Coal-Wind Hybrid: Assumptions & Findings

1. Coal-Wind Hybrid: Assumptions & Findings Amol Phadke, Ph.D. Lawrence Berkeley National Laboratory (AAPhadke@lbl.gov) 9/6/2007, 2007

2. 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

3. Overview 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

4. 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

5. Coal Wind Hybrid from an Economic Perspective

6. Key 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

7. Resource 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

8. Assumptions about Capital Costs and Technical 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

9. Key Assumptions…I

10. 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

11. 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

12. Key Assumptions: Transmission • Feast Model Assumptions • Base Case: AC + DC Transmission

13. Key Assumptions, Financing

14. Approach to Analyze the Economics of Fuel 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

15. Additional Costs of Fuel Production Facilities

16. Syngas Storage Option: Estimating Storage Requirements

17. 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

18. 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

19. 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

20. 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

21. Base Case Assumptions

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

23. Testing the Economic Rationale of Coal-Wind 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%

24. Costs and benefits of the coal wind hybrid option • 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

25. Results: NPV of the benefits

26. Comparison with competing options • Base Case • Sensitivity Analysis

27. Results: Base Case

28. Sensitivity Analysis: Conceptual Map

29. Transmission Choice & Costs • Wind costs affected by the transmission assumptions the most

30. Effect of wind integration and capacity costs • Stand alone wind more competitive if wind integration and capacity costs are negligible

31. Effect of Natural Gas Prices • At a price of about $5.5/MMBtu or below, CCGT is the cheapest option

32. Effect of EOR Revenues: Net Carbon Costs • Counting EOR makes stand alone coal the cheapest option

33. Effect of Coal Prices • Results are not very sensitive to coal prices

34. Effect of Carbon Prices • ~ $16/TonC02 or below, PC becomes the most attractive option

35. Scenario where advanced coal and hybrid options are not cost competitive • Low NG ($5/MMBty) and low Carbon ($20/MMBtu) Price

36. Effect of Increase/Decrease in Capital Costs of Generation Technologies • CCGT costs least affected

37. 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

38. Next steps • Emission footprint • Finalize first draft of the report • Incorporate any suggested changes • Comparison of qualitative advantages of different hybrid options