Renewable Energy Supply Curves for E3 GHG Calculator

1. Renewable Energy Supply Curves for E3 GHG Calculator Energy & Environmental Economics, Inc. Greenhouse Gas Modeling UpdateOctober 2, 2007

2. Overview & Key Tasks

3. Supply Curve Overview • Key input to “E3 Calculator” • Cost of new renewable generation is represented in supply curves • Based on all-in levelized costs including capital, operating, interconnection / collection • Separate supply curves for CA and 10 other WECC zones

4. WECC Zones in GHG Model

5. Supply Curve Key Tasks • Collect and assess existing public data • Develop resource availability within each WECC zone • Develop levelized costs within each WECC zone • Input data into spreadsheet model • Create supply curves

6. Data Sources and Assessment

7. Supply Curve Data Overview • Five renewable technologies evaluated • Wind • Geothermal • Hydro • Biomass • Solar Thermal • General approach: Use uniform cost assumptions and let resource class/availability drive zonal supply curves • Mainstream estimates for 2007 technology • Use publicly-available data

8. WGA, Clean and Diversified Energy Advisory Committee (CDEAC) reports (2006) NREL WinDS Model CEC 2007 IEPR Scenario Analyses Project California Biomass Collaborative CA Assessment 2006 ORNL, Biomass as a Feedstock, Billion Ton Vision Report (2005) NREL, A Geographic Perspective on the Current Biomass Resource Availability in the United States (2005) EIA, Annual Energy Outlook 2007 CEC, Central Station Generation Costs (2007) AWEA Wind Vision BC Hydro, 2006 IEP Utility IRPs AESO 2005 10-Year Transmission Plan and 2003 20-Year Outlook NTAC, Canada-Northwest-California Transmission System Options (2006) CEC Intermittency Analysis Project (2007) NW Power Council, 5th Power Plan (2005) NW Power Council, 4th Power Plan (1998) Geothermex/CEC, New Geothermal Site Identification and Qualification (2004) INL, Virtual Hydro Prospector; Estimation of Economic Parameters of U.S. Hydropower Resources (2003) Sargent & Lundy/NREL, Assessment of Parabolic Trough and Power Tower Solar Technology Cost (2003) Black & Veatch, Economic, Energy, and Environmental Benefits of Concentrating Solar Power in California (2006) MIT, The Future of Geothermal Energy (2007) Petty & Porro, Updated U.S. Geothermal Supply Characterizations (2007) Wiser & Bollinger, LBNL, Annual Report on U.S. Wind Power (2006) Conversations with Utilities, EIA, State agencies, Research labs, Resource developers, Industry groups CEC Strategic Value Analyses (2003) Data Sources

9. Resource Assessment Methods • Wind & Solar Thermal • Top-down resource potential assessments with filters • Geothermal, Hydro & Biomass • Bottom-up project-level evaluation based on costs & conditions, expert opinion

10. Cost Estimation Methods • Used EIA’s Assumptions to Annual Energy Outlook 2007 as baseline for conventional and renewable technology costs • Substituted other technology cost estimates for EIA values as appropriate • Used adjustment factors to account for inflation of materials costs since time studies were completed • Adjusted using regional capital cost multipliers from U.S. Army Corps of Engineers (range: CA = 1.20 to WY = 0.92) • Cost estimates shown here exclude federal PTC/ITC and state-level tax incentives (but will include in base case) • Rule of thumb estimates of gen-tie and interconnection costs, usually based on distance to transmission

11. Supply Curves

12. Total Renewable Resource Availability by Region (MW) • Biomass & small hydro resources limited • Some geothermal potential in most areas • The main story is wind and solar thermal

13. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

14. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

15. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

16. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

17. Base Case RPS Targets by Region • RPS currently in effect in 8 of 11 regions (shaded green) • Assume 5% for other regions to reflect known renewables plans • WECC-wide gap: • 120,000-150,000 GWh, or • 13,000-18,000 aMW, or • 40,000-55,000 MW of wind

18. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

19. DOES NOT INCLUDE LONG-DISTANCE TRANSMISSION COSTS

20. Resource Assessment Cost Estimation

21. Wind Resource & Cost Data • Resource Potential from NREL • GIS input for WinDS model • 98 resource regions in WECC • Exclude cities, lakes, Federal lands, >20% slopes • Use wind power Class to calculate capacity factor • Include all resources ≥ Class 5 • Include resources < Class 5 only if local transmission capacity available • Generation costs (in 2007$): • EIA 2007 Annual Energy Outlook: $1595/kW installed • AWEA Wind Vision: $1600/kW installed • Levelized cost range for all sites in supply curve: $78/MWh - $159/MWh • Interconnection Cost • Use distance proxy based on NREL GIS data & linear $/MW-mile cost • Firming Cost:$294/kW installed

22. Wind Resources • 2,400,000 MW of raw potential in WECC • 277,000 MW included after filtering for power class and local transmission availability Total MT Wind:54,000 MW Total WY Wind:139,000 MW

23. Solar Thermal Resource Data • Resource Potential from NREL • GIS data used for WGA CDEAC analysis • 31 resource regions in WECC • Exclude cities, lakes, Federal lands, >1% slopes, noncontiguous resource areas • Use Direct Normal Irradiation (DNI) class and Latitude to calculate capacity factor • Include only resources with DNI > 6.75 kWh/m2/day • Interconnection Cost • Used measured distance from center of solar potential in GIS region to nearest 230+ kV line & linear $/MW-mile cost

24. Solar Thermal Resources • 128,000 MW of WECC-wide potential included after applying filters

25. Solar Thermal Costs • Wide range of estimates in literature • Capital costs range from $2200 to $4400/kW • Capacity factors from 28% to 56% • Levelized energy cost from $71 to $219/MWh • Key cost determinants • Technical progress assumptions • Tax policy assumptions • Amount of storage • Black & Veatch (2006) costs used in model: $3073/kW • Trough technology with 6 hour storage and 40% capacity factor • EIA 2007 Annual Energy Outlook: $3191/kW, 40% c.f. • Levelized cost range for all sites in model: $146/MWh - $218/MWh

26. Geothermal Resource & Cost Data • Resource Potential • Project-specific MW and cost estimates • Use CEC/Geothermex (2004) for CA & NV sites • Use WGA CDEAC (2006) for rest of WECC • Results after applying EIA filters: • CA: 3000 MW at 21 sites • NV: 1300 MW at 43 sites • BC: 185 MW at 2 sites • Rest of WECC: 1500 MW at 24 sites • Generation Costs • Site-specific; varies with depth, temperature, & proven resource • Cost range for most sites: $2400/kW to $3700/kW • Levelized cost range for all sites: $65/MWh to $324/MWh • Interconnection Cost • Used measured distance from center of site location to nearest 115+ kV line & linear $/MW-mile cost

27. Hydro Resource & Cost Data • Resource Potential • Site-specific MW & cost estimates • INL data based on FERC applications • EIA filtered site list based on costs and other parameters • E3 selected only sites with existing dam and no documented barriers • Sites smaller than 30 MW are RPS-eligible • Total hydro results after applying filters: • CA: 660 MW at 41 sites • NW: 2090 MW at 40 sites • BC: 5582 MW • AB: 200 MW • Rest of WECC: 400 MW at 71 sites • Generation Costs • Vary by location and conditions • Range for most sites: $1200-1900/kW • Capacity factors range: 15% to 65% • Cost range for all sites: $73/MWh to $254/MWh • Interconnection Costs • Used INL GIS estimate of distance from site to existing transmission & linear $/MW-mile cost • Firming Cost:$168/kW installed for small hydro sites

28. Biomass Resources • “Biomass” includes many different technologies and resource types • Solid Biomass • Sub-Categories:Wood, Mill Waste, Municipal Solid Waste, Ag Residues • Constraints: Fuel supply is uncertain and has competing uses • Biogas • Sub-Categories: Landfill Gas (LFG), Wastewater Treatment, Dairy/Manure • Constraints: Most potential is for projects <1 MW, uneconomic to develop • High gross potential, but difficult to determine how much is economically developable

29. Biomass Resource & Cost Data • Resource Potential: • NREL state-level biomass availability by type used as reference point • Scaled NREL data using estimate of likely development in California by 2020 (CEC/California Biomass Collective 2006) • Results: • CA: 600 MW of solid biomass & 300 MW of biogas • Rest of WECC: 1700 MW of solid biomass & 300 MW of biogas • Generation Costs (in 2007$): • Biogas (EIA 2007 Annual Energy Outlook): $2492/kW • Biomass (CEC/CBC 2006): $3646/kW • Capacity factor: 80% for both technologies • Fuel costs: $1.81/MMBtu (biogas); $3.64/MMBtu (biomass) • Levelized cost range: $112 - $135/MWh (biomass); $91 - $111/MWh (biogas) • Interconnection Costs • Assumed generators locate near transmission, so interconnection costs minimal

30. Wind “Firmed” wind to 90% capacity factor on peak by adding capital cost of 0.7 MW of CTs for each MW of wind (net of CT energy benefit) Added hourly integration costs that increase with wind’s share of area generation ($5/MWh- $12/MWh) Solar Thermal Assumed 6 hours of thermal storage allowing 90% capacity factor on peak with no firming Added $6.25/MWh energy benefit because production occurs during peak hours Assumed no hourly integration costs Treatment of Intermittent Resources

31. Summary of Renewable Energy Costs • Notes: • * Levelized costs include: • Interconnection & financing costs • Fuel costs (for biomass & biogas) • Firming and shaping costs (for wind & hydro) • Regional capital cost adjustments from U.S. Army Corps of Engineers (e.g., CA = 1.20; WY = 0.92) • Solar thermal variable costs include peak period energy benefit • Small hydro and geothermal capital costs are for generic plant only • Each site in data has its own capital cost • Costs across sites range widely

32. Our Renewables Costs Look High Because… • Tried to account for recent cost inflation (at least 50% in most cases) • Includes full tax workup based on IOU financing • Includes estimates of funds used during construction • Includes estimates of transmission integration costs • Excludes federal tax credits • Wind resource is “firmed” with CTs

33. Conventional Resources • Five technologies considered: • Gas combined-cycle combustion turbine (CCCT) • Pulverized coal steam • Coal integrated gasification combined cycle (IGCC) • Coal IGCC with carbon capture and sequestration (CCS) • Nuclear • Assume no limit on quantity of conventional resources that can be developed in each region

34. Comparison of Conventional Resource Costs • Today’s technology • Same financial, tax credit, and recent cost inflation assumptions as renewables • Regional differences driven by fuel prices and capital cost differences

35. Key Data Uncertainties • Solar Thermal generation cost • Wide range of current costs estimates • Large uncertainty about future costs • Interconnection costs • Variability can be large • Estimation techniques important, especially for wind • Data limitations result in different estimation methodology for different technologies

36. Key Modeling Uncertainties • Include federal and state tax incentives? • Will PTC & ITC expire? • Modeling CA resources • Statewide potential vs resource zone approach • Affects what user can specify in “dashboard” • Treatment of intermittent renewables • Firming & integration costs, esp. for wind • New long-line transmission (e.g. CA-WY) • What to assume for base case?