Preliminary Results with the Regional Portfolio Model

1. 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 2

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 3

4. Resources Available forSelection by the Model • CCCT (415 MW Nominal) • available 2011-2012 • 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 2011-2012 • 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 4

5. Resources Available forSelection by the Model • Nuclear • Biomass • Imported Wind with new transmission 5

6. Demand Response Programs 6

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. 7

8. Possible Studies 8

9. Overview • Overview • Conservation • Renewable Portfolio Standards • Carbon, carbon, carbon 9

10. Supply Curve for Discretionary Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation 090220.xls 10

11. Supply Curve for Lost Opportunity Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation 090220.xls 11

12. Annual Availability for Lost Opportunity Conservation Source: C:\Backups\Plan 6 Studies\Data Development\Conservation\Olivia Conservation 090220.xls 12

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 13

14. Overview • Overview • Conservation • Renewable Portfolio Standards • Carbon, carbon, carbon 14

15. Oregon RPS Obligations 15 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) 15

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

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

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 18

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 19

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 20

21. Overview • Overview • Conservation • Renewable Portfolio Standards • Carbon, carbon, carbon 21

22. State of the Distribution C:\Backups\Plan 6 NEC\Council Presentations\081113 GoToMeeting P4 on Carbon, PTC, REC Uncertainties\Carbon Tax stats for Maury and Jeff.xls 22

23. Carbon Measurement for the Regions Power Sector • Economic end effects for carbon control included • Average and TailVaR90 carbon production for two periods estimated • Aug 2022 - Aug 2025 • Aug 2026 - Aug 2029 • NPV cost of carbon penalty alone estimated • Permits some evaluation of “transfer cost issues” 23

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 CO2 per MWh) 24

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 25

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…. 26

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 27

28. End 28

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

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

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

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

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

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