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LCOE and LACE

Sam Baldwin Chief Science Officer

Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy

EIA LCOE-LACE Workshop July 25, 2013

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LCOE • A measure of Cost. • Considerations?

– Capital cost, cost of capital/financial structure, interest during construction, commodity material costs, etc.?

– Fuel cost; Resource availability and quality; Site issues; etc.? – Capacity factor realized, etc.? – Transmission; interconnection costs; integration costs? – Operations?

• Dispatchable? Ramp rates? • Reserves?

– Other costs? • Water consumption? • Environmental impacts—land, water, atmosphere, climate, biosphere? • Etc.

It is complicated: technologies have different constraints and serve different purposes. LCOE is a first term in an approximation of cost…. Perhaps add an error term/bar and specify particular role/purpose of the technology?

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LACE • A measure of Value • Regulated utilities • Deregulated markets

– Market operations model needed – NEMS, ReEDS, GridView, (SCUC/SCED), etc.? • Resolution of model: temporal, spatial, system? • Operation of system?

– Value depends on time of day/week/season, location, system, weather, etc.? – Price taker/setter?

• Fuel cost; Resource availability and quality; Site issues; etc.? • Variable O&M, etc.? • Transmission? • LMPs?

– Other values/costs: • (Energy, capacity), but also T&D deferrals, loss savings, ancillary services, portfolio

hedge value, voltage support, grid security (if enabled), etc.? – Investment decision process?

It is complicated: LACE will have many different values depending on local circumstances. It is a first term in an approximation of value…. Would an error term/bar be sufficient?

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Examples Cambridge Energy Research Associates Power Plant Cost Index

0

1

2

3

4

5

6

7

8

9

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2009

Dol

lars

per

MM

Btu

Historical AEO Natural Gas Price Forecasts vs. Actual NG Prices(Average Lower 48 Wellhead Prices)

Actual Average Wellhead Price

Sources: EIA Annual Energy Outlooks

85

86

87 89

90

91

9293

9495

05

0403

02

Forecasts 96 to 01In order of lowest to highest:

97, 98, 99, 00, 96, 01

Forecasts 85 to 97Trended downward in

response to the downward trend in

actual prices.

08

0607

Forecasts 03 to 08Trending upward

with in initial years with declines

09

10

Forecasts 09 to 10Rose and then declined to ref lect spike in actual

prices in 2008

59.90

59.92

59.94

59.96

59.98

60.00

60.02

60.04

5:50 6:00 6:10 6:20 6:30

TIME (pm)

FREQ

UENC

Y (Hz

)

2600-MWGeneration

Lost AGC RESPONSE

GOVERNOR RESPONSE

System Loss / Frequency Excursion Source: NREL

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Northeast Blackout New York City August 2003

Kristina Hamachi LaCommare, and Joseph H. Eto, LBNL

Storms and Power System Interruptions

Hurricane Katrina August 2005

Midwest & Mid-Atlantic Derecho

June 2012

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2010 2050

Renewable Electricity Futures study

• RE generation from technologies that are commercially available today, in combination with a more flexible electric system, is more than adequate to supply 80% of total U.S. electricity generation in 2050—while meeting electricity demand on an hourly basis in every region of the country.

• The abundance and diversity of U.S. renewable energy resources can support multiple combinations of renewable technologies to achieve high levels of renewable electricity use, and result in deep reductions in electric sector greenhouse gas emissions and water use.

• The direct incremental cost associated with high renewable generation is comparable to published cost estimates of other clean energy scenarios. Improvement in the cost and performance of renewable technologies is the most impactful lever for reducing this incremental cost.

http://www.nrel.gov/re_futures/

For more information Sam.Baldwin@ee.doe.gov