Commercial Solar Power Plant Feasibility Study: Bakersfield, California
Christopher Horvath, Yaman Al Zayat December 12, 2008
1. Technology Background Solar power towers harness the energy of the sun into a useable electricity form. They have the potential to supply much of the world’s energy needs since the sun is the most readily available clean and renewable form of energy. It is also becoming a more affordable and reliable source of electricity. The main components of a solar power plant include the central tower, the heliostat mirrors, storage tanks, steam generator, and turbines. The unique aspects of the power plant are the heliostats which track the sun and move to apply the light to one continual point. These heliostats account for roughly 50% of the capital costs for the power plant, thus the cost is highly related to the advancement and volume production of heliostats. The sunlight focal point is at the top of the tower where the fluid is heated to 565°C before flowing into storage tanks before producing steam driving the generators.
Figure 1: Solar Power Plant Diagram
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The first solar power plant, Solar One, built in the Mojave Desert of California produced 10 MW, used water as the heat exchange fluid and produced electricity just during daylight hours. It was later retrofitted with additional heliostats and molten salt as the heat exchange fluid, enabling 10 MW of power production, including non-daylight hours. Recently, Solar Tres was built in Spain with molten salt storage as well to obtain a capacity of 15 MW [1]. There are also several other power plants in production or planning especially in southern Spain, but also in Australia, South Africa, and America. While there are also many areas of the world that have a great potential for solar energy production due to high sun exposure and unpopulated desert land, the economics keep it from being the most viable investment. Areas with large reserves of oil, such as northern Africa and the Middle East keep electricity costs very low, effectively eliminating competition. However, as technology advances, production increases, power plant scaling increases, and fossil fuel supply decreases or their costs increase, it may become advantageous to build in these regions.
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2. Proposal In the choice of location, Retscreen was utilized to find a suitable match of daily solar radiation with locations already home to the technology. Towns in California and Texas had apt matches, but ultimately Bakersfield California was chosen due to the better renewable energy climate of California. The average price by MWh sold to California ISO (private power grid) during 2007 was 54.5 USD, with the current running average this year at around $70 [2]. During the hottest summer days, demand increases drastically and prices by MWh can reach $300 [3]. As a state participating in the Western climate
initiative which is run by the Federal Energy Regulatory Commission (FERC), the state would be required to reach 20% renewable energy of total energy production by 2010, and 33% by 2020 [4,5]. California’s generating capacity is 56,347 MW; current usage at regular peaks is around 46,000 MW, but with summer peak demand, California generally imports energy from neighboring states. Non-residential accessible land near Bakersfield costs around $10,000 per acre and Figure 7 of Appendix A shows the sunlight intensity. Additionally, the United States appears as a country moving towards cleaner, renewable energy, with the government offering large sun grants to individuals who integrate renewable energy with their homes or office, and further incentives to increase efficiency [6]. While no grant initiatives or tax credits were included in this particular financial analysis, it is almost certain that a project of this magnitude would receive considerable funding, making it more affordable and profitable. The current financial analysis does not include any supplementary income as the aim was to see the profitability and feasibility of this being an independent project. For example there is one federal grant for building an electricity production plant which
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utilizes the sun, a grant offering 30% of the capital cost by way of Tax benefits. This grant is available for utility companies and private investors, with a project completion deadline of Jan 1st 2017. In the case proposed here, the power plant was sized at 50 MW with molten salt storage technology, requiring an area of 25 acres. Using 95 heliostats, each had an area of 280 square meters for supplying the necessary intensity. The desert area here was considered as relatively cheap with a total cost at $250,000 for the required land. With a capacity factor of 76%, it would produce 332,000 MWh each year. In the effort to be competitive with existing power plant technology, the electricity would be sold at $60 per MWh, or 6 cents/KWh to a distribution company. Of course this translates to a higher premium for their customers to cover their own expenses and profit. The capital costs were calculated based on $6,100/KW, with an 8% interest rate for the first 12 months during construction, adding up to about $322M. At $75/KW/year for operational and maintenance costs an additional $1.12 M was required per year [7]. The project has an expected lifespan of 25 years, with a 3.2% interest rate based on the 16 year life and high loan [8]. The break-even point in this model was 21 years, equating to a total profit of $70.1M at the end of 25 years. While the payback period can be adjusted by lengthening the debt term, it was more advantageous to wait longer and receive a more sizable profit in the end. Appendix A shows the data figures from Retscreen for financial and cost analysis, with diagrams of cash flow, and other important figures.
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3. Comparison with Other Technologies Tables 1 and 2 display the cost information relevant to differing power plant technologies including those based on coal, gas, and the proposed solar power alternative. It is clear that the upfront capital cost of the solar power is two to four times greater than the conventional options, however the ongoing costs of the solar option is a mere fraction and would serve as the basis for its payback period.
Table 1: Cost comparison between differing power plant types Power plant type
Capital cost 2008 [$/KW]
Total cost for 50MW plant
Supercritical coal
2214
110.7M
Supercritical coal +ccs
4037
201.9M
Gas combined cycle +ccs
1558
77.9M
Solar Power Tower
6180
309M
Table 2: Ongoing costs by power plant type Power plant type
Fuel cost c/kWh
Total cost, 1 year production @ 76% rate [$]
Supercritical coal
8.65
27.93M
Supercritical coal +ccs
14.19
47.2M
Gas combined cycle +ccs
10.31
34.3M
n/a (no fuel cost)
1.1M (O&M costs)
Solar Power Tower
This is due to the fuel costs of the conventional power plants, for which solar has only a free supply of fuel input. The ongoing costs are simply for operation and maintenance which is only about 2 - 3 ½ % that of the conventional counterparts. After the solar plant pays back its initial capital, the cost per kWh is very small at less than 1 cent/kWh [9].
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Apart from cost, the obvious frontrunner when considering greenhouse gas emissions, is clearly the solar power tower technology. Disregarding the production and construction of the plants themselves and the electricity Transmission and Distribution losses which are rather comparable, the Coal Power plant produces 313,000 tons of CO2 more per year than does its solar equivalent. While these GHG emissions are sellable as carbon credits to other companies, it is better to keep them and encourage others to reduce their carbon footprint as well. The solar power plant has an expected lifetime of 25 years, but it is very possible to upgrade or renew the non-working parts of the station at the end of its lifetime. These costs would be marginal compared to building a new station. At this point the station debt would be very low and therefore the profit would increase dramatically as in the initial 20 years period, servicing and repaying the debt would take most of the profit.
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4. Appendix A – Retscreen Figures
Figure 2: Energy Model
Figure 3: Capital Cost Analysis
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Figure 4: Emissions Analysis
Figure 5: Financial Analysis Part 1
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Figure 6: Financial Analysis Part 2 – Payback Calculation
Figure 7: Bakersfield, CA Natural Resource Data
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5. Appendix B - Conclusions (1) Yaman AL Zayat This project offers a very clean, consistent energy production which is important for today's market. The initial investment is higher than other conventional power station but the upkeep is much lower than any other plant. Although this plant has a lifetime of 25 years, that doesn't mean it cannot keep running after that time. At the end of its life time the plant could be upgraded/renewed for a lower cost than building a new plant, at this point the profitability of the plant would be very high. Energy prices keep increasing with time; this would provide an additional profit margin as the cost of production is consistent. Another important aspect is that governments are looking to decrease their dependence on international markets; this could be part of that solution. This technology is not dependent on the fuel market, in the last year we have observed how volatile this market is. This option provides a secure energy production with a consistent price and production which does not depend on the market. A plant of this size could receive some government's grants that are tailor made for this project, there is also the possibility of selling the GHG credits, but I do not believe that this would make sense as this would encourage others to keep polluting. To conclude this project is profitable but the return on investment is lower than what investors are looking for, if grants and GHG allowances are included in the finances, this would be more attracting to conventional investors but I would rather find some investors who would be interested in providing a clean energy plant and willing to make less profits.
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(2) Christopher Horvath From the data accrued and analyzed by Retscreen, it has been shown that building a Solar Power Tower of this magnitude has the prospect of profit. Granted, it has a large payback period for chosen variables due to the newness of the technology, but still at the end it pays for itself and then some. At a total profit of 74.3M USD, it works out to an average of 3 million per year. While it is possible that certain cost factors may have been missed or not considered, it is also highly likely that such a project would receive sizable amounts of funding in grants or tax credits that would counteract and overtake the costs. It is most important to note the savings in terms of Greenhouse gases, as this is the chief purpose of such an endeavor. The principle reason for building this is to produce clean power as a sustainable means of meeting society’s energy needs. Without such moves in mentality, humankind would continue depleting the world’s resources while simultaneously polluting it. Once this technology continues to prove itself further through projects such this, power plants can scale up massively to hundreds of Megawatts at a time, and eventually be able to provide for the much needed energy for the world. So based on this data, I say that this project is worthwhile, both in economic and environmental regards.
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6. References
1. “The Solar Project” Wikipedia: The Free Encyclopedia. 11 December 2008. <http://en.wikipedia.org/wiki/The_Solar_Project> 2. “System Status” California ISO. 17 December 2008. <http://www.caiso.com/outlook/SystemStatus.html> 3. “Seasonal Assessments” California ISO. 17 December 2008.http://www.caiso.com/docs/2003/04/25/200304251132276595.html 4. “Collaborative Greenhouse Gas (GHG) Programs” Federal Energy Regulatory Commission. 17 December 2008. <http://www.ferc.gov/market-oversight/mktelectric/overview/elec-ovr-ghg.pdf> 5. “California's Renewable Energy Programs” The California Energy Commission. 17 December 2008. <http://www.energy.ca.gov/renewables/index.html> 6. “California Incentives for Renewables and Efficiency” Database of State Incentives for Renewables and Efficiency (DSIRE). 17 December 2008. <http://www.dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=CA&RE =1&EE=1> 7. “Assessment of Concentrating Solar Power Technology Cost and Performance Forecasts.” Electric Power, 2005, Sargent & Lundy LLC. Chicago, IL, USA, 2005. <http://www.trec-uk.org.uk/reports/sargent_lundy_2005.pdf> 8. “Interest Rates” ANZ Business. 17 December 2008. <http://www.anz.com/aus/RateFee/InterestRates/Rates.asp?section=SBS>
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9. “The Economics of Nuclear Power” World Nuclear Association. 17 December 2008. <http://www.world-nuclear.org/info/inf02.html> 10. Enermodal Engineering Ltd./Marbek Resource Consultants Ltd. COST REDUCTION STUDY FOR SOLAR THERMAL POWER PLANTS. Ontario, Canada, 1999.< http://www.solarpaces.org/Library/docs/STPP%20Final%20Report2.pdf> 11. Solar Paces. Solar Power Tower. 11 December 2008. <http://www.solarpaces.org/CSP_Technology/docs/solar_tower.pdf>. 12. Cameron, Peter, Crompton, Glenn. Parsons Brinckerhoff Australia Pty. Solar Power Plant Pre-feasibility Study. Brisbane QLD 4001 Australia, 2 September 2008. 11 December 2008. <http://www.cmd.act.gov.au/__data/assets/pdf_file/0005/2939/Solar_Power_Plant_Prefeasibility_study.pdf> 13. Title Page Picture: < http://www.instablogsimages.com/images/2007/08/22/towerps10_69.jpg> 14. Figure 1: < http://www.metaefficient.com/wp-content/uploads/molten-salt-solarpower.jpg>
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