Tuesday, November 18, 2014

Cost of solar power (46)

The Australian federal government is currently doing everything it can to destroy the local renewables industry.  That’s a scarcely believable situation, but it is true.  It merely reflects the very close relationship between the government and the fossil fuel industry in this country.

Even in gloomy times like the present, however, an occasional nugget of good news comes along.  In this case, it’s a large nugget!  Please read on …

Way back in 2011 when the current opposition was in government, there was a federal program called Solar Flagships.  The idea was to use government funds to provide substantial funding for large solar installations.  Early success was expected, to be followed by rapid build-up of a sunrise industry.

That didn’t happen.  The Solar Flagships program was not successful.  The targets were too ambitious, markets were not ready, human capital was not able to bring projects to a successful conclusion, power take-off agreements weren’t arranged and entrenched inertia against renewables was too strong.  A review of the experience is available here.  It is very blunt and makes fascinating reading.

One of the successful Solar Flagship proposals was the Moree Solar Farm, which I blogged about here.  It was for a utility-scale project (150 MW, AUD 923 million) at a good site in northern New South Wales, and was announced in June 2011.  My estimate for the Levelised Cost of Electricity (LCOE) was AUD 263/MWh.  (Please note, this is an adjusted figure, arrived at using 2% annual O&M cost, which is my current practice.)

The Moree Solar Farm proposal limped along in a near-death state for three years until just recently a revised proposal was announced for which funding was committed.  This project is going to go ahead as announced by ARENA here.

Construction and operation of the system will be carried out by Moree Solar Farm Pty Ltd, a subsidiary of the Spanish company FRV.  Construction will take place over 2014-15, so let’s assume that the launch will be in December 2015.

The new project will have peak power 56 MW grid-connected AC (70 MW DC ex-modules).  The total project value is AUD 164 million, of which ARENA is providing AUD 101.7 million.  The total estimated output over the 30-year lifetime of the system is 4,000 GWh, or 133.3 GWh per year.

From a technical point of view, the system will use polycrystalline modules and a single-axis tracking system.  I calculate the Capacity Factor will be 1000 × 133.3 / (24 × 365 × 56) = 0.272.  That is a little less than I expected for a system with single-axis tracking, but let’s stay with the estimate.

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 new Moree project are as follows:

Cost per peak Watt              AUD 2.9/Wp
LCOE                                     AUD 141/MWh

The components of the LCOE are:
Capital           {0.094 × AUD 164×106}/{133×103 MWhr} = AUD 116/MWhr
O&M              {0.020 × AUD 164×106}/{133×103  MWhr} = AUD 25/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)


You can compare results with my LCOE graphic.

In the space of just over three years, the LCOE for projects at Moree fell from AUD 263 to AUD 141 per MWh, a 47% reduction (actually more if inflation is taken into account).  I think that would accord with the expectations of most observers.

The LCOE for the new Moree project can be compared with recent large installations in Australia on the list above: Nyngan & Broken Hill (AUD 205), Mugga Lane (AUD 137) and Coree (AUD 163).

What will be the LCOE in three years?  It seems to me that the future – in which utility-scale PV installations out-compete new-build fossil fuel projects – is nearly with us.

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