Integration of Clean Energy

into Oil Field Operations

National Renewable Energy Laboratory • Emma Elgqvist, Ricardo Castillo, Emily Newes, and Jill Engel-Cox
Conoco Phillips • Luis Zorrilla

Summary of Findings Snapshot

Integrating clean energy into oil and gas • Smaller renewable energy technologies are cost-effective; larger systems
operations could reduce emissions and generating 50% of the site’s load offset significant amounts of carbon
maximize higher-value use of produced dioxide (CO₂) but at an added cost.
hydrocarbons. In this published study, analysts • For grid-connected systems, the low-cost industrial electricity rates
from the Joint Institute for Strategic Energy ($0.03 per kilowatt-hour [kWh]) paid by these facilities reduces the net
Analysis (JISEA) and the National Renewable present value of colocated renewable power installations beyond
Energy Laboratory (NREL) evaluated clean economic viability.
power technologies for an oil field in the
• A calculated cost of emissions reduction ($/tCO₂e) based on renewable
Delaware Basin using NREL’s REopt tool. The
energy generated indicates that a cost of carbon of $7/tCO₂e would
analysts evaluated different configurations
result in a breakeven point for a renewable energy system generating
of distributed energy resources based on the
50% of the site’s load (assuming the system could net meter
technologies available and the load they could
excess generation).
satisfy, available land, and hypothetical carbon
pricing. The analysis is part of a collaborative • We performed a case study to understand the benefits of
program with industry to understand site- embracing microgrids as an enabling platform to increase
specific energy consumption and prices in energy resilience and optimize deployment of
the oil and gas supply chain and determine distributed energy resources (DERs) for
under what conditions clean energy options grid and non-grid-connected systems.
are economically attractive. This work These systems can help overcome
was sponsored by a consortium including operational challenges and progress
ConocoPhillips, Baker Hughes, Extraction Oil & toward sustainability goals
Gas, Kinder Morgan, and the Interstate Natural when paired with renewable
Gas Association of America Foundation. sources of energy. Joint Institute for
Strategic Energy Analysis
Increasing Importance of (Domonoske 2021). In addition, the energy costs and greenhouse gas
rapid decline in the price of clean emissions, as well as to preserve oil
Clean Energy in Oil and
energy technologies over the past and gas resources for their highest
Gas Operations decade (Figure 1) makes them more value uses.
Oil and gas resources are expected attractive than ever before, and the
In 2019, JISEA established a
to comprise a significant portion of coupling of conventional generation
collaborative program to:
our energy demand and economic with renewables could deliver the most
output in the next decade. (U.S. Energy feasible and economically attractive • Support the identification,
Information Administration 2021). solution to reducing emissions. development, and adaptation of
Prudent business practices, which highly reliable, cost-effective clean
One way to meet continued demand
are especially important in times with energy solutions for oil and gas
for oil and gas and the energy intensity
volatile oil prices, require minimizing operations
required for oil field operations—while
product losses and reducing energy also meeting emissions reduction • Perform techno-economic analysis
costs along the supply chain. Global goals and minimizing environmental and site-specific optimization of
pressure to address environmental burdens—is to integrate clean combinations of renewable and
concerns and the advantages of clean energy technologies into oil and gas conventional generation, storage,
energy—reduced impacts on the operations (Ericson, Engel-Cox, and and energy conservation
environment, increased operational Arent 2019). Incorporating clean • Demonstrate the most promising
efficiencies, and conservation of oil and energy technologies and otherwise technologies for validation of
gas resources for the marketplace—are reducing the amount of fossil fuels performance in various field
compelling the oil and gas industry used in petroleum production, environments (while analyzing
to consider implementing clean transportation, and refining processes optimization scenarios), in
technologies into their operations has the potential to decrease both partnership with industry.

Figure 1. Clean energy technology percent cost reductions since 2008

Source: Natural Resources Defense Council 2021. EV is electric vehicle.

2 | Natural Gas – Electric Interface Study

Members of that consortium include Methodology One key input to REopt is the oil field’s
ConocoPhillips, Baker Hughes, electric load (typically as 15-minute
To explore the techno-economics of
Extraction Oil & Gas, Kinder Morgan, or hourly data), which must be met
renewable energy integration into
and the Interstate Natural Gas by a combination of technologies in
oil and gas operations, JISEA/NREL
each time-step. For this analysis, the
Association of America Foundation. analysts used NREL’s techno-economic utility costs along with distributed
As part of this program, and with decision support model called REopt solar PV, wind turbines, and battery
supporting funding from the U.S. (NREL 2021). It was developed to energy storage systems (BESS)
Department of Energy, the group has optimize energy systems for buildings, were considered. The model makes
explored downstream (Krah et al. campuses, communities, microgrids, decisions about the most cost-optimal
Forthcoming), midstream (Elgqvist and more. The tool recommends the combination, size (possibly zero), and
et al. 2021), and upstream (Krah et optimal mix of renewable energy, dispatch of technologies based on site
al. 2020) clean energy, and energy conventional generation, and energy goals, technology costs and incentives,
resiliency goals. Specifically, the storage technologies to meet cost and utility costs that could be avoided
analysis evaluates solar photovoltaics savings, resilience, and energy with distributed energy technologies.
(PV), wind turbines, and energy performance goals. Formulated as a
storage for clean energy integration mixed-integer linear program, REopt Case Study: Collection of
into oil and gas operations. The provides an integrated cost-optimal Oil Field Operation in the
following content describes the energy solution. An overview of inputs Delaware Basin
techno-economic modeling and and outputs are shown in Figure 2. The The United States has a long history
results from the upstream case, technology assumptions used in REopt of oil exploration and production, with
focusing on oil wells. can be found in the appendix. quantities reaching 12.8 million barrels

Figure 2. Overview of inputs and outputs for the REopt modeling platform
Source: National Renewable Energy Laboratory

3
 per day in December 2019 (U.S. Energy
Information Administration 2020).
Currently, the number of productive wells
in the United States is around 969,000.
U.S. wells generally produce from 100 to
3,200 barrels of oil equivalent per day.
Many recently drilled wells use horizontal
drilling, which is the most productive
drilling process (U.S. Energy Information
Administration 2020). The Delaware
Basin is part of the larger Permian
Basin, an area of oil and gas production
Southeast New Mexico and West Texas
(Figure 3), that produces around 40%
of all U.S. oil. It is estimated that the
Delaware Basin could produce a total
of 46.3 billion barrels of oil (Railroad
Commission of Texas 2021).

As a case study to explore energy

options at upstream oil and gas sites,
JISEA/NREL modeled clean energy
options at a ConocoPhillips upstream
production site in the Delaware Basin.
The site has ample land that could
be used for solar PV or other energy
development, so the model was not
constrained by land availability. Figure 4
shows the site’s 15-minute-interval data
for parts of 2019 and 2020. The original
data (left) were rearranged, and missing
Figure 3. Delaware Basin map
Source: U.S. Energy Information Administration 2019

15-Minute Interval Data Available 15-Minute Interval Data for Modeling

90 90

80 80
Consumption (kWh)
Consumption (kWh)

70 70

60 60

50 50

40 40

30 30

20 20

10 10

0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2020 Usage 2019 Usage

Figure 4. 15-minute interval energy consumption data for relevant feeder that supplies electricity to wells
Source: National Renewable Energy Laboratory

4 | Natural Gas – Electric Interface Study

Oil field operations in the Delaware Basin in west Texas. Photo from iStock 1152480694

data were filled in with prior month’s provide the lowest life cycle cost of and with a negative net present value.
consumption data to make a complete electricity Without net metering, a 91-kW PV
year of data for modeling purposes system with a 2-kW (1-hour) battery
3. 50% Renewable Energy: size of
(right). The load fluctuates between 10 would result in a net present value of
distributed energy systems that would
and 80 kW, and it appears to be fairly -$22,468 (and a 11.5% increase in life
generate 50% renewable energy on an
consistent throughout the year (based on cycle electricity costs). In Scenarios 2
annual basis.
available data). and 3, the model could (but did not)
Scenarios 2 and 3 were evaluated select to build wind turbines.
The site is classified under the Primary with and without full net metering of
Service, Greater than 10 kW – Distribution electricity generated above the site’s The cost of a carbon offset can be
Line electricity rate, with energy load and with two methodologies for compared to a carbon tax. The values
charges of $0.03/kWh. This value is low accounting for emissions reduction shown in Scenarios 2B and 3B in Table
compared to commercial and residential (including all renewable electricity 1 are the break-even numbers, or the
rates, which vary from $0.05/kWh to generated by the system, or what cost of carbon that would result in a
over $0.15/ kWh (Roberts 2016). The rate renewable electricity is actually $0 net present value for the renewable
has two demand charges: $1.61/kW based consumed on site). energy systems recommended, based
on the monthly peak, and $3.83 that is on a reduction in the grid purchases.
based on the highest of the monthly According to Greenhouse Gas Protocol
Results: Clean Energy
peak and 80% of the annual peak. The (World Resources Institute and World
Options for Oil Field
rate also has a fixed charge (which was Business Council for Sustainable
not included because onsite generation
Operations Development 2021), only emission
would not offset this charge). Results indicate that smaller renewable reductions from reduced grid purchases
energy technologies (i.e., those count toward emissions reduction
JISEA/NREL evaluated the techno- generating 5% of a site’s load) are cost- though reduction from on-site
economic potential of PV, wind, and optimal (Table 1). An 8-kW PV system generation can be reported as additional
BESS at the Delaware Basin oil field could be cost-effective and would information. For example, if a carbon
operation under the following scenarios: reduce both annual energy ($469) and tax of $32.11/ tCO₂e were enacted, it
1. Base Case Life Cycle Cost of Electricity: demand charges ($65) by reducing would cost the same to install the 91 kW
assumes site continues to purchase all grid purchases. The net present value of PV (with a small battery) as it would
electricity from utility grid over the 25-year analysis period is $479. to pay the carbon tax in the scenario
Larger systems (i.e., those generating without net metering. If the carbon
2. Minimum Life Cycle Cost: size of
50% of the site’s load) offset significant tax increased to over $32.11/tCO₂e, it
distributed energy systems that would
amounts of CO₂ but at an added cost would be more cost-effective to install

5
Table 1. REopt Techno-Economic Results for Installation of Solar and Wind at a ConocoPhillips Oil Field Operation in the Delaware Basin

Scenarios

1. Base Case 2. No Net Metering 3. Full Net Metering

2B. 50% 3B. 50%

Renewable Renewable
2A. Minimum Energy 3A. Minimum Energy
Life Cycle Cost Generation Life Cycle Cost Generation

PV size (kilowatt-DC) — 8 91 8 91

Battery size (kilowatt) — 0 2 0 0

Battery size (kilowatt) — 0 2 0 0

Battery size (hours) — — 1 — —

Wind size (kilowatt) — 0 0 0 0

Total capital cost (dollars) $0 $8,480 $98,560 $8,480 $96,460

Electricity purchases (kilowatt-hour) 338,858 323,522 212,586 323,522 213,334

Percent renewable energy generated

based on generation (%) 0% 5% 50% 5% 50%

Reduction in grid purchases (kilowatt-

hour) 0 15,332 126,268 15,332 125,520

Annualized CO₂e offset based on

reduction in grid purchases (tCO₂e) 0 6 53 6 53

Cost of emissions reduction offset based

on reduction in grid purchases ($/tCO₂e) 0 — $32.11 — $6.82

Renewable energy generated annually

(kilowatt-hour) 0 15,402 169,471 15,402 169,429

Annualized CO₂e offset based on

renewable energy generated (tCO₂e) 0 6 71 6 71

Cost of emissions reduction based on

renewable energy generated ($/tCO₂e) — — $23.92 — $5.05

Year 1 energy costs (dollars) $10,369 $9,900 $6,505 $9,898 $5,185

Year 1 demand costs (dollars) $4,440 $4,375 $4,218 $4,375 $4,316

Year 1 energy savings (dollars) $0 $469 $3,864 $471 $5,184

Year 1 demand savings (dollars) $0 $65 $222 $65 $124

Life cycle cost of electricity (dollars) $195,417 $194,938 $217,884 $194,911 $200,161

Net present value (dollars) $0 $479 -$22,468 $506 -$4,745

6 | Natural Gas – Electric Interface Study

 Scenario 2B: Hourly Dispatch for 50% RE Generation
100

80
Power (kW)

60

40

20

0
2019 (January - December)

Grid Serving Load PV Serving Load Storage Serving Load

PV Exported PV to Storage Load

Figure 5. Hourly dispatch of solar PV and battery storage

Source: National Renewable Energy Laboratory

renewable energy technologies to Microgrid Approach for 3. Natural gas generators that can use
provide carbon reductions. This break- Multiple Wells flare gas which would otherwise
even point decreases to $6.82/tCO₂e be burned: The U.S. Environmental
In addition to performing the REopt
if the site can fully net meter the solar Protection Agency has begun a very
analysis, JISEA/NREL developed a
PV system. The impact of alternatively aggressive enforcement strategy
high-level microgrid approach at
calculating these values is based on total of the New Source Performance
the ConocoPhillips site that could be
on-site renewable generation, where the Standards in § 60.18 and National
considered a road map of potential
break-even point without and with net Emission Standards for Hazardous
solutions on how to integrate and
metering further decreases to $23.92/ Air Pollutants in § 63.11 with the
deploy microgrids into oil field
tCO₂e and $5.05/tCO₂e respectively. intent to increase flaring efficiency
operations. These microgrids could
and reduce venting. Therefore,
If net metering is available (Scenario 3), be deployed at the field scale and
this technology could transform
the economics of the 50% renewable could support multiple well sites.
an operational threat into a value
energy scenario improve significantly Resiliency was the focus of this second
stream opportunity, and it could
because the electricity that is generated assessment, and the objective was to
help avoid significant penalties.
above the load is compensated at increase the probability of surviving
One challenge for this technology
the retail value; the 91-kW PV system electrical outages and maintaining full
is confirming there will be sufficient
would result in a net present value of operations. The technologies that were
feedstock supply.
-$4,745, which is only a 2.5% increase in considered in this second assessment
life cycle costs. The minimum life cycle include: 4. Diesel generators
cost solution (i.e., a smaller system) is 5. Microgrid controllers.
1. Solar PV paired with BESS
not impacted because the resulting
electricity generation rarely, if ever, 2. Various infrastructure upgrades, such Sizing these technologies would
exceeds the site load. Figure 5 shows as additions to the communication depend on many factors, such as
how the solar PV and battery storage network and reclosers that might the projected and desired period
system would be dispatched throughout be needed. A recloser is part of the of continued operation during an
the year. PV generated above site load system that islands the microgrid, or electrical outage and the compensation
could be exported to the utility or in this case connects the microgrid scheme assigned to help make the
curtailed. back to the main grid. business case. The existing system

7
 100 kW PV, (1) 500 kW/500 kWh BESS, (2) 750 kW Dual - Fuel Generators

A B C D E F G H I J

150 150 150 150 150 150 750 501 45 113

kVA kVA kVA kVA kVA kVA kVA kVA kVA kVA

Figure 6. Schematic of existing electric distribution system and one potential resilient solution
Source: National Renewable Energy Laboratory

includes a 21.6-kV feeder, about 10 • Open the point of common coupling, The second possible transition from
substations that could potentially feed separating the installation from the grid-tied state to island state is through
dozens of well sites—depending on utility’s power grid a blackstart sequence. In this case, the
operational and economic factors— installation’s power grid has already gone
• Operate the BESS in grid-forming
through a distribution network down and there is no voltage on the
mode to provide a voltage and
simplified as in Figure 6. One potential 21.6-kV distribution system. The expected
frequency reference for the island;
system that could be considered consists operation of the system at this point
immediately, the microgrid controller
of a central power plant rated at 1.5 MW would be to:
will send a signal to the switchgear
(two 750-kW diesel generators) paired
to enable the transfer of loads into the • Open the point of common coupling,
with a 500-kW solar array and a 500
system. separating the installation from utility’s
kW/500 kWh BESS. This system would
power grid
be managed by a microgrid controller • Regulate the PV to not exceed a
that would (1) enable the interoperability specified threshold of the load and/or • Open the breaker, separating the
of the proposed generation mix in order capability of the BESS system. generator bus from the 21.6-kV bus so
to maximize the resiliency posture as sources could be paralleled if required
If the transition were successful, the
well as (2) optimize the deployment before energizing
oil field would not notice the transition
of the proposed DER. Through either or a loss in power, and most devices • Start the BESS and/or generator in
the existing communication network would continue operation during the grid-forming mode to provide a voltage
or network infrastructure, reclosers or transition. The BESS would cover the load and frequency reference for the island
remotely operated switches would allow requirement, and after the transition, the • Parallel other sources to the generator
the sectionalizing equipment required microgrid controller would start balancing bus
to bring in the microgrid sequentially sources and regulate the state of charge
and under various operating modes to • Close the breakers in a hierarchy
of the BESS. Note that it is acceptable for
enhance the resiliency of the system. sequence to start energizing the most
the PV to go offline to avoid instability in
critical and largest loads first.
The system could enable movement from the system during the transition, as the
focus is providing uninterruptable power The system could move from an islanded
a grid-tied state to an islanded state
to the installation loads until the diesel state to a grid-tied state via two main
via two main methods: uninterruptable
generator comes online. The PV can be methods: closed transition and open
power transition and blackstart. In the
reset and brought into operation after the transition. During a closed transition, the
uninterruptable power transition, the
transition as long as the ratio of the PV to BESS and/or generator detects the grid
microgrid controller and/or the BESS
the diesel generators is significantly small. voltage and frequency from the utility
needs to react to the detection of a loss in
Otherwise, the distribution system would and synchronizes the island’s voltage and
utility power by providing these functions
require load tap changers to increase and frequency within a tight tolerance without
within a few cycles:
stabilize the voltage. interrupting power.

8 | Natural Gas – Electric Interface Study

Oil field operations with wind turbines in the distance. Photo from iStock 506613568

The main objective of the microgrid The intermittent nature of DERs is often challenges but help meet sustainability
upgrades is to improve the resiliency cited as the major reason for limiting benchmarks.
posture and reduce electrical outages. their broader deployment in high-
BESS can help oil fields deal with the
Additionally, the microgrid can provide energy intensity industries such as the
challenges resulting from the large
ancillary services such as an improved oil and gas sector. However, the ongoing
proportion of inductive loads and
power quality, harmonics reduction, and development of new standards is aimed
power electronic equipment (variable
power factor correction. Upon loss of at remedying these constraints. For
frequency drives), which represent
utility power, the BESS could momentarily example, IEEE 1547-2018 allows smart
significant sources of low power factors
carry multiple feeders with dozens of inverters to ride-through abnormal
and harmonics in the distribution system.
well site loads connected. If utility power conditions of DERs. Such functionalities
Electric utilities commonly incur large
were not restored within 15 minutes, the would address most of the concerns
financial penalties if these parameters
diesel generators would start and would about the intermittent nature of DERs.
fall outside their limits. So, a detailed
pick up the entire load. If the load were
study could assess a well site’s needs to
higher than the BESS capacity when Insights for Industry determine the appropriate technology
utility power was lost, fast load shedding Quantifying—and raising awareness of— design and the most cost-effective
of noncritical facilities, or critical facilities the value of resiliency is paramount for technology.
with an uninterruptible power supply or the development, design, and operation
its own source such as diesel generator, of microgrids. Given increasing state In this study, JISEA/NREL explored
would begin. This would reduce the load and federal regulatory scrutiny, oil and the potential for cost-effective clean
and allow the BESS to come online until gas operators could consider these energy implementation at an oil field in
the diesel generators took over. With novel approaches to decrease emissions the Delaware Basin. The results indicate
the potential diversity of DERs, different and energy demand. Microgrids could smaller renewable energy technologies
combinations of DERs could be deployed become a highly effective tool kit that are cost-effective; larger systems
to maximize the value stream. could not just help overcome operational generating 50% of the site’s load offset

9
significant amounts of CO₂ but at a fairly enable a coherent sustainability strategy ———. 2020. “Opportunities for Clean
small added cost. JISEA/NREL calculated to complement and enhance operational Energy in Natural Gas Well Operations.”
the cost of emissions reduction ($/tCO₂e) requirements. Well sites have promising In 2020 IEEE International Systems
Conference (SysCon), 1–7. https://doi.
based on renewable energy generated site-specific resources and conditions to
org/10.1109/SysCon47679.2020.9275853.
and found that this too could improve make this approach a reality.
economics should they be monetized. NREL (National Renewable Energy
In the future, the REopt analysis could Laboratory). 2021. “REopt: Renewable
The oil field operation studied here be expanded to cover more oil wells Energy Integration and Optimization.” 2021.
benefits from low costs of grid electricity and land areas where larger PV plus https://reopt.nrel.gov/.
purchases, making the economics of battery energy storage systems could
Natural Resources Defense Council. 2021.
renewable energy integration challenging. be developed and provide power to the
“Revolution Now.” NRDC. April 2021. https://
Sites in other areas of the country may market. This could allow assessment of an www.nrdc.org/revolution-now.
have higher electricity rates, making alternative business model and provide
renewable energy installation more more value than net metering. Railroad Commission of Texas. 2021.
“Permian Basin.” 2021. https://www.rrc.
profitable. Renewable energy technology
texas.gov/oil-and-gas/major-oil-and-gas-
costs continue to decrease across the References formations/permian-basin/.
country. Although there is variability in Domonoske, Camila. 2021. “Big Oil
renewable energy resources across the Roberts, Billy. 2016. “2013 Electricity
(Probably) Isn’t Going Away Anytime
Price.” Open Energy Information. April 26,
United States, it is likely that the avoided Soon. But It’s Definitely Changing.” NPR.
2016. https://openei.org/wiki/File:2013_
cost of electricity (coupled with current org (blog). June 8, 2021. https://www.
Electricity_Price.jpg.
or existing policy environments) could npr.org/2021/06/08/1002448099/big-
drive prioritization and implementation of oils-transition-3-takeaways-on-how-the- U.S. Energy Information Administration.
industry-is-and-isnt-going-green. 2019. “Delaware Formation Structure
clean energy projects. More specifically,
Map (Delaware Basin).” Maps: Oil and Gas
the adoption of microgrids will provide Elgqvist, Emma, Emily Newes, Jill
Exploration, Resources, and Production.
two significant strategic advantages to Engel-Cox, and Ricardo Castillo. 2021.
October 28, 2019. https://www.eia.gov/
the operations: “Clean Energy Integration in Natural
maps/maps.htm.
Gas Compressor Station Operations.”
• The increased resilience will enable a JISEA Research Highlight. Golden, CO: ———. 2020. “The Distribution of U.S.
higher chance to overcome electrical Joint Institute for Strategic Energy Oil and Natural Gas Wells by Production
outages and operate independently Analysis. https://www.nrel.gov/docs/ Rate.” Washington, DC: U.S. Department of
from the electric utility, when needed. fy21osti/80540.pdf. Energy. https://www.eia.gov/petroleum/
wells/pdf/full_report.pdf.
• Microgrids are more likely to create Ericson, Sean, Jill Engel-Cox, and Doug
Arent. 2019. “Approaches for Integrating World Resources Institute, and World
higher value streams from DERs
Renewable Energy Technologies in Business Council for Sustainable
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and the deployment of ancillary NREL/TP-6A50-72842. Colorado, USA: Protocol.” 2021. https://ghgprotocol.org/.
services. The Joint Institute for Strategic Energy
---. 2021. "Annual Energy Outlook 2021."
Analysis. https://www.nrel.gov/docs/
Future adoption of microgrids could Washington, DC: U.S. Department of
fy19osti/72842.pdf.
realize the intersection of operations Energy. https://www.eia.gov/outlooks/
and sustainability and leverage their Krah, K., S. Ericson, X. Li, W. Olawale, aeo/.
shared goals. Taking full advantage of the R. Castillo, E. Newes, and J. Engel-Cox.
approaches laid out in this study could Forthcoming. “Distributed Clean Energy
Opportunities for Refinery Operations.”

This work was authored by the Joint Institute for Strategic Energy Analysis (JISEA), operated by Alliance for Sustainable Energy,
LLC, for the U.S. Department of Energy (DOE) under Contract No. DEAC36-08GO28308. Funding provided by Kinder Morgan,
the Interstate Natural Gas Association of America Foundation, Extraction Oil & Gas, Baker Hughes, and ConocoPhillips. The views
expressed herein do not necessarily represent the views of the DOE, the U.S. Government, or sponsors.

10 | Natural Gas – Electric Interface Study

Appendix
Economic analysis assumptions
Input Assumption
Objective Minimize life cycle cost
Ownership model Direct ownership
Build-year 2020
Analysis period 25 years
Site’s discount rate (nominal) 8.3% per NREL 2020 Annual Technology Baseline1
Oncor Primary Service greater than 10-kW distribution line (per Conoco
Electricity cost
Philips)
2.49% per the U.S. Energy Information Administration (2020–2045 for
Electricity cost escalation rate (nominal)
west south-central region—industrial)2
Inflation rate 2.5% per NREL 2020 Annual Technology Baseline
1
“2020 Annual Technology Baseline,” NREL, https://atb.nrel.gov/
2
“Annual Energy Outlook 2021,” U.S. Energy Information Administration, https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-
AEO2020&region=1-7&cases=ref2020&start=2018&end=2050&f=A&linechart=ref2020-d112119a.3-3-AEO2020.1-7&map=ref2020-
d112119a.4-3-AEO2020.1-7&sourcekey=0 ; https://www.eia.gov/consumption/commercial/maps.php

Analysis assumptions for solar PV

Input Assumption
System type Ground-mounted, single-axis tracking
Technology resource TMY2 weather file from National Solar Resource Database1
Installed capacity density 6 acres/MW
Tilt Tilt = 0
Azimuth 180⁰ (south-facing)
DC-to-AC ratio 1.2
$1.06/W-dc (1-axis tracking utility scale) per NREL 2020 Annual
Capital costs
Technology Baseline2
Operation and maintenance costs $13/kW/yr per NREL 2020 Annual Technology Baseline
26% federal investment tax credit3; 5-yr MACRS (Modified Accelerated
Incentives
Cost Recovery System)4
1
“NSRDB Archives,” NREL, https://rredc.nrel.gov/solar/old_data/nsrdb/ TMY2 is Typical Meteorological Year 2.
2
“2020 Annual Technology Baseline,” NREL, https://atb.nrel.gov/
3
“Business Energy Tax Investment Tax Credit,” DSIRE, http://programs.dsireusa.org/system/program/detail/658
4
“Modified Accelerated Cost-Recovery System,” DSIRE, http://programs.dsireusa.org/system/program/detail/676

Analysis assumptions for battery storage

Input Assumption1
Battery type Lithium-ion
DC-DC round-trip efficiency 89.9%
Minimum state of charge 20%
Capital costs $420/kWh + $840/kW

Replacement costs (year 10) $200/kWh + $410/kW

26% federal investment tax credit; 5-yr MACRS (assumes grid cannot
Incentives
charge BESS)
1
“REopt Lite User Manual,” NREL, https://reopt.nrel.gov/tool/REopt%20Lite%20Web%20Tool%20User%20Manual.pdf

11
 Analysis assumptions for wind

Input Assumption
Technology resource AWS Truepower database1
Installed capacity density 30 acres/MW
Capital costs Large (>1,000 kW): $3.450/WAC 2018 distributed wind market report2
Operation and maintenance costs $40/kW/yr per NREL distributed wind cost analysis³

Incentives 5-yr MACRS; federal production tax credit expired in 20194,5,6

¹ “Renewables,” UL, https://aws-dewi.ul.com/

² “2018 Distributed Wind Market Report,” U.S. Department of Energy, https://www.energy.gov/sites/prod/files/2019/08/f65/2018%20
Distributed%20Wind%20Market%20Report.pdf
³ “Assessing the Future of Distributed Wind: Opportunities for Behind-the-Meter Projects,” NREL, https://www.nrel.gov/docs/fy17osti/67337.pdf
⁴ “Business Energy Investment Tax Credit,” DSIRE, http://programs.dsireusa.org/system/program/detail/658
⁵ “Modified Accelerated Cost-Recovery System,” DSIRE, http://programs.dsireusa.org/system/program/detail/676
⁶ “Renewable Electricity Production Tax Credit,” DSIRE, http://programs.dsireusa.org/system/program/detail/734

Analysis assumptions for emissions

Input Assumption
Region Electric Reliability Council of Texas¹
Total output emissions rate 872.4 lb. CO₂e/MWh; 5.1% grid loss = 0.42 tCO₂e/MWh²
¹ “Power Profiler 2019 Data,” EPA, https://www.epa.gov/egrid/power-profiler#/ERCT
² “eGRID Summary Tables 2019,” EPA, https://www.epa.gov/sites/production/files/2021-02/documents/egrid2019_summary_tables.pdf
Annual cost (or savings) = Net present value ($) / present worth factor
Annual tCO₂e offset = Reduction in grid purchases (MWh) * emissions factor (tCO₂e/MWh)
Cost of emissions reduction = annual cost ($) /annual tCO₂e offset (tCO₂e)

JISEA is operated by the Alliance for Sustainable Energy,

LLC, on behalf of the U.S. Department of Energy’s National
Renewable Energy Laboratory, the University of Colorado-
Boulder, the Colorado School of Mines, Colorado State University,
Massachusetts Institute of Technology, and Stanford University.

NREL/TP-6A50-81107 • January 2022

Joint Institute for
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