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Copyright 2014 The Brattle Group, Inc.
This report was prepared for the Texas Clean Energy Coalition
with the support of the Cynthia and George Mitchell Foundation. All
results and any errors are the responsibility of the authors and do
not represent the opinion of the projects sponsors, The Brattle
Group, Inc. or its clients.
Exploring Natural Gas and Renewables in ERCOT The Role of Demand
Response, Energy Efficiency And Combined Heat and Power
Peter Fox-Penner Ira Shavel Jurgen Weiss
Ryan Hledik Pablo Ruiz Yingxia Yang Rebecca Carroll Jake
Zahniser-Word
June 3rd, 2014
PREPARED BY
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Agenda
Key Findings Overview of Modeling Scenarios Major Inputs Updates
Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price and Environmental Impacts
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Key Findings Natural gas and renewable dominate the supply
addi7ons across all scenarios
Natural gas and renewable addiAons dominate the supply picture,
with gas providing both low-cost base load energy and ancillary
services that integrate wind and solar energy. The original forms
of complementarity discussed in prior reports for the TCEC conAnue
to occur, albeit in a more nuanced manner with the introducAon of
the increased opAons of EE, DR, and CHP.
Energy eciency and demand response provide substan7al
opportuni7es to displace future capacity addi7ons and lower overall
electricity costs.
Our program porSolio was designed to be moderate in size and use
well-established approaches primarily driven by ERCOT energy
prices. Even so, 3 GW of peak reducAon could be achieved by new EE
programs and 2 to 4 GW of new DR programs are idenAed as
economically achievable in our modeling scenarios.
In total, this represents a 40%-50% reducAon in projected peak
demand growth.
Large CHP are very economical but not small CHP units New large
CHP installaAons at petrochemical faciliAes are very economical;
the
simulaAon indicates that the full potenAal of these opportuniAes
will be realized by 2032 in all scenarios. However, the high
capital costs and rapid payback required for smaller CHP units
inhibits any further CHP adopAons in our scenarios.
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Key Findings Real energy prices in Reference scenarios remain
within the band of prices actually experienced in ERCOT between
2010 and 2012
The highest annual average price for a converged year is about
$67/MWh ($2012) for the Strong Federal Carbon Policy/high gas price
scenario. However, even this extreme scenario price is $3/MWh lower
than its counterpart scenario in Phase II.
Carbon emissions are slightly below all comparable Phase II
scenarios. These lower emissions are the net eect of reduced sales
(including from
EE programs) and higher renewables penetraAon, partly oset by
partly oset by increased generaAon share of coal capacity.
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Agenda Key Findings Overview of Modeling Scenarios Major Inputs
Updates Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price and Environmental Impacts
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Overview of Modeling Scenarios
No. Case* Gas Price Renewable Cost
Load forecast Carbon Policy
1 Phase III Reference AEO 2014 Reference
Base Brattle Phase III forecast
No
2 Enhanced Energy Efficiency AEO 2014 Reference
Base Brattle Phase III forecast adjusted with enhanced EE
portfolio
No
3 Moderate Federal Carbon Policy
AEO 2014 Reference
Base Brattle Phase III forecast adjusted with enhanced EE
portfolio
In 2025 coal units require 50% carbon reduction
4 Strong Federal Carbon Policy AEO 2014 Low Oil and Gas Resource
Case
Approx. 15% reduction in capital cost by 2025
Brattle Phase III forecast adjusted with enhanced EE
portfolio
In 2025 coal units require 90% carbon reduction
* In all cases, existing DR, new DR programs, and CHPs are all
available with the same economic characeristics. * In all cases,
there is no reserve margin requirement modeled.
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Agenda
Key Findings Overview of Modeling Scenarios Major Inputs Updates
Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price Impacts and Environmental
Impacts
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Natural Gas Prices Update
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Load Forecast and Adjustment
Energy Forecast Peak Forecast
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Agenda
Key Findings Overview of Modeling Scenarios Major Inputs Updates
Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price Impacts and Environmental
Impacts
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An expanded EE portfolio could cost-effectively reduce demand by
3 GW
Codes & standards and planned uAlity EE iniAaAves could
reduce peak demand by around 4 GW by 2032
We conservaAvely idenAfy an addiAonal 3 GW of demand reducAon
that could be achieved through an expanded porSolio of EE
programs
These programs include residenAal cooling, commercial lighAng,
and industrial pumping
The porSolio is cost-eecAve under all scenarios, with a
benet-cost raAo between 1.1 and 1.3
AccounAng for benets such as avoided T&D capacity costs or
reduced emissions would further improve the benet-cost raAo
Bo&om-up EE potenAal studies in Texas are very dated this is
a clear area where new research is needed
Peak Demand Growth, 2014 - 2032
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As early as 2017 we idenAfy between 450 and 760 MW of economic,
achievable DR in ERCOT, represenAng a 20% to 30% increase over the
exisAng porSolio
By 2032, economic new DR grows to between 2.3 and 3.8 GW, more
than doubling the current porSolio
The porSolio could be expanded further; for example, it could
include default dynamic pricing coupled with automaAon
technologies
The analysis could also be extended to explore the ability of DR
2.0 to facilitate the integraAon of renewables around-the-clock
ERCOTs existing DR portfolio could be roughly doubled through
new initiatives
Size of cost-eec7ve DR Resource (2032)
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Agenda
Key Findings Overview of Modeling Scenarios Major Inputs Updates
Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price and Environmental Impacts
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Reference Case With Required Reserve Margin Phase II
4.4 GW of gas steam reArements and 8 GW of Northwestern wind
reAres by 2032 (we assume that wind faciliAes reAre when 20 years
old)
Aner 2028 PV becomes economical and 5.4 GW is added
Apart from PV and 4.5 GW wind, almost all new capacity is CCGT
(21.3 GW)
32.7 GW of total new construcAon occurs and total net capacity
reaches 101.9 GW (22% increase)
No signicant addiAons or reArements of coal
2032 GeneraAon Share
Gas 47.8%
Renewables 7.3%
Coal 34.7%
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Reference Case with new DR and new CHP Phase III
2032 GeneraAon Share
Gas 44.1%
Renewables 10.7%
Coal 34.9%
10.8 GW of wind is added by 2032 , 6.3 GW more than Phase II due
to high natural gas prices, higher load factor, and no required
reserve margin
Our results understate wind builds between now and 2017 (vs.
ERCOTs queue) because we dont reect a current upsurge in Panhandle
wind builds. This would likely not aect our results, but may result
in slightly overstated new CCGT addiAons.
2.8 GW solar is added, 2.6 GW less than whats added in Phase II
due to the peak load reducAon and new DR penetraAon
3.8 GW new DR is added by 2032, 2.3 GW more penetraAon than
Phase II
11.4 GW of CCGT and 3 GW of CHP are added by 2032. In total, 7
GW fewer gas units are added than Phase II.
Overall 4 GW less new capacity construcAon by 2032 with more
wind and less CC and solar
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Reference Case with new DR, new CHP, and Enhanced EE Phase
III
2032 GeneraAon Share
Gas 43.5%
Renewables 11.0%
Coal 35.0%
11.9 GW of wind is added by 2032 , 1.1 GW more than Phase III
Reference without enhanced EE due to higher load factor
1.4 GW solar is added, which is 1.4 GW less than whats added in
Phase III reference due to the peak load reducAon
3.3 GW DR is added by 2032, slightly lower DR market penetraAon
relaAve to reference case without new EE
11.3 GW of CCGT and 3 GW of CHP are added by 2032. Very similar
gas units to reference without enhanced EE
Overall 1 GW fewer new capacity addiAons by 2032 and 1.7 GW more
reArements due to the new energy eciency programs impacts on peak
reducAon and total load reducAon
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Moderate Federal Carbon Policy Phase III
3.5 GW less coal capacity by 2032 due to the assumed 16% derate
when retrorng with 50% CCS
8.7 GW out of 11 GW of steam gas also reAres because of no
required reserve margin
3.6 GW of new DR installed by 2032, a comparable amount to the
installments in the reference case
Total capacity buildout of by 2032 is 1.8 GW more than the
Reference Case:
q 12.1 GW Gas CCGT and 3 GW of CHP, in total 0.7 GW more than
Reference Case
q 14.5 GW Wind, in total 3.6 GW more than Reference Case
q 0.5 GW PV, which is 2.3 GW less than the Reference Case
2032 GeneraAon Share
Gas 48.4%
Renewables 13.2%
Coal 28.4%
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Strong Federal Carbon Policy Low Renewable Cost High Gas Prices
Phase III
9.6 GW out of 19.2 GW of coal capacity reAres by 2032, 6.5 GW
less than Phase II due to higher gas prices and no required reserve
margin.
9.5 GW out of 11GW of steam gas also reAres because of no
required reserve margin
2.3 GW of new DR installed by 2032, 1.5 GW less than reference
case, due to more solar PV penetraAon.
Largest 2032 capacity buildout:
q 10 GW Gas CCGT and 3 GW of CHP, in total 12 GW less than Phase
II
q 47 GW Wind, in total 11GW more than Phase II
q 14 GW PV, 2 GW more than Phase II
2032 GeneraAon Share
Gas 27.3%
Renewables 46.3%
Coal 15.9%
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Agenda
Key Findings Overview of Modeling Scenarios Major Inputs Updates
Review of Modeling Results
OpportuniAes for Demand Response (DR ) and Energy Eciency
(EE)
Future Resource AddiAons Price and Environmental Impacts
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Price Impacts
Average wholesale electricity market prices have risen across
the board in our Phase III scenarios due to higher natural gas
prices, parAally oset by the price-reducing eects of DR, CHP, and
EE.
Importantly, the inclusion of EE, DR, and CHP in the Phase III
scenario reduces the higher-priced carbon rule scenarios, than what
otherwise would have been. In Phase II, 2032 prices in the carbon
rule cases topped out at almost $70/MWh, $3/MWh more than the same
scenario in Phase III
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Environmental Impacts
Carbon Emission Savings Carbon Emission Savings
ScenariosAnnual Savings in 2032, MMT
% Change vs. Phase 2
Reference
Phase 3 Reference with CHP and DR 7 3.1%
Phase 3 Reference with CHP, DR, and EE 10 4.7%
Phase 3 Moderate Federal Carbon Rule 74 34.6%
Phase 3 Strong Federal Carbon Rule 171 79.9%
The combined eects of higher gas prices, lower load growth,
enhanced DR and CHP installaAons lower CO2 emissions about 4% by
2032 versus the Phase II Reference Case, or about 143 million
metric tons. This is the equivalent of closing one 600 MW coal
plant for 30 years.
New EE programs further reduce CO2 by 10 MMT, the equivalent of
one years emissions from an 800 MW coal plant.