# Presentation: 376976

## Renewable Energy Modeling Issues in the National Energy Modeling System

**Steve Clemmer**
**Research Director, Clean Energy Program**
**Union of Concerned Scientists**
**NREL Energy Analysis Seminar**
**Washington, DC**
**December 9, 2004**

## NEMS Strengths

**Comprehensive, integrated energy-economic model**
**Energy supply, demand, and price feedbacks**
**Capable of analyzing a wide range of renewable energy and other policies**
**Provides detailed national and regional results**
**Underlying structure of model is reasonably good**
**Model structure and assumptions are fully documented and subject to peer-review**
**Extensive and responsive full-time staff dedicated to developing, using, and updating model**

## Unique Aspects ofModeling Renewables

**High capital/low operating costs**
**Dispersed resources**
**Small but rapidly growing industry**
**Variable output of wind and solar**
**Alternative uses for biomass resources**
**Benefits**
**environmental**
**modular**
**domestic resource**
**inexhaustible resource**

## How Renewables Are Modeled in NEMS Electricity Module

**Costs and performance for 7 utility scale renewable technologies**
**Renewable energy costs, potential, and production for 13 electricity reliability (NERC) regions**
**Technology learning and optimism factors**
**Electricity planning based on lowest net present value cost of competing plants over 20-year period**
**Electricity dispatch based on variable operating, fuel, and environmental costs **
**Constraints applied as renewable penetration grows**

## Key Renewable Energy Constraints in NEMS

**Short-term growth rate constraints**
**for every 1% increase in total US capacity above 50% from previous year, capital costs rise 0.5% for wind, 0.33% for biomass, and 1% for solar.**
** ****Long-term capital cost multipliers: to reflect resource degradation, transmission network upgrades, and competition with other uses.**
**increase of up to 200% for wind; over 33% for geothermal**
**Annual build limits for certain resources**
**Geothermal development limited to 25 MW/site/year**
**Cap on regional penetration of variable output resources (wind and solar) – EIA has raised value from 10% to 20% over last few years.**
**Capacity credit for wind -- was fixed at 75% of capacity factor now declines as penetration increases **
**Limits on building in one region to serve another**
**Biomass cofiring in coal plants – was limited to 3-5% now up to 15%**
**Energy crops not available until after 2010**

## NEMS Limitations& Areas of Improvement

**Limited empirical support for long-term cost multipliers and penetration constraints **
**Multiple constraints can produce unintended results**
**Limited flexibility in changing underlying structure**
**Electricity planning based on regulated industry**
**International growth has limited effect on technology learning**
**Modeling variable output renewables (wind and solar)**
**Limited ability to model wind and transmission issues**
**Unrealistic renewable energy supply curves**
**Doesn’t include class 3 wind resources**
**Natural gas price projections low; don’t capture volatility**

## UCS Approach to Modeling Renewables in NEMS

**Identified modeling issues as reviewer on EIA RPS and power plant multi-pollutant reduction reports and by testing the model over past several years.**
**Modified certain renewable assumptions based on input from renewables experts familiar with NEMS and new research**
**including DOE, NREL, ORNL, LBL, state agencies, consultants, renewable energy developers, actual projects, utilities **
**Used modified versions of NEMS to analyze national renewable electricity standards and other clean energy policies**

## Wind UCS model modifications

**Modified windy land area**
**reduced by 50 percent in the Northeast, Plains, and West to account for additional siting constraints**
**added potential in Texas and Mid-Atlantic based on updated data from NREL & plans by developers**
**EIA uses mix of old data from early 1990s & new data from NREL**
**Changed EIA's designation as a commercial technology to "evolutionary" status to allow for reduction in capital costs as installed capacity increases based on the GPRA projections**
**Regional penetration constraint raised from 20% to 30%**
**Regions in Germany, Denmark and Spain already over 20% **
**Replaced regional capital cost multipliers of up to 200% with maximum 50% increase as wind penetration increases **
**Up to 20% for wind integration costs based on PacifiCorp IRP**
**Up to 30% for additional siting and transmission costs**

**Notes:**
Bullet 1 Notes: CEF study, which assumed EPRI/DOE projections will be achieved through increased R&D funding together with industry learning, growth in domestic capacity that occurs under our renewables policy package, and growth in international capacity.  Cadogan and Brower claim EIA’s learning function underestimates cost reductions from growth in international capacity and R&D and likely overestimates cost reductions due to growth in domestic capacity.

## EIA’s Applies High CostPenalty to Wind

**Source: EIA, “Modeling Costs of U.S. Wind Supply,” *****Issues in Midterm Analysis and Forecasting*****, 1999, updated for AEO 2004.**

***91% of total US class 4-6 wind resource faces EIA’s highest cost penalty***

## BiomassUCS model modifications

**Reduced forestry residues by half to provide extra margin against using unsustainable sources**
**EIA's estimate already excludes road less areas, steep slopes, and more than half the remaining residues **
**Excluded 5% of C&D debris, on top of existing 75% exclusion, to provide extra margin against using contaminated materials**

**Notes:**
Basis for bullet 1: Actual experience from around the world (e.g. Denmark) has shown a typical size coal plant can cofire up to 15% biomass, with minimal impacts on plant efficiency and resource limits within a 50-100 mile radius around the plant. CEF assumed 5%, but authors acknowledge this was overly conservative.

Basis for bullet 2: No empirical basis or documented explanation by EIA; fuel supply curves take into account increasing costs; more flexibility in siting plants closer to transmission lines. 

## GeothermalUCS model modifications

**Reduced conventional geothermal resource available for development by 60% on average**
**based on new study for California Energy Commission and input from geothermal developers**
**Added 3,400 MW of potential development by 2025 from Enhanced Geothermal Systems (EGS)**
**based on data from the GPRA analysis**

**Notes:**
Basis for bullet 1: Expert input from Dan Entingh, PERI, co-author of the EPRI/DOE study and the study EIA uses for the site-specific data, who claims EIA’s assumptions are based on late 1980s technology. Drilling and other exploration costs for successive developments at an already developed field can actually be lower than initial costs based on a better understanding of the field.

Basis for bullet 2: Recent EIA revisions to NEMS; recommendation from Dan Entingh.

Basis for bullet 3: CEF study; duplicated by NEMS short-term capital cost multipliers; has little impact on results because not enough new solar and biomass capacity is added.

## UCS model modifications for policy cases

**Assumed continued R&D investments combined with increases in installed RE capacity from the PTC and national RES will lower costs and improve performance to eventually reach levels projected by DOE for the FY05 Government Performance Review Act (GPRA) analysis (for wind, solar and biomass) and EIA's "DOE Goals" case (for geothermal)**
**Costs are lower than EIAs for wind, solar & geothermal, & roughly the same for biomass & landfill gas**
**Increased annual maximum geothermal development per site from EIA limit of 25-50 MW to 100 MW**
**based on GPRA analysis**

**Notes:**
Bullet 1 Notes: CEF study, which assumed EPRI/DOE projections will be achieved through increased R&D funding together with industry learning, growth in domestic capacity that occurs under our renewables policy package, and growth in international capacity.  Cadogan and Brower claim EIA’s learning function underestimates cost reductions from growth in international capacity and R&D and likely overestimates cost reductions due to growth in domestic capacity.

## New Wind Cheaper thanNew Coal and Gas

**Not including PTC, transmission costs, or wind integration costs**

- Sources: EIA, Annual Energy Outlook, 2004; UCS, Renewing Our Economy, 2004; DOE, FY05 Government Performance Review Act , 2004.

## Renewable Energy Cost Trends:R&D and Market Growth Lower Costs

## EIA underestimates RE development from state policies

**UCS Renewable Energy Projections****from State Standards and Funds**

****Includes Delaware, Hawaii, Illinois, Montana, Ohio, Oregon, and Pennsylvania.  Does not include higher standard adopted in Pennsylvania in Nov. 2004. Source: UCS**

**Other****

**California**

**Nevada**

**IA & WI**

**NJ**

**CT & RI**

**MA**

**Maine**

**Minnesota**

**AZ & NM**

**New York**

**Texas**

**23,240 MW new renewables**
**58.3 MMTCO****2**** reductions**

**Maryland**

**Colorado**

**EIA only includes ~3,100 MW new RE from state standards & funds after 2001**
**EIA assumes many states will use existing capacity and exemptions **
**Difficult to change in model**
**6 states adopted standards in 2004**

## EIA has consistently underestimated gas prices

**Wellhead Natural Gas Prices (2002$/Mcf)**

## UCS Uses of NEMS

**Renewable Portfolio Standards**
**Production Tax Credit extension/expansion**
**Increases in renewable energy R&D programs**
**Net Metering**
**Energy efficiency investments**
**Emissions cap & trade**
**Impact of higher natural gas prices**
**Testing changes to key renewables assumptions**

## Renewable Generation Mix in 202020% by 2020 National RES 

- Sources: UCS, *Renewable Energy Can Help Ease Natural Gas Crunch*, March 2004, and UCS, *Renewing America’s Economy*, August 2004.

## National RES LowersNatural Gas Prices

## National RES LowersCoal Prices

## National RES LowersElectricity Prices

## Renewable Energy SavesElectric & Gas Consumers Money20% by 2020 National RES

**Total cumulative savings = $29-49 billion**
**Consumers save even with EIAs conservative renewables assumptions**

## Renewable energy conserves natural gas supplies 

**15.7 Tcf**

**> 1/4 of  residential gas use**

**Notes:**
America’s natural gas supplies cannot keep pace with our growing demand. 
Instead of increasing our dependency on LNG supplies from the Middle East and former Soviet states, switching to renewable energy will reduce natural gas demand and conserve supplies. 
Under a 20 percent RES, natural gas use would be 1.4 trillion cubic feet (Tcf) less than business as usual in 2020 (15.7 Tcf cumulatively by 2020)—equal to 27 percent of the natural gas consumed annually by U.S. households today. 

## EIA & UCS historical studies: More renewables = more gas savings

**20% renewables = 11% of 2020 gas use, or 3⁄4 of 2001 residential consumption**

**Notes:**
The RES increases the amount of new renewable energy entering the market. The increased competition from renewable energy reduces demand for natural gas, conserving natural gas supplies for future use.
The scatter plot shows that the more new renewable energy generation we get in our nation’s electricity mix, the greater the natural gas savings.

## EIA & UCS studies:More gas savings = lower gas prices

**20% renewables = 9% lower gas price in 2020**

**Notes:**
The RES increases the amount of new renewable energy entering the market. The increased competition from renewable energy reduces demand for natural gas, conserving natural gas supplies for future use.
The scatter plot shows that the more new renewable energy generation we get in our nation’s electricity mix, the greater the natural gas savings.

## Renewable Energy Creates Jobs

** ****$8.2 billion in income**

** ****$10.2 billion in GDP**

** ****Nearly twice as many jobs as fossil fuels**

**Notes:**
Renewable energy development would create new high-paying jobs and other economic benefits in the United States. 
By 2020, the 20 percent RES would create more than 355,000 new jobs in manufacturing, construction, operation, maintenance, and other industries. Renewable energy development would create nearly twice as many jobs as producing the same amount of electricity from fossil fuels—a net increase of nearly 157,500 jobs by 2020.

## Renewable energy reduces emissions and environmental compliance costs 

**15% reduction**
**(434 MMT) in 2020**

**Notes:**
Increasing renewable energy use will reduce the amount of air pollution from power plants that threaten people’s health by burning coal, oil, and natural gas. 
Carbon dioxide emissions, which trap heat in the atmosphere and cause global warming, would also be reduced. Nationally, the 20 percent RES will reduce about 434 million metric tons (MMT) of power plant carbon dioxide (CO2) emissions per year by 2020—a reduction of 15 percent below business-as-usual levels. 
The RES will also reduce harmful water and land impacts from extracting, transporting, and using fossil fuels and conserve resources for future generations. 

## Conclusions

**Unique aspects of renewables should be considered in models**
**NEMS is capable of modeling many of these unique aspects, but not all**
**Many of EIA’s renewables assumptions are pessimistic and artificially raise renewable costs**
**Despite some progress by EIA, more work is needed to improve renewables modeling in NEMS**
**A strong national renewable electricity standard is feasible and affordable, even with EIA’s more pessimistic assumptions**