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Tanner Janesky's avatar

Great article, and interesting model. Thank you!

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Brian Smith's avatar

I've seen claims made that solar energy is cost-competitive for at least 10 years. They have all had obvious, glaring holes in the logic or calculations that undermined the conclusions, so I am perhaps more skeptical of such claims than I should be. However, this case seems quite weak.

I can't see the workings of the simulator tool, so I can't evaluate how it works, or if the calculations make sense. However, I see some obvious issues:

1. Why do gas generators and solar have different WACC, and why is the WACC so low? I'd expect it would be at least 10%, and the WACC for solar should be at least as high as the WACC for gas.

2. Why does the model include gas prices as GBP per MWh? I've always seen these prices in terms of $ per MMCF or $ per therm. Does the model intend the price to be GBP per therm? If the price really is GBP per MWh, how does the gas turbine's efficiency affect the calculation?

3. Why do you base your calculations on a gas turbine efficiency of 45%? This seems very low for a baseload application - even 25 years ago, combined cycle generators exceeded 55% total efficiency.

4. Why do you assume that gas turbines last 25 years? When I worked in the industry, I was able to find only one large power generation gas turbine that had been retired, and that was because the of an uncontained failure of a turbine blade. Gas turbine peakers installed in the early 1970s were still operating normally in the early 2000s. Adjusting this parameter doesn't seem to change the levelized cost, so I don't know whether or how it affects the calculations.

5. Why do you assume that solar generators will last 35 years? I've never seen an estimate this high.

6. What assumption do you make for battery life? If batteries are routinely charged and discharged daily, I'd expect them to last 3-5 years. Perhaps more if batteries are sized to frequently hold more than a night's worth of demand.

7. You say that "For battery storage, a cost of £200/kWh is assumed." What is the source for this assumption? The US National Renewable Energy Laboratory reported that costs were $2080 in 2023 (£1612 at today's exchange rate), optimistically going down to to $762 (£590) by 2050.

8. Why do you assume constant demand at 1GW? Electricity demand fluctuates during the day, and from day to day within a week, and from month to month during a year. If you include this demand variability, it might make solar look better, because highest demand typically comes in late afternoon, on workdays, and in the summer - the best hours for solar generation. Assuming, of course, that electricity usage remains similar to today, and we don't switch to electrification for heating or transportation.

If I address the three issues that seem most obvious to me (raising battery cost to £1612, increasing solar WACC to 7.5%, and increasing gas turbine efficiency to 55%), your benchmark goes down to £64/MWh, and your final gas/solar battery combination goes up to £226/MWh.

Out of curiosity, did you consult anyone who works in financing, building, and operating powerplants when developing the model and writing this post?

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