December 18, 2017
Catalyst Cooperative, Boulder, CO | catalyst.coop
The Platte River Power Authority (PRPA) exploration of a zero net carbon generation portfolio is an important first step towards implementing a no or low carbon electricity system. The study was initiated in response to PRPA members’ requests. PRPA contracted Pace Global to conduct a Zero Net Carbon (ZNC) Portfolio Analysis, which was released in December 2017.
The ZNC portfolio examined in the PACE Global study had a net cost (valued in the present) only 8% higher than that of PRPA’s baseline 2016 Integrated Resource Plan (IRP) portfolio over the planning horizon considered (2018-2050). This 8% additional cost is relative to only the generation and transmission portion of PRPA’s operations, and so we would expect potential rate impacts to be smaller than that, as rates also cover distribution and administrative costs, which are substantial.
The electric utility industry is changing rapidly, and it is difficult to accurately predict the future. The ZNC portfolio analysis adopted many conservative assumptions from PRPA’s 2016 IRP, especially with regard to the future price of solar power and electricity storage, and how the generation mix of the regional grid will evolve. We think it is worth revisiting some of those assumptions in a future study and offer some alternatives below.
Many of the outcomes of a modeling exercise like this one are largely determined by the input assumptions. Here we highlight some of the explicit and implicit assumptions about resources, which underlie PRPA’s ZNC Portfolio Analysis, and offer references which support alternative scenarios.
Future Renewable PPA Prices
• Over the planning horizon, the all-in costs for wind and solar appear to be very gently declining in real terms (i.e. when adjusted for inflation).
• The assumptions underlying the evolution of the all-in wind & solar PPA prices could be spelled out in more detail. Especially given the current uncertainty about renewable energy tax credit policy at the federal level, it would be useful to have the full-time series for the individual cost components — especially breaking out the assumed tax credit impacts on a $/MWh basis annually.
• Renewable energy PPA prices have continued to decline nationally for years, much more quickly than is assumed in the ZNC study (LBNL Utility Scale Solar, 2016; LBNL Wind Market Technology Report, 2016). In the short term, US tax credit policy will have a significant impact on PPA prices, but over the longer term envisioned by the study, most industry analysts expect technology prices to be driven down by economies of scale globally (BNEF New Energy Outlook, 2017). When technology becomes a small portion of the overall cost, the soft costs of renewable energy deployment will face more downward pressure.
• Direct comparisons of PPA prices in $/MWh globally aren’t easy because of different solar resource quality and policy regimes, but the trend in module and balance of system costs should apply globally, as those components are largely commoditized, and those costs have declined rapidly over the last decade (BNEF New Energy Outlook, 2017).
• Global solar deployments continue to grow rapidly. Megaprojects are going forward in China, India, the Persian Gulf, Mexico, Chile, and other developing nations, where high-quality resources, along with low labor, land, & permitting costs have resulted in large PPAs at prices below $30/MWh. The resulting economies of scale should drive down the cost of commoditized solar components for everyone, potentially for many years.
• What are the assumptions underlying the wind and solar PPA price forecasts? Why does the all-in cost of solar shown in Exhibit 9 decline between 2023 and 2036 in nominal terms, and then flatten out? Is the assumption that beyond 2036 there will no longer be cost reduction opportunities in the technology?