Real Implications of Alternative Energy Sources for Communities WCCMA 2008 Summer Conference Roger Garratt Director, Resource Acquisition & Emerging Technologies.

Real Implications of Alternative Energy Sources for Communities

WCCMA 2008 Summer Conference

Roger GarrattDirector, Resource Acquisition & Emerging Technologies

August 20, 2008

Agenda

PSE Overview

PSE Renewable Resources

Market Overview

Community Benefits

Conclusions

PSE, a Washington Company

State’s oldest and largest utility, serving more than half of State’s population

Over 1 million electric customers

Over 700,000 natural gas customers

Added 56,000 customers in last two years

Public Service Company with an obligation to serve

Sample

PSE Energy Need

*Energy need before conservation, includes new contracts, new wind and hydro shapes, and Sumas

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Jan

uar

y aM

W

Colstrip

Natural Gas

Hydro

Wind

Contracts

NUGs1161 aMW

1548 aMW1966 aMW

2007 Load Forecast with Conservation

*Lowest Reasonable Cost Resource Portfolio, from May 2007 Integrated Resource Plan

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

aMW

fo

r Ja

nu

ary

Reference Case Load Forecast (average January Load without Conservation)

New Energy Efficiency New Wind

New Natural Gas Combined Cycle

New Mid-Term Market Purchases

Biomass

Existing Resources

PSE Resource Strategy

Wind & Solar Acquisitions

Renewables Strategy

Existing Wind

0

100

200

300

400

500

600

An

nu

al a

MW

RPS Need

PSE Goal

New Renewables

CA: 2000 levels by 2010; 1990 levels by 2020;80% below 1990 levels by 2050

AZ: 2000 levels by 2020; 50% below 2000 levels by 2040

CT: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

FL: 2000 levels by 2017; 1990 levels by 2025;80% below 1990 levels by 2050

HI: 1990 levels by 2020

IL: 1990 levels by 2020; 60% below 1990 levels by 2050

MA: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 1990 levels long term

ME: 1990 levels by 2010; 10% below 1990 levels by 2020;75-80% below 2003 levels long term

MN: 15% below 2005 levels by 2015; 30% below 2005 levels by 2025;80% below 2005 levels by 2050

NH: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

NY: 5% below 1990 levels by 2010; 10% below 1990 levels by 2020

NJ: 1990 levels by 2020; 80% below 2006 levels by 2050

NM: 2000 levels by 2012; 10% below 2000 levels by 2020;75% below 2000 levels by 2050

OR: Stabilize by 201010% below 1990 levels by 2020; 75% below 1990 levels by 2050

WA: 1990 levels by 2020; 25% below 1990 levels by 2035;50% below 1990 levels by 2050

RI: 1990 levels by 2010; 10% below 1990 levels by 2020

VT: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

Source: www.pewclimate.org

CA: 2000 levels by 2010; 1990 levels by 2020;80% below 1990 levels by 2050

AZ: 2000 levels by 2020; 50% below 2000 levels by 2040

CT: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

FL: 2000 levels by 2017; 1990 levels by 2025;80% below 1990 levels by 2050

HI: 1990 levels by 2020

IL: 1990 levels by 2020; 60% below 1990 levels by 2050

MA: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 1990 levels long term

ME: 1990 levels by 2010; 10% below 1990 levels by 2020;75-80% below 2003 levels long term

MN: 15% below 2005 levels by 2015; 30% below 2005 levels by 2025;80% below 2005 levels by 2050

NH: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

NY: 5% below 1990 levels by 2010; 10% below 1990 levels by 2020

NJ: 1990 levels by 2020; 80% below 2006 levels by 2050

NM: 2000 levels by 2012; 10% below 2000 levels by 2020;75% below 2000 levels by 2050

OR: Stabilize by 201010% below 1990 levels by 2020; 75% below 1990 levels by 2050

WA: 1990 levels by 2020; 25% below 1990 levels by 2035;50% below 1990 levels by 2050

RI: 1990 levels by 2010; 10% below 1990 levels by 2020

VT: 1990 levels by 2010; 10% below 1990 levels by 2020;75-85% below 2001 levels long term

Source: www.pewclimate.org

Greenhouse Gas (GHG) Targets

Renewables development is booming

Source: Renewable Northwest Project

Rise in Wind Component Manufacturers in the U.S.

Clipper WindpowerCedar Rapids, Iowa

Manufacture and assembly of 2.5-MW Liberty wind turbines and spare parts for support services

Fuhrländer (Proposed)Helena, Montana

Will manufacture 2.5 MW AG wind turbine, which has 150-ft. blades

DMI West Fargo, ND & Tulsa, OK

All three facilities (2 US and 1 Canada) manufacture wind towers.

Knight & CarverHoward, South Dakota

Blade construction and repair facility

LM GlasfiberLittle Rock, AK & Grand Forks, ND

Both facilities manufacture blades for wind turbines.

PPG IndustriesShelby, North Carolina

Facility produces high-tech fiberglass for blades; PPG also produces blade and tower coatings

Trinity Structural Towers Clinton, IL & Fort Worth, TX

Both facilities manufacture wind towers that support turbines as large as 2.5 MW.

Vestas Windsor, Colorado

Manufactures 130- and 144-foot long blades for 1.65 and 3 MW turbines

GamesaPhiladelphia, Pennsylvania

Multiple plant sites manufacture turbine parts, nacelles and towers for G80, G83, G87 and G90 2 MW machines..

TECO-WestinghouseRound Rock, Texas

Assembles nacelles, using Composite Technology’s DeWind brand turbines; and also produces the rotor hub.

Note: Map is illustrative only; it is not intended to be a representation of all wind component manufacturing in the U.S.

Economic Benefits – Wild Horse

$8 million – to local community during construction

$1.3 million – 2008 property taxes

Hospital $45,000

Local schools $556,442

County $345,248

State $369,156

Lease and royalty payments to state agencies:

WDFW $80,000

DNR (schools) $306,000

Renewable Energy Center - over 10,000 visitors since opening April 1, 2008

Guided Tours – over 125 tour groups

TourismTourism

Conclusions

Renewable resources are consistent with public interests

Environmental benefits

Sustainability

Energy independence

Community members “connect” with renewable resources

Over time, renewables will become more and more prevalent

Questions?

Appendix

Rising Wind Project Costs

Charts Source: Thorndike Landing analysis

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Tur

bin

e C

ost

($/k

W)

< 100 MW

100-300 MW

> 300 MW

Deal Size

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Tur

bin

e C

ost

($/k

W)

< 100 MW

100-300 MW

> 300 MW

Deal Size

Wind turbines comprise 60% of total project costs.

$/kW

$500/kW

$1,000/kW

$1,500/kW

$2,000/kW

$2,500/kW

$3,000/kW

$3,500/kW

$4,000/kW

$4,500/kW

$5,000/kW

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Installed Cost

Initially: Experience Curve Driven Shape (manufacturing cost is

main fundamental driver)

Transition to Scarcity Pricing

(value created is increasingly

important fundamental driver:

fuel prices, CO 2 cost,

incentives)

Annual Averages

Annual Max

Annual Min

Sources: Berkeley Lab database of wind projects (historical cost data), Thorndike Landing analysis

Aggressive turbine supply response,

softening gas prices

Current gas prices, CO2 regimes

$/kW

$500/kW

$1,000/kW

$1,500/kW

$2,000/kW

$2,500/kW

$3,000/kW

$3,500/kW

$4,000/kW

$4,500/kW

$5,000/kW

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Installed Cost

Initially: Experience Curve Driven Shape (manufacturing cost is

main fundamental driver)

Transition to Scarcity Pricing

(value created is increasingly

important fundamental driver:

fuel prices, CO 2 cost,

incentives)

Annual Averages

Annual Max

Annual Min

Sources: Berkeley Lab database of wind projects (historical cost data), Thorndike Landing analysis

Aggressive turbine supply response,

softening gas prices

Current gas prices, CO2 regimes

Rising Installed Wind Project Costs

Rising Turbine Costs

Summer Transfers

Winter Transfers

Constrained Transmission

Path

Additional transmission investment required

Technology Development

Concept Proof of Concept

Pilot Early Commercial

Favorable High Market Economics

Favorable Mass Market Economics

Solar PV

Dairy Digester

Fuel Cells

Wind

Traditional Biomass

Geothermal

Wave

Algae

CSP - PV

Tidal CSP Solar Thermal Electric

PHEV

Biomass Gasification

Batteries

Hopkins Ridge Wind Facility

157 MW

November 2005 service date

Four new units added in 2008

87 Vestas V80 1.8 MW turbines

~1,069,000 MWh generated

Wild Horse Wind Facility

229.6 MW

December 2006 service date

127 Vestas V80 1.8 MW turbines

Over 1,058,000 MWh generated

22-unit expansion planned for 2009-2010

Wild Horse Solar Facility

500 kW Facility

450 kW Phase I

October 2007 service date

573 MWh generated

5-acre footprint

$4.5 million capital cost

Klondike III Power Purchase Agreement

223.6 MW Facility

50 MW PSE share

80 GE 1.5 MW, 44 Siemens 2.3 MW, 1 MHI 2.4 MW

Owned/operated by PPM Energy

December 2007 service date