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Study on Renewable Energy Resources, Oman - authority for ...

Study on Renewable Energy Resources, Oman - authority for ...

Renewable Energy Resources in Oman The system effects by a wind farm connected to a power system can be analysed by a system modelling tool (e.g. WASP), which can estimate the effects in the form of substituted electricity (MWh), and in the form of substituted capacity (MW) assuming that the level of security of supply is the same as in the basecase situation. The system effects can also be estimated from the base-case situation by doing some assumptions/considerations on what conventional units that may be substituted. The second approach is used for an evaluation of the system effect of establishing the wind farm in the power system. Economic effects It is assumed that the 40 MW installed wind power capacity can substitute 40 MW gas turbine capacity. In the calculation it is assumed that a 140 MW GT (natural gas fired) is replaced by a 100 MW GT and a 40 MW Wind Farm erected in the Quiroon and Thumrait areas. It is assumed that the wind farm can be ready for operation in 2011 and one of the 140 MW gas turbines in 2009 will be replaced by a 100 MW gas turbine and 40 MW wind farm. It is furthermore assumed that the electricity generation from the wind farm substitutes the electricity generation from the planned gas turbine corresponding to the production by 40 MW. By this assumption the annual savings in fuel cost and variable O&M costs can be calculated. Table 6.12 below shows the net present value of the wind farm costs and the saved costs at conventional plants, assuming that the wind farm substitutes gas turbine capacity both with respect to the capacity and the generation. The costs are calculated for the four different gas prices previously used. Furthermore, the NPV's are calculated, assuming a real discount rate of 7.5% and a lifetime of 25 years for conventional technologies and 20 year for the wind farm. Table 6.12 Discounted economic net costs of wind farms, million USD, compared to Gas Turbines Low gas price Medium gas price, Gas Opportunity Cost plus depletion premium High Gas price 1.5 USD/MMBtu 3.0 USD/MMBtu 3.0 USD/MMBtu 6.0 USD/MMBtu Costs of wind farm - capital costs - O&M costs 69 61 8 69 61 8 69 61 8 69 61 8 Saved costs at conventional power - saved capital costs - save fuel costs - saved O&M costs 24 8 15 1 39 8 30 1 54 8 45 1 69 8 60 1 Net costs 45 30 15 0 Concerning the wind farm capital costs, it is assumed that half of the investment is made in 2009 and the other half in 2010. In order to assess what requirements it takes for wind power to become completely competitive with natural gas, the break even price for natural gas has been calculated below in Fig. 6.5. Page 104 of 134 .

Renewable Energy Resources in Oman Fig. 6.5 Break- even Natural Gas price compared to 40 MW Wind Farm 80 70 $US million 60 50 40 30 20 10 NPV of wind farm costs NPV of gas cost savings Net cost of wind farm 0 Gas cost: 1.5$ mmBTu Gas cost: 3$ mmBTu Gas cost: 3$ mmBTu + depletion Gas cost: 6$ mmBTu Fig. 6.5 shows that a gas price of 6 USD/MMBtu balances the net costs of wind energy. The opportunity cost of gas which is assumed to 3 USD/MMBtu with a depletion premium of 3% p.a. returns discount ed net wind farm costs of USD 15 Mill in this case. If a wind farm can be implemented as a CDM project, and the avoided carbon emissions from gas consumption sold, the price obtained for the Certified Emission Reductions (CER) can be calculated based on the shadow price of CER of 25.5 USD/ton. This is considerably higher than current level obtained on the European markets which is between 3 - 5 EUR/ton. However, it is expected that the carbon prices will increase when the market becomes more mature and organised over the coming years and a future price of 12 -15 EUR/ton is not considered unlikely. 6.3.2 Small Electricity Generation Fig. 6.6 shows a comparison of the production cost of PV, PV-diesel and diesel generation systems. The cost of diesel generation is based on the current Oman diesel price. It can be seen that the diesel generation has the lowest cost, followed by the PV-Diesel hybrid. Fig. 6.6 Cost of Small Applications - New Capacity $US/MWh 425 245 Average cost of RAEC Diesel generaiton 161 PV 0.2 kW Hybrid 0.01 kW New Diesel 1 MW Page 105 of 134 .

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