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 jbakke@misoenergy.org
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