wholesale power price forecast 01/28/03 current trends update jeff king january 31, 2003

Wholesale Power Price Forecast

01/28/03 Current Trends Update

Jeff King

January 31, 2003

Northwest Power Planning Council: January 2003

What is the power price forecast?

• An estimate of future wholesale spot market power prices.

• E.g., as would be traded as short-term contracts at the Mid-Columbia trading hub.

• 2001 to 2025.

• Monthly and annual average prices for high & low-load hours (can also look at hourly prices).


Ancillary products

• Market-driven future generating capacity additions.

• Estimate of fuel use.

• Estimate of certain environmental effects of system operation (e.g. CO2 production).

• Transmission usage


Uses of the power price forecast

• Estimate the market value of new resource alternatives (e.g., conservation measures).

• Estimate the cost implications of policies affecting power system composition or operation (e.g., value of a seasonal shift in hydro output).

• Estimate environmental effects of changes in power system composition or operation (e.g., effect of resource additions on CO2 production).

• Price forecast input into risk analysis model.

• Resource development forecast into GENESYS model


Forecasting process

Loads

Input Data Base

ExistingGeneration

Fuel Prices

NewResources

Model RunParameters

Long-termResource

Optimization

PriceForecast

DemandForecast

Trends & Issues

Fuel PriceForecast

HydroAssessment

ResourceAssessment

Hydro Data

0

50000

100000

150000

200000

250000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Capa

city

(MW

)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

20012002200320042005200620072008200920102011201220132014201520162017201820192020


Geographic Scope

• Load-resource areas defined by transmission bottlenecks

• individual generating units (>3700 total)

• fuel price forecasts for ea. LRA

• load forecast for ea. LRA

• load curtailment blocks for ea. LRA

• new resource options for ea. LRA


General assumptions

• Projects under construction are completed as scheduled; additional projects are market-driven.

• Suspended projects:– If > 25% complete, entered as partial-cost new resource

options.– If < 25% complete, omitted

• New projects are developed by resource-specific mix of developers.

• Projects scheduled for retirement are retired; additional retirements are market-driven.


Other general assumptions

• Intra-regional transmission cost:– $15/kW/yr point-to-point transmission & basic

ancillary services cost plus 1.9% transmission loss penalty.

– Exceptions include peaking units and industrial cogeneration

• Pancaked inter-area transmission losses & rates.• Bid margin set at 5% of variable cost.


Significance of the “Current Trends” Case

• Our best estimate of future wholesale power prices resulting from continuation of current economic and energy policy trends.

– Average water conditions

– Average loads

• Not necessarily the “Right thing to do”

– may not fully consider value of risk mitigation.

– may represent less than desirable reserve levels.

• Not intended to represent a recommended course of action


Current Trends case assumptions

• NPPC medium fuel price forecasts.• NPPC medium load forecasts:

– Demand returns to medium growth rates by 2006.– Long-term growth adjusted for programmatic conservation.

• New resource options most likely to play significant role:– Gas-fired combined-cycle GT– Duct firing (power augmentation) for combined-cycle– Gas-fired simple-cycle GT– Wind– Pulverized coal-fired steam-electric– Solar PV

• Permanent 1.7 cents/kWh production incentive for new wind & solar.


More Current Trends case assumptions

• SBC and RPS resource development where adopted:

– simulated as new wind.

– quantity based on estimated above-market resource cost (resource cost less price forecast)

• Oregon CO2 standard for all new fossil units:

– offset fee $1/TCO2 (2000), escalating at 20%/yr.

– applies to 17% of total CO2 production.

• $7.50/MWh green tag revenue for new renewables.

• Intermittent resources limited ~ 20% of total native capacity, by area.

• No new coal in Western WA, W. OR, CA.


Forecast Fuel Price Trends(%/yr, 2003 – 2025)

Case Natural Gas (US Wellhead)

Coal (Western Minemouth)

Low -0.3 - 1.5

Medium Low 0.0 - 1.1

Medium 0.1 - 0.8

Medium High 0.3 - 0.5

High 0.6 - 0.1


Natural gas prices are based on US wellhead forecast

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

2000 2005 2010 2015 2020 2025

$/M

MB

tu (re

al 20

00$)

US Wellhead (Medium forecast)

AECOPNW East

PNW West


New resource characteristics

Capital ($/kW)

Fixed O&M ($/kW/yr)

Variable O&M ($/MWh)

Heat Rate,Lifecycle

(Btu/kWh)

Technology Improvement

(%/yr)

540 MW 2x1 CC

$565 $8.85 FxOM$15 PtoP Tx

$2.80 7030 Cost: -0.6%HR: -0.6%

70 MW Duct Firing

$225 $3 FxOM$15 PtoP Tx

$1.00 9500 Cost: +0.1%HR: -0.3%

2x46 MW SC


$8.00 9960 Cost: -0.6%HR: -0.6%

100 MW Wind


B1: $1 + $4 shpgB2: $1 + $8 shpg

-- Cost:-4 >-2%

400 MW Coal Steam


$1.75 9550 Cost: +0.1%HR: -0.3%

20 MW Solar PV


Inc. in Fixed O&M

-- Cost:-8 >-4%


Additional new resource characteristics

Forced Outage

(%)

Planned Outage

(days/yr)

Operating Availability

(%)

Base Resource Limits

Developer Mix (COU/IOU/IPP)

CC 5% 18 92% Initially, not limited

15/15/70%

Duct Firing 5% 18 92% Prior run new CC development

As for CC

SC 4% 10 94% Initially, not limited

40/40/20%

Wind Inc. in avail.

Inc. in avail.

B1: 28-36 % B2: 26-34%

B1: 1000MW/areaB2: 2000MW/area

20/20/60%

Coal Steam 7% 35 84% None in PNWWest or CA

25/25/50%

Solar PV Inc. in avail.

Inc. in avail.

22% Not limited 50/25/25%


Updates since September draft

• Updated inventory of recently-completed projects and projects under construction.

• Updated load growth forecasts.• CO2 offset cost escalates as originally intended.• Adjusted hydro shaping factors British Columbia.• Corrected fuel price pointers for several resources.• Corrected New Mexico variable gas prices.• Recalibrated duct-firing and RPS/SBC resource builds.• Adjusted quantities of second block of new wind. • Recalculated fixed O&M costs for existing resources.• First load curtailment block restored to default value.


Forecast WECC Resource Mix (012503 Current Trends Update)

0

50000

100000

150000

200000

250000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Ca

pa

cit

y (

MW

)

Wind SBC Renewables. New Wind GeothermalBiomass & MSW Solar Unassigned NG HydropowerNuclear Existing coal Planned Coal New coalNGST Existing NGCC Planned NGCC New NGCCNew NGCC Duct Burners Existing NGGT & IC Planned NGGT New NGGTFuel Oil Storage


Mid-Columbia price forecast

$0

$5

$10

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$20

$25

$30

$35

$40

$45

$50

$55

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Pri

ce (

2000

$/M

Wh

)

PNWE - Current Trends (092702)

PNWE - R4 Fin Base2 (012803)


Levelized Mid-Columbia price forecast (2006 – 25)

$38.13$36.16

$38.13$36.25

$38.13 $38.66 $38.34 $38.15$39.46 $39.78 $39.51

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

PNWE -CurrentTrends

(092702)

PNWE -Reopt

CurrentTrends

(123002)

PNWE -Cold startCurrent

Trends A1(011003)

PNWE -R4 Fixes(011303)

PNWE -R4 Fixes &Updates(011503)

PNWE -R4 1stCalib

(011603)

PNWE -R4 2ndCalib

(011703)

PNWE -R4 Default

CB 1(012103)

PNWE -R4 Default

CB 1GRACCO2

(012103)

PNWE -R4 Default

CB 1GRAC

CO2 LclHY

(012403)

PNWE -R4 FinBase2

(012803)

Lev

eliz

ed P

rice

($/

MW

h)


Monthly average prices & loads (Mid C)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pri

ce

(2

00

0 $

/MW

h)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

De

ma

nd

(a

MW

)

On-peak prices Off-peak prices All hours

On-peak loads Off-peak loads


Forecast WECC Fuel Use

0

1000

2000

3000

4000

5000

6000

7000

8000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Fu

el U

sa

ge

(T

Btu

)

Nuclear Total Coal

Geothermal Biomass

Total Gas Total Oil


Forecast WECC CO2 Production(012403 Current Trends Update)

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CO

2 P

rod

uc

tio

n (

Th

ou

sa

nd

To

ns

)

Geothermal Existing coal Planned Coal New coal Unassigned NG

NGST Existing NGCC Planned NGCC New NGCC Existing NGGT & IC

Planned NGGT New NGGT Fuel Oil


Base & sensitivity studies 1

Lower Cost < Current Trends > Higher Cost

Fuel Prices NPPC Low NPPC Medium NPPC High

Load Growth NPPC Low NPPC Medium NPPC High

Renewable Incentives

Phaseout $17 prod credit $7.50 tag

SBC/RPS

$0.03/kWh (Declining w/CO2 control)

CO2 Control None Approx OR std: $1/Ton CO2, esc @ 20%/yr on 17% CO2

$15/TCO2 (test effect; attempt cap & trade model)

Clean Air Act ?? Hg control for new coal

??


Base & sensitivity studies 2

Lower Cost < Current Trends > Higher Cost

Climate & Hydro Test sensitivity to climate effects on hydrograph

Test sensitivity to climate effects on hydrograph

Test sensitivity to climate effects on hydrograph

Technology Optimistic financing/impvmt.

Base Pessimistic

financing/impvmt.

Reliability No operating reserve requirement

6.5% op. reserves, average water

6.5% op. reserves, critical water

Transmission congestion

Unfettered, rolled-in cost

Current plans No expansion

wholesale power price forecast 01/28/03 current trends update jeff king january 31, 2003

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