Levelized Cost of Electricity:

LCOE calculation two power plants: a wind farm and a natural gas combined cycle power plant.

Assume the following power plant characteristics: Natural gas power plants: capacity factor1 of 85% and a lifetime of 30 years Wind farms: capacity factor of 40% and a lifetime of 20 years

and the following policy: Capacity factor is the percent of time a power plant operates over a year.

Wind is eligible for a federal subsidy (technically a production tax credit) of $23/MWh for the first 10 years of its lifetime.

Formulas:

($/) = ($) / ()

($) = ($) + & ($) + ($) ($)

($) = () ($/)

& ($) = ($) + ($)

($) = () ($//) () ($) = () ($/) (%) (/) ()

For the natural gas combined cycle, fuel costs need to be added (there are no fuel costs for the wind farm). Fuel costs depend on fuel price and fuel consumption, which is a function of the actual output or MWh generation of the plant. For simplicity, assume a constant natural gas price of $4/mmBtu. Plus since theyre annual costs, you need to account for the lifetime of the power plant. The formula fuel costs is:

($) = ($ ) () (/) (%) (/) ()

The last cost issue is the tax credit. Note that the tax credit only applies to the wind farm. It is a production tax credit that gives the wind farm 2.4 cents/kWh ($24/MWh) of electricity generation. The wind farm can claim this tax credit for every MWh they generate during the first ten years of production. Calculate it as follows: ($)= $/ () (%) ( / ) Once youve calculated the costs (capital, operating, and tax credits), the last step in LCOE is dividing the lifetime costs by the lifetime generation. The formula for lifetime energy production is: ()= () (%) ( / ) ()

Questions: (a) What are the capital costs (i.e., installation costs) for the two projects (in $)? (b) What are the lifetime fixed O&M costs for the two projects (in $)? (c) What are the lifetime variable O&M costs for the two projects (in $)? (d) What are the lifetime fuel costs (in $) for the natural gas combined cycle plant? (e) What are the lifetime tax credits (in $) for the wind farm? (f) What is the lifetime energy generation (in MWh) for the two projects? (g) What is the LCOE (in $/MWh) for the two projects? Which project has the lowest LCOE? (h) The production tax credit for wind is scheduled to be phased out over the next five years. What is the LCOE of the wind project without the tax credit?

LCOE calculation two power plants: a wind farm and a natural gas combined cycle power plant. Advanced Natural Gas Combined Cycle Onshore (ANGCC) Wind Nominal capacity (MW) Overnight capital cost (S/kW) Fixed O&M cost (S/kw/y) Variable O&M cost (S/MWh) Heat Rate (Btu/kWh) 6300 Capacity Factor(%) 185% Lifetime (yr) 429 1104 1877 10 39.7 N/A 40% 20 30 LCOE calculation two power plants: a wind farm and a natural gas combined cycle power plant. Advanced Natural Gas Combined Cycle Onshore (ANGCC) Wind Nominal capacity (MW) Overnight capital cost (S/kW) Fixed O&M cost (S/kw/y) Variable O&M cost (S/MWh) Heat Rate (Btu/kWh) 6300 Capacity Factor(%) 185% Lifetime (yr) 429 1104 1877 10 39.7 N/A 40% 20 30