Thursday, 21 May 2020

Fund Managers with A$1.73 billion to invest, should you: Invest now in Solar Projects OR invest in Advanced Nuclear Power Plants in 5 years time????

A$1.73 billion of capital investment is going into Robertstown Solar Project in South Australia. It is a single tracking solar power plant, with a capacity factor of 23%, compared to the 10% or so, experienced in nations like the UK, in temperate zones.
This is Robertstown Solar Project.
One of the first Advanced Nuclear Power Plants (NPPs), the BWRX-300 Small Modular Reactor (SMR) will commence operation in 2027 and should become available in the Australia by 2030. 

And this is the BWRX-300 Advanced NPP

At the current exchange rate, the cost of US$675 million giving a capital investment cost of A$1.028 billion. So A$1.73 billion of investment would finance 505 MW of BWRX-300 'capacity'.

The most significant factor investors should consider about advanced SMRs is their build programmes are now down to 2 years - no different to Solar PV or Wind Farm projects. So the cost-of-capital burden that has drained investment from conventional npps is utterly negated. Comparing investments, it need not be considered a part of 'Significant Costs'.


For the Robertstown Solar investment, assuming the full 30.12 million MWh are generated between 2022 and 2052, the first significant cost is capital investment content:, which works out at A$57.44/MWh.

The second significant cost is O&M. The National Renewable Energy Laboratory (NREL) in the USA predicts a 2020 cost of US$10.5/kW/yr. At the current exchange rate, that equates to A$16.0/kW/yr. For 500 MW of installed capacity, that's a total cost over 30 years of A$240 million. The O & M cost content works out at A$7.97/MWh.
NREL Operation and Maintenance (O & M) Costs

The third significant cost is fuel and since it is stated frequently that this is 'free energy' the fuel cost content is A$0.00/MWh.

The fourth and final significant cost is decommissioning. An Oct 2017 RFF Report gives a cost for decommissioning a 300 MW US Solar PV Project at $45,976/MW. That's $22.99 million for 500 MW Robertstown Solar. Using 2017 exchange rate and adding in Australia's inflation brings it to A$31.45 million This Decommissioning cost content is A$1.04/MWh.

RFF Report. P.36; Table 9.

The significant cost total is A$66.45/MWh. When applied to the 30.12 million MWh, the cost is A$2.00 billion.
For the Advanced NPP, the BWRX-300, 505 MW of installed 'capacity would  generate 3.98 million MWh of 24/7 electricity every year and 238.9 million MWh over their 60 years lifespan. The first significant cost is a investment capital content of A$7.24/MWh.

It is then possible to ascertain all of the remaining costs: Fuel fabrication; O&M; waste fund; decommissioning fund - from an analysis of Hinkley Point C npp. All of these costs add up to €23.00/MWh in 2018. Factor in the 2018 € to A$ exchange rate and Australia's inflation to 2020 and this significant cost is A$37.17/MWh.
Pie Chart: Hinkley Point C nuclear power plant

The significant cost total is A$44.41/MWh. When applied to 238.9 million MWh, the cost is A$10.61 billion.
So what does that mean for the pension pots that have gone into the  A$1.73 billion utility scale solar pv projects, commencing generation in 2022 and earning for every MWh sold at the going Wholesale Price?Thinking in terms of a Wholesale Electricity Price of A$86.00/MWh:
After a 30 years lifespan of economical operation, by 2052, Robertstown Solar will have generated an income of £2.59 billion, with significant costs of A$2.00 billion. That's a potential for dividend payments from earnings of A$590 million

Working out at A$0.34 for every A$1.00 of capital invested.
Meanwhile, it is reasonable to assume the Pension Fund Manager holding onto his A$ million until 2027 would probably have partaken of 'opportunity earnings'. Then by 2030, the A$1.73 billion invested in advanced npps starts earning on the Wholesale Market.

Again,thinking in terms of a Wholesale Electricity Price of A$86.00/MWh:
After 22 years of operation, by 2052,  the BWRX-300 generation will have raised an income of A$7.53 billion, with significant costs of A$3.89 billion. That's a potential for dividend payments from earnings of A$3.64 billion (6X more).

But it will carry on for another 38 years of economical operation to reach A$9.94 billion

Working out at A$5.75 for every A$1.00 of capital invested (17X more).



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