The Nature of Risky Futures

1. The Nature of Risky Futures Michael Schilmoeller Thursday May 19, 2011 SAAC

2. Outline • Return to Future 750 • Overbuilding, is it expensive? “Overbuilding is a planning blunder” • Lack of foresight and the consequences • The role of mid-study CCCTs • Getting it wrong

3. Future 750 NPV Cost: $72,351,242,187.50 C:\Backup\Plan 5\Portfolio Work\Olivia\SAAC 2010\110519 SAAC Meeting\Analysis of futures\Illustrations\Spinner_L813LR_EUCI_SAAC.xls

4. Average over all futures NPV Cost: $78,868,493,989.58

5. Loads

6. Electricity Price

7. Natural Gas Price

8. Carbon Penalty

9. Power Cost per kWh

10. A More Useful Comparison • Compare Future 750 with CCCTs against Future 750 without CCCTs • Look not only at cost, but also at what the cost burden per ratepayer would be • Use (Total Cost)/(Frozen Efficiency Load), not (Total Cost)/(Frozen Efficiency Load-Conservation Energy) • We want to treat conservation as we would any other resource used to meet the frozen efficiency load

11. Future 750 with no CCCT NPV Cost: $72,351,242,187.50 NPV Cost: $66,913,822,724.86 Source: C:\Backup\Plan 5\Portfolio Work\Olivia\SAAC 2010\110519 SAAC Meeting\Analysis of futures\L8133Future_750_110429_150342 no CCCT.xls

12. Future 750 with no CCCT

13. We Need To Get It Wrong Sometimes • How much we are willing to pay for an option (to build a power plant) depends on both • The cost if we cannot build it, but turn out to need it • The cost if we build it, but turn out not to need it

14. The Value of Mid-Study CCCTs • The Sixth Power Plan resource portfolio included siting and licensing for nine 415 MW CCCTs, such that we could break ground in 2019 • Expected load growth was virtually flat and electricity and natural gas prices were moderate • The plan did not “predict” we would build the CCCTs; probability of completion was about 30 percent. • The preparation for the CCCTs was driven by the carbon penalty risk

15. End

16. Source: workbook “L811x1_LR2.xls”, worksheet “Data (9)”