THE BEST NEW ENERGY IN THE WEST

Exploration of Resource and Transmission Expansion Decisions in the Western Renewable Energy Zone Initiative
Andrew Mills, Amol Phadke, and Ryan Wiser, February 2010 (Lawrence Berkeley National Laboratory)

SUMMARY
The grid operators in the West are getting organized and that’s great news for New Energy.

To begin with, they have identified 55 areas rich with New Energy resources (“hubs”) in the vicinity of the 20 most significant population centers (“load centers”) and ranked them according to their economic and environmental viability.

This is work generated from the Western Renewable Energy Zone (WREZ) initiative, a forum for coordinating transmission expansion for the region’s grid (“the Western Interconnection”).

Researchers at the Department of Energy (DOE) Lawrence Berkeley National Laboratory (LBNL) demonstrate what that enormous database is capable of with Exploration of Resource and Transmission Expansion Decisions in the Western Renewable Energy Zone Initiative, a new paper that identifies what each load center’s best New Energy is, where it is and how much investment is needed to build the necessary new transmission so that the West can obtain one-third of its electricity from New Energy sources by 2029.

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Each New Energy source is assigned an Adjusted Delivered Cost (ADC) that determines its relative value.

Key conclusions:
(1) Wind energy is the most available New Energy in the West and could make up 38-to-65% of New Energy’s one-third of Western power.
(2) Solar energy is the next most available New Energy, capable of providing 14-to-41% of the one-third.
(3) Solar can provide a larger part of the one-third only where solar power plant generation achieves a lower cost.
(4) Biomass, geothermal, and hydropower are abundant in some local areas but are available only in limited numbers of the WREZ hubs and therefore cannot provide more than 16-to-23% of the overall one-third.
(5) The total cost for new transmission needed to deliver one-third of the West’s power from New Energy is estimated at $22-to-$34 billion. The money would be used to build mostly 230-to-315 mile segments, though there would likely need to be a few very long new transmission lines of 800+ miles.
(6) The cost of new transmission could be dramatically reduced, to as low as $17 billion, if trading renewable energy credits (RECs) is a part of the shift to New Energy. This would allow load centers distant from New Energy resources to obtain less than one-third of their power from New Energy but to purchase RECs paying for load centers adjacent to WREZ hubs to draw much greater than one-third of their power from New Energy.
(7) The $17-tp-34 billion cost of new transmission represents 10-to-19% of the total delivered cost of New Energy, meaning that – because New Energy has no fuel costs – the bulk of the cost for New Energy is the building of infrastructure expected to have a 25+ year life of service.

The sophistication of this LBNL analysis is remarkable. It demonstrates the enormous level of maturation the New Energies have achieved and the degree to which the vision of a New Energy economy is drawing ever nearer to reality.

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COMMENTARY
As part of the Western Governors Association (WGA) effort to expand their states’ New Energy capacities, the region's Governors created the Western Renewable Energy Zones (WREZ) initiative. It brought together a wide spectrum of stakeholders and identified 55 areas rich with New Energy resources (“hubs”) in the vicinity of the 20 most significant population centers (“load centers”) in the Western Electricity Coordinating Council (WECC).

The hubs were identified as areas rich in New Energy resources and ranked according to their environmental and other sensitivities and their proximity to load centers. The Adjusted Delivered Cost (ADC) determined each New Energy source’s relative value.

The ADC considers the generation and transmission costs (adjusted for key
market value factors) in dollars per megawatt-hour ($/MWh).

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The ranking was done using a transparent, Excel-based tool developed by Black & Veatch, LBNL and a spectrum of Western New Energy and transmission experts. The tool allows any load center in the Western Interconnection to identify available New Energy resources and run “what-if” scenarios about how much tranmission would be needed to obtain various combinations of it.

A WREZ hub is defined as a region where there is any New Energy resource economically and environmentally viable enough to justify building new 500 kilovolt (kV) transmission to deliver it at a 1,500 megawatt capacity.

The LBNL analysis of how much transmission would be necessary and how much it will cost is based on the premise that New Energy would only be obtained from the WREZ hubs. But, because there are other, isolated sources of New Energy available to the large load centers, less transmission would actually be needed to meet the hypothetical 2029 one-third standard.

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Wind is the most cost effective and available New Energy for taking the portion of New Energy in the U.S. power mix from 12% to 25%. By the time the Western load centers are getting 25% of their power from New Energy, much of the hubs’ wind resources would be consumed so that, as they go to the 33% New Energy level, equal amounts of solar and wind power would be added.

Going from 12% New Energy to 33% New Energy adds, on average, ~$20/MWh to the ADC of New Energy, 15% of which is for building new transmission.

Solar is only more cost effective in a narrow spectrum of load centers with high-quality solar supplies far from large high-quality wind supplies. Overall, wind is $34/MWh lower than the average ADC of solar.

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(1) Wind energy is the most available New Energy in the West and could make up 38-to-65% of New Energy’s one-third of Western power.

(2) Solar energy is the next most available New Energy, capable of providing 14-to-41% of the one-third.

(3) Solar can provide a larger part of the one-third only where solar power plant achieves a lower cost although it is a preferred choice in some places in the Southwest where there is no significant wind resource.

Wind is a larger part of the mix where it is most plentiful, its costs are lowest, transmission costs are lowest and incentives are favorable.

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Solar is a larger part of the mix where it is plentiful and cheapest, wind and transmission are unavailable and solar technology and financing are favorable.

(4) Biomass, geothermal, and hydropower are abundant in some local areas but are available only in limited numbers of the WREZ hubs and therefore cannot provide more than 16-to-23% of the overall one-third. New Energy use increases by 278% as its part in the energy mix goes from 12% to 33% but biomass, geothermal, and hydropower increase only by 78%.

A base 33% New Energy scenario consumes 81% of the all hydropower, biomass, and geothermal resources (including all geothermal available) but only 54% of available solar and 31% of available wind.

The lowest New Energy ADCs are generally in the Northern Rocky Mountain region. The highest are in the Northern Pacific region. Costs in the Southwestern states are moderate due to the availability of nearby high-quality solar resources and some limited quantity but high-quality wind and geothermal resources.

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(5) The total cost for new transmission needed to deliver one-third of the West’s power from New Energy is estimated at $22-to-$34 billion. It would be used to build mostly 230-to-315 mile segments, though there would likely need to be a few very long new transmission lines of 800+ miles.

The cost of the new transmission and line loss adds no more than 14-to-19% to the ADC of New Energy.

Long lines are more economic if they are 500 kV HVDC lines instead of single circuit 500 kV AC lines. Such lines could facilitate the use of a third of the 33% New Energy via long distance (400+ mile) transmission.

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(6) The cost of new transmission could be dramatically reduced, to $17 billion, if renewable energy credits (RECs) are included into the system, allowing load centers distant from New Energy resources to obtain less than one-third of their power from New Energy but to purchase RECs paying for load centers adjacent to WREZ hubs to draw much greater than one-third of their power from New Energy.

The use of RECs could reduce the ADC of New Energy by $6/MWh.

(7) The $17-to-34 billion cost of new transmission represents 10-to-19% of the total delivered cost of New Energy, meaning that – because New Energy has no fuel costs – the bulk of the cost for New Energy is the building of infrastructure expected to have a 25+ year life of service.

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QUOTES
- From the LBNL report: “…because we use a high-level screening tool and abstract from existing state renewable energy policy requirements, specific resource procurement decisions and transmission lines cannot be justified or rejected by this analysis alone. Where our analysis identifies that transmission and resource procurement decisions vary significantly with assumptions, however, it is important that the more detailed analysis of specific resources and transmission explicitly evaluate these assumptions in more detail.”

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- From the LBNL report: “As the most attractive wind sites in the WREZ hubs are depleted, however, nearly equal amounts of solar and wind are added as renewable targets increase from 25% to 33% WECC-wide. Increasing the renewable target from 12% to 33% is found to increase the average cost of renewable energy supply by approximately $20/MWh. Regardless of the target level, new transmission costs total roughly 15% of total delivered costs.

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- From the LBNL report: “The figures included earlier, however, also present results for two cases in which unbundled renewable energy credits (RECs) are allowed. By relaxing the requirement that each load zone must physically deliver sufficient renewable energy to their zone to meet the 33% renewable energy target, we found that transmission expansion needs could be reduced by as much as $8 billion; of all of the scenarios that we modeled, allowing RECs had the largest impact on reducing necessary transmission expenditures. Allowing the free trade of RECs can reduce transmission expansion by allowing (1) load zones near high-quality resource areas to increase procurement of renewables, and (2) load zones far from high-quality resources to purchase credits rather than building transmission to deliver resources to their load. As a result of the impact on transmission expenditure, free trade in RECs is found to reduce the average renewable energy costs WECC-wide by roughly $6/MWh. The ability of load zones to rely on RECs is a policy decision that should be explicitly considered in more detailed transmission planning studies for renewable energy.”