SPSC Low Carbon Tool: Interim Status Report CREPC/SPSC meeting San Diego, CA October 5, 2012 Arne Olson

Energy and Environmental Economics, Inc. E3 has operated at the nexus of energy, environment, and economics since it was founded in 1989 E3 advises utilities, regulators, government agencies, power producers, energy technology companies, and investors on a wide range of critical issues in the electricity and natural gas industries Offices in San Francisco, CA and Vancouver, B.C. 30 professional staff in economics, engineering & policy 2

The 2010 & 2011 SPSC Carbon Reduction Scenarios SPSC Study Case carbon reduction targets based on economy-wide Waxman/Markey bill 17% below 2005 levels by % below 2005 levels by 2030 Low Carbon Case in the WECC 10-year plan Tool evaluates congestion given transmission and generation assumptions, carbon pricing changes dispatch but not new build Low Carbon Case in the WECC 20-year plan Evaluates new transmission and generation; carbon pricing can change new generation and transmission build choices LBNL funded E3 to develop the “Low Carbon Scenarios Tool” to support SPSC development of inputs to the WECC’s 20-year tool & track combined impacts of DSM & electrification on WECC loads 3

Proposed Interface of Low Carbon Tool & WECC LTPT 4 WECC Long-term Transmission Planning Tool Electricity sector only: 2032 Low Carbon Tool Economy-wide “baseline” emissions forecast Emission reduction measures Economy-wide carbon reduction scenario Electricity-sector carbon target New electricity demand due to electrification Input to WECC Carbon reduction policies in electricity sector Optional input to WECC

Low Carbon Tool Screen Shot Excel-based, users can define and save new scenarios Option for State & Province-specific GHG reduction inputs & outputs or WECC-wide inputs & outputs 5

Low Carbon Tool: WECC Baseline CO 2 Forecasts 6 Economy-wide baseline (CO 2 from fuel combustion only) Electricity Sector Baseline (CO 2 from fuel combustion only)

Example Scenario: Economy-Wide CO2 Reduction Options 7 1. Fuel Efficiency & Conservation 2. Fuel Switching Zero-Carbon Biofuels 3. Electrification (res., comm., industrial & transportation vehicles) 6. Decarbonization of Electricity Sector (DSM, RPS, coal displacement & CCS) 7. Offsets/Residual (non-WECC or non-fossil fuel based CO2 reductions) 5. Reduction in Mining & Refining Energy Use Due to Reduced Demand 4. Fuel Switching Natural Gas Vehicles

Example Scenario: Impacts in Electricity Sector Electrification increases carbon in electricity sector even while reducing carbon in overall economy 8 impact of electrification Zero-carbon resources

Example Scenario: WECC Electrification Impacts 9 Net impact of electrification and energy efficiency results in higher load growth than reference case

Next Steps Work with SPSC & LBNL staff to develop draft inputs to the “Low Carbon Case” Webinar with SPSC to show draft inputs, solicit feedback To be scheduled in Oct – Nov. timeframe Revise inputs based on SPSC & LBNL feedback Work with WECC staff to integrate results of Low Carbon Case into Long-Term Planning Tools SPSC members may also be interested in developing state & provincial specific scenarios 10

Thank You Contact: Arne Olson, Partner Energy and Environmental Economics, Inc. 101 Montgomery Street, San Francisco, CA (415) 391 – 5100

Low Carbon Tool Approach 12 Base Case Non-Electric Fuel Demand Fuel-Specific Emissions Factors Low Carbon Case Non-Electric Emissions Policy-Driven Changes Fuel Efficiency Biofuels Switching Natural Gas Switching Electrification Low Carbon Case Fuel Demand Policy-Driven Modifiers Electric Efficiency Electrification Low Carbon Case Electric Demand Clean Energy Goals RPS Targets Coal Displacement Sector Carbon Cap Low Carbon Case Electricity Mix Offsets Base Case Electricity Demand Base Case Electricity Mix Low Carbon Case Electric Emissions

Inputs for Low Carbon Case Low Carbon Tool inputs can be calibrated to long- term carbon reduction targets in 2050 Potential to calibrate to existing studies, i.e. Science (2012) Williams et al., on California GHG reduction pathways impacts to electric sector evaluated based on long-term carbon goals and assumptions about adoption rates of GHG reduction measures, specified in the tool as “s-curve”