uncertainty in the regional portfolio model
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Uncertainty in the Regional Portfolio Model. Michael Schilmoeller for the Northwest Power and Conservation Council Generation Resource Advisory Committee Thursday, January 22, 2009. Overview. Construction Costs Electricity Price Uncertainty Economic Retirement - PowerPoint PPT PresentationTRANSCRIPT
Uncertainty in the Uncertainty in the Regional Portfolio Regional Portfolio
ModelModelMichael Schilmoeller
for theNorthwest Power and Conservation CouncilGeneration Resource Advisory Committee
Thursday, January 22, 2009
2
OverviewOverview
Construction Costs Electricity Price Uncertainty Economic Retirement Variable Capacity for Existing Units
3
Attributes of Cost FuturesAttributes of Cost Futures Generation Resource Advisory
Committee (GRAC) at their December 18, 2008 meeting suggested futures should reflect
Expectations about cost trends Greater uncertainty associated with
technology that is immature or carries more political baggage
Correlation among costs, due to common elements such as steel, switches, labor, and concrete
Distinctions due to unique elements, likely reliance on sources outside the United States and associated exchange rate uncertainty, and so forth
4
Cost Components More Cost Components More ConsistentConsistent
Source: Forecasting construction costs.xls, worksheet MJS 2
(See also range “CERA Commodity Inputs” on wks MJS 3
0
20
40
60
80
100
120
140
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Co
st,
rela
tive
to
200
8 (1
.00)
CCCT-GI
Coal-GI
IGCC-GI
Nuclear-GI
SCCT-GI
Wind-GI
CCCT-CERA
Coal-CERA
IGCC-CERA
Nuclear-CERA
SCCT-CERA
Wind-CERA
5
ExpectationsExpectations
Source: Random Variable 02.xls, worksheet “Graphs of Futures”
Forecasts of Expected Costs
0
1000
2000
3000
4000
5000
6000
7000
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Ove
rnig
ht
cost
$20
06/k
W IGCC
Nuclear
Solar Thermal
Coal
Geothermal (Binary Flash)
Wind Class 5
CCCT
SCCT
6
Cost MatricesCost Matrices
Source: 2008 Nov 17 CCAF Power Tabular Data _ MJS.xls, worksheet “Table 2”
7
Input-Driven Behavior based Input-Driven Behavior based onon
CERA ScenariosCERA Scenarios
Au
xili
ary
Eq
uip
men
t
Bu
lk M
ate
rial
s
Civ
ils a
nd
Co
ns
tru
ctio
n
Des
ign
an
d P
roje
ct M
an
agem
ent
Lab
or
Maj
or
Po
wer
Eq
uip
me
nt
Ste
el
Oth
er
MP
E-B
L
MP
E-G
T
MP
E-N
R
MP
E-S
T
MP
E-W
T
CCCT 24.8 5 0.9 1.2 7.8 0 4.4 13.8 0.0 0.0 0.0 42.1 0.0Coal 28.3 1.8 4 3.6 35 0 3.7 8.8 14.8 0.0 0.0 0.0 0.0IGCC 11.7 1.9 2.1 6 20.6 52.4 4.3 1.0 0.0 0.0 0.0 0.0 0.0Nuclear 16.6 0.2 2.6 4.9 13.7 0 3.1 13.5 0.0 0.0 45.4 0.0 0.0SCCT 28.7 2.1 6.1 1.4 11.1 0 3.5 15.3 0.0 31.8 0.0 0.0 0.0Wind 5.4 2.2 13.7 0.2 2.3 0 1.2 0.2 0.0 0.0 0.0 0.0 74.8
8
Influences in Plant CostInfluences in Plant Cost
correlations
stochasticGBM wmr
plant costescalators
steel
cost growth expections
stochasticGBM wmr
stochasticGBM wmr
auxillaryequipment
majorequipment
I/O matrix
… …
plant costs
currentovernight
costs
stochastic uncertainty in growth
correlationswith otherplant costs
stochasticgrowth
9
Individual FuturesIndividual Futures
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
7000.00S
ep-0
9
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
CCCT
Coal
IGCC
Nuclear
SCCT
Wind
Solar_Thermal
Geothermal
Source: Random Variable 02.xls, worksheet “Graphs of Futures”
10
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
Nuclear
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
11
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
IGCC
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
12
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
Solar Thermal
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
13
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
Geothermal
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
14
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
Conventional Coal
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
15
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
Wind
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
16
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
CCCT
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
17
Cost DecilesCost Deciles
Source: Random Variable 01.xls, worksheet “Statistics”
SCCT
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000S
ep
-09
Se
p-1
0
Se
p-1
1
Se
p-1
2
Se
p-1
3
Se
p-1
4
Se
p-1
5
Se
p-1
6
Se
p-1
7
Se
p-1
8
Se
p-1
9
Se
p-2
0
Se
p-2
1
Se
p-2
2
Se
p-2
3
Se
p-2
4
Se
p-2
5
Se
p-2
6
Se
p-2
7
Se
p-2
8
Ov
ern
igh
t c
os
t $
20
06
/kW
100 percent
90 percent
80 percent
70 percent
60 percent
50 percent
40 percent
30 percent
20 percent
10 percent
00 percent
mean
18
OverviewOverview
Construction Costs Electricity Price Uncertainty Economic Retirement Variable Capacity for Existing Units
19
Current Electricity Price Current Electricity Price ForecastForecast
Interim, created Monday 1/5/2009 PNW prices east of the Cascades Average hydrogeneration conditions Most recent (12/20/2008) frozen efficiency
electricity requirements forecast Most recent (11/28/2008) natural gas price
forecast To be updated:
CO2 penalty assumptions RPS resource development assumptions cost and availability of new resources
20
Current Electricity Price Current Electricity Price ForecastForecast
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2006
$/M
Wh
On-peak
Off-peak
Source: chart “MONTHLY PRICES”, wkb “AO_6P_11112008_ABL_HD MONTHLY POWER PRICE FORECAST.XLS”
21
Current Electricity Price Current Electricity Price ForecastForecast
Source: chart “MONTHLY PRICES2”, wkb “AO_6P_11112008_ABL_HD MONTHLY POWER PRICE FORECAST.XLS”
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.0020
06$/
MW
h
On-peak
Off-peak
22
Current Conditions (ICE)Current Conditions (ICE)
Source: chart “Chart 1”, wkb “ICE MONTHLY AVERAGE 2005-2008.XLS”
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2006
$/M
Wh
On-peak
Off-peak
23
Current Electricity Price Current Electricity Price ForecastForecast
On- and Off-Peak AverageOn- and Off-Peak Average
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Sep
-09
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
$200
6/M
Wh
Source: wks “Electricity Price Futures”, wkb “Illustrations and graphs from L805 after extraction.xls”
24
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Sep
-09
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
$200
6/M
Wh
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Sep
-09
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
$200
6/M
Wh
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Sep
-09
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
$200
6/M
Wh
Current Electricity Price Current Electricity Price FuturesFutures
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Sep
-09
Sep
-10
Sep
-11
Sep
-12
Sep
-13
Sep
-14
Sep
-15
Sep
-16
Sep
-17
Sep
-18
Sep
-19
Sep
-20
Sep
-21
Sep
-22
Sep
-23
Sep
-24
Sep
-25
Sep
-26
Sep
-27
Sep
-28
$200
6/M
Wh
Source: wks “Electricity Price Futures”, wkb “Illustrations and graphs from L805 after extraction.xls”
25
Deciles for Electricity Deciles for Electricity PricePrice
Source: wks “EP Deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”
Electricity
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.0020
10
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
$200
6/M
Wh
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
mean
input
26
Close-Up on DecilesClose-Up on Deciles
Source: wks “EP Deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”
Electricity
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.0020
10
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
$200
6/M
Wh
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
mean
input
27
OverviewOverview
Construction Costs Electricity Price Uncertainty Economic Retirement Variable Capacity for Existing Units
28
Retirement DecisionRetirement Decision
Prescribed number of evaluation and mothball periods for each plant
If decision criterion, using only forward-going FOM is negative, begin evaluation
Once evaluation period is over, begin mothball state (no generation)
Once mothball periods have passed, decommission and incur cancellation cost
If any period yields a positive decision criterion value, reset all the counters above
29
IssuesIssues
What kind of costs, in addition to normal operating costs, would be incurred in each phase?
Is there a better representation of the retirement decision?
30
OverviewOverview
Construction Costs Electricity Price Uncertainty Economic Retirement Variable Capacity for Existing Units
31
New CapabilityNew Capability
Only for existing plants with a single cohort
Variable capacity could be stochastic Representing uncertainty about whether
anticipated capacity will materialize Each future’s capacity different Can increase or decrease during over the
study within a future Capacity would affect only FOM costs Could be used to model RPS development
uncertainty, if restricted to the case of increasing capacity over the study
32
IssuesIssues
Are there other aspects of a plant with varying capacity, such as construction cost?
33
EndEnd
34
CERA Cost ComponentsCERA Cost Components
Cost Component Indices
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2000 2001 2002 2003 2004 2005 2006 2007 2008
$200
8
Ancillary Equipment
Construction & Civils
Construction Labor
Electrical Bulks
Engineering & Project Mgt
Major Equipment
Steel *
Source: 2008 Nov 17 CCAF Power Tabular Data _ MJS.xls, worksheet “Table 2”
November 2008 CERA Special Report Capital Costs Analysis Forum–Power: Market Review.
35
CERA Cost ComponentsCERA Cost Components
Source: 2008 Nov 17 CCAF Power Tabular Data _ MJS.xls, worksheet “Table 2”
Major Equipment
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2000 2001 2002 2003 2004 2005 2006 2007 2008
$200
8
Gas Turbines **
Steam Turbines **
Nuclear reactors
Boilers ***
Wind Turbines & Towers
Gasification and GasTreatment ****
Source: Cambridge Energy Research Associates.Notes: All historic figures in actual, nominal terms * Steel index has been reconstituted since the Q1, 2008 report ** Gas and steam turbine index were combined in the Q1, 2008 report *** Boiler index is slightly changed since Q1, 2008 index due to previous omission with respect to one CFB facility **** Gasification and gas treatment will only be added to the overall PCCI as of Q3, 2008
November 2008 CERA Special Report Capital Costs Analysis Forum–Power: Market Review.
36
Existing FeaturesExisting Features
Market-Driven Planning A feature we do not use for our planning:
unplanned market additions, at a higher price
Early construction – response to circumstances
Existing decision based on market viability and prospective adequacy of the system
Mothball and cancellation options Option to incur all expenses in the first
period
37
New FeaturesNew Features
Overnight construction cost uncertainty Applies to mothball and cancellation costs as
well Distinct costs if mothballed or cancelled in
the first period of early construction Fixed operations and maintenance (FOM)
cost uncertainty Capacity uncertainty Decision criterion re-evaluated with
revised going-forward cost only
38
New FeaturesNew Features
Economic retirements Based on covering FOM, optionally FOM with
uncertainty Internal, cohort-specific calculation of
decision criterion VOM uncertainty optional
Uncertainty in availability for immature technologies, transmission completion, u.s.w.
Distinct construction cost rates in early and late phases
Cohort-specific stochastic forced outages