A Survey of the Generation Landscape

• Transmission Summit 2016
• March 2016

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Agenda

• Changing Generation Landscape
  • Trend 1 Regulatory Reform
  •  Trend 2 Reserve Margins
  • Trend 3 Generation Mix
  • Trend 4 Grid Evolution
• Generation Impacts on Transmission

1

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Trend 1 Regulatory Reform

• The Clean Power Plan (CPP), coupled with several other ongoing regulatory and environmental initiatives, will have a profound impact on U.S. generation

 

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Trend 1 Regulatory Reform (Contd)

CPP Where are we today?

• Published in the Federal Registry October 2015
• Immediately followed by more than 20 states filing a petition for review with the U.S. Court of Appeals of D.C. (West Virginia et al. v. EPA et al.)
• U.S. Supreme Court stayed implementation of the CPP pending judicial review (02/29/2016)
  • Prohibits the EPA from engaging in actions to implement or enforce the CPP
•  Ongoing litigation, the U.S. Court of Appeals for the District of Columbia Circuit will hear arguments on June 2, 2016

 

CPP Targets By State

The final rule demands more from high emitting states and focuses on greenhouse gas emitters who have done little to control their emissions to this point  

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CPP Performance Rates by Technology

• Final state goals lie between the fossil steam and combustion turbine (CT) technology targets
• Existing technology (supercritical and natural gas CT) emissions exceed targets
• All but the coal unit building block fall outside the fence line of a power plant and, critics say, outside of the EPA's Clean Air Act authority to enforce

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Trend 1 Regulatory Reform (Contd)

CPP Impacts on generation

• Acceleration of the ongoing transformation of the resource mix
  • Coal plant retirements
  • Increased reliance on gas-fired plants
  • Impact on nuclear unclear
  • Growth of renewables
•  Coordination among utilities, ISO/RTOs, NERC, and other commodities
  • Understand full impact of changes
  • Identify options for ensuring long-term system reliability

   

Trend 2 Declining Reserve Margins

Reserve margins continue to trend downward despite a decline in electricity demand

• 21 NERC Assessment Areas eight areas at risk of falling below reference margin levels by 2025
• Uncertainties will require more granular analysis to raise awareness of resource adequacy concerns

 

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Trend 2 Declining Reserve Margins (Contd)

Example WECC-NWPP-CA

• Anticipated demand growth in the area is a major contributor to the reserve margin shortfall in this assessment area
• WECC-NWPP-CA will require an additional 2.4 GW of on-peak available resources by 2025 to cover the capacity shortfall and maintain their reference margin level
• Tier 2 and Tier 3 resources could be advanced to cover resource adequacy concerns

 

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Trend 3 Changing Generation Mix

What does the future look like?

• Coal replaced with natural gas, growth in renewables, and new technologies (storage, distributed generation, etc.)

Coal

• Significant coal plant retirements in the near future due to environmental regulation
• Between 40 GW and 90 GW in the 2014-40 period (most by 2020)

 

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Trend 3 Changing Generation Mix(Contd)

Natural Gas

• Will continue to replace coal-fired generation for base-load generation
  • Low natural gas prices and regulation have fostered the change
•  Issues to consider
  • Adequacy of gas pipeline infrastructure, planning, and operational strategies to ensure fuel delivery
  • Coordination with the electric infrastructure
  • Prices are low today but will they stay low in the future?
• Is this a sustainable long-term solution?

 

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Trend 3 Changing Generation Mix(Contd)

Nuclear

• 61 commercially operating nuclear plants with 99 reactors in 30 states
  • 2015 Capacity 100 GW
  • Despite announced retirements, capacity is expected to growth by 3.4 GW by 2020
• All three announced retirements are single unit sites
  • Other single unit sites at risk due to market conditions (low gas prices)
• Nuclear power plant construction cost estimates tend to be uncertain
  • Cost overruns and delays account for up to 200% of initial estimates

 

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Trend 3 Changing Generation Mix(Contd)

Wind

• On December 18, 2015, the U.S. Congress extended the 2.3% Production Tax Credit (PTC) for wind through 2019
• Continued state Renewable Portfolio Standard (RPS) challenges
• Proximity of load to wind may require additional investment in transmission infrastructure

 

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Trend 3 Changing Generation Mix(Contd)

Solar

• On December 18, 2015, the U.S. Congress extended the 30% Investment Tax Credit (ITC) for solar through 2021
  • +25 GW of extra solar capacity (2016-2020) and $40B in incremental investment
• Solar prices will likely continue to decline although at a slower rate

 

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Trend 4 Evolving Grid

Major Drivers

• New technologies, evolving resource mix, and market conditions changing energy delivery infrastructure
• Energy efficiency, demand response (DR), and demand side management programs (DSM) encourage conservation
• Deployment and integration of distributed energy resources (DERs) is a game-changer facilitated by:
  • Regulatory policy and incentives
  • Technology advancements
  • Increased acceptance levels
• Technology forcing the need to manage both sides of the supply/demand equation

 

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Trend 4 Evolving Grid (Contd)

Challenges

• Reliance on central station generation being called into question
• Regulatory models need to be reconsidered
  • Accommodate new market entrants
  • Address stranded investments
• Market operations are no longer one-way, centralized, and fully transparent

 

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Transmission Impacts

Areas of Consideration

• Infrastructure - upgrades or new transmission build to alleviate constraints or connect new supply
• Planning-creativity in transmission modeling and planning to address uncertainty
• Operations-adjustments to real-time operations to ensure reliability of the bulk electric system
• Commodities-expanded collaboration and communication across commodities as dependence on natural gas grows
• Regulation-rethinking of the traditional regulatory model to animate markets, accommodate new entrants, and address cost recovery

 

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Transmission Impacts (Contd)

Industry Response to Changing Generation Mix

• Avoid the wait and see approach and continue pursuing alternatives given the lead time required to implement transmission solutions
• Continue collaborating with neighboring utilities, regions, and commodities to understand outcomes and coordinated responses
• Take a creative approach to planning, considering a range of scenarios and resulting impacts of potential regulatory or policy outcomes
• Adopt technologies or enhanced operational practices to address system reliability challenges
• Remain active and a vocal industry advocate to preserve the integrity of a safe, reliable, and efficient transmission grid

A fundamental change in the electricity generation mix is occurring. It will transform grid level reliability, diversity, and flexibility.