Draft FifthPacific

NorthwestElectric Power

and Conservation

Plan

The plan in summary

• Aggressive development of conservation• Confirm and develop demand response resource• Moderate near-term commercial scale development

of wind to confirm costs, availability• Be prepared to begin construction of

– Coal-fired generation by 2010;

– Significant wind shortly thereafter;

– Gas-fired generation late in planning period

• Address key policy issues– Adequacy standards Transmission BPA future role

Goal of this plan…• Help assure an adequate, efficient,

economical and reliable power system

• By identifying a robust, flexible plan for managing power system costs and risks in the face of future uncertainty

Where are we now, surplus or deficit?

• Currently a regional surplus BUT – Most surplus owned by Independent Power Producers

(IPPs), not regional utilities

– Many NW utilities energy short

IPP generation

Available to region but at market price, subject to market risk

-2500-2000-1500-1000-500

0500

1000150020002500

Energ

y (aM

W)

Med

Med-Low

Med-High

Su r

plu s

/Def

icit

(aM

W)

LoadForecast

Developing the plan• Identify and characterize Resources• Identify and quantify key Uncertainties

* Loads * Hydro conditions * Fuel prices *Penalties on CO2 emissions * Forced outages * Market price of

electricity

Evaluate cost of operating and expanding power system for 1000+ Plans over 750 Futures

Plans – amounts and types of resources and when to be prepared to start constructionFutures – scenarios that combine the key uncertainties over the 20 year planning period

Seek out plans that minimize average costs for given level of Risk (expensive outcomes)

The “Supply Curve”Resource Supply Curve 2025

0.00

2.00

4.00

6.00

8.00

10.00

12.00

0 2000 4000 6000 8000 10000 12000Average Megawatts

Cen

ts/k

Wh

(L

evel

ized

200

0$)

Coal ConservationGasRenewables

Generic coal, gas and wind units are shown at typical project sizes - more units could be built at comparable cost.

Conservation

Regional Conservation Savings

0

500

1,000

1,500

2,000

2,500

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Year

Ann

ual C

umul

ativ

e To

tals

(aM

W)

BPA and Utility Programs Alliance Programs State Codes Federal Standards

2500 aMW Over last 22 years

Achievable Conservation in 2025 by Sector and Levelized Cost

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

<1.0 <2.0 <3.0 <4.0 <5.0 <6.0 <7.0 <8.0 <9.0 <10.0 >10.0

Levelized Cost (Cents per kWh $2000)

Avera

ge M

eg

aw

att

s in

2025

Industrial

Irrigation

Commercial

Residential

Looking ahead – Over 2500 aMW < .05/kWh;Avg cost $.024/kWh

Demand Response• Demand response-- voluntary, temporary

reductions or shifts in load– Response to price volatility, reliability issues

• Not a part of past plans• But 2000-2001 proved its importance• With changes in economy, can it be developed in

substantial quantity at reasonable costs?

Key uncertainties• Hydro –

– Annual generation can vary +/- 4000 avg MW about mean – system must accommodate this variation

• Loads – – Long term trends and shorter term variations, e.g.

economic and weather cycles

• Fuel prices, particularly natural gas– Long term trends and shorter-term volatility;

e.g.“boom-bust” cycles and weather-driven volatility

Key Uncertainties (cont.)• Climate change mitigation policy

– Growing agreement that there will be some kind of control on CO2 emissions, but when, how much very uncertain

• Market price of electricity– It is West Coast market – not determined solely by NW

actions – Market can be volatile– Risk of having too many resources when market prices

are low; having too few resources when market is high

The Portfolio Model• Evaluates average

cost and risk of operating and expanding power system for alternative Plans over 750 Futures

• Does this for 1000+ plans

• Seeks out plans that minimize average cost for a given level of risk

Li

kelih

ood

(Pro

babi

lity) Avg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Like

lihoo

d (P

roba

bilit

y) Avg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Like

lihoo

d (P

roba

bilit

y) Avg CostAvg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 3250010000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Cost of System Operation and Expansion Li

kelih

ood

(Pro

babi

lity) Avg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Like

lihoo

d (P

roba

bilit

y) Avg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Like

lihoo

d (P

roba

bilit

y) Avg CostAvg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 3250010000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold

Cost of System Operation and Expansion

Feasibility Space

25000

25500

26000

26500

27000

27500

28000

16000 16500 17000 17500 18000

Net Present Value System Cost -- Millions 2004$

Ris

k (T

ailV

ar90

) --

Mil

lio

ns

2004

$

Efficient Frontier

Individual Plans

25400

25600

25800

26000

26200

26400

26600

26800

27000

16000 16200 16400 16600 16800 17000

Expected Cost -- Millions 2004$

Ris

k (T

ailV

ar90

) Mill

ion

s 20

04$

A -- Least Cost

B

C

D -- Least Risk

Efficient Frontier

D

01000200030004000500060007000

1 8 15 22 29 36 43 50 57 64 71 78Quarters

aMW

01000200030004000500060007000

DR

Conservation

Avg Loads

A

0

1000

2000

3000

4000

5000

6000

7000

1 8 15 22 29 36 43 50 57 64 71 78

Quarters

aMW

0

1000

2000

3000

4000

5000

6000

7000

DR

Wind

Conservation

Avg Inc Load

B

0

1000

2000

3000

4000

5000

6000

7000

1 8 15 22 29 36 43 50 57 64 71 78

Quarters

aMW

0

1000

2000

3000

4000

5000

6000

7000

Wind

Coal

Conservation

Avg Inc Load

C

ChoosingA Plan

Base Plan -- Representative Buildout

0

1000

2000

3000

4000

5000

6000

7000

1 8

15

22

29

36

43

50

57

64

71

78

Quarters

aM

W

0

1000

2000

3000

4000

5000

6000

7000

SCCT

CCCT

Wind

Coal

Conservation

Avg Inc Load

D

Common characteristics of the least cost plans• All include “aggressive” conservation

– 700 aMW over next 5 years; 2500 aMW over 20 years

• All include demand response– Up to 2000 MW by 2016 – dispatches when prices >

$150/MW-hr

• None require start of construction of generating resources before 2010– From regional standpoint, reliance on market and

conservation thru end of decade appears less costly than developing additional generation

• Moving down the efficient frontier (lowering risk)– Increasing costs of being prepared to develop additional

resources and developing if necessary – insurance premium

The choice of a plan• Cost and risk measures necessary but not

sufficient to choose a plan• Other factors are considered, e.g.,

– Non power system costs and non-monetary effects associated with high cost outcomes not captured in cost/risk measures

– Retail rates and rate stability– Level of dependence on imports/Power supply adequacy

• Council’s recommendation – the lowest risk, least cost-plan

Recommended plan

ES-10

Base Plan -- Most Likely Development

01000200030004000500060007000

Sep

-03

Sep

-05

Sep

-07

Sep

-09

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

Ye a rs

aMW

01000200030004000500060007000

SCCT

CCCT

W ind

Coal

Conservation

Avg New Load

Resource Plan – Most Likely Development

Development schedule will differ for different futures (www.nwcouncil.org/dropbox/Olivia and Portfolio Model/L24X-376-P1.zip)

700 aMW conservation over 5-years? – a challenge but doable• We’ve done that much at times in past

– Less than average annual achievement from all sources 1991-02– Utility system has spent more in the past– Greater experience and improved acquisition tools – codes and standards

processes, Alliance, – Many major utilities have conservation targets at or near this level

• Mostly taps new sources of improved efficiency– Nearly two-thirds is new measures or new applications– 40% is lost-opportunities that are not available yet– Getting it all means making PNW 10% more efficient over 20 years

• There is a rate impact but– About 2/3 of cost of meeting target is already in current rates– Additional cost ~$50 - $75 million/yr = less than 1% of regional utility

revenue requirements

And, doing less conservation is more costly and more riskyCost and Risk Consequences of Reduced

Conservation

250002550026000265002700027500280002850029000

16500 17000 17500 18000 18500 19000 19500

Expected Cost $Millions (2004$)

Ris

k $M

illio

ns

(200

4$)

Base – 700 aMW 5-yrs, 2540 20-yrs

Reduced – 500 aMW 5-yrs, 2480 20-yrs

Minimium – 250 aMW 5-yrs, 1450 20-yrs

Decreasin

g Conse

rvatio

n

Increasin

g cost

and risk

The Action Plan – what needs to happen over next 5 years

• Develop resources now that can reduce cost and risk to the region– 700 average megawatts of conservation,

2005 – 2009– 500 megawatts of demand response,

2005 – 2009– Secure cost-effective lost opportunity

cogeneration and renewable energy projects

Alternative Conservation ScenariosLeast Risk, Least Cost Most Likely Buildout

01000200030004000500060007000

Sep

-03

Sep

-05

Sep

-07

Sep

-09

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21

aMW

01000200030004000500060007000 SCCT

CCCT

Wind

Coal

Conservation

Inc Load

Moderate ConservationMost Likely Buildout

010002000300040005000

60007000

Sep

-03

Sep

-05

Sep

-07

Sep

-09

Sep

-11

Sep

-13

Sep

-15

Sep

-17

Sep

-19

Sep

-21E

ner

gy

Cap

abili

ty -

aM

W

010002000300040005000

60007000

CCCT

SCCT

Coal

Wind

Conservation

Inc Load

Constrained ConservationMost Likely Buildout

0

1000

2000

3000

4000

5000

6000

7000

Sep

-03

Sep

-05

Sep

-07

Sep

-09

Sep

-11

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Sep

-15

Sep

-17

Sep

-19

Sep

-21

En

erg

y C

apab

ilit

y -a

MW

0

1000

2000

3000

4000

5000

6000

7000

CCCT

SCCT

Coal

Wind

Conservation

Inc Load

Total Residential Sector Cost-Effective & Realistically Achievable

0

200

400

600

800

1,000

1,200

1,400

Ave

rage

Meg

awat

ts

Residential Appliances -155 aMW

Residential SpaceConditioning - 290 aMW

Residential Water Heating- 300 aMW

Residential Lighting - 530aMW

Residential Compact Fluorescent Lamps

• 30 sockets/home potential• 18 sockets/home achievable• 60 Watts to 13 Watts

average reduction• Target ~11 million per year

2005-2009 for 160 aMW• Levelized cost 1.7

cents/kWh• Up to 20% of near-term

targets

Residential Heat Pump Water Heaters

• Lots of electric water heaters in place

• 200 MWa by 2025 @4.3 cents per kWh levelized

• 1 of 4 DHW replacements• Availability, cost &

reliability issues• Possible regional program

for economy of scale

Total Commercial Sector Realistically Achievable Potential = 1105 aMW

(Medium Forecast – 2025)

0

200

400

600

800

1,000

1,200

Avera

ge M

eg

aw

att

s Envelope

Infrastructure

Equipment

HVAC

Lighting

Power Supplies in Equipment

• US stock 2.5 billion units

• Use 6% of US electricity

• 15-50% savings

• 155 MWa PNW in 2025

• TV• Cordless phone• Computers• Visa machine• Answering machines• Chargers

Packaged Refrigeration Appliances

• Reach-in Refrigerators & Freezers

• Ice Makers• Beverage Merchandisers• Walk-ins• Vending Machines• Water Coolers• 70 MWa PNW savings

• Process optimization

• Sensors & controls

• Remote monitoring

• Training

Municipal Sewage Treatment                                 • 832 PNW facilities

• 2000 MGD total treated flow

• 340 MWa total electricity use

• 30% to 70% documented savings in small & mid-size plants

• Many non-energy benefits

• 60 MWa savings potential

Commercial Sector Realistically Achievable Potential for Buildings = 685 aMW

(Medium Forecast - 2025)

Lighting50%

335 aMW

Refrigeration5%

35 aMWEnvelope3%

20 aMW

Equipment2%

15 aMWHVAC40%

265 aMW

Commercial Lighting

• About 20 separate lighting measures• Significant improvement in fluorescent lamp & ballast

technology• Improvements in metal halide lighting• Improvements in incandescent spot lighting• More efficient lighting designs & fixtures • Daylighting in warehouses, schools, some retail• Needs training, product availability

Industrial Sector Conservation Potential

• Estimate of 5% of 2025 forecast loads

• 350 aMW at 1.8 cents per kWh– Process controls– Drive systems– Lighting– Refrigeration

• Significant uncertainty around estimate– Changes in region’s industrial mix

Key windpower assumptions - I• Capital cost: Capital costs (overnight, yr 2000) range

from $930/kW (large project) to $1120/kW (small project). $1010/kW on average. E.g., all-in of $1070/kW (2004$) for IPP-financed project in 2004. Moderately certain.

• Technology Improvement: 10% cost reduction with each doubling of forecast global capacity (2%/yr average cost reduction 2005–24). Uncertain, but consistent w/last 10–15 yrs.

Key windpower assumptions - II• Shaping: $4/MWh for first 2500 MW of new capacity,

$8/MWh thereafter. Based on PacifiCorp & Bonneville work. Increasing shaping load on existing system may be offset by geographic diversity. Highly uncertain.

• Developable new capacity: West of Continental Divide: 2500 MW high quality (30% CF); 2500 MW moderate quality (28% CF). Central MT: Very large high quality resource (36% CF), transmission-limited to local development. Professional judgement of industry reps; Uncertain.

Key windpower assumptions -III

• PTC: $8.95/MWh mean levelized in 2005, declining to $1.50/MWh in 2025. Very uncertain.

• Green tags: $6/MWh mean levelized in 2004, declining to $1.50/MWh in 2025. Very uncertain, probably high.

• Other:– Fixed O&M - $20/kW/yr– Variable O&M - $1.00/MWh (land rent)– Transmission - $15/kW/yr + 1.9% loss assessment

Opportunities for public comment• Public Hearings:

– Tuesday, Oct. 12, Missoula

– Tuesday, Oct. 26, Portland.

– Wednesday, Oct. 27, Eugene

– Thursday, Oct. 28, Tri Cities

– Monday, Nov. 1, Twin Falls

– Monday, Nov. 8, Boise

– Wednesday, Nov. 10, Seattle

– Tuesday, Nov. 16, CdA Id

– Wed, Nov 17, Spokane

• Comments close Nov 19

• Send comments toMark WalkerDirector of Public AffairsNorthwest Power & Conservation Council851 SW 6th Avenue, Suite 1100Portland, Oregon  97204-1348fax 503-820-2370or email comments@nwcouncil.org

http://www.nwcouncil.org/energy/powerplan/draftplan/Default.htm