generation and transmission resource cost update … resource cost...assumptions reflect the latest...

Prepared for WECC

May 15, 2019

Generation and Transmission

Resource Cost Update 2019

Background, approach, and sources

Transmission resource capital cost update

• B&V cost framework and recent inflation metrics

– Benchmarking vs. estimated Tx project costs

Generation resource capital cost update

• In-depth review of resources with rapidly declining costs:

– Comparison of costs across public sources for solar PV, wind, Li-ion battery storage

– Benchmarking vs. recent public PPA prices and RFP bids

• Recommended cost updates for all other resources and comparison vs. prior cost

reports for WECC

Next steps

• Updates to FO&M and financing cost assumptions

• Levelized cost modeling with state-by-state adjustments (WECC Cost Calculator)

Contents

2

3

Background

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 WECC’s 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 and fixed costs

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: 2016/2017

Total CostFuel and Variable

Costs= + Fixed Cost

(E3 Capital Cost Tool)

4

Approach

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 study’s LTPT, allowing

for the development of robust scenarios through cost minimization

• Capital costs will serve as inputs to pro forma model (“Capital Cost Calculator”) that applies

standard lifetime, financing, and O&M assumptions to calculate levelized costs of each resource

This efforts builds on similar work performed in late 2016–early 2017

INPUTS MODELS STUDY RESULTS

20-Y

ear

Stu

dy

Twenty-Year Capital Expansion Plan

Generation Portfolio

Transmission Topology

Gen Capital Costs

Tx Capital Costs

Long-Term Planning Tools(Capital Expansion Optimization)

SCDT

NXT

Other Constraints

5

Resource costs are typically quoted in either upfront capital costs ($/kW) or

levelized costs ($/MWh) that are indicative of likely PPA prices for renewables

Levelized costs include several other cost factors and assumptions beyond the

project’s upfront capital cost

• Financing costs: cost of capital, financing lifetime, tax rates and incentives

• Operating costs: fixed and variable O&M of plant operations (“opex”), including fuel

• Performance assumptions: amount of energy generation over which fixed costs are spread, i.e.

average capacity factor, is a major driver of LCOE

In this research phase, E3 has focused on capital costs, which are more

comparable across data sources and suitable for benchmarking

Capital costs versus levelized costs

Capital costs

Operating costs

Financing costsPro forma

financial model

for project cash

flows

Levelized costs

Performance

6

Resource costs vary significantly from project to

project due to a variety of local and project-

specific factors

• Local climate: wind speed, solar irradiance, temperature

• Local terrain: greenfield vs. brownfield, flat vs. hilly,

forested vs. desert

• Local development costs: labor, permitting, taxes,

interconnection

• Project-specific: offtaker risk and financing costs,

developer economies of scale, etc.

These factors explain the wide range of reported

costs that E3 has observed

In this initial capital cost report, E3 has

identified a reference cost for each technology

associated with an average project in WECC

• The next phase of work will identify how local cost

factors can be generalized a state-by-state basis

Defining a capital cost reference point

Average Wind Speed

Forest Cover

High-Voltage Transmission

Sources of resource cost data

7

NREL

• Annual Technology Baseline 2018

• US Solar PV System Cost. Benchmark:

Q1 2018

• 2017 Cost of Wind Energy Review

• 2018 US Utility-Scale PV Plus-Energy

Storage System Costs Benchmark

LBNL

• Tracking the Sun 2018

• 2017 Wind Technologies Market Report

Lazard

• Levelized Cost of Energy Analysis v12.0

• Levelized Cost of Storage Analysis v4.0

IRENA

• Renewable Power Generation Costs in

2017

• Electricity Storage Costs in 2017

APS – 2017 IRP

Avista – 2017 IRP

Idaho Power Company – 2017 IRP

Pacificorp – 2017 IRP Update

Puget Sound Energy – 2017 IRP

E3 forms its capital cost estimates by reviewing a wide range of public

sources including national lab studies, industry analyst reports, and IRPs

from utilities within WECC, including:

8

After reviewing public sources of resource cost data, E3 benchmarks

reported capital costs versus recent project prices to ensure its

assumptions reflect the latest market trends

• Public sources often rely on historical data 1-3 years old and may be outdated by

the time they are published

• Market prices reflect actual transactable costs for new or future projects

PPA benchmarking was performed for resources with greatest cost

uncertainty due to rapid cost declines: solar, wind, and battery storage

Because PPA prices are quoted as levelized costs, E3 has calculated

the implied capital costs from different PPA prices using standard opex

and financing assumptions

For solar and wind, benchmarking is straightforward, as capital costs

are the primary driver of total levelized costs (O&M costs are minimal)

• Capital and financing is approximately 70% of wind cost and 90% of solar cost

Storage costs are more comparable on a levelized fixed-cost basis for

several reasons, thus are benchmarked to PPAs by that metric

Cost benchmarking vs. recent PPAs

9

For consistency, all cost data points are reported in real 2018$ and

indexed to year of commercial operation date as best possible

• National lab and industry analyst reports are mix of retrospective and prospective

• IRPs and PPAs quote cost for near-term procurement, COD 1-2 years in future

Past E3 cost studies have used learning curve methodology to

estimate future cost declines for renewable technologies

• Learning curve approach is suitable for macro analysis of technology costs driven

by single component (e.g. PV modules), but difficult to apply to soft costs and

other factors (global supply chain and policy incentives)

E3 proposes using NREL ATB’s low, mid, and constant forecast

scenarios as sensitivities in place of single cost forecast in this study

Cost vintaging and forecast methodology

IRPs

2018 204020202016

NREL

PPAs Market price

Historical price

Forecast price

Transmission Resource

Cost Update

11

Build off existing B&V TEPPC cost calculator while benchmarking vs.

external sources

• 2014 Transmission Capacity Cost Calculator spreadsheet and report

• Maintain same cost factors for terrain, technology types

• Check inputs/outputs vs. RETI and other public Tx planning sources

Update 2014 costs to revised 2018 figures using following inputs:

• Inflation multipliers on commodity prices of raw materials and industrial

construction costs: Bureau of Labor Statistics (BLS)

• CPI inflation for generic project admin costs: BLS

• Right of way costs per acre: Bureau of Land Management (BLM) Linear Right of

Way Schedule

Check cost assumptions vs. other public studies, planning reports,

and new or proposed transmission projects

Transmission cost update approach

12

The BLM publishes zonal

schedules of ROW rent and

corresponding annual

adjustments

• Released once every 10 years

• Latest update was released in 2016

• Zonal designations across the U.S.

are made on a county level basis

based on census data and can

change with each release

B&V Transmission Cost

Calculator has been updated with

the 2018 rent schedule

BLM Right-of-Way (ROW) cost updates

BLM Zone Land Costs

BLM Zone

Number

2015 Per Acre Rent

($/acre-year)

2018 Per Acre Rent

($/acre-year)% Change

1 9 8 -3%2 17 16 -6%3 34 32 -8%

4 52 48 -8%5 69 66 -4%

6 103 95 -8%7 172 133 -23%

8 345 85 -75%9 690 457 -34%

10 1,035 1,402 36%11 1,724 2,805 63%12 3,449 7,011 103%13 14,02314 21,034

15 28,045

13

Black & Veatch estimated generic inflators for Tx and substation

costs of 1.5% from 2012 to 2013 and 2.0% from 2013 to 2014

E3 used inflation data for the primary components of Tx capital costs

(materials, labor, and general overhead) to update calculator for 2018

• Refined update for full 2012 to 2018 period, including re-estimate of 2012 to 2014

Approach increases transmission resource costs by 10.5% in nominal

terms since 2012, equivalent to 1.7% annual inflation

• Real cost increase of 1.3% above US-CPI inflation from 2012 to 2018

Inflation updates to B&V Tx costs

Tx Cost

Component Weighting

2012-2018

inflation

2012-2018

CAGR Sources

Materials 50% 5.6% 0.9% BLS Metals PPI, FRED Aluminum and Steel

Labor 35% 16.3% 2.6% BLS PPI Construction-Industrial

General 15% 13.3% 2.1% BLS CPI-West

Total 100% 10.5% 1.7%

14

Inflation indices underlying forecasts

show relatively consistent trend

Price Indices Used for Inflation Benchmarks

Metals prices have been volatile,

declining in 2015-2016 before

increasing again in 2017-2018

15

Annual inflation of B&V Tx costs from

2012 to 2018

2012 2013 2014 2015 2016 2017 2018

Cost per mile $927,000 $914,126 $929,502 $904,570 $888,709 $948,316 $1,024,611

Source B&V 2012

study

E3 E3 E3 E3 E3 E3

Calculated Capital Cost per Mile for 230 kV Single Circuit Line (Nominal $)

Commodity cost indices for aluminum and steel drive recent uptick in

Tx costs since 2016 after slight decline from 2014 to 2016

All-in capital costs for Tx are estimated to have increased 10.5% in

nominal terms since 2012 study, or 1.3% in real terms

2012 2013 2014 2015 2016 2017 2018

Cost per mile $1,011,538 $983,538 $1,007,301 $958,996 $924,612 $967,282 $1,024,611

Source B&V 2012

study

E3 E3 E3 E3 E3 E3

Calculated Capital Cost per Mile for 230 kV Single Circuit Line (Real 2018 $)

16

Benchmarking source: EEI’s “2016 Transmission Projects: At a Glance”

• Approximate project costs and high-level summaries of major transmission projects

completed in 2015 or expected to be completed within next 4 years

E3 updated cost calculator benchmarked to within 5%-10% of EEI’s 2016

reported costs for three sample transmission projects modeled

Benchmarking vs. actual Tx projects

Project name Description Approx.

cost (EEI)

E3 updated

B&V estimate

Path 42 15 miles of 230 kV reconductor, including

substation upgrades and incorporation of a 230

kV, 48 MVAR capacitor bank, spanning from

Devers to Mirage Substation. Completed in 2015

31 MM$ 28 MM$

Sun Valley- Trilby

Wash – Palm Valley

30 miles of new, double circuit capable, 230 kV

lines through the western Phoenix Metropolitan

area. A new 230;69 kV substation wit hone

transformer is included. Went into service in

2016.

75 MM$ 72 MM$

Palo Verde–Delaney–

SunValley–Morgan–

Pinnacle Peak

110 miles of new 500 kV lines connecting

northeast Phoenix to southwest Phoenix in 4

segments. Went into service in 2016.

312 MM$ 330 MM$

17

Tx benchmarking assumptions

Input assumptions to E3 updated B&V Tx cost calculator

Select Transmission Projects Path 42Sun Valley - Trilby

Wash - Palm Valley

Palo Verde - Delaney -

Sun Valley - Morgan -

Pinnacle Peak

Voltage Class 230 kV Double Circuit 230 kV Double Circuit 500 kV Single Circuit

Conductor Type ACSR ACSR ACSR

Structure Lattice Lattice Lattice

Length Category > 10 miles > 10 miles > 10 miles

New or Re-conductor? Re-conductor New New

Average Terrain Multiplier 1 1 1

Desert/Barren Land 12 25 80

Rolling Hills (2-8% Slope) 3 5 30

6 95

7 30 15

8

9 15

Voltage 230 kV Substation 230 kV Substation 500 kV Substation

New or Existing Site? Existing New Existing

Circuit Breaker Type Breaker and a Half Breaker and a Half Breaker and a Half

# of Line/XFMR Positions 3 3 3

HVDC Converter No No No

Transformer Type 115/230 kV XFMR 138/230 kV XFMR 230/500 kV XFMR

MVA Rating Per Transformer 200 200 200

# of Transformers 1 1 3

SVC MVAR Rating 0 0 0

Shunt Reactor MVAR Rating 0 0 0

Series Capacitor MVAR Rating 48 0 0

AFUDC/Overhead Cost 17.5% 17.5% 17.5%

BLM Zone

Terrain Type

Substation

Project Inputs

18

Despite volatile commodity costs, all-in Tx capital costs have not

changed significantly in real terms since 2012, increasing just 1.3%

E3 has updated the 2012 B&V Tx cost calculator with the latest

inflation factors and it appears to benchmark well to the reported or

estimated costs of a small sampling of recent Tx projects

E3 has also corrected a small formula error in the original B&V Tx

cost calculator and will provide an updated version to WECC

Tx cost update summary

Generation Resource

Cost Update

20

E3 first surveyed recent reports on costs of new resources

• National lab studies, utility IRPs, industry analyst reports

• All technologies assessed in prior cost studies were included in this review

Next, E3 and WECC selected core technologies for closer study

• Resources that were studied in the past and are no longer economically

competitive were filtered out (e.g. single-axis tracking solar is now more

economic than fixed-tilt solar and is employed on all new grid-scale projects in

WECC, thus fixed-tilt was removed from study)

E3 performed additional research and cost benchmarking for core

technologies with rapidly evolving cost profiles

• Benchmarking of public capital cost estimates versus implied capital costs from

PPA prices in recent WECC-area RFPs

• Examination of research reports with future cost forecasts

Approach, resources considered, and

changes from prior studies

21

Solar PV

• Grid-scale – tracking, ground-mounted PV

Wind

• Onshore and offshore (fixed-base and floating)

• Further variations in interconnection, capital cost

associated with wind quality, etc. to be handled in

more detail in next phase

Energy Storage

• Lithium-ion battery storage

– Utility-scale, with and without paired solar

– Costs broken out by capacity (kW) and energy (kWh)

• Flow battery storage

• Pumped hydro storage

• Compressed air energy storage (CAES)

Distributed energy resources (DERs)

• Residential solar – fixed tilt, rooftop PV

• Commercial solar – fixed tilt, rooftop PV

• Lithium-ion battery storage – BTM

– Costs broken out by capacity (kW) and energy (kWh)

Specific resources studied

Gas

• CT: Aero/Frame

• CCGT: Wet/Dry, Conventional/Advanced, with and

without CCS

• Reciprocating Engine

Other renewables

• Geothermal: Binary/Flash, Standard/Enhanced

• Small Hydro

• Biomass/Biogas

• Solar Thermal

Other thermal

• Combined Heat and Power (CHP)

• Coal: PC without CCS and IGCC with CCS

• Nuclear: Large

• Nuclear: Small modular

23

Capital cost 2012 E3 2014 E3 2016 E3 2018 E3*

<20 MW >20 MW <20 MW >20 MW <20 MW >20 MW <20 MW >20 MW

Tracking solar ($/kW-dc) $3,700 $3,250 $3,200 $2,800 $1,700 $1,500 $1,100

Tracking solar ($/kW-ac) $4,400 $3,800 $4,200 $3,600 $2,200 $1,900 $1,450

Utility-scale tracking solar

Recommended Capital Cost, Real 2018$

Capital Cost Estimate by Source

24

Utility-scale solar PV cost benchmarking

PPAs and levelization assumptionsP

PA S

um

mar

y

Project NameBuild

Year

PPA Price

(2020 $/MWh)Location CF (%)

Xcel RFP: CO Median RFP bids 2020 29.50 CO 28

AZ Solar 1 2020 24.99 Salome, AZ 32

NV PUC: Eagle Shadow Solar 2021 23.29 Clark County, NV 35

NV PUC: Copper Mountain 5 2021 21.13 Boulder City, NV 33

NV PUC: Techren V 2020 29.98 Boulder City, NV 32

PNM: Route 66 PPA 2021 29.39 Albuquerque, NM 33

Many recent solar PV projects with public PPA prices available

E3 estimated implied capital costs with FO&M and financing costs

based on 2018 NREL ATB

• FO&M of ~$11/kW-yr from NREL ATB

• WACC of 7.2% based on NREL ATB methodology + E3 cost of capital update

E3 assumed project capacity factors and PPA escalation terms based on

publicly available data or E3 best estimates if not disclosed in PPA

25

Utility-scale solar PV cost benchmarking

results show wide range, accurate midpoint

PPA implied capital cost,

2020 COD

NREL ATB

2020 forecast

Low Median High Low Mid High

Capital cost (2018 $/kW-dc) $778 $935 $1,265 $886 $1,003 $1,198

Capital cost (2018 $/kW-ac) $1,047 $1,262 $1,708 $1,171 $1,325 $1,582

Implied capital costs from benchmark PPAs show a wide spread, likely

due to sensitivity to financing, O&M, and capacity factor assumptions

Average PPA benchmarked price of $935/kW-dc is between NREL “Low”

and “Mid” case forecasts of $886 to $1,003/kW-dc in 2020

E3 recommended cost of $1,100/kW-dc in 2018 is close to NREL Mid

case and suggests further cost decline of ~15% by 2020 is already

priced into new PPAs being signed today

26

Three capital cost trajectories are projected

• Low, Mid, and Constant (no cost reductions beyond 2021)

• Based on the NREL 2018 Annual Technology Baseline

E3 recommended cost for 2018 and PPA benchmarking for 2020

suggest that NREL Mid cost case is accurate baseline forecast

• Low-cost trajectory may provide a useful sensitivity

Solar PV capital cost forecasts

Utility-Scale Solar PV Capital Cost Forecast

PPA benchmarking

implied 2020 costsE3 2018

recommended

cost

27

Solar PV, preliminary LCOEs

Capacity Factor LCOE (2018 $/MWh)

27% CF 31.05

30% CF 27.94

33% CF 25.40

Solar PV Levelized Cost Forecast Scenarios

2018 Levelized Cost Estimates – Mid Scenario LCOE for solar PV depends on

both capital cost and a number

of other factors

• Financing cost

• O&M costs

• ITC

• Operating lifetime

• Capacity factor

E3 assumes that several cost

factors will evolve in the future

• ITC step-up

• Declining capital costs

• Declining O&M costs

29

Capital cost 2012 WECC 2014 E3 2016 E3 2019 E3*

Onshore wind ($/kW) $2,300 $2,250 $2,100 $1,650

Onshore wind



Significant variance in wind costs by source likely reflects regional

differences in wind quality and installation and interconnection costs

30

Onshore wind cost benchmarkingP

PA

Su

mm

ary Project Name

Build

Year

PPA Price

(2020 $/MWh)Location CF (%)

Xcel RFP: CO Median RFP bids 2020 18.10 CO 45

PNM: La Joya 2020 27.92 Estancia, NM 47

Very few recent PPA prices available for wind projects in WECC

E3 estimated implied capital costs using two sets of assumptions with

high and low FO&M and financing costs based on NREL scenarios

• FO&M of ~$11/kW-yr from NREL ATB

• WACC of 7.2% based on NREL ATB methodology + E3 cost of capital update

E3 assumed project capacity factors and PPA escalation terms based

on publicly available data or E3 best estimates if not disclosed in PPA

31

Onshore wind cost benchmarking results

show same wide range, accurate midpoint

Implied capital costs from benchmark PPAs show a wide spread, due

primarily to sensitivity to financing cost assumptions

Average PPA benchmarked price of $1,550/kW is aligned reasonably

well with NREL “Mid” case forecast of $1,622/kW in 2020

E3 recommended cost of $1,650/kW in 2018 is close to NREL Mid case

and suggests further cost decline of ~4% by 2020 is already priced

into new PPAs being signed today

PPA implied capital

cost, 2020 COD NREL ATB

2020 forecast (TRG5)

Lower Avg Upper Low Mid High

Capital cost (2018 $/kW) $1,156 $1,474 $1,792 $1,493 $1,596 $1,705

32


• Low, Mid, and Constant (no cost change beyond 2017)


Onshore Wind capital cost forecasts

NREL 2018 ATB: Onshore Wind Capital Cost Forecast

E3 2018

recommended

cost

PPA benchmarking

implied 2020 costs

33

Capacity Factor LCOE (2018 $/MWh)

35% CF $33.93

40% CF $29.50

45% CF $21.98

Onshore Wind, preliminary LCOEs

Onshore Wind Levelized Cost Forecast Scenarios

Preliminary

2018 Levelized Cost Estimates- Mid Scenario LCOE for onshore wind

depends on both capital cost

and a number of other factors

• Financing cost

• O&M costs

• PTC


• Capacity factor



• PTC step-up and expiration



34


Offshore wind – fixed base ($/kW) $7,000 $6,700 $4,800 $3,500

Offshore wind – floating ($/kW) $6,500

Offshore wind



Floating base offshore wind added to represent potential future west coast projects. Fixed

base offshore wind is not viable in most of WECC given seafloor depth off WA/OR/CA

35


• Low, Mid, and Constant (no cost change beyond 2017)


Offshore Wind capital cost forecasts

Floating Base Offshore Wind – TRG 10 Capital Cost Forecast

36

Floating Offshore Wind, preliminary LCOEs

Onshore Wind Levelized Cost Forecast Scenarios LCOE for onshore wind

depends on both capital cost

and a number of other factors

• Financing cost

• O&M costs

• ITC


• Capacity factor



• ITC step-up and expiration



Lack of large-scale floating offshore wind

projects to date adds significant uncertainty to

cost forecasts

Energy Storage

38

Battery costs vary significantly by

system specifications

For modeling purposes, costs are

commonly broken into two categories

• Costs that scale with power (“capacity”),

quoted in $/kW

• Costs that scale with energy (“duration”),

quoted in $/kWh

Battery modules are the largest and

best understood component of

system cost and the one that scales

most linearly with duration

• Each kWh of duration adds around $300

today, but is declining rapidly

Fixed capacity cost including inverter

and interconnection varies

significantly by report

• For storage paired with solar, these costs

may be minimal

Lithium-ion battery cost breakdown by

power capacity and duration

Utility-scale 4-hr Battery Cost by Component

Utility-scale Battery Cost by Duration

39


Li-ion battery capacity ($/kW)

- Paired with solar $75

- Standalone $200

Li-ion battery energy ($/kWh) $325

Li-ion battery, 4-hr ($/kW)

- Paired with solar

n/a $5,059 $3,200

$1,375

- Standalone n/a $5,059 $3,200 $1,500

Lithium-ion battery storage

Recommended Capital Cost


Recent RFP bids for solar+storage

To benchmark against recent storage PPA prices, E3 examined solar+storage prices in three

recent RFPs

TEP - 2017

• Under $45/MWh for 100 MW / 30 MW / 4-hr NextEra solar+storage project in May 2017

Xcel - 2017

• No explicit guidance on how solar+storage contracts should be structured. Appears they bid as bundled PPAs for

generation and capacity, presumably with utility dispatch

• Standalone storage: $11,300/MW-mo median (4- to 10-hr durations)

• Hybrid bids with storage add $2.90/MWh (wind median) or $6.50/MWh (solar median)

• Preferred portfolio, approved by CPUC, included 275 MW of storage

– All three storage projects selected are solar hybrid plants

NV Energy - 2018

• Explicit instruction for hybrid projects: at least 100 MW RE, 25 MW storage, 4-hr duration

• Hybrids bid two separate contracts: one for solar generation ($/MWh) and one for capacity ($/MW-mo)

• Storage contracts at $6,110-$7,755/MW-mo

• Solar capacity, battery capacity as % of solar, and battery duration were all near minimum in winning bids

– NextEra: Dodge Flats 200 MW/50 MW/4-hr

– NextEra: Fish Springs 100 MW/25 MW/4-hr

– Cypress Creek: 101 MW/25 MW/4-hr Crescent Valley project (Battle Mountain Solar)

40

NextEra claims storage adds a premium of $15/MWh for solar projects completed in 2017-2018

• Approximate capacity price of $160-$175/kW-yr for storage assuming typical sizing and solar capacity factor

• Typically 4-hr storage at 25% of solar capacity (e.g. 100 MW solar plant, 25 MW / 100 MWh storage)

In recent RFPs, this premium has fallen to $6-$7/MWh for projects with COD in 2021-22

• Capacity price of $73 to $94/kW-yr for hybrid projects with unbundled storage prices (NV Energy)

NextEra projects storage premium will fall to $5/MWh by mid-2020s, or under $60/kW-yr with typical sizing ratio

41

Levelized cost of storage when paired with solar – E3 vs NextEra

Gross CONE in 2018 $/kW-yr

Current hybrid storage bids reflect aggressive

price decline assumptions, capture of the ITC,

and other cost savings from pairing with solar

such as reduced interconnection costs

Result? Discount of 25% to 40% versus standalone

storage levelized costsRecent NV Energy

RFP winners

Declining capital costs and capture of ITC drive

low storage bid prices when paired with solar

42

Hybrid solar-plus-storage projects have been contracted under a

variety of arrangements regarding the role of scheduling coordinator

• Different contract arrangements may favor use for shifting solar vs. providing

ancillary services such as frequency regulation or spinning reserves

To qualify for the ITC, storage must be charged from solar for the first

five years of operation

Finally, DC vs. AC coupled storage may offer different amounts of

flexibility in dispatch depending on the given project’s

interconnection capacity

E3 recommends modeling hybrid storage as a dispatchable resource

independent from solar, but restricted to charging from co-located

solar during the first five years of project life if possible

Modeling solar plus storage dispatch

43


Flow battery, 4-hr ($/kW) n/a $5,350 $3,200 $2,000

Flow battery storage



Flow battery estimated costs have declined nearly as rapidly as Li-ion, but limited

commercial experience adds significant uncertainty. No major utility-scale PPAs

have been signed for flow batteries in the US to date

Distributed Energy Resources

45

In addition to grid-scale resources, E3 has provided cost estimates for

distributed energy resources typically located behind the meter (BTM)

DERs are a less commoditized type of resource due to site-specific

cost factors that vary greatly from project to project

• For example, rooftop solar costs will vary from building to building depending

upon roof size and accessibility, mounting options, etc.

• This variability makes DER costs difficult to generalize

Given their smaller scale and higher soft costs associated with

customer acquisition, installation, overhead, etc. DERs are typically

more expensive than utility-scale resources of the same technology

• However, DERs also present different value streams, such as retail bill savings

and potential for T&D deferral

DER overview

46

Capital cost 2012 WECC 2014 E3 2016 E3 2018 E3

Residential solar

($/kW-dc)

$6,150 $5,100 $3,100 $2,700

Residential solar

($/kW-ac)

$7,250 $6,200 $3,700 $3,250

BTM residential solar (rooftop)



47


Commercial solar

($/kW-dc)

$5,200 $4,300 $2,750 $1,850

Commercial solar

($/kW-ac)

$6,100 $5,100 $3,300 $2,200

BTM commercial solar (rooftop)



48

BTM Li-ion battery storage


Li-ion battery capacity

($/kW)

- - - $300

Li-ion battery energy

($/kWh)

- - - $670

Li-ion battery, 2-hr ($/kW) - - - $1,650

Two-hour duration is most typical for BTM storage today, which is

primarily used for demand charge clipping

As with solar, BTM storage is significantly more expensive than utility-

scale storage due to smaller scale, higher soft costs, etc.

• Likewise, BTM storage is generally assumed to be non-dispatchable for system

modeling purposes, though some DR programs (e.g. CA DRAM) have contracted

with BTM storage

E3 did not find any precedents for BTM storage paired with solar

qualifying for the ITC, thus BTM storage is modeled as a single use case

50

Gas- and oil-fired generation

Capital cost ($/kW) 2012 WECC 2014 E3 2016 E3 2018 E3*

Gas CT—Aero $1,300 $1,300 $1,250 $1,300

Gas CT—Frame $900 $900 $850 $800

Gas CCGT—Conventional (Wet) $1,300 $1,200 $1,200 $1,200

Gas CCGT—Conventional (Dry) $1,400 $1,300 $1,250 $1,250

Gas CCGT—Advanced (Wet) $1,400 $1,300 $1,300 $1,250

Gas CCGT—Advanced (Dry) $1,500 $1,400 $1,350 $1,300

Gas CCGT—Advanced w/ CCS n/a n/a n/a +$1,200

Reciprocating Engine n/a $1,400 $1,350 $1,350


Cost reports reviewed by E3 show minimal changes since prior study

Gas CCGT with CCS was added as a category that is represented by a

cost premium over Advanced CCGT plant costs without CCS

• CCGTs with CCS will be subject to different operational assumptions, such as

increased heat rates (lower efficiency), decreased flexibility (no daily cycling), and

variable costs that incorporate the value of tax credits for CCS

Other thermal and renewables

52

Other renewables


Geothermal—Binary $6,400 $6,300 $5,300 $6,100

Geothermal—Binary, enhanced n/a $10,700 $10,600 $13,600

Geothermal—Flash $6,400 $6,300 $5,300 $5,100

Geothermal—Flash, enhanced n/a $10,700 $10,600 $9,000

Hydro—small $4,100 $4,800 $4,200 $4,200

Biomass $4,900 $4,600 $4,550

$4,400Biogas - Landfill $3,200 $3,000 $2,950

Biogas – Other $6,400 $6,000 $5,900

Solar thermal $5,700-$8,200 $5,500-$8,000 $6,300-$6,900 $5,600-$8,300


Cost reports reviewed by E3 show relatively minor changes since prior study

Biomass and biogas technologies were combined into single category

• These technologies were often labeled interchangeably or as generic “biopower”

• Limited cost data that clearly differentiated between technologies suggests high degree of

project-specific cost considerations, rather than technological differences

53

CHP was combined into single technology due to limited cost data that

differentiated between small and large systems

Coal IGCC with CCS and small modular nuclear costs are based on public reports

and IRPs, but minimal commercial data exists for these technologies

• Estimated cost for coal IGCC with CCS declined significantly over past two years

• Small modular nuclear was added as a category, but no projects have been licensed or built to date

Large scale nuclear costs were increased to $10,000/kW to reflect the latest cost

estimates for Vogtle, which may total $27B ($12,000/kW)

Other thermal technologies


CHP – Small $4,300 $4,100 $4,000$2,200

CHP – Large $1,850 $1,800 $1,750

Coal – PC no CCS $4,200 $3,950 $3,900 $3,900

Coal – IGCC with CCS $9,300 $8,800 $8,700 $6,700

Nuclear—Large $8,700 $8,200 $8,450 $10,000-$12,000

Nuclear—Small modular n/a n/a n/a $6,200


Next steps

55

Complete WECC-wide pro forma financial model (“Cost Calculator”)

Research regarding regional cost factors will be incorporated in

WECC Cost Calculator

• Technology-driven factors such as wind turbine costs that vary by wind speed

• Macroeconomic factors that vary by region and impact Capital and O&M costs,

such as local labor costs and taxes

• Interconnection cost differences that vary by location and proximity to existing Tx

Completion of updated WECC Cost Calculator which will produce

levelized costs for all state, technology, and resource combinations

for 2019 through 2040

Next steps

Thank You

Thank You

Arne Olson, Sr. Partner, [email protected]

Nick Schlag, Director, [email protected]

Sandy Hull, Sr. Consultant, [email protected]

Vivian Li, Consultant, [email protected]

Femi Sawyerr, Consultant, [email protected]

mailto:[email protected]





generation and transmission resource cost update … resource cost...assumptions reflect the latest...

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