CPUC Avoided Cost Workshop. Generation Avoided Costs. Organization of Presentation. Goals and Recommended Approach Discussion of Comments Input Data Vs. Methodology Scenarios and Stress Cases. Goals for the Avoided Cost Methodology.
Generation Avoided Costs
Long Run Proxy
Electric Forward data
Gas Futures data
Long Run Marginal Cost (CCGT)
Megawatt Daily sample of long-term forward data for on-peak delivery ($/MWh for August 22, 2003)
Average annual prices derived from on-peak quotes
Use 1999 PX data for on-peak to off-peak ratio
Data SourcesShort-Term Forecast Example
Electric forwards data
Natural gas futures data
“Thin markets are not accurate”
“Forward prices do not reflect full capacity value - Hedge value”
The comparison shows that forward market prices do not differ significantly by market (NYMEX futures vs. Platts bilateral).
With the exception of 1) and 2), it is not clear these alternatives provide a better outcome than E3’s proposed methodology
Data and markets
ApproachGeneration Cost Level: LRMC
1. Most capacity that has come on line or is planned is from gas fired generation: 73% in US; 90% in NWPPC area; 84% in WECC area; and 98% in California.
2. Combined Cycle (CCGT) plants are the dominant technology: 89% of NWPPC area gas fired plants; 94% of planned gas fired plants in WECC area; 87% of the gas fired plants constructed in the last 3 years or planned in California.
3. Combustion Turbines (CT) comprise of 5% of the NWPPC area gas fired generator market. In the WECC area, of the gas fired plants that had their technology specified 3% of the plants planned were CTs. In California, CTs comprise of 13% of the gas fired plants.
Data Sources marketsLRMC- Different Plant Specifications(Data was produced in June, 2002)
Data shows significant differences in costs and performance by plant type
Data Sources marketsLRMC Example Using EIA, EPRI and CEC estimates of CT and CCGT Costs
The levelized cost is fairly close if we use a common set of input assumptions
What really drives the LRMC are the gas and financing forecasting assumptions
Data Sources marketsHourly Shape: Historical Market Data Timeline
Used for Price Shape
and low prices
for small RNS
Electricity crisis: hot summer, gas price spike, emission cost spikes; dry hydro; capacity shortage; rolling blackouts; capped prices
Average of Hourly Values by Month
“Separate electric capacity and energy avoided costs are needed”
“Use of CCGT misstates avoided cost in high usage and low-usage periods”
May be Suitable for DR and Dispatchable DG or Rate Programs
Scenarios Generator TypesHigh Gas Price/High Growth Scenario
Scenario- Higher growth pushes the resource balance year
to 2007, the transition to LRMC begins at 2006 and we have
75th percentile gas prices until 2010 and base case LRMC after.
Resource Balance Year
Electric Forward data from Platts
Long Run Marginal Cost (CCGT)
Transition to LRMC
Base Case Gas
PG&E climate zone 12, weighted average of planning divisions