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NPCC Analyses Look at NW Power Supply, Power Prices by CBB Staff Columbia Basin Bulletin - March 5, 2004

Two draft analyses by the Northwest Power and Conservation Council offer new views of the region's future power supply and wholesale power prices.

One analysis indicates that the Northwest has a surplus of electricity that could last through 2008, depending on the impacts of hydroelectric conditions and growth in the demand for power.

The analysis is available at this location: www.nwcouncil.org/news/2004_02/9.pdf

The other analysis suggests that wholesale prices will remain near current levels through the end of the decade. Both analyses will be refined further and then included in the Council's next Northwest Power Plan, which is scheduled for completion later this year.

The analysis is available at this location: www.nwcouncil.org/news/2004_02/4.pdf

"Predicting the future is inherently risky, but our analyses suggest the most likely scenarios based on current conditions," Council Chair Judi Danielson, Idaho, said. "These analyses will help determine the best mix of power generation and conservation to meet future demand for power."

One analysis shows that the electricity surplus in the Northwest currently is about 1,000 average megawatts, assuming the lowest average annual water supply. That is nearly enough electricity to serve a city the size of Seattle for a year (or roughly equivalent to average production of Lower Snake River dams, see powerbpa.htm).

The surplus results from the addition of new generating plants and energy conservation in the Northwest following the energy crisis of 2000 and 2001 and the fact that demand for power has not recovered fully from the economic downturn during the energy crisis.

It is difficult to predict accurately the future power supply in the Northwest, in part because about half of the region's electricity comes from hydropower and hydropower depends on annual precipitation. The current outlook is that hydropower conditions in 2004 will be near normal.

The other analysis suggests the power surplus should keep wholesale prices from jumping up quickly over the next few years, as they did in 2001, and that inflation-adjusted long-term power prices could be at current levels or even somewhat below them.

This analysis is the result of a simulation of the entire power system in the western United States and assumes moderate growth in demand for power and fuel prices, average hydropower conditions and continuation of current trends in energy policies.

With these assumptions, the analysis predicts wholesale prices, which rose in 2003 as the result of increases in the price of natural gas, will stay near current levels -- around $40 per megawatt-hour -- through most of the decade.

Prices then will decline slightly as anticipated improvements in generation technology counteract increasing natural gas prices. Natural gas is the fuel for about 15 percent of the region's electricity supply.

The analysis suggests new resources will be needed late in the decade as demand for power catches up with supply, and that these primarily would be coal-fired power plants, wind generators and energy conservation. Several caveats affect the Council's analysis, such as the unknown future costs of natural gas, unexpected changes in demand, high-voltage transmission limitations, and transportation costs for coal.

But with those caveats the Council analysis indicates average wholesale prices could be $36.50 per megawatt-hour in 2000 dollars-- a little lower than today's average cost -- through 2025.

The Council prepared the analyses as part of developing the draft Fifth Northwest Power Plan. The plan uses a price forecast to assess the cost-effectiveness of new energy conservation that might be added to the region's power supply as demand for power increases over time. The price forecast also helps the Council analyze the cost implications of future power system policies.

The two analyses will continue to be refined in the coming months. The draft power plan is scheduled for release for public comment in May.