Mon-Fen Hong Slides 6.7.11

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

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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


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


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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


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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


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


10

Supply curve is predominantly wind

RENEWABLE ENERGY PREMIUM SUPPLY CURVE WITH PTC IN NEW ENGLAND


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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?

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ACP

Win

dBi

omas

s U

pgra

des

Hydr

o U

pgra

des

Solar PV Premium

>$200


Much of onshore wind is needed to meet future RPS demand

GETTING TO THE RPS TARGET


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ACP

Regional RPS Demand 2015

Regional RPS Demand 2020

Win

dBi

omas

s U

pgra

des

Smal

l Hyd

ro


• 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

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THANK YOU!

MON-FEN [email protected]

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Mon-Fen Hong Slides 6.7.11

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