A renewable energy developer is considering two different power plant investment

Question

A renewable energy developer is considering two different power plant investments. Both would have a capacity of 500 MW, face a 10 year lifetime and an annual discount rate of 15%. The first is a solar photovoltaic plant with a total installed cost of $300 million, a capacity factor of 15% and a levelized variable cost of $5/MWh. The second is a wind plant with a total installed cost of $400 million, a capacity factor of 30% and a levelied variable cost of $15/MWh. Calculate the LCOE and ARR for each plant. Which should the developer choose?

Please show your work in details.

Explanation / Answer

Renewable energy can be defined as it is the energy which we can use again and again in the planet earth to get the fulfillment of the energy requirement along with the sustainable developement of the nations. the renewable sources of energy like wind solar are ecofriendly and can be use for millions of years without damaging the environment and the ecosystem.

now we need to find the LCOE and ARR for the given problem so lets begin with this as follows-

according to the problem it is given that

capacity of both the plant=500MW

lifetime=10years

discount rate=15%

first we take the case of the solar photovoltaic plant then

installation cost=$300 capacity factor=15% and the levelized variable cost=$5/MWh

LCOE is given by= (sum of cost over lifetime)/ (sum f electricity produced over lifetime)

300000000/(0.15x5x10)= 225.00$/KWh

ARR= (total net profit per year/ initial cost) x100 =225.00/500= 45%

similarly for the case of the second plant-

LCOE=(400000000)/(.3x15x10)= 888.9 $/KWh

ARR=888.9/500=17.7%

so we can see that plant first is more convinent to use and thus developer will go for solar photovoltaic power plant.

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