Blueprint for Reliability:

Transcription

1 Blueprint for Reliability: 2005 Northeast Power Coordinating Council General Meeting Department of Telecommunications and Energy Chairman Paul G. Afonso September 28,

2 Electricity Projected Growth in Electricity Demand in NE 1.5% p.a Billions of Kwhrs Residential Commercial/Other Industrial Transportation Source: Dept. of Energy, EIA, Annual Forecast, February

3 Electricity Natural Gas Could Become Almost 50% of All Fuels Used for Electric Generation If ALL future capacity is gas-fired 7% 15% 4% 0% 39% (1) 6% 13% 4% 0% 48% 10% 25% Current Summer Capacity (1) A little more than half of gas-fired capacity has some limited ability to burn oil (limited by oil storage and environmental regulations). 8% 21% Natural Gas Oil Coal Hydro Nuclear Renewables Other Source: 2004 from EIA (summer capacity); 2012 assumes Reference Load (50/50) from CELT 2004 Forecast, ISO-NE, October 2004 and assumes a 12% reserve margin, with ALL incremental capacity gasfired. 3

4 Electricity New Transmission Lines Source: Connecticut Light & Power Company 12C Application Presentation, ISO-NE Stakeholders Meeting, Marlborough, MA February 7,

5 Electricity New Transmission Helps Boston Reserve Position WITH NStar 345 kv line 7 Salem thru % 35% Megawatts Reserves BEFORE NStar 345 kv line & Dominion agreement on Salem Typical Minimum Reserve Level 30% 25% 20% 15% 10% 5% 0% Reserves as % of Load % Peak Capacity + Imports (MW) Reserves as % of Load ISO Reference Case Peak Load (MW) No Action Case Reserves as % of Load Source: RTEP 04 Report, October 2004, 50/50 Case 5

6 Electricity Major Massachusetts Transmission Projects Project Proponent Cost (MM$) Projected In-Service Date Status NStar 345 kv Line NStar $ Fully approved and under construction Northshore Upgrades Nantucket Interconnection Central MA Reinforcements National Grid Total = $114.9 Various First $5 MM ISO-NE approved and under construction with expected in-service dates in 2005 & Remaining $110 MM projects proposed with completion expected in timeframe NStar TBD Dec. 06 Project has both MA Siting approval and ISO-NE Reliability approval. No construction yet. National Grid $ ISO-NE approved in May 04. Currently under construction 6

7 New Generation We Rely on the Private Sector to Build New Power Plants Under the 1997 MA Electric Industry Restructuring Act, regulated utilities no longer have an obligation to build power plants. With wholesale prices set by market forces, unregulated developers must deploy capital to build new plants. Thus, we rely on market forces to ensure adequate supplies of electricity. In the initial 5 years following Restructuring over 8700 MW of new capacity was added across New England with the result that New England as a whole has surplus capacity In Massachusetts just under 4000 MG of new capacity was added, including 9 large new plants including in the Boston area the Sithe Mystic and Weymouth plants and the Mirant Kendall Square plant In addition, the new capacity has allowed the closure of several older, less efficient and/or more polluting plants 7

8 New Generation We Rely on the Private Sector to Build New Power Plants However, new power plants have often been located far from population centers where electricity demand is highest. The location of power plants influences both the reliability and price of electricity. New transmission helps deliver power to where its most needed. Location-dependent price signals encourages the siting of new plants nearer to demand centers. Without new investment, current capacity surplus will be eliminated by demand growth. To be most effective, new capacity needs to be added in the right place, in the right amount, of the right type and built at the right time. Not all of these criteria were met in the postrestructuring capacity boom. 8

9 New Generation Deficits in peaking resources are likely to occur first. Need to develop demand reduction programs and distributed generation in the face of large financial and institutional barriers. The challenge is to address the inherent risk of investment in peaking resources which have low and uncertain utilization rates by either raising short-term price caps or some sort of subsidy Deficits in overall resources may come if market forces don t adequately reward investment. The FERC has required there be, as of next October, an incentive mechanism (known as Locational Installed Capacity or LICAP ) to reward the provision of generating capacity. LICAP, however, may be costly and does not guarantee new generation 9

10 New Generation Objectives of Resource Adequacy Capacity prices set by competition in market Capacity payments for performance; facilitate development of sufficient resources Promote regional resource adequacy Integration of capacity and reserve markets Promote demand response and energy efficiency Support restructuring goals by not shifting ownership risk to customers 10

11 New Generation Capacity Market Overview and Key Provisions Use of an open auction format with a single clearing price to procure capacity resources Multi-year planning horizon for the capacity auctions, allows new capacity to participate Multi-year compensation/ performance commitment for capacity resources Auction process reflects the amount to be procured as established by states/iso-ne/stakeholders Financial and development qualifications apply to auction participants to assure availability substantial penalties for non-performance 11

12 New Generation Locational Contingency Reserves Market Provides price signals for resources that can address locational reliability needs (for contingency coverage) and provide operating flexibility Minimizes the need for RMR agreements Addressing the locational reliability needs through locational reserves facilitates implementation of the more efficient regionwide NERAM 12

13 Natural Gas Gas Demand Will Grow Forecasted Massachusetts Gas Load Growth After ,000 60,000 50,000 MMCf 40,000 30,000 20,000 10, Source: EIA, Utility Reports DOER NOTE: Assumes continued Energy Efficiency Programs 13

14 Natural Gas Map source: Levitan Associates, report to ISO-NE, March 24, 2004 Iroquois Transmission Pipelines VT Tennessee MA NH Portland ME Maritimes & NE 1 Maritimes + Portland Algonquin Pipeline Delivery Capacity 2004 Bcf/d Algonquin Tennessee Maritimes & NE Portland Iroquois Vermont Gas Distrigas Total CT RI 2 1 Existing LNG terminal, Everett, MA 0.7 to 1.0 Bcf/d 2 Proposed Weaver s Cove LNG terminal 0.4 to 0.8 Bcf/d 14

15 Natural Gas Proposed New Infrastructure for NE LNG Capacity (MMcf/d) Projected In- Service Date Status Bear Head, Pt. Tupper, Nova Scotia Canaport LNG, St. John, New Brunswick 750 Nov Canadian approval rec d 500?2008? Canadian approval rec d Quoddy LNG, Maine 500?2008? Lacks local approval Northeast Gateway/Excelerate, Offshore Gloucester Neptune, Offshore Gloucester Weaver s Cove, Fall River Filed with MARAD/Coast Guard 400?2007? Initial MARAD/Coast Guard filing deemed inadequate; Mid 2008 Rec d FERC approval; legal challenges pending KeySpan, Providence 375 Early 2006 FERC denied approval 15

16 Energy Efficiency Reduce Growth in Electricity Use Massachusetts Electric Load Growth, ,000 30,000 25,000 GWh 20,000 15,000 10,000 5, Source: EIA, Utility Reports, DOER EE Savings--Current Spending Load Increase 16

17 Energy Efficiency Programs Reduce Growth in Use Forcasted Massachusetts Gas Load Growth After 2005 MMCf 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - EE Savings-- Current Spending Load Increase Source: EIA, Utility Reports DOER 17

18 Regional Greenhouse Gas Initiative (RGGI) The Regional Greenhouse Gas Initiative, or RGGI, is a cooperative effort by 9 of the Northeastern and Mid-Atlantic states to reduce carbon dioxide emissions 18

19 Regional Greenhouse Gas Initiative (RGGI) Develop a multi-state cap-and-trade program covering greenhouse gas (GHG) emissions. The program will initially be aimed at developing a program to reduce carbon dioxide emissions from power plants in the participating states, while maintaining energy affordability and reliability. 19

20 Regional Greenhouse Gas Initiative (RGGI) Program Start Date and 2015 Review Tentative start in There will be a comprehensive review in 2015 to assess, among other things, program success in meeting emissions reduction goals, price impacts, the numerical limit on offsets, the viability of additional reductions after 2020, and the extent to which the program has caused increases in imports and associated emissions leakage. 20

21 Regional Greenhouse Gas Initiative (RGGI) Reduction Goals The cap will be implemented in two phases. Emissions will be stabilized at approximately 150 million tons from 2009 through 2015; followed by a 10% reduction between 2015 and

22 Regional Greenhouse Gas Initiative (RGGI) Regional Cap Level and Apportionment The initial cap level shall be set at 150,602,356 short tons of carbon dioxide, which is approximately equivalent to the average emissions of the highest 3 years between 2000 and

23 Regional Greenhouse Gas Initiative (RGGI) State Emission Budgets Initial state emissions budgets will be: Connecticut: 10,957,575 short tons Delaware: 7,570,787 short tons Maine: 5,492,902 short tons Massachusetts: 25,335,204 short tons New Hampshire: 8,645,460 short tons New Jersey: 23,009,554 short tons New York: 65,576,805 short tons Rhode Island: 2,665,239 short tons Vermont: 1,348,830 short tons Total: 150,602,356 short tons 23

24 Regional Greenhouse Gas Initiative (RGGI) 30,000,000 MA Apportioned RGGI Allowances CO2 Emissions, metric tons 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 Total MA Allowances

25 Regional Greenhouse Gas Initiative (RGGI) Allowance Allocations Decisions on allowance allocations will be left to each state, except: All states agree to set aside 5% of their emissions budget for the regional Strategic Carbon Fund ( SCF ). The SCF shall be used to achieve additional environmental benefits through the development of projects that achieve supplemental greenhouse gas emissions reductions and carbon sequestration beyond that required to achieve the cap. 25

26 Regional Greenhouse Gas Initiative (RGGI) All states agree to propose for legislative and/or regulatory approval that 20% of the allowances will be allocated for a public benefit purpose. Public benefit purposes may include the use of the allowances to promote energy efficiency, to directly mitigate electricity ratepayer impacts, promote renewable energy technologies, and/or to stimulate or reward investment in technologies that will reduce emissions of carbon dioxide from power generation in the state. 26

27 Regional Greenhouse Gas Initiative (RGGI) Potential Emissions Leakage The states recognize the potential that a regional carbon constraint may lead to increased electricity imports and associated emissions leakage. The Strategic Carbon Fund will result in emissions reductions in addition to those that will be achieved by the cap. These additional reductions will help to offset potential emissions leakage. The states further agree to monitor electricity imports into the RGGI region on an ongoing basis, and evaluate the extent to which those imports may have been caused by RGGI. 27

28 Regional Greenhouse Gas Initiative (RGGI) Offsets The program will have a offsets component, as follows: Initial Types From the start of the program, offset credits will be issued for the following qualified projects and/or actions within a participating RGGI state: landfill gas, sulfurhexaflouride (SF6), afforestation and natural gas/home heating oil/propane end-use energy efficiency projects. Additional Types Additional offset types will be added to the program over time. The MOU will direct the states to develop an offset standard for sustainable forestry management on a priority basis. 28

29 Regional Greenhouse Gas Initiative (RGGI) Next Steps Continue to get input via stakeholders meetings Meeting of the nine states in September Draft Memorandum of Understanding Work toward a model rule Each state implements via regulation or file with legislature 29

30 Energy Challenges 30