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WECC Long-Term Planning Scenario Report

In support of the Regional Transmission Expansion Planning Project

By

Scenario Planning Steering Group

Western Electricity Coordinating Council

March 29, 2013

W E S T E R N E L E C T R I C I T Y C O O R D I N A T I N G C O U N C I L • W W W . W E C C . B I Z1 5 5 N O R T H 4 0 0 W E S T • S U I T E 2 0 0 • S A L T L A K E C I T Y • U T A H • 8 4 1 0 3 - 1 1 1 4 • P H 8 0 1 . 5 8 2 . 0 3 5 3

WECC Scenarios

Table of Contents

Introduction....................................................................................................................................1

Scenario Background....................................................................................................................1

Focus Question for the Scenarios.............................................................................................2

A Consistent Set of Key Drivers of Change..............................................................................3

Key Scenario Drivers, Predetermined Elements and Uncertainty............................................3

The Organizing Scenario Matrix...............................................................................................4

The Organizing Scenario Matrix....................................................................................................5

Point of View of the Scenarios..................................................................................................6

Policy Implications for the Scenarios........................................................................................6

Modeling and the Transmission Planning Results for the Scenarios........................................8

Scenario One: Focus on Economic Recovery...............................................................................9

Key Scenario Metrics in 2032:..................................................................................................9

Beginning Years: 2013-2017/The Dark Before the Dawn.......................................................10

Middle Years: 2018-2022/A New Day Dawning......................................................................15

Final Years: 2023-2033/A Bright New Day.............................................................................18

Scenario One - Overview by Key Driver.................................................................................22

Scenario One – Overview of Modeling Parameters................................................................26

Scenario One - Policy Themes...............................................................................................29

Scenario Two: Focus on Clean Energy.......................................................................................31

Key Scenario Metrics in 2032:................................................................................................31

Middle Years: 2018-2022/Tension Passing Through the Inflection Point Toward Sustainability................................................................................................................................................37

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Final Years: 2023-2033/The Lumpy Implementation of the Advanced and Clean Technology Power Industry........................................................................................................................43

Scenario Two - Overview by Key Driver.................................................................................47

Scenario Two – Overview of Modeling Parameters...........................................................50

Scenario Two - Policy Themes...............................................................................................52

Scenario Three: Focus on Short-Term Consumer Costs............................................................54

Beginning Years: 2013-2017/The Doldrums Don’t End..........................................................55

Middle Years: 2018-2022/Struggling to Get on Track.............................................................57

Final Years: 2023-2033/Same as it Ever Was........................................................................59

Scenario Three - Overview by Key Driver...............................................................................63

Scenario Three – Overview of Modeling Parameters.............................................................66

Scenario Three – Policy Themes............................................................................................69

Scenario Four: Focus on Long-Term Societal Costs...................................................................71

Beginning Years: 2013-2017/The Rise of Smart Energy........................................................72

Middle Years: 2018-2022/The Age of Self-Sufficiency...........................................................77

Ending Years: 2023 to 2033/The Re-Optimization of Electric Power.....................................79

Scenario Four - Overview by Key Driver.................................................................................82

Scenario Four – Overview of Modeling Parameters...............................................................86

Scenario Four - Policy Themes...............................................................................................88

Using the Scenarios for Long Term Thinking and Early Indicators.............................................90

Long-Term Use of the Scenarios............................................................................................90

Early Indicators for Long-Term Transmission Planning...............................................................92

Early Indicators for Scenario 1: Focus on Economic Growth.................................................92

Early Indicators for Scenario 2: Focus on Clean Energy........................................................93

Early Indicators for Scenario 3: Focus on Short-Term Consumer Costs................................94

Early Indicators for Scenario 4: Focus on Long-Term Societal Costs....................................94

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Appendix I: Scenario Narrative EPS............................................................................................95

Scenario 1:..............................................................................................................................95

Scenario 2:..............................................................................................................................95

Scenario 3:..............................................................................................................................96

Scenario 4:..............................................................................................................................96

Appendix II: Comparative Scenario Summary.............................................................................98

Appendix III: Policy Theme Table................................................................................................99

Appendix IV: Annotated Policy Theme Table............................................................................101

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IntroductionThis report presents the final version of long-term planning scenarios created in support of the Western Electric Coordinating Council’s (WECC) Regional Transmission Expansion Planning project (RTEP) funded partially by a United States Department of Energy (DOE) contract awarded to WECC in 2009 as part of the American Recovery and Reinvestment Act.

These scenarios incorporate input, ideas, and recommendations that the Scenario Planning Steering Group (SPSG) provided Reos Partners during and between workshops held in Salt Lake City, Utah, on May 23rd, 2011, July 11th-12th, 2011 and December 12th-13th, 2012. This report is therefore a draft revision of the scenarios, which were first completely presented in the draft report issued in October 2011, with subsequent revisions to incorporate policy guidance in March 2012.

These scenarios are the qualitative basis from which quantitative inputs were developed by the SPSG’s Metrics Data Task Force (MDTF) during 2012 to feed into the Study Case Development Tool (SCDT) and the Network Expansion Tool (NXT). The first draft of these scenarios was used in an iterative fashion to develop the quantitative modeling inputs and refine the arguments and ideas included in these final scenario narratives. The SCDT and NXT are the basis for generating alternative transmission expansion plans for the WECC region so that a wider range of possible developments might be considered in WECC transmission planning. The transmission planning results of the modeling of these scenarios are more fully presented in the report by WECC staff, which contains the 20 Year TEPPC Planning Results.

Scenario BackgroundScenario-based planning is a technique for managing uncertainty in decision making. It is especially useful when long-term investments must be evaluated despite the human inability to accurately predict the future. Scenarios offer a tool for imagining plausible and well-researched futures and thereby enable planning across a wider range of potential futures. When used well this approach can spur learning and help in identifying emerging risks and opportunities.

Scenarios cannot take into account all aspects of the complexity of interrelationships and interdependencies of the real world. However, scenarios are a powerful tool for sensitizing decision makers to emergent key factors, which can influence the outcome of their decisions. When used as a tool for guiding long-term capital decisions, scenarios can help managers to more effectively assess both the timing and scale of investments. They can also provide the time needed to create alternative financing and risk management options. It is in that manner that these scenarios have been prepared and used by WECC and its stakeholders in the transmission planning process.

These scenarios emerged from a series of workshops lead and facilitated by consultants from Reos Partners under contract to WECC. The Reos team facilitated several phases of work in a comprehensive scenarios analysis process working with and under the guidance of the SPSG

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and WECC staff. Phases of this work included: (1) Scenario-planning workshops to create the scenarios; (2) The creation of an on-going research process which allowed SPSG members to contribute useful information on energy industry developments to an on-line database (the Event/Pattern/Structure system1); (3) Facilitation of webinars to share and discuss ongoing research; and (4) Participation in task forces which developed metrics and policy ideas for the overall project effort. Archived information and related work products from this process are available on the WECC website in the section dedicated to the SPSG.

The scenarios are based on the following key structural elements: (1) An anchoring “focus question” for all of the scenarios; (2) A set of “key drivers” representing trends and factors that must be reflected in all of the scenarios; and (3) An organizing matrix structure based on two highly uncertain and very important key drivers. Each of these is described in this report.

Focus Question for the ScenariosScenario planning, as a tool for managing future uncertainty, enables stakeholders to create and test strategic responses given a diverse range of plausible future conditions. Good scenarios are based on a clear enunciation of the decisions and uncertainties at play: The “focus question” that ensures scenarios are developed with a clear sense of the issues at hand. The SPSG agreed on the focus question detailed below.

Chart 1: Focus Question to Anchor the Revision of the Current WECC Scenarios

1 It should be noted that EPS submissions have been integrated into this version of WECC scenarios. In each scenario, there are a few underlined blue hyperlinks which link to the relevant EPS submission on the SPSG website. Double-clicking on the EPS link will take you there.


WECC Scenarios

It should be understood that power supply in the context of the focus question of the scenarios includes approaches other than building new generation, including investment in energy efficiency and demand-side management.

A Consistent Set of Key Drivers of ChangeWhile scenario analysis does not allow accurate predictions of the future, it does provide a tool for rigorously imagining alternative possible futures in which important decisions may play out. The most useful scenarios derive these imagined futures from a studied consideration of factors and trends (“key drivers”) that will most likely and powerfully influence future conditions.

Key Scenario Drivers, Predetermined Elements and UncertaintyTo imagine and plan for the evolution of electric power markets and related needs for transmission in the WECC region, the SPSG agreed to develop long-term scenarios using the following list of key drivers:

1.) The evolution of regional economic growth in the WECC Regions

2.) Technological innovation in electric supply technology and distribution systems

3.) The evolution of electric demand in the WECC Regions

4.) The evolution of electric supply in the WECC Regions

5.) Changes in the regulation of electric power systems in the WECC Regions

6.) Changes in federal regulation affecting the electric power industry

7.) Changes in social values related to energy issues

8.) Changes in society's preferences for sustaining environmental and natural resources

9.) Shifts in national and global financial markets

10.) Shifts in the availability and price of commodity fuels used in the electricity sector.

After each of the four scenario narratives a table summarizes how each of the ten key drivers play out in that particular scenario over the twenty-year period. These tables can be used to compare how the drivers differ between the scenarios. Appendix II in this report provides a more comprehensive short-form comparative analysis of the scenarios using the driving forces.

Within the key drivers above there are predetermined elements and high degrees of uncertainty. Predetermined elements are issues that clearly exist in the current environment, which will, by necessity, have a role in how the future unfolds in any scenario. In the WECC scenarios this includes things such as: (1) The implementation of FERC Order 1000 and its impact on regional planning; (2) Ongoing public deliberations and policy formation related to climate change; (3)


WECC Scenarios

Improvements in energy efficiency across the economy driven by the current pace of technological improvements and government mandated standards; and (4) The meeting of RPS standards in power generation investments throughout the WECC region.

Those elements and other factors, as they are implemented within the time frame of the scenarios, remain uncertain. The scenarios are a tool for using imagination and analysis to give a range of possible roads the key drivers, in combination, may take. Scenarios in this sense are not, and cannot be, accurate predictions of the future, but serve as useful, diverse and challenging futures with which to assess uncertainty. With the modeling results, this uncertainty can be analyzed in depth in terms of their impact on transmission planning in the WECC region. By thinking through those results, their insights and the additional questions that arise, we establish a holistic process for managing uncertainty.

The Organizing Scenario MatrixA “scenario matrix” is a tool for organizing and distinguishing ideas during the creation scenarios. To create a matrix, the key drivers are first prioritized using the consensus or majority vote of a team to select the two drivers that are simultaneously most uncertain and most important. Additionally, the top two drivers should be independent of one another. These two drivers are then ascribed a range of uncertainty, represented as an arrow with ends pointing in opposite directions to indicate polar extremes. Crossing these arrows creates four quadrants that function as “scaffolding” for developing distinctive scenarios.

After due consideration, the SPSG selected “technological innovation in electric supply and distribution” and “economic growth in WECC regions” as the two most important and most uncertain drivers. The resulting matrix and ranges of uncertainty are shown on the next page. It provides a starting point from which to create distinctly different worlds and a way to integrate the other drivers into a narrative structure. It has been revised in this report to show the final narrative titles for the scenarios.

Chart 2: WECC Transmission Scenario Matrix


The Organizing Scenario Matrix

WECC Scenarios


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The revised scenario narratives in this report are the final stories that describe very different future “worlds” or contexts for future WECC transmission decisions. The organizing scenario matrix is a conceptual device in which the future can be explored within distinct quadrants as well as by moving among the quadrants over time. The matrix serves as a sophisticated tool for distinguishing, at a glance, the major differences and starting assumptions in the imagined worlds. Movement among the quadrants to represent a plausible evolution of future conditions is discussed later in this report in the section on Early Indicators.

Point of View of the Scenarios The scenarios are written from the point of view of a neutral observer (similar to a newspaper reporter) explaining the future as it is unfolding. In addition to the events and trends playing out in relation to the key drivers, the observer identifies the actions of four key stakeholder groups: (1) Regulators and legislators; (2) Companies in the electricity industry (investor-owned utilities, power plant and transmission system owners, operators and developers); (3) Activists and advocates for various causes, especially the environment; and (4) Electric energy consumers (residential, commercial, industrial and agricultural). Since this is an exercise in storytelling, different stakeholders may be active or dormant in particular timeframes in each of the scenarios.

Policy Implications for the ScenariosThree of the key scenario drivers can be considered to be policy changes: (1) Changes in regulation of the electric power systems in the WECC region; (2) Changes in federal regulation affecting the power industry; and (3) Changes in society’s preferences for sustaining environmental and natural resources. Policy is rightly a very broad term so changes in policy can affect an even wider range of areas. Policies are critical because they set the rules, regulation, laws, and context for risk assessments affecting decisions about important matters, especially large capital investments, in the energy business. Policies allow the democratic process to exert influence on energy industry decisions so as to ensure they align with the desires and values of society. Clearly, policy shifts over the next decade or more can have a powerful effect across the electric power industry and thereby heavily influence generation and transmission investment decisions.

In addition, the SPSG created the Policy Development Task Force (PDTF) to explore further how other policies might affect the evolution of the WECC scenarios. The work of the PDTF also has been captured in the scenario narratives, as well as in the scenario modeling metrics.

In order to give additional coherence to such a broad area as policy and to give some indication of how they might evolve, each scenario attempts to reflect an evolution of events that are roughly consistent with the overall policy themes. These themes signify the overall context through which policy changes may arise and also indicate a predominant direction. The policy themes for each scenario are shown on the next page.


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Chart 3: Policy Themes by Scenario Matrix

Following each of the scenario narratives is a chart, which indicates the general direction of change in policy areas. This change is consistent with the ideas and trends in the particular scenario. Those directional indicators of change will also be the basis for making modifications from a set of common case assumptions used to create quantitative analyses of the scenarios. Importantly, the overarching policy context of each scenario was used in the planning process by the Metrics Data Task Force to change quantitative variables in the Reference Case assumptions used in the 20-year modeling process using the SCDT and NXT. Those changes in the quantitative variables were best guess and consensus estimates from the MDTF based on their professional expertise, and in some cases, tied to research analyses referenced in the EPS system. In light of this work, the policy ideas were given real economic power in the modeling to change outcomes in transmission plans.

The policies in each scenario have been placed in one of five categories: (1) ‘++’ = Most aggressive; (2) ‘+’ = Aggressive; (3) ‘0’ = neutral; (4) ‘-’= Aggressive in the opposite direction;


WECC Scenarios

and (5) ‘– –’ = most aggressive in the opposite direction. Appendix III and Appendix IV provide further detail on the indicators and their influence within the scenarios.

Modeling and the Transmission Planning Results for the ScenariosAs mentioned earlier, WECC staff will be discussing with stakeholders the results from long-term (20-year) study cases based on these scenarios, as well as the results of other study cases, as a basis for creating alternative 20-year transmission plans in addition to the WECC Reference Case. Following each scenario narrative is a placeholder for high-level summary of those transmission-planning results. A comparative analysis of the transmission planning results and suggestions about key factors, which impacted the differences, will follow the scenario narratives. Appendix V of this report includes a comparative analysis of those results.


WECC Scenarios

Scenario One: Focus on Economic RecoveryWide-spread Economic Growth in WECC Region with Increasing Standards of Living and Evolutionary Changes in Electric Supply and Distribution Technology

This is a world in which an initially slow uptick out of recession is followed by rising economic growth in the WECC region. Happening in concert with a steady pace of incremental rather than breakthrough technology improvements in the power sector this growth supports the emergence of the next generation power system for the region—one which is more efficient, flexible, responsive to customers, and takes full advantage of a spreading smart grid. After a period of international financial instability, the U.S. economy with more growth is back on a more solid fiscal foundation with the restructuring of the national debt leading to the implementation of new tax and fiscal policies. The U.S., with its growing population, entrepreneurial culture, and ability to develop advanced technologies, helps to bring the global economy back into balance.

A steadily improving economy drives increasing electricity demands from consumers and expanding businesses and industries—both large and small. In the early years, natural gas meets this demand as increasing supplies keeps domestic prices low. As the last decade unfolds however, there is a major shift towards renewables driven by a robust regional electricity market facilitating the integration of renewables, and increasing environmental concerns about land and water use and air quality. Continued concern about climate change leads to efforts to reduce CO2 emissions and culminates in a federal energy policy, which includes a national carbon tax. These changes contribute to economic growth as they trigger innovation, revitalize markets and drive new investment.

Even without game-changing breakthroughs, the energy sector is a primary beneficiary of the prowess of the U.S. in both technology development and entrepreneurial vigor and provides a solid basis for overall economic growth for the nation. The WECC region, home to some of the nation’s best educational and financial management institutions, leads the long-term positive evolution of the nation’s economy.

Key Scenario Metrics in 2032:Natural Gas Price = $10.00

Cost of Carbon = 2032 Reference Case value: $37.11

Policy Adjusted Peak Load Growth Rate* = 1.9% (2032 Ref Case = 1.5%)

Policy Adjusted Demand Growth Rate* = 1.6% (2032 Ref Case = 1.2%)


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* Adjusted for known electrification, DSM and energy efficiency policies included in the modeling results

Beginning Years: 2013-2017/The Dark Before the DawnThe big events and issues shaping the electric power sector in the WECC region in early 2013 can be summarized in six key areas: (1) The impact of and slow recovery from the 2008-2009 credit crunch and follow-on recession; (2) A growing concern among voters and their representatives about both the short-and-long-term effects of climate change, yet with no political consensus to act nationally or globally; (3) A rapidly emerging concern about the long-term availability and usage of fresh water; (4) The growing investment in renewable energy technologies to meet renewable portfolio standards (RPS); (5) Organizing and implementing energy imbalance markets (EIM); and (6) The impacts of implementing FERC Order 1000.

Those six issues make investor-owned utility managers nervous about their future opportunities in serving long-term demand growth, as well as where and how to invest in new assets. Activists and advocates for protection of the environment (including clean-tech investors) promote balanced financial and regulatory support to sustain and accelerate investment in clean energy technologies. Even though there is a general acceptance of and some enthusiasm about clean energy technologies, most are still not quite cost competitive with the traditional sources of power. Improvements are needed in some of their performance areas. Innovations are coming, as seen in labs and pilot projects, but further steps will be needed as those new options are implemented more widely and integrated into existing power systems (See Figure 1.1 below on the challenges of impactful innovation).

Legislators and regulators have a delicate dilemma on their plate: How to continue progress toward a cleaner and more sustainable power system without imposing high and quickly escalating energy costs and unnecessary risks on consumers and industry. Additionally, these advancements must not harm economic growth or job creation.


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Figure 1.1: Technology: An Economic Growth Driver

In these early years, federal and state policies concentrate on economic growth. Though the U.S. economy continues on the positive growth trajectory that began in 2012, big challenges must be resolved. The financial crises in the European Union, especially in Greece, Spain, and Italy, as well as the political battles over how to reduce the U.S. deficit, dominate the headlines. There are concerns that the European Union could implode from within, as austerity programs do not prove effective. Pundits, investment analysts, and global finance experts all publish nightmare scenarios that contribute to the overall sense of gloom.

The optimistic news from the U.S. housing market, increased job growth and lowering rates of unemployment are all offset with news of conflicts in the Middle East rattling oil markets. Oil prices, now above $100 per barrel, have only small effects in the U.S. as oil consumption continues to decline, yet constrains economic growth outside the U.S. as global consumption increases. Despite ongoing monetary interventions by European Union finance ministers, there are fears the ongoing debt crises in Portugal, Spain, and Greece look like might lead to further economic contraction in Western Europe. Europe lags well behind the U.S. and Asia in terms of economic growth and continues as a drag on the global economy.

President Obama’s re-election in 2012 provided a degree of hope that Congress and the Obama Administration would collaborate to address the fundamental problems of the U.S.


“Innovation Pessimism: Has the Machine Broken Down?” The Economist, January 12 2013

Although the boom times are back in Silicon Valley, it may come as a surprise that some in Silicon Valley think the place is stagnant, and that the rate of innovation has been slackening for decades. And a small but growing group of economists reckon the economic impact of the innovations of today may pale in comparison with those of the past. Some suspect that the rich world’s economic doldrums may be rooted in a long-term technological stasis.

Economists divide growth into two different types, “extensive” and “intensive”. Extensive growth is a matter of adding more and/or better labour, capital and resources. Intensive growth is powered by the discovery of ever better ways to use workers and resources, and economists label the all-purpose improvement factor responsible for such growth “technology”.

Technological progress does not require all technologies to move forward in lock step - merely that some important technologies are always moving forward. Innovation and technology, though talked of almost interchangeably, are not the same thing. Innovation is what people newly know how to do. Technology is what they are actually doing; and that is what matters to the economy.

Although the economic impacts of technology lag investment in the technology, there may be reason for optimism as we are just entering the period where the exploitation of recent technology innovation (e.g., information & communications technology) will begin to have a significant impact on economic growth.

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economy. This notion of political harmony proves ephemeral as changes in tax policies as well as debt reduction are spread out over several years. The benefits come slowly, and while helping parts of the economy, the extended uncertainty about policy restrains broad economic growth both in the U.S. and globally. Voter frustration with the political gridlock results in an attitude shift towards candidates running for state or federal office in 2014 and 2016 towards those more willing to collaborate on solving the nation’s economic ills. However, in general, policies supporting a balanced approach to economic growth gain wider support.

By 2017, actions for effective regulation and the restructuring of the national debt leads to the implementation of tax and fiscal policies geared toward reestablishing middle class growth and supporting small businesses development. Economic growth is the primary focus of policymakers in Washington, D.C. and the states in the Western Interconnection. These actions coupled with economic growth in Asia, particularly China, India and Latin America prevents a return to recession.

Economic growth in the WECC region happens in fits and starts. Those western states and provinces with strong natural resource and agricultural sectors enjoy higher growth in the early years than the ones focused on high technology, defense and tourism. California, along with the Pacific Northwest, British Columbia, and Alberta are more closely tied to the global economy and need global growth to support their industries. The western states as a whole are able to take advantage of renewed growth in Asia and Latin America because of their emphasis on exports and international trade.

Electric power technologies are part of these globally focused industries, and companies in the WECC region lead the wind and solar power sectors, and are better able to integrate technology innovations. Companies in the Silicon Valley develop the software and services necessary to implement and run an optimized/smarter grid. Regulatory policies and state incentives enable utilities to start to implement innovative products and services. These domestic markets support companies that can produce and export technologies that will reshape the power business.

Western utilities and other energy companies continue their development of improved solar and wind technologies, including offshore, dispatchable, and low-speed wind generation. They pioneer investments and activities leading to more energy efficiency and overall conservation. Significant potential remains in this space for new and dynamic innovations.

While renewable portfolio standards combined with state and provincial tax incentives have stimulative impacts, demand growth remains the single largest driver for new investment in the energy sector. In the short term, due to slowly improving economic conditions and slower power demand growth because of more energy efficiency, power companies see limited opportunities. As a result, some new plant construction slows and some planned transmission expansion is put on hold.

As events unfold, optimism about the long-term potential of the U.S. economy proves to be accurate—albeit after some really tough early years. Power sector investments centered on technology eventually come to market. These technologies, which had started with a few utility


WECC Scenarios

systems both before and during economic stagnation, transform the power sector into a more efficient, flexible, and customer-responsive business. Previously announced coal plant retirements proceed without delay as the EPA continues its push for cleaner air quality. New sources of demand appear on the horizon as economic growth accelerates, companies large and small expand and consumer spending rebounds (See Figure 1.2, even with growing energy efficiency, absolute growth in demand is important).

Figure 1.2: Share of Energy Used by Appliances and Consumer Electronics Increases in U.S. Homes“Share of Energy Used by Appliances and Consumer Electronics Increases in U.S. Homes,”

Residential Energy Consumption Survey (RECS), U.S. Energy Information Agency

Over the past three decades, the share of residential electricity used by appliances and electronics in U.S. homes has nearly doubled from 17 percent to 31 percent, growing from 1.77 quadrillion Btu (quads) to 3.25 quads.

This rise has occurred while Federal energy efficiency standards were enacted on every major appliance, overall household energy consumption actually decreased from 10.58 quads to 10.55 quads, and energy use per household fell 31 percent.

http://www.eia.gov/consumption/residential/reports/electronics.cfm

Long-term planning to meet this potential demand centers on the balance of fuels. Despite environmental concerns, the U.S. allows increased drilling and production of oil and natural gas using hydrofracturing (“fracking”)2 driving natural gas prices lower and quickly increasing supply (with a side benefit of driving electricity demand through the electrification of fracking fields). At the same time, gas turbine manufacturers continue to improve gas-fired turbine efficiency adding increased flexibility in following load demand and shaping wind generation.

Variability and uncertainty of wind and solar energy requires flexible and reliable power sources to maintain reliability standards. Natural gas plants can be brought on line relatively quickly when demand spikes and can serve as replacements for retiring coal plants. Natural gas is abundant in the United States, so using it does not hurt the nation’s trade balance and provides domestic jobs. Natural gas quickly becomes the “fuel of choice” for both new and replacement generation. The challenges for natural gas include the uncertainty of continued long-term supply from shale gas, the long-term potential for price volatility, the need for new transmission and delivery infrastructure, and public concerns about air and water pollution resulting from the use of fracking technology.

Renewable energy and environmental activists and advocates focus on three concerns: (1) The environmental impacts of fracking used for oil and natural gas production; (2) Curbing greenhouse gas emissions that contribute to climate change, and (3) The effects of extreme

2 The process of using a fluid to create cracks in sedimentary rock and a proppant (small solid) to hold open the crack, releasing trapped oil and gas.


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http://www.eia.gov/consumption/residential/reports/electronics.cfm

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weather events, particularly the continuing severe drought in the western U.S., which leads to additional application of dry-cooled generation. These issues become more pressing as the U.S. moves towards “energy independence” through domestic oil and gas production.

Land use and endangered species are part of the discussions about transmission system expansion. The public, well informed about these issues, continues to support policies protecting the natural environment despite continued uncertainty about the economy. When both technological innovations and careful public involvement in project development are key aspects of system expansion, there’s support for moving new technological solutions into the market. Even without federal pressure, some states are continuing to pursue clean energy solutions in direct response to voters’ demands.

Policy makers understand the long-term planning challenges in this period of economic recovery period along with changing dynamics within the power system. As part of their responses to FERC 1000, public utility transmission providers publish a white paper on Balancing Authority (BA) consolidation, which serves as a framework for institutional changes in the WECC region, including tighter planning coordination.

As 2017 comes to a close, an uncertain US economy continues to slowly pick up momentum, while the WECC region maintains an annual economic growth rate of 2.5%. Population growth within the WECC region’s population coupled with continued economic growth increases energy demand placing new pressures on the electric grid. As a result, utilities will have to increase generation and distribution in the coming decade. Most utilities initiate processes to allocate the capital for the IT infrastructure upgrades necessary to create, implement, and take advantage of the long-discussed grail—the “smart grid.” (See Figure 1.3 on the challenges of smart grid growth).

Figure 1.3: The Smart Grid” at a Crossroad“Many of the smart grid projects that were announced in 2009 through early 2011 were funded by the Department of Energy, with American Recovery and Reinvestment Act grants. Since then, the level of activity has slowed down, for a few reasons. First, obviously we went through a boom phase with federal funding, and that boom is now gone. Decisions to cover costs for smart grid rollouts lie in the hands of state regulators. A number of states already decided to approve smart grid investments, and now we have a small trickle of states that are moving ahead. Illinois is one of them. But state regulators likely will pause and look at the utilities on the East Coast, Texas, Florida and the West Coast to see if utilities in those areas get the return on investment they expected, now the technology is working and what lesson are being learned. That will take 12 to 24 months. After that, we’ll see more states ready to take the jump and approve investments in smart grid.”

Source: January, 2013, Public Utilities Fortnightly, quote from Jack Azagury, of Accenture Corp.

“The Challenges of Big Data on the Smart Grid”, MIT Technology Review, July 2011.




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Before the smart grid can become a reality, much less leave the infancy stage, utilities need to prepare for an onslaught of data - and not just a doubling or triple - but an increase of multiple orders of magnitude.

Currently utilities are hindered by old legacy IT that cannot deal with this data inflow - much less communicate effectively with each other - and they are upgrading very slowly.

The realization of the smart grid and all of the benefits will be delayed much farther into the future than most forecasts anticipate.

The technology is there; it only needs to be refined and standardized into easy-to-use applications so power companies can smoothly integrate them into their operations.

Middle Years: 2018-2022/A New Day DawningPessimism does not last forever—even the Great Depression ended. In the early part of this period, economic growth in the western U.S. appears to be inconsistent with some areas accelerating while others still lagging. By 2022, the overall tide has turned with the return of a solid foundation of consistent, if not spectacular, economic growth—providing a long-needed boost just as the U.S. begins to rebuild its aging transmission infrastructure. As a whole, the WECC region is growing at a solid 2.75%. This turnaround’s foundation lies in the sizable decline of the U.S. federal budget deficit leading to lower long term borrowing cost for business investment and employment growth as a result of both exports and a more competitive U.S. manufacturing sector. With the demise of China’s long-term labor cost advantage, the U.S. accelerates exports of high-quality products that can only be manufactured with a more educated and productive labor force. These trends support a strong housing market and growth in consumer spending.

Newer industries, including biotechnology and information services, experience significant growth rates. The commercialization of three-dimensional computer chip technology kick starts the next “smart product” generation, which results in the proliferation of chip-based intelligence in almost every product. Clean energy technologies expand quickly, increasing their economic impacts as companies based in the WECC region start to produce and export more products resulting from their recent R&D spending. For these companies, geographic proximity to both domestic and export markets increases the overall global competitiveness of regional companies.

The energy sector contributes to job growth by increasing demand for distributed power systems and energy management services. Utilities start to build out smart-grid systems using new, more intelligent devices on both the demand and supply sides. Demographics, which are often underappreciated as an economic driver, start affecting the global economy. As a result of consistent immigration, the U.S. population grows, as is evidenced in the 2020 U.S. Census. The U.S. avoids the continuing population losses seen in Japan and most of the member states in the European Union. In combination with the ongoing recovery and population growth, renewed spending returns as consumers start to purchase big-ticket items including



https://www.wecc.org/committees/BOD/TEPPC/SPSG/Lists/Events/DispForm.aspx?ID=264&Source=http://www.wecc.biz/committees/BOD/TEPPC/SPSG/Lists/Events/PersonalViews.aspx?Paged=TRUE&PagedPrev=TRUE&p_Created=20120702%2021

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automobiles, appliances and electronics—items that were deferred by many during the last five years.

While Arab nations in North Africa and the Middle East are moving toward more democratic forms of government, this process proves to be both contentious and rife with uncertainty. Oil prices consistently hover above $120 per barrel based largely on global demand. Price spikes occur regularly because of political disruptions and violent outbreaks in the Middle East.

A combination of renewable energy, readily available domestic natural gas and oil, and energy efficiency and conservation provides a clear path for steady reductions in U.S. energy imports. Natural gas prices are only slightly impacted by both environmental regulations on fracking and increased demand from the electric power sector as production continues to increase. However, as the push for energy independence continues and new natural gas infrastructure comes online, there are growing concerns that the distribution system is now even more vulnerable to both natural disaster and terrorism.

Innovations in both electric supply and distribution systems emerge from renewed R&D spending—although no game-changing breakthroughs are on the horizon, a number of innovations are reaching a critical mass, including:

Wave generation technologies make significant strides and are close to being market ready at competitive costs

The first EGS (Engineered Geothermal System) comes on line in California and traditional plants experience better efficiencies

Small scale modular nuclear plants are successfully demonstrated

Solar DG at 100 KW scale and larger has reached grid parity (retail cost)

Advanced battery solutions for energy storage and electric vehicles.

Supported by state and provincial energy policies, “grid optimization” emerges at the sub-regional level, including energy imbalance markets (EIM) and operations/commercial tools. There are still large gaps in the system, however: After a serious attempt by cyber-terrorists to collapse the nation’s electric grid and financial system in 2018 was narrowly averted, security of both the grid and infrastructure becomes paramount as Congress finally enacts a cyber security bill. The failed attack and the new regulations add momentum to the smart grid build out.

Global financial markets have absorbed and restructured the toxic debt that had so severely damaged credit markets. There were some significant bankruptcies and mergers, but, by this time, credit flows support both sound investment and home ownership. Money pours into the energy sector, as investors perceive it to be a secure industry. Sound economics drive good investments: Demand grows and is very likely to rise because of expansion in industrial and consumer product sectors. After five years of sluggish growth, electric-powered vehicles start to




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pick up market share due to lower costs and higher efficiencies of greatly improved battery systems (See Figure 1.4 on expected shifts in the transportation fleet).

Figure 1.4: Sales of light-duty vehicles using non-gasoline technologies by fuel type, 2010, 2020, and 2035 (million vehicles sold)

Source: DOE/EIA Energy Outlook 2012 (With Projections to 2035), Page 85, DOE, April 2012

In the WECC region, the reshaping of the electric power systems takes an “inside-out” approach. Installation of generation close to load now happens before power is shipped in via transmission lines. This means that forms of distributed generation, demand response, solar power, natural gas and energy management systems now dominate the market. The challenge with this approach centers on sudden spikes in demand and guaranteeing reliability. As a result, these systems remain connected to the grid to ensure reliability. Smart grid investments by early adopters in communities, high technology companies, and utilities accelerate.

With a steadily improving economy, public pressure on the power industry focuses on climate change solutions as well as other environmental concerns. Land use impacts of natural gas production, renewable energy installations and water scarcity lingering from the 2011-2016 drought (evidenced by additional dry-cooled generation) now merit continued public concern. As the nation grows both in terms of demographics and economics, there are more conflicts about the use of limited natural resources.

Tourism continues as a sizable industry in the WECC regions and land use, in particular the use of open and protected areas, sometimes conflict with energy system growth. A balanced approach in most instances allows important transmission and distribution systems investment to proceed, especially those bringing in power from renewable sources. State and provincial economies pursue environmental agendas, while federal policies are aimed mostly at fostering economic growth. Moderates and centrists maintain political power in many states and seek to




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balance both employment and economic growth with responsible stewardship of natural resources.

Electric power companies actively adjust to the new more distributed and self-contained power infrastructure, effectively and efficiently managing the data and information flows coming from the accelerated build out of the smart grid. Energy services evolve into many submarkets as consumers are segmented into levels and styles of service that will accommodate their different needs. Even so, many consumers continue to receive power the old-fashioned way.

There are many new players in the energy market, especially in the information sphere. Supporting this faster-paced aspect of the electric market are large corporations developing software and hardware options that allow smart energy businesses to provide quality services. The technology allows WECC to expand the sub-regional EIM region-wide and leads to more sophisticated energy trading and more effective cost management. This more connected system allows Native American Tribes and First Nations to develop and manage their energy-producing assets and activities and, as a result, receive financial benefits.

By the end of 2022, renewed confidence in the economy and financial systems as well as ongoing technology improvements provides a foundation for an economic renaissance and the long-overdue transformation of the electric power system in the WECC region.

Final Years: 2023-2033/A Bright New DayThe global recession of 2008-2010 is long forgotten. Global financial markets are completely restructured and sovereign debt is under control compared against what was the case during the global recession. With the positive resolution of the European Union’s problems, worldwide growth outpaces pre-recession rates, yet seems to be managed in ways to prevent a new “bubble” as lessons learned take effect. By 2032, annual economic growth in the WECC region has risen to 3.5%, thus recouping jobs lost in the recession. Plus, there are now enough new jobs to cover the needs from expanding industry sectors and steady population growth. The long needed national infrastructure rebuild and upgrades continue across the region, adding new jobs and expanding basic industries. The WECC region is once again the land of opportunity.

Even as the population ages population growth, though inconsistent across the region, outpaces the rest of the U.S. It’s strongest among the Northwest and Pacific coast states and provinces. In addition, retirees decide once again to move to Arizona and Nevada despite increases in temperature and water constraints.

Relations between the U.S. and Middle Eastern countries remain strained, though some stability emerges. This stability comes at a price, however, as many of the new democracies created during the Arab Spring sometimes pursue policies considered antithetical to the global economic interests of the U.S. Economic growth outside the U.S. is driven by China and India. This is critical due to the importance of exports to continued U.S. economic growth. Many of those exports support growth in the WECC region and thus demand for energy. High technology


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exports from companies in the WECC region are a big contributor to the revitalization of the U.S. economy during these years.

By 2032, the smart grid is spreading across the U.S. and Canada. This was enabled by standards and interconnection agreements between the two countries supported by states and provinces. The grid now “…intelligently integrates the actions of all users connected to it—generators, consumers and those that do both—in order to efficiently deliver sustainable, economic and secure electricity supplies…”3

Taking advantage of improvements in information and communications technologies, including a new generation of computer chips, the grid now works in real time gathering and acting on information effectively. The grid does four things very well: (1) Ensures reliability; (2) Seamlessly integrates renewables; (3) Improves economics; and (4) Guarantees the sustainability of generation, distribution and use of electricity across North America.4

Traditional power companies, some of which still serve primarily rural areas, still sustain reliable service by having access to power resources beyond their peak demand. They maintain backup reserves that can be put into service quickly. What’s emerging in the improved more independent power system is one running much closer to its limits, albeit with much higher productivity.

Running a leaner system also helps to lower costs; however, when the limits are reached, there are new approaches in the provisions for back-up reserves. These new approaches now drive markets for energy storage technologies and smaller forms of clean, distributed generation. In fact, high-density DG areas are now significant enough to be considered “resource areas” for transmission expansion allowing production to be shipped outside of the DG local area. Over the past decade, improvements in storage solutions—pumped storage, compressed air, and advanced batteries—have solved the basic problem of storing electricity generated for both back-up reserves and off-peak demand. Solar and wind generation are also integrating improved technologies for energy storage.

The concept of a personal energy portfolio based on features like time-of-use pricing, special rates for electric vehicle charging, feed-in tariffs for solar power systems, and incentives for load management creates an array of possibilities for savvy consumers, both large and small. Some communities in the WECC region sign specialized deals with companies for clean energy projects for their local utilities.

Consumers quickly adapt to a new power system that provides them with more choices, even if they sometimes make a bad decision. Because the power system is cleaner and allows for more options, it’s viewed as a significant improvement in power services. Consumer surveys find a persistent desire for even cleaner systems and for more information on energy usage and conservation.

3 The Global Smart Grid Federation4 The U.S. Department of Energy


http://energy.gov/oe/technology-development/smart-grid

http://www.globalsmartgridfederation.org/smartgriddef.html

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In an effort to spur further technology advances in the power sector and to meet growing demands to address climate change, a national energy policy focusing on costs, air quality, CO2

emissions and fossil fuel export policies, is enacted. The law has several new aspects: (1) An increase in energy efficiency standards; (2) Additional renewable energy requirements in utility generation portfolios; (3) A ($37/ton) carbon tax; and (4) An expansion through the use of incentives of the market for cleaner, more efficient, and smarter energy technology. At the national level, this law complements ongoing efforts to further reduce imports of oil.

In mid-decade the U.S. is close to real “energy independence", and as a result is well-protected against global oil and gas volatility. Driven by global demand and exhaustion of the best shale plays, natural gas reaches $10 in the U.S. With global demand on the rise and prices high, gas and coal produced in the WECC region is sent to new shipping facilities on the Pacific Coast for export to meet increased Asian demand—but with an additional export carbon tax to continue revenue generation and to be consistent with the new national energy policy.

As economic growth continues, a major shift away from fossil fuel-driven power takes hold. Over the last decade, as economic growth continues there is increasing public concern about the ongoing use of natural gas. Combined with the increasingly destructive effects of climate change, states are now beginning to consider new RPS.

Almost all new generation is renewable as clean energy technology improvements in EE (Energy Efficiency), EVs (Electrical Vehicles) and DG/DR reach critical mass. 20 years of continual improvements in solar, wind and geothermal technologies have brought them to cost parity with natural gas. Wind has displaced coal-fired plants in regions with less-than-ideal solar conditions, leading to additional coal plant retirements. Solar thermal is highly competitive on utility scale applications, and EGS is now commonplace where it makes economic sense. Both renewed efforts to reduce CO2 emissions along with commercial viability of small modular nuclear plants lead to increased use of nuclear energy. Renewables are the new “fuel of choice”.

As renewable generation now makes up over 20% of power generation in the WECC region, power utilities have a need to pursue improved ways to meet their reserves requirements. They need large amounts of power at the multi-megawatt scale to meet the balancing needs of intermittent renewable resources. Once again, natural gas-fired generation presents a strong alternative, in addition to evolving storage options associated with wind and solar power.

Despite all the changes, electric power still cannot be called cheap. Energy efficiency, demand-side management and conservation still pay, and consumers still want energy-efficient homes, buildings and equipment. Since buildings in the U.S. and Canada typically last about 100 years, retrofitting them becomes a larger segment of the conservation business.

As a result of the benefits from the movement to energy self-sufficiency, the U.S. reaches a tipping point in 2032 as the country becomes self-sufficient in all energy sectors, including transportation fuels. With national energy independence now in place, federal action can now spur more energy development, including an energy superhighway system in certain parts of


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the country. These DC lines connect resources to major load centers in major cities and urban areas. Cooperation with Canada and Mexico advances to building new interconnections utilizing the smart grid across the WECC region.

During these years, some Middle Eastern and North African governments, which had seen internal revolts, have now become working, though fragile, democracies. Individuals who once led these popular political revolutions have now become nationally-elected leaders within their societies. They now focus on trying to raise national standards of living while connecting to the global economy. With the huge natural endowments and capital resources from oil and other natural resources, several of these nations join the World Trade Organization. As a result, their citizens become more discerning consumers of global goods. These changes open up export markets for U.S. goods including many from companies in the WECC region.

Bringing people from developing countries into the global economy creates a “new China” in terms of boosting global economic activity. India surpasses China in annual rates of GDP growth, and Indonesia, with its large population, increases its international trading and resource exports. Companies in the WECC region look to these new markets for exports of their clean energy technologies.

As 2032 comes to close and the new decade begins, there are four pressing questions facing WECC energy markets in this world:

1.) Will there be greater ties between the US Interconnections (e.g., WECC/ERCOT, etc.)?Does that change our electricity costs and prices in the Western Interconnection?

2.) Should energy development be more centrally planned and implemented in the Western Interconnection and can the smart grid and a leaner system create sufficient economic benefits in this time frame without such a transformation?

3.) Has the US reached the correct balance between the need for clean energy to address climate concerns versus the need for continued economic growth?

4.) Will the land use implications of increased oil and natural gas development put constraints on resource choices?

New scenarios are needed…


WECC Scenarios

Scenario One - Overview by Key Driver

Key Driver Scenario Summary

The evolution of electricity demand in WECC region

The economy begins a slow but steady recovery, and coupled with continued population growth drives a return to electricity demand growth. High fuel prices drive incremental electric vehicle adoption.

The evolution of electricity supply in the WECC region

Renewables struggle to grow in early years, but new investment and coal plant retirements trigger a resurgence of development, renewable generation takes off in last decade with increased deployment of on-site generation and storage.

Innovation in electricity supply technology & distribution systems

Slow and incremental technology innovation in the sector is mirrored in new generation development and operational and communications improvements. Renewables innovations pick up in the later years. Increased technology innovation in gas-fired turbines continues to drive natural gas for new generation.

The course of regional economic growth in the WECC region

Growth in the early years remains slow, and leads the WECC states and provinces to enact legislation to support economic development. The economy picks up in the middle years, followed by growth in the later years.

Changes in the regulation of electric power systems in the WECC region

States and provinces continue to drive energy policy in early years. The WECC region begins to manage the power industry with better optimization of generation and transmission across the Western Interconnection.

Changes in federal regulation affecting electric power industry

The U.S. and Canada establish federal national energy policies to drive toward energy independence. A national energy policy is enacted, including a carbon tax.

Changes in social values related to Consumer demand for customer-centric energy independence drives demands for


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energy issues energy-efficiency products, onsite generation and storage, etc. The public and investors begin to implement local community grids with clean generation.

Changes in society’s preferences for environmental & natural resources

Impacts of natural gas extraction cause states to look at increasing RPS standards. Centrist policies support reasonable energy infrastructure development leaning more towards renewables in the later years.

Shifts in national & global financial markets

Stabilization of financial markets following changes in deficit spending in the U.S. and other nations. Global financial markets return to normal credit patterns.

Shifts in the availability & prices of commodity fuels used in the electricity sector

Natural gas remains a clear choice for new dispatchable and replacement of coal fired generation in the early years.


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Scenario One Description Direction of Change2

Central Station Coal/CCS

Large-scale coal-fired power generation in the large megawatt scale needing transmission connections/with clean carbon sequestration.

-decreasing, no CCS breakthrough

Central Station Gas Large-scale natural gas-fired generation in the large megawatt scale needing transmission connections

+increasing due to economic growth

Central Station

Solar

Large-scale solar power generation at the megawatt scale needing transmission connections

+increasing with economic growth

Central Station

Wind

Large-scale wind-powered generation in the megawatt scale needing transmission connections


Central Station Nuclear Large-scale nuclear-powered generation needing transmission connections -decreasing with plant retirements

Geothermal Power Central station geothermal needing transmission connections ~relatively same as historic levels

Hydro Power Expansion/Extension

Continuation or expansion of hydro power generation at existing plants needing transmission connection

~relatively same as historic levels

Solar Power Small scale (generally roof top photovoltaic systems) that are located at the site of consumption


Distributed Energy Efficiency

Multiple forms of investment in capital stock which leads to reduced energy consumption or which support load management

+increasing due to economic growth

Distributed Gas Small-scale natural gas-fired generation serving loads in a local area which may or may not require distribution


Distributed Power Use of local sources of electric energy storage from stationary or mobile ~relatively same as historic levels


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Scenario One Description Direction of Change2

Storage sources

Large Scale Central Storage

Using a range of technologies and needing transmission connections ~relatively same as historic levels

1 The above listing of sources of power supply options can change over time and with varying degrees depending on conditions in the scenario. Conditions in the scenario related to changes in economic growth, fuel prices, technological change, industry regulations (state, provincial, and federal) and public policies will affect the amount of power supplied from the power sources. For this scenario a sense of the direction of change can be indicated as follows:

2 + increasing, ++ significant increases, - decreasing, --significant decreases, and ~ no significant change from historical levels.


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Scenario One – Overview of Modeling ParametersThe scenario narrative above is a largely qualitative description of a potential world for the WECC region over the next 20 years. As part of the TEPPC planning objectives the scenarios are also to be used to generate alternative transmission plans through modeling study cases with the Study Case Development Tool and the Network Expansion Model. During 2012 a team from the SPSG created quantitative modeling inputs to represent the scenarios for use in the Long-Term Planning Tool (LTPT). Those quantitative representations vary by scenario and the full detail of this work will be presented to WECC stakeholders during the first quarter of 2013 by WECC staff. Shown below are some of the key distinguishing model parameters for Scenario One shown against the Reference Case parameters.

Input Parameters Units 2032Reference Value

Scenario 1

Fuel & Carbon Costs

Natural Gas $/MMBtu $6.58 $10.00

Coal $/MMBtu $1.62 $1.62

Carbon $/ton $37.11 $37.11

Capital Cost Reductions

Geothermal % below 2012 cost

0% 0%

IGCC w/ CCS % below 2012 cost

0% 0%

Solar PV % below 2012 cost

31% 31%

Solar Thermal % below 2012 cost

25% 25%

Wind % below 2012 cost

8% 0%

Net Energy for Load

Load GWh 1,163,526 1,210,159


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Scenario 1

Policy-Driven Load Reductions

GWh 0 0

Policy-Driven Electrification GWh 0 0

WECC Net Energy for Load GWh 1,163,526 1,210,159

Implied Growth Rate, Unadjusted Load

%/yr 1.5% 1.9%

Implied Growth Rate, Adjusted Load

%/yr 1.5% 1.9%

Coincident Peak Demand

Load MW 198,715 206,685

Policy-Driven Load Reductions

MW -4,952 -4,952

Policy-Driven Electrification MW 0 0

WECC Coincident Peak MW 193,763 201,733


%/yr 1.4% 1.8%


%/yr 1.2% 1.6%

LOAD NUMBERS SHOWN ARE DRAFT AND NEED TO BE REVIEWED ONCE INPUTS ARE FINALIZED

Renewable Goals

State RPS % of Load Energy

Current state policies


Federal RPS % of Load Energy

none none

In-state RPS Requirement % of RPS Current in-state Current in-state


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Scenario 1

requirement preferences applied to RPS requirements

preferences applied to RPS requirements


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Scenario One - Policy ThemesThe chart below indicates how policy areas might influence the context in which energy related decisions are to be made within scenario one. The indicators on the charts will also be used to indicate changes from the common case assumptions, which will be the basis for WECC quantitative modeling. The common case assumptions should be thought of as a world, which naturally extrapolates from current conditions with no extraordinary changes.

Key: ‘++’ = Most aggressive; ‘+’=aggressive ; ‘-’= less aggressive; ‘– –’ = least aggressive; ‘0’ = neutral

Policy Categories Scenario 1: Focus on Economic Growth

Notes

Policy Theme High need driven by economic growth.

+ means:

Greenhouse Gas Policies

0 more aggressive reduction targets

Economic Policies + pro-growth policies

Capital Investment Support

+ more investment support

Renewable Energy Policies

0 more favorable to renewables

Transmission and Standards

0 more favorable to investment and coordinated operations

Federal R&D/ Technology Support

0 more support

Transportation Policies

0 more support for alt. fuel vehicles and transport.

choices

Demand-side Policies

0 more support for demand-side investments

Energy Security/Independence

0 more support for domestic


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Policy Categories Scenario 1: Focus on Economic Growth

Notes

Policies resources

Environmental/ Cultural Policies

0 more protection of environmental/cultural

resources

Consumer Issues 0 more restrictions on cost recovery

Fuel 0 more support for enhanced production


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Scenario Two: Focus on Clean EnergyWide-spread Economic Growth in WECC Region with Increasing Standards of Living and Paradigm Changes in Electric Supply and Distribution Technology

This is a world in which the economic gloom from the 2008-2010 recession turns around because of effective economic policies and a technological rebound that shows the power of innovation to restructure markets and industries. Initially tough, but ultimately, correct policy changes address the damage done to financial markets from the credit crisis and lead to a properly functioning financial industry that invests in real assets. Some of those real assets are rebuilding and retooling a cleaner, smarter, more energy efficient and flexible energy infrastructure as new environmental policies encourage investment which will support long-term competitive advantages for the nation and states in the WECC region.

Positive developments in the global economy, including growth in trade and further economic expansion in developing nations, benefit the U.S. overall. After an adjustment period, new policies address concerns about climate change and the costs of economic externalities. Investment surges into technological innovations in the energy market and other industries, creating a greener and solid long-term foundation for job growth. However, there is a zigzag nature to this greening change as policies to protect the jobs in and the economic power of fossil fuel industry are also enacted, however with care to address emerging environmental policies. Innovative products shape a more efficient, interconnected, and intelligent business environment. Companies in the power industry are also revising their business models to compete with new entrants and provide new information-intensive services using smart-grid approaches.

With some periods of policy adjustment and adaptation, the WECC region, home to many of the emerging industries shaping the world, leads the transformation to a more environmentally responsible marketplace and enters a new period of long-term growth.

This is a story of persistent long-term change toward a greener and more sustainable power system. However, the path there has some challenges with financial adjustments within the power industry and periods of internally inconsistent national energy policies.

Key Scenario Metrics in 2032:Natural Gas Price = 2032 Reference Case value: $6.58

Cost of Carbon = $100




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Beginning Years: 2013-2017/Steps Toward Building a Foundation for a Modernized Electric Power System

The big events and issues shaping the electric power sector in the WECC region in early 2012 can be summarized in four key areas: (1) The impact of and recovery from the 2008-2009 credit crunch and follow-on recession; (2) A growing concern among voters and their representatives about both the short-and-long-term effects of climate change; (3) A rapidly emerging concern about the long-term availability and usage of freshwater; (4) The growing investment in renewable energy technologies to meet renewable portfolio standards (RPS); and (5) Assessing how implementation of the recent FERC Order 1000 addressing regional planning might play out.

Taken together, those five issues make players in the electric power industry (investors, developers, regulators, activists and policy makers) anxious about the shape of the business—especially the shape of long-term demand growth and where and how to invest. Investors, including investor-owned utilities, private owners of generation and transmission, and public power companies can envision the emergence of a cleaner, greener and more efficient system. They are wary of over investing and concerned with problems with cost recovery. Regulators want to send the right signals to the market, but are wary of putting rising costs onto consumers who are likely to resist them. Activists and advocates for protection of the environment seek to promote balanced financial and regulatory support in order to sustain and accelerate investment in renewable and clean technologies while mitigating climate change impacts and supporting economic growth (see Figure 2.1 on the growing competitiveness of solar power).

Elected officials and policy makers want guidance on how to enable the emergence of a more flexible and robust energy infrastructure, which will be the basis for long-term economic growth. There are a range of views on how FERC Order 1000 may affect power and transmission investments and cost allocations generally controlled within state bodies. Legislators and regulators face a complex challenge: How to continue progress toward a cleaner, efficient and more sustainable power system without imposing high and escalating energy costs on consumers and industry (see Figure 2.1 below on the increasing cost competitiveness of solar power). Plus, this must be accomplished without damaging economic growth or job creation. Within all of these considerations there is also excitement about the prospect of expanding economic opportunity by seizing a leadership position in the global clean-technology sector. Over time, smart investments in emerging technologies raise the prospect of reducing power cost to customers.


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Figure 2.1: Guess What: Falling Solar Costs, Rising Retail RatesUnsubsidized Solar Electricity Price v. Commercial Retail Electricity Price (Nominal)

Source: Commercial Rooftop Revolution, Institute for Local Self-Reliance (ILSR), Dec. 2012

As this future unfolds, it becomes possible to manage the tough issues of the early years because of a return to solid economic growth and the emergence of national political leadership to address the threat of climate change. Innovative new technologies are decreasing costs and providing new features and options for consumers and businesses. This does not come easy because new policies take time to implement and industry players experience an adjustment period. Between 2013 and 2018, key policies and decisions take shape in an atmosphere of positive, yet nervous feelings for all participants in the industry, especially investors.

During these early years, the U.S. and global economies confront several fearsome challenges, including: (1) The environmental damage associated with a warming climate and economic dislocations associated with extreme weather-related events; (2) The European debt, banking, and currency crises; (3) Turmoil in the Middle East shaking oil markets and increasing prices (even though there is no shortage of oil in the world); (4) An ongoing concern about potential sovereign debt defaults by the U.S and certain European nations; and (5) Persistent unemployment challenges, coupled with a slow recovery in the housing and real estate markets that stifles consumer spending, which is still the major driver of U.S. economic growth. Fortunately, regulatory adjustments within the banking sector ensure that lending and banking activity is now better aligned with public policy and long-term stable growth.

These myriad problems would normally push other legitimate concerns like climate change, looming water scarcities and utility infrastructure to the bottom of a legislative list. However, after Hurricane Sandy’s devastation of the U.S. Eastern Seaboard in 2012 as well as the drought conditions in the Western U.S., citizens voice concern about the safety of cities, valued natural resources, agriculture and the quality and stability of essential public infrastructure. There’s now a willingness to pay more to ensure greater security and reliability in these vital systems. Political leaders feel emboldened to communicate to voters the tough choices required


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to rebalance incentives in order to grow the economy in a more sustainable direction. This includes addressing greenhouse gas emissions like carbon and expressing a willingness to invest in technologies, which mitigate the cost of climate change. Regulators recognize these concerns and focus on sending accurate price signals to the market in order to spur the necessary investments.

In the WECC region, states, provinces, and local governments develop the fundamental groundwork that will eventually pay big dividends for long-term growth and environmental protection; the region bursts with economic activity, especially in the energy sphere. Examples include:

1.) Maintaining renewable portfolio standards in order to provide a positive climate for investment in innovative clean-energy technologies;

2.) Taking the lead on policies required to cap carbon emissions (thereby monetizing those emissions);

3.) With some federal support, providing tax credits and other benefits to spur electric vehicle adoption;

4.) Creating and enforcing new rules on water use and safety;

5.) Monitoring and regulating the safe use of new natural gas drilling techniques, reducing fugitive emissions of carbon in drilling and transportation, and enabling that fuel’s accessibility;

6.) Regulators working with local utility companies to bring increased efficiency and high technology into the management of their power systems and lower energy costs for consumers and businesses; and

7.) Working with businesses in the manufacturing sector to develop jobs as U.S. competitiveness increases due to lower costs of energy and high levels of innovation.

These actions, coupled with the establishment of a region-wide Energy Imbalance Market (EIM) in the WECC region, eventually coalesce into a solid foundation that will put the electricity sector on a more sustainable, cleaner and operationally flexible path. Industry experts praise the leadership role of companies in the WECC region and advocate their actions as a national model. Protecting citizens and proper price signaling to investors are key inputs into the thinking of both energy regulators and policy makers.

During these years, the basic components of the emerging electric energy business are in place. These components include:

1.) Expanding implementation of smart grid and metering technologies ;

2.) Building of renewable energy generation—both wind and solar power systems as well as advanced geothermal systems—supported by sustained R&D;






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3.) Continued evolution of battery technology to serve both the automotive and distributed generation industries;

4.) Investment in new information, communications, sensor and control technologies that will bring more efficient management into the power system;

5.) The expansion of pay-for- performance cost recovery regulation in the power sector that allow for more win-win business models for consumers and investors; and

6.) Continued investment in energy efficiency and opportunities for distributed generation.

Though changes are put in place, not all companies are prepared to quickly adjust. This leads to some short-term damage in their financial positions and, in some cases, write-downs and write-offs of sunken obsolete assets. The financial impacts are spread among key stakeholders as investors take some losses. Some costs are rolled into utility rates with long-term cost recovery and some price increases hit consumers. Opposition to rate increases is avoided as consumers are willing to pay more for what they now view as reasonable costs in light of their support for addressing environmental concerns. The adjustment to a more sustainable energy market moves ahead without much rancor. On the whole, growing investments in the energy sector support economic growth.

The electricity sector struggles with what to do about existing coal and natural gas generation. Some business and political constituencies support extraction of fossil fuels. Supporters in both the Eastern U.S. coal states (West Virginia, Ohio, and Pennsylvania) and coal-producing states in the WECC region develop a national alliance meant to save the domestic coal industry. This coalition is able to delay the impact of EPA rules on the coal industry and advertise the ability of new technologies—including the development of carbon capture and sequestration—to keep one of North America’s most abundant fossil energy resources online. Policy proposals for the long-term survival of the fossil industry lead to the U.S. government approving the development of export facilities on the West Coast for coal and LNG exports to China and other Asian nations. Climate advocates see this policy as a zigzag and one that is inconsistent with the spirit of the policy changes enacted to address climate change. There is frustration among activists and some investors with policy makers not seeming to understand the growing benefits of cleaner fuels, market innovations and investments that are supporting optimization of the power grid.

Natural gas supporters contend that it is much cleaner than coal, has a smaller carbon footprint, and that it is much easier to build gas-fired power plants in a wide range of sizes to support the base-load, peaking, and fast-ramping needs of power companies. Domestic gas supplies are just as abundant, if not more so, than coal. There’s an expectation that increasing supplies will restrain increases in natural gas prices even while sustaining some level of exports.

The retirement of old, dirty coal plants makes perfect sense to environmental activists and natural gas enthusiasts (see Figure 2.1 below for one forecast of possible coal retirements). Advocates for the renewable energy business also view the retirement of coal plants as essential to the replacement of dirty capacity with clean capacity. Growth, technological




WECC Scenarios

advances and economies of scale will continue to lower the cost of renewable generation and increase its competitiveness across the board. Taken together, the battle for market share among coal, gas, and renewables suggests lower overall energy costs as they each provide checks and balances on one other. Wind and solar generators find themselves continually on alert to find ways to lower their costs.

Figure 2.2: Announced and Projected Coal Retirements by NERC RegionCoal plant retirements may be of little consequence in the WECC region and thus most new generation will be built to meet demand growth.

Source: Potential Coal Plant Retirements: 2012 Update, The Brattle Group, Oct. 2012

During these early years, the nuclear power industry maintains a low public profile with only a modest level of lobbying for additional R&D funding. Concerns about safety, long-term waste disposal, and the impact of Japan’s Fukushima Daiichi plant meltdown make investors and policy makers quite risk averse about nuclear power. Though new plant designs, e.g. thorium-fueled molten salt reactors, appear promising, only investments by power companies in the Southern U.S. keep the industry in business. Few utility CEOs will publicly commit to nuclear without significant government guarantees and financial support, including recovery of investment costs during construction.

In both the 2014 and 2016 national election cycles, polls of American voters show consistent political support for a more progressive energy future. Job growth potential, export market opportunities, and private investment in the underlying new energy technologies sustain a centrist political approach that spurs innovation and commercial development. Federal, state, and provincial government policies push the expansion of renewable energy investment and R&D. Consumers accept a new value proposition based on previously externalized costs being included in planning, decision making and power rates. With subtle, but strong, reminders from


WECC Scenarios

large damaging storms and other climate related events, the public accepts the proposition that climate change must be addressed. This is evident in the growing electrification of the automotive and transport sectors.

By the 2016 U.S. election cycle, economic recovery nationally and in the WECC region is on solid ground. Growing tax revenues have strengthened state coffers and housing markets are in full recovery, much of it driven by more urban infill building.

Middle Years: 2018-2022/Tension Passing Through the Inflection Point Toward SustainabilityPolicy change in the energy industry is never a good thing for everyone, especially for those invested in the past or in maintaining the status quo. Policy makers and, to a growing extent, the public understand the need to make near-term decisions that support long-term change. The central question is this: Who is going to pay for it? Or, how do we all pay for it? The solution turns out to be an approach based on sharing the pain in order to minimize the impact of a boom-bust cycle.

Investment in new energy infrastructure is needed to support a more efficient (thus cheaper), reliable, resilient and cleaner base for the economy. At the same time, some large investments from the past are made obsolete. It is not politically feasible to place the whole cost of making the transition on those companies that had made legitimate energy investments to serve the nation. With the boom there is also a bust for some.

State and federal energy policy makers and regulators struggle with how to distribute the cost and rate impacts of the energy market transition taking place. Federal agencies are careful not to extend their power too far into local rate setting, but want the expected cost-saving benefits of a more efficient, coordinated and more regional power system captured. State governors and regulators also want cost savings, but also wish to capture in-state economic development opportunities and keep power rates moderate to support job growth. With all of this, comes a lot of work to manage the financial issues in the energy market transition.

The energy industry manages to muddle through some financial challenges with support from regulators and policy makers who soften the impact of the adjustments needed. Combinations of refinancing, long-term rate recovery, tax breaks, and rate increases are used in various states to make the deals needed to smooth the path toward a sustainable energy sector. In most cases, rate increases are put in place without shocks.

In contrast to this downward trend, there is expansion in areas such as: (1) Smart meters and smart-grids; (2) Wind and solar plants (including some CSP plants capable of meeting reliability needs) with new storage technologies; (3) Flexible natural gas plants used to balance power systems in meeting reliability; (4) Electric vehicle charging stations; and (5) A transformation of the power grid that enables more coordination between distribution-level and transmission-level operations.




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In light of the earlier setbacks for U.S. car manufacturers in the electric vehicle market, most observers did not anticipate such tremendous success in the hybrid vehicle market. But with the price of hybrid and all-electric vehicles declining due to ramped-up production and improved battery systems technology that extend vehicle range, a positive feedback loop of customer satisfaction accelerates sales and overall market penetration. Hybrids sales achieve 30% market share for all vehicles sold in North America by 2020. With EPA CAFE standards for light-duty vehicles still expected to come online by 2025, forecasts are that all-electric and gasoline hybrids will achieve a combined 50% share of the new vehicle market by then.

Electric power companies welcome a new wave of investment in heavy-duty and long distance vehicles even though few had expected the size of the uptick in demand growth from the transportation market. Increased profits also help U.S. automakers rebuild both their financial base and their manufacturing assets for the long term. What’s good for General Motors is once again good for America.

The U.S. is not alone in pursuing investments that will change electric power markets. Other nations in Europe and Asia are also on the bandwagon seeking to generate jobs, investments and competitive exports. Policies to address climate change are common in the largest economies in line with global commitments to address greenhouse gases. U.S. leadership plays an encouraging role in a global implementation of clean-tech investments with financial as well as policy support.

Another trend being shaped by policy and energy realities is the reduction in urban sprawl. Urban and inner-suburban land development contributes to a more efficient economic structure for the nation. Lifestyles, which embrace the use of public transportation, car sharing, biking, and just plain old walking, are no longer seen as exceptional.

The increase in demand growth benefits the power sector and makes the drive toward meeting renewable portfolio standards easier. It’s putting the “wind in the blades” of wind generators. Solar companies, builders of distributed power systems, and independent power networks all experience growth in sales. This leads to a more distributed and smarter power system. Consumers experience the emergence of a power system in which a wider range of prices are charged for differing levels of energy services. Prices paid to recharge cars may differ from location to location or at different times of the day. The unfolding and full deployment of information, communications, sensor and control technologies allow demand side resources to play a much larger role in ensuring reliability. Power from greener sources is easier for consumers to access by choice.

During these years the U.S. economy hits its stride. States and Provinces in the WECC region are in full recovery mode. States and Provinces with strong positions in mining, timber, agriculture, and energy lead the way. As incomes rise, consumers start to purchase big-ticket appliances, televisions (including some relatively energy-intensive 3-D sets), and cars with greater frequency. Some of these purchases help to put a cleaner and greener U.S. economy into place, but the prosperity also causes some increased use of electricity.


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Extensive use of rooftop solar systems is key to this movement. Electronic and mechanical devices are now embedded with smart communications and management technology to allow various modes of use, many with energy efficiency as a key choice. Making smart choices becomes a fabric of the social environment as people share and exchange ideas and experiences. These shifts contribute to job growth in the economy (see potential categories of new job growth in Table 2.2).

Table 2.2: Description of Brookings-Battelle Clean Economy Categories (Energy, Energy Efficiency and Renewables)

Category/ Segment Name Description

Appliances Energy-efficient appliances used for cooking, heating, cooling and various consumer and industrial applications

Battery Technologies Make or develop batteries and other energy storage technologies

Electric Vehicle Tech. Make electric/hybrid vehicles, or supply them with specialized parts

Energy-saving Building Materials

Provide building insulation and weatherization services or make building materials that save energy

Fuel Cells Make or develop technologies that convert hydrogen into fuel

Green Architecture & Construction

Provide architectural or engineering services for building projects that meet stringent environmental standards

HVAC and Building Controls

Make energy efficient temperature control equipment or audit buildings for energy efficiency

Lighting Make lighting that meets federal Energy Star standards for efficient lighting

Professional Energy Services

Provide certified energy efficient professional services or services related to energy research or energy efficient consulting and design

Public Mass Transit Provide multi-passenger transportation to the public or school children, displacing less efficient single-passenger vehicle travel

Smart Grid Provide services related to electricity measurement and control

Biofuels/Biomass Produce or develop energy from biological or agricultural materials

Geothermal Generate or develop technologies that convert heat from the earth’s core into energy or facilitate the use of such energy

Hydropower Generate or develop power from dammed water



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Category/ Segment Name Description

Renewable Energy Services Provide professional or construction-related services to manage or implement renewable energy projects

Solar Photovoltaic Produce, develop or install technologies that convert sunlight into electricity

Solar Thermal Produce, develop, or install technologies that capture and distribute heat from the sun

Waste-to-Energy Produce or develop technologies that convert waste to energy

Wave/Ocean Power Produce or develop technologies that convert naturally flowing water into energy

Wind Produce, develop, or install technologies or specialized components of those technologies that convert wind into energy

Source: “Sizing the Clean Economy: A National and Regional Green Jobs Assessment,” The Brookings Institution, Metropolitan Policy Program, July 31, 2011

http://www.brookings.edu/metro/clean_economy.aspx

Breakthroughs in electric vehicle technology contribute to an overall economy driven by improvements in technology. Technology, particularly information and communications, bores even deeper into most products and services across the economy. In the power sector, smart-grid technology revolutionizes the energy services market, tying in smarter equipment and appliances, and allowing for a more efficient and flexible power grid. Unsurprisingly, smart grids lead to smarter energy customers. This includes industrial companies where energy cost saving can drop to the bottom line and increase their competitiveness. The variable output from wind and solar generators becomes much easier to manage and integrate with flexible gas-fired reserves, efficient regional energy markets, geographically and technologically diverse renewable energy, and a smarter power grid encompassing both transmission and distribution systems.

Underlying these consumer choices are a range of institutional changes in the electric industry in the WECC region. A federal policy for carbon pricing is now in effect along with a renewable energy portfolio standard for the nation. Federal policy now aligns with internationally agreed-upon goals. Carbon prices range from $50 per ton toward of $100 per ton. Incentives for clean and energy-efficient operations in industry have remade some of the tax code.

The tension and dynamics in the emerging energy market make for a trade-off between costs and features (with prices now increasingly signaling full life-cycle costs) and more progressive views of energy. Should some consumers and special groups be protected from some prices and market effects? Policy, nevertheless, leans toward change. Economic growth allows some cushioning of impacts on some parties through the use of rebates, tax breaks and financial aid.


http://www.brookings.edu/metro/clean_economy.aspx

WECC Scenarios

The new long-term model for the power system begins to settle firmly into place during these years. It provides an effective and efficient mix of elements, including: (1) DC transmission; (2) Smart grid and metering systems; (3) Integrated distributed and renewable generation with storage and flexible gas-fired reserves; (4) Independent power networks serving some large customers, local communities and industrial parks; (5) Load management enabled by connection to final consumers getting real-time price signals; (6) A WECC-wide EIM system using sub-hourly scheduling and coordination that is working well despite some occasional “learning” opportunities when unexpected weather or other demand-related anomalies conditions occur; and (7) Cyber investments in the power grid that support national security.

Forecasted water and air pollution problems for shale gas development prove mostly misplaced as monitoring and sensing applications emerge and are backed by strong regulatory enforcement. Protecting the air and water does reduce the number of sites deemed appropriate for drilling and strong regulatory enforcement does impose exploration and development costs that increase the price of natural gas. This increase in price is accepted as it reflects the true costs of safely developing gas fields. Large integrated oil and gas companies bring rationality to the gas market after a short-term boom-and-bust cycle wipes out smaller unstable players. On balance, the reduced need for gas driven by advances in low carbon technologies and the increased costs of gas exploration and development results in natural gas prices in a moderate and competitive range. It allows natural gas to maintain its foothold in the power generation markets where it plays an important balancing function as the amount of intermittent renewable generation increases.

The evolution of the power system is not without problems. It’s not really carbon free, so the system fails to completely address long-term climate concerns effectively. Even if it’s easier to manage, energy does not come cheap for all and protecting low-income customers requires special attention as the incidence of increased electricity rates is regressive. In addition, large penetrations of utility-scale wind and solar technologies have some impacts on the environment even with aggressive mitigation practices. Some wind generation impacts bird migration adversely while some solar farms disturb delicate desert ecosystems. Electricity generation must use less water since the security of clean water supplies evolves into a national concern because of persistent drought conditions, which, incidentally, lower hydro power generation.

Land-use issues make for intense court battles. State, provincial, and tribal governments must address all of these issues. State and federal courts must decide whether and how to assign damages to carbon emitters, including electric utilities, in response to climate change class action suits seeking payments for environmental damages. A rapid expansion of natural gas use is also restrained by the need for supporting investments in pipelines, storage and other related infrastructure to deliver the gas. In some cases, there are also challenges with integrating gas with power generation due to contracting issues and natural gas pricing policies.

With the return to stable economic growth, coal supporters suggest that successful pilot projects demonstrating the safety and effectiveness of carbon capture and sequestration (CCS) should slow the phase out of existing coal-fired plants and encourage new plants to be sited and built. Environmental advocates show up at public hearings with evidence to the contrary, especially






WECC Scenarios

relating to long-term containment risks of sequestered carbon emissions. Activists argue for the environmental dispatch of power, which would make coal plants the last resort. Low natural gas prices challenge coal advocates as they watch power companies add new gas generation, sometimes to manage peak demand from the transportation sector. Variations in demand from the transport sector cause peak demand to shift and the need for flexible ramping of resources to increase, particularly when combined with unanticipated turns in daily weather patterns.

Power companies have a leading role in the electrification of the U.S. economy and make moves to restructure their companies to remain viable, eyeing expansion of their transmission grids and power management systems in order to share resources more effectively. New subsidiaries and service arms now serve growing demand. Finding the right mix of assets while responding to tighter environmental standards can be problematic.

In addition, rising customer expectations driven by real-time communications increase the pressure for change on the industry. The power system assimilates Moore’s Law—the long-true rule of thumb that the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years—and drives cycles of updating and the turnover of services and applications. Over time, the standards for smart grid applications developed by the National Institute of Standards and Technology (NIST) guide a myriad of new investments as they are reported and implemented by a variety of standards-setting bodies, including WECC.

A series of persistent weather-related disasters coupled with international pressure to address greenhouse gas concerns provide the U.S. president and Congress with the political impetus to develop national climate change adaptation and carbon reduction goals. In following rounds of global negotiations, developing nations make binding commitments, which they now believe they can make with improved technologies that will not negatively impact their economic growth (See Figure 2.3 below for an overview of climate change concerns expressed internationally). Those commitments contribute to global growth in clean technology investments and potential export markets for U.S. companies.

Figure 2.3: The World Bank on Climate ChangeDespite commitments so far for cutting emissions, the world still needs to adapt to the unavoidable impacts of climate change

Climate change and increased variability are already affecting many development sectors –agriculture, water, health, and infrastructure – and will continue to do so in the coming decades.

Adaptation is at the centre of the World Bank’s support to developing countries as it is critical to sustaining and furthering development gains in these countries.

Poorer nations and communities are likely to suffer the most as they often are dependent on climate sensitive activities, located in drier and warmer or coastal areas and have limited institutional and financial capacity.


WECC Scenarios

Despite being widely agreed upon as an important threshold that should not be crossed in order to avoid dangerous consequences, it now looks increasingly likely that the world might miss the 2 degree C target.

Research is indicating that there is a significantly higher probability of tipping elements in the Earth system being activated, with cascading effects around the world. Instead of incremental change, such (non-linear) dynamics could be disruptive in nature and inherently difficult to predict.

Adaptation is at the centre of the World Bank’s support to developing countries as it is critical to sustaining and furthering development gains in these countries.

It will cost an estimated $70-$100 billion per year through 2050 for developing countries to adapt, according to a World Bank study Economics of Adaptation to Climate Change (EACC).

Source: http://climatechange.worldbank.org/content/4-degree-warmer-world-we-must-and-can-avoid-it-infographic

A coherent U.S. national energy policy translates into legislation with clean energy targets and renewable portfolio standards. The Canadian government follows suit with its own national clean energy plan. This Canadian policy change catalyzes research and development in the renewable energy sector with those companies focused on energy efficiency getting serious cash injections. Additionally, new environmental agreements ease the siting of generation and transmission expansion on federal lands. Despite these movements fossil fuel exports from North America to the rest of the world are at record levels. Natural gas use and prices within North America also remain moderate with abundant supplies, but used consistent with carbon reducing policies.

Final Years: 2023-2033/The Lumpy Implementation of the Advanced and Clean Technology Power IndustryThe impacts of some breakthrough technologies in electricity generation make for some interesting power industry dynamics. The long-awaited, “easy-to-fuel-and-use” fuel cell comes online, with most now using renewable energy, advanced electrolysis systems, and occasionally, natural gas as a feedstock for hydrogen. Fuel cells exist in a wide range of sizes and for numerous applications, including cars. A few states are now building pilots for advanced coal-fired generation with safe and reliable carbon capture. On the renewables side, super-efficient solar cells now harvest 50% of sunlight. Breakthroughs in storage allow large-scale renewable projects to operate competitively across the power spectrum on cost and performance bases. The integration of power generation with transmission and distribution systems operates smoothly because of the information and communications capabilities now built in to generation, transmission and distribution technologies.

Managing peak demands on transmission grids now has aspects that look like high-tech video games with some attendant emotional shocks for managers as weather conditions change. With


http://climatechange.worldbank.org/content/4-degree-warmer-world-we-must-and-can-avoid-it-infographic

http://climatechange.worldbank.org/content/4-degree-warmer-world-we-must-and-can-avoid-it-infographic

http://climatechange.worldbank.org/content/economics-adaptation-climate-change-study-homepage

WECC Scenarios

all of this there is now clear and unrelenting movement toward a long-term environmentally sustainable power system, not only in the U.S., but globally. U.S. leadership in developing clean technologies boosts the national economy as the nation is the world leader in innovation and exports.

The ongoing electrification of the U.S. economy matures during these latter years. Growing integration of the automotive sector with the power sector finds people charging their vehicles during the day or night, but often with sensitivity to prices communicated via smart systems. Consumers take so much pleasure operating their vehicles, especially when the fuel monitoring systems in the vehicles show the net use of a gallon of gasoline with over 100 miles traveled. Oil prices remain above $100 per barrel due to global demand from developing nations.

An American and Chinese partnership on space-based solar power plants for research purposes represents a huge R&D investment for the future of clean power. While the plant ostensibly powers the International Space Station, the research eventually leads to promising applications for ground-based solar power. Advanced battery storage and fuel cell systems for the home market gain in popularity for drivers of hybrid electric vehicles. Short-distance DC power lines interconnecting power generation islands support system operations. Coal supporters advocate for the benefits of cost-competitive in-situ gas derived from coal, which leaves some of the carbon in place. Natural gas prices, higher than in years past, are expected to rise as the industry must try to access more difficult-to-recover reserves.

As the full policy support for movement toward a more balanced, cleaner, smarter energy infrastructure is put in place, defining a “balanced energy portfolio” evolves into a pressing issue. Power company executives from across the spectrum of services and assets classes agree that prices and costs must continue to be balanced with stewardship of the natural environment. An elevated level of information-intensive customer service is considered part of the basics of the business. Government and regulators leaders agree with power companies on improved core services. Providing those services results in the emergence of a modern, cleaner energy system, but with diverse patterns of energy investments in infrastructure at the state level.

Moving across states, a wide range of integrated power system assets thrive. Some states become considerable users of renewable generation, while others have more of a balance with natural gas. Some states have significant numbers of independent power islands, while others rely more on energy efficiency with most customers still reliant on the grid. Varying levels of integration with smart grid systems exist with some power companies having large numbers of tech-savvy consumer and industrial users of the systems, while others primarily use it to manage loads in the larger system. The slowness of some public power agencies to invest explains many of these variations across the country.

Even with some common features, a one-size-fits-all solution doesn’t quite emerge. WECC member states and provinces take diverse approaches with urban areas in California and British Columbia being on the high end of power system development, while rural parts of Washington State take a simpler approach. In many places, one can find a mix of different methods to meet



WECC Scenarios

energy needs. There are zero-energy and green buildings in many areas. Utility rate programs, which encourage efficient consumption, vary widely. Some programs provide special rates for certain kinds of equipment. The WECC transmission smart grid evolves to allow easy importing and exporting of power between states. This contributes to stable rates across the region. Zero net-energy regulations in some states support a range of technology options and result in new homes and some entire neighborhoods becoming models of energy efficient living.

Power industry investors and observers in the press argue for a rationalization (or setting of clear identifying boundaries) of the industry into distinct business models incorporating:

1.) Power generators (both renewable and traditional);

2.) Energy services providers;

3.) Smart systems providers and integrators

4.) Independent power network owners who incorporate distributed generation;

5.) Demand-side management and energy efficiency companies;

6.) Transmission service companies;

7.) Local distribution service companies; and

8.) Regional conglomerates or holding companies.

Regulators seek to rationalize the industry in order to protect consumers, stabilize increases in customer bills, guide cooperative efforts, and continue enforcement of the regulations now in place. Investors are seeking to find stable and secure business models and rational reasons for mergers and acquisitions. Some policy makers are wondering whether there should be a continued role for public power. And if so, in what form? All parties in the industry are also concerned about frequent and disturbing cyber-attacks and security breaches in the power system. None prove catastrophic, but their regularity is an industry headache.

The short-term benefits to the environment of the shift in the electric power industry are becoming increasingly evident, even though climate change impacts from historical emissions have yet to run their full course (likely to take hundreds of years). Local air quality is improving and energy demand growth is mostly flat.

What is most evident as advanced energy technologies are being implemented is how much smarter and efficiently energy is being used compared to patterns in, for example, the late 1990s. More energy is being produced in an environmentally sound manner and closer to the point of consumption. People are smarter about energy prices and values.

As 2032 comes to a close and the new decade begins to take shape, the four major issues face energy players in the WECC region include:






WECC Scenarios

1.) Should policy pressure supporting preferences for the clean energy industry dissipate now that many of the dirtier production practices have disappeared and the clean technologies are the industry’s standard?

2.) What will happen when the nation’s electric generation base moves to over 50% renewable power? Should the barriers for efficient power transfer and trading be removed on a nationwide basis despite States’ rights issues?

3.) How should consumers be protected from price and other risks in the more market-oriented power system? What services are now so basic as to be tantamount to a right for all consumers?

4.) Will there ever be a way to dramatically and further reduce fossil fuel use on a global basis since greenhouse gas emissions are still accumulating at a rate that risks severe climate impacts?

5.) What new utility business models will emerge as the transition from the traditional utility operating paradigm emerges?

6.) With an increasing reliance on digital technologies, smart grids and electrification of the transportation and industrial sector, how do we continue to increase power quality, reliability and protect against cyber-attacks?



WECC Scenarios

Scenario Two - Overview by Key Driver


The evolution of electricity demand in the WECC region

The economy recovers and electricity demand growth returns. Improving energy efficiency and energy management systems. New growth comes primarily from the transportation sector.


Natural gas-fired power generation expands based on cost and the need for flexible generation capacity, but is limited by higher carbon prices. Renewable resources expand supported by policy and higher carbon prices. Coal-fired power is reduced but not eliminated. New advanced nuclear power systems are considered.


Continued innovation in all renewable energy forms and energy storage. Carbon capture successfully demonstrated.


Growth in the early years remains slow, with a pickup in the middle years, followed by solid growth in the latter years. New industries and strength in traditional industries of mining and commodities spur job growth. Clearer regulatory policy sending sound signals for investment.


Policy changes in support of increasing renewable portfolio standards and caps on carbon emissions.


Policy changes to support national renewable portfolio standards and building of energy infrastructure on federal lands with adequate environmental protections.

Changes in social values related to energy issues

Voters express strong preferences for environmental sustainability. Consumers become accustomed to more information and choices in their energy services usage.


Continued support for sustainable environmental development and stewardship of natural resources.

Shifts in national & global financial Eventual stabilization of financial markets following based on wiser economic policy


WECC Scenarios


markets and growth, which reduces deficit spending. U.S. and global financial markets return to accommodative credit growth patterns.


Shale gas development regulated. Renewable energy costs become more competitive with fossil fuel-fired energy.

Scenario Two: Form of Power5 Description Direction of Change

TBD by Model Results

Central Station Coal/CCS Large-scale coal-fired power generation in the large megawatt scale needing transmission connections/with clean carbon sequestration.

+increasing, but with CCS only


~same as historical levels, competing with renewables

Central Station Solar Large-scale solar power generation at the megawatt scale needing transmission connections

+increasing with technology breakthroughs

Central Station Wind Large-scale wind-powered generation in the megawatt scale needing transmission

+increasing with economic growth and new technology


+ increasing, ++ significant increases, - decreasing, --significant decreases, and ~ no significant change from historical levels.


WECC Scenarios

Scenario Two: Form of Power Description Direction of Change

TBD by Model Results

connections

Central Station Nuclear Large-scale nuclear-powered generation needing transmission connections

--fast decline due to clean alternatives

Geothermal Power Central station geothermal needing transmission connections

+increasing with new technology


Continuation or expansion of hydro power generation at existing plants needing transmission connections

~same as historical levels

Distributed Solar Small scale (generally roof top photovoltaic systems) that are located at the site of consumption

++increasing with new technology and economic growth

Distributed Energy Efficiency Multiple forms of investment in capital stock which leads to reduced energy consumption or which support load management


Distributed Gas Small-scale natural gas-fired generation serving loads in a local area which may or may not require distribution


Distributed Power Storage Use of local sources of electric energy storage from stationary or mobile sources


Large Scale Central Storage Using a range of technologies and needing transmission connections

+increasing with new technology


WECC Scenarios

Scenario Two – Overview of Modeling ParametersThe scenario narrative above is a largely qualitative description of a potential world for the WECC region over the next 20 years. As part of the TEPPC planning objectives the scenarios are also to be used to generate alternative transmission plans through modeling study cases with the Study Case Development Tool and the Network Expansion Model. During 2012 a team from the SPSG created quantitative modeling inputs to represent the scenarios for use in the Long-Term Planning Tool (LTPT). Those quantitative representations vary by scenario and the full detail of this work will be presented to WECC stakeholders during the first quarter of 2013 by WECC staff. Shown below are some of the key distinguishing model parameters for Scenario Two shown against the Reference Case parameters.

Input Parameters Units 2032Reference Value Scenario 2

Fuel & Carbon Costs


Coal $/MMBtu $1.62 $1.62

Carbon $/ton $37.11 $100.00


Geothermal % below 2012 cost 0% 10%

IGCC w/ CCS % below 2012 cost 0% 40%

Solar PV % below 2012 cost 31% 55%

Solar Thermal % below 2012 cost 25% 45%

Wind % below 2012 cost 8% 17%

Net Energy for Load

Load GWh 1,163,526 1,210,159


WECC Scenarios


Policy-Driven Load Reductions GWh 0 -250,171

Policy-Driven Electrification GWh 0 +160,000


Implied Growth Rate, Unadjusted Load %/yr 1.5% 1.9%

Implied Growth Rate, Adjusted Load %/yr 1.5% 1.1%


Load MW 198,715 206,685

Policy-Driven Load Reductions MW -4,952 -50,365

Policy-Driven Electrification MW 0 +18,265


Implied Growth Rate, Unadjusted Load %/yr 1.4% 1.8%



Renewable Goals



Current state policies, increased

by 50%

Federal RPS % of Load Energy none 15% minimum RPS

In-state RPS Requirement % of RPS requirement

Current in-state preferences applied to RPS requirements

No preferences for in-state resources


WECC Scenarios

Scenario Two - Policy ThemesThe chart below indicates how policy areas might influence the context in which energy related decisions are to be made within scenario two. The indicators on the charts will also be used to indicate changes from the common case assumptions, which will be the basis for WECC quantitative modeling. The common case assumptions should be thought of as a world, which naturally extrapolates from current conditions with no extraordinary changes.


Policy

Categories

Scenario 2:

Focus on Clean Energy Notes

Policy

Theme

Deep, binding GHG reduction targets in

response

to int’l treaty.

+ means:


++ more aggressive reduction targets

Economic

Policies

+ pro-growth policies


+ more investment support


+ more favorable to renewables


+ more favorable to investment and coordinated operations


+ more support

Transportation Policies

++ more support for alt. fuel vehicles and transport. choices


++ more support for demand-side investments

Energy Security/ 0 more support for domestic


WECC Scenarios

Policy

Categories

Scenario 2:

Focus on Clean Energy Notes

Independence Policies

resources

Environmental/

Cultural Policies

0 more protection of environmental/cultural resources

Consumer Issues – more restrictions on cost recovery

Fuel – – more support for enhanced production


WECC Scenarios

Scenario Three: Focus on Short-Term Consumer CostsNarrow and Slow Economic Growth in the WECC region with Stagnating Standards of Living/Evolutionary Changes in Electric Supply and Distribution Technology

This is a world in which the failure to regulate the financial sector coupled with inadequate policy choices exacerbate the detrimental impacts of the 2008-2009 trifecta of a credit crisis, the burst housing bubble, and massive government deficits. Economic growth in the United States, including the Western region, is restrained for two decades. Similar to the long-term doldrums, which hit the Japanese economy starting in the 1990s, a large overhang of debt constrains both lending in the broader economy and government investment initiatives to spur growth. Increases in taxes, failure to invest in the future and worsening wealth disparities also play a role in slowing growth. Societal values are shaken by a loss of confidence in financial institutions and in the regulation of these institutions. Even as values like protection of natural resources remain, they are balanced against economic costs in times when scarcity is felt in society.

States hit particularly hard by the housing crisis in the Western region are very slow to recover as they dig out of years of real estate overcapacity. Unemployment remains above historical levels, keeping consumer spending on a slow growth trajectory. Within the electricity sector, the slower economic growth discourages power companies in all sectors from taking large risks and causes most companies to be cautious when investing in and implementing new technologies and continues delays in transmission investment.

Those technologies that are low risk, proven, and assured of cost recovery proceed at a steady pace. Low natural gas prices encourage the continued use of traditional power generation technologies in concert with improving renewable technologies that meet portfolio standards required by legislators and regulators. Expansion of transmission systems occurs mostly within states as states focus on self-sufficiency and minimal voluntary power exchanges occurs to meet system reliability.

Key Scenario Metrics in 2032:

Natural Gas Price = 2032 Reference Case value: $6.58

Cost of Carbon = $0.00





WECC Scenarios

Beginning Years: 2013-2017/The Doldrums Don’t End The big events and issues shaping the electric power sector in the WECC region in these years can be summarized in four key areas: (1) The impact of and recovery from the 2008-2009 credit crunch and follow-on recession; (2) A growing concern among voters and their representatives about both the short-and-long-term effects of climate change; (3) A rapidly emerging concern about the long-term availability and usage of freshwater; (4) The growing investment in renewable energy technologies to meet renewable portfolio standards (RPS) and (5) Assessing how implementation of FERC Order 1000 might play out

All together these five issues make investor-owned utility managers nervous about their future growth opportunities (long-term demand growth, and where and how to invest in new resources). Activists and advocates for protection of the environment see an ongoing need to lobby for balanced financial and regulatory support to sustain and accelerate investment in renewable and clean technologies.

Legislators and regulators are being pushed from two sides: (1) How to continue progress toward a cleaner and more sustainable power system; and (2) How to mitigate rate impacts for consumers and industry and prevent slowing economic growth and job creation. As the future unfolds in this world, low levels of economic growth and a lack of paradigm-changing technological innovation do not provide much wiggle room to share the benefits normally available with a more productive economy. Over the longer term societal values will lean toward protecting and sustaining natural resources and absorbing some costs in order to get the benefits. RPS requirements are maintained in the power industry, but not increased, as environmental concerns are tempered in light of ongoing economic difficulties.

A strong signal of the slow pace at which economic growth recovers in the WECC region emerges from assessments of the recovery in the hardest-hit housing markets. In California, Arizona, and Nevada, large-scale overinvestment in housing leads to significant price declines in home values. Unemployment in those states remains several points above the national average, hovering around the +10% range. Immigration into the region continues to decline. In light of declining incomes, consumers must retrench, rebuild savings, and focus on “de-leveraging,” much as U.S banks had done. Businesses in many areas of the region cut back as their sales remain stagnant.

There’s a general sense of cautiousness about long-term investments as the economic uncertainty persists. Electricity demand growth is flat or barely inching upwards across the region after steep declines during the deepest part of the recession. States view energy policy as a tool for stimulating their economies and thus pursue their energy resources with the goal of facilitating job growth. This pursuit stimulates competition among the states and a preference for in-state self-sufficiency, and thus many of these growth policies prove ineffective in the long run.

Despite the dismal economic conditions, activity stirs in the power sector in two key areas: (1) A limited roll out of smart grid technologies at both the transmission and distribution levels of the industry; and (2) The steady expansion in cost competitive distributed solar power systems and wind energy farms. Both regulatory mandates and tax incentives encourage these two



WECC Scenarios

developments. Each one also provides real value in meeting demands for a cleaner and more efficient (and intelligent) power system. Benefits are real as air quality improves in some areas and consumers begin to understand how to consume energy more intelligently to save money.

The expanding availability of low-cost natural gas driven by new drilling technology continues (see Figure 3.1 below). Though there is ongoing apprehension that natural gas fracking impacts are not completely understood and that natural gas remains a producer of greenhouse gases when used in power generation, it is much cleaner and has a smaller carbon footprint than coal. In addition, the current economics encourage use of more gas-fired generation to replace coal-fired plants. EPA regulations dealing with the cleanup of coal-fired plant emissions prompt owners of those plants to consider early retirement and reinvestment in natural gas plants. Though such big investments don’t occur instantly, the emerging trend could lead to a significant shift in the fossil fuel mix in the power system over the long term. FERC rulings on cost allocations in the transmission sector also point toward more competition and lower costs. Certain states, like Montana, because of their access to low-cost natural gas, do become manufacturing hubs for energy-intensive industries.

Figure 3.1: Long Term Prospects for Natural Gas with Fracking Technology”

“Special Future Energy Issue: Natural Gas,” Popular Science, July, 2011:

With advances in a drilling technique called hydraulic fracturing, or “fracking,” companies can now profitably extract gas from previously hard-to-reach shale formations. Worldwide gas reserves of shale gas currently stand at 6,662 trillion cubic feet, the energy equivalent of 827 billion barrels of oil (about 10 times annual global consumption). And that doesn’t include the gas that is routinely discovered alongside oil in oil fields and that is sure to be found in some of those yet-to-be-explored deep water basins.

Gas is so plentiful that, in energy-equivalent terms, its price is a quarter that of oil. A gas-powered future could still have some high external costs, though. Fracking can be extremely hazardous to the local environment. The method uses high-pressure fluids to break open deep formation in which gas is trapped, and these fluids often contain toxins that might contaminate ground water supplies.

As rate increases are kept purposely low and with limited ability to innovate, utilities strive to use the grid more efficiently through low-cost operational enhancements. The cheaper the solution the better it is for utilities that are focused on short-term costs by their regulators. Coupled with more stringent reliability standards, utilities choose to extend maintenance cycles. Despite initial resistance from consumer-owned utilities, the mounting cost pressures associated with reliability compliance requirements point toward further grid coordination and consolidation of system management practices.

Expanding availability, managing costs, and assuring reliability are the touchstones of power system management, despite the desires of some activists to add to these goals in order to encourage the movement to a cleaner, and in their view, more sustainable power system.





WECC Scenarios

Shrinking tax revenues and the possibility of higher costs to consumers and businesses during slow economic times, make some legislators and regulators nervous. However, the majority of voters consistently support long-term preferences for the conservation and protection of the natural environment. Cleaner air, in particular, retains high levels of public support even if somewhat higher costs are required.

Power company managers and investors in power infrastructure seem resigned to a mode of “back to basics” and getting more use out of existing assets. Managers prefer to defer investment, taking a wait-and-see mode due to the economic conditions. They want to avoid a negative downward spiral that could be caused by higher costs from investment and shrinking demand growth. They prefer to make smart and relatively small investments that allow flexibility in balancing and trading power.

Wildly unpredictable oil prices due to tensions in the Middle East make conditions for economic recovery difficult to forecast. Pending political decisions regarding the U.S. federal deficit, particularly those dealing with long-term debt reduction and tax policy, make for an uncertain situation. Financial pressures encourage more mergers and consolidation among renewable energy developers. It’s unclear when either higher growth in power demand will return or conditions will ripen for further investment, thus arguing for reducing financial risks. Moderate to low gas prices promote real competition for the expansion of renewables despite portfolio standards, which can be lowered (as done in New Jersey in 2012 with the approval of new gas generation in that state). Small-scale and on-site options for energy efficiency, whether in lighting systems, load management, or improved equipment, also shave tenths of a point off of long-term energy demand growth.

Middle Years: 2018-2022/Struggling to Get on TrackDuring this period, with the continued drag on the economy coming from an overhang of debt and contractions in government spending, growth in energy demand goes completely flat in the WECC region. This restrains investment across the energy sector and leads to consolidation and contraction in the clean energy sector. Some states review their RPS standards and reduce them going forward while accommodating past investments. Power systems in the WECC region don’t go brown, but the pace of greening is dramatically slowed. Fossil fuel developments, especially those that support export markets and job creation, are given broad support. Policy makers are unclear on their policy priorities as a result of the long-term evolution of the power system. Policy seems to be going slowly in both directions—address climate concerns when affordable, but develop fossil fuels where profitable.

Electric power providers are getting one consistent message from their customers—cheaper is better. Any new bells and whistles had better pay off quickly and easily; otherwise they are not interested. Companies slow their investment in smart-grid applications, especially as straightforward and easy-to-use applications are not forthcoming. The integration of renewable energy technology is also being done with cost factors in mind. This slows development in some areas as agreements to share the full-systems cost slow regulatory approvals. While this is occurring, utilities extend the lives of existing facilities as a least-cost option. They are comforted


WECC Scenarios

by national policies that move away from pricing carbon and do not more heavily regulate greenhouse gas emissions. Policies put in place during the earlier decade are allowed to stand, but are not added to or aggressively enforced.

The dominant feature defining power markets in the WECC region continues to be stagnant economic growth. The underlying factors of a slow housing market, state government budgets in the red, and significantly reduced federal spending continue in this period. High unemployment restrains consumer spending. Uneven improvements in living standards across the region persist, as purchases of big-ticket items for the home remain especially low. Pockets of extreme poverty emerge in the U.S. and Canada, triggering programs to provide low-cost energy, water and food for the poor. Adverse changes in hydro conditions increase the risks of seasonal energy shortages as well as price shocks.

Any real progress on reducing carbon emissions happens as a result of more efficient and less carbon-intensive power systems coming online. L ow-cost natural gas is playing an important competitive role with renewables and serving to put a check on rising power prices. There’s also increased cooperation and coordination between the natural gas industry and the electricity transmission sector on both planning and operations. Regulators and politicians remain sensitive to keeping near-term energy price increases at a moderate level so as not to worsen economic conditions.

Several states and provinces in the WECC region now show balanced budgets, though with significantly reduced overall spending. Some states also experience slow, but moderately improving, job growth; especially those with industries focused on mining and energy development for exporting power within the region. None of this growth, however, echoes the employment boom seen between the late 1990s and early 2000s. Much of it is driven by various types of state support in the energy sector.

Investment capital remains difficult to secure because of fluctuating interest rates (especially during some years with spikes in inflation), shrinking federal loan supports, or the perceived credit quality of some investments. Companies defer capital investments until the last possible moment when conditions assure cost recovery. Since growth in overall power demand is limited, the pressure to merge and consolidate some parts of the power industry persists.

A limited source of new investment results from the retirement of the very-oldest and most-polluting coal-fired plants that cannot cost-effectively meet new air quality and emission standards. Often, regulators seeking to achieve policy goals approve these investments in new sources of supply. There is hope these investments will provide a stimulus to the economy. Resource planners, however, look at all options to replace that power including new local or central station generation and energy efficiency, but what they primarily desire is assured cost recovery. Other issues like water (with intermittent droughts in the region) and land use also affect those decisions. Advocates in those areas remain vigilant in monitoring regulatory decisions.



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WECC Scenarios

Homeowners and small businesses begin to see a small light at the end of the tunnel by 2023. Household debt loads decline and federal spending increases on a limited basis. A general belief among consumers that there are ways in which “having less can mean having more” emerges. Less stuff might equal more personal time. Less personal debt coupled with fewer credit cards may mean more personal and family financial wellbeing. Less energy use may mean stable energy bills. Less income for some households means an inadequate diet as well as an increase in long-term illness. Despite the harsh consequences for some, the “less can be more” philosophy does find an expression in local and national voting patterns as some people voice a pronounced preference to cut federal and state spending and to “live within our means.” This ethic serves to constrain overall economic growth.

Final Years: 2023-2033/Same as it Ever WasThese ten years might be the most historically lackluster for the power industry in the WECC region. Very little seems significantly different or unrecognizable from what existed a decade ago. Things seem to be just “rolling along.” This can happen when economic growth rates range between 1% and 2% and are coupled with sufficient capacity to meet that level of growth without significant expansion. By 2032, the electric power business remains in standard patterns of business owing transmission, distribution and generation. Utility managers are operating fairly low-risk businesses if they control costs. Grid optimization drives transmission decisions. Centralized decision making about the grid becomes the industry standard. Coordinated operations become business as usual as there is less overall balkanization within the grid.

Global financial markets remain dangerous for power companies seeking investment capital as interconnected, sophisticated, and fast-trading capital markets appear difficult to navigate. Country-level banking crises continue since international standards remain elusive and largely unenforceable. Derivative-based instruments make financial markets appear unstable and opaque despite attempts by federal regulators to prevent abuse. Stable and coordinated economic growth in the global economy exists for short periods, though there is little continuity.

Because of both reliability requirements and compliance concerns, utilities must ensure that transmission is not underutilized. Generally speaking, there’s now more situational awareness within the grid. For regulators, a persistent fear of a cyber attack on the grid encourages focused public investment in technologies that enhance this grid knowledge. There’s also an increased adoption of load-shifting and demand response enabled by the smart grid and driven by the integration of renewables. Utilities are pushed to increase coordination and centralize management of the power grid. Eventually, this leads to the voluntary formation of an Energy Imbalance Market.

There are now fewer major players in the traditional electric power sector. Large areas of the grid have been consolidated large areas via mergers. Large investment holding companies also play a big role as they can manage risk across large portfolios. Public power companies remain, but, in many cases, have merged into regional-scale organizations focused on reducing costs. Foreign owners hold some renewable power companies through significant equity investments. None of this matters much to the average consumer since they view the industry as rather


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WECC Scenarios

unglamorous and staid. Unit prices for power are higher, but usage, in most instances, remains either lower or manageable and is of little concern to most consumers.

Power prices continue in a stable zone with small but predictable increases, but the focus on short-term costs has run its course. Deferred maintenance and failure to invest in infrastructure that would have improved long-term cost reduction opportunities now come to a head. Consumers face the situation of accepting increased bills to finance long-term investment or permanently damaging U.S. competitiveness in the world market.

The off-grid or informal power sector offers some interesting, though uncomplicated, lessons. Distributed generation models shift risks and slowly increase customer participation. These models consist of using proven and reliable distributed generation systems in isolated grids that have well-engineered back-up systems. DG users are positioned in activities—small office parks and vacation properties—where short-term outages do not have catastrophic impacts. DG systems now compete on a cost basis with grid-connected power.

Fossil fuel use in the energy sector, including electric power and transportation, is proportionately lower than two decades earlier. The growing usage of hybrid-electric vehicles in the automotive market leads to a fall in gasoline demand. Legislators continue to use energy policy as a means of stimulating state economies. They mandate energy efficiency measures and demand response.

Coal-fired generation has shrunk to a smaller share of U.S. power generation, especially in the WECC region, as natural gas and renewables enlarge their market shares. The more noticeable capital investments in the industry are in the few large power systems (some wind, some natural gas, and some solar-powered) replacing retired coal plants. In many cases, the plants have been built on the old coal plant sites to make use of existing transmission connections.

With the stability of operations in the power sector, state leaders call for a pullback of federal regulation to allow states to manage their power systems illustrate the emergent belief that there can be regional cooperation without a federal role. State regulators continue to balance cost versus reliability as utilities desire the most efficient ways to meet service requirements. Only those stakeholders suggesting a nationalized power grid see the need for a substantial and continuing federal role. Increased coordination among balancing authorities is starting to happen.

During these years American society is in the midst of retooling and reinvesting in its people resources. The failure to invest during the previous decade coupled with the deferral of essential maintenance can no longer be ignored. Significant investment is needed to keep the West competitive. Long-term high unemployment is on the decline as local and national government policies support re-educating people for the jobs of the future. The value of taking personal responsibility for one's life and the environment shared by all is influencing policies in many areas. Local solutions to many problems are highly valued.

Public pressure on the power sector continues to come from advocates and activists concerned about the long-term impacts of climate change. The U.S. remains a leading global emitter of




WECC Scenarios

greenhouse gases due to industry and the continued use of natural gas in the power generation sector. A much larger biofuels sector faces scrutiny as full life-cycle analyses start to question the sector’s purported carbon neutrality and overall impact on water usage.

Investors in the remaining coal-fired and gas-fired plants consistently highlight the low cost of fossil fuel generation as well as the use of the best available technologies that result in less air pollution (see Figure 3.2 below on long term progress in making coal less polluting). They also point out that lower power costs support economic growth and help the U.S. and Canada maintain energy-intensive industries like automobile manufacturing, which is returning to North America from BRIC6 countries because of rising energy costs globally.

Figure 3.2: “Defying the Odds: Virginia Brings a New Coal-Fired Plant Online”

Source: “Defying the Odds: Virginia Brings a New Coal-Fired Plant Online,”

Public Utilities Fortnightly, December 2012

As 2032 comes to a close and the new decade officially begins to take shape, there are four pressing questions facing WECC energy markets in this world:

1.) What’s the right balance between reliability and cost?

2.) How much longer can concerns about cost and reliability be more important than concerns about climate change?

3.) When and how quickly should the U.S. retire natural gas plants that are now the largest emitters of greenhouse gases in the power sectors (having now equaled or surpassed the declining coal market)?

4.) What kinds of generation should be built to support the next build out of the power system? Are carbon sequestration or other technologies mature and reliable enough to address climate change?

New scenarios are needed….

6 Brazil, Russia, India and China



WECC Scenarios

Scenario Three - Overview by Key Driver



Combination of high unemployment and decline in incomes means that electricity demand remains stagnant over the 20-year period.


Coal-fired plants phased out over the duration of the scenario with natural gas taking its place. A balanced, portfolio approach to energy supply takes hold.


Smart grid technology developed in order to support industry goals of managing costs and assuring reliability.


WECC states and provinces suffer from high unemployment and decline in incomes. Most still feeling the long-terms effects of the credit crunch and the housing crisis. Increased pockets of poverty.

Changes in the regulation of lectric power systems in the WECC region

With reductions in the overall electricity demand, regulatory bodies take a hands-off approach to the power industry. Tax breaks and financial incentives for renewables eliminated due to maturation of the sector.


Both FERC and EPA develop policies that encourage the industry to transition from coal to natural gas and other renewables.


Political unrest in the Middle East drives public’s desire to reduce exposure to Middle Eastern oil and find other, more secure, sources of power.


Public pressure on the power industry forces companies to deal with carbon emissions in a pro-active manner. With little capital available, companies must use low-cost efficiencies to reduce emissions from coal-fired plants.

Shifts in national & global financial Credit at a premium as small and mid-sized enterprises cannot access capital through the


WECC Scenarios

markets banks. Highly volatile financial and banking sectors across the globe.


By 2031, fossil fuel usage much lower. Increase in the number of electric vehicles means decrease in gas usage. Coal prices decline due to plant retirements. Lowered natural gas prices spur increased use.


WECC Scenarios

Scenario Three: Form of Power

Description Direction of Change

Central Station Coal/CCS Large-scale coal-fired power generation in the large megawatt scale needing transmission connections/with clean carbon sequestration.

~no change from historic levels due to economic conditions


++increasing as cheapest source of power

Central Station

Solar


-decreasing due to lack of new technology and slow economy

Central Station

Wind


~maintains relative position

Central Station

Nuclear

Large-scale nuclear-powered generation needing transmission connections ~maintains relative position with extensions

Geothermal

Power

Central station geothermal needing transmission connections ~maintains relative position


Continuation or expansion of hydro power generation at existing plants needing transmission connections

~maintains relative position with extensions

Distributed Solar Small scale (generally roof-top photovoltaic systems) that are located at the site of consumption

+increases due to local initiatives

Distributed

Energy Efficiency


+increases due to local initiatives

Distributed Small-scale natural gas-fired generation serving loads in a local area which may +increases due to local initiatives


WECC Scenarios

Scenario Three: Form of Power

Description Direction of Change

Gas or may not require distribution

Distributed

Power Storage

Use of local sources of electric energy storage from stationary or mobile sources +increases due to local initiatives

Large Scale

Central Storage

Using a range of technologies and needing transmission connections ~relatively same with no innovation


WECC Scenarios

Scenario Three – Overview of Modeling ParametersThe scenario narrative above is a largely qualitative description of a potential world for the WECC region over the next 20 years. As part of the TEPPC planning objectives the scenarios are also to be used to generate alternative transmission plans through modeling study cases with the Study Case Development Tool and the Network Expansion Model. During 2012 a team from the SPSG created quantitative modeling inputs to represent the scenarios for use in the Long-Term Planning Tool (LTPT). Those quantitative representations vary by scenario and the full detail of this work will be presented to WECC stakeholders during the first quarter of 2013 by WECC staff. Shown below are some of the key distinguishing model parameters for Scenario Three shown against the Reference Case parameters.


Fuel & Carbon Costs


Coal $/MMBtu $1.62 $1.62

Carbon $/ton $37.11 $0.00


Geothermal% below 2012

cost0% 0%

IGCC w/ CCS% below 2012

cost0% 0%

Solar PV% below 2012

cost31% 15%

Solar Thermal% below 2012

cost25% 12%

Wind% below 2012

cost8% 0%

Net Energy for Load

Load GWh 1,163,526 1,118,518


WECC Scenarios


Policy-Driven Load Reductions GWh 0 0

Policy-Driven Electrification GWh 0 0



%/yr 1.5% 1.1%


%/yr 1.5% 1.1%


Load MW 198,715 191,023

Policy-Driven Load Reductions MW -4,952 -4,952

Policy-Driven Electrification MW 0 0



%/yr 1.4% 1.0%


%/yr 1.2% 0.8%


Renewable Goals

State RPS% of Load

EnergyCurrent state

policies

Current state policies, reduced by

50%

Federal RPS % of Load none none


WECC Scenarios


Energy

In-state RPS Requirement % of RPS requirement

Current in-state preferences applied

to RPS requirements

Current in-state preferences applied

to RPS requirements


WECC Scenarios

Scenario Three – Policy ThemesThe chart below indicates how policy areas might influence the context in which energy related decisions are to be made within scenario three. The indicators on the charts will also be used to indicate changes from the common case assumptions, which will be the basis for WECC quantitative modeling. The common case assumptions should be thought of as a world, which naturally extrapolates from current conditions with no extraordinary changes.


Policy

Categories

Scenario 3:

Focus on Short-Term Consumer Costs

Notes

Policy

Theme

Slow growth leads to hard choices about policy goals.

+ means:


– more aggressive reduction targets

Economic

Policies

0 pro-growth policies


0 more investment support


– more favorable to renewables


0 more favorable to investment and coordinated operations


– more support

Transportation

Policies

– more support for alt. fuel vehicles and transport.

choices


0 more support for demand-side investments

Energy Security/ 0 more support for domestic


WECC Scenarios

Policy

Categories

Scenario 3:


Notes

Independence Policies

resources

Environmental/

Cultural Policies

– more protection of environmental/cultural

resources

Consumer Issues + more restrictions on cost recovery

Fuel + more support for enhanced production


WECC Scenarios

Scenario Four: Focus on Long-Term Societal Costs

Narrow and Slow Economic Growth in the WECC region with Stagnating Standards of Living/Paradigm Changes in Electric Supply and Distribution Technology

Despite uneven economic growth across the western Unites States and Canada, this world experiences a fundamental shift in the usage and generation of electricity. Economic growth is slowed by constraints on government spending and persistent problems in the capital markets. Sufficient government support for developing new energy technologies encourages further private investment that lead to significant breakthroughs. Technological advances in areas indirectly related to electric energy, such as information and communications, material science, robotics nevertheless feed change in the power industry. The new technology picks up momentum because of innovative features and lower costs, which drive growing rates of adoption. Energy Efficiency as well as Demand-Side Management help to drive the shifts seen in this world. States and companies in the WECC region play a leading role in this transformation demonstrating the effectiveness of the new applications. Support for this transition also comes from voters consistently expressing values in support of a cleaner and healthier environment.

Consumers are willing to pay for cleaner and more environmentally sustainable products because they see the benefits in improved health and lifestyles, which don’t require exceptionally higher spending as many new technologies are very cost competitive and highly efficient. The lagging effects from the 2008-2009 credit crises and housing bubble, higher and more volatile oil prices, and some poor national policy choices plague the U.S and the global economy, allowing only short periods of sporadic growth. Despite these economic troubles, the transformation of the U.S. energy industry, through the leadership of western states, becomes a bright spot for the nation over the ensuing two decades.

Key Scenario Metrics in 2032:

Natural Gas Price = $5.00

Cost of Carbon = $75.00




WECC Scenarios


Beginning Years: 2013-2017/The Rise of Smart EnergyThe big events and issues shaping the electric power sector in the WECC region in early-2013 happen in four key areas: (1) The impact of and recovery from the 2008-2009 credit crunch and follow-on recession; (2) A growing concern among voters and their representatives about both the short-term and long-term effects of climate change; (3) A rapidly emerging concern about the long-term availability and usage of freshwater because of serious and sustained drought conditions; and (4) The expanding investment in renewable energy technologies to meet renewable portfolio standards (RPS)and; (5) Assessing how the implementation of FERC Order 1000 may play out.

The global economy is slowly recovering from the recession (or even depression, some say) that began in 2008. Debt problems in the United States and Japan, a slowdown in China, and the ongoing Eurozone crisis remain unresolved and converge in these early years. There is no reason to hope for or expect a short-term turnaround as policy confusion and conflicts reign . Investors are risk averse and postpone new hires in the early years, and the recession settles deeper into the American psyche as about 15% of Americans live in sustained poverty by the mid-to-late years of this decade.

At the same time, Mother Nature seems as relentless as the economic downturn. What Hurricane Katrina started in 2005 and Hurricane Sandy repeated in 2012 gains momentum in 2013 and beyond, as North Americans struggle through ever more devastating hurricanes, floods, and droughts. Desperation turns to cries for action. Movements for the protection of the environment expand in strength and diversity, gradually forcing the federal government to accelerate investment in renewable and clean technologies. This provides policy support for increased R&D investment from government which in turn encourages private investment.

Investor-owned utility managers are nervous about their future opportunities—long-term demand growth and where and how to invest in new assets. Legislators and regulators encounter a related and substantial dilemma: how to progress toward a cleaner and more sustainable power system without concurrently overburdening consumers and industry. Potential harm to economic growth and job creation makes this challenge complex.

A smart choice for the entire nation is investment that focuses on renewables and carbon-free solutions. It stimulates economic development and addresses growing concerns about climate change and, relatedly, energy independence. Even in a depressed economy, investment and policy that leans toward renewable and carbon-free energy solutions seems prudent and hopeful.




WECC Scenarios

Most politicians, be they federal, state, or municipal, seek out opportunities to publicize their support for policies that they believe their constituents view as beneficial to the public good. This is especially true when the proposed policy promises both well-paying jobs and viable business opportunities. Sometimes these policies, however well intentioned, don’t lead to the predicted outcomes despite significant upfront public expenditures. Over the long term, unintended consequences lead to budget and cost overruns that often alienate political constituencies and restrain further risky investments.

On the other hand, federal investment combined with private resources creates initiatives like the U.S. Department of Defense’s funding of the initial phases of the “networked computer” experiment in the 1960s. This effort eventually led to what the public would come to know as the Internet. There were comparable periods of slow economic growth in that period as well, though not enough to deter investment. This pattern reasserts itself in the energy sector during this period.

Politicians push public policies funding research and development that advance renewable energy solutions as well as catalyze both job creation and economic expansion. Energy saving thermostats, appliances, lighting, and “apps” that allow consumers to monitor their energy usage and savings with smart and portable devices gain a small, but significant, foothold. Utilities follow suit, aggressively marketing tools and upgrades that promise future savings or risk mitigation for ratepayers. Early adopters think it trendy to know their household’s “Energy Efficiency Scorecard.” Elsewhere in the energy sector, there are advances in small modular nuclear technology in regions where nuclear energy is politically acceptable.

High and fluctuating oil prices harm economic growth and, in turn, provide a powerful political impetus for new energy policies—even though the public appetite for change usually wanes somewhat during periods of economic recession. Companies with sufficient private funding take financial risks in the energy and clean technology sectors. More often than not, the capital markets and consumer uptake reward their boldness. Smart grid and energy service companies deliver tools to lower and manage costs, resulting in decreased energy bills.

Through strategic investments in smart grid technologies and in concert with the expanding wind and solar sectors, large investor-owned utilities and other players lay the foundation for the emergence of a more technologically advanced power sector. Large-scale generation generally focuses on replacing carbon-intensive resources with carbon-free and renewable energy. Consumers also demand flexibility in both rates and services from state PUCs and utilities in order to accommodate and drive cost-effective distributed renewable energy innovations.

During these years, natural gas availability rises and prices decline as the energy market experiences a flood of new supply driven by improved drilling and fracturing technology. Energy industry veterans joke about being “present at the creation” of the “Birth of Natural Gas.” Some industry players warn of an emerging pattern of boom-and-bust cycles, which will adversely




WECC Scenarios

affect investors. Companies in the power generation business, however, argue forcefully for new investment to keep the cost of power low in order to spur long-term economic growth (See Figure 4.1 below on the possible long term supply of natural gas in the U.S). There is serious talk of building out domestic infrastructure to export domestic gas to Asian markets. Rural areas within the WECC region experience load growth because ongoing gas exploration efforts are increasingly supplied by electricity from the grid.

Figure 4.1: Shale Gas Technically Recoverable Resources and Cumulative Production

Source: “Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays,” U.S. EIA, July 2011

With a slow-growing economy constrained by both the aftershocks of the housing bust and high unemployment, new energy demand is not available to sustain profits and growth in the electric power industry. However, because of growing public and regulatory pressure to confront climate change and reduce carbon emissions, coal-fired generation is on an accelerated downward trajectory. The output of those plants must be replaced, providing a compelling case for increased investment by the electric power sector despite low economic growth. Only the most efficient and cleanest coal-fired plants or those whose owners can handle the costs of environmental upgrades can survive tighter national emissions regulations put forth by the EPA. Even during slow economic times, the political consensus sustains the demand to move toward a cleaner power sector—one that does not pollute the air or produce wastes that foul water.



WECC Scenarios

Severe weather-related events and smog-filled scorching summer days in major North American cities, though not conclusively tied to climate change, raise interest and concern about long-term resilience among a growing number of voters and citizens—including, but not limited to, those who care deeply about environmental issues. In some cases, severe storms wreak such havoc with aging energy infrastructure that politicians and utilities begin to explore significant investments and innovation—like burying lines to reduce exposure to severe weather—that will minimize repair costs and reduce power outages. Drought also exacerbates water shortages in the Colorado River System and in both Northern and Southern California. In many cases, state and provincial governments take the lead from the federal government to push for more innovation and cooperation across the industry. California and Colorado raise their RPS to 40%.

Coupled with the above factors and declines in coal-fired power, other drivers propel a shift in electric power generation. Information, communications, and sensor technologies expand aggressively into the power business, pointing the way toward new approaches to energy efficiency, load management, and cost reduction. Distributed power systems—many based on a variety of improving solar energy technologies—small-scale storage technology using advanced battery systems, and two-way communication demonstrate new possibilities for reliable electric service (see Figure 4.2 below for a view of investment activity in solar energy).

Figure 4.2: 2010 Annual Solar Megawatts Ranking by Utility Company

2010 Annual Solar Megawatts Ranking by Utility Company

Company Installed Megawatts of Solar Power

Pacific Gas & Electric 157.3

Florida Power & Light 87.2

Public Service Electric & Gas (NJ) 74.7

Southern California Edison 68.4

Xcel Energy (CO) 42.0

Tri-State G&T Co-op Assoc. (CO) 30.2

Arizona Public Service 29.9

San Diego Gas & Electric 27.1

Jersey Central Power & Light (NJ) 22.9

Duke Energy Carolinas (NC) 20.8



WECC Scenarios

Source: “The 2010 Solar Electric Power Association Ranking,” The Public Utilities Fortnightly, July 2011

Since the late 1980s, electricity industry researchers at places like the Electric Power Research Institute (EPRI) have experimented with smart grid technologies. Their research proves useful as it establishes a widely accepted understanding of the components of a smart-grid infrastructure. These components begin to combine to provide better service to end-users. Better service results from an increase in energy management options for all players in the industry structure working backwards and forward (see Figure 4.3 for a high level model of the many aspects of the emerging smart grid)).

An integrated vision for the industry includes demand-side management, energy efficiency, load management, price signaling, support for electric vehicles, variable-power generation, distributed systems, and storage. Utilities design new business models to replace revenues lost because of stagnant economic growth and the emergence of distributed generation and energy efficiency. Decoupling electricity supply from the full-range of energy services becomes more prominent across the West. A regional electricity market, facilitated by both technology and IT advances, lowers costs, increases renewables, and reduces carbon emissions.

Figure 4.3: High Level Smart Grids Domains


WECC Scenarios

Source: “Securing Tomorrow’s Grid Part 1,” Public Utilities Fortnightly, July 2011

States and provinces based in WECC undertake limited policy actions to spur economic growth. These actions often support emerging energy technologies that create new industries and well-paying jobs. Within the region, there are attempts to implement polices to limit carbon and greenhouse gas emissions via caps. Significant, if not widely followed, changes in federal regulations, such as requiring planning for variable electric resources, enable companies to develop new power storage and battery technologies.

Middle Years: 2018-2022/The Age of Self-Sufficiency A national policy shift occurs, one for which political and technological progressives had advocated: carbon-based taxes coupled with the elimination of tax subsidies for the oil industry. The tax revenue is funneled into substantial investments in both the smart grid and renewables technologies. Because of storage breakthroughs as well as efficient and reliable distributed power systems, micro grids emerge. Smart technology and operations enable the maximum use


WECC Scenarios

of existing infrastructure (grid and generation), the efficient integration of limited new assets with old assets, and the retrofitting of aging assets.

Gallup polling data identifies a majority of Americans unnerved by ongoing political instability in the Middle East. Geopolitical uncertainty leads to wildly fluctuating and sometimes abnormally high oil prices. In turn, this unpredictability threatens U.S. economic growth and drives public support for active disengagement from the region. News media coverage of the Middle East turmoil reinforces the notion that higher rates in the short term will lead to a sustainable and independent energy future in the long term.

As a way to achieve more energy independence, the U.S. doubles investments focused on electric system infrastructure. At the same time, annual increases in the federal defense budget are capped. Forced to do more with less, a number of U.S. military bases are completely off the grid by 2022. This military demonstration yields commercial applications that lead to innovations in technology and infrastructure. There’s now a greater reliance on modular, distributed resources that are low risk, have fast payback, and are situated in strategic, high-value locations.

Parallel to these developments, encouraging the growth of new power industry models becomes government policy. As a result, new utility business models and regulatory incentives gain momentum. The Energy Imbalance Market is increasingly operational and enables the integration of renewables while more efficiently utilizing gas. Some consumers invest in power systems providing an unprecedented level of self-sufficiency. These systems, which are often commercialized versions of military innovations, combine distributed generation, energy storage, advanced batteries emerging from the electric vehicle sector, information systems to enable energy efficiency and sophisticated load management, and other smart tools offered by emerging smaller players.

As more consumers become familiar with the possibilities and benefits of the changes described above, they now view energy efficiency and distributed generation as effective tools for lowering their energy costs. Public polls show a willingness to accept new rate structures necessary to accommodate the shift to energy efficiency and distributed generation as well as the entry of third party devices.

At the same time, ongoing extreme weather events focus more attention and investment on collaborative solutions. Maintaining infrastructure and support systems by means of climate-friendly, environmentally-efficiently actions take precedence. Utilities decide to bury both new and existing power lines in an effort to lower maintenance and repair costs. While hydro generation declines in parts of the U.S., increases in wind and solar power along with more gas generation balance the system.




WECC Scenarios

These many innovations accelerate policy changes centered on clean energy solutions. There’s now acceptance of a Clean Energy Standard. California increases the RPS to 50%, while Colorado also boosts the RPS to 50%. Among other states, debates center on implementing a carbon tax or a cap and trade system as a way to raise revenue. The U.S. signs an international climate change treaty and agrees to enact policies to reduce greenhouse gas emissions. U.S. leaders in both government and business support these policies because they realize that innovation in the energy sector creates new jobs and industries. For example, a market for Concentrated Solar Power (CSP) with molten salt storage emerges. It becomes cost competitive and helps to balance both wind and photovoltaic power.

With the Chinese economy rebounding, American and Chinese companies sign joint-venture agreements to sell products and services in both developed and developing nation. Companies headquartered in California, other western states, and Canada lead the way through related investments. The U.S. and those European nations that remain on a slow growth path because of their fiscal austerity measures compete for highly valued sources of economic vitality. Government efforts to reduce deficits force them to target spending in a strategic fashion to spur economic development.

Technological innovations in the energy supply and distribution parts of the electric power industry accelerate because of what is happening in industries like IT (software and data storage), materials, communications, manufacturing, and nanotechnology. Cell phone applications for remotely monitoring and controlling energy management systems in the home and at offices become more widely available. Consumers know how to manage their power consumption, and, in a growing number of cases, live with grid-independent power systems.

Smart grid system applications now penetrate the distribution system of utilities creating new options for further use of distributed generation and energy conservation. Smart appliances and space conditioning systems develop into industry standards. Analytic tools needed to plan and operate distributed generation also improve. Additionally, advancements in supercomputing and big data management lead to improved weather modeling and forecasting while providing cost-saving benefits. Overall electricity demand growth in the WECC region goes flat.

During this time, the warnings of a boom-and-bust cycle in the natural gas sector are validated, albeit in partial fashion. It’s not so much a lack of resource supply, but rather the rapidly rising costs due to stricter air and water quality requirements that hinder the sector’s expansion. Because of the enactment of state laws to protect air and water quality from shale gas development, a slowdown in exploration occurs. Many small independent exploration companies collapse and are bought up by the traditional large oil and gas companies at substantial discounts. This consolidation takes several years to rationalize the industry, close down poor performing projects, and stabilize prices. As this consolidation process evolves,




WECC Scenarios

greenhouse gas restrictions tighten, further restricting the use of natural gas and leading to further price declines.

Efforts to introduce natural gas into the transportation sector don’t really succeed because hybrid electric vehicles already use gasoline very efficiently. Drivers decide that the costs of switching from an electric hybrid to a natural gas vehicle are prohibitive. Natural gas-fired generation used for peaking purposes is the single best way that the fuel can serve the transportation market. Natural gas is the cleanest short-term alternative in the event that new base-load or peaking generation is needed. Some utilities seriously consider options for new gas-fired base-load generation as a replacement for nuclear plants close to retirement.

Natural gas does serve as a transition fuel in a specific circumstance: coal-fired generation is destined for a complete phase out in all but a few limited instances in the WECC region. The historical cost advantages of coal as a cheap and abundant fuel for generation disappear because of the high costs of reducing or capturing greenhouse gas emissions. Sequestering carbon emissions turns out to be far more technically difficult and expensive than had been expected.

Ending Years: 2023 to 2033/The Re-Optimization of Electric Power Business leaders and even some politicians think that the ongoing low and moderate levels of economic growth in the U.S. and other advanced nations must be part of the natural evolution of the global economy. Developing nations monopolize low-wage and low-skilled jobs through efficient means, so the U.S. must continue its transition to a more technologically-advanced economy needing less human labor overall.

This causes higher levels of unemployment as the U.S. education system lags behind other industrialized nations. Given the country’s large consumer-driven economy, higher levels of unemployment constrain long-term growth rates in the U.S. As a result, there are persistent cycles of high unemployment during which workers have to retool their skills. Large gaps in income and overall economic inequality grow over time as well.

Despite being stuck on a slow economic path, the U.S. continues to invest in transitioning the electric power infrastructure. Future hopes for U.S. economic growth are now pinned to high technology. Improvements in electricity transmission technologies lead to a national plan to both upgrade and rebuild parts of the nation’s transmission grid by incorporating more DC lines in combination with wireless information processing systems. This work is part of the full roll out of smart grid technology and the “informationalizing” of energy use.

The three legs of the electricity transmission stool are optimization, efficiency, and innovation. As these mature in the late years, electricity flows seamlessly across geographically diverse areas with costs allocated across all of society. Most power generation is now done close to load centers with the emphasis on photovoltaic solar and community generation. A robust grid


WECC Scenarios

continues to capture opportunities in markets across the U.S. The newly optimized power system is advanced, efficient, and information-intensive while the demand side is coupled with the deployment of distributed technology in load centers.

Political and business leaders agree that these innovations will support long-term economic and job growth. At the same time, environmental advocates continue to be concerned that both new transmission and large utility-scale generation have land-use issues and impact endangered species and these concerns persist even in the presence of a new energy business model. Siting new power lines must be done in an inclusive manner. Activists push for new regulations to address microclimate impacts of both wind and solar plants as dense installations make them more noticeable.

Climate change is now accepted as reality after a decade of extreme weather events. An effective national energy plan supports investment in a more robust grid needed to minimize weather-related outages. Coastal power plants are shuttered due to projected rises in sea level as well as storm concerns. Population shifts occur as states restrict housing development within certain coastal areas. Climate conditions, especially shifting levels of rainfall, impact hydroelectric conditions. In parts of WECC, debates center around abandoning some hydropower because of a lack of water in the hydrologic basins behind the dams. Ongoing drought leads to difficult tradeoffs for utilities: (1) Competition for water usage prevents CCS technology and nuclear from taking off; and (2) A lack of water slows wildcat natural gas development.

The continuing climate crisis encourages collaboration in the development of low-cost, environmentally acceptable carbon reduction solutions and private sector investments. Renewable energy deployment is tailored to the needs of specific regions—what works in California may not work in Wyoming. Pursuing a diversity of approaches is a key aspect of the process.

The solar and wind power sectors suffer directly because of a larger issue during these years—a logjam of electric supply technologies trying to find a place in a market of low-energy demand growth. Breakthroughs proceed ahead of the market’s ability to absorb them as new applications. Innovations occur on both the demand and supply side and so the rollout of many technological capabilities gets delayed. In some cases, good ideas collect dust on the shelf. Overall per capita electric energy consumption stays flat. Natural gas is being used for base load, balancing, and reliability.

Much of the controversy in the energy policy arena occurs at the local level where people must deal with both the pros and cons of a more distributed energy system. Energy-related issues find their way to the forefront of civic agendas in local elections. In these instances, concerns focus on siting distributed-generation facilities. Hydrogen-powered fuel cells become part of


WECC Scenarios

distributed generation systems along with more advanced solar panels. Reasonably priced home fuel cells become available.

Most traditional power utilities have evolved into different organizations over the past twenty years. Energy services, especially those related to information systems, constitute a large part of their businesses. In many cases, they provide services to power system networks owned by other companies. For only some of their customers do utilities have ultimate responsibility for reliability, as some types of customers become wholly self-sufficient. Back-up power, provided as a service in general, uses distributed power systems—advanced batteries, fuel cells and solar arrays—and not connections to the power grid.

The large conglomerate power companies maintain portfolios of assets including ownership of power plants, transmission lines, data management services, integration and portfolio management services, and manufacturing plants that build distributed power systems. Utilities with new business models become more responsive to consumers needing support for their distributed generation. Some companies diversify into the growing water management business, as water efficiency and purification become more closely related to energy use. These larger companies participate in regional planning processes and lobby for regulations that ease regional development to reduce the costs of new investments.

As 2032 comes to a close and the new decade begins to unfold, the four major issues in the WECC energy markets in this scenario are:

1.) How can new technologies sitting on the shelf be brought to market in profitable ways despite slow growth in energy demand? Is the likely retirement of some old power systems like nuclear power and hydro systems premature?

2.) What clean technology should be the choice for new base-load generation for the U.S.? Despite the now much cleaner and smarter power system in the U.S., the need for further reductions in greenhouse gas emissions remains in place. The remaining coal and gas-fired plants, as well as the increased size of the U.S. economy, still lead to higher emissions.

3.) How will utilities meet the steady need for upgrading the performance of an information-intensive energy industry?

4.) How can concentrations of market power in this scenario be prevented?



WECC Scenarios

Scenario Four - Overview by Key Driver



Stagnant growth rates keep demand low. Little to no sign of a quick turnaround in demand over the long term.


Regulatory pressure on shale-gas development leads to a slowdown in natural gas exploration. Coal remains on a retirement trajectory. Renewables viewed as viable alternative because of climate change impacts. Renewables now more cost-competitive with conventional resources.


Smart grid technology is widely commercialized as the industry develops an integrated vision, which includes demand-side energy, EE, load management, DR and variable-power generation.


Sustained, lower economic growth rates in North America, Europe, and Japan lead to a belief that structural unemployment will be permanent aspects of these economies.


U.S. and Canadian governments willing to fund renewables demonstrations in order to spur innovation.


Federal policymakers implement tax increases and eliminate subsidies for the oil industry. The resulting windfall in revenue becomes the catalyst for a sustained increase in federal funding for renewables research, development, and deployment.


Informed energy consumers expect power companies to empower them to manage their individual energy portfolios. Strong emphasis on conservation. Consumers willing to pay higher rates in return for lower overall bills.


The harmful effects of climate change lead the U.S. to sign onto an international climate change treaty. Serious public concern about the power industry’s impact on water quality.

Shifts in national & global The long-term effects of the housing bust and the credit crunch ensure that financial markets


WECC Scenarios


financial markets prefer to fund low-risk projects . Private capital makes limited investments in the power industry.


Coal and natural gas considered problematic due to emissions concerns and worries about shale-oil development. Carbon tax increases and higher energy bills enable the transition to renewables.


WECC Scenarios

Scenario Four - Overview of Generation PortfolioScenario Four: Form of Power Description Direction of Change

Central Station Coal/CCS Large-scale coal-fired power generation in the large megawatt scale needing transmission connections/with clean carbon sequestration or recycling

~ maintains long-term position with CCS technology

Central Station Gas Large-scale natural gas-fired generation in the large megawatt scale needing transmission connections.

+ increasing as cost competitive option

Central Station

Solar


- decreasing, unable to compete with other options

Central Station

Wind


+ increasing with technology innovations

Central Station

Nuclear

Large-scale nuclear-powered generation needing transmission connections

- decreasing as clean, cheaper options exist


WECC Scenarios

Geothermal Power Central station geothermal needing transmission connections

~ holds position

Hydro Power Expansion/Extension Decline in hydro power generation at as a result of ongoing droughts

~ holds position

Distributed Solar Small scale (generally roof top photovoltaic systems) that are located at the site of consumption

+ increasing with technology innovations and cost decreases

Distributed

Energy Efficiency



Distributed

Gas

Small-scale natural gas-fired generation serving loads in a local area which may or may not require distribution


Distributed

Power Storage

Use of local sources of electric energy storage from stationary or mobile sources


Large Scale

Central Storage

Using a range of technologies and needing transmission connections

+ increases with innovation


WECC Scenarios

Scenario Four – Overview of Modeling ParametersThe scenario narrative above is a largely qualitative description of a potential world for the WECC region over the next 20 years. As part of the TEPPC planning objectives the scenarios are also to be used to generate alternative transmission plans through modeling study cases with the Study Case Development Tool and the Network Expansion Model. During 2012 a team from the SPSG created quantitative modeling inputs to represent the scenarios for use in the Long-Term Planning Tool (LTPT). Those quantitative representations vary by scenario and the full detail of this work will be presented to WECC stakeholders during the first quarter of 2013 by WECC staff. Shown below are some of the key distinguishing model parameters for Scenario Four shown against the Reference Case parameters.7


Fuel & Carbon CostsNatural Gas $/MMBtu $6.58 $5.00Coal $/MMBtu $1.62 $1.62Carbon $/ton $37.11 $75.00Capital Cost Reductions

Geothermal % below 2012 cost

0% 0%

IGCC w/ CCS % below 2012 cost

0% 0%

Solar PV % below 2012 cost

31% 31%

Solar Thermal % below 2012 cost

25% 25%

Wind % below 2012 cost

8% 12%

Net Energy for LoadLoad GWh 1,163,526 1,118,518Policy-Driven Load Reductions GWh 0 -125,085

Policy-Driven Electrification GWh 0 +50,000


+ increasing, ++ significant increases, - decreasing, --significant decreases, and ~ no significant change from historical levels.


WECC Scenarios


WECC Net Energy for Load GWh 1,163,526 1,043,433Implied Growth Rate, Unadjusted Load %/yr 1.5% 1.1%


Coincident Peak DemandLoad MW 198,715 191,023Policy-Driven Load Reductions MW -4,952 -25,182

Policy-Driven Electrification MW 0 +5,708WECC Coincident Peak MW 193,763 171,548Implied Growth Rate, Unadjusted Load %/yr 1.4% 1.0%


LOAD NUMBERS SHOWN ARE DRAFT AND NEED TO BE REVIEWED ONCE INPUTS ARE FINALIZEDRenewable Goals



Current state policies, increased by 50%

Federal RPS % of Load Energy none 15% minimum

RPSIn-state RPS Requirement % of RPS

requirementCurrent in-state preferences applied to RPS requirements

Current in-state preferences applied to current policy RPS requirements; no preference for in-state resources to meet increase in RPS targets


WECC Scenarios

Scenario Four - Policy ThemesThe chart below indicates how policy areas might influence the context in which energy related decisions are to be made within scenario four. The indicators on the charts will also be used to indicate changes from the common case assumptions, which will be the basis for WECC quantitative modeling. The common case assumptions should be thought of as a world, which naturally extrapolates from current conditions with no extraordinary changes.

Key: ‘++’ = Most aggressive; ‘+’=aggressive; ‘-’= less aggressive; ‘– –’ = least aggressive; ‘0’ = neutral

Scenario 4: Focus on Long-Term Societal Costs

Policy

Categories Notes

Policy

Theme

“Low-hanging fruit” investment in clean,

domestic resources.

+ means:


+ more aggressive

reduction targets

Economic

Policies

0 pro-growth policies


0 more investment support


+ more favorable to renewables


+ more favorable to investment and coordinated operations


+ more support

Transportation

Policies

+ more support for alt. fuel vehicles and transport. choices


++ more support for

demand-side investments

Energy Security/Independence Policies

++ more support for

domestic resources

Environmental/ + more protection of


WECC Scenarios

Policy

Categories Notes

Cultural Policies

environmental/cultural resources

Consumer Issues 0 more restrictions

on cost recovery

Fuel ++ more support for

enhanced production


WECC Scenarios

Using the Scenarios for Long Term Thinking and Early IndicatorsThe draft scenarios are written as if the entire twenty-year period unfolds in one quadrant. Remaining in one quadrant was a necessary step for creating distinctly different worlds and as a way to provide clear alternatives to drive the transmission planning results. Since scenarios are tools for thinking and learning they can also be combined in imaginative ways.

Long-Term Use of the ScenariosThe WECC scenarios can be seen as “archetypes” or states of play for periods of time (generally shorter than 20 years). It is in this light that one can imagine pathways through the archetypal spaces over longer periods. Here are some suggestions from the pathways shown in Chart 4 below. We use directional designations for the four scenario quadrants: (1) Scenario One is the Northwest (NW) Quadrant; (2) Scenario Two is the Northeast (NE) Quadrant; (3) Scenario Three is the Southwest (SW) Quadrant; and (4) Scenario Four is the Southeast (SE) Quadrant.

Chart 4: Long-Term Movement


WECC Scenarios

From SW to NWHere we can imagine the U.S. and the WECC region emerging from the 2008-2010 recession and steadily returning to stable economic growth. If technology in the power industry evolves steadily (with no big breakthroughs), then it is possible for the WECC region to stay in this world for five to ten years. Supported by global economic growth, good demographics and effective economic policies, this world could even extend out for the majority of the 20 years. For transmission investment, this path would call for new transmission to tie in the new generation being built to meet growing demand.

From NW to NEMovement here would be caused by a ramp up in technological innovation in the power sector combined with investments across the industry to implement a new paradigm. These investments would contribute to sustaining economic growth. This could be a 10-year boom (like the 1990s) with have a soft landing that essentially characterizes a long period of time. For transmission investment, this path may indicate that interstate transmission may already be sufficient and that most of the action could be in the distribution system and in limited in-state transmission. The transmission added during the period in Scenario One might prove sufficient.

From NE back to NWThe movement back to the NW after a period in the NE could be plausible as the direct result of a period of implementing a new energy infrastructure that then becomes the norm. Technological innovation returns to a stable pattern following the changes put in place for a decade or less. The NW to NE and back to NW could happen over two decades. In this pathway, the transmission and distribution built during the earlier period may be sufficient for a long time. If distributed resources, energy efficiency and smart grid technologies are used to manage and meet demand and reliability, transmission assets may not be needed for a long time.

From SW to SEThis pattern might be plausible if economic growth proved difficult to generate. The long-term overhang of the global debt bubble, a lack political cooperation with regards to economic policies as well as other factors could lead to this being the norm for another decade. For transmission investments, this path may demand more from distribution systems than from transmission systems. If distributed generation, energy efficiency, and smart grid systems characterize the nature of the innovation, the amount of investment in transmission may be driven by the normal cycles of maintenance and the sustaining the core facilities.

From SE to NEFollowing on the above, it’s plausible that after a decade in the SE quadrant, technological innovation along with improved economic and political policies reinvigorate economic growth. It is plausible to imagine a steady climb up to the NE over a decade as confidence and experience builds momentum. This results in a long-term pathway to a re-modernized energy infrastructure. If this emerges, a wave of new investment for transmission may be required just to keep up with the return of economic growth and the rise of both new infrastructure and technological


WECC Scenarios

capabilities. This path suggests that over time, as the economy recovers, the world might shift to conditions similar to those described in Scenario Two, and that an improved economic climate leads to investment in R&D and eventually to technological breakthroughs.

Early Indicators for Long-Term Transmission PlanningThe descriptions of movement above have within them indicators that conditions are changing. A primary benefit of scenario-based planning is the generation of early indicators of change so that decisions might be better managed to reduce risks and also take advantage of emerging opportunities. Short-to-medium term risks in transmission planning are generally related to meeting both reliability and congestion management requirements.

Over longer periods of time, concepts like resilience, adaptability and flexibility are important for long-term capital investments in transmission systems. Resilience and adaptability in transmission planning might be helpful for dealing with unexpected operating conditions, i.e., weather conditions or emergencies, or with rare unanticipated changes in energy supply or demand, i.e., a long-term plant outage affecting supply or changes in economic conditions impacting demand.

The WECC Reference Case will be the starting point for information and analysis provided by WECC to its members in order to guide transmission expansion plans. Early indicators emerging from these scenarios could assist WECC members involved in the planning for, investing in, or managing of transmission assets. These indicators could help to improve real-time decisions if events diverge from conditions in the Reference Case.

From an overarching standpoint, the key indicators will oftentimes pinpoint the emergence of conditions similar to a specific scenario. They can be related to the major axis drivers of economic growth and the pattern of technological advances in the electric power industry. In addition, indicators can be valuable tools for perceiving changes at a more targeted level. Depending on the point of view of an observer, there can be a limitless number of early indicators, so there can never a complete list. Early indicators can fit within the list of key drivers are the foundation of the scenarios or could or extend beyond them.

Listed below by each scenario are some more targeted early indicators proposed by SPSG members Readers are welcome to add more from their specific perspective. Most importantly, early indicators should be connected to potential decisions and used for further learning and inquiry.

Early Indicators for Scenario 1: Focus on Economic Growth1.) Efforts to form new business models in the power industry fail and leading companies

back to traditional positions in the marketplace.

2.) Consumers largely reject flexible pricing options in new energy service offerings.

3.) Climate change-related events diminish and the momentum for strong GHG policies by government leaders dies.


WECC Scenarios

4.) New technological options in the power industry prove too expensive for customers and this lead to limited adoption rates.

5.) Problems with fracking as well as unexpected declines in gas supply lead to higher gas prices and a return to a more traditional generation portfolio for power companies.

6.) Mergers and the concentration of market share in the power industry suppress rates of innovation.

7.) Market factors result in high wholesale electricity prices forcing power companies to make investments to serve local needs in a traditional manner.

8.) The growth of smart-grid technology and installations is uneven and scattered with no standard emerging.

Early Indicators for Scenario 2: Focus on Clean Energy1.) Both political will and public/voter support for strong climate change regulation impose

costs on carbon emissions in a manner that leads to positive a transformation of the economy.

2.) Breakthrough technology that addresses GHG emissions combined with faster than anticipated rates of adoption.

3.) A long-term commitment to tax and other policy preferences for renewable technology investments at the federal level.

4.) New innovative firms in the power industry survive and prosper and are therefor able to offer services and products beyond the traditional package.

5.) Quantum leap level breakthroughs in energy storage that extend the applicability of renewable technologies and greatly increase their competitiveness.

6.) Consolidation of balancing authorities that increases reliability and coordination in the power grid and also enables new products and services to emerge.

7.) Federally-supported R&D, including research funded by the U.S. Department of Defense, successfully demonstrates new technological options for micro-grids and other power supply options.

8.) Surprisingly cheap and effective big data applications in the power sector ease the way for provision of new services.

Early Indicators for Scenario 3: Focus on Short-Term Consumer Costs1.) Poor and ineffective economic policy development and implementation in the U.S. and

Europe stifles economic growth over the long term.


WECC Scenarios

2.) A devastating physical or cyber-attack which massively harms the U.S. power grid and, in turn, the economy for an extended period.

3.) The cost to fully implement current state RPSs are much higher than anticipated and lead to voter backlash.

4.) The unexpected return of high inflation rates within in the general economy.

5.) The fracking-related boom in gas proves short-lived, while coal prices fall to historically-low levels.

6.) The pace and cost of adding sufficient gas pipeline and other infrastructure needed to expand natural gas use in the power sector proves to be more challenging than expected.

7.) Another (or the old unresolved one from 2008) financial bubble damages the global economy.

8.) War in the Middle East or with Iran distracts politicians from energy issues.

Early Indicators for Scenario 4: Focus on Long-Term Societal Costs1.) A powerful climate-related event that provides the public with the strongest possible

evidence of the need to quickly address the issue regardless of short-term costs.

2.) The U.S. takes a strong energy security stance with a preference for domestic resources and fuel price stability.

3.) Renewable energy resources quickly advance competitively and can prosper with lower levels of tax and policy preferences (perhaps supported by effective storage technology).

4.) U.S.-based and international insurers impose costs on high GHG-emitting technologies to cover the financial impacts of climate change.

5.) Persistent volatility in natural gas prices magnifies the risks to the economy.

6.) A substantial and long-term jump in oil prices driven by global demand (above $150 per barrel for the foreseeable future).

7.) A workable and effective cap and trade process is implemented and achieves early success in the U.S.

8.) A more distributed power system, which is anchored in solar energy, load control and energy efficiency, expands rapidly due to its cost competitiveness.


WECC Scenarios

Appendix I: Scenario Narrative EPSIn each scenario there are underlined blue hyperlinks directing the reader to relevant EPS submissions on the SPSG website. Below are all the EPS links listed by scenario with the page numbers from the scenario narrative section.

Scenario 1:P. 13 Technology as a Growth Engine

P. 13 Will There be a Silver Bullet for the U.S. Economy?

P. 15 Risk Aware Planning for the Electric Utility Sector

P. 16 Oil Boom Counterpoint: Shale Oil Everywhere…For a While

P. 16 U.S. to Be World’s Top Oil Producer in 5 Years, IEA Report Says

P. 16 GLOBAL ECONOMY-U.S. looks best of 2013 economic runners

P. 16 MIT Study on the Future of the Electric Grid

P. 17 Big data on the Smart Grid

P. 17 Weather Extremes Changing Patterns of Energy Use and Infrastructure

P. 18 U.S. to add 93 Million to Population by 2050

P. 18 U.S. to Be World’s Top Oil Producer in 5 Years, IEA Report Says

P. 18 SecDef Panetta Warns of Dire Threat of Cyberattack on U.S.

P. 19 New DOE Innovation Hub Aims to Cut Battery Costs by 80 Percent

Scenario 2:P. 33 CERES Publishes "Practicing Risk Aware Electric Regulation

P. 33 Global Economy: Fork in the Road as U.S. Outstrips Europe

P. 33 Bringing Big Data to Smart Meters


p. 33 Big Boost in Utility Capital Spending Must Pivot to Reflect New Realities

p. 35 US Housing Rebound Story Intact

p. 37 Bringing Big Data to Smart Meters















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WECC Scenarios

P. 39 Prudent Development of Natural Gas and Oil

P. 39 GE's New Natural-Gas Turbines Could Help Renewables

P. 42 The Technology Path to Deep Greenhouse Gas Emissions Cuts by 2050: The Pivotal Role of Electricity


P. 43 Declassified Report: Terrorist Attack on Power Grid Could Cause Broad Hardship

P. 43 House Committee Members Release a New Report on Climate Change

Scenario 3:P. 53 Why a Global Economic Rebound MAY be short-lived

P. 53 Coal Plants Disproportionate Impacts on Minorities and the Poor

P. 54 North Dakota Electrical Demand to Triple in Oil Patch

P. 54 Bipartisan Group Proposes a Centralized Energy Policy Council

P. 55 A Powerful Thirst: Energy, Water and Drought

P. 55 US Energy Independence Within View - Implications and Consequences

P. 57 IMF Slashes Growth Forecast, Economy Fragile thru 2018

P. 57 Tech’s New Wave, Driven by Data

P. 57 Declassified Report: Terrorist Attack on Power Grid Could Cause Broad Hardship


P. 57 DG - Environment Concerns Driving Co-Generation Equipment Market

P. 58 A 20-Year Low in U.S. Carbon Emissions

P. 58 Natural Gas Sets Record by Matching Coal's Electric Power Output

P. 53 A 20-Year Low in U.S. Carbon Emissions

P. 54 Natural Gas Sets Record by Matching Coal's Electric Power Output

Scenario 4:P. 66 IMF Slashes Growth Forecast, Economy Fragile thru 2018



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WECC Scenarios

P. 66 Fearing an Impasse in Congress, Industry Cuts Spending

P. 67 Electricity Innovation Lab Launched to Drive Transformation of the U.S. Electricity Sector

p. 67 LEDs Emerge as a Popular ‘Green’ Lighting

P. 68 Coal Plants Disproportionate Impacts on Minorities and the Poor

P. 68 Yale Survey Shows Increasing Awareness of Climate Change and Extreme Weather

P. 71 Senate Gives Green Light to Pentagon Green Energy

P. 71 California Company to Bring Solar to Military Housing

P. 72 Storage, Auto DR and Grid Flexibility Critical in Wind and Solar Penetration

P. 72 Bringing Big Data to Smart Meters













WECC Scenarios

Appendix II: Comparative Scenario SummarySee attached spreadsheet


WECC Scenarios

Appendix III: Policy Theme TableThis appendix contains a comparative analysis chart, which shows in one place how the policy areas might influence the policy arena in which energy related decision might be make within the context of the scenarios. These charts are useful in that they allow readers to see and compare the significant differences between the scenarios in one place.

Key; ‘++’ = Most aggressive; ‘+’=aggressive; ‘-’= less aggressive; ‘– –’ = least aggressive; ‘0’ = neutral

Policy

Categories

Scenario 1:

Focus on Economic Growth

Scenario 2:

Focus on Clean Energy

Scenario 3:

Focus on Short-Term Consumer

Costs

Scenario 4:

Focus on Long-Term Societal Costs

Notes

Policy

Theme

High need driven by economic

growth.

Deep, binding GHG reduction targets in

response to int’l treaty.

Slow growth leads to hard choices about

policy goals.

“Low-hanging fruit” investment in clean, domestic resources.

+ means:


0 ++ – + more aggressive

reduction targets

Economic

Policies

+ + 0 0 pro-growth policies


+ + 0 0 more investment support


0 + – + more favorable to renewables


0 + 0 + more favorable to investment and


WECC Scenarios

Policy

Categories

Scenario 1:

Focus on Economic Growth

Scenario 2:

Focus on Clean Energy

Scenario 3:

Focus on Short-Term Consumer

Costs

Scenario 4:

Focus on Long-Term Societal Costs

Notes

coordinated operations


0 + – + more support

Transportation

Policies

0 ++ – + more support for alt. fuel vehicles and transport

choices


0 ++ 0 ++ more support for demand-side investments

Energy Security/Independence Policies

0 0 0 ++ more support for

domestic resources

Environmental/

Cultural Policies

0 0 – + more protection of environmental/

cultural resources

Consumer Issues 0 – + 0 more restrictions

on cost recovery

Fuel 0 – – + ++ more support for

enhanced production


WECC Scenarios

Appendix IV: Annotated Policy Theme TableKey; ‘++’ = Most aggressive; ‘+’=aggressive; ‘-’= less aggressive; ‘– –’ = least aggressive; ‘0’ = neutral

Policy

Categories

Scenario 1:

Focus on

Economic Growth

Scenario 2:

Focus on

Clean Energy

Scenario 3:


Scenario 4:

Focus on Long-Term

Societal Costs

Policy theme High need driven by

economic growth.

Deep, binding GHG reduction targets in response to international treaty.

Slow growth leads to hard choices about policy goals.

“Low-hanging fruit” investment in clean,

domestic resources.

Greenhouse gas policies

0

No new GHG policies, but continued use of GHG adders

in resource planning

++

Strong new GHG policies with aggressive reduction targets

–

No new GHG policies and reduced concern about GHGs in resource planning relative to today

+

GHG reduction targets, but less aggressive and with more “outs” than in Scenario 2

Economic policies +

“Pro-growth” policies may lead to higher economic growth and electric loads

+

“Pro-growth” policies may lead to higher economic growth and electric loads

0

Neutral policies with respect

to growth

0

Neutral policies with respect

to growth

Capital investment support

+

“Pro-investment” policies may lead to reduced cost and risk in capital-intensive investments

+

“Pro-investment” policies may lead to reduced cost and risk in capital-intensive investments

0

Neutral policies with respect to investment support

0

Neutral policies with respect to investment support


WECC Scenarios

Policy

Categories

Scenario 1:

Focus on

Economic Growth

Scenario 2:

Focus on

Clean Energy

Scenario 3:


Scenario 4:

Focus on Long-Term

Societal Costs

Renewable energy policies

0

No new RPS mandates or incentives, but no retrenchment from existing policies

+

Strong policies to support renewables as carbon-free resources

–

Existing incentives allowed to expire and current RPS targets are relaxed or delayed due to concerns about cost

+

Strong policies to support renewables as clean, secure, domestic resources

Transmission and standards

0

No major initiatives to increase transmission investment or coordinated operations

+

New initiatives to increase transmission investment and enhance coordinated operations and planning as part of GHG reduction plan

0

No major initiatives to increase transmission investment or coordinated operations

+

New initiatives to increase transmission investment and enhance coordinated operations and planning to increase use

of domestic resources

Federal R&D/ technology support

0

No major federal

R&D initiatives

+

Major new federal initiatives to jump-start technologies needed to transition away from fossil energy

–

Reduced budgets for R&D due to lower tax revenues and federal spending cuts

+

Major new federal initiatives to increase our ability to cost-effectively utilize clean,

domestic resources

Transportation policies

0

No major initiatives to increase

++

Strong policies to increase use of electric vehicles as GHG

–

Reduction of existing efforts to increase use of alternative fuels

+

Moderate new policies to increase use of electric and


WECC Scenarios

Policy

Categories

Scenario 1:

Focus on

Economic Growth

Scenario 2:

Focus on

Clean Energy

Scenario 3:


Scenario 4:

Focus on Long-Term

Societal Costs

use of alternative fuels reduction strategy natural gas vehicles

Demand-side policies

0

No major initiatives to increase energy efficiency and demand response

++

Strong policies to increase use of energy efficiency as GHG reduction strategy

0

No major initiatives to increase energy efficiency and demand response

++

Strong policies to increase use of energy efficiency as cost-effective, secure domestic resource

Energy Security/ Independence policies

0

No major initiatives to increase use of domestic energy resources

0


0


++

Major new initiatives to increase use of domestic energy resources to reduce dependence on imported oil

Environmental/ Cultural policies

0

No major initiatives to increase or decrease land/cultural protections, criteria pollutant emissions or water consumption

0

All-out effort to reduce GHG emissions may require some compromise with respect to land use and water consumption policies

–

Existing emissions reduction and land & cultural- protection initiatives are delayed or weakened due to concerns about cost

+

Increased focus on land-use, cultural protections & water use and emissions reductions as self-interested investments in clean, domestic resources

Consumer issues 0

No major initiatives to increase consumer protections in

–

Focus on GHG reductions may require increased incentives such as equity adders or early recovery

+

Rollback of existing incentives for transmission investments and increased scrutiny of

0

No major initiatives to increase consumer protections in


WECC Scenarios

Policy

Categories

Scenario 1:

Focus on

Economic Growth

Scenario 2:

Focus on

Clean Energy

Scenario 3:


Scenario 4:

Focus on Long-Term

Societal Costs

electric utility sector to encourage capital-intensive investments

new investments by state commissions in order to keep rates low

electric utility sector

Fuel 0

No major initiatives to increase or decrease ability to extract fuels from domestic lands or waters

– –

Significant efforts to reduce drilling in order to reduce GHG emissions

+

New initiatives to increase drilling in an effort to keep

fuel prices down

++

Major new initiatives to increase drilling, particularly for gas, in order to reduce dependence on imported oil

Key; ‘++’ = Most aggressive; ‘+’=aggressive; ‘-’= less aggressive; ‘– –’ = least aggressive; ‘0’ = neutral
