2016 Economic Study (NEPOOL Scenario Analysis) New England - - PowerPoint PPT Presentation

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M A R C H 2 4 , 2 0 1 7 | B O S T O N , M A

Michael I. Henderson

D I R E C T O R , R E G I O N A L P L A N N I N G A N D C O O R D I N A T I O N

New England Restructuring Roundtable

2016 Economic Study (NEPOOL Scenario Analysis)

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Overview of Presentation

• About the Study
• Study Scenarios
• Study Metrics
• Results Summary

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About the Study

• The ISO is conducting a scenario analysis

for NEPOOL to inform regional stakeholder discussions about the effects of public policies on the future electric power system

• What’s not included in the study:

recommendations, a transmission plan, resolution of technical or market issues

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The ISO Has Organized the Study into Two Phases

• Phase I – A traditional economic study analysis that utilizes

assumptions provided by stakeholders and shows their effect on factors like the future resource mix and energy market prices (completed in 2016 )

• Phase II – The ISO will supplement Phase I in 2017 by discussing

additional market and operational issues, such as projected Forward Capacity Market prices, regulation, ramping and reserve requirements, and natural gas deliverability issues

• Study materials are available on the Planning Advisory

Committee webpage: https://www.iso- ne.com/committees/planning/planning-advisory

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NEPOOL Identified Resource Scenarios

The scenarios include a range of potential futures to address system needs as generators retire or demand grows, and fall into two general categories:

1. Closer to current system and planned development of resources (Scenarios 1,4,5) 2. Effects of large amounts of renewable/clean energy resources (Scenarios 2,3,6)

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1. RPS + Gas: Physically meet Renewable Portfolio Standards (RPS) and replace generator retirements with natural gas (combined cycle units) 2. ISO Queue: Physically meet RPS and replace generator retirements with new renewable/clean energy 3. Renewables Plus: Physically meet RPS, add renewable/clean energy, EE, PV, PEV, storage, retire old generating units 4. No Retirements (beyond FCA #10): Meet RPS with resources under development and use RPS Alternative Compliance Payments (ACP) for shortfalls, add natural gas units 5. Gas + ACPs: Meet RPS with resources under development and use ACP, replace retirements with natural gas 6. RPS + Geodiverse Renewables: Scenario 2 with a more geographically balanced mix of on/offshore wind and solar PV

NEPOOL’s Six Base Scenarios

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Highlights of Study Metrics

• Total energy production for each resource type

(terawatt-hours)

• Relative Annual Resource Cost (RARC) encompassing all

components (billions of dollars and cents per kWh)

– Systemwide production costs ($M/year) – Capital costs of resource additions – Preliminary high-level, order-of-magnitude transmission-development costs ($ billion)

• Energy market contributions to fixed costs ($/kW-year)
• Carbon Dioxide (CO2) emissions (Million tons)
• Full study contains additional metrics:

– Load-serving entity (LSE) energy expense ($ million) – Average locational marginal prices (LMPs) ($/MWh) – Transmission interface flows (% of interface ratings)

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ISO-NE INTERNAL USE

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RESULTS SUMMARY

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Key Findings

• Some scenarios yielded lower production costs and emissions,

but higher relative annual resource costs

– Would require significant transmission expansion and investment in new resources, particularly for wind power development in northern New England

• Across all scenarios, revenues from the energy market are

insufficient to cover a new resource’s fixed costs

– Would require other revenue sources to be economically viable

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Energy by Source Varies Across Scenarios in 2030

Natural gas is on the margin most of the time across all scenarios

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20 40 60 80 100 120 140 160 180 RPS+Gas ISO Queue Renewables Plus No Retirements Gas+ACP RPS+GeoDiv. Renewables Generation (TWh)

NG Wind PV Oil Coal Wood EE/DR Imports Hydro Nuclear Misc

Notes: TWh: Terawatt-hours; Unconstrained transmission shown in left column; constrained transmission shown in right column

Coal Heavy renewable, clean energy, PEVs Wind Wind

RPS+Gas ISO Queue Renewables Plus No Retirements Gas+ACP RPS+GeoDiv. Renewables

PV

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Transmission Constraints Have a Noticeable Impact in Scenarios with Heavy Onshore Wind

10 20 30 40 50 60

RPS+Gas ISO Queue Renewables Plus No Retirements Gas+ACP RPS+Geodiverse Renewables Generation (TWh)

Wind Energy Output in 2030

Wind (unconstrained transmission) Wind (constrained transmission) Wind-power output increases when transmission is unconstrained

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Comparing Total Costs of All Scenarios

• The Relative Annual Resource Cost (RARC) metric is a means
• f comparing the total costs of all six scenarios
• RARC compares the annualized carrying costs assumed for

new resource additions, order-of-magnitude transmission costs for integrating resources, and production-cost savings for each scenario

• Scenarios with more onshore wind see higher increases in

transmission costs

• Scenarios with more PV and offshore wind see higher

increases in new resource development costs

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• 4
• 2

2 4 6 8 10 12

RPS+Gas ISO Queue Renewables Plus No Retirements (Reference) Gas+ACP RPS+Geodiverse Renewables

($ billion)

Capital Cost of Developing Resources, Annualized

2030 Case with Transmission System Constrained

Battery EE Solar New Offshore Wind New Onshore Wind Combined Cycle New TX Ties Transmission Production cost SAV Total (Net) 13

Renewable Resources Have Lower Production Costs, but Higher Relative Annual Resource Costs

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• 4
• 2

2 4 6 8 10 12

RPS+Gas ISO Queue Renewables Plus No Retirements (Reference) Gas+ACP RPS+Geodiverse Renewables

($ billion)

Capital Cost of Developing Resources, Annualized

2030 Case with Transmission System Unconstrained

Battery EE Solar New Offshore Wind New Onshore Wind Combined Cycle New TX Ties Transmission Production cost SAV Total (Net) 14

Greater Transmission Investment Is Required to Unlock Onshore Wind in Maine

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• Energy market revenues are depressed by:
• Zero-cost resources
• Competition of natural gas units
• Low capacity factors of fossil units

Energy Market Revenues Are Insufficient to Cover a Resource’s Fixed Costs; Other Revenues Are Needed for Economic Viability

15 Revenue needed from other sources Contribution to fixed costs

Key:

100 200 300 400 500 600 700 800 900 1000

2030_S1_UN 2030_S2_UN 2030_S3_UN 2030_S4_UN 2030_S5_UN 2030_S6_UN

Contribution to Fixed Costs ($/kW-yr)

Annual PV Annual NGCC Annual GT Annual Off-Shore Annual Off-Shore Annual On-Shore Annual On-Shore Massachusetts PV NGCC Simple Cycle GT Offshore Wind #1 Offshore Wind #2 Massachusetts Wind Maine Wind

Offshore wind resources see the largest revenue gap

RPS+Gas ISO Queue Renewables Plus No Retirements Gas+ACP RPS+GeoDiv. Renewables

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CO2 Emissions Vary with Amount of Zero-Emitting Resources

Renewable-heavy scenarios would fall below or within the range of RGGI goals, but transmission constraints could pose a challenge

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34.0 18.2 13.1 40.9 37.6 16.3 34.8 28.1 14.3 40.8 37.5 18.6

5 10 15 20 25 30 35 40 45

RPS+Gas ISO Queue Renewables Plus No Retirements Gas+ACP RPS+Geodiverse Renewables CO2 Emissions (Million Tons)

Annual Systemwide CO2 Emissions - 2030

Unconstrained (RGGI) Constrained (RGGI) 2.5% RGGI reduction target 5% RGGI reduction target

Note: “Non RGGI” includes smaller resources not subject to the Regional Greenhouse Gas Initiative

Unconstrained (Non RGGI) Constrained (Non RGGI) Range of limits for RGGI- jurisdictional resources

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Challenges and Solutions for Large-Scale Renewable Integration

• Lack of traditional spinning resources (and addition of asynchronous

resources including EE, PV, wind, and HVDC imports) may pose physical challenges

– Issues include need to address system protection, power quality, voltage regulation, regulation, ramping, and reserves

• Special control systems may be required, especially to stabilize the system

and provide frequency control

• Efficient storage technologies would help facilitate the integration of

variable resources

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