PREPA Ex. 1.0 Siemens PTI Report Number: RPT-015-19 Puerto Rico Integrated Resource Plan 2018-2019 Draft for the Review of the Puerto Rico Energy Bureau Prepared for Puerto Rico Electric Power Authority Submitted by: Siemens Industry Rev. [2] 6/7/2019 Siemens Industry, Inc. Siemens Power Technologies International 400 State Street • P.O. Box 1058 Schenectady, New York 12301-1058 USA v16 Tel: +1 (518) 395-5000 • Fax: +1 (518) 346-2777 www.siemens.com/power-technologies Revision History Date Rev. Description 01/21/2019 0 Initial draft 02/12/2019 1 Second Draft with Implementation Plan and Caveats and limitations and other adjustments 06/07/2019 2 Third draft with responses to PREB Order. Contents Legal Notice ................................................................................................................. ix Part 1 – Introduction and Summary of Conclusions .......................................... 1-1 Introduction ............................................................................................................1-1 Summary of Conclusions and Recommendations ................................................1-5 Transforming the Grid Architecture and Supply with MiniGrids ..............1-8 New Infrastructure to Lower Rates and Achieve MATS Compliance: .......................................................................................... 1-10 Additions to Preserve Options and Hedge Uncertainties ..................... 1-11 Understanding the IRP as a Road Map ............................................... 1-12 Summary of all cases analyzed .......................................................................... 1-13 Part 2 – Planning Environment .............................................................................. 2-1 Environmental and Energy Standards and Regulations Applicable to PREPA...................................................................................................................2-1 Laws and Regulations Changed Since Last IRP ..................................................2-3 Solar and Energy Storage Cost Decline ................................................................2-5 Hurricane Impacts on the IRP ...............................................................................2-6 PROMESA Federal Act .........................................................................................2-7 Title III ......................................................................................................2-8 Title V .......................................................................................................2-8 Fiscal Plan .............................................................................................................2-8 PREPA Board Vision Statement ...........................................................................2-9 Privatization ........................................................................................................ 2-11 Part 3 – Load Forecast ............................................................................................ 3-1 Data, Assumptions and Methodology ...................................................................3-1 Historical Energy Sales............................................................................3-1 Load Forecast Methodology ....................................................................3-3 Fundamental Drivers for the Load Forecast ............................................3-5 Macroeconomic and Weather Projections ..............................................3-6 Gross Long Term Energy Forecast .........................................................3-9 Net Long Term Energy Forecast .......................................................... 3-12 Assessments of prior forecasts ............................................................ 3-17 Siemens Industry, Inc. – Siemens Power Technologies International i Contents Long Term Peak Demand Forecast ..................................................... 3-18 Stochastic Distribution .......................................................................... 3-24 Parametric Distributions ........................................................................ 3-25 Quantum Distribution: Additional Variability ......................................... 3-25 Base Case Load Forecast Selection .................................................... 3-32 Part 4 – Existing Resources ................................................................................... 4-1 Existing Generation Resources and Distributed Generation.................................4-1 Summary of Current PREPA and Contracted Supply Resources ........................4-1 IRP Modeling of PREPA’s Existing Generation Facilities. ......................4-2 Utility Scale Renewable PPOAs ........................................................... 4-13 Environmental Considerations............................................................................ 4-17 National Ambient Air Quality Standards (NAAQS) ............................... 4-19 SO2 NAAQS ......................................................................................... 4-19 Mercury and Air Toxics Standards (MATS) .......................................... 4-22 Summary of Environmental Permits and Expenditures For Generation ............................................................................................ 4-25 Carbon Regulation ................................................................................ 4-26 New Source Performance Standards for GHGs for Electric Generating Units ................................................................................... 4-26 Clean Power Plan and Affordable Clean Energy Rule – GHG Emissions Guidelines for Existing Electric Generating Units ............... 4-27 Consideration of the Effect of Future Regulation of Carbon on Generators in Puerto Rico .................................................................... 4-28 Puerto Rico RPS .................................................................................. 4-28 Clean Water Act Section 316(b) ........................................................... 4-29 Puerto Rico Water Quality Standards Regulation ................................ 4-29 Part 5 – Resource Needs Assessment ................................................................. 5-1 Overview of the Needs ..........................................................................................5-1 Three Strategies ....................................................................................................5-2 Uncertainties ..........................................................................................................5-4 Scenarios ...............................................................................................................5-4 Sensitivities ............................................................................................................5-6 Portfolio Cases ......................................................................................................5-8 Part 6 – New Resource Options ............................................................................ 6-1 Overview of New Generation Resources ..............................................................6-1 ii Siemens Industry, Inc. – Siemens Power Technologies International Contents Capital Cost Recovery Factors ..............................................................................6-1 Weighted Average Cost of Capital (WACC) ............................................6-2 Cost of Capital Recovery Factor by asset class ......................................6-3 New Fossil-Fired Generation Resources ..............................................................6-3 Generation Options Development and Sizing .........................................6-3 Representative Future Generation Resources Characteristics ...............6-4 Future Generation Resources Development Timeline ......................... 6-14 Levelized Cost of Energy (LCOE) ........................................................ 6-14 Solar Photovoltaic (PV) Projects ........................................................................ 6-19 Baseline Operating and Overnight Capital Costs ................................. 6-19 Interconnection Costs ........................................................................... 6-20 Land Costs ............................................................................................ 6-21 Weighted Average Cost of Capital (WACC) ......................................... 6-21 Investment Tax Credit (ITC) ................................................................. 6-21 Project Development and Construction Time ....................................... 6-21 Levelized Cost of Energy (LCOE) ........................................................ 6-22 Minimum Technical Requirements (MTR)............................................ 6-27 Battery Storage ................................................................................................... 6-27 Installed Costs and Applications ........................................................... 6-28 Future Cost Trends ............................................................................... 6-29 Li-ion Battery System Price Forecast ................................................... 6-30 Wind Projects ...................................................................................................... 6-32 Baseline Operating and Overnight