Scenario Development for Long Term Resource Planning Developing Future Scenarios Ken Ross Integrated Resource Planning Manager January 10, 2012
Agenda Jan. 10, 2012 FortisBC Scenario Development Workshop Time Activity 8:00 a.m. 8:30 a.m. Sign In & Breakfast 8:30 a.m. 8:45 a.m. Welcome & LTRP Update 8:45 a.m. 9:30 a.m. Scenario Analysis Overview Background on approach to scenario analysis and how scenarios will be used; development of scenarios through examining critical uncertainties Interactive Session 9:30 a.m. 10:30 a.m. Identify critical uncertainties 10:30 a.m. 10:50 a.m. Break Interactive Session 10:50 a.m. 12:00 p.m. Develop scenario themes 12:00 p.m. 12:45 p.m. Lunch 12:45 p.m. 1:45 p.m. Review FortisBC s Scenario Development work Themes to date; compare/contrast with RPAG themes 1:45 p.m. 2:00 p.m. Wrap Up & Next Steps 2
Long Term Resource Planning process Examine the Planning Environment Forecast of Energy Needs Efficiency and Conservation Potential Options for Growth and Sustainment Select Preferred Options Long Term Strategy & Action Plan Risks & opportunities Customer & demand forecasts Demand side management Conservation effort, infrastructure, service offerings, energy purchases Portfolio Analysis 4-year Action Plan Long Term Resource Plan (LTRP) IRP = LTRP 3
Resource Planning Objectives Ensure Safe, Reliable and Secure Supply Innovative and Cost Effective Energy Solutions for Customers Expand Energy Efficiency and Conservation Act on Environmental and Social Priorities Contribute to Climate Change Solutions 4
Background 2010 LTRP Commission Directives and Customer/ Stakeholder Expectations A 20-year vision of the Utility and response to legislated energy & GHG objectives Contribution to BC GHG Reduction Targets New business environment and approach to demand forecasting Resource Plan Advisory Group and other consultation A broader range of scenario inputs 5
Traditional IRP Likelihood of outcomes Past Today Future 6
2013 LTRP Forecasts cannot precisely predict future events Develop wide ranging plausible future scenarios Future scenarios based on dramatic changes rather than variations of recent trends Identify a set of resources that will work in all scenarios a no regrets set of resources Game changing events: Something happened in 1908 to change the horse cart industry Something affected the sales of slide rules in the 1970s Something happened to change the telephone industry Something happened to change postal delivery service industry 7
Analytical Approach Potential Scenario Output
Format for Test Analysis Economy Carbon Prices NGT Demand Emissions Energy Mix Policy Test Inputs Context Outputs 9
Test Input 1: Economic Activity (GDP) Demand Difficult to model Apparent correlation between total vehicle sales and GDP, but cannot isolate NGV GHG Emissions Difficult to model GHGs rise with GDP only to a point Some argue GHG emissions more closely related to electricity generation than GDP Energy Mix Difficult to model Energy mix is based on demand so cannot be modeled without a demand figure RECOMMENDATION: Use GDP to inform assumptions rather than as an input 10
Test Input 2 Carbon Prices Demand Able to model We can calculate impacts on demand, albeit with substantial assumptions - particularly in terms of cross-price elasticity But, demand is considered inelastic. GHG Emissions Able to model We can calculate the reduction in GHG emissions based on the reduction in consumption Energy Mix Able to model We can model the energy mix based on the consumption changes due to the carbon tax 11
Test Input 3 Low Carbon Fuel Requirement Policy Demand Able to Model We can model the potential impacts for the Low Carbon Fuel Requirement on natural gas use GHG Emissions Able to Model We can calculate the GHG emissions for each potential energy mix at varying levels of demand Energy Mix Able to Model We can explore a variety of different fuel mixes that will achieve the targeted reduction in carbon intensity 12
Conclusions - Inputs Economy Inform context Will not include as data input but will use to inform assumptions Carbon Prices Can model Need to review assumptions with stakeholders Should remember that demand is inelastic Policy Potential to model Some policies can be modeled; others may need to outline context and/or inform assumptions 13
Potential Scenarios Ship Shape Hodge Podge Strong growth Stronger, and successful, emissions reductions High carbon tax Volatile economic cycles Emissions targets not met Lower carbon tax 14
Ship Shape Scenario- Possible Output LCFR 10% Below 2010; Carbon Tax: $150/tonne Demand (LNG): 29 PJ Demand (CNG): 18 PJ Total Demand: 418 PJ Propane, 1% Heavy Fuel Oil, 16% CI=73.94 LNG, 7% Electricity, 2% CNG, 4% GHG Emissions: 27 MT C0 2 Diesel Fuel Oil, 21% Motor Gasoline, 48% 15
Hodge Podge Scenario Possible Output LCFR 10% Below 2010 (not met); Carbon Tax: $70/tonne Demand (LNG): 16 PJ Demand (CNG): 7 PJ Total Demand: 393 PJ Electricity, 0.9% Propane, 1.3% CI= 78.73 Heavy Fuel Oil, 15.2% LNG, 4.0% CNG, 1.7% GHG Emissions: 27 MT C0 2 Diesel Fuel Oil, 27.3% Motor Gasoline, 49.5% 16
Keep in mind Input Parameters Economic activity World, Continent, Region Energy strategy & coordination Technology Advancements Energy Prices World, Continent, Region Carbon costs Capital Costs Demographics & migration Labour Costs Regulatory / policy environment Energy, Emissions, Urban Planning, Environment, Safety Social perceptions / opinions Weather volatility? Intermediate Inputs/Outputs Amount of EEC spending Amount of EEC Savings Infrastructure sustainment spending? Market Share Energy supply and demand World, Continent, Region Gas to Liquids Imports / exports Output Parameters No. of Gas Customers Overall Gas Demand Res., Comm., Ind. Transportation (Vehicles) Gas Use Rates Gas System Utilization Customer Rates No. of TES Customers TES Consumption Energy Mix GHG Emissions Economic Contribution 17
What if? Scenario Planning Process
Steps in Scenario Planning Stakeholder Engagement Progress A. Define Define the question and parameters Define a starting point or status quo B. Explore Identify trends and forces Identify uncertainties and importance Rank uncertainties and importance Select scenario themes C. Build Flesh out scenario future worlds Write scenario stories Test the model D. Use Develop and assess strategies Ongoing monitoring and assessment of scenarios and strategies 19 Integrated Resource Planning
Question A. Define B. Explore C. Build D. Use What resources must FortisBC have in place to supply customers integrated energy needs safely, reliably, and securely, while managing environmental impacts and at reasonable cost, over the next 20+ years? 20
Energy Planning Environment Drivers of Change A. Define B. Explore C. Build D. Use Policy Environment Technology Competition Energy Demographics Customers Supply Economics 21
Importance/Uncertainty A. Define B. Explore C. Build D. Use Driver of Change Insignificant Predetermined Important Uncertain 22
Identifying Critical Uncertainties A. Define B. Explore C. Build D. Use High Importance Insignificant Low Uncertainty High Uncertainty 23 Critical Uncertainty Inevitable Insignificant Low Importance
Building Scenarios A. Define B. Explore C. Build D. Use Critical Uncertainty 1 Critical Uncertainty 2 24
Scenarios Visions of Future A. Define B. Explore C. Build D. Use Critical Uncertainty 1 World 1 World 2 Critical Uncertainty 2 World 3 World 4 25
Reviewing FortisBC s Scenarios FortisBC has conducted this same exercise internally and the results will be presented after the RPAG activity We will outline the 4 scenarios we have developed, along with specific details for 1 scenario We will compare/contrast with RPAG critical uncertainties and review variables/assumptions within scenarios 26
Steps for interactive sessions: 1. Identify uncertainties (anything goes!) 2. Group similar uncertainties 3. Place your Top 5 critical uncertainties on the matrix, using sticky notes BREAK 4. Review and discuss critical uncertainty rankings 5. Select 2 critical uncertainties to create scenario matrix 6. Identify scenario themes 27
Interactive Session 9:30-10:30 Identify Critical Uncertainties
What resources must FortisBC have in place to supply customers integrated energy needs safely, reliably, and securely, while managing environmental impacts and at reasonable cost, over the next 20+ years? Policy Environment Technology Competition Energy Demographics Customers Supply Economics 29
Break 10:30-10:50
Interactive Session 10:50-12:00 Develop Scenario Themes
Importance Select Top 2 Critical Uncertainties to Develop Scenario Themes High 5 1 3 2 32 Low 0 3 Uncertainty High 5
Lunch 12:00 12:45
FortisBC Scenario Results Current Draft Scenarios
Internal Scenario Planning Results A. Define B. Explore C. Build D. Use Insignificant High Importance Carbon Capture & Storage Self Sustaining Technology Municipal Regulations Climate Policy Oil Shortages Smart technology/increased Energy Consciousness Low Uncertainty High Uncertainty 35 Low Importance
Building Scenarios A. Define B. Explore C. Build D. Use Abundant Supply Supply Critical Uncertainty 1 Constricted Supply Slow Technological Advancement Technology Critical Uncertainty 2 Rapid Technological Advancement 36
Scenarios - Visions of Future A. Define B. Explore C. Build D. Use Rapid Technological Advancement Pricing Carbon Doing More with Less Abundant Supply Constricted Supply Demand Renaissance Limited Choices 37 Slow Technological Advancement
Pricing Carbon Abundant supply and rapid technological advancement Pricing Carbon Demand Renaissance Doing More with Less Limited Choices Description Natural gas supply is abundant due to shale gas developments but government policy focuses on strict carbon emission reductions, which drives the development and adoption of new, low carbon/carbon neutral technologies and limits the market penetration of natural gas. Assumptions Low gas price High carbon price Strong economic growth Policy focused on carbon reduction Renewable thermal & energy efficiency a priority, including the use of Smart technology Greater conversion to electricity, resulting in higher electricity prices Energy strategies are consistent within regions, but may be disparate among regions 38
Doing More with Less Constricted supply and rapid technological advancement Pricing Carbon Demand Renaissance Doing More with Less Limited Choices Description Natural gas supply is constrained and new technologies are emerging rapidly to meet future energy needs. Carbon policy is not a driver in this scenario; rather, generalized environmental policies contribute to constricted natural gas supply and support renewable thermal development. Assumptions Moderate to high gas price Moderate to strong economic growth Policy focused on environmental impacts of energy, not carbon impacts Strongest market penetration for renewable thermal technologies, compared to other scenarios Coordinated energy strategies among regions and all levels of government 39
Demand Renaissance Abundant supply with slow technological advancement Pricing Carbon Demand Renaissance Doing More with Less Limited Choices Description Natural gas supply is abundant due to shale gas developments while new technologies are slow to advance, leaving natural gas as an important means to meet long term energy needs. Assumptions Low gas price Low carbon price Moderate economic growth Policy focused on economic growth rather than environment/carbon/climate Less renewable thermals, compared to Pricing Carbon and Doing More with Less Smart technology slow to market Disparate energy strategies among regions and levels of government Industrial demand renaissance 40
Limited Choices Constricted supply and slow technological advancement Pricing Carbon Demand Renaissance Doing More with Less Limited Choices Description Natural gas supply is constricted and a slower economy results in slow technological development, limiting the energy alternatives available to meet consumers long term needs. Assumptions Moderate gas price Moderate carbon price Slow economic growth Policy focused on economic growth with some advancement of carbon regulations Slower market penetration for renewable thermals Widespread use of smart technology Disparate energy strategies among regions and levels of government 41
Outlying Issues Items that are not captured in the 4 scenarios, but may need to be considered: Carbon Capture and Storage Electricity Storage Fuel Cells / Hydrogen Carbon Stripping Other? 42
Pricing Carbon - Details Abundant supply and rapidly advancing technology Pricing Carbon Demand Renaissance Doing More with Less Limited Choices Driving Forces Indicators Assumptions 1. Policy 2. Economy 3. Energy Prices 4. Adoption of Technology Carbon Tax $80/tonne CO2e ($4/GJ) GHG Emission Reductions Strictly enforced GDP 3.0% growth Job Growth Strong Housing Starts Strong Natural Gas $6.50/GJ in 2030 Electricity $125/mWh in 2030 1 Renewable Thermal Availability Accessibility Adaptability Moderate relative to alternatives High High High 43 1 BC Wholesale Market - Nominal $(CAD)
Compare/Contrast How do these critical uncertainties compare to those identified by the RPAG? 44
Next Steps RPAG Meetings
46 Next Steps Scenario Development Timeline