tep portfolio strategies · integrated resource plan (irp) ... changes in portfolio 1. resource...

TEP Portfolio Strategies

Michael SheehanDirector, Resource Planning

2

Integrated Resource Plan (IRP)

What is an IRP?

A detailed evaluation of future Loads and Resources

The current “best view” of the future resource possibilities

A process that considers a wide range of future outcomes

The basis for developing near-term actionable items

A continuous process

What an IRP is NOT:

It is not the single right answer for future resources

No longer “least cost”

Integrated Resource Plan (IRP)

Maintain System Reliability

Determine Resource Needs - Transmission, Generation and Distribution

Determine Financial Implications

Capital Requirements, Rate Impacts, Earnings, Cash Flow, Financing Needs

Strategic Positioning

Climate Change Policy

Regional Development

Reduce Regulatory Risk 3

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Preferred Plan Preferred Plan Preferred Plan

Pursue common elements across all strategies

Develop planning contingencies to deal with uncertainties

Continuous evaluation of future resource options

Portfolio Strategies & Contingency Planning

Preferred Plan

Contingency 2

Contingency 4

Contingency 6

Contingency 3 Contingency 5

Load SensitivitiesRange of Load Growth Sensitivities

5

Reference Case

High Growth

3% DSM

15% DSM

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

2009 2011 2013 2015 2017 2019 2021 2023 2025

Peak

Dem

and

, MW

Changes in Portfolio1. Resource Types2. Technologies3. Timing4. Transmission

Market SensitivitiesNatural Gas and CO2 Emission Prices

Permian Gas Market, $/mmBtuMarket Sensitivity

6

Reference Case

High GasSensitivity

Low Case Sensitivity

$0

$5

$10

$15

$20

$25

2010 2015 2020 2025 2030

An

nu

al A

ve

rag

e $

/mm

Btu

Reference Case

High Carbon

Sensitivity

$0

$10

$20

$30

$40

$50

$60

$70

2010 2015 2020 2025 2030

An

nu

al C

O2

Pri

ce

$/T

on

CO2 Emission Prices, $/TonCarbon Case Sensitivity

7

Ventyx Advisors with assistance from industry experts identified four distinct themes which are expected to have the greatest impact on the future energy business environment over the next 25 years. The themes were drawn from the key uncertainties.

Global Turmoil Disruptions in gas supply leads to global stagnation,

and a U.S. recession, which is followed by sustained low economic growth

where energy independence away from Middle East oil and LNG imports

is critical.

Technology Evolution Undeniable evidence of global warming

leads to a societal shift to reduce CO2 through greater energy

conservation and “zero emission” supply-side technologies

Global Economy The shift of industrial U.S. load to the service

industries and a policy of global consolidation drive the U.S. to forge a

pact with G20 to stabilize global economy inflationary pressures and

wealth disparity.

Return to Reliability Growing concern of electricity reliability due

to brownouts and increased outages drives a lack in consumer

confidence. The Electric Reliability Organization (ERO) recognizes the

shortfall of the aging transmission structure and leads to further

consolidation of planning areas.

Electric Power Horizons 2009Scenarios of the Global Energy Future

8

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

Nam

epla

te C

apac

ity,

MW

Scenario Expansion PlansTurbines Combined Cycle Solar Wind Bio-Resources

9

375475

375 325

500 325 525 675

375450

350

375

0

150

300

450

600

750

900

1050

1200

1350

1500

MW

Resource Expansion Plans - 15% DSM versus 3% DSM

Turbines Solar (15% DSM) Add'l Solar (3 % DSM)

Selected Portfolio Strategies

Portfolio 1 – Peaking Resource Strategy (Short-Term Plan)

Portfolio 2 – Intermediate Resource Strategy

Portfolio 3 – Carbon Reduction Strategy

Portfolio 4 – Aggressive Renewables Strategy

Portfolio 5 – Aggressive Carbon Reduction Strategy

Portfolio 1

Portfolio 2

Portfolio 4

Portfolio 5

Portfolio 3 Portfolio 4

All PlansPeaking

Resource Strategy

Intermediate Resource Strategy

Carbon Reduction Strategy

Aggressive Renewable

Strategy

Aggressive Carbon Reduction

Strategy

Pinal Central - Tortolita 345 EHV

2015 – 100 MW Combustion Turbine

2015 - 600 MWCombined Cycle Unit




15% Energy Efficiency Target by 2020


2015 - Irvington-Vail 345kV EHV




Meet RES Requirements with Emphasis on Solar

2015 Coal Retirement Option

2015 Palo-Verde-Tortolita

2015 Coal Retirement Option









2018 - Apache-Tortolita, Saguaro

2016-2020 Coal Retirement Options

Double RES TargetBy 2030

2023 - Irvington-South 345kV EHV

2027-Irvington-South 345kV EHV

2020- Tortolita - North Loop Double Circuit

345kV

2023 - Tortolita -North Loop Double

Circuit 345kV

2023 – ZeroEmissions Base Load Resource

2027-Irvington-South 345kV EHV

CSP

Common Elements Across All Portfolio Strategies

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

50 MW 125 MW 250 MW 400 MW 575 MW

Pinal CentralTortolita

500kV EHV

40 MW 175 MW 400 MW 550 MW 600 MW

DG 25 MW DG 75 MW DG 150 MW DG 200 MW DG 275 MW

Energy Efficiency

Utility Scale Renewables

Distributed Generation

Transmission

Portfolio 1 – Peaking Resource Strategy

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

200 MW Combustion

Turbines

200 MW Combustion

Turbines

Portfolio 2 – Intermediate Resource Strategy

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

IrvingtonSouth

345kV EHV

CombinedCycle Plant

600 MW

IrvingtonVail

345kV EHV

Portfolio 3 – Carbon Reduction Strategy

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

IrvingtonSouth

345kV EHV

CombinedCycle Plant

600 MW

IrvingtonVail

345kV EHV

Coal Retirement

Option

200 MW Combustion

Turbines

Portfolio 4 – Aggressive Renewable Strategy

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

200 MW 350 MW 750 MW 1000 MW

Tortolita North Loop

345kV EHV

Palo VerdeTortolita

EHV Investments

200 MW Combustion

Turbines

200 MW Combustion

Turbines

Portfolio 5 – Aggressive Carbon Reduction Strategy

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

IrvingtonSouth

345kV EHV

200 MW Combustion

Turbines

Coal Retirement

Option CombinedCycle Plant

600 MW

IrvingtonVail

345kV EHV

Coal Retirement

Option

Coal Retirement

Option

Tortolita North Loop

345kV EHV

Zero Emission Base LoadResource

CSP

Annual CO2 EmissionsMillions of Tons

18

-

2

4

6

8

10

12

14

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Mill

ion

To

ns

Peaking Resource Intermediate Resource

Carbon Reduction Aggressive Renewable


Coal & GasReference

TEP Allocations under Waxman-Markey

15%

25%

50%

Carbon Tax Exposure

Annual Natural Gas UsageBillion Cubic Feet

19

Coal & Gas Reference

-

5

10

15

20

25

30

35

40

45

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

An

nu

al U

sage

, BC

F

Carbon Reduction Aggressive Carbon Reduction



50%40%

60%

Annual Water UsageBillion Gallons

20


-

1

2

3

4

5

6

7

8

9

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Bill

ion

Gal

lon

s




15%

Annual Water UsageBillion Gallons

21


-

1

2

3

4

5

6

7

8

9

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Bill

ion

Gal

lon

s




15%

25%

Retail RatesCost per kWh

22

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

¢/kW

h

Business As Usual Peaking Resource

Intermediate Resource Carbon Reduction

Aggressive Renewable Aggressive Carbon Reduction

6M Tons

None

3M Tons

2030 Carbon Reductions

Per Year

$105

$197

$174 $165 $167 $168 $169

$203

$-

$50

$100

$150

$200

$250

Today (2010) Gas & Coal Reference Case

Peaking (Low DSM)

Peaking Intermediate Carbon Reduction

Aggressive Solar

Aggressive Carbon

Reduction

2030 Average Monthly Residential Bill

15% RES &3% DSM by

2020

15% RES & 15% DSM by 2020

10,558 kWh/yr

9.8¢/kWh

8,515 kWh/yr

19.6¢/kWh

8,515 kWh/yr

23.8¢/kWh

Do

llars

(N

om

inal

)

UPC

Rate

9,995 kWh/yr

18.4¢/kWh

11,071 kWh/yr

17.8¢/kWh

No DSM or RES

Tucson Electric Power RatesPortfolio 1 – Peaking Resource Strategy

24

6.4¢ 7.1¢

Base Rates

3.3¢

4.6¢ Fuel & Purchase Power

1.1¢ Energy Efficiency

0.5¢

1.7¢ REST

5.7¢ Carbon Tax

-

5.00

10.00

15.00

20.00

25.00

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

¢/kW

h

Tucson Electric Power Capacity Portfolio 1 – Peaking Resource Strategy

25

Existing Coal Resources

Existing Natural Gas Resources

New Combustion Turbines

Energy Efficiency



Direct Load Control

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Pe

ak D

em

and

Coal Resources

Natural Gas Resources

Energy Efficiency



0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

GW

h

Tucson Electric Power Energy Portfolio 1 – Peaking Resource Strategy

26

Tucson Electric Power – Short-Term Decisions

27

Preferred Strategy

NO

YES

Combustion Turbines Solar Resources & Energy Efficiency

Combustion Turbines Solar Resources &Energy Efficiency

Combined Cycle ResourceSolar Resources & Energy Efficiency

2010 2011 2012 2013 2014 2015

CoalRetirement Options

Economic Recovery

EnergyEfficiencyImpacts

Carbon Policyor High Load

Growth

Carbon Legislation

Tucson Electric Power – Contingency PlanningLonger Term Portfolio Decisions

28

ExtremelyHigh CO2

Emission Costs

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Coal Retirement

Options

Coal Retirement

Options


Portfolio

PHEVLoad

Growth

High Natural

Gas Prices

Zero-EmissionBase Load Options

Regional Development

of Renewable

Projects

Portfolio Decisions

Market &

Policy Factors

Technology Innovations

Carbon Legislation

Tucson Electric Power – Longer Term Decisions

29

Combustion Turbines Solar Resources &Energy Efficiency

Combined Cycle ResourceSolar Resources &Energy Efficiency

2016 2018 2020 2022 2024 2026 2028 2030

Aggressive Renewables

Combustion Turbines & Combined Cycle Resources

Aggressive Carbon ReductionCarbon Policy or High Load

Growth

CSP

Resource Plan Conclusions

575 MW of utility scale solar capacity by 2030

250 MW of distributed generation renewables by 2030

15% Energy Efficiency target by 2020

Meets projected peaking and intermediate load requirements

» Peaking resources will provide summer capacity & support for renewables

» Peaking resource strategy transitions to combined cycle strategy

Resource Plan considers future carbon reduction requirements

» Future coal retirement decisions

» Potential for future emission retrofits through technology innovations

» Fuel switching options from coal to natural gas

30

Energy Efficiency Programs

RES Portfolio

Peaking Resources

Coal Reduction Strategy

tep portfolio strategies · integrated resource plan (irp) ... changes in portfolio 1. resource...

Documents