Addendum Combined Heat and Power Revisions to the CPUC GHG Calculator Revised Report

Transcription

1 Addendum Combined Heat and Power Revisions to the CPUC GHG Calculator Revised Report Prepared for: California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA Under R October 2010

2 Addendum: Combined Heat and Power Revisions This addendum to the CPUC GHG Calculator Revised Report (update to version 3b, March 2010) discusses some changes to the treatment of combined heat and power (CHP) in the GHG Calculator prepared by Energy and Environmental Economics, Inc. (E3) as part of CPUC proceeding R These changes are also reflected in a new version of the GHG Calculator, version 3c, which is posted on the E3 website: These changes are being made in response to some concerns with the treatment of CHP in the GHG Calculator raised by the CHP industry, and to correct a problem with the calculation of CHP customer costs. These changes affect the carbon dioxide (CO 2 ) savings from CHP shown in the GHG Calculator, as well as the cost of CHP, but have a minor effect on the overall results of the scenarios discussed in the final report. Therefore, the key results of these changes are presented below in lieu of issuing a complete new version of the final report. Version 3c of the GHG Calculator includes the following changes to the treatment of CHP: 1. The default assumption for the CHP boiler credit is switched, such that CHP now receives the thermal credit of the CHP boiler for GHG emissions accounting purposes by default. This change can be found in the GHG Calculator in the Resources tab where the selection in cell M117 is changed from False to True. 2. The weighted average calculation of CHP customer costs, in $/MWh, for on-site CHP and export-to-grid CHP is adjusted to reflect the relative cost contributions of small (<5 MW) CHP and large (> 5MW) CHP to each of these categories. This is a formula change, and does not reflect changes to the CHP inputs. The original and new values are shown in Table 2 below. In the GHG Calculator version 3c, the new formulas can be found in the GenCost tab in cells AD84 and AD85. In the original version 3b of the GHG Calculator the relevant formula was located on the GenCost tab in cell 1

3 Y87, where customer costs between on-site CHP and export-to-grid CHP were not differentiated. Table 1. Comparison of GHG Calculator v3b and v3c CHP customer cost Customer cost of CHP $/MWh (Original, v3b) $/MWh (Revised, v3c) On-site CHP $68.43 $ Export-to-Grid CHP $68.43 $ On-site CHP is now credited for avoided line losses. In version 3b of the GHG Calculator, avoided line losses were incorrectly omitted from the on-site CHP calculations. In version 3c, accounting for the avoided line losses of onsite CHP increases the avoided generation and avoided CO 2 of on-site CHP. Export-to-grid CHP is not credited for avoided line losses because the generation from these larger units is generally interconnected at a higher voltage on the transmission system than smaller CHP. So for the purposes of line losses, export-to-grid CHP is treated like generation from a power plant. These changes to the treatment of CHP in the GHG Calculator result in a small increase to the CO 2 savings from CHP and a change in the net customer cost of CHP. Furthermore, the avoided cost of on-site CHP also increases slightly due to the change in how line losses are credited. In turn, these changes affect the utility cost per tonne and the total resource cost per tonne of CHP. The original CHP CO 2 and cost values, as well as the revised values, are summarized in Table 3 below. Table 2. Comparison of Original (v3b) to Revised (v3c) CHP Outputs On-site CHP Export-to-Grid CHP Original Revised Original Revised Utility Program Cost ($M) $0 $0 $1,039 $1,039 Net Customer Cost ($M) $739 $1384 $1,072 $427 Avoided Energy Cost ($M) $599 $649 $868 $868 Avoided Capacity Cost ($M) $166 $180 $212 $212 Avoided T&D Cost ($M) $177 $191 $0 $0 CO2 Savings (million tonnes) Utility Cost ($/tonne) ($454) ($334) ($15) ($12) Total Resource Cost ($/tonne) ($98) $119 $367 $111 2

4 Overall, these changes increase the CO 2 savings in the Accelerated Policy Case by a little more than one million tonnes of CO 2 in 2020, from 31 million metric tonnes of CO 2 savings in 2020, to 32.6 million metric tonnes of CO 2 savings in These small changes to the CO 2 savings and cost of CHP do not have a major impact on the final report s conclusions and thus are not summarized here. The total resource cost of on-site CHP has increased, from -$98/tonne to $119/tonne, while the total resource cost of export-chp has decreased, from $367/tonne to $11/tonne, due to the change in allocation of customer costs between these resource types. The fact that the $/tonne number for CHP is so sensitive to small changes in the numerator or denominator of the calculation* highlights that it is important not to rely exclusively on the cost per tonne of CO 2 saved for resources when making policy decisions, given that small changes to the input assumptions can result in large changes to the $/tonne result. *The $/tonne calculation is = (cost - benefits) / (CO 2 savings) The largest change to the overall GHG Calculator results is to alter the relative placement of CHP in the emissions abatement supply curves, as shown in Figures 1 through 4 below (replicated from Figure 8 and Figure 9 of the final report). The figures below show the emissions abatement supply curves using both the original (version 3b) CHP assumptions and the revised (version 3c) CHP assumptions. 3

5 Figure 1: Original GHG Calculator v3b: Total Resource Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $1,000 $800 Net CO2 Savings: 31 MMT CO2e $600 Biogas Export CHP Geothermal Wind Figure 2. Revised CHP Assumptions GHG Calculator v3c: Total Resource Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $1,000 $900 $800 Net CO2 Savings: 32.6 MMT CO2e $700 $600 $500 $300 Export CHP Biogas $100 Geothermal Wind $(100) 4

6 Figure 3. Original GHG Calculator v3b: Utility Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $300 $100 $(100) $(300) Net CO2 Savings: 31 MMT CO2e Geothermal Export CHP Biogas Wind $(400) $(500) Figure 4. Revised CHP Assumptions GHG Calculator v3c: Utility Cost Perspective GHG of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $300 Net CO2 Savings: 32.6 MMT CO2e $100 $(100) Export CHP Biogas Geothermal Wind $(300) $(400) 5

7 CHP Inputs: Sensitivity Analysis E3 also developed a sensitivity analysis for some of the key CHP performance assumptions, based on historical reported performance data for CHP units in California. Based on data from the U.S. DOE Energy Information Agency and a CPUC Self- Generation Incentive program evaluation, E3 developed a sensitivity test for the gross heat rate and electric share of CHP emissions. The inputs for this sensitivity are shown in Table 3 below. In the GHG Calculator, these changes replicated on the Resources tab, by changing the values in cells G114, G115, J114 and J115. Table 3. Comparison of GHG Calculator v3b and v3c CHP input assumptions <5MW >5 MW (Original, (Revised, (Original, (Revised, v3b) v3c) v3b) v3c) Gross Heat Rate (Btu/kWh) 9, , , ,745 3 Electric share of CHP emissions (remainder is thermal) 57% 1 78% 2 65% 1 64% 3 1 Selected as a result of April 1, 2008 CHP working group conference call with GHG proceeding stakeholders. 2 Source: Itron, Inc., CPUC Self-Generation Incentive Program Fifth Year Impact Evaluation: Final Report, prepared for PG&E and the Self-Generation Incentive Program Working Group, March Source: U.S. Department of Energy, Energy Information Administration, Form EIA- 906, EIA-920, year

8 The impacts of this change to the inputs for the CHP gross heat rate and electric share of GHG emissions also change the final results for the cost per tonne of CHP. Notably, the total resource cost of CHP increases significantly and the CO 2 savings decrease, due to the higher heat rates. These values are reflective of how CHP would impact California s costs and emissions if there was no change between historical CHP performance and new CHP performance. In reality, it is more likely that new CHP performance will increase relative to historical CHP performance. Table 4. Comparison of Original (v3b) to Sensitivity analysis of CHP Outputs (v3c) On-site CHP Export-to-Grid CHP Original Sensitivity Original Sensitivity Utility Program Cost ($M) $0 $0 $1,039 $1,039 Net Customer Cost ($M) $739 $1,655 $1,072 $649 Avoided Energy Cost ($M) $599 $649 $868 $868 Avoided Capacity Cost ($M) $166 $180 $212 $212 Avoided T&D Cost ($M) $177 $191 $0 $0 CO2 Savings (million tonnes) Utility Cost ($/tonne) ($454) ($669) ($15) ($17) Total Resource Cost ($/tonne) ($98) $416 $367 $248 This CHP sensitivity also alters the relative placement of CHP in the emissions abatement supply curves, as shown in Figures 5 through 8 below (replicated from Figure 8 and Figure 9 of the final report). The figures below show the emissions abatement supply curves using both the original (version 3b) CHP assumptions and the CHP sensitivity analysis results (using version 3c of the GHG Calculator). 7

9 Figure 5: Original GHG Calculator v3b: Total Resource Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $1,000 $800 Net CO2 Savings: 31 MMT CO2e $600 Biogas Export CHP Geothermal Wind Figure 6. Sensitivity on CHP, GHG Calculator v3c: Total Resource Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $1,000 $800 Net CO2 Savings: 30.1 MMT CO2e $600 Biogas Export CHP Wind Geothermal 8

10 Figure 7. Original GHG Calculator v3b: Utility Cost Perspective of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $300 $100 $(100) $(300) Net CO2 Savings: 31 MMT CO2e Geothermal Export CHP Biogas Wind $(400) $(500) Figure 8. Sensitivity on CHP, GHG Calculator v3c: Utility Cost Perspective GHG of Accelerated Policy Case GHG Abatement Supply Curve Incremental to Reference Case $300 Net CO2 Savings: 30.1 MMT CO2e $100 $(100) $(300) Geothermal Wind Biogas Export CHP $(500) $(700) 9