Written by 9H Interns: Rudy Nesvik & George Ristic
Read the Full Article here.
Executive Summary
As part of its commitment to provide long-term funding for students, the 9H Foundation undertook a significant initiative: the construction of a 500-kW single-axis solar facility in Laramie, WY.
The one sentence conclusion? It is not financially recommended to construct a 500 kW solar facility.
It cost $837,449 (CAPEX) to develop and construct the 500kW solar facility. After 30 years of anticipated revenues and expenses, the solar facility would ultimately lead to a net present value (NPV) loss between $371,941 & $609,122, depending on the discount rate and tax credit availability. This results in negative returns on investment (ROIs) between -72% and -44%, depending on tax credits.
Though the 9H Solar Facility is predicted to generate a total net revenue of $279,968 over its lifetime (from 2023 through 2052), it will never offset the $837,449 of capital expenditures (CapEx) required to develop and construct the project. While the investment tax credit (ITC) should provide a one-time lump sum payment of $251,235 in 2024 from the federal government (30% of the CAPEX), this still would not be enough to make the project’s financial projections positive.
The anticipated first-year production for the 9H facility is 976 MWh, enough to power the equivalent of ~100 residential homes for the entire year. Due to the degradation rate for the First Solar Series 6 solar panels, the projected energy production in 2052 is 844 MWh, a 13.5% loss from its original power production. The calculated annual revenue was determined using the Power Purchase Agreement (PPA) price of $43 per MWh, which is significantly higher than the average solar PPA price. This results in an estimated gross power sales revenue of $41,976 for the first year (2023-2024). The total 2023 operational expenses (OPEX) for the 9H facility is $18,997 (excluding decommissioning costs) and $25,130 (including decommissioning costs). The annual OPEX includes a comprehensive preventative maintenance inspection (PMI), liability insurance, inland marine insurance, property tax, property lease, and decommissioning costs.
As is often the case in any construction project, from contract signing to electricity generation, the solar project was slightly over budget and 16 months over schedule, taking a total of 22 months to complete. Initiated in June 2021, the project faced various delays including issues with geotechnical studies, ordering materials, supply chain delays, various installation issues, contractor furloughs, and adverse weather conditions. These setbacks resulted in a project completion date of April 18, 2023, instead of the initially envisaged completion date of December 31, 2021. Because of these delays, it caused a missed revenue opportunity of $51,396 for the 9H Foundation.
Financial viability aside, this project provides hands-on learning experiences for University of Wyoming students and plays a crucial role in collecting data to assess the risks for solar development within the state. The 9H solar project shares the lessons it has learned allowing ranchers, companies, or individuals to make informed decisions about the true costs & benefits of developing a solar facility. This article provides an in-depth analysis of the limits of green energy.