1. ENERGY CENTER State Utility Forecasting Group (SUFG) Alternative Resources and Energy Capacity Presented by: Douglas J. Gotham Purdue University Presented to: Institute of Public Utilities 56 th Annual Regulatory Studies Program August 12, 2014

2. ENERGY CENTER State Utility Forecasting Group (SUFG) Main Presentation Topics Current status of renewable resource development Estimating capacity credits for variable resources using probabilistic methods Thermal system operating considerations Optimal and least-cost capacity expansion paths 2

3. ENERGY CENTER State Utility Forecasting Group (SUFG) 3 Source: EERE/WPA 2013 U.S. led global growth in wind power with over 13 GW added in 2012. The 60 GW total installed capacity ranks 2 nd to China’s 75 GW.

4. ENERGY CENTER State Utility Forecasting Group (SUFG) 4 Wind Penetration in US States (Capacity)

5. ENERGY CENTER State Utility Forecasting Group (SUFG) Wind Penetration in US States Source: AWEA 2012 5

6. ENERGY CENTER State Utility Forecasting Group (SUFG) 6 US Wind Capacity Growth Slowed Down substantially in 2013 Source: EERE/WINDexchange Headwinds against future growth include Lack of clarity about federal tax incentivesLack of clarity about federal tax incentives Low natural gas pricesLow natural gas prices Modest electricity demand growthModest electricity demand growth Limited near term demand from state RPSsLimited near term demand from state RPSs Growing competition from solar in some regionsGrowing competition from solar in some regions

7. ENERGY CENTER State Utility Forecasting Group (SUFG) 7 United States Wind Resource Map (80 meter)

8. ENERGY CENTER State Utility Forecasting Group (SUFG) US PV Solar Resource Map 8

9. ENERGY CENTER State Utility Forecasting Group (SUFG) US PV Installations 9 Source: SEIA

10. ENERGY CENTER State Utility Forecasting Group (SUFG) Global PV Market 10

11. ENERGY CENTER State Utility Forecasting Group (SUFG) US CSP Installations 11 Source: SEIA, NREL

12. ENERGY CENTER State Utility Forecasting Group (SUFG) 12 Source: DSIRE Renewable Portfolio Standards March 2013

13. ENERGY CENTER State Utility Forecasting Group (SUFG) Intermittency All generators have some amount of uncertainty when it comes to availability –Mechanical failure –Environmental factors Some renewable resources experience this problem on a far greater scale 13

14. ENERGY CENTER State Utility Forecasting Group (SUFG) Intermittency Problems Operational –Low output + high demand –High output + low demand –Rapid change in output Scheduling –Unit commitment –Gas purchase Planning 14

15. ENERGY CENTER State Utility Forecasting Group (SUFG) 121254367981110182019232224211314161715 Hour of the Day Load (MW) Max Load Min Load Wind Production Source: Veselka (Argonne National Laboratory)

16. ENERGY CENTER State Utility Forecasting Group (SUFG) Intermittency in Planning Amount –How much power will the intermittent resource produce when it is needed most? Type –How will the intermittent resource impact the appropriate mix of resources? 16

17. ENERGY CENTER State Utility Forecasting Group (SUFG) Load and wind generation exhibit a strong negative correlation, with the negative correlation being stronger during the summer months Load and Wind Patterns

18. ENERGY CENTER State Utility Forecasting Group (SUFG) Load and Solar Patterns Solar power is also intermittent, but is more predictable than wind –“Forecast for tonight – dark” – George Carlin –Cloud cover can introduce short-term variations in output Solar power is positively correlated with load –Solar intensity tends to be greater in the summer 18

19. ENERGY CENTER State Utility Forecasting Group (SUFG) Capacity Value of Intermittent Generation Rule of thumb method –Simple and easy to understand –There is no standard approach and little to no scientific basis for value –May not account for geographic variability of load and resource 19

20. ENERGY CENTER State Utility Forecasting Group (SUFG) Capacity Value of Intermittent Generation Historical availability –Use the percentage of full output that is available when the system peak demand occurs –Accounts for local factors –Large variations from year to year –Small sample size of historical observations 20

21. ENERGY CENTER State Utility Forecasting Group (SUFG) MISO Wind Availability on Peak (% of Nameplate) SummerAvailabilityCapacity Credit 200511.5% 200656.0%20% 20072.1%20% 200812.4%20% 20091.5%20% 201021.6%8% 201144.2%12.9% 20129.8%14.7% 201352.6%13.3% 201414.1% 21

22. ENERGY CENTER State Utility Forecasting Group (SUFG) Indiana Wind PPA Simulated Availability on Peak 22 Date of Annual Peak Demand Peak Load (MW) Wind Generation (MW) * Wind Output as % of Wind Capacity 8/3/200419,201577.4% 8/3/200520,06517422.6% 7/31/200620,79123130.0% * Wind generation is based on simulated output from NREL data for appropriate locations of Indiana utility PPAs at the time of the study (770MW)

23. ENERGY CENTER State Utility Forecasting Group (SUFG) 23

24. ENERGY CENTER State Utility Forecasting Group (SUFG) Capacity Value of Intermittent Generation Effective Load Carrying Capability –The amount of new load that can be added with a given amount of new generation while maintaining a constant loss of load probability –MISO uses this method to determine the capacity credit shown earlier 24

25. ENERGY CENTER State Utility Forecasting Group (SUFG) Loss of Load Probability aka - loss of load expectation –given an expected demand for electricity and a given set of supply resources with assumed outage rates, what is the likelihood that the supply will not be able to meet the demand? Generally used to meet a minimum standard, such as 1 day in 10 years –or about 0.000274 25

26. ENERGY CENTER State Utility Forecasting Group (SUFG) All Power Generators Experience Outages Some Outages Such as Maintenance Schedules Are Planned Total System Capacity Resulting Reserve Margin Planned Outages Source: Veselka

27. ENERGY CENTER State Utility Forecasting Group (SUFG) All Power Generators Experience Outages Due to Mechanical Problems Some Outages Are not Known in Advance Total System Capacity Source: Veselka

28. ENERGY CENTER State Utility Forecasting Group (SUFG) Intermittent Resources in a LOLP It is not as simple as adding another generator A wind or PV generator will often operate at a level lower than full capacity –Rather than two states (on/off), there is a distribution of possible states fossil-fueled generators may have multiple states as well (partial outages, de-rates) –That distribution differs at various times of the day or year 28

29. ENERGY CENTER State Utility Forecasting Group (SUFG) Wind Probability Profiles Should Be Used When Constructing “with Wind” Resultant Load Probability Curves Exceedance Probability (%) Wind Production (MW) Summer Nighttime Wind Is Less Than Daytime Wind Winter Wind Is Greater Than Summer Wind Source: Veselka

30. ENERGY CENTER State Utility Forecasting Group (SUFG) Simulation of Intermittent Output Rather than calculate the LOLP analytically, it can be estimated using a Monte Carlo simulation –Simulate the state of each generator (including wind output level) using multiple random draws –In many cases, the sufficiency of historical data may affect the accuracy of the probability distribution of intermittent resources 30

31. ENERGY CENTER State Utility Forecasting Group (SUFG) Impact of Intermittency on Type of Resources Needed One approach is to use a load duration curve and load duration curve net of wind (or solar) Apply a break-even cost curve to the load duration curve net of wind 31

32. ENERGY CENTER State Utility Forecasting Group (SUFG) hr 4 hr 17 121254367981110182019232224211314161715 Sort Order (Highest to Lowest) Load (MW) Max Load Min Load Time Load Some Information Is Lost Such as Load Changes Over Time hr 17 hr 4 Source: Veselka

33. ENERGY CENTER State Utility Forecasting Group (SUFG) NGCCGT Cycling Coal Base Load Coal Nuclear 0100 Exceedance Probability (%) Load (MW) Max Load Is Never Exceeded Time Load Min Load Is Always Exceeded Information Such as Unit Ramping and Frequency of Unit Starts/Stops Are Lost Source: Veselka

34. ENERGY CENTER State Utility Forecasting Group (SUFG) 121254367981110182019232224211314161715 Hour of the Day Load/Wind Output (MW) Max Load Min Load Wind Generation Source: Veselka

35. ENERGY CENTER State Utility Forecasting Group (SUFG) 121254367981110182019232224211314161715 Hour of the Day Load (MW) New Max New Min Wind Typically Increases Resultant Load Changes Resultant Load Source: Veselka

36. ENERGY CENTER State Utility Forecasting Group (SUFG) NGCC GT Cycling Coal Nuclear Base Load Coal Lowest O&M Costs Highest O&M Costs 121254367981110182019232224211314161715 Hour of the Day Load (MW) Without Wind With Wind Coal May Operate Less Efficiently @ Min Gen Faster & Often More Ramping of Thermal Units Unit Dispatch with Wind Results in Less Thermal Generation & Associated Air Emissions Source: Veselka

37. ENERGY CENTER State Utility Forecasting Group (SUFG) NGCC GT Cycling Coal Base Load Coal 121254367981110182019232224211314161715 Hour of the Day Load (MW) Min Load Nuclear Forced Out of Service Some Units May Be Stopped & Restarted Revise Unit Commitments When Base Load Units Are Forced Out-of- Service, It Can Potentially Cause Problems with Technical Minimums at Some Units Source: Veselka

38. ENERGY CENTER State Utility Forecasting Group (SUFG) Annualized Cost ($/MW-yr) 0100 GT NGCC Coal Capacity Factor (%) GT 0-7% NGCC 7-40% Coal 40-85% Nuclear 85-100% Levelized Capital + Fixed O&M A Simple Screening Curve Reveals Technology Niches Source: Veselka

39. ENERGY CENTER State Utility Forecasting Group (SUFG) Levelized Cost ($) Capacity Factor (%) 0 100 GT NGCC Coal Nuclear 100 0 Exceedance Probability (%) Normalized Load (%) Nuclear Coal NGCC GT 100 Combining Screening Curves with the Load Duration Curve Approximates the “Ideal” Capacity Mix Source: Veselka

40. ENERGY CENTER State Utility Forecasting Group (SUFG) Levelized Cost ($) Capacity Factor (%) 0 100 GT NGCC Coal Nuclear 100 0 Normalized Load (%) Nuclear Coal NGCC GT Exceedance Probability (%) Without Wind With Wind 100 Expansion Mix Is Affected by Introducing a Variable Supply Resource Source: Veselka

41. ENERGY CENTER State Utility Forecasting Group (SUFG) SUFG Study SUFG looked at the impact of various levels of wind penetration on resource needs for Indiana 41

42. ENERGY CENTER State Utility Forecasting Group (SUFG) Data Sources Indiana statewide hourly load for 2004- 2006 NREL wind speed estimates for 2004- 2006, using locations from which Indiana utilities are currently purchasing wind power –No Indiana utilities were purchasing wind power during that period, but it does maintain the chronological relationship between wind and load 42

43. ENERGY CENTER State Utility Forecasting Group (SUFG) Costs for New Generation TypeAnnualized Fixed Cost (2010 $/MW/Yr) Variable Cost (2010 $/MWh) PC 542,27725.34 CC 170,10037.66 CT 110,35362.26 Wind 403,4300.00 43

44. ENERGY CENTER State Utility Forecasting Group (SUFG) Effect of Natural Gas Prices Projected natural gas prices were low enough that coal units are not cost competitive at any capacity factor Natural gas combined cycle are used to meet both baseload and intermediate needs 44

45. ENERGY CENTER State Utility Forecasting Group (SUFG) Load Duration Curve + Break-even Cost Curve w/ Low NG Prices 45

46. ENERGY CENTER State Utility Forecasting Group (SUFG) Additional Resource Requirements (MW) 46 0 MW Wind1,000 MW Wind3,000 MW Wind6,000 MW Wind CC87550000 CT5,7695,8736,0165,586 Total6,6446,3736,0165,586 The first 1,000 MW of wind has a capacity value of 271 MW (27.1%), the next 2,000 MW has a capacity value of 357 MW (17.9%), and the last 3,000 MW has a capacity value of 430 MW (14.3%).

47. ENERGY CENTER State Utility Forecasting Group (SUFG) New Capacity Requirements 47

48. ENERGY CENTER State Utility Forecasting Group (SUFG) As Wind Penetration Increases…. Baseload/cycling resource requirements decrease Peaking resource requirements increase (until existing cycling resources start being used as peakers) Total resource requirements decrease at a declining rate 48

49. ENERGY CENTER State Utility Forecasting Group (SUFG) Solar Impacts Unlike wind, solar output is generally positively correlated with demand –both are higher during the day –bright sunshine can increase demand Solar usually decreases the need for peaking resources and has less impact on baseload/cycling needs 49

50. ENERGY CENTER State Utility Forecasting Group (SUFG) The Duck Curve 50 Source: California ISO DR-EE Roadmap

51. ENERGY CENTER State Utility Forecasting Group (SUFG) Energy Storage and Demand Response Both storage and DR tend to shift demand from peak periods to off-peak periods Decreases need for peaking/cycling resources Increases need for baseload resources Total resource requirements decrease 51

52. ENERGY CENTER State Utility Forecasting Group (SUFG) Energy Efficiency Energy efficiency impacts tend to vary depending on the particular end use affected –lighting programs impact mornings and evenings more than daylight and middle of the night hours –LED traffic lights operate at all hours 52

53. ENERGY CENTER State Utility Forecasting Group (SUFG) 53 Further Information Doug Gotham –765-494-0851 –gotham@purdue.edugotham@purdue.edu http://www.purdue.edu/discoverypark/energy/SUFG/