QUADRENNIAL ENERGY REVIEW | Second Installment

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QUADRENNIAL

ENERGY REVIEW

April 13, 2016 | Tulsa, Oklahoma

Second Installment

QUADRENNIAL ENERGY REVIEW | Second Installment

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QER Background and Process

Presidential Memorandum stated the Administration will conduct a Quadrennial Energy Review to be led by the White House Domestic Policy Council and Office of Science and Technology Policy

Supported by a Secretariat established at the Department of Energy

Process involves the robust engagement of federal agencies and outside stakeholders

Enables the federal government to translate policy goals into a set of analytically based, integrated actions for proposed investments over a four-year planning horizon

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Changing Energy Landscape in US

Increasing Energy Production

Natural gas production growth

Oil production growth

Intermittent renewables

Distributed generation/energy resources

Increased generation/production/ demand efficiency

Policy Developments

CAF

Clean Air Act -111 (d), other

Clean Water Act/other

RFS

RPS (state)

RGGI (regional)

Energy Security Changes

Decreased N. American energy imports

Climate change impacts

Vulnerabilities more evident, including aging infrastructures, physical and cyber threats

Increased interdependencies

Increased energy support required by allies

Technology Advances

Solar (central and rooftop)

Wind

Demand-side

Hydraulic fracturing

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QER Process- General

Analysis

Baselines

Scenarios and modeling

Analysis of disruptive events

Synthesis of available work

Stakeholder Engagement Stakeholder meetings Stakeholder comments Technical workshops Regular briefings

Interagency Collaboration

Technical expertise

Data, studies, analysis

Interim and final product reviews

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QER Focus

Develop an integrated view of the short, intermediate, and longterm objectives for Federal energy policy(economic, environmental, and security priorities);

Outline legislative proposals;

Identify executive actions (programmatic, regulatory, fiscal, etc.) coordinated across multiple agencies;

Identify resource requirements for RD&D and incentive programs; and

Provide a strong analytical base for decision-making, insights on industry trends and economic impacts

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QER 1.1: Transmission, Storage and Distribution Infrastructure

Why Did we do Transmission, Storage and Distribution Infrastructure in QER 1.1?

Highly capital intensive

Long-lived at the decadal scale

Connective tissue of energy systems

Decisions made today will strongly influence our energy

mix for much of the 21st century

TS&D Infrastructure is the Limiting Factor in Transforming our Energy Systems!

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QER 1.1: 63 Recommendations

Increasing Resilience, Reliability, Safety and Asset Security

Modernizing the Electric Grid

Modernizing US Energy Security Infrastructure

Shared Transportation

Integrating N. American Energy Markets

Workforce

Siting and Permitting

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QER 1.1: Implementation

QER 1.1 Implementation Report Card

Detailed analysis of all 63 recommendations Shows where additional work is required

Implementation Breakdown: Executive Action (White House)

DOE 33 Other Federal Agencies 10

Legislative Action (Congress) New Appropriation 11 New Statute 9

Highlights: 3 recommendations are complete 9 recommendations are now law

following Congressional action $2 billion to modernize the

Strategic Petroleum Reserve

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Current Work on QER 1.1 and 1.2

QER 1.2 Electricity: Scoping Baselines National labs, consultants Framing documents Stakeholder consultations

QER 1.1 TS&D Implementation Energy bill Appropriations Transportation bill Interagency/DOE work

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Linking QER 1.1 and 1.2

Fuels

Waste

QER 1.1

QER 1.2

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QER 1.2: Electricity Generation to End Use

QER 1.1 documented major transformation of Electricity Sector:

Changing generation mix Low load growth Increasing vulnerability to severe weather/climate New technologies, services and market entrants Cyber/physical threats Aging infrastructure and workforce Growing overlap between jurisdictions

Given the centrality of electricity to the Nation, this transformation merits a closer examination in the next

installment of the QER.

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The QER Lens

QER 1.2 will analyze how the electric power system as a whole is evolving, including:

Integrating new technologies Changing market conditions Grid operations Financing and valuing Changing role of the customer

Physical structures and the roles of a range of actors, institutions and industries are being analyzed, vis--vis:

Maintaining reliability of supply Ensuring electricity affordability Adapting to dramatic changes in technology and

services

QER analyses are underway to consider issues such as: Fuel choice Distributed and centralized generation Physical and cyber vulnerabilities Federal, state, and local policy direction Expectations of residential and commercial consumers Reviewing existing and evolving business models for a

range of entities, throughout the system

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QER Process Timeline

Sept 15

Oct 15

Nov 15

Dec 15

Jan 16

Feb 16

Mar 16

Apr 16

May 16

Jun 16

Jul 16

Aug 16

Sep 16

Oct 16

Nov 16

QER Kick-off

Cross-Cut Teams and AnalysisPolicy Analysis and

QER DraftingWH and

Interagency Review

DistributionGeneration

Policy OptionsScoping Phase

Review,Formatting

Findings and InsightsAnalysis Launched

Issue Papers

Evaluation of Policy Options

Formal Stakeholder Outreach & Coordination*

Analysis Feedback, Refinement, Workshops, Interagency, Stakeholders

*Need to specify dates of interagency, DOE WG, S1, external stakeholders following finalization of outreach strategy

Final Report Release & Roll-out (mid-Nov 16)

Markets Environment

End-Use

Jurisdiction

Approx 100 QER-related products

(business as usual)

Analytic Integration Team

Key Issues, Framing, Outline, and Integration

Chapter Drafts

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Stakeholder Engagement Outreach Timeline

Jan Feb Mar Apr May Jun Jul

Stakeholder

Meetings1st Public Stakeholder Meeting (DC)

5-6 Meetings around country

Technical

WorkshopsNumber, subjects and locations (TBD)

Comment

Period

February 4 July 1, 2016

Submit comments at energy.gov/qer

DC Briefings3-5 to introduce QER 1.2 and also upon completion

Small group meetings and individual stakeholder meetings throughout process

2016

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General Roles and Responsibilities

White House

Oversight of the process and broad guidance and direction to the Secretariat, interagency process

Oversee process to concur on outline of final document prior to drafting

Convene EOP and interagency and help guide coordination and discussion

Participate in analytical briefings

Review analytical products

Help chair formal public meetings

Participate in key outreach meetings

Own review/concurrence process for draft and final documents

Convene weekly calls with DOE

DOE Working Group

Oversee analytical work in coordination with the interagency

Oversee process and timelines

Oversee calendar and meeting scheduling

Own document version control

Support concurrence process

Interagency/stakeholder outreach

Ensure final production of baselines, and QER 1.2

Outreach/Coordination

Public stakeholder meetings around the country

Technical workshops conducted by DOE analytical teams

Interagency coordination process

Ad hoc key stakeholder meetings

QER Secretariat

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Cross-Cutting Teams

Issue Areas / Work Streams Other Federal Agencies

End-use HUD, FERC, EPA, DOD, DHS, USDA, DOT, DOC, DOL, DOI, GSA, Treasury

Grid Operations (Transmission/ Distribution) FERC, DOT, USDA, DHS, DOI, DOD, EPA, NERC, FCC

Generation FERC, EPA, USDA, DOD, HUD, DHS, NERC, NRC, GSA, DOI

Markets DOC, Treasury, FERC, DOI, CFTC

Jurisdictions (Institutional Arrangements, Planning, Business Models)

FERC, DOI, NERC, EPA

Environment (Water, Carbon, Waste,, Land-use, end use, etc.) EPA, DOI, USDA, EOP, DOI/USGS/BOR, USACE

Finance Treasury, USDA, DOC, HUD

Innovation / Technology* NSF, DOD, DOC (NIST)

Resilience NOAA, EPA, USDA, USACE, DOI, DHS (IP, Policy, OCIA, OIP), DOD, HUD, EOP/CEQ

Security (Phys/Cyber) DHS (NPPD: IP/OCIA, Policy), DOD, FBI, FERC

North America DOS, DOC, EPA, FERC, HUD, NOAA

Jobs/Workforce DOL, Ed, Treasury, VA, NSF

Valuation FERC, EPA, DHS

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Sub-Set of Issues We Anticipate Addressing

I. Electricity consumption and energy efficiency by sector (residential, commercial, industrial, transportation) status, trends and barriers. What levels and patterns of electricity consumption exist today and are forecasted for 2040 in the

industrial, commercial, residential and transportation sectors? What business models and methods of customer engagement have been most successful, or show the

most promise, for deploying residential efficiency measures? What is the role of policy in facilitating these models and methods?

II. Distributed energy resources (DER): demand response, distributed generation and distributed energy storage. How should DER value streams be assessed from different perspectivescustomer, utility and society? What are the major barriers to distributed generation deployment, including financial, technical,

transactional and distribution system limitations? What policies and regulations enable demand response to support variable energy resources at utility

scale?

III. Grid Operations and Planning How do different system architectures facilitate or inhibit efficient grid evolution? What lessons from international experiences with grids operating at high penetration levels of variable

energy resources can be translated to U.S. system operations? What are the implications of having a hybrid generation system a mix of centralized and distributed

resources on the grid?

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Sub-Set of Issues We Anticipate Addressing

IV. Generation Portfolio, Reliability, Supply Chains, and Equity What is the evolution of the generation portfolio? What are our reserve margins? What is the availability and need for backup power? What policies can be put in place to increase access to rural, low-income communities, and remote

communities?

V. Electricity Markets What frameworks and metrics can characterize regional markets and degree of market regulation? How

have markets performed across different criteria since restructuring? How can policy levers be employed to remove barriers in each type of market to facilitate policy goals? Are there barriers to cleaner and more efficient generation given cost of capital differences?

VI. Electricity Finance How sensitive are costs to inputs (commodity prices, construction costs, technology costs)? How do costs change under alternate financial scenarios (interest/debt/capital)? What are the end user cost distributions under alternate DG/centralized scenarios?

VII. Electricity Valuation How are uncertainty and risk taken into account under electricity valuation practices? What value streams do electricity technologies provide to the system that are or are not monetized (and

to which stakeholders do they accrue)? Do grid operators and policymakers manage tradeoffs among value streams?

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Sub-Set of Issues We Anticipate Addressing

VIII. Innovation and Technology What are the government, industry, and investor roles across the clean energy innovation spectrum? How has technology innovation enabled policy changes (e.g. FERC rules)? What level of innovation is required to prudently ensure availability of clean energy capabilities to meet

our 2030 and 2050 goals, focusing on the electricity sector, e.g. baseload, storage?

IX. Jurisdiction and Regulations How did existing jurisdictional boundaries and policies evolve? What are the authorities for oversight of

the electricity system? What are the responsibilities vested at each level? What policy levers that exist at each level?

Distribution-level planning is becoming increasingly important, DER requires utility planners to achieve better integration of transmission planning and distribution planning and coordination between the Feds and the states. How do wholesale and retail markets complement each other (from a jurisdictional perspective)?

X. Environment What are potential generation pathways for meeting the U.S. goals for economy-wide de-carbonization by

2050 and how to plan for a future that achieves deep decarbonization of the energy sector? How do the interconnected flows of energy and water compare across states? How are these changing

over time? What are the key environmental justice issues that are related to the electric power sector and what policy measures should be taken to minimize impacts to EJ communities?

What are the key environmental issues that arise in the context of electric infrastructure siting and what policy measures should be taken to minimize these impacts?

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Sub-Set of Issues We Anticipate Addressing

XI. Resilience What strategies and methods are available to improve the resilience of the electricity system, and how do

alternative approaches compare on benefits, costs, and performance? How can system resilience be maintained in the face of evolving trends and changing conditions, i.e., increased

consumer choice, DER, smart grids, climate change, regional migration, fuel diversity? What is the role of the insurance industry?

XII. Security (Physical/Cyber) What are the key threats, vulnerabilities, risks and consequences associated with cyber and physical attacks on

electricity systems, especially SCADA and ICS? How can we address the threat of EMPs to the grid? Have system owners and operators incorporated physical security measures in response to terrorist attacks? How do

utilities view cyber threats, e.g. in response to NISTs framework and NERCs cybersecurity standards? As the economy is increasingly electrified (including DER), do cyber and physical vulnerabilities change?

XIII. North American Integration Are there barriers or constraints for continuing integration with Canadas electricity sector? How will new

transmission be handled? Mexicos electricity sector is less extensively integrated with the United States. Integration is not a current reality,

but an objective. How does an analysis of the Canadian border inform policies with Mexico? For Canadian hydropower to backstop U.S. electricity, what are the constraints and opportunities?

XIV. Employment and Workforce Development What are workforce skills and requirements in context of evolving technology and the environment