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Power - Wind turbine - 19,200 kW / Canada
Case study assignment
You have been hired by a wind energy project developer that is interested in purchasing older windfarms and repowering them with modern wind turbines. You have been asked to look at an existing wind energy facility and prepare a pre-feasibility study on their behalf. The site that the firm is considering is a 19 MW facility consisting of 52 wind turbines that are 10 years old, no longer supported by the original manufacturer, and the operations & maintenance costs are rising. The firm wants to examine the possibility of repowering the facility with 19 MW of newer, more efficient turbines. The firm wants to use a Nordex N43 600 kW model for this project. Based on original wind resource studies, as well as ongoing wind monitoring, it is thought that the site has anomalous wind shear, such that higher towers put rotor blades in lower wind speeds. Thus, a 40 m tower has been chosen over taller versions.
Among the challenges of the project are the complications of using, wherever possible, existing infrastructure (wires, substation, etc.) and certain limitations in the existing supply contract. The windfarm has a contract under a special government renewable energy program from the 1980's, designed to explore and stimulate renewable energy. This 20-year contract does not accommodate green power premiums or the sale of emissions reduction credits, and requires government approval for significant changes to technology, sites or contract terms.
Site information
The site is located in southwest Alberta, on a high ridge that is situated almost perpendicular to the strong local winds. The nearest weather data are from Lethbridge, AB, however the firm has access over 10 years of nearby wind data at 10 m and has found the average wind speed to be 1.1 m/s higher than reported at Lethbridge. The original wind study suggested that the wind shear is unusual at the site: the wind shear exponent is 0.15 to about 30 m, then begins to reverse, and wind speeds are actually thought to decrease with increasing height. The site already includes a substation for interconnection, and there is good access for cranes and construction equipment. With communities nearby, the cost of travel and accommodation is modest.
Financial information
Financial figures for the analysis are provided by the firm (income tax rate of 28%, inflation at 2.5%, debt ratio of 70%, debt interest rate of 8.5%, discount rate of 8.5%, and a debt term of 10 years). The debt term of the project was originally 20 years, but with only 10 years left in the contract, must also now be 10 years. The project does not qualify for the immediate expensing of capital costs permitted under Canadian tax law for energy exploration investments. The capital cost of all new wind turbine equipment is therefore depreciated at a 30% declining balance. The repowered project is expected to last for 25 years. The price for the remaining 10 years of the contract is fixed at $0.06/kWh. It is assumed that the salvage value of the existing equipment will equal the cost of decommissioning and removal.
Prepare a RETScreen study, documenting any assumptions that you are required to make, and report on the significant conclusions from this analysis.
Solution
The worked-out solution is the data file selected from within the RETScreen Project Database. The user automatically downloads the Project Database file while downloading the RETScreen software.
Teacher's notes
Results
In 1993 and 1994, the Cowley Ridge Windplant was developed as part of a contract under the Alberta Small Power Research & Development Act (SPRD). The act provided for 20-year contracts for selected renewable energy projects, and set legislated prices for them. Cowley Ridge received a "flat" $0.06/kWh.
The project was developed by Kenetech Wind Power and used their wind turbine, the KVS-33. This variable speed, 33-m rotor diameter wind turbine was nominally rated at 360 kW, and the project consists of 52 of these machines. The project was sold to a Canadian utility, who took advantage of certain capital cost allowance tax opportunities in order to make the project economic. Unfortunately, within several years Kenetech went bankrupt, and manufacturer support for the wind turbines disappeared. Keeping the machines operational and efficient is consequently a great challenge, but has been successfully done. Recently, the project changed hands again, and talk of repowering the facility has surfaced.
System description
The wind turbine that has been proposed for repowering is a Nordex Balcke N43 600, rated at 600 kW peak output, and using stall regulated rotor blades. It generates electricity at 690 VAC, 3-phase. Energy is transformed to 34,500 volts at transformers adjacent to each turbine, and delivered to the grid via an existing substation, connected to a 69,000-volt transmission line. The installed cost of a project of this scale would typically be about $1,600/kW when all project costs are included.
Lessons learned
Repowering an existing project may not always be as attractive as one would think. Although capital costs have declined, the tax regime and original advantages for projects may change and affect the financial viability of the facility in adverse ways. With electricity sales becoming deregulated and more competitive, the likelihood of large projects with long term contracts is reduced, and developers and operators must be creative in order to have successful projects, technically as well as financially.
Photo
Wind farm - Cowley Ridge, Alberta, Canada
References
Case study assignment
You have been hired by a wind energy project developer that is interested in purchasing older windfarms and repowering them with modern wind turbines. You have been asked to look at an existing wind energy facility and prepare a pre-feasibility study on their behalf. The site that the firm is considering is a 19 MW facility consisting of 52 wind turbines that are 10 years old, no longer supported by the original manufacturer, and the operations & maintenance costs are rising. The firm wants to examine the possibility of repowering the facility with 19 MW of newer, more efficient turbines. The firm wants to use a Nordex N43 600 kW model for this project. Based on original wind resource studies, as well as ongoing wind monitoring, it is thought that the site has anomalous wind shear, such that higher towers put rotor blades in lower wind speeds. Thus, a 40 m tower has been chosen over taller versions.
Among the challenges of the project are the complications of using, wherever possible, existing infrastructure (wires, substation, etc.) and certain limitations in the existing supply contract. The windfarm has a contract under a special government renewable energy program from the 1980's, designed to explore and stimulate renewable energy. This 20-year contract does not accommodate green power premiums or the sale of emissions reduction credits, and requires government approval for significant changes to technology, sites or contract terms.
Site information
The site is located in southwest Alberta, on a high ridge that is situated almost perpendicular to the strong local winds. The nearest weather data are from Lethbridge, AB, however the firm has access over 10 years of nearby wind data at 10 m and has found the average wind speed to be 1.1 m/s higher than reported at Lethbridge. The original wind study suggested that the wind shear is unusual at the site: the wind shear exponent is 0.15 to about 30 m, then begins to reverse, and wind speeds are actually thought to decrease with increasing height. The site already includes a substation for interconnection, and there is good access for cranes and construction equipment. With communities nearby, the cost of travel and accommodation is modest.
Financial information
Financial figures for the analysis are provided by the firm (income tax rate of 28%, inflation at 2.5%, debt ratio of 70%, debt interest rate of 8.5%, discount rate of 8.5%, and a debt term of 10 years). The debt term of the project was originally 20 years, but with only 10 years left in the contract, must also now be 10 years. The project does not qualify for the immediate expensing of capital costs permitted under Canadian tax law for energy exploration investments. The capital cost of all new wind turbine equipment is therefore depreciated at a 30% declining balance. The repowered project is expected to last for 25 years. The price for the remaining 10 years of the contract is fixed at $0.06/kWh. It is assumed that the salvage value of the existing equipment will equal the cost of decommissioning and removal.
Prepare a RETScreen study, documenting any assumptions that you are required to make, and report on the significant conclusions from this analysis.
Solution
The worked-out solution is the data file selected from within the RETScreen Project Database. The user automatically downloads the Project Database file while downloading the RETScreen software.
Teacher's notes
- A number of parameters have been "pushed" in order to ensure that a potentially profitable project is not discarded. The debt ratio is relatively high, the discount rate is set to the debt interest rate, and "aggressive" cost estimates have been used. Nevertheless, the internal rate of return remains below 5%: the repowering project is not financially viable.
- Since the existing contract explicitly prevents green power sales and the project does not qualify for immediate expensing of capital costs, other approaches are necessary to achieve financial viability. Possibilities include:
- Terminating the contract in favour of a new green power sales agreement;
- Re-examining the premise that the wind shear at the site is anomalous (i.e., that wind speed does not increase with increased height);
- This would require a new wind energy resource assessment program to determine whether the increased cost of taller towers would be justified by increased energy production;
- Seeking other cost reductions in the redevelopment program;
- Exploiting opportunities to document and sell greenhouse gas emissions reductions; and
- Taking advantage of any renewable energy production credits, should they become available in the future.
- It can be expected that at some point during the project major components such as blades or drivetrains will need to be replaced due to failure. A set of blades or a drivetrain costs roughly 20% to 25% of the purchase price of the turbine. This has been accounted for as a periodic cost.
- The insurance premium is relatively high; this reflects actual experience at this site.
- The transmission line maintenance figure is included as part of the parts and labour and because the initial transmission line cost of $50,000 used in the analysis (and on the basis of which the maintenance cost is calculated) is only the upgrade cost of the line.
Results
In 1993 and 1994, the Cowley Ridge Windplant was developed as part of a contract under the Alberta Small Power Research & Development Act (SPRD). The act provided for 20-year contracts for selected renewable energy projects, and set legislated prices for them. Cowley Ridge received a "flat" $0.06/kWh.
The project was developed by Kenetech Wind Power and used their wind turbine, the KVS-33. This variable speed, 33-m rotor diameter wind turbine was nominally rated at 360 kW, and the project consists of 52 of these machines. The project was sold to a Canadian utility, who took advantage of certain capital cost allowance tax opportunities in order to make the project economic. Unfortunately, within several years Kenetech went bankrupt, and manufacturer support for the wind turbines disappeared. Keeping the machines operational and efficient is consequently a great challenge, but has been successfully done. Recently, the project changed hands again, and talk of repowering the facility has surfaced.
System description
The wind turbine that has been proposed for repowering is a Nordex Balcke N43 600, rated at 600 kW peak output, and using stall regulated rotor blades. It generates electricity at 690 VAC, 3-phase. Energy is transformed to 34,500 volts at transformers adjacent to each turbine, and delivered to the grid via an existing substation, connected to a 69,000-volt transmission line. The installed cost of a project of this scale would typically be about $1,600/kW when all project costs are included.
Lessons learned
- Every possible measure to reduce costs, and expense capital costs rapidly, is necessary to reduce the cost of generation below the low existing contract price.
- At this scale of development, it is still not realistic to expect a marginal spot market to provide sufficient revenue, nor sufficient long term market certainty, to allow a successful project to proceed without some sort of additional revenue, such as a green premium, tax credit or emissions reduction market.
- A short-term contract, with 10 years remaining in this case, does not permit the amortisation of the high capital costs over the 20 to 25-year lifetime of the equipment.
- The capital costs, as well as the wind energy resources at a site, are critical to the economics of a project.
Repowering an existing project may not always be as attractive as one would think. Although capital costs have declined, the tax regime and original advantages for projects may change and affect the financial viability of the facility in adverse ways. With electricity sales becoming deregulated and more competitive, the likelihood of large projects with long term contracts is reduced, and developers and operators must be creative in order to have successful projects, technically as well as financially.
Photo
Wind farm - Cowley Ridge, Alberta, Canada
References
- Alberta Department of Natural Resources, Website: http:// www.resdev.gov.ab.ca.
- Canadian Hydro Developers Inc., Website: http:// www.canhydro.com.
- Cowley Ridge Wind Power Inc., Website: http:// www.cowleyridge.com.
- Edworthy, Jason, "Personal communication," Nor'wester Energy Systems Ltd., 2000.
- Power Pool of Alberta, Website: http:// www.powerpool.ab.ca.
