Friday, December 18, 2015

Levelised cost of pumped hydro


RenewEconomy had an interesting story yesterday about plans to develop a pumped hydro storage facility at an abandoned gold mine in central Queensland.  Further details are available in this media release from the Australian Renewable Energy Agency, ARENA, which has given a grant of AUD 4 million to help with a feasibility study for the project.

In brief, the facility is to be located at the abandoned Kidman gold mine, 270 km north-west of Townsville.  The mine site has two deep pits 400 m apart, there is plenty of water available, there is an existing 132 kV transmission line connecting the site to a substation near Townsville, and there is plenty of infrastructure already on site.  This project will use existing features of the landscape for pumped hydro generation without need for extensive earthworks.

The best details that I could find about the project are at this web page for the proposers, Genex Power.  From that we read the estimated cost is AUD 282 million, the peak power output will be 330 MW and the project will deliver 1,650 MWh of energy in a single cycle.  To do this, water is pumped from one pit to the other with an average head of 190 m; in so doing, water level in the lower pit will change by 44 m and in the upper pit by 8 m. 

From the point of view of capital costs, this project will deliver 1,650 MWh for AUD 282 million; that is AUD 170,909 per MWh installed capacity, or AUD 171 per kWh installed capacity.  That’s deliverable now, without need for R&D or assumptions about the likely decrease in cost of battery storage.  One could expect the project would have a long lifetime, far longer than the life of batteries.

As an aside, 1,650 MWh divided by 330 MW gives 5 hours, a convenient round number for the recharge/discharge time of the system.

What then is the value of this storage?  At present, the main opportunity is to use off-peak power (coal generated) at night to recharge the upper dam, and then to provide power during periods of peak demand in the rest of the day.  There would also be some value in ancillary services to the grid such as reserve generation capacity and frequency control.

In future, as the fraction of intermittent generation increases in the grid, especially from PV, the value proposition will switch around.  The upper pit will be charged during the day and discharged at night.  I imagine hefty simulations will be required to understand and quantify this likely transition in usage, hence the need for a substantial feasibility study.

In November 2015, I blogged about the Levelised Cost of Electricity storage.  In that post, I presented a standard methodology to calculate the value of energy stored in an operational sense.  That methodology is used in the cases below.

For a best-case scenario, let’s assume the cost of capital is 6%, the project delivers the full 1,650 MWh on a daily basis for 40 years, and that the round-trip efficiency is 100%.  Also assume that the cost of maintenance is 1% of the capital cost.  Then the Levelised Cost of Electricity Stored is AUD 36 per MWh.

For a less favourable scenario, let’s assume the cost of capital is 8%, only half of the full capacity is used each day for 25 years, the round-trip efficiency is 90% and the cost of maintenance is 2% of the capital cost.  In this case, the Levelised Cost of Electricity Stored is AUD 118 per MWh.

The feasibility of this project – or not – will rest on a raft of assumptions about present and future demand, cost of capital, cost of O&M, competition in the market place, etc.  Nevertheless, if existing features of the landscape can be used, it seems to me that pumped hydro storage is much cheaper than battery storage today, and will continue to be cheaper for many years in the future.

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