Review of Capital Costs for
Generation Technologies
Technical Advisory Subcommittee
January 31, 2017
Arne Olson, Partner
Doug Allen, Managing Consultant
Femi Sawyerr, Associate
History
In 2009, E3 provided WECC with recommendations for
capital costs of new electric generation technologies to
use in its 10-year study cycles
• Prior to this effort, the relative costs of WECC’s study cases could
only be compared on a variable-cost basis
• This effort allowed WECC to quantify relative scenario costs on a
basis reflecting their actual prospective costs to ratepayers by
combining variable & fixed costs
Total
Cost
=
Fuel and
Variable Costs
+
Fixed Cost
(E3 Capital Cost Tool)
E3 has updated these capital cost assumptions several
times to capture major changes in technology costs (e.g.
solar PV) and ensure continued accuracy
Most recent update: 2014
2
Background
In preparation for its upcoming 20-year study plan, WECC has asked E3
to provide guidance on resource cost to use in that study
These capital costs will serve as an input to the 20-year study’s LTPT,
allowing for the development of robust scenarios through cost
minimization
This efforts builds on similar work done in early 2014
20-Year Study
INPUTS
MODELS
(Capital Expansion Optimization)
Twenty-Year Capital
Expansion Plan
SCDT
Generation Portfolio
NXT
Transmission Topology
Long-Term Planning Tools
Gen Capital Costs
STUDY RESULTS
Tx Capital Costs
Other Constraints
3
3
Study Approach
E3 uses a two-step process to develop capital
cost assumptions for the 20-year studies:
1.
Determine the cost to install a power plant today (2016)
2.
Forecast reductions (if applicable) in technology capital costs
over the next two decades
E3 uses capital costs estimates in conjunction
with other assumptions in WECC studies to
determine the annualized costs of new
resources:
•
Financing structure and cost
•
Tax credits
•
Depreciation (MACRS)
•
Fixed O&M costs
4
Technologies To Be Covered
Technology
Biogas
Subtypes
Landfill, Other
Biomass
CHP
Small, Large
Coal
Steam, IGCC with CCS
Energy Storage
Battery, Pumped Storage
Gas CT
Aeroderivative, Frame
Gas CCGT
Basic, Advanced
Geothermal
Binary/Flash, Enhanced (EGS)
Hydro
Small, Large
Nuclear
Solar Thermal
No storage, 6-hr Storage
Solar PV
Residential, Commercial, Fixed Tilt (1-20 MW), Fixed Tilt (>
20 MW), Tracking (1-20 MW), Tracking (> 20 MW)
Wind
Onshore, Offshore
* Capital costs for resources in gold were checked to determine if a cost update is
necessary, but have remained stable since the last update
5
Data Sources and Assumptions
E3 develops capital cost assumptions based on a literature
review of public cost estimates from a variety of sources:
•
Government-contracted engineering studies
•
Regional or industry studies
•
Utility integrated resource plans (IRPs)
•
Publicly reported actual costs
Current update focuses on sources included in the 2014 capital
cost review, with additional sources where appropriate
•
Stakeholder feedback & recommendations welcome
All costs in this update are expressed in 2016 dollars unless
explicitly stated otherwise
E3’s cost recommendations represent the “all-in” cost of
building a new plant, including the cost of borrowing during
construction
•
“Overnight” capital cost estimates are scaled up to allow for comparison with
all-inclusive cost estimates
6
Wind and Solar Capital Cost
Summary (DRAFT)
Technology
WECC 2012
E3 2014 Update
E3 2016 Update
(2016 $/kW)
(2016 $/kW)
(2016 $/kW)
Subtypes
Solar PV
Residential Rooftop
$5,820
$4,452
$2,900
($/kW-dc)
Commercial Rooftop
$4,942
$3,845
$2,600
Fixed Tilt (1-20 MW)
$3,102
$2,631
$1,600
Tracking (1-20 MW)
$3,541
$3,035
$1,700
Fixed Tilt (> 20 MW)
$2,635
$2,226
$1,400
Tracking (> 20 MW)
$3,075
$2,631
$1,500
No Storage
$5,381
$5,565
$6,000
Six Hour Storage
$7,797
$8,095
$8,000
Onshore
$2,196
$2,125
$1,700-$2,000
Offshore
$6,589
$6,375
$4,500
Solar Thermal
Wind
7
Other Generation Technology
Capital Cost Summary (DRAFT)
WECC 2012
Technology
Geothermal
E3 2016 Update
Subtypes
(2016 $/kW)
(2016 $/kW)
(2016 $/kW)
$4,667
$4,351
$4,300
Landfill
$3,020
$2,833
$2,800
Other
$6,040
$5,666
$5,600
Binary/Flash
$6,369
$5,970
$5,000
Enhanced Geothermal
$6,589
$10,118
$9,000
Small
$3,843
$4,047
$4,000
Large
$3,294
$3,238
$3,200
Biomass
Biogas
E3 2014 Update
Hydro
8
Storage Technology Capital Cost
Summary (DRAFT)
WECC 2012
Technology
E3 2014 Update
(2016 $/kW)
Battery
E3 2016 Update
Subtypes
Li-Ion
(2016 $/kW)
n/a
(2016 $/kW)
$3,000 - $5,000
$5,059
Flow
n/a
$3,000 - $6,000
Pumped Storage
n/a
$3,036
$2,500
Compressed Air
Energy Storage
n/a
n/a
$1,700
9
PRESENT DAY COSTS SOLAR PV
Solar Price Trends over Time
Solar capital costs have continued to decline
sharply during recent years
• Declines seen across all technologies, as much as 50%
relative to 2014 estimates
• Tight range of estimates for Residential/Commercial solar,
wider for Utility-Scale solar
Cost advantage of larger systems has decreased in
recent years
• Smaller difference in the updated numbers between the
“Small” and “Large” system capital cost estimates
11
Details on Cost Estimates
Data is presented according to type and size
(where appropriate) of installation
• Residential Rooftop
• Commercial Rooftop
• Utility-Scale Fixed Tilt
• Utility-Scale Tracking
Data points collected from sources are shown over
time to indicate the trend of cost evolutions in
recent years
E3 estimate takes into account current cost
estimates as well as changes over time relative to
2014 estimate
12
Residential Rooftop Solar Costs
over Time
E3 Recommendation:
$2,900/kW
13
Commercial Rooftop Solar Costs
over Time
E3 Recommendation:
$2,600/kW
14
Utility-Scale Fixed Tilt Solar Costs
over Time
E3 Recommendation:
$1,600/kW (1-20 MW)
$1,400/kW (20+ MW)
15
Utility-Scale Tracking Solar Costs
over Time
E3 Recommendation:
$1,700/kW (1-20 MW)
$1,500/kW (20+ MW)
16
Aligning Cost & Performance
Assumptions for Solar PV
Solar PV capacities
•
Direct current (DC): sum of module nameplate rating
•
Alternating current (AC): inverter nameplate rating
Capital costs are typically reported relative to the system’s DC nameplate
rating (in $/kW-dc), but can be expressed relative to the AC nameplate
ratio by multiplying by the Inverter Loading Ratio
Capital Cost
Capital Cost
($/kW-ac)
($/kW-dc)
Inverter Loading Ratio
DC nameplate
AC nameplate
Chart shows industry average
ILRs in recent years
For more detail on the treatment of DC and AC
capacity in WECC studies, see E3’s presentation
to TAS (12-12-2013)
Source: Utility-Scale Solar 2015: An Empirical Analysis of Cost,
Performance and Pricing Trends in the United States (LBNL, 2016)
17
Recommended Assumptions
Values in the LBNL study cited above indicate that the
recommended inverter loading ratios for the fixed tilt solar
resources should be updated from their 2014 values:
•
Fixed tilt, utility: 1.35
•
Tracking, utility: 1.30
•
Rooftop: 1.20
Solar PV Subtypes
E3 2016 Update
(2016 $/kW-dc)
$/kW-dc
Inverter
Loading Ratio
X
ILR
E3 2016 Update
(2016 $/kW-ac)
=
$/kW-ac
Residential Rooftop
$2,900
1.20
$3,480
Commercial Rooftop
$2,600
1.20
$3,120
Fixed Tilt (1-20 MW)
$1,600
1.35
$2,160
Tracking (1-20 MW)
$1,700
1.30
$2,210
Fixed Tilt (> 20 MW)
$1,400
1.35
$1,890
Tracking (> 20 MW)
$1,500
1.30
$1,950
18
Summary of Solar PV
Recommendations
Capital costs expressed in $2016
Comparison of DC and AC costs in E3 2016 update:
E3 2016 Update
Solar PV Subtypes
2016 $/kWdc
2016 $/kWac
Residential Rooftop
$2,900
$3,480
Commercial Rooftop
$2,600
$3,120
Fixed Tilt (1-20 MW)
$1,600
$2,160
Tracking (1-20 MW)
$1,700
$2,210
Fixed Tilt (> 20 MW)
$1,400
$1,890
Tracking (> 20 MW)
$1,500
$1,950
19
Comparison of Solar PV Recommendations to
Past Recommendations
Solar costs have declined in recent years
Cost differences across the different types of solar have also
declined
20
PRESENT DAY COSTS WIND
Wind Price Trends over Time
Wind capital costs have remained relatively
constant over the past few years
• Slight downward trend, but not approaching the cost
decreases seen for solar
• Estimates reflect observed cost differences by region
Data on Offshore Wind remains sparse
• First offshore wind facility in the US came online this month
• Previous estimates were high, have declined in recent years
22
Details on Cost Estimates
Data/estimates are presented for both onshore
and offshore wind
Data points are presented over time to indicate the
trend of cost evolutions in recent years
E3 estimate takes into account current cost
estimates as well as changes over time relative to
2014 estimate
23
Cost Differences by Region
Data from LBNL indicates that wind capital costs
are likely to vary according to the region in which
the project is located
• Projects in the “Interior” zone (Rocky Mountains) are less
expensive to install than those in the “West” zone
• E3 recommends reflecting this difference in capital cost
estimates
Source: 2015 Wind Technologies Market Report, LBNL
24
Onshore Wind Solar Costs over
Time
E3 Recommendation:
$1,700/kW (Interior)
$2,000/kW (Coastal)
25
Offshore Wind Costs over Time
E3 Recommendation:
$4,500/kW
26
Summary of Wind Capital Cost
Recommendations
Capital costs expressed in $2016
Wind Subtypes
E3 2012
Update
E3 2014
Update
E3 2016
Update
2016 $/kW
2016 $/kW
2016 $/kW
Interior
Onshore
$1,700
$2,196
$2,125
Coastal
Offshore
$2,000
$6,589
$6,375
$4,500
Cost decrease in both categories relative to 2014
update (6-20% for onshore, 29% for offshore)
27
FUTURE COST
PROJECTIONS
Cost Trajectory Methodology
In 2012, E3 developed methodologies to create plausible
trajectories of future generation capital costs
• Solar PV: application of learning curves to present-day costs
• 20% learning rate for modules; 10% for BOS
• IEA Medium-Term Outlook forecast of global installations
• Wind: application of learning curves to present-day costs:
• 10% learning rate
• IEA Medium-Term Outlook forecast of global installations
The general framework used to project future costs
remain valid, but E3 has updated assumptions based on
improved/new data and information
29
Learning Curve Theory
Learning curves describe an observed empirical relationship
between the cumulative experience in the production of a good
and the cost to produce it
•
Increased experience leads to lower costs due to efficiency gains in the
production process
•
The functional form for the learning curve is empirically derived and does not
have a direct theoretical foundation
Example: 20% Learning Rate
The learning rate represents
the expected decrease in
costs with a doubling of
experience
Price
Global installed capacity is
used as a proxy for
cumulative experience in the
electric sector
2x
-20%
2x
-20%
Cumulative Experience
30
FUTURE COST
PROJECTIONS - SOLAR
Components of Solar PV Costs
For each segment of solar PV, E3 has broken capital costs out into three
categories:
1.
Module costs: direct cost of photovoltaic modules
2.
Non-module hard costs: costs of inverter, racking, electrical equipment, etc.
3.
“Soft costs”: labor, permitting fees, etc.
Cost reductions in each category will result from different drivers and
may not apply equally across all market segments
32
Module Cost Reductions
Historically, over the long-term, modules have stayed
relatively close to a learning rate of 20%
•
See International Technology Roadmap for Photovoltaic 2015 Results,
available at http://www.itrpv.net
Current module prices are below long-term learning curve
•
Potential for cost reductions due to module cost declines is expected to be
limited until trend returns to long-run average
33
Forecasting Future Module Prices
E3’s projection of
module costs relies on
the extrapolation of
global PV forecast from
the IEA’s Medium Term
Renewable Energy
Outlook
Module prices are
assumed to remain
stable at today’s level
until the long-term
trend “catches up”
Learning curve
approach supports
anecdotal evidence that
suggests further
reductions in module
costs are limited
34
Non-Module Cost Reduction
Potential
In 2014, E3 assumed that non-module cost components for rooftop PV
would follow a learning rate of 15% while those for utility-scale PV
would follow a 10% learning rate
•
Reflected substantial effort to identify cost reduction potential in rooftop PV systems
•
Reported “costs” of rooftop systems are increasingly influenced by the retail rate structures that enable
their viability
•
Fair market value of PV exceeds actual system costs, allowing for more rapid cost declines with
increase experience / competition
E3 sees no evidence that these learning rates have changed substantially
20%
reduction
relative to
2016
29%
reduction
relative to
2016
35
Comparison to Prior Recommendations:
Residential and Commercial
Residential and commercial rooftop solar PV costs have been
revised downward from the 2014 E3 Update reflecting recent
market cost declines
36
Comparison to Prior Recommendations:
Utility Scale Fixed Tilt
37
Comparison to Prior Recommendations:
Utility Scale Tracking
38
FUTURE COST
PROJECTIONS - WIND
Forecasting Future Turbine Prices
Learning rates are based on
meta-analysis of literature
presented in Rubin (2015)2
•
Estimated at 12% for both on
and offshore turbines
E3’s projection of module
costs relies on the
extrapolation of global wind
forecast from the Global
Wind Energy Council
•
Total installed capacity increases
to ~800 GW in 2020, ~2,800 GW
in 2040
•
Offshore wind increases from
<3% of global total in 2015 to
~25% of global total in 20401
– Share of offshore wind is taken from IEA projections
– Rubin, E., I. Azevedo, P. Jaramillo, S. Yeh. “A review of learning rates for electricity supply technologies.” Energy
Policy 86, pp. 198-218.
1
2
40
Turbine Price Evolution over Time
Due to relative
maturity of onshore
wind industry,
offshore costs
decline more
rapidly over the
next 15-20 years
Past 2030, growth
in offshore wind
slows to levels near
that for onshore
51% below
2016
estimate
24% below
2016
estimate
41
COMPARISON OF
PRESENT AND FUTURE
COSTS
Levelized Cost Estimates – 2016
Residential
(17% CF)
20-30%
Capacity
Factor
35-45%
Capacity
Factor
Commercial
(23% CF)
25-33%
Capacity
Factor
30-40%
Capacity
Factor
43
Levelized Cost Estimates – 2036
Compares current costs to projected
costs with cost improvements and
reduced ITC / no PTC
Residential
(17% CF)
25-33%
Capacity
Factor
Commercial
(23% CF)
20-30%
Capacity
Factor
35-45%
Capacity
Factor
30-40%
Capacity
Factor
* Note – Comparison shown here reflects only the effect of declining capital costs / expiring tax incentives, does
not reflect potential capacity factor improvements due to technological advancement
44
PRESENT DAY COSTS STORAGE
Characterizing Storage Options
The breadth of potential storage applications is wide,
and the appropriate technology and its characteristics
will vary considerably
Sources: Sandia (2013), Indiana State Utility Forecasting Group (2013)
46
Recommendations –
Pumped Hydro Storage
Pumped hydro is a relatively mature technology that can
scale-up to over 1 GW although costs are highly
dependent on the specific site
Recent projects in PacifiCorp’s territory (JD Pool, Swan
Lake, and Seminoe) estimated at $2,600 - $2,700/ kW
E3 Recommendation:
$2,500/kW
47
Lithium Ion Battery Costs by
Storage Capacity
Costs presented according to storage life
Tighter range of costs than that seen for flow batteries
• Likely due to wide range of potential materials that can be used in
flow batteries
E3 Recommendation:
4-Hour, $3,000/kW
8-Hour, $5,000/kW
48
Flow Battery Costs by Storage
Capacity
Costs separated according to storage life
Wide range of costs based on materials used
E3 Recommendation:
4-Hour, $3,000/kW
8-Hour, $6,000/kW
49
Battery cost projections
Dramatic changes since 2005
These cost improvement trends are expected to
continue into the 2020s
Follow-on work could focus on projecting cost declines
Source: Nykvist et al. (2015),
http://www.nature.com/nclimate/journal/v5/n4/full/nclimate2564.html
50
Compressed Air Energy Storage
(CAES) Costs over Time
Relatively few data
points available
All estimates in the
$1,200/kW $2,000/kW range
E3 Recommendation:
$1,700/kW
51
PRESENT DAY COSTS –
OTHER TECHNOLOGIES
Solar Thermal – No Storage
Newer sources are generally aligned, if a little bit higher,
than E3’s prior estimate for solar thermal cost
E3 Recommendation:
$6,000/kW
Solar Thermal – w/ Storage
No evidence of cost changes for Solar Thermal
with Storage
E3 Recommendation:
$8,000/kW
Biomass Capital Costs
No clear trend in
Biomass capital cost
estimates
• EIA estimates increased
12%, Lazard slightly down
Mature technology,
costs are unlikely to
decrease substantially
E3 Recommendation:
$4,300/kW
Geothermal Costs
Data indicates a modest
decline in capital costs for
Binary/Flash Geothermal
Range of estimates has also
narrowed
E3 Recommendation:
$5,000/kW
Enhanced Geothermal Costs
Little to no updated information on costs /
viability of Enhanced Geothermal Systems
since 2014 update
Limited deployment of EGS systems means
that available cost data is based on
experimental deployments
E3 Recommendation:
$9,000/kW
57
Hydropower Costs
A review of the available literature shows no
evidence that Hydropower costs have changed
since the 2014 update
EIA inputs for 2016 AEO did not update hydro costs
NWPCC considers hydro to be a “secondary”
resource in the 7th Power Plan
• Cost information not given
E3 Recommendation:
$4,000/kW – Small Hydro
$3,200/kW – Large Hydro
58
PRESENT DAY COSTS –
CONVENTIONAL
TECHNOLOGIES
Conventional Technology Costs
E3 conducted a high-level review of conventional
technology costs to determine if there was
evidence in significant changes in last two years
Generic cost estimates (Lazard, EIA, etc.) have
experienced little to no change
IRP cost estimates have seen small changes
• Lack consistent direction, indicating likely a result of
project-specific factors
Recommendation: Use nominal numbers from 2014
update, assumes that any cost improvements offset
inflation
60
PRESENT DAY COSTS –
FIXED O&M
Fixed O&M Recommendations
Technology
Subtypes
Fixed O&M ($/kW-yr.)
Solar PV
Residential Rooftop
$33
Commercial Rooftop
$20
Fixed Tilt (1-20 MW)
$30
Tracking (1-20 MW)
$35
Fixed Tilt (> 20 MW)
$20
Tracking (> 20 MW)
$30
No Storage
$67
Six Hour Storage
$67
Onshore
$40
Offshore
$100
Solar Thermal
Wind
62
Fixed O&M Recommendations
Technology
Subtypes
Biomass
Fixed O&M ($/kW-yr.)
$120
Landfill
$100
Other
$120
Binary/Flash
$120
Enhanced Geothermal
$400
Small
$20
Large
$20
Li-Ion
$30
Flow
$100
Biogas
Geothermal
Hydro
Battery
Pumped
Storage
$15
Compressed
Air Energy
Storage
$20
63
Thank You!
Contact Doug Allen ([email protected]) with questions or
comments
Energy and Environmental Economics, Inc. (E3)
101 Montgomery Street, Suite 1600
San Francisco, CA 94104
Tel 415-391-5100
Web http://www.ethree.com
BIBLIOGRAPHY
Sources
Arizona Public Service
• 2014 Integrated Resource Plan. Apr 2014
• Link
Avista
• 2015 Electric Integrated Resource Plan. Aug 2015
• Link
California Energy Commission
• Estimated Cost of New Renewable and Fossil Generation in
California. Mar 2015
• Link
66
Sources (cont’d)
California Solar Initiative (CSI)
• CSI data. Nov 2016
• Link
Greentech Media
• U.S. PV System Pricing H2 2016: System Price Breakdowns
and Forecasts. Nov 2016
• Link
Idaho Power Company
• 2015 Integrated Resource Plan. Jun 2015
• Link
67
Sources (cont’d)
International Renewable Energy Agency (IRENA)
• Renewable Power Generation Costs in 2014. Jan 2015
• Link
Lazard
• Levelized Cost of Energy Analysis – Version 9.0. Nov 2015
• Link
• Levelized Cost of Energy Analysis – Version 10.0. Dec 2016
• Link
• Levelized Cost of Storage Analysis – Version 1.0. Nov 2015
• Link
68
Sources (cont’d)
Lazard (cont’d)
• Levelized Cost of Storage Analysis – Version 2.0. Dec 2016
• Link
Lawrence Berkeley National Laboratory (LBNL)
• Tracking the Sun VIII: The Installed Price of Residential and
Non-Residential Photovoltaic Systems in the United States.
Aug 2015
• Link
• Tracking the Sun IX: The Installed Price of Residential and
Non-Residential Photovoltaic Systems in the United States.
Aug 2016
• Link
69
Sources (cont’d)
Lawrence Berkeley National Laboratory (LBNL)
(cont’d)
• Utility Scale Solar 2015. Aug 2016
• Link
• 2015 Wind Technologies Market Report. Aug 2016
• Link
National Renewable Energy Laboratory (NREL)
• Distribution Generation Renewable Energy Estimate of
Costs. Feb 2016
• Link
70
Sources (cont’d)
Pacificorp
• 2015 Integrated Resource Plan. Mar 2015
• Link
Pacificorp and Black & Veatch
• 2017 Integrated Resource Plan. Aug 2016
• Link
Portland General Electric
• 2016 Integrated Resource Plan. Nov 2016
• Link
71