CVP Cost Allocation Public Workshop – January 18, 2013

1. CVP Cost Allocation Public Workshop – January 18, 2013 “PLEXOS Methodology and Assumptions”

2. Methodology Summary • Estimate value of CVP power by comparing the differential costs for two scenarios: • With fully-functional CVP • Without CVP, but with replacement portfolio • Study is performed with CVP constraints modeled • PLEXOS is used to determine the difference in variable costs between the two scenarios • Capital and fixed operating costs are from another source

3. PLEXOS Overview • Fundamental market simulation model (supply and demand) • Minimizes total market cost for all variables: • Energy and ancillary services (AS) • Fuel and variable operating expenses • Emission costs (if modeled) • Wheeling costs and losses • Subject to 1000s of constraints: • System load and AS • Plant performance • Transmission capability • Uncertainty of variable-energy resources

4. Solving UC/ED using MIP • Unit Commitment and Economical Dispatch can be formulated as a linear problem (after linearization) with integer variables of generator on-line status Minimize Cost = generator fuel and VOM cost + generator start cost + contract purchase cost – contract sale saving + transmission wheeling + energy / AS / fuel / capacity market purchase cost – energy / AS / fuel / capacity market sale revenue Subject to • Energy balance constraints • Operation reserve constraints • Generator and contract chronological constraints: ramp, min up/down, min capacity, etc. • Generator and contract energy limits: hourly / daily / weekly / … • Transmission limits • Fuel limits: pipeline, daily / weekly/ … • Emission limits: daily / weekly / … • Others

5. Long-term security assessment Maintenance planning and outageassessment Mid-term simulation Resolve and price emission /fuel/ energy constraints Short–term simulation Full chronological simulation Integration of Mid- and Short-Term Constraints • PLEXOS includes three integrated algorithms: • Long-, mid-, and short-term • Three perspectives are seamlessly integrated • Mid-term simulation decomposes hydro, fuel, emission, and energy constraints for the short-term simulation • CALSIM monthly output decomposed into daily amounts for short-term

6. Detailed Generator Modeling • General chronological constraints modeled, i.e., • Minimum up and down time • Ramp up and down rate • Minimum capacity with hourly economic or must-run status • Reserve (regulation up/down, spinning and non-spinning) provision capacities • Start cost as a function of number of hours being down • Forbidden operation zone • User-specified fuel mixture / mixture ranges or model-determined fuel mixture • Heat Rate as a function of fuel types • Average heat rate for multiple loading points • Incremental heat rate for multiple loading points • Polynomial fuel-generation IO curve • Emission rate with removal rate • Initial commitment and dispatch status

7. Combined Cycle Modeling, continued Fuel=1.68e+9 Btu Energy content of electricity = 3412 Btu/kWh Gen=160 MWh ~ Duct Burner Fuel=1.45e+8 Btu Waste=1.134e+9 Btu HR=10500 Btu/kWh Efficiency=32.5% 1.96004e+9 Btu ~ Fuel=1.68e+9 Btu HR=10316 Btu/kWh Efficiency=33% Gen=160 MWh Boiler efficiency = 80% ~ Waste=1.134e+9 Btu HR=10500 Btu/kWh Efficiency=32.5%

8. PLEXOS Hydro Modeling • Inflows, storages, plants, and spills are modeled and optimized on an hourly basis • In terms of either acre-feet (volume) or MWh • The hydro contribution is maximized given energy and AS markets (or system requirements) • Hydro is fully integrated with the thermal (hydro-thermal integration) and is perfectly arbitraged against all available markets

9. Storage I ~ ~ ~ ~ ~ ~ ~ ~ ~ H 1 H 2 P/S 3 H 5 P/S 1 H 3 P/S 2 H 6 H 4 Storage II Storage VI Storage III Storage V An Example of Cascaded Hydro System Inflow Inflow Inflow Inflow Sea

10. LT-Plan: PLEXOS for Integrated Resource Planning • Alternative portfolio development methodology • Objective: Minimize net present value of forward-looking costs (i.e. capital, fixed operating and production costs) Cost ($) Total Cost C(x) + P(x) Capital Cost C(x) Production Cost P(x) Optimal Investment x* Investment x

11. Hydro Value • Energy • Ancillary services • Fast ramp (up and down) • No greenhouse gas

12. Primary Data Sources • WECC TEPPC (Transmission Expansion Planning Policy Committee) regional database (version PCO) • CA Utility LTPP (Long-Term Power Plan) revisions and updates for CA • CVP-specific information

13. Selected Examples of Data Input to PLEXOS • Simulation year – 2020 • Base year for dollars – 2010 • CA hydro aggregated in two zones • Northern and Southern California • CVP extracted from aggregated hydro

14. Data Inputs II • CAISO 2011-2020 Changes (MW) • Summer Peak Load • Summer peak load = 6,200 MW • Demand-side reductions = 8,100 MW • Net peak summer load = (1,900 MW) • Summer Generation Capacity • Retirements = 13,100 MW • New additions = 11,100 MW (Thermal, RPS) • Net summer capacity = 2,000 MW • primarily RPS and OTC replacement

15. Data Inputs III • CAISO 2011-2020 Changes (MW) • Renewable Portfolios • In-state = 14,200 MW • Out-of-state = 5,093 • In-state renewable types • Hydro = 0 MW • PV Solar = 4,600 MW • Solar Thermal = 3,600 MW • Wind = 5,034 MW • Out-of-state renewable • Wind = 5,000 MW

16. Data Inputs IV • Natural gas prices (2010 $) • PG&E Citygate -- $5.61 / MMBtu (delivery to burner-tip adds 7 to 23 cents / MMBtu) • SoCal Border -- $5.41 / MMBtu (delivery adds 44 cents / MMBTU) • Current Price (1/4/2013) -- $3.30 to $3.60 / MMBtu (source: California Energy Markets) • CO2 Emission Price (2010 $) • $36.30 (short-ton CO2) • CA Net Exchange (summer peak) • 16,400 MW

17. Questions?

18. Selected Acronyms • AS – Ancillary Services • CAES – Compressed air energy storage • CAISO – CA Independent System Operator • CO2 – Carbon dioxide • LTPP – Long-Term Procurement Plan • OTC – Once-Through Cooling • TEPPC – Transmission Expansion Planning Policy Committee (WECC regional database for market simulation purposes) • WECC – Western Electric Coordinating Council

19. References • LTTP data assumptions – http://www.caiso.com/Documents/2011-08-10_ErrataLTPPTestimony_R10-05-006.pdf