Capital Cost Recommendations for 2009 TEPPC Study Energy and Environmental Economics January 6,...

Capital Cost Recommendations for 2009 TEPPC Study

Energy and Environmental Economics

January 6, 2010

2January 6, 2010

About E3

Regulatory/Policy EE avoided costs for CA utilities

Calculate MPR for CPUC

33% RPS and GHG studies for CPUC

Advising CPUC on long-term planning

CA Solar Initiative cost-effectiveness

EPA National Action Plan for EE

2007 Idaho Energy Plan

Utility WEIL Group “Towards 2020” study of

renewables and transmission

BC-California renewable energy partnership

Advising PG&E on Diablo relicense

Assisting HECO with Feed-in Tariff

Expert testimony for CAISO on Sunrise line

Economic assessment of HPX line

IPPs/Technology Companies E3 clients include BrightSource Energy, First Solar, and Hydrogen Energy International

Analysis of market opportunities for alternative technologies such as distributed PV, energy storage, electric vehicles and demand response for developers and VC clients

E3’s expertise has placed us at the nexus of planning, policy and markets in California and the West

3January 6, 2010

WEIL Group 2009 TEPPC Study Request PROMOD only looks at variable costs

WEIL Group is interested in incorporating capital costs for 2009 plan

Retained to E3 to assist TEPPC in:

Developing resource cost and performance resource cost and performance assumptionsassumptions to include in all of the cases modeled.

Developing transmission costing assumptionstransmission costing assumptions to include in all cases modeled.

Developing assumptions regarding the cost of integratingcost of integrating intermittent renewables.

Defining the methodology for incorporating fixed costsmethodology for incorporating fixed costs into study outputs.

WEIL Group 2009 Study Request“[S]tudies should include appropriate analyses needed to understand the impact on electricity costs… The WEIL has completed and can share study results and assumptions performed for us by the consulting firm E3.”

4January 6, 2010

Methodology for Incorporating Capital Costs Need to incorporate fixed costs

into WECC-wide annual cost metric in order to provide meaningful comparison among cases

Metric: Partial WECC-wide Revenue Requirement

Does not incorporate fixed costs of existing facilities

Single-year (2019) “snapshot” based on annualized costs

WECC-Wide Revenue Requirement

+ Existing generation variable costs

+ New generation variable costs

+ New generation fixed costs

+ Intermittent resource integration costs

+ Cost of new transmission

= Total WECC Revenue Requirement

5January 6, 2010

Pro Forma Model

E3 developed a pro forma financing modelE3 developed a pro forma financing model based on recent E3 models:

CPUC 33% RPS Implementation Analysis

Hawaiian Electric Company solar procurement

CPUC’s California Solar Initiative cost-effectiveness study

WECC Staff will operate the modelWECC Staff will operate the model for 2009 Study

Model outputs annualized fixed costs for each resource type based on capital cost and financing inputs

Separate module calculates cost of new transmission facilities based on assumed configurations and distances

Simple, publicly available spreadsheet model

Resource Cost and Performance

7January 6, 2010

Resource Costing Assumptions

Survey of publicly-available data sourcesSurvey of publicly-available data sources

WREZ Project

RETI/CPUC 33% Implementation Analysis

CEC Cost of Generation model

Northwest Power and Conservation Council

U.S. Energy Information Administration

E3 developed high-level assumptionsE3 developed high-level assumptions based on survey results

Overnight $/kW, IDC, fixed O&M costs in $/kW-yr., etc.

E3 also recommends regional cost multipliersregional cost multipliers to reflect differences in land, labor and taxes

8January 6, 2010

Technologies Covered in Initial Survey

Biomass: combustion (stoker boiler)

Biogas – Landfill Gas

Biogas – Other (dairy, food waste)

Combined-Cycle Combustion Turbine (CCGT)

Simple Cycle Combustion Turbine (CT)

CHP < 5 MW

CHP > 5 MW

Coal steam (supercritical boiler)

Coal IGCC with carbon capture and sequestration

Nuclear

Geothermal

Hydro – small (e.g., <50 MW)

Hydro – large

Hydro – upgrade

Solar thermal – trough

Solar thermal – trough with storage

Solar PV – fixed axis

Solar PV – tracking

Wind

Wind – offshore

9January 6, 2010

Resource Costing Data Gathered

Data required for TEPPC study:

Capital Costs

Financing assumptions

Annualized fixed costs in 2019

Additional data gathered:

Fuel Cost

Heat Rate

Capacity Factor

Treatment of O&M is somewhat complicated:

Split of O&M costs between fixed and variable is inconsistent across sources of resource costing data

WECC PROMOD runs already include assumptions about variable O&M

E3 calculated “Consolidated O&M” to ensure that recommendations for fixed O&M are consistent with WECC’s variable O&M assumptions

10January 6, 2010

Biomass

SourceCapacity Factor (%)

Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)

Fuel Cost($2009/MMBtu)

Heat Rate

(Btu/kWh)

CEC COG

(Fluidized Bed)85% $3,580 $99.5 $4.5 $17.8 $2.00 10500

CEC COG

(Stoker Boiler)85% $2,909 $160.1 $7.0 $28.5 $2.00 11000

NPCC 80% $4,289* $193.0 $4.0 $31.5 $2.00 15500

WREZ 85% 3,400-6,000 N/A N/A 24 to 52 1.4 to 2.414,000-15,780

33% RPS 80% $4,248 $82.8 $11.1 $22.9 $2.49 14749

RETI Phase 1A 80% 3,000-4,500 $83.3 $11.0 $22.9 0 to 314,000-15,800

Recommended 85%$4,250

Low: $3,400High: $6,000

$155$4

PROMOD(Biomass)

$24.8$1.105PROMOD

(Wood)14800

*Only ”Overnight” costs reported by NPCC and EIA

11January 6, 2010

Biogas – Landfill Gas


Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate

(Btu/kWh)

CEC COG 75% $1,984* $21.4 $16.1 $19.3 N/A 11566

NPCC 85% $2,520* $27.9 $20.4 $24.1 $2.00 10060

33% RPS 80% $3,211 $107.9 $0.0 $15.4 $1.72 11566

RETI Phase 1A 80% 1200 - 2000 $0.0 $17.1 $17.1 1 to 2 13500

EIA 90% $2,651* $119 $0 $15.1N/A

13648


Low:$2,500High:$3000

$130 $0Recommended

$18.6$2.221PROMOD

(Bio)12070


12January 6, 2010

Biogas - Other


Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate

(Btu/kWh)

CEC COG(AD Dairy)

75% $5,522 $53.6 $16.1 $24.2 $0.00 12407

CEC COG(AD Food)

75% $5,150 $150.0 -$60.0 -$37.2 $0.00 17060

NPCC(Animal manure)

85% $5,362* $48.3 $16.1 $22.6 $0.00 10250

RETI Phase 1A(An. Digestion)

80% $4000-$6000 $17.1 1 to 3 N/A $1 to $3 13000


Low: $5000High: $6000

$165 $0Recommended

$23.5 $0Recommended

13200


Note: WECC does not currently have a Biogas-Other characterization, so the variable O&M and fuel costs and heat rate are E3 recommendations should a characterization be needed in the future.

13January 6, 2010

Combined Cycle CT (CCCT)


Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate

(Btu/kWh)

CEC COG(CCCT - no duct)

75% $1,346 $8.6 $3.2 $4.5 $6.56 6940

CEC COG(CCCT - duct)

70% $1,329 $8.3 $3.2 $4.5 $6.56 7050

CEC COG(CCCT – Advanced)

75% $1,225 $7.1 $2.9 $4.0 $6.56 6470

NPCC(CCCT)

90% $1,244* $15.0 $1.8 $3.7 $6.75 7110

33% RPS(CCCT)

92% for planning, 65% for dispatch

$1,160 $11.0 $4.9 $6.9 $7.13 6924

EIA(Conventional)

87% $1,003* $13.0 $2.2 $3.9 N/A 7196

EIA(Advanced)

87% $988* $12.2 $2.1 $3.7 N/A 6752


Low: $1,000High:$1,500

$8$4.9

PROMOD (CC G+H)

$6.0$7.09

PROMOD (Gas AVG)

7000


14January 6, 2010

Combustion Turbine – Simple Cycle

SourceCapital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate(Btu/kWh)

CEC COG(CT 49.9MW)

$1,484 $23.9 $3.9 $43.0 $6.56 9266

CEC COG(CT 100MW)

$1,416 $17.4 $3.9 $32.3 $6.56 9266

CEC COG(Advanced cycle)

$991 $13.5 $3.6 $25.5 $6.56 8550

NPCC(Aeroderivative)

$1,126 * $15.0 $4.3 $28.8 $6.75 9370

NPCC(Heavy duty)

$654* $4.3 $1.1 $8.1 $6.75 11960

33% RPS(CT)

$846 $15.1 $5.0 $29.6 $7.13 9600

EIA(Conventional)

$696* $12.6 $3.7 $24.3 N/A 10810

EIA(Advanced)

$661.0 $11.0 $3.3 $21.2 N/A 9289

Recommended$1,100Low: $900

High: $1,200$14

$5PROMOD

(All Other CT)$27.8

$7.09PROMOD (Gas AVG)

9300

*Only ”Overnight” costs reported by NPCC and EIA** Consolidated O&M calculated using a 7% capacity factor for all sources

15January 6, 2010

CHP < 5 MWSource

Capacity Factor (%)

Capital Costs

($2009/kW)

Fixed O&M($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate(Btu/kWh)

33% RPS 68% $3,709 $0.0 $13.9 $13.9 $7.13 8907


Low:$3,500High:$3,900

$0.0 $14Recommended

$14$7.09

PROMOD (Gas AVG)

8910


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate(Btu/kWh)

33% RPS 85% $1,600 $0.0 $4.2 $4.2 $7.13 6918


Low:$1,400High:$1,600

$0.0 $4.5Recommended

$4.5$7.09

PROMOD (Gas AVG)

6920

CHP > 5 MW

16January 6, 2010

Coal Steam


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate(Btu/kWh)

NPCC 90% $3,753* $64.3 $2.9 $11.1 $2.10 9000

33% RPS 85% $3,270 $26.0 $4.3 $7.8 $1.99 8844

EIA 85% $2,146* $28.7 $4.8 $8.6 N/A 9200


Low:$3,000High:$4,000

$50$3

PROMOD (Coal AVG)

$9.6$1.619

PROMOD (Coal AVG)

9000


17January 6, 2010


Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate(Btu/kWh)

33% RPS 85% $6,278 $43.0 $4.2 $10.0 $1.99 9713

EIA 87% $3,496* $46.1 $4.4 $10.5 N/A 8307


Low:$6,000High:$11,000

$25 $10Recommended

$13.8$1.619PROMOD

(Coal AVG)12000

*Only ”Overnight” costs reported by EIA

** Cost of sequestration is included in the Fixed O&M costs

Coal IGCC with Carbon Capture and Sequestration

Note: WECC does not currently have a IGCC characterization, so the variable O&M costs and heat rate are E3 recommendations should a characterization be needed in the future.

18January 6, 2010

NuclearSource

Capacity Factor (%)

Capital Costs

($2009/kW)

Fixed O&M

($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid.O&M

($2009/MWh)


Heat Rate

(Btu/kWh)

CEC COG 86% $6,039 $147.7 $5.3 $24.8 $0.63 10400

NPCC 90% $5,898* $96.5 $1.1 $13.3 $0.73 10400

33% RPS 85% $6,122 $64.1 $0.5 $9.1 $0.93 10400

EIA 90% $3,459* $93.9 $0.5 $12.4 N/A 10434

Florida Power & Light Company (1)

$5,500 - $8,182

Progress Energy (1) $7,500

SCE&G/Santee Cooper (1)

$5,682

Georgia Power (2) $6,447

Moody’s (3) $7,500


Low: $6,500High: $8,000

$70$6

PROMOD(Nuclear)

$15.4$0.6

PROMOD(Uran)

10400

(1) Source: Nuclear Energy Institute (NEI) (12/2009)(2) Source: World Information Service on Energy. (Cooper, Mark) (08/2009)


19January 6, 2010

Geothermal


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG(Binary)

90% $4,846 $47.4 $4.6 $10.6

CEC COG(Dual Flash)

94% $4,403 $58.4 $5.1 $12.1

NPCC 90% $5,147* $187.7 $4.8 $28.6

WREZ 80%-90% 4,140-13,400 N/A N/A 27 to 42

33% RPS 87% $4,157 $159.5** $30.1** N/A

RETI Phase 1A 70%-90% 3000 - 5000 N/A 25 - 30 N/A

EIA (cost of least expensive plant)

90% $1,783.9* $171.7 $0.0 $21.8


Low:$4,000High:$6,750

$180$5

PROMOD(Geothermal)

$27.8

*Only ”Overnight” costs reported by NPCC and EIA**33% RPS Calculator reports both fixed and variable O&M values, but uses only one value for each site depending on the original data source.

20January 6, 2010

Hydro - Small


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 30% $1,882 $17.6 $3.5 $10.1

NPCC 50% $3,217* $96.5 $0.0 $22.0

WREZ Assumptions 40% -60% 700 - 5300 N/A N/A $3 - $13

33% RPS 33% $3,099 $13.2 $3.3 $7.9

RETI Phase 1A 40% - 60% $2500 - $4000 5 to 25 5 to 6 N/A

Recommended 35%$3,300Low:$500

High:$4,000$25 $0

PROMOD$8.2


21January 6, 2010

Hydro - Large


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

WREZ Assumptions 40% to 60% $700 - $5300 N/A N/A 3 to 13

33% RPS 45% $3,099 $13.2 $3.3 $6.7

EIA 65% $2,338* $14 $3 $5.0


High:$4,000$25 $0

PROMOD$5.7


22January 6, 2010

Hydro -Upgrade


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 30% $932 $12.6 $2.4 $7.1

WREZ Assumptions 40% to 60% 500 - 3,200 N/A N/A 3 to 13

RETI Phase 1A 40% to 60% 600 - 3000 5 to 25 3.5 to 6 N/A


High:$5,300$23 $0

PROMOD$5.3

23January 6, 2010

Solar Thermal – Trough without storage


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 27% $4,019 $68.0 $0.0 $28.8

WREZ(Dry Cooled)

20% to 28%$5,346 to

$5,552$66.0 $0.0 $24 to $32

WREZ(Wet Cooled)

22% to 30%$5,146 to

$5,352$66.0 $0.0 $24 to $32

33% RPS28% $4,125 $58.7 $0.0 $24.0

RETI Phase 1A26% to 29% $3,800-$4,800 $66.3 $0.0 $26 to $29

EIA31% $5,235* $59.2 $0.0 $21.8


Low:$5,100High:$5,600

$65 $0PROMOD

$25.5


24January 6, 2010

Solar Thermal – Trough with 6hr Storage


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 65% $5,893 $68.0 $0.0 $11.9

NPCC 36% $5,040* $60.0 $1.0 $20.0

WREZ(Dry Cooled)

29% to 39% $7,600 $66.0 $0.0 $19 - $26

WREZ(Wet Cooled)

22% to 27% $7,400 $66.0 $0.0 $28 - $34

Recommended 36%$7,500Low:7,300High:8,000

$65 $0PROMOD

$20.6


25January 6, 2010

Solar PV – Fixed Tilt

SourceAC Capacity

Factor (%)

Capital Costs

($2009/kWe)

Fixed O&M ($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

WREZ(Thin-film)

25% $4,500 $50.0 $0.0 $22.8

33% RPS(Crystalline)

23% $6,612 $39.1 $0.0 $19.1

RETI Phase 1A(Crystalline)

25% to 30% $6,500 - $7500 $35.1 $0.0 $13 to $16


Low:$3,600High:$5,500

$50 $0PROMOD

$21.0

Note: Capital costs reported in $/kWe. Using a DC AC derate factor of 80%, $4,500/kWe is equivalent to $3,600/kW DC

26January 6, 2010

Solar PV - Tracking

SourceAC

Capacity Factor (%)

Capital Costs

($2009/kWe)

Fixed O&M ($2009/kW-yr)

Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 27% $4,960 $68.0 $0.0 $28.8

NPCC 25% $7,721* $38.6 $0.0 $17.6

WREZ 23% - 28% $5,700 $65 $0.0 25 to 32

RETI Phase 1A 28% $6,500 - $7500 $35.1 $0.0 $14.6

EIA 21% $6,295* $12.2 $0.0 $6.6


Low:$5,000High:$6,500

$65 $0PROMOD

$15.6


Note: Capital costs reported in $/kWe. Using a DC AC derate factor of 80%, $5,700/kWe is equivalent to $4,560/kW DC

27January 6, 2010

Wind - Onshore


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG(Class 3/4)

37% $2,332 $13.7 $5.5 $9.7

CEC COG(Class 5)

42% $2,332 $13.7 $5.5 $9.2

NPCC38% $2,252* $42.9 $2.1 $15.0

WREZ21% to 40% 2,300 $60 $0.0 17 to 33

RETI Phase 1A25% to 40% 1,900 - 2,400 $50.0 $0.0 14 to 23

33% RPS33% $2,313.4 $53.3 $0.0 $18.4

EIA38% $2,005* $31.6 $0.0 $9.5


Low:$1,900High:$2,500

$50 $0PROMOD

$17.3


28January 6, 2010

Wind - Offshore


Capital Costs

($2009/kW)


Variable O&M

($2009/MWh)

Consolid. O&M

($2009/MWh)

CEC COG 45% $6,548 $27.4 $11.0 $18.0

RETI Phase 1A 35% to 45% $5,000 - $6,000 75 - 100 $0.0 N/A

EIA 40% $4,015* $93.3 $0.0 $26.6


Low:$4,000High:$8,000

$90 $0PROMOD

$25.7


29January 6, 2010

Regional Multipliers

E3 recommends multipliers to reflect regional differences in cost of land, labor and materials

E3 developed regional multipliers based on US Army Corps of Engineers, Civil Works Construction Cost Index System (CWCCIS)

Vary by technology depending on components of total capital and O&M costs

Biomass Biogas - Landfill

Biogas - Other

Simple Cycle CT

Combined Cycle

CT (CCGT)

CHP<5M CHP >5MCoal

Steam

IGCC with

Carbon Sequestr

ation

Nuclear

Alberta 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00Arizona 0.95 0.95 0.96 0.95 0.98 0.97 0.97 0.97 0.97 0.95British Columbia 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00California 1.20 1.20 1.15 1.18 1.09 1.12 1.12 1.13 1.12 1.19Mexico 0.90 0.90 0.93 0.91 0.96 0.94 0.94 0.94 0.94 0.91Colorado 0.98 0.98 0.99 0.98 0.99 0.99 0.99 0.99 0.99 0.98Idaho 0.97 0.97 0.98 0.97 0.99 0.98 0.98 0.98 0.98 0.97Montana 0.96 0.96 0.97 0.96 0.98 0.98 0.98 0.98 0.98 0.96New Mexico 0.94 0.94 0.95 0.94 0.97 0.96 0.96 0.96 0.96 0.94Nevada 1.10 1.10 1.08 1.09 1.04 1.06 1.06 1.06 1.06 1.10Oregon 1.10 1.10 1.08 1.09 1.04 1.06 1.06 1.06 1.06 1.10Utah 0.94 0.94 0.95 0.94 0.97 0.96 0.96 0.96 0.96 0.94Washington 1.08 1.08 1.06 1.07 1.04 1.05 1.05 1.05 1.05 1.08Wyoming 0.90 0.90 0.93 0.91 0.96 0.94 0.94 0.94 0.94 0.91

Geothermal

Hydro - Small

Hydro - Large

Hydro - Upgrade

Solar Thermal - Trough

Solar Thermal - Trough

w/ storage

Solar PV - Fixed Tilt

Solar PV - Tracking

Wind - Onshore

Wind - Offshore

Alberta 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00Arizona 0.95 0.95 0.95 0.95 0.97 0.97 0.98 0.98 0.97 0.98British Columbia 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00California 1.20 1.20 1.20 1.20 1.13 1.13 1.09 1.09 1.12 1.09Mexico 0.90 0.90 0.90 0.90 0.94 0.94 0.96 0.96 0.95 0.96Colorado 0.98 0.98 0.98 0.98 0.99 0.99 0.99 0.99 0.99 0.99Idaho 0.97 0.97 0.97 0.97 0.98 0.98 0.99 0.99 0.98 0.99Montana 0.96 0.96 0.96 0.96 0.97 0.97 0.98 0.98 0.98 0.98New Mexico 0.94 0.94 0.94 0.94 0.96 0.96 0.97 0.97 0.96 0.97Nevada 1.10 1.10 1.10 1.10 1.07 1.07 1.05 1.05 1.06 1.05Oregon 1.10 1.10 1.10 1.10 1.07 1.07 1.05 1.05 1.06 1.05Utah 0.94 0.94 0.94 0.94 0.96 0.96 0.97 0.97 0.96 0.97Washington 1.08 1.08 1.08 1.08 1.05 1.05 1.04 1.04 1.05 1.04Wyoming 0.90 0.90 0.90 0.90 0.94 0.94 0.96 0.96 0.95 0.96

Note: 1.00 = US average

Financing and Tax Assumptions

31January 6, 2010

Financing Assumptions

Need to translate $/kW cost inputs into annualized revenue requirements

Requires tax workup, assumptions about project ownership and financing, and calculation of annual cash flows

For simplicity, E3 recommends using IPP financing for most resource types Exceptions: IOU financing for coal, nuclear,

large hydro and hydro upgrades

32January 6, 2010


Debt % Equity %Debt Rate

Equity Rate

WACC

IOU

NPCC 50% 50% 7% 11% 9.0%

COG 48% 52% 5.40% 11.85% 8.75%

WREZ 50% 50% 6.50% 12% 9.25%

33% 44.75% 55.25% 5.96% 10.78% 8.6%

Recommended 48% 52% 6.30% 11.40% 9.00%

IPP

NPCC 60% 40% 6% 14.50% 9.4%

COG 60% 40% 7.49% 14.47% 10.28%

WREZ 60% 40% 8% 15% 10.8%

RETI 60% 40% 7.5% 15% 10.5%

33% 60% 40% 7.27% 15.29% 10.48%

Recommended 60% 40% 7.30% 15.00% 10.38%

MUNI

NPCC 100% 0% 5.20% 0% 5.2%

WREZ 100% 0% 5% 0% 5%

33% 100% 0% 6.50% 0% 6.5%

Recommended 100% 0% 5.50% 5.50% 5.50%

33January 6, 2010

Project financing typically requires minimum Debt Service Coverage Ratio (DSCR) (ratio of annual cash flows to debt service) of at least 1.41.4

E3 recommends adding equity to financing structure as necessary to maintain DSCR >= 1.4

Recommended equity % for IPP cases with a DSCR >= 1.4 are shown:


Using General Equity %

DSCR with 40% Equity

Recommended equity share to

achieve DSCR>1.4 %

Biomass - Combustion-based 40% 1.08 48%

Biogas - Landfill 40% 1.28 44%

Geothermal 40% 0.83 54%

Solar Thermal - Trough 40% 0.75 53%

Solar Thermal - Trough w/ storage 40% 0.77 53%

Solar PV - Tracking 40% 0.76 53%

Solar PV - Fixed Tilt 40% 0.76 53%

Wind - Onshore 40% 1.08 47%

34January 6, 2010

Tax Assumptions

Investment Tax Credit

(ITC)

Production Tax Credit (PTC)

($/MWh)

Production Tax Credit Duration

(years)

MACRS Term (Years)

Biomass $21.00 10 10*Biogas - Landfill $11.00 10 10*Biogas - Other $11.00 10 10*Simple Cycle CT 20

Combined Cycle CT 20

Coal 20

Nuclear 20

Geothermal $21.00 10 5

Hydro $11.00 10 20

Solar Thermal 30% 5

Solar PV 30% 5

Wind $21.00 10 5

CEC CHP 20

Federal Tax rate: 35% State tax rate: 7%

Recommended use of current tax code for the tax assumptions

*WREZ applies 7 yr MACRS to 60% of Capital Cost and 20yr MACRS to 40% of the Capital Cost. Here, an average of the two is used.

35January 6, 2010

Levelized Cost Results from E3 Pro Forma Model

Note: The TEPPC 2009 Study will use only the fixed costs in $/kW-yr; the $/MWh values are provided for reference

TechnologyFixed Costs

($/kW-yr.)

Levelized Cost of Energy ($/MWh)

Biomass $547.1 $98.58

Biogas - Landfill $408.9 $92.34

Biogas - Other $795.7 $121.47

Simple Cycle CT $193.7 $403.39

CCGT $203.2 $91.60

CHP < 5M $606.2 $193.28

CHP > 5M $259.4 $95.96

Coal Steam $494.5 $88.16

IGCC with CCS $1,242.9 $228.05

Nuclear $949.5 $145.76

TechnologyFixed Costs

($/kW-yr.)

Levelized Cost of Energy ($/MWh)

Geothermal $630.4 $113.17

Hydro - Small $416.1 $160.51

Hydro - Large $354.6 $92.47

Hydro - Upgrade $171.0 $44.58

Solar Thermal - Trough $445.9 $193.78

ST - Trough w/ storage $594.6 $201.00

Solar PV - Fixed Tilt $369.6 $179.90

Solar PV - Tracking $470.1 $211.87

Wind - Onshore $241.7 $89.26

Wind - Offshore $627.3 $191.53

Intra-hour Integration Costs for Intermittent Renewables

37January 6, 2010

Renewable Resource Integration Costs Intermittent resources impose operating

costs due to variability and unpredictability

Increased need for ramp and regulation

Recommend cost adderRecommend cost adder for wind and solar PV to reflect within-hour balancing and ancillary services

Survey to establish range of cost estimates

BPA’s Wind Balancing Service

Northwest Wind Integration Forum (summarizes studies by Avista, Idaho Power, PacifiCorp, Puget Sound Energy, and BPA)

E3 33% Calculator and GHG Calculator(summarizes studies by Avista, BPA, Great River, Idaho Power, Manitoba Hydro, MNPUC, PacifiCorp, PSCO, PSE, We Energies, and Xcel)

38January 6, 2010

$6.45

$5.28 $4.11

$5.05

$11.07

$5.02

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

0% 5% 10% 15% 20% 25% 30% 35%Wind Share of Control Area Generation Capacity

$200

9/M

Wh

Avista (2008)

Idaho Power (2008)

PSE(2005)

BPA (2007)

Xcel (2006)

We Energies (2003)

PSCO (2006)

MNPUC (2006)

Manitoba Hydro (2006)

33% Values (2008)

BPA Tariff (2009)

NPCC (2007)

Renewable Resource Integration Costs

Recommended Integration cost adder for Wind and PV: $6/MWh$6/MWh

Recommended $6/MWH

39January 6, 2010

BPA’s Wind Balancing Service, Bonneville Power Administration Transmission Services, October 2009, http://www.transmission.bpa.gov/business/Rates/documents/2010_Rate_Schedules_10_01_09.pdf

Northwest Wind Integration Action Plan, Northwest Power Planning and Conservation Council and others, March 2007, http://www.nwcouncil.org/energy/Wind/Default.asp

Review of International Experience Integrating Variable Renewable Energy Generation, California Energy Commission, April 2007, http://www.energy.ca.gov/pier/final_project_reports/CEC-500-2007-029.html

2006 Minnesota Wind Integration Study, Minnesota Public Utilities Commission, November 2006, http://www.puc.state.mn.us/docs/windrpt_vol%201.pdf

GRE Wind Integration Study, presented at UWIG Technical Workshop, Seattle, WA; October 2003, http://www.uwig.org/seattlefiles/seck.pdf Wind Integration Study, Xcel Energy and the Minnesota Department of Commerce, September 28, 2004,

http://www.uwig.org/XcelMNDOCStudyReport.pdf System Operations Impacts of Wind Generation Integration Study, We Energies, July 24, 2003,

http://www.uwig.org/WeEnergiesWindImpacts_FinalReport.pdf Wind Integration Study Report Of Existing and Potential 2003 Least Cost Resource Plan Wind

Generation, Xcel Energy Transmission Planning, April 2006, http://www.rmao.com/wtpp/Misc_Info/2008%20Wind%20Integration%20Study.pdf

Wind/Hydro Integration for Manitoba Hydro’s System, Presented to UWIG by Bill Girling, March 22nd, 2007, http://www.uwig.org/Portland/Girling.pdf

Renewable Resource Integration Costs Sources

Transmission Cost and Financing

41January 6, 2010

Transmission Costing Assumptions

Survey of publicly-available data sources

WREZ Transmission Model

RETI/CPUC 33% Implementation Analysis

CPUC Greenhouse Gas Calculator

All costs were converted to 2009 dollars

Develop transmission costing modelDevelop transmission costing model for calculating capital costs from assumptions about components based on recent E3 models

$ per line-mile by voltage, $ per mile of right-of-way by jurisdiction, $ per substation by voltage

Annualized based on generic financing assumptions

42January 6, 2010

Recommended Transmission Line and Right-of-Way Costs

JursidictionLand Cost ($k/acre)

Alberta 9.48$

Arizona 9.48$

British Columbia 9.48$

California 27.50$

CFE 1.87$

Colorado 9.48$

Montana 5.34$

New Mexico 5.34$

Nevada 9.48$

Northwest 9.48$

Utah 9.48$

Wyoming 5.34$

Note: Recommended costs are based on the WREZ Transmission Model. These costs were benchmarked against E3’s GHG Calculator and the RPS Calculator, which gave similar costs.

Line TypeLine Capital Cost ($M/mi)

Termination Cost ($M)

Substation Cost

($M/sub)

500 kV AC Single $1.80 - $50

500 kV AC Double $2.88 - $50

345 kV AC Single $1.26 - $40

345 kV AC Double $2.02 - $40

230 kV AC Single $0.90 - $35

230 kV AC Double $1.44 - $35

500 kV DC Bi-Pole $1.44 $500 -

43January 6, 2010

Transmission Financing Assumptions New transmission could be

constructed by IOUs, independent transmission companies, or federal agencies

For simplicity, recommend assuming IOU financing

Economic life based on expected rate treatment, e.g., 30-40 years

Debt % Equity % Debt Rate Equity Rate WACC

IOU

NPCC 50% 50% 7% 11% 9.0%

COG 48% 52% 5.40% 11.85% 8.75%

WREZ 50% 50% 6.50% 12% 9.25%

33% 44.75% 55.25% 5.96% 10.78% 8.6%

Recommended 48% 52% 6.30% 11.40% 9.00%

Line Type 33% Model WREZ Recommended

Economic Life 40 20 40

Debt Term 40 20 40

Debt Percentage 45% 60% 48%

Equity Percentage 55% 40% 52%

Debt Cost 6.0% 7.0% 6.30%

Equity Cost 10.8% 11.0% 11.40%

Tax Depreciation Period 15 15 15

Transmission Financing Assumptions

General IOU Financing Assumptions

Sources and Contact Info

45January 6, 2010

Sources CEC Comparative Costs of California Central Station Generation

http://www.energy.ca.gov/2009publications/CEC-200-2009-017/CEC-200-2009-017-SD.PDF CPUC 33% RPS Implementation Analysis

http://www.cpuc.ca.gov/PUC/energy/Renewables/hot/33implementation.htm EIA. Annual Energy Outlook (03/2009)

http://www.eia.doe.gov/oiaf/aeo/assumption/pdf/0554(2009).pdf LBNL.“Financing Non-Residential Photovoltaic Projects.”(01/09)

http://eetd.lbl.gov/ea/EMS/reports/lbnl-1410e.pdf MIT. Update on the Cost of Solar (05/2009)

http://web.mit.edu/ceepr/www/publications/workingpapers/2009-004.pdf NEI. The Cost of New Generating Capacity in Perspective (12/2009)

http://www.nei.org/filefolder/The_Cost_of_New_Generating_Capacity_in_Perspective.pdf NPCC. Draft 6th Northwest Power Plan. (09/2009)

http://www.nwcouncil.org/energy/powerplan/6/default.htm RETI. Phase 1A. (05/2008)

http://www.energy.ca.gov/2008publications/RETI-1000-2008-002/RETI-1000-2008-002-F.PDF WREZ. Phase1. (10/2009)

http://www.nrel.gov/docs/fy10osti/46877.pdf WREZ Technology Assumptions (01/2009)

http://www.westgov.org/wga/initiatives/wrez/zita/Technology%20Assumption%20-%20Supply%20Curve%20TCversion.pdf

46January 6, 2010

Contact Information

Energy and Environmental Economics, Inc. (E3)

101 Montgomery Street, Suite 1600

San Francisco, CA 94104

Phone: 415-391-5100

Web: http://www.ethree.com

Arne Olson, Partner ([email protected])

Andres Pacheco, Associate ([email protected])

Nick Schlag, Associate ([email protected])

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