Guest Post by David Middleton
Great News! Siemens will generate an 18% return on a project that will have a negative return on investment (-9%)… All at the taxpayers’ expense!
At first glance, this looked too good to be true…
White Sands breaks ground on Army’s largest solar array
April 26, 2012
By Ms Miriam U Rodriguez (ATEC)
White Sands Missile Range leaders came out to break ground and to commemorate the start of a renewable energy project at the site of the new Solar Photo Voltaic Array Project, the Army’s largest solar array, April 19 on WSMR.
A 42-acre tract of land located about ¼ mile northeast of the Las Cruces Gate next to main post will be the site where 4.115 MW of single-axis vertical azimuth-tracking ground-mounted solar Photo Voltaic panels will be installed.
[…]
In conjunction with the 4.115 MW project, WSMR will also be installing a 350 kW solar PV Carport at the parking lot for the Headquarters Building 100.
[…]
The total cost of both projects is $16.8M with a cost of $3.77 per Watt.
The solar project is being funded within an Energy Savings Performance Contract (ESPC) utilizing an Energy Services Agreement (ESA) that the Huntsville Army Corp of Engineers (COE) has awarded to Siemens on behalf of WSMR. Under the awarded task order, Siemens will maintain and operate the equipment and will provide the energy to WSMR. This agreement is for a period of 25 years. The simple payback is 18.1 years. The energy being provided will cost the same that WSMR is currently paying the local utility company which is a blended rate of $0.08/kWh.
[…]
$3.77 per Watt is less than $4 million per MW. That’s a big deal. Solar PV usually runs from $5 to $8 million per MW of installed capacity and $0.08/kWh is dirt cheap by solar standards. $0.08/kWh is only 25% more expensive than the levelized generation cost of natural gas-fired electricity generation.
On top of all that, the Army didn’t have to pay any of the $16.8 million construction cost. Siemens would recoup its costs by selling the electricity to the Army at the current market rate. What a deal for the taxpayers! Green energy for the same price as dirty old energy!
It turns out that it actually is too good to be true…
Corps of Engineers completes Army’s largest solar array installation
January 22, 2013
By James W. Campbell, USACE
WHITE SANDS MISSILE RANGE, N.M. (Jan. 22, 2013) — The largest solar power system in the U.S. Army is coming online at White Sands Missile Range, N.M., and officials gathered Jan. 16, to mark the occasion with a ribbon-cutting ceremony.
The Energy Savings Performance Contract, or ESPC, project, awarded and managed by the U.S. Army Engineering and Support Center, Huntsville, provides the sprawling desert base with a new 4.465 megawatt solar photovoltaic system…
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Along with being the largest solar project, there’s another first in how the system at White Sands Missile Range was funded.
“We used an Energy Services Agreement for the photovoltaic equipment along with the ESPC concept which was a first for the Army,” said Will Irby, Huntsville Center ESPC Program Manager.
An ESA is an arrangement whereby a third party owns, operates and maintains the power generation system and provides electricity to the customer. This third-party ownership mechanism allowed for a significant tax grant from that reduced the project cost by $6.1M, Irby said.
[…]
The taxpayers paid 27% of Siemens’ construction costs. The actual cost was $5.13 per Watt, $5.1 million per MW. A natural gas-fired plant costs $700,000 to $900,000 per MW. Since the taxpayers footed 27% of the up-front costs, Siemens can generate about an 18% annual return selling the electricity to the Army for $0.08/kWh…
(My return on investment calculation does not apply a discount rate or any other “time-value of money” measures.)
As if the economics of this weren’t bad enough, the 4.1 MW solar PV array covers 42 acres. That’s a generating density of 0.11 MW per acre. Natural gas-fired plants generate more than 6 MW per acre…
U.S. Army Dedicates 4.1 LCPV Solar Power Array at White Sands
By Renewable Energy World Editors
January 18, 2013
New Hampshire, USA — On Wednesday, January 16th, the U.S. Army dedicated its largest solar photovoltaic system at White Sands Missile Range, in a ceremony led by Brig. Gen. Gwen Bingham, White Sands commander. Bingham was joined by Katherine Hammack, assistant secretary of the Army for Installations, Energy and Environment for the ceremony and Judy Marks, president and CEO of Siemens Government Technologies. (see photo at the end of the article.)
“I came here about four months ago talking about how White Sands is a national treasure and now we can feel proud that we’re really on the environmental edge,” Bingham said. “It takes passion to do something like this. I’m just excited about the journey that will lie ahead.”
[…]
If “White Sands is a national treasure,” wouldn’t you think that the gov’t might want to reduce, rather than expand, the footprint of electricity generation for the facility?
The new solar PV arrays are expected to provide up to 10% of the facility’s electricity demand at a full cost of $22.9 million and will cover 42 acres of “national treasure.” A couple of 7 MW natural-gas fired reciprocating engines could provide 100% of the facility’s electrical needs at a cost of $5.6 million and probably only occupy 2-3 acres of “national treasure.”
Natural gas prices would have to rise to ~$8/mcf (mmBTU) for the natural gas-fired reciprocating engines’ levelized cost to become as expensive as the solar LCVP installation. US natural gas prices are not expected to rise to any where near $8/mcf by 2020.
Unless the Obama Administration finds a way to shut down fracking and kill the shale boom, the real price of natural gas is unlikely to increase very much at all over the next 10-15 years.
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David Banks: “That they will tear down in a few years when we get more efficient technology”
We already have more efficient technology. It is called Gas Turbines.
What a great post! I like this! Thanks David!
Some experts are beginning to refer to the US frac gas resources as “effectively infinite“, and also effectively free. Natural gas will economically ‘eat the lunch’ of any currently known competing energy source, for a long time to come.