Embed Size (px)
Citation preview
PRESENTATION BY NATALIA KULICHENKO
SENIOR ENERGY SPECIALIST
JUNE 28, 2012
Concentrating Thermal Solar –
lessons from different countries
Currently Installed CST Capacity (2012)
2
Country Total Operating Total under Construction
or Commissioning Total Announced
USA
(CA, NV, AZ, NM, ID, FL) 524.5 MW 1,447 MW 23,091.5 MW
Spain 1,081.4MW 673.5 MW 1,101.48 MW
Morocco 20 MW - 500 MW
Algeria 25 MW - 215 MW
Australia 6.8 MW 47.2 MW 250 MW
China - 31 MW 453 MW
South Africa - - 250 MW
Mexico - 12 MW -
Italy 5 MW 5 MW -
Egypt 20 MW - 100 MW
France - 13.4 MW 50MW
Jordan - - 100 MW
UAE - 100 MW -
Iran 17.3 MW - 72 MW
India 2.5 MW 10 MW 700 MW
Portugal - - 13 MW
Incentive Systems and Financing
Schemes
Regulatory Challenges with regard to CST promotion
4
• Provide sufficient incentives to developers to balance high up-front investment costs against savings in fuel and O&M costs and cost-reduction potential
Effectiveness
• Limit societal cost of the particular regulatory mechanism
• Avoid overpriced incentives resulting in investment bubbles and high societal costs
• Consider cost-reduction potential of different technologies
Efficiency
Current Instruments and Frameworks
5
Instruments available:
Feed-in tariff
Quota (Renewable Portfolio Standard – RPS; Green Certificate System – GCS; etc.)
Subsidy/tax incentive
Voluntary renewable energy scheme
Renewable energy fund
Differs among Market Structure
Spain:
Feed-In Tariff Framework (FIT)
United States:
Renewable Portfolio Standard Framework (RPS)
Feed-In Tariff Frameworks
6
•.
Set at a predefined level or as premium above market-wholesale price
Preferential grid access and specified tariff rate over extended period
Utilities required to off-take output but can pass cost difference on
Incentive for cost-reduction: tariffs reduced every year
PROS/CONS depends on mix of RE generation created by FIT and actual design of FIT
Pros:
reduced spot market prices, GHG emissions, need for fossil
fuel imports
Cons:
increases the overall price of electricity for customers
Renewable Portfolio Standard Frameworks
7
RPS combined with tax incentives, loan guarantees, voluntary purchases of RE power
Retailers obliged to reserve increasing percentage of RE to supply mix every year
Retailers can draw upon own facilities, purchase RE power, trade Green Certificates (GCs)
GCs reflect incremental cost of marginal capacity need to fulfill RPS requirement
Pros:
Trading GCs should create strong incentive to meet demand for GCs in
the least-cost fashion
Lower societal cost
Cons:
Once quota is reached, incentive to operate cost-efficiently vanishes
High administrative costs for retailers and developers
Choice of a Tariff Scheme in a Developing Country
Competitive Bidding Market determines price
… minimizes rent (no windfall profits for developers)
… allows choice between pre-selected or dev. selected sites
… allows transmission planning & optimization (MA, QC examples)
… not a problem who pays for transmission and other elements
… transparent scheme, no need for special tax incentives etc.
Feed-in Tariff (FIT) Market determines MW volume
… hard to estimate efficient pricing model in advance
… developers select sites, not suitable w/concentrated resource
… puts pressure on transmission planning, grid congestion queue?
… must plan who pays for any cost element including grid
… incentives important, zoning issues critical, corruption prone
IMPORTANT POLICY CONSIDERATIONS PART 1
Choice of a Tariff Scheme in a Developing Country
Competitive Bidding 2 … incomplete regulation (e.g. grid code) can be solved ad hoc by »regulation by contract«
… public land lease can be integrated in process and can be non-exclusive (QC example)
… permitting process (must be) integrated in RFP and quasi-automatic
... MW volume is controlled
Feed-in Tariff (FIT) 2 … requires complete and transparent regulatory scheme
… competition for scarce physical resources (transmission grid, public land leases)
… competition for regulatory resources (permits) –resource lock-up by unqualified bidders
… if tariff scheme is profitable queuing or quasi-market rationing develops
IMPORTANT POLICY CONSIDERATIONS PART 2
INDIA NATIONAL SOLAR MISSION (source: NVVN)
10
• The National Solar Mission is major initiative of the Government of India –
–To promote ecologically sustainable growth;
–Addressing India’s energy security challenge.
• The Mission is set in three phases-
–Phase-I (up to 2012-13) – 1000 MW
–Phase-2 (2013-17) – 4,000 MW
–Phase-3 (2017-22) – 20,000 MW
INDIA NATIONAL SOLAR MISSION – Bundling Scheme(source: NVVN)
11
INDIA NATIONAL SOLAR MISSION - Implementation (source: NTPC)
12
• In order to facilitate grid connected solar power generation in the first phase, a mechanism of “bundling” relatively expensive solar power with power from the unallocated quota of the Government of India (Ministry of Power) generated at NTPC coal based stations, which is relatively cheaper.
• This “bundled power” would be sold to the Distribution Utilities.
• For each MW of installed capacity of solar power for which a Power Purchase Agreement (PPA) is signed by NVVN, the Ministry of Power (MoP) shall allocate to NVVN an equivalent amount of MW capacity from the unallocated quota of NTPC coal based stations and NVVN will supply this “bundled” power to the Distribution Utilities.
CST COST REDUCTION
STRATEGIES
The purpose is to assess cost efficient and cost effective approaches to reduce Levelized Cost of Electricity (LCOE) for CSP plants in India
Assumptions are key - used physical data inputs from both available bid data and US DOE database, and actual incentives provided by GoI to solar projects
Assessments are done for 1) parabolic trough & power tower; and b) wet and dry (air) cooling methods
With scaling up of CSP in India, majority of future plants will be air-cooled – need to be accounted as an input for cost analysis
Cost Reduction Strategies for CSP in India
14
Assessment Methodology
15
Sensitivity Analysis – Cost Impact for Government
Impact of regulatory/financial incentives and storage eligibility on government cost burden
Sensitivity Analysis – Cost Impact on Developers
Impact of variations in DNI and local conditions on LCOE
Impact of different financial and regulatory incentives on
LCOE
Impact of different technical eligibility criteria
on LCOE
Current Scenario – Parabolic Trough and Power Tower
LCOEs under current scenario using
NREL’s Solar Advisory Model and DNI data for Jodphur (one of the best on DNI resource)
Main Financial and Regulatory Assumptions
Analysis Period 25 years Loan Term 12 years
Inflation Rate 5.5% Loan Rate 11.75%
Real Discount Rate 15% Debt Fraction 70%
Minimum Alternative Tax
18.5% ROE 19%
Property Tax 0% Min required IRR 15%
VAT+ Excise Duties 5% on 100% of
Direct Costs Min required DSCR 1.5
Depreciation Schedule
7% first 10 years | 1.33% afterwards
EX Rs/US$ 45.0 Rs/$
Financial Modeling Exercise
16
Current Scenario in India
17
10
15
20
25
30
35
40
45
50
Air-cooled Wet-Cooled
Parabolic Trough Power Tower
CERC FIT
10152025303540455055606570
Current Scenario Lower DNI Scenario
Parabolic Trough (Air-Cooled) Power Tower (Air-Cooled)
CERC FIT
DNI Sensitivity Analysis
– Cost for Developers
18
25% decrease in DNI causes LCOE to increase by 25-35%
10
15
20
25
30
35
40
45
50
Current Scenario Lower Labor Cost Provision of "Free" Land
Parabolic Trough (Air-Cooled) Power Tower (Air-Cooled)
CERC FIT
Local Conditions Sensitivity Analysis
– Cost for Developers
19
10
15
20
25
30
35
40
45
50
Longer LoanTerm 20
years
ConcessionalFinancing
lowers loanrate to 8%
Higher D/ERatio 75/25
AcceleratedDepreciationwithout FITreduction
GBIs at1.0Rs/kWh
granted
All incentivescombined
Parabolic Trough (Air-Cooled) Power Tower (Air-Cooled)
CERC FIT
Cost Impact in India – Air Cooling
20
10
15
20
25
30
35
40
45
50
Current Scenario w/ Financial & RegulatoryIncentives
w/ Financial & RegulatoryIncentives and 6 hours of
storage
Parabolic Trough (Air-Cooled) Power Tower (Air-Cooled)
CERC FIT
Financial & Regulatory Incentives and Storage
Eligibility – combined
21
Incentive granted Reduction in
LCOE Cost Effect
Cost Impact for 500 MW
US$ per -1% LCOE
Current scenario + Concessional Financing
-9.5% Cost of guarantees
Not quantifiable
but likely to be very low
Not quantifiable
but likely to be very low
Current scenario + Accelerated Depreciation
-6.5% Lower tax revenues
$ 184 m $28 m
Current scenario + GBIs at 1.0 Rs/kWh
-4.3% Additional
Expenditures $ 464 m $ 108 m
All three of the above
-20.3%
Lower tax revenues + cost of
guarantees + expenditures
6 hrs of Thermal Storage
-13.8% Additional
expenditures $ 2,480 m $ 180 m
Sensitivity Analysis Parabolic Trough -
Cost Impact for Government
22
Incentive granted Reduction in LCOE
Cost Effect Cost Impact for 500 MW
US$ per -1% LCOE
Current scenario + Concessional Financing
-9.4% Cost of guarantees Not quantifiable
but likely to be very low
Not quantifiable
but likely to be very low
Current scenario + Accelerated Depreciation
-6.4% Lower tax revenues $ 148 m $ 23 m
Current scenario + GBIs at 1.0 Rs/kWh
-5.1% Additional Expenditures
$ 457 m $ 90 m
All three of the above
-21.0% Lower tax revenues + cost of
guarantees + expenditures
6 hrs of Thermal Storage
-29.3% Additional expenditures
$ 3,151 m $ 108 m
Sensitivity Analysis Power Tower -
Cost Impact for Government
23
DNI accuracy matters – LCOE is very sensitive to DNI changes
LCOE much less sensitive to cost of labor and land
Current LCOEs are too high to allow for cost recovery and meeting
financing constraints
Financial and regulatory incentives combined with payment for
electricity generated through storage can lower LCOEs
Allowing for storage is most effective but least cost-efficient way
Concessional finance is still effective and likely to be cost-efficient
Conclusions on Cost reduction strategies on CSP
24
LOCALISATION OPPORTUNITIES
Localization of Manufacturing Supply Chain (Source eSolar)
26
Assumes 92MWe Direct Steam Plant (w/ 600,000 heliostat ST3, 24 receiver towers)
Notes : High end scenario is dependent on ability to justify installing local manufacturing factory, NRE cost not included Partial items : Drive – excludes gearbox, Camera & Towers – excludes camera specialty parts
LOW END SCENARIO HIGH END SCENARIO
BOMValue at Current
Supply Source
%
Contribution
Estimated
Localization
Value of
Localization
Activities
%
Contribution
Estimated
Localization
Value of
Localization
Activities
%
Contribution
Heliostat
RM frame $6,024,000 3.9% Yes $6,024,000 3.9% Yes $6,024,000 3.9%RM Tape $588,000 0.4% No - No -
Reflector Mirror $10,182,000 6.6% No - Yes $10,182,000 6.6%Drive $54,876,000 35.8% No - Partial $27,438,000 17.9%PCBA $8,785,714 5.7% Yes $8,785,714 5.7% Yes $8,785,714 5.7%Cable $3,514,286 2.3% Yes $3,514,286 2.3% Yes $3,514,286 2.3%Structure $15,891,429 10.4% Yes $15,891,429 10.4% Yes $15,891,429 10.4%
Cleaning System $1,390,000 0.9% Yes $1,390,000 0.9% Yes $1,390,000 0.9%Sensors $164,850 0.1% No - No -
Installation Tools $35,700 0.02% Yes $35,700 0.02% Yes $35,700 0.02%Cameras & Towers $4,707,744 3.1% No - Partial $2,353,872 1.5%FECs $4,588,770 3.0% Yes $4,588,770 3.0% Yes $4,588,770 3.0%
Receivers $28,800,000 18.8% No - Yes $28,800,000 18.8%
Receiver Towers $13,776,000 9.0% Yes $13,776,000 9.0% Yes $13,776,000 9.0%
Total $153,324,492 100% $54,005,898 35.2% $122,779,770 80.1%
Ex-works
27
Local Installation: Jobs Created (Source eSolar)
Assumptions
Construction and installation of an entire power plant
92 MW solar direct steam facility. Timing is one year.
Location is MENA.
Baseline is USA with efficiency and cost adjustment factors for MENA
Materials and support services job creation is not included Job Class Example
Jobs (site only)
$/Hour Salary
Management supervisor 8 $40 $632,000
Skilled electrician, pipefitter 226 $20 $9,405,000
Unskilled heliostat assembly 523 $10 $10,871,000
Total 756 $20,908,000
28
Power Plant Operations: Annual O&M (Source eSolar)
Plant Labor Example Jobs
(plant only) $/Hour Salary
Management plant manager 6 $40 $499,000
Skilled electrician, technician 34 $20 $1,414,000
Unskilled heliostat maintenance 27 $10 $561,000
Total Labor 67 $2,474,000
Plant Operations & Maintenance Annual Spend
Solar collector system repair & maintenance (w/o labor) $800,000
Power plant repair and maintenance (w/o labor) $5,500,000
Total Power Plant O&M (includes labor) $8,774,000
29
Summary: Direct Localization
One Time Impact Jobs Value
Local manufacturing jobs 1,161 $25,396,000
Local construction jobs 756 $20,908,000
Local mfg. material & services – high range
$122,779,000
Total (mfg jobs value included in material & services) 1,917 $143,687,000
Ongoing Operations - Annual Impact Jobs Value
Local Jobs (plant only) 67 $2,474,000
Power Plant O&M (less labor) $6,300,000
Total Annual Impact 67 $8,774,000
(Source eSolar)
Support Job Created
Assumptions
Construction investment multiplier = 1.78
Permanent job multiplier for the power generation industry = 4.21
30
One Time Impact Direct Jobs
Multiplier Support
Jobs Value
Local manufacturing 1,161 1.78 x 2,067 $45,206,000
Local construction 756 1.78 x 1,346 $37,219,000
Total One Time 3,412 $82,425,000
Ongoing Operations - Annual Impact
Direct Jobs
Multiplier Support
Jobs Value
Local Jobs 67 4.21 x 282 $10,420,000
Total Permanent 282 $10,420,000
(Source eSolar)
31
Localization Summary (Source eSolar)
One Time Impact Jobs Value
Local manufacturing jobs 1,161 Included in material &
services
Local construction jobs 756 $20,908,000
Local support jobs 3,412 $82,425,000
Local material & services – high range $122,779,000
Total 5,329 $226,112,000
Ongoing Operations - Annual Impact Jobs Value
Local plant permanent jobs 67 $2,474,000
Local plant permanent support jobs 282 $10,420,000
Power Plant O&M (less labor) $6,300,000
Total Annual Impact 349 $19,194,000
Local manufacturing readiness in India
Cost reduction potential due to local manufacturing for components
considered for 100 MW PTC plant without thermal storage in India
Local Content Requirements
All countries want to do this – and develop a base for exports(!)
Requires a critical mass of about 1000 MW (average across several start up markets
Requires that all orders go to a single manufacturer to incentivize investment in a local market and secure a market share
Requires a stable, long pipeline of orders, min. 5 years
Time horizon beyond 2-3 years requires bid price indexation
ISO 9000 series certification of supply chain required
Foundations, roads, electrical works: Locally procured anyway
Apertures/towers: Economic to manufacture locally anyway (>100 MW)
TYPICAL ISSUES – WHY IT RARELY HAPPENS IN FIRST STAGES
