Thursday, December 5, 2013

Cost of solar power (40)

It’s been a few months since I blogged about the Cost of Solar Power.  Part of the reason is that I had a holiday in China in September, which was an overwhelming experience.  I came back convinced that China is on an unstoppably huge economic trajectory, which will of course have enormous implications for us in Australia.

I’ve also been very busy with R&D on solar-powered recuperated Brayton-cycle engines, a topic that I’ll discuss on another occasion.  Some details, but not recent or confidential results, are at www.sunoba.com.au.

In Australia the domestic PV market is in a calm and modestly-growing condition now that feed-in tariff schemes of various state governments have been wound back.  But there is one segment of the market that’s growing nicely – that’s related to medium-sized PV installations on commercial buildings, especially when the electricity produced can be used within the facility during the day.  Under such circumstances, my understanding is that the installations are economically attractive.

Let’s look at the economics of a recently-announced installation on a winery in Western Australia.

In July 2013, Ferngrove Winery opened a 228 kW PV system.  According to Solar Progress, the system has 696 high-efficiency SunPower 327-Watt panels with six 39 kW German-made Kaco inverters.  The project was half-financed by the federal government’s AusIndustry Clean Technology Food and Foundries Program, which announced that the total project cost was AUD 892,780.   On their website, Ferngrove state that the project will deliver 341 MWh of electricity per year.

I’ll analyse the Levelised Cost of Electricity (LCOE) for the Ferngrove Winery project using my standard assumptions:


  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.

For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.  Note that I am now using annual maintenance costs of 2% rather than 3% as in posts during 2011.

The results for the Ferngrove Winery project are as follows:

Cost per peak Watt              AUD 3.92/Wp
LCOE                                     AUD 298/MWh

The components of the LCOE are:

Capital           {0.094 × AUD 892,780}/{341 MWhr} = AUD 246/MWhr
O&M              {0.020 × AUD 892,780}/{341 MWhr} = AUD 52/MWhr

 
By way of comparison, LCOE figures (in appropriate currency per MWh) for all projects I’ve investigated are given below.  The number in brackets is the reference to the blog post, all of which appear in my index of posts with the title “Cost of solar power ([number])”:

(2)        AUD 183 (Nyngan, Australia, PV)
(3)        EUR 503 (Olmedilla, Spain, PV, 2008)
(3)        EUR 188 (Andasol I, Spain, trough, 2009)
(4)        AUD 236 (Greenough, Australia, PV)
(5)        AUD 397 (Solar Oasis, Australia, dish, 2014?)
(6)        USD 163 (Lazio, Italy, PV)
(7)        AUD 271 (Kogan Creek, Australia, CLFR pre-heat, 2012?)
(8)        USD 228 (New Mexico, CdTe thin film PV, 2011)
(9)        EUR 200 (Ibersol, Spain, trough, 2011)
(10)      USD 231 (Ivanpah, California, tower, 2013?)
(11)      CAD 409 (Stardale, Canada, PV, 2012)
(12)      USD 290 (Blythe, California, trough, 2012?)
(13)      AUD 285 (Solar Dawn, Australia, CLFR, 2013?)
(14)      AUD 263 (Moree Solar Farm, Australia, single-axis PV, 2013?)
(15)      EUR 350 (Lieberose, Germany, thin-film PV, 2009)
(16)      EUR 300 (Gemasolar, Spain, tower, 2011)
(17)      EUR 228 (Meuro, Germany, crystalline PV, 2012)
(18)      USD 204 (Crescent Dunes, USA, tower, 2013)
(19)      AUD 316 (University of Queensland, fixed PV, 2011)
(20)      EUR 241 (Ait Baha, Morocco, 1-axis solar thermal, 2012)
(21)      EUR 227 (Shivajinagar Sakri, India, PV, 2012)
(22)      JPY 36,076 (Kagoshima, Kyushu, Japan, PV, start July 2012)
(23)      AUD 249 (NEXTDC, Port Melbourne, PV, Q2 2012)
(24)      USD 319 (Maryland Solar Farm, thin-film PV, Q4 2012)
(25)      EUR 207 (GERO Solarpark, Germany, PV, May 2012)
(26)      AUD 259 (Kamberra Winery, Australia, PV, June 2012)
(27)      EUR 105 (Calera y Chozas, PV, Q4 2012)
(28)      AUD 205 (Nyngan and Broken Hill, thin film PV, end 2014?)
(29)      AUD 342 (City of Sydney, multiple sites, PV, 2012)
(30)      AUD 281 (Uterne, PV, single-axis tracking, 2011)
(31)      JPY 31,448 (Oita, PV?, Japan, to open March 2014)
(32)      USD 342 (Shams, Abu Dhabi, trough, to open early 2013)
(34)      USD 272 (Daggett, California, designed 2010)
(35)      GBP 148 (Wymeswold, UK, PV, March 2013)
(36)      USD 139 (South Georgia, PV, June 2014)
(37)      USD 169 (Antelope Valley, CdTe Pv, end 2015)
(38)      AUD 137 (Mugga Lane, PV, mid 2014)
(39)      AUD 163 (Coree, fixed PV, Feb 2015)
(40)      AUD 298 (Ferngrove Winery, July 2013)

Conclusion

You can compare results in the graphic below (click for a larger image), which expresses costs in USD/MWh at the exchange rates of 6 December 2013.   (Currencies deflated at 1.75% per annum, baseline date is end 2014.  Red is for solar thermal, blue for PV.  Filled-in circles denote completed projects, open circles denote announced projects.)

According to my methodology, the LCOE for the Ferngrove Winery project is not especially good.  It’s 83% higher than that for the large Coree project (number 39 on the list) announced in mid-2013, and 15% higher than the Kamberra Winery project (number 26 on the list) completed in mid-2012.

But Ferngrove had to pay only half the cost, which means the LCOE as they see it would be AUD 149 per MWh.  That would be economically worthwhile at present, and presumably will be much more so in the future when the world gets serious about climate change.