) into the system design.
Both fuel prices and wind speed are employed in this
scenario to do sensitivity optimization analysis on the
system. Furthermore, each instance of sensitivity
Solar PV
optimization analysis is separated into three options.
Equations (7)–(9) are the recommended equations for
optimizing system sensitivity in this scenario.
𝑆𝑂𝐶3−𝑜𝑝𝑡𝑖𝑜𝑛1 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝑊𝑇4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 0.5 ($/𝐿) (7)
Battery 𝑆𝑂𝐶3−𝑜𝑝𝑡𝑖𝑜𝑛2 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝑊𝑇4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 1.0 ($/𝐿) (8)
𝑆𝑂𝐶3−𝑜𝑝𝑡𝑖𝑜𝑛3 = 𝐺𝐸𝑁1 + 𝐺𝐸𝑁2 + 𝐺𝐸𝑁3 + 𝑊𝑇4 +
𝑃𝑉5 + 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 @ 1.5 ($/𝐿) (9)
B. Cost optimization function
In HOMER, all system architectures are rated based on
their Net Present Cost (NPC), which is the fundamental
metric for determining system optimization and computing
the system's Cost of Energy (COE). The NPC in HOMER is
equal to the sum of all component costs, including sales and
purchasing power to and from the grid (P-grid), salvage
value (SV), and air pollution fines. Therefore, the total NPC
may be calculated mathematically as [9]:
𝑇𝑁𝑃𝐶 = 𝐶𝐶 + 𝑅𝐶 + 𝑂&𝑀 + 𝑆𝑉 + 𝑃𝑔𝑟𝑖𝑑 (10)
Where,
CC, RC, and O&M are the capital, replacement, operation,
and maintenance costs.
Because the fundamental goal of optimization is to
decrease and maintain acceptable levels of system
dependability. As a result, reducing COE and maintaining
system dependability at an appropriate level is critical. COE
may therefore be determined analytically using (11) [10]:
 Sensitivity Analysis

Scenario-1 Scenario-2 Scenario-3

(5 Diesel Generators
(5 Diesel Generators

(5 Diesel Generators

+ Battery @ $0.5/L)

+ Battery @ $1.5/L)

+ Batt. + WT @ $1/
(4 Diesel Gen. + PV

(4 Diesel Gen. + PV

(3 Diesel Gen. + PV

(3 Diesel Gen. + PV
(4 Diesel Gen. + PV

(3 Diesel Gen. + PV
+ Battery @ $1/L)

+ Batt. + WT @

+ Batt. + WT @
@ $0.5/L)

@ $1.5/L)
Option-1:

Option-2:

Option-3:

Option-4:

Option-5:

Option-6:

Option-7:

Option-8:

Option-9:
@ $1/L)

$0.5/L)

$1.5/L)
L)
Fig. 3: Diagrammatic representation of the proposed method

The two states of LPSP are either zero (0) or one (1). The
𝐶𝑂𝐸 (𝑘𝑊ℎ) =
𝑇𝑁𝑃𝐶 ∗𝐶𝑅𝐹
(11) zero (0) state means no unmet load available (𝑃𝑢𝑛𝑚𝑒𝑡 (𝑡) =
𝑃𝑑 0), while the one (1) state indicates that there exists an unmet
Where, load during the period of simulation ( 𝑃𝑢𝑛𝑚𝑒𝑡 (𝑡) > 0 ).
𝐶𝑅𝐹 and 𝑃𝑑 are the capital recovery factor and the electric Furthermore, for a given hybrid renewable energy system,
load demand, respectively. The capital recovery factor's HOMER reduces both 𝑇𝑁𝑃𝐶 and LPSP [13].
principal role is to transform the present value into the same 𝑃𝑡𝑜𝑡 ≤ (𝑃𝑃𝑉 + 𝑃𝑊𝑇 + 𝑃𝑔𝑟𝑖𝑑 ) (15)
yearly cash flows, and it can be stated as (12) [11]:
𝑃𝑟
(𝑅𝐹 = ) > 80% (16)
𝑃𝑑
𝑛(1+𝑛)𝑦
𝐶𝑅𝐹 = (12)
𝑛(1+𝑛)𝑦 −1
III. SIMULATION RESULTS AND DISCUSSION
Where,
𝑛, 𝑦 are the interest rate and project lifespan in years. The recommended system is optimized utilizing a total
Power deficit is one of the primary issues of hybrid energy demand of 259 MW from an IEEE 14-bus test
renewable energy source (HRES) design. It often happens system powered by five (5) generators. The loads in this
when the total energy supply is insufficient to satisfy the investigation were classified into two categories: non-
total energy demand. The strategy known as Loss of Power critical and critical loads. The loads were split in half to
Supply Probability can help alleviate the power shortage avoid a total blackout in the event of an unanticipated event
problem (LPSP). The LPSP technique, which is the ratio of and to make scheduling easier.
all unmet loads to total electric load demand, is a worldwide The proposed system uses an annual discount rate of 8%,
used statistic to quantify the stability of HRES on an annual an inflation rate of 2%, a project duration of 25 years, and a
basis. LPSP may be expressed mathematically as (13) [12]: capacity shortfall fraction of 0%. HOMER synthesizes
hourly solar radiation over twelve months using Graham's
technique. Graham's technique is used in data production to
∑𝑇
1 𝑃𝑢𝑛𝑚𝑒𝑡 (𝑡) generate hourly variability and spontaneous correlation. Fig.
𝐿𝑃𝑆𝑃 = (13)
𝑃𝑑 4 depicts the proposed system's daily load profile. It can be
seen that there is an early morning (between the hours of
Where, 06:00 am) and evening rise (between the hours of 5:00 pm
𝑃𝑢𝑛𝑚𝑒𝑡 (𝑡) is the unmet load in an hour (h) and can be to 9:00 pm) in electricity use. This is expected as people
expressed as (14): generally wake up early to prepare for work and come back
in the evening to prepare supper, possibly take showers, and
0 𝐸𝑙 (𝑡) < 𝐸𝑡𝑜𝑡 (𝑡) watch television.
𝑃𝑢𝑛𝑚𝑒𝑡 (𝑡) = { (14)
𝐸𝑙 (𝑡) − 𝐸𝑡𝑜𝑡 (𝑡) 𝐸𝑙 (𝑡) > 𝐸𝑡𝑜𝑡 (𝑡) Fig. 5 depicts the daily solar irradiation profile. The
monthly average solar radiation values ranged from 2.850 to
Where, 8.180 kWh/m2/day, with an annual average of 5.43
𝐸𝑙 and 𝐸𝑡𝑜𝑡 are the load demand and total available power kWh/m2/day. It can also be seen from the GHI (Global
generated at time t. Horizontal Irradiation) profile that the solar radiations are
very high at the beginning and the end of the year and very
low at the middle of the year. Therefore, May until August

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represented the months of the rainy season, and there are To achieve the goal of this study, the following three
likely to be more cloudy days during these months. Finally, scenarios were considered:
fig. 6 shows the monthly average wind speed profile. Here
A. CASE 1: Sensitivity optimization investigation with all
the reference wind speed is measured at the reference
the five diesel generators
height.

Table 1 below details the total energy production by each

Weekday's component in this case. Fig. 7 and 8 show the monthly
energy production of each generator as well as an overview
Weekend's
of the system costs. The extra power generated is 132
15 kWh/year, equal to 0.139 percent, with no unmet load or
capacity shortfall.
Load (kW)

10 TABLE 1. TOTAL ELECTRIC POWER PRODUCTION BY EACH

COMPONENT.
Fuel Sensiti Sensiti Energy resources Total The ratio
5 pric vity vity energy of total
e cases options generation generatio
($/L (kWh/year n (%)
) )
0 0.5, 𝑆𝑂𝐶1 Options Diesel Gen_1 91.906 60.1
0 2 4 6 8 10 12 14 16 18 20 22 1.0, _1,2,3
1.5 Diesel Gen_2 67.170 71.0
Hours Diesel Gen_3 24.751 26.1

Diesel Gen_4 2.673 2.82

Diesel Gen_5 72.5 0.0766

Fig. 4. Daily hourly load profile
Excess electricity 30 23.139

Renewable 0 %
fraction
Unmet electric 0 0
0,7 10 load
Daily Radiation (kWh/m2/day)
Clearness Index

Capacity shortage 0 0
0,65 8
6
0,6
4
0,55 2
0,5 0
Apr

Aug
Jul
Jun

Oct
Nov
Feb
Jan

Sep

Dec
Mar

May

Month's
Clearness Index
Daily Radiation (kWh/m2/day)

Fig. 5. Monthly solar irradiation and clearness index for a

year Fig. 7. The monthly energy production of the power
system with diesel generators
Average Wind Speed (m/s)

6,5
6
5,5
5
4,5
Jan
Feb

Jun
Jul

Sep
Aug
Apr

Oct
Nov
Dec
Mar

May

Months
Fig. 8. The base case power system cost summary with five
Fig. 6. Monthly average wind speed for a year diesel generators

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 5
Excess 72.781 41.4
B. CASE 2: Sensitivity optimization investigation with one electricity
generator replaced with solar PV Renewable 63.0 %
fraction
To satisfy the needed load requirement, one of the Unmet 0 0
generators was replaced with a renewable energy source electric
(solar PV) of the same capacity. In addition, a storage system load
(battery) with a capacity of 1 kW was also attached to store Capacity 0 0
surplus produced energy when generation exceeds shortage
consumption. The converter transforms the solar PV and
battery's DC output power to the needed AC input power for
the loads. Table 2 below gives comprehensive details of total
energy production by each component in this case. Fig. 9 and
10 show the monthly energy production of each element as
well as a breakdown of the system costs.

TABLE 2. TOTAL ELECTRIC POWER PRODUCTION BY EACH

COMPONENT AND RENEWABLE PENETRATION
Fuel Sensitivit Sensitivit Energy Total The ratio
pric y cases y resources energy of total
e Options generation generatio Fig. 9. The monthly energy production of the power systems
($/L (kWh/yea n (%) with diesel generation and PV system.
) r)
Diesel 8.32 0.636
Gen_1
Diesel 2.235 1.17
Gen_2
Diesel 44.613 34.1
0.5 𝑆𝑂𝐶2 Option_1 Gen_3
Diesel 16.813 12.9
Gen_4
Solar_PV_ 66.237 50.7
5
Excess 34.608 26.5
electricity
Renewable 31.8 %
fraction
Unmet 0 0
Fig. 10. The system cost summary with diesel generation and
electric PV system
load
Capacity 0 0
shortage C. CASE 3: Sensitivity optimization investigation with two
Diesel 41.25 31.1
generators been replaced with solar PV and wind turbine
Gen_1
Diesel 17.065 0.732
Gen_2 This system layout combines hybrid renewable energy
1.0 𝑆𝑂𝐶2 Option_2 Diesel 38.862 26.7 sources (solar PV and wind turbine) with a series of
Gen_3 generators to satisfy the energy demands of the loads. The
Diesel 12.228 8.40 fifth generator has been replaced with a wind turbine of the
Gen_4 same capacity in this scenario. Table 3 below gives a detailed
Solar 93.349 64.2
_PV_5
description of total energy production by each component in
Excess 48.206 33.1 this case.
electricity
Renewable 44.8 %
Fig. 11 and 12 show the monthly energy production of
fraction each component as well as an overview of the system costs.
Unmet 0 0 TABLE 3. TOTAL ELECTRIC POWER PRODUCTION BY EACH
electric COMPONENT AND RENEWABLE PENETRATION
load Fuel Sens Sensiti Energy resources Total The
Capacity 0 0 pric itivit vity energy ratio of
shortage e y Option generation total
($/L) case s (kWh/year generati
Diesel 72.0 0.0409 s ) on (%)
Gen_1 Diesel Gen_1 15.17 0.394
Diesel 15.90 0.335 Diesel Gen_2 10.348 7.89
Gen_2 Diesel Gen_3 36.648 27.9
Diesel 26.727 15.2 Wind_Turbine_4 46.329 12.5
Gen_3 Solar_PV_5 67.291 51.3
Diesel 17.609 4.33 0.5 𝑆𝑂𝐶3 Option Excess electricity 34.285 26.1
Gen_4 _1 Renewable 49.7 %
1.5 𝑆𝑂𝐶2 Option_3 Solar_PV_ 40.924 80.1

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 fraction while generating a surplus of 34.285 kWh/year with no
Unmet electric 0 0 unmet electric load or capacity shortfall.
load
Capacity shortage 0 0 TABLE 4. TOTAL SYSTEM COST SUMMARY FOR ALL THE
PROPOSED CASES
Diesel Gen_1 12.66 0.189 Sensitivity Sensitivity NPC COE O&C
Diesel Gen_2 7.671 5.45 cases options
Diesel Gen_3 30.123 21.4 CASE 1 Option_1 361,117.70 0.2955 26,000.18
Wind_Turbine_4 33.419 23.7 Option_2 582,952.40 0.477. 43,160.06
Solar_PV_5 69.399 49.3 Option_3 804,787.10 0.6585 60,319.95
Excess electricity 43.901 31.2
𝑆𝑂𝐶3 Option Renewable 59.7 % CASE 2 Option_1 417,919.20 0.3420 12,941.73
1.0 _2 fraction Option_2 537,077.80 0.4395 21,330.14
Unmet electric 0 0 Option_3 632,770.40 0.5178 24,785.00
load
Capacity shortage 0 0 CASE 3 Option_1 445,976.50 0.3649 11,897.10
Option_2 495,577.70 0.4055 15,566.32
Option_3 566,550.80 0.4636 17,112.08
Diesel Gen_1 14.92 0.307
Diesel Gen_2 5.092 3.17
Diesel Gen_3 20.951 13.1 IV. CONCLUSION
Wind_Turbine_4 66.837 41.7
This project aims to build and simulate a community
Solar_PV_5 67.066 41.8
Excess electricity 62.530 39.0
energy system that will assist significant electricity and
1.5 𝑆𝑂𝐶3 Option Renewable 71.9 % natural gas customers lower operational costs. Economic
_3 fraction feasibility analysis on a hybrid (solar PV-Wind turbine-diesel
Unmet electric 0 0 generators) stand-alone system design was performed in the
load cost optimizer function in HOMER Pro software. Based on
Capacity shortage 0 0 the system's net present value, energy cost, and operating
cost numbers. The suggested system demonstrates that the
proposed system architectures 2 and 3, which feature the
integration of solar PV and wind turbines, are more cost-
effective than Case 1, which is the base Case. Furthermore,
the suggested system design in Case 3 was chosen as the
most inexpensive and efficient to deploy with lower
operational costs.
ACKNOWLEDGMENT
The authors greatly appreciate the management of Cape
Peninsula University of Technology (CPUT) and the Center
for Substation Automation and Energy Management System
of the Department of Electrical, Electronic, and Computer
Engineering, Bellville Campus, CPUT. South Africa. For
Fig. 11. The monthly energy production for the power
providing a well conducive research environment to carry
systems with coal generators, PV, and wind turbines
out this study. This work is supported partly by the National
Research Foundation (NRF) under Grant NRF Thuthuka
Grant Number 138177 (TTK210329591306). Also, the
authors acknowledge the research grant support from the
Eskom Tertiary Education Support Programme (TESP) and
the Eskom Power Plant Engineering Institute (EPPEI) in
carrying out this research work.
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