IRP Study Description and Assumptions

2015 SWEPCO Integrated Resource Plan
Description of Studies and Study
Assumptions
January 30, 2014
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Contents
 Introduction to SWEPCO
SWEPCO Resource Planning
 IRP Process and Studies
 Identifying resource options
 Analyzing portfolios
 Key Inputs and Resource Assumptions
 Stakeholder Input Process
 Next Steps
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About Southwestern Electric Power: Integrated Resource Planning
Southwestern Electric Power
Company (SWEPCO) is
headquartered in Shreveport, LA
More than 524,000 customers in
Louisiana, Arkansas and Texas.
 228,000 customers - LA
 182,000 customers - TX
 114,000 customers - AR
SWEPCO also serves wholesale
customers which represent about
20% of its load
SWEPCO participates in the
Southwest Power Pool Regional
Transmission Organization which
establishes system reliability criteria
SWEPCO is a unit of American Electric Power (NYSE: AEP),
which is one of the largest electric utilities in the United States,
delivering electricity to more than 5 million customers in 11
states.
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SWEPCO IRP Options
The IRP Process requires the selection of a mix of resources to meet SWEPCO’s future energy and
capacity needs. Resources are generally categorized into traditional supply side, demand side and
variable (or intermittent) energy resources.
 Supply Side Resources
 Baseload
 Intermediate
 Peaking
 Demand Side Resources
 Energy Efficiency
 Demand Response
 Customer-Owned Generation
 VVO/Smart Grid
 Variable (Intermittent) Energy Sources
 Solar
 Wind
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About Southwestern Electric Power: Current Resources
Solid-Fuel (Coal) Units:
 Flint Creek Unit 1 (264 MW*) Gentry, AR. In-service 1978
 Pirkey Unit 1 (580 MW*) Hallsville, TX. In-service 1985
 Turk Unit 1 (477 MW*) Fulton, AR. In-service 2012
 Welsh Units 1-3 (1,584 MW**) Pittsburg, TX. In-service 1977-82
 Dolet Hills Unit 1 (257 MW*) Mansfield, LA. In-service 1986
Gas-Steam Units:





Renewable Resources (Wind Purchase Power Agreements)
 Canadian Hills (201 MW) Canadian County, OK 2013
 High Majestic Wind II (159 MW) Carson & Potter Counties, TX 2009 & 2013
 Flat Ridge Wind Energy (109 MW) Wichita, KS 2011 & 2013
SPP Capacity value assigned to Wind PPAs = 20 MW
Demand Side Resources
 Demand Response (71 MW)
Arsenal Hill Unit 5 (110 MW) Shreveport, LA. In-service 1960
 Energy Efficiency (85MW) 2008-2013
Knox Lee Units 2-5 (469 MW) Longview, TX. In-service 1950-74
Lieberman Units 1-4 (242 MW) Mooringsport, LA. In-service 1947-59
Other Resources (Purchases net of Sales) 481 MW
Lone Star Unit 1 (50 MW) Lone Star, TX. In-service 1954
(Includes 180 MW PPA from CLECO)
Wilkes Units 1-3 (830 MW) Avinger, TX. In-service 1964-71
Gas-Combined Cycle Unit:
 J.L. Stall Unit 1 (511MW) Shreveport, LA. In-service 2010
Gas-Combustion Turbine Units:

H.R. Mattison Units 1-4 (301 MW) Tontitown, AR. In-service 2007
2013 Total Owned Generating Plant Capability (CDR, Section 1) 5,675 MW
* reflects SWEPCO’s ownership share
** Welsh Unit 2 to retire in 2016
Turk Plant Awards To-date
• Edison Electric Institute Edison Award Winner
• Power Magazine – 2013 Plant of the Year Award Winner
• Engineering News Record Texas and Louisiana – Best Safety Award
Winner (Submitted by and awarded to CB&I)
• Engineering News Record Texas and Louisiana – Best Project Winner
in the Energy/Industrial Category (Submitted by and awarded to CB&I)
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SWEPCO Potential Resources - Overview
Coal




Baseload and intermediate resource
Higher CO2 emissions than natural gas
Abundant fuel source
Option to place environmental controls on
existing uncontrolled units to lower non-CO2
emissions, or retire
Wind and Solar
 Intermittent. Not always aligned with peak
demand
 No emissions
 No fuel costs but some technologies have high
capital costs
 Currently heavily driven by incentives
Nuclear






Baseload with high capacity factor
Very low fuel and energy cost
No air emissions
Large water use
Spent fuel storage issues
High initial construction cost/risks
Demand-Side Management
 Used to reduce peak load/capacity requirements
 Costs vary, but need to balance cost and
customer reliability preferences
 Costs escalate with increased use
 May include customer owned generation
Natural Gas




Moderate construction costs
Lower CO2 emissions than coal
Slightly higher variable cost than coal
Firm gas delivery service may increase costs
Energy Efficiency
 Low capital and operating costs
 Dependent on customer adoption
 Program costs vary
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Objectives for the SWEPCO IRP Stakeholder Process
Stakeholder input is an important part of the IRP process. SWEPCO identified three main objectives for
stakeholder engagement:
 Inform: Increase stakeholders’ understanding of the IRP process, key assumptions used in the IRP, and
challenges that SWEPCO faces.
 Listen: Understand our stakeholders’ resource planning concerns and objectives.
 Consider: Provide a forum for productive stakeholder feedback on specific topics at key points in the IRP
process to inform SWEPCO’s decision-making.
Two stakeholder workshops will be held during the planning process. The tentative timeline is shown below.
Workshop #1
March 20, 2014
Stakeholder Feedback
May 20, 2014
Draft IRP Report
January 2015
Stakeholder Feedback
April 2015
Workshop #2
February 2015
Final IRP Report
August 2015
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The Integrated Resource Planning Process
 Resource planning is a complex effort that must
balance the needs of a variety of constituents:
 Customers
 Regulators,
 Shareholders, and
 Other Stakeholders…
There are many priorities that compete for resources as SWEPCO works
toward its objective to provide safe, reliable, clean power at rates that are
reasonable.
 …while ensuring that electricity is provided in a safe,
reliable, and efficient manner at reasonable rates.
 The process involves looking at “big-picture” trends
that affect energy markets, developing and using
forecasting and analysis models, and selecting
approaches that will meet customer needs in the
safest, most reliable and economical way given the
uncertainties about the future.
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The Integrated Resource Plan Development - Study Description
Creating an Integrated Resource Plan (IRP) involves four basic and interconnected steps:
 Step 1: Gathering data, developing input assumptions and creating scenarios
 Step 2: Portfolio Development
 Step 3: Analyzing portfolios
 Step 4: IRP Report Development
Develop a forecast of customer demand
Evaluate on-going capabilities of existing resources
to meet that demand
Determine the need to be
filled – amount, timing and type
Identify (supply and demand side) resources
that may be available to meet the need
Use sophisticated modeling techniques
to provide insight to the best solution
Produce the integrated resource plan
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Step 1: Gathering data, developing input assumptions and creating scenarios
This phase of the IRP development involves:

SWEPCO works with its internal experts to develop forecasts for commodities and fuel prices. These
are the core drivers in the integrated resource plan.

SWEPCO meets with interested stakeholders to solicit feedback on IRP input assumptions.

Load forecasts are developed for the next twenty years and beyond. These forecasts take into
consideration elements such as projected economic growth and energy efficiency effectiveness. They
help the resource planners to anticipate the level of energy and capacity needed during the 20-year
timeframe (2015-2034) of the IRP.

Cost projections are developed for new construction, environmental compliance, and other key input
assumptions.

Potential resource options are screened to eliminate those that have technical and commercial
availability limitations or are not feasible in SWEPCO’s service territory.

Assumptions on operational characteristics of existing resources are revisited, including their anticipated
remaining useful life.

Scenarios are developed to reflect possible futures. These scenarios will be used to guide analysis of
different resource portfolios.
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Step 1 (cont’d) - Scenario Development, Cost and Performance Assumptions
IRP
development involves the creation of a comprehensive set of economic
.
scenarios to fully evaluate potential resource portfolios.
 SWEPCO has developed five economic scenarios which cover a wide range of possible future states.
 Base Commodity Pricing (with CO2 emissions at $15/metric-ton beginning in 2022)
 Lower Band Commodity Pricing
 Higher Band Commodity Pricing
 No Carbon (assumes cost of CO2 emissions is $0/metric-ton)
 High Carbon (assumes cost of CO2 emissions is $25/metric-ton)
 Economic Scenarios are fully integrated
Cost and Performance Assumptions are derived from publicly available data
where feasible
 Supply-side asset costs are derived from government sources
 Performance factors will reflect costs and geography of SWEPCO service territory

Develop assumptions regarding cost effective demand side programs such as program cost and program
life.

Develop assumptions regarding the adoption of customer owned generation and amount and timing of its
deployment.
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Step 2: Portfolio Development
This phase of the IRP development involves:
 For each of the economic scenarios, SWEPCO will create a cost-optimized portfolio
using the Plexos modeling software
 Portfolios will be subject to robust analyses (see next slide)
 The results of these analyses will guide SWEPCO in the selection or creation of a
preferred portfolio
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Step 3: Analyzing Portfolios
This phase of the IRP development involves:
 Each model-optimized portfolio is evaluated in more detail.
 Each of the five portfolios is evaluated under all pricing scenarios.
 In addition to the discrete modeling in the previous step, an evaluation which measures the
“revenue requirement at risk” of each portfolio is also performed.
 The preferred resource portfolio is selected by determining which portfolio best meets a
number of quantitative and qualitative criteria. Portfolio costs under each scenario, results
of sensitivities, risk analysis and other key considerations including system diversity and
environmental footprint are used in this selection process.
 The preferred resource portfolio may be a hybrid portfolio which includes options from each
of the optimized portfolios.
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Step 4: IRP Report Development
This phase of the IRP development involves:
 Results of the preferred resource portfolio and other key components of the draft IRP will
be shared with stakeholders prior to finalizing the IRP.
 After receiving stakeholder feedback, the final document is prepared and reviewed to
assure all regulatory requirements are met.
 The report is then presented to SWEPCO senior management prior to final submittal to the
Louisiana Public Service Commission in August 2015.
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Planning Assumptions
 Commodity Prices
 Load Forecast – Energy and Demand
 Going In Capabilities, Load and
Reserves
Planning assumptions may change throughout the IRP
development period as new information becomes available –
stakeholders will be notified of any material revisions
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Planning assumptions for SWEPCO’s IRP development
Commodity Prices (2013 Forecast – Nominal $)
(Prices are not location specific but reflect trading hubs)
Power On‐Peak SPP Price ($/MWh)
Power Off‐Peak SPP Price ($/MWh)
120.0
90.0
80.0
100.0
70.0
60.0
50.0
80.0
60.0
40.0
30.0
20.0
10.0
40.0
20.0
0.0
0.0
2013
2015
2017
2019
Base
High Carbon
2021
2023
2025
Lower band
No Carbon
2027
2029
2013
Higher Band
2015
2017
Base
High Carbon
2019
2021
2023
Lower band
No Carbon
2025
2027
2029
Higher Band
Coal (PRB 8800 0.8#) Price $/ton)
Henry Hub Gas Price ($/mmBtu)
12.0
25.0
10.0
20.0
8.0
15.0
6.0
10.0
4.0
5.0
2.0
0.0
0.0
2013
2013
2015 2017
Base
High Carbon
2019
2021 2023
Lower band
No Carbon
2025
2027 2029
Higher Band
2015 2017
Base
High Carbon
2019
2021 2023
Lower band
No Carbon
2025
2027 2029
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Higher Band
Planning assumptions for SWEPCO’s IRP development
Commodity Prices (2013 Forecast)
CO2 Price ($/tonne)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2013
2015
2017
Base
High Carbon
2019
2021
2023
Lower band
No Carbon
2025
2027
2029
Higher Band
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30,000
6,000
25,000
5,000
20,000
4,000
15,000
3,000
10,000
2,000
5,000
1,000
0
Peak Demand (MW)
Net Energy Requirement (GWh)
Planning assumptions for SWEPCO’s IRP development – Load Forecast
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
ENERGY
Peak Demand
Note: Effective 2015, SWEPCO wholesale customer NTEC to migrate from a "gross" 'full-requirements' (~720 MW) wholesale load to a simple, 'fixed' 200 MW
requirement load. Simultaneously, the contract will also lead to the removal from SWEPCO's resource portfolio of approx. 500 MW of self supplied capability for
which SWEPCO had been obligated to dispatch in SPP and utilize within its long-term planning
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SWEPCO Resource Needs Assessment
“Going-In” Capability, Demand And Reserve Forecast
Southwestern Electric Power Company
A Capability
12 ACT
Existing Plants and new additions
Adjustments
Wind Purchases
CAPABILITY, DEMAND AND RESERVES FORECAST
2012 - 2025
(MW)
June 2013 Load Forecast
2013
2014
2015
2016
2017
2018
2019
Sales without Reserves
Unknown Wholesale Purchase
Total Capability
2021
2022
2023
2024
2025
5240
5675
5675
5675
5147
5147
5147
5147
5147
5147
5147
5147
4945
4945
3
‐4
20
‐9
20
‐9
20
‐43
20
‐48
20
8
‐48
20
‐48
20
‐48
20
‐48
20
‐48
20
‐48
20
‐48
20
‐48
20
421
‐18
0
5646
503
‐18
0
6176
503
‐18
0
6171
140
‐18
0
5808
266
‐18
0
5372
266
‐18
53
5428
158
‐18
0
5259
‐14
158
‐18
0
5245
158
‐18
7
5266
32
‐18
173
5306
32
‐18
196
5329
32
‐18
241
5374
32
‐18
466
5397
32
‐18
519
5450
5051
48
‐347
4752
5094
51
‐357
4788
5111
59
‐360
4810
4528
249
‐73
4704
4553
247
‐73
4727
4602
247
‐73
4776
4456
200
‐72
4584
4488
200
‐72
4616
4506
200
‐72
4634
4541
200
‐72
4669
4562
200
‐72
4690
4601
200
‐72
4729
4621
200
‐72
4749
4668
200
‐72
4796
894
15.8%
1388
22.5%
1361
22.1%
1104
19.0%
645
12.0%
652
12.0%
675
12.8%
629
12.0%
632
12.0%
637
12.0%
639
12.0%
645
12.0%
648
12.0%
654
12.0%
894
1388
1361
1104
645
652
675
629
632
637
639
645
648
654
Transfer from PSO
Transfer to PSO
Other known Purchases w/o Reserves
2020
Demand
Native Load Responsibility*
Sales With Reserves
Other Purchases With Reserves
Net Demand Responsibility
Reserves
Reserve Capacity, MW
Capacity Margin
check
*Adjusted for Active and Passive DSM and Diversity
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Planning assumptions for SWEPCO’s IRP development
Cost of New Resources
 Generation Resources
 Renewable Resources
 Wind
 Solar (Utility-Owned)
 Solar (Customer-Owned)
 Demand Side Resources
 Energy Efficiency
 To be determined during IRP process
 Demand Response
 Smart Grid Technologies
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Planning assumptions for SWEPCO’s IRP development
Publicly available data from
the US Energy Information
Administration will be the
starting point for
SWEPCO’s resource cost
assumptions
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Planning assumptions for SWEPCO’s IRP development
Intermittent resource costs are expected to decline. For wind projects, the Production Tax
Credit (PTC) is assumed not to be in effect (it expired at the end of 2013). Solar Investment
Tax Credit of 30% applies until 2016 and is reduced to 10% in 2017 and beyond.
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Planning assumptions for SWEPCO’s IRP development
Efficiency Resource costs are expected to continue to increase.
Residential and Commercial consumption is flat-to-declining and EISA
lighting standards are fully phased-in.
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Stakeholder Feedback Process for SWEPCO’s IRP development
 Initial Stakeholder meeting on March 20, 2014 to discuss study assumptions and
sensitivity analyses.
 Stakeholders have until May 20, 2014, to provide written comments.
 All Stakeholder comments should be addressed to [email protected] and
[email protected]
 Comments are welcome on any aspect of the IRP process:
 Fundamental Pricing Assumptions
 Load Forecast
 Cost of technology options
 DSM/Energy Efficiency assumptions
 Sensitivity cases
 Portfolio selection
 Other
 SWEPCO will consider each stakeholder request.
 SWEPCO may need to contact stakeholders to clarify comments, therefore
stakeholders should designate a contact person to address SWEPCO’s questions.
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SWEPCO’s IRP Development- Next Steps
 Stakeholders’ written comments are to be forwarded to SWEPCO by May 20, 2014.
 Upon receipt of comments, SWEPCO will:
 evaluate stakeholder comments.
 begin modeling effort after written comments are resolved.
 issue its Draft IRP in January 2015.
 host a follow-up stakeholder meeting in February 2015 to discuss the draft IRP.
 Stakeholders may file written comments on draft IRP in April 2015
 SWEPCO files final IRP in August 2015
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