Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Transcript of Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 1/23
Mesoscale Modeling and ProbabilisticEconomic Analysis
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 2/23
2
Contents
• Project Principles
• Alternative Wind Assessment Technologies
- mesoscale modeling
- quantifying uncertainty
• Economic decision making under uncertainty
- limitations of traditional economics
- probability based decision making
• Conclusions
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 3/23
3
Projects aim to reduce risk / increase certainty
through development to financial close
Wide distributions of outcomes
when project first considered
Narrow distribution of outcomes
required for financial close
Project management to cost effectively move from;
•Concept to feasibility / consenting
•Feasibility / consenting to detail design
•Detail design to financial close / construction
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 4/23
4
Contents
• Project Principles
• Alternative Wind Assessment Technologies
- mesoscale modeling
- quantifying uncertainty
• Economic decision making under uncertainty
- limitations of traditional economics
- probability based decision making
• Conclusions
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 5/23
5
The initial assessment of wind resources
only justifies the feasibility study
Yes
No
Is
there enough
wind over
the site
Feasibility
study
Is thesite worth
consenting
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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6
There are a number of techniques to
assess wind resource
Financialclosure
+/- 3%$200k12 monthsHub Height WindMast
InitialAssessment
+/- 10% for80m wind
$50k12 monthsProspecting 30mwind mast
All stages+/- 5%$10kWeeksMesoscalemodelling
Best UseAccuracy for
80massessment
CostTimeType of
Measurement
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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7
Mesoscale modeling is recommended
for initial site economic evaluation
WRF Validations
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0
Measured mean wind speed (m/s)
M
o d e l m e a n w i n d
s p e e d ( m / s )
Onshore
Offshore
Trendline
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Model period can be selected to
represent long-term wind climate
3
4
5
6
7
8
9
10
11
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
- D Q
0RQWK
0 H D Q : L Q G 6 S H H G P V
Monthly mean wind speed and 12-month moving average for long-term NCEP data
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Mesoscale modeling gives a good overall view
of sites for conceptual turbine placement
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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High resolution modeling provides
insight to site dynamics
6.2
13.7
17.5 17.3
15.7
12.3
7.9
9.4
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
%
Wind Class Frequency Distribution
Wind Class (m/s)
Calms 0.1 - 2.0 2.0 - 4.0 4.0 - 6.0 6.0 - 8.0 8.0 - 10.0 10.0 - 12.0 12.0 - 14.0 >= 14.0
NORTH
SOUTH
WEST EAST
4%
8%
12%
16%
20%
WIND SPEED
(m/s)
>= 14.0
12.0 - 14.0
10.0 - 12.0
8.0 - 10.0
6.0 - 8.0
4.0 - 6.0
2.0 - 4.0
0.1 - 2.0
Calms: 0.00%
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Wind assessment (mesoscale or alternatives)
contains uncertainties
Maximum
Wind SpeedMinimum
Wind Speed
+ One
Std Dev-One
Std. Dev
Mean
Within
One
std dev
66% of
time
m/sec @ 80m
8.1 9.5 10.9
Uncertainties•Measurement accuracy
•Vertical extrapolation
•Long-term correction
•Flow modeling
Together, these
amount to 15%uncertainty
eg
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…. which can be expressed in terms of
probabilities
Probabilities
•P50 of 9.5 m/sec
•P75 of 8.5 m/sec
W ind Speed a t 8 0 m
0
0.1
0.2
0.30.4
0.5
0.6
0.7
0.8
0.9
1
4
. 4 5
4
. 9 4
5
. 4 3
5
. 9 1
6
. 4 0
6
. 8 9
7
. 3 8
7
. 8 7
8
. 3 5
8
. 8 4
9
. 3 3
9
. 8 2
1 0
. 3 1
1 0
. 7 9
1 1
. 2 8
1 1
. 7 7
1 2
. 2 6
1 2
. 7 5
1 3
. 2 3
1 3
. 7 2
1 4
. 2 1
m / se c
C u m
u l a
t i v e P r o b a b i l i t y
P75 means that there is a 75% probability that the annual average wind
speed will be greater than 8.5 m/sec.
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Contents
• Project Principles
• Alternative Wind Assessment Technologies
- mesoscale modeling
- quantifying uncertainty
• Economic decision making under uncertainty
- limitations of traditional economics
- probability based decision making
• Conclusions
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
http://slidepdf.com/reader/full/probabilistic-economic-analysis-wind-energykenhumphreyblairwalter 14/23
14
Feasibility assessment involves a number of
assumptions and uncertainties.
Assumptions Typical Uncertainty level
Wind Speed +/- 15%
Turbine Costs +/- 25%
Euro / NZ$ +/- 25%
O&M costs +/- 25%
Electricity Price +/- 20%
Wind speed
Accuracy of
+/- 15% appearsadequate for an
initial economic
assessment
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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15
Lets consider a site which could take up to
25 large 3 MW turbines
The question we are generally faced with is whetherthere is sufficient wind resources to justify negotiating aland agreement, measuring wind speed at hub heightand undertaking feasibility engineering ahead ofproceeding with a resource consent application.
Cost to
Find out
Value of
Project
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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Traditionally, we would make estimates of
economic variables and calculate value
Assumptions Source
• Wind Speed Mesoscale model
• Turbine Cost Manufacturer
• Euro / NZ$ Treasury
• O&M costs Manufacturer
• Electricity Price Consultant
In this example, the project looks OK with a 8.3 % IRR
Project Summary
Number of Turbines 25 V90
Installed Capacity 75 MW
Gross Annual Generation 305 GWh
Capital Cost 230,104,875 NZ$
Installed Cost 3,068 NZ$ / kW
Internal Rate of Return post tax 8.34 %
Net Present Value post tax* 5,112,576 NZ$
* Nominal After Tax WACC 8 %
NZWEA Mesoscale
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… but we really need to recognize and quantify
the uncertainty in all assumptions
0.25n/a2.0Euro/NZ$
Min 1.0
Max 2.0
Min 2.25
Max 3.75
Min 8
Max 12
n/a
Min / Max
n/a1.37O & M Costs
(c/kWhr)
n/a3.0Turbine Cost
(Euro m))
n/a10Electricity Price
(c/kWhr)
1.429.5Wind Speed(m/sec)
St DevMeanDistributionFactor
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Firstly, we can get a feel for the gross
energy yield from the development
Probabilities
•P50 of 305 GWhrs
•P75of 258 GWhrs
Cumula tive Probability for GW h
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
5 8 .
4 4
7 7 .
8 6
9 7 .
2 7
1 1 6 .
6 9
1 3 6 .
1 0
1 5 5 .
5 2
1 7 4 .
9 3
1 9 4 .
3 5
2 1 3 .
7 6
2 3 3 .
1 8
2 5 2 .
5 9
2 7 2 .
0 1
2 9 1 .
4 2
3 1 0 .
8 4
3 3 0 .
2 6
3 4 9 .
6 7
3 6 9 .
0 9
3 8 8 .
5 0
4 0 7 .
9 2
4 2 7 .
3 3
4 4 6 .
7 5
GW h
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Then, we can describe project economics in
terms of probabilities
Probabilities
•P50 8.3% IRR
5 NPV(8%)
•P75 6.5% IRR.
(22) NPV(8%)
Cumula tive Probability f or I RR
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
- 1 .
0 0
- 0 .
1 0
0 .
8 0
1 .
7 0
2 .
6 0
3 .
5 0
4 .
4 0
5 .
3 0
6 .
2 0
7 .
1 0
8 .
0 0
8 .
9 0
9 .
8 0
1 0 .
7 0
1 1 .
6 0
1 2 .
5 0
1 3 .
4 0
1 4 .
3 0
1 5 .
2 0
1 6 .
1 0
1 7 .
0 0
I RR
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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20
Now our question can now be answered in a
somewhat more complete manner
Cost to
Find out
$1 million estimate
Value of
Project
P50 of NPV $ 5m
P75 of NPV $ (22)m
In this example, there is only a 55 % probability that the projectvalue will exceed $1 million (the cost of feasibility engineering)
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Contents
• Project Principles
• Alternative Wind Assessment Technologies
- mesoscale modeling
- quantifying uncertainty
• Economic decision making under uncertainty
- limitations of traditional economics
- probability based decision making
• Conclusions
7/30/2019 Probabilistic Economic Analysis Wind EnergyKenHumphreyBlairWalter
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22
In practical terms, these techniques have
been used successfully in New Zealand
• At least 12 small wind farm sites have been evaluated with mesoscalemodeling; with
- two projects proceeding without further investment in windassessment (HorseShoe Bend and Weldcone)
- one project about to install a 30m wind mast to verify particular localtopographic effects
- a number of other projects under consideration by developers
- two projects rejected outright without any further investigation.
• Costs and timescales are modest - average cost for mesoscalemodeling with feasibility study is $10,000 to $15,000 in 6-8 weeks.
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In summary, mesoscale modeling and decision
making under uncertainty has its place
• Mesoscale modeling is good for initial assessment andscreening studies.
• Physical measurement appropriate when more detailedunderstanding of site features and energy yield is needed
• Hub height measurement is needed for financing
• Probabilistic economic analysis has its place throughout
project development to highlight uncertainties of inputsand outcomes; to refine assumptions and to engage withthe financial community.