# Presentation: 844795

## Potential Impacts of anAdvanced Energy Portfolio Standard in Pennsylvania

**Ryan Pletka, P.E. **
**Black & Veatch**
**November 9, 2004**

**Supported by:**
- Heinz Endowments
- Community Foundation for the Alleghenies

- N  R  E  L     E  N  E  R  G  Y     A  N  A  L  Y  S  I  S     F  O  R  U  M

## Black & Veatch:Introduction

- Global consulting, engineering, and construction firm
- Involved over 100,000 MW of power projects
- 7,000 employees in over 100 offices
- 50 staff working on all aspects of renewable and advanced energy technologies

## Study Objective

- Identify most cost effective mix of resources built in response to AEPS
- Identify economic benefits or costs

**Assess the Potential Economic Impacts of a 20 Percent Advanced Energy Portfolio Standard (AEPS) in Pennsylvania **

## Current Status of Renewable and Advanced Energy In Pennsylvania

- Current installations:
- 730 MW Hydro
- 430 MW Biomass (Including municipal solid waste)
- 130 MW Wind
- 1,922 MW Waste Coal
- Policy
- System Benefit Funds have stimulated renewables
- Current “RPS” Policy Ineffective
- State Received a “D” from UCS
- Over 200 Companies in the Renewable Energy Industry
- American Hydro
- Ebara Solar
- Sea Solar Power
**GE and Gamesa**

**2002 Energy Share**

## General AEPS Assumptions

- Timeframe
- 2006 – 6%
- Increases 2%/year
- 2014 – 20%
- Evenly split in two-tiers:
- Tier I – RE & EE
- Tier II – waste coal, greenhouse gas, advanced technologies
- No imports or exports (simplification for analysis)
- Production Tax Credit through 2009

**2004 Tier I Baseline**

**2004 Tier II Baseline**

## AEPS Resource Assessment Methodology

- Screen Technologies
- Characterize Resources
- Estimate Cost to Generate and Transmit Electricity
- Apply Avoided Cost of Power Model
- Develop Supply Curves
- Develop Least-Cost Portfolio of Projects

## AEPS Eligible Resources

**Tier I**
- Wind
- Low-impact hydro
- Biogas and coal mine methane
- Biomass
- Solar photovoltaics
- “Energy conservation” – demand side, ie, consumers
- “Energy efficiency” – supply side, ie, power plants
- Solar thermal
- Ocean and lake energy
- Solid waste (non combustion)
- Fuel cells fueled by Tier I resources

**Tier II Resources**
- Waste Coal
- New facilities
- Air pollution controls at existing facilities
- Integrated gasification combined cycle
- Fuel cells fueled by non-Tier I resources
- Greenhouse gas (GHG) reductions

## Wind Assessment

- Pennsylvania wind resources relatively modest
- GIS analysis based on latest NREL data
- Capital Cost:
- Base: $1,175-$1,275/kW
- Transmission: +$20-$110/kW
- “Expensive” resources: +$500/kW (50% of total)
- Included 300 MW, class 5, offshore wind farm in Lake Erie

## Biomass Cofiring Assessment

**Biomass Cofiring Assessment**

- Pennsylvania has good biomass resources and lots of coal plants
- Focused on cofiring at 38 existing coal units
- Capital cost: $100-$700/kW
- Biomass resources
- Only _sustainable and clean_ resources identified
- Assessment based on ORNL database
- Biomass collected from 75 mile radius around plants

## Biomass Resources and Coal Plants

**Biomass Resources and Coal Plants**

## Biogas (Landfill and Digester Gas) Assessment

**Biogas (Landfill and Digester Gas) Assessment**

- Reasonably good potential from biogas resources
- Internal combustion engines are proven technology
**Landfill gas** based on EPA LMOP database
- Capital cost: $1,300-$2,350/kW
**Digester gas** examined dairy and swine farms
- Capital cost: $2,500-$3,750/kW

## Hydro Assessment 

- Relatively Modest Hydro Opportunities
- Analysis Based on INEEL Assessment
- New Sites
- Upgrades at Existing Plants
- Generation Additions to Dams Without Power
- 42 Projects Identified, 5 at Undeveloped Sites

## Energy Conservation / Efficiency Assessment

- Good opportunity for energy conservation/efficiency in PA
- Analysis Based on B&V, ACEEE assessments
- Residential measures
- Commercial & Industrial measures
- Over 16,000 GWh of potential identified over 20 years
- About 10% of PA consumption
- Wide range of costs and payback potential
- Consumers won’t necessarily implement  measures even if economical

## Waste Coal Combustion 

- Excellent waste coal resource in Pennsylvania
- To be eligible for AEPS, waste coal projects must be low emissions
- Analysis Based on PA DEP waste coal assessments
- 3 Planned New Site Developments
- 15 Environmental control upgrades at existing plants
- Environmental control upgrade projects also receive substantial revenue from emissions credit markets

## Properly Characterizing Resource Cost

- One of the largest modeling differences between renewables and fossil fuels is that costs vary tremendously based on renewable resource quality
- There are a limited number of very good renewable / advanced project sites
- Costs rise as “low-hanging” projects are developed
- Supply curves capture these effects

## Simple Supply Curve Example

## Biogas Supply Curve 2006Premium over Avoided Costs

**Biogas Supply Curve 2006****Premium over Avoided Costs**

## Aggregate Tier I Supply Curve 2010

**Aggregate Tier I Supply Curve 2010**

- Tier I

**2010 requirement**

- Biomass Cofiring and Energy Efficiency / Conservation add Significant Flexibility

**Premium**

## Aggregate Tier II Supply Curve 2010

- Tier II

**2010 requirement**

**Premium**

## Tier I Cost Premium Supply Curves

## Tier II Cost Premium Supply Curves

**Tier II Cost Premium Supply Curves**

## Optimum Mix of Resources to Meet the AEPS Requirements

**Tier I Energy Mix**

**Tier II Energy Mix**

## Tier I Least Cost Mix 

- Wind, biomass cofiring, and energy conservation comprise about 80 percent of mix
- Some solar (4 MW) assumed to be built, even though not economical

## Tier II Least Cost Mix 

- Waste coal combustion is projected to make up all of Tier II

## Projected Build-out Schedule (6,470 MW)

**This Portfolio Used to Calculate Economic Impacts**

## Economic Impacts Assessment

- Compared building a 20% AEPS portfolio to building the “Business As Usual” (BAU) portfolio
- Cost of electricity
- Economic impacts (Jobs, Output, Earnings)
- Fossil fuel prices
- BAU Portfolio: 50% coal, 40% combined cycle, 10% simple cycle
- Portfolios equated on an equivalent _energy_ production basis
- RPS portfolio: 6,470 MW
- BAU portfolio: 2,460 MW
- Environmental externalities purposely not assessed

## Cumulative Economic Impacts

- Economic Benefits of the AEPS Portfolio compared to Business as Usual
**Cost of electricity:** reduced by $2.7 billion (cumulative present value), about 1% when spread over all consumption
**Employment: **Creates over 70,000 additional job-years over 20 years (average of new 3,500 jobs)
**State output: **Creates about $7 billion in increased state output
**Personal Income: **Creates about $2.5 billion in additional earnings

## Pennsylvania Employment Impacts, “Job-years” per MW

**RPS portfolio: 6,470 MW **
**BAU portfolio: 2,460 MW **

**Impacts proportional to the percent of project expenditures made in PA in various industries**

## Open Issues

- Regional Supply and Demand Balance
- Benefits and Drawbacks of Credit Trading
- Location and Deliverability Requirements
- Implementation and Rulemaking

## Conclusions and Acknowledgements

- Acknowledgements
- Community Foundation for the Alleghenies – Mike Kane
- Heinz Endowments
- PA DEP
- REPP
- Industry

- Contact
- Ryan Pletka
- Black & Veatch
- 913-458-8222
- pletkarj@bv.com