6/15/2016 Introduction to quiz: Economics of wind energy | Coursera

Introduction to quiz: Economics of wind energy

This document contains all the information you need to solve the quiz called
'Economics of wind energy'. Please calculate your answers to the questions at the
bottom of this page. You will then be prepared to start the quiz.

We recommend using a calculation tool such as a spread sheet or a computer

programming tool to solve the exercise.

You can download this document in PDF format:

Introduction to quiz_ Economics of wind energy _ Coursera.pdf

Learning Objectives

The main learning points of this exercise were:

The net present value of a wind farm project takes the value for each year of the
turbine lifetime into account.

Before calculating the levelised cost of energy, all revenues and costs must be
converted to their present value and added together.

The levelised cost of energy is typically given in €c per kWh.

Description

In this exercise you will actually make some of the calculations that were talked about
in the videos. The two calculations are:

1) The net present value (NPV) of a wind farm project;

2) The levelised cost of energy (LCOE) from a wind farm.

You will calculate for the 20 year lifetime of a wind farm project and assume that
payments and revenue are due by the end of each payment period, with the exception
of the initial investment that takes place at the beginning of year 0.

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For completing the quiz, you might 븢制nd the PDF given below useful as it contains
all the necessary formulas for calculations in the quiz:

Formulas for Economics PDF.pdf

Calculating the net present value (NPV) of wind farm projects

The 'NPV' function has the following syntax:

NPV(rate,value1,value2,...(last value- decommissioning cost)) - initial capital investment,

where:

"rate" is the discount rate over one year

"value1" is the annual net income in year 1

"value2" is the annual net income in year 2 (and so on till one before the last year)

"last value" is the annual net income for the last year.

"decommissioning cost" is an administrative and technical process which includes

clean-up of radioactive materials and progressive demolition of the plant.

"initial capital investment" is the initial capital investment, which occurs at the
start of year 0

For calculating the NPV, it is possible to use a 'NPV' function found in most spread
sheets. If you haven't got access to a spread sheet tool, you can use a NPV calculator
from the internet, for example:

http://m.calculatorsoup.com/calculators/븢制nancial/net-present-value-calculator.php

Calculating the levelised cost of energy (LCOE) from a wind farm

Before calculating the levelised cost of energy over the 20 year lifetime of the project,
the present value of all costs must be calculated (i.e. the initial capital cost, the
operations and maintenance (O&M) cost over the project lifetime, and the
decommissioning cost).

The net present value of the O&M costs is calculated with the NPV function.

The present value of the decommissioning cost is calculated with the PV function, which
has the following syntax:
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PV(rate, number of periods, annual payment, future value),

where

"rate" is the discount rate over one year

"number of periods" is the project lifetime in years

“annual payment” is zero

"future value" is the payment cost made to decommission the wind farm

For calculating the PV, it is possible to use a 'PV' function found in most spread sheets.
If you haven't got access to a spread sheet tool, you can use a PV calculator from the
internet, for example:

http://www.calculator.net/present-value-calculator.html

For calculating the levelised annual cost, the PMT function (otherwise known as the
payment function) can be used. It has the syntax:

PMT(rate, number of periods, present value), where:

"rate" is the discount rate over one year

"number of periods" is the project lifetime in years

"present value" is the present value of the sum of all costs (see above)

We can divide the annual energy production into the annual levellised cost to get the
cost of energy.

For calculating the PMT, it is possible to use 'PMT' functions found in most spread
sheets. If you haven't got access to a spread sheet tool, you can 븢制nd a PMT calculator
on the internet, for example:

http://www.hvks.com/Numerical/web븢制nance.html

Hint: the PV value here is the PV of all the costs (PVC)

Data

The basic information about the wind farm:

Wind farm capacity (MW) 50

Capital investmen (€) 65 000 000

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Period of operation (years) 20

Decommissioning costs (€) 3 000 000

O&M costs (€/kWh) 0.0091

Annual energy production (kWh) 110 000 000

Electricity selling price, tari썆侉 (€/kWh) 0,075

Annual discount rate (%) 8

Questions

Please use the information given above to answer the following questions. Write down
your answers as you go. You will need them when you answer the quiz.

Remember: In Quiz it will as absolute values!

Net present value (NPV) of the wind farm project

In order to make this calculation, we need to convert some of the information we have
into annual 븢制gures:

1. What are the O&M costs in euro for each year (€/year)?

2. What is annual revenue from selling the electricity (€/year)?

3. What is the annual net income (€/year)?

4. What is the net present value of this wind farm project(€)? Hint: when calculating
with NPV function don't forget to extract the decommissioning cost from the last
years net income.

The levelised cost of energy (LCOE) from a wind farm.

Once again, we need the capital cost of the wind farm (€) and the O&M costs in euro for
each year (€/year) - calculated in exercise above. Finally, we will need the
decommissioning costs (€).

1. Again, using the NPV function, what is the present value of all the maintenance costs
for the 20 years of operation (€)? Hint: For calculating NPV of costs, the sign of each
annual entry should be negative. Note also that the initial capital investment should
not be included here.
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2. What is the present value of the payment cost made to decommission the wind farm
(€)? Hint: Use the PV function but take care as the annual payment is zero and the
decommissioning cost is the future value.

3. Finally, add these two together with the initial capital cost to give the present value of
all the costs (€).

4. What is the levellised annual cost (€/year)?

5. What is the levellised cost of energy (LCoE) for the wind farm (€/kWh)?

6. What is this in €c/kWh?

Summary

The main learning points of this exercise were:

The net present value of a wind farm project takes the value for each year of the
turbine lifetime into account.

Before calculating the levelised cost of energy, all revenues and costs must be
converted to their present value and added together.

The levelised cost of energy is typically given in €c per kWh.

 Complete

  

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