Methodology for a Cost-Benefit Analysis of RES-E, Eoin clifford eirgrid

Methodology for a Cost-

Benefit Analysis of RES-E

Dr. Eoin Clifford

26th May 2014

Background

• What is cost of meeting our 2020 RES-E targets?

• Compare cost of 40% system in 2020 to a reference system with current levels of RES-E

CBA on meeting 2020 targets

• EirGrid, DCENR, CER, SEAI (ESRI advising)

• Not an evaluation of renewable support payments (REFIT) or current electricity market (SEM)

Steering Committee

• Currently carrying out studies

• Report due this Summer

Delivery

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Philosophy

• Comparing bottom line costs

• Assumes competitive market

Bottom-up approach

• Where do differences arise between RES-E 40% scenario and Reference scenario?

• Calculate costs of these differences

• Translate to consumer impact

• Not an absolute costing of the power system

Differential approach

• Production & Capital costs

• Network build

• System operation costs

Comprehensive

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Market Study?

Production Cost

Cost to generate electricity

Bottom up approach

Requires Long term cost estimates

Extra costs passed on competitively

vs. Wholesale Cost

Cost to suppliers

Top down approach

Requires Market calculation

Gen behaviour same in both scenarios

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Cost Components

• What is annualised cost of building renewables?

• REFIT rates used as a proxy

• REFIT balancing costs represent cost of additional risk in handlingRES generation

RES-E costs (Long term)

• Cost of burning fuel

• Calculated using Plexos dispatch (Short-Run Marginal Cost)

• Should be lower in RES-E 40% scenario

Thermal Operation Costs

• Calculated through Plexos model

• Only Reserve, Inertia, SNSP included

• Cost of operating the power system tends to increase with intermittent generation.

System Operation Costs

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Cost Components

• Reference scenario needs extra conventional capacity to make up for lower levels of RES-E

• Adequacy assessment determines generation capacities required

• Best New Entrant generator costs assumed

Thermal Capital Costs

• EirGrid’s DS3 programme has determined the additional system services needed to facilitate high levels of wind

• Cost of implementation taken from DS3 report

Additional System Services

• RES-E 40% scenario requires additional network investment

• Cost per MW of installed wind based on Grid-25 network strategy.

Network Costs

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Cost Components Data Sources

System Operation Costs (DBC)

Thermal Operation Costs

Risk to supplier from RES

Long term RES costs

Non-RES Capital Costs

Additional Network Costs

Cost/Benefit of RES

Additional System Services

REFIT Rates

BNE calculation

Adequacy calculation

Plexos Model

Grid 25 Cost estimation

DS3 CBA Report

Assumptions

• Focus is on costs and benefits to Ireland

• All-island modelling with common costs split according to demand in the two jurisdictions (3:1)

Ireland only

2020 Study year

• RES-E 40% scenario assumes 40% target met, based on latest Generation Capacity Statement (GCS 2014-2023)

• Reference scenario assumes RES-E capacity as per end of 2013

Renewables

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Plexos Study

• Hourly least-cost dispatch of generators to meet demand

• Also considers operational constraints

Market Modelling tool

• RES-E volumes for long-term RES-E costs

• Production costs for thermal generation

• Constrained run provides System Operation Costs

Solution gives us…

• Fuel IEA World Energy Outlook 2013 New Scenarios as base

• -25%, +25%, +50% as scenarios

Fuel Prices

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System Operational Constraints

• Reserve is a function of largest single infeed

Inertia & Reserve

• System Non Synchronous Penetration

• What percentage of non-synchronous generation can the system handle?

SNSP

• Assumes required reinforcements are in place so there is no transmission congestion

• Cost of network development is considered

No network modelled

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Thermal Capital Costs

• Make sure portfolio meets 8 hours LOLE

• Extra thermal generation required in Reference Scenario

• Assume OCGTs

• Also considering CCGTs as a scenario

Capacity Studies

• Best New Entrant €78.18/kW for 2012/13

• Published figure used to determine capacity payments

Valuation

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RES Costs (Long Term)

• REFIT is proxy for annualised RES costs

• Not calculating PSO

REFIT

• Volume of wind calculated through Plexos study

• Some wind not in support scheme

Wind

• Represents risk to supplier due to variability of generation

• Effectively part of REFIT rate, has been included

Balancing charge

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Costs & Benefits not considered

• Transfers?

• EU Penalties?

• Huge uncertainty

Obligation to meet target

• Assumption is that costs/savings passed on efficiently

Supplier Profits

• REFIT payments for 15 years

• Lifetime of RES-E project may be longer

Project Lifetimes

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Next Steps

• Review assumptions

• Finalise calculations

Study

• Agree with Steering Committee

• Publish this Summer

Report

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