Methodology for a Cost-Benefit Analysis of RES-E, by Eoin Clifford, Eirgrid at the IEA Task 26 Cost and Value of Wind Energy seminar.

1. Methodology for a Cost-
Benefit Analysis of RES-E
Dr. Eoin Clifford
26th May 2014

2. 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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3. 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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4. 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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5. 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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6. 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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7. 7
Cost ComponentsData 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

8. 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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9. 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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10. 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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11. 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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12. 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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13. 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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14. Next Steps
• Review assumptions
• Finalise calculations
Study
• Agree with Steering Committee
• Publish this Summer
Report
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