OGE Energy : OG&E 2024 Integrated Resource Plan

INTEGRATED RESOURCE PLAN

OKLAHOMA GAS & ELECTRIC

PREPARED 2024

OGE ENERGY CORP

OG&E submits this Integrated Resource Plan (IRP) in compliance with requirements established pursuant to the Oklahoma Corporation Commission's (OCC) Electric Utility Rules OAC 165:35-37 and the Arkansas Public Service Commission's (APSC) Resource Planning Guidelines for Electric Utilities.

EXECUTIVE SUMMARY

OG&E plans to meet future capacity needs through a balanced portfolio of solar resources and hydrogen-capable combustion turbines that provides affordable costs for customers while satisfying IRP objectives. OG&E will also seek market opportunities for immediate capacity needs.

Over the next five years, load growth, unit retirements, and changes in Resource Adequacy policy will result in the need for additional generation capacity to meet OG&E's planning reserve requirements. OG&E has significant generation capacity needs in the near term, as shown in the table below.

OG&E Planning Reserve Margin and Needed Capacity (MW unless noted)

OG&E's prior IRP, prepared in 2021, demonstrated the projected need for additional capacity resources at that time. Since 2021, OG&E's capacity needs have grown further due to increased capacity requirements specified by the Southwest Power Pool (SPP) and load growth in the OG&E service area. Looking forward, the need for investment in generation resources could continue to grow as SPP further enhances policies addressing Resource Adequacy, electrification contributes to expanding load growth in the region, and environmental regulations change.

The IRP analysis contained in this report evaluates a range of potential generation portfolios to meet the capacity needs and determines a balanced portfolio of solar resources and combustion turbines is the preferred plan to satisfy expected capacity needs. This plan helps maintain system resiliency and reliability, advances fuel and technology diversity of the generation fleet, improves operational flexibility, is scalable, and expands OG&E's renewable generation portfolio. Adding zero-emitting technologies along with high-efficiency combustion turbines that enable and support renewable generation growth are important building blocks to meet expectations for cleaner energy in the future. Additionally, advances in combustion turbine technology are expected to further expand the capability to utilize hydrogen as a fuel, providing future emission and fuel diversity benefits.

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OG&E's 2024 IRP is designed to meet existing environmental obligations while also considering future updates to environmental regulations and addressing, to the extent possible, uncertainties in the environmental regulatory landscape. In particular, OG&E's fleetwide compliance obligations under the recent Good Neighbor Plan, which revises the Cross State Air Pollution Rule (CSAPR) ozone-season Nitrogen Oxides (NOx) trading program for Electric Generating Units (EGUs), are uncertain due to pending litigation. Depending on the outcome of litigation, compliance may require a range of potential modifications to existing units and other necessary actions. OG&E retained the services of 1898 & Co., a part of Burns & McDonnell (1898 & Co.), to assist with the analysis and modeling of the 2024 IRP. OG&E and 1898 & Co. analyzed resource portfolios and various fleet-wide compliance plans consistent with the current understanding of this rule.

OG&E will issue a Request(s) for Proposals (RFP) for resources to meet the capacity requirements and other IRP objectives of the company and to seek future generation that increases efficiency, diversifies our fuel mix by advancing cleaner generation, and maintains affordability and reliability for OG&E's customers. OG&E will also continue to monitor environmental regulation developments, including those from litigation, and take actions if deemed necessary.

OG&E Action Plan

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Table of Contents

I. Introduction .................................................................................................................. 1

II. IRP Objectives and Process ........................................................................................ 2

III. Current and Future Risks ........................................................................................... 3

III. A. Current Resource Adequacy Policy Risks .......................................................... 3

III. A. 1. Resource Adequacy Policy Risk Overview ................................................. 3

III. B. Future Resource Adequacy Policy Risks ........................................................... 4

III. B. 1. Winter Resource Adequacy Requirement ................................................... 4

III. B. 2. Demand Response Program Accreditation ................................................. 5

III. B. 3. Fuel Assurance Policy ................................................................................ 5

III. B. 4. Ramping Capability Requirement ............................................................... 5

III. C. Environmental Compliance Risk ........................................................................ 5

III. C. 1. Compliance with Current Environmental Regulations ................................. 6

III. C. 2. Potential Environmental Compliance Risk .................................................. 6

IV. Assumptions ............................................................................................................ 11

IV. A. Load Forecast .................................................................................................. 11

IV. B. Planning Reserve Margin ................................................................................. 12

IV. C. Generation Resources ..................................................................................... 12

IV. C. 1. Existing Resources .................................................................................. 12

IV. C. 2. Resource Changes in the Ten-Year Planning Horizon ............................. 14

IV. C. 3. Future Resource Options ......................................................................... 16

IV. C. 4. Resource Location Considerations .......................................................... 18

IV. D. Fuel Price Projections ...................................................................................... 19

IV. E. Risk Assessment ............................................................................................. 19

IV. E. 1. Sensitivities .............................................................................................. 20

IV. E. 2. Scenarios ................................................................................................. 21

IV. E. 3. Sensitivity and Scenario Summary ........................................................... 23

IV. F. Integrated Marketplace Locational Marginal Prices .......................................... 24

IV. G. Alternate Policy Future Cases ......................................................................... 25

IV. G. 1. CSAPR Compliance Future Case ............................................................ 25

IV. G. 2. Status Quo Future Case .......................................................................... 27

IV. G. 3. Summary of Futures, Scenarios, and Sensitivities ................................... 27

V. Resource Planning Modeling and Analysis ............................................................... 30

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V. A. Planning Reserve Margin .................................................................................. 30

V. B. Modeling Methodology ...................................................................................... 30

V. C. Portfolio Development ...................................................................................... 31

V. D. Expected Future Case Analysis ........................................................................ 32

V. E. Portfolio Risk Assessment ................................................................................ 34

V. F. CSAPR Compliance Future Case Analysis ....................................................... 41

V. G. Status Quo Future Case Analysis ..................................................................... 45

V. H. Qualitative Considerations ................................................................................ 53

V. H. 1. Operational Flexibility and Resiliency Benefits .......................................... 53

V. H. 2. Fuel and Technology Diversity and Reduced Environmental Footprint ..... 53

VI. OG&E 2024 IRP Conclusion .................................................................................... 55

VII. Action Plan .............................................................................................................. 57

VIII. Schedules .............................................................................................................. 58

VIII. A. Electric Demand and Energy Forecast .......................................................... 58

VIII. B. Existing Generation Resources ..................................................................... 59

VIII. C. Transmission Capability and Needs .............................................................. 60

VIII. D. Needs Assessment ........................................................................................ 61

VIII. E. Resource Options .......................................................................................... 62

VIII. F. Fuel Procurement and Risk Management Plan .............................................. 62

VIII. G. Action Plan .................................................................................................... 62

VIII. H. Requests for Proposals ................................................................................. 63

VIII. I. Modeling Methodology and Assumptions ........................................................ 63

VIII. J. Transmission System Adequacy .................................................................... 64

VIII. K. Resource Plan Assessment ........................................................................... 65

VIII. L. Proposed Resource Plan Analysis ................................................................. 65

VIII. M. Physical and Financial Hedging .................................................................... 65

IX. Appendices .............................................................................................................. 66

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List of Figures

Figure 1 - OG&E Service Area ....................................................................................... 1

Figure 2 - Integrated Resource Planning Seven Step Process ...................................... 2

Figure 3 - Renewables Nameplate Overnight Cost Projections in 2023$ ($/kWAC) ...... 18

Figure 4 - EIA 2023 Annual Energy Outlook Fuel Projections (Nominal $) ................... 19

Figure 5 - Natural Gas Sensitivities .............................................................................. 20

Figure 6 - Solar Capital Cost Sensitivities .................................................................... 21

Figure 7 - Scenario Fuel Projections ............................................................................ 21

Figure 8 - Energy Evolution Impact to Load ................................................................. 22

Figure 9 - SPP Coal Capacity Comparison .................................................................. 23 Figure 10 - Base Case and Sensitivity Average Annual OG&E Load LMP Comparison

...................................................................................................................................... 24

Figure 11 - Base Case and Scenario Average Annual OG&E Load LMP Comparison 25

Figure 12 - Customer Cost Components ...................................................................... 31

Figure 13 - New Resource Option Earliest Availability ................................................. 32

Figure 14 - Natural Gas Price Sensitivity Assessment ................................................. 35

Figure 15 - CO2 Tax Sensitivity Assessment ................................................................ 36

Figure 16 - Solar Capital Cost Sensitivity Assessment ................................................. 36

Figure 17 - Fuel Supply Scenario Assessment ............................................................. 37

Figure 18 - Energy Evolution Scenario Assessment ..................................................... 38 Figure 19 - Portfolio Cost including Load and Existing Generation Units with Natural Gas

Sensitivity ...................................................................................................................... 39 Figure 20 - Portfolio Cost including Load and Existing Generation Units with CO2 Tax

Sensitivity and Energy Evolution Scenario .................................................................... 40

Figure 21 - CSAPR Future Case Natural Gas Price Sensitivity Assessment ............... 43

Figure 22 - CSAPR Future Case CO2 Tax Sensitivity Assessment .............................. 43

Figure 23 - CSAPR Future Case Fuel Supply Scenario Assessment ........................... 44

Figure 24 - CSAPR Future Case Energy Evolution Scenario Assessment ................... 44

Figure 25 - Status Quo Future Case Natural Gas Price Sensitivity Assessment .......... 47

Figure 26 - Status Quo Future Case CO2 Tax Sensitivity Assessment ........................ 48

Figure 27 - Status Quo Future Case Solar Capital Cost Sensitivity Assessment ......... 48

Figure 28 - Status Quo Future Case Fuel Supply Scenario Assessment ..................... 49

Figure 29 - Status Quo Future Case Energy Evolution Scenario Assessment ............. 50 Figure 30 - Status Quo Future Case Portfolio Cost including Load and Existing

Generation Units with Natural Gas Sensitivity ............................................................... 51 Figure 31 - Status Quo Future Case Portfolio Cost including Load and Existing

Generation Units with CO2 Tax Sensitivity and Energy Evolution Scenario .................. 52

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List of Tables

Table 1 - Energy Forecast (GWh) ................................................................................ 11

Table 2 - Peak Demand Forecast (MW) ....................................................................... 11

Table 3 - OG&E Existing Thermal Resources .............................................................. 13

Table 4 - OG&E Existing Renewable Resources ......................................................... 13

Table 5 - Existing Power Purchase Agreements .......................................................... 14

Table 6 - Existing Capacity Purchase Agreements ...................................................... 14

Table 7 - Resource Options in 2023$ ........................................................................... 17

Table 8 - Sensitivity and Scenario Summary ................................................................ 23

Table 9 - CSAPR Compliance Options ......................................................................... 27

Table 10 - Summary of Futures, Scenarios and Sensitivities ....................................... 29

Table 11 - Capacity Position (MW unless noted) .......................................................... 30

Table 12 - Portfolios with Base Case, 30-year NPVCC ($M) ........................................ 33

Table 13 - Sensitivity, 30-year NPVCC ($M) ................................................................ 35

Table 14 - Scenario, 30-year NPVCC ($M) .................................................................. 37

Table 15 - OG&E Preferred Plan .................................................................................. 38

Table 16 - CSAPR Future Case Portfolios with Base Case, 30-year NPVCC ($M) ...... 42

Table 17 - CSAPR Future Case Sensitivity, 30-year NPVCC ($M) .............................. 43

Table 18 - CSAPR Future Case Scenario, 30-year NPVCC ($M) ................................ 44

Table 19 - Status Quo Future Case Capacity Position (MW unless noted) .................. 45

Table 20 - Status Quo Future Case Portfolios with Base Case, 30-year NPVCC ($M) 46

Table 21 - Status Quo Future Case Sensitivity, 30-year NPVCC ($M) ......................... 47

Table 22 - Status Quo Future Case Scenario, 30-year NPVCC ($M) ........................... 49

Table 23 - OG&E Status Quo Future Case Preferred Plan .......................................... 50

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List of Acronyms

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I. Introduction

OG&E was formed in 1902 and is Oklahoma's oldest and largest investor-owned electric utility. OG&E serves more than 894,000 customers in 267 towns and cities in an approximately 30,000 square mile area of Oklahoma and western Arkansas. OG&E's service area is shown inFigure 1.

Figure 1 - OG&E Service Area

This IRP Report and Appendices have been completed following the Oklahoma Corporation Commission (OCC) Electric Utility Rules and APSC Resource Planning Guidelines for Electric Utilities. Sections I - VII present the IRP objectives and process, assumptions, resource planning modeling and analysis, and five-year action plan. Section VIII concludes the report with the following schedules as prescribed by Oklahoma Corporation Commission rule OAC 165:35-37-4(c):

• A. Electric demand and energy forecast

• B. Forecast of capacity and energy contributions from existing and committed supply-and demand-side resources

• C. Description of transmission capabilities and needs covering the forecast period

• D. Assessment of the need for additional resources

• E. Description of the supply, demand-side and transmission options available to the utility to address the identified needs

• F. Fuel procurement, purchased power procurement, and risk management plans

• G. Action plan identifying the near-term (i.e., across the first five (5) years) actions

• H. Proposed RFP(s) documentation, and evaluation

• I. Technical appendix for the data, assumptions, and descriptions of models

• J. Description and analysis of the adequacy of its existing transmission system

• K. Assessment of the need for additional resources to meet reliability, cost and price, environmental, or other criteria

• L. An analysis of the utility's proposed resource plan

• M. Description and analysis of the utility's consideration of physical and financial hedging to determine the utility's ability to mitigate price volatility

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Disclaimer

OGE Energy Corporation published this content on 29 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 April 2024 18:50:06 UTC.