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 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 cost-effective.

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.