WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

August 13, 2014

MEMORANDUM FOR: John Conti

Assistant Administrator for Energy Analysis

Jim Diefenderfer

Office Director

Office of Electricity, Coal, Nuclear, and Renewables Analysis

Paul Holtberg

Team Leader

Analysis Integration Team

FROM: Renewable Electricity Analysis Team

SUBJECT: Summary of AEO2015 Renewable Electricity Working Group 

Meeting held on July 24, 2014

Presenters: Chris Namovicz, Gwen Bredehoeft

Topics included AEO2014 model and data updates, a summary of AEO2014 model results, and a brief 

overview of planned changes for the AEO2015. Data updates included revisions to existing and planned 

capacity based on new data from the Form EIA-860, PTC effective expiration dates, and initial capital 

cost updates from the SAIC capital cost report (used for AEO2013) based on EIA’s learning model. The 

model enhancements discussion included the integration of POLYSYS with NEMS to create modelinteractive supply curves for biomass, the handling of spinning reserves to better account for the impact 

of intermittent generators, and RPS updates. The presentation concluded with an announcement of

changes in the AEO and IEO production cycles where full and reduced content reports will be produced in 

alternate years. Because of the shortened development cycle for AEO2015, EIA is planning minimal 

updates to the model this year. Those updates that are planned for AEO2015 include: capturing 

renewable capacity additions that have actually occurred or are under development; continuing work on 

POLYSYS integration; and reviewing trends in the installed cost of renewable projects to determine if 

changes are warranted in EIA cost assumptions.

Participants Present:

Aaron Bergman (DOE)

Austin Brown (NREL)

Ben Matek (Geothermal Energy Association)

Carrie Annand (Biomass Power Assoc.)

Christopher Namovicz (EIA)
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

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Christopher Richard (DOE—contractor)

Danielle Lowenthal-Savy (EIA)

David Feldman (NREL)

Elyse Steiner (EPA-Clean Air Markets Division)

Emily Williams (AWEA)

Eric Lantz (DOE)

Erin Boedecker (EIA)

Erin Boyd (DOE)

Gwen Bredehoeft (EIA)

Jason Burwen (Bipartisan Policy Center)

Michael Goggin (AWEA)

Rich Tusing (DOE)

Tyler Hodge (EIA)

Participants Online:

April Lee (EIA)

Chad Augustine (NREL)

Frances Wood (OnLocation, Inc.)

Nate Blair (NREL)

Sharon Showalter (OnLocation, Inc.)

Tina Kaarsberg (DOE)

Issues Discussed

• Learning rates

o A discussion of the methodology used to establish NEMS learning-by-doing parameters 

occurred. NEMS allows all generation technologies’ capital costs to decline, based on 

technology-specific parameters, due to learning. However, for wind, NEMS also allows 

learning-based capacity factor improvements. 

o In NEMS, the learning algorithm is based on capacity growth in the United States and 

does not incorporate global capacity growth. In addition to capacity-driven learning for 

capital costs, NEMS also incorporates a minimum learning rate, which is technologydependent and partially accounts for international learning.

o Progress ratios systematically decrease with capacity. A participant asserted that there 

is no precedent for systematically decreasing progress ratios.

o EIA plans to reevaluate the learning curve structure at some point in the future.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

• Capital Costs and PPA vs LCOE

o This discussion addressed issues of whether or not EIA’s wind and solar PV capital cost 

estimates are too high, citing LBNL’s studies such as the “Wind Technologies Report” 

and “Tracking the Sun”. EIA and LBNL use somewhat different approaches, neither of 

which may fully capture all the nuance of project cost. EIA noted that it has consulted 

these reports, and reviewed the underlying data at a more granular level to allow for 

better comparison with the technology characterizations that are modeled in NEMS. In 

the past, EIA has judged that EIA assumptions are roughly consistent with the cost data 

in said LBNL reports, but is still in the process of reviewing cost assumptions for the 

AEO2015.

o This discussion included clarification of the difference between power purchase 

agreements (PPAs) and levelized cost of energy (LCOE) estimates, including an 

explanation of why they are not comparable. The LCOE does not account for the variety 

of options available to actual PPA markets for financing, contract terms, local incentives, 

and multiple value streams. Although PPAs should not be compared to LCOE, if this 

comparison is made, it should at least focus on specific regions rather than national 

averages which obfuscate regional differences in cost and performance. 

o Does EIA use Bloomberg New Energy Finance as a source in its analysis of capital and 

levelized costs? Yes, EIA does review BNEF publications on LCOE, PPAs, and project 

costs. However, because methodologies differ substantially, it does not directly 

incorporate this information into its assumptions. 

• Cofiring

o Cofiring does not contribute to new capacity, and its projected increased use is driven in 

part by state renewable portfolio standards.

• Geothermal terminology in EIA surveys

o The Geothermal Energy Association (GEA) requested clarification of capacity definitions 

in the survey EIA-860. EIA will put GEA in touch with the appropriate survey staff to 

address this matter.

• Spinning reserves

o The topic of how the spinning reserve margins have changed since the AEO2013 was 

discussed. In general, the approach has a bigger impact on “stress” cases with higher 

wind or solar penetration than in the Reference case. Do the spinning reserve margins 

only account for impacts of intermittent generators on operating reserve requirements? 

No, each capacity type is evaluated within the algorithm with respect to its impact on 

both the need for operating reserves, as well as its ability to contribute to operating 

reserves.

o More documentation on the spinning reserves should be available when the EMM 

documentation is released.

• Net Metering
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

o Distributed PV is modeled in the end-use (residential and commercial) modules of 

NEMS. While net metering is not explicitly modeled, residential installations are 

compensated for excess generation at the retail rate, so net metering is in effect 

captured.