Wind and Other Renewable Assumptions

in EPA’s 2008 IPM Base Case

Elliot Lieberman and Serpil Kayin

Clean Air Markets Division
U.S. EPA Office of Air and Radiation
NWCC Environmental Costs and Benefits Workshop
October 8, 2008
 Outline of Presentation
Key Assumptions for Potential (New) Renewable Capacity in IPM
• Wind
– Cost, performance, and penetration assumptions
– Potential wind resource base
– Capacity credits
• Cost and performance assumptions for
– Solar
– Geothermal
– Landfill gas
– Biomass (standalone and co-firing)
• Tax incentives for renewables
• Renewable portfolio standards
• Issues for future consideration
 What is IPM
• The Integrated Planning Model (IPM) is a long-term
capacity expansion and production costing model for
analyzing the electric power sector
• It is a multi-regional, deterministic, dynamic linear
programming model
• IPM finds the least-cost solution to meeting electricity
demand subject to environmental, transmission, fuel,
reserve margin, and other system operating constraints
• Developed by ICF International and populated with
assumptions specified by each client
• Used by U.S. EPA to project the impact of emission
policies on the U.S. electric power sector
Wind Generation Assumptions

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Cost, Performance and Penetration Assumptions for Potential
Wind Technology

The EPA Base Case explicitly models onshore wind units. Off shore wind units are
not modeled. The wind technology assumptions modeled in the EPA Base Case
are primarily based on AEO 2008.

The wind resources are categorized into 3 wind classes, 4, 5 and 6; and 5 cost
classes ranging from 1 (least expensive) to 5 (most expensive).

Wind generation profile assumptions that specify hourly generation patterns for a
representative day by region, season and wind class are based on AEO 2008.
These generation profiles define the dispatch of these units.

The EPA Base Case includes a wind penetration constraint for each model region,
which restricts each region’s total wind generation up to 20 percent of total
generation.

Base cost assumptions for new (potential) wind generation:
Cost Parameter
Capital Cost (2006$/kW) 1,707
Fixed O&M Cost (2006$/kW-yr) 29.48
Variable O&M Cost (2006$/MWh) 0.0
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Potential Wind Resource Base

The assumptions regarding the wind resource base were obtained from PERI
(Princeton Economic Research Inc.). The table below shows the wind resource base
modeled by NEMS region in the EPA Base Case.

Available Wind Resource Incremental Capacity (MW) in Each Cost Multiplier Step

NEMS Region 1X 1.2X 1.5X 2X 3X Total

ECAR 484 484 329 329 310 1,934

ERCOT 5,054 9,999 5,118 3,803 6,132 30,107
MAAC 245 245 167 167 157 981
MAIN 980 980 667 667 627 3,922
MAPP 6,068 76,443 265,185 526,490 1,066,530 1,940,716
New York 913 913 621 621 585 3,654
New England 1,804 2,556 1,482 1,482 1,395 8,720
Florida 0 0 0 0 0 0
SERC 870 870 592 592 557 3,482
SPP 6,423 42,468 89,049 207,712 421,577 767,229
NWP 11,271 41,997 36,824 199,846 405,747 695,685
RA 2,934 9,009 3,718 55,892 11,0581 182,135
California 6,404 6,404 4,355 4355 4,099 25,616
Total 43,452 192,369 408,107 1,001,955 2,018,297 3,664,180
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Wind Technology – Capacity Credit

For intermittent technologies such as wind and solar units, their contribution towards regional
reserve margin requirements is less than 100%. The reserve margin contribution for such
technologies is estimated based on a unit’s generation profile.

First, the hourly load for the model region is sorted in descending order (highest to lowest). Next,
the average generation, derived from the generation profile, for the top 30% of the hours is
calculated.

The resulting value, expressed as a percent of the unit’s rated output capacity is used as the
reserve margin contribution/ capacity credit for the unit. The table below shows the national
average reserve margins by wind class, modeled in the EPA Base Case.

Wind Class Reserve Margin Contribution (%)

Wind Class 4 32

Wind Class 5 39

Wind Class 6 46

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Solar Generation Assumptions

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Cost and Performance Assumptions for Potential Solar
Technology Modeled in EPA Base Case

The EPA Base Case models two types of solar technologies: Solar
Thermal and Solar Photovoltaic.

The cost characteristics for the potential solar technologies are obtained
from EIA’s AEO 2008 and are shown in the table below.

Capital Costs FOM Costs VOM Costs

(2006$ /kW) (2006$ /kW) (mills /kWh)

Solar PV 4,915 11.37 0

Solar Thermal 3,004 55.24 0

Solar generation profile assumptions that specify hourly generation

patterns for a representative day by region and season are based on AEO
2008. These generation profiles define the dispatch of these units.

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Geothermal Generation
Assumptions

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 Performance and Unit Cost Assumptions for Geothermal
Technologies

Geothermal technology assumptions in the EPA Base Case are site specific
and are based on EIA’s AEO 2008.

There are 88 sites in total. The ranges of the site specific assumptions are
summarized below.

Heat Rate (Btu Capital Costs FOM Costs VOM Costs Total Capacity
Technology
/kWh) (2006$ /kW) (2006$ /kW-yr) (mills /kWh) (MW)

29,660 –
Geothermal 1,049 – 13,352 147 - 212 0 8,963
397,035

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Landfill Gas Generation
Assumptions

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Cost Performance and Assumptions for Landfill Gas
Technology

Potential landfill gas technology assumptions are obtained from AEO 2008.

The potential is divided into 3 categories: High, Low and Very Low
methane producing landfills.

Heat Rate (Btu Capital Costs FOM Costs VOM Costs

Resources (MW)
/kWh) (2006$ /kW) (2006$ /kW) (mills /kWh)

Landfill
13,648 1,799 111 0.01 653
Gas (High)

Landfill
13,648 2,266 111 0.01 581
Gas (Low)

Landfill Gas
13,648 3,489 111 0.01 3,819
(Very Low)

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Biomass Generation Assumptions

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Biomass Technologies Modeled in EPA Base Case

Heat Capital FOM VOM

The EPA Base Case 2008 models Rate Costs Costs Costs

Two types of standalone biomass (Btu (2006$ (2006$ (mills
technologies: /kWh) /kW) /kW) /kWh)
• Biomass conventional direct fired
boiler (prior to 2020) Conventional
Direct Fired
• Biomass gasification combined 13,500 3,000 83.0 11.3
Boiler
cycle (from 2020 onward) (before 2020)

Biomass co-firing in coal fired units Advanced
• Cost characteristics shown in BGCC 9,800 2,600 47.0 8.6
adjacent table (2020- )
• Limited to maximum of
•10% of a coal unit’s net Biomass Cofiring Assumptions
capacity coming from biomass Boiler Type All
and
• 50 MW of such capacity at Plant Size (MW) 600
any given facility Biomass Cofiring Size (MW) 50

The biomass supply curves used in Capital Cost (2006$/kW1) 178
the EPA Base Case are obtained
from AEO 2008. Fixed O&M Cost (2006$/kW) 7.4

Maximum Biomass Co-firing

Rate possible 10% / 50MW at a facility
1Per 15
kW of biomass power
 Tax Incentives
for Renewable Technologies

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Tax Incentives for Renewable Technologies

Production Tax Investment Tax

Technology Depreciation
Credits (PTC)1 Credits (ITC)

Wind - - 5 year MACRS2

Solar - PV - 10% 5 year MACRS

Solar - Thermal - 10% 5 year MACRS

Geothermal - 10% 5 year MACRS

Landfill - - 5 year MACRS

Biomass - - 5 year MACRS

1No PTC is assumed in EPA Base Case 2008 since the first year modeled is 2012 and existing PTC provisions expire
prior to 2012.
2Modified Accelerated Cost Recovery System

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Renewable Portfolio Standards

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 State Renewable Portfolio Standards

Renewable portfolio standards (RPS) require utilities to use

renewable energy or renewable energy credits (RECs) to account
for a certain percentage of their retail electricity sales – or a certain
amount of generating capacity – within a specified timeframe.

More than half of all U.S. states have established a RPS.

The level of RPS requirements and the technologies applicable to

meet the RPS requirements vary by state.

The RPS assumptions in the EPA Base Case are based on AEO
2008.

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Assumptions for Renewable Portfolio Standards (RPS)
by NEMS Region

Year 2012 2015 2020 2025 2030

NEMS Region % of Generation Unless Otherwise Indicated

ERCOT 3.9 5.0 5.0 5.0 5.0
MAAC 7.3 9.4 13.1 13.3 13.3
MAIN 3.7 5.7 8.9 12.1 12.1
MAPP 6.2 8.5 10.0 11.1 11.1
New England 6.8 8.3 11.1 11.5 11.5
SERC 0.5 0.9 1.7 1.9 1.9
NWP 4.1 6.6 11.4 12.3 12.3
RA 3.0 4.2 6.0 6.9 6.9
CNV 0.0 12.0 11.0 10.0 10.0
New York 1 4,745 5,461 5,615 5,660 5,793
Source: Table 75. Aggregate Regional RPS Requirements http://www.eia.doe.gov/oiaf/aeo/assumption/pdf/renewable.pdf
1. Figures represent GWh.

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Issues for Future Consideration

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 Issues for Future Consideration

Modeling wind classes 3 and 7.

Modeling offshore wind.

Revising methodology for estimating capacity credits for intermittent

technologies such as wind and solar.

Re-evaluating capital cost assumptions for renewable (and

conventional) generating technologies in view of escalating costs in
the current market.

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