Vol 7, Number 1 – May 22, 2010

Energy efficiency brings

good things to life

• The new official power and conservation plan for the Northwest confirms that more than enough inexpensive energy efficiency is availability to meet most new electricity needs.

Background

The region’s official power planning agency recently finalized the Sixth Northwest Power and Conservation Plan, which charts an exciting new course for the region. The Northwest Power and Conservation Council says the region can meet all new electricity needs over the next 20 years with energy efficiency and renewables, building almost no new fossil-fueled generating plants.

The Council, created by federal law in 1980 and overseen by two governor-appointed members from each of the four Northwest states, must produce a detailed 20-year power and conservation plan for the region every five years. All Council plans carry great weight, directly, indirectly and symbolically.

• Federal law requires the Bonneville Power Administration to follow Council plans when choosing power and energy efficiency resources. About half the region’s electricity customers are served by public utilities and cooperatives that purchase most of their power from BPA.
• Washington state’s clean energy Initiative (I-937) requires the state’s larger utilities to follow Council methodology when determining their own energy efficiency targets.
• Utility executives, including those not tied to Bonneville, as well as regulatory agencies, state legislators and other decision-makers rely upon the high-quality analyses behind the plans.

This Transformer, the first in a 2-part series on this critical step on the road to our clean and affordable future, presents the Council’s final recommendations and its conclusion that cheap energy efficiency can and should meet most of the region’s new power needs. Part II will compare the findings of the Sixth Northwest Power and Conservation Plan to the NW Energy Coalition’s Bright Future analysis.

If there’s just one take-away …

The Sixth Northwest Power and Conservation Plan presents an extraordinarily powerful vision of a clean energy future. It rests on one fundamental conclusion: We have enough inexpensive energy efficiency (conservation) opportunities to meet practically all of our new electricity needs for the foreseeable future.

The Council foresees region-wide population rising about 1.2% a year through 2030, plus new and bigger TVs and other electronics and expanded air conditioning use pushing up per-person use 0.2% per year. As a result, the region will need another 7,000 average megawatts (aMW) of electricity – fully one-third of total current use. The plan calls for meeting 85% of those growing power needs by using less of it … by switching to more efficient lights, appliances, motors, computers, heat pumps, etc. The Council estimates that acquiring the energy efficiency in the plan will create 47,000 new jobs for the region.

Renewable portfolio standard (RPS) laws in Oregon, Washington and Montana mandate enough new renewable energy resources to cover the remaining 15%. Some new natural gas generation will be needed toward the end of the period to help integrate the (mainly wind) renewables and in some scenarios to substitute for coal-fired generation.

The Council expects that this combination of cheap efficiency and RPS renewables will continue and even increase the region’s current power surplus, allowing us to affordably move away from coal-fired generation and salmon-endangering lower Snake River hydropower without having to build much new conventional generation. (See Chapter 14 of the Sixth Plan, figures 14-1 through 14-3)

Efficiency first

Council staff conducted a broad and deep analysis of the region’s conservation potential. Staff looked at literally thousands of energy efficiency measures, considering such issues as:

• Cost-effectiveness — whether saving energy with the particular measure costs less than generating it.
• Hours of use and load shape — when savings would occur, e.g., at night when power isn’t worth much or in the middle of a hot August afternoon when it is most valuable.
• Market acceptance — the pace of product turnover, number of applications and any incentives needed to get consumers to use it.

Staff then ranked all the measures by cost per kilowatt-hour saved. Ranking least expensive were things such as better showerheads and TV screens. Higher-cost measures included new efficient furnaces, air conditioners and solar panels. (The Council considers a customer’s on-site solar generation “efficiency” because it reduces the need for utility generation.)

Projecting 20 years out, the Council found about 4,500 aMW of efficiency costing less than 5¢ per kilowatt-hour (kWh) — about half the cost of new natural-gas or wind generation — and another 1,500 aMW competitive with new generation at less than 11¢/kWh.

Besides the straightforward cost savings compared to new generation resources, the Council found that conservation reduces the risk of high-cost events such as the energy crisis of 2001, droughts that reduce the region’s hydro output and the imposition of carbon penalties. These risk-reduction benefits add another few cents/kWh to the value of conservation.

The analysis led the Council to its precedent-setting recommendation that 85% of our load growth through 2030 be met with available energy efficiency with an average cost of about 3.6¢/kWh. The 5,900 aMW of new conservation is roughly half again as much as the Fifth Plan’s target.

The Council’s model

Exhaustive and rigorous analyses done for the Sixth Plan provide the regional database for making decisions about the Northwest’s energy future.

The Council had to make many best-guess assumptions to reach its conclusions and calculate future bills and rates. These included the costs of new generating resources; the cost of the natural gas used in many power plants; population and load growth; and the likelihood and fiscal impacts of future carbon dioxide regulation to combat climate change.

Staff developed a model that tests thousands of possible resource acquisition strategies, each tested against 750 different futures. The least costly strategies became candidates for the Council’s preferred strategy.

The final plan includes discussion of nine of these scenarios. Each represents the least-cost, least-risk strategy for serving the region under specific conditions or actions such as passage of various climate policies (modeled as CO2 prices) or removal of the four Lower Snake River dams. Council members then chose a 5-year Action Plan — basically a collection of recommendations for the region’s utilities and decision-makers.

The Sixth Plan does not advocate for dam removal and recommends no particular carbon reduction policy, though many of the final scenarios assume carbon penalties averaging  $47/ton by 2029. By itself, the plan would do no more than stabilize power system carbon emissions at 2005 levels – which still is farther than any previous plan has gone.

Regarding both climate policy and dam removal, the analysis reflects a conscious effort to position the region to react once goals are set through state and/or Congressional action. It does so in two ways:

1. By setting strong energy efficiency targets, since analysis shows conservation saves money regardless of future climate or salmon policy.
2. By providing a regional blueprint for reducing carbon emissions and/or replacing the power from the four lower Snake River dams, should their removal be deemed necessary, and calculating the costs, rate and bill impacts of such actions.

What will all this cost?

We start with the bottom line:  the scenario model used by the Northwest Power and Conservation Council in developing the Sixth Plan calculates that over the next 20 years the region’s power system can meet regional load growth, reduce its coal use by 40% and replace the power generated by the four lower Snake River dams … all the while reducing customers’ bills.

How can that be possible?  Again, it’s all about the energy efficiency. Of the additional 7,000 aMW of new electricity needed by 2030, 5,900 aMW of energy efficiency improvements are available at an average of about 3.6¢ per kilowatt-hour — about a third the cost of alternative resources. State RPS requirements will result in new renewables, mostly wind, to cover most of the remaining need.

Phasing out significant amounts of coal-fired generation (about a 40% reduction in usage) and removing the four lower Snake River dams would require some additional resources – 600-1,000 aMW or so of natural gas-fired turbines, according to Council analysis.

Once the 5,900 aMW of conservation are subtracted, the region’s load growth is reduced to only about 0.3% per year, which is far less than the population growth rate of 1.2% per year.  On average, each household and business will be using less generated electricity, and total system costs, though rising somewhat, will be spread over a wider population base. Therefore, average bills will fall across the region. (Customers of different utilities would see somewhat different bill impacts, of course.)

Four scenarios

Four scenarios — business as usual (current policy), no conservation, coal phase-out and coal phase-out plus dam removal — analyzed by the Council provide an interesting window into the next 20 years.

In Chapter 10, “Resource Strategy,” and Appendix O, “Calculations of Revenue Requirements and Customer Bills,” the Sixth Plan presents the rate and bill impacts, climate emissions, coal power reductions and need for new natural-gas resources associated with each scenario.

The following chart summarizes the results of the Council’s calculations.   The gas and CO2 emissions figures come from Figure 10-19. The average rate and bill figures come from Tables O-2 and O-4 (we use the average rate and bill impacts in year 2029 for each scenario). The average bills and rates shown in Figure 10-19 are levelized over 20 years to indicate their impact at the end of the period.

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In each case, the bill and rate impacts are averages spread to all residential ratepayers in the region and reflect carbon emissions prices (taxes or other policy instruments) that ramp up to $47/ton, with revenues returned to ratepayers as dividends, tax rebates or subsidies. Thus the Council deems the carbon revenues “transfer payments” rather than costs.

The increases and decreases in emissions, generation and customer bills are all in the year 2030 compared to current levels in 2010. For example, the Council uses current (2005) carbon emissions for the Northwest electric sector at 57 million tons/year (Chapter 10, pp. 10-22).

Let’s take a closer look at the scenarios themselves:

1. Business as usual (“current policy”) – Assumes utilities continue to make energy efficiency investments, but no carbon tax or other climate policy is imposed. Without a carbon price, coal use stays the same as today, and only 299 MW of combined cycle gas turbines and 236 MW of single-cycle gas peakers would be added for the remaining load growth. Despite the continued operation of the coal plants, emissions levels remain flat due to continued investments in conservation. Rates would increase about 3%, but bills would fall — again, thanks to the large amount of conservation — $12.36 per month by 2030.
2. No conservation – If the region stopped doing conservation, we would have to build about 5,000 MW of additional gas-fired generation (both combined-cycle and single-cycle) by 2030. Because this scenario includes rising CO2 costs, about 1,000 aMW of coal is phased out and despite the lack of conservation, emissions stay flat from today’s level. Rates would rise about 9% from today, and average bills would go up about $10.50 per month. Clearly this is not the path we are or ever would be on.
3. Phase out coal – Of several coal-reduction plans the Council analyzed, the “Carbon Risk” scenario was deemed most likely. It assumes a CO2 price gradually increasing to $47/ton by 2029 (the same assumption used in all scenarios except the first discussed here). As the price rises, coal-fired power becomes too expensive; coal power use drops about 40% and is replaced with about 1,000 aMW of new, somewhat more expensive natural gas-fired power. Emissions drop 30% from today’s level, meeting Oregon, Washington and Montana state goals. Rates increase about 7%, but due to less usage per customer, bills drop almost $11 per month by 2030. Clearly, while weaning ourselves from coal will be a little more expensive than business as usual, and bills will be lower than today’s and the benefits will be huge.
4. Phase out coal + remove the lower Snake River dams – This scenario starts with Scenario 3 above, then adds replacement power for about 1,100 aMW of output from the four dams. The Council’s model shows this alternative would shut down a bit less coal and reduce regional exports by around 531 aMW (not shown in table above) compared to the previous scenario, and even fewer new gas-fired plants are needed. Emissions are reduced about 25% from today, meeting state reduction goals. Replacement power would cost around $500 million per year, which sounds like a lot until one notes that the total cost of serving new needs will be several times that amount. The extra cost would raise rates about 10% by 2030, but bills still would fall $9.39 per month from today’s level.

Conclusion

The Council’s scenario models confirm that we can reduce our reliance on coal, serve growing loads, replace the power from the four lower Snake River dams, and still save money.

Now it’s time for the region’s utilities, decision-makers and all energy consumers to embrace the Sixth Northwest Power and Conservation Plan and its critical supporting studies. We can affordably develop our abundant clean energy resources and revitalize our economy in the process.

Next

Our 2-part series of Transformers on the Sixth Northwest Power and Conservation Plan will conclude with a comparison of the plan and its relevant studies with our Bright Future investigation of “how to keep the Northwest’s lights on, jobs growing, goods moving and salmon swimming in the era of climate change.”

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The Transformer is a regular electronic publication of the NW Energy Coalition, distributed free of charge, that offers thoughtful discussion and analysis of trends, issues and controversies affecting Northwest energy policy. Subscribe online or contact marc@nwenergy.org The NW Energy Coalition is an alliance of more than 110 environmental, civic and human service organizations, progressive utilities and businesses in Oregon, Washington, Idaho, Montana, Alaska and British Columbia. We promote development of renewable energy and energy conservation, consumer protection, low-income energy assistance, and fish and wildlife restoration on the Columbia and Snake rivers. www.nwenergy.org