considerations regarding a renewable portfolio standard (rps) framework for the state of oregon...
TRANSCRIPT
Considerations regarding a Renewable Portfolio Standard (RPS) Framework
for the State of Oregon
Governor’sRenewable Energy Working Group
July 11, 2006
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Our Goal Today….
To provide the Governor’s Renewable Energy Working
Group (REWG) a look into the issues of an RPS from
the point of view from operating utilities as presented
by members of PNUCC.
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Is this what its all about?
Oregon needs to make sure it doesn’t just follow the crowd….Oregon needs to make sure it doesn’t just follow the crowd….
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Utilities in Oregon: One Size Doesn’t Fit All2004 MWh SALES TO ULTIMATE CUSTOMERS*
Oregon
Percent Average Percent AverageMWh of MWh No. of MWh of MWh No. ofSales Sales Customers Sales Sales Customers
Investor-Owned Utilities: Municipal-Owned Utilities:
Idaho Power 665,045 1.5% 17,851 Ashland 169,437 0.38% 10,562
PacifiCorp 13,133,928 29.3% 519,389 Bandon 55,957 0.12% 3,631
Portland General Electric 17,764,138 39.6% 762,336 Canby 149,118 0.33% 6,134
Total Investor-Owned 31,563,111 70.4% 1,299,576 Cascade Locks 19,252 0.04% 582
Drain 19,734 0.04% 660
Cooperatives: Eugene 2,606,765 5.81% 83,118
Blachly-Lane County 147,297 0.33% 3,482 Forest Grove 249,886 0.56% 8,421
Central Electric 545,383 1.22% 27,151 Hermiston 103,576 0.23% 5,123
Clear Water Power 1,951 0.00% 162 McMinnville 830,416 1.85% 15,083
Columbia Basin Electric 93,831 0.21% 3,672 Milton-Freewater 109,995 0.25% 4,796
Columbia Power 23,335 0.05% 1,746 Monmouth 62,708 0.14% 3,484
Columbia Rural Electric 5,443 0.01% 138 Springfield 741,014 1.65% 30,414
Consumers Power, Inc. 360,195 0.80% 20,419 Total Municipal-Owned 5,117,858 11.4% 172,008
Coos-Curry Electric 324,979 0.72% 16,498
Douglas Electric 143,367 0.32% 9,340 People's Utility Districts:
Harney Electric 62,866 0.14% 2,121 Central Lincoln 1,273,661 2.84% 36,215
Hood River Electric 92,356 0.21% 3,441 Clatskanie 1,000,571 2.23% 4,325
Lane Electric 208,407 0.46% 12,296 Columbia River 468,498 1.04% 17,347
Midstate Electric 333,230 0.74% 16,572 Emerald 415,858 0.93% 18,104
Oregon Trail Electric 642,284 1.43% 28,837 Northern Wasco Co. 241,988 0.54% 10,356
Salem Electric 380,436 0.85% 17,462 Tillamook 386,834 0.86% 18,893
Surprise Valley Electrification 30,265 0.07% 1,572 Total PUDs 3,787,411 8.5% 105,240
Umatilla Electric 812,599 1.81% 13,217
Wasco Electric 88,783 0.20% 4,508
West Oregon 68,230 0.15% 4,196
Total Cooperatives 4,365,236 9.7% 186,830 Total Oregon 44,833,617 100.0% 1,763,654
* Ultimate Customer Totals exclude Sales for Resale and Other Electric Revenue.
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Most Oregon COUs purchase all or the majority of their power from BPA
• New federal contracts will begin in 2011• The existing output of the federal system will be
“allocated” to publics as Tier One• The Tier One resource is approximately 90% hydro
and 10% nuclear and is virtually greenhouse gas free
• Load growth can be covered through a BPA Tier Two product or a non-BPA resource
• Some COUs have requested BPA provide a Tier Two renewable product
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What generating resources are there in Oregon?In the US?
Name Plate Capacity
Coal5%
Hydro62%
Natural Gas29%
Wind3%
Wood Waste1%
US Resource Mix (capacity): Natural Gas 39%; Coal 32%; Hydro 10%; Nuclear 10%; Fuel Oil 5%; Renewables and other 1%
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What is important to our customers?
Safe power system
Reliability of supply
Reasonably priced energy
Price stability
A preference for cost effective renewable resources
Choice
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How do utilities plan for customers requirements?
Transmission& Distribution
Fuel Transportation(if applicable)
GenerationFuel Extraction(if applicable)
Demand Response Energy Efficiency
End use
Through “Integrated Resource Planning”….
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What is Integrated Resource Planning?
• Resource life
• Fuel supply term
• Fixed vs. variable (cost structure)
• Fuel price volatility
• Technology
• Shaft risk (size)
• Location
• Fuel supply / source
• Greenhouse gasses
• Sulphur dioxide, mercury, nitrogen oxide
• Habitat, water quality
• Contract vs. owned
• Capital Cost
• Fuel type
• Transmission and transport
PValue& Risk
Portfolio
Mix
Price Stability
En
vironm
ent
Rel
iab
ilit
y
Cost
Its managing value, risk and resource choices through a balanced portfolio approach…
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Existing Governance and Regulatory Structure
IOUsIntegrated Resource PlansPUC must approve rate recovery for resource decisions
COUsLocally elected boards responsible for resource decisionsLocal boards and councils directly accountable to their customersMuni/PUD Boards or City Councils subject to initiative, referendum, recallMuni/PUD Board subject to open meetings and public records lawsCo-op boards elected by members – meetings and decisions open to all members
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Existing Regional Resource Planning
The NW is unique in how it plans its energy futureThe Northwest Power Act established the Northwest
Power and Conservation Council Council required to develop a 20 year power plan
to assure adequate, efficient, economical and reliable power system
The Plan addresses future uncertainties; identifies realistic resource alternatives; analyzes the costs and risks that arise from resource alternatives and the interactions of resource choices and uncertain futures; and lays out a flexible strategy for managing those costs and risks
BPA resource acquisitions guided by the Council’s Plan
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How much new generation is needed in the region?
Regional Supply Balance MWa
Change in Load - 2005 to 2025 6,600
Less 5th Plan Conservation 2,600
Less committed generation 960
Less current surplus 2,500
New Generation Needed 540
Regional RPS Forecasted Resource Additions MWa
Target 25% of Load (after conservation) 6,000
Existing (non-hydro) renewables 500
Committed renewables 345
New renewables needed for RPS 5,155
Source: Northwest Power Planning and Conservation Council
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Would a 25% RPS strand investments?
Source: Northwest Power Planning and Conservation Council
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a 10 Percent
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Plan
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What would a 25% standard would mean to a theoretical Oregon COU at 1.25% annual Load Growth?
• 2004 load: 150 aMW• 2012 load: 166 aMW Tier1 Allocation• 2025 load: 195 aMW
• 2025 25% Renewable obligation = 49aMW
• Tier 1 Power displaced = 20 aMW195 aMW - 49 aMW = 146 aMW166 aMW - 146 aMW = 20 aMW
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What wind development is already occurring?
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Existing Wind Projects
PROJECT Name / LocationAs of: 3/1/2006
Size (MW)
Year in Service Location/Comments
Vansycle Wind Project25 1999
South of Walla Walla WAOutput purchased by Portland General Electric
Stateline Wind Project (Nine Mile substation)
90 2000South of Pasco WAOutput purchased by PBL
Condon Wind Project50 2000
near Condon OROutput purchased by PBL
Klondike Phase I24 2000
East of Wasco OROutput purchased by PBL
Nine Canyon I48 2001
Near Kennewick WAOutput purchased by NT customers
Nine Canyon I Addition15 2003
Near Kennewick WAOutput purchased by NT customers
As of 12/2004: 252
Klondike Phase II76 6/2005
East of Wasco OROutput purchased by Portland General Electric
Blue Sky/Hopkins Ridge150 12/2005
East of Dayton WAProject purchased by Puget Sound Energy
As of 12/2005: 478
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Pending and Potential Projects
Under Construction:
Big Horn Wind Project(Spring Creek Substation)
200 6/2006East of Goldendale WA
Leaning Juniper (Arlington Wind)(Jones Canyon Substation) 200 10/2006
South of Arlington OR
Ta-Ma-Y-Slah (Arlington Wind)(Jones Canyon Substation)
105 12/2006South of Arlington OR
Estimated As of 12/2006: 983
Potential by 12/ 2007 2500 MW
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One Utility’s Experience with an RFP for Renewable Resources
Resource Capacity (MW) Percentage of total
Wind 1170 95%
Biomass 20 2%
Manure 10 1%
Landfill Gas 20 2%
Excluding hydro, wind is currently 93% of installed renewable capacity nationwide, and 85% of energy.
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Why is the Predominance of Wind Important?
Firming Resources Required for Average Energy or an Alternative Planning Metric
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Characteristics of the Wind Resource
• Appears to be most cost effective renewable option• Emission and fuel free• Relatively mature technology
• Cannot be dispatched• Challenges in Forecasting – even hour-ahead• Highly Variable and Volatile – within the hour• Reactive Power Consuming• Must be Firmed by Another Resource
Why is the Predominance of Wind Important?
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Wind Integration - Transmission Issues?
• Wind requires Firm Transmission Capacity at approximately 3x the average energy delivered
• Location of the Firming Resource is critical
• We must Understand the OATT implications• The influence of the Integration of Wind on a large
scale must be modeled for NW transmission• Several Groups are beginning to address these
issues: WECC; NWPP (NTAC); BPA-Council• Study results likely not available to inform pending
RPS development for Washington and Oregon
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Transmission: Is there enough?
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Wind Integration - Regional Capability?
• Tapping out FCRPS capability– “It is likely that by the middle of next year, BPA will have to
either allocate more capacity to regulation or enter the market for regulating reserves.” - BPA
• Paradigms of Operation – Inexpensive Energy or Ancillary Services for integrating Wind Energy?
• The discussion is both about physical capability, cost and who pays
• Hydro operations for fish are interrelated• BPA will need the active cooperation and
collaboration of other regional utilities, developers and policy makers to help manage the variability of the resource.
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How close to the “operating edge” are we?
The best indicators of how close the system is being operated to the edge fall into the following categories:
– Amount of time the system is congested– The difficulty of taking maintenance outages– The degree of special protection schemes such as
direct generation tripping that is required for more common contingencies
– Increasing vulnerability to system disturbances– Operating limits constrained below path ratings– Increased difficulty of maintaining voltage schedules
and reactive margin– Safe operating limits sensitive to modeling
assumptions
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How close to the “operating edge” are we?
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What are some challenges with a mandate?
• Availability of high potential sites in Diverse Basins• Impact of Nationwide development of RPSs on cost
& availability of Wind Machines• Acquisition of Resources Ahead of Need
• Conflict with Integrated Resource Plans• Consistency with the Council’s Five-Year Plan
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What utility concerns need to be addressed in order to assess the
feasibility of a mandate for Oregon?
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Utility ConcernWhat would be the primary objective of a renewable policy?
Reduce green house gas emissions
Increase power supply fuel diversity focusing on load growth
Stimulate economic development
¹ source: Oregon Renewable Action Plan, Goals and Initiatives page 5
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Utility ConcernWould there be a percentage “target”?
To effectively manage the cost to customers of implementing a renewable policy -- Resource additions should be based on need not want
Acquisition of resource beyond planning requirements voids the Integrated Planning Process tenet of “Least Cost Plan”
Acquisition of resources beyond need causes displacement of resources and leads to “stranded costs”
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Utility ConcernWould there be constraints on timing of implementation?
•Longer lead-times can lead to better cost management in today's market for renewable resources•Longer lead-times would promote long-term investment in regional renewable energy generation•Shorter term planning may result in higher cost burdens to consumer•Need for flexibility and coordination with least cost planning and regional power planning, including BPA contracts
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Utility ConcernWhat would count as a “renewable” resource?
• Hydro• Solar energy• Wind energy• Geothermal energy• Wave energy (ocean or tidal)• Biofuels, Biomass, Biowaste, Landfill gas • Fuel cells using eligible renewable fuel sources
Resources must meet specific requirements that limit potential environmental impact (e.g. emission standards)
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Utility ConcernTo what would the target be applied?
Retail Load Growth Demand?
Net out existing hydro and apply percentage to remaining load?
Other?
If applied to total load, would displace existing resources, including hydro.
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Utility ConcernFlexibility in meeting renewable development targets?
Compliance flexibility is necessary due to inherent fluctuations in renewable energy production and development risk
– Overproduction: • Green Tag banking• Credit for early compliance
– Under-compliance:
• Forgiveness for failure to comply due to uncontrollable circumstances
• Allowed average compliance over a specified time– Utility diversity
• Small distribution utilities lack the resources and therefore have a low tolerance for risk associated with project development
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Utility ConcernWould there be a cap on the cost of renewable development?
Mandated resource portfolio standards can create increased resource acquisition and operating costs above least cost alternatives
Investor owned utilities need the ability to recover prudent costs
Oregon currently has a cost cap on the acquisition cost of renewable resources via the SB1149 Systems Benefit Charge
Oregon’s COUs are not-for-profit pass-through organizations. All costs are incurred by electric consumers.
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Utility ConcernWould there be a cost effectiveness standard?
• Impact on customer rates, • Utility system reliability and stability, • Costs and availability of eligible renewable
resources and technologies, permitting approvals,• Impacts on the economy, culture, community,
environment, land and water, demographics, and • The need to provide firming for intermittent
resources• The need for new transmission capacity
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Utility ConcernWho would govern the process?
Must respect the historic and existing governance and regulatory structure:
PUC for IOUs
Local boards for COUs
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Utility ConcernWould “green tags” count toward achieving renewable targets?
Green tags help utilities to better manage costs and more efficiently shape the timing and size of renewable resource acquisitions
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Summary / Concluding thoughts
• Cost-effective renewable resources will be a key component of the resources needed to serve Oregon’s load growth
• Establishing an RPS isn’t necessary in Oregon at this time given the current renewable base and pace of renewable resource development
• Adequate regulatory and planning processes already exist for evaluation of long term resource additions
• We need “a flexible resource strategy that can perform well under the expanded and intensified range of future uncertainties” (5th Power Plan)