6 th Annual Natural Gas Conference Focus on the Future Power - - PowerPoint PPT Presentation

ISO-NE PUBLIC

6th Annual Natural Gas Conference Focus on the Future

Power Generation in the Northeast

Moderator: Jim Cohen, Verrill Dana, LLP Panelists: Eric Johnson, ISO-NE Heather Hunt, NESCOE Dan Dolan, New England Power Generators Association

ISO-NE PUBLIC

O C T O B E R 1 8 , 2 0 1 8 | F A L M O U T H , M E

Eric D. Johnson

D I R E C T O R , E X T E R N A L A F F A I R S

Verrill Dana Natural Gas: Focus on the Future Workshop

Power Generation in the Northeast

ISO-NE PUBLIC

Dramatic Changes in the Energy Mix

The fuels used to produce the region’s electric energy have shifted as a result of economic and environmental factors

31% 22% 18% 15% 7% 8% 31% 1% 2% 48% 8% 11%

Nuclear Oil Coal Natural Gas Hydro Renewables

2000 2017

Percent of Total Electric Energy Production by Fuel Type (2000 vs. 2017)

Source: ISO New England Net Energy and Peak Load by Source Renewables include landfill gas, biomass, other biomass gas, wind, grid-scale solar, municipal solid waste, and miscellaneous fuels. This data represents electric generation within New England; it does not include imports or behind-the-meter (BTM) resources, such as BTM solar.

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Lower-Emitting Sources of Energy Supply Most of New England’s Electricity

Natural Gas, 41% Nuclear, 26% Imports, 17% Renewables, 9% Hydro, 7% Coal, 1% Oil, 1%

Renewables include landfill gas, biomass, other biomass gas, wind, grid-scale solar, municipal solid waste, and miscellaneous fuels. Note:

2017

Net Energy for Load: 121,142 GWh

• In 2017, most of the

region’s energy needs were met by natural gas, nuclear, imported electricity (mostly hydropower from Eastern Canada), renewables, and other low- or non-carbon- emitting resources

• Region is transitioning

away from older coal and oil resources

ISO-NE PUBLIC

Electric Energy $/MWh Fuel $/MMBtu $0 $5 $10 $15 $20 $25 $30 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180

Wholesale Electricity at New England Hub (Real-Time LMP) Natural Gas

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Natural Gas and Wholesale Electricity Prices Are Linked

Monthly average natural gas and wholesale electricity prices at the New England hub

Hurricanes hit the Gulf Before the Recession and Marcellus Shale gas boom Winter 2012/2013 Winter 2013/2014 Winter 2014/2015 Winter 2017/2018

ISO-NE PUBLIC

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Natural Gas Is the Dominant Fuel Source for New Generating Capacity in New England

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Natural Gas Nuclear (uprate) Wind Solar Biomass Hydro Fuel Cell Oil

Note: New generating capacity for years 2018 – 2021 includes resources clearing in recent Forward Capacity Auctions.

Cumulative New Generating Capacity in New England (MW)

ISO-NE PUBLIC

• Few interstate pipelines and liquefied

natural gas (LNG) delivery points

• Regional pipelines are:

– Built to serve heating demand, not power generation – Running at or near maximum capacity during winter

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But the Natural Gas Delivery System Is Not Keeping Up with Demand

Pipelines LNG facilities Marcellus shale

Source: ISO New England

ISO-NE PUBLIC

10 Closed or Retiring Generation at Risk

Since 2013, More Than 4,600 MW of Generation Have Retired or Announced Plans for Retirement in the Coming Years

• More than 5,000 MW of

remaining coal and oil are at risk of retirement

• These resources have played

a critical role in recent winters when natural gas supply is constrained in New England

ISO-NE PUBLIC

Wind Power and Natural Gas Dominate New Resource Proposals in the ISO Interconnection Queue

Note: Some natural gas proposals include dual-fuel units (oil); some wind and solar proposals include battery storage; megawatts represent nameplate capacity ratings; megawatts have been rounded for each proposal. Source: ISO Generator Interconnection Queue (August 2018) FERC and Non-FERC Jurisdictional Proposals

11 Wind 7,948, 59% Natural Gas 3,092, 23% Solar 1,533, 11% Battery Storage 845, 6% Hydro 74, 1% Biomass 37, <1% Fuel Cell 15, <1%

State Megawatts (MW) Massachusetts 5,737 Maine 4,568 Connecticut 1,630 Rhode Island 1,178 New Hampshire 243 Vermont 188 Total 13,544

Proposals by Type Proposals by State

TOTAL 13,544 MW

ISO-NE PUBLIC

Energy-Efficiency and Renewable Resources Are Trending Up in New England

1,300 7,900 Existing Proposed

Wind

(MW)

Nameplate capacity of existing wind resources and proposals in the ISO-NE Generator Interconnection Queue; some wind proposals include battery storage.

2,400 5,800 PV thru 2017 PV in 2027

Solar

(MW)

Final 2018 ISO-NE PV Forecast, AC nameplate capacity from PV resources participating in the region’s wholesale electricity markets, as well as those connected “behind the meter.”

2,500 5,200 EE thru 2017 EE in 2027

Energy Efficiency

(MW)

Final 2018 CELT Report, EE through 2017 includes EE resources participating in the Forward Capacity Market (FCM). EE in 2027 includes an ISO-NE forecast of incremental EE beyond the FCM.

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ISO-NE PUBLIC

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Developers Are Proposing Large-Scale Transmission Projects to Help Deliver Clean Energy to Load Centers

• Developers are proposing 17 elective

transmission upgrades (ETUs) to help deliver nearly 14,000 MW of clean energy

– Mostly Canadian hydro and onshore wind from northern New England

• Wind projects make up 59% of proposed

new power resources, but most are remote

• Massachusetts has plans to contract for

1,600 MW of offshore wind

Map is representative of the types of projects announced for the region in recent years

Source: ISO Interconnection Queue (August 2018)

ISO-NE PUBLIC

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ISO-NE PUBLIC

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Power Generation in the Northeast: Fuel Security

Natural Gas Conference October 2018

Fa Fast-tracking Fuel el Sec Securi rity ty

Chapter 1. Now. Exceptionally accelerated litigation over what to pay Exelon’s Mystic units and LNG terminal to prevent 2022 retirement

• Decision expected by end of 2018

Chapter 2. Short-Term. FERC considering ISO-NE fast-tracked proposal seeking authority to offer cost-of-service agreements to resources that ISO-NE deems necessary for fuel security

• Decision expected by end of 2018
• Legal basis to approve a contract between ISO-NE and Exelon (ch. 1)

Chapter 3. Long-Term. ISO-NE in stakeholder process to develop market-based fuel security solution(s) - incremental to Pay for Performance

• ISO-NE FERC filing by summer 2019

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“Chap Chapter 1” 1”: Exelon’s M Mystic 8 8 & 9 9 and nd Ev Everett (202

022-20 2024 24)

• If FERC concludes that ISO-NE may offer a cost-of-

service agreement under the banner of fuel security to a resource that wants to retire, critical to protect consumers’ economic interests and impacts on electricity markets in the process

• Actively litigating ISO-NE and Exelon’s negotiated

agreement including, for example, capital expenses, rates of return, management costs of LNG supply business, a true-up mechanism and “clawback”

• No consumer cost impact analysis to inform consideration of filed

agreement and changes to pro forma

• NESCOE sought reconsideration on the schedule, which accelerated

pace benefits Exelon

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“Chap Chapter 2” 2”: Co Cost-of-Ser ervi vice e Agreem eemen ent A Author hority

• ISO-NE proposal for contracting authority under the

banner of fuel security is new and proposed to be temporary (2022-2025)

• ISO-NE has such authority in connection with transmission security

(until ISO-NE develops a transmission solution)

• ISO-NE’s Fuel Security Analysis will determine

whether a resource is needed for fuel security

• Fuel security need arises when ISO-NE’s model indicates there is

likely to be insufficient energy to operate the system through cold weather in winter

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“Chap Chapter 2” 2”: Fue uel S Secur urity Co Cost-of

• f

Service A e Agreem eemen ent T Tariff

• NESCOE would prefer a course that avoids clearing a runway around competitive

markets for more cost-of-service agreements. If FERC deems continuing cost-of- service agreement authority to be necessary, it should be effective for the shortest period and subject to an exceptionally high bar*

• Fuel security analysis trigger is more conservative than resource adequacy planning
• ISO analysis should assume states generally satisfy state renewable and clean energy laws
• Authority should expire in 2024, not 2025
• Cost-of-service agreement costs should be allocated in the manner that is most

cost-effective for consumers

• Based on transmission charge recovery rather than on real-time load obligation
• Going forward, ISO-NE should provide consumer cost analysis of changes it

proposes or accepts to the pro forma cost-of-service agreement

• Resources retained for fuel security should be capacity price-takers**
• If ISO-NE’s market design reflected the system’s fuel security reliability needs, the

resources retained for fuel security would receive adequate revenue and be considered economic

• Revenues earned under a cost-of-service agreement should be reflected in a resource’s

capacity offer

www.nescoe.com 20 *Connecticut does not join these positions **New Hampshire does not join the position on price-taking treatment

Some P Pri rinciples t s to Help Identify R Risk sks s and E Evalua uate e Solut utions

• ns

as provide ded d by by N NESCOE t to I ISO-NE i in April 2 2018 a and f filed with FE FERC in M May 2 2018

• The problem needs to be fully and fairly analyzed and

precisely defined

• A broad range of potential solutions need to be

considered

• Consumer interests must be the guiding factor in

evaluating potential solutions

• All potential solutions must be illuminated by a cost-

effectiveness analysis to enable assessment of whether the costs of proposed solutions have a reasonable relationship to asserted risks

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“Chap Chapter 3” 3” Jus ust Be Begi ginning S So More Unkno nowns ns t than K n Kno nowns ns

• What is the specific fuel security problem to be solved?
• NESCOE asked ISO-NE for greater specificity about the problem to

be solved in April 2018

• ISO-NE released a problem statement on October 10, 2018: “There

may be insufficient energy available to the New England power system during extended cold winter weather conditions to satisfy electricity demand, given the system’s evolving resource mix and fuel delivery infrastructure”

• What does ISO-NE mean by “energy-secure infrastructure”?
• In what year is there a resource need in order to avoid a fuel

security risk?

• What is the quantity of resources needed to achieve fuel

security?

• What is the duration of the need?

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Questions?

For more information see Resource Center at www.nescoe.com

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