northwest power and conservation council will co2 change what we do? tom eckman manager,...

Northwest Power and ConservationCouncil

Will CO2 ChangeWill CO2 ChangeWhat We Do?What We Do?

Tom EckmanTom EckmanManager, Conservation ResourcesManager, Conservation Resources

Northwest Power and Conservation CouncilNorthwest Power and Conservation Council

Presented May 2, 2007Presented May 2, 2007Utility Energy ForumUtility Energy Forum


Assertion: Carbon Control Is In Assertion: Carbon Control Is In Our FutureOur Future

Problem:Problem:

– We don’t know whenWe don’t know when

– We don’t know “how much”We don’t know “how much”

So:So:

– How should we position energy efficiency How should we position energy efficiency

programs to address a “carbon controlled” future?programs to address a “carbon controlled” future?


Let’s Start With The AnswerLet’s Start With The Answer

Do It Sooner! Do It Sooner!

Do More!Do More!

How Much Sooner?

How Much More?


PNW Portfolio Planning – PNW Portfolio Planning – Scenario Analysis on SteroidsScenario Analysis on Steroids

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Annual Load Growth

Pro

bab

ilit

y (

%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 1% 2% 3% 4% 5%

Real Natural Gas Escalation Rate% )

Pro

bab

ilit

y (

%)

0%

5%

10%

15%

20%

25%

30%

3.27% 3.80% 3.85% 3.93% 2.50%

Nominal Annual Electricity Price Escalation Rate

Pro

bab

ilit

y (

%)

0

20

40

60

80

100

120

98

467

705

842

1,06

9

1,19

1

1,28

3

1,33

5

1,35

3

1,37

3

1,65

0

Resource Potential

Levelize

d C

ost

0%2%4%6%8%

10%12%14%16%18%20%

Carbon Tax Implementation Date

Pro

bab

ilty

(%

)

0

5000

10000

15000

20000

25000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975

Hydrosytem Year

Cap

acit

y (

MW

)

0%2%4%6%8%

10%12%14%16%18%20%

Pro

bab

ilit

y

$0 $6 $12 $18 $24 $30 $36

Carbon Tax

Portfolio Portfolio Analysis Analysis ModelModel


Nu

mb

er

of

Ob

serv

ati

ons

Cost for Future 2

Cost for Future 1

Analysis Test 1,000s of “Resource Plans” Analysis Test 1,000s of “Resource Plans”

Against 750 Difference “Futures”Against 750 Difference “Futures”

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Distribution of Cost for a PlanDistribution of Cost for a Plan

Avg Cost


Risk and Expected Cost Risk and Expected Cost Associated With A PlanAssociated With A Plan

Like

lihood

(Pro

bab

ility

)

Avg Cost

10000 12500 15000 17500 20000 22500 25000 27500 30000 32500

Power Cost (NPV 2004 $M)->

Risk = average ofcosts> 90% threshold


Plans Along the Efficient Frontier Permit Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against RiskTrade-Offs of Costs Against Risk

$35,500

$36,000

$36,500

$37,000

$37,500

$23,600 $23,800 $24,000 $24,200 $24,400 $24,600

NPV System Cost (Millions)

NPV

Sys

tem

Ris

k (M

illio

ns)

Least Risk

Least Cost


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

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

CBase 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

EfficientFrontier

Background

55thth Plan Relies on Conservation and Plan Relies on Conservation and

Renewable Resources to Meet Load GrowthRenewable Resources to Meet Load Growth**

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2004 2007 2010 2013 2016 2019 2022

Annual

Energ

y O

utp

ut

(aM

W)*

Coal (ICG)

CCGTurbine

SCGTurbine

DR

Wind

Conservation

**Actual future conditions (gas prices, CO2 control, conservation accomplishments) will Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedule and amountschange resource development schedule and amounts


Should We Do It Sooner? Should We Do It Sooner?

Would Higher Carbon Control Cost Would Higher Carbon Control Cost Assumptions Significantly Increase the Assumptions Significantly Increase the PacePace

of Cost-Effective PNW Electricity of Cost-Effective PNW Electricity Conservation PotentialConservation Potential

(and reduced carbon emissions)?(and reduced carbon emissions)?


Timing Matters –Timing Matters –Three Conservation Deployment Three Conservation Deployment

Schedules TestedSchedules Tested

0

500

1000

1500

2000

2500

3000

2005 2010 2015 2020Year

Cum

ualt

ive S

avin

gs

(MW

a)

Option 3 - Status QuoOption 2 - SustainedOption 1 - Accelerated


The Plan Calls for Accelerating The Plan Calls for Accelerating Conservation Development Because it Conservation Development Because it

Reduces Cost & RiskReduces Cost & Risk

$20

$22

$24

$26

$28

$30

$32

$34

$36

$38

$40

Option 1 - Accelerated Option 2 - Sustained Option 3 - Status Quo

NPV

(bill

ion 2

004$)

NPV System Cost NPV System Risk


0

2

4

6

8

10

12

0 2000 4000 6000 8000 10000 12000Average Megawatts

Ce

nts

/kW

h (

Le

ve

lize

d 2

00

4$

)

Coal ConservationGasRenewables

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

cost.

Uncertainties Impact Supply CurvesUncertainties Impact Supply Curves


The Plan Calls for Accelerating The Plan Calls for Accelerating Conservation Development Because Conservation Development Because Reduces Carbon Dioxide EmissionsReduces Carbon Dioxide Emissions

0

20

40

60

80

100

120

140

Option 1 -Accelerated

Option 2 - Sustained Option 3 - StatusQuo

Cum

ula

tive

Em

issi

ons

(Tons)


Meeting 5Meeting 5thth Plan’s Conservation Targets Plan’s Conservation Targets Reduces Forecast PNW Power System Reduces Forecast PNW Power System CO2 Emissions in 2025 by Nearly 20%CO2 Emissions in 2025 by Nearly 20%

0

10

20

30

40

50

60

70

With 5th Plan's Conservation Without 5th Plan's Conservation

2025 C

O2 E

mis

sions

(tons)


Should We Do More? Should We Do More?

Would Higher Carbon Control Cost Would Higher Carbon Control Cost Assumptions Significantly Increase the Assumptions Significantly Increase the AmountAmount of Cost-Effective PNW Electricity of Cost-Effective PNW Electricity

Conservation PotentialConservation Potential

(and reduced carbon emissions)?(and reduced carbon emissions)?


There’s Remaining Electric There’s Remaining Electric Energy Efficiency PotentialEnergy Efficiency Potential

0

500

1000

1500

2000

2500

3000

3500

4000

$10 $20 $30 $40 $50 $60 $70 $80 $90 $100

Levelized Cost (2000$/MWa)

En

erg

y S

avin

gs

in 2

02

5 (

MW

a)

Technically Achievable Potential

Economically Achieveable Potential*

450 MWa Remaining Technically Achievable Potential < $100/MWh

*Without “Certain” Carbon Control


The 5The 5thth Plan Already Includes Expected Plan Already Includes Expected Value of CO2 Control “Risk”Value of CO2 Control “Risk”

$0

$1

$2

$3

$4

$5

$6

$7

$8

Quarter

$ p

er T

on C

O2

Levelized Cost = ~ $3/ton


Would Higher “Carbon Cost” Would Higher “Carbon Cost” Matter?Matter?

Both Both AmountAmount & & ValueValue of CO2 avoided of CO2 avoided depends on when it is avoideddepends on when it is avoided

Hence, the “carbon control” value of Hence, the “carbon control” value of energy savings should incorporate their energy savings should incorporate their time-based value (as it does for time-based value (as it does for electricity savings)electricity savings)– Shape of Savings (kWh daily & seasonally)Shape of Savings (kWh daily & seasonally)– Physical production (pounds per kWh daily Physical production (pounds per kWh daily

and seasonally)and seasonally)


Marginal System CO2 Marginal System CO2 Production FactorProduction Factor

The amount of carbon dioxide The amount of carbon dioxide (lbCO2/kWh) produced by the marginal (lbCO2/kWh) produced by the marginal resource required to meet load.resource required to meet load.

Typically assessed as an average over some Typically assessed as an average over some period, e.g., a year, and therefore an period, e.g., a year, and therefore an average of the CO2 production of many average of the CO2 production of many different resources that may be on the different resources that may be on the margin during the period.margin during the period.

The Marginal Resource* The Marginal Resource* Establishes Market Price and Establishes Market Price and

Carbon Content/kWhCarbon Content/kWh

Step 1 - Identify hourly marginal (highest-cost dispatched) Step 1 - Identify hourly marginal (highest-cost dispatched) Northwest resourceNorthwest resource

Step 2 - Calculate marginal CO2 factor for hourStep 2 - Calculate marginal CO2 factor for hour

Area Time_Period Price Marginal_Res ource

Dis patch Cos t, all ($/MWh)

Regional Marginal Res ource

Marginal CO2

Factor (lb/kWh)

Marginal Fue l Type

Load Segment

Eas te rn Or & Wa, Id North 1/1/2015 Hour: 1 25.38 Pra irie Wood Products $21.29 3Idaho South 1/1/2015 Hour: 1 26.37 J im Bridger 4 $21.68 J im Bridger 4 2.34 Coal 3Wes te rn Or & Wa 1/1/2015 Hour: 1 24.97 Georgia Pacific (Camas) $21.31 3Eas te rn Or & Wa, Id North 1/1/2015 Hour: 2 22.92 Pra irie Wood Products $21.29 3Idaho South 1/1/2015 Hour: 2 21.68 J im Bridger 4 $21.68 J im Bridger 4 2.34 Coal 3Wes te rn Or & Wa 1/1/2015 Hour: 2 20.37 Mossyrock 1 $3.04 3

**This resource (and its effects, such as CO2 production) will (generally)This resource (and its effects, such as CO2 production) will (generally)

be the resource displaced for that hour by new resource additions.be the resource displaced for that hour by new resource additions.


Northwest Resources “on the margin”Northwest Resources “on the margin”55thth Plan Resource Portfolio Plan Resource Portfolio

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2005 2010 2015 2020 2025

Ho

urs

/yr

Demand

Hydro

Natural Gas

Fuel Oil

Biomass

Coal

Nuclear

Must-run


Estimated Annual Average Marginal PNW Estimated Annual Average Marginal PNW Power System CO2 Emissions FactorsPower System CO2 Emissions Factors

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2005 2010 2015 2020 2025

lbs

of

CO

2/k

Wh


Pace of Conservation Acquisition Does Pace of Conservation Acquisition Does Not Significantly Change theNot Significantly Change the

“Marginal CO2 Production Factor” “Marginal CO2 Production Factor”

0.0

0.3

0.5

0.8

1.0

1.3

1.5

2005 2010 2015 2020 2025

lbC

O2/

kWh

2600 aMW of Conservation by 20251500 aMW of Conservation by 2025


High Fuel PricesHigh Fuel Prices Not Significantly Change Not Significantly Change

the “Marginal CO2 Production Factor”the “Marginal CO2 Production Factor”

0.0

0.3

0.5

0.8

1.0

1.3

1.5

2005 2010 2015 2020 2025

lbC

O2

/kW

h

Expected Value Natural Gas Price

High Forecast Natural Gas Price


Forecast of Physical CO2 Avoided*Forecast of Physical CO2 Avoided*

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2005 2010 2015 2020 2025

Pounds

per

kW

h

1 Weekday On Peak2 Weekday Shoulder & Weekend Days

3 Week Nights4 Weekend Nights

Based on Modeling PNW System dispatch using Based on Modeling PNW System dispatch using Aurora™ ModelAurora™ Model

Marginal Carbon Savings by Marginal Carbon Savings by Load ShapeLoad Shape

0.0

0.3

0.5

0.8

1.0

1.3

1.5

2005 2010 2015 2020 2025

lbC

O2/

kWh

All hoursSegment 1Segment 2Segment 3Segment 4

Segment 1: 0800 – 1800 M-FSegment 1: 0800 – 1800 M-F

Segment 2: 0400 - 0800/1800-2200 M-F; 0400 – 2200 S&SSegment 2: 0400 - 0800/1800-2200 M-F; 0400 – 2200 S&S

Segment 3: 2200 - 0400 M-FSegment 3: 2200 - 0400 M-F

Segment 4: 2200 - 0400 S&SSegment 4: 2200 - 0400 S&S


Timing-Based Value CO2Timing-Based Value CO2

ShapeShape of Savings (kWh)of Savings (kWh)

Value of CO2 Avoided ($/ton)Value of CO2 Avoided ($/ton)

Value of CO2 Avoided Value of CO2 Avoided

**

==

Shape of Savings - On Peak

0

5

10

15

20

25

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

Month

Per

cen

t o

f An

nu

al M

easu

re S

avin

gs

Occ

uri

ng

in M

on

th

Commercial AirConditioning

Street Lighting

SF ResidentialWeatherization

ResidentialLighting

$

**

Physical CO2 Avoided (lbs/kWh)Physical CO2 Avoided (lbs/kWh)

$0

$1

$2

$3

$4

$5

$6

$7

$8

S-200

7

S-200

8

S-200

9

S-201

0

S-201

1

S-201

2

S-201

3

S-201

4

S-201

5

S-201

6

S-201

7

S-201

8

S-201

9

S-202

0

S-202

1

S-202

2

S-202

3

S-202

4

S-202

5

Quarter

$ p

er

Ton C

O2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2005 2010 2015 2020 2025

Pou

nd

s p

er

kW

h

Weekday On Peak Weekend DaysWeek Nights Weekend Nights


Typical “On-Peak” Load ProfilesTypical “On-Peak” Load Profiles

0%

5%

10%

15%

20%

25%

30%

35%

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Perc

ent

of

Annual U

se

Res. Space HeatingRes. Central ACIrrg. AgricultureCommerical HVAC


Typical “Off-Peak” Load ProfilesTypical “Off-Peak” Load Profiles

0%

1%

2%

3%

4%

5%

6%

7%

8%

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Per

Cent

of

Annual U

se

Res. Space Heating

Res. Central AC

Irrg. Agriculture

Commerical HVAC


Impact of $15/ton Carbon Control Impact of $15/ton Carbon Control Cost of “Avoided Cost” for Selected Cost of “Avoided Cost” for Selected

Conservation Savings Shapes*Conservation Savings Shapes*

0.0

0.3

0.5

0.8

1.0

1.3

1.5

Flat

Syste

m L

oad

Shape

Res. S

pace

Hea

ting

Irrgig

ated

Ag

Comm

ercia

l Ligh

ting

Street

Ligh

t

Comm

ercia

l AC

Segm

ent 1

Segm

ent 2

Segm

ent 3

Segm

ent 4

CO

2 A

dd

er

in m

ills

pe

r kW

h

Impact of Alternative CO2 Control Costs Impact of Alternative CO2 Control Costs on Marginal Value of Conservation on Marginal Value of Conservation

SavingsSavings

$0

$2

$4

$6

$8

$10

$12

$14

$16

$0 $5 $10 $15 $20 $25 $30

Cost of CO2 ($/Ton CO2)

CO

2 v

alu

e (

$/M

Wh

)

0.85 lb/kWh

0.9 lb/kWh

0.95 lb/kWh

1.0 lb/kWh

Flat (8760 hr) zero-CO2 resource


Impact of Higher Assumed Impact of Higher Assumed CO2 “Control” CostCO2 “Control” Cost

Assuming PNW CO2 Emissions Factor ofAssuming PNW CO2 Emissions Factor of~ 1 lb/kWh~ 1 lb/kWh– A $10/ton CO2 change in emissions “control” A $10/ton CO2 change in emissions “control”

cost increases cost increases forecastedforecasted market prices by market prices by approximately $4/MWhapproximately $4/MWh

– A $40/ton CO2 change in emissions “control” A $40/ton CO2 change in emissions “control” cost increases cost increases forecastedforecasted market prices by market prices by approximately $16/MWhapproximately $16/MWh


Carbon Control Might Make 4% to 15% Carbon Control Might Make 4% to 15% More Conservation “Cost-Effective”More Conservation “Cost-Effective”

0

500

1000

1500

2000

2500

3000

3500

$10 $20 $30 $40 $50 $60 $70 $80 $90 $100

Levelized Cost (2000$/MWa)

En

erg

y S

avin

gs

in 2

02

5 (

MW

a)

Technically Achievable PotentialEconomically Achieveable Potential - 5th Plan*Economically Achieveable Potential - $10/Ton "CO2 Adder"Economically Achieveable Potential - $40/Ton "CO2 Adder"

Additional 100 - 400 MWa Cost-Effective @ $10 - $40 Ton

*Without “Certain” Carbon Control


SummarySummary

The Northwest Power and Conservation Council’s The Northwest Power and Conservation Council’s 55thth Plan relies on “non-carbon” producing Plan relies on “non-carbon” producing resources to meet 85-90% of anticipated load resources to meet 85-90% of anticipated load growthgrowth

The 5The 5thth Plan considered “carbon control” risk Plan considered “carbon control” risk Higher and more certain carbon control costs Higher and more certain carbon control costs

assumptions could make 4-15% more assumptions could make 4-15% more conservation cost-effectiveconservation cost-effective

There are probably cheaper near-term options for There are probably cheaper near-term options for carbon control than the PNW Power Systemcarbon control than the PNW Power System


QuestionsQuestions

northwest power and conservation council will co2 change what we do? tom eckman manager,...

Documents

conservation council

threshold slide

cost risk slide

conservation accomplishments

plan avg cost slide

certain carbon control

carbon dioxide emissions

power cost npv