Overview of MISO Gas-Electric Infrastructure Analyses and Workshops - - PowerPoint PPT Presentation

Industrial Energy Consumers of America (IECA) Presentation

Overview of MISO Gas-Electric Infrastructure Analyses and Workshops

November 27, 2012 Washington, D.C.

Disclaimer

• Disclaimer: The reports and this presentation was

prepared by Gregory L. Peters, President, EnVision Energy Solutions for the benefit of the Midwest Independent Transmission System Operator (“MISO”). This work involves detailed analyses of interstate pipeline daily flow and capacity data and data obtained and compiled by an independent third party. The appropriate professional diligence has been applied in the preparation of this analysis, using what is believed to be reasonable assumptions. However, since the report also necessarily involves assumptions regarding the future and the accuracy of the data, no warranty is made, expressed or implied.

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Purpose of the Phase 1 and Phase 2 Studies

• The purpose of Phase 1 of the Gas/Electric Infrastructure

Interdependency Analysis is to:

Review and analyze current and future natural gas pipelines, storage facilities and related infrastructure, and extrapolate the impact for natural gas-fired electric power generation from 2011 – 2030 in the MISO region.

• The purpose of Phase 2 of the Gas/Electric Infrastructure

Interdependency Analysis is to:

Build upon the Phase 1 analysis and incorporate the impacts of lower gas prices; and, correspondingly higher capacity factors on the existing gas fleet, on the existing pipeline infrastructure in the MISO region.

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Analysis Concept

12k Retirement Starting 2016 Embedded Facilities 2011 – 2015 Embedded Facilities 2011 - 2015

CT and CC Gas Requirements

Note: box size not precisely to requirements scale

Maximum Pipeline Capacity (General Findings)

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Overview of MISO Region Major Pipelines

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Trunk - systems are large-diameter long-distance trunklines that generally tie supply areas to natural gas market areas. Grid - systems are usually a network of many interconnections and delivery points that operate in and serve major natural gas market areas. Bolded pipelines indicate MISO-identified facilities

Pipeline Name Principal Supply Source(s) System Configuration 1. Alliance Pipeline LP Canada Trunk 2. ANR Pipeline Company Louisiana, Kansas, Texas Trunk/Grid 3. Bison Pipeline LLC Wyoming, Montana, North Dakota Trunk 4. Mississippi River Trans. Corp. Arkansas, Oklahoma Trunk 5. Crossroads Pipeline Company Interstate System (feeder) Trunk 6. Great Lakes Gas Trans. Ltd Canada/Canada export Trunk 7. Guardian Pipeline Interstate System (feeder) Trunk 8. KO Gas Trans Co (KY-OH) Interstate System (feeder) Trunk 9. Midwestern Gas Trans. Interstate System (feeder) Trunk 10. Northern Border Pipeline Canada, ND (Bakken) and Bison PL Trunk 11. Natural Gas PL Co. of America Kansas, Oklahoma, Louisiana, Texas Trunk 12. Northern Natural Gas Co. Kansas, Oklahoma, Texas Trunk/Grid 13. Panhandle Eastern Pipe Line Co. Kansas, Oklahoma, Texas Trunk 14. Texas Eastern Transmission Louisiana, Texas Trunk 15. Texas Gas Transmission Louisiana, Texas Trunk 16. Trunkline Gas Company Louisiana, Texas Trunk 17. Viking Gas Transmission Canada Trunk 18. Vector Pipeline LP Interstate/export Canada System Trunk 19. Rockies Express Pipeline Co. Wyoming, Colorado Trunk 20. Southern Star Central Pipeline Kansas, Oklahoma, Wyoming Trunk/Grid 21. Williston Basin Interstate PL ND, WY, MT , Canada Trunk/Grid

MISO Region Major Interstate Pipelines

(All pipelines were analyzed)

Results – Phase 1

• Wellhead Gas supply is not expected to be an issue
• Additional gas pipeline infrastructure is needed to

accommodate fuel switching

– Additional inter-regional and intra-regional (solely within MISO) main line development needed – Lateral pipelines and compressor additions development needed

• Timing for development of new pipeline infrastructure is the

main issue

– Planning, siting, regulatory and construction of new main line gas pipelines will be on the order of 3-5 years, if started now – Compliance with Mercury and Air Toxics Standards is 3-5 years

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Phase 1 - Pipeline Capacity Assessment

• New pipeline infrastructure is needed to manage volatility and

ensure reliability

• 21 major pipelines are in the MISO footprint
• With the advent of shale gas, the pipeline flow usage is in a state of

flux

• Some are essentially fully subscribed and some are not
• New gas-fired generation will be served off different lines
• New main lines as well as lateral lines (line from the main line to the

power plant) will be needed

• On-site storage of fuel, either diesel or LNG, may substantially

lessen the need for new pipeline capacity. The costs and trade-offs need to be studied going forward.

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Phase 2 Scenarios Analyzed

• Expected Capacity Case Embedded Units with Phase 1 Incremental

12K Retirement Units scenario (reduced capacity factors).

• Maximum Capacity Case (worst Case): Embedded Units with Phase

1 Incremental 12K Retirement Units scenario.

• Capacity Factors:

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Summary Insufficient Seasonal Capacity

Nov.1, 2009 – Oct. 31, 2011 - View from relative comparison basis.

* Crossroads and Vector: Allocated units from LDCs. Crossroads & Guardian restricted by upstream pipelines.

** ANR requires further analysis and explanation of Market Area operations behind measurement points. *** Tested w/ 1 CT & 1 CC unit. Note: Period Nov. 1, 2009 – Oct. 31, 2011 used as REX became fully operational in Nov. 2009.

EXPECTED CASE MAXIMUM CASE

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Results – Phase 2

• Modified-Backcast analysis based on the existing gas infrastructure

with existing and new gas capacity were not intended to be a detailed market-area engineering analysis that uses sophisticated forward looking flow analysis.

• Over 65% of the Pipelines have insufficient capacity at measurement

points into their market area to fully meet the needs of the existing (embedded) units operating at expected capacity factors.

• For the period 2016 – 2030, almost 90% of the pipelines have

insufficient capacity based on current capacities for the existing units plus an incremental 12,000 MW of coal-to-gas retirement.

• Gas industry participants reviewed the report and provided comments
• f Phase 1 and 2 Analyses. Pipelines comments in general are more
• ptimistic.

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Results – Phase 2 continued

• Some pipelines sourcing gas supply from the Gulf Coast have

higher levels of insufficient capacity compared to other Southwest and Mid-Continent pipeline sources.

– Additionally, Shale gas supplies in proximity to MISO will need pipeline flow changes and infrastructure build-out.

• To ensure generator availability, gas storage may be required
• Storage options need to be addressed further.
• On site diesel or liquid natural gas (LNG) appear as viable options
• Tariff changes may be needed to add qualifications to generators
• Regional coordination of MISO members will produce a better

solution than each stakeholder acting alone

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Challenges to Moving Forward

• Regional coordination will have greater benefits than each

stakeholder acting separately

• Cost allocation, who pays and how are the costs recovered for gas

infrastructure

• Changing regulatory policy creates cost recovery uncertainty
• Cost to MISO members will be determined based on the level of

retirements as well as location of the new gas-fired power plants

• Costs are allocated to main line pipeline development with a

complex cost recovery mechanism and to lateral pipelines, which are generally the responsibility of the power plant owner

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Next Steps

• MISO has conducted regional meetings with its Stakeholders to

develop a keys issues lists of their concerns.

• The FERC held 5 regional Technical Conferences to take input on

Gas/Electric Infrastructure issues.

• MISO participated in those Technical Conferences and presented

concerns and issues.

• After the FERC Technical Conferences, MISO and its stakeholders

will hold additional workshops with gas industry participants to continue the dialogue between our two industries, identify infrastructure needs and move forward on solutions.

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MISO regional workshops – Overview Issues

• Issue 1 - Inconsistencies between the way natural gas is

bought, sold, and nominated and electricity is offered in the RTO will become more of a problem than it is today.

• Issue 2 – Pipeline contracting procedures and subtleties; need

for firm service that is not economic

• Issue 3 - Risks associated with Natural Gas curtailment

practices

• Issue 4 - Planning for new pipelines

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Issue 1 – Gas Nomination/RTO dispatch

• Alignment of Natural Gas pipeline nomination deadlines and

the MISO dispatch processes

• Regulated pipeline and electric tariff issues need refinement for

transmission of power and natural gas at wholesale level: – Timing – Notification – Prioritization

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Issue 2 - Pipeline contracting procedures

• Additional pipeline capacity will be required to serve the

demands of gas fired generators;

– the process for adding pipeline capacity requires a commitment for firm transportation service for multiple years; currently it is uneconomic for gas fired generators to procure firm service.

• Firm capacity sold on 24x7 basis; whereas, peaking and

intermediate capacity needs are volatile

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Issue 3 - Risks associated with Natural Gas curtailment practices

• Often gas-fired generators are curtailed first. This practice, if it

continues has the potential to negatively impact how we serve

• ur customers.
• If the principal source of natural gas for a pipeline is the Gulf

Coast – hurricanes are a real risk to supply interruption

• There are upstream force majeure risks and flow pattern risks.
• Storage in the Midwest is not multi-cycle; multi-cycle is needed

to supply gas fired generators

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Issue 4 – Planning For New Pipelines

• New pipelines are needed and can be contracted for by

each company.

– Continuation of the radial build outs – Not optimized for the region – Business as usual for pipelines

• New pipeline development can be coordinated at the

regional level

– Increase network aspects of the pipelines – Reduce costs to the region – Develop gas/electric infrastructure partnership

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Takeaways from Previous Zonal Gas-Electric

Workshops

There is a need for improved and/or increased: – Info sharing and communication between gas and electric industries – Cross-industry education – Coordination of emergency operations – Involvement of state and federal regulators going forward on gas-electric issues and solutions – Flexible solutions to interdependency issues (incentivize/penalize – don’t mandate) – Definition of firm capacity and firm fuel supply (tariff changes) – Understanding of and clarity on pipeline services

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Pipeline Meetings Takeaways

• Abundant shale gas is a game-changer, driving shifts in historical pipeline

flow patterns.

• Pipeline service offerings vary from one to the next, sometimes significantly.
• Pipeline infrastructure expansion is currently mostly supply-push.
• The electric power industry is the biggest driver of natural gas demand.
• Economics may lead to conversion of natural gas pipelines to oil pipelines.
• Incremental pipeline tariff rates will be higher than current rates, i.e. early

movers will get a better deal.

• Pipeline pressure levels are a concern for some pipelines, due to no-notice

takes and PHMSA documentation requirements.

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Discussion and Conclusion

Thank you Contacts: John Lawhorn Senior Director Regulatory & Economic Studies MISO 651.632.8479 Greg Peters President EnVision Energy Solutions 804.378.0770

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