TODAY’S STUDY: HOW RATEPAYERS BENEFIT WHEN UTILITIES BUY EFFICIENCY

The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs

Megan A. Billingsley, Ian M. Hoffman, Elizabeth Stuart, Steven R. Schiller, Charles A. Goldman, Kristina LaCommare, March 2014 (Lawrence Berkeley National Laboratory)

Executive Summary

End-use energy efficiency is increasingly being relied upon as a resource for meeting electricity and natural gas utility system needs within the United States. There is a direct connection between the maturation of energy efficiency as a resource and the need for consistent, high-quality data and reporting of efficiency program costs and impacts. To support this effort, LBNL initiated the Cost of Saved Energy Project (CSE Project) and created a Demand-Side Management (DSM) Program Impacts Database to provide a resource for policy makers, regulators, and the efficiency industry as a whole.

This study is the first technical report of the LBNL CSE Project and provides an overview of the project scope, approach, and initial findings, including:

• Providing a proof of concept that the program-level cost and savings data can be collected, organized, and analyzed in a systematic fashion;

• Presenting initial program, sector, and portfolio level results for the program administrator CSE for a recent time period (2009-2011); and

• Encouraging state and regional entities to establish common reporting definitions and formats that would make the collection and comparison of CSE data more reliable.

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The LBNL DSM Program Impacts Database includes the program results reported to state regulators by more than 100 program administrators in 31 states, primarily for the years 2009-2011. In total, we have compiled cost and energy savings data on more than 1,700 programs over one or more program-years for a total of more than 4,000 program-years’ worth of data, providing a rich dataset for analyses. We use the information to report costs-per-unit of electricity and natural gas savings for utility customer-funded, end-use energy efficiency programs. The program administrator CSE values are presented at national, state, and regional levels by market sector (e.g., commercial, industrial, residential) and by program type (e.g., residential whole home programs, commercial new construction, commercial/industrial custom rebate programs).

In this report, the focus is on gross energy savings and the costs borne by the program administrator—including administration, payments to implementation contractors, marketing, incentives to program participants (end users) and both midstream and upstream trade allies, and evaluation costs. We collected data on net savings and costs incurred by program participants. However, there were insufficient data on participant cost contributions, and uncertainty and variability in the ways in which net savings were reported and defined across states (and program administrators). As a result, they were not used extensively in this report. It is also important to note that savings metrics reported by program administrators draw heavily from estimated values.

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Results

The CSE values presented in this study are retrospective and may not necessarily reflect future CSE for specific programs, particularly given updated appliance and lighting standards. The CSE values are presented as either (a) the savings-weighted average values; (b) as an inter-quartile range with median3 values across the sample of programs; or (c) both.

Table ES-1 provides an overall indication of national, savings-weighted average program administrator CSE values by sector using two indicators (e.g., levelized CSE 6% real discount rate and first-year CSE).4 Figure ES-1 indicates the savings-weighted averages, medians and inter-quartile ranges for levelized CSE values using a 6% discount rate.

Our key national and regional findings are:

• The U.S. average levelized CSE was slightly more than two cents per kilowatt-hour when gross savings and spending is aggregated at the national level and the CSE is weighted by savings.

• Residential electricity efficiency programs had the lowest average levelized CSE at $0.018/kWh. Lighting rebate programs accounted for at least 44% of total residential lifetime savings with a savings-weighted average levelized CSE of $0.007/kWh. The residential CSE, when the lighting programs were removed, was $0.028/kWh. Low-income programs have an average levelized CSE at $0.070/kWh.

• Commercial, industrial and agricultural (C&I) programs had an average levelized CSE of $0.021/kWh.

• Not surprisingly, the levelized CSE varies widely, both among and within program types. We find that the median value is typically higher than the savings-weighted average for nearly all types of programs. One possible explanation is that our sample includes a number of very large programs and for any given program type, larger efficiency programs have lower CSE than smaller programs because administrative costs are spread over more projects (e.g., economies of scale).

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• In reviewing regional results, efficiency programs in the midwest had the lowest average levelized CSE ($0.014/kWh), while programs in northeast states had a higher average CSE value ($0.033/kWh). Programs in western states are at $0.023/kWh and for the southern states included in the database, the comparable program CSE was $0.028/kWh.

• Natural gas efficiency programs had a national, program administrator savings-weighted average CSE of $0.38 per therm, with significant differences between the C&I and residential sectors (average values of $0.17 vs. $0.56 per therm, respectively).

• The cost of saved energy may vary across program administrator portfolios for reasons that have little to do with programmatic efficiency. In some jurisdictions, a policy mandate of acquiring all reasonably available cost-effective energy efficiency can lead to a focus on more comprehensive programs which will tend to have a higher CSE because they are serving more diverse constituencies and technologies. In other jurisdictions, the focus may be on acquiring the cheapest savings possible.

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Program-level results

We also examined the cost of saved energy by program type for both residential and C&I programs (see Chapter 3). Figure ES-2 shows an example for the C&I programs, including savings-weighted average (pale green bar) CSE values, the inter-quartile ranges (blue line) and median (red dotted line) CSE values. The median value and inter-quartile ranges for CSE are based on calculations for each individual program and gives equal weighting to programs irrespective of their relative size in terms of either savings or costs.

The simplified C&I programs have median values for program administratorCSE that range from $0.01/kWh to $0.05/kWh. It is worth noting that the savings-weighted average CSE values for custom and prescriptive rebate program categories are $0.018/kWh and $0.015/kWh, respectively. Since these two program categories account for almost 70% of C&I sector savings, they tend to drive the overall CSE results for the C&I sector (less than $0.02/kWh).

For the residential programs, several program categories have a relatively tight range of program CSE values (see Figure ES-3). For example, Consumer Product Rebate programs have an inter-quartile range of $0.01/kWh to $0.04/kWh and a low savings-weighted average (~$0.01/kWh). However, the residential prescriptive ($0.03/kWh to $0.11/kWh), new construction ($0.03/kWh to $0.11/kWh) and whole-home upgrade ($0.03/kWh to $0.21/kWh) program types have significantly larger ranges. There are several possible reasons for the range of CSE values in each of these program categories. The prescriptive simplified program category includes detailed program types that implement a wide variety of measures (e.g., HVAC, insulation, windows, pool pumps) as well as some generic “prescriptive” programs6 that often include measures also found in the consumer product rebate category. This broad measure mix, and the variation in costs and measure lifetimes associated with those measures, are possible drivers for the wide range of CSE values for the prescriptive category.

For the Whole-Home Upgrade program category, the broad range of program designs and delivery mechanisms (this category includes audit, direct install, and retrofit/upgrade programs) may help explain the relatively wide range of CSE values. Overall, most C&I program categories have a relatively smaller inter-quartile range of CSE values compared to residential program categories.

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Total resource cost of saved energy

Although we focus on program administrator costs in this report, it is important to note that these metrics do not reflect a total cost perspective since program administrators infrequently report participant costs. We were able to collect participant cost data from a handful of program administrators. However, given small sample size and uncertainty in how participant costs were derived, it is difficult to confidently assess the “all-in” or total resource cost of efficiency or analyze potential influences on the total cost of the efficiency resource. For these reasons, in Figure ES-4, we compare the program administrator’s levelized CSE vs. a total resource levelized CSE for illustrative purposes only. We calculate this total resource CSE for the simplified program categories where both program administrator and participant costs are available for more than 18 program years.

For this small sample of programs, we found that the levelized total resource CSE values are typically double the program administrator CSE with the exception of the Residential Whole Home Upgrade program category (which has a savings-weighted total resource CSE about 25-30% higher than the program administrator CSE). Further data collection and analyses could better characterize the way in which the ratio of program administrator costs to participant costs varies as a function of sector, measure types, and market maturity; and how incentives and direct support might be optimized to pay no more than is necessary to meet a state’s efficiency policy objectives.

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Observations and Recommendations on Reporting

In calculating the CSE, we utilized information on program administrator costs, annual energy savings, estimated lifetime of measures installed in a program, and an assumed discount rate. However, with respect to current program reporting practices, we observed several challenges to the collection of this data for the purposes of calculating the CSE:

• Inconsistencies in the quality and quantity of the costs and savings data led LBNL to develop and attempt to apply consistent data definitions in reviewing and entering program data:

o Program administrators in different states did not define savings metrics (e.g., varying definitions of net savings) and program costs consistently; and

o Market sectors and program types were not characterized in a consistent fashion among program administrators.

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• Many program administrators did not provide the basic data needed to calculate CSE values at the program level (i.e., program administrator costs, lifetime savings or program-average measure lifetimes), which can introduce uncertainties into the calculation of CSE values (as we developed and utilized methods to impute missing values in some cases).

As a practical matter, the quality and quantity of program data reported by program administrators is an important factor in assessing energy efficiency as a resource in the utility sector. Additional rigor, completeness, standard terms, and consensus on at least essential elements of reporting could pay significant dividends for program administrators and increase confidence in energy efficiency savings among policymakers and other stakeholders, particularly in situations where efficiency is treated as a resource in utility procurement decisions, ISO/RTO forward capacity markets or as an environmental compliance or mitigation option by state or federal environmental agencies.

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Of the 45 states currently running utility-customer funded efficiency programs (Barbose et. al. 2013), only 31 states provided reporting with sufficient transparency to complete a program-level CSE analysis, and almost all of the 31 states’ data required some interpretation for purposes of regional or national comparison. With more consistent and comprehensive reporting of program results, additional insights can quite possibly be obtained on trends in the costs of energy efficiency as a resource as program administrators scale up efforts, what saving energy costs among an array of strategies, and what and how cost efficiencies might be achieved.

Therefore, we urge state regulators and program administrators to consider annually reporting certain essential data fields at a portfolio level and more comprehensive reporting of program-level data in order to facilitate the comparison of efficiency program results at state, regional and national levels. A diagram illustrating this reporting hierarchy approach can be found in Chapter 5, Figure 5-1.

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As part of the LBNL CSE Project, we intend to continue collecting energy efficiency program data and analyzing and reporting the CSE for efficiency actions funded by utility customers. We also plan to:

• Work with state, regional and national stakeholders to encourage the collection of program cost and impact data using a common terminology and program typology as defined in this report and a companion policy brief (Hoffman et al. 2013). This is important for organizing program data into appropriate and consistent categories so that programmatic energy efficiency, as a regional and national resource, can be reliably assessed.

• Annually compile data reported by program administrators and state agencies from across the United States.

• Conduct additional analyses to help increase understanding of factors that influence EE program impacts, costs and the cost of saved energy.

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QUICK NEWS, March 31: $100MIL NEW ENERGY LAND GRAB; SIEMENS DOUBLES DOWN ON UK OCEAN WIND W/$264MIL FACTORY; LEBANON RICH WITH GEOTHERMAL

$100MIL NEW ENERGY LAND GRAB Altus and Macquarie to Finance Land for Wind and Solar Power

Justin Doom, March 20, 2014 (Bloomberg News)

“Altus Power America Management LLC, a U.S. renewable-energy investment company, and Macquarie Group Ltd. (MQG) will invest as much as $100 million in a program to buy land that developers will use for large power projects and lease it back to them...Leasing the land will free up more capital for renewable-power systems…Wind and solar projects qualify for federal tax credits that don’t apply to purchases of the land where they’re built…The first land deal may close as early as the second quarter…The nationwide program will target the U.S. West and Southwest…[Altus] started a fund in November to finance commercial solar projects…” click here for more

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SIEMENS DOUBLES DOWN ON UK OCEAN WIND W/$264MIL FACTORY Siemens doubles investment plan for UK wind turbine factory

Karolin Schaps and Jane Baird, March 25, 2014 (Reuters)

“German engineering group Siemens said it had doubled the money it plans to invest in building an offshore wind turbine factory and an installation facility in Britain to 160 million pounds ($263.8 million)…Associated British Ports, its partner in the Green Port Hull installation part of the project, will spend another 150 million pounds…The companies expect the two sites to create jobs for up to 1,000 people…[T]he world's top offshore wind turbine maker will start producing nacelles, the engines that power wind farms, and its largest model of offshore wind turbines at 6 megawatts (MW) each, now made in Demark, [in mid-2016] at a new manufacturing plant…Britain wants to defend its spot at the top of the world's offshore wind ranking by supporting the construction of new wind farms through a guaranteed electricity price mechanism…” click here for more

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LEBANON RICH WITH GEOTHERMAL …Lebanon sitting on extensive geothermal energy

March 25, 2014 (The Daily Star)

“…[T]he geothermal energy available in [Lebanon through soon to be available technology] is 1,000 million megawatt hours, which is 70 fold the amount of energy needed in Lebanon per year [according to Energy and Water Minister Arthur Nazarian…The minister underlined the need begin work…as the extraction process takes a long time…Nazarian said that the ideal scenario would be to meet 0.2 percent of Lebanon’s total energy needs with geothermal sources by 2025…[The first step is] to establish a geothermal atlas for the country and estimate the current overall potential of geothermal heat and power generation, and the ability of geothermal power to assist in the objective of the Lebanese government in meeting 12 percent of its total energy needs from renewable energy sources by 2020…[F]ew countries have implemented serious and complete geothermal assessments…” click here for more

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Earth Hour Is Tonight

Do like Spiderman says. #yourpower or EarthHour.org From Earth Hour via YouTube

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Earth Hour’s Biggest Opportunity

It can also be Cuddle Hour. From Durex Earth Hour via YouTube

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Will Climate Change Solutions Soar Like An Avatar Or Sink Like The Titanic?

Titanic and Avatar Director James Cameron takes on climate change. From Years of Living Dangerously via YouTube

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13 OF WORLD’S 14 HOTTEST YEARS WERE THIS CENTURY – METEOROLOGISTS

Scientists to climate change skeptics: Get real

March 24, 2014 (CBS News/AP)

"Much of the extreme weather that wreaked havoc in Asia, Europe and the Pacific region last year can be blamed on human-induced climate change, according to the World Meteorological Organization…2013 was the sixth-warmest year on record. Thirteen of the 14 warmest years have occurred in the 21st century…Rising sea levels has led to increasing damage from storm surges and coastal flooding, as demonstrated by Typhoon Haiyan [which killed at least 6,100 people and caused $13 billion in damage to the Philippines and Vietnam and Australia] had its hottest year on record…[Central European flooding caused $22 billion in damage,] there was $10 billion in damage from Typhoon Fitow in China and Japan, and a $10 billion drought in much of China…Only a few places -- including the central United States -- were cooler than normal last year…” click here for more

Click thru for the complete report

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WORLD SOLAR TO KEEP GROWING

Solar PV Industry Targets 100 GW Annual Deployment in 2018…300 GW of new solar PV to be installed in the next five years, as solar increases to 3% of total global power supply

March 20, 2014 (SolarBuzz)

“The solar photovoltaic (PV) industry is set for rapid growth over the next five years, with up to 100 gigawatts (GW) annual deployment being targeted in 2018, according to [SolarBuzz]…This end-market growth is projected to increase annual PV module revenues, which are forecast to reach $50 billion in 2018…Despite being severely hampered by overcapacity and declining operating margins during 2012 and 2013, the PV industry still grew 34% over this two-year period. Having grown to more than 37 GW of end-market demand in 2013, the global solar PV industry is now set to hit a new milestone in 2018, reaching a cumulative installed capacity level of 500 GW. This strong demand will also further stimulate revenues for the industry’s manufacturers, with PV module revenues of more than $200 billion available over the five-year period from 2014 to 2018…” click here for more

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WORLD WIND NOW

World Market Update 2013 International Wind Energy Development Forecast 2014-2018

1Q 2014 (Navigant Research)

“…[According to the World Market Update 2013…Global installation in 2013 of 36.13 GW…Vestas recaptures the No.1 position after it lost its leading position to GE Wind in 2012…China regains its title as the world’s largest annual market with 16,088 MW of new wind power installed in 2013…Offshore wind grows over 50% annually in 2013 and lines up for steady growth in Europe…Direct drive turbines take 28.1% of the global market even as traditional DFIG regains popularity…Goldwind’s GW1.5 MW was the most frequently installed wind turbine in 2013…Wind power will deliver at least 2.87% of the world’s electricity in 2014, growing to 7.28% in 2018…Wind power capacity installations in 2014 are expected to rebound with 29.6% growth and]… more than 314 GW of onshore wind requiring service and maintenance was installed by the end of 2013…At least 100 GW of that total is now out of warranty, with responsibility for operations and maintenance (O&M) falling to the owners. Demand for O&M services…is expected to grow at by 40 GW a year from 2013 onward…” click here for more

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GEOTHERMAL WORLD TO GATHER TO PUSH POLICY

Two Dozen Countries to be Represented as Global Geothermal Community Gathers with Policy Makers on Earth Day

March 26, 2014 (Geothermal Energy Association)

“Representatives from 24 countries will come together with Washington leaders for the GEA International Geothermal Showcase in Washington D.C. on Tuesday, April 22. The Showcase will examine the outlook for the geothermal market and the policies driving geothermal development. The Geothermal Energy Association will release the results of its new annual U.S. and International Market Update…Countries that will be represented at the event will include the Philippines, Nicaragua, India, Belgium, Germany, Nigeria, Colombia, Fiji, Iceland, Commonwealth of Dominica, Tanzania, Japan, Switzerland, Uganda, Kenya, Taiwan, New Zealand, Ethiopia, Indonesia, Romania, Turkey, Italy, United States and Slovakia…GEA’s new U.S. and International Market Update will report that international geothermal power market is booming, with nearly 700 geothermal projects under development in 76 countries…” click here for more

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EARTH HOUR HEATS UP CLIMATE CHANGE

Earth Hour 2014 special: Durex releases ‘#TurnOffToTurnOn’ campaign

Priya Prakashan, March 26, 2014 (India.com)

“…[J]ust in time for the Earth Hour 2014 that falls on Saturday, March 29, when people will be urged to switch off their lights for an hour at 8.30 pm...[a] survey conducted in the UK, sponsored by [condom-maker] Durex, revealed that 12% people have answered a call, 10% of people have read a text during sex and 5% have even checked Facebook while making love. And couples today are having 20% less sex than they were in 2000…The truth is that we need to realize that these online social networking sites are ruining our quality time…[#TurnOffToTurnOn] asks us to put down the screen and… reconnect while the light is turned off [during this year’s Earth Hour]…” click here for more

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SOLAR PRICE MATCHES OLD ENERGY COSTS IN MANY COUNTRIES

Solar energy now same price as conventional power in Germany, Italy, Spain – report

March 25, 2014 (RT)

"Solar energy now costs the same as conventionally generated electricity in Germany, Italy and Spain…[but] high installation costs are impeding other countries from achieving grid parity [according to an Eclareon analysis]…Gone are the days when electricity produced through solar panels cost significantly more that conventionally-generated power, as Italy, Spain and Germany have reached energy parity…[R]esearchers looked at a standard 30 kilowatt solar power system and assessed its ‘leveled cost of energy’ (LCOE). The LCOE accounts for all of the factors that contribute to the overall cost of electricity, such as: installation, maintenance, depreciation and investment…[I]n Brazil, Chile, France, Germany, Italy, Mexico and Spain…the LCOE had dropped over the last few years, although less dramatically in countries with a well-established solar infrastructure like Italy, Germany and Spain. Progress in Brazil, Chile and Mexico is still impeded by high installation costs…” click here for more

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WIND IS HIRING

Vestas Continues Hiring Spree At Colorado Factories

March 12, 2014 (North American Windpower)

“During what the company hails as one of its best years for wind turbine orders, Vestas announced plans in November 2013 to begin hiring hundreds of new workers at its four Colorado factories… The company's blade factory in Windsor, blade and nacelle factories in Brighton and tower factory in Pueblo [have hired about 400 and expect] to add [another 450] production workers this year after Vestas secured orders for nearly 900 turbines in 2013…In 2011 and 2012, a downturn in the U.S. wind industry proved challenging for Vestas…[but] it is debt free today and earned a profit in 2013…Based on orders received in 2013, Vestas says it has the potential for an additional 2.6 GW of turbine sales in the U.S. and Canada…[and] is exporting blades, towers and nacelles from Colorado to projects in Mexico, Brazil and Uruguay.” click here for more

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WHERE IN THE WORLD SOLAR IS GROWING

Top 10 Solar PV Markets Illustrate Shifts in Global Demand

March 11, 2014 (SolarBuzz)

“…Looking at the growth rates of [the top 10 global PV markets and over 80% of end-market demand] in 2013, we can see a distinct trend…away from Europe and towards Asia…[T]he three fastest growing markets in 2013 were Japan, China, and Thailand, each more than doubling…[T]hree of the top European markets saw end-market levels decline…[B]y 2013 market size and forecast 2014 growth rates…China and Japan were the largest markets and grew the most by far…[and are] projected to continue increasing in 2014, but the shift to Asia will be further aided by growth in the Indian and Thai markets. In fact only two top-10 markets, Germany and Australia, declined in terms of market size in 2013 and are forecast to continue the decline…” click here for more

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TODAY’S STUDY: HOW NEW ENERGY GROWS JOBS – THE ILLINOIS EXPERIENCE

Clean Jobs Illinois; An In-Depth Look at Clean Energy Employment in Illinois

March 2014 (Clean Energy Trust et. al.)

Introduction

In 2013, Clean Energy Trust commissioned BW Research Partnership, a national leader in workforce and economic development research, to conduct a survey of Illinois clean energy firms to better understand employment in the sector. Clean Jobs Illinois™ is based on survey research data collected by BW Research Partnership and was developed in partnership with Environmental Entrepreneurs, The Environmental Law & Policy Center and the Natural Resources Defense Council, which contributed financial and staff resources to support the research and report.

Clean energy refers to a wide variety of technologies that create or conserve energy and help us meet our 21st century resource challenges. Energy innovation lessens our dependence on fossil fuels and foreign oil and helps keep our air and water clean. In Illinois, clean energy is creating jobs for workers and lowering utility bills for families and businesses. It is increasingly recognizable in our daily lives, from wind turbines and solar panels that harness clean, safe energy sources that won’t run out; to electric vehicles that eliminate the need to stop and pay for gas; to thermostats that learn our behavior and respond to lower our electric bills. Illinois has an important role to play in accelerating the development and adoption of clean energy. Located at the connecting point between two of the country’s major electric grids, Illinois is the third largest producer of electricity in the U.S. It is home to world-class research institutions and universities, leading corporations and businesses and a thriving entrepreneurial and startup community. The state’s economic c and geographic diversity sustain a full range of clean energy technologies – from farm fuels to advanced batteries.

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On a number of fronts, Illinois is leading on clean energy. It ranked eighth in the 2013 U.S. Clean Tech Leadership Index of states with the strongest policies for reducing environmental footprints. Strong building codes and the combination of a Department of Energy national laboratory, a top-ranked green MBA program and a clean energy incubator were cited among differentiating factors. Illinois also cracked the top ten for energy efficiency leadership for the first time in 2013, thanks in large part to utility efficiency standards that went into effect in 2008. Additionally, the City of Chicago, a major economic driver in the state, has made efficiency in buildings a top priority through passage of energy efficiency ordinances and initiatives like Retrofit Chicago’s Commercial Building Initiative.

On other fronts, clean energy faces challenges. Illinois’ renewable energy standard – the Renewable Portfolio Standard (RPS) – requires that by 2025 at least 25 percent of the electricity supply comes from clean sources, which is positive. However, the RPS has faced implementation challenges because of changes in the structure of the Illinois energy market. Additionally, on-again off-again tax incentives at the federal level – including the expiration of the Wind Production Tax Credit -- – have made renewable energy investors wary. The effects of these challenges are evident in the survey results. Respondents noted maintaining a strong RPS as the top area of importance in terms of growing their clean energy businesses in Illinois. Policy uncertainty led to employment declines in renewable energy and supporting services, which dragged down the otherwise impressive clean energy industry growth rate.

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Meanwhile, other states are moving ahead in clean energy leadership with innovative policy measures, like the new formula Minnesota regulators are using to assess the value of solar; higher energy efficiency targets for utilities in states like Massachusetts, California, New York, Oregon and Vermont; energy storage goals in California; and a Green Bank for funding clean energy projects in New York that is capitalized in part by revenues from the Regional Greenhouse Gas Initiative.

Clean Jobs Illinois offers an in-depth look at clean energy employment in Illinois – where it is today and where it is headed. It employed a rigorous, survey-based methodology in which 1,599 firms provided information on their clean energy activities and 415 firms completed the full survey. Surveys were fielded from a universe of known employers and a representative sample of unknown employers throughout October and November 2013. The total effort included placing more than 27,000 phone calls and sending more than 9,000 emails.

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The survey methodology is closely aligned to how employment estimates are generated by the Bureau of Labor Statistics. It is similar in design to several other highly regarded studies, including the National Solar Jobs Census series and the Massachusetts Clean Energy Center Industry Reports. Unlike other reports, it does not rely on revenue estimates or economic models and assumptions.

For purposes of the study, clean energy was defined as energy efficiency, renewable energy, clean or alternative transportation and greenhouse gas management. The survey counted only those workers who have clean energy related jobs at organizations that are directly connected to the clean energy industry. While this narrow definition likely undercounts the total number of workers who have work responsibilities connected to clean energy, the definitions are critical to prevent over counting jobs that are only marginally connected to the industry. Even with a conservative approach, Clean Jobs Illinois affirms that the state’s clean energy industry is a significant source of jobs and an economic engine with tremendous potential for continued growth.

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Key Findings

Clean energy is a significant part of the Illinois economy.

There are 96,875 Illinois workers who spend some portion of their day supporting clean energy activities – that’s enough to fill Soldier Field one and a half times over. In fact, the clean energy industry is larger than the real estate and accounting industries combined.

Clean energy provides good jobs for Illinois workers.

More than a third, 35 percent, of clean energy jobs are in engineering, research, manufacturing and assembly – many in STEM careers (science, technology, mathematics, and engineering). These are good jobs with good benefits, and they make Illinois’ economy more productive and competitive. Nearly another third, 30 percent, of clean energy workers are in the installation and maintenance sector. These are local jobs done here in Illinois that will stay here in Illinois.

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Clean energy is as much about how we use energy as it is about how we produce it.

A majority of firms in the clean energy sector, 62 percent, operate primarily in the energy efficiency industry. Renewable energy is the second leading industry, with 21 percent of clean energy companies. Alternative transportation makes up 5 percent of the sector with 1 percent of firms focusing on managing greenhouse gas emissions. Another 12 percent are categorized as other, many of which are professional service firms or other service providers that work mainly with clean energy firms.

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Clean energy companies are growing and are optimistic about 2014.

Illinois’ clean energy industry is projected to grow by 9 percent and top 100,000 workers in 2014. Certain clean energy sectors experienced rapid growth in 2013, including alternative transportation (21 percent), greenhouse gas management (5 percent) and energy efficiency (3 percent). In 2014, 40 percent of firms in the clean energy sector expect to add workers.

Policy challenges are weighing down growth among renewable energy companies.

Between 2008-2012, Illinois was a top-five state for renewable energy development. Due in significant part to policy headwinds, renewable energy industry employment contracted in 2013 by 0.2 percent. While most clean energy sectors were moving forward, renewable energy lost jobs and weighed down overall clean energy industry growth in Illinois. Maintaining a strong Renewable Portfolio Standard law was cited by clean energy firms as the top area of importance for growing their business.

Illinois is ready to lead in clean energy.

Quality of life, proximity to customers and access to educated and skilled workers were top reasons clean energy businesses chose to locate in Illinois. World-class universities and research institutions and strong professional networks were also cited as advantages to locating in Illinois. Thanks to its rich clean energy ecosystem, Illinois ranked eighth among states for clean tech leadership in 2013. And Illinois can again be a leader in renewable energy, as it was when it ranked in the top five among states for wind energy development between 2008-2012.

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Research Findings: Industry Sectors

Clean energy encompasses a wide variety of technologies that create or conserve energy and help us meet our 21st century resource challenges. This section provides a look at the overall breakdown of industry sectors that make up Illinois’ clean energy industry, as well as a closer look at each individual sector. Table 1 provides the sector breakout of clean energy businesses in the state, and Table 2 shows which technologies were included in the survey definitions of each sector. It should be noted that when more than one response was allowed, there was significant overlap between renewable energy and energy efficiency firms, suggesting that many firms are engaged in both focus areas.

Energy Efficiency

Energy efficiency technologies include low-energy lighting, heating and cooling controls and energy automation systems, which deliver cost savings and comfort. They also include next-generation technologies s like advanced batteries and smart grid systems and controls. Energy efficiency is the primary focus for 62 percent of clean energy firms. The significance of this sector shows that clean energy is as much about how we use energy as it is about how we produce it.

Energy efficiency is helping families and businesses reduce their carbon footprints, save money and improve their bottom lines. Thanks to energy efficiency technologies, household electricity use in the U.S. has fallen to the lowest levels since 2001. And between now and 2016, electricity demand in the Midwest is projected to decline annually by almost 1 percent.

Illinois’ robust energy efficiency sector is due in part to the state’s energy efficiency standards. Illinois efficiency standards say that utilities must reduce electricity demand by 2 percent each year but spend less than 2.015 percent of rates paid by customers on efficiency projects, The Illinois Commerce Commission recently reaffirmed these goals, informed by input from survey partners Environmental Law & Policy Center and Natural Resources Defense Council.11 Energy efficiency is the primary focus for 62 percent of clean energy firms. The strength of this sector has helped make Illinois the number one state in the U.S. for green buildings and shows that clean energy is as much about how we use energy as it is about how we produce it.

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Energy Efficiency In Focus: Energy Storage

One of the most important technology areas for advancing clean energy is energy storage. This includes any technology that can store energy for use at a later time – the most recognizable of which are batteries and fuel cells. Energy storage enables other clean energy technologies. For example, a high-capacity battery linked to a solar energy system can store energy while the sun shines and deliver it after dark. Likewise, energy storage helps resolve the intermittency of wind power and enables electric vehicles that can go farther on a single charge. While energy storage technology is a growing part of all sectors of the clean energy industry, most businesses working on energy storage identified themselves as energy efficiency firms.

Illinois is at the forefront of energy storage technology as home to the Joint Center for Energy Storage Research (JCESR) – a U.S. Department of Energy-supported $120 million public-private partnership based out of Argonne National Laboratory in Lemont, Illinois that is working to develop next-generation batteries. Clean Energy Trust is a key commercialization partner of JCESR, which has a 5x5x5 goal: creating batteries with five times the energy density of today’s batteries at one fifth the cost in five years. Energy storage is an important sub-sector of Illinois’ clean energy economy, and the economy as a whole, as it combines a number of advanced industries – materials science, chemistry, manufacturing and engineering.

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Renewable Energy

Renewable energy was reported as the primary technology area by 21 percent of businesses. It is perhaps the most widely recognized clean energy sector, from wind farms and biofuels refineries that dot Illinois’ countryside to increasingly common rooftop solar arrays. Other renewable technologies include geothermal energy, bioenergy, combined heat and power and hydropower.

The survey found that wind businesses in Illinois are 41 percent larger than the average solar firm. Today, wind farms in Illinois generate enough electricity to power 750,000 homes with energy that is secure, clean and affordable.13 In contrast, Illinois’ solar sector is less mature in its development but, surprisingly, Illinois has better solar intensity than the world’s leading solar markets, Germany and Japan. Illinois’ Renewable Portfolio Standard has incentives for both utility scale and smaller scale, or distributed, solar energy, which if fully implemented will result in consistent demand for solar energy through 2025 and beyond…

Alternative Transportation…Greenhouse Gas Management…Other…

Industry Growth…Clean Energy Firm Characteristics…Clean Energy Workforce…Illinois Business Climate…

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QUICK NEWS, March 26: WIND SAVES CALIFORNIA’S GRID; MIDEAST BACKS AWAY FROM SPAIN’S CSP; FRENCH UTILITY CUTS NUCLEAR FOR NEW ENERGY

WIND SAVES CALIFORNIA’S GRID CAISO: Wind, demand response helped avoid February emergency alert

Christine Cordner, March 21, 2014 (SNL)

“The California ISO was saved from calling an energy emergency alert in February due to an uptick in wind generation…[C]old weather caused natural gas price spikes and supply curtailments to Southern California generators [Feb. 6]…[N]eeds were met by increased output from northern California generation, higher imports, a Flex Alert call for conservation, and demand response…Demand response played a key role by reducing peak load by approximately 700 MW. In addition, the system benefited from 800 MW of additional wind generation, which started ramping up…just as CAISO was preparing to call a Stage One emergency alert…[G]as incidents are getting closer and closer to the edge [according to CAISO CEO Steve Berberich]…Wind resources provided 40% of total renewable energy in 2013, up from 38% in 2012, while solar resources provided 17% in 2013, up from 8% in 2012…[Geothermal] provided 27% of CAISO's renewable energy tally…[S]olar is expected to increase its share in 2014…” click here for more

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MIDEAST BACKS AWAY FROM SPAIN’S CSP Masdar versus Spain: say adios to CSP investors? Spain’s administration seems unperturbed at the growing queue for arbitration over loss of CSP earnings. But it may need to think twice about wooing foreign investors in future.

Heba Hashem/Jason Deign, March 21, 2014 (CSP Today)

“Spain’s ability to attract future CSP investors looks increasingly in doubt as the number of international backers embarking on arbitration proceedings grows…Abu Dhabi’s leading clean energy player, Masdar, became the fourth international CSP investor to present a claim against Spain at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), for loss of earnings caused by policy changes…Masdar has investments in three CSP projects in Spain, including Torresol Energy’s landmark Gemasolar plant, which was opened in October 2011…Since then, however, relations between the two countries appear to have soured…[because of reduced] support schemes that originally attracted foreign investors…” click here for more

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FRENCH UTILITY CUTS NUCLEAR FOR NEW ENERGY EDF Curbs Nuclear Generation to Allow for Wind and Solar on Grid

Tara Patel, March 19, 2014 (Bloomberg BusinessWeek)

“Electricite de France SA, the world’s biggest nuclear operator, is having to cut production from its reactors to accommodate higher European wind and solar output, potentially curbing future earnings from atomic power…The utility, whose 58 French reactors account for about three-quarters of the country’s electricity production, can lower the output of a 1,000-megawatt plant by four-fifths in about 20 minutes…France’s nuclear fleet was designed to provide baseload power, or electricity generated around the clock. As European countries add more renewable sources such as wind and solar parks, plants that produce atomic or fossil-fueled power are having to suspend output to avoid overloading the grid…Each of EDF’s reactors can book about 200 million euros ($278 million) a year in earnings before interest, taxes, depreciation and amortization, Miniere said. The utility has earmarked 55 billion euros to invest through 2025 on maintaining and improving the safety of atomic plants.” click here for more

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TODAY’S STUDY: ENERGY STORAGE COMES TO MARKET

Commercializing Energy Storage in the United States

March 2014 (CSP Today)

Overview

With the announcement of California’s energy storage procurement target of 1,325 MW by 2020, and other states working hard to follow in their footsteps, developers are now focused on moving storage technologies from demonstration to commercialization. However, from increasing efficiencies and the reducing costs of existing technologies, to securing investment for commercial deployment, there are still a number of roadblocks that must be overcome to commercialize storage technologies. This guide explores the current status of energy storage commercialization and provides insight into the role of banks and venture capital in bringing technologies to market. It also explores the positive impact that California’s storage mandate could have on market growth, as well as the key lessons that can be learned from other renewable technologies to achieve commercialization.

Introduction

There has never been a better time to talk about energy storage in the United States. Barely a year ago the need for grid-scale energy storage was infrequently appreciated and even more rarely discussed. Now it is not just being sought after, but mandated.

California, which leads the nation in terms of green energy ambitions, has been the first state to wake up to the need to store, for a variety of uses, at least some of the excess power that will be coming off its growing wind and solar portfolio.

The California Public Utilities Commission’s Assembly Bill 2514 (AB 2514), approved last October, requires utilities to add energy storage to their grids. Puerto Rico followed suit in December, with a mandate for storage to be added to new renewable energy developments. Texas, America’s biggest electricity consumer and largest wind power producer, is similarly tipped to become an energy storage hotspot.

Elsewhere, energy storage is already being embraced to help improve the efficiency and longevity of existing grid infrastructure. In short, energy storage is coming of age in the US.

But there are still uncertainties over which technologies will dominate this market, and how current players can best position themselves to take advantage of the opportunity before them.

This guide examines present thinking around the options for these players, asking:

 What is the current state of commercialization of energy storage technologies?

 What role can banks and venture capital investors play in commercialization?

 What impact will the Californian AB 2514 mandate have on the market?

 How will today’s demonstration projects benefit commercialization?

 What can energy storage learn from other clean-tech sectors?

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The current state of energy storage commercialization

As of January 2014, the US Department of Energy (DoE) Global Energy Storage Database listed more than 21GW of operational energy storage across America.1

Most of this was in the form of long-standing pumped hydro reserves (see figure 1). But Brian Mendoza, Head of Business Development at the battery vendor Eos Energy Storage, says a recent uptick in non-hydro storage’s fortunes is evident in terms of requests for proposals (RFPs)…

However, while energy storage system (ESS) commercialization is picking up pace it still faces a number of significant challenges. Specifically:

 The market is characterized by a wide range of technology options, many of which are still in the early stages of development, with different applications, which makes it difficult to pick ‘winners’ that can be produced at a commercial scale.

 The business models for energy storage are still being defined. Storing excess renewable energy is often seen as the primary application for ESS, but there are others, such as frequency regulation, which offer more immediate benefits.

 Many ESS technologies are not yet cost-competitive. This is particularly evident in the battery market, where prices still determine volumes rather than the other way around.

 Reliability and safety are seen as problematic for a number of technologies, including established battery chemistries such as lead-acid and lithium-ion.

 With a few exceptions, there is still little regulatory incentive to implement ESS.

The role of funding bodies in commercialization

Funding bodies such as banks and venture capital firms are key to the commercialization of any new technology.

But in energy storage the level of involvement from such traditional funding sources is less than might be expected by comparison with other energy sectors. There are several possible reasons for this.

The most obvious is that the still immature state of the market, as well as of many of its constituent technologies, makes it a poor match for many traditional funders.

Problems with relatively high-profile names such as A123 or Xtreme Power have done little to inspire confidence in the wider investor community.

A further challenge, related to the lack of clear business models, is that ESS projects can benefit a number of different stakeholders but it may be difficult to get all these beneficiaries to assume the upfront costs.

This can make it difficult to make return-on-investment estimations. Finally, larger private equity firms may have difficulty finding ESS projects that meet their minimum capital investment requirements.

All this adds up to an environment where traditional sources of investment are limited to a few entities that understand the market, such as the clean-tech venture capital firm Kleiner Perkins Caufield & Byers.

Elsewhere, funding has been secured through less orthodox means such as direct investment by individuals (including Bill Gates and Warren Buffet) or companies that can sell into or benefit from ESS, such as equipment manufacturers and utilities…

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The impact of the California mandate

According to the DoE: “The recent California ruling on storage targets for 2020 represents a unique opportunity for increasing market adoption of electricity storage in California specifically, and the United States in general.”

This opportunity is significant because it will force utilities to deploy energy storage technologies at increasing levels between now and 2020 (see table 1).

California is effectively set to become a major proving ground for ESS, with learning from the market serving to help deploy energy storage at scale elsewhere in the US and worldwide.

This scaling up will not only give current, more established storage technologies the chance to be tried and tested in a utility grid setting, but will also potentially allow those that are still in development to be put to the test…

The mandate will thus help energy storage to overcome some of the commercialization challenges outlined above, particularly around business models and cost.

Regarding the latter, the payback period for ESS under the California Self Generation Incentive Program is already estimated to be of the order of three to four years, compared to five or six years without incentives.

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The status of US demonstration projects

As of January 2014, the DoE Energy Storage Database listed almost 180 operational energy storage projects in the US. Around two-fifths of these were pending verification, indicating the challenge associated with detailed reporting on existing projects.

Of all the operational projects listed, almost half (48%) are battery-based, perhaps reflecting the large number of battery technologies and vendors currently vying for attention in the market.

A further 29% were thermal storage projects, followed by pumped hydro (20%), then compressed air and flywheels (about 1.5% each).

However, when viewed by capacity instead of number of projects, pumped hydro dominates the landscape, with 20.3GW installed.

This compares to around 50MW for thermal storage, 20MW for batteries, 11MW for compressed air and a little over 2MW for flywheels.

Also worthy of note is the wide variety of applications that energy storage appears to be used for (see figure 2). The top applications are (in order) energy time shifting, electric bill management, renewable capacity firming and frequency regulation.

Beyond this, though, are uses that range from transmission upgrade deferrals and ramping to load following and on-site power.

While the data on commissioning of projects is incomplete, it appears many of the developments listed on the DoE database have only begun operation in the last five years or so. Most projects from before 2000 are pumped hydro.

This implies that the majority of the ESS facilities currently in place could be considered pilots or demonstration projects, which is an important point in terms of commercialization…

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What can energy storage learn from other clean-tech sectors?

Energy storage in general is too varied a field to bear comparison with any single other clean-tech sector.

While wind, solar, tidal, biomass and other green generation sources all comprise discrete groups of technologies in their own right, energy storage mechanisms as diverse as pumped hydro and battery ESS have little in common.

Having said that, the battery market in particular has been noted as bearing a strong resemblance to the solar PV market of five to 10 years ago.

Partly this is to do with the range of applications it covers; like PV, battery storage can be used anywhere from utility grids to consumer residential settings.

Another similarity is that the economics of battery commercialization are heavily dependent on economies of scale (something that does not happen with pumped hydro, for example).

Finally, the battery market is currently characterized by a large number of start-ups and technology variants, with few clear market leaders, as was the case for PV until a few years ago.

This situation has led some observers to predict an imminent phase of aggressive price competition followed by intense market consolidation, as has been the case with PV6. This would bring down prices and could trigger much wider adoption of battery ESS.

It should be noted, however, that not all observers agree that such a transition is imminent, or even likely.

As one analyst remarks, the battery manufacturers most likely to succeed a competitive showdown, which are those owned by diversified conglomerates such as Panasonic, have little incentive to start a price war since their products are selling well already.

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Conclusions

Energy storage is still in its infancy. But it is growing up fast. And the US is leading the way.

Worldwide, only Germany has a comparable environment for the development of energy storage, but ebbing support for renewables in general raises questions over how much of a market the nation will ultimately be.

Across America, in contrast, support continues to grow, with the DoE correctly identifying energy storage as a key plank in the country’s quest for energy security.

Similar mandates to those imposed by California and Puerto Rico look set to be introduced in other states, including Texas and New York.

In the latter, the New York Battery and Energy Storage Technology Consortium was created in 2010 to position the state as a global leader in energy storage technology, including applications in transportation, grid storage and power electronics.

Beyond interested parties ranging from state policymakers and utilities to residential solar customers and electric vehicle owners, the USA is home to other important stakeholders that are committed to developing energy storage.

The US Department of Defense, for instance, has put about $145 million a year into energy storage programs since 20098

. With this kind of support, it seems inevitable that the USA will play a key part in the commercialization of energy storage worldwide and that the changes taking place in markets such as California could be critical for wide-scale adoption in the coming year.

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QUICK NEWS, March 25: WIND REACHES UP; NEW FED BACKING FOR BIG SOLAR?; BIG BUILDING LIGHTING GETS EFFICIENT

WIND REACHES UP Wind Industry’s New Technologies Are Helping It Compete on Price

Diane Cardwell, March 21, 2014 (NY Times)

“The wind industry... is reaching for the sky. With new technology allowing developers to build taller machines spinning longer blades, the industry has been able to produce more power at lower cost by capturing the faster winds that blow at higher elevations...in places like Michigan, Ohio and Indiana, where the price of power from turbines built 300 feet to 400 feet above the ground can now compete with conventional sources like coal…[And] a start-up called Altaeros Energies is preparing to introduce BAT — or Buoyant Airborne Turbine — the enormous, white helium-filled doughnut surrounding a rotor will float about 1,000 feet in the air and feed enough electricity to power more than a dozen homes through one of the cables tethering it to the ground…” click here for more

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NEW FED BACKING FOR BIG SOLAR? A new sunrise for CSP in Section 1703 loan guarantees? U.S. loan guarantees for renewable energy ended in 2011. Or did they?

Heba Hashem/Susan Kraemer, March 21, 2014 (CSP Today)

“…Energy Secretary Moniz declared that the Loan Programs Office (LPO) has remaining loan-guarantee authority – of $40 billion…[R]enewable energy loan guarantees under new funding of Section 1705 of the 2005 Energy Policy Act…[gave] birth to the giant new Concentrated Solar Power (CSP) projects in the US that are just starting to tumble past the finish post four years later. Solana and Ivanpah are now in operation. Crescent Dunes and Mojave are close behind…[D]espite the success of almost 100% of all the loan-guaranteed projects…Section 1705 was allowed to sunset [because of one bad renewable loan, Solyndra]…Energy Secretary Moniz referenced is the first funding under a different authority of the 2005 Energy Policy Act - Section 1703…The DOE is now preparing to offer new loan guarantees…[of $1.5 billion to up to $4 billion] for renewable energy loan guarantees…These funds will be for innovative projects that employ new or significantly improved energy technologies…” click here for more

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BIG BUILDING LIGHTING GETS EFFICIENT High-Bay Lighting; Energy Efficient Lighting and Lighting Controls for Warehouse, Industrial, Sporting, Retail, and Transportation Facilities

1Q 2014 (Navigant Research)

“High-bay lighting must meet the stringent demands of illuminating spaces from afar while minimizing contrast, reducing glare, and in many cases meeting strict safety and hazardous environment requirements. Until very recently, light-emitting diode (LED) technology was not able to meet these requirements, at least not at a reasonable price. In 2013, however, several high-bay LED products were launched that provide exceptional quality in a price range that allows for acceptable paybacks from energy savings…Navigant Research forecasts that global sales of high-bay luminaires and lamps will peak at almost $17.0 billion in 2017 and then decline to $15.9 billion in 2021…” click here for more

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TODAY’S STUDY: GETTING TO 30% NEW ENERGY ON THE GRID

PJM Renewable Integration Study

February 28, 2014 (General Electric International, Inc. for PJM Interconnection, LLC.)

Executive Summary

Project Overview

At the request of its stakeholders, PJM Interconnection, LLC. (PJM) initiated this study to perform a comprehensive impact assessment of increased penetrations of wind and solar generation resources on the operation of the PJM grid. The principal objectives include:

• Determine, for the PJM balancing area, the operational, planning, and energy market effects of large-scale integration of wind and solar power as well as mitigation/facilitation measures available to PJM

• Make recommendations for the implementation of such mitigation/facilitation measures This study is motivated by the need for PJM to be prepared for a considerably higher penetration of renewable energy in the next 10 to 15 years. Every jurisdiction within the PJM footprint, except for Kentucky and Tennessee, has a renewable portfolio standard (RPS), or Alternative Energy Portfolio Standard (AEPS), or non-binding Renewable Portfolio Goal (RPG)1.

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This study investigates operational, planning, and energy market effects of large-scale wind/solar integration, and makes recommendations for possible facilitation/mitigation measures. It is not a detailed near-term planning study for any specific issue or mitigation. The target year is 2026, which was used to estimate the PJM annual load profile used in the study scenarios.

The growth of renewable energy is largely driven by Renewable Portfolio Standards and other legislative policies. The cost-benefit economics of renewable resources, and quantifying the capital investment required to install additional wind and solar infrastructure, were beyond the scope of this study and were not investigated. The study assumed that the penetration of renewable resources would increase and investigated how the PJM system would be affected.

The impact of renewables on production cost savings was investigated, but the analysis did not include possible secondary impacts to the capacity market such as increased retirements due to non-economic performance or a possible need for generators to recover more in the capacity market because of reduced revenue in the energy market.

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Project Team

Six companies joined forces to execute the broad range of technical analysis required for this study.

• GE Energy Consulting – overall project leadership, production cost and capacity value analysis

• AWS Truepower – development of wind and solar power profile data

• EnerNex – statistical analysis of wind and solar power, reserve requirement analysis

• Exeter Associates – review of industry practice/experience with integration of wind/solar resources

• Intertek Asset Integrity Management (Intertek AIM), formerly APTECH – impacts of increased cycling on thermal plant O&M costs and emissions

• PowerGEM – transmission expansion analysis, simulation of sub-hourly operations and real-time market performance

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Data Sources

This study used a combination of publicly available and confidential data to model the Eastern Interconnection, the PJM grid, and its power plants. In order to protect the proprietary interests of PJM stakeholders, the production simulation analysis was primarily based on publically available data, reviewed and vetted by PJM to assure consistency with the operating characteristics of the PJM grid and the power plants under its control. The sub-hourly analysis used PowerGEM’s Portfolio Ownership and Bid Evaluation (PROBE) program, which is regularly used by PJM to monitor the performance of the real-time market2. PROBE uses proprietary power plant data, but that data was not shared with any other study team members per PJMs existing non-disclosure agreement with PowerGEM.

AWST provided wind and solar power generation profiles and power forecasts within the PJM interconnection region, as well as the rest of the Eastern Interconnection, as inputs to hourly and sub-hourly grid simulations. These data sets were based on high-resolution simulations of the historical climate performed by a mesoscale numerical weather prediction (NWP) model covering the period 2004 to 2006.

Meteorological data from NREL’s EWITS project3 was used to produce power output profiles for both wind and solar renewable energy generation facilities. A site selection process was completed for onshore and offshore wind as well as for the centralized and distributed solar sites within the PJM region. The selection includes sites that could be developed to meet and exceed renewable portfolio standards for the PJM Interconnection. Power output profiles were produced for each of the sites using performance characteristics from the most current power conversion technologies as of July 2011. The resulting wind and solar power profiles were validated against measurements.

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Study Scenarios

Table 1 summarizes the PJM wind and solar installed capacity for the ten study scenarios. Note that the scenarios are defined in terms of percentage of renewable energy generation (MWh), whereas Table 1 summarizes the wind and solar capacity (MW) in each scenario. Also, all scenarios include 1.5% of non-wind, non-solar renewable generation.

2% BAU: This is a Business As Usual (BAU) reference case with the existing level of wind/solar in year 2011. This case is a benchmark for how PJM operations will change as wind and solar penetration increases.

14% RPS: Wind and solar generation meets existing RPS mandates by 2026, with 14% renewable energy penetration in PJM.

20% LOBO: 20% wind and solar energy penetration in PJM, Low Offshore and Best Onshore; 10% of wind resources are offshore, 90% of wind resources are onshore in locations with best wind quality.

20% LODO: 20% wind and solar energy penetration in PJM, Low Offshore and Dispersed Onshore; 10% of wind resources are offshore, 90% of wind resources are onshore. Incremental onshore wind added in proportion to load energy of individual states.

20% HOBO: 20% wind and solar energy penetration in PJM, High Offshore and Best Onshore; 50% of wind resources are offshore, 50% of wind resources are onshore in locations with best wind quality.

20% HSBO: 20% wind and solar energy penetration in PJM, High Solar and Best Onshore; similar to 20% LOBO, but with twice the solar energy and proportionately less wind energy.

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The 30% scenarios are similar to the 20% scenarios, but with more wind and solar resources to achieve 30% wind and solar energy penetration in PJM.

Figure 1 shows the locations of wind plants for the 14% RPS scenario. Note the high concentration of wind plants in Illinois, Indiana and Ohio, which have high quality wind resources. Other study scenarios where onshore wind resources were selected based on a “best sites” criteria also have high concentrations of wind plants in these western PJM states. Scenarios with the “dispersed sites” criteria moved some of the Illinois and Indiana wind resources eastward, to Ohio, Pennsylvania, and West Virginia.

Most of the scenario technical analysis was performed using wind, solar and load profiles from year 2006. Four scenarios (2% BAU, 14% RPS, 20% LOBO, and 30% LOBO) were analyzed with 2004, 2005, and 2006 renewable and load profiles, in order to quantify differences in performance using different profile years. Although there were some observable differences in operational and economic performance due to differences in wind and solar production across the three profile years, the overall impacts were relatively small and did not affect the study conclusions.

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Study Assumptions

PJM annual load energy was extrapolated to the study year 2026 using a method to retain critical daily and seasonal load shape characteristics. The average annual load growth for PJM was assumed to be 1.1%4. Load for the rest of the Eastern Interconnection was based on Ventyx “Historical and Forecast Demand by Zone”.

New thermal generators (about 35 GW of SCGT and 6 GW of CCGT) were added to the PJM system in the 2% BAU scenario to meet the reserve margin requirements in 2026 consistent with the assumed load growth (for a total of about 65 GW of SCGT and 38 GW of CCGT). For consistency across scenarios, the new thermal generators added to meet reserve requirements in the 2% BAU scenario remained available in all higher renewable penetration scenarios. The additions included ISA/FSA qualified plants from the PJM queue, but rest of the additions were not reflective of other future projects in the PJM queue.

Some existing PJM power plants were assumed to retire by 2026, per retirement forecast data from PJM and Ventyx.

All operating power plants were assumed to have the necessary control technologies to be compliant with emissions requirements. No emission or carbon costs were assumed in the base scenarios although Carbon costs were considered in one of the sensitivity cases.

Fuel prices used for production cost simulations are shown in Table 2.

The wind profiles produced for this study used performance characteristics from the most current power conversion technologies as of July 2011. Therefore, the power output profiles are slightly higher than what has been historically observed in PJM.

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Major Conclusions and Recommendations

A brief summary of the major conclusions and recommendations are listed here. Further details are presented in subsequent sections of this report.

Conclusions

The study findings indicate that the PJM system, with adequate transmission expansion and additional regulating reserves, will not have any significant issues operating with up to 30% of its energy provided by wind and solar generation. The amount of additional transmission5 and reserves required are briefly defined later in this summary and in much greater detail in the main body of the report.

• Although the values varied based on total penetration and the type of renewable generation added, on average, 36% of the delivered renewable energy displaced PJM coal fired generation, 39% displaced PJM gas fired generation, and the rest displaced PJM imports (or increased exports).

• No insurmountable operating issues were uncovered over the many simulated scenarios of system-wide hourly operation and this was supported by hundreds of hours of sub-hourly operation using actual PJM ramping capability.

• There was minimal curtailment of the renewable generation and this tended to result from localized congestion rather than broader system constraints.

• Every scenario examined resulted in lower PJM fuel and variable Operations and Maintenance (O&M) costs as well as lower average Locational Marginal Prices (LMPs). The lower LMPs, when combined with the reduced capacity factors, resulted in lower gross and net revenues for the conventional generation resources. No examination was made to see if this might result in some of the less viable generation advancing their retirement dates.

• Additional regulation were required to compensate for the increased variability introduced by the renewable generation. The 30% scenarios, which added over 100,000 MW of renewable capacity, required an annual average of only 1,000 to 1,500 MW of additional regulation compared to the roughly 1,200 MW of regulation modeled for load alone. No additional operating (spinning) reserves were required.

• In addition to the reduced capacity factors on the thermal generation, some of the higher penetration scenarios showed new patterns of usage. High penetrations of solar generation significantly reduced the net loads during the day and resulted in economic operation which required the peaking turbines to run for a few hours prior to sun up and after sun set rather than committing larger intermediate and base load generation to run throughout the day.

• The renewable generation increased the amount of cycling (start up, shut down and ramping) on the existing fleet of generators, which imply increased variable O&M costs on these units. These increased costs were small relative to the value of the fuel displacement and did not significantly affect the overall economic impact of the renewable generation.

• While cycling operations will increase a unit’s emissions relative to steady state operations, these increases were small relative to the reductions due to the displacement of the fossil fueled generation.

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Recommendations

Adjustments to Regulation Requirements

The amount of regulation required by the PJM system is highly dependent upon the amount of wind and solar production at that time. It is recommended that PJM develop a method to determine regulation requirements based on forecasted levels of wind and solar production. Day-ahead and shorter term forecasts could be used for this purpose.

Renewable Energy Capacity Valuation

Capacity value of renewable energy has a slightly diminishing return at progressively higher penetration, and the LOLE/ELCC approach provides a rigorous methodology for accurate capacity valuation of renewable energy.

PJM may want to consider an annual or bi-annual application of methodology in order to calibrate its renewable capacity valuation methodology in order to occasionally adjust the applicable capacity valuation of different classes of renewable energy resources in PJM.

Mid-Term Commitment & Better Wind and Solar Forecast

Inherent errors in the day-ahead forecasts for wind and solar production lead to suboptimal commitment of generation resources in real-time operations, especially if simple cycle combustion turbines are the primary resources used to compensate for any generation shortages. Wind and solar forecasts are much more accurate in the four- to five-hour-ahead timeframe than in the current day-ahead commitment process. It is recommended that PJM consider using such a mid-range forecast in real-time operations to update the commitment of intermediate units (such as combined cycle units that could start in a few hours). The wind and solar forecast feature can be added to the current PJM application called Intermediate Term Security Constrained Economic Dispatch (IT SCED)6 which is used to commit CT’s and guides the Real Time SCED (RT SCED) by looking ahead up to two hours. This would result in less reliance on higher cost peaking generation.

Exploring Improvements to Ramp Rate Performance

Ramp-rate limits on the existing baseload generation fleet may constrain PJM’s ability to respond to rapid changes in net system load in some operating conditions. It is recommended that PJM explore the reasons for ramping constraints on specific units, determine whether the limitation are technical, contractual, or otherwise, and investigate possible methods for improving ramp rate performance.

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