introduction to renewable energy · 2020. 10. 6. · watts/m 2 in weak resource areas to 240...

Introduction to Renewable Energy

I N D U S T R Y O V E R V I E W

S E P T E M B E R 2 0 2 0C O N F I D E N T I A L

C O N F I D E N T I A L

I The Energy Transition

I N T R O D U C T I O N T O R E N E W A B L E E N E R G Y

110 GW of Wind and 85 GW of Solar Capacity Are Installed Nationwide

I T H E E N E R G Y T R A N S I T I O NI N T R O D U C T I O N T O R E N E W A B L E E N E R G Y

Wind and solar generation in the U.S. currently displaces roughly 4 TCF of gas generation per year

Source: https://www.seia.org/states-map, AWEA Wind 101

Wind Capacity Installations in the U.S. by MW Solar Capacity Installations in the U.S. by MW

5,871

3,108

3,423 973

880

1,816

4,062

1,952

152

268

391

30,217

8,173

6,524

2,364

1,742

3,6404,048

10,664

5,6591,201

7462,357

2,317 864`742

1,4591,987

29 208

1912

9

923214

149

120755

0

00 0 0

0

00

0

206

64

> 10,000 5,001–10,000 MW 2,501–5,000 MW

1,001–2,500 MW 501–1,000 MW 1–500 MW

0

< 50 MW < 200 MW

< 10,000 MW < 30,000 MW

< 1,000 MW

93

123358

3062,849

7862,402

550

10 1,26355

455 288

199216

308

278

138

1,4630

2

500

78

2381,477

6,4511,100

351

62

560138

1,514

51

181318 283 2,664

5,578

227

880

1,799

4,766 1,068

5,577

3,613

28,472

8

1,362

145DC: 95

3,386

1

Solar and Wind Accounted for 66% of New Electric Capacity Installed in 2019, Up from 28% in 2010

I T H E E N E R G Y T R A N S I T I O N

Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory, Wood Mackenzie U.S. Solar Market Insight 2019

Annual Electricity Generating Capacity Additions and Retirements, 2005-2019*

Planned Retirements in 2020– (8 GW)

Wind44%

Natural Gas22%

Solar PV32%

Other2%

Coal51%

Natural Gas33%

Nuclear14%

Other1%

Wind1%

Planned Additions in 2020– (24 GW)


(30)

(20)

(10)

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Gigawatts

Nuclear Coal Oil and Gas Other Wind Solar

2

The Cost of Onshore Wind Energy Has Fallen by 70% Over the Last Decade


$101 $99

$50 $48 $45$37

$32 $32 $30 $29 $28

$169

$148

$92 $95 $95

$81 $77

$62 $60 $56 $54

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$/MW

h

Levelized Cost of Wind Energy 2009-2019

Source: Lazard 2019 Levelized Cost of Energy Report. 3

The Cost of Solar Energy Has Fallen by 89% Over the Last Decade


Levelized Cost of Solar Energy 2009-2019

$323

$226

$148

$101$91

$72$58 $49 $46 $40 $36

$394

$270

$166$149

$104$86

$70 $61 $53 $46 $44

$0

$50

$100

$150

$200

$250

$300

$350

$400

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$/MW

h

Source: Lazard 2019 Levelized Cost of Energy Report. 4


Variations in fuel prices can materially affect the LCOE of conventional generation technologies, but direct comparisons to “competing” renewable energy generation technologies must take issues such as dispatch characteristics into account (e.g., baseload and/or dispatchable intermediate capacity vs. those of peaking or intermittent technologies)

Source: Lazard estimates.Note: Unless otherwise noted, the assumptions used in this sensitivity correspond to those used in the global, unsubsidized analysis as presented on the page titled “Levelized Cost of Energy

Comparison—Unsubsidized Analysis”.

Unsubsidized ± 25% Fuel Price Adjustment

x x

Renewable Energy

Conventional

x

$151

$75

$64

$36

$32

$126

$69

$28

$140

$115

$62

$38

$242

$154

$148

$44

$42

$156

$112

$54

$208

$195

$157

$75

$0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275

Solar PV—Rooftop Residential

Solar PV—Rooftop C&I

Solar PV—Community

Solar PV—Crystalline Utility Scale

Solar PV—Thin Film Utility Scale

Solar Thermal Tower with Storage

Geothermal

Wind

Gas Peaking

Nuclear

Coal

Gas Combined Cycle

Levelized Cost ($/MWh)

Gas Combined Cycle reflects a range of gas prices: $2.59 – $4.31

Lazard’s 2019 Levelized Cost of Energy Comparison—Sensitivity to Fuel Prices

5


Source: NREL.*Note: Map provides average wind speeds using 2017-2013 data modeled at 100 meters above surface level from NREL. Legend converted from wind velocity in m/s to W/m2 using the

Danish Wind Industry Association’s Wind Power Calculator: http://xn--drmstrre-64ad.dk/wp-content/wind/miller/windpower%20web/en/tour/wres/pow/index.htm

Wind Power(Watts / m2)

Not All Wind Resources Are Created Equal, Ranging from 200 Watts/m2 Near Load Centers to 800 Watts/m2 in Strong Resource Areas

>1,160850 – 1,160590 – 850400 – 590250 – 400150 – 25075 – 15030 – 75

…Not All Solar Resources Are Created Equal, But Vary Less, Ranging from 170 Watts/m2 in Weak Resource Areas to 240 Watts/m2 in Strong Resource Areas


Source: NREL.*Note: Map provides annual average daily solar resource using 1998-2016 data. Legend converted from kWh/m2/Day and represents average solar irradiance. The amount of power

generated also depends on other factors, such as the efficiency of solar panels. The amount of solar power utilized (is not represented here) will depend on various factors including price, timing of demand, and transmission availability and efficiency

Solar Power(Watts / m2)

>240230 – 240220 – 230210 – 220200 – 210190 – 200180 – 190170 – 180

• 20% of Texas energy came from wind and 1% from solar in 2019

• Wind penetration of the energy mix has reached levels as high as 58%

Texas is a Renewable Energy Leader—Thanks to Strong Resources, A Business-Friendly Development Environment, and Accessible Power Markets


Texas is a Renewable Energy Leader

Source: ERCOT, AWEA Texas State Fact Sheet, SEIA Texas State Fact Sheet, U.S. Energy Information Administration.

Current ERCOT Fuel Mix (2019)Growth of Wind and Solar % of ERCOT Generation, 2014 – 2019

Gas -CC

40%

Nuclear11%

Wind20%

Coal20%

Other2%

Gas7%

0

0.3

0.6

0.9

1.2

1.5

0

5

10

15

20

2014 2015 2016 2017 2018 2019

Wind (%) Solar (%)

5th in solar • Texas ranks 5th in installed solar power in the country (2nd in 2019) with 5,600 MW1st in wind

• Texas has more wind energy installed—30,200 MW—than any other U.S. state, which produces 20% of the state’s energy, and represents $53 billion in capital investment.

• This is largely the result of smart state policy such as the CREZ transmission line infrastructure

• ERCOT expects more growth by 2022, based on discussions with owners and developers• Wind capacity expected

to grow 56%

• Solar capacity expected to grow 557%

• Battery capacity is forecast to grow by 283% to 1,057 MW in 2021

8

State and Federal Policy Have Been the Primary Drivers of Supply and Demand for Renewables, Supplemented by Corporate/ESG Demand


Yearly Installed Solar Capacity and ITC History

30 states + DChave adoptedRenewable Portfolio Standards (RPS)

14 states + DChave committed to a zero-carbon energy mix by 2050

Presidential Candidate Biden’s platform calls for 100% clean energy by 2035

Source: AWEA Wind Powers American Businesses 2020, JCT, US Treasury, OMB, DBL Investors, NEI, DOE, 2019 AWEA Wind Powers America Annual Report, Solar Energy Industries Association 2019, NCSL

0 1000 2000 3000

GoogleFacebook

WalmartAT&T

MicrosoftAWS

Kimberly-ClarkGeneral MotorsDow Chemical

T-Mobile MW Contracted

Top Corporate Wind Purchasers

0 500

AppleAWS

TargetWalmart

SwitchGoogleKaiser…

PrologisSolvay

Fifth Third Bank MW Installed

Top Corporate Solar Installers

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

E

Year

ly In

stall

ed S

olar

Cap

acity

(MW

) Residential, PVNon-Residential, PVUtility, PVUtility, CSP

ITC Created

ITC Extended

ITC Extended& Expanded

ITC Extended

The federal Investment Tax Credit (ITC) supported the solar industry

• 1992: Federal government introduces the wind Production Tax Credit helps to launch the modern wind industry

• 2019: Credit extended at 60% of its value

• 2021: Tax credit will phase out for projects not online by end of 2024

3%

64%12%

21%

WindFossilOther RenewablesNuclear

The federal Production Tax Credit (PTC) supported the wind industry

State initiatives and potential new federal policies will propel growth 250+ major companies have set 100% renewable energy goals

Federal Incentives for Energy by Sector, 1947-2015

9


II Technology


Wind Turbines Convert Kinetic to Mechanical Energy, Which Spins a Generator to Produce Electricity

I I T E C H N O L O G YI N T R O D U C T I O N T O R E N E W A B L E E N E R G Y

Wind Turbine Diagram

Blades• Capture wind movement• Sweep 440 tons of air per

second in GE’s new 220 m offshore turbine, the Haliade-X

• Blade tip of the Siemens B75 travels at 180 mph

Rotor• Where blades meet• Spins a generator

Nacelle• Contains the gear box, low- and

high-speed shafts, generator, controller, and brake

Tower• Supports the structure of the

turbine • Made from tubular steel (shown

here), concrete, or steel lattice

Source: Siemens, DOE, Office of Energy Efficiency and Renewable Energy

Wind Turbine Parts

12

π is Wind Energy’s Best Friend


Source: AWEA 2019 Wind Powers America Annual Report, Vestas, GE, NEG

When the Vestas 47 came out in 1997 it had a swept area of 1,734 m2 and was considered state-of-the-art. The world’s most powerful turbine today—the Haliade-X—sweeps 35,950 m2

The Haliade-X has a swept area 21x larger than

the V-47

Evolution of the Utility-Scale Turbine—Average rotor diameter and hub height by year, 2000-2019

14

Offshore Wind is Expected to Grow, as Some Developers Target High, Consistent Wind Speeds and Fewer Siting Issues on the Open Ocean


U.S. Global

0

30

60

90

120

150

180

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

China

United Kingdom

Germany

United States

Netherlands

South Korea

Taiwan

France

Japan

India

Denmark

Belgium

Poland

Other

Cumulative Installations (GW)

U.S. offshore wind projects under development as of June 2018

Global offshore wind cumulative installation forecast

Connecticut825,000 MWh/year by 2025

New Jersey3,500 MW by 2030

Maryland>480 MW by 2022

Empire Wind1,800 MW

Maine5,000 MW by 2030

New EnglandAqua Ventus I

12 MW

New York2,400 MW by 2030

Massachusetts1,600 MW by June 2027

Icebreaker I20.7 MW

South Fork90 MW

Vineyard Wind800 MW

Block Island Wind Farm30 MW

Deepwater ONE1,100 MW

Bay State Wind2,000 MW

US Wind2,200 MW

Ocean Wind2,200 MW

Fishermen’s Atlantic City Wind Farm2,200 MW

Revolution Wind600 MW

Garden State Offshore Energy680 MW Slipjack

120 MWUS Wind Inc.248 MW

Coastal Virginia Offshore Wind12 MW

Kitty Hawk1,500 MW

Sources: Bloomberg NEF (2019), NREL (2019), AWEA U.S. (2019), JP Morgan (2019), Iberdrola

• Offshore wind projects tend to have fewer siting issues and less sensitive local politics than onshore projects

• The potential offshore wind pipeline is currently >25,700 MW

• BP recently entered into a strategic partnership with Equinor to develop offshore wind in the U.S., beginning with Empire Wind in NY (2 GW) and Beacon Wind in MA (2 GW)

• Larger turbines catch higher speed winds offshore (up to twice as much as in a medium onshore wind farm), and double wind speed equates to eight times more power

• Offshore projects are less intermittent than other renewables (with a capacity factor of ~45%), and may bring wind energy closer to population hubs in some areas

• Offshore wind installations are projected to triple by 2025

• Germany & the UK currently lead, with China catching up

15

• The ERCOT market generally chooses resources with the lowest variable costs to operate first & must balance generation with load

• Wind (and solar) are cheap: they do not incur fuel costs to operate

• On windy days, wind power tends to lower wholesale electricity prices

• Negative pricing: when supply exceeds the demand reachable by transmission & thermal generations cannot be backed down, ERCOT reduces wind generation—then the marginal generation source, wind sets the market price low or negative

• Low/negative prices lead to lower than expected returns for generators

ERCOT Price Duration Curve

Source: OPEC, CAISO, Bloomberg NEF, WoodMac, Yale School of Forestry, EIA, ERCOT, EPEX Spot, CAISO, SEMO, OTE, Watt-Logic*”Net Load” represents the difference between forecasted load (demand) and expected electricity production 16

I N T R O D U C T I O N T O R E N E W A B L E E N E R G Y I I T E C H N O L O G Y

• Electricity grid supply must meet demand to avoid blackouts

• In California, low-cost solar output during daylight hours floods the grid

• Grid operators must manage “net load” fluxes (stable electricity sources making up what solar does not produce) – these have declined during daylight hours as less expensive solar has come online

• In the mornings and afternoons, operators must ramp load rapidly up and down to match demand, which many conventional generators are not designed to do

• These conditions stress generators & contribute to evening price hikes

Ramping needs High penetration will mean new opportunities for use of electric power

The “California Duck Curve” Shows Steep Ramping Needs & Over-generation Risk*

(50)

0

50

100

150

$200

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

2011 2014 2017 2018

Electricity Price ($/MWh) Frequency of Hours> $0 > $50 >$100 > $200 > $300

2011 8,756 792 219 124 892012 8,780 287 93 30 162013 8,757 424 104 36 202014 8,716 898 199 63 342015 8,705 254 88 40 212016 8,653 281 111 33 222017 8,724 389 137 52 232018 8,730 584 188 79 57

Renewables Variability Presents New Challenges for Grid Operators

17

Storage Creates Opportunities for Resource OptimizationAffordable energy storage would complement the intermittency of renewable energy, and is a growing area of investment

Source: Center for Sustainable Systems at the University of Michigan, i3 connect, Deloitte, BNEF, REN 2019

• Traditional hydro pumped storage requires high capex, the right terrain, & and cooperative local communities

• Batteries (esp. lithium ion) gain traction as costs decline• Key issues include price and available duration of use

• ERCOT battery capacity is forecast to reach 1,057 MW by 2021

Small storage capacity expected to grow

Projects in ERCOT Queue by Capacity

I N T R O D U C T I O N T O R E N E W A B L E E N E R G Y I I T E C H N O L O G Y

Energy is lost if not used or stored

• Storage may gather excess energy when it is cheap and release it when energy is expensive

• Feasible storage time: ~4 hours• Complements the intermittent nature of renewables

Daily Energy Storage Demand and Load Leveling

0 4 8 12 16 20 24Time (hours)

Store Energy

Release Energy

Low Demand Period

High Demand Period

38 39 73 94 104163 163 16340

799 799

100 150

163

173173

38 39 7394 104

366

12351285

0

200

400

600

800

1000

1200

2015 2016 2017 2018 2019 2020 2021 2022

MW

Other Planned No Financial Security PostedFinancial Security Posted Cumulative MW Installed

18


0

10

20

30

40

50

60

70

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2014 2015 2016 2017 2018 2019

Number of Deals

Inve

stm

ent (

US$ B

illion

s)

Investment Number of Deals

Corporate and venture capital investment in energy storage grows

1,183

917

721 663588

381293

219 180 156

0

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2019 $/kWh

Source: Center for Sustainable Systems at the University of Michigan, i3 connect, Deloitte, BNEF, REN 2019*Includes EV investment geared towards related battery technology

Lithium-ion battery storage prices continue to drop each year

Decreasing Storage Prices Boost Incentives to InvestThe cost of lithium-ion batteries is falling exponentially

19


III Solar & Wind Farm Development


Continuous 1-2 Years 6-9 Months 3-9 Months 6-9 Months ~30 Years

The Wind Development Process Typically Lasts 3-4 Years

I I I S O L A R & W I N D F A R M D E V E L O P M E N TI N T R O D U C T I O N T O R E N E W A B L E E N E R G Y

Source: 2019 AWEA Wind Powers America Annual Report.

Prospecting

Land Control

PermittingInterconnection Process

Preliminary Engineering

Procure Turbines

PPA

Engineering

Construction Permits

Network Upgrades

ConstructionIn Service

Market Assessment Resource Review Siting Land

Counterparty Contract

Negotiation: Power Off-take

Construction and Project

Commissioning

Project OperationSeek Financing

Wind Development Timeline

21


IV The Future


What’s Happening in Houston?

I V T H E F U T U R E

While many cities aim to brand themselves as energy transition facilitators, Houston has a head start

• Early Players still active: EDPR, Pattern

• Start ups: Quidnet, Fervo, Key Capture, Broad Reach

• The City of Houston has committed to 100% renewable energy by 2025 through partnering with NRG

• Initiatives: Greentown Labs, Climate Action Plan, Houston Renewable Energy Alliance

• Houston-based PE funds are adding renewables to their portfolios

Hosting renewable energy companies

Building the ecosystem

Increasing interest from investors

Source: WoodMac, BloombergNEF, Reuters, The Carbon Capture & Storage Association (CCSA), Energy Strategy Reviews, company websites, City of Houston, The Greater Houston Partnership

Note: Green “rankings” weighed based on annual investment in renewable energy and emissions strategies; by Matthias Pick in Energy Strategy Reviews

• European oil majors with bases in Houston are expanding into renewables

Gathering Oil & Gas interest

“Houston must lead the world to an era of low-cost, reliable, and climate-friendly energy. Nowhere else in the world is there such aconcentration of scientists, engineers, and economists who understand energy systems and can affect the necessary change.”HOUSTON BUSINESSMAN BOBBY TUDOR AT THE GREATER HOUSTON PARTNERSHIP ANNUAL MEETING, JANUARY 2020


23

introduction to renewable energy · 2020. 10. 6. · watts/m 2 in weak resource areas to 240...

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