Solar Projects being approved in California
I am going to be a little critical with today’s reporting. More than once EnergyBiz will report on a deal , but they never delve into the deal. Yes EnergyBiz is free, but seriously it doesn’t take much work with the internet. For example, today’s article I came across on EnergyBiz involves the California Public Utility Commission (CPUC) approving PG&E solar deal with Sempra. In the article, they note how the commission approved the project, the dates, and the size. However, how come no discussion on the cost or expected performance of the project? Yes the project is a bilateral deal so the information is somewhat hidden. A little investigated journalism you can conclude the project is likely a 25 year commitment for under 0.10852 $/kWh with an expected capacity factor of 23%. First you go to the CPUC website. Do a simple search on “PG&E Sempra Nevada Solar “and you will get this link to the deal. In the deal you will note in the beginning “Generation from the 150 MW Project is expected to contribute an average of 303 gigawatt-hours (GWh) annually towards PG&E’s annual procurement target”. This would calculate to a 23% capacity factor. This is not the best capacity factor, but not the worst either.
In terms of cost the same link shows the statement “Based on 2012 commercial online date for the Copper Mountain 2 facility, the 25-year PPA is below the 2009 MPR and accordingly the PPA does not have above-market costs associated with it.” A little more investigative journalism would have you search on the website to see the 2009 MPR. The 2009 MPR can be seen on this link. From the link there is a table showing the 2012 25 year contract MPR is 0.10852 $/kWh. Interestingly if they had used the 2011 MPR, the limit was 0.09274$/kWh a drop of more than 10%.
The next level of investigated journalism is to see what type of cost Sempra is paying to build this facility. To do this I went to a publically available levelized costing calculator supplied by the very capable National Renewal Energy Laboratory (NREL) – note I served on the advisory panel for the technical review team. In addition to the calculator, if you click on the labels NREL will display the tables showing the range of cost. The lowest cost for solar is $5000/kW. For the remaining variables I used period 25, discount rate 4%, capacity factor 23%, FOM 10, VOM 0.002, HR 10000, and Fuel Cost 0. This produced a levelized cost of 0.166. I then changed the capital cost till the levelized cost was below 0.11. This occurs at $3200. If the investment tax credit is computed from the $5000 basis you do get around $3500. Applying a negative fuel cost (-1) from the $3500 capital cost you would produce 0.108. This implies likely the technology cost is still around $5000/kWh with a need for a 30% investment tax credit and some value of renewable credit around $10/MWh.
If you are of the very curious mind, you will be asking yourself how in the world is the MPR that high? Since you will note in the MPR link they state – “The MPR represents what it would cost to own and operate a baseload combined cycle gas turbine (CCGT) power plant over various time periods”. Well you see that’s not really a “true” statement on many fronts. Obviously there are forecast that need to be employed to calculate a CCGT cost in the future. They decided on using a NYMEX future curve for fuel which is understandable. The big driver pushing the MPR high is the assumption of CO2 price.
If this forecast became true, in the near future (in two weeks), Californians would be adding an extra 10 cpg on gasoline and by 2030 they will be paying almost a dollar extra on gasoline. This CO2 cost stream adds roughly $19/MWh on the levelized cost of CCGT– almost a 20% premium. Even removing the CO2 cost and comparing it with NREL levelized cost calculator the CPUC model shows an additional 0.01 $/kWh cost using the same inputs.
With simple investigative journalism the article EnergyBiz reported, which anyone could do scraping a company’s website, transforms into real value and knowledge.
At AEC we are committed to giving you knowledge not just information. Feel free to email me your comments or suggestions David K. Bellman [email protected]
CSAPR – Cross State Air Pollution Rule – Trading Strategies
CSAPR – Cross State Air Pollution Rule – Trading Strategies
There are some clear winners and losers in the recent Cross State Air Pollution Rule (CSAPR). With the modified ruling of allowing the first two years of open trading among the groups, bring up some significant opportunity to maximize trade potentials for significant gains. At AEP, I have spent numerous hours learning and evaluating emissions trading strategy given our largest emitter standings in almost every category. I will tell you now CSAPR offers significant opportunity to make or lose significant sums of money.
Emissions trading require game theory analysis with some added inefficiencies in order to safely execute a successful trading strategy. Working with the Center for Energy Economics and simulating the recent CSAPR and reviewing the ruling there are some real opportunities for those in short position to minimize their losses significantly. As with most new trading rules/laws, they never account for potential maximization of individual actors.
If you are in a short position, please do call or email me I can help mitigate whether you are in Group 1 or Group 2. Likewise, if you are long call or email me, please don’t go selling away as you will likely be leaving money on the table. Since the beginning of emissions trading, there have always been significant losers and winners. Emission market trading requires a fundamental approach to ultimately be successful.
David K. Bellman
614-356-0484
CSAPR – Cross State Air Pollution Rule – 5 Steps to Solve / Gain Insights into the Impact on the Market
1. Understand the rule in terms of the number allowance and the limitations of trading
2. Evaluate existing generation emission rates (EPA)
3. Examine the choices to mitigate emissions
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-Retire
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-Install Pollution Control Technology – Cost and Effectiveness
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-Dispatch less – Competitive landscape with alternative plants
4. Simulate the various mitigation sources through pricing emission
- Emission price will lead to reduce emission
- High enough price will lead to retirement or incentivize the installation of control technology
5. Analyze competing fuel competition demand as a result of simulation
- Do the commodity assumptions make sense in lieu of the competitive landscape and underlying fundamentals? If not repeat step 4 with new commodity assumptions.
Call us to help you reaffirm your conclusions or help you through the process. We can identify hurdles and give you solutions to get you over them and also help you avoid the land mines of analytical paralysis.
David K. Bellman
614-356-0484
Cross State Air Pollution Rule (CSAPR) – AKA Casper – Coal Unit Changes
I have reviewed the EPA emissions data for 2011 and compared it with 2010. There are many coal units who no longer are showing up in the list and/or are no longer emitting nearly as much. This is a clear sign units are retiring, retrofitting, and/or installing control equipment. I was able to identify a few units that have actually converted to gas.
Most of the time when I examined retrofitting a coal unit to burn gas, the economics have to be driven for grid stability and/or capacity purposes. Converting the unit to burn gas typically leads to worse heat rate and coal units compared to combine cycles are already 30% less efficient. Adding less efficiency will lead to having a very expensive peaker on the system.
If there is interest to mapping your system data to the latest EPA releases I do have a proven system to do this. Please send me an email if your intersted in this. I could save you much time and headache.
David
614-356-0484
Modeling Cross-State Air Polution Rule (CSAPR) by the EPA
Modeling Cross State Air Pollution Rule (CSAPR) can be done. If you haven’t already done so – it is right around the corner 1/1/2012. I can help you setup your power model to run the Cross State Air Transport Pollution Rule (CSAPR). I will also be able to explain a process to produce emission price forecast. This can be done in just about any power model – whether it is AURORAxmp, Promod, GE Maps, etc…
I can have all this done before next year if you would call me ASAP 614-356-0484. I have been working with the Center for Energy Economics Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin. Within a weeks time we will be running simulations of CSAPR in various gas price conditions producing projections of emission allowance prices.
This proven process that I will transfer to you will also be able to identify coal retirements in the system, show potential stress points in terms of gas demand as coal units retire, and many other significant market insights. Modeling rules like this will have potential to make or mitigate cost within the millions. I have a process that will be transparent and empowering to your team. Your knowledge of the markets will expand immensely.
You will note I have received notable recommendations for my ability to get your team up to speed on the Cross State Air Pollution Rule (CSAPR).
“David is a highly intelligent, talented individual. He is an expert on markets and economics and provided AEP and me with excellent analysis and information which was applied directly to our strategic planning.”
— Carl English, Vice Chairman, American Electric Power
“David is one of those rare people who can see the forest but also knows how the trees are made. He has a strong background in energy and energy modeling with real depth in oil, natural gas, and power/emissions markets.”
— Allan Stewart, Executive Director, PIRA Energy Group
Please do call – times of uncertainty you can lose or make significant sums of money.
David
