Posted by: bmeverett | March 14, 2010

Florida – the Sunshine State


Let’s do some math – something the New York Times never seems interested in. The March 4 NYT contained a glowing piece on a new solar power plant under construction by Florida Power and Light (FPL) in West Palm Beach County. The project will graft a solar power plant onto a new combined cycle natural gas power plant, which offers some savings in shared equipment. The solar plant, called the Martin Next Generation Solar Energy Center, consists of 191,000 mirrors which track the Sun and focus its energy on a tower which converts the heat into electrical energy.

The Times explains that this new plant is an experiment: “The project’s advantages are obvious: electricity generated from the sun will allow FPL to cut natural gas use and reduce carbon dioxide emissions. It will provide extra power when it is most needed: when the summer sun is shining, Floridians are cranking up their air-conditioning and electricity demand is at its highest. The plant also serves as a real-life test on how to reduce the cost of solar power, which remains much more expensive than most other forms of electrical generation.”

I can hardly wait for the results of this experiment. Oh, wait a minute. We can see the results right now with a little simple arithmetic. The article contains the key parameters:
1. The solar power plant will generate a maximum of 75,000 kilowatts (kW) of power and will cost $476 million or $6.35 per Watt of capacity. By comparison, the natural gas plant costs about $0.50 per Watt of capacity. You can start to see the problem right here.

2. FPL claims the solar plant will save 1.3 billion cubic feet of natural gas per year and 2.75 million tons of carbon dioxide over the 30-year life of the project. The FPL website is a bit more ambitious, claiming savings of 1.36 billion cubic feet of natural gas and 20,000 barrels of oil each year.

According to the FPL website, the solar plant is expected to generate 155 million kilowatt-hours (kWh) per year. If a 75,000 kW plant could operate every hour of every day, it could generate 657 million kWh per year (75,000 X 24 X 365). Nuclear and fossil fuel plants can run 90% or more of the time if necessary, but solar plants depend are at nature’s mercy. Even sunny Florida is dark half the time and has lots of clouds and rain, so the solar plant can operate effectively only 25% of the time. Here’s problem number 2 with solar energy.

Presumably FPL’s shareholders want a return on their investments. To earn a 15% internal rate of return (IRR) on a $476 million investment over 30 years, assuming that annual operating costs are about $15 million, would require revenue of roughly $100 million per year. In return, FPL would save the cost of 1.36 billion cubic feet of natural gas and 20,000 barrels of oil every year. According to the US Energy information Administration, the most recent price for natural gas delivered to electric power plants in Florida is $7.50 per thousand cubic feet and the most recent price for diesel oil is about $100 per barrel. In other words, the solar power plant will costs consumer $100 million per year and save them about $12 million ($10.3 million worth of natural gas and $1.6 million worth of diesel). Doesn’t sound like much of a deal to me.

How about saving CO2 – the dreaded greenhouse gas that threatens to inundate Florida with rising sea levels? If the solar plant costs consumers $88 million per year and saves about 90,000 tons of CO2 per year, the net cost is roughly $1,000 per ton.

Is that a lot or a little? Putting a price on carbon dioxide either through a tax or a “cap-and-trade” system is all the rage these days, but politicians also know that too high a price could do serious damage to the economy. As a result, all the current or proposed carbon trading systems put an upper limit on the carbon price. For example, the Kerry-Boxer Bill, which is currently under discussion in the US Senate, specifies a maximum price of $28 per ton. The carbon price on the European Climate Exchange is current about 13 Euros (US$18) per ton. The Regional Greenhouse Gas Initiative (RGGI) established by ten New England and Mid-Atlantic states, has a current carbon price of $3 per ton. So FPL is doing an “experiment” to determine how $1,000/ton compares with $28, $18 or $3 per ton. Guess what? It’s higher.

If the solar plant is a bad deal for consumers, why is FPL building it? Florida has what’s known as a Renewable Portfolio Standard or RPS, which requires utilities to produce renewable energy equal to 7% of total output by 2013, 12% by 2016 and 18% by 2019. Although the Florida rules attempt to limit the cost of implementing the RPS, the only choices will be expensive. When Floridians figure out that meeting the RPS is prohibitively expensive, future politicians will relax the standards, as they always do. Meanwhile, the current crop of Florida politicians can pat themselves on the back for sticking their constituents with an absurdly expensive, high-profile program that offers trivial benefits.
Jad Mouawad, the author of The New Times article, could easily have looked at these issues and written an incisive and informative article. I guess he, like the rest of the press, was blinded by Sun.

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