STRATEGY INPUT SESSION ON FLEXIBLE PATH Discussions with our Environmental Stakeholders May 4, 2018
COMPETITIVE INFORMATION As a municipally-owned utility, we focus on providing reliable service at an affordable price to all the customers in our broad service area. We are committed to being as transparent as possible about our business decisions. We also though operate in the competitive ERCOT market where our ability to buy & sell electricity at optimum prices is critical to our ability to provide reasonably-priced services to our customers. When we are asked to disclose competitively-sensitive information, we do so only when we are sure that our actions will not compromise our ability to protect our customers’ best interests. The requested items listed below, we believe, would fall into this category: • Price/cost by resource • ERCOT Price Projections – subscription resources to consider: ‒ Siemens Pace Global ‒ Wood MacKenzie ‒ PIRA ‒ SNL 2
TABLE OF CONTENTS • WE ARE RECOGNIZED AS AN INDUSTRY LEADER • GREAT INPUT FROM OUR ENVIRONMENTAL COMMUNITY • FLEXIBLE PATH: WHY & WHY NOW • ACTIVE & EFFECTIVE EMISSIONS REDUCTIONS • EXISTING FLEET – KEY TO OUR EVOLUTION • KEY ASSUMPTIONS: ‒ Capacity Factors, Production Profile Curves, Load / Demand, & Other Costs • FINANCIAL INFORMATION • ADDITIONAL SCENARIOS 3
WE ARE RECOGNIZED AS AN INDUSTRY LEADER 2017 2017 Community Steward of Public Utility the Year Award of the Year 2017 for Air Quality Program Demand Response Project of the Year 2018 Shining Cities #6 in Total Solar Capacity 2018 Environmental Champion 2018 2017 #3 nationally in Wind Most Trusted Utility Brand for Publicly Held Utilities in US Southern Region 4
GREAT INPUT FROM OUR ENVIRONMENTAL COMMUNITY • Quarterly meetings since 2012 representing many organizations • Citizens Climate Lobby • EDF • Environment Texas • Imagine SA • MOMS Clean Air Force Collaboration • Our Revolution Texas Leading to Action! • Public Citizen Closing Deely • • SEED Spruce 1 SCRs on hold • • Sierra Club Adding Air Monitors ‒ Alamo Group • ‒ Lone Star Added $15 M in Solar • ‒ National Rebates • Texas Solar Services Community Solar • • Texas Victory Project 5
UPCOMING COMMUNITY EVENTS Event Date Time Venue Saturday, May 12, 2018 9:30 am – 12:00 pm Our Savior Lutheran Church Thursday, May 17, 2018 5:30 pm – 7:30 pm Somerset Multi-Purpose Center Tuesday, May 22, 2018 5:30 pm – 7:30 pm St. Mary Magdalen Thursday, May 31, 2018 5:30 pm – 7:30 pm Cuellar Community Center Saturday, June 2, 2018 9:30 am – 12:00 pm The Neighborhood Place Thursday, June 7, 2018 5:30 pm – 7:30 pm Hamilton Community Center Tuesday, June 12, 2018 5:30 pm – 7:30 pm St. Anthony’s Church Hall Saturday, June 23, 2018 9:30 am – 12:00 pm Southside Lions Community Center Tuesday, June 26, 2018 5:30 pm – 7:30 pm Hardberger Park Ecology Center Thursday, July 12, 2018 5:30 pm – 7:30 pm Pre-K for SA East Center Saturday, July 21, 2018 9:30 am – 12:00 pm Ramirez Community Center Thursday, July 26, 2018 5:30 pm – 7:30 pm St. Dominic Church 6
FLEXIBLE PATH: WHY & WHY NOW Technology is evolving at a rapid pace. Flexibility is needed for us to meet the needs & desires of our customers in a responsible way. 7
ACTIVE & EFFECTIVE EMISSION REDUCTIONS Sparked by great progress thru 2017, by 2040 the Flexible Path reduces the intensity of CO2, NOx, & SO2 emissions by 80%, 97%, & 99%, respectively. CO2 (lbs/MWh) NOx, SO2 (lbs/MWh) 1,600 3.5 1,400 Historical 3.0 Flexible Path Forecast CO2 1,200 2.5 NOx 1,000 2.0 SO2 800 1.5 600 1.0 400 0.5 200 0 0.0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 8 Calendar Year
EXISTING FLEET IS A KEY PART OF THE EVOLUTION Eliminates need to build big power plants Transitioning to the Future Technology Drives Timing Past Present Future 8
KEY ASSUMPTIONS The Flexible Path allows for updates in strategic direction as technologies & customer needs change. • Shut down JK Spruce 1 in 2030 – potentially 17 years before planned 2047 • Remove SCR* for JK Spruce 1 from business plan & budget • Extend Combined Cycle plants’ (AVR & Rio Nogales) life for 8 years • Add 4,100 MW more renewables by 2040 – total of 5,700 MW renewable • Change 550 MW battery storage from 1 to 4 hour duration • Smaller increments of flexible generation build to meet load forecast gap MAJOR CONSIDERATION : “Technology to Beat” based on small flexible gas units 10 * Selective Catalytic Reduction (Reduces NOx)
CAPACITY FACTORS Dispatchable Units - Capacity Factors Historical & Forecasted 100% Historical Flexible Path Forecast Annual Capacity Factor (%) Non-Dispatchable Units 75% Historical & Forecasted Capacity Factors CCycle (CY 2015-2017) West Texas Solar 25 - 31% 50% Coal Local Solar 19 - 25% Gas Peaking West Texas Wind 33 - 36% 25% Coastal Wind 36 - 37% Nuclear 87 - 97% 0% 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Calendar Year Flex Path results in running less coal / other fossil fuel plants, while maintaining reliability & broadening our future opportunities to integrate new technology. 11
PROJECTED PRODUCTION CURVES BY RESOURCE Traditional Path Flexible Path 40 40 The Flexible Path: 35 35 Adds significant • amount of 30 30 renewables & battery storage 25 25 Traditional assets • TWh TWh 20 20 play a transitional role for reliability 15 15 Timing of • 10 10 retirements will be flexible & most 5 5 likely dependent on energy storage 0 0 technology 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Calendar Year Calendar Year Nuclear Coal Gas Flex Gen Renewables Mrkt Purch Nuclear Coal Gas Flex Gen Renewables Mrkt Purch 12
PRODUCTION PROFILE CURVES Coal Nuclear 2017 Typical Non-Summer 2017 Typical Summer Day 2017 Typical Summer or Non- Summer Day Note: Customer demand = Summer Day usage = load 100% 100% 100% Capactiy Factor 75% 75% Capacity Factor Capacity Factor 75% 50% 50% 50% Nuclear serves 25% 25% baseload role 25% 0% 0% 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 0% Hour of the Day Hour of the Day 1 3 5 7 9 11 13 15 17 19 21 23 Coal tends to be load following & is driven by Hour of the Day customer demand, as well as power market & gas prices Solar & Wind Combined Cycle Typical Summer or 2017 Typical Summer Day 2017 Typical Non-Summer Day Non-Summer Day 100% 100% Solar provides 100% about 6 effective Capacity Factor 75% Capacity Factor 75% hours without clouds Capacity Factor 75% West Wind tends to be the most unpredictable resource TX 50% 50% Wind 50% Coasta Wind is the most 25% 25% l Wind variable - Coastal 25% wind better matches Solar 0% 0% customer load PV 0% 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 4 7 10 13 16 19 22 Hour of the Day Hour of the Day Hour of the Day Combined Cycle is dependent on customer demand, as well as power market & gas prices 13
LOAD / DEMAND Capacity is added to replace retired units & to meet growing demand • Solar produces about 31% & wind produces about 40% during the 7 p.m. August summer peak • Storage is assumed to become economically viable over time & produce 100% at summer peak • New plant sizes of 200 to 750 MW are reduced to 50 to 350 MW with Flex Path • 8,000 6,000 MW 4,000 2,000 0 2010 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Calendar Year Nuclear Coal Gas Flex Gen Renewables Renewable Additions Storage/Tech Peak Demand 14 Note: Demand contains retail & wholesale obligations, but capacity is only built for retail
MAINTAINING RELIABILITY IN ADVERSE WEATHER Traditional generation assets are needed when renewables are not available. 6000 Highest Usage Hour 4,866 MW 5000 4,316 MW 4,250 MW 4,216 MW 26.9% 4000 24.9% Low: 23˚F Low: 26˚F Low: 22˚F High: 57˚F 35.7% High: 43˚F High: 36˚F 36.1% HDD*: 25 HDD*: 30 HDD*: 36 MW 3000 37.6% 45.1% 2000 0.2% 36.1% 35.5% 5.2% 0.2% 1000 4.9% 3.0% 8.8% 3.0% 24.8% 25.2% 25.5% 21.4% 0 Summer January 3 January 16 January 17 (6/23/17 5-6 PM) (1/3/18 7-8 AM) (1/16/18 6-7 PM) (1/17/18 7-8 AM) Nuclear Wind Solar Landfill Gas Coal Gas *HDD = Heating Degree Days 15
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