Comparative Analysis on Economic Viability of Independent Power Producing System in Nigeria

The aim of this research is to compare the economic benefits of various types of power generating technologies such as gas turbines, wind turbines and solar energy that is suitable for power producing plants in Nigeria. The study conducts economic assessment by developing a data-intensive spread-sheet-based model. The model estimates the unit cost of electricity generated by a 10MW capacity solar photovoltaic system (PV), Wind turbine and Gas Turbine. Comparison based on investment cost and capacity charge indicated that the levelized cost of electricity (LCOEsolar) by solar PV was found to be $0.05188 per kWh with a net present value of (-$3,520,003), (LCOEwind), by Wind turbine was found to be $0.0732per kWh or with a net present cost of (-$24,486,076), while (LCOEgas) by Gas turbine was found to be $10.07214 per kWh or with a net present value of ($11,813,136). Results obtained with reference to LCOE showed that solar PV has the lowest cost of power generation, followed by gas turbine, and then wind turbine. Consequently, comparison based on decision for economic and preferable energy to invest in as well as the annual return the investment is projected to generate indicated that the internal rate of return (IRR) for both solar PV and wind turbine was found to be negative with a simple payback period of 14 and 35 years respectively, while internal rate of return (IRR) for gas turbine was found to be 18.67% with 5 years payback period. Hence, result obtained with reference to IRR and SPBP showed that gas turbine is the most economic and preferable energy generating technology to invest in since it is projected to generate 18.67% annual return from the investment in a minimum of 5 years period as compared to solar PV and wind turbine. Although natural gas-based power generation has lower upfront costs but it is vulnerable to volatile fuel prices, whereas electricity generation from renewables has higher upfront costs but provides electricity at costs that are highly predictable.


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Abstract-The aim of this research is to compare the economic benefits of various types of power generating technologies such as gas turbines, wind turbines and solar energy that is suitable for power producing plants in Nigeria.The study conducts economic assessment by developing a dataintensive spread-sheet-based model.The model estimates the unit cost of electricity generated by a 10MW capacity solar photovoltaic system (PV), Wind turbine and Gas Turbine.Comparison based on investment cost and capacity charge indicated that the levelized cost of electricity (LCOEsolar) by solar PV was found to be $0.05188 per kWh with a net present value of (-$3,520,003), (LCOEwind), by Wind turbine was found to be $0.0732perkWh or with a net present cost of (-$24,486,076), while (LCOEgas) by Gas turbine was found to be $0.07214 per kWh or with a net present value of ($11,813,136).Results obtained with reference to LCOE showed that solar PV has the lowest cost of power generation, followed by gas turbine, and then wind turbine.Consequently, comparison based on decision for economic and preferable energy to invest in as well as the annual return the investment is projected to generate indicated that the internal rate of return (IRR) for both solar PV and wind turbine was found to be negative with a simple payback period of 14 and 35 years respectively, while internal rate of return (IRR) for gas turbine was found to be 18.67% with 5 years' payback period.Hence, result obtained with reference to IRR and SPBP showed that gas turbine is the most economic and preferable energy generating technology to invest in since it is projected to generate 18.67% annual return from the investment in a minimum of 5 years' period as compared to solar PV and wind turbine.
Index Terms-Gas Turbine; Wind Turbine; Solar PV; Cost per kWh.

I. INTRODUCTION
Electricity, which is accepted to mean the supply of electric power generally plays a vital role in the socioeconomic development of a nation.The supply of electricity involves generation, transmission and distribution of the electric power to consumers.Electricity is one aspect of the utility sector that is very important and meaningful for the growth of every society.It promotes the economy and aids the well-being of individuals [1].
Electricity can be classified as the most important energy source but also the most momentary, a source that must be consumed immediately it is produced.This makes economics of electricity production modelling more complex when compared with the same task for other products.A future investment decision on electricity production will need a well detailed accurate modelling because much emphasise will based on the modelling outcome.In a developing country like Nigeria, high cost of exploration techniques and Naira devaluation have made power generation unattractive [2].
In the power industry, two major criteria are used for cost comparison.They are: capital cost and the levelized cost of electricity.The latter is a lifecycle cost analysis of a power plant that uses assumptions about the future value of the currency to convert all future costs and revenues into current prices.
The levelized cost is mostly used in the power sector but has its own disadvantages, particularly in its ability to handle risk.Even so these two measures, together, are the first consulted when power sector investment and planning decisions are to be made.The former involves the turnkey project cost which includes civil/structural works, balance of plant that includes both the mechanical and electrical installations.
The cost of a unit of electricity depends on a large number of different factors.The key factor among these is the cost of the power plant used in production of power.For there to be a significant comparison between different power generating technologies, an economic analysis will focus on unconstrained open market costs at every period of the analysis The aim of this project is to compare the economic benefits of various types of generating technologies such as gas turbines, wind turbines and solar energy that are suitable for power producing plants in Nigeria.To achieve the aim of this research, the objectives include the following: i.To evaluate the cost of generating 10MW using the various types of generating technologies for Independent power producers.ii.To determine the cost of fuel, maintenance and lifecycle of each of the fore mentioned generating technologies.iii.To determine the economic viability for each renewable technology as to enable the Independent Power Producers (IPP) breakeven.This research work will be carried out in Nigeria for comparative analysis of techno-economic viability of independent power producing system.The project concerned with the best cost-effective power plant to be run is limited to wind turbine, solar PV and gas turbine technologies.
Techno-economic evaluation and the feasibility study on standalone hybrid solar-wind system with battery energy for a remote island was carried out by Ma (2014).In 2009, the data for the wind and solar radiation was obtained and recorded.The effects and economic performance of the Comparative Analysis on Economic Viability of Independent Power Producing System in Nigeria Udoka Christopher, Barinyima Nkoi and Felix E. Oparadike wind turbine sizing, PV panel sizing and the battery bank on the system were examined.Finally, an analysis load renewable energy and resource consumption was performed to determine the robustness of economic analysis and identify which variable has the greatest impact on the results.The results demonstrate the techno-economic feasibility of implementing the solar/wind/battery system to supply power to this island [3].
A study on autonomous hybrid battery/PV/wind power system for a household in city of Urumqi, China making use of HOMER simulation software on how to optimize a model and simulation approach was carried out by [4].A technoeconomic feasibility study on them shows that the system with 5KW of PV arrays (72% solar energy penetration), wind turbine of 2.5KW (28% wind energy penetration), 8 batteries each of 6.94KWh, and 5KW power converters of a hybrid system reduces the total NPC to about 11% and 9% respectively when compared to wind/battery and PV/battery power system.
PV/Wind/diesel hybrid power system was tested in a village in Saudi Arabia that is currently running on a diesel generator.Each of the diesel generator has a capacity of 1.12MW.The research found that the PV/Wind/diesel with 35% renewable energy (9% solar PV and 26% wind) to be feasible with COE of $0.212 per KWh.The energy requirement of the village was met in which their yearly power consumption is around 17,043.4MWh and with 4.1% energy in excess.The annual contributions of solar PV, wind, and the diesel generating sets were 1,653.5MWh,4,713.7MWh,and 11,542.6MWh, respectively.The proposed hybrid power system assisted in keeping away 4,976.8tons of GHG equivalent of CO2 gas in to the local atmosphere of the village along with conservation of 10,824 barrels of fossil fuel annually [5].
Reference [6] carried another research on the technoeconomics evaluation of off-grid hybrid diesel-PV-battery system on rural electrification in Saudi Arabia.The main purpose is to find out the effect of PV/battery penetration on COE of different hybrid systems.The outcome of the research shows that the number of operational hours of diesel generators de-creases with increase in PV capacity.
Reference [7] and [6] carried a research on the decentralized/stand-alone hybrid diesel-wind power systems to meet residential power requirement of hot coastal regions.The research was simulated and the outcome demonstrates that hybrid system having seven 150KW wind energy conversion system which can also boost of three days' battery storage will be adequate to satisfy the residential annual power requirement which is 3512MWh.The result of this research can help in optimizing the size of wind machine and also for sizing diesel/wind/battery energy systems for coastal.Reference [8] researched on the commercial feasibility of solar parks and wind farm in hot regions.
Reference [9] researched on the practicability of generating electricity in rural and semi-urban areas in northern part of Nigeria using a hybrid energy system.Taking the price of diesel at $1.1/L and annual mean global solar radiation (GSR) of 6.00 kWh/m2 per day, results shows that generator/PV/battery hybrid system is more economical and the best option for stand-alone electricity generating system in this location and locations similar to Northern part of Nigeria.The simulated result shows that the LCOE for this hybride energy system varies between $0.348/kWh and $0.378/kWh which is subject to interest rate.These costs are actually lower when compared to the cost of running only diesel generator (without battery) which fluctuates between $0.417 and $0.423 per kWh.Result shows that when hybrid energy is used, there is a significant reduction in emission of GHG against when only a diesel generator is used.
The most reliable system for supply load demands is the Diesel-Wind-PV hybrid systems with battery storage.Around the world, there is extensive diversification on cost accounting system because the solar radiation and wind speed and fuel cost fluctuates from one place to another.Take for instance, COE per kWh in Kish Island [10] and Binalood city [11] in Iran are $0.348/kWh and $0.422/kWh, respectively.A rural area in Saudi Arabia [5] ($0.212/kWh), for villages in Ethiopia [12], Malaysia [13] and Urumqi [4] it costs $0.383/kWh, $0.282/kWh and $1.045/kWh respectively.

A. Materials
The research methodology involves data collection and analysis of 10MW power generation on gas turbine, wind turbine and solar energy.The material involves the following: i. Sending out Request for Quotation (RFQ) to different OEM's of power generating equipment.ii.Field investigation of the plant layout process and its design specifications iii.Collection of data from the Ministry of Power, for the economic investment, operating cost and revenue.

B. Methods
The method to be used in determining the best economic power generating technology are by i. Levelised Cost of Electricity Generation (LCOE) ii.NET PRESENT VALUE (NPV) iii.Internal Rate of Return (IRR) iv.Simple Payback Period (SPBP).Levelised Cost of Electricity Generation (LCOE): The LCOE is the price of electricity required for a generating equipment to breakeven over its lifespan.Any price of electricity price higher than this would yield a greater return on capital, while a price lower than it would yield a lower return on capital, or even a loss In calculating LCOE, the formula to be used is (Simplified Levelised Cost of Energy) where: LCOE = levelised cost of energy; It = Investment expenditures in the year t; Mt = Operations and maintenance expenditures in the year t Ft = Fuel expenditures in the year t; Et = Electricity generation in the year t; r = Discount rate; and n = Economic life of the system.The interest rate "r" used for discounting both costs and benefits is stable and does not vary during the lifetime of the project under consideration.The Projected Costs of Generating Electricity was worked with 11 % discount rate.

C. Net present Value
NPV is how much return, a power generating plant makes while taking into consideration the time value of money.When the result of NPV is positive, it shows that the power plant project will be more profitable and if the NPV turns negative, it shows that it will not be a profitable investment.We can say that for a project to be "good investment" the NPV needs to be positive and it is a criteria for deciding whether to invest in a power plant project.
Initial Investment Cost, I0 Present Value at the project life time, PVn

D. Internal Rate of Returns (IRR)
Internal Rate of Return (IRR): IRR is the interest rate at which Net Present Value (NPV) of all the cash flow in a power plant project equals zero.It is a tool that shows the growth level the project is expected to generate and also acts like a benchmark for future projects.IRR serves as a criterion that indicates the return an investment is expected to generate.

E. Simple Payback Period (SPBP)
Simple Payback Period, SPBP: SPBP is the period of time a project will take to recoup the cash outflow.It is the amount of time it takes to breakeven, this means, time it takes to recover all the investment cost of a power plant.

A. Results
The result of the economic analysis of installing a Wind, Gas Turbine and Solar PV technology of 10 MW.The analyses are represented in table and figures.
The following are basic assumptions adopted: • Case A -system with small wind turbine; • Case B -System with Solar Photovoltaic; • Case C -system with gas turbine.The analysis refers only to the investment which is in the variable part of the system.In order to calculate the LCOE, a net capacity load of 10MW is used on all the three generating technologies.
E: Electricity Production (kWh/year) = Net load capacity x capacity factor x 8760 x 1000 Cash flow will be maintained for the period of 30 years being the lifetime of each of the generating technologies.
The LCOE is calculated as follows: LCOE = {(overnight capital cost x capital recovery factor + fixed O&M cost )/(8760 x capacity factor)} + (fuel cost x heat rate) + variable O & M cost.

1) Wind Turbine Data:
The cost of investment of wind turbine is estimated at USD 32,570,000 The total energy production using 10MW system with capacity factor (55%) is 1,445,400MWh.Discount rate is considered at 11% (or 0.11), which is mostly accepted.The operation and maintenance cost is taken to be at 7.5% of the investment cost which is approximately USD 2,442,750.The cash flow is calculated for 30 years lifetime.Electricity Production (kWh) at the end of first year: Estimated Electricity generated using a wind turbine nameplate capacity of 10MW system with capacity factor (55%) for 1 year (8760 hours).

2) Calculation of LCOE for Wind Turbine at the end of first year
Estimated Electricity expected to be generated, E0 The same procedure was used to get the data for the remaining 30 years.

4) Calculation for Internal Rate of Return (IRR) for Wind Technology
Discount rate 1, R1 = 11% Hence, the internal rate of return, IRR for wind turbine is negative.

5) Calculation for Simple Payback Period (SPBP) for Wind Technology
Initial Investment Cost, I0 = $32,570,000 Annual net cash flow = $929,850 Simple Payback Period, SPBR= Initial Investment / cash flow Simple Payback Period, SPBR= $32,570,000 / $929,850= 35 years Hence, the simple payback Period for the wind turbine technology is estimated at 35 years.

6) Data for solar PV:
In case of photovoltaic system, the cost of investment, is estimated at USD9,230,000 The annual energy production which is derived using 10MW of Solar PV system with capacity factor (22%) is 19,272,000kWh.Discount rate is considered at 11% (or 0.11), which is mostly accepted.The operation and maintenance cost is taken to be at 7.5% of the investment cost which is approximately USD 692,250 per year.The cash flow is calculated for 30 years lifetime.Electricity Production (kWh) at the end of first year; Estimated Electricity generated using a wind turbine nameplate capacity of 10MW system with capacity factor (%) for 1 year (8760 hours).

7) Calculation of LCOE for
Estimated Electricity expected to be generated, E0 E0= The same calculation was used to generate the data for the remaining years 30 years.

8) Calculation for Net Present Value (N 9,230,000 PV) of solar PV technology
Cost of Investment, = $9,230,000; NPV= PV30 -I0 NPV at 11% discount rate = ($ -3,520,003) NPV of solar PV at 11% discount rate = ($ -3,520,003) The same procedure was used to get the data for the remaining 30 years.

9) Calculation for Internal Rate of Return (IRR) for solar PV technology
Discount rate 1, R1 = 11%; Hence, the internal rate of return, IRR for solar energy is negative Hence, the simple payback Period for the solar energy technology is estimated at 14 years

11) Data for gas turbine:
The investment price of gas turbine is estimated at USD 18,664,945 The total energy production using 10MW system with capacity factor (0.25 i.e. 25%) is 21900000kWh.Discount rate is considered at 11% (or 0.11), which is mostly accepted.The operation and maintenance cost is taken to be at 7.5% of the investment cost which is approximately USD 1,399,870.88/year.The Fuel cost was also estimated at USD 2,500,000 (constant every year).The cash flow is calculated for 30 years lifetime.Fuel cost is optional, but considered only for gas turbine since solar PV and wind turbine do not have fuel costs.The same calculation was used to generate data for the remaining years.

13) Calculation for Net Present Value (NPV) of Gas turbine at the end of first year
Cost of Investment, = $18,664,945 NPV= PV30 -I0 NPV at 11% discount rate = ($0.1867)NPV of gas turbine at 11% discount rate is $0.1867The same procedure was used to get the data for the remaining 30 years.

14) Calculation for Internal Rate of Return (IRR) for Gas Turbine
Discount rate 1, R1 = 11%; Hence, the internal rate of return, IRR that will make the NPV equals zero is 18.67% Hence, the simple payback period for the Gas turbine is estimated at 1 year.

IV. CONCLUSION
The cost comparison reveals that gas turbine is one of the strongest options for Nigeria to deliver the needed power in the most cost competitive way.
The study conducts economic assessment by developing a data-intensive spread-sheet-based model.The model estimates the unit cost of electricity generated by a 10MW capacity solar photovoltaic system (PV), Wind turbine and Gas Turbine.Comparison based on investment cost and capacity charge indicated that the levelized cost of electricity (LCOEsolar) by solar PV was found to be $0.05188 per kWh with a net present value of (-$3,520,003), (LCOEwind), by Wind turbine was found to be $0.0732perkWh or with a net present cost of (-$24,486,076), while (LCOEgas) by Gas turbine was found to be $0.07214perkWh or with a net present value of ($11,813,136).Results obtained with reference to LCOE showed that solar PV has the lowest cost of power generation, followed by gas turbine, and then wind turbine.Consequently, comparison based on decision for economic and preferable renewable energy to invest in as well as the annual return the investment is projected to generate indicated that the internal rate of return (IRR) for both solar PV and wind turbine was found to be negative with a simple payback period of 14 and 35 years respectively, while internal rate of return (IRR) for gas turbine was found to be 18.67% with 5 years' payback period.Hence, result obtained with reference to IRR and SPBP showed that gas turbine is the most economic and preferable generating technology to invest in since it's IRR is 18.67% and return on the investment is 5 years as compared to solar PV and wind turbine.
From the research work, the following recommendations need to be implemented in order to foster a better choice of energy generation system that is cost-effective: Government should invest in gas turbine technology because it is cheapest means of power generation compared to other sources of power generation.Also, places where conventional power stations are located should be replaced with mini gas turbine.Government should encourage investors that want to go into gas turbine energy by providing some incentives for them.Overall, for gas turbine to be the best means of power generation, government should subsidize the cost of natural gas.
Discount rate, r = 0.11; I = $ 32,570,000; t1 = 1 year; M&O cost, M0 = $ 2,442,750 Sum of Cost at the end of first year = 10 x 1000 x 0.55 x 8760 E0 = 48,180,000kWh.Electricity Production (kWh) at the end of first year, ,180,000 / (1+0.11)E1 = 43,405,405KWh LCOE at the end of first year= Sum of Cost for first year / Sum of Electrical Energy produced for one year = $ 31,543,018/43,405,405 = $ 0.7267 per kWh LCOE for wind turbine at the end of one year = $ 0.7267 per kWhThe same procedure was used to generate the data for the remaining 30 years.See Fig.1to 3 3) Calculation for Net Present Value (NPV) of Wind Technology Cost of Investment, = $32,570,000; Present Value at the end of 30 years, PV30 = $24,995,554.95NPV= PV30 -I0 NPV at 11% discount rate = ($ -24,486,076) Solar PV at the end of first year Discount rate, = 0.11; I $9,230,000; t1 = 1 year; M&O cost, M0 = $ 692,250 Sum of Cost at the end of first year =

12 )
Calculation of LCOE for Gas Turbine at the end of first year Discount rate, r = 0.11; I = $18,664,945; t1 = 1 year; M & O cost, M0 = $ 1,399,870.88;Fuel cost per year, F (constant throughout) = $ 3,033,939 Sum of Cost at the end of first year ($) = I + M1 + F = 18,664,945 + 1,399,870 + 3,033,939 = $ 23,098,754 Electricity Production (kWh) at the end of first year; Estimated Electricity generated using a Gas Turbine nameplate capacity of 10MW system with capacity factor (80%) for 1 year (8760 hours).Estimated Electricity expected to be generated, E0 E0= 10 x 1000 x 0.80 x 8760 E0 = 70,080,000 kWh Electricity Production (kWh) at the end of first year, ,135,135 kWh LCOE at the end of first year= Sum of Cost for first year / Sum of Electrical Energy produced for one year = $ $ 23,098,754/ 63,135,135 kWh = $ 0.3296 per kWh LCOE for Gas Turbine at the end of one year = $ 0.3296 per kWh 15) Calculation for Simple Payback Period (SPBB) for Gas turbine Initial Investment Cost, I0 = $18,664,945 Annual net cash flow = $(4,905,600-1,399,870) =3,505,730 Simple Payback Period, SPBR= Initial Investment / cash flow Simple Payback Period, SPBR= $9,230,000 / $656790= 5 years

Fig. 2 Fig. 3 Present
Fig. 2 Present Value of Solar PV Energy Produced [kWh] over Lifetime [Years]

TABLE I :
LCOE, TOTAL KWH, NPV, IRR AND SPBP FOR THE THREE ENERGY TECHNOLOGIES OVER 30 YEARS' LIFETIME.