23
The WECC Scenarios: Early Indicator, Trends and Scenario Movement Analysis The 17 th Monthly Report to WECC and the SPSG for February 2017 Published March 7, 2017 The Quantum Planning Group San Francisco, California Specialists in Scenario Planning, Analysis & Strategy Development

The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

  • Upload
    others

  • View
    1

  • Download
    0

Embed Size (px)

Citation preview

Page 1: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

The WECC Scenarios: Early Indicator, Trends and

Scenario Movement Analysis

The 17th Monthly Report to WECC and the SPSG

for February 2017

Published March 7, 2017

The Quantum Planning Group

San Francisco, California

Specialists in Scenario Planning, Analysis & Strategy Development

Page 2: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 2 of 23

EXECUTIVE SUMMARY

Scenario Movement: There were no changes in our view about trends indicating movement in the scenario matrix during February.

This month’s report finds continued trends and indicators of movement towards Scenario 3: Focus on Short-term Consumer Costs, in both scenario matrix axes and other indicators. Events and trends also continue to point to movement towards Scenario 5: Energy, Water, and Climate Change.

We see continued conflicting axis indicators around Scenario 1: Focus on Economic Recovery and Scenario 4: Focus on Long-Term Societal Costs as the Economic Growth axis indicators point away from Scenario 1 but towards Scenario 4, while Technology Innovation indicators point to Scenario 1 and away from Scenario 4. We see no combination of the key axis indicators pointing towards Scenario 2: Focus on Green Energy (which argues a large-scale shift toward renewable energy with powerful technological breakthroughs contributing to that movement). Our scenario review starts on page 14.

Scenario Axis Trends: Events and trends in February continue to paint mixed signals and unclear understanding for economic growth globally, the US and the Western Interconnection in particular.

Broad economic indicators point towards Scenarios 3 and 4, and away from Scenarios 1 and 2 as slow and uneven growth in the Western Interconnection and high rates of unemployment in the region continue (though some states have better employment performance than others). In addition, and even with almost daily Dow Jones average records, the uneven and often conflicting statements by the incoming Administration have made uncertainty about future economic growth even higher with particular concern about changing trade policies toward imposing tariffs.

Early news reports about the Trump Administration’s economic, tax and budget proposals are confusing as they advocate large deficits which the controlling Republican House and Senate are unlikely to implement.

Progress along the Technology Innovation axis has not changed since our last report(s). We continue to see no revolutionary breakthroughs in technology innovation, although there continue to be continuous improvements in renewables, storage, energy efficiency and energy production costs. The continuing incremental improvements within electricity supply and distribution technology innovation continue pointing to Scenarios 1 and 3 and away from scenarios 2 and 4. Our discussion begins on page 11. Uncertainties, Major Trends and Wild Cards

While no EPS in February brought to light a new significant uncertainty, a new major trend emerged in jobs related to the energy sector.

Page 3: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 3 of 23

The Energy Information Agency (EIA)1 reported that new job creation in the energy sector is now driven by renewable energy and that the solar energy sector alone passed the combined fossil sectors in new power generating jobs in 2016.

Additionally, a number of new events in previously noted uncertainties and trends in February confirm that these trends are continuing, and should stay on our watch lists.

Continuing the trend of economics driving generation choices while at the same time conflicting with the desire to keep jobs, the Navajo Generating Plant - the largest coal-fired plant in the Western U.S. - is slated for closure in 2019. Located on the Navajo tribe’s reservation, there are serious concerns about losing approximately 3,000 jobs if the plant closes. The reason cited for the closure is the continuing record low natural gas prices2.

In over-supplied energy markets, California media3 are beginning to focus on the possibility of building excess generating capacity in the State and the resulting costs to consumers. Billions of dollars in excess costs are suggested, and the article notes that in many cases new generation construction is causing existing plants to curtail operations or in some case close entirely.

Energy efficiency improvements will continue to affect energy demand as 2016 saw the lowest total cost of energy expenditures by the average US household since 19594. In 2016 the average total energy consumption share of household expenditures was 3.9%, the first time it has dropped below 4% since record keeping started in 1960.

Finally, we discuss in the Scenario 5 review a recent report by the EIA noting that sulfur dioxide (SO2) emissions produced by power plants in the U.S. declined by 73 percent from 2006 to 20155.

A new Wild Card – continuing issues in solar financing6 - was added in February, and continues the trend of financial difficulty within the rooftop solar sector, but this time with additional cross-sector implications. A recent article noting that some customers of SolarCity, a major supplier of rooftop solar photovoltaic systems, are defaulting on home mortgages, and the transparency of SolarCity’s reporting of lawsuits related to the defaults and subsequent foreclosures may indicate additional trouble for SolarCity’s parent company Tesla.

Our discussion of Trends and Wild Cards begin on page 5.

1 U.S. Solar Industry Passes Fossil for Job Creation, EIA, Forbes, Computer World and MIT Technology Review, January 24

2017 2 Largest Coal Plant in West to Close, The Washington Post, February 14 2017 3 Media reports excess power with high consumer costs in California. Los Angeles Times, February 5 2017 4 US Household Energy Spending Hits 50-year Low, Christian Science Monitor and Bloomberg New Energy Finance,

February 20 , 2017 5 SO2 Emissions Fall Faster than Coal Generation Decreases, The EIA and Agri-Pulse, January 27, 2017 6 Media reports issues with financial performance of consumer loans for Tesla's SolarCity, New York Times &

Bloomberg, February 22 2017

Page 4: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 4 of 23

INTRODUCTION

This is the 17th of the monthly reports by the Quantum Planning Group (QPG) to WECC and the Scenario Planning Steering Group (SPSG) delivered on the 7th day of each month, covering:

1. Significant Event-Pattern-Structure (EPS) Events and Early Indicators (EIs) for the WECC scenarios and their implications;

2. Significant Uncertainties and Major Trends within the EPS and Early Indicators; 3. Movement and progress indicated by the trends towards one or more of the WECC

scenarios; and 4. These reports include Scenario 5: Energy/Water/Climate Change since Event EPSs

can be related to this scenario, even though there are no specific Early Indicators for this scenario other than a 3-degree F temperature rise by 2034.

While this monthly report details EPS submittals for February 1-28 2017 inclusively, our analysis considers and builds on learnings from the last 16 reports. We refer the reader to our report to the SPSG of November 3, 2015, entitled: WECC Scenarios Trends and Early Indicator Analysis, and the prior WECC Scenarios: Early Indicator, Trends and Scenario Movement Analysis reports of October 2015 - January 2017 for additional information found here.

The links to the event EPSs that follow in this report are “hot” and, when clicked, will take the reader directly to the EPS in the SPSG pages on the WECC website, or to referenced articles.

For February there were: 14 new EPS with significant events added, 9 EPS (64%) with one or more EIs flagged for 19 EIs flagged

For the period September 2015 – February 2017 there were: 329 Total EPS with significant events added 186 EPS (56%) with one or more EIs flagged for 343 EIs flagged

This month’s report includes the following sections:

Executive Summary……………………………………………………. Page 2 Significant Uncertainties, Recent Trends & Wild Cards… Page 5 Scenario Axis Trends………………………………………………….. Page 12 EPS Events with EIs and Scenarios 1-5 Movement……….. Page 15 EPS Events without EIs Flagged………………………………….. Page 23

Page 5: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 5 of 23

SIGNIFICANT UNCERTAINTIES FOR CONSIDERATION

There were no EPS events or EIs in February that highlighted a new significant uncertainty. However, February saw a new major trend emerge, and a number of EPS events that confirmed a number of recently reported trends continuing.

RECENT TRENDS from February EPS submissions

2016 Energy Sector Jobs Report from the Energy Information Administration (EIA)

During the January 2017 SPSG meeting, QPG was requested by SPSG members to take note of the recent EIA7 report which showed that new job creation in the energy sector is now driven by renewable energy and that the solar energy sector alone passed the combined fossil sectors in new power generating jobs in 2016.

In this report, we will show a fuller picture of jobs in the power sector presented in the EIA report, to help SPSG members see the larger context of energy jobs in the US.

While the growth in solar jobs is an important point to note, there are issues behind the raw job numbers in the EIA report which can leave room for varied viewpoints as to what extent job creation should influence the direction of energy policy. We suggest a few but welcome others from SPSG members and WECC Staff as we contemplate trends that might impact energy policy.

In conjunction with the EIA report, there were several articles (referenced in the EPS noted in footnote 7) in the national press which argued that national and state energy policies to support renewable energy investment should be maintained in light of the positive impacts on jobs and economic activity.

This would suggest a political basis8 for renewable energy policy (we are not saying this is wrong or has not happened in the past for fossil fuels). However, if a political basis is argued, it can useful to look at the EIA jobs report details and ask questions about whether energy policies should be based on job numbers alone.

Here are some of the key facts from the electric power generation section of the report.

7 U.S. Solar Industry Passes Fossil for Job Creation, EIA, Forbes, Computer World and MIT Technology Review, January 24

2017 8 Governors Urge Trump Administration to Support Green Energy Jobs, Bloomberg, February 2, 2017

Page 6: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 6 of 23

Figure 1: Power generation and fuels employment by sector The EIA report9 notes that power generation and fuels technology makes up more than 2 million jobs. Solar electricity generation accounted for 373,807 jobs, while wind accounted for 101,738 jobs. Fossil - coal, gas, and oil - accounted for 187,117 jobs. When fuel is included, however, fossil has 1,073,872 jobs, while renewables have 782,243 jobs. The majority of new power sources came from three main markets in 2016, making up 93% of total new additions and driving job growth: Solar……………9.5 gigawatts Natural gas….8.0 gigawatts Wind…………...6.8 gigawatts

Figures 2-6: The breakdown of major sectors of renewable power generation jobs compared to coal and natural gas10.

The solar workforce increased by 25% in 2016, adding 73,615 jobs, while wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 –

2016, from 508,000 megawatt hours (MWh) to just over 28,000,000 MWh11. Note in the solar and wind energy segments the high percentage of workers engaged in construction. Much of the increase in solar jobs was due to the large number of construction jobs related to the build out of new solar generation capacity.

9 US Energy and Employment Report 2016, EIA Complete Report, January 24 2017 10 Data source for the previous table and following charts: EIA US Energy and Employment Report 2016 11 This EIA data only reflects net generation at utility-scale facilities

Generation and Fuels Employment by Sub-Technology

Electric Power

GenerationFuels Total

RENEWABLESSolar 1 373,807 373,807

Wind 2 101,738 101,738 Geothermal 5,768 5,768 Bioenergy/CHP 26,014 104,663 130,677

Corn Ethanol 28,613 28,613 Other Ethanol/Non- Woody 23,088 23,088 Woody Biomass Fuel for Energy and Cellulosic Biofuels

30,458 30,458

Other Biofuels 22,504 22,504 Low impact Hydroelectric Gen 9,295 9,295 Traditional Hydropower 56,295 56,295

Renewables Total 572,917 209,326 782,243

NUCLEAR 68,176 8,595 76,771

FOSSILCoal 3 86,035 74,084 160,119

Natural Gas 4 52,125 309,993 362,118 Oil/Petroleum 12,840 502,678 515,518 Advanced Gas 4 36,117 36,117

Fossil Total 187,117 886,755 1,073,872

Other Generation/Other Fuels 32,695 82,736 115,431

Total All Types 860,905 1,187,412 2,048,317

Page 7: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 7 of 23

Net generation from coal sources declined by 53% between 2006 and September 2016, while electricity generation from natural gas increased by 33%.

Note the preponderance of extraction jobs in the coal and natural gas sectors supporting actual power generation that are not required in the solar and wind sectors. As noted above, solar and wind employment is highly dependent on construction, with relatively few permanent jobs remaining after construction, even in utility scale installations. As solar and wind build-out reaches saturation or declines due to lack of subsidies or financing, construction, manufacturing and wholesale trade jobs in solar will decline as they are dependent on new projects, leaving relatively few permanent jobs in the sector.

What we see from looking at the jobs data12 is that it may be wise to consider a fuller context:

1. The energy sector as a whole is a healthy provider of economic activity and jobs for the U.S. economy. The U.S. economy is made stronger and more resilient by energy sector activity. However, there are complex interrelationships across different parts of the energy sector that make it difficult to argue that one sector (renewables) will or can replace another (fossil fuels) for electricity generation. For example, increases in the development of fossil fuels, regardless of end use, can drive increases in electricity demand to service that activity needing multiple sources of generation.

2. Numbers of jobs alone is not the only factor to consider when assessing the economic benefits of jobs in the energy sector and thus making them a factor in energy policy. Other factors also matter, including pay levels (higher is better); the duration of employment (longer terms are better); job conditions (safety is a concern); and durability in a location (people can build communities with durable jobs that are attached to a location). The quality of the underlying jobs can matter greatly.

3. Technological innovation is changing the number and character of jobs in the energy sector as repetitive physical jobs are the easiest to apply new technology to.

12 Note: The full EIA report is very complete and complex. Although we did not include other industry segments in this

report, the full EIA report also includes breakdowns of transmission, distribution and storage, energy efficiency, and alternative fuel vehicles, parts and manufacture employment.

Page 8: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 8 of 23

Information, sensing/monitoring, and communications technologies are reducing the overall number of jobs while raising the qualifications needed for the remaining jobs. In some areas, this is leading to a shortage of qualified workers and the need for more training. Governments are often working with industry to support this kind of job training.

4. Job creation in the electric energy sector has historically been just one of several factors upon which energy policies have been set. Others have included: the impact of that activity on the broader economy (what value is being produced?); effects in the natural environment (is it clean, safe and sustainable?); fit with technology innovation (is this a better way?); and market dynamics (how does it fit with other competitive options?). We think these factors still matter and will be used in developing future policies to support renewable energy and fossil fuels.

Many of these and other issues and concerns have been raised in previous SPSG meetings. Also, the trend is not unnoticed by state and provincial leaders concerned about job growth and the shifting of jobs in the power generation sector away from fossil towards renewables. And this shift won’t just impact generation workers in the fossil sector; it will also impact the associated fuels sector workers, something not usually mentioned when this trend is discussed.

We have included this look at the jobs report because it raises a number of issues, concerns, and indicators for the Western Interconnection and WECC stakeholders. The complex dynamics between economic growth, energy policy, and employment might arise as an important issue in future WECC planning analyses.

Economics Continue to Drive Generation Choices

Continuing the trend of economics driving generation choices, the Navajo Generating Plant - the largest coal-fired plant in the Western U.S. - is slated for closure in 201913. Located on the Navajo tribe reservation, there are serious concerns about the resulting job losses. The reason cited for the closure is the continuing record low natural gas prices. Noted in a letter14 to the public by the Arizona Corporation Commission, the plant owner, the Salt River Project (SRP), wants to close the plant in 2019 when its reservation lease expires so it can find lower cost natural gas power elsewhere.

The Commission (which does not regulate the facility) is calling an emergency meeting to try and find ways to keep the plant from closing. At least 3,000 Navajo jobs are at stake if the plant closes. The issues surrounding this plant are a primary example of how the need for jobs can override industry economic decisions.

13 Largest Coal Fired Plant in US Closing, The Washington Post, February 14, 2017 14 Arizona Corporation Commission Letter, February 2, 2017

Page 9: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 9 of 23

Is California Overbuilding Generation Capacity?

California media15 are beginning to focus on the building of possible excess power in the state and the costs to consumers. Billions of dollars in excess costs are suggested, and the article notes that in many cases new generation construction is causing existing plants to curtail operations or, in some cases, close entirely. A primary example is the Sutter Energy Center. The Los Angeles Times noted that since startup, the Sutter plant in 2001, that natural gas plant was considered the cleanest and most efficient gas plant built to date at a cost of $300 million. The plant closed in 2015, well short of its 30-40 year lifespan since its power was no longer needed due in large part to new plant (Colusa) regulators approved in 2010 just 40 miles away. Two other large and efficient plants in California (14-year-old Moss Landing and 13-year-old La Paloma) are facing closure decades ahead of schedule.

The state has traditionally had a 15% reserve margin of generation capacity to ensure reliability; however, there is a real possibility of the state hitting a 21% reserve margin by 2019, possibly creating more stranded generators as the market price paid for power falls or stays low.

We have noted in previous reports the difficulties in balancing new energy supplies with demand and that accounting for clean energy-related mandates is challenging for regulators in California and other states. And, we see that independent power sold in a competitive marketplace can quickly create stranded or marginal generation as demand continues to stagnate and market prices change16.

US Household Energy Spending Hits 50 Year Low

As reported in the Christian Science Monitor, 2016 saw the lowest total cost of energy expenditures by the average US household since 195917. In 2016 the average total energy consumption share of household expenditures was 3.9%, the first time it has dropped below 4% since record keeping started in 1960.

At the same time, greenhouse gas (GHG) emissions from the energy sector in 2016 were 24.1% below 2005 levels, an annualized reduction rate of 5.3% annually for the 11-year period.

15 Media reports excess power with high consumer costs in California. Los Angeles Times, February 5 2017 16 Economics & Demand Force CA Gas Generator Plant Bankruptcy, Reuters, December 6 2016 17 US Household Energy Spending Hits 50-year Low, Christian Science Monitor and Bloomberg New Energy Finance,

February 20, 2017

Page 10: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 10 of 23

Figure 9: Energy as share of total personal consumption expenditure

Source: Bloomberg New Energy Finance

Consumption costs for natural gas and electricity reflect the overall trend of lower energy expenditures. Natural gas expenditures were under 0.4% and Electricity under 1.4%, both the lowest totals on record. The primary causes for the decrease were expanding renewable energy use and energy efficiencies combined with lower natural gas prices over the past decade. We expect this trend, which has had and will continue to have impacts on slowing future electricity demand.

Continuing Problems in the Solar Finance Arena – A new Wild Card

Recently, media have reported on the legal and financial confusion with Tesla Corporation's SolarCity’s accounting18 for their customer’s mortgage defaults and foreclosures and the resulting concerns in the industry. The confusion stems from a lack of transparency about just how many foreclosure lawsuits SolarCity is party to as a defendant as they attempt to protect their installations on homes owned by customers who default on their mortgages or go into foreclosure. SolarCity owns the rooftop solar photovoltaic systems installed on those houses, yet banks often consider them part of the overall property fixtures. It seems clear that the firm has lowered their potential customer’s credit requirements. Indeed, some customers are being approved for leases on the rooftop solar systems even though they are currently in foreclosure proceedings on their mortgages. SolarCity is not alone; their competitor SunRun has been named in a number of similar lawsuits.

SolarCity’s ability to continue to finance its new installations could be under new pressure from its investors and credit rating agencies as it has pitched its value to investors on a simple premise: Once customers lease a system, they will make payments to the company month after month for at least 20 years. Of perhaps more concern is that parent company

18 Media reports issues with financial performance of consumer home loans for Tesla's SolarCity, The New York Times

and Bloomberg, February 22, 2017

Page 11: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 11 of 23

Tesla may need to go back to the well for large amounts of new debt19 to finance its auto expansion, storage, and solar panel businesses.

If SolarCity were to have a major financial setback we believe this could affect the entire solar rooftop industry as financial lenders question the investment attractiveness of the industry. Elon Musk, CEO of Tesla has been a major cheerleader for the solar industry. Damage to his credibility or that of his SolarCity subsidiary could have an industry-wide effect.

WILD CARDS

As we noted and discussed in detail above, a new Wild Card – continuing financial problems in solar financing - was added in February. We continue to monitor the current Wild Cards of a preference for fossil fuels, cyber-security and the United Kingdom’s referendum on leaving the EU (BREXIT) for all scenarios.

19 Bloomberg, February 22, 2017

Page 12: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 12 of 23

SCENARIO AXIS TRENDS

The WECC Scenario Matrix

Each of the four original WECC scenarios fits into one of four quadrants within a 2 x 2 matrix, using the two primary scenario drivers chosen by the SPSG of 1) Economic Growth in the WECC Region; and 2) Technology Innovation in Electric Supply and Distribution.

Each scenario can thus be described – at a high level – by the combination of the matrix axes.

For example, Scenario 1: Focus on Economic Recovery would be characterized as: “Widespread Economic Growth in the WECC Region with Increasing Standards of Living and Evolutionary Changes in Electric Supply and Distribution Technology”.

The matrix provides both a quick visual model for the scenarios and a reference for the discussions that follow. However, for a complete understanding of the scenarios, we encourage readers to read the 2013 WECC scenario narratives found here. Economic Growth in the Western Interconnection

February saw jobs and unemployment reports released for activity during January 2017. US employers added 227,000 jobs in January, up from 156,000 in December 201620. The unemployment rate finished at 4.8%, up from December’s 4.7%. The US “hidden” unemployment for January was up overall:

• Working part time wanting full time = 5.8%, up from 5.6% in December • Currently unemployed but want jobs = 5.9%, up from 5.4% in December

Figure 10

20 US and Canada add Jobs in January 2016-Alberta Continues to Lose, The New York Times, February 2, 2017

Page 13: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 13 of 23

However, January saw a continuation of lower wage gains for hourly workers, as the growth rate slipped back down to 2.5% for the year-over-year average for January 2016 to January 2017.

While the job growth is good news, on a more somber note, two measures of economic well-being were reported in January as falling in 2016. US GDP growth in 2016 was revised down to 1.6% for the year. Also, US worker productivity slowed in the fourth quarter of 2016, and rose only 0.2% in 2016, the smallest gain since 2011 (2015 saw an increase of 0.9%)21.

Productivity has a direct effect on job growth, as lower productivity rates tend to increase job growth as employers compensate for the lower productivity gains. Productivity is also tied to GDP growth - lower productivity means less output which is reflected in lower GDP growth.

Canada added 48,300 new jobs in January22, while the unemployment rate moved down to 6.8% from December’s 6.9%. Alberta lost 24,300 full-time jobs in January, with the unemployment rate rising to 8.8% from December’s 8.5%. British Columbia saw 11,000 new jobs, and unemployment fell a full percentage to 5.6%, the lowest among the provinces.

The US has not been able to grow jobs consistently over the past 12-24 months, yet the overall job growth trend has reduced unemployment during that time. However, the drop in wage growth and the increase in workers joining the workforce in January indicate the US is not at "full employment" yet.

Canada also sees inconsistent job growth, and, for the past 12 months gained 276,100 jobs, yet fully 189,900 (69%) were part-time jobs. Alberta continues to struggle with the effects of low oil and natural gas prices - the primary economic driver of the province.

There are still no indicators of high and widespread economic growth within the Western Interconnection as defined in the WECC scenarios and we continue to see mixed signals at best across the region.

On the global economic front, and despite the almost daily record setting Dow Industrial average, uncertainty and inconsistencies remain as the US economic policy is yet to be detailed, China’s bad debt issues still overhang the global economy, and BREXIT looms ever closer.

Considering continued slow and uneven growth in the Western Interconnection at the state and provincial levels, and continued high rates of unemployment in the region, economic indicators point away from scenarios 1 and 2, and towards scenarios 3 and 4.

21 US Economic Growth & Productivity Slows in 2016, Reuters and The New York Times, January 27, 2017 22 The Canadian Press, February 10 2017

Page 14: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 14 of 23

Technology Innovation in Electricity Supply and Distribution

Like a broken record, we continue to say that progress along this axis has not changed since our last report(s). We continue to not see any true breakthroughs in this technology area, as innovation in this sector continues to focus on incremental improvements in renewables, storage efficiencies, and production costs. In fact, we have seen one engineering economic analysis for an emerging distributed energy technology pairing of battery storage with rooftop solar that suggests questionable economic and environmental benefits23.

The continuing incremental and continuous improvement within electricity supply and distribution technology innovation remains pointing to scenarios 1 and 3 and away from scenarios 2 and 4.

23 Consumer use of storage with solar panels may increase emissions, Nature and Utility Dive, February 21, 2017

Page 15: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 15 of 23

EPS EVENTS WITH EARLY INDICATORS & SCENARIO MOVEMENT

Scenario 1: Focus on Economic Recovery (S1): Widespread economic growth in WECC region with increasing standards of living and evolutionary changes in electric supply and distribution technology EPS Events Noting Flagged Early Indicators:

EPS Key Drivers EIs Flagged

Governors Urge Trump Administration to Support Green Energy Jobs*

Changes in Social Values Related to Energy Issues 1.3

Largest Coal Plant in West to close* Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

1.5

Media reports excess power with high consumer costs in California*

Evolution of Electric Supply in the WECC Region 1.3

U.S. becoming a major LNG exporter according to EIA*

Shifts in Availability and Prices of Fuels used in Electricity Sector

1.2

C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

NONE

Increasingly State RPS Increases Drive Out-of-State Energy & Transmission Projects*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

Note: Items with * indicate EPS affecting more than one scenario

S1 Trends

Economic Growth: Considering the section above on the Economic Growth axis, we can make a strong case that economic trends continue to point away from Scenario 1.

Technology Innovation: Current trends continue to indicate continued incremental improvements in electricity supply and distribution technology, therefore pointing towards the Scenario 1 technology quadrant.

Other indicators: New natural gas generation continue. Wild Cards of continuing financial issues in the solar sector, fossil power generation protection, cyber-security and BREXIT impacts remain as Wild Cards for Scenario 1. S1 Movement NO CHANGE: Year to date events indicate continued conflicting movement around S1.

Page 16: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 16 of 23

Scenario 2: Focus on Clean Energy (S2): Widespread economic growth in WECC region with increasing standards of living and paradigm changes in electric supply and distribution technology EPS Events Noting Flagged Early Indicators:

EPS Key Drivers EIs Flagged

CA Regulators get organized regulating DER in the future*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region

2.3, 2.4, 2.5

Governors Urge Trump Administration to Support Green Energy Jobs*

Changes in Social Values Related to Energy Issues 2.3

Consumer use of storage with solar panels may increase emissions

Innovation in Electric Supply and Distribution 2.4

Largest Coal Plant in West to close* Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

2.1

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

2.3

Media reports issues with financial performance of consumer loans for Tesla's SolarCity*

Shifts in national and global financial markets WILDCARD

NONE

Increasingly State RPS Increases Drive Out-of-State Energy & Transmission Projects*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

NONE

US Household Energy Spending Hits 50-year Low*

Innovation in Electric Supply and Distribution; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

SO2 Emissions Fall Faster than Coal Generation Decreases*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources

NONE

Note: Items with * indicate EPS affecting more than one scenario

Page 17: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 17 of 23

S2 Trends

Economic Growth: Current events and trends continue to point away from movement towards Scenario 2.

Technology Innovation: We are still not seeing the breakthrough or paradigm changing electricity supply and distribution technology innovations presumed in this scenario.

Other indicators: There is continued strong growth in renewable energy in the Western Interconnection and the US. However, the long-term energy policy of the Trump administration has yet to be defined for this area, and we are unsure of the trajectories of policy decisions at the state and federal levels and how they will affect renewable energy. The Wild Cards of continuing financial issues in the solar sector, fossil power generation protection, cyber-security and BREXIT impacts remain as Wild Cards for Scenario 2. S2 Movement

NO CHANGE: Year to date events show no clear movement towards S2 from either axis or other indicators.

Page 18: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 18 of 23

Scenario 3: Focus on Short-Term Consumer Costs (S3): Narrow and slow economic growth in the WECC region with stagnating standards of living with evolutionary changes in electric supply and distribution technology EPS Events Noting Flagged Early Indicators:

EPS Key Drivers EIs Flagged

U.S. becoming a major LNG exporter according to EIA*

Shifts in Availability and Prices of Fuels used in Electricity Sector

3.4

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

3.3

US and Canada add Jobs in January 2016-Alberta Continues to Lose*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region

3.2, 3.3

US Economic Growth & Productivity Slows in 2016*

Economic Growth in the WECC Region 3.2, 3.3

C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

NONE

Note: Items with * indicate EPS affecting more than one scenario

S3 Trends

Economic Growth: Considering the Economic Growth section above on regional growth and unemployment trends, we continue to see a strong case that economic trends are still pointing towards Scenario 3 (and 4).

Technology Innovation: Current trends continue to indicate continued incremental improvements in electricity supply and distribution technology – pointing towards the Scenario 3 technology quadrant.

Other indicators: The Wild Cards of continuing financial issues in the solar sector, fossil power generation protection, cyber-security and BREXIT impacts remain as Wild Cards for Scenario 3. S3 Movement

NO CHANGE from our last report: there is a clear movement towards S3 in both economic and technology indicators.

Page 19: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 19 of 23

Scenario 4: Focus on Long –Term Societal Costs (S4): Narrow and slow economic growth in the WECC region with stagnating standards of living with paradigm changes in electric supply and distribution Technology EPS Events Noting Flagged Early Indicators:

EPS Key Drivers EIs Flagged

CA Regulators get organized regulating DER in the future*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region

4.2

Media reports excess power with high consumer costs in California*

Evolution of Electric Supply in the WECC Region 4.2

C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

NONE

Increasingly State RPS Increases Drive Out-of-State Energy & Transmission Projects*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

US Household Energy Spending Hits 50-year Low*

Innovation in Electric Supply and Distribution; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

SO2 Emissions Fall Faster than Coal Generation Decreases*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources

NONE

US and Canada add Jobs in January 2016-Alberta Continues to Lose*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region

NONE

US Economic Growth & Productivity Slows in 2016*

Economic Growth in the WECC Region NONE

Note: Items with * indicate EPS affecting more than one scenario

Page 20: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 20 of 23

S4 Trends

Economic Growth: As described above in Scenario 3, we can make a strong case that economic trends are pointing towards Scenario 4 (and 3).

Technology Innovation: Current trends continue to indicate continued incremental improvements in electricity supply and distribution technology – pointing away from the S4 technology quadrant.

Other indicators: The Wild Cards of continuing financial issues in the solar sector, fossil power generation protection, cyber-security, and BREXIT impacts remain as Wild Cards for Scenario 4. S4 Movement

NO CHANGE: There continues to be no clear combination of indicators pointing towards S4.

Page 21: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 21 of 23

Scenario 5: Energy-Water-Climate Change (S5): S5 assumes a 3 degree F rise in global average temperature by 2034 and is the single key driver for this scenario. S5 does not have any associated Early Indicators; however, the SPSG is planning work to complete S5 that could include new early indicators for the scenario.

Of February’s 14 EPS, 8 are relevant to S5, some with significant effects. EPS Key Drivers EIs Flagged

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

2.3, 3.3

US and Canada add Jobs in January 2016-Alberta Continues to Lose*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region

3.2, 3.3

US Economic Growth & Productivity Slows in 2016*

Economic Growth in the WECC Region 3.2, 3.3

Increasingly State RPS Increases Drive Out-of-State Energy & Transmission Projects*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

US Household Energy Spending Hits 50-year Low*

Innovation in Electric Supply and Distribution; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

U.S. Solar Industry Passes Fossil for Job Creation*

Innovation in Electric Supply and Distribution; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

NONE

SO2 Emissions Fall Faster than Coal Generation Decreases*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources

NONE

C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

NONE

Note: Items with * indicate EPS affecting more than one scenario

Page 22: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 22 of 23

Even though there are no specific Early Indicators for S5, and it does not appear on a scenario matrix as do the other scenarios, we can look at events and trends pointing towards or away from S5. S5 Trends

These trends noted in our last report(s) continue to affect Scenario 5:

• Donald Trump’s election as president of the US remains a Wild Card for S5 as we have continued mixed signals on what his actions will be on this issue.

• Yet-to-be-understood impacts from the BREXIT vote could negatively impact Europe’s commitments under the Paris Agreement.

• Improved Cybersecurity is critical in maintaining the country’s ability to manage not only their electric grids but other infrastructure that could be affected by climate change/global warming and those technologies designed to prevent or mitigate impacts of climate change.

• Global warming continues

There was some good news reported in February on the GHG emissions front in the US. Sulfur dioxide (SO2) emissions produced in the generation of electricity in the US declined by 73% from 2006 to 2015 according to the EIA24. The reduction is much larger than the decrease in coal-fired electricity generation over that period, which was 32%. From 2014 to 2015, the most recent year with complete power plant emissions data, SO2 emissions fell 26%. Ohio, Indiana, and Kentucky had the highest SO2 emissions rates in 2014, but each state experienced substantial decreases in 2015.

These states were among the top five states to retire coal capacity during 2015, according to the EIA, collectively retiring more than one-third of all retired coal-fired capacity in 2015.

The EIA noted three factors contributing to the lower SO2 emissions: 1. Changes in the electricity generation mix. Electricity generation from coal fell 14%

from 2014 to 2015 2. Installation of emission reduction equipment at coal-fired plants 3. Lower utilization of the highest-emission plants

Whether this trend continues after the Trump administration finally settles on their environmental and energy policies right now is anyone’s guess. S5 Movement

NO CHANGE from our last report: Year to date events continue to indicate that the trajectory trend towards the 3 degrees F global average temperature rise - the basis for this scenario - has not eased, and in fact may be accelerating. Despite best intentions global efforts to address global warming have yet to be broadly implemented. Current indicators continue to accelerate and point towards S5.

24 SO2 Emissions Fall Faster than Coal Generation Decreases, The EIA and Agri-Pulse, February 8, 2017

Page 23: The WECC Scenarios: Early Indicator, Trends and … Trends and...wind employment increased by 32% adding 24,650 new jobs. Solar generation grew by over 5,000% from 2006 – 2016, from

Early Indicators, Trends & Scenario Movement March 7 2017

Quantum Planning Group Page 23 of 23

EPS EVENTS WITHOUT EARLY INDICATORS

There are a number of EPS events each month without EIs flagged due to the structure of the EIs in each scenario and yet are seen as significantly affecting the scenarios through their impacts on Key Drivers. These EPS - in addition to the EPS with EIs - were considered in our analysis of the Scenario Trends and Movements in this report. Significant EPS Affecting Key Drivers not flagged as EIs

Related scenarios and EPS, newest first: Scenarios EPS Key Drivers

2 Media reports issues with financial performance of consumer loans for Tesla's SolarCity

Shifts in national and global financial markets WILDCARD

2,4,5 Increasingly State RPS Increases Drive Out-of-State Energy & Transmission Projects*

Economic Growth in the WECC Region; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

2,4,5 US Household Energy Spending Hits 50-year Low*

Innovation in Electric Supply and Distribution; Evolution of Electric Demand in the WECC Region; Evolution of Electric Supply in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources; Shifts in Availability and Prices of Fuels used in Electricity Sector

2,4,5 SO2 Emissions Fall Faster than Coal Generation Decreases*

Evolution of Electric Supply in the WECC Region; Changes in Regulation of Electric Power Systems in the WECC Region; Changes in Social Values Related to Energy Issues; Changes in Society’s Preferences for Sustaining Environment and Natural Resources

1,2,3,4,5 C$ 1.6 Billion Fort McMurray Transmission Line Approved*

Economic Growth in the WECC Region; Evolution of Electric Supply in the WECC Region

Note: Items with * indicate EPS affecting more than one scenario