Integrated Resource Plan Summary Report 2019Public Version
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Alabama Power Company 2019 IRP Summary Report Public Version Integrated Resource Plan Summary Report 2019Public Version 1 TABLE OF CONTENTS EXECUTIVE SUMMARY .......................................................................................................................................1 I. INTRODUCTION AND OVERVIEW ........................................................................................................... 5 II. ENVIRONMENTAL STATUTES AND REGULATIONS ............................................................................. 8 II.A. General ............................................................................................................................................................... 8 II.B. Air Quality .............................................................................................................................................................9 II.C. Water Quality .................................................................................................................................................... 12 II.D. Coal Combustion Residuals .......................................................................................................................... 13 II.E. Climate Issues ....................................................................................................................................................14 III. INTEGRATED RESOURCE PLAN ..............................................................................................................15 III.A. Process Overview ............................................................................................................................................. 15 III.B. Load Forecast ....................................................................................................................................................19 III.C. Fuel Forecast ..................................................................................................................................................... 22 III.D. Reserve Margin .................................................................................................................................................23 III.E. Emerging Resiliency Needs .......................................................................................................................... 29 III.F. Development of Indicative Resource Additions .................................................................................. 29 IV. CONCLUSION ............................................................................................................................................. 34 FIGURES Figure ES-1 Summer and Winter Target Planning Reserve Margin Comparison..............................3 Figure I-1 Alabama Power Capacity Mix ....................................................................................................6 Figure III-A-1 Alabama Power IRP Process ......................................................................................................16 Figure III-B-1 Alabama Power Weather Normalized Historical Peak Demand with Forecast ..... 21 Figure III-D-1 Alabama Power Projected Seasonal Reserve Margins .....................................................27 Figure III-D-2 Alabama Power Projected Winter Capacity Needs ..........................................................27 Figure III-D-3 Alabama Power Projected Summer Capacity Needs ...................................................... 28 Figure III-F-1 Alabama Power Winter Benchmark Plans ............................................................................32 Figure A1-1 Alabama Power Company Existing Supply-Side Resources ........................................A1-1 I Figure A2-1 Winter – Integrated Resource Plan 2019 Projections of Active Demand-Side Options (DSOs) 2019-2038 ..........................................................A2-3 Figure A2-1 Summer – Integrated Resource Plan 2019 Projections of Active Demand-Side Options (DSOs) 2019-2038 ..........................................................A2-4 Figure A2-2 Winter – Integrated Resource Plan 2019 Projections of Passive Demand-Side Options (DSOs) 2019-2038 ........................................................ A2-7 Figure A2-2 Summer – Integrated Resource Plan 2019 Projections of Passive Demand-Side Options (DSOs) 2019-2038 ....................................................... A2-8 APPENDICES Appendix 1: Alabama Power Company Existing Supply-Side Resources ......................................A1-1 Appendix 2: Alabama Power Company Demand-Side Management Programs .......................A2-1 Appendix 3: Alabama Power Company Procurement of Renewable Resources .......................A3-1 II EXECUTIVE SUMMARY The 2019 Integrated Resource Plan (“2019 IRP”)1 for Alabama Power Company (“Alabama Power” or “Company”) is a comprehensive process that serves as the foundation for certain decisions affecting the Company’s future portfolio of supply-side and demand-side resources.2 The IRP process does not produce binding determinations concerning new specific resources that the Company will procure in the future. Rather, it is a management tool that, using the best information currently available, facilitates the Company’s ability to make future resource decisions that result in reliable and cost- effective electric service to customers, while accounting for risks and uncertainties inherent in planning for resources sufficient to meet expected customer demand. The dynamic nature of the Company’s IRP process thus produces a comprehensive plan of indicative resource additions that serves as the basis on which the Company can develop and manage its portfolio of supply-side and demand-side management (“DSM”) resources to provide reliable electric service to its customers. The IRP is developed on a formal basis every three years and is reviewed with the staff of the Alabama Public Service Commission (“APSC”). This review keeps the APSC informed as to the timing of needed resource additions, while also helping to ensure that the process yields results that are consistent with the Company’s ultimate goals of minimizing rates and providing the desired level of service reliability. These goals are important because they allow the Company to be competitive with other energy providers and promote economic development within the State of Alabama. Alabama Power remains committed to maintaining a diverse supply-side generating portfolio, along with cost-effective DSM resources that benefit all customers. Resource diversity on the supply side, which includes nuclear, natural gas, coal, oil, hydroelectric, wind, solar, and biomass resources, provides significant benefit to customers, as it enables the Company to adapt to changes impacting its energy supply obligations. In that regard, the Company’s generating fleet is transitioning due to a number of factors, including the cost of natural gas and the cost impacts of various environmental regulations 1 As noted, the IRP is a comprehensive, data-intensive process that ultimately yields an indicated list of future resource additions designed to meet appropriate reliability requirements in a cost-effective manner. This Summary Report only serves to overview that process and summarize its results; however, for ease of reference this document is sometimes referred to as the “2019 IRP”. 2 Appendix 1 is a detailed list of all supply-side resources owned and controlled by Alabama Power. Appendix 2 summarizes the Company’s activities related to existing and potential Demand Side Management (“DSM”) programs. 1 by the U.S. Environmental Protection Agency (“EPA”). A recent example of an environmentally-driven change is the retirement of Gorgas Units 8-10 due to the compliance requirements of EPA’s coal combustion residuals rule (Disposal of Coal Combustion Residuals from Electric Utilities, or “CCR Rule”). Ongoing uncertainties also persist in connection with EPA’s Effluent Limitation Guidelines rule addressing wastewater limits for steam electric power plants, as well as initiatives at the federal level to regulate or tax carbon dioxide (“CO2”) emissions. The cost and operating implications for the Company’s supply resources related to these and other considerations remain factors in the Company’s planning scenarios related to the 2019 IRP. As reflected in the 2019 IRP, Alabama Power’s planning process now separately considers the winter and the summer seasons, thereby ensuring sufficient reserve capacity during different times of the year, as compared to a focus solely on summer reliability. Historically, the Company’s capacity planning decisions have been driven by summer peak loads and a corresponding summer-focused Target Reserve Margin. These planning techniques have proven to be successful in supporting reliability, while cost-effectively meeting the needs of customers. However, operational experience over the last several years, and in particular a winter peak demand for the Alabama Power system, demonstrates a significant transition in reliability risk from the summer-only season to predominantly the winter season. As a result, Alabama Power is modifying its summer-based capacity planning approach to specifically address reliability on a seasonal basis. Seasonal planning provides greater visibility into capacity needs in both summer and winter, rather than limiting reliability decisions to a single season. In support of the transition to seasonal planning, the 2019 IRP reflects the