MARGINAL COST OF WIND AND
SOLAR PV ELECTRICITY
GENERATION
Impact of Responding to Dispatch
Instructions
July 17, 2015
D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
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Section 1
»
Introduction
Section 2
»
Approach & Methodology
Section 3
»
Analysis of Wind Generation
Section 4
»
Analysis Solar PV Generation
Section 5
»
Results
1
Introduction
IESO commissioned Navigant to undertake a study of the marginal cost to
wind and solar PV generation when responding to dispatch instructions
Objective 1
• Estimate the marginal cost (MC) of production for transmissionconnected wind and solar photovoltaic (PV) generation facilities
in Ontario; and
Objective 2
• Analyse the impact of various extreme weather conditions and
the requirement to follow dispatch instructions (i.e. the act of
having output curtailed) on the marginal cost of production.
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Introduction
The MC of production for wind and solar PV generators is effectively equal
to the variable O&M costs
»
Marginal cost is generally defined as the change in total cost that arises when the quantity
produced is increased by a unit.
»
Absent fuel or other direct input costs, the marginal cost of production for wind and solar PV
generation facilities is the incremental operation and maintenance (O&M) cost that is incurred as a
result of an incremental unit of production.
»
In some instances certain components may have finite useful lives or finite defined times between
maintenance requirements, usually referred to as “mean time between failures”, which are affected
by the total units of production.
»
Hence, each incremental unit of production results in an incremental cost.
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Introduction
Variable O&M costs are defined as the subset of total O&M costs that
increase or decrease according to the amount of electricity produced
Predictive maintenance
includes activities performed on
equipment expected to fail soon,
typically based on the results of
condition based monitoring.
Variable
O&M
Corrective maintenance is
performed to repair equipment
that is damaged or
underperforming.
Preventive maintenance
includes activities that are
performed on a scheduled basis
regardless of the condition of
the equipment.
Fixed
O&M
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»
Total O&M costs: all expenditures
linked to the maintenance
(preventive, corrective, predictive)
and physical operation of the plant.
»
Expressed either in $/MWh (implies
variable costs), or in $/kW-year
(implies fixed costs). Can be
converted using an assumed
average capacity factor.
»
Navigant will refer to total O&M
costs in terms of $/MWh
(recognising that costs are part
variable and part fixed).
Approach & Methodology
Navigant completed interviews with: ISOs, wind and solar generation
owners/operators, and wind turbine and solar panel and inverter OEMs
»
Telephone interviews were conducted with relevant stakeholders across North America
Interview Group
Wind
Solar PV
Total
N/A
N/A
2
Operators
6
5
11
Original Equipment Manufacturers (OEMs)
2
2
4
Independent System Operators (ISOs)
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Approach & Methodology
Navigant also reviewed secondary research and conducted interviews with
two ISOs that have conditions and market rules that are similar to IESO
»
»
New York Independent System Operator (NYISO) and Midcontinent Independent System Operator
(MISO) both dispatch wind, solar, or both resources.
›
Stated that they do not directly monitor or track the marginal or variable cost of wind and solar
generation.
›
They inferred that the bidding behaviour of the group (i.e. they did not comment on a single
particular generator) suggests a small, near zero, variable cost of production.
›
This inference was based on anecdotal evidence suggesting that wind generators in these
markets typically appear to bid into the real-time or day-ahead energy market at a value equal to
the negative of the value of the federal production tax credit.
Secondary research did not uncover any directly relevant studies from other jurisdictions that
address the incremental impact of curtailment on the marginal cost of production for wind and solar
generation.
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Approach & Methodology
Both qualitative and quantitative information on the impact of various
factors on the MC of production was gathered from interviewees
»
The following factors were explored with interviewees:
›
›
›
The impact of curtailing output on O&M costs associated with particular pieces of equipment;
›
Back-feed or station service requirements in case of a shutdown or insufficient self-generation.
The impact of a complete shutdown of the facility on O&M costs;
The restart or ramp-up process to return to full production capability and the risks associated
with delays; and,
»
Interviews were also supplemented with technology/component specific questions (e.g., inverters
for solar and pitch systems for wind).
»
Navigant also discussed generic findings from other interviews and secondary research to assess
consistency and reasonableness across different manufacturers, locations, and conditions.
The interview process resulted in a range of O&M costs that were relatively consistent
across interviewees.
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Approach & Methodology
The following conditions and factors below were analysed based on
discussions with generation owners/operators and OEMs:
What are Variable O&M
Costs under various
conditions?
• Normal, or base case
conditions
• Wind:
• Extremely high wind
• Frequent icing
• Solar:
• Frequent ice or snow
buildup
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What is the impact of
frequent partial shutdown?
• System or components
affected
• Incremental O&M costs
• Time to regain full capacity
• Wind:
• Incremental impact due to
high wind or icing
conditions
• Solar:
• Incremental impact due to
icing conditions or snow
buildup
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What is the impact of full
plant shutdown?
• System or components
affected
• Incremental O&M costs
• Time to regain full capacity
• Costs for station service
during shutdown
• Wind:
• Incremental impact due to
high wind or icing
conditions
• Solar:
• Incremental impact due to
icing conditions or snow
buildup
Analysis of Wind Generation
Wind power generation facilities consist of the following main components:
» Blade or rotor, which converts the
energy in the wind to rotational
shaft energy;
» A drive train, usually including a
gearbox and a generator;
» A tower that supports the rotor
and drive train; and
» Other equipment, including
controls, electrical cables, ground
support equipment, and
interconnection equipment.
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Analysis of Wind Generation
O&M costs vary widely depending on size, age, and location of turbines and
there was a lack of industry consensus on costs of service and maintenance
Scenario
Base (normal)
wind regime
Findings
» Major contributor to overall O&M costs over the life of an asset is parts replacement, followed by
labour.
» The average variable O&M cost for modern utility-scale wind plants is relatively low in the early
years, increases steadily during the middle years, and levels off at a relatively high level towards the
end of a 25-year asset lifecycle.
» The average variable O&M cost of a wind plant is approximately the same as the base case.
High wind regime
» The main difference will be increased wear and tear on the pitch system, since more time will be
spent in the upper end of the power curve, i.e., when wind speeds are greater than ~13
meters/second (m/s).
» The average variable O&M cost of a wind plant could be significantly higher than the base case.
Frequent icing
conditions
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» After long periods of sustained shutdown or lack of power, a cold start-up sequence for a wind
turbine generator might require the use of additional heaters of component and subsystem gear and
control boxes.
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Analysis of Wind Generation
Several components were found to have increased wear and tear due to
curtailment conditions
Conditions
Findings
» Several components will experience increased wear and tear when power output is changed frequently.
» The primary components affected likely include substation capacitor bank switchers and pitch systems.
Partial
curtailment
conditions
» Operation of capacitor bank switchers is highly site-specific, as they are primarily exercised in plants in
radial locations on the grid and when the capacitor banks are used for voltage control. In such cases,
some plants that are being dispatched regularly are experiencing premature failures.
» Pitch systems are also exercised each time there is a change in power output (for this analysis we assume
that wind turbine generators are equipped with variable pitch systems).
» In order to curtail wind turbine generators with fixed pitch systems, they must be shut down completely by
braking and opening the circuit breaker.
Full
curtailment
conditions
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» The same components are affected in the same manner that they are affected by partial curtailment.
» The power output changes in the same manner and frequency, and the cost estimates will be the same.
» For the full curtailment condition when the breakers or switches at each wind turbine generator are
opened, there will be additional wear and tear on the breakers or switches.
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Analysis of Solar PV Generation
Solar PV generation facilities consist of the following main components:
» solar panels;
» racking and fixtures;
» cabling connecting panels to
inverters, and inverters to the grid;
» inverters and associated cooling
systems and shelters;
» relays and breakers at individual
inverters and at the main grid
interconnection; and
» associated access roads, lawn,
and fencing.
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Source: Midwest Green Energy
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Analysis of Solar PV Generation
O&M costs vary depending on size, age, and location of the solar facility as
well as the O&M strategies employed
Scenario
Findings
» Total O&M costs for systems with trackers are generally higher than for fixed systems.
Base (Normal)
Wind Regime
» Inverter OEMs design for a specified period and set maintenance intervals based on calendar dates,
not production.
» Likewise, plant operators generally contract O&M service providers based on a fixed annual fee that
is not tied to production.
» As such variable O&M costs for a solar PV facility are essentially zero.
» Output from panels by partially obstructing the incident radiation with light coverage.
Icing Conditions
Or Snow Buildup
» The buildup of snow and resulting performance degradation depends on several factors.
» The impact of snow and ice buildup is material to the annual energy output of a solar farm in Ontario.
» However, in all cases the O&M expense related to snow removal is considered a fixed cost.
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Analysis of Solar PV Generation
Curtailment conditions were found to have minimal impacts on O&M
Conditions
Findings
» Achieved through a uniform reduction in output from all the inverters at a facility or by fully shutting down
some of the inverters while allowing the remainder to run at full capacity.
Partial
Curtailment
Conditions
» Minimal impact on equipment life since reducing inverter output increases the direct current voltage,
reduces operating current, and lowers the inverter temperature. Operating in this zone may actually extend
inverter life. It will also reduce the duty cycle of the associated cooling fans and air-conditioning units
extending their life as well.
» If inverters are fully shutdown, it will result in more power cycling and thermal cycling relative to their design
life. However, the inverters have been designed to drop to a zero power level each night. As such, the
additional thermal cycles will have a minimal effect on inverter life.
» Will result in more power cycling and thermal cycling relative to the design life of the equipment.
Full
Curtailment
Conditions
» Systems with axial tracking may also see increased wear as they continue to track, remain stationary, or
move to a rest position during a full curtailment. However, in both cases the equipment has been designed
to drop to a zero power or rest state each night. As such, the additional thermal cycles and tracker
movement will have a minimal effect on their life.
» In cases where the main breaker is opened, there will be some additional wear on the breaker. However, in
the case of a controlled shutdown power is brought to zero before the breaker is opened.
» Given the low frequency of events where the breaker is opened, full curtailments are expected to have a
minimal impact on life.
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Results
The marginal cost for wind generators to respond to partial or full
curtailment was found to be less than $3/MWh (USD) in all conditions
Units
Low to medium wind
regime
High wind regime
Icing conditions
Average variable O&M cost
USD/MWh
$8.0 - $14.0
$8.2 - $14.4
$10.0 - $17.0
Incremental O&M cost due to partial curtailment
USD/MWh
$0.2 - $2.1
$0.2 - $2.1
$0.2 - $2.1
Incremental O&M cost due to full curtailment
USD/MWh
$0.5 - $2.6
$0.5 - $2.6
$0.5 - $2.6
Time to regain full plant capacity after partial curtailment
Minutes
<1
<1
<1
Time to regain full plant capacity after full curtailment
Minutes
~5
~5
Depends on time
down
Description
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Results
The marginal cost for solar PV generators to respond to partial or full
curtailment was found to be approximately $0/MWh in all conditions
Description
Units
Normal conditions
Icing conditions
Average variable O&M cost
USD/MWh
$0
$0
Incremental O&M cost due to partial curtailment
USD/MWh
$0
$0
Incremental O&M cost due to full curtailment
USD/MWh
$0
$0
(minimal cost for trackers)
(minimal cost for trackers)
Time to regain full plant capacity after partial curtailment
Minutes
0.5 - 5
0.5 - 5
Time to regain full plant capacity after full curtailment
Minutes
~5
~5
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Appendix
Discussion Guide
Marginal Cost of Wind and Solar Interview Discussion Guide
Impact of Weather
1.
What weather events or conditions have a significant impact on O&M costs?
a)
b)
c)
d)
Extreme cold weather
Extreme hot weather
Lightning
Other
2.
What systems or components are most affected by each of the above conditions or events?
3.
For each system or component identified above, what is the difference in plant availability, failure rate or incremental O&M cost [due to each
identified weather condition]?
4.
What newer technologies are available which help to minimise the incremental costs identified above?
Impact of Following Dispatch
1.
What systems or components are most affected by each of the following dispatch requirements?
a)
b)
Braking from load (partial plant shutdown)
Complete shutdown of a facility
2.
For each system or component identified above, what is the difference in plant availability, failure rate or incremental O&M cost [due to a partial or
complete plant shutdown]?
3.
What newer technologies are available which help to minimise the incremental costs identified above?
4.
What are the costs associated with risk of delay or failure during the restart process?
5.
What are typical back-feed costs for station service supply, in case of a shutdown or insufficient self-generation?
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