2.3 Services 26
2.3.2 Resource Adequacy Capacity 30
Utilities are required to meet customer loads under a range of conditions and circumstances, and California generators are required to maintain available resources to meet CPUC “Resource Adequacy” requirements for generation during times of system peak demand. This service reflects the cost of providing reliable capacity to meet system load.
This study assumes the marginal capacity resource that would be avoided by distributed PV capacity would be a natural gas-‐fired GE LMS 100 peaking unit. This unit is appropriate since it would typically be operated at the time of distributed PV generation, but is a flexible resource that could be used to ramp up and down with the variability of the PV output. This is a state-‐of-‐the-‐art generator, and many utilities in the Southwestern United states are currently planning to use these resources to meet marginal energy requirements in the future. This annual net cost is used as a proxy for the utility cost to provide resource adequacy capacity. To represent the capacity value provided by the distributed PV fleet, this annual net cost is multiplied by the RAC factor described above, which captures the extent to which PV fleet output matches the utility load profile.
2.3.2.1
Methodology
It was assumed that the resource adequacy capacity value is approximated by the annual net cost of installing and operating a new GE LMS 100 unit. Based on actual project data assembled by Black & Veatch in 2013, the levelized installed cost of a GE LMS 100 unit in California was assumed to be $202.56/kW-‐year. A fixed operations and maintenance (O&M) cost of $22.33/kW-‐year in 2012 was added to this levelized installed cost, and the fixed O&M cost was escalated at three percent annually to $29.14/kW-‐year in 2021. Net revenues earned by the unit in the CAISO energy and ancillary service markets were subtracted in each year (net revenues varied from $3/kW-‐year to $10/kW-‐year during the study period depending on market conditions). Projected net revenues are based on the projected dispatch of a similar generating unit located in southern California using regional production simulation modeling of the Western Interconnection. The net annual cost is the levelized installed cost, plus the fixed O&M cost, minus the net revenues; annual values for each
9 Available at http://www.caiso.com/Documents/2013FirstQuarterReport-‐MarketIssues_Performance-‐
BLACK & VEATCH | Methodology 31
are shown in Table 10. The net annual cost calculated in this study rose from $218.06/kW-‐year in 2012 to $228.73/kW-‐year in 2021.
The net annual cost of a GE LMS 100 was used as a proxy for the utility cost to provide resource adequacy capacity. To calculate the resource adequacy capacity value provided by the distributed PV fleet, the net annual cost was multiplied by the annual RAC value described above in section 3.2.
2.3.2.2
Data
Data sources for this service were:
1) Black & Veatch levelized installed cost assumption for GE LMS 100 unit 2) Black & Veatch fixed O&M cost assumption for GE LMS 100 unit
3) Net revenue results for similar unit from Black & Veatch production cost model Table 10. Net Annual Capacity Cost Calculations
Year Levelized Installed Cost($/kW-‐Year)
Fixed O&M Cost ($/kW-‐Year) Net Revenues ($/kW-‐Year) Net Annual Capacity Cost ($/kW-‐Year) 2012 $ 202.56 $22.33 $6.84 $218.06 2013 $ 202.56 $23.00 $6.84 $218.73 2014 $ 202.56 $23.69 $6.84 $219.42 2015 $ 202.56 $24.41 $5.95 $221.02 2016 $ 202.56 $25.14 $9.66 $218.04 2017 $ 202.56 $25.89 $8.00 $220.48 2018 $ 202.56 $26.67 $8.00 $221.30 2019 $ 202.56 $27.47 $5.00 $224.64 2020 $ 202.56 $28.29 $6.00 $225.30 2021 $ 202.56 $29.14 $3.00 $228.73
2.3.2.3
Results
Annual utility costs for this service over the ten-‐year study period are shown in Table 11. Table 11. Utility Costs for Resource Adequacy Capacity
Year Cost/kW-‐Year 2012 $218.06 2013 $218.73 2014 $219.42 2015 $221.02 2016 $218.04 2017 $220.48 2018 $221.30 2019 $224.64 2020 $225.30 2021 $228.73
Annual utility avoided costs for this service over the ten-‐year study period are shown in Table 12. Utility avoided costs for resource adequacy capacity are equal to the utility costs above multiplied by the RAC factor in each year.
Table 12. Utility Avoided Costs for Resource Adequacy Capacity
Year Cost/kW-‐Year 2012 $ 117.37 2013 $ 115.82 2014 $ 114.32 2015 $ 112.67 2016 $ 108.06 2017 $ 109.18 2018 $ 109.19 2019 $ 109.55 2020 $ 107.63 2021 $ 106.80
2.3.2.4
Discussion
The resource adequacy capacity costs reflect the “long-‐term” resource adequacy costs of developing and operating a state-‐of-‐the-‐art generating unit in California. It is important to distinguish between “near-‐term” and “long-‐term” capacity costs. There is an active bilateral market for capacity in California, but this market is generally limited to capacity available for the next few years. As there is more generation capacity in California in the next few years than is projected to be required, prices in this market are much lower than the estimated cost for development of long-‐term resources. When considering the value of new resources, utility resource planners typically use the long-‐term value of capacity to assess the value of an alternative resource.
The long-‐term capacity costs developed by Black & Veatch are higher than many other capacity cost estimates for the California market. This cost estimate is based on Black & Veatch’s experience with developing LMS 100 units and our understanding of the cost to build and operate a new peaking resource in California.