California Energy Commission Crude Oil and Transportation Fuel

California Energy Commission Crude Oil and Transportation Fuel Price Cases For the 2015 IEPR Joint Lead Commissioner Workshop on Transportation Energy Demand Forecasts June 24, 2015 Ysbrand van der Werf Supply Analysis Office Energy Assessments Division 1

California Energy Commission Overview • Fuel price cases in Preliminary Transportation Forecast – – – Petroleum (Refiner Acquisition Cost) Gasoline/ E 85 Diesel / Jet Fuel Transportation NG / Electricity Hydrogen • Proposed updated fuel prices for Revised Transportation Forecast 2

California Energy Commission Preliminary Petroleum Cost Cases Refiner Acquisition Cost $200 $180 $160 High Oil Price Composite PADD 5 Dollars per Barrel (2012$) $140 Preliminary cases based on 2013 values resulted in a narrow band of prices Reference Case Composite PADD 5 Low Oil Price Composite PADD 5 $120 $100 $80 $60 $40 $20 $0 2014 2015 2016 2017 2018 2019 2020 2021 Source: California Energy Commission and U. S. Energy Information Administration 3 2022 2023 2024 2025 2026 3

California Energy Commission Preliminary California Gasoline and E 85 Price Cases $7 Dollars per Gallon ($2012) $6 E 85 prices grow at about the same rate as gasoline. E 85 significantly cheaper than gasoline $5 $4 $3 $2 $1 2015 2016 2017 2018 2019 2020 2021 2022 2024 E 85 High Price Case E 85 Reference Price Case E 85 Low Price Case Gasoline High Price Case Gasoline Reference Price Case Gasoline Low Price Case Source: California Energy Commission and U. S. Energy Information Administration 4 2023 2025 2026 4

California Energy Commission Preliminary California Diesel and Jet Fuel Prices $8 $7 Diesel and Jet Fuel prices expected to increase through the forecast period. Dollars per Gallon ($2012) $6 $5 $4 $3 $2 $1 $0 2015 2016 2017 2018 2019 2020 2021 2022 2024 Diesel High Price Case Diesel Reference Price Case Diesel Low Price Case Jet Fuel High Price Case Jet Fuel Reference Price Case Jet Fuel Low Price Case Source: California Energy Commission and U. S. Energy Information Administration 5 2023 2025 2026 5

California Energy Commission Preliminary Retail Natural Gas and Transportation Electricity Price Cases $6 Dollars per Gallon ($2012) $5 Electricity prices increase slightly over forecast. Natural gas prices remain flat, driven by ample supplies. $4 $3 $2 2015 2016 2017 2018 2019 2020 2021 2022 Transportation Electricity High Price Case Natural Gas High Price Case Transportation Electricity Reference Price Case CNG Mid Price Case Transportation Electricity Low Price Case CNG Low Price Case Source: California Energy Commission and U. S. Energy Information Administration 6 2023 2024 2025 2026 6

California Energy Commission Preliminary Retail Hydrogen Price Cases $20 $18 Dollars per GGE ($2012) $16 $14 $12 Transportation Hydrogen High Price Case Transportation Hydrogen Reference Price Case Transportation Hydrogen Low Price Case Hydrogen prices very low compared to more recent data, discussed later in this presentation $10 $8 $6 $4 $2 $0 2015 2016 2017 2018 2019 2020 2021 2022 Source: California Energy Commission and U. S. Energy Information Administration 7 2023 2024 2025 2026 7

California Energy Commission Proposed Changes to Fuel Price Cases for Revised Forecast 1. Updated petroleum price forecasts based on new forecasts from EIA 2. Revised hydrogen price forecasts based on newly available data and analysis tools 8

California Energy Commission Revised Petroleum Prices Preliminary prices were adapted and updated versions of the 2014 crude oil price cases from the Energy Information Administration (EIA) Staff developed new cases based on recently published oil price projections from EIA Annual Energy Outlook (AEO) 2015 Produces more variation between cases, in part because different 2015 prices are used 2015 data will be updated for revised forecast; subsequent years adjusted to fit the 2015 price 9 9

California Energy Commission Staff Proposed Petroleum Cost Cases Refiner Acquisition Cost $200 $180 New cases (solid lines) based on EIA forecast include wider range of prices Dollars per Barrel, 2012$ $160 $140 $120 $100 $80 $60 $40 $20 $0 2014 2015 2016 2017 2018 2019 2020 2021 2023 2024 2025 High Demand Case, West Coast Mid Demand Case, West Coast Low Demand Case, West Coast Previous High Case Previous Mid Case Previous Low Case Source: California Energy Commission and U. S. Energy Information Administration 10 2022 2026 10

California Energy Commission Proposed New Hydrogen Price Cases Based on $15/kg price of 2015 actual transactions and other retail station data High quality data collected by Energy Commission from state-funded stations Scenarios developed using the Hydrogen Financial Analysis Scenario Tool (H 2 FAST) available from National Renewable Energy Laboratory (NREL). Note that this does not produce forecasts, but is used for analysis http: //www. nrel. gov/hydrogen/h 2 fast/ 11 11

California Energy Commission Noteworthy Changes in Hydrogen Prices 1. 2. 3. 4. 5. 6. Cases include all components of producing and retailing hydrogen Cost of methane is almost negligible Technology of producing and compressing hydrogen well established - unlikely to change Technology of hydrogen retail station is new and costs could decline Utilization rate of the station is key variable; higher the throughput, lower the cost of retailing fuel More data will be available for final forecast 12 12

California Energy Commission Hydrogen Station Cost Breakdown Representative Station, 2015 Offsite SMR Natural Gas $ 0. 60 Hydrogen Production $ 1. 20 Compression $ 4. 00 Transport $ 2. 00 Retail at 50% Station Capacity $ 6. 00 Sales Tax $ 1. 20 Retail Price $ Cost of Station is Single Biggest Component 15. 00/kg 13 13

California Energy Commission Hydrogen Common Assumptions • Cost of building retail stations is uniform and is lowest available with current technologies • All stations use offsite Steam Methane Reformation (SMR) and transport hydrogen to the retail station • All stations use biomethane as feedstock to produce renewable hydrogen - implicitly incorporated in scenarios • Station lifetime of ten years and no replacement costs of any kind are necessary—this may be overoptimistic 14 14

California Energy Commission Preliminary and Proposed Hydrogen Price Case Comparisons $22 $20 Real Hydrogen Price, 2015$ $18 $16 $14 $12 $10 $8 Hydrogen prices now reflect real-world data and show significant increase $6 $4 $2 $0 2015 2016 2017 2018 2019 2020 2021 2023 2024 High price scenario ($/kg) Mid price scenario ($/kg) Low price scenario ($/kg) old hydrogen high price old hydrogen mid price old hydrogen low price Source: California Energy Commission and U. S. Energy Information Administration 15 2022 2025 2026 15

California Energy Commission Hydrogen Low-Price Case 1. Cost of building retail stations is constant and funded with grants for two-thirds of the construction costs 2. Retail stations pay their own operating costs after receiving operation and maintenance (O&M) grants for two years 3. Retail station usage increases to 80 percent of capacity over five years 4. It may be possible to improve on this scenario using NREL’s H 2 FAST 16 16

California Energy Commission Hydrogen Mid-Price Case 1. Cost of building retail stations remains the same and some construction costs continue to be funded with grants 2. Retail stations pay their own operating costs after receiving operation and maintenance (O&M) grants for two years 3. Retail station usage increases to 70 percent of capacity over eight years 17 17

California Energy Commission Hydrogen High-Price Case High Station Counts Drive High Retail Hydrogen Prices For a given number of vehicles Stations are used at low percentage of capacity (sales per station will be low) If number of stations grows faster than number of vehicles, cost of retail hydrogen can continue to increase Higher the number of stations, fewer stations will sell enough fuel to pay their own costs Fewer stations that can pay their own costs, greater the need for O&M grants 18 18

California Energy Commission Mid Energy Price Case Summary Proposed Revised Price 1600 1400 1200 Cents per Gallon (Real $2012) Cents per Gallon (Real 2012$) Preliminary Retail Price 1000 800 600 400 Single largest relative change are the Hydrogen prices 1000 800 600 400 200 0 2015 2017 2019 2021 2023 2025 0 201520162017201820192020202120222023202420252026 Gasoline Diesel Transportation Hydrogen Jet Fuel 19 19

California Energy Commission High Energy Price Case Summary Preliminary Retail Price Proposed Retail Price 2500 2000 Wider variation across all fuels reflected in high case. Cents per Gallon (Real $2012) Cents per Gallon (Real 2012$) 2000 1500 1000 500 0 2015 20 1500 0 201520162017201820192020202120222023202420252026 2017 2019 2021 2023 2025 Gasoline Diesel Transportation Hydrogen Jet Fuel Source: California Energy Commission and U. S. EIA

California Energy Commission Low Energy Price Case Summary Proposed Retail Price Preliminary Retail Price 1600 1400 Wider variation across all fuels reflected in low case. 1200 1000 800 600 400 200 0 2015 21 Cents per Gallon (Real $2012) Cents per Gallon (Real 2012$) 1400 2017 2019 2021 2023 2025 0 201520162017201820192020202120222023202420252026 Gasoline Diesel Transportation Hydrogen Jet Fuel Source: California Energy Commission and U. S. EIA

California Energy Commission Questions? Comments? Ysbrand van der Werf Supply Analysis Office Energy Assessments Division Ysbrand. vander. Werf@energy. ca. gov / 916 -651 -4531 22 22

California Energy Commission H 2 FAST Inputs That Differ from Defaults Input Number of stations Common to all scenarios 1 Input Installation time 0 Station type Delivered gas Capital Cost 1, 900, 000 Road tax 0 Installation Cost 200, 000 Sales tax 8% Maintenance Cost 80, 000 Project operational life 12 years Operating Incentives 200, 000 Debt/equity financing 0. 33 Operating incentives decay rate Operating incentives sunset Price of hydrogen at project onset 50% 2 years Cost of delivered hydrogen ($/kg) Common to all scenarios Debt type Period of loan $7. 50 One-time loan 12 years $15 23 23

California Energy Commission H 2 FAST Inputs That Differ by Scenario Input high-price mid-price low-price 100 180 Capital Cost $1, 900, 000 $2, 500, 000 Capital Incentives $1, 400, 000 $1, 800, 000 4. 75% 1. 9% -1. 0% 10 years 8 years 5 years 60% 70% 80% Total Capacity (kg/day) Price escalation rate Demand ramp-up Long-term nominal utilization 24 24