Review of Capital Costs for Generation Technologies Technical Advisory Subcommittee January 31, 2017 Arne Olson, Partner Doug Allen, Managing Consultant Femi Sawyerr, Associate History In 2009, E3 provided WECC with recommendations for capital costs of new electric generation technologies to use in its 10-year study cycles Prior to this effort, the relative costs of WECCs study cases could only be compared on a variable-cost basis This effort allowed WECC to quantify relative scenario costs on a basis reflecting their actual prospective costs to ratepayers by combining variable & fixed costs Total
Total Cost Cost = Fuel Fuel and and Variable Variable Costs Costs + Fixed Fixed Cost Cost (E3 (E3 Capital Capital Cost Cost Tool) Tool)
E3 has updated these capital cost assumptions several times to capture major changes in technology costs (e.g. solar PV) and ensure continued accuracy Most recent update: 2014 2 Background In preparation for its upcoming 20-year study plan, WECC has asked E3 to provide guidance on resource cost to use in that study These capital costs will serve as an input to the 20-year studys LTPT, allowing for the development of robust scenarios through cost minimization This efforts builds on similar work done in early 2014 20-Year Study INPUTS MODELS (Capital Expansion Optimization)
Twenty-Year Capital Expansion Plan SCDT Generation Portfolio NXT Transmission Topology Long-Term Planning Tools Gen Capital Costs STUDY RESULTS Tx Capital Costs Other Constraints 3 3 Study Approach
E3 uses a two-step process to develop capital cost assumptions for the 20-year studies: 1. Determine the cost to install a power plant today (2016) 2. Forecast reductions (if applicable) in technology capital costs over the next two decades E3 uses capital cost estimates in conjunction with other assumptions in WECC studies to determine the annualized costs of new resources: Financing structure and cost Tax credits
Depreciation (MACRS) Fixed O&M costs 4 Data Sources and Assumptions E3 develops capital cost assumptions based on a literature review of public cost estimates from a variety of sources: Government-contracted engineering studies Regional or industry studies Utility integrated resource plans (IRPs)
Publicly reported actual costs WECC stakeholders provided review and feedback during January April 2017 All costs in this update are expressed in 2016 dollars unless explicitly stated otherwise E3s cost recommendations represent the all-in cost of building a new plant, including the cost of borrowing during construction Overnight capital cost estimates are scaled up to allow for comparison with all-inclusive cost estimates 5 Wind and Solar Capital Cost Summary Technology WECC 2012
Fixed Tilt (> 20 MW) $2,635 $2,226 $1,300 Tracking (> 20 MW) $3,075 $2,631 $1,400 Updated Concentrated Solar Power Parabolic Trough with 7.5 hrs Storage*
- - $6,000 ($/kW-ac) Solar Tower with 9 hrs Molten Salt Storage* - - $6,500 Wind Onshore $2,196 $2,125
$1,700-$2,000 ($/kW-ac) Offshore $6,589 $6,375 $4,500 *Following feedback from the CSP Alliance on Solar Thermal costs, E3 has updated previous categories (Solar Thermal with/without storage) to reflect the latest technical developments 6 Other Generation Technology Capital Cost Summary WECC 2012 Technology
CHP Coal Aeroderivative Gas CT $1,147 Frame Basic Wet-Cooled Basic Dry-Cooled Gas CCGT Nuclear Recip Engine $1,356 Note on interpreting graphs Graphs in the following presentation attempt to show all data points used to generate estimates Includes data from past years which help identify trends over time and within data sources
Studies published by the same entity are grouped by color For sources with a single point estimate for capital costs, estimates are denoted by Many sources provided estimated ranges, which are denoted by (high estimate) and (low estimate) E3 recommended estimates (past and current) are denoted by The detailed data behind these graphs can be provided upon request 10 PRESENT DAY COSTS SOLAR PV Solar Price Trends over Time Solar capital costs have continued to decline sharply during recent years Declines seen across all technologies, as much as 50% relative to 2014 estimates Tight range of estimates for Residential/Commercial solar, wider for Utility-Scale solar Cost advantage of larger systems has decreased in
recent years Smaller difference in the updated numbers between the Small and Large system capital cost estimates 12 Details on Cost Estimates Data is presented according to type and size (where appropriate) of installation Residential Rooftop Commercial Rooftop Utility-Scale Fixed Tilt Utility-Scale Tracking Data points collected from sources are shown over time to indicate the trend of cost evolutions in recent years E3 estimate takes into account current cost estimates as well as changes over time relative to 2014 estimate 13 Residential Rooftop Solar Costs
over Time E3 Recommendation: $2,900/kW-dc 14 Commercial Rooftop Solar Costs over Time E3 Recommendation: $2,600/kW-dc 15 Utility-Scale Fixed Tilt Solar Costs over Time E3 Recommendation: $1,500/kW-dc (1-20 MW) $1,300/kW-dc (20+ MW) 16 Utility-Scale Tracking Solar Costs over Time
E3 Recommendation: $1,600/kW-dc (1-20 MW) $1,400/kW-dc (20+ MW) 17 Aligning Cost & Performance Assumptions for Solar PV Solar PV capacities Direct current (DC): sum of module nameplate rating Alternating current (AC): inverter nameplate rating Capital costs are typically reported relative to the systems DC nameplate rating (in $/kW-dc), but can be expressed relative to the AC nameplate ratio by multiplying by the Inverter Loading Ratio Capital Cost Capital Cost
($/kW-ac) ($/kW-dc) Inverter Loading Ratio DC nameplate AC nameplate Chart shows industry average ILRs in recent years For more detail on the treatment of DC and AC capacity in WECC studies, see E3s presentation to TAS (12-12-2013) Source: Utility-Scale Solar 2015: An Empirical Analysis of Cost, Performance and Pricing Trends in the United States (LBNL, 2016) 18 Recommended Assumptions
Values in the LBNL study cited above indicate that the recommended inverter loading ratios for the fixed tilt solar resources should be updated from their 2014 values: Fixed tilt, utility: 1.35 Tracking, utility: 1.30 Rooftop: 1.20 Solar PV Subtypes E3 2016 Update (2016 $/kW-dc) $/kW-dc Inverter Loading Ratio X
Tracking (> 20 MW) $1,400 1.30 $1,820 19 Summary of Solar PV Recommendations Capital costs expressed in $2016 Comparison of DC and AC costs in E3 2016 update: E3 2016 Update Solar PV Subtypes 2016 $/kWdc 2016 $/kWac Residential Rooftop
$1,300 $1,755 Tracking (> 20 MW) $1,400 $1,820 20 Comparison of Solar PV Recommendations to Past Recommendations Solar costs have declined in recent years Cost differences across the different types of solar have also declined 21 PRESENT DAY COSTS WIND Wind Price Trends over Time
Wind capital costs have remained relatively constant over the past few years Slight downward trend, but not approaching the cost decreases seen for solar Data is often presented by region, but little indication of systematic price differences across regions Data on Offshore Wind remains sparse First offshore wind facility in the US came online this month Previous E3 estimates were high relative to costs released since that update 23 Details on Cost Estimates Data/estimates are presented for both onshore and offshore wind Data points are presented over time to indicate the trend of cost evolutions in recent years E3 estimate takes into account current cost
estimates as well as changes over time relative to 2014 estimate 24 Cost Differences by Region Data from LBNL indicates that wind capital costs are likely to vary according to the region in which the project is located Projects in the Interior zone (Rocky Mountains) are less expensive to install than those in the West zone E3 recommends reflecting this difference in capital cost estimates Within region, E3 applies state-specific capital cost multipliers to reflect variation across state lines Source: 2015 Wind Technologies Market Report, LBNL
25 Onshore Wind Solar Costs over Time E3 Recommendation: $1,700/kW-ac (Interior) $2,000/kW-ac (West) 26 Offshore Wind Costs over Time E3 Recommendation: $4,500/kW-ac 27 Summary of Wind Capital Cost Recommendations Capital costs expressed in $2016 Wind Subtypes E3 2012
$1,700 $6,589 $6,375 $4,500 Cost decrease in both categories relative to 2014 update (6-20% for onshore, 29% for offshore) 28 FUTURE COST PROJECTIONS Cost Trajectory Methodology In 2012, E3 developed methodologies to create plausible trajectories of future generation capital costs Solar PV: application of learning curves to present-day costs 20% learning rate for modules; 10% (Utility-Scale) or 15% (Rooftop) for
BOS IEA Medium-Term Outlook forecast of global installations Wind: application of learning curves to present-day costs: 10% learning rate IEA Medium-Term Outlook forecast of global installations The general framework used to project future costs remain valid, but E3 has updated assumptions based on improved/new data and information and included projections for battery storage 30 Learning Curve Theory Learning curves describe an observed empirical relationship between the cumulative experience in the production of a good and the cost to produce it Increased experience leads to lower costs due to efficiency gains in the
production process The functional form for the learning curve is empirically derived and does not have a direct theoretical foundation Example: 20% Learning Rate The learning rate represents the expected decrease in costs with a doubling of experience Price Global installed capacity is used as a proxy for cumulative experience in the electric sector 2x -20% 2x
-20% Cumulative Experience 31 FUTURE COST PROJECTIONS - SOLAR Components of Solar PV Costs For each segment of solar PV, E3 has broken capital costs out into three categories: 1. Module costs: direct cost of photovoltaic modules 2. Non-module hard costs: costs of inverter, racking, electrical equipment, etc. 3. Soft costs: labor, permitting fees, etc. Cost reductions in each category will result from different drivers and
may not apply equally across all market segments 33 Module Cost Reductions Historically, over the long-term, modules have stayed relatively close to a learning rate of 20% See International Technology Roadmap for Photovoltaic 2015 Results, available at http://www.itrpv.net Current module prices are below long-term learning curve Potential for cost reductions due to module cost declines is expected to be limited until trend returns to long-run average 34 Forecasting Future Module Prices E3s projection of module costs relies on
the extrapolation of global PV forecast from the IEAs Medium Term Renewable Energy Outlook Module prices are assumed to remain stable at todays level until the long-term trend catches up Learning curve approach supports anecdotal evidence that suggests further reductions in module costs are limited 35 Non-Module Cost Reduction Potential In 2014, E3 assumed that non-module cost components for rooftop PV would follow a learning rate of 15% while those for utility-scale PV would follow a 10% learning rate
Reflected substantial effort to identify cost reduction potential in rooftop PV systems Reported costs of rooftop systems are increasingly influenced by the retail rate structures that enable their viability Fair market value of PV exceeds actual system costs, allowing for more rapid cost declines with increase experience / competition Learning rates are applied based on global installed capacity E3 believes these learning rates are still appropriate for use in 2016 20% reduction relative to 2016 29% reduction
relative to 2016 36 Comparison to Prior Recommendations: Residential and Commercial Residential and commercial rooftop solar PV costs have been revised downward from the 2014 E3 Update reflecting recent market cost declines 37 Comparison to Prior Recommendations: Utility Scale Fixed Tilt 38 Comparison to Prior Recommendations: Utility Scale Tracking 39 FUTURE COST
PROJECTIONS - WIND Forecasting Future Turbine Prices Learning rates are based on meta-analysis of literature presented in Rubin (2015)2 Estimated at 12% for both on and offshore turbines E3s projection of module costs relies on the extrapolation of global wind forecast from the Global Wind Energy Council Total installed capacity increases to ~800 GW in 2020, ~2,800 GW in 2040
Offshore wind increases from <3% of global total in 2015 to ~25% of global total in 20401 Share of offshore wind is taken from IEA projections Rubin, E., I. Azevedo, P. Jaramillo, S. Yeh. A review of learning rates for electricity supply technologies. Energy Policy 86, pp. 198-218. 1 2 41 Turbine Price Evolution over Time Due to relative maturity of onshore wind industry, offshore costs decline more rapidly over the next 15-20 years Past 2030, growth
in offshore wind slows to levels near that for onshore 51% below 2016 estimate 24% below 2016 estimate 42 PRESENT DAY COSTS STORAGE Characterizing Storage Options The breadth of potential storage applications is wide, and the appropriate technology and its characteristics will vary considerably Sources: Sandia (2013), Indiana State Utility Forecasting Group (2013) 44
System Characteristics The table below compares some of the operating characteristics of the energy storage technologies examined here Technology Typical Size (MW) Round Trip Efficiency (%) Economic Lifetime (yrs) O&M Costs (2016 $/kW-yr) Pumped Hydro Storage 100+
10-20 100 Compressed Air Energy Storage 100+ 70 20+ 15 45 Recommendations Pumped Hydro Storage Pumped hydro is a relatively mature technology that can scale-up to over 1 GW although costs are highly dependent on the specific site Recent projects in PacifiCorps territory (JD Pool, Swan Lake, and Seminoe) estimated at $2,600 - $2,700/ kW
E3 Recommendation: $2,500/kW-ac 46 Lithium Ion Battery Costs by Storage Capacity Costs presented according to storage life Tighter range of costs than that seen for flow batteries Likely due to wide range of potential materials that can be used in flow batteries E3 Recommendation: 4-Hour: $3,000/kW-ac, $750/kWh 8-Hour, $5,000/kW-ac, $625/kWh 47 Flow Battery Costs by Storage Capacity
Costs presented according to storage life Wide range of costs based on materials used Li-Ion batteries expected to have minor cost advantage E3 Recommendation: 4-Hour: $3,000/kW-ac, $750/kWh 8-Hour, $6,000/kW-ac, $750/kWh 48 Battery cost projections Dramatic changes since 2005 These cost improvement trends are expected to continue into the 2020s Because of widespread use in other sectors, however, cannot apply learning curve methodology used elsewhere Instead, cost projections are based on expected overall % declines before the technology reaches maturity Source: Nykvist et al. (2015), http://www.nature.com/nclimate/journal/v5/n4/full/nclimate2564.html
49 Forecasting Future Battery Prices Price reduction rates are based on data presented by Lazard (2016)1 Li-Ion: A 6% reduction rate was used; average of the high and low values predicted by Lazard Flow: A 5.5% reduction rate was used; average of the high and low values predicted by Lazard Updated Technology reaches maturity by 2028, after which
reductions are minimal 1 Lazard, Levelized Cost of Storage v2.0, 2016 50 Compressed Air Energy Storage (CAES) Costs over Time Relatively few data points available Updated All estimates in the $1,200/kW $2,000/kW range E3 Recommendation: $1,700/kW-ac 51 PRESENT DAY COSTS
OTHER TECHNOLOGIES Concentrated Solar Power Capital Costs Updated In past years, E3 has generated two cost estimates for solar thermal plants With and without storage Based on comments from the CSP Alliance, capital cost estimates are now presented for two types of solar thermal plant Parabolic Trough, 7.5 hours of energy storage Power Tower, 9 hours of energy storage Due to change in technologies, cost estimates for solar thermal were based on latest information on technology (trough/tower)
and incremental cost of storage International Renewable Energy Agency (IRENA) provided the only estimates for technologies proposed by CSA New cost estimates focus on technology and incremental storage costs rather than vintage Concentrated Solar Power Parabolic Trough Updated E3 Recommendation: 7.5 hours: $6,000/kW-ac IRENA estimates (cited by CSP Alliance) shown in light green Concentrated Solar Power
Solar Tower Updated E3 Recommendation: 9 hours: $6,500/kW-ac IRENA estimates (cited by CSP Alliance) shown in light green Future Cost Projections - CSP Updated Price reduction rates are based on data presented by IRENA (2016)1 Parabolic Trough: A 33% reduction rate between the 2015 value and the projected 2025 value
Solar Tower: A 37% reduction rate between the 2015 value and the projected 2025 value No additional price reductions assumed beyond those estimated by IRENA 1 IRENA, The Power to Change: Solar and Wind Reduction Potential to 2025, 2016 Biomass Capital Costs No clear trend in Biomass capital cost estimates EIA estimates increased 12%, Lazard slightly down Mature technology,
costs are unlikely to decrease substantially E3 Recommendation: $4,300/kW-ac Geothermal Costs Data indicates a modest decline in capital costs for Binary/Flash Geothermal Range of estimates has also narrowed E3 Recommendation: $5,000/kW-ac Enhanced Geothermal Costs Little to no updated information on costs / viability of Enhanced Geothermal Systems since 2014 update Limited deployment of EGS systems means that available cost data is based on experimental deployments
E3 Recommendation: $9,000/kW-ac 59 Hydropower Costs A review of the available literature shows no evidence that Hydropower costs have changed since the 2014 update EIA inputs for 2016 AEO did not update hydro costs NWPCC considers hydro to be a secondary resource in the 7th Power Plan Cost information not given No change in estimates 60 PRESENT DAY COSTS CONVENTIONAL TECHNOLOGIES Conventional Technology Costs
E3 conducted a high-level review of conventional technology costs to determine if there was evidence in significant changes in last two years Generic cost estimates (Lazard, EIA, etc.) have experienced little to no change IRP cost estimates have seen small changes Lack consistent direction, indicating likely a result of projectspecific factors Recommendation: Use nominal numbers from 2014 update, assume cost improvements offset inflation 62 Conventional Generation Technology Capital Cost Summary Technology Subtypes WECC 2012 E3 2014 Update E3 2016 Update
(2016 $/kW-ac) (2016 $/kW-ac) (2016 $/kW-ac) Small $3,859 $3,845 $3,800 Large $1,669 $1,670 $1,650 Steam
$10 Advanced Dry-Cooled $10 CHP Coal Gas CT Gas CCGT Nuclear $85 Recip Engine $18 67
LEVELIZED COST ESTIMATES 2016 AND 2036 Levelized Cost of Energy by Resource 2016 and 2036 Updated Expiration of tax incentives are largely offset by capital cost improvements for Solar PV technologies Forecasted capital cost reductions for wind (especially offshore) make up for expiration of the PTC 69 Levelized Cost of Energy by Resource 2016 and 2036 Updated Expiration of tax incentives causes increases in LCOE for mature renewable
resources Forecasted capital cost reductions for solar thermal technologies offset loss of ITC 70 Levelized Cost of Energy by Resource 2016 and 2036 Updated Conventional technologies have constant LCOEs in 2016$ 71 Levelized Fixed Costs by Resource 2016 and 2036 Updated Forecasted capital cost reductions for wind result in lower LFCs
Expiration of tax incentives are largely offset by capital cost improvements for Solar PV technologies 72 Levelized Fixed Costs by Resource 2016 and 2036 Updated Expiration of tax incentives causes increases in LFC for mature renewable resources Forecasted capital cost reductions for solar thermal technologies offset loss of ITC 73 Levelized Fixed Costs by Resource 2016 and 2036
Updated Conventional technologies have constant LFCs in 2016$ 74 Levelized Fixed Costs by Resource 2016 and 2036 Updated Cost improvements lower LFCs for battery storage options LFCs for more conventional storage options remain constant in 2016$ 75 Thank You! Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104
Tel 415-391-5100 Web http://www.ethree.com BIBLIOGRAPHY Sources Arizona Public Service 2014 Integrated Resource Plan. Apr 2014 Link Avista 2015 Electric Integrated Resource Plan. Aug 2015 Link California Energy Commission Estimated Cost of New Renewable and Fossil Generation in California. Mar 2015 Link 78 Sources (contd)
California Solar Initiative (CSI) CSI data. Nov 2016 Link Greentech Media U.S. PV System Pricing H2 2016: System Price Breakdowns and Forecasts. Nov 2016 Link Idaho Power Company 2015 Integrated Resource Plan. Jun 2015 Link 79 Sources (contd) International Renewable Energy Agency (IRENA) Renewable Power Generation Costs in 2014. Jan 2015 Link The Power to Change: Solar and Wind Reduction Potential to
2025, Jun 2016 Link Lazard Levelized Cost of Energy Analysis Version 9.0. Nov 2015 Link Levelized Cost of Energy Analysis Version 10.0. Dec 2016 Link 80 Sources (contd) Lazard (contd) Levelized Cost of Storage Analysis Version 1.0. Nov 2015 Link Levelized Cost of Storage Analysis Version 2.0. Dec 2016 Link Lawrence Berkeley National Laboratory (LBNL) Tracking the Sun VIII: The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States. Aug 2015
Link 81 Sources (contd) Lawrence Berkeley National Laboratory (LBNL) (contd) Tracking the Sun IX: The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States. Aug 2016 Link Utility Scale Solar 2015. Aug 2016 Link 2015 Wind Technologies Market Report. Aug 2016 Link 82 Sources (contd) National Renewable Energy Laboratory (NREL)
Distribution Generation Renewable Energy Estimate of Costs. Feb 2016 Link Pacificorp 2015 Integrated Resource Plan. Mar 2015 Link Pacificorp and Black & Veatch 2017 Integrated Resource Plan. Aug 2016 Link 83 Sources (contd) Portland General Electric 2016 Integrated Resource Plan. Nov 2016 Link 84
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