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Home My WebLink About20170925Utah_OCS 1.10 NREL_Presentation 1-21-2015.pdfDNREL NATIONAL RENEWABLE ENERGY LASORATORY Wind Power Project Repowering: History,Economics,and Demand Wind Exchange Webinar Eric Lantz January 21,2015 NREL/PR-6A20-63591 NRELis a national laboratoryof the U.S.Department of Energy,Office of Energy Efficiency and Renewable Energy,operated by the Alliance for Sustainable Energy,LLC. Presentation Overview 1.Background -Concepts and Context 2.Status -U.S.and Globally 3.Economics -Conceptual and 'Actual'Plants 4.Future Demand -Expectations for the 2020s 5.Key Takeaways -Summary of Findings NATIONAL RENEWABLE ENERGY LABORATORY 2 Background Repowering can be defined in two ways: o Full repowering:complete dismantling and replacement of turbine equipment at an existing project site o Partial repowering:replacing selected turbine or plant components to extend the life of a given facility at some cost that is less than full repowering;may also trigger fewer legal hurdles Repowering offers various opportunities: o Increased project productivity o Improved grid support and interactions o Better utilization of high-value resource areas o Reduced visual impacts (fewer turbines per overall capacity) o Potentially,reduced avian and wildlife impacts Repoweringfirst emerged in the early 1990s in the California and Danish wind power markets and was followed by the Dutch and German markets in the 1990s and 2000s NATIONAL RENEWABLE ENERGY LABORATORY 3 Status Denmark: o Typically repowers 10s to 100s of MW per year o Has historically provided repowering incentives that are in addition to feed-in-tariffs o Cited constraints include:capital requirements of new projects,shifts in ownership models away from the community,limited economic value Germany: o Observed to have the largest potential market for repowering,estimated at approximately 6 GW o Typically repowers 10s to 100s of MW per year o Has historically provided repowering incentives that are in addition to feed-in-tariffs o Cited constraints include setbacks,turbine height restrictions,and limited economic value U.S. o 1980s and 1990s vintage technology in California represents the primary current opportunity for repowering in the U.S.(~2 GW),but has been limited by the 'California Fix'among other policy and regulatory factors To date,repowering has tended to be Full Repowering NATIONAL RENEWABLE ENERGY LABORATORY 4 Economics:Phase 1 Analysis Develop representative plants for four specific points in time:1999,2003,2008,2012 Quantify and compare the financial impacts of Full Repoweringand Developingan Adjacent Greenfield Site Quantify and compare the financial impacts of Partial Repowering,Full Repoweringand Developing an Adjacent GreenfieldSite,for the 2003 conceptual plant in 2025 Conceptual Plant Technology,cost,and Performance Parameters Year Turbine Rating Hub Height Rotor Diameter Commissioned (MW)(m)(m) 1999 0 7 56 48 2012 2 1 85 95 Source:Lantz et al.,2013 Operations Installed Capital Cost Net Capacity Factor"PPA Pricee ExpendituresPlant(Year 1)Commiccion Date Repower Partial Fixed VariableGreenfieldPartial2012PTC2012RepowerGreenfieldRepower.2012 20122012$lkW Repower S/MWh Available 2003 1 402 29 8%35 Yes 12 5 8 2 2020 1 816 1,725 42 D%42 0%57 No 12.5 6 1 2Ü25 1 770 i 68 1 L5Ü4 43 0 o 43 0 o 37 2 e 53 No 12 5 6 1 2030 1 712 I 626 430°a 430 o 51 No 12.5 6 1 'Histoncal data are dern ed nom iser and Bohnger 2012 e future data are derived from NRI L cost projection analyses te y Chapman et al 2t 12 I 5 Department of Energy 2003)cunent industrv trends and sent-structured interviews with owner operators NATIONAL RENEWABLE ENERGY LABORATORY 5 Economics:Conceptual Plants 1999 2003 Existing +Repower Existing +Repower Existing +Repower Existing +RepowerExisting+Repower Existing+Repower Existing+Repower Existing+z. Green Green Green Green Green Green Green Green 2015 2020 2025 2030 2015 2020 2025 Source:Lantz et al.,2013;Note:data illustrate value gained or lost as a result of a specific investment decision;as each of these plants is modeled at an equivalent size,the change in plant-specific NPVs can be compared across time;however,caution is advised against any direct assessment of wind plant profitability or return on investment,asthe overall magnitude of NPV is highly correlated to plant size Wind power plants built in 1999 appear to be reasonably profitable after about 15 years of operations,but both repowering and developingan adjacent greenfield could add additional value After 20 years,the economics start to shift,with full repowering becoming more attractive than an adjacent greenfield sometime between 20 and 25 years of operation For the 2003 facility,analysis suggests that buildingan adjacent greenfield plant in 2015 and 2020 is also the preferred alternative;however,repowering appears to become financiallyattractive a bit sooner,between 16 and 21 years of operation (2020-2025) The shorter expected lifetime for the 2003 facility is a function of its lower estimated PPA price, which results in lower overall profitability and allows increasing operationalcosts to erode the value of these projects,earlier in their life NATIONAL RENEWABLE ENERGY LABORATORY 6 Economics:Conceptual Plants 2008 2012 10)----------------------------------------------------- $(120)---- $(70)E×isting +Repower Existing+Repower Existing +Repower Existing +RepowerExisting+Repower Existing+Repower Existing+Repower Existing+Repower Green Green Green Green Green Green Green Green 2015 2020 2025 203o 2015 2020 2025 2030 Source:Lantz et al.,2013;Note:data illustrate value gained or lost as a result of a specific investment decision;as each of these plants is modeled at an equivalent size,the change in plant-specific NPVs can be compared across time;however,caution is advised against any direct assessment of wind plant profitability or return on investment,asthe overall magnitude of NPV is highly correlated to plant size Full repowering results in a reduction in the NPV of future after-tax cash flows, through 2030,for these more recent projects This effect is in part the result of historically high PPAs signed in 2008,but also results from the assumed declines in pricing that are expected as future technology advancements and cost reductions are realized Based on these results,more recent projects could ultimately delay repowering investments until 25 years of operation or beyond NATIONAL RENEWABLE ENERGY LABORATORY 7 Economics:Partial Repowering 2003 Plant Analysis of partial repowering assumes: o Replacementof rotor and drivetrain $14 ---------------------------------------------------------------------------- o Increase in NCF from 30%to 37%i o 15%cost reduction relative to a green ifield(~10%relative to repowering) o Construction in 2025 From these premises,the benefits of partial repowering come in well below that of developing an adjacent greenfield and full repowering i s2 Partial repowering solutions that can Existing+Green Repower PartialRepower be realized at lower cost wou Id like lar 6°urce:Lantz et al.,2013;Note:data illustrate value gained or lost as a result of a specific I ¶investment decision;as each of these plants is modeled at an equivalent size,the change in Prove more via ble plant-specific NPVs can be compared across time;however,caution is advised against any direct assessment of wind plant profitability or return on investment,as the overall magnitude of NPV is highly correlated to plant size NATIONAL RENEWABLE ENERGY LABORATORY 8 Economics:Case Study Analysis Case studies were developed for plants in the Northeast,on the West Coast,and in the upper Midwest $70 ----------------------------------------------------------- With the exception of the West Coast plant repowering,at the present time,does not appear to be overly compelling These results are consistent with decisions "Sao ----------E --------Mktwest:---- Existing plammadeonthegroundandtheresultsofthej920_____ 16ves prior conceptual analysis i Age and estimated project financials are the Existng+Repower Existin +Repo.ter Eosting +Repower primaryvariables affecting these results °' Source:Lantz et al.,2013;Note:Comparing the NPV across the three case studies is not appropriate. The absolute magnitude of the NPV is highly correlated with the size of the wind plant,as largerAn assumed lower canacitv factor for the .r r wind plants require higher levels of mvestment.Within each case study,it was always assumed thatgreenfieldinvestmentoptionontheWestbothgreenfieldandrepoweringdecisionswouldbeofthesamesize(i.e.,same rated capacity)and Coast also supports repowering relative to thus can be fairly compared. other regions where high quality resources remain available NATIONAL RENEWABLE ENERGY LABORATORY 9 Future Equipment Demand Supply chain demand can be approximated based on calculated s,soo --------------------------------------------------------------2sooo lifetimes 3000 _________________________________14000 Estimates assume:12000 i o 25%of existing facilities repower at 20 years --c r-d A 10000 y o 50%repower at 25 years of operation o Remaining 25%of the existing fleet are sooo assumed to continue to operate after 25 1,soo years or to be decommissioned e 600 1.000 4000 By in large U.S.repowering activity can be expected to remain rather modest °°° until the mid-to late-2020s,achieving a cumulative levels of 14 GW by 2030 2 17 2 Source:Lantz et al.,2013;Note:Results assume 1 MW of existing capacity is replaced by 1 MW of repowered capacity . Repowering demand could be expected to remain strong after 2030, based on the assumed lifetimes applied here as well as recent and projected average installation levels NATIONAL RENEWABLE ENERGY LABORATORY 10 Key Takeaways In the U.S.,projects that continue to operate in the black after 20 years generally have little incentive to repower,relative to investing in new greenfield sites The balance tends to tip towards repowering sometime between 20 and 25 years of operations,but may be even later for more recent plants,depending on future operations costs Partial repowering that only results in modest cost savings relative to full repowering can be expected have minimal impact on the market Repowering demand outside of California is not likely to have a noticeable impact until the mid-to late 2020s,but assuming healthy levels of wind installations into the future could ultimately constitute a large portion of the U.S. wind industry A number of variables could alter these conclusions and include: o Technology advancement o Wind resource quality,for new greenfield plants o Prices paid for wind generation,now and in the future o Operations expenditures escalation rates (and plant performance generally) o Cost savings achieved by repowering,relative to greenfield development NATIONAL RENEWABLE ENERGY LABORATORY 11 Additional Information and contact Details For additional reading,the full report and associated references can be found here:Wind Power Project Repowering:Financialhttp://www.nre .gov/docs/v14 Feasibility,Decision Drivers, and Supply Chain Effects o st /60 5 35.pd Eric Lantz,Michael Leventhal, and Ian Baring-Gould For specific questions email: er c.antz nre .gov NREL is a national laboratory of the U.S.Department of Energy Office of Energy Efficiency &Renewahle Energy Operated bytheAlliance for Sustainable Energy,LLC TNs report is available at no cost from the National Renewable EnergyLaboratory(NREL)atwww.nreLgov/publications. Technical Report NREUTP-6A20-60535 December 2013 Contract No.DE-AC36-08GO28308 NATIONAL RENEWABLE ENERGY LABORATORY 12