Discussion of Resource Plans

1. Discussion ofResource Plans Michael Schilmoeller for the Northwest Power and Conservation Council Wednesday, June 10, 2009

2. Overview • Interpreting the resource strategy • Key assumptions • Resource build out • Decision milestones • Comparison of least risk and least cost plans • Similarities • Differences in • Power cost and rate volatility • Changes in costs within futures • Wholesale power market exposure • Choosing a plan 2

3. Base Case Assumptions • RPS renewables are acquired • Scenario uncertainty for carbon costs, range from $0 to $100, grow over the planning period and reach average of $50 per ton by 2030 • Scenario uncertainty for construction costs, load requirements, natural gas price, electricity price, forced outage rates, aluminum price, production tax credits, value of renewable energy credits (RECs) • Variation for hydrogeneration and forced outage based on historical patterns 3

4. Resources Available forSelection by the Model • Conservation • Discretionary conservation limited to 160 average megawatts per year, phased in to 85% penetration maximum • CCCT (415 MW) available 2011-2012 • SCCT (85 MW Frame GT) available 2012 • Wind generation (100 MW blocks), 4800 MW available by end of study, no REC credit if RPS are assumed in force, includes any production tax credit (PTC) and transmission, integration, and firming costs • Geothermal (14 MW blocks) available 2011, 424 MW (382 MWa) by end of study 4

5. Resources Available forSelection by the Model • Woody Biomass (25 MW), available 2014, 830 MW by end of study • Advanced Nuclear (1100 MW), available 2023, 4400 MW by end of study • Supercritical pulverized coal-fired power plants (400 MW), available 2016 • IGCC (518 MW) available 2023, with carbon capture and sequestration • Wind imported from Montana, with new transmission, available 2011, 1500 MW by end of study • Five classes of demand response, 2000MW available by end of study, 1300 MW of this limited to 100 hours per year of operation 5

6. Least-Cost Plan (A) Source: Schedules for plan resources 090609.xls 6

7. Least-Risk Plan (D) Source: Schedules for plan resources 090609.xls 7

8. RPS Development Expected RPS requirement by end of study is 1800 MWa, but it can vary from 1400 MWa to 2500 MWa. Non-wind renewables (purple) would play a significant role Contribution from Plan wind will be a small portion of total RPS wind. Source: RPS plus wind buildout.xls 8

9. Build Out of ResourcesWind Least-risk plan wind has about 50 percent likelihood of completion Average energy is about half of maximum possible. Source: workbook “L811x2_LR3.xls” 9

10. Build Out of ResourcesGeothermal Least-risk plan geothermal has about 80 percent likelihood of completion Source: workbook “L811 LR plan buildout 080604.xls” 10

11. Build Out of Resources Combined-Cycle Combustion Turbine Least-risk plan CCCTs have about 30 percent likelihood of completion Source: workbook “L811x2_LR3.xls” 11

12. Build Out of ResourcesSimple-Cycle Combustion Turbine Least-risk plan SCCTs have about 20 percent likelihood of completion Source: workbook “L811 LR plan buildout 080604.xls” 12

13. Action Plan Schedule of DecisionLeast-Risk Plan Siting, licensing, and permitting associated with the least-risk plan falls after the Action Plan time period. Regional planning costs for the first four resources is about $72 M. Source: Schedules for plan resources 090609.xls 13

14. Overview • Interpreting the resource strategy • Key assumptions • Resource build out • Decision milestones • Comparison of least risk and least cost plans • Similarities • Differences in • Power cost and rate volatility • Changes in costs within futures • Wholesale power market exposure • Choosing a plan 14

15. Filtering Out Plans • Efficient Frontier • Finding the best plans • Discovering the successful and less unsuccessful strategies • Represent entire distributions • Distributions of cost • Show NPV costs • Hide year-to-year excursions that hold much of what we typically think of as risk 15

16. Examining Annual Differences • Cost and rate variation, across time and futures • Changes in costs within futures • Market exposure, across time and futures 16

17. Cost And Rate Variation • Trying to understand how much a plan protects regional ratepayers from overall cost and rate variation, especially annual rate increases (“rate shock”) • Uses real levelized costs for all investments, including conservation 17

18. Cost And Rate Variation Findings • Relative to the least-cost plan, the least-risk plan has higher likelihood of smaller rate variation, both increases and decreases • Because the plans are so similar in most years, however, the likelihood of significant differences between the plans is small 18

19. Changes in System Costwithin Futures • Trying to understand how the least risk plan might protect regional ratepayers from cost excursions within a future, relative to the least cost plan • We get to live in only one future (but we can not know which one) • Within a future, how long do savings last? How frequently do costs and savings occur? 19

20. Differences in NPV CostsLeast-risk plan less Least-cost plan Least-risk plan costs more than least-cost plan in most futures Least-risk plan reduces cost primarily in the futures that would have been the most expensive under the least-cost plan (not shown). 20 Source: LR&LC_distributions.xls, worksheet “LR less LC”

21. Findings for System Costwithin Futures • Fixed costs are higher for least-risk plans than least-cost plans due to siting, licensing, and construction costs. Variable costs are lower. • Differences occur in a variety of patterns, but often involve higher cost for least-risk plans earlier followed a small number of large savings. • Because most of the plants come into service late in the study, so do the savings. 21

22. Market Exposure • Trying to understand how much a plan protects regional ratepayers from wholesale electricity market price variation, especially during periods of energy import • Look at energy and cost associated with imports and exports from outside the region, including from regional IPPs 22

23. Market Exposure Findings • The variation in imports and exports is significant • Relative to the least cost plan, the least risk plan would provide • some economic advantage 20 to 30 percent of the time that the region imports • expected annual import cost savings that grows to $250 million by the end of the study • protection exceeding $400 million in 4 percent of hydro quarters by the end of the study 23

24. The Choice • A plan with more resources reduces dependence on the power market and increases power price and rate stability • A plan with resources provides guidance to the region regarding the resources that promote an efficient and reliable system • Very little difference exists between least-cost and least-risk plans in the five-year Action Plan time period. • The least-risk plan preserves decision milestones 24

25. End

26. Difference in Cost Distributions Source: LR&LC_distributions.xls, worksheet “LR less LC” 26