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Energy Planning and Recent Regulatory Developments Northwest Energy Systems Symposium (NWESS) University of Washington February 22, 2008 Nicolas Garcia.

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Presentation on theme: "Energy Planning and Recent Regulatory Developments Northwest Energy Systems Symposium (NWESS) University of Washington February 22, 2008 Nicolas Garcia."— Presentation transcript:

1 Energy Planning and Recent Regulatory Developments Northwest Energy Systems Symposium (NWESS) University of Washington February 22, 2008 Nicolas Garcia

2 2 Discussion Topics Energy Independence Act – a.k.a I-937 Conservation Renewable Other Recent Regulatory Requirements S.6001 Integrated Resource Planning Background IRP Goals and Key Objectives Load and Resource Balance Preferred Resource Portfolio

3 3 I-937 Conservation Requirement Law Requires Washington Utilities to: 1.Acquire All “Cost-Effective” Conservation (starting in 2010)  Develop a ten-year conservation potential using methods that are consistent with those used by the Northwest Power and Conservation Council (NWPCC)  Pro-rate the ten-year conservation goals into biennial conservation targets The Law specifies administrative penalties to be assessed for shortfalls - $50 per megawatt hour (2006 dollars subject to inflation)

4 4 Annual Targets ≈ 5 to 6 aMW I-937 Conservation Requirement January 2007 Assessment for Tacoma Power using methodologies consistent with NWPCC  Technical potential: about 159 aMW (across all customer sectors)  Economic potential: about 102 aMW (cost effective)  Achievable potential: about 54 aMW in first 10 years

5 5 Tacoma Power’s Load and Resource Balance I-937 Compliance -- Conservation aMW

6 6 Compliance required regardless of utility need. Amount of Renewables based on annual retail load:  3% by 2012  9% by 2015  15% by 2020 Utilities must acquire:  Renewable Energy Credits (REC), and/or  Eligible Renewable Resources (MWh) Eligible Renewable Resources Wind Solar Geothermal Incremental Hydro Biomass Landfill Gas Ocean (wave, tidal) Bio Diesel I-937 Renewables Requirement

7 7 Estimated Renewable Acquisition Required Under I-937 Renewable Requirement Renewable Requirement Tacoma Power’s Requirement based on Load Projections aMW MWh or RECs 2012 3%18160,000 2013 3%19160,000 2014 3%19160,000 2015 3%19160,000 2016 9%56500,000 2017 9%57500,000 2018 9%57500,000 2019 9%57500,000 2020 15%95850,000 After 2020 15%95+850,000

8 8 Renewables Cost Cap and Penalties The law includes an incremental cost cap equal to 4% of a utility's annual revenue requirement.  Presently, Tacoma Power’s revenue requirement is approximately $300 million which would set the incremental cost cap at about $12 million.  Assuming that RECs cost $30 per certificate, the $12 million price cap will be reached at 400,000 RECs – well less than the 500,000 RECs indicated by retail load in 2016. 4%

9 9 1.Should one acquire renewable assets, renewable energy credits, or some combination of both? 2.Will renewable energy credits be available? If so, at what cost? 3.How much in the way of renewables or RECs should one acquire given the 4% renewable cost cap? 4.If one decides to comply by acquiring assets: 1.when should the acquisition be made? 2.what types of renewable technologies make the most sense? What is The Best Way to Comply with the Renewable Requirements?

10 10 Compliance using new Renewable Resources Average Water = Annual average of 72 years of system flows Critical Water = Annual system worst year on record (72 years) Note: Planned conservation acquisitions not included in graphic aMW

11 11 1.No central market clearinghouse. 2.Renewable Portfolio Standards becoming commonplace. Competition for RECs is likely to be vigorous. 3.Many sellers do not have track records. 4.Who bears the risk if intermittent resources generate less than expected? 5.No one has significant experience in this field. Compliance using Renewable Energy Credits

12 12 How to Comply with the Renewable Energy Mandate?

13 13 Discussion Topics Energy Independence Act – a.k.a I-937 Conservation Renewable Other Recent Requirements S.6001 Integrated Resource Planning Background IRP Goals and Key Objectives Load and Resource Balance Preferred Resource Portfolio

14 14 S.6001 Requirements Emission limit of 1,100 lbs of greenhouse gases per MWh for new baseload generation  Covers plant that operate more than 60% of the time. Emission limit of 1,100 lbs of greenhouse gases per MWh for new long-term contracts  Contracts lasting 5 years or more.  Questions regarding unspecified sources. Implementing rules must consider effects on system reliability and cost to utility customers. Greenhouse gas emissions performance standard

15 15 Discussion Topics Energy Independence Act – a.k.a I-937 Conservation Renewable Other Recent Requirements S.6001 Integrated Resource Planning Background IRP Goals and Key Objectives Load and Resource Balance Preferred Resource Portfolio

16 16 What Is Integrated Resource Planning? Creates long-term structured comprehensive analysis framework for choosing least cost and least risk resources to meet future customer demand Considers combinations of supply side (e.g. power projects) and demand side (e.g. conservation) resources Considers future uncertainty Takes environmental and societal considerations into account Is transparent and inclusive - entails public participation Provides action plan for resource acquisition - types, amount and timing of new resources

17 17 Risk Management / Mitigation Critical Water Adequacy Planning Resource Diversity Short Term Operations Planning/Analysis Integrated Resource Planning Scenario Planning / Strategic Planning Wholesale Market Participation Trading Guidelines / Controls Credit Risk Management Program Regional BPA Dialogue Participation Resource Adequacy Regional Dialogue Debt Coverage Ratios, Bond Covenants Participation in Regulatory Processes Compliance with Emergency Action Plans Comprehensive Infrastructure Maintenance Utility Risks, Opportunities and Mitigation Tools Low Market Prices High Market Prices Market Volatility Transmission Access High Debt Costs Out of state demand Counterparty Risk Load Increases Load Decreases Regional Infrastructure Overbuild Generation Carbon Regulation Other Regs (e.g. Fed RPS) Labor Attraction/Retention Ageing Infrastructure I-937 Compliance Natural Disasters Dry Regional Hydro Wet Regional Hydro

18 18 The Basic IRP Process 1.Identify / Evaluate Goals and Objectives 2.Identify Resource Need (Gap)  Forecast future supply capability  Forecast future customer demand  Calculate Load and Resource Balance (Load vs. Supply) –Stochastic Modeling 3.Identify and Evaluate Candidate Resources  Identify and characterize generic supply side resources  Identify and characterize demand side resources (e.g., conservation)  Create candidate “portfolios” of resources for analysis 4.Conduct Computer Model Simulation of Resource Portfolios  Utilize methods to consider risk and uncertainty  Rank resource portfolios on the basis of least cost and least risk  Identify Preferred Resource Portfolio

19 19 Long-Term Power Planning Goals Overall goal is to Develop a Long Term Resource Acquisition Strategy that: Minimizes Resource Portfolio Cost (Keep Rates Low) Maintains / Enhances Reliability Minimizes Environmental / Societal Impacts Minimizes / Manages Risk

20 20 The Basic IRP Process 1.Identify / Evaluate Goals and Objectives 2.Identify Resource Need (Gap)  Forecast future supply capability  Forecast future customer demand  Calculate Load and Resource Balance (Load vs. Supply) –Stochastic Modeling 3.Identify and Evaluate Candidate Resources  Identify and characterize generic supply side resources  Identify and characterize demand side resources (e.g., conservation)  Create candidate “portfolios” of resources for analysis 4.Conduct Computer Model Simulation of Resource Portfolios  Utilize methods to consider risk and uncertainty  Rank resource portfolios on the basis of least cost and least risk  Identify Preferred Resource Portfolio

21 21 Cushman Bonneville Power Administration Priest Rapids GCPHA Misc. Other Wynochee Nisqually Cowlitz Identify Resources

22 22 Identify Load and Resource Gap aMW Average Water Surplus/Deficit

23 23 The Basic IRP Process 1.Identify / Evaluate Goals and Objectives 2.Identify Resource Need (Gap)  Forecast future supply capability  Forecast future customer demand  Calculate Load and Resource Balance (Load vs. Supply) –Stochastic Modeling 3.Identify and Evaluate Candidate Resources  Identify and characterize generic supply side resources  Identify and characterize demand side resources (e.g., conservation)  Create candidate “portfolios” of resources for analysis 4.Conduct Computer Model Simulation of Resource Portfolios  Utilize methods to consider risk and uncertainty  Rank resource portfolios on the basis of least cost and least risk  Identify Preferred Resource Portfolio

24 24 Alternative Resources

25 25 The Basic IRP Process 1.Identify / Evaluate Goals and Objectives 2.Identify Resource Need (Gap) Forecast future supply capability Forecast future customer demand Calculate Load and Resource Balance (Load vs. Supply) Stochastic Modeling 3.Identify and Evaluate Candidate Resources Identify and characterize generic supply side resources Identify and characterize demand side resources (e.g., conservation) Create candidate “portfolios” of resources for analysis 4.Conduct Computer Model Simulation of Resource Portfolios Utilize methods to consider risk and uncertainty Rank resource portfolios on the basis of least cost and least risk Identify Preferred Resource Portfolio

26 26 Final Thoughts Integrated resource planning is becoming both easier and more difficult. Easier in that regulations are limiting resource choices More difficult in that regulations continue to evolve requiring planners to factor in political/regulatory risk along with more traditional risks:  fuel cost, counter party risk, electric price volatility, hydro variability, transmission availability, forced outages, etc.

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