Douglas J. Arent

1
Advanced Renewables Status and Implications for
Climate ModelingSummer 2007

• Douglas J. Arent
• Director, Strategic Energy Analysis and
  Applications Center
• National Renewable Energy Laboratory

2
Synopsis

• Technology Status update
• Modeling Insights and Issues
• Policy Development issues

3
Global Markets are Growing Rapidly
Global Growth of Wind Energy Capacity
Global PV Shipments
4
Investing in the Future
Energy-Tech Investments Percent of Total U.S.
Venture Capital
Global Renewable Energy Annual Growth Rates
2000-2004
Sources Renewables 2005 Global Status Report,
REN21 Clean Energy Trends 2006, Nth Power LLC
5
Alternative Energy Money Is Flowing Into the
Sector
2006 Investment and MA By Sector and Asset
Class
Annual VC Investment Volume 2001-2004 Compared
With 2005-2006
Source New Energy Finance 2007
6
World Energy Supply andthe Role of Renewable
Energy BAU Forecasts
Source OECD/IEA, 2004
7
Technology Innovation ChallengesThe Next
Generation

• Wind Turbines
• Improve energy capture by 30
• Decrease costs by 25
• Solar Systems
• Improved performance through, new materials,
  lower cost manufacturing processes, concentration
• Nanostructures
• Biofuels
• New feedstocks
• Integrated biorefineries

8
Wind and Marine Energy RD
Source NREL 2007
9
GE WindEnergy 3.6 MW Turbine
Arklow Banks Windfarm The Irish Sea
Photo R. Thresher
10
Geothermal RD
Source NREL 2007
11
Photovoltaics RD
Source NREL 2007
12
Concentrating Solar Power RD
Source NREL 2007
13
Biofuels RD
Source NREL 2007
14
Renewable Energy Cost Trends
Levelized cost of energy in constant 20051
Source NREL Energy Analysis Office
(www.nrel.gov/analysis/docs/cost_curves_2005.ppt)
1These graphs are reflections of historical cost
trends NOT precise annual historical data. DRAFT
November 2005
15
Modeling RETs Key Issues to Address

• Methodologies
• Technology characterization Capital, OM, Fuel,
  performance
• Financial assumptions (Discount rate!), LCOE
  assumptions
• Geospatial characteristics
• Resource
• Transmission
• Emissions
• Cross Sector opportunities
• PHEVs
• Poly Gen plants
• Technology Advancementslearning
• Institutional Factors- Lock In
• Uncertainty

16
Valuation depends on Analytic Approach

• Discounted Cash Flow (DCF) or other linear
  approaches may not be most appropriate.
• Stochastic analysis and options analysis offer
  alternative insights.

Source Optimizing the Level of Renewable
Electric RD Expenditures Using Real Options
Analysis, NREL/TP-620-31221, 2003
17
Nominal LCOE with Tax and Carbon Policy
0.059
0.066
0.060
0.041
0.046
Numerical values represent total LCOE after tax
credit applied
Production and investment tax credits per EPACT
2005 Carbon permit price 100/Ton C Carbon
sequestration assumed to eliminate 90 of
carbon emissions
18
(No Transcript)
19
Regional Issues Matter


NEMS and Haiku Electricity Regions NEMS Coal
Supply Regions

NARG Gas Supply Regions IPM N. America Region
Set
20
Renewable Portfolio Standards
WA 15 by 2020
ME 30 by 2000
VT 10 by 2012
MN 25 by 2025
IA 2 by 1999
NH 23.8 by 2025
WI 10 by 2015
NY 24 by 2013
MT 15 by 2015
MA 4 by 2009
IL 8 by 2013
OR 25 by 2025
RI 16 by 2019
CT 10 by 2010
NV 20 by 2015
NJ 22.5 by 2020
CO 20 by 2020
DE 10 by 2019
MD 7.5 by 2019
DC 11 by 2022
AZ 15 by 2025
CA 20 by 2010
PA 8 by 2020
NM 20 by 2020
VA 12 by 2022
TX 5,880 MW (5.5) by 2015
RPS
RE Goal
HI 20 by 2020
MO 10 by 2020
As of June 2007 For Xcel Energy, the
requirement is 30 by 2020. Sources Union of
Concerned Scientists and NREL
21
Wind Deployment System (WinDS) ModelDetailed
Treatment of Wind Grid Integration Issues
22
Wind Resources in WinDS _at_ 50 m
23
WinDS 2030 RPS Transmission and Consumption
24
Plug-in Hybrid Electric Vehicle Modeling
Loads
Reserve Margins
The Grid
Ancillary Services
Off peak
Reserves as needed
25
PHEVs Can Increase Wind Penetration
Assumes 50 PHEV-V2G penetration by 2050
26
F-T FUELS ELECTRICITY FROM COAL PRAIRIE
GRASSES WITH TWO C-STORAGE MECHANISMS

• Growing mixed prairie grasses on C-depleted
  soils ? substantial
• build-up of C in roots/soils
• Exploiting CCS soil/root C buildup ?
  realization of near-zero
• GHG emissions for F-T fuels with modest
  biomass inputs
• Two-C-storage strategy ? much larger role for
  biomass in mitigating
• climate change than is feasible with any
  conventional biofuel strategy
• Source Bob Williams, Princeton University

27
GHG Emission Rates for Fuel Production and Use
Penultimate case based on switchgrass (28 of
emission rate for gasoline) exploits negative CO2
emissions potential of photosynthetic CO2 storage
in geological reservoirs Final case shows what
can be realized by exploiting both CO2 storage
and soil/root C storage by growing mixed grasses
on C-depleted (formerly cultivated) soils
28
Total Vehicle Emissions (PHEVs vs. Gasoline)

• Tailpipe NOX decreases while total NOX emissions
  remain the same
• Total SO2 emissions depend on charging scenario
• CO2 emissions reduced by
• 50 vs. combustion vehicles
• 30 vs. hybrid vehicles

Current combustion vehicle (CV) is 2003 National
Low Emission Vehicle (NLEV) standard of 0.3
gms/mi which is phased out from 2004-2006. Future
combustion vehicle (CV) is 2007 Tier 2 Bin 5
rating of 0.07 gms/mi. This is the standard all
manufacturers fleets must meet.
29
Learning for Electric Technologies
Source IEA 2000
30
Lock In Long Lived Infrastructure.Todays
decisions have long lifetimes.
Source Grubler, Energy Policy 27 247-280 1999
31
Why consider learning?
Source IEA, 2000 Genie model runs
32
Climate Policy Issues and Advanced Renewables

• Assumptions!
• Structure Matters
• Tax vs cap and trade (or other options).
• Allocation approach
• Clarity vis a vis RECs, RPS, RFS, other policies

33
Renewable Energy Contributions
Fossil fuel price assumptions as reported range
from Oil 19 - 27 per bbl Coal 12 - 17 per
short ton Natural Gas 2.60 4.60 per
tcf PEWs high end for oil is 41.70/bbl IEA
has the highest price for coal at 37.40/ton
PEW TW w/ Policy
PEW TT w/ Policy
EPG Renewables
High Progressive policy change and rapid
technological advancement
PEW AOG w/ Policy
PEW TT
Scenarios Adv
PEW TW
EPG Current and EPG Increase Coal and Nuclear
UCS Clean Energy Blueprint
Scenarios Mod
Moderate moderate policy and technological change
Tellus Policy
Scenarios BAU
AEO High
PEW AOG
Platts
UCS BAU
AEO Ref
Low minimal policy, slow technological change,
greater reliance on fossil fuels
IEA
AEO Low
AEO 2002
Tellus Reference
Values derived from both Total Energy
Consumption and Electricity Consumption Studies.
34
Electric Sector Drivers Why Policy Matters
63 GW 2002
Gas increases PIFUA changed PURPA CC
efficiency Low price through deregulation
Coal declines CAAA
Gas declines PIFUA prohibits
Nuclear emerges Technology Available Too cheap to
meter
Nuclear decline 3-Mile Island (1979) Chernobyl
(1986)
35
Future Gas Prices are Highly Uncertain, and
Forecasting Performance to Date Has Been Dismal
36
What Might a Stochastic Model Show You?

• Incorporating uncertainty into an energy market
  model conveys significantly more information than
  a single point estimate

37
Summary

• Advanced Renewables Growing Robustly
• Continued Technology Advances Anticipated at
  accelerating rates
• Investment and Global Markets are driving
  innovation
• Accurate Modeling Requires Care
• Methodologies
• Technology characterization Capital, OM, Fuel,
  performance
• Financial, LCOE assumptions
• Geospatial characteristics
• Resource
• Transmission
• Emissions
• Cross Sector opportunities
• PHEVs
• Poly Gen plants
• Technology Advancementslearning
• Institutional Factors- Lock In
• Accounting for Uncertainty can be extremely
  insightful