Wednesday, April 8, 2015

Cost of solar power (50)

As mentioned in the two previous posts, I’m currently reading an authoritative report by the Frankfurt School – UNEP Centre and Bloomberg New Energy Finance on the renewable industry around the world. 

From my standpoint, one obvious observation from the report is how out-of-step Australia is with the rest of the world.  There are immensely powerful drivers for growth of renewables in the global economy:
  • energy security
  • new-build infrastructure in developing countries
  • pollution reduction
  • the need to reduce CO2 emissions

The effect of those drivers can be seen in the chart below, which is based on data in Figure 3 of the linked report.  It shows global trends in annual investment in renewables from 2004 to 2014.  The figures in brackets in the legend are the compound average growth rate of global investment in each technology from 2004 to 2014.

So, it is absolutely crystal clear – the global economy is investing heavily in renewables, particular solar and wind.

Is this trend likely to continue?  I refer you to a detailed article by Andy Skuce on the Skeptical Science website today.  His arguments cannot be summarised simply in one or two charts, but the crucial result is that current rates of CO2 emissions are absolutely incompatible with the need to keep the global temperature rise in industrial times to less than 2°C.  Much more investment in renewables will be required than is occurring at present.  A logical conclusion is that the investment trends shown in the chart above are likely to strengthen.

How does the Australian federal government act in the face of these trends?  The government says that switching to renewables will “clobber” our economy, that coal (and only coal!) will lift the developing world out of poverty, and that we should extract and burn every last kilogram of coal that we can. 

However, the price of coal as shown in the chart above (source) does not inspire confidence.  After a long stable period, there was a surge in the price from 2004 onwards.  Helped along by stimulus packages in various countries, notably China, the price surge lasted through the Global Financial Crisis in 2007 up until 2010, at which time the price entered a long steep decline.  Investment in coal does not look like a good strategy to me.

Well, that’s my rant for the day.  Let me now analyse the Ashalim 1 solar thermal plant in Israel.

The Ashalim solar project is based in the Negev desert in Israel.  It’s a 121 MW plant, now under construction, and due to be finished in 2017.   The project is being carried out by Megalim Solar Power, a joint venture between Alstom (25.05%), BrightSource (25.05%) and NOY Infrastructure and Energy Investment Fund (49.9%).

The technology is very similar to the Ivanpah Project in the USA (also involving BrightSource) – that is direct steam generation via heliostats and tower, with no thermal storage.  The Capacity Factor of Ivanpah is 31% (source), which implies the annual output of Ashalim will be 0.31 × 121 × 24 × 365 MWh, or approximately 330,000 MWh per year.  Back-up heating by gas is available but capped to 15% of the total output.  The cost of the project is reported as USD 821 million.

We can now proceed to analyse 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 Ashalim are as follows:

Cost per peak Watt              USD 6.78/Wp
LCOE                                     USD 284/MWh

The components of the LCOE are:
Capital           {0.094 × USD 821×106}/{330,000 MWhr} = USD 234/MWhr
O&M              {0.020 × USD 821×106}/{330,000 MWhr} = USD 50/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)
(50       USD 284 (Ashalim, solar thermal, 2017)


You can compare results with my LCOE graphic.

On this analysis, the LCOE for the Ashalim plant is rather expensive, about 2.3 times that for Cerro Dominador in Chile (number 41 in the list above), also a solar thermal plant which is due for completion around the same time.  I note that some of the project cost for Ashalim includes construction of a natural gas pipeline for back-up heating, but I doubt that omission of that cost would lower the LCOE by more than 10%. 

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