Wednesday, January 28, 2015

Cost of solar power (48)

According to charts available at this website, the Atacama Desert has the best solar resource in the world, as much as 3,500 kWh/m^2 per year.  Moreover this solar resource occurs in a region with significant electricity demand from mining and metal processing operations.  Couple that with all the usual drivers for renewable energy (decarbonisation, price reduction in PV systems, energy security, …) and it’s no surprise that there is now significant solar power generation activity in the Atacama Desert.

The 100 MW Amanecer PV plant in the Copiapo municipality was opened on 8 June 2014.  At the time of opening it was the largest PV plant in South America.  The 280 Ha installation is at an altitude of 1,165 m above sea level, comprises 310,000 Sun Edison panels and will provide 270 GWh of electricity to the local grid.  Construction took only 6 months.

The output of the plant will provide 15% of the local electricity demand of the Chilean steel group CAP, the largest iron ore and pellet producer on the American Pacific Coast.  The cost of the plant has been variously reported as USD 250 million and USD 260.5 million, the latter figure seeming the more authoritative.

We can now proceed to analyse the LCOE 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 Amanecer project are as follows:

Cost per peak Watt              USD 2.61/Wp
LCOE                                     USD 110/MWh

The components of the LCOE are:
Capital           {0.094 × USD 260.6×106}/{270,000 MWhr} = USD 91/MWhr
O&M              {0.020 × USD 260.6×106}/{270,000 MWhr} = USD 19/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, PV, July 2013)
(41)      USD 125 (Cerro Dominador, CST, mid 2017)
(42)      USD 190 (La Paz, PV, September 2013)
(43)      USD 152 (Austin Energy, PV, 2016)
(44)      AUD 304 (Weipa, PV, January 2015)
(45)      AUD 256 (Kalgoorlie-Boulder, PV, August 2014)
(46)      AUD 141 (new Moree Solar Farm, PV, one-axis tracking, December 2015)
(47)      AUD 184 (Brookfarm, PV, December 2015)
(48)      USD 110 (Amanecer, PV, June 2014

Conclusion

You can compare results with my LCOE graphic.

The LCOE for the Amanecer project is outstanding, the best I have analysed so far.  The installation cost per peak Watt (USD 2.61/Wp) is nothing special these days, but the annual output is superb.   I calculate the Capacity Factor as 270,000 / (100×365×24) = 0.308.
 
That’s what one should expect with the best solar resource in the world!

Monday, January 26, 2015

Real cost of coal-fired power (update)


In April 2011, I made a blog post about the real cost of coal-fired power, particularly when the social cost of carbon (SCC) is included.  Since then, there have been a couple of big developments – (1) the cost of coal has fallen (not increased as I expected in 2011) and (2) there is increasing economic evidence that the SCC should be higher.  It’s time for me to update the previous post.
 
Let’s take the cost of coal first of all.
 
Here’s the cost (USD/tonne) of Australian thermal coal, 12,000 BTU/lb (27.912 GJ/t), less than 1% sulphur, 14% ash, FOB Newcastle or Port Kembla (source).    The past few years have not been good for coal miners, even allowing for the recent fall in the Australian dollar, and the price of coal is still in a downtrend.
 
 
What about the SCC?

In evaluating the SCC, the sort of issues to be considered are
  • land disturbance
  • methane emissions from mines
  • carcinogens
  • public health burden of communities
  • fatalities due to coal transport
  • emissions of air pollutants from combustion
  • effects of mercury emissions (lost productivity, mental health, cardiovascular)
  • climate damage from combustion emissions (CO2, N2O, soot)
Let me now refer you to a recent excellent article by Dana Nuccitelli.  Citing work by Moore & Diaz of Stanford University, he argues the costs of climate change have been underestimated because climate change will slow the rate of GDP growth in developing countries.  Moore & Diaz argue that the SCC is between USD 70/t and USD 400/t depending on assumptions in their model, with a best estimate of USD 200/t CO2.

(Meanwhile, the US Government has recently set the SCC as USD 37/t, increased from USD 22/t and accompanied by outraged protest from the Republican party.)

I’ll now calculate the Levelised Cost of Electricity (LCOE) for coal-fired power for different Capacity Factors and different Social Costs of Carbon.  This will be done under 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),
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.


Given the risk of future stranded assets and hence the difficulty in obtaining finance for new coal-fired power generation (see this reference to Bloomberg), the assumed cost of finance above is probably on the low side.  
The LCOE calculations are made under the following additional assumptions

  • specific capital cost Rankine-cycle steam plant: AUD 1,500,000/MW
  • thermodynamic efficiency: 0.39
  • cost of coal: USD 65/t currently equivalent to AUD 81.25/t
  • fraction of coal that is carbon: 0.737
  • energy content of coal: 27.9 GJ/t
The LEC is then calculated for
  • SCC in the range AUD 0 to AUD 200 per tonne
  • Capacity Factors in the range 0.7 to 1.0 (the Capacity Factor is the fraction of time that the generator is active)
Here are the updated results for the LCOE in AUD per MWh (click for a clearer image):





For these parameters, 894 kg CO2 is emitted per MWh.  So, as a rule of thumb, every $ increase in the SCC translates to almost one extra $ on the LCOE when expressed in $/MWh.
 
Conclusion
 
If the official US SCC of $37/t were to be adopted in Australia, the cost of coal-fired power would be increased by about $35/MWh.  If the best-estimate (USD 200/t) for the SCC is applied, then coal-fired power would be completely uncompetitive with renewable forms of energy such as wind and solar.  The risk of stranded assets would further weaken the case for coal-fired power generation.