Wholesale Power Price Forecast 012803 Current Trends Update

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Wholesale Power Price Forecast01/28/03 Current
Trends Update

• Jeff King
• January 31, 2003

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What is the power price forecast?

• An estimate of future wholesale spot market power
  prices.
• E.g., as would be traded as short-term contracts
  at the Mid-Columbia trading hub.
• 2001 to 2025.
• Monthly and annual average prices for high
  low-load hours (can also look at hourly prices).

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Ancillary products

• Market-driven future generating capacity
  additions.
• Estimate of fuel use.
• Estimate of certain environmental effects of
  system operation (e.g. CO2 production).
• Transmission usage

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Uses of the power price forecast

• Estimate the market value of new resource
  alternatives (e.g., conservation measures).
• Estimate the cost implications of policies
  affecting power system composition or operation
  (e.g., value of a seasonal shift in hydro
  output).
• Estimate environmental effects of changes in
  power system composition or operation (e.g.,
  effect of resource additions on CO2 production).
• Price forecast input into risk analysis model.
• Resource development forecast into GENESYS model

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Forecasting process
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Geographic Scope

• Load-resource areas defined by transmission
  bottlenecks
• individual generating units (gt3700 total)
• fuel price forecasts for ea. LRA
• load forecast for ea. LRA
• load curtailment blocks for ea. LRA
• new resource options for ea. LRA

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General assumptions

• Projects under construction are completed as
  scheduled additional projects are market-driven.
• Suspended projects
• If gt 25 complete, entered as partial-cost new
  resource options.
• If lt 25 complete, omitted
• New projects are developed by resource-specific
  mix of developers.
• Projects scheduled for retirement are retired
  additional retirements are market-driven.

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Other general assumptions

• Intra-regional transmission cost
• 15/kW/yr point-to-point transmission basic
  ancillary services cost plus 1.9 transmission
  loss penalty.
• Exceptions include peaking units and industrial
  cogeneration
• Pancaked inter-area transmission losses rates.
• Bid margin set at 5 of variable cost.

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Significance of the Current Trends Case

• Our best estimate of future wholesale power
  prices resulting from continuation of current
  economic and energy policy trends.
• Average water conditions
• Average loads
• Not necessarily the Right thing to do
• may not fully consider value of risk mitigation.
• may represent less than desirable reserve levels.
• Not intended to represent a recommended course of
  action

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Current Trends case assumptions

• NPPC medium fuel price forecasts.
• NPPC medium load forecasts
• Demand returns to medium growth rates by 2006.
• Long-term growth adjusted for programmatic
  conservation.
• New resource options most likely to play
  significant role
• Gas-fired combined-cycle GT
• Duct firing (power augmentation) for
  combined-cycle
• Gas-fired simple-cycle GT
• Wind
• Pulverized coal-fired steam-electric
• Solar PV
• Permanent 1.7 cents/kWh production incentive for
  new wind solar.

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More Current Trends case assumptions

• SBC and RPS resource development where adopted
• simulated as new wind.
• quantity based on estimated above-market resource
  cost (resource cost less price forecast)
• Oregon CO2 standard for all new fossil units
• offset fee 1/TCO2 (2000), escalating at 20/yr.
• applies to 17 of total CO2 production.
• 7.50/MWh green tag revenue for new renewables.
• Intermittent resources limited 20 of total
  native capacity, by area.
• No new coal in Western WA, W. OR, CA.

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Forecast Fuel Price Trends(/yr, 2003 2025)
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Natural gas prices are based on US wellhead
forecast
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New resource characteristics
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Additional new resource characteristics
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Updates since September draft

• Updated inventory of recently-completed projects
  and projects under construction.
• Updated load growth forecasts.
• CO2 offset cost escalates as originally intended.
• Adjusted hydro shaping factors British Columbia.
• Corrected fuel price pointers for several
  resources.
• Corrected New Mexico variable gas prices.
• Recalibrated duct-firing and RPS/SBC resource
  builds.
• Adjusted quantities of second block of new wind.
• Recalculated fixed OM costs for existing
  resources.
• First load curtailment block restored to default
  value.

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Forecast WECC Resource Mix (012503 Current
Trends Update)
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Mid-Columbia price forecast
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Levelized Mid-Columbia price forecast (2006 25)
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Monthly average prices loads (Mid C)
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Forecast WECC Fuel Use
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Forecast WECC CO2 Production(012403 Current
Trends Update)
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Base sensitivity studies 1
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Base sensitivity studies 2