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From the New England Wind Energy Education Project Conference and Workshop
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ECONOMICS OF WIND
MON-FEN HONG PRINCIPAL CONSULTANTRENEWABLE ENERGY AND ENERGY EFFICIENCY
07 Ju
ne 2
011
April 2011
BLACK & VEATCH OFFERS A WIDE RANGE OF RENEWABLE ENERGY DEVELOPMENT AND IMPLEMENTATION SOLUTIONS
Transmission Infrastructure
Policy, Regulatory and RatesEnvironmental Impact and Climate Change
POWER PRODUCERS END USERS
Strategic Planning Project Development
Project Implementation
AssetManagement
Sustainability, Energy Efficiency &
Self Generation
April 2011
• Multidisciplinary group of more than 250 staff across company
• Services from R&D to turnkey EPC projects
• Experienced in all energy sources:
• Wind
• Hydro
• Solar Thermal
• Biomass
• Landfill Gas
• Anaerobic Digestion
• Ocean
• Solar Photovoltaic
• Geothermal
• Ethanol / Biodiesel
GLOBAL RENEWABLE ENERGY CAPABILITIES COVERING ALL TECHNOLOGIES
National Solar Thermal Test Facility
• Levelized Cost of Energy (LCOE)
• Comparing the Cost of Wind
• Renewable Energy Supply Curve for New England
• Getting to the RPS Target
• Reality Check for Real World Projects
OV
ER
VIE
W
OVERVIEW
07 June 2011
4
NEWEEP Economics of Wind
• Capital cost
• Operating cost
• Financing cost• Taxes
• Incentives
• Performance characteristics
• Transmission and Integration*
Net cash flow over life of project is variable due to tax benefits and makes comparisons difficult
TYPICAL COMPONENTS OF COST OF A PROJECT
07 June 2011NEWEEP Economics of Wind
5
Project Cash Flow
• Convert stream of annual costs/ benefits to a fixed unit cost or equivalent revenue requirement (kWh or MWh)
Unit costs allow comparison of different types of resources
LEVELIZED COST OF ENERGY
07 June 2011NEWEEP Economics of Wind
6
020406080
100120140160
25% 27% 29% 31% 33%
$ pe
r MW
h
020406080
100120140160
10% 12% 14%
With PTC
Without PTC
LCOE is highly dependent on project characteristics
HOW LCOE CHANGES WITH PROJECT INPUTS
07 June 2011NEWEEP Economics of Wind
7
Wind Capacity Factor
Return Requirement and Incentives
Range in LCOE of generation due to variations in cost components
LCOE OF RENEWABLE ENERGY RESOURCES AND CONVENTIONAL
07 June 2011NEWEEP Economics of Wind
8
Low values for fossil cost estimates. Natural Gas = $5/MBtu; Coal = $2/MBtu. Higher values for fossil cost estimate. Natural Gas = $8/MBtu; Coal = $2/MBtu. CO2 assumes $60/ton.
$0 $50 $100 $150 $200 $250 $300 $350
Wind
Geothermal
Biomass
Solar PV Thin Film
Solar PV Tracking
Solar Thermal Trough
Gas Combined Cycle
Pulverized Coal
Levelized Cost of Generation ($/MWh)
Renewables Without Subsidies
Renewables With Subsidies
Fossil Fuel With CO2
Fossil Fuel Without CO2
Capacity value is another value component that is also calculated based on time of output
UNDERLYING ENERGY VALUE
07 June 2011NEWEEP Economics of Wind
9
Wind Output Energy Price
Output Weighted Energy Value
X
LCOE
Energy
Capacity
RE Premium
0
50
100
150
Cost Value Renewable Energy Premium
$ pe
r MW
h
Renewable Energy Premium is the difference between LCOE and underlying energy/capacity value
RENEWABLE ENERGY PREMIUM
07 June 2011NEWEEP Economics of Wind
10
Supply curve is predominantly wind
RENEWABLE ENERGY PREMIUM SUPPLY CURVE WITH PTC IN NEW ENGLAND
07 June 2011NEWEEP Economics of Wind
11
Win
dBi
omas
s U
pgra
des
Smal
l Hyd
ro
Source: Maine Task Force, 2008
Range depends on behind the meter or large-utility scale, but premium still higher than offshore wind
HOW DOES SOLAR COMPARE?
07 June 2011
12
NEWEEP Economics of Wind
ACP
Win
dBi
omas
s U
pgra
des
Hydr
o U
pgra
des
Solar PV Premium
>$200
Source: Maine Task Force, 2008
Much of onshore wind is needed to meet future RPS demand
GETTING TO THE RPS TARGET
07 June 2011NEWEEP Economics of Wind
13
ACP
Regional RPS Demand 2015
Regional RPS Demand 2020
Win
dBi
omas
s U
pgra
des
Smal
l Hyd
ro
Source: Maine Task Force, 2008
• Supply curve used a set of common assumptions for similar resources.
• In reality, LCOE can vary depending on the specifics of a project…• Energy production is highly site specific• Capital costs benefit from scale economies• Fixed costs benefit from scale economies• Federal tax incentives set to expire • Financing costs (debt and equity) depends on availability• Access to transmission
All of these factors drive projects to optimize for performance, size, and timing.
REALITY CHECK FOR REAL WORLD PROJECTS
07 June 2011
14
NEWEEP Economics of Wind