August 9, 2013

MEMORANDUM FOR: John Conti

Assistant Administrator for Energy Analysis

Alan Beamon

Office Director

Office of Electricity, Coal, Nuclear, and Renewables Analysis

Paul Holtberg

Team Leader

Analysis Integration Team

FROM: Electricity Analysis Team

SUBJECT: Summary of First AEO 2014 Electricity Working Group Meeting

held on July 24, 2013

ATTENDEES: Diefenderfer, Jim

Aniti, Lori

Milton, Carrie

Jones, Jeff

Martin, Laura

Bredehoeft, Gwendolyn

Eynon, Bob

Leff, Mike

Mellish, Mike

Kearney, Diane

Slater-Thompson, Nancy

Napolitano, Sam

Hodge, Tyler

Jones, Ayaka

Namovicz, Chris

Adams, Greg

Gospodarczyk, Marta

Fan, Cha-Chi

*Schmalzer, David (Argonne)

*Van Brunt, Michael (Covanta Energy)

*Wright, Evelyn (DecisionWare)

*Chartier, Dan (Edison Electric Institute)

*Niemeyer, Vic (Electric Power Research Institute)

*Nethercutt, Elliott (North American Electric Reliability 

Corporation)

*McGough, Michael (Nuscale Power)

*Showalter, Sharon (OnLocation)
*Wood, Frances (OnLocation)

*Sanders, Sandy (OnLocation)

*Evenson, Eric J. (U.S. Geological Survey)

*Fleischman, Lesley (Union of Concerned Scientists)

*Rollison, Eric (U.S. DOE: Office of Electricity Delivery and 

Energy Reliability)

*Kislear, Jordan P (U.S. DOE: Office of Fossil Energy)

*Khan, Sikander (U.S. DOE: Office of Fossil Energy)

*Zelek, Charles (U.S. DOE: Office of Fossil Energy, National 

Energy Technology Laboratory)

*Bergman, Aaron (U.S. DOE: Office of Policy and International 

Affairs)

*Schoeberlein, David (U.S. DOE: Office of Policy and 

International Affairs)

*Clement, Zachary (U.S. DOE: Office of Policy and International 

Affairs)

*Fields, Fletcher (U.S. DOE: Office of Policy and International 

Affairs)

*Hodson, Elke (U.S. DOE: Office of Policy and International 

Affairs)

*Stevens, Bill (U.S. Environmental Protection Agency)

*Kelley, Matthew (Westinghouse)

*Non-EIA Attendees

Presentation topics included the main environmental regulatory assumptions that will be used in 

the AEO2014, enhancements that were made or are planned for the model, and updates to the 

data and input files. Discussion of the environmental regulations centered on updates to the 

MATS modeling from AEO2013, updates to RGGI, and a discussion of the upcoming 

environmental issues that EIA is monitoring. The model enhancements discussed included 

reserve margins and capacity payments, spinning and operating reserves, O&M cost updates, 

municipal utility pricing data updates, and carbon transport utilization and storage. The 

presentation concluded with summaries of the EIA data updates related to the data collection 

cycle for the year ending December 31, 2012.

Specific issues raised by participants included the following topics

New Source Performance Standards (NSPS)

A participant mentioned that the new NSPS would be effective on the date of promulgation, 

which is expected to be on September 20, 2013 and wanted to know whether the new standards 

would be reflected in the Reference Case. Staff responded that the new rule could impact 

EIA’s “freeze” date, and that EIA would likely include the new rule if it is available at that 

time.

Capacity Payments
There was some discussion around the fact that EIA was not explicitly modeling a capacity 

market. Staff explained that there is no uniformity across the country and that EIA is trying to 

mimic PJM, New England, and New York by setting the cost of a new turbine to be the cost of 

new entry (CONE) price. Staff indicated that EIA uses a fixed reserve margin unique to each 

region, and that capacity payments are paid on top of generation costs. The new algorithm 

applies to all regions, even Texas. Staff added that while all markets are different in the real 

world, in the NEMS framework a consistent modeling approach is applied for each region. 

However, capacity payments only apply to regions that are modeled competitively.

Planned Coal Plant Retirements

A participant indicated that he had seen 37 GW of projected coal retirements in the Energy 

Velocity dataset, and wanted to know why EIA’s number was lower (approximately 30 GW). 

Staff explained that EIA includes the planned retirements in the model that have been reported to 

EIA on the Form EIA-860. Energy Velocity, as a data vendor, uses EIA data as a starting point, 

but also includes press reports and other non-EIA sources. Another participant inquired as to 

whether there were stipulations with EIA that respondents must have cleared retirement 

decisions with the ISOs or with the EPA before they can report to EIA. Staff replied that there 

are not, but that in general plant owners tend to be more conservative in reporting to EIA. Staff 

also indicated that EIA had identified cases where respondents indicated to the EPA that they 

would retire units as part of their settlement agreements but then did not report those retirement 

plans to EIA. EIA is following up with respondents to resolve such discrepancies.

Retrofits

A participant raised a question regarding EIA’s presentation slide related to FGD and DSI 

retrofits and EIA clarified that the values presented were reflective of planned installations. 

Another participant indicated that several ISOs had conducted surveys of generating plants 

regarding plans to comply with MATS and wondered whether EIA had looked at those data sets. 

He claimed that those survey results seem to indicate a higher level of DSI retrofits, but that the

results of the surveys were not final. Staff responded that EIA would research the MATS 

compliance plans reported to the ISOs and try to resolve any discrepancies relative to EIA 

reporting. Another participant stated that to the extent that the numbers change, it won’t really 

affect the electricity prices, but Staff pointed out that the importance is to understand MATS 

compliance activities. He also pointed out that the reported retrofits are input into the model, but 

the model also determines if additional retrofits are required. Staff added that EIA is trying to 

inform the model inputs as much as possible.

Coal CCS plants

A participant asked about whether the coal additions include the CCS plants, such as Kemper 

County. Staff said there is a slide from the Coal Working Group that EIA can provide that has a 

list of the coal plants that will be included in the model. 

Capital Costs
A participant asked if EIA would be using different capital costs from those used for AEO 2013. 

EIA staff confirmed that the capital costs for AEO 2014 would also be based on the SAIC report 

originally prepared for AEO 2013. A participant wanted to know whether there will be an 

update to the capital cost study from SAIC in the foreseeable future. Staff replied that EIA is 

trying to do a new study every two to three years, depending on funding, but that EIA has no 

defined time frame for the next study at this point.

Water Usage

A participant wanted to know whether there would be any other assumptions with regards to 

water needs other than 316(b). Staff replied that the consideration for the cost of building new 

plants already takes into account the best available control technology, and that every new unit 

built must have state-of-the-art controls. The participant followed up by explaining that there is 

a lot of focus on saline, groundwater, brackish water, and waste water return flows. Staff replied 

that EIA’s model does not account for that, but that it is implied in the O&M costs. Staff 

indicated that EIA would evaluate those plants that report use of alternative sources of 

water. 

Coal Plant Modeling and Cost of Capital Adders

A modeling participant brought up the fact that as gas prices rise to a level of $7 [per MMBtu] 

toward the end of the forecast, he is seeing coal builds (by 2050) on the order of 50-60 GW. He 

also pointed out that although the NSPS is not final yet, EIA uses the cost of capital adder to 

indicate uncertainty around the NSPS issue. He also wanted to know if there was something in 

the EIA model limiting the life of coal plants, and he expressed concern that the EIA projection 

differs from what others are seeing and expecting. Staff explained that additional O&M costs are 

assumed after a plant reaches 30 years of age but there are no explicit limitations regarding the 

age of plants. Another participant pointed out that the cost of capital adder is designed to 

account for regulatory uncertainty, but that no other technologies are being penalized in the same 

way. The initial participant felt that EIA’s coal forecast in 2040 was low and that using the cost 

of capital adder throughout the entire forecast was unrealistic. EIA will evaluate the 

appropriateness for retaining the cost of capital adder.

Nuclear

A participant questioned EIA’s assumption that all new nuclear builds would be the AP1000’s in 

the out years, and that the system has the ability to absorb SMRs with lower costs. Staff replied 

that an SMR side case was performed for AEO 2013, which did impact the amount of nuclear 

capacity that was being built in the out years of the model. EIA does not anticipate changes in 

modeling SMRs, given updated guidance from the NRC, and the available cost data for SMRs. 

The participant pointed out that $452 million in DOE funding is a significant change from last 

year, to which Staff responded that this continues to be something that EIA monitors.

A participant wanted to know whether EIA uses a cost inflator on the nuclear units to reflect 

greenfield costs, which would be of particular importance in the high GHG case. Staff replied 

that there are many hypotheticals that EIA could include in the model, but that one could easily 
argue that as the nuclear industry grows, it will be easier to find workers, the materials costs 

could drop, but it may be more expensive to site a new plant. He pointed out that it’s difficult to 

build scenarios in a deterministic model. Also a nuclear renaissance could impact the fuel prices. 

Renewable Resource Data

A participant inquired if EIA was planning to update the renewable resource information from

NREL. Staff responded that a request had been made, but that funding was not in place for this 

year. The information was updated two years ago, but some updates, such as the availability of 

new transmission, matching different technologies in different areas of the country still needs to 

be done. EIA hopes that this will be done next year.