WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

February 29, 2016

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 February 9, 2016

Presenter: Chris Namovicz

Topics included AEO2016 model and data updates and a summary of AEO2016 model results. Data

updates included required modeling development efforts to include the final and proposed CPP rule, as

well as capital cost updates, RPS developments, and new federal tax policies.   

Participants Present:

Bergman, Aaron  (DOE)

Bowman, Michelle (EIA)

Boyd, Erin (DOE)

Brown , Austin  (NREL)

Comstock, Owen (EIA)

Diefenderfer, Jim (EIA)

Donohoo‐Vallett, Paul (DOE)

Goggin, Michael  (AWEA)

Hodge, Tyler (EIA)

Hodson, Elke (DOE)

Jarzomski, Kevin (EIA)

Lindenberg, Steve (DOE)

Lindstrom, Perry (EIA)

Lowenthal‐Savy, Danielle (EIA)

Luckow, Patrick (Synapse Energy)

Margolis, Robert (NREL)
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

Namovicz, Christopher (EIA)

Sukunta, Manussawee (EIA)

Vermeer, Grace (MJ Bradley)

White, Carol (EIA)

Participants Via Webex:

Augustine, Chad (NREL)

Baca, Justin (SEIA)

Dubin, Kenneth (On Location Inc)

Feldman, David (NREL)

Ho, Jonathan (NREL)

Hunt, Hannah (AWEA)

Jones, Jeff (EIA)

Kwon, Augustine (EIA)

Lee, April (EIA)

Mai, Trieu (NREL)

Marcy, Cara (EIA)

Martin, Laura (EIA)

Matek, Ben (Geothermal Energy Association)

Mayes, Fred (EIA)

Moses, Carolyn (EIA)

Peterson, David (EIA)

Richard, Christopher (EE)

Rosner, David (DOE)

Showalter, Sharon (OnLocation, Inc.)

Stanberry, Matt (AEE)

Tusing, Rich (DOE)

White, David (Synapse Energy)

Wilson, John D. (Southern Alliance for Clean Energy)

Wiser, Ryan (LBL)

Wood, Frances (OnLocation, Inc.)

Issues Discussed

Renewable Portfolio Standards, Investment Tax Credit (ITC)/Production Tax Credit (PTC)

 A participant asked how EIA handles the ‘under construction’ deadline for renewable tax credits.

EIA assumes that the plant must be in‐service based on the expiration date of the tax credit plus an

assumed period that accounts for typical plant development and construction periods.

 A participant asked how EIA treats interstate trading, and commented that ERC trading in EMM

seems restrictive.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

EIA will conduct side cases to model interstate trading to the extent possible in the regional model, but

there is still much uncertainty regarding the level to which trading might develop. EIA is also looking into

nation‐wide trading.

Performance Characteristics

 A participant asked if the PV costs quoted in the presentation include the effect of learning.

EIA confirmed that the estimated PV capital costs presented include the impact of learning. 30% of the

PV costs are attributed to modules and 70% of the PV costs are attributed to the Balance of System. As

more PV capacity is installed, the cost will decline.

 The discussion of performance characteristics raised the issue of whether or not the CPP and ITC

extension were causing costs to decrease.

EIA confirmed that the CPP and ITC contribute to the decrease in capital costs. A third major factor is the

lower initial cost for solar technology, which also helps to make it more competitive relative to other

generating technologies.

 The discussion on performance characteristics also addressed the change in slope of the learning

curve. The participant wanted to know if the price of materials was the cause for the change in

slope.

EIA clarified that the change in the metals price index and segmented learning both contribute to the

change in slope.

 A participant wanted to know if EIA was modeling PV tracking or fixed tilt systems in the AEO2016.

EIA is modeling fixed‐tilt but requested both fixed and tracking cost and performance estimates to

evaluate whether or not to model tracking systems in the future.

 A participant wanted to know if the wind capacity is hitting any growth bounds, and if the wind

growth bounds are specified at the EMM level.

EIA uses an overall intermittent penetration limit of 40%, which is achieved in several steps. Current

modeling results indicate that intermittent generation levels are reaching step limits (above 30%), at

which point penetration levels begin to slow down. Current intermittent penetration growth limits for

wind are specified in the EMM.

 A question was raised as to whether growth limits applied only to utility scale or to both utility scale

and distributed generation.  

EIA applies limits to both utility‐scale and distributed generation. [Note: EIA’s approach was modified

subsequent to this meeting.  As of this posting, the referenced limits only apply to utility‐scale generation

from wind and solar]
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

 A participant wanted to know if there is a capacity factor difference occurring regarding the wind

and solar balance.

EIA confirmed that capacity factors are changing as new plants with higher capacity factors are built.

Wind Capacity factors improve as additional capacity is installed. EIA has region‐specific capacity factors.

Solar capacity factors are static over time in the model.

 The issue of regionality of wind costs was discussed. A participant wanted to know how the high‐

cost regions were calculated.  

EIA uses available data for the cost in specific regions or neighboring regions where necessary.  In the

highest cost region, the available data consists of only one plant, so that is what EIA used for the region’s

estimated cost.

 A participant asked what other methodologies are used to estimate costs.

EIA takes labor cost multipliers provided by Leidos and uses those multipliers to develop regional

differentiation for all generating technologies (except for wind).

 A participant wanted to know if the calculations to estimate costs are based on built plants.

EIA confirmed that Leidos develops a cost‐less cost estimate based on estimated labor and materials

costs based on their experience with actual plants. They then use standard engineering models to

estimate labor costs.

 A participant wanted to know if EIA is using the regional cost estimates included to determine

immutable costs.

EIA confirmed that the regional cost multipliers are generally held constant in the model, although the

underlying capital costs do change with time.

 A participant raised additional concerns over costs, especially with small builds and basing cost

estimates on a small sample size, which they believe to be the case.

EIA stated that there are 2 options: 1) Wait for more projects to be built and adapt cost estimates; 2)

Look at what are likely similarities/differences between regions, based on the Leidos study and other

considerations. EIA noted that regions 9 and 5 have some similarities to the Southeast, and also have

high costs. Tying together similar regions is probably a better approach than basing costs on one plant.

 A participant noted that perhaps the EIA methodology is double penalizing with the single‐point

estimates for cost and capacity factor. Georgia Power did an RFI for wind projects in the Southeast

(market offers only). Using this data from Georgia Power might help calibrate regional costs. This

methodology might also provide a transitional component to cost to allow costs to come up or down

to average over time.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

EIA recognizes the merits of the participant’s suggestion, but is not following that methodology for this

AEO cycle. Leidos did provide regional multipliers based on labor estimates but EIA used an observed

distribution of actual project costs instead. [EIA subsequently followed‐up with the Georgia RFI data and

did not find suitable cost estimates to contribute to calibrating regional cost estimates.]

 A participant wanted to know which technologies the Leidos regional cost multipliers being applied

to.

EIA confirms that the multipliers are being applied to all technologies, except for wind. The final regional

cost multipliers will be specified in the final report from Leidos.

 A participant asked if EIA will allow for capacity to increase if wind/solar are balanced, or if their

capacity is capped.

EIA stated that the 40% cap on intermittent generation is based on the sum of wind and solar

generation, and is not a function of the relative contribution of each. The model is not readily adjustable

to make capacity depend on the generation mix.

Clean Power Plan

 A participant asked if EIA will apply an ERC for renewables in the rate‐based approach to evaluating

the Clean Power Plan.

EIA confirms that it applies ERC’s for trading. For the mass‐based approach, renewables only reduce total

carbon emissions. For the rate‐based approach, renewables both lower the amount of carbon in the

numerator of the rate, but in EPA’s formula, also increase the base generation in the denominator, thus

enhancing their overall value in reducing the emission rate. The mass based approach will be

incorporated into the Reference Case. EIA is performing sensitivity analysis to evaluate the impact of the

rate‐based approach.

 A participant asked if EIA is attributing the decrease in wind generation to the CPP and natural gas

prices.  

Wind generation is influenced by a number of factors. EIA will run side cases with variations in natural

gas prices and CPP implementation approaches that will help demonstrate the impact of these factors on

wind and other renewable builds.

 A participant asked how the EIA gas prices from AEO2016 compare to the gas prices in the High

Oil/Gas case from AEO2015.

Natural gas prices in the preliminary AEO2016 generally fall between the AEO2015 Reference case and

the High Oil and Gas Resource case from the AEO2015.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

 A participant wanted to know if the CPP results in a decrease in biomass because the CPP is thought

to penalize its use.

EIA clarified that the CPP does not necessarily penalize biomass; whether or not biomass use is penalized

depends on the biomass accounting that individual states choose to use.  Current EPA guidance on

biomass accounting leaves the biomass accounting interpretation dependent on a number of factors,

and it is not easy to say if it penalizes biomass or not without case‐specific knowledge.  EIA assumes that

biomass will count as a zero‐carbon resource for CPP compliance.  Biomass generation is less under the

CPP as more coal‐fired plants are retired so there are fewer opportunities for biomass cofiring.

 A participant wanted to know if EIA will run an alternate scenario where the CPP is adjusted to meet

COP21 targets.  

EIA is currently looking at cases based on various carbon fees.  EIA will not be running an alternate

COP21 specific side case.  EIA does not propose or make energy or environmental policy and will not be

exploring potential modifications of the CPP that would meet COP21 targets.

 A participant wanted to know how states’ targets are being allocated among CPP regions.

EIA allocates emission targets based on current generation mix for each state. The methodology is based

on shares of covered generation according to the CPP rule.

Other Topics

 A participant wanted to know if EIA models energy storage.

EIA currently models the operation of existing pumped hydro storage facilities, but does not model

energy storage as a possible capacity expansion option.  EIA is planning to assess energy storage for

potential inclusion in future AEOs.  

 A participant wanted to know if EIA has made any changes to the way it models intermittency in

AEO2016.

EIA models dynamic capacity credits and a few other intermittency‐related items such as surplus wind

curtailment and time‐of‐day and seasonal match to load. One major change that was incorporated into

the model this is year is the quantification of distributed PV. The average daily load had been net

negative; now the model uses total generation, including end‐use PV, which it treats as utility scale PV

generation.  This allows the distributed PV to be evaluated using existing intermittency algorithms, which

are otherwise unchanged. [Note: EIA’s approach was modified subsequent to this meeting.  As of this

posting, the referenced limits only apply to utility‐scale generation from wind and solar]

Reporting Issues

 A participant commented that wind builds seem to be low, especially compared to what’s currently

under construction.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

In combination with data reported to EIA on the Form EIA‐860, EIA conducts independent research to

assess projects in development.  EIA encourages wind developers to report project construction status

promptly to EIA. EIA currently picks up plants that are ‘under construction’ and ‘planned’; capacity builds

for 2016 and 2017, based on what is reported to EIA on the Form EIA‐860.