Electricity Model
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World Energy Projection System (WEPS): Electricity Model Independent Statistics & Analysis U.S. Department of Energy www.eia.gov Washington, DC 20585 Last Updated 2020 This report was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA’s data, analyses, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in this report therefore should not be construed as representing those of the U.S. Department of Energy or other federal agencies. U.S. Energy Information Administration | World Energy Projection System: Electricity Model i Table of Contents 1. Introduction .............................................................................................................................................. 2 2. Objective Function .................................................................................................................................... 2 3. Key Constraints ......................................................................................................................................... 3 3.1 Summary of Key Constraints .............................................................................................................. 3 3.2 Discussion of Key Constraints ............................................................................................................ 3 3.3 Optional Constraints .......................................................................................................................... 4 3.4 Renewables Penetration Limits ......................................................................................................... 4 4. Interaction with Other WEPS Models ....................................................................................................... 5 5. Energy System Structure ........................................................................................................................... 6 6. Shadow Prices and Cost-of-Service Regimes ............................................................................................ 7 7. Model Data Sources .................................................................................................................................. 8 7.1 Existing generation stock ................................................................................................................... 8 7.2 Operating and maintenance costs ..................................................................................................... 8 7.3 Wind and solar potential ................................................................................................................... 8 7.4 Hydro potential and generation profile ............................................................................................. 9 7.5 Inter-regional transmission capacity ............................................................................................... 10 7.6 Historical generation and consumption .......................................................................................... 10 Table of Figures Figure 1. Energy system structure and WEPS linkages for each model region ............................................ 7 U.S. Energy Information Administration | World Energy Projection System: Electricity Model 1 1. Introduction The International Electricity Market Model (IEMM) projects the following key quantities: • Electricity generating capacity, including additions and retirements • Electricity generation • Electricity added and removed from storage • Electricity sold and purchased • Electricity delivered to consumers • Fuel consumed in electricity generation • Carbon dioxide emissions • Electricity prices The model projects these quantities for each of the WEPS regions by year and time-slice. A time-slice is a time period, specified by EIA analysts, as a period of the day during a particular month or season (e.g., January from 7:00 p.m. to 9:00 p.m.). In some cases, some of the quantities listed above are also broken out by other characteristics such as the type of technology used to generate the electricity. The model projects these quantities by minimizing an objective function subject to several constraints. The objective function represents the total cost to electricity suppliers of meeting all of the electricity demands, by year and time-slice, as projected by the WEPS demand models. Examples of constraints include limits on fuel-specific electricity generating equipment, policy constraints (e.g., renewable portfolio standards), and emissions caps. The IEMM uses linear programming to perform the constrained optimization. 2. Objective Function To minimize the total system cost of meeting electricity demands projected by WEPS demand models, the IEMM breaks the cost into several components: • Capital costs for investment in new electricity generating capacity–these costs are annualized over the generating unit’s economic life, at either the system discount rate or a technology- specific discount rate estimated by EIA analysts, • Fixed and variable annual Operation and Maintenance (O&M) costs of electricity generating equipment, • Costs for fuel consumed, including purchases at regional fuel prices and any delivery costs identified by EIA analysts • Projected taxes and subsidies minus the salvage value of generators with remaining economic life In some cases, the IEMM includes additional costs in the analysis. Other possible costs include: • Decommissioning costs (e.g., capital expenditures and/or annual operation and maintenance costs) for equipment that incurs costs for dismantling at the end of its useful life, • Damage costs from pollutant emissions (e.g., from acid rain or health impacts), and • Welfare loss/gain resulting from changes in quantity of electricity demanded. U.S. Energy Information Administration | World Energy Projection System: Electricity Model 2 The additional costs are included when we configure the IEMM to allow the quantity of electricity demanded in each region to be affected by price changes rather than fixed at the value received from the main WEPS system. In this case, the minimization of system costs, including welfare gains/losses, is equivalent to maximizing total consumer plus producer surplus.1 3. Key Constraints 3.1 Summary of Key Constraints The cost minimization is subject to constraints that impose physical, operational, and policy restrictions on the electricity supply costs. These constraints account for: • Retrofits and retirements of electricity generating equipment, based on equipment age • Fuel-specific equipment efficiencies and fuel shares for fuel-flexible generating units • Equipment availability • Reserve capacity requirements, which require suppliers to maintain sufficient generating capacity to exceed peak demand by a specified amount • Commodity balance and demand satisfaction • Projected policy constraints, including renewable portfolio requirements, emissions limits, and minimum and maximum addition and operation of generating units by type 3.2 Discussion of Key Constraints This section provides more information on the first five constraints listed above. • Equipment retrofits and retirements. When computing the available capacity for a certain time period, the model accounts for the capacity resulting from all investments up to that period. Some of these capacity investments may have been made before the initial period but the equipment is still in operating condition and other capacity investments may have been projected at or after the initial period, up to and including the period in question. Investments in a particular technology increase its projected installed capacity for the duration of the technical life of the technology. When the technology is retired, the projected capacity for this technology decreases. • Equipment efficiencies and fuel shares. These constraints specify that the amount of electricity produced (output) is in fixed proportion to the sum of the fuels used in electricity generation (inputs). For example, we may have a fuel-flexible power plant that can burn different combinations of fuels, but the total amount of electricity generated must be proportional to the sum of the quantities of fuel used. • Use of available capacity. For each time period, the model may project the use of some or all of the installed electricity generating capacity, according to the technology-specific availability factor, which defines a maximum capacity usage. • Reserve capacity requirements. This constraint requires that the total capacity of all processes producing electricity in each year, region, and time-slice must exceed the average demand in the time-slice where peak demand occurs (e.g., a daytime hour in summer), by a certain percentage. 1 See Loulou, R., Remne, U., Kanudia, A., Lehtila, A., Goldstein, G., 2005. Documentation for the TIMES Model Part I, Energy Technology Systems Analysis Programme, https://www.iea-etsap.org/docs/Documentation_for_the_TIMES_Model-Part-I_July- 2016.pdf, Section 3.2.3.2, for an explanation of the equivalence. U.S. Energy Information Administration | World Energy Projection System: Electricity Model 3 • Commodity balance and demand satisfaction. In each year and time-slice, the production of electricity within each region, plus any imports from other regions, must balance the amount of electricity consumed in the region and exported to other regions.