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2013 Fuel Security Enhancement

2013 Fuel Security Enhancement. Incentivizing Re-Commissioning of Lost Dual-Fuel Capability. Dual Fuel History. As a result of poor market incentives, most of our dual-fuel capability has been decommissioned The 2004 CELT report listed 10,614 MW of dual-fuel capable units (winter)

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2013 Fuel Security Enhancement

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  1. 2013 Fuel Security Enhancement Incentivizing Re-Commissioning of Lost Dual-Fuel Capability

  2. Dual Fuel History • As a result of poor market incentives, most of our dual-fuel capability has been decommissioned • The 2004 CELT report listed 10,614 MW of dual-fuel capable units (winter) • The 2012 CELT report listed 6,219 MW of dual-fuel capable units (winter) • This includes >1000 MW of new CT RFP generation that was required to be dual-fuel • Result: Essentially half (5000 MW) of our dual-fuel capability has been de-commissioned over the past 8 years. • Most of this could be re-commissioned if we addressed costs and risks.

  3. Problem Statement • Operational issues are addressed in a separate presentation. • Additions to Dual-Fuel fleet: • Adding new units that were never dual-fuel may not be practical in the necessary time horizon. But there are a large number of units that have been permitted and commissioned to provide dual-fuel, that could come back quickly. • If we want to do more than retain our existing dual-fuel fleet, attracting significant numbers of units that previously decommissioned dual-fuel will likely take more incentive. • Need mechanism to recover capital cost and major recurring expense. • Types of cost involved: • Permit updates, equipment refurbishment, recurring maintenance cost, tuning and recommissioning after major maintenance cycles • Testing, testing maintenance adders, inventory carrying cost, oil additives and consumables, system maintenance, and opportunity cost during testing

  4. Proposed Solution • Suggested Solution • ISO-NE determines MW quantity of resource needed • Units submit sealed offers to ISO-NE of $/kW-month payment needed to provide this service • ISO-NE selects, and all selected units are paid the clearing price $xx/kW-month • Open to both New and Existing Dual-Fuel • Units contract to provide service for up to 5 years (Winter 2013/14 through 2017/18) • Program terminates when PI or other market-based solution is ready. • Needs to be multi-year to spread upfront costs and support economics • For units that receive payments, ISO-NE allowed to direct units onto secondary fuel when necessary • Units would have separate bids for both oil and gas operation • ISO-NE identifies penalties for non-performance • Penalties, > payments made, if not available based on fuel

  5. Compatibility with Review Criteria • Reliability: • Incents re-entry of previously commissioned dual-fuel resources; commits selected resources to stay until market-based replacement (PI?) is ready. Allows ISO to direct use of alternate fuel during system stress. • Payments • Clearing price paid after demonstrating capability – like Black Start, VARs and LFRM • Costs • Allocate to Network Load • Is a reliability expense, like Black Start. • Penalties a direct credit against cost. • Markets • No price suppression (or increase) in energy markets. However, access to more flexibly-fueled units would be expected to reduce LMP volatility during times of system stress

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