Thursday, February 9, 2017

Cost of solar power (67)


Three weeks ago, I analysed the Levelised Cost of Electricity (LCOE) for the Sun Metals utility-scale PV project near Townsville, Queensland.  The LCOE was excellent, AUD 72 per MWh according to my standard assumptions.

Today, I’ll analyse another recently-announced PV installation in the same region, namely the Ross River Solar Farm.  As with Sun Metals, the Ross River project will have single-axis horizontal tracking, but now the panels will be crystalline PV as opposed to thin-film Cd-Te.  According to the project developers, the site is a 202 Ha disused mango farm, the peak capacity will be 135 MW and the cost is AUD 225 million.  Construction will commence in the first quarter of 2017 and is expected to take 12 months.

The output from Ross River Solar Farm is the subject of a power purchase agreement with EnergyAustralia as part of its obligations under the federally mandated Renewable Energy Target.  I’ll estimate the annual output using the same Capacity Factor as for the Sun Metals project, namely 0.28.  A defence of that CF is given here.  The annual production is therefore estimated as 0.28 × 365 × 24 × 135 = 331,128 MWh.

 Let me now estimate the LCOE for the Ross River Solar Farm 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% of capital cost.

The results are as follows:

Cost per peak Watt              AUD 1.67/Wp
LCOE                                     AUD 77.46/MWh

The components of the LCOE are:

Capital           {0.094 × 225 × 106}/{331,128 MWh} = AUD 63.87/MWh
O&M              {0.020 × 225 × 106}/{331,128 MWh} = AUD 13.59/MWh

Conclusion

Well, the LCOE (AUD 77/MWh) isn’t quite as good as that for the Sun Metals project (AUD 72/MWh), but it’s still very good, and the second best that I’ve analysed in Australia.

This confirms the continuing decrease in the cost of solar power, as shown in the LCOE graphic below.  The graphic shows my LCOE results in USD/MWh over eight years at current exchange rates (AUD = USD 0.7541, EUR = USD 1.069, JPY = USD 0.00868, GBP = USD 1.2544) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made my LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

My concluding observation is that whilst Australian politicians continue to bicker about the development of renewal energy in the local market, our enterprises and our citizens are just getting on with the transformation.  One day, in a short amount of time, the politicians will wake up and realise that the energy landscape has changed before their very eyes, at great disruption to incumbent large players, and in a way that helps lower our greenhouse gas emissions in line with the Paris Agreement.  What will the politicians squabble about then?


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