The best strategy for meeting Puget Sound Energy (PSE) customers' long-range electricity demand is for the utility to continue promoting energy efficiency, acquiring additional power supply for periods of peak customer usage and securing enough renewable power resources, over time, to stay in compliance with state law, according to the utility's draft 2013 integrated resource plan.
Updated every two years, the draft plan forecasts PSE customers' energy requirements 20 years into the future and suggests the resource options most likely to meet customer energy needs at the lowest cost and risk.
The draft plan notes that development of vast North American shale-bed deposits of natural gas has steeply driven down the commodity's market price, which in turn has softened electricity prices. The draft plan adds, however, "… it is not realistic to expect natural gas prices to remain this low over the long term. The very affordability of this fuel means that usage is also increasing, especially in the transportation and utility [power generation] sectors, and this will create upward pressure on prices over time."
The market price for natural gas, which topped $13 per dekatherm (MMBtu) in 2008, is currently trading in the $3.50 to $4 range. The draft IRP sees today's wholesale gas prices rising to the $6 to $7 range by 2020. Meanwhile, the cumulative, 20-year cost of securing PSE customers' electric supply is projected to be $13.8 billion. While that figure is slightly above the 2011 plan's forecast, it is far below the 20-year, $20 billion PSE power cost predicted four years ago.
The draft plan predicts that, 20 years from now, PSE will need about 40 percent more natural gas supply — about 380,000 dekatherms more per day — to serve its customers' peak, wintertime demand for gas. Current peak-day demand is about 930,000 dekatherms.
An additional 156,000 dekatherms per day will be needed by 2033 to fuel PSE's simple-cycle gas-fired power plants. This added supply capacity represents a 90 percent increase in the natural gas used by PSE's fleet of "peaker" plants.
These power plants typically operate only during high spikes in power demand — primarily winter cold snaps or summertime heat waves — or when the plants are needed to offset the loss of baseload power generating resources caused by drought, equipment failure, or other unforeseen circumstances.
Expanded use of natural gas across the region could strain its gas infrastructure, the draft plan says. Ensuring sufficient gas supply regionally may require expansion of the Northwest's gas-transmission pipeline system and more underground gas-storage capacity.
Another option could involve PSE development of a liquefied natural gas facility that not only would help the utility meet customers' peak-demand periods but also could serve marine and road transportation powered by clean-burning natural gas.
By 2033, PSE will need to secure nearly 5,400 MW of additional power resources to meet customers' peak electricity demand, according to the draft plan. The utility can shave off almost 1,000 MW of that need by helping customers save energy, the draft plan says.
Much of the remaining supply can be obtained, particularly in the near term, through cost-effective market-power purchases. But longer term, as regional power demand begins to exceed existing generation capacity, less reliance on market power may be warranted, the draft IRP states.
In addition, PSE will need to acquire another 300 MW of renewable energy by 2022 — and 600 MW by 2033 — to maintain compliance with the Washington Energy Independence Act (I-937). The voter-approved law requires utilities to provide 15 percent of their customers' electricity from renewable sources by 2020. PSE today is the top utility producer of renewable energy in the Northwest, with 773 MWs of generating capacity from its three large wind farms in Washington.
Other highlights of the draft 2013 IRP:
· The draft plan found that continued operation of the coal-fired Colstrip Generating Station in Eastern Montana as part of PSE's diversified energy portfolio remains economical for PSE customers under most of the likely future scenarios examined. The draft plan, however, did identify some future market conditions or potential regulations that could impact that finding. PSE owns about one-third of the 2,094-MW plant's output. Colstrip provided 16.7 percent of PSE customers' total power supply in 2012. The draft plan's base-case analysis suggests that continued Colstrip operations would save PSE customers about $150 million per year in power costs. Replacing Colstrip power with a combination of gas-fired resources and market power, the draft IRP states, would require a 7 percent increase in PSE electric rates and increase the volatility of customers' bills.
· A decade-long surplus of power-generating capacity in the Northwest will soon be gone. Once coal-fired power plants in Boardman, Ore., and Centralia, Wash., are retired starting in 2020, reliability of the region's electric grid will "erode" unless replacement power plants are built. The draft IRP notes that PSE will devote additional study to this issue through an update to the plan later this year.
The final plan will be filed with the Washington Utilities and Transportation Commission by May 30.