13.1 Cost structure and levelized cost of energy (LCOE) analysis

Airborne wind energy systems offer a promising alternative to traditional wind turbines. By harnessing high-altitude winds, these systems could potentially achieve higher capacity factors and lower material costs, leading to improved cost-effectiveness.

Understanding the cost structure and LCOE of airborne wind energy is crucial for assessing its economic viability. This analysis considers capital and operational expenditures, design factors, and financial considerations to determine the overall cost-competitiveness of this emerging technology.

Cost Structure of Airborne Wind Energy

Capital and Operational Expenditures

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  Critical review of the levelised cost of energy metric View original

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• Capital expenditures (CAPEX) for airborne wind energy systems encompass costs for airborne component, ground station, tether system, and power electronics
• Operational expenditures (OPEX) include maintenance, repair, and replacement costs for system components, as well as labor and land lease expenses
• Capacity factor significantly impacts overall cost structure by determining energy produced relative to system's rated capacity
  • Higher capacity factors generally lead to improved cost-effectiveness
  • Airborne systems may achieve higher capacity factors due to access to stronger, more consistent high-altitude winds

Design and Technology Factors

• Technological maturity and economies of scale determine component costs and overall system expenses
  • As technology advances, costs are expected to decrease
  • Large-scale production can lead to reduced per-unit costs
• Choice of airborne wind energy system design influences both CAPEX and OPEX
  • Rigid wing systems may have higher initial costs but potentially lower maintenance needs
  • Soft kite designs might offer lower manufacturing costs but require more frequent replacements
• Regulatory requirements and environmental impact assessments introduce additional costs
  • Permitting processes for new technology can be complex and time-consuming
  • Environmental studies may be required to assess impacts on wildlife (birds, bats)

Financial Considerations

• Financing costs and risk perception by investors affect overall cost structure
  • Higher perceived risks may lead to increased interest rates or required returns
  • As technology matures and demonstrates reliability, financing costs are likely to decrease
• Project development costs include site assessment, wind resource evaluation, and grid connection studies
• Insurance costs may be higher for novel technologies until long-term performance data is available

Levelized Cost of Energy Calculation

LCOE Formula and Components

• LCOE formula incorporates total lifecycle costs divided by total energy production, expressed in $/kWh or$/MWh
  • $LCOE = \frac{\sum_{t=1}^{n} \frac{I_t + M_t + F_t}{(1+r)^t}}{\sum_{t=1}^{n} \frac{E_t}{(1+r)^t}}$
  • Where: I = Investment, M = O&M costs, F = Fuel costs, E = Energy production, r = Discount rate, t = Time period, n = Lifetime
• Capital costs annualized over project lifetime using appropriate discount rate
  • Includes equipment costs (airborne component, ground station, tether)
  • Installation and commissioning expenses
• Annual operating and maintenance costs factored into calculation
  • Regular maintenance schedules
  • Repairs and component replacements
  • Labor costs for operations and maintenance personnel

Energy Production and Project Lifetime Considerations

• Annual energy production estimated based on system's capacity factor
  • Accounts for variations in wind resources and system availability
  • May consider seasonal fluctuations in wind patterns
• Project lifetime and degradation factors considered in LCOE calculation
  • Typical project lifetimes range from 20-30 years
  • Performance degradation over time may reduce energy production
    • Tether wear, airborne component efficiency losses
• Capacity factor variations significantly affect LCOE
  • Higher capacity factors generally lead to lower LCOE values
  • Airborne systems may achieve higher capacity factors in some locations

Financial and Policy Factors

• Financing costs incorporated through weighted average cost of capital (WACC)
  • Reflects combination of debt and equity financing
  • WACC typically ranges from 5-10% for renewable energy projects
• Taxes, subsidies, and policy-related factors included when applicable
  • Investment tax credits or production tax credits may lower effective LCOE
  • Carbon pricing mechanisms could improve competitiveness against fossil fuels
• Discount rate choice reflects time value of money and perceived project risks
  • Higher discount rates increase LCOE by placing more weight on near-term costs

Sensitivity Analysis of LCOE

Key Parameters and Their Impact

• Sensitivity analysis systematically varies key input parameters to assess impact on calculated LCOE
• Capacity factor variations significantly affect LCOE
  • 1% increase in capacity factor can lead to 0.5-1% decrease in LCOE
  • Example: Increasing capacity factor from 35% to 40% might reduce LCOE by 2-4%
• Capital cost uncertainties substantially influence LCOE calculations and projections
  • 10% reduction in capital costs could lead to 5-8% decrease in LCOE
  • Example: Reducing initial investment from $2000/kW to$1800/kW might lower LCOE by 6%

Operational and Financial Sensitivities

• Operational and maintenance cost estimates impact LCOE sensitivity
  • 20% reduction in annual O&M costs might result in 3-5% LCOE decrease
  • Example: Lowering annual O&M from $50/kW to$40/kW could reduce LCOE by 4%
• Chosen discount rate or WACC has significant effect on LCOE
  • 1 percentage point decrease in WACC can lead to 3-5% reduction in LCOE
  • Example: Reducing WACC from 8% to 7% might lower LCOE by 4%
• Project lifetime assumptions influence LCOE sensitivity
  • Extending lifetime from 20 to 25 years could reduce LCOE by 5-10%
  • Example: Increasing project duration from 20 to 30 years might decrease LCOE by 15%

Technology and Market Projections

• Technological learning rates and cost reduction projections analyzed for future LCOE improvements
  • Learning rates of 10-15% per doubling of cumulative installed capacity are common in renewable energy
  • Example: 15% learning rate could lead to 30% cost reduction after 10 GW of installed capacity
• Market size and growth rate assumptions affect long-term LCOE projections
  • Faster market growth can accelerate cost reductions through economies of scale
  • Example: Doubling annual installation rate might increase learning rate from 12% to 14%
• Component-specific cost reduction potentials evaluated
  • Tether materials, control systems, and power electronics offer significant cost reduction opportunities
  • Example: 50% reduction in tether costs could lead to 5-10% decrease in overall system LCOE

Cost Competitiveness of Airborne Wind Energy vs Conventional Technologies

Comparison with Conventional Wind Turbines

• LCOE comparisons account for differences in capacity factors, capital costs, and operational expenses
• Airborne wind energy potential for higher capacity factors due to access to higher altitude winds
  • Conventional turbines typically achieve 30-50% capacity factors
  • Airborne systems may reach 50-70% in favorable locations
• Lower material requirements and simplified installation for airborne systems may reduce capital costs
  • Conventional turbines require 500-1000 tons of materials per MW
  • Airborne systems may use 50-200 tons per MW, depending on design
• Operational and maintenance costs compared considering accessibility and component lifespan
  • Airborne systems may have more frequent, but potentially simpler maintenance requirements
  • Conventional turbines have less frequent but more complex maintenance needs

Scalability and Grid Integration

• Scalability and power density evaluated against conventional wind turbines and other renewables
  • Airborne systems may achieve higher power densities (W/m² of land use)
  • Example: 5-10 W/m² for airborne systems vs 2-3 W/m² for conventional wind farms
• Grid integration costs and potential benefits factored into cost competitiveness analyses
  • Reduced transmission infrastructure needs for some airborne designs
  • Potential for mobile deployment in remote or disaster-affected areas

Comparison with Other Energy Sources

• LCOE of airborne wind energy compared to other renewable and non-renewable sources
  • Current LCOE estimates for airborne wind: $50-100/MWh (highly uncertain due to early stage)
  • Conventional onshore wind: $30-60/MWh
  • Solar PV: $30-50/MWh
  • Natural gas combined cycle: $40-70/MWh
• Factors considered in comparisons include dispatchability, environmental impact, and long-term cost trajectories
  • Airborne wind may offer improved dispatchability compared to conventional wind and solar
  • Lower environmental impact than fossil fuel sources
  • Potential for steeper cost reduction curve due to technological immaturity