Sunday, September 27, 2015

Cost of solar power (58)


For some time now, residents of South Australia have been agitating for construction of a Concentrating Solar Thermal (CST) power station at Port Augusta to replace two old coal-fired power stations.  The owner of the coal-fired stations, Alinta Energy, has now released reports describing the financial viability of the project.  These reports were prepared by Alinta with support from the Australian Renewable Energy Agency and the Government of South Australia.

What do the reports say about the Levelised Cost of Electricity (LCOE) for this project?  And why is Alinta walking away from this project that could be built within two years?

As a starting observation, let me say that the Alinta reports are very instructive.  They have been carefully prepared with input from numerous serious players in the industry.  The base case is for a Rankine-cycle 50 MW CST power station at nearly 40% thermal-electrical efficiency and based on heliostat/tower technology with molten salt storage for 15 hours.  Port Augusta has good solar resources and Alinta’s estimate for the annual output is 301 GWh, which corresponds to a Capacity Factor of 301,000 /(50 × 365 × 24) = 0.687.

The problems, however, come in two ways.  First, the Port Augusta CST plant would be expensive.  Alinta’s base estimate, which I will use here, is for a cost of AUD 577 million.  In part, that reflects the recent collapse in the Aussie dollar, thereby making components such as the power block and molten salt storage more expensive.  Another contributing factor is that the Alinta price estimate includes a hefty AUD 68 million contingency, in addition to Balance of Plant costs of AUD 118 million and EPC/owner costs of AUD 53 million.  The estimated cost for the heliostat field is AUD 138 million (AUD 150 per square metre), for the receiver AUD 86 million, for the tower AUD 21.5 million and for the molten salt storage AUD 83 million.  The steam turbine package was estimated at AUD 29 million.

The second big problem for Alinta is that there is currently an oversupply of generating capacity in South Australia.  So, the price achieved for the output would be the electricity wholesale pool price in South Australia, which is not particularly high, even allowing for variations between peak and off-peak prices, as Alinta did.  The study made no allowance for a price on carbon, nor for any other government support.

Let me now estimate 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.  It should be noted that the Alinta financial model is more detailed than mine.

Note that I am now using annual maintenance costs of 2% of capital cost rather than 3% as in posts during 2011.  As an aside, the Alinta study includes a sophisticated estimate for the annual maintenance costs, namely AUD 8 million, or 1.4% of the capital.  That’s less than my 2% of capital, but I won’t change my methodology at this stage.

The results for the proposed Port Augusta CST installation are as follows:

Cost per peak Watt              AUD 11.54/Wp
LCOE                                     AUD 218/MWh

The components of the LCOE are:
Capital           {0.094 × 577×106}/{301,000 MWhr} = AUD 180/MWhr
O&M              {0.020 × 577×106}/{301,000 MWhr} = AUD 38/MWhr

Conclusion

The LCOE for the proposed Port Augusta CST plant is AUD 218 per MWh.  As can be seen from my post summarising all projects I have examined, the Port Augusta LCOE is significantly more than my estimates for recent PV projects.  Perhaps the best comparisons are with other recent CST projects.  In USD at today’s exchange rate, the LCOE for Port Augusta would be USD 153 per MWh, whereas Cerro Dominador is USD 125/MWh, Ashalim is USD 284/MWh and Xina Solar One is USD 256/MWh.

I should also give the LCOE resulting from Alinta’s sophisticated financial model based on a 12% internal rate of return (IRR); that’s AUD 201/MWh.  The chosen value for the IRR explains why Alinta is walking away from this project – on their 12% IRR, the project has a negative net present value.  Simple really; at the present time and without a lot of government support, this project would not get board approval.

Tuesday, September 15, 2015

LCOE results and graphic

This post summarises my results for the Levelised Cost of Electricity (LCOE) for 57 solar projects in various parts of the world.

In the graphic below, red denotes solar thermal, blue denotes PV.  Open circles denotes projects that have been announced but not completed (to my knowledge).  Filled-in circles denote completed projects.  The LCOE is expressed in US dollars at today’s exchange rates (16 September 2015).  Currencies are depreciated/appreciated by 1.0175 (1.75%) per annum using today's date as the baseline.

The current exchange rates are (in USD):
EUR 1.1300
AUD 0.7125
JPY 0.00833
GBP 1.54005
CAN 075441
INR 0.01505

(please click graphic to see a bigger image)




I need to sound a note of caution in interpreting this graphic.  When projects are announced, the project price is also announced, and that’s the information I’ve used.  If the project is a small one, then it doesn’t matter much that the opening date for the project is different to the date at which the price is announced.  In some cases, however, the project will take a long time to complete, so it’s inconsistent to use the announced price for the project.  An example is Cerro Dominador, announced in February 2014 and not due to open until mid-2017.  The announced price is in 2014 dollars, whereas the datum on the graphic has been plotted as if the price is in deflated 2017 dollars.  So the results for Cerro Dominador look a bit better than they actually are.

Don’t allow these subtleties to obscure the overall trend, however, which is that solar power is obviously getting cheaper, both for solar thermal and for PV.

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])”.  The date given in this list is the completion date of the project (or estimate thereof).

(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 & 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
(49)      USD 113 (DEWA, PV, April 2016)
(50)      USD 284 (Ashalim, solar thermal, 2017)
(51)      USD 256 (Xina Solar One, solar thermal, 2017)
(52)      AUD 129 (Barcaldine, PV, one-axis, March 2017)
(53)      AUD 139 (Nyngan & Broken Hill, fixed PV, late 2015)
(54)      AUD 240 (DeGrussa, PV/batteries, early 2016)
(55)      AUD 364 (Uterne Stage 1, PV, one-axis tracking, July 2011
            AUD 230 (Uterne Stage 2, PV, one-axis tracking, August 2015)
(56)      INR 4,034 (Cochin Airport, PV, August 2015)
(57)      AUD 136 (Lilydale, PV, one-axis tracking, September 2017)


Monday, September 14, 2015

Cost of solar power (57)


Overseas readers of this blog might be interested to read that Australia woke up to a new Prime Minister this morning.  As a result of an internal coup in the parliamentary ranks, Tony Abbott was replaced by Malcolm Turnbull as parliamentary leader of the Liberal Party.  Today Turnbull was sworn in as Prime Minister.

However, let me get back to regular topics.  RenewEconomy had a story yesterday about a proposed 150 MW PV facility at Lilydale, so I’ll run the numbers on that.

Construction on the AUD 400 million project is expected to start in ‘2016 to 2017’, require 18 months and create up to 200 construction jobs.  The 400 Ha site is more than 900 km north-west of Brisbane, capital of the State of Queensland.  This is coal-mining country, so it’s a nice twist that it will become home to a major PV installation.  The solar resource is excellent.

The new facility is to be developed by global renewables giant FRV.  It will use polycrystalline PV panels with single-axis tracking.  The one piece of information not mentioned in RenewEconomy’s report is the annual output, but let me assume the same Capacity Factor as the Barcaldine PV project, in the same general location, and also with one-axis tracking.  That CF was 0.256, which implies annual output for Lilydale of 0.256 × 150 × 365 × 24 = 336,384 MWh per year.

We can now estimate for the Levelised Cost of Electricity (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 Lilydale installation are as follows:
Cost per peak Watt              AUD 2.67/Wp
LCOE                                     AUD 136/MWh

The components of the LCOE are:
Capital           {0.094 × 400×106}/{336,384 MWhr} = AUD 112/MWhr
O&M              {0.020 × 400×106}/{336,384 MWhr} = AUD 24/MWhr

Conclusion

The LCOE for Lilydale (AUD 136 per MWh) is similar to that for the proposed Barcaldine project (AUD 129 per MWh).  The Lilydale project cannot compete however with the best I have analysed –  Cochin Airport (link).

Overall, the trend is clear.  The technology is improving, the prices are coming down.  The path towards the clean energy revolution is irresistible, and we should note today that a political impediment in Australia to this energy revolution has been removed from office.

I need to update my LCOE graphic and provide a link to all of my LCOE results.  I’ll do that tomorrow.