Effects of Alternative Scenarios on Sixth Power Plan

1. Effects of Alternative Scenarios on Sixth Power Plan Northwest Power and Conservation Council Whitefish, MT June 2009

2. Scenarios • Base case • Low Conservation • High Conservation • Carbon Policy Explorations • Suspend Carbon Policy • No RPS • $100/ton Carbon Cost • $20/ton Carbon Cost • Close Existing Coal Plants • Dam Removal • Plug-In Electric Hybrid Vehicles (Remaining) • Climate Change (Remaining)

3. Base Case Assumptions • Forecasts of demand and fuel prices • RPS renewables are acquired • Carbon costs range from $0 to $100, grow over the planning period and reach average of $50 per ton by 2030 • Discretionary conservation limited to 160 average megawatts per year, phased in to 85% penetration maximum

4. Limitations of Carbon Price Analysis • Carbon pricing policy is modeled as a tax on carbon emissions from generation • The costs do not consider how the revenues might come back to utilities or citizens • Current cap and trade proposals would have different effects • Granting free carbon allowances to emitters will reduce the cost impact to utilities • Any actual costs of emissions themselves are not captured in the analysis, i.e. the benefits of the reductions are not counted

5. Translating Costs to Rates and Bills • Costs minimized in the Power Plan are not consumer rates or bills • Not all costs are included, only future costs that are affected by the plan • Planning costs exclude existing capital costs of power plants and T&D infrastructure • Not all conservation costs are paid by utilities, plan counts all of them

6. Low Conservation Case • Purpose • To test the effect of acquiring conservation more slowly than the base case • Assumptions • Acquisition of discretionary conservation limited to 100 MWa per year, instead of 160 MWa in the base case • Lost-opportunity conservation developed more slowly

7. Effects of Low Conservation Case

8. Findings: Low Conservation Case • Cost of the power system increases by 8% • Carbon emissions increase by 11 to 26% depending on accounting • Slightly increased reliance on renewable generation, and more natural gas CCCTs • Conservation is reduced by over 20% compared to the base case

9. High Conservation Case • Purpose • To test the effect of accelerated conservation acquisition • Assumptions • Limit on acquisition of discretionary conservation increased to 220 MWa per year, instead of 160 MWa in the base case • Same increase in ramp as the reduction in the low conservation case, (i.e. 60 MWa)

10. Effects of High Discretionary Conservation Case

11. Findings: High Conservation Case • Relatively little effect on cost or carbon emissions (available discretionary conservation is just achieved sooner) • Slightly increased reliance on renewable generation • Fewer natural gas SCCTs optioned

12. No-Carbon-Policy Case • Purpose • To provide a basis for answering questions about the cost of reducing carbon emissions • Assumptions • No renewable portfolio standards • No renewable energy credits • No exposure to future carbon cost uncertainty

13. Effects of Suspended Carbon Policy

14. Findings: Suspend Carbon Policy Case • NPV cost of the power system reduced by almost half (47%) • Rates reduced by 12% to 25% • Carbon emissions grow to 14% above 2005 level • Little reliance on renewable generation, greater development of natural gas • Conservation is only reduced by 7% from base case

15. $100 a Ton Carbon Cost • Purpose • To consider how the resource strategy might be change if a high carbon cost future were assured rather than just a liklihood • Assumptions • A known $100 per ton carbon cost instead of uncertain costs between $0 and $100 • RPS goals assumed to be met • RECs are retained by utilities, i.e. wind costs are not reduced by REC value

16. $100 CO2 Cost Case * * Run on a previous base case

17. Findings: $100 Per Ton CO2 Cost * • Power system cost increased by 45% • Carbon emissions reduced by 25% from the base case • Small effects on conservation or renewable generation • Six times more natural gas CCCTs optioned, no SCCTs optioned • Base load coal being displaced

18. No Renewable Portfolio Standards • Purpose • To assess the role of RPS policies relative to carbon pricing strategies • Assumptions • RPS requirements eliminated • Wind credited with REC value • Region still faces base case carbon price uncertainty

19. No RPS Case * Includes all wind because of no RPS assumption

20. Findings: No RPS Case • Small reduction in cost • Small increase in carbon emissions • Slightly increased conservation • Renewable generation is difficult to compare, but appears that about the same amount of wind is developed • Natural gas resources are optioned a little earlier, with slightly more SCCTs

21. Retire Coal Plants Early • Purpose • To compare the cost and effectiveness of a coal retirement strategy to carbon pricing risk of the base case • Assumptions • Existing coal plants are phased out beginning in 2012 through 2020 • RPS and carbon cost uncertainty remain in place

22. Retire Coal Plants Early Case * Numbers based on immediate closure assumption and old base case

23. Findings: Retire Coal Plants Early • Comparison is difficult until new case finishes • Significant and more certain carbon emission reductions • Higher cost to replace coal plants • Large increase in CCCTs to replace coal generation

24. Dam Removal Case • Purpose • To test the value of preserving existing carbon free electricity resources • Assumptions • Lower Snake River dams are removed in about 10 years • Model determines how to meet energy and capacity needs

25. Dam Removal Case

26. Findings: Dam Removal Case • Cost of power system increases 7% • Three times as many natural gas CCCTs are optioned • Small increase in carbon emissions • Little effect on conservation or renewable generation

27. Sensitivity of the Base Case to Varying Carbon Costs • Purpose: • To test the sensitivity of the base case resource plan to changing carbon costs (without uncertainties in all variables) • Assumptions: • Operate the RPM without uncertainty to test power system response to changing carbon costs

28. Effect of Carbon Priceon Emissions

29. Findings on Carbon Emissions • Base case reduces carbon emissions below 1990 levels by 2030 • Without carbon policy, emissions would continue to grow, although more slowly • RPS is consistent with least risk plan in the face of carbon cost uncertainty • High ($100) carbon cost would reduce emissions to 2/3 of 1990 levels by 2030

30. Findings on Carbon Emissions –Continued • Retiring the existing regional coal plants would reduce carbon emissions to 40% of 1990 levels by 2030, at lower cost to the power system than carbon penalties (although penalties would include some compensating revenues to the region) • Removing 1,200 MWa of hydropower capability would increase both cost and carbon emissions

31. Findings on Conservation • Lower conservation acquisition would increase both cost and carbon emissions • Faster conservation acquisition would have relatively little effect on total conservation • Less conservation available at high cost end of the potential • Discretionary conservation is achieved more quickly, but total is still limited

32. Additional Cases to Add • Impacts of potential climate change • Effects of Plug-in hybrid vehicles • Lower known CO2 costs ($20) • Revisions to • $100 carbon price • Coal plant retirement