A Novel LCOE Pricing Model for Renewable Energy with Power Purchase Agreement: A Case Study in China

Round 1

Reviewer 1 Report

This paper presented a LCOE pricing model for renewable energy with PPA.

The paper is well written and the contributions are clearly described. The reviewer suggests the authors to better compare the proposed pricing model with the current model (pros and cons of each in a Table or Figure) and also the policy challenges/barriers/needs associated with the implementation of the proposed model.

Author Response

Comments and Suggestions for Authors

This paper presented a LCOE pricing model for renewable energy with PPA.

The paper is well written and the contributions are clearly described. The reviewer suggests the authors to better compare the proposed pricing model with the current model (pros and cons of each in a Table or Figure) and also the policy challenges/barriers/needs associated with the implementation of the proposed model.

Response: Thank you for your comments. We summarized the advantages and disadvantages of the standard model and the proposed model in Figure 4. Also, policy supports coordinated with the proposed model are presented. Please see the revisions marked with the“Track Changes” functions in sub-section 3.2.

Author Response File: Author Response.docx

Reviewer 2 Report

It is mentioned among the basic assumptions of the case study that management cost are supposed to decrease over time. In table 1, however, the value increases after the first year and then remains constant. Please ensure homogeneity between scenario description and data representing the scenario.

 

In the basic assumptions it is mentioned a slight increase in O&M costs over time due to equipment aging. Why are the O&M costs assumed to increase directly after year 5 and then not anymore?

 

Figure 4 labeling is confusing. The label “Excluding the operating costs of power system” line makes allusion of taking the operation costs (form the operations and maintenance costs) rather than the intended “System operation costs”. Review the Figure and data portrayed to ascertain the correct data is shown and fix the label.

 

In figure 4 it would also make sense to explain the difference between LCOE 1 and LCOE 2. Form the context of the manuscript I can guess that LCOE 1 refers to the proposed calculation method (equation 2) while LCOE 2 refers to the standard method (equation 1)?

 

Making use of one of the statistical methods of correlation analysis would facilitate the reader to understand what tables 2 - 6 intend to portray. If correlation analysis is what is intended rather than sensitivity analysis.

 

The statement “The investment is expected to fall to 2100 CNY/kWh by 2025” (line 395) is confusing, Is the state/private investment expected to decrease as in less support/interest for renewables is expected? Or is this statement talking about the cost for construction still?

 

The calculation method of the PPA presented on tables 2 and 3 should be included. In the main contributions of the manuscript it is mentioned: “PPA pricing model considering system operation costs and time value of capital in the electricity market is proposed” (lines 134 -135) this calculation method would fulfill the intended contribution.

 

Review the labels of all the figures and tables. Define clearly what each label represents and check homogeneity. What are constructions costs and how are they different from investment costs? Are “operating costs of power system” (also in figure 5) from O&M costs or from “system operating cost”?

 

Is section 5.2 a novel contribution from the authors as mentioned in contribution 4 (line 142-145)? If so, calculation method should be included. Otherwise proper citation is missing.

 

Some grammatical errors should be fixed.

Author Response

Comments and Suggestions for Authors

It is mentioned among the basic assumptions of the case study that management cost are supposed to decrease over time. In table 1, however, the value increases after the first year and then remains constant. Please ensure homogeneity between scenario description and data representing the scenario.

Response: Thank you for your comments. We checked and reviewed the report, the future management costs in China will basically remain stable. So we modified the scenario description in the basic assumptions and added the reference. Please see the revisions marked with the“Track Changes” functions.

 

In the basic assumptions it is mentioned a slight increase in O&M costs over time due to equipment aging. Why are the O&M costs assumed to increase directly after year 5 and then not anymore?

Response: Thank you for your comments. Due to the equipment aging, the O&M costs will increase slightly compared with the previous period. Then the operation and maintenance costs will basically remain stable in future. So we modified the scenario description and added the reference. Please see the revisions marked with the “Track Changes” functions.

 

Figure 4 labeling is confusing. The label “Excluding the operating costs of power system” line makes allusion of taking the operation costs (form the operations and maintenance costs) rather than the intended “System operation costs”. Review the Figure and data portrayed to ascertain the correct data is shown and fix the label.

Response: Thank you for your comments. We have modified the label to “Excluding the system operation costs”. Also, we checked and modified the descriptions for Figure 4 (now is Figure 5), Please see the revisions in the Sub-section 4.2 and Figure 5.

 

In figure 4 it would also make sense to explain the difference between LCOE 1 and LCOE 2. Form the context of the manuscript I can guess that LCOE 1 refers to the proposed calculation method (equation 2) while LCOE 2 refers to the standard method (equation 1)?

Response: Thank you for your comments. Yes, LCOE 1 refers to the proposed calculation method (equation 2) while LCOE 2 refers to the standard method (equation 1). We also added some explanations for the difference, please see the revisions marked with the “Track Changes” functions in the Sub-section 4.2.

 

Making use of one of the statistical methods of correlation analysis would facilitate the reader to understand what tables 2 - 6 intend to portray. If correlation analysis is what is intended rather than sensitivity analysis.

Response: Thank you for your comments.

The correlation analyses in Sub-section 5.1 are intended to reflect how the PPA price changes under various scenarios with different value of payback period, construction cost, system operation costs and other indicators. And all calculations are based on the modified LCOE method. In order to directly reflect the impacts of changes with related factors on the payback period, Sub-section 5.2 presents the correlation analysis results with a SAF index.

 

The statement “The investment is expected to fall to 2100 CNY/kWh by 2025” (line 395) is confusing, Is the state/private investment expected to decrease as in less support/interest for renewables is expected? Or is this statement talking about the cost for construction still?

Response: Thank you for your comments. The “investment” here was intended to represent the cost for construction still, so we revised it here as well as the following paragraphs. Please see the revisions marked with the“Track Changes” functions in Sub-section 5.1.

 

The calculation method of the PPA presented on tables 2 and 3 should be included. In the main contributions of the manuscript it is mentioned: “PPA pricing model considering system operation costs and time value of capital in the electricity market is proposed” (lines 134 -135) this calculation method would fulfill the intended contribution.

Response: Thank you for your comments. PPA price in table 2 – 6 are obtained by the modified LCOE pricing model, as shown in equation 2. In order to express more clearly, we added an illustration in the paragraph, please see the revisions in Sub-section 5.1.

 

Review the labels of all the figures and tables. Define clearly what each label represents and check homogeneity. What are constructions costs and how are they different from investment costs? Are “operating costs of power system” (also in figure 5) from O&M costs or from “system operating cost”?

Response: Thank you for your comments.

Investment cost mainly refers to the construction cost. We have modified the expression in sub-section 5.1. Please see the revisions marked with the“Track Changes” functions.

“operating costs of power system” in Figure 5 (now is Figure 6) indicates the “system operation cost” in sub-section 5.2. So we modified the figure and checked the other labels of all the figures and tables. Please see the revisions marked with the“Track Changes” functions.

 

Is section 5.2 a novel contribution from the authors as mentioned in contribution 4 (line 142-145)? If so, calculation method should be included. Otherwise proper citation is missing.

Response: Thank you for your comments. SAF is used to clearly reflect the impacts of various indicators on the investment payback period. So, we have added a citation in contribution 4 (line 143), please see the revision marked in red.

 

Some grammatical errors should be fixed.

Response: Thank you for your comments. We have reviewed the whole paper, and modified grammatical errors, please see the revisions marked with the“Track Changes” functions. (e.g. line 284, 354, etc.)

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

All my comments/concerns have been properly addressed.