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Improving estimates of transmission capital costs for utility-scale wind and solar projects to inform renewable energy policy

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Will Gorman's picture
Graduate Student Researcher Lawrence Berkeley National Lab

Will Gorman is a Graduate Student Researcher in the Electricity Markets and Policy Department at Lawrence Berkeley National Laboratory. His research focuses on the economics of distributed energy...

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  • Apr 20, 2020
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New National Lab Study Quantifies the Cost of Transmission for Renewable Energy

 

We are pleased to announce a new study conducted by Berkeley Lab entitled Improving estimates of transmission capital costs for utility-scale wind and solar projects to inform renewable energy policy, which has been accepted for publication in the journal Energy Policy. The study seeks better insight on the potential costs of large-scale transmission investments associated with the development of utility-scale wind and solar by using a set of complementary analytical approaches.

Based on this analysis, several key findings emerge:     

         

Estimating the cost of transmission is challenging.

Transmission investments often create system-wide impacts, which are idiosyncratic and dependent on geographical context. Thus, costs for system-level assets can be difficult to attribute to any individual generation resource. Transmission often provides multiple values, such as reliability and congestion relief, in addition to connecting new generators. There is often a tradeoff between maximizing wind and solar generation while minimizing the distance to load centers, thus balancing between the cost of energy and the cost of transmission is essential. The bottom line: any generalized estimate of transmission costs is difficult to apply to individual investment decisions. 

 

Using many different sources of data provides better cost insight.

To show the range of cost estimates, the study combines four complementary approaches, using (1) generator interconnection applications, (2) grid expansion studies, (3) individual transmission projects, and (4) aggregate United States transmission expenditures. Each approach has advantages and drawbacks but taken together can put bounds around average transmission costs, producing a cost range with a relatively high level of confidence.

 

We found that the average levelized transmission capital cost for renewables ranges from $1 to $10/MWh.

This study’s levelized capital cost estimates for renewable-related transmission are generally lower than prior estimates. At the same time, the study’s unit costs ($/kW) are generally in line with prior estimates, highlighting the sensitivity of the levelized results to assumptions about project lifetime, discount rate, and capacity factor. A final, but important caveat to these estimates is that they do not include transmission O&M costs. Because of the potential large share of costs due to O&M, future work should consider adding transmission O&M cost estimates to the capital cost estimates.

We appreciate the funding support of the U.S. Department of Energy for making this work possible.

Discussions
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Matt Chester's picture
Matt Chester on Apr 20, 2020

This study’s levelized capital cost estimates for renewable-related transmission are generally lower than prior estimates. At the same time, the study’s unit costs ($/kW) are generally in line with prior estimates, highlighting the sensitivity of the levelized results to assumptions about project lifetime, discount rate, and capacity factor.

This is really interesting and obviously important to transmission planning. Do you think at all the impact will be to not only refine and improve these cost estimates, but perhaps to throw doubt into the real applicability of the estimates that come up? It seems like the study shows just how hard it is to estimate these costs and that intense study still leaves room for error along the way

Will Gorman's picture
Will Gorman on Apr 20, 2020

I think that is in part true, that detailed studies are needed to to estimate these costs.  However, we generated a pretty robust range of values here and were surprised to find that that range isn't too expensive. 

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