SEDS Electric Sector

1. SEDS Electric Sector SEDS Review James Milford Walter Short 5/7/09 NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy operated by the Alliance for Sustainable Energy, LLC

2. Electric Sector in Context of SEDS Converted Energy Primary Energy Macroeconomics End-Use Biomass Biofuels Buildings Coal Electricity Heavy Transportation Macroeconomics Natural Gas Hydrogen Industry Oil Liquid Fuels Light Vehicles

3. Electric Sector Data Flow Outgoing Data Incoming Data Macroeconomics Macroeconomics Interest Rate Capital Investments Biomass Biomass Biomass Price Biomass Demand Coal Coal Coal Price Coal Demand Natural Gas Natural Gas Natural Gas Price Electricity Natural Gas Demand Resid. Fuel Oil Demand Residual Fuel Oil Price Liquid Fuels Liquid Fuels Peak Load Buildings Buildings Base Load Heavy Transportation Heavy Transportation Electricity Demand Electricity Price Industry Industry CO2 Content of Electricity Light Vehicles Light Vehicles CO2 Produced

4. Major Components of Electric Sector Capacity Expansion GW Electricity Prices $/kWh Generator Dispatch TWh • Capacity – multi-stage logit based on LCOE • Generation – logit based on operation costs • Prices – based on rate base, fuel, O&M, transmission, distribution, and general administration costs

5. Major Assumptions • Spatially represented by a national region • Temporally represented by annual decision making • Transmission is not modeled • Storage and load shifting is not modeled • Hydro, off-shore wind, MSW, landfill gas, and distributed PV* plants cannot compete for market share • Static electricity price multipliers for customer types • Static load shape • No time-of-day pricing of electricity * Distributed PV is modeled in the buildings sector

6. Decision Flow in Electric Sector Installed Plant Capacity GWh/yr $/kWh Dispatch Plants to Meet Demand Electicity Price Projection of Next Year’s Demand Electricity Demand MW/yr New Capacity Additions Plant Retirements Market Share Levelized Cost of Energy

7. Representing National Load Gigawatts Peak - 1% of annual energy, 4% maximum annual capacity factor Peak/Intermediate - 8% of annual energy, 33% max annual c.f. Intermediate - 16% of annual energy, 73% max annual c.f. Base - 75% of annual energy, 98% max annual c.f. 0 8760 Hours

8. Factors that Affect Capital Cost over Time R&D Improvements First-of-a-kind Multiplier $/kW Capital Cost after Factors Base Capital Cost Learning-by-doing Improvements Construction Period Costs Multiplier Initial Uncertainty Resource Quality Multiplier Tax and Finance Multiplier* Increases Increases/Decreases Decreases Effect on Capital Cost * Investment tax credits are included in this multiplier

9. Levelized Cost of Energy in a Given Year $/kWh • In general, technologies are competed based on their levelized cost of energy in each dispatch period. • Variable resource tech’s are non-dispatchable, so their LCOE’s are equal in each dispatch period.

10. Market Share Algorithm Overview LCOE Increase LCOE for rapid growth Market share for new additions (undamped) MW/yr Market share for new additions (damped) Total Capacity Additions Average weighted LCOE Market share for new additions (damped) Market share for new additions (undamped) Increase LCOE for rapid growth LCOE • Dispatchable Technologies: coal, IGCC, natural gas, nuclear, biomass, geothermal • Variable Resource Technologies: wind, solar

11. Components of Electricity Price 2007$/kWh -General administration costs and transmission and distribution costs are static throughout the simulation

12. Sources of Data • Technology Costs: • Annual Energy Outlook 2008 • GPRA assumptions • Existing Units and Technology Performance: • Generator Availability Report (GAR) • EPA EGRID2006 database • EIA Existing Units database 2005 and 2006 • Annual Energy Outlook 2008 assumptions • Annual Energy Review • Supply/Resource Curves • NREL’s ReEDS (formally WinDS) model • NREL’s geothermal program • R&D Improvements • PDS Expert Elicitations (from the Portfolio Decision Support program)

13. Results • Scenarios • Base Case – no carbon regulation, no national RPS, no nuclear policy • Carbon Cap – CO2 emissions reduced to 4000 tonnes by 2035 • High Natural Gas Price – price increases to $50/MMBtu by 2030 • RPS – 25% national renewable standard by 2025 • Target R&D – increased R&D funding levels for Geothermal, Wind, CSP, and PV technologies • Policy – possibility of carbon cap, RPS, and nuclear policy

14. Generation – Deterministic Base Case TWh

15. Generation – Stochastic Mean Base Case TWh

16. Change in Generation from Base Case for Several Cases – Deterministic 2030 TWh

17. Change in Generation from Base Case for Several Cases – Deterministic 2050 TWh

18. Change in Generation from Base Case for Several Cases – Stochastic 2030 TWh

19. Change in Generation from Base Case for Several Cases – Stochastic 2050 TWh

20. Generation from Renewable Technologies in 2030 for Several Scenarios Probability TWh

21. Generation from Renewable Technologies in 2050 for Several Scenarios Probability TWh

22. Cumulative Electric Sector CO2 Emissions (2005-2030) for Several Scenarios Probability Billion tonnes CO2

23. Cumulative Electric Sector CO2 Emissions (2005-2050) for Several Scenarios Probability Billion tonnes CO2

24. Electricity Price - Deterministic 2007$/kWh

25. Electricity Price – Stochastic Mean 2007$/kWh

26. Cumulative Capacity Additions (2005-2050) – Policy Uncertainty Case Probability GW

27. Issues and Future Work • Electricity Storage • Shifting loads from peak to base • Facilitating wind and PV • Transmission • Regional Considerations