1 Findings and Recommendations of the CSP-DSW Study C.N. Papanicolas PRINCIPAL RESEARCH PARTNERS: Massachusetts Institute of Technology (MIT) University of Illinois Electricity Authority of Cyprus

2 Climate Change, need for reduction of CO 2 emissions EU places central importance to reducing dependence on fossil fuels The launch of the Mediterranean Solar Plant of the newly founded Union for the Mediterranean (UPM) Stimulus packages and Research funding in both the EU and the US for cultivate new “green” technologies Recent growth of interest in RES: The CSP-DSW Project

3 The Study Focused on: The CSP-DSW Project An examination of current technologies for Desalination and Electricity Production using Concentrated Solar Power. An assessment of the maturity of the available technologies for implementation in a pilot and subsequently in a commercial plant. Defining the operational parameters, capacity and a conceptual design of a pilot plant. (constraint: budget of 18 MEuro + land) Providing an economic assessment, feasibility and viability of the proposed technology.

4 The CSP-DSW Study comprises: A techno-economic assessment study of the current status of technology in the co-production of electricity and desalinated using Concentrated Solar Power (CSP) The CSP-DSW co- generation scheme utilises thermal energy from the Power Cycle and the Solar Harvesting for the desalination process The CSP-DSW Project

5 Solar energy is harvested by a field of Heliostats on a hilly, south facing, location near the sea. The reflected solar energy will be captured by a central receiver and converted to heat and stored in a salt container of conventional or novel design. Storage initially is proposed at temperatures of 500 to 600 ο C. A more advanced and challenging design operating at 600 to 1000 ο C provides an excellent future solution for use with a supercritical CO 2 cycle. A Conceptual Design of a CSP-DSW plant: The CSP-DSW Project

6 Steam is generated from the heat reservoir of the salt container; this production is augmented by collecting “waste” heat from the various subsystems of the entire unit. Electricity will be produced using commercially available steam extraction turbine. Desalinated water will be produced using an innovative Multiple Effect Distillation (MED) with a Thermal Vapour Compressor, principally from the heat output of the steam turbine and other heat sources of the system. Design of a CSP-DSW plant: The CSP-DSW Project

FINANCIAL ANALYSIS OF THE CSP-DSW SYSTEM Pursued by: Indradip Mitra, George Tzamtzis & CNP. 7

8 A detailed Financial Assessment of the proposed conceptual pilot plant has been modelled The initial hypothesis about the advantageous nature of the co-generation scheme and the promise that RES hold for the future is confirmed A number of improvements in the incentives (principally feed in Tariffs) for the promotion of RES in Cyprus have become obvious. Financial Analysis

9 The financial analysis was carried out based on a Discounted Cash Flow (DCF) model Four different desalination configuration options were examined for the CSP-DSW project, giving an insight on the choice of preference between MED and RO The main Financial Indicators considered were: Net Present Value (NPV) Internal Rate of Return (IRR) Benefit cost ratio (also known as profitability index) Revenue cost ratio

10 Financial Environment Project Lifetime: 20 years Construction time: 2 years Annual Discount Rate: 6% Inflation rate:2% Debt interest rate: 6% Income tax: 10% on the gross profit Currency conversion rate: 1 Euro = 1.43 USD Assumptions and Considerations Financial Analysis

11 Income and Performance Electricity selling price to grid: 0.26 €/kWh (Cyprus FIT for CSP) Water selling price: 0.92 €/m 3 (not FIT exists for “green” water) Capacity factor: 85% (50,60 and 70% for first 3 years) Clean Development Mechanism (CDM) benefits GHG emission factor: 0.8 Ton/MWh Benefit: 14 Euros per Ton of CO2 Assumptions and Considerations Financial Analysis

12 CSP-DSW System Parameters Financial Analysis

13 CSP-DSW System Parameters Financial Analysis OTHER COSTS Utilities: 1.5 Million Euros Site works: 1.5 Million Euros Piping: 1.5 Million Euros Salt: 0.46 Million Euros Land Requirements Required land area: 214,000 m2 Land cost: 2.1 million Euros Personnel Costs per year Salaries: 670 k Euros (30 people, technicians and administrators) Annual Production Electricity Production: 25.7 GWh Water Production: 310,870 m3 For further studies the price of land needs to be more precisely defined, here the figure assumed is quite low and corresponds to high-inclination land This system employs a very small MED unit for water production. This is to maximize profit since the FIT for electricity favours its production over water

14 Financial Analysis

15 Financial Analysis

16 Financial Analysis Financial Analysis Results Without GHG benefits NPV: 19.1 Million Euros IRR: 13.26% Benefit cost ratio: Revenue cost ratio: 3.19 Simple non-discounted payback: 7.9 yrs With GHG benefits the financial performance is further enhanced!

17 Financial Analysis The CSP-DSW system is attractive from a financial point of view! The particular system was designed to yield minimum water, in order to make it more profitable. Nevertheless, even if the small MED system is replaced with the large MED- TVC system presented earlier by Prof. Georgiadis, it still is profitable: Without GHG benefits NPV: 15.1 Million Euros IRR: 11.35% Revenue cost ratio: 3.02 Simple non-discounted payback: 8.7 years Increase in capital costs: 3 Million Euros This is a clear indication that water production from RES is not favoured in the current FIT system. Co-generation schemes are heavily penalised for water production

18 Financial Analysis The CSP-DSW system in a non-FIT environment The FIT currently in place introduces a market distortion. Interesting results are obtained if the FIT is omitted (assumed selling price for electricity 0.10 Euros/kWh) The CSP-DSW system was examined with 3 options on the desalination unit: -A standard MED unit with daily production capacity of 1000 m3 of water -An Advanced MED TVC system with daily production capacity of 5000 m3 -An RO of equal capacity with daily production capacity of 5000 m3 Standard MED unit RO unitAdvanced MED TVC system NPV (million Euros)

19 Financial Analysis The CSP-DSW system in a non-FIT environment All cases are financially non-viable. This is expected as at the moment RES are not competitive with fossil fuel The MED-TVC System is better than the other options: in these conditions, the co-generation scheme is preferable Comparison of RO and MED-TVC indicates that MED is preferable to RO on a financial level for the CSP-DSW system

20 Financial Analysis Levelized cost of production Determining the cost of electricity and water in a dual purpose plant is a complex issue. Levelized Cost of Water (LCOW) through the Escaped revenue method: is the revenue from electricity of the single purpose plant is the revenue from electricity of the dual purpose plant is the water production during the plants whole lifetime. The difference of possible revenue streams between an electricity only plant of same characteristics and the cogeneration plant was thought to have occurred because of introducing the desalination facility into the electricity only system

21 Financial Analysis CSP-DSW system variations 3 options on the desalination unit were examined: -A small MED unit with daily production capacity of 1000 m3 of water -A MED TVC system with daily production capacity of 5000 m3 -An RO of equal capacity with daily production capacity of 5000 m3 Small MED unitRO unitMED TVC system Capital Costs (million Euros) Electricity produced (kWh per day) Water Production (m3 per day) In the above production values, a factor of 85% as operational availability has been used for financial calculations.

22 Financial Analysis Levelized cost of production The Levelized Cost of Electricity (LCOE) for the dual purpose plant, is calculated after the LCOW is subtracted from the total levelized costs of the plant. Small MED unit RO unitMED TVC system LCOE (Euro cent/kWh) LCOW ( Euro cent/m3) Once again the FIT tariff for Electricity distorts the picture. Water production is penalised hence the low LCOE for maximum electricity production and large LCOW for the first case.

23 Financial Analysis Financial Analysis Conclusions From a commercial point of view CSP-DSW project is attractive Water production induces a heavy penalty by reducing electricity production which is sold at a very attractive tariff Without a feed-in tariff and GHG benefits all cases produce a loss: the technology is not yet ready to compete with fossil fuel While the FIT stays fixed, O&M costs increase annually causing the net positive annual cash flow to decrease. The FIT should be linked to inflation to make investments in RES more attractive A rough estimate of an optimized 50 MWe plant, indicates that the cost will be reduced to below 13 cent Euro/kWh.

STUDY CONCLUSIONS AND RECOMMENDATIONS 24

25 The concept of CSP co-generation is sound both from an engineering point of view and from an economic – policy point of view. The advantages of CSP-DSW are realized only when the power and desalination cycles are optimized together. The Heliostat – Central Receiver technology with a substantial storage capability is judged to be the most suitable. Desalination employing Multi Effect Distillation possibly in hybrid mode with Reverse Osmosis for added flexibility is recommended. Recommendations

26 Given the currently available turbine technology a minimum size of 4MWe is required. A capital investment approaching 25 Million Euros (excluding the cost of land) will be needed. The utilization of a south facing hilly terrain on the south coast of Cyprus as the preferred location to site such a plant is recommended. While the use of hilly terrain is a novelty, we recommend this option. A detailed and sophisticated business model reveals that such a plant, will be economically profitable. STUDY CONCLUSIONS

27 A preliminary investigation of the commercially available components reveals that key components are not readily available for the particular application (e.g. conditions of saline humid costal environment). We judge that the unavailability of some components will introduce unnecessarily high risk and imparting unacceptable financial risk. A number of “custom” solutions that need to be engineered for the particular application, such as the receiver and storage units, which are at the conceptual level sound and promising, have not yet been demonstrated or tested to a sufficient degree so as to present acceptable risk for an investment to a pilot plant. STUDY CONCLUSIONS

28 The CSP-DSW Project Reccomendation: The technological choices recommended provide a sound basis for the commencement of research and engineering studies for a 4 MWe CSP-DSW demonstration plant. A decision to proceed with the construction of such plant presents high risk We strongly recommend the pursuit of testing and demonstration of critical subsystems to assess the robustness and suitability of the technologies chosen in an island environment