Nescoe

Mechanisms 2.0 Study – Phase I: Scenario Analysis Presentation

Renewable and Clean Energy Mechanisms 2.0 Study – Phase I: Scenario Analysis

Winter 2017

[see pdf version]

Overview

  • Context
  • Analytical Approach and Modeling Assumptions
    • Scenario Analysis ➡ Mechanisms Analysis
  • Modeling Results
    • Energy, Capacity, and Emissions
    • Missing Money
  • Phase I: Scenario Analysis – Observations
  • Next Steps

What the Analysis will Not Provide

The modeling is illustrative, rather than predictive. It is based on many assumptions, any one or more of which history may prove wrong to varying degrees. The analysis will provide directionally indicative information about a range of hypothetical scenarios. It is not a plan, and it is a not a collective or individual state view of or preference about the future.  The costs LEI’s model identifies are based on assumptions and therefore should not be interpreted as an actual price tag.

The Study does not attempt to:

  • Precisely forecast the timing of future generator retirements, or infrastructure development.
  • Evaluate cost-effectiveness under an avoided cost approach.
  • Optimize the level, timing, or location of renewable and clean energy resources.
  • Suggest winners or losers.

This study should be viewed accordingly, and critically. 

NESCOE welcomes from market participants or others any facts or data that clarify, correct, or should be considered in reviewing the study results.

Context for Mechanisms 2.0 Study

[see pdf for graphics]

Mechanisms 2.0 Analytical Approach

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LEI Modeling and Economic Analysis

[see pdf for graphics]

Scenario Analysis Design

[see pdf for graphics]

Mechanisms 2.0 – Base Case

  • Represents “Business As Usual”

–A variation on London Economics International’s (LEI) multi-client Base Case

  • Continuation of existing state policies related to RPS and carbon emissions

–Current RPS targets with transmission transfer limits based on recent ISO-NE analysis

  • LEI adds on-shore wind capacity until transmission interfaces constrain new entry

–Current RGGI allowance price forwards through 2020 are escalated at an assumed inflation rate (2%)

  • “Just in time” economic new entry and retirements based on forecasted market dynamics

–Results of Forward Capacity Auctions (FCA) through FCA 10 incorporated into new entry and retirements

–Integrated energy and capacity market modeling through the study period; includes convex demand curves

–Cost of New Entry (CONE): Combined Cycle Gas Turbine is Offer Review Trigger Price ($9.46/kW-month) based on recent FCA results and perceived CONE trend

  • Baseline expectations for load growth under weather normal conditions

–ISO-NE CELT 50/50 Load Forecast, net of Energy Efficiency and behind-the-meter Solar PV

  • LEI’s proprietary fuel price forecasts, based on known and committed infrastructure projects

–Levelized Cost of Pipeline model for Algonquin City Gate natural gas delivered prices

–Current forwards and actual historical prices escalated at EIA-forecasted growth rates for oil and coal

  • Imports from neighboring systems assumed to continue historical trends over existing ties
  • No Clean Energy RFP respondents have been included in the Base Case

Scenario Design – Assumptions

Scenario

Generation Transmission Imports
Retirements New Entry
2025 2030

Base Case

FCA 10 FCA 10

+ 1,155 MW On-Shore Wind

+ 277 MW Solar PV

+ 30 MW Off–Shore Wind

+ 2,194 MW Natural Gas

FCA 10

+ 1,155 MW On-Shore Wind

+ 402 MW Solar PV

+ 30 MW Off–Shore Wind

+ 3,694 MW Natural Gas

ISO-NE RSP List
(June 2016 PAC Transmission Transfer Capabilities Update)
Historical trends continue over existing ties
Alternative Scenarios  ***Inherit Assumptions from Base Case*** Expanded RPS 35% by 2025

40% by 2030

+2,750 MW On-Shore Wind
+600 MW Solar PV

+1,500 MW Off-Shore Wind

+1,694 MW Natural Gas+3,575 MW On-Shore Wind
+1,000 MW Solar PV

+2,000 MW Off-Shore Wind

+1,694 MW Natural Gas+ 2,400 MW HVDC

40% by 2025

45% by 2025

+4,250 MW On-Shore Wind
+1,000 MW Solar PV

 

+2,000 MW Off-Shore Wind

+1,694 MW Natural Gas+5,500 MW On-Shore Wind
+1,250 MW Solar PV

+2,500 MW Off-Shore Wind

+1,694 MW Natural Gas+ 3,600 MW HVDC Clean Energy Imports +1,694 MW Natural Gas+ 2,694 MW Natural Gas+1,000 MW HVDC+1000 MW CSO
(7.9 TWh/year)Nuclear Retirements3,350 MW Nuclear
units retire by 2025+ 5,194 MW Natural Gas+ 7,194 MW Natural Gas  Combined Renewable and Clean Energy +4,250 MW On-Shore Wind
+1,000 MW Solar PV

+2,000 MW Off-Shore Wind

+1,694 MW Natural Gas+5,500 MW On-Shore Wind
+1,250 MW Solar PV

+2,500 MW Off-Shore Wind

+2,194 MW Natural Gas

+3600 MW HVDC

+1000 MW HVDC

+1000 MW CSO
(7.9 TWh/year)No Transmission +4,250 MW On-Shore Wind
+1,000 MW Solar PV

 

+2,000 MW Off-Shore Wind

+1,694 MW Natural Gas+5,500 MW On-Shore Wind
+1,250 MW Solar PV

+2,500 MW Off-Shore Wind

+1,694 MW Natural Gas+3600 MW HVDC

Scenario Design: Assumptions

[see pdf for graphics]

Forecasted Energy Market Prices

[see pdf for graphics]

Forecasted Capacity Market Prices

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Forecasted Power Sector Carbon Emissions

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Energy Market Competitive Dynamics

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Scenario Analysis and Energy Market Competition

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Excess Supply Effect on Production

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Estimated Missing Money:  Selected Resource Types – 2025

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Estimated Missing Money:  Selected Resource Types – 2030

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Estimated Missing Money:  Existing Natural Gas

[see pdf for graphics]

Estimated Missing Money:  New Dual Fuel

[see pdf for graphics]

Estimated Missing Money:  Existing Solar PV

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Expanded RPS Scenarios and Treatment of Transmission for New On-Shore Wind Resources

Scenario: Transmission for Deliverability Assumption of Transmission Costs Responsibility
Expanded RPS 35%-40% Included in the Model (assumes adequate transmission has been built), Enabling Renewable Energy Delivery Outside of the Markets as an Elective Transmission Upgrade (“ETU”) or Public Policy Project
Paid for by New On-Shore Wind Resources in their interconnection agreements
More Aggressive RPS 40%-45% Included in the Model (assumes adequate transmission has been built), Enabling Renewable Energy Delivery Outside of the Markets as an ETU or Public Policy Project
Paid for by New On-Shore Wind Resources in their interconnection agreements
More Aggressive RPS 40%-45% without Transmission Not modeled, resulting in Congestion and Curtailments None

Estimated Missing Money: New On-shore Wind Resources

[see pdf for graphics]

Phase I: Scenario Analysis Observations

  1. When the LEI model adds new renewable generating resources or additional clean energy imports to the New England system with zero or very low marginal costs, those added resources have the effect of decreasing the amount of money that all resources earn from New England’s capacity and energy markets.
  2. Under Base Case load conditions, if the region adds more than 25,000,000 MWh (annually) of new renewable resources and/or clean energy imports by 2025, existing renewable and clean energy resources produce less power. The assumed load forecast in all scenarios includes regional energy efficiency programs and distributed generation impacts consistent with the 2016 ISO-NE Capacity Energy Loads and Transmission (“CELT”) Report’s load forecast net of passive demand resources and behind-the-meter solar photovoltaics. 
  3. In the Base Case, if New England maintains current RPS targets and does not add transmission for new on-shore wind, the modeling shows that there will not be enough renewable resources to satisfy the states’ aggregated RPS targets in 2025 and 2030.
  4. If New England does not build new transmission to allow new on-shore wind resources to move power to population centers, both new and existing on-shore wind resources will operate less often and earn less revenue in 2025 and 2030.
  5. Under every hypothetical scenario, LEI’s analysis projects that nuclear units, existing oil combustion turbines, oil internal combustion turbines, oil steam, and pumped storage remain profitable in 2025 and 2030.
  6. If New England’s nuclear resources retire and/or if New England has only enough renewable resources to meet current RPS levels, New England’s emissions will increase significantly.
  7. Different types of renewable and clean energy resources have different effects on wholesale electricity costs and emissions.

NESCOE welcomes from market participants or others any facts or data that clarify, correct, or should be considered in reviewing the study results.

Questions?