Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Technical Presentation (January 2021)
84 slides from Duke Energy Corporation (holding Company)'s technical presentation, Jan 6, 2021
Slide 1: Integrated Resource Plan (IRP)
Integrated Resource Plan (IRP)
Slide 2: Presentation Topics
Presentation Topics Welcome & Objective 1. IRP Building Blocks & Development 2. Load Forecasting 3. Resources 4. Scenarios and Sensitivities 5. Regional Transmission Organizations 6. Resource Modeling
Slide 3: Welcome and Objective
Welcome and Objective ▪ The process of Integrated Resource Planning is accomplished using data, forecasts and strategic assumptions, conducting analyses to formulate a preferred resource plan for each utility and defining a short-term implementation plan ▪ Key components of this complex process will
Slide 4: IURC Director's Report Development Process (IURC)
1 IURC DIRECTOR’S REPORT DEVELOPMENT PROCESS (IURC) 1/6/2021 4
Slide 5: IURC's Director's Report Development Process
IURC’s Director’s Report Development Process ▪ Dr. Bob Pauley 1 2 3 4 5 6 7 8 1/6/2021 5
Slide 6: IRP Public Advisory Process Overview (OUCC)
2 IRP PUBLIC ADVISORY PROCESS OVERVIEW (OUCC) 1/6/2021 6
Slide 7: IRP Public Advisory/Participation Process (OUCC)
IRP Public Advisory/Participation Process (OUCC) ▪ Barbara Smith ▪ Overview of the IRP Stakeholder Process ▪ Where We Are Now ▪ The Road Ahead 1 2 3 4 5 6 7 8 1/6/2021 7
Slide 8: IRP Building Blocks & Development
3 IRP BUILDING BLOCKS & DEVELOPMENT 1/6/2021 8
Slide 9: IRP Building Blocks & Development Outline
IRP Building Blocks & Development Outline ▪ Purpose of Integrated Resource Planning (IRP) ▪ Development process ▪ Building blocks ▪ Results 1 2 3 4 5 6 7 8 1/6/2021 9
Slide 10: IRP Building Blocks & Development
IRP Building Blocks & Development ▪ Purpose of IRP: ▪ “IRPs describe how the utility plans to deliver safe, reliable, and efficient electricity at just and reasonable rates”. ▪ Process to screen options, model variables, produce possible resource plans for multiple scenarios ▪ Complex effort to bala
Slide 11: IRP Building Blocks
IRP Building Blocks Load Resources Costs Forecast Fuel – NG, coal, Economic Supply side- other drivers generation Market prices – energy & capacity EE standard Demand side – Risks – e.g. impacts EE, DR, DG environmental costs 1 2 3 4 5 6 7 8 1/6/2021 11
Slide 12: IRP Building Blocks: Scenarios and Sensitivities
IRP Building Blocks Load Resources Costs Forecast Economic drivers Scenarios Supply side- generation Fuel – NG, coal, other Market prices – & energy & capacity EE standard Demand side – Risks – e.g. impacts EE, DR, DG Sensitivities environmental costs 1 2 3 4 5 6 7 8 1/6/2021 12
Slide 13: Process & Results
Process & Results ▪ Develop scenarios or future views of the world to shape inputs and frameworks for analysis ▪ Include sensitivity analysis of specific variables ▪ Results in multiple resource plan options ▪ Model outputs include parameters of each plan such as: ▪ Present Value Revenue Requirement
Slide 14: Load Forecasting
4 LOAD FORECASTING 1/6/2021 14
Slide 15: Load Forecasting
Load Forecasting ▪ Load forecasting is a fundamental building block of the IRP process ▪ Use historical data and known/projected future drivers to predict future energy and demand requirements ▪ Indiana requires a 20-year forecast period for the IRP ▪ The utility is required to serve its peak load +
Slide 16: Load Forecasting
Load Forecasting ▪ Base Load ▪ Minimum level of demand on an electrical supply system over 24 hours ▪ Power sources: those plants which can generate consistent and dependable power ▪ Intermediate Load ▪ Medium level of demand ▪ Power sources: plants which can operate between extremes and generally h
Slide 17: Load Forecasting: Generation and Reserve Margin
Load Forecasting Generation Reserve Margin Load on annual peak day Load on typical day 6 AM 4 PM 3 AM 1 2 3 4 5 6 7 8 1/6/2021 17
Slide 18: Load Forecasting
Load Forecasting ▪ Utilities typically forecast energy by customer class ▪ Residential, Commercial, Industrial ▪ Street Lighting, Government Use, Wholesale ▪ System energy derived by aggregating across the sales forecast and adjusting for line losses ▪ Peak demand forecast is typically based on the
Slide 19: Load Forecasting - Drivers
Load Forecasting - Drivers ▪ Weather ▪ Economy ▪ Demographics ▪ Appliance saturation and size ▪ Appliance efficiency trends driven by ▪ Consumer demand ▪ Utility sponsored demand side management (DSM) programs ▪ Government codes and standards ▪ Consumer behavior and technology changes ▪ Thermal shel
Slide 20: Load Forecasting – Typical Methods
Load Forecasting – Typical Methods ▪ Simple Pattern or Trend Model ▪ Extrapolate past usage trends into the future ▪ Econometric Model ▪ Relate historical energy sales to weather, demographics, economic activity, efficiency trends with statistical models and project this relationship forward based o
Slide 21: Patterns and Trend Models
Patterns and Trend Models ▪ The forecast is extrapolated from past energy trends and monthly/seasonal patterns ▪ Exponential Smoothing ▪ ARIMA Models ▪ Simple trend-based linear regression models ▪ Trend models are simple to estimate and can be useful in projecting near-term trends. Trend models imp
Slide 22: Econometric Model
Econometric Model ▪ Captures the factors that impact electricity use ▪ Weather, population, economic activity, more efficient appliances ▪ Linear and non-linear regression models: estimate the relationship between monthly electric sales (the dependent variable) and the variables that cause electrici
Slide 23: End Use Forecasting
End Use Forecasting ▪ End-use models: An engineering-based approach were we develop annual kWh forecasts for defined end-uses ▪ Electric Power Research Institute (EPRI) End-Use models: REEPS and COMMEND ▪ Collect and maintain detailed end-use database ▪ Number of units, appliance age distribution, t
Slide 24: Statistically Adjusted End Use (SAE) Model
Statistically Adjusted End Use (SAE) Model ▪ Blend of econometric and end use modeling ▪ Incorporates end-use ownership and efficiency trends as well as weather, price, and economic data AC Saturation Central Heating Saturation Saturation Levels Room AC Resistance Water Heat AC Efficiency Heat Pump
Slide 25: Load Forecasting - Conclusion
Load Forecasting - Conclusion Generation Reserve Margin Load on annual peak day Load on typical day 6 AM 4 PM 3 AM 1 2 3 4 5 6 7 8 1/6/2021 25
Slide 26: Resources
5 RESOURCES 1/6/2021 26
Slide 27: Resources Overview
Resources Overview ▪ Load Shapes ▪ Resources categories: ▪ Dispatchable supply side ▪ Variable supply side ▪ Demand side ▪ Distributed generation 1 2 3 4 5 6 7 8 1/6/2021 27
Slide 28: Resources Categories
Resources Categories ▪ Dispatchable supply side ▪ Nuclear, coal, combined cycle (CC)/ combustion turbine (CT) ▪ Biomass, reservoir hydro, batteries, combined heat & power (CHP) ▪ Variable supply side ▪ Solar & wind and renewable + storage (hybrid) ▪ Run of river hydro ▪ Demand side ▪ Energy Efficien
Slide 29: Resources – Supply Side Costs
Resources – Supply Side Costs Derived from multiple sources: ▪ Internal ▪ Project Management ▪ Emerging technologies studies ▪ External ▪ Proprietary third-party engineering studies ▪ Electric Power Research Institute (EPRI) ▪ Energy Information Agency (publicly available) ▪ All-source Request for P
Slide 30: Resources – Demand Side (Energy Efficiency)
Resources – Demand Side (Energy Efficiency) ▪ Resource Description ▪ EE is not a single resource but rather a collection of hundreds of different measures such as lighting, appliances or motors ▪ Typically, ▪ EE is incorporated into the load forecast implicitly ▪ EE levels are frequently described i
Slide 31: Resources – Demand Side (Energy Efficiency)
Resources – Demand Side (Energy Efficiency) ▪ Resource Description ▪ EE can be incented by the utility, but frequently requires an action by the customer ▪ Participation is less than what purely economic behavior would suggest 1 2 3 4 5 6 7 8 1/6/2021 31
Slide 32: Resources – Demand Side (Demand Response)
Resources – Demand Side (Demand Response) ▪ Resource Description ▪ Demand Response (DR) is a resource used to reduce peak load by one of these options: ▪ Customers agreeing to load curtailment in exchange for an option, e.g. Air Conditioning Load Management (ACLM) or industrial curtailment ▪ Calling
Slide 33: Resources – Demand Side (Demand Response)
Resources – Demand Side (Demand Response) Benefits Challenges ▪ Capacity value in RTO market ▪ Unique Evaluation Measurement & ▪ Opportunity for customers to lower Verification (EM&V) requirements bill in exchange for agreeing to ▪ Higher use of DR may can drive customers load curtailment away from
Slide 34: Resources – Distributed Generation
Resources – Distributed Generation Resource Description: Distributed Generation are resources connected on distribution circuits. Examples include solar, wind, combined heat and power (CHP), and energy storage. Benefits Challenges ▪ Avoided line losses/T&D ▪ System operations expenses ▪ Dispatch-abi
Slide 35: Scenarios and Sensitivities
6 SCENARIOS AND SENSITIVITIES 1/6/2021 35
Slide 36: Scenarios & Sensitivities
Scenarios & Sensitivities ▪ IRPs include a multitude of options amidst a range of uncertainties given a 20+ year future view ▪ Consider risks and uncertainties through scenario planning and stochastic/probabilistic modeling ▪ Examples: ▪ Economic drivers ▪ Environmental regulations ▪ Technology adva
Slide 37: Definitions
Definitions ▪ Risk – the variance from expected outcome due to a change in one or more assumptions. ▪ Uncertainty – the potential range of possibilities that a particular variable or assumption may vary ▪ *Base Case Scenario – “The base case [scenario] should describe the utility’s best judgment (wi
Slide 38: Scenario Planning vs. Sensitivity Analysis
Scenario Planning vs. Sensitivity Analysis ▪ Scenario Planning ▪ Sensitivity Analysis ▪ Example potential future world ▪ Example assumptions tested outcomes ▪ Load Forecast ▪ Plant Retirement ▪ Strong Economy ▪ Commodity Prices : Locational Marginal Pricing (LMPs), ▪ Weak Economy Natural Gas (NG), C
Slide 39: Scenarios and Sensitivities
Scenarios and Sensitivities Scenario 1 Scenario 2 Resource Plan 1 Resource Plan 2 Sensitivity a Sensitivity b Sensitivity c Sensitivity d 1 2 3 4 5 6 7 8 1/6/2021 39
Slide 40: Scenario Planning
Scenario Planning ▪ Characteristics ▪ Starts with understanding major factors / drivers (external) that move potential future world outcomes in different directions. ▪ Intuitive ▪ Inclusive ▪ Then develop different plausible potential future world outcomes ▪ Each scenario incorporates multiple uncer
Slide 41: Sensitivity Analysis
Sensitivity Analysis ▪ Characteristics ▪ Identifies key assumptions ▪ Assumptions to which our plan results are most and least sensitive ▪ Identifies Resource Plans that are most robust to the most key assumptions ▪ Identifies Resource Plans that are most sensitive to the most key assumptions (i.e.
Slide 42: Sensitivity Analysis
Sensitivity Analysis ▪ Characteristics ▪ Varying intensity ▪ Various methods - Monte Carlo simulation, probabilistic decision tree, other ▪ May be in IRP and/or specific project/certificate of need analysis ▪ Quantitative ▪ Assign specific percentage probability based on statistics or even educated
Slide 43: Regional Transmission Operators
7 REGIONAL TRANSMISSION OPERATORS 1/6/2021 43
Slide 44: Agenda
Agenda ▪ Overview of RTOs ▪ What they are ▪ Who participates ▪ What they do ▪ How they benefit Indiana’s customers ▪ RTOs and the IRP ▪ Relevancy to Indiana’s IRP process ▪ RTOs and Utilities – Information Exchanged 1 2 3 4 5 6 7 8 1/6/2021 44
Slide 45: Overview of Regional Transmission Organizations
OVERVIEW OF REGIONAL TRANSMISSION ORGANIZATIONS 1/6/2021 45
Slide 46: Overview of RTOs – What is an RTO?
Overview of RTOs – What is an RTO? ▪ Regional Transmission Organizations (RTOs) or Independent System Operators (ISOs) are independent, non-profit organizations that optimize the operation and planning of the transmission systems of their region ▪ Reliably operate their portion of the Bulk Electric
Slide 47: Overview of RTOs – How many RTOs are there?
Overview of RTOs – How many RTOs are there? ▪ There are 7 RTOs across the US ▪ Indiana participates in two: ▪ PJM ▪ Indiana Michigan Power ▪ MISO ▪ Duke Indiana ▪ Indianapolis Power & Light ▪ NIPSCO ▪ Vectren Image source: www.ferc.gov/industries/electric/indus-act/rto.asp 1/6/2021 47
Slide 48: Overview of RTOs – Why are there RTOs?
Overview of RTOs – Why are there RTOs? ▪ FERC envisioned RTOs as a way for existing US power pools to satisfy the requirement of providing non-discriminatory access to transmission for competitive generation ▪ Subsequently, FERC encouraged the voluntary formation of RTOs to administer the transmissi
Slide 49: Overview of RTOs – Who makes up an RTO?
Overview of RTOs – Who makes up an RTO? ▪ Participants - operationally and/or through stakeholder process ▪ Transmission owners ▪ Load serving entities ▪ Transmission developers ▪ Generators and independent power producers ▪ Power marketers ▪ End use customers ▪ State regulators and consumer groups
Slide 50: Overview of RTOs – What does an RTO do?
Overview of RTOs – What does an RTO do? ▪ Reliably operates a portion of the Bulk Electric System ▪ As transmission service provider, RTOs facilitate the scheduling of electric transmission ▪ As transmission operator* and reliability coordinator, RTOs ensure the real time reliability of their region
Slide 51: Overview of RTOs – What does an RTO do? (cont.)
Overview of RTOs – What does an RTO do? (cont.) ▪ Provides reliability planning for the electric system ▪ Transmission studies including impact of new generator interconnections ▪ Generation assessments (not generation reliability planning) ▪ Coordination for outage planning ▪ Coordinated regional a
Slide 52: Overview of RTOs – What does an RTO do? (cont.)
Overview of RTOs – What does an RTO do? (cont.) ▪ Administers the energy and ancillary services markets on a daily basis ▪ Dispatches the system by matching generation resources to load to provide the needed electrical energy ▪ Security constrained, economic dispatch ▪ Lowest cost available resource
Slide 53: Overview of RTOs – What does an RTO do? (cont.)
Overview of RTOs – What does an RTO do? (cont.) Administers the annual capacity market/auction ▪ Capacity markets (or MISO’s auction) provide a competitive structure for generation owners to sell their available capacity to load serving entities like Indiana utilities ▪ Utilities can also purchase o
Slide 54: Overview of RTOs – What does an RTO do? (cont.)
Overview of RTOs – What does an RTO do? (cont.) ▪ MISO’s Single Year Capacity Construct (Duke, IPL, NIPSCO, Vectren) ▪ Auction for the next Planning Year running June 1 – May 31 ▪ Capacity obligation established to meet summer peak and carried for entire year ▪ Footprint is separated into individual
Slide 55: Some benefits of the RTO/ISO approach
Some benefits of the RTO/ISO approach Optimized Economies Available Potential Evolving Footprint Liquid Transmission of Scale Capacity Long Term Markets Diversity Marketplace System • Centralized Reserves Price Signal • Capacity, • Wide • Allows • Real Time operating • Available at • Bringing Energy
Slide 56: RTOs and the IRP
RTOS AND THE IRP 1/6/2021 56
Slide 57: RTOs and the IRP – How do they interact?
RTOs and the IRP – How do they interact? ▪ The Indiana Utility Regulatory Commission (IURC) is the regulator of Indiana’s resource adequacy ▪ The IURC regulates the resource requirement for each utility ▪ Through the IRP, utilities demonstrate that they have enough resources to meet the forecasted s
Slide 58: RTOs and the IRP – How do they interact? (cont.)
RTOs and the IRP – How do they interact? (cont.) ▪ RTOs perform an analysis role for the region’s resource adequacy ▪ RTOs also evaluate the ability of smaller areas in the region to meet their Planning Reserve Margin requirements ▪ These areas do not break cleanly on state boundaries and are even m
Slide 59: RTOs and Utilities – Information Exchanged
RTOS AND UTILITIES – INFORMATION EXCHANGED 1/6/2021 59
Slide 60: RTOs and Utilities – What Information is exchanged?
RTOs and Utilities – What Information is exchanged? ▪ Information exchanged includes ▪ Load and Resource forecasts ▪ Maintenance outage plans ▪ Plans for generation retrofits, retirements and additions ▪ Environmental compliance plans ▪ Demand side resources ▪ Generation fuel assumptions ▪ Transmiss
Slide 61: Resource Modeling
7 RESOURCE MODELING 1/6/2021 61
Slide 62: Resource Modeling Agenda
Resource Modeling Agenda ▪ Objective: Provide a basic overview of resource modeling and how it is used in developing an IRP ▪ List software criteria necessary for resource modeling ▪ Identify and describe resource modeling inputs ▪ Provide examples of model output ▪ Describe risk modeling options an
Slide 63: Resource Modeling
Resource Modeling ▪ Role of Resource Modeling in Developing an IRP ▪ Utilities must select among a variety of resource options (supply and demand-side) to meet their customers’ energy needs ▪ Each resource option has a different cost and energy profile ▪ The optimal suite of resources will vary base
Slide 64: Resource Modeling
Resource Modeling ▪ Production Costing Function ▪ Production Costing accounts for the costs of converting fuel and other variable and fixed costs in order to produce electrical energy to meet customers’ load ▪ Resource Planning Function ▪ Long-Term resource optimization is the development of a syste
Slide 65: Resource Modeling
Resource Modeling ◼ The “Objective Function” is to minimize net present value of forward-looking costs (i.e. capital and production costs) Revenue Requirement C(x) + P(x) Cost ($) Plan A* Capital Cost C(x) Production Cost P(x) Optimal Investment x* Investment x 1 2 3 4 5 6 7 8 1/6/2021 65
Slide 66: Resource Modeling
Resource Modeling ▪ Software tools used in resource modeling functions (Production Costing and Resource Planning) 1 2 3 4 5 6 7 8 1/6/2021 66
Slide 67: Resource Modeling
Resource Modeling ▪ Criteria for selecting Resource Planning Software ▪ Market-based commitment & dispatch ▪ Easily model emission-limited dispatch ▪ User-friendly input/output interface ▪ Responsive user support 1 2 3 4 5 6 7 8 1/6/2021 67
Slide 68: Resource Modeling
Resource Modeling ▪ Inputs used in the modeling ▪ Existing System ▪ Resource Options ▪ Scenario Drivers ▪ Financial Rate Inputs 1 2 3 4 5 6 7 8 1/6/2021 68
Slide 69: Resource Modeling
Resource Modeling Inputs : Existing System Resource Options Scenario Drivers Financial Inputs ▪ Existing system operating characteristics ▪ Heat rates ▪ Capital expenditures ▪ Load points (MW) ▪ On-going capital ▪ Start cost ▪ Maintenance schedule (dates) ▪ Start cost times (hours) ▪ Forced outage r
Slide 70: Resource Modeling
Resource Modeling Inputs : Existing System Resource Options Scenario Drivers Financial Inputs ▪ Resource Options ▪ Thermal ▪ Build costs ($/kW) ▪ Base load, Intermediate, and ▪ Construction profiles Peaking ▪ Economic life ▪ Energy efficiency ▪ Technical life ▪ Commercial and Residential ▪ Min and m
Slide 71: Resource Modeling
Resource Modeling Inputs : Existing System Resource Options Scenario Drivers Financial Inputs ▪ Scenario drivers ▪ Load forecast (base) ▪ Load sensitivities (high, low) ▪ Commodity prices (base) ▪ Coal, Gas, Market energy price ▪ Price sensitivities (high, low) ▪ Environmental Regulation ▪ Water, CO
Slide 72: Resource Modeling
Resource Modeling Inputs : Existing System Resource Options Scenario Drivers Financial Inputs ▪ Financial Rate Inputs 1 2 3 4 5 6 7 8 1/6/2021 72
Slide 73: Resource Modeling
Resource Modeling ▪ Long term resource models utilize the objective function described earlier while abiding by the following possible constraints: ▪ Minimum and maximum reserve margins ▪ Resource addition and retirement candidates (i.e., maximum units built) ▪ Age and lifetime of generators ▪ Opera
Slide 74: Resource Modeling
Resource Modeling 1/6/2021 74
Slide 75: Resource Modeling
Resource Modeling ▪ Long term resource models provide multiple plans for each scenario analyzed ▪ Cost of plan is represented by the cumulative present worth of revenue requirements (CPW) or present value of revenue requirements (PVRR) ▪ Models produce an optimal plans fuel cost, Variable O&M and Fi
Slide 76: Outputs
Resource Modeling Outputs 1/6/2021 76
Slide 77: Outputs
File Edit Topic Bun Tools Help CD cel) £8 Run options TR | Ge Standard Reports [J Report Acent BE] » @ 4xX+\/4%E|>o Strategist Topics Formula : 161.4808, Mi Find New Topic [a Module Data Ey Input =) Sa) Output 2 Load Forecast Adjustment = Gi Generation and Fuel 2 Company es BLC Program FUEL (2 Efflu
Slide 78: Outputs
a wd Stondard —~ z New OF Connect ESS! Se File Clipboard Numeric Format Solution _ © IM RP Initial ST 2016-45 Base Band NFL] Phase, =) 1 ap east Date [chart] wv sceaie - em som Parent Name Collection Property Band Datetime Units Rockport 185% Rockport2 85% Tanners Aa | AEPLEAST Generator Fuel Cost |
Slide 79: Resource Modeling
Resource Modeling ▪ Sample output for one resource plan Plan A Fuel VOM Emission FOM Annualized Revenue Cost Cost Cost Cost Build Cost Pool Revenue Requirement Year ($000) ($000) ($000) ($000) ($000) ($000) ($000) 2016 104,492 7,652 12,500 5,854 107,357 161,562 76,293 2017 111,806 8,188 13,375 6,264
Slide 80: Resource Modeling
Resource Modeling ▪ Sample output for multiple resource plans INDIANA MICHIGAN POWER COMPANY I&M Capacity Resource Optimization PRELIMINARY - Summary Comparison Plan A, Plan B, Plan C Under High Band Commodity Pricing Fixed O&M+ New Build Less: Var O&M+ Capital+ Contract ICAP Revenue Market Load Emi
Slide 81: Resource Modeling
Resource Modeling ▪ Risk Modeling Options ▪ Deterministic ▪ Stochastic/Probabilistic ▪ Subject specified plan through a ▪ Identify variables variety of commodity price ▪ Energy Price, Fuel Price, assumptions and load sensitivities. Emission Price ▪ Present value of revenue ▪ Randomly selected iterat
Slide 82: Resource Modeling
Resource Modeling ▪ Risk Modeling Output Revenue Requirements $ ▪ Deterministic Low Plan Base Plan High Plan Low Commodity 6,000,000 7,456,123 8,456,123 Base Commodity 7,894,123 7,000,000 9,456,123 High Commodity 9,456,321 8,456,123 8,000,000 ▪ Probabilistic 1/6/2021 82
Slide 83: Resource Modeling
Resource Modeling ▪ Using Resource Model Results to Determine Preferred Plan ▪ Look for similar elements in optimal plans under a variety of input scenarios ▪ Quantify impact of modifying resource selection ▪ Measure risk characteristics of Preferred Plan to Optimal Plans that are developed under a
Slide 84: Utility IRP Contacts
Utility IRP Contacts ▪ IPL: ipl.irp@aes.com ▪ NIPSCO: NIPSCO_IRP@nisource.com ▪ Vectren: irp@centerpointenergy.com ▪ I&M: jftorpey@aep.com ▪ Duke: scott.park@duke-energy.com