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November 30, 2018

MEMORANDUM FOR: Ian Mead

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

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

SUBJECT: Summary of AEO2019 Preliminary Results of the Electricity Working 

Group Meeting held on September 20, 2018

This memorandum summarizes the presentation at the second AEO2019 Electricity Working Group 

meeting, which included preliminary results from AEO2019 and the resulting discussion. The 

presentation materials are available in a separate document on EIA’s website. 

Background: Policy developments

EIA began by outlining key policy-related developments for the AEO2019 cycle, including the EPA’s 

proposed Affordable Clean Energy (ACE) rule that replaces the original Clean Power Plan (CPP.) EIA 

stated that our Reference case would exclude the CPP and retain the current New Source Performance 

Standard for greenhouse gas emissions for electric generating units (consistent with AEO2018). 

AEO2019 also includes coverage of new state programs in New Jersey (SB 2314) and California (SB 100) 

to support carbon-free generation, as well as state RPS programs to reflect tighter standards (in 

Massachusetts). 

Model enhancements (AEO2019)

For new generation, EIA implemented revised assumptions for the costs of new combined-cycle 

generating units, which were based on a report conducted in support of the PJM basic generation 

service (capacity) auction. The report recommended a change in the assumed cost of new entrant based 

on the continued decline in the cost of new natural gas-fired combined-cycle generating units--

converging on simple cycle combustion turbine costs-- which was generally confirmed by EIA in the 

evaluation of data for new builds filed on the Form EIA-860. For renewable generation, EIA updated the 

costs of new solar PV to reflect policy and market considerations. Finally, EIA updated coal supply curve 

cost parameters. 

For existing units, in AEO2019 EIA updated the generator operating and maintenance cost assumptions 

based on recommendations from a study conducted by engineering firm Sargent & Lundy (S&L). The 

S&L study also evaluated EIA’s treatment of plant aging. In its current approach, EIA assumes plants 

incur an increase in annual capital expenditures to account for plant life extension when a unit reaches a

certain age (generally 30 years). S&L’s analysis could not verify that approach, instead finding that aging 
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was a significant factor for only a limited number of generating technology types. Further, where it was 

significant, the effect of aging was consistent over time rather than a one-time increase in cost. 

In addition, the AEO2019 shifts from performing a risk analysis of individual nuclear plants (used in 

AEO2018) to evaluating generation-at-risk using the method applied to other types of generation. In 

AEO2018, EIA evaluated the potential for retiring individual nuclear plants based on an assessment of 

local market conditions (e.g., including, among others, local market prices, fixed costs, deregulated 

market exposure, load growth, and aging costs.) AEO2019 no longer includes retirements based on this 

separate risk factor analysis; instead the model retires units that meet two conditions: the plants are 

projected to have three or more years of negative operating margins and they are not needed for a 

least-cost solution to satisfy reserve margin requirements (as is the case for fossil generating units).

Preliminary Results

The next segment of EIA staff’s presentation focused on comparing the AEO2018 results with the 

AEO2019 preliminary projections. Preliminary results show lower natural gas prices in the short term, 

stabilizing at about 7-8% lower than in the AEO2018, which results in a generation mix similar to 

AEO2018 with slightly less coal generation and higher mid-term natural gas generation. Also similar to 

AEO2018, after the year 2025, capacity additions consist mainly of natural gas and solar facilities. 

However, total solar PV capacity (utility and end-use) is lower as a result of lower natural gas and

electricity prices and re-specification of the end-use PV model.

Coal production in AEO2019 is projected to decrease slightly in the short term with small increases in 

later years. Overall, coal production is lower than the AEO2018 levels throughout the forecast period

with the western United States accounting for most of the decline in overall coal production. U.S. coal 

exports are expected to recover only gradually through 2050. In addition, overall electricity sales 

growth is expected to remain largely unchanged from AEO2018 projection levels.

Discussion

The discussion following the presentation of preliminary results focused on policy changes, additional 

modeling enhancements, and projections for coal, natural gas, and renewables generation.

Policy changes

At the state level, California’s legislation (SB 100) commitment to 60% renewable electricity generation 

by 2030, phasing into 100% “carbon-free” generation by 2045 is still open to interpretation, given that 

qualifying clean energy resources and additional specifications related to the California RPS await final 

regulatory definition. One participant noted that such a program could result in significant cost 

increases. Under EIA’s assumption that the program includes large-scale hydro, fossil with carbon

sequestration, and nuclear, significant new costs as a result of SB 100 are unlikely given that 

approximately 90%-95% of RPS compliance will be met with in-state qualifying generation by 2050 

(including large-scale hydro), even without new targets. Sufficient qualifying resources are available 

from bordering regions (such as hydro and wind in the Northwest or nuclear and solar in the Southwest) 

to allow for the residual target to be met without significant impact on the baseline generation 

projection.
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Another participant asked if EIA would revise the costs for coal plants without carbon capture and 

sequestration given EPA’s proposal to revise the NSPS for coal plants. The same participant also asked 

whether the experience with the Kemper integrated gasification combined-cycle (IGCC) plant would be 

considered given that Kemper did not end up operating as a coal plant. EIA noted that because the 

current status of NSPS revision as a proposed rule, the existing NSPS would be reflected in the AEO2019 

Reference case. In addition, no further analysis has been conducted on the cost of IGCC, so EIA has no 

basis for revising the assumptions.

Additional modeling enhancements

One participant noted that EIA had previously discussed improvements to projections of transmission 

and distribution (T&D) costs and asked if EIA had done anything in that area for AEO2019. EIA 

acknowledged that, as a basis for a better representation of the potential to capture long-term cycles in 

T&D spending, a project to digitize historic financial reports for utility capital expenditures was 

underway and expected to be concluded in the next quarter, but it would not be completed in time for 

inclusion in AEO2019. 

Another participant asked a follow-up question about the status of the monthly instead of seasonal 

electricity demand representation. EIA replied that load shapes are applied to annual demands from the 

end-use models to generate demand curves for the Electricity Market Model. The load shapes are based 

on monthly and hourly profiles and have 864 data points (24 hours x 12 months x 3 day types.) The new 

REStore model dispatches storage and intermittent generating technologies using this detailed level of 

demand information. The larger electricity dispatch and planning models use aggregated time slices, 

with three load slices for each of three seasons, due to processing time limitations.

Coal

One participant asked how much coal generation is projected to decline. They also asked how much 

additional coal will be exported from the Appalachian region.

EIA indicated that total coal production in AEO2019 was projected to drop to slightly less than 700 

million tons per year between 2030 through 2050, a decline of about 50 million tons compared with

AEO2018. In AEO2019, Appalachia exports are projected to rise by 2 million tons in 2018 and 5 million 

tons in 2019 compared with 2017 export levels, and the growth is split between metallurgical coal and 

steam coal. EIA’s Reference case does not project a high level (more than 100 million) of coal exports 

after 2020.

Another participant asked what EIA assumed for the marginal cost of a flue gas desulfurization (FGD)

unit. EIA assumes that FGD units are always on if installed, so no provision for variable operation of FGD 

at individual coal units is necessary.
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Renewables 

One participant asked for additional detail on the decline in the overnight capital costs of solar 

photovoltaic (PV) panels. EIA indicated that it re-evaluates solar and wind costs for each AEO cycle

because they have both shown significant movement from year to year. For solar in AEO2019, EIA also 

had to consider the potential near- and long-term impacts of factors affecting solar costs such as PV 

tariffs and excess supply of panels on the international market resulting from changes to solar policy in 

China. EIA determined that these two factors more or less cancelled each other, and that adjusting the 

2018 cost for PV panels to account for the learning effects of recent market builds was sufficient to keep 

modeled cost of PV panels in line with cost declines observed in both EIA and Lawrence Berkeley 

National Laboratories (LBNL) data, as well as with general price trends from the National Renewable 

Energy Laboratory (NREL).

Another participant asked if EIA planned to evaluate wind cost revisions. EIA found that adjusting the 

2018 capital cost for wind generators to account for the learning effects of recent market builds was 

sufficient to keep modeled wind generator costs in line with cost declines observed in both EIA and LBNL 

data.

Another participant asked if EIA’s projections of capacity additions (slide 22 in the presentation) the 

segment for solar PV panel additions includes both utility scale and distributed generation. EIA 

confirmed that the slide shown includes capacity from all sectors for PV panels.

Natural gas

One participant asked what contributed to the projections of a lower natural gas price in AEO2019 than 

AEO2018. EIA noted that the natural gas production projections have increased largely as a result of

increasing the size of the estimated potential resource as well as technological improvements in industry 

production practices. 
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Attendees

Guests (in person)

Name Affiliation

Rachel Goldstein Solar Energy Industries Association

Adam Stern AWEA

Celeste Wanner AWEA

Skyler Drennen Energy Ventures Analysis

Jordan Kislear U.S. Department of Energy

Tina Kaarsberg U.S. Department of Energy

Guests (WebEx/phone)

Name Affiliation

Mikhail Adamantiades Environmental Protection Agency

Nana Ayensu General Electric

Justin Baca Solar Energy Industries Association

Youngsun Baek Union of Concerned Scientists

Frank Benavides Alliance Resource Partners

Jose Benitez Energy Ventures Analysis

Kikelomo Buari Southern Company

Jason Burwen Energy Storage Association

Wesley Cole National Renewable Energy Laboratory

Leslie Coleman National Mining Association

Tyler Cromey Southern Company

Ryan Dougherty Geothermal Exchange Organization

Erich Eschman Environmental Protection Agency

Neva Espinosa Electric Power Research Institute

Sarah Forbes U.S. Department of Energy

Steve Frauenheim Edison Electric Institute

Jamie Heller Hellerworx

Michael Leitman National Rural Electric Cooperative Association

Yanghe Liu Entergy

Jay Lucey Coalition of Northeastern Governors

Carl Lundgren U.S. Department of Labor

Greg Marmon Wood Mackenzie

Jim Moore Spire

Aditya Jayam Prabhakar MISO

Jay Ratafia-Brown Leidos

Ricky Roberts Electric Power Research Institute

Joshua Rockwell Office of Surface Mining Reclamation and Enforcement

Sandra Sattler Union of Concerned Scientists

Serpil Kayin Environmental Protection Agency
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Daniel Shields Office of Ohio Consumer’s Counsel

David Shin American Petroleum Institute

Sharon Showalter OnLocation

Cynthia Simpson U.S. Department of Labor

Michael Stansky First Energy

Mark Strohfus GR Energy Services

Chen-Hao Tsai Midcontinent Independent System Operator

Kenneth Walsh Leidos

David White Synapse

John Wilson Southern Alliance for Clean Energy

Thomas Wilson Electric Power Research Institute

Frances Wood OnLocation

Thomas Wos Tri-State Generation & Transmission

Evelyn Wright Sustainable Energy Economics

Song Zhao Leidos

Paul Zummo American Public Power Association

EIA Staff (WebEx/phone)

Name Affiliation

Rosalyn Berry U.S. Energy Information Administration 

Scott Jell U.S. Energy Information Administration 

Nilay Manzagol U.S. Energy Information Administration 

Bonnie West U.S. Energy Information Administration

EIA Staff (in person)

Name Affiliation

Lori Aniti U.S. Energy Information Administration 

Greg Adams U.S. Energy Information Administration

Richard Bowers U.S. Energy Information Administration

Michelle Bowman U.S. Energy Information Administration

Jim Diefenderfer U.S. Energy Information Administration

Kenneth Dubin U.S. Energy Information Administration

David Fritsch U.S. Energy Information Administration

Thaddeus Huetteman U.S. Energy Information Administration

Tyler Hodge U.S. Energy Information Administration 

Jeffrey Jones U.S. Energy Information Administration

Augustine Kwon U.S. Energy Information Administration

Angelina LaRose U.S. Energy Information Administration

Perry Lindstrom U.S. Energy Information Administration
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Cara Marcy U.S. Energy Information Administration

Laura Martin U.S. Energy Information Administration

Elizabeth May U.S. Energy Information Administration

Ian Mead U.S. Energy Information Administration

Christopher Namovicz U.S. Energy Information Administration

Shirley Neff U.S. Energy Information Administration

Brian Park U.S. Energy Information Administration

Michael Scott U.S. Energy Information Administration

Manussawee Sukunta U.S. Energy Information Administration