CHILE LEVELISED COST OF ENERGY - NRDC · Chile Levelised Cost of Energy, April 2011 1 CHILE...
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CHILE LEVELISED
COST OF ENERGY
PRESENTED TO NRDC
APRIL 2011
TYLER TRINGAS, ENERGY ECONOMICS
Chile Levelised Cost of Energy, April 2011 2/ / / /
CONTENTS
• Introduction
• Objectives
• Levelised Cost of Energy Model Description
• Levelised Cost of Energy in Chile
• Impact of Transmission Costs
• Impact of CCS
• Impact of Fuel Prices
• Learning Curve Impacts
• Case Study: Time of Day Value
• Conclusions
Chile Levelised Cost of Energy, April 2011 3/ / / /
INTRODUCTION
• Bloomberg New Energy Finance (BNEF) is a leading provider of industry
information and analysis to investors, corporations and governments in the
clean energy and carbon sectors. BNEF has a dedicated global network of
125 analysts, based across 10 offices in Europe, the Americas, Asia &
Africa that continuously monitor market changes, deal flow and financial
activity, increasing transparency in clean energy and carbon markets.
• Natural Resources Defense Council (NRDC) commissioned Bloomberg
New Energy Finance to prepare an assessment of the levelised cost of
energy (LCOE) for various generation technologies in the Chilean power
sector and commissioned Valgesta Energía to provide Chilean data.
• Where the Chilean experience or data was limited or lacking, BNEF drew
upon its global database. Where indicated, BNEF conducted independent
research in Chile which also supplements the information provided by
Valgesta.
Chile Levelised Cost of Energy, April 2011 4/ / / /
OBJECTIVES
• The analysis first compares the levelised cost of energy (LCOE) for
conventional and renewable energy sources in Chile in 2011, 2020 and
2030 to show the evolution of the costs of non-conventional renewable
energy technologies.
• The analysis then shows the impacts of the costs of transmission, fuel
and pollution control investments on the LCOE.
• Finally, the analysis presents a scenario showing the possible impact of
non-conventional renewable energy on peak energy prices.
Chile Levelised Cost of Energy, April 2011 5/ / / /
LEVELISED COST OF ENERGY MODEL DESCRIPTION
Source: Bloomberg New Energy Finance
The levelised cost of energy
represents a constant cost
per unit of generation
computed to compare the
generation costs of different
technologies.
The specific LCOE is the
power price, in USD/MWh,
in year 1 that, escalating
with inflation through the
project life, exactly returns a
IRR (in this case, 10%).
By indicating the price at
which a technology can
profitably sell electricity, the
technique allows the LCOE
to be representative of a
competitive tendering
process for actual power
contracts.
Development
Cost
Capital
Equipment
Cost
Construction
Cost
Capacity
Factor
Equity
Investment
Post-Tax
Cash flows
IRR
LCOE
Power Price
GuessTax AnalysisVariable O&M
Revenues
Fixed O&M
Depreciation
Cash flow Analysis
Construction Analysis
Annual Operational Analysis
Chile Levelised Cost of Energy, April 2011 6/ / / /
39
30
45
32
35
51
56
68
73
82
197
155
156
193
225
346
102
169
137
137
179
259
91
111
155
108
284
221
242
277
328
0 100 200 300 400
Biogas/Landfill utilty-scale
Small Hydro
Large Hydro Aysen
Large Hydro
Biomass all feedstocks utilty-scale
Wind onshore utilty-scale
Geothermal flash utilty-scale
CCGT utilty-scale
Coal utilty-scale
Geothermal binary utilty-scale
STEG trough utilty-scale
STEG tower + heliostat utilty-scale
PV cSi utilty-scale
cPV two-axis tracking utilty-scale
PV cSi commercial
Diesel utilty-scale
NCRE LCOE Conventional LCOE Central Scenario SIC Energy Price SING Energy Price
560
FIGURE 1.1: 2011 LCOE CHILE LEVELISED COST OF
ENERGY
Source: Bloomberg New Energy Finance, Valgesta Energía
USD/MWh
Note: Large Hydro are non-Aysen projects, small hydro are less than 20MW.
Today, on an LCOE basis, a
wide range of non-
conventional renewable
energy (NCRE)
technologies, including
biogas/landfill gas, small
hydro, biomass, onshore
wind, geothermal are
competitive with the new
build cost of Chile’s
mainstay energy sources of
large hydro, natural gas and
coal.
Energy prices are from CNE
data and calculated as the
average of 1st quarter 2011
and the last three quarters
of 2010.
Chile Levelised Cost of Energy, April 2011 7/ / / /
39
30
45
32
35
60
56
78
77
82
131
110
92
174
128
450
102
169
137
137
179
121
91
121
169
108
159
133
143
249
187
590
0 100 200 300 400
Biogas/Landfill utilty-scale
Small Hydro
Large Hydro Aysen
Large Hydro
Biomass all feedstocks utilty-scale
Wind onshore utilty-scale
Geothermal flash utilty-scale
CCGT utilty-scale
Coal utilty-scale
Geothermal binary utilty-scale
STEG trough utilty-scale
STEG tower + heliostat utilty-scale
PV cSi utilty-scale
cPV two-axis tracking utilty-scale
PV cSi commercial
Diesel utilty-scale
NCRE LCOE Conventional LCOE Central Scenario SIC Power Price SING Power Price
FIGURE 1.2: 2020 CHILE LEVELISED COST OF ENERGY
Source: Bloomberg New Energy Finance, Valgesta Energía
Note: Large Hydro are non-Aysen projects, small hydro are less than 20MW.
*Programa de Estudios e Investigaciones en Energia - Instituto de Asuntos Públicos en Energía
Universidad de Chile. Diesel fuel prices beyond 2030 not modelled
By 2020, utility scale PV
and solar thermal systems
will be competitive
sources of energy without
subsidies.
With increasing thermal
fuel prices and decreasing
costs for renewables,
several technologies such
as wind, biomass,
geothermal and small
hydro will in some cases
be a cheaper option for
new energy capacity than
conventional
technologies.
Energy prices are based
on PRIEN* 2008 forecast
to 2030, “dynamic” case.
USD/MWh
Chile Levelised Cost of Energy, April 2011 8/ / / /
FIGURE 1.3: 2030 CHILE LEVELISED COST OF ENERGY
By 2030, most selected
renewable energy
technologies will be
cheaper or competitive
with thermal
technologies.
Energy prices are based
on PRIEN* 2008
forecast to 2030,
“dynamic” case.
39
30
45
32
35
52
56
81
78
82
104
87
74
155
104
470
102
169
137
137
179
105
91
123
172
108
127
106
115
221
151
0 100 200 300 400
Biogas/Landfill utilty-scale
Small Hydro
Large Hydro Aysen
Large Hydro
Biomass all feedstocks utilty-scale
Wind onshore utilty-scale
Geothermal flash utilty-scale
CCGT utilty-scale
Coal utilty-scale
Geothermal binary utilty-scale
STEG trough utilty-scale
STEG tower + heliostat utilty-scale
PV cSi utilty-scale
cPV two-axis tracking utilty-scale
PV cSi commercial
Diesel utilty-scale
NCRE LCOE Conventional LCOE Central Scenario SIC Power Price SING Power Price
610
USD/MWh
Source: Bloomberg New Energy Finance, Valgesta Energía
Note: Large Hydro are non-Aysen projects, small hydro are less than 20MW.
*Programa de Estudios e Investigaciones en Energia - Instituto de Asuntos Públicos en Energía
Universidad de Chile. Diesel fuel prices beyond 2030 not modelled
Chile Levelised Cost of Energy, April 2011 9/ / / /
FIGURE 2: IMPACT OF TRANSMISSION COSTS ON LCOE
USD/MWh
Source: Bloomberg New Energy Finance, Valgesta Energía
39
30
45
32
35
51
56
68
73
82
197
155
156
193
225
346
102
170
181
139
180
264
101
112
156
118
284
229
255
286
328
0 100 200 300 400
Biogas/Landfill utilty-scale
Small Hydro
Large Hydro Aysen
Large Hydro
Biomass all feedstocks utilty-scale
Wind onshore utilty-scale
Geothermal flash utilty-scale
CCGT utilty-scale
Coal utilty-scale
Geothermal binary utilty-scale
STEG trough utilty-scale
STEG tower + heliostat utilty-scale
PV cSi utilty-scale
cPV two-axis tracking utilty-scale
PV cSi commercial
Diesel utilty-scale
NCRE LCOE Conventional LCOE Transmission Cost
Central Scenario SIC Energy Price SING Energy Price
570 Except for distributed
generation (not connected
to the grid), new generation
sources require some
transmission build out
unless built adjacent to
existing transmission.
Renewables and large
hydro must be located
where resources are found
and therefore have a wide
range of possible costs.
Transmission costs for
stand-alone coal and gas
facilities will depend heavily
on where local regulations
permit project siting and
could vary significantly for
an individual project.
Chile Levelised Cost of Energy, April 2011 10/ / / /
FIGURE 3: 2011 LCOE WITH CCS
Source: Bloomberg New Energy Finance
USD/MWh
CCS technology is
expensive because it has
not yet been
commercialized. In
addition to incremental
CAPEX, it reduces a
plant’s operating
efficiency lowering
capacity factors.
As a consequence, in
2011 CCS could increase
the LCOE by a factor of 2.
BNEF does not predict
widespread deployment of
CCS until 2030, with costs
reductions in excess of
25% only occurring in
2050.
Note: Assumes Valgesta Central coal scenario and CNE SIC gas price forecast.
73
68
51
156
56
245
200
264
242
90
0 50 100 150 200 250 300
Coal
Natural Gas CCGT
Wind Onshore utility-scale
PV cSI utility-scale
Geothermal
NCRE LCOE Conventional LCOE Cost of CCS
Chile Levelised Cost of Energy, April 2011 11/ / / /
FIGURE 4.1: FUEL PRICE FORECASTS TO 2030
Source: Bloomberg New Energy Finance, Valgesta Energía
USD/ton
USD/MMBtu
0
50
100
150
200
250
300
350
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Coal Chile historic trend
Coal EIA trend
Coal Valgesta Central
Coal EIA + Export price
Coal CNE
0
2
4
6
8
10
12
14
16
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Gas CNE SING
Gas CNE SIC
Gas EIA
Future thermal prices
are very uncertain for
Chile and forecasts
range widely. These
forecasts have a large
impact on future LCOE.
Valgesta created a
weighted-average coal
forecast methodology
which is our base case
assumption although
some forecasts are
substantially higher.
The CNE forecast for
SIC from 2012 was used
as the base case for
natural gas.
Note: Prices assumed steady after 2030
Chile Levelised Cost of Energy, April 2011 12/ / / /
FIGURE 4.2: IMPACT OF COAL PRICE FORECASTS
Source: Bloomberg New Energy Finance, Valgesta Energía
NCRE follow a
predictable path for price
reductions in the long-
term. However, future
thermal prices depend
on very unknown fuel
prices.
This makes the point of
parity with other fuels
very uncertain but
possibly very near.
60
80
100
120
140
160
180
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Coal (historic trend) Coal (EIA trend) Coal (Valgesta Central)
Coal (CNE forecast) Wind onshore PV cSi utilty-scale
Solar Thermal expected grid parity possible grid parity
Range of coal
price estimates
USD/MWh
Chile Levelised Cost of Energy, April 2011 13/ / / /
FIGURE 5: LEARNING CURVE, CAPEX ASSUMPTIONS:
USDM/W
Source: Bloomberg New Energy Finance
USD/W
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Coal CCGT PV cSi residential roof
PV cSi commercial/BIPV PV cSi utilty-scale Wind onshore utilty-scale
Solar Thermal
Crystalline silicon PV
modules, fall in cost by 25%
for each doubling of global
capacity.
Wind turbine prices in Chile
are historically very high but
in the medium term we
expect them to quickly
converge with our global
averages.
Learning effects ultimately
slow as global markets
mature and capacity
doubles less frequently.
Tech 2010 2015 2020 2025 2030 % ∆ 2020 % ∆ 2030
Coal 3.17 3.17 3.17 3.17 3.17 0% 0%
CCGT 1.51 1.51 1.51 1.51 1.51 0% 0%
PV cSi residential roof 3.76 2.20 1.68 1.45 1.35 -55% -64%
PV cSi commercial/BIPV 3.48 2.08 1.61 1.38 1.29 -54% -63%
PV cSi utilty-scale 2.98 1.84 1.43 1.23 1.15 -52% -61%
Wind onshore utilty-scale 2.62 2.02 1.66 1.50 1.36 -37% -48%
Solar Thermal 4.61 3.00 2.58 2.22 1.90 -44% -59%
Chile Levelised Cost of Energy, April 2011 14/ / / /
FIGURE 6: GLOBAL PV EXPERIENCE CURVE
Source: Bloomberg New Energy Finance Solar Price Index,
Paul Maycock, Solarbuzz
0.1
1
10
100
1 10 100 1000 10000 100000 1000000
historic prices experience curve Chinese c-Si module prices
USD/W
MW
Using inflation-adjusted data
back to 1976 from Paul
Maycock, Bloomberg New
Energy Finance estimates
the industry learning rate at
25%. This figure shows blue
and purple points
representing the actual data
points from the historical
dataset, and the line is a fit
to the experience curve
formula. Cumulative volume
is on the x-axis and cost is
on the y-axis, both on a log
scale to make the
relationship display as a
straight line.
Chile Levelised Cost of Energy, April 2011 15/ / / /
FIGURE 7: GLOBAL WIND TURBINE PRICE INDEX
Source: Bloomberg New Energy Finance
Wind Turbine Price Index
€m/MW
0.790.86
0.95 0.960.88
1.00 1.03 1.02
1.10 1.10
1.21 1.20
1.061.02
0.98 0.98 0.98
H1
2004
H2
2004
H1
2005
H2
2005
H1
2006
H2
2006
H1
2007
H2
2007
H1
2008
H2
2008
H1
2009
H2
2009
H1
2010
H2
2010
H1
2011
H2
2011
H1
2012
Disclosed contracts H1 2010
Our Wind Turbine Price
Index includes analysis of
approximately 100 turbine
contracts globally, including
Latin America,
encompassing around 20%
of the global annual wind
market. Because onshore
wind turbines represent a
mature technology, the
learning curve is essentially
flat. Offshore wind turbines,
by contrast, represent an
emerging technology whose
costs are expected to
decline 15% in the period up
to 2030.
Chile Levelised Cost of Energy, April 2011 16/ / / /
FIGURE 8: LEARNING CURVE LCOE FORECAST BY
PROJECT COMMISSIONING DATE
Source: Bloomberg New Energy Finance
USD/MWh
50
100
150
200
250
300
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Coal utilty-scale CCGT utilty-scale PV cSi commercial
PV cSi utilty-scale PV cSi residential roof Wind onshore utilty-scale
Solar Thermal
Chile Levelised Cost of Energy, April 2011 17/ / / /
FIGURE 9.1: SIMPLIFIED TIME OF DAY MULTIPLIERS FOR
CALIFORNIA SHOWING PEAK ENERGY VALUE
Source: Bloomberg New Energy Finance, California Public
Utilities Commission
Value
multiplier
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Utility 1 Utility 2 Utility 3 Hour of day
This analysis only looks at a
constant USD/MWh cost,
however in reality energy
produced at times of peak
demand has higher value.
For reference, we include a
simplified perspective of the
“value multipliers” used by
California utilities to
represent this time of day
value. Customized
multipliers would have to be
developed for Chile.
These multipliers are used
to adjust power contracts
based on time of day the
project delivers power.
Chile Levelised Cost of Energy, April 2011 18/ / / /
FIGURE 9.2: SIMPLIFIED DAILY OUTPUT PROFILE OF
SOLAR TECHNOLOGIES
Source: Bloomberg New Energy Finance
% of total
output
Hour of day
0%
2%
4%
6%
8%
10%
12%
14%
16%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
PV - Commercial PV - Utility
Solar Thermal Electric Generation (STEG) STEG plus Storage
This figure shows a
typical daily output
profile of solar
technologies,also using
California as a
reference.
By multiplying the
curves in Figures 9.1
and 9.2, power from PV
and solar thermal are
worth 1.3 – 1.5x the
nominal USD/MWh paid.
We would expect results
to be roughly similar in
the SIC.
Chile Levelised Cost of Energy, April 2011 19/ / / /
FIGURE 10: SOLAR: RESIDENTIAL PV GRID PARITY VS. LCOE:
CHILE, MEXICO, BRAZIL POISED TO COMPETE
Source: Bloomberg New Energy Finance
Note: WACC = 10%; O&M = 1.5% of capex; system degradation = 0.7% per year; project life = 25
years; based on 2010 retail electricity prices; no electricity price increase assumed
Retail electricity prices (USD/kWh)
kWh/kW/year
Grid parity differs in each
country dependant on the
solar resource and avoided
cost of retail electricity.
The lines on the graph to
the left show how cost
declines in solar module
prices over time move more
countries into grid parity.
Chile is expected to hit retail
grid parity by 2014, although
sunnier parts of the country
will see it earlier.
BrazilChile
Peru
Mexico
Hawaii
CaliforniaUS
Spain
Germany
Italy
Denmark
France
Turkey
ChinaSouth Africa
Japan
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
700 900 1,100 1,300 1,500 1,700 1,900
Latin America
North America
Europe
Asia and Africa
$4.00/W
$2.00/W
Chile Levelised Cost of Energy, April 2011 20/ / / /
FIGURE 11: PROJECTED COST OF POLICY SUPPORT
(LCOE MINUS POWER PRICE)
Source: Bloomberg New Energy Finance
USD/MWh
Biomass
Geothermal
Small Hydro
Solar PV (utility)
Solar Thermal
-100
-50
0
50
100
150
200
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Wind High
Wind Low
Depending on the energy
policy framework Chile
puts in place, the costs of
scaling up renewable
energy will vary.
A rough estimate of the
costs of deploying each
technology can be made
by subtracting the
projected power price
from the projected LCOE
of a given technology.
A result greater than zero
indicates the amount of
payment required in
excess of the projected
power price.
Chile Levelised Cost of Energy, April 2011 21/ / / /
AREAS FOR FURTHER STUDY
• The Chilean renewable energy market is still very immature with few data points. Although,
the best available data was included in this report, global averages and local analyst
estimates were frequently used.
• As Chile’s energy matrix evolves, it is very unclear what entities (small or large independent
power producers, large corporates, state-backed entities) will actually be building future
energy infrastructure. The financing structures and hurdle rates of the each of these entities
could significantly change the actual price of energy from projects within a certain technology.
• Renewable resource information was of limited availability at the time of this study.
Preliminary analysis indicates Chile has world-class solar and geothermal resources and
reasonable wind and biomass resources however there are few projects to have confirmed
this output and a lack of detailed and publicly available studies.
• Other relevant costs and benefits are beyond the scope of the study, such as the costs of
pollution not related to equipment costs, the costs of integrating variable resources into the
grid, the benefits of diversification and other benefits and costs.
Chile Levelised Cost of Energy, April 2011 22/ / / /
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CHILE LEVELISED COST OF
ENERGY
TYLER TRINGAS