Case Study Evaluation
Note: For the purpose of the project economics, the following assumptions have been made:
Case Study 1:
Case study one; the off grid, stand alone system based on Stornoway; revenue streams are:
· Electricity sales,
· Income from ROC’s, &
· Sale of hydrogen fuel.
For case study one, there was only one scenario to analyse:
· Matching the demand of a community using purely renewable sources.
Case Study 2:
Case study two; the grid connected system based in Glasgow; revenue streams are:
· Firm electricity sales, &
· Income from ROC’s.
For case study two, there were three scenarios to analyse:
· Providing flat annual power output,
· Providing flat power for four hours of the day, at peak times &
· Providing four hour power intervals throughout the year, closely following the wind supply.
Case Study 1:
Matching the demand of a community using purely renewable sources
As you can see the predicted cash flow over the lifetime of the project concludes with a considerable loss of £130,796,782.
The large dip in year 0 of the graph is the initial purchase of component capital costs, which is the largest expenditure in any one year. Some of the components will have to be replaced at the end of their lifespan, which occurs in years 10 and 20.
The gain at the end of the project is the expected salvage revenue, which is equivalent to the value left in the components when the project concludes in year 25. This amounts to £25,096,758.
As mentioned above, the component costs are the most expensive expenditure. In the first year of the project alone, the capital cost of the components totalled £81,091,368 and over the entire project lifespan, the component costs amount to £140,929,834 (including capital costs, replacement costs and O&M, less any salvage).
In this particular scenario, the hydrogen tank is the most expensive component and contributes 38.31% of the component expenditure over the lifespan of the project and this is due to the size of the tank, which is in the region of 24 tonnes. This was necessary to ensure the demand on the island could be met throughout the year, using purely renewables and the buffering system.
In this particular scenario, there are three forms of revenue generation.
The grid sales are the largest source of revenue generation, contributing almost 54% of the total revenue and this contributes £20,924,535 over the lifetime of the project.
The sale of excess ROC’s is additional revenue that can be made from the renewable energy generation. This contributes a further 19.24% of revenue generation over the lifespan of the project, at £7,459,303. This money is only generated until the end of year 17 of the project, because the renewable obligation is set to cease in 2027, however, should this be extended, further revenue could be obtained.
The sale of hydrogen fuel contributes a further 26.79% to revenue generation and this is still considerable when you consider that over the lifespan of the project this amounts to £10,385,856.
Case Study 2, Scenario 1:
Providing flat annual power output
As you can see the predicted cash flow over the lifetime of the project concludes with a considerable loss of £215,570,337.
The large dip in year 0 of the graph is the initial purchase of component capital costs, which is the largest expenditure in any one year. Some of the components will have to be replaced at the end of their lifespan, which occurs in years 5, 10, 15 and 20.
The gain at the end of the project is the expected salvage revenue, which is equivalent to the value left in the components when the project concludes in year 25. This amounts to £43,432,336.
As mentioned above, the component costs are the most expensive expenditure. In the first year of the project alone, the capital cost of the components totalled £128,335,726 and over the entire project lifespan, the component costs amount to £235,522,605 (including capital costs, replacement costs and O&M, less any salvage).
In this particular scenario, the hydrogen tank and the electrolyser are the most expensive components and these contribute 33.28% and 32.02% respectively, of the component expenditure over the lifespan of the project.
In this particular scenario, there are two forms of revenue generation.
The grid sales are the largest source of revenue generation, contributing in excess of 73% of the total revenue and this contributes £49,457,910 over the lifetime of the project.
The sale of excess ROC’s is additional revenue that can be made from the renewable energy generation. This contributes a further 26.58% of revenue generation over the lifespan of the project, at £17,902,332. This money is only generated until the end of year 17 of the project, because the renewable obligation is set to cease in 2027, however, should this be extended, further revenue could be obtained.
Case Study 2, Scenario 2:
Providing flat power for four hours of the day at peak times
As you can see the predicted cash flow over the lifetime of the project concludes with a considerable loss of £342,795,079.
The large dip in year 0 of the graph is the initial purchase of component capital costs, which is the largest expenditure in any one year. Some of the components will have to be replaced at the end of their lifespan, which occurs in year 20.
The gain at the end of the project is the expected salvage revenue, which is equivalent to the value left in the components when the project concludes in year 25. This amounts to £41,460,485.
As mentioned above, the component costs are the most expensive expenditure. In the first year of the project alone, the capital cost of the components totalled £241,340,726 and over the entire project lifespan, the component costs amount to £360,594,458 (including capital costs, replacement costs and O&M, less any salvage).
In this particular scenario, the hydrogen tank is the most expensive component and this contributes 56.18%, of the component expenditure over the lifespan of the project.
In this particular scenario, there are two forms of revenue generation.
The grid sales are the largest source of revenue generation, contributing in excess of 80% of the total revenue and this contributes £77,524,654 over the lifetime of the project.
The sale of excess ROC’s is additional revenue that can be made from the renewable energy generation. This contributes a further 19.59% of revenue generation over the lifespan of the project, at £18,894,167. This money is only generated until the end of year 17 of the project, because the renewable obligation is set to cease in 2027, however, should this be extended, further revenue could be obtained.
Case Study 2, Scenario 3:
Providing hour power intervals throughout the year, closely following the wind supply
As you can see the predicted cash flow over the lifetime of the project concludes with a considerable loss of £180,037,782.
The large dip in year 0 of the graph is the initial purchase of component capital costs, which is the largest expenditure in any one year. Some of the components will have to be replaced at the end of their lifespan, which occurs in years 4, 9, 13, 18, 20 and 22.
The expected salvage revenue amounts to £36,973,386, which is equivalent to the value left in the components when the project commences in year 25.
As mentioned above, the component costs are the most expensive expenditure. In the first year of the project alone, the capital cost of the components totalled £104,795,156 and over the entire project lifespan, the component costs amount to £216,386,714 (including capital costs, replacement costs and O&M, less any salvage).
In this particular scenario, the fuel cell is the most expensive component and this contributes 53.88%, of the component expenditure over the lifespan of the project. This is as a result of being replaced 5 times throughout the project.
In this particular scenario, there are two forms of revenue generation.
The grid sales are the largest source of revenue generation, contributing in excess of 73% of the total revenue and this contributes £52,134,037 over the lifetime of the project.
The sale of excess ROC’s is additional revenue that can be made from the renewable energy generation. This contributes a further 26.75% of revenue generation over the lifespan of the project, at £19,035,506. This money is only generated until the end of year 17 of the project, because the renewable obligation is set to cease in 2027, however, should this be extended, further revenue could be obtained.
Economic Analysis
A brief summery of the project economics can be viewed below. However, please note that this is not fully comprehensive and it excludes any interest payments that would be incurred when the project cash flow falls into deficit.
It is apparent that both the off-grid and all of the strong grid scenarios are far from being economically viable and they all make a considerable loss at the end of the 25 year project lifespan.
The size of the components and the costs associated with the buffering system, in addition to the replacement costs incurred throughout the project far outweigh any revenue that is generated from electricity, ROC and hydrogen fuel sales.
As you would expect, the wind turbine system alone, which produces a very intermittent power output has proven to make a profit in all four scenarios. This is despite only being able to sell electricity at the lower system sell price (SSP), however, its success should probably be attributed to the much reduced component costs: which only include land rent and wind turbines.
At present, the difference in price that can be achieved between selling non-firm electricity at system sell price (SSP) and firm electricity at market index price (MIP) is not sufficient to enable a costs effective purchase of all of the components necessary to implement a buffering system. The extortionate capital cost and replacement cost of components is far too great to ever be recouped by the current electricity and fuel sale prices.
Having discovered that all of the scenarios investigated are far from being economically viable, the group decided to investigate what would be required to make such a buffering system economically viable. The results from this can be obtained in the ‘sensitivities and future economics’ section here.
