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Calculating electricity emission factors for SEIP TAG (Oct 08) Mark Dean MED. Overview of methodology. GEM model Determine “least cost” build schedule of new generation plant over the period 2008-2032. Requires assumptions about capital costs, fuel costs, carbon costs and demand growth.
Calculating electricity emission factors for SEIP TAG (Oct 08)Mark Dean MED
MW of new plant required each year, by technology
SDDP model (“SRMC” approach)
LRMC supply curves
Wholesale price forecasts based on LRMC of new entrant plant
Wholesale price forecasts based on SRMC of thermal plant and water values.
Emission factors based on SRMC approach
Emission factors based on LRMC approach
Compare emissions factors from SRMC vs LRMC approaches and decide on the more appropriate method for the first commitment period (2010-2012)
(Tom Halliburton undertook the SDDP modelling, whilst MED undertook the GEM and LRMC modelling.)
We have used the 2008 SOO assumptions where possible, mainly from the "Medium renewables" scenario which was more middle of the road:
The main modifications we have made to the SOO scenario is:
The build schedules, fuel costs and carbon costs from each of the GEM runs then feed through to SDDP. Other specific assumptions we need to make in SDDP:
These baseload tranches are intended to reflect take or pay fuel obligations.
Uses 2008 SOO CapX assumptions (refer to appendices for details)
Gas $9/GJ, Coal $4/GJ, Lignite $1.90/GJ
Includes location factors (ie. all @ Haywards prices)
Thermal plant run as baseload (around 90% utilisation for CCGT, 85% for Coal)
Shows net MW
(ie. reduced by capacity factors)
SRMC = O&M + fuel + CO2 costs
(ie. excludes capital cost recovery)
Appx 300 MW demand growth by 2012 (@ 1.3% pa), and we have a (net) 230MW of geothermal & wind under construction
LRMC delta $MWh = (LRMC for relevant carbon cost scenario at cumulative MW point x) – (LRMC with no carbon cost at cumulative MW point x)
Emissions factor tCO2perMWh = LRMC delta / $CO2perTonne
However, to calculate emissions factor for SEIP TAG, we need to consider the timing of these potential new plant investments
In previous slide we see that up to 1200MW, the carbon inclusive scenarios all have renewables, so the price delta in left chart is very similar for all scenarios up to 1200MW, resulting in relatively high/low emissions factors (note formula above)
Supply curves eventually converge with expensive renewable vs expensive renewable
Discrete increments for geothermal vs geothermal
Reflects more expensive renewables moving down the supply curve and also increased thermal costs
Discrete increments for peaker vs peaker
“Committed” plant (ie. are under construction)
Algorithm for forecasting price in a given year:
Notice below how lumpiness of investment schedule results in peaks/troughs in price forecast curves …..
Wind, expensive geo & some thermal ($40 & $20)
2010& 2011 Energyhedge prices…. are generators already factoring in the more expensive renewable projects? (Could look at setting price forecast based on expectations for the next 2-3 years?)
Post 2020 the carbon inclusive LRMC is mostly in a $100 - $110 band irrespective of the size of carbon cost.
Cheap lignite & coal plant
Coal vs cheap lignite
Coal vs Coal
Still Geo vs Geo but also reflects timing of projects
Geo vs Geo
SRMC analysis based on SDDP runs (refer to Tom Halliburton’s report for more details)
Lumpy investment profile creates peaks & troughs in curves
Increasing gas prices between 2011 & 2024 drive up CCGT SRMC
Is not a predictor of “level” of spot market prices … generators need to make profit also
With a higher % of renewables, there will be additional system costs (providing capacity , transmission, etc) …. these costs are not reflected in LRMC curves
As CO2 cost increases, SRMC price delta tends to increase, however, LRMC delta tends to stay more constant (LRMC price forecasts post 2020 for all carbon inclusive scenarios sit in a relatively constant $100-$110 range – see slides 9&10)
Lumpiness of investment schedule leads to peaks/troughs so averaging over several years has some merits
First few years SRMC > LRMC for most scenarios, but medium/long term is some convergence if we “look through” the peaks/troughs
Variable O&M ($/MWh):
Assumes a USD/NZD exchange rate of 60cents