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Session 2:
What Load Growth for PJM?
James F. WilsonPrincipal, Wilson Energy Economics
Organization of PJM States Annual MeetingBaltimore, Maryland
October 12, 2015
2
Forecasting Future PJM Load Growth
● Important
– Underpins all resource adequacy assessments
– Drives generation acquisition and transmission expansion ($$ billions)
– 1% $17/MW-day increase in RPM price $1 billion in capacity cost
● Difficult especially for longer term outlooks
– Uncertainty about economic and demographic growth
– Changing relationship between economic growth and electric loads
– Changing ways we use electricity (appliances, buildings, industries, etc.)
– Increasingly price-sensitive peaks (shortage pricing, smart devices)
3
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Actual Peaks
PJM_RTO
4
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Actual Peaks
Weather Normalized Peaks
PJM_RTO
5
130,000
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
1 2 3 4 5 6 7 8 9 10
PJM RTO Top Ten Daily Peak Loads by Year, 2005-2015
2005 2006 2007 2008
2009 2010 2011 2012
2013 2014 2015
'06'11
'07
'14'15
'13'12'10'05
'08
'09
Source: PJM hourly unrestricted load data. Data reflects current RTO footprint for all years. 2015 data is estimated values through October 6.
6
PJM Load Forecasting (current method, simplified)
1. Select historical period (in example: 1998-2014)
2. Calculate historical peak load growth (1.5%/year)
3. Calculate historical economic variable growth (2.5%/year)
4. Calculate elasticity of peak to economic growth (1.5/2.5=0.6)
5. Get forecast of economic growth (Moody’s; 1.8%/yr)
6. Calculate peak load forecast = economic growth x elasticity (1.8%/yr x 0.6 = 1.1%/year)
7
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Weather Normalized Peaks
Economic Index
PJM_RTO
8
Forecast Accuracy, Past Several Years:Chronic Over-Forecasting
● Not just longer-term forecasts; 1-year forecasts also too high
● Not just during recession; post-recession forecasts also too high
● Not just due to inaccurate economic forecasts; forecasts too high over short-term, in zones with stable economics, and post-recession
9
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2007 2008 2009 2010 2011 2012 2013 2014 2015Delivery Year
PJM Forecast 4-Year Load Growth for RPM, RTO Region
[1] Forecast growth as used in RPM compares the three year forward forecast for a delivery year to the weather-normalized actual peak load for the year prior to the forecast (for example, for the 2011 delivery year, the growth from the 2007 weather -normalized peak to 2011 based on the Jan. 2008 forecast); for 2007 through 2010 delivery years, the 2007 forecast and 2006 weather -normalized actuals were used.
For 2007 to 2010, the2007 forecast was used.
10
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2007 2008 2009 2010 2011 2012 2013 2014 2015Delivery Year
PJM Forecast v Actual Peak Load Growth for RPM RTO Region
4-year forecast growth as used in RPM [1] Actual four-year growth [2]
[1] Forecast growth as used in RPM compares the three year forward forecast for a delivery year to the weather-normalized actual peak load for the year prior to the forecast (for example, for the 2011 delivery year, the growth from the 2007 weather-normalized peak to 2011 based on the Jan. 2008 forecast); for 2007 through 2010 delivery years, the 2007 forecast and 2006 weather-normalized actuals were used.[2] Actual/updated growth compares the actual weather-normalized peak (or updated forecast, for 2015) to the same weather-normalized peak load (for the 2011 delivery year, growth from the 2007 weather-normalized peak to the 2011 weather-normalized peak).All values adjusted to consistent delivery year RTO geographic footprint.
For 2007 to 2010, the2007 forecast was used.
11-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
2007 2008 2009 2010 2011 2012 2013 2014
MW
PJM Forecast One Year Peak Load Growth: RTO Region
Source: PJM. Graphic compares forecast and actual one-year peak load growth to the year indicated from weather-normalized peakfor the prior year. Values adjusted for consistent RTO footprint in each year.
12
8661,633
648 670
2,390
1,376367
1,141
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
2007 2008 2009 2010 2011 2012 2013 2014
MW
PJM Forecast v Actual One Year Peak Load Growth: RTO Region
Forecast change Actual change
Source: PJM. Graphic compares forecast and actual one-year peak load growth to the year indicated from weather-normalized peakfor the prior year. Values adjusted for consistent RTO footprint in each year.
Average 6-month forward over-forecast, 2007-2014: 1,136 MW.
866 = over-forecast amount
13
14
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Weather Normalized Peaks
Economic Index
Equipment Intensity Index
PJM_RTO
Solution: Recognize Trends in Energy Intensity/Efficiency?
15
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Weather Normalized Peaks
Economic & Intensity Index
Economic Index
PJM_RTO
16
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Historical Peak Load, Zone:
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Economic&Intensity Index
PJM_RTO
17
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Economic Index Values (1998=1.0)
AE AEP APS ATSI BGE
COMED DAYTON DPL DQE DUKE
EKPC JCPL METED PECO PENLC
PEPCO PJM_MA PJM_RTO PL PS
RECO UGI VEPCO
18
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Equipment Intensity Index Values (1998=1.0)
AE AEP APS ATSI BGECOMED DAYTON DPL DQE DUKEEKPC JCPL METED PECO PENLCPEPCO PJM_MA PJM_RTO PL PSRECO UGI VEPCO
19
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Equipment Intensity Index Values (1998=1.0)
AE AEP APS ATSI BGECOMED DAYTON DPL DQE DUKEEKPC JCPL METED PECO PENLCPEPCO PJM_MA PJM_RTO PL PSRECO UGI VEPCO
(Same data as previous slide, Stretched vertical scale)
20
0.55
0.65
0.75
0.85
0.95
1.05
1.15
1.25
1.35
1.45
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
2007 2009 2011 2013 2015 2017 2019 2021 2023
Peak Load Forecast, Zone:
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Linear (Weather Normalized Peaks)
PJM_RTO
47¢
As additional post-recession experience accumulates, and if trends are stable, will an approach focused on the recent period be simpler and more accurate?
21
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Elasticities of Peak Load to Forecast Variable, Recent PJM Load Forecasts
2013 Forecast, Elasticity to Economic Variable2014 Forecast, Elasticity to Economic VariableElasticity, 2015 forecast no binary variableSept. 2015 Forecast w/New Spec, Elasticity to Econ/Intensity Variable
load adjustments: none in 2013 forecast, excluded from this analysis of 2014 forecast, DOM adjustment is reflected in 2015 forecast values.
22
Speaker Information
James F. Wilson Principal, Wilson Energy Economics4800 Hampden Lane Suite 200Bethesda, MD 20814240-482-3737 office301-535-6571 [email protected] James Wilson is an economist with 30 years of consulting experience in the electric power and natural gas industries. His work has pertained to the economic and policy issues arising from the interplay of competition and regulation in these industries, including restructuring policies, market design, market analysis and market power. Recent engagements have involved resource adequacy and capacity markets, contract litigation, rate cases, modeling of utility planning problems, and many other economic issues arising in these industries.
Mr. Wilson has been involved in electricity restructuring and wholesale market design for over twenty years in PJM, New England, California, Russia, and other regions. He also spent five years in Russia in the early 1990s advising on the reform, restructuring, and development of the Russian electricity and natural gas industries for the World Bank and other clients.
Prior to founding Wilson Energy Economics, Mr. Wilson was a Principal at LECG, LLC. He holds a B.A. in Mathematics from Oberlin College and an M.S. in Engineering-Economic Systems from Stanford University.
23
Appendix: Zonal Forecast Graphs
● The following graphs show, for RTO and zones:– Actual and weather-normalized historical peaks
– PJM peak load forecast with new specification as of September 2015
– Combined economic and intensity index (combines the six-part economic variable from Moody’s with the Other Equipment variable based on EIA data)
● Question to ponder: How well does the combined economic and intensity index track and explain the pattern of the historical weather-normalized peaks? – Over the entire period (1998-2014)?
– Over the recent, post-recession period (2009-2014)?
24
0.7
0.8
0.9
1.0
1.1
1.2
1.3
100,000
120,000
140,000
160,000
180,000
200,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PJM_RTO
25
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1,800
2,000
2,200
2,400
2,600
2,800
3,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
AE
26
0.7
0.8
0.9
1.0
1.1
1.2
1.3
16,000
18,000
20,000
22,000
24,000
26,000
28,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
AEP
27
0.7
0.8
0.9
1.0
1.1
1.2
1.3
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
APS
28
0.7
0.8
0.9
1.0
1.1
1.2
1.3
9,000
10,000
11,000
12,000
13,000
14,000
15,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
ATSI
29
0.7
0.8
0.9
1.0
1.1
1.2
1.3
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
BGE
30
0.7
0.8
0.9
1.0
1.1
1.2
1.3
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
COMED
31
0.7
0.8
0.9
1.0
1.1
1.2
1.3
2,400
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
4,200
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
DAYTON
32
0.7
0.8
0.9
1.0
1.1
1.2
1.3
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
DPL
33
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
DQE
34
0.7
0.8
0.9
1.0
1.1
1.2
1.3
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
DUKE
35
0.7
0.8
0.9
1.0
1.1
1.2
1.3
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
EKPC
36
0.7
0.8
0.9
1.0
1.1
1.2
1.3
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
JCPL
37
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1,600
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
METED
38
0.7
0.8
0.9
1.0
1.1
1.2
1.3
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PECO
39
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PENLC
40
0.7
0.8
0.9
1.0
1.1
1.2
1.3
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PEPCO
41
0.7
0.8
0.9
1.0
1.1
1.2
1.3
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PL
42
0.7
0.8
0.9
1.0
1.1
1.2
1.3
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
PS
43
0.7
0.8
0.9
1.0
1.1
1.2
1.3
280
300
320
340
360
380
400
420
440
460
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
RECO
44
0.7
0.8
0.9
1.0
1.1
1.2
1.3
120
140
160
180
200
220
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
UGI
45
0.7
0.8
0.9
1.0
1.1
1.2
1.3
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Summer NCP Forecast, Zone:
Actual Peaks
Weather Normalized Peaks
Forecast w/New Spec. (Sept. 2015)
Econ & Intensity Index
VEPCO