20160217 PAC Item 02a MISO CPP Final Rule Analysis Near Term
Transcription
20160217 PAC Item 02a MISO CPP Final Rule Analysis Near Term
State Impacts from Regional Results for MISO’s Near-Term Analysis of EPA’s Final Clean Power Plan Planning Advisory Committee February 17, 2016 Results of this study are not recommendations. Results are intended to provide information to help understand impacts of the CPP on the MISO system. Each state and utility should consider these results within the broader context of their CPP compliance objectives, policy goals and views about desired future resource mix. MISO will report key findings ahead of the coming deadlines that states must meet MISO’s Goals: • Inform policymakers as they formulate compliance strategies • Enable the reliable, efficient implementation of CPP-related policy decisions made by our member-states and asset-owners EPA’s Timeline for states to implement Clean Power Plan (through 2018) Today MISO’s Timeline for analyzing Clean Power Plan (through 2018) State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 2 MTEP17 Futures will combine Clean Power Plan analysis and potential siting process reforms Siting Process Review Determine process revisions necessary to site resource mix driven by CPP compliance Siting Kick-off Methodology Mar PAC April WS Finalize Methodology July PAC CPP Mid-Term Analysis Determine how to model CPP limits in MTEP models Results Overview Scope Mar PAC 2015 • Potential increased renewables • • • • Wind zones (updates) Solar zones Ozone nonattainment Potential process improvements • Coal retirement levels • Indicative generation forecasts • Controls to model CPP limits • Accelerated CPP • CPP Kick-off: • Partial CPP Narratives and Variables Feb WS Mar WS MTEP17 Futures Input assumptions for overlay planning Futures Refinement May PAC Finalize MTEP17 Futures July PAC Sep PAC Weights MTEP17 Futures and Siting State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) Overlay Planning 3 Key observations 1 Generation will rise/fall in similar locations under both rate & mass, so transmission expansion, if needed, will be similar under both. 2 Mass-based compliance produces a more balanced mix of buyers and sellers within MISO. 3 Most states see a mass based compliance advantage unless a regional heavy penetration of renewables and energy efficiency is achieved. 4 Under a ‘patchwork’ mix of both rate & mass compliance, states with a rate advantage will lose that benefit if other states go mass. 5 Under current capacity trends, all MISO states have a mass based compliance advantage. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 4 Notes Results of this study are not recommendations and are intended to provide information to help understand impacts of the CPP on the MISO system. Each state and utility should consider these results within the broader context of their CPP compliance objectives, policy goals, and views about desired future resource mix. • All models assume reliability is maintained through the addition of new resources • Models reflect current generation, assumed retirements and resource expansion, including – Units with signed Generator Interconnection Agreements (GIA) – Resources forecasted as part of the MTEP15 7-step process to meet planning reserve margins and renewable portfolio standards • Additional scenarios look at other possible resource changes beyond current trends with the assumption that the changes would occur regardless of the CPP • Results in this presentation model: – Trading ready sub-category rate and mass based compliance – Interstate energy and emissions trading • Benefits of CO2 allowances are assumed to go to load • Generators are counted for compliance in the state in which they are physically located State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 5 MISO’s detailed study of the CPP requires some assumptions be simplified Range of compliance outcomes is extremely broad Near-term modeling framework Current trends Gap analysis Alternative scenarios Rate or mass? Scenario 1 50/50 Split Scenario 2 30/70 Split Scenario … Final Complicated questions that aren’t directly addressed in this study Optimal resource mix? Which compliance pathway should a state pursue? Optimal transmission expansion? Optimal pipeline expansion? This study uses PLEXOS and includes a detailed representation of the power system and assumes resource build-out scenarios to answer more focused questions. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 6 Study methodology tests compliance options under increasingly different capacity scenarios $160 2030 EI CO2 Price (Nominal $/short ton) $140 Rate $120 $100 $80 $60 Mass $40 $20 $- CPP Constraints (CPP) Coal-to-Gas Conversions (C2G) Gas Build-Out (GBO) Gas, Wind, Solar Build-Out (GWS) High EE, Wind, Solar Build-Out (EWS) Increasing change in system build-out from current state Each scenario includes a resource mix that is assumed to have been built due to economic or policy drivers other than the CPP, and compliance impacts are measured using this resource mix. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 7 Compliance cost trends are consistent under varying gas prices, though the magnitude of the trend varies Base gas price is $4.67 in 2015. 2022 (+$2) Mass 2025 (+$2) Rate Base Mass 2030 Base Rate (-$2) Mass (-$2) Rate Gas price changes are likely to change future capacity trajectories, but don’t change compliance trends within the same trajectory. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 8 State Example (Arkansas) Capacity (GW) 18 16 +524 MW 14 -524 MW +900 MW +644 MW -524 MW 12 10 -5,082 MW 8 6 4 Steam Turbine CC CT Renewable EE Nuclear Other The model assumes a regional heavy penetration of renewables and EE as an input to the EWS scenario. 2 0 Year CPP C2G GBO GWS EWS Increasing change in system build-out from current state 2022 2025 2030 Blue indicates lower production costs under sub-category rate compliance. Green indicates lower production costs under mass compliance. As a result, EWS rate compliance would likely be less expensive than EWS mass. • In 2025 and 2030, the increasingly stringent targets lead Arkansas’ coal-heavy fleet to see a cost advantage under mass-based compliance. • In the capacity scenarios studied, Arkansas needs to buy ERCs or allowances to maintain compliance, except for when a balance of coal retirements and renewables penetration positions it as a seller. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 9 1 Generation will rise/fall in similar locations under both rate & mass, Sub-category Rate Mass + Mixed NSC so transmission expansion, if needed, will be similar under both Maps shown result from the CPP scenario. 2022 2025 2030 While the magnitude and location of impacts on generation change with varying capacity expansion scenarios, within each scenario the impact of rate and mass compliance are similar. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 10 2 Mass-based compliance produces a more balanced mix of buyers and sellers within MISO 30 States selling ERCs see more value under rate-based compliance. Millions of Allowances/ERCs Traded in 2030 20 Mass States buying ERCs / allowances Rate 10 0 -10 States selling ERCs / allowances -20 Modeling includes Fermi 3 in Michigan. Vertical lines show range of emission trading over all scenarios. Resource forecast siting assumptions influence the outcome of rate/mass advantage. -30 MI LA IL SD MT MS ND TX MN IA WI AR MO IN KY State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 11 3 Most states see a mass based compliance advantage unless a regional heavy penetration of renewables and energy efficiency is achieved 2022 2025 2030 Increasing change in system build-out from current state State CPP IN SD IL IA MO MN LA TX MI MS KY WI AR ND C2G GBO GWS EWS State CPP C2G GBO IN SD IL IA MO MN LA TX MI MS KY WI AR ND Blue indicates lower production costs under sub-category rate compliance. Green indicates lower production costs under mass compliance. GWS EWS State CPP C2G GBO GWS EWS IN SD IL IA MO MN LA TX MI* MS KY WI AR ND Gradient charts show the relative difference between ratebased production costs and mass-based production costs. If all states move towards non-CO2 emitting resources the rate/mass advantage holds, but if a small number of states move towards non-CO2 emitting resources they will see a rate advantage. *Modeling includes Fermi 3 by 2030 (nuclear, has signed GIA). Michigan (MI) has a mass based advantage without Fermi 3. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 12 Under a ‘patchwork’ mix of both rate & mass compliance, states with a rate advantage will lose that benefit if other states go mass Patchwork models use the CPP scenario. All states choose mass based compliance 55% less expensive 4 5 MISO states see rate advantage (SD, LA, MI, MS, ND). 17 EI states total Sort states by cost advantage All states choose rate based compliance 0 MISO states see rate advantage. 8 EI states total 1st Mixed rate/mass run 50/50 split 9 MISO states see mass advantage (IN, IL, IA, MO, MN, TX, KY, WI, AR). 17 EI states total 2nd Mixed rate/mass run 14 MISO states see mass advantage. 26 EI states total 60% less expensive than all states choose rate 70% less expensive than all states choose rate As the process of creating patchwork model is iterated, individual states without a strong advantage between rate and mass will tend toward the regional compliance advantage. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 13 5 Under current capacity trends, all MISO states have a mass based compliance advantage (R) indicates a state is modeled under rate compliance, (M) indicates a state is modeled under mass compliance State A dark green box indicates that mass costs are less expensive. A dark blue box indicates that rate costs are less expensive. CPP CPP 1st Mixed CPP 2nd Mixed IN (M) (M) SD (R) (M) IL (M) (M) IA (M) (M) MO (M) (M) MN (M) (M) LA (R) (M) TX (M) (M) MI* (R) (M) MS (R) (M) KY (M) (M) WI (M) (M) AR (M) (M) ND (R) (M) A change in cell color across columns indicates a change in compliance advantage. An (R) in a green box indicates that although the state previously saw an advantage with rate, that advantage is lost when a group of other states choose mass compliance. The CPP 2nd mixed rate/mass model results show that all input advantages match the output advantages, indicating the system has reached an equilibrium. *Modeling includes Fermi 3 by 2030 (nuclear, has signed GIA). Michigan (MI) has a mass based advantage without Fermi 3. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 14 Next steps • March PAC – Initial discussion on mid-term analysis • State/utility review of modeling results – Our modeling has been built with a regionally consistent set of assumptions. – On-going discussions with states, utilities and other stakeholders about their current thoughts on resource planning, factoring in CPP compliance considerations. • MISO will work with stakeholders to determine how future planning efforts will proceed in light of the recent stay of the CPP. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 15 Contact info • EPA regulations webpage https://www.misoenergy.org/WhatWeDo/EPARegulations/Pages/111(d).aspx • Additional questions? Please contact: Jordan Bakke at [email protected] State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 16 APPENDIX Takeaways from modeling of sub-category rate compliance • Cost advantage under rate based compliance stems from: – Increase in new non-CO2 emitting generation – Ability of some gas units to create ERCs and gas shift ERCs • Steam turbine gas units can produce high priced ERCs, which creates value for states with these units when the ERC market is tight • CO2 emissions can increase as renewables are added • Coal retirements have little impact on compliance as the total fleet efficiency is relatively unchanged • Almost all combined cycle units see an increased cost adder by 2030 creating similar dispatch disparities between existing and new CCs as seen under mass based compliance ERC = Emission Rate Credit State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 18 2 Process to create mixed rate/mass (patchwork) runs Patchwork 1 < Mass Rate < Mass State maintains rate compliance in patchwork #2 State is assigned rate in patchwork #1 Mass < Patchwork 1 State is assigned mass in patchwork #2 Results from all states choose rate and all states choose mass Mass < Rate Patchwork 1 < Rate State maintains mass compliance in patchwork #2 Rate < Patchwork 1 State is assigned rate in patchwork #2 State is assigned mass in patchwork #1 As the process of creating patchwork model is iterated, individual states without a strong advantage between rate (run 1) and mass (run 2) will tend toward the regional compliance advantage. State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 19 The final rule study will evaluate CPP compliance pathways and inform the transmission planning process • • • • • • • Near-Term Modeling Mid-Term Modeling Long-Term Modeling (Understanding compliance pathways) (Preparing for transmission overlay development) (Developing transmission overlay) Rate vs. mass comparison Rate and mass interactions State vs. regional compliance Trading options Federal plan Range of compliance sensitivities Relative compliance costs Using Existing PLEXOS and EGEAS models* *Existing draft rule models will be updated with final rule parameters. • • • • • • Potential generation retirements Optimal resource expansion Wind/solar zones Renewables penetration/mix Renewables siting Thermal siting with new ozone rule Using new EGEAS models* and external research • • • Will be informed by state compliance plans Will use futures formulated through MTEP17 process Updates to assumptions as needed over MTEP18 and ‘19 cycles Using new EGEAS, PLEXOS and PROMOD models *Evaluated using three proposed CPP futures. MISO’s CPP Final Rule Study State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 20 Near-term production cost model scenarios Business-asUsual (BAU) Assumptions consistent with MTEP15 BAU economic planning model 12.6 GW of MATS-related coal retirements in MISO CPP Constraints (CPP) CPP constraints applied Coal-to-Gas Conversions (C2G) 25% of coal capacity per region is incrementally converted to run on natural gas Gas Build-Out (GBO) 25% of coal capacity per region is incrementally retired New gas-fired generators are built to compensate for retired capacity Gas, Wind, Solar Build-Out (GWS) High EE, Wind, Solar Build-Out (EWS) 30% of coal capacity per region is incrementally retired EE at 1.5% of energy sales beginning in 2020 with 1.5% year-over-year growth 13% of the retired capacity is replaced by new gas units 15% footprintwide RPS 17% by wind + solar CPP constraints applied Assumptions applied across all scenarios State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 21 Generators added in model between 2013-2030 in BAU State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 22 C2G conversion sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 23 C2G retirement sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 24 GBO expansion sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 25 GBO retirement sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 26 GWS expansion sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 27 GWS retirement sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 28 EWS expansion sites State Results for MISO’s Near-Term Analysis of EPA's Final Clean Power Plan (Feb. 17, 2016) 29