Natural Gas Avoided Cost Meeting 10 a.m. 12 p.m. May 12, 2017 - - PowerPoint PPT Presentation

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Natural Gas Avoided Cost Meeting 10 a.m. 12 p.m. May 12, 2017 - - PowerPoint PPT Presentation

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Natural Gas Avoided Cost Meeting 10 a.m. 12 p.m. May 12, 2017 Agenda Introduction OPUC Energy Trust Schedule for updates Overview of Process to Update Avoided Costs Proposed Updates for 2017 Possible Future Updates

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Natural Gas Avoided Cost Meeting 10 a.m. – 12 p.m. May 12, 2017

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Agenda

  • Introduction
  • OPUC
  • Energy Trust
  • Schedule for updates
  • Overview of Process to Update Avoided Costs
  • Proposed Updates for 2017
  • Possible Future Updates
  • Overview of Inputs
  • Q&A
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  • OPUC recommended that Energy Trust host this meeting
  • OPUC exploring avoided cost across many dockets and as part of many

forums

Introduction from OPUC

Avoided Cost and C/E @ OPUC

Energy Efficiency Demand Response Resource Value of Solar (DG) Qualified Facilities SmartGrid Storage

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Introduction from Energy Trust

  • Purpose of the meeting
  • To describe and get input on the process of assembling avoided costs
  • Energy Trust uses avoided costs to value energy savings for planning and

reporting

  • Prescriptive and custom measures
  • Programs
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Schedule

  • Already received inputs from utilities
  • Avoided cost meetings May 12
  • Natural gas avoided costs
  • Electric avoided costs
  • Updates completed for 2018 planning and implementation June 30
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Avoided Costs

  • Assign economic value to energy savings based on utility system benefits
  • The “benefit” in benefit-cost ratios, along with non-energy benefits
  • Used for reporting and testing for measures and programs
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Avoided Cost Update Process

  • Happen every two years for electric and gas
  • Key inputs come from utilities and Power Council
  • Energy Trust is largely a “taker” of inputs, i.e., we make the stew but don’t

grow the vegetables

  • We blend values from each utility by share of revenue
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Current Formula

𝐶𝑓𝑜𝑓𝑔𝑗𝑢 𝐷𝑝𝑡𝑢 𝑆𝑏𝑢𝑗𝑝 = 𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢𝑡 + 𝑂𝑝𝑜 𝐹𝑜𝑓𝑠𝑕𝑧 𝐶𝑓𝑜𝑓𝑔𝑗𝑢𝑡 𝐷𝑝𝑡𝑢𝑡 𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢 = 𝐻𝑏𝑡 𝑄𝑠𝑗𝑑𝑓 𝐺𝑝𝑠𝑓𝑑𝑏𝑡𝑢 ∙(1+ 10% Power Act Credit) + Risk Reduction Value

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Gas Price Forecast

  • Forecasts of marginal supply costs from each utility
  • By year
  • Includes:
  • The long term gas price forecast (includes embedded forecasted cost of carbon

compliance)

  • Gas storage carrying costs
  • Upstream variable costs
  • Carbon compliance is included in commodity pricing to extent it is known
  • Weighted for each load shape for each measure to account for seasonal

price variation

𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢 = (𝐻𝑏𝑡 𝑄𝑠𝑗𝑑𝑓 𝐺𝑝𝑠𝑓𝑑𝑏𝑡𝑢) ∙(1+ 10% Power Act Credit) + Risk Reduction Value

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NW Power Act Credit

  • NW Power Act: Gives energy efficiency a 10% cost advantage
  • OPUC directs Energy Trust to apply to natural gas avoided costs
  • 839a(4)(D): For purposes of this paragraph, the "estimated incremental

system cost" of any conservation measure or resource shall not be treated as greater than that of any non-conservation measure or resource unless the incremental system cost of such conservation measure or resource is in excess of 110 per centum of the incremental system cost of the nonconservation measure or resource.

  • [Northwest Power Act, §3(4)(0), 94 Stat. 2699.]

𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢 = 𝐻𝑏𝑡 𝑄𝑠𝑗𝑑𝑓 𝐺𝑝𝑠𝑓𝑑𝑏𝑡𝑢 ∙(1+ 10% Power Act Credit) + Risk Reduction Value

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Risk Reduction Credit

  • Pursuing energy efficiency instead of other resources reduces risk:
  • Cost-effective energy efficiency is purchased in smaller increments
  • Protects from price risk/volatility

𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢 = 𝐻𝑏𝑡 𝑄𝑠𝑗𝑑𝑓 𝐺𝑝𝑠𝑓𝑑𝑏𝑡𝑢 ∙(1+ 10% Power Act Credit) + Risk Reduction Value

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Shape to NWPCC Load Profiles

0% 5% 10% 15% 20% 25%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % of Total Annual Consumption

Monthly View

Res Heating - Monthly DHW - Monthly

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Differences in Value by End Use

Residential Water Heater (15 years) FLAT Industrial Process (15 years) Residental Space Heat (25 years) Residential Weatherizat ion (45 years) Commercial Boiler (30 years) Clothes Washer (15 years) Premium Value $0.18 $0.18 $0.25 $0.32 $0.27 $0.18 Gas Price Forecast $5.02 $4.97 $7.45 $9.74 $8.26 $4.93

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00

NPV $/first-year therm Avoided Cost for range of Common Measures with differing expected useful lives

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Gas Avoided Cost Buildup

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$- $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Years

Annual 2016 Blended Avoided Costs for Commercial Space Heat Measure

Gas Price Forecast Premium Value

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Gas Avoided Cost Buildup

$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

NWN 2016 IRP Annual Avoided Cost Stream - NWN- Commercial Space Heat Measure

Gas Price Forecast Capacity Cost 10% Power Act Credit Risk Premium Value

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Proposed Changes to Gas Avoided Cost Methodology

  • Incorporate as many years of future forecasts that utilities have available.
  • Make improvements to the method for how avoided costs between 10-year

periods are being calculated.

  • Enhance Avoided Cost Formula
  • For NW Natural incorporate Supply and Distribution Deferral by load shape and include

10% conservation adder.

  • For NW Natural incorporate fixed transmission costs
  • For NW Natural incorporate forecasted utility cost of Oregon State carbon policy

compliance

𝐵𝑤𝑝𝑗𝑒𝑓𝑒 𝐷𝑝𝑡𝑢 = 𝐻𝑏𝑡 𝑄𝑠𝑗𝑑𝑓 𝐺𝑝𝑠𝑓𝑑𝑏𝑡𝑢 ∙(1+ 10% Power Act Credit) + (Supply and Distribution Capacity Cost ∙peak day/annual load factor) ∙(1+ 10% Power Act Credit) + Risk Reduction Value

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Updated NW Natural—Oregon Inputs

Year Commodity Capital Commodity Adder Gas Price and Transport Costs + Oregon CO2 Policy 1 adder (2017$/Therm) Supply Capacity Value (2017$/Therm) OR Distribution Capacity Value (2017$/Therm) Calculated Risk Premium (2017$/Therm) Levelized Risk Premium to Use (2017$/Therm) 2018 $0.24 $1.32 $1.38 $0.02 $0.00 2019 $0.22 $1.32 $1.38 $0.01 $0.00 2020 $0.23 $1.32 $1.38 $0.00 $0.00 2021 $0.33 $1.32 $1.38

  • $0.03

$0.00 2022 $0.35 $1.32 $1.38

  • $0.04

$0.00 2023 $0.36 $1.32 $1.38

  • $0.05

$0.00 2024 $0.39 $1.32 $1.38

  • $0.08

$0.00 2025 $0.40 $1.32 $1.38

  • $0.09

$0.00 2026 $0.39 $1.32 $1.38

  • $0.08

$0.00 2027 $0.40 $12.09 $1.38

  • $0.09

$0.00 2028 $0.41 $12.09 $1.38

  • $0.10

$0.00 2029 $0.43 $12.09 $1.38

  • $0.11

$0.00 2030 $0.44 $12.09 $1.38

  • $0.13

$0.00 2031 $0.46 $15.69 $1.38

  • $0.13

$0.00 2032 $0.47 $15.69 $1.38

  • $0.14

$0.00 2033 $0.49 $15.69 $1.38

  • $0.15

$0.00 2034 $0.50 $15.69 $1.38

  • $0.16

$0.00 2035 $0.52 $15.69 $1.38

  • $0.17

$0.00 2036 $0.54 $15.69 $1.38

  • $0.19

$0.00 2037 $0.55 $15.69 $1.38

  • $0.19

$0.00 2038 $0.56 $15.69 $1.38

  • $0.21

$0.00

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Previous NW Natural Oregon Gas Price Forecast

Gas Price Forecast Year Real 2016$/ therm 2016 $0.48 2017 $0.39 2018 $0.34 2019 $0.34 2020 $0.38 2021 $0.44 2022 $0.40 2023 $0.37 2024 $0.39 2025 $0.41 2026 $0.45 2027 $0.47 2028 $0.45 2029 $0.43 2030 $0.43 2031 $0.43 2032 $0.43 2033 $0.45 2034 $0.45 2035 $0.45

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NW Natural Avoided Costs Compared

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60

NW Natural Gas Price Forecasts Compared - 2014 IRP, 2016 IRP and updated 2017 gas price forecast

Real 2016$/therm from 2014 IRP Real 2017$/therm from new 2017 Price Forecast Real 2017$/therm from 2016 IRP

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Updated Cascade Natural Gas Inputs

Year Total Avoided Cost Commodity Transport Fixed Transport Commodity Storage Fixed Storage Commodity 2017 $0.51220 $0.34317 $0.16375 $0.00315 $0.00060 $0.00154 2018 $0.51090 $0.34230 $0.16333 $0.00314 $0.00059 $0.00153 2019 $0.50670 $0.33949 $0.16199 $0.00312 $0.00059 $0.00152 2020 $0.49430 $0.33118 $0.15802 $0.00304 $0.00057 $0.00148 2021 $0.50000 $0.33500 $0.15985 $0.00307 $0.00058 $0.00150 2022 $0.51820 $0.34719 $0.16566 $0.00319 $0.00060 $0.00156 2023 $0.50330 $0.33721 $0.16090 $0.00309 $0.00059 $0.00151 2024 $0.52430 $0.35128 $0.16761 $0.00322 $0.00061 $0.00157 2025 $0.52390 $0.35101 $0.16749 $0.00322 $0.00061 $0.00157 2026 $0.52560 $0.35215 $0.16803 $0.00323 $0.00061 $0.00158 2027 $0.53400 $0.35778 $0.17071 $0.00328 $0.00062 $0.00160 2028 $0.54900 $0.36783 $0.17551 $0.00338 $0.00064 $0.00165 2029 $0.54710 $0.36655 $0.17490 $0.00336 $0.00064 $0.00164 2030 $0.56900 $0.38123 $0.18190 $0.00350 $0.00066 $0.00171 2031 $0.57920 $0.38806 $0.18516 $0.00356 $0.00067 $0.00174 2032 $0.57500 $0.38525 $0.18382 $0.00354 $0.00067 $0.00173 2033 $0.59990 $0.40193 $0.19178 $0.00369 $0.00070 $0.00180 2034 $0.59840 $0.40093 $0.19130 $0.00368 $0.00070 $0.00180 2035 $0.60410 $0.40474 $0.19312 $0.00371 $0.00070 $0.00181 2036 $0.62730 $0.42029 $0.20054 $0.00386 $0.00073 $0.00188

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Previous Cascade Natural Gas Inputs

Gas Price Forecast Year Real (2016$) Cost/therm 2016 $0.50 2017 $0.52 2018 $0.51 2019 $0.53 2020 $0.52 2021 $0.51 2022 $0.54 2023 $0.55 2024 $0.54 2025 $0.51 2026 $0.53 2027 $0.54 2028 $0.53 2029 $0.51 2030 $0.51 2031 $0.48 2032 $0.47 2033 $0.49 2034 $0.48 2035 $0.48

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Cascade Natural Gas Avoided Costs Compared

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60

Cascade Natural Gas Gas Price Forecasts Compared - 2014 IRP AC

  • vs. 2016 IRP avoided costs

Real (2016$) Cost/therm Real (2017$) Cost/therm

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Updated Avista Inputs

Gas Price Forecast (Fuel and Carbon Only) Year Real 2017$/therm 2017 $0.23 2018 $0.28 2019 $0.28 2020 $0.31 2021 $0.34 2022 $0.37 2023 $0.39 2024 $0.41 2025 $0.44 2026 $0.35 2027 $0.38 2028 $0.41 2029 $0.41 2030 $0.42 2031 $0.43 2032 $0.44 2033 $0.46 2034 $0.48 2035 $0.48 2036 $0.41

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Previous Avista Inputs

Gas Price Forecast Year Real 2014$/therm 2016 $0.19 2017 $0.24 2018 $0.29 2019 $0.29 2020 $0.30 2021 $0.32 2022 $0.33 2023 $0.33 2024 $0.35 2025 $0.37 2026 $0.37 2027 $0.38 2028 $0.41 2029 $0.42 2030 $0.44 2031 $0.46 2032 $0.47 2033 $0.48 2034 $0.49 2035 $0.49

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Avista Avoided Costs Compared

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60

Avista Gas Price Forecasts Compared - 2016 IRP AC vs. 2017 price forecast Real 2017$/therm Real 2014$/therm

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Q & A

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Thank You

Spencer Moersfelder, Planning Manager Spencer.Moersfelder@energytrust.org 503.445.7635