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Your Tax Dollars at Risk

February 23, 2011

“Solar Plant to Generate Power After Sundown”, proclaimed a headline in the Wall Street Journal.

The Gila Bend, 250 MW concentrating solar power plant being built by a foreign company, Abengoa, received a $1.45 billion loan guarantee from the Department of Energy (DOE).

In other words, DOE used U.S. tax dollars to guarantee the loan of a foreign company. If the plant fails, the tax payer is on the hook for the money.

The plant itself will use salt beds to store heat so the power plant can continue to generate electricity for a few hours after the sun goes down. Of course, cloudy days will still be a problem.

Concentrating solar uses mirrors to focus sun light on a receiving unit, in this case a tower, where it heats a liquid to produce steam that then drives a steam turbine generator.

The electricity generated by concentrating solar is very expensive. The Gila Bend plant will cost $8,000 per KW to build.

Here are some comparisons of construction costs for other types of power plants.

TABLE
Method Fuel & Operating Costs Costs incl. Depreciation Construction Costs
Traditional Coal $0.02 /kWh $0.04 /kWh $2,000 /KW
Ultra Supercritical Coal $0.02 /kWh $0.06 /kWh $2,500 /KW
Natural Gas Combined Cycle NA $0.06 /kWh $1,200 /KW
Nuclear (Recent costs increasing) $0.02 /kWh $0.09 /kWh $4,000 /KW
Integrated Gasification Combined Cycle NA NA $5,000 /KW

 

Natural Gas Combined Cycle and Ultra Supercritical Coal power plants cost far less to build and generate electricity at a much lower cost.

To make matters worse, the true cost per KW must recognize that solar power plants have a low capacity factor. Capacity factor measures the actual amount of electricity produced by a power plant as compared with what it could theoretically produce based on its nameplate rating. The table shows adjusted costs for typical installations based on capacity factors.

TABLE
Alternative Capacity Factor Construction Costs
Wind, land based 30% $6,600 / KW
Wind, off shore 39% $6,200 to $12,800 / KW
Solar, PV 16% – 25% $24,000 to $37,000
Solar, concentrating 22% – 30% $12,000 to $16,000 / KW
Ultra-supercritical coal 80% $3,100 / KW

 

In the case of the Gila Bend plant, the capacity factor should be around 40% which results in an adjusted cost of $20,000 per KW.

Because states have enacted Renewable Portfolio Standards that require utilities to purchase electricity produced by renewable methods, such as wind and solar, this very expensive electricity will be foisted off on to the consumer. In this case, Abengoa has a 30-year purchase agreement with Arizona Public Service, so the electric bills of Arizona Public Service customers will go up.

If the RPS law is overturned, or if operating costs are higher than anticipated, or the salt beds don’t work as predicted, Abengoa could have difficulty meeting its loan obligations, and the tax payer will foot the bill.

If the system works as predicted, then the tax paying customer will foot the bill.

In either case, the ordinary consumer foots the bill.

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[To find earlier articles, click on the name of the preceding month below the calendar to display a list of articles published in that month. Continue clicking on the name of the preceding month to display articles published in prior months.]

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3 Comments leave one →
  1. February 23, 2011 10:12 pm

    I can’t understand how the Gila Bend solar power plant can have a capacity of 40 percent. I think you can theoretically calculate a capacity for solar with collectors operating in two dimensions and no clouds. You know it can’t be more than 50 percent because of nightfall. Due to the sun having small strength during the mornings and later in the day and less sun after noon June 21, I think the theoretical capacity factor would be less than 25 percent. They must be storing half the energy being picked up at noon to come up with these numbers. I think this is cheating with numbers.

    The energy being stored has got to be big. I think it must be 1000 Mw-hrs.

    I toured what was called Solar One in Barstow, CA in 1986. I asked the engineers the cost of electricity in cents per kw-hr. They said they were not allowed to give out this information. I suggested $1.00 per kw-hr and they said that was a good number. This was a 10 Mwe plant that never made that much electricity. It cost $141 million to build. In mornings and late afternoons the plant required more electricity to operate than it produced. In 1985 the plant had a gross output of 13,500 Mw-hr and a net output of 8,800 Mw-hr. I think my guess of $1 per kw-hr was too low. In terms of power output, this plant had a capacity of 9 percent.

    Regards, Jim Rust

    Heaven help the taxpayers on this Gila Bend plant if they go through with it. If the plant has zero capital cost for generating electricity(taxpayers pay for plant), operating electricity may be competitive. Otherwise the rate payers will be paying $1 per kw-hr or more

  2. February 26, 2011 10:20 am

    Jim:
    Sorry for the delay in responding, but I have been out of the country.
    You could very easily be right about the capacity factor.
    I made a rough attempt to factor in the additional generation after dark using the salt beds. As noted in the above table the capacity factor for concentrating solar is typically 22% to 30% depending on the type of concentrating solar and where it is located in the sunbelt here or in Spain.
    Donn

  3. May 15, 2011 5:18 pm

    I applaud your efforts to educate “the masses” and inject critical, incisive analysis into the energy debate. I have featured your website in a subpage titled “Other Useful Web Sites” in conjunction with my web-book, Free Market Solar Power: https://sites.google.com/site/freemarketsolarpower/home

    My book’s free, not even any ads, and no, I’m not shilling for any interest of any kind.

    My core thesis: Solar subsidies are like a narcotic — they feel good at first but are ultimately destructive. Once the free market brings Solar PV prices down to the point where Joe Six Pack invests in it on his own, end-point mass electricity consumption will substantially if not radically drop, and MAYBE fewer base load, brown power plants will need to be built (but what happens when 2 weeks of cloudy days befall a large area?).

    The lack of cost-feasible electricity storage and Solar PV’s variability (hence, its unattractiveness to base- and peak-load seeking utilities) plague its market. Throwing public money at it will only magnify its flaws, not fix them.

    I will be checking your site from time to time, and welcome any criticisms and research you may care to offer.

    — James Christopher Desmond (a reformed “greenie”)

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