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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 The MPR also included other assumptions about plant heat rates, debt/equity splits, and finance costs. Where possible, this report has used the same assumptions as the MPR.12 6.2 Cost of Energy Calculations Black & Veatch developed a cost of energy comparison between each of the proxy parabolic trough CSP plant and comparable fossil fuel technologies. The levelized cost of energy is a present value measure of the lifecycle cost of generating power from a given plant considering the capital cost, operating costs (including fuel), capacity factor, financing cost, and incentives. The levelized cost is a useful calculation because it allows comparison of different generation technologies on an equal basis. For this analysis, the parabolic trough CSP plant was compared with simple cycle and combined cycle combustion turbines because these types of plants provide peaking and intermediate electric services similar to CSP plants. Capital cost and performance assumptions for the CSP technologies were developed in Section 2.0 and performance assumptions for the combined and simple cycle combustion turbines were provided in Table 5-3. Financial assumptions, such as cost of debt and equity, were taken directly from the 2005 MPR ruling and are listed in Table 6-1. Actual plant financing parameters may differ from MPR; however, MPR has been used in this document for consistency. For all generation technologies it was assumed that the plant would be owned by a credit worthy independent power producer (IPP) with a power purchase agreement with a California IOU. The Energy Policy Act of 2005 contains a number of incentives for renewable energy generation13. Specifically, the Act increases the Investment Tax Credit (ITC) to 30 percent through December 31, 2007, for solar facilities14. Solar facilities had a “permanent” ITC of 10 percent before the Act was passed. Because the 30 percent ITC may not be extended, cost of energy calculations have been made assuming both a 30 percent ITC and the older 10 percent ITC.15 12 We diverge only in capacity factor. The MPR uses a 92 percent capacity factor, while we use 40 percent to stay consistent with the intermediate duty cycle of CSP. At a 92 percent capacity factor, our LCOE calculations result in a price of $77 per MWh, equivalent to the MPR. 13 26 USC § 48 (2005). 14 The Act also extended the Production Tax Credit (PTC) to solar facilities, but the PTC for solar expired at the end of 2005. 15 A bill was recently introduced in the Senate (S.2401) that would extend the ITC to 2010. April 21, 2006 6-2

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