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May 1 5, 2018 | Westborough, MA

May 1 5, 2018 | Westborough, MA. Reliability Reviews for Fuel Security: Criteria for Unit Retention in the Forward Capacity Market (FCM). Peter Brandien. VP, System operations.

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May 1 5, 2018 | Westborough, MA

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  1. May 15, 2018 | Westborough, MA Reliability Reviews for Fuel Security: Criteria for Unit Retention in the Forward Capacity Market (FCM) Peter Brandien VP, System operations

  2. While the region’s resource mix is shifting, its fuel-security risks are sensitive to the retirement of resources from the system • To address near-term operational fuel-security risks, the ISO is developing a reliability criteria to help it maintain regional energy security. The criteria would apply to retirement reviews conducted pursuant to Section III.13.2.5.2.5 • At today’s meeting, the ISO will continue the conversation on defining the appropriate criteria that may require retaining a resource in the FCM to address regional fuel-security risks • Provide additional clarity on the proposed model inputs and outputs to determine if the criteria are met • Discuss how the ISO would conduct a fuel-security reliability review

  3. Summary of ISO’s Work Plan for Addressing Fuel-Security Risks: Chapter One • For FCA 13, the ISO received Retirement De-list Bids from Exelon Generation Company and found that allowing the retirement of two units at the Mystic station would increase the region’s fuel-security risks during the winter periods associated with FCA 13 and 14 • The ISO discussed its plans with the PC on April 6 and 10. On May 1, the ISO made a filing to FERC seeking a waiver of its tariff to allow retention of two units to address the region’s fuel-security risks • We asked to hear from FERC by July 6 • Exelon is expected to file its proposed Cost of Service Agreement shortly for Capacity Commitment Periods 2022-2023 and 2023-2024; proceedings will take place at FERC if the waiver is granted • Exelon has indicated it is seeking timely approval of its filing before FCA 13 runs or it will retire unconditionally • The ISO plans to discuss the implications of some of the provisions of the proposed Cost of Service agreement at an upcoming Markets Committee • The cost-allocation issues that will be discussed during “chapter two” will also be applied to “chapter one;” ISO-NE has stated that it believes the costs should be shared by the entire region

  4. Summary of ISO’s Work Plan for Addressing Fuel-Security Risks: Chapter Two • The ISO is seeking to document its criteria for reliability reviews of winter fuel-security risks presented by retirement bids, and the authority to allow it to retain resources if needed for regional fuel-security needs • This effort to address fuel-security risks is intended for use in FCA 14 and FCA 15, ahead of the development of market-based solutions to improve energy security (“chapter 3”), and is the focus of the current discussions at the Reliability Committee • Discussions will also occur at the Markets Committee • The ISO is considering language that will limit the application of these provisions until chapter 3 provisions are in place and then retire the provisions, similar to the treatment of the winter reliability programs • The ISO plans to file tariff provisions by November 2018 to allow for an Order and implementation before the next retirement window for FCA 14 in March 2019

  5. Summary of ISO’s Work Plan for Addressing Fuel-Security Risks: Chapter Two, Cont. • Various components in chapter two: • Reliability criteria: primarily at Reliability Committee • The model and inputs to be used in the operational reliability review for fuel security • The reliability criteria applied to ISO’s review (i.e., load shedding and depletion of 10-minute reserves) • The trigger for retaining a particular resource to address fuel-security concerns • Interaction with existing tariff provisions: primarily at Markets Committee • For example, timing of fuel-security reviews and interaction of retained resources with other retirement provisions • Auction treatment of retained resource: primarily at Markets Committee • Includes potential concerns raised about price impacts in primary auction – An open issue that may take longer than Nov. target filing • Cost-allocation: primarily at Markets Committee • Cost-allocation provisions for retained resources

  6. Summary of ISO’s Work Plan for Addressing Fuel-Security Risks: Chapter Three • In January, the ISO released its Operational Fuel-Security Analysis examining how anticipated generating resource and fuel-mix combinations could affect its reliable operation of the regional bulk power system during an entire winter period • This study became the basis of the ISO’s filing in the Resilience Docket • The ISO discussed its observations with the Reliability Committee over the course of several months and ran additional scenarios for stakeholders to reflect their perspectives of anticipated resource and fuel-mix combinations for the 2024/2025 timeframe • The ISO’s desire to address these regional winter fuel-security risks through market-based solutions for energy security has been referred to as “Chapter 3” and is the subject of separate discussions that will take place at the Markets Committee starting in June 2018 • Discussions on the problem, the product, and the options for energy security solutions will take place during this track

  7. Duration of Fuel-Security Reliability Provisions • Based on feedback from the April 25 RC, the ISO has decided to expressly limit the use of the fuel-security reliability review to a two year period (FCA 14 and 15) • This is with an expectation that the market-based solution in the longer-term will replace these reliability review provisions, which implies that such a market-based solution is implemented ahead of FCA 16 • This limited applicability should help ensure further narrowing of the use of cost of service agreements for resources that are critical for energy security, along with the threshold requirement that a binding retirement request is the trigger for the use of the fuel-security reliability review

  8. Further Details on Model Inputs • CELT/Load Forecasts draft updates would be incorporated into the assumptions used for the review of fuel-security reliability risks:  • Winter Net 90/10 Load with reductions for Energy Efficiency • PV (Commercial + BTM) • The draft CELT/Load Forecasts have been presented already at the Planning Advisory Committee and RC before the fuel-security reviews of retirement bids will take place • ISO will use known resources or and transmission facilities from the last auction • Future to-be-built resources • Future to-be-built tie import facilities • Known retirements: • Resources • LNG facilities • Existing Generating Capacity Resources for the FCA at issue will be modeled at their Seasonal Claimed Capability • This resource mix captures new resources cleared in the prior auction, which become part of existing capacity immediately following that auction • Generation facilities that are not Existing Generation Capacity Resources in the FCM, but are existing on the system will be modeled at their Seasonal Claimed Capability

  9. Further Details on Model Inputs, cont. • Additional values to be updated ahead of review: • LDC demand • Pipeline capacity expansions • Each March, the ISO could present its model inputs with stakeholders • Anticipating a two-year effort, a recent real-world winter with some system stress, 2014/2015, is a reasonable choice for the winter profile • A significant additional level of effort and development of assumptions likely would be needed to create a combined probabilistic winter forecast

  10. Further Details on Variable Inputs • The ISO proposes to vary certain values for system sensitivities • Dual-Fuel unit inventories: 1-2 replenishments • LNG: 0.8-1.2 Bcf/day • Tie-line Imports: 2,500-3,500 MW • The ISO plans to test dual-fuel unit replenishments at both one replenishment and two replenishments; until data indicates that the assumptions should be updated • Input associated with two replenishments assumes dual-fuel oil tanks start the season full and refill once during the winter season, and that fast-start units refill continuously • Likely optimistic values based on winter logistics • Early December fuel surveys will be utilized for inventories and replenishment of oil only units • In terms of LNG deliveries, the ISO will vary delivery numbers • ISO expects to use values between 0.8 Bcf/day to 1.2 Bcf/day based on historic values • If observed or expected LNG deliveries warrant changes to the modeled values, the ISO will notify stakeholders of these changes in the March timeframe

  11. Further Details on Variable Inputs, cont. *The study will also assume that New England receives an additional 500 MW of emergency imports from its neighbors during times of system stress when Operating Procedure No. 4 is implemented • The ISO will vary tie-line imports to be between 2,500 MW and 3,500 MW* • On average, over the last five winters, about 2,500 MW has been flowing into New England from neighboring grids just over 60% of the time and 3,000 NW has been flowing into New England from neighboring grids approximately 35% of the time • If observed or expected imports on existing tie-lines warrant changes to the modeled values, the ISO will notify stakeholders of these changes in the March timeframe • The higher end of this range (3,500 MW) assumes that a new transmission line from Canada or New York has a binding and enforceable contract under a state procurement to be in-service • The ISO will include additional resources in its analysis that have a binding and enforceable contract under a state procurement to be in-service

  12. Further Details on Model Output Metrics • In terms of the output metrics, the fuel-security assessment will show the number of hours of deficiency without a resource needed for fuel security • OP-4 • Action 1 • MWh • Hours • Actions 2-5 • MWh • Actions 6-11 • MWh • 10-minute reserve depletion • MWh • Hours • OP-7 Action • MWh • Days

  13. Reliability Reviews for Fuel Security The fuel-security reliability review is intended to apply in narrow circumstances where the region is facing the actual loss (i.e., retirement) of a facility rather than the loss of a capacity obligation The ISO is working through how reviews for fuel security would be done relative to reviews for transmission security and if different timelines would be needed for the fuel-security reviews

  14. Reliability Reviews for Fuel Security, cont. • Retirement bids are received in March • If there is more than one retirement bid, the ISO proposes that the fuel-security reliability reviews will be conducted in descending bid price order • Bids with the same price will be reviewed in order of: • Least negative impact to reliability • Submission time • Depletion of 10-Minute reserve and/or activation of OP-7 may trigger a resource retention

  15. Reliability Reviews for Fuel Security: Example Fuel-Security Modeling, Load Shaping The hourly demand levels from winter 2014/2015 will be adjusted to reflect the ISO’s winter net 90/10 forecast

  16. Reliability Reviews for Fuel Security: Example • Daily Available Gas will be calculated and shaped to reflect hourly gas usage. Gas availability profile will be shifted from off-peak hours to on-peak hours to follow the hourly electric demand curve • (Total Daily Available Gas) = (Daily Pipeline Available Gas) + (Daily LNG Injections Available) + (Daily Satellite Gas Injections) • (Total Daily Available Gas for Generation) = (Total Daily Available Gas) – (New England Daily LDC Demand) – (New Brunswick Daily LDC Demand) • (Hourly Gas Available for Generation) = (Total Daily Available Gas for Generation )/ 24 * (Ratio of Hourly Electric Demand to Peak Demand for the Day)

  17. Reliability Reviews for Fuel Security: Example • The study model will be based on winter conditions when oil and gas fuels were tight (winter 2014/15) • Resource capabilities are updated (based on CELT) and then dispatched within the model on an hourly basis. The unit requesting retirement will be removed from the dispatch • Demand will be met by dispatching non-oil-fired and non-natural-gas-fired generators first • Resources in this category include renewables, such as on- and offshore wind, solar PV, other renewables (e.g., biomass, refuse, landfill gas); nuclear; and hydro, including pumped storage. • Next in the dispatch order will be imports, then natural-gas-fired generators • If all power plants are already operating at full capability, and more demand for power still needs to be served, dual-fuel generators with stored oil will be dispatched • Finally, oil-only generators will be dispatched if necessary

  18. Reliability Reviews for Fuel Security: Example *On June 1, 2018, demand-response resources will be integrated into New England’s wholesale energy markets and will be dispatched based on price in the same way generators are dispatched and will not be available as emergency resources. The fuel-security study will not reflect this change because this will be the first time demand-response resources will be fully integrated into economic dispatch systems, so the price and other aspects of their offers, which affect when they will be dispatched to reduce energy consumption, is uncertain at this time • Once dispatch requirements are met (energy and reserves) no additional resources are dispatched • If energy and reserves are not met, Operating Procedure – 4 Action During a Capacity Deficiency actions will be applied to relieve system stress

  19. Reliability Reviews for Fuel Security: Analysis Summary • Analysis summary will be displayed as shown below • Emphasis on hours of 10-Minute Reserve Depletion and OP-7 Action

  20. Conclusion • To address near-term operational fuel-security risks, the ISO is developing a reliability criteria to help it maintain regional energy security. The criteria would apply under retirement reviews conducted pursuant to Section III.13.2.5.2.5 • The fuel-security reliability review will be used for a two-year period associated with FCA 14 and 15

  21. Stakeholder Schedule • Proposed schedule of tentative target dates

  22. Stakeholder Schedule, cont.

  23. Peter Brandien (413) 535-4022 | PBRANDIEN@iso-ne.com

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