Renewable Portfolio Standards: Landscape, Strategies, Cost ...
ECC Conf Presentation for Mike Kotara FINAL · 2016-08-25 · Overcoming the Cost Hurdle fR blEfor...
Transcript of ECC Conf Presentation for Mike Kotara FINAL · 2016-08-25 · Overcoming the Cost Hurdle fR blEfor...
General Session
Four Decades of Pursuing a Diversified Energy Portfolio at CPS EnergyCPS Energy
MIKE KOTARASenior Vice President
MIKE KOTARASenior Vice PresidentCPS EnergyCPS Energy
SPEAKERSPEAKER
CPS Energy BackgroundCPS Energy – Background• Electric & Gas utility serving the greater San Antonio area
• Oldest energy utility in Texas – Founded in 1860Oldest energy utility in Texas Founded in 1860• First service was gas lights in front of The Alamo• Celebrating 150 years of operation
• One of the largest municipally‐owned utilities in the U.S.g p y• 707,000 electric customers• 323,000 natural gas customers• 3,600 employees
• Outstanding customer satisfaction track record• Low electric rates – 2009 Residential rates averaged about 9¢/kwh
J.D. Power Survey – Southern Region 2008 2009 2010J.D. Power Survey Southern Region 2008 2009 2010
Electric Residential Customers 2nd 1st 3rd
Gas Residential Customers 2nd 1st n/a
CPS E ’ Vi i 2020CPS Energy’s Vision 2020• Goals for Renewable Energygy
• 1,500 MW of renewable energy capacity by 2020• 100 MW from renewable sources other than wind by 2020
• Goals for Energy Efficiency & Conservation• Save for Tomorrow Energy Plan (STEP) will help avoid 771 MW
of electric load growth by 2020g y
• Drive local economic development by maintaining retail electric rates at least 10%maintaining retail electric rates at least 10% lower than other major Texas cities
M i T k AMain Take-Aways• Energy diversification and energy independence have been cornerstones of CPS Energy’s strategy for the past four decades
R bl i i f t b t th• Renewable energy is growing fast, but there are challenges to overcome, and traditional energy sources are still important
• Uncertainty around natural gas prices is a significant risk for all new energy projects including nuclear, coal and
bl ll l drenewables, as well as plant upgrades
Four Decades of Energy Mix Diversification at CPS EnergyDiversification at CPS Energy
1970 1990Nuclear16.3%
1980
Gas – Steam Gas Steam
Coal30.9%
Gas – Steam
Coal25.2%
Gas – Steam100.0%
1,701 MW
Gas – Steam52.8%
4,632 MW
Gas Steam74.8%
3,452 MW
G CC
2010
Gas – CT & CC 10.2%
Renewables10.9%
Gas – Steam29.1%
2000
Gas – CC 9.4%
Nuclear14.8%
Nuclear16.4%
Coal33.5%
6,800 MW InstalledC it
Coal28.0% Gas –
Steam47.8%5,113 MW
Capacity
970 Megawatts of New Generation Capacity in 2010Generation Capacity in 2010
Spruce Unit 2 Braunig Peaking TurbinesSpruce Unit 2780 Megawatts
PRB Low-Sulfur Coal
Braunig Peaking Turbines190 Megawatts
Natural Gas / Fuel Oil
Diverse Energy Mix Keeps CPS Energy’s Residential Bills LowEnergy’s Residential Bills Low$0.19
$0 13$0.15$0.17
$0 09$0.11$0.13
Avg REP$/kw
h
$0.05$0.07$0.09
CPSE
Mar '08
Sep '08
Feb '09
May '09
Aug
'09
Nov
'09
Feb '10
May '10
Aug
'10
M S F M A N F M A
CPS’ Renewable Energy ProjectsProjects in Commercial OperationWind 709.0 MW
Landfill Gas 9.6 MW
Total 718 6 MW
Sweetwater 3 & 4 Wind
Total 718.6 MW
Projects in DevelopmentWind 150.0 MW
Desert Sky Wind
Solar 41.4 MW
Total 191.4 MW
Covel Gardens Landfill Gas
Western Ranch Solar I
Blue Wing Solar
CPS Energy is a leader in Renewable
Energy with more than 900 MW under
Penascal Wind
Papalote Creek WindCedro Hill Wind
than 900 MW under contract
Blue Wing Solar ProjectDeveloper – JuwisolarEquity Owner – Duke EnergyOff-Take – CPS EnergyScheduled COD – Dec. 2010Capacity – 14.4 MWDeal Structure – 30 yr PPASolar Technology – Thin FilmLocation – San Antonio, TX
Challenges for Renewable EnergyChallenges for Renewable Energy
Cost / FinancingCost / Financing
I t itt / F tiIntermittency / Forecasting– Financial Risk in ISO Markets
Transmission Congestion Riska s ss o Co gest o s
Cost of Renewable Energy is D i B t Still M E iDropping, But Still More Expensive
25
15
20
10
15
ents/
kWh
0
5
Ce
0
Nucle
ar
atura
l Gas
urch
ased
Po
wer
GCC
Coal
w/ C
CS Win
d
Solar
Th
erm
al
Na P IG
CPS Energy 2009 IRP Study
Overcoming the Cost Hurdle f R bl Efor Renewable Energy
Renewable energy’s costNatural Gas
4 0%RenewablesRenewable energy s cost
premium can be overcome by:
• Cost averaging with less expensive
4.0%Economic Purchases
0.4%
13.0%
resources in a larger portfolio
• Retail demand for “Green Power” at premium pricing
Coal44.8%
Nuclear37.7%at premium pricing
• Regulatory requirements such as Renewable Portfolio Standards (RPS) or Feed in Tariffs (FIT)
CPS Energy’s 2010 Forecast EnergyMi F R il El i S l(RPS) or Feed‐in‐Tariffs (FIT) Mix For Retail Electric Sales
(MWh)
Wind Energy Forecasting is a ChallengeFinancial Risk Worn by “Wind Takers” in ISO MarketsFinancial Risk Worn by Wind Takers in ISO Markets
450
500 300
Over-Scheduled at High Prices
300
350
400
450
150
200
250
MW
h)
150
200
250MW
50
100
150
MC
PE ($
/M
0
50
100
5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
-50
0
0:1
1:1
2:1
3:1
4:1
5:1
6:1
7:1
8:1
9:1
10:1
11:1
12:1
13:1
14:1
15:1
16:1
17:1
18:1
19:1
20:1
21:1
22:1
23:1
4/2/2010 --- 4/3/2010
SQ1 Schedule MCPE W SQ1 Generation
Under-Scheduledat Negative Prices
SQ1 Schedule MCPE - W SQ1 Generation
Top Uncertainties for New Energy Development & Plant Upgrades
Natural Gas Prices
G h G L i l iGreenhouse Gas Legislation
Cost and Availability of CapitalCost and Availability of Capital
Natural Gas Prices are the Biggest Unknownthe Biggest Unknown
Increasing Risk Duration
Capital Technology Carbon Fuel Cost
Nuclear
Natural Gas
New Coal w/CCS
Hi h Ri k M di Ri k L Ri kR l i Ri k L d High Risk Medium Risk Low RiskRelative Risk Legend
Weak Economy + Surplus of Shale Gas = Lower Gas PricesShale Gas Lower Gas Prices
High Degree of Uncertainty in Long-Term Gas Price ForecastingLong Term Gas Price Forecasting
13
14
10
11
12
8
9
10
$/m
mBt
u
5
6
7
$
42011 2015 2019 2023 2027 2031
2008 Spring 2009 Fall 2009 2010
CPS Energy IRP Studies
Key Factors for “Retrofit vs. Retire” Decisions for Existing Coal-Fired PlantsDecisions for Existing Coal Fired Plants
Expected remaining plant life and utilization factors– Natural gas prices/wholesale electric prices
Wi d b ild t– Wind energy build-out– New environmental regulations/constraints
Other standard variables (efficiency condition etc )– Other standard variables (efficiency, condition, etc.)Carbon pricing impact on CO2 emissionsCapital requirements for other regulatoryCapital requirements for other regulatory upgrades and efficiency/reliability upgrades
CPS Energy’s Analysis of JT Deely Plant Sho s Fa orable EconomicsPlant Shows Favorable Economics
Significant positive NPV under current long-range
Deely 1 Deely 2under current long-range forecast for natural gas prices
– Break-even natural gas price is more than 30% below the D 2009 f f 2015 2035
Capacity (MW) 430 430
COD 1976 1977
Fuel PRB Coal PRB Coal Dec-2009 forecast for 2015-2035
Significant positive NPV even under Waxman-Markey “High CO Price” scenario
Fuel PRB Coal PRB Coal
PM Control Baghouse Baghouse
SCR for NOx No 2011CO2 Price scenario
– $30-$109/ton vs. EPA forecast of $10-35/ton vs. CBO forecast $15-53/ton (2012-2030)
FGD for SOx No No
Analyzed retrofitting Deely 1 & 2 with FGD scrubbers and the 2nd SCR vs.
Significant positive NPV even with 27 GW of wind energy build out in Texas by 2018
FGD scrubbers and the 2 SCR vs. retiring the plant early and building a new natural gas H-class combined cycle plant
– ERCOT forecasts 19 GW of wind