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2014 LTSA Scenario and Data Assumptions March 25, 2014

2014 LTSA Scenario and Data Assumptions March 25, 2014. Outline. Scenario Assumptions Capital Cost Projections Fuel Price Projections Emission Price Projections Load Forecast Retirement Process Generation Siting Process Additional Information. Scenario Assumptions.

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2014 LTSA Scenario and Data Assumptions March 25, 2014

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  1. 2014 LTSA Scenario and Data Assumptions March 25, 2014

  2. Outline • Scenario Assumptions • Capital Cost Projections • Fuel Price Projections • Emission Price Projections • Load Forecast • Retirement Process • Generation Siting Process • Additional Information

  3. Scenario Assumptions

  4. Capital Cost Projections

  5. Current Trends Capital Cost Assumptions (Nominal $/kW) • Thermal Costs are increased 2.4% annually (EIA AEO 2014 early release) • Solar PV costs are developer supplied

  6. High Capital Cost Assumptions (Nominal $/kW) • High costs are 10% higher than those in Current Trends scenario

  7. Low Capital Cost Assumptions (Nominal $/kW) • Low costs are 10% less than those in Current Trends scenario

  8. Fuel Price Projections

  9. NG Price for Scenarios • Selected EIA AEO 2014 as price for Current Trends scenario • Added $1.5/mmBtu for high price, $3.50/mmBtu for High Gas scenario • Subtracted $1.00/mmBtu for low gas price

  10. Coal Price for Scenarios • Average of price forecasts from 2014 and 2012 EIA AEO and SNL

  11. Emission Price Projections

  12. CO2 Price Forecast • Average of price forecasts from Synapse and Fraunhofer for use in the Stringent Environmental scenario

  13. SO2 Price for Scenarios • Average of price forecasts from EPA and Black & Veatch

  14. NOx Price and Mercury Trading for Scenarios • Average of price forecasts from EPA and Black & Veatch • Because MATS will be effective in 2016 , no mercury emission allowance trading is assumed.

  15. Emission Assumptions for All Scenarios

  16. Load Forecast

  17. Current Trends Load Forecast • Peak increases at an average of 1.25% per year and energy increases at an average 1.68% per year Peak Forecast

  18. LNG Exports Overview • 9 Proposed LNG facilities in ERCOT • 3 general locations (Freeport, Corpus Christi region, Brownsville) • Assume principally powered from grid. • Assume 2018-2019 online dates • Assume each Bcf/d of LNG capacity has a load of several hundred MWs, based on indicative proprietary data available to ERCOT, but we expect public load data will become available soon. • Available data indicates each Bcf/d of LNG capacity could used 300 to 500 MW. These numbers show the large load impact LNG facilities could have.

  19. Retirement Process

  20. Fixed Length Retirements • Wind units will be retired at 25 years • Thermal retirements • All gas units will be retired at 50 years • All coal units will be retired at 55 years • Needto evaluate UPLAN’s retirement process

  21. Economic Retirement Process • Age, efficiency, profit margins and cost of retrofits are considered • Each category was broken into different groups and each group was given a value from 1-6 depending on number of groups • Age: <10 yrs (1), 10-20 yrs (2), 20-30 yrs (3), 30-40 yrs (4), >40 yrs (5) • Efficiency: <6 MMBtu (1), 6-7.5 MMBtu (2), 7.5-9 MMBtu (3), 9-10.5 MMBtu (4), 10.5-12 MMBtu (5), >12 MMBtu (6) • Profit margins: >25% (1), 10-25% (2), 0-10% (3), -10-0% (4), -10- (-25)% (5), <-25% (6) • Retrofit: need to define retrofit process • UPLAN results will be used to determine profit margin values • Each unit was given a total score (sum of values for each category) • ∑ = A (Wa) + E (We) + P (Wp) + R (Wr) • Retirement decision: if the unit’s total score was higher than 1 standard deviation above the mean of the sum of all units scores

  22. Retrofit Costs for Emission Control

  23. Generation Siting Process

  24. Generation Siting Method • Used process developed in the DOE LTS where consideration was give to: • Gas pipeline density • Railroad density • Urban population density • Wind and solar conditions • Surface water conditions • Non-attainment zones • Also consider brownfield sites and other sources of water to determine a list of available 345 kV buses for the siting of new generation • Expansion wind generation will use site profile information supplied by AWS Truepower from the 130 hypothetical sites delivered Sept 2012 • Similar information will be used for the siting of solar projects. Profiles from URS delivered in March 2013 for potential sites in Texas

  25. Generation Siting Method • Each new generator the UPLAN model builds (including wind and solar) will be given a list of potential 345 kV buses for siting • UPLAN evaluates each site and will place the new unit at the site that results in the highest revenue • ERCOT will review the site selection by UPLAN and re-site if it is appropriate to do so

  26. Additional Information

  27. Renewable Installations by Year • Average installations per year for all years is 801 MWs. • Average installations per year for the years 2006 thru 2009 is 1,766 MWs ERCOT Wind installations per year • Wind installations per year up to 2,500 MW • Solar installations per year up to 1,500 MW

  28. Next Steps • Complete load data adjustments for Current Trends scenario • LNG additions • Oil and gas drilling additions • Input all data for Current Trends scenario into UPLAN model • Run UPLAN model and test/adjust processes developed for generation expansion and unit retirement • Finalize data gathering and assumptions for all scenarios • EE and DR assumptions • LNG and drilling load • Other data

  29. Appendix

  30. Henry Hub forecast by Wood Mackenzie Source: Wood Mackenzie, “North America Natural Gas Outlook – ERCOT Planning Workshop”, Jan. 2014.

  31. Fraunhofer CO2 Price Projections Source: C. Kost, J. N. Mayer, J. Thomsen, N. Hartmann, C. Senkpiel, S. Philipps, S. Nold, S. Lude, N. Saad, T. Schlegl, “Levelized Cost of Electricity Renewable Energy Technologies”, Nov. 2013, Fraunhofer Institute for Solar Energy Systems ISE

  32. Source: EPA, Office of Air and Radiation, “Estimating Future Air Emissions Allowance Values”, Nov. 2006

  33. Black & Veatch March 2013 Source: Black & Veatch, “City of Ames Energy Resource Options Study”, Mar. 2013

  34. Ventyx Fall 2013 - NOX Source: Ventyx, “National Database Release Notes”, Fall 2013.

  35. Ventyx Fall 2013 – SOX

  36. Synapse CO2 Prices Source: P. Luckow, E.A. Stanton, B. Biewald, J. Fisher, F. Ackerman, E. Hausman, “2013 Carbon Dioxide Price Forecast”, Synaps Energy Economics, Nov. 2013.

  37. Ventyx Fall 2013 – CO2

  38. Technology Price Projections - 2012$ • Capital cost estimates from 2013 EIA Capital Cost Projections Update, April 2013

  39. Technology Price Projections - 2012$ • Capital cost estimates from August 2013 Lazard’s Levelized Cost of Energy Analysis

  40. Capital Cost Assumptions • Average conventional capital cost assumptions • GDP growth rate from EIA AEO 2014 Early Release - 2.4%

  41. Capital Cost Assumptions – Cont. • Average renewable capital cost assumptions • GDP growth rate from EIA AEO 2014 Early Release - 2.4%

  42. Wind Cost Trends • 2013 Brattle ERCOT Study for Clean Energy Council assumed in the Reference Case that wind costs fall to 1,800 2012$/kW in 2015 and then remain constant in real terms through 2030. In the Low Cost Renewable case, they decline to 1,500 2012$/kW by 2030. • The NREL 2012 Wind Technologies Market Report shows a range of $1,500 – 2,400/kW for recent capital costs for the Interior region (including Texas) Source: NREL. 2012 Wind Technologies Market Report. August 2013.

  43. Wind Capacity Factor Trends • Recent performance improvements in wind turbines could increase capacity factors by 10% in the near term • Projections for levelized cost of energy (LCOE) provide insight into both capital cost and performance trends Source: NREL. IEA Wind Task 26: The Past And Future Cost Of Wind Energy, Work Package 2. May 2012.

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