ERCOT PUBLIC 3/25/ LTSA Scenario and Data Assumptions March 25, 2014

ERCOT PUBLIC 3/25/ Outline  Scenario Assumptions  Capital Cost Projections  Fuel Price Projections  Emission Price Projections  Load Forecast  Retirement Process  Generation Siting Process  Additional Information

ERCOT PUBLIC 3/25/ Scenario Assumptions

ERCOT PUBLIC 3/25/ Capital Cost Projections

ERCOT PUBLIC 3/25/ Current Trends Capital Cost Assumptions (Nominal $/kW) Thermal Costs are increased 2.4% annually (EIA AEO 2014 early release) Solar PV costs are developer supplied

ERCOT PUBLIC 3/25/ High Capital Cost Assumptions (Nominal $/kW) High costs are 10% higher than those in Current Trends scenario

ERCOT PUBLIC 3/25/ Low Capital Cost Assumptions (Nominal $/kW) Low costs are 10% less than those in Current Trends scenario

ERCOT PUBLIC 3/25/ Fuel Price Projections

ERCOT PUBLIC 3/25/ NG Price for Scenarios Selected EIA AEO 2014 as price for Current Trends scenario Added $1.5/mmBtu for high price, $3.50/mmBtu for High Gas scenario Subtracted $1.00/mmBtu for low gas price

ERCOT PUBLIC 3/25/ Coal Price for Scenarios Average of price forecasts from 2014 and 2012 EIA AEO and SNL

ERCOT PUBLIC 3/25/ Emission Price Projections

ERCOT PUBLIC 3/25/ CO2 Price Forecast Average of price forecasts from Synapse and Fraunhofer for use in the Stringent Environmental scenario

ERCOT PUBLIC 3/25/ SO2 Price for Scenarios Average of price forecasts from EPA and Black & Veatch

ERCOT PUBLIC 3/25/ NOx Price and Mercury Trading for Scenarios Average of price forecasts from EPA and Black & Veatch Because MATS will be effective in 2016, no mercury emission allowance trading is assumed.

ERCOT PUBLIC 3/25/ Emission Assumptions for All Scenarios

ERCOT PUBLIC 3/25/ Load Forecast

ERCOT PUBLIC 3/25/ Peak increases at an average of 1.25% per year and energy increases at an average 1.68% per year Current Trends Load Forecast Peak Forecast

ERCOT PUBLIC 3/25/ LNG Exports Overview 9 Proposed LNG facilities in ERCOT 3 general locations (Freeport, Corpus Christi region, Brownsville) Assume principally powered from grid. Assume online dates Assume each Bcf/d of LNG capacity has a load of several hundred MWs, based on indicative proprietary data available to ERCOT, but we expect public load data will become available soon. Available data indicates each Bcf/d of LNG capacity could used 300 to 500 MW. These numbers show the large load impact LNG facilities could have. LowCurrent Trends High Total LNG Capacity 1.8 Bcf/d5.8 Bcf/d9.8 Bcf/d Bcf/d Freeport 0.6 Bcf/d Freeport, 1.0 Bcf/d Corpus, 1.0 Bcf/d Brownsville 0.6 Bcf/d Freeport, 1.5 Bcf/d Corpus, 2.0 Bcf/d Brownsville Bcf/d Freeport 1.2 Bcf/d Freeport, 1.0 Bcf/d Corpus, 1.0 Bcf/d Brownsville 1.2 Bcf/d Freeport, 1.5 Bcf/d Corpus, 3.0 Bcf/d Brownsville Range of potential load additions 540 MW to 900 MW 1,740 MW to 2,900 MW 2,940 MW to 4,900 MW

ERCOT PUBLIC 3/25/ Retirement Process

ERCOT PUBLIC 3/25/ Wind units will be retired at 25 years Thermal retirements –All gas units will be retired at 50 years –All coal units will be retired at 55 years Need to evaluate UPLAN’s retirement process Fixed Length Retirements

ERCOT PUBLIC 3/25/ Age, efficiency, profit margins and cost of retrofits are considered Each category was broken into different groups and each group was given a value from 1-6 depending on number of groups –Age: 40 yrs (5) –Efficiency: 12 MMBtu (6) –Profit margins: >25% (1), 10-25% (2), 0-10% (3), -10-0% (4), -10- (-25)% (5), <- 25% (6) –Retrofit: need to define retrofit process UPLAN results will be used to determine profit margin values Each unit was given a total score (sum of values for each category) –∑ = A (Wa) + E (We) + P (Wp) + R (Wr) Retirement decision: if the unit’s total score was higher than 1 standard deviation above the mean of the sum of all units scores Economic Retirement Process

ERCOT PUBLIC 3/25/ Retrofit Costs for Emission Control

ERCOT PUBLIC 3/25/ Generation Siting Process

ERCOT PUBLIC 3/25/ Used process developed in the DOE LTS where consideration was give to: –Gas pipeline density –Railroad density –Urban population density –Wind and solar conditions –Surface water conditions –Non-attainment zones Also consider brownfield sites and other sources of water to determine a list of available 345 kV buses for the siting of new generation Expansion wind generation will use site profile information supplied by AWS Truepower from the 130 hypothetical sites delivered Sept 2012 Similar information will be used for the siting of solar projects. Profiles from URS delivered in March 2013 for potential sites in Texas Generation Siting Method

ERCOT PUBLIC 3/25/ Each new generator the UPLAN model builds (including wind and solar) will be given a list of potential 345 kV buses for siting UPLAN evaluates each site and will place the new unit at the site that results in the highest revenue ERCOT will review the site selection by UPLAN and re-site if it is appropriate to do so Generation Siting Method

ERCOT PUBLIC 3/25/ Additional Information

ERCOT PUBLIC 3/25/ Renewable Installations by Year Average installations per year for all years is 801 MWs. Average installations per year for the years 2006 thru 2009 is 1,766 MWs ERCOT Wind installations per year Wind installations per year up to 2,500 MW Solar installations per year up to 1,500 MW

ERCOT PUBLIC 3/25/ Next Steps Complete load data adjustments for Current Trends scenario o LNG additions o Oil and gas drilling additions Input all data for Current Trends scenario into UPLAN model Run UPLAN model and test/adjust processes developed for generation expansion and unit retirement Finalize data gathering and assumptions for all scenarios o EE and DR assumptions o LNG and drilling load o Other data

ERCOT PUBLIC 3/25/ Appendix

ERCOT PUBLIC 3/25/ Henry Hub forecast by Wood Mackenzie Source: Wood Mackenzie, “North America Natural Gas Outlook – ERCOT Planning Workshop”, Jan

ERCOT PUBLIC 3/25/ Fraunhofer CO2 Price Projections Source: C. Kost, J. N. Mayer, J. Thomsen, N. Hartmann, C. Senkpiel, S. Philipps, S. Nold, S. Lude, N. Saad, T. Schlegl, “Levelized Cost of Electricity Renewable Energy Technologies”, Nov. 2013, Fraunhofer Institute for Solar Energy Systems ISE

ERCOT PUBLIC 3/25/ Source: EPA, Office of Air and Radiation, “Estimating Future Air Emissions Allowance Values”, Nov. 2006

ERCOT PUBLIC 3/25/ Source: Black & Veatch, “City of Ames Energy Resource Options Study”, Mar Black & Veatch March 2013

ERCOT PUBLIC 3/25/ Ventyx Fall NOX Source: Ventyx, “National Database Release Notes”, Fall 2013.

ERCOT PUBLIC 3/25/ Ventyx Fall 2013 – SOX

ERCOT PUBLIC 3/25/ Synapse CO2 Prices Source: P. Luckow, E.A. Stanton, B. Biewald, J. Fisher, F. Ackerman, E. Hausman, “2013 Carbon Dioxide Price Forecast”, Synaps Energy Economics, Nov

ERCOT PUBLIC 3/25/ Ventyx Fall 2013 – CO2

ERCOT PUBLIC 3/25/ Technology Price Projections $ Capital cost estimates from 2013 EIA Capital Cost Projections Update, April 2013

ERCOT PUBLIC 3/25/ Technology Price Projections $ Capital cost estimates from August 2013 Lazard’s Levelized Cost of Energy Analysis

ERCOT PUBLIC 3/25/ Capital Cost Assumptions Average conventional capital cost assumptions GDP growth rate from EIA AEO 2014 Early Release - 2.4%

ERCOT PUBLIC 3/25/ Capital Cost Assumptions – Cont. Average renewable capital cost assumptions GDP growth rate from EIA AEO 2014 Early Release - 2.4%

ERCOT PUBLIC 3/25/ Brattle ERCOT Study for Clean Energy Council assumed in the Reference Case that wind costs fall to 1, $/kW in 2015 and then remain constant in real terms through In the Low Cost Renewable case, they decline to 1, $/kW by The NREL 2012 Wind Technologies Market Report shows a range of $1,500 – 2,400/kW for recent capital costs for the Interior region (including Texas) Wind Cost Trends Source: NREL Wind Technologies Market Report. August 2013.

ERCOT PUBLIC 3/25/ Recent performance improvements in wind turbines could increase capacity factors by 10% in the near term Projections for levelized cost of energy (LCOE) provide insight into both capital cost and performance trends Wind Capacity Factor Trends Source: NREL. IEA Wind Task 26: The Past And Future Cost Of Wind Energy, Work Package 2. May 2012.