Wednesday, November 22, 2017

LCOE - why it's unfair on renewables technologies and how wind is cheaper than you think

I've been playing around with Levelised Cost of Energy and have seen that some arbitrary choices in its application can unfairly discriminate against renewables projects.  Renewables projects are long term and have low operating costs, and high capex, whereas conventional thermal projects have lower capital cost as a proportion of total costs, and higher operating costs (because of their fuel costs).

LCOE is conventionally calculated as NPV(costs)/NPV(energy) - the discounted sum of costs divided by the discounted total energy production.  Hidden within this are two critical factors - discount rate, and inflation rate.  There's a third one, too, which is a bit more difficult to handle - uncertainty in fuel gas prices.

LCOE is usually calculated without any inflation and BEIS' most recent Electricity Generation Costs report applies a discount rate of 7.8% to gas, but 8.9% to offshore wind.  On this basis, BEIS has CCGT's LCOE (exceeding carbon taxes) at £47/MWH, and offshore wind at over £100.

It gets interesting when you scale back the offshore wind costs, to get an LCOE equal to the recent strike prices under CfD2 of £57.50.

Inflation
Current HMG inflation forecasts are about 2-3% - and it seems that adding inflation at 2% to the BEIS figures increases the CCGT LCOE to £60/MWh and the offshore wind one to £64/MWh - a much closer gap.

Discount rate
Given that the revenue risk in offshore wind CfD projects is much mitigated by the CfD (and its Government backing), and there is real variability in future gas prices, it seems reasonable to use the same discount rate for CCGT and offshore wind.  Especially if the offshore wind develop can mitigate capex risk through its contract structure.  At the same discount rate, the offshore wind LCOE (in an inflation free work) falls from £57.50/MWh to £54/MWh.

Combination
If you accept my points on both inflation and discount rates, the LCOE's for the technologies align at £60/MWh!

And that's before you consider the fuel price risk faced by CCGT projects (or the intermittency of offshore wind, to be fair).

But this does suggest that offshore wind isn't just miles cheaper than nuclear, it's also competitive with the backbone technology of CCGT!

Wednesday, November 15, 2017

ITES 2017

Busy this week attending the International Tidal Energy Summit. Ambitious title, but legitimate, because there are developers here from Scotland , Spain, United States and Wales.

There’s lots of discussion about how to reduce levelised cost of energy and whether it’s best to start small and innovate quickly or go large soon. 

What do you think?

Friday, September 29, 2017

Redfield Tidal Report


Redfield Consulting is pleased to announce that its updated Tidal Energy Report is now available.  Covering more than 150 tidal energy devices, and reviewing the top 20 in more detail, the report provides an authoritiative and objective overview of the current state of the tidal stream energy sector.

For device developers, it provides a review of the competitive landscape; for potential investors, it permits identification and high-grading of potential investment opportunities.

It is available as a pdf for £295+VAT, or in hardcopy for £350+VAT.  More details are available in the flyer available at http:www.redfieldconsulting.co.uk/Redfield Tidal Report flyer.pdf

If you’d like to order, would like further information or have any questions, please contact Redfield Consulting, at reports@redfieldconsulting.co.uk



Tuesday, September 26, 2017

Scotrenewables update

A tweet from Scotrenewables claims 20MW output over 24 hours.  With a 2MW device, that equates to a capacity factor of 20/(24*2) = 41.7% over the period.

The period was September 21/22, when the moon was new and tides were therefore at their springiest - especially as it's around the autumn equinox, when springs are at their springiest.

But either way, a capacity factor of better than 40% is comparable with offshore wind.




Monday, September 25, 2017

State of play on offshore wind CfDs and RO projects

I thought that a list of wind farms and their financial support arrangements might be useful:

RO-accredited operational projects (per OFGEM ROC Register)



Generating Station
MW
Country
Commission Date
Organisation
Barrow Offshore Windfarm - A
 90
England
01/01/2006
Barrow Offshore Wind Limited
BLYTH OFFSHORE WIND FARM
 2
England
01/02/2001
EON UK plc
Blythe Offshore Wind Turbine WTG 2
 2
England
01/12/2000
EON UK plc
Burbo Offshore Windfarm - A (31/01/07)
 90
England
01/07/2007
SeaScape Energy Ltd
Kentish Flats Ltd - A,C
 90
England
01/08/2005
Vattenfall Wind Power Ltd
North Hoyle Offshore Wind Farm  - A
 60
Wales
28/10/2003
Beaufort Wind Ltd
Scroby Sands Wind Farm
 60
England
01/05/2004
EON UK plc
Gunfleet Sands I
 108
England
24/07/2009
SeaScape Energy Ltd
Gunfleet Sands II
 65
England
24/07/2009
SeaScape Energy Ltd
Beatrice Offshore Windfarm
 10
Scotland
08/05/2007
REPSOL SINOPEC RESOURCES UK LIMITED
Rhyl Flats Wind farm
 90
Wales
15/07/2009
Innogy Renewables UK Limited (Wind)
Ormonde Wind Farm
 148
England
18/08/2011
Ormonde Energy Limited
Thanet Offshore Wind Farm
 298
England
02/07/2010
Vattenfall Wind Power Ltd
Robin Rigg Offshore Wind Farm (West)
 89
Scotland
18/07/2009
EON UK plc
Sheringham Shoal
 315
England
02/09/2011
Scira Offshore Energy Limited
Gunfleet Sands Demo
 12
England
26/08/2013
DONG Energy Gunfleet Sands Demo (UK) Ltd
Walney Offshore Wind Phase I
 182
England
13/01/2011
Walney (UK) Offshore Windfarms Ltd.
Greater Gabbard
 500
England
23/02/2011
Greater Gabbard Offshore Winds Limited
London Array Offshore Windfarm
 626
England
04/11/2012
London Array Ltd
Teesside windfarm
 61
England
05/07/2013
Teesside Windfarm Ltd
FEPODWT
 7
Scotland
31/03/2014
ORE Catapult
Westermost Rough
 205
England
12/09/2014
Westermost Rough Limited
Humber Gateway Offshore Wind Farm
 215
England
02/03/2015
EON UK plc
West of Duddon Sands Offshore Wind Farm
 374
England
10/02/2014
Morecambe Wind Limited
Walney Offshore Wind Phase II
 182
England
25/08/2011
Walney (UK) Offshore Windfarms Ltd.
Lincs Wind Farm
 256
England
27/08/2012
Lincs Wind Farm Ltd
Kentish Flats Extension Wind Farm
 50
England
01/09/2015
Vattenfall Wind Power Ltd
Robin Rigg Offshore Wind Farm (East)
 83
Scotland
20/04/2010
EON UK plc
Gwynt y Mor
 570
Wales
30/09/2013
Gwynt y Mor Offshore wind farm limited
Inner Dowsing Offshore Wind Farm
 90
England
20/04/2008
Inner Dowsing Wind Farm Ltd
Lynn Offshore Wind Farm
 90
England
15/03/2008
Lynn Wind Farm Ltd
Race Bank
 565
England
08/06/2017
DONG Energy RB (UK) Ltd




Contracts for difference - project name, capacity, developer, CfD price, target commissioning date

CfD introductory round (April 2014)
Burbo Bank, 258MW, DONG, £150/MWh, 2017
Hornsea 1, 1.2 GW, DONG, £140/MWh, 2020/21
Walney Extension, 660MW, DONG, £150/MWh, 2017/18
Beatrice, 664MW, Repsol and SSE, £140/MWh, 2018/19
Dudgeon, 400MW, Statkraft/Statoil, £150/MWh, 2017

CfD Round 1 (February 2015)
East Anglia One, 714MW, Scottish Power, £119.89/MWh, 2017/18
Neart na Gaoithe, 448MW, Mainstream, £114.39/MWh, 2018/19

CfD Round 2 (September 2017)
Triton Knoll, 800MW, Innogy/Statkraft, £74.75/MWh, 2021/22
Moray Firth, £57.50/MWh, 2022/23

Hornsea 2, DONG, £57.50/MWh, 2022/23


There are a number of other projects under development at present which may, if they commission in time, be ROC-eligible (e.g. Rampion), or alternatively could apply for CfDs or operate on a merchant basis.