Energy Analysis Department Coal-Wind Hybrid: Assumptions & Findings Coal-Wind Hybrid: Assumptions & Findings Amol Phadke, Ph.D. Lawrence Berkeley National

Energy Analysis Department

Coal-Wind Hybrid:Coal-Wind Hybrid: Assumptions & Findings Assumptions & Findings

Amol Phadke, Ph.D.Lawrence Berkeley National Laboratory

([email protected])

9/6/2007, 2007


Outline of the Presentation Outline of the Presentation

• Final Assumptions

• Testing the economic rationale of coal-wind hybrid

• Results for hybrid options

• Competitiveness of the hybrid with other options

• Conclusions


Overview of the AnalysisOverview of the Analysis

• Developed a spread-sheet based model

• Identified possible hybrid configurations

• Finalized assumptions about technical parameters and costs

• Evaluated costs of different options with varying assumptions

• Today’s objectives - Review assessment of the hybrid options


Economic Rationale for Coal-Wind Hybrid Economic Rationale for Coal-Wind Hybrid

• What is Coal-Wind Hybrid project?

• Economic rationale

• Improve the utilization of transmission lines

• Long distance transmission costs are significant

• Second best option to firm-up the wind• Avoid wind integration and capacity costs


Coal Wind Hybrid from an Economic PerspectiveCoal Wind Hybrid from an Economic Perspective

Gasifier Power Generation

Fuel Production

Load

Wind Power

Transmission


Key Economic ConsiderationsKey Economic Considerations

• Tradeoffs between generation and transmission costs

- Backing down of power generation unit: Increases generation costs per unit of output and reduces transmission costs

• Tradeoffs between fuel production and transmission costs

- Lower capacity factor of the FT reactor


Resource Options ConsideredResource Options Considered

• Hybrid options

- Hybrid with fuels production (SNG, Syncrude, methanol)

- Syngas storage (system is sized lower than the power generation unit)

- CCGT-wind hybrid, CT-wind Hybrid, Hypothetical Hybrid Benchmark

- All Coal-wind hybrid options have 3000 MW of coal generation , 1500 MW wind generation, 3000 MW of transmission line

• Competing options

- Stand alone coal, stand alone wind (with capacity overbuild), NGCC, PC, solar concentric power

• Options not considered

- Advanced gas: cost of saved CO2 ~ $80/Ton, buying permits more economical

- PC + CCS: More expensive than IGCC + CCS

- IGCC without CCS: without CCS, IGCC does not offer economic advantages over PC. IGCC has lower emissions of mercury and sulfur and has lower water requirements


Assumptions about Capital Costs and Technical Assumptions about Capital Costs and Technical Parameters Parameters

• Current costs expressed in 2006$

• NETL estimates include recent run-ups in fossil plant costs

• NREL estimate (reference) of wind plant costs include recent run-ups in plant costs

• Technological performance (expected performance of plants coming online in 2010-2015 time horizon)

- Capacity factor

- Heat Rate


Key Assumptions…I Key Assumptions…I

Wind IGCC +CCS NGCC PCSolar Concentric Power

Capital Cost ($/kW)Total Plant Cost ($/kW) 2,223 554 1,497 Total Plant Cost + Other Costs + AFUDC ($/kW) 1,650 2,788 753 1,872 4,400

Heat Rate 11,300 6,719 10,050 Capacity Factor 47% 90% 90% 85% 42%

O&M Costs Fixed ($/kW-Year) 12 34 10 26 50Variable ($/MWh) 5 8 4.6 5 0.7

Other Fixed Costs (Insurance, property, & income taxes ($/kW-year) 45 76 21 51 118All Costs in 2006$


Fuel Prices Assumptions Fuel Prices Assumptions

• Natural Gas Prices

- Annual energy outlook (AEO) forecast

- Systematic difference between AEO & NYMEX futures ($0.78/MMBtu : Bolinger et. al)

Risk premium Systematic bias No convergence

- NYMEX projected into future using escalation rate in AEO Adjusted for delivery in the pacific region (by adding $.11/MMBtu) Levelized natural gas price (2010-2030) of $7.10/MMBtu (2006$) Cut off ranges explored

• Coal Prices

- Levelized price (2010-2030) derived from AEO forecast of Wyoming Coal: $9.40/Short Ton : $0.55/ MMBtu

- Cut off ranges explored


Carbon Prices Assumptions Carbon Prices Assumptions

• Base Case $40/TonCO2: FEAST model assumption base case (assuming CA will meet its targets on its own: without buying offsets)

• Wide range of carbon prices (significantly driven by assumptions about offset prices and emission reduction target levels)

• Cutoff price estimated, high price scenario explored


Key Assumptions: Transmission Key Assumptions: Transmission

• Feast Model Assumptions

• Base Case: AC + DC Transmission

Route Distance Capacity Type Cost ($ Million) M $/MW LossesWyoming - Mona (Utah) - S. Nevada - Southern CA 1092 3000 AC 4300 1.43 8%Wyoming - S. Nevada - Southern CA 1090 3000 AC & DC 3300 1.10 7%S. Wyoming - Southern CA 850 3000 1-500 kV DC 2700 0.90 6%


Key Assumptions, Financing Key Assumptions, Financing

Cost of Debt (Before tax) 0.06Return on Equity (Before tax) 0.107Debt % 0.448Equity % 0.553Nominal Discount Rate (before tax) 8.6%Nominal Discount Rate (after tax) 7.5%Inflation Rate 2%Real Discount Rate 5.5%

Utility Financing


Approach to Analyze the Economics of Fuel Approach to Analyze the Economics of Fuel Production (SNG, Syncrude, Methenol)Production (SNG, Syncrude, Methenol)

• Adding a Fuel Facility

- Allows a higher capacity factor for all the components in the system except the power generation unit

- Lowers the capacity factor of the fuels plant

• Additional costs of fuel production are apportioned to the costs of power generation

For example, in a Syncrude production facility

- $737M required for FT which has a peak capacity of handling gas worth 1500 MW of output and runs @ 47% capacity factor

- Same output can be produced by a FT which has a peak capacity to handle gas worth ~ 1500 MW, which costs $346M

- Cost of FT that is paid by power generation $390M

• The costs of this configuration are cheaper compared to a configuration in which the entire IGCC unit is backed down to accommodate the wind output

• The economics of the fuels production facility is same as a stand-alone coal to liquids fuel production facility


Additional Costs of Fuel Production FacilitiesAdditional Costs of Fuel Production Facilities

Hybrid Option Cost of Production Total Production Price Margin (M$/Year)Syncrude 45 ($/bbl) 6.29 Million bbl 60 ($/bbl) 94Synthetic Natural Gas 5.4 ($/MMBtu) 44 Million MMBtu/year 7.1 ($/MMBtu) 74.8Methenol

Hybrid Option Additional Cost ($ Million) Averaged over total generation ($/MWh)Syncrude 390 1.1Syngas Storage 380 1.0Synthetic Natural Gas 334 0.9Methenol* SNG Additional cost includes additional cost of the pipeline


Syngas Storage Option: Estimating Storage Syngas Storage Option: Estimating Storage Requirements Requirements

Month Geneneration(GWh)

Storage Requirement (Monthly Average - Monthly)(GWh)

Jan 398 -13Feb 586 214Mar 477 66Apr 397 -1May 424 13Jun 358 -40Jul 300 -112Aug 305 -106Sep 252 -146Oct 304 -108Nov 550 152Dec 472 60

51211%

*Big Horn Baisn Wind Data

Maximum cumulative storage requirementStorage as a % of total generation


Variation in Storage Requirement Variation in Storage Requirement

• Year to year and within month lower than the seasonal requirements for storage

• Variation in the seasonal storage requirements

• Storage costs assuming storage in depleted natural gas wells (cheapest option)

• Storage requirement 4stdev greater than the observed value

Year 1 2 3MN 5.79% 6.42% 4.70% 0.70%MW/NW 7.0% 6.8% 7.7% 0.38%

Storage Requirment (% of Total Generation)Stdev


EOR Revenue and Potential EOR Revenue and Potential

• EOR revenues depend on the oil price

• Bilateral monopoly case EOR revenues will be shared in half:

$15/MWh if EOR revenue = $30/MWh

• Total EOR potential in the RM region will absorb 70% of the CO2 emissions of the hybrid plant in its lifetime

• Average EOR revenue (adjusting for transpiration costs) $9.5/MWh

• Distance from different markets

- For first few plants, sequestration costs will be zero

Oil Price ($/BBl) 30 42 70EOR Revenue ($/Metric Ton) 23 32 54EOR Revenue ($/MCF) 1.2 1.68 2.8EOR Revenue ($/MWh) 22 30 51

CO2 Trasnport Distance (Miles)

EOR Revenue ($/MWh)

Transportation Costs ($/TonCO2)

EOR Revenue ($/TonofCO2)

EOR Revenue ($/MWh)

Within Rocky Mountain Region 200 15 1.61 15 14To Regina, SK 500 15 4.03 12 11To Calgary, AB 770 15 6.20 10 9To Odessa, TX 1020 15 8.21 8 8


Other key issues Other key issues

• Ramp rate of FT is sufficient to accommodate variation in output due to wind

• ~ 3% reduction in the heat rate of hybrid options due to backing down of power generation unit

• Capacity equivalence costs are considered in scenario analysis

• 20% overbuilding of wind capacity results into ~ 15% increase in transmission utilization & 1.5 % reduction in wind capacity

factor


Results Results

• Comparing with other hybrid options

- Wind-CCGT hybrid, wind CT Hybrid, wind-coal hybrid without fuels production

- Sensitivity to fuel prices

• Comparing with the benchmark co-located coal-wind facility

• Comparing with competing options

• Sensitivity analysis

- Transmission

- Wind integration and capacity costs

- EOR

- Capacity equivalence costs

- Fuel prices

- Carbon prices

- Capital costs


Base Case Assumptions Base Case Assumptions

Coal Price ($/MMBtu) 0.549Gas Price ($/MMBtu) 7.1Emission Price ($/TonCO2) 40Transmission Cost ($/MW-Mile) 1100Transmission Loss (%) 7%Wind Capacity Factor (%) 47.0%Net Carbon Costs ($/MWh) 0Capacity Equivalance Costs ($/MWh) 0Wind Integration Costs ($/MWh) 3Discount Rate (After tax) 5.50%


Comparing Hybrid Options: Coal-wind hybrid Comparing Hybrid Options: Coal-wind hybrid with fuel production or storage is the cheapest with fuel production or storage is the cheapest

Hybrid with CCGT Hybrid with CTIGCC Wind IGCC Wind CCGT Wind CT Wind

Capacity (MW) 3000 1500 3000 1200 3000 1500 3000 3000Transmission Capacity (MW) 3000 3000 3000 3000

Summary of Costs Total Average Cost ($/MWh) 83 76 97 103

Variable Generation Cost ($/MWh) 14 1 14 1 52 1 71 1Fixed Generation Cost ($/MWh) 50 47 40 47 18 47 24 47Transmission Cost ($/MWh) 18 17 18 17 20 18 22 17Emmission Allownace Cost ($/MWh) 6 0 6 0 17 0 23 0Total Cost ($/MWh) 89 65 78 65 107 66 140 65Generation Fraction 75% 25% 75% 25% 75% 25% 50% 50%

Average costs (@ $5/MMBtu Price) 83 76 86 93Average cost (@ $20/TonCO2) 80 73 90 97Average cost (@$5/MMBtu & $20/TonofCO2) 80 73 79 86

Hybrid w/o Fuel Production

Hybrid with Fuel Production


Testing the Economic Rationale of Coal-Wind Testing the Economic Rationale of Coal-Wind Hybrid Hybrid

• Stand alone coal, wind, and other hybrid options and are not the appropriate benchmarks, they are competing options

- Total costs are influenced by generation costs in addition to transmission utilization

- If stand alone wind generation is cheaper than coal, then Coal and Wind hybrid could be cheaper than coal simply because it is including wind generation

• Appropriate benchmark is - co-located coal-wind facility where the ratio of the coal to wind generation is the same

as the hybrid system

- Coal unit is operated at its full capacity factor

- Enough transmission capacity to carry peak coal and 80% of the peak wind generation (since the wind capacity is overbuilt)

- This hypothetical benchmark consist of ~2700 MW of coal, 1800 MWs of wind , and 4200 MWS of transmission capacity which results into a transmission utilization of 77% instead of 97% in the hybrid case

- Coal generation 75%, wind generation 25%


Costs and benefits of the coal wind hybrid Costs and benefits of the coal wind hybrid optionoption

• Benefits

- Improved utilization of transmission

Compared to stand alone wind, stand alone coal, and the hypothetical co-located coal wind facility

Cycling leads to improved transmission utilization

An outage causes lower utilization of transmission. However, in the hybrid, the utilization of transmission is less affected by an outage. Outage is usually less than the backed down power generation in the hybrid [For an outage rate of 10%, transmission utilization is lowered by 3% instead of 10% in the stand alone coal case]

- Improved utilization of the IGCC + CCS system

In the stand alone option, outage in the power generation unit requires backing down of gasifiers resulting into lower utilization of the air separation unit, gasifiers, pollution control equipment, carbon separation and capture equipment. In the hybrid, this is not the case. The output from the gasifieres can be diverted to the fuels plant

- Avoided wind integration and capacity equivalence costs

• Costs

- Lower utilization of the power generation unit

- Additional costs of fuel production or syngas storage faculties


Results: NPV of the benefits Results: NPV of the benefits

Net Economic Benefit Due to the HybridBenefit ($/MWh) Annual ($Million) NPV (Million)

Base Case 2.11 54 781Base Case + Capacity Equivalance Cost 2 ($/MWh) 2.61 67 9674 ($/MWh) 3.11 79 1152

Base Case + HVAC Transmission + $4 of Capacity equivalance costs 3.91 100 1448

Base Case + Only DC transmission 1.57 40 583

Base Case + Only DC transmission + No integration costs 0.82 21 305


Comparison with competing options Comparison with competing options

• Base Case

• Sensitivity Analysis


Results: Base CaseResults: Base Case

Coal Only Wind Only CCGT PC

Solar Concentric

Power

IGCC Wind IGCC WindCapacity (MW) 3000 3600 3000 1500 3000 3000 3000Transmission Capacity (MW) 3000 3000 3000 3000 3000 3000

Summary of Costs Total Average Cost ($/MWh) 77.4 81.0 75.7 84.9 99.1 134.7

Variable Generation Cost ($/MWh) 14.0 1.0 13.9 1.0 52.3 10.5 0.7Fixed Generation Cost ($/MWh) 38.2 49.2 39.8 47.2 11.9 26.1 127.6Transmission Cost ($/MWh) 18.7 27.8 17.7 16.9 4.4 20.1 6.3Emmission Allownace Cost ($/MWh) 6.4 0.0 6.4 0.0 16.3 42.4 0.0Total Cost ($/MWh) 77.4 81.0 77.8 65.2 84.9 99.1 134.7Generation Fraction 1.0 1.0 0.7 0.3 1.0 1.0 1.0

Hybrid with Fuel Production


Sensitivity Analysis: Conceptual MapSensitivity Analysis: Conceptual Map

Factors Effect

Emission Allowance Cost

For a $40/Ton of CO2 allowance, emission allowance cost($/MWh) for PC = 40 CCGT =16 IGCC+CCS =6 Wind = 0

Natural Gas Prices Affects the competitiveness of CCGT based generation

Transmission HVAC/HVDCHVAC 33% costlier, relative increase in wind costs as wind has lower TC utilization

Access to high quality wind Lowers wind cost

Market for Captured CO2Lowers cost of all options which include IGCC + CCS

Insurance and taxes Poportional to investment costs; increases the cost of the IGCC + CCS option the most

Discount rate Increases the cost of capital intensive technologies the most

State of the World Factors

Configuration Choices


Transmission Choice & Costs Transmission Choice & Costs

• Wind costs affected by the transmission assumptions the most

Levelized price of power $/MWh; 2006$Coal Wind Hybrid CCGT PC Solar Con

With HVAC Transmission 81.6 87.4 79.5 85.6 103.9 135.6Predominontly HVDC 77.4 81.0 75.7 84.9 99.1 134.7HVDC 74.4 76.6 72.9 84.5 95.6 134.1


Effect of wind integration and capacity costsEffect of wind integration and capacity costs

• Stand alone wind more competitive if wind integration and capacity costs are negligible


No wind integration costs 77.4 78.0 75.7 85 99 135Base Case 77.4 81.0 75.7 84.9 99.1 134.7Capacity costs ($4/MWh) 77.4 85.0 75.7 85 99 135


Effect of Natural Gas PricesEffect of Natural Gas Prices

• At a price of about $5.5/MMBtu or below, CCGT is the cheapest option

Levelized price of power $/MWh; 2006$NG Price ($/MMBtu) Coal Wind Hybrid CCGT PC Solar Con

5 77.4 81.0 75.7 70.5 99.1 134.77.1 77.4 81.0 75.7 84.9 99.1 134.7

9 77.4 81.0 75.7 97.9 99.1 134.7Cut off (5.8) 77.4 81.0 75.7 76.0 99.1 134.7


Effect of EOR Revenues: Net Carbon CostsEffect of EOR Revenues: Net Carbon Costs

• Counting EOR makes stand alone coal the cheapest option

Levelized price of power $/MWh; 2006$Net Carbon Costs ($/MWh) Coal Wind Hybrid CCGT PC Solar Con

5 82.4 81.0 79.4 84.9 99.1 134.70 77.4 81.0 75.7 84.9 99.1 134.7

-9.5 67.9 81.0 68.6 84.9 99.1 134.7


Effect of Coal Prices Effect of Coal Prices

• Results are not very sensitive to coal prices

Levelized price of power $/MWh; 2006$Coal Price ($/MMBtu) Coal Wind Hybrid CCGT PC Solar Con

0.38 75.4 81.0 74.1 84.9 97.3 134.70.54 77.4 81.0 75.7 84.9 99.1 134.70.68 79.0 81.0 76.9 84.9 100.6 134.7

Cut off (1.5) 88.9 81.0 84.5 84.9 109.4 134.7


Effect of Carbon Prices Effect of Carbon Prices

• ~ $16/TonC02 or below, PC becomes the most attractive option

Levelized price of power $/MWh; 2006$Carbon Price ($/TonCO2) Coal Wind Hybrid CCGT PC Solar Con

20 74.0 81.0 73.1 76.6 76.5 134.740 77.4 81.0 75.7 84.9 99.1 134.760 80.8 81.0 78.2 93.2 121.8 134.7

Cut off ($16/TonCO2) 73.3 81.0 72.6 74.9 71.9 134.7


Scenario where advanced coal and hybrid Scenario where advanced coal and hybrid options are not cost competitive options are not cost competitive

• Low NG ($5/MMBty) and low Carbon ($20/MMBtu) Price


Low NG & Carbon Price 74 81 73 62 76 135


Effect of Increase/Decrease in Capital Effect of Increase/Decrease in Capital Costs of Generation Technologies Costs of Generation Technologies

• CCGT costs least affected


Base Case 77 81 76 85 99 13520% Lower 71 72 68 83 95 11320% Higher 84 90 83 87 104 156


Conclusions Conclusions

• Coal-wind hybrid with fuel production or syngas storage is most economical among other hybrid alternatives (CCGT-wind hybrid, CT-wind Hybrid, and coal-wind hybrid without fuel production or storage)

• Coal-wind hybrid has economic merit and compared to a stand alone benchmark, savings range from ~ $300 M to $1500 Mover the life of the project

• Coal-wind hybrid is competitive with or more economical compared to

- NGCC generation above a NG price $5.5/MMBtu (at a carbon price of $40/TonCO2)

- PC generation above a carbon price of $16/TonCO2

- It is more economical than PC and NGCC based on prevailing expectations of the cost of generation technologies and fuel prices

• Stand-alone wind generation is more economical than NGCC generation in most scenarios

• Results are screening level: future work required for precise estimates


Next steps Next steps

• Emission footprint

• Finalize first draft of the report

• Incorporate any suggested changes

• Comparison of qualitative advantages of different hybrid options

Documents

Energy Analysis Department Coal-Wind Hybrid: Assumptions & Findings Coal-Wind Hybrid: Assumptions & Findings Amol Phadke, Ph.D. Lawrence Berkeley National