uc-denver gem program renewable energy trends, solar overview

Top Ten Renewable Energy Market Drivers and Solar

Energy Overview

Global Energy Management

University of Colorado, Denver

August 5, 2010

by: Ron Miller, P.E.

Renewable Energy

• Market drivers for renewable energy

• Solar energy

• Photovoltaic (PV)

• Concentrated Solar Power (CSP)

Renewable Energy Project Drivers

• Renewable resource availability, technically-feasible

• Environmentally-acceptable

• Financially-viable

Top 10 Renewable Energy Market Drivers

• Federal Direction

• State RPS

• Economic downturn

• ITC and PTC, accelerated depreciation

• Energy prices

• Technology cost structure

• Project funding

• Carbon tax

• Hurdle rate of return for project acceptance

• Transmission Constraints

Federal Direction

• The Energy Policy Act (EPACT) of 2005, or Public Law 109-58 directs the federal government to increase its renewable energy use, with a goal of using

• 3 percent or more in fiscal years 2007 - 2009,

• 5 percent or more in fiscal years 2010 - 2012,

• 7.5 percent or more by 2013

• Reducing water consumption by 2% annually through FY 2015 from Executive Order 13423

Federal Direction, cont’d.

• Invest $150 billion over a decade in clean energy (wind, solar, and next generation biofuels), providing 5 million new jobs

• Ensure that 10 percent of the nation's electricity comes from renewable sources by 2012 and 25 percent by 2025

• Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050

Federal Direction, cont’d.

• Federal government:

• Annual electricity bill of more than $3.5 billion

• Real estate portfolio that includes about 500,000 buildings and facilities

• Uses 2% of overall energy in the country

• Will be large player in energy efficiency and renewable energy sources due to their directives

Economic Downturn

• Lower energy usage

• Increased energy efficiency

• Absolute Renewable Portfolio Standards (RPS) targets in megawatt-hour (MWh) will be lowered as a result

• Reduction in size, number, and/or timing of RE projects could result

• Prices for several components have peaked

• Increased foreign competition (China)

Renewable Portfolio Standards

ITC and PTC

• Congressional action• 8-year extension 30% solar investment tax credit (ITC)

• Utilities can benefit from the ITC

• Authorized $800 million for clean energy bonds for renewable energy generating facilities, including solar

• Extended production tax credit (PTC) for wind and biomass projects through CY2012; 2.1 cents per kWh tax credit based on actual RE production

• Can elect to take PTC, or ITC, or grant

• Accelerated depreciation over 6 years key in providing additional revenue stream to RE projects

Energy Prices

• Fossil fuels increasingly more costly/volatile• American Electric Power has asked to raise rates 45%

for Ohio customers over the next three years, while the Tennessee Valley Authority has raised electricity rates 20%, its largest increase in 30 years

• RE projects seen as price hedge vs. energy price hikes and future carbon tax costs

• Energy convergence coming, date unknown

• Once convergence happens, explosive growth potential

Average Residential Electricity Price in U.S. In 2008

U.S. Electricity Rates 2007 vs. PV

U.S. Electricity Rates 2015 vs. PV

PV Price Convergence

Increasing price for fossil fuel generation (lower left) will meet declining cost for renewables (upper left)

Technology Cost Structure

• PV prices declined with increased polysilicon supply into 2012

• Increased use of multiple light frequencies will lower price/kWh

• Wind project capital cost driven by:

• High U.S. demand

• Steel prices for turbine structures

• Import key components/unfavorable exchange rate

Project Funding

• Capital markets constrained due to financial crisis

• Lack of funding adversely affects project development and implementation

• Inflation’s impact could increase lending rates, thus reducing rate of return

• 2 MW PV - $10-14 M

• 150 MW wind - $300 M

• 250 MW CSP - $750 M - $1 B

U.S. Capital PV Investment

PV capital for projects is increasing with state RPS and federal tax incentives

RE Technology Capital Comparison

Need to factor in capacity factor in comparison: coal/nuclear 90%, wind 35-40%, solar 20%

Carbon Tax

• Carbon limits may be coming – will partially or totally close the cost gap between RE and fossil fuel generation

• Will be utility pass-through, increasing energy costs

Carbon Legislation At National Level

Source: B&V 2008 Strategic Directions In The Electric Utility Industry Survey

Hurdle Rate - Project Acceptance

• RE developers looking for 6 year payback

• Coincides with end of federal accelerated depreciation benefits in project year 6

• Revenue stream for RE project developers:

• Sale of energy

• PTC or ITC from federal government

• Sale of renewable energy credits to utilities

• Accelerated depreciation (tax write-off)

Transmission Constraints

• According to North American Reliability Council (NERC), new generation supplies forecast to outpace transmission development, constraining wind development with planned 145,000 megawatts of capacity over next 10 years

• Generation growth over 10 years: 21%

• Transmission line growth over 10 years: 10% with 1,700 circuit miles

Transmission Solutions

• Texas approved $4.9 billion transmission system upgrade moving power from West Texas to major population centers in 4 years. Capable of transmitting 18,500 MW of wind power. Cost: $4/month/retail customer

• National upsurge in transmission investment ($8 billion per year) due to Congressional action to increase transmission project allowed rate of return

High-Voltage Transmission Needs In The Future

More high-voltage transmission lines needed to harness renewable resources in West

Solar Energy

Photovoltaic (PV)

U.S. Solar Resources

Source: NREL

Alamosa 8.2 MW PV Plant

PV Data

• 1 megawatt (MW) per 10 acres

• Installed price $5M – 7M/ MW

• 1 MW of PV capacity produces 1,500-2,100 megawatt-hour (MWh) per year in energy

• 1 MW PV provide average annual energy for 200-280 Colorado homes

Different PV Applications

• Fixed – stationary on rooftop or ground-mounted

• Single-axis tracking – tracks sun from east to west during day, more kWh than fixed

• Double-axis tracking – tracks sun from east to west daily and seasonally north/south, more kWh than single-axis

• Concentrating PV – lens on PV panel to intensify the sun’s brightness

Alamosa 8.2 MW PV Plant

Double-axis tracking PV Single-axis tracking PV

Market Factors

• Oversupply dynamic emerged in 2009 due to polysilicon production capacity increase and recession

• Industry consolidation over next few years

• Demand growth forecasted 38% for 2009, 59% in 2010 per Deutsche Bank

Projected U.S. PV Installations

Tremendous growth in U.S. PV installations, with more projected through 2025

PV Projected Price Decline2007-2025 (cents/kWh)

PV Project Size Increasing

3 large Colorado PV projects - Denver International Airport 2 MW ground-mounted PV, August, 2008

Top 10 Solar Utilities

Xcel Energy (Public Service) 5th place of solar utilities; strong California and Nevada presence

Source: Solar Electric Power Association

Large Solar Utility Announcements

Source: Solar Electric Power Association

Concentrated Solar Power (CSP), Solar Thermal, or Solar Trough

CSP Data

• 250 MW per 1,600 acres (1 MW per 6.5 acres)

• 250 MW with 3-hour storage per 2,000 acres

• Installed price $3.0M to $4.0M per MW

• 1 MW of CSP capacity produces 3,200 MWhper year in energy

• 1 MW CSP provide average annual energy for 425 Colorado homes

CSP Process Flow

Similar to conventional generation plants, except solar provides heat to make steam for turbine generator

Source: NREL

CSP Collector Components

Absorber pipe receives heat from parabolic reflector, heating synthetic oil to 700-800 degrees F.

Source: NREL

CSP Collector Operation

Solar Collector Operation

Synthetic oil is circulated through solar collector to make steam for turbine generator

CSP Power Plant Components

Andasol 1 & 2 - Spain

Nevada Solar One

64 MW Trough plant built for Nevada Power in Boulder City, NV

CSP Growth Projection

CSP growth projected to 43,000 MW by 2025; water rights for cooling water could be governing factor

CSP Price Ranges 2007-2025

Total capital investment $53 billion

CSP Players

• Flagsol (part of Solar Millennium)

• Solel Solar Systems

• Acciona Solar Power (was Solargenix)

• Sener / ACS Cobra

• Solucar R&D (part of Abengoa)

• IST Solucar (part of Abengoa)

• Ausra

CSP Price Trends

• With full 30% ITC available, costs for “next” projects in SW US will be $130 -$150/MWh

• Costs in the $100 -$120/MWh are expected by the end of this decade for large scale projects

• R&D and other “efficiencies” will drop costs to below $100/MWh

CSP Advantages / Trends

• Storage of energy (heat) addresses peak energy, growing faster than base demand

• Reduces need for expensive, under-utilized gas peaking plants

• Applicability in tandem with combined cycle combustion turbine operations

• Economies of scale driving unit cost down, as typical projects are 100 – 500 MW range

CSP Advantages / Trends

• Technology advances in primary loop medium increasing temperature by 100 degrees F - higher energy production

• Demonstrated plant reliability beyond 20 years, lower Levelized Cost Of Energy (LCOE) by about 1.5 cents/kWh

• CSP market in the SW US can grow to 1-

2 GW per year

CSP Market for CSP in SW US

• Arizona: 2,000 MW

• Nevada: 1,500 MW

• New Mexico/West Texas: 1,000 + MW

• Colorado: 500 MW after 2010

Questions and Answers

Contact Information

Ron Miller, P.E.

303-723-5465

303-748-3441 cell

ronmiller74@comcast.net

http://www.linkedin.com/in/ronmiller10

“Drivers of the New Renewable Energy Transmission System” CLE Renewable Energy Transmission March, 2010 conference available at link above

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