Wind

Integra,on and the Cost of Carbon

Dinos Gonatas
CPG Advisors
cpgonatas@cpg-advisors.net (978) 985-4309

No Federal Carbon Price State RPS Policies Set Carbon Agenda

RPS No RPS

Renewable requirements dier substan,ally Many require physical power deliver or in-state genera,on

States Driving Diverse Projects

States Driving Diverse Projects

Wind Integra,on Studies - 2010

WECC NREL/ GE Study

Eastern Interconnect NREL/Enernex

SPP, NYISO, ISO-NE Subregional Studies

CRA GE

GE

3 Ways to Reduce Carbon

1.

3 Ways to Reduce Carbon

1.

2.

3 Ways to Reduce Carbon

1.

2.

3.

Carbon Reduc,on Depends on Fuel Displaced

Wind Displaces Gas in Merit Dispatch

ISO-NE Example

ISO-NE study shows gas reduc,on

ISO-NE Genera2on by Source
80 70 60 TWh/year 50 40 30 20 10 0 No wind

full queue build-out best on-shore aggressive build

Wind

gas - CC

gas - CT

Nuclear

Hydro

Coal

Steam - oil and other

Large reduc,on in combined cycle dispatch for New England subregion

NYISO study shows gas reduc,on

NYISO Genera2on by Source
60

50

1275 MW wind 4250 MW wind

40 TWh/yr

30

20

10

0 Wind gas - CC gas - CT Nuclear Hydro Coal Steam - oil and other Steam - gas

Large reduc,on in combined cycle dispatch for NYISO

SPP study shows coal & gas reduc,on

SPP Genera2on by Source
200 180 160 140 120 TWh/yr 100 80 60 40 20 0 Wind gas - CC gas - CT Nuclear Hydro Coal Steam - oil and Steam - gas other Base case 10% wind 20% wind

Balanced reduc,on in fossil genera,on

In Eastern-wide Study, Coal Displaced

NREL Eastern Interconnect Genera2on by Source
2500 2000 1500 1000 500 0

TWh/yr

Business as usual "20%, best on-shore" 30% wind

Wind

gas - CC

gas - CT

Nuclear

Hydro + geothermal

Coal

Steam - oil Steam - gas and other

overall impact on coal in Eastern interconnec,on overall

WECC shows gas reduc,on

WECC Genera2on by Source
400 350 300 250 TWh/yr Base case 200 150 100 50 0 Wind + solar gas - CC gas - CT Nuclear Hydro Coal Steam - oil and other Steam - gas 10% wind 20% wind 30%w and solar

Balanced reduc,on in fossil genera,on

Carbon Reduc,on Varies by Region/ Subregion

Genera,on in New England and SPP diers from Eastern interconnect

Eastern Interconnect 2008 2,000 Genera2on
1,500 TWH TWh 1,000 500 - 60 50 40 30 20 10 0 coal gas nuclear

New England 2008 genera2on

SPP 2008 Genera2on

100 80 60 40 20 0 coal gas nuclear

Dierence in genera,on eet might explain some of disparate impact on coal in Eastern Interconnect

Balancing Area Constraints Force Coal down in Midwest/ Great Plains

NREL

Spinning reserve (Gas - CC or CT) must back wind within each balancing area to comply with con,ngency limits Wheres theres liile gas, gas CCs are added locally and coal is displaced but otherwise gas is displaced

Renewables have greatest impact in gas poor states

Power Plant Economic Assump,ons

ANribute Capital & Installa,on Costs Capacity Revenue Transmission Costs Heatrate Gas Price Wind $1700/kW Gas C-C $1000/kW

0 5$/kW-mo N/A N/A

2$/kW-mo 5$/kW-mo 6,800 btu/kwh 65%

Cash Flow Model yielding Levelized Cost of Power

Capacity factor 25 45%

4 14$
10% 50% 7% 25 years

Cost of equity (ROE) leverage interest rate Project Life

Capacity factor and gas prices are most sensi,ve variables Not including subsidies for wind

On-Shore Wind vs. Gas Levelized Costs

20%
175 150

25%

Wind Net Capacity Factor 30% 35% 40%

45%

50%

LCOE $/MWh

125 100 75 50 25 0

Gas CC Wind

8 10 Gas Price $/mmbtu

12

14

High quality wind unsubsidized wind resource competes with gas-red genera,on at pre-shale prices

O-Shore Wind vs. Gas Levelized Costs

Wind vs Gas Levelized Power Costs
Wind Net Capacity Factor
20% 450 400 350 25% 30% 35% 40% 45% 50%

LCOE $/MWh

300 250 200 150 100 50 0 4 6 8 10 12 14

Gas CC Wind O-shore Wind

Gas Price $/mmbtu

O-shore wind 2.65 more costly than on-shore Similar costs to solar (solar is distributed, with lower NCF, more rapid cost declines due to tech advances)

Cost of Reducing Carbon Emissions

Add Wind Where Coal Plants Are and Gas Isnt

Eec,ve Ac,on Ties Wind Resource to Coal States

Long haul lines from prime wind regions to load Short haul lines from decent wind regions to load Whichever is most economic! (may need both at high wind penetra,on)

Conclusions
Carbon impact of renewables depends on local genera,on eet Wind displacing coal is almost as cost eec,ve as gas displacing coal, compe,,ve at higher gas prices Wind displacing gas is not cost eec,ve. RPS standards in gas- poor states have a much bigger impact on carbon Transmission projects to bring wind to gas-poor regions make far more sense than those bringing wind energy to the coasts Thank you