scenario development stakeholder workshop · scenario development process overview of scenario...

Copyright © 2013 The Brattle Group, Inc.

PRESENTED TO

PRESENTED BY

Scenario Development Stakeholder Workshop 2014 ERCOT Long Term System Assessment

Regional Planning Group

Judy Chang Hannes Pfeifenberger Michael Hagerty

January 13, 2014

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Today’s Agenda Time Duration Topic / Title

8:30 AM 45 min Introduction/Review of Agenda 9:15 AM

60 min Session 1 – Economic Growth in Texas • Lloyd Potter, Texas State Demographer • Eric Clennon, Texas Economic Development Office

10:15 AM 15 min Break 10:30 AM 60 min Session 2 – Natural Gas Supply and Market Prices

• Svetlana Ikonnikova, Bureau of Economic Geology • Gabe Harris, Wood Mackenzie

11:30 AM 1 hour Lunch Break

12:30 PM 45 min Session 3 – Potential Effects of Environmental Regulations on Existing Baseload Generation • Metin Celebi, The Brattle Group

1:15 PM 60 min Session 4 – Energy/Water Issues • Bridget Scanlon, Bureau of Economic Geology • Michael Webber, University of Texas, Austin

2:15 PM 15 min Break

2:30 PM 75 min Session 7 – Renewable Energy Potential and Economics • Alan Comnes, SunPower Corporation representing Solar Energy Industries Association • Jeff Clark, The Wind Coalition • Julia Matevosyan, ERCOT Renewable Integration • Ira Shavel, The Brattle Group

3:45 PM 15 min Break 4:00 PM 30 min Wrap Up and Next Steps 4:30 PM Adjourn

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Content   Review of Scenarios in ERCOT 2012 LTSA   Scenario Development for Transmission Planning   Scope and Timeline of Scenario Development Effort

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Background Scenarios Considered in 2012 LTSA

▀ The Long-Term System Assessment is ERCOT’s long-term transmission planning process; the 2012 LTSA assessed ERCOT’s transmission needs under various future scenarios

▀ The modeling assumptions were based on scenarios developed by ERCOT and the RPG Long Term Planning Task Force

▀ The 2012 LTSA scenarios centered around a Business-As-Usual (BAU) with fuel price assumptions from publicly available data sources (e.g. Energy Information Administration forecasts)

▀ The other 9 scenarios included variations of: − Continuation of Production Tax Credits for renewable energy − Stringent environmental regulation − High natural gas prices − Drought − Various combinations of Demand Response, Energy Efficiency,

Distributed Generation, and Energy Storage

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Background Brattle Review of 2012 LTSA

▀ Brattle reviewed ERCOT 2012 LTSA and developed recommendations for improving how economic value of transmission can be considered − Interviewed stakeholders to obtain feedback − Presented analyses and recommendations to RPG − Reviewed modeling process and economic analysis − Developed final set of recommendations

▀ Significant stakeholder comments showed the need to increase input from stakeholders in scenario development in future LTSAs

▀ We recommended in our report that ERCOT should: − Reiterate their invitation to stakeholders to participate in the scenario

process − Include stakeholders in developing future scenarios

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Scenario Development Process Scenarios in Transmission Planning

▀ Long-term Transmission Planning benefits from developing a set of scenarios that define how the future may look like in 15 – 20 years:

▀ Scenarios are not sensitivities, where a single variable is adjusted

▀ Scenarios are fully-specified futures with internally consistent set of assumptions about the most significant trends, drivers, and uncertainties that together provided an aggregate view of the future

Privileged and Confidential Prepared at the Request of Counsel | brattle.com 6

Scenario Development Process Time Horizon for Long-Term Transmission Planning

2014 2020 2024 2029 2034

Regional Transmission Plan

How will relative fuel prices change?

What is the rate of load growth

Where are the reliability needs

Where are the new generation being built and old retired?

What will be the impact of environmental factors, such as water availability?

What major demographic shifts may occur?

What new technologies may change consumption and generation patterns

Long-term macro-economic shifts

Long-term Transmission Needs

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Scenario Development Process Use Long-Term Planning to Supplement RTP   Scenario-based evaluation of transmission in Long-Term Planning linked

to RTP process to increase robustness of major investment decisions: ▀ Estimate net-benefits of economic projects considered within RTP process

based on results of Long-Term-Planning process ▀ Use scenarios to assess the robustness of project economics

Year 5 Year 10 Year 20

Benefits (Scenario 1)



Long-Term Evaluation

TRR

E1

RTP Evaluation

Year 3

R1

R2 R3

$

TRRs

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Scenario Development Process Overview of Scenario Development Process

1. Identify Key Trends, Drivers, and Uncertainties

2. Descriptions of Potential Scenarios

3. Develop Parameters for the Scenarios

Current Trends

Econ Boom

High Gas

Strict Env.

Gas Prices Base Low High High

CO2 Costs Base Low Base High

Renewable Costs

Base Low High High

Inflation Base Low Base Base

Gross Load Base Low Base Low

`

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Project Scope and Timeline 2014 LTSA Scenario Development

▀ Conduct workshops to solicit perspectives from stakeholders about what scenarios should be considered in 2014 LTSA − Workshop #1: Identifying Future Trends, Drivers and Uncertainties − Workshop #2: Developing Future Scenarios − Workshop #3: Transforming Scenarios into Planning Assumptions

▀ Document results from each workshop

▀ Work with ERCOT to translate planning assumptions into specific parameters that can be used in system modeling

▀ Document details of scenario development process, provide tools for conducting updates, and recommend improvements for future LTSA efforts

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Current Trends

Econ Boom

High Gas

Strict Env.



Renewable Costs

Base Low High High



Project Scope and Timeline ERCOT LTSA Scenario Development Steps

  1. Identify Future Trends, Drivers and Uncertainties ▀ Industry experts from within and outside of the power industry

and ERCOT market participants present their views on a range of topics

▀ Identify and summarize trends, drivers and uncertainties to drivers of future scenarios

  2. Develop Future Scenarios ▀ Participants (working in small teams) draft descriptions of

future scenarios based on key drivers ▀ Participants review and further refine the scenarios to ensure

that they capture the desired range of futures

  3. Translate Future Scenario Descriptions into Planning Assumptions

▀ Brattle and ERCOT staff will translate the scenarios from qualitative descriptions to specific planning assumptions with input and feedback from stakeholders

Privileged and Confidential Prepared at the Request of Counsel | brattle.com 11

Project Scope and Timeline Scenario Development Project Timeline

2014 LTSA Scenario Development Process

Industry Presentations

Market Particpant Presentations

Trends, Uncertainties, Drivers Summarized

Develop Future Scenarios

Break-out Sessions Describing Scenarios

Document Key Messages and Work Products from Each Workshop

Work with ERCOT to Translate Key Scenario Descriptions into Plannning Assumptions

Draft and Finalize Vol 2 of Report Recommending Scenario Development Process and How the Scenarios and Sensitivities Should be Used and Updated

Draft and Finalize Vol 1 of Report Documenting Scenarios and Sensitivities Developed

Jan Feb Mar Apr May Jun

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Workshop #1 – Trends, Drivers, and Uncertainties Time Duration Topic / Title

8:30 AM 45 min Introduction/Review of Agenda 9:15 AM

60 min Session 1 – Economic Growth in Texas • Lloyd Potter, Texas State Demographer • Eric Clennon, Texas Economic Development Office

10:15 AM 15 min Break 10:30 AM 60 min Session 2 – Natural Gas Supply and Market Prices

• Svetlana Ikonnikova, Bureau of Economic Geology • Gabe Harris, Wood Mackenzie

11:30 AM 1 hour Lunch Break

12:30 PM 45 min Session 3 – Potential Effects of Environmental Regulations on Existing Baseload Generation • Metin Celebi, The Brattle Group

1:15 PM 60 min Session 4 – Energy/Water Issues • Bridget Scanlon, Bureau of Economic Geology • Michael Webber, University of Texas, Austin

2:15 PM 15 min Break

2:30 PM 75 min Session 7 – Renewable Energy Potential and Economics • Alan Comnes, SunPower Corporation representing Solar Energy Industries Association • Jeff Clark, The Wind Coalition • Julia Matevosyan, ERCOT Renewable Integration • Ira Shavel, The Brattle Group

3:45 PM 15 min Break 4:00 PM 30 min Wrap Up and Next Steps 4:30 PM Adjourn

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Wrap Up

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Some of what we heard today   Economic drivers

▀ Total population growth mostly around and east of I-35 (in eastern/southern Texas) and El Paso, but percentage growth also high in parts of western Texas (to be updated with oil and gas activities since 2010)

▀ Need to understand level and type of job creation ▀ Skyrocketing oil production since 2010 ▀ Significant job growth of energy-intensive industries in Houston,

Dallas and (recently) the Midland-Odessa area, much of it tied to oil and gas industry

  Oil and gas industry ▀ Total growth in Texas oil and gas production is modest, but

production is shifting among locations ▀ Should be able to use recent analyses on oil/gas field productivity

to improve long-term electricity load forecasting

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Some of what we heard today (cont’d)

  Load growth ▀ Combination of recession and energy efficiency significantly reduced

long-term electricity growth for the country; technological changes (e.g., lighting) will keep electricity growth lower than historical levels

  Generation retirements ▀ Limited retirement of existing coal fleet at current projections of

natural gas prices, but a $1 decrease in gas prices likely triggers additional 6 GW of coal plant retirements

▀ 1-2 GW of natural gas and oil generation retirement likely by 2022, ~7 GW by 2032

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  Water ▀ 2011 was most extreme drought since 1800s; vulnerability increased

as water consumption growth exceeded storage growth. ▀ Electricity sector uses approximately 4% of water use in the state

(~60% of withdrawals); ▀ Low water levels may limit volume of possible withdrawals ▀ Backup systems and switch to natural gas can reduce risk exposure

  Solar Generation ▀ Solar PV (utility-scale) costs down to $2/W by 2013 (from $5 in 2010) ▀ Solar potential in the state is compatible with the wind generation

profile and the already invested CREZ lines

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  Wind Generation ▀ 25% coastal wind today; significant growth (1/3 of total) due to more

valuable output, but limited by transmission constraints ▀ High Panhandle capacity factors (65%?) attracting more investment (2/3

of total), but concerned about future curtailments ▀ New wind generation technology more efficient (taller towers and

longer blades more output, lower cost per MWh)   Renewables integration

▀ Additional operating reserves will be needed to balance intermittent output of renewable resources

▀ New 5-min reserves (800-1300 MW) in previously explored scenarios (S3, S8); possibly new “inter-hour commitment” service

▀ Integration of substantial additional amounts of renewable generation (35-60GW) is feasible

▀ Economics depend on tax incentives, natural gas prices, and environmental regulations

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#1: Trends, Drivers and Uncertainties   Today: we gathered some information and perspectives about future trends, drivers, and uncertainties to be considered in the 2014 LTSA

▀ Experts from within and outside of the power industry in Texas presented their views on a range of issues to be considered by stakeholders when developing the future scenarios to be modeled

  Next Steps:

▀ Obtain additional input from ERCOT market participants on their own perspectives to be considered in developing future scenarios at the next (2-day) workshop

▀ We will draft a list of major trends, drivers, and uncertainties of power usage and transmission needs over the LTSA time horizon

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#2: Developing Future Scenarios   January 23-24: RPG stakeholders will:

▀ Obtain additional input on drivers and uncertainties (e.g., from transmission providers);

▀ Break into small teams to draft future scenarios that capture the identified drivers, including articulating the potential implications of future scenarios on ERCOT power market

  Homework before January 23-24:

▀ Hope to engage transmission owners to share their perspectives and system knowledge

▀ Based on what was heard today, stakeholders will think about the major drivers for future scenarios to be considered in the 2014 LTSA

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#3: Translating Scenarios into Assumptions   After that, in February, Workshop #3 will be used to translate the scenarios from Workshop #2 into specific modeling assumptions that can be used in transmission planning

▀ Prior to the workshop, we will summarize the scenario developed scenarios in Workshop #2 and fine tune the descriptions based on input and feedback from stakeholders

▀ At the workshop, we will work with stakeholders to translate the future scenarios into specific assumptions based on the information gathered during the Workshop #1 presentations

Current Trends

Econ Boom

High Gas

Strict Env.



Renewable Costs

Base Low High High



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Contact Information

JUDY CHANG Principal │ Cambridge, MA [email protected] +1.617.234.5630 HANNES PFEIFENBERGER Principal│ Cambridge, MA [email protected] +1.617.234.5624

MICHAEL HAGERTY Associate │ Cambridge, MA [email protected] +1.617.234.5675

  Please contact us with any questions, thoughts, and information related to drivers and uncertainties that should be considered by ERCOT in its long-term transmission planning effort

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