Western Interconnect Gas – Electric Interface Study Public Report Presentation 2018 Trusted commercial intelligence woodmac.com
INTRODUCTION AND SUMMARY Project Background & Context Background Context In 2017, WECC commissioned Wood Mackenzie, E3, and Argonne National In the West, we have entered a period in which it is Labs to undertake an evaluation of both possible and reasonable to aspire to low the reliability of the gas/electric wholesale power costs and steady reductions in interface in the Western emissions Interconnection. However, the transition away from large, baseload This study consisted of multiple nuclear and coal generation towards more intermittent work-streams: resources places a considerable potential strain on 1) Identifying and modelling the impact of overall system reliability potential power system vulnerabilities In this context, natural gas generation will take on an stemming from gas system disruptions increasingly important role due to its flexibility and 2) Evaluating potential mitigation options and ability to compensate for the variability of renewable their associated costs and capabilities for resources reducing such impacts 3) Identifying reliability risks associated with Consequently, the ability of the gas/electric systems gas contracting strategies as well as to handle both everyday variability as well as existing market rules & protocols unforeseen disruptions becomes critical for ensuring 4) Providing reasonable and actionable energy security in the West recommendations for WECC and key stakeholders 2
INTRODUCTION AND SUMMARY The configuration of the gas/electric system combined with the loss of Aliso Canyon will create region-wide reliability issues that need to be addressed • Prior to the 2015 gas leak, the 86 bcf of market-area gas storage available at Aliso Canyon played a key role in managing system volatility and reliability Baseload retirements and load • Renewables additions help mitigate but do not replace the growth will drive natural gas increased need for firm, dependable resources stemming demand growth, creating constraints from the 11 GW of coal and nuclear retirements on the gas system • Pipeline flow analysis indicate concerns around volumetric constraints, which limits daily operational flexibility • The Desert Southwest (DSW) and Southern California regions are particularly at risk from disruptions of pipeline Absent key balancing with storage, infrastructure or gas production Southern California and the Desert • The Pacific Northwest (PNW) is more resilient to major gas Southwest are at risk from system disruptions, largely owing to market area gas disruptions of the gas system storage (in OR, WA and Northern CA) and electric transmission connectivity • A combination of physical solutions will be required: investments in renewable generation, battery storage, demand response programs, gas infrastructure and There is no silver bullet: a portfolio storage as well as dual-fuel fired generation of mitigation solutions will be • Improved regional coordination, reserve adequacy necessary to address the reliability accounting, curtailment priorities and forecasting would risk decrease market frictions and improve the ability of the system to respond to disruptions and day-to-day variability 3
Agenda The Situation in the West – 2026 WECC Common Case Dynamics The Challenge – Disruption Scenario Modelling Results Mitigation Options & Recommendations Appendix 4
THE SITUATION IN THE WEST – 2026 WECC COMMON CASE DYNAMICS The Western grid is being transformed through retirements of baseload resources and additions of solar and wind generation Cumulative West Coal/Nuclear Retirements to 2026 30,000 Retired capacity (MW) Coal 25,000 9 GW of coal and 2.2 GW of Nuclear 20,000 nuclear generation is projected 15,000 12,364 to be retired by 2026 10,000 4,834 5,000 1,967 Up to 20 GW of new solar 0 (utility & distributed 2017 2020 2025 generation) is projected to be Cumulative New CA Solar Capacity through 2026 installed in California by 2026 Installed capacity (MW) 25,000 18,705 20,000 Bulk electricity storage will 15,000 play an increasing role, but 10,205 there is little clarity on the 10,000 6,455 scale and timing 5,000 0 2017 2020 2025 Source: WECC 2026 Common Case 5
THE SITUATION IN THE WEST – 2026 WECC COMMON CASE DYNAMICS Gas burn for power could increase by ~21%* or slightly more than 1.0 bcfd through 2021 Western Interconnection gas power burn (bcfd) Average CCGT capacity factors (%) Baseload retirements 100 7 Planning to meet gas increase gas demand for burn in 2021 is the power post-2024 +21% 90 immediate challenge 6 80 5 70 60 4 50 3 40 30 2 20 1 10 0 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2018 2019 2020 2021 2022 2023 2024 2025 2026 Canada California PNW Basin PNW DSW DSW Rockies Basin California Rockies Source: Wood Mackenzie, E3 based on 2026 WECC Common Case *Purely on an energy, not capacity, basis keeping gas burn flat through 2021 would require 26 GW of solar power 6
THE SITUATION IN THE WEST – 2026 WECC COMMON CASE DYNAMICS The Western Interconnection and other West Coast natural gas markets become increasingly dependent on 7 long-haul pipelines and 3 supply basins West US & Canada Gas Pipes & Producing Basins WCSB (total production) The West is blessed with access to Key 18 diverse and economic supply XX (XX%) 15 sources between Western Canada, Aug. 2026 Gas flow bcfd in bcfd (Aug. 2026 Permian and Rockies plays utilization %) » Combined reserves of 350 tcf available Northwest PL at less than $4/mmbtu for dry gas and GTN $50/bbl for associated gas 2017 2026 4.0 (95%) Rockies & San Juan However, several major interstate Northwest PL (total production) pipelines are already highly utilized 0.2 (30%) 12 11 (<75% on annual basis) bcfd 0.8 (82%) Western Canada remains a critical Ruby 1.2 (80%) supply source for the Western US 2017 2026 demand centers Kern River Greater reliance on Permian gas Permian (total production) increases reliability risks in Desert 2.2 (93%) 13 Transwestern/ Southwest and Southern California bcfd El Paso 7 3.0 (80%) Market area underground gas storage is a key resource 1.8 (82%) 2017 2026 El Paso Source: Wood Mackenzie 7
Agenda The Situation in the West – 2026 WECC Common Case Dynamics The Challenge – Disruption Scenario Modelling Results Mitigation Options & Recommendations Appendix 8
THE CHALLENGE – DISRUPTION SCENARIO MODELLING ANALYSIS The study evaluated 5 key base cases representing major disruptions to the Western Interconnection as well as 5 additional sensitivities Regional Base (N-1) Case N-2 case focus Disruption on a PNW Pacific Disruption at the US/Canada border (or Low hydro conditions Northwest upstream) receipt point on the system pipeline M6+ earthquake in the Rocky Mountain Seismic event disrupting Pacific House area, that disrupts natural gas Low hydro conditions Alberta supply Northwest production in Alberta Disruption on the critical mainline section Disruption on a Basin Basin/ downstream of the supply basin and Low hydro conditions pipeline California upstream of the demand centers Desert Disruption on a DSW Disruption on critical Southern NM section Southwest/ NA pipeline of DSW pipeline Southern CA Week-long winter supply freeze-off in the Winter supply freeze-off Permian and San Juan basins reducing Low hydro conditions / Desert in the Permian & San supply by 1.5 bcfd, higher residential gas Transmission outage from Southwest demand. 15% of generation in AZ/NM CA wildfire Juan unavailable due to freezing conditions 9
THE CHALLENGE – DISRUPTION SCENARIO MODELLING ANALYSIS The Southwest disruptions constitute the primary vulnerabilities within the Western Interconnection that we have identified to date Outage nameplate capacity (GW) Unserved energy & unmet reserves (GWh) 26 24 450 428 All at-risk scenarios are Limited risk Unserved energy 24 exhibiting unmet spinning 400 22 reserves throughout the At-risk Unmet spinning reserves forecast 20 350 Identified issue 18 300 16 15 16 14 14 14 236 250 14 13 12 12 200 10 8 150 8 6 100 59 52 4 50 23 2 6 4 1 0 27 GW 0 0 DSW Freeze Canada Canada Freeze Freeze Other DSW Freeze Canada Canada Freeze Freeze PNW PNW Basin Pipeline off - Low - Low - Avg off- Path off - Base cases - base Off - - low - base Off - Off - - low - base - base Rupture hydro hydro hydro 26 out low hydro Path 26 stress hydro stress hydro outage stress Unrisked Economic Impact 1 ($US bn) $27.4 $2.2 $3.4 $3.7 $0.8 $0.6 $0 Risked Economic Impact 2 ($US bn) $1.1 $0.27 $0.002 $0.02 $0.6 $0 Unserved energy in the DSW scenarios results from the configuration of the gas network, which limits deliverability in isolated “islands” of power plants in Phoenix and Southern California Notes : (1) Economic impact estimated based on cost of unserved energy in each state for each type of demand sector (2) Risked Economic Impact estimated based on probability of each disruption Source: Argonne National Labs , E3, Wood Mackenzie 10
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