Copyright 2014 The Brattle Group, Inc.

This report was prepared for the Texas Clean Energy Coalition with the support of the
Cynthia and George Mitchell Foundation. All results and any errors are the responsibility
of the authors and do not represent the opinion of the projects sponsors, The Brattle
Group, Inc. or its clients.
Exploring Natural Gas and
Renewables in ERCOT
The Role of Demand Response, Energy Efficiency
And Combined Heat and Power
Peter Fox-Penner
I ra Shavel
Jurgen Wei ss
Ryan Hl edi k
Pabl o Rui z
Yi ngxi a Yang
Rebecca Carrol l
Jake Zahni ser-Word
June 3rd, 2014
PREPARED BY
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Agenda
key I|nd|ngs
Cvervlew of Modellng Scenarlos
Ma[or lnpuLs updaLes
8evlew of Modellng 8esulLs
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce and LnvlronmenLal lmpacLs
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Key Findings
Natura| gas and renewab|e dom|nate the supp|y add|nons across a|| scenar|os
! naLural gas and renewable addluons domlnaLe Lhe supply plcLure, wlLh gas provldlng
boLh low-cosL base load energy and anclllary servlces LhaL lnLegraLe wlnd and solar
energy. 1he orlglnal forms of complemenLarlLy dlscussed ln prlor reporLs for Lhe 1CLC
conunue Lo occur, albelL ln a more nuanced manner wlLh Lhe lnLroducuon of Lhe
lncreased opuons of LL, u8, and CP.
Lnergy emc|ency and demand response prov|de substanna| opportun|nes to
d|sp|ace future capac|ty add|nons and |ower overa|| e|ectr|c|ty costs.
! Cur program poruollo was deslgned Lo be moderaLe ln slze and use well-esLabllshed
approaches prlmarlly drlven by L8CC1 energy prlces. Lven so, 3 CW of peak reducuon
could be achleved by new LL programs and 2 Lo 4 CW of new u8 programs are ldenued
as economlcally achlevable ln our modellng scenarlos.
! ln LoLal, Lhls represenLs a 40-30 reducuon ln pro[ecLed peak demand growLh.
Large Cn are very econom|ca| but not sma|| Cn un|ts
! new large CP lnsLallauons aL peLrochemlcal faclllues are very economlcal, Lhe
slmulauon lndlcaLes LhaL Lhe full poLenual of Lhese opporLunlues wlll be reallzed by 2032
ln all scenarlos. Powever, Lhe hlgh caplLal cosLs and rapld payback requlred for smaller
CP unlLs lnhlblLs any furLher CP adopuons ln our scenarlos.
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Key Findings
kea| energy pr|ces |n keference scenar|os rema|n w|th|n the band of
pr|ces actua||y exper|enced |n LkCC1 between 2010 and 2012
! 1he hlghesL annual average prlce for a converged year ls abouL $67/MWh
($2012) for Lhe SLrong lederal Carbon ollcy/hlgh gas prlce scenarlo.
Powever, even Lhls exLreme scenarlo prlce ls $3/MWh lower Lhan lLs
counLerparL scenarlo ln hase ll.
Carbon em|ss|ons are s||ght|y be|ow a|| comparab|e hase II scenar|os.
! 1hese lower emlsslons are Lhe neL eecL of reduced sales (lncludlng from
LL programs) and hlgher renewables peneLrauon, parLly oseL by parLly
oseL by lncreased generauon share of coal capaclLy.
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Agenda
key I|nd|ngs
Cverv|ew of Mode||ng Scenar|os
Ma[or lnpuLs updaLes
8evlew of Modellng 8esulLs
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce and LnvlronmenLal lmpacLs
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Overview of Modeling Scenarios
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* ln all cases, Lhere ls no reserve margln requlremenL modeled.
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Agenda
key I|nd|ngs
Cvervlew of Modellng Scenarlos
Ma[or Inputs Updates
8evlew of Modellng 8esulLs
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce lmpacLs and LnvlronmenLal lmpacLs
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Natural Gas Prices Update
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Load Forecast and Adjustment
Lnergy Iorecast eak Iorecast
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Agenda
key I|nd|ngs
Cvervlew of Modellng Scenarlos
Ma[or lnpuLs updaLes
kev|ew of Mode||ng kesu|ts
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce lmpacLs and LnvlronmenLal lmpacLs
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An expanded EE portfolio could cost-effectively
reduce demand by 3 GW
! Codes & sLandards and planned
uullLy LL lnluauves could reduce
peak demand by around 4 CW by
2032
! We conservauvely ldenufy an
addluonal 3 CW of demand
reducuon LhaL could be achleved
Lhrough an expanded poruollo of
LL programs
! 1hese programs lnclude resldenual
coollng, commerclal llghung, and
lndusLrlal pumplng
! 1he poruollo ls cosL-eecuve under
all scenarlos, wlLh a beneL-cosL
rauo beLween 1.1 and 1.3
! Accounung for beneLs such as
avolded 1&u capaclLy cosLs or
reduced emlsslons would furLher
lmprove Lhe beneL-cosL rauo
! 8ouom-up LL poLenual sLudles ln
1exas are very daLed - Lhls ls a clear
area where new research ls needed
eak Demand Growth, 2014 - 2032
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! As early as 2017 we ldenufy
beLween 430 and 760 MW of
economlc, achlevable u8 ln
L8CC1, represenung a 20 Lo 30
lncrease over Lhe exlsung poruollo
! 8y 2032, economlc new u8 grows
Lo beLween 2.3 and 3.8 CW, more
Lhan doubllng Lhe currenL
poruollo
! 1he poruollo could be expanded
furLher, for example, lL could
lnclude defaulL dynamlc prlclng
coupled wlLh auLomauon
Lechnologles"
! 1he analysls could also be
exLended Lo explore Lhe ablllLy of
u8 2.0" Lo faclllLaLe Lhe
lnLegrauon of renewables around-
Lhe-clock
ERCOTs existing DR portfolio could be roughly
doubled through new initiatives
S|ze of cost-eecnve Dk kesource (2032)
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Agenda
key I|nd|ngs
Cvervlew of Modellng Scenarlos
Ma[or lnpuLs updaLes
kev|ew of Mode||ng kesu|ts
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce and LnvlronmenLal lmpacLs
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Reference Case With Required Reserve Margin
Phase II
! 4.4 CW of gas sLeam reuremenLs and 8
CW of norLhwesLern wlnd reures by
2032 (we assume LhaL wlnd faclllues
reure when 20 years old)
! Aer 2028 v becomes economlcal
and 3.4 CW ls added
! AparL from v and 4.3 CW wlnd,
almosL all new capaclLy ls CCC1 (21.3
CW)
! 32.7 CW of LoLal new consLrucuon
occurs and LoLal neL capaclLy reaches
101.9 CW (22 lncrease)
! no slgnlcanL addluons or reuremenLs
of coal
2032 Cenerauon Share
Cas
47.8
8enewables
7.3
Coal
34.7
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Reference Case with new DR and new CHP Phase III
2032 Cenerauon Share
Cas
44.1
8enewables
10.7
Coal
34.9
! 10.8 CW of wlnd ls added by 2032 , 6.3 CW
more Lhan hase ll due Lo hlgh naLural gas
prlces, hlgher load facLor, and no requlred
reserve margln
! Cur resulLs undersLaLe wlnd bullds beLween now
and 2017 (vs. L8CC1's queue) because we don'L
reecL a currenL upsurge ln anhandle wlnd bullds.
1hls would llkely noL aecL our resulLs, buL may
resulL ln sllghLly oversLaLed new CCC1 addluons.
! 2.8 CW solar ls added, 2.6 CW less Lhan
whaL's added ln hase ll due Lo Lhe peak load
reducuon and new u8 peneLrauon
! 3.8 CW new u8 ls added by 2032, 2.3 CW
more peneLrauon Lhan hase ll
! 11.4 CW of CCC1 and 3 CW of CP are added
by 2032. ln LoLal, 7 CW fewer gas unlLs are
added Lhan hase ll.
! Cverall 4 CW less new capaclLy consLrucuon by
2032 wlLh more wlnd and less CC and solar

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Reference Case with new DR, new CHP, and
Enhanced EE Phase III
2032 Cenerauon Share
Cas
43.3
8enewables
11.0
Coal
33.0
! 11.9 CW of wlnd ls added by 2032 , 1.1 CW
more Lhan hase lll 8eference wlLhouL
enhanced LL due Lo hlgher load facLor
! 1.4 CW solar ls added, whlch ls 1.4 CW less
Lhan whaL's added ln hase lll reference due
Lo Lhe peak load reducuon
! 3.3 CW u8 ls added by 2032, sllghLly lower
u8 markeL peneLrauon relauve Lo reference
case wlLhouL new LL
! 11.3 CW of CCC1 and 3 CW of CP are added
by 2032. very slmllar gas unlLs Lo reference
wlLhouL enhanced LL
! Cverall 1 CW fewer new capaclLy addluons
by 2032 and 1.7 CW more reuremenLs due Lo
Lhe new energy emclency programs' lmpacLs
on peak reducuon and LoLal load reducuon

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Moderate Federal Carbon Policy Phase III
! 3.3 CW less coal capaclLy by 2032 due
Lo Lhe assumed 16 deraLe when
reLromng wlLh 30 CCS
! 8.7 CW ouL of 11 CW of sLeam gas also
reures because of no requlred reserve
margln
! 3.6 CW of new u8 lnsLalled by 2032, a
comparable amounL Lo Lhe
lnsLallmenLs ln Lhe reference case
! 1oLal capaclLy bulldouL of by 2032 ls
1.8 CW more Lhan Lhe 8eference Case:
! 12.1 CW Cas CCC1 and 3 CW of CP, ln
LoLal 0.7 CW more Lhan 8eference Case
! 14.3 CW Wlnd, ln LoLal 3.6 CW more Lhan
8eference Case
! 0.3 CW v, whlch ls 2.3 CW less Lhan Lhe
8eference Case
2032 Cenerauon Share
Cas
48.4
8enewables
13.2
Coal
28.4
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Strong Federal Carbon Policy Low Renewable Cost High
Gas Prices Phase III
! 9.6 CW ouL of 19.2 CW of coal
capaclLy reures by 2032, 6.3 CW less
Lhan hase ll due Lo hlgher gas prlces
and no requlred reserve margln.
! 9.3 CW ouL of 11CW of sLeam gas
also reures because of no requlred
reserve margln
! 2.3 CW of new u8 lnsLalled by 2032,
1.3 CW less Lhan reference case, due
Lo more solar v peneLrauon.
! LargesL 2032 capaclLy bulldouL:
! 10 CW Cas CCC1 and 3 CW of CP, ln
LoLal 12 CW less Lhan hase ll
! 47 CW Wlnd, ln LoLal 11CW more Lhan
hase ll
! 14 CW v, 2 CW more Lhan hase ll
2032 Cenerauon Share
Cas
27.3
8enewables
46.3
Coal
13.9
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Agenda
key I|nd|ngs
Cvervlew of Modellng Scenarlos
Ma[or lnpuLs updaLes
kev|ew of Mode||ng kesu|ts
! CpporLunlues for uemand 8esponse (u8 ) and Lnergy
Lmclency (LL)
! luLure 8esource Addluons
! rlce and LnvlronmenLal lmpacLs
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Price Impacts
! Average wholesale elecLrlclLy
markeL prlces have rlsen
across Lhe board ln our hase
lll scenarlos due Lo hlgher
naLural gas prlces, parually
oseL by Lhe prlce-reduclng
eecLs of u8, CP, and LL.
! lmporLanLly, Lhe lncluslon of
LL, u8, and CP ln Lhe hase
lll scenarlo reduces Lhe
hlgher-prlced carbon rule
scenarlos, Lhan whaL
oLherwlse would have been.
ln hase ll, 2032 prlces ln Lhe
carbon rule cases Lopped ouL
aL almosL $70/MWh, $3/MWh
more Lhan Lhe same scenarlo
ln hase lll
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Environmental Impacts
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! 1he comblned eecLs of hlgher gas prlces, lower load growLh, enhanced u8 and CP
lnsLallauons lower CC2 emlsslons abouL 4 by 2032 versus Lhe hase ll 8eference Case,
or abouL 143 mllllon meLrlc Lons. 1hls ls Lhe equlvalenL of closlng one 600 MW coal
planL for 30 years.
! new LL programs furLher reduce CC2 by 10 MM1, Lhe equlvalenL of one year's
emlsslons from an 800 MW coal planL.