UNS Electric, Inc. Integrated Resource Plan March 1, … Preliminary Integrated Resource Plan March...
Transcript of UNS Electric, Inc. Integrated Resource Plan March 1, … Preliminary Integrated Resource Plan March...
UNSElectric
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UNSElectric,Inc.
2016PreliminaryIntegratedResourcePlan
March1,2016
2016PreliminaryIntegratedResourcePlan
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Foreword New environmental regulations, emerging technologies and changing energy needs have reinforced the importance of long‐term resource planning to UNS Electric and other electric utilities. Whatever the future may bring, our 2016 preliminary Integrated Resource Plan (“IRP”) outlines our strategy for ensuring that UNS Electric’s safe, reliable electric service remains a constant in our complex, evolving industry. We will continue to expand our use of cost‐effective renewable energy resources and energy efficiency programs for customers. In 2016, we’ll add 35‐megawatt (“MW”) of solar capacity at UNS Electric, increasing the total renewable energy portfolio to 62 MW. We also will expand our energy efficiency resources through several new programs available this year. In the future, demand response partnerships with customers could help UNS Electric manage peak load demands while reducing the need for new infrastructure. As requested by the Commission, this preliminary IRP report addresses the status of emerging resource options like energy storage technologies and small nuclear reactors. Although not all options are viable at this time, we will continue to assess their potential value as part of our resource planning process. Since filing its 2014 IRP, UNS Electric has strengthened its generating portfolio and reduced its reliance on the wholesale energy market through the purchase of a 138 MW share of the efficient natural gas‐fired Gila River Power Station in Gila Bend. Thefast‐ramping capability of this efficient resource makes it a critical compoment of our long‐term strategy to expand use of renewable resources. UNS Electric continues to evaluate the potential impact of the Clean Power Plan (“CPP”) issued last year by the U.S. Environmental Protection Agency. The resource plan outlined in this document should put us in a strong position to comply with the new rules, which would require a 32‐percent reduction in carbon dioxide (CO2) emissions from Arizona power plants. UNS Electric does not own or operate coal‐fired generators, so the CPP would not affect us as significantly as other electric providers. But the status of the CPP is in question after the U.S. Supreme Court issued a stay suspending enforcement of the rules pending further ligitation. UNS Electric’s continued evaluation of new resources is an important part of our efforts to provide safe, reliable and cost‐effective service to customers. We intend to provide more robust resource planning information for UNS Electric’s final IRP in 2017. David G. Hutchens President and CEO
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Acknowledgements
UNSElectricIRPTeam
VictorAguirre,Manager,ResourcePlanningJeffYockey,Manager,EnvironmentalandLong‐TermPlanningKevinBattaglia,LeadResourcePlannerLucThiltges,LeadResourcePlannerGregStrang,SeniorForecastingAnalystStephanieBrowne‐Schlack,SeniorForecastingAnalystDeniseRicherson‐Smith,Director,CustomerServices&Programs,CustomerCareCenterRonBelval,Manager,TransmissionPlanningJimTaylor,SeniorDirector,T&DOperationsJeffKrauss,Manager,RenewableEnergyJoeBarrios,Supervisor,MediaRelations&RegulatoryCommunicationsErikBakken,SeniorDirector,TransmissionandCorporateEnvironmentalServicesMikeSheehan,SeniorDirector,FuelsandResourcePlanning
IRPConsultantsandForecastingServices
PaceGlobalhttp://www.paceglobal.com/GaryW.Vicinus,ExecutiveVicePresident,‐ConsultingServicesMelissaHaugh‐ConsultingServicesAnantKumar‐ConsultingServicesWoodMackenzie‐ConsultingServiceshttp://public.woodmac.com/public/homeEPIS‐AuroraXMPSoftwareConsultingServiceshttp://epis.com/
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TABLEOFCONTENTS
Foreword.................................................................................................................................................................................................................3Acknowledgements............................................................................................................................................................................................4
CHAPTER1‐EXECUTIVESUMMARYIntroduction...........................................................................................................................................................................................................92016PreliminaryIntegratedResourcePlanRequirements............................................................................................................9UpdatesonUNSE’sResourcePlanningStrategySincethe2014IRP.........................................................................................10GilaRiverUnit3.................................................................................................................................................................................................10UNSE’sLong‐TermResourceDiversificationStrategy.....................................................................................................................10TransmissionResources.................................................................................................................................................................................11Achieving15%Renewablesby2025........................................................................................................................................................11SupportingFutureRenewableIntegration............................................................................................................................................12CompliancewiththeCleanPowerPlan...................................................................................................................................................13PlanningfortheFutureofEnergyEfficiency........................................................................................................................................18PowerGenerationandWaterImpactsofResourceDiversification...........................................................................................19
CHAPTER2‐LOADFORECASTGeographicalLocationandCustomerBase............................................................................................................................................21RetailSalesbyRateClass...............................................................................................................................................................................22LoadForecastProcess.....................................................................................................................................................................................23Methodology........................................................................................................................................................................................................23RetailEnergyForecastbyRateClass........................................................................................................................................................24PeakDemandForecast....................................................................................................................................................................................25
CHAPTER3‐LOADSANDRESOURCESFutureLoadObligations.................................................................................................................................................................................28ResourceCapacity.............................................................................................................................................................................................29ExpectedAnnualEnergy................................................................................................................................................................................30CommunityScaleRenewables.....................................................................................................................................................................31ExistingRenewableResources....................................................................................................................................................................31DistributedGeneration...................................................................................................................................................................................32OverviewofUNSRenewablePortfolio.....................................................................................................................................................33EnergyEfficiency...............................................................................................................................................................................................34ProgramPortfolioOverview.........................................................................................................................................................................35Transmission.......................................................................................................................................................................................................36
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CHAPTER4‐EMERGINGTECHNOLOGIESSmallModularNuclearReactors................................................................................................................................................................39ReciprocatingInternalCombustionEngines.........................................................................................................................................41TheFutureoftheDistributionGrid...........................................................................................................................................................43EnergyStorage....................................................................................................................................................................................................45Lazards’sStorageAnalysis:KeyFindings...............................................................................................................................................48CostCompetitiveStorageTechnologies..................................................................................................................................................48FutureEnergyStorageCostDecreases....................................................................................................................................................49
CHAPTER5‐OTHERRESOURCEPLANNINGTOPICSEnergyImbalanceMarket..............................................................................................................................................................................51IntegrationofRenewables.............................................................................................................................................................................53UtilityOwnershipinNaturalGasReserves............................................................................................................................................56
CHAPTER6‐FUTURERESOURCEASSUMPTIONSFutureResourceOptionsandMarketAssumptions..........................................................................................................................57GenerationResources–MatrixofApplications...................................................................................................................................58ComparisonofResources..............................................................................................................................................................................59LevelizedCostComparisons.........................................................................................................................................................................60RenewableTechnologies–CostDetails..................................................................................................................................................61ConventionalTechnologies–CostDetails..............................................................................................................................................62Lazard’sLevelizedCostofEnergyAnalysis:KeyFindings..............................................................................................................63CostCompetivenessofAlternativeEnergyTechnologies...............................................................................................................63TheNeedforDiverseGenerationPortfolios.........................................................................................................................................64TheImportanceofRationalandTransparentEnergyPolicies.....................................................................................................64RenewableElectricityProductionTaxCredit(“PTC”)......................................................................................................................65EnergyInvestmentTaxCredit(“ITC”).....................................................................................................................................................66ImpactsofDecliningTaxCreditsandTechnologyInstalledCosts..............................................................................................68ImpactsofDecliningPTCandTechnologyInstalledCosts.............................................................................................................69
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CHAPTER7‐MARKETASSSUMPTIONS&SCENARIOSMarketAssumptions........................................................................................................................................................................................70PermianNaturalGas........................................................................................................................................................................................70PaloVerdeMarketPrices...............................................................................................................................................................................702016IRPScenarios...........................................................................................................................................................................................71EnergyStorageCase.........................................................................................................................................................................................71SmallNuclearReactorsCase........................................................................................................................................................................71LowLoadGrowthorExpandedEnergyEfficiencyCase..................................................................................................................71ExpandedRenewablesCase..........................................................................................................................................................................72AdditionalProposedScenarios...................................................................................................................................................................72MarketBasedReferenceCase......................................................................................................................................................................72HighLoadGrowthCase...................................................................................................................................................................................72
CHAPTER8‐RISKANALYSISANDSENSITIVITIESFuel,MarketandDemandRiskAnalysis.................................................................................................................................................73PermianNaturalGas........................................................................................................................................................................................74PaloVerde(7x24)MarketPrices................................................................................................................................................................75LoadGrowthSensitivity.................................................................................................................................................................................76
CHAPTER9‐ACTIONPLAN2016–2017ActionPlan................................................................................................................................................................................77
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Executive Summary
Introduction
UNSElectric’s(UNSE’sortheCompany’s)2016preliminaryIntegratedResourcePlan(“IRP”)introducesanddiscussestheissuesthatUNSEplanstoanalyzeindetailforthefinal2017IntegratedResourcePlan.Thepurposeofthisreportistoprovideregulators,customersandotherinterestedstakeholdersanopportunitytounderstandthecurrentplanningenvironmentandprovidefeedbackontheCompany’sfutureresourceplanspriortothe2017FinalIRPsubmittalonApril1,2017.InadditiontoprovidingasnapshotofUNSE’scurrentloadsandresources,thisreportprovidesanoverviewofcurrentresourcecostassumptions,forwardmarketconditionsaswellasadiscussiononsomenewemergingtechnologies.ThisreportalsohighlightsanumberofchangesintheCompany’sresourceplanssincethe2014IRPanddiscussessomeofthenewinfrastructurerequirementsandpolicydecisionsthatmustbeaddressedoverthenextfewyears.
2016PreliminaryIntegratedResourcePlanRequirements
InaccordancewithDecisionNo.75269(DocketNo.E‐00000V‐15‐0094),theCommissionorderedtheArizonaloadservingentitiestofileapreliminaryIRPonMarch1,2016withthefinalIRPreportdueApril1,2017.ThisorderstipulatedthatthepreliminaryIRPincludesthefollowingtopics;
LoadForecast
LoadandResourceTable(includingtechnologydiscussion)
SourcesofAssumptionsandTechnologiesEvaluated
StatusupdateonCompany’splantoparticipateintheEnergyImbalanceMarket(“EIM”)
ScenariosRequestedin2014IRPDecision(No.75068)
o EnergyStorage
o SmallNuclearReactors
o ExpandedRenewables(includingdistributedresources):biogas,solar,wind,geothermal,etc.
o ExpandedEnergyEfficiency/demandresponse/integratedemandsidemanagement(whichshallincludetheeffectofmicro‐gridsandcombinedheatandpower)
ProposedSensitivities
FutureActionPlan
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Updates on UNSE’s Resource Planning Strategy since the 2014 IRP
GilaRiverUnit3
InDecember2014,TucsonElectricPower(“TEP”)andUNSEacquiredUnit3attheGilaRiverGeneratingStationfor$219million.GilaRiverUnit3isa550megawattnaturalgascombined‐cyclepowerplantlocatedinGilaBend,Arizona.Today,lownaturalgaspricesmakeGilaRiverUnit3oneoflowestcostgenerationassetsforbothTEPandUNSE.GilaRiver’sfastrampingcapabilities,alongwithitsreal‐timeintegrationintoTEP’sbalancingauthority,providebothTEPandUNSEwithanidealresourcetosupporttheintegrationoffuturerenewables.
UNSE’sLong‐TermResourceDiversificationStrategy
TheadditionofGilaRiver3boostedUNSE’sgeneratingcapabilitiestocoverasignificantamountofitsbaseloadandintermediatecapacityrequirements.UNSEiswell‐positionedtoshapeitsresourceportfoliomixmoreaptlytothefinaloutcomeoftheStateImplementationPlans(“SIP”)andtheCleanPowerPlan(“CPP”).UNSEiscommittedtofollowthroughonitslong‐termportfoliodiversificationstrategytotakeadvantageofothernear‐termopportunitiestocomplywiththeCPP,theArizonaEnergyEfficiencyStandardandtheArizonaRenewableEnergyStandard.UNSEwillstudythepotentialofstoragetechnologiesandnaturalgasgeneratingresourcesthatwillbeutilizedtomeetgrowingdemandandtohelpmitigatethechallengesthatarepresentedwiththeintermittencyandvariabilityofrenewableresources.UNSEplanstofilethesedetailsonitsdiversificationstrategyinthe2017FinalIRP.
Figure1‐UNSE’sLongTermResourceDiversificationStrategy
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Transmission Resources
UNSE’stransmissionresourcesincludeapproximately334milesoftransmissionlinesownedbyUNSE,long‐termtransmissionrights(Point‐to‐PointandNetworkservice)purchasedfromWesternAreaPowerAdministration(“WAPA”),TEP,andPoint‐to‐Pointtransmissionpurchasedfromothertransmissionprovidersonanadhocbasis.GivenUNSE’sdependenceonthird‐partytransmissionprovidersUNSEworkscloselywithWAPA’stransmissionplanninggrouptoensureadequatelong‐termtransmissioncapacityisavailabletoservetheMohaveserviceterritories.WAPArecentlyconductedanupdatedSystemImpactStudy(“SIS”)forUNSEtoaddresscurrentandfutureloadgrowthforecasts.BasedonWAPA’savailabletransmissioncapacity,theloadservingcapabilityforMohaveCountyissufficientlyabovetheloadprojectionswithinthestudyperiodofthe2017FinalIRP.InSantaCruzCounty,UNSEcompletedtheVailtoValencia115kVto138kVtransmissionupgradeinDecember2014.
Achieving 15% Renewables by 2025
UNSEplanstocontinuedevelopmentoflowcostrenewableprojectsthatprovidelong‐termvaluetoUNSE’sretailcustomersinMohaveandSantaCruzcounties.UNSEcontinuestobecommittedtomeetatargetof15%ofretailenergyneedswithrenewableenergyresourcesby2025.Figure2below,illustratesUNSE’scommitmenttoexpanditsrenewableresourceportfolio.By2023,UNSEexpectstoexceedtheRenewableEnergyStandard.
Figure2–UNSEPortfolioEnergyMix
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SupportingFutureRenewableIntegration
AspartofthisIRPplanningcycle,UNSEiscurrentlyevaluatinganumberoftechnologiestosupportUNSE’srampupinrenewableresources.Reciprocatingenginesandbatterystoragearetwotechnologiesbeingconsideredtosupportrenewableintegration.
NaturalGasReciprocatingEngines
Reciprocatingengines,whilenotnewtechnology,areemergingaspotentialalternativesinlarge‐scaleelectricgeneration.Advancesinengineefficiencyandtheneedforfast‐responsegenerationmakereciprocatingenginesaviableoptiontostabilizevariableandintermittentelectricdemandandrenewableresources.AspartoftheCompany’scommitmenttotargethigherlevelsofrenewables,UNSEisevaluatingthecostandoperationalcharacteristicsofreciprocatingenginesasanalternativetobothframeandaeroderivativenaturalgascombustionturbines.Aspartofthe2017FinalIRP,UNSEplanstoprovideanin‐depthanalysisoncosts,usesandpotentialbenefitsofthistechnologytosupportrenewableintegration.
BatteryStorage
Inthespringof2015,TEPissuedarequestforproposals(“RFP”)forthedesignandconstructionofutility‐scaleenergystoragesystems.CurrentlyTEPisworkingwithtwovendorstofinalizetheplansfortwo10MWlithiumionbatterystorageprojects.While20MWrepresentsonly1%ofTEP’speakretailload,theseprojectsarelargeenoughtohaveameasurableimpactonsupportinggridoperations.Assumingtheperformancefromthesefirsttwoinstallationsisfavorable,TEPwouldthenconsiderfutureenergystorageprojectsasaviableoptionforregulationandfrequencyresponsetosupporttheexpandeduseofrenewableresources.BothoftheseprojectsawaitCommissionapprovalthroughTEP’s2016RenewableEnergyStandardandTariffImplementationPlan(A.A.C.R14‐2‐1813)(DocketE‐01933A‐15‐0239).TEPanticipatesthatthependingstorageprojectswillbeinserviceduringtheearlymonthsof2017.Chapter6providesmoredetailontheseTEPspecificprojectsalongwithanin‐depthanalysisbyLazard1onstoragetechnologiesthathighlightstoragecosts,usesandtechnologycombinations.UNSEwillmonitortheTEPbatterystorageprojectandwillanalyzeitsapplicabilitywithintheUNSEserviceterritory.
Since2011UNSEhashelpedcustomerssavemorethan155,000megawatt‐hours,enoughenergytopowernearly14,500homesforayear.ThesesavingshelpUNSEworktowardthegoalsinArizona’sEEStandard,whichcallsonutilitiestoachievecumulativeenergysavingsof22percentby2020.
1 Lazard is a preeminent financial advisory and asset management firm. More information can be found at https://www.lazard.com
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CompliancewiththeCleanPowerPlan
OnOctober23,2015,theEPApublishedafinalruleregulating,forthefirsttime,“CO2”emissionsfromexistingpowerplants.Ingeneral,thisfinalrule,referredtoasthe“CleanPowerPlan”(“CPP”),aimstoreduceCO2emissionsfromU.S.powerplantsby32%from2005levelsby2030.Morespecifically,theruleestablishesemissionguidelinesbasedonEPA’sdeterminationofthe“bestsystemofemissionreductions”,whichStatesandtribes(heretoreferredtoas“States”)mustusetosetstandardsapplicabletotheaffectedplantsintheirjurisdictions.
Arizonaisoneof27stateschallengingtheEPA’srulemakingauthorityandArizonahasfiledsuitagainsttheEPA.OnFebruary9,2016,theUnitedStatesSupremeCourtissuedastayoftheCPP2meaningthattherulehasnolegaleffectpendingtheresolutionofthestateandindustrychallengetotherule.ThatchallengeiscurrentlybeforetheU.S.CourtofAppealsfortheD.C.Circuit,whichwillhearoralargumentsonJune2,2016.Inalllikelihood,thismeansaD.C.Circuitdecisionwillnotbeissueduntilearlyfall,attheearliest.Givenallthat’satstake,eitherenbancreviewontheD.C.Circuitorapetitionforcertiorarilikelywillfollow.
TheCPPestablishesemissiongoalsfortwosubcategoriesofpowerplantsintheformofanemissionrate(lbs/MWh)thatdeclinesovertheperiodfrom2022to2030.Thosesubcategoriesare:
Fossilfiredsteamelectricgeneratingunits(“SteamEGUs”)‐includescoalplantsandoilandnaturalgas‐firedsteamboilers
Naturalgas‐firedcombined‐cycleplants(“NGCC”)Thenusingtheserates(“SubcategoryRates”)andtheproportionalgenerationfromsteamEGUsandNGCCplantsineachstate,theCPPderivesstatespecificgoals(“StateRates”).TheCPPalsoconvertstheseemissionrategoalstototalmass(i.e.shorttons)goalsforeachstate.EachstateisrequiredtodevelopaStatePlanthatwillregulatetheaffectedplantsintheirjurisdiction.UNSEwillbesubjecttotheArizonaStatePlan.Table1belowshowstheapplicablerategoals.
Table1–CPPRateGoals
CO2Rate(lbs/MWh) 2022‐2024 2025‐2027 2028‐2029 2030+
SubcategorizedRate‐SteamEGUs 1,671 1,500 1,308 1,305SubcategorizedRate‐NGCC 877 817 784 771
StateRate‐Arizona 1,263 1,149 1,074 1,031
TherearethreeprimaryformsoftheStatePlanavailabletostates(withsub‐options):
Rate Plantsarerequiredtomeetanemissionratestandard(lbs/MWh)equaltotheplant’semissionsdividedbythesumofitsgenerationandthegenerationfromqualifyingrenewableenergyprojectsand/orverifiedenergyefficiencysavings.Arateplancouldbeadministeredthroughtheuseofemissionratecredits(“ERCs”),wheresourceswithemissionsabovethestandardgeneratenegativeERCswhentheyoperate,andsources
2http://www.supremecourt.gov/orders/courtorders/020916zr3_hf5m.pdf
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withemissionsbelowthestandard(ornoemissions)generatepositiveERCs.Attheendofacomplianceperiod,eachaffectedplantmusthaveatleasta“zero”balanceofERCs.
Undertherateapproach,stateshavetheoptionofmeasuringcomplianceagainsttheStateRateortheSubcategoryRates.
Mass Plantsareallocated(orotherwiseacquire)allowances,thetotalofwhichequalsthestate’smassgoal,andeachplantmustsurrenderanallowanceforeachtonofCO2emittedduringacomplianceperiod.Ownersofplantsthatdonothavesufficientallowancescanreduceemissionsbycurtailingproduction,re‐dispatchingtoaloweremissionresource,orretiringtheplantandre‐distributingallowancestotheirremainingplants.
StateMeasures Insteadofregulatingpowerplantsdirectly,astatecouldimplementpoliciesthatwillhavetheeffectofreducingemissionsintheirstatesuchasbuildingcodes,renewableenergymandatesorenergyefficiencystandards.Complianceismeasuredbasedonemissionsfromtheaffectedplants.
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ArizonaTheStateofArizonahasbeenproactiveinplanningforCPPcompliance.FollowingsubmittalofcommentstoEPA’sproposedrule,andpriortotheEPAissuingthefinalrule,theArizonaDepartmentofEnvironmentalQuality(“ADEQ”)continuedworkingwithstakeholders,andthroughaseriesofmeetingsaccumulatedalistofPotentialComplianceStrategies3.Afterthefinalrulewasissued,ADEQcontinuedtomeetwithstakeholdersandoneofitsinitialstepswastodevelop10PrincipalsofanArizonaResponsetotheCleanPowerPlan4.DuringthisphaseofCPPplanningADEQformedaTechnicalWorkingGrouptoassistinevaluatingtechnicalaspectsoftheplan.
TheStateofArizonahaspreviouslystateditiscommittedtodevelopingaStatePlan.DuetothecomplexitiesinherentindevelopingaStatePlan,theStateofArizonaalsoindicatedthatitwouldfileaninterimplanpriortoSeptember6,2016,andrequestatwo‐yearextensionforfilingthefinalStatePlan.However,thistimingwillbedelayedinlightoftheU.S.SupremeCourtstayoftherule.
Inpreparingfortheinitialplansubmittal,ADEQorganizedtheoptionsfortheformofaStatePlanintosubsetsofRateorMass,andhasexpressedaninterestinfocusingonthemostlikelyoptions.
Chart1–ADEQRegulatoryFrameworkOptions5
3http://www.azdeq.gov/environ/air/phasetwo.html4http://www.azdeq.gov/environ/air/phasethree.html5Ibid,ADEQ“EPA’sFinalCleanPowerPlan:Overview,SteveBurr,AQD,SIPSection,September1,2015
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PACEGlobalArizonaCPPAnalysis
TohelpevaluatetherelativebenefitsofRateversusMassforArizona,theArizonautilitieshiredPACEGlobal(“PACE”)toconductamodelingassessmentoftherelativecompliancepositioncomparedtotheStateRateandMassgoalsbasedonabasecaseoutlook.Theresults6ofthatassessmentindicatethatArizonawouldlikelyfallshortoftheallowancesneededtocoveremissionsusingamassapproach.However,Arizonawasabletomeettherategoalsforthevastmajorityofthecomplianceperiodstudied.Aratebasedplan,ingeneral,betteraccommodatestheneedtomeetfutureloadgrowthwithexistingplants,andthesubcategoryrateapproachisgenerallyconsideredbetterforresourceportfolioswithahighpercentageofcoal‐firedgeneration.
Figure3–PACEGlobalArizonaCPPAnalysis
WhilethefinallegalstatusoftheCPPhasyettobedetermined,itisworthnotingthatUNSE’songoingresourcediversificationplanisconsistentwiththegoalsoftheCPPwithagenerationportfoliosourceprimarilyfromnaturalgas,renewableenergy,andenergyefficiency.
6Moreinformationcanbefoundathttp://www.azdeq.gov/environ/air/phasethree.html#technical
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Energy Efficiency in the Clean Power Plan
Inthefinalrule,EPAidentifiesavarietyofenergyefficiencymeasures,programs,andpoliciesthatcancounttowardcomplianceoftheCPP.Theseincludeutilityandnonutilityenergyefficiencyprograms,buildingenergycodes,combinedheatandpower,energysavingsperformancecontracting,stateapplianceandequipmentstandards,behavioralandindustrialprograms,andenergyefficiencyinwaterandwastewaterfacilities,amongothers.
EnergyEfficiencyunderMassBasedComplianceProgramsUnderamassbasedapproach,energyefficiencyinherentlycountstowardcomplianceandstatescanuseanunlimitedamounttohelpachievetheirstategoals.Energyefficiencyinherentlycountstowardcomplianceunderamassbasedapproachsinceitdisplacesactualfossilgenerationandtheassociatedemissionsunderamasscap,freeingupallowancesforsourcesusetowardstheirremainingeffectedEGUsortotrade.Thereisnolimitontheuseofenergyefficiencyprogramsandprojects,andenergyefficiencyactivitiesdonotneedtobeapprovedaspartofastateplan,therefore,Evaluation,MeasurementandVerification(EM&V)isgenerallynotrequiredformassbasedapproachesundertheCleanPowerPlan.
EnergyEfficiencyunderRateBasedComplianceProgramsUnderratebasedplans,quantifiedandverifiedmegawatthours(MWh)fromeligibleenergyefficiencymeasuresinaratebasedstatecanbeusedtogenerateERCsandadjusttheCO2emissionrateofanaffectedEGU,regardlessofwheretheemissionreductionsoccur.EnergyefficiencyunderateratebasedplanmustundergoEM&V.ThefinalCPPgivesstateswithratebasedplanstheabilitytodesigntheirprogramssothattheyarereadyforinterstatetradingofERCs,includingthoseissuedforenergyefficiency,withouttheneedforformalarrangementsbetweenindividualstates.ThesestateplansrecognizeERCsissuedbyanystatethatalsousesaspecifiedEPAapprovedorEPAadministeredtrackingsystem.
EnergyEfficiencyandtheCleanEnergyIncentiveProgram(“CEIP”)EPAhasalsoproposedanearlycreditoptionforstatescalledtheCEIP.TheCEIPawardsearlycreditforlow‐incomeenergyefficiencyprogramsandcertainrenewableenergyprojectsimplementedin2020and2021.Theprogramoffersatwo‐to‐onematchforstateenergyefficiencysavingsinordertoincenttheseeffortspriortothestartofthecomplianceperiod.Thefinalrulealsorequiresstatestoincorporatetheneedsoflow‐incomeandunderservedcommunitieswithintheircomplianceplans,andfullyengagethesecommunitiesalongwithotherstakeholdersduringtheplanningprocess.
TransmissionandDistributionEfficiencyMeasuresEPA’sfinalrulealsoallowstransmissionanddistribution(“T&D”)measuresthatimprovetheefficiencyoftheT&Dsystemtocounttowardsemissionreductionsandcomplianceoptions.ThisincludesT&Dmeasuresthatreducelinelosses7ofelectricityduringdeliveryfromageneratortoanend‐userandT&Dmeasuresthatreduceelectricityuseattheend‐user,suchasconservationvoltagereduction(CVR)8.
7 T&Dsystemlosses(or‘‘linelosses’’)aretypicallydefinedasthedifferencebetweenelectricitygenerationtothegridandelectricitysales.TheselossesarethefractionofelectricitylosttoresistancealongtheT&Dlines,whichvariesdependingonthespecificconductors,thecurrent,andthelengthofthelines.TheEnergyInformationAdministration(EIA)estimatesthatnationalelectricityT&Dlossesaverageabout6percentoftheelectricitythatistransmittedanddistributedintheU.S.eachyear. 8 Volt/VAroptimization(VVO)referstocoordinatedeffortsbyutilitiestomanageandimprovethedeliveryofpowerinordertoincreasetheefficiencyofelectricitydistribution.VVOisaccomplishedprimarilythroughtheimplementationofsmartgridtechnologiesthatimprovethereal‐timeresponsetothedemandforpower.TechnologiesforVVOincludeloadtapchangersandvoltageregulators,whichcanhelpmanagevoltagelevels,aswellascapacitorbanksthatachievereductionsintransmissionlineloss.
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PlanningfortheFutureofEnergyEfficiencyUNSE'senergyefficiencyprogramswillcontinuetocomplywiththeArizonaEnergyEfficiencyStandardthattargetsacumulativeenergysavingsof22%by2020.Infutureplanningcycles,UNSEplanstoexpanditsenergyefficiencyresourceportfoliotobecompliantundertheprovisionsoftheCPP.UNSEplanstopartnerwithstatesandlocalorganizationstoleveragetheEPA’sCEIPtoidentifyopportunitiestoimproveenergyefficiencyforlow‐andmoderateincomecustomerswhilesupportingprivatesectorandfoundationinitiatives.Inthe2017FinalIRP,UNSEplanstohighlightthecompany'sstrategyonhowitplanstomakethistransition.ThistransitionfromthecurrentArizonaEnergyEfficiencystandardtocomplianceundertheCPPwillplayakeyroleinachievinglowcostenergyalternativesforUNSE'scustomers.
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PowerGenerationandWaterImpactsofResourceDiversification
TheCPPachievesCO2emissionreductionsprimarilybyreplacinggenerationfromhigheremittingcoal‐firedresourceswithacorrespondingamountofgenerationfromloweremittingNGCCplantsandzero‐emissionrenewableresources9.Fortunately,wateruseamongthesepowergenerationtechnologiesisanalogoustotheirrespectiveCO2emissions.SeetheChart2,belowforaveragewaterconsumptionratesforvariouselectricitygenerationtechnologies.Basedonthesewaterconsumptionrates,implementationoftheCPPshouldresultinlowerwaterconsumptionforpowergenerationoverall.
Chart2–LifeCycleWaterUseforPowerGeneration10
However,unlikeCO2emissions,waterconsumptionhasamuchmorelocalizedenvironmentalimpact.Theavailabilityofwaterthatiswithdrawnfromsurfacewatersishighlydependentonprecipitationandsnowpack,aswellasotheruses.Similarly,theavailabilityofwaterthatiswithdrawnfromgroundwateraquifers,asinthecaseofGilaRiver,isdependentontherechargetoandotherwithdrawalsfromtheaquifer,butisalsoafunctionofthehydrogeologicalcharacteristicsoftheaquiferitself.
9EnergyEfficiencyisalsoanimportanttoolforachievingtheCO2emissionreductionscalledforundertheCPP.10AdaptedfromMeldrumet.al.“Lifecyclewateruseforelectricitygeneration:areviewandharmonizationofliteratureestimates”,publishedMarch3,2013,http://iopscience.iop.org/article/10.1088/1748‐9326/8/1/015031
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Totheextentthatthe“replacement”powergenerationislocatedatorneartothecoal‐firedgenerationitisreplacing,wateravailabilitywillbecomelessofanissueunderCPPimplementation.However,ifthe“replacement”powergenerationislocatedelsewhere,thewateravailabilityinthatareamayneedtobeevaluated.
Thereisover6,000MWofexistingNGCCcapacitylocatedwestofPhoenix,Arizona(inproximitytothePaloVerdeNuclearGeneratingStation)thatislikelytoseeasignificantincreaseingenerationasaresultofCPPimplementation.Whilethesegeneratingfacilitiesareexpectedtohavetherequisitelegalrightstowithdrawtheamountofwaternecessarytomeetexpectedhigherdemandforelectricity,theriskassociatedwiththecumulativeimpactofhighergroundwaterwithdrawalonhydrogeologicalavailabilityshouldbeassessed.UNSEwillincludeaqualitativeassessmentaspartofthe2017FinalIRP.
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LOAD FORECAST
Introduction
IntheIRPprocess,itiscrucialtoestimatetheloadobligationsthatexistingandfutureresourceswillberequiredtomeetforbothshortandlongtermplanninghorizons.Asafirststepinthedevelopmenttheresourceplan,alongtermloadforecastwasproduced.ThischapterwillprovideanoverviewoftheanticipatedlongtermloadobligationsatUNSE,adiscussionofthemethodologyanddatasourcesusedintheforecastingprocess,andasummaryofthetoolsusedtodealwiththeinherentuncertaintycurrentlysurroundinganumberofkeyforecastinputs.
GeographicalLocationandCustomerBase
UNSEcurrentlyprovideselectricitytoapproximately94,000customersintwogeographicallydistinctareas.InnorthwestArizona,UNSEprovidesservicetothemajorityofMohaveCounty.Thissegmentoftheserviceterritoryincludesapproximately75,000customerslocatedprimarilyintheKingmanandLakeHavasuCityareas.InadditiontoMohaveCounty,UNSEalsoprovidesservicetothemajorityofSantaCruzCountyinsouthernArizona.Thissouthernserviceterritoryincludesapproximately19,000customerslocatedprimarilyintheNogalesarea.Thetworegionsareverydifferentbothintermsofpopulationandgeography.Forinstance,MohaveCountyisestimatedtohaveacurrentpopulationofapproximately204,000andhasexperiencedanestimated1.15%annualgrowthoverthelastdecade,whileSantaCruzCountyisestimatedtohaveacurrentpopulationofapproximately47,000,andhasgrownatanestimated1.14%annualrateoverthesameperiod.Inadditiontothevaryingpopulationdynamics,thegeographyandweatherofthetwoserviceareasarealsodistinctlydifferent.Forexample,LakeHavasuCitysitsatanelevationofapproximately735feet,whileNogalesislocatedinmountainousterrainandsitsat3,823feet.Thedifferencesinpopulationdemographics,topography,andweatherresultindistinctpatternsofdemand,consumption,andcustomergrowthwithineachregionthatmustbetakenintoaccountduringtheplanningprocess.Whiletheeconomicclimatehasslowedpopulationgrowthsignificantlyinrecentyears,UNSE’sserviceareasarestillexpectedtoexperiencesignificantgrowthaftertherecessionaryenvironmentinArizonasubsides.Thisanticipatedgrowthwilllikelyrequiretheacquisitionofadditionalresourcesinordertoprovideservicetoanincreasingcustomerbase.
Chapter2
2016PreliminaryIntegratedResourcePlan
Page‐22
Chart3summarizesthehistoricalandprojectedUNSEresidentialcustomergrowthfrom2005‐2030.
Chart3‐UNSEResidentialCustomerGrowth2005‐2030
RetailSalesbyRateClass
In2015,UNSEexperiencedretailpeakdemandofapproximately400MWwhilegeneratingapproximately1,600GWhofsales.Approximately89%of2015retailsalesweregeneratedbytheresidentialandcommercialrateclasses,andapproximately11%generatedbytheindustrialandminingrateclasses.Chart4detailsestimated2016UNSEretailsalesbyrateclass.
Chart4–Estimated2016RetailSales%byRateClass
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
72,000
77,000
82,000
87,000
92,000
97,000
102,000
107,000
2005 2008 2011 2014 2017 2020 2023 2026 2029
Growth, %
Residen
tial Customers
Average Annual Residential Customers % Growth
Residential51%
Commercial38%
Industrial10%
Mining0.56%
Other0.12%
UNSElectric
Page‐23
Load Forecast Process
Methodology
TheloadforecastpresentedinthisPIRPwasderivedusinga“bottomup”approach.Amonthlyenergyforecastwaspreparedforeachofthemajorrateclasses(residential,commercial,industrial,andmining).WidelyvaryingcustomerusagepatternsandweatherinMohaveandSantaCruzcounties,aswellassignificantdifferencesbetweencustomerusageandweatherintheKingmanareaandtheLakeHavasuCityareawithintheMohaveserviceterritoryrequirethattheforecastsbefurthersegmentedintothreedistinctgeographicalprojections.However,theindividualmethodologiesfallintotwobroadcategories:
1) Fortheresidentialandcommercialclasses,forecastsareproducedusingstatisticalmodels.Inputsmayincludefactorssuchashistoricalusage,weather(e.g.averagetemperatureanddewpoint),demographicforecasts(e.g.populationgrowth),andeconomicconditions(e.g.grosscountyproductanddisposableincome).
2) Fortheindustrialandminingclasses,forecastsareproducedforeachindividualcustomeronacasebycasebasis.Inputsincludehistoricalusagepatterns,informationfromthecustomersthemselves(e.g.timingandscopeofexpandedoperations),andinformationfrominternalcompanyresourcesworkingcloselywiththeminingandindustrialcustomers.
Aftertheindividualmonthlyforecastsareproduced,theyareaggregated(alongwithanyremainingmiscellaneousconsumptionfallingoutsidethemajorcategories)toproduceamonthlyenergyforecastforthecompany.
Afterthemonthlyenergyforecastforthecompanywasproduced,theanticipatedmonthlyenergyconsumptionwasusedasaninputforanotherstatisticalmodelusedtoestimatesthepeakdemandforeachmonthbasedonthehistoricalrelationshipbetweenconsumptionanddemandinthemonthinquestion.Annualpeakdemandwasthencalculatedbysimplytakingthemaximummonthlypeakdemandforeachyearintheforecastperiod.
2016PreliminaryIntegratedResourcePlan
Page‐24
RetailEnergyForecast
AsillustratedinChart5,UNSE’sretailsales,inaggregate,areexpectedtoberelativelyflatoverthenextfewyears.Totalenergysalesareexpectedtosteadilygrowthroughouttheforecasthorizon.
Chart5‐RetailEnergySales
RetailEnergyForecastbyRateClass
AsillustratedinChart6theloadforecastassumessignificant,steadyenergysalesgrowthatUNSEthroughouttheplanningperiod.However,thegrowthratesvarysignificantlybyrateclass.TheenergysalestrendsforeachmajorrateclassaredetailedinChart6.ThelossofminingsalesduetoeconomicweaknesscanbeseeninChart6.
Chart6‐RetailEnergySalesbyRateClass
0
500
1,000
1,500
2,000
2,500
2005 2008 2011 2014 2017 2020 2023 2026 2029
UNSE Retail GWh
0
200
400
600
800
1,000
1,200
2005 2008 2011 2014 2017 2020 2023 2026 2029
UNSE Retail (GWh)
Residential Commercial Industrial Mining
UNSElectric
Page‐25
PeakDemandForecast
AsillustratedinChart7,UNSE’speakdemandisexpectedtoincreasethroughouttheforecastperiod.
Notethatallreferencestopeakdemandare“coincidental”peaksystemdemand(i.e.thehighestdemandseensimultaneouslyintheMohaveandSantaCruzserviceareas).Duetogeography,thetwoserviceareastypicallyexperienceindividualserviceareapeaksatdifferenttimeswiththeSantaCruzpeaktypicallyoccurringinJuneandtheMohavepeaktypicallyoccurringinJulyorAugust.BecauseMohaveCountygeneratesmuchhigherdemand(andenergysales),theUNSEcoincidentalsystempeakalsotypicallyoccursinJulyorAugust.
Chart7‐ReferenceCasePeakDemand
DataSourcesUsedinForecastingProcess
Asoutlinedabove,thereferencecaseforecastrequiresabroadrangeofinputs(demographic,economic,weather,etc.)Forinternalforecastingprocesses,UNSEutilizesanumberofsourcesforthesedata:
IHSGlobalInsight
TheUniversityofArizonaForecastingProject
ArizonaDepartmentofCommerce
U.S.CensusBureau
NOAA
WeatherUnderground
250
300
350
400
450
500
550
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
UNSE Retail Peak Dem
and (MW)
2016PreliminaryIntegratedResourcePlan
Page‐26
UNSElectric
Page‐27
LoadandResources
TheloadsandresourceschartshownbelowillustrateshowUNSE’sfirmloadobligationsaremetcurrently.ThefirmloadobligationsrepresentUNSE’sretaildemandlessenergyefficiencyanddistributedgenerationplusa15%planningreservemargin.The2017FinalIRPwillevaluatetheremainingpeakdemandrequirements(shownbelow)todetermineadiverseportfoliomix.
Chart8–UNSELoadsandResources
Chapter3
2016Prelim
inaryIntegratedResourcePlan
Page‐28
Future Load
Obligations
Thetablesonthenexttw
opagesprovideadatasum
maryonUNSE’sloadsandresources.Table2detailsUNSE’sprojectedfirmloadobligationswhich
includeretaildemand,lessenergyefficiencyanddistributedgenerationplusplanningreserves.
Table2‐Firm
LoadObligations,SystemPeakDem
and(MW)
Dem
and, M
W
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Residen
tial
226
230
234
240
245
250
257
262
267
272
279
286
292
299
305
Commercial
166
168
170
172
174
176
179
180
181
183
184
186
186
186
187
Industrial
44
45
45
46
47
47
47
47
47
47
47
47
46
45
46
Mining
2
00
00
00
0
00
00
00
0
Other
1
11
11
11
1
11
11
11
1
Gross Retail Peak Dem
and
440
443
451
458
466
474
482
489
496
503
511
518
524
531
538
Distributed Gen
eration
‐7
‐8
‐9
‐10
‐11
‐11
‐12
‐12
‐13
‐13
‐13
‐14
‐14
‐14
‐14
Energy Efficiency
‐23
‐25
‐30
‐35
‐40
‐45
‐49
‐52
‐55
‐58
‐61
‐63
‐63
‐63
‐64
Net Retail Peak Dem
and
410
410
411
413
416
418
422
425
428
432
437
442
448
454
460
Firm
Wholesale Dem
and
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
System
Losses
32
32
32
32
33
33
33
33
34
34
34
35
35
36
36
Total Firm Load
Obligations
442
442
443
446
448
451
455
458
462
466
471
477
483
490
496
Reserve Margin
74
‐25
‐126
‐128
‐120
‐117
‐117
‐117
‐117
‐111
‐112
‐114
‐115
‐117
‐120
Reserve Margin, %
17%
‐6%
‐28%
‐29%
‐27%
‐26%
‐26%
‐25%
‐25%
‐24%
‐24%
‐24%
‐24%
‐24%
‐24%
UNSElectric
Page‐29
Resource Cap
acity
Table3detailsUNSE’scurrentresourceportfoliobasedonaresource’scapacitycontributiontosystempeak.
Table3–CapacityResources,SystemPeakDem
and(MW)
Firm
Resource Cap
acity (MW)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Gila River Power Station
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
137.5
Black M
ountain
90
90
90
90
90
90
90
90
90
90
90
90
90
90
90
Valen
cia
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
63.5
Total N
atural G
as Resources
291
291
291
291
291
291
291
291
291
291
291
291
291
291
291
Utility Scale Ren
ewables
22
22
22
22
27
32
35
39
42
45
49
53
57
62
65
Dem
and Response
4
4
5
5
6
6
7
7
8
8
9
9
10
10
11
Total Ren
ewable & EE Resources
25
26
26
27
32
38
42
46
49
53
58
62
67
72
76
Short‐Term
Market Resources
200
100
0
0
0
0
0
0
0
0
0
0
0
0
0
Future Storage Resources
0
0
0
0
5
5
5
5
5
10
10
10
10
10
10
Total Firm Resources
516
417
317
318
328
334
338
342
345
354
359
363
368
373
377
2016PreliminaryIntegratedResourcePlan
Page‐30
Expected Annual Energy
Chart9showstheexpectedenergycontributionrequiredtomeetUNSE’sfirmloadobligationsbyyearandresourcetype.In2016,UNSE’senergyportfolioiscomprisedofapproximately65%purchasedpowerand22%naturalgasresources.ThebalanceoftheenergyrequiredisprovidedbyEE,DGandrenewablePVandwind.By2030,50%ofUNSE’senergyportfolioisunsubscribedthoughtheenergyefficiencyandrenewablestandardwillbemet.Inthe2017FinalIRP,UNSEwillpresentabalancedanddiversifiedportfoliotomeetfutureenergyneeds.
Chart9–ExpectedAnnualEnergyRequirements(GWh)
UNSElectric
Page‐31
Community Scale Renewables and Distributed Generation
CommunityScaleRenewablesUNSEismovingtowardadiverseportfolioofrenewableresourcesthatcomplieswiththeArizonaRenewableEnergyStandard(“RES”).UNSEiscommittedtomeettherenewableenergystandardgoals,whichrequiresUNSEtoobtainrenewableenergywhichisequivalentto6%ofits2016retailloadrequirementandgrowingto15%by2025.Inthefirstquarterof2014,UNSEadded7.2MW(DC)ofsolarPVinRioRico,Arizona.Thisresourceadditionbringsthetotalrenewablecapacitytonearly30MW.TheadditionofRedHorseSolar(seeTable4below)willputUNSEabovecompliancein2016byapproximately2%.
EXISTING RENEWABLE RESOURCES
OverviewOverthelastseveralyears,UNSEhasworkedwiththird‐partycontractorstodevelopthreenewrenewableresourceprojectswithinUNSE’sserviceterritory.Inaddition,theCompanyiscurrentlyworkingwithTorchRenewablestodevelopanewsolarfixedPVprojectlocatedinWillcox,Arizona.Table4belowprovidesanoverviewonUNSErenewableprojects.
Table4–UNSE’sRenewableResources(ExistingandPlanned)
Resource‐ Counterparty Owned/PPA Technology Location Operator‐
Manufacturer Completion
Date Capacity MW
Western Wind PPA Wind Kingman, AZ Western Wind Sept 2011 10.3
La Senita School Owned SAT PV Kingman, AZ Solon Nov 2011 0.98
Black Mountain PPA SAT PV Kingman, AZ Solon Jun 2012 8.9
Rio Rico Owned PV Rio Rico, AZ Gehrlicher Mar 2014 5.76
Red Horse Solar (Future) PPA SAT PV Willcox, AZ Torch Renewables Q2 2016 30
UNSE Owned Solar UNSE TBD Kingman, AZ TBD Q4 2016 5
Notes: PPA–PurchasedPowerAgreement–Energyispurchasedfromathirdpartyprovider. SATPV–SingleAxisTrackingPhotovoltaic PV–FixedPanelPhotovoltaic
2016PreliminaryIntegratedResourcePlan
Page‐32
LocationsofUNSRenewableProjects
DistributedGeneration
Bytheendof2015,UNSEhadapproximately20MWofrooftopsolarPVandsolarhotwaterheatingcapacity.Distributedgenerationisexpectedtosupplyatleast40GWhofenergyin2016.
.
UNSElectric
Page‐33
OverviewofUNSRenew
ablePortfolio
2016PreliminaryIntegratedResourcePlan
Page‐34
Energy Efficiency
Overview
ThissectionisanoverviewoftheelectricDemand‐SideManagement(“DSM”)programsthattargettheresidential,commercialandindustrial(“C&I”)sectors,aswellastheirassociatedproposedimplementationcosts,savings,andbenefit‐costresults.
UNSErecognizesthatenergyefficiencycanbeacost‐effectivewaytoreduceourrelianceonfossilfuels.UNSEoffersavarietyofenergysavingoptionsforcustomers,fromsimpleconsultationtoincentivesthatencouragebothhomeownersandbusinessestoinvestinefficientheatingandcoolingandotherenergyefficiencyupgrades.
UNSE,withinputfromotherpartiessuchasNavigantConsulting,Inc.(“Navigant”)andtheSouthwestEnergyEfficiencyProject(“SWEEP”),hasdesignedacomprehensiveportfolioofprogramstodeliverelectricenergyanddemandsavingstomeettheannualDSMenergysavingsgoalsoutlinedintheStandard.Theseprogramsincludeincentives,direct‐installandbuy‐downapproachesforenergyefficientproductsandservices;educationalandmarketingapproachestoraiseawarenessandmodifybehaviors;andpartnershipswithtradealliestoapplyasmuchleverageaspossibletoaugmentthereturnofrate‐payerdollarsinvested.
ThroughUNSE’sDSMprogramsUNSEhasmadegreatstridestowardmeetingtheaggressivegoalsintheStandard.TheStandardcallsoninvestor‐ownedelectricutilitiesinArizonatoincreasethekilowatt‐hoursavingsrealizedthroughcustomerratepayer‐fundedenergyefficiencyprogramseachyearuntilthecumulativereductioninenergyachievedthroughtheseprogramsreaches22percentby2020.
CurrentImplementationPlan,Goals,andObjectives
UNSE’shigh‐levelenergyefficiency‐relatedgoalsandobjectivesareasfollows:
Implementcost‐effectiveenergyefficiencyprograms
Designandimplementadiversegroupofprogramsthatprovideopportunitiesforparticipationforallcustomers
Whenfeasible,maximizeopportunitiesforprogramcoordinationwithotherefficiencyprograms(e.g.,SouthwestGasCorporation,ArizonaPublicServiceCorporation)toyieldmaximumbenefits
Maximizeprogramenergysavingsataminimumcostbystrivingtoachievecomprehensivecost‐effectivesavingsopportunities
ProvideUNSEcustomersandcontractorswithwebaccesstodetailedinformationonallefficiencyprograms(residentialandcommercial)forelectricitysavingsopportunitiesatwww.uesaz.com
Expandtheenergyefficiencyinfrastructureinthestatebyincreasingthenumberofavailablequalifiedcontractorsthroughtrainingandcertificationinspecificfields
Usetrainedandqualifiedtradealliessuchaselectricians,HVACcontractors,builders,architectsandengineerstotransformthemarketforefficienttechnologies
Educatecustomersonbehaviormodificationsthatenablethemtouseenergymoreefficiently.
UNSElectric
Page‐35
ProgramPortfolioOverviewAsdemonstratedinTable5,UNSE’sportfolioofprogramscanbedividedintoresidential,commercial,behavioral,andsupportsectorswithadministrativefunctionsprovidingsupportacrossallprogramareas.WiththeCommission’sapprovalofUNSE’s2015/2016EEPlan,UNSEhasaddedmeasureswithinexistingprogramsincludingenergystarappliances,HVAC,andlightingmeasures.
Table5–UNSElectricPortfolioofPrograms
Residential Sector Appliance Recycling
Energy Star Appliance Program
Existing Homes
Low Income Weatherization
Multi‐Family Direct Install
New Construction
Shade Trees
Behavioral Sector Community Education
K‐12 Energy Education
Commercial & Industrial Sector
Bid for Efficiency
C&I Facilities/Schools
C&I Demand Response
Retro‐Commissioning
Support Sector Education and Outreach
Energy Codes & Standards Enhancement
2016PreliminaryIntegratedResourcePlan
Page‐36
Transmission
Overview
TransmissionresourcesareakeyelementinUNSE’sresourceportfolio.AdequatetransmissioncapacitymustexisttomeetUNSE’sexistingandfutureloadobligations.UNSE’sresourceplanningandtransmissionplanninggroupscoordinatetheirplanningeffortstoensureconsistencyindevelopmentofitslong‐termplanningstrategy.Onastatewidebasis,UNSEparticipatesintheACC’sBiennialTransmissionAssessment(“BTA”)whichproducesawrittendecisionbytheACCregardingtheadequacyoftheexistingandplannedtransmissionfacilitiesinArizonatomeetthepresentandfutureenergyneedsofArizonainareliablemanner.
UNSEactivelyparticipatesintheregionaltransmissionplanningandcostallocationprocessofWestConnectasanenrolledmemberoftheTransmissionOwnerswithLoadServiceObligations(“TOLSO”)sectorincompliancewithFERCOrderNo.1000(“FERCOrder1000”).ThisfinalrulereformsFERC’selectrictransmissionplanningandcostallocationrequirementsforpublicutilitytransmissionproviders.WestConnectiscomposedofutilitycompaniesprovidingtransmissionofelectricityinthewesternUnitedStatesworkingcollaborativelytoassessstakeholderandmarketneedsanddevelopcost‐effectiveenhancementstothewesternwholesaleelectricitymarket.
Figure4–FERCOrder1000TransmissionPlanningRegions
SinceFERCOrder1000,WestConnectwentthroughitsfirstone‐yearregionalplanningandcostallocationprocessuponcompletionandapprovalofthe2015RegionalTransmissionPlaninDecember2015.Noprojectsubmittals,andthereforenocostallocationwasrequiredsincenoregionaltransmissionneedswereidentifiedinthisabbreviated2015cycle.
UNSElectric
Page‐37
PreparationforthefirstWestConnectbiennialregionaltransmissionplanningandcostallocationprocesscoveringtheperiodJanuary1,2016throughDecember31,2017beganinthelastquarterof2015.Preparationincludedinitiationofthe2016‐17RegionalStudyPlanprocessandacceptanceofscenariostobeevaluatedforinclusioninthestudyplanoccurredbyDecember31,2015.WestConnectconductsanassessmentoftransmissionplanningmodelsincorporatingthesescenariostoidentifytheneedfornewtransmission.Thekeydeliverableisaregionaltransmissionplanthatselectsregionaltransmissionprojectstomeetidentifiedreliability,economic,publicpolicy,orcombinationthereof,transmissionneeds.
ToassistwithArizona’sCPPstateplanningefforts,UNSEparticipatedwithAPS,SRP,SouthwestTransmissionCooperativeandTEPonaproposaltocoordinatedevelopmentofitsCPPcomplianceplan,andpreparedandsubmittedajointArizonaUtilityGroup(“AUG”)studyrequesttoWestConnecttobeincludedinthe2016‐17RegionalPlanningProcess.WorkingthroughtheregionalplanningprocessisthemostefficientmethodofachievingacredibleoutcomebecauseitisaccomplishedincoordinationwiththeotherthreewesternPlanningRegions(CaliforniaIndependentSystemOperator(“CAISO”),ColumbiaGridandNorthernTierTransmissionGroup)andthereforeincoordinationwithotherstates.AkeyobjectiveistohaveaccesstotheWestConnectpowerflowbasecasetoperformamorecrediblereliabilityanalysisontheArizonatransmissionsystemassessingtheimpactoftheCPPandmeetingBTAplanningrequirements.
2016PreliminaryIntegratedResourcePlan
Page‐38
UNSElectric
Page‐39
EMERGING TECHNOLOGIES
Small Modular Nuclear Reactors
Smallmodularnuclearreactors(“SMR”),approximatelyone‐thirdthesizeofcurrentnuclearplants,are
compactinsize(300MWorless)andareexpectedtooffermanybenefitsindesign,scale,andconstruction
(relativetothecurrentfleetofnuclearplants)aswellaseconomicbenefits.Asthenameimplies,being
modularallowsforfactoryconstructionandfreighttransportationtoadesignatedsite.Thesizeofthefacility
canbescaledbythenumberofmodulesinstalled.Capitalcostsandconstructiontimesarereducedbecausethe
modulesareself‐containedandreadytobe“dropped‐in”toplace.
AWorldNuclearAssociation2015reportonSMRstandardizationoflicensingandharmonizationofregulatory
requirements,saidthattheenormouspotentialofSMRsrestsonanumberoffactors:
Becauseoftheirsmallsizeandmodularity,SMRscouldalmost becompletelybuiltinacontrolledfactorysettingandinstalledmodulebymodule,improvingthelevelofconstructionqualityandefficiency.
Theirsmallsizeandpassivesafetyfeaturesmakethemfavorabletocountrieswithsmallergridsandlessexperienceofnuclearpower.
Size,constructionefficiencyandpassivesafetysystems(requiringlessredundancy)canleadtoeasierfinancingcomparedtothatforlargerplants.
Moreover,achieving‘economiesofseriesproduction’foraspecificSMRdesignwillreducecostsfurther.
TheWorldNuclearAssociationliststhefeaturesofanSMR,including:
Smallpower,compactarchitectureandemploymentofpassiveconcepts(atleastfornuclearsteamsupplysystemandassociatedsafetysystems).Thereforethereislessrelianceonactivesafetysystemsandadditionalpumps,aswellasACpowerforaccidentmitigation.
Thecompactarchitectureenablesmodularityoffabrication(in‐factory),whichcanalsofacilitateimplementationofhigherqualitystandards.
Lowerpowerleadingtoreductionofthesourcetermaswellassmallerradioactiveinventoryinareactor(smallerreactors).
Potentialforsub‐grade(undergroundorunderwater)locationofthereactorunitprovidingmoreprotectionfromnatural(e.g.seismicortsunamiaccordingtothelocation)orman‐made(e.g.aircraftimpact)hazards.
EmergingTechnologyChapter4
2016PreliminaryIntegratedResourcePlan
Page‐40
Themodulardesignandsmallsizelendsitselftohavingmultipleunitsonthesamesite.
Lowerrequirementforaccesstocoolingwater–thereforesuitableforremoteregionsandforspecificapplicationssuchasminingordesalination.
Abilitytoremovereactormoduleorin‐situdecommissioningattheendofthelifetime
TheWorldNuclearAssociationwebsitehasdetailedinformationrelatedtoSMRs.Thewebsiteislocatedat:http://www.world‐nuclear.org/info/nuclear‐fuel‐cycle/power‐reactors/small‐nuclear‐power‐reactors/
NuScalePowerTMisdeveloping50MWemodulesthatcanbescaledupto600MWe(12modules).ThescalabilityofSMRsallowsforsmallutilitieslikeUNSEtoconsidertheirviabilitywhilelesseningthefinancialrisk.InDecemberof2013,NuScalewasawardedagrantbytheDepartmentofEnergy(“DOE”)thatwouldcoverhalf(upto$217million)tosupportdevelopmentandreceivecertificationandlicensingfromtheNuclearRegulatoryCommission(“NRC”)onasinglemodule.
Inthefallof2014,NuScalesignedteamingagreementswithkeyutilitiesintheWesternregion,whichincludeEnergyNorthwestinWashingtonStateandtheUtahAssociationofMunicipalPowerSystems(“UAMPS”),representingmunicipalpowersystemsinUtah,Idaho,NewMexico,Arizona,Washington,Oregon,andCalifornia.Thisinitialproject,knownastheUAMPSCarbonFreePowerProject,wouldbesitedineasternIdahoandisbeingdevelopedwithpartnersUAMPS,whichwillbetheplantowner,andEnergyNorthwest,whichwillbetheoperator.Theteamexpectsthatthe12‐moduleSMRwillbeoperationin2024.
NuScaleCross‐sectionofTypicalNuScaleReactorBuilding
50MWeNuScalePowerModule
UNSElectric
Page‐41
Reciprocating Internal Combustion Engines
ReciprocatingInternalCombustionEngines(“RICE”)aresimplycombustionenginesthatareusedin
automobiles,trucks,railroadlocomotives,constructionequipment,marinepropulsion,andbackuppower
applications.Moderncombustionenginesusedforelectricpowergenerationareinternalcombustionengines
inwhichanair‐fuelmixtureiscompressedbyapistonandignitedwithinacylinder.RICEarecharacterizedby
thetypeofcombustion:spark‐ignited,likeinatypicalgaspoweredvehicleorcompression‐ignited,alsoknown
asdieselengines.
Figure5–Wartsila‐50DF
Anemergingandpotentiallybeneficialuseoftheseenginesisinlarge‐scaleelectricutilitygeneration.The
combustionengineisnotanewtechnologybutemergingadvancesinefficiencyandtheneedforfast‐response
generationmakeitaviableoptiontostabilizevariableandintermittentelectricdemandandresources.RICE
hasdemonstratedthefollowingbenefits;
FastStartTimes–Theunitsarecapableofbeingon‐lineatfullloadwithin5minutes.Thefastresponseisidealforcyclingoperation.RICEcanbeusedto‘smooth’outintermittentresourceproductionandvariability.
RunTime‐Theunitsdonotrequiretobemaintainedatfullloadorshutdownforextendedperiodsoftime.Aftershutdown,theunitmustbedownfor5minutes,ataminimumtoallowforgaspurging.
ReducedO&M–CyclingtheunithasnoimpactonthewearofRICE.Theunitisimpactedbyhoursofoperationandnotbystartsandcyclingoperationsasisthecasewithcombustionturbines.
FastRamping–Atstart,theunitcanramptofullloadin2minutesonahotstartandin4minutesonawarmstart.Oncetheunitisoperational,itcanrampbetween30%and100%loadin40seconds.Thisrampingiscomparabletotheratethatmanyhydrofacilitiescanrampat.
MinimalAmbientPerformanceDegradation–ComparedtoAeroderivativeandFrametypecombustionturbines,RICEoutputandefficiencyisnotasdrasticallyimpactedbytemperature.ThesitealtitudedoesnotsignificantlyimpactoutputonRICEbelow5,000feet.
2016PreliminaryIntegratedResourcePlan
Page‐42
GasPressure–RICEcanrunonlowpressuregas,aslowas85PSI.MostCT’srequireacompressorforpressureat350PSI.
ReducedEquivalentForcedOutageRate(“EFOR”)–EachRICEhasanEFORoflessthan1%.AfacilitywithmultipleRICEwillhaveacombinedEFORthatisexponentiallylessbyafactorofthenumberofunitsatthefacility.
LowWaterConsumption–RICEuseaclosed‐loopcoolingsystemthatrequiresminimalwaterusage.
Modularity–EachRICEunitisbuiltatapproximately2to20MWsandisshippedtothesite.
AnintriguingapplicationforRICEisitspotentialforregulatingthevariabilityandintermittencyofrenewable
resources.InthefinalIRP,UNSEwillexplorethepossibilityofnaturalgaspoweredRICEinitsproposed
scenarios.
Figure6–ReciprocatingInternalCombustionEngineFacility
UNSElectric
Page‐43
DELIVERY TECHNOLOGY
TheFutureoftheDistributionGrid
Changesinthesupply,demand,anddeliveryofelectricityareremodelingelectricdistributionsystemsatmostNorthAmericanutilities.DistributedEnergyResources(“DERs”)areleadingmanyofthesechanges.Bycreatingenergysupplyinnew,small,intermittent,anddistributedlocationsacrossthegrid,DERshaverequirednewlevelsofsystemflexibility.DERshavealsocreatednewopportunitiesforelectricutilitiestoimproveperformance,tolowercosts,andtoimprovecustomersatisfaction.
ToaccommodateDERsandotherinnovations,electricutilitiesneedtodomorethanmaketheirdistributionsystemsbigger.Instead,utilitiesneedtomaketheirdistributionsystemssmarter.Smartdistributionsystemsprovideflexibility,capability,speedandresilience.Toachievenewlevelsofperformance,thesesmartdistributionsystemsincludenewtypesofsoftware,networks,sensors,devices,equipment,andresources.Toachievenewlevelsofeconomicvalue,thesesmartdistributionsystemsoperateaccordingtonewstrategiesandmetrics.WithmoredistributedgenerationresourcesbeingdeployedonUNSE’sdistributionsystem,higherdemandsandlowerenergyconsumptionisoccurringtoday.Thisputsdemandsonthetransmissionanddistributionsystemsthatwerenotcontemplatedintheoriginaldesignsandrequirementsofthesystem.Tomeetthesenewdemands,newmethodsandtechnologyneedstobedevelopedandimplemented.UNSEisintendingtoutilizetechnologytoaddmoresensingandmeasurementdevicesandnewmethodsformanagingandoperatingthedistributionsystem.Thisapproachturnsadistributionfeederintoaneffectivemicrogridsystem.
Figure7–SmartGridSystems
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Withincreaseddemandandlowerenergyconsumption,newtechniquesandstrategiesneedtobedevelopedandimplementedtoeffectivelymanagecosts.Byaddingadditionalmeasurementandsensingcapabilitiesthesituationalawarenessofthedistributionsystemwillbeincreased.Thesituationalawarenessallowsforrealtimeoperationsandplanningopportunitiesforefficiencyandproductivitychanges.Toutilizetheexistingdistributionsystemmoreefficiently,UNSEisinvestigatingtheuseofDERs,energystorage,energyefficiency,andtargeteddemandresponsecapabilitiesinconjunctionwithoptimizationsoftwaretoreducetheinfrastructureadditionsrequiredduetohighercustomerdemand.Thisstrategyismuchdifferentthanhowthedistributionsystemhasbeenmanagedinthepast.WearenowusingabottomupplanninganddesignprocessthatneedstobeintegratedwiththeIRPprocess.Newtoolsandcapabilitieswillberequiredasaresultofthenewopportunitiesandcapabilitiesenvisioned.
Atthecoreofthesechangesistheneedforacommunicationsnetworkthatallowsforintelligentelectronicdevicestobeinstalledonthedistributionsystem.Thecommunicationsnetworkallowsforthebackhaulofinformationfromtheintelligentelectronicdevicestocentralizedsoftwareandcontrolapplications.Simplycollectinganddisplayingmoresensingandmeasurementinformationwon’tprovidetheneededbenefits.Anintegratedapproachtotheinstallationoffielddevices,softwareapplicationsandhistoricaldatamanagementwillbeneeded.Adistributionmanagementsystem(“DMS”)isthecentralsoftwareapplicationthatprovidesdistributionsupervisorycontrolanddataacquisition(“SCADA”),outagemanagementandgeographicalinformationintoasingleoperationsview.Bycombiningtheinformationfromallthreeofthesesystemsintoasingleviewanelectricaldistributionsystemmodelcanbecreatedforbothrealtimeapplicationsandplanningneeds.Thesingleviewprovidessituationalawarenessofthedistributionsystemthathasnotbeenpossibleinthepast.Italsocreatesaplatformfromwhichadditionalapplicationscanbeimplementedtocontinuetoprovidevalueandnewopportunities.Thehistoricalinformationalsocreatesanewopportunitytodrivevalueanddecisionsbasedonsystemperformanceanddynamicsimulations.
WiththedevelopmentofmultipledistributionmicrogridfeedersandDERsystems,thechallengeofresourcedispatchingwilldevelop.Asolutiontodispatchacrossafleetofresourcesofexistingcentralizedgeneration,purchasedpowerfromthemarketandtheintermittencyofDERsystemstocustomerdemandwillberequired.Thespeedinwhichtheresourcepoolwillneedtochangeandoptimizeforefficiencyandcostwillrequirethesystemtobeautomated.Thedistributionmicrogridfeederconceptisintendedtohelpmanagethedistributionlevelintermittencybutwouldneedtobemonitoredandmanagedbytheautomatedsystemforresourcemanagement.Tomanagesuchalargeanddynamicsystemasoutlinedisasubstantialchallenge.Thistypeofautomatedsystemisnotcurrentlyavailablewithintheutilityindustry.
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Energy Storage
Theelectricindustryhasalwayshadaninterestinthepossibilityofstoringenergy.Utilitieshavealwaysstrivedtomaintainasafe,reliableandcosteffectiveelectricgrid.Newchallenges,suchastheemergenceofrenewablegenerationhasgeneratedagreaterinterestinelectricenergystorage.ThetopicofEnergyStorageSystems(“ESS”)coversmanydifferenttypesoftechnology.Eachtechnologyhasspecificattributesandapplicationthatleadtousingthembasedonindividualsystemrequirementsforanidentifiedneed.Theenergystoragetechnologiesaremadeupofsystemssuchaspumpedhydro,compressedairenergystorage,varioustypesofbatteries,andflywheels.
PumpedHydro‐Power–Thistechnologyhasbeeninusefornearlyacenturyworldwide.PumpedhydroaccountsformostoftheinstalledstoragecapacityintheUnitedStates.Pumpedhydroplantsuselowercostoff‐peakelectricitytopumpwaterfromalow‐elevationreservoirtoahigherreservoir.Whentheutilityneedstheelectricityorwhenpowerpricesarehigher,theplantreleasesthewatertoflowthroughhydroturbinestogeneratepower.
Typicalpumpedhydrofacilitiescanstoreupto10ormorehoursofwaterforenergystorage.Pumpedhydroplantscanabsorbexcesselectricityproducedduringoff‐peakhours,providefrequencyregulation,andhelpsmooththefluctuatingoutputfromothersources.Pumpedhydrorequiressiteswithsuitabletopographywherereservoirscanbesituatedatdifferentelevationsandwheresufficientwaterisavailable.Pumpedhydroiseconomicalonlyonalarge(250‐2,000MW)scale,andconstructioncantakeseveralyearstocomplete.
Theround‐tripefficiencyofthesesystemsusuallyexceeds70percent.Installationcostsofthesesystemstendtobehighduetositingrequirementsandobtainingenvironmentalandconstructionpermitspresentsadditionalchallenges.Pumpedhydroisaproventechnologywithhighpeakusecoincidence.ForUNSE,itisalessviableoptionduetolimitedavailablesitesandwaterresources.
CompressedAirEnergyStorage(“CAES”)–Aleadingalternativeforbulkstorageiscompressedairenergystorage.CAESisahybridgeneration/storagetechnologyinwhichelectricityisusedtoinjectairathighpressureintoundergroundgeologicformations.CAEScanpotentiallyoffershorterconstructiontimes,greatersitingflexibility,lowercapitalcosts,andlowercostperhourofstoragethanpumpedhydro.ACAESplantuseselectricitytocompressairintoareservoirlocatedeitheraboveorbelowground.Thecompressedairiswithdrawn,heatedviacombustion,andrunthroughanexpansionturbinetodriveagenerator.Thedispatchtypicallywilloccurathighpowerpricesbutalsowhentheutilityneedstheelectricity,
CAESplantsareinoperationtoday—a110‐MWplantinAlabamaanda290‐MWunitinGermany.Bothplantscompressairintoundergroundcavernsexcavatedfromsaltformations.TheAlabamafacilitystoresenoughcompressedairtogeneratepowerfor26hoursandhasoperatedreliablysince1991.
CAESplantscanuseseveraltypesofair‐storagereservoirs.Inadditiontosaltcaverns,undergroundstorageoptionsincludedepletednaturalgasfieldsorothertypesofporousrockformations.EPRIstudiesshowthatmorethanhalftheUnitedStateshasgeologypotentiallysuitableforCAESplantconstruction.Compressedaircanalsobestoredinabove‐groundpressurevesselsorpipelines.Thelattercouldbelocatedwithinright‐of‐waysalongtransmissionlines.Respondingrapidlytoloadfluctuations,CAESplantscanperformrampingdutytosmooththeintermittentoutputofrenewablegenerationsourcesaswellasprovidespinningreserveandfrequencyregulationtoimproveoverallgridoperations.
Batteries–Severaldifferenttypesoflarge‐scalerechargeablebatteriescanbeusedforESSincludingleadacid,lithiumion,sodiumsulfur(NaS),andredoxflowbatteries.Batteriescanbelocatedindistributionsystems
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closertoenduserstoprovidepeakmanagementsolutions.Anaggregationoflargenumbersofdispersedbatterysystemsinsmart‐griddesignscouldevenachievenearbulk‐storagescales.
Inaddition,ifplug‐inhybridelectricvehiclesbecomewidespread,theironboardbatteriescouldbeusedforESS,byprovidingsomeofthesupportingor“ancillary”servicesintheelectricitymarketsuchasprovidingcapacity,spinningreserve,orregulationservices,orinsomecases,byprovidingload‐levelingorenergyarbitrageservicesbyrechargingwhendemandislowtoprovideelectricityduringpeakdemand.
Flywheels–Theserotatingdiscscanbeusedforpowerqualityapplicationssincetheycanchargeanddischargequicklyandfrequently.Inaflywheel,energyisstoredbyusingelectricitytoacceleratearotatingdisc.Toretrievestoredenergyfromtheflywheel,theprocessisreversedwiththemotoractingasageneratorpoweredbythebrakingoftherotatingdisc.
Flywheelsystemsaretypicallydesignedtomaximizeeitherpoweroutputorenergystoragecapacity,dependingontheapplication.Low‐speedsteelrotorsystemsareusuallydesignedforhighpoweroutput,whilehigh‐speedcompositerotorsystemscanbedesignedtoprovidehighenergystorage.Amajoradvantageofflywheelsistheirhighcyclelife—morethan100,000fullcharge/dischargecycles.
Scale‐powerversionsofthesystem,a100kWversionusingmodifiedexistingflywheelswhichwasaproofofconceptonapproximatelya1/10thpowerscale,performedsuccessfullyindemonstrationsfortheNewYorkStateEnergyResearchandDevelopmentAuthorityandtheCaliforniaEnergyCommission.
EnergyStorageApplicability
Althoughthelistofenergystoragetechnologiesdiscussedaboveisnotall‐inclusive,itbeginstoillustratethepointthatnoteverytypeofstorageissuitableforeverytypeofapplication.Typicaluseapplicationsforenergystoragetechnologiesmayinclude:
EnergyManagement–Batteriescanbeusedtoprovidedemandreductionbenefitsattheutility,commercialandresidentiallevel.Batteriescanbeidealordesignedtoreplacetraditionalgaspeakingresources.Theycanalsobeusedasshort‐termreplacementduringemergencyconditions.
LoadandResourceIntegration–Energystoragesystemscanbedesignedtosmooththeintermittencycharacteristicsofspecificloadsand/orsolarsystemsduringcloudmigrations.
AncillaryServices–Flywheelsandbatterieshavethepotentialtobalancepowerandmaintainfrequency,voltageandpowerqualityatspecifiedtolerancebands.
GridStabilization–PumpedHydro,CAESandvariousbatteriescanimprovetransmissiongridperformanceaswellasassistwithrenewablegenerationstabilization.
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Becauseofthedifferentusecasepotentialsthetechnologiescanbeimplementedinaportfoliostrategy.Therearefourchallengesrelatedtothewidespreaddeploymentofenergystorage:
CostCompetitiveEnergyStorageTechnologies(includingmanufacturingandgridintegration)
ValidatedReliability&Safety
EquitableRegulatoryEnvironment
IndustryAcceptance
UNSEshowstheneedtodevelopaportfoliooffuturestoragetechnologiesthatwillsupportlong‐termgridreliability.Theneedforfuturestoragetechnologiesisfocusedonsupportingtheneedforquickresponsetimeancillaryservices.Theseservicesarelistedbelow:
LoadFollowing/Ramping
Regulation
VoltageSupport
PowerQuality
FrequencyResponse
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ThefollowingisanarrativefromLazard’sfirstversionofitsLevelizedCostofEnergyAnalysis11.Lazard’sfirstversionofitsLevelizedCostofStorageAnalysis(LCOE1.0)providesanindependent,in‐depthstudythatcomparesthecostsofenergystoragetechnologiesforparticularapplications.12Thestudy’spurposeistocomparethecost‐effectivenessofeachtechnologyonan“applestoapples”basiswithinapplications,andtocompareeachapplicationtoconventionalalternatives.13KeyfindingsofLCOS1.0include:1)selectenergystoragetechnologiesarecost‐competitivewithcertainconventionalalternativesinanumberofspecializedpowergridusesand2)industryparticipantsexpectcoststodecreasesignificantlyinthenextfiveyears,drivenbyincreasinguseofrenewableenergygeneration,governmentalandregulatoryrequirementsandtheneedsofanagingandchangingpowergrid.
LAZARD’S STORAGE ANALYSIS: KEY FINDINGS
CostCompetitiveStorageTechnologies
Selectenergystoragetechnologiesarecost‐competitivewithcertainconventionalalternativesinanumberofspecializedpowergriduses,butnonearecost‐competitiveyetforthetransformationalscenariosenvisionedbyrenewableenergyadvocates.
Althoughenergystoragetechnologyhascreatedagreatdealofexcitementregardingtransformationalscenariossuchasconsumersandbusinesses“goingoffthegrid”ortheconversionofrenewableenergysourcestobaseloadgeneration,itisnotcurrentlycostcompetitiveinmostapplications.However,someusesofselectenergystoragetechnologiesarecurrentlyattractiverelativetoconventionalalternatives;theseusesrelateprimarilytostrengtheningthepowergrid(e.g.,frequencyregulation,transmissioninvestmentdeferral).
Today,energystorageappearsmosteconomicallyviablecomparedtoconventionalalternativesinusecasesthatrequirerelativelygreaterpowercapacityandflexibilityasopposedtoenergydensityorduration.Theseusecasesincludefrequencyregulationand—toalesserdegree—transmissionanddistributioninvestmentdeferral,demandchargemanagementandmicrogridapplications.Thisfindingillustratestherelativeexpenseofincrementalsystemdurationasopposedtosystempower.Putsimply,“batterylife”ismoredifficultandcostlytoincreasethan“batterysize.”Thisislikelywhythepotentiallytransformationalusecasessuchasfullgriddefectionarenotcurrentlyeconomicallyattractive—theyrequirerelativelygreaterenergydensityandduration,asopposedtopowercapacity
LCOS1.0findsawidevariationinenergystoragecosts,evenwithinusecases.Thisdispersionofcostsreflectstheimmaturityoftheenergystorageindustryinthecontextofpowergridapplications.Thereisrelativelylimitedcompetitionandamixof“experimental”andmorecommerciallymaturetechnologiescompetingattheusecaselevel.Further,seeminglyasaresultofrelativelylimitedcompetitionandlackofindustrytransparency,somevendorsappearwillingtoparticipateinusecasestowhichtheirtechnologyisnotwellsuited
11 Lazardisapreeminentfinancialadvisoryandassetmanagementfirm.Moreinformationcanbefoundathttps://www.lazard.com 12LazardconductedtheLevelizedCostofStorageanalysiswithsupportfromEnovationPartners,anleadingenergyconsultingfirm.13Energystoragehasavarietyofuseswithverydifferentrequirements,rangingfromlarge‐scale,powergrid‐orientedusestosmall‐scale,consumer‐orienteduses.TheLCOSanalysisidentifies10“usecases,”andassignsdetailedoperationalparameterstoeach.Thismethodologyenablesmeaningfulcomparisonsofstoragetechnologieswithinusecases,aswellasagainsttheappropriateconventionalalternativestostorageineachusecase.
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FutureEnergyStorageCostDecreases
Industryparticipantsexpectcoststodecreasesignificantlyinthenextfiveyears,drivenbyincreasinguseofrenewableenergygeneration,governmentpoliciespromotingenergystorageandpressuringcertainconventionaltechnologies,andtheneedsofanagingandchangingpowergrid.
Industryparticipantsexpectincreaseddemandforenergystoragetoresultinenhancedmanufacturingscaleandability,creatingeconomiesofscalethatdrivecostdeclinesandestablishavirtuouscycleinwhichenergystoragecostdeclinesfacilitatewiderdeploymentofrenewableenergytechnology,creatingmoredemandforstorageandspurringfurtherinnovationinstoragetechnology
CostdeclinesprojectedbyIndustryparticipantsvarywidelybetweenstoragetechnologies—lithiumisexpectedtoexperiencethegreatestfiveyearbatterycapitalcostdecline(~50%),whileflowbatteriesandleadareexpectedtoexperiencefiveyearbatterycapitalcostdeclinesof~40%and~25%,respectively.Leadisexpectedtoexperience5%fiveyearcostdecline,likelyreflectingthefactthatitisnotcurrentlycommerciallydeployed(and,possibly,theoptimismofitsvendors’currentquotes)
Themajorityofnear‐tointermediate‐costdeclinesareexpectedtooccurasaresultofmanufacturingandengineeringimprovementsinbatteries,ratherthaninbalanceofsystemcosts(e.g.,powercontrolsystemsorinstallation).Therefore,usecaseandtechnologycombinationsthatareprimarilybattery‐orientedandinvolverelativelysmallerbalanceofsystemcostsarelikelytoexperiencemorerapidlevelizedcostdeclines.Asaresult,someofthemost“expensive”usecasestodayaremost“levered”torapidlydecreasingbatterycapitalcosts.Ifindustryprojectionsmaterialize,someenergystoragetechnologiesmaybepositionedtodisplaceasignificantportionoffuturegas‐firedgenerationcapacity,inparticularasareplacementforpeakinggasturbinefacilities,enablingfurtherintegrationofrenewablegeneration
Seethefullreportathttps://www.lazard.com/media/2391/lazards‐levelized‐cost‐of‐storage‐analysis‐10.pdf
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OTHER RESOURCE PLANNING TOPICS
Energy Imbalance Market
Energyimbalanceonanelectricalgridoccurswhenthereisadifferencebetweenreal‐timedemand,orloadconsumption,andgenerationthatisprescheduled.Priortotheemergenceofrenewableenergytechnologyonthegrid,balancingoccurredtocorrectoperatinglimitswithin30minutes.Flowsareoftenmanagedmanuallybysystemoperatorsandtypicallybilaterallybetweenpowersuppliers.Theintermittentcharacteristicsofwindandsolarresourceshaveraisedconcernsabouthowsystemoperatorswillmaintainbalancebetweenelectricgenerationanddemandinsmallerthanthirtyminuteincrements.EnergyImbalanceMarkets(“EIMs”)createamuchshorterwindowmarketopportunityforbalancingloadsandresources.AnEIMcanaggregatethevariabilityofresourcesacrossmuchlargerfootprintsthancurrentbalancingauthoritiesandacrossbalancingauthorityareas.Thesubhourlyclearing,insomecasesdownto5minutespotentiallyprovideseconomicadvantagetoparticipantsinthemarket.EIMsproposetomoderate,automateandeffectivelyexpandsystem‐widedispatchwhichcanhelpwiththevariabilityandintermittencyofrenewableresources.EIMsboasttocreatesignificantreliabilityandrenewableintegrationbenefitsbysharingresourcereservesacrossmuchlargerfootprints.
CAISO–EIM
OnNovember1,2014,theCAISOwelcomedPacifiCorpintothewesternEIM.Nevada‐basedNVEnergybeganactiveparticipationintheEIMonDecember1,2015.ThisvoluntarymarketserviceisavailabletoothergridsintheWest.SeveralWesternutilitieshavecommittedtojointheEIM.Meanwhile,workisunderwayforPugetSoundEnergyinWashingtonandArizonaPublicServicetoenterthereal‐timemarketinOctober2016.Inthefallof2015,PortlandGeneralElectricandIdahoPowereachannouncedtheirintentionstopursueEIMparticipation.
ParticipantsintheEIMexpecttorealizeatleastthreebenefits:
Produceeconomicsavingstocustomersthroughlowerproductioncosts
ImprovevisibilityandsituationalawarenessforsystemoperationsintheWesternInterconnection
Improveintegrationofrenewableresources
TEPhascontractedwiththeenergyconsultingfirmE3toperformastudytodeterminetheeconomicbenefitsofTEPparticipatingintheenergyimbalancemarket.E3willevaluateEIMbenefitstoTEPbasedonasetofstudyscenariosdefinedthroughdiscussionswithTEPtoreflectTEPsysteminformation,includingloads,resources,andpotentialtransmissionconstraintsforaccesstomarketsforreal‐timetransactions.TheprojectanalysisbeganinFebruary2016andisexpectedtobecompletedbytheendofJune,2016.TEPwillthenevaluatetherelevantcostsandbenefitsofjoiningthewesternEIM.UNSEiswithintheTEPbalancingauthorityandthereforewillalsomakeadeterminationtoparticipatebasedontheTEPanalysisandresults.
Chapter5
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Natural Gas Storage
Naturalgasisafuelsourcethatproduceslesscarbondioxidethancoalforagivenunitofenergygeneration.Naturalgas‐poweredelectricgenerationcanalsobemoreresponsiveandsupportiveofthevariabilityandintermittencyofrenewablegeneration.Naturalgasusagehashistoricallyundergoneseasonalfluctuationswithhigherconsumptionduringthewintermonthsduetoresidentialandcommercialheating.Thedisplacementofcoalandtheemergenceofrenewablegenerationwilllikelyshiftgasdemandincreasestothesummermonths.Asutilitiespotentiallybegantoleanmoretowardnaturalgas‐poweredelectricgeneration,anensuingissueorconcernistheabilityofsupplyanddeliverabilitytomeetincreaseddemand.Theavailabilityofnaturalgasstoragehelpsalleviatesomeconcern.
Naturalgasispivotalinmaintainingareliableelectricgrid.Naturalgasstorageprovidesareliabilitybackstoptoamultitudeofdisruptionsthatmayimpactthedeliveryofnaturalgas.Storagehelpstolevelthebalanceofproduction,whichisrelativelyconstant,andtheseasonallydrivendemandorconsumption.Gascanbeinjectedintostoragewhiledemandislowandreleasedforconsumptionwhiledemandishighorwhiletherearedisruptionsinsupply.MuchlikewaterstoredbehinddamsallowsfortimelyirrigationofseasonalcropsandforNaturalgasstorageistypicallystoredundergroundandprimarilyinthreedifferentformations;depletedoiland/orgasreservoirs,aquifersandsaltcavernformations.
Figure8–NaturalGasStorageTypes
Source:EIAEnergyInformationAdministration
DepletedReservoirs–Thereservoirsresultfromthevoidremainingaftergasoroilisrecovered.Depletedreservoirsaremorewidelyavailableandthemostutilized.Thisformofstorageisthemostcommonfornaturalgasstorage.Theiravailability,ofcourse,isdependentonthelocationofexistingwellsandpipelineinfrastructure.Tomaintainadequatewithdrawalpressure,upto50%ofthestoredgascapacitybecomes
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unrecoverablecushiongas,thisdependsonhowmuchnativegasremainsinthereservoir.Injectionandwithdrawalratesarealsodependentonthegeologicalcharacteristics.
Aquifers–TheuseofaquifershasbeenmoreprevalentintheMidwesternUnitedStates.Inthecaseofdepletedgasandaquiferstoragereservoirs,theeffectivenessofstorageisprimarilydependentonthegeologicalconditions.Therockformationporosity,permeability,andretentioncapabilityareimportant.Asuitableaquiferisonethatisoverlaidwithimpermeablecaplayer.Unlikedepletedreservoirs,whereexpensiveinfrastructurewasinstalledduringtheexplorationandextractionofoilandgas,aquifersrequireextensivecapitalinvestment.Sinceaquifersarenaturallyfullofwater,insomeinstancespowerfulinjectionequipmentmustbeused,toallowsufficientinjectionpressuretopushdowntheresidentwaterandreplaceitwithnaturalgas.Aquiferstypicallyoperatewithonewithdrawalperiodperyear;thisisbecauseofslowfilltopushwaterback.
SaltCaverns–ThebestopportunityfornaturalgasstorageinArizonaandintheSouthwestmightbeinsaltcaverns.Saltcavernsallowforhighwithdrawalandinjectionratesofnaturalgas.Thismakessaltcavernsidealtomeetdemandincreasesortooperateasemergencyback‐upsystems.Saltcavernsarecreatedthroughaprocesscalledsolutionmining;freshwaterisblastedintosaltformationsandthemixtureisflushedtothesurfacecreatingachamber.Thechambersarestructurallystrongandextremelyairtight.Whilecushiongasisstillrequiredata20%to30%level,itislessthanrequiredfordepletedreservoirs.
Integration of Renewables
ThevalueandcostofrenewablesolarPVisestimatedtochangewithincreasedpenetration.TodeterminethevalueofsolarPV,it’simperativetounderstanditsrelationshiptoconsumerload.InthecaseofDistributedGeneration,mostrenewablesolarissited‘behindthemeter’oroncustomerfacilities.TherelationshipofaDGsolarinstallationataresidentialsiteisassumedtobedifferentthananinstallationatacommercialsite.Wecanassumethatresidentialpeakloadoccurssoonafterconsumersarrivehomefromwork.Commercialpeaktendstooccurduringtheearlytomid‐afternoonworkhours.Thisisanimportantdistinctioninthisdiscussionbecausethecostsandvaluevaryduebetweenthemultiplecustomertypes.Howeverforthisdiscussionwewillreferonlytotheimpactonthesysteminitsentiretyandforsolarasawhole.
Historically,electricutilitieswithpredominantairconditioningloadsetapeakdemandbetween4:00PMto5:00PMonasummerday.SolarPVcanhelpreducethispeakbutnotatthefullpotentialofitssolaroutput.Fixedarraysolarpeakproductionistypicallyat12:00to1:00PM,whilesingle‐axistrackingsystemscanexpanditspotentialtocoincidemorewiththeretailpeakdemand.UNSE’scurrentrenewableportfolio(toincludeDGandwind)isatapproximately5%of2030retailenergyprojection.
Chart10belowdemonstratesthattheexistingpenetrationofsolaralreadyhasanobservablereductiontoretailpeakdemand.Closerexaminationalsorevealsthatthenetpeakisbeginningtoshifttotheright.Thereductiontothepeakin2030fromexistingsolarisapproximately4%.Whileareductiontoretailpeakisobserved,only40%ofthesolarinstalledcapacitycontributestothatreduction.
UNSEiscommittedtomeetingthe15%RESby2025.Bymaintainingthatcommitmentthrough2030,thesolarcomponentoftherenewableportfolioreducespeakbyanother6%.Thoughthereisanobviousreductioninpeak,thetimethepeakissetisshiftingclosertothelastdiurnalhourofatypicalclear‐skysummerday(7:00to8:00PM).Itissignificantthentonotethatthoughweintroducea30%renewabletargetwithahighpenetrationofsolar,thereductiontothenewshifted(7:00PM)peakattributedtosolarisbeginningtodiminish.Weobservea1%reductiontoretailpeakbutasignificantdrop(from40%to6%)topeak
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contributionfromtheincrementalsolarcapacityadditions.Asretailloadgrows,solarPV(withoutstoragecapabilities)cannotcontributetothereductionofpeakdemandbeyond7:00PM;regardlessofitspenetration.
Chart10–ImpactofIncreasedSolarProduction(DuckCurve)
Whileitcanbearguedthatsolarmaycontributetoreducedlosses,toapportionedcapacityreductions(generationandtransmission),andcarbonemissionreductionsamongotherbenefits,wenotefromthechartabovethatotherchallengesarise.Asthesunisrising,electricloadstabilizesandbeginsanascenttowardthepeak.IncreasedpenetrationofsolarcreatesarapidnetdropinloadandUNSEmusthavegeneratorsthatarecapableoframpingdownatafastrate.Mostbase‐loadunitssuchascoalandgas‐steamarechallengedtorespondtothisrampdownandsubsequentrampup.Itisatthispointthatthenetreductioninloadcancreatetheneedforrapidrespondinggeneratorstoregulatetheinitialsteepdeclineinloadfollowedbyanimmediaterise.Fromaresourceplanningcontext,withtheincreasingpenetrationofsolarsystems,wemusttakeintoconsiderationtherightcombinationofresourcestorespondtothevariabilityandintermittencyofrenewablesystems.Aportfoliowithahighpenetrationofsolarandotherrenewablesmaynecessitatetheinstallationofreciprocatinginternalcombustionenginesand/orstorageintheformofbatteriesorgas.
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Natural Gas Reserves Provenreservesofnaturalgasareestimatedquantitiesthatanalysesofgeologicalandengineeringdatahavedemonstratedtobeeconomicallyrecoverablefromknownreservoirsinthefuture.AccordingtoEIA,majoradvancesinnaturalgasexplorationandtechnologyhasincreasedreservesin2014to388.8trillioncubicfeet(Tcf)from354.0Tcfreservesin2013.
Table9–U.SProvedReservesandReserveChanges(2013to2014) Wet Natural Gas ‐Tcf
U.S. proven reserves at December 31, 2013 354.0
Total discoveries 50.5
Net revisions 1.0
Net Adjustments, Sales, Acquisitions 11.5
Production ‐28.1
Net additions to U.S. proved reserves 34.8
U.S. proven reserves at December 31, 2014 388.8
Percent change in U.S. proved reserves 9.8% Notes: Total natural gas includes natural gas plant liquids. Columns may not add to total because of independent rounding. Source: U.S. Energy Information Administration, Form EIA‐23L, Annual Survey of Domestic Oil and Gas Reserves
Provenreservesareaddedeachyearwithsuccessfulexploratorywellsandasmoreislearnedaboutfieldswherecurrentwellsareproducing.Theapplicationofnewtechnologiescanconvertpreviouslyuneconomicnaturalgasresourcesintoprovenreserves.U.S.provenreservesofnaturalgashaveincreasedeveryyearsince1999.Figure10illustratesthedistributionofthereservesbystateandoffshorearea.
Figure10–EIANaturalGasProvenReservesbyState/Area(2014)
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Utility Ownership in Natural Gas Reserves
Asutilitiesplacemorerelianceoncleanermoreefficientnaturalgasresources,UNSEhasbeenresearchingnewwaystolockinlong‐termfuelpricestabilityfornaturalgas.Onepotentialsolutionbeingexploredbyanumberofgasandelectricutilitiesistheinvestmentandownershipinphysicalnaturalgasreserves.
Overthelastfewyears,anumberofutilitieshavepartneredwiththird‐partynaturalgasproducerstodeveloppartnershipstoacquireanddevelopnaturalgasreserves.Thesepartnershipswereformedasanalternativeapproachtoexistingfinancialhedgingpracticesandwereseenasawayforcompaniestodevelopalong‐termphysicalhedgeforitsexpandinggasgenerationfleet.
Productionofoilandassociatednaturalgashasgrownsubstantiallyoverthelastseveralyearsleadingtoasupplysurplusthathasdepressednaturalgaspricestothelowesttheyhavebeenintwentyyears.Asaresult,thisenvironmentcreatesopportunitiesforutilitiesandotherlargegaspurchaserstoacquirenaturalgasreservesathistoriclows.Thefigurebelowhighlightsanumberofcompaniesthathavesuccessfullydevelopedpartnershipsaroundnaturalgasreserveownership.
Figure11‐OverviewofRecentUtility‐ThirdPartyGasReserveProjects
Regionalcoaldiversificationstrategiesandtheshifttorelyonmorenaturalgaswillencourageutilitiestosecurenaturalgasreserves.TheCompanyplanstoexplorehowitmightpursuesimilarpartnershipswithregionalgasandelectricutilitiesinaneffortsecurelong‐termnaturalgaspricestabilityforitscustomers.
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FUTURE RESOURCE OPTIONS AND MARKET ASSUMPTIONS Inconsideringfutureresources,theresourceplanningteamevaluatesamixofrenewableandconventionalgenerationtechnologies.Thismixoftechnologiesincludedbothcommerciallyavailableresourcesandpromisingnewtechnologiesthatarelikelytobecometechnicallyviableinthenearfuture.TheIRPprocesstakesahigh‐levelapproachandfocusesonevaluatingresourcetechnologiesratherthanspecificprojects.Thisapproachallowstheresourceplanningteamtodevelopawide‐rangeofscenariosandcontingenciesthatresultinaresourceacquisitionstrategythatcontemplatesfutureuncertainties.Assumptionsoncostandoperatingcharacteristicsaretypicallygatheredfromseveraldatasources.BelowisalistofresourcesthatUNSEreliesontocompilecapitalcostassumptionsforthermalandrenewableresources:
U.S.EnergyInformationAdministration‐https://www.eia.gov/forecasts/aeo/electricity_generation.cfm
WesternElectricityCoordinatingCouncil(asrecommendedbyE3)‐https://www.wecc.biz/Reliability/2014_TEPPC_Generation_CapCost_Report_E3.pdf
Black&Veatch‐http://bv.com/docs/reports‐studies/nrel‐cost‐report.pdf
NationalRenewableEnergyLaboratory‐http://www.nrel.gov/analysis/re_futures/index.html
Lazard‐https://www.lazard.com/media/2390/lazards‐levelized‐cost‐of‐energy‐analysis‐90.pdf;https://www.lazard.com/media/2391/lazards‐levelized‐cost‐of‐storage‐analysis‐10.pdf
UNSEreliesonanumberofthird‐partydatasourcesandconsultantstoderiveassumptioninitson‐goingplanningpractices.Inaddition,informationgatheredthroughourcompetitivebiddingprocessorrequestforproposalprocesscanbeusedtoputbothself‐buildresourcesandmarket‐basedpurchasedpoweragreementsonacomparativebasis.
Chapter6
2016PreliminaryIntegratedResourcePlan
Page‐58
Generation Resources – Matrix of Applications
Table6providesabriefoverviewofthetypesofgeneratingresourcesthatwillbeincludedandevaluatedintheresourceplanningprocessforthe2017finalIRP.Foreachtechnologytypeabriefsummaryofpotentialrisksandbenefitsarelisted.Inaddition,attributessuchascosts,sitingrequirements,dispatchability,transmissionrequirementsandenvironmentalpotentialaresummarized.
Table6‐ResourceMatrix
Category Type
Zero or Low
Carbon Potential
State of Technology
Local Area Option
Intermittent Peaking Load
Following Base Load
Energy Efficiency Energy
Efficiency Yes Mature Yes
Demand Response
Direct Load Control
Yes Mature Yes
Renewables
Wind Yes Mature
Solar PV Yes Mature Yes
Solar Thermal Yes Mature Storage (1)
Conventional
Reciprocating Engines
Mature
Combustion Turbines
Mature Yes Combined
Cycle (NGCC) Mature Yes
Small Modular Nuclear (SMR)
Yes Emerging (1) NaturalGashybridizationorthermalstoragecouldallowresourcetobedispatchedtomeetutilitypeakloadrequirements.
UNSElectric
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Comparison of Resources
Generationplanningandresourceanalysiscanbeperformedbyusingawidespectrum
oftoolsandmethodologies.Priortorunningdetailed
simulationmodelsforthe2017FinalIRP,theUNSEresourceplanningteam
willcom
binethesourceinformationandsettleonthecostparam
etersfor
thevaryingtechnologies.Table7andTable8shownbelowdem
onstrateacom
parisonofcapitalcostestimates,usedbyUNSEinthe2012and2014
IRPsversuscostspublishedbyThird‐PartySources,forthermalandrenew
ableresourcesrespectively.Thetablesdem
onstratethevaryingrangeof
costs,evenwithineachtechnology.Inthe2017FinalIRP,theresourceplanninggroupwillincorporatetheinputfromthird‐partysources,
stakeholdersandotherdatasourcestoderiveareasonablesetofcostinputs(construction,EHV/interconnection,constructiontoincludeITC,fixed
O&M,variableO&M,andfuelcosts).
Table7–CapitalCostforThermalResources
Plant Construction Costs
Units
Small A
eroderivative
Combustion Turbine
Small Frame
Combustion
Turbine
Natural G
as
Reciprocating
Engines
Small M
odular
Reactor (SMR)
Natural G
as
Combined Cycle
(NGCC)
2012 IR
P
2012 $/kW
$1,156
$779
‐ ‐
$1,320
2014 IR
P
2014 $/kW
$1,062
$808
‐ ‐
$1,367
Third Party Source
2014 $/kW
$1,150
$825
$1,300
‐ $1,125
Third Party Source
2016 $/kW
$800 ‐ $1,000
$800 ‐ $1,000
$1,150
‐ $1,000 ‐ $1,300
Prelim
inary IRP Estim
ate 2016 $/kW
$1,250
$800
$1,200
$6,400
$1,300
Table8–CapitalCostforRenew
ableResources
Plant Construction Costs
Units
Solar Th
erm
al
6 Hour Storage
(100 M
W)
Solar
Fixed PV
(20 M
W)
Solar Single Axis Tracking
(20 M
W)
Wind Resources
(50 M
W)
2012 IR
P
2012 $/kW
$5,650
$2,350
$2,549
$2,400
2014 IR
P
2014 $/kW
$7,144
$1,993
$2,290
$2,278
Third Party Source
2014 $/kW
$7,100
$3,325
$3,800
$2,000
Third Party Source
2016 $/kW
$10,000 ‐ $10,300
$1,400 ‐ $1,500
$1,600 ‐ $1,750
$1,250 ‐ $1,700
Prelim
inary IRP Estim
ate 2016 $/kW
$10,000
$1,500
$1,600
$1,450
2016PreliminaryIntegratedResourcePlan
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LEVELIZED COST COMPARISONS
Thecalculationofthelevelizedcostofelectricity(“LCOE”)providesacommonmeasuretocomparethecostofenergyacrossdifferentdemandandsupply‐sidetechnologies.TheLCOEtakesintoaccounttheinstalledsystempriceandassociatedcostssuchascapital,operationandmaintenance,fuel,transmission,taxincentivesandconvertsthemintoacommoncostmetricofdollarspermegawatthour.ThecalculationfortheLCOEisthenetpresentvalueoftotalcostsoftheprojectdividedbythequantityofenergyproducedoverthesystemlife.
Becauseintermittenttechnologiessuchasrenewablesdonotprovidethesamecontributiontosystemreliabilityastechnologiesthatareoperatorcontrolledanddispatched,theyrequireadditionalsysteminvestmentforsystemregulationandbackupcapacity.Aswithanyprojection,thereisuncertaintyaboutallofthesefactorsandtheirvaluescanvaryregionallyandacrosstimeastechnologiesevolveandfuelpriceschange.Furtherresourceutilizationisdependentonmanyfactors;theportfoliomix,regionalmarketprices,customerdemandandmust‐runrequirementsaresomeconsiderationsoutsideofLCOE.
TheLCOEprojectioncontainsmanyfactorsthatwillvarybetweennowandwhenthefinalIRPisfiledonApril1,2017.Assuch,UNSEwillderivethelevelizedcostsatthetimethatthecapitalcostsandotherinputsarepreparedforfinalanalysis.
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REN
EWABLE TEC
HNOLO
GIES – COST DETAILS
Table9includestherenewabletechnologycostsforthe2016Prelim
inaryIntegratedResourcePlan.
Table9‐Renew
ableResourceCostAssumptions
Plant Construction Costs
Units
Solar Th
erm
al
6 Hour Storage
(100 M
W)
Solar
Fixed PV
(20 M
W)
Solar Single Axis
Tracking
(20 M
W)
Wind Resources
(50 M
W)
Project Lead Tim
e
Years
4
2
2
2
Installation Years
First Year Available
2020
2018
2018
2018
Peak Capacity
MW
100
20
100
50
Plant Construction Cost
2016 $/kW
$9,800
$1,450
$1,550
$1,250
EHV/Interconnection Cost
2016 $/kW
200
50
50
200
Total Construction Cost
2016 $/kW
$10,000
$1,500
$1,600
$1,450
Operating Characteristics
Fixed
O&M
2016 $/kW
$80.00
$13.00
$10.00
$40.00
Typical Capacity Factor
Annual %
50%
29%
25%
33%
Expected Annual Output
GWh
438
110
127
145
Net Coinciden
t Peak
NCP%
85%
33%
51%
13%
Water Usage
Gal/M
Wh
800
0
0
0
ITC
Percent
30%
30%
30%
‐
PTC
$/M
Wh
‐ ‐
‐ $23.00
Levelized
Cost of En
ergy
$/M
Wh
$161
$54
$70
$49
2016Prelim
inaryIntegratedResourcePlan
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CONVEN
TIONAL TECHNOLO
GIES – COST DETAILS
Table10includestheconventionalresourcecostassum
ptionsforthe2016Prelim
inaryIntegratedResourcePlan.
Table10‐ConventionalResourceCostAssumptions
Plant Construction Costs
Units
Small
Aeroderivative
Combustion
Turbine
Small Frame
Combustion
Turbine
Natural G
as
Reciprocating
Engines
Small
Modular
Reactor
(SMR)
Natural G
as
Combined
Cycle
(NGCC)
Project Lead Tim
e
Years
4
4
2
12
4
Installation Years
First Year Available
2020
2020
2018
2028
2020
Peak Capacity , M
W
MW
45
75
2
300
550
Plant Construction Cost
2016 $/kW
$1,200
$770
$1,070
$6,000
$1,135
EHV/Interconnection Cost
2016 $/kW
50
30
30
400
165
Total Construction Cost
2016 $/kW
$1,250
$800
$1,200
$6,400
$1,300
Operating Characteristics
Fixed O&M
2016 $/kW
$12.50
$13.25
$17.50
$29.30
$16.50
Variable O&M
2016 $/kW
$3.50
$3.75
$12.50
$5.00
$2.00
Gas Transportation
2016 $/kW
$16.80
$16.80
$16.80
‐ $16.80
Annual Heat Rate
Btu/kWh
9,800
10,500
9,000
10,400
7,200
Typical Capacity Factor
Annual %
15%
8%
45%
85%
50%
Expected Annual Output
GWh
59
53
8
2,234
2,409
Fuel Source
Fuel Source
Natural G
as
Natural G
as
Natural G
as
Uranium
Natural G
as
Unit Fuel Cost
$/m
mBtu
$5.67
$5.67
$5.67
$0.90
$5.67
Net Coincident Peak
NCP%
100%
100%
100%
100%
100%
Water Usage
Gal/M
Wh
150
150
50
800
350
Levelized
Cost of En
ergy
$/M
Wh
$247
$306
$135
$145
$103
UNSElectric
Page‐63
ThefollowingisanarrativefromLazard’sninthversionofitsLevelizedCostofEnergyAnalysis14.Lazard’sninthversionofitsLevelizedCostofEnergyAnalysis(LCOE9.0)analysisprovidesanindependent,in‐depthstudyofalternativeenergycostscomparedtoconventionalgenerationtechnologies.Thecentralfindingsofthestudyare:1)thecostcompetitivenessandcontinuedpricedeclinesofcertainalternativeenergytechnologies;2)thenecessityofinvestingindiversegenerationresourcesforintegratedelectricsystemsfortheforeseeablefuture;and3)theimportanceofrationalandtransparentpoliciesthatsupportamodernandincreasinglycleanenergyeconomy.
Lazard‐https://www.lazard.com/media/2390/lazards‐levelized‐cost‐of‐energy‐analysis‐90.pdf
LAZARD’s LEVELIZED COST OF ENERGY ANALYSIS: KEY FINDINGS
CostCompetivenessofAlternativeEnergyTechnologies
Certainalternativeenergytechnologies(e.g.,windandutility‐scalesolar)continuetobecomemorecost‐competitivewithconventionalgenerationtechnologiesinsomeapplications,despitelargedecreasesinthecostofnaturalgas.Lazard’sanalysisdoesnottakeintoaccountpotentialsocialandenvironmentalexternalities(e.g.,thesocialcostsofdistributedgeneration,environmentalconsequencesofconventionalgeneration,etc.)orreliability‐orintermittency‐relatedconsiderations(e.g.,transmissionsystemorback‐upgenerationcostsassociatedwithcertainalternativeenergytechnologies)
Despiteasharpdropinthepriceofnaturalgas,thecostofallformsofutility‐scalesolarphotovoltaicandutility‐scalewindtechnologiescontinuetoremaincompetitivewithconventionalgenerationtechnologiesasillustratedbytheproliferationofsuccessfulbidsbyrenewableenergyprovidersinopenpowerprocurementprocesses.
Currently,rooftopsolarPVisnotcostcompetitivewithoutsignificantsubsidies,due,inpart,tothesmall‐scalenatureandaddedcomplexityofrooftopinstallation.However,theLCOEofrooftopsolarPVisexpectedtodeclineincomingyears,partiallyasaresultofmoreefficientinstallationtechniques,lowercostsofcapitalandimprovedsupplychains.Importantly,LazardexcludesfromtheiranalysisthevalueassociatedwithcertainusesofrooftopsolarPVbysophisticatedcommercialandindustrialusers(e.g.,demandchargemanagement,etc.),whichappearsincreasinglycompellingtocertainlargeenergycustomers.
Communitybasedsolarprojects,inwhichmembersofasinglecommunity(e.g.,housingsubdivisions,rentalbuildings,industrialparks,etc.)owndividedinterestsinsmall‐scaleground‐mountedsolarPVfacilities,isbecomingmorewidespreadandcompellingincertainareas.Theseprojects,whichallowparticipantstoreceivecreditsagainsttheirelectricbillseitherbystatestatuteornegotiatedagreementsbetweentheprojectsponsorsandlocalutilities,providesolarenergyaccesstoconsumerswithouttheeconomicmeansorpropertyrightstoinstallrooftopsolarPV.However,whilecommunitysolarprojectsbenefitfromincreasedscaleanddecreasedinstallationcomplexityascomparedtorooftopsolarPV,mostcommunityscaleprojectsarerelativelysmallcomparedtoutility‐scalePVprojects,andarethereforemoreexpensivecomparedtoutility‐scalesolarPV.
Thepronouncedcostdecreaseincertainintermittentalternativeenergytechnologies,combinedwiththeneedsofanagingandchangingpowergridintheU.S.,hassignificantlyincreaseddemandforenergystoragetechnologiestofulfillavarietyofelectricsystemneeds(e.g.,frequencyregulation,transmission/substation
14 Lazardisapreeminentfinancialadvisoryandassetmanagementfirm.Moreinformationcanbefoundathttps://www.lazard.com
2016PreliminaryIntegratedResourcePlan
Page‐64
investmentdeferral,demandchargeshaving,etc.).Industryparticipantsexpectthisincreaseddemandtodrivesignificantcostdeclinesinenergystoragetechnologiesoverthenextfiveyears.Increasedavailabilityoflower‐costenergystoragewilllikelyfacilitategreaterdeploymentofcertainalternativeenergytechnologies.
Energyefficiencyremainsanimportant,cost‐effectiveformofalternativeenergy.However,costsforvariousenergyefficiencyinitiativesvarywidelyandmayfailtoaccountfortheopportunitycostsofforegoneconsumption.
Verylarge‐scaleconventionalandrenewablegenerationprojects(e.g.,IGCC,nuclear,solarthermal,etc.)continuetofaceanumberofchallenges,includingsignificantcostcontingencies,highabsolutecosts,competitionfromrelativelycheapnaturalgasinsomegeographies,operatingdifficultiesandpolicyuncertainty.
TheNeedforDiverseGenerationPortfolios
Despitetheincreasingcost‐competivenessofcertainalternativeenergytechnologies,futureresourceplanningeffortswillrequirediversegenerationfleetstomeetbaseloadgenerationneedsfortheforeseeablefuture.Theoptimalsolutionformanyutilitiesistousealternativeenergytechnologiesasacomplementtoexistingconventionalgenerationtechnologies.Overall,theU.S.willcontinuetobenefitfromabalancedgenerationmix,includingacombinationofalternativeenergyandconventionalgenerationtechnologies.
Whilesomealternativeenergytechnologieshaveachievednotional“gridparity”undercertainconditions(e.g.,best‐in‐classwind/solarresources),suchobservationdoesnottakeintoaccountpotentialsocialandenvironmentalexternalities(e.g.,socialcostsofdistributedgeneration,environmentalconsequencesofconventionalgeneration,etc.),orreliability‐relatedconsiderations.
TheImportanceofRationalandTransparentEnergyPolicies
Therapidlychangingdynamicsofenergycostshaveimportantramificationsfortheindustry,policymakersandthepublic.IntheU.S.,acoordinatedfederalandstateenergypolicy,groundedincostanalysis,couldenablesmarterenergydevelopment,leadingtosustainableenergyindependence,acleanerenvironmentandastrongereconomicbase.
Alternativeenergycostshavedecreaseddramaticallyinthepastsixyears,driveninsignificantpartbyfederalsubsidiesandrelatedfinancingtools,andtheresultingeconomiesofscaleinmanufacturingandinstallation.Manyofthesesubsidieshavealreadyorareexpectedtostepdownorexpireforselectedalternativeenergytechnologies.Akeyquestionforindustryparticipantswillbewhetherthesetechnologiescancontinuetheircostdeclinesandachievewideradoptionwithoutthebenefitofsubsidies
ThepublicnarrativesurroundingalternativeenergytechnologiesremainsfocusedtoalargedegreeonrooftopsolarPV,notwithstandingitssignificantlyhigherLCOErelativetoutility‐scalesolarPVandwind,anditspotentiallyadversesocialeffectsinthecontextofexistingnetmeteringregimes(e.g.,high‐incomehomeownersbenefitingfromsuchregimeswhilestillrelyingonthebroaderpowergrid,andrelatedcosttransferstotherelativelylessaffluent).Thisfocus,combinedwiththeavailabilityofgovernmentincentivesforrooftopsolar,distortsintelligentsystem‐wideintegratedresourceplanningandpolicy.
Seethefullreportathttps://www.lazard.com/media/2390/lazards‐levelized‐cost‐of‐energy‐analysis‐90.pdf
UNSElectric
Page‐65
Renewable Electricity Production Tax Credit (“PTC”)
Thefederalrenewableelectricityproductiontaxcreditisaninflation‐adjustedper‐kilowatt‐hour(kWh)taxcreditforelectricitygeneratedbyqualifiedenergyresourcesandsoldbythetaxpayertoanunrelatedpersonduringthetaxableyear.Thedurationofthecreditis10yearsafterthedatethefacilityisplacedinserviceforallfacilities.
InDecember2015,theConsolidatedAppropriationsAct,2016extendedtheexpirationdatefortheproductiontaxcredittoDecember31,2019,forwindfacilitiescommencingconstruction,withaphase‐downbeginningforwindprojectscommencingconstructionafterDecember31,2016.TheActextendedthetaxcreditforothereligiblerenewableenergytechnologiescommencingconstructionthroughDecember31,2016.TheActappliesretroactivelytoJanuary1,2015.
Thetaxcreditamountisadjustedforinflationbymultiplyingthetaxcreditamountbytheinflationadjustmentfactorforthecalendaryearinwhichthesaleoccurs,roundedtothenearest0.1cents.TheInternalRevenueService(“IRS”)publishestheinflationadjustmentfactornolaterthanApril1eachyearintheFederalRegistrar.For2015,theinflationadjustmentfactorusedbytheIRSis1.5336.
Applyingtheinflation‐adjustmentfactorforthe2014calendaryear,aspublishedintheIRSNotice2015‐20,theproductiontaxcreditamountisasfollows:
$0.023/kWhforwind,closed‐loopbiomass,andgeothermalenergyresources $0.012/kWhforopen‐loopbiomass,landfillgas,municipalsolidwaste,qualifiedhydroelectric,and
marineandhydrokineticenergyresources.
ThetaxcreditisphaseddownforwindfacilitiesandexpiresforothertechnologiescommencingconstructionafterDecember31,2016.Thephase‐downforwindfacilitiesisdescribedasapercentagereductioninthetaxcreditamountdescribedabove:
Table11–ProductionTaxCreditPhaseDown
Construction Year (1) PTC Reduction
2017 PTC amount is reduced by 20%
2018 PTC amount is reduced by 40%
2019 PTC amount is reduced by 60%
(1)Forwindfacilitiescommencingconstructioninyear.
Notethattheexactamountoftheproductiontaxcreditforthetaxyears2017‐2019willdependontheinflation‐adjustmentfactorusedbytheIRSintherespectivetaxyears.Thedurationofthecreditis10yearsafterthedatethefacilityisplacedinservice.
Seehttp://energy.gov/savings/renewable‐electricity‐production‐tax‐credit‐ptcformoredetails.
2016PreliminaryIntegratedResourcePlan
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Energy Investment Tax Credit (“ITC”)
TheConsolidatedAppropriationsAct,signedinDecember2015,includedseveralamendmentstothefederalBusinessEnergyInvestmentTaxCreditwhichapplytosolartechnologiesandotherPTCeligibletechnologies.Notably,theexpirationdateforthesetechnologieswasextended,withagradualstepdownofthecreditsbetween2019and2022.
TheITChasbeenamendedanumberoftimes,mostrecentlyinDecember2015.Thetablebelowshowsthevalueoftheinvestmenttaxcreditforeachtechnologybyyear.Theexpirationdateforsolartechnologiesandwindisbasedonwhenconstructionbegins.Forallothertechnologies,theexpirationdateisbasedonwhenthesystemisplacedinservice(fullyinstalledandbeingusedforitsintendedpurpose).
Table12–InvestmentTaxCreditsbyYearandTechnology
Technology 2016 2017 2018 2019 2020 2021 2022 Future Years
PV, Solar Water Heating, Solar Space Heating/Cooling,
Solar Process Heat 30% 30% 30% 30% 26% 22% 10% 10%
Hybrid Solar Lighting, Fuel Cells, & Small Wind
30% ‐ ‐ ‐ ‐ ‐ ‐ ‐
Geothermal Heat Pumps, Microtubines,
Combined Heat and Power Systems
10% ‐ ‐ ‐ ‐ ‐ ‐ ‐
Geothermal Electric
10% 10% 10% 10% 10% 10% 10% 10%
Large 30% 24% 18% 12% ‐ ‐ ‐ ‐
Wind
SolarTechnologiesEligiblesolarenergypropertyincludesequipmentthatusessolarenergytogenerateelectricity,toheatorcool(orprovidehotwaterforusein)astructure,ortoprovidesolarprocessheat.Hybridsolarlightingsystems,whichusesolarenergytoilluminatetheinsideofastructureusingfiber‐opticdistributedsunlight,areeligible.Passivesolarsystemsandsolarpool‐heatingsystemsarenoteligible.
FuelCellsThecreditisequalto30%ofexpenditures,withnomaximumcredit.However,thecreditforfuelcellsiscappedat$1,500per0.5kilowatt(kW)ofcapacity.Eligiblepropertyincludesfuelcellswithaminimumcapacityof0.5kWthathaveanelectricity‐onlygenerationefficiencyof30%orhigher.
SmallWindTurbinesThecreditisequalto30%ofexpenditures,withnomaximumcreditforsmallwindturbinesplacedinserviceafterDecember31,2008.Eligiblesmallwindpropertyincludeswindturbinesupto100kWincapacity.
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GeothermalSystemsThecreditisequalto10%ofexpenditures,withnomaximumcreditlimitstated.Eligiblegeothermalenergypropertyincludesgeothermalheatpumpsandequipmentusedtoproduce,distributeoruseenergyderivedfromageothermaldeposit.Forelectricityproducedbygeothermalpower,equipmentqualifiesonlyupto,butnotincluding,theelectrictransmissionstage.
MicroturbinesThecreditisequalto10%ofexpenditures,withnomaximumcreditlimitstated(explicitly).Thecreditformicroturbinesiscappedat$200perkWofcapacity.Eligiblepropertyincludesmicroturbinesupto2MWincapacitythathaveanelectricity‐onlygenerationefficiencyof26%orhigher.
CombinedHeatandPower(“CHP”)Thecreditisequalto10%ofexpenditures,withnomaximumlimitstated.EligibleCHPpropertygenerallyincludessystemsupto50MWincapacitythatexceed60%energyefficiency,subjecttocertainlimitationsandreductionsforlargesystems.TheefficiencyrequirementdoesnotapplytoCHPsystemsthatusebiomassforatleast90%ofthesystem'senergysource,butthecreditmaybereducedforless‐efficientsystems.
Seehttp://energy.gov/savings/business‐energy‐investment‐tax‐credit‐itcformoredetails.
2016PreliminaryIntegratedResourcePlan
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Impacts of Declining Tax Credits and Technology Installed Costs
Chart11throughChart13shownbelowreflectthenear‐termcapacitypricedeclinesona$/kWbasisfrom2016‐2022associatedwiththereductionintheinstalledcostsofsolartechnologiesrelativetothelevelizedcostrealizedona$/MWhassumingdifferentlevelsofinvestmenttaxcreditsbyyear.ThesolarITCassumptionsarebasedonthefederalinvestmenttaxcreditassumptionsshownonpage66.
Chart11–SolarPVFixed,ImpactsofDecliningTaxCreditsandTechnologyInstalledCosts
Chart12–SolarSAT,ImpactsofDecliningTaxCreditsandTechnologyInstalledCosts
$70
$67
$64
$62$63
$65
$74
$54
$56
$58
$60
$62
$64
$66
$68
$70
$72
$74
$76
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2016 2017 2018 2019 2020 2021 2022
LCOE, $/M
Wh
Installed Cost, $/kW
Solar PV ‐ Fixed Tilt (20 MW)
$/MWh $/KW
$54 $51 $49 $49 $51 $54
$61
‐$4
$6
$16
$26
$36
$46
$56
$66
$76
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2016 2017 2018 2019 2020 2021 2022
LCOE, $/M
Wh
Installed Cost, $/kW
Solar Single Axis Tracking (20 MW)
$/MWh $/KW
UNSElectric
Page‐69
Chart13–SolarThermal,ImpactsofDecliningTaxCreditsandTechnologyInstalledCosts
Impacts of Declining PTC and Technology Installed Costs
Chart14shownbelowreflectsthenear‐termcapacitypricedeclinesona$/kWbasisfrom2016‐2022associatedwiththereductionintheinstalledcostsofwindresourcesrelativetothelevelizedcostrealizedona$/MWhassumingdifferentlevelsofproductiontaxcreditsbyyear.ThewindPTCassumptionsarebasedonthefederalproductiontaxcreditassumptionsshownon65.
Chart14–Wind,ImpactsofDecliningProductionTaxCreditsandTechnologyPriceInstalledCosts
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2016 2017 2018 2019 2020 2021 2022
LCOE, $/M
Wh
Installed Cost, $/kW
Solar Thermal ‐ 6 Hour Storage (100 MW)
$/MWh $/KW
‐$4
$6
$16
$26
$36
$46
$56
$66
$76
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2016 2017 2018 2019 2020 2021 2022
LCOE, $/M
Wh
Installed Cost, $/kW
Wind (50 MW)
$/MWh $/KW
2016PreliminaryIntegratedResourcePlan
Page‐70
MARKET ASSUMPTIONS
PermianNaturalGas
UNSE’scurrentforwardpriceforecastforPermiannaturalgasstartsat$2.86/MMBtuin2016,andescalatesto$8.93/MMBtuin2035.Chart15‐PermianBasinNaturalGasPricesshowsthe20yearnaturalgaspriceprojectionsinnominaldollars.
Chart15‐PermianBasinNaturalGasPrices
PaloVerde(7x24)MarketPrices
UNSE’scurrentforwardpriceforecastfor7x24PaloVerdewholesalemarketpricesstartsat$28.76/MWhin2016,andescalatesto$87.35/MWhin2035.Chart16‐PaloVerde(7x24)MarketPricesshowsthe20yearwholesalepowerpriceprojectionsinnominaldollars.
Chart16‐PaloVerde(7x24)MarketPrices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
$/m
mBtu
‐
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
$/M
Wh
UNSElectric
Page‐71
2016 IRP SCENARIOS
Thefollowingsectionprovidesadescriptionofthedifferentscenariostobeanalyzedinthe2017FinalIRPwhichisdueonApril1,2017.Thereareatotalof6scenariosthatwillbepresentedintheIRP.Thescenariosarelistedandgroupedasfollows;
ScenariosRequestedbyDecisionNo.75068(2014IRP)o EnergyStorageCasePlano SmallNuclearReactorsCasePlano ExpandedEnergyEfficiencyCasePlano ExpandedRenewablesCasePlan
AdditionalProposedScenarioso MarketBasedReferenceCasePlano HighLoadGrowthCasePlan
SCENARIOS REQUESTED IN DECISION NO. 75068 (2014 IRP)
EnergyStorageCasePlan
Inthiscase,UNSEwillexplorethepotentialofEnergyStorageSystems(ESS)asameansforsolvingrenewablegenerationintermittencyandvariability.Thecasewillbedesignedtofullymeetrenewableandenergyefficiencystandardsandtotheextentthatpeakingcapacityisrequired,ESSwillbeanalyzedasaresourcetocoverpeakdemandrequirements.ThepotentialandapplicabilityofESSisdescribedinChapter4above.
SmallNuclearReactorsCasePlan
SmallNuclearReactors(SMRs)isatechnologythatcanbeutilizedtolowercarbondioxide(CO2)emissions,aswellasotherpollutants,whileprovidingreliable,sustainedandefficientpoweroutput.Inthiscase,UNSEwillstudytheimpactofSMRsasaresourcetosupplantretiringcoalassets.Thecasewillbedesignedtofullymeetrenewableandenergyefficiencystandards.ThiscasewillalsobecompliantwiththeCleanPowerPlan.
LowLoadGrowthorExpandedEnergyEfficiencyCasePlan
Forpurposesofthisscenario,itisassumedthatUNSErealizesadditionalenergyefficiencyanddistributedgenerationtargets(abovetheEEstandard).Underthisscenario,UNSE’sEEprogramsareexpandedbyprogramdesignand/orbytechnologyefficiencyimprovements.
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ExpandedRenewablesCasePlan
UNSEwillpresentthisscenariotostudytheimpactofexpandedrenewabledevelopment.Underthisscenario,UNSEwillincrementallydevelopacommunity‐scalerenewableportfoliothatultimatelyresultsinUNSEserving30%ofitsretailloadby2030(withrenewableresources).Inthisscenario,UNSEanticipatesthatcomplementaryresourceswillbeneededtomaintainreliabilityandtoachieveresponsivenesstotheintermittentandvariablecharacteristicsofsolarandwindresources.Acombinationofdifferenttechnologies(orindividualtechnologies)willbetestedtocomplementtherenewablesassumptions.
AshigherpercentagesofrenewableresourcesareaddedtoUNSE’sresourceportfolio,UNSEanticipatestheneedforfutureinvestmentsintransmission,quick‐startcombustionturbines,energystoragedevicesandsmartgridtechnologiesinordertomaintainreliablegridoperations.Forpurposesofreliability,the2017FinalIRPwillstudytheexpansionofbatterystoragetechnology,reciprocatinginternalcombustionenginesandothertechnologytosupportfutureancillaryservicerequirementsforthegrid.
Additional Proposed Scenarios
MarketBasedReferenceCasePlan
Forpurposesofthe2017FinalIRP,UNSEwillagaindeveloptheMarketBasedReferenceCaseplan.Underthisscenario,itisassumedthatUNSEreliesonthewholesalemarketforlimitedamountsoffirmwholesalepurchasedpoweragreements(PPA)tomeetitsfuturesummerpeakingrequirements.ThisscenarioprovidessomeinsightsintohowUNSE’sresourceportfoliomightlookifthereisadequatesupplyofmerchantresourcecapacitywithintheDesertSouthwestregionoverthelong‐term.Forpurposesofthisscenario,itisassumedthatUNSEdevelopsaportfoliooflongandshort‐termpurchasedpoweragreementstocoveritssummerpeakingrequirements.ItisassumedthatUNSElimitsitsrelianceonfirmmarketcapacitypurchasesto200MWperyear.Allotherassumptionsincludingtransmission,CPPcompliance,andrenewabletechnologyupgradesarethesameastheReferenceCaseplan.
HighLoadGrowthCasePlan
Forpurposesofthe2017FinalIRP,UNSEproposestomodelalowloadgrowthscenariothataffectUNSE’slong‐termexpansionplans.Thisthirdcompanyscenariocontemplatestheincreaseoflargeindustrialcustomerorafacilityshut‐downatanexistingminingcustomerwithinUNSE’sserviceterritory.
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Fuel, Market and Demand Risk Analysis
Forthe2017FinalIRP,UNSEplanstodevelopedexplicitmarketriskanalyticsforeachcandidateportfoliothroughtheuseofcomputersimulationanalysisusingAuroraXMP15.Specificallyastochasticbaseddispatchsimulationwillbeusedtodevelopaviewonfuturetrendsrelatedtonaturalgasprices,wholesalemarketprices,andretaildemand.Theresultsofthismodelingwillthenbeemployedtoquantifytheriskuncertaintyandevaluatethecostperformanceofeachportfolio.Thistypeofanalysisensuresthattheselectedportfolionotonlyhasthelowestexpectedcost,butisalsorobustenoughtoperformwellagainstawiderangeofpossibleloadandmarketconditions.
AspartoftheCompany’s2017resourceplan,UNSEplanstoconductriskanalysisaroundthefollowingkeyvariables:
NaturalGasPrices
WholesaleMarketPrices
RetailLoadandDemand
AsummaryoftheinputdistributionsareshownforallthesevariablesonChart17throughChart19below:
15AURORAxmpisastochasticbaseddispatchsimulationmodelusedforresourceplanningproductioncostmodeling.AdditionalinformationaboutAURORAxmpcanbefoundathttp://epis.com/
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NATURAL GAS & WHOLESALE MARKET PRICE SENSITIVITY
PermianNaturalGas
Chart17showsboththeexpectedforwardmarketpricesaswellastheexpectedpricedistributionsfornaturalgassourcedfromthePermianBasin.
Chart17‐PermianBasinNaturalGasPriceDistributions
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PaloVerde(7x24)MarketPrices
Chart18showsboththeexpectedforwardwholesalemarketpricesaswellastheexpectedpricedistributionsforpowersourcedfromthePaloVerdemarket.
Chart18‐PaloVerde(7x24)MarketPriceDistributions
WhenconsideringChart17andChart18fromabove,itisimportanttonotethatthesummarystatisticsareaggregationsratherthanindividualpricepaths.ForinstancetheP95numberforagivenyearrepresentsthepointwhich95%ofsimulatedvaluesfallbelow.Individualpricepathsmimicrealisticbehaviorbybeingsubjecttotheprice“spikes,”meanreversion,anduneventrendobservedinactualmarkets.
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LOAD GROWTH SENSITIVITY
Chart19showsboththeexpectedretailpeakdemandaswellastheexpecteddemanddistributionsforUNSE’sretailcustomers.
Chart19–UNSEPeakRetailDemandDistributions
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UNSElectric
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2016 – 2017 Action Plan
InaccordancewithDecisionNo.75269,this2016PreliminaryIRPintroducesanddiscussestheissuesthatUNSEmayanalyzeindetailforthefinalIRP.UNSEwillcontinuetodevelopafinalIRPinaccordancewiththescheduleoutlinedinDecisionNo.75269.Thescheduleincludesthefollowingmilestones,whichUNSEwillmeet.
File2016PreliminaryIntegratedResourcePlan March1,2016
SubmitPreliminaryIntegratedResourcePlanUpdate October1,2016
Pre‐filingWorkshoponFinalIntegratedResourcePlan November2016
File2017FinalIntegratedResourcePlan April3,2017
ThedecisiontodeferthedeadlineforfilingaFinalIRPwaslargelyduetotheimpactthattheCPPisanticipatedtohaveonresourceplans,andthehighdegreeofuncertainlyaroundhowtheCPPwillbeimplementedinthejurisdictionswheretheregulatedLSEshavefacilities.Asdescribedpreviously,theUSSupremeCourthasissuedastayoftheCPPpendinglitigationintheDCCircuitCourtandincludingpotentialUSSupremeCourtreview.Duringthestay,StatesarenotobligatedtocontinuetoworkonStatePlans,andthedeadlinesforthoseplans,aswellascompliancetimelinesforaffectedunits,willneedtobeadjustediftheruleremainsinplacefollowinglitigation.ArizonaandNewMexicoarecurrentlyevaluatingifandhowtoproceedinlightofthestay.AfinalrulingontheCPPlitigationisnotexpectedpriortoJuneof2017,andmaynotbeissueduntil2018.
The2017FinalIRPwillbeduepriortothecompletionofalloftheStatePlansgoverningCPPimplementation,therefore,UNSEanticipatesthattheFinalIRPwillhavetoaccommodatesomelevelofuncertaintywithregardtoCPPimplementation.Scenariosand/orsensitivitiestoaddressthisuncertaintywillbepresentedintheOctober2016IRPUpdate,totheextenttheyhavebeenidentified.Additionalscenariosand/orsensitivitiesmaybecomenecessarypriortocompletionofthe2017FinalIRP.UNSEwillcontinuetoactivelyparticipateinthedevelopmentoftheseStatePlans,inanattempttogatherasmuchclarityconcerningCPPimplementationaspossible.
UNSEhasdevelopedashort‐termactionplanbasedontheresourcedecisionsthatmustbeimplementedinparallelwithdevelopmentofthe2017FinalIRP.Underthisactionplan,additionaldetailedstudyworkwillbeconductedtovalidatealltechnicalandfinancialassumptionspriortoanyfinalimplementationdecisions.
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UNSE’sactionplanincludesthefollowing:
UNSEplanstocontinuewithitscommunityscalebuildoutofitscurrentrenewableenergystandardimplementationplans.UNSEanticipatesthatanadditional35MWofnewrenewablecapacitywillbein‐servicebytheendof2016raisingthetotaldistributedgenerationandutilityscalecapacityonUNSE’ssystemtoapproximately83MW.Bytheendof2016,renewableresourceswillmakeupcloseto26%ofUNSE’stotalnameplategenerationcapacity.Asaresult,UNSEiscurrentlyinvestingitstimeandresourcesintoanumberofresearchanddevelopmentactivitiesthatwilldeterminethefutureneedforstorageandsmartgridtechnologiestosupportthegrid.UNSEwilllearnfromtheexperiencesofTEPinitsdevelopmentoftwo10MWenergystorageprojectsslatedforinserviceinearly2017(pendingACCapproval).
UNSEwillcontinuetoimplementcost‐effectiveEEprogramsbasedontheArizonaEEStandard.UNSEwillcloselymonitoritsenergyefficiencyprogramimplementationsandadjustitsnear‐termcapacityplansaccordingly.
Aspartofitsnear‐termportfoliostrategy,UNSEwillcontinuetoutilizethewholesalemerchantmarketfortheacquisitionofshort‐termmarketbasedcapacityproducts.Inaddition,UNSEwillcontinuetomonitorthewholesalemarketforotherresourcealternativessuchlong‐termpurchasedpoweragreementsandlowcostplantacquisitions.UNSEwillalsomonitoritsnaturalgashedgingrequirementsasitreducesitsrelianceoncoalbasedgenerationinfavorofnaturalgasresourcesandmakerecommendationsonpotentialfuelhedgingchangesiftheybecomenecessary.
UNSEplanstocommunicateanymajorchangeinitsanticipatedresourceplanwiththeArizonaCorporationCommissionaspartofitsongoingplanningactivities.UNSEhopesthisdialogwillallowtheCommissionanopportunitytohelpshapeUNSE’sfutureresourceportfoliooutcomeswhileprovidingUNSEwithgreaterregulatorycertaintywithregardstofutureresourceinvestmentdecisions.