May 28, 2019

MEMORANDUM FOR: Stephen K. Nalley

Acting Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

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

SUBJECT: Summary of AEO2020 Electricity Working Group meeting held on April 

10, 2019

This memorandum provides an overview of the presentation given during the first AEO2020 Electricity 

Working Group meeting and a summary of the discussion that took place. 

Overview

At the beginning of the meeting, EIA stated that AEO2020 will be a short AEO cycle and will include the 

six core side cases (High/Low Macro, High/Low Oil Price, and High/Low Oil and Gas Resource and 

Technology cases), along with the Reference case.

EIA held the first working group meeting in the development cycle to

• Respond to feedback/frequently asked questions on AEO2019 and the underlying assumptions

• Provide an opportunity to solicit modeling improvement suggestions for AEO2020 or for 

consideration for EIA’s budgeting process and implementation for AEO2021 or beyond

• Identify issues or topics that might be better addressed through targeted working group 

discussions.

The presentation materials are available in a separate document. The meeting covered three separate 

topics:

• Review of AEO2019 results: solicitation of comments/responses

• Review of current laws and regulations expected to be incorporated into AEO2020

• Overview of long-term Electricity Market Module (EMM) enhancements

Model updates

The meeting began with a summary of AEO2019 results followed by discussion of issues that were raised 

in the early coverage of the release. Some issues discussed include
• The divergence between the projected decline in coal generation and coal retirements

o Why are coal retirements not projected in the later years of the forecast even though

many units would reach 60 years of age during this timeframe?

o EIA noted that coal retirements represented in EMM are driven by economics rather 

than age and that the noneconomic plants are retired earlier in the projection period.

• The rise in electricity prices despite flat or slow natural gas growth.

o Generation costs decrease 15% by 2050 and account for a 60% share of the price of 

electricity in 2018 in the Reference case. 

o Transmission costs increase by 18%, and distribution costs increase by 24% because of

the need to replace aging infrastructure and upgrade the grid to integrate wind and 

solar capacity.

• The significant reduction in overnight capital cost assumption for new natural gas advanced 

combined-cycle technology

o New, larger combined-cycle designs result in substantial economies of scale for this 

technology. According to the April 2018 report, PJM Cost of New Entry, PJM’s next 

generating capacity auction cost per unit of installed capacity for the advanced

combined-cycle design will be 25% to 30% lower compared with older combined-cycle

units.

• The decline in average emissions intensity relative to AEO2018 levels

o Relative to AEO2018, in the Reference case, EIA projects lower-emitting natural gas 

generation to grow while higher-emitting coal-fired generation is expected to decline 

through 2050.

Pending AEO2020 laws and regulations updates

EIA is monitoring the status of a number of proposed regulatory and legislative initiatives for AEO2020 

and will incorporate into the Reference case all those that are finalized in time for inclusion in this cycle.

• EPA’s Affordable Clean Energy (ACE) rule proposal to replace the Clean Power Plan revises the 

best system of emission reduction (BSER) finding to include only heat-rate efficiency 

improvements. ACE will be included if finalized on schedule by Spring 2019.

• EPA revisions to the new source performance standards (NSPS) to eliminate carbon capture and 

sequestration (CCS) requirements and apply specifications for technology type/size. Revised 

NSPS will be included if finalized by Spring 2019.

• Section 45Q tax credit for CCS technology will be included in AEO2020, including the $50 per 

metric ton credit for secure geologic storage and the $35 per metric ton credit for enhanced oil 

or gas recovery (EOR).

• EIA staff intends to model updates to state carbon emission policies and renewable portfolio 

standard (RPS) programs, as well as updates to state participation in the Regional Greenhouse 

Gas Initiative (RGGI) program.
Pending AEO2020 modeling enhancements

• Redefining EMM regional boundaries to account for structural changes in independent system 

operators, regional transmission organizations, and regional power market developments—

from 22 to 25 EMM regions

• Incorporating results of the study to update capital cost and performance characteristics for 

new generating technologies

• Adding short-term wholesale market price projections

Long-term EMM enhancements

• Introduce the capability to alter EMM regional definitions as needed 

• Analyze and update transmission and distribution spending projections to account for the 

potential long-term cyclical pattern in transmission and distribution spending (for more detail 

see next section.)

• Examine coal supply curves

Discussion

The discussion following the presentation focused on a number of more detailed topics.

Changing approach to transmission and distribution modeling

One participant questioned how EIA planned to revise changing transmission and distribution 

projections. EIA noted that currently capital investment in the transmission and distribution system is 

projected as a function of changes in peak demand, based on historical trends. Additional transmission 

capital investment is added with each new generating unit addition to account for grid interconnection 

costs. Regression equations have been developed to project the operating and maintenance costs for 

transmission and distribution as a function of peak demand and overall customer sales. 

EIA plans to revise the current treatment of transmission and distribution spending to account for longterm cycles in investment patterns. To extend the data on historical investment for transmission and 

distribution (current databases have data only as far back as 1994), a contractor is currently scanning

volumes from the Federal Power Commission on utility capital spending going back to 1938. After that 

project, which is not anticipated to be included in AEO2020, is completed, EIA will reevaluate the 

transmission and distribution projection equations in EMM. 

Revision to cost of new advanced combined-cycle generation technology

One participant noted EIA’s change in AEO2019 to reduce the cost of advanced combined-cycle

technology 25%–30% and asked whether the change was applicable only to units above a certain size. 

EIA responded that advanced combined cycle is defined consistent with the Frame H specifications, with 

the lowest threshold capacity level reported at 292 megawatts (MW) for a single unit. However, because 

EMM adds new builds as needed to suit the increment of capacity required to meet reserve margin 
requirements, even when advanced combined cycle is the least cost technology, it is possible that the 

size of the projected new build could be below the Frame H minimum capacity size. 

Another participant asked if EIA applied learning cost reductions to advanced combined cycle even 

though the cost of new advanced combined cycle was reduced in AEO2019. EIA indicated the learning 

parameters specified for advanced combined cycle still applied, even with the lower cost assumption.

Treatment of CO2 targets from individual companies

A participant asked whether EIA incorporated commitments to reduce CO2 made by specific utility 

companies, citing the examples of DTE Energy and Consumers Power in Michigan setting goals of 80% 

CO2 reductions by 2040 and Xcel committing to a 100% CO2 reduction. EIA noted that under the 

assumption of current laws and regulations the Reference case includes state actions backed by legal or 

regulatory requirements (e.g., states passing 100% RPS policies) but not corporate-level voluntary 

commitments.

Federal tax treatment of utilities in AEO2019

Another participant asked whether the December 2017 tax bill or the section 45Q tax credits were 

reflected in the AEO2019 financial assumptions. EIA responded that the Tax Cuts and Jobs Act of 2017 

was modeled in AEO2019. The federal carbon storage (section 45Q) tax credit was not reflected in 

AEO2019 but will be incorporated in AEO2020. 

Offshore wind development

A participant asked if offshore wind targets reflected in state assumptions will be modeled in AEO2020 

or if EIA would include only offshore wind levels that are currently enacted into law.

EIA responded that offshore wind mandates are not included in state assumptions, but the offshore 

wind projects will eventually be included in Form EIA-860 reporting, along with the cost updates for 

offshore wind. EIA noted that with respect to mandates, in the past, target online years have been 

unclear, so they cannot be accurately represented. 

Other issues

Another participant asked about EIA’s approach to modeling distributed generation. EIA responded that 

distributed generation is covered in the buildings and industrial model portion of National Energy 

Modeling System (NEMS).

A participant urged EIA to expand its treatment of the renewable fuels standard, citing its importance to 

the use of biomass as a transportation fuel.
Attendees

Guests (in person)

Name Affiliation

Bob Cleaves Biomass Power Association

Rachel Goldstein Solar Energy Industries Association

Guests (WebEX/Phone)

Name Affiliation

Justin Baca Solar Energy Industries Association

Youngsun Baek Union of Concerned Scientists

Frank Benavides Alliance Resource Partners

Anne Benson Midcontinent Independent System Operator 

Wesley Cole National Renewable Energy Laboratory 

Paul Donohoo-Vallett U.S. Department Of Energy

Erich Eschman Environmental Protection Agency

Sarah Forbes U.S. Department Of Energy

Steve Frauenheim Edison Electric Institute

John Hensley American Wind Energy Association

Whitney Herndon Rhodium Group

Serpil Kayin Environmental Protection Agency

Jordan Kislear U.S. Department Of Energy

Hannah Kolus Rhodium Group

Michael Leitman National Rural Electric Cooperative Association

Kevin Lucas Solar Energy Industries Association

Jim Moore Spire Energy

Aditya Jayam Prabhakar Midcontinent Independent System Operator

Amit Rao Midcontinent Independent System Operator

Jay Ratafia-Brown Leidos

Chris Salmi NJ Clean Air Council

David Schmalzer Argonne National Laboratory
Sharon Showalter OnLocation

Tom Simchak Energy Storage Association

Mark Strohfus Great River Energy

Tracy Terry OnLocation

Chen-Hao Tsai Midcontinent Independent System Operator

Celeste Wanner American Wind Energy Association

David White Synapse

Thomas Wilson Electric Power Research Institute

Frances Wood OnLocation

EIA staff attendees (in-person)

Name Affiliation

Lori Aniti U.S. Energy Information Administration

Erin Boedecker U.S. Energy Information Administration

Richard Bowers U.S. Energy Information Administration

David Daniels 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

Thad Huetteman 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

Cara Marcy U.S. Energy Information Administration

Laura Martin U.S. Energy Information Administration

Christopher Namovicz U.S. Energy Information Administration

Michael Scott U.S. Energy Information Administration

Manussawee Sukunta U.S. Energy Information Administration

Terry Yen U.S. Energy Information Administration

EIA staff attendees (WebEx/phone)

Name Affiliation

Michelle Bowman U.S. Energy Information Administration 

Tyler Hodge U.S. Energy Information Administration 

Bonnie West U.S. Energy Information Administration