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October 5, 2017

MEMORANDUM FOR: Ian Mead

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Electricity, Coal, Nuclear, and Renewables Analysis

SUBJECT: Summary of AEO2018 2

nd Joint Electricity, Coal, and Renewables Working

 Group held on September 19, 2017

The working group presentation provided a discussion of the significant data and modeling updates

expected for the AEO2018 Reference case, and presented preliminary AEO2018 projections. 

Participants were also encouraged to forward any follow up questions or comments to 

AnnualEnergyOutlook@eia.gov, or any of the staff listed at the end of the presentation materials, which

are available in a separate document.

Model Enhancements 

Electric Sector, including Nuclear

EIA staff began the meeting with a discussion of the significant electric sector model development 

activities, focusing on review and revision of existing air regulations for electric generators, including the 

status of EPA’s Clean Power Plan (CPP) and related regulations, and an overview of cases that EIA expects 

to include in the AEO2018 release. Although EIA has yet to determine whether the Reference case will 

include the CPP, cases based on Reference Case assumptions with and without the CPP will be published. 

In addition, several side cases will also be published to show the effects with and without the CPP.

Another development for AEO2018 includes the capability to model the economic risk for nuclear units 

to more accurately reflect unit operating costs and revenues to gauge the impact of state Zero Emission 

Credit programs. 

Renewables

The discussion of renewable electricity model updates highlighted the more detailed representation of 

state Renewable Portfolio Standards, changing utility rate structures, the addition of capital costs and 

performance assumptions for new energy storage, solar (tracking), and wind (tall tower) technologies, 

increasing the limits on the share of intermittent generation, renewable curtailments, and updated 

capital structures.

Preliminary Results

The second portion of EIA staff’s presentation focused on a comparison of the AEO2017 results with the 

AEO2018 preliminary projections which included the CPP (to allow for a more direct comparison). 

Preliminary results show lower natural gas prices, stabilizing at around 20-25% lower than AEO2017, 

which results in less coal and higher natural gas generation in the projected generation mix through 

2035. Capacity additions consist mainly of natural gas and solar after 2025. Coal production is lower in 
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response to the reduced coal generation demand, and coal exports appear slightly lower overall in 

AEO2018, with the Western U.S. accounting for most of the decline in overall coal production. The 

overall electricity sales growth rate through 2050 is expected to remain quite low, at under 1%, similar 

to AEO2017.

Discussion

Questions and comments on the presentation from participants mainly revolved around the CPP, 

modeling nuclear economic risk, and renewables.

Clean Power Plan

The Clean Power Plan was the focus of much of the discussion. In particular, participants were 

concerned with the potential effects on the projections and their relative validity if the CPP is repealed. 

EIA noted that while it does look unlikely that the CPP will be implemented in its current form, there 

will likely be some form of a rule, particularly with the EPA v. Massachusetts endangerment finding

remaining in place, which would require some form of carbon regulation. As EIA does not make explicit 

policy assumptions, current laws are incorporated and cases with and without the CPP will still be run 

so as to include the possibility of repeal and provide projections addressing both scenarios.

One participant asked if we allowed for coal units without carbon capture and sequestration (CCS) to be

built. EIA staff indicated that this option is not available since all cases in the AEO2018 currently include 

EPA’s New Source Performance Standard, which requires at least 30% CCS for coal units. In addition, 

the assumption of a 3% adder on the cost of capital for all coal-related investments with less than 90% 

CCS continues to be included to account for the riskiness of these investments in the absence of a 

defined carbon policy. EIA staff also referred one participant to the AEO2017 Electric Assumptions 

document for information on the technology options for new combined cycle units with CCS.

Some participants inquired as to whether EIA would, in the case of overwhelming public opinion in 

favor of carbon reduction, revise AEO cases. EIA reiterated that it does not develop policy, preventing 

us from formulating cases based on policy that was not proposed or in effect. Another participant 

expressed interest in revised CO2 emissions side cases. EIA staff indicated that CO2 cases may be 

considered, but no decision has been made regarding the full complement of side cases for AEO2018.

Modeling Nuclear Economic Risk

One participant inquired about the update procedures for the plant-level nuclear generator data. EIA 

staff responded that multiple sources of information are in place, and updates are expected to occur 

regularly. Another participant asked if there would be a specific assumption about retirements 

associated with subsequent license renewal (SLR). EIA staff indicated that according to a recent study, 

rather than being a significant source of uncertainty, the costs of SLR are another routine and 

foreseeable cost consideration for nuclear operators and would be considered as such in the evaluation 

of economic risks. For that reason, EIA is developing a plant-level risk analysis in lieu of the approach 

used for AEO2017 where approximately 25% of the fleet was retired after 60 years of commercial 

operations.

One participant inquired whether EIA would select one of the nuclear fixed O&M assumptions 

mentioned on slide 7, or include multiple cases. EIA staff indicated that the testing of a range of fixed 

O&M is intended to test the sensitivity of the model to competition with natural gas at current gas 

prices, and that only one assumption would be made across all cases published in the AEO2018.
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Regarding the discussion of economic risks for nuclear units on slide 8, a participant inquired whether 

the model includes a reward for baseload reliability or generation portfolio diversification. EIA staff 

stated that the model does not model portfolio diversity directly, but instead requires that power be 

provided in every hour with sufficient capacity reserve margin. 

Another participant asked about the assessment of nodal and zonal prices. EIA replied that nodal prices 

were reviewed at the plant level, but that EMM regional prices apply within the NEMS-EMM, and EIA is 

looking at plant-level market information to adjust risk factors, accordingly. 

Renewables

Regarding the revision of utility rate structures (slide 13), EIA staff clarified that the value of solar is 

passed through to end-users to ensure appropriate price signals are modeled to signal new solar builds. 

EIA also clarified that energy efficiency program costs for the Clean Power Plan are explicitly accounted 

for in developing retail electricity prices, as are incentives for California’s SB32. Although the end-use 

models represent current utility efficiency programs using rebates, the costs of the modeled rebates for 

those programs are not passed to the power sector and are not explicitly considered when developing 

retail electricity prices. 

Another participant asked if EIA assumes 100% achievement of RPS and whether transmission 

expansion projects are explicitly modelled. EIA staff stated that RPS targets are assumed to be met, 

with Alternate Compliance Payments incorporated as appropriate, and that although transmission 

expansion projects are not modelled in detail, inter-regional transmission costs and constraints are 

included between EMM regions. EIA also added that contractor efforts are underway to determine if 

more transmission detail is needed to ensure adequate representation of the potential for new 

transmission links to mitigate the impact of intermittent generation on regional grid operations.

Regarding the costs for new technologies discussed on slide 14, EIA staff clarified that the capital cost 

estimate for battery storage developed by Leidos is not being used, and provided a discussion of the 

learning trajectory for storage in response to questions from participants. EIA staff further explained 

that its learning curve methodology is assumed to start off learning at a ‘revolutionary’ technology rate 

of 20% per doubling during a technology’s early development phase, and slowing to a 10% rate of 

‘evolutionary’ learning as the scale of development increases (the technology is not assumed to reach a 

‘mature’ state of learning by 2050). 

Regarding the increasing maximum intermittent share of total generation discussed on slide 15, some 

participants asked what level of caps for solar generation and diverse portfolio requirements are built 

into the model. EIA responded that non-dispatchable generation is currently capped at 40%, though 

testing is being done for values as high as 70%. EIA staff clarified that the cap applies at the regional 

annual level and is not a cap on the instantaneous or hourly level. 

A participant asked whether EIA made any assumptions regarding the cost of renewable life extension. 

EIA staff stated that fixed and variable O&M costs represent the cost of maintaining capacity 

indefinitely, but that EIA may pursue a study to look at useful life and aging costs past the first 30-40 

years of commercial operations. 
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Attendees

Guests (in person) Affiliation

Courtney Grosvenor DOE Office of Energy Policy and Systems Analysis

Elke Hodson DOE Office of Energy Policy and Systems Analysis

Nathaniel Horner DOE Office of Energy Policy and Systems Analysis

Sophia Mahmood Energy Ventures Analysis

Ann Satsangi DOE Office of Fossil Energy

Bob Schmitt DOE Office of Energy Policy and Systems Analysis

Seth Swartz Energy Ventures Analysis

Guests (WebEx/phone) Affiliation

Chad Augustine National Renewable Energy Laboratory 

Justin Baca Solar Energy Industries Association

Youngsun Baek Union of Concerned Scientists

Delma Bratvold Leidos

Glenn Carlson Union Pacific

Wesley Cole National Renewable Energy Laboratory 

Leslie Coleman National Mining Association (NMA)

Erich Eschmann Environmental Protection Agency

Carolyn Evans Norfolk Southern

Jerry Eyster GE Energy Financial Services

Rachel Fakhry Natural Resources Defense Council

Mark Gehlhar Office of Surface Mining

Don Hanson Argonne

Whitney Herndon Rhodium Group

Riley Hollis Office of Surface Mining

Emily Hunter Department of Labor

Hari Kadavath Department of Labor 

Serpil Kayin Environmental Protection Agency

John Larsen Rhodium Group

Michael Leitman National Rural Electric Cooperative Association (NRECA)

Osmond Lindo Department of Labor

Carl Lundgren Department of Labor 

Grant Marciniak Norfolk Southern 

Gregory Marmon Wood Mac

Emily Medine Energy Ventures Analysis

Jim Moore Spire

Greg Moxness Department of Labor 

Caitlin Murphy Department of Energy

Andrew Nicholls Pacific NW National Laboratory

Chris Nichols National Energy Technology Laboratory (NETL)
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Karen Obenshain Edison Electric Institute

Ron Oster Peabody Energy 

Paul Pierce U.S. Geological Survey (USGS)

Jay Ratafia-Brown Leidos

Shawn Rumery Solar Energy Industries Association

Sandra Sattler Union of Concerned Scientists

Dan Shields Office of the Ohio Consumers' Counsel

Cynthia Simpson Department of Labor

Michele Somerday FirstEnergy

Kevin Steinberger National Resources Defense Council (NRDC)

William Stevens Independent Consultant

Mark Strohfus Great River Energy

Chen-Hao Tsai Center for Energy Economics

James VandePutte Department of Energy 

Boddu Venkatesh ICF

Brian Walker Office of Energy Efficiency & Renewable Energy (EERE)

Ken Walsh Leidos

David White Synapse Energy

Frances Wood OnLocation, Inc.

Thomas Wos Tri-State G&T

Evelyn Wright Sustainable Energy Economics

Garry Young Entergy 

Chuck Zelek National Energy Technology Laboratory (NETL)

Song Zhao Leidos

EIA attendees (in person)

Greg Adams EIA

Lori Aniti EIA

Rosalyn Berry EIA

Erin Boedecker EIA

Richard Bowers EIA

Michelle Bowman EIA

Michael Cole EIA

Jim Diefenderfer EIA

Kenneth Dubin EIA

David Fritsch EIA

Thaddeus Huetteman EIA

Kevin Jarzomski EIA

Scott Jell EIA

Augustine Kwon EIA

Angelia LaRose EIA

Cara Marcy EIA
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Laura Martin EIA

Chris Namovicz EIA

Michael Scott EIA

Manussawee Sukunta EIA

Bonnie West EIA

Carol White EIA

EIA attendees (WebEx/Phone)

Marta Gospodarczyk EIA

Tyler Hodge EIA

Jeff Jones EIA

Nilay Manzagol EIA