KEY FINDINGS AND RESOURCE STRATEGY

The Council’s Power Plan Goal - Ensure an adequate, efficient and affordable

regional power system Major Components Forecast of regional electricity demand over the next 20

years A “least cost with acceptable risk” Resource Strategy Regional action plan to implement Resource Strategy

Use By statute, plan guides Bonneville Power Administration’s

resource decisions By tradition, plan serves as an independent reference for

all of the region’s utilities, regulatory commissions and policy-makers

2

The Seventh Power Plan – Major Issues

3

Impact of announced coal-plant retirements on need for new resource development

Centralia 1 & 2 – 1340 MW

Boardman –550 MW

North Valmy – 522 MW

Implications of and options for addressing EPA’s Clean Power PlanHow to best meet regional need for capacity (i.e., peaking) resources

The Region’s Population and Economy Are Expected To Grow

114% 120%127% 126%

136%

0%

20%

40%

60%

80%

100%

120%

140%

Population Employment Households CommercialFloor Space

IndustrialOutput

Perc

ent

Gro

wth

201

5 to

203

5

4

Key Finding

Energy Efficiency and Demand Response can meet nearly all growth in energy and capacity needs

5

Key Finding:Energy Efficiency Meets Load Growth Over The Next

Two Decades

-

5,000

10,000

15,000

20,000

25,000

30,000

2015 2020 2025 2030 2035

Regi

onal

Loa

d (A

vera

ge M

egaw

atts

)

6

Regional Load Growth Met with Energy Efficiency

Regional Load Net of Energy Efficiency

Load Reduction from Federal StandardsAdopted Post-Sixth Power Plan

Northwest Loads After Accounting for Energy Efficiency Are Forecast To Remain At or Below

Current Levels Until 2035

0

5,000

10,000

15,000

20,000

25,000

2001 2006 2011 2016 2021 2026 2031

Annu

al E

lect

ricity

Loa

ds

(ave

rage

meg

awat

ts)

7th Plan Net Load After Energy Efficiency

6th Plan Net Load After Energy Efficiency

Actual Loads

7

Key Finding:Least Cost Resource Strategies Rely on Conservation and Demand

Response to Meet Nearly All Forecast Growth in Regional Energy and Capacity Needs

-

1,000

2,000

3,000

4,000

5,000

6,000

2015 2020 2025 2030 2035

Cum

ulat

ive

Reso

urce

Dev

elop

men

t (a

MW

)

Wind

Solar

Geothermal

Natural Gas

Energy Efficiency

8

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2015 2020 2025 2030 2035

Cum

ulat

ive

Reso

urce

Dev

elop

men

t (M

W)

Renewable ResourcesDemand ResponseNatural GasEnergy Efficiency

Why the Seventh Power Plan Relies on Energy Efficiency and Demand Response Resources

9

Because they cost less!

All Resource Cost – Energy

$0 $20 $40 $60 $80 $100 $120 $140 $160

Energy Efficiency (Average Cost w/ T&D Credit)

Energy Efficiency (Average Cost w/o T&D Credit)

Solar PV - Low Cost S. ID

Natural Gas - CCCT Adv1

Natural Gas - CCCT Adv2

Solar PV - S. ID

Wind -MT w/ new transm.

Wind - MT w/ Transm. Upgrade

Wind - Colum. Basin

Natural Gas - Frame GT East

Solar PV- S. ID w/ Transm. Expan.

Natural Gas - Recip Engine East

Natural Gas - Aero GT East

Real Levelized Cost (2012$/MWh)

Capital O&M + Property Taxes + Insurance Fuel + Transmission

10

All Resource Cost – Peak Capacity

$0 $50 $100 $150 $200 $250 $300 $350 $400

Demand Response Price Block 1Demand Response Price Block 2Demand Response Price Block 3

Solar PV - Low Cost S. IDNatural Gas - Frame GT East

Natural Gas - CCCT Adv1Demand Response Price Block 4Natural Gas - Recip Engine East

Natural Gas - Aero GT EastNatural Gas - CCCT Adv2

Solar PV - S. IDWind - Colum. Basin

Solar PV- S. ID w/ Transm. Expan.Wind -MT w/ new transm.

Wind - MT w/ Transm. Upgrade

Real Levelized Cost (2012$/kW-yr)

Capital O&M + Property Taxes + Insurance Fuel + Transmission

11

Key Finding

Demand Response resources should be developed to meet regional peak demands

12

Key Finding:There is a high probability that at least 600 MW of Demand Response

should be developed across all scenarios tested

-

500

1,000

1,500

2,000

2,500

3,000

2015 2020 2026 2031

Cum

ulat

ive

Dev

elop

men

t (M

W)

Existing Policy Social Cost of Carbon - MidRangeRetire Coal and Inefficient Gas Retire CoalRetire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New GasRegional RPS @ 35%

13

Key Finding:The Probability and Amount of Demand Response Deployment Varies Over a Wide

Range, But There is a Very High (70%+) Probability of Needing at least 600 MW

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Prob

abili

ty o

f Dep

loym

ent

Deployment Level (Winter Peak MW)Existing Policy SCC - MidRangeRetire Coal Retire Coal w/SCC_MidRangeRetire Coal w/SCC_MidRange No New Gas Increase Market RelianceNo Demand Response Regional RPS @ 35%Lower Conservation

14

Minimum Probability of 600 MW DR Deployment by 2021 is 70%

Key Finding

Retiring coal plant generation can be replaced by greater reliance on existing natural gas plants very limited development of new gas-fired generation

15

Key Finding:Existing Natural Gas Offsets Announced Coal Plant

Retirements, Resulting in Lower CO2 Emissions

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2015 2020 2025 2030 2035

Exis

ting

Gas

Dis

patc

h (a

MW

)

Lower Conservation Existing Policy

Social Cost of Carbon - Mid-Range Retire Coal

Retire Coal w/SCC_MidRange Regional RPS @ 35%

16

Key Finding No immediate need to acquire or

build new generating resources Unless, regional energy efficiency and

demand response goals are not achieved

ORUnless, additional coal plants are

retired

17

Probability of Needing New Natural Gas Generation by 2021

0% 25% 50% 75% 100%

No Demand Response

Retire Coal w/SCC_MidRange

Lower Conservation

Retire Coal

Retire Coal and Inefficient Gas

Regional RPS @ 35%

Existing Policy

Increased Market Reliance

Social Cost of Carbon - MidRange

18

Key Finding

Resource strategies that maximize the use of existing regional resources to satisfy the region’s resource adequacy standards are lower cost, require less resource development and produce fewer emissions

19

Key Finding: Net Exports (Exports-Imports) Are Strongly Influenced By

Regional Resource Development

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

2015 2020 2025 2030 2035

Net

Exp

orts

(aM

W)

Existing Policy Social Cost of Carbon - Mid-Range

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC_MidRange Regional RPS @ 35%

20

Key Finding

EPA carbon emission reduction regulations can be met regionallyHowever, some states, especially

Montana, face significant challenges

21

Key Finding:Regional Annual Average CO2 Emissions for Least-Cost

Resource Strategies Are Below EPA’s Emission Limits

-

5

10

15

20

25

30

35

40

2015 2020 2025 2030 2035Annu

al A

vera

ge C

O2

Emis

sion

s (M

MT)

No Coal RetirementExisting PolicySocial Cost of Carbon - Mid-RangeReire Coal w/SCC MidRange & No New Gas

22

Key Findings:Annual Regional power system CO2 emissions could be reduced by 70 % by retiring

all existing coal plants, and 80% if these plants were replaced with Renewable Resources

10

16

16

18

21

26

36

41

47

54

- 20 40 60

Retire Coal w/SCC_MidRange & No New Gas

Retire Coal and Inefficient Gas

Retire Coal

Retire Coal w/SCC_MidRange

SCC - Mid-Range

Regional RPS at 35%

Existing Policy

Develop 55% Less Energy Efficiency

No Coal Retirement*

PNW Power System Historical Emissions…

CO2 Emissions in 2035 (MMT)*Scenario assumes Centralia, Boardman and North Valmy are not retired.

23

70%

Key Finding:The Lowest Cost Policies for Reducing Regional Power System CO2 Emissions Impose

A Cost on Carbon, The Highest Increase Renewable Portfolio Standards

$349

$170

$100

$78

$23

($11)

($50) $0 $50 $100 $150 $200 $250 $300 $350 $400

Regional RPS at 35%

Retire Coal and Inefficient Gas

Retire Coal w/SCC_MidRange & No New Gas

Retire Coal

Retire Coal w/SCC_MidRange

SCC - Mid-Range

PV Carbon Emissions Reduction Cost ( 2012$/MT)

24

Key Finding: Increased renewable portfolio standards are not necessary to comply at the regional level with recently promulgated federal carbon dioxide emissions

regulations, nor are they an element of a regional least cost resource strategy

Why Increasing RPS Isn’t the Least Cost Option for Reducing CO2 Emissions RPS don’t reduce coal use RPS don’t change the fact that the “wind

don’t blow and the sun doesn’t shine all of the time” RPS lower the amount of cost-effective energy

efficiency

25

Resource Strategy Energy Efficiency Development

1400 aMW by 2021 3000 aMW by 2026 4300 aMW by 2035

Expand Use of Demand Response Develop at least 600 MW of demand response resources by 2021

Natural Gas Increase use of existing gas generation to offset coal plant retirements While there is a very low probability of regional need for new gas-fired

generation prior to 2021, individual utility circumstances and need for capacity and other ancillary services may dictate development

26

Resource Strategy Renewable Resources

Develop local renewable alternatives that are cost-effective now Develop solar PV systems to comply with existing renewable portfolio standards,

especially in areas with increasing summer peak loads Conduct research on and demonstration of renewable energy with a more

consistent output like geothermal or wave energy

Carbon Policies Support policies that cost effectively achieve state and federal carbon dioxide

emissions reduction goals, while maintaining regional power system adequacy by: Develop the energy efficiency and demand response Replace retiring coal plants increased use of existing gas-fired generation. Dispatch existing regional generation to meet adequacy standards for energy and

capacity rather than to serve external markets No increasing the requirements of state renewable portfolio standards alone, since this

would not result in the development of the least cost resource strategy for the region nor the least cost resource strategy for reducing carbon at the regional level.

27

Resource Strategy Regional Resource Use

Continue to improve system scheduling and operating procedures across the region’s balancing authorities to maximize cost-effectiveness and minimize the need for new resources to integrate renewable generation

Improve use of existing regional resource to meet regional adequacy standards

Expand Resource Alternatives Energy efficiency Renewable with less variable output (e.g., enhanced geothermal, wave)

Adaptive Management

28

Questions?

Backup Slides

30

Carbon Dioxide Emission Reduction Policies Council Tested Multiple Policy Options for Reducing Carbon

Emissions Non-Pricing Policies Existing state and federal policies (RPS & CPP) Retire Coal (all plants beyond those plants already announced) Retire Coal and Inefficient Natural Gas (below 40% efficiency) Increase Regional RPS to 35% of All Retail Sales

Pricing Policies Assume carbon cost equivalent to Federal Government’s

estimate of the Social Cost of Carbon (SCC) Mid-Range SCC Estimate ($40/MT in 2016, escalating to $60/MT in 2035 95th Percentile SCC Estimate ($160/MT in 2016, escalating to $180/MT in

2035 Non-Pricing Combined with Pricing Policies Retire Coal w/MidRange SCC Retire Coal w/MidRange SCC and Restrict Development to

Renewable Resources

31

Key Finding:Carbon Pricing Policies Drive Cumulative Emissions Reduction and System Cost

0

50

100

150

200

250

300

350

400

450

500

$0

$20

$40

$60

$80

$100

$120

$140

Existing Policy Retire Coal SCC - Mid-Range Retire Coal w/SCC_MidRange Retire Coal w/SCC_MidRange & No New Gas

Cum

ulat

ive

Emss

ion

Redu

ctio

n (M

MT)

Pres

ent V

alue

Sys

tem

Cos

t (b

illio

n 20

12$)

Present Value Average System Cost (2012$)

Cumulative CO2 Emission Reduction Over Existing Policy Scenario

32

Summary of Carbon Reduction Policy Costs and Impacts

CO2 Emissions - PNW System 2016 - 2035 (MMT)

Cumulative Present Value

Average System Cost of Emission Reduction

(2012$)

Cumulative CO2 Emission

Reduction Over Existing Policy

- Scenario (MMT)

Incremental Emission Reduction

(MMT)

Incremental Average

System Cost

(billion 2012$)

Incremental Cost of CO2

Emission Reduction (2012$/MT)

Existing Policy $82 0 0 $0 $0

Retire Coal $98 197 197 $16 $81

SCC - Mid-Range $78 351 154 ($20) ($130)

Retire Coal w/SCC_MidRange $91 377 26 $13 $500 Retire Coal

w/SCC_MidRange & No New Gas $126 430 53 $35 $660

33

Key Finding: Increased renewable portfolio standards are not necessary to comply at the regional level with recently promulgated federal carbon dioxide emissions

regulations, nor are they an element of a regional least cost resource strategy

Why Increasing RPS Isn’t the Least Cost Option for Reducing CO2 Emissions RPS don’t reduce coal use RPS don’t change the fact that the “wind

don’t blow and the sun doesn’t shine all of the time” RPS lower the amount of cost-effective energy

efficiency

34

Two Carbon Emission Reduction Policies Result in Significant Renewable Resource Development

Average Annual New Renewal Resource Generation Dispatch 2015-2035Under Alternative Resource Strategies

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2015 2020 2025 2030 2035

Annu

al A

vera

ge D

ispa

tch

(aM

W)

Existing Policy Social Cost of Carbon - MidRange

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas

Regional RPS @ 35%

35

Neither of These Policies Significantly Reduce Coal UseAverage Annual Coal Generation Dispatch 2015-2035

Under Alternative Resource Strategies

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2015 2020 2026 2031

Annu

al A

vera

ge D

ispa

tch

(aM

W)

Existing Policy Social Cost of Carbon - MidRange

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas

Regional RPS @ 35%

36

However, Increased Reliance on Renewable Resources Does Reduce Reliance on Existing Natural Gas Generation

Average Annual Existing Gas Generation Dispatch 2015-2035Under Alternative Resource Strategies

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

2015 2020 2026 2031

Annu

al A

vera

ge D

ispa

tch

(aM

W)

Existing Policy Social Cost of Carbon - MidRange

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas

Regional RPS @ 35%

37

And, Increased Reliance on Renewable Resources Does Decrease New Gas-Fired Generation Development

Average Annual New Natural Gas Generation Dispatch 2015-2035Under Alternative Resource Strategies

-

500

1,000

1,500

2,000

2,500

3,000

2015 2020 2026 2031

Annu

al A

vera

ge D

ispa

tch

(aM

W)

Existing Policy Social Cost of Carbon - MidRange Retire Coal and Inefficient Gas

Retire Coal Retire Coal w/SCC MidRange Regional RPS @ 35%

38

Increased Reliance on Renewable Resources Produces Less Energy Efficiency Development By Lower Market Prices

Cumulative Energy Efficiency Development 2016-2035Under Alternative Resource Strategies

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

2015 2020 2026 2031

Cum

ulat

ive

Dev

elop

men

t (aM

W)

Existing Policy Social Cost of Carbon - MidRange

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas

Regional RPS @ 35%

39

As A Result, Increased Reliance on Renewable Resources (Without Also Retiring Coal Generation) Produces the Least Carbon Emission

Reductions of All Policies TestedAverage Annual Carbon Dioxide Emissions 2015-2035

Under Alternative Resource Strategies

-

5

10

15

20

25

30

35

40

45

2015 2020 2026 2031

Annu

al C

arbo

n D

ioxi

de E

mis

sion

s (M

MT)

Existing Policy Social Cost of Carbon - MidRange

Retire Coal and Inefficient Gas Retire Coal

Retire Coal w/SCC MidRange Retire Coal w/SCC MidRange and No New Gas

Regional RPS @ 35%

40