Regional Portfolio Model and Direct Use of Gas Assessment

1. Regional Portfolio Model and Direct Use of GasAssessment Michael Schilmoeller NW Power and Conservation Council for the Regional Technical Forum Tuesday, June 29, 2010

2. Overview Goals of the study Principles of the fuel-switching evaluation The role of the Regional Portfolio Model (RPM) Preliminary findings

3. GAS PIPE & DISTRIB 99+% EFF Hot Water Thermodynamics GAS PIPE & DISTRIB 99% EFF COMBUSTION TURBINE 48% EFF ELEC TRANS & DISTRIB 86% EFF GAS TANK 58% EFF INSTANT GAS 82% EFF HPWH 200% EFF ELEC TANK 93% EFF 57% 81% 81% 38%

4. GAS PIPE & DISTRIB $/cuft-year Hot Water Economics GAS PIPE & DISTRIB $/cuft-year COMBUSTION TURBINE $92/kW-year ELEC TRANS & DISTRIB $45/kW-year INSTANT GAS $911/Tank GAS TANK $283/Tank HPWH $1300/Tank ELEC TANK $286/Tank

5. Objectives • What’s better economically? • Switching can go either way: direct gas to electricity or electricity to direct gas • Costs and decisions use total resource cost, with wholesale prices for electricity and gas • The study should consider carbon penalty costs and other sources of risks • Recognize uncertainty and imperfect foresight • Determine if incentives or disincentives improve the outcome

6. Key Assumptions • Limited to existing construction of new residential and commercial buildings • Assume that energy requirement per household for heating is fixed (price insensitive), but seasonal • Assume that a fixed portion of existing stock turns over each year, which limits the potential

7. Existing Segments

8. Conversion Options

9. Selected Combinations

10. Least-Cost Solutionone market segment, fixed gas price Total Cost (real levelized 2006$/103 BTU) Electricity Price (2006$/MWh) Principles of the fuel-switching evaluation

11. Optimal Program Tableone market segment Principles of the fuel-switching evaluation

12. Incremental Fixed Cost Tableone market segment Principles of the fuel-switching evaluation

13. Incremental Gas Use Tableone market segment Principles of the fuel-switching evaluation

14. Incremental Electricity Use Tableone market segment Principles of the fuel-switching evaluation

15. Roll Up Incr. Fixed Costacross all market segments Principles of the fuel-switching evaluation

16. Roll Up Incr. Gas Usageacross all market segments Principles of the fuel-switching evaluation

17. Roll Up Incr. Electricity Usageacross all market segments Principles of the fuel-switching evaluation

18. Overview Goals of the study Principles of the fuel-switching evaluation The role of the Regional Portfolio Model (RPM) Preliminary findings

19. How the NWPCCApproach Differs No perfect foresight, use of decision criteria for capacity additions Likelihood analysis of large sources of risk (“scenario analysis”) Adaptive plans that respond to futures Role of the RPM

20. Special Terms • Futures: aspects of the future we cannot control, combinations of uncertainties • Plans: actions or policies that we can control Role of the RPM

21. Sources of Uncertainty Fifth Power Plan Load requirements Gas price Hydrogeneration Electricity price Forced outage rates Aluminum price Carbon allowance cost Production tax credits Renewable Energy Credit (Green tag value) • Sixth Power Plan • aluminum price and aluminum smelter loads were removed • Power plant construction costs • Technology availability • Conservation costs and performance Role of the RPM

22. Excel Spinner Graph Model Represents one plan responding under each of 750 futures Illustrates “scenario analysis on steroids” Role of the RPM

23. The Least-Risk Plan Role of the RPM

24. 1 2 2 3 4 6 8 5 7 9 10 Representationoff-peak formulas not shown Role of the RPM

25. Evaluation Role of the RPM

26. Overview Goals of the study Principles of the fuel-switching evaluation The role of the Regional Portfolio Model (RPM) Preliminary findings

27. Closest Plan with No Natural Gas Price Decision Criterion Adjustment Preliminary Findings

28. First Results Are Not Credible • The RPM found the least risk plan strongly discourages switching from electricity to natural gas (strongly encourages switching from direct use of natural gas to electric heat pumps) primarily because of assumed high natural gas appliance cost • We do not fully understand the economic calculations in the GEP fuel-switching model • We may have some inconsistencies in interpretation of GEP model results Preliminary Findings

29. Assumptions Need Review Source: workbook “C:\Backups\Plan 6\Studies\Model Development\Direct Use of Gas\Gas Conversion Model (080509) MJS markup.xls”, worksheets “Inputs” and “Incr Costs” Preliminary Findings

30. Schedule • Indication of pieces of study that participants want to review (Today) • June 29, August 3, and possibly September 28 RTF meetings • Conservation Resource Advisory Committee (CRAC) meeting on policy implications in September? • Presentation of results to the Power Committee of the Council (September?) Preliminary Findings

31. Research Is Full of Surprises This presentation, including the spinner graph: http://www.nwcouncil.org/dropbox/NWPCC-DUG-100629.zip More information about the Council and its work: www.NWCouncil.org