NIPSCO 2018 Integrated Resource Plan Preliminary Lessons Learned IURC IRP Contemporary Issues Technical Conference April 15, 2019 NIPSCO | NIPSCO.com |
Agenda • Introductions and Overview • Key Challenges for 2018 IRP and Improvement Plan • Developing Supply Side Assumptions For IRP Using RFP NIPSCO | NIPSCO.com | 2
INTRODUCTION AND OVERVIEW Overview of NIPSCO Electric • 468,000 electric customers in 20 counties • ~2,900 MW generating capacity — Owns coal, gas, and hydro plants — Additional 100 MW of wind purchased power • 12,800 miles of transmission and distribution — Interconnect with 5 major utilities (3 MISO; 2 PJM) — Serves 2 network customers and other independent power producers Gas • 819,000 natural gas customers in 32 counties • 17,000 miles of transmission and distribution lines • Interconnections with 7 major interstate pipelines • 2 on-system storage facilities 2,900 Merrillville, Ind. Employees Headquarters NIPSCO | NIPSCO.com | 3
INTRODUCTION AND OVERVIEW Evolving resource planning to meet today’s challenges Other • Wind Purchase Power Agreement (“PPAs”): 100 MW (2000s) • Hydro: 10 MW (1920s) Location of Owned Gas Units NIPSCO • Sugar Creek Combined Cycle: 535 MW (2000’s) generation • Bailly #10: 31 MW assets • RM Schahfer #16A-B: 155 MW Owned Coal Units • RM Schahfer: 1,625 MW (1970’s – 80’s) • Michigan City: 469 MW (1974) Bailly retired in 2018 (450 MW) NIPSCO | NIPSCO.com | 4
Agenda • Introductions and Overview • Key Challenges for 2018 IRP and Improvement Plan • Developing Supply Side Assumptions For IRP Using RFP NIPSCO | NIPSCO.com | 5
KEY CHALLENGES Challenges Going Into The 2018 NIPSCO IRP IRP Process Challenges Portfolio Challenges • • Shortcomings identified in prior planning Coal assets facing pressures from cycle (2016) regarding models and sustained low natural gas prices, analysis techniques environmental regulation and maintenance capital needs • • Difficulty developing reasonable Diverse replacement options for technology cost estimates, given historic consideration, including gas, renewables, trends and rapidly changing costs for and energy storage renewables and storage • • Need for greater levels of transparency Large industrial load uncertainty regarding assumptions with stakeholders NIPSCO | NIPSCO.com | 6
KEY CHALLENGES 2018 IRP Improvement Plan Subject 2016 IRP Feedback 2018 Improvements • • Fuel price projections do not capture the nuanced and Utilized independently generated commodity price dynamic relationships between oil and natural gas, or forecasts using an integrated market model Commodity Price • whether the historic market correlations are evolving Provided transparent assumptions related to key inputs Forecasts • No transparency and availability of underlying and outputs • assumptions for fuel forecasts Benchmarked against publicly available forecasts • • NIPSCO IRP planning model was limited to scenarios Implemented efficient risk informed (stochastics) analysis Risk Modeling and sensitivities with the ability to flex key variables • NIPSCO’s construction of scenarios and sensitivities • Built upon the progress made in the 2016 IRP with Scenarios and in the 2016-2017 IRP is a significant advancement thematic and modeling informed selections for detailed Sensitivities over the 2014 IRP. The clarity of the narratives was cost analysis commendable and transparency was exceptional Leveraged 3 rd party and publicly available datasets to • • Capital cost estimates for new capacity resources were based on proprietary consultant information develop a range of current and future capital cost Capital Cost estimates for new capacity resources Assumptions • • Conducted an “all - source” Request for Proposals (“RFP”) No scenario or sensitivity covered uncertainties of resource technology cost solicitation for replacement capacity resources • • Provide additional details around selection of the Provided detailed analysis on selection of the preferred Preferred Plan and the analysis used to develop plan driven by need for it to be actionable • Preferred Plan and Developed enhanced scorecard methodology to include • Scorecard Provide a detailed narrative for those metrics that more quantifiable metrics that better evaluated tradeoffs • can be quantified as well as those that do not lead Incorporated rate impact analysis as part of preferred to quantification plan metrics • • DSM groupings are not getting quite the same Utilized new modeling capabilities will enable DSM to DSM Modeling treatment as the supply side resources be treated equally with other supply side resources NIPSCO | NIPSCO.com | 7
Agenda • Introductions and Overview • Key Challenges for 2018 IRP and Improvement Plan • Developing Supply Side Assumptions For IRP Using RFP NIPSCO | NIPSCO.com | 8
SUPPLY SIDE ASSUMPTIONS NIPSCO IRP Timeline Jan- Mar ‘18 Apr- Jun ‘18 Jul- Sep ‘18 Oct- Dec ‘18 IRP Process Scorecard RFP Strategy & Solicitation Development Commodity Portfolio Concept Price Forecast Development Scenario Retirement Modeling Development Replacement Model Set Up Modeling IRP Report Drafting Filed Stakeholder Engagement NIPSCO | NIPSCO.com | 9
Stakeholders Played a Key Role Throughout the Process • NIPSCO held five Public Advisory Meetings and one Technical Webinar – NIPSCO utilized the process to obtain feedback on the design of the request for proposals – One Public Advisory Meeting was a webinar to present the request for proposal results – Stakeholders were offered the opportunity to make presentations at the Public Advisory meetings • Stakeholders provided useful input into the design and construction of the RFP • One-on-one meetings were also conducted with interested parties • Scenarios were run for stakeholders as inputs were provided – Results were reported out to the broader group as part of the Public Advisory Meetings NIPSCO | NIPSCO.com | 10
SUPPLY SIDE ASSUMPTIONS Linear planning risks inconsistencies between IRP and RFP Traditional linear IRP to RFP structure 1. Load forecast 2. Technology costs 1. Resource needs & 3. Technology performance timing IRP RFP 4. Environmental scenarios 2. Technology selection / resource preferences 5. Fuel price scenarios 6. Other inputs Best practices: Narrow RFP Consistent 1. Clear product definition with IRP preferences 2. Clear and concise evaluation criteria 3. ~2 to 3 month RFP timeline to ensure bidder engagement 4. Firm, binding bid structure 5. Third-party oversight NIPSCO | NIPSCO.com | 11
SUPPLY SIDE ASSUMPTIONS Integration adds complexity but improves IRP conclusions Integrated IRP to RFP structure Initial anticipated resource Broad RFP requirements All technologies RFP Final resource needs and timing reflecting market-based data options represented Best practices: 1. Flexible definition of utility needs Market-based cost and 2. Flexible evaluation criteria IRP performance assumptions across all technologies and 3. RFP timeline accommodates IRP resource timing modeling requirements 4. Flexible bid structure 5. Third-party oversight NIPSCO | NIPSCO.com | 12
SUPPLY SIDE ASSUMPTIONS RFP Generated Significant Amount Of Responses Wind + Solar + Demand Total CCGT* CT** Coal Wind Solar + Solar Storage Technology Storage Resp. Bids Storage 4 - - 1 - 1 - - - 6 Asset Sale Technology & Ownership PPA 8 - 3 6 - 26 7 8 1 59 (Overview Of • Nearly 10,000 MW Option 3 1 - 7 1 8 4 1 - 25 Proposals) of MISO-recognized Total 15 1 3 14 1 35 11 9 1 90 capacity (UCAP) Locations IN, IL IN IN, KY IN IL, IN, IA IN IN IN IA, IN, IL, MN was offered into the RFP VARIABLE DURATION • A broad set of 2,464 2,423 2,194 Duration 2,023 technologies and 1,746 (UCAP MW by duration) fuels, both fossil and 933 renewable, were 550 500 50 available 6 10 15 20 25 30 10-20 25-30 20-30 Contract Duration (Years) • Ownership and PPA ICAP*** UCAP options were 13,236 (MW) (est. MW) Demand Response available 70 70 Storage 925 925 • Most contract Solar + Storage Quantity 1,220 902 9,446 durations skew to & Technology Wind + Solar + Storage 0 0 20+ years; several & Ownership Coal 772 772 bidders did offer (RFP Projects By shorter 10-year and 2,580 1,291 Solar Technology) 15-year options 2,209 287 Wind 0 0 Natural Gas (CT) 5,470 5,199 Natural Gas (CCGT) 13,236 9,446 * Combined cycle gas turbine **Combustion turbine Note that totals are on a project basis, which eliminates double ICAP (MW) UCAP (MW) ***Installed Capacity counting of multiple proposals for the same facility. There are more than enough capacity resources bid in to RFP to meet NIPSCO’s needs NIPSCO | NIPSCO.com | 13
Integrating RFP results into IRP assumptions • As part of NIPSCO’s 2018 IRP process, NIPSCO and Charles River Associates (“CRA”) developed a methodology to translate specific IRP bids into manageable inputs for the IRP analysis – The IRP was intended to select the best resource mix and future portfolio concept, and not select specific assets or projects – The IRP was a highly transparent and public process that requires sharing of major inputs – The IRP modeling was complex, and resource grouping improved the efficiency of the process NIPSCO | NIPSCO.com | 14
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