The Pacific Northwest’s approach to energy planning is different from just about everywhere else in the world: It is a regionally coordinated, public process where everyone — utilities, interest groups, and individual citizens — can help decide how we meet our energy needs.
Planning Failure Catalyzes Change
Building federal dams on the Columbia River system in the 1930s and 1940s brought enormous economic benefits to the region and spurred population growth. By the 1970s, believing new resources would be needed to meet future demand, energy planners embarked on an aggressive program to build several fossil-fuel and nuclear generating plants.
The region’s decision to build five nuclear power plants in the state of Washington was based, in part, on inaccurate Northwest electricity load forecasts. Only one of the plants was ever completed. Due to exorbitant cost overruns, the other four plants were abandoned or mothballed prior to completion.
Two of the unfinished plants were responsible for one of the largest bond defaults in the history of the nation, while the financing for the other three plants was backed by the Bonneville Power Administration. Over the years, BPA customers have paid billions of dollars in debt service costs on the two unfinished projects that it backed.
From 1978 to 1984, BPA was forced to raise its rates by 418 percent (adjusted for inflation) to pay for the cost of all three plants. Ultimately, Congress concluded that an independent agency, without a vested interest in selling electricity, should be responsible for forecasting the region’s electricity load growth and recommending which resources should be built.
A Regional Vision and Voice
The Council was authorized by Congress in 1980 when it passed the Northwest Power Act, giving the states of Idaho, Montana, Oregon, and Washington a greater voice in how we plan our energy future and manage natural resources. The Council is responsible for developing a fish and wildlife program to protect fish and wildlife adversely affected by the hydrosystem and a 20-year power plan.
Congress concluded that energy efficiency should be the priority energy resource for meeting the region’s future load growth. The Act directs the Council to give priority to cost-effective energy efficiency, followed by cost-effective renewable resources. In effect, for the first time in history, energy efficiency was deemed to be a legitimate source of energy, on par with generating resources. Since 1983, the region’s utilities have acquired the equivalent of more than 6,900 average megawatts of electricity, enough energy savings to power five cities the size of Seattle.
Planning for a Secure and Affordable Energy Future
Managing risk is central to the Council’s approach to energy resource planning. Before the Council, this wasn’t always the case.
Until the Council’s first plan, energy planning was based on a single forecast of the region’s most likely energy demand. Resources that took 10 to 15 years to build were planned and constructed to that best guess, facing the risk of either underbuilding or overbuilding resources.
The Northwest has experienced both situations. The most serious case of over-building was when the region decided to build five nuclear plants in the state of Washington. The opposite situation arose in the mid-1990s when exceptionally low market prices, coupled with a series of above average precipitation years, led Northwest utilities to depend too much on the spot market to meet loads. When California’s ill-fated deregulation effort in the 1990s coincided with a severe Northwest drought in 2000-2001, West Coast electricity market prices spiked to stratospheric heights that averaged more than $700 per megawatt hour over an entire month, compared to around $30 per megawatt hour in prior years. Again, electricity ratepayers paid the price with significantly higher rates.
A Strategic Approach
The plan, updated every five years, includes several key provisions: an electricity demand forecast; electricity and natural gas price forecasts; an assessment of the amount of cost-effective energy efficiency that can be acquired over the life of the plan; and a least-cost generating resources portfolio. The plan guides BPA’s resource decision making to meet its customers’ electricity load requirements.
There are many unknowns when it comes to energy planning: Growing renewable generation; technological advances; and initiatives to lower carbon emissions all add to the challenge of planning for the future.
To manage these uncertainties, the Council strives to identify a resource strategy that will ensure a reliable and economical power supply. The Council uses a set of planning models to evaluate resources and resource strategies to understand their cost and risk tradeoffs across potential futures.
Throughout the planning process, the Council relies on participation from a wide variety of stakeholders — utilities, public interest groups, and state agencies and commissions — to give their perspectives and to vet the analyses.
It’s a rigorous process. In the end, it’s a journey the region takes to develop a plan that offers the best insurance not just for a prosperous future, but for a secure future, too.
Key Elements of the Northwest Power Plan
The process to develop a power plan takes about two years and is conducted by the Council’s power planning division staff, working in coordination with advisory committees, who have technical expertise in economics, engineering, forecasting, and modeling. The following are brief descriptions of our staff and their work:
Anticipating population growth, fuel price costs, and energy savings is central to power planning. For example, natural gas is a dominant fuel in the U.S. power sector; its price forecast is a strong indicator of electricity prices and resource development, so it’s a key input.
Analysts prepare forecasts of the Northwest’s economy, electricity demand, and energy prices. Staff also analyze the economic structure of power markets and state-level load forecasts for electric vehicles, cannabis production, data centers, and the market potential for onsite battery and solar installations.
The Northwest Power Act defines cost-effective energy efficiency as the resource of first choice when considering new resources. Where will efficiency savings come from? What technologies — like highly efficient lights — are likely to be low-cost and easily adopted? Estimating the available cost-effective energy efficiency, and setting regional targets, is therefore central to the plan.
Regional Technical Forum: This advisory committee to the Council develops standards to verify and evaluate energy efficiency savings. The RTF’s estimates support utilities in achieving energy efficiency and enable the region to track its progress in meeting the plan’s efficiency targets.
The Council works with the Bonneville Power Administration, utilities, the Northwest Energy Efficiency Alliance, the Energy Trust of Oregon, and energy organizations to meet the efficiency targets in its plan.
- Power Planning Resources Manager Tina Jayaweera
- Senior Energy Analyst Kevin Smit
- Regional Technical Forum Manager Laura Thomas
In the 1980s and 90s, BPA relied on its directly served industrial customers to shed significant load during short-term periods of constrained supply. These large customers (primarily aluminum smelters) would then be compensated for this reduction in production. This is an early example of demand response (DR). Today, demand response has expanded to all customer classes, where utilities can call upon an end-use customer to drop a small amount of load during a few hours of need. With many customers participating simultaneously, significant drops in load can be achieved. For the 2021 Power Plan, Council staff will be developing a supply curve for DR products as part of the least cost strategy of meeting future electricity demand.
The plan identifies generating resources and technologies that can help achieve a secure and affordable power supply. Information and assumptions about the technical, cost, performance, and environmental aspects of resources are a critical part of assessing their potential role in meeting demand and are key inputs in the Council’s modeling. Emerging technologies, such as offshore wind, are also closely tracked.
In developing its regional plan, the Council uses three different models in its analysis. The GENESYS model is used to simulate the operation of the regional power system, including the non-power and operational constraints of the hydropower system, in order to assess the adequacy of the power supply; the AURORA model is used to analyze electricity markets; and the Regional Portfolio Model is used to identify adaptive, least-cost resource strategies for the region.
The Council developed the RPM to simulate numerous resource plans across a broad range of possible futures to identify tradeoffs between expected cost and risk.
- Manager of Planning and Analysis John Ollis
- Senior Power System Analyst John Fazio
- Power System Analyst Dor Hirsh Bar Gai
- Power System Analyst Dan Hua