Monday, January 30, 2017

Cost of solar power (66)


This will be a first for me – I’m going to analyse the Levelised Cost of Electricity (LCOE) for a large PV installation in Cixi, China, 150 km south of Shanghai.  Because of China’s rapid industrialisation and cheap labour, I’m expecting the LCOE will be somewhere near the best in the world to date, but let’s see.

PV Magazine has the story, also reprinted in RenewEconomy.

The PV installation is 200 MW, presumably AC to grid.  The panels are mounted over a 299.5 Ha fish farm, “deliberately spaced far apart for enough sunlight to penetrate the water, which is critical for the growth of the fish beneath the surface”.  From the picture accompanying the article, it looks like the panels are fixed.

The project is expected to generate 220 GWh of electricity per annum (roughly enough for 100,000 homes) and cost 1.8 billion yuan (or USD 262.6 million at today’s exchange rate).  Construction started in late June 2016 and finished in December 2016.

The Capacity Factor for the Cixi project is 220,000 / (200 * 365 * 24) = 0.126, which is surprisingly low, given that the latitude is about 30°N and the solar resource should be good.  The CF value is consistent with fixed panels.

Let me now estimate the LCOE for the Cixi 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% of capital cost. 

The results are as follows:

Cost per peak Watt              CNY 9/Wp
LCOE                                     CNY 933/MWh

The components of the LCOE are:
Capital           {0.094 × 1.8 × 109}/{220,000 MWh} = CNY 769/MWh
O&M              {0.020 × 1.8 × 109}/{220,000 MWh} = CNY 164/MWh

Conclusion

At the exchange rate of CNY 6.85 to the USD, the LCOE for the project is USD 136/MWh.  That’s quite a lot more expensive than recent big projects I’ve analysed as you can see from the graphic below.  The Capacity factor for the Cixi project is poor, hence the annual output is not as large as anticipated, and hence the LCOE is not up to international best practice.  I’m surprised.

The graphic shows my LCOE results in USD/MWh over eight years at today’s exchange rates (AUD = USD 0.75431, EUR = USD 1.06928, JPY = USD 0.00868, GBP = USD 1.25437) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made my LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

Sunday, January 15, 2017

Cost of solar power (65)


It’s been six months since I blogged about the cost of PV projects, and I suspect that the cost of solar power has continued to fall rapidly.  Let’s see whether that’s true by estimating the Levelised Cost of Electricity (LCOE) for the Sun Metals solar PV plant, 15 km south of Townsville in Queensland, Australia.

PV magazine has the story.  The 100 MW installation will be complete in Q1 2018 and will exploit a connection to Sun Metals’ existing substation.  The project features one-axis tracking, thin film CdTe panels from First Solar and is part of a major upgrade of Sun Metals zinc operations. 

PV magazine states the cost of the project is AUD 155 million, but doesn’t explicitly mention the Capacity Factor.  So, let me use data from the Australian Renewable Energy Agency (ARENA), which says that the average Capacity Factor for one-axis tracking installations in Queensland is 0.28.  (By way of defence of this CF, it should be noted that the solar resource near Townsville is excellent, even if it doesn’t quite match that of the best locations in the world, such as Chile.)

Under that CF assumption, the annual output of the Sun Metals project would be 0.28 × 365 × 24 × 100 = 245,280 MWh per year.

Let me now estimate the LCOE for the Sun Metals 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% of capital cost. 

The results are as follows:

Cost per peak Watt              AUD 1.55/Wp
LCOE                                     AUD 72.04/MWh

The components of the LCOE are:

Capital           {0.094 × 155 × 106}/{245,280 MWh} = AUD 59.40/MWh
O&M              {0.020 × 155 × 106}/{245,280 MWh} = AUD 12.64/MWh

Conclusion

Wow, the LCOE of AUD 72/MWh is a stunning figure for Australia and not far behind global best practice.  At today’s foreign exchange rate of AUD 1.00 = USD 0.75, my LCOE estimate is USD 54/MWh, which is way below my previous best result for Australia. 

As shown in the LCOE graphic below, the cost of solar power continues to fall rapidly.  The graphic shows my LCOE results in USD/MWh over eight years at today's exchange rates (AUD = USD 0.7495, EUR = USD 1.064, JPY = USD 0.00873, GBP = USD 1.2179) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made the LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

It’s clear we are in the midst of an amazing technological/industrial revolution, even if this is not widely appreciated by the media in this country.  One might well ask how much longer this decline in the LCOE will continue!