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Estimating the Cost of Generating Electricity

As shown in the table below, we have estimated the cost of generating electricity and the potential generating capacity from renewable sources available in the Pacific Northwest. The cost estimates are for wholesale power in dollars per megawatt-hour. These are levelized life-cycle costs in 2009 dollars. Retail power costs would be higher. The cost estimates are for base-case assumptions. Actual project costs could be higher or lower. Estimates of generating potential are in average megawatts. The Northwest Power and Conservation Council supplied data for the cost and generating potential estimates. 
   
To better understand how these estimates are calculated, we refer to the NWPCC process as follows:

  1. The annual costs of project development, operation and decommissioning were calculated for each year over the economic life of the project.
  2. The resulting series of annual cash flows were discounted by a discount rate, and then summed to a net present value.
  3. The present value was converted into a uniform series of annual cash flows using the same discount rate.
  4. The uniform annual cash flow was adjusted to present value dollars, then divided by the estimated annual energy production in kilowatts to yield the unit (per kilowatt-hour) levelized life-cycle cost.

Glossary of some of the terms used are explained below:

Present value

Future costs expressed in terms of their current value.

Discount rate

A rate used to convert future costs to their present value.

Base case assumptions

Costs are calculated using base-case assumptions. For example, we used financing typical of independent power producers for each calculation. This results in levelized costs that more-or-less reflect the basic costs and capabilities of the technology. Financing, however, can greatly affect the cost of energy from a given technology, and in the real world, different technologies may be developed using different types of financing. For example, rooftop photovoltaic systems might be developed using home mortgage financing, which could reduce the energy cost by 50 percent. Some projects that use renewable resources are eligible for federal or state incentives, which would reduce the cost. No incentives are included in these cost estimates. For a detailed understanding of these assumptions and the levelized cost calculation procedure, please see Appendix I of the Sixth Power Plan.

Average megawatts

An average megawatt is the energy produced by the continuous operation of one megawatt of capacity over a period of one year (8,760,000 kilowatt-hours).

NWPPC estimates

We based our estimates on the NWPCC's Sixth Power Plan, released in February 2010. These estimates will be revised in 2013 as the NWPPC prepares its Seventh Power Plan for 2014.

 

Summary of Renewable Generating Resources (Table 6-1) 

Resource
Leading
Technology
Services
Estimated
Undeveloped
Potential
Earliest Service
Capacity
Cost
($/kW-yr)
Energy Cost($/Wh)
Key
Issues
Renewable Resources
Hydropower
New projects
Firm capacity
Energy
Low hundreds of
MWa?
2016
--
$60 and up
Siting constraints
Development cost and lead time
Upgrades to existing projects
Firm capacity
Energy
Balancing
Low hundreds of
MWa?
Project- specific
Project-specific
Project-specific
 
Wastewater
Treatment
gas
Reciprocating
engines
Firm capacity
Energy
7-14 MWa
2012
--
$104
Cost (smaller treatment
plants)
Landfill
gas
Reciprocating engine
Firm capacity
Energy
70 MWa
2012
--
$73
Competing uses of biogas
Animal manure
Reciprocating
engine
Firm capacity
Energy
50-110 MWa
2012
--
$80-$140
Cost
Competing uses of biogas
Woody residues
Steam-electric
Firm capacity
Energy
Cogeneration
665 MWa
2014
--
$88-$125
Cost
CHP revenue
Reliable fuel supply
Geothermal
Binary hydrothermal
Firm capacity
Energy
370 MWa
2017
--
$81
Investment risk
(Exploration and well field confirmation)
Enhanced
geothermal
Firm capacity
Energy
Thousands of
MWa?
Uncertain
--
N/A
Immature technology
Tidal
current
Water current turbines
Energy
Low hundreds of
MWa?
Uncertain
--
N/A
Immature technology
Environmental impacts
Competing uses of sites
Wave
Various buoy and
overtopping devices
Energy
Low thousands of
MWa?
Uncertain
--
N/A
Immature technology
Competing uses of seaspace
Offshore
Wind
Floating WTG
Energy
Thousands of
MWa?
Uncertain
--
N/A
Immature technology
Competing uses of seaspace
Solar
Utility-scale
Photovoltaic
arrays
Energy
Abundant
2013
--
$280
Cost
Poor load/resource coincidence
Availability and cost of balancing services
Solar
(Nevada)
Parabolic trough
Firm capacity
Energy
600 MWa/500kV
circuit
2015
--
OR/WA $230
ID $190
Cost
Lack of suitable PNW
resource
Availability and cost of transmission
Wind
(Local)
Wind turbine generators
Energy
OR/WA-1410
MWa
ID-215 MWa
MT-80 MWa
2013
--
OR/WA $103
ID $109
MT $89
Availability and cost of balancing services
Wind
(Alberta)
 
Energy
760 MWa/+/-500kV
DC Ckt
2015
--
OR/WA $140
Availability and cost of
balancing services Availability and cost of transmission
Wind
(Montana)
 
Energy
570 MWa/new
500kV Ckt
Via CTS Upgrade
2015
--
ID $116
OR/WA $150
OR/WA $130
Availability and cost of
balancing services Availability and cost of transmission
Wind
(Wyoming)
 
Energy
570 MWa/500kV Ckt
2015
--
ID $121
OR/WA $150
Availability and cost of balancing services
Availability and cost of transmission