1. Will CO2 Change What We Do?
Tom Eckman
Manager, Conservation Resources
Northwest Power and Conservation Council
Presented May 2, 2007
Utility Energy Forum

2. Assertion: Carbon Control Is In Our Future
Problem:
We don’t know when
We don’t know “how much”
So:
How should we position energy efficiency programs to address a “carbon controlled” future?
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3. Let’s Start With The Answer
Do It Sooner!
Do More!

4. How Much Sooner?
How Much More?

5. PNW Portfolio Planning – Scenario Analysis on Steroids
Portfolio Analysis Model
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6. Distribution of Cost for a Plan
Analysis Test 1,000s of “Resource Plans” Against 750 Difference “Futures”
Avg Cost
Distribution of Cost for a Plan
Number of Observations
Cost for
Future 2
Cost for
Future 1
10000
12500
15000
17500
20000
22500
25000
27500
30000
32500
Power Cost (NPV 2004 $M)->
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7. Risk and Expected Cost Associated With A Plan
Avg Cost
Risk = average of
costs> 90% threshold
Likelihood (Probability)
10000
12500
15000
17500
20000
22500
25000
27500
30000
32500
Power Cost (NPV 2004 $M)->
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8. Plans Along the Efficient Frontier Permit Trade-Offs of Costs Against Risk
Least Cost
Least Risk
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9. Efficient Frontier A B C D Background
Typically, plans along the efficient frontier proceed from “relying on the market” at the low-cost, high risk end, to “building reserves” at the high-cost, low-risk end. Beware over building, however. The over-built plans are well off the efficient frontier.
Resources closer to the least-risk end of the trade-off curve typically do not pay for themselves on an expected value basis. We are paying a premium for these resources most of them do not cover their costs.
It shouldn't be surprising that this is true for conservation as well. The key take away is that conservation can play this role less expensively than alternatives, like SCCTs. A major factor in that conclusion is the nature of electricity prices at the low risk and of the trade-off curve. At the end of the curve we have lower average costs and less volatility.
slide 9
Background

10. 5th Plan Relies on Conservation and Renewable Resources to Meet Load Growth*
*Actual future conditions (gas prices, CO2 control, conservation accomplishments) will change resource development schedule and amounts

11. (and reduced carbon emissions)?
Should We Do It Sooner?
Would Higher Carbon Control Cost Assumptions Significantly Increase the Pace of Cost-Effective PNW Electricity Conservation Potential
(and reduced carbon emissions)?
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12. Timing Matters – Three Conservation Deployment Schedules Tested
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13. The Plan Calls for Accelerating Conservation Development Because it Reduces Cost & Risk
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14. Uncertainties Impact Supply Curves
The whiskers represent min and max cost given the cost range of key input variables like fuel price, CO2 tax, resource availability and cost of capital.
Note lots of overlap among coal, gas, and RR
Also skewed high-side uncertainty
RR in this graph is wind & geothermal mostly
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15. The Plan Calls for Accelerating Conservation Development Because Reduces Carbon Dioxide Emissions
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16. Meeting 5th Plan’s Conservation Targets Reduces Forecast PNW Power System CO2 Emissions in 2025 by Nearly 20%
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17. (and reduced carbon emissions)?
Should We Do More?
Would Higher Carbon Control Cost Assumptions Significantly Increase the Amount of Cost-Effective PNW Electricity Conservation Potential
(and reduced carbon emissions)?
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18. There’s Remaining Electric Energy Efficiency Potential
450 MWa Remaining Technically Achievable Potential < $100/MWh
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*Without “Certain” Carbon Control

19. The 5th Plan Already Includes Expected Value of CO2 Control “Risk”
Levelized Cost = ~ $3/ton
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20. Would Higher “Carbon Cost” Matter?
Both Amount & Value of CO2 avoided depends on when it is avoided
Hence, the “carbon control” value of energy savings should incorporate their time-based value (as it does for electricity savings)
Shape of Savings (kWh daily & seasonally)
Physical production (pounds per kWh daily and seasonally)
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21. Marginal System CO2 Production Factor
The amount of carbon dioxide (lbCO2/kWh) produced by the marginal resource required to meet load.
Typically assessed as an average over some period, e.g., a year, and therefore an average of the CO2 production of many different resources that may be on the margin during the period.
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22. The Marginal Resource* Establishes Market Price and Carbon Content/kWh
Step 1 - Identify hourly marginal (highest-cost dispatched) Northwest resource
Step 2 - Calculate marginal CO2 factor for hour
*This resource (and its effects, such as CO2 production) will (generally)
be the resource displaced for that hour by new resource additions.

23. Northwest Resources “on the margin” 5th Plan Resource Portfolio
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24. Estimated Annual Average Marginal PNW Power System CO2 Emissions Factors
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25. Pace of Conservation Acquisition Does Not Significantly Change the “Marginal CO2 Production Factor”
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26. High Fuel Prices Not Significantly Change the “Marginal CO2 Production Factor”
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27. Forecast of Physical CO2 Avoided*
Based on Modeling PNW System dispatch using Aurora™ Model
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28. Marginal Carbon Savings by Load Shape
Segment 1: 0800 – 1800 M-F
Segment 2: / M-F; 0400 – 2200 S&S
Segment 3: M-F
Segment 4: S&S

29. $ Timing-Based Value CO2 Shape of Savings (kWh) * * =
Physical CO2 Avoided (lbs/kWh) *
Value of CO2 Avoided ($/ton) = $
Value of CO2 Avoided
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30. Typical “On-Peak” Load Profiles
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31. Typical “Off-Peak” Load Profiles
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32. Impact of $15/ton Carbon Control Cost of “Avoided Cost” for Selected Conservation Savings Shapes*
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33. Impact of Alternative CO2 Control Costs on Marginal Value of Conservation Savings

34. Impact of Higher Assumed CO2 “Control” Cost
Assuming PNW CO2 Emissions Factor of
~ 1 lb/kWh
A $10/ton CO2 change in emissions “control” cost increases forecasted market prices by approximately $4/MWh
A $40/ton CO2 change in emissions “control” cost increases forecasted market prices by approximately $16/MWh
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35. Carbon Control Might Make 4% to 15% More Conservation “Cost-Effective”
Additional MWa $10 - $40 Ton
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*Without “Certain” Carbon Control

36. Summary
The Northwest Power and Conservation Council’s 5th Plan relies on “non-carbon” producing resources to meet 85-90% of anticipated load growth
The 5th Plan considered “carbon control” risk
Higher and more certain carbon control costs assumptions could make 4-15% more conservation cost-effective
There are probably cheaper near-term options for carbon control than the PNW Power System
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37. Questions
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