Tennessee Valley Authority · NYSE:TVC
Tennessee Valley Authority — Technical Presentation (February 2015)
114 slides from Tennessee Valley Authority's technical presentation, Feb 10, 2015
Slide 1: 2015 Integrated Resource Plan Energy Efficiency Seminar
201 5 INTEGRATED RESOURCE PLAN Energy Efficiency Seminar February 10, 2015
Slide 2: Energy Efficiency Seminar Agenda
Energy Efficiency Seminar Agenda Time Topic Speaker 10:00 – 10:15 Welcome and Introductions Matt Murray / Joe Hoagland 10:15 – 10:30 Overview of TVA’s IRP Process TVA (Gary Brinkworth) 10:30 – 11:00 Industry Approach to Energy Efficiency Evaluation in Planning Studies Navigant (Dan Bradley) 11:00 –
Slide 3: Key Goals and Takeaways
Key Goals and Takeaways Understand how TVA models energy efficiency as a resource within the TVA integrated resource planning approach Understand energy efficiency design parameters and impacts on resource planning results Convey different energy efficiency modeling approaches and results acro
Slide 4: Will the coffee still be there in the future?
Will the coffee still be there in the future? Will the coffee still be there in the future? With that same flavor/quality? In that same amount? 4
Slide 5: Overview of TVA's IRP Process
Overview of TVA’s IRP Process Gary Brinkworth Tennessee Valley Authority 5
Slide 6: The Resource Planning Process
The Resource Planning Process Resource Planning is a common tool in the utility industry to identify the least cost solution to meet customer demand over a long horizon (usually 20 years or longer). Develop Load Project customer demand for electricity in the future Forecast Define Existing Defin
Slide 7: Why This Is Important to Customers
Why This Is Important to Customers Planners are essentially developing a road map for TVA. This road map will guide decision makers and support TVA’s overall mission: — Low cost reliable power — Environmental stewardship — Economic development This road map outlines changes that, if implemented,
Slide 8: The IRP Must Be Consistent with TVA's Mission
The IRP Must Be Consistent with TVA’s Mission RATES: maintain low rates ASSET PORTFOLIO: meet reliability STEWARDSHIP: expectations & be responsible provide a stewards balanced portfolio DEBT: live within our means 8
Slide 9: Scenarios and Strategies Establish the Planning Framework
“Scenarios and Strategies” Establish the Planning Framework Scenarios Planning Strategies Describe potential outcomes of factors Test various business options within TVA’s (uncertainties) outside of TVA’s control control Represent possible conditions and are not Defined by a combination of r
Slide 10: How the Resource Planning Process Works
How the Resource Planning Process Works The result of a strategy evaluated in a scenario How uncertainty impacts the Portfolio results Standardized metrics to compare Portfolios 10
Slide 11: Goals For An Optimal Resource Plan
Goals For An Optimal Resource Plan Environmentally Low Cost Risk Informed Responsible • Minimizing cost critical to economic • TVA must manage many risks on behalf • TVA must have a clear understanding of efficiency, and mandated by the TVA Act of customers, including construction the environmental
Slide 12: IRP Process Flowchart at TVA
IRP Process Flowchart at TVA An IRP is a special form of resource planning that seeks to optimize supply-side and demand-side contributions to make up a least cost plan. TVA’s process for conducting an IRP differs slightly from what’s typical in the industry. Unique to TVA – related to NEPA1 complia
Slide 13: How TVA models energy efficiency as a resource in its IRP
Today’s discussion will focus on how TVA models energy efficiency as a resource in its integrated resource plan Part 1: Part 2: Block Design Block Selection Development of Identify the quantity fundamental and schedule of EE design parameters blocks using the for the EE blocks. resource optimization
Slide 14: Industry Approach to Energy Efficiency Evaluation in Planning Studies
Industry Approach to Energy Efficiency Evaluation in Planning Studies Dan Bradley Navigant Consulting 14
Slide 15: Overview: Utilities take many approaches to IRPs
Overview Utilities take many different approaches to Integrated Resource Plans (“IRPs”) – including approaches to Energy Efficiency (“EE”) evaluation » IRPs are long-term plans to meet forecasted annual peak and energy levels - plus a reserve margin balancing its objectives and mandates and by minim
Slide 16: EE Can Be Set External or Internal to Utility IRP
Overview EE Can Be Set External or Internal to Utility IRP » EE programs are mandated by regulators or policy or can be driven by the utility Utility Regulator Policy Sometimes in IRP i.e., Energy Efficiency Depends on what utility docket, sometimes in Resource Standard willing to spend on EE unique
Slide 17: Overview of Approaches to EE in Planning
Overview Overview of Approaches to EE in Planning » Approaches to including EE in IRPs range along a spectrum from including an assumed “externally-derived” EE in the load forecast to treating EE as a supply resource Force externally- Treat as supply derived MW resource » Also instances where states
Slide 18: Historically EE is Input to IRP; This is Beginning to Change
Overview Historically EE is Input to IRP; This is Beginning to Change » Historically energy EE dealt with in Illustrative IRP Process load forecast – particularly where EE is ‘externally derived”- and included Load Forecast, Supply only to meet statutory goals Fuel Forecast, etc. Portfolio Scenarios
Slide 19: Overview of Approaches to Treatment of EE in IRP
Overview Overview of 3 Approaches to Treatment of EE in IRP » Demand Side: – Load Modifier: EE deducted from load forecast which is then used in IRP Complexity, Flexibility » Supply Side: – Supply Curve: EE is included as a supply option and represented as a fixed, continuous supply curve developed
Slide 20: Case Studies
Case Studies Navigant reviewed IRPs of select organizations for this workshop to present a variety of approaches toward EE in IRPs » Navigant reviewed 8 organizations and selected 4 case studies for this workshop: – Georgia Power – utility determines EE level externally – Xcel Energy – Commission de
Slide 21: Case Study: Xcel Energy
Case Study » Xcel Energy Commission Determines EE level Externally and Treats as Reduction to its Load Forecast » The Colorado Public Service Commission (PSC) defines EE as either a supply- side resources or demand-side resource » Colorado’s EERS requires that the PSC set energy and peak demand targ
Slide 22: Case Study: Georgia Power
Case Study » Georgia Power Utility Determines EE level External to IRP and Treats as Reduction to its Load Forecast Nine Step Process » Georgia Power developed EE assumptions 1. Update Technology Catalog with consultant externally from resource modeling, then 2. Technical and economic potential stud
Slide 23: Case Study: Northwest Power and Conservation Council
Case Study » Northwest Power and Conservation Council Council Determines EE level Externally and Treats as Supply Side Resource Costs/Benefits included in EE » Converts potential study data1 into supply curves2 Value » Time-effect used to produce hourly (8760) load shape • Energy system costs and be
Slide 24: Case Study: PacifiCorp
Case Study » PacifiCorp Council Determines EE level Externally and Utility Treats as Supply Side Resource » Uses the NPCC plan to develop EE supply curves to include in its own resource planning modeling – Adjusted value provided by offsetting generation, T&D expansion deferral, and stochastic risk
Slide 25: Treatment of EE in IRP: Case Study Summary
Case Study » Summary Comparative Illustration of Approaches Taken to EE in IRP Supply Council TVA Treatment of EE in IRP SCE PacifiCorp Demand Entergy Arkansas Georgia Xcel AEP Power Ohio Dominion External Adder Utility Derived Interaction between EE and IRP Case Other Orgs Studies Reviewed ©2015 Na
Slide 26: Takeaways
Takeaways » Utilities incorporate EE into their resource planning in a variety of ways, and the approach does not appear to depend strictly on state EE policies, geographic location, or whether or not a state has a regulated or deregulated energy market » Current trends show utilities moving away fr
Slide 27: Energy Efficiency Block Design
Energy Efficiency Block Design Ed Colston Tennessee Valley Authority 27
Slide 28: The EE Modeling Concept
The EE Modeling Concept Part 1: Part 2: Block Design Block Selection Development of Identify the quantity fundamental and schedule of EE design parameters blocks using the for the EE blocks. resource optimization model. Iteration required • Block costs • Uncertainty • Ramp-rate • Risk 28
Slide 29: Enhancing EE Resource Modeling
Enhancing EE Resource Modeling Attributes 2015 IRP Structure Sector Blocks Basis Pricing Tiers Extrapolated from Single Portfolio Assumption Level Pricing Tier Break Points Labor Intensity Moderate Ease of Modification Moderate Selection Flexibility Block by Block Modeling Outcome Preferred Path/EE
Slide 30: Making Energy Efficiency into a Power Plant
Making Energy Efficiency into a Power Plant Block Characteristics: • Capacity factor equivalent • Load Shape • Cost to build program Plant built in • Time to implement 10 MW blocks • Lifetime of Program • Installed Cost / kwh Three Primary Sectors: Residential, Commercial, Industrial 30
Slide 31: Definition and Development of Tiers
Definition and Development of Tiers Residential Programs Block Weight Started with FY15 energy efficiency portfolio New Homes 12% Self Audit 2% Three cost tiers identified along with In Home Energy Evaluation 20% “Must Run” category Manufactured Homes 16% Heat Pump 10% Blocks were grouped by s
Slide 32: Definition and Development of Blocks
Definition and Development of Blocks Must Run represents the impacts of projected programmatic efforts required by TVA’s Compliance Agreement with EPA (rounded to next whole block) Tier 1 represents escalation of basic costs associated with current (FY15 Plan) portfolio by sector; escalated at s
Slide 33: Translating Customer Meter Impact to System Impact
Translating Customer Meter Impact to System Impact Savings at End-Use System Impact Net-to-Gross Factor T&D Losses Meter 12.2 MW 10 MW X 77 % X 1.065 61 GWh 50 GWh 1 System Block Program impacts at the end-user’s meter translate to fewer system impacts 33
Slide 34: Summary of Block Ramp Rates & Other Parameters
Summary of Block Ramp Rates & Other Parameters Block Parameters Residential Commercial Industrial Tier 3 was developed using a step-function MW per Block 10 10 10 increase in Tier 2 incentives and fixed costs; GWh per Block 50 59 72 escalated at standard rates through time Ramp Rate (Yr 1 - 5) 25%
Slide 35: Block Load Shapes
Block Load Shapes Programs are developed to provide system The demand reduction impact of each block, impacts which mitigate higher generation costs regardless of Sector, is 10 MW at the time of and system loads during peaks TVA’s summer peak; impacts in other seasons vary as illustrated below
Slide 36: Alignment with the Valley Potential Study
Alignment with the Valley Potential Study (Generation Level Savings) Note: Potential Study Source – Tennessee Valley Authority Energy Efficiency Potential Study 2012 Update, EnerNOC Utility Solutions Consulting, Report No. 1360.2 36
Slide 37: TVA block design costs are aligned with the industry
TVA block design costs are aligned with the industry All Sectors - Cost per First Year kWh Compared to 2013 Actuals 1.40 U.S. Utilities 1.20 Peer Utilities TVA Blocks TVA EE 2013 1.00 0.80 0.60 0.40 0.20 0.00 TVA EE 2013 TVA Block T3 TVA Block T2 Source: Replication of “E Source DSM Achievements and
Slide 38: Creative Approaches Required for Step Change in EE Implementation
Creative Approaches Required for Step Change in EE Implementation Maximum incremental annual savings of all blocks represents roughly six times the annual incremental amount achieved thus far By 2033, cumulative savings from all selectable blocks represents almost 15% of supply resources Reach
Slide 39: Energy Efficiency Block Design Summary
Energy Efficiency Block Design Summary Block Characteristics defined to provide inputs necessary for modeling: — Ramp rates — Net system impacts - MW and GWh — Block costs — Aggregate load shapes Part 1: Part 2: Block Design Block Selection Development of Identify the quantity Comparison to othe
Slide 40: IRP Model Execution and Selected Initial Results
IRP Model Execution and Selected Initial Results Tom Rice Tennessee Valley Authority 40
Slide 41: The EE Modeling Concept
The EE Modeling Concept Part 1: Part 2: Block Design Block Selection Development of Identify the quantity fundamental and schedule of EE design parameters blocks using the for the EE blocks. resource optimization model. Iteration required • Block costs • Uncertainty • Ramp-rate • Risk 41
Slide 42: Resource Modeling Approach
Resource Modeling Approach Why Model EE and DR as supply side resources? To allow full portfolio optimization To clearly demonstrate value proposition To allow flexible, nimble response to changing business environments Challenges: Typical EE modeling approach (as a load modifier) doesn’t le
Slide 43: Resource Characteristics
Resource Characteristics Summer Hourly Peak Load Profile Chart illustrates the combined 35,000 2,000 30,000 EE & DR Reductions (MW) impact of energy efficiency and 25,000 1,500 Peak Load (MW) demand response on the hourly 20,000 load shape for a typical summer 1,000 15,000 day 10,000 500 5,000 - -
Slide 44: EE Expansion Options & Performance Assumptions
EE Expansion Options & Performance Assumptions Expansion Option Assumptions Res Res Res Com Com Com Ind Ind Ind Each unit is 10 MW at summer peak Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3 Unit Characteristics Units represent the three sectors; Nameplate Capacity (MW) 10 10 1
Slide 45: EE Cost Projections Over Time before Uncertainties
EE Cost Projections Over Time before Uncertainties EE blocks are compared below to a combined cycle plant; given the capacity factors of our EE assumptions they most closely resemble an intermediate to baseload resource in energy profile EE costs over time increase at slightly less than inflatio
Slide 46: Comparison to Supply Side Resources
Comparison to Supply Side Resources SUPPLY SIDE COMPARISON Supply Side resources New have many characteristics Coal w/ directly modeled in Com EE Ind EE Res EE New CC New CT CCS AP1000 resource planning tools Year Available 2014 2014 2014 2019 2018 2028 2026 Outage Rate Demand side resou
Slide 47: Drivers of Uncertainty
Drivers of Uncertainty Uncertainty exists with all resource types and is modeled in different ways. For Energy Efficiency we consider two primary sources of uncertainty: Design and Delivery Uncertainty Design Uncertainty exists for the following reasons: — Blocks are “proxies” for programs not y
Slide 48: Design Uncertainty
Design Uncertainty Blocks modeled for EE represent proxies for programs not yet Illustrative Example of Residential program Block End of residential developed. 1,800 End of program life block life 1,600 — This is a reasonable approach 1,400 for a long-term IRP geared Annual kWh Savings towards str
Slide 49: Delivery Uncertainty: End Use Customer Relationships
Delivery Uncertainty: End Use Customer Relationships LPC Delivery Risk Higher TVA is not the end-use Risk provider in most cases, 35% and there is risk in how 30% the 155 local power 25% LPC delivery uncertainty companies would vary in 20% diminishes over time as programs and delivery their delive
Slide 50: Delivery Uncertainty: Realization Rate
Delivery Uncertainty: Realization Rate Realization rate is a ratio of measured vs. estimated energy reduction Net Realization Rates A 2014 study on California’s Custom 100% Impact Evaluation found realization rates 90% kWh/yr kW on the order of 50-60% for some 80% programs 70% 60% — TVA has diff
Slide 51: Uncertainty in Timing and Impacts of Codes and Standards
Uncertainty in Timing and Impacts of Codes and Standards Graph demonstrates increasing stringency on codes and standards up to 2012 TVA’s load forecast models the impact of known standards as load reductions Our EE modeling assumes that over the 20 year study period TVA programs can be develop
Slide 52: Uncertainty / Planning Factor Adjustment
Uncertainty / Planning Factor Adjustment A planning factor was used in More 35% Design and Delivery uncertainties increase order to acknowledge various uncertainty over time before leveling out by 2025 uncertainties 30% Years 1-5 reflect LPC delivery 25% uncertainty; at year 6 this begins 20% LP
Slide 53: All-In EE Levelized Costs After Planning Adjustment
All-In EE Levelized Costs After Planning Adjustment 2015 & 2033 Most of the EE blocks remain cheaper Energy Cost Comparison than a natural gas combined cycle (CC) Tier 1 Tier 2 Tier 3 unit over the study period $180 $160 — Only Residential Tiers 2 and 3 become $140 $120 more expensive after planni
Slide 54: Stochastic Analysis Captures Cost and Demand Uncertainty
Stochastic Analysis Captures Cost and Demand Uncertainty; Planning Adjustment Captures Design & Delivery Uncertainty Stochastic Analysis of Production Cost and Financials Bound Uncertainty The range around EE costs are directly driven by distributions on O&M cost escalations and indirectly by deman
Slide 55: EE cost uncertainty is less than that of a combined cycle
EE cost uncertainty is less than the cost uncertainty of a combined cycle The EE uncertainty band is driven cost uncertainty on the escalation rate over time The uncertainty band around CC costs are much wider due to fuel, emissions, O&M, capacity factor, and capital cost uncertainty 250 Residen
Slide 56: 2015 Integrated Resource Plan Sample Results
2015 Integrated Resource Plan Sample Results Actuals Forecasts EE increases 100% to 9% of supply by 90% 2033 80% 70% 60% % of GWh 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 EEDR 0% 0% 0
Slide 57: Sample IRP Results Demonstrate Range of Outcomes
Sample IRP Results Demonstrate Range of Outcomes TVA’s IRP results show Maximum EE Available in Study CASE 1A EEDR Energy substantial EE growth over 35000 the planning horizon 30000 25000 One of our Strategies “Maximize EE” explicitly 20000 GWh tests selecting all available EE from the study 150
Slide 58: IRP Model Execution and Selected Initial Results Summary
IRP Model Execution and Selected Initial Results Summary Long Term Resource Planning is an inherently uncertain task, and EE is no exception EE is a competitive resource that introduces additional uncertainties around design and delivery that are unique from traditional resources TVA’s approach
Slide 59: Regional View of Energy Efficiency
Regional View of Energy Efficiency Mandy Mahoney Southeast Energy Efficiency Alliance 59
Slide 60: SEEA Serves the Southeast
SEEA SERVES THE SOUTHEAST The Southeast Energy Efficiency Alliance (SEEA) promotes energy efficiency as a catalyst for economic growth, workforce development and energy security. We do this through collaborative public policy, thought leadership, outreach programs, and technical advisory activities.
Slide 61: Energy Efficiency ≠ Energy Conservation
ENERGY EFFICIENCY≠ ENERGYEFFICIENCY =ENERGY ENERGYCONSERVATION PRODUCTIVITY
Slide 62: A Region of Opportunity
A REGION OF OPPORTUNITY
Slide 63: Robust EE Opportunities
Building Appliance Financing Energy Codes Standards Programs Energy Utility EE Combined Heat Performance Behavioral Programs and Power (CHP) Contracting Lead by Example Non-Utility Residential, (State and Local Benchmarking Commercial and Governments) Industrial Initiatives ROBUST EE OPPORTUNITIES 6
Slide 64: Energy Efficiency's Strategic Role
ENERGY EFFICIENCY’S STRATEGIC ROLE Job Creation Energy Taxpayer Security Savings Economic Development Infrastructure Resilience
Slide 65: But Energy Efficiency Is Not a Silver Bullet
BUT ENERGY EFFICIENCY IS NOT A SILVER BULLET
Slide 66: Bridging Resources to Make EE Accessible
BRIDGING RESOURCES TO MAKE EE— ACCESSIBLE, BITE-SIZED, AND TAILORED TO THE NEEDS OF THE SOUTHEAST 66
Slide 67: Thank you!
Thank you! Mandy Mahoney, President Southeast Energy Efficiency Alliance mmahoney@seealliance.org
Slide 68: Energy Efficiency Benchmarking
Energy Efficiency Benchmarking Peden Young ScottMadden Management Consultants 68
Slide 69: Energy Efficiency Benchmarking
Energy Efficiency Benchmarking ScottMadden was asked to look at how the initial results compare to other utilities’ energy efficiency programs Benchmarking Scope and Methodology ￭ Current State • Current TVA data was compared to the results of a recent a study done by E Source capturing energy effic
Slide 70: Policy Has Been A Main Driver of Energy Efficiency
Current State Benchmarking Policy Has Been A Main Driver of Energy Efficiency In general, energy efficiency achievement is higher in areas with Energy Efficiency Resource Standards (EERS) ￭ Targets are typically expressed in terms of an Annual Energy Savings Rate Incremental Annual Energy Savings =
Slide 71: Survey Results Reflect This Regional Trend
Current State Benchmarking Survey Results Reflect This Regional Trend 2013 Annual Energy Savings Rates: Top 10 National Grid 2.09 APS 1.91 BC Hydro 1.83 Otter Tail Power Co. 1.71 Sacramento Municipal Utility District 1.67 West Penn Power 1.60 Xcel Energy 1.58 Duquesne Light 1.57 Met-Ed 1.55 Baltimor
Slide 72: TVA's Savings Per Customer Are Aligned With Regional Peers
Current State Benchmarking TVA’s Savings Per Customer Are Aligned With Regional Peers 700 Otter Tail Power Energy savings per customer (kWh) 600 500 BC Hydro APS West Penn Power 400 Rocky Mtn Power 300 Gulf Power 200 100 TVA 0 Southeast Mid-Atlantic/NE Midwest West Pacific NW Southwest * TVA values
Slide 73: 3-Year Trend: Average Energy Savings Rate Holds Steady
Current State Benchmarking 3-Year Trend: Average Energy Savings Rate Holds Steady 2.50 Annual Energy Savings Rate (%) 2.00 1.50 1.00 Average Average Average 0.50 TVA TVA TVA 0.00 2010 2011 2012 2013 2014 * TVA values exclude renewables, and budget/expenditures include overhead 73 Replication of “E S
Slide 74: Benchmarking Peer Group
Energy Efficiency Long-Term Projections Benchmarking Peer Group ￭ The following utilities were used as a benchmarking peer group to help TVA understand how the initial IRP results compare to plans of other utilities in the region • Dominion (DOM) • Tennessee Valley Authority (TVA) • Duke Energy Prog
Slide 75: How to Read the Benchmarking Results
Energy Efficiency Long-Term Projections How to Read the Benchmarking Results (Illustration) TVA (High) TVA (Low) Utility X Time ￭ The TVA curves represent the range of outcomes in the Current Outlook Scenario based on preliminary results TVA (High) Maximize Energy Efficiency TVA (Low) Reference Plan
Slide 76: TVA and Regional Peers
Energy Efficiency Long-Term Projections TVA and Regional Peers TVA (High) TVA (Low) Sources and notes: State Energy Efficiency Standards: Policy Brief, ACEEE; Commission Filings and Orders; Utility IRPs * TVA results are based on EE savings at the generator (net of free ridership) and end user sales
Slide 77: Views on Energy Efficiency Modeling Approach
Views on Energy Efficiency Modeling Approach John Wilson Southern Alliance for Clean Energy 77
Slide 78: Views on TVA EE Modeling Approach
Views on TVA EE Modeling Approach Presentation to TVA “Evaluating Energy Efficiency in Utility Resource Planning” Meeting February 10, 2015 John D. Wilson & Natalie Mims
Slide 79: TVA is Taking a New Approach
TVA is Taking a New Approach • Dialogue has worked: TVA has been responsive to stakeholder input Comments on 2011 IRP Comments during 2015 IRP process • SACE agrees that TVA’s decision to evaluate energy efficiency as a resource is challenging, and applauds TVA for taking on this effort. • SACE
Slide 80: Draft 2015 IRP Reduces EE
Draft 2015 IRP Reduces EE EEDR 2020 Goal 2030 Goal 2011 IRP, adjusted* 2700 MW 3800 MW Draft 2015 IRP 1000 MW 3200 MW Reduction in IRP Goals 1700 MW 600 MW Maximum Achievable 2500 MW 5900 MW * 2011 IRP goals adjusted to reflect 1100 MW of avoided capacity achieved through EEDR programs 2008-13. Maxi
Slide 81: Concerns About EE Potential Assumptions and Methods
Concerns About EE Potential Assumptions and Methods 1. Cap on growth rate for energy efficiency Improved values could increase near-term EE by as much as 70%. 2. High costs for Tier 2 & Tier 3 Tier 1 costs are reasonable 3. “Risk premium” adds cost, not risk, to contingency factors Result: EE Tier
Slide 82: Concern 1: TVA's Growth Rate Caps
Concern 1: TVA’s Growth Rate Caps • Method is OK • Strongly disagree that the values selected by TVA are appropriate Growth cap is more restrictive than industry experience in the first five years Growth cap is more relaxed than industry experience after EE programs scale up • Improved values co
Slide 83: TVA's EE Growth Caps
TVA’s EE Growth Caps • Program expansion rate maximum of: • 25% of prior year savings, per year for years 1-5 • 20% of prior year savings, per year for years 6-15 • 15% of prior year savings, per year after year 16 • Annual savings capped at <1% of retail sales until 2021. Year Growth Cap Maximum Pr
Slide 84: Evidence that Growth Can Be Greater
Evidence that Growth Can Be Greater Actual Savings 2010 2011 2012 2013 Gulf Power Savings n/a 0.35% 0.61% 0.80% Growth rate 74% 31% Georgia Power Savings n/a 0.16% 0.26% 0.39% Growth rate 50% 63% Kentucky Savings 0.07% 0.15% 0.25% 0.52% Growth rate 114% 67% 108% Growth Cap 2013 2014 2015 2016 TVA Ma
Slide 85: Concern 2: TVA's Program Cost Assumptions
Concern 2: TVA’s Program Cost Assumptions • Accept that “tiers” are needed for model to “work,” but they do not reflect reality. • Tier 1 costs are a reasonable basis for estimating the future cost of all energy efficiency. • The model should not need such high (and unjustified) costs for Tier 2 & 3
Slide 86: Program Costs Are Not Mainly Related to Program Size
Program Costs Are Not Mainly Related to Program Size Utility achievements: Energy savings of 0.3 - 1.7% at “Tier 1” costs 9
Slide 87: Tier 2 and 3 Costs Suggest TVA Would Become the Connecticut of the Southeast
Tier 2 and 3 Costs Suggest TVA Would Become the Connecticut of the Southeast TVA @ 1.5% TVA @ 1% TVA 2013 Molina, M., American’s Best Value for the Efficiency Dollar: A National Review of the Cost of Utility Energy Efficiency Programs (ACEEE 2014). 10
Slide 88: Concern 3: TVA's Risk Premium Assumptions
Concern 3: TVA’s Risk Premium Assumptions • SACE agrees with TVA that EE has risks • The “risk premium” is really a “failure assumption” • TVA modeled EE Tier 3 costs to be four times greater than current program costs • Tier 3 costs are modeled at roughly the same cost as if the programs completely
Slide 89: EE is a Low-Risk Resource
EE is a Low-Risk Resource (Focus on Tier 3 Block) NGCC - EE 1/3 Program Failure 400 NGCC - EE Program Failure Capacity (MW) Added 300 Spot Market Used to Provide Energy Until NGCC Built 200 EE - Program Success 100 EE - 1/3 Program Failure 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 202
Slide 90: How TVA Gets to Four Times Costs
How TVA Gets to Four Times Costs • Historical EE cost Consistent with industry experience, costs escalate at 2% annually from current costs, no contingency factor • High-cost EE EE programs are delivered, but using Tier 3 cost, no contingency factor • High-cost EE w/contingency Tier 3 cost plu
Slide 91: Risk Premium: Roughly Breakeven With 100% Program Failure
Risk Premium: Roughly Breakeven With 100% Program Failure 1/3 Program 100% Program PVRR ($mm) EE Success Failure Failure Historical EE $ 754 $ 1,496 Cost High-cost EE $ 1,988 $ 2,335 $ 2,939 High-cost EE $ 2,386 $ 2,605 w/contingency High-cost EE $ 3,084 $ 3,074 w/risk premium • High-cost EE w/risk
Slide 92: Appendix: Solutions and Additional Data
Appendix Solutions and Additional Data 15
Slide 93: Growth Caps Limit Model Below 2011 IRP Decision
Growth Caps Limit Model Below 2011 IRP Decision 16
Slide 94: Growth Rate Cap Solutions
Growth Rate Cap Solutions • Not Recommended: Higher growth rate caps • 40% cap: At 0.3% of retail sales, growth to 0.42% is realistic … but at 1% of retail sales, growth in one year to 1.4% of retail sales is unrealistic. • Inverse cap structure • Example: Assume maximum program size of 1.5% of reta
Slide 95: Impact of Switching to Inverse Cap + Load Growth
Impact of Switching to Inverse Cap + Load Growth Alternative Cap TVA Cap Year @ 1% Load Growth (% of Retail Sales) (% of Retail Sales) 2014 0.30% 0.30% 2015 (Y1) 0.38% 0.64% 2016 0.47% 0.91% 2018 0.59% 1.13% 2019 0.73% 1.30% 2020 (Y5) 0.92% 1.44% Cumulative 3.4% 5.7% 18
Slide 96: TVA's Program Cost Assumptions
TVA’s Program Cost Assumptions Savings are less than Savings are 1% of retail sales in less than 1.5% years 1-10 with 100% of retail sales in block adoption years 10-20 with 100% block adoption Cost Annual Savings (LCOE) (GWh) Tier 1 1.3 – 3 cent/kWh 500 -1000 Tier 2 1.5 – 5 cents/kWh 50 -1000 Tier
Slide 97: Range of Levelized Costs
Resource Costs 18.0 Range of Levelized Costs (cents per kWh) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Energy Wind Natural Coal Solar PV - Biomass Nuclear Coal IGCC Efficiency Gas Utility Combined Scale Cycle Energy efficiency program portfolio data from Molina 2014; All other data from Lazard 2014. 2
Slide 98: Evidence That Costs Don't Escalate Rapidly
Evidence That Costs Don’t Escalate Rapidly 21
Slide 99: TVA's Risk Premium Assumptions
TVA’s Risk Premium Assumptions • Reasons TVA Gives To Support Risk Premium Local power companies would vary in how they deliver EE (assumes substantial net downside variation in the short term) Technology, codes & standards, and experience suggests anticipated efficiency resource may not materia
Slide 100: Tier 1: Stochastic Risk Solution
Tier 1: Stochastic Risk Solution Tier 1 Total Average Cost $1,340/kW (5% Risk of Program Failure) 30% $ 1,100 - cost w/o contingency 20% $ 1,300 - cost w/20% contingency 10% $4,300 - spot market + NGCC 0% - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 First-Year Cost ($/kW) 23
Slide 101: Higher Tiers Solution
Higher Tiers Solution Tier 2 Total Average Cost $1,870/kW (20% Risk of Program Failure) 30% $ 1,300 - 20% cost w/o contingency $4,300 - spot market + NGCC 10% $ 1,500 - cost w/ 20% contingency 0% - 1,000 2,000 3,000 4,000 5,000 Tier 3 First-Year Cost ($/kW) Total Average Cost $2,300/kW (35% Risk of
Slide 102: Comments on Cost/Risk Solution
Comments on Cost/Risk Solution Observations Key Assumptions • Suggested average cost for • Tier 1: $1,100/kW (@2%) Tier 3 is a reduction of • Tier 3: $2,900/kW (@2%) roughly 1/3 • Spot market: $100/MWh (@3%) • Risk is measured as risk, • NGCC: $1,000/kW (@3%, 8% not as cost amortization thru 2040) •
Slide 103: Assessment of the TVA Methodology
Assessment of the TVA Methodology Mark Klan Navigant Consulting 78
Slide 104: Introduction and Context
Introduction and Context » In Tennessee Valley Authority’s (TVA’s) current activity to prepare a 2015 Integrated Resource Plan (IRP), they are modifying their approach to handling of Energy Efficiency (EE) » The new approach considers EE as a selectable resource in capacity expansion modeling and as
Slide 105: Scope of Assessment
Scope of Assessment » Navigant’s review of IRP-related EE focused on assumed cost and performance, and the planned incorporation into resource modeling » Task 1 involved review of cost and performance assumptions for EE, including: – Block and sector structure – Pricing tiers and breakpoints – Progr
Slide 106: Summary of Results and Insights (1 of 3)
Summary of Results and Insights (1 of 3) » Overall, TVA’s planned approach and assumptions are reasonable, and no major “show-stoppers” have been identified » In some areas, however, TVA’s assumptions appear to lead to a conservative treatment of EE, while other assumptions appear optimistic (mostly
Slide 107: Summary of Results and Insights (2 of 3)
Summary of Results and Insights (2 of 3) Key Comments on EE Program Assumptions Related to IRP Modeling (cont.) » Market adoption methodology is relatively static based on expert opinion and non-TVA consumer research, which is reasonable for base case assessments – Approach may not readily accommoda
Slide 108: Summary of Results and Insights (3 of 3)
Summary of Results and Insights (3 of 3) Key Comments on System Modeling of EE » Regarding persistence of implemented EE over time, examination of preliminary modeled outcomes suggests a possible upward bias to EE estimates, with higher bias in earlier years » Considering block comparability in prel
Slide 109: Bottom-Line and TVA Response (1 of 2)
Bottom-Line and TVA Response (1 of 2) » On balance, TVA appears to be relatively well-positioned to introduce energy efficiency into IRP modeling as a model-selectable resource, as opposed to forcing in pre-set amounts at pre-determined times » Strong Aspects of TVA Approach: – Detailed coordination
Slide 110: Bottom-Line and TVA Response (2 of 2)
Bottom-Line and TVA Response (2 of 2) » As of late July, TVA’s resource planning group was exploring modifications to the planned approach, partly based on the Navigant assessment: – Adjusting relationship between increased incentives and increased EE achieved – Examining a possible risk-adjusted pl
Slide 111: Seminar Audience Q&A
Seminar Audience Q&A D015 INTEGRATED RESOURCE PLAN 86
Slide 112: Concluding Remarks and Close
Concluding Remarks and Close Joe Hoagland Tennessee Valley Authority 87
Slide 113: 2015 IRP/SEIS Schedule: Major Milestones & Stakeholder Sessions
2015 IRP/SEIS Schedule: Major Milestones & Stakeholder Sessions 2/26 12/15-16 Review draft IRP/SEIS; Detailed review discuss likely sensitivity 8/25 of initial case cases; preview public results session content 5/13-14 EE modeling 10/7 webinar 1/26-27 Review of final Mid-course 4/10 Review of recomm
Slide 114: The Path Forward
The Path Forward Document the input gathered from today’s seminar and vet at the IRP Working Group meeting scheduled for February 26, 2015 Run sensitivity analysis for select model parameters, e.g., ramp-rate, uncertainty, risk, etc. The TVA IRP management team is available to answer additiona
Tennessee Valley Authority — Technical Presentation (February 2015) on 6ix