Half-hourly Operating Cash Flow

The key operating metric is the plant’s half-hourly cash flow associated with wholesale market operations, PPA revenue and incurred fixed costs pro-rated to a capacity factor adjusted half-hourly basis that reflects the operational dispatch of the plant according to the dispatch profile outlined in Table 3 and the TYM based solar output. Note that we do not incorporate depreciation costs within this measure.

Equation 20 shows the total half-hourly PPA revenue from both the gas and solar components shown in Equation 18 and Equation 19, respectively.

Equation 20: Half-hourly PPA revenue from both the gas and solar components

.

Re

Re

_REV

PPA

v

PPA

v

PPA





Equation 21 calculates the operating cash flow as the sum of the wholesale market profit (WMP) and PPA revenue (PPA_REV) less operational fixed costs from Equation 3, Equation 20 and Equation 8, respectively.

Equation 21: Half-hourly Operating cash flow (OCF)

. _ _

_ t thh

t

t WMP PPA REV Fixed Costs adj

OCF   

Note that the calculation of wholesale market costs and PPA revenue is linked to the output of the gas and solar components of the plant respectively while wholesale market revenue and pro-rated fixed costs are based upon the output and fixed costs of the whole plant. Of course, if either of these components is not dispatched during the half-hourly dispatch

with that component will be zero but the full capacity factor adjusted half-hourly pro-rated fixed cost will be incurred as long as some dispatch of the plant occurs. If the plant is not dispatched, then no wholesale market cash flow, PPA revenue or pro-rated fixed costs will be earned or incurred by the plant.

Equation 22 shows the annual operating cash flow that aggregates the half-hourly operating cash flows in Equation 21 to produce an annual figure.

Equation 22: Annual operating cash flow (AOCF)

. 1



Collating the projected annual cash flow outcomes for each year over the lifetime of the project enables one to perform NPV analysis to assess the financial feasibility of the project given the initial capital outlay associated with the construction of the generation plant – e.g. its ‘overnight’ capital cost. Moreover, this analysis can also be used to assess what gas and solar PPA strike prices might be required given the dispatch profile outlined in Table 3 and TMY based yield of the LFR to ensure the financial feasibility of the project. In this context, project feasibility is linked to achieving a positive NPV for the project and is calculated in excel using the formula in Equation 23.

Equation 23: Net Present Value of annual operating Cash flows less CAPEX



,

,...,

,

AOCF

AOCF

AOCF

NPV

Capex

NPV





where Capex is the overnight capital cost of the project (in $m) and AOCF_j is the projected annual cash flow of the generator in year ' j'calculated from Equation 22 for all years over the lifetime of the plant, i.e. j1,...,n,where we have assumed that

n40

Note that in the above calculations we have incorporated information contained in RATCH’s May 2014 ‘Assumptions Register’ document (RAC 2014) relating to the capital cost of the project (e.g. Capex in $m), FOMC ($m, p.a.). We have also incorporated the latest technical parameters relating to fuel costs (in $/GJ), Variable Operation and Maintenance (VOMC) costs (in $/MWh), auxiliary load (in % terms) as well as heat rate data needed to calculate the SRMC of the hybrid plant according to Equation 7: Short run marginal cost. Additionally, we assumed a WACC of 11.93% and a generation plant lifetime of 40 years.

3.9 Conclusion

In this section, we have operationalised the research questions arising from the literature review in Section 2. We are ready to apply the methodology to calculate the results, which we present in the next section.

4 Results

This chapter presents the results from running the simulations described in the methodology to address the research questions arising from the literature review. Section 2.4.2 discusses the estimation of the expected lower and upper bounds for domestic gas prices to determine a sensitivity of the NEM’s wholesale spot prices and plant’s revenue to gas prices. Five research questions form the main section headings in this results chapter:

 What is the expected TMY dispatch of the proposed plant given the plant’s dispatch profile for hours of the week and expected TMY yield of the LFR?

 What are the half-hourly wholesale spots prices for the plant’s lifetime without gas as a bridging technology?

o Assuming a reference gas price of between $5.27/GJ to $7.19/GJ for base- load gas generation (depending upon nodal location;) and

o for peak-load gas generation of between $6.59/GJ to $8.99/GJ; and o given the plant’s dispatch profile

 What are the half-hourly wholesale spots prices for the plant’s lifetime with gas as a bridging technology?

o Assuming some replacement of coal with gas generation  How sensitive are wholesale spot prices to higher gas prices?

o Assuming high gas prices are between $7.79/GJ to $9.71/GJ for base-load gas generation (depending upon nodal location); and

o for peak-load gas generation of between $9.74/GJ to $12.14/GJ; and  What is the plant’s revenue for these reference gas prices?

 How sensitive is the plant’s revenue to gas as a bridging technology?  How sensitive is the plant’s revenue to higher gas prices?

 What is the levelised cost of energy for the proposed plant?

4.1 What is the expected TMY dispatch of the proposed plant given the