Monday, February 11, 2013

BRRIMS solar thermal power

Since mid 2012, I’ve been working on a new concept for solar thermal power generation.   Just at the moment most details are confidential, but you can see some public information at

Sunday, February 10, 2013

Cost of solar power (33)

Today’s edition of RenewEconomy carries a story about how the Greens have a plan to convert Western Australia into 100% renewable electricity within two decades.  The plan builds on previous studies in Australia, including Beyond Zero Emission’s stationary energy plan.

This follows on a report last week from Bloomberg New Energy Finance, which gave comparisons for various power generation scenarios, both with and without the cost of carbon.  The figures by BNEF show that in 2012, the LCOE (Levelised Cost of Electricity in AUD/MWhr) for various technologies are as follows:
  • wind 80-120
  • large-scale PV 160-230
  • solar thermal 180-360
  • biomass 140-230
  • landfill gas 70-90
  • coal 90-170 (140-240 with cost of carbon included)
  • natural gas CCGT 100-120 (125-140 with cost of carbon included)
  • natural gas OCGT 195-230 (230-250 with cost of carbon included)
[Those figures are as I have read them off a chart printed by RenewEconomy.]

The BNEF results are remarkable.  For wind-power, the best sites already give a superior LCOE to coal-fired power stations, albeit without the benefit of dispatchability. 

Moreover it is entirely reasonable to assume the renewables LCOE will come down with time.  For fossil fuel generators the cost will go up with time.

The plan of the WA Greens is also useful because it gives additional estimates for current costs of large-scale renewable generation technologies, specifically wind, solar thermal with storage, solar PV with tracking, wave-power and geothermal.  Here are the details:

Wind (2,500 MW project)
Annual output: 6,242 GWhr/yr
Capital cost:  AUD 2,530/kW (specific), AUD 6.3 billion (project)
Capacity Factor: 0.38 (maximum), 0.29 (project)
LCOE: AUD 91/MWhr (at rated CF), AUD 121/MWhr (at project CF)

Solar thermal with storage (3,500 MW project)
Annual output: 9,658 GWhr/yr
Capital cost:  AUD 8,308/kW (specific), AUD 29.1 billion (project)
Capacity Factor: 0.42 (maximum), 0.32 (project)
LCOE: AUD 187/MWhr (at rated CF), AUD 249/MWhr (at project CF)

Solar PV with tracking (1,300 MW project)
Annual output: 2,050 GWhr/yr
Capital cost:  AUD 3,860/kW, AUD 5.0 billion (project)
Capacity Factor: 0.24 (maximum), 0.18 (project)
LCOE: AUD 147/MWhr (at rated CF), AUD 196/MWhr (at project CF)

Wave (500 MW project)
Annual output: 1,150 GWhr/yr
Capital cost:  AUD 5,900/kW, AUD 3.0 billion (project)
Capacity Factor: 0.35 (maximum), 0.26 (project)
LCOE: AUD 222MWhr (at rated CF), AUD 296/MWhr (at project CF)

Geothermal (hot dry rocks, 300 MW project)
Annual output: 1,636 GWhr/yr
Capital cost:  AUD 7,000/kW, AUD 2.1 billion (project)
Capacity Factor: 0.83 (maximum), 0.62 (project)
LCOE: AUD 156/MWhr (at rated CF), AUD 208/MWhr (at project CF)

Over the past two years I’ve estimated the LCOE for 32 large-scale solar power projects around the world.  I’ve done this with my own methodology (explained immediately below).  The burning question is: how does my methodology compare with data from the plan of the WA Greens?  That’s the question answered in this post.
Here are my customary assumptions to estimate the Levelised Cost of Electricity (LCOE) for the project.  The assumptions are:
  • 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.
For the wind project, my calculation can be summarised as follows:
Project : wind (at studied CF)
LCOE             AUD 115/MWhr
The components of the LCOE are:
Capital  {0.094 × AUD 6,300×10^6}/{6,242,000 MWhr} = AUD 95/MWhr
O&M     {0.020 × AUD 6,300×10^6}/{6,242,000 MWhr} = AUD 20/MWhr
The calculation proceeds similarly for the other projects.
My results and the comparisons to the Greens figures are as follows.  These are LCOE figures at the estimated CF for the project, not the rated CF.  All figures in AUD/MWhr.
Solar thermal
Solar PV
Two of those comparisons (wind, wave) are very close; the other three differ substantially.
What’s going on here?
Although my LCOE methodology is very simple, in the past I’ve found it to give good comparisons with other published LCOE figures.  I don’t know the LCOE formula used in the Greens study, but I’m suspicious for example that my LCOE is 38% more than the Greens for solar thermal with storage, yet 29% less for geothermal.
I’m also suspicious about some of the other parameters in the Greens study.  For example, is geothermal really going to have less specific capital cost than solar thermal with storage, and yet give a CF that is almost twice as high?  I don’t buy that!  (And if so, why is the Greens LCOE for solar thermal only 20% higher than for geothermal?)
As further data becomes available, I’ll continue to benchmark my LCOE methodology against others.  In the interim, all that I can advise is to treat the Greens figures with due caution.

Wednesday, February 6, 2013

Solar power: big trends, rapid changes

Living in an isolated country with a small population, Australians should be used to the occasional huge shock from the outside world.  Whether helpful or terrible, these shocks will always be transformative. 

As an example of a traumatic shock, think what our indigenous peoples received in 1788.  As an example of a helpful shock, think of the growth of East Asian economies in recent decades.  All would agree that the Chinese demand for our raw materials is transforming our economy; most would agree the changes are for the better.  Or if we can’t agree on the merits of that transformation, think about developments in telecommunications and the internet, in which the outcomes of R&D and commercialisation done overseas have been rapidly adopted in Australia.

My contention is that another big shock is coming.  It’s renewable energy, and solar power in particular.

With respect to renewable energy, many influential Australians wear blinkers, just like a horse that must not be frightened.  Australia has about 9% of the world’s coal reserves and perhaps 1.5% of its natural gas.  An extractive national mentality is reinforced by immense deposits of iron ore and major resources of other minerals – gold, bauxite and copper to name just a few.  That really shapes the nature of our economy, our politics, our media, even our ethos.

Internationally, there are several drivers for development of renewable energy – these include access to energy, energy security, a desire to avoid costly imports, development of local industry and concerns about anthropogenic climate change.

In Australia, we have ready access to energy, energy security is not a problem, we have a trade surplus in energy, and our weak manufacturing sector doesn’t concentrate on elaborately transformed manufactures such as wind turbines and PV panels.   As for climate change, if your stomach is strong enough you can visit Australian websites like to see widely-held denialist views.

Most of those international drivers for renewable energy don’t apply here, so you wouldn’t expect us to be leading the race to produce and install renewable energy devices.  And we aren’t! 
But those drivers do apply elsewhere. 

I’ll discuss two examples, the first being Germany.  There, winters are cold and expectations high; the population demands access to energy.  Although Germany has substantial deposits of brown coal, the bulk of their fossil fuel energy comes from regimes that are less than fully reliable.  Naturally German economists would prefer that foreign exchange was not spent on expensive fossil fuel imports.  Germany has a wonderful manufacturing sector able to produce any sort of renewable energy device.  And lastly, the Green movement is strong, resulting in a national consensus to eliminate nuclear energy and reduce CO2 emissions.  Little wonder that cool-headed, far-thinking Germany is a world leader in renewable energy.  By the way, please bear in mind that the ruling coalition is on the conservative side of politics.

My second example is China.  Again the population wants access to energy for industrial development and human comfort.  In 2008, China had 14% of the world’s coal reserves, but these are being used rapidly.  The Chinese must cope with the challenge of securing energy in competitive world markets.  They want to use their foreign exchange in a more strategic way than spending on energy imports.  They are definitely building up manufacturing capabilities in high-technology goods and elaborate manufactures.   And, lastly, the population is surely heartily sick of growing environmental degradation, such as the recent instance of smog from coal-fired power plants swamping Beijing.

Note that China has a command economy in which the leadership takes strategic decisions and implements them in five-year plans.  In a decade or so, China will have the biggest economy in the world.  They will produce goods that will shape activities in the rest of the world.  Would you like to guess what they are investing in today?   Amongst others, that would include factories to produce wind turbines and PV panels.  That will be followed by investments in batteries and perhaps solar thermal power.

Let’s discuss a few facts about PV.

As manufacturers become more skilled and operate on a larger scale, the price of goods falls.  With PV modules, the price per Watt in constant dollars is falling by 22% for each doubling of cumulative production.  That trend has held for more than 30 years and is still intact. 

Together with supportive government policies, this has led to an explosion in annual PV installations, which grew worldwide at an average rate of 44% per year over 10 years from the start of this century.  Worldwide, 28 GW of grid-connected PV was installed in 2011.  You don’t need to be a mathematician to work out what will happen if these growth rates hold for a few more years, as would seem to be both technically achievable and likely in view of strategic decisions taken in boardrooms in countries like Germany and China.

What are the implications for Australia?

Clearly, the price of PV panels will continue to fall.  This will happen at the same time that the cost of electricity from the grid goes up.  Already we have “socket parity”, in which PV electricity is comparable in price with grid electricity provided it can be used at the time of generation.    If there are beneficial developments with batteries, then the situation for PV will become even more favourable.  Consumers will simply abandon the grid.

Such developments will take place even quicker in China.  You can expect the Chinese to make herculean efforts to reduce fossil fuel consumption and clean up their environment.  The fervour will spread to other big Asian economies.  A big export market for Australia is at risk.   Assets that feature strongly on our stock market and superannuation plans run the risk of being stranded.  In this scenario, a large sector of our economy would be destroyed, jobs lost and wealth evaporated.

Note also that an explosion of installations for wind-power started about 5-10 years earlier than for PV, and might well be followed about 5-10 years later than for PV by solar thermal power.

Let us also heed the warnings of climate scence.  Anthropogenic climate change is happening, in some ways faster than predictions of the Intergovernmental Panel on Climate Change.  A substantial fraction of the planet’s carbon reserves must be left unburnt if we are to keep temperature increases to a tolerable level.  When the effects of climate change are visible enough, governments around the world will take decisive action to eliminate CO2 emissions.  Moreover, insurance companies will simply refuse to write policies for protection against climate change.  Those developments will strengthen conclusions drawn above about stranded assets.

If you are interested in reading further about these trends, I commend A Global Forecast for the Next 40 Years by Jorgen Randers.  It’s an extremely thought-provoking book.

To conclude with an automotive analogy, the Australian economy is accelerating along a dead-end road, pedal to the metal.  Opinion-shapers in Australia can’t see the big problem ahead, or perhaps they are unwilling to look.  To persuade the electorate to stop and turn around will not be easy, but it is surely preferable to take action through enlightened self-interest than to have change forced on us by the outside world.

This is the text of a speech delivered to the SEARCH Foundation on 7 February 2013.