Community Energy Forum

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Power Supply Issues And Potential Resources For
Green Mountain Power

• Community Energy Forum
• March 30, 2005
• Montpelier, Vermont
• Douglas C. Smith,
• Technical Director
• La Capra Associates

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La Capra Associates

• Over 20 years experience in the energy industry
• Rooted in New England, national breadth
• Resource Planning and Portfolio Design
• Energy Procurement and Contract Negotiation
  (Wholesale Retail Customers)
• Wholesale Electricity Market Forecasting
• Renewable Energy Market Policy and Analysis
• Equal opportunity employer

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Major Themes

• Todays sources of power
• The New England electricity market
• GMPs power supply needs
• GMPs Integrated Resource Plan
• Detailed discussion of resource options
• A range of supply demand options
• Major characteristics
• Pros cons

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Power Supply Decisions Matter
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Major Existing Electricity SuppliesAn Overview
Key Potential
Typical
Capital
Variable
Environmental
Type
Operation
Cost
Cost
Impacts
Fish Recreation
Hydroelectric
As Available
Very High
Zero
Nuclear
Base load
Very high
Very low
Waste Storage
Coal
Base load
High
Low
High Air Emissions
Gas Combined
Follows load
Moderate
Moderate
Low Air Emissions
Cycle
Moderate Air
Oil/gas Steam
Follows load
Moderate
High
Emissions
Combustion
Moderate Air
Peaking
Low
Very high
Turbine
Emissions
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Overview of GMP New England

• GMP serves 300 MW, or 1 of NE load
• Limited local fuel resources
• New generation almost all fueled by natural gas
• Gas oil prices are key drivers of electricity
  prices
• Market electricity prices reflect trends
  volatility in gas oil prices

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Electricity Price Outlook
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Overview of GMPs Power Supply
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GMPs Future Power Supply Needs
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Who Builds New Generating Capacity?

• 1990s and Earlier
• Utility-constructed capacity
• Non-utility plants selling under long-term
  contract
• 1999 to 2004 A Building Boom
• Fueled by natural gas
• Built by merchant generators, not utilities
• To date, financial results generally poor
• Future Needs
• Will capital markets regulatory rules support
  development of new capacity?

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Key Planning Issues

• Understanding implications of uncertainty
• Fuel prices, electricity market prices
• Electricity demand growth
• Environmental regulations
• Capital costs
• Ranking performance of potential resources
• Projected long-term costs
• Exposure to long-term cost variations
• Exposure to short-term cost variations
• Emission-related costs

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GMP IRP Portfolio Results

• Better-performing portfolios tended to include
• Fixed-price market purchases
• Some new peaking capacity in Vermont
• New renewable resources
• Lesser-performing portfolios
• Heavy reliance on spot market
• Partial ownership in a NE gas plant
• Partial ownership in a NE coal plant

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Other IRP Themes

• Portfolio flexibility has value
• Renewable power sources potentially
  cost-effective with federal tax credits
• Advanced planning is needed to make resources
  available on time
• Watch for events that could justify a shift in
  strategy

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Developments Since IRP Analysis

• High prices for natural gas oil
• Also, gas pipeline constraints to NE
• Mandatory renewable electricity programs
  implemented in several states
• New renewable supply encountering local
  challenges
• Implementation of new ISO-NE market rules
• Implications
• The case for renewables may be improving
• A period of transition continued vigilance is
  warranted

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Potential Resource Options for GMP

• Spot market purchases
• Energy
• Capacity
• Forward energy purchases
• Typically in fixed blocks
• Up to several years
• Longer-term purchase from a specific generating
  unit
• E.g., a new gas-fired plant

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Resource Options (continued)

• Long-term purchase from Vermont Yankee
• Entergy Nuclear would need license extension
• Priced according to market
• Future purchase from Canada
• Large scale hydro resources
• Priced according to market
• Construct new generation in Vermont
• Likely location northwest VT
• Likely fueled by natural gas (25 to 50 MW)
• Smaller units possible at customer sites

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Resource Options (continued)

• Renewable electricity sources
• Wind, biomass, landfill gas
• Energy efficiency
• Past programs implemented by GMP
• Going forward statewide or targeted approach,
  likely implemented by Efficiency Vermont (funded
  by customer surcharge)

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Tradeoffs Among Resource Options
Long-term
Unit
Contract
Performance /
Resource Option
Commitment
Cost Risk
Location
Air Emissions
Capital Cost
Spot Market Purchases
Vermont
Moderate
None
No
No
Moderate
Long-term Market Purchase at Fixed Price
None
Yes
Yes
Various
Purchase Output from Gas Combined Cycle Unit
Southern NE
Low
None
Yes
Yes
Purchase New Renewables (Wind, Landfill Gas,
Biomass)
Various
None to Low
None
Yes
Possibly
Vermont
None
Construct Wind Power
Very High
No
Yes
Purchase Output from VT Yankee
Vermont
None
None
Yes
Yes
Purchase from Canada
Vermont Border
None to Low
None
Yes
Possibly
Vermont
Low to Moderate
Construct New Gas-Fired Capacity
High
No
Yes
Increase Energy Efficiency
Vermont
None
Very High
No
Yes
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Your Input to Power Supply Planning

• Relative ranking of power supply goals
• Expected price
• Price stability over time
• Reliability of supply
• Environmental concerns
• Views on particular resource options
• Other?

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Questions?

• Additional Information Sources
• GMP 2003 INTEGRATED RESOURCE PLAN (IRP)
• http//www.greenmountainpower.biz
• VT DPS VERMONT ELECTRIC PLAN
• http//www.state.vt.us/psd/
• Douglas C. Smith, Technical Director
• La Capra Associates
• 20 Winthrop Square, Boston
• 617-367-6500
• dsmith_at_lacapra.com

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New Englands Power Sources