Overview of Energy-Overview of Energy-Environment ModelingEnvironment Modeling

MS&E 290: Public Policy MS&E 290: Public Policy AnalysisAnalysis

February 22, 2005February 22, 2005

AgendaAgenda

Energy System DiagramsEnergy System Diagrams Process Engineering and Levelized CostsProcess Engineering and Levelized Costs Resource Supply and Fuel DemandsResource Supply and Fuel Demands Equilibrium and WelfareEquilibrium and Welfare Economy-Wide FeedbacksEconomy-Wide Feedbacks

ResourceExtraction

Refiningand

ConversionTransport Generation

Transmissionand

Distribution

UtilizingDevice End Use

Example Energy System DiagramExample Energy System Diagram

Solid

Gas

Liquid

Misc. Electric-BuildingMisc. Electric - IndustrialOffice EquipmentAir ConditioningWater HeatSpace Heat

Electric

Process HeatPetrochemicalsPassenger TravelOther Transport

Renewables

Nuclear

Coal

Natural Gas

Crude Oil

Pipeline

Pipeline DG

DG

DGlHydrogen

Ethanol

Generic Types ofGeneric Types of Energy/Environment Policy Models Energy/Environment Policy Models

Process EngineeringProcess Engineering Individual Technologies RepresentedIndividual Technologies Represented Need to Add in Market and Economy Wide EffectsNeed to Add in Market and Economy Wide Effects

Energy Market ModelsEnergy Market Models Bring in Energy Market FeedbacksBring in Energy Market Feedbacks Weaker on Technology & EconomyWeaker on Technology & Economy

General Equilibrium ModelsGeneral Equilibrium Models Bring in Economy-Wide FeedbacksBring in Economy-Wide Feedbacks Weaker on Energy Markets and TechnologyWeaker on Energy Markets and Technology

Process Engineering Example:Process Engineering Example:Choice of Electric Power PlantsChoice of Electric Power Plants

Process Analysis: Basic Cost Process Analysis: Basic Cost DataData

Capital Capital CostCost

Fixed Fixed O&M O&M CostCost

Variable Variable O&M O&M CostCost

FuelFuel

TechnologyTechnology ($/kW)($/kW) ($/kW)($/kW) ($/($/kWhr)kWhr)

($/($/Mbtu)Mbtu)

NuclearNuclear 19251925 60.8460.84 .00045.00045 0.430.43CoalCoal 11221122 25.5125.51 .00319.00319 1.271.27Gas CCGas CC 586586 10.6310.63 .00212.00212 3.43.4Gas CTGas CT 457457 8.58.5 .00319.00319 3.43.4Solar PVSolar PV 35263526 10.4710.47 00 00Solar Solar ThermalThermal

22932293 50.8850.88 00 00

WindWind 976976 27.1527.15 00 00

Process Analysis: Basic Performance Process Analysis: Basic Performance DataData

Years to Years to ConstrucConstructt

Plant Plant Size Size

Ave.Ave.

CapacitCapacityy

FactorFactor

Heat RateHeat Rate

TechnologyTechnology (Years)(Years) (MW)(MW) (%)(%) (Mbtu/(Mbtu/KWhr)KWhr)

NuclearNuclear 55 600600 9090 1040010400CoalCoal 44 400400 8585 90009000Gas CCGas CC 33 400400 8585 70007000Gas CTGas CT 22 120120 3030 93949394Solar PVSolar PV 22 55 2525 1028010280Solar Solar ThermalThermal

33 100100 2525 1028010280

WindWind 33 5050 2929 1028010280

Levelized Cost = I*CRF + O&M + FQ Q Q

Where: I = Capital investment, including financing.CRF = Capital Recovery FactorO&M = Fixed and variable O&M F = Fuel cost Q = Annual plant output (kWhr)

CRF = rn(1 + r)n

(1+r)n – 1

r = real discount rate (like interest rate)n = plant life

Levelized Generation Cost Methodology

Levelized Cost Comparison for Electric Power Generation

0

0.05

0.1

0.15

0.2

0.25

Nuclear Coal Gas CC Gas CT Solar PV SolarThermal

Wind

Generation Technology

Do

llars

per

kilo

Wa

tt H

ou

r (i

n 2

003

Do

llars

)

Fuel

Variable O&M

Fixed O&M Charges

Capital Charges

Levelized Cost Comparison for Electric Power GenerationWith $100 per Ton Tax on Carbon

0

0.05

0.1

0.15

0.2

0.25

Nuclear Coal Gas CC Gas CT Solar PV SolarThermal

Wind

Generation Technology

Do

llars

per

kilo

Wa

tt h

ou

r (i

n 2

003

US

Do

llars

)

Carbon Tax

Fuel

Variable O&M

Fixed O&M Charges

Capital Charges

ResourceExtraction

Refiningand

ConversionTransport Generation

Transmissionand

Distribution

UtilizingDevice End Use

Example Energy System DiagramExample Energy System Diagram

Solid

Gas

Liquid

Misc. Electric-BuildingMisc. Electric - IndustrialOffice EquipmentAir ConditioningWater HeatSpace Heat

Electric

Process HeatPetrochemicalsPassenger TravelOther Transport

Renewables

Nuclear

Coal

Natural Gas

Crude Oil

Pipeline

Pipeline DG

DG

DGlHydrogen

Ethanol

X X

X X

X X X

CostPe

S

Cumulative Supply SuQe

Resource Supply CurvesResource Supply Curves

Demands for Energy FuelsDemands for Energy Fuels

X X

X X

X X

X X

D

Cost

Demand or Qc

Demand for Oil

Price

Quantity

Demand or Willingness to Pay

Gain in Consumers’ Surplus From Price Drop

Supply of Oil

Price

Quantity

Supply or Cost of Resource Extraction

Producers’ Surplus Loss From Price Drop

Supply/Demand EquilibriumIn Oil Market

Price

Quantity

Demand or Willingness to Pay

Supply or Cost of Resource Extraction

Supply/Demand Equilibrium Maximizes Consumers’ Plus Producers’ Surplus

Assessing Economy Wide Feedbacks:Assessing Economy Wide Feedbacks:Using Economy-Wide Production Using Economy-Wide Production

FunctionsFunctions

Output

Energy Primary Factors

Labor Capital

ElectricityFossil Fuels

IntermediateGoods

FuelGoods

CarbonRights

Y = F(K,L,E,M)

Some Additional Issues In Some Additional Issues In Energy-Environmental Energy-Environmental

ModelingModeling Technology DevelopmentTechnology Development

EndogenousEndogenous Policy DrivenPolicy Driven

International TradeInternational Trade International SecurityInternational Security