The 1 USD/Watt Myth

Anyone interested in alternative energy knows that there is a race on for the 1 dollar per Watt price target for alternative energy. One may wonder what this means and why it is important. Let us proceed..

What does one dollar per Watt mean?

The cost of one dollar per Watt originates in the PV market. This refers to PV solar panels that have a Wp rating (say 150 Wp), meaning the power they generate with a 1000 W/m2 insolation. This metric is used by the industry to say the cost of a unit should be below 1 USD/Watt (as you see in the articles). But why?

First lets try to figure out what it means cost wise. If a technology requires a 1 USD/Watt capital investment, is it a good deal? Lets say the cost of electricity is 0,20 USD (which it is in most places around the world), then a solar panel of 1 USD/Watt will pay itself back after 5000 hours of full sun. This is about 4 years in a sunny place. So in that sense the metric identifies a good deal (PV panels last up to 50 years). Generally investments require a 3-5 year ROI.

Does Coal Make the Milestone?

We know most PV doesn't make the 1 USD/Watt mark, the current price hovers around 2 USD/Watt. But how would a normal coal fired power plant do? Coal fired power plants are build all the time. Coal has a heating value of 6,67 kWh per kilogram. Coal fired power plant efficiency is about 36% which means you need 0,42 kilo of coal to make 1 kWh. At 26,2 USD per ton you get a cost of 0,0109 USD per kWh. This comes down to 0,0000109 USD per Watthour. You see coal energy is practically free, just like solar, except it pollutes the athmosphere and it is not free, because these numbers add up..

But the 1USD/Watt metric is about the powerplant/installation. We can work that out be using a real project that is currently undeway:“A 1,600 MW hard coal-fired plant in Lubmin on the Baltic Sea in Germany for startup in 2012, at a cost of 2,85 billion USD”. A 1,600 MW plant generates 1,600 MW/hr. Some math shows this results in a 1,78 USD/Watt cost. Ergo, regular energy does not make the cut of 1 USD/Watt!

The real cost of coal

Of course a 1,78 USD/Watt power plant needs coal. So on a cost per kWh basis coal will cost 0,0109 USD/kWh which is cheap, but not free. Coal fired power plants need a lot of maintenance and produce waste which adds to the hidden cost, not to mention soot and the averse effects on the climate. So the industry does not hit its own price target. I think we can conclude that the metric and the industry target is completely bogus.

Concentated Solar Power, the ANDASOL 1 Example

Concentrated solar power has great potential. It uses essentially the same technology as coal fired power plants, only without the coal. Instead it requires an up front investment into lots of mirrors. Lets look at the numbers from the Andasol 1 project build in Spain. That project cost 380 million USD to realize a 50 MWe power plant (generating 50.000.000 Watt per hour). According to the project data this plant will generate 182 million kWh per year. This is a low number considering the collector field which measures a whopping 549.360 square meter and catches 2,200 kWh/m2 per year. Optimally you could be looking at 1.208.592.000 kWh thermal power and still 241 million kWh per year if the efficiency was 20%, but I digress. 

With a price of 380 million for a 50 MWe power plant the cost per Watt comes to 7,6 USD. This means it doesn't meet the 'standard'. There are several things you can say about this: First, the rated life of a coal fired plant is an extendable 25 years. The combined total cost over this period (assuming all else equal) leaves us with a cost of 0,01258 USD/kWh for solar and 0,01903 USD/kWh for coal.

Second:The cost of the solar plant don't add up. The Mirror material costs little over 20 Million for the given surface, the steam turbine could costs only 5 million, so you have an incredible 355 Million left to build the rest of the power plant. Something tells me there's money disappearing !! If you keep to the 1,78 USD/Watt target you could spend 89 million on the solar plant. That would buy you 2 million square meter of mirror, you'd be left with 40 million to build a 100 MW steam turbine, because that would be the output at 20% efficiency..

Industry Capture and Price Fixing

Something is clearly not right about a 2,86 billion dollar power plant. Something also is not right about a solar plant with 355 Million missing in action. I believe we see industry capture and price fixing. Another reason for suspecing this is that solar trough plants, which are now widely accepted, still qoute at ten times the cost of the mirrors (I checked with the suppliers). Because the industry is not meeting its own standard and because of the suspicious numbers I'd say lets forget about the 1 USD/Watt metric.