long-term fuel price forecasts for the sixth power plan northwest power & conservation council...
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NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Long-term Fuel Price Forecasts for the Sixth Power Plan
Northwest Power & Conservation Council
Generating Resources Advisory Committee
August 21, 2008
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
NPCC long-term fuel price forecasts
• Determine a range of plausible long-term trends in natural gas, world oil and western coal prices
• Commodity cycles around the trend and short-term volatility are simulated in the Portfolio Model analysis
• Fuel prices affect resource selection, generation cost, and price of electricity
• Retail prices affect demand for fuels and electricity (directly through competition, indirectly through cost of generation)
• Delivered prices for residential, commercial, industrial and electric generation are estimated for the AURORA, GENESYS, Energy 2020 and Portfolio Risk model
• Seasonality is estimated where significant
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
NPCC Fuel price forecast history
• Fifth Power Plan (Summer 2004)
• Revised Council Forecast (Sep. 2007)
• Revisions proposed to the Natural Gas Advisory Committee (Aug. 2008)
• Draft for Sixth Power Plan (Oct. 2008)
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
What's Happened to Oil and Natural Gas Prices Since 5th Plan
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
2003 2004 2005 2006 2007 2008
06
$/B
bl
0.00
2.00
4.00
6.00
8.00
10.00
12.00
06
$/M
MB
tu
Oil
Natural Gas
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Natural Gas
NorthwestPower andConservation
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NorthwestPower andConservation
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Henry Hub Forecast Compared to Actual Prices
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2.00
4.00
6.00
8.00
10.00
12.00
14.00
No
min
al $
/MM
Btu
L
ML
M
MH
H
Actual
Actual Annual
NorthwestPower andConservation
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NorthwestPower andConservation
Council
2025 Natural Gas Price Comparisons
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Low Medlo Medium Medhi High
2006
Do
llar
Per
MM
Btu
5th Plan
7-Sep
Working (2)
$4.64
$5.60
$7.25
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Working wellhead natural gas price forecast(2006 $ Per MMBtu at wellhead)
Low Medium Low Medium Medium High High2006 6.402010 6.50 7.00 7.50 8.00 9.002015 5.00 5.75 7.00 8.00 9.002020 4.25 5.50 7.00 8.00 9.252025 4.25 5.75 7.25 7.75 9.252030 4.50 6.00 7.50 8.25 9.50
Growth Rates 2006 - 15 -2.71% -1.18% 1.00% 2.51% 3.86% 2006 - 30 -1.46% -0.27% 0.66% 1.06% 1.66%
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Working FC vs. Futures Market and Range of Short-Term Forecasts
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2006
$/M
MB
tu
NYMEX
NGW Low
NGW M
NGW H
STEO
Low
Medium
Medlo
Medhi
High
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Working FC vs. AEO08 and Others(Natural Gas)
0.00
2.00
4.00
6.00
8.00
10.00
12.00
20
06
$/M
MB
tu
AEO08
L
ML
M
MH
H
GII
EVA
EEA
DB
SEER
Altos
AEO-H
AAEO-L
Avg others
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Delivery costs to AURORA LRAs
Delivery Points Costs in 2008
Sumas to Western OR/WA $ .63
AECO to Eastern OR/WA $ .59
Rockies to Southern ID $ .62
AECO to Eastern MT $ .77
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
World Oil Prices
NorthwestPower andConservation
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NorthwestPower andConservation
Council
Crude Oil Price Forecast Revisions
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
20
06
$ P
er
Ba
rre
l
Draft 6th
5th Plan
Rev Sept. 07
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Working Crude Oil Price Forecasts(Imported RAQ in 2006 $ / Bbl.)
Low Medium Low Medium Medium High High2006 59.022010 70.00 80.00 90.00 100.00 110.002015 50.00 65.00 70.00 80.00 90.002020 30.00 45.00 60.00 70.00 80.002025 40.00 50.00 65.00 75.00 85.002030 45.00 55.00 70.00 85.00 95.00
Growth Rates 2006 - 15 -1.83% 1.08% 1.91% 3.44% 4.80% 2006 - 30 -1.12% -0.29% 0.71% 1.53% 2.00%
NorthwestPower andConservation
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NorthwestPower andConservation
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Working FC vs. Others(Imported RAQ)
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20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
Imp
ort
ed
RA
Q (
06
$/B
bl)
Low
Medlo
Medium
Medhi
High
AEO08
AEO -HighAEO -LowIEA Ref
GII
DB
SEER
NorthwestPower andConservation
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NorthwestPower andConservation
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Coal Prices
NorthwestPower andConservation
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NorthwestPower andConservation
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Source: EIA
Recent spot coal pricesApril 05 To April 08
NorthwestPower andConservation
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NorthwestPower andConservation
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Historical and Forecast Coal Prices(Powder River Basin)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
20
00
$ P
er
MM
Btu
History
Low
Medlo
Medium
Medhi
High
6th Plan working forecast
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Working coal price forecast(Powder River in 2000$/ MMBtu)
Low Medium Low Medium Medium High High2006 0.472010 0.45 0.50 0.53 0.57 0.602015 0.44 0.50 0.54 0.59 0.642020 0.43 0.50 0.56 0.62 0.682025 0.42 0.49 0.57 0.64 0.722030 0.41 0.49 0.59 0.67 0.76
Growth Rates 2006 - 15 -0.76% 0.63% 1.63% 2.62% 3.43% 2006 - 30 -0.60% 0.17% 0.92% 1.48% 2.03%
NorthwestPower andConservation
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NorthwestPower andConservation
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Working Forecast vs. AEO08(PRB Coal)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
20
00
$/M
MB
tu
WY
/MT
Low
ML
M
MH
High
AEO08
NorthwestPower andConservation
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NorthwestPower andConservation
Council
At its August 15 meeting, the NGAC ...generally agreed with the proposed medium oil price forecast
(about $80 in the long-run)
recommended use of a wider range of oil prices - well above $100 in the high; below $40 in the low (see poll results)
generally agreed on a somewhat higher medium long-term gas price (about $8), based on a 10:1 oil:gas price parity
recommended against a fixed oil:gas price parity across the cases (see chart of history)
generally agreed the spread of gas prices be increased on the high side, but not to exceed $12. Disagreement regarding low (arguments ranged between $4 to $6).
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
The NGAC poll of long-term world oil price
0
1
2
3
4
5
6
7
8
$40 $50 $60 $70 $80 $90 $100 $110 $120
Crude Oil Price Forecast
Vo
tes
Low
Med
High
Average of Medium poll
$125 & higher$40 & lower
NorthwestPower andConservation
Council
NorthwestPower andConservation
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Crude Oil and Natural Gas Price History(Refiners' Acquisition Cost of Imported Oil)
(Wellhead Price of Natural Gas)
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2.00
4.00
6.00
8.00
10.00
12.00
No
m $
/ MM
Btu
Crude Oil
Natural Gas
NorthwestPower andConservation
Council
NorthwestPower andConservation
Council
Where to from here
• Digest NGAC and other comments
• Proposed revisions for draft 6th Plan to Power Committee in October
• Incorporate into planning models by December for use in 6th Plan analyses