California Valley Solar Ranch: What for $1.24 Taxpayer Billion?
“One acre or 1,500 acres? 88 percent capacity factor or 22 percent? Less than $1,500,000 per megawatt of capacity or $6,400,000 per megawatt? Location near the customer load or remote? Highly dispatchable electricity or non-dispatchable? Do we need to really ask these questions.”
The huge California Valley Solar Ranch (CVSR) central-station solar plant is apparently now at “full power” thanks to a loan guarantee from the U.S. taxpayers of $1,237,000,000. Information regarding this project has been published here by Earthtechling, and also here, by the U.S. Department of Energy.
In an earlier article by Eric Lipton and Clifford Krauss in the New York Times entitled A Gold Rush of Subsidies in Clean Energy Search, the full cost of the project was established as $1.6 billion. Lipton and Krauss indicate:
The project is also a marvel in another, less obvious way: Taxpayers and ratepayers are providing subsidies worth almost as much as the entire $1.6 billion cost of the project. Similar subsidy packages have been given to 15 other solar- and wind-power electric plants since 2009.
The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google.
A Critical Appraisal
In a realistic appraisal of the CVSR we should note the following:
· An investment of $1.6 billion 250 MW breaks down to an extravagant $6,400,000 per megawatt.
· The Solar Ranch covers 1,500 acres.
· The CVSR is projected to produce 482,000 MWh per year, implying an operating capacity factor of around 22%.
· Given a reasonable appraisal of the value of 482,000 MWh per year, it is not possible that the solar panels will be able to provide a return sufficient to pay back the $1.6 billion investment within their functional life (not even close), even when ignoring annual operating and maintenance costs. Hundreds of millions of dollars will be lost (see Updated CSVR Cash Flow).
The appraisal is none too flattering. Indeed, it is devastating in terms of resource (mis)allocation and consumer welfare. Environmental considerations would have to calculate the emissions associated with building the wholly unnecessary plant in payback time.
Opportunity Cost: Natural Gas Plant
A much more viable alternative to a solar generation facility, although not the only one, is a plant using natural gas. A natural gas combined cycle gas turbine (CCGT) facility capable of 250 MW would have required less than one-fourth the capital investment, would be capable of making four times the electricity per year at 88% capacity factor, and would fit on a single acre.
Also, a CCGT facility could have been located closer to the point(s) of actual use of the electricity, and could provide dispatchable energy which could be increased or decreased as demand fluctuates; something the solar facility is incapable of providing.
Assuming complete and total displacement of coal generation (something which the CCGT really can do and the Solar Ranch really cannot) the reduction in annual CO2 emissions provided by a 250 MW CCGT facility would be about twice more than the Solar Ranch.
Conclusion: Energy Density
One acre or 1,500 acres? 88 percent capacity factor or 22 percent? Less than $1,500,000 per megawatt of capacity or $6,400,000 per megawatt? Location near the customer load or remote? Highly dispatchable electricity or non-dispatchable? Do we need to really ask these questions.
The statistics gets down to one thing: energy density. As Professor Colin McInnes, a Fellow of the Royal Academy of Engineering, explained in No time to Abandon Energy Density:
The era of cheap energy is over only if we choose so. If we use technical innovation to accelerate, rather than supplant, moves towards greater energy density, we can deliver energy that is both cheaper and more abundant. And, as a useful side effect, we will help de-carbonise our economy in the process.
There is no doubt that we Americans need to alter our energy strategy. The question of how we will change it, however, needs to be determined by scientific evaluation of fact and logical analysis of performance and economics; not by emotion, political considerations, and “feel good” methodologies.