CHP in the E3 GHG Model Proposed Changes for Stage 2

April 1, 2008

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Process Notes

Presentation describes the E3 proposed approach for including CHP in Stage 2

Hoping for consensus on reference case cost, performance, and penetration inputs

Sensitivity analysis can be done by users and inputs can be changed to evaluate alternative cases

All parties will have the opportunity to comment

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Agenda CHP in E3 Stage 1 Model

Key CHP issues CHP regulatory status under AB32

Data availability

Thermal/electric split

On-site/grid export split

E3 Proposed Stage 2 model changes Existing CHP

Adding new CHP

Reference case cost & performance assumptions

EPUC/CAC proposed assumptions

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CHP in Stage 1 Model

Stage 1 model contains the CHP units that are in the WECC databases

Stage 1 model does not specify CHP generation as a separate category

Stage 1 model does not have a way to add new CHP generation

Parties requested E3 to add CHP as separate category

E3 requested help from parties in identifying CHP units in the WECC databases

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CHP Regulatory Status under AB32

CARB’s GHG inventory treats CHP as a separate category from non-CHP generation

However, CARB considers part of CHP emissions to be included in CA’s “electricity sector” - i.e. all those that are not associated with “useful thermal output”

Currently, CARB considers emissions associated with “useful thermal output” to be point source emissions, not electricity sector emissions, so separately regulated

CARB reviewing approach to CHP regulation and reporting - status could change

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Data Availability

Major data shortcomings for CA CHP No single source that has capacity, generation, and

emissions for all CA CHP

Different capacity size cutoffs for different databases

Little reliable data for small (<1 MW) CHP

WECC databases don’t identify CHP units

Difficult to match EIA Form 920 list to WECC names

Unclear if WECC CHP heat rates are net or gross

E3 model makes assumptions about existing CHP based on best available data

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Thermal/Electric Split

Emissions for thermal and electric regulated separately under current scheme

CARB inventory split based on EIA Form 920 (generation & fuel use) and predecessor data

EIA methodology changed ca. 2003, changing the split significantly CARB emissions % electric 1990-2003: 63%

CARB emissions % electric 2004: 78%

What is a reasonable thermal / electric split?

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On-Site/Grid Export Split

EIA and CARB do not distinguish on-site (i.e. behind the meter) from grid export generation

CEC estimates on-site non-PV generation in load forecast, data reliability and overlap with EIA/CARB data uncertain

Plexos does not model on-site generation

What is reasonable assumption for on-site/grid export split for existing CHP fleet?

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Proposed Changes in Stage 2 Model

Add CHP as new generation option

Account for CHP generation and emissions separately from non-CHP generation

Provide user controls for cost, performance, and penetration assumptions for user cases

Provide user controls for thermal/electric and on-site/on-grid splits for user cases

Separate treatment of existing and new CHP

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Existing CHP in Stage 2 Model On-site CHP: generation already embedded in load

forecast so no adjustment is necessary

On-grid CHP: many CHP units are not identified in WECC database, so CHP fleet generation is underestimated in the Plexos model

This is corrected by adjusting CHP fleet generation and emissions to hit expected values based on historical data Existing CHP generation and emissions in Plexos summarized,

then adjusted in E3 calculator to expected value

Non-CHP generation decremented by the same amount in E3 calculator

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CHP Data for 2003 & 20042004 2003 Source

CHP generation GWh

43,282 44,900 EIA Form 906/920

CHP electric fuel MMBtu

421,705 (78%)

335,959 (63%)

EIA Form 906/920

CHP thermal fuel MMBtu

121,074 191,390 EIA Form 906/920

CHP total emission MMT

30.09 29.67 CARB Inventory

CHP electric emissions MMT

23.55 (78%)

18.71 (63%)

CARB Inventory

CHP thermal emissions MMT

6.54 10.96 CARB Inventory

Non-PV self-generation GWh

11,288 12,473 CEC Load Forecast

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CA CHP Capacity by Unit Size

Source: EEA database, 2006 data

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Existing CHP Expected Values Units < 5 MW (380 MW, 30% c.f.) generation estimated

at 1000 GWh, assumed all on-site

CEC self-gen ~ 11,000 GWh, so ~ 10,000 GWh from units > 5 MW and 1,000 GWh from units < 5 MW

10-year average EIA total CHP generation and CARB emissions show no trend, so can use for expected CHP generation: 44,000 GWh

emissions: 30 MMT

electric share of generation and emissions: 63%

Use CHP net heat rate implied in EIA data to be consistent with CARB’s present methodology; however, calculator will track thermal fuel use efficiency proposed by CAC/EPUC

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Existing CHP Expected Values

Expected CHP* Split

CHP Generation GWh 44,000On-site GWh 11,000 25%

> 5 MW 10,000< 5 MW 1,000

On-grid GWh 33,000 75%> 5 MW 33,000< 5 MW 0

Total CHP Emissions MMT 30.0Electric Emissions MMT 18.9 63%

On-site MMT 4.7On-grid MMT 14.2

Thermal Emissions MMT 11.1 37%

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Formulation of Existing CHP Adjustment

Expected CHP*

PLEXOS CHP

PLEXOS Non-CHP Adjustment

E3 Calculator

CHP

E3 Calculator Non-CHP

Generation GWh 44,000On-site GWh 11,000On-grid GWh 33,000

Total CHP Emissions MMT 30.0Electric Emissions MMT 18.9

On-site MMT 4.7On-grid MMT 14.2

Thermal Emissions MMT 11.1

*Based on 10-year average (1995-2004) of EIA generation and CARB emissions, rounded.

Col A Col B Col C Col D =A-B

Col E= B+D= A

Col F= C-D

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New CHP in Stage 2 Model

Two categories of new CHP > 5 MW nameplate = “Large” CHP (cogen)

< 5 MW nameplate = “Small” CHP (self-gen)

Division at 5 MW based on SGIP criteria

Characteristics of large CHP represented by 40 MW gas turbine

Characteristics of small CHP represented by 3 MW gas reciprocating engine

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E3 Proposed2020 BAU Reference Case AssumptionsBusiness as Usual Forecast of New CHP 2008 - 2020

<5MW CHP >5MW CHP Source

Nameplate Capacity (MW) 175 0 Derived based on 100% on peak contribution

Peak load reduction (MW) 175 0 CEC Forecast '08-'18 Forecast, Form 1.4, pg 42

Behind the meter usage (GWh) 1035 0 CEC Forecast '08-'18 Forecast, Form 1.2, pg 40

Exported to Grid (GWh) 0 0Capacity Factor 67.5% 0 Calculated from CEC Forecast

% Electricity Consumed On-site 100% 0MMBtu Fuel (thermal and electric) 9,059,648 0 Calculated from Gross Heat Rate

Total CHP Emissions (thermal and electric) MMt 0.48 0MMBtu Fuel Thermal 3,301,854 0 Assumed Thermal Use of Fuel

MMBtu Fuel Electric 5,757,795 0 Assumed Electric Use of Fuel

Electric CO2 emissions, lbs/MWh 651 0 Calculated

Electric CO2 emissions, MMt 0.31 0 Calculated

Electric CO2 emissions, off-grid MMt 0.31 0 Calculated

Electric CO2 emissions, on-grid MMt - 0 Calculated

Avoided Thermal Consumption, MMBtu 4,127,317 0Avoided Thermal emissions, MMt 0.22 0Net Emissions = Total - Avoided Thermal MMt 0.26 0Net Electric CO2 emissions w/ Thermal Credit lbs/MWh 557 0

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E3 Proposed2020 Aggressive Ref Case Assumptions

Aggressive Policy Case Forecast of CHP 2008 - 2020<5MW CHP >5MW CHP Source

Nameplate Capacity (MW) 1,574 394 CEC 2005 Potential Study; Base Case

Peak load reduction (MW) 1,574 394 Derived assuming 100% on peak contribution

Behind the meter usage (GWh) 9,307 733 Calculated using percent of use on-site

Exported to Grid (GWh) - 2,200 Calculated using percent of use on-site

Capacity Factor 67.5% 85% See below

% Electricity Consumed On-site 100% 25% See below

MMBtu Fuel (thermal and electric) 81,433,910 26,007,463 Calculated from Gross Heat Rate

Total CHP Emissions (thermal and electric) MMt 4.32 1.38 Calculated

MMBtu thermal 29,679,170 8,856,913 Assumed Thermal Use of Fuel

MMBtu electric 51,754,740 17,150,551 Assumed Electric Use of Fuel

CO2 emissions, lbs/MWh 651 684 Calculated

Electric CO2 emissions, MMt 2.75 0.91 Calculated

Electric CO2 emissions, off-grid MMt 2.75 0.23 Calculated

Electric CO2 emissions, on-grid MMt - 0.68 Calculated

Avoided Thermal Consumption, MMBtu 37,098,963 11,071,141 Avoided Thermal emissions, MMt 1.97 0.59 Net Emissions = Total - Avoided Thermal MMt 2.35 0.79 Net Electric CO2 emissions w/ Thermal Credit lbs/MWh 557 596

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E3 ProposedNew CHP Cost and Performance Assumptions

Cost and Emissions Assumptions for CHP<5MW CHP >5MW CHP

Assumed Technology 3MW Gas Recip40MW Gas Turbine w/ CHPSource

Installed Cost $/kW 925$ 680$ CEC 2005 Potential Study

Emissions Control (AT) Cost $/kW 175$ 75$ CEC 2005 Potential Study

Total Installed Cost $/kW 1,100$ 755$ Calculated

Total Installed Cost $2008/kW 1,753$ 1,203$ Consistent Inflation Assumption

Gross Heat Rate, Btu/kWh 8,750 8,865 CEC 2005 Potential Study

Net Electric Heat Rate, Btu/kWh 5,561 5,846 CEC 2005 Potential Study

Thermal Output, Btu/kWh 3,198 3,019 CEC 2005 Potential Study

Assumptions <5MW CHP >5MW CHP Source

Peak load reduction 100% 100% Assumption

Capacity Factor 67% 85% <5MW CEC '08-'18 forecast; >5MW Assumption

% Electric used on-site 100% 25% Assumption based on CEC Load Forecast and EIA

Fuel for Electricity 64% 66% <5MW CEC Forecast; >5MW 2003 EIA

Fuel for Thermal 36% 34% Calculated

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EPUC/CAC New CHP Data2008 2020 2008 2020

Mo d e l C HP P la n t sSiz e MW e le c 2.409 2.409 49.116 49.116Ty p eCo st o f Pr im e Mo v e r & A u x iliar ie s $ 1,200,000 1,200,000 27,300,000 26,500,000 Co st o f He at Re c o v e r y $ 500,000 500,000 14,500,000 14,000,000 In st allati o n Co st $ 500,000 500,000 6,200,000 6,200,000 To t al Co st $ 2,200,000 2,200,000 48,000,000 46,700,000 To t al In st alle d Co st $/k W 913 913 977 951O&M Co st $/k Wh 0.0120 0.0010 0.0083 0.0080 Ho u r s o f Fu ll Lo ad Op e r ati o n h r s 6500 6500 8000 8000Cap ac it y Fac t o r % 74% 74% 91% 91%Ele c t r ic Effi c ie n c y (LHV) % 43.08% 43.96% 40.11% 41.76%Th e r m al Effi c ie n c y (LHV) % 39.34% 40.66% 40.75% 42.31%To t al Effi c ie n c y (LHV) % 82.42% 84.62% 80.86% 84.07%Fu e l Co n su m p ti o n MW 5.592 5.480 122.454 117.620Ov e r all He at Rat e Bt u /k Wh 7923 7765 8509 8173Th e r m al Ou t p u t MW 2.200 2.228 49.896 49.762Use f u l A n n u al Th e r m al Ou t p u t MMBt u 48806 49427 1362360 1358702A n n u al Ne t Po w e r Ou t p u t MMBt u 53442 53442 1341063 1341063A n n u al CO2 Em issio n s MTCO2 7300 7154 196734 188968

S p lit o f t h e C O2 b e t w e e n t h e r m a l a n d e le c t r icDisp lac e d B o ile r Fu e l Co n su m p ti o n * Bt u /k Wh 3882 3882 3882 3882He at Rat e A sso c iat e d w it h E le c t r ic Pr o d u c ti o n Bt u /k Wh 4041 3883 4627 4291Ele c t r ic CO2 Em issio n s/MWh lb 523 503 599 556Th e r m al CO2 Em issio n s/MWh lb 503 503 503 503Em issio n s f r o m E le c t r ic it y Pr o d u c ti o n MTCO2 3723 3577 106981 99215Em issio n s f r o m Th e r m al Ou t p u t MTCO2 3577 3577 89753 89753

Gas En g in e , HEX Gas Tu r b in e , WHB

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EPUC/CAC Existing CHP DataData Sources For Calculations: Year 2003 EIA-906 and EIA-860 And SCE 2003 QF Efficiency Monitoring Data*

Allocated Electric

Fuel Consumption (MMBtu) Net Electric Generation

Heat Rate

CA Statewide EIA Data for 2003 Total Electric Thermal MWh (Btu/kWh) Natural Gas/Refinery Gas/Refinery Related 410,763,392 259,454,952 151,308,440 37,502,430 6,918 2003 CA Statewide Fuel Consumption Ratios: Total To MWh Electric To MWh Thermal To MWh Natural Gas/Refinery Gas/Refinery Related 10.9530 6.9184 4.0346 Allocated Electric

Fuel Consumption (MMBtu) Net Electric Generation

Heat Rate

SCE QF Monitoring Data for 2003 Total Electric Thermal MWh Percent (Btu/kWh) Oil & Gas Industry Related (Large Projects) 144,301,419 68,527,699 75,773,720 11,847,453 77.2% 5,784 Small Projects High Efficiency (<50 MWa) 965,748 338,923 626,824 61,921 0.4% 5,474 Small Projects Low Efficiency (<50 MWa) 36,459,726 28,562,346 7,897,381 3,442,076 22.4% 8,298 Total Natural Gas/Refinery Gas/Refinery Related 181,726,893 97,428,968 84,297,925 15,351,450 100.0% 6,347 2003 SCE Data Fuel Consumption Ratios: Total To MWh Electric To MWh Thermal To MWh Total Natural Gas/Refinery Gas/Refinery Related 11.8378 6.3466 5.4912 Range of Fuel to MWh Ratios for SCE Data 10.5923 to 15.5965 5.4735 to 8.2978 2.2944 to 10.1230

Thank YouAny Questions?