Energy Storage Replace Gas Plants

[KeyboardWarrior + 527]

@Wombat

 

We're talking about the Vulcan plant in Alberta okay?

We have a capital cost, a rated output, and an average output per installed kilowatt in alberta. 

https://www.energyhub.org/alberta/ Output first

 

Good, we'll bump it up to 1300 for you. 

Plant is rated at 400 MW, which is 400,000 kW. https://calgaryherald.com/business/local-business/greengate-secures-partner-to-finance-countrys-largest-solar-project/

Plant cost is at the very least $500 million, since that's what Denmark injected. We'll calculate returns based on this.

What are they getting for their power? It seems that when bridging the industrial rate with the residential rate and then accounting for rate cuts during grid overload, 7 cents per kilowatt hour seems fair. You can challenge this later if you'd like. 

400,000 * 1300 = 520 million kilowatt hours (A)

A * $0.07 = $35,000,000 per annum

$35,000,000 / $500,000,000 = 7.2% annual return. 

7.2% so far. Tell me about what else they're getting... please. 

Edited May 7, 2020 by KeyboardWarrior

[KeyboardWarrior + 527]

3 minutes ago, Wombat said:

I will ask again, how much does 20 years worth of NG to feed a generator cost? As Dan said, photons are free.

Doesn't matter. You get your money back faster by a fat margin. That's all anybody should care about. 

Solar's capital cost and yield on that cost are what make it problematic for now. 

Edited May 7, 2020 by KeyboardWarrior

[KeyboardWarrior + 527]

@Wombat

https://energypost.eu/developing-world-cashflow-analysis-shows-gas-coal-far-more-profitable-than-clean-energy/

Guess what... this isn't combined cycle either. They double the power for the same fuel amount. You know this. 

Edited May 7, 2020 by KeyboardWarrior

[Wombat + 1,028]

8 minutes ago, KeyboardWarrior said:

Doesn't matter. You get your money back faster by a fat margin. That's all anybody should care about. 

Solar's capital cost and yield on that cost are what make it problematic for now. 

Do you know what NPV is?

[Wombat + 1,028]

14 minutes ago, KeyboardWarrior said:

Doesn't matter. You get your money back faster by a fat margin. That's all anybody should care about. 

Solar's capital cost and yield on that cost are what make it problematic for now. 

OK, you are not accounting for life of project. CCGT may pay off 5 years, solar 7-8, but over 20-30 years, solar half the price because photons are free, NG is not. Business finance clearly not ur forte, so I can't educate you.

[BradleyPNW + 282]

On 5/4/2020 at 7:45 AM, Jay McKinsey said:

Northern Europe has a lot of wind instead and solar power can be sourced from the south, particularly Africa. They also have great access to pumped storage suitable geography in Norway. China is installing its solar in the sunny western part of the country.

That's for sure. Europe pipes in natural gas from the Middle East and Russia. Smaller gauge HVDC lines from North Africa/Southwest Asia would be relatively easy and cheap. However, most of the talk I've seen tends to favor curtailment rather than storage. Especially with a continental sized grid like this region. Or you could just build larger solar arrays on cheap land in countries that aren't very happy with Russia such as Ukraine or Turkey. 

Over the next ten years we'll get to the point where LACE makes it too expensive to keep existing fossil fuel plants in operation compared to shutting them down and replacing with solar. I'm not sure what happens after that. Maybe fossil fuel plants become more valuable and change the LACE figures because the market is saturated with solar profiles, or maybe thermal/chemical storage kills fossil fuels off entirely. (wrt grid energy, not transportation energy.) 

[KeyboardWarrior + 527]

1 hour ago, Wombat said:

OK, you are not accounting for life of project. CCGT may pay off 5 years, solar 7-8, but over 20-30 years, solar half the price because photons are free, NG is not. Business finance clearly not ur forte, so I can't educate you.

This is absurd. You can't seem to understand that the profits from gas are far higher than from solar. Solar has a long payoff because it simply doesn't earn anything. Too far beneath 10% returns; and if you're going by Buffet's advice on value investing, then trash this investment and buy some indexes.

Btw, solar isn't "7-8 years". You should consider 15 yeas to be a good payoff for solar. 

Let me spell this out for you. $1B in solar = under $100 M per annum. $1B in gas = $200 M per annum. 

Edited May 7, 2020 by KeyboardWarrior

[Jay McKinsey + 1,489]

3 hours ago, NickW said:

No doubt and will also have energy security* benefits for China

* another aspect of solar / wind that many on here overlook as regards net energy importers. 

That is an aspect I am always amazed at. With all the clamor about energy independence through oil and gas here in the US it is never mentioned that domestic solar and wind provides the same independence. 

[Jay McKinsey + 1,489]

 

6 hours ago, Wombat said:

All the more reason to require that wind farms should be forced to allocate 20% of production to battery storage!

No need for regulation, the market is very efficiently taking care of that as it is far more lucrative to store power at the production site to sell at peak than sell for low price or be curtailed when the wind is blowing or sun is bright. Most of this new CA storage purchase is going to be located at the production sites.

[Coffeeguyzz + 454]

Mr. Wombat

Your query regarding how much natgas is required over 20 years electricity generation just launched me into a long overdue dive into the 'Electricity Data Browser' section from the EIA.gov site.

For anyone with sufficient time - and interest - this site offers up an incredibly detailed, timely array of info ranging all across the spectrum of power generation in this country - including renewables - right down to the individual plant level.

 

I just randomly targeted about 10 new CCGPs located in Florida, Pennsylvania, Ohio, and Massachusetts.

Although some variability exists, the massive (~1,500 Mw) plant in Northeast Pennsylvania, the Lackawanna Energy Center, provides a brief, illustrative example of what's going on.

 

Using January 2020 data ... Production ~900,000 MegawattHOURS (!)

Natgas consumed ~5.8 billion cubic feet

Price of fuel (Ohio sourced, as per EIA) ~$2/mmbtu ... aka per 1,000 cubic feet.

Cost of January's fuel for LEC complex $11.66 million. (5.8 bcf@$2/mmbtu).

Revenue at average PJM wholesale pricing of $25/MwHOUR gives $22.4 million gross revenue for January. (~900,000×$25).

 

Summary ... Fuel cost  11 1/2 million.

                       Revenue  22 1/2 million.

 

Deeper dive ... the ~29000 MwHOURS  per DAY sold in January (900,000÷31) are less than the theoretical ~35,000 Megawatthours per day with this plant's nameplate being 1,485 Megawatts.  (24×1,485).

So ... what this 'Real World' illustrative example may show is that the hours where $2 fuel is NOT being burned is the low demand, low revenue-producing hours. Although this particular plant was offline only briefly in January, some of the others were non productive (and non fuel-burning) for more hours throughout the month(s).

As this plant is a stone's throw from Cabot's wells, the actual fuel price may even be lower. (Private contractual terms are seldom publicised).

The other plants surveyed were in this ballpark with the Massachusetts' Salem Harbor plant having significantly higher fuel prices.

 

Overall, the efficiency of this type of power generation seems to be exceptionally robust for consumers looking for reliable, economic electricity.

Edited May 7, 2020 by Coffeeguyzz

[Jay McKinsey + 1,489]

5 hours ago, Wombat said:

I disagree. Here in Australia, we have barely scratched the surface when it comes to solar/wind penetration, yet wholesale price regularly hits down-limit of minus $1000. Seasonal shifting will indeed become booming market sector, including batteries, H2, and pumped Hydro.

You may be right. It will vary greatly between geographical regions. Sure is going to be fun watching the economics unfold!

[Jay McKinsey + 1,489]

@Coffeeguyzz

The EDB is one my favorite toys! I made a color coded chart that I use for easy quick reference that you might like. I'm so use to my color choices it drives me nuts when I see articles using the default random color choices. 

https://www.eia.gov/electricity/data/browser/#/topic/0?agg=2,0,1&fuel=vtvv&geo=g&sec=g&linechart=ELEC.GEN.HYC-US-99.M~ELEC.GEN.NG-US-99.M~ELEC.GEN.WND-US-99.M~ELEC.GEN.TSN-US-99.M~ELEC.GEN.NUC-US-99.M~ELEC.GEN.COW-US-99.M~&columnchart=ELEC.GEN.ALL-US-99.M~ELEC.GEN.COW-US-99.M~ELEC.GEN.NG-US-99.M~ELEC.GEN.NUC-US-99.M~ELEC.GEN.HYC-US-99.M~ELEC.GEN.WND-US-99.M&map=ELEC.GEN.ALL-US-99.M&freq=M&ctype=linechart&ltype=pin&rtype=s&maptype=0&rse=0&pin=

Edited May 7, 2020 by Jay McKinsey

[KeyboardWarrior + 527]

8 hours ago, Wombat said:

Goodbye coal?

Ever heard of supercritical coal? Coal plant efficiencies 50+%, and higher with "ultra supercritical" coal plants. 

[KeyboardWarrior + 527]

8 hours ago, Wombat said:

Wrong. Once a few more of your LNG plants completed over next 24 months, Henry Hub natural gas price will jump to at least $4/mmbtu, and will be EVEN LESS COMPETITIVE with solar/battery.

Sadly for you, my calculations are done with $3 per million btu, and you're still nowhere near competitive even with that rate. 

[KeyboardWarrior + 527]

He'll either run off or ignore the obvious financial conclusion. 

[Jay McKinsey + 1,489]

5 hours ago, KeyboardWarrior said:

@Wombat

 

We're talking about the Vulcan plant in Alberta okay?

We have a capital cost, a rated output, and an average output per installed kilowatt in alberta. 

https://www.energyhub.org/alberta/ Output first

 

Good, we'll bump it up to 1300 for you. 

Plant is rated at 400 MW, which is 400,000 kW. https://calgaryherald.com/business/local-business/greengate-secures-partner-to-finance-countrys-largest-solar-project/

Plant cost is at the very least $500 million, since that's what Denmark injected. We'll calculate returns based on this.

What are they getting for their power? It seems that when bridging the industrial rate with the residential rate and then accounting for rate cuts during grid overload, 7 cents per kilowatt hour seems fair. You can challenge this later if you'd like. 

400,000 * 1300 = 520 million kilowatt hours (A)

A * $0.07 = $35,000,000 per annum

$35,000,000 / $500,000,000 = 7.2% annual return. 

7.2% so far. Tell me about what else they're getting... please. 

What else they are getting is revenue from the sale of carbon credits.  As I understood it, that is what made this project economically viable. The cost of solar hasn't dropped enough to be favorable in such poor solar conditions. Seems like wind would be a much better choice for Alberta. What I don't understand is why they chose to build low grade solar in a high grade wind neighborhood, seems they should still be able to sell their carbon credits with wind.

But in regard to the larger question of the profitability of solar/wind vs fossil I think it would be much more appropriate to look at a place where they compete more directly such as Texas which has great conditions for solar wind and fossil. I'll see if I can find some numbers.

Just for reference I will note that the discussion of the Alberta solar project was in a different thread.

Edited May 7, 2020 by Jay McKinsey

[KeyboardWarrior + 527]

3 minutes ago, Jay McKinsey said:

What else they are getting is revenue from the sale of carbon credits.  As I understood it, that is what made this project economically viable. The cost of solar hasn't dropped enough to be favorable in such poor solar conditions. Seems like wind would be a much better choice for Alberta. What I don't understand is why they chose to build low grade solar in a high grade wind neighborhood, seems they should still be able to sell their carbon credits with wind.

But in regard to the larger question of the profitability of solar/wind vs fossil I think it would be much more appropriate to look at a place where they compete more directly such as Texas which has great conditions for solar wind and fossil. I'll see if I can find some numbers.

Just for reference I will note that the discussion of the Alberta solar project was in a different thread.

I agree with all of this, and I’ll go ahead and find out how much they’ll be making from the credits. 

I’m in favor of desert solar, and I’ll probably do more research on wind viability. Solar panels in the south and southwest basically get a 50% revenue boost, cutting the payoff time quite a ways as you’re definitely aware. 

[KeyboardWarrior + 527]

If everything I've done is correct, a carbon credit is equivalent to 2.48 MWh at 100% efficiency. (Is that how they do this?) By division, if a credit is $30 per ton of CO2, then that's an extra $12 per MWh they'll be receiving. So, I simply turn my 7 cents per kWh into 8.2 cents per kWh. Let's see what percent return will be now.

As far as I know, there is no more government financing in Canada for solar projects, so $500 million is the cost and that's it. 

[(400,000 kW * 1300 kWh/y * $0.082) / $500,000,000] * 100 = 8.5% return yearly. So we've got a twelve year payoff assuming they aren't paying taxes on farm earnings. Nice. Too bad the boost was artificial via taxing solutions. In my opinion a carbon tax doesn't truly make something profitable because credits have no intrinsic value. 

Now, traditional gas plants can break even after 5 years when gas is at $3.00. I imagine combined cycle has the same breakeven period but surpasses the traditional system by a large factor. 

Edited May 7, 2020 by KeyboardWarrior

[Wombat + 1,028]

5 minutes ago, KeyboardWarrior said:

If everything I've done is correct, a carbon credit is equivalent to 2.48 MWh at 100% efficiency. (Is that how they do this?) By division, if a credit is $30 per ton of CO2, then that's an extra $12 per MWh they'll be receiving. So, I simply turn my 7 cents per kWh into 8.2 cents per kWh. Let's see what percent return will be now.

As far as I know, there is no more government financing in Canada for solar projects, so $500 million is the cost and that's it. 

[(400,000 kW * 1300 kWh/y * $0.082) / $500,000,000] * 100 = 8.5% return yearly. So we've got a twelve year payoff assuming they aren't paying taxes on farm earnings. Nice. Too bad the boost was artificial via taxing solutions. In my opinion a carbon tax doesn't truly make something profitable because credits have no intrinsic value. 

Now, traditional gas plants can break even after 5 years when gas is at $3.00. I imagine combined cycle has the same breakeven period but surpasses the traditional system by a large factor. 

You still haven't done NPV calculation over 20 years. Really doesn't matter if gas "breaks even" after 5 years, solar 10 years. After 5 years, gas plant operating cost still high, after 10 years, operating cost of solar close to zero. Why do you think many US utilities going solar despite cheap NG? It is because solar cheaper over life of project. https://oilprice.com/Alternative-Energy/Renewable-Energy/Can-Anything-Stop-The-Renewable-Revolution.html

[KeyboardWarrior + 527]

27 minutes ago, Wombat said:

You still haven't done NPV calculation over 20 years. Really doesn't matter if gas "breaks even" after 5 years, solar 10 years. After 5 years, gas plant operating cost still high, after 10 years, operating cost of solar close to zero. Why do you think many US utilities going solar despite cheap NG? It is because solar cheaper over life of project. https://oilprice.com/Alternative-Energy/Renewable-Energy/Can-Anything-Stop-The-Renewable-Revolution.html

I understand this concept. It's the same reason nuclear plants take longer to break even despite the fact that they outearn gas, so here's the deal. 

In the scenario of gas vs nuclear, nuclear takes longer to earn back its capital but its earnings per dollar of invested capital are higher than gas.

In the scenario of gas vs solar, gas has higher earnings per dollar of invested capital with all costs considered for every single year of operation. Sure, solar has no operating cost, but it makes fuck all for profit. You get a 20% return every year you run a gas plant, but an 8-10% return for a solar plant. 

This is just the way it is. Companies are switching because of tax incentives and the ability to deduct panel depreciation (up to 85% I believe), but not at all because it's better than gas. 

In 20 years you will have spent $8 billion on gas, but will have made $12 billion in revenue and $4 billion in profits. For 20 years of a solar plant, you'd have made maybe $800 million along with whatever you spent on building the thing. To be more specific, with the figures provided by the Vulcan plant, let's scale it up to 1000 MW rating. That would cost you $1.5B and your earnings would be $110 M every year. In twenty years you'd have paid for your $1.5B (with NO interest considered) and made $500-$600 million. So, $4B or $600M? Which would you prefer? After 20 years remember. 

Edited May 8, 2020 by KeyboardWarrior

[markslawson + 1,042]

11 hours ago, Wombat said:

Makes no difference. They will be used for all of the above, peak load management AND frequency control management AND output replacement. That is the beauty of batteries. Point of the article is simply that: "They are coming now"! No need for technical details?

I agree that they will probably be used for whatever, but of course they remain a niche market. As battery installations are still fairly infrequent I strongly suspect that at the moment they are also only marginally profitably. This is difficult to check as they tend to be part of larger projects with no separate figures available for them. If you can point to non-activist material on profitability I'd be interested. However, as renewables often mess up network pricing and supply they may well turn a profit - one bad idea making up for another. One poster was trying to sell me the idea that battery prices are in free fall. They have been saying the same thing about PVs and wind turbines for years now and those generators still have to be helped by mandates...  

[markslawson + 1,042]

12 hours ago, Wombat said:

Actually, both wind AND solar make sense in Australia now, coal and NG no longer. Victoria building large wind farm in Bass Strait that will power 1.1 million homes.

This is just more of the same nonsense that has been put about for decades now. They make as much sense as they always did which is none.. the new wind farms are the result of Victorian state climate targets, not because of any actual advantage wind farms have.. then the poor bunnies that run the grids somehow have to juggle inputs and outputs to make it work. One solution adopted in Australia is to pay major users to stay off the network in times of high demand.  

[Wombat + 1,028]

46 minutes ago, markslawson said:

This is just more of the same nonsense that has been put about for decades now. They make as much sense as they always did which is none.. the new wind farms are the result of Victorian state climate targets, not because of any actual advantage wind farms have.. then the poor bunnies that run the grids somehow have to juggle inputs and outputs to make it work. One solution adopted in Australia is to pay major users to stay off the network in times of high demand.  

That is because we do not yet have enough solar and wind generation, let alone storage capacity. Snowy hydro 2.0 will fix this.

[Wombat + 1,028]

48 minutes ago, markslawson said:

This is just more of the same nonsense that has been put about for decades now. They make as much sense as they always did which is none.. the new wind farms are the result of Victorian state climate targets, not because of any actual advantage wind farms have.. then the poor bunnies that run the grids somehow have to juggle inputs and outputs to make it work. One solution adopted in Australia is to pay major users to stay off the network in times of high demand.  

The SA to NSW interconnector will also help.

[KeyboardWarrior + 527]

@Wombat

Let's do NPV

Both plants are rated at 1000 MW and will sell all of their power.

Solar plant gets $80 per MWh, gas plant gets $70 per MWh.

Gas plant costs $1B, solar costs $1.5B.

20 year period. Gas is $3 per million btu.

interest is 5%

GAS

[($200,000,000 * 20) / ((1 + 0.05)^20)] - $1,000,000,000 = approx $500,000,000

SOLAR

[($110,000,000 * 20) / ((1 + 0.05)^20)] - $1,500,000,000 = -$670,000,000

Is this correct?