1 Regional Portfolio Model and Direct Use of Gas Assessment Michael Schilmoeller NW Power and...

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Regional Portfolio Model and Regional Portfolio Model and Direct Use of GasDirect Use of Gas

AssessmentAssessment

Michael SchilmoellerMichael SchilmoellerNW Power and Conservation CouncilNW Power and Conservation Council

for thefor theRegional Technical ForumRegional Technical ForumTuesday, June 29, 2010Tuesday, June 29, 2010

2

OverviewOverview

• Goals of the study• Principles of the fuel-switching

evaluation• The role of the Regional Portfolio Model

(RPM)• Preliminary findings

3

GAS TANK 58% EFF INSTANT GAS 82% EFF

ELEC TANK 93% EFFHPWH 200% EFF

GAS PIPE & DISTRIB 99% EFF COMBUSTION TURBINE 48% EFF

GAS PIPE & DISTRIB 99+% EFF

57% 81%

81%38%

Hot Water Thermodynamic

s

ELEC TRANS & DISTRIB 86% EFF

4

GAS TANK $283/TankINSTANT GAS $911/Tank

ELEC TANK $286/TankHPWH $1300/Tank

GAS PIPE & DISTRIB $/cuft-year COMBUSTION TURBINE $92/kW-year

GAS PIPE & DISTRIB $/cuft-year

Hot Water Economics

ELEC TRANS & DISTRIB $45/kW-year

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Objectives• What’s better economically?

– Switching can go either way: direct gas to electricity or electricity to direct gas

– Costs and decisions use total resource cost, with wholesale prices for electricity and gas

– The study should consider carbon penalty costs and other sources of risks

• Recognize uncertainty and imperfect foresight• Determine if incentives or disincentives

improve the outcome

6

Key Assumptions• Limited to existing construction of new

residential and commercial buildings

• Assume that energy requirement per household for heating is fixed (price insensitive), but seasonal

• Assume that a fixed portion of existing stock turns over each year, which limits the potential

7

Existing Segments

Market Segment

Existing Heat System Existing DHW Gas Extension

FAF Electric Electric Resistance Main and ServiceService Extension

1m Heat Pump Electric Resistance Main and ServiceService Extension

Zonal Electric Electric Resistance Main and ServiceService Extension

FAF Electric Electric Resistance Main and ServiceService ExtensionNA

1s Heat Pump Electric Resistance Main and ServiceService Extension

Zonal Electric Electric Resistance Main and ServiceService Extension

2m Gas FAF Electric Resistance existing2s Gas FAF Electric Resistance existing3m Gas FAF Electric Resistance existing3s Gas FAF Electric Resistance existing4m Gas FAF Gas Tank existing4s Gas FAF Gas Tank existing

source: C:\Backups\Plan 6\Studies\Model Development\Direct Use of Gas\Gas Conversion Model (080509) MJS markup.xls, worksheet "table illus"

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Conversion Options

Retrofit Heating SystemFAF

Electric Heat Pump Gas FAFGas

Hydronic Gas/HP Hybrid

Retrofit DHW

source: C:\Backups\Plan 6\Studies\Model Development\Direct Use of Gas\Gas Conversion Model (080509) MJS markup.xls, worksheet "table illus"

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Gas

Tan

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WH

Inst

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Gas

Gas

Tan

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Inst

ant

Gas

Gas

Tan

k

Inst

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Gas

HP

WH

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Selected CombinationsRetrofit Heating System FAF Electric Heat Pump Gas FAF Gas Hydronic Gas/HP Hybrid

Retrofit DHW

Market Segment

Existing Heat System Existing DHW Gas Extension

FAF Electric Electric Resistance Main and Service 1 1 1 1 1 1 6Service Extension 1 1 1 1 1 1 6

1m Heat Pump Electric Resistance Main and Service X X 1 1 1 1 1 1 8Service Extension X X 1 1 1 1 1 1 8

Zonal Electric Electric Resistance Main and Service 1 1 1 1 1 1 6Service Extension 1 1 1 1 1 1 6

FAF Electric Electric Resistance Main and Service 1 1 1 1 4Service Extension 1 1 1 1 4NA X X 1 3

1s Heat Pump Electric Resistance Main and Service X X 1 1 1 1 6Service Extension X X 1 1 1 1 6

Zonal Electric Electric Resistance Main and Service 1 1 1 1 4Service Extension 1 1 1 1 4

2m Gas FAF Electric Resistance existing X X 22s Gas FAF Electric Resistance existing X X 23m Gas FAF Electric Resistance existing X X 23s Gas FAF Electric Resistance existing X X 24m Gas FAF Gas Tank existing 1 1 1 1 44s Gas FAF Gas Tank existing 1 1 1 1 4

Total 87source: C:\Backups\Plan 6\Studies\Model Development\Direct Use of Gas\Gas Conversion Model (080509) MJS markup.xls, worksheet "table illus"X - some applicance choice is the same as existing; 1 - both appliances change

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Gas

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Gas

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Gas

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Gas

HP

WH

10

-10.0

10.0

30.0

50.0

70.0

90.0

110.0

130.0

150.0

-10 10 30 50 70 90 110 130 150

ERA

HPA

HPC

HPD

DUZ

Least-Cost Solutionone market segment, fixed gas price

Tota

l C

ost

(re

al le

veliz

ed

20

06

$/1

03

BTU

)

Electricity Price (2006$/MWh)Principles of the fuel-switching evaluation

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Optimal Program Tableone market segment

MC Electric

MC Gas -$ 10$ 20$ 30$ -$ Program 73 No Conversion Program 71 Program 71

1$ Program 73 No Conversion Program 71 Program 712$ Program 73 Program 73 No Conversion Program 713$ Program 73 Program 73 Program 73 Program 714$ Program 73 Program 73 Program 73 Program 735$ Program 73 Program 73 Program 73 Program 736$ Program 73 Program 73 Program 73 Program 737$ Program 73 Program 73 Program 73 Program 738$ Program 73 Program 73 Program 73 Program 739$ Program 73 Program 73 Program 73 Program 73

source: Illustrating DUG 100606.xls, segment 2m-3m

Optimal Program

Principles of the fuel-switching evaluation

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Incremental Fixed Cost Tableone market segment


MC Electric

MC Gas -$ 10$ 20$ 30$ -$ ($142,464.08) 0 $434,000.40 $434,000.40

1$ ($142,464.08) 0 $434,000.40 $434,000.402$ ($142,464.08) ($142,464.08) 0 $434,000.403$ ($142,464.08) ($142,464.08) ($142,464.08) $434,000.404$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)5$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)6$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)7$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)8$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)9$ ($142,464.08) ($142,464.08) ($142,464.08) ($142,464.08)


Incremental Fixed Cost

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Incremental Gas Use Tableone market segment


MC Electric

MC Gas -$ 10$ 20$ 30$ -$ -32344.40754 0 11571.27109 11571.27109

1$ -32344.40754 0 11571.27109 11571.271092$ -32344.40754 -32344.40754 0 11571.271093$ -32344.40754 -32344.40754 -32344.40754 11571.271094$ -32344.40754 -32344.40754 -32344.40754 -32344.407545$ -32344.40754 -32344.40754 -32344.40754 -32344.407546$ -32344.40754 -32344.40754 -32344.40754 -32344.407547$ -32344.40754 -32344.40754 -32344.40754 -32344.407548$ -32344.40754 -32344.40754 -32344.40754 -32344.407549$ -32344.40754 -32344.40754 -32344.40754 -32344.40754


Incremental Gas Usage: 2010

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Incremental Electricity Use Tableone market segment


MC Electric

MC Gas -$ 10$ 20$ 30$ -$ 0.842991508 0 -0.419844613 -0.419844613

1$ 0.842991508 0 -0.419844613 -0.4198446132$ 0.842991508 0.842991508 0 -0.4198446133$ 0.842991508 0.842991508 0.842991508 -0.4198446134$ 0.842991508 0.842991508 0.842991508 0.8429915085$ 0.842991508 0.842991508 0.842991508 0.8429915086$ 0.842991508 0.842991508 0.842991508 0.8429915087$ 0.842991508 0.842991508 0.842991508 0.8429915088$ 0.842991508 0.842991508 0.842991508 0.8429915089$ 0.842991508 0.842991508 0.842991508 0.842991508


Incremental Electric Usage: 2010

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Roll Up Incr. Fixed Costacross all market segments

(RL $ 2006/yr)

MC Gas MC Electric ($/MWh $2006)

($/MMBTU $2006) -$ 10$ 20$ 30$ -$ ($81,728,682.12) 0 $11,728,451.70 $12,570,529.19

1$ ($81,728,682.12) ($81,586,218.04) $11,728,451.70 $11,728,451.702$ ($81,728,682.12) ($81,728,682.12) ($78,027,511.96) $11,728,451.703$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) $11,728,451.704$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)5$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)6$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)7$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)8$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)9$ ($81,728,682.12) ($81,728,682.12) ($81,728,682.12) ($81,728,682.12)


Incremental Fixed Cost


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Roll Up Incr. Gas Usageacross all market segments

(MMBTU/yr)


($/MMBTU $2006) -$ 10$ 20$ 30$ -$ -7181960.834 0 311812.4594 323473.9025

1$ -7181960.834 -7149616.427 311812.4594 311812.45942$ -7181960.834 -7181960.834 -6307790.717 311812.45943$ -7181960.834 -7181960.834 -7181960.834 311812.45944$ -7181960.834 -7181960.834 -7181960.834 -7181960.8345$ -7181960.834 -7181960.834 -7181960.834 -7181960.8346$ -7181960.834 -7181960.834 -7181960.834 -7181960.8347$ -7181960.834 -7181960.834 -7181960.834 -7181960.8348$ -7181960.834 -7181960.834 -7181960.834 -7181960.8349$ -7181960.834 -7181960.834 -7181960.834 -7181960.834


Incremental Gas Usage: 2010


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Roll Up Incr. Electricity Usageacross all market segments

(MWa/yr)


($/MMBTU $2006) -$ 10$ 20$ 30$ -$ 188.8392834 0 -11.38488915 -11.77734369

1$ 188.8392834 187.9962919 -11.38488915 -11.384889152$ 188.8392834 188.8392834 166.169613 -11.384889153$ 188.8392834 188.8392834 188.8392834 -11.384889154$ 188.8392834 188.8392834 188.8392834 188.83928345$ 188.8392834 188.8392834 188.8392834 188.83928346$ 188.8392834 188.8392834 188.8392834 188.83928347$ 188.8392834 188.8392834 188.8392834 188.83928348$ 188.8392834 188.8392834 188.8392834 188.83928349$ 188.8392834 188.8392834 188.8392834 188.8392834

10$ 188.8392834 188.8392834 188.8392834 188.8392834source: Illustrating DUG 100606.xls, segment 2m-3m

Incremental Electric Usage: 2010


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OverviewOverview




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How the NWPCCHow the NWPCCApproach DiffersApproach Differs

• No perfect foresight, use of decision criteria for capacity additions

• Likelihood analysis of large sources of risk (“scenario analysis”)

• Adaptive plans that respond to futures

Role of the RPM

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Special TermsSpecial Terms

• Futures: aspects of the future we cannot control, combinations of uncertainties

• Plans: actions or policies that we can control

Role of the RPM

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Sources of UncertaintySources of Uncertainty• Fifth Power Plan

– Load requirements– Gas price– Hydrogeneration– Electricity price– Forced outage rates– Aluminum price– Carbon allowance cost– Production tax credits– Renewable Energy Credit

(Green tag value)

• Sixth Power Plan– aluminum price and

aluminum smelter loads were removed

– Power plant construction costs

– Technology availability– Conservation costs and

performance

Role of the RPM

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Excel Spinner Graph Model

• Represents one plan responding under each of 750 futures

• Illustrates “scenario analysis on steroids”

Role of the RPM

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The Least-Risk PlanDirect Use of Gas study L814a

and efficient frontier11,765 plans evaluated

Expected Outcomes (NPV $2006 M)

Wo

rst

Ou

tco

mes

(N

PV

$20

06 M

)

Role of the RPM

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Representationoff-peak formulas not shown

Role of the RPM

1

2

234

6 85

7109

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Evaluation

Role of the RPM

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OverviewOverview




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Closest Plan with No Natural Gas Price Decision Criterion Adjustment

Direct Use of Gas study L814aand efficient frontier

11,765 plans evaluated

Expected Outcomes (NPV $2006 M)

Wo

rst

Ou

tco

mes

(N

PV

$20

06 M

)

Preliminary Findings

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First Results Are Not Credible• The RPM found the least risk plan strongly

discourages switching from electricity to natural gas (strongly encourages switching from direct use of natural gas to electric heat pumps) primarily because of assumed high natural gas appliance cost

• We do not fully understand the economic calculations in the GEP fuel-switching model

• We may have some inconsistencies in interpretation of GEP model results


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Assumptions Need Review


Source: workbook “C:\Backups\Plan 6\Studies\Model Development\Direct Use of Gas\Gas Conversion Model (080509) MJS markup.xls”, worksheets “Inputs” and “Incr Costs”

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Schedule

• Indication of pieces of study that participants want to review (Today)

• June 29, August 3, and possibly September 28 RTF meetings

• Conservation Resource Advisory Committee (CRAC) meeting on policy implications in September?

• Presentation of results to the Power Committee of the Council (September?)


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Research Is Full of SurprisesResearch Is Full of Surprises

More information about the Council and its work:

www.NWCouncil.org

This presentation, including the spinner graph:

http://www.nwcouncil.org/dropbox/NWPCC-DUG-100629.zip

1 Regional Portfolio Model and Direct Use of Gas Assessment Michael Schilmoeller NW Power and...

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