ERCOT PUBLIC 7/22/2014 1 2014 LTSA Scenario Results July, 2014.

ERCOT PUBLIC7/22/2014 1

2014 LTSA Scenario Results

July, 2014


Agenda

• Summary of Scenario Results

• Scenario Load Forecasts

• Scenario Comparisons

• Scenarios Selected for Full Study

• Modified Siting Process


Scenario Summary

• Generation expansion for nine scenarios are complete - Low Global Oil Prices remaining

• Scenarios indicate natural gas will remain the primary fuel in ERCOT

• Expansion of wind continues but solar becomes a major player in most scenarios

• Generation by coal resources declines in most scenarios to about 25% of generated energy

• Roughly 50% of the coal fleet retires in the Stringent Environmental Scenario

• Reserve Margins for all scenarios in 2029 are in the 9% to 14% range


Comparison of Load Forecasts• LNG

i. All forecasts included 235 MW of LNG in the COAST weather zone for 2018 and 706 MW for 2019 – 2029

ii. The High Economic Growth forecast included an additional 784 MW of LNG in the SOUTH weather zone for 2018 and an additional 1,568 MW for 2019 – 2029

iii. The High LNG included 1607 MW in 2018 and an additional 2,233 MWs in the COAST and SOUTH weather zones for 2019 - 2029

• Energy Efficiency and Load Management

• The Current Trends, High Economic Growth, and High Natural Gas forecasts used 686 MW (same as included in Feb CDR)

• The Stringent Environmental and Global Recession forecast increased the 686 MW by 3.3% per year (1,117 MW in 2029)

• The High EE/DG forecast increased EE by 20% per year (7,063 MW in 2029)


Comparison of Load Forecasts

• PV DG

i. The High EE/DG, Stringent Environmental, and the Global Recession forecasts included 220 MW of peak load reduction due to PV for 2018, increasing to 1,057 MW in 2029

ii. The rest of the forecasts included no PV load reductions.

• Load Adjustments

i. The High Economic Growth forecast increased the growth rates in the COAST, NCENT, and SCENT weather zones to 1.5% per year for 2015 – 2029.

ii. The High Natural Gas forecast increased the growth rates in the COAST, NCENT, and SCENT weather zones by 0.2% per year for 2015- 2029.

iii. The Global Recession forecast decreased the peak in ERCOT by 5.0% in 2021 and used a slower forecasted growth rate for 2022 – 2029.


Comparison of Load Forecasts

Peak Load Forecasts


Scenario Comparisons

• Total Capacity by Fuel Type in 2029‒ Wind total times 8.7%‒ Solar total times 70%

Potential Scenarios selected for full study



• Total Capacity by Technology Type in 2029‒ Wind total times 8.7%‒ Solar total times 70%



• Percentage of Energy Generated by Fuel Type for 2029


Selection of Scenarios for Full Study

• Scenarios selected for complete study were based on some of the following factors:

– Stakeholder feedback– location of new load– Total amount of renewable generation– Total new capacity added to the system– Meets a required reserve margin

• Selected Scenarios include:– Current Trends– Stringent Environmental– High Economic Growth– Global Recession– To be named later


Generation siting methodology for LTSA

The generation expansion planning process yields the

total capacity additions by generation type with its

expected in-service dates

The resource siting methodology identifies the individual

buses where such generation can be modeled

Generator siting methodology to be used in the LTSA

was first presented as part of the DOE report in 2013

This process has since been updated based on

stakeholder feedback


Generation siting methodology for LTSA

Siting of Wind/Solar generation considered in this LTSA will

be dictated by the wind and solar curves used in the

expansion process

For conventional generation type, the planned/expansion

generation capacity is divided between the weather zones

in the same proportion as their contribution towards total

load growth

Buses at competing sites based will be sorted based on the

annual average LMP


Priority for Siting of allotted capacity

Generators which meet Planning Guide (PG) 6.9 requirements but

not considered in gen expansion plan

Generators with a signed interconnection agreement (IA) but do

not meet PG 6.9 requirements

Buses with highest LMP will then be evaluated based on following

priority

Resource availability for the generation type

Sites with mothball generation

Brownfield sites

New (greenfield) sites


Questions?

Doug [email protected]

Julie [email protected]


Appendix


Economic Growth•Migration to TX along I-35 corridor•Growth in south Texas•Industrial growth in Houston, I-35, Midland/Odessa, Valley•~1.5% load growth – high growth in near term then tapering off in long-term •LNG growth based on permits existing – needs review•Oil production rates follow trend in recent EIA projections for Texas

Weather / Water•No drought situation, but water supply continues to be a concern to existing and new generators. •No specific increase in electricity consumption due to drought conditions.

Transmission Regulation /Policy•Policy set to reduce constraints•Increased DC-tie capacity with neighboring region •Higher reliability standards are set by NERC to avoid load shedding

End-Use•Increased need for ancillary services•Increase penetration of demand response•Increasing distributed generation

Generation Resource Adequacy•No reserve margin set for ERCOT•Maintain energy-only market•Economic retirements continues based on economics

Environmental Regulation•MATS and 316B are implemented by 2016•CSAPR Hybrid •Greenhouse gas regulation set with flexibility•No other major changes in environmental regulations

Story:Same old, same old. The recent population and economic growth in Texas continues in the near future, fueled largely by the continued growth of the oil and gas sector and the relative robust Texas economy compared to the rest of the U.S. World oil prices high enough to keep increasing oil production in the short-term, keeping domestic natural gas prices relatively low. With low gas prices, several LNG export terminals are built between 2014 and 2024. Modest wind growth continues based on economics without production tax credits. Capital costs for solar continues to decline at a slower rate than recent history. No required reserve margin is set for ERCOT and the environmental regulations continues to be moderate, with no explicit federal carbon tax or required national cap and trade, but greenhouse gas emissions become regulated beyond 2016.

Implications for ERCOT:•Continued modest economic and therefore load growth in Texas.•Growth in oil production and population across the state leads to new transmission needs•Continued increased renewables leading to reliability (inertia) issues•No major generation retirements triggered by stringent environmental regulations.

1. Scenario: Current Trends

Alternative Generation•Solar: 1000 MW / year •Wind capacity addition limit: 3,000 MW/yr•Capacity factor wind – rely on historical data from ERCOT•Capital cost wind ~$2,000/kW•Capital cost solar ~4.4% reduction/year•Overall renewable growth driven by economic entry•No production tax credit beyond 2013•No change to existing investment tax credit policy

Gas/Oil Prices•EIA reference case or best available gas and oil price forecasts


Current Trends Scenario Highlights

• Conditions existing today will generally continue into the future

• ERCOT’s basecase load forecast with the addition of small amounts LNG

• Natural gas prices increase slowly but are generally considered low

• No major changes to environmental regulations

• Trends in capital cost for new resources are increasing at GDP with the exception of Solar PV which is declining thru the planning period

• Modest increase in penetration of demand response

• No specified reserve margin, generator additions for conventional and renewable resources are by economics only

• No PTC


CC Adds MW 650 3,600 1,200 - - CT Adds MW 700 2,090 380 1,740 900 Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW - 100 3,200 4,200 2,600 Wind Adds MW - - - - - Annual Capacity Additions MW 1,350 5,790 4,780 5,940 3,500 Cumulative Capacity Additions MW 1,350 7,140 11,920 17,860 21,360 Retirements MW 955 2,086 2,379 2,453 950 Residential Demand Response MW 300 18 19 21 14 Industrial Demand Response MW 1,200 73 78 83 58 Reserve Margin % 9.95 10.10 10.30 11.90 12.77 Coincident Peak MW 76,571 79,935 82,686 85,443 87,300 Average LMP $/MWh 52.50 55.40 65.41 68.01 71.21 Natural Gas Price $/mmbtu 5.02 5.07 5.93 6.03 6.35 Average Market Heat Rate MMbtu/MWh 10.46 10.93 11.03 11.28 11.21 Natural Gas Generation % 46.0 51.0 49.0 51.0 51.0 Coal Generation % 31.0 27.0 28.0 26.0 25.0 Wind Generation % 12.0 11.0 11.0 10.0 9.0 Solar Generation % - - 2.0 4.0 6.0 Scarcity Hours HRS 8.0 10.0 10.3 10.0 8.0 Unserved Energy GWhs 4.5 10.8 11.9 10.9 8.3 SO2 Tons 312,930 272,616 304,280 272,207 266,469 CO2 (k) Tons 240,205 247,719 256,896 256,860 259,524 NOx Tons 112,419 114,359 118,814 118,987 120,677

2027 2029Description Units 2018 2021 2024

Current Trends Scenario Results


Economic Conditions•Net population growth in Texas ~1%•Urbanization with growth concentrated in the major cities•No industrial growth•Capital for new generation difficult to obtain•Little to no GDP growth or net load growth

Weather / Water•Same as under Current Trends – no drought conditions, but limited water supply for new generation

Gas/Oil Prices•Lower prices (~$1/mmbtu lower than assumptions under Current Trends)•Less oil exploration and production•No LNG development

Transmission Regs/Policies•Same as assumed under Current Trends•Transmission faces lower construction cost per mile

End - Use•Customers are more cost conscious, thus more conservation •Limited growth of new technologies that are still high costs, such as storage•Low load growth due to increased efficiency and changed customer behavior

Alt Gen Resources•Lower oil/gas prices•Limited development of wind and solar due to low energy prices•Nuclear re-licensing •Slower solar cost decline due to reduced global demand

Gen Resource Adequacy Standards•Retiring of coal plants due to low energy margins •System inertia issues increase

Environ. Regs. / Energy Policy•Continuing modest environmental regulations, no significant changes from assumptions under Current Trends•Government incentives continue for high efficiency appliances•Continued subsidies for renewables (PTC/ITC)

Story:

Low energy prices threaten the Texas economy. Load growth is limited, resource expansion is limited to gas-fired plants and continued subsidized renewables. Stimulus programs help create incentives for consumers to replace old appliances and increase conservation. Coal plants that rely on coal by rail retire due to lower energy margins.

Implications for ERCOT:•Slow load growth•Growth in urban areas greater than in rural areas•Limited generation development, predominantly gas-fired, subsidized renewables•Import/export issues between urban areas will need to be addressed•Stability issues continue to increase due to low system load

2. Scenario: Global Recession


Global Recession Highlights• Natural gas price is low

• Scenario includes PTC and ITC

• No Reserve Margin

• Solar capital costs decline slower

• Lowest reserve margin of all scenarios – 9% in 2029


CC Adds MW - - - - - CT Adds MW 380 950 3,990 760 380 Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW - - 3,000 2,400 Wind Adds MW - 853 - 990 422 Annual Capacity Additions MW 380 1,803 3,990 4,750 3,202 Cumulative Capacity Additions MW 380 2,183 6,173 10,923 14,125 Retirements MW 975 2,086 2,379 2,453 950 Residential Demand Response MW 300 337 379 427 480 Industrial Demand Response MW 1,200 1,349 1,518 1,708 1,921 Reserve Margin % 7.95 8.67 8.17 8.23 9.07 Coincident Peak MW 76,307 75,760 77,897 80,099 81,604 Average LMP $/MWh 55.58 60.12 63.23 67.19 70.33 Natural Gas Price $/mmbtu 4.27 4.37 5.20 6.00 6.63 Average Market Heat Rate MMbtu/MWh 13.02 13.76 12.16 11.20 10.61 Natural Gas Generation % 51.7 51.9 50.3 47.6 46.4 Coal Generation % 25.6 24.9 27.1 27.9 28.2 Wind Generation % 12.1 12.8 12.4 9.6 12.7 Solar Generation % - - - 1.9 3.3 Scarcity Hours HRS 11.0 17.0 12.0 12.0 12.0 Unserved Energy GWhs 13.2 18.2 20.2 24.5 19.8 SO2 Tons 230,606 230,491 265,478 279,012 285,814 CO2 (k) Tons 209,007 209,887 223,368 227,725 230,919 NOx Tons 109,579 108,933 117,475 120,448 121,949


Global Recession Scenario Results


Transmission Regs/Policies•Same as under Current Trends•Higher cost for Transmission (for both materials and labor)

Economic Conditions•High Texas GDP growth •High population growth (2.5%/yr)•Pro-business environment•Industrial growth concentrated in Houston, I-35 corridor, Midlands/Odessa, Lower Rio Grand Valley•Higher LNG exports than under Current Trends •Capital is available to support new generation and transmission

Weather / Water•Higher water costs, but does not limit growth (e.g., potentially more dry cooling for new generation)

Oil/Gas Prices•Higher (but still relatively low) gas prices than under Current Trends (~$1.5/mmbtu higher than in Current Trends)•Same oil prices as under Current Trends

End-Use •Growth of household income•However, more energy-efficient new homes •Overall efficiency gains are similar as under Current Trends•Fast adoption of new demand-side technologies

Alt. Gen. Resources•Renewables are economic and growth occur due to higher gas prices•More technological improvement than under Current Trends for renewables and storage•Cap on annual wind capacity growth

Gen Resource Adequacy Standards•Likely to impose a resource adequacy requirement

Environ. Regs/Energy Policy•Continued modest environmental regulations, no significant changes from assumptions under Current Trends•U.S. more focused on developing domestic energy sources

Story:Higher economic growth than under Current Trends. Growth occur throughout Texas driven in large part by oil and gas sector and related upstream and downstream industries.

Implications for ERCOT:•High load growth•High urban growth •High industrial growth, concentrated through I-35 corridor, Midlands/Odessa, and Lower Rio Grand Valley•Higher costs for new generation and transmission due to high commodity prices•Potential challenges with generation portfolios keeping pace with load profile changes

3. Scenario: High Economic Growth


High Economic Growth Scenario Highlights• High load forecast

• Capital cost change

• Increase CT and CC capital cost by 25%

• Solar starts from 3000 $/kW in 2013 and decreases 5% every year;

• All the other technologies the same as in Current Trends

• LNG Medium assumption

• Gas price is 1.5 $/MMBtu higher than in Current Trends

• 13.75% reserve margin target


CC Adds MW 1,300 800 400 - - CT Adds MW 190 - 190 - - Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW 600 4,200 4,500 3,900 2,600 Wind Adds MW - - 100 1,175 121 Reliability Adds MW 4,147 4,222 3,230 3,040 1,900 Annual Capacity Additions MW 6,237 9,222 8,420 8,115 4,621 Cumulative Capacity Additions MW 6,237 15,459 23,879 31,994 36,615 Retirements MW 1,120 2,336 2,379 2,453 950 Residential Demand Response MW 300 18 19 21 14 Industrial Demand Response MW 1,200 73 78 83 58 Reserve Margin % 13.75 13.98 13.94 13.88 13.92 Coincident Peak MW 78,133 83,071 86,747 90,551 93,176 Average LMP $/MWh 50.11 53.37 63.70 67.80 73.05 Natural Gas Price $/mmbtu 6.52 6.57 7.43 7.53 7.85 Average Market Heat Rate MMbtu/MWh 7.69 8.12 8.57 9.00 9.31 Natural Gas Generation % 43.5 45.6 45.8 46.8 48.1 Coal Generation % 33.8 31.2 29.7 27.4 26.0 Wind Generation % 11.9 10.8 10.3 10.2 9.8 Solar Generation % 0.4 2.8 5.1 6.9 8.0 Scarcity Hours HRS - - 2 3 3 Unserved Energy GWhs - - 0.3 2.3 4.6 SO2 Tons 388,082 392,774 392,711 356,953 326,398 CO2 (k) Tons 236,104 249,096 255,942 258,156 262,170 NOx Tons 126,985 133,607 137,619 138,437 140,451


High Economic Growth Scenario Results


Economic•Same as under Current Trends•Additional growth in clean technologies

Weather / Water•Above average summer temperatures•Greater water stresses and higher water costs than under Current Trends.

Gas Price / Oil Price•Higher gas prices than under Current Trends: also higher resulting wholesale electricity prices

Transmission Reg.•Same as under Current Trends

End – Use Customer Acceptance•More high efficiency homes and buildings built•Efficiency gains are above those under Current Trends, thus lower net load growth•Higher installation DG•Higher DR participation•More options for microgrids, smart appliances, etc.

Alt. Gen. Resources•Capital cost for wind and solar technologies and CHP decrease faster than under Current Trends•Improved storage technology and lower cost

Gen Resource Adequacy Standards •Same as under Current TrendsEnviron. Regs/Energy Policy

•Increase stringency in building codes, with more net zero buildings•Government provides more incentives for building retrofits to increase efficiency•Increase in appliance standards increase•More attractive DR programs/pricing

Story:Economic growth good enough to allow new investments in efficiency and distributed generation. Customers increase acceptance of EE/DG technologies which leads to widespread market adoption

Implications for ERCOT:•Lower net load growth compared to under Current Trends•More market-based programs for demand response•Widespread of distributed generation creates some operational challenges

4. Scenario: High Efficiency/Distributed Generation


High EE and DG Highlights• High natural gas price

• High amounts of EE, DR and DG


CC Adds MW 620 1,200 1,950 800 1,950 CT Adds MW 190 3,650 - 950 - Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Biomass Adds MW - - - - - Solar Adds MW - 1,500 4,200 4,000 1,900 Wind Adds MW - - - 351 100 Annual Capacity Additions MW 810 6,350 6,150 6,101 3,950 Cumulative Capacity Additions MW 810 7,160 13,310 19,411 23,361 Retirements MW 995 2,086 2,379 2,453 950 Residential Demand Response MW 300 337 379 426 480 Industrial Demand Response MW 1,200 1,349 1,518 1,707 1,921 Reserve Margin % 9.51 9.49 10.98 12.68 13.97 Coincident Peak MW 76,417 79,686 82,298 84,895 86,646 Average LMP $/MWh 64.67 67.71 73.86 75.19 76.68 Natural Gas Price $/mmbtu 6.52 6.57 7.43 7.53 7.85 Average Market Heat Rate MMbtu/MWh 9.92 10.31 9.94 9.99 9.77 Natural Gas Generation % 42.9 46.3 45.5 46.8 47.1 Coal Generation % 34.3 31.2 30.5 28.2 27.5 Wind Generation % 10.2 11.4 10.9 10.2 10.0 Solar Generation % - 1.0 3.4 5.5 6.5 Scarcity Hours HRS 8.0 10.0 10 6 6 Unserved Energy GWhs 6.4 11.0 8.4 10.4 7.6 SO2 Tons 391,705 376,518 383,036 341,385 308,433 CO2 (k) Tons 233,394 238,214 242,866 242,897 240,659 NOx Tons 126,772 128,983 132,018 131,863 129,938


High EE and DR Scenario Results


Economic Conditions•GDP growth slightly higher than under Current Trends•Population growth ~2.3%/yr•Pro-business environment•Higher LNG exports than under Current Trends•Reduced Industrial growth (downstream facilities)•Increased gas exploration in Texas

Weather / Water•Same as under Current Trends•Increased water costs which contribute to the higher cost of producing natural gas

Gas Prices / Oil Prices•Natural gas prices $3.50/mmbtu above Current Trends by 2020•Oil prices same as under Current Trends

Transmission Regs / Policies• Same as under Current Trends

End - Use•Motivate high energy efficiency at a higher rate than current trends.

Alt. Gen Resources•Renewables are more economic and thereby more growth than under Current Trends•Annual limit on wind development•More technological improvements for renewables

Gen Res Adequacy Standards •Same as under Current Trends

Environm. Regs / Energy Policy•Modest environmental regulation, same as in under Current Trends•No regulatory impediments to LNG exports•Lower coal plant retirements due to higher energy margin

Story:

•Natural gas prices are high, but are below global natural gas prices – thus still continued LNG export as under Current Trends.•No impediments to LNG exports•High gas prices also reduce the downstream industrial growth compared to under Current Trends•Increase in renewable development compared to under Current Trends, due to higher gas and wholesale energy prices

Implications for ERCOT:-High load growth-High urban growth-Reduced downstream industrial growth (in the Houston, Corpus, and coastal areas)

5. Scenario: High Natural Gas Prices


High Natural Gas Prices Highlights• Lower solar and storage costs than under Current Trends

• Gas price is 3.5 $/MBtu higher than under Current Trends

• High EE and DG as under Stringent Environmental scenario, DR growth additional 3% every year than under Current Trends


CC Adds MW 650 - 2,600 400 1,300 CT Adds MW 700 1,140 100 1,430 190 Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW 250 250 250 250 - Geothermal Adds MW - - - - - Solar Adds MW 200 4,500 4,500 4,500 2,800 Wind Adds MW 100 2,065 232 571 926 Annual Capacity Additions MW 1,900 7,955 7,682 7,151 5,216 Cumulative Capacity Additions MW 1,900 9,855 17,537 24,688 29,904 Retirements MW 1,145 2,171 2,911 2,453 950 Residential Demand Response MW 300 47 55 63 48 Industrial Demand Response MW 1,200 189 219 253 191 Reserve Margin % 10.51 11.04 13.21 14.32 15.71 Coincident Peak MW 76,603 79,866 83,092 86,413 88,697 Average LMP $/MWh 71.54 75.78 83.06 87.08 90.89 Natural Gas Price $/mmbtu 8.52 8.57 9.43 9.53 9.85 Average Market Heat Rate MMbtu/MWh 8.40 8.84 8.81 9.14 9.23 Natural Gas Generation % 42.3 40.5 40.3 41.7 42.7 Coal Generation % 34.7 32.8 31.4 29.0 27.2 Wind Generation % 12.1 13.4 12.9 12.0 12.1 Solar Generation % 0.2 2.9 5.3 7.5 8.7 Scarcity Hours HRS 4.0 8.0 10 7 7 Unserved Energy GWhs 2.3 6.9 8.1 9.2 11.7 SO2 Tons 395,927 394,626 398,444 359,957 325,148 CO2 (k) Tons 235,875 236,522 241,295 242,950 243,038 NOx Tons 127,634 128,360 132,255 132,284 132,331


High Natural Gas Scenario Results


Economic Conditions•Moderate economic growth – (some limits on oil & gas development)•Less oil and gas production than under Current Trends•Less LNG exports than under Current Trends•Population growth same as under Current Trends at ~1.5%/yr, in the I-35 corridor and Houston areas but decrease in the Valley (Midland) area•Increase in industrial production of alternative energy and efficiency-related technologies

Weather & Water•More extremes helps convince public and politicians to take action•Higher water costs than under Current Trends, increasing dry-cooling for new generators

Natural Gas Prices•Moderate increase than under Current Trends •Same amount of LNG exports as under Current Trends

Oil Prices•Higher oil prices than under Current Trends•But growth in oil exploration and development limited by stringent environmental regulations

End – Use Customers / Policies•Continued stringent building code – 10% improvement every 3 years•More onsite solar penetration –

• 1000 MW by 2022• 3000 MW by 2032

•Existing buildings retrofits – 20% improvement in existing buildings efficiency

Transmission Regs•More DC ties such as Tres Amigas / El Paso / Cross Wind•Solar CREZ to west Texas to take advantage of Pecos / Brewster / El Paso•Potential ties w/ Mexico

Enviro Regs / Energy Policies•Federal greenhouse gas emission standard implemented•Federal standard of 25% renewable / energy efficiency•More stringent ozone standard implemented•Toxic emissions standards implemented•Some limits on drilling and associated disposal wells•Government imposes some water usage limits, raising cost of water•More dry cooling for natural gas generators•Moderate carbon tax / price materializes•Increase nuclear safety concerns than under Current Trends

Story:•Aggressive action on mitigating environmental impacts of energy sector, including electric generation and oil & gas sectors•Higher gas, oil, electricity prices, and lower solar, wind, storage costs.•Assumes more DC ties with neighboring regions and the development of concentrated solar regions that will require solar-CREZ lines to and from west Texas.•Higher electricity prices drive more adoption of energy efficiency and customer-sited solar PV.•Uncertain development of new nuclear & geothermal

Implications for ERCOT:•Challenge in matching generator w/ load•Reserve & integrate issues•Potential need for new ancillary services to provide faster & flexible resources•More transmission for solar CREZ•Need to develop rules for integrating storage & distributed generation•Need to address issues associated with adding DC ties to neighboring regions (including NERC and FERC-related issues)

6. Scenario: Stringent Environmental Regulations

Alt. Generation Resources •Continued PTC/ITC through 2020, reducing over time•Continued decrease capital costs for solar: 3-5% /yr•Wind capacity factors increase due to technological improvements•Cap on annual wind generation•Increased development of storage due to cost reductions for batteries & compressed air•More financing mechanism are available (e.g.: real estate investment trusts, property-assessed clean energy financing, and others]


Stringent Environmental Scenario Highlights

• ERCOT’s Current Trends load forecast was adjusted for increased EE and 2,400 MW of Solar DG by 2029

• Current Trends NG forecast was increased by $1.50/mmBtu in each year

• Costs for SO2, NOx, and CO2 were added

– CO2 costs ranged from $25/ton in 2018 to $61/ton in 2029

– At these CO2 costs ERCOT exceeds current GHG emission levels goals for both 2020 and 2030

• PTC and ITC were added to Wind and Solar expansion

• Demand response was increased an additional 3% per year over Current Trends amounts

• DC Ties were increased by 3,000 MW to represent new connections to external ERCOT markets

• This scenario will be analyzed with Kermit


Stringent Environmental Results

Capacity by Fuel TypeWind total times 8.7%Solar total times 70%

Generation by Fuel Type


CC Adds MW - 2,000 650 2,000 6,400 CT Adds MW - - 190 - - Coal Adds MW - - - - - Nuclear Adds MW - - - 1,100 1,100 CAES Adds MW - - - - - Geothermal Adds MW - 120 120 120 120 Biomass adds MW - - 80 80 80 Solar Adds MW - 4,500 4,500 4,500 3,000 Wind Adds MW 2,627 4,337 5,614 413 300 Annual Capacity Additions MW 2,627 10,957 11,154 8,213 11,000 Cumulative Capacity Additions MW 2,627 13,584 24,738 32,951 43,951 Retirements MW 3,854 2,086 2,379 11,223 977 Residential Demand Response MW 300 318 337 358 373 Industrial Demand Response MW 1,200 1,273 1,351 1,434 1,492 Reserve Margin % 11.96 9.84 10.90 14.49 13.52 Coincident Peak MW 76,557 79,931 82,692 85,457 87,321 Average LMP $/MWh 69.39 84.78 106.59 100.97 109.67 Natural Gas Price $/mmbtu 6.52 6.57 7.43 7.53 7.85 Average Market Heat Rate MMbtu/MWh 10.64 12.90 14.35 13.41 13.97 Natural Gas Generation % 51.6 54.9 54.1 54.5 56.7 Coal Generation % 24.5 16.5 12.0 8.3 3.7 Wind Generation % 13.8 16.5 19.9 18.7 18.2 Solar Generation % - 2.6 4.9 7.1 8.4 Scarcity Hours HRS - 2.0 8.0 1.0 2.0 Unserved Energy GWhs - 1.5 6.1 0.8 2.1 SO2 Tons 253,868 169,839 123,993 86,700 41,523 CO2 (k) Tons 206,849 184,529 166,290 153,662 132,129 NOx Tons 106,910 92,600 80,318 74,607 69,006


Stringent Environmental Scenario Results


Economic Conditions•High economic growth in Texas, especially industrial growth at gulf coast, •High growth in oil & gas exploration•High growth in manufacturing near border & ports•Growth in immigration to Texas

Weather / Water•Technology improvement in oil & gas production•Technological improvements alleviate additional pressure on water supply

Natural Gas & Oil Prices•$10/MMBtu price difference with the rest of world•High oil prices $100+/barrel•[Domestic natural gas price could be equal/higher/lower than in Current Trends]

Transmission Regulations•Same as Current Trends

End - Use•More potential for industrial demand response•Same as Current Trends for non-industrial demand response•More CHP [due to high NG supply]

Alternative Generation•Same as Current Trends

Resource Adequacy Standards•Could deviate from Current Trends if additional growth from the LNG exports drive faster demand growth than naturally supported by market entry.

Environmental Regulations•Environmental regulations conducive to continued growth in oil & gas production•[Other environmental regulations are same as in Current Trends]•Other policies are conducive to LNG export

Story:Very healthy global economy drives high demand for natural gas. Oil & gas exploration in Texas remain high. Abundant natural gas supply spurs large export and industrial growth in Texas.

Implications for ERCOT:•High electricity load growth on the coast & dry gas basins•Transmission improvements needed to serve new industrial load and oil & gas load•Pressure on resource adequacy [due to uncertainties around how to meet the fast growing electric demand]

8. Scenario: High LNG Export


High LNG Export Highlights• Load forecast between High Economic Growth and Current Trends

scenarios

• Added 4.1 bcf/d LNG from 2018 and additional 5.7 bcf/d from 2019, the total is around 3840 MW flat load


CC Adds MW 2,600 7,200 3,200 1,450 1,850 CT Adds MW 760 1,700 190 1,060 - Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW - - 3,700 4,200 2,800 Wind Adds MW - - - - - Annual Capacity Additions MW 3,360 8,900 7,090 6,710 4,650 Cumulative Capacity Additions MW 3,360 12,260 19,350 26,060 30,710 Retirements MW 955 2,086 2,379 2,453 950 Residential Demand Response MW 300 18 19 21 14 Industrial Demand Response MW 1,200 73 78 83 58 Reserve Margin % 9.51 9.85 11.01 11.98 13.05 Coincident Peak MW 78,721 84,639 88,315 92,119 94,744 Average LMP $/MWh 53.50 57.10 63.59 67.54 69.16 Natural Gas Price $/mmbtu 5.02 5.07 5.93 6.03 6.35 Average Market Heat Rate MMbtu/MWh 10.66 11.26 10.72 11.20 10.89 Natural Gas Generation % 47.2 48.3 52.9 54.9 55.5 Coal Generation % 30.6 29.1 26.3 23.8 22.9 Wind Generation % 11.8 12.0 10.0 8.9 8.5 Solar Generation % 0.0 0.0 2.0 4.0 5.3 Scarcity Hours HRS 8 11 8 11 7 Unserved Energy GWhs 7.1 12.9 8.7 10.0 6.7 SO2 Tons 316,107 273,429 314,332 278,560 269,049 CO2 (k) Tons 230,087 220,369 256,336 258,153 262,069 NOx Tons 124,100 119,118 142,814 144,306 147,069


High LNG Export Scenario Results


Economic Conditions•Same as in Current Trends•Companies are more willing to locate in Texas due to perceived highly reliable electricity system

Weather / Water•Same as Current Trends

Gas / Oil Prices•Same as Current Trends

Trans Regs•CREZ concept applied to load centers•[Legislative direction or PUCT mandate to increase system resiliency and flexibility beyond traditional planning criteria]•[Increased reliability standards applied to transmission planning]

End Use•Same as Current Trends

Alt. Gen•Same as in Current Trends•[Perceived reliability issues could result in increased distributed generation and higher backup gen / cogen at the customers]

Res Adequacy•Regulators’ desire for a more robust fleet leads to required reserve margin and/or centralized capacity market

Environmental Regs / Energy Policy•[Environmental regs and renewables] are the same as in Current Trends •[Limitations on] generation development near load centers

Story:

•[“Black swan” events on the grid occur more regularly across the US, impacting system reliability]•Northeast-type events (e.g. blackouts, storms) occur in ERCOT, Rio Grande Valley blackout, •West Texas load growth continues•Houston import constraints + challenging reliability events occur •Regulators have major concerns, generation and load see high risk •[Value of resilience and system flexibility is broadly recognized and stakeholders are more willing to invest in infrastructure to ensure greater resiliency]

Implications for ERCOT:•Highly reliable system would drive more load growth•Reduced congestion risk would lead to greater generation buildout•System will be able to support major power transfers within ERCOT during highly variable conditions (weather, wind, growth…)•Highly reliable & flexible system as a result•[Be able to serve spikes in load growth]

9. Scenario: High System Resiliency


High System Resiliency Highlights• DC Ties were increased by 3,000 MW to represent new connections to

external ERCOT markets as under Stringent Environmental Scenario

• Included a 13.75% reserve margin target

• DR growth is 5% every year as under String Environmental Scenario


CC Adds MW - 1,600 - - - CT Adds MW - 2,660 - - - Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW - - 2,500 1,800 400 Wind Adds MW - - - - - Reliability Adds MW 1,710 3,990 3,420 3,420 2,470 Annual Capacity Additions MW 1,710 8,250 5,920 5,220 2,870 Cumulative Capacity Additions MW 1,710 9,960 15,880 21,100 23,970 Retirements MW 1,952 2,086 2,569 2,453 950 Residential Demand Response MW 300 47 55 63 48 Industrial Demand Response MW 1,200 189 219 253 191 Reserve Margin % 13.80 13.80 13.82 13.79 13.91 Coincident Peak MW 79,571 82,936 85,686 88,443 90,300 Average LMP $/MWh 38.43 42.31 47.72 51.23 55.20 Natural Gas Price $/mmbtu 5.02 5.07 5.93 6.03 6.35 Average Market Heat Rate MMbtu/MWh 7.66 8.35 8.05 8.50 8.69 Natural Gas Generation % 46.1 49.8 48.3 50.6 51.9 Coal Generation % 31.1 28.7 29.6 27.8 27.3 Wind Generation % 12.1 11.4 10.9 9.8 9.4 Solar Generation % 0.0 0.0 1.5 2.5 2.7 Scarcity Hours HRS - - - - - Unserved Energy GWhs - - - - - SO2 Tons 315,785 301,067 340,338 312,889 304,938 CO2 (k) Tons 225,041 233,102 244,327 248,058 254,251 NOx Tons 119,110 124,851 130,037 131,855 134,802


High System Resilience Scenario Results


Economic Conditions•[Moderate decline in population and economic growth with higher impacts on localities with water intensive industry]•Increased water and electricity prices•Productivity and job losses in agriculture•Potential negative impact on oil & gas extraction•Impact on local economy

Weather & Water•More drought than in the Current Trends•Hot summers•Limited water supply

Natural Gas and Oil Prices•Moderate increase in natural gas prices relative to in Current Trends [$1 – 2/MMBtu]•Moderate impact on local oil production, but prices are set internationally [at the same price as Current Trends]

Gen Res Adequacy Standards•Mandated reserve margin and increased operating reserves•Demand response [plays a larger role than in Current Trends]

End – Use Customer / Policies•Increase the development of demand-side management tools [increases EE penetration beyond those in the Current Trends]•Greater market penetration of time-of-use rates and water smart devices

Alt. Generation Resources•Continued investments in renewables, storage, and dry-cooling [with continued federal PTC/ITC continues]•Policy incentives for dry-cooling retrofits?]•Development of co-location desalination and power plants•[Renewable costs same as Current Trends]

Transmission Regs •More DC ties to neighboring regions•Potentially increase in transmission into high solar regions [possibly solar CREZ]•Increase in transmission due to policy/ regulatory changes resulting from drought

Enviro Regs / Energy Policies•Required drought management plans and water conservations•Stringent requirements on power generation water use leads to dry cooling•Tax breaks for drought resistant generation•[Other environmental regs are same as Current Trends]

Story:

•The rate of population and economic growth moderately declines, due to sustained [multi-year] drought conditions.•Sustained drought conditions impact water-intensive generation resources (nuclear/coal/steam units), and lead to significant increase [over those in Current Trends] in renewables and storage, dry cooling [on thermal generation], and transmission expansion.

Implications for ERCOT:•Derating units due to water resource limitations and generation retirements lead to challenges in meeting demand•Potential need for new ancillary services to meet the needs of integrating new renewable energy generation•More transmission [will be needed for expansion of renewables [over those in Current Trends]•[Seriously consider] more interconnections outside ERCOT.

10. Scenario: Water Stress


Water Stress Highlights• High natural gas price

• New thermal additions are dry cooled only

• Includes PTC / ITC

• Increased DC ties

• Reserve margin set to 13.75%


Water Stress Scenario Results

CC Adds MW - - - - - CT Adds MW - 760 300 - - Coal Adds MW - - - - - Nuclear Adds MW - - - - - CAES Adds MW - - - - - Geothermal Adds MW - - - - - Solar Adds MW - 3,200 4,400 3,500 2,600 Wind Adds MW - - 399 - 272 Reliability Adds MW 1,550 3,500 850 1,140 190 Annual Capacity Additions MW 1,550 7,460 5,949 4,640 3,062 Cumulative Capacity Additions MW 1,550 9,010 14,959 19,599 22,661 Retirements MW 922 3,966 2,379 2,453 950 Residential Demand Response MW 300 318 337 358 373 Industrial Demand Response MW 1,200 1,273 1,351 1,434 1,492 Reserve Margin % 13.62 13.36 13.81 13.70 13.69 Coincident Peak MW 76,557 79,931 82,693 85,457 87,322 Average LMP $/MWh 47.58 52.14 57.27 72.73 77.82 Natural Gas Price $/mmbtu 6.52 6.57 7.43 7.53 7.85 Average Market Heat Rate MMbtu/MWh 7.30 7.94 7.71 9.66 9.91 Natural Gas Generation % 46.3 48.3 47.2 48.9 49.6 Coal Generation % 32.3 29.6 28.8 26.8 25.6 Wind Generation % 11.3 10.7 10.6 9.6 9.4 Solar Generation % - 1.9 4.2 5.9 7.1 Scarcity Hours HRS - 2.0 - 4.0 7 Unserved Energy GWhs - 0.04 - 3.8 9.0 SO2 Tons 392,932 379,956 384,213 345,663 311,049 CO2 (k) Tons 233,829 238,339 243,316 245,872 247,597 NOx Tons 125,808 127,781 130,469 131,884 132,695


Date post:	21-Dec-2015
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ERCOT PUBLIC 7/22/2014 1 2014 LTSA Scenario Results July, 2014.

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