Time moves a little slower here
The paint peels ’cause the summers here are so severe
And we’re nowhere near nowhere you would know of
Locals here pride, they show up just to show off
(1955, Hilltop Hoods, writing about South Australia)
No doubt they’ve been burning the midnight oil in the office of South Australian Energy Minister Tom Koutsantonis to deliver on the SA energy plan announced Premier Jay Weatherill in March.
It’s hard to believe it has been only six weeks since the SA government signed up Elon Musk’s Tesla to build the world’s largest lithium ion battery. Three weeks later the Weatherill Government contracted APR energy to supply nine GE TM2500 aero derivative diesel-gas turbines totalling 276MW. (APR provided similar generators to Hydro Tasmania in 2016 during the failure of Basslink submarine HVDC cable to Victoria.)
Contrary to the apoplectic rubbish you might have read elsewhere, these state-of-the-art generators will run only when absolutely necessary to avoid load-shedding events and are significantly cleaner than SA’s now-retired coal fleet.
And, of course, the latest news is the signing of a ‘Generation Project Agreement’ (more on that later) with SolarReserve that underwrites the development of what will be the largest solar thermal power-tower unit with storage in the world.
(There are currently seven solar thermal farms globally with higher capacity, but all others either use parabolic troughs or smaller capacity power-tower units.) SolarReserve was founded in 2008 and, like Tesla, is headquartered in California.
This third piece of the Weatherill-Koutsantonis triptych is intended to bring new, independent generation capacity into the state which will increase competition and put downward pressure on prices.
Much has been written about the $650 million project, and I set out here to collect together what is known and fill in some of the gaps.
Aurora, as the project is known, will be situated on Carriewerloo Station, a sheep and cattle pastoral lease belonging to Amanda and Scott Michael, about 30 km north of Port Augusta — not far from the former sites of the Northern and Playford power stations. Aurora is aiming to begin construction in February 2018 with completion expected in 2020.
A field of billboard-sized computer-controlled mirrors (100m2 heliostats) follow the sun and reflect sunlight onto a target at the top of a 227m tower, where the equivalent of 1200 suns heats up a molten salt — not table salt, but an inert mixture of sodium nitrate and potassium nitrate, traditionally used as garden fertiliser.
According to SolarReserve, the initial melting of the salt is a one-time process, after which the liquid salt is recirculated and used for the 40+ year life of the plant – without any degradation, or the need for replacement or topping up. Temporary equipment is brought on-site during plant commissioning to melt the salt, which is later removed after the process is completed.
Just to put a rumour to rest, no natural gas or other fuel is required for power generation, and the plant will have no pipeline feed.
Molten salt starts in the ‘cold’ storage tank at 288°C and is circulated up to the ‘receiver’ — a set of 14 panels of tube walls arranged into a cylindrical vessel approximately 30m high and 20m wide — heating the salt to 565°C. The heated salt then descends the tower and is stored in the ‘hot’ storage tank.
When power is required, the heated salt is pumped through a heat exchanger to transfer the heat energy from the salt to water in order to generate high temperature/pressure steam which is then run through a standard steam turbine generator, not unlike the turbines in many thermal power stations.
The salt, still in liquid state, is returned to the ‘cold’ storage tank ready to be ‘charged’ again when the tower is ‘on sun’. The exhaust steam from the turbine is ‘dry cooled’ and condensed into water and then returned to be used again, meaning that water usage is kept to a minimum.
According to Solar Reserve’s Senior VP of Development, Tom Georgis, the gross output of the turbine is 150 MW, however the plant’s auxiliary load during the day reduces the daytime ‘sent-out’ power to 135 MW. “After the sun sets, we are no longer collecting energy from the sun, so the heliostat field and cold salt pumps are not operating, and consequently the auxiliary loads are much reduced.”
In the evening, with lower auxiliary loads and generally when the value of the power will be highest, the plant will be able to increase its net generation. At 135 MW, the capacity factor is 42%, which will curiously place it with the second highest capacity factor in South Australia. (Only the 180 MW Osborne Power Station, a gas generator in north-western Adelaide, achieves a greater capacity factor at 77%.)
The molten salt storage tanks will store up an equivalent of 1100 MWh generation, or about eight hours at 135MW load. The facility is expected to generate in excess of 495 GWh annually, or 3.8% of SA’s 2015–16 annual energy consumption of 12,934 GWh.
On the day the Aurora deal was announced, Tom Koutsantonis tweeted:
A shiver has just gone up the coal generation industry’s spine. Solar thermal just won a competitive tender for base load generation in SA.
— Tom Koutsantonis (@TKoutsantonisMP) August 14, 2017
My guess is that Tom was referring to three strengths of the project:
- Dispatchability — the generator will provide power on demand, especially on hot, still evenings when solar PV and wind generators are idle and wholesale power prices can be up to 150 times higher than average.
- Grid services — the generator will provide valuable (but not yet valued) inertia that helps the grid ride through power disturbances, such as the one that ‘blacked out’ the state last September.
- Cost competitive — the price is somewhere between very good and excellent, depending on a range of assumptions, and worthy of discussion.
The SA Government went to open tender looking for two power supply contracts to meet its long term power needs:
- 75% open to any dispatchable technology, to bring new generation into the market
- 25% constrained to dispatchable renewable energy technologies, to “drive innovation in storage and other technologies”.
SolarReserve managed to beat out all other bidders in both categories, including a number of gas generators that bid for the technology-neutral portion.
The full energy output of the Aurora facility is contracted to the South Australian Government under a ‘Generation Project Agreement’ (GPA) designed by Danny Price of Frontier Economics, and will provide a benefit in favour of the SA government. (More on that here)
The SA Government’s peak loads are typically during off peak periods for the market, thus allowing it to benefit from lower spot prices, however Aurora’s energy storage will allow it to generate during peak market periods and help bring peak prices down with more competition and supply.
One quarter of the renewable energy certificates (LGCs) created will be bundled with the energy, which will be voluntarily surrendered by the SA Government, ensuring that 25% of the Government’s power is carbon neutral, which will go towards the state’s Carbon Neutral Adelaide targets. The remaining 75% of certificates will stay with SolarReserve, who will presumably market them as they please.
The SA government expects to pay a $75/MWh levelised cost for the 20 year duration of contract, but not more than $78/MWh.
For the South Australian government this is a good price — it’s significantly cheaper than the average wholesale price of $108.66/MWh in SA in FY2017 and also below SA 2020 baseload futures price of about $85/MW. The contract also has the benefit of protecting the Government from price rises over the next 20 years and providing the opportunity for price reductions.
Given that SolarReserve will be holding on to 75% of the LGCs, it’s difficult to state with certainty the full project levelised cost of energy (LCoE). By the time the project comes online in 2020 there will be only 10 years of the current RET remaining. Most experienced hands in the sector predict that, in the absence of new policy, LGC spot prices will tank well before 2025.
Energy Minister Tom Koutsantonis has stated that he is “advised that LGCs were not a significant factor in SolarReserve’s ability to offer a capped price of $78/MWh.”
My back-of-the-envelope calculation is total LGC revenue might add no more than $9.50/MWh over all energy generated in the first 20 years. As such the ‘all-in’ value of the contract would be less than $87.50/MWh. Note that the Finkel review, handed down just two months ago, estimated $172/MWh in 2020 and didn’t expect the median price of solar thermal to reach $87 until 2050.)
(Ed: We probably need to factor in the federal government’s “equity” contribution, which would lower the LCOE).
Given that alternative sources of long term electricity in South Australia almost certainly cost more than the combined value of the GPA and future value of LGCs, it is clear that the net subsidy (value of subsidy under the Commonwealth RET minus the value of savings to South Australia) is effectively zero — a far cry from the hysterical claims by the anti-renewables media that renewable energy is costly.
In late 2016 SolarReserve bid the 260 MW Copiapó solar-thermal project at US$63/MWh (A$79.50) without any subsidy into a Chilean reverse auction. However, the Chilean government chose instead to move forward with cheaper, but inflexible wind generation. SolarReserve will be rebidding the Copiapó project into the next Chilean tender later this year, and hopes to start construction by the end of 2018.
The company received an unwelcome setback when its $1bn Crescent Dunes facility in Nevada was taken offline last October for eight months due to a crack in the floor of one of the molten salt storage tanks. The problem was apparently caused by incorrect installation by a contractor and was repaired under warranty. The company says it has learnt from the decidedly low-tech problem.
As The Australian reported on Friday, it is not yet clear whether the project will receive all or part of the $110m ‘investment’ that was included in the 2017-18 federal budget.
(The deal was brokered by Nick Xenophon in what cynics might call a classic Xenophon move. In exchange for his decisive vote enabling the passage of the company tax cuts, a move that was bound to upset the ‘left’ and please the ‘right’, he secured investment in a project that had become totemic for the ‘left’ and popular with the ‘sensible centre’. Moreover, true to form, he secured a win for South Australia — both government and electricity consumers.)
The $110m has been variously described as either a concessional loan at 3% interest rate or concessional equity in line with the federal government’s March 2016 direction to ARENA to move away from grants and into investments with the opportunity for a return to taxpayers.
On Monday morning, SolarReserve’s CEO Kevin Smith told ABC Adelaide that the current pricing structure to the South Australian Government includes the $110m concessional funding, and that the company was confident of receiving the funding as “SolarReserve is the only game in town”, a statement no doubt contested by John Hewson, Chair of the Port Augusta Graphite Energy Company (formerly Solarstor) and others hoping for a look-in.
Smith commented that the $110m assumed is “not a grant, it’s not a subsidy, it’s an equity investment so we’ll have to pay that money back along with the premium that’s associated with the $110 million… if we didn’t get that it would change the price but it wouldn’t be a dramatic change in price.” Smith added that SolarReserve already has commitments and interest for funding that together are 50% more than is required.
In six short weeks, the South Australian Government has signed three very important contracts that underwrite their energy transition. Meanwhile, Prime Minister Turnbull has the temerity to label the SA Government’s efforts as “ideology and idiocy in equal measure”, all the while trying to herd a cabal of confused backbenchers with coal fetishes to arrive at a much needed and overdue federal energy policy.
And while SA moves ahead with new wind, battery, solar PV, solar thermal and a proposed pumped hydro plant, the total capacity of coal fired generation under construction in Australia remains at zero megawatts — for the tenth year in a row.
Simon Holmes à Court is Senior Advisor at the Energy Transition Hub, University of Melbourne.
Listen to our podcast on the Solar Tower power plant with Giles Parkinson, David Leitch and solar thermal expert Keith Lovegrove. Click below.
