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An Overview of the Results and Methods of State by zfx67650

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									An Overview of the Results 

and Methods of State RPS 

 Cost-Benefit Projections

                            Ryan H. Wiser

           Lawrence Berkeley National Laboratory

              rhwiser@lbl.gov; 510-486-5474


          EPA RPS Collaborative Conference Call


                               June 7, 2005

 Environmental Energy Technologies Division • Energy Analysis Department
                         Project Overview

•	 Project scope
   –	 Survey of 22 RPS cost impact analyses
   –	 Sample includes state or utility-level analyses completed since 1998
•	 Comparison of key results
   –	   Direct or inferred retail rate impacts
   –	   Renewable deployment by technology
   –	   Secondary cost impacts and benefits
   –	   All results presented are taken from the first year that each RPS hits its
        ultimate target level (e.g. 2013 for New York, 2010 for California)
•	 Comparison of study methodologies
   –	   General modeling approaches
   –	   Renewable resource characterization
   –	   Avoided fossil generation
   –	   Sensitivity scenarios
   –	   Other details

    Environmental Energy Technologies Division • Energy Analysis Department
            RPS Cost-Impact Study Sample:

              Who, When, and Where?

                                                                             Synapse
                                                                               2003
  Tellus 2003
                                                                 CCAP/ICF 2003
                                                                 ICF 2003
                                                  WUC            DPS 2004
                                                  2001                                     SEA 2002
                                                          UCS
                                                          2003

                                                   WUC                B&V 2004           Tellus 2002
                                        UCS
                                                   2000
                                        2001                                           Rutgers 2004
UCS                         PPC 2004
2001                                                                               Synapse 2003
                            UCS 2004
  EC 2004
 (LADWP)      PEG 1998

             AZ PIRG 2005



                                       UCS 2005




       GDS 2001


        Environmental Energy Technologies Division • Energy Analysis Department
         Distribution of Base-Case Impacts on

            Average Retail Electricity Rates

              10
                    9
                    8
Number of Studies




                    7
                    6
                    5
                    4
                    3
                    2
                    1
                    0
                         <-1%     -1%-0     0-1%    1%-2% 2%-3% 3%-4% 4%-5%                   >5%
                                   Change in Average Retail Electricity Rates


                    Environmental Energy Technologies Division • Energy Analysis Department
                                          Relationship Between Incremental RPS

                                             Targets and Retail Rate Impacts

                                          25%
Change in Avg. Retail Electricity Rates




                                          20%                                                        n = 20
                                                                                                     R2 = 0.14
                                          15%

                                          10%

                                           5%
                                                                                                                           Note:
                                           0%                                                                              Error bars
                                                                                                                           reflect
                                          -5%                                                                              alternate
                                                                                                                           scenarios
                                          -10%                                                                             from the
                                                                                                                           base case
                                          -15%
                                                 0%             5%            10%             15%            20%
                                                                      Incremental RPS Target

                                                 Environmental Energy Technologies Division • Energy Analysis Department
                                                 Residential Electricity Bill Impacts:

                                                             Northeast

                                                                                                                $16.8
                                         $8
Average residential bill impact ($/mo)




                                         $6

                                         $4

                                         $2

                                         $0

                                         ($2)

                                         ($4)

                                         ($6)

                                         ($8)
                                                   PA     NY DPS      VT       MD       MA        RI       NJ      NY CCAP   NY ICF
Incremental
                                                    9%      7%       10%       8%        7%       18%      14%          5%    8%
RPS Target:

                                                Environmental Energy Technologies Division • Energy Analysis Department
                                               Residential Electricity Bill Impacts:

                                                    Midwest, Texas, West

                                         $8
Average residential bill impact ($/mo)




                                         $6

                                         $4           Texas and Midwest                           West

                                         $2

                                          $-

                                         $(2)

                                         $(4)

                                         $(6)

                                         $(8)
                                                 TX      IA    WI    MN      HI    CA    CO PPC    WA     CA AZ PEG AZ PIRG
Incremental                                                                                            (LADWP)
                                                 5%      9%    9%     9%     4%    13%    7%       15%    20%    1%   20%
RPS Target:

                                           Environmental Energy Technologies Division • Energy Analysis Department
              Incremental Renewable Deployment by

                     Study and Technology

                   40,000

                   35,000                 Wind               Biomass
                                          Biomass Co-Fire    Landfill Gas
                   30,000                 Hydro              Solar
Generation (GWh)




                                          Geothermal         Other
                   25,000

                   20,000             Wind represents 55% of incremental generation
                   15,000

                   10,000

                    5,000

                      -




                                                                                           RG
                                                             N
                                       A




                                                        IA
                                 I




                                                                        AZ I
                                              PS
                            VT




                                                   PA




                                                                             CS


                                                                                       A
                                                                              C




                                                                                                A
                                                                  I
                                 R




                                                                              H
                                                                 W




                                                                       C G
                                      M




                                                             M




                                                                                      W




                                                                                                C
                                                                          PE
                                              D




                                                                           U
                                                                          PP




                                                                                        PI
                                          Y




                                                                         O

                                                                         O



                                                                                       AZ
                                          N




                                                                       C
                                     Northeast               Midwest               West

                     Environmental Energy Technologies Division • Energy Analysis Department
Many Studies Also Evaluate Potential

          Public Benefits

 Economic

                                          Employment                           7

                                  Gross state product                      6

                          Natural gas price reduction                      6
 Hedge Value




                   Wholesale electric price reduction                  5

                             Natural gas hedge adder          2

                             CO2 emissions reduction                                            13
 Environmental




                 Criteria pollutant emissions reduction                        7

                                 Water use reduction          2

                                                      Num ber of studies considering each scenario





 Environmental Energy Technologies Division • Energy Analysis Department
      Four General Modeling Approaches

              Have Been Used

Four broad categories:
™ Category A: Linear spreadsheet                    Category A                                 Category D
  model of both RE + avoided utility cost           (14 studies)                               (6 studies)

™ Category B: Linear spreadsheet
  model of RE + generation dispatch                          AZ PIRG, AZ PEG,      CO UCS, NJ, NY
  model of avoided utility cost with base-                  CA, CA LADWP, CO
                                                            PPC, HI, IA, MD, MN,
                                                                                    CCAP, NY ICF,
                                                                                       RI, TX
  case resource mix                                          NE, PA, VT, WA, WI


™ Category C: Linear spreadsheet                                                          NY
                                                                                                    Category C
  model of RE + generation dispatch                                                 MA
                                                                                         DPS
                                                                                                     (1 study)
  model of avoided utility cost with                                                     Category B
  implied RPS mix                                                                         (1 study)

™ Category D: Integrated energy model

      Environmental Energy Technologies Division • Energy Analysis Department
                     Estimating the Busbar Cost of 

                          Renewable Energy

   Three major components of renewable generation cost estimation:

How much is                                     How much does it                      How much will it cost
available?                                      cost now?                             in the future?
Renewable resource                              Current cost and                      Future cost and
availability assessment                         performance of                        performance of
                                                renewable technologies                renewable technologies
 Sources of Resource Availability Assumptions    Sources of Busbar Cost Assumptions   Do Studies Assume Technology Learning?


                                                                                                    No
                                                                                                    (2)

                             None
           Primary
                              (5)                   Prim ary
          research
                                                   research
              (6)                                                        Govt
                                                       (8)
                                                                        Source
                                                                         (11)

        Non-govt             Govt                                                                           Yes
         source             Source                                                                          (19)
           (4)                (6)
                                                       Non-govt
                                                        source
                                                          (2)




         Environmental Energy Technologies Division • Energy Analysis Department
 Many Studies Appropriately Consider the

Secondary Costs of Renewable Generation

                                 Number of
 Cost Variable                                 Studies
                                  studies
                                               AZ PEG, CO PPC, CO UCS, IA, MD, MA,
 Capacity value                      13
                                               MN, NY DPS, NY ICF, PA, RI, TX, WI
 Time differentiation of                       CA, CO UCS, MA, NJ, NY CCAP, NY
                                     10
 renewable generation                          DPS, NY ICF, RI, TX, WI
                                               CA, CA LADWP, CO PPC, CO UCS, IA,
 Transmission cost                   10
                                               MA, MN, TX, VT, WI
                                               CO PPC, CO UCS, IA, MN, NJ, TX, WA,
 Integration cost                     8
                                               WI

 Admin. & transaction cost            4        CA, MA, WA, WI



      Environmental Energy Technologies Division • Energy Analysis Department
   Methodologies for Estimating Avoided

      Costs Vary Among the Studies

Five major categories:
1. Conventional fossil fuel 
                                                 Other
                                                                            2 studies
   plant proxy
                                              Integrated
                                                                            AZ PEG,
                                                                               WA
                                                            energy model

2. Dispatch simulation                                        6 studies
                                                           CO UCS, NJ, NY
   model w/o RPS resources            Dispatch
                                     simulation
                                                           CCAP, NY DPS,
                                                                              Conventional plant
                                       w/RPS                                         proxy

3. Dispatch simulation               resources
                                       1 study
                                                                                   9 studies
                                                                              CA, CA LADW P, CO
   model w/RPS resources              NY DPS                                  PPC, HI, IA, MD, MN,
                                                                                    PA, VT

4. Integrated energy model

                                     Dispatch simulation
                                     w/o RPS resources
                                          3 studies
5. Other                               AZ PIRG, MA, W I




     Environmental Energy Technologies Division • Energy Analysis Department
      Scenario Analysis Is Often Used to

         Bound the Possible Impacts

       Fossil fuel price uncertainty                                           8

      Renew able technology cost                                          7
  Production Tax Credit availability                                      7

        Alternate RPS target levels                                  6
             Availability of imports                            5
Wholesale market price uncertainty                              5

   Financing/contract assumptions                               5
                 Resource eligiblity                       4

Demand for RE from other sources                 2
 Maximun compliance penalty cost                 2
                      Load grow th          1
               Carbon credit value          1

                                       Num ber of studies considering each scenario


     Environmental Energy Technologies Division • Energy Analysis Department
                              Conclusions

•	 The cost of RPS policies is typically projected to be relatively modest
    –	 less than 5% increase in rates and less than $5/month for an avg. household,
       with cost savings a possibility; high end of range typically from the Northeast
•	 Wind power expected to serve 55% of the RPS-driven RE demand
•	 Recent trend toward studies that forecast not just costs and
   environmental benefits, but also macroeconomic and hedge benefits
•	 Studies use a variety of methods and data sources to calculate costs
   and benefits: a standard study “template” has not yet emerged
•	 Sophistication and detail of cost-impact analysis is largely a function of
   available funds and the purposes of the study
    –	 Not entirely clear that more sophisticated models necessarily improve accuracy
•	 Assumptions for primary and secondary costs and benefits likely to be
   more important than what model is used
    –	 natural gas price forecast, whether PTC is assumed to exist, projected
       transmission costs, supply curves for renewable energy

     Environmental Energy Technologies Division • Energy Analysis Department
 Some Possible Areas of Improvement…

•	 Improved Treatment of Transmission Costs: these costs are
   often poorly understood and imprecisely modeled
•	 Competing RPS Requirements: consider potential RPS policies
   in nearby states, and impact on RE resource supply and cost
•	 Coal as the marginal price setter: at high natural gas prices,
   need to consider possibility that RE will increasingly offset coal
•	 Greater Use of Scenario Analysis: natural gas and wholesale
   price forecasts, PTC availability
•	 Consideration of Future Carbon Regulation: consider impacts
   in the event that future carbon regulations are established
•	 More Robust Treatment of Public Benefits: in particular,
   employment, economic development, and hedge benefits

     Environmental Energy Technologies Division • Energy Analysis Department
                RPS Cost Studies - Northeast

State Principal Author(s)     Year    Title
 MA    Sustainable Energy     2002    Massachusetts RPS: 2002 Cost Analysis Update – Sensitivity
       Advantage & LaCapra            Analysis
 MD    Synapse                2003    The Maryland Renewable Portfolio Standard: An Assessment of
                                      Potential Cost Impacts
 NJ    Rutgers CEEEP          2004    Economic Impact Analysis of New Jersey’s Proposed 20%
                                      Renewable Portfolio Standard
 NY    Center for Clean Air   2003    Recommendations to Governor Pataki for Reducing New York
       Policy/ICF                     State Greenhouse Gas Emissions
 NY    ICF                    2003    Report of Initial Analysis of Proposed New York RPS
 NY    NY DPS                 2004    Renewables Portfolio Standard Order Cost Analysis
 PA    Black & Veatch         2004    Economic Impact of Renewable Energy in Pennsylvania
 RI    Tellus                 2002    Rhode Island RPS Modeling
 VT    Synapse                2003    Potential Cost Impacts of a Vermont Renewable Energy Portfolio
                                      Standard


      Environmental Energy Technologies Division • Energy Analysis Department
             RPS Cost Studies – Rest of U.S.

State      Principal Author(s)        Year   Title
  AZ       AZ PIRG Education Fund     2005   Renewing Arizona’s Economy: The Clean Path to Jobs and Economic Growth
  AZ       Pacific Energy Group       1998   Solar Portfolio Standard Analysis
  CA       UCS                        2001   Powering Ahead: A New Standard for Clean Energy and Stable Prices in California

   CA      Environment California     2004   Clean and Affordable Power: Updated Cost Analysis for Meeting a 20% Renewables
(LADWP)                                      Portfolio Standard by 2017 at LADWP
  CO       Public Policy Consulting   2004   The Impact of the Renewable Energy Standard in Amendment 37 on Electric Rates in
                                             Colorado
  CO       UCS                        2004   The Colorado Renewable Energy Standard Ballot Initiative: Impact on Jobs and the
                                             Economy
  HI       GDS Associates             2001   Analysis of Renewable Portfolio Standard Options for Hawaii

  IA       Wind Utility Consulting    2000   Projected Impact of a Renewable Portfolio Standard on Iowa’s Electricity Prices

  MN       Wind Utility Consulting    2001   Projected Impact of a Renewable Portfolio Standard on Minnesota’s Electricity Prices
  NE       UCS                        2001   Strong Winds: Opportunities for Rural Economic Development Blow Across Nebraska
  TX       UCS                        2005   Increasing the Texas Renewable Energy Standard: Economic and Employment Benefits

  WA       Tellus                     2003   Economics of a Washington Energy Portfolio Standard: Effects on Ratepayers

  WI       UCS                        2003   A Study to Evaluate the Impacts of Increasing Wisconsin’s RPS



          Environmental Energy Technologies Division • Energy Analysis Department

								
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