Photovoltaic systems for Malaysian islands: Effects of interest rates, diesel prices and load sizes

Standalone diesel systems have been widely used on Malaysian islands due to the isolated locations of the islands. Nevertheless, the high diesel prices and the high cost of transporting diesel to islands cause the use of standalone diesel systems to be uneconomical. This study analyzes the feasibility of implementing PV (photovoltaic) systems as alternatives to standalone diesel systems by considering the effects of annual real interest rates, diesel prices and load sizes, using the HOMER (hybrid optimization of multiple energy resources) software. The results indicate that, at the ordinary diesel price of $ 0.61/L, low interest rates (0–3%) are desirable for the implementation of hybrid PV/diesel with battery systems over standalone diesel systems, regardless of the load sizes. Although different load sizes may affect the decisions on the implementation of PV systems at higher interest rates (6–9%), these effects become less pronounced as the price of diesel increases to $ 1.22/L or higher. Also, under high diesel prices, the choice of optimal system configurations obtained for small load sizes should be applicable for larger load sizes, albeit with different component ratings. Although the current study is intended for Malaysian islands, the findings can be generalized for other places with similar solar radiation levels.