TODAY’S STUDY: NEW ENERGY IN THE SUBURBS

A Clean Electricity Vision for Long Island; Supplying 100% of Long Island’s Electricity Needs with Renewable Power

Geoff Keith, Tim Woolf and Kenji Takahashi, August 29, 2012 (Synapse Energy Economics)

Introduction

In recent years a number of cities and states worldwide have established aggressive renewable energy targets. For example:

• San Francisco’s mayor has called for the city to supply 100% of its electricity needs from renewable energy sources by 2020, and the city has formed a task force to develop an implementation plan.1

• The German city of Munich plans to serve all residential demand and the subway/tram system with renewable power by 2015, and all demand by 2025.2

• In July of 2011, the Scottish government announced its Routemap for Renewable Energy in Scotland 2011 which sets a target for “the equivalent of all of Scotland’s electricity needs to come from renewables by 2020”.3

• Under a Danish government plan announced November 25, 2011, 100% of Denmark's electricity and heat would come from renewable energy by 2035. By 2050, the entire energy supply -- electricity, heat, industry and transportation -- would come from renewables, according to the plan.4

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To be clear, renewable energy targets like these typically use an accounting framework in which some fossil-fueled electricity is used during certain hours of the year, and it is offset by additional renewable generation or the purchase of Renewable Energy Credits (RECs).

This study focuses on an aggressive move to renewable energy – and energy efficiency – on Long Island. The study was commissioned by Renewable Energy Long Island and other member organizations of the Long Island Clean Energy Roundtable, funded by the Long Island Community Foundation and the Rauch Foundation. The analysis was performed by Synapse Energy Economics.

Specifically, this study examines a future in which Long Island generates or contracts for renewable energy sufficient to meet all of its residential electricity needs by 2020 and all of its electricity needs by 2030. The 2030 vision includes the use of some fossil-fueled generation, which is offset by the purchase of Renewable Energy Credits. This “Clean Electricity Vision” (CEV) is compared to a “Reference Case” future, based on the current plan for meeting Long Island’s electricity needs. The two scenarios are compared in a detailed spreadsheet analysis, with attention to annual energy requirements, installed capacity requirements and a constrained regional transmission system. The scenarios are compared in terms of the resource mixes, costs and carbon emissions. The CEV would provide benefits in addition to carbon reductions – environmental benefits, local economic development and reduced exposure to fossil fuel prices – but these benefits are not quantified here.

The study provides a first-order look at costs and feasibility. The intent is not to lay out a detailed resource plan, but to inform the discussion of these issues and to prompt further analysis. Both scenarios should be examined with an hourly dispatch model to better understand potential costs associated with variable generation, operating reserves and maintaining system stability.

The sections below present the study’s methodology, key assumptions and conclusions. However, we begin by describing the key challenge inherent in a rapid move to renewable electricity.

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The Challenge of Peak Loads

Regional power systems must not only provide enough energy to meet demand, they must also be able to accommodate minimum and maximum loads and periods when loads are changing rapidly. While wind and solar energy is abundant, it cannot be dispatched at will like a gas-fired power plant.5 In order to meet peak loads entirely with renewable energy, a system would have to be dramatically overbuilt, leading to oversupply during off-peak periods, or it would need large amounts of electricity storage capacity. Over the long term, fully renewable power systems with sufficient storage capacity make sense – in fact they may be our only option in the long run. But moving to this paradigm within the next decade or two would be extremely expensive. This is why the more aggressive renewable energy targets typically allow for some fossil-fueled generation.

In the Northeastern U.S., there is a well established system of tradable Renewable Energy Credits (RECs). A certificate is created for each MWh of renewable generation, and these certificates can be purchased with the energy from the generator or they can be purchased separately. The RECs provide an additional source of revenue for renewable power projects, and they ensure that multiple entities do not claim to be buying the same renewable energy. In addition, the price of RECs provides an important market signal which indicates when new renewable energy is in demand.

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In the Clean Electricity Vision laid out here, Long Island would contract for a large amount of renewable energy along with the associated RECs. It would continue to meet a large portion of its capacity requirements with fossil-fueled units that operate very little. It would rely on other fossil-fueled units for both capacity and to follow fluctuations in renewable generation. Overall, in 2020 the Island would be meeting nearly 50% of its energy requirement with renewable energy generated on Island or purchased from off Island. This would likely be sufficient renewable energy to serve all residential customers on the Island. By 2030 the Island would be meeting 75% of its annual electric energy needs with a mix of owned and purchased renewable energy. It would meet the remaining 25% of its needs with fossil-fueled generation and purchase an equal amount of RECs to give the Island, in effect, a 100% renewable electricity supply…

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The Resource Mixes

The energy mixes in our Reference Case (RC) and CEV are shown in Figure 2. The details of these resource mixes appear in Tables A3 through A6 in the Appendix. These tables show specified amounts of generic resource types, and we indicate whether each resource is located on or off the Island and whether the contract is for energy, capacity or both. They also show the energy production of each resource type, as well as the nameplate capacity and the amount of capacity credited to the NY ISO’s Long Island locational capacity requirement (LI LCR).14

The Reference Case

In 2020, the Reference Case energy mix is 13% renewable. In 2030, renewables make up 21%. The PV projects located on island and the offshore wind provide both energy and capacity. We assume that all other renewable energy is obtained in the form of long-term contracts for energy and RECs but not capacity.15 As noted, we add transmission costs to wind sited in Upstate New York and Maine; however these costs are intended to address constraints in those areas, not to allow the projects to provide capacity on Long Island.

The Reference Case also includes 1,100 MW of new combined-cycle capacity on the Island, added between 2020 and 2030.

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The Clean Electricity Vision

Figure 2 above also shows the 2020 energy mix in the CEV. In this scenario, the same cost assumptions are used for supply-side resources as in the Reference Case; however costs per MWh differ due to different assumed capacity factors. Assumed fuel costs are the same in both scenarios.

By 2020, Long Island is generating or purchasing renewable energy sufficient to meet 48% of its electricity needs, or approximately all of its residential demand. By 2030, it is meeting 75% of its electricity supply with renewable energy. The vast majority of this energy is from wind. By 2030 there are 2,250 MWs of offshore wind connected directly to the Long Island grid, producing roughly 8,480 GWh per year. The Island is also purchasing 6,190 GWh per year from onshore wind farms (off Island). There are 800 MWs of energy storage capacity on the Island, moving 2,240 GWh per year (equal to 16% of the total wind energy) from off-peak to on-peak periods.

There are 900 MWs of PV on the Island, producing nearly 1,500 GWh per year. Smaller amounts of landfill gas, biomass and hydropower are also contributing to the mix.

In 2030, in addition to the renewable energy discussed above, Long Island is relying on 6,260 GWhs of fossil or nuclear generation to meet its electricity needs. We include in the CEV the cost of an equal amount of RECs, priced at $25 per MWh.

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Figure 3 shows the capacity being used to meet capacity requirements in the two scenarios. For capacity analysis, offshore wind capacity is derated to 30% of nameplate, and PV capacity is derated based on the percentage of PV energy in the resource mix. In both scenarios PV capacity is derated to 44% of nameplate in the 2020. In the CEV in 2030, PV is 6% of the energy mix and is derated to 38% of nameplate capacity.16 Resources not shown in Figure 3 (such as biomass) are not being used to meet capacity requirements – the purchase is for energy only. Note that, while a considerable amount of fossil-fueled capacity is being used to meet capacity obligations, it is contributing a much smaller fraction of energy (Figure 2).

Note that this analysis does not consider the effects of demand response markets in New York. In these markets, customers are paid a monthly fee to reduce their demand when directed to do so by the power system operators. Demand response reduces peak loads, and it also helps accommodate variable generation. Currently, there are robust and growing demand response markets in New York, New England and PJM, however simulating these markets was beyond the scope of this work.

It is important to note that, while we have tried to make rational choices in developing the CEV, it is not necessarily the optimal scenario. Exploring the impacts of other renewable fuel mixes would be useful future work.

Net Impacts of the Clean Electricity Vision… Issues and Uncertainties…PV Additions… Distribution System Costs…

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Conclusions

The major conclusions of this work are as follows.

• It appears technically feasible for Long Island to have a 100% renewable and zero-carbon electricity supply by 2030, using many existing resources for capacity and using RECs to offset a modest amount of fossil generation.

• The incremental, annual power supply cost of the CEV in 2020 (relative to the Reference Case) would be in the range of 23% in 2020 and 16% in 2030.

• Average customer bills across all rate classes could be expected to increase by about 12% in 2020 and about 8% in 2030, relative to the Reference Case.

• The CEV would provide dramatic reductions in actual carbon emissions (in the range of 80% by 2030), and with the purchase of RECs, the Island would in effect be paying for a CO2-free electricity supply.

• An aggressive move to renewable energy would provide benefits that have not been addressed here, including local economic development, reduced fuel price risk and reduced environmental and health impacts of power generation.

In addition, further work in the following areas would be useful.

• This CEV should be investigated with an hourly dispatch model. Important areas to explore are the accommodation of variable generation, the impact of expanding demand response markets, differences in the need for operating reserves and maintaining system stability.

• Energy efficiency is by far the lowest cost electricity resource at Long Island’s disposal, and many utilities are capturing more efficiency than LIPA is today. Several states are now funding efforts to capture “all cost effective” efficiency opportunities. The prospects for raising New York State’s funding levels and efficiency goals should be explored.

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