Gas-Electric Infrastructure Challenges WPUI Gas Program September 17, 2012
MISO EPA/Gas related efforts - Timeline EPA Rules & Regulations MISO EPA Impact Study, Oct 2011 Gas Consultant Phase 1 Study, Feb 2012 Gas Consultant Phase 2 Study, July 2012 MISO Gas Electric Infrastructure Workshops, July 2012 FERC Gas Electric Technical Conferences, Aug 2012 MISO Gas Pipeline discussions, Present 2
Overview of Impacts 12.6 GW of coal capacity Identified as at-risk Expected retirement dates to be in the 2014/2015 calendar years 12.6 GW of retirement would erode MISO projected reserve margins by 12 percentage points, dropping system resources 6 to 7 percentage points below required targets. Capital investment of $33.0 Billion will be required to retrofit and/or replace units Average energy prices may increase by $5/MWh Energy Cost Impacts EPA Compliance Retrofit Capital Costs New Capacity Capital Fixed Charges Fixed O&M Capital Costs Transmission Capital Costs Total Capital Costs 12,652 MW of Retirements $5/MWh $22.5B $9.6B $0.0B $0.9B $33.0B 3
Key Issues Affecting Compliance (3-5 years) MATS related - coordination of outages required to install compliance equipment Maintenance margin calculator tool Quarterly survey Investigate Reciprocal Internal Combustion Engines (RICE) standards and their impact on Behind the Meter Generation (BTMG) Sufficient manufacturing, engineering and other resource availability to meet necessary timelines Ability of the natural gas infrastructure to meet the anticipated fuel switching requirements 4
Why should MISO be concerned about gas? Forecast Perspective Capacity Factors (CF) increase significantly for the existing gas fleet under changing regulatory and gas price scenarios Historic CF is based on 20 year averages. No new EPA rules, no retirements and $4.50 gas Phase 1 is based on EPA rules, 12,000 MW of retirements and $4.50 gas price Phase 2 Expected is based on EPA rules, 12,000 MW of retirements and $2.50 gas price 90 80 70 60 50 40 30 20 10 0 10 1 2 27 6 65 17 82 CT CC Phase 2 Max based on existing gas units running at same level as new gas units 5
Why should MISO be concerned about gas? Real Time Perspective 90% Contribution to Total Energy Served Jan thru June only 80% 70% 60% 50% 40% 30% 20% 10% 77% 78% 75% 65% 14% 14% 14% 14% 3% 3% 4% 5% 5% 2% 11% 8% 0% 2009 2010 2011 2012 Year Coal Nuclear Gas Wind 6
Lack of Fuel for Gas Units Summary 2007-2011 Total of 168 outages were recorded with an overall of 19,015 MW of power and 1,045,576 MWH of energy. These 168 outages have two different cause codes and are divided into five main categories. 7
Outages with Cause Code 9130 Category Category Description Sum of Instances Total Loss (MWH) Range of Loss (MWH) Total Reduction (AVG MW) Range of Reduction (MW) Lack of Supply Maintenance or Technical Issues at Other Points 4 6,392 1,598 1,598 188 47 47 Lack/Loss Fuel Supply 23 33,2672 101 32,206 1977 6 164 No Fuel Contract 1 4,472 4,472 4,472 13 13 13 Lack of Supply Total 28 343,536 2,178 Maintenance Station/Pipeline/Valve Maintenance 22 69,236 115 15,023 1,477 14 144 Maintenance Total 22 69,236 1,477 Pipe Contingency Restrictions placed because of Excessive 1 3,285 3,285 3,285 280 280 280 Demand Supply Valve/Pipeline Failure/Outage 5 88,209 340 61,040 1,505 85 545 Pipe Contingency Total 6 91,494 1,785 Pressure Low Gas Pressure; some because of 24 38,672 3 29,789 2,537 1 390 Maintenance/Technical Issues at Other Points Pressure Total 24 38,672 2,537 N/A No Information was Provided 39 108,539 3 7,224 4,748 1 286 N/A Total 39 108,539 4,748 *Cause Code 9130: Lack of fuel where the operator is not in control of contracts, supply lines, or delivery of fuels 8
Outages with Cause Code 9131 Category Category Description Sum of Instances Total Loss (MWH) Range of Loss (MWH) Total Reduction (AVG MW) Range of Reduction (MW) Lack of Supply Lack/Loss Fuel Supply 6 65,371 4 32,826 409 1 191 Maintenance or Technical Issues at Other Points 5 5,238 918 1,320 873 153 220 Lack of Supply Total 11 70,609 1,282 Maintenance Software/System Upgrade 7 884 97 140 404 35 158 Maintenance Total 7 884 404 Pipe Contingency Pipe Contingency Total Pressure Restrictions placed because of Excessive 8 12,970 20 3,388 1,185 5 220 Demand Supply Valve/Pipeline Failure/Outage 11 75,616 20 18,920 1,161 42 220 19 88,587 2,346 Low Gas Pressure; some because of Maintenance/Technical Issues at Other Points 4 2,996 242 1,300 354 53 153 Pressure Total 4 2,996 354 N/A No Information was Provided 8 231,020 19 111,103 1,903 12 545 N/A Total 8 231,020 1,903 *Cause Code 9131: Lack of fuel (interruptible supply of fuel part of fuel contract) 9
Contingency Type vs. Unit Size Pressure Pipe Contingency Maintenance Lack of Supply 0 30 60 90 120 150 180 210 240 270 300 330 360 390 420 450 480 510 540 570 600 Unit Capacity (MW) This Plot represents that units are involved with Pressure and Pipeline contingencies regardless of their size where as, Maintenance and Lack of Supply are constraints that mainly happen to units smaller than 300 MWs. 10
Key Gas-Electric Interdependency Issues Information Sharing & Communication Flexible Solutions to Interdependency Issues Cross-Industry Education Involvement of State and Federal Regulators Coordination of Emergency Operations 11
Workshop feedback received to-date MISO Coordinate communication, but not gas infrastructure planning and expansion Examine the treatment of firm vs. non-firm service going forward Examine the feasibility of aligning the MISO electric day with the gas day Extend MISO s forward capacity market Write flexibility into the generator retirement reporting requirements (Attachment Y) for definitive retirements Gas Industry Review the no-bump rule Work to provide clarity on existing pipeline services/contractual arrangements Work with FERC to develop a streamlined regulatory process for pipelines to incorporate more flexible service in their tariffs Help improve understanding of the gas industry by electric industry players Examine the possibility of adding nomination periods across pipelines Incorporate forward-looking planning into business operations Improve industry transparency Joint Partnership Improve information sharing and communication Improve system emergency planning and coordination 12
Next Steps MISO will coordinate with INGAA to provide Planning & Operations Training for gas industry professionals MISO will establish a stakeholder group (Gas-Electric Task Force) to offer a forum for moving forward on gas-electric efforts A tariff workshop will be scheduled to address potential tariff changes related to gas-electric issues 13
Appendix 14
Environmental Protection Agency Proposing Four New Regulations 2010 2011 2012 2013 2014 2015 2016 2017 2018+ Clean Water Act Develop Rule Compliance Prep Period Compliance Coal Combustion Residuals Develop Rule Compliance Prep Period Compliance Clean Air Transport Rule/Cross State Air Pollution Rule Develop Rule Compliance Vacated Mercury and Air Toxics Standards Develop Rule Compliance Prep Period State Exten -sion EPA Exten -sion Compliance
Purpose of the Phase 1 and Phase 2 Studies 1. 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. 2. 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. 16
Results Phase 1 (Feb 2012) 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 5-6 years, if started now Compliance with Mercury and Air Toxics Standards is 3-5 years 17
Results Phase 2 Modified-Backcast analysis based on the existing gas infrastructure with existing and new gas capacity additions running with a $2.50/Mbtu gas price: The analyses 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 for the existing units plus an incremental 12,000 MW of coal-to-gas retirement. Gas industry participants reviewed the report and provided comments that were more optimistic than the conclusions, which are contained in Appendix 2. 18
Results Phase 2 continued Pipelines sourcing gas supply from the Gulf Coast have significantly higher levels of insufficient capacity compared to the Southwest and Mid-Continent pipeline sources. 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 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 No obvious venue (except FERC) for that coordination exists, other than MISO 19
Pipeline Specific 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. 20
Overview of MISO Region Major Pipelines 21