Anthony W . Buxton, Esq. March 20, 2014 E2Tech Regional Electric - - PowerPoint PPT Presentation

Anthony W . Buxton, Esq.

March 20, 2014

E2Tech Regional Electric Grid & Natural Gas Pipeline Infrastructure: Opportunities and Challenges

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Percentage of Households that Heat with Distillate Fuel Oil in New England, Compared to U.S. Average

Country/State U.S. MA[8] CT[9] RI[10] ME[11] NH[12] VT[13] Percentage 6.5 32 46 37 70 49 48

[8] EIA, Massachusetts State Profile and Energy Estimates, available at http://www.eia.gov/state/print.cfm?sid=MA. [9] EIA, Connecticut State Profile and Energy Estimates, available at http://www.eia.gov/state/print.cfm?sid=CT. [10] EIA, Rhode Island State Profile and Energy Estimates, available at http://www.eia.gov/state/print.cfm?sid=RI. [11] EIA, Maine State Profile and Energy Estimates, available at http://www.eia.gov/state/analysis.cfm?sid=ME. [12] EIA, New Hampshire State Profile and Energy Estimates, available at http://www.eia.gov/state/print.cfm?sid=NH. [13] EIA, Vermont State Profile and Energy Estimates, available at http://www.eia.gov/state/print.cfm?sid=VT.

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Heating Expenditures / Household in Northeast[14] Region Year Natural Gas Fuel Oil 2012-13 Projected 2013-14 2012-13 Projected 2013-14 Northeast $884 $990 $2,092 $2,164 Midwest $652 $690 $2,092 $2,164 Entire U.S. $603 $649 $2,092 $2,164

[14] Short-Term Energy Outlook.

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MW

Figure 4-1 : ISO New England Generator Unit Additions - 2001 through 201214

3,000 2,500 2,000 1,500 1,000 500

Wind an d So lar Water Other Renewables Co al Up rates Oil Nuclear Up rates Natural Gas 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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NOx and SO2 System Emission (kTons) CO2 System Emission (kTons)

Figure 5-1: 2001-2012 Annual System Aggregate Emissions of NOX, SO2, and CO2 in kTons

250 70,000 200 150 100 50 60,000 50,000 40,000 30,000 20,000 10,000 NOx SO2 CO2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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How Much Carbon Pollution Could New England Avoid by Converting from Fuel Oil to Natural Gas?

Year Consumption Per Household[15] # of Northeast Households[16] Heat Content[17]

CO2

Pollution[18] Total CO2 Pollution

1. Fuel Oil

2012- 13 540 gal. (12.86 barrels) 5,520,000 5.825 MMBtu/barrel 161.3 lbs/MMBtu 66,698,160,000 pounds of CO2

2. Natural Gas

2012- 13 75.2 million cubic ft. (mcf) Assume 5,520,000 1.023 MMBtu/mcf[19] 117 lbs/MMBtu 49,684,213,000 pounds of CO2 Carbon Dioxide Emission Savings 17,013,947,000 pounds of CO2

[15] Short-Term Energy Outlook. [16] Short-Term Energy Outlook. [17]http://www.oregon.gov/energy/cons/pages/industry/ecf.aspx and http://www.eia.gov/tools/faqs/faq.cfm?id=45&t=8. [18] EIA, Carbon Dioxide Emissions Coefficients, available at http://www.eia.gov/environment/emissions/co2_vol_mass.cfm. [19] http://www.eia.gov/tools/faqs/faq.cfm?id=45&t=8.

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2/28/2014 2/19/2014 2/10/2014 2/1/2014 1/23/2014 1/14/2014 1/5/2014 12/27/2013 12/18/2013 12/9/2013 12/1/2013

$ per M Wh

2/28/2014 2/19/2014 2/10/2014 2/1/2014 1/23/2014 1/14/2014 1/5/2014 12/27/2013 12/18/2013 12/9/2013 12/1/2013

date this year

Time Series Plot of MeanLMP Time Series Plot of MeanMillLoad

This Year

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Base Case – Supply and Demands

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Pipeline Scenarios

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Pipeline Scenarios

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Scenario Results

Base Case LDC Contracted Governors' Letter 2 bcf/d Option

($/mmbtu) ($/mmbtu) ($/mmbtu) ($/mmbtu) Jan $5.91 $4.35 $2.58 $0.74 Feb $4.25 $1.88 $0.27 $0.00 Mar $0.70 $0.16 $0.02 $0.00 Apr $0.07 $0.00 $0.00 $0.00 May $0.10 $0.00 $0.00 $0.00 Jun $0.47 $0.23 $0.00 $0.00 Jul $2.64 $1.24 $0.14 $0.00 Aug $0.68 $0.02 $0.00 $0.00 Sep $0.34 $0.18 $0.00 $0.00 Oct $0.03 $0.00 $0.00 $0.00 Nov $1.21 $0.29 $0.02 $0.00 Dec $4.17 $2.62 $0.98 $0.09 Annual $1.71 $0.91 $0.34 $0.07

Estimated Average Basis Differential

Scenarios

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Scenario Results

Annual Energy Costs Savings vs. Base Case Load Weighted

• Avg. Energy Price

Scenario ($) ($) ($/MWh) Base Case

$6,799,918,543 $53.43

LDC Contracted

$5,779,346,212 $1,020,572,331 $45.41

Governors' Letter

$4,937,899,864 $1,862,018,679 $38.80

2 bcf/d Option

$4,481,671,060 $2,318,247,482 $35.22

• 2013 All Hours Average LMP – Mass Hub was approximately $56.00
• 2013 Weighted Average LMP – Mass Hub was approximately $60.00
• Modeled total 2013 natural gas used for Power Gen was close to what we

expect EIA will report when all data are in.

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Additional Issues

• 1. Fundamental shift in New England natural gas

market that began in February 2013

• 2. Generating Plant Retirements
• 3. Increasing Demand for Natural Gas
• 4. Relationship between Pipelines and

Transmission Lines to Canada

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Gas Market Shift

At end of 2012, LDC contracts for LNG supply had, for the most part, terminated – pricing was now at the World Spot Market. Impacted deliveries to Canaport and Everett facilities. Further, in the case of Canaport, it meant that by February 2013 storage was low with no limited capacity to schedule deliveries. The result was price spikes in February, well above what the market experienced in January 2013.

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Gas Market Shift

Canaport is behaving much more strategically this

• winter. Further, it has

eliminated its “burn-off” problem, which had required a constant send-

• ut of between 50 and 100

mmcf/d.

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Generating Plant Retirements Our model does not include the retirements of Salem Harbor (unit 3) or Brayton Point. These total about 1,300 MW. Replacing these units with CCGT units at 7,500 btu/kWh results in an additional 225 mmcf/d of natural gas demand. This alone is more than 20% of the additional pipeline capacity under the Governors’ Letter Scenario.

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Generating Plant Retirements If ISO-NE’s fears come to pass and an additional 1,500 MW of coal plants retire over the next 5 years and replaced by natural gas, the total 2,700 MW will increase winter day gas demands for Power Gen by 0.5 bcf/d – this is 50% of the entire pipeline capacity proposed in the Governors’ Letter.

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Increased LDC Demands Various studies have estimated an increase of between 250 mmcf/d and 400 mmcf/d in winter natural gas demands by LDC customers. If this is added to the Power Gen demands resulting from generating plant retirements, the total will be close to 0.9 bcf/d or virtually 100% of the new pipeline capacity proposed by the Governors – leaving New England essentially in the same position we are in now.

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Pipelines and Transmission Lines

• The more pipeline capacity we develop, the lower the winter

basis differential and therefore the lower the energy price in the New England market.

• Driving the price of energy down will result in better pricing

from HQ or any other Canadian generator.

• Regardless of whether or not transmission lines are built,

New England will receive the full value – either in lower gas prices or lower contract prices with HQ.

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