Team iRISE: INCORPORATING RENEWABLES INTO SUSTAINABLE ... · articles, Team iRISE calculated that a 40 MW community in New York represents about 54,000 households and serves 160,000

Team iRISE: INCORPORATING RENEWABLES INTO SUSTAINABLE ENTERPRISES

Document prepared for:

The leading integrated power company in the United States of America.

Document prepared by:

Edgar Virgüez, Ph.D. Candidate Colin Walker, MEM Candidate

Jenna Weiner, MEM & MBA Candidate

Economist Energy Case Study

Nicholas School of the Environment Duke University

March 8th, 2017

Durham, North Carolina The United States of America

ABSTRACT

As the United States energy infrastructure ages and climate disruption threatens the

integrity of the grid, new, cleaner technologies can provide resiliency and reliability. However,

creating a clean and resilient energy system for a residential neighborhood, such as a 40 MW

New York community, is not feasible with traditional financing strategies.

In this case study, we developed an innovative financial model to economically

implement a distributed energy system consisting of rooftop photovoltaic (PV) panels, fuel cells,

and battery storage. Our model creates a partnership between NRG and the community. The

partnership structure reduces NRG’s risk, while giving the community energy independence.

The community’s and NRG’s incentives are aligned to conserve energy, reduce costs, and

generate revenue through selling excess energy and ancillary services to NYISO. Our financing

strategy enables NRG to invest in clean distributed energy systems and reshape the energy

industry for a sustainable future.

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Contents 1. INTRODUCTION .................................................................................................................. 3

2. COMMUNITY PARAMETERS ........................................................................................... 4

3. DISTRIBUTED ENERGY TECHNOLOGIES ................................................................... 4

4. BUSINESS MODEL ............................................................................................................... 6

4.1. Partnership Model ......................................................................................................................... 6

4.2. Monthly Billing ............................................................................................................................. 6

4.3. NRG Management ......................................................................................................................... 7

4.4. Consumer Experience .................................................................................................................... 8

5. INCENTIVES .......................................................................................................................... 8

5.1. NRG .............................................................................................................................................. 8

5.2. Consumers ..................................................................................................................................... 9

5.3. Government ................................................................................................................................. 10

6. FINANCIAL MODEL .......................................................................................................... 11

7. ANALYSIS ............................................................................................................................ 12

8. REFERENCES ...................................................................................................................... 13

APPENDIX ................................................................................................................................... 16

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1. INTRODUCTION

In 2005, Hurricane Wilma hit South Florida and caused Susan Baker to lose power in her

Miami Beach home for four days. The meat in the freezer turned rancid and became a breeding

ground for deadly bacteria. When cleaning out the contents of the fridge, Susan contracted

pseudomonas, an extremely dangerous strain of pneumonia. She became severely ill and nearly

died. Shortly after recovering, she purchased a 40kW diesel generator to ensure her and her

family’s safety. Reliable energy can be a matter of life or death, and during nearly every

hurricane season, South Floridians are reminded of this.

Increasingly extreme weather is becoming a concern in not only South Florida due to

anthropogenic global climate disruption, largely caused by the burning of fossil fuels for

electricity. In 2012 Hurricane Sandy devastated the Northeast, and communities on Long Island

were without power for over two weeks.

The interconnectedness of the U.S. electricity grid makes it difficult to quickly restore

power after a catastrophic event. Distributed energy could offer a solution by allowing

communities to island. By islanding, communities can use their generation sources to supply their

electricity needs without having to depend on outside power lines to be fixed or the necessary

generators to come online. Clean distributed energy has the potential to mitigate the effects of

global warming and save lives in a world where the consequences of climate change are forcing

us to rethink the structure of our grid.

Although distributed energy has many obvious benefits, there are also numerous

significant hurdles that must be addressed before distributed energy can be a viable option. Team

iRISE developed a financial model to implement a distributed energy system in a 40 MW

community on Long Island, New York.

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2. COMMUNITY PARAMETERS

Using information from the Energy Information Administration (EIA) and peer review

articles, Team iRISE calculated that a 40 MW community in New York represents about 54,000

households and serves 160,000 residents. Using the same values, iRISE assumes the average

New York household is 1,832ft2 and consumes 6,500 kWh per year. If the community pays an

average of $0.169 per kWh, then average household currently pays $92 per month, totaling $60

million per year for the whole community.

3. DISTRIBUTED ENERGY TECHNOLOGIES

The community modeled by iRISE is fueled by rooftop photovoltaic (PV) panels, battery

storage, and fuel cells. The PV panels have an installed capacity of 56.19 MW, the fuel cells have

a nameplate capacity of 29.08 MW, and the battery storage has a maximum capacity of 2,165.073

kWh. Team iRISE selected the capacity levels of the three technologies by formulating an

optimization problem that minimized operational costs. The model included constraints that

accounted for demand, reliability, and available rooftop area for PV installation.

The generation mix was chosen to address resiliency, reliability, and pollution concerns.

A resilient energy system can recover quickly from a major shock, such as damage from extreme

weather, whereas a reliable system can perform the work necessary when called upon.

The distributed nature of the proposed system makes it is easier for the system to recover

from damage. For example, in 2003 a transmission line overheated in Ohio and caused adjacent

lines to overload and overheat as well. This caused a cascading effect, and the power outage

spread throughout the entire Northeast and parts of the Midwest. Most generators are not black

start, meaning they need power from the grid to restart. This means that when there is a massive

power outage, such as the incident in 2003, it can take days, or even weeks, for there to be

enough power on the grid to restart all of the necessary generators. iRISE’s proposed energy

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system is islanded so it will not rely on the grid. Also, PV and some types of fuels cells are black

start generators, which makes the system resilient.

Reliability is an equally important concern when building an energy system. Frequency is

maintained by exactly matching the supply and demand of energy. Maintaining frequency is

essential for protecting all of the appliances and electronics connected to the system. Therefore,

generators that are dispatchable and have fast ramp rates are imperative for ensuring reliability.

Fuel cells and batteries are dispatchable, which means they can provide power at any time, and

they also have fast ramp rates, meaning they can adjust their power output instantaneously. In

addition, this generation mix can also accommodate the community’s needs when one of the

three technologies is offline due to fuel shortages or routine maintenance. The fuel cells and

batteries have enough capacity to meet peak load when the sun is not shining, and the PV panels

plus batteries can service the community if the fuel cells malfunction or need maintenance.

By deploying these three technologies, the carbon equivalent (CO2E) emissions released

to the atmosphere to supply electricity would be reduced by an average of 52% when compared

to emissions generated by natural gas, and 72% in relation to emissions generated by coal. The

estimated annual emissions of the new system would be 103,000 tons of CO2E, with an average

emissions rate of 0.58 pounds of CO2E per kWh. This value is significantly lower when

compared to the reported values for fuels like coal (2.07 to 2.17 pounds CO2E per kWh) or

natural gas (1.22 pounds CO2E per kWh).

Although these relatively newer technologies have larger upfront costs, they hedge

against a carbon tax that will inevitably be implemented in the next decade. Fuel cells can run on

various types of fuel such as biogas and hydrogen. Although cheap natural gas is currently the

most economical fuel, the use of fuel cells does not perpetuate the carbon lock-in dilemma.

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Unlike most other fossil fuel powered generators, as the market for cleaner types of fuel matures

it will be easy to convert the fuel cells.

4. BUSINESS MODEL

4.1. Partnership Model

iRISE developed a business model to support an innovative financing strategy. In the

iRISE model NRG forms a partnership with the community. In this partnership there is a

managing partner and an equity partner. Throughout the life of the technologies NRG makes up

100% of the managing partner. In the beginning, NRG also makes up 100% of the equity partner.

However, over time the community’s share of the equity partnership increases as NRG’s

decreases. The community will pay back the capital costs invested by NRG via monthly billing

revenue, eventually making the community 100% of the equity partner.

4.2. Monthly Billing

The monthly bill that the community receives will consist of four line items. Each

homeowner’s portion of the community’s bill is determined by the square footage of their house.

First, there will be a $0.0819 per square foot capital cost recovery fee that is used to purchase the

community’s portion of the equity partnership. Second, there will be a $0.003 per square foot

management fee that NRG will receive. Third, there will be a variable operating, maintenance,

and fuel cost passed through NRG to consumers that will amount approximately to $0.0226 per

square foot. Fourth, there will be a distribution credit or debit, in dollars per square foot, based on

the community’s equity ownership level. The profit or loss reflects (1) NRG’s performance

selling excess electricity and ancillary services in the wholesale market and (2) a consumer’s

decision to participate in an optional demand response program, as described in section 4.4.

iRISE constructed a sample monthly bill using a Monte Carlo simulation of 100,000 trials. The

expected monthly bill for a 1,650 ft2 house can be seen below in Figure 1.

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Figure 1. Sample bill.

4.3. NRG Management

As managing partner, NRG is paid a management fee for performing various

responsibilities such as billing, system management, and participating in the wholesale market.

iRISE has built an energy system where the community is independent and will rarely need to

purchase energy on the wholesale market unless market prices are below the marginal cost of the

community’s technologies. Presumably, there will be instances where the community can sell

energy and other ancillary services, such as grid frequency regulation using the battery storage or

ramping capability. iRISE believes this could potentially be a large source of revenue. If there are

profits earned through NRG’s effective management, then the distributions will be paid out

according to the partners’ ownership level.

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The novel bill structure proposed is also important in helping shape consumers’

perception of a utility’s role and responsibilities. Instead of paying only for the actual energy

supplied per month, the management fee helps consumers realize that a utility does much more

than simply send electricity when requested.

4.4. Consumer Experience

iRISE also proposes enhancing the consumer experience through an interactive

smartphone app that promotes transparency. All consumers will have access to an app that will

track real-time energy use and compare their energy use intensity to their neighbors. The real-

time feedback allows the consumers to keep track of their energy consumption and improves the

relationship between the partners by establishing trust through transparency.

From this app, consumers can opt into a demand response program that utilizes smart

plugs. NRG may choose to request demand response in order to avoid turning on the fuel cells or

to be able to sell energy or other ancillary services on the spot market when prices are high. Both

the community and NRG will benefit from the demand response program because it would

increase profit distributions. However, consumers who choose to participate in the demand

response program will benefit two-fold. These consumers will receive a larger percentage per

square foot of the profit distributions owed to the community, or if there is a debit, they will be

responsible for a smaller proportion of the loss.

5. INCENTIVES

5.1. NRG

iRISE prioritized aligning incentives for the major stakeholders in the development of this

proposal. Although capital costs are relatively high, this model enables NRG to invest in newer

technology with substantially less risk. NRG will earn 7% on their capital and they will earn this

regardless of the amount of energy produced or price fluctuations in the market. NRG’s equity

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ownership will decrease. However, their risk will decrease as the managing and equity partners

share in the losses or profits and the capital cost recovery reduces NRG's cumulative cash

invested.

Currently, utility companies generate revenue by selling energy on a per kWh basis.

Therefore, utilities have less of an incentive to conserve energy. In addition, utilities do not have

an incentive to reduce costs since the public utility commission sets rates and lower costs lead to

lower rates in their next rate case. In the iRISE model, revenue is not based on how much energy

is sold. Thus NRG has an incentive to conserve energy and reduce costs. NRG also has an

incentive to perform well in the market, which benefits both the equity and managing partners.

5.2. Consumers

Consumers can decrease their monthly bill through energy conservation on two parts of

their bill. First, if they conserve energy the fuel cell will not need to be deployed as often and

consumers will save on operating, maintenance, and fuel costs. Second, energy conserved can

also free up the technologies to generate revenue on the wholesale market, and consumers will

profit from increased distributions. The smartphone app provides an additional incentive to

conserve energy through behavioral feedback and modification. The app makes community

members hold their neighbors accountable and encourages teamwork towards a mutual goal of

profitability.

With increasing extreme weather patterns, energy independence, increased resiliency, and

reliability are additional benefits and incentivize the community to participate in this model. With

the iRISE energy system, individual community members do not have a need to purchase

generators to keep their families safe during extreme weather, like Susan Baker decided to do

after Hurricane Wilma. Therefore, consumers are receiving an additional service from having this

energy system.

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In developing this model, team iRISE was dedicated to aligning both party’s incentives.

The end goal was to build an affordable, profitable, resilient, and reliable, energy system. The

financial model incentivizes NRG and the community to act in a way that works towards the

common goal with minimal opposition.

5.3. Government

The energy industry is highly regulated and any change needs government cooperation.

New York State has a culture of originality and is aggressively pursuing ways to make their grid

more resilient, affordable, and clean. Reforming Energy Vision (REV) is New York’s plan to

attain these goals. The iRISE model fits well with the REV framework by working towards the

same goals and using similar methods, such as paying for market and grid management rather

than paying for electricity on a per kWh basis.

New York State not only has an incentive to cooperate with NRG and the community in

employing the iRISE model, but team iRISE foresees ways that New York may provide

additional incentives to implement the model. Long Island specifically has major transmission

congestion issues. The generation mix proposed by iRISE can provide significant relief from

transmission congestion. In addition, most clean energy is characterized as a variable energy

resource. These resources can cause major problems for the grid. However, the community’s

solar energy will not add to the stress on the grid because of the additional battery storage. As

New York pushes for more clean energy, the unique features of the iRISE generation mix may

help New York in reaching their renewable target. As a result, New York may provide additional

incentives such as a congestion relief subsidy or a distributed energy investment tax credit. These

are not included in the financial model. However, they are important considerations for NRG’s

long-term planning.

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6. FINANCIAL MODEL

Using levelized cost of electricity data from the EIA, iRISE prepared a financial model

for the first five years as shown in Figure 2. A complete description of the model for the 30 year

period is presented in the Appendix.

Figure 2. Financial model constructed by iRISE.

Year 1 2 3 4 5Cumulative Capital Cost Balance ($) 909,387,614 903,269,186 896,538,915 889,135,618 880,991,990Cost of Capital ($) 90,938,761 90,326,919 89,653,892 88,913,562 88,099,199Cumulative Total Capital Costs ($) 1,000,326,375 993,596,104 986,192,807 978,049,179 969,091,189

Total Operational Costs ($) 26,725,549 27,126,433 27,533,329 27,946,329 28,365,524

NRG Equity (% ) 100% 99% 99% 98% 97%Community Equity (% ) 0.00% 0.67% 1.41% 2.23% 3.12%

NRG Distribution Share (% ) 100% 98% 97% 95% 93%Community Distribution Share (% ) 0% 2% 3% 5% 7%

Cost parameters per area ($ ft-2) 1 2 3 4 5Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0030 0.0031 0.0032 0.0033 0.0034Operation and Maintenance 0.0226 0.0229 0.0232 0.0236 0.0239Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050

Monthly Bill ($ house-1 month-1) 1 2 3 4 5Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $5.50 $5.66 $5.83 $6.01 $6.19Operation and Maintenance Fee $41.31 $41.93 $42.56 $43.20 $43.85Distributions $0.00 -$0.16 -$0.32 -$0.47 -$0.63Total Monthly Bill $197 $197 $198 $199 $199

Annual Bill ($ house-1 year-1) 1 2 3 4 5Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $66 $68 $70 $72 $74Operation and Maintenance Fee $496 $503 $511 $518 $526Distributions $0 -$2 -$4 -$6 -$8Total Annual Bill $2,362 $2,370 $2,377 $2,385 $2,393

Community Cash Flow ($ year-1) 1 2 3 4 5Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544Operation and Maintenance Fee $26,725,549 $27,126,433 $27,533,329 $27,946,329 $28,365,524Distributions $0 -$687 -$2,887 -$6,826 -$12,760Cash Flow $127,338,059 $127,844,914 $128,359,470 $128,881,687 $129,411,497

NRG Cash Flow ($ year-1) 1 2 3 4 5Cost of Capital $90,938,761 $90,326,919 $89,653,892 $88,913,562 $88,099,199Management Income $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544Distributions Income $493,794 $485,281 $476,767 $468,253 $459,740Total Income $94,987,876 $94,474,179 $93,902,498 $93,266,809 $92,560,483

Capital Investment $909,387,614 $0 $0 $0 $0Cash Flow -$814,399,738 $94,474,179 $93,902,498 $93,266,809 $92,560,483

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7. ANALYSIS

The estimated capital cost of the three technologies is $909,387,614. With a 7% discount

rate, the community will be 100% of the equity partner by year 30, and NRG will have an

internal rate of return of 9.41%.

The three technologies chosen require substantial capital costs. Although the generation

mix is insulated from carbon taxes, iRISE had to choose expensive and young technology to

achieve this. As with all technology, costs will decrease over time with improvements and

learned best practices.

The large capital cost has a significant effect on the community’s monthly bill. Although

the customer’s bill increases from the current rates, the customer is receiving additional valuable

services. The community is not only purchasing electricity, they are buying energy independence

and resiliency. Efficient and reliable distributed energy systems will become more valuable as

climate change continues to threaten the integrity of the grid.

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8. REFERENCES

1. Andrews, Kirk. (2015). Finance Overview, Investor Meeting. NRG.

2. Annamaria Buonomano, Francesco Calise, Massimo Dentice d’Accadia, Adolfo Palombo,

Maria Vicidomini, Hybrid solid oxide fuel cells–gas turbine systems for combined heat

and power: A review, Applied Energy, Volume 156, 15 October 2015, Pages 32-85, ISSN

0306-2619, http://dx.doi.org/10.1016/j.apenergy.2015.06.027.

3. Carnegie Mellon University Green Design Institute. (2017) Economic Input-Output Life

Cycle Assessment (EIO-LCA) US 2002 (428 sectors) Retrieved March 08, 2017, from

http://www.eiolca.net/.

4. Chun Sing Lai, Malcolm D. McCulloch, Levelized cost of electricity for solar

photovoltaic and electrical energy storage, Applied Energy, Volume 190, 15 March 2017,

Pages 191-203, ISSN 0306-2619.

5. DiSavino, S. (2012, November 14). LIPA restores power to most Sandy outages on Long

Island, NY. Retrieved March 08, 2017, from http://www.reuters.com/article/us-storm-

sandy-lipa-idUSBRE8AD0VI20121114.

6. J. Hernández-Moro, J.M. Martínez-Duart, Analytical model for solar PV and CSP

electricity costs: Present LCOE values and their future evolution, Renewable and

Sustainable Energy Reviews, Volume 20, April 2013, Pages 119-132, ISSN 1364-0321.

7. Manasseh Obi, S.M. Jensen, Jennifer B. Ferris, Robert B. Bass, Calculation of levelized

costs of electricity for various electrical energy storage systems, Renewable and

Sustainable Energy Reviews, Volume 67, January 2017, Pages 908-920, ISSN 1364-

0321, http://dx.doi.org/10.1016/j.rser.2016.09.043.

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8. New York Average household size, 2009-2013 by County. Retrieved March 08, 2017,

from http://www.indexmundi.com/facts/united-states/quick-facts/new-york/average-

household-size#map.

9. Peter Kästel, Bryce Gilroy-Scott, Economics of pooling small local electricity

prosumers—LCOE & self-consumption, Renewable and Sustainable Energy

Reviews, Volume 51, November 2015, Pages 718-729, ISSN 1364-0321.

10. Rebecca E. Ciez, J.F. Whitacre, Comparative techno-economic analysis of hybrid micro-

grid systems utilizing different battery types, Energy Conversion and Management,

Volume 112, 15 March 2016, Pages 435-444, ISSN 0196-8904.

11. U.S. Energy Information Administration. Electric Power Monthly. (2017). Retrieved

March 08, 2017, from https://www.eia.gov/electricity/monthly/pdf/epm.pdf.

12. U.S. Energy Information Administration. (2016). Levelized Cost and Levelized Avoided

Cost of New Generation Resources in the Annual Energy Outlook 2016. Retrieved March

08, 2017, from https://www.eia.gov/outlooks/aeo/electricity_generation.cfm.

13. U.S. Energy Information Administration. (2015). Photovoltaic industry overview and

shipments. Retrieved March 08, 2017, from

https://www.eia.gov/renewable/data.php#solar

14. U.S. Energy Information Administration. (2017). Residential Energy Consumption

Survey (RECS). Retrieved March 08, 2017, from

https://www.eia.gov/consumption/residential/

15. U.S. Energy Information Administration. (2017). State Electricity Profiles. Retrieved

March 08, 2017, from https://www.eia.gov/electricity/state/.

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16. Understanding the Link Between Climate Change and Extreme Weather. (2016, October

19). Retrieved March 08, 2017, from https://www.epa.gov/climate-change-

science/understanding-link-between-climate-change-and-extreme-weather.

https://www.epa.gov/climate-change-science/understanding-link-between-climate-change-and-extreme-weather

https://www.epa.gov/climate-change-science/understanding-link-between-climate-change-and-extreme-weather

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APPENDIX Table 1A. Parameters used in the model describing the analyzed community.

Table 2A. Parameters used in the model for the community electricity consumption.

Table 3A. Parameters used in the model describing the potential available area for rooftop installation.

Table 4A. Capital costs factors used in the optimization model for each of the three analyzed technologies.

Table 5A. Capacity factors used in the optimization model for each of the three analyzed technologies.

Table 6A. Levelized Cost of Electricity (LCOE) factors used in the optimization model for each of the three analyzed technologies (excludes capital cost of technologies).

Number of Households 53,908 householdsResidents per Households 2.95 persons household-1

Number of People Served 159,028 persons

Capacity 40 MWAnnual Energy Consumption 350,400,000 kWh y-1

Household Average Consumption 6,500.0 kWh y-1 household-1

Per Capita Electricy Consumption 2,203.4 kWh y-1 person-1

Electricity Tariff 0.169 $ kWh-1

Household Annual Electricity Expenditure $1,099 $ y-1 household-1

Household Monthly Electricity Expenditure $92 $ month-1 household-1

Total Annual Electricity Expenditure $59,217,600 $ y-1

Service Area per Household 1,832 ft2 household-1

Total Community Area 98,758,892 ft2

Total Community Area 3.54 miles2

Number of floors per Household 2.5 floor household-1

Total Available Rooftop Area per Household 733 ft2 household-1

Total Available Rooftop Area 39,503,557 ft2

Total Available Rooftop Area 1.42 miles2

Total Available Area 15,801,423 ft2 household-1

Average Roof Pitch 5.5 inchRoof Pitch Factor 1.5Roof Square Footage 57,843,796.7 ft2

Maximum Available Installation 578.4 MW

Unitary Capital Costs (PV) 3,705,000 $ MW-1

Unitary Capital Costs (Fuel Cells) 5,500,000 $ MW-1

Unitary Capital Costs (Batteries) 250 $ kWh-1

Capacity Factor (PV) 27.2% %Capacity Factor (Fuel Cells) 85.0% %Battery Efficiency 85.0% %

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Table 7A. Optimal capacity (minimizing operational costs while complying with restrictions) resulting from the optimization model.

Table 8A. Energy generation for the first year used the installed capacity resulting from the optimization model.

Table 9A. Capital and operational costs resulting from the installation of 85.27 MW in the community and its operation during a year.

LCOE (PV) - Excluding Capital Costs 13.00 $ MWh-1

LCOE (Fuel Cells) - Excluding Capital Costs 65.40 $ MWh-1

LCOE (Batteries) - Excluding Capital Costs 5.00 $ kWh-1

Installed Capacity PV 56.19 MWInstalled Capacity Fuel Cells 29.08 MWInstalled Capacity Batteries 2,165,073 kWh

Annual Energy Generation (PV) 133,892,683 kWh y-1

Annual Energy Generation (Fuel Cells) 216,507,317 kWh y-1

Installed Generation Capacity 350,400,000 kWh y-1

Installed Storage Capacity 1,840,312 kWh

Total Capital Costs 909,387,614 $Total Operational Costs 26,725,549 $ y-1

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Table 10A. Expected values of the results from the model (cost parameters, equity and management distribution).

Year 1 2 3 4 5 6 7 8 9 10Cumulative Capital Cost Balance ($) 909,387,614 903,269,186 896,538,915 889,135,618 880,991,990 872,034,000 862,180,211 851,341,043 839,417,958 826,302,564Cost of Capital ($) 90,938,761 90,326,919 89,653,892 88,913,562 88,099,199 87,203,400 86,218,021 85,134,104 83,941,796 82,630,256Cumulative Total Capital Costs ($) 1,000,326,375 993,596,104 986,192,807 978,049,179 969,091,189 959,237,400 948,398,232 936,475,147 923,359,754 908,932,821

Total Operational Costs ($) 26,725,549 27,126,433 27,533,329 27,946,329 28,365,524 28,791,007 29,222,872 29,661,215 30,106,133 30,557,725

NRG Equity (% ) 100% 99% 99% 98% 97% 96% 95% 94% 92% 91%Community Equity (% ) 0.00% 0.67% 1.41% 2.23% 3.12% 4.11% 5.19% 6.38% 7.69% 9.14%

NRG Distribution Share (% ) 100% 98% 97% 95% 93% 91% 90% 88% 86% 84%Community Distribution Share (% ) 0% 2% 3% 5% 7% 9% 10% 12% 14% 16%

Cost parameters per area ($ ft-2) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0030 0.0031 0.0032 0.0033 0.0034 0.0035 0.0036 0.0037 0.0038 0.0039Operation and Maintenance 0.0226 0.0229 0.0232 0.0236 0.0239 0.0243 0.0247 0.0250 0.0254 0.0258Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050

Year 11 12 13 14 15 16 17 18 19 20Cumulative Capital Cost Balance ($) 811,875,632 796,006,006 778,549,417 759,347,170 738,224,697 714,989,978 689,431,787 661,317,776 630,392,365 596,374,412Cost of Capital ($) 81,187,563 79,600,601 77,854,942 75,934,717 73,822,470 71,498,998 68,943,179 66,131,778 63,039,236 59,637,441Cumulative Total Capital Costs ($) 893,063,195 875,606,606 856,404,359 835,281,887 812,047,167 786,488,976 758,374,965 727,449,554 693,431,601 656,011,853





Year 21 22 23 24 25 26 27 28 29 30Cumulative Capital Cost Balance ($) 558,954,664 517,792,941 472,515,046 422,709,362 367,923,109 307,658,230 241,366,864 168,446,361 88,233,808 0Cost of Capital ($) 55,895,466 51,779,294 47,251,505 42,270,936 36,792,311 30,765,823 24,136,686 16,844,636 8,823,381 0Cumulative Total Capital Costs ($) 614,850,130 569,572,235 519,766,551 464,980,298 404,715,419 338,424,053 265,503,551 185,290,998 97,057,189 0





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Table 11A. Expected values of monthly and annual bill the results from the model.

Monthly Bill ($ house-1 month-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $5.50 $5.66 $5.83 $6.01 $6.19 $6.37 $6.56 $6.76 $6.96 $7.17Operation and Maintenance Fee $41.31 $41.93 $42.56 $43.20 $43.85 $44.51 $45.17 $45.85 $46.54 $47.24Distributions $0.00 -$0.16 -$0.32 -$0.47 -$0.63 -$0.79 -$0.95 -$1.11 -$1.26 -$1.42Total Monthly Bill $197 $197 $198 $199 $199 $200 $201 $202 $202 $203

Annual Bill ($ house-1 year-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $66 $68 $70 $72 $74 $76 $79 $81 $84 $86Operation and Maintenance Fee $496 $503 $511 $518 $526 $534 $542 $550 $558 $567Distributions $0 -$2 -$4 -$6 -$8 -$9 -$11 -$13 -$15 -$17Total Annual Bill $2,362 $2,370 $2,377 $2,385 $2,393 $2,401 $2,410 $2,419 $2,427 $2,436

Monthly Bill ($ house-1 month-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $7.39 $7.61 $7.84 $8.07 $8.31 $8.56 $8.82 $9.08 $9.36 $9.64Operation and Maintenance Fee $47.95 $48.67 $49.40 $50.14 $50.89 $51.65 $52.43 $53.21 $54.01 $54.82Distributions -$1.58 -$1.74 -$1.90 -$2.05 -$2.21 -$2.37 -$2.53 -$2.68 -$2.84 -$3.00Total Monthly Bill $204 $205 $205 $206 $207 $208 $209 $210 $211 $211

Annual Bill ($ house-1 year-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $89 $91 $94 $97 $100 $103 $106 $109 $112 $116Operation and Maintenance Fee $575 $584 $593 $602 $611 $620 $629 $639 $648 $658Distributions -$19 -$21 -$23 -$25 -$27 -$28 -$30 -$32 -$34 -$36Total Annual Bill $2,445 $2,455 $2,464 $2,474 $2,484 $2,495 $2,505 $2,516 $2,527 $2,538

Monthly Bill ($ house-1 month-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $9.93 $10.22 $10.53 $10.85 $11.17 $11.51 $11.85 $12.21 $12.57 $12.95Operation and Maintenance Fee $55.64 $56.48 $57.33 $58.19 $59.06 $59.94 $60.84 $61.76 $62.68 $63.62Distributions -$3.16 -$3.32 -$3.47 -$3.63 -$3.79 -$3.95 -$4.11 -$4.26 -$4.42 -$4.58Total Monthly Bill $212 $213 $214 $215 $216 $218 $219 $220 $221 $222

Annual Bill ($ house-1 year-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $119 $123 $126 $130 $134 $138 $142 $146 $151 $155Operation and Maintenance Fee $668 $678 $688 $698 $709 $719 $730 $741 $752 $763Distributions -$38 -$40 -$42 -$44 -$45 -$47 -$49 -$51 -$53 -$55Total Annual Bill $2,549 $2,561 $2,573 $2,585 $2,598 $2,610 $2,624 $2,637 $2,650 $2,664

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Table 12A. Expected values of the community and NRG cash flows.

Table 13A. Expected values of the Net Present Value and IRR from the model.

Community Cash Flow ($ year-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544 $4,121,590 $4,245,238 $4,372,595 $4,503,773 $4,638,886Operation and Maintenance Fee $26,725,549 $27,126,433 $27,533,329 $27,946,329 $28,365,524 $28,791,007 $29,222,872 $29,661,215 $30,106,133 $30,557,725Distributions $0 -$687 -$2,887 -$6,826 -$12,760 -$20,982 -$31,821 -$45,648 -$62,885 -$84,007Cash Flow $127,338,059 $127,844,914 $128,359,470 $128,881,687 $129,411,497 $129,948,804 $130,493,478 $131,045,351 $131,604,210 $132,169,794

NRG Cash Flow ($ year-1) 1 2 3 4 5 6 7 8 9 10Cost of Capital $90,938,761 $90,326,919 $89,653,892 $88,913,562 $88,099,199 $87,203,400 $86,218,021 $85,134,104 $83,941,796 $82,630,256Management Income $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544 $4,121,590 $4,245,238 $4,372,595 $4,503,773 $4,638,886Distributions Income $493,794 $485,281 $476,767 $468,253 $459,740 $451,226 $442,712 $434,199 $425,685 $417,171Total Income $94,987,876 $94,474,179 $93,902,498 $93,266,809 $92,560,483 $91,776,216 $90,905,972 $89,940,898 $88,871,254 $87,686,314

Capital Investment $909,387,614 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow -$814,399,738 $94,474,179 $93,902,498 $93,266,809 $92,560,483 $91,776,216 $90,905,972 $89,940,898 $88,871,254 $87,686,314

Community Cash Flow ($ year-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $4,778,053 $4,921,395 $5,069,036 $5,221,107 $5,377,741 $5,539,073 $5,705,245 $5,876,402 $6,052,695 $6,234,275Operation and Maintenance Fee $31,016,091 $31,481,332 $31,953,552 $32,432,856 $32,919,348 $33,413,139 $33,914,336 $34,423,051 $34,939,397 $35,463,488Distributions -$109,549 -$140,115 -$176,387 -$219,130 -$269,208 -$327,592 -$395,372 -$473,776 -$564,183 -$668,139Cash Flow $132,741,784 $133,319,801 $133,903,391 $134,492,022 $135,085,070 $135,681,809 $136,281,398 $136,882,866 $137,485,098 $138,086,813

NRG Cash Flow ($ year-1) 11 12 13 14 15 16 17 18 19 20Cost of Capital $81,187,563 $79,600,601 $77,854,942 $75,934,717 $73,822,470 $71,498,998 $68,943,179 $66,131,778 $63,039,236 $59,637,441Management Income $4,778,053 $4,921,395 $5,069,036 $5,221,107 $5,377,741 $5,539,073 $5,705,245 $5,876,402 $6,052,695 $6,234,275Distributions Income $408,657 $400,144 $391,630 $383,116 $374,603 $366,089 $357,575 $349,062 $340,548 $332,034Total Income $86,374,274 $84,922,139 $83,315,608 $81,538,941 $79,574,813 $77,404,160 $75,005,999 $72,357,242 $69,432,479 $66,203,751

Capital Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow $86,374,274 $84,922,139 $83,315,608 $81,538,941 $79,574,813 $77,404,160 $75,005,999 $72,357,242 $69,432,479 $66,203,751

Community Cash Flow ($ year-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $6,421,304 $6,613,943 $6,812,361 $7,016,732 $7,227,234 $7,444,051 $7,667,372 $7,897,394 $8,134,315 $8,378,345Operation and Maintenance Fee $35,995,440 $36,535,371 $37,083,402 $37,639,653 $38,204,248 $38,777,312 $39,358,971 $39,949,356 $40,548,596 $41,156,825Distributions -$787,382 -$923,861 -$1,079,762 -$1,257,535 -$1,459,929 -$1,690,019 -$1,951,254 -$2,247,491 -$2,583,051 -$2,962,767Cash Flow $138,686,551 $139,282,643 $139,873,191 $140,456,039 $141,028,742 $141,588,532 $142,132,279 $142,656,447 $143,157,050 $143,629,592

NRG Cash Flow ($ year-1) 21 22 23 24 25 26 27 28 29 30Cost of Capital $55,895,466 $51,779,294 $47,251,505 $42,270,936 $36,792,311 $30,765,823 $24,136,686 $16,844,636 $8,823,381 $0Management Income $6,421,304 $6,613,943 $6,812,361 $7,016,732 $7,227,234 $7,444,051 $7,667,372 $7,897,394 $8,134,315 $8,378,345Distributions Income $323,521 $315,007 $306,493 $297,979 $289,466 $280,952 $272,438 $263,925 $255,411 $246,897Total Income $62,640,291 $58,708,244 $54,370,359 $49,585,647 $44,309,010 $38,490,826 $32,076,497 $25,005,954 $17,213,107 $8,625,242

Capital Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow $62,640,291 $58,708,244 $54,370,359 $49,585,647 $44,309,010 $38,490,826 $32,076,497 $25,005,954 $17,213,107 $8,625,242

Net Present Value NRG $156,573,917Internal Rate of Return 9.41%

21

Figure 1A. Probability density function of the Net Present Value of the investment for NRG after 100,000 trials of the Monte Carlo simulation.

Team iRISE: INCORPORATING RENEWABLES INTO SUSTAINABLE ... · articles, Team iRISE calculated that a 40 MW community in New York represents about 54,000 households and serves 160,000

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