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)

Copyright© 2010 Ronald L. Miller. Material can be shared or copied with attribution to
the copyright holder. http://www.linkedin.com/in/ronmiller10 2

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 Decline
2007-2025 (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

Source: Solar Electric Power Association

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


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 MWh
per year in energy
• 1 MW CSP provide average annual energy
for 425 Colorado homes

CSP Process Flow

Source: NREL

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


CSP Collector Components

Source: NREL

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


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

UC-Denver GEM program Renewable Energy Trends, Solar Overview

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