# Presentation: 831364

## Wholesale Power Price Forecast01/28/03 Current Trends Update

- Jeff King
- January 31, 2003

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## What is the power price forecast?

- An estimate of future wholesale spot market power prices.
- E.g., as would be traded as short-term contracts at the Mid-Columbia trading hub.
- 2001 to 2025.
- Monthly and annual average prices for high & low-load hours (can also look at hourly prices).

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## Ancillary products

- Market-driven future generating capacity additions.
- Estimate of fuel use.
- Estimate of certain environmental effects of system operation (e.g. CO2 production).
- Transmission usage

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## Uses of the power price forecast

- Estimate the market value of new resource alternatives (e.g., conservation measures).
- Estimate the cost implications of policies affecting power system composition or operation (e.g., value of a seasonal shift in hydro output).
- Estimate environmental effects of changes in power system composition or operation (e.g., effect of resource additions on CO2 production).
- Price forecast input into risk analysis model.
- Resource development forecast into GENESYS model

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## Forecasting process

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## Geographic Scope

-  Load-resource areas defined by transmission bottlenecks
-  individual generating units (>3700 total)
-  fuel price forecasts for ea. LRA
-  load forecast for ea. LRA
-  load curtailment blocks for ea. LRA
-  new resource options for ea. LRA

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## General assumptions

- Projects under construction are completed as scheduled; additional projects are market-driven.
- Suspended projects:
-  If > 25% complete, entered as partial-cost new resource options.
- If < 25% complete, omitted
- New projects are developed by resource-specific mix of developers.
- Projects scheduled for retirement are retired; additional retirements are market-driven.

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## Other general assumptions

- Intra-regional transmission cost:
- $15/kW/yr point-to-point transmission & basic ancillary services cost plus 1.9% transmission loss penalty.
- Exceptions include peaking units and industrial cogeneration
- Pancaked inter-area transmission losses & rates.
- Bid margin set at 5% of variable cost.

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## Significance of the “Current Trends” Case

- Our best estimate of future wholesale power prices resulting from continuation of current economic and energy policy trends.
- Average water conditions
- Average loads
- Not necessarily the “Right thing to do”
- may not fully consider value of risk mitigation.
- may represent less than desirable reserve levels.
- Not intended to represent a recommended course of action

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## Current Trends case assumptions

- NPPC medium fuel price forecasts.
- NPPC medium load forecasts:
- Demand returns to medium growth rates by 2006.
- Long-term growth adjusted for programmatic conservation.
- New resource options most likely to play significant role:
- Gas-fired combined-cycle GT
- Duct firing (power augmentation) for combined-cycle
- Gas-fired simple-cycle GT
- Wind
- Pulverized coal-fired steam-electric
- Solar PV
- Permanent 1.7 cents/kWh production incentive for new wind & solar.

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## More Current Trends case assumptions

- SBC and RPS resource development where adopted:
- simulated as new wind.
- quantity based on estimated above-market resource cost (resource cost less price forecast)
- Oregon CO2 standard for all new fossil units:
- offset fee $1/TCO2 (2000), escalating at 20%/yr.
- applies to 17% of total CO2 production.
- $7.50/MWh green tag revenue for new renewables.
- Intermittent resources limited ~ 20% of total native capacity, by area.
- No new coal in Western WA, W. OR, CA.

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## Forecast Fuel Price Trends(%/yr, 2003 – 2025)

| Case | Natural Gas (US Wellhead) | Coal (Western Minemouth) |
| --- | --- | --- |
| Low | -0.3 | - 1.5 |
| Medium Low | 0.0 | - 1.1 |
| Medium | 0.1 | - 0.8 |
| Medium High | 0.3 | - 0.5 |
| High | 0.6 | - 0.1 |

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## Natural gas prices are based on US wellhead forecast

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## New resource characteristics

|  | Capital ($/kW) | Fixed O&M ($/kW/yr) | Variable O&M ($/MWh) | Heat Rate,
Lifecycle (Btu/kWh) | Technology Improvement (%/yr) |
| --- | --- | --- | --- | --- | --- |
| 540 MW 2x1 CC | $565 | $8.85 FxOM
$15 PtoP Tx | $2.80 | 7030 | Cost: -0.6%
HR: -0.6% |
| 70 MW Duct Firing | $225 | $3 FxOM
$15 PtoP Tx | $1.00 | 9500 | Cost: +0.1%
HR: -0.3% |
| 2x46 MW SC | $730 | $8 FxOM
$0 PtoP Tx | $8.00 | 9960 | Cost: -0.6%
HR: -0.6% |
| 100 MW Wind | $1010 | $20 FxOM
$15 PtoP Tx | B1: $1 + $4 shpg
B2: $1 + $8 shpg | -- | Cost:-4 >-2%
 |
| 400 MW Coal Steam | $1230 | $40 FxOM
$15 PtoP Tx | $1.75 | 9550 | Cost: +0.1%
HR: -0.3% |
| 20 MW Solar PV | $6000 | $15 FxOM
$15 PtoP Tx | Inc. in Fixed O&M |  -- | Cost:-8 >-4% |

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## Additional new resource characteristics

|  | Forced Outage (%) | Planned Outage
(days/yr) | Operating Availability (%) | Base Resource Limits | Developer Mix (COU/IOU/IPP) |
| --- | --- | --- | --- | --- | --- |
| CC | 5% | 18 | 92% | Initially, not limited | 15/15/70% |
| Duct Firing | 5% | 18 | 92% | Prior run new CC development | As for CC |
| SC | 4% | 10 | 94% | Initially, not limited | 40/40/20% |
| Wind | Inc. in avail. | Inc. in avail. | B1: 28-36 % 
B2: 26-34% | B1: 1000MW/area
B2: 2000MW/area | 20/20/60% |
| Coal Steam | 7% | 35 | 84% | None in PNWWest or CA | 25/25/50% |
| Solar PV | Inc. in avail. | Inc. in avail. | 22% | Not limited | 50/25/25% |

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## Updates since September draft

- Updated inventory of recently-completed projects and projects under construction.
- Updated load growth forecasts.
- CO2 offset cost escalates as originally intended.
- Adjusted hydro shaping factors British Columbia.
- Corrected fuel price pointers for several resources.
- Corrected New Mexico variable gas prices.
- Recalibrated duct-firing and RPS/SBC resource builds.
- Adjusted quantities of second block of new wind.
- Recalculated fixed O&M costs for existing resources.
- First load curtailment block restored to default value.

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## Forecast WECC Resource Mix (012503 Current Trends Update)

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## Mid-Columbia price forecast

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## Levelized Mid-Columbia price forecast (2006 – 25)

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## Monthly average prices & loads (Mid C)

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## Forecast WECC Fuel Use

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## Forecast WECC CO2 Production(012403 Current Trends Update)

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## Base & sensitivity studies 1

|  | Lower Cost < | Current Trends | > Higher Cost |
| --- | --- | --- | --- |
| Fuel Prices | NPPC Low | NPPC Medium | NPPC High |
| Load Growth | NPPC Low | NPPC Medium | NPPC High |
| Renewable Incentives | Phaseout | $17 prod credit $7.50 tag
SBC/RPS | $0.03/kWh (Declining w/CO2 control) |
| CO2 Control | None | Approx OR std: $1/Ton CO2, esc @ 20%/yr on 17% CO2 | $15/TCO2 (test effect; attempt cap & trade model) |
| Clean Air Act | ?? | Hg control for new coal | ?? |

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## Base & sensitivity studies 2

|  | Lower Cost < | Current Trends | > Higher Cost |
| --- | --- | --- | --- |
| Climate & Hydro | Test sensitivity to climate effects on hydrograph | Test sensitivity to climate effects on hydrograph | Test sensitivity to climate effects on hydrograph |
| Technology | Optimistic financing/impvmt. | Base | Pessimistic
financing/impvmt. |
| Reliability | No operating reserve requirement | 6.5% op. reserves, average water | 6.5% op. reserves, critical water |
| Transmission congestion | Unfettered, rolled-in cost | Current plans | No expansion |

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