Northwest Power and ConservationCouncil

Overview of Draft Sixth Power Plan

Council Meeting

Whitefish, MT

June 9-11, 2009

Northwest Power and ConservationCouncil

The Challenge

• Develop a strategy for meeting the region’s electricity needs that is:– Lowest cost– Mitigates the risk of unknown future conditions

• Fuel supplies and costs• Regional economic growth• Climate change policies• Capacity and flexibility required for wind integration

– Recognizes and implements the Council’s Fish and Wildlife Program

Northwest Power and ConservationCouncil

Plan: In One Slide• Aggressive conservation development• Improve the ability to integrate wind • Acquire cost-effective local small-scale

resources• Meeting current carbon goals will require

less use of existing coal plants• Prepare for the future through RD&D on

carbon-neutral generation, demand response, smart grid, and efficiency

Northwest Power and ConservationCouncil

Conditions Facing the Region

• Slower demand growth, but increasing summer peak loads

• Higher fuel prices

• Risk of significant carbon control costs

• Increasing share of variable output resources

Northwest Power and ConservationCouncil

Resource Alternatives• Increased cost-effective efficiency

potential– Technological progress and new applications– Higher avoided costs

• Generating resources more expensive– Levelized cost - $78 to $239 per megawatt-

hour– Constrained by RPS requirements– Limited alternatives in early years of plan

Northwest Power and ConservationCouncil

Strategy: Conservation

• Aggressive acquisition of cost-effective conservation is lowest cost resource and reduces risks from higher fuel prices and potential carbon control costs– Has the potential to meet most load growth

and delay and reduce generating resource commitments in the near term

– Reduces consumers’ electricity bills and creates local jobs and income

Northwest Power and ConservationCouncil

Strategy: Renewable Generation

• In the face of potential future carbon control costs, development of wind and geothermal generation is prudent, with or without an RPS requirement– Integration of wind will require increased

reserves for capacity and within-hour balancing

– There are actions that can be taken to reduce these reserve requirements, but additional capacity may be needed in some control areas, especially Bonneville’s

Northwest Power and ConservationCouncil

Strategy: Fossil Fuel Generation

• Natural gas-fired generation is the best alternative for electricity generation after transmission accessible wind and geothermal.– On a regional planning basis, not needed for 5 years– Individual utilities may face different needs to meet

their customers’ or balancing area’s requirements

• Meeting stated carbon reduction goals will require reduced operation, or retirement, of coal plants

Northwest Power and ConservationCouncil

Electricity Rates• Electricity rates (2006$) are expected to

increase by roughly 30 percent over 20 years– Increases are consistent with:

• increasing fuel costs, carbon penalties, and more expensive generating resources

• Efficiency acquisition can affect rates– Effect depends on how much of cost is incurred by

utilities vs. codes, standards, and customers– Consumer electricity bills are reduced because fewer

Kilowatt-hours are consumed• Generating resources also affect rates

– Full cost is recovered through electricity rates

Northwest Power and ConservationCouncil

Capacity and Flexibility

• Growth of variable output wind generation increases need for capacity and within-hour balancing reserves. – Reduce the requirements

• Improved system operation; e.g. wind forecasting, reserve sharing, dynamic scheduling

– Add needed capacity and reserves• Generating resources with operating costs near the

wholesale market price• In long term, storage and demand response technologies

may become available

Northwest Power and ConservationCouncil

Climate Policies• Resource strategy reduces expected

carbon emissions from 57 MMtpy* in 2005 to 40 by 2030

• below to 1990 level of 44• 30 % below 2005 normal-hydro level• 40% below actual 2005 level.

– However, emissions vary significantly depending on future conditions

– Without coal plant retirement, 20 percent of futures could have no reduction

*

* Million Tons Per Year

Northwest Power and ConservationCouncil

Climate Policy Continued

• Retiring existing coal plants would reduce carbon emissions to 68% below 2005 level– Reduces risk of high carbon emission futures

• A $100 per ton emission cost would reduce emissions to 48% below 2005 level– But costs more than coal plant retirement– But cost comparison can be misleading - some of

emission cost may be compensated by free allowances and sharing in revenue generated by the cost

Northwest Power and ConservationCouncil

Climate Policy Continued

• The resource strategy exceeds the WCI 2020 target for emissions, at least by 2030

• Carbon control policies and cost risk will increase the cost of electricity– Typical future electric rates increase 3-20 %

from current levels; depending on policy

• Without carbon policies, emissions grow to 14% above 2005 levels

Northwest Power and ConservationCouncil

Action Plan• Accelerate efficiency acquisition

– NEET is a regional head start

• Identify near-term, local, small scale renewable and CHP alternatives

• Identify cost-effective flexibility strategies• Monitor and demonstrate new technology

(efficiency, DR, smart-grid, nuclear, CCS)• Adaptive management of plan

implementation