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2016 Integrated Resource Plan Update
Tucson Electric Power (TEP)UNS Electric, Inc. (UNSE)
2016 IRP WorkshopJuly 18, 2016
2016 IRP Workshop Topics
Victor AguirreManager,
Resource Planning
• Load Forecast • Loads and Resources Update• Current Renewable Projects• New Technologies
– Battery Storage Project– Reciprocating Engines – Small Modular Reactors – Energy Imbalance Market Update
Jeff YockeyManager, Environmental and
Long-Term Planning
• Portfolio Diversification• Renewable Outlook• Energy Efficiency Outlook• Clean Power Plan Update• U of A Water Study Update
Mike SheehanSenior Director, Fuels and
Resource Planning
• Forecast Assumptions• Scenarios and Sensitivities• Future Transmission Plans• EV Case Study• Future Operational Challenges• Three Year Action Plans
1
2016 Integrated Resource Plan Update
Victor AguirreManager, Resource Planning
2016 IRP WorkshopJuly 18, 2016
TEP Retail Load Forecast
0
500
1000
1500
2000
2500
3000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Peak
Dem
and,
MW
2014 IRP 2016 Pre-IRP 2016 TEP Forecast (w/out Mine Expansions)
Historical
3
TEP Loads & Resources
4
TEP Renewable Energy Portfolio
• Renewable Energy Standard (RES) requires 15% renewable energy supply by 2025
• TEP is ahead of schedule in achieving Arizona’s RES requirement
• 280 MWAC of solar and wind generation (PPA and owned)
• Red Horse – recent project (41 MWAC Solar/30 MW Wind)
• Approximately 12,000 TEP customers with distributed solar generation in TEP’s service area (~ 130 MWAC)
AmonixDual Axis Concentrated
PV 1.2 MW
AvalonFixed PV28.3 MW
CogenraSAT Concentrated
Thermal PV1.1 MW
E. ON.Single Axis Tracking PV
4.8 MW
Fort HuachucaFixed PV13.6 MW
Gato Montes SolarFixed PV 4.9 MW
Macho SpringsWind
50.4 MW
NRG Avra ValleyFixed PV25 MW
Picture Rocks SolarFixed PV20 MW
Solon Prairie FireFixed PV4.0 MW
SpringervilleFixed PV5.1 MW
Areva SolarConcentrated Solar Thermal
5.0 MW
Valencia SolarSingle Axis Tracking
PV 10 MW
Solon UASTP 1Single Axis Tracking PV
1.3 MW500 kW of Lithium-Ion Battery Storage
Solon UASP 3Fixed PV4.0 MW
White Mountain Solar
SAT Concentrated Thermal PV
8.3 MW5
New Technology - Review
• Energy Storage Systems (ESS)– DeMoss Petrie Battery Storage– University of Arizona Tech Park Battery Storage
• Reciprocating Internal Combustion Engines (RICE)• Small Modular Nuclear Reactors (SMR)• Energy Imbalance Market (EIM)
6
TEP Energy Storage Projects
• 2 Projects – Lithium-Ion Type Batteries
• NextEra Energy Resources
– 10 MW lithium nickel-manganese-cobalt battery system
– DeMoss Petrie Substation
– Operational by the end of 2016
• E.On Climate & Renewables
– 10 MW lithium titanate oxide battery storage
– Combined with 2 MW Solar PV
– University of Arizona Tech Park
– 2Q of 2017
• Frequency Regulation
• Research
NextEra Energy Resources 2015The 10 MW energy storage project to be installed near Interstate 10 and West Grant Road could be
similar to this NextEra Energy Frontier Battery Storage Project in Shabbona, Ill.
7
CHARACTERISTICS• Fast Start Times• Flexible Run Time• Reduced O&M• Fast Ramping• Less Ambient Performance Degradation• Lower Gas Pressure Requirement • Low Water Consumption• Modularity
Reciprocating Engines
APPLICABILITY● Increased Reliability (EFOR spread across multiple units)● Renewable Integration Requirements
— Variability— Intermittency Mitigation— Other Ancillary Needs
● Potential EIM Participation● Long-Term Resource Diversification (Peaking)
The LCEC Generation PlantInside the engine hall of a
reciprocating engine power plant. The LCEC Generation Plant in Lovington,
New Mexico is powered by five Wärtsilä gas-fired engines.
Source: http://lcecnet.coopwebbuilder.com/content/lcec-generation-llc8
Small Modular Nuclear Reactors
• Modular – Factory Built• Passive Safety Features – Infinite Cooling• Zero Emission• Long-lead time• Expensive• Potential baseload resource to replace coal• Outside of TEP planning horizon
• Utah Associated Municipal Power Systems (UAMPS) – Carbon Free Power Project (CFPP)– 46 members in 8 states– Commercial Operation – 2025
Source http://www.nuscalepower.com/
9
10
Energy Imbalance Market
EIM Benefits• Pool generation resources over a wider area• Sub-hourly real-time energy market• Automated region-wide dispatch• Moderate intermittent resources/demand
EIM Status● E3 Consultant● Initiated March 2016● Data Collection – April - June 2016● Analysis – June - August 2016● Results – September 2016● Next Steps
• Studying Cost-Benefits of CAISO Energy Imbalance Market
11
2017 2021 2024 2028 2031
TEP’s Future Resources Needs
Future Natural GasResources
Target 30% Renewables by
2030
20 MW Battery Storage
Technology
SMRTechnology
For BaseloadReplacement
RegionalTransmission
Projects
Natural Gas StorageAnd
Gas Infrastructure
Fully Compliant with Arizona Energy
Efficiency Standard22% by 2020
Energy Imbalance
Market
PORTFOLIO DIVERSITY
TECHNOLOGY REVIEW
12
UNSE Retail Load Forecast
-
100
200
300
400
500
600
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
2014 IRP 2016 Pre-IRP
13
UNSE Loads & Resources
14
UNSE Renewable Energy Portfolio
Red Horse SolarFixed PV30 MW
Kingman Wind & SolarWind & Fixed PV
10.2 MW
Black Mountain SolarFixed PV8.9 MW
La SenitaSingle Axis PV
0.98 MW
• Renewable Energy Standard (RES) requires 15% renewable energy supply by 2025
• UNSE is ahead of schedule in achieving Arizona’s RES requirement
• 56 MW of solar and wind generation
• Red Horse Solar – In Service Summer 2016 (30 MWAC)
• GrayHawk Solar (PURPA) –Summer 2017 (46 MWAC)
• Approximately 2,000 UNSE customers with distributed solar generation in UNSE’s service area (~ 21 MWAC)
15
UNSE’s Future Resources Needs
2016 2019 2021 2023 2026 2030
Future Natural GasResources
Target 15% Renewables by
2018
Battery Storage
Technology
Regional
TransmissionProjects
Natural Gas Storage
Fully Compliant with Arizona Energy
Efficiency Standard22% by 2020
RICE
PORTFOLIO DIVERSITY
TECHNOLOGY REVIEW
Energy Imbalance
Market
16
2016 Integrated Resource Plan Update
Jeff YockeyManager of Environmental and
Long-Term Planning
2016 IRP WorkshopJuly 18, 2016
2017 2021 2024 2028 2031
+197 MWOperationalControl of
Springerville Unit 12017
Coal Diversification Strategy
-170 MWRetire TEP’s Share of San Juan Unit 2
December 2017
-170 MWOption to Exit
San Juan Unit 1July 2022
-168 MWOption to Exit
Navajo GeneratingStation
December 2030
-110 MWOption to ExitFour CornersPower Plant
June 2031
San Juan Economic Viability Assessment
and Participant Commitment
June 2018
SCR Required on Remaining Navajo UnitsJanuary 2031
Four Corners Coal Supply Agreement ExpirationJuly 2031
18
Assumptions – Renewable Energy
Renewable Energy
• TEP - 30% Renewable Energy by 2030– Exceed REST requirements for total renewable
energy
• UNSE - Meet REST requirements for total renewable energy early
• Meet REST requirements for distributed generation
• Regulatory Rate Reform
• Diversification of RE Portfolio– Mix of distributed generation, community
solar, and wind
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
GWh
TEP Renewable Energy Production
Wind Solar DG REST Target Energy
19
Renewable Contribution to Peak Capacity
0
1
2
3
4
5
6
7
8
9
10
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Rene
wab
le O
utpu
t, M
W
Solar Fixed PV Solar Single Axis Tracking Solar Thermal - 6 Hour Storage AZ Wind NM Wind
Technology NM Wind AZ Wind Solar PV (Fixed) Solar PV (Single-Axis) Solar CSP (Storage)Annual Capacity Factor 38% 30% 17% 24% 38%System NCP Peak Factor 9% 9% 33% 51% 83%
System Peak
Representative of 10MW Facilities
No other renewables
Average of Typical Summer Day (June – August)
20
TEP Duck Curve
-
200
400
600
800
1,000
1,200
1,400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
MW
Hour
30% Target2030 Winter/Spring DayExisting Solar (6% of 2030 Target)15% of 2030 Target
Reduced Thermal Unit Minimums
Thermal Unit Ramp UpThermal Unit Ramp Down
No Peak Contribution
100% Fixed PV
21
Adjustments to Peak
-
500
1,000
1,500
2,000
2,500
3,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
MW
Hour
30% Target
2030 Typical Summer Peak Day
Existing Solar (6% of 2030 Target)
15% of 2030 Target
Shifted
Reduced Peak
Reduced Thermal Unit Minimums
Thermal Unit Ramp Up
Thermal Unit Ramp Down
22
Energy Efficiency
• Meet EE Standard through 2020
• Further growth between 2020-2032?– Program Adoption– Rate Incentives– In-home Technology
• Assess EM&V under the CPP
• Leverage Clean Energy Incentive Program (CEIP)
– Low Income Communities
Common Practice Baseline
Persistence
Annualized Savings
Building Codes
23
Clean Power Plan
• Regulates CO2 from existing power plants based on best system of emission reduction, “BSER”
• States set standards through implementation plans• BSER Establishes emission goals for two subcategories of power plants• State goals derived based on proportional generation
CO2 Rate (lbs/MWh) 2022-2024 2025-2027 2028-2029 2030+
Subcategorized Rate - Steam EGUs 1,671 1,500 1,308 1,305
Subcategorized Rate - NGCC 877 817 784 771
State Rate - Arizona 1,263 1,149 1,074 1,031
State Rate - New Mexico 1,435 1,297 1,203 1,146
State Rate - Navajo Nation 1,671 1,500 1,380 1,305
● Rate goals converted to total mass goals (i.e. short tons of CO2) for each state24
Clean Power Plan
• Timing of CPP Implementation uncertain due to litigation– Supreme Court stayed rule in February pending litigation in the DC
Circuit Court– DC Circuit Court to hear oral arguments in September 2016, en banc
• Ruling possible in late 2016
– Appeal to Supreme Court a near certainty• Decision in late 2017 or early 2018
• All deadlines to be shifted in proportion to the length of the litigation
• States individually electing whether to proceed with, slow, or stop CPP planning
25
Clean Power Plan
• Navajo Nation– Coal retirements– No existing NGCC– Limited energy efficiency– Point to mass-based
• New Mexico– Coal retirements– Point to mass-based
• Arizona– Proceeding slowly– Evaluating rate vs. mass
26
Restricted © Siemens AG 2014 All rights reserved.Page 27
0
200
400
600
800
1,000
1,200
1,400
1,600
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Emis
sion
Rat
e (lb
s/M
Wh)
Arizona Emission Rate vs. Official Emission Rate
AZ CPP Rate Goal Projected AZ Rate
0
5
10
15
20
25
30
35
40
45
50
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Emis
sion
s (M
illion
Sho
rt To
ns)
Arizona CO2 Emissions
AZ Affected Coal AZ Affected Gas CC AZ Affected Oil/Other AZ Mass Goal
Summary of Base Case State Rate and Mass AnalysisCoal Reduction and ERCs from Renewables and Efficiency Position Arizona for Compliance Under Rate Goal
• This analysis suggests that Arizona is well positioned for rate approach based on the Base Case outlook due to increased reliance on gas expected and significant energy efficiency and new renewables.
• Arizona meets CPP interim goal under a rate-based approach – falls slightly short of meeting final goal.
– ERCs banked during interim period could be used to meet compliance with final goal.
• On a mass basis, Pace Global projects a net annual allowance deficit that would equate to retiring another ~1,900 MW of coal to comply by 2030.
AZ Rate v. CPP Rate Goal
AZ Emissions v. CPP Mass Goal
Report Available on http://www.azdeq.gov/node/1206
Resource Diversification Water Use
Resource Diversification to
Result in Lower Water Use Overall
Qualitative Risk Assessment with
University of Arizona
28
Other Environmental Impacts
• 2015 Ozone NAAQS– Standard lowered to 0.70 ppm– Could impact permitting for new gas generation
• Regional Haze– EPA proposal to adjust state plan deadlines from July 2018 to July 2021– Springerville and other sources to be evaluated for emission
reductions to achieve “reasonable progress”
October 2017Final EPA
Designations for 2015 Ozone NAAQS
2017 2018 2019 2020 2021
July 2018Regional Haze SIPs
due to EPA (currently)
December 2020Attainment date for
Marginal Ozone Non-attainment
July 2021Proposed due date for Regional Haze
SIPs
29
2016 Integrated Resource Plan Update
Mike SheehanSenior Director of Fuels and Resource Planning
2016 IRP WorkshopJuly 18, 2016
Resource Planning Data Assumptions
• Future Resource Assumptions– PACE Global– Wood MacKenzie– Electric Power Research Institute (EPRI)– Black & Veatch– National Renewable Energy Laboratory (NREL)– IHS CERA– National Energy Technology Laboratory (NETL)– Request for Proposals (RFPs)
• Independent Third-Party Data Sources– Avoid internal biases– In-depth analysis behind data– Forward thinking outcomes
31
Natural Gas Fundamental Supply & Demand Model
Exports from U.S.
5
1
2
43
End-Use Customer Demands
Supplier Production Costs
Pipeline andStorage
Capacities
Natural GasClearingPrices
Power Generation Demand
32
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
2015 2017 2019 2021 2023 2025 2027 2029
Low Case Base Case High Case
Forward Permian Natural Gas Prices
High Case $4.75/mmBtu
Base Case $3.77/mmBtu
Low Case $3.01/mmBtu
33
Scenarios and SensitivitiesPortfolios
1. Energy Storage Case2. Small Nuclear Reactor Case3. Full Coal Retirement Case4. High Energy Efficiency Case5. High Renewables Case6. Market Reference Case
Sensitivities1. Natural Gas Prices2. Wholesale Power Prices3. Retail Load and Demand4. CO2 Compliance
Combined Scenario Planning
Combined Scenarios Load Growth Natural Gas Prices
Coal Retirements
EnvironmentalCompliance Costs Capital Costs
Environmental Regulation Low High Full High Moderate
Technology Evolution Moderate Moderate Moderate Low High
Economic Turmoil Low Low Low Low Moderate
34
Electric Vehicles (EVs)
Tesla Model 3: Does it signal an Electric Car Revolution?Cost - The base version of the Model 3 will be produced at $35,000.
Performance - 0-60 in less than 6 seconds in the base version.
Range - The base model with a 50-60 kWh battery - 215 miles per charge.
Charging - Supercharging to near full capacity in 40 minutes compared to multiple hours with other EVs. Regular charging in 5-6 hours from a home charger.Note: Data based on Wood-MacKenzie Electric Vehicle Case Study and www.teslamotors.com
35
Jeffrey Pyun Department of Chemistry & Biochemistry, University of Arizona Department of Chemical & Biological Engineering Seoul National University, World Class University Program
36
Future EV Charging Profiles
• Workplace incentives to charge during the day to utilize solar generation resources.
• Maximizes carbon reduction in the transportation sector while reducing the “duck-curve” effects in power generation sector.
Today’s EV Charging Profile
• Current battery technology has 85% of EV owners charging overnight at home.
• Results in off-peak reliance of predominately coal, natural gas and wind generation resources.
EV Charging Infrastructure and Incentives
0%
5%
10%
15%
20%
25%
6:00 10:00 14:00 18:00 22:00 2:00Source: Wood Mackenzie; Idaho National Laboratory
0%
5%
10%
15%
20%
25%
30%
6:00 10:00 14:00 18:00 22:00 2:00
Discounted Charging Rates for EV Customers
9AM to 3PM
Utility Programs to
Curtail Charging
Loads3PM to 9PM
EV Charging Peak around
2 AM
37
EV Scenarios for TEP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2015 2018 2021 2024 2027 2030
Perc
ent o
f Loa
d %
TEP EV Penetration Scenario
Base EV Case Aggressive EV Adoption
-
20
40
60
80
100
120
140
2015 2018 2021 2024 2027 2030
EV D
eman
d (M
W)
EV Demand (MW)
Base EV Case Aggressive EV Adoption
Source: Adapted from Wood Mackenzie Long-Term Forecast Assumptions - 2016
5% of LoadUnder
Aggressive Adoption
2.5% of LoadUnderBaseCase
136 MW By 2030
(Aggressive Case)
72 MWBy
2030(Base Case)
– Implementation of new TOU rates, demand response and direct load control strategies for EVs– Promotion of workplace charging systems and Level 3 charging stations sourced from renewables– Incremental EV load growth could help creates volumetric opportunities to reduce overall customer rates
38
2016 Levelized Cost of Energy ($/MWh)$279
$222
$161 $145
$106
$82 $70
$54 $49
$36 $-
$50
$100
$150
$200
$250
$300
FrameCombustion
Turbine
AeroderivitiveCombustion
Turbine
Solar Thermal- Six HourStorage
Small ModularReactor
Natural GasReciprocating
Engines
Natural GasCombined
Cycle
Solar PV -Fixed Tilt
Solar PV -Tracking
WindResources
EnergyEfficency
$/M
Wh
$50 (a)
(b)
Assumptions:The LCOE analysis assumes 43.5% debt at 5.2% interest rate and 56.5% equity at 10% cost for both conventional and renewable generation technologies based on 2016 in-service date. A levelized natural gas price of $3.77 per MMBtu is assumed for all applicable natural gas technologies. All solar resources reflect the investment tax credit changes associated with the December 2015 Consolidated Appropriations Act. Wind resources represent on-shore technologies and assume all production tax credits based on the December 2015 Consolidated Appropriations Act. Analysis does not reflect potential impact of evolving regulations/rules promulgated pursuant to the EPA’s Clean Power Plan. The LCOE reflects interconnected bus bar costs and excludes reliability–related costs (i.e., system integration and backup capacity costs associated with renewables) and potential social and environmental externality costs. Energy efficiency notes (a) Estimates per National Action Plan for Energy Efficiency; (b) Costs based on Arizona total and program administrator cost of saved electricity for various initiatives in 2012 dollars. Source: Lawrence Berkeley National Laboratory (LBNL) Demand-Side Management (DSM) Program Database for the period 2009 to 2013.
39
Conventional Technologies
Plant Construction Costs UnitsFrame
Combustion Turbine
AeroderivativeCombustion
Turbine
Natural Gas Reciprocating
Engines
Small Modular Reactor (SMR)
Natural Gas Combined
Cycle (NGCC)
Project Lead Time Years 4 4 2 12 4Installation Years First Year Available 2020 2020 2018 2028 2020Peak Capacity , MW MW 75 45 20 300 550Plant Construction Cost 2016 $/kW $770 $1,200 $1,070 $6,000 $1,135EHV/Interconnection Cost 2016 $/kW $30 $50 $30 $400 $165Total Construction Cost 2016 $/kW $800 $1,250 $1,200 $6,400 $1,300
Operating Characteristics Fixed O&M 2016 $/kW-Yr $13.25 $12.50 $17.50 $29.30 $16.50Variable O&M 2016 $/MWh $3.75 $3.50 $12.50 $5.00 $2.00Gas Transportation 2016 $/kW-Yr $16.80 $16.80 $16.80 - $16.80Annual Heat Rate Btu/kWh 10,500 9,800 8,000 10,400 7,200Typical Capacity Factor Annual % 8% 15% 45% 85% 50%Expected Annual Output GWh 53 59 79 2,234 2,409Fuel Source Fuel Source Natural Gas Natural Gas Natural Gas Uranium Natural GasUnit Fuel Cost $/mmBtu $3.77 $3.77 $3.77 $0.90 $3.77Net Coincident Peak NCP% 100% 100% 100% 100% 100%Water Usage Gal/MWh 150 150 50 800 350
Levelized Cost of Energy $/MWh $279 $222 $106 $145 $82
40
Renewable Technologies
Plant Construction Costs($2016)
UnitsSolar Thermal 6 Hour Storage
(100 MW)
Solar Fixed PV(20 MW)
Solar Single Axis Tracking(20 MW)
Wind Resources(50 MW)
Project Lead Time Years 4 2 2 2Installation Years First Year Available 2020 2018 2018 2018Peak Capacity MW 100 20 20 50Plant Construction Cost 2016 $/kW $9,800 $1,450 $1,700 $1,250EHV/Interconnection Cost 2016 $/kW 200 50 50 200Total Construction Cost 2016 $/kW $10,000 $1,500 $1,750 $1,450
Operating Characteristics Fixed O&M 2016 $/kW-Yr $80.00 $10.00 $13.00 $40.00Typical Capacity Factor Annual % 50% 25% 32% 33%Expected Annual Output GWh 438 44 56 145Net Coincident Peak NCP% 85% 33% 51% 13%Water Usage Gal/MWh 800 0 0 0ITC Percent 30% 30% 30% -PTC $/MWh - - - $23.00
Levelized Cost of Energy $/MWh $161 $70 $54 $49
41
Levelized Cost of Energy and Storage Technologies
• Levelized Cost of Energy – https://www.lazard.com/perspective/levelized-cost-of-energy-analysis-90/
• Levelized Cost of Storage Technologies– https://www.lazard.com/perspective/levelized-cost-of-storage-analysis-10/
42
Renewable ResourcesTechnology Innovation Curves and Renewable Tax Credits
$70
$67$64
$62$63
$65
$74
$55
$60
$65
$70
$75
0
500
1000
1500
2000
2016 2017 2018 2019 2020 2021 2022
LCO
E, $
/MW
h
Inst
alle
d Co
st, $
/kW
Solar PV - Fixed Tilt (20 MW)
$/MWh $/KW
$54 $51 $49 $49$51 $54
$61
-$4$6$16$26$36$46$56$66$76
0
500
1000
1500
2000
2016 2017 2018 2019 2020 2021 2022
LCO
E, $
/MW
h
Inst
alle
d Co
st, $
/kW
Solar SAT - Tracking (20 MW)
$/MWh $/KW
$49 $54 $59$64
$75 $75 $75
-$4$6$16$26$36$46$56$66$76
$0
$500
$1,000
$1,500
$2,000
2016 2017 2018 2019 2020 2021 2022
LCO
E, $
/MW
h
Inst
alle
d Co
st, $
/kW
Wind (50 MW)
$/MWh $/KW
$161 $157 $153 $151 $158 $165$188
$0
$50
$100
$150
$200
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2016 2017 2018 2019 2020 2021 2022
LCO
E, $
/MW
h
Inst
alle
d Co
st, $
/kW
Solar Thermal - 6 Hour Storage (100 MW)
$/MWh $/KW
Note: Utility projects which have commenced construction before December 31, 2021 may still qualify for the 30, 26 or 22 percent ITC if they are placed in service before December 31, 2023. The Treasury and IRS are currently drafting guidance which will inform solar developers of which percentage of ITC they will qualify for depending on when they started their project
43
CAISO Spring 2016 Price Curves($/MWh)
Historical Hourly Price Curves($/MWh)
Solar Penetration Impacts on Hourly Wholesale Power Prices
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
1 3 5 7 9 11 13 15 17 19 21 23$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
1 3 5 7 9 11 13 15 17 19 21 23
Prices Collapse
8AM to 2PMDue to Solar
Surplus
Prices Increases
4PM to 10PMDue to Fast
Ramping Requirements
Typical Spring Day Typical Spring Day
Wholesale power prices are in process of undergoing a fundamental hourly price shift to accommodate the integration of solar resources
Market Prices Aligned with Customer Demand
44
Future Natural Gas Infrastructure Requirements
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24M
cf
2032 Daily Natural Gas Usage (Mcf)
TEP
UNSE
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Mcf
2016 Daily Natural Gas Usage (Mcf)
TEP
UNSE
Hourly Gas Usage Hourly Gas Usage
Peak Hour Usage 3,400 McfMax Ramp Up 2,500 McfMax Ramp Down (1,400) Mcf
Peak Hour Usage 9,100 McfMax Ramp Up 4,300 McfMax Ramp Down (3,900) Mcf
Average Summer Daily Usage 75,000 Mcf Average Summer Daily Usage 175,000 Mcf
TEP’s 2016 Resource PortfolioCoal Resources and
10% Renewables
Future Coal Retirements
andHeavy SolarRenewable
Portfolio
45
Future Regional Transmission Projects
Tucson
Springerville
Greenlee
South
Tortolita
Palo Verde
San Juan
Four Corners
PinalCentral
Navajo
Kyrene
Valencia
Jojoba
Willow
Sunzia East
SouthlineTransmission
Project
SunziaTransmission
Project
Westwing
Western Spirit
Project
Coal Generation
Natural Gas Generation
Wind Generation
Solar Generation
Sunzia Project
Southline Project
Western Spirit Project
Future EHV Upgrades
Merchant Generation at
Palo Verde
46
Renewable Portfolio Diversification
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Mcf
2032 Heavy Solar Portfolio
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24M
cf
2032 Balanced Solar / Wind Portfolio
Hourly Gas Usage Hourly Gas Usage
Peak Hour Usage 8,800 McfMax Ramp Up 3,400 McfMax Ramp Down (2,800) Mcf
Peak Hour Usage 9,100 McfMax Ramp Up 4,300 McfMax Ramp Down (3,900) Mcf
Overall Decrease in Ramp Up and
Ramp Down During Typical Day
80% Solar and 20% Wind 50% Solar and 50% Wind
47
(300.0)
200.0
700.0
1,200.0
1,700.0
2,200.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour
ly U
nit D
ispa
tch
Coal Natural Gas Wind Market Purchases Over Generation
2017 IRP Portfolio Diversification Strategy
• Compliance with Clean Power Plan
• Fast Ramping Natural Gas Resources
• Renewable Portfolio Diversification
• Energy Storage Technologies
• Regional Transmission and Imbalance Markets
• Natural Gas Storage
• Demand Response Programs
• Energy Efficiency
– Low Income Programs
– Clean Power Plan Compliant
• Improvements in Rate Design1 – Downward Ramping2 – Minimum Generation3 – Upward Ramping4 – Peak Shift5 – Over-Generation
Hourly Dispatch
5
1
2
4
3
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Future IRP Requirements
• TEP and UNSE Support a Three-Year Planning Cycle
• Three Year Action Plans– Provides detailed overview on Company’s near-term initiatives– Need to have a process to change plans between IRP planning cycles– Acknowledgement that these updates may be competitively sensitive
April 20172017 Final IRP
Report
2017 2018 2019 2020 2021Stakeholder Workshops
April 2018ACC
Acknowledgement of 2017 Final IRP
April 20192019 PreliminaryIRP Report Due
April 20202020 Final IRP
Report
April 2021ACC
Acknowledgement of 2020 Final IRP
Staff Review Staff ReviewStart of New IRP Planning Cycle
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Planning to Meet Future Operational Requirements
201480% Coal
4% Renewables
202350% Coal
20% Renewables
203230% Coal
30% Renewables
• Regional Haze Compliance• Renewable Portfolio Standard• Energy Efficiency Standard
• Coal Plant Retirements• Additional Natural Gas• Additional Renewables
• Clean Power Plan Compliance• Resolving “Duck Curve” Challenges• Regional Transmission Development• Natural Gas Infrastructure Development
• Renewable Portfolio Diversification• Energy Storage Technologies• Reciprocating Engines• Energy Imbalance Market• Regional Transmission Markets• Natural Gas Storage• New TOU Rate Designs• Demand Response
Operational Requirements
Operational RequirementsPortfolio Solutions
Portfolio Solutions
• Baseload Coal Replacements
• Future Clean Power Plan Compliance
Operational Requirements
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