ERCOT PUBLIC 9/15/2015 1 2016 LTSA Scenario Assumptions Doug Murray ERCOT Sr. Planning Analyst September 15, 2015

ERCOT PUBLIC9/15/2015 1

2016 LTSA Scenario AssumptionsDoug MurrayERCOTSr. Planning Analyst

September 15, 2015


Agenda

• Data Sources

• Scenario Descriptions

• Load Forecasts

• Capital Cost Projections

• Fuel Price Projections

• High Storage/Electric Vehicle Adoption Scenario

• Generation Expansion Schedule


Data Assumptions and Sources

• Assumption in this presentation are preliminary and changes are likely in the next couple months based on stakeholder comments

• In general the sources for the information were obtained from:

– EIA 2015 AEO

– Lazard’s Levelized Cost of Energy Analysis - 2014

– Several reports from Lawrence Berkeley National Lab (LBNL)

– Electric Vehicle Transportation Center at Univ. of Central Florida

– Federal Highway Administration

– Electric Power Research Institute (EPRI)

– Solar Energy Industries Association (SEIA)

– American Natural Gas Association (ANGA)

– Presentations given at the scenario development workshops


Scenario DescriptionsInput

Assumptions1. Current

Trends

2. High Economic Growth

3. Environmental

Mandate

4. Texas Recession

5. Extended extreme weather

6. High Efficiency/DG

7. Sustained low natural gas

prices

8. High Storage/EV

adoption

Economic Growth Continued population and industrial growth

Higher population, GDP, industrial growth

Same as Current Trends

Slowdown in population and

industrial growth. slower oil and gas

development



Industrial sector sees moderate growth


End Use/New Markets

Moderate increase in DR, DG, need for A/S


Increased focus on effi ciency measures

for cost savings

Slow down in EE penetration


Significant increase in effi ciency and DG

installations


Growth in EE and Roof top PV, Electric

vehicles and charging infratstructure.

Env Regs/Energy Policy

Regional Haze and CSAPR emission limits


Regional Haze, CSAPR, NAAQS, CPP Carbon

limits






Renewable Tax Credits

NoneSame as Current

TrendsYes





Yes

Alternative Generation

Continued Wind and Solar growth with

economic entry

Higher renewable growth

Renewable incentives to continue

Slower decline in cost of renewables

including storage

Investments in renewables,

storage, desalination &

power plant co-location



High penetration of Storage coincident with wind and PV

Natural Gas/Oil Prices

Avg of EIA reference and high oil/gas production case



Lower than Current Trends



Lower than Current Trends


TechnologyModerate

technological improvements, New

DC Ties

Smarter appliances resulting in increase in

EE and price responsiveness


No significant technological

improvements

Smarter appliances resulting in increase

in EE and price responsiveness.

Desal plants along

Smarter appliances resulting in increase in

EE and price responsiveness

Improvement in effi ciency of gas

plants

Increased residential energy storage,

electric vehicles, faster charging infrastructures

Generation Resource Adequacy

No reserve margin target

13.75% Reserve Margin Target







Water/WeatherNo drought, continued

concerns of water stress




Sustained, longer periods of extreme weather (summer

and winters), higher water costs





Scenario DescriptionsInput Assumptions 1. Current

Trends2. High Economic

Growth3. Environmental

Mandate4. Texas

Recession


scenario

6. High Efficiency/DG

7. Sustained low natural gas prices

8. High Storage/Electric Vehicle adoption

Economic Growth Same as CT Same as CTSystem Load Growth (Peak and Total Energy) Med High Med Low Med Med Med Med

GDP gowth Med High Med Low Med Med Med MedPopulation growth Med High Med Low Med Med Med MedOil & gas production growth Low High Low Low Low Low Low LowIndustrial growth Med High Med Low Med Med High MedLNG export terminal additions Low High Low Low Low Low High Low

Env Regs/Energy Policy Same as CT Same as CT Same as CT Same as CT316b, CSAPR Hybrid, ozone Yes Yes Yes Yes Yes Yes Yes YesGHG Regulations No No Yes No No No No NoCPP No No Yes No No No No NoPTC/ITC No No Yes No No No No NoNuclear relicensing Low Low Med Low Low Low Low Low

Alternative Generation Same as CT Same as CT Same as CTRenewable and storage capital cost reductions

Solar Med High High Med High Med Med MedStorage Med High High Med High Med Med HighWind Med High High Med High Med Med Med

Natural Gas/Oil Prices Same as CT Same as CT Same as CT Same as CTNG price forecast Med High Med Med High Med Low MedOil price forecast Low High Low Low Low Low Low Low

Transmission RegulationDC-tie capacity increases Yes No Yes No No No No No

Generation Resource AdequacyReserve margin No No No No No No No No

End Use/New Markets Same as CT Same as CT Same as CTRooftop solar DG Med Med Med? Low Med High Med MedEE Growth Med Med Med? Low Med High Med MedDR Growth Med Med Med? Low Med High Med High

Water/Weather Same as CT Same as CT Same as CT Same as CT Same as CT Same as CTClimate Impacts Med Med Med Med High Med Med Med


Load Forecast – Modeling Assumptions

Scenario Base ForecastEnergy

EfficiencyRooftop PV

Price Responsive DR

LNG Terminals

Current Trends ERCOT Planning LTDEF1

3.5% of the total demand by 2031

Current amount of known solar

Use same amount from 2014 LTSA

Freeport + Corpus Christi

High Economic Growth

Load forecast based on Moody’s high economic data

MW savings same as Current Trends



Freeport + Corpus Christi + Brownsville

Environmental Mandate Same as Current Trends

5% of the total demand by 2031

Increased amounts of rooftop solar



Texas Recession

5% drop in total load (peak and energy) in year 2022 followed by recovery using Moody's – low economic data

No growth No growth Same as Current Trends


Extended Extreme Weather

Forecast based on 2011 weather yearSame as Current Trends




High EE/DG Same as Current Trends 15% of the total demand by 2031

Increased amounts of rooftop solar

Increase amounts of responsive DR


Low Sustained NG price

Same as CT with higher industrial growth in Corpus-Houston area




Freeport + Corpus Christi + Brownsville

1: The 2015 ERCOT planning LTDEF (under development) will be used for the 2016 LTSA


Base Capital Cost Assumptions ($/kW)

• Thermal plant costs increase at 2.4% annually (2015 EIA AEO)

Year CC CT Coal Nuclear IGCC Wind Solar PV Biomass Geothermal Battery CAES2014 1,073 791 3,202 6,395 4,307 1,800 2,160 3,903 5,025 750 1,056 2015 1,099 810 3,279 6,548 4,410 1,782 1,824 3,997 5,145 735 1,076 2016 1,125 829 3,357 6,705 4,516 1,764 1,616 4,093 5,269 710 1,095 2017 1,152 849 3,438 6,866 4,624 1,747 1,452 4,191 5,395 680 1,116 2018 1,180 869 3,520 7,031 4,735 1,729 1,365 4,292 5,525 632 1,136 2019 1,208 890 3,605 7,200 4,849 1,712 1,341 4,395 5,657 611 1,157 2020 1,237 911 3,691 7,372 4,965 1,703 1,325 4,500 5,793 590 1,178 2021 1,267 933 3,780 7,549 5,085 1,695 1,310 4,608 5,932 585 1,200 2022 1,297 956 3,871 7,731 5,207 1,686 1,298 4,719 6,074 580 1,222 2023 1,328 979 3,964 7,916 5,332 1,678 1,294 4,832 6,220 576 1,244 2024 1,360 1,002 4,059 8,106 5,460 1,669 1,298 4,948 6,369 587 1,267 2025 1,393 1,026 4,156 8,301 5,591 1,661 1,304 5,067 6,522 598 1,291 2026 1,426 1,051 4,256 8,500 5,725 1,665 1,311 5,189 6,679 609 1,314 2027 1,461 1,076 4,358 8,704 5,862 1,669 1,317 5,313 6,839 620 1,338 2028 1,496 1,102 4,463 8,913 6,003 1,674 1,324 5,441 7,003 631 1,363 2029 1,532 1,128 4,570 9,127 6,147 1,678 1,330 5,571 7,171 643 1,388 2030 1,568 1,155 4,679 9,346 6,294 1,682 1,337 5,705 7,344 655 1,414 2031 1,606 1,182 4,792 9,570 6,446 1,686 1,344 5,842 7,520 667 1,439


Natural Gas Price Assumptions

• Average of EIA Reference and EIA High Oil & Gas production case will be used for Current Trends Scenario

• For Low Natural Gas Price Scenario assumed price remained below $4/mmBtu


Storage/EV Scenario Assumptions

Scenario will include:• Information for batteries is still being developed

• Increasing penetration on electric vehicles• Approximately 8 million passenger vehicles on Texas roads• Vehicle charging pattern will charge all day with most charging occurring off-pk hours• Average vehicle will require:

– 8 hours of charging– 30 miles driven per day– 10.2 kWh needed per day– 1.275 average hourly charge rate

• 1,600,000 EVs by 2031 which will be 20% of total passenger vehicles in Texas today?


EPRI EV Charging Patterns


EV Average Charging Pattern


Schedule for Generation Expansion

• Comments/changes to data completed by mid October

• Final scenario data development by end of October

• Model runs begin early November

• Completion of generation expansion January 2016


Questions

Contact info:Doug MurrayJulie [email protected]

[email protected]

512.248.3982

Sandeep [email protected]

mailto:[email protected]




Appendix


The 2016 LTSA Scenarios

1. Current trends

2. High economic growth

3. Environmental mandate

4. Texas recession


6. High energy efficiency/distributed generation

7. Sustained low natural gas scenarios

8. Storage/electric vehicle adoption scenario


Economic Growth• Migration to TX along I-35 corridor• Lower Growth in south and west Texas• Industrial growth in Houston, I-35• Average GDP growth in line with long-term average

US GDP growth rate~1.5% load growth – high growth in near term then tapering off in long-term

• LNG growth based on permits existing – may be 2 new LNG plants

• Oil production rates drop to those seen in recent projections

Weather / Water• No drought situation, but water supply

continues to be a concern to existing and new generators.

• No specific increase in electricity consumption due to drought conditions.

Technology• No breakthroughs – steady modest

cost improvements• New DC ties

End-Use• Increased need for ancillary services• Increase penetration of demand response• Increasing distributed generation

Government policy/mandate• No reserve margin set for ERCOT• Maintain energy-only market• Economic retirements continues based on

economics• Increased DC-tie capacity with neighboring

region

Environmental Regulation• Impact of Regional HAZE and CSAPR are seen in the

near future• CSAPR Hybrid • Greenhouse gas regulation set with flexibility• No other major changes in environmental regulations

– no CPP impacts

Story:Same old, same old. The recent population and economic growth in Texas continues in the near future, however the recent decline of the oil and gas sector has impacted growth in the west and south Texas especially in areas near the oil and gas plays. World oil prices are low enough to keep oil production low in the short-term, while also keeping domestic natural gas prices relatively low. With low gas prices, currently commissioned LNG export terminals get completed by 2019-2020 timeframe however no new LNG Terminals get added. Modest wind and solar growth continues based on economics without production tax credits. Capital costs for solar continues to decline at the current rate for 3-4 more years. No required reserve margin is set for ERCOT and the environmental regulations continues to be moderate, with no explicit federal carbon tax. However SOx/NOx limits imposed by CSPAR, and Regional Haze ruling become active by 2018.

Implications for ERCOT:• Continued modest economic and therefore load

growth in Texas.• Reduction in oil production and population across the

state results in slower load growth in oil and gas producing regions

• Continued increased renewables especially solar may lead to reliability (inertia) issues

• While EPA’s clean power plan has not been implemented in this scenario, other emissions standards may have some effect on future generation mix

1. Scenario: Current trends

Alternative Generation• Total wind capacity of 20K to 25K generation added

by 2017• Solar capability addition limit:1000 MW/ year • Wind capacity addition limit: 3,000 MW/yr• Capacity factor wind – rely on historical data from

ERCOT• Capital cost wind ~$1755/kW• Capital cost solar ~4.4% reduction/year continues

for 3 to 4 years• Overall renewable growth driven by economic entry• No production tax credit beyond 2013• No change to existing investment tax credit policy

Gas/Oil Prices• Sustained low oil prices• Moderate growth in natural gas prices


Technology• Smarter appliances with an increase in

efficiency and price responsive• Automated price responsive demand

response is greater than Current Trends

Economic Conditions• High Texas GSP growth ~5%/year• High population growth (2.5%/yr)• Pro-business environment• Industrial growth concentrated in Houston, I-35

corridor, Midlands/Odessa, Lower Rio Grand Valley• Higher LNG exports than under Current Trends • Capital is available to support new generation and

transmission

Weather / Water• Same as Current TrendsOil/Gas Prices

• Higher (but still relatively low) gas prices than under Current Trends (~$6/7 or use EIA’s high forecast)

• Higher oil prices than under Current Trends

End-Use • Growth of household income however, more

energy-efficient new homes • Overall efficiency gains are similar as under Current

Trends• Higher distributed generation than current trends

Alt. Gen. Resources• Renewables are economic and growth occurs

due to higher gas prices• More technological improvement than under

Current Trends for renewables and storage• Cap on annual wind capacity growth

Gen Resource Adequacy Standards• mandated reserve margin of 13.75%• Consider additional ancillary services

Environ. Regs/Energy Policy• Continued modest environmental regulations,

no significant changes from assumptions under Current Trends

• U.S. more focused on developing domestic energy sources

Story:Texas economy continues to outpace US economic growth. Increased immigration to Texas shows continued accelerated load growth in urban centers. Higher natural gas prices increase drilling activity and lead to higher economic growth than under Current Trends. Growth occurs throughout Texas driven in large part by oil and gas sector and related upstream and downstream industries. Local natural gas price, while higher than current trends, is expected to be competitive in global LNG market, thus resulting completion of additional LNG terminals along the Texas gulf coast. Lastly, Alternative generation such as wind and solar is expected to respond to higher priced natural gas fueled generation.

Implications for ERCOT:• High load growth• High urban growth • High industrial growth, concentrated

through I-35 corridor, Midlands/Odessa, Lower Rio Grand Valley and oil and gas rich areas

• Potential challenges with generation portfolios keeping pace with load profile changes

2. Scenario: High economic growth


Economic Conditions• Moderate economic growth • Same LNG exports than under Current

Trends• Population growth same as under Current

Trends Increase in industrial production of alternative energy and efficiency-related technologies

Weather & Water• Same as Current Trends

Natural Gas Prices• Same as Current Trends • Same amount of LNG exports as under Current Trends

Technology• Same as current trends• Some improvement in efficiency of gas and

renewable incorporation of storage.

End – Use Customers / Policies• Continued stringent building code – 10%

improvement every 3 years

Transmission Regs• Same as Current TrendsEnvironmental Regs / Energy

Policies• Ongoing Regional Haze and CSAPR

related emission limits remain active• Carbon limits imposed by CPP

implementation in Texas

Story:This scenario assumes a nationwide implementation of stringent environmental regulations. This implementation results in increased energy efficiency and customer-sited solar PV. In addition to the target of 32% CO2 reductions in Texas, the scenario also expects existing regulations related to Regional Haze, NAAQS and CSAPR continue to remain active. Continued drop in cost of renewable generation and retention of tax credits makes solar and wind generation more competitive. Stricter emission standards are expected to be in place to achieve the CO2 target set by these regulations, making coal generation less economical and may gradually get replaced by Natural Gas fired generation. Stricter regulations around water use result in installation of dry cooled generation.

Implications for ERCOT:• Lower peak and overall end use• Challenge in matching generator w/ load• Reserve & integrate issues• Potential need for new ancillary services to

provide faster & flexible resources

3. Scenario: Environmental mandate

Alt. Generation Resources • Continued PTC/ITC through 2020, reducing over time• Continued decrease capital costs for solar: 3-5% /yr• Wind capacity factors increase due to technological

improvements• Cap on annual wind generation• Increased development of storage due to cost

reductions for batteries & compressed air• More financing mechanism are available; e.g.: real

estate investment trusts, property-assessed clean energy financing, and others


Economic Conditions• Net population growth in Texas ~negative to

zero• Urbanization with growth concentrated in the

major cities• No industrial growth• Capital for new generation difficult to obtain• Little to no GDP growth or net load growth

Weather / Water• Same as under Current Trends – no

drought conditions, but limited water supply for new generation

Gas/Oil Prices• Lower prices (~$1/mmbtu lower than

assumptions under Current Trends)• Less oil exploration and production• No LNG development

Technology• Less spending one energy efficient

appliances• Limited growth of new technologies

that are still high costs, such as storage

End - Use• Customers are more cost conscious, thus

more conservation – less disposable income

Alt Gen Resources• Lower oil/gas prices• Limited development of wind and solar due to

low energy prices• Nuclear re-licensing • Slower solar cost decline due to reduced

global demand

Gen Resource Adequacy Standards• Retiring of coal plants due to low energy

margins • System inertia issues increase• No reserve margin mandate

Environ. Regs. / Energy Policy• Continuing modest environmental

regulations, no significant changes from assumptions under Current Trends

• Government incentives continue for high efficiency appliances

• Same as Current Trends

Story:Low energy prices threaten the Texas economy. Load growth is limited. Resource expansion is limited to gas-fired plants and continued subsidized renewables. Stimulus programs help create incentives for consumers to replace old appliances and increase conservation. similar to but less impactful than 1980’s recession.

Implications for ERCOT:• Slow load growth• Growth in urban areas greater than in rural

areas• Counties with oil and gas economies

shrink at a faster rate• Limited generation development,

predominantly gas-fired, subsidized renewables

• Import/export issues between urban areas will need to be addressed

• Stability issues continue to increase due to low system load

4. Scenario: Texas recession


Economic Conditions• Slow down in population and economic growth

with higher impacts on localities with water intensive industry

• Increased food, water and electricity prices• Productivity and job losses in agriculture• Potential negative impact on oil & gas extraction• Impact on local economy, lower economic growth

than national average

Weather & Water• More drought than in the Current Trends• Extreme high and low temperatures• Hot summers• Limited water supply – water rights

restricted

Natural Gas and Oil Prices• Moderate increase in natural gas prices

relative to in Current Trends [$1 – 2/MMBtu]

• Moderate impact on local oil production, but prices are set internationally. at the same price as Current Trends

Gen Res Adequacy Standards• Demand response plays a larger role

than in Current Trends• Increase in transmission due to

policy/ regulatory changes resulting from drought

End – Use Customer / Policies• Increase the development of demand-

side management tools• increases EE penetration beyond

those in the Current Trends• Greater market penetration of time-

of-use rates and water smart devices

Alt. Generation Resources• Continued investments in renewables, storage,

and dry-cooling • Development of co-location desalination and

power plants• Renewable costs same as Current Trends

Technology• More efficient appliances, HVAC• Less water intensive generation

Environmental Regs / Energy Policies• Required drought management plans and

water conservations• Stringent requirements on power generation

water use leads to dry cooling• Tax breaks for drought resistant generation• Other environmental regs are same as Current

Trends

Story:In this scenario Texas undergoes extreme weather conditions for an extended period of time, this means hot summers and cold winters. The sustained water stressed drought conditions impact water-intensive generation resources (nuclear/coal/steam units), and lead to significant increase in renewables and storage, dry cooling on thermal generation], and transmission expansion over those in Current Trends. Extremes in weather result in more energy consumption per capita.

Implications for ERCOT:• Derating units due to water resource

limitations and generation retirements lead to challenges in meeting demand

• Potential need for new ancillary services to meet the needs of integrating new renewable energy generation

• Seriously consider more interconnections outside ERCOT.

5. Scenario: Extended extreme weather


Economic• Same as under Current Trends• Additional growth in clean

technologies

Weather / Water• Same as Current Trends

Gas Price / Oil Price• Moderate to Higher gas prices

(4$-5$/mmbtu) than under Between Current Trends and High economic growth scenario: also higher resulting wholesale electricity prices

Technology• Accelerated price reductions of solar,

storage, high SEER HVAC, Lighting and Controls

End – Use • More high efficiency homes and

buildings built due to enhanced building codes

• Efficiency gains are above those under Current Trends, results in 30% reduction in energy usage in homes and buildings relative to pre-2006

• Increased time of use + price-responsiveness

• Higher installation DG• Higher DR participation• More options for microgrids, smart

appliances, etc.

Alt. Gen. Resources• Capital cost for wind and solar

technologies and CHP decrease faster than under Current Trends

• Improved storage technology and lower cost

Gen Resource Adequacy• Same as under Current Trends• No reserve margin mandate however

expectations is that increased load resources participation helps meet system need

Environ. Regs/Energy Policy• Increase stringency in building codes,

with more net zero buildings• Government provides more incentives

for building retrofits to increase efficiency

• Increase in appliance standards increase• More attractive DR programs/pricing• Environmental regs same as current

trends

Story:Economic growth good enough to allow new investments in efficiency and distributed generation. Customers increase acceptance of EE/DG technologies which leads to widespread market adoption. In addition to the efficiency improvements there is higher participation in price responsive demand response.

Implications for ERCOT:• Lower net load (demand and energy)

growth compared to under Current Trends

• More market-based programs for demand response

• Widespread distributed generation creates some operational challenges

• Lower capital cost of renewable generation

6. Scenario: High efficiency/distributed generation


Economic Conditions• Gas sector gets impacted with

sustained load natural gas prices• However, lower gas prices stimulates

growth in manufacturing industry• Global demand for US LNH continues

to stay robust resulting an increase in development of LNG export terminals

Weather / Water• Same as Current Trends

Natural Gas Prices• Local natural gas priced stay low $2-

4/MMBtu . • Global natural gas price continue to

stay higher than US natural gas prices

Technology• Efficiency improvements for gas plants

and other generation types

End - Use• Less likely to have EE and DG growthAlternative Generation

• Slight slowdown on renewable roll out due to reduced NG prices

• PTC/ITC same as current trends

Resource Adequacy Standards• As some plants become uneconomic,

leading to pressure for market mechanisms

Environmental Regulations• Moderate regulation on oil & gas

drilling activity• Other environmental regulations

are same as in Current Trends

Story:Improvements in extraction technology continues to create an natural gas over-supply condition. As a result, gas prices continue to stay low in the 2-4$/MMBtu range. Such sustained low natural gas prices creates an environment which stimulates growth in industrial sector. While the cost of local natural gas remains low, there continues to be a healthy global demand for US LNG, resulting in increase in development of LNG export terminals along Texas’ gulf coast

Implications for ERCOT:• The industrial sector sees strong growth• Tighter reserve margin with unit

retirements• Seasonal mothballing of plants a

possibility• Need for transmission due to unit

retirements and load growth in the industrial sector

7. Scenario: Sustained low natural gas prices


Economic Conditions• GDP growth same as Current

Trends• Population growth ~2.3%/yr• Pro-business environment

Weather / Water• Same as under Current TrendsGas Prices / Oil Prices

• Same as Current Trends

Technology• More spending on EE and energy

storage• More charging infrastructures• Faster charging• Longer range Electric Vehicles

End - Use• Motivate high energy efficiency at

a higher rate than current trends.• Storage developed close to loads• Flat load shape at the transmission

delivery site• More residential PV

Alt. Gen Resources• High penetration of storage coincident

with higher penetration of wind and PV• Renewable – wind and solar growth same

as current trends

Gen Res Adequacy Standards • Same as under Current Trends• No reserve mandate

Environm. Regs/Energy Policy• Modest environmental regulation,

same as in under Current Trends• Impact of Regional HAZE and CSAPR

are seen in the near future• Greenhouse gas regulation set with

flexibility• No other major changes in

environmental regulations – no CPP impacts

Story:This scenario calls for increased adoption of Electric Vehicles and continued drop in the cost of . Storage. Electric vehicle developed for longer range, infrastructure for faster charging more prevalent. Proliferation of roof-top PV + Storage application results in flattening and shitting of loads. Electric vehicle charging has a potential of ‘birthday cake’ effect showing spikes of demand during the shoulder hours.

Implications for ERCOT:• Flat load shape – higher energy usage

but net reduction and shifting of peak load and hour

• High urban growth due to growth in infrastructures used for electric vehicle charging and battery swapping centers

• More residential PV with storage

8. Scenario: High storage/electric vehicle adoption

Documents

ERCOT PUBLIC 9/15/2015 1 2016 LTSA Scenario Assumptions Doug Murray ERCOT Sr. Planning Analyst September 15, 2015