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Kevin Harris ColumbiaGrid

Kevin Harris ColumbiaGrid. DWG CO2 Meeting Aug 7, 2014. Background. Objective of CO2 Cost: Within production cost modeling The primary purpose of applying a CO2 cost is to change the dispatch order of coal vs. gas generation

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Kevin Harris ColumbiaGrid

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  1. Kevin HarrisColumbiaGrid DWG CO2 Meeting Aug 7, 2014

  2. Background • Objective of CO2 Cost: • Within production cost modeling • The primary purpose of applying a CO2 cost is to change the dispatch order of coal vs. gas generation • The impact of any CO2 cost adder is relative to the coal and gas price. • The higher the spread between coal and gas requires a high CO2 cost to have the same impact on dispatch • CO2 cost is an effective fuel adder: • NG ($/MMBtu):=($/ton CO2)*5.849% • ($/ton CO2)*(ton/2000 LB)*(116.98 LB CO2/MMBtu) • Coal ($/MMBtu):=($/ton CO2)*10.71% • ($/ton CO2)*(ton/2000 LB)*(214.22 LB CO2/MMBtu)

  3. Previous CO2 Analyst • The impact of any CO2 cost is relative to the assumed coal and gas price. • What’s the value of comparing CO2 cost from other analyst without knowing it’s relative position to coal and gas price? • Without knowing the coal and gas price for a published CO2 yields a price without a valued reference frame • The objective of the analyst is unknown • What is a valued reference frame? • The transition point where the net coal and gas price are equal, i.e. “Neutral CO2 Cost” • Where neither gas or coal have a competitive advantage

  4. Neutral CO2 Cost • Neutral CO2 cost • Equation ($/MWh): Coal(Fuel + Emiss Cost) = Gas (Fuel + Emiss Cost) • Neutral CO2 cost formula: • NFC:= Net Fuel Cost ($/MWh) • Fuel Cost ($/MWh) + Emission Cost ($/MWh) • x:= CO2 cost ($/ton) • y:= Fuel CO2 content (lb CO2/MMBtu) • FC:= Fuel Cost ($/MMBtu) • HR:= Heat Rate (MMBtu/MWh) • Short ton:= 2000 lb/ton

  5. NG Impact on Neutral CO2 Cost Assumed Heat Rates (MMBtu/MWh): • ST-Coal: 10.5 • CC: 7.1 For every dollar increase in gas the Neutral CO2 cost increase by $10/ton For every dollar increase in coal the Neutral CO2 cost decrease by $-14.8/ton Coal:= $2.50/MMBtu Coal:= $1.50/MMBtu

  6. Published CO2 Cost 1 of 2 • WECC Compiled CO2 Cost The purpose of each case is unknown High Mid Low

  7. Published CO2 Cost 2 of 2 • WECC Complied CO2 cost with modeled TEPPC 2024 neutral CO2 cost What we want: Ideal comparison would be based on actual coal and gas price for each scenario What we get: Chart shows relative impact of each CO2 scenario based on TEPPC modeled fuel cost High Mid Low

  8. What Should We Do? • The goal is to tailor CO2 price to fit the objective of the case. • The Formula consist of two components: • Develop the CO2 price based on the neutral CO2 cost (reference price) • Apply an adder to adjust the neutral CO2 cost: • Positive adder: Increase the competitive advantage Gas has over Coal (Larger numbers increase gas advantage over coal) • Negative adder: Narrows the competitive advantage Coal has over Gas (Smaller numbers increase coal’s advantage over gas)

  9. Recommendation • Develop CO2 cost based on an objective (Formula Based) • Gas is more competitive than coal • This results in greater impact on transmission (e.g., more flow on certain lines, relative to expected flow patterns). • Input parameters: • ST-Coal Heat Rate: 10.5 • CC Heat Rate: 7.1 (Summer F-Frame CC) • CO2 Content of Coal: 214.22 lb CO2/MMBtu • For Sub-Bituminous coal (Lignite is 215.44) • CO2 content of Gas: 116.977 lb CO2/MMBtu • Weighted national average • NG prices, annual SoCal border strip • Coal prices, capacity weighted price

  10. Recommendation Continued • What is the competitive advantage gas has over coal? • Compare previous studies to determine what they used? • Issue: We don’t know the coal and gas price used to determine competitive advantage • Arbitrary select a value: 5-10 $/MWh • Use a gas 1.5 HR advantage over coal • With $6.00/MMBtu gas, it’s advantage over coal is $9.00/MWh

  11. Compare 2034 CO2 Cost • Compare WECC recommended CO2 cost for 2034 w/Formula Based Method

  12. Recommendation – Base Case • Preserve the relationship CA has between coal, gas and CO2 cost. Apply this relationship to WECC modeled data: • Calc the ratio of [CA CO2 cost]/[CA Neutral CO2 cost] • Apply the same ratio to WECC modeled Neutral CO2 cost • Calculate CA import cost as an implied heat rate. • Apply the implied heat rate to the appropriate WECC gas price

  13. Questions & Comments Kevin Harris ColumbiaGrid harris@columbiagrid.org (503) 943-4932

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