Preliminary Results with the Regional Portfolio Model Michael Schilmoeller for the Northwest Power and Conservation Council Generation Resource Advisory Committee Thursday, March 19, 2009

2 Overview  Overview  Conservation  Renewable Portfolio Standards  Carbon, carbon, carbon

3 Prior Presentations to GRAC  December 18, 2008  Power plant cost uncertainty  January 22, 2009  Power plant cost uncertainty distributions  Natural gas price uncertainty  Electricity Price Uncertainty  Carbon penalty Uncertainty  Economic Retirement  Variable Capacity for Existing Units

4 Resources Available for Selection by the Model  CCCT (415 MW Nominal)  available  SCCT (94 MW Nominal)  available 2012  IGCC (518 MW Nominal)  with carbon capture and sequestration  available 2023  Five classes of demand response  total approaching 2000MW by the end of the study  1300 MW of this limited to 100 hours per year of operation  Wind generation (100 MW Blocks)  available  100 MW by the end of the study in excess of anticipated RPS requirements and consequently available for REC credit  5500 MW without REC credit  Includes transmission, any production tax credit (PTC), and integration, and firming costs  Conservation  discretionary and lost opportunity  amount determined by wholesale electricity price and the cost- effectiveness premium

5 Resources Available for Selection by the Model  Nuclear  Biomass  Imported Wind with new transmission

6 Demand Response Programs

7 Early Returns  Higher costs due to greater likelihood and higher limit on carbon penalty  More conservation  Fifth Plan: 2,500 MWa  Preliminary Sixth Plan: 5,000 MWa  Cost effectiveness premium over wholesale electricity price likely to go up  Current OR, WA, and MT RPS targets, disregarding retail rate constraints, call for all of the less expensive wind generation available (1,700 MWa)  Depending on the size and timing of any carbon penalty, there may be a need for gas-fired turbine capacity well in advance of adequacy requirements.

8 Possible Studies

9 Overview  Overview  Conservation  Renewable Portfolio Standards  Carbon, carbon, carbon

10 Supply Curve for Discretionary Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation xls

11 Supply Curve for Lost Opportunity Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation xls

12 Annual Availability for Lost Opportunity Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation xls

13 … And More On the Way  900 MWa of lost opportunity conservation not reflected in the prior figures and values  Primarily from replacing existing TVs and computer monitors with higher- efficiency units, assuming today’s technology

14 Overview  Overview  Conservation  Renewable Portfolio Standards  Carbon, carbon, carbon

15 Oregon RPS Obligations Source: Kip Pheil, Oregon Department of Energy, 10/29/08, for the Renewable Energy Working Group (C:\Backups\Plan 6 Studies\Data Development\Resources\New Resource Candidates\RPS Resources\REWG_29oct08-RPS_update-v2.ppt)

16 Renewable Energy Credit Banking  Washington: 1 year  Montana: 2 years  Oregon: Indefinitely

17 Regional RPS Development C:\Backups\Plan 6 Studies\L807\CO2 and RPS futures\L807 CO2 distribution 05.xls

18 RPS Modeling  Basecase – all obligated utilities in the region meet their RPS targets  RPS resource in the region depends on the load requirement under each future  Net of conservation in the future  Accounting for each state’s policy for RPS banking of RECs  Costs for RPS resources currently tied to wind and do not reflect construction cost uncertainty  No attempt to model cost caps

19 Modeling Regional RPS Activity  The availability of REC sales for wind generation is determined RPS requirements and banking policy  Wind generation can be constructed in advance of RPS requirement. Surplus would be banked or sold into the REC market  In a study, uncertainty in development of RPS capacity will be explored  Capture some of the rate impact constraint effect  Wind will still be available as required

20 Modeling Regional RPS Activity  Also remaining  500 MWa of biomass to include as option to meet RPS targets and other needs  More non-carbon resources  Nuclear  Wind imported from Wyoming and Montana over new power transmission lines  Geothermal

21 Overview  Overview  Conservation  Renewable Portfolio Standards  Carbon, carbon, carbon

22 State of the Distribution C:\Backups\Plan 6 NEC\Council Presentations\ GoToMeeting P4 on Carbon, PTC, REC Uncertainties\Carbon Tax stats for Maury and Jeff.xls

23 Carbon Measurement for the Regions Power Sector  Economic end effects for carbon control included  Average and TailVaR 90 carbon production for two periods estimated  Aug Aug 2025  Aug Aug 2029  NPV cost of carbon penalty alone estimated  Permits some evaluation of “transfer cost issues”

24 Carbon Measurement for the Regions Power Sector – Two Measures  Ignoring imports and exports  Accounting for imports and exports  Firm contract and market transactions  Market energy assumed produced by natural gas-fired CCCT with 9000 average heat rate (about ½ US ton of CO 2 per MWh)

25 Modeling  Market and firm electricity purchases and sales use an electricity price adjusted upward by any carbon penalty  Adjustment is consistent with the assumption for market power carbon content  Examining carbon content at higher carbon penalty factors

26 Effect of Carbon Control Policy on the Preferred Plan  Different control policies have different effects on regional cost  for example, a regional cap and trade systems on the power sector would keep most transfers within the region, while a carbon tax may or may not  Much of the apparent difference in cost is related to “transfer cost” issues  What is the cost of modifying the merit order of dispatch alone?  For a quick, cheap, and incomplete perspective….

27 Penalty Costs Source: C:\Backups\Plan 6 Studies\L807\Analysis of Optimization Run_L807_looking at lack of variation in costs with DR.xls

28 End

29 Futures for Natural Gas Prices Source: wks “NGP futures”, wkb “Illustrations and graphs from L805 after extraction.xls”

30 Natural Gas Price Deciles Source: wks “NGP deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”

31 Natural Gas Price Deciles Source: wks “NGP deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”

32 Natural Gas Price Deciles Source: wks “NGP deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”

33 Natural Gas Price Deciles Source: wks “NGP deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”

34 Natural Gas Price Deciles Source: wks “NGP deciles”, wkb “Illustrations and graphs from L805 after extraction.xls”