NW Energy Coalition and Save Our Wild Salmon Comments on Draft Sixth Northwest Power Plan

The Issues

NW Energy Coalition and Save Our Wild Salmon Comments on Draft Sixth Northwest Power Plan

November 6, 2009

November 6, 2009

NW Energy Coalition and Save Our Wild Salmon Comments on

Draft Sixth Northwest Power Plan

Prepared by Steve Weiss and Nancy Hirsh, NW Energy Coalition

Introduction

The NW Energy Coalition (Coalition) and Save Our Wild Salmon (SOS) applaud Northwest Power and Conservation Council members for recognizing the wealth of clean energy opportunities in our region and for designing a draft Sixth Power and Conservation Plan that foresees meeting virtually all new conventional demand with clean energy, mostly conservation. This is truly an historic step.

The draft Sixth Plan contains the most comprehensive analysis ever done by the Council, clearly showing that the cost-effective conservation targets are reasonable and quite attainable, even when the valid concerns of small rural utilities are appropriately addressed. It is probably the best plan this Council has produced.

But that’s not the proper context within which to assess the plan. We live in momentous times that demand prompt and effective responses to global warming. In this context, the draft Sixth Plan falls far short of the mark. It calls for stabilizing greenhouse gas emissions, but not for the absolute reductions these times require. The draft Sixth Plan does not show the way for the Northwest electric sector to do its share in meeting state and regional greenhouse gas emissions-reduction goals. It offers no direction to the region, and worse yet, no acknowledgment that the region should proactively address climate concerns. It fails to acknowledge the economic benefits of early action and the costs of taking no action.

Meeting climate change responsibilities means dealing with the coal plants that produce 23% of the region’s electricity and 87% of the regional power system’s CO₂ pollution. The Council has already determined that to meet its share of states’ 2050 reduction targets, the power system would have to shed almost all the coal serving the region.

While the Council cannot order coal plant closures, it can and must embrace the power system’s climate change responsibilities, as well as its responsibilities to wildlife already endangered by the power system whose plight is worsened by climate change. Instead of waiting for Congress or some other body to pass laws limiting carbon emissions, the Council should do what the Northwest Power and Conservation Act requires: fully factor the environmental costs of global warming – and the benefits of dealing with it now — into its resource recommendations.

Those costs – a reasonable proxy for the full accounting the Act requires would be the $47 per ton of CO₂ modeled by staff – would be used by Bonneville Power Administration when making current and ongoing resource purchase decisions and tell individual utilities that, yes, even today’s emissions have a cost.

The Council’s extraordinary modeling capability is the envy of other regions. Today, that technical capability must be matched with political leadership. The Council’s Plan must show us the way to meet the responsibilities that the future demands of us. The Council must not waver from its statutory responsibility to ensure that we realize the full potential of energy efficiency – our lowest-cost and least-risk resource. And the Sixth Northwest Power and Conservation Plan must show the way to a clean, affordable, carbon-free and salmon-friendly energy future.

Our detailed analyses follow:

Action Plan

In the opening paragraphs of the conservation section the Council outlines the “uncertainties of the underlying assumptions” and how these may be so significant that the conservation may not be available. The result is outlining a range of savings over the 5-year period and a mid-term review. Looking back over the past 28 years that the Council has been evaluating conservation opportunities, there have always been uncertain economic times and dramatic events, but conservation acquisition has remained a strong and vibrant investment for consumers and the utilities (with the exception of the mid-1990s deregulation craze). The Council does not explain why these uncertainties are so different from those seen in the past that the approach to setting the conservation target must change.

The draft Action Plan states that the Council may adjust the target “to reflect actual achievements or conditions different than forecast that have effected the total amount of conservation available.” Adjusting the target – down or up — to reflect changing conditions seems reasonable and appropriate. However, we see no reason to adjust the target to reflect actual achievements. This seems like an invitation to under-perform and does not address the market barriers that may limit acquisition.

We recommend the Council remove actual achievement, high or low, as a rationale for adjusting the target.

CONS-4: An excellent idea, but this recommendation lacks specifics and direct accountability for follow-through. The action element seems to be missing except for a broad goal outlined in the heading.
CONS-8: The RTF is nationally recognized as a leader in developing the protocols for utilities to determine the value of savings from measures and programs. We strongly support the call for additional funding and do not believe that it should be “provisional.” The RTF has achieved amazing results on a shoestring budget and must have expanded resources to support the regional acceleration of conservation efforts.
CONS-12: We strongly support the incorporation of the risk-mitigation benefits of conservation in resource management plans. We suggest applying these risk-mitigation benefits to the evaluation of the existing hydropower system as the hydrograph changes due to climate change.
CONS-14: Many of the elements suggested in this action item were recommended or analyzed by NEET. We are concerned that this effort could duplicate efforts already underway in the region. If an “implementation plan” is found to be necessary and takes many months to be developed, the delay must not be used as an excuse to adjust the conservation targets. In addition, we are concerned that utility staff and resources will be devoted to a lengthy regional implementation plan, drawing the staff and resources away from direct savings acquisition efforts.
Very briefly in the Conservation chapter (#4) the Council writes about the importance of operational management improvements in both the commercial and industrial sectors. We believe that the Council and the region should focus more of their expertise on the areas of O&M training, building and facility operator education and the commissioning of buildings and facilities. A number of studies in the region (by NEEA) and nationally have shown that energy system controls – for lighting, motors and HVAC – often have produced lower savings than expected due to operator override or mismanagement of the system. As the region strives to accelerate its level of savings acquisition, we cannot allow measures to under-perform. Investment in training, commissioning (retro and ongoing) and management education will be essential.

We recommend that the Action Plan include a new item that supports utility and regional investment in more extensive building operator and code official training and require retro and ongoing commissioning.

GEN-8d: This section calls for the states to “establish a reasonable parity in the treatment of resources, including conservation in the design of renewable portfolio standards and other low-carbon resource incentives” (p. AP-14). The purpose of this recommendation is to “[p]romote CO₂ reduction parity of resource mandates and incentives.” (ibid) We are troubled by this recommendation for a number of reasons. First of all, this action item aims to put CO₂ reduction as the priority purpose of state mandates and incentives. But the many state and federal programs that address renewables and conservation have been designed for multiple purposes, primarily economic development and market transformation of emerging renewable technologies, as well as CO₂ reduction. It is inappropriate for the Council to reinterpret the many statutes or other public policy initiatives of the states in this manner.

It is ironic that the Council’s draft plan itself does not promote CO₂ reduction, but seems to be attempting to tell state policy-makers to rewrite their policies to do so. We would take this recommendation more seriously if the Council’s Plan reflected more of a concern for the reduction of CO₂ emissions. Currently, the draft plan addresses CO₂ emissions reductions only against the risk that Congress might in the future impose a carbon price, not as a central priority for the plan.

We recommend that GEN-8d be eliminated.

BPA-2a: Bonneville has agreed to meet its share of the Council’s target AND to provide the backstop to ensure that the full conservation targets of its customer utilities are achieved. This commitment should be reflected in the text.
In general the Action Plan lays out an excellent overall roadmap to begin implementation of the Plan. We appreciate the level of detail and specificity of the Action Plan items. To implement many of the items in the Action Plan and to achieve the important action items listed on AP-24 and 25, the Council clearly will need additional resources and capability. We support an expanded budget for the Council to help implement all the Action Plan recommendations and to enhance its analytic capability.

Chapter 1 – Introduction

Under the heading of Major Issues on page 1-3, the Council appropriately identifies climate change as a major issue affecting the power system. We believe it is vital to also include the impacts of climate change on the hydrosystem and resources in the region. This element is not included in the discussion of climate change. Known and expected costs from climate change are being felt now in different sectors of the Northwest economy. Some of these costs will impact the electric system.

Research by the University of Washington Climate Impacts Group has shown expected changes in the hydrograph that will impact the value of the hydropower resources. These costs need to be embedded in the assumptions of future resource costs.

We recommend that the physical impacts of climate change on the hydrosystem and on biomass resources be included in the evaluation of climate change and as part of the resource portfolio analysis.

On page 1-3, last paragraph, the text states that Washington’s RPS is 20%. It is 15% by 2020.
The climate change discussion talks in broad generalities about the policies adopted across the West and in the Western Climate Initiative. Yet there is no specific reference to the very specific emissions reduction targets and goals outlined in statute in Washington and Oregon and by executive order in Montana. Why leave out very relevant and impactful information from this overview of this critical issue?
The discussion of Changing Technologies, referred to as smart grid, is well developed on key questions and opportunities on the customer side of the meter. However, the summary does not focus on the breadth of opportunities for digital technology on the utility side of the meter. Distribution and transmission system opportunities for advanced communication technologies are likely to be more significant in the near term than full deployment of AMI, pricing strategies and other customer-based appliances and technologies.

We recommend expanding the description of utility smart grid opportunities in the Introduction and throughout the Plan.

We strongly support the Vision laid out by the Council but fail to see how the third bullet on developing cost-effective carbon-reducing technologies for conventional coal plants is really articulated in the recommendations of the plan. In addition, we believe that the Vision should explicitly state that the Vision for the region’s electric system is to meet the greenhouse gas emissions reduction goals currently established by Washington, Oregon and Montana.

Chapter 2 – Key Drivers of Demand

Table 2-1 lists the medium [do you mean “median”?] population growth rate at 1.1%, yet the text on page 2-2 says that population growth is expected to be 1.3%. Is the Council taking a more conservative approach in the model? If so, why not on all the other drivers that seem to track with projections?
The low case projects low wellhead natural gas prices between $4-5 mBtu and aggressive development of LNG and other non-conventional supplies. Yet in recent years high wellhead prices, not low natural gas prices, have driven LNG and coal-bed methane development. Please explain this rationale.
Has the Council forecast any scenario in which future carbon caps are applied at the mine mouth? While most legislative strategies apply limits on carbon emissions to the power plant, some proposals apply those limits where the resource is extracted or first enters the U.S. prior to combustion or processing.
While the medium and high price forecasts may be sufficient to capture this driver, it is something that should be included in the text.

Chapter 3 – Electricity Demand Forecast

Many recent utility IRPs, particularly those of PGE, PacifiCorp and Avista, seem to be assuming higher growth rates than those assumed by the Council. It is important to try to reconcile the Council’s numbers with those of region’s utilities since the Council is relying on a new forecasting tool for the first time (Energy 2020).

We recommend an action item be added to compare utility and Council’s forecasts with the goal of reconciling any differences. This is important, since the rate of growth is a fundamental driver for the entire Plan’s analysis.

We applaud the fact that the Council is beginning to investigate some of the climate change impacts on power system supply and demand that are more thoroughly described in Appendix L (see our comments on that appendix).

However, while we understand that the Council’s analysis is quite preliminary, it is clear that some conclusions regarding change in runoff patterns affecting generation and changes in usage (caused by temperature change) are evident enough to be included in the load and hydro forecasts used in the Plan. Zero change is extremely unlikely, given the weight of scientific evidence of rapid climate change.

We recommend that a preliminary estimate of generation shift from summer to winter, and load shift from winter to be summer, using about a 2 degree F change by 2030, be used in the final Sixth Plan.

Chapter 4 – Conservation Supply Assumptions

We applaud the Council’s thorough and careful evaluation of existing and emerging technologies and of new innovations that are still in the research and development phase. The summation of achievement since the Fifth Plan, beating the cost-effective savings target by a significant margin, is a testament to the depth of the efficiency resource and the opportunities in the region. The staff analysis of available savings is consistent with the Coalition’s 2009 study, The Power of Efficiency. We have no doubt that the region will achieve even more success in the next five years.
A very important finding in footnote 5 on page 4-15 should be highlighted in the text. This footnote describes the staff evaluation of the achievability rates used in the Council’s planning assumptions. The analysis found that the region is capturing 85% of the potential from cost-effective measures and that, in fact, the achievability factor could be higher.

Many utilities have raised concerns that this planning assumption is too aggressive. The past five years of acquisitions exceeding the Council targets confirms that acquisition rates certainly should be no lower than 85%. It is unclear why the Council sticks with the “no more than 85 percent of the technically feasible and cost-effective savings” level given the footnote text.

We recommend the Council rely on its research and data from actual programs and maintain at least the 85% planning assumption.

On page 4-4, footnote 3, the text compares the Fifth Plan’s technically achievable potential to “this plan’s estimate [of] just over 5,100 aMW at an equivalent levelized life-cycle cost.” The cost is stated earlier in the footnote as $120/MWh. Yet on the next page, Figure 4-1 shows the achievable potential for the Sixth Plan as 6,000 aMW at a levelized cost of $120/MWh. This needs to be clarified — is it 5,100 or 6,000 aMW available at $120/MWh?
In the section detailing some of the implications for I-937 requirements the last paragraph on page 4-23 on penetration rates is not particularly clear in what it is trying to present. It raises a potential discrepancy between the Council methodology and I-937 but the paragraph in the draft Plan is not helpful in resolving the discrepancy or helping readers to understand the impact of the problem.

We recommend that this paragraph be deleted from this chapter.

Another minor edit to this section of Chapter 4, at the top of page 4-23 the text calls out the fact that the Department of Commerce rules allow a utility to adopt a share of the Council’s regional targets. This option applies to the investor-owned utilities as well as per the UTC rules.

Chapter 5 – Demand Response

The Council does a thorough evaluation of the various options for demand response. With ever-increasing constraints on capacity in both winter and summer, the region should fully explore this resource. In addition, we congratulate the Council on its leadership in the Pacific Northwest Demand Response Project and development of the cost-effectiveness guidelines. These materials should be widely distributed to utilities and regulators throughout the region.
Given the need for more resources that reduce peak energy use, this chapter, along with Chapter 4, should provide more analysis of the energy savings opportunities on peak. Some utilities are concerned about large deployment of demand response programs, while failing to fully explore or value conservation measures that reduce demand on peak.
We recommend that the Action Plan conservation deployment section call for more focus on measures that reduce load on peak. We note, however, the Council’s result from Appendix D, that shows a narrowing over time of the price difference between heavy and light load hours. This suggests that measures that merely shift load from heavy to light load hours may not be very cost-effective. Thus our recommendation is to focus most efforts on “needle peaks” that require the system to carry extra, expensive reserves and threaten reliability, not on typical load shifting.
· It is not clear why the Council chose not to include any demand response options in the “efficient frontier.” This chapter identifies at least 1,500-1,700 MW of load reductions and also documents significant regional experience at PGE, PacificCorp and Idaho Power that peak demand reductions through demand response is reliable and cost-effective.
- · In this chapter, as in many other references throughout the draft, the need for shaping resources to integrate wind and other variable-output energy resources is discussed in detail. However, similar discussion is missing about two other major resources that require significant amounts of shaping services: coal and nuclear.[1] These two resources, because they are inflexible and pose large single-shaft risk, also entail significant shaping costs.
  - In this chapter, and elsewhere in the text, statements are made regarding a future requirement for additional firm capacity and balancing resources to deal with increased reliance on wind power. The implication throughout the draft is that the main issue with integrating wind is dealing with periods when the wind is not blowing. While that is indeed important, it should also be emphasized that the problem of wind is most acute in times when the wind is blowing hard. The system actually needs more capacity to quickly reduce generation than it needs to increase generation.
  - The draft Plan’s hydro system capability has been modeled based on the fish operations in the 2008 biological opinion (p. 6-15, 8-14, etc.). But the 2008 BiOp operations never have been implemented since they are not legal. In fact, court-ordered changes in spill and flow have been required for the past two years.
  - Page 6-16 contains a BPA estimate of the cost of its fish and wildlife costs–$800 million per year, or about 20% of BPA’s revenue requirement—with no explanation that the Council’s own estimates contained in Appendix M are much lower. Page M-2 states that the budgets for capital and expenses average about $287 million per year, and page M-20 gives the estimate for the “cost” to existing hydro operations as $274 million per year, for a total of $561 million per year, or 30% less. Using this number gives a percentage of about 15%,[3] not 20%.
  - · We applaud the Council and its partners for undertaking an update to the 1994 direct use study. We look forward to evaluating the results. We presume that all the new and emerging electric space heat and water heat technologies will be compared to all the new and emerging gas-fired units.
    - · Part of the discussion of the portfolio model is how it has overcome the drawbacks of traditional utility resource plans (e.g., p. 8-8). We believe the Council’s model is second to none in how it deals with uncertainty, optionality and risk. Now it is important that it be made available to regional utilities in a form they can use economically.
      - In the portfolio model, “The capital costs of existing resources are sunk cost and are not affected by future resource choices” (p. 8-8). As the chapter explains, the model assumes that existing resources will be replaced upon retirement with comparable cost resources. Thus the model’s analysis includes only forward-looking costs that can be changed by decision-makers.
      - The model’s accounting for market power purchases and sales fails to capture probable changes in that market from a significant carbon price. “For the purpose of calculating load-based carbon, the model assumes imported and exported power has the same carbon loading….” (p. 8-10). However, it is much more likely that significant carbon costs probably will split the one wholesale market into three different ones: a zero-carbon market of surplus hydropower, nuclear and wind; a market for gas-fired power; and a market for coal-fired power. This is likely because producers of power with cleaner profiles than those of the “default” market will want to sell their power outside of such a market—perhaps bilaterally at first—to capture the added value of their product’s cleanliness. This development will further discourage the production of coal power. We understand this may be difficult, but we suggest it for the Seventh Plan.
      - On p. 8-17, it is noted that the model keeps track of two carbon costs: revenues that may be collected (which actually are transfer payments) and true costs related to alternative dispatch of resources. However, in the many charts and graphs that display this sort of information, including the rate and bill effects of Appendix P, it is really impossible for the reader to not be confused. Headings that say “w/CO₂” and “WO/CO₂” are confusing, as are the descriptions of the two coal-retirement scenarios.
      - Fundamentally, the treatment of climate change and carbon emissions in the Plan is faulty. The Council treats the problem of climate change as one of controlling the costs to the region of carbon regulation, or “as a proxy for the cost of CO₂ control…” (p. 8-16), or generally as a risk. But the Council instead must estimate the environmental cost of carbon emissions and use that cost in its analyses. The Council’s mandate is to internalize in its analysis the cost of what is now an environmental externality.
      - It sends BPA and regional utilities the message that CO₂ isn’t really a problem until someone else, perhaps Congress, tells them it is. Pollute all you want until someone else takes it seriously.
      - The draft Plan results in no emissions reductions unless CO₂ regulation is implemented, because utilities run their existing plants as if CO₂ didn’t matter.
      - The draft Plan provides no direction, and little useful guidance, to utilities to reduce their emissions (e.g., in accordance with the targets set by Oregon, Washington and Montana). Because the Council treats carbon as a future risk that need not be dealt with until later, rather than a serious ongoing cost, the draft Plan does not provide the region the least-cost, least-risk path to serious carbon reductions.
      - The draft Plan doesn’t inform us regarding the best way to meet our carbon reduction targets. Only one case modeled (two slightly different variations of the same case) actually reduces emissions—the coal retirement case—but that scenario was just an arbitrary shutdown of every coal plant by 2020. It leaves many questions unanswered about how the region would meet its emissions goals: Should utilities shut down their coal plants? When? Should they keep them available for shortages and run them only for a limited number of hours? What are the tradeoffs? Other possible phase-out approaches should be modeled to select a best approach that would likely have lower costs and bill impacts. For example, cases that gradually limit total hours of coal plant operation or a planned phase-out of the least efficient plants first should be investigated.
      - As required by the Act: (a) develop a methodology to determine the quantifiable environmental costs of global warming emissions; then, (b) use that methodology to determine a cost of global warming emissions for use in analyzing system costs and evaluating and choosing the Council’s plan.
      - The CO₂ cost determined above should be incorporated into the Council’s Plan as direction to BPA and the utilities regarding both the operation (dispatch) of existing plants and for use in choosing future resources. Bonneville, for example, should be required to evaluate balancing purchases using this value. BPA now purchases some coal-fired power at prices not much different than those of other resources. Including a CO₂ cost would change the nature of those purchases.
      - Model a least-cost, least-risk path for reducing the region’s emissions consistent with Oregon, Washington and Montana goals, the WCI targets, and/or targets recommended by the scientific consensus regarding global warming. That is, allow the model to choose how to proceed under various CO₂ constraints that have been adopted by the states and WCI. The states and utilities need to know the best, least-expensive way to meet those targets.
      - Page 8-25 states that “Adoption of RPS legislation by other states, in particular California, is expected to impact the region primarily through the expected price of wholesale power. The anticipated change in wholesale electricity prices due to this effect is incorporated in Council modeling….” We do not believe that the full impact of the new 33% California RPS has been modeled. In particular, if, as it seems likely, a substantial amount of unbundled RECs are allowed to qualify in California’s standard, a surplus of “null” power likely will be available to the region’s utilities that would be trapped by inadequate transmission capacity to the Southwest. This would result in a surplus not currently in the Council’s model.
      - Critical pieces missing from the Plan and the Resource Strategy are discussions and explanations of how the preferred Strategy and action items were chosen and how they are connected to the analysis. Chapters 8 and 9 provide a thorough explanation of the Council’s model, including the assumptions and risk analysis, but the model does not select the preferred portfolio or actions. However, sometimes the text leaves the impression that the model made the decisions. In fact, 12 scenarios were analyzed and each scenario results in hundreds of individual resource strategies falling on the scenarios’ efficient frontiers. All are “optimal” as far as the model is concerned.
      - The tables in Chapter 9 need more explanation and clearer headings. Our comments on Chapter 8 noted the issue of how carbon costs and dispatch costs can be confused. In addition, it is not very useful to the reader to see only the different amounts of SCCT and CCCTs optioned in each scenario without also seeing the average amount—or the average number of scenarios—in which these gas turbines are actually constructed. Also, the CT options are mislabeled as MWa, when in fact they should be MW. These are capacity, not energy, numbers. Finally, we believe rate impact is a very poor measure of these scenarios. A far better measure is bill impact. After all, the reason rates are higher in scenarios with robust efficiency targets is that the cost of the efficiency programs is covered by consumers, but it ignores the savings from on those programs—which go back to consumers, who pay bills, not rates.
      - The discussion of the four lower Snake River dam removal scenario is introduced with a gratuitous comment: “The value of this [the region’s hydro system] is sometimes overlooked” (p.9-18). We do not know of anyone involved with this issue who overlooks the system’s value. Some however, including the Coalition and SOS, believe certain elements of the system are extremely detrimental to restoration of healthy wild fish populations. To paint all who are involved in the debate as being casually unaware of the value of the hydro system is uncalled for. If anything, we would argue that the Council’s own analysis shows that the value of the four lower Snake River dams has been highly overvalued by others in the debate. In fact, it would be useful to the reader to point out how small a rate (or bill) increase would be needed to remove the four dams.
      - The statement that “the primary replacement of the dams is provided by natural gas-fired combined-cycle combustion turbines” (p. 9-19) is misleading and actually contradictory given the fact that Table 9-8 that summarizes the results shows that only 422 aMW (this should be MW, by the way—this is capacity, not energy) are optioned. In many, if not most futures, these are not even constructed. In reality, the model shows that dam removal does not require many new resources, since the energy efficiency and renewables being built tend to create a surplus of capacity. Since this seems counter to the numbers put out by BPA, which has argued that 3,000 MW of new CTs would have to be built, a short discussion of the model results would be informative.
      - The characterization of a carbon price applied to carbon dioxide emissions as a “penalty” is inappropriate in this document. Greenhouse gas emissions’ impact on global climate has been well documented by scientists from the local to international level (see our comments on Appendix L). Currently, our economy fails to account for the cost of emitting these climate- altering emissions. Accounting for this externality is not a penalty — it is simply assigning a cost for actions taken and is an emissions allowance price. Given the important analysis contained in this chapter, the word choice is unnecessary and unfortunate.
      - Page 10-2 describes the benefits of the carbon-free nature of the hydroelectric system. This is clearly a fair statement. It also says removing the four lower Snake River dams would “undo 40 percent of the carbon reductions expected to be accomplished through the Council’s plan.” The chart on page 9-26 shows the dam removal scenario resulting in 2030 emissions of 40.2 MMt and the $0 to $100 carbon risk scenario resulting in 2030 emissions of 37.1 MMt. The difference is not 40 percent given the starting point of 57 MMt as stated on page 10-2. Please explain how the 40% number is calculated.
      - The average cost of $47 per ton is a reasonable estimate of future carbon emission allowance prices, yet we continue to object to any Council modeling scenarios that have a carbon allowance price of $0.00. It is almost certainly an underestimation of the environmental and social costs of carbon emissions, however. As stated in this chapter and Appendix L, the science and policy directions are clear: limits on carbon emissions are forthcoming and the cost of these emissions to society is undoubtedly high. Given the analysis in this chapter and specifically the review of literature on pricing, it is not clear what justification the Council uses to set the bottom range of cost estimates at $0 per ton.
      - ·      The description of a cap-and-trade program states that a benefit of this policy compared to mandates and tax policies is that it is incorporated into retail prices of energy. It is our experience in Washington and Oregon that tax policies and mandates, such as renewable energy standards, are reflected in wholesale and retail prices. The downstream signal to consumers is felt either way and utilities are quick to state that requested rate increases are due to mandates.
        
        ·      Is there a reason that throughout all the discussion of carbon taxes and international policies the chapter does not discuss the carbon tax implemented in British Columbia and its effectiveness to date?
        
        The introductory “summary of key findings” in Chapter 11 makes some statements that imply that existing resources, except for wind, are relatively easy to integrate: “…capacity, the ability to meet peak-hour load, and flexibility, the ability to rapidly increase or decrease generation output, were not [historically] significant problems” (p. 11-1). But tell that to the system operator facing unforeseeable near-instantaneous shutdown of the region’s 1,200 MW nuclear plant! Or consider long maintenance outages from older coal plants in the middle of peak periods, such as recent Boardman coal plant history. Yes, wind is a unique resource with unique challenges. But every resource has its challenges, and the above statement makes it seem like something really new and difficult is coming if we try to rely on wind too much. The text should put things into perspective for the reader and explain how each resource has its real, and expensive, challenges.
        
        The solutions to the flexibility need listed at the top of p. 11-2 should mention the Smart Grid. For example, the deployment of smart hot water heaters could be a very inexpensive source of flexibility and storage.
        
        The “Background” (p. 11-2) and continuing discussions through Chapter 11 leave the impression that the hydrosystem “used to” have a lot of flexibility, but the increase in wind generation is using it up. The discussion gives the erroneous impression that using hydro to integrate wind is somehow cheaper than using natural gas. (This then also leads to the argument that removing the four lower Snake dams would cause wind integration costs to increase, or indeed make it impossible to integrate very much wind, although we know that areas such as Texas with almost no hydro successfully integrate huge amounts of wind.)
        
        Page 12-8 notes: “When Bonneville acquires resources, the Power Act then requires that, with certain narrow exceptions, all of Bonneville’s resource actions be consistent with the Council’s power plan.” These exceptions must not be used to the point of violating the Act’s intent — that BPA acquire resources consistent with the power plan. BPA presently buys hundreds of aMW of electricity from the “market” to meet load and optimize the value of the hydrosystem, which are generally included as one of the “narrow exceptions.”
        
        In its discussion of oil prices, the draft makes this statement:
        
        One remarkable result in Appendix D is that, “The forecast shows a narrowing of the difference between on-peak and off-peak power prices over the planning period” (p. D-3). This result has some important ramifications that should have been discussed in detail, rather than just casually noted.
        
        Figure D-9 and the accompanying text are confusing, because they do not indicate whether the price differences are due to CO₂ allowance costs (really a transfer payment) or to dispatch differences.
        
        ·      In its discussion of climate change modeling, Appendix L makes a questionable statement that leaves the reader with an inaccurate impression of the scientific modeling:
        
        ·      We applaud the excellent explanation of how the costs of the operations of the hydro system for the benefit of fish and wildlife should be calculated. In particular:
        
        For too long the integration of the fish and wildlife program and the power plan have been talked of only in terms of cost, and only in terms of the difference between current operations and operations without consideration for fish and wildlife, priced at current wholesale market electricity prices. This may be interesting information to know, as a theoretical opportunity cost and for understanding total effects on Bonneville revenues over time. It does not necessarily reflect actual costs to Bonneville and the region over time, which should take into account instead the costs of the resources actually added over time to replace the hydropower generation… (p. M-3)
        
        We agree that the proper costs to assign lost hydro generation are “the costs of the resources actually added over time to replace the hydropower generation,” and that this methodology also should be used in other parts of this Plan to estimate the costs to replace the power if the four lower Snake dams are removed. That is, the cost analysis should adopt the point of view of someone in 2029 who looks back and calculates the lost hydro share of the entire cost of resources added over that period for load growth and resource replacement, without attempting to color-code the resources and assigning the low-cost ones to load growth and the higher-cost ones to replacement power for the dams.
        
        Conclusion
        
        The Coalition and SOS greatly appreciate the tremendous effort of the Council on both the analytic work done to put the details of the draft Plan together and the stakeholder and public input processes throughout the past year. The Council’s Plan is model for local utilities as well as utilities and resource planners across the country. We are proud to be a part of this process and urge the Council to approve a Final Plan that addresses the important issues raised in our comments and by hundreds of citizens across the region.
        
        Interestingly, as computer climate models have become more sophisticated in recent years, the predicted increase in temperature has gotten smaller. Nonetheless, most climatologists concur that the warming trend is real and could have serious impacts worldwide. (p. L-3)
        
        We are not aware of any trend of the models to predict lower temperature increases than those predicted earlier. In fact, the international climate consensus has continued to raise the ante on the impacts of climate change and on the likelihoodof extremely serious, if not catastrophic, near-term effects. Early models were unable, for example, to include synergistic effects that will undoubtedly increase the rate of global warming. These include huge emissions of methane from melting tundra and the positive feedback loop created by melting ice exposing darker water and land in the polar regions and Greenland. These effects are likely to raise the rate of increase in temperature and environmental damage above those previously assumed. Projected sea level rise by the end of the century, for example, has increased remarkably.
        
        The last sentence in the statement quoted above makes it seem as if some doubt remains about the seriousness of the crisis we face. There no longer can be any doubt that our climate is changing due to human sources of greenhouse gases, most significantly CO₂. The composition of the atmosphere has been shifted to the extent that CO₂ levels are higher than they have been in the past 800,000 years.^[5] James Hansen, a NASA climate scientist, tells us that to avoid catastrophic melting of ice sheets, CO₂levels must be no higher than 350 parts per million. Today, the atmosphere contains up to 387 parts per million. The President of the United States, the Oregon, Montana and Washington Governors, the Oregon and Washington Legislatures and the WCI have recognized that global warming poses a serious threat to the economic well-being, public health, natural resources and environment of the region, the nation and our world.
        
        This January, President Obama stood before the nation and called for a “new era of responsibility,” promising that his government would “restore science to its rightful place” and “roll back the specter of a warming planet.”^[6] The President spoke of a clean energy future where “[w]e will harness the sun and the winds and the soil to fuel our cars and run our factories,” built upon a strong and interlocking foundation of innovation and sustainability.^[7] The U.S. Environmental Protection Agency has stated that the dangers presented by climate change are “not a close case” and “[i]n both magnitude and probability, climate change is an enormous problem.”^[8]
        
        In order for our region, the nation and our world to “roll back the specter of a warming planet,” global climate change must be a top priority for the Council. The Council must help prevent the transformation of the region from one of the most beautiful places on Earth to what the Oregon Governor’s Advisory Group on Global Warming described in 2004 as “dramatically altered and far less habitable within only a few generations.”^[9]
        
        Climate change is not a problem just for our children and grandchildren, however. Climate changes are occurring already. Northwest storms are more frequent and intense, and heat waves, droughts and floods are more severe and frequent. In addition, Northwest temperatures have been rising since 1920, precipitation has increased 10% (up to 40% in some areas) since 1916, the sea level is rising 1-2mm per year, glaciers are rapidly retreating, and Cascade snowpack is melting earlier and faster each spring.^[10] These changes in the water cycle, along with other global climate changes, threaten crops, salmon, recreation, fishing and water supplies. Global climate change also affects the reproductive success, range and diet of vulnerable species.^[11] A recent study revealed that climate change may be responsible for widespread decline in Western forests.^[12]
        
        Every day brings new evidence of the scale of the threat; even in the few months since the draft Plan was prepared, prominent international organizations have released reports documenting the harm caused by the accelerating climate crisis. In the past few months, the magnitude of human suffering that global warming is causing, and will cause, has been repeatedly underlined and amplified. A series of new reports, including a magisterial call for action from the Lancet, one of the world’s leading medical journals, lends even greater urgency to addressing health and welfare impacts ranging from flooded coasts to sweltering heat waves to spreading diseases.^[13]
        
        The Lancet Commission’s study, conducted by top academics working jointly with University College London, made world headlines when it was released this May,^[14] concluding simply that “[c]limate change is the biggest global health threat of the 21^st century.”^[15] Bigger, in other words, than cancer, AIDS, multi-drug-resistant tuberculosis, starvation, malaria or pandemic flu. As the report puts it, “[e]ffects of climate change on health will affect most populations in the next decades and put the lives and wellbeing of billions of people at increased risk.”^[16]
        
        Moreover, major climate-linked disasters are on the rise. “In recent years, more than 2 billion people were affected by natural disasters, many of which were directly or indirectly related to extreme meteorological phenomena, including heat waves and cold waves, floods, droughts, and windstorms.”^[17] Reinsurance giant Munich Re tracks such disasters and reports that in 2007 brought 960 major natural disasters – the highest number ever – and “more than 90% [were] the result of extreme weather-related or climate-related events.”^[18] The 2007 events were accompanied by 16,000 reported fatalities and $82 billion in economic losses.^[19] Munich Re reports that “the number of great weather-related disasters has climbed from an average of less than two per year in 1950 to more than six annually by 2007. Over the same period, average annual economic losses have risen from less than $5 billion to more than $60 billion.”^[20]
        
        Increasing CO₂ also causes ocean acidification. Acidic seawater interferes with the survival and growth of coral reefs and invertebrates because the acid dissolves the minerals these organisms need to build skeletons.^[21] “According to recent surveys, the ocean is now acidifying 100 times faster than at any time during the past 20 million years.”^[22] Continuing to burn coal also results in releases of nitrogen, with profound negative impacts on the local, regional and global ecosystem.[23]
        
        The final Plan should not downplay this issue. Staff should include some of the latest summaries of the huge environmental and social impacts to which our continuing emission of greenhouse gases is contributing. Instead, the draft Plan seems to take the position that the only real risks facing the region due to climate change are that Congress might impose a price on emissions and that runoff patterns and energy usage might change a bit. This lack of urgency about climate change is what condones a Plan that recommends continued non-stop operation of the region’s many coal plants despite the tremendous damage they do to the environment.
        
        Appendix M: Integrating Fish & Wildlife and Power Planning
        
        We will not reiterate our comments on Chapter 9 and those made at the Portland hearing that the draft Plan’s Recommended Resource Strategy does not embed the environmental cost of climate change in the modeling assumptions and therefore treats this cost as a risk. In doing this, the Council shies away from charting a course that ensures the region can achieve the emissions reduction goals adopted by three of the four Northwest states.
        
        Chapter 11: Capacity and Flexibility Resources
        
        We recommend that the draft take a more neutral and balanced tone overall. Statements about the nature of resources and about costs and problems should avoid value-laden language and seek to keep things in perspective compared to “business as usual.”
        
        In reality, the hydro system’s flexibility always has been used to its utmost to move generation to high-value heavy load hours while shaping loads given the other constraints it must deal with (flood control, navigation, recreation, fish requirements, etc.). There is no “free” or unused flexibility available for wind, and BPA and other utilities understand this when they price wind integration costs as the avoided cost of using gas-fired turbines to provide those services. Therefore the cost of wind integration is pretty much the same whether done with hydro or gas-fired turbines. In fact, relying upon hydro during light load hours to deal with wind integration has some real drawbacks that increase the cost. To be prepared to ramp down hydro at night should the wind come up is a very expensive proposition that requires the use of valuable water when prices are lowest.
        
        We recommend that Chapter 11 include: (1) a discussion of the drawbacks of using hydro for wind integration; and (2) a discussion of the costs of integrating wind, specifically how those costs are related to the cost of gas-fired flexibility. This would put the discussion into perspective with other regions and show the reader that our reliance on hydro for this purpose may not be the least expensive way to go.
        
        Chapter 12: Bonneville’s Obligations
        
        In particular, as we point out in our discussion of Chapter 8, we believe that the Power Act requires the Council to determine a cost for CO₂ emissions and to include that cost in its calculation of system costs used to choose resources.
        
        We do not know the exact nature of the power purchased by BPA, and it is conceivable that neither does Bonneville. (However, given points of delivery, prices and hours, it should not be too difficult to estimate in many instances.) We know that BPA is working hard to sort out the sources of its market purchases and determine how much comes from coal-fired power plants. Bonneville should do its part to reducing its carbon footprint.
        
        The Council should state clearly that it expects Bonneville to act consistently with its Plan to the greatest extent possible, including in purchases that are technically considered exceptions under the Power Act. Of particular importance is for BPA to consider the cost of carbon emissions when making those purchases.
        
        Appendix A: Fuel Price Forecast
        
        The high price case is unlikely in the long term because of the alternative supplies and reductions in use that are likely to occur at such high prices. There are still ample supplies of conventional oil in the world, but its production is currently restricted by turmoil in the Middle East and the immaturity of the economies of former Soviet Union states. (p. A-13)
        
        The Coalition and SOS agree with the statement that, in the long run, alternatives to oil will be developed that would be accelerated by high prices, thus providing an upward limit to oil prices. However, the evidence does not support the second sentence. Most oil-industry experts forecast that sizeable new discoveries of conventional oil will not compensate for both the continuing rapid declines in the production of existing fields and future demand growth, especially in developing countries. As a result we soon will see “peak oil” conditions that could result in sustained higher prices.
        
        The statement that there are “ample supplies of conventional oil” is not supported by evidence nor the consensus opinion of experts. We believe that, in the long run, the oil price forecast should center on what is now the draft’s medium high forecast. Even this may be conservative.
        
        Appendix D: Electricity Price Forecast
        
        For one thing, a narrowing of on- and off-peak prices reduces the value of storage and peak-shaving technologies and strategies. For example, time-of-use pricing might not be of much value, nor would large pumped water, compressed air storage facilities or demand- response programs focused mainly on load shifting.
        
        It is also likely that hydro-operating strategies aimed at moving generation from light load hours to heavy load hours will become less valuable, lowering the cost of using hydro flexibility for integrating wind and solar resources. Currently, the use of hydro for capturing the diurnal price spread competes with its use for integrating wind. When the former use becomes less valuable, the opportunity cost of using hydro for integrating renewables will fall.
        
        We urge the Council to highlight this result, rather than leaving it buried in the appendix, and discuss the causes of the finding and the ramifications for the power system.
        
        As noted earlier, whenever the impacts of CO₂ costs are discussed, it is important to break out the real costs of dispatch changes caused by a price signal, and allowance costs that are simply transfer payments (possibly zero, if allowances are free). Only the former are true costs to society.
        
        Appendix L: Climate Change and Power Planning

Chapter 6 – Generating Resources and Energy Storage Technologies

[1] For example, see p. 6-11, which states that “The addition of large amounts of wind power to the Northwest power system has increased the demand for regulation and load following services.” While this may be true, it implies that no other types of resource additions would do so. In fact, any new inflexible coal or nuclear plants that might be added also would require more load-following services. We would argue that the presence of the large amount of coal and nuclear power now on the grid—as opposed to more flexible gas resources—saps the flexibility of the hydro system, making it much more expensive to integrate additional wind.

[2] It is our understanding, from discussions with Michael Schilmoeller, that the model at this time allows coal plants to be very frequently dispatched, but does not add significant O&M costs for this practice. We believe that for these reasons, as well as future regulatory requirements, the model should assume shutdown or mothballing of coal plants once their utilization factors fall significantly.

[3] $561 M / ($3.5 B + $274 M) = 14.9%. We note that a correct calculation includes the foregone revenues in both the numerator and denominator. Bonneville has on occasion included foregone revenues only in the numerator when calculating percentages.

[4] Recent discussion with Michael Schilmoeller indicate that he will fix this error in the final draft.

[5] “Provocative New Study Warns of Crossing Planetary Boundaries,” Carl Zimmer: Yale Environment 360, http://www.e360.yale.edu/content/feature.msp?id=2192 (last visited Sep. 29, 2009).

[6] See http://www.whitehouse.gov/blog/inaugural-address/ (Ex 1).

[7] See id.

[8] U.S. Environmental Protection Agency, Climate Change Division, Office of Atmospheric Programs, Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, at ES-1, 3-4 (April 17, 2009), available at http://epa.gov/climatechange/endangerment/downloads/TSD_Endangerment.pdf (last visited June 16, 2009).

[9] Governor’s Advisory Group on Global Warming, Oregon Strategy for Greenhouse Gas Reductions at i (2004) (available at http://www.oregon.gov/ENERGY/GBLWRM/docs/GWReport-FInal.pdf).

[10] Scientific Consensus Statement on the Likely Impacts of Climate Change on the Pacific Northwest, Consensus Statement drafted by a subcommittee of participants in the scientific meeting “Impacts of Climate Change on the Pacific Northwest” convened at OSU on June 15, 2004 at 4 (available at www.ef.org/westcoastclimate/E_OSU%20Consensus%20Statement.pdf).

[11] See IPCC, Climate Change 2001: Impacts, Adaptation and Vulnerability (2001), available at http:www.grida.no/climate/ipcc_tar/wg2/index.htm; IPCC, Climate Change 2007: The Synthesis Report (2007), available at http:www.ipcc.ch; NRC, Climate Change Science: An Analysis of Some Key Questions, (2001) (available at http://books.nap.edu/html/climatechange/).

[12] Phillip J. vanMantgnm, et al., “Widespread Increase of Tree Mortality Rates in the Western United States,” Science Vol. 323 (Jan. 23, 2009) (available at http://www.sciencemag.org).

[13] Anthony Costello et al., The Lancet Commissions, Managing the health effects of climate change, 373 The Lancet 1693, 1693 (May 16, 2009).

[14] See, e.g., “Global warming ‘biggest health threat’,” The Hindu (Indian coverage) (May 14, 2009); “Climate change biggest threat to global health: doctors,” CCTV (Chinese coverage) (May 14, 2009); “Climate change is ‘biggest health threat of 21^st century, claims report into global warming,” Daily Mail (British coverage) (May 14, 2009); “Climate change could be world’s biggest health threat: Report shows rising temperatures could spread drought and tropical disease,” ABC News (American and Canadian coverage) (May 14, 2009).

[15] Anthony Costello et al., The Lancet Commissions, Managing the health effects of climate change, 373 The Lancet 1693, 1693.

[16] Id.

[17] Id. at 1706.

[18] Id.; see also Ernst Rauch, Munich Re, Effects of Climate Change on the Insurance Industry, 26A Stanford Environmental Law Journal 239 (2007).

[19] Lancet Report at 1706.

[20] Id.

[21] “Provocative New Study Warns of Crossing Planetary Boundaries,” Carl Zimmer: Yale Environment 360, http://www.e360.yale.edu/content/feature.msp?id=2192 (last visited Sep. 29, 2009).

[22] Id.

[23] We thank the Sierra Club for the information provided here on climate change impacts.

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The NW Energy Coalition is an alliance of more than 115 environmental, civic and human service organizations, progressive utilities, and businesses in Oregon, Washington, Idaho, Montana and British Columbia. We promote development of renewable energy and energy efficiency, consumer protection, low-income energy assistance, and fish and wildlife restoration on the Columbia and Snake rivers.