DEVELOPMENT OF OPTIMUM RENEWABLE ENERGY GENERATION PORTFOLIOS
Jason Abiecunas, Black & Veatch Corporation ()
Ryan Pletka, Black & Veatch Corporation ()
The use of renewable energy is expanding rapidly due to a combination of market and political forces. Government regulations, consumer demand, environmental concerns and economics are all driving forces in the expanding renewable energy market. As a result of accelerated development and implementation in the past few years, renewable energy has emerged from niche markets to become a mainstream player in the energy market. In Europe, construction of new renewable energy capacity has even outpaced new fossil fuel capacity. A similar situation may occur in the United States as the market works through an oversupply of new fossil fuel capacity, while numerous states are mandating the installation of thousands of megawatts of renewables. Renewable energy is often heavily subsidized through high feed-in tariffs, tax subsidies, and mandated purchase schemes. These subsidies disguise the true cost of renewable energy and make decisions on deploying the optimal generation portfolio more difficult. An unbiased and systematic approach to evaluate integration of renewable energy into a power generation portfolio on a least-cost basis is necessary.
The objective of this paper is to describe an approach to optimizing renewable portfolio development on a least-cost basis. A general overview of the renewable energy sector and the status of development of key technologies will be given. This will be followed by an explanation of a Black & Veatch optimization model and its application to renewable policy decision making. The model considers key commercial renewable energy technologies: wind, solar photovoltaic, solar thermal, biomass landfill gas, biomass digester gas, biomass direct fired, biomass cofiring, geothermal, and hydro. The approach integrates renewable resource assessments, technology and project characterizations, transmission system evaluations, forecasts for technology improvement, analysis of avoided costs, and financial analysis to develop renewable energy supply curves. These curves show the amount of renewable energy that can be deployed for a given price.
The approach can been used to identify the optimum deployment of cost effective renewable resources (when, where, and what type). For a utility, the application might be estimating the rate impact of implementing a 1,000 MW renewable energy portfolio. For a government regulator, the model might be used to estimate the economic impacts of mandating electricity suppliers in a region to produce a percent of their power from renewable sources. Examples of the model used for both cases will be given and explained.
Introduction
Renewable energy generation technologies are based on energy sources that are practically inexhaustible because most are solar derivatives. Current world usage of renewable energy is roughly 2 percent of consumption, but the use of renewable energy is growing rapidly due to a combination of environmental and political drivers. Renewable energy technologies are often favored by the public over conventional fossil fuel technologies because of the perception that renewable technologies are more environmentally benign. The international community has embraced this opinion in recent years as there has been growing concern over the potential effects of greenhouse gas emissions and global warming. With the adoption of the Kyoto Protocol in most of the industrialized world, nations have sought alternative ways to generate electricity in more environmentally benign ways, while decreasing or stabilizing carbon emissions. Although the US federal government has not committed to the Kyoto Protocol, many state and local governments in the US have seen the value of generating power from clean and sustainable sources of energy, and have begun to support and advocate renewable energy development.
Utilities and governments are increasingly interested in what renewable energy options are available and what the true costs of development actually are. This paper provides background information on major renewable energy technologies and discusses the current level of development of each technology. The paper goes on to discuss the Black & Veatch renewable energy least-cost portfolio model methodology.
Renewable Energy Technologies Background
Wind
Wind power systems convert the movement of air to electricity by means of a rotating turbine and a generator. World-wide wind energy capacity is estimated to be over 39,000MW. This is the fastest growing renewable energy technology; US installed capacity has grown by an average of 30 percent over the last five years. In fact, installation of wind turbines has outpaced the installation of all other energy technologies (conventional and renewable) in Europe for the last two years. Modern wind energy facilities contain groupings of 0.1MW to over 2MW wind turbines. Off-shore wind energy research has led to the development of larger wind turbines, now approaching 5MW. Improved siting techniques, low-wind speed energy capture, and wind turbine reliability have led to increased capacity factors; the average capacity factor in the US has increased from 20 percent in 1998 to over 30 percent in 2002. Furthermore, the cost of constructing and operating wind farms has decreased dramatically in the last decade. Such that in some locations, wind energy is price competitive with baseload and intermediate natural gas-fired combined cycle power generation.
Solar
Solar photovoltaic power systems convert the energy of the sun to electricity through the use of the photovoltaic effect that takes place within thin silicon cells. Production of solar photovoltaic modules reached 742 MW in 2003, with annual growth rates exceeding 20 percent. The majority of solar photovoltaic installations were in Japan and Germany. The modularity, simple operation, and low maintenance requirements of solar photovoltaics are ideal for serving distributed, remote, and off-grid applications. Grid connected systems are becoming more prevalent with utility and government subsidies offered in the major solar photovoltaic markets. Production costs have declined considerably over the last 20 years; however, incentives to offset the high initial capital cost are required to make this technology cost competitive with conventional generation technologies. Historically, the cost of solar photovoltaic energy has declined by about 20 percent with every doubling of production capacity. This general trend is expected to continue in the future as the current production capacity for the industry as a whole is still relatively small. Even so, the cost of generating electricity with solar photovoltaic technology is still projected to be much higher than that of other renewable energy technologies.
Solar Thermal
Solar thermal power systems capture thermal energy from the sun and convert it to electricity through various means. Solar thermal technology options include parabolic trough, parabolic dish, central receiver, and solar chimney. Parabolic trough plants consist of rows of parabolic solar collectors that focus the sun’s energy onto a glass tube carrying a heat transfer working fluid. The working fluid is used to produce steam and drive a turbine generator. With solar power tower plants a mirror field is used to heat a molten salt working fluid in a solar collector atop a single tall tower. The heat in the working fluid produces steam to drive a turbine generator. A solar chimney uses a large greenhouse to heat air that enters a tall chimney (about ½ mile high), which creates an air current that drives air turbines. A parabolic dish receiver focuses the sun’s radiation onto a heat engine at the focal point of the dish to generate power. The parabolic trough, solar tower, and solar chimney are central station technologies. The parabolic dish is a modular, distributed technology. The installed capacity of grid connected solar thermal technology is 350 MW, nearly all of which is the solar trough plants located in southern California. The other technologies have only been investigated on pilot and demonstration scale applications. The cost of generating power with solar thermal technologies is anticipated to decline considerably over the next 20 years if additional facilities are developed. Although no solar thermal facilities have been built since 1990, new projects are being investigated for several applications around the world.
Geothermal
Geothermal power plants convert geothermal heat to electricity by either using steam directly from the earth or by using hot brine to heat a working fluid to drive a turbine generator. As of 2002, there was an estimated 8,227 MW of installed electric capacity world-wide, with an additional 15,580 MWth being used for district heating applications. This is one of the more mature renewable energy technologies, and has the advantage of being a baseload, dispatchable resource. In addition to power generation, geothermal resources have other applications including direct space heating, process heat applications. Because geothermal power applications are limited to sites where high temperature and pressure reserves are found there are relatively few places in the world suitable for geothermal power generation development. The cost of constructing a new geothermal facility is heavily dependent upon the cost of drilling geothermal wells, which can be several million dollars each. The cost of exploratory drilling is a major barrier to development of geothermal plants. Drilling and exploration are considered to be relatively mature, so costs are not expected to decline considerably over the next 20 years.
Biomass Direct
Biomass is any material of recent biological origin, such as wood wastes, animal manure, or crop residues. Direct fired biomass fueled power stations generate electricity with the Rankine heat energy cycle used in conventional fossil fueled power stations. In biomass power stations, the biomass fuel is burned in a boiler to produce steam that is used to drive a turbine generator. It is estimated that there is currently in excess of 35,000 MW of installed biomass generating capacity worldwide. The majority of biomass plants are in the pulp and paper industry and combust waste products from manufacturing. Municipal solid waste combustion has also been utilized as a waste management strategy throughout Europe, Asia and the United States. Modern direct fired biomass plants are usually less than 50 MW and have lower efficiencies that their coal-fired counterparts because of the dispersed nature of the feed stock, and low heat value of fuels. The cost of generating power with biomass power plants is cost competitive with conventional technologies when waste or low cost fuels are used. This is considered to be a mature renewable energy technology; consequently, costs are not anticipated to decline considerably over the next 20 years.
Biomass Cofiring
Another option for utilization of biomass fuels is cofiring with coal at existing power plants. Coal fired plants have much higher unit capacities, sometimes exceeding 1,000 MW, than biomass plants. Due to their scale, modern coal plants are able to obtain higher efficiencies, while achieving economies of scale to achieve low power production costs. Through cofiring, renewable energy can be generated with biomass while taking advantage of the high efficiencies of coal plants to generate power at a lower cost than could be accomplished with a stand-alone biomass fueled plant. There are numerous methods and technologies that can be used to accomplish biomass cofiring including direct mixing with the existing fuel supply, separate fuel handling and feed systems, and biomass gasification cofiring. The amount of coal that can be displaced by cofiring varies by cofiring approach and boiler technology. Typically, about 10 percent of the boiler’s heat input can generally be displaced by biomass without extensive boiler modifications. There is estimated to be over 2,000 MW of biomass cofiring capacity, largely in industrial boilers. The cost of generating power by biomass cofiring can be cost competitive with conventional generation technologies, particularly with the application of waste or opportunity fuels. The cost of implementing biomass cofiring is expected to decline somewhat over the next 20 years as the industry gains more experience with this technology.
Biogas
Biogas is low heat content gas produced by the anaerobic digestion of municipal wastewater or manure, and the gas produced from the decomposition of waste in landfills. This gas can be used for direct heat applications, power production, or other applications. Electricity is produced with biogas through combustion in an internal combustion engine, combustion turbine, microturbine, or reacted in a fuel cell. Anaerobic digestion projects are generally developed on farms to supply farm electric needs, or as a first step in sewage sludge treatment. Landfill gas projects are developed as a means to prevent the release of landfill gas to the environment; landfill gas is both a potent greenhouse gas and contains acid rain precursors. These projects generally supply only enough energy to support a portion of the host facility’s electric needs, although in certain circumstances larger projects can be developed. Anaerobic digestion and landfill gas projects generating power with internal combustion engines and combustion turbines are cost competitive with conventional technologies. Generation of power with biogas is considered to be a mature renewable energy technology and costs are not expected to decline in the next 20 years.
Hydro
Hydroelectric power is generated by capturing the potential energy of water by passing it through a turbine as it moves from a higher to lower elevation. This is the most mature renewable energy technology with over 740,000 MW of installed capacity world-wide. The growth rate of hydroelectric generation is relatively modest as many of the best sites have already been developed. In many regions of the world, development of hydroelectric generation has focused on “low-impact” applications that are usually below 20-30 MW. Incremental additions and upgrades to existing hydroelectric plants, many of which have been in operation in excess of 50 years, are also opportunities to add additional low cost generation with limited environmental impact. These types of projects are generally considered to be renewable, while large applications are considered by many to be non-renewable because of the environmental impacts of building large dams. Hydroelectric generation is currently cost-competitive with fossil fueled generation technologies. There are no expected cost declines for hydroelectric generation in the next 20 years.
Ocean
Ocean energy consists of thermal energy stored in warm surface waters, wave energy, and tidal currents. Technologies are actively being developed to harness each of these energy sources. There is currently less than 300 MW of installed capacity to harness ocean energy; nearly all of which are ocean tidal facilities. However, interest in ocean energy conversion has increased in recent years, with several demonstration projects planned for ocean thermal energy conversion and wave energy conversion systems. All of the ocean energy technologies are in the research and development and demonstration phases and are not cost-competitive with conventional generation technologies. With continued research, development, and demonstration, these technologies could reach commercialization within 20 years and become cost competitive.