Avoided Costs of Generation
Current Avoided Cost Calculator
Calculates the long-run, all-in cost of a
Combined Cycle Gas Turbine (CCGT)
running 92% of the year.
• All-in cost is total fuel, O&M, and levelized capital
costs of a new generator.
• All-in cost is then shaped into hourly profile from
the CA PX day-ahead market price
• Capacity values included in the hourly market
price.
Proposed Update
• Calculator updated to use new calculator
currently used for Distributed Generation and
Demand Response
• Transmission & Distribution avoided costs
unchanged but input values updated to reflect
more recent utility filings.
• Gas and electricity price inputs updated.
• Discount rate changed from after-tax Weighted
Average Cost of Capital to before-tax WACC.
Avoided Costs of Electricity Generation
has six component avoided costs
1.
2.
3.
4.
5.
6.
Generation capacity
Generation energy
Ancillary services
T&D capacity
Environmental (GHG) costs
33% Renewables (RPS) costs
Avoided Costs of Generation Capacity
• Prior to 2017, interpolated from the resource adequacy
value of $28.07/kW-yr in 2008 – the actual cost of
capacity.
• 2017 and beyond, equal to fixed costs of a new CT less
the net revenues that the CT would attain from selling to
the real-time energy and ancillary service markets.
• 2017 is the Resource Balance Year – when system
demand will equal system capacity.
• Allocated over the top 259 hours of the system load to
roughly reflect peak hours.
• Generally results in more avoided capacity costs than
current model, so that peakier measures are more costeffective.
Avoided Cost of Energy
• Prior to resource balance year, the average
energy cost is based on latest NYMEX market
price forecast available.
• The long-run energy market price is used for
resource balance and subsequent years. It
begins with the 2010 MRTU day-ahead market
price escalated to the natural gas burner tip
forecast.
• Annual long-run energy market price is set so
that the CCGT’s energy market revenue plus the
capacity market payments equal the fixed and
variable costs of the CCGT
Avoided Cost of T&D Capacity
• Potential deferral of T&D network
upgrades from reduction in local peak
loads
• Updated by climate zone for PG&E, from
its 2011 GRC Phase II, Jan. 7, 2011.
• Updated at system level for SCE and
SDG&E.
Avoided GHG costs
• Estimates of avoided CO2 emissions of
energy saved.
• Uses the Synapse Consulting forecast
• No longer uses an adder like the current
methodology
• Note: took out NOX and PM-10 because
those are now captured in the capital costs
of the new plants used to set the long-run
cost of energy and capacity.
Avoided RPS costs
• Energy savings result in a decrease in the
33% renewables requirement, which
results in additional savings.
• Based on the Renewable Premium, which
is the difference between the cost of a
typical group of renewables and the cost
of conventional (CCGT) generation.