June 2018 Arne Olson, Senior Partner Kush Patel, Partner

Pacific Northwest Low Carbon Scenario Analysis 2018 Scenarios and Sensitivities
June 2018 Arne Olson, Senior Partner Kush Patel, Partner Nick Schlag, Director Kiran Chawla, Consultant Femi Sawyerr, Associate

Introduction This is a joint report to share the results of independently sponsored studies Each of the entities in the report independently requested and sponsored additional scenarios and sensitivities to the 2017 PGP Study Some entities requested the same studies Those studies were run consistently for each entity

Presentation Structure
Background 100% GHG Reduction Scenario PGP Sponsored Scenarios and Results Climate Solutions Sponsored Scenarios and Results National Grid Sponsored Scenarios and Results Conclusion

Background and Context

Context of 2018 Analysis In 2017, the Public Generating Pool (PGP) sponsored the Pacific Northwest Low Carbon Scenario Analysis, a study of alternative policies for achieving reductions in electric sector carbon emissions in the Northwest The original study can be found here: In 2018, follow-up studies were individually sponsored by three organizations to explore specific questions left unanswered by the original study Public Generating Pool Climate Solutions National Grid This document reports on the assumptions and results from these additional studies

Original Study Results: Cost & Emissions Impacts in 2050
Note: Reference Case reflects current industry trends and state policies, including Oregon’s 50% RPS goal for IOUs and Washington’s 15% RPS for large utilities

2050 Scenario Summary From the Original Study
Inc Cost ($MM/yr.) GHG Reductions (MMT) Avg GHG Abatement Cost ($/ton) Effective RPS % Zero Carbon % Renewable Curtailment (aMW) Reference — 20% 91% 201 40% Reduction +$163 7.5 $22 21% 92% 294 60% Reduction +$434 14.2 $30 25% 95% 364 80% Reduction +$1,046 20.9 $50 31% 102% 546 30% RPS +$330 4.3 $77 30% 101% 313 40% RPS +$1,077 $144 40% 111% 580 50% RPS +$2,146 11.5 $187 50% 121% 1,033 Leg Tax ($15-75) +$804 19.1 $42 28% 99% 437 Gov Tax ($25-61) +$775 18.7 $41 424 No New Gas +$1,202 2.0 $592 22% 93% 337 Incremental cost and GHG reductions are measured relative to the Reference Case

About the Additional Studies
PGP sponsored additional studies exploring the means for and cost of achieving additional CO2 emissions reductions beyond the 80% goal assumed in the original study: 90%, 95% and 100% GHG emissions reductions with varying quantity and price of carbon-free biogas as a substitute for fossil natural gas Climate Solutions sponsored additional studies exploring 100% GHG emissions reductions: With and without biogas and small modular nuclear reactors (SMR), under alternative technology costs, and with a ceiling or “off-ramp” on compliance costs National Grid sponsored additional studies exploring the potential role for pumped hydro storage: Alternative assumptions about the cost of new pumped hydro facilities and new gas-fired generation, and accelerated coal retirement All scenarios assume revenue recycling

Scenario Matrix – All Sponsored Scenarios and Sensitivities
INPUT ASSUMPTIONS Scenario Original Study Assumptions Biogas P&Q Sensitivities Alternative Technology Costs Pumped Storage Cost Update High Gas Capital Costs Limited New Gas Build Reference  40% Reduction 60% Reduction 80% Reduction 30% RPS 40% RPS 50% RPS Leg Tax ($15-75) Gov Tax ($25-61) No New Gas 90% Reduction 95% Reduction 100% Reduction with Hydro, Wind Geothermal, and Solar (HWGS)   100% Reduction + Biogas 100% Reduction + SMR 100% Reduction + Off Ramp 30% RPS + No Coal ● Original PGP Study; ● PGP; ● Climate Solutions; ● National Grid

Base Cost Assumptions for Candidate Technologies
Technology Resource Unit 2018 2022 2026 2030 Gas Annual Core NW Fuel Costs $/MMBtu $3.24 $2.95 $3.32 $3.82 CT-Frame $/kW-ac $950 CCGT $1,300 Hydro Upgrades Non Powered Dam $4,500 Upgrades $1,277 $1,254 $1,206 $1,158 Geothermal Central Oregon $4,557 Wind Columbia River Basin $1,925 $1,910 $1,896 $1,882 Montana $1,823 $1,810 $1,796 $1,783 Wyoming $1,722 $1,709 $1,697 $1,684 Solar WA/OR $1,617 $1,558 $1,513 $1,438 $/kW-dc $1,244 $1,199 $1,164 $1,106 Battery Storage (4-hr Storage) - $/kWh $587 $455 $372 $352 Pumped Storage (10-hr Storage) $261 Base capital cost assumptions are the same as in the original PGP study Capital costs are kept flat beyond 2030

100% Reduction Scenario Individually Requested by PGP and Climate Solutions

2050 Portfolio Summary - PGP Carbon Cap Scenarios
84 GW of new renewable capacity added by 2050 in 100% Reduction HWGS scenario 10 GW of new storage capacity Gas generation eliminated entirely by 2050 Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference - 20% 91% 80% Reduction +$1,046 20.9 31% 102% 100% Reduction HWGS +$18,377 27.6 62% 135% Resources Added (MW) Energy Balance (aMW) * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impacts All Cases – Original PGP Study + 100% Reduction HWGS

There are significant reliability challenges under a scenario without dispatchable thermal generation The scenario considers the effect of a 100% GHG reduction cap with only hydro upgrades, wind, geothermal, solar, and electric energy storage available as new resources Without dispatchable thermal generation capacity, it may be difficult to meet load under extreme weather conditions E.g., extended cold-weather period with low wind and solar production that occurs during a drought year This challenge would only increase under a scenario with significant electrification of building and vehicle loads to meet long-term carbon goals

There are significant modeling challenges under a scenario without dispatchable thermal generation
The current version of RESOLVE was not designed to consider cases without some form of dispatchable capacity The model does not provide sufficiently robust examination of unusual weather conditions that drive the need for dispatchable capacity The model cannot consider multi-day energy storage as a potential solution to the energy constraints that are encountered The model does not consider land-use or other environmental limitations on resource supply or transmission capacity More study is needed to examine resource availability and transmission requirements More study is needed to analyze whether the system as modeled meets reliability expectations

PGP Sponsored Scenarios

Summary of Sponsored Scenarios - PGP
Scenario Name Question Answered Updates to Model 90% Reduction Effect of a 90% GHG reduction target Added 90% GHG reduction trajectory, assuming a straight line reduction from 2016 to 2050 95% Reduction Effect of a 95% GHG reduction target Added 95% GHG reduction trajectory, assuming a straight line reduction from 2016 to 2050 100% Reduction + Biogas Effect of availability of biogas to run in existing natural gas infrastructure Added 100% GHG reduction trajectory, assuming 60% reduction by 2030 and 100% reduction by Capacity unconstrained pipeline biogas available for use in natural gas generators at $31/MMBtu cost Sensitivity Name Question Answered Updates to Model 100% Reduction + Biogas 3xP Effect of availability of biogas to run in existing natural gas infrastructure Capacity unconstrained pipeline biogas available for use in natural gas generators at $93/MMBtu cost 100% Reduction + Biogas Q/3 12.5 Tbtu of pipeline biogas available for use in natural gas generators at $31/MMBtu cost 100% Reduction + Biogas 3xP Q/3 12.5 Tbtu of pipeline biogas available for use in natural gas generators at $93/MMBtu cost

2050 Portfolio Summary - PGP Carbon Cap Scenarios
17 GW of new renewable capacity added by 2050 in 90% Reduction scenario 23 GW of new renewable capacity added by 2050 in 95% Reduction scenario 21 GW of new renewable capacity and 41 TBtu of pipeline biogas consumed in 2050 in 100% Reduction + Biogas scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % 80% Reduction +$1,046 20.9 31% 102% 90% Reduction +$1,818 24.3 41% 112% 95% Reduction +$2,612 26.0 47% 117% 100% Reduction + Biogas +$3,264 27.6 44% 115% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impacts Original PGP Study Cases

Cost & Emissions Impacts Original PGP Study + Additional Carbon Cap Scenarios
100% Reduction HWGS Scenario’s 2050 annual cost increase of $18.4 billion is beyond the scale of this chart Note: Reference Case reflects current industry trends and state policies, including Oregon’s 50% RPS goal for IOUs and Washington’s 15% RPS for large utilities

2050 Portfolio Summary - PGP 100% Reduction + Biogas Sensitivities
24 GW of new renewable capacity added by 2050 and in the 100% + Biogas 3xP sensitivity 44 GW of new renewable capacity added by 2050, 12.5 TBtu of pipeline biogas is used in 2050, and about 300 GWh of unserved energy in both the 100% Reduction + Biogas Q/3 and 100% Reduction + Biogas 3xP Q/3 sensitivities Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % 100% Red. + Biogas (Base) +$3,264 27.6 44% 115% 100% Red. + Biogas 3xP +$4,950 50% 120% 100% Red. + Biogas Q/3 +$6,834 59% 130% 100% Red. + Bio. 3xP Q/3 +$7,640 Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impacts All Cases –Original PGP Study + All PGP Additional
Both Biogas Q/3 Scenarios have about 300 GWh of unserved energy in 2050 Note: Reference Case reflects current industry trends and state policies, including Oregon’s 50% RPS goal for IOUs and Washington’s 15% RPS for large utilities

2050 Summary of Results from PGP Sponsored Scenarios
Inc Cost ($MM/yr.) GHG Reductions (MMT) Avg GHG Abatement Cost ($/ton) Effective RPS % Zero Carbon % Renewable Curtailment (aMW) Reference — 20% 91% 201 80% Reduction +$1,046 20.9 $50 31% 102% 546 90% Reduction +$1,818 24.3 $75 41% 112% 884 95% Reduction +$2,612 26.0 $100 47% 117% 1,200 100% Reduction + Biogas +$3,264 27.6 $118 44% 115% 1,082 PGP Biogas P & Q Sensitivities 100% Reduction + Biogas 3xP +$4,950 $179 50% 120% 1,481 100% Reduction + Biogas Q/3 +$6,834 $247 59% 130% 4,328 100% Reduction + Biogas 3xP Q/3 +$7,640 $277 4,289 Incremental cost and GHG reductions are measured relative to the Reference Case

Summary of GHG Reductions from PGP Sponsored Scenarios
Unit 2020 2030 2040 2050 Original Study Assumptions 90% Reduction MMtCO2 — 2.2 11.9 24.3 95% Reduction 2.9 13.0 26.0 100% Reduction + Biogas 1.3 11.3 18.6 27.6 PGP Biogas P & Q Sensitivities 100% Reduction + Biogas 3xP 100% Reduction + Biogas Q/3 100% Reduction + Biogas 3xP Q/3 GHG reductions are measured relative to the Reference case

Pipeline Biogas Potential Assumptions
The pipeline biogas consumed in the unconstrained 100% Reductions + Biogas scenarios is about a third of the combined Oregon and Washington in-state potential Assumes no purpose-grown crops Assumed market price of $31/MMBtu reflects other uses Pipeline biogas potential available for use in electricity sector requires more study Estimated 2040 Oregon and Washington Biomethane Potential (Tbtu) *Potential estimates are based on DOE Billion Ton Study Update of 2016:

Climate Solutions Sponsored Scenarios

Summary of Sponsored Scenarios – Climate Solutions
Scenario Name Question Answered Updates to Model 100% Reduction + Off-ramp Effect of a 100% GHG reduction target with a $200/ton off-ramp Added 100% GHG reduction trajectory, assuming 60% reduction by 2030 and 100% reduction by $200/ton off-ramp in 2050 100% Reduction + Biogas Effect of a 100% GHG reduction target with pipeline biogas as zero CO fossil resource Added 100% GHG reduction trajectory, assuming 60% reduction by 2030 and 100% reduction by Pipeline biogas available for use in natural gas generators at $31/MMBtu cost 100% Reduction + SMR Effect of a 100% GHG reduction target with flexible small modular nuclear reactors Added 100% GHG reduction trajectory, assuming 60% reduction by 2030 and 100% reduction by New nuclear candidate resource at $100/MWh all-in cost. Retires all fossil plants in 2049 Sensitivity Name Question Answered Updates to Model Alternative Technology Costs Effect of potential technological breakthrough in cost reductions for emerging technologies Solar PV costs updated using NREL 2017 Annual Technology Baseline (ATB)*. Relative to Base Case wind costs reduced by 20%; battery costs reduced by 70%; and biogas fuel cost reduced by 20% *NREL 2017 Annual Technology Baseline:

Low Technology Cost Trajectories
Solar PV – WA/OR Land Based Wind – Columbia River Basin Battery Storage – 4-hr Storage Pipeline Biogas − Original PGP Study Base; − Original PGP Study Low Tech Costs; Climate Solutions Alt. Tech Costs

2050 Portfolio Summary – Climate Solutions Carbon Cap Scenarios
7 GW of gas capacity added by 2050 in Off-ramp Scenario 21 GW of new renewable capacity added by 2050 in 100% Reduction + Biogas Scenario 8 GW of new SMR capacity and 5 GW of pumped storage capacity added by 2050 in 100% Reduction + SMR Scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference - 20% 91% 100% Reduction + Off-ramp +$1,148 21.8 33% 104% 100% Reduction + Biogas +$3,264 27.6 44% 115% 100% Reduction + SMR +$6,574 37% 130% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impacts Original PGP Study Cases

Cost & Emissions Impacts All Cases – Original PGP Study + Climate Solutions Updates

2050 Portfolio Summary – Climate Solutions Alternative Technology Costs Sensitivity
7 GW of renewable capacity and 9 GW of storage capacity are added by 2050 in the Reference Scenario 28 GW of renewable capacity and 7 GW of storage capacity are added by 2050 in the 100% Reduction + Biogas Scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference (Alt. Technology Costs) - 21% 92% 100% Red. + Biogas +$2,165 27.3 47% 119% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impact – Climate Solutions Alternative Technology Costs Sensitivity
Alternative Technology Costs Sensitivity reduces the incremental cost of meeting the 100% reduction carbon cap target by $1 billion Cost & Emissions Impact, Base Case Cost & Emissions Impact, Alternative Technology Costs Note: 2050 annual cost increases are shown relative to the Reference Case, Alternative Technology Cost sensitivity

2050 Summary of Results from Climate Solutions Sponsored Scenarios
Inc Cost ($MM/yr.) GHG Reductions (MMT) Avg GHG Abatement Cost ($/ton) Effective RPS % Zero Carbon % Renewable Curtailment (aMW) Original Study Assumptions Reference — 20% 91% 201 100% Reduction + Off-ramp +$1,148 21.8 $53 33% 104% 591 100% Reduction + Biogas +$3,264 27.6 $118 44% 115% 1,082 100% Reduction + SMR +$6,574 $238 37% 130% 852 Climate Solutions Alternative Technology Cost Sensitivity +$818 -0.3 21% 92% 277 +$2,165 27.3 $79 47% 119% 1,354 Incremental cost and GHG reductions are measured relative to the respective Reference cases Negative GHG reductions value means emissions are higher relative to the reference scenario

Summary of GHG Reductions from Climate Solutions Sponsored Scenarios
Unit 2020 2030 2040 2050 Original Study Assumptions 100% Reduction + Off-ramp MMtCO2 1.3 11.3 18.6 21.8 100% Reduction + Biogas 27.6 100% Reduction + SMR Climate Solutions Alternative Technology Cost Sensitivity 1.8 11.6 18.8 27.3 GHG reductions are measured relative to the respective Reference cases

Pipeline Biogas Potential Assumptions
The pipeline biogas consumed in the 100% Reduction + Biogas base scenario is about a third of the combined Oregon and Washington in-state potential Assumes no purpose-grown crops Assumed market price of $31/MMBtu reflects other uses Pipeline biogas potential available for use in electricity sector requires more study Estimated 2040 Oregon and Washington Biomethane Potential *Potential estimates are based on DOE Billion Ton Study Update of 2016:

Reliability analysis is needed for energy limited systems with high levels of storage as a capacity resource Thermal fleet retirements in 100% GHG reductions scenarios coupled with load growth create a need for replacement capacity to ensure resource adequacy In the alternative technology costs scenarios the primary source of capacity added is energy storage (pumped hydro & batteries) Storage provides capacity to help meet peak demands but does not generate energy that is needed during low hydro years or multi-day low generation events More study is needed to analyze whether systems with significant storage capacity as modeled meet reliability expectations The alternative technology costs scenarios meet the current reserve margin requirement with the addition of new energy storage (1 MW of 10-hr storage capacity is assumed equivalent to 1 MW of natural gas capacity) However, it is unclear how much energy storage can contribute to Resource Adequacy in the Pacific Northwest

National Grid Additional Scenarios

Summary of Sponsored Scenarios – National Grid
Scenario Name Question Answered Updates to Model 30% RPS with Coal Retirement Effect of a 30% RPS combined with a forced retirement of coal generators Retires all coal generators in 2030 Sensitivity Name Question Answered Updates to Model Low Pumped Storage Capital Costs (Low PS Capex) What capacity of pumped storage resources are selected when costs are updated using Swan Lake facility capital costs Updated pumped storage capital cost Low Pumped Storage Capital Costs & High Gas Capital Costs (Low PS Capex & High Gas Capex) What capacity of pumped storage resources are selected when, building on the Low PS Capex sensitivity, the capital cost of a gas facility is increased Updated pumped storage capital cost. Updated natural gas resource capital cost using the final capital cost value for the Carty Generating Station Low Pumped Storage Capital Costs & Limited New Gas Build (Low PS Capex & Limited New Gas) What capacity of pumped storage resources are selected when, building on the Low PS Capex sensitivity, you constrain the build of new gas units Updated pumped storage capital cost. Constrain build of new gas units to repowering of CCGT units and 1000 MW of CT every decade

2050 Portfolio Summary – National Grid Low Pumped Storage Capital Costs
8 MW of pumped storage capacity is added by 2050 in the Reference Scenario 22 MW of pumped storage capacity is added by 2050 in the 80% Reduction Scenario 52 MW of pumped storage capacity is added by 2050 in the 30% RPS with Coal Retirement Scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference (Low PS Capex) - 20% 91% 80% Reduction +$1,047 20.9 31% 102% 30% RPS with Coal Retirement +$1,139 18.3 30% 101% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

2050 Portfolio Summary – National Grid Low Pumped Storage Capital Costs & High Gas Capital Costs
2 GW of pumped storage capacity is added by 2050 in the Reference Scenario 1.6 GW of pumped storage capacity is added by 2050 in the 80% Reduction Scenario 2.3 GW of pumped storage capacity is added by 2050 in the 30% RPS with Coal Retirement Scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference (Low PS & High Gas Capex) - 20% 91% 80% Reduction +$1,028 21.1 31% 102% 30% RPS with Coal Retirement +$1,170 18.4 30% 101% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

2050 Portfolio Summary – National Grid Low Pumped Storage Capital Costs & Limited New Gas Build
3 GW of pumped storage capacity is added by 2050 in the Reference Scenario 1 GW of pumped storage capacity is added by 2050 in the 80% Reduction Scenario 4.4 GW of pumped storage capacity is added by 2050 in the 30% RPS with Coal Retirement Scenario Scenario Inc Cost ($MM/yr.) GHG Reductions (MMT) Effective RPS % Zero CO2 % Reference (Low PS & Limited New Gas) - 20% 91% 80% Reduction +$1,030 21.1 31% 102% 30% RPS with Coal Retirement +$1,181 18.4 30% 101% Resources Added (MW) Energy Balance (aMW) ** ** **Note the change in the Y-axis scale change * EE shown here is incremental to efficiency included in load forecast (based on NWPCC 7th Plan)

Cost & Emissions Impact – National Grid All Sensitivities
Original PGP Study Low PS Capex Low PS Capex & High Gas Capex Low PS Capex & Limited New Gas Build

2050 Summary of Results from National Grid Additional Scenarios
Inc Cost ($MM/yr.) GHG Reductions (MMT) Avg GHG Abatement Cost ($/ton) Effective RPS % Zero Carbon % Renewable Curtailment (aMW) Original Study Assumptions Reference — 20% 91% 201 80% Reduction +$1,046 20.9 $50 31% 102% 546 30% RPS No Coal +$1,139 18.3 $62 30% 101% 313 Low Pumped Storage Capital Costs 192 +$1,047 504 297 Low Pumped Storage Capital Costs & High Gas Capital Costs 205 +$1,028 21.1 $49 487 +$1,170 18.4 $64 287 Low Pumped Storage Capital Costs & Limited New Gas Build 210 +$1,030 492 +$1,181 292 Incremental cost and GHG reductions are measured relative to the respective Reference cases

Summary of Selected Pumped Storage Capacity Results
Scenario 2020 2030 2040 2050 Original Study Assumptions Reference — 80% Reduction 30% RPS No Coal Low Pumped Storage Capital Costs 8 22 52 Low Pumped Storage Capital Costs & High Gas Capital Costs 655 1,051 2,010 666 820 1,690 762 1,001 2,342 Low Pumped Storage Capital Costs & Limited New Gas Build 274 3,054 21 1,184 2,067 4,456 Incremental cost and GHG reductions are measured relative to the respective Reference cases

Reliability analysis is needed for energy limited systems with high levels of storage as a capacity resource Thermal fleet retirements coupled with load growth create a need for replacement capacity to ensure resource adequacy In the limited gas scenario and when gas capital costs are assumed to be high, pumped storage is added as a capacity resource Storage provides capacity to help meet peak demands but does not generate energy that is needed during low hydro years or multi-day low generation events More study is needed to analyze whether systems with significant storage capacity as modeled meet reliability expectations 1 MW of 10-hr storage capacity is assumed equivalent to 1 MW of natural gas capacity However, it is unclear how much energy storage can contribute to Resource Adequacy in the Pacific Northwest

Thank You! Energy and Environmental Economics, Inc. (E3) Montgomery Street, Suite San Francisco, CA Tel Web Arne Olson, Senior Partner Kush Patel, Partner Nick Schlag, Director Kiran Chawla, Consultant Femi Sawyerr, Associate

June 2018 Arne Olson, Senior Partner Kush Patel, Partner

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