ECC Conf Presentation for Mike Kotara FINAL · 2016-08-25 · Overcoming the Cost Hurdle fR blEfor...
Transcript of ECC Conf Presentation for Mike Kotara FINAL · 2016-08-25 · Overcoming the Cost Hurdle fR blEfor...
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General Session
Four Decades of Pursuing a Diversified Energy Portfolio at CPS EnergyCPS Energy
MIKE KOTARASenior Vice President
MIKE KOTARASenior Vice PresidentCPS EnergyCPS Energy
SPEAKERSPEAKER
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CPS Energy BackgroundCPS Energy – Background• Electric & Gas utility serving the greater San Antonio area
• Oldest energy utility in Texas – Founded in 1860Oldest energy utility in Texas Founded in 1860• First service was gas lights in front of The Alamo• Celebrating 150 years of operation
• One of the largest municipally‐owned utilities in the U.S.g p y• 707,000 electric customers• 323,000 natural gas customers• 3,600 employees
• Outstanding customer satisfaction track record• Low electric rates – 2009 Residential rates averaged about 9¢/kwh
J.D. Power Survey – Southern Region 2008 2009 2010J.D. Power Survey Southern Region 2008 2009 2010
Electric Residential Customers 2nd 1st 3rd
Gas Residential Customers 2nd 1st n/a
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CPS E ’ Vi i 2020CPS Energy’s Vision 2020• Goals for Renewable Energygy
• 1,500 MW of renewable energy capacity by 2020• 100 MW from renewable sources other than wind by 2020
• Goals for Energy Efficiency & Conservation• Save for Tomorrow Energy Plan (STEP) will help avoid 771 MW
of electric load growth by 2020g y
• Drive local economic development by maintaining retail electric rates at least 10%maintaining retail electric rates at least 10% lower than other major Texas cities
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M i T k AMain Take-Aways• Energy diversification and energy independence have been cornerstones of CPS Energy’s strategy for the past four decades
R bl i i f t b t th• Renewable energy is growing fast, but there are challenges to overcome, and traditional energy sources are still important
• Uncertainty around natural gas prices is a significant risk for all new energy projects including nuclear, coal and
bl ll l drenewables, as well as plant upgrades
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Four Decades of Energy Mix Diversification at CPS EnergyDiversification at CPS Energy
1970 1990Nuclear16.3%
1980
Gas – Steam Gas Steam
Coal30.9%
Gas – Steam
Coal25.2%
Gas – Steam100.0%
1,701 MW
Gas – Steam52.8%
4,632 MW
Gas Steam74.8%
3,452 MW
G CC
2010
Gas – CT & CC 10.2%
Renewables10.9%
Gas – Steam29.1%
2000
Gas – CC 9.4%
Nuclear14.8%
Nuclear16.4%
Coal33.5%
6,800 MW InstalledC it
Coal28.0% Gas –
Steam47.8%5,113 MW
Capacity
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970 Megawatts of New Generation Capacity in 2010Generation Capacity in 2010
Spruce Unit 2 Braunig Peaking TurbinesSpruce Unit 2780 Megawatts
PRB Low-Sulfur Coal
Braunig Peaking Turbines190 Megawatts
Natural Gas / Fuel Oil
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Diverse Energy Mix Keeps CPS Energy’s Residential Bills LowEnergy’s Residential Bills Low$0.19
$0 13$0.15$0.17
$0 09$0.11$0.13
Avg REP$/kw
h
$0.05$0.07$0.09
CPSE
Mar '08
Sep '08
Feb '09
May '09
Aug
'09
Nov
'09
Feb '10
May '10
Aug
'10
M S F M A N F M A
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CPS’ Renewable Energy ProjectsProjects in Commercial OperationWind 709.0 MW
Landfill Gas 9.6 MW
Total 718 6 MW
Sweetwater 3 & 4 Wind
Total 718.6 MW
Projects in DevelopmentWind 150.0 MW
Desert Sky Wind
Solar 41.4 MW
Total 191.4 MW
Covel Gardens Landfill Gas
Western Ranch Solar I
Blue Wing Solar
CPS Energy is a leader in Renewable
Energy with more than 900 MW under
Penascal Wind
Papalote Creek WindCedro Hill Wind
than 900 MW under contract
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Blue Wing Solar ProjectDeveloper – JuwisolarEquity Owner – Duke EnergyOff-Take – CPS EnergyScheduled COD – Dec. 2010Capacity – 14.4 MWDeal Structure – 30 yr PPASolar Technology – Thin FilmLocation – San Antonio, TX
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Challenges for Renewable EnergyChallenges for Renewable Energy
Cost / FinancingCost / Financing
I t itt / F tiIntermittency / Forecasting– Financial Risk in ISO Markets
Transmission Congestion Riska s ss o Co gest o s
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Cost of Renewable Energy is D i B t Still M E iDropping, But Still More Expensive
25
15
20
10
15
ents/
kWh
0
5
Ce
0
Nucle
ar
atura
l Gas
urch
ased
Po
wer
GCC
Coal
w/ C
CS Win
d
Solar
Th
erm
al
Na P IG
CPS Energy 2009 IRP Study
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Overcoming the Cost Hurdle f R bl Efor Renewable Energy
Renewable energy’s costNatural Gas
4 0%RenewablesRenewable energy s cost
premium can be overcome by:
• Cost averaging with less expensive
4.0%Economic Purchases
0.4%
13.0%
resources in a larger portfolio
• Retail demand for “Green Power” at premium pricing
Coal44.8%
Nuclear37.7%at premium pricing
• Regulatory requirements such as Renewable Portfolio Standards (RPS) or Feed in Tariffs (FIT)
CPS Energy’s 2010 Forecast EnergyMi F R il El i S l(RPS) or Feed‐in‐Tariffs (FIT) Mix For Retail Electric Sales
(MWh)
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Wind Energy Forecasting is a ChallengeFinancial Risk Worn by “Wind Takers” in ISO MarketsFinancial Risk Worn by Wind Takers in ISO Markets
450
500 300
Over-Scheduled at High Prices
300
350
400
450
150
200
250
MW
h)
150
200
250MW
50
100
150
MC
PE ($
/M
0
50
100
5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
-50
0
0:1
1:1
2:1
3:1
4:1
5:1
6:1
7:1
8:1
9:1
10:1
11:1
12:1
13:1
14:1
15:1
16:1
17:1
18:1
19:1
20:1
21:1
22:1
23:1
4/2/2010 --- 4/3/2010
SQ1 Schedule MCPE W SQ1 Generation
Under-Scheduledat Negative Prices
SQ1 Schedule MCPE - W SQ1 Generation
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Top Uncertainties for New Energy Development & Plant Upgrades
Natural Gas Prices
G h G L i l iGreenhouse Gas Legislation
Cost and Availability of CapitalCost and Availability of Capital
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Natural Gas Prices are the Biggest Unknownthe Biggest Unknown
Increasing Risk Duration
Capital Technology Carbon Fuel Cost
Nuclear
Natural Gas
New Coal w/CCS
Hi h Ri k M di Ri k L Ri kR l i Ri k L d High Risk Medium Risk Low RiskRelative Risk Legend
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Weak Economy + Surplus of Shale Gas = Lower Gas PricesShale Gas Lower Gas Prices
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High Degree of Uncertainty in Long-Term Gas Price ForecastingLong Term Gas Price Forecasting
13
14
10
11
12
8
9
10
$/m
mBt
u
5
6
7
$
42011 2015 2019 2023 2027 2031
2008 Spring 2009 Fall 2009 2010
CPS Energy IRP Studies
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Key Factors for “Retrofit vs. Retire” Decisions for Existing Coal-Fired PlantsDecisions for Existing Coal Fired Plants
Expected remaining plant life and utilization factors– Natural gas prices/wholesale electric prices
Wi d b ild t– Wind energy build-out– New environmental regulations/constraints
Other standard variables (efficiency condition etc )– Other standard variables (efficiency, condition, etc.)Carbon pricing impact on CO2 emissionsCapital requirements for other regulatoryCapital requirements for other regulatory upgrades and efficiency/reliability upgrades
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CPS Energy’s Analysis of JT Deely Plant Sho s Fa orable EconomicsPlant Shows Favorable Economics
Significant positive NPV under current long-range
Deely 1 Deely 2under current long-range forecast for natural gas prices
– Break-even natural gas price is more than 30% below the D 2009 f f 2015 2035
Capacity (MW) 430 430
COD 1976 1977
Fuel PRB Coal PRB Coal Dec-2009 forecast for 2015-2035
Significant positive NPV even under Waxman-Markey “High CO Price” scenario
Fuel PRB Coal PRB Coal
PM Control Baghouse Baghouse
SCR for NOx No 2011CO2 Price scenario
– $30-$109/ton vs. EPA forecast of $10-35/ton vs. CBO forecast $15-53/ton (2012-2030)
FGD for SOx No No
Analyzed retrofitting Deely 1 & 2 with FGD scrubbers and the 2nd SCR vs.
Significant positive NPV even with 27 GW of wind energy build out in Texas by 2018
FGD scrubbers and the 2 SCR vs. retiring the plant early and building a new natural gas H-class combined cycle plant
– ERCOT forecasts 19 GW of wind