Friday, 15 September 2017

The cost of building too many solar farms

Solar panels give us plenty of power in the summer when we don’t need so much and not much in the winter when we do. Building solar is like going to the shops to buy a winter woolly and buying a stack of T-shirts instead. Last time I wrote about this I focussed on our pattern of energy demand and how that can best be matched to wind and solar generation patterns. I concluded that we need some solar now but less in the future. That post was criticised for ignoring costs. So this time I will discuss the extra costs of investing in the wrong sort of renewables.

Solar power and onshore wind costs are similar, offshore wind a little more.
According to BEIS the costs for large scale PV and onshore wind are similar as shown in the chart[1]. This shows levelised costs per kWh generated for a range of technologies, including construction and connection, fuel and maintenance costs, different construction times, loan rates and. I won’t bore you with the details. Incidentally, based on the latest Contracts for Difference (CfD) auction the cost of offshore wind is considerably less than BEIS estimated, even though the report is less than one year old. This is probably due to lower rates for loans as the technology is deemed less risky than it used to be [2].

Levelised cost estimates for projects commissioning in 2020 £/MWh image from [1]. This report is less than a year old but the latest CfD auction results show that offshore wind costs have been overestimated [2].

We can do short term energy storage but not summer to winter.
If we install too much solar power we will have too much in summer and/or not enough in winter. This is a serious problem as we don’t have suitable technology for storing energy over long periods. Battery storage, flywheels, pumped hydro-electric power and so on are fine for hour to hour and maybe day to day but month to month is a problem and summer to winter totally impractical.

We need little solar now, even less in the future.
This chart shows current demand quarter by quarter matched optimally by a mix of solar, offshore and onshore wind, lifted from my previous post Does the UK need solar electricity. There I show that with current demand it does make sense to have some solar. However in the future we can expect winter power demand to increase as people move over to clean electric heating. This means we need less and less solar in the mix.

Current demand pattern matched by a mix of wind and solar power [3]. Wind gives most power in the winter while solar gives most power in the summer. Demand is higher in winter than summer so wind power is a better match. However, for current demand the optimum solution includes some solar. Shifting heating from fossil fuels to clean electricity will increase winter demand making wind a better match.

Beyond the optimum, adding more solar brings limited savings on wind.
What happens if we have more than the optimum solar? The chart below shows what happens if we add solar panels generating 1000 MWh/year assuming we are balanced to start with. Most of this is in summer (Q2 and Q3) and generation is lowest in Q4; this governs how much less wind power we can get away with and hence savings in the other quarters. Overall, our savings on wind power reduce generation by 412 MWh.

Reduced need for wind power to balance 1 MW solar power generation.
Based on quarterly load factors from [4] adjusted for predictions in [1].
Q4 is the critical one with lowest solar generation and this limits how much less wind we can get away with. With zero excess in Q4 we have large excess in Q2 and Q3.

Investing £1 million in solar saves perhaps £0.5 million on wind.
The costs of all the renewable types are overwhelmingly up front because wind and sunshine are free and maintenance is a fraction of the building cost. So having excess power in the summer doesn’t result in cost savings – we have already invested to generate the power whether we use it or not. The cost per MWh for solar and onshore wind are about the same and 1000 MWh solar saves around 400 MWh wind so if we invest £1000 in solar we need to invest £400 less in wind. The overall cost is £600 more than it would have been.

Offshore wind is more expensive so if you assume solar replaces offshore wind the savings are a little higher. Assuming offshore wind is 1.2 times the cost of solar, the savings on wind are about half the cost of the solar.

Private solar and private PPA agreements benefit solar owners.
The costs and benefits are split due to the nature of the market. A lot of solar is built in relatively small installations and the electricity generated is used by the owner. Alternatively, private power purchasing agreements are becoming popular [5][6]. For example a factory with a suitable roof might install its own panels but if it doesn’t have one it could do a fixed price PPA with a solar farm. This means that whoever owns the panels has guaranteed revenue. On the other hand typical large wind farms deal with the power retail companies (i.e. where most of us buy our power from) and may only get the market price. If there is too much power in summer that drops prices and hence their revenues, if they can sell the power at all. This introduces a lot of risk in their business and discourages investment.

The cost of wasted summertime wind is borne by consumers.
However, if the generators have a CfD deal, designed by the government to reduce risk, then in effect they still have a price guarantee. The catch is that the top up fees for the CfD are funded by the energy companies – and ultimately paid for by us consumers. This means that when Acme Corp gets their power direct from a solar PV farm, they might save money and they definitely gain green kudos. However, if this leads to wasted wind power in summer, the cost of that is borne by ordinary consumers, i.e. you and me.

SolarOnshore windOffshore wind
Pre development time (years)135
Construction time (years)023
Table data from [1]

Any renewables is better than none; solar power is easy to build.
There is an argument that we don’t have enough renewables energy of any sort now and any renewables is better than no renewables, however they are financed. This is hard to disagree with. What worries me is the perception that solar power is ‘easy’ (relatively easy to get planning permission, typically quick to build, see table above) whereas wind power is hard. This means solar power looks like a practical, achievable solution even though it is not – it may be achievable but it is not a solution, at least not anywhere near an optimal cost solution.

In the current economic climate solar may be the more feasible option, but the consequential extra costs will be borne by ordinary consumers.

[1] Electricity Generation Costs (BEIS) Nov 2016
[2] Offshore wind celebrates ‘astounding’ price reductions in 3.2GW CfD win (Clean Energy News) Sep 2017
[3] Does the UK need solar electricity (my blog) Sep 2016
[4] Energy Trends: renewables (ONS) Sep 2017
[5] PPA to lead UK solar claims developer panel (Solar Power Portal) Apr 2016
[6] Lightsource agrees largest UK airport solar project (Renewable Energy Focus) Mar 2016

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