PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

PacifiCorp – 2007 IRPChapter 6 – Modeling and Risk Analysis Approach6. MODELING AND RISK ANALYSIS APPROACHChapter Highlights The IRP modeling effort seeks to determine the comparative cost, risk, supply reliability,and emissions attributes of resource portfolios. The 2007 IRP modeling effort consisted of three phases: (1) resource screening usingthe company’s capacity expansion optimization tool (the Capacity Expansion Module,or CEM), (2) risk analysis portfolio development, and (3) detailed probabilistic (stochastic)production cost simulation and resource risk analysis. For resource screening, PacifiCorp defined 16 alternative future scenarios and associatedsensitivity studies with the assistance of public stakeholders. These alternative futurestest wide variations in potential CO 2 regulatory costs, natural gas prices, wholesaleelectricity prices, retail load growth, and the scope of renewable portfolio standards. In addition, the company defined futures to evaluate the availability of renewable productiontax credits and the level of achievable market potential for load control anddemand-response programs. PacifiCorp next defined risk analysis portfolios for stochastic simulation. The CEMwas used to help build fixed resource investment schedules for wind and distributed resources,and to optimize the selection of other resource options according to specific resourcestrategies. PacifiCorp devoted considerable effort to model the effect of CO 2 emission compliancestrategies. All risk analysis portfolios were simulated with five CO 2 adder levels—$0/ton, $8/ton, $15/ton, $38/ton, and $61/ton (in 2008 dollars)—and associated forwardgas/electricity price forecasts. The company modeled both a cap-and-trade and emissionstax compliance strategy, and expanded its reporting of CO 2 emissions impacts. Portfolio performance was assessed with the following measures: (1) stochastic meancost (Present Value of Revenue Requirements), (2) customer rate impact, measured asthe levelized net present value of the change in the system average customer price dueto new resources for 2008 through 2026, (3) emissions externality cost, (4) capital cost,(5) risk exposure, (6) CO 2 and other emissions, (7) and supply reliability statistics. The preferred portfolio is selected from among the risk analysis portfolios primarily onthe basis of relative cost-effectiveness, customer rate impact, and cost/risk balanceacross the CO 2 adder levels.117