Interim Report On Renewables and Unconventional Energy in Hawaii. Prepared by Warren Bollmeier with Tom Loudat and Prahlad Kasturi

Transcription

1 Interim Report On Renewables and Unconventional Energy in Hawaii Prepared by Warren Bollmeier with Tom Loudat and Prahlad Kasturi for the Hawaii Energy Policy Project University of Hawai i at Manoa November 2003

2 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft PREFACE This revised Interim Report is to document the results of the Study of Renewables and Unconventional Energy in Hawaii, conducted by WSB-Hawaii, in collaboration with Tom Loudat and Associates, for the University of Hawaii Social Science Research Institute in support of the Hawaii Energy Policy Forum (HEPF). The work was performed under The Research Corporation of Hawaii (RCUH) Purchase Order No. Z Note: WSB-Hawaii, as Contractor to RCUH, reserves the rights to certain proprietary information, including data and analytical procedures developed to complete this study, some of which predated this study. Interim Report i November 19, 2003

3 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Section TABLE OF CONTENTS Page No. Table of Contents i 1.0 Introduction Background Objectives and Key Outputs of this Study Approach Starting Point for the Study Overall Approach Candidate Project Screening Process Project Phasing Strategy Evaluation of Public Policy Options Context of this Study Presentation and Discussion of Results Introduction of Technologies Reviewed Description of Technologies Studied Generic Observations Presentation and Discussion of the Results Screening the Candidate Projects and Commercial Activities Preliminary Near-Term Analysis of Selected Projects An Assessment of the Business as Usual Scenario Preliminary Phasing Strategy Near-Term (2003 to 2008) Mid-Term (2008 to 2018) Far-Term (2018 to 2033) Evaluation of Public Policy Options Interim Report ii November 19, 2003

4 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Section TABLE OF CONTENTS (Continued) 3.0 Summary, Conclusions and Recommendations Summary of Objectives, Key Outputs and Approach Key Results and Conclusions Recommendations Appendices A B C D E F G H I Terms of Reference (Renewables and Unconventional Energy) WSB-Hawaii Task Breakdown and Detailed Discussion of Approach and Methodology Working Database: Candidate Projects Working Database: Initial Projects (Screening Process) Financial Viability of Renewable Projects in Hawaii Utility Trends: Capacity, Demand, Projected Generator Unit Additions, Planned Retirements and Avoided Costs Analysis of the Trends in the Consumer Price Index National Renewable Energy Laboratory Technology Descriptions Electricity Production and Potential Capacity by Technology, Island and Waste Component J Working Database: Future Costs Analysis - Estimates of Installed Costs and Levelized Cost of Energy K L Working Database: Phasing Strategy Analysis Economics of Transition to Heat and Electricity Through Non- Conventional and Renewable Fuels Interim Report iii November 19, 2003

5 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 1.0 Introduction The purpose of this report is to document the results of the Study of Renewables and Unconventional Energy in Hawaii, conducted by WSB-Hawaii in collaboration with Tom Loudat and Associates for the University of Hawaii at Manoa s Social Science Research Institute in support of the Hawaii Energy Policy Forum (the Forum). The work was performed under The Research Corporation of Hawaii (RCUH) Purchase Order No. Z Background The Social Science Research Institute established the Hawaii Energy Policy Project (HEPP) to coordinate the Forum s activities. The HEPP has brought stakeholders together to envision a preferred energy future for Hawaii. Representatives of the major stakeholders (electric utilities, the renewable energy industry, fuel suppliers, environmentalists, federal, state and county agencies, the business community and others) are now participating in the process as members of the Forum. The Forum has the following vision for energy in Hawaii in the year 2030: We will have environmentally friendly, renewable, safe, reliable, and affordable energy resources. Our energy technology and systems will be efficient, with the best available emission controls; decentralized; meet consumers needs; and maximize the use of Hawai i s energy assets. Hawai i will encourage investment in energy system development and continually assess energy development options based on a full accounting of costs and benefits. 1 The Forum s approach includes assessing current information on major trends that will have potential impact on Hawaii s energy future, identifying technical and policy issues that require further study, and commissioning issue and policy papers. The papers include: 1 #1. Hydrocarbons Outlook (completed), #2. Renewable and Unconventional Energy (this study), #3. Regulation, Taxation and Incentives (completed), #4. Environmental Requirements on Electric Power Producers (completed), #5. Social, Economic and Cultural Forces (underway), and #6. Reducing Hawaii s Energy Demand Through Increased Efficiency (underway). The Forum will also: plan and conduct an Energy Summit to solicit input on options for resolving the policy conflicts the project is intended to address, conduct focus groups or other activities to obtain input on major energy trends and policy issues and decisions, and develop recommendations to effect the necessary policy changes, e.g., laws and practices relating to renewable energy development and reducing the dependence on imported fossil fuels. 1 Reference: HEPP website: for this vision and other information on the HEPP. Interim Report 1 November 19, 2003

6 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 1.2 Objectives and Key Outputs of this Study The primary objectives of this study were to develop and evaluate a working database of potential wind, solar and biomass projects and other commercial activities for the generation of electricity in Hawaii over the next 30 years, and to examine possible frameworks for evaluating the resulting economics impacts. The 30-year timeframe is viewed by the Forum as a transitional period to a possible future hydrogen economy. A secondary objective was to discuss briefly other renewable, unconventional, and energy transfer technologies. The key outputs were the preparation of a strategy to phase in renewables into the electric utility grids, an evaluation of the potential for alternative public policy options to facilitate the implementation process, and a preliminary assessment of the overall economic impacts. 1.3 Approach This study was conducted by WSB-Hawaii under the direction and management of the HEPP and specifically it s Project Team, which was headed by Dr. Michael Hamnett, Director of the Social Science Research Institute. This study was based on the energy terms of reference prepared by the Project Team (See Appendix A). A summary of the approach follows; for a detailed discussion, including the WSB-Hawaii task breakdown (see Appendix B) Starting Point for the Study The Hawaii Natural Energy Institute (HNEI) Global Resource Assessment (GRA) 2, led by Mitch Ewan, was used as the starting point for identifying candidate wind, solar and biomass projects for the working database on this study. The GRA incorporates results from precursor studies conducted by Robert Lynette and Associates (RLA) on the Hawaii Energy Strategy (HES) for the Department of Business, Economic Development and Tourism (DBEDT) and by GDS in support of the Renewable Portfolio Standards (RPS) initiative also for DBEDT. The GRA includes a description of the renewable energy sources (including wind, solar, biomass, geothermal and hydro), the technologies to harvest their energy content, and economic models to calculate the hydrogen output for a given unit of renewable energy input. The hydrogen output data are then used to estimate the overall potential for producing hydrogen from renewable energy resources in Hawaii Overall Approach WSB-Hawaii assembled an initial working database of candidate projects utilizing the GRA and the precursor RLA and GDS studies. Performance and cost estimates of wind, solar and biomass projects from these studies were reviewed and updated, and new projects were added (See Appendix C for the Working Database: Candidate Projects). The candidate projects were then evaluated in the following three-step process: Project Screening Process. The candidate projects and activities were screened to determine which projects were good candidates for development. The candidate project screening process is summarized below in section Note: WSB-Hawaii also evaluated the potential for current or potential retail commercial activities, such as solar hot water and photovoltaics (PV) now and solar air conditioning in the future; 2 The GRA utilizes data and information from previous renewable energy resource studies performed for DBEDT by Robert Lynette and Associates (RLA) Consulting in 1995 and GDS Associates, Inc. in Interim Report 2 November 19, 2003

7 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Preliminary Phasing Strategy. A preliminary strategy was initially developed for phasing the projects and activities on our island grids and to meet our energy needs over the next 30 years, assuming today s economics, government policies, and utility and business practices ( business as usual scenario) as summarized in section 1.3.4; and Public Policy Options. Alternative public policy options were identified and evaluated for the potential to facilitate the phasing strategy. In conjunction with the evaluation of public policy options, a preliminary assessment was made of the potential overall economic impacts associated with a shift towards renewables. Specifically, with support from Tom Loudat and Associates, a preliminary assessment was made of several potential frameworks for conducting such an analysis of the overall economic impacts to the state. One approach was selected and a preliminary analysis was conducted for the island of Oahu. (See section 1.3.5) Candidate Project Screening Process Note: for the details on the process see Appendix B, for results see Appendix D. One of the outputs of the HNEI GRA is an estimate of the maximum amount of electricity that could be generated from Hawaii s identified resource areas and subsequently used to produce hydrogen. HNEI recognized but did not evaluate the potential impact of grid integration issues to reduce the renewable potential, as the renewables-to-hydrogen applications do not require the renewables to be interconnected with the grid. In addition, the potential impacts of land-use and other constraints (e.g., community acceptance) were recognized, but not evaluated. However, these implementation issues are at the heart of this study, and, thus, the candidate projects were subjected to the following three screens to determine which projects were more realistic and potential could be developed: First Screen (Grid Integration): The grid integration screen included consideration of overall transmission capacity and constraints, by island and within key areas on each island, access to transmission lines, current operational limitations and interconnection requirements, especially for intermittent sources, such as wind and solar. In some cases, existing transmission capacity will limit project development and developers must also factor into their financial analysis potential curtailments of windfarm output during nighttime, low-load conditions and added costs to meet new utility interconnection requirements. In addition, the issues relevant to sale of electricity to the utility by third parties, usually referred to as Independent Power Producers (IPPs), were evaluated; Second Screen (Land-Use): The land-use screen included consideration of whether projects could meet current land-use requirements (e.g., compliance with zoning and environmental requirements, especially for projects on government land). The permitting requirements vary greatly depending on who owns the land and the zoning. For example, projects on government lands will require the preparation and approval of an Environmental Assessment (EA), as a minimum, in order to meet state environmental law (Chapter 343, Hawaii Revised Statutes) and permitting requirements. If the land is zoned Conservation, the developer will probably have to prepare and gain approval of an Environmental Impact Statement (EIS), a more complex and costly document than an EA. The cost to a developer for an EIS and the application for a Conservation District Use Permit can easily exceed $200K. On the other hand, a wind project on private, agricultural land is considered a pre-permitted use in Hawaii and an EA is not required. In all cases, the developer must obtain a construction permit from the county. Finally, issues relevant to obtaining a land lease for project site access were evaluated; and Interim Report 3 November 19, 2003

8 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Third Screen (Community Acceptance): The community acceptance screen included consideration of known social/cultural values and concerns regarding potential impacts to the environment and the economy, and other factors of importance to the community, such as visual impact, noise and impacts on birds and their habitat. In general, the community in Hawaii views renewable projects positively. However, the potential impacts must be evaluated for each project. Note: community acceptance, in part, will be subject to full disclosure and discussion of project plans and details by the developer. Overall Comments - Screening Process: it may be debatable which screen should be applied first. However, the order presented above represents the approach used by most developers, e.g., talk first to the utility about potential market opportunities, then talk to landowners about hosting a project, and then, assuming landowner support is obtained, discuss further and negotiate with the utility, while seeking support from the community. WSB-Hawaii observes that developers wishing to be good neighbors will talk to the community early and often Project Phasing Strategy To develop a project phasing strategy, WSB-Hawaii studied the selected projects in more detail, including how the projects would be implemented and what makes them financially viable, and estimating and comparing current and future project costs with future market prices. The phasing strategy was then assembled into three sub-periods as follows: near-term (2003 to 2008): now to five years from now, mid-term (2008 to 2018): subsequent following ten years, and far-term (2018 to 2033): final 15 years of the overall 30 year period. Selecting Projects and Commercial Activities. The projects and activities passing through the screening process were considered to be the best market opportunities for now and over the next 30 years. Specifically, the projects represent market opportunities as they were: (a) evaluated as technically-viable (i.e., capable of meeting utility and land-use requirements and constraints), (b) likely to obtain community acceptance and support, and (c) capable of providing electricity or other energy products (such as hot water or cold air) competitively in today s market or have a reasonable expectation of doing so over the next 30 years. Implementing the Market Opportunities. In developing the project phasing strategy, WSB- Hawaii then assumed that the primary driver in the implementation process would be the willingness of private investors to develop specific projects (such as a windfarm, PV or biomass facility) or purchase commercial products (such as a solar hot water heater or PV system for home or business use). An investor would first evaluate whether a specific project s (or product s) cost of energy (or payback period) looked attractive with respect to the market price (or other investment opportunities). In the case of a larger project for sale of electricity to the utility, the ultimate decision by the investor typically hinges upon the determination of whether the project could be financed and hence be financially viable. In the case of the retail (household) investor, the process could be described as similar, but could also tend to be swayed by other non-financial factors. For more details on the approach for the project phasing strategy, see Appendix B. Interim Report 4 November 19, 2003

9 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft So What Makes a Project Financially Viable? The investment decision is recognizably a complex, complicated one, and it was not WSB-Hawaii s intent to investigate in this study all the factors relevant to what makes a project financially viable. In fact, it would be difficult, if not impossible, to determine as that would require developers to divulge proprietary information. However, WSB-Hawaii did want to test the value of the cost of energy (COE) estimates developed in the working database as an indicator of potential project financial viability. This is important for two reasons: 1. COE is perhaps the best single overall figure of merit for comparing projects and identifying market opportunities, and 2. Having accurate COE estimates is one of the keys to developing a project phasing strategy over the study s 30-Year timeframe. It was especially valuable to confirm if simplified COE methods, such as the Technical Assistance Guide (TAG) method developed by the Electric Power Research Institute (EPRI), could provide accurate estimates (Note: while COE is important, the market price for energy, whether the utility payment for large projects such as windfarms or the retail utility rate for customer-sited projects, is equally important). In determining just how valuable the COE estimates are raises two questions: 1. First, is a project financially viable when the energy payment from the utility equals or exceeds the actual project COE?, and 2. Second, how accurate are the COEs in the working database? The short answer to the first question is yes, IF the energy payments will generate revenues in excess of costs over time and provide a satisfactory return to investors. However, in order to convince an investor that a projected return is real, a developer must satisfy questions about the accuracy of project cost and revenue estimates, which gets us quickly to the second question. The second question is ideally this would require a detailed analysis of each of the estimates in the working database, which was beyond the scope of this study. However, since some of the projects reviewed in previous studies are being developed, there was opportunity to compare the actuals with predictions. For example, the latest GDS COE estimates for windfarms at excellent wind sites were in the 4 to 5 cents/kwh range for potential projects on the Big Island. Since the expected utility payments were higher than the COEs, the windfarm developments have appeared to be cost-effective for some time. Yet, proposed projects have not been implemented and current project proposals appear to be under a lot of stress. Consequently, WSB-Hawaii conducted a brief financial analysis using two levelized cost of energy (LCOE) 3 models to determine what was causing the stress. The results of the analysis indicated that the previous estimates of COEs were overly optimistic for the following three reasons: Actual project development costs are higher than predicted in previous estimates, due primarily to the longer time and extended effort required to negotiate PPAs, Actual equipment costs are higher, primarily due to unanticipated utility interconnection requirements and included in previous cost estimates, and 3 Levelized cost of energy models account for future costs by including inflation factors. Thus, the costs for projects in the future are expressed in today s dollars. Interim Report 5 November 19, 2003

10 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Actual fixed operating costs are projected to be much higher, due, in part, to taxes and insurance costs not accounted for in earlier studies. Note: See Appendix E for the details on this analysis and the models used. In summary, the results of project financial analyses depend on the level of detail and accuracy of the input data. Consequently, WSB-Hawaii has endeavored to obtain the most realistic cost data and COE estimates. Ultimately, developers and investors determine the financial viability of a proposed project using their own detailed, proprietary financial analyses. Estimates of Project Costs over the 30-Year Timeframe. Estimates of project costs over the 30- year time frame were prepared in three steps: First, estimating a range of project sizes, e.g., available costs for a 10 MW facility were used to project costs for facilities from 1 to 50 MWs, Second, adjusting available data for previous years forward to 2003, and Third, using available data from NREL, the Navigant Study and other sources, to estimate future costs of projects. Note: see Appendix B for details on how the cost estimates were prepared. Estimates of the Market Prices over the 30-Year Timeframe. The primary market for renewables is the electric utility, which can be broken down into supply-side and demand-side segments. On the supply-side, projects that would provide electricity for sale to the utility must be viable at the market price, which is the utility s avoided cost. A brief discussion on the utility avoided cost payments is included below. On the demand-side, projects are cost-effective if their COEs are or below the end-user s COE (typically, the retail electric utility rate). Description of Avoided Cost Payments. Under our state PURPA 4 law, avoided cost payments have two primary components: energy and capacity. Historically, only firm power sources (defined as dispatchable) receive both energy and capacity payments, while non-firm (intermittent) sources, such as wind, receive only the energy payment. Energy payments (in cents/kwh) cover the variable costs that the utility avoids by not having to generate the electricity provided by a renewable IPP. The energy payment includes the cost of fuel and variable operations and maintenance costs, but is driven by the cost of fuel, which we know goes up and down. Historically, the utility reports to the PUC changes in the energy component of avoided costs on a quarterly basis. Capacity payments (in $/kw-yr) cover the cost of the capacity provided by the IPP and thus avoided by the utility. The calculation of the payment, however, is more complicated compared to the energy payment and consequently negotiated on each PPA. A typical range for capacity payments is $100 to $200/kW-Yr for the amount of capacity that is firm. For example, a baseload generator with a high capacity factor (say 80%), might receive a capacity credit as high as 100%, while a peaking generator might receive a capacity credit in the 15% to 30% range. The value of the capacity credit to the IPP can be high. For example, assume a 10 MW biomass facility is given a 100% capacity credit. Effectively, the credit could translate into 1.5 to 3 cents/kwh adder to the energy payment. 4 PURPA is the Public Utilities Regulatory Policy Act, which was passed by the U. S. Congress in 1978 to diversify our country s energy resource base and to encourage competition in implementing that diversification. Interim Report 6 November 19, 2003

11 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Estimates of Utility Avoided Costs over the 30-Yr Timeframe. WSB-Hawaii reviewed the historical trends in avoided costs for the utilities in Hawaii along with related trends in utility capacity and energy demand, and planned generator unit additions and unit retirements (See Appendix F). Trends in the consumer price index were also reviewed (See Appendix G). Typically, utilities use future fuel prices estimates prepared by an independent agency, such as the U. S. Energy Information Agency (EIA), as inputs for estimates of future avoided costs. However, WSB-Hawaii elected to use a different approach for this study for two reasons: 1. The EIA and other predictors of fuel costs aren t able to predict or capture fuel price volatility, only average inflationary trends, and 2. The EIA projections do not include local impacts. For this study, WSB-Hawaii provides estimates of future avoided energy costs based on historical avoided energy cost data in Hawaii (See Appendices F and G for details). Analysis of these trends shows the actual volatility in oil prices and the actual inflationary impacts in Hawaii. For example, while avoided costs fluctuated up and down over the past nine years, the result is a net average increase statewide of about 4.1% (compounded). WSB-Hawaii considers these results to be conservative, in part, as there were no significant (like during the Persian Gulf War) fuel price spikes during the nine year period analyzed. During this same nine year period, the consumer price index (CPI) in Honolulu grew at an annual compounded rate of about 1.2%. Thus, over the past nine years in Hawaii, the avoided costs statewide have averaged about 3% higher than the CPI. Therefore, WSB-Hawaii used an annual multiplier of 1.03 when estimated future avoided energy costs. Assembling the Project Phasing Strategy (Business as Usual Scenario). Assembling the project phasing strategy from working database is a system integration challenge, similar to the utility s IRP. Specifically, given existing generation and DSM, what is best way to meet the forecasted demand? The IRP process is intended to result in the lowest cost approach, given an overall set of goals and constraints. In this study, WSB-Hawaii is asking what appears to be a different question: how much of future electricity demand (utility and non-utility) can be met by renewables? Since it may not be possible to meet future demand entirely by renewables, consideration should also be given to the role of DSM and distributed generation, including Combined Heat and Power. Given this overall integration approach, it may be possible to offset and/or preclude the need for conventional, central-station fossil powerplants in Hawaii. Thus, the initial phasing strategy (Business as Usual scenario) discussed herein will consider the following approach to increasing our use of renewable to meet our future electricity needs: The capability of intermittent renewable sources to save fuel and contribute to our state s Renewable Portfolio Standards (RPS) law. Note: our RPS has goals are for the renewable fraction of the electricity sold by our utilities to be 7% by the end of 2003, 8% by the end of 2005 and 9% by the end of Note: the statewide renewable fraction was about 6.1% as of the end of 2002; The potential for renewables with/without storage to provide net capacity to the utility grid. The initial opportunity will be for firm renewable sources, such as biomass, to defer new generation requirements; The potential for renewables to meet on-site loads, which can be accomplished by: (a) generation technologies, e.g., PV, (b) direct use technologies, such as solar hot water and solar air conditioning, that preclude the need for electricity, Interim Report 7 November 19, 2003

12 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft and (c) renewable combined, heat and power (CHP) technologies, e.g., solar air conditioning, which can provide cold air, hot water and electricity; and Implementation will be paced by the current market conditions, regulatory framework, government policies, and utility and business practices, i.e., business as usual, herein referred to as BAU Evaluation of Public Policy Options As described above, the initial project phasing strategy was developed, assuming the BAU scenario. WSB-Hawaii then evaluated two public policy options as a means of accelerating the phasing strategy timeline and conducted a preliminary assessment of the potential overall economic impacts associated with a shift towards renewables (For more details see Appendix B). The following are the two public policy options evaluated: Regulatory reform The objective of regulatory reform would be to open up the market to renewables, in part, by establishing a higher value for renewable electricity. Some examples of potential regulatory reform measures include: o o o avoided costs could be increased by an amount (commonly referred to as an adder ) to recognize the benefits of renewables that are not captured in current avoided costs, utilities could be required by a mandatory RPS to acquire renewables at the lowest market prices via an open, competitive bidding process approved by the PUC (our current voluntary RPS does not require such a process), and retail wheeling of renewable power from renewable suppliers to retail customers with the PUC establishing a charge for access to the utility s transmission and distribution. Note: each of these measures would increase renewable market opportunities and competition for delivery of renewable electricity. It should be noted that while specific renewable goals could be achieved, especially with a mandatory RPS, the cost to the ratepayers to achieve those goals would not be known in advance. Increased incentives - The objective would be to create a greater market pull for renewables by increasing incentives above the current level. Existing incentives include state investment tax credits for wind (20%) and solar (35%) systems. The credits are capped at $1,500 for residential systems and at $250,000 for commercial projects. There are also the federal business investment tax credit of 10% for PV and the production tax credit (currently at 1.8 cents/kwh for electricity delivered) for windfarms. Examples of potential increased incentive measures include: o o o Expanding the state tax credit to include other technologies, such as biomass, Increasing or removing the CAP on commercial projects, and Applying a system benefit charge to ratepayers. Note: depending on the type of incentive employed, a fixed amount of funds can be dedicated or estimated. However, while a specific level of funds would be dedicated, the amount of renewables would not be known in advance. And, in contrast to the market reform measures discussed above, the burden would be placed on the taxpayer rather than the ratepayer. Interim Report 8 November 19, 2003

13 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft In order to evaluate the potential impacts of these two public policy options on the renewable phasing strategy, WSB-Hawaii assumed an: (a) adder to avoided costs of 1 to 3 cents/kwh, and (b) investment of $4M/yr in increased incentives. This level of investment was viewed by the HEPF Project Team as potentially viable. For example, if $4M/yr of the PUC s annual revenues, which have averaged $10 to $12M/yr from taxes paid by the utilities and other regulated industries, could be dedicated to increased incentives for renewables. 1.4 Context of this Study WSB-Hawaii would like to discuss briefly the context of this study in terms of its origins and goals compared with previous studies of renewables in Hawaii, and the expected contributions and limitations of the study. Setting the Stage. The origins of this study are grounded in our state policy to reduce our dependence on imported fossil energy, as embedded in our state constitution and the revised Hawaii statutes. After a decade of limited renewable development in the 1980 s and early 1990 s followed by another decade of planning by state agencies and discussions in the relevant arenas (the utilities, the state legislative, and PUC), WSB-Hawaii observed that all parties could agree on only one thing -- to disagree on how state policy should be implemented. The Hawaii Energy Policy Forum. The Hawaii Energy Policy Forum was initiated by HECO with assistance from the University as discussed previously. So, for the first time in Hawaii, there is a utility-sponsored, policy-oriented activity to take a serious look at our state s overall energy future. It can be argued that the Forum has a broader-base of participation, when compared to the usual suspects involved in the past two decades. Perhaps more important than the actual make up of the Forum is the new opportunity to discuss and gain support for implementation policy measures, as opposed to arguing opposing positions before the legislature or the PUC. Comparison to Previous Studies. This study builds on the work of the precursor GRA, RLA and GDS studies, as described previously, which identified key resource and project areas, and performance and costs estimates, and, in the case of the GRA, extended the estimates to include the potential production of hydrogen in Hawaii. Specifically, projects in this study were screened in detail to evaluate which represented the best market opportunities over a 30-year timeframe (also note that most available studies on renewables do not look farther than 20 years into the future). Finally, the development of a project phasing strategy has not been attempted before. Expected Contributions. The key expected output of this study is the development of a strategy for implementing projects and commercial activities over the next 30 years. It is expected that the phasing strategy will spur new discussion in support of our overall energy goals and specifically our RPS. Specifically, the project phasing strategy provides a ladder of realistic projects for reaching and surpassing the initial RPS goals. Expected Limitations. Development of the project phasing strategy is similar to the utility s integrated resource planning process, and therefore, is limited by the validity of the assumptions and accuracy of the data used in the analysis. In addition, WSB-Hawaii would like to acknowledge the assistance provided by sources listed in Appendix B, but acknowledge at the same time that all viable technology options may not have identified and that more accurate information on the technologies studies may be available. Interim Report 9 November 19, 2003

14 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Furthermore, the maturity of the specific technologies did impact the analysis in at least two important ways. First, since windfarm technology is more mature, at this point, than commercial solar technology (e.g., PV or parabolic troughs) or advanced biomass technologies (e.g., biomass gasification combined cycle), the key cost and performance factors are known with more certainty. Second, since there are over 25,000 Megawatts (MW) of capacity installed in windfarms worldwide, more is known about their operational characteristics. It is hoped that the approach used to develop the phasing strategy will facilitate further evaluation as each technology matures further, and, for that matter, new technologies emerge. Interim Report 10 November 19, 2003

15 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 2.0 Presentation and Discussion of Results The results of this study are presented and discussed in the following sub-sections: Introduction of Technologies Reviewed(See Section 2.1), Detailed Description of Technologies Studied (See Section 2.2), Generic Observations (See Section 2.3), and Presentation and Discussion of the Results (See Section 2.4) 2.1 Introduction of the Technologies Reviewed Given the time and other resources available for this study, effort was focused on development of a working database for wind, solar and biomass projects and commercial activities (See Section 2.2). In addition, unconventional energy sources, energy storage and transfer technologies, and other options were reviewed briefly with the following results: Unconventional Energy Sources Conventional energy sources are coal, oil, gas, and nuclear. While some might consider renewables unconventional, they are typically are considered as a separate category. So what is unconventional? Although Combined Heat and Power (CHP), is typically fossilfueled, it is considered unconventional primarily due to its application, i.e., distributed on the grid as opposed to central station, and its primary objective (to offset site load). As an element of an overall integrated energy program, CHP can play an important role by: 1. offsetting new load growth and deferring new utility generator requirements, 2. providing lower cost, reliable power to users, 3. reducing our fossil fuel use significantly, and 4. helping protect our environment. Note: the fuel of choice for CHP on the mainland is natural gas. Locally, other fuels, such as propane and diesel, are available. Energy Storage Technologies Energy storage includes many different technologies, such as batteries, flywheels, compressed air and pumped hydro storage (PHS) 5. As another element of an overall integrated energy program, PHS as a mature technology can play an important role by: 1. Facilitating the addition of more renewables (especially intermittent sources, such as wind, solar and hydro). Specifically, PHS can help shift loads from peak periods to off-peak, and provide additional load at night for wind, 2. Replacing fossil generation (especially more expensive peaking generators), and 3. Providing additional benefits to the utility (including peak-shaving, frequency regulation, voltage support, spinning reserve, and black start capability). 5 Flow batteries, which utilize large tanks for the electrolytes are another potential commercial-scale technology. A demonstration Regenesys 12 MW flow battery with 10 hours of storage is being tested a Tennessee Valley Authority power plant in Columbus, MS (See: BOYES%20-%20RegenAndNASMonitoring.pdf) Interim Report 11 November 19, 2003

16 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Energy Transfer Technologies Advanced energy transfer technologies could allow us to transfer energy from one island to another and from one area of an island to another area. However, much R&D and commercial development is required: 1. Microwaves: Conceivably, it may be possible to beam energy from outer space and vice versa using microwaves. At this point, the theory has yet to be demonstrated, and, if proved feasible, is a long way off; 2. Superconducting Cables: This is an emerging technology with at least one underway. 6 Superconducting cables would operate at lower voltages and lower line losses, thus, potentially revolutionizing the way we transmit power; 3. Submarine Cables: The concept of intertieing our islands with a submarine cable was proposed and studied in the 1980 s and did not prove to be a costeffective solution. However, costs of DC-cables are coming down and certain island-to-island applications may become feasible in the mid-to-long term; and 4. Hydrogen: Hydrogen is the ultimate energy carrier and fuel for the future. However, there are many technical issues to resolve, which will require significant investments in research and development of hydrogen production, storage and transfer facilities, both here in Hawaii and elsewhere. As the hydrogen technologies become affordable and are implemented in Hawaii, we will have the opportunity for reaching our energy nirvana -- hydrogen to firm up renewable electricity and renewable hydrogen for numerous applications in all the energy sectors. So, the stage is set, the carrot is out there. Other (Demand-Side) Options Demand-side options are typically the most cost-effective options available now, and should be pursued vigorously: 1. Conservation: the first and best energy option is to avoid the need for electricity either by lifestyle changes or by using technologies, such as solar hot water, solar air conditioning 7, and deep ocean water air conditioning 8, and 2. Energy Efficiency: energy efficiency options most often provide the most bang for the buck, whether it is replacing incandescent bulbs with compactfluorescents, using more energy-efficient appliances and load-management devices, etc. The utility s energy efficiency programs should be expanded. Note: the HEPP has commissioned a separate study on energy-efficiency Southwire Company installed the world s first industrial high-temperature superconducting cable system in 2000 to power three of its manufacturing plants in Carrollton GA. The cable consists of three single-phase, 30m long cables rated at 1250 A at 12.4 kv. Solar air conditioning utilizes high-temperature solar collectors to fire a double-effect absorption chiller. This type of chiller has historically been fired by natural gas in markets where natural gas was cheaper than electricity. Solar air conditioners have been in the market for several years and are cost-effective in some areas now. Deep ocean water air conditioning uses OTEC-derived technology to provide cost-effective options in the sitespecific applications and should be included in our energy mix. Interim Report 12 November 19, 2003

17 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Other Renewable Options 1. Several technologies, for possible study in a follow-on second phase to this study, include: pumped-hydro-storage, geothermal, and biomass-to-diesel and biomass-to-ethanol. The latter two technologies can provide biofuels for both transportation and electrical sector applications; 2. Additional technologies that show promise in the near-to-mid-term and are potential topics for additional evaluation include: solar air conditioning, deep ocean water air conditioning, and run-of-the-stream hydro; and 3. Additional technologies that show promise in the mid-to-far-term include: ocean thermal energy conversion (OTEC) and wave energy systems. 2.2 Description of the Technologies Studied Wind, solar and biomass technologies were studied, starting with the technologies and projects evaluated in the precursor GRA, GDS and RLA studies. These projects, which were for commercial delivery of wholesale power to the utility grid, became the candidate projects on this study as identified in initial working database (see Appendix C). Note: the precursor studies did not include demand-side technologies. The following are the specific technologies, which were evaluated for projects the 5 to 50 MW in capacity: Windfarms, Photovoltaics, Parabolic Trough, Dish Sterling, Biomass Combustion (principally cogeneration), and Biomass Gasification For a description of these technologies, see the Technology Descriptions in Appendix H, which were prepared by the National Renewable Energy Laboratory (NREL), Golden, Colorado. Please note that NREL discusses parabolic trough and dish sterling technologies in the Concentrating Solar Power (CSP) section, along with another CSP technology, Power Towers. Note: WSB-Hawaii added the following demand-side technologies to the evaluation: Solar Hot Water, Solar Air Conditioning, Photovoltaics, and Wind Turbines. Interim Report 13 November 19, 2003

18 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 2.3 Generic Observations There were several challenges in gathering data and information. Specifically, developers have been reluctant to share data on the costs and expected performance of future projects, especially those in the planning stage. There was a concern that releasing certain information might jeopardize their competitive positions. The alternative was to work with costs of projects already implemented, and with the National Renewable Energy Laboratory and others, such as the Navigant Consulting Group, to assess trends for the candidate projects. The utility has also been reluctant to share data. Their position, stemming from similar concerns as voiced by developers, has been to release only information and data that have been published in the public domain. Specific proprietary reports prepared by EPRI, for example, which most certainly have valuable information on renewables, were not made available. 2.4 Presentation and Discussion of the Results As noted in section 1, an initial working database of approximately 108 candidate projects was assembled from the precursor studies and is summarized in Appendix C. The results from the analysis of the working database are presented as follows: Approximately 51 of the candidate projects and commercial activities were then screened (see Section below); Twenty-six of these projects passed successfully through the screening process and were analyzed further for possible for implementation in the near-term (2003 to 2008) as discussed in Section an assessment of the impacts of the business-as-usual scenario on analysis of the near-term implementation process (See Section 2.4.3) Screening the Candidate Projects and Commercial Activities Candidate Projects. Referring to Appendix D, the initial database of 108 projects included multiple projects proposals at the same site. Thus, the initial database was reduced to 51 by reducing the candidate projects to one at most sites. The candidate projects were then subjected to three-step screening progress as previously described. The results of the screening process are summarized on four spreadsheets, one each for wind, solar, PV and biomass. Each spreadsheet includes the following key information and data, broken down island and for the projects or project areas for each island: The HNEI GRA data (resource characteristics, resource area, potential output), Grid Integration Issues Land Use Issues Community Acceptance Issues, and An Initial Near-Term Assessment Overall, the results show that the potential outputs for wind, solar and biomass projects from the HNEI GRA study are very high, and indicate many more times the potential energy (electricity) than is needed on the island grids. This was expected, as the HNEI approach was to assume that the resource areas could be utilized to the maximum, and, the resultant electrical output used to produce hydrogen via electrolysis. Interim Report 14 November 19, 2003

19 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft In contrast, the results of the screening process indicate realistic projects for generation and supply of electricity to our island grids. An initial near-term (2003 to 2008) assessment indicated two trends which reduce the number of candidate projects: Limitations due to grid capacity and/or operational constraints, especially for intermittent sources on all the outer islands, such as in North Kohala project area on the Big Island, and the smaller islands of Molokai and Lanai; and Land use issues, which effectively reduce the number of potential sites, especially on Oahu and Kauai. Note: renewables appear to have a broad-base of support within the community. However, each project will have specific potential issues that will need to be discussed and resolved. Thus, developers must secure support on a project-by-project basis. Screening of Commercial Activities. In addition to the larger, grid-oriented projects discussed above, there are a number of important other commercial activities, which include the sale of smaller wind and solar systems, generally for installation and operation on the customer-side of the utility s meter. Technically, each is a project, but distinguished from the larger, grid-oriented projects less by size and more by the ease in siting and permitting. Also, while the utility may solicit these type of installations by design, e.g., on their demand-side management (DSM) programs, individual projects are not planned and approved on a project-by-project basis like the larger, grid-oriented projects. Three commercial activities studied were residential and commercial: Solar hot water (SHW) systems -- are included on the utility s DSM program. This DSM program element, supported by 35% state tax credits that have been place since 1990, has been successful with 3,000 to 4,000 SHW installations a year and a total of 70,000 to 80,000 systems installed statewide. The energy savings and peak demand reduction benefits for the average residential SHW varies some by island. For example, on about 2,447 kwh of electricity is saved every year and kw of capacity is provided to the grid by the average residential SHW, vs. 2,357 kwh/yr and kw on Maui, and 2,356 kwh/yr and kw on Hawaii. 9 In short, SHW is a mature technology and there is vibrant competition among local installers to supply SHW systems to customers; Net-metered PV systems today represent an emerging market with a handful systems installed since the enactment of our state s net metering law in There is evidence 10 that the market could grow at a rate of 20% a year, and possibly more rapidly over time as systems costs drop. The market is currently limited by the net metering law to the number of systems equivalent to 1% of the peak demand on each utility grid; and Solar air conditioning systems today represent another emerging market, but have yet to be introduced in Hawaii. A solar air conditioning system employs a high-temperature (400F) collector to drive a double-effect absorption chiller. Such a system would require a flat area approximately 10,000 square feet to provide 50 to 70 tons of air conditioning capacity. This is a technology to watch in the near future from companies such as Solargenix (formerly Duke-Solar), Denver, Colorado. Note: a solar air conditioner can be configured as a CHP by using waste heat to provide hot water and also electricity Residential Efficient Water Heater (REWH) Program and Residential New Construction (RNC) Program Impact Evaluation Report, prepared for HECO, HELCO and MECO by Xenergy Inc., Oakland, CA, Oct. 25, Personal communication: L. Valenta, Inter Island Solar Supply (August, 2003). Interim Report 15 November 19, 2003

20 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Preliminary Near-Term Analysis of Selected Projects A preliminary analysis of the selected projects was conducted for the near-term (2003 to 2008) period. The potential electricity contributions and costs were estimated for each of the projects and commercial activities. Referring to Appendix D-5 (Sheet A), the potential 26 projects (not counting small projects on Molokai and Lanai) and commercial activities are listed by technology, capacity and island. The energy contributions are noted as a percentage of the total statewide energy use, and also for each island. Also provided are the barrels of oil saved per project and cumulative by island and statewide. The corresponding value for the dollars saved by avoiding the oil purchases is indicated for an oil price of $30/barrel. Nine of 26 projects were selected as the most viable for the near-term. The overall trends indicate that windfarms and conventional biomass (cogeneration and combustion) are the most viable in the near-term based on expected costs and performance factors, followed by concentrating solar power projects, advanced biomass and PV. Please note that these trends, in general, illustrate the: maturity of the technologies with respect to each other, level of detail available for analysis of the candidate projects, and uncertainty in the estimates of future costs and performance. The nine selected projects should be treated as realistic development opportunities. The overall near-term potential in MW of capacity for these projects is summarized in Table 1, and discussed by specific technologies and island below (Also see Sheet B in Appendix D-5). The first set of values in each cell indicates the range of capacities for the projects considered in the near-term. The second set in parentheses indicates the capacity of the nine selected projects. Technology Hawaii* Maui** Oahu Kauai Totals Supply-Side Windfarms 20 to 30 (30) 20 to 35 (20) 50 to 100 (50) 5 to 10 (10) 95 to 175 (110) Parabolic Trough 0 to 30 (0) 0 to 30 (0) 0 to 50 (0) 0 to 10 (0) 0 to 120 (0) PV 0 to 5 (0) 0 to 10 (0) 0 to 10 (0) 0 to 5 (0) 0 to 30 (0) Biomass 8 to 21 (8) 13 to 43 (15) 10 to 20 (10) 9 to 31 (9) 40 to 115 (42) Demand-Side Solar Hot Water (9) PV (1) Totals 30 to 88 (40) 35 to 120 (37) 67 to 187 (67) 14 to 56 (19) 145 to 450 (162) Notes: * = numbers in the parentheses are the values for 9 selected projects and commercial activities. ** = including Molokai and Lanai. Table 1. Potential Renewable Capacity Additions (2003 to 2008) Interim Report 16 November 19, 2003

21 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The annual amounts of electricity in MWH estimated to be delivered to the grid from the nine projects are summarized in the Table 2. The estimates for 2008 are compared with the estimated renewable percentages for 2003, which are assumed for the purposes of this study to be the same as for Note: Refer also to Sheet B of Appendix D-5. Technology Hawaii Maui Oahu Kauai Totals Supply-Side Windfarms 105,120 70, ,200 35, ,440 Parabolic Trough PV Biomass 48,803 91,980 61,320 55, ,291 Demand-Side Solar Hot Water 7,068 7,071 23,247 1,179 38,665 PV , ,398 Totals 171, , ,532 91, ,545 Renewable % in 2003* 25.1% 3.1% 4.2% 6.5% 6.1% Renewable % in 2008** 36.9% 15.9% 6.9% 25.5% 11.7% Notes: * = 2003 percentages are assumed to be the same as the actual 2001percentages. ** = An annual growth rate of 1.5% is assumed to estimate the 2008 electricity demand. Table 2. Potential Annual Energy Contributions in MWH Windfarms. Windfarms can play a significant role in the energy diversification on each of our islands. A windfarms can require a large land area (20 or more acres a MW), if a number turbines are installed in an orthogonal array, e.g., multiple rows of turbines. However, the actual footprint occupied by the turbine foundations and other site structures is a small percentage (generally less than 5%) of the total array area. Furthermore, windfarms are a proven compatible use on agricultural land, as cattle can be grazed and crops can be grown underneath the turbines. In an industrial setting, wind projects, could also make sense. The following are comments on the prospects for windfarms on each of the islands in the near-term: Hawaii (20 to 30 MW). There are three projects in development: 10 MWs each at Hawi and Kahua and the proposed repowering to 20 MW at South Point. Based on the interconnect studies that have been conducted to date, 30 MWs might be the islandwide limit due to potential curtailments at night. In addition, there is a 10 MW to 13 MW limit for projects intertied with the existing 34 kv transmission line to Hawi from Waimea. Thus, only one of Hawi or Kahua projects can be implemented in the near term. This situation could change, if the night-time load grows either from overall growth of the island demand and/or the installation of a pumped-hydro-storage (PHS) facility; Maui (20 to 30 MW). Maui is still waiting for its first windfarm, the Kaheawa Pastures 20 MW project. Subject to a interconnect study, it is possible that an additional windfarm of 10 MW could be accepted on Maui. Beyond that, the situation is much like that on Hawaii, i.e., there will be night-time load problems; Molokai and Lanai: (less than 5 MWs). A small amount of wind could be accommodated on each of these islands (maybe 2 MW on Molokai and 1 MW on Lanai), and could be cost-effective, if coordinated with other of the other developments; Interim Report 17 November 19, 2003

22 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Oahu (50 to 100 MW). Repowering the original Kahuku site to 50 MW is shown as the best opportunity, but this will depend primarily on the landowner, which is now the United States Army. Other project sites in the near-term include other Kahuku land (including the Flats), Kaena Point and Barbers Point. At present, there are no known developers pursuing these opportunities. The relatively small amounts potentially available at Kaena Point and perhaps also Kahuku Flats may make projects not worth pursing. Finally, Barbers Point is more likely a mid-term opportunity, as the wind resource is not as strong as the other sites and there are land issues to resolve; and Kauai (5 to 10 MW). The challenge on Kauai is to find a wind site. A developer secured a contract with Kauai Electric (now Kauai Island Utility Coop), but has been unsuccessful in find a suitable site. Concentrating Solar Power. Concentrating Solar Power (CSP) technologies include parabolic trough, Sterling-Dish and Power Towers. The most applicable to Hawaii are the parabolic trough systems. Sterling-Dish has only been demonstrated at small-scale, and manufacturers claims of improved cost and performance are not being met. Power Towers are great for desert country where there is a lot of room for multi-mw size projects that may become cost-effective some day. Meanwhile, 320 MW of parabolic trough systems installed by Luz at Kramer Junction during the lucrative tax credit days of the 1980 s are still operational, and advanced trough systems are under development and commercial implementation. Solargenix (formerly Duke-Solar) plans to install a 50 MW system in Nevada in the 2004 to 2005 timeframe. It is anticipated that this Solargenix project will demonstrate improved costs and performance compared to the earlier Luz designs. In addition, thermal storage of up to 12 hours, using the molten salt technology developed on the Power Tower program, can be incorporated with the parabolic troughs, thus increasing their potential value to the utility as a peaking unit and possibly for baseload capacity. Trough systems without storage require about 5 acres per MW, and double that with storage. However, there are several factors that would make parabolic trough systems more expensive in Hawaii: (1) a 50 MW system may be too big for the outer islands and smaller systems will be more expensive, (2) our solar resources are not as good as Nevada s, which will require a larger trough array for a given capacity system, and (3) shipping of components to Hawaii. Nevertheless, parabolic troughs are a technology to watch for possible implementation in Hawaii. The following are comments on the prospects for parabolic troughs on each of the islands in the near-term: Hawaii (0 to 30 MW). Hawaii has perhaps the best solar sites in the state, room for projects and high avoided costs. While Keahole may require more effort in permitting and the resource is not as good as in the Kawaihae and Lalamilo areas, installation of a parabolic trough system at NELHA would comport with and support NELHA s mission; Maui (0 to 30 MW). Maui has some good solar sites, but less room for projects. The Kihei area is believed to be the best area for solar; Molokai and Lanai: (no more than 5 MW). The costs for smaller trough systems would be more expensive, such that these two smaller islands may not be good host candidates in the near-term; Oahu (0 to 50 MW). Oahu could accommodate larger trough systems, due to its larger grid, but its avoided costs are lower. However, if storage is included, a tough system could qualify for capacity credit, much like their smaller brothers, domestic solar hot water systems; and Interim Report 18 November 19, 2003

23 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Kauai (0 to 10 MW). The challenge on Kauai is two-fold, first, higher costs due to the smaller facility size that could be integrated on the grid, and second, finding a site. One possibility that should be considered is the Barking Sands area. Note: it is probably unrealistic that any parabolic trough projects could be developed in the next five years in the BAU scenario. Photovoltaics. Referencing the NREL PV Technology Description (Appendix H), PV costs on the mainland range from $5,100 to $9000/kW for crystalline silicon systems depending on the application and demand. The PV industry has been struggling to keep up with demand over the past five years or so. Thus, there has not been much downward pressure on prices. This will change as more manufacturing capability is added. Meanwhile, current commercial system (1 MW and larger) costs in Hawaii are estimated at greater than $7,000/kW with levelized cost of energy greater than 13 cents/kwh and above current utility avoided costs. While long-term projections are encouraging, it is not likely that commercial PV for wholesale power to the utility will be cost-effective in the near-term, BAU scenario. This assessment assumes that the current incentive structure, which limits the amount of our state energy credits (35% of the installed cost) to a maximum of $250,000 per commercial project. Similarly, the residential and smallcommercial PV market will struggle due to their higher costs, despite the incentives created by our state tax credits and net metering. The following are comments on the prospects for large PV projects on each of the islands in the near-term: Hawaii (0 to 5 MW). Hawaii has perhaps the best solar sites in the state, room for projects and high avoided costs. While Keahole may require more effort in permitting and the resource is not as good as in the Kawaihae and Lalamilo areas, installation of a large PV system at NELHA would comport with and support NELHA s mission; Maui (0 to 5 MW). Maui has some good solar sites, but less room for projects. The Kihei area is believed to be the best area for PV; Molokai and Lanai: (no more than 5 MW). The higher avoided costs for these islands potentially makes for better project opportunities, especially if the renewable credit is available to support the full costs of a large-scale project; Oahu (0 to 10 MW). Oahu could accommodate a larger PV, due to its larger grid, but its avoided costs are lower. Kauai (0 to 5 MW). The challenge on Kauai is two-fold, first, higher costs due to the smaller facility size that could be integrated on the grid, but the challenge of finding a site. One possibility that should be considered is the Barking Sands area. Note: PV could be competing with parabolic trough systems for specific sites. PV would require roughly the same area per MW, but would be more expensive in the near-term. Also, since it is not clear if there is as strong of economy of scale with larger PV projects than is the case with parabolic troughs, it is believed the initial PV projects would be smaller, as noted above. In any case, it is any of these projects could be developed in the next five years in the BAU scenario. Biomass. The most realistic near-term options in biomass appear to be residue-to-energy and incremental capacity additions at existing cogeneration facilities. For residue-to-energy, conventional incineration (ala a HPOWER-type facility) would be lower risk given the existing facility and experience on Oahu. However, from an energy perspective, the existing wastes Interim Report 19 November 19, 2003

24 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft (residue) 11 streams could be more effectively utilized via and anaerobic digestion of wet residues and gasification of the dry residues. Wet residues include sewage sludge, food and green clippings, and animal excrement. Note: there is opportunity for anaerobic digestion of animal excrement. Dry residues include paper, newsprint, cardboard, and wood. To accomplish this type of dual feedstock approach would be a challenge. However, dedication of Municipal Solid Waste (MSW) as is done for incineration and power generation on Oahu is also a challenge. There is one other possible approach, which would combine the attributes of the existing H- POWER facility and a gasifier. Some background first. Presently, the City and County of Honolulu is considering adding a third boiler to increase the power delivery from the facility and better utilize the incoming MSW. Regarding gasification technology, a low-pressure, indirect gasifier has been demonstrated at the McNeil Power Station near Burlington, Vermont, and gasifiers are entering the market. The gasifier produced a medium-btu gas 12 that was shown to be suitable for firing an unmodified combustion turbine-generator. 13 Meanwhile, early commercial units of 25 MW and larger are being planned for installation in Europe. 14 Now for the approach. As a first step, the City and County of Honolulu should consider adding a gasifier to the HPOWER facility. A gasifier, such as discussed above, could be fueled with dry residues, and the resultant product gas would be used to fire one or more of the boilers. This approach could provide a gain of 10 MW or more in average capacity. A more detailed study would be required to confirm this estimate. In summary, use of a gasifier would result increase HPOWER s system efficiency and lead to a higher plant capacity factor. See Appendix I for a summary of the biomass resources available in the islands, based on previous work by Robert Shleser (Independent Consultant), Scott Turn (HNEI), and George St. John (Independent Consultant). Appendix I also includes an analysis of the various options (anaerobic digestion, combustion and gasification) for generating electricity from these biomass resources. An initial review indicates there is potential for dedicated energy crops, but specific projects may be difficult to develop in the near-term. An example of one technology that could be costeffective in the near-term would be a combustion facility with wood chips as the primarily fuel to fire a boiler to power a steam turbine. There are over 7,000 MW of such facilities on the mainland with over 60 in California. Using a short-rotation tree crop, such as eucalyptus, a 13 MW facility would require a tree plantation approximately 8,000 acres in size. While eucalyptus would be rotated on an 8-year cycle, the facility would not have to wait eight years before become operational. For example, a developer could use existing wood residues and harvest available alien species, such as gorse, that are becoming a problem, for example, on the Big Island. The following are comments on the prospects for large biomass projects on each of the islands in the near-term: 11 The Biomass Program Manager, Dr. Ralph Overrend, encourages us to the term residues, instead of wastes, as one of the biomass feedstocks for generation of electricity or production of fuels. Wastes are what are left after the residues have been used and wastes are what we then dispose of in landfills. 12 BTU = British Thermal Units. The energy content of medium-btu gas is 450 to 500 BTU per standard cubic foot. 13 Personal Communication (October, 2003): Ralph Overend, NREL. The demonstrated gasifier output, given input levels of up to 320 tons per day of wood chips, could fire a 60 to 70 MW turbine-generator. However, plans to add a turbine-generator at the McNeil Station are on hold. 14 Personal Communication (October, 2003): Ralph Overend, NREL. Interim Report 20 November 19, 2003

25 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Hawaii (8 to 21 MW). A similar analysis was performed for the Big Island. There appears to be a near-term HPOWER-type opportunity for 8 MW (peak). There could be near-term opportunities for energy crops (13 MW), if a developer was able to secure land (8,000) and initial feedstock for a direct combustion facility; Maui (13 to 43 MW). A similar analysis was performed for Maui. There appears to be a near-term HPOWER-type opportunity for 15 MW (peak). There is also a potential for an addition of 15 MW in cogeneration utilizing cane trash. Like on Hawaii, there could be a near-term opportunity for energy crops for a 13 MW direct combustion facility; Molokai and Lanai: (0 MW). There do not appear to be any near-term opportunities for biomass projects on these islands; Oahu (10 to 20 MW). The biomass residues on Oahu are not being fully utilized. HPOWER utilized 600,000 tons of MSW of the 1.1 million tons it received, the balance being landfilled. Scott Turn 15 estimated a total potential of 1.6 million tons of MSW on Oahu in If this full MSW stream could be processed, it is estimated that HPOWER s average capacity could be increased by 21 MW (peak capacity by 30 MW). There are plans to add another boiler, which could theoretically increase the potential capacity by 50%, increasing from the current 46 MW to 69 MW. However, the primary objective of adding the third boiler is to improve the efficiency of the facility s operation and reduce system downtime. 16 As discussed above, a gasifier unit could be added to the HPOWER facility. Finally, there do not appear to be opportunities for energy crops on Oahu in the near-term; and Kauai (9 MW to 31 MW). A similar analysis was performed for the Kauai. There appears to be a near-term HPOWER-type opportunity for about 9 MW (peak), plus an opportunity given the potential availability of 150,000 wet tons/year of excess bagasse 17. If this is added to the incineration feedstock, the total potential could be as much as 22 MW (peak). Finally, there do not appear to be opportunities for energy crops in the near-term. Solar Hot Water. Historically, from 3,000 to 4,000 systems a year are being installed statewide with the support of our current tax credits and utility DSM program incentives. Counties (first, Maui and now the City and County of Honolulu) are implementing low cost loan programs, which will help encourage consumers to invest in solar hot water systems. Given that, WSB- Hawaii believes it is reasonable that 4,000 net 18 systems a year or 16,000 could be installed in the four year period from 2004 through the end of Referring to Sheet B of Appendix D-5, the peak capacity values (statewide total of 8.9 MW) deferred by SHW are indicated in Table 1. The electricity offset values (statewide total of 38,564 MWH) are indicated in Table 2. Net-Metered PV. The residential and small commercial PV market is being encouraged by our state renewable tax credit and our net metering law. Based a 20% annual growth rate, there is potential to reach a 0.08% level of net metered systems. Specifically, the number of systems installed would have the combined capacity equal to 0.08% of the peak demand on each of the islands. Referring to Sheet B of Appendix D-5, the capacity values (statewide total of 1.3 MW) of PV are indicated in Table 1 by island. The electricity supplied (statewide total of 2,294 MWH) to the site-load and the grid are indicated in Table Analysis of Hawaii Biomass Energy Resources for Distributed Energy Applications, December 2002, prepared for DBEDT by HNEI (Scott Turn, Vheissu Keffer and Milton Staackman), Honolulu, HI. 16 Personal Communication (Oct. 2003): Colin Jones, Refuse Division, City and County of Honolulu, HI. 17 Personal Communication (Aug. 2003): Steven Green, Gay and Robinson, Kamakani, Kauai, HI 18 Some systems will be replacements, such that the actual number installed would be greater than 16,000. Interim Report 21 November 19, 2003

26 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft An Assessment of the Business as Usual Scenario The results as presented in the previous section for near-term, business as usual scenario (BAU) assumed that projects would not face significant barriers and could be implemented in a timely manner. However, if the record for the past 10 or so years is reviewed, one could argue that under the BAU scenario nothing much happens in Hawaii. Here is some evidence: The last windfarm to be constructed, the South Point (Kamaoa) project on the Big Island, became operational in 1987; The last hydropower facility to be constructed, the Wailuku River Hydro project near Hilo on the Big Island, became operational in 1993; Also in 1993, the Puna Geothermal Ventures (PGV) became operational after a lengthy development period; After lengthy negotiation periods, two new windfarm PPAs have been signed and approved by the PUC. The first, the Zond-Pacific project for 10 MW at Kahua Ranch was signed by the utility in 2000 and approved by the PUC in The second, the Hawi Renewable Development (HRD) project for 5.28 MW at Hawi on the Big Island was signed in 2002 and approved in Arguably, the action now falls primarily on the developers. In the case of Kahua, HRD acquired the rights to the project, but the original PPA has lapsed and the project is on hold. The Hawi project is also on hold, as HRD is currently re-negotiating with the utility on new interconnect requirements; Other PPAs that have been negotiation for five or more years include the 20 MW Kaheawa Pastures windfarm, a second 5.28 MW windfarm at Hawi, and the repowering of the South Point windfarm to 20 MW; Solar hot water systems are installed under the DSM programs, and these systems are making a valuable contribution; After a lengthy debate at the Legislature, a net metering law was passed and PV systems are now being interconnected on our grids, and there are a modest number of off-grid systems; Efforts to pursue new hydro and wind projects on Kauai have stalled out as developers could not secure access to suitable project sites, but The bottom-line under BAU: no new renewable projects have been constructed in the past 10 years. Thus, developers have attempted, some successfully, to implement renewable projects in Hawaii under our state PURPA law. However, the progress has been grudgingly slow. At a minimum, one could conclude that implementation of renewables in Hawaii has not lived up to the intent and spirit of PURPA. WSB-Hawaii observes that a more proactive, constructive approach to the implementation of PURPA is needed, such as has been accomplished in Maine. There are other alternatives, such as the successful mandated Renewable Portfolio Standards (RPS) law being implemented in Texas, and currently being introduced in California, where much progress has already been made in implementing renewables. However, before discussing policy alternatives, let s look closer at implementation of PURPA in Hawaii. Interim Report 22 November 19, 2003

27 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Actually, the BAU scenario assumed in the near-term analysis discussed in the previous section assumes a proactive implementation of PURPA. More specifically, under PURPA implementation of the selected projects could be facilitated by a proactive approach, hereafter referred to as BAU-Plus, and would include, as a minimum, the following characteristics: The contracting process with the utility and PUC is expedited with standard offer contracts, such that contracts can be negotiated, signed and approved by the PUC within one year; Developers (IPPs) are treated as partners and work closely with the utility to provide reliable power to the grid while maintaining the integrity of the grid; An IPP and the utility share the cost of resolving new grid integration issues. Recent experience shows that IPPs and the utility continue to face new technical challenges, and it is appropriate for the utility both to share added costs as we seek to increase our use of renewables, while maintaining the safety and integrity of our electric grids; Developers and the utility provide full disclosure each other and to landowners and the community; and All stakeholders assist IPPs in securing support for projects. Interim Report 23 November 19, 2003

28 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Preliminary Phasing Strategy A proactive business as usual plus scenario (BAU +), is assumed for development of a preliminary phasing strategy for the selected projects and commercial activities. The first part of the strategy is the near-term (2003 to 2008) which was described in the previous section. Therefore, the discussion in this section will focus on the mid-term (2008 to 2018) and long-term (2018 to 2033). As discussed in Section 1.3.3, the development of the phasing strategy was carried out and is presented and discussed below in the following four steps: Estimation of future performance and costs of the projects and commercial activities; A review the history and trends in utility capacity, demand, projected generator unit additions and planned retirements and avoided costs; Comparison of the trends in future renewable costs versus utility avoided costs; and Assembling the phasing strategy for the BAU + Scenario. Estimation of future performance and costs of the projects and commercial activities Spreadsheets were prepared for each of the technologies to estimate the installed costs and levelized cost of energy (LCOE) for a range of project sizes for over the period 2003 to The detailed data, including graphs of the data, are included in Appendix J. Please note that this analysis resulted in project costs and LCOE s for a given technology, based on the size and design of the facility and the site s resource characteristics. While there are potential variations in costs across the island chain, these variations were not examined in detail as that was beyond the scope of this study. The results of this analysis are presented and discussed below for each technology, along with additional discussion regarding the project opportunities for each island. Windfarms The estimated costs for windfarms are indicated in the four charts on the next page, including both on-shore (Charts 1 and 2) and off-shore (Charts 3 and 4) installations. Windfarms represent the best opportunity for commercial renewable electricity throughout the 30-year period. Windfarms are already cost-effective in the BAU + Scenario. Their costs are expected to drop for at least another 10 or 15 years. As discussed previously, the LCOE represent market opportunities, and do not necessarily represent an energy cost payment that would make projects financially viable for developers. As can be seen in the charts, wind technology is maturing rapidly. There are off-shore installations in Europe, where the incremental costs are greater than 50% more than on-shore. Over time, the increment will decrease to perhaps only 25%. Overall, the challenge will be to: resolve the issues with and implement the current projects in development; gain access to additional sites, especially on Oahu and Kauai; devise a strategy utilizing pumped-hydro storage and other technologies to allow increased penetration of windfarms on our island grids; and explore the feasibility of developing off-shore windfarms when the available on-shore sites have been developed. Interim Report 24 November 19, 2003

29 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Chart 1. On-shore Windfarm Installed Costs Chart 2. On-Shore Windfarm Levelized Cost of Energy Installed Costs ($/kw) MW 10 MW 20 MW 50 MW 100 MW Levelized Cost of Energy (cents/kwh) MW 10 MW 20 MW 50 MW 100 MW Year Year Chart 3. Off-Shore Windfarm Installed Costs Chart 4. Off-Shore Windfarm Levelized Cost of Energy Installed Costs ($/kw) Series1 10 MW 20 MW 50 MW 100 MW Levelized Cost of Energy (cents/kwh) MW 10 MW 20 MW 50 MW 100 MW Year Year Note: the costs are in $2003. See the spreadsheet in Appendix J for the details of how the installed costs and LCOEs were estimated. Concentrating Solar Power (CSP). The situation for CSP is much different from wind. While there are thousands of MWs of windfarms in the U.S. world-wide, there are only 320 MWs of CSP installed by Luz at Kramer Junction, California in the 1980 s. However, CSP is re-entering the market with advanced designs with projected lower costs than the original Luz installations Thus, with more installations, estimates of future costs will have a stronger foundation. Case I (Charts 5 and 6 on the next page) summarizes the costs derived from the CSP Technology Description (TD). In reviewing these data with NREL, it was learned Case I is optimistic, as it assumes an optimistic financial structure and a higher solar resource (Kramer Junction) that is available in Hawaii. Case II (Charts 7 and 8), developed recently with assistance from Henry Price at NREL, is more accurate as NREL has updated its modeling capability since the TD was prepared, and costs are higher reflecting a larger parabolic trough array required to reach the desired MW output in Hawaii. Therefore, based on only an energy payment, trough systems appear expensive at this point under the BAU + Scenario (remember also the limitations on our state tax credits). Over the long-term, trough system costs are expected to continue to drop, and opportunities will open up. Moreover, trough systems can incorporate as much as 12 hours of storage. With storage, trough systems have a potential added value to the utility to provide peaking power or perhaps even baseload power. The final version of this report will include additional analysis to include estimates of cost for trough systems with storage. Interim Report 25 November 19, 2003

30 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Chart 5. Installed Costs (Trough) Case I (NREL Handbook Data) Chart 6. Levelized Cost of Energy: Case I (NREL Handbook Data) Installed Costs ($/kw) MW 50 MW 100 MW Levelized Cost of Energy (cents/kwh) MW 50 MW 100 MW Year Year Chart 7. Installed Costs (Trough): Case II (Updated NREL Data) Chart 8. Levelized COE: Case II (Updated NREL Data) Installed Cost ($/kw) MW 50 MW 100 MW Levelized Cost of Energy (cents/kwh) MW 50 MW 100 MW Year Year Note: the costs are in $2003. See the spreadsheet in Appendix J for the details of how the installed costs and LCOEs were estimated. Photovoltaics. Photovoltaics have always been the darling of the renewables industry. PV is glitzy, it s magic, etc., but oh-so-expensive. Costs have come down dramatically in the past 20 years, but are only now about where wind was 20 years ago. Nevertheless, there is a lot of optimism for the future of PV. Industry members (Reference the PV Roadmap) have predicted a $3,000/kW installed cost to the end-user by 2010 and half that by Long-range projections, as noted in the PV TD, are also very optimistic about the thin-film technology. The estimates for this study take a more conservative view and are based on the forecasts for the crystalline silicon technology, which is more mature and more efficient (requires less area) than thin-film. While advocates have always viewed PV for rooftops (residential and small commercial), there may be potential commercial projects that are able to take advantage of the economies of scale. If prices continue to drop as predicted, that opportunity may open up sooner than some might have thought possibly before, e.g., perhaps as early as 5 to 10 years from now (see Charts 9 to 12 on the next page), if avoided costs increase to the 8 to 10 cents across the islands. Meanwhile, as can be seen in Charts 11 and 12, residential and small-commercial PV costs are already competitive with retail rates that exceed 18 cents/kwh in the islands in the BAU + Scenario. Now that Hawaii has a net metering law, the primary barrier to the market is, and always has been, the high initial costs of PV. As an intermittent source, PV can benefit from storage. Thus, PV power can be extended on the grid with PHS. The grid, of course, provides storage to the net metered PV user. Interim Report 26 November 19, 2003

31 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Chart 9. Commercial PV - Installed Costs Chart 10. Commercial PV - Levelized Cost of Energy Installed Costs ($/kw) MW 5 MW 10 MW 25 MW 50 Mw 100 MW Levelized Cost of Energy (cents/kwh) MW 5 MW 10 MW 25 MW 50 MW 100 MW Year Year Chart 11. Residential/Small Commercial - Installed Costs Chart 12. Residential/Small Commercial PV - LCOE 10, , Installed Costs ($/kw) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1 kw 5 kw 10 kw 25 kw 50 kw Levelized Cost of Energy (cents/kwh) kw 5 kw 10 kw 25 kw 50 kw 1, Year Year Note: the costs are in $2003. See the spreadsheet in Appendix J for the details of how the installed costs and LCOEs were estimated. Biomass. The near-term potential in biomass appears to be residue-to-energy and cogeneration, followed by energy crops, possibly in the near-term and more likely in the mid-tolong-term, e.g., eucalyptus for supplying wood chips. Given the relatively small amounts of Municipal Solid Wastes (MSW) on the outer islands, it doesn t appear realistic to use anaerobic digesters or gasifiers to capture that resource. As on Oahu, a conventional, HPOWER, incinerator-type facility may be the best approach, assuming that a facility developer can obtain access to the MSW and a site. As discussed previously, another option is to add a gasifier to HPOWER improve the efficiency from the dry residues and add capacity to the facility. A niche market may exist for development of anaerobic digesters utilizing animal excrements. Digester costs from the Navigant study are shown in Charts 13 and 14 on the next page. Regarding energy crops, if the feedstock can be harvested and delivered at a low enough cost in the near-term, then incineration is probably the best power plant approach. However, NREL is working closely with industry to develop the more advanced gasification systems, such as the Biomass Gasification Combined Cycle (BGCC). Per Charts 15 and 16, the BGCC cost projections are very encouraging for this emerging technology. As discussed previously, a demonstration gasification facility was constructed and operated at the McNeil Power Station near Burlington, Vermont, and commercial gasifier facilities are being planned in Europe. Over time, there may additional technology and feedstock options to evaluate. Interim Report 27 November 19, 2003

32 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Chart 13. Installed Costs (Anaerobic Digesters) - Navigant Chart 14. LCOE (Anaerobic Digesters) - Navigant 6, Installed Cost ($/kw) 5,000 4,000 3,000 2,000 1, MW 2 MW 5 MW 10 MW 15 MW Levelized Cost of Energy (cents/kwh) MW 2 MW 5 MW 10 MW 15 MW Year Year Chart 15. Installed Cost (BGCC) - NREL Chart 16. Levelized Cost of Energy (BGCC) - NREL 4, , Installed Costs ($/kw) 3,000 2,500 2,000 1,500 1, MW 50 MW 100 MW LCOE (cents/kwh) MW 50 MW 100 MW Year Year Note: the costs are in $2003. See Appendix J for the details of how the installed costs and LCOEs were estimated. A review of the history and trends in utility capacity, demand, projected generator unit additions and planned retirements and avoided costs Spreadsheets (See Appendix F) were created to present and analyze the trends in utility capacity, demand, projected generator unit additions, planned retirements and avoided costs. In addition, the trends in the consumer price index (CPI) were also analyzed for comparison with the trends in the avoided costs (See Appendix G). For example, are avoided costs increasing at a similar rate as the CPI, or more, or less than the CPI? The primary goals of this analysis were to identify specific opportunities for renewable projects that would occur when: 1. Projects become cost-effective in the BAU + Scenario, e.g., this would potentially occur when the levelized cost of energy (LCOE) is equal to or less than the avoided cost. As noted before, the LCOE is an indicator of potential project financial viability, and would thus signal an opportunity. So, for technologies that are currently too expensive, windows of opportunity would occur when the technology cost curve intersects with the avoided cost curve; and 2. Either new generation is projected or retirements of existing generation, e.g., definite windows or opportunity open, if renewables can defer new generation or replace retired generation. Interim Report 28 November 19, 2003

33 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Note: the process just described should seem familiar, especially those familiar with the utility planning process. Specifically, the utility evaluates costs, new generation and requirements in a similar manner to prepare IRP options to meet forecasted new capacity and demand. Trends in Utility Demand, Capacity, and Generator Additions and Retirements These trends are presented for each of the islands in Appendix F. Annual forecasted growth in demand and capacity varies from a low of 1.5% on Oahu to 2 to 3% on the outer islands. Given these growth rates, new utility-style, central station power plants are being planned, and this raises some overall questions, such as: Where will the new power plants be sited? In the long-term, are these projected growth rates really sustainable? and Can the expected growth be off-set by a combination of DSM, CHP and renewables? It is hoped that there can be additional discussion on these and related questions. To shed some light on the benefit of alternatives to the central station power plant approach, slower growth options were analyzed briefly and included in the spreadsheets. At a minimum, new generation can be deferred, if growth is slowed. New generation can be precluded, if growth in utility demand and capacity needs can be met with DSM, CHP and renewables. Trends in Utility Avoided Costs and the CPI The avoided costs (energy component only) for each island were analyzed and are presented in detail in Appendix F, and the CPI data and analysis in Appendix G. For most of the islands, nine plus years of historical data were available, in the case of Hawaii actually 12+ years, and Kauai, only seven. Historically, it has been difficult to predict future avoided costs based on projections of oil prices, e.g., typical forecasts show nice smooth curves, which are hardly ever right. More importantly, the forecasts don t account for the volatility that has been seen historically, and don t include local impacts in price and volatility. As an alternative, WSB-Hawaii used the historical trends in avoided costs as a means for evaluating future costs. Specifically, WSB-Hawaii assumed that the historical trends will continue. The historical trends show that avoided costs have risen consistently over the period for the data that were available. Referring to the top table on the next page, during the 9-year period form 1994 to 2003, the statewide average annual increase in the avoided cost was 5.33%, which is equivalent to a compound rate of 2.84%. Note that the compound rate for the HECO system was 4.16%. These increases were compared with the CPI, which grew at a compounded rate of 1.15% during the same period. The statewide avoided cost grew at a rate approximately 3% above that of the CPI. For the HECO system, the growth rate was 3.37%. Effectively, these growth rates are levelized, as inflation has been removed. To estimate future costs, these levelized rates were used along with two benchmarks. The first benchmark is the 8-year-average based on data over the past 9-year period (Case A) and second, based on the current costs over the first two quarters of 2003 (Case B). Using an annual inflation in avoided costs of 3% above the CPI, the second table on the next page shows estimated avoided costs for the future for the two cases. Interim Report 29 November 19, 2003

34 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Period ( ) Statewide Summary and Analysis of Avoided Costs Period ( Current) Average CPI Growth AC % Average CPI Growth AC % Rate Rate Annual % Compound Compound Above Annual % Compound Compound Above Utility Increase Rate (%) Rate (%) CPI Increase Rate (%) Rate (%) CPI Comments HECO yrs of data (1994 to 2002) HELCO yrs of data (1991 to 2002) MECO - Average Simple Average Maui yrs of data (1994 to 2002) Molokai yrs of data (1994 to 2002) Lanai yrs of data (1994 to 2002) HECO Averages Simple Average Kauai yrs of data (1996 to Current) SW Averages Overall Observations and Conclusions: 1. HECO's (Oahu Only) increase in avoided costs has averaged a compound rate of 4.69% over the 8 to 9 year period. 2. HECO's family increase in avoided costs has averaged 3.01 to 3.37% above the CPI. 3. Believe that 3% above CPI is conservative. Future Avoided Cost Estimates 1. Annual Inflation of Avoided Cost = 3% avove the Consumer Price Index, hence 3% is a levelized rate. 2. Upper and lower range are based on two reference Cases: A (9-Yr average from 1994 to 2002) and B (current). 3. Case A is more conservative. Note that avoided costs increased dramatically in the first two quarters of Base Avoided Cost Estimated Future Avoided Costs Island 9-Yr Avg Oahu Hawaii Maui Molokai Lanai Kauai Interim Report 30 November 19, 2003

35 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The two graphs below show the estimated future avoided costs, assuming the annual 3% inflation in avoided costs above the CPI. If this proves to be our future, based on our current fossil fuel system, avoided costs are going to more than double over the next 30 years in today s dollars. That will make virtually every renewable option cheaper than oil. Estimated Future Avoided Costs (9-Yr Base) Estimated Futue Avoided Costs (Current Base Case) AC (cents/kwh-$2003) Oahu Hawaii Maui Molokai Lanai Kauai Avoided Costs (cents/kwh-$2003) Oahu Hawaii Maui Molokai Lanai Kauai Year Year A comparison of the trends in future renewable costs versus utility avoided costs Given the estimates of both renewable system costs and avoided costs, as discussed above, it is a relatively straightforward process to compare the data. However, since there are a large number of options to assess, i.e., each of the four technologies (with variations such as onshore vs. off-shore), and six islands the islands, six examples are presented below: Parabolic Troughs (Oahu and Hawaii) Referring to Charts 17 and 18 on the next page, the data plotted are from the updated data set from NREL (Case II). One can see that the LCOEs for the trough systems (30 MW, 50 MW and 100 MW) are initially above the avoided costs for the two islands. Note that the two avoided cost cases (A = 9 year average; B = Current) are plotted. On Oahu (Chart 17), it appears that troughs will become cost-effective in the 2012 to 2026 timeframe, while on Hawaii (Chart 18), perhaps 2009 to Commercial Photovoltaics for Oahu and Hawaii Referring to Charts 19 and 20 on the next page, the data plotted are from the NREL Technology Description. One can see that the LCOEs for the PV systems (1 MW, 5 MW and 10 MW) are initially above the avoided costs for the two islands. Note that the two avoided cost cases (A = 9 year average; B = Current) are plotted. On Oahu (Chart 19), it appears that commercial PV will become cost-effective in the 2013 to 2016 timeframe, while on Hawaii (Chart 20), perhaps 2010 to Biomass Gasification Combined Cycle for Hawaii and Maui Referring to Charts 21 and 22 on the next page, the data plotted are from the NREL Technology Description. One can see that the LCOEs for the BGCC systems (25 MW, 50 MW and 100 MW) are initially above the avoided costs for the two islands, except for the 100 MW systems on Hawaii (see Chart 21). Note that the two avoided cost cases (A = 9 year average; B = Current) are plotted. The smaller systems appear to become costeffective in the 2013 to 2016 timeframe on Maui (see Chart 22), while on Hawaii (Chart 21), perhaps 2010 to Interim Report 31 November 19, 2003

36 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Chart 17. Phasing Strategy: Parabolic Troughs for Oahu (Case II - Updated NREL Data) Chart 18. Phasing Strategy: Parabolic Troughs for Hawaii (Case II - Upated NREL Data) LCOE and AC (cents/kwh_ Case A - AC Case B - AC 30 MW 50 MW 100 MW LCOE and AC (cents/kwh) Case A - AC Case B - AC 30 MW 50 MW 100 MW Series Year Year Chart 19. Phasing Strategy: PV for Oahu Chart 20. Phasing Strategy for PV on Hawaii LCOE and AC (cents/kwh) Case A - AC Case B - AC 1 MW 5 MW 10 MW LCOE and AC (cents/kwh) Case A - AC Case B - AC 1 MW 5 MW 10 MW Year Year Chart 21. Phasing Strategy for BGCC on Hawaii Chart 22. Phasing Strategy for BGCC on Maui LCOE and AC Case A - AC Case B - AC 25 MW 50 MW 100 MW LCOE and AC (cents/kwh) Case A - AC Case B - AC 25 MW 50 MW 100 MW Year Year Phasing Strategy Examples Interim Report 32 November 19, 2003

37 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Assembling a phasing strategy for the BAU + Scenario A phasing strategy was assembled based on the analysis presented in the previous sections, and is discussed below for the mid-term (2008 to 2018) and the far-term ( ). Mid-Term (2008 to 2018) A similar approach was used as for preliminary analysis of the selected projects for near-term (2003 to 2008) period. Specifically, the potential electricity contributions and costs were estimated for each of the projects and commercial activities in the mid-term. Referring to Sheet C of Appendix D-5, the potential projects and commercial activities are listed by technology, capacity and island. The energy contributions are noted as a percentage of the total statewide energy use, and also for each island. Also provided are the barrels of oil saved per project and cumulative by island and statewide. The corresponding value for the dollars saved by avoiding the oil purchases is indicated for an oil price of $30/barrel. The overall trends indicate that windfarms and conventional biomass (cogeneration and combustion) will continue to be economically viable, and that concentrating solar power projects, advanced biomass and PV will all become viable during the mid-term. As noted previously, analysis only nine of the 26 projects were selected as the most realistic for implementation in the near-term. Thus, the preliminary analysis for the mid-term assumes that the remaining 17 projects would be implemented. It is also recognized that there is less certainty in predicting the mid-term future, compared to the near-term. However, just as was the case for the near-term analysis, the 17 projects are viewed as realistic. Furthermore, there are at least two factors that could result in larger and/or additional projects: Addition of pumped-hydro storage (or other viable storage such as flow batteries), which could facilitate higher levels of wind and solar capacity, and Emergence of viable energy crops, in conjunction with maturing of gasification technologies. Note: two biomass projects were added, bringing the total to 19. The incremental increase in MW of capacity during the mid-term is summarized in Table 3, and discussed by specific technologies and island below (Also see Sheet C in Appendix D-5). The first set of values in each cell indicates the capacities for the nine near-term projects. The second set values are the range of capacity for the 19 projects considered in the mid-term. Note: two biomass projects were added, one each on Maui and Hawaii. The third set of values indicates capacities for the selected 19 projects that are believed to be realistic development opportunities. Interim Report 33 November 19, 2003

38 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Technology Hawaii Maui** Oahu Kauai Totals Supply-Side Windfarms (30)* 10 to 60 [60]*** (20) 35 to 255 [200] (50) 75 to 100 [100] (10) 0 [0] (110) 120 to 415 [340] Parabolic Trough (0) 30 [30] PV (0) 5 to 25 [10] Biomass (8) 13 to 22 [13] (0) 30 to 40 [30] (0) 5 to 10 [5] (15) 28 to 62 [37] (0) 50 to 100 [50] (0) 10 to 50 [25] (10) 20 to 25 [20] (0) 10 [10 ] (0) 0 to 5 [0] (9) 22 to 38 [22] (0) 120 to 180 [120] (0) 20 to 90 [40] (42) 73 to 122 [82] Demand-Side Solar Hot Water [22] PV [16] Totals 64 to 143 [119] Notes: 104 to 373 [278] 182 to 302 [222] 32 to 53 [32] 382 to 871 [651] * = numbers in the parentheses are the values for the 9 near-term projects. ** = including Molokai (large wind project with a submarine cable to Oahu) and Lanai. *** = numbers in the brackets are the capacity for 19 selected projects and commercial activities. Table 3. Potential Renewable Capacity Additions (2008 to 2018) The annual amounts of electricity in MWH estimated to be delivered to the grid from the 19 projects are summarized in the Table 4 (See also Sheet C of Appendix D-5. The estimates for 2018 are compared with the estimated renewable percentages for 2008 and 2003 (assumed for the purposes of this study to be the same as for 2001). Technology Hawaii Maui Oahu Kauai Totals Supply-Side Windfarms 210, , , ,296,480 Parabolic Trough 105, , ,200 35, ,480 PV 8,760 8,760 17,520 8,760 43,800 Biomass 134, , , , ,332 Demand-Side Solar Hot Water 17,670 17,768 58,116 2,946 96,410 PV 3,305 3,305 22,015 1,298 29,922 Totals 479, ,866 1,376, ,948 2,506,424 Renewable % in 2003* 25.1% 3.1% 4.2% 6.5% 6.1% Renewable % in 2008** 36.9% 15.9% 6.9% 25.5% 11.7% Renewable % in 2018** 66.9% 44.5% 19.5% 55.5% 28.6% Notes: * = 2003 percentages are assumed to be the same as the actual 2001percentages. ** = An annual growth rate of 1.5% is assumed to estimate the 2008 electricity demand. Table 4. Potential Annual Energy Contributions in MWH Interim Report 34 November 19, 2003

39 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Windfarms. Windfarms will continue play a significant role in the energy diversification on each of our islands. Through this period, it is probable that most, if not all, of the suitable on-shore sites will be developed: Hawaii (10 to 60 MW). The 10 MW Hawi (or Kahua) and the 20 MW repowering at South Point is assumed to have been implemented in the near-term. Assuming that new transmission is added to the North Kohala area and pumped-storage hydro (or some other suitable form of storage) and additional system controls (if found to be necessary to maintain the grid operational stability) are integrated into the grid, 10 to 50 MWs of windfarms could be added in the mid-term. The alternatives would include 10 MW at Kahua and perhaps up to 50 MW in the Lalamilo area; Maui (10 to 30 MW). The Kaheawa Pastures 20 MW project is assumed to have been implemented in the near-term. It is possible that an additional windfarm of 10 MW (West Maui or Northwest Haleakala) could be accepted on Maui as noted previously. Similarly as for Hawaii, if storage and controls (if necessary) are integrated into the grid, 20 MWs of windfarms could be added in the mid-term. The alternatives would include another 20 MW at Kaheawa or in the central valley; Molokai (15 to 215 MW) and Lanai (10 MW). It was assumed that no wind developments would occur on Molokai and Lanai in the near-term. In the mid-term, however, there is a possibility of a large (150 to 200 MW) windfarm on West Molokai to deliver electricity via submarine cable to Oahu. There could be smaller windfarms on Molokai (15 MW) and Lanai (10 MW), coupled with pumped-storage to power the islands. However, the windfarm option would need to be evaluated against other options, such as a biomass facility utilizing energy crops, or a wind-solar hybrid with storage. In any case, there would be ample opportunity to provide 100% of the electricity from renewables; Oahu (75 to 100 MW). It was assumed 50 MW of wind could be developed on Oahu, ideally at Kahuku, but it was recognized that will depend primarily on the United States Army. In the mid-term, if agreement is reached with the Army, the Kahuku site and area could support as much as another 50 MW or total of 100 MW. Also, a 25 to 50 MW project at Barber s Point could be viable, assuming land use issues are resolved; and Kauai (0 MW). Assuming that 10 MW is developed in near-term, there may not be opportunity on Kauai for an additional windfarm to provide electricity to the grid. Parabolic Troughs. It was assumed that none of the selected parabolic through systems would be implemented in the near-term, but should become viable in the mid-term. The following are comments on the prospects for parabolic trough projects on each of the islands in the mid-term: Hawaii (30 MW). Hawaii has perhaps the best solar sites in the state, room for projects and high avoided costs. While Keahole may require more effort in permitting and the resource is not as good as in the Kawaihae and Lalamilo areas, installation of a parabolic trough system at NELHA would comport with and support NELHA s mission; Maui (30 MW). Maui has some good solar sites, but less room for projects. The Kihei area is believed to be the best area for solar; Interim Report 35 November 19, 2003

40 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Molokai and Lanai: (0 to 5 MW). Smaller trough systems may become cost-effective in the mid-term, and should be evaluated with other alternatives for powering Molokai and Lanai; Oahu (50 to 100 MW). Oahu could accommodate larger trough systems, due to its larger grid, but its avoided costs are lower. However, if storage is included, a trough system could qualify for capacity credit, much like their smaller brothers, domestic solar hot water systems; and Kauai (0 to 10 MW). The primary challenge in the mid-term finding a site. As noted before, one possibility that should be considered is the Barking Sands area. Photovoltaics. It was assumed that none of the selected parabolic through systems would be implemented in the near-term, but should become viable in the mid-term. The following are comments on the prospects for large PV projects on each of the islands in the mid-term: Hawaii (5 to 25 MW). Hawaii has perhaps the best solar sites in the state, room for projects and high avoided costs. While Keahole may require more effort in permitting and the resource is not as good as in the Kawaihae and Lalamilo areas, installation of a large PV system at NELHA would comport with and support NELHA s mission; Maui (5 to 10 MW). Maui has some good solar sites, but less room for projects. The Kihei area is believed to be the best area for PV; Molokai (0 to 5 MW) and Lanai (0 to 5 MW). These islands have good solar sites, but {V should be evaluated with the other alternatives; Oahu (10 to 50 MW). Oahu could accommodate a larger PV, due to its larger grid; Kauai (0 to 5 MW). The challenge on Kauai is two-fold, first, higher costs due to the smaller facility size that could be integrated on the grid, but the challenge of finding a site. One possibility that should be considered is the Barking Sands area. Note: PV could be competing with parabolic trough systems for specific sites. PV would require roughly the same area per MW, and could be approaching price parity with parabolic trough systems in the mid-term. Biomass. It was assumed that near-term implementation of biomass projects would be primarily in the residue-to-energy and cogeneration applications. In the mid-term, opportunities will open up for biomass gasification, including use of energy crops, and perhaps incremental capacity additions to the residue-to-energy facilities. The following are comments on the prospects for large biomass projects on each of the islands in the mid-term: Hawaii (13 to 22 MW). In the near-term analysis it was assumed HPOWER-type, 8 MW project would be implemented, while a 13 MW direct combustion facility utilizing an energy crop probably would not. Such a facility would be a candidate for the mid-term, or 22 MW biomass gasification facility utilizing the same potential feedstock; Maui (28 to 37 MW). In the near-term analysis it was assumed an addition of 15 MW in cogeneration utilizing cane trash or a HPOWER-type, 15 MW project would be implemented, while a 13 MW direct combustion facility utilizing an energy crop probably would not. Thus, in the mid-term, there is an opportunity for a 15 MW (either a H- POWER type or cogeneration), and the opportunity for at 13 MW to 22 MW combustion or gasifier facility fueled by energy crops (similar to that on Hawaii); Interim Report 36 November 19, 2003

41 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Molokai (15 MW) and Lanai (10 MW). In the near-term, no biomass facilities were selected. In the mid-term, however, a biomass facility fueled by energy crops should be considered along with other alternatives; Oahu (20 to 25 MW). It was assumed that the capacity of HPOWER would be expanded by 10 MW in the near-term. The best opportunities in the mid-term on Oahu would be to add a gasifier unit to the HPOWER facility. The gasifier would be used to fire one or more of the facility s boilers. The gain in capacity could be 20 to 25 MW or more. There is also an opportunity for anaerobic digestion of animal excrement, but it estimated at less than 1 MW. Finally, it is not clear if there might be land available for energy crops in the mid-term; and Kauai (22 MW to 38 MW). A near-term HPOWER-type opportunity for about 9 MW would be developed. In the mid-term, this facility capacity could be expanded by 22 MW if bagasse residues could be utilized. If the same bagasse resource could be utilized by a gasifier, the facility output could be as much as 38 MW. Finally, it is not clear if there might be land available for energy crops in the mid-term. Solar Hot Water. In the near-term, it was assumed that 4,000 net 19 solar hot water (SHW) systems a year would installed and the amounts were prorated among the islands as indicated in Appendix D-5 (Sheet C). The same annual assumptions were made for the mid-term. Therefore, the total number of systems installed was estimated to be 40,000 for the ten year period from 2008 through the end of Similarly, the capacity and energy values were also prorated. Specifically, the incremental peak capacity values (statewide total of 22.3 MW) deferred by SHW are indicated in Table 3. The electricity offset values (statewide total of 96,410 MWH) are indicated in Table 4. Net-Metered PV. The residential and small commercial PV market is expected to continue to grow vigorously during the mid-term and reach a 0.86% level of net metered systems. Specifically, the number of systems installed would have the combined capacity equal to 0.86% of the peak demand on each of the islands. Referring Sheet C to Appendix D-5, the capacity values (statewide total of 16.3 MW) of PV are indicated in Table 3 by island. The electricity supplied (statewide total of 29,922 MWH) to the site-load and the grid are indicated in Table Some systems will be replacements, such that the actual number installed would be greater than 16,000. Interim Report 37 November 19, 2003

42 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Far-Term (2018 to 2033) As noted previously, there is less certainty in predicting the mid-term potential for renewables, compared to the near-term. Consequently, extension of the analysis for another 15 years into future is a greater challenge. Thus, a detailed analysis of projects for the far-term (2018 to 2033) was not conducted. Instead, WSB-Hawaii elected to evaluate the trends and factors that will impact the phasing strategy in the far-term on each of our islands. Trends. If the market price for electricity continues to follow historical trends, as discussed herein, all renewables studied will be cheaper than conventional fossil energy. If not, the transition will occur over a longer period. In either case, as we ultimately replace or convert our fossil energy power plants, the overall pace of the transition will depend on our ability to resolve the implementation issues of the future, which will differ depending on the market. Overall, the key known issues as of now are: Wholesale (or Supply-Side): the ability of developers and/or the utility to gain support for and site projects, due to land availability and use constraints, and our united ability to innovate and solve the technical challenges associated with integrating increasing levels of renewables on the utility grids. Among the missing pieces to the pie, is a model sophisticated enough to characterize the operation of multiple renewable generators in line with conventional generators, and Retail (or Demand-Side): our united ability to educate consumers on the merits of specific technologies, ability to buy, and to ensure that vibrant competition for delivery of energy services is established and maintained. WSB-Hawaii believes the pace will differ some, depending on the technology, as follows: Windfarms: Once all available on-shore sites are developed, there will be some opportunities for off-shore, especially for Oahu. The best off-shore sites would include near Kaena and Kahuku Points and along the Makapuu-Diamond Head corridor. However, whether these sites could be permitted is a topic for discussion at a later time. Even with the addition of storage, there may also be a limit to the amount of wind power that can be integrated with the grid. Some additional technical solutions may be required, such as more sophisticated load-management controls to keep generation in balance with the load at all times; Concentrating Solar Power: Notwithstanding the future evolution of Sterling-Dish and Power Tower technologies, the CSP technology of choice for Hawaii will likely be parabolic trough. If so, trough systems with storage may become preferred over wind and PV. Consequently, and especially on Oahu, development may hinge on the ability of the developer to secure a site. Given that, as mentioned previously, a wind site that is also a good solar site, e.g., Barber s Point, would become a good candidate for a windsolar hybrid facility. Finally, as mentioned above, development of trough systems will also depend on the development and utilization of an advanced utility operational model; Commercial Photovoltaics: Predicting the potential for Commercial PV is more of a challenge. If far-term costs drop as dramatically as predicted by, PV energy delivery costs will become competitive with parabolic troughs, and possibly wind. As with parabolic troughs, PV could be coupled with wind. Or it may turn out that PV will indeed have higher value on the demand-side, as is true now; Interim Report 38 November 19, 2003

43 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Biomass: As often said by Bob Shleser, Biomass is our most sustainable resource. By the end of the mid-term, we should be utilizing all of our agricultural residues and MSW to generate electricity. The remaining and highest-yielding opportunities will be from gasification of energy crops. Thus, the challenges will be to secure land for growing and the crops, and siting the gasification facilities, which will be able to provide firm power; Solar Hot Water. In the far-term, with possibly as many as 200,000 solar hot water systems in place, a house or an apartment complex without a solar hot water (SHW) system will likely be considered an anomaly. The market will have been self-sustaining for a long time, as most customers will replace systems after the end of their useful life, which will likely average 20 years. Referring to Sheet D of Appendix D-5, 200,000 systems could off-set 2.85% of the total electrical demand. Retail (Resident/Small Commercial) PV. Referring to Sheet D of Appendix D-5, net metered retail PV systems (average 2 kw in size) could off-set 3.1% of the total electrical demand, surpassing solar hot water. Finally, homeowners with both an average SHW and a 2 kw PV would benefit from about 505 kwh/month. A lot of them would have zero net energy homes. Factors. The important factors, some of which might be called wild cards, that will influence and possibly modify the trends discussed above: Maturation process of the renewable technologies: the process is closely related to the level of government support for R&D and market incentives (See also the discussion on public policy options in Section 2.4.5). Government support will be especially important for the technologies in this order: PV, biomass gasification, parabolic troughs and wind; Structure of the market: renewables will do best in open markets that have a mandate for renewables, such as a RPS. In monopoly markets, such as in Hawaii, RPS may also work, but may require incentives for investor-owned utilities; (See also the discussion on public policy options in Section 2.4.5); Fossil Fuel Prices: fluctuations in fossil fuel prices, and especially for oil, which is the most volatile and on which Hawaii most heavily depends, work both ways. While there are experts on both sides of this issue, recent history validates a continuous increase over time in the market price for electricity in Hawaii. More importantly, Hawaii needs to address the issue of the export of our dollars to import fossil energy. Reducing our dependence on imports will provide overall economic benefits to the state; Energy Use Trends. One of the real wild cards might be a long-term warming trend in Hawaii s weather and/or an increase in our average humidity. Either one would likely trigger a greater need for air conditioning our homes. However, this need could be met by solar, as described previously; and Environmental Mandates: mandates will most likely come on a separate track from conventional government policy, but could be consistent with renewably-friendly policies already in place or contemplated. For example, if the U. S. were to agree to a Kyotostyle requirement to reduce emissions, a transition to renewables along with other fossilfuel saving measures, would be the order of the day. Many, if not most, observers of the Kyoto-process would agree that a protocol will come. It is only a matter of time, and most certainly within our 30 year timeframe. Interim Report 39 November 19, 2003

44 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Island Energy Futures. Given the business-as-usual-plus (BAU + ) scenario, what does the farterm future hold for our islands? Based on the results of mid-term analysis, the outer islands will be approaching or exceeding 50% renewables and Oahu would be almost 20%. Overall, demand-side options (principally solar hot water, PV, but also solar air conditioning) will continue to offer residential and small-commercial customers the opportunity to become zero net energy users. This will be an important segment of the energy market, as the residential load is 25% or more of the electricity demand in the islands, and will be a key on Oahu. Beyond that, here are some potential energy future options by island: Hawaii: Hawaii would be at almost 67% renewables at the end of mid-term. Further development of energy crops and/or its geothermal resources, could move Hawaii towards 100% renewables. Maui: Maui would be at almost 45% renewables at the end of mid-term. Like Hawaii, further development of energy crops could move Maui towards to 100% renewables. There will continue to be opportunity for parabolic troughs, commercial PV and possibly windfarms. It is conceivable that Maui s geothermal resources could be tapped. Although not considered as good as Hawaii s high-temperature resource, there may be enough of a low to medium temperature geothermal resource to develop; Molokai: As discussed previously, a large windfarm on Molokai would be a one-way connection to Oahu and could possibly be designed to power Molokai. However, there may be better options for the people of Molokai to consider for 100% renewable generation, including energy crops, solar and additional wind. Energy crops could be used to grow soybeans for production of biodiesel, which could fuel Molokai s existing utility generators. The energy crop plantation would provide valuable jobs and revenues to Molokai. While wind and solar options would require some storage, and may not be as cost-effective; Lanai: The people of Lanai would have similar options to consider for 100% renewable generation, including energy crops, solar and additional wind. Again, energy crops to produce biodiesel for fueling the existing utility generators may be the best option; Oahu: Given the land availability and use issues, Oahu will need to look more to its roofs to incorporate PV. Off-shore windfarms could play a role. However, Solar Air Conditioning, though not studied in detail herein, will be one of the potential wild cards, along with the long-waiting ocean technologies. Deep ocean water air conditioning can and should play a role starting now. By the end of mid-term, the economics of OTEC could be favorable. While it may take longer than 30 years from now, given the vast array of renewable technologies in Oahu s quiver, a goal of reaching 100% renewables will be technically feasible; and Kauai: In addition to demand-side options, the best long-term options for the people of Kauai to consider will include renewable CHP for resorts, and energy crop options, including both biodiesel-to-electricity and gasification-to-electricity. Interim Report 40 November 19, 2003

45 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Evaluation of Public Policy Options The results of this task are presented in the following three sections: 1. Brief review and evaluation of public policy options, 2. Revising the phasing strategy to incorporate alternate public policy options, and 3. Assessing the Economics of a Major Shift off of Oil Brief review and evaluation of public policy options As mentioned previously, it was decided with HEPF Project Team, that the public policy options to pursue would follow into two broad categories: regulatory reform and increased incentives. Following a review of the Freedman 20 study, WSB-Hawaii utilized an initial, simplified approach to evaluating the public policy options as described below. Market Reform Options. WSB-Hawaii observes that historical attempts to improve Hawaii s PURPA law and market reforms in other jurisdictions have focused on: opening the market and reducing the barriers to entry, e.g., via standard offer contracts, setting a requirement (or mandate) for renewables, increasing the price of renewable electricity the utility is willing to pay above existing avoided costs, and lowering the price of renewable electricity to the customer. As discussed previously, a constructive, proactive implementation of PURPA (referred herein as the business-as-usual-plus (or BAU + ) scenario implies a reduction of the market entry barriers, but not necessarily setting renewable requirements or increasing avoided costs. In any case, a renewable mandate, such as a Renewable Portfolio Standard (RPS), establishes a market price for renewable sources via a competitive process, which can lead to a higher price for renewables, if warranted. Retail wheeling is the primary mechanism for lowering the price to the customer. Retail wheeling is when a third party (energy service provider) contracts directly with a retail customer, and pays for access to the utility s transmission and distribution (T&D) system. Since the provider s costs under a retail wheeling agreement would typically be lower than the utility s retail price, the provider could offer a lower price to the customer. Since a detailed review of the impacts of the various reform measures was beyond the scope of this study, a simplified approach was developed to evaluate the bottom-line impact of an increase in the price the utility would pay for renewable electricity. The approach was to increase the avoided cost by an incremental amount (referred to as an adder ) as follows: It is proposed here that there be a 1 to 3 cent adder to avoided cost to accelerate implementation of renewables in today s market, and The justification for the adder could be as follows: 1 cent for improved system reliability, 1 cent for energy security and 1 cent for environmental protection. 20 Hawaii Utility Regulation and Taxation, prepared for the HEPF by Haiku Design and Analysis (Carl Freedman) and Microdesign Northwest (Jim Lazar) for the HEPF, July, Interim Report 41 November 19, 2003

46 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The following is a brief analysis of two examples of projects that might benefit if such an approach were implemented: Consider a 2-cent adder for a 5 MW residue-to-energy facility on Kauai and a 10 MW cogeneration addition on Maui with annual outputs of 30,660 and 61,320 MWH respectively (Note: a 10 MW windfarm annual output would be approximately 35,000 MWH); The annual incremental project revenue shortfalls are about $613K and $1.16 M respectively; and These shortfalls represent the following percentages of 1999 revenues: 0.8% of $77.8M on Kauai and 0.7% of $156.8M on Maui. The public policy decision would then need to be made as to whether the incremental revenue shortfalls should be rate-based, and thus ultimately born by the ratepayer, as opposed to being paid in some other manner. If born by the ratepayer, then this approach would be similar to the electricity feed law that Germany currently has. In any case, the process is to recognize a higher value and thus pay a higher price for the renewable electricity. Increased Incentives. Incentives, in general, serve to create a stronger market pull for renewables, by effectively lowering the installation costs of projects. The approach on this study was to consider a $4M a year fund for investing in renewables. This approach is similar to a System Benefit Charge (SBC) that is in place in California and other states. The major difference might be the source of the funds. In the case of most SBCs, a tax is placed on the ratepayer in the form of a surcharge. This is not unlike our current surcharges to pay for IRP or positive energy adjustment costs 21. The $4M could also come from the state s general fund. So, again, it comes down to a choice of whether the ratepayer foots the bill or the taxpayer or both. In the BAU + the taxpayer is investing via the renewable tax credits, which could theoretically be expanded. Currently, any net lost revenues from net metered systems are being paid by the ratepayers. With either approach to fund the $4M, the investments would help pay to meet the goals of our RPS, and the taxpayers will pay for the bill, as opposed to the ratepayers. There are a number of options for use of the fund. For example: Pay for the market reform adders discussed above; Pay for a state Production Tax Credit (PTC) to mirror the federal PTC, which has been particularly effective in promoting windfarms on the mainland. The federal PTC, currently due to expire on December 31, 2003, effectively pays projects via a tax credit to the investors approximately 1.8 cents/kwh for the electricity actually delivered during the first 10 years of the projects. While currently only available for wind and close-loop biomass, there have been proposals to expand coverage to other biomass, and solar. Note: there is a precedent for this type of approach, e.g, the past, there have been both federal and state investment tax credits; Enhance the state tax credit law to increase or remove the CAP (currently at $250K) on 20% tax credit for commercial wind and 35% tax credit for solar projects; and Expand the credit to include certain biomass technologies. 21 The Energy Cost Adjustment Charge (ECAC) which is applied to customer bills. The ECAC can be a credit, but in recent history the ECAC has been positive. Interim Report 42 November 19, 2003

47 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Revising the phasing strategy to incorporate alternate public policy options The net impact of employing market reform measures or increased incentives will be to accelerate the implementation of renewables. However, a detailed analysis of the quantitative impacts of public policy options on specific projects was beyond the scope of this study. Qualitatively, it would appear that a 2 cent adder or a state PTC would probably accelerate implementation by 2 to 5 years, depending on the technology. Assessing the Economics of a Major Shift off of Oil As a complement to the overall study and specifically to the examination of Public Policy Options, Tom Loudat and Associates (TLA) was contracted to assess the economics of a major transition in our energy strategy, i.e., off of oil. See Appendix L for a copy of the TLA study entitled Economics of Transitions to Heat and Electricity Through Non-Conventional and Renewable Fuel. Framework Development. The TLA study presents a framework allowing the assessment of the economics of power generation transitions. The qualitative aspects of this framework demonstrate the breath required for a comprehensive economic analysis of this transition. Since the framework is quantitative it also allows a preliminary investigation of the economics of meeting incremental power demands transitioning from central generation (CG) capacity to distributed generation (DG) capacity. After evaluating four potential models, TLA selected the WADE model, developed by Casten and Collins (see Appendix L for details of the model and the evaluation process). The WADE model results show that the optimum way to supply incremental electric load growth is full reliance on DG. Mainland Study. In a study performed by the authors for the 20 year period on the mainland from 2000 to 2020, the 2020 incremental power cost under DG would be 5.8 cents per KWh as compared to 8.9 cents/kwh for power from new CG, a reduction of about 35 percent. DG reliance also lowers total capital cost by $291 billion or 38%, reduces 2020 incremental power costs by $52 billion and reduces N ox (Nitrogen oxides) by 68 percent, S 02 (Sulfur Dioxide) by 91 percent, PM 10 (Particulate Matter) by 5 percent and carbon dioxide emissions by 46 percent versus total reliance on CG. The authors found that markets have largely chosen CG due to outmoded laws and regulations that are unintentional barriers to efficiency. States and countries that remove barriers can gain significant competitive advantage over polities favoring the status quo, which fail to remove barriers to more efficient DG. The savings from DG as compared to CG result due to a reduction of capital costs and losses from T&D associated with CG power, through recycling the normally waste heat from electric generation and by providing power-utilizing renewables technology. Oahu Case Study. TLA adapted and used the model, herein referred to as the Hawaii Energy Transition Model, for a preliminary analysis of Oahu s incremental power demands through With respect to meeting Oahu s needs with a 100% DG versus 100% CG, the preliminary model results include: a capital cost increase of $250 million, an increase of 38%; an incremental power cost savings of 2.18 cents/kwh, a savings of 22%; and reductions in emissions ranging from 38% to 74% depending on the specific pollutant. Interim Report 43 November 19, 2003

48 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The Oahu results differ from the mainland in two regards: first, there is a capital cost premium of 38% on Oahu, compared to a 38% savings on the mainland, and, second, the power costs savings are not as good (22% vs. 35%). Regarding the capital costs, HECO indicated to TLA that they have no plans new generation during the next 20 years. In addition, the expected T&D costs ($20M) are much lower (roughly 1/6 th ) of the incremental T&D costs on the mainland. On the other hand, the reasons for difference in the power costs savings are not directly apparent. In addition, TLA has estimated that the power cost savings of $58M in 2023 resulting from a transition to DG. $44.5M or 77% of the $58M would leave the state, translating into a loss of 1239 jobs, a labor income loss of $33 million, and lost tax revenues of $6 million. Even though the results are preliminary, they support the contention that every measurable policy goal is improved by utilizing DG given the base assumptions regarding current technology, efficiencies, costs and emission in the Hawaii Energy Transition Model. The numerous options tested in the model all demonstrate a uniform advantage for DG derived power. Since DG technologies are in the early part of the learning curve, further DG improvements can be anticipated as deployment increases. The recent blackout in the North East and Canada stretching from Toronto to New York shows how system vulnerability due to system surges, extreme weather or terrorist actions will improve as the potential for DG is realized. Power quality will also improve by moving towards a hybrid of CG and DG power systems. The prima facie evidence from the TLA analysis that supplying approximately 80 percent of Oahu s power need from CG may no longer be optimal suggests that similar analysis holds true for the other counties in Hawaii. It is clearly important to revisit and reexamine Hawaii s regulatory environment for the utilities industry, the structure of institutional incentives for nonconventional and renewable fuels, refinery and transportation constraints, and constraints imposed by resource capacity and community acceptance. Siting of co-generation facilities in the State and power procurement are other candidates demanding immediate attention in order to facilitate the emergence of green power in the State. The time appears to be propitious for making the transition to soft energy paths. Interim Report 44 November 19, 2003

49 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 3.0 Summary, Conclusions and Recommendations A summary of the study objectives, key outputs and approach, results and conclusions, and recommendations are provided in the following three sections. 3.1 Summary of Study Objectives, Key Outputs and Approach The primary objective of this study was to develop and evaluate a working database of potential wind, solar and biomass projects and other commercial activities for the generation of electricity in Hawaii over the next 30 years, and to examine possible frameworks for evaluating the resulting economics impacts. The key outputs were the preparation of a strategy to phase in renewables into the electric utility grids, an evaluation of the potential for alternative public policy options to facilitate the implementation process, and a preliminary assessment of the overall economic impacts to the state. The approach started with the assembly of an initial working database of about 108 candidate projects utilizing the Global Resource Assessment (GRA) prepared by the Hawaii Natural Energy Institute (HNEI) as the reference point. The GRA incorporated results from precursor studies conducted by Robert Lynette and Associates (RLA) on the Hawaii Energy Strategy (HES) for the Department of Business, Economic Development and Tourism (DBEDT) and by GDS in support of the Renewable Portfolio Standards (RPS) initiative also for DBEDT. Performance and cost estimates of wind, solar and biomass projects from these studies were reviewed and updated. The candidate projects were evaluated in a three-step process: Project Screening. The candidate projects were screened to determine which projects were realistic candidates for development or could reasonably be expected to be during the 30-year timeframe. The screening process included evaluation of utility integration, land use and community acceptance issues. A total of 26 projects survived the screening process and were selected for further analysis; Preliminary Phasing Strategy. Future performance and costs estimates were prepared for the 26 projects and two biomass projects were added, bringing the total to 28. Future project costs were compared with estimates of future utility market prices for electricity. A preliminary strategy was initially developed for phasing the projects and activities on our island grids and to meet our energy needs over the next 30 years, assuming today s economics, government policies, and utility and business practices ( business as usual scenario). The 30-year period was broken down into three sub-periods: o near-term (2003 to 2008), o mid-term (2008 to 2018), and o far-term (2018 to 2033). Finally, an assessment was made of the business-as-usual scenario in terms of the implementation of renewables under our state PURPA law. Public Policy Options. Alternative public policy options were identified and evaluated for the potential to facilitate the phasing strategy. In conjunction with the evaluation of public policy options, a preliminary assessment was made of the potential overall economic impacts associated with a shift towards renewables. Specifically, with support from Tom Loudat and Associates, a preliminary assessment was made of several potential frameworks for conducting such an analysis of the overall economic impacts to the state. One approach was selected and a preliminary analysis was conducted for Oahu. Interim Report 45 November 19, 2003

50 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 3.2 Key Results and Conclusions The key results are discussed below by key study area. Identifying and Characterizing the Renewable Technologies Appropriate for Hawaii The primary wind, solar and biomass technologies studied and evaluated as being the most appropriate for Hawaii s wholesale and retail electricity markets are: Wholesale (Supply-side) Windfarms, Parabolic troughs, Photovoltaics, and Biomass Gasification. Retail (Demand-side) Solar hot water, Photovoltaic, and Solar Air Conditioning. Obtaining accurate data and information the technologies was a challenge. The level of detail and certainty was directly proportional to the maturity of the technology, which fell roughly in the same order as the technologies are listed above. In addition, developers and the utility were not eager to share data and information that were not public. Analysis and comparison of the past 9 years of utility avoided cost data and the consumer price index (CPI) showed that the avoided costs have been increasing at a compounded rate of 3% above the CPI. Given that, the avoided costs will more than double during the 30 year timeframe. During the same period, renewable costs will continue to drop, and market opportunities will open up, based on the readiness of the specific technologies, the market price, and the ability of developers to overcome implementation issues and finance projects. It is believed that the approach used to characterize the performance and costs of the technologies is valid, but is subject to the accuracy of input data and information. Thus, the evolution of the working database is considered a work in progress. Development of Commercial Projects The screening process revealed a number of important issues, the sum of which, are directly relevant to determining viability of specific projects. These include: Utility-Integration Issues: firm power sources have the highest value to the utility, as they can be depended on and can defer new generation needs, intermittent sources have less value and currently face requirements (performance standards and fault-ride through) to protect the reliability and integrity of the grid, system operational constraints, due to system emergencies and low, night-time loads when intermittent sources may be curtailed, and increasing levels of intermittent sources can be facilitated with the addition of storage, such as pumped-hydro, to the grid. Interim Report 46 November 19, 2003

51 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Land-Use Issues: Restrictions on land-use vary significantly with ownership and zoning, Projects on government land and/or land zoned conservation require permits and developers must prepare an Environmental Assessment, as a minimum, to show compliance with state land use and environmental laws, and Projects on private land face less permitting requirements, e.g., windpower is considered a pre-permitted use on private, agricultural land. Community Acceptance Issues: The community generally views renewable projects positively, However, specific projects may have visual, environmental (e.g., impacts to birds or their habitat and noise) and/or cultural impacts, and Community acceptance, in part, will be subject to full disclosure and discussion of project plans and details by the developer. A number of projects currently in development, primarily windfarms, had been studied previously on the GRA and looked like excellent development candidates given the utility s current avoided costs. However, developers were failing to reach agreement with the utility on power purchase agreements and project financial viability was in question. A brief analysis, utilizing two separate lifecycle costing models, revealed that actual: Project development costs are higher than predicted in previous estimates, due to the longer time and extended effort required to negotiate PPAs, Equipment costs are higher, primarily due to utility interconnect requirements not anticipated and included in previous cost estimates, and Fixed operating costs are projected to be much higher, due, in part, to taxes and insurance costs not accounted for in earlier studies In parallel, an assessment was made of the implementation of PURPA in business as usual scenario with the following overall findings: No new renewable projects have been constructed in the past 10 years, Negotiation of power purchase contracts has taken five years or more with HECO, and approval by the PUC up to an additional year, Developers sometimes share the responsibility in project delays, and, at least in one case, a project has died during a company transition, and At a minimum, one could conclude that implementation of renewables in Hawaii has not lived up to the intent and spirit of PURPA. WSB-Hawaii concludes that a more proactive, constructive approach to the implementation of PURPA is needed, referred herein as the BAU-Plus (BAU + ), that would include, as a minimum, the following characteristics: The contracting process with the utility and PUC is expedited via standard offer contracts, such that contracts can be negotiated, signed and approved by the PUC within one year; Developers are treated as partners and work closely with the utility to provide reliable power to the grid while maintaining the integrity of the grid; Interim Report 47 November 19, 2003

52 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Developers and the utility share the cost of resolving new grid integration issues. Recent experience shows that IPPs and the utility continue to face new technical challenges, and it is appropriate for the utility both to share added costs as we seek to increase our use of renewables, while maintaining the safety and integrity of our electric grids; Developers and the utility provide full disclosure to each other and to landowners and the community; and All stakeholders assist developers in securing support for projects. Developing a Project Phasing Strategy Moving forward, a phasing strategy was developed for the 28 selected projects and other commercial activities initially for the business-as-usual scenario with these results: Near Term (2003 to 2008). 9 wind and biomass projects and, on the demand-side, solar hot water and PV systems, were determined to be feasible in the near-term (2003 to 2008). Implementation of these projects and activities was estimated to bring the statewide renewable fraction by the end of 2008 to 11.7%, 22 with the following breakouts by island: Hawaii: 36.9% Maui: 15.9% Oahu: 6.9% Kauai: 25.5% Mid-Term (2008 to 2018). 19 wind, parabolic trough, PV and biomass, and, on the demand-side, solar hot water and PV systems, were determined to be feasible in the mid-term (2008 to 2018). Implementation of these projects and activities was estimated to bring the statewide renewable fraction by the end of 2018 to 28.6%. Hawaii: 66.9% Maui: 44.5% Oahu: 19.5% Kauai: 55.5% Far-Term (2018 to 2033). A detailed analysis was not conducted, in large part, due to the challenge and uncertainty of predicting that far into the future. Instead, the trends and factors that will impact the phasing strategy in the far-term were evaluated as each of our islands moves towards a 100% renewable future. Specifically: As renewables become cheaper than conventional fossil energy and on-shore sites for large projects are exhausted, off-shore windfarms will be considered, along with other technologies not studied (e.g., wave, OTEC). The people of the outer islands, especially Molokai and Lanai, will have many options to consider, including energy crops, such as biodiesel, to fuel generators, and combinations of wind, parabolic trough, and PV in conjunction with storage; 22 Based on the estimated renewable fraction of 6.2% for Interim Report 48 November 19, 2003

53 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The remaining energy needs, especially on Oahu, will be met by demand-side options, including technologies not studied, e.g., deep ocean water air conditioning. By 2033, there could be 200,000 solar hot water systems, offsetting 2.85% of our total statewide electrical demand; and more than 140,000 residential and small-commercial PV systems supplying 3.1%. Evaluation of Public Policy Options A limited analysis was conducted of two alternative public policy options, market reform and increased incentives, in order to evaluate the potential for accelerating the implementation of renewables. The market reform options, which would be paid for by the ratepayer include: opening the market and reducing the barriers to entry, e.g, standard offer contracts; setting a requirement (or mandate) for renewables, e.g., RPS; increasing the price of renewable electricity the utility is willing to pay above existing avoided costs, e.g., an adder for increased system reliability, energy security and environmental protection or an electricity feed law; and lowering the price of renewable electricity to the customer, e.g. via retail wheeling agreements. Market reform options can serve to accelerate the implementation of renewables by effectively increasing the market price, which would allow projects currently over the market price to be competitive. Incentives serve to create a stronger market pull for renewables by lowering the installation costs of projects. The approach on this study was to evaluate the impacts of a $4M/year incentive fund, which would be paid for by the taxpayer. This fund could be used to: Pay for the market reform adders discussed above; Pay for a state Production Tax Credit (PTC) to mirror the federal PTC, which effectively pays projects via a tax credit to the investors approximately 1.8 cents/kwh for the electricity actually delivered during the first 10 years of the projects; Enhance the state tax credit law to increase or remove the CAP (currently at $250K) on 20% tax credit for commercial wind and 35% tax credit for solar projects; and Expand the credit to include certain biomass technologies. Qualitatively, it would appear that a 2 cent adder or a state PTC would accelerate implementation by 2 to 5 years, depending on the technology. Tom Loudat and Associates conducted a preliminary analysis utilizing the WADE model of Oahu s incremental power demands through 2023 to illustrate the potential benefits of meeting Oahu s future needs with a 100% distributed generation (DG). Specifically, while the results show that a greater capital investment, compared to the 100% central generation (CG) approach, there would be an incremental power cost savings of 2.18 cents/kwh (or 22%)with DG compared to CG. The WADE model appears to be an excellent tool for evaluating Hawaii s energy transition to distributed generation, which would include renewables. Interim Report 49 November 19, 2003

54 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Brief Assessment of the Potential Impacts of Known Factors ( Wild Cards ) The important factors, some of which might be called wild cards, that will influence and possibly modify the trends and pace of our energy transition include: Maturation process of the renewable technologies: the process is closely related to the level of government support for R&D and market incentives. Government support will be especially important for the technologies in this order: PV, biomass gasification, parabolic troughs and wind; Structure of the market: renewables will do best in open markets that have a mandate for renewables, such as a RPS. In monopoly markets, such as in Hawaii, RPS may also work, but may require incentives for investor-owned utilities; Fossil Fuel Prices: fluctuations in fossil fuel prices, and especially for oil, which is the most volatile and on which Hawaii most heavily depends, work both ways. While there are experts on both sides of this issue, recent history validates a continuous increase over time in the market price for electricity in Hawaii. More importantly, Hawaii needs to address the issue of the export of our dollars to import fossil energy. Reducing our dependence on imports will provide overall economic benefits to the state; Role of Renewables in the Utility Grid. Initially, renewables serve to save fuel, especially from intermittent sources like wind and solar. The value of renewables increases with their ability to defer and new conventional generation needs, and, ultimately, to replace all conventional generation. This process will need to be planned and managed carefully so that conventional generation is not stranded; Energy Use Trends. One of the real wild cards might be a long-term warming trend in Hawaii s weather and/or an increase in our average humidity. Either one would likely trigger a greater need for air conditioning our homes. However, this need could be met by solar, as described herein; and Environmental Mandates: mandates will most likely come on a separate track from conventional government policy, but could be consistent with renewably-friendly policies already in place or contemplated. For example, if the U. S. were to agree to a Kyoto-style requirement to reduce emissions, a transition to renewables along with other fossil-fuel saving measures, would be the order of the day. Many, if not most, observers of the Kyoto-process would agree that a protocol will come. It is only a matter of time, and most certainly within our 30 year timeframe. Overall Conclusions: the study results show that there is a ladder of realistic projects and commercial activities, and a phasing strategy for implementing them, such that Hawaii could double its renewable use in the near-term (2003 to 2008) and double it again in the mid-term (2008 to 2033). The key implementation issues have been identified and considered in developing the phasing strategy. The phasing strategy, however, does assume that there is a proactive, constructive implementation under our state PURPA law. Public policy options are needed to support the process, and accelerate the process if desired. Interim Report 50 November 19, 2003

55 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft 3.2 Recommendations A ladder of realistic projects and commercial activities has been identified that can move us down the implementation path towards achieving our state goal to reduce our dependence on imported fossil energy. The time has come to focus on an implementation plan. The following are recommendations in support of that objective: An implementation plan needs a specific goal or a set of goals that quantify Hawaii s Energy Transition to preferred, sustainable energy future, such as the Governor s Goal of 20% of our electricity from renewables by 2020; The plan should also look beyond a specific period by establishing a planning goal to continue to update the goals and the plan, e.g., every three to five years; The structure of the utility system is important. The results of this study suggest that a transition towards distributed generation, which is a paradigm shift, is needed. This transition should be considered as another key goal or result of the plan; In addition to distributed generation, which includes renewables, the plan should also look at how we promote and use other distributed energy resources, such as energy efficiency (including efficient lighting, appliances and load management), energy conservation (including solar hot water and air conditioning systems), and storage; The detailed approach to how the transition will be implemented is perhaps the most important aspect of the plan. The approach will benefit from innovation (to overcome technical and administrative challenges) and competition (to achieve the plan s goals in the most efficient and cost-effective manner). With our current monopoly structure, the results of this study indicate that we need a proactive, constructive implementation of PURPA, and we need to establish and maintain vibrant competition for energy services. Thus, the approach should include the market reform and incentive measures that would best support the plan s goals and approach; and Finally, the plan is only a plan until it gains stakeholder and public support and recommended public policy measures are implemented. More importantly, and it has already been said: We need sustainable policy for sustainable energy. Interim Report 51 November 19, 2003

56 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft APPENDICES Interim Report A-1 November 19, 2003

57 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Appendix A HEPF Terms of Reference* Task #2 Renewable and Unconventional Energy Consultant (s) shall prepare a brief analysis of the major technological trends and resources that may influence the supply of renewable energy in Hawaii over the next 30 years. Promising technologies shall be accompanied with an indicative economic analysis. Phase 1- Identifying a framework(s) for plausible renewable alternatives Consultant comments shall include, but not be limited to, the following topics: a. Overview of technology and resources An overview of the technology/resources which are most appropriate to meeting basic energy needs in Hawaii. The technologies and role of centralized and decentralized energy storage. A brief commentary on the prospects for long range transfers of electrical energy (e.g. microwaves, cryogenic cables etc.), which might bring electrical power to/from the US Mainland to Hawaii or distribute power between the islands in the next thirty years. b. Impact of demand characteristics on renewable options. The implications of the electrical load characteristics, reliability, power quality and costs, in Hawaii on the introduction of new and renewable based energy supplies. This analysis should make reference to the structure of consumer demand (e.g. tourism/military/government as major consumers, limited industrial demand etc), the difficulty of inter-island connections, and the mismatch between population distribution and renewable energy resources. [This analysis must be done by island.] For non-electrical energy options the consultant will provide a summary of capacity constraints on any renewable options that are identified as highly promising c. Implications for energy security through new and renewable technologies A qualitative assessment of potential economic implications and the likelihood of success of Hawaii adopting measures designed to increase energy security through the introduction of new technologies and renewable energy sources. d. Public policies to promote new and renewable energy technologies A summary of public policies which have been adopted in other states/jurisdictions to promote the introduction of new technologies and technologies based on renewable energy sources. Note should also be made of any policies being considered for adoption by the Federal Government. *From the HEPF Request for Quotations Interim Report A-1 November 19, 2003

58 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Phase 2- Economic Analysis of Potential Renewable Options Based on options identified in Phase 1 above, the consultant shall undertake an indicative economic analysis of probable costs and benefits to Hawaii from implementing promising renewable technologies. a b c This analysis shall include: 1) solar (both photovoltaic and water heating), 2) wind technologies and 3) ethanol production plus any other technologies identified as particularly promising in Phase 1. In undertaking this analysis the consultant will identify key costs and benefits that might be affected by technological development over the next twenty years. The consultant will comment on current public policies that may either encourage or create barriers to the implementation of increased renewable use. This work may draw on (but not necessarily be limited to) work undertaken by the regulatory and incentives consultancy. Interim Report A-2 November 19, 2003

59 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Appendix B WSB-Hawaii Task Breakdown and Detailed Discussion of Approach and Methodology Note: due to funding available, elements of Phase 1 and 2 (as discussed in the Terms of Reference) were combined and the number of technologies evaluated was limited to three: wind, solar and biomass. The Scope of Work was broken down into three Tasks: Task 1 Development of a Working Database The overall goal of this task was to assemble a working database of candidate renewable projects and commercial activities, which could be subjected first to analysis in today s current market and economic conditions, and then for development of a preliminary strategy for phasing in renewables over the next 30 years (Task 2) and evaluation of public policy options for accelerating the process (Task 3). The key output of Task 1 was to develop a list of projects and commercial activities given our current context, i. e., Hawaii s current economic situation and the market conditions, regulatory framework, government policies, and utility and business practices. The approach for Task 1 included the following four steps: Step 1. Gather data and information The organizations and individuals contacted are listed below. In preparing for Step 2, emphasis was placed on gaining an understanding of the previous Hawaii Energy Strategy (HES), GDS and Hawaii Natural Energy Institute (HNEI) studies, and to seek additional data and information relevant to depicting today s market and projecting future conditions. During this step, the following are the key data and information: Current costs and performance of systems on the mainland and in Hawaii, Projects of costs and performance of systems on the mainland and in Hawaii, Economic data and assumptions for analysis of project lifecycle costs, Developer perspectives of the overall viability of candidate projects, Characteristics of the utility grids in Hawaii and integration issues, Land-use issues and landowner perspectives, and Community acceptance issues and perspectives. Sources of data and information included: HES (Project No. 3 - Renewable Energy Resource Assessment and Development Program, conducted by RLA & Associates) - November Available only in hard copy (limited numbers) from DBEDT; HES (Follow-Up Study in Support of RPS, conducted by GDS Associates with support from Global Energy Concepts) - March This report can be downloaded from DBEDT s website at: 23 Renewable Energy Resource Assessment and Development Program, Hawaii Energy Strategy, Project No. 3, November 1995, prepared for SOH/DBEDT by RLA Consulting, nd Avenue HE, Suite A, Bothell, WA Interim Report B-1 November 19, 2003

60 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft HNEI Global Resource Assessment for Hydrogen Production in Hawaii (draft) 25. This assessment is in progress, and the final report is pending; The Changing Face of Renewable Energy: A Navigant Consulting Multi-Client Study, Public Release Document 26. This report can be downloaded from Navigant s website at: /$FILE/NCI-RenewableEnergy-MultiClient-PublicDocument-August2003v.pdf; NREL (National Renewable Energy Laboratory) Web-Sites (Wind, Solar, Biomass, and Energy Analysis). The NREL Power Technologies Databook can be downloaded at: The relevant sections are included in Appendix H. See also (the databook website) for the complete list of information on power technologies; NREL RET Finance Model: This is an on-line-only model, which focuses on the financial aspects of projects, can be accessed via: RETSCREEN Model, Minister of Natural Resources, Canada: This model, which is a more engineering-oriented model that also provides detailed financial information, can be downloaded from: and Hawaii Energy Regulation and Taxation, prepared by Haiku Design and Analysis (Carl Freedman) and Microdesign Northwest (Jim Lazar) for the HEPF. Personal Correspondence: Wind: Keith Avery (Urban Power Company, Ashland OR), Richard Horn (Hawi Renewable Development, Chico CA),Tony Pace (Apollo Energy Corporation, Foster City CA), Brian Smith (Wind Program Manager, NREL, Golden CO) and Sandy Butterfield (Chief Engineer, NREL, Golden CO), Solar: John Czingula (Solargenix, Denver, CO), Cully Judd, Rick Reed and Louis Valenta (Inter Island Solar Supply, Honolulu HI), Keith Cronin (Cronin Engineering, PV Installer, Kailua HI), Christy Herig (PV Program Specialist, NREL, Golden CO). Biomass: Robert Shleser (Biomass Consultant, Waimanalo HI); George St. John (Biomass/Hydro Consultant, Aiea HI); Scott Turn (HNEI, Honolulu HI; Ralph Overend, Biomass Program Manager; Matt Ringer, Staff Engineer, NREL, Golden CO; and Analysis: Blair Swezey (Senior Policy Advisor, NREL, Golden CO), and Jorn Aabakken (Energy Analyst, NREL, Golden CO). Step 2. Assemble Initial Working Database: Candidate Projects (See Appendix C) One of the outputs of the HNEI Global Resource Assessment (GRA) was an estimate of the maximum amount of electricity that could be generated from Hawaii s identified resource areas and subsequently used to produce hydrogen. HNEI started with the potential projects and project areas that had been identified and evaluated previously in the HES and GDS energy studies. WSB-Hawaii inserted these data into candidate project Excel workbooks. 24 Analysis of Renewable Portfolio Standard Options for Hawaii, March 2001, prepared for SOH/DBEDT by GDS Associates, Inc, 1850 Parkway Place, Suite 720, Marietta GA Hawaii s Renewable Energy Resources, HNEI Study prepared by Mitch Ewan, draft in progress, July The Changing Face of Renewable Energy: A Navigant Consulting Multi-Client Study, Public Release Document, June 18, 2003, Lisa Frantzis, Navigant Consulting, 220 Wheeler Road, Suite 400, Burlington, MA Interim Report B-2 November 19, 2003

61 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The workbooks included spreadsheets that list the HES and GDS data by technology (one each for wind, concentrating solar power, photovoltaics, and biomass), by island and by project area. These spreadsheets were used as the reference point for the detailed evaluation, including screening of the candidate projects and evaluation of project costs and performance. New projects and commercial activities were added as appropriate. These spreadsheets (See Appendix C) include the following information: project site, size in megawatts (MW), estimates of installed and energy costs (optimistic, nominal, and conservative), and estimates (optimistic, nominal, and conservative) of output in megawatt-hours (MWH). The HES study, conducted in 1995, included estimates in two timeframes: current (1995) and future (2000). The GDS study was conducted in 2000 (reported in 2001) and also included estimates in two timeframes: current (2000) and future (2005). The list of candidate projects is lengthy, in large part, due to consideration of multiple project options at a given project site or project area. For example, 5 and 15 MW windfarms were considered for Kahua Ranch and North Kohala (Hawi); 3, 30 and 50 MWs at Lalamilo Wells and so on. The data, as one might expect, show that the larger projects were more potentially costeffective. However, the earlier studies did not reach any conclusions as to which project sizes would be most feasible to develop. As indicated in the spreadsheets, a number of the candidate projects were selected for further evaluation in Step 3. Step 3. Initial Evaluation of Existing Databases Screening Process (See Appendices D-1 to D-4) The initial evaluation of the existing databases consisted of in-depth review of the candidate projects assembled in the initial working database. It was noted that HNEI recognized, but did not evaluate on the GRA the potential impact of land-use and other constraints (e.g., community acceptance) to reduce the renewable potential. In addition, integration issues with the utility grid were not considered, as the renewables-to-hydrogen applications do not require the renewables to be interconnected with the grid. However, the implementation issues are at the heart of this study, and the candidate projects were screened to determine how much of the potential suggested by the GRA could realistically be developed for the supply of wholesale electricity to the utility. Starting from the HNEI GRA, the candidate projects were evaluated by technology, island and project area, and resource availability, using a following set of three screens: utility integration, land use, and community acceptance as discussed below: First Screen: Grid Integration. The grid integration screen included all the issues associated with a developer s ability to gain access to the market (i.e., the grid). Overall, a number of technical and financial/ administrative issues must be resolved in order for the developer to secure a satisfactory power purchase agreement (PPA) to gain access to the market. Interim Report B-3 November 19, 2003

62 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft The technical issues are closely related to the location of the proposed project site and the type, size and operational characteristics of the technology, i.e., wind, solar or biomass, and are related to the utility s interconnection requirements. The interconnection requirements are developed in detail, based on the results of developer-funded interconnect requirement studies conducted by the utility. The primary output of an interconnect study, which can cost the developer $30 to $50K, is an assessment of how the technology (e.g., a windfarm) will operate on the utility s system under normal and emergency situations, and whether the utility can accept the specific wind turbine model and the proposed project on its grid. A significant amount of data must be provided by the developer, including a dynamic model of the wind turbine model and detailed wind data for the project site. The results also indicate the conditions under which the project output might be curtailed, and any additional requirements the project must meet. The key issues, which center on utility requirements to ensure grid reliability and integrity, are: Project Size Limitations. There may be limitations on the size (in MW) of project due to load constraints on the transmission line to which the project would be interconnected, and the amount of power than can be delivered at night. The latter is driven by the load and the amount of must-run generators on the grid; Performance Standards. Intermittent sources, such as wind, are required to meet certain performance standards, which limit the fluctuating content of the windfarm s output. If the windfarm exceeds the standard, the utility can curtail the project s output, resulting in revenue losses. It should be noted that most advanced wind turbines can meet the performance standards. However, this is nevertheless a contentious issue. It is hoped that once the new windfarms are operational, the experience will justify relaxation of performance standards; Fault-Ride-Through Requirements. All projects may be required to meet a fault-ride though requirement (FRTR) that specifies the time the facility must stay on-line during utility fault conditions. Normally, a wind turbine s controller will sense a drop in line voltage, such as would occur during fault conditions, and disconnect the turbine in order to protect the turbine from damage. The utility s requirement, which is designed to keep sufficient generation on line and preclude potential power blackouts, would increase the time the turbine would have to stay interconnected. This issue is not unique to Hawaii, and is being discussed in other venues, including on the mainland and in Europe. However, HECO is the first to impose a FRTR and the FRTR is more stringent than is being discussed elsewhere, especially when combined with the performance standard. There are no known turbines that can meet HECO s FRTR. It is believed that variable speed turbines with power electronics can provide a FTR capability for a less stringent FRTR. Fortunately, developers have at least one technical solution, albeit a very expensive power conditioning system that must be added to the windfarm to provide the required FRT capability. It should be noted that this is a very contentious issue, as there are questions as to whether the requirement, as proposed, is needed, and whether the developers should bear all of the added costs to meet the FRTR. The financial/administrative issues are negotiated on a project-by-project basis. The primary issues relevant to the financial success of a project are: Avoided Cost Payments. Under Hawaii s PURPA law, qualified renewable facilities are eligible for avoided cost payments. The payments have two primary components: energy (in cents/kwh), which are the fuel and variable operation and maintenance costs avoided by the utility, and capacity (in $/kw-year), which are the costs avoided when new generation capacity is deferred. Interim Report B-4 November 19, 2003

63 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Historically, the utility has made energy payments to all IPP facilities, but only capacity payments to those facilities that provide firm power (by their definition, capacity which is dispatchable). The energy payments are adjusted quarterly, and basically go up and down with the price of oil. In addition, PURPA contracts originally had no minimum (or floor) price, which made it difficult for developers to secure financing. Specifically, without a floor price, developers could not estimate a minimum project revenue stream with any certainty. The solution was the floor-price mechanism approved by the PUC in the mid- 90 s, which allows a developer to lock in a minimum energy payments; Alternate Cost Payments. Under PURPA, alternate cost payments are possible. The Zond-Pacific contract for a 10 MW windfarm at Kahua Ranch included a levelized payment with an initial floor price and an annual 1.5% escalator. Another approach might be to have a floor and a ceiling price; Length of the PPA. Most developers seek a minimum PPA term of 20 years, and an option for another 5 or 10 years. Note: a 20 to 30 year PPA term is consistent with the term a developer would seek of the lease for access to a project site; and Environmental Credits. Developers for projects on HECO s system have been required, against their objections, to assign all potential future environmental credits to HECO. Environmental credits could become a reality, for example, if Hawaii participates voluntarily in credit trading for reduction of fossil emissions. Credit trading could occur as part of a formal requirement (ala the proposed Kyoto Protocol) placed on the utilities to reduce fossil emissions. In summary, WSB-Hawaii s assessment is that negotiation of PPAs with HECO (which negotiates all PPAs on its system, and the systems of its subsidiaries, MECO and HELCO), has been a contentious, long drawn-out, expensive process. The negotiation process has taken a minimum of five years. In contrast, developers have not experience the same barriers with Kauai Island Utility Cooperative (formerly Kauai Electric). For example, a windfarm developer negotiated a PPA with Kauai Electric in six months. At the risk of taking arrows from both sides, the following is a representation of the two views of the HECO process: Developers generally do not believe the avoided costs offered by the utility represent the intent of PURPA and are not equitable, thus representing a barrier to development. Developers have questioned the need for the performance standards and fault ride through requirements as being imposed by HECO, along with the release of future environmental credits, especially without review and approval by the PUC. Overall, developers need to be able to secure a contract with utility and approval by the PUC within a year. Developers also acknowledge as the negotiation process elongates, they can be sources for delays, often to respond to utility requirements, but also when there are transitions in company ownership and/or objectives. However, developers believe that Standard Offer Contracts would facilitate the process, and would avoid the existing process, which is more like trying to hit a moving target. HECO believes that current energy payments are appropriate, that capacity payments are not warranted, and floor price mechanism may result in the utility and the customer paying too much for renewable electricity. HECO maintains that the required performance standards and fault ride through capabilities are needed to ensure reliability and integrity of the grid. HECO argues that negotiations require time, often due to the effort required to resolve complex technical and administrative issues. Finally, HECO questions the feasibility of establishing Standard Offer Contracts, as their experience suggests that developers will likely want to deviate from such contract formats. Interim Report B-5 November 19, 2003

64 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Second Screen: Land Use Gaining access to a project site is a key step in the development process, either by purchasing land or securing a lease from a landowner. Typically, most developers seek leases rather than buying land for their projects. Overall, a number of administrative issues must be resolved in order for the developer to secure a satisfactory land lease for access to the site, including: Land Ownership. Land ownership is a key factor in the process to obtain a land use agreement. In the case of government land (federal, state and county), both a permit and lease are required from the landowner. If the project is to be sited in land zoned conservation, a conservation district use permit (CDUP) must be obtained from the state Department of Land and Natural Resources (DLNR). In the case of a private landowner, only a lease is required unless the project would be on conservation land. In that case, A CDUP is required. All projects will require a construction permit from the county, and, depending on the type of the project, other permits may be required. Notes: (1) the key components of a lease include: the term (typically 30 years), payment (can be a set amount per year per acre used by the project or a share of the gross revenues from the project), and other conditions, such as what happens if the project is terminated, type and amount of insurance coverage required, etc., and (2) Regarding leases on state land, there has been a recent precedent set by the DLNR and the state legislature. Specifically, Zond-Pacific applied for and was granted a CDUP for the Kaheawa Pastures windfarm on state conservation land above Maalaea on Maui. However, since DLNR was required by law to auction off the lease, Zond was faced with having to bid for and possibly being outbid and losing their initial investment in the project. Given that and the message that would sent to other developers, DLNR went to the legislature and a bill was passed in the 2002 session authorizing DLNR the option to negotiate leases directly. Zoning. The zoning category, together with the type of landowner, also has a significant impact on the permitting and lease processes. This can be best described by illustrating two ends of the spectrum: on one end, wind energy projects on private land, zoned agricultural, are considered a pre-permitted use, and do not require an Environmental Assessment (EA); while wind projects on state land, zoned conservation, do require an EA, as a minimum. See also discussion on Environmental Requirements. Environmental Requirements. All projects on government land and on private conservation land must meet the full environmental requirements of Chapter 343 of the Hawaii Revised Statutes, in order to gain approval for a Conservation District Use Permit (CDUP). As a minimum, an EA, which may take a year to complete, is required. An EA may be sufficient, if it can be argued that there will be no significant impacts from a proposed project. However, due to the size and nature of power projects and potential significant impacts, the more detailed Environmental Impact Statement (EIS) is generally required. The preparation and approval process typically takes a minimum of a year and a half, including the review by the accepting agency and the public. Note: the environmental review must include all potential impacts, including damage to land and water resources, harm to birds and plants, noise, visual, and economic and cultural. Landowner Support. Ultimately, the developer needs the landowner s support. At the end of the day, after all permits are obtained and the lease negotiations are completed, it really comes down whether the landowner believes the project will be a good neighbor in the community. Interim Report B-6 November 19, 2003

65 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Third Screen: Community Acceptance Issues The community is often interested in the same issues at the landowner, and the permitting process, especially on government land, allows the community an opportunity to contribute and participate directly in the process. While a detailed survey was not conducted specifically for this study, some observations based on the results of national surveys on renewables and WSB-Hawaii s experience can be made: Overall. Renewable projects are generally viewed positively by the community. There is the recognition that all projects will have some negative impacts, but renewables can provide significant benefits in terms of protecting the environment, stimulating the economy and diversifying our energy resources. Visual Impact. All projects face potential objection, if the community feels there is a loss of visual amenity. For example, visual impact has been raised as concern for windfarms. However, compared to some stories of projects elsewhere, the community in Hawaii has gone on record (Kaheawa Pastures) in full support of the project and did not object to the potential visual impact. In any case, each project must be evaluated on its own merits; Impacts to Birds and Bird Habitat. While considered a rare event worldwide, certain windfarms have resulted in injury and mortality to birds, especially raptors at windfarm sites in California and in Spain. However, in Hawaii there have been no records of bird strikes or injury on the windfarms constructed during the 80 s. Note: since there are Nene in the proposed project at Kaheawa Pastures, the issues were studied thoroughly. A program was designed to mitigate the risks to a level acceptable to DLNR; Cultural Impacts. Potential cultural impacts are arguably more important in Hawaii than elsewhere. In most cases, projects can be modified to avoid valuable cultural resources (e.g., a heiau), accommodate native practioners access to the land, or meet other culturally-oriented requests; and Noise. Facilities generate noise, and, if located too close to residences, businesses or other areas that humans use, there can be problems. This was not an issue for the Kaheawa Pastures windfarm, but could be an issue for other project proposals. Overall Notes on the Screening Process: It may be debatable as to which screen one should apply first. However, the order presented above represents the historical approach used by most developers, e.g., talk first to the utility about potential market opportunities, then talk to landowners about hosting a project, and then, assuming landowner support is obtained, discuss further and negotiate with the utility and seek support from the community. WSB-Hawaii observes that developers wishing to be good neighbors will seek community support early in the process. In addition to the screening process, an initial assessment was made based on overall performance, costs and financial viability in terms of today s economics (here in referred to as the business as usual scenario). As a result of the screening process and in preparation for Step 4, the initial working database was revised and key projects were identified as noted in the Appendix D spreadsheets. Finally, a review of candidate commercial activities was initiated in preparation for Step 4. These commercial activities include residential and commercial solar hot water, solar air conditioning and photovoltaic systems. Interim Report B-7 November 19, 2003

66 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Step 4. Initial Prioritization of Projects and Activities in the Business As Usual Scenario (See Appendix D-5) The revised working database was first segregated into supply-side and demand-side segments, and each segment broken down by island and technology. Each project (e.g., windfarm) and commercial activity (e.g., installation of solar hot water collectors) was then compared based on a number of figures of merit, e.g., project size, installed costs, capacity factor, annual output in Megawatt hours (MWH), levelized cost of energy, percentage of island and statewide electricity usage, and barrels of oil avoided. The initial prioritization was accomplished by identifying key market opportunities for the Business As Usual (BAU) scenario in the near-term. The BAU assumes the current economic and market conditions, regulatory framework, government policies, and utility and business practices. This prioritization required updating the working database by: Assembling cost and performance data for each of the technologies for the year 2003 which included: Gathering data on proposed/existing projects in Hawaii and on the mainland, Using available data to estimate a range of projects sizes, e.g., available costs for a 10 MW facility were used to project costs for facilities from 1 to 50 MWs, Adjusting available data for previous years forward to 2003, Establishing the year 2001 as the reference point for energy use calculations. This is the current, most-complete information available from DBEDT, and Applying engineering judgment in consort with personal consultations with industry and laboratory personnel where data were unavailable. Identifying projects and other commercial activities already in development or that could reasonably be expected to be implemented in the near-term (now to 5 years from now). The database was expanded further to estimate performance and costs for the year All cost projections were made in $2003. Task 2 Development of Preliminary Project/Activity Phasing Strategy - Business As Usual Scenario The overall goal of this task was to develop a preliminary strategy for phasing in renewables over the next 30 years first assuming the Business As Usual (BAU) scenario. Note: in Task 3, the phasing strategy was expanded by considering alternative public policy options as a means to accelerate the phasing process. The 30-year period was broken down into three sub-periods as follows: near-term (2003 to 2008): now to five years from now, mid-term (2008 to 2018): subsequent following ten years, and far-term (2018 to 2033): final 15 years of the overall 30 year period. The approach for Task 2 included the following four steps: Interim Report B-8 November 19, 2003

67 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Step 1. Estimate future performance and costs of the projects and commercial activities The approach was to utilize available data and information to estimate future performance and costs to candidate projects and commercial activities. In this regard, NREL data (see the Technology Descriptions in Appendix H) were the most helpful. In addition, the Navigant Study and personal communications with NREL personnel and industry were very useful. For this study, performance and costs were estimated for the years 2003, 2008, 2013, 2018, 2023 and 2033 in $2003. Unfortunately, the sources of data were often from other years and in other year s dollars. For example, NREL data were for 2000, 2005, 2010, 2015, 2020, and, in some cases, to 2030, while the Navigant data were for the period from 2002 to 2013, and the GDS data were for 2000 and Consequently, the source data were interpolated to provide the desired time period in $2003. The future trends were estimated starting from the 2003 data assembled in Task 2 and using the trends predicted by NREL. In essence, these trends are broken down into ratios for year X as compared to the year 2003, e.g., the installed system cost ($2003) in year 2008 may be 90% of the year 2003, 85% in the year 2013, and so on. Step 2. Review the history and trends in utility capacity, demand, projected generator unit additions and planned retirements and avoided costs Current data and information on the utility s capacity, demand, projected generator unit additions and planned retirements, and avoided costs were obtained from the Hawaiian Electric Company Inc. (HECO), the Kauai Island Utility Coop (KIUC), and the Public Utilities Commission (PUC). Note: these data and information were essentially updates from the most recent Integrated Resource Plans (IRP) prepared by the utilities. The available data were reviewed and analyzed to summarize the average increases in capacity, demand and avoided costs over the period 1994 to present, with the exception of data from KIUC from 1996 to present. The specific sources of data obtained and reviewed include: HECO Electric Utility System Cost Data to the PUC under the Commission s Rule , dated July 1, 2002 and filings of its subsidiaries Maui Electric Company, Ltd. (MECO), dated and the Hawaii Electric Light Company, Ltd. (HELCO), both on the same date; HECO Energy Cost Data filings with the PUC (dated September 20, 2000; September 28, 2001; September 30, 2002; and June 30, 2003); MECO Energy Cost Data filings with the PUC (dated September 29, 2000; September 28, 2001; July 1, 2002; September 30, 2002; and June 30, 2003); HELCO Energy Cost Data filings with the PUC (dated September 20, 2000; September 28, 2001; September 30, 2002; and June 30, 2003); and Spreadsheet data provided by KIUC (Joe McCawley) on capacity, demand, avoided costs, and planned unit additions. Step 3. Compare the trends in future renewable costs versus utility avoided costs In addition to the data collected in Steps 1 and 2, the next challenge was to estimate the future trends in avoided costs. As an input to this analysis, additional sources of data were collected and reviewed including: energy cost trends prepared by the Energy Information Agency, and the Consumer Price Index (CPI) for Honolulu and the entire U. S. Interim Report B-9 November 19, 2003

68 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Given the projection of avoided costs, the initial comparison of renewable and avoided costs is straightforward, e.g., for example, at what point in the future do the declining costs of current high-cost renewables, such as PV, equal the increased avoided costs of the utility. The avoided cost trends, along with trends in renewables and the future utility needs in capacity, demand and generator additions and retirements, are the basic inputs needed for Step 4. Step 4. Assemble the Phasing Strategy for Business As Usual Scenario Step 4 resembled an overall system integration challenge, such as the basic process in the utility s IRP. Specifically, given existing generation and DSM, what is best way to meet the forecasted demand? The IRP process is intended to result in the lowest cost approach, given an overall set of goals and constraints. The process in Step 4 resembles IRP with one major exception: can all future electricity demand (utility and also non-utility) be met by renewables? Since it may not be possible to meet future demand entirely by renewables, consideration should also be given to the role of DSM and distributed generation, including Combined Heat and Power. Given this overall integration approach, it may be possible to offset and/or preclude the need for conventional, central-station fossil powerplants in Hawaii. Thus, the phasing strategy discussed herein will consider the following under the BAU Scenario as a means for meeting as much of our future electricity needs from renewables: The capability of intermittent renewable sources to save fuel and contribute to our state s Renewable Portfolio Standards (RPS) law, The potential for renewables with/without storage to provide net capacity to the utility grid and thus defer the need for fossil generators, The potential for renewables to meet on-site loads, and Implementation will be paced by the current market conditions, regulatory framework, government policies, and utility and business practices. Task 3 Evaluation of Alternative Public Policy Options The goal of this task was to review and evaluate alternative public policy options as a means to accelerate the phasing strategy developed in Task 2. The approach for Task 3 included the following two steps: Step 1. Review and evaluate public policy options The basic input for this step was the study conducted by Haiku Design and Analysis (Carl Freedman) and Microdesign Northwest (Jim Lazar) for the HEPF. This study, entitled Hawaii Energy Regulation, Taxation and Incentives, which provided a detailed discussion of policy options, was reviewed. Based on this study and input from the HEPF Project Team, it was decided that the public policy options to pursue would follow into two broad categories: regulatory reform and increased incentives. For example, regulatory reform could lead to higher avoided costs, as one option, while a budget of $4M for increased state incentives was suggested. Interim Report B-10 November 19, 2003

69 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft Step 2. Revise the phasing strategy to evaluate selected public policy options The implementation of the public policy options was assumed, whether through actions of the PUC or the state legislature. The resulting impacts on the phasing strategy were evaluated. It was anticipated that the net result would be to accelerate the project timelines. Step 3. Preliminary Analysis of the Overall Economic Impacts A preliminary assessment was made of the potential overall economic impacts associated with a shift towards renewables. Specifically, with support from Tom Loudat and Associates (TLA), a preliminary assessment was made of four potential frameworks for conducting such an analysis. The models evaluated were: 1. The Model Induced Technological Change (MIND) was developed by the Potsdam Institute for Climate Impact Research to capture the effect of induced technical change, economic growth and the post-kyoto process. The model focuses on R & D investments for improving energy use efficiency, investments in learning by doing within the renewable energy sector and investments in efficiency improvements within the fossil fuel sector. 2. The CRT Model was developed by Chakravorty, Roumasset, and Tse in The CRT uses a dynamic simulation model with endogenous resource substitution to study the transition from fossil fuels to renewable energy. The model determines the effect of technological advances in renewables on aggregate and sectoral level fossil fuel use and energy prices. 3. The MARKAL (the Market Allocation model) was developed by Smekens of the ECN Policy Studies Group as an integrated energy system model and as a possible tool for transition analysis. The model covers the energy system of OECD 1990 Western Europe enlarged with biomass and agri-food system in one single region. MARKAL is a least cost energy optimization model using linear programming procedure. 4. The WADE economic model developed by Casten and Collins, is an optimizing model for future heat and power generation in the United States. The model calculates economic and environmental impacts of supplying incremental electric load growth in America with varying mixes of central and decentralized generation. Starting with current generating capacity and estimates of retirement and load growth, the model builds user-specified capacity to meet future growth and retirement. The WADE model was selected for the purposes of this study. The model has shown significant savings for utilizing distributed generation to meet to future capacity and energy needs on the mainland. TLA then adapted model in order to conduct a case study of Oahu. Specifically, TLA worked with HECO and others to prepare Oahu-specific inputs and run the model. The initial results, which include future capital cost requirements, operating and maintenance cost requirements, and costs of energy delivery for two alternative scenarios for meeting future utility capacity and energy demand. The first scenario was for meeting all future capacity and demand needs with conventional central station generation. The second scenario assumed that future needs would be met by distributed generation. The results of the two scenarios where compared. Interim Report B-11 November 19, 2003

70 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft APPENDIX C INITIAL WORKING DATABASE Candidate Projects CONTENTS 1. Candidate Windfarm Projects Database 2. Candidate Concentrating Solar Power Projects Database 3. Candidate Photovoltaics Projects Database 4. Candidate Biomass Projects Database 5. Island Maps Indicating Project Sites and Areas Interim Report C-1 November 19, 2003

71 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-1. Candidate Wind Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Windspeed Size $M $/MW Optimistic Nominal Conservative Island Location Study M/S MPH MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Hawaii Kahua Ranch 95-C , N/A 30, N/A 25, N/A 95-F , N/A 38, N/A 31, N/A 95-C , , , F , , , C , N/A 35, , N/A Lalamilo Wells 95-C , , , F , , , C , N/A 184, , N/A 01-F , N/A 219, , N/A 95-C , N/A 92, N/A 77, N/A 95-F , N/A 115, N/A 96, N/A 01-C , N/A 111, , N/A 01-F , N/A 132, , N/A 95-C , N/A 10, N/A 8, N/A 95-F , N/A 12, N/A 10, N/A 01-C , N/A 12, , N/A 01-F , N/A 14, , N/A North Kohala 95-C , , , F , , , C , N/A 66, , N/A 01-F , N/A 78, , N/A 01-C , N/A 20, , N/A 01-F , N/A 23, , N/A Interim Report C-2 November 19, 2003

72 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-1. Candidate Wind Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Windspeed Size $M $/MW Optimistic Nominal Conservative Island Location M/S MPH MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Maui McGregor Pt 95-C , , , F , , , C , N/A 75, , N/A NW - Haleakala 95-C , N/A 74, N/A 62, N/A 95-F , N/A 93, N/A 78, N/A 01-C , N/A 135, , N/A 01-F , N/A 161, , N/A 95-C , N/A 44, N/A 37, N/A 95-F , N/A 56, N/A 47, N/A 01-C , N/A 82, , N/A 01-F , N/A 97, , N/A 95-C , , , F , , , C , N/A 29, , N/A 01-F , N/A 32, , N/A Puunene 95-C , N/A 36, N/A 30, N/A 95-F , N/A 45, N/A 37, N/A 01-C , N/A 61, , N/A 01-F , N/A 72, , N/A 95-C , , , F , , , C , N/A 20, , N/A 01-F , N/A 24, , N/A Interim Report C-3 November 19, 2003

73 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-1. Candidate Wind Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Windspeed Size $M $/MW Optimistic Nominal Conservative Island Location Study M/S MPH MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Maui West Maui 95-C , , , F , , , C , N/A 37, N/A 31, N/A 95-F , N/A 46, N/A 39, N/A 95-C , N/A 12, N/A 10, N/A 95-F , N/A 15, N/A 12, N/A (GDS didn't 01-C 10 consider) 01-F 10 Oahu Kahuku 95-C , N/A 121, N/A 101, N/A 95-F , N/A 151, N/A 126, N/A 01-C , N/A 202, , N/A 01-F , N/A 240, , N/A 95-C , N/A 75, N/A 63, N/A 95-F , N/A 94, N/A 79, N/A 01-C , N/A 140, , N/A 01-F , N/A 150, , N/A 95-C , , , F , , , C , N/A 76, , N/A 01-F , N/A 90, , N/A Interim Report C-4 November 19, 2003

74 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-1. Candidate Wind Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Windspeed Size $M $/MW Optimistic Nominal Conservative Island Location Study M/S MPH MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Oahu Kaena Point 95-C , , , F , , , C , N/A 38, , N/A 01-F , N/A 45, , N/A 95-C , N/A 3, N/A 3, N/A 95-F , N/A 4, N/A 3, N/A 01-C , N/A 8, , N/A 01-F , N/A 9, , N/A Kauai Anahola 95-C , , N/A 5, N/A 95-F , , , N. Hanapepe 95-C , , , F , , , C , N/A 25, , N/A 01-F , N/A 27, , N/A Port Allen 95-C , , , F , , , C , N/A 10, , N/A 01-F , N/A 12, , N/A Interim Report C-5 November 19, 2003

75 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-2. Candidate Solar Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insolation Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Hawaii Keahole Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A N. Kohala Dish Sterling 95-C , , , F , , , (93-94 slr data) 95-C , N/A 9, N/A 8, N/A 95-F , N/A 9, N/A 8, N/A Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Waikoloa Parabolic Trough 95-C , , , (93-94 slr data) 95-F , , , Dish Sterling 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Notes: 1. GDS did not include trough technology. Data are from NREL Technology Characterizations. 2. Study = Year; C= Current; F= 5 Years into the Future; kmd = kwh/m2/day Interim Report C-6 November 19, 2003

76 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-2. Candidate Solar Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Maui Kahului Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , N/A 45, N/A 40, N/A 95-F , N/A 47, N/A 42, N/A 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Kihei Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , N/A 47, N/A 43, N/A 95-F , N/A 50, N/A 45, N/A (93-94 slr data) 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Puunene Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , N/A 46, N/A 41, N/A 95-F , N/A 48, N/A 43, N/A (93-94 slr data) 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Interim Report C-7 November 19, 2003

77 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-2. Candidate Solar Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Oahu Lualualei Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , , , F , , , Note 1 Trough N/A N/A N/A 182, N/A N/A N/A Trough N/A N/A N/A 224, N/A N/A N/A Trough N/A N/A N/A 224, N/A N/A N/A N. Ewa Plain Parabolic Trough 95-C , , , F , , , Dish Sterling 95-C , , , F , , , Note 1 Trough N/A N/A N/A 182, N/A N/A N/A Trough N/A N/A N/A 224, N/A N/A N/A Trough N/A N/A N/A 224, N/A N/A N/A Pearl Harbor Parabolic Trough 95-C , , , (93-94 slr data) 95-F , , , Dish Sterling 95-C , , , F , , , Note 1 Trough N/A N/A N/A 109, N/A N/A N/A Trough N/A N/A N/A 134, N/A N/A N/A Trough F N/A N/A N/A 134, N/A N/A N/A Interim Report C-8 November 19, 2003

78 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-2. Candidate Solar Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Kauai Barking Sands Dish Sterling 95-C , , , (93-94 slr data) 95-F , , , Note 1 Trough N/A N/A N/A 36, N/A N/A N/A Trough N/A N/A N/A 44, N/A N/A N/A Trough N/A N/A N/A 44, N/A N/A N/A Interim Report C-9 November 19, 2003

79 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-3. Candidate PV Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF Hawaii Keahole COE MWH CF COE MWH CF COE Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 64, N/A 57, N/A 95-F , N/A 66, N/A 56, N/A Tracking Array 95-C , N/A 71, N/A 64, N/A Note 1 10 N. Kohala 95-F , N/A 74, N/A 63, N/A 10 Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 10, N/A 9, N/A 95-F , N/A 10, N/A 8, N/A Tracking Array 95-C , N/A 11, N/A 10, N/A 95-F , N/A 11, N/A 10, N/A Note 1 Fixed C , N/A 10, , N/A Fixed F , N/A 10, , N/A Waikoloa Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 64, N/A 57, N/A 95-F , N/A 66, N/A 56, N/A Tracking Array 95-C , N/A 71, N/A 64, N/A Note F , N/A 74, N/A 63, N/A 10 Interim Report C-10 November 19, 2003

80 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-3. Candidate PV Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF MWH CF COE MWH CF COE Maui Kahului COE Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 20, N/A 18, N/A 95-F , N/A 21, N/A 18, N/A Tracking Array 95-C , N/A 26, N/A 23, N/A 95-F , N/A 27, N/A 23, N/A Note 1 Note 1 Kihei Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 20, N/A 18, N/A 95-F , N/A 21, N/A 18, N/A Tracking Array 95-C , N/A 28, N/A 25, N/A 95-F , N/A 26, N/A 22, N/A Puunene Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 20, N/A 18, N/A 95-F , N/A 21, N/A 18, N/A Tracking Array 95-C , N/A 25, N/A 22, N/A 95-F , N/A 25, N/A 22, N/A Interim Report C-11 November 19, 2003

81 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-3. Candidate PV Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF MWH CF COE MWH CF COE Oahu Lualualei COE Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 38, N/A 34, N/A 95-F , N/A 39, N/A 33, N/A Tracking Array 95-C , N/A 43, N/A 38, N/A 95-F , N/A 44, N/A 37, N/A Fixed Array 95-C , N/A 19, N/A 17, N/A 95-F , N/A 19, N/A 16, N/A Tracking Array 95-C , N/A 21, N/A 19, N/A 95-F , N/A 22, N/A 18, N/A Note N. Ewa Plain Fixed Array 95-C , , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 19, N/A 17, N/A 95-F , N/A 19, N/A 16, N/A Tracking Array 95-C , N/A 21, N/A 19, N/A 95-F , N/A 22, N/A 18, N/A Note Interim Report C-12 November 19, 2003

82 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-3. Candidate PV Projects) Revised Draft Notes: (projects for evaluation) (current = 2000 GDS data, reported in 2001) (future = 2005 GDS data) Insltn Size $M $/MW Optimistic Nominal Conservative Island Location Study kmd MW Low Hi Low Hi MWH CF MWH CF COE MWH CF COE Pearl Harbor Fixed Array 95-C , COE , , F , , , Tracking Array 95-C , , , F , , , Fixed Array 95-C , N/A 19, N/A 17, N/A 95-F , N/A 19, N/A 16, N/A Tracking Array 95-C , N/A 21, N/A 19, N/A 95-F , N/A 22, N/A 18, N/A Note 1 00-C , N/A 10, , N/A 00-F , N/A 10, , N/A Kauai Barking Sands Fixed Array 95-C , N/A 19, N/A 17, N/A 95-F , N/A 20, N/A 17, N/A Tracking Array 95-C , , N/A 19, F , , N/A 19, Note Notes: 1. GDS did not prioritze this project. 2. Study = Year; C= Current; F= 5 Years into the Future; kmd = kwh/m 2 /day Interim Report C-13 November 19, 2003

83 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-4. Candidate Biomass Projects) Revised Draft Legend: (projects for evaluation) (current = 2000 GDS data) (future = 2005 GDS data) Land Size $M $/MW Optimistic Nominal Conservative Use Island Location Study kt/a-yr ka T/A MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Hawaii Hamakua Coast Grass Crops 95-C , N/A 153, N/A 137, N/A (Paaukau) 95-F , , , Note 1 Tree Crops 95-C , , , F , , , Note 1 Hilo Coast Grass Crops 95-F , , , Note 1 (Pepeeko) Tree Crops 95-C , , , F , , , Note 1 Tree Crops+OW 95-F , , , Note 1 Ka'u Grass Crops 95-F , , , Note 1 Interim Report C-14 November 19, 2003

84 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-4. Candidate Biomass Projects) Revised Draft Legend: (projects for evaluation) (current = 2000 GDS data) (future = 2005 GDS data) Land Size $M $/MW Optimistic Nominal Conservative Use Island Location Study kt/a-yr ka T/A MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Maui Paia - Puunene Grass Crops 95-C , , , F , , , Note 1 Tree Crops 95-C , , , F , , , Note 1 Organic Wastes 95-C N/A N/A , , , F N/A N/A , , , Note 1 Oahu Barber's Point Organic Wastes 95-F N/A N/A , , , Note 1 Waialua Grass Crops 95-C , , , F , , , Note 1 Interim Report C-15 November 19, 2003

85 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix C-4. Candidate Biomass Projects) Revised Draft Legend: (projects for evaluation) (current = 2000 GDS data) (future = 2005 GDS data) Land Use Size $M $/MW Optimistic Nominal Conservative Island Location Study kt/a-yr ka T/A MW Low Hi Low Hi MWH CF COE MWH CF COE MWH CF COE Kauai Lihue Grass Crops 95-F , , , Note 1 Tree Crops 95-C , , , F , , , Note 1 Kaumakani Grass Crops 95-F , , , Note 1 Tree Crops 95-C , , , F , , , Note 1 Tree Crops+OW 95-F , , , Note 1 Notes: 1. GDS did not study biomass. 2. Study = Year + C (Current) or F (Future); kt/a-yr = thousand dry tons per acre - year; A= Acres; OW = Organic Wastes Interim Report C-16 November 19, 2003

86 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Final Draft Appendix C-5 N. Kohala W2 S2 Kahua Ranch W3 Paaukau S1 Lalamilo Wells W1 B1 H3 H1 H2 B2 Pepeeko Keahole S2 O1 Waikoloa Puna B3 Pahala W4 South Point Island of Hawaii Project Areas Interim Report C-1 November 19, 2003

87 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Final Draft Appendix C-5 (Continued) West Maui W1 Kahului NW Slope of Haleakala B3 S3 W4 B1 Wailua Iki H1 Lah aina B2 S1 W3 Puunene W2 McGregor Point Kihei S2 Island of Maui Project Areas Interim Report C-2 November 19, 2003

88 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Final Draft Appendix C-5 (Continued) Kahuku Hills W1 W2 Kahuku Flats Kaena Point W3 B1 S2 N. Ewa Plain Lualualei S3 S1 S4 Ewa Plain Pearl Harbor Island of Oahu Project Areas Interim Report C-3 November 19, 2003

89 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Final Draft Appendix C-5 (Continued) W2 S. of Kilauea Anahola W2 Barking Sands N. of Hanapepe H1 S1 B3 B3 B2 W1 B1 W3 Port Allen z Island of Kauai Project Areas Interim Report C-4 November 19, 2003

90 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii Revised Draft APPENDIX D WORKING DATABASE Initial Projects Database Screening Process CONTENTS 1. Initial Windfarm Projects Database 2. Initial Concentrating Solar Power Projects Database 3. Initial Photovoltaics Projects Database 4. Initial Biomass Projects Database 5. Preliminary Analysis of Selected Projects Interim Report D-1 November 19, 2003

91 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-1. Initial Windfarm Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Hawaii Line Lalamilo Wells North Kohala Kahua Ranch South Point Comments # HNEI GRA 1 Turbines ,158 Total Turbines (Island-Wide) 2 Output (MW) 1, ,474 Total Capacity (Island-Wide) 3 Area (Acres) 1 23,043 9,078 21,139 20,250 Kahua Ranch is only 8,000 acres 4 Resource Class 7 to 9? Class 7 to 9+ Class 7? to 9 Class 7 to 8 Some differences in HES data and local knowledge 5 Grid Integration 6 Line Voltage (kv) Phase lines 7 Max. Load (MW) (35-59) 17 to to to to 500 amp rating/phase; times 1.7 for 3-Phase 8 Number of Lines 2 (69) Lalamilo is only area for significant development 9 Limit 2 (MW) 50 to 100? to 30? Due to existing capacity on lines 10 Oper. Limit 3 (MW) Near-term limitations without new load or storage 11 Other Issues Yes Yes Yes Yes Performance standards; fault-ride-through requirement 12 Land Use 13 Land Ownership State Private Private Private Existing windfarms on 3; one under development 14 Zoning Agricultural Agricultural Agricultural Agricultural Pre-approved use for wind in Hawaii on Ag land 15 EA/EIS Required Yes No No No EIS is 1.5+ year process for State/Conservation Land 16 Environ. Issues Maybe Maybe No No Possible impacts to birds at Upolu 17 Landowner Support Yes Yes Yes Yes Need to look how state might facilitate development 18 Community 19 Visual Impact Maybe Maybe Maybe Maybe Must be evaluated for each project 20 Environ. Issues Probably Not Probably Not Probably Not Probably Not Generally viewed as positive rather than negative 21 Cultural Impacts Maybe Maybe Maybe Maybe Developers must be sensitive to cultural values 22 Other Issues Maybe Maybe Maybe Maybe Noise, if located to close to residences 23 Initial Assessment 24 Near-Term (by 2008) 0 MW 10 MW 10 MW 20 MW 30 MW total: N. Kohala ahead of Kahua 25 MWH/Yr 0? About 10% of 1998 island demand; 1.3% of statewide 26 Overall Viability N/A Maybe Maybe Maybe Depends on PPA requirements and avoided cost 27 Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart 28 Near-Term MW 10 MW MW 20 to 30 MW Requires storage and/or sophisticated controls Interim Report D-2 November 19, 2003

92 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-1. Initial Windfarm Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Maui Line West Maui McGregor Point Puunene NW Haleakala Comments # HNEI GRA 1 Turbines Total Turbines (Island-Wide) 2 Output (MW) ,653 MW Total Capacity (Island-Wide) 3 Area (Acres) 1 7,998 4,888 14,664 7,427 4 Resource Class 4 to 6 Class 9-10 Class 4-5? Class 5 to 7 Individual turbine sites can vary significantly 5 Grid Integration 6 Line Voltage (kv) or Phase lines 7 Max. Load (MW) 35 to to 59 (12-20)/(35-59) 12 to to 500 amp rating/phase; times 1.7 for 3-Phase 8 Number of Lines McGregor is initial area for development 9 Limit 2 (MW) 20 to to to Due to existing capacity on lines 10 Oper. Limit 3 (MW) to 30 MW: without new load or storage 11 Other Issues Yes Yes Yes Yes Performance standards; fault-ride-through requirement 12 Land Use 13 Land Ownership Private State Private Private Active development at Kaheawa Pastures (McGregor) 14 Zoning Agricultural Conservation Agricultural Agricultural Pre-approved use for wind in Hawaii on Ag land 15 EA/EIS Required Yes No No No EIS is 1.5+ year process for State/Conservation Land 16 Environ. Issues Maybe Yes Maybe Maybe Possible impacts to birds; mitigation for Nene 17 Landowner Support Maybe Yes Maybe Maybe Need to look how state might facilitate development 18 Community 19 Visual Impact Maybe No Maybe Maybe Must be evaluated for each project 20 Environ. Issues Probably Not Probably Not Probably Not Probably Not Generally viewed as positive rather than negative 21 Cultural Impacts Maybe No Maybe Maybe Developers must be sensitive to cultural values 22 Other Issues Maybe No Maybe Maybe Noise, if located to close to residences 23 Initial Assessment 24 Near-Term (by 2008) 10 MW 2 20 MW 2 10 MW 2 30 MW MW total 25 MWH/Yr About 6-9% of 1998 island demand; % of SW 26 Overall Viability Maybe Maybe Maybe Maybe Depends on PPA requirements and avoided cost 27 Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart 28 Near-Term MW MW MW MW? Requires storage and/or sophisticated controls Interim Report D-3 November 19, 2003

93 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-1. Initial Windfarm Projects Database) Revised Draft Screening of Project Areas: Islands of Lanai and Molokai Line NW Lanai W Molokai W Molokai Comments # WSB-Hawaii 1 Turbines Single Row (small projects); Large Array (Molokai) 2 Output (MW) MW total: storage with small projects; 150 MW (DC-cable link to Oahu) 3 Area (Acres) 1 less than 10 less than 15 1,500 Single row on small projects; array with 4 rows on large project 4 Resource Class 4 to 6 Class 9-10 Class 9-10 Individual turbine sites can vary significantly 5 Grid Integration 6 Line Voltage (kv) N/A 3-Phase lines 7 Max. Load (MW) 12 to to 20 N/A 300 to 500 amp rating/phase; times 1.7 for 3-Phase 8 Number of Lines NW Coast (Lanai); Molokai Ranch (Molokai); DC link to Oahu 9 Limit 2 (MW) N/A Existing grid limitations (small projects); cable project has its own trans. line 10 Oper. Limit 3 (MW) ? PHS limits input to grid; limits of cable project ot Oahu (TBD) 11 Other Issues Yes Yes Yes Performance standards; fault-ride-through requirement 12 Land Use 13 Land Ownership Private Private Private Existing windfarms on 3; one under development 14 Zoning Agricultural Agricultural Agricultural Pre-approved use for wind in Hawaii on Ag land 15 EA/EIS Required No No Yes EIS is 1.5+ year process for seawater cable 16 Environ. Issues Maybe Maybe Yes Passage of cable trough beaches and reefs 17 Landowner Support Maybe Maybe Maybe Unknown on Lanai; expected to be favorable on Molokai 18 Community 19 Visual Impact Maybe Maybe Maybe Must be evaluated for each project 20 Environ. Issues Probably Not Probably Not Probably Not Generally viewed as positive rather than negative 21 Cultural Impacts Maybe Maybe Maybe Developers must be sensitive to cultural values 22 Other Issues Maybe Maybe Maybe How does it work for the community? 23 Initial Assessment 24 Near-Term (by 2008) 10 MW 15 MW 150 MW Large project may take more time to get support 25 MWH/Yr Lanai (125%, 0.34% SW); Molokai (125%, 0.5% SW); Cable (Oahu-7%,5%SW) 26 Overall Viability Maybe Maybe Maybe Depends on detailed feasibility study and access to grid 27 Implementation Issues Yes Yes Yes See Implementation Issues Chart 28 Near-Term+ N/A N/A 150 MW More generation may not be needed on Lanai/Molokai Interim Report D-4 November 19, 2003

94 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-1. Initial Windfarm Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Oahu Line Kahuku Hills Kahuku Flats Kaena Point Barbers Point Comments # HNEI GRA 1 Turbines N/A 229 Total Turbines (Island-Wide) 2 Output (MW) N/A 687 MW Total Capacity (Island-Wide) 3 Area (Acres) 1 5,777 2,476 6,285 N/A 4 Resource Class 6 to 7 Class 5 to 6 Class 6 to 7 Class 3 to 4+? Individual turbine sites can vary significantly 5 Grid Integration 6 Line Voltage (kv) Phase lines; 8 miles away at Kaena Point 7 Max. Load (MW) 23 to to to to to 500 amp rating/phase; times 1.7 for 3-Phase 8 Number of Lines Limit 2 (MW) to 150? Due to existing capacity on lines 10 Oper. Limit (MW) N/A N/A N/A N/A Won't reach threshold in near-term 11 Other Issues Yes Yes Yes Yes Performance standards; fault-ride-through requirement 12 Land Use 13 Land Ownership Federal Private State Private HERS project (mid-80's); failed attempt at Kaena 14 Zoning Agricultural Agricultural Agricultural Industrial Pre-approved use for wind in Hawaii on Ag land 15 EA/EIS Required Probably No Yes No EIS is 1.5+ year process for State/Conservation Land 16 Environ. Issues Maybe Probably Maybe Maybe Possible impacts to birds on flats 17 Landowner Support Maybe Maybe Maybe Maybe Need for support to make hard choices 18 Community 19 Visual Impact Maybe Maybe Maybe Maybe Must be evaluated for each project 20 Environ. Issues Probably Not Maybe Probably Probably Not Generally viewed as positive rather than negative 21 Cultural Impacts Probably Not Maybe Maybe Probably Not Developers must be sensitive to cultural values 22 Other Issues Maybe Maybe Maybe Maybe Noise, if located to close to residences 23 Initial Assessment 24 Near-Term (by 2008) 50 MW 10 MW 5 MW 25 MW Barbers: wind/solar hybrid 25 MWH/Yr About % of 1998 Oahu Demand;1.7-3% of SW 26 Overall Viability Maybe Maybe Maybe Maybe Federal support, PPA requirements and avoided cost 27 Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart 28 Near-Term MW MW 5 MW MW Kahuku: transmission; Barbers: wind/solar hybrid Interim Report D-5 November 19, 2003

95 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-1. Initial Windfarm Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Kauai Line Hanapepe 1 Kilauea/Anahola 1 Port Allen 1 Comments # HNEI GRA 1 Turbines Total Turbines (Island-Wide) 2 Output (MW) MW Total Capacity (Island-Wide) 3 Area (Acres) 10,474 4,888 3,555 4 Resource Class 6 Class 3 Class 4-5 Individual turbine sites can vary significantly 5 Grid Integration 6 Line Voltage (kv) Phase lines 7 Max. Load (MW) 31 to to to to 500 amp rating/phase; times 1.7 for 3-Phase 8 Number of Lines NW Coast (Lanai); Molokai Ranch (Molokai) 9 Limit 2 (MW) 10 to to to 20 Due to existing capacity on the grid 10 Oper. Limit 3 (MW) 5 to 10? 5 to 10? 5 to 10? 5 to 10 MW: Low-night time loads would limit to one project 11 Other Issues No No No KE (now KIUCC) negotiated PPA with developer in 6 months 12 Land Use 13 Land Ownership Private Private Private? Existing developer has not found a site 14 Zoning Agricultural Agricultural Agricultural? Pre-approved use for wind in Hawaii on Ag land 15 EA/EIS Required No No No 16 Environ. Issues Maybe Yes Maybe Threatened Birds in Kiluaea area 17 Landowner Support Maybe Maybe Maybe So far no landowner has stepped up to the plate 18 Community 19 Visual Impact Maybe Maybe Maybe Must be evaluated for each project; could be issue on Kauai 20 Environ. Issues Maybe Probably Not Probably Not Generally viewed as positive rather than negative, Nene in N. Hanapepe 21 Cultural Impacts Maybe Maybe Maybe Developers must be sensitive to cultural values 22 Other Issues Maybe Maybe Maybe See Implementation Issues Chart 23 Initial Assessment 24 Near-Term (by 2008) 10 MW 3 10 MW 3 10 MW 3 Only one project could be accepted on grid; maybe Anahola 25 MWH/Yr About 8% of 1998 island demand; 0.3% of statewide 26 Overall Viability N/A Doubtful Maybe Depends on PPA requirements and avoided cost 27 Implementation Issues Yes Yes Yes See Implementation Issues Chart 28 Near-Term MW MW MW Requires Pumped-Hydro Storage Interim Report D-6 November 19, 2003

96 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-2. Initial Solar Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment); Island of Hawaii Waikoloa Keahole Point North Kohala Comments HNEI GRA Potential Output (MW) 14,428 7,142 4,285 PV Power; no estimates for trough or dish technologies Area (Acres) 101,000 50,000 30,000 Resource(KMD) Better on flat-land and closer to the ocean Grid Integration Line Voltage (kv) or 69 3-Phase lines Max. Load (MW) 35 to (17-29) or (35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines (34); 2 (69) Limit 2 (MW) 30 to to to 100 In near term, operational constraints will take priority Oper. Limit 3 (MW) CSP/PV may have limits during day (requires study) Other Issues Probably Probably Probably For example, negotiation of PPA Land Use Land Ownership State, Private State Private No projects under development Zoning Ag, Urban, Cons. Conservation Agricultural EA/EIS Required Yes, No Yes No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Maybe Maybe Maybe Need to avoid sensitive areas Landowner Support Maybe Maybe Maybe Need to look how state might facilitate development Community Visual Impact Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Initial Assessment Near-Term (by 2008) 3 30 MW 30 MW 30 MW One trough project possible; dish (also PV) too expensive MWH/Yr About 10% of 1998 island demand; 1% of statewide (one project) Overall Viability Maybe Maybe Doubtful Depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes See Implementation Issues Chart Near-Term+ 30 to 50 MW 30 to 50 MW 30 to 50 MW Requires interconnect studies Notes: 1. Sites: Waikoloa (shows promise; possibly with wind as a hybrid?); Keahole (state land with EIS hurdle; could pass a law?); N. Kohala (will have transmission issue, like wind, such that short-term is doubtful; would require new line) 2. Land Requirements: trough (no storage): 5 acres/mw; (with storage): 10 acres/mw. 3. Trough is definitely cheaper and has the ability (with storage) to provide peaking power; dish technology continues to lag promises. Interim Report D-7 November 19, 2003

97 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-2. Initial Solar Projects Database) Revised Draft HNEI GRA Grid Integration Land Use Community Initial Assessment Notes: Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Maui Puunene Kihei Kahului Airport Comments Potential Output (MW) 2,421 3, PV Power; no estimates for trough or dish technologies Area (Acres) 16,950 23,731 5,085 Puunene area is same for wind projects Resource(KMD) Kihei is believed to be better than Puunene (hm?) Line Voltage (kv) 23 or or 69 3-Phase lines Max. Load (MW) (12-20)/(35-59) 35 to 59 (12-20)/(35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines Limit 2 (MW) 10 to to In near term, operational constraints will take priority Oper. Limit 3 (MW) CSP/PV may have limits during day (requires study) Other Issues Probably Probably Probably For example, negotiation of PPA Land Ownership Private Private Private No projects under development Zoning Agricultural Agricultural Agricultural EA/EIS Required No No No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Probably Not Probably Not Probably Not Landowner Support Maybe Yes Doubtful A trough system would displace sugar land; Visual Impact Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Near-Term (by 2008) 30 MW 30 MW 30 MW One trough project possible; dish (also PV) too expensive MWH/Yr About 9% of 1998 island demand; 1% of statewide (one project) Overall Viability Maybe Maybe Doubtful Depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes See Implementation Issues Chart Near-Term MW MW MW Requires interconnect studies; could offset some peaking generation 1. Sites: Kihei (Haleakala Ranch, ag, but sloping: PV or dish may be better); Kahului Airport (HC&S land to the south and east; while possibly suitable for some wind, solar seems out) 2. Land Requirements: trough (no storage): 5 acres/mw; (with storage): 10 acres/mw. 3. Trough is cheaper can provide peaking power (with storage); dish technology continues to lag promises; and PV, while more expensive, could be a player in the mid-to-long term. Interim Report D-8 November 19, 2003

98 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-2. Initial Solar Projects Database) Revised Draft HNEI GRA Grid Integration Land Use Community Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Oahu PH Blast Zone Lualualei N Ewa Plain Ewa Plain Comments Potential Output (MW) 121 1,513 1, PV Power; no estimates for trough or dish technologies Initial Assessment Area (Acres) ,594 12, Resource (KMD) ? 4.86 Best? Ewa Plain is believed to be best site Line Voltage (kv) or Phase lines Max. Load (MW) 23 to to to 39 (23-39)/(70-117) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines (46); 3 (138) Limit 2 (MW) to 150? In near term, operational constraints will take priority Oper. Limit (MW) 25 MW 30 MW 30 to 60 MW 100 to 150 MW CSP/PV may have limits during day (requires study) Other Issues Probably Probably Probably Probably For example, negotiation of PPA Land Ownership Federal Federal, HHL State, Private Fed,SOH,Private No projects under development Zoning Agricultural Agricultural Agricultural Industrial EA/EIS Required Maybe No Yes No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Maybe Probably Not Probably Not Probably Not Safety issues at Pearl Harbor Landowner Support Maybe Maybe Maybe Maybe Need to look how state might facilitate development Visual Impact No Probably Not Probably Not No Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Maybe Maybe Maybe Maybe Maybe hard to find site in N Ewa Near-Term (by 2008) 50 MW 50 MW 50 MW 50 MW Only one in near-term; Barbers: wind/solar hybrid? MWH/Yr About 2.3% of 1998 Oahu Demand; 1.7% of SW Overall Viability Maybe Maybe Doubtful Maybe Fed/SOH support, PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart Near-Term+ 50 MW+ 50 MW+ 0 MW 50 MW+ Barbers: wind/solar hybrid; Maybe Lualualei Notes: 1. Sites: Pearl Harbor could be a good site, since the blast zone probably has no other planned uses; Barber's Point would be excellent for a wind/hybrid, if Campbell Estate would support (need to discuss); Lualualei needs some discussion with Navy and community. 2. Land Requirements: trough (no storage): 5 acres/mw; (with storage): 10 acres/mw. 3. Trough is definitely cheaper and has the ability (with storage) to provide peaking power; dish technology continues to lag promise. Interim Report D-9 November 19, 2003

99 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-2. Initial Solar Projects Database) Revised Draft HNEI GRA Grid Integration Land Use Community Initial Assessment Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Kauai Barking Sands Comments Potential Output (MW) 907 PV Power; no estimates for trough or dish technologies Area (Acres) 6,350 Resource (KMD) Line Voltage (kv) 60 3-Phase lines Max. Load (MW) 31 to to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines 1 Ends at the Barking Sands Missle Test Range Limit 2 (MW) 10 to 30 In near term, operational constraints will take priority Oper. Limit 3 (MW) 5 to 10 CSP/PV may have limits during day (requires study) Other Issues Maybe Need to discuss with Kaui Coop Land Ownership Federal, State No current development underway Zoning Agricultural EA/EIS Required Yes Could make an argument for a FONSI Environ. Issues Probably Not Nothing identified at this time Landowner Support Maybe Need to discuss with Navy Visual Impact Maybe Must be evaluated for each project; don't believe solar projects be problem Environ. Issues Probably Not Generally viewed as positive rather than negative Cultural Impacts Proably Not Developers must be sensitive to cultural values Other Issues Maybe Need to look how Feds/State might facilitate development Near-Term (by 2008) 10 MW Only one project could be accepted on grid in near term. MWH/Yr 0 About 7.7% of 1998 island demand; 0.34% of statewide Overall Viability Maybe Depends on Fed/State support, PPA requirements and avoided cost Implementation Issues Yes See Implementation Issues Chart Near-Term+ 10 MW+ Would require on-site storage and an interconnect study Notes: 1. Sites: land is really limited on Kauai. Barking Sands could be a good site: needs further discussion with Navy. 2. Land Requirements: trough (no storage): 5 acres/mw; (with storage): 10 acres/mw. 3. Trough is definitely cheaper and has the ability (with storage) to provide peaking power; dish technology continues to lag promises. Interim Report D-10 November 19, 2003

100 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Hawaii Waikoloa Keahole Point North Kohala Comments HNEI GRA Potential Output (MW) 14,428 7,142 4,285 PV Power; no estimates for trough or dish technologies Area (Acres) 101,000 50,000 30,000 Resource(KMD) Better on flat-land and closer to the ocean Grid Integration Line Voltage (kv) or 69 3-Phase lines Max. Load (MW) (17-29) or (35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines ; 2-69 Limit 2 (MW) 30 to to to 100 In near term, operational constraints will take priority Oper. Limit 3 (MW) 5 to 10 MW 5 to 10 MW 5 to 10 MW PV may have limits during day (requires study) Other Issues Yes Yes Yes Land Use Land Ownership State, Private State Private No projects under development Zoning Ag, Urban, Cons. Conservation Agricultural EA/EIS Required Yes, No Yes No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Maybe Maybe Maybe Need to avoid sensitive areas Landowner Support Maybe Maybe Maybe Need to look how state might facilitate development Community Visual Impact Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Initial Assessment Near-Term (by 2008) 5 MW 5 MW 5 MW One or more projects might be possible MWH/Yr About 0.9% of 1998 island demand; 0.09% of SW (one project) Overall Viability Doubtful Doubtful Doubtful Depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes See Implementation Issues Chart Near-Term+ 5 to? MW 5 to? MW 5 to? MW High intial cost is a driver Notes: 1. Sites: Waikoloa (shows promise; possibly with wind as a hybrid?); Keahole (state land with EIS hurdle; could pass a law?); N. Kohala (will have transmission issue, like wind, such that short-term is doubtful; would require new line) 2. Land Requirements: 3 to 7.5 acres per MW 3. PVs high initial cost will be a major hurdle through the near-term Interim Report D-11 November 19, 2003

101 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Maui Puunene Kihei Kahului Airport Comments HNEI GRA Potential Output (MW) 2,421 3, PV Power; no estimates for trough or dish technologies Area (Acres) 16,950 23,731 5,085 Puunene area is same for wind projects Resource(KMD) Kihei is believed to be better than Puunene (hm?) Grid Integration Line Voltage (kv) 23 or or 69 3-Phase lines Max. Load (MW) (12-20)/(35-59) 35 to 59 (12-20)/(35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines Limit 2 (MW) 10 to to to 40 In near term, operational constraints will take priority Oper. Limit 3 (MW) 5 to 10 MW 5 to 10 MW 5 to 10 MW PV may have limits during day (requires study) Other Issues Yes Yes Yes Land Use Land Ownership Private Private Private No projects under development Zoning Agricultural Agricultural Agricultural EA/EIS Required No No No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Probably Not Probably Not Probably Not Landowner Support Maybe Yes Doubtful A trough PV would displace sugar land Community Visual Impact Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Initial Assessment Near-Term (by 2008) 5 MW 5 MW 5 MW One or more projects might be possible MWH/Yr About 0.8% of 1998 island demand; 0.09% of SW (one project) Overall Viability Maybe Maybe Doubtful Depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes See Implementation Issues Chart Near-Term+ 5 to? MW 5 to? MW 5 to? MW High intial cost is a driver Notes: 1. Sites: Kihei (Haleakala Ranch - OK); Kahului Airport & Puunene (HC&S land to the south and east), while possibly suitable for wind, solar seems out) 2. Land Requirements: 3 to 7.5 acres per MW 3. PVs high initial cost will be a major hurdle through the near-term Interim Report D-12 November 19, 2003

102 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Oahu PH Blast Zone Lualualei N Ewa Plain Ewa Plain Comments HNEI GRA Potential Output (MW) 121 1,513 1, PV Power; no estimates for trough or dish technologies Area (Acres) ,594 12, Resource (KMD) ? 4.86 Best? Ewa Plain is believed to be best site Grid Integration Line Voltage (kv) or Phase lines Max. Load (MW) 23 to to to 39 (23-39)/(70-117) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines ; Limit 2 (MW) to 150 In near term, operational constraints will take priority Oper. Limit (MW) 5 to 25 5 to 30 5 to 30 5 to? CSP/PV may have limits during day (requires study) Other Issues Yes Yes Yes Yes Land Use Land Ownership Federal Federal, HHL State, Private Fed,SOH,Private No projects under development Zoning Agricultural Agricultural Agricultural Industrial EA/EIS Required Maybe No Yes No EIS is 1.5+ year process for State/Conservation Land Environ. Issues Maybe Probably Not Probably Not Probably Not Safety issues at Pearl Harbor Landowner Support Maybe Maybe Maybe Maybe Need to look how state might facilitate development Community Visual Impact No Probably Not Probably Not No Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Generally viewed as positive rather than negative Cultural Impacts Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Maybe Maybe Maybe Maybe Maybe hard to find site in N Ewa Initial Assessment Near-Term (by 2008) 10 MW 10 MW 10 MW 10 MW One or more projects might be possible MWH/Yr About 0.1% (1998 island demand); 0.09% of SW (one project) Overall Viability Doubtful Doubtful Doubtful Doubtful Fed/SOH support, PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart Near-Term+ 10 MW+ 10 MW+ 10 MW+ 10 MW+ Barbers: wind/solar hybrid; Maybe Lualualei Notes: 1. Sites: Pearl Harbor and Lualualie could good sites (if available); Barber's Point is a candidate for a wind/hybrid. 2. Land Requirements: 3 to 7.5 acres per MW 3. PVs high initial cost will be a major hurdle through the near-term Interim Report D-13 November 19, 2003

103 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Kauai Barking Sands Comments HNEI GRA Potential Output (MW) 907 PV Power; no estimates for trough or dish technologies Area (Acres) 6,350 Resource (KMD) Grid Integration Line Voltage (kv) 60 3-Phase lines Max. Load (MW) 31 to to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines 1 Ends at the Barking Sands Missle Test Range Limit 2 (MW) 10 to 30 In near term, operational constraints will take priority Oper. Limit 3 (MW) 5 to 10 CSP/PV may have limits during day (requires study) Other Issues Maybe Need to discuss with Kaui Coop Land Use Land Ownership Federal, State No current development underway Zoning Agricultural EA/EIS Required Yes Could make an argument for a FONSI Environ. Issues Probably Not Nothing identified at this time Landowner Support Maybe Need to discuss with Navy Community Visual Impact Maybe Must be evaluated for each project; don't believe solar projects be problem Environ. Issues Probably Not Generally viewed as positive rather than negative Cultural Impacts Proably Not Developers must be sensitive to cultural values Other Issues Maybe Need to look how Feds/State might facilitate development Initial Assessment Near-Term (by 2008) 5 MW Only one project could be accepted on grid in near term. MWH/Yr 0 About 2% of 1998 island demand; 0.09% of statewide (one project) Overall Viability Maybe Depends on Fed/State support, PPA requirements and avoided cost Implementation Issues Yes See Implementation Issues Chart Near-Term MW+ Would require an interconnect study Notes: 1. Sites: land is really limited on Kauai. Barking Sands could be a good site: needs further discussion with Navy. 2. Land Requirements: 3 to 7.5 acres per MW 3. PVs high initial cost will be a major hurdle through the near-term Interim Report D-14 November 19, 2003

104 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Hawaii Paaukau Pepeeko Pahala NEW-TBD Comments HNEI GRA Area (Acres) 41,794 32,246 20,007 N/A Productivity (Dry Tons/Acres/Yr) N/A Annual Production (Dry Tons/Yr) 1,170, , ,196 N/A Grid Integration Line Voltage (kv) 34 or or or or 69 3-Phase lines Max. Load (MW) (17-29) or (35-59) (17-29) or (35-59) (17-29) or (35-59) (17-29) or (35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines 1 (34); 1 (69) 1 (34); 1 (69) 1 (34); 1 (69) 1 (34); 1 (69) Limit 1 (MW) 30 to to to to 60 In near term, operational constraints will take priority Oper. Limit 2 (MW) Interconnect studies (?); would provide peaking capacity Other Issues Probably Probably Probably Probably For example, negotiation of PPA Land Use Land Ownership Private Private Private TBD No projects under development Zoning Agricultural Agricultural Agricultural TBD Would help preserve green land and creat jobs EA/EIS Required Maybe Maybe Maybe TBD EIS is 1.5+ year process for State/Conservation Land Environ. Issues Probably Not Probably Not Probably Not TBD Impacts are generally viewed as positive; access to water? Landowner Support Maybe Maybe Maybe TBD Near term benefits of lease rents Community Visual Impact Probably Not Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Impacts are generally viewed as positive Cultural Impacts Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Probably Not Could provide alternate solution to waste disposal problems Initial Assessment Near-Term (by 2008) 25 MW 25 MW 25 MW 8 MW May be difficult for facility to be operational in this period MWH/Yr About 4.5% of 2001 island demand; 0.45% of SW (only one project) Overall Viability Maybe Maybe Maybe Maybe Ala HPOWER; depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart Near-Term MW 8-33 MW 8-33 MW 8-33 MW Development of energy crops might be feasible in mid-term Notes: 1. Near-Term Potential: waste-to-energy projects; the identified project areas have potential over mid-to-long-term for energy crops. 2. Sites: Paaukau: Old Hamakua Sugar Co., good for trees; grass?; Old Hilo Coast Processing (Pepeeko): better for tree crops?; Old Kau Sugar Co. (Pahala): better for grass crops 3. Waste to Energy: anaerobic digestion for sludge and other wet wastes (Hilo Landfill?) and gasification for dry wastes (Hilo Landfill?); or an HPOWER-type facility (maybe 8 MW); problems will be to gain access to and collect the sludge, and collect and sort the MSW. Interim Report D-15 November 19, 2003

105 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Maui Paia Puunene Lahaina NEW-TBD Comments HNEI GRA Area (Acres) 29,516 23,291 15,283 N/A Paia & Puunene (HC&S, which plans continued sugar operations) Productivity (Dry Tons/Acres/Yr) N/A Annual Production (Dry Tons/Yr) 826, , ,924 N/A Grid Integration Line Voltage (kv) 23 or or or 69 3-Phase lines Max. Load (MW) (12-20)/(35-59) (12-20)/(35-59) 35 to 59 (17-29) or (35-59) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines 1 each 1 each 2 1 (34); 1 (69) Limit 1 (MW) 10 to to to to 60 In near term, operational constraints will take priority Operational Limit 2 (MW) Interconnect studies (?); would provide peaking capacity Other Issues Probably Probably Probably Probably For example, negotiation of PPA Land Use Land Ownership Private Private Private TBD No projects under development Zoning Agricultural Agricultural Agricultural TBD Would help preserve green land and creat jobs EA/EIS Required Maybe Maybe Maybe TBD EIS is 1.5+ year process for State/Conservation Land Environ. Issues Probably Not Probably Not Probably Not TBD Impacts are generally viewed as positive; access to water? Landowner Support Maybe Maybe Maybe TBD Near term benefits of lease rents Community Visual Impact Probably Not Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Impacts are generally viewed as positive Cultural Impacts Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Notc Probably Not Could provide alternate solution to waste disposal problems Initial Assessment Near-Term (by 2008) 25 MW 15 MW 25 MW 15 MW Doubtful if facilities could be operational in this period MWH/Yr MW About 15% of 2001 island demand; 1.7% of SW (two projects) Overall Viability Maybe Maybe Maybe Maybe Depends on PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart Near-Term MW MW MW MW Development of energy crops may be feasible in mid-term Notes: 1. Near-Term Potential: waste-to-energy projects; the identified project areas have potential over mid-to-long-term. 2. Sites: Paia/Puunene (HC&S property): to remain in sugar (maybe 15 MW new co-gen: cane/trash); Lahaina (Pioneer Mill): too many competing uses and is less productive. 3. Waste to Energy: anaerobic digestion for sludge and other wet wastes (Central Maui landfill?), and gasification for dry wastes (Central Maui Landfill?); or an HPOWER-type facility (15 MW); problems will be to gain access to and collect the sludge, and collect and sort the MSW. Interim Report D-16 November 19, 2003

106 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Oahu Waialua Barber's Point Sand Island HPOWER Comments HNEI GRA Area (Acres) 12,054 23,291 N/A N/A Productivity (Dry Tons/Acres/Yr) N/A N/A Annual Production (Dry Tons/Yr) 337, ,148 N/A N/A Grid Integration Line Voltage (kv) or or Phase lines Max. Load (MW) 23 to 39 (23-39)/(70-117) 23 to 39 (23-39)/(70-117) 300 to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines 1 3 (46); 3 (138) 2 3 (46); 3 (138) Limit 1 (MW) to to In near term, operational constraints will take priority Oper. Limit 2 (MW) N/A N/A N/A N/A Interconnect studies (?); would provide peaking capacity Other Issues Probably Probably Probably Probably For example, negotiation of PPA Land Use Land Ownership Private Fed,SOH,Private State Private New boiler being planned at HPOWER Zoning Agricultural Industrial Industrial Industrial Would help preserve green land and creat jobs EA/EIS Required Maybe No Yes TBD EIS is 1.5+ year process for State/Conservation Land Environ. Issues No Probably Not No TBD Impacts are generally viewed as positive; access to water? Landowner Support Maybe Maybe Maybe TBD Near term benefits of lease rents Community Visual Impact Probably Not Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Impacts are generally viewed as positive; access to water? Cultural Impacts Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Probably Not Could provide alternate solution to waste disposal problems Initial Assessment Near-Term (by 2008) 50 MW 50 MW 50 MW 20 MW HPOWER expansion may be feasible in this period MWH/Yr MW: about 1.5% of 2001 island demand; 1.1% of statewide Overall Viability Maybe Maybe Maybe Maybe Fed/SOH support, PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes See Implementation Issues Chart Near-Term MW MW MW MW Would require development of energy crops Notes: 1. Near-Term Potential: waste-to-energy projects; the identified project areas have potential over mid-to-long-term. 2. Sites: Waialua (Old Oahu Sugarmill); could it be revived for energy crops (?); Barbers Point (HPOWER - 20 MW additional MSW potential); Sand Island (current location for waste water treatment facility - room for additional facility); efforts to collect MSW would need to be enhanced. 3. Waste to Energy: anaerobic digestion for sludge and other wet wastes (Sand Island?) and gasification for dry wastes (Barbers Point?). problems will be to gain access to and collect the sludge, and collect and sort the MSW. Expanding HPOWER may be better option. Interim Report D-17 November 19, 2003

107 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-4. Initial Biomass Projects Database) Revised Draft Screening of Project Areas: Reference Point (HNEI Global Resource Assessment): Island of Kauai Lihue Kaumakani Kekaha Eleele NEW-TBD Comments HNEI GRA Area (Acres) 24,050 3,261 8,294 7,015 N/A Productivity (Dry Tons/Acres/Yr) N/A Annual Production (Dry Tons/Yr) 673,400 91, , ,420 N/A Grid Integration Line Voltage (kv) Phase lines Max. Load (MW) 31 to to to to to to 500 amp rating/phase; times 1.7 for 3-Phase Number of Lines Limit (MW) 10 to to to to to 30 In near term, operational constraints will take priority Oper. Limit (MW) 5 to 10 5 to 10 5 to 10 5 to 10 5 to 10 Interconnect studies (?); would provide peaking capacity Other Issues Maybe Maybe Maybe Maybe Maybe For example, negotiation of PPA Land Use Land Ownership Private,SOH Private Private Private TBD Projects under consideration Zoning Agricultural Agricultural Agricultural Agricultural TBD Would help preserve green land and creat jobs EA/EIS Required Maybe Maybe Maybe Maybe TBD EIS is 1.5+ year process for State/Conservation Land Environ. Issues Maybe Maybe Maybe Maybe TBD Impacts are generally viewed as positive; access to water? Landowner Support Maybe Maybe Maybe Maybe TBD Near term benefits of lease rents Community Visual Impact Probably Not Probably Not Probably Not Probably Not Probably Not Must be evaluated for each project Environ. Issues Probably Not Probably Not Probably Not Probably Not Probably Not Impacts are generally viewed as positive; access to water? Cultural Impacts Probably Not Probably Not Probably Not Probably Not Probably Not Developers must be sensitive to cultural values Other Issues Probably Not Probably Not Probably Not Probably Not Probably Not Could provide alternate solution to waste disposal problems Initial Assessment Near-Term (by 2008) 10 MW 10 MW 10 MW 10 MW 9 to 22 MW Waste-to-energy shows promise; energy crops are father out MWH/Yr to At 10 MW: about 14% of 2001 island demand; 0.6% of SW Overall Viability Maybe Maybe Maybe Maybe Best Chance Fed/SOH support, PPA requirements and avoided cost Implementation Issues Yes Yes Yes Yes Yes See Implementation Issues Chart Near-Term+ 10 MW+ 10 MW+ 10 MW+ 10 MW+ 10 MW+ Would require development of energy crops Notes: 1. Near-Term Potential: waste-to-energy projects; the identified project areas have potential for enegy crops over mid-to-long-term. 2. Sites: Lihue (Lihue Plantation): out of production and land rights may be sold?; Kaumakani (C. Brewer): also out of production; Kekaha/Kamakani (Gay & Robinson): plans for potential expansion of sugar; potential for additional co-gen from excess bagasse; and Eleele (Alexander & Baldwin - out of sugar production): convert to bananagrass? 3. Waste to Energy: anaerobic digestion for sludge and other wet wastes (Kekaha landfill) and gasification for dry wastes (Kekaha landfill). problems will be to gain access to and collect the sludge, and collect and sort the MSW. HPOWER option may be feasible, with about 9 MW (peak) from MSW, and 13 MW (peak) from excess bagasse for a total of up to 22 MW (peak); about 16 MW (average). Interim Report D-18 November 19, 2003

108 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Amounts of Electricity Generated in 2001 Millons of KWh* * Millions of kwh = thousands of MWHs Note: electricity is utility + non-utility Island Total Oil Coal Other Msw Wind Solar Biomass Hydro Geo RE - MWH Isle -RE SW - RE Hawaii 1, % 2.5% Maui 1,210 1, % 0.3% Lanai % 0.0% Molokai % 0.0% Oahu 8,081 6,093 1, % 3.1% Kauai % 0.3% Totals: 10,821 8,401 1, % 6.2% Note: In 2001, the renewable fraction was 6.2% vs. 8.3% in 1998, principally due to declines in biomass. Future Renewable Energy Production (in Million kwhs): (Possible RPS Scenario) Summary of Near-Term & Mid-Term Analysis (2001: Baseline Year) Analysis Parameter Value Comments (incremental MWH added--refer to spreadsheets below for project details) Annual Load Growth Factor % growth rate is assumed as an SW average Near-Term Hawai Maui Oahu Kauai SW Renewables Level (%) 6.2 Includes both utility and non-utility electricity Windfarms 105,120 70, ,200 35, ,440 Annual RPS % Increment 1 Not a requirement - possible future benchmark Parabolic Trough Wholesale PV M-kWh RE-M-kWh M-kWh Annual Biomass 48,803 91,980 61,320 55, ,291 Year Level (%) T. Energy Target 2001 Needed Amount Retail PV , , , Solar Hot Water 7,068 7,071 23,247 1,179 38, , Totals (Added Amounts) 161, , ,532 91, , , MWHs (2001) 273,976 37, ,434 28, , ,315 1, MWHs (2008) 435, , , ,634 1,358, ,485 1, Renewable %'s in % 3.1% 4.2% 6.5% 6.2% ,657 1, Renewable %'s in % 15.9% 6.9% 25.5% 11.7% ,832 1, ,009 1, Mid-Term Hawai Maui Oahu Kauai SW ,189 1, , Windfarms 210, , ,120-1,296, ,372 1, , Parabolic Trough 105, , ,200 35, , ,558 2, , Wholesale PV 8,760 8,760 17,520 8,760 43, ,746 2, , Biomass 134, , , , , ,937 2, , Retail PV 3,305 3,305 22,015 1,298 29, ,132 2, , Solar Hot Water 17,670 17,678 58,116 2,946 96, ,328 2, , Totals (Added Amounts) 479, ,866 1,376, ,948 2,506, ,528 2, , MWHs (2001) 273,976 37, ,434 28, , ,731 3, , MWHs (2008) 435, , , ,634 1,358, ,937 3, , MWHs (2018) 915, ,895 1,973, ,582 3,865, ,146 3, , Renewable %'s in % 3.1% 4.2% 6.5% 6.2% ,359 3, , Renewable %'s in % 15.9% 6.9% 25.5% 11.7% ,574 3, , Renewable %'s in % 44.5% 19.5% 55.5% 28.6% Interim Report D-19 November 19, 2003

109 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Sheet A - Potential Projects and Commercial Activity to 2008 (Near-Term) - 26 Projects Note: Used 1998 data for Molokai and Lanai, since 2001 data are not complete Project Cumulative LCOE Island %'s bbls-oil $ saved Wind Island MW Hrs/Yr CF MWH/yr M-kWh/yr %* M-kWh/yr % /kwh Project Cum. saved at $30/bbl ( ) Hawaii (HRD) , to ,400 2,744,800 Hawaii AEC) , to ,800 5,489,600 Hawaii (KRL) , to ,400 2,744,800 Maui (HRD) , to ,800 5,489,600 Maui (TBD) , to ,400 2,744,800 Molokai (TBD) , to ,600 4,117,200 M-Oahu (Cable) , to ,000 41,172,000 Lanai (TBD) , to ,400 2,744,800 Oahu (KH) , , t o ,000 13,724,000 Oahu (KF) , , to ,400 2,744,800 Oahu (KP) , , to ,200 1,372,400 Oahu (BP) , , to ,000 6,862,000 Kauai , , to ,400 2,744,800 Totals: 345 1,208,880 1,209 2,014,800 94,695,600 Renewable Total (Cumulative): 16.6 Increment from Wind: 10.4 *Percentage of estimated 2008 electricity use Project Cumulative LCOE bbls-oil $saved Solar-CSP Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island% Cum% saved at$30/bbl ( ) Hawaii , to ,200 8,234,400 Maui , to ,200 8,234,400 Oahu , to ,000 13,724,000 Kauai , ,400 2,744,800 Totals: , ,800 32,937,600 Renewable Total (Cumulative): 20.2 Increment from Solar-CSP: 3.6 Project Cumulative LCOE bbls-oil $saved Solar-PV Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island% Cum% saved at$30/bbl ( ) Hawaii , to , ,648 Maui , to , ,648 Oahu , to ,368 1,427,296 Kauai , to , ,648 Totals: 25 45, ,920 3,568,240 Renewable Total (Cumulative): 20.6 Increment from Solar-PV: 0.4 Page 2 Interim Report D-20 November 19, 2003

110 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Project Cumulative LCOE bbls-oil $ saved Biomass Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum % saved at $30/bbl ( ) Hawaii (waste) , ? ,339 3,822,932 Maui (co-gen) , ? ,300 7,205,100 Maui (waste) , ? ,300 7,205,100 Oahu(HPOWER) , ? ,200 4,803,400 Kauai (waste) , ? ,119 27,359,592 Totals: , Note: Hawaii (residue-to-energy); Maui (residue-to-energy); 15 MW of additional co-gen); Oahu (expand HPOWER by 10 MW); Kauai (9 MW - residue-to-energy) Renewable Total (Cumulative): 23.6 Increment from Biomass: 3.0 Totals (Supply-Side Annual Savings): 3,373, ,561,032 Demand-Side Options NM % 0.08 AvgkW 2 Oahu Pk 1259 HI Peak 189 Maui PK 189 Kauai 74 Activity Cumulative bbls-oil $ saved Solar-PV Island Units MW Hrs/Yr C.F MWH/yr M-kWh/yr % M-kWh/yr % Island % Cum % saved at $30/bbl ( ) Hawaii ,751 Maui ,751 Oahu , , ,228 Kauai ,147 Totals: , , ,877 Renewable Total (Cumulative): 23.6 Increment from PV: 0.02 Activity Cumulative bbls-oil $ saved Solar-SHW Island Units MWp MWH/yr MWavg CF M-kWh/yr % M-kWh/yr % Island % Cum % saved at $30/bbl ( ) Hawaii 3, , , ,660 Maui 3, , , ,895 Oahu 9, , ,744 1,820,976 Kauai , ,964 92,316 Totals: 16, , ,273 3,020,847 Renewable Total (Cumulative): 24.0 Increment from SHW: 0.35 Totals (Demand-Side Annual Savings): 68,271 3,208,723 Grand Total: 3,441, ,769,756 Page 3 Interim Report D-21 November 19, 2003

111 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Sheet B - Selected Projects and Commercial Activity to 2008 (Near-Term) - 9 Projects Project Cumulative LCOE Island %' bbls-oil $ saved Wind Island MW Hrs/Yr CF MWH/yr M-kWh/yr %* M-kWh/yr % /kwh Project Cum. saved at $30/bbl ( ) Hawaii (HRD) , to ,400 2,744,800 Hawaii (AEC) , to ,800 5,489,600 Maui (HRD) , to ,800 5,489,600 Oahu (KH) , to ,000 13,724,000 Kauai , to ,400 2,744,800 Totals: , ,400 30,192,800 Renewable Total (Cumulative): 9.1 Increment from Wind: 3.3 * Percentage of estimated 2008 electricity use Project Cumulative LCOE bbls-oil $ saved Solar - CSP Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum % saved at $30/bbl ( ) Hawaii to Maui to Oahu to Kauai Totals: Renewable Total (Cumulative): 9.1 Increment from CSP: 0.0 Project Cumulative LCOE bbls-oil $ saved Solar-PV Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum % saved at $30/bbl ( ) Hawaii to Maui to Oahu to Kauai to Totals: Renewable Total (Cumulative): 9.1 Increment from PV: 0.0 Project Cumulative LCOE bbls-oil $ saved Biomass Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum % saved at $30/bbl ( ) Hawaii (waste) , ? ,339 3,822,932 Maui (co-gen) , ? ,300 7,205,100 Maui (waste) ? Oahu (HPOWER) , ? ,200 4,803,400 Kauai (waste) , ? ,980 4,323,060 Totals: , ,819 20,154,492 Note: Hawaii (waste-to-energy); Maui (waste-to-energy); 15 MW of additional co-gen); Oahu (expand HPOWER by 10 MW); Kauai (9 MW - waste) Renewable Total (Cumulative): 11.3 Increment from Biomass: 2.2 Totals (Supply-Side Annual Savings): 1,071,219 34,515,860 Page 4 Interim Report D-22 November 19, 2003

112 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Demand-Side Options NM % 0.08 AvgkW 2 Oahu Pk 1259 HI Peak 189 Maui PK 189 Kauai 74 Activity Cumulative bbls-oil $ saved Solar-PV Island Units MW Hrs/Yr C.F MWH/yr M-kWh/yr % M-kWh/yr % Island % Cum % saved at $30/bbl ( ) Hawaii ,751 Maui ,751 Oahu , , ,228 Kauai ,147 Totals: , , ,877 Renewable Total (Cumulative): 11.3 Increment from PV: 0.02 Activity Cumulative bbls-oil $ saved Solar-SHW Island Units MWp MWH/yr MWavg CF M-kWh/yr % M-kWh/yr % Island % Cum % saved at $30/bbl ( ) Hawaii , , ,660 Maui , , ,895 Oahu , ,744 1,820,976 Kauai , ,964 92,316 Totals: , ,273 3,020,847 Renewable Total (Cumulative): 11.7 Increment from SHW: 0.32 Totals (Demand-Side Annual Savings): 68,271 3,208,723 Grand Total: 1,139,490 37,724,583 Page 5 Interim Report D-23 November 19, 2003

113 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Sheet C - Potential Projects and Commercial Activity to 2018 (Mid-Term) - 19 Projects Note: Used 1998 data for Molokai and Lanai, since 2001 data are not complete Project Cumulative LCOE Island %'s bbls-oil $ saved Wind Island MW Hrs/Yr CF MWH/yr M-kWh/yr % # M-kWh/yr % /kwh Project Cum. saved at $30/bbl ( ) Hawaii () to Hawaii (Lala) , to ,000 13,724,000 Hawaii (KRL) , to ,400 2,744,800 Maui (TBD) , to ,800 5,489,600 Maui (TBD) , to ,400 2,744,800 Molokai (TBD) to M-Oahu (Cable) to Lanai (TBD) to Oahu (KH) , to ,000 13,724,000 Oahu (KF) to M-Oahu (Cable) , , to ,051,200 49,406,400 Oahu (BP) , , to ,000 13,724,000 Kauai , to Totals: 370 1,296,480 1,296 2,160, ,557,600 Renewable Total (Cumulative):# 19.6 Increment from Wind: 9.6 # Percentage of estimated 2018 electricity use Project Cumulative LCOE bbls-oil $ saved Solar - CSP Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum% saved at $30/bbl ( ) Hawaii , to ,200 8,234,400 Maui , to ,200 8,234,400 Oahu , to ,000 13,724,000 Kauai , ,400 2,744,800 Totals: , ,800 32,937,600 Renewable Total (Cumulative): 22.7 Increment from CSP: 3.1 Project Cumulative LCOE bbls-oil $ saved Solar-PV Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum% saved at $30/bbl ( ) Hawaii , to , ,200 Maui , to , ,200 Oahu , to ,200 1,372,400 Kauai , to , ,200 Totals: 25 43, ,000 3,431,000 Renewable Total (Cumulative): 23.1 Increment from PV: 0.3 Page 6 Interim Report D-24 November 19, 2003

114 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix D-5. Preliminary Analysis of Selected Projects) Revised Draft Project Cumulative LCOE bbls-oil $ saved Biomass Island MW Hrs/Yr CF MWH/yr M-kWh/yr % M-kWh/yr % /kwh Island % Cum% saved at $30/bbl ( ) Hawaii (crops) , ? ,840 10,567,480 Maui (residue) , ? ,300 7,205,100 Maui (crops) , ? ,840 10,567,480 Oahu (HPOWER) , ? ,400 9,606,800 Kauai (waste) , ? ,032,220 48,514,340 Totals: , ,839,600 86,461,200 Renewable Total (Cumulative): 27.6 Increment from Biomass: 4.6 Totals (Supply-Side Annual Savings): 4,774, ,440,540 NM % 0.86 AvgkW 2 Oahu Pk 1461 HI Peak 219 Maui PK 219 Kauai 86 Activity Cumulative bbls-oil $ saved Solar-PV Island Units MW Hrs/Yr C.F MWH/yr M-kWh/yr % M-kWh/yr % Island % Cum% saved at $30/bbl ( ) Hawaii , , ,882 Maui , , ,882 Oahu 6, , ,692 1,724,508 Kauai , , ,644 Totals: 8, , ,871 2,343,916 Renewable Total (Cumulative): 27.9 Total from PV: 0.2 Activity Cumulative bbls-oil $ saved Solar-SHW Island Units MWp MWH/yr MWavg CF M-kWh/yr % M-kWh/yr % Island % Cum% saved at $30/bbl ( ) Hawaii 7, , ,450 1,384,150 Maui 7, , ,463 1,384,738 Oahu 23, , ,860 4,552,440 Kauai 1, , , ,790 Totals: 40, , ,683 7,552,117 Renewable Total (Cumulative): 28.6 Increment from SHW: 0.7 Totals (Demand-Side Annual Savings): 210,554 9,896,032 Grand Total: 4,984, ,336,572 Page 7 Interim Report D-25 November 19, 2003

115 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii November 19, 2003 Appendix E Financial Viability of Renewable Projects in Hawaii To provide estimates of the cost of energy for candidate projects, the previous studies (HES and GDS) used the Electric Power Research Institute (EPRI) Technical Assistance Guide (TAG) method. The EPRI TAG employs a straightforward calculation whereby annual costs are divided by annual output in kwh. The result is a cost of energy (COE) in cents/kwh. The annual costs are the sum of two components: (1) the installed costs multiplied by a fixed charge (which includes the cost of financing, insurance and other fixed annual costs) and (2) the annual variable operating costs. The EPRI TAG method is a good way to compare projects and for identifying project opportunities, but is not necessarily the best method for determining the financial viability of projects, as the EPRI TAG method does not allow for calculation of levelized energy costs, evaluation of alternative financial structures and other financial details. Lifecycle cost methods that incorporate costs, performance, economic and financial data are preferred. In fact, developers typically have their own in-house, proprietary models. Fortunately, there are at least two models in the public domain, which can be used to assess the financial viability of renewable projects: RETSCREEN developed by the Ministry of Natural Resources in Canada, is a spreadsheet model that can be downloaded off the Internet. Specific, RETSCREEN models are available for windfarms, concentrating solar and small hydro. The models provide for detailed of installed costs, performance, economic and financial data, including variable debt/equity ratios. The key outputs are levelized cost of energy, internal rate of returns (IRRs), before and after taxes, and project cash flows; and RETFINANCE developed by NREL, is an Internet-based model and is not downloadable. There are separate modules for wind and solar. As the name implies, this model focus on financial inputs, and requires only summary costs and performance inputs. The economic and financial data, such as minimum debt service coverage ratios (DSCRs). In this model, the anticipated energy payment is an input, and the key financial outputs are the IRRs, actual DSCRs, and cash flows. While a detailed lifecycle analysis of all candidate models was beyond the scope of this study, analyses of specific projects, for example windfarms currently under development in Hawaii, were conducted in order to shed light on what really makes projects financially viable. After discussion with developers, it was found that the results of these models provide results representative of current wind projects in development. Comparing estimates from the EPRI TAG cost estimates with RETSCREEN and RETFINANCE has proved revealing: The EPRI TAG method can be a close indicator of lifecycle costs, if the key project inputs are identical, e.g., installed costs, annual operating costs, and annual output. The RETSCREEN model provided insight as to the viability of current projects. While the GDS study results show favorable COE s of 4 to 5 cents/kwh for wind projects, actual COE s (and hence average payment required in the power purchase agreement) are in the range of 6 to 7 cents/kwh or more. The or more depends on the details of project financing (of which WSB-Hawaii has no details), such as the debt/equity ratios, desired IRRs (Internal Rate of Return), and DSCRs (Debt Service Coverage Ratios) required by lenders, and the fact that installation and operating costs are higher: Interim Report E-1 November 19, 2003

116 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii November 19, 2003 Actual project development costs are higher than predicted in previous estimates, due to the longer time and extended effort required to negotiate PPAs, Actual equipment costs are higher, primarily due to utility interconnect requirements not anticipated and included in previous cost estimates, and Actual fixed operating costs are projected to be much higher, due, in part, to taxes and insurance costs not accounted for in earlier studies. The RETFINANCE model has provided similar results and some additional insights into what makes a project viable, specifically the role the DSCR requirements can play. The key analysis input data needed for a RETSCREEN and/or RETFINANCE analysis of specific projects are summarized in the Table 1, along with typical outputs. Interim Report E-2 November 19, 2003

117 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii November 19, 2003 Key Analysis Input Data Typical Range Comments Project Size 5 to 100 MW Larger projects are generally more viable Installed Costs $900 to $9,000/kW The key driver in project economics Fixed Operating Costs $5 to $50/kW-Year Most available estimates are low Annual General & Admin 5 to 10% Can be included in Fixed Costs Annual Property Tax 1% Can be included in Fixed Costs Insurance Expense 3% Can be included in Fixed Costs Variable Operating Costs 0.1 to 1.5 cents/kwh Dropping as industries mature Site Resource - Wind Class 4 to 9 Among best in the world Site Resource Solar Up to 6 kwh/m 2 /day Only desert sites are better Site Resource Biomass Residues Underutilized Site Resource Biomass Agricultural Residues Needs further evaluation Site Resource Biomass Energy Crops Needs further evaluation Capacity Factor - Wind 30 40% or more Can be tailored to project site Capacity Factor Solar 20 40% or more PV (low); Conc. Solar (high-with storage) Capacity Factor - Biomass 60 70% or more Capacity is firm Avoided Cost of Energy Variable Either a model input or output Energy Escalation Rate 3.0 % Higher than inflation rate Inflation Rate 2.5 % Discount Rate 12 % Project Lifetime 20 to 30 years Most developers use 20 years Debt Ratio 70% Debt Interest Rate 7.5% Commercial rates Debt Term 10 to 15 years 15 years is better for cash flow and IRR Income Tax Rate 35% State Income Tax Rate 8% For Hawaii State Tax Rate 4% For excise and use tax Minimum DSCR 1.4 RET FINANCE only Average DSCR 1.8 RET FINANCE only Production Tax Credit For windfarms Some HI developers assume no PTC 27 Desired IRR 15 to 20% Investors require at least 15 to 18% Key Analysis Outputs Typical Range Comments Levelized cost of energy Variable Nominal and Real (cents/kwh) Investors IRR (% Variable Before and after taxes Actual DSCRs (ratio) Variable Minimum and Average, compared to req. Cash Flow Variable By component over project lifetime Simple Payback (Years) Variable Ideally, 5 to more than 10 years Yr to Positive Cash Flow Variable Investors get nervous with neg. cash flow Table 1. Financial Analysis Input and Output Data 27 Some developers in Hawaii appear to use a conservative approach by not including the PTC as it is not a permanent credit and may not be available when a project is constructed. Interim Report E-3 November 19, 2003

118 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii November 19, 2003 APPENDIX F UTILITY TRENDS Capacity, Demand, Projected Generator Unit Additions, Planned Retirements, and Avoided Costs CONTENTS 1. Statewide Summary 2. HECO 3. HELCO 4. Maui 5. Molokai 6. Lanai 7. Kauai Interim Report F-1 November 19, 2003

119 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-1. Statewide Summary) Revised Draft Period ( ) Statewide Summary and Analysis of Avoided Costs Period ( Current) Average CPI Growth AC % Average CPI Growth AC % Rate Rate Annual % Compound Compound Above Annual % Compound Compound Above Utility Increase Rate (%) Rate (%) CPI Increase Rate (%) Rate (%) CPI Comments HECO yrs of data (1994 to 2002) HELCO yrs of data (1991 to 2002) MECO - Average Simple Average Maui yrs of data (1994 to 2002) Molokai yrs of data (1994 to 2002) Lanai yrs of data (1994 to 2002) HECO Averages Simple Average Kauai yrs of data (1996 to Current) SW Averages Overall Observations and Conclusions: 1. HECO's (Oahu Only) increase in avoided costs has averaged a compound rate of 4.69% over the 8 to 9 year period. 2. HECO's family increase in avoided costs has averaged 3.01 to 3.37% above the CPI. 3. Believe that 3% above CPI is conservative. Future Avoided Cost Estimates 1. Annual Inflation of Avoided Cost = 3% avove the Consumer Price Index, hence 3% is a levelized rate. 2. Upper and lower range are based on two reference Cases: A (9-Yr average from 1994 to 2002) and B (current). 3. Case A is more conservative. Note that avoided costs increased dramatically in the first two quarters of Base Avoided Cost Estimated Future Avoided Costs Island 9-Yr Avg Oahu Hawaii Maui Molokai Lanai Kauai Interim Report F-1 November 19, 2003

120 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-1. Statewide Summary) Revised Draft Estimated Future Avoided Costs (9-Yr Base) AC (cents/kwh-$2003) Oahu Hawaii Maui Molokai Lanai Kauai Year Interim Report F-2 November 19, 2003

121 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-1. Statewide Summary) Revised Draft Estimated Futue Avoided Costs (Current Base Case) Avoided Costs (cents/kwh-$2003) Oahu Hawaii Maui Molokai Lanai Kauai Year Interim Report F-3 November 19, 2003

122 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-2. HECO) Revised Draft Note: HECO claims that load growth includes impact of 3rd Party Co-Gen The First Chart Shows Continued Growth On Oahu - Sustainable? Without DSM Annual With DSM Annual Net MW Reserve Margin Margin Year Net Peak Percentage Net Peak Percentage Installed Margin as a % of as a % of Resource Capacity (MW) Change (MW) Change Capacity (MW) Net Peak Inst. MW Description Change Date (MW) % 24% % % % 22% % % % 21% CBB LM DSM Addition % % % 20% RDLC LM DSM Addition % % % 19% % % % 18% % % % 17% % % % 21% Simple Cycle Addition Jan % % % 19% % % % 18% % % % 18% AES/Kalaeloa Addition % % % 21% Simple Cycle Addition Jan % % % 20% % % % 19% % % % 18% % % % 16% % % % 19% Combustion Turbine Addition Jan % % % 18% % % % 17% % % % 15% % % % 14% % % % 13% Observations: to 2% expected growth in capacity 2. Historically, growth period 83 to 96 average was more like 2% or more 3. From 2013 on, plan on 1.5% growth maximum : Simple Cycle Turbine: MW (first Phase of Dual-Train, Combined-Cycle Combustion Turbine) : Simple Cycle Turbine: (Second Phase) : Combustion Turbine: 87.6 (Third Phase) Interim Report F-4 November 19, 2003

123 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-2. HECO) Revised Draft The Second Chart Shows Full-On DSM/CHP On Oahu Note: rapid phasing of DSM/CHP results in drop of Net Peak from 1.9% growth (without DSM) in 2004 to 1.7%; from 1.8% to 1.4% in 2005; to 1% in 2006; and NO GROWTH in 2007 on. There are similar reductions in the Net Peak (With DSM) Without DSM Annual With DSM Annual Net MW Reserve Margin Margin Year Net Peak Percentage Net Peak Percentage Installed Margin as a % of as a % of Resource Capacity (MW) Change (MW) Change Capacity (MW) Net Peak Inst. MW Descripton Change Date (MW) % 24% % % % 22% % % % 21% CBB LM DSM Addition % % % 20% RDLC LM DSM Addition % % % 20% % % % 20% % % % 20% % % % 20% No SC-ST % % % 20% % % % 20% % % % 21% AES/Kalaeloa Addition % % % 21% No SC-ST % % % 21% % % % 21% % % % 21% % % % 21% % % % 21% No CT % % % 21% % % % 21% % % % 21% % % % 21% % % % 21% Observations: 1. Assuming that new load can be met with a combination of DSM and CHP (which really a DSM) provides dramatic results 2. Historically, growth period 83 to 96 average was more like 2% or more 3. From 2013 on, plan on 1.5% growth maximum : Simple Cycle Turbine: MW (first Phase of Dual-Train, Combined-Cycle Combustion Turbine) Interim Report F-5 November 19, 2003

124 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-2. HECO) Revised Draft HECO Demand vs. Installed Capacity Case 1: Continued Growth with DSM Megawatts (MW) Without DSM Net Peak With DSM Net Peak Net MW Installed Year Interim Report F-6 November 19, 2003

125 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-2. HECO) Revised Draft HECO Demand vs. Installed Capacity Case 2. Slow to No Growth with Aggessive DSM Megawatts (MW) With DSM Net Peak Installed Capacity Year Interim Report F-7 November 19, 2003

126 WSB-Hawaii Appendix F-2. HECO (Continued) Revised Draft Basic Data and Analysis Fuel Avoided Annual Year to Multi-Year Cum Year Costs Cost Percent Avoided Year AC Averages 1994 to X % % Year QTR /mmbtu /kwh Change Cost change % # Years Change Average Annual Increase -- 8 Years (1994 to 2002) 7.3 for 9-year period 5.2 Compounded Rate (like in a Certificate of Deposit) 4.7 for 9-year period 4.7 Observations: 1. Use the range of 9 historical annual averages as a basis for predicting the future. 2. Quarterly low: 3.08 (1999-2nd Qtr); Quarterly high: 7.45 (2003-2nd Qtr) 3. Let's run 2 scenarios: first, the 9-yr average, second, with the current! Interim Report F-8 November 19, 2003

127 WSB-Hawaii Appendix F-2. HECO (Continued) Revised Draft Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 9-Yr Average Case B: Start with Current (2003) 9-Yr Average A. C Current Avoided Cost Lower Inflation Cases 1.02 Case C: Start with 9-Yr Average Case D: Start with Current (2003) Note: for summary use, 3% inflation rate with Case A and B estimates Avoided Cost Year Case A Case B Case C Case D Interim Report F-9 November 19, 2003

128 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-3. HELCO) Revised Draft The First Chart Show Continued Growth On Hawaii - Sustainable? Without DSM Annual With DSM Annual Net MW Reserve Margin Margin Net Peak Percentage Net Peak Percentage Installed Margin as a % of as a % of Resource Capacity Year (MW) Change (MW) Change Capacity (MW) Net Peak Installed MW Description Change Date (MW) % 35.7% CT-4 Add Dec % 34.4% Keahole-D-18,19 Retire Dec % % % 37.8% CT-5 Add Feb % 37.2% Keahole-D-20 Retire Feb % 32.0% HCPC-Contract Retire Dec % % % 30.7% % % % 29.4% % % % 28.0% % % % 26.6% % % % 24.8% % % % 23.1% % % % 21.3% % % % 19.3% % % % 17.1% Next increment? % % % 14.6% % % % 12.1% % % % 9.4% % % % 6.7% % % % 3.9% % % % 1.0% % % % -1.9% % % % -5.0% % % % -8.1% % % % -11.4% % % % -14.7% Notes: (1) need to add long-range plan from HELCO IRP; (2) Sources: HELCO PURPA Filing The Second Chart Shows More Modest Growth (1.5%) from 2005 Forward - Sustainable? Interim Report F-10 November 19, 2003

129 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-3. HELCO) Revised Draft Without DSM Annual With DSM Annual Net MW Reserve Margin Margin Net Peak Percentage Net Peak Percentage Installed Margin as a % of as a % of Resource Capacity Year (MW) Change (MW) Change Capacity (MW) Net Peak Installed MW Description Change Date (MW) % 35.7% CT-4 Add Dec % 34.4% Keahole-D-18,19 Retire Dec % % % 37.8% CT-5 + Retires Add Feb % % % 30.7% % % % 29.4% % % % 28.4% % % % 27.3% % % % 26.2% % % % 25.1% % % % 24.0% % % % 22.8% % % % 21.7% % % % 20.5% % % % 19.3% % % % 18.1% % % % 16.9% Next increment? % % % 15.6% % % % 14.3% % % % 13.1% % % % 11.8% % % % 10.4% % % % 9.1% % % % 7.7% % % % 6.3% % % % 4.9% % % % 3.5% % % % 2.1% % % % 0.6% % % % -0.9% % % % -2.4% % % % -4.0% % % % -5.5% % % % -7.1% % % % -8.7% Interim Report F-11 November 19, 2003

130 WSB-Hawaii Appendix F-3. HELCO (Continued) Revised Draft Fuel Avoided Annual Year to Multi-Year Cum Year Cum Year Costs Cost Percent Avoided Year AC 1991 to X 1994 to X Year QTR /mmbtu /kwh Change Cost % change /kwh # Years % Change % Change Average Annual Increase Years (1991 to 2002) 3.05 for 8-year period 5.71 for 9-year period 8.10 Compounded Rate (like in a Certificate of Deposit) 2.01 for 8-year period 4.40 for 9-year period 5.36 Observations: 1. Use the range of 9 historical annual averages as a basis for predicting the future?; 2. Quarterly high: 9.40 (2003-2nd Qtr); Quarterly low: 4.40 (1991-1st Qtr) 3. Let's run 2 scenarios: first, the 9-yr average, second, with the current! Interim Report F-12 November 19, 2003

131 WSB-Hawaii Appendix F-3. HELCO (Continued) Revised Draft Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 9-Yr Average Case B: Start with Current (2003) 9-Yr Average A. C Current Avoided Cost Lower Inflation Cases 1.02 Case C: Start with 9-Yr Average Case D: Start with Current (2003) 1. Annual Inflation of Avoided Cost = 3% 2. Upper and lower range are based on two reference Cases: A (9-Yr average from 1994 to 2002) and B (current). Avoided Cost Year Case A Case B Case C Case D Interim Report F-13 November 19, 2003

132 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-4. MECO) Revised Draft The First Chart Shows Rather Robust and Continued Growth On Maui - Sustainable? Without DSM Annual With DSM Annual Net MW Reserve Margin Margin Net Peak Percentage Net Peak Percentage Installed Margin as a % of as a % of Resource Capacity Year (MW) Change (MW) Change Capacity (MW) Net Peak Installed MW Description Change Date (MW) % 23.5% % % % 22.9% % % % 21.3% 20 MW Wind Add % % % 19.0% % % % 17.0% % % % 14.7% Maalaea 18 Add % % % 19.1% % % % 16.7% % % % 20.5% % % % 18.0% HC&S PPA Expire Dec Waena 1 (CT) Add 20.8 Waena 2 (CT) Add % % % 20.0% Waena 3 (ST) Add % % % 17.6% % % % 20.6% % % % 18.2% % % % 20.8% % % % 18.4% Waena 4 (CT) Add 20.8 Waena 5 (CT) Add % % % 19.9% Waena 6 (ST) Add % % % 17.5% % % % 19.6% % % % 17.2% % % % 19.1% % % % 16.7% Waena 7 (CT) Add 20.8 Waena 8 (CT) Add 20.8 Interim Report F-14 November 19, 2003

133 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-4. MECO) Revised Draft The Second Chart Shows More Modest Growth (1.5%) - Sustainable? Without DSM With DSM Net MW Reserve Margin Margin Net Peak Net Peak Installed Margin as a % of as a % of Resource Capacity Year (MW) (MW) Capacity (MW) Net Peak Installed MW Descripton Change Date (MW) % 23.5% % % % 22.9% % % % 21.8% 20 MW Wind Add % % % 20.6% % % % 19.4% % % % 18.2% HC&S PPA Extend Dec % % % 17.0% % % % 21.2% Maalaea 18 Add % % % 20.0% % % % 18.8% % % % 17.6% % % % 22.5% Waena 1 (CT) Add % % % 21.4% % % % 20.2% % % % 19.0% % % % 23.4% Waena 2 (CT) Add % % % 22.2% % % % 21.1% % % % 19.9% % % % 23.0% Waena 3 (ST) Add % % % 21.9% % % % 20.7% % % % 19.5% % % % 18.3% % % % 22.1% Waena 4 (CT) Add % % % 21.0% % % % 19.8% % % % 18.6% % % % 22.1% Waena 5 (CT) Add % % % 20.9% % % % 19.7% % % % 22.2% Waena 6 (ST) Add % % % 21.0% Sources: MECO PURPA Filing (no Appendix D) and IRP ( ) Interim Report F-15 November 19, 2003

134 WSB-Hawaii Appendix F-4. MECO (Continued) Revised Draft Fuel Avoided Annual Year to Multi-Year Cum Year Costs Cost Percent Avoided Year Averages # X to 1994 Year QTR /mmbtu /kwh Change Cost % change /kwh Years % Change Average Annual Increase -- 8 Years (1994 to 2002) Year (current) 7.1 Compounded Rate (like in a Certificate of Deposit) Interim Report F-16 November 19, 2003

135 WSB-Hawaii Appendix F-4. MECO (Continued) Revised Draft Observations: 1. Use the range of 9 historical annual averages as a basis for predicting the future? 2. Quarterly low: 3.08 (1999-2nd Qtr); Quarterly high: 7.45 (2003-2nd Qtr) 3. Let's run 2 scenarios: first, the 9-yr average, second, with the current! Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 9-Yr Average Case B: Start with Current (2003) 9-Yr Average A. C Current Avoided Cost 8.16 Lower Inflation Cases 1.02 Case C: Start with 9-Yr Average Case D: Start with Current (2003) Avoided Cost Year Case A Case B Case C Case D Interim Report F-17 November 19, 2003

136 WSB-Hawaii Appendix F-6. Lanai (Avoided Cost Analysis) Revised Draft Fuel Avoided Annual Year to Multi-Year Cum Year Costs Cost Percent Avoided Year AC Averages # 1994 to X Year QTR /mmbtu /kwh Change Cost % change /kwh Years % Change Average Annual Increase -- 8 Years (1994 to 2002) Years 6.1 Compounded Rate (like in a Certificate of Deposit) Interim Report F-18 November 19, 2003

137 WSB-Hawaii Appendix F-6. Lanai (Avoided Cost Analysis) Revised Draft Observations: 1. Use the compounded rate over 9-years (i.e., from 1994 to current in last column) 2. Quarterly low: (1994-1st 3 Qtrs); Quarterly high: (2001-1st Qtr) 3. Let's run 2 scenarios: first, the 9-yr average, second, with the current! Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 9-Yr Average Case B: Start with Current (2003) 9-Yr Average A. C Current Avoided Cost 9.06 Lower Inflation Cases 1.02 Case C: Start with 9-Yr Average Case D: Start with Current (2003) Avoided Cost Year Case A Case B Case C Case D Interim Report F-19 November 19, 2003

138 WSB-Hawaii Appendix F-6. Lanai (Avoided Cost Analysis) Revised Draft Fuel Avoided Annual Year to Multi-Year Cum Year Costs Cost Percent Avoided Year AC Averages 1994 to X Year QTR /mmbtu /kwh Change Cost % change /kwh # Years % Change Average Annual Increase -- 8 Years (1994 to 2002) 4.5 to Compounded Rate (like in a Certificate of Deposit) Interim Report F-20 November 19, 2003

139 WSB-Hawaii Appendix F-6. Lanai (Avoided Cost Analysis) Revised Draft Observations: 1. Use the compouned rate over 9-years (i.e., from 1994 to current in last column) 2. Quarterly low: (1994-1st 3 Qtrs); Quarterly high: (2001-1st Qtr) 3. Let's run 2 scenarios: first, the 9-yr average, second, with the current! Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 9-Yr Average Case B: Start with Current (2003) 9-Yr Average A. C Current Avoided Cost Lower Inflation Cases 1.02 Case C: Start with 9-Yr Average Case D: Start with Current (2003) Avoided Cost Year Case A Case B Case C Case D Interim Report F-21 November 19, 2003

140 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-7. KIUC) Revised Draft The First Chart Shows Rather Robust and Continued Growth On Kauai (3%) - Sustainable? Without DSM Annual With DSM Annual Net MW Reserve Margin Margin as a % Net Peak Percentage Net Peak Percentage Installed Margin as a % of of Installed MW Resource Capacity Year (MW) Change (MW) Change Capacity (MW) Net Peak Less LG 1 Descripton Change Date (MW) % % 51.3% % #DIV/0! % 49.1% % #DIV/0! % 46.9% % #DIV/0! % 44.7% % #DIV/0! % 42.3% % #DIV/0! % 39.9% % #DIV/0! % 37.4% % #DIV/0! % 34.9% % #DIV/0! % 32.3% % #DIV/0! % 29.6% % #DIV/0! % 33.5% D10 Add % #DIV/0! % 30.9% % #DIV/0! % 41.1% Coal Add % #DIV/0! % 38.9% % #DIV/0! % 36.5% % #DIV/0! % 34.1% % #DIV/0! % 31.7% % #DIV/0! % 29.1% % #DIV/0! % 36.1%? Add % #DIV/0! % 33.8% % #DIV/0! % 31.4% % #DIV/0! % 28.9% Note 1: LG is largest generator (23.7 MW) Interim Report F-22 November 19, 2003

141 WSB-Hawaii Study of Renewables and Unconventional Energy in Hawaii (Appendix F-7. KIUC) Revised Draft The Second Chart Shows More Modest Growth (1.5%) - Sustainable? Without DSM Annual With DSM Annual Net MW Reserve Margin Margin as a % Net Peak Percentage Net Peak Percentage Installed Margin as a % of of Installed MW Resource Capacity Year (MW) Change (MW) Change Capacity (MW) Net Peak Less LG 2 Description Change Date (MW) % % 51.3% % #DIV/0! % 49.1% % #DIV/0! % 48.0% % #DIV/0! % 46.9% % #DIV/0! % 45.7% % #DIV/0! % 44.6% % #DIV/0! % 43.4% % #DIV/0! % 42.2% % #DIV/0! % 40.9% % #DIV/0! % 39.7% % #DIV/0! % 38.4% % #DIV/0! % 37.1% % #DIV/0! % 35.8% % #DIV/0! % 34.5% % #DIV/0! % 33.2% % #DIV/0! % 31.8% % #DIV/0! % 36.8% D10 Add % #DIV/0! % 35.5% % #DIV/0! % 34.2% % #DIV/0! % 32.9% % #DIV/0! % 31.6% % #DIV/0! % 42.8% Coal Add % #DIV/0! % 41.7% % #DIV/0! % 40.5% % #DIV/0! % 39.4% % #DIV/0! % 38.2% % #DIV/0! % 37.0% % #DIV/0! % 35.8% % #DIV/0! % 34.6% % #DIV/0! % 33.3% % #DIV/0! % 32.1% % #DIV/0! % 30.8% % #DIV/0! % 29.5% Interim Report F-23 November 19, 2003

142 WSB-Hawaii Appendix F-7. KIUC (Continued) Revised Draft Fuel Avoided Annual Year to Multi-Year Cum Year Costs Cost Percent Avoided Year AC Averages 1996 to X Year QTR /mmbtu /kwh Change Cost % change /kwh # Years % Change N/A N/A N/A N/A N/A (est.) N/A N/A N/A N/A N/A N/A N/A 1 N/A #VALUE! #VALUE! Average Annual Increase -- 6 Years (1996 to 2002) 4.73 to Compounded Rate (like in a Certificate of Deposit) Interim Report G-24 November 19, 2003

143 WSB-Hawaii Appendix F-7. KIUC (Continued) Revised Draft Observations: 1. Use the compounded rate over 9-years (i.e., from 1994 to current in last column) 2. Quarterly low: (1994-1st 3 Qtrs); Quarterly high: (2001-1st Qtr) 3. Let's run 2 scenarios: first, the 4-yr average ( ), second, with the current! Out-Year Projections of Avoided Cost Annual Inflation Factor 1.03 Case A: Start with 7-Yr Average Case B: Start with Current (2003) 7-Yr Average A. C Current Avoided Cost 7.52 Lower Inflation Cases 1.02 Case C: Start with 7-Yr Average Case D: Start with Current (2003) Avoided Cost Year Case A Case B Case C Case D Interim Report G-25 November 19, 2003

144 WSB-Hawaii Appendix F-7. KIUC (Continued) Revised Draft Interim Report G-26 November 19, 2003

145 WSB-Hawaii Appendix G. CPI Analysis Revised Draft APPENDIX G Analysis of the Trends in the Consumer Price Index Interim Report G-1 November 19, 2003

146 WSB-Hawaii Appendix G. CPI Analysis Revised Draft Table CONSUMER PRICE INDEX, FOR ALL URBAN CONSUMERS (CPI-U), ALL ITEMS, FOR HONOLULU AND UNITED STATES: 1940 TO 2002 [ average = 100. Excludes rent before 1963] Honolulu United States Annual Percent change Annual Percent change Year Average from year previous Average from year previous (NA) 14 (NA) Interim Report G-2 November 19, 2003

147 WSB-Hawaii Appendix G. CPI Analysis Revised Draft Appendix G (continued) Yr - % Increase (91 to 02) 21.8 Compound Rate Yr - % Increase (94 to 02) 9.6 Compound Rate Yr - % Increase (94 to 03) 10.8 Compound Rate 1.15 % Increase (73 to 02) Compound Rate 4.18 % Increase (40 to 02) Compound Rate 4.13 Observations: For this study, we will use the 9-Year calculation (1994 to Current). Consider it to be conservative, i.e., no major war, oil embargos, etc. CPI has grown at compounded rate of 1.81% over the past 11-year period. Source: For Honolulu: from surveys by Eugene Danaher and Hawaii State Department of Labor and Industrial Relations, cited in Hawaii State Department of Planning and Economic Development, The Honolulu Consumer Price Index, (Statistical Report 187, May 30, 1986), as shifted to base : U.S. Bureau of Labor Statistics, Consumer Price Index-All Urban Consumers [CPI-U] Honolulu, BLS FAX-on-Demand Code 9130 and 9225; for the U.S, Code 9210; and < and for Honolulu < accessed February 20, The State of Hawaii Data Book Interim Report G-3 November 19, 2003

148 WSB-Hawaii Appendix H. NREL Technology Descriptions Revised Draft APPENDIX H NREL TECHNOLOGY DESCRIPTIONS Interim Report H-1 November 19, 2003

149 Biopower Technology Description Biopower, also called biomass power, is the generation of electric power from biomass resources now usually urban waste wood, crop and forest residues; and, in the future, crops grown specifically for energy production. Biopower reduces most emissions (including emissions of greenhouse gases- GHGs) compared with fossil fuel-based electricity. Since biomass absorbs CO 2 as it grows, the entire biopower cycle of growing, converting to electricity, and regrowing biomass can result in very low CO 2 emissions. Through the use of residues, biopower systems can even represent a net sink for GHG emissions by avoiding methane emissions that would result from landfilling of the unused biomass. Representative Technologies for Conversion of Feedstock to Fuel for Power and Heat Homogenization is a process by which feedstock is made physically uniform for further processing or for combustion. (includes chopping, grinding, baling, cubing, and pelletizing) Gasification (via pyrolysis, partial oxidation, or steam reforming) converts biomass to a fuel gas that can be substituted for natural gas in combustion turbines or reformed into H 2 for fuel cell applications. Anaerobic digestion produces biogas that can be used in standard or combined heat and power (CHP) applications. Agricultural digester systems use animal or agricultural waste. Landfill gas also is produced anaerobically. Biofuels production for power and heat provides liquid-based fuels such as methanol, ethanol, hydrogen, or biodiesel. Representative Technologies for Conversion of Fuel to Power and Heat Direct combustion systems burn biomass fuel in a boiler to produce steam that is expanded in a Rankine Cycle prime mover to produce power. Cofiring substitutes biomass for coal or other fossil fuels in existing coal-fired boilers. Biomass or biomass-derived fuels (e.g. syngas, ethanol, biodiesel) also can be burned in combustion turbines (Brayton cycle) or engines (Otto or Diesel cycle) to produce power. When further processed, biomass-derived fuels can be used by fuels cells to produce electricity System Concepts CHP applications involve recovery of heat for steam and/or hot water for district energy, industrial processes, and other applications. Nearly all current biopower generation is based on direct combustion in small, biomass-only plants with relatively low electric efficiency (20%), although total system efficiencies for CHP can approach 90%. Most biomass direct-combustion generation facilities utilize the basic Rankine cycle for electric power generation, which is made up of the steam generator (boiler), turbine, condenser, and pump. For the near-term, cofiring is the most cost-effective of the power-only technologies. Large coal steam plants have electric efficiencies near 33%. The highest levels of coal cofiring (15% on a heat input basis) require separate feed preparation and injection systems. Biomass gasification combined cycle plants promise comparable or higher electric efficiencies (> 40%) using only biomass because they involve gas turbines (Brayton cycle), which are more efficient than Rankine cycles. Other technologies being developed include integrated gasification/fuel cell and biorefinery concepts.

150 Technology Applications The existing biopower sector, nearly 1,000 plants, is mainly comprised of direct-combustion plants, with an additional small amount of cofiring (six operating plants). Plant size averages 20 MW e, and the biomass-to-electricity conversion efficiency is about 20%. Grid-connected electrical capacity has increased from less than 200 MW e in 1978 to over 6500 MW e in More than 75% of this power is generated in the forest products industry s CHP applications for process heat. Wood-fired systems account for close to 95% of this capacity. In addition, about 3,300 MW e of municipal solid waste and landfill gas generating capacity exists. Recent studies estimate that on a life-cycle basis, existing biopower plants represent an annual net carbon sink of 4 MMTCe. Prices generally range from 8 to 12 /kwh. Current Status CHP applications using a waste fuel are generally the most cost-effective biopower option. Growth is limited by availability of waste fuel and heat demand. Biomass cofiring with coal ($50-250/kW of biomass capacity) is the most near-term option for large-scale use of biomass for power-only electricity generation. Cofiring also reduces sulfur dioxide and nitrogen oxide emissions. In addition, when cofiring crop and forest product residues, GHG emissions are reduced by a greater percentage (e.g. 23% GHG emissions reduction with 15% cofiring). Biomass gasification for large-scale (20-100MW e ) power production is being commercialized. It will be an important technology for cogeneration in the forest products industries (which project a need for biomass and black liquor CHP technologies with a higher electric thermal ratio), as well as for new baseload capacity. Gasification also is important as a potential platform for a biorefinery. Small biopower and biodiesel systems have been used for many years in the developing world for electricity generation. However, these systems have not always been reliable and clean. DOE is developing systems for village power applications and for developed world distributed generation that are efficient, reliable, and clean. These systems range in size from 3kW to 5MW and will begin field verification in the next 1-3 years. Current companies include: Future Energy Resources, Inc. (FERCO) Foster Wheeler Energy Products of Idaho PRM Energy Systems Technology History In the latter part of the 19 th century, wood was the primary fuel for residential, commercial, and transportation uses. By the 1950s, other fuels had supplanted wood. In 1973, wood use had dropped to 50 million tons per year. At that point, the forest products and pulp and paper industries began to use wood with coal in new plants and switched to wood-fired steam power generation. The Public Utility Regulatory Policies Act (PURPA) of 1978 stimulated the development of nonutility cogeneration and small-scale plants, leading to 70% self-sufficiency in the wood processing and pulp-and-paper sectors. As incentives were withdrawn in the late 1980s, annual installations declined from just over 600 MW in 1989, to MW in There are now nearly 1,000 wood-fired plants in the United States, with about two-thirds of those providing power (and heat) for on-site uses only.

151 Technology Future The levelized cost of electricity (in constant 1997$/kWh) for Biomass Direct-fired and Gasification configurations are projected to be: Direct-fired Gasification Source: Renewable Energy Technology Characterizations, EPRI TR R&D Directions include: Gasification This technology requires extensive field verification in order to be adopted by the relatively conservative utility and forest products industries, especially to demonstrate integrated operation of biomass gasifier with advanced power generation (turbines and/or fuel cells). Integration of gasification into a Biorefinery platform is a key new research area. Small Modular Systems Small-scale systems for distributed or minigrid (for premium or village power) applications will be increasingly in demand. Cofiring The DOE biopower program is moving away from research on cofiring, as this technology has reached a mature status. However, continued industry research and field verifications are needed to address specific technical and nontechnical barriers to cofiring. Future technology development will benefit from finding ways to better prepare, inject, and control biomass combustion in a coal-fired boiler. Improved methods for combining coal and biomass fuels will maximize efficiency and minimize emissions. Systems are expected to include biomass cofiring up to 5% of natural gas combined cycle capacity.

152 Biomass Market Data Cumulative Generating Capability, by Type (MW) Source: Energy Information Administration, Annual Energy Outlooks for , Table A17, and Renewable Resources in the U.S. Electricity Supply, 1993, Table 4, and world data from United Nations Development Program, World Energy Assessment, 2000, Table U.S. Electric Generators Municipal Solid Waste* 2,870 3,410 2,490 2,560 2,750 2,840 Wood and Other Biomass 1,910 1,640 1,760 1,460 1,370 1,390 U.S. Cogenerators Municipal Solid Waste* Wood and Other Biomass 5,350 5,450 6,000 4,640 5,260 5,260 U.S. Total Municipal Solid Waste* 2,000 3,280 3,870 3,010 3,260 3,260 3,350 Wood and Other Biomass 6,000 7,260 7,090 7,760 6,100 6,630 6,650 Biomass Total 8,000 10,540 10,960 10,770 9,360 9,890 10,000 Rest of World Total** 30,000 World Total 40,000 * Municipal Solid Waste includes Landfill Gas ** Number derived from subtracting U.S. total from the world total. Figures may not add due to rounding.

153 U.S. Annual Installed Generating Capability, by Type (MW) Source: Renewable Electric Plant Information System (REPiS), Version 5, NREL, Agricultural Waste Biogas Municipal Solid Waste Wood Residues Total U.S. Cumulative Generating Capability, by Type* (MW) Source: Renewable Electric Plant Information System (REPiS), Version 5, NREL, Agricultural Waste Biogas Municipal Solid Waste ,172 2,916 2,916 2,916 2,916 2,938 Wood Residues 4 3,576 4,935 6,371 7,317 7,409 7,449 7,539 7,552 Total 3,897 5,837 9,064 11,106 11,270 11,428 11,609 11,752 * There are an additional MW of Ag Waste,.945 MW of Bio Gas, 32.1 MW of MSW and MW of Wood Residues that are not accounted for here because they have no specific online date. 1 Agricultural residues, cannery wastes, nut hulls, fruit pits, nut shells 2 Biogas, alcohol (includes butahol, ethanol, and methanol), bagasse, hydrogen, landfill gas, livestock manure, wood gas (from wood gasifier) 3 Municipal solid waste (includes industrial and medical), hazardous waste, scrap tires, wastewater sludge, refused-derived fuel 4 Timber and logging residues (Includes tree bark, wood chips, saw dust, pulping liquor, peat, tree pitch, wood or wood waste)

154 Generation from Cumulative Capacity, by Type (Billion kwh) Source: Energy Information Administration, Annual Energy Outlooks for , Table A17, and Renewable Resources in the U.S. Electricity Supply, 1993, Table 4, and world data from United Nations Development Program, World Energy Assessment, 2000, Table U.S. Electric Generators Municipal Solid Waste* Wood and Other Biomass U.S. Cogenerators Municipal Solid Waste* Wood and Other Biomass U.S. Total Municipal Solid Waste* Wood and Other Biomass Biomass Total Rest of World Total** 104 World Total 160 * Municipal Solid Waste includes Landfill Gas ** Number derived from subtracting U.S. total from the world total. Figures may not add due to rounding. U.S. Generation from Cumulative Capacity, by Type (Billion kwh) Source: Energy Information Administration, Monthly Energy Review, January 2002, Table Waste** Wood* Total Biomass * Wood includes wood, wood waste, black liquor, red liquor, spent sulfite liquor, wood sludge, peat, railroad ties, and utility poles. ** Waste includes Municipal solid waste, landfill gas, meathane, digester gas, liquid acetonitrile waste, tall oil, waste alcohol, medical waste, paper pellets, sludge waste, solid byproducts, tires, agricultural byproducts, closed loop biomass, fish oil

155 U.S. Annual Energy Consumption for Electricity Generation (Quadrillion Btu) Source: Energy Information Administration, Renewable Energy Annual 2000 ( ), Table 3, and Energy Information Administration, Renewable Energy Annual 1995 (1990), Table Industrial Sector Electric Utility Sector Electric Power Industry Total Technology Performance Source: Renewable Energy Technology Characterizations, EPRI TR , 1997 (this document is currently being updated by DOE and the values most likely will change). Efficiency * ** 2020 Capacity Factor (%) Direct Fired Co-Fired Gasification Efficiency (%) Direct Fired Co-Fired Gasification Net Heat Rate (kj/kwh) Direct Fired 15,280 13,000 13,000 13,000 11,810 10,620 Co-Fired 11,015 11,066 11,066 11,066 11,066 11,066 Gasification 10,000 10,000 9,730 9,730 9,200 8,670 Cost * Total Capital Cost ($/kw) Direct Fired 1,965 1,745 1,510 1,346 1,231 1,115 Co-Fired*** Gasification 2,102 1,892 1,650 1,464 1,361 1,258 Feed Cost ($/GJ) Direct Fired Co-Fired*** Gasification Fixed Operating Cost ($/kw-yr) Direct Fired Co-Fired*** Gasification

156 * Variable Operating Costs ($/kwh) Direct Fired Co-Fired*** Gasification Total Operating Costs ($/kwh) Direct Fired Co-Fired*** Gasification Levelized Cost of Energy ($/kwh) Direct Fired Co-Fired*** N/A N/A N/A N/A N/A N/A Gasification * Data is for 1997, the base year of the Renewable Energy Technology Characterizations analysis. ** Number derived by interpolation. *** Note Co-Fired cost characteristics represent only the biomass portion of costs for capital and incremental costs above conventional costs for Operations & Maintenance (O&M), and assume $9.14/dry tonne biomass and $39.09/tonne coal, a Heat input from biomass at 19,104 kj/kg, and that variable O&M includes an SO2 credit valued at $110/tonne SO2. No Co-firing COE is reported in the RETC.

157 Geothermal Energy Technology Description Geothermal energy is thermal energy from within the earth. Hot water and steam are used to produce electricity or applied directly for space heating and industrial processes. There is potential to use geothermal energy to recover minerals and metals present in the geothermal brine. System Concepts Geophysical, geochemical, and geological exploration locate permeable hot reservoirs to drill. Wells are drilled into the reservoirs. Well fields and distribution systems allow the hot geothermal fluids to move to the point of use, and are injected back to the earth. Steam turbines using natural steam or hot water flashed to steam, and binary turbines produce mechanical power that is converted to electricity. Direct applications utilize the thermal energy directly, for heating, without conversion to another form of energy. Representative Technologies Dry steam plants, which use geothermal steam to spin turbines; Flash steam plants, which pump deep, high-pressure hot water into lower-pressure tanks and use the resulting flashed steam to drive turbines. Binary-cycle plants, which use moderately hot geothermal water to heat a secondary fluid with a much lower boiling point than water. This causes the secondary fluid to flash to vapor, which then drives the turbines. Exploration technologies for the identification of fractures and geothermal reservoirs; drilling to access the resource; geoscience and reservoir testing and modeling to optimize production and predict useful reservoir lifetime. Technology Applications Mile-or-more-deep wells can be drilled into underground reservoirs to tap steam and very hot water that drive turbines and electricity generators. Because of economies of scale, geothermal power plants supply power directly to the grid, typically operating as baseload plants. Another use is direct applications to use the heat from geothermal fluids without conversion to electricity. In the United States, most geothermal reservoirs are located in the western states, Alaska, and Hawaii, but some eastern states have geothermal resources that are used for direct applications. Hot water near Earth's surface can be piped directly into facilities and used to heat buildings, grow plants in greenhouses, dehydrate onions and garlic, heat water for fish farming, and pasteurize milk. Some cities pipe the hot water under roads and sidewalks to melt snow. District heating systems use networks of piped hot water to heat many buildings in a community. The recovery of minerals and metals from geothermal brine can add value to geothermal power projects

158 Current Status Hydrothermal reservoirs provide the heat for about 2100 MW of operating generating capacity in the United States at 18 resource sites. Another 700 MW of capacity at The Geysers has been shut down. Three types of power plants are operating today: Dry steam, flash steam, and binary. Worldwide installed capacity stands at about 8000 MW. The United States has a resource base capable of supplying heat for 40 GW of electrical capacity at costs competitive with conventional systems. Hydrothermal reservoirs are being used to produce electricity with an online availability of 97%; advanced energy conversion technologies are being implemented to improve plant thermal efficiency. Direct applications capacity is about 600 MW t in the United States. Direct-use applications are successful, but require colocation of a quality heat source and need. More than 20 states utilize the direct use of geothermal energy, including Georgia and New York. Current leading geothermal technology companies include the following: Calpine Corporation Caithness Energy Cal Energy Company (a subsidiary of Mid American Energy Holding Company) Ormat International, Inc. Technology History The use of geothermal energy as a source of hot water for spas dates back thousands of years. In 1892, the world's first district heating system was built in Boise, Idaho, as water was piped from hot springs to town buildings. Within a few years, the system was serving 200 homes and 40 downtown businesses. Today, the Boise district heating system continues to flourish. Although no one imitated this system for some 70 years, there are now 17 district heating systems in the United States and dozens more around the world. United States' first geothermal power plant went into operation in 1922 at The Geysers in California. The plant was 250 kw, but fell into disuse. In 1960, the country's first large-scale geothermal electricity-generating plant began operation. Pacific Gas and Electric operated the plant, located at The Geysers. The resource at the Geysers is dry steam. The first turbine produces 11 megawatts (MW) of net power and operated successfully for more than 30 years. In 1979, the first electrical development of a water-dominated geothermal resource occurred at the East Mesa field in the Imperial Valley in California. In 1980, UNOCAL built the country's first flash plant, generating 10 MW at Brawley, California. In 1981, with a supporting loan from DOE, Ormat International, Inc., successfully demonstrated binary technology in the Imperial Valley of California. This project established the technical feasibility of larger-scale commercial binary power plants. The project was so successful that Ormat repaid the loan within a year. By the mid 1980s, electricity was being generated by geothermal power in four western states: California, Hawaii, Utah, and Nevada. In the 1990s, the U.S. geothermal industry focused its attention on building power plants overseas, with major projects in Indonesia and the Philippines. In 1997, a pipeline began delivering treated municipal wastewater and lake water to The Geysers steamfield in California, increasing the operating capacity by 70 MW. In 2000, DOE initiated its GeoPowering the West program to encourage development of geothermal resources in the western United States by reducing nontechnical barriers.

159 Technology Future The levelized cost of electricity (in constant 1997$/kWh) for the two major future geothermal energy configurations are projected to be: Hydrothermal Flash Hydrothermal Binary Source: Renewable Energy Technology Characterizations, EPRI TR New approaches to utilization will be developed, which increase the domestic resource base by a factor of 10. Improved methodologies will be developed for predicting reservoir performance and lifetime. Advances will be made in finding and characterizing underground permeability and developing low-cost, innovative drilling technologies. Further R&D will reduce capital and operating costs and improve the efficiency of geothermal conversion systems. Heat recovery methods will be developed that allow the use of geothermal areas that are deeper, less permeable, or dryer than those currently considered as resources.

160 Geothermal Market Data Annual Installed Electric Capacity (MWe) Source: Renewable Energy Project Information System (REPiS), Version 5, NREL, U.S Rest of World World Total Cumulative Installed Electric Capacity (MWe) Source: Renewable Energy Project Information System (REPiS), Version 5, NREL, 2001, and Renewable Energy World/July-August 2000 page 123 Table U.S ,698 2,540 2,684 2,720 2,720 2,720 2,720 2,769 Rest of World 1,298 3,066 3,293 4,114 5,206 World Total 2,100 4,764 5,832 6,797 7,974 Annual Generation from Cumulative Installed Electric Capacity (billion kwh) U.S. Source: EIA,REA Table 4 ( ), EIA REA 1995 (1990) and, Renewable Energy World/July- August 2000 page 126, Table Electric Power Industry Imports Electric Geothermal Total Rest of World World Total

161 Annual U.S. Geothermal Heat Pump Shipments, by type (units) Source: Energy Information Administration - REA Table ARI-320 4,696 4,697 7,772 10,510 13,236 ARI-325/330 26,800 25,697 28,335 26,042 34,271 Other non-ari Rated ,327 1,714 1,655 Totals 32,334 31,385 37,434 38,266 49,162 Capacity of U.S. Heat Pump Shipments* (Rated Tons) Source: Energy Information Administration - REA Table ARI ,120 15,060 24,708 35,776 33,163 ARI-325/ ,925 92, ,186 98, ,303 Other non-ari Rated 3,935 5,091 6,662 6,758 6,070 Totals 188, , , , ,446 * One Rated Ton of Capacity equals 12,000 Btu's. Annual U.S. Geothermal Heat Pump Shipments by Customer Type and Model Type (units) Source: Energy Information Administration - REA Table 38, REA Table 38, and REA Table Exporter 2, ,172 Whole Sale Distributor 21,444 29,181 14,377 9,193 Retail Distributor 8, ,222 2,555 Installer 18,762 25,302 18,429 24,917 End-User Others 13 1,727 1,135 6,259 Total 51,520 57,922 38,266 49,162

162 Annual U.S. Geothermal Heat Pump Shipments by Export & Census Region (units) Source: Energy Information Administration - REA Table 37, REA Table 37, and REA Table Export 4,090 2, ,303 Midwest 11,874 13,402 12,240 13,112 Northeast 6,417 9,280 5,403 6,044 South 25,302 26,788 16,195 20,935 West 3,837 6,025 3,947 2,768 Total 51,520 57,922 38,266 49,162 Cumulative Installed Capacity Source: EIA - AEO , Table A17, Renewable Resources in the U.S. Electric Supply, Table 4, World Totals from UNDP World Energy Assessment 2000, Tables 7.20 and 7.22 and, Renewable Energy World/July-August Electricity (MWe) U.S. 2,575 3,020 3,000 2,870 2,860 2,790 2,850 Rest of World 3,292 3,778 5,130 5,379 World Total 5,867 6,798 8,000 8,239 Direct Use- Heat (MWth) U.S. 1,910 Rest of World 9,090 World Total 1,950 7,072 8,064 8,664 10,400 11,000 17,175 Annual Generation from Cumulative Installed Capacity Source: EIA - AEO , Table A17, Renewable Resources in the U.S. Electric Supply, Table 4, and World Totals from UNDP World Energy Assesment 2000, Tables 7.20 and Electricity (Billion kwhe) U.S Rest of World World Total Direct Use- Heat (billion kwhth) U.S. 4.0 Rest of World 36.0 World Total

163 Installed Capacity and Power Generation/Energy Production from Installed Capacity Source: Lund and Freeston, World-Wide Direct Uses of Geothermal Energy 2000, Lund and Boyd, Geothermal Direct-Use in the United States Update: , J. Lund, World Status of Geothermal Energy Use Overview , Sifford and Blommquist, Geothermal Electric Power Production in the United States: A Survey and Update for , and G. Huttrer, The Status of World Geothermal Power Generation Proceedings of the World Geothermal Congress 2000, Kyushu-Tohoku, Japan, May 28- June10, Cumulative Installed Capacity Electricity (MWe) U.S. 2,369 2,343 2,314 2,284 2,293 2,228 Rest of World 4,464 5,746 World Total 3,887 4,764 5,832 6,833 7,974 Direct Use- Heat* (MWth) U.S. 4,200 Rest of World 12,975 World Total 1,950 7,072 8,064 8,664 16,209 17,175 Annual Generation/Energy Production from Cumulative Installed Capacity Electricity (Billion kwhe) U.S Rest of World 33.8 World Total 49.3 Direct Use- Heat* (TJ) U.S. 13,890 20,302 21,700 Rest of World 98, ,707 World Total 86, , , ,139 * Direct Use- Heat includes geothermal heat pumps as well as traditional uses. Geothermal Heat pumps account for 1854 MWth (14,617 TJ) in 1995 and 6849 MWth (23,214 TJ) in 1999 of the world totals and 3600 MWth (8,800 TJ) in 2000 of the US total. Conversion of GWh to TJ is done at 1TJ = GWh.

164 Annual Generation from Cumulative Installed Capacity (Billion kwh) Source: EIA, Monthly Energy Review, December Table 7.2 Electricity Net Generation U.S Rest of World World Total Annual Geothermal Energy Consumption for Electric Generation (Quadrillion Btu) Source: EIA, Monthly Energy Review, Electric Power Sector Energy Consumption , U.S. Total Rest of the World World Tota Annual Geothermal Energy Source: EIA, Monthly Energy Review, Energy Consumption by Source , Consumption (Quadrillion Btu) U.S. Total Rest of the World World Tota

165 Technology Performance Efficiency Source: Renewable Energy Technology Characterizations, EPRI TR , 1997 (this document is currently being updated by DOE and the values most likely will change) Capacity Factor (%) Flashed Steam Binary Hot Dry Rock Cost Capital Cost ($/kw) Flashed Steam 1,444 1,372 1,250 1,194 1,147 1,100 Binary 2,112 1,994 1,875 1,754 1,696 1,637 Hot Dry Rock 5,519 5,176 4,756 4,312 3,794 3,276 Fixed O&M ($/kw-yr) Flashed Steam Binary Hot Dry Rock

166

167 Concentrating Solar Power Technology Description Concentrating Solar Power (CSP) systems concentrate solar energy 50 to 5,000 times to produce hightemperature thermal energy, which is used to produce electricity for distributed or bulk generation power applications. System Concepts In CSP systems, highly reflective sun-tracking mirrors produce temperatures of 400 to 800 C in the working fluid of a receiver; this heat is used in conventional heat engines (steam or gas turbines or Stirling engines) to produce electricity at system solar-to-electric efficiencies of up to 30%. Systems using advanced photovoltaics (PV) cells may achieve efficiencies greater than 35%. Representative Technologies A parabolic trough system focuses solar energy on a linear oil-filled receiver, which collects heat to generate steam and power a steam turbine. When the sun is not shining, steam can be generated with fossil fuel to meet utility needs. Plant sizes can range from 10 to 100 MWe. A power tower system uses many large heliostats to focus the solar energy onto a tower-mounted central receiver filled with a molten-salt working fluid that produces steam. The hot salt can be stored efficiently to allow power production to match utility demand even when the sun is not shining. Plant size can range from 30 to 200 MWe. A dish/engine system (see diagram above) uses a dish-shaped reflector to power a small Stirling or Brayton engine/generator or a high-concentrator PV module mounted at the focus of the dish. Dishes are 2 to 25 kw in size, can be used individually or in small groups, and are easily hybridized with fossil fuel. Technology Applications Concentrating solar power systems can be sized for village power (10 kilowatts) or grid-connected applications (up to 100 megawatts). Some systems use thermal storage during cloudy periods or at night. Others can be combined with natural gas such that the resulting hybrid power plants can provide higher-value, dispatchable power. To-date, the primary use of CSP systems has been for bulk power supply to the southwestern grid. However, these systems were installed under very attractive power purchase rates that are not generally available today. With one of the best direct normal insolation resources anywhere on Earth, the southwestern states are still positioned to reap large and, as yet, largely uncaptured economic benefits from this important natural resource. California, Nevada, Arizona, and New Mexico are each exploring policies that will nurture the development of their solar-based industries.

168 In addition to the concentrating solar power projects under way in this country, a number of projects are being developed in India, Egypt, Morocco, and Mexico. In addition, independent power producers are in the early stages of design and development for potential parabolic trough and/or power tower projects in Greece (Crete) and Spain. Given successful deployment of systems in one or more of these initial markets, several domestic project opportunities are expected to follow. Distributed systems deployment opportunities are emerging for dish-engine systems. Many states are adopting green power requirements in the form of "portfolio standards" and renewable energy mandates. While the potential markets in the U.S. are large, the size of developing worldwide markets is immense. The International Energy Agency projects an increased demand for electrical power worldwide more than doubling installed capacity. More than half of this is in developing countries and a large part is in areas with good solar resources, limited fossil fuel supplies, and no power distribution network. The potential payoff for dish/engine system developers is the opening of these immense global markets for the export of power generation systems. Current Status CSP technology is generally still too expensive to compete in widespread domestic markets without significant subsidies. Consequently, RD&D goals are to reduce costs of CSP systems to 5 to 8 /kwh with moderate production levels within five years, and below 5c/kWh at high production levels in the long term. Nine parabolic trough plants, with a total rated capacity of 354 MWe, were installed in California between 1985 and Their continuing operation has demonstrated their ability to achieve commercial costs of about 12 to 14 /kwh. Solar Two, a 10-MWe pilot power tower with three hours of storage, also installed in California, provided technical information needed to scale up to a MW commercial plant, the first of which is now being planned in Spain. A number of prototype dish/stirling systems are currently operating in Nevada, Arizona, Colorado, and Spain. High levels of performance have been established; durability remains to be proven, although some systems have operated for more than 10,000 hours. The CSP industry includes 25 companies who design, sell, own, and/or operate energy systems and power plants based on the concentration of solar energy. CSP companies include energy utilities, independent power producers or project developers, equipment manufacturers, specialized development firms, and consultants. While some firms only offer CSP products, many offer related energy products and services. Four of the 25 are Fortune 500 Companies. Current companies include: Duke Solar Energy, LLC Stirling Energy Systems Nexant (a Bechtel Technology & Consulting Company) Science Applications International Corp. The Boeing Company STM Corporation KJC Operating Company WGAssociates SunRay Corporation Morse & Associates Arizona Public Service Corporation United Innovations Inc. Spencer Management Associates Reflective Energies Kearney & Associates Industrial Solar Technologies Nagel Pump Spectralab Clever Fellows Innovative Consortium Salt River Project Array Technologies Energy Laboratories Inc. Concentrating Technologies Amonix Ed Tek Inc.

169 Technology History Organized, large-scale development of solar collectors began in the United States in the mid-1970s under the Energy Research and Development Administration (ERDA) and continued with the establishment of the U.S. Department of Energy (DOE) in Troughs: Parabolic trough collectors capable of generating temperatures greater than 500ºC (932 F) were initially developed for industrial process heat (IPH) applications. Acurex, SunTec, and Solar Kinetics were the key parabolic trough manufacturers in the United States during this period. Parabolic trough development also was taking place in Europe and culminated with the construction of the IEA Small Solar Power Systems (SSPS) Project/Distributed Collector System in Tabernas, Spain, in This facility consisted of two parabolic trough solar fields one using a single-axis tracking Acurex collector and one the double-axis tracking parabolic trough collectors developed by M.A.N. of Munich, Germany. In 1982, Luz International Limited (Luz) developed a parabolic trough collector for IPH applications that was based largely on the experience that had been gained by DOE/Sandia and the SSPS projects. Southern California Edison (SCE) signed a power purchase agreement with Luz for the Solar Electric Generating System (SEGS) I and II plants, which came online in Luz later signed a number of Standard Offer (SO) power purchase contracts under the Public Utility Regulatory Policies Act (PURPA), leading to the development of the SEGS III through SEGS IX projects. Initially, the plants were limited by PURPA to 30 MW in size; later this limit was raised to 80 MW. In 1991, Luz filed for bankruptcy when it was unable to secure construction financing for its 10th plant (SEGS X). The 354 MWe of SEGS trough systems are still being operated today. Experience gained through their operation will allow the next generation of trough technology to be installed and operated much more cost-effectively. Power Towers: A number of experimental power tower systems and components have been field-tested around the world in the past 15 years, demonstrating the engineering feasibility and economic potential of the technology. Since the early 1980s, power towers have been fielded in Russia, Italy, Spain, Japan, and the United States. In early power towers, the thermal energy collected at the receiver was used to generate steam directly to drive a turbine generator. The U.S.-sponsored Solar Two was designed to demonstrate the dispatchability provided by molten-salt storage and to provide the experience necessary to lessen the perception of risk from these large systems. U.S. Industry is currently pursuing a subsidized power tower project opportunity in Spain. This project, dubbed Solar Tres, represents a 4x scale-up of the Solar 2 design. Dish/Engine Systems: Dish/engine technology is the oldest of the solar technologies, dating back to the 1800s when a number of companies demonstrated solar-powered steam-rankine and Stirling-based systems. Development of modern technology began in the late 1970s and early 1980s. This technology used directly illuminated, tubular solar receivers, a kinematic Stirling engine developed for automotive applications, and silver/glass mirror dishes. Systems, nominally rated at 25 kwe, achieved solar-toelectric conversion efficiencies of around 30% (still the world record to date). Eight prototype systems were deployed and operated on a daily basis from 1986 through In the early 1990s, Cummins Engine Company attempted to commercialize dish/stirling systems

170 based on free-piston Stirling engine technology. Efforts included a 5 to 10 kwe dish/stirling system for remote power applications, and a 25 kwe dish/engine system for utility applications. However, largely because of a corporate decision to focus on its core diesel-engine business, Cummins canceled their solar development in Technical difficulties with Cummins' free-piston Stirling engines were never resolved. Current dish/engine efforts are being continued by three U.S. industry teams - Science Applications International Corp. (SAIC) teamed with STM Corp., Boeing with Stirling Energy Systems, and WG Associates with Sunfire Corporation. SAIC and Boeing together have five 25kW systems under test and evaluation at utility, industry, and university sites in Arizona, California, and Nevada. WGA has two 10kW systems under test in New Mexico, with a third off-grid system being developed in 2002 on an Indian reservation for water-pumping applications. Technology Future The levelized cost of electricity (in constant 1997$/kWh) for the three CSP configurations are projected to be: Trough Power Tower Dish/Engine Source: Renewable Energy Technology Characterizations, EPRI TR for Dish/Engine, and Program values for Trough and Power Tower. RD&D efforts are targeted to improve performance and lifetime, reduce manufacturing costs with improved designs, provide advanced designs for long-term competitiveness, and address barriers to market entry. Improved manufacturing technologies are needed to reduce the cost of key components, especially for first-plant applications where economies of scale are not yet available. Demonstration of Stirling engine performance and reliability in the field are critical to the success of dish/engine systems. DOE expects Dish/Stirling systems to be available by 2005, after deployment and testing of 1 MW (40 systems) during the next two years. Key DOE program activities are targeted to support the next commercial opportunities for these technologies, demonstrate improved performance and reliability of components and systems, reduce energy costs, and develop advanced systems and applications. The successful conclusion of Solar Two sparked worldwide interest in power towers. As Solar Two completed operations, an international consortium led by U. S. industry including Bechtel and Boeing (with technical support from Sandia National Laboratories), formed to pursue power tower plants worldwide, especially in Spain (where special solar premiums make the technology cost-effective), but also in Egypt, Morocco, and Italy. Their first commercial power tower plant is planned to be four times the size of Solar Two (about 40 MW equivalent, utilizing storage to power a 15MW turbine up to 24 hours per day). The World Bank s Solar Initiative is pursuing CSP technologies for less-developed countries. The World Bank considers CSP as a primary candidate for Global Environment Facility funding, which could total $1B to $2B for projects over the next 2 years.

171 Concentrating Solar Power Market Data U.S. Installations (electric only) Source: Renewable Energy Project Information System (REPiS), Version 5, NREL, 2001, and Renewable Energy Technology Characterizations, EPRI TR Cumulative (MW) U.S Power Tower Trough Dish/Engine Annual Generation from Cumulative Installed Capacity (Billion kwh) Source: EIA, AEO Table A17, Renewable Resources in the Electric Supply, Table 4, and Monthly Energy Review, December Table U.S Technology Performance Efficiency Source: Renewable Energy Technology Characterizations, EPRI TR , 1997 (this document is currently being updated by NREL and the values most likely will change), and TC revisions made by Hank Price of NREL for Trough technologies and Scott Jones of Sandia National Laboratory for Power Towers in Capacity Factor (%) Power Tower Trough Dish Solar to Electric Eff. (%) Power Tower Trough Dish/Engine

172 Cost* Total ($/kwp) Power Tower 1,747 1, Trough 4,033 2,103 1,633 1,277 1,185 1,072 Dish/Engine 12,576 5,191 2,831 1,365 1,281 1,197 Total ($/kwnameplate) Power Tower 3,145 2,329 2,605 2,475 2,345 Trough 4,033 3,154 2,988 2,766 2,568 2,323 Dish/Engine 12,576 5,691 3,231 1,690 1,579 1,467 O&M ($/kwh) Power Tower Trough Dish/Engine Levelized Cost of Energy Power Tower ($/kwh) Trough Dish/Engine * Cost data for Trough and Power Tower technologies are from 2001 revisions (in 2001$). Dish/Engine data for $/kwp excludes costs of hybrid system and $/kwnameplate includes hybrid costs (in 1997$).

173 Photovoltaics Technology Description Photovoltaic (PV) arrays convert sunlight to electricity without moving parts and without producing fuel wastes, air pollution, or greenhouse gases (GHGs). Using solar PV for electricity and eventually transportation (from hydrogen production) will help reduce CO 2 worldwide. System Concepts Flat-plate PV arrays use global sunlight; concentrators use direct sunlight. Modules are mounted on a stationary array or on single- or dual-axis sun trackers. Arrays can be ground-mounted or on all types of buildings and structures (e.g., see semi-transparent solar canopy, right). PV dc output can be conditioned into gridquality ac electricity, or dc can be used to charge batteries or to split water to produce H 2. Representative Technologies Flat-plate cells are either constructed from crystalline silicon cells, or from thin films using amorphous silicon. Other materials such as copper indium diselinide (CIS) and cadmium telluride also hold promise as thin-film materials. The vast majority of systems installed today are in flat- plate configurations where multiple cells are mounted together to form a module. These systems are generally fixed in a single position, but can be mounted on structures that tilt toward the sun on a seasonal basis, or on structures that roll east to west over the course of the day. Photovoltaic concentrator systems use optical concentrators to focus direct sunlight onto solar cells for conversion to electricity. A complete concentrating system includes concentrator modules, support and tracking structures, a power-processing center, and land. PV concentrator module components include solar cells, an electrically isolating and thermally conducting housing for mounting and interconnecting the cells, and optical concentrators. The solar cells in today's concentrators are predominantly silicon, although gallium arsenide-based (GaAs) solar cells may be used in the future because of their high-conversion efficiencies. The housing places the solar cells at the focus of the optical concentrator elements and provides means for dissipating excess heat generated in the solar cells. The optical concentrators are generally Fresnel lenses but also can be reflectors. Technology Applications PV systems can be installed as either grid supply technologies or as customer-sited alternatives to retail electricity. As suppliers of bulk grid power, PV modules would typically be installed in large array fields ranging in total peak output from a few megawatts on up. Very few of these systems have been installed to-date. A greater focus of the recent marketplace is on customer-sited systems, which may be installed to meet a variety of customer needs. These installations may be residential-size systems of just one kilowatt or commercial-size systems of several hundred kilowatts. In either case, PV systems meet customer needs for alternatives to purchased power, reliable power, protection from price escalation, desire for green power, etc. Interest is growing in the use of PV systems as part of the building structure or façade ( building integrated ). Such systems use PV modules designed to look like shingles, windows, or other common building elements.

174 PV systems are expected to be used in the United States for residential and commercial buildings; distributed utility systems for grid support; peak power shaving, and intermediate daytime load following; with electric storage and improved transmission, for dispatchable electricity; and H 2 production for portable fuel. Other applications for PV systems include electricity for remote locations, especially for billions of people worldwide who do not have electricity. Typically, these applications will be in hybrid mini-grid or battery-charging configurations. Almost all locations in the United States and worldwide have enough sunlight for PV (e.g., U.S. sunlight varies by only about 25% from an average in Kansas). Land area is not a problem for PV. Not only can PV be more easily sited in a distributed fashion than almost all alternatives (e.g., on roofs or above parking lots), a PV-generating station 140 km by 140 km sited at an average solar location in the United States could generate all of the electricity needed in the country ( GWh/year), assuming a system efficiency of 10% and an area packing factor of 50% (to avoid self-shading). This area (0.3% of U.S.) is less than one-third of the area used for military purposes in the United States. Current Status The cost of PV-generated electricity has dropped 15- to 20-fold; and grid-connected PV systems currently sell for about $5 $10/W p (20 to 50 /kwh), including support structures, power conditioning, and land. They are highly reliable and last 20 years or longer. Crystalline silicon is widely used and the most commercially mature photovoltaic material. Thinfilm PV modules currently in production include three based on amorphous silicon, cadmium telluride and CIS alloys. About 288 MW of PV were sold in 2000 (more than $2 billion worth); total installed PV is more than 1 GW. The U.S. world market share is about 26%. Annual market growth for PV has been about 25% as a result of reduced prices and successful global marketing. In recent years, sales growth has accelerated to almost 40% per year. Hundreds of applications are cost-effective for off-grid needs. Almost two-thirds of U.S.-manufactured PV is exported. However, the fastest growing segment of the market is grid-connected PV, such as roof-mounted arrays on homes and commercial buildings in the United States. CA is subsidizing PV systems because it is considered cost-effective to reduce their dependence on natural gas, especially for peak daytime loads for air-conditioning, which matches PV output. Highest efficiency for wafers of single-crystal or polycrystalline silicon is 24%, and for commercial modules is 13% 15%. Silicon modules currently cost about $2-$3/W p to manufacture. During the past 2 years, world record solar cell sunlight-to-electricity conversion efficiencies were set by federally funded universities, national laboratories, or industry in copper indium gallium diselenide (19% cells and 12% modules) and cadmium telluride (16% cells, 11% modules). Cell and module efficiencies for these technologies have increased more than 50% in the past decade. Efficiencies for commercial thin-film modules are 5% 11%. A new generation of thin-film PV modules is going through the high-risk transition to first-time and large-scale manufacturing. If successful, market share could increase rapidly. Highest efficiencies for single-crystal Si and multijunction gallium arsenide (GaAs)-alloy cells for concentrators are 25% 34%; and for commercial modules are 15% 17%. Prototype systems are being tested in the U.S. desert SW. Current leading PV companies in 2000 and associated production of cells/modules are listed below:

175 U.S. Production (2000) World Production MW MW BP/Amoco Solarex Kyocera Sharp Siemens Astropower Sanyo Photowatt ASE (GMBH) Solec Intl - - Advanced PV Sys. - - USSC ASE Americas Others Total (for leading producers) Source: PV News, Vo. 20, No. 2, Page 2 Technology History French physicist Edmond Becquerel first described the photovoltaic (PV) effect in 1839, but it remained a curiosity of science for the next three quarters of a century. At only 19, Becquerel found that certain materials would produce small amounts of electric current when exposed to light. The effect was first studied in solids, such as selenium, by Heinrich Hertz in the 1870s. Soon afterward, selenium PV cells were converting light to electricity at 1 percent to percent efficiency. As a result, selenium was quickly adopted in the emerging field of photography for use in light-measuring devices. Major steps toward commercializing PV were taken in the 1940s and early 1950s, when the Czochralski process was developed for producing highly pure crystalline silicon. In 1954, scientists at Bell Laboratories depended on the Czochralski process to develop the first crystalline silicon photovoltaic cell, which had an efficiency of 4 percent. Although a few attempts were made in the 1950s to use silicon cells in commercial products, it was the new space program that gave the technology its first major application. In 1958, the U.S. Vanguard space satellite carried a small array of PV cells to power its radio. The cells worked so well that PV technology has been part of the space program ever since. Even today, PV plays an important role in space, supplying nearly all power for satellites. The commercial integrated circuit technology also contributed to the development of PV cells. Transistors and PV cells are made from similar materials and operate on similar physical mechanisms. As a result, advances in transistor research provided a steady flow of new information about PV cell technology. (Today, however, this technology transfer process often works in reverse, as advances in PV research and development are sometimes adopted by the integrated circuit industry.) Despite these advances, PV devices in 1970 were still too expensive for most "down to Earth" uses. But, in the mid-1970s, rising energy costs, sparked by a world oil crisis, renewed interest in making PV technology more affordable. Since then, the federal government, industry, and research organizations have invested billions of dollars in research, development, and production. A thriving industry now exists to meet the rapidly growing demand for photovoltaic products.

176 Technology Future The levelized cost of electricity (in constant 1997$/kWh) for PV are projected to be: Utility-owned Residential (crystalline Si) Utility Scale Thin Film Concentrator Source: Renewable Energy Technology Characterizations, EPRI TR (Note that this document is currently being updated by DOE and the values most likely will change). Crystalline Silicon - Most PV systems installed to-date have used crystalline silicon cells. That technology is relatively mature. In the future, cost-effectiveness will be achieved through incremental efficiency improvements, enhanced yields, and advanced lower-cost manufacturing techniques. Even though some thin-film modules are now commercially available, their real commercial impact is only expected to become significant during the next three to 10 years. Beyond that, their general use should occur in the time frame, depending on investment levels for technology development and manufacture. Thin films using amorphous silicon, which are a growing segment of the U.S. market, have several advantages over crystalline silicon. It can be manufactured at lower cost, is more responsive to indoor light, and can be manufactured on flexible or low-cost substrates. Improved semiconductor deposition rates will reduce manufacturing costs in the future. Other thin-film materials will become increasingly important in the future. In fact, the first commercial modules using indium gallium diselinide thin-film devices were produced in Improved manufacturing techniques and deposition processes will reduce costs and help improve efficiency. Substantial commercial interest exists in scaling-up production of thin films. As thin films are produced in larger quantity, and as they achieve expected performance gains, they will become more economical for the whole range of applications. Multijunction cells with efficiencies of 38% at very high concentrations are being developed. Manufacturing research and supporting technology development hold important keys to future cost reductions. Large-scale manufacturing processes will allow major cost reductions in cells and modules. Advanced power electronics and non-islanding inverters will lessen barriers to customer adoption and utility interface. A unique multijunction GaAs-alloy cell developed at NREL was spun off to the space power industry, leading to a record cell (34%) and a shared R&D100 Award for NREL/Spectrolab in This device configuration is expected to dominate future space power for commercial and military satellites.

177 Photovoltaics Market Data PV Cell/Module Production (Shipments) Source: PV News, Vol. 15, No. 2, Feb. 1996, Vol. 16, No. 2, Feb. 1997, & Vol. 20, No. 2, Feb. 2001, and [Paul Maycock, Annual (MW) U.S Japan Europe Rest of World World Total Cumulative (MW) U.S Japan Europe Rest of World World Total ,156 1,443 1,839 US % of World Sales Annual 71% 34% 32% 44% 44% 41% 35% 30% 26% 27% Cumulative 75% 52% 39% 37% 38% 39% 38% 37% 35% 33% Annual Capacity (Shipments retained, MW)* Source: Strategies Unlimited U.S Total World *Excludes indoor consumer (watches/calculators).

178 Cumulative Capacity (Shipments retained, MW)* Source: Strategies Unlimited U.S Total World ,210 *Excludes indoor consumer (watches/calculators). U.S. Shipments (MW) Source: Energy Information Administration, Annual Energy Review, 2000, Tables 10.5 and 10.6, and REA 2000, Table 24. Annual Shipments Total Imports Exports N/A Domestic Total On-Grid* Domestic Total Off-Grid* Cumulative Shipments Total Imports Exports N/A Domestic Total On-Grid* Domestic Total Off-Grid* * Domestic Totals include imports and exclude exports. Annual U.S. Installations (MW) Source: The 2000 National Survey Report of Photovoltaic Power Applications in the United States, prepared by Paul D. Maycock and Ward Bower, April 30, 2001, prepared for the IEA, Table E Grid-Connected Distributed Off-Grid Consumer Government Off-Grid Industrial/Commercial N/A N/A N/A Consumer (<20 w) Central Station Total

179 Cumulative U.S. Installations* (MW) Source: The 2000 National Survey Report of Photovoltaic Power Applications in the United States, prepared by Paul D. Maycock and Ward Bower, April 30, 2001, prepared for the IEA, Table Off-grid Residential Off-grid non-residential On-grid Distributed N/A N/A N/A On-grid Centralized Total * Excludes installations less than 40kW. Annual World Installations (MW) Source: PV News, Vol. 19, No.11, Nov Consumer Products US Off-Grid Residential World Off-Grid Rural Communications/ Signal N/A N/A 14 N/A PV/Diesel, Commercial Grid-Conn Res, Commercial Central Station (>100kW) Total Annual U.S. Shipments by Cell Type (MW) Source: PV News, Vol. 15, No. 2, Feb. 1996, Vol. 16, No. 2, Feb. 1997, Vol. 17, No. 2, Feb. 1998, Vol. 18, No. 2, Feb. 1999, Vol. 19, No. 3, March. 2000, and Vol. 20, No. 3, March Single Crystal Flat Plate Polycrystal (other than ribbon) Amorphous Silicon Crystal Silicon Concentrators Ribbon Silicon N/A N/A N/A Cadmium Telluride SI on Low-Cost-Sub A-SI on Cz Slice 0.0 Total

180 Annual World Shipments by Cell Type (MW) Source: PV News, Vol. 15, No. 2, Feb. 1996, Vol. 16, No. 2, Feb. 1997, Vol. 17, No. 2, Feb. 1998, Vol. 18, No. 2, Feb. 1999, Vol. 19, No. 3, March. 2000, and Vol. 20, No. 3, March Single Crystal Flat Plate Polycrystal Amorphous Silicon Crystal Silicon Concentrators Ribbon Silicon N/A N/A N/A Cadmium Telluride SI on Low-Cost-Sub A-SI on Cz Slice Total Annual U.S. Shipments by Cell Type (MW) Source: EIA, Renewable Energy Annual 1997, Table 27, Renewable Energy Annual 2000, Table 26, and Solar Collector Manufacturing Activity annual reports, Single-Crystal Silicon Cast and Ribbon Crystalline Silicon Crystalline Silicon Total Thin-Film Silicon N/A N/A Concentrator Silicon Other Total Annual Grid Connected Capacity (MW) Source: The 2000 National Survey Report of Photovoltaic Power Applications in the United States, prepared by Paul D. Maycock and Ward Bower, April 30, 2001, for the IEA, derived from Table 1; Japan data from PV News, Vol. 20, No. 7, July U.S. N/A N/A N/A Japan

181 Cumulative Grid Connected Capacity (MW) Source: The 2000 National Survey Report of Photovoltaic Power Applications in the United States, prepared by Paul D. Maycock and Ward Bower, April 30, 2001, for the IEA, Table 1; Japan data from PV News, Vol. 20, No. 7, July U.S. N/A N/A N/A Japan Annual US Installed Capacity (MW) Source: Renewable Electric Plant Information System (REPiS), Version 5, NREL, Top Ten States California Arizona New York Texas Colorado Hawaii Georgia Florida Massachusetts Washington, D.C Total U.S Cumulative U.S. Installed Capacity (MW) Source: Renewable Electric Plant Information System (REPiS), Version 5, NREL, Top Ten States California Arizona New York Texas Colorado Hawaii Georgia Florida Massachusetts Washington, D.C Total U.S

182 Technology Performance Source: Renewable Energy Technology Characterizations, EPRI TR , 1997.C185 (This document is currently being updated by DOE and the values most likely will change). Efficiency Cell (%) Crystalline Silicon Thin Film Concentrator Module (%) Crystalline Silicon Thin Film N/A N/A Concentrator System (%) Crystalline Silicon Thin Film Concentrator Cost Module ($/Wp) Crystalline Silicon Thin Film Concentrator BOS ($/Wp) Crystalline Silicon Thin Film Concentrator N/A N/A Total ($/Wp) Crystalline Silicon * Thin Film Concentrator O&M ($/kwh) Crystalline Silicon Thin Film Concentrator * Range in total capital cost for Crystalline Silicon in 2000 is $5.1/Wp to $9.1/Wp depending on market supply and demand. (Source: John Mortensen, Factors Associated with Photovoltaic System Costs, June 2001, NREL/TP , Page 3).

183 Wind Energy Technology Description Wind turbine technology converts the kinetic energy in the wind to mechanical energy and ultimately to electricity. Grid-connected wind power reduces GHG emissions by displacing the need for natural gas- and coal-fired generation. Village and off-grid applications are important for displacing diesel generation and for improving quality of life, especially overseas. System Concepts The principle of wind energy conversion is simple: Wind passing over the blade creates lift, producing a torque on the rotor shaft that turns a gearbox. The gearbox is coupled to an electric generator that produces power at the frequency of the host power system. Some new innovative designs use low-speed generators, which eliminate the need for a gearbox. Representative Technologies Two major design approaches are being used: (1) typical of historic European technology 3-bladed, up-wind, stiff, heavy machines that resist cyclic and extreme loads, and (2) lightweight, flexible machines that bend and absorb loads, primarily being developed by U.S. designers. Several alternative configurations within each approach are being pursued. Technology Applications Thirty-seven states have land area with good winds (13 mph annual average at 10 m height, wind class 4, or better). For wind-farm or wholesale power applications, the principal competition is natural gas for new construction and natural gas in existing units for fuel saving. Utility restructuring is a critical challenge to increased deployment in the near-term because it emphasizes short-term, low-capital-cost alternatives and lacks public policy to support deployment of sustainable technologies such as wind energy. Current Status Wind technology is competitive today in bulk power markets with support from the production tax credit, and in high-value niche applications or markets that recognize noncost attributes. Current performance is characterized by levelized costs of 4 to 5.5 /kwh (depending on resource intensity and financing structure), capacity factors of 30 to 40 percent, availability of 95 to 98%, total installed project costs ( overnight not including construction financing) of $800 to $1,100/kW, and efficiencies of 65 to 75% of the theoretical (Betz limit) maximum. The worldwide annual market growth rate for wind technology is at a level of 30% with new markets opening in many developing countries. Domestic public interest in environmentally responsible electric generation technology is reflected by new state energy policies and in the success of green marketing of wind power across the country. Preliminary estimates are that installed capacity at the end of 2001 was 4,260 MW in the United States, and 23,300 MW worldwide; compared to 2,550 MW in the United States and 17,653 worldwide in 2000; and 2,450 MW in the United States and 13,598 MW worldwide in U.S. energy generation from wind was nearly 5 TWh out of a worldwide total of 30 TWh in 2000, up from 4.5 TWh out of an approximate total of 26 TWh in Twelve states had more than 20 MW of large wind turbine capacity at the end of 2001, with 15 additional states having less than 20 MW each. In the United States, the wind industry is thinly capitalized, except for the acquisition of Enron

184 Wind Corporation by General Electric Co. About six manufacturers and six to 10 developers characterize the U.S. industry. In Europe, there are about 12 turbine manufacturers and about 20 to 30 project developers. European manufacturers have established North American manufacturing facilities and are actively participating in the U.S. market. Current leading wind companies and sales volume are shown below: U.S. Market (2001) World Market (2000) (Estimated) MW Percent MW Percent Vestas (DK GE/Enron (USA) Bonus (DK) Mitsubishi (JP) NEG Micon (DK) Nordex (DK) Enercon (D) Gamesa (SP) Ecotecnia (SP) Suzlon (Ind) Dewind (GE) MADE (SP) Others Sources: U.S. Market NREL, November 2001, World Market BTM Consult, ApS, World Market Update 2000 Technology History Prior to 1980, DOE sponsored, and NASA managed, large-scale turbine development starting with hundred-kilowatt machines and culminating in the late 1980s with the 3.2-MW, DOE-supported Mod-5 machine built by Boeing. Small-scale (2-20 kw) turbine development efforts also were supported by DOE at the Rocky Flats test site. Numerous designs were available commercially for residential and farm uses. In 1981, first wind farms were installed in California by a small group of entrepreneurial companies. PURPA provide substantial regulatory support for this initial surge. During the next five years, the market boomed, installing U.S., Danish, and Dutch turbines. By 1985, annual market growth had peaked at 400 MW. Following that, federal tax credits were abruptly ended, and California incentives weakened the following year. In 1988, European market exceeded the U.S. for the first time, spurred by ambitious national programs. A number of new companies emerged in the U.K. and Germany. In 1989, DOE s focus changed to supporting industry-driven research on components and systems. At the same time, many U.S. companies became proficient in operating the 1600 MW of installed Capacity in CA. They launched into value engineering and incremental increases in turbine size. DOE program supported value-engineering efforts and other advanced turbine development efforts. In 1992, Congress passed the Renewable Energy Production Tax Credit (REPI), which provided a 1.5 cent/kwh tax credit for wind-produced electricity. Coupled with several state programs and mandates, installations in the U.S. began to increase. In 1997, Enron purchased Zond Energy Systems, one of the value-engineered turbine manufacturers. In FY2001, DOE initiated a low wind speed turbine development program to broaden the U.S. costcompetitive resource base. In 2002, General Electric Co. purchased Enron Wind Corporation.

185 Technology Future The levelized cost of electricity for wind energy technology is projected to be: Class Class Assumptions include: 30-year levelized cost, constant January 2002 dollars, generation company ownership/financial assumptions; wind plant comprised of 100 turbines; no financial incentives included. Source: FY03 U.S. DOE Wind Program Internal Planning Documents, Summer 2001 Wind energy s competitiveness by 2005 will be affected by policies regarding ancillary services and transmission and distribution regulations. Substantial cost reductions are expected for wind turbines designed to operate economically in low wind speed sites, which will increase the amount of economical wind resource areas by 20-fold, and will be within 100 miles of most load centers. Initial lower levels of wind deployment (up to 15 20% of the total U.S. electric system capacity) are not expected to introduce significant grid reliability issues. Inasmuch as the wind blows only intermittently, use of this technology at larger penetrations may require modification to system operations or ancillary services. Transmission infrastructure upgrades and expansion will be required for large penetrations of wind energy to service major load centers. Over the long-term, as more high wind sites become used, emphasis will shift toward installation in lower wind speed sites. Advances in technology will include various combinations of the following improvements, accomplished through continuing R&D: Towers taller for more energy, softer to shed loads, advanced materials, and erection techniques to save cost Rotors - Improving airfoils and plan forms to increase energy capture - for instance, a variable rotor diameter; larger rotors at the same cost or small cost increase by optimizing design and manufacturing, using lighter materials, and implementing controls to mitigate loads. Drive Train and Generators New designs to reduce weight and cost. Advances in power electronics and operational algorithms to optimize drive train efficiencies, especially by increasing low efficiencies in ranges of operation that are currently much lower than those in the peak range. In addition to new power electronics and operational approaches, possible advances include permanent magnet generators, and use of single-stage transmissions coupled with multiple smaller, simpler, off-the-shelf generators that can be purchased from high-volume manufacturers. Controls By reducing loads felt throughout the turbine, various approaches for passive and active control of turbines will enable larger, taller structures to be built for comparatively small cost increases, resulting in improvements in system cost of energy. Design Codes Reductions in design margins also will decrease the cost of turbines and allow for larger turbines to be built for comparatively small increases in cost, resulting in improvements in system cost of energy. Foundations New designs to lower cost. Utility Grid Integration Models and tools to analyze the steady and dynamic impact, and operational characteristics of large wind farms on the electricity grid will facilitate wind power integration. Improved wind forecasting and development of various enabling technologies will increase the value of wind power.

186 Wind Market Data Grid Connected Wind Capacity Source: Reference IEA (data supplemented by Windpower Monthly, April 2001, and 2001 data from Windpower Monthly, January 2002). Cumulative (MW) U.S. 10 1,039 1,525 1,770 1,794 1,741 1,890 2,455 2,554 4,240 Denmark ,100 1,400 1,752 2,338 2,417 Netherlands Germany ,137 1,576 2,082 2,874 4,445 6,095 8,100 Spain ,539 2,334 3,175 UK Europe ,494 3,384 4,644 6,420 9,399 12,961 16,362 India ,095 1,220 1,426 Japan Rest of World World Total 15 1,097 2,002 4,887 6,118 7,579 9,625 13,598 17,653 23,270 Source: Renewable Energy Project Information System (REPiS), Version 5, NREL, Annual (MW) U.S Cumulative (MW) U.S ,569 1,778 1,779 1,787 1,973 2,631

187 Annual Market Shares Source: US DOE wind turbine shipment database; DOE Wind Program Data Sheets; American Wind Energy Association Association US Mfg Share of US Market 98% 44% 36% 67% NA 38% 78% 44% 0% US Mfg Share of World Market 65% 42% 20% 5% 2% 4% 13% 9% 6% State Installed Capacity Source: American Wind Energy Association. Annual State Installed Capacity (MW) Top Ten States California* N/A N/A Texas Iowa Minnesota Washington Oregon Wyoming Kansas Colorado Wisconsin Total of 10 States N/A N/A ,635 Total U.S. N/A N/A ,694 Cumulative State Installed Capacity (MW) Top Ten States (as of 2001) California* N/A N/A 1,387 1,387 1,396 1,396 1,646 1,646 1,714 Texas ,096 Iowa Minnesota Washington Oregon Wyoming Kansas Colorado

188 Wisconsin Total of 10 States N/A N/A 1,455 1,455 1,465 1,605 2,486 2,521 4,157 Total U.S. N/A N/A 1,457 1,457 1,474 1,616 2,500 2,566 4,261 * The data set includes 1, MW of wind in California that is not given a specific installation year, but rather a range of years ( MW in , in , and MW in "mid-1980's"), this has led to the "Not Available" values for 1985 and 1990 for California and the totals, and this data is not listed in the annual installations, but has been added to the cumulative totals for 1995 and on. Annual Generation from Cumulative Installed Capacity (Billion kwh) Source: U.S. - EIA, Monthly Energy Review, December Table 7.2.; IEA Countries - IEA Wind Energy Annual Reports, U.S IEA Countries Technology Performance Source: U.S.DOE Wind Program, , FY03 U.S.DOE Wind Energy Production Program Internal Planning Documents, Summer 2001, Capacity Factor (%) Class Class Specific Energy (kwh/m 2 *) Class ,110 1,260 1,310 1,330 Class ,150 1,300 1,400 1,650 1,700 1,740 1,760 Production Efficiency** (kwh/kw) Class ,300 1,750 2,200 2,860 3,500 3,600 3,600 Class ,700 1,900 2,200 3,450 3,880 4,350 4,450 4,700 * m 2 is the rotor swept area. ** Production Efficiency is the net energy per unit of installed capacity.

189 Cost* Source: FY03 U.S. DOE Wind Program Internal Planning Documents, Summer Project Cost ($/kw) Class 4 1, (Overnight costs) Class 6 1, O&M ($/kw) Class Class Fixed O&M & Land Class ($/kw) Class Specific Cost* (Project Capital Cost Per Rotor Captured Area - $/m2) * Jan 2002 dollars Source: FY03 U.S. DOE Wind Program Internal Planning Documents, Summer 2001, Class Class Levelized Cost of Energy* ($/kwh) Source: U.S. DOE Wind Program ; FY03 U.S. DOE Wind Program Internal Planning Documents, Summer 2001, Class Class * 30-year term, constant January 2002 dollars. Generation Company Ownership/Financial Assumptions. Wind plant comprised of 100 turbines. No financial incentives are included.

190 Hydrogen Technology Description Like electricity, hydrogen can be produced from many sources, including fossil fuels, renewable resources, and nuclear energy. Hydrogen and electricity can be converted from one to the other using electrolyzers (electricity to hydrogen) and fuel cells (hydrogen to electricity). Hydrogen is an effective energy storage medium, particularly for distributed generation. When hydrogen produced from renewable resources is used in fuel cell vehicles or power devices, there are very few emissions the major byproduct is water. With improved conventional energy conversion and carbon capture technologies, hydrogen from fossil resources can be used efficiently with few emissions. The Hydrogen Economy vision is based on a clean and elegant cycle: separate water into hydrogen and oxygen using renewable or nuclear energy, or fossil resources with carbon sequestration. Use the hydrogen to power a fuel cell, internal combustion engine, or turbine, where hydrogen and oxygen (from air) recombine to produce electrical energy, heat, and water to complete the cycle. This process produces no particulates, no carbon dioxide, and no pollution. System Concepts Hydrogen made via electrolysis from excess nuclear or renewable energy can be used as a sustainable transportation fuel or stored to meet peak-power demand. It also can be used as a feedstock in chemical processes. Hydrogen produced by decarbonization of fossil fuels followed by sequestration of the carbon can enable the continued, clean use of fossil fuels during the transition to a carbon-free Hydrogen Economy. A hydrogen system is comprised of production, storage, distribution, and use. A fuel cell works like a battery but does not run down or need recharging. It will produce electricity and heat as long as fuel (hydrogen) is supplied. A fuel cell consists of two electrodes a negative electrode (or anode) and a positive electrode (or cathode) sandwiched around an electrolyte. Hydrogen is fed to the anode, and oxygen is fed to the cathode. Activated by a catalyst, hydrogen atoms separate into protons and electrons, which take different paths to the cathode. The electrons go through an external circuit, creating a flow of electricity. The protons migrate through the electrolyte to the cathode, where they reunite with oxygen and the electrons to produce water and heat. Fuel cells can be used to power vehicles, or to provide electricity and heat to buildings. Representative Technologies Hydrogen production Thermochemical conversion of fossil fuels, biomass, and wastes to produce hydrogen and CO 2 with the CO 2 available for sequestration (large-scale steam methane reforming is widely commercialized) Renewable (wind, solar, geothermal, hydro) and nuclear electricity converted to hydrogen by electrolysis of water (commercially available electrolyzers supply a small but important part of the super-high-purity hydrogen market) Photoelectrochemical and photobiological processes for direct production of hydrogen from sunlight and water.

191 Hydrogen storage Pressurized gas and cryogenic liquid (commercial today) Higher pressure (10,000 psi), carbon-wrapped conformable gas cylinders Cryogenic gas Chemically bound as metal or chemical hydrides or physically adsorbed on carbon nanostructures Hydrogen distribution By pipeline (relatively significant pipeline networks exist in industrial areas of the Gulf Coast region, and near Chicago) By decentralized or point-of-use production using natural gas or electricity By truck (liquid and compressed hydrogen delivery is practiced commercially) Hydrogen use Transportation sector: internal combustion engines or fuel cells to power vehicles with electric power trains. Potential long-term use as an aviation fuel and in marine applications Industrial sector: ammonia production, reductant in metal production, hydrotreating of crude oils, hydrogenation of oils in the food industry, reducing agent in electronics industry, etc. Buildings sector: combined heat, power, and fuel applications using fuel cells Power sector: fuel cells, gas turbines, generators for distributed power generation Technology Applications In the U.S., nearly all of the hydrogen used as a chemical (i.e. for petroleum refining and upgrading, ammonia production) is produced from natural gas. The current main use of hydrogen as a fuel is by NASA to propel rockets. Hydrogen's potential use in fuel and energy applications includes powering vehicles, running turbines or fuel cells to produce electricity, and generating heat and electricity for buildings. The current focus is on hydrogen's use in fuel cells. The primary fuel cell technologies under development are: Phosphoric acid fuel cell (PAFC) - A phosphoric acid fuel cell (PAFC) consists of an anode and a cathode made of a finely dispersed platinum catalyst on carbon paper, and a silicon carbide matrix that holds the phosphoric acid electrolyte. This is the most commercially developed type of fuel cell and is being used in hotels, hospitals, and office buildings. The phosphoric acid fuel cell can also be used in large vehicles, such as buses. Proton-exchange membrane (PEM) - The proton-exchange membrane (PEM) fuel cell uses a fluorocarbon ion exchange with a polymeric membrane as the electrolyte. The PEM cell appears to be more adaptable to automobile use than the PAFC type of cell. These cells operate at relatively low temperatures and can vary their output to meet shifting power demands. These cells are the best candidates for light-duty vehicles, for buildings, and much smaller applications. Solid oxide fuel cells (SOFC) - Solid oxide fuel cells (SOFC) currently under development use a thin layer of zirconium oxide as a solid ceramic electrolyte, and include a lanthanum manganate cathode and a nickel-zirconia anode. This is a promising option for high-powered applications, such as industrial uses or central electricity generating stations. Direct-methanol fuel cell (DMFC) - A relatively new member of the fuel cell family, the directmethanol fuel cell (DMFC) is similar to the PEM cell in that it uses a polymer membrane as an electrolyte. However, a catalyst on the DMFC anode draws hydrogen from liquid methanol, eliminating the need for a fuel reformer. Molten carbonate fuel cell (MCFC) - The molten carbonate fuel cell uses a molten carbonate salt as the electrolyte. It has the potential to be fueled with coal-derived fuel gases or natural gas. Alkaline fuel cell - The alkaline fuel cell uses an alkaline electrolyte such as potassium hydroxide. Originally used by NASA on missions, it is now finding applications in hydrogen-powered vehicles. Regenerative or Reversible Fuel Cells - This special class of fuel cells produces electricity from hydrogen and oxygen, but can be reversed and powered with electricity to produce hydrogen and oxygen.

192 Current Status Currently, 48% of the worldwide production of hydrogen is via large-scale steam reforming of natural gas. Today, we safely use about 90 billion cubic meters (3.2 trillion cubic feet) of hydrogen yearly. Direct conversion of sunlight to hydrogen using a semiconductor-based photoelectrochemical cell was recently demonstrated at 12.4% efficiency. Hydrogen technologies are in various stages of development across the system: Production - Hydrogen production from conventional fossil-fuel feedstocks is commercial, and results in significant CO2 emissions. Large-scale CO2 sequestration options have not been proved and require R&D. Current commercial electrolyzers are 80-85% efficient, but the cost of hydrogen is strongly dependent on the cost of electricity. Production processes using wastes and biomass are under development, with a number of engineering scale-up projects underway. Storage - Liquid and compressed gas tanks are available and have been demonstrated in a small number of bus and automobile demonstration projects. Lightweight, fiber-wrapped tanks have been developed and tested for higher-pressure hydrogen storage. Experimental metal hydride tanks have been used in automobile demonstrations. Alternative solid-state storage systems using alanates and carbon nanotubes are under development. Use - Small demonstrations by domestic and foreign auto and bus companies have been undertaken. Small-scale power systems using fuel cells are being beta-tested. Small fuel cells for battery replacement applications have been developed. Much work remains. Recently, there have been important advances in storage energy densities in recent years: high pressure composite tanks have been demonstrated with 7.5 wt.% storage capacity, exceeding the current DOE target, and new chemical hydrides have demonstrated a reversible capacity of 5 wt.% hydrogen. The composite tank development is a successful technology partnership between the national labs, DOE and industry. Industrial investment in chemical hydride development has recently been initiated. SunLine Transit receives support to operate a variety of hydrogen production processes for its bus fleet. The California Fuel Cell Partnership has installed hydrogen refueling equipment (liquid delivered to the facility) Major industrial companies are pursuing R&D in fuel cells and hydrogen reformation technologies with a mid-term timeframe for deployment of these technologies for both stationary and vehicular applications. These companies include: ExxonMobil Toyota Shell Daimler-Chrysler Texaco Honda BP International Fuel Cells General Motors Ballard Ford Air Products Daimler-Chrysler Praxair Toyota Plug Power Systems Technology History From the early 1800s to the mid 1900s, a gaseous product called town gas, manufactured from coal, supplied lighting and heating for America and Europe. Town gas is 50% hydrogen, with the rest comprised of mostly methane and carbon dioxide, with 3% to 6% carbon monoxide. Then, large natural gas fields were discovered, and networks of natural gas pipelines displaced town gas. (Town gas is still found in limited use today in Europe and Asia.) From 1958 to present, the National Aeronautics and Space Administration (NASA) has continued work on using hydrogen as a rocket fuel and electricity source via fuel cells. NASA became the worldwide largest user of liquid hydrogen and is renowned for its safe handling of hydrogen.

193 During the 20th century, hydrogen was used extensively as a key component in the manufacture of ammonia, methanol, gasoline, and heating oil. It was and still is also used to make fertilizers, glass, refined metals, vitamins, cosmetics, semiconductor circuits, soaps, lubricants, cleaners, margarine, and peanut butter. Recently, (in the late 20th century/dawn of 21st century) many industries worldwide have begun producing hydrogen, hydrogen-powered vehicles, hydrogen fuel cells, and other hydrogen products. From Japan s hydrogen delivery trucks to BMW s liquid-hydrogen passenger cars, to Ballard s fuel cell transit buses in Chicago and Vancouver, B.C.; to Palm Desert s Renewable Transportation Project, to Iceland s commitment to be the first hydrogen economy by 2030; to the forward-thinking work of many hydrogen organizations worldwide, to Hydrogen Now! s public education work; the dynamic progress in Germany, Europe, Japan, Canada, the U.S., Australia, Iceland, and several other countries launch hydrogen onto the main stage of the world s energy scene. Technology Future Fuel cells are a promising technology for use as a source of heat and electricity for buildings, and as an electrical power source for electric vehicles. Although these applications would ideally run off pure hydrogen, in the near-term they are likely to be fueled with natural gas, methanol, or even gasoline. Reforming these fuels to create hydrogen will allow the use of much of our current energy infrastructure gas stations, natural gas pipelines, etc. while fuel cells are phased in. The electricity grid and the natural gas pipeline system will serve to supply primary energy to hydrogen producers. By 2005, if DOE R&D goals are met, (1) onboard hydrogen storage in metal hydrides at >5 wt% will be developed; (2) complete engineering design of a small-scale, mass-producible reformer for natural gas will be completed; and (3) an integrated biomass-to-hydrogen system will be demonstrated. By 2010, advances will be made in photobiological and photoelectrochemical processes for hydrogen production, efficiencies of fuel cells for electric power generation will increase, and advances will be made in fuel cell systems based on carbon structures, alanates, and metal hydrides Although comparatively little hydrogen is currently used as fuel or as an energy carrier, the longterm potential is for us to make a transition to a hydrogen-based economy in which hydrogen will join electricity as a major energy carrier. Furthermore, much of the hydrogen will be derived from domestically plentiful renewable energy or fossil resources, making the Hydrogen Economy synonymous with sustainable development and energy security. In summary, future fuel cell technology will be characterized by reduced costs and increased reliability for transportation and stationary (power) applications For a fully developed hydrogen energy system, a new hydrogen infrastructure/delivery system will be required. In the future, hydrogen could also join electricity as an important energy carrier. An energy carrier stores, moves, and delivers energy in a usable form to consumers. Renewable energy sources, like the sun or wind, can't produce energy all the time. The sun doesn't always shine nor the wind blow. But hydrogen can store this energy until it is needed and can be transported to where it is needed. Some experts think that hydrogen will form the basic energy infrastructure that will power future societies, replacing today's natural gas, oil, coal, and electricity infrastructures. They see a new hydrogen economy to replace our current energy economies, although that vision probably won't happen until far in the future.

194 Advanced hydropower is new technology for producing hydroelectricity more efficiently, with improved environmental performance. Current technology often has adverse environmental effects, such as fish mortality and changes to downstream water quality and quantity. The goal of advanced hydropower technology is to maximize the use of water for hydroelectric generation while eliminating these adverse side effects in many cases both increased energy and improved environmental conditions can be achieved. Advanced Hydropower Technology Description System Concepts Conventional hydropower projects use either impulse or reaction turbines to convert kinetic energy in flowing or falling water into turbine torque and power. Source water may be from free-flowing rivers/streams/canals or released from upstream storage reservoirs. Improvements and efficiency measures can be made in dam structures, turbines, generators, substations, transmission lines, and systems operation that will help sustain hydropower s role as a clean, renewable energy source. Representative Technologies Turbine designs that minimize entrainment mortality of fish during passage through the power plant. Autoventing turbines to increase dissolved oxygen in discharges downstream of dams. Reregulating and aerating weirs used to stabilize tailwater discharges and improve water quality. Adjustable-speed generators producing hydroelectricity over a wider range of heads and providing more uniform instream flow releases without sacrificing generation opportunities. New assessment methods to balance instream flow needs of fish with water for energy production. Advanced instrumentation and control systems that modify turbine operation to maximize environmental benefits and energy production. Technology Applications Advanced hydropower products can be applied at more than 80% of existing hydropower projects (installed conventional capacity is now 78 GW); the potential market also includes GW at existing dams without hydropower facilities (i.e., no new dams required for development) and about 30 GW at undeveloped sites that have been identified as suitable for new dams. The nation's largest hydropower plant is the 7,600 megawatt Grand Coulee power station on the Columbia River in Washington State. The plant is being upscaled to 10,080 megawatts, which will place it second in the world behind a colossal 13,320 megawatt plant in Brazil. There would be significant environmental benefits from installing advanced hydropower technology, including enhancement of fish stocks, tailwater ecosystems, and recreational opportunities. These benefits would occur because the advanced technology reverses adverse effects of the past. Additional benefits would come from the protection of a wide range of ancillary benefits that are provided at hydropower projects but are at extreme risk of becoming lost in the new deregulated environment.

195 Current Status Hydropower (also called hydroelectric power) facilities in the United States can generate enough power to supply 28 million households with electricity, the equivalent of nearly 500 million barrels of oil. The total U.S. hydropower capacity including pumped storage facilities is about 95,000 megawatts. Researchers are working on advanced turbine technologies that will not only help maximize the use of hydropower but also minimize adverse environmental effects. According to EIA, hydropower provided 12.6% of the nation s electricity generating capability in 1999 and 80% of the electricity produced from renewable energy sources. DOE estimates current capital costs for large hydropower plants to be $1,700 to $2,300 per kw (although no new plants are currently being built in the U.S. and O&M is estimated at approximately 0.7 cents/kwh. Worldwide, hydropower plants have a combined capacity of 675,000 megawatts and annually produce over 2.3 trillion kilowatt-hours of electricity, the energy equivalent of 3.6 billion barrels of oil. Existing hydropower generation is declining because of a combination of real and perceived environmental problems, regulatory pressures, and changes in energy economics (deregulation, etc.); potential hydropower resources are not being developed for similar reasons. The current trend is to replace hydropower with electricity from fossil fuels. Some new, environmentally friendly technologies are being implemented (e.g., National Hydropower Association s awards for Outstanding Stewardship of America s Rivers). DOE's Advanced Hydropower Turbine System (AHTS) program is also demonstrating that new turbine designs are feasible, but additional support is needed to fully evaluate these new designs in fullscale applications. There is insufficient understanding of how fish respond to turbulent flows in draft tubes and tailraces to support biological design criteria for those zones of power plants. Fish resource management agencies do not recognize that the route through turbines is acceptable for fish this perception could be overcome if field testing continues to show mortality through turbines is not greater than other passage routes. TVA s Lake Improvement Plan has demonstrated that improved turbine designs can be implemented with significant economic and environmental benefits. Field testing of the Minimum Gap Runner (MGR) designs for Kaplan turbines indicate that fish survival up to 98% is possible, if conventional turbines are modified. FERC instituted a short-term reduction in regulatory barriers on the West Coast in 2001 this resulted in more than 100,000 MWh of additional generation and a significant shift from non-peak to peak production, without significant adverse environmental effects. Regulatory trends in relicensing are to shift operation from peaking to baseload, effectively reducing the energy value of hydroelectricity; higher instream flow requirements are also reducing total energy production to protect downstream ecosystems, but scientific justification is weak. Frequent calls for dam removal is making relicensing more costly to dam owners. Regional efforts by Army Corps of Engineers and Bonneville Power Administration are producing some site-specific new understanding, especially in the Columbia River basin, but commercial applications are unlikely because of pressures from industry deregulation and environmental regulation. Voith-Siemans Hydro and TVA have established a limited partnership to market environmentally friendly technology at hydropower facilities. Their products were developed in part by funding provided by DOE and the Corps of Engineers, as well as private sources. Flash Technology is developing strobe lighting systems to force fish away from hydropower intakes and to avoid entrainment mortality in turbines.

196 Technology History Since the time of ancient Egypt, people have used the energy in flowing water to operate machinery and grind grain and corn. However, hydropower had a greater influence on people's lives during the 20th century than at any other time in history. Hydropower played a major role in making the wonders of electricity a part of everyday life and helped spur industrial development. Hydropower continues to produce 24% of the world's electricity and supply more than 1 billion people with power. The first hydroelectric power plant was built in 1882 in Appleton, Wisconsin, to provide 12.5 kilowatts to light two paper mills and a home. Today's hydropower plants generally range in size from several hundred kilowatts to several hundred megawatts, but a few mammoth plants have capacities up to 10,000 megawatts and supply electricity to millions of people. By 1920, 25% electrical generation in the U.S. was from hydropower, and was 40% in Most hydropower plants are built through federal or local agencies as part of a multipurpose project. In addition to generating electricity, dams and reservoirs provide flood control, water supply, irrigation, transportation, recreation and refuges for fish and birds. Private utilities also build hydropower plants, although not as many as government agencies. Technology Future By 2003, a quantitative understanding of the responses of fish to multiple stresses inside a turbine should be developed. Biological performance criteria for use in advanced turbine design should also be available. By 2005, environmental mitigation studies should be available on topics such as in-stream flow needs to produce more efficient and less controversial regulatory compliance. In addition, pilot-scale testing of new runner designs, including field evaluation of environmental performance, will allow fullscale prototype construction and testing to proceed. By 2010, full-scale prototype testing of AHTS designs should be completed, including verified biological performance of AHTS in the field. This will allow AHTS technology to be transferred to the market.

197 Hydroelectric Power Market Data Cumulative Grid Connected Hydro Capacity (MW)* Source: U.S. data from EIA, AEO Tables A9 and A17, Renewable Resources in the Electric Supply, Table 4. World Total from EIA, International Energy Annual, , Table 6.4. International data from International Energy Agency, Electricity Information 1997 (1998 edition). U.S Conventional and other Hydro 72,900 78,480 78,390 78,530 79,110 80,280 80,270 Pumped Storage 19,900 19,600 19,600 19,300 19,200 19,200 U.S. Hydro Total 98,380 97,990 98,130 98,410 99,480 99,470 OECD Europe 119, , , , ,440 IEA Europe 118, , , , ,000 Japan 18,280 19,980 20,820 21,160 21,210 OECD Total 278, , , , ,380 IEA Total 271, , , , ,420 World Total 656, , , ,000 *excludes pumped storage, except for specific U.S. pumped storage capacity listed. Annual Generation from Cumulative Installed Capacity (Billion kwh) Source: EIA, International Energy Annual 1999, DOE/EIA-0219(99), Table United States Canada Mexico Japan Western Europe Former Soviet Union

198 Eastern Europe China Brazil Rest of World World Total 1,758 2,015 2,176 2,501 2,543 2,594 2,587 2,626 State Generating Capability (MW) Source: EIA, Electric Power Annual Vol.1: 1994 & Table 2, Table 5. Top Ten States Washington 21,054 21,038 21,054 Oregon 9,021 9,031 9,038 California 13,504 13,538 13,535 New York 7,246 7,311 5,279 Montana 2,514 2,551 2,546 Idaho 2,416 2,418 2,432 Arizona 2,833 2,884 2,884 Alabama 2,959 2,962 2,881 South Dakota 1,820 1,820 1,820 Tennessee 3,668 3,744 3,725 U.S. Total 90,885 96,629 96,342 94,477 98,471 99,041 99,068 State Annual Generation from Cumulative Installed Capacity* (Billion kwh) Source: EIA, Electric Power Annual Vol. 1: Table A12, Table 10. Top Ten States Washington Oregon California New York Montana Idaho Arizona Alabama

199 South Dakota Tennessee U.S. Total * Annual generation figures for years before 1998 do not include nonutility generation, which is not reported in the Electric Power Annual.

200 Solar Buildings Technology Description Solar building technologies deliver heat, electricity, light, hot water, and cooling to residential and commercial buildings. By combining solar thermal and electric building technologies with very energyefficient construction methods, lighting, and appliances, it is possible to build Zero Energy Homes (see photo for an example demonstration home). Zero Energy Buildings (residential and commercial) have a zero net need for offsite energy on an annual basis and also have no carbon emissions. System Concepts In solar heating systems, solar thermal collectors convert solar energy into heat at the point of use, usually for domestic hot water and space heating. In solar cooling systems, solar thermal collectors convert solar energy into heat for absorption chillers or desiccant regeneration. In solar lighting systems, sunlight is transmitted into the interior of buildings using glazed apertures, light pipes, and/or optical fibers. Representative Technologies Active solar heating systems use pumps and controls to circulate a heat transfer fluid between the solar collector(s) and storage. System sizes can range from 1 to 100 kw. Passive solar heating systems do not use pumps and controls but rather rely on natural circulation to transfer heat into storage. System sizes can range from 1 to 10 kw. Transpired solar collectors heat ventilation air for industrial and commercial building applications. A transpired collector is a thin sheet of perforated metal that absorbs solar radiation and heats fresh air drawn through its perforations. Hybrid solar lighting systems focus concentrated sunlight on optical fibers in order to combine natural daylight with conventional illumination. Hybrid Solar Lighting (HSL) has the potential to more than double the efficiency and affordability of solar energy in commercial buildings by simultaneously separating and using different portions of the solar energy spectrum for different end-use purposes, i.e. lighting and distributed power generation. Technology Applications More than 1,000 MW of solar water-heating systems are operating successfully in the United States, generating more than 3 million MW-hrs per year. Based on peer-reviewed market penetration estimates, there will be approximately 1 million new solar water-heating systems installed by 2020, offering an energy savings of 0.16 quads (164 trillion Btus). Retrofit markets: There are 72.5 million existing single-family homes in the United States. An estimate of the potential replacement market of 29 million solar water-heating systems assumes that only 40% of these existing homes have suitable orientation and nonshading. (9.2 million replacement electric and gas water heaters.) New construction: In 2000, 1.2 million new single-family homes were built in the United States. Assuming 70% of these new homes could be sited to enable proper orientation of solar water- heating systems, this presents another 840,000 possible system installations annually. While the ultimate market for the zero-energy building concept is all new building construction; the near-term focus is on residential buildings; particularly, single-family homes in the Sunbelt areas of the

201 country. Of the 1.2 million new single-family homes built in the U.S. in 2000, 44% of these new homes were in the southern region of the country and 25% were in the western region, both areas with favorable solar resources. Current Status About 1.2 million solar water-heating systems have been installed in the U.S., mostly in the 1970s and 1980s. Due to relatively low energy prices and other factors, there are approximately only 8,000 installations per year. Typical residential solar systems use glazed flat-plate collectors combined with storage tanks to provide 40% to 70% of residential water-heating requirements. Typical systems generate 2500 kwh of energy per year and cost $1.00 to $2.00/Watt. Typical solar pool-heating systems use unglazed polymer collectors to provide 50% to 100% of residential pool-heating requirements. Typical systems generate 1,600 therms or 46,000 kwh of energy per year and cost $0.30 to $0.50/Watt Four multidisciplinary homebuilding teams have begun the initial phase of designing and constructing Zero Energy Homes for various new construction markets in the United States. One homebuilder Shea Homes in San Diego is currently building, and quickly selling, 300 houses with Zero Energy Home features solar electric systems, solar water heating, and energy-efficient construction. Key companies developing or selling solar water heaters include: Alternative Energy Technologies Aquatherm FAFCO Radco Products Sun Systems Harter Industries Duke Solar Heliodyne, Inc. Sun Earth Thermal Conversion Technologies Technology History 1890s- First commercially available solar water heaters produced in southern California. Initial designs were roof-mounted tanks and later glazed tubular solar collectors in thermosiphon configuration. Several thousand systems were sold to homeowners. 1900s- Solar water heating technology advanced to roughly its present design in 1908 when William J. Bailey of the Carnegie Steel Company, invented a collector with an insulated box and copper coils. 1940s- Bailey sold 4,000 units by the end of W.W.I and a Florida businessperson who bought the patent rights sold nearly 60,000 units by s- Industry virtually expires due to inability to compete against cheap and available natural gas and electric service. 1970s- The modern solar industry began in response to the OPEC oil embargo in , with a number of federal and state incentives established to promote solar energy. President Jimmy Carter put solar water-heating panels on the White House. FAFCO, a California company specializing in solar pool heating, and Solaron, a Colorado company that specialized in solar space and water heating, became the first national solar manufacturers in the United States. In 1974, more than 20 companies started production of flat-plate solar collectors, most using active systems with antifreeze capabilities. Sales in 1979 were estimated at 50,000 systems. In Israel, Japan, and Australia, commercial markets and manufacturing had developed with fairly widespread use. 1980s- In 1980, the Solar Rating and Certification Corp (SRCC) was established for testing and certification of solar equipment to meet set standards. In 1984, the year before solar tax credits expired, an estimated 100,000-plus solar hot-water systems were sold. Incentives from the 1970s helped create the 150 business manufacturing industry for solar systems with more than $800 million in

202 annual sales by When the tax credits expired in 1985, the industry declined significantly. During the Gulf War, sales again rose by about 10 to 20% to its peak level, more than 11,000 square feet per year (sq.ft./yr) in 1989 and s- Solar water-heating collector manufacturing activity declined slightly, but has hovered around 6,000 to 8,000 sq.ft./yr. Today's industry represents the few strong survivors: More than 1.2 million buildings in the United States have solar water heating systems, and 250,000 solar-heated swimming pools exist. Unglazed, low-temperature solar water heaters for swimming pools have been a real success story, with more than a doubling of growth in square footage of collectors shipped from 1995 to Reference: American Solar Energy Society and Solar Energy Industry Association Technology Future Near-term solar heating and cooling RD&D goals are to reduce the costs of solar water heating systems to 4 /kwh from their current cost of 8 /kwh using polymer materials and manufacturing enhancements. This corresponds to a 50% reduction in capital cost. Near-term Zero Energy Building RD&D goals are to reduce the annual energy bill for an average size home to $600 by Near-term solar lighting RD&D goals are to reduce the costs of solar lighting systems to 5 /kwh. Zero-energy building RD&D efforts are targeted to optimize various energy efficiency and renewable energy combinations, integrate solar technologies into building materials and the building envelope, and incorporate solar technologies into building codes and standards. Solar heating and cooling RD&D efforts are targeted to reduce manufacturing and installation costs, improve durability and lifetime, and provide advanced designs for system integration.

203 Solar Buildings Market Data U.S. Installations (Thousands of Sq. Ft.) Annual Source: EIA, Renewable Energy Annual Table 16, REA Table 18, and REA Table DHW Pool Heaters 6,787 7,528 7,200 8,141 Total Solar Thermal 18,283 19,166 11,021 7,136 7,162 7,759 7,396 8,046 Cumulative DHW Pool Heaters Total Solar Thermal 62, , , , , , , ,748 U.S. Annual Shipments (Thousand Sq. Ft.) Source: Energy Information Administration, Renewable Energy Annual Table 11, REA 1996 Table 16 and REA 2000 Table Total 19,398 11,409 7,666 7,616 8,138 7,756 8,583 Imports 1,562 2,037 1,930 2,102 2,206 2,352 Exports 1, U.S. Shipments by Cell Type (thousands of sq. ft.) Source: EIA Renewable Energy Annual Table 10.3 Solar Thermal Collector Shipments by Type, Price, and Trade, Low Temperature Collectors 12,233 3,645 6,813 6,821 7,524 7,292 8,152 Medium Temperature Collectors 7,165 2, High Temperature Collectors 5, Total 19,398 11,409 7,666 7,616 8,137 7,756 8,583

204 U.S. Shipments of All Solar Thermal Collectors by Market Sector, and End Use (Thousands of Sq. Ft.) Source: EIA, Renewable Energy Annual 1997, Table 16, and REA Table Market Sector Residential 6,874 7,360 7,165 7,773 Commercial Industrial Utility Other Total 7,618 8,137 7,749 8,582 End Use Pool Heating 6,787 7,528 7,200 8,141 Hot Water Space Heating Space Cooling Combined Space and Water Heating Process Heating Electricity Generation Other Total 7,615 8,136 7,748 8,583 U.S. Shipments of High Temperature Collectors by Market Sector, and End Use (Thousands of Sq. Ft.) Source: EIA, Renewable Energy Annual 1997, Table 16, and REA Table Market Sector Residential Commercial Industrial

205 Utility Other Total End Use Pool Heating Hot Water Space Heating Space Cooling Combined Space and Water Heating Process Heating Electricity Generation Other Total U.S. Shipments of Medium Temperature Collectors by Market Sector, and End Use (Thousands of Sq. Ft.) Source: EIA, Renewable Energy Annual 1997, Table 16, and REA Table Market Sector Residential Commercial Industrial Utility Other Total End Use Pool Heating Hot Water Space Heating Space Cooling Combined Space and Water Heating

206 Process Heating Electricity Generation Other Total U.S. Shipments of Low Temperature Collectors by Market Sector, and End Use (Thousands of Sq. Ft.) Source: EIA, Renewable Energy Annual 1997, Table 16, and REA Table Market Sector Residential 6,146 6,791 6,810 7,408 Commercial Industrial Utility Other Total 6,822 7,524 7,285 8,152 End Use Pool Heating 6,766 7,517 7,164 8,129 Hot Water Space Heating Space Cooling Combined Space and Water Heating Process Heating Electricity Generation Other Total 6,821 7,524 7,285 8,152

207 Technology Performance Energy Production Source: Arthur D. Little, Review of FY 2001 Office of Power Technology's Solar Buildings Program Planning Unit Summary, December Energy Savings DHW (kwh/yr) 2,750 Pool Heater (therms/yr) 1,600 Cost Source: Hot Water Heater data from Arthur D. Little, Water Heating Situation Analysis, November 1996, page 53, and Pool Heater data from Ken Sheinkopf, Solar Today, Nov/Dec 1997, pp Capital Cost* ($/System) Domestic Hot Water Heater 1,900-2,500 Pool Heater 3,300-4,000 O&M ($/System-yr) Domestic Hot Water Heater Pool Heater 0 * Costs represent a range of technologies, with the lower bounds representing advanced technologies, such as a low-cost polymer integral collector for domestic hot-water heaters, which are expected to become commercially available after 2010.

208 Reciprocating Engines Technology Description Reciprocating engines, also known as internal combustion engines, require fuel, air, compression, and a combustion source to function. They make up the largest share of the small power generation market and can be used in a variety of applications due to their small size, low unit costs, and useful thermal output. System Concepts Reciprocating engines fall into one of two categories depending on the ignition source: spark ignition (SI), typically fueled by gasoline or natural gas; or compression ignition (CI), typically fueled by diesel oil. Reciprocating engines also are categorized by the number of revolutions it takes to complete a combustion cycle. A two-stroke engine completes its combustion cycle in one revolution and a fourstroke engine completes the combustion process in two revolutions. Representative Technologies The four-stroke SI engine has an intake, compression, power, and exhaust cycle. In the intake stroke, as the piston moves downward in its cylinder, the intake valve opens and the upper portion of the cylinder fills with fuel and air. When the piston returns upward in the compression cycle, the spark plug fires, igniting the fuel/air mixture. This controlled combustion forces the piston down in the power stroke, turning the crankshaft and producing useful shaft power. Finally the piston moves up again, exhausting the burnt fuel and air in the exhaust stroke. The four-stroke CI engine operates in a similar manner, except diesel fuel and air ignite when the piston compresses the mixture to a critical pressure. At this pressure, no spark or ignition system is needed since the mixture ignites spontaneously, providing the energy to push the piston down in the power stroke. The two-stroke engine, whether SI or CI, has a higher power density, because it requires half as many crankshaft revolutions to produce power. However, two-stroke engines are prone to let more fuel pass through, resulting in higher hydrocarbon emissions in the form of unburned fuel. Technology Applications Reciprocating engines can be installed to accommodate baseload, peaking, or standby power applications. Commercially available engines range in size from 50 kw to 6.5 MW making them suitable for many distributed power applications. Utility substations and small municipalities can install engines to provide baseload or peak shaving power. However, the most promising markets for reciprocating engines are on-site at commercial, industrial, and institutional facilities. With fast startup time, reciprocating engines can play integral back-up roles in many building energy systems. Onsite reciprocating engines become even more attractive in regions with high electric rates (energy/demand charges). When properly treated the engines can run on fuel generated by waste treatment (methane) and other biofuels. By using the recuperators that capture and return waste exhaust heat, reciprocating engines can be used in combined heat and power (CHP) systems to achieve energy efficiency levels approaching 80%. In fact, reciprocating engines make up a large portion of the CHP or cogeneration market.

209 Current Status Commercially available engines have electrical efficiencies (LHV) between 37 and 40% and yield NOx emissions of 1-2 grams per horsepower hour (hp-hr). Installed cost for reciprocating engines range between $600 and $1,600/ kw depending on size and whether the unit is for a straight generation or cogeneration application. Operating and maintenance costs range 2 cents to 2.5 cents/kwh. Exhaust temperature for most reciprocating engines is F in non-chp mode and F in a CHP system after heat recovery. Noise levels with sound enclosures are typically between db. The reciprocating engine systems typically include several major parts: fuel storage, handling, and conditioning, prime mover (engine), emission controls, waste recovery (CHP systems) and rejections (radiators), and electrical switchgear. Annual shipments of reciprocating engines (sized 10GW or less) have almost doubled to 18 GW between 1997 and The growth is overwhelming in the diesel market, which represented 16 GW shipments compared with 2 GW of natural gas reciprocating engine shipments in 2000 (Source: Diesel and Gas Turbine Worldwide). Key indicators for stationary reciprocating engines: Installed Worldwide Capacity Installed US Capacity 146 GW 52 GW 1,022 Source: Distributed Generation: The Power Paradigm for the New Millenium, 2001 Manufacturers of reciprocating engines include: Caterpillar Jenbacher Cummins Wartsila Detroit Diesel Waukesha Number of CHP sites using Recips in the U.S. Technology History Natural gas reciprocating engines have been used for power generation since the 1940s. The earliest engines were derived from diesel blocks and incorporated the same components of the diesel engine. Spark plugs and carburetors replaced fuel injectors, and lower compression ratio pistons were substituted to run the engine on gaseous fuels. These engines were designed to run without regard to fuel efficiency or emission levels. They were used mainly to produce power at local utilities and to drive pumps and compressors. In the mid-1980s, manufacturers were facing pressure to lower NOx emissions and increase fuel economy. Leaner air-fuel mixtures were developed using turbochargers and charge air coolers, and in combination with lower in-cylinder fire temperatures, the engines reduced NOx from 20 to 5 g/bhp-hr. The lower in-cylinder fire temperatures also meant that the BMEP (Brake Mean Effective Pressure) could increase without damaging the valves and manifolds. Reciprocating engine sales have grown more then five-fold from 1988 (2 GW) to 1998 (11.5 GW). Gas-fired engine sales in 1990 were 4% compared to 14% in The trend is likely to continue for gas-fired reciprocating engines due to strict air-emission regulations and because performance has been steadily improving for the past 15 years.

210 Technology Future The U.S. Department of Energy, in partnership with the Gas Technology Institute, the Southwest Research Institute, and equipment manufacturers, supports the Advanced Reciprocating Engines Systems (ARES) consortium, aimed at further advancing the performance of the engine. Performance targets include: High Efficiency- Target fuel-to-electricity conversion efficiency (LHV) is 50 % by Environment Engine improvements in efficiency, combustion strategy, and emissions reductions will substantially reduce overall emissions to the environments. The NOx target for the ARES program is 0.1 g/hp-hr, a 90% decrease from today s NOx emissions rate. Fuel Flexibility Natural gas-fired engines are to be adapted to handle biogas, renewables, propane and hydrogen, as well as dual fuel capabilities. Cost of Power The target for energy costs, including operating and maintenance costs is 10 % less than current state-of-the-art engine systems. Availability, Reliability, and Maintainability The goal is to maintain levels equivalents to current state-of-the-art systems. Other R&D directions include: new turbocharger methods, heat recovery equipment specific to the reciprocating engine, alternate ignition system, emission control technologies, improved generator technology, frequency inverters, controls/sensors, higher compression ratio, and dedicated natural gas cylinder heads.

211 Reciprocating Engines Technology Performance Power Ranges (kw) of Selected Manufacturers Source: Manufacturer Specs Low High Caterpillar 150 3,350 Waukesha 200 2,800 Cummins 5 1,750 Jenbacher 200 2,600 Wartsila 500 5,000 Market Data Market Shipments Source: Debbie Haught, DOE, communication 2/26/02 - from Diesel and Gas Turbine Worldwide. (GW of units under 10 MW in size) Diesel Recips Gas Recips

212 Microturbines Technology Description Microturbines are small combustion turbines of a size comparable to a refrigerator and with outputs of 25 kw to 500 kw. They are used for stationary energy generation applications at sites with space limitations for power production. They are fuel-flexible machines that can run on natural gas, biogas, propane, butane, diesel, and kerosene. Microturbines have few moving parts, high efficiency, low emissions, low electricity costs, and waste heat utilization opportunities; and are lightweight and compact in size. Waste heat recovery can be used in combined heat and power (CHP) systems to achieve energy efficiency levels greater than 80 percent. System Concepts Microturbines consist of a compressor, combustor, turbine, alternator, recuperator, and generator. Microturbines are classified by the physical arrangement of the component parts: single shaft or two-shaft, simple cycle or recuperated, inter-cooled, and reheat. The machines generally operate over 40,000 rpm. A single shaft is the more common design as it is simpler and less expensive to build. Conversely, the split shaft is necessary for machine-drive applications, which do not require an inverter to change the frequency of the AC power. Efficiency gains can be achieved with greater use of materials like ceramics, which perform well at higher engine operating temperatures. Representative Technologies Microturbines in a simple cycle, or unrecuperated, turbine; compressed air is mixed with fuel and burned under constant pressure conditions. The resulting hot gas is allowed to expand through a turbine to perform work. Simple-cycle microturbines have lower cost, higher reliability, and more heat available for CHP applications than recuperated units. Recuperated units use a sheet-metal heat exchanger that recovers some of the heat from an exhaust stream and transfers it to the incoming air stream. The preheated air is then used in the combustion process. If the air is preheated, less fuel is necessary to raise its temperature to the required level at the turbine inlet. Recuperated units have a higher efficiency and thermal-to-electric ratio than unrecuperated units, and yield percent fuel savings from preheating. Technology Applications Microturbines can be used in a wide range of applications in the commercial, industrial, and institutional sectors, microgrid power parks, remote off-grid locations, and premium power markets. Microturbines can be used for backup power, baseload power, premium power, remote power, cooling and heating power, mechanical drive, and use of wastes and biofuels. Microturbines can be paired with other distributed energy resources such as energy storage devices and thermally activated technologies.

213 Current Status Microturbine systems are just entering the market and the manufacturers are targeting both traditional and nontraditional applications in the industrial and buildings sectors, including CHP, backup power, continuous power generation, and peak shaving. The most popular microturbine installed to date is the 30-kW system manufactured by Capstone. The typical kw unit cost averages $1,000/kW. For gas-fired microturbines, the present installation cost (site preparation and natural gas hookup) for a typical commercial site averages $8,200. Honeywell pulled out of the microturbine business in December 2001, leaving the following manufacturers in the microturbine market: Capstone Turbine Corporation DTE Energy Technologies Elliot Energy Systems Turbec Ingersoll-Rand UTRC Bowman Power Capstone, Ingersoll-Rand, Elliott, and Turbec combined have shipped more than 2,100 units (156 MW) worldwide during the past four years. Technology History Microturbines represent a relatively new technology, which is just making the transition to commercial markets. The technology used in microturbines is derived from aircraft auxiliary power systems, diesel engine turbochargers, and automotive designs. In 1988, Capstone Turbine Corporation began developing the microturbine concept; and in 1998, Capstone was the first manufacturer to offer commercial power products utilizing microturbine technology. Technology Future The market for microturbines is expected to range from $2.4-to-$8 billion by 2010, with 50 percent of sales concentrated in North America. The acceptable cost target for microturbine energy is $0.05/kWh, which would present a cost advantage over most nonbaseload utility power. The next generation of "ultra-clean, high efficiency" microturbine product designs will focus on the following DOE performance targets: High Efficiency Fuel-to-electricity conversion efficiency of at least 40 percent. Environment NOx < 7 ppm (natural gas). Durability 1,000 hours of reliable operations between major overhauls and a service life of at least 45,000 hours. Cost of Power System costs < $500/kW, costs of electricity that are competitive with alternatives (including grid) for market applications by 2005 (for units in the kw range) Fuel Flexibility Options for using multiple fuels including diesel, ethanol, landfill gas, and biofuels.

214 Microturbines Market Data Microturbine Shipments Source: Debbie Haught, communications 2/26/02. Capstone sales reported in Quarterly SEC filings, others estimated. # of units Capstone Other Manufacturers MW Capstone Other Manufacturers Technology Performance Source: Manufacturer Surveys, Arthur D. Little (ADL) estimates. Current System Efficiency (%) LHV: 17-20% unrecuperated, 25-30%+ recuperated Lifetime (years) 5-10 years, depending on duty cycle Emissions (natural gas fuel) Current Future (2010 CO ,180 g/kwh (17-30% efficiency) SO2 Negligible (natural gas) Negligible NOx 9-25 ppm <9 ppm CO ppm <9 ppm PM Negligible Negligible Typical System Size Current Products: kw Units can be bundled or "ganged" to produce power in larger increments Maintenance Requirements (Expected) 10,000-12,000 hr before major overhaul (rotor replacement) Footprint [ft 2 /kw] Future Products: up to 1 MW

215 Technology Performance Sources: Debbie Haught, DOE, communication 2/26/02 and Energetics, Inc. Distributed Energy Technology Simulator: Microturbine Validation, July Capstone Turbine Corporation Elliot Energy Systems Ingersoll-Rand Energy Services Turbec DTE Energy Technologies Model Name Model 330 Capstone 60 TA-80 PowerWorks ENT 400 recuperated Size 30 kw 60 kw 80 kw 70 kw 100 kw 300 kw Voltage VAC 400 VAC 480/277 VAC Fuel Flexibility natural gas, medium Btu gas, diesel, kerosene natural gas natural gas natural gas, biogas, ethanol, diesel natural gas (diesel, propane future) Fuel Efficiency (cf/kwh) % (+/-2%) 28% (+/- 2%) 28% 30-33% 30% 28% (+/- 2%) Efficiency 70-90% CHP 70-90% CHP 80% CHP 80% CHP 74% CHP Emissions NOx O2 NOx diesel <60ppm, NOx NG <25ppm, CO diesel <400ppm, CO NG <85ppm NOx O2, CO O2 NOx O2, CO <15ppm, UHC <10ppm NOx O2 Units Sold 1999: 211 units 2000: 790 units 2001: 1,033 units 2001: 100 units 2000: 2 pre-commercial units, expected commercial in : 20 units in the European market Unit Cost $1000/kW $75,000 Cold Start-Up Time 3 min Web site cts_microtubines.html ww.irco.com/energysys tems/powerworks.html Available late min emergency, 7 min normal gynow/portfolio/2_1_4. asp

216 A fuel cell is an electrochemical energy conversion device that converts hydrogen and oxygen into electricity and water. This unique process is practically silent, nearly eliminates emissions, and has no moving parts. Fuel Cells Technology Description System Concepts Similar to a battery, fuel cells have an anode and a cathode separated by an electrolyte. Hydrogen enters the anode and air (oxygen) enters the cathode. The hydrogen and oxygen are separated into ions and electrons, in the presence of a catalyst. Ions are conducted through the electrolyte while the electrons flow through the anode and the cathode via an external circuit. The current produced can be utilized for electricity. The ions and electrons then recombine, with water and heat as the only byproducts. Fuel cell systems today typically consist of a fuel processor, fuel cell stack, and power conditioner. The fuel processor, or reformer, converts hydrocarbon fuels to a mixture of hydrogen-rich gases and, depending upon the type of fuel cell, can remove contaminants to provide pure hydrogen. The fuel cell stack is where the hydrogen and oxygen electrochemically combine to produce electricity. The electricity produced is direct current (DC) and the power conditioner converts the DC electricity to alternating current (AC) electricity, for which most of the end-use technologies are designed. As a hydrogen infrastructure emerges, the need for the reformer will disappear as pure hydrogen will be available near point of use. Representative Technologies Fuel cells are categorized by the kind of electrolyte they use. Alkaline Fuel Cells (AFCs) were the first type of fuel cell to be used in space applications. AFCs contain a potassium hydroxide (KOH) solution as the electrolyte and operate at temperatures between 60 and 250 C (140 to 482 F). The fuel supplied to an AFC must be pure hydrogen. Carbon monoxide poisons an AFC, and carbon dioxide (even the small amount in the air) reacts with the electrolyte to form potassium carbonate. Phosphoric Acid Fuel Cells (PAFCs) were the first fuel cells to be commercialized. These fuel cells operate at C ( F) and achieve 35 to 45% fuel-to-electricity efficiencies LHV. Proton Exchange Membrane Fuel Cells (PEMFCs) operate at relatively low temperatures of C ( F), have high power density, can vary their output quickly to meet shifts in power demand, and are suited for applications where quick startup is required (e.g, transportation and power generation). The PEM is a thin fluorinated plastic sheet that allows hydrogen ions (protons) to pass through it. The membrane is coated on both sides with highly dispersed metal alloy particles (mostly platinum) that are active catalysts. Molten Carbonate Fuel Cell (MCFC) technology has the potential to reach fuel-to-electricity efficiencies of 45 to 60% on a lower heating value basis (LHV). Operating temperatures for MCFCs are around 650 C (1,200 F), which allows total system thermal efficiencies up to 85% LHV in combinedcycle applications. MCFCs have been operated on hydrogen, carbon monoxide, natural gas, propane, landfill gas, marine diesel, and simulated coal gasification products. Solid Oxide Fuel Cells (SOFCs) operate at temperatures up to 1,000 C (1,800 F), which further enhances combined-cycle performance. A solid oxide system usually uses a hard ceramic material instead of a liquid electrolyte. The solid-state ceramic construction enables the high temperatures, allows more

217 flexibility in fuel choice, and contributes to stability and reliability. As with MCFCs, SOFCs are capable of fuel-to-electricity efficiencies of 45 to 60% LHV and total system thermal efficiencies up to 85% LHV in combined-cycle applications. Technology Applications Fuel cell systems can be sized for grid-connected applications or customer-sited applications in residential, commercial, and industrial facilities. Depending on the type of fuel cell (most likely SOFC and MCFC), useful heat can be captured and used in combined heat and power systems (CHP). Premium power applications are an important niche market for fuel cells. Multiple fuel cells can be used to provide extremely high (more then six nines) reliability and high-quality power for critical loads. Data centers and sensitive manufacturing processes are ideal settings for fuel cells. Fuel cells also can provide power for vehicles and portable power. PEMFCs are a leading candidate for powering the next generation of vehicles. The military is interested in the high efficiency, low-noise, small-footprint portable power. Current Status Fuel cells are still too expensive to compete in widespread domestic and international markets without significant subsidies. PAFC More than 170 PAFC systems are in service worldwide, with those installed by ONSI having surpassed 2 million total operating hours with excellent operational characteristics and high availability. Economic Specifications of the PAFC (200 kw) Expense Description Cost Capital Cost 1 complete PAFC power plant $850,000 Installation Electrical, plumbing, and foundation $40,000 Operation Natural gas costs $5.35/MMcf Minor Maintenance Service events, semi-annual and annual maintenance $20,000/yr Major Overhaul Replacement of the cell stack $320,000/5 yrs Source: Energetics, Distributed Energy Technology Simulator: Phosphoric Acid Fuel Cell Validation, May PEMFC Ballard s first 250 kw commercial unit is under test. PEM systems up to 200 kw are also operating in several hydrogen-powered buses. Most units are small (<10 kw). PEMFCs currently cost several thousand dollars per kw. SOFC A small, 25 kw natural gas tubular SOFC systems has accumulated more than 70,000 hours of operations, displaying all the essential systems parameters needed to proceed to commercial configurations. Both 5 kw and 250 kw models are in demonstration. MCFC 50 kw and 2 MW systems have been field-tested. Commercial offerings in the 250 kw-2 MW range are under development.

218 Some fuel cell developers include: Avista Laboratories Ball Aerospace and Technologies Corp. Ballard Power Systems, Inc BCS Technology, Inc. Ceramatec DCH Technology, Inc FuelCell Energy H Power IdaTech M-C Power ONSI Corporation (IFC/United Technologies) Plug Power, LLC Proton Energy Systems Siemens Westinghouse Power Corporation Fuel Cell Type Electrolyte Operating Temp ( C) Electrical Efficiency (% LHV) Commercial Availability Typical Unit Size Range Startup time (hours) AFC KOH s PEMFC Nafion kw < 0.1 PAFC Phosphoric Acid kw 1-4 MCFC Lithium, 250 kw-2 potassium, Post 2003 MW carbonate salt 5-10 SOFC Yttrium & zirconium oxides Post kw Sources: Anne Marie Borbely and Jan F. Kreider. Distributed Generation: The Power Paradigm for the New Millennium, CRC Press, 2001, and Arthur D. Little, Distributed Generation Primer: Building the Factual Foundation (multi-client study), February 2000 Technology History In 1839, William Grove, a British jurist and amateur physicist, first discovered the principle of the fuel cell. Grove utilized four large cells, each containing hydrogen and oxygen, to produce electric power which was then used to split the water in the smaller upper cell into hydrogen and oxygen. In the 1960s, alkaline fuel cells were developed for space applications that required strict environmental and efficiency performance. The successful demonstration of the fuel cells in space led to their serious consideration for terrestrial applications in the 1970s. In the early 1970s, DuPont introduced the Nafion membrane, which has traditionally become the electrolyte for PEMFC. In 1993, ONSI introduced the first commercially available PAFC. Its collaborative agreement with the U.S. Department of Defense enabled more than 100 PAFCs to be installed and operated at military installations. The emergence of new fuel cell types (SOFC, MCFC) in the past decade has led to a tremendous expansion of potential products and applications for fuel cells. Technology Future According to the Business Communications Company, the market for fuel cells was about $218 million in 2000, will rise to $2.4 billion by 2004, and will reach $7 billion by Fuel cells are being developed for stationary power generation through a partnership of the U.S DOE and the private sector. Industry will introduce high-temperature natural gas-fueled MCFC and SOFC at $1,000 -$1,500 per kw that are capable of 60% efficiency, ultra-low emissions, and 40,000 hour stack life. DOE is also working with industry to test and validate the PEM technology at the 1 kw level and to transfer technology to the Department of Defense. Other efforts include raising the operating temperature of the PEM fuel cell for building, cooling, heating, and power applications and improve reformer technologies to extract hydrogen from a variety of fuels, including natural gas, propane, and methanol. 5-10

219 Fuel Cells Technology Performance Source: Arthur D. Little (ADL) estimates, survey of equipment manufacturers. Only industrial applications; table does not address residential/commercial-scale fuel cells. Technology Installed Cost ($/kw) 2000 Characteristics 2005 Characteristics Non-Fuel O&M (cents/kwh) Electrical Efficiency (LHV) Installed Cost ($/kw) Non-Fuel O&M (cents/kwh) Electrical Efficiency (LHV) Size Range (kw) Low High Low High High Low Low High Low High High Low Low Temperature Fuel Cell (PEM) ,000 3, % 30% 1,000 2, % 33% High Temperature Fuel Cell (SOFC & MCFC) 250-1,000 NA 1,500 2, % 45% Source: Energetics, Distributed Energy Technology Simulator: PAFC Validation, May Size (kw) Capital Cost Installation (Site Preparation) Operation Costs (Natural Gas) Minor Maintenance Major Overhaul Installation of a commercially available PAFC 200 $850,000 $40,000 $5.35/MMcf $20,000/yr $320,000/5 yrs

220 Technology Performance There have been more than 25 fuel cell demonstrations funded by the private sector, the government, or a cofunded partnership of both. The objectives for most have been to validate a specific technology advance or application, and most of these demonstrations have been funded by the Office of Fossil Energy. This is a listing of the demonstrations that have taken place between 1990 and today that have been published. All of the demonstrations were deemed a success, even if the testing had to end before its scheduled completion point. All of the manufacturers claimed they learned a great deal from each test. All the OPT-funded demonstrations were used to prove new higher performance-based technology either without lower catalyst levels, metal separator plates, carbon paper in lieu of machined carbon plates, or new membrane materials. Only the Plug Power fuel cell tested for the Remote Power Project failed, due to an electrical fire. Fuel Cell Type Company Objective Phosphoric Acid Fuel Cell UT Fuel Cells (IFC)/FE 12.5 kw prototype using a new membrane assembly. (60 units) 40 kw power plant (46 units) 100 kw prototype for Georgetown Bus. (2 units) Methanol 200 kw first manufacturing prototype for PC25 (4 units) including natural gas reformer Phosphoric Acid Fuel Cell IFC/OPT 200 kw hydrogen version of PC 25 without a reformer, lower cost assembly Solid Oxide Westinghouse/FE 2 MW SOFC at Toshiba for fuels and tubular geometry testing 100 kw plannar unit to test seals, Netherlands 250 kw hybrid(57/50) w/turbine SoCal Ed 250 kw tubular SOFC combined heat and power, Ontario Power Molten Carbonate Fuel Cell Energy/FE 250 kw 8,800 hours Danbury Ct. first precommercial prototype 3 MW four years to build, Lexington Clean Coal Project 2 MW San Diego failed early Proton Exchange Membrane Plug Power/OTT Plug Power/OPT 10 kw prototype for vehicles 50 kw unsuccessful 25 kw prototype for Alaska, integrated with diesel reformer 50 kw prototype for Las Vegas refueling station, integrated with natural gas reformer

221 Proton Exchange Membrane IFC/OTT 10 kw prototype sent to LANL for evaluation 50 kw prototype sent to GM for evaluation, reduced Pt catalyst 75 kw prototype installed in Hundai SUV, prototype for all transportation devices Proton Exchange Membrane Schatz Energy Center/OPT (3) 5 kw Personal Utility Vehicles, (1) 15 kw Neighborhood Electric Vehicle Palm Desert each incorporated different levels of Pt catalyst, different membranes, all hydrogen fueled 1.3 kw Portable Power Unit Proton Exchange Membrane Enable/OPT (3) 100 W Portable Power Units to demonstrate radial design (2) 1.5 kw Portable Power Units incorporating the LANL adiabatic fuel cell design (1) 1 kw air breather design for wheelchair Proton Exchange Membrane Ballard: no DOE funds (6) 250 kw 40 foot passenger buses, hydrogen fueled: 3 Chicago, 2 Vancouver, 1 Palm Desert (1) 100 kw powerplant for Ford Think car (1) 250 kw stationary powerplant new manufacturing design Proton Exchange Membrane Nuvera/OPT 3 kw powerplant using metal separator plate technology for Alaska evaluated by SNL and University of Alaska Proton Exchange Membrane Coleman Powermate/Ballard no DOE funds (3) 1.3 kw precommercial prototype UPS systems, metal hydride storage, under evaluation at United Laboratories for rating Proton Exchange Membrane Reliant Energy 7.5 kw precommercial prototype of radial stack geometry with conductive plastic separator plates Alkaline Zetec 25 kw precommercial prototype to demonstrate regenerative carbon dioxide scrubber Alkaline Hamilton Standard/IFC (100) 12.5 kw commercial units for NASA Alkaline Union Carbide (2) 50 kw fuel cells for GM van and car

222 Batteries Technology Description Batteries are likely the most widely known type of energy storage. They all store and release electricity through electrochemical processes and come in a variety of shapes and sizes. Some are small enough to fit on a computer circuit board while others are large enough to power a submarine. Some batteries are used several times everyday while others may sit idle for 10 or 20 years before they are ever used. Obviously for such a diversity of uses, a variety of battery types are necessary. But all of them work from the same basic principles. System Concepts Battery electrode plates, typically consisting of chemically reactive materials, are placed in an electrolyte, which facilitates the transfer of ions in the battery. The negative electrode gives up electrons during the discharge cycle. This flow of electrons creates electricity that is supplied to any load connected to the battery. The electrons are then transported to the positive electrode. This process is reversed during charging. Batteries store and deliver direct current (DC) electricity. Thus power conversion equipment is required to connect a battery to the alternating current (AC) electric grid. Representative Technologies The most mature battery systems are based on lead acid technology. There are two major kinds of lead acid batteries: flooded lead acid batteries and valve-regulated-lead-acid (VRLA) batteries. There are several rechargeable, advanced batteries under development for stationary and mobile applications, including lithium-ion, lithium polymer, nickel metal hydride, zinc-air, zinc-bromine, sodium sulfur, and sodium bromide. These advanced batteries offer potential advantages over lead acid batteries in terms of cost, energy density, footprint, lifetime, operating characteristics reduced maintenance, and improved performance. Technology Applications Lead acid batteries are the most common energy storage technology for stationary and mobile applications. They offer maximum efficiency and reliability for the widest variety of stationary applications: telecommunications, utility switchgear and control, uninterruptible power supplies (UPS), photovoltaic, and nuclear power plants. They provide instantaneous discharge for a few seconds or a few hours. Installations can be any size. The largest system to date is 20 MW. Lead acid batteries provide power quality, reliability, peak shaving, spinning reserve, and other ancillary services. The disadvantages of the flooded lead-acid battery include the need for periodic addition of water, and the need for adequate ventilation since the batteries can give off hydrogen gas when charging. VRLA batteries are sealed batteries fitted with pressure release valves. They have been called lowmaintenance batteries since they do not require periodic adding of water. They can be stacked horizontally as well as vertically, resulting in a smaller footprint than flooded lead acid batteries. Disadvantages include higher cost and increased sensitivity to the charging cycle used. High temperature results in reduced battery life and performance. Several advanced flow batteries are under development. The zinc-bromine battery consists of a zinc positive electrode and a bromine negative electrode separated by a microporous separator. An aqueous

223 solution of zinc/bromide is circulated through the two compartments of the cell from two separate reservoirs. Zinc-bromine batteries are currently being demonstrated in a number of hybrid installations, with microturbines and diesel generators. Sodium bromide/sodium bromine batteries are similar to zincbromine batteries in function and are under development for large-scale, utility applications. The advantages of flow battery technologies are low cost, modularity, scalability, transportability, low weight, flexible operation, and all components are easily recyclable. Their major disadvantages are a relatively low cycle efficiency. Other advanced batteries include the lithium-ion, lithium-polymer, and sodium sulfur batteries. The advantages of lithium batteries include their high specific energy (four times that of lead-acid batteries) and charge retention. Sodium sulfur batteries operate at high temperature and are being tested for utility load leveling applications. Current Status Energy storage systems for large-scale power quality applications (~10 MW) are economically viable now with sales from one manufacturer doubling from 2000 to Lead-acid battery annual sales have tripled between 1993 and The relative importance of battery sales for switchgear and UPS applications shrunk during this period from 45% to 26% of annual sales by VRLA and flooded battery sales were 534 and 171 million dollars, respectively, in Recently, lead-acid battery manufacturers have seen sales drop with the collapse of the telecommunications bubble in They saw significant growth in sales in 2000, due to the demand from communications firms, and invested in production and marketing in anticipation of further growth. Many manufacturers have been subject to mergers and acquisitions. A few dozen manufacturers in the U.S. and abroad still make batteries. Government and private industry are currently developing a variety of advanced batteries for transportation and defense applications: lithium-ion, lithium polymer, nickel metal hydride, sodium metal chloride, sodium sulfur, and zinc bromine. Rechargeable lithium batteries already have been introduced in the market for consumer electronics and other portable equipment. There are two demonstration sites of ZBB s Zinc Bromine batteries in Michigan and two additional ones in Australia. Flooded East Penn Exide Rolls Trojan Representative Current Manufacturers VRLA Nickel Cadmium, Lithium Ion Hawker SAFT GNB Sanyo Panasonic Panasonic Yuasa Zinc Bromine Medentia Powercell ZBB Technology History Most historians date the invention of batteries to about 1800 when experiments by Alessandro Volta resulted in the generation of electrical current from chemical reactions between dissimilar metals. Secondary batteries date back to 1860 when Raymond Gaston Planté invented the lead-acid battery. His cell used two thin lead plates separated by rubber sheets. He rolled the combination up and immersed it in a dilute sulfuric acid solution. Initial capacity was extremely limited since the positive plate had little active material available for reaction. Others developed batteries using a paste of lead oxides for the positive plate active materials. This allowed much quicker formation and better plate efficiency than the solid Planté plate. Although the rudiments of the flooded lead-acid battery date back to the 1880s, there has been a continuing stream of

224 improvements in the materials of construction and the manufacturing and formation processes. Since many of the problems with flooded lead-acid batteries involved electrolyte leakage, many attempts have been made to eliminate free acid in the battery. German researchers developed the gelledelectrolyte lead-acid battery (a type of VRLA) in the early 1960s. Working from a different approach, Gates Energy Products developed a spiral-wound VRLA cell, which represents the state of the art today. Technology Future Lead-acid batteries provide the best long-term power in terms of cycles and float life and, as a result, will likely remain a strong technology in the future. Energy storage and battery systems in particular will play a significant role in the Distributed Energy Resource environment of the future. Local energy management and reliability are emerging as important economic incentives for companies. A contraction in sales of lead-acid batteries that began in 2001 was expected to continue over the next few years until 9/11 occurred. Military demand for batteries may drastically alter the forecast for battery sales. Battery manufacturers are working on incremental improvements in energy and power density. The battery industry is trying to improve manufacturing practices and build more batteries at lower costs to stay competitive. Gains in development of batteries for mobile applications will likely crossover to the stationary market. Zinc Bromine batteries are expected to be commercialized in 2003 with a target cost of $400/kWh. A 10 MW-120 MWh sodium bromide system is under construction by the Tennessee Valley Authority A 40 MW nickel cadmium system is being built for transmission line support and stabilization in Alaska.

225 Batteries Market Data Recent Battery Sales Source: Battery Council International, Annual Sales Summary, October % 214% 298% 2000 Growth Flooded Batteries (Million $) VRLA Batteries (Million $) Total Lead-Acid Batteries (Million $) Percent Communications 69% 26% 58% Percent Switchgear/UPS 45% Market Predictions Source: Sandia National Laboratories, Battery Energy Storage Market Feasibility Study, September Year MW ($ Million)

226 Technology Performance Grid-Connected Energy Storage Technologies Costs and Efficiencies Source: Sandia National Laboratories, Characteristics and Technologies for Long- vs. Short-Term Energy Storage, March Energy Storage System Energy Related Cost ($/kwh) Lead-acid Batteries Power Related Cost ($/kw) Balance of Plant ($/kwh) Discharge Efficiency low average high Power Quality Batteries Advanced Batteries Technology Performance Off-Grid Storage Applications, Their Requirements, and Potential Markets to 2010 According to Boeing Source: Sandia National Laboratories, Energy Storage Systems Program Report for FY99, June Application Single Home: Developing Community Storage System Attributes Power Developing Community: No Industry Developing Community: Light Industry Developing Community: Moderate Industry Advanced Community or Military Base Power (kw) MW Energy (kwh) , MWh Base (kw) Peak (kw) < 8 < 40 < 400 < 1000 Discharge Duration 5 to 72 hrs 5 to 72 hrs 5 to 24 hrs 5 to 24 hrs 0.5 to 1 hr Total Projected Number of Systems 47 Million 137,000 40,000 84, ,000 Fraction of Market Captured by Storage > 50 > 50 ~ 30 ~ 10 < 5 Total Number of Storage Systems to 24 Million 69,000 12,000 8,000 < 7,000 Capture Market Share

227 Technology Performance Advanced Batteries Characteristics Source: DOE Energy Storage Systems Program Annual Peer Review FY01, Boulder City Battery Energy Storage, November Energy Storage System Sodium Sulfur Vanadium Redox Zinc Bromine Field Experience Over 30 Projects, 25 kw to 6 MW, Largest 48 MW Several Projects 100kW to 3 MW (pulse power), Largest 1.15 MWh Several Projects, 50 kw to 250 kw, Largest 400 kwh Production Capacity 160 MWh/yr 30 MWh/yr 40 to 70 MWh/yr Actual Production 50 MWh/yr 10 MWh/yr 4.5 MWh/yr Life 15 yrs 7 to 15 yrs 10 to 20 yrs Efficiency 72% 70to 80 % 65 to 70% O&M Costs $32.5k/yr $50k/yr $30 to $150k/yr

228 Advanced Energy Storage Technology Description The U.S. electric utility industry has been facing new challenges with deregulation and limitations on installing new transmission and distribution equipment. Advanced storage technologies under active development, in addition to advanced batteries, include processes that are mechanical (flywheels, pneumatic storage) and purely electrical (supercapacitors, super-conducting magnetic storage), and compressed air energy storage. These advanced energy storage solutions will help achieve more reliable and low-cost electricity storage. Flywheel Cutaway System Concepts Flywheels (Low-Speed and High-Speed) Flywheels store kinetic energy in a rotating mass. The amount of stored energy is dependent on the speed, mass, and configuration of the flywheel. They have been used as short-term energy storage devices for propulsion applications such as engines for large road vehicles. Today, flywheel energy storage systems are usually categorized as either low-speed or high-speed. High-speed wheels are made of high-strength, low-density composite materials, making these systems considerably more compact than those employing lower-speed metallic wheels. However, the low-speed systems are still considerably less expensive per kwh. Supercapacitors Supercapacitors are also known as Electric Double Layer Capacitors, pseudocapacitors, or ultracapacitors. Charge is stored electrostatically in polarized liquid layers between an ionically conducting electrolyte and a conducting electrode. Though they are electrochemical devices, no chemical reactions occur in the energy storage mechanism. Since the rate of charge and discharge is determined solely by its physical properties, an ultracapacitor can release energy much faster (i.e., with more power) than a battery, which relies on slow chemical reactions. Ultracapacitors have 100 times the power density of conventional capacitors and 10 times the power density of ordinary batteries. Compressed Air Energy Storage (CAES) CAES systems work as follows: during off-peak hours, air is pumped into underground tanks and compressed using low-cost electricity at pressures up to 1,078 pounds per square inch. During peak times, the compressed air is released and heated using a small amount of natural gas. The heated air flows through a turbine generator, which produces electricity. In conventional gas-turbine power generation, the air that drives the turbine is compressed and heated using natural gas. In contrast, CAES technology needs less gas to produce power, because it uses air that already has been compressed and stored. Superconducting Magnetic Energy Storage (SMES) SMES systems store energy in the magnetic field created by the flow of direct current in a coil of superconducting material. SMES systems provide rapid response to either charge or discharge, and their available energy is independent of their discharge rate. SMES systems have a high cycle life and, as a result, are suitable for applications that require constant, full cycling and a continuous mode of operation. Micro-SMES devices in the range of 1 to 10 MW are available commercially for power-quality applications.

229 Representative Technologies While the system concepts section addressed energy storage components exclusively, all advanced storage systems require power conditioning and balance of plant components. For vehicle applications, flywheels, CAES, and ultracapacitors are under development. A dozen companies are actively developing flywheels steel, low-speed flywheels, are commercially available now; composite, high-speed flywheels are rapidly approaching commercialization. Pneumatic storage (CAES) is feasible for energy storage on the order of 100 s MWh. Prototype ultracapacitors have recently become commercially available. Technology Applications Energy available in SMES is independent of its discharge rating, which makes it very attractive for high power and short time burst applications such as power quality. SMES are also useful in transmission enhancement as they can provide line stability, voltage and frequency regulation, as well as phase angle control. Flywheels are primarily used in transportation, defense, and power-quality applications. Load management is another area where advanced energy storage systems are used (e.g., CAES). Energy stored during off-peak hours is discharged at peak hours, achieving savings in peak energy, demand charges, and a more uniform load. Load management also enables the deferral of equipment upgrades required to meet an expanding load base, which typically only overloads equipment for a few hours a day. Ultracapacitors are used in consumer electronics, power quality, transportation, and defense and have potential applications in combination with distributed generation equipment for following rapid load changes. Current Status Utilities require high reliability, and per-kilowatt costs less than or equal to those of new power generation ($400 $600/kW). Compressed gas energy storage can cost as little as $1 $5/kWh. SMES has targets of $150/kW and $275/kWh. Vehicles require storage costs of $300 to $1000/kWh to achieve significant market penetration. The major hurdle for all storage technologies is cost reduction. Ultracapacitor development needs improved energy density from the current 1.9 W-h/kg for lightduty hybrid vehicles. Low-speed ( rpm) steel flywheels are commercially available for power quality and UPS applications. There is one 110-MW CAES facility operated by an electric co-op in Alabama. Six SMES units have been installed in Wisconsin to stabilize a ring transmission system. Representative Current Manufacturers Flywheels Supercapacitors CAES SMES Active Power American Flywheel Systems Pillar Nanolab Cooper Maxwell NEC Ingersoll Rand ABB Dresser-Rand Alstrom American Superconductor

230 Technology Future Developments in the vehicular systems most likely will crossover into the stationary market. High-temperature (liquid-nitrogen temperatures) superconductors that are manufacturable and can carry high currents could reduce both capital and operating costs for SMES. High-speed flywheels need further development of fail-safe designs and/or lightweight containment. Magnetic bearings will reduce parasitic loads and make flywheels attractive for small uninterruptible power supplies and small energy management applications. Much of the R&D in advanced energy storage is being pursued outside the United States, in Europe, and Japan. U.S. government research funds have been very low, relative to industry investments. One exception has been the Defense Advanced Research Programs Agency, with its flywheel containment development effort with U.S. flywheel manufacturers, funded at $2 million annually. The total DOE Energy Storage Program budget hovers in the 4-6 M$ range during the past 10 years.

231 Advanced Energy Storage Market Data Market Predictions Source: Sandia National Laboratories, Cost Analysis of Energy Storage Systems for Electric Utility Applications, February Energy Storage System Present Cost Projected Cost Reduction SMES $54,000/MJ 5-10% Flywheels $200/kWh 443 Technology Performance Energy Storage Costs and Efficiencies Source: Sandia National Laboratories, Characteristics and Technologies for Long- vs. Short-Term Energy Storage, March Energy Storage System Energy Related Cost ($/kwh) Power Related Cost ($/kw) Balance of Plant ($/kwh) Discharge Efficiency Micro-SMES , ,000 Mid-SMES 2, ,500 SMES Flywheels (high-speed) 25, ,000 Flywheels (low-speed) Ultracapacitors 82, ,000 CAES

232 Technology Performance Energy Storage Technology Profiles Source: DOE/EPRI, Renewable Energy Technology Characterizations, December 1997, Appendix A. Technology Installed U.S. Total Facility Size Range Potential/Actual Applications Flywheels 1-2 demo facilities, no commercial sites. In 2002, steel flywheels with rotational speeds of rpm are commercially available for power quality and UPS applications. kw scale Electricity (Power Quality) Transportation, Defense SMES 5 facilities with approx. 30 MW in 5 states From 1-10 MW (micro-smes) to MW Electricity (T&D, Power Quality) Ultracapacitors Millions of units for standby power; 1 defense unit 7-10 W commercial kw prototype Transportation Defense Consumer Electronics Electricity (Power Quality) CAES 110 MW in Alabama 25 MW to 350 MW Electricity (Peak-shaving, Spinning Reserve, T&D)

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234 Superconducting Power Technology Technology Description Superconducting power technology refers to electric power equipment and devices that use superconducting wires and coils. High Temperature Superconductivity (HTS) enables electricity generation, delivery and end use without the resistance losses encountered in conventional wires made from copper or aluminum. HTS wires have the potential to carry 100 times the current without the resistance losses of comparable diameter copper wires. HTS power equipment, such as motors, generators, and transformers, has the potential to be half the size of conventional alternatives with the same power rating and only half the energy losses. System Concepts Source: American Superconductor HTS systems will be smaller, more efficient, and carry more power than a similarly rated conventional system. HTS systems will help the transmission and distribution system by allowing for greater power transfer capability, increased flexibility, and increased power reliability. Representative Technologies Transmission Cables Motors Generators Current Limiters Transformers Flywheel Electricity Systems Technology Applications Superconducting technology will modernize the electric grid and infrastructure, resulting in greater flexibility, efficiency and cost effectiveness. Wire and Coils have reached a sufficient level of development to allow for their introduction into prototype applications of HTS systems such as motors, generators, transmission cables, current limiters and transformers. Motors rated greater than 1,000 hp will primarily be used for pump and fan drives for utility and industrial markets. Current Controllers will perform as a fast sub-cycle breaker when installed at strategic locations in the transmission and distribution system. Flywheel electricity systems can be applied to increase electric utility efficiency in two areas electric load leveling and uninterruptible power systems (UPS) applications. Transformers are environmentally friendly and oil-free, making them particularly useful where transformers previously could not be sited, such as in high density urban areas or inside buildings. Reciprocating Magnetic Separators can be used in the industrial processing of ores, waste solids, and waste gases, as well as performing isotope separations and water treatment.

235 Current Status Much of the research and development in HTS is focused on wire and system development and prototype system design and deployment. There are 18 manufacturers, 8 National Laboratories, 6 utilities, and 17 universities participating in the U.S. Department of Energy Superconductivity Program alone. The list of manufacturers includes: 3M American Superconductor IGC SuperPower Southwire Company ABB Pirelli Cables North America Waukesha Electric Systems Prototype power transmission cables have been developed and are being tested by two teams led by Pirelli Cable Company and Southwire Company respectively. A 1,000 horsepower prototype motor was produced and tested by Rockwell Automation/Reliance Electric Company. The results of these tests are being used to design a 5,000 hp motor. A team led by General Electric has developed a design for a 100 MW generator. A 15 kv Current Controller was tested at a Southern California Edison substation in July The design of a 3 kw/10 kwh flywheel system has been completed. The superconducting bearings, motor/generator, and control system have been constructed and are undergoing extensive testing. A rotor construction is underway. The design of the reciprocating magnetic separator has been finalized, and components for the system have been procured and assembled. The test site has been prepared, and cryogenic testing has begun. Technology History In 1911, after technology allowed liquid helium to be produced, Dutch Physicist Heike Kammerlingh Onnes found that at 4.2 K, the electrical resistance of mercury decreased to almost zero. This marked the first discovery of superconducting materials. Until 1986, superconductivity applications were highly limited due to the high cost of cooling to such low temperatures, which resulted in costs higher than the benefits of using the new technology. In 1986, two IBM scientists, J. George Bednorz and Karl Müller achieved superconductivity on lanthanum copper oxides doped with barium or strontium at temperatures as high as 38 K. In 1987, the compound Y 1 Ba 2 Cu 3 O 7 (YBCO) was given considerable attention as it possessed the highest critical temperature at that time, at 93 K. In the following years, other copper oxide variations were found, such as bismuth lead strontium calcium copper oxide (110 K), and thallium barium calcium copper oxide (125 K). In 1990, the first (dc) HTS motor was demonstrated. In 1992 a 1-meter long HTS cable was demonstrated. By 1996, a 200-horsepower HTS motor was tested and exceeded its design goals by 60%.

236 Technology Future Year of 50% Market Penetration Motors Transformers Generators Underground Cable Source: ORNL/Sub/ , 2000 Edition - High Temperature Superconductivity: The Products and Their Benefits. Low-cost, high-performance YBCO Coated Conductors will be available in 2005 in kilometer lengths. The present cost of HTS wire is $300/kA-m. By 2005, for applications in liquid nitrogen, the wire cost will be less than $50/kA-m and for applications requiring cooling to temperatures of K the cost will be less than $30/kA-m. By 2010, the cost-performance ratio will have improved by at least a factor of four. The cost target is $10/kA-m.

237 Superconducting Power Technology Market Data Projected Market for HTS devices Source: U.S. Department of Energy, September 2001, Analysis of Future Markets (Thousands of Dollars) for High Temperature Superconductors, Draft. Year Motors 164, , , ,284 1,816, ,025 15,399 50, , ,770 Transformers ,451 9,353 56, ,277 Generators 6,926 24,710 83, , , , ,499 Cables 4,117 14,405 48, , , , ,326 Total 11,270 40, , , ,857 1,246,196 1,597,872 Underground Power Cables: Market Penetration and Benefits Case 1 Source: ORNL/Sub/ , 2000 Edition - High Temperature Superconductivity: The Products and Their Benefits % Market Miles Sold this Year Total Miles Installed ,379 1,839 Total Annual Savings (10 6 $)

238 Underground Power Cables: Market Penetration and Benefits Case 2 Source: ORNL/Sub/ , 2000 Edition - High Temperature Superconductivity: The Products and Their Benefits % Market Miles Sold this Year Total Miles Installed Total Annual Savings (10 6 $) The first case is based on electrical generation and equipment market growth averaging 2.5% per year through This number was chosen based on historic figures from and the assumption that a strong economy will continue this kind of growth. Case 2 follows present EIA projections of 1.4% growth, with somewhat more conservative results. Technology Performance HTS Energy Savings Source: U.S. Department of Energy, September 2001, Analysis of Future Markets (GWh) for High Temperature Superconductors, Draft. Year Motors Transformers ,194 Generators ,417 2,699 4,196 5,785 Cables ,336 2,289 3,326 Total ,086 4,283 7,235 10,774

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240 Thermally Activated Technologies Technology Description Thermally Activated Technologies (TATs), such as heat pumps, absorption chillers, and desiccant units, provide onsite space conditioning and water heating,which greatly reduce the electric load of a residential or commercial facility. These technologies can greatly contribute to system reliability. System Concepts TATs may be powered by natural gas, fuel oil, propane, or biogas, avoiding substantial energy conversion losses associated with electric power transmission, distribution, and generation. These technologies may use the waste heat from onsite power generation and provide total energy solutions for onsite cooling, heating, and power. Representative Technologies Thermally activated heat pumps can revolutionize the way residential and commercial buildings are heated and cooled. This technology enables highly efficient heat pump cycles to replace the best natural gas furnaces, reducing energy use as much as 50%. Heat pumps take in heat at a lower temperature and release it a higher one, with a reversing valve that allows the heat pump to provide space heating or cooling as necessary. In the heating mode, heat is taken from outside air when the refrigerant evaporates and is delivered to the building interior when it condenses. In the cooling mode, the function of the two heat-exchanger coils is reversed, so heat moves inside to outside. Absorption chillers provide cooling to buildings by using heat. Unlike conventional electric chillers, which use mechanical energy in a vapor compression process to provide refrigeration, absorption chillers primarily use heat energy with limited mechanical energy for pumping. The chiller transfers thermal energy from the heat source to the heat sink through an absorbent fluid and a refrigerant. The chiller achieves its refrigerative effect by absorbing and then releasing water vapor into and out of a lithium bromide solution. In the process, heat is applied at the generator and water vapor is driven off to a condenser. The cooled water vapor then passes through an expansion valve, reducing the pressure. The low-pressure water vapor then enters an evaporator, where ambient heat is added from a load and the actual cooling takes place. The heated, low-pressure vapor returns to the absorber, where it recombines with lithium bromide and becomes a low-pressure liquid. This low-pressure solution is pumped to a higher pressure and into the generator to repeat the process. Desiccant equipment is useful for mitigation of indoor air quality problems and for improved humidity control in buildings. The desiccant is usually formed in a wheel made up of lightweight honeycomb or corrugated material (see figure). Commercially available desiccants include silica gel, activated alumina, natural and synthetic zeolites, lithium chloride, and synthetic polymers. The wheel is rotated through supply air, usually from the outside, and the material naturally attracts the moisture from the air before it is routed to the building. The desiccant is then regenerated using thermal energy from natural gas, the sun, or waste heat.