Wednesday, April 1, 2015

Cost of solar power (49)

Lately I’ve been reading an authoritative report by the Frankfurt School – UNEP Centre and Bloomberg New Energy Finance on the renewable industry around the world.  The picture that emerges is of an unstoppable rise of solar power, mainly PV, with a compound average growth rate in investment of 29% from 2004 to 2014.  Worldwide in 2014, 46 GW of new solar capacity was added and the total investment in solar projects was USD 149.6 billion.

One topic that caught my eye in the report is the Levelised Cost of Electricity (LCOE) for a proposed 200 MW PV plant to be built for the Dubai Electricity and Water Authority, DEWA.  The quoted figure is USD 59.8 per MWh, which is said to be the lowest figure ever from an Independent Power Producer for a utility-scale PV project.  The project is due for completion in April 2017.

In this post, I’ll compare the above figure with the LCOE calculated using my standard methodology.

Another report shows this project was vigorously contested, with 49 bidders receiving qualification documents for the tender process.  Of those, 24 were invited to submit a bid and 10 proposals were eventually submitted.  In the end, a consortium led by Saudi firm ACWA Power and Spanish developer TSK was announced as the winner of the process.  The PV panels will be from First Solar.

Unusually, the cost of the project is crystal clear.  DEWA recently signed a contract for loans totalling USD 344 million, said to represent 86% of the cost of the project.  So the total project cost is USD 344 million/0.86 = USD 400 million, perhaps a suspiciously round number.

But, as is not infrequently the case, the annual output of the proposed system is not publicly available, so I need to use an estimate for the Capacity Factor for the project.  Dubai is at latitude 25°N and has a dry sunny climate.  It should be an excellent site for solar energy.  Let me assume the panels are fixed (I couldn’t find any technical details in reports I read) and that the Capacity Factor is 0.23, which represents an educated guess based on other projects I have examined.  So the annual output will be 0.23 × 200 × 365 × 24 = 403 GWh approximately.

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 DEWA project are as follows:

Cost per peak Watt              USD 2.00/Wp
LCOE                                     USD 113/MWh

The components of the LCOE are:
Capital           {0.094 × USD 400×106}/{403,000 MWhr} = USD 93/MWhr
O&M              {0.020 × USD 400×106}/{403,000 MWhr} = USD 20/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
(49)      USD 113 (DEWA, PV, April 2016)


You can compare results with my LCOE graphic.

Bearing in mind (1) the uncertainty with my estimate for the annual output and (2) when the projects are completed, the LCOE for the Dubai project is about the same as the best project I have analysed so far, namely the Amanecer project in the Atacama desert.  The cost per peak Watt for DEWA is less than for Amanecer, but the Capacity Factor is not as good.  As I wrote in my previous post, the Atacama desert has the world’s best solar resources.

Also, my LCOE estimate for the DEWA project (USD 113/MWh) is 89% greater than the LCOE quoted in the press reports.  How can this be?  Well, the financing of utility-scale projects is a secret process – who knows what interest rates are really applicable, whether there are hidden government subsidies and what taxation regimes are applicable?  That’s why I compare the LCOE for renewables projects using a standard set of assumptions, thereby giving the list of results shown above and in the LCOE graphic.

You can be sure that the price of large-scale PV is continuing to fall.  Fossil fuel proponents would do well not to ignore these obvious and mighty trends.

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