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Proposed Avoided Cost for Cost-Effectiveness Determinations

Proposed Avoided Cost for Cost-Effectiveness Determinations. January 5, 2009. Picking the Cost-Effectiveness “Limit”. Deemed Measure cost-effectiveness analysis uses regional avoided cost assumptions

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Proposed Avoided Cost for Cost-Effectiveness Determinations

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  1. Proposed Avoided Cost for Cost-Effectiveness Determinations January 5, 2009

  2. Picking the Cost-Effectiveness “Limit” • Deemed Measure cost-effectiveness analysis uses regional avoided cost assumptions • Historically, these assumptions are consistent with the Council’s medium wholesale price forecast adjusted for: • Market price risk • Load uncertainty • Resource cost uncertainty • Fuel price uncertainty • Carbon control cost uncertainty

  3. Final 6th Plan Forecast of Future Wholesale Market Prices is Slightly Lower the Draft Plan

  4. This Is Due to Lower Forecast Natural Gas Prices and the Impact of RPS Resources

  5. Future Wholesale Market Prices Span a Wide Range

  6. Medium Market Prices Must Be Adjusted for Risk Before Use In Cost-Effectiveness Analysis • The “Right” Market Price forecast is one that results in the amount of conservation identified as cost-effective by the Resource Portfolio Model (RPM) over 20-yrs • Lost-Opportunity = 3090 MWa • Non-Lost Opportunity = 2870 MWa • Total = 5960

  7. Method for Selecting the “Appropriate” Market Price Forecast • Use Aurora Mid-C Market medium price forecast without carbon control cost • Add “conservation risk premium” from Resource Portfolio Model (RPM) • $50 /MWh for Lost-Opportunities • $??/MWh for Non-Lost Opportunities • Adjust Aurora price with premiums to reflect carbon control price until “mini-RPM” builds similar level of conservation as full RPM

  8. What’s the “mini-RPM” • Identical to full Resource Portfolio Model except all inputs are “deterministic” • Medium price forecast for gas and electricity • Medium load forecast • Expected value cost for resources, forced outage rates • Fixed carbon control cost and timing

  9. 6th Plan Medium Forecast w/No Risk Premium or Carbon Control Cost

  10. 6th Plan Medium Forecast with RPM Risk Premium without Carbon Control Cost

  11. 6th Plan Medium Forecast with RPM Risk Premium and Carbon Control Cost*

  12. 6th Plan Medium Forecast Compared to Forecast Adjusted for RPM Risk Premium and Carbon Control Cost *Assumes Flat Load Shape

  13. Levelized Avoided Cost-Limit for Lost-Opportunity Conservation Resource Installed in 2010 with Flat Load Shape and 20-year Expected Useful Life

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