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Capital Cost Recommendations for 2009 TEPPC Study

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1 Capital Cost Recommendations for 2009 TEPPC Study
Energy and Environmental Economics January 6, 2010

2 About E3 E3’s expertise has placed us at the nexus of planning, policy and markets in California and the West Regulatory/Policy EE avoided costs for CA utilities Calculate MPR for CPUC 33% RPS and GHG studies for CPUC Advising CPUC on long-term planning CA Solar Initiative cost-effectiveness EPA National Action Plan for EE 2007 Idaho Energy Plan Utility WEIL Group “Towards 2020” study of renewables and transmission BC-California renewable energy partnership Advising PG&E on Diablo relicense Assisting HECO with Feed-in Tariff Expert testimony for CAISO on Sunrise line Economic assessment of HPX line IPPs/Technology Companies E3 clients include BrightSource Energy, First Solar, and Hydrogen Energy International Analysis of market opportunities for alternative technologies such as distributed PV, energy storage, electric vehicles and demand response for developers and VC clients January 6, 2010

3 WEIL Group 2009 TEPPC Study Request
WEIL Group 2009 Study Request “[S]tudies should include appropriate analyses needed to understand the impact on electricity costs… The WEIL has completed and can share study results and assumptions performed for us by the consulting firm E3.” PROMOD only looks at variable costs WEIL Group is interested in incorporating capital costs for 2009 plan Retained to E3 to assist TEPPC in: Developing resource cost and performance assumptions to include in all of the cases modeled. Developing transmission costing assumptions to include in all cases modeled. Developing assumptions regarding the cost of integrating intermittent renewables. Defining the methodology for incorporating fixed costs into study outputs. January 6, 2010

4 Methodology for Incorporating Capital Costs
Need to incorporate fixed costs into WECC-wide annual cost metric in order to provide meaningful comparison among cases Metric: Partial WECC-wide Revenue Requirement Does not incorporate fixed costs of existing facilities Single-year (2019) “snapshot” based on annualized costs WECC-Wide Revenue Requirement + Existing generation variable costs + New generation variable costs + New generation fixed costs + Intermittent resource integration costs + Cost of new transmission = Total WECC Revenue Requirement January 6, 2010 4

5 Pro Forma Model E3 developed a pro forma financing model based on recent E3 models: CPUC 33% RPS Implementation Analysis Hawaiian Electric Company solar procurement CPUC’s California Solar Initiative cost-effectiveness study WECC Staff will operate the model for 2009 Study Model outputs annualized fixed costs for each resource type based on capital cost and financing inputs Separate module calculates cost of new transmission facilities based on assumed configurations and distances Simple, publicly available spreadsheet model January 6, 2010

6 Resource Cost and Performance

7 Resource Costing Assumptions
Survey of publicly-available data sources WREZ Project RETI/CPUC 33% Implementation Analysis CEC Cost of Generation model Northwest Power and Conservation Council U.S. Energy Information Administration E3 developed high-level assumptions based on survey results Overnight $/kW, IDC, fixed O&M costs in $/kW-yr., etc. E3 also recommends regional cost multipliers to reflect differences in land, labor and taxes January 6, 2010

8 Technologies Covered in Initial Survey
Biomass: combustion (stoker boiler) Biogas – Landfill Gas Biogas – Other (dairy, food waste) Combined-Cycle Combustion Turbine (CCGT) Simple Cycle Combustion Turbine (CT) CHP < 5 MW CHP > 5 MW Coal steam (supercritical boiler) Coal IGCC with carbon capture and sequestration Nuclear Geothermal Hydro – small (e.g., <50 MW) Hydro – large Hydro – upgrade Solar thermal – trough Solar thermal – trough with storage Solar PV – fixed axis Solar PV – tracking Wind Wind – offshore January 6, 2010

9 Resource Costing Data Gathered
Data required for TEPPC study: Capital Costs Financing assumptions Annualized fixed costs in 2019 Additional data gathered: Fuel Cost Heat Rate Capacity Factor Treatment of O&M is somewhat complicated: Split of O&M costs between fixed and variable is inconsistent across sources of resource costing data WECC PROMOD runs already include assumptions about variable O&M E3 calculated “Consolidated O&M” to ensure that recommendations for fixed O&M are consistent with WECC’s variable O&M assumptions January 6, 2010

10 Biomass Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG (Fluidized Bed) 85% $3,580 $99.5 $4.5 $17.8 $2.00 10500 (Stoker Boiler) $2,909 $160.1 $7.0 $28.5 11000 NPCC 80% $4,289* $193.0 $4.0 $31.5 15500 WREZ 3,400-6,000 N/A 24 to 52 1.4 to 2.4 14,000-15,780 33% RPS $4,248 $82.8 $11.1 $22.9 $2.49 14749 RETI Phase 1A 3,000-4,500 $83.3 $11.0 0 to 3 14,000-15,800 Recommended $4,250 Low: $3,400 High: $6,000 $155 $4 PROMOD (Biomass) $24.8 $1.105 PROMOD (Wood) 14800 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

11 Biogas – Landfill Gas Source Capacity Factor (%)
Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG 75% $1,984* $21.4 $16.1 $19.3 N/A 11566 NPCC 85% $2,520* $27.9 $20.4 $24.1 $2.00 10060 33% RPS 80% $3,211 $107.9 $0.0 $15.4 $1.72 RETI Phase 1A $17.1 1 to 2 13500 EIA 90% $2,651* $119 $0 $15.1 13648 Recommended $2,750 Low:$2,500 High:$3000 $130 $0 Recommended $18.6 $2.221 PROMOD (Bio) 12070 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

12 Biogas - Other Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG (AD Dairy) 75% $5,522 $53.6 $16.1 $24.2 $0.00 12407 (AD Food) $5,150 $150.0 -$60.0 -$37.2 17060 NPCC (Animal manure) 85% $5,362* $48.3 $22.6 10250 RETI Phase 1A (An. Digestion) 80% $4000-$6000 $17.1 1 to 3 N/A $1 to $3 13000 Recommended $5,500 Low: $5000 High: $6000 $165 $0 Recommended $23.5 13200 *Variable O&M estimated to be $200/MWh, reduced by an economic benefit from a tipping fee, or soil amendment credit, estimated to be $3.70/MMBtu. (Assumes $20/ton tipping fee, 70% food waste moisture content). *Only ”Overnight” costs reported by NPCC and EIA Note: WECC does not currently have a Biogas-Other characterization, so the variable O&M and fuel costs and heat rate are E3 recommendations should a characterization be needed in the future. January 6, 2010

13 Combined Cycle CT (CCCT)
Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG (CCCT - no duct) 75% $1,346 $8.6 $3.2 $4.5 $6.56 6940 (CCCT - duct) 70% $1,329 $8.3 7050 (CCCT – Advanced) $1,225 $7.1 $2.9 $4.0 6470 NPCC (CCCT) 90% $1,244* $15.0 $1.8 $3.7 $6.75 7110 33% RPS 92% for planning, 65% for dispatch $1,160 $11.0 $4.9 $6.9 $7.13 6924 EIA (Conventional) 87% $1,003* $13.0 $2.2 $3.9 N/A 7196 (Advanced) $988* $12.2 $2.1 6752 Recommended $1,300 Low: $1,000 High:$1,500 $8 $4.9 PROMOD (CC G+H) $6.0 $7.09 PROMOD (Gas AVG) 7000 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

14 Combustion Turbine – Simple Cycle
Source Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG (CT 49.9MW) $1,484 $23.9 $3.9 $43.0 $6.56 9266 (CT 100MW) $1,416 $17.4 $32.3 (Advanced cycle) $991 $13.5 $3.6 $25.5 8550 NPCC (Aeroderivative) $1,126 * $15.0 $4.3 $28.8 $6.75 9370 (Heavy duty) $654* $1.1 $8.1 11960 33% RPS (CT) $846 $15.1 $5.0 $29.6 $7.13 9600 EIA (Conventional) $696* $12.6 $3.7 $24.3 N/A 10810 (Advanced) $661.0 $11.0 $3.3 $21.2 9289 Recommended $1,100 Low: $900 High: $1,200 $14 $5 PROMOD (All Other CT) $27.8 $7.09 PROMOD (Gas AVG) 9300 *Only ”Overnight” costs reported by NPCC and EIA ** Consolidated O&M calculated using a 7% capacity factor for all sources January 6, 2010

15 CHP < 5 MW CHP > 5 MW Source Capacity Factor (%)
Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) 33% RPS 68% $3,709 $0.0 $13.9 $7.13 8907 Recommended $3,700 Low:$3,500 High:$3,900 $14 Recommended $14 $7.09 PROMOD (Gas AVG) 8910 CHP > 5 MW Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) 33% RPS 85% $1,600 $0.0 $4.2 $7.13 6918 Recommended $1,600 Low:$1,400 High:$1,600 $4.5 Recommended $4.5 $7.09 PROMOD (Gas AVG) 6920 January 6, 2010 15

16 Coal Steam Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) NPCC 90% $3,753* $64.3 $2.9 $11.1 $2.10 9000 33% RPS 85% $3,270 $26.0 $4.3 $7.8 $1.99 8844 EIA $2,146* $28.7 $4.8 $8.6 N/A 9200 Recommended 87% $3,750 Low:$3,000 High:$4,000 $50 $3 PROMOD (Coal AVG) $9.6 $1.619 PROMOD (Coal AVG) *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

17 Coal IGCC with Carbon Capture and Sequestration
Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) 33% RPS 85% $6,278 $43.0 $4.2 $10.0 $1.99 9713 EIA 87% $3,496* $46.1 $4.4 $10.5 N/A 8307 Recommended 75% $9,000 Low:$6,000 High:$11,000 $25 $10 Recommended $13.8 $1.619 PROMOD (Coal AVG) 12000 *Only ”Overnight” costs reported by EIA ** Cost of sequestration is included in the Fixed O&M costs Note: WECC does not currently have a IGCC characterization, so the variable O&M costs and heat rate are E3 recommendations should a characterization be needed in the future. January 6, 2010

18 Nuclear Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid.O&M ($2009/MWh) Fuel Cost ($2009/MMBtu) Heat Rate (Btu/kWh) CEC COG 86% $6,039 $147.7 $5.3 $24.8 $0.63 10400 NPCC 90% $5,898* $96.5 $1.1 $13.3 $0.73 33% RPS 85% $6,122 $64.1 $0.5 $9.1 $0.93 EIA $3,459* $93.9 $12.4 N/A 10434 Florida Power & Light Company (1) $5,500 - $8,182 Progress Energy (1) $7,500 SCE&G/Santee Cooper (1) $5,682 Georgia Power (2) $6,447 Moody’s (3) Recommended $7,500 Low: $6,500 High: $8,000 $70 $6 PROMOD (Nuclear) $15.4 $0.6 PROMOD (Uran) *Only ”Overnight” costs reported by NPCC and EIA (1) Source: Nuclear Energy Institute (NEI) (12/2009) (2) Source: World Information Service on Energy. (Cooper, Mark) (08/2009) January 6, 2010 18

19 Geothermal Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG (Binary) 90% $4,846 $47.4 $4.6 $10.6 (Dual Flash) 94% $4,403 $58.4 $5.1 $12.1 NPCC $5,147* $187.7 $4.8 $28.6 WREZ 80%-90% 4,140-13,400 N/A 27 to 42 33% RPS 87% $4,157 $159.5** $30.1** RETI Phase 1A 70%-90% EIA (cost of least expensive plant) $1,783.9* $171.7 $0.0 $21.8 Recommended $5,500 Low:$4,000 High:$6,750 $180 $5 PROMOD (Geothermal) $27.8 *Only ”Overnight” costs reported by NPCC and EIA **33% RPS Calculator reports both fixed and variable O&M values, but uses only one value for each site depending on the original data source. January 6, 2010

20 Hydro - Small Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 30% $1,882 $17.6 $3.5 $10.1 NPCC 50% $3,217* $96.5 $0.0 $22.0 WREZ Assumptions 40% -60% N/A $3 - $13 33% RPS 33% $3,099 $13.2 $3.3 $7.9 RETI Phase 1A 40% - 60% $ $4000 5 to 25 5 to 6 Recommended 35% $3,300 Low:$500 High:$4,000 $25 $0 PROMOD $8.2 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

21 Hydro - Large Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) WREZ Assumptions 40% to 60% $700 - $5300 N/A 3 to 13 33% RPS 45% $3,099 $13.2 $3.3 $6.7 EIA 65% $2,338* $14 $3 $5.0 Recommended 50% $3,300 Low:$500 High:$4,000 $25 $0 PROMOD $5.7 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

22 Hydro -Upgrade Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 30% $932 $12.6 $2.4 $7.1 WREZ Assumptions 40% to 60% ,200 N/A 3 to 13 RETI Phase 1A 5 to 25 3.5 to 6 Recommended 50% $1,500 Low:$700 High:$5,300 $23 $0 PROMOD $5.3 January 6, 2010

23 Solar Thermal – Trough without storage
Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 27% $4,019 $68.0 $0.0 $28.8 WREZ (Dry Cooled) 20% to 28% $5,346 to $5,552 $66.0 $24 to $32 (Wet Cooled) 22% to 30% $5,146 to $5,352 33% RPS 28% $4,125 $58.7 $24.0 RETI Phase 1A 26% to 29% $3,800-$4,800 $66.3 $26 to $29 EIA 31% $5,235* $59.2 $21.8 Recommended $5,350 Low:$5,100 High:$5,600 $65 $0 PROMOD $25.5 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

24 Solar Thermal – Trough with 6hr Storage
Source Capacity Factor (%) Capital Costs ($2009/kW) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 65% $5,893 $68.0 $0.0 $11.9 NPCC 36% $5,040* $60.0 $1.0 $20.0 WREZ (Dry Cooled) 29% to 39% $7,600 $66.0 $19 - $26 (Wet Cooled) 22% to 27% $7,400 $28 - $34 Recommended $7,500 Low:7,300 High:8,000 $65 $0 PROMOD $20.6 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

25 Solar PV – Fixed Tilt Source AC Capacity Factor (%) Capital Costs ($2009/kWe) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) WREZ (Thin-film) 25% $4,500 $50.0 $0.0 $22.8 33% RPS (Crystalline) 23% $6,612 $39.1 $19.1 RETI Phase 1A 25% to 30% $6,500 - $7500 $35.1 $13 to $16 Recommended $4,500 Low:$3,600 High:$5,500 $50 $0 PROMOD $21.0 Note: Capital costs reported in $/kWe. Using a DC AC derate factor of 80%, $4,500/kWe is equivalent to $3,600/kW DC January 6, 2010

26 Solar PV - Tracking Source AC Capacity Factor (%) Capital Costs ($2009/kWe) Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 27% $4,960 $68.0 $0.0 $28.8 NPCC 25% $7,721* $38.6 $17.6 WREZ 23% - 28% $5,700 $65 25 to 32 RETI Phase 1A 28% $6,500 - $7500 $35.1 $14.6 EIA 21% $6,295* $12.2 $6.6 Recommended $5,700 Low:$5,000 High:$6,500 $0 PROMOD $15.6 *Only ”Overnight” costs reported by NPCC and EIA Note: Capital costs reported in $/kWe. Using a DC AC derate factor of 80%, $5,700/kWe is equivalent to $4,560/kW DC January 6, 2010

27 Wind - Onshore Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG (Class 3/4) 37% $2,332 $13.7 $5.5 $9.7 (Class 5) 42% $9.2 NPCC 38% $2,252* $42.9 $2.1 $15.0 WREZ 21% to 40% 2,300 $60 $0.0 17 to 33 RETI Phase 1A 25% to 40% 1, ,400 $50.0 14 to 23 33% RPS 33% $2,313.4 $53.3 $18.4 EIA $2,005* $31.6 $9.5 Recommended $2,350 Low:$1,900 High:$2,500 $50 $0 PROMOD $17.3 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

28 Wind - Offshore Source Capacity Factor (%) Capital Costs ($2009/kW)
Fixed O&M ($2009/kW-yr) Variable O&M ($2009/MWh) Consolid. O&M ($2009/MWh) CEC COG 45% $6,548 $27.4 $11.0 $18.0 RETI Phase 1A 35% to 45% $5,000 - $6,000 $0.0 N/A EIA 40% $4,015* $93.3 $26.6 Recommended $6,000 Low:$4,000 High:$8,000 $90 $0 PROMOD $25.7 *Only ”Overnight” costs reported by NPCC and EIA January 6, 2010

29 Regional Multipliers E3 recommends multipliers to reflect regional differences in cost of land, labor and materials E3 developed regional multipliers based on US Army Corps of Engineers, Civil Works Construction Cost Index System (CWCCIS) Vary by technology depending on components of total capital and O&M costs Note: = US average January 6, 2010

30 Financing and Tax Assumptions

31 Financing Assumptions
Need to translate $/kW cost inputs into annualized revenue requirements Requires tax workup, assumptions about project ownership and financing, and calculation of annual cash flows For simplicity, E3 recommends using IPP financing for most resource types Exceptions: IOU financing for coal, nuclear, large hydro and hydro upgrades January 6, 2010

32 Financing Assumptions
Debt % Equity % Debt Rate Equity Rate WACC IOU NPCC 50% 7% 11% 9.0% COG 48% 52% 5.40% 11.85% 8.75% WREZ 6.50% 12% 9.25% 33% 44.75% 55.25% 5.96% 10.78% 8.6% Recommended 6.30% 11.40% 9.00% IPP 60% 40% 6% 14.50% 9.4% 7.49% 14.47% 10.28% 8% 15% 10.8% RETI 7.5% 10.5% 7.27% 15.29% 10.48% 7.30% 15.00% 10.38% MUNI 100% 0% 5.20% 5.2% 5% 6.5% 5.50% January 6, 2010

33 Recommended equity share to achieve DSCR>1.4 %
Financing Assumptions Project financing typically requires minimum Debt Service Coverage Ratio (DSCR) (ratio of annual cash flows to debt service) of at least 1.4 E3 recommends adding equity to financing structure as necessary to maintain DSCR >= 1.4 Recommended equity % for IPP cases with a DSCR >= 1.4 are shown: Using General Equity % DSCR with 40% Equity Recommended equity share to achieve DSCR>1.4 % Biomass - Combustion-based 40% 1.08 48% Biogas - Landfill 1.28 44% Geothermal 0.83 54% Solar Thermal - Trough 0.75 53% Solar Thermal - Trough w/ storage 0.77 Solar PV - Tracking 0.76 Solar PV - Fixed Tilt Wind - Onshore 47% January 6, 2010

34 Tax Assumptions Federal Tax rate: 35%
State tax rate: 7% Recommended use of current tax code for the tax assumptions Investment Tax Credit (ITC) Production Tax Credit (PTC) ($/MWh) Production Tax Credit Duration (years) MACRS Term (Years) Biomass $21.00 10 10* Biogas - Landfill $11.00 Biogas - Other Simple Cycle CT 20 Combined Cycle CT Coal Nuclear Geothermal 5 Hydro Solar Thermal 30% Solar PV Wind CEC CHP *WREZ applies 7 yr MACRS to 60% of Capital Cost and 20yr MACRS to 40% of the Capital Cost. Here, an average of the two is used. January 6, 2010

35 Levelized Cost Results from E3 Pro Forma Model
Technology Fixed Costs ($/kW-yr.) Levelized Cost of Energy ($/MWh) Biomass $547.1 $98.58 Biogas - Landfill $408.9 $92.34 Biogas - Other $795.7 $121.47 Simple Cycle CT $193.7 $403.39 CCGT $203.2 $91.60 CHP < 5M $606.2 $193.28 CHP > 5M $259.4 $95.96 Coal Steam $494.5 $88.16 IGCC with CCS $1,242.9 $228.05 Nuclear $949.5 $145.76 Technology Fixed Costs ($/kW-yr.) Levelized Cost of Energy ($/MWh) Geothermal $630.4 $113.17 Hydro - Small $416.1 $160.51 Hydro - Large $354.6 $92.47 Hydro - Upgrade $171.0 $44.58 Solar Thermal - Trough $445.9 $193.78 ST - Trough w/ storage $594.6 $201.00 Solar PV - Fixed Tilt $369.6 $179.90 Solar PV - Tracking $470.1 $211.87 Wind - Onshore $241.7 $89.26 Wind - Offshore $627.3 $191.53 Note: The TEPPC 2009 Study will use only the fixed costs in $/kW-yr; the $/MWh values are provided for reference January 6, 2010

36 Intra-hour Integration Costs for Intermittent Renewables

37 Renewable Resource Integration Costs
Intermittent resources impose operating costs due to variability and unpredictability Increased need for ramp and regulation Recommend cost adder for wind and solar PV to reflect within-hour balancing and ancillary services Survey to establish range of cost estimates BPA’s Wind Balancing Service Northwest Wind Integration Forum (summarizes studies by Avista, Idaho Power, PacifiCorp, Puget Sound Energy, and BPA) E3 33% Calculator and GHG Calculator (summarizes studies by Avista, BPA, Great River, Idaho Power, Manitoba Hydro, MNPUC, PacifiCorp, PSCO, PSE, We Energies, and Xcel) January 6, 2010

38 Renewable Resource Integration Costs
Recommended Integration cost adder for Wind and PV: $6/MWh Recommended $6/MWH January 6, 2010

39 Renewable Resource Integration Costs Sources
BPA’s Wind Balancing Service, Bonneville Power Administration Transmission Services, October 2009, Northwest Wind Integration Action Plan, Northwest Power Planning and Conservation Council and others, March 2007, Review of International Experience Integrating Variable Renewable Energy Generation, California Energy Commission, April 2007, 2006 Minnesota Wind Integration Study, Minnesota Public Utilities Commission, November 2006, GRE Wind Integration Study, presented at UWIG Technical Workshop, Seattle, WA; October 2003, Wind Integration Study, Xcel Energy and the Minnesota Department of Commerce, September 28, 2004, System Operations Impacts of Wind Generation Integration Study, We Energies, July 24, 2003, Wind Integration Study Report Of Existing and Potential 2003 Least Cost Resource Plan Wind Generation, Xcel Energy Transmission Planning, April 2006, Wind/Hydro Integration for Manitoba Hydro’s System, Presented to UWIG by Bill Girling, March 22nd, 2007, January 6, 2010

40 Transmission Cost and Financing

41 Transmission Costing Assumptions
Survey of publicly-available data sources WREZ Transmission Model RETI/CPUC 33% Implementation Analysis CPUC Greenhouse Gas Calculator All costs were converted to 2009 dollars Develop transmission costing model for calculating capital costs from assumptions about components based on recent E3 models $ per line-mile by voltage, $ per mile of right-of-way by jurisdiction, $ per substation by voltage Annualized based on generic financing assumptions January 6, 2010

42 Recommended Transmission Line and Right-of-Way Costs
Line Type Line Capital Cost ($M/mi) Termination Cost ($M) Substation Cost ($M/sub) 500 kV AC Single $1.80 - $50 500 kV AC Double $2.88 345 kV AC Single $1.26 $40 345 kV AC Double $2.02 230 kV AC Single $0.90 $35 230 kV AC Double $1.44 500 kV DC Bi-Pole $500 Note: Recommended costs are based on the WREZ Transmission Model. These costs were benchmarked against E3’s GHG Calculator and the RPS Calculator, which gave similar costs. January 6, 2010

43 Transmission Financing Assumptions
New transmission could be constructed by IOUs, independent transmission companies, or federal agencies For simplicity, recommend assuming IOU financing Economic life based on expected rate treatment, e.g., years General IOU Financing Assumptions Debt % Equity % Debt Rate Equity Rate WACC IOU NPCC 50% 7% 11% 9.0% COG 48% 52% 5.40% 11.85% 8.75% WREZ 6.50% 12% 9.25% 33% 44.75% 55.25% 5.96% 10.78% 8.6% Recommended 6.30% 11.40% 9.00% January 6, 2010

44 Sources and Contact Info

45 Sources CEC Comparative Costs of California Central Station Generation CPUC 33% RPS Implementation Analysis EIA. Annual Energy Outlook (03/2009) LBNL.“Financing Non-Residential Photovoltaic Projects.”(01/09) MIT. Update on the Cost of Solar (05/2009) NEI. The Cost of New Generating Capacity in Perspective (12/2009) NPCC. Draft 6th Northwest Power Plan. (09/2009) RETI. Phase 1A. (05/2008) WREZ. Phase1. (10/2009) WREZ Technology Assumptions (01/2009) January 6, 2010

46 Contact Information Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Phone: Web: Arne Olson, Partner Andres Pacheco, Associate Nick Schlag, Associate January 6, 2010


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