Futures for ITP Year 20 Assessment

Futures for Integrated Transmission Planning Process Year 20 Assessment

Revision 3

Updated February 2, 2010 Futures for ITP Year 20 Assessment

Introduction As part of the Integrated Transmission Plan (ITP) proposal, a 10 year and 20 year assessment of the SPP system will be performed. Due to the uncertainties involved in forecasting future system conditions, a number of futures will be considered that take into account multiple variables. Consideration of multiple futures will provide for a transmission expansion plan that will evolve as economic, environmental, regulatory and technological changes arise that affect the industry.

Once the futures have been developed and the levels of imports/exports have been decided for each future, they will be submitted for review through the appropriate working groups. Consideration of these alternative futures will allow the ITP to take into account variability by considering the economic, environmental, governmental, and technological changes likely to affect the electricity industry. Initiatives such as plug-in hybrid electric vehicles, smart grid, Renewable Electricity Standards, energy storage and conversion applications, and other future technologies will change the way the electric grid is utilized. How SPP plans, directs construction of, and recovers the costs for electric grid expansion must also evolve to meet these initiatives.

Under the current ITP Process, development of the futures for the 20 year assessment needs to be completed prior to January 2010 for staff to begin the ITP. The futures for the 10 year assessment will be developed and approved during the latter half of 2010, for a 10 year study to be completed in 2011. Going forward, the futures for the 20 and 10 year assessments will be revisited every 3 years. Due to the 20 year assessment scheduled to start at the beginning of 2010, this document will focus on futures for that assessment.

Future Variables Though there is a possibility for many independent variables to be considered, the number of futures should be limited to a reasonable number in order to facilitate the analysis. Each future selected will contain some combination of variables. Several key variables are discussed below. Regulatory Changes in rules that regulate the industry could have significant impact on the design and operation of the power system in the future. Of upcoming initiatives that may have an impact, those focused on environmental policy could have the largest impact. Several states in the SPP footprint now have a Renewable Portfolio Standard (RPS) that requires that a certain amount of power being produced come from renewable energy sources such as wind, solar, biomass and others. Currently Missouri, Kansas and New Mexico have a mandate for 20% of the power generated to come from renewable sources by 2020. Texas also has a requirement for 5,880 MW of renewable energy to be online by 2015, expanding to 10,000 MW by 2025. On the national level, 1

02/02/2010 Futures for ITP Year 20 Assessment a clause was included in the Waxman-Markey bill that required the creation of a Federal Renewable Electricity Standard (RES) of 25% by 2025. The primary effect of these RPS initiatives would be an increase in the amount of renewable generation available in the SPP footprint. Given the wind potential in the SPP footprint, the majority of this renewable generation would be assumed to come from wind generation.

Demand A number of factors may influence the forecasts for demand in the future. Expansion of technology could lead to gains in efficiency. Demand response, distributed generation and Smart Grid initiatives could also lead to lower demand. Alternatively, expansion of the electric vehicles and economic recovery could lead to higher than expected demand. Appropriate adjustments in demand (load forecasts) will be applied to each future.

Capital Cost of Generation As load continues to grow, additional generation will be needed to meet that demand. Changes in cost of fuel, regulations and other concerns will influence the construction and output level of the generation. The makeup of generation selected to serve load in the future will be determined by the capital cost of the generation.

Wind Generation Of primary interest in the SPP footprint is the production of wind energy. The SPP footprint has tremendous potential for wind generation, and the large amount of wind generation in the SPP interconnection queue reflects the interest in wind generation. The recent CAWG survey on renewable energy provided some important data on what the expectations are for the states and individual utilities on the expected levels of wind power in the SPP footprint with and without a Federal RES.

Fuel Cost The cost of fuel varies over time, and increases or decreases in certain fuel prices can affect the mix of generation that is produced. Appropriate adjustments in the fuel price forecast will be applied to each future.

02/02/2010 Futures for ITP Year 20 Assessment

20 Year Futures

Overview The futures to be presented here will be composed of the variables as acted upon by certain drivers. Staff recognizes that there may be overlap between futures created under a different driver. The proposed futures are discussed below.

Renewable Energy Renewable generation in the footprint will be required under various generation futures. Renewable generation allocation requirements will be determined by SPP staff and stakeholders. Renewable generation, for the purpose of this study, includes qualified hydro, wind, solar, bio-fuel, etc.

Certain renewable generation, primarily wind, hydro and solar, operates as energy resources that require generation profiles be developed to model the synchronized output curves for individual wind plants as well as for the aggregate wind fleet. These output curves should also be synchronized with load data to preserve statistical relationships between wind output and load. SPP staff will use the National Renewable Energy Laboratory (NREL)’s database of synthetic wind plant output data as the primary input for the wind farm hourly maximum output capabilities used in the Study. This data will be sent to ESWG to review for the appropriate expected output of the select renewable wind resources. Profiles for any hydro or solar generation data will be developed on an as needed base by the working group. The economic dispatch model should try to realistically model renewable generation curtailment, based on historical market behavior, expected market conditions and reliability requirements.

The expected location of future renewable generation should not be based entirely on the location of current renewable generation and proposed renewable generation in the current interconnection queue. To take into consideration the fact that where additional transmission is built, future renewable generation will likely be developed in area.

In each future, renewable generation will be considered. Starting with the Base Case, existing state mandates, further detailed by the CAWG survey, will be utilized.

Capacity Margin During the process for resource selection for the various futures, a 12% capacity margin will be maintained. Wind resources will count 5%1 of their nameplate capacity to the capacity margin. The selected consultant for resource planning will provide an estimate of accredited capacity for other types of renewable resources.

1 Add footnote 3

1. Base Case a. Overview The base case will consist of no changes to established operating and planning policies and procedures already set for the study time frame, absent approved transmission upgrades which eliminate or mitigate existing practices. This case will be a baseline transmission expansion consistent with no dramatic changes to the current political climate. However, it will include planning requirements to meet existing renewable energy targets absent a federal renewable standard. b. Objective The objective of the base case is to develop a baseline to use in the Study. This case will be used as a backdrop to develop the other futures used in this analysis and serves as a reference case for comparison purposes. c. Assumptions The assumptions for the base case are that no major changes occur to established policies of the utilities and state and federal authorities for the study time frame. There will be no major change in resource mix, fuel prices, renewable targets, etc. d. Resource mix The resource mix used for the base case will be an extrapolation of current resource plans and policies that are established in the SPP footprint today. A resource planning tool will be used to develop the appropriate resource mix for the base case. These resource plans will be reviewed and modified, as appropriate, by stakeholders through the ESWG. e. Renewable Energy Renewable energy will be modeled in this future, using the expected renewable energy targets from the CAWG survey, detailed in the tables below. The columns in the table list the wind targets through various areas for each state. The Wind per zone column is the sum of the wind targets for wind to be contained within the balancing authorities in the state. The Wind by state column is the sum of the wind targets to be contained within the state, but external to the reported balancing authority. The Wind by region column is the sum of the wind targets to be external to both the state and the balancing authority. The sum of these three numbers, Wind per zone, Wind by state, and Wind by region, represent the total amount of wind that each balancing authority within the state need to meet their designated targets. A more detailed breakdown of these numbers in included as Appendix 1.

State Wind per zone (MWh) Wind by state (MWh) Wind by region (MWh) KS 3,102,486 5,839,900 400,160 MO - 2,216,280 1,665,124

NE 2,874,327 1,149,100 - OK 5,052,000 4,963,141 2,507,900 TX 4,180,491 1,263,500 1,073,500 NM 473,040 - - LA - - 1,697,000 AR - 552,300 650,100

Non-wind per zone Non-wind by state Non-wind by region State (MWh) (MWh) (MWh) KS - - 998,640 MO - 52,560 64,000 NE 88,700 - - OK 159,000 581,709 645,000 TX 37,200 518,000 13,200 NM 210,827 - - AR 2,300 - 23,700 LA 6,400 - 30,200

2. Renewable Electricity Standard a. Overview The Renewable Electricity Standard (RES) case will consider a federally mandated, twenty percent (20%) RES. This case will consider that the requirements for the SPP footprint are provided by the region. SPP staff will work with stakeholders through the ESWG and CAWG to determine a reasonable representation for each state and utility plan considering the resource allocation for this future allowing, for example, that if a state wishes to locate all of its renewable requirements in-state. b. Objective The RES case will be used to determine what type of transmission backbone will be required to meet a federal RES of 20% for the SPP footprint. As such, the focus of this analysis will be to deliver these renewable resources to the market in the SPP footprint and assumes all load in the SPP be required to meet this RES. Primary consideration will not be given to the delivery of energy outside the SPP footprint; however, a robust plan could leverage this potential option for future expansion. c. Assumptions The driving assumption for the RES future will be a 20% federal renewable standard for the footprint wherein energy efficiency is not counted as renewable for the purpose of this study. A driving factor for the transmission plan developed for this case will be the siting and location for the renewable resources in the footprint. These assumptions will be developed leveraging the state surveys conducted by the CAWG as well as input from stakeholders through the ESWG.

The expected location of future renewable generation should not be based entirely on the location of current renewable generation and proposed renewable generation in the current interconnection queue. To take into consideration the fact that where additional transmission is built, future renewable generation will likely be developed in area.

Care will be taken to avoid providing competitive advantage to one group of generation resources over another; therefore, the generation future should be broad and general to provide for the regions needs. Specific generating resources, beyond current commitments, will not be targeted for development. The assumptions used for wind locations will be high level, considering only interconnection to the EHV backbone grid. d. Resource mix The resource mix for the 20% RES future will contain a 20% renewable energy portfolio of generation in the resource mix. Any generation developed beyond that assumption will be developed using resource planning tools and reviewed and modified, as appropriate, by stakeholders through the ESWG. f. Renewable Energy Renewable energy will be modeled in this future, using the expected renewable energy targets from the CAWG survey, detailed in the tables below. This table was derived from the expected levels for a Federal 20% RES. The columns in the table list the wind targets through various areas for each state. The Wind per zone column is the sum of the wind targets for wind to be contained within the balancing authorities in the state. The Wind by state column is the sum of the wind targets to be contained within the state, but external to the reported balancing authority. The Wind by region column is the sum of the wind targets to be external to both the state and the balancing authority. The sum of these three numbers, Wind per zone, Wind by state, and Wind by region, represent the total amount of wind that each balancing authority within the state need to meet their designated targets. A more detailed breakdown of these numbers in included as Appendix 1.

State Wind per zone (MWh) Wind by state (MWh) Wind by region (MWh) KS 3,102,486 5,839,900 421,127 MO - 2,216,280 3,608,022 NE 4,773,262 3,007,400 - OK 5,052,000 4,963,141 2,528,866 TX 4,180,491 2,563,500 1,073,500 NM 473,040 - - AR - 683,300 1,052,710 LA - - 1,697,000

Non-wind per zone Non-wind by state Non-wind by region State (MWh) (MWh) (MWh) KS - 52,560 998,640 MO - - 64,000 NE 88,700 - -

OK 159,000 581,709 645,000 TX 37,200 900,000 13,200 NM 210,827 - - AR 2,300 - 23,700 LA 6,400 - 30,200

3. Carbon Mandate a. Overview Current carbon policy is in the process of being determined in the form of EPA regulations and is also being considered by federal authorities, as such, this study recommends that a carbon price methodology be used for the purpose of this analysis. b. Objective The Carbon Mandate future will be used to determine a transmission expansion necessarily to deliver resources to the market under a carbon mandate. c. Assumptions For the purpose of this analysis the carbon mandate future will be conducted using a $49/ton (real) $73/ton (2030 nominal) for the price of a CO2 emissions. A sensitivity will be conducted to consider a $26/ton (real) $39/ton (nominal). d. Resource mix The carbon mandate future will use the base case as a starting point, and then apply a carbon price to the simulation. A resource planning tool will be used to develop the appropriate resource mix for the base case. These resource plans will be reviewed and modified, as appropriate, by stakeholders through the ESWG. e. Renewable Energy Renewable energy will be modeled in this future, using the same renewable energy targets as in the Base Case.

4. Carbon Mandate + Renewable Electricity Standard a. Overview This future represents a combination of the Carbon Mandate and Renewable Electricity Standard Futures. Therefore, this future will consider the impact of a Federal 20% RES and a carbon price simultaneously.

02/02/2010 Futures for ITP Year 20 Assessment b. Objective This future will be used to determine what type of transmission backbone will be required to meet a federal RES of 20%, along with a price on carbon emissions for the SPP footprint. As such, the focus of this analysis will be to deliver these renewable resources to the market in the SPP footprint and assumes all load in the SPP be required to meet this RES. Primary consideration will not be given to the delivery of energy outside the SPP footprint; however, a robust plan could leverage this potential option for future expansion. c. Assumptions For the purpose of this analysis the carbon mandate future will be conducted using a $49/ton (real) $73/ton (2030 nominal) for the price of a CO2 emissions.

The driving assumption for the RES future will be a 20% federal renewable standard for the footprint wherein energy efficiency is not counted as renewable for the purpose of this study. A driving factor for the transmission plan developed for this case will be the siting and location for the renewable resources in the footprint. These assumptions will be developed leveraging the state surveys conducted by the CAWG as well as input from stakeholders through the ESWG. The expected location of future renewable generation should not be based entirely on the location of current renewable generation and proposed renewable generation in the current interconnection queue. To take into consideration the fact that where additional transmission is built, future renewable generation will likely be developed in area.

Care will be taken to avoid providing competitive advantage to one group of generation resources over another; therefore, the generation future should be broad and general to provide for the regions needs. Specific generating resources, beyond current commitments, will not be targeted for development. The assumptions used for wind locations will be high level, considering only interconnection to the EHV backbone grid. d. Resource mix The carbon mandate future will use the base case as a starting point, and then apply a carbon price to the simulation, on top of that a 20% renewable energy portfolio of generation will be placed in the resource mix.

A resource planning tool will be used to develop the appropriate resource mix for the base case. These resource plans will be reviewed and modified, as appropriate, by stakeholders through the ESWG. f. Renewable Energy Renewable energy will be modeled in this future, using the expected renewable energy targets from the CAWG survey, as detailed in the Renewable Electricity Standard Future.

Fuel Costs The costs presented in this section are meant for use as a reference only. It is expected that the consultant SPP will retain for the resource selection will provide more detailed information regarding fuel cost forecasts.

Fuel costs for use in the Futures will use Energy Information Administration forecasts as a starting point. The latest Annual Energy Outlook (AEO) report data provides fuel cost forecasts out to 2035. The table below is sourced from the 2010 AEO, published December 2009, Table 81, Electric Power Projections for EMM Region Southwest Power Pool.

Fuel Prices (2008 dollars per million Btu) 2030 Coal 1.74 Natural Gas 7.33 Distillate Fuel Oil 22.65

Table 1, Total Energy Supply and Disposition Summary, from the 2010 AEO provides fuel forecasts on a national basis for 35 years as well. Those values for 2030 are listed below.

Prices (2008 dollars per unit) 2030 Low Sulfur Light Price (dollars per barrel) 123.50 Imported Crude Oil Price (dollars per barrel) 111.49 Gas Price at Henry Hub (dollars per million Btu) 8.05 Gas Wellhead Price (dollars per million Btu) 7.11 Gas Wellhead Price (dollars per thousand cubic feet) 7.31 Coal Minemouth Price (dollars per ton) 27.43 Coal Delivered Price (dollars per million Btu) 2.09

Generator Prototypes The costs presented in this section are meant for use as a reference only. It is expected that the consultant SPP will retain for the resource selection will provide more detailed information regarding generator capital costs.

The ESWG will be the primary point of contact to develop a list of prototype generators to be used as a generic set representing the future resources in the study (for example, CT Gas, CC Gas, ST Coal, ST Nuclear, Wind, Hydro, etc). The ESWG will work to determine a set of values for the following data types including, but not limited to, and using publically available data when applicable:.

o Capital Cost

o Startup Cost

o Min Up

o Min Down

o Ramp Rate

o Heat Rate

The following information regarding capital costs of generation was provided by the CAWG Survey. Note that the survey provided a set of costs that originated at the Organization of MISO States (OMS). The numbers in the table below represent an average of the responses.

Capacity Cost $/kW Generation Type Fuel Low Med High

Nuclear Uranium 3485 3947 6000

IGCC with CCS Coal 2869 3669 4516

New Com Cycle with CCS Natural Gas 1583 1879 2099

Distributed Generation Hydrogen Natural Gas[2] 1414 1753 2056

Photovoltaic NA 5190 6434 7524

Biomass NA 3237 4013 5104

Hydro NA 1927 2389 2803

Wind NA 1857 2195 2621

The 2010 Energy Information Administration (EIA) Annual Energy Outlook (AEO) provides some figures on capital cost for generation. The numbers in the table below were obtained from EIA Report #EIA-0554, Electricity Market Module, Table 8.13. The Low numbers were taken from the Falling Costs case for 2015, the Mid numbers were taken from the Reference case for 2015 and the High numbers were taken from the Rising Costs case for 2015. Numbers in the table are Total Overnight Cost in 2007 $/kW.

Capital Costs Low Mid High

Scrubbed Coal New 1,959 2,058 2,117

IGCC 2,239 2,378 2,421

IGCC w/sequestration 3,248 3,496 3,511

Conv Gas/Oil CC 916 962 990

Adv Gas/Oil CC 895 948 969

Adv Gas/Oil CC w/sequestration 1,751 1,890 1,894

Conv CT 638 670 689

Adv CT 596 634 646

Fuel Cells 4,827 5,360 5,215

Adv Nuclear 3,101 3,318 3,351

Distributed Generation - Base 1,280 1,370 1,384

Distributed Generation -Peak 1,537 1,645 1,661

Biomass 3,506 3,766 3,790

MSW - Landfill Gas 2,421 2,543 2,616

Geothermal 4,246 1,711 4,588

Conventional Hydro 2,192 2,242 2,418

Wind 1,844 1,923 1,992

Wind Offshore 3,581 3,851 3,869

Solar Thermal 4,445 5,021 4,803

Photovoltaic 5,437 6,038 5,875

Further information for generator prototypes was obtained from the EIA AOE 2010 Table 8.2, Cost and Performance Characteristics of New Central Station Electricity Generating Technologies. That table is reproduced in part below.

Variable Fixed Heatrate6 Lead Size time O&M5 O&M in 2009 Technology (mW) (years) (2008 mills/kWh) ($2008/kW) (Btu/kWhr) Scrubbed Coal New7 600 4 4.69 28.15 9200 Integrated Coal-Gasification Comb Cycle (IGCC)7 550 4 2.99 39.53 8765 IGCC with carbon sequestration 380 4 4.54 47.15 10781 11

Conv Gas/Oil Comb Cycle 250 3 2.11 12.76 7196 Adv Gas/Oil Comb Cycle (CC) 400 3 2.04 11.96 6752 Adv CC with carbon sequestration 400 3 3.01 20.35 8613 Conv Comb Turbine8 160 2 3.65 12.38 10788 Adv Comb Turbine 230 2 3.24 10.77 9289 Fuel Cells 10 3 49.00 5.78 7930 Adv Nuclear 1350 6 0.51 92.04 10488 Distributed Generation - Base 2 3 7.28 16.39 9050 Distributed Generation - Peak 1 2 7.28 16.39 10069 Biomass 80 4 6.86 65.89 9451 Geothermal7,9 50 4 0.00 168.33 32969 MSW - Landfill Gas 30 3 0.01 116.80 13648 Conventional Hydropower9 500 4 2.49 13.93 9884 Wind 50 3 0.00 30.98 9884 Wind Offshore 100 4 0.00 86.92 9884 Solar Thermal7 100 3 0.00 58.05 9884 Photovoltaic7 5 2 0.00 11.94 9884

Appendix 1: Renewable Energy Detailed Tables Target Renewable Energy – No RES State Utility Type Wind MWh NM SPS Wind per Zone 473,040 TX SPS Wind per Zone 4,180,491 KS Midwest Wind per Zone 456,221 KS Sunflower Wind per Zone 955,366 KS Westar Wind per Zone 1,690,899 OK PSO Wind per Zone 942,000 OK OGE Wind per Zone 3,000,000 NE NPPD Wind per Zone 2,146,327 NE OPPD Wind per Zone 728,000

State Utility Type Wind MWh TX SWEPCO Wind by State 1,263,500 MO KCPL Wind by State 1,112,520 MO GMO Wind by State 1,165,080 KS Kansas City Power & Light Wind by State 1,165,080 KS Midwest Wind by State 153,300 KS Sunflower Wind by State 674,520 KS Westar Wind by State 3,847,000 OK PSO Wind by State 2,745,000 OK OGE Wind by State 2,000,000 OK OMPA Wind by State 218,141 NE LES Wind by State 421,100 NE OPPD Wind by State 728,000 AR SWEPCO Wind by State 552,300

State Utility Type Wind MWh TX SWEPCO Wind by Region 1,073,500 MO EDE Wind by Region 1,209,619 KS Kansas City BPU Wind by Region 337,260 KS Empire Wind by Region 62,900 OK Empire Wind by Region 62,900 OK PSO Wind by Region 1,445,000 OK OGE Wind by Region 1,000,000 AR SWEPCO Wind by Region 650,100 AR Empire Wind by Region 38,708 LA SWEPCO Wind by Region 1,697,000

Non Wind State Utility Type % Solar % Hydro % Other MWh

NM SPS NW per Zone 210,827 63 37

TX SWEPCO NW per Zone 37,200 35 65

OK PSO NW per Zone 59,000 100

OK OGE NW per Zone 100,000 100

NE LES NW per Zone 37,200 100

NE OPPD NW per Zone 51,500 100

AR SWEPCO NW per Zone 2,300 100

LA SWEPCO NW per Zone 6,400 100

Non Wind State Utility Type % Solar % Hydro % Other MWh TX ETEC NW by State 518,000 24 76 MO KCPL NW by State 26,280 100 MO GMO NW by State 26,280 100 OK OMPA NW by State 581,709 100

TX SWEPCO NW by Region 13,200 100

MO EDE NW by Region 64,000 100 Kansas Electric Power KS Coop. NW by Region 998,640 100

OK WFEC NW by Region 645000 84 16

AR SWEPCO NW by Region 23,700 48 52

LA SWEPCO NW by Region 30,200 42 58

Target Renewable Energy – Federal RES

State Utility Type Wind MWh

NM SPS Wind per Zone 473,040

TX SPS Wind per Zone 4,180,491

TX GSEC Wind per zone 1,257,000

KS Midwest Wind per Zone 456,221

KS Sunflower Wind per Zone 955,366

KS Westar Wind per Zone 1,690,899

OK PSO Wind per Zone 942,000

OK OGE Wind per Zone 3,000,000

OK WFEC Wind per Zone 1,110,000

NE NPPD Wind per Zone 4,045,262

NE OPPD Wind per Zone 728,000

State Utility Type Wind MWh TX SWEPCO Wind by State 1263500 TX ETEC Wind by State 1,300,000 MO KCPL Wind by State 1,112,520 MO GMO Wind by State 1,103,760 KS Kansas City Power & Light Wind by State 1,165,080 KS Midwest Wind by State 153,300 KS Sunflower Wind by State 674,520 KS Westar Wind by State 3,847,000 OK PSO Wind by State 2,745,000 OK OGE Wind by State 2,000,000 OK OMPA Wind by State 218,141 NE LES Wind by State 879400 NE OPPD Wind by State 2,128,000 AR SWEPCO Wind by State 552300 15

AR AECC Wind by State 131000

State Utility Type Wind MWh TX SWEPCO Wind by Region 1,073,500 MO KCPL Wind by State 1,053,309 MO GMO Wind by State 1,125,750 MO Empire Wind by Region 1,428,963 KS Empire Wind by Region 83,867 KS Kansas City BPU Wind by Region 337,260 OK PSO Wind by Region 1,445,000 OK OGE Wind by Region 1,000,000 AR Empire Wind by Region 51,610 AR SWEPCO Wind by Region 650,100 AR AECC Wind by Region 351,000 LA SWEPCO Wind by Region 1,697,000

NM SPS NW per zone 210,827 63 37

TX SWEPCO NW per zone 37,200 35 65