The Northwest Forecast – Energy Efficiency Dominates Resource Development

Northwest Power and ConservationCouncil

The Northwest Forecast – The Northwest Forecast – Energy Efficiency Energy Efficiency Dominates Resource Dominates Resource DevelopmentDevelopment

Tom EckmanTom Eckman

Manager, Conservation ResourcesManager, Conservation Resources

Northwest Power and Conservation CouncilNorthwest Power and Conservation Council

Presented September 26, 2005Presented September 26, 2005

2005 ACEEE Energy Efficiency as a Resource Conference2005 ACEEE Energy Efficiency as a Resource Conference


What You’re About To HearWhat You’re About To Hear

Efficiency and the Current Resource MixEfficiency and the Current Resource Mix

Regional Efficiency GoalsRegional Efficiency Goals

– 55thth Northwest Power and Conservation Plan Northwest Power and Conservation Plan

– Utility and SBC Administrator PlansUtility and SBC Administrator Plans

What’s Behind the GoalsWhat’s Behind the Goals

The Challenge AheadThe Challenge Ahead


PNW Energy Efficiency PNW Energy Efficiency AchievementsAchievements1978 - 20041978 - 2004

0

500

1,000

1,500

2,000

2,500

3,000

Avera

ge M

egaw

att

s

1978 1982 1986 1990 1994 1998 2002

BPA and Utility Programs Alliance Programs State Codes Federal Standards

Since 1978 Utility & BPA Since 1978 Utility & BPA Programs, Energy Codes & Programs, Energy Codes & Federal Efficiency Standards Have Federal Efficiency Standards Have Produced Nearly 3000 aMW of Produced Nearly 3000 aMW of Savings.Savings.


Cumulative 1978 - 2004 Efficiency Cumulative 1978 - 2004 Efficiency Achievements by SourceAchievements by Source

Alliance Programs185 aMW

6%

State Codes560 aMW

19%

Federal Standards545 aMW

19%

BPA and Utility Programs1635 aMW

56%


Energy Efficiency Resources Energy Efficiency Resources Significantly Reduced Projected PNW Significantly Reduced Projected PNW

Electricity SalesElectricity Sales

14,000

16,000

18,000

20,000

22,000

24,000

1980 1985 1990 1995 2000

Avera

ge M

egaw

att

s

Medium High ForecastMedium LowMedium High Minus ConservationActual


Energy Efficiency Met Nearly 40% of Energy Efficiency Met Nearly 40% of PNW Regional Firm Sales Growth PNW Regional Firm Sales Growth

Between 1980 - 2003Between 1980 - 2003

61%

39%

Generation Conservation


Regional Utility Conservation Acquisitions Have Regional Utility Conservation Acquisitions Have Also Helped Balance Loads & ResourcesAlso Helped Balance Loads & Resources

0

20

40

60

80

100

120

140

160

1978 1982 1986 1990 1994 1998 2002

Con

serv

ati

on

Acq

uis

itio

ns

(aM

W)

Response to West Coast

Energy CrisisResponse to NW

Recession

Response to “Restructuring

Discussions”

Creating Mr. Toad’s Wild Ride for the PNW’s Energy Efficiency IndustryCreating Mr. Toad’s Wild Ride for the PNW’s Energy Efficiency Industry


So What’s 3000 aMW?So What’s 3000 aMW?

It’s enough electricity to serve the It’s enough electricity to serve the entireentire state of Idaho and all of Western state of Idaho and all of Western MontanaMontana

It’s enough electricity to meet nearly It’s enough electricity to meet nearly 60% of Oregon total electricity use60% of Oregon total electricity use


So Much for the Past, So Much for the Past, What’s AheadWhat’s Ahead

PNW Portfolio Planning – Scenario Analysis on SteroidsPNW Portfolio Planning – Scenario Analysis on Steroids

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Annual Load Growth

Pro

bab

ilit

y (

%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 1% 2% 3% 4% 5%

Real Natural Gas Escalation Rate% )

Pro

bab

ilit

y (

%)

0%

5%

10%

15%

20%

25%

30%

3.27% 3.80% 3.85% 3.93% 2.50%

Nominal Annual Electricity Price Escalation Rate

Pro

bab

ilit

y (

%)

0

20

40

60

80

100

120

98

467

705

842

1,06

9

1,19

1

1,28

3

1,33

5

1,35

3

1,37

3

1,65

0

Resource Potential

Levelized C

ost

0%2%4%6%8%

10%12%14%16%18%20%

Carbon Tax Implementation Date

Pro

bab

ilty

(%

)

0

5000

10000

15000

20000

25000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975

Hydrosytem Year

Cap

acit

y (

MW

)

0%2%4%6%8%

10%12%14%16%18%20%

Pro

bab

ilit

y

$0 $6 $12 $18 $24 $30 $36

Carbon Tax

Frequency Chart

Dollars

Mean = $689.000

.011

.022

.032

.043

0

10.75

21.5

32.25

43

($3,509) ($1,131) $1,247 $3,625 $6,003

1,000 Trials 1,000 Displayed

Portfolio Portfolio Analysis Analysis ModelModel

$35,500

$36,000

$36,500

$37,000

$37,500

$23,500 $24,000 $24,500 $25,000

NPV System Risk (2004$Millions)

NP

V S

yste

m C

ost

(20

04

$M

illio

ns)

Efficient FrontierEfficient Frontier

NPV System Cost


Plans Along the Efficient Frontier Permit Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against RiskTrade-Offs of Costs Against Risk

$35,500

$36,000

$36,500

$37,000

$37,500

$23,600 $23,800 $24,000 $24,200 $24,400 $24,600

NPV System Cost (Millions)

NPV

Syst

em

Ris

k (

Mill

ions)

Least Risk

Least Cost


Three Conservation Options TestedThree Conservation Options Tested

Option 1Option 1: : AcceleratedAccelerated – Similar to the “best – Similar to the “best performance” over the last 20 yearsperformance” over the last 20 years– Non-lost opportunity limited to 120 aMW/yearNon-lost opportunity limited to 120 aMW/year– Ramp-up lost-opportunity to 85% by 2017Ramp-up lost-opportunity to 85% by 2017

Option 2Option 2: : SustainedSustained - Similar to typical rates over - Similar to typical rates over last 20 yearslast 20 years– Non-lost opportunity limited to 80 aMW/yearNon-lost opportunity limited to 80 aMW/year– Ramp-up lost-opportunity to 85% by 2017Ramp-up lost-opportunity to 85% by 2017

Option 3Option 3: : Status QuoStatus Quo - Similar to lowest rates over - Similar to lowest rates over last 20 yearslast 20 years– Non-lost opportunity limited to 40 aMW/yearNon-lost opportunity limited to 40 aMW/year– Ramp-up lost-opportunity to 85% penetration by 2025Ramp-up lost-opportunity to 85% penetration by 2025


Average Annual Conservation Average Annual Conservation Development for Alternative Levels of Development for Alternative Levels of

Deployment TestedDeployment Tested

0

500

1000

1500

2000

2500

3000

2005 2010 2015 2020Year

Savin

gs

(aM

W)

Option 3 - Status QuoOption 2 - SustainedOption 1 - Accelerated


Accelerating Conservation Accelerating Conservation Development Reduces Cost & Development Reduces Cost &

RiskRisk

$20

$22

$24

$26

$28

$30

$32

$34

$36

$38

$40

Option 1 - Accelerated Option 2 - Sustained Option 3 - Status Quo

NPV

(bill

ion

20

04

$)

NPV System Cost NPV System Risk


WECC Carbon Dioxide Emissions WECC Carbon Dioxide Emissions Reductions for Alternative Reductions for Alternative

Conservation TargetsConservation Targets

0

10

20

30

40

50

60

70

80

Mill

ion T

ons

over

20 y

ears

Option 1 -Accelerated

Option 2 -Sustained

Option 3 - StatusQuo


Why Energy Efficiency Reduces NPV Why Energy Efficiency Reduces NPV System Cost and RiskSystem Cost and Risk

It’s A Cheap (avg. 2.4 cents/kWh TOTAL It’s A Cheap (avg. 2.4 cents/kWh TOTAL RESOURCE COST) Hedge Against Market RESOURCE COST) Hedge Against Market Price SpikesPrice Spikes

It has value even when market prices are It has value even when market prices are low low

It’s Not Subject to Fuel Price RiskIt’s Not Subject to Fuel Price Risk It’s Not Subject to Carbon Control RiskIt’s Not Subject to Carbon Control Risk It’s Significant Enough In Size to Delay It’s Significant Enough In Size to Delay

“build decisions” on generation“build decisions” on generation

55thth Plan Relies on Conservation and Plan Relies on Conservation and

Renewable Resources to Meet Load GrowthRenewable Resources to Meet Load Growth**

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2004 2008 2012 2016 2020 2024

Year

Inst

alle

d C

apaci

ty (

MW

or

aM

W)

Conservation (aMW) Wind (MW) DR (MW)SCGTurbine (MW) CCGTurbine (MW) Coal (ICG) (MW)

**Actual future conditions (gas prices, CO2 control, conservation accomplishments) will Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedulechange resource development schedule


Near-Term Conservation Targets Near-Term Conservation Targets (2005-2009) = 700 aMW(2005-2009) = 700 aMW

0

20

40

60

80

100

120

140

160

2005 2006 2007 2008 2009

Resourc

e (

aM

W)

Residential - Lost Opportunity

Commercial - Lost Opportunity

I rrigated Agriculture - Non LostOpportunity

Industrial - Non Lost Opportunity

Residential - Non Lost Opportunity

Commercial - Non Lost Opportunity


Plan Plan Conservation Action ItemsConservation Action Items

Ramp up “Lost Opportunity” conservationRamp up “Lost Opportunity” conservation» Goal => 85% penetration in 12 years Goal => 85% penetration in 12 years » 10 to 30 MWa/year 2005 through 200910 to 30 MWa/year 2005 through 2009

Accelerate the acquisition of “Non-Lost Accelerate the acquisition of “Non-Lost Opportunity” resourcesOpportunity” resources

» Return to acquisition levels of early 1990’sReturn to acquisition levels of early 1990’s» Target 120 MWa/year next five yearsTarget 120 MWa/year next five years

Employ a mix of mechanismsEmploy a mix of mechanisms» Local acquisition programs (utility, SBC Administrator & Local acquisition programs (utility, SBC Administrator &

BPA programs)BPA programs)» Regional acquisition programs and coordinationRegional acquisition programs and coordination» Market transformation venturesMarket transformation ventures


Implementation Implementation ChallengesChallenges


The Total Resource Acquisition Cost* of The Total Resource Acquisition Cost* of 55thth Plan’s Conservation Targets Plan’s Conservation Targets

2005 – 2009 = $1.64 billion2005 – 2009 = $1.64 billion

$0

$50

$100

$150

$200

$250

$300

$350

$400

2005 2006 2007 2008 2009

Tota

l R

eso

urc

e C

ost

s(M

illio

ns

20

00

$)

Residential - Lost Opportunity

Commercial - Lost Opportunity

I rrigated Agriculture - Non LostOpportunity

Industrial - Non Lost Opportunity

Residential - Non Lost Opportunity

Commercial - Non Lost Opportunity

*Incremental capital costs to install measure plus program administration costs estimated at 20% of capital.


Meeting the Plan’s Efficiency Targets Will Meeting the Plan’s Efficiency Targets Will Likely Require Increased Regional InvestmentsLikely Require Increased Regional Investments

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Avera

ge 1

991-

04

Avera

ge 2

001-

2004

2005

2009

Uti

lity

In

vestm

en

ts (

mil

lio

n 2

00

0$

)


Although, The Share of Utility Although, The Share of Utility Revenues Required is ModestRevenues Required is Modest

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Avera

ge 1

991-

04

Avera

ge 2

001-

2004

2005

2009

Sh

are

of

Reta

il R

even

ues (

%)

Regional Average Revenues/kWh will need to increase by $0.000006/kWh


Utility* Efficiency Acquisition Plans for 2005 Are Utility* Efficiency Acquisition Plans for 2005 Are Close to 5Close to 5thth Plan Targets Plan Targets

0

20

40

60

80

100

120

2005 5th Plan Target 2005 Utility Acquistion Plan

Con

serv

ati

on

Levels

(M

Wa)

*Targets for 15 Largest PNW Utilities. These utilities represent approximately 80% of regional load.


Most IOU Efficiency Plans are Close Most IOU Efficiency Plans are Close to 5to 5thth Plan’s Targets Plan’s Targets

0

5

10

15

20

25

Pacifi

Corp

(OR,W

A,ID)

Puge

t Sou

nd E

nerg

y

Portland

Gen

eral

Idah

o Po

wer

Avist

a Util

ities

North

weste

rn E

nerg

y

Con

serv

ati

on

Levels

(M

Wa)

Plan Targets

Utility Plans


However, Several Large Public Utility Efficiency However, Several Large Public Utility Efficiency

Plans Are Well Below 5Plans Are Well Below 5thth Plan Targets Plan Targets

0

1

2

3

4

5

6

7

8

9

10

Seattl

e City

Lig

ht

Snoho

mish

PUD

Taco

ma

Power

Cowlit

z PU

D

Clark

PUD

EWEB

Grant

PUD

Bento

n PU

D

Flat

head

REA

Con

serv

ati

on

Levels

(M

Wa)

Plan Targets

Utility Plans


Summary – The PNWSummary – The PNW

Council and Recent Utility IRPs (PSE, Council and Recent Utility IRPs (PSE, Avista, Northwestern, Snohomish PUD) all Avista, Northwestern, Snohomish PUD) all found that accelerating energy efficiency found that accelerating energy efficiency acquisitions reduces projected system cost acquisitions reduces projected system cost and riskand risk

The Council’s 5The Council’s 5thth Plan Target is Plan Target is AchievableAchievable . . . but some major utilities are . . . but some major utilities are “behind the curve”“behind the curve”

The Northwest Forecast – Energy Efficiency Dominates Resource Development

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