Input Development for SPSG Scenarios

1. Input Development for SPSG Scenarios November 13, 2014 Arne Olson, Partner Nick Schlag, Sr. Consultant

2. Topics for Discussion • Carbon capture & sequestration technologies • Enhanced geothermal • Load modifications

3. IGCC with CCS

4. Cost Reductions – IGCC w/ CCS • Reference Case cost: $8,200/kW • Consistent with expected cost of Kemper County plant • Does not reflect significant technological progress/learning • As in prior study cycle, E3 recommends using the Reference assumptions in all scenarios except Scenario 2 • Scenario 2 narrative allows for a breakthrough in CCS technology IGCC w/ CCS Capital Cost by Scenario ($/kW) Technology breakthrough $8,200 $4,800 $8,200 No change from Reference Case $8,200 $8,200

5. Cost Reduction Recommendations from 2032 • In 2012, E3 chose a 40% reduction for IGCC with CCS technology to represent a “breakthrough” based on the lowest available cost estimates for the technology • This level of cost reduction would also render IGCC w/ CCS technology competitive with traditional gas CCGT in a high carbon price future ($100/ton) Origin of E3’s Original Recommendation Slide from E3 presentation to MDTF, October 2, 2012

6. Pre- vs. Post-Combustion CCS • Availability of cost estimates for both technologies are limited: • Kemper: $5.6 billion for 580 MW unit ($9,600/kW) • Boundary Dam: $1.24 billion for 110 MW unit ($11,200/kW) • WA Parish: $1 billion for 250 MW unit ($4,000/kW) • Other public sources do not suggest substantial differences between current costs for pre- and post-combustion CCS: All costs have been adjusted to reflect AFUDC costs and are expressed in 2014 $

7. Enhanced Geothermal

8. Enhanced Geothermal Costs • Cost estimates for enhanced geothermal systems vary widely and are highly site-specific: “NREL Base Case”costs reflect EGS systems and are obtained from Updated US Geothermal Supply Characterization and Representation for Market Penetration Model Input (Oct 2011)

9. Enhanced Geothermal Costs • Based on NREL study, a 30% capital cost reduction in EGS technology is plausible • Cost reduction could be applied to EGS technologies in Scenarios 2 & 4

10. Load Forecasts

11. Components of Load Forecast • Three independent parameters may drive differences in load between scenarios: • How much to increment/decrement Reference Case load forecasts to capture impacts of differences in economic conditions on underlying load growth? • How much incremental energy efficiency (beyond that embedded in Reference Case) to include? • How much policy-driven electrification load to include? • Assumptions used in 2032 scenarios provide a useful starting point for a framework to develop updates GOAL: Review assumptions used in 2032 load forecasts to inform development of 2034 load forecasts

12. Changes in Underlying Load Growth (2032 Study) • In 2032 study, WECC-wide growth rates were adjusted by ±0.4%/yr between 2022-2032 to reflect differences in underlying economic growth: • Scenarios 1 & 2: +0.4% • Scenarios 3 & 4: -0.4% WECC-Wide CAGR Assumptions, 2022-2032 1.9% 1.9% 1.5% 1.1% 1.1% Slide summarizes assumptions from 2032 study

13. Changes in Incremental Energy Efficiency (2032 Study) • LBNL’s 2032 High DSM load forecast served as the basis for assumptions related to incremental energy efficiency • Assumes average efficiency of residential/ commercial end uses in 2032 equals that of today’s best available technology • Savings reflected in the High DSM forecast scaled to reflect scenario narratives: • Scenarios 1 & 3: no additional EE • Scenario 2: very aggressive EE • Scenario 4: moderate incremental EE WECC-Wide Incremental Efficency (2032 Study) 100% of LBNL 2032 High DSM forecast savings (~21% load reduction) n/a n/a 50% of LBNL 2032 High DSM forecast savings (~11% load reduction) n/a Slide summarizes assumptions from 2032 study

14. Changes in Electrification (2032 Study) • Additional load in Scenario 2 driven by electrification of end uses across all sectors, motivated by trend towards deep decarbonization pathways • Additional load in Scenario 4 assumed to result from growing penetrations of plug-in electric vehicles WECC-Wide Electrification Load (2032 Study) +160 TWh (~13% load increase) n/a n/a +50 TWh (~5% load increase ) n/a Slide summarizes assumptions from 2032 study

15. 2032 Load Forecast – Building Blocks • Scenario-specific load adjustments yield a range of load assumptions for studies: • Implied growth rates vary from 0.62%/yr (Scenario 4) to 1.75%/yr (Scenario 2) Slide summarizes assumptions from 2032 study

16. 2032 Load Forecast - Results • Load levels vary widely across scenarios: Slide summarizes assumptions from 2032 study

17. Thank You! Energy and Environmental Economics, Inc. (E3)101 Montgomery Street, Suite 1600San Francisco, CA 94104Tel 415-391-5100Web http://www.ethree.com

18. Scenario 2 Electrification: Review of Long-Term GHG Reduction Studies • Assume incremental electrification increases (post-DSM) demand by 20% in 2032 due to electrification across all sectors • Studies demonstrate what would be needed to achieve long-term GHG reductions (rather than a forecast of what’s likely given current policies & trends): • U.K. Department of Energy and Climate Change, “2050 Pathways Analysis,” July 2010. • California Council on Science and Technology, “California’s Energy Future: The View to 2050,” May 2011. • Williams, et al. “The Technology Path to Deep Greenhouse Gas Emissions Cuts by 2050: The Pivotal Role of Electricity,” Science (2012) (written by E3 colleagues and LBNL staff). Comparison of electrification as a share of that year’s total electricity demand

19. Scenario 4 Electrification : National Academies Press Study Scaled to the WECC • Nat’l Academies Study = 11.4 million light-duty vehicles (LDVs) by 2032 in WECC • 17% of fleet • Equal to ~ 46 TWh of incremental electricity load in WECC in 2032 assuming fully-electric vehicles use ~4,000 kWh/yr National Academies Press report, “Transitions to Alternative Transportation Technologies – Plug-in Hybrid Electric Vehicles,” (PHEVs), (2012).