Pacific Northwest Resource Adequacy Standard

1. Pacific Northwest Resource Adequacy Standard GRAC Meeting October 23, 2008

2. Outline • What makes up the Northwest power supply? • What is a “resource adequacy” standard? • Didn’t we already have one? • Why do we need (a new) one? • What exactly is it? • How is it enforced? • What is the status of the power supply? • How does it compare to last years assessment? • How does this compare to other reports? Resource Adequacy Standard

3. What makes up the Northwest Power Supply?

4. Firm Generating Resources 1% Resource Adequacy Standard

5. Monthly Shape of River Flowsand NW Electricity Demand Resource Adequacy Standard

6. Comparison of Storage and Runoff Volumes Resource Adequacy Standard

7. Variability in NWHydroelectric Generation Resource Adequacy Standard

8. What is a “resource adequacy” standard?

9. Three Components toKeeping the Lights On • Resource and fuel availability • Bulk delivery – high voltage transmission • Distribution – low voltage transmission Most outages are due to distribution Resource Adequacy Standard

10. What is resource adequacy? • Physical adequacy The region is assured that, in aggregate, load-serving entities have sufficient power resources to satisfy forecast future loads with an acceptable risk of curtailment • Economic adequacy The region is assured that, load-serving entities have sufficient power resources to satisfy forecast future loads with an acceptable risk of high cost years Resource Adequacy Standard

11. Build vs. Buy • Building more resources increases average cost but reduces risk of high cost years • Relying more on the market reduces average cost but increases the risk of high cost years Resource Adequacy Standard

12. Objectives for anAdequacy Standard • Transparent and easy to calculate • Linked to a more sophisticated analysis (like a Loss-of-load-probability assessment) • Provide adequate protection against • Unwanted curtailments and • High and/or volatile prices Resource Adequacy Standard

13. Didn’t we already have one?

14. Historic NW Planning Criteria • Average annual load/resource balance of zero • Critical water hydroelectric generation • No spot-market supply • No non-firm resource generation • But . . . Resource Adequacy Standard

15. Historic NW Planning Criteria • But, we could “borrow” energy stored in reservoirs by backing it up with agreements to curtail future loads, if necessary. • This moves away from a strict “critical-water” standard, without adding additional risk. Resource Adequacy Standard

16. Historic NW Planning Criteria • However, the region didn’t really plan to these criteria • The region’s load/resource balance steadily grew more and more deficit throughout the 1990s. • Why were utilities not more concerned? Resource Adequacy Standard

17. Historic NW Energy L/R Balance Resource Adequacy Standard

18. What, Me Worry? • Nearly 4,000 MWa more energy under average water conditions (vs. critical). • Over 7,000 MW of transmission capacity connecting the NW and the SW. • A large SWwintersurplus capacity is forecast for some time (recall that the SW peaks in summer and the NW peaks in winter). Resource Adequacy Standard

19. Why do we need one?

20. Why Now? • West Coast electricity crisis of 2000-01 • 2005 Energy Bill • Increasing complexity of the power supply • IPP and spot market generation • Integrating wind • Added constraints on hydro • Increasing summer loads • Council’s Fifth Power Plan Resource Adequacy Standard

21. What Happened Leading Up to 2001? • Very little resource development in the 1990s • Dysfunctional California market • Second driest year in 2001 • Led to a situation where the NW was short and could not make it up with better-than-critical hydroelectric generation or imports Resource Adequacy Standard

22. What Happened in 2001? • DSI loads were purchased • BPA curtailed fish bypass spill • Utilities forced to acquire very expensive resources (i.e. diesel generation) • Some load lost due to economic considerations • Region got through – but not the way it would have liked to! Resource Adequacy Standard

23. What’s Happened Since? • NW demand is still about 1,500 MWa lower (mostly DSIs) • Over 9,000 MW of new generating capacity • Turned the annual L/R deficit of 4,000 MWa into a large surplus Resource Adequacy Standard

24. Resource Development Since 2000 Resource Adequacy Standard

25. What exactly is it?

26. Institutional Framework SMD FERC Reliability Title (Enforceable) States NERC (Voluntary) Energy Offices Council PUCS Regional Councils (WECC) Adequacy Forum State Standards(i.e. Cal) Power Pools Planning Committee CREPC 5th Plan Control Areas Reliability Subcommittee WRAT BPA Resource Adequacy Standard

27. Components of a Standard • Metric – something measurableAn assessment of available resources compared to expected loads • Threshold – acceptable value for the metricSet to yield a 5% loss of load probability Resource Adequacy Standard

28. Two Challenges • Energy Planning:Fuel (water) management to get us through the year • Capacity Planning:Machine capability to get us past peak hours of the day Resource Adequacy Standard

29. Metrics • Annual Needs – Annual average generating capability minus annual average load, referred to as the annual load/resource balance (in MWa) • Hourly Needs – Surplus hourly generating capability over expected sustained peak hourly load, referred to as the reserve margin (in percent) Resource Adequacy Standard

30. Thresholds • Energy – zero, i.e. loads and resources should be in balance, on average, over the year • Capacity – surplus percent required to cover • Operating reserves • Extreme weather event • Other contingencies Resource Adequacy Standard

31. Thresholds • Energy – Load/resource balance • Physical = 0 MWa • Economic = approx. 3,000 MWa • Capacity – Reserve margin • Physical Winter = 23% • Physical Summer = 24% • Economic = ? Resource Adequacy Standard

32. Current Energy Assumptions • Out-of-region market • About 200 MWa per year • Non-firm hydro • About 1,100 MWa per year • Uncommitted IPPs • Dispatched as regional resources limited by capacity assumptions • Wind • 30 percent of nameplate annually Resource Adequacy Standard

33. Energy Planning Adjustment Resource Adequacy Standard

34. Current Capacity Assumptions • Out-of-region market • 3,000 MW maximum in winter • None available in summer • Non-firm hydro • 2,000 MW in winter • 1,000 MW in summer • Uncommitted IPPs • Full availability in winter • 1,000 MW maximum in summer • Wind • 5 percent over the sustained peak period Resource Adequacy Standard

35. How is it enforced?

36. AdequacyImplementation Plan • Power supply adequacy will be accessed on a regional basis • Three years out • Five years out • Voluntary participation – non-binding standard Resource Adequacy Standard

37. Implementation Plan > Econ < Econ> Phys 3 Years Out < Phys > Econ < Econ>Phys 5 Years Out < Phys Resource Adequacy Standard

38. AdequacyImplementation Plan • “Green light” – Regional power supply is adequate • “Yellow light” warning – economic standard is not met in either the 3rd or 5th year or if the physical standard is not met in the 5th year. • “Red light” warning – the physical standard is not met in the 3rd year. Resource Adequacy Standard

39. Red-light Warning Actions • Heavily publicized adequacy report • Initiate a process to validate the data • Instigate public meetings to consider possible actions Resource Adequacy Standard

40. What is the status of the Northwest power supply?

41. Adequacy Assessment Resource Adequacy Standard

42. How does it compare to last year’s assessment?

43. Adequacy Assessment - Energy Resource Adequacy Standard

44. Adequacy Assessment- Capacity Sustained Period changed from 50-hours in 2007 to 18-hours in 2008. Resource Adequacy Standard

45. Resource and Load Assumptions for 2013 Resource Adequacy Standard

46. Load Differences for 2011 Resource Adequacy Standard

47. How does it compare to other regional reports?

48. Load/Resource Balance (2011) *Load includes firm exports minus firm imports. Resource Adequacy Standard