and Pricing Trends: Past & Future 2013 National Ryan Wiser - - PowerPoint PPT Presentation

Energy Efficiency & Renewable Energy eere.energy.gov

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Program Name or Ancillary Text eere.energy.gov

WIND AND WATER POWER PROGRAM

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Wind Energy Cost, Performance and Pricing Trends: Past & Future

Ryan Wiser

Lawrence Berkeley National Laboratory

2013 National Summit on RPS

November 6, 2013

WIND AND WATER POWER PROGRAM

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• 13.1 GW of wind added in 2012, more than 90% higher than 2011
• $25 billion invested in wind power project additions
• Cumulative wind power capacity up by 28%, bringing total to 60 GW

Wind Power Additions Hit a New Record in 2012, in Part Driven By the Then-Planned Expiration of Federal Tax Incentives

5 10 15 20 25 30 35 40 45 50 55 60 65 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual U.S. Capacity (left scale) Cumulative U.S. Capacity (right scale) Cumulative Capacity (GW) Annual Capacity (GW)

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Wind Power Was the Largest Source of U.S. Generating Capacity Additions in 2012

• Wind was, for the first time, the largest resource added in terms
• f gross capacity, despite persistently low natural gas prices

0% 10% 20% 30% 40% 50% 20 40 60 80 100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Total Annual Capacity Additions (GW) Wind Other Renewable Gas Coal Other Non-Renewable Wind (% of Total)

Wind Capacity Additions (% of Total Annual Capacity Additions)

WIND AND WATER POWER PROGRAM

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• Past deployment substantially impacted by wind

technology improvement, and impacts on:

 Cost trends  Performance trends  Pricing trends

• Future deployment may be impacted to an even

greater degree, given policy uncertainty at Federal and State levels

• Presentation focused on past and near-term

trends, limited to land-based wind

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Past Trends: Cost

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Wind Turbine Prices Remain Well Below the Levels Seen Several Years Ago

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Announcement Date U.S. Orders <5 MW U.S. Orders from 5 - 100 MW U.S. Orders >100 MW Vestas Global Average Polynomial Trend Line for Orders Turbine Transaction Price (2012$/kW) Recently reported global average prices

Figure depicts reported transaction prices from 102 U.S. wind turbine orders totaling 27 GW

Escalation in turbine prices from 2003 through 2008: rising commodity prices; increased labor costs; improved manufacturer profitability; turbine up-scaling

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Reported Installed Project Costs Continue to Trend Lower

1,000 2,000 3,000 4,000 5,000 6,000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Installed Project Cost (2012 $/kW) Commercial Operation Date Individual Project Cost (689 projects totaling 49,414 MW) Capacity-Weighted Average Project Cost

Whereas turbine prices peaked in 2008/2009, project-level installed costs peaked in 2009/2010, reflecting the normal passage of time between when a turbine supply agreement is signed and when those turbines are actually installed

2012 average: $1,940/kW, down $200/kW from 2011; down $300/kW from peak

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Some Regional Differences in Average Wind Power Project Costs Are Apparent

Different permitting/development costs may play a role at both ends of spectrum: it’s easier/cheaper to build in the US interior and harder/more expensive along the coasts

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Interior 42 projects 3,827 MW Northeast 29 projects 1,101 MW Great Lakes 21 projects 1,529 MW West 25 projects 2,938 MW Southeast 1 project 19 MW Installed Project Cost (2012 $/kW) Capacity-Weighted Average Project Cost Individual Project Cost Capacity-Weighted Average Cost, Total U.S. Sample includes projects built in 2012

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Past Trends: Performance

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Regional Variations in Capacity Factor Reflect the Strength of the Wind Resource

0% 10% 20% 30% 40% 50% 60% Southeast 4 projects 308 MW Northeast 6 projects 289 MW West 37 projects 2,452 MW Great Lakes 15 projects 2,077 MW Interior 48 projects 5,430 MW Generation-Weighted Average (by region) Generation-Weighted Average (total U.S.) Individual Project (by region) 2012 Capacity Factor Sample includes 110 projects built in 2010 or 2011 and totaling 10.6 GW

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Average Hub Height and Rotor Diameter Have Increased Dramatically: Would Expect

Capacity Factor Increases to Follow

• Two periods of rapid scaling: 1998-2006 and 2009-present
• 2007-2008 mostly stagnant, as OEMs focused on meeting demand

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 10 20 30 40 50 60 70 80 90 100 1998-99 2000-01 2002-03 2004-05 2006 2007 2008 2009 2010 2011 2012

Commercial Operation Year

Average Nameplate Capacity (right scale) Average Rotor Diameter (left scale) Average Tower Height (left scale)

Meters MW 11

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As Dominant Turbine OEM in the US, GE Provides a Useful Example of the Evolution of Turbine Design

2.60 m2/kW 3.10 m2/kW 3.30 m2/kW 4.85 m2/kW 4.85 m2/kW 2002 2010 2012- (standard) 2012- (lower wind speed)

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However, Trends in Sample-Wide Capacity Factors Were Impacted by Curtailment and Inter-Year Wind Resource Variability…

The wind resource index is compiled from NextEra Energy Resources reports. The pre-2007 portion of the index is adjusted to approximate the conversion from wind speed to generation (this adjustment is unnecessary starting in 2007).

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0.00 0.15 0.30 0.45 0.60 0.75 0.90 1.05 1.20 0% 5% 10% 15% 20% 25% 30% 35% 40% 2000 10 591 2001 30 943 2002 73 2,682 2003 84 3,128 2004 106 4,500 2005 129 5,142 2006 153 7,967 2007 196 9,951 2008 240 14,926 2009 339 23,617 2010 452 33,381 2011 516 38,561 2012 446 42,844 Long-Term Wind Resource Index Sample-Wide Capacity Factor Capacity Factor Based on Estimated Generation (if no curtailment in subset of regions) Capacity Factor Based on Actual Generation (with curtailment) Wind Resource Index (right scale) # MW: # Projects: Year:

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And… Despite Turbine Scaling that Should Boost Capacity Factors, Project Build-Out in Lower-Quality Wind Resource Areas Has Pushed the Other Way

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275 305 335 365 395 425 75 80 85 90 95 100 1998-99 2000-01 2002-03 2004-05 2006 2007 2008 2009 2010 2011 2012 Commercial Operation Date Average 80m Wind Resource Quality Among Built Projects (left scale) Average Specific Power Among Built Projects (right scale) Index of Wind Resource Quality at 80m (1998-99=100) Specific Power (W/m^2 )

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Past Trends: Wind Power Price

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Sample of Wind Power Prices

• Berkeley Lab collects data on historical wind power sales

prices, and long-term PPA prices

• PPA sample includes 302 contracts from projects built from

1998-2012, totaling 24,626 MW (42% of all wind capacity added in that period, and 70% of all capacity added that is sold under bundled PPAs)

• Prices reflect the bundled price of electricity and RECs as

sold by the project owner under a power purchase agreement

– Dataset excludes merchant plants and projects that sell renewable energy certificates (RECs) separately – Prices reflect receipt of state and federal incentives (e.g., the PTC or Treasury grant), as well as various local policy and market influences; as a result, prices do not reflect wind energy generation costs

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Wind PPA Prices Generally Have Been Falling Since 2009 and Now Rival Previous Lows Set a Decade Ago

(this despite the trend to lower-quality wind resource sites)

17 $0 $20 $40 $60 $80 $100 $120 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 PPA Execution Date

Interior (14,802 MW, 173 contracts) West (6,835 MW, 68 contracts) Great Lakes (2,356 MW, 33 contracts) Northeast (855 MW, 20 contracts) Southeast (268 MW, 6 contracts)

Levelized PPA Price (2012 $/MWh)

75 MW 150 MW

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A Smoother Look at the Time Trend Shows Steep Recent Decline in Pricing; Especially Low Pricing in Interior Region

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$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1996-99 10 553 2000-01 17 1,249 2002-03 24 1,382 2004-05 30 2,190 2006 30 2,311 2007 26 1,781 2008 39 3,465 2009 47 3,982 2010 40 3,999 2011 34 3,533 2012 8 630 Average Levelized PPA Price (Real 2012 $/MWh) Nationwide Interior Great Lakes West Northeast PPA Year: Contracts: MW:

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New Lower Wind-Speed Technology Reduces the Variability in LCOE Across a Range of Wind Resource Sites: Modeled Results

8 m/s 7 m/s 6 m/s

$0 $20 $40 $60 $80 $100 $120

2002-03 Current, 2012-13 Standard Technology Technology Choice

Levelized Cost of Energy ($/MWh) Includes Federal PTC & MACRS

26% Cost Reduction 5% Cost Reduction 19

Note: Graphic only includes changes in capital cost and turbine design (i.e., capacity factors); graphic does not include changes in O&M, availability, financing, etc.

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Available Land Area Exceeding LCOE Thresholds Has Increased: Modeled Results

2002-03: Standard Technology

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000

$30 $40 $50 $60 $70 $80 $90

Available Land Area (km2)

Levelized Cost of Energy ($/MWh)

2012-13: Lowest Cost Tech Choice

w/: PTC/MACRS w/o: PTC/MACRS $57 $67 $77 $89 $99 $110 $121

Percentage Increase Since 2002-2003: < $35/MWh w/ PTC & MACRS: 42% < $55/MWh w/ PTC & MACRS: 48% < $75/MWh w/ PTC & MACRS: 25%

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Current and Future Trends

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Areas of Continued Wind Power Technology Advancement

Land-based wind technology is relatively mature, but continued advancement opportunities include:

• Plant-level design and management to maximize production
• Advanced control systems for turbines and plants to increase

energy production, reduce loads

• Improved numerical methods for understanding wind resource
• Blade innovations to increase performance, reduce loads & noise
• Multiple drivetrain technologies, with increase reliability
• Enhanced reliability & robustness among all components & systems
• Continued turbine scaling, especially low to mid wind speed sites

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Most Projections for Land-Based Wind Plant LCOE Anticipate Further Reductions

Note: Projections included here were derived from a variety of methods including learning curves, expert elicitation, and engineering-based models

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Focusing on Projects Installed from 2009-2012 (to control for resource quality) and on Capacity Factor in First Six Months of 2013 (to include 2012 installations) Shows Technology Evolution

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Specific Power < 260 = recent, lower wind-speed models such as GE 1.6 MW / 100m rotor; Siemens 2.3/108; Vestas 1.8/100; Nordex 2.4/117; Specific Power < 220 = GE 1.6/100

Note: Very small sample size exists for some of these categories

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Recent PPA Trends Suggest Further Price Reductions (and capacity factor increases)

• Xcel (SPS; 700 MW proposed to regulator):
• 5700 MW of bids < $30/MWh w/ RECs [RECs value <$2.5/MWh]
• Mammoth -- 199 MW, OK, 57.1% CF: $22/MWh energy only
• Palo Duro -- 249 MW, TX, 54.1% CF: $23/MWh energy only
• Roosevelt -- 250 MW, NM, 48.4% CF: $23/MWh energy only
• Xcel (CO, MN; 1200 MW total): $25-35/MWh

"It works out to a very good levelized cost for our customers," Xcel CEO Fowke

• said. "These prices are so compelling, the energy [cost] associated with it is

less than you can do locking in a 20-year gas strip.” Xcel expects the wind projects to save its customers about $800 million in fuel costs over 20 years.

• AEP-PSO (OK; 600 MW): 50.6% expected capacity factor
• OPPD (NE; 400 MW): 50% expected capacity factor

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Though Low Wholesale Electricity Prices Have Challenged the Relative Economics

• f Wind Power in Recent Years…

10 20 30 40 50 60 70 80 90 100 Interior 28 projects 2,969 MW Great Lakes 4 projects 219 MW Northeast 3 projects 210 MW West 7 projects 766 MW Total US 42 projects 4,163 MW Average 2012 Wholesale Power Price Range Individual Project Levelized Wind PPA Price Generation-Weighted Average Levelized Wind PPA Price Wind project sample includes projects with PPAs signed in 2011 or 2012 2012 $/MWh

Wind PPA prices are most competitive with wholesale prices in the Interior region (where PPAs signed in 2011/2012 generally ranged from $20-40/MWh)

WIND AND WATER POWER PROGRAM

Uncertainties in Future Natural Gas Prices Are Substantial, and Upwards Trajectory in Prices Is Anticipated

Source: LBNL compilation of forecasts and data from the Energy Information Administration

3 4 5 6 7 8 9 10 11 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Natural Gas Price Delivered to Electricity Generators (2012 $/MMBtu)

1998-2001 2008 2009 2010 2012 2011

2013 (Ref)

2002 2005 2006-07 2004 2003

Actual

2013 (High) 2013 (Low)

Actual versus AEO Projections

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WIND AND WATER POWER PROGRAM

Recent Wind PPAs Can Compete on a Long-Term Basis, and Many Very Recent PPAs Can Compete in Short Term; PTC Plays a Key Role in this Competitiveness

Note: Wind is modeled as “fuel saver” – i.e., assumed to offset only fuel costs of gas generation (no credit for capacity value, etc.)

*Fuel cost projections are translated from $/MMBtu into $/MWh terms using average heat rates implied in the NEMS modeling output

20 40 60 80 100 120 140 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 Nominal $/MWh Range of recent EIA gas scenarios* AEO11 reference gas AEO12 reference gas AEO13 reference gas Historical gas Wind PPA sample Wind PPA sample (no PTC) +$23/MWh if no PTC

Wind PPA sample includes only those signed in 2011 or 2012: 38 PPAs totaling 3,876 MW

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Many current PPAs in Interior

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Conclusions

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Current Low Prices for Wind Energy Can Compete with Only the Operating Cost of Natural Gas Plants in Some Areas, and May Support Higher Growth in the Future, but Other Pricing Headwinds Include…

• Lack of clarity about fate of federal tax incentives
• Continued low natural gas and wholesale electricity prices
• Growing competition from solar in some regions

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Regional Definitions Based on Combination

• f Geography and Wind Resource

Interior Great Lakes West Southeast Northeast