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:
- The annual costs of project development, operation and decommissioning were calculated for each year over the economic life of the project.
- The resulting series of annual cash flows were discounted by a discount rate, and then summed to a net present value.
- The present value was converted into a uniform series of annual cash flows using the same discount rate.
- 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:
Future costs expressed in terms of their current value.
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.
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).
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)