Mesoscale Modeling and Probabilistic

Economic Analysis
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
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
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
5
The initial assessment of wind resources
only justifies the feasibility study
Yes
No
Is
there enough
wind over
the site
Feasibility
study
Is the
site worth
consenting
6
There are a number of techniques to
assess wind resource
Financial
closure
+/- 3% $200k 12 months Hub Height Wind
Mast
Initial
Assessment
+/- 10% for
80m wind
$50k 12 months Prospecting 30m
wind mast
All stages +/- 5% $10k Weeks Mesoscale
modelling
Best Use Accuracy for
80m
assessment
Cost Time Type of
Measurement
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
8
Model period can be selected to
represent long-term wind climate
3
4
5
6
7
8
9
10
11
J
e
n
-
I
8
J
e
n
-
8
0
J
e
n
-
8
2
J
e
n
-
8
4
J
e
n
-
8

J
e
n
-
8
8
J
e
n
-
9
0
J
e
n
-
9
2
J
e
n
-
9
4
J
e
n
-
9

J
e
n
-
9
8
J
e
n
-
0
0
J
e
n
-
0
2
J
e
n
-
0
4
J
e
n
-
0

J
e
n
-
0
8
Honth
H
e
e
n

w
|
n
d

8
p
e
e
d

(
m
|
s
)
Monthly mean wind speed and 12-month moving average for long-term NCEP data
9
Mesoscale modeling gives a good overall view
of sites for conceptual turbine placement
10
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%
11
Wind assessment (mesoscale or alternatives)
contains uncertainties
Maximum
Wind Speed
Minimum
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
12
. which can be expressed in terms of
probabilities
Probabilities
P50 of 9.5 m/sec
P75 of 8.5 m/sec
Wi nd Speed at 8 0 m
0
0. 1
0. 2
0. 3
0. 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.
13
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
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% appears
adequate for an
initial economic
assessment
15
Lets consider a site which could take up to
25 large 3 MW turbines
The question we are generally faced with is whether
there is sufficient wind resources to justify negotiating a
land agreement, measuring wind speed at hub height
and undertaking feasibility engineering ahead of
proceeding with a resource consent application.
Cost to
Find out
Value of
Project
16
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
17
but we really need to recognize and quantify
the uncertainty in all assumptions
0.25 n/a 2.0 Euro/NZ$
Min 1.0
Max 2.0
Min 2.25
Max 3.75
Min 8
Max 12
n/a
Min / Max
n/a 1.37 O & M Costs
(c/kWhr)
n/a 3.0 Turbine Cost
(Euro m))
n/a 10 Electricity Price
(c/kWhr)
1.42 9.5 Wind Speed
(m/sec)
St Dev Mean Distribution Factor
18
Firstly, we can get a feel for the gross
energy yield from the development
Probabilities
P50 of 305 GWhrs
P75of 258 GWhrs
Cumulat ive Probabilit y f or GWh
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
GWh
19
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%)
Cumulat ive Probabilit y 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
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 project
value will exceed $1 million (the cost of feasibility engineering)
21
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
22
In practical terms, these techniques have
been used successfully in New Zealand
At least 12 small wind farm sites have been evaluated with mesoscale
modeling; with
- two projects proceeding without further investment in wind
assessment (HorseShoe Bend and Weldcone)
- one project about to install a 30m wind mast to verify particular local
topographic 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 mesoscale
modeling with feasibility study is $10,000 to $15,000 in 6-8 weeks.
23
In summary, mesoscale modeling and decision
making under uncertainty has its place
Mesoscale modeling is good for initial assessment and
screening studies.
Physical measurement appropriate when more detailed
understanding 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 inputs
and outcomes; to refine assumptions and to engage with
the financial community.