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.
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Renewable Energy
• Market drivers for renewable energy
• Solar energy
• Photovoltaic (PV)
• Concentrated Solar Power (CSP)
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Renewable Energy Project Drivers
• Renewable resource availability, technically-feasible
• Environmentally-acceptable
• Financially-viable
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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
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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
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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
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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
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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)
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Renewable Portfolio Standards
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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
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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
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Average Residential Electricity Price in U.S. In 2008
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U.S. Electricity Rates 2007 vs. PV
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U.S. Electricity Rates 2015 vs. PV
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PV Price Convergence
Increasing price for fossil fuel generation (lower left) will meet declining cost for renewables (upper left)
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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
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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
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U.S. Capital PV Investment
PV capital for projects is increasing with state RPS and federal tax incentives
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RE Technology Capital Comparison
Need to factor in capacity factor in comparison: coal/nuclear 90%, wind 35-40%, solar 20%
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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
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Carbon Legislation At National Level
Source: B&V 2008 Strategic Directions In The Electric Utility Industry Survey
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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)
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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
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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
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High-Voltage Transmission Needs In The Future
More high-voltage transmission lines needed to harness renewable resources in West
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Solar Energy
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Photovoltaic (PV)
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U.S. Solar Resources
Source: NREL
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Alamosa 8.2 MW PV Plant
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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
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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
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Alamosa 8.2 MW PV Plant
Double-axis tracking PV Single-axis tracking PV
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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
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Projected U.S. PV Installations
Tremendous growth in U.S. PV installations, with more projected through 2025
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PV Projected Price Decline2007-2025 (cents/kWh)
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PV Project Size Increasing
3 large Colorado PV projects - Denver International Airport 2 MW ground-mounted PV, August, 2008
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Top 10 Solar Utilities
Xcel Energy (Public Service) 5th place of solar utilities; strong California and Nevada presence
Source: Solar Electric Power Association
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Large Solar Utility Announcements
Source: Solar Electric Power Association
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Concentrated Solar Power (CSP), Solar Thermal, or Solar Trough
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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
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CSP Process Flow
Similar to conventional generation plants, except solar provides heat to make steam for turbine generator
Source: NREL
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CSP Collector Components
Absorber pipe receives heat from parabolic reflector, heating synthetic oil to 700-800 degrees F.
Source: NREL
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CSP Collector Operation
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Solar Collector Operation
Synthetic oil is circulated through solar collector to make steam for turbine generator
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CSP Power Plant Components
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Andasol 1 & 2 - Spain
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Nevada Solar One
64 MW Trough plant built for Nevada Power in Boulder City, NV
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CSP Growth Projection
CSP growth projected to 43,000 MW by 2025; water rights for cooling water could be governing factor
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CSP Price Ranges 2007-2025
Total capital investment $53 billion
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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
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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
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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
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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
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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
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Questions and Answers
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Contact Information
Ron Miller, P.E.
303-723-5465
303-748-3441 cell
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