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Economic, Energy, and Environmental Benefits of Concentrating Solar Power in California

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Economic, Energy, and Environmental Benefits of Concentrating Solar Power in California ( economic-energy-and-environmental-benefits-concentrating-sol )

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Cost of Energy and NREL CA Solar Benefits Value of Dispatchability 6.0 Cost and Value of CSP Energy This section provides the results of cost of energy calculations for CSP along with an evaluation of the time of delivery value of CSP energy. This section begins with a discussion of the Market Price Referent, the “reference price” of energy in California. 6.1 The Market Price Referent A good starting point for discussion of the cost of renewable energy in California is the Market Price Referent, or MPR.10 The MPR is part of the rulemaking surrounding the California Renewable Portfolio Standard (RPS). Utilities in California are not obligated to purchase renewable energy at prices above the MPR, which is a value set by the California Public Utilities Commission (CPUC) to reflect the market “all-in” (energy and capacity) price for base-load energy. If a renewable energy project has a cost to generate above the MPR, the generator can apply to the CEC for Supplemental Energy Payments (SEPs) to cover above market costs. The MPR is released after the results of the renewable energy solicitations are announced so the MPR does not affect the bids. The MPR for 2005 was calculated with a proxy plant methodology using a natural gas fired combined cycle plant as the proxy for base-load energy. There was no simple- cycle proxy as in previous years. Instead, time of delivery (TOD) multipliers are to be applied to the baseload MPR value to come up with pricing at peak times. The all-in dollar per MWh levelized energy price for each proxy plant was calculated for 10, 15, and 20 year contract terms. The 2005 MPR value for a 20-year PPA starting in 2007 is $77.24 per MWh. The MPR also includes a 25-year natural gas price forecast, which is based on NYMEX forward futures costs for the first six years, and a combination of EIA and private forecasts for the later years. This report uses a natural gas forecast of $6.40 per MMBtu, escalated at 2.5 percent, which is equivalent to the levelized MPR natural gas forecast for 2007-2026.11 The CPUC MPR gas forecast is the consensus forecast of California natural gas prices among the CPUC, Utilities, and public interest groups. 10 The 2005 MPR declaration was published in March 2006 by the CPUC. It is available at http://www.cpuc.ca.gov/PUBLISHED/COMMENT_RESOLUTION/54445.htm. 11 Levelized using the MPR weighted average cost of capital of 9.3 percent as the discount rate. The levelized forecast for MPR natural gas from 2007 to 2026 is $7.61/MMBtu, while $6.40/MMBtu escalated at 2.5 percent annually is $7.62/MMBtu levelized. April 21, 2006 6-1

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