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Economic Analysis of Northeast Reliability Interconnection (Second NB Tie)

Economic Analysis of Northeast Reliability Interconnection (Second NB Tie). Monday, July 12, 2004 Wayne Coste ISO-NE Power Supply & Reliability. Seasonal nature of savings/benefits to allow comparison to capacity availability in Maritimes

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Economic Analysis of Northeast Reliability Interconnection (Second NB Tie)

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  1. Economic Analysis of Northeast Reliability Interconnection (Second NB Tie) Monday, July 12, 2004 Wayne Coste ISO-NE Power Supply & Reliability

  2. Seasonal nature of savings/benefits to allow comparison to capacity availability in Maritimes Where is the Generation coming from that provides the benefits of the added 150MW Orrington South. Inconsistency of economic impact of the Maine-New Hampshire transmission upgrade Rationale for considering Case 9A as the basis A single gas-fired combined cycle unit to model Maritime systems Capacity availability in Maritime Sub-area Savings ISO’s “LSE Expense” Methodology Issues Raised DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  3. Based on RTEP 04 assumptions, several cases were investigated Simulation shows the NRI will provide benefits to NE over the six year period (2008-2013) The total saving in LSE expense is about $98.9 million The total production cost reduction is $ 30.9 million Other qualitative benefits due to NRI Economic Assessment Review DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  4. Production cost is basically fuel cost and some minor O&M cost LSE Expense is the product of sub-area LMP and the sub-area load. The LMP is calculated using a transportation model considering transmission constraints. “LSE Expense” Methodology DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  5. Economic Assessment Review Assigned Transmission Limits (MW) * 200 MW of “price-taker” energy was assumed in addition to energy transactions that are priced on gas-fired CC DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  6. Monthly Flow Duration Curves • Based on NB to Maine Flows for Case 9A and 9A_1 • More energy flow imported in summer • In April and May, maintenance in New England causes a large amount of energy imported from NB DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  7. 700 MW Limit Historical Monthly Daily Flow Profile Historical New Brunswick to New England Interface Flow Average, Minimum and Maximum for Hours 1 to 24 by Month DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  8. Source of Increased Energy Available Due to 150 MW Orrington South Upgrade Year 2010 Dispatched Energy in BHE and NB (GWh) • Increased Generation comes from New Brunswick • Resource in BHE has minor competitive ($1.50/MWh) advantage over similar resource in NB due to through and out assumption. • Results are based on the current assumptions DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  9. Consistency with Previous TEAC ME-NH Upgrade Analyses • Previous TEAC presentations showed more benefits associated with Maine-New Hampshire upgrades than this analysis • The difference is caused by the different assumptions • TEAC 7 (RTEP01), New Brunswick modeled as a fixed 700 MW price taker. TEAC comments resulted in price sensitive (dispatchable) energy assumptions for NB and HQ • In TEAC 17, ME/NH upgrade benefits was related to elimination of a “double whammy” due to unit specific interface limit reduction DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  10. Use of Case 9A as the Base for NRI Analysis • The only difference between base case and Case 9A is the amount of available capacity in New Brunswick; • The difference of LSE expense and production cost between the two cases is relatively small. • The difference attributed to maintenance scheduling • Use of Case 9A as Base Case eliminates this source of model noise DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  11. Use of Case 9A as the Base for NRI Analysis: Annual Sub-Area Effects Change in NE of Production Cost: Base case minus Case 9A DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  12. Use of Case 9A as the Base for NRI Analysis – Annual Sub-Area Effects Change in NE LSE Expense: Base case minus Case 9A DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  13. NB is Strongly Winter Peaking DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  14. Gas CC is proxy for willingness to sell available surplus energy Supply Curve of New Brunswick in Year 2005 is estimated Capacity / heat rate from SGC Engineering’s reply ISO fuel price assumption Monthly peak and average load from SGC Engineering’s reply Appropriateness of Gas CC Proxy Price in NB DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  15. The summer peak load in NB is ~3500 MW Supply curve shows more economic units could be used to export energy to NE NB maintenance could have an effect Supports 200 MW of price taker energy Gas-fired CC is a conservative assumption unit Heat rate of 8400 Btu/kWh for summer energy Lower heat rate resource provides more benefits Effect of lower heat rate to be seen in a sensitivity case Reasonableness of Gas CC Proxy Price in NB DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  16. Supply Curve Illustrating Cost of Marginal Energy Maritime Supply Curve DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  17. Sensitivity to Gas CC Proxy Price Case 9A / 9A1 used to evaluate effect of lower strike price Cheaper energy in NB brings more benefits from NRI DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  18. With the reduction of available capacity in New Brunswick, the economic benefits of NRI decrease When S396 out of service, 0 MW generation in Maritime is available, the benefit is zero If some units in New England are retired, more benefits from NRI will be seen Effect of Available Capacity in NB DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  19. Additional Sensitivity Cases: Available Capacity in NB DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  20. Effect of Available Capacity in NB Change in NE Production Cost Due to NRI ($ Millions) DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  21. Effect of Available Capacity in NB Change in NE LSE Expense Due to NRI ($ Millions) DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  22. Question: In the sub-area saving charts, the sub-areas that would benefit the most economically by the second New Brunswick tie are Maine and Rhode Island and why? The total sub-area savings are related to the sub-area load level and influenced by the New England internal constraints The average LMP shows Maine has the largest LMP saving, and CT has the smallest LMP saving Sub-area Savings DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  23. Sub-Area Average Changes in Prices Average for six years DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  24. One reason for additional transmission is to provide an insurance benefit Low probability … high outcome events Assume that once in the 30 year life of the line LMPs in Day-Ahead and Real-Time prevented from spiking to $1000/MWh from $500/MWh affecting all of New England 25,000 MW affected across New England Price spike duration lasts 4 four hours 25,000 MW * 4 hours * $(1000 – 500)/MWh = $50,000,000 Potential “Insurance” Benefit of NRI DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

  25. Questions? DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

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