Jun 14, 2012 - Source: California's Electricity System Supply and Demand Overview, presentation by Jeffrey Byron, Commis
Renewables Integration: The Value of Concentrating Solar Power (CSP) and the Net System Cost Methodology Addressing the Economic Challenges of Comparing Among Renewable Resource Options Joseph Desmond, Sr. VP, Government Affairs and Communications BrightSource Energy June 14, 2012
Different Resources Serve Different Needs
Source: California’s Electricity System Supply and Demand Overview, presentation by Jeffrey Byron, Commissioner, State Energy Resources Conservation and Development Commission (energy commission), to the California State Assembly Utilities and Commerce Committee, Informational Hearing, March 29, 2007. * According to the energy commission, 1 megawatt will provide electricity for approximately 750 homes.
2
Output Variability Impacts Grid Operations and Increases Costs … Wind Example
Forecast Uncertainty Day-to-Day
Non-Coincidence with Peak Demand
Variable resources require changes in grid system operation resulting in integration costs Short-term variability increases the need for frequency regulation
Increased variability requires greater flexibility and operating reserves, with more ramping capability to meet output changes Tehachapi Source: Electric Power Research Institute, presented at REFF-West, September 2009 Ercot Load Chart Source: The Wind-Energy Myth by Robert Bryce, August 12, 2011, National Review
3
Output Variability Impacts Grid Operations and Increases Costs …
PV Output Variability
… Requiring Dispatchable Generation to Maintain Reliability Tehachapi Source: Electric Power Research Institute, presented at REFF-West, September 2009 Chart Source: NERC – Accommodating High Levels of Variable Generation
4
Wind and PV: Poor Alignment with System Peak Demand Results in Lower Capacity Values
Additional resources are needed to meet reliability requirements Load shape source: California’s Electricity System Supply and Demand Overview, presentation by Jeffrey Byron, Commissioner, State Energy Resources Conservation and Development Commission (energy commission), to the California State Assembly Utilities and Commerce Committee, Informational Hearing, March 29, 2007. Production output of wind and PV are illustrative. Not drawn to scale with load shape curve.
5
Solar Thermal with Storage: Superior Alignment and More Energy Sold at Premium Prices
Energy storage increases asset utilization and transforms solar thermal into a high-value, flexible resource Note: CA utility time-of-use factors based on PG&E and SCE data.
6
Net System Cost is a Metric Used to Evaluate Cost Competitiveness Between Resource Alternatives What it takes to make the hardware
What it takes to generate electricity
What it takes to keep the lights on
Capital Cost
Energy Cost
Net System Cost
$/W
Levelized Cost of Energy (LCOE)
Least-Cost, Best-Fit (LCBF)
Considers additional costs and energy produced
Considers utility value
Considers only hardware Number of panels / mirrors / equipment Cost to make it Installed cost adds labor and materials
Capital costs
LCOE
Capacity factor
Integration costs
Degradation
Market value of energy (and ancillary services)
Operating costs Basic financing
Availability at peak demand
Unlike other methodologies, Net System Cost accounts for both costs and benefits 7
LCOE Amortizes Plant Costs Across Production
Levelized Cost of Energy (LCOE) LCOE compares the cost per unit of energy (in $/MWh) across different technology types. Accounts for:
Capital costs Capacity factor Fuel costs (if any) O&M costs Taxes
LCOE is essentially the total costs of a project over its lifetime divided by the total megawatt hours of power it produces
PV (Lifecycle costs) LCOE =
PV (MWh Energy Production)
Increasing capacity factor is a key driver of LCOE reductions over time 8
Intermittent Resources, such as Wind and PV, Impose Integration Costs on Power Grids
Integration costs are additional services, such as ancillary services, a grid operator must purchase to account for increased forecast uncertainty and variability associated with wind and solar resources in order to meet grid reliability standards. PV/Wind
Backup Power Gas Plant Reliable power
“It [is] important for Edison to keep its customers’ total costs in mind going forward, which include the integration costs of solar panels. We know those costs are real, and we’re trying to mitigate those by having a balanced portfolio.” - - Marc Ulrich, Southern California Edison, VP of Alternative and Renewable Power (Bloomberg, November 2011)
Renewable technologies which avoid integration costs are competitively advantaged in a resource selection process 9
CSP Avoids Real Integration Costs Imposed by Intermittent Resources
According to Energy and Environmental Economic (E3), while integration cost estimates vary by study, there is a clear upward trend in integration costs, per megawatt hour, as renewables penetration increases.1
The California Public Utilities Commission Long Term Planning Process methodology applies $7.50/MWh, as a “penalty” for all wind and solar resources in resource ranking and selection. 1
Integration costs are increasingly being assigned by utilities to intermittent resources within the selection process Chart Source: Wiser, Ryan and Bolinger, Mark, Lawrence Berkeley National Laboratory, “2009 Wind Technologies Market Report”, pg 65; and, Navigant Consulting et al; Large Scale PV Integration Study, Prepared for NV Energy; July 2011 1"Competitive Market Analysis Prepared for BrightSource Energy" (E3, March 2012).
10
Energy Value Varies According to a Resource’s Time of Delivery
The average price received for wholesale energy market products produced by a resource, including ancillary services.
Resource production during peak hours receives a higher average price. Resources with storage can further increase average revenues by better matching production to market prices.
Energy value is highest during peak demand hours Production output of PV and CSP are illustrative. Not drawn to scale with load shape curve.
11
Integrating Thermal Storage Extends Production to Capture Maximum Energy Value
Storage is charged when excess steam generation is directed to a molten salt tank Energy storage enables production during peak price and demand hours after the sun sets Production output of PV and CSP are illustrative. Market Price / System Value are representative, not actual, prices.
12
Integrating Thermal Storage Transforms a Solar Thermal Plant into a High-value, Flexible Resource
Storage is discharged when most economic to dispatch the power plant Energy storage enables optimization of production profile against market prices Production output of PV and CSP are illustrative. Market Price / System Value are representative, not actual, prices.
13
Capacity Value Varies According to the Availability of a Resource at System Peak
Capacity value refers to a power plant’s expected available production during peak demand hours multiplied by forward capacity prices. Capacity Value = On-Peak Availability Factor % × Plant Capacity (MW) × Capacity Price
Reliable resources, such as solar thermal and natural gas, have higher capacity value availability factors used for planning from California’s 2010 Long Term Planning Process (LTPP), except Solar Thermal with Storage from Western Wind and Solar Integration Study, Prepared for NREL by GE Energy, May 2010 and Simple Cycle Natural Gas is a BrightSource management estimate. 1On-peak
14
Resources Available During Peak Demand Hours Receive Higher Capacity Values
CSP technology with storage can be optimized to match the net system peak and maximize capacity value 1
Denholm, Paul and Mark Mehos, Enabling Greater Penetration of Solar Power via the Use of CSP with Thermal Energy Storage, National Renewable Energy Laboratory, Technical Report, NREL/TP-6A20-52978, November 2011, available at http://www.nrel.gov/csp/pdfs/52978.pdf. 2 On-peak availability factors used for planning from California’s 2010 Long Term Planning Process (LTPP), except Solar Thermal with Storage from Western Wind and Solar Integration Study, Prepared for NREL by GE Energy, May 2010.
15
Solar Thermal Provides Superior System Value Compared to PV
NREL Estimates of System Cost and Benefit Variances between CSP with Storage and PV1 Range of Value ($ / MWh) Low
High
Energy Shifting & Ancillary Services
$5
$10
Capacity Value
$7
$20
Reduced Curtailment
$3
$3
Avoided Integration Costs
$1
$7
$16
$40
Total
NREL estimates are consistent with growing number of third-party studies on the system benefits associated with dispatchable solar thermal power Paul, (solar thermal forecasting & modeling analyst at NREL) “Tradeoffs and Synergies between CSP and PV at High Grid Penetration.” PowerPoint presentation on July 5, 2011. Estimates are preliminary and are based on gas prices between $4.50 and $9.00 per mm BTU.
1 Denholm,
16
Net System Cost is a Metric Used to Compare Cost Competitiveness Between Resource Alternatives
The method by which utilities procure resources to minimize the total cost of system operations. Calculated by comparing total costs associated with a resource minus its benefits.
Evaluation based on Net System Cost is designed to achieve the lowest overall cost to ratepayers The comparison of Net System Cost above is for illustrative purposes only and is not based on actual values.
17
brightsourceenergy.com
18
