Explore Future Assumptions

On the "Explore Future Assumptions" page, a Linear Program takes on the task of fulfilling demand while minimizing costs, which the user was doing on the preceding "Understand electricity generation"page. The linear program does the calculation over an entire year's worth of electricity data in 13 regions within the Continental United States.

In addition to minimizing costs and fulfilling demand, the linear program also ensures that a specified amount of "Clean Energy" is consumed where Clean Energy is defined as Solar and Wind. Optionally, the user can add Nuclear Power or Carbon Capture and Sequestration (CCS) to the definition of Clean Energy.

If the user selects different cost assumptions for power generation, or a different carbon tax, then the site will show updated results.

CO2 outcomes reported by the tool

The “Understand Electricity Generation” page reports CO2 for California electricity consumption, including imports. Today’s value of 83.1 million metric tons is reported by CalEPA for 2015. The amount of CO2 reported by the tool assumes the latest and most efficient power plants. If we today’s capacity mixture could be reproduced using these latest plants, they would only generate 65.3 million metric tons of CO2. Using efficient natural gas (NG) plants plus hydropower would produce 91.3 million metric tons, which is an increase from today because California uses a large amount of zero-carbon energy.

The CO2 goal in the “Understanding Generation” page comes from the U.S. Deep Decarbonization Pathway Report 15, which projects that in 2050, electricity should generate no more than 0.054 metric tons of CO2 per MWh of electricity (in the most lenient case --- other scenarios may force emissions as low as 0.014).

The “Explore Future Assumptions” page reports CO2 for electricity consumption across the United States. The EIA reports this as 1.82 billion metric tons for 2016. Using the most efficient plants would reduce this to 1.61 billion metric tons. Implementing efficient NG plus hydropower would reduce it further to 1.25 billion metric tons. As in “Understand Generation”, the CO2 goal comes from the U.S. Deep Decarbonization Pathway Report.

Cost outcomes reported by the tool

The costs reported by the tool are an estimate of the cost to generate a megawatt-hour of electricity, about 1.1 times the amount of electricity used by a typical U.S. household.

The cost presented is the Levelized Cost of Electricity (LCOE). LCOE estimates the cost based on three factors: the cost of building the generation plants (per megawatt-hour of capacity), the cost to maintain the plants (per megawatt-hour of capacity per year), and the cost to actually generate the electricity (per megawatt-hour of produced electricity). The LCOE estimate assumes a complete rebuild of the grid, when new plants have replaced old ones.

We assume that the building cost and the fixed maintenance cost are amortized over a 30-year lifespan of the plant. We use a net-present-value calculation for this amortization, with an assumed (real) discount rate of 6%.

We assume that the building cost and the fixed maintenance cost are amortized over a 30-year lifespan of the plant. We use a net-present-value calculation for this amortization, with an assumed (real) discount rate of 6%.

Because the tool is computing LCOE, it will not reflect the price charged to industrial, commercial, or residential customers. Prices for those customers are typically higher than the cost to build and operate the generating plants. The tool doesn’t model how increased costs of generation are passed to customers.

Energy generation cost assumptions

To simplify Policy Simulations, we reduced the choices for energy generation costs to three per technology. For solar, wind, and nuclear power, these are labeled “optimistic future”, “moderate future”, and “today”; to reflect possible future reductions in the capital cost in building these kinds of plants. For natural gas, the choices are “low cost”, “medium cost”, and “high cost”; which reflect future volatility in natural gas fuel prices.

Power Sources

For all power sources, we model costs arising from the following sources:

Capital: Cost to build the plant ($ per Kilowatt of capacity)

Fixed: Cost to maintain the plant ($ per Kilowatt of capacity per year)

Variable: Cost to generate energy ($ per Megawatt hour)

For fossil fuel plants, the variable costs are determined from:

Fuel: Cost of fuel ($ per MMBTU)

Heat-rate: Fuel to electricity efficiency (btu per kilowatt hour)

For simulations with a carbon tax, we also source the CO2 generated:

CO 2 ; Tonnes of CO 2 per Megawatt hour

Zero CO 2 sources

Costs for solar and wind production have fallen significantly over the past few years and are expected to get even cheaper over time. The price for nuclear power has remained the same over time, but recent startups and developments are working on ‘Advanced Nuclear’ technology which may make nuclear power cheaper in the future.

Source Capital ($ / kW) Fixed ($ / kW-year) Solar Optimistic Future 6304 21.661 Solar Moderate Future 10404 21.661 Solar Today 22771 21.661 Wind Optimistic Future 13704 46.711 Wind Moderate Future 15004 46.711 Wind Today 16861 46.711

Source Capital ($ / kW) Fixed ($ / kW-year) Variable Costs ($ / MWh) Nuclear Optimistic Future 20003 603 123 Nuclear Moderate Future 35003 803 123 Nuclear Today 58801 99.651 101,5

We treat hydropower as a legacy resource, assuming that all economic sites for building dams have already been exploited. This caps the total amount of hydropower available to be the existing capacity in each region in the United States.

Source Capital ($ / kW) Fixed ($ / kW-year) Variable Costs ($ / MWh) Hydropower 0 (already built) 14.931 2.661

Fossil fuel

Fossil fuel technology is mature, with efficiency slowly improving. The biggest factor that affects natural-gas-based electricity is the cost of the natural gas itself. With the widespread use of hydraulic fracturing in the United States, natural gas prices have reached historic lows. For natural gas, we set “low cost” to be the price paid by utilities for natural gas in the second quarter of 2016. However, natural gas prices are volatile in both time and across different countries. To represent this volatility, we set “medium cost” to be a typical European fuel price (January 2016) and “high cost” be $13.5/MMBTU (higher than the highest monthly price in the United States since 2002, but lower than the peak Japanese cost for LNG). We set capital costs to today’s technology to be the same across all three fuel costs.

For natural gas, we consider two types of plant Natural Gas Combined Cycle (NGCC) and Natural Gas Conventional Turbine (NGCT)

For coal, we see very little price changes over time and have fixed coal costs at a single value.

Source Capital ($ / kW) Fixed ($ / kW-year) Fuel ($ / MMBTU) Heat rate (BTU / kWh) CO 2 (kg / MMBTU) NGCT $ 6721 6.761 2.516 85501 537 NGCT $$ 6721 6.761 2.516 85501 537 NGCT $$ 6721 6.761 2.516 85501 537 NGCC $ 10941 9.941 2.516 62001 537 NGCC $$ 10941 9.941 2.516 62001 537 NGCC $$ 10941 9.941 2.516 62001 537 Coal 29342 31.182 2.142 88002 987

Carbon capture and sequestration (CCS)

Carbon Capture and Sequestration captures CO2 in the exhaust of fossil fuel plants, then transports it to geological storage where it can be sequestered. The additional machinery to capture the CO2 requires energy from the fossil fuel plant, which lowers overall plant efficiency. In addition, carbon capture equipment costs extra capital.

For this simulation, we consider cryogenic capture methods. For different fuel type we add Additional Capital and Fixed Costs to the values in the chart above. We increase the heat rate of the plants, which reflects decrease inefficiency; and multiply Fossil Fuel CO2 output by a CO2 Multiplier to represent the amount of CO2 which escapes the flue at CCS plants.

Fuel Type Additional Capital ($ / kW) Additional Fixed ($ / kW-year) Additional Variable ($ / kW) Heat Rate Multiple CO 2 Multiplier NGCT + CCS 3959,1,2 23.27 5.091,2 1.211 0.10 NGCC + CCS 3959,1,2 23.27 5.091,2 1.151 0.10 Coal + CCS 6569,1,2 35.25 5.041,2 1.181 0.10

We also assume that CO 2 costs $11/tonne to transport and store underground.8

Storage cost assumptions

Storage costs can arise from one of three sources:

Capital: Net present cost (over 30 years) to build the storage element ($ / Megawatt hour), assuming a 10-year lifespan for Li-Ion batteries.11

Charge Capital: Cost to build the charging element ($ / Megawatt)

Discharge Capital: Cost to build the discharging element ($ / Megawatt)

We categorize costs for Storage as:

Capital: Net present cost to build the storage element ($ / Megawatt hour), assuming a 10-year lifespan

Charge Capital: Cost to build the charging element ($ / Megawatt)

Discharge Capital: Cost to build the discharging element ($ / Megawatt)

Storage also has efficiency losses:

Storage efficiency: amount of energy maintained in untouched system over time: (Storage t+1 - Storage t ) / t

- Storage ) / t Charge efficiency: amount of energy added to storage per energy taken from the grid.

Discharge efficiency: amount of energy added to the grid per energy taken from storage.

Storage Type Capital ($ / kWh) Charge Capital ($ / kW) Discharge Capital ($ / kW) Charge Efficiency Discharge Efficiency Storage Efficiency Li-Ion batteries 187 100 100 0.9 0.9 1.0

Transmission cost assumptions

We assume long-range transmission is accomplished by High-Voltage DC lines, which cost $334 / MW / km of line, and incur a 3% efficiency loss for every 1000km of line.12

Hydropower limits

When simulating Hydropower, we considered it fully dispatchable with total capacity and generation limits determined by actual 2015 capacity and generation totals.13 Note that 2015 was an El Nino year, although per wikipedia, “During the winter of 2014-15, the typical precipitation and impacts of an El Niño event, did not occur over North America, as the event was weak and on the borderline of being an event.” 14

Sources