May 18, 2016 - 2%. 4%. 49%. 15%. 1%. Nuclear. Oil. Coal. Natural Gas. Hydro .... Vermont's standard recognizes all forms of renewable energy, and is.
MAY 18, 2016
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SALT LAKE CITY, UTAH
Changing Resources: How New England Has Responded to Challenges Associated with the Expanded Role of Natural Gas Western Electricity Coordinating Council Western Reliability Summit
Gordon van Welie PRESIDENT & CHIEF EXECUTIVE OFFICER
ISO-NE PUBLIC
For Over a Decade the Region Has Been Working on Gas-Related Challenges and Will Continue to Do So • New England’s generation fleet is changing rapidly, and older fossilfueled resources are retiring • The region’s reliance on natural gas for power generation is increasing and may continue to increase with retirements and the addition of new gas resources • The ISO has made, and as necessary will continue to make, market rule changes and operational enhancements to meet natural gas-related challenges ISO-NE PUBLIC
NPCC
Northeast Power Coordinating Council
Western Interconnection
Eastern Interconnection
ERCOT
2
FRAMING THE CHALLENGE
ISO-NE PUBLIC
3
Region Has Not Developed Gas Pipeline Infrastructure to Keep Pace with Growth of Gas-fired Generation Cumulative New Generating Capacity in New England (MW)
Note: New generating capacity for years 2016 – 2018 includes resources clearing in recent Forward Capacity Auctions ISO-NE PUBLIC
4
New England Has Seen 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 Percent of Total Electric Energy Production by Fuel Type (2000 vs. 2015) 2000
2015 49%
31% 30% 22%
18% 2%
Nuclear
Oil
15%
4% Coal
Natural Gas
13% 15% Hydro and Other Renewables
2% 1% Pumped Storage
Source: ISO New England Net Energy and Peak Load by Source Other renewables include landfill gas, biomass, other biomass gas, wind, solar, municipal solid waste, and miscellaneous fuels ISO-NE PUBLIC
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Natural Gas and Wholesale Electricity Prices Are Linked
Fuel $/MMBtu
Electric Energy $/MWh
Monthly Average Natural Gas and Wholesale Electricity Prices in New England
ISO-NE PUBLIC
6
Regional Power Plant Air Emissions Have Declined with Changes in the Fuel Mix Reduction in Aggregate Emissions (ktons/yr) Year
NOx
SO2
CO2
2001
59.73
200.01
52,991
2014
20.49
11.68
39,317
% Reduction, 2001–2014
66%
94%
26%
Reduction in Average Emission Rates (lb/MWh) Year
NOx
SO2
CO2
1999
1.36
4.52
1,009
2014
0.38
0.22
726
% Reduction, 1999–2014
72%
95%
28%
Source: 2014 ISO New England Electric Generator Air Emissions Report, January 2016 ISO-NE PUBLIC
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New England Shifts to Coal and Oil in Cold Weather Winter 2014‒2015 Fossil Fuel Mix
250,000
Oil Coal
Daily Energy MWh
200,000
Natural Gas / LNG
150,000
100,000
50,000
0 D
b
1 2014
J
1 2015
ISO-NE PUBLIC
F b
1 2015
8
The Region Has Lost—and Is at Risk of Losing— Substantial Non-Gas-Fired Resources Major Generator Retirements: •
Salem Harbor Station (749 MW) – 4 units (coal & oil)
•
Vermont Yankee Station (604 MW) – 1 unit (nuclear)
•
Norwalk Harbor Station (342 MW) – 3 units (oil)
•
Brayton Point Station (1,535 MW) – 4 units (coal & oil)
•
Mount Tom Station (143 MW) – 1 unit (coal)
•
Pilgrim Nuclear Power Station (677 MW) – 1 unit (nuclear)
•
Additional retirements are looming ISO-NE PUBLIC
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Infrastructure Will Be Needed to Deliver Energy from Proposed Resources All Proposed Generation
Wind Proposals
Developers are proposing to build 13,000 MW of generation, including nearly 8,200 MW of gas-fired generation and more than 4,200 MW of wind
Natural gas 63% Wind 33%
ME ME 3,080 3,641 MW VT 30 VT MW 47
MW
NH MW NH 6591 MW MW MA 480 MA 464MW MW
Other 4% Source: ISO Generator Interconnection Queue (January 2016) FERC Jurisdictional Proposals Only ISO-NE PUBLIC
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Investments in Shared Natural Gas Infrastructure Face Regulatory Challenges • Gas pipeline capacity is built only if it is contracted for directly – Does not have a socialized cost-recovery mechanism similar to ‘open access’ electric transmission investments
• Merchant generators have cheaper alternatives, and pipeline developers cannot capture the scarcity rents, which dissipate once the infrastructure is built – States, therefore, are trying to mimic the model for transmission by requiring EDCs to contract for pipeline capacity to serve generators – FERC is considering Spectra Energy’s proposal for a capacity release mechanism (subject of a May 9 technical conference) ISO-NE PUBLIC
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States Have Set Goals to Increase Renewable Energy and Reduce Greenhouse Gas Emissions 59%* 20%
10%
11%
12.5%
15%
Percent Reduction of Greenhouse Gas (GHG) Emissions Below 1990 Levels* by 2050 (economy wide) ME*
ME
NH
RI
MA
CT
NH
RI
MA
CT*
80%
80%
VT
VT
State Renewable Portfolio Standard (RPS) for Class I or New Renewable Energy by 2020 75% - 80% * Vermont’s standard recognizes all forms of renewable energy, and is unique in classifying large-scale hydro as renewable.
80%
85%
75%
* Connecticut’s goal is tied to 2001 levels. Maine’s goal is tied to 2003 levels. ISO-NE PUBLIC
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Flexible Resources Will be Needed to Balance Increasing Levels of Variable Generation Solar
Wind
(MW)
(MW)
4,200 3,200
1,300 900
Existing
PV thru 2015
Proposed
Nameplate capacity of existing wind resources and proposals in the ISO-NE Generator Interconnection Queue; megawatts (MW). ISO-NE PUBLIC
PV in 2025
2016 ISO-NE Solar PV Forecast, nameplate capacity, based on state policies.
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ISO-NE’s Capacity Market Has Attracted New Peaking and Combined Cycle Gas Generation to Load Centers • 3,000 MW of gas-fired generation have come forward in recent auctions (FCAs 7–10) with commitments to be available in 2017–2019
FCA-10: Major new gas-fired resources
• A mix of existing and new resources cleared in FCA-10, including three new, gas-fired, dual-fuel power plants totaling 1,300 MW • FCA-10 also attracted renewable resources, demand resources and imports: Solar: 40 MW Wind: 27 MW Hydro: 2 MW Demand resources: 2,746 MW (including 371 MW of new resources) – Imports from New York/Canada: 1,450 MW – – – –
ISO-NE PUBLIC
333 MW gas-fired peaker on Cape Cod
485 MW natural gas plant in Rhode Island 484 MW natural gas plant in Southwest CT
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“Public Policy” Electric Transmission Infrastructure Faces Regulatory Challenges • Reliability investments have worked well, resulting in $12 billion of completed and planned investment. Federal, ISO, and state interests are generally aligned and costs are socialized. • Additional transmission investments are needed to achieve the region’s clean energy goals, but regulatory authority is split between two jurisdictions: – The federal government (FERC) oversees regional transmission rates, cost allocation, and the “public policy” transmission framework, with ISO as regional administrator. – The states control siting and are obligated by law to meet clean energy goals, but hold different views on cost allocation approaches. Setting aside cost allocation issues, the New England states, in an appeal to the D.C. Circuit Court, argue that FERC unlawfully expanded the scope of Order 1000 and interfered with the states’ implementation of their own laws. ISO-NE PUBLIC
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Opposition to Infrastructure Development • Environmental groups and affected landowners have mounted fierce opposition to certain natural gas and transmission infrastructure projects • Many elected officials within the region (at the local, state and federal level) have voiced opposition to natural gas and certain transmission infrastructure projects • MA, CT and RI are considering long term contracting for significant quantities of renewable energy. This will require additional transmission investment. ISO-NE PUBLIC
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MARKET RULE CHANGES AND OPERATIONAL IMPROVEMENTS
ISO-NE PUBLIC
ISO-NE INTERNAL USE
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Region Is Taking Action to Improve Electric Market Efficiency and Enhance Gas-Electric Coordination Recent Improvements • Day-Ahead Energy Market Timeline Shift • Better Coordination and InformationSharing with Natural Gas Pipeline Operators
Winter Reliability Programs
Longer-Term • Pay-forPerformance Capacity Market Enhancements
• Energy Market Offer Flexibility ISO-NE PUBLIC
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Recent Improvements: Day-Ahead Energy Market Timeline Shift • Moved the Day-Ahead Energy Market timelines and moved the Resource Adequacy Analysis (RAA) process to better match the natural gas nomination and confirmation cycles • Changes facilitate supplemental commitment of oil and coal generators if necessary and provide gas-fired generators more time to line up fuel for the operating day Day-Ahead Energy Market Process/Step
Previous Deadline
New Deadline
Participants submit bids to supply power
12 p.m.
10 a.m.
ISO posts day-ahead results
4 p.m.
12:00 to 1:30 p.m.
4 p.m. to 6 p.m.
From time results are posted to 2 p.m.
10 p.m.
5 p.m.
Re-offer period for participants to submit revisions ISO completes RAA process
ISO-NE PUBLIC
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Recent Improvements: Energy Market Offer-Flexibility • Beginning December 3, 2014, market rule changes went into effect that provide greater flexibility for resources to structure and modify their supply offers in both the day-ahead and realtime markets • Previous market structure provided limited ability for resources to alter their supply offers to reflect changes in natural gas prices • Generators now have greater flexibility to reflect changing fuel costs into the market through hourly (rather than daily) offers and intra-day offer modifications (rather than only prior to the operating day) ISO-NE PUBLIC
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Recent Improvements: Better Coordination and Information-Sharing with Natural Gas Pipeline Operators • ISO works with the pipelines to coordinate generator and pipeline maintenance schedules • The ISO developed a gas usage tool which estimates the remaining gas pipeline capacity, by individual pipe, for use by ISO-NE system operators to see if the electric sector demand can be accommodated ISO-NE PUBLIC
21
Winter Reliability Program Is the Bridge to Capacity Market Changes • The Winter Reliability Program serves as a stop-gap measure until the longer-term Pay-for-Performance capacity market changes go into effect on June 1, 2018 • Program addresses regional winter reliability challenges created by New England’s increased reliance on natural gasfired generation and lack of adequate gas infrastructure • Resources participating in the program provide incremental energy inventory during the winter months to help ensure reliable system conditions • The program focuses on oil inventory (including dual-fuel generation), LNG and demand response ISO-NE PUBLIC
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Pay-for-Performance (PFP) Helps Improve Reliability While Ensuring Resource Adequacy • PFP is a two-part settlement in which a base payment is set in the Forward Capacity Auction (FCA), and a performance payment is determined during the delivery year • Performance payment may be positive or negative depending on resource performance during a shortage condition
– Over-performing resources are paid a premium through revenue transfers from under-performing resources
• PFP creates an incentives for investment that is:
– Low-cost and highly reliable (nearly always operating); or – Highly flexible and highly reliable (gets online quickly and reliably) ISO-NE PUBLIC
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Region Identified Gas-Related Challenges and Continues to Make Operational and Market Enhancements • New England has been at the forefront of natural gas-electric system challenges for more than a decade • Enhanced coordination and communication with the natural gas industry has been essential to ensure reliable operation of the bulk electric system • ISO New England has worked with regional stakeholders to develop market enhancements to improve generator performance and strengthen grid reliability • Challenges will remain as additional non-gas-fired resources retire and gas-fired generation proposes to enter the region ISO-NE PUBLIC
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ISO-NE PUBLIC
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