Arizona Public Service Company Resource Plan
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ARIZONA PUBLIC SERVICE COMPANY RESOURCE PLAN REPORT January 29, 2009 How to Read this Report Following the Executive Summary, this Resource Planning Report has been divided into four parts, specifically to facilitate a careful dialogue of the Resource Plan, its development, and the analyses that support the selected Resource Plan. While each part can be reviewed independently, all readers should consider beginning their review with the Executive Summary and Part I, which together deliver the fundamental elements of this Resource Plan. Part I provides a review of the APS Resource Plan and the Action Plan. Part II addresses APS’s resource needs and some of the current challenges in resource planning. Part III describes APS’s current portfolio of resources, including transmission; provides a review of available resource options; and reviews the portfolio level analysis used in the development of this Resource Plan. Finally, Part IV provides a detailed discussion of four topics that APS believes will play an increasingly important role during the time period covered by this Resource Plan. A table of acronyms and a glossary of terms used in this Report follow the Table of Contents. TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................... 1 1.1 INTRODUCTION ................................................................................................... 5 1.1.A. Purpose.......................................................................................................... 5 1.1.B. Key Considerations for Resource Planning.................................................. 5 1.1.C. The Resource Planning Process.................................................................... 7 1.1.D. APS Resource Needs .................................................................................... 9 1.2 APS’S PROPOSED RESOURCE PLAN.............................................................. 12 1.2.A. APS Resource Plan Overview .................................................................... 12 1.2.B. Fundamentals of the APS Resource Plan ................................................... 14 1.2.C. Three-Year Action Plan.............................................................................. 20 1.2.D. Transmission Needs.................................................................................... 21 1.2.E. Regulatory Actions to Support this Resource Plan..................................... 25 1.3 STAKEHOLDER INVOLVEMENT IN THE DEVELOPMENT OF THIS PLAN .................................................................................................................. 27 2.1 CURRENT CHALLENGES IN RESOURCE PLANNING................................. 30 2.1.A. Cost Escalation............................................................................................ 30 2.1.B. Environmental Regulation.......................................................................... 33 2.1.C. Natural Gas Price Levels and Volatility ..................................................... 38 2.1.D. Financial Sustainability............................................................................... 39 2.1.E. Retail Competition...................................................................................... 46 2.2 NEEDS ASSESSMENT ........................................................................................ 48 2.2.A. Load Forecast Summary ............................................................................. 48 2.2.B. Outlook for Annual System Peak Demand and Energy ............................. 49 2.2.C. Customer Growth........................................................................................ 51 2.2.D. Residential Use Per Customer .................................................................... 57 2.2.E. Non-Residential Use Per Customer ............................................................ 61 2.2.F. Wholesale and Extra Large Retail Customer Sales .................................... 62 2.2.G. Annual System Peak Demand and Total System Energy........................... 63 2.3 GAP ANALYSIS................................................................................................... 64 2.3.A. Reliability and Reserve Margins................................................................. 66 2.3.B. Regional Capacity and WECC ................................................................... 67 2.4 MARKETS AND PROCUREMENT.................................................................... 68 3.1 THE COMPANY’S CURRENT PORTFOLIO .................................................... 71 3.1.A. Summary of Existing Resources................................................................. 71 3.1.B. Existing Resources...................................................................................... 72 3.1.C. Outlook for Existing Resources.................................................................. 78 3.1.D. Energy Mix ................................................................................................. 80 3.1.E. Other Key Parameters................................................................................. 81 3.1.F. Efficiency Improvements............................................................................ 84 3.1.G. Transmission System .................................................................................. 85 3.2 TECHNOLOGY COMPARISONS....................................................................... 92 3.2.A. Energy Efficiency Programs....................................................................... 93 3.2.B. Distributed Energy...................................................................................... 94 3.2.C. Demand Response....................................................................................... 96 3.2.D. Solar Technologies (Non-Distributed)........................................................ 97 3.2.E. Wind.......................................................................................................... 101 3.2.F. Geothermal................................................................................................ 102 3.2.G. Biomass and Biogas.................................................................................. 103 3.2.H. Natural Gas Combustion Turbines (Peaking Units) ................................. 104 Page ii 3.2.I. Natural Gas Combined Cycle ................................................................... 106 3.2.J. Coal........................................................................................................... 107 3.2.K. Nuclear...................................................................................................... 111 3.2.L. Summary of Resource Options................................................................. 113 3.2.M. Economic Analysis ................................................................................... 114 3.2.N. Value Adjusted Supply Analysis .............................................................. 120 3.3 RESOURCE PORTFOLIO ANALYSIS............................................................. 126 3.3.A. Analysis of Energy Efficiency Cases........................................................ 126 3.3.B. Analysis of Supply-Side Resource Planning Cases.................................. 136 3.3.C. Sensitivity Analysis .................................................................................. 151 3.4 CONCLUSION OF RESOURCE PORTFOLIO ANALYSIS............................ 161 SPECIAL TOPICS .................................................................................................... 163 4.1 TRANSMISSION NEEDS FOR RENEWABLE RESOURCES ....................... 164 4.2 BACKGROUND ON NUCLEAR DEPLOYMENT .......................................... 170 4.2.A. LICENSING PROCESS ........................................................................... 170 4.2.B. EARLY SITE PERMIT............................................................................ 171 4.2.C. STANDARD DESIGN CERTIFICATION.............................................. 172 4.2.D. COMBINED CONSTRUCTION PERMIT AND OPERATING LICENSE .................................................................................................. 173 4.2.E. INTERVENTION AND LITIGATION RISK ......................................... 173 4.2.F. USED NUCLEAR FUEL......................................................................... 174 4.2.G. TRANSMISSION..................................................................................... 174 4.2.H. MOVING FORWARD ............................................................................. 175 4.3 ADDITIONAL INFORMATION ON ENERGY EFFICIENCY PROGRAM IMPLEMENTATION.......................................................................................... 176 Page iii 4.3.A. SHORT-TERM DSM ACTION PLAN (2009 TO 2011)......................... 177 4.3.B. LONG-TERM DSM ACTION PLAN (2012 AND BEYOND)............... 179 4.4 SOLAR GENERATION...................................................................................... 181 4.4.A. SOLAR GENERATION PATTERNS ..................................................... 181 4.4.B. SPRING-TIME OPERATION ................................................................. 183 4.4.C. SUMMER OPERATION ......................................................................... 185 4.4.D. SUMMARY.............................................................................................. 186 Page iv TABLE OF FIGURES