ERCOT PUBLIC 3/25/2014 1 2014 LTSA Scenario and Data Assumptions March 25, 2014

ERCOT PUBLIC3/25/2014 1

2014 LTSA Scenario and Data Assumptions

March 25, 2014


Outline

Scenario Assumptions

Capital Cost Projections

Fuel Price Projections

Emission Price Projections

Load Forecast

Retirement Process

Generation Siting Process

Additional Information


Scenario Assumptions

Input Assumptions1. Current

Trends2. Global

Recession

3. High Economic Growth

4. High Efficiency/DG

5. High Gas Price

6. Stringent Environmental

7. Low Global Oil Prices

8. High LNG Exports

9. High System Resilience

10. Water Stress

Economic GrowthSystem Load Growth (Peak and Total Energy) Med Low High Med Med Med Med High Med MedLocal Load Growth (deviations from system growth)

I-35 Med Low High Med Med Med Med High Med MedHouston Med Low High Med Med Med Med High Med MedMidland/Odessa Med Low High Med Med Low Low High Med LowLower Rio Grand Valley Med Low High Med Med Med Low High Med LowDry Gas Basins Low Low Med Med High Med Med

Capital availability/business environment Med Low High High High High Med Med Med Med

Env Regs/Energy PolicyFossil plant retirements Med Med Med High Low High Med Med Med HighRenewable incentives Med High Med Med Med High Med Med Med HighNuclear relicensing Med High High Low High Low Med Med Med MedLimits/regulations on oil & gas development Med Med Low High High High Med Low Med High

Alternative GenerationRenewable and storage capital cost reductions Med Low High High High High Med Med Med HighAnnual renewable capacity total additions Econ. Subsidized Econ. Econ. Econ. Subsidized Econ. Econ. Econ. Subsidized

Natural Gas/Oil PricesNG price forecast Med Low High High Very High High High Med Med HighOil price forecast Med Low Med Med Med Med Low High Med Med

Transmission RegulationDC-tie capacity increases Med Low Med Med Med High Med Med High HighTransmission costs per mile Med Low High Med High High Med Med Med Med

Generation Resource AdequacyReserve margin None None Yes None None None None None Yes Yes

End Use/New MarketsDG Growth Med Low High Very High High High High Med High HighEE Growth Med High Med Very High High High High Med High HighDR Growth Med High High Very High High High High High High High

Water/WeatherClimate Impacts Med Med Med High Med High Med Med Med MedWater Stress/Costs Med Low High High High High Med Low Med High


Capital Cost Projections


Current Trends Capital Cost Assumptions (Nominal $/kW)

Year CC CT Coal Coal W/CCS Nuclear IGCC Wind OnShore Solar PV Biomass Geothermal Battery CAES2013 987 803 3,416 5,168 6,110 3,937 1,850 2,500 3,724 4,719 2,074 1,037 2014 1,011 822 3,493 5,292 6,257 4,032 1,884 2,250 3,813 4,824 2,112 1,056 2015 1,035 842 3,571 5,419 6,407 4,128 1,919 1,900 3,905 4,932 2,151 1,076 2016 1,060 862 3,641 5,550 6,561 4,227 1,925 1,683 3,998 5,052 2,191 1,095 2017 1,085 883 3,722 5,683 6,718 4,329 1,961 1,513 4,094 5,165 1,747 1,116 2018 1,111 904 3,806 5,819 6,879 4,433 1,997 1,422 4,193 5,280 1,779 1,136 2019 1,138 926 3,891 5,959 7,044 4,539 2,033 1,396 4,293 5,398 1,812 1,157 2020 1,165 948 3,978 6,102 7,213 4,648 2,071 1,380 4,396 5,519 1,632 1,178 2021 1,193 970 4,067 6,248 7,387 4,760 2,109 1,365 4,502 5,642 1,662 1,200 2022 1,222 994 4,159 6,398 7,564 4,874 2,148 1,352 4,610 5,768 1,693 1,222 2023 1,251 1,018 4,241 6,552 7,745 4,991 2,157 1,357 4,720 5,909 1,623 1,244 2024 1,281 1,042 4,336 6,709 7,931 5,111 2,196 1,361 4,834 6,041 1,653 1,267 2025 1,312 1,067 4,433 6,870 8,122 5,233 2,237 1,375 4,950 6,176 1,683 1,291 2026 1,344 1,093 4,533 7,035 8,317 5,359 2,278 1,389 5,068 6,314 1,714 1,314 2027 1,376 1,119 4,634 7,204 8,516 5,487 2,320 1,403 5,190 6,456 1,746 1,338 2028 1,409 1,146 4,739 7,377 8,720 5,619 2,362 1,417 5,315 6,600 1,778 1,363 2029 1,443 1,173 4,845 7,554 8,930 5,754 2,406 1,431 5,442 6,748 1,811 1,388 2030 1,477 1,201 4,954 7,735 9,144 5,892 2,450 1,445 5,573 6,899 1,844 1,414

• Thermal Costs are increased 2.4% annually (EIA AEO 2014 early release)• Solar PV costs are developer supplied


High Capital Cost Assumptions (Nominal $/kW)

• High costs are 10% higher than those in Current Trends scenario

Year CC CT Coal Coal W/CCS Nuclear IGCC Wind OnShore Solar PV Biomass Geothermal Battery CAES2013 1,086 883 3,758 5,685 6,721 4,331 2,035 2,750 4,096 5,191 2,282 1,141 2014 1,112 904 3,842 5,822 6,882 4,435 2,072 2,475 4,194 5,307 2,324 1,162 2015 1,139 926 3,928 5,961 7,047 4,541 2,111 2,090 4,295 5,425 2,366 1,183 2016 1,166 948 4,005 6,104 7,217 4,650 2,118 1,851 4,398 5,558 2,410 1,205 2017 1,194 971 4,095 6,251 7,390 4,762 2,157 1,664 4,504 5,682 1,922 1,227 2018 1,222 994 4,186 6,401 7,567 4,876 2,196 1,564 4,612 5,808 1,957 1,250 2019 1,252 1,018 4,280 6,555 7,749 4,993 2,237 1,536 4,722 5,938 1,993 1,273 2020 1,282 1,043 4,376 6,712 7,935 5,113 2,278 1,518 4,836 6,071 1,795 1,296 2021 1,313 1,068 4,474 6,873 8,125 5,236 2,320 1,502 4,952 6,206 1,828 1,320 2022 1,344 1,093 4,574 7,038 8,320 5,361 2,362 1,487 5,071 6,345 1,862 1,344 2023 1,376 1,119 4,665 7,207 8,520 5,490 2,372 1,492 5,192 6,500 1,785 1,369 2024 1,409 1,146 4,769 7,380 8,724 5,622 2,416 1,498 5,317 6,645 1,818 1,394 2025 1,443 1,174 4,876 7,557 8,934 5,757 2,460 1,512 5,445 6,794 1,852 1,420 2026 1,478 1,202 4,986 7,738 9,148 5,895 2,506 1,528 5,575 6,946 1,885 1,446 2027 1,513 1,231 5,098 7,924 9,368 6,036 2,552 1,543 5,709 7,101 1,920 1,472 2028 1,550 1,260 5,212 8,114 9,593 6,181 2,598 1,558 5,846 7,260 1,955 1,499 2029 1,587 1,291 5,329 8,309 9,823 6,329 2,646 1,574 5,986 7,423 1,992 1,527 2030 1,625 1,322 5,449 8,508 10,058 6,481 2,695 1,590 6,130 7,589 2,029 1,555


Low Capital Cost Assumptions (Nominal $/kW)

• Low costs are 10% less than those in Current Trends scenario

Year CC CT Coal Coal W/CCS Nuclear IGCC Wind OnShore Solar PV Biomass Geothermal Battery CAES2013 888 722 3,075 4,652 5,499 3,543 1,665 2,250 3,351 4,247 1,867 933 2014 910 740 3,144 4,763 5,631 3,628 1,696 2,025 3,432 4,342 1,901 951 2015 932 758 3,214 4,878 5,766 3,715 1,727 1,710 3,514 4,439 1,936 968 2016 954 776 3,277 4,995 5,905 3,805 1,733 1,515 3,598 4,547 1,972 986 2017 977 794 3,350 5,114 6,046 3,896 1,765 1,361 3,685 4,649 1,572 1,004 2018 1,000 813 3,425 5,237 6,191 3,989 1,797 1,280 3,773 4,752 1,601 1,022 2019 1,024 833 3,502 5,363 6,340 4,085 1,830 1,257 3,864 4,858 1,631 1,041 2020 1,049 853 3,580 5,492 6,492 4,183 1,864 1,242 3,957 4,967 1,469 1,060 2021 1,074 873 3,661 5,623 6,648 4,284 1,898 1,229 4,052 5,078 1,496 1,080 2022 1,100 894 3,743 5,758 6,807 4,386 1,933 1,217 4,149 5,191 1,523 1,100 2023 1,126 916 3,817 5,897 6,971 4,492 1,941 1,221 4,248 5,318 1,461 1,120 2024 1,153 938 3,902 6,038 7,138 4,599 1,977 1,225 4,350 5,437 1,488 1,141 2025 1,181 960 3,990 6,183 7,309 4,710 2,013 1,237 4,455 5,559 1,515 1,161 2026 1,209 983 4,079 6,331 7,485 4,823 2,050 1,250 4,562 5,683 1,543 1,183 2027 1,238 1,007 4,171 6,483 7,664 4,939 2,088 1,262 4,671 5,810 1,571 1,205 2028 1,268 1,031 4,265 6,639 7,848 5,057 2,126 1,275 4,783 5,940 1,600 1,227 2029 1,298 1,056 4,360 6,798 8,037 5,179 2,165 1,288 4,898 6,073 1,630 1,249 2030 1,329 1,081 4,458 6,961 8,230 5,303 2,205 1,301 5,016 6,209 1,660 1,272


Fuel Price Projections


NG Price for Scenarios

• Selected EIA AEO 2014 as price for Current Trends scenario

• Added $1.5/mmBtu for high price, $3.50/mmBtu for High Gas scenario

• Subtracted $1.00/mmBtu for low gas price


Coal Price for Scenarios

• Average of price forecasts from 2014 and 2012 EIA AEO and SNL


Emission Price Projections


CO2 Price Forecast

• Average of price forecasts from Synapse and Fraunhofer for use in the Stringent Environmental scenario


SO2 Price for Scenarios

• Average of price forecasts from EPA and Black & Veatch


NOx Price and Mercury Trading for Scenarios

• Average of price forecasts from EPA and Black & Veatch

• Because MATS will be effective in 2016 , no mercury emission allowance trading is assumed.


Emission Assumptions for All Scenarios

Scenarios CO2 Price NOx Price SO2 Price Mercury Price1. Current Trends No Yes Yes No2. Global Recession No Yes Yes No3. High Economic Growth No Yes Yes No4. High Efficiency/DG No Yes Yes No5. High Gas Price No Yes Yes No6. Stringent Environmental Yes Yes Yes No7. Low Global Oil Prices No Yes Yes No8. High LNG Exports No Yes Yes No9. High System Resilience No Yes Yes No10. Water Stress No Yes Yes No


Load Forecast


• Peak increases at an average of 1.25% per year and energy increases at an average 1.68% per year

Current Trends Load Forecast

Peak ForecastYear Peak (MWs) Energy (GWh)2014 68,096 336,400 2015 69,057 343,007 2016 70,014 349,594 2017 70,871 356,122 2018 71,806 362,581 2019 72,859 368,990 2020 73,784 375,365 2021 74,710 381,743 2022 75,631 388,093 2023 76,550 394,421 2024 77,471 400,752 2025 78,384 406,499 2026 79,309 412,808 2027 80,236 419,143 2028 81,166 425,490 2029 82,099 431,843


LNG Exports Overview

• 9 Proposed LNG facilities in ERCOT• 3 general locations (Freeport, Corpus

Christi region, Brownsville)• Assume principally powered from

grid.• Assume 2018-2019 online dates• Assume each Bcf/d of LNG capacity

has a load of several hundred MWs, based on indicative proprietary data available to ERCOT, but we expect public load data will become available soon.

• Available data indicates each Bcf/d of LNG capacity could used 300 to 500 MW. These numbers show the large load impact LNG facilities could have.

Low Current Trends

High

Total LNG Capacity

1.8 Bcf/d 5.8 Bcf/d 9.8 Bcf/d

2018 0.6 Bcf/d Freeport

0.6 Bcf/d Freeport,1.0 Bcf/dCorpus,1.0 Bcf/d

Brownsville


Brownsville

2019 1.2 Bcf/dFreeport


Brownsville


Brownsville

Range of potential load additions

540 MW to 900 MW

1,740 MW to 2,900

MW

2,940 MW to 4,900

MW


Retirement Process


• Wind units will be retired at 25 years

• Thermal retirements

– All gas units will be retired at 50 years

– All coal units will be retired at 55 years

• Need to evaluate UPLAN’s retirement process

Fixed Length Retirements


• Age, efficiency, profit margins and cost of retrofits are considered

• Each category was broken into different groups and each group was given a value from 1-6 depending on number of groups

– Age: <10 yrs (1), 10-20 yrs (2), 20-30 yrs (3), 30-40 yrs (4), >40 yrs (5)

– Efficiency: <6 MMBtu (1), 6-7.5 MMBtu (2), 7.5-9 MMBtu (3), 9-10.5 MMBtu (4), 10.5-12 MMBtu (5), >12 MMBtu (6)

– Profit margins: >25% (1), 10-25% (2), 0-10% (3), -10-0% (4), -10- (-25)% (5), <-25% (6)

– Retrofit: need to define retrofit process

• UPLAN results will be used to determine profit margin values

• Each unit was given a total score (sum of values for each category)

– ∑ = A (Wa) + E (We) + P (Wp) + R (Wr)

• Retirement decision: if the unit’s total score was higher than 1 standard deviation above the mean of the sum of all units scores

Economic Retirement Process


Retrofit Costs for Emission Control

Control Technology Cost Estimate ($/KW)Wet Limestone Scribber 512Dry Sorbent Injection 39Selective Non-catalytic Reduction 10Baghouse with Activeated Carbon Injection (ACI) 256Dry Cooling 10% of capital cost


Generation Siting Process


• Used process developed in the DOE LTS where consideration was give to:

– Gas pipeline density

– Railroad density

– Urban population density

– Wind and solar conditions

– Surface water conditions

– Non-attainment zones

• Also consider brownfield sites and other sources of water to determine a list of available 345 kV buses for the siting of new generation

• Expansion wind generation will use site profile information supplied by AWS Truepower from the 130 hypothetical sites delivered Sept 2012

• Similar information will be used for the siting of solar projects. Profiles from URS delivered in March 2013 for potential sites in Texas

Generation Siting Method


• Each new generator the UPLAN model builds (including wind and solar) will be given a list of potential 345 kV buses for siting

• UPLAN evaluates each site and will place the new unit at the site that results in the highest revenue

• ERCOT will review the site selection by UPLAN and re-site if it is appropriate to do so

Generation Siting Method


Additional Information


Renewable Installations by Year

• Average installations per year for all years is 801 MWs. • Average installations per year for the years 2006 thru 2009 is 1,766 MWs

ERCOT Wind installations per year

• Wind installations per year up to 2,500 MW• Solar installations per year up to 1,500 MW


Next Steps

• Complete load data adjustments for Current Trends scenarioo LNG additionso Oil and gas drilling additions

• Input all data for Current Trends scenario into UPLAN model

• Run UPLAN model and test/adjust processes developed for generation expansion and unit retirement

• Finalize data gathering and assumptions for all scenarios

o EE and DR assumptionso LNG and drilling load o Other data


Appendix


Henry Hub forecast by Wood Mackenzie

Source: Wood Mackenzie, “North America Natural Gas Outlook – ERCOT Planning Workshop”, Jan. 2014.


Fraunhofer CO2 Price Projections

Source: C. Kost, J. N. Mayer, J. Thomsen, N. Hartmann, C. Senkpiel, S. Philipps, S. Nold, S. Lude, N. Saad, T. Schlegl, “Levelized Cost of Electricity Renewable Energy Technologies”, Nov. 2013, Fraunhofer Institute for Solar Energy Systems ISE


Source: EPA, Office of Air and Radiation, “Estimating Future Air Emissions Allowance Values”, Nov. 2006


Source: Black & Veatch, “City of Ames Energy Resource Options Study”, Mar. 2013

Black & Veatch March 2013


Ventyx Fall 2013 - NOX

Source: Ventyx, “National Database Release Notes”, Fall 2013.


Ventyx Fall 2013 – SOX


Synapse CO2 Prices

Source: P. Luckow, E.A. Stanton, B. Biewald, J. Fisher, F. Ackerman, E. Hausman, “2013 Carbon Dioxide Price Forecast”, Synaps Energy Economics, Nov. 2013.


Ventyx Fall 2013 – CO2


Technology Price Projections - 2012$

• Capital cost estimates from 2013 EIA Capital Cost Projections Update, April 2013


Technology Price Projections - 2012$

• Capital cost estimates from August 2013 Lazard’s Levelized Cost of Energy Analysis


Capital Cost Assumptions• Average conventional capital cost assumptions• GDP growth rate from EIA AEO 2014 Early Release - 2.4%

Year CC CT Coal Coal W/CCS Nuclear IGCC2013 987 803 3,416 5,168 6,110 3,937 2014 1,011 822 3,493 5,292 6,257 4,032 2015 1,035 842 3,571 5,419 6,407 4,128 2016 1,060 862 3,641 5,550 6,561 4,227 2017 1,085 883 3,722 5,683 6,718 4,329 2018 1,111 904 3,806 5,819 6,879 4,433 2019 1,138 926 3,891 5,959 7,044 4,539 2020 1,165 948 3,978 6,102 7,213 4,648 2021 1,193 970 4,067 6,248 7,387 4,760 2022 1,222 994 4,159 6,398 7,564 4,874 2023 1,251 1,018 4,241 6,552 7,745 4,991 2024 1,281 1,042 4,336 6,709 7,931 5,111 2025 1,312 1,067 4,433 6,870 8,122 5,233 2026 1,344 1,093 4,533 7,035 8,317 5,359 2027 1,376 1,119 4,634 7,204 8,516 5,487 2028 1,409 1,146 4,739 7,377 8,720 5,619 2029 1,443 1,173 4,845 7,554 8,930 5,754 2030 1,477 1,201 4,954 7,735 9,144 5,892


Capital Cost Assumptions – Cont.• Average renewable capital cost assumptions• GDP growth rate from EIA AEO 2014 Early Release - 2.4%

Year Wind OnShore Solar PV Biomass Geothermal2013 1,850 2,500 3,724 4,719 2014 1,884 2,250 3,813 4,824 2015 1,919 2,000 3,905 4,932 2016 1,925 1,935 3,998 5,052 2017 1,961 1,870 4,094 5,165 2018 1,997 1,805 4,193 5,280 2019 2,033 1,740 4,293 5,398 2020 2,071 1,675 4,396 5,519 2021 2,109 1,650 4,502 5,642 2022 2,148 1,625 4,610 5,768 2023 2,157 1,600 4,720 5,909 2024 2,196 1,575 4,834 6,041 2025 2,237 1,550 4,950 6,176 2026 2,278 1,540 5,068 6,314 2027 2,320 1,530 5,190 6,456 2028 2,362 1,520 5,315 6,600 2029 2,406 1,510 5,442 6,748 2030 2,450 1,500 5,573 6,899


• 2013 Brattle ERCOT Study for Clean Energy Council assumed in the Reference Case that wind costs fall to 1,800 2012$/kW in 2015 and then remain constant in real terms through 2030. In the Low Cost Renewable case, they decline to 1,500 2012$/kW by 2030.

• The NREL 2012 Wind Technologies Market Report shows a range of $1,500 – 2,400/kW for recent capital costs for the Interior region (including Texas)

Wind Cost Trends

Source: NREL. 2012 Wind Technologies Market Report. August 2013.


• Recent performance improvements in wind turbines could increase capacity factors by 10% in the near term

• Projections for levelized cost of energy (LCOE) provide insight into both capital cost and performance trends

Wind Capacity Factor Trends

Source: NREL. IEA Wind Task 26: The Past And Future Cost Of Wind Energy,Work Package 2. May 2012.

Documents

ERCOT PUBLIC 3/25/2014 1 2014 LTSA Scenario and Data Assumptions March 25, 2014