M Stavy, A Financial Algorithm for Computing the Levelized Cost (US$/MWh) of Storing Solar (Wind) Electricity (LCOS) at a Grid Scale Energy Storage Plant (ESP): An Algorithm for Bankers and Investors
ABSTRACT–This paper discusses the financial and technical principles underlying the levelized cost (LC) method of computing the cost (US$/MWh) of the bulk storage of solar (wind) electricity (LCOS). The paper presents a LC algorithm. The algorithm equations are presented. A glossary is presented. For rapid computation, an Excel LC Algorithm Workbook is presented. The financial algorithm uses nine recognized energy storage plant (ESP) specifications (specs) to compute the levelized cost of the stored solar (wind) electricity. Published (assembled) spec values for the proposed Highview/Encore Liquid Air Energy Storage (LAES) Plant (Vermont), for the upcoming Tesla Li-ion Battery Moss Landing ESP (Moss Landing, California) and the actual (since 1967) Cabin Creek Pumped Hydro Energy Storage Plant (Clear Creek County, Colorado) are used as case studies to demonstrate the algorithm. The emphasis in this paper is on ESP cost; not on ESP revenue, but the revenue is discussed when the paper tries to reconcile the LCOS method with ESP GAAP project accounting. When the revenue (US$/MWh) equals the LCOS, the ESP is earning its weighted average cost of capital (WACC). The goal of this paper is to present a standard computational algorithm (an app in an Excel Workbook) for bankers (investors, financial analysts) to use. Readers can do a LC computation based on the paper’s LCOS algorithm and on their own nine assembled ESP specs. The paper’s LCOS algorithm gives the reader who has these nine ESP spec values, a quick “back of the envelope” verification of a developer’s (manufacturer’s; promotor’s) value for their ESP LCOS. A complication arises in using this paper’s LC algorithm. The complication is that published ESP spec values are limited and that an ESP developer’s spec values must be confirmed by the reader before they use this paper’s Excel LC Algorithm Workbook to compute the ESP LCOS. The paper has three case studies that discuss how to assemble the nine ESP specs when good specs are not publicly available.
In finance, having good numbers is always a challenge.
Below download Michael’s Solar and Energy Storage Northeast 2020 Poster. It will look good on your grandchildren’s bedroom wall or on your office wall.
Below download the Post Convention Version of his Poster Handout.
Below download the Pre-Convention Draft Version of Michael’s Solar and Energy Storage Northeast 2020 Paper.
Below download his paper’s Excel LCOS Algorithm Workbook. It is complete unless you find some errors.
Michael wants to thank you for stopping by his poster and discussing his paper with him.
Michael’s paper, Is Wind “Power to Gas” Ready for Prime Time on the North American Grid? has been selected for presentation at CLEANPOWER 2020, 1-4 June, Colorado Convention Center, Denver.
WARNING! This paper was greatly influenced by Russia and, in particular, by that very famous Russian, Мистер Sputnik.
In the hydrogen industry, this technology is known as “power to gas” or as P2G. The power referred to is wind power ( it could be solar energy). The gas referred to is hydrogen as a green gas. It is green because it is produced with renewable energy. The grid referred to is the natural gas grid, not the electric grid.
Michael is doing a financial analysis of P2G for bankers and investors. He looks forward to working for U in Denver!
Stay tuned! More information on Michael’s CleanPower 2020 paper will be forthcoming!
Michael’s NEW Web of Science ResearcherID is AAG-6642-2019. Use this ID and the search function to find his researcher Web of Science Profile at Publons. Go to https://publons.com/about/home/
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