1. Capacity Valuation

2. + + − − + = Summary RPS Calculator Valuation Framework
A primary component in the Net Market Value (NMV) calculation used to rank competing resources
Reflects the value associated with a resource’s ability to avoid conventional capacity
Version 6.0 now utilizes ELCC values versus fixed NQC values in Version +
Levelized Cost of Energy +
Transmission Cost −
Capacity Value −
Energy Value +
Integration Cost* =
Net Resource Cost
*Not currently quantified in RPS Calculator

3. Major Updates to RPS Calculator
Methodology used to value output of renewable generation captures declining returns to scale, allowing for better analysis of high penetrations
Version
Capacity value attributed to renewable resources based on static assumptions
Avoided cost of capacity valued at cost of new entry
Value based only on snapshot in 2020
Version 6.0
Capacity value evaluated endogenously in each year based on other renewable resources in portfolio
Avoided cost of capacity calculated based on load-resource balance
Value streams calculated based on lifecycle impact to ratepayers

4. Goals for New Methodology
Model Functionality
Versions 2-5
Version 6
Differentiate capacity value between renewable resources 
Dynamic methodology that captures renewable portfolio effects and declining capacity value with resource saturation 
Avoided cost of capacity accounts for CAISO reserve margin relative to load-resource balance

5. Avoided Cost of Capacity
Capacity Value
Capacity value reflects the value associated with a renewable resource’s ability to avoid conventional generation capacity, and it is calculated as:
RPS Calculator measures capacity value at various renewable penetrations and mixes by:
Quantifying each renewable resource’s capacity credit using the Effective Load Carrying Capability (ELCC) method
Varying the avoided cost of capacity depending on system-wide reserve margin
Capacity Value
($/kW-yr)
Capacity Credit
(% of nameplate capacity)
Avoided Cost of Capacity
($/kW-yr)

6. Old Methodology Based on NQC
Capacity value reflects avoided conventional generation investments afforded by renewable build
Common practice is to measure the contribution of variable renewables towards reliability based on output during peak load conditions
Original method: Net Qualifying Capacity (NQC) calculated using 70% excedence methodology
Calculated as 70th percentile of generation between HE14 and HE18 (Apr-Oct)
Differentiated between technologies
Did not account for changes to the net peak that occur with continued renewable build
Guiding Principle:
Resources that are more peak-coincident have more capacity value

7. New Methodology Based on ELCC
While the first increment of solar PV has a relatively large impact on peak, it also shifts the “net peak” to a later hour in the in day
This shift reduces the coincidence of the solar profile and the net peak such that additional solar resources have a smaller impact on the net peak

8. Changing Value of Capacity
The marginal ELCC of one renewable resource technology declines as its penetration increases
This is most apparent for solar PV, which has a high capacity credit at low penetrations, but this rapidly decreases as additional capacity is added
A renewable portfolio that contains a diverse set of technologies can mitigate the decline in ELCC

9. Effective Load Carrying Capability (ELCC)
Pursuant to legislation, Resource Adequacy has adopted “Effective Load Carrying Capability” to determine the contribution of variable renewables towards the system’s reserve margin
By definition, ELCC depends on the composition of the system (both conventional and renewable resources)
ELCC is now incorporated in Version 6.0 as a lookup function in an ELCC “surface” or matrix
ELCC of incremental resources updates each year as the composition of the system changes
In the RPS Calculator, the surface contains nearly 10,000 ELCC values—each associated with a different portfolio of renewable resources
Interpolation between points on the surface is used to determine marginal ELCC values for resource screening
ELCC is the additional firm load that can be met by an incremental generator while maintaining the same level of system reliability

10. Development of the ELCC Function
E3 used a stochastic LOLP methodology to calculate the ELCC of a wide range of possible renewable portfolios
Example portfolios:
RPS Calculator can access up to 9,750 of these portfolios to best characterize the ELCC of a portfolio and the marginal ELCC of potential additions
Portfolio
CSP
(No Storage)
(w/ Storage)
Solar PV
(Distributed)
(Utility-scale)
Wind
(Coastal)
(Inland)
ELCC of Portfolio
(% of Peak) 1
1.50%
12.00%
9.00%
2.50%
0.00%
16.11% 2
3.00%
7.50%
18.29% 3
10.50%
10.00%
22.52% 4
6.00%
21.08%

11. ELCC Calculation Approach
ELCC values used in RPS Calculator were developed by E3 using the Renewable Energy Capacity Planning (RECAP) model
Uses industry-standard approach to evaluate loss of load probability:
Calculate hourly net load distributions (based on load, wind, solar shapes)
Calculate capacity outage probability table (based on generator forced outage assumptions)
Calculate probability that supply < net load in each time period
Method is expected to yield similar results to methodology under development in the RA proceeding
Values will be benchmarked against calculations used in the RA proceeding when available
RECAP Model:

12. ELCC Function Interpolation
To approximate the ELCC of points not sampled by the LOLP simulations, the RPS Calculator uses linear interpolation
Example: Utility-scale solar in absence of other renewable resources
ELCC function represents ELCC of whole renewable portfolio
Marginal ELCC (ELCC of incremental resources in year of build) is approximated by the slope of the curve

13. ELCC Function Interpolation
To approximate the ELCC of points not sampled by the LOLP simulations, the RPS Calculator uses linear interpolation
Example: Utility-scale solar in absence of other renewable resources
In year of interest:
Renewable portfolio online
Marginal ELCC of solar
1MWh of additional solar
Existing renewable portfolio in year of interest
ELCC from LOLP model

14. Renewable Portfolio ELCC
ELCC Surface
Because the ELCC of each incremental resource depends on the whole portfolio of renewable resources, the ELCC function is actually a multidimensional surface
Wind/solar slice of surface:
One dimension for each renewable resource type
Marginal ELCC for each resource is approximated by slope of surface in each direction
Linear interpolation in multiple dimensions involves placing each portfolio on to a facet of this surface
Renewable Portfolio ELCC
Wind Penetration
Solar Penetration

15. ELCC Surface
Because the ELCC of each incremental resource depends on the whole portfolio of renewable resources, the ELCC function is actually a multidimensional surface
Wind/solar slice of surface:
For any portfolio on this facet:
Marginal ELCC of wind
Renewable Portfolio ELCC
1MWh of additional wind
Wind Penetration
Marginal ELCC
of solar
1MWh of additional solar
Solar Penetration

16. Capacity Value Calculation
The other component of a resource’s capacity value is the avoided cost of capacity from an alternative source
Avoided capacity cost is driven by the need for capacity
When the system is short, capacity avoided cost approaches the all-in net cost of a new CT
When the system is long, capacity avoided cost is represented by today’s average RA contract price
RPS Calculator includes Load-Resource Balance for CAISO to determine the timing of this transition
Assumptions from LTPP used where possible
New CT net cost
Based on recent average RA contract prices

17. Determining Avoided Capacity Costs
Year-by-year avoided cost evaluated based load-resource balance using assumptions provided by LTPP
Load forecast, demand-side resources, conventional generator additions & retirements
Avoided cost transitions from short-run to long-run avoided cost when load-resource balance is reached
Transition from short-run to long-run avoided cost

18. RPS Calculator Guide
The parameters that affect Capacity Value can be found on the following tabs:
Generators: list of non-renewable generators in the CAISO and/or contracted to CAISO loads
Includes NQC assumptions for each conventional plant
Aligned with LTPP
ELCC_Table: ELCC lookup table for a range of RPS portfolios
ELCC_Interp: calculation of marginal ELCCs for each technology based on current portfolio of renewable resources
System_Capacity: evaluation of CAISO system load-resource balance (and the corresponding value of capacity)
Valuation: calculation of capacity value ($/MWh) used in resource screening and selection process