# Presentation: 290408

## A NW Conservation Strategy: Promise and Prospects

- Mike Warwick
- Pacific NW National Laboratory
- Portland, OR
- Mike.Warwick@pnl.gov

## Overview

- The promise of a strategy – Is it possible?  Is it practical?
- Why not?
- Prospects for a strategy
- Examples

## The Past as Prologue

- The region has done this before.  One example is the RSEP Wind Project
- Goal was to facilitate expansion of cost-effective wind resource in BPA/Regional supply curve.
- “Institutional” approach was step-wise, (ready, aim, fire), assess potential, rank possible sites, do a demo project, offer incentives, hope market takes over.
- Meetings with industry participants resulted in radical revision in approach (ready, fire, aim).
- Just Do It!
- BPA initiated process to purchase up to 50MW of wind generated power, launching a market that is now large, competitive (among providers and against alternative power sources), and wholly commercial.

## Lessons from the RESP Wind Project

- Industry input is essential.  The earlier the better.
- Counter-intuitive inputs need to be reviewed for self-dealing and favoritism, but not much else.  If they have faith in their approach, so should you.
- Think big.  Commit early (so it is harder to back out).  Have an exit plan that doesn’t burn any bridges.  (The exit plan for the RSEP conservation projects is a good, “bad” example.)

## What is the need for a conservation strategy?

- Gas, oil, and power spot prices have returned to “normal” levels.
- Price spikes were short lived.
- Critical water planning is conservative by its nature, only utilities that based plans on “normal” water got burned.
- Smarter planning and fuel price risk management is all you need.

## Long-term Price VolatilityOil vs. Natural Gas (1973-2000)[EIA]

## Volatility in Monthly Retail Gas PriceSource: EIA

## EIA Retail Gas Price Forecast 2001-2020

## Sources of Uncertainty

- Over 90% of world oil supplies are _government-owned_.  Thus, politics is a more important part of oil price than “market forces.”  Our ability to forecast prices is poor, but it is much better than our ability to forecast future politics!
- Domestic natural gas supplies (ex. Alaska) are not keeping pace with domestic consumption.  The balance must come from _new_ domestic sources or imports from Canada and Mexico.  Thus, domestic supplies and prices will become more sensitive to politics as well.
- Long-run gas prices are presently constrained by coal costs, which are historically low and stable.  That is changing and carbon controls or taxes would change that relationship substantially.
- Bottom line, the upper limit on gas prices could shift upward significantly.  No individual consumer has any control over these factors.  Therefore, each consumer should have some kind of plan to respond if historic trends change.

## Why You Need a Strategy

- Past is NOT Prologue – Standard stock broker disclaimer.  No one knows what fuel prices, or rainfall, will be each of the next 20 years.
- If volatility is a new “fact of life,” you need a strategy to plot a course through an uncertain future.
- First element of any strategy is expected price.  It is the basis for all decisions.  (A market price proxy is equivalent to “cost-effectiveness” threshold under least-cost planning.)

## Benefits of a Conservation Strategy

- A price proxy allows you to make long-term investment decisions about:
- risk-management,
- conservation and efficiency investments,
- new building designs, and
- self-generation options.
- A “conservation strategy” is the first step on the path towards “sustainability.”

## Who Has Energy Strategies?Three Examples

- The Army Energy Plan
- The Army Forces Command Energy Strategy (FORSCOM accounts for ~ 9% of US Government energy use.)
- PNNL Facility Energy Management Plan for the 21st Century

## Features of a Strategy

- Energy price proxy and volatility assumptions.  (Will prices be high, low, or spike every 5 or 10 years?)
- Where is energy going today and why?
- What are your energy use priorities?
- What is potential for conservation, fuel switching, use management, self-generation?
- What are your native energy resources (wind, solar – including passive, etc.)?
- Who are the stakeholders and implementers (include in this support staff in finance, legal, contracts, etc.)?
- Who is your “champion?”  Are they high enough in the organization to make this work?
- Communication plan to communicate process and progress and claim credit where due.

## This Process Seems to be Instinctive in the Region

- BPA had a sense of future price levels and volatility when it responded to the recent crisis.
- They had a stakeholder process and communicated throughout the process.
- They had a sense of energy use priorities and acted to curtail “lower priority” ones through contract buy-outs.
- We can do this!