Finding a Place for Utility-Scale PV Plants in Europe

Transcription

1 Finding a Place for Utility-Scale PV Plants in Europe Companion article to the blog published in the European Energy Review on 21 November Frank Peter Leonard Krampe Matthias Deutsch Contact Frank Peter frank.peter@prognos.com Berlin, 21 November

2 Finding a place for utility-scale PV plants in Europe With the debate about future RE support schemes in Europe heating up, some argue that electricity generation from PV should primarily take place in the sunnier south of Europe for efficiency reasons. Accordingly, excess electricity could then be transported to northern regions. The idea of such longdistance electricity transmission, however, hinges critically on the absolute difference between PV generation s in those two regions. When this difference gets smaller, the remaining room for grid s diminishes as well. At some point, it becomes more -efficient to generate electricity from PV in the center than importing it from the south of Europe. Utility-scale PV plants are on track for exactly those kind of reductions, if the policy frameworks enable them to achieve this objective. The future of renewable energy support is currently discussed in both EU member states and at the European level. For example, whatever the next German government will look like, it will need to further develop one of the fundamental pillars of the German energy transition: the renewable energy support scheme. If election campaign rhetoric is of any indication, a pressing topic is the -efficiency of renewable energy support. And closely associated is the issue of whether support should explicitly discriminate between different types of renewable energy technologies. Meanwhile, in Brussels, two lines of discussion are under development: the Directorate General Energy just published its communication on the internal electricity market with guidance on the design of renewable support schemes. In addition, DG Competition is preparing guidelines on state aid in energy and environment. Both are relevant for the question whether renewable support should be technology-neutral i.e. without a differentiation of support levels by technology. Those discussions on technology-neutral support schemes have to be seen against the background of a larger EU debate on whether the Union should give itself just one target for greenhouse gas emissions (with the prospect of offering just one technology-neutral price signal), or additional targets for renewable energy and efficiency. The fundamental implication of technology-neutral support is more direct competition between different renewable energy technologies. As a consequence, investors would need to focus primarily on sites with the best resource potential available to remain competitive vis-à-vis other RE technologies. Such concentration on the best sites has been a dominant theme in the 2

3 European discussion for several years. Many have argued that within Europe, PV plants, for example, should be primarily erected in southern regions with the highest insolation in order to generate electricity at least. This notion has been frequently connected to directed transmission of excess electricity from the south to the centers of demand further north. Conventional wisdom holds that extending the grid is sufficiently cheap for such purposes. But there are clear limitations to this line of thought. New findings In a recent analysis 1 commissioned by a utility-scale PV plant constructor, we have shown that ground-mounted utility-scale PV power plants can make a -efficient and technically valuable contribution to electricity generation, provided that adequate support policies are in place. Already today, utility-scale PV plants are among the most efficient renewable energy sources for electricity generation in some parts of Germany. In the medium term, the levelized s of electricity (LCOE) from utility-scale PV plants are projected to fall below those of electricity generation from hard coal and gas. Given those forecasted developments, we need to reconsider the notion that PV plants should be erected at sites with the highest insolation, i.e. primarily in southern Europe. More specifically, we need to re-evaluate the of electricity generation plus transport via the grid. Transport from sites with high solar resource potential in the south to centers of high demand in northern and central Europe only make sense if there is still a sufficiently large absolute difference between regions. Otherwise, transmission through the grid would not pay off. With substantially decreasing of utilityscale PV plants, this absolute difference, however, is going to be reduced, making directed grid transport between different European regions less beneficial. Given the high insolation, generation s from utility-scale PV plants in southern Europe range between 5.7 and 6.6 cent/kwh. Due to the better resource potential, those s are below the ones in Germany. However, one needs to add long-distance transmission in a range from 2.7 to 3.7 cent/kwh. The resulting total of generation and transmission amount to 8.8 to 9.7 cent/kwh. Those values exceed the of electricity generation from utility-scale PV plants in the center and southern parts of Germany (see figure 1)

4 Figure 1: Levelized of electricity for PV utility-scale plants in Germany compared to those in Spain, Italy and Greece (including High-voltage direct current transport) in cent 2012 /kwh Generation in four German regions with different levels of insolation Total = Transmission Generation Note: LCOE for 40 years, including two investment cycles (2015 and 2035); summary tables of the underlying assumptions can be found in the appendix to this article Clearly, distributing RES generation across Europe has another important benefit that is not included in our LCOE estimates: Producing electricity at locations that are far away from each other increases the chances of averaging out fluctuations in generation, i.e. having less correlation between sites. In view of our LCOE estimates, however, one should critically reassess the idea of placing PV predominantly to the south of Europe. Instead, utility-scale PV plants should be primarily located close to demand. National and EU-wide discussions about the future design of RES support should elaborate on the ideas presented here and provide for support that makes such efficient generation with utility-scale PV possible. Assumptions Obviously, our LCOE estimates are up to discussion and could be further scrutinized. Summary tables of the underlying assumptions can be found in the appendix to this article. Two major assumptions in our calculations are as follows: 1. Different from some other analyses, the time horizon considered here spans 40 years, as we have also compared PV to conventional power generation, for which 40 years lifetime is a customary assumption (see our full report). Since a usual PV 4

5 system operates for 20 years, the analysis encompasses two PV investment cycles, with the first investment made in 2015, and the second in Therefore, some components accrue only once at the first investment cycle in Those include the s of construction preparation and PV module sub-structure, the s of security infrastructure, and possibly s of environmental compensation measures (i.e. planting trees). The key component is the of grid connection. At the second investment in 2035, those components do not need to be considered again. Instead, only module and possibly inverter s matter. Overall we assume a decrease in specific module of about 2% per annum, which does not appear overly ambitious given the decline observed in the past. 2. Conventional electricity transmission by alternating current is not economical at long distances. Therefore, transmission between European regions should be based on high-voltage direct current (HVDC) lines with much fewer losses of less than 1% per 100 km. In our calculations, transport s have been estimated with the same methodology that has been used for electricity generation s, including investment for HVDC lines, DC-AD converter stations and annual operation s. Moreover, we make assumption about annual full load hours (capacity factors) and capital s. HVDC investment s are derived from current investment s in the German Network Development Plan Most likely those estimates mark the lower bound of grid investment s and are therefore optimistic, i.e. conservative assumptions. If actual investment s were higher, the room for transmission s would be even smaller, making PV generation in Germany even more economical relative to generation in southern Europe. Appendix Comparison of the levelized of electricity for utility-scale PV plants over 40 years selected assumptions and results for Germany and Southern Europe 5

6 Assumptions and LCOE results for four German regions with different levels of insolation Utility-scale PV (40 years overall, with 2 investment cycles 2015/2035 and a yearly degradation of 0.5%) Dimension Investment 2012 /kw Electricity generation Fixed operating s Variable operating MWh/MW ,020 1, ,020 1,100 % of investment 2% 2% 2% 2% 2% 2% 2% 2% 2012/ /MWh WACC (real) % 5% 5% 5% 5% 5% 5% 5% 5% LCOE Dimension years time of operation 40 years time of operation Cent 2012 /kwh Cent 2012 /kwh Prognos AG 6

7 Assumptions and LCOE results for southern Europe Utility-scale PV (40 years overall, with 2 investment cycles 2015/2035 and a yearly degradation of 0.5%) Dimension Spain Italy Greece Spain Italy Greece Investment 2012/ kw 1,000 1,000 1, Electricity generation Fixed operating Variable operating MWh/MW 1,700 1,600 1,600 1,700 1,600 1,600 % of investment 2% 2% 2% 2% 2% 2% 2012/ /MWh WACC (real) % 6% 6% 6.5% 6% 6% 6.5% LCOE Dimension Spain Italy Greece 40 years of operation Cent 2012 /kwh Prognos AG 7

8 Assumptions and LCOE results for HVDC transmission HVDC transmission (40 years of operation) 2015 Dimension Spain Italy Greece Distance Km 2,100 1,400 1,500 Investment 2012/ /kw 1,625 1,170 1,235 Fixed operating s Variable operating s % of investment 3% 3% 3% 2012/ /MWh Full load hours h 4,000 4,000 4,000 WACC (real) % 5.3% 5.3% 5.3% LCOE Dimension Spain Italy Greece 40 years of operation Cent 2012 /kwh Prognos AG 8

9 Comparison of the levelized of electricity for utilityscale PV plants over 40 Years Generation in four German regions with different levels of insolation Total = Transmission Generation 2013 Prognos AG 9