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COMMERCIAL ASPECTS OF SOLAR UPDRAFT TOWERS

Gerhard Weinrebe, Rudolf Bergermann*, Jörg Schlaich*, Wolfgang Schiel*,


David Hornidge**

* Schlaich Bergermann Solar, Stuttgart


** Solarparc AG, Bonn

Gerhard Weinrebe, Hohenzollernstr. 1, D-70178 Stuttgart, Germany


Tel. +49 711 648710, Fax+49 711 6487166, g.weinrebe@sbp.de

Abstract
The solar updraft tower concept and its special features are described first. Then basic
economic data and commercial aspects are presented. Financing conditions and revenue
streams from electricity generation and non-energy revenues like tourism are discussed, and
their influence on economic viability is analysed. As an example, technical and economic data
for future commercial solar updraft tower systems in Spain are used.

Keywords: Solar updraft tower, cash-flow, revenue stream, internal rate of return, Spain.

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Introduction
A ‘solar updraft tower’, sometimes called ‘solar chimney’, is a solar thermal power plant
utilizing a combination of solar air collector and central updraft tube to generate a solar
induced convective flow which drives pressure staged turbines to generate electricity.

The solar updraft tower concept was proven by building and operating a prototype in Spain
from 1981 to 1989. After a phase without new projects, increasing ecological concerns and
significantly rising fossil fuel prices led to a renewed interest in this technology. In Australia,
project development for a solar updraft tower started in 2001. Now the Spanish feed-in tariff
makes solar updraft towers an especially interesting option for Southern Spain.

Solar Updraft Tower Principle


The solar updraft tower enables clean production of electricity around the clock by combining
familiar elements in a novel way. It consists of three essential elements – solar air collector,
tower, and turbines – pictured in Figure 1. The collector works in the same way as a
greenhouse, with incoming solar radiation heating the air under the roof. The air flows in
freely from the perimeter, and as it heats up, it moves naturally towards the centre of the
collector, passing through the turbines, up the tower and back into the atmosphere. The lower
air density of the hot air inside the tower tube provides a natural convection force, drawing
the air up through the tower, just as a chimney does. Turbines located at the tower base
convert this air movement into electricity. A constant 24 hour operation can be realised by
placing water-filled tubes on the ground underneath the collector. These tubes absorb some of

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the heat during the day, releasing it at night when the air is colder, ensuring a continuous
updraft. But even without this additional elements the inherent heat storage capacity of the
soil under the collector guarantees a smooth daily power production curve with electricity
generation after sunset. As the plant's prime mover is the air temperature difference (causing
an air density difference) between the air in the tower and ambient air, lower ambient
temperatures at night help to keep the output high even when the temperature of natural and
additional thermal storage also decreases without sunshine, because the temperature
difference remains practically the same.

Figure 1. Solar updraft tower principle

The solar updraft tower principle was proven by building and operating a prototype in Spain
for seven years. This 50 kW test facility had a 200 m tower and about 44’000 m2 collector
area. From mid 1986 to early 1989 the plant was run on a regular daily basis. As soon as the
air velocity in the tower exceeded a set value, typically 2.5 m/s, the plant started up
automatically and was automatically connected to the public grid. During this 32 month
period, the plant ran, fully automatically, an average of 8.9 hours per day. In 1987 there were
3067 h with a solar global horizontal irradiation of over 150 W/m² at the Manzanares site.
Total operation time of the plant with net positive power to the grid was 3157 hours,
including 244 hours of net positive power to the grid at night. These results show that the
system and its components are dependable and that the plant as a whole is capable of highly
reliable operation. Thermodynamic inertia is a characteristic feature of the system, continuous
operation throughout the day is possible, and for large systems even abrupt fluctuations in
solar radiation are effectively cushioned [1].

Apart from working on a very simple principle and the steady energy output described above,
solar updraft towers have additional special features:

Turbines and generators - subject to a steady flow of air - are the plant's only moving
parts, warranting low operation and maintenance requirements.

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Unlike fossil-fuelled and also some concentrating solar power stations, solar updraft
towers do not need cooling water. This is a key advantage in the many sunny countries
that already have major problems with water supply.
The building materials needed for solar updraft towers, mainly concrete and glass, are
available everywhere in sufficient quantities.
Solar updraft towers can be built now, even in less industrially developed countries. The
industry already available in most countries is entirely adequate for solar updraft tower
requirements.
The collector uses both direct and diffuse solar radiation. This is crucial for tropical
countries where the sky is frequently overcast.
A potential drawback is the fact that solar updraft towers require large areas of flat land. This
land should be available at low cost, which means that there should be no competing usage
for the land, like, e.g., intensive agriculture.

Commercial Solar Updraft Towers in Spain


A solar updraft tower with a capacity of 5 to 50 MW is proposed by Schlaich Bergermann
Solar to be built in southern Spain. This location is especially promising for three main
reasons:
Southern Spain receives among of the highest amounts of annual solar irradiation in all of
Europe. Sites with global horizontal irradiation levels exceeding 1800 kWh/(m²a) are not
uncommon.
The Spanish Government supports the development of renewable energies by legislation
stipulating higher selling prices. At the time of writing, a feed-in tariff of 0.22 €/kWh is
guaranteed for 25 years.
Spain receives the second largest amount of foreign tourists worldwide [2]. With a tower
offering panoramic views from a height of several hundred meters, the potential for extra
revenue from tourism in southern Spain cannot be ignored.

Choosing the Solar Updraft Tower Capacity


Electricity yielded by a solar updraft tower is in proportion to the intensity of global solar
radiation, collector area and tower height. There is in fact no optimum physical size for such
plants. Optimum dimensions can be calculated only by including specific component costs
(collector, tower, turbines) for individual sites. To decide on the appropriate size of a first
commercial solar updraft tower in Spain, investment costs were calculated using dimensions
that result from a basic optimisation procedure (Table 1) and material and construction costs
found in cooperation with a large contractor.

Capacity MW 5 15 30 50 100 200


Tower height m 550 650 750 750 1000 1000
Tower diameter m 45 60 70 90 110 120
Collector diameter m 1250 2300 2950 3750 4300 7000
Electricity output GWh/a 11 34 68 120 250 532

Table 1. Typical solar updraft tower dimensions and electricity output for a site with an
annual global radiation of 1800 kWh/(m²a)

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The cost for unskilled labour, needed mainly for collector construction, is assumed to be
18 €/h. To make the viewing platform as attractive as possible, tower heights were selected
slightly larger than under pure electricity cost minimization criteria.

Then, with the respective annual energy outputs from simulation runs using weather data for
Southern Spain, levelized electricity costs (LEC) were calculated using an interest rate of
4.5 % and a depreciation time of 25 years (Table 2). A depreciation time of 25 years is used
because this is the duration during which the attractive feed-in tariff is guaranteed by the
Spanish Royal Decree 436/2004. For this simplified calculations discounted replacement
costs for collector membranes and turbines during operation of the plant were added to
investment cost. The Spanish Law limits the size of solar power plants, to be subsidized by
the Feed-in Tariff 2004, to 50 MW. In Table 1 and Table 2 the bigger plants of 100/200 MW
are only added for information to illustrate the full potential of solar updraft towers.

Capacity MW 5 15 30 50 100 200


Tower cost Mio € 19 34 49 64 156 170
Collector cost Mio € 14 41 66 106 142 349
Turbine cost Mio € 8 19 32 48 75 133
Engineering, tests, misc. Mio € 5 10 17 24 41 43
Total Mio € 45 104 163 242 414 695
Annuity on investment (4.5 %, 25 years) Mio € 3.1 7.0 11.0 16.4 28.0 46.9
Annual operation & maintenance cost Mio € 0.2 0.5 0.8 1.2 2.0 3.6
Levelized electricity cost (LEC) A €/kWh 0.30 0.22 0.17 0.14 0.12 0.09
Levelized electricity cost (LEC) B €/kWh 0.16 0.15 0.12 0.11 0.09 0.07
A
at a site with an annual global horizontal solar radiation of 1800 kWh/(m²a), a typical value for Spain
B
at a site with an annual global horizontal solar radiation of 2300 kWh/(m²a), a value found at the best sites
worldwide
Table 2. Investment cost and levelized electricity cost

From Table 2 it can be seen that, even when considering only the revenue stream from
electricity sales, under the Spanish feed-in tariff solar updraft towers are economically viable
from a size of about 15 MW on, as the calculated LEC are lower than the feed-in tariff of
roughly 22 €-cent per kWh (2005 value).

A variation of the financial parameters interest rate and depreciation time is shown in Fig. 2.
The upper boundary was calculated for a depreciation time of 25 years, the lower boundary
for 40 years. Design technical life time of the system main components (tower and collector
structure) is 60 years. As expected, electricity generating costs of the capital intensive solar
updraft towers are dominated by interest rate. Depreciation time also has a significant
influence. Assuming an interest rate of e.g. 9 % and a depreciation time of 25 years leads to
LEC of 0.14 €/kWh (0.11 €/kWh)* for the 200 MW system. When, e.g. by clever financial
engineering, an interest rate of 4 % and a depreciation time of 40 years is achieved, LEC drop
to 0.07€/kWh (0.06 €/kWh), i.e. half the formerly calculated cost.

*
Values for a site with 2300 kWh/(m²a) are given in brackets.

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Figure 2. Levelized electricity cost vs. interest rate and depreciation time for selected
typical solar updraft tower systems in Spain.

Additional revenues from non-energy sources and grants from the EU, Spain or Germany will
further improve the commercial performance of any system, and they may even make a
smaller plant attractive, as their effect is more pronounced on smaller systems. Most probably
a grant of 5 Mio €, independent of the plant size, can be obtained from the European Union.
In addition further grants from the Spanish and or the German government may be expected
in the magnitude of another 5 Mio €. Hence three levels of grants are considered in Fig. 3,
which shows the effect of non-energy revenues on levelized electricity costs. For each plant
size three cases (from left to right) are shown: no grant, 5 Mio € grant, and 10 Mio € grant.

Tourism revenues are also considered. The tower of a 5 MW plant will be, e.g., 550 m high
and thus one of the highest buildings world-wide. The visit of such a structure, including a
ride up to a circumferential viewing platform, obviously will become a significant tourist
attraction and presents the potential for a considerable non-energy revenue-stream. Very
cautious estimates show that a considerable part of the annuity on investment and annual
operation and maintenance costs can be generated by this tourism revenue. For comparison,
the expertise for tourism development at the location of a potential 200 MW solar updraft
tower in Mildura, Australia, 500 km north of Melbourne, resulted in an annual expected
tourism operating surplus of 3.7 Mio € for the most likely scenario. Hence it seems very
probable that for a location in Spain, which is within a one hour drive from one of the major
tourist attractions, similar figures can be expected.

In Fig. 3, four levels of non-energy revenues are considered: 0, 1, 3 and 5 Mio € per year. The
selling of naming rights and agricultural use of the outer collector area are not considered in
this first analysis, whereas renting out the periphery of the collector (outer 100m rim) for
agricultural use is included in the detailed cash-flow model used later.

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Figure 3. Influence of grants and non-energy revenues on electricity cost

Fig. 3 demonstrates that all sizes are economically feasible in Spain. The larger ones between
30 and about 50 MW could be operated profitably from energy revenues alone. Smaller plants
require an additional revenue-stream, but a nominal one of about 1 Mio €/year only is
sufficient for all plant sizes. The smaller the plant the more efficient will be the non-energy
revenues, as Fig. 3 illustrates, and in some cases they would even be adequate to run the plant
without income from energy production, as the red and blue dots for the 5 MW plant indicate.

Analysis of a 30 MW Solar Updraft Tower using a Cash-Flow Model


Now a 30 MW solar updraft tower is analysed in more detail using a sophisticated cash-flow
model (main data see Table 1) using the diminishing balance depreciation method [3]. Here,
in contrast to the simplified calculations presented before, turbine and collector replacement
cost are not discounted and added to investment cost, but they are considered when they
actually happen. This results in nominally reduced initial construction costs of 146 Mio €.
More base case scenario data is given in Table 3.

An important output of the model is the project cash flow (Fig. 4). The repayment of loans in
the model at constant annuities is visible from the ‘flat tops’ above interest and principal
payments. As the loan reaches maturity, the interest portion of the annuity decreases and the
principal portion increases. In the base-case, the outstanding debt principal at construction
completion came to 102.3 Mio €, which over twenty-five years may be repaid by an annuity
of 6.9 Mio €/year. There is a slight upwards jump in debt payments after year 12 due to the
small loan taken to pay for the partial replacement of the collector roof. Similarly, a third loan
to fund the new turbines is repaid over the years 26 to 35.

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Variable Value Variable Value
Discount rate for project cash-flow 10% Grant 5 Mio. €
Discount rate for cash-flow to equity 15% Corporate Tax rate 35%
Interest rate on loans 4.5% Depreciation time 25 years
Loan repayment time 25 years Annual O&M cost 0.8 Mio €
Years of interest only payments 0 Annual insurance cost 0.2 Mio €
General inflation rate 2% Annual electricity output 68 GWh
Electricity price inflation rate 1.5% Debt/equity ratio 2/3
Initial reference tariff 0.073304 €/kWh Accounts receivable 45 days
Fixed Tariff during first 25 years 300% Accounts payable 30 days
Fixed Tariff thereafter 240% Salvage price 10 Mio €
Tourism Income 2.5 Mio €/year Turbines replaced after 25 years
Depth of crop from perimeter 100m Plastic membranes replaced after 12 years
Agricultural land rent income 60€/ha/year Loan repayment time for turbine 10 years
and membrane replacement
Offset emissions 0.35 t CO2/MWh Length of start-up phase 1 year
Price of emission certificate 20 €/tonne Output in start-up year 90%
(EUA, 1 tonne CO2)
Table 3. Base case scenario values

Figure 4. Cash-Flow

The results of an analysis of the influence of the following risks and parameters on project
internal rate of return (IRR) are shown in Fig. 5:
Construction time over-run Debt/ equity ratio
Operating performance Loan repayment time
O&M over-run Tourism income
Electricity price inflation rate EUA price
Interest rate

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Base case IRR is 10.15%. Not quite unexpected, the most influential parameters are
construction cost and construction time overrun as well as operating performance. In contrast
to the smaller, e.g. 5 MW solar updraft tower, for this 30 MW power plant tourism income is
a welcome additional revenue stream, but not crucial.

Figure 5. Sensitivity of project Internal Rate of Return (IRR) for selected variables

Summary and Outlook


All solar updraft plant sizes prove to be viable but with different kind of risk constellations.
The risks have been identified and are well understood. The small ones carry more the risk of
the tourist revenue forecasts, bear nearly no technology risk and present generally a smaller
risk due to the smaller investment volume. The large ones mean high investment and bear the
technology risk of a first-of-its-kind-plant more since these plants mainly rely on energy
revenues. Evaluating all these aspects, a first solar updraft tower of 5 to 15 MW capacity
seems to be a good compromise with minimized overall risk.

Acknowledgements

We would like to thank our colleagues at the Schlaich Bergermann und Partner (SBP) office
in Stuttgart for constant support of solar energy activities.

References and Notes


[1] Schlaich J, Bergermann R, Schiel W, Weinrebe G, The Solar Updraft Tower - An
Affordable and Inexhaustible Global Source of Energy, Bauwerk-Verlag, Berlin, 2004

[2] World Tourist Organisation (WTO), Tourism highlights, Edition 2005, Madrid, 2006

[3] Bodie Z, Merton, RC, Finance. Prentice-Hall, 2000