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3353 Peachtree Road NE Suite 600, North Tower
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2012 Long-Term Reliability Assessment
November 2012
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AssessmentPreparation
NERC|2012LongTermReliabilityAssessment|November2012Pagei
North American Electric Reliability Corporation
AtlantaOffice
3353PeachtreeRoadNE,Suite600NorthTowerAtlanta,GA30326404.446.2560
WashingtonD.C. Office
1325GStreetNW,Suite600Washington,DC200052024003000
ThisassessmentwaspreparedbyNERCinitscapacityastheElectricReliabilityOrganization1andprovidesanindependentviewofthe10yearreliabilityoutlookfortheNorthAmericanBPS,2whileidentifyingtrends,emergingissues,andpotentialrisks.Additional insightwillbeoffered regarding resourceadequacyandoperating reliability,aswellasanoverviewofprojectedelectricitydemandgrowth for individualassessmentareas.The10yearperiodobserved in thisassessment isfrom20132022,withthe2013summerasthe initialseason. Informationanddataforthe2012summerand2012/2013winter seasonsareprovided inNERCs seasonal reliabilityassessments.3Thisnewapproacheliminatesoverlapbetweenseasonalandlongtermassessments.
Additionalinquiriesregardingtheinformation,data,andanalysisinthisassessmentmaybedirectedtotheNERCReliabilityAssessmentStaff:
NERCReliabilityAssessmentStaffName Position Email Phone
HerbSchrayshuen VicePresidentandDirector [email protected] 4044462563
JohnN.Moura AssociateDirector [email protected] 4044469731
EricRollison Engineer [email protected] 4044469738
ElliottJ.Nethercutt TechnicalAnalyst [email protected] 4044469722
TrinhLy JuniorEngineer [email protected] 4044469737
MichelleMarx AdministrativeAssistant [email protected] 4044469727
1Section39.11(b)oftheU.S.FERCsregulationsprovidethat:TheElectricReliabilityOrganizationshallconductassessmentsoftheadequacyoftheBulkPowerSysteminNorth
AmericaandreportitsfindingstotheCommission,theSecretaryofEnergy,eachRegionalEntity,andeachRegionalAdvisoryBodyannuallyormorefrequentlyifsoorderedbytheCommission.
2BPSreliability,asdefinedintheHowNERCDefinesBPSReliabilitysectionofthisreport,doesnotincludethereliabilityofthelowervoltagedistributionsystems,whichsystemsaccountfor80percentofallelectricitysupplyinterruptionstoendusecustomers.
3NERC2012SummerReliabilityAssessmentand2012/2013WinterReliabilityAssessment:http://www.nerc.com/page.php?cid=4|61.
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Preface
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Preface TheNorthAmericanElectricReliabilityCorporation(NERC)haspreparedthefollowingassessmentinaccordancewiththeEnergy PolicyActof 2005, inwhich theUnited States Congress directedNERC to conductperiodic assessments of thereliabilityandadequacyof thebulkpower system (BPS)ofNorthAmerica.4,5NERCoperatesunder similarobligations inmanyCanadianprovinces,aswellasaportionofBajaCaliforniaNorte,Mexico.
NERC is an international regulatory authority established to evaluate and improve the reliability of the BPS in NorthAmerica.NERCdevelopsandenforcesreliabilitystandards;annuallyassessesseasonaland longterm (10year)reliability;monitors theBPS throughsystemawareness;andeducates, trains,andcertifies industrypersonnel.NERC is theElectricReliabilityOrganizationforNorthAmerica,subjecttooversightbytheU.S.FederalEnergyRegulatoryCommission(FERC)andgovernmentalauthoritiesinCanada.6
ReliabilityStandardsare theplanningandoperating rules thatelectricutilities follow tosupportandmaintaina reliableelectricsystem.Thesestandardsaredevelopedbytheindustryusingabalanced,open,fairandinclusiveprocessaccreditedbytheAmericanNationalStandards Institute (ANSI).WhileNERCdoesnothaveauthoritytosetReliabilityStandards forresource adequacy (e.g., reserve margin criteria) or to order the construction of resources or transmission, throughreliabilityassessment,NERCcanindependentlyassesswherereliabilityissuesmayariseaswellasidentifyemergingrisks.This information,alongwithNERCrecommendations, isthenavailabletopolicymakersandfederal,state,andprovincialregulatorstosupportdecisionmakingwithintheelectricsector.
NERCRegionalEntities NERCRegionalEntitiesMap NERCAssessmentAreasMapFRCC FloridaReliabilityCoordinatingCouncilMRO MidwestReliabilityOrganizationNPCC NortheastPowerCoordinatingCouncilRFC ReliabilityFirstCorporationSERC SERCReliabilityCorporation
SPPRE SouthwestPowerPoolRegionalEntityTRE TexasReliabilityEntity
WECC WesternElectricityCoordinatingCouncil
NERCprepares seasonal and longterm assessmentsof theoverall reliability and adequacyof theNorthAmericanBPS,which isdivided into26assessmentareas,bothwithinandacrosstheeightRegionalEntityboundaries,asshownbythecorrespondingtableandmapsabove.7Topreparetheseassessments,NERCcollectsandconsolidatesdatafromtheeightRegional Entities, including forecasts for onpeak demand and energy, demand response, resource capacity, andtransmissionprojects.TheuseofthisbottomupapproachaccountsforvirtuallyallelectricitysuppliedintheUnitedStates,Canada,andaportionofBajaCaliforniaNorte,Mexico.The information isanalyzedto identifynotabletrends,emergingissues,andpotentialconcernsregardingfutureelectricitysupply,aswellastheoveralladequacyoftheBPStomeetfuturedemand.Reliabilityassessmentsaredevelopedwiththeintentionofinformingindustry,policymakers,andregulatorsandtoaidNERCinachievingitsmissiontoensurethereliabilityoftheNorthAmericanBPS.
4H.R.6asapprovedbyoftheOneHundredNinthCongressoftheUnitedStates,theEnergyPolicyActof2005:http://www.gpo.gov/fdsys/pkg/BILLS109hr6enr/pdf/BILLS
109hr6enr.pdf.5TheNERCRulesofProcedure,Section800,furtherdetailtheObjectives,Scope,DataandInformationrequirements,andReliabilityAssessmentProcessrequiringannual
seasonalandlongtermreliabilityassessments.6AsofJune18,2007,theU.S.FederalEnergyRegulatoryCommission(FERC)grantedNERCthelegalauthoritytoenforceReliabilityStandardswithallU.S.users,owners,and
operatorsofthebulkpowersystem,andmadecompliancewiththosestandardsmandatoryandenforceable.InCanada,NERCpresentlyhasmemorandumsofunderstandinginplacewithprovincialauthoritiesinOntario,NewBrunswick,NovaScotia,Qubec,andSaskatchewan,andwiththeCanadianNationalEnergyBoard.NERCstandardsaremandatoryandenforceableinBritishColumbia,Ontario,NewBrunswick,andNovaScotia.NERChasanagreementwithManitobaHydromakingreliabilitystandardsmandatoryforthatentity,andManitobahasadoptedlegislationsettingoutaframeworkforstandardstobecomemandatoryforusers,owners,andoperatorsintheprovince.Inaddition,NERChasbeendesignatedastheelectricreliabilityorganizationunderAlbertasTransportationRegulation,andcertainreliabilitystandardshavebeenapprovedinthatjurisdiction;othersarepending.NERCandNPCChavebeenrecognizedasstandardssettingbodiesbytheRgiedelnergieofQubec,andQubechastheframeworkinplaceforreliabilitystandardstobecomemandatoryandenforceableinthatjurisdiction.
7AlargermapoftheassessmentareaboundariesisincludedinAppendixIVofthisassessment.
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Preface
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Assessment Preparation and Design The2012 LongTermReliabilityAssessment (2012LTRA) ispublished inaccordancewithTitle18,39.11of theCodeofFederalRegulations,8alsoreferredtoasSection215oftheFederalPowerAct,which instructsNERCtoconductperiodicassessmentsoftheBPS.NERCsobligationtoproducealongtermreliabilityassessmentisfurtherdescribedbySection803ofNERCsRulesofProcedure,9which calls for thedevelopmentof an annual longterm reportwith a10yearplanninghorizon.
NERCprepared the2012 LongTermReliabilityAssessmentwith support from theReliabilityAssessment Subcommittee(RAS),underthedirectionoftheNERCPlanningCommittee(PC).ThisreportisbasedondataandinformationsubmittedbyeachoftheeightRegionalEntities,whicharerepresentedontheRAS.InitialdataandinformationwassubmittedinJune2012,andperiodicupdatesoccurredthroughoutthedevelopmentofthereport.AnyotherdatasourcesincludedbyNERCstaffareidentifiedaccordingly.
NERCuses aRASpeer reviewprocess inpreparingboth seasonal and longterm reliability assessments to leverage theknowledgeandexperienceofsubjectmatterexpertsrepresentingNERCRegions,aswellastheelectricityindustryatlarge.This process provides an essential balance that ensures the validity of data and information provided by the RegionalEntities. Each regional selfassessment is assigned to subcommittee members from other Regions to provide acomprehensivereviewthatisdiscussedandverifiedbythesubcommitteeinopenmeetings.ThereviewprocessenablesallRASmemberstheopportunitytoverifythateachRegionalEntityproducesqualityassessmentsthatareaccurateandofferacomprehensiveassessmentforeachassessmentarea.Acompletedraftofthedocument isfurtherreviewedbythePCand the Member Representatives Committee (MRC), fully vetting all findings and conclusions. Prior to release, theassessmentissubmittedtotheNERCBoardofTrustees(BOT)forfinalreviewandapproval.
The2012LTRAisarrangedasfollows:
An Executive Summary presents notable findings and highlights brought forward from NERCs reference caseprojectionsforthelongtermoutlook.ThissectionalsoprovidesanoverviewofNERCwidereliabilityissuesthathavebeenrecognizedbythe industryas importantemerging issuesthatneedtobeaddressed.Additionally,highlightsofthe projected resource adequacy are provided for the 26 assessment areas, alongwith areaspecific impacts andpotentialvulnerabilities.
TheKeyReliabilityFindingssectionincludeshighlightsidentifiedfromthe2012LTRAReferencecase.Thereferencecase incorporatesknownpolicyand regulationchangesexpected to takeeffect throughout the10year timeframe,assuming a variety of factors such as economic growth,weather patterns, and system equipment behavior. ThissectionprovidesNERCs independentassessmentofthe2012LTRAReferencecaseandrecommendationstofurtheridentify,study,ormanagereliabilityconcerns.
TheEmergingReliabilityIssuesinFocussectionsupportsthedevelopmentofscenariostheanalysisofwhichcanindicatethesensitivityofthereferencecasetochangesinprespecifiedconditionsandprovideinsightintotheriskstoregionalreliability.Emergingreliability issuesaregenerallyknownorunknownrisksNERCand itsstakeholdershaveendorsedforassessment.ContinuedunderstandingsofpotentialimpactstotheBPS,thelikelihoodofthoseimpacts,andregionalimplicationsareimportantcharacteristicstoNERCsreliabilityassessmentprocess.
The Demands, Resources, and ReserveMargins section provides summary tables and corresponding analysis ofprojectionsoftheelectricitysupply,demand,andtransmissionthroughoutNorthAmerica.
TheRegionalReliabilityAssessmentssection includessummarytablesandcorrespondingtextthatprovideamorecomprehensiveandgranularreliabilityoutlookforeachassessmentarea.
8http://www.gpo.gov/fdsys/pkg/CFR2010title18vol1/pdf/CFR2010title18vol1sec3911.pdf.9NERCRulesofProcedure:http://www.nerc.com/page.php?cid=1|8|169.
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Preface
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Report and Data Assumptions Forecastscannotpreciselypredict the future. Instead,many forecasts reportabaselineormost likelyoutcomeandarangeofpossibleoutcomesbasedonprobabilitiesaroundthebaselineormidpoint.EachNERCRegion isresponsible forprovidingprojections forNERCsseasonaland longtermreliabilityassessments.Projectionsarehighlydependentonthedata, methodologies, model structures, and other assumptions that often vary by Region, Reliability Coordinator,assessment area, or Balancing Authority.10 Generally, future generation projections are often derived from generationqueuesandotherareaspecificresourceplanningprocesses,whileloadprojectionsaretypicallybasedonanoncoincident50/50peakdemandforecastprobability.AdditionalinformationisavailableinAppendixIVandVofthisassessment.
WhenaggregatingthisdatatoprovideoverallprojectionsfortheUnitedStates,Canada,orNorthAmericaasawhole,NERCstrivestoensuretheseprojectionsareasaccurateaspossibletoaidtheindustry,regulators,andpolicymakers.
The2012LTRAreferencecaseforelectricitysupplyandinternaldemandprojectionsareasfollows:
DataupdatesareincludeduntilSeptember2012.Anysubsequentrevisionsorcorrectionsmaynotbeincludedorotherwiserepresentedinthisassessment.
Averageornormalweatherconditions. Basedontheeconomicconditionsandoutlookatthetimeofanalysis. Generatingandtransmissionequipmentavailabilityisbasedonhistoricperformance. Plannedoutagesandadditionstoorupgradesofgenerationandtransmissionwillbecompletedasscheduled. Demandreductionsexpectedfromdirectcontrolloadmanagementandinterruptibledemandcontractswillbe
availableifandwhentheyareneeded.
Otherpeakdemandsidemanagementanddemandresponseprogramsareincludedinnetinternaldemandforecasts. ElectricitytransfersbetweenRegionsarecontractuallyarrangedandoccurasprojected. Federal,state,andprovinciallawsandregulationsineffectatthetimeofdataandinformationcollection.
Inthe2011LongTermReliabilityAssessment,NERCindicatedthattheEnvironmentalProtectionAgencys(EPA)CrossStateAirPollutionRule(CSAPR),combinedwithotherenvironmentalregulations,coulddirectly impactpowersupplydecisionsandgridreliability.OnAugust21,2012,theD.C.CircuitCourtvacatedtheCSAPR,11whichhadoriginallyrequired23statestoreduceannualSO2andNOXemissions.Finaldatasubmissionforthisassessmentmaynotreflectthefull impactofthevacated rule.Thedata collected for the2012LTRA isgenerallybasedon theassumption that this rulewould remain ineffect.However,sinceCSAPRdidnotmandatephysicalrequirementsforelectricgenerators,therulehadasmallerbearingonunitretirementdecisionscomparedtootherfactors.Moreover,thelikelydriversbehindretirementdecisionswillbethecombinationofotherfederalandstateenvironmentalrules,changingfuelcosts(i.e., lowernaturalgasprices),andothereconomicdecisions.Thestatusoftheseassumptionsisrepresentedinthereferencecaseassessedinthisreport.
10AdditionalinformationonthemethodsandassumptionusedbyeachAssessmentAreaareavailablethroughthefollowinglink:
http://www.nerc.com/files/2012LTRA_PartII.pdf.11TheCSAPRwasinitiallydesignedtoreplaceEPA's2005CleanAirInterstateRule(CAIR).ADecember2008courtdecisionkepttherequirementsofCAIRinplacetemporarily
butdirectedEPAtoissueanewruletoimplementCleanAirActrequirementsconcerningthetransportofairpollutionacrossstateboundaries.Thisactionrespondstothecourt'sconcerns.ForadditionalinformationseetheEPAwebsitehttp://www.epa.gov/airtransport/.
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Preface
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Enhancements A number of enhancements have beenmade to the 2012 LongTerm Reliability Assessment in support of stakeholdercomments, the Reliability Assessment Improvement Plan,12 guidance from the Board of Trustees, and the ReliabilityAssessmentSubcommitteeseffortstoobtainadditionalinformationneededtosufficientlyperformthelongtermreliabilityassessment.Thisyear,enhancementsinclude:
Anenhancedviewofgeneratorretirementsandretrofitso Asupplementalrequestforinformationanddataonknownandpotentialgeneratorretirementsand
retrofitsinthenext10years(seeAppendixIXformoreinformation)
ProbabilisticindicestosupplementtheLongTermReliabilityAssessmento ThebiannualprobabilisticassessmentreportisdesignedtocomplementtheLongTermReliability
AssessmentbyprovidingadditionalprobabilisticstatisticsofLossofLoadHours(LOLH)andExpectedUnservedEnergy(EUE).Theanalysiswillprovideresultsforthethirdandfifthyearofthe2012LongTermReliabilityAssessment2014and2016results(seeAppendixVIIIformoreinformation)
Regionalvulnerabilitiesandemergingissuesidentifiedinthereporto EmergingissuesaredevelopedforeachassessmentareathatprovideamoregranularviewonRegion
specificissuesthatpotentiallyaffectlongtermBPSreliability
Risktypeevaluationsofkeyreliabilityfindingsandemergingreliabilityissueso Evaluationsofriskstooperatingreliability(security)comparedtothosethatimpactresourceadequacyo PreliminarysupportfortheReliabilityIssuesSteeringCommittee(RISC)frameworkasthiswillevolveinto
futurereliabilityassessments
ARegionalMethodsandAssumptionsdocumento Aseparatedocumentispublishedthatdetailsmethodsandassumptionsusedinthedevelopmentofthe
seasonalandlongtermreliabilityassessmentsforeachNERCAssessmentArea.ThisinformationismodifiedonlyasfrequentlyastheAssessmentAreachangesorenhancestheprocessforassessingreliability.Thisdocumentispublishedtosupportthe2012LongTermReliabilityAssessmentandcanbefoundontheNERCwebsite.13
Modified10yearassessmentperiodo The10yearperiodobservedinthisassessmentisfrom20132022,withthe2013summerastheinitial
season.Informationanddataforthe2012summerand2012/2013winterseasonsareprovidedinNERCsseasonalreliabilityassessments.14Thisnewapproacheliminatesoverlapbetweenseasonalandlongtermassessments.
12ReliabilityAssessmentImprovementPlan:http://www.nerc.com/files/Reliability%20Improvement%20Report%20RAITF%20100208.pdf.132012LTRAMethodsandAssumptions:http://www.nerc.com/files/2012LTRA_PartII.pdf.14NERC2012SummerReliabilityAssessmentand2012/2013WinterReliabilityAssessment:http://www.nerc.com/page.php?cid=4|61.
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TableofContents
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Table of Contents
PREFACE................................................................................................................................................IITABLEOFCONTENTS................................................................................................................................VI
EXECUTIVESUMMARY...............................................................................................................................1KEYRELIABILITYFINDINGS.........................................................................................................................5EMERGINGRELIABILITYISSUESINFOCUS.....................................................................................................50PROJECTEDDEMAND,RESOURCES,ANDRESERVEMARGINS(20132022)........................................................57REGIONALRELIABILITYASSESSMENTS
ERCOT...........................................................................................................................................78FRCC..............................................................................................................................................94MISO...........................................................................................................................................101MROMANITOBAHYDRO.................................................................................................................112MROMAPP.................................................................................................................................122MROSASKPOWER..........................................................................................................................128NPCCMARITIMES..........................................................................................................................135NPCCNEWENGLAND(ISONE)........................................................................................................144NPCCNEWYORK...........................................................................................................................159NPCCONTARIO.............................................................................................................................172NPCCQUBEC...............................................................................................................................183PJM.............................................................................................................................................193SERCE.........................................................................................................................................206SERCN........................................................................................................................................213SERCSE.......................................................................................................................................220SERCW.......................................................................................................................................227SPP..............................................................................................................................................234WECC..........................................................................................................................................242
APPENDIXI:NERCREFERENCECASEANNUALDEMANDTABLES..................................................................260APPENDIXII:NERCWIDETRANSMISSIONADDITIONS,UPGRADES,ANDRETIREMENTS......................................262APPENDIXIII:NERCWIDEPROJECTEDTRANSFORMERPROJECTS..................................................................291APPENDIXIV:ABOUTTHISASSESSMENT...................................................................................................308APPENDIXV:RELIABILITYCONCEPTSUSEDINTHISREPORT...........................................................................312APPENDIXVI:LISTOFACRONYMS...........................................................................................................316APPENDIXVII:TERMSUSEDINTHISASSESSMENT.......................................................................................318APPENDIXVIII:PROBABILISTICASSESSMENTS............................................................................................327APPENDIXIX:ASSESSMENTPREPARATION................................................................................................328
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ExecutiveSummary
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Executive Summary Inpreparingthisassessment,NERChasevaluatedkeyreliability indicators, includingpeakdemandandenergy forecasts,resourceadequacy,transmissiondevelopment,changesinoverallsystemcharacteristicsandoperatingbehavior,andotherinfluentialorregulatoryissuesthatmayimpactthereliabilityoftheBPS.
Overthenext10years,theelectricindustrywillfaceanumberofsignificantemergingreliabilityissues,whichareexplainedindetailthroughout thisreport.Emergingreliabilitychallengeswilldrivea transformationalchange for the industry thatcouldpotentiallyresult inadramaticallydifferentresourcemixwithrelianceonnaturalgasandrenewablegeneration,aneed forenhancedmodeling,anew riskandprobabilistic frameworkbuilt toaddress reliabilitychallenges,andgrowingcriticalinfrastructureandprotectionconcernsbothphysicalandcyber.
Oneof themost significantoverarching findingsof this report isa rapid change in resourcemix in severalareasacrossNorthAmerica.Whilethekeyfactorsdrivingthisevolutionarychangevarybyregion,fuelpriceeconomics,environmentalregulations, and renewable requirements are themost significant factors affecting thepaceof change. Fundamentally,substantialmodifications to thebulkpower system require a greatdealof time todesign, site,permit, andultimatelyconstruct.Asprojected in this report,amajorityofnewgeneration,aswellasoldergenerationexpected to retire,willcontribute to a significant resource shift. As resources change both in system characteristics and geography, thetransmissionsystemwillbechallengedtodevelopamorerobustgridthat isnotonlyresilienttoresourceshifts,butalsoothermoreextremeconditions.
Withtheexceptionofthechallenges identified inElectricReliabilityCouncilofTexas(ERCOT),theelectricity industryhaspreparedplansforthe20132022assessmentperiodinanefforttoprovidereliableelectricserviceacrossNorthAmerica.Asidentifiedinpreviousassessments,capacityresourcesinERCOThavedriftedtoalevelbelowreliabilitytargets.Inotherassessmentareas,potentialimpactsofissuesthatarenotyetfullyunderstoodcouldaffecttheimplementationofcurrentplans.
While thehighlightsof this reportarepresented independently, theyarecrosscutting,and interdependenciesbetweenmanyofthese issuespresentuniquechallengestotheelectricity industry.Growth in flexibleresources,suchasdemandresponseandquickstartnaturalgaspowergenerators,andincreasedtransmissionplanstointegraterenewableresourcesdistant from load centers are encouraging trends.However, fundamental changes toplanning andoperating strategiesmust consider evolving risks such as increased dependency on natural gas, uncertainties of variable and renewablegeneration,andnewvectorsofpenetrationforemergingcyberandphysicalsecuritythreats.Theconfluenceoftheserisksare critically interdependent and must be strategically managed, monitored, and mitigated in order to preserve thereliabilityoftheBPS.
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ExecutiveSummary
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2012KeyReliabilityFindings:
Increaseddependenceonnaturalgasforelectricityinsomeareashasincreasedtheneedforallgasusers,electricsystemplannersandoperators,andpolicymakers to focusmoresharplyon the interactionbetween theelectricandgas industries.Theadoptionofhighlyefficientcombinedcycletechnologybytheelectricpower industryandtheemergenceofshalegashavealteredtherelativeeconomicsofgasfiredgeneration.Asaresult,thedependenceonnaturalgasbytheelectricpowersectorhasincreasedsignificantly.Trendsinfuelmixchangeshighlightedinthisassessmentidentifygasfiredgenerationastheprimarychoicefornewcapacitywithalmost100GWofPlannedandConceptualcapacityexpectedoverthenext10years,whichrepresentsalmosthalfofallnewgenerationcapacity.
For themajority of the bulk power system, Planning ReserveMargins appear sufficient tomaintain reliabilitythroughthelongtermhorizon.However,therearesignificantchallengesfacingtheelectricindustrythatmayshiftindustry projections adding considerable uncertainty to the long term assessment. Future uncertainties includeelectricity market changes, fuelprices (natural gas in particular), potential environmental regulations, andrenewableportfoliostandards.
Startingasearlyasnextyear,theElectricReliabilityCouncilofTexas(ERCOT)PlanningReserveMarginisanticipatedtobe13.4percent,whichisbelowtheNERCReferenceMarginLevelandERCOTplanningtargetof13.75percent.At these levels, the risk of insufficient generation resources tomeet peak demand increases beyond reliabilitytargets.
Due largelytotheuniqueconfluenceoffinalandpotentialenvironmentalregulations, lownaturalgasprices,andothereconomicfactors,about71GWoffossilfiredgenerationisprojectedtoretireby2022,withover90percentretiringby2017.WiththeexceptionofERCOT,theretirementofthiscapacitydoesnotposesignificantresourceadequacyconcerns.ReserveMarginsare likelytobereduced,butto levelsthatarestillabovetargets.However,retirements over the next three to four years may raise issues related to system stability and the need fortransmissionenhancements,whichifnotaddressedcouldcausereliabilityconcernsinsomeareas.
Significant Fossil-Fired Generator Retirements Over Next Five Years
Increased Risk of Capacity Deficiencies in ERCOT as Planning Reserve Margins Projected to Fall Below Targets
Resources Sufficient to Meet Reliability Targets in Most Areas
Increased Dependence on Natural Gas for Electricity Generation
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ExecutiveSummary
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Allareasareprojectingat leastsome increasedavailabilityofDemandSideManagement(DSM)overthenext10yearstoreducepeakdemands,contributingeithertothedeferralofnewgeneratingcapacityorimprovingoperatorflexibility indayaheadorrealtimetimeoperations.NERCwide,DSM isprojectedtototalroughly80,000MWby2022 (orabout7percentof theonpeak resourceportfolio),offsettingapproximately sixyearsofpeakdemandgrowth.However,unliketraditionalgeneratingresourceswithmanydecadesofhistoricdataforanalysis,thelongtermprojectionsofDSMinvolvegreaterforecastinguncertaintyparticularywithDemandResponseresources.
Asrecentasfiveyearsago,transmissionwasbeingconstructedatarateofabout1,000circuitmilesperyear.Inthelastfiveyears,over2,300circuitmileswereconstructedperyear,morethandoublingactualbuildsinthepreviousfiveyears.Withthecurrentplans inplace,thatrate isexpectedto increaseto3,600milesperyearoverthenextfiveyears.NERCwide,almostaquarterofnewtransmission isspecifically linkedtothe integrationofrenewablegeneration.
Renewableresourcesaregrowing in importance inmanyareasofNorthAmericaas thenumberofnew facilitiescontinues to increase. The share of capacity from renewable resources will continue to grow, especially assignificant additions are projected for both wind and solar throughout North America. In 2012, renewablegeneration, including hydro,made up 15.6 percent of all onpeak capacity resources and is expected to reachalmost17percentin2022.Contributingtothisgrowthisapproximately20GWofonpeakFuturePlannedcapacityandanadditional21.5GWofonpeakConceptualcapacity. It isvitalthatthesevariableresourcesare integratedreliably and in a way that supports the continued performance of the BPS and addresses both planning andoperationalchallenges.
Asignificantgenerationretrofiteffortisexpectedoverthenext10yearsinordertocomplywithfederalandstatelevelenvironmentalregulations.Amajorityofenvironmentalcontrolsareexpectedtobeput inplacetomeetairregulationsbyApril2016. Intotal,339unitlevelretrofitsonfossilfiredgenerationwillbeneeded,totalingabout160GW.However,thereisstillsignificantuncertaintyintheforecastedvaluesasmaintenancescheduleshavenotyetbeenfullyevaluatedbyallareas.
Long-Term Generator Maintenance Outages for Environmental Retrofits
Renewable Resource Additions Introduce New Planning and Operational Challenges
Transmission Growth to Accommodate New and Distant Resources
Increases in DemandSide Management Help Offset Future Resource Needs
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ExecutiveSummary
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Future Reliability Challenges and Emerging Issue Risk Types AcomprehensivereliabilityassessmentoftheNorthAmericanBPSrequiresconsiderationsofemerging issuesandfuturerisks to reliability.WhileNERC is in theprocessofdeveloping a strategic framework to address andprioritizehighriskissues,itisimportanttorecognizehowdifferentriskscanbeexposedandwhatthepotentialimpactcouldbetoreliability.
Emerging risks identified in the currentand past longterm reliability assessmentreports are shown in Figure 1. Twofundamental and measurablecharacteristicsofBPSreliabilityformthefoundationoftheconceptsdescribed inthisdocumentresource adequacy andoperatingreliability(orsystemsecurity).Each issue in Figure I includes thepotential to impact these twocharacteristicsdifferently;therefore,theimpacts to system reliability can bedifferentandmustbewellunderstood.Theresultsaretheproductofcombinedindustrysurveys,engineering judgment,andNERCsindependentassessment.
By understanding these risks, theelectricity industry can be moreeffective inmitigating adverse impacts.With resource adequacy impacts, theability of the BPS to supply theaggregateelectricaldemandandenergyrequirements is compromised.Operatingreliabilityimpactsincludeallothersystemdisturbancesthatresultintheunplannedoruncontrolledinterruptionofcustomerdemand, regardlessofcause. Impacts thatspreadoverawideareaof thegridare referred toascascadingoutagestheuncontrolledsuccessivelossofsystemelementstriggeredbyanincidentatanylocation.
Going forward, an enhanced framework fordeveloping strategic and tactical recommendationswillhelpNERC and theindustryeffectivelyfocusresourcesonthecritical issuesneededtobest improvethereliabilityoftheBPS.TheReliabilityIssuesSteeringCommittee(RISC)isanadvisorycommitteethatreportsdirectlytotheNERCBoardofTrusteesandtriagesandprovidesfrontend,highlevelleadershipandaccountabilityfornominatedissuesofstrategicimportancetoreliability.Ultimately, the recommendationswill improve efficiency ofNERC Reliability Standards development, engage highlevelstakeholderleadership,andpromotereliabilityexcellence.15
15RISCWebsite:http://www.nerc.com/page.php?cid=1|117|428.
Figure1:FutureReliabilityChallengesandEmergingIssuesasaFunctionofResourceAdequacyversusOperatingReliabilityImpacts
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KeyReliabilityFindings
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Key Reliability Findings Eachyear,theLongTermReliabilityAssessment (LTRA) formsthebasis fortheNERCreferencecase.Thisreferencecaseincorporates knownpolicy and regulation changes that are expected to take effect throughout the 10year timeframe,assumingavarietyof factorssuchaseconomicgrowth,weatherpatterns,andsystemequipmentbehavior.ThissectionprovidesNERCsindependentassessmentofthe2012referencecaseanddiscusseskeyfindingsandchallengesofmanagingreliabilityconcerns.
Significant Fossil-Fired Generator Retirements Over Next Five Years Largelyduetotheuniqueconfluenceoffinalandpotentialfederalenvironmentalregulations,lownaturalgasprices,andother economic factors, approximately 71 GW of fossilfired generation16 is projected to retire by 2022,with over 90percentretiringby2017.Overthepastthreeyears,significantuncertaintysurroundingfossilfiredgenerationretirementshasbeenthemostprominentemergingreliabilityissueassessedbyNERCandtheelectricpowerindustry.Forthefirsttime,coalfiredgeneration isprojected todeclineover the10yearassessmentperiod.Whilesignificant fossilfiredgenerationretirementswereexpected(basedona2011NERCassessment),themagnitudeofretirementsremainsuncertainduetogeneratorownersnotrevealingorannouncingplansforunitretirementsuntilrecently.
Forthe2012LTRAReferencecase,approximately44GWoffossilfiredcapacityretirementshasbeenconfirmedtoretireinthenext10years(Figure2).ConfirmedretirementsarethosethathavebeenannouncedorotherwiseincludedinagivenPlanningCoordinators resourceplans.Additionally,unconfirmed retirementprojectionshavebeen reported, reachingatotalof26GWby2022,amajorityofwhichareprojectedtoretireby2017(Figure3).Projectedretirementswereforecastbyindividualassessmentareasbasedonreasonableexpectations.Formanyassessmentareas,existingstudiesandanalyseswereappliedasabasis for retirementprojectionsoverandabove theamount thathasalreadybeen confirmed. Someassessmentareasdidnotfullyprojectadditionalretirementsbeyondconfirmedamountsincludedinthereferencecaseasinsufficient informationwasavailabletomakeadetermination.17Forassessmentareasthatdidnotsubmitsupplementalretirementdata,the2012LTRAReferencecasedatawasapplied.Uncertaintiesstillexistandmoregeneratorsmayretirethanwhatisprojectedinthisassessment.
Figure2:NERCWideCumulativeSummerFossilFiredCapacityResourceRetirements
16NERCreviewstheimpactsofbothcontrolledandvariableresourcesinthisassessment.Variableresourcesdifferfromconventionalcontrollableresources,suchasfossilfired
resourcesinafundamentalway:theirfuelsource(wind,sunlight,andmovingwater)cannotpresentlybecontrolledorstored.Unlikecoalornaturalgas,whichcanbeextractedfromtheearth,deliveredtoplantsthousandsofmilesaway,andstockpiledforusewhenneeded,variablefuelsmustbeusedwhenandwheretheyareavailable.
17ERCOT,FRCC,NPCCNewEngland,NPCCOntario,andSERCAssessmentAreas
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Figure3:NERCWideConfirmedRetirementsbyFuelType(SummerCapacity)
CapacityType 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Coal 2,131 6,380 8,597 12,496 23,615 26,719 27,198 27,971 28,067 28,650 28,650 28,650Petroleum 1,531 2,880 4,088 4,719 4,909 6,221 6,221 6,221 6,221 6,221 6,221 6,221Gas 2,405 4,195 5,565 6,086 7,530 7,919 8,121 8,365 8,417 8,493 8,493 8,611Total 6,067 13,454 18,250 23,301 36,054 40,858 41,539 42,556 42,705 43,364 43,364 43,482
In the2011LongTermReliabilityAssessment,NERCprojectedcapacity lossesdue toretirementsandderatesassociatedwith environmental control impacts to generator ratings.18 Based on the results of the Moderate Case, 36 GW ofincrementalcapacityincoal,oil,andgasfiredgenerationwasidentifiedforeitherretirementorforcapacityreductionstosupportadditionalstation loads (deratings)by2018. In theStrictCase,capacity reductionsamount toapproximately59GW.Forretirementsonly,thestudyindicatedarangeof7GWto18GWfor2015and32GWto54GWfor2018(Moderateto Strict Cases represent the ranges).19 Confirmed and unconfirmed retirements in the 2012LTRA Refernce case showsignificantlymoregeneratorsretiringthanhadpreviouslybeenprojectedbyNERCfor2015;however,2018projectionsaremore in linewith last years study.This isbelieved tobedue largely toadecrease innaturalgaspricesaswellas theextendedcomplianceperiodassociatedwiththeEPAMercuryandAirToxicsStandard(MATS).20,21
OnDecember16,2011,theEnvironmentalProtectionAgency(EPA)issuedaruletoreduceemissionsoftoxicairpollutantsfrompowerplants.Specifically,MATSwill reduceemissions fromexistingandplanned coalandoilfiredgeneratorsbyrequiringtheinstallationofenvironmentalcontrols.Thesecontrolstypicallyinvolvetheadditionofdrysorbentinjection22ora scrubberonunits to controlemission levels.Generationownerswillultimatelybe chargedwithdecidingbetweeninvestingintheplanttoensurecompliance,orclosingitpermenantly.
Addingtotheregulatoryconstraint, lownaturalgas inrecentyearsoffers incentivesforplantownerstoconvertexistingplants from coal to gas. Retirement decisions for existing coal and oilfired units are often highly sensitive to thereplacement costs for that capacitywhich, ineffect is fuel costdependent.Therefore, theoptionof converting theseexistingunitstonaturalgasbecomesamoreeconomicallyattractivealternativeasgaspricesdecline.Accordingtothe2011NERCstudyonpotentialgeneratorretirements,a$2downwardswingonnaturalgaspricescouldpotentiallydoubletheamountofretiredcoalfiredgenerationaspartoftheNERCscenarioanalysis.23HenryHubnaturalgaspriceshavedropped
18Extractionfrom2011LongTermReliabilityAssessment:http://www.nerc.com/files/EPA%20Section.pdf.19Deratesassociatedwithgeneratorretrofitsareembeddedwithinthe2012LTRAreferencecaseforprojectedcapacityresourcesandgeneratorratingsandhavebeen
consideredaspartoftheoverallassessment.20http://www.epa.gov/mats/.21NationalEmissionStandardsforHazardousAirPollutantsfromCoalandOilfiredElectricUtilitySteamGeneratingUnitsandStandardsofPerformanceforFossilFuelFired
ElectricUtility,IndustrialCommercialInstitutional,andSmallIndustrialCommercialInstitutionalSteamGeneratingUnits,http://www.gpo.gov/fdsys/pkg/FR20120216/pdf/2012806.pdf.
22http://www.eia.gov/todayinenergy/detail.cfm?id=5430.23BasedonHenryHubPrices,2011LongTermReliabilityAssessment,Table35:Projected2018CoalRetirementsBasedonGasPriceSensitivity:
http://www.nerc.com/files/2011%20LTRA_Final.pdf.
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almost$2sinceNERCs2011studyongenerationretirements,providingobviousincentivesandgreatereconomicbenefitstoswitchfromcoaloroiltogasgeneration(Figure4).
Figure4:MonthlyAverageElectricGenerationNaturalGasPrices2007July2012(2010dollarspermillionBtu)24
Otherreasonsforgenerationretirementsincludeeconomicrelateddecisionsforcontinuingtheoperationofagivenplant.Decisionsmaybeimpactedbytheplantsage,pastinvestmentinenvironmentalcontrols,andotherregionalspecificissuessuchasfuelmix,renewableportfoliostandards,andimpactsofotherproposedenvironmentalregulations.
While facility retirementsareexpectedNERCwideincluding in theUnitedStatesandCanadasomeassessmentareaswillbeimpactedmorethanotherswill.Itisimportanttonotethatabsoluteretirementimpactswillonlycausearesourceadequacy concern if retirements cause the Planning ReserveMargin to fall below the targets.25 For example, PJM isprojectedtoretirethelargestamountoffossilfiredcapacityby2022;however,evenwith15GWofgeneratorretirementsconfirmed,PlanningReserveMarginsdonot fallbelow theNERCReferenceMargin Leveluntil2020.Theplans fornewgenerationinPJM,alongwithavailablereserves,allowPJMtheflexibilityrequiredtomaintainresourceadequacythroughthelongterm.
PJM,MISO,andtheSERCAssessmentAreasareprojectingthehighestamountofretirements(over10GW),aswellasthehighestpercentagerelativetototalcapacityresources11.9percent,11percent,and5.1percent,respectively(Figure5).Ontarioisalsoprojectedtoretire14.2percentofitstotalcapacityby2014(Table1).
Figure5:NERCWideConfirmedandProjectedFossilFiredCapacityRetirementsfor10YearPeriod
24U.S.DepartmentofEnergyEnergyInformationAdministration:http://www.eia.gov/dnav/ng/hist/n3045us3m.htm.25TargetsarebasedonresourceplanninganalysisorregulatorycriteriawithinRegions,NERCAssessmentAreas,orCanadianprovinces.Insomecases,thesetargetsare
mandatory.ThetargetforeachassessmentareaisappliedastheNERCReferenceMarginLevel.
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Table1:CumulativeNERCWideConfirmedandUnconfirmedFossilFiredCapacityRetirements26AssessmentArea Certainty 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
ERCOTConfirmed 342 342 342 342 342 342 342 342 342 342 342 342Unconfirmed 0 0 0 0 0 0 871 871 871 871 871
FRCCConfirmed 957 1,344 2,599 2,599 2,611 3,321 3,345 3,345 3,345 3,421 3,421 3,421Unconfirmed 0 0 0 0 0 0 0 0 0 0 0
MISOConfirmed 1,012 2,170 2,281 2,281 2,281 2,281 2,281 2,281 2,281 2,281 2,281 2,281Unconfirmed 252 364 364 364 364 9,626 9,626 9,626 9,626 9,626 9,626
MROSaskPowerConfirmed 0 0 201 201 262 262 262 262 262 262 262 262Unconfirmed 0 0 0 0 0 0 0 0 0 278 278
NPCCNewEnglandConfirmed 0 0 0 587 587 587 587 587 587 587 587 587Unconfirmed 0 0 0 0 0 0 0 0 0 0 0
NPCCNewYorkConfirmed 219 1,204 1,204 1,204 1,204 1,204 1,204 1,204 1,204 1,204 1,204 1,204Unconfirmed 0 1,342 1,342 1,342 1,342 1,342 1,342 1,342 1,342 1,342 1,342
NPCCOntarioConfirmed 920 920 920 2,699 4,002 4,112 4,290 4,494 4,546 4,546 4,546 4,664Unconfirmed 0 0 0 0 0 0 0 0 0 0 0
NPCCQubecConfirmed 450 730 730 730 730 730 730 730 730 730 730 730Unconfirmed 0 0 0 0 0 0 0 0 0 0 0
PJMConfirmed 0 1,367 1,601 3,518 12,215 14,578 14,578 14,578 14,578 14,578 14,578 14,578Unconfirmed 0 1,038 1,931 4,289 7,373 7,373 7,373 7,373 7,373 7,373 7,373
SERC(E,N,SE,W)Confirmed 977 3,401 4,882 5,605 7,550 9,172 9,467 10,280 10,280 10,280 10,280 10,280Unconfirmed 0 0 0 0 0 0 0 0 0 0 0
SPPConfirmed 0 0 130 130 676 926 926 926 926 926 926 1,457Unconfirmed 496 700 737 1,305 1,851 2,108 2,108 2,108 2,116 2,116 2,116
WECCTotalConfirmed 1,190 1,972 3,485 3,530 4,132 4,132 4,316 4,316 4,316 4,899 4,899 4,899Unconfirmed 340 613 722 1,366 1,366 1,366 1,911 2,204 3,213 3,655 4,150
TOTALNERC Confirmed 6,067 13,450 18,375 23,426 36,592 41,647 42,328 43,345 43,397 44,056 44,056 44,705TOTALNERC Unconfirmed 1,088 4,057 5,096 8,666 12,296 21,815 23,231 23,524 24,541 25,261 25,756TOTALNERC TOTAL 6,067 14,538 22,432 28,521 45,259 53,943 64,143 66,576 66,921 68,597 69,316 70,460
Forallthesereasons,NERC isprojectingapproximately64.1GWofcapacitytoberetiredby2017and70.5GWby2022.WiththeexceptionofERCOT,theretirementofthiscapacitydoesnotposesignificantresourceadequacyconcerns.Rather,issuesrelatedtosupportingsystemstabilityandtransmissionenhancementsrequiredasaresultofretiringgenerationarelikelytocausesomereliabilityconcernsinareasthatareimpactedbylargegeneratorretirements(Figure6).
Figure6:NERCWideConfirmedandProjectedFossilFiredCapacityRetirements(with2011asabaseyear)27
26NetOnPeaksummercapacity.27Naturalgasandcoal/oilprojectionsprojectionsareaggregatedfrom2012LTRAreferencecasedataandrepresentnetchanges(i.e.,thereareincreasesincapacitythroughout
theassessmentperiodaswell).Capacitychangesareduetoacombinationofcapacityretirements,derates,andmaintenanceoutages.Unconfirmedretirementsofoilandcoalwereprovidedthroughasupplementaldatarequest.DetailsonthisrequestareprovidedinAppendixIX.The2012LTRAReferencecaseindicatesapproximaterly32GWofgasfiredcapacityisprojectedfrom20122022.Thisfigurehasabaseyearof2011,withover40GWprojectedfrom20112022.
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ProjectedCoal/OilCapacityNet Reductions:35GW
ProjectedGasFired Capacity:+40GW
UnconfirmedCoal/Oil CapacityRetirements:25.7 GW
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The retirement of larger and/or strategically situated generating unitswill cause changes to the power flows and theperformanceof thebulkpowersystem.Thesechangingcharacteristicswill requireenhancements to the interconnectedtransmissionsystemstoprovidereactiveandvoltagesupport,addressthermalconstraints,andprovideforsystemstability.
Systemplanners andoperatorsmustunderstand and study impactsof every generator thatmaybe retired; inmarketareas, this analysis is performed with a retirement request of the market participant. Federal environmental rulecompliancedeadlineswillchallengetheelectricindustrysplanninghorizonsandprocesses.Transmissionlinesandfacilities,aswellaspowerplants,areoftenplannedandconstructedoveralongperiodoftime.Therefore,sufficienttimeisneededsothatplanscanbedevelopedandimplementedtoaccommodategeneratorretirements.Ifthesedecisionsaremadeinatime frame that does not allow for building new generation capacity or transmission enhancements, overall systemreliabilitycouldbeadverselyaffected.
Thelackofcertaintyhasleftsystemplannerswithlittleinformationonhowthesystemmightbechangedinthefuture.Forexample, inmanyofthederegulatedmarketareas,the ISO/RTO,performingthePlanningCoordinatorfunction,has littleinsightintotheretirementdecisionsofgeneratorsservingthemarket.ManyoftheISO/RTOshavechallengesinidentifyinggeneratorsthatwillretire,becausethemarketrulesorcriteriadonotrequiregeneratorsto informthesystemoperatoruntil90dayspriortotherequestedretirementdateorterminationofaninterconnectionagreement.However,thoseareaswithaforwardcapacitymarketstructureareabletoforeseemarketparticipantwithdrawalsuptothreeyearsinthefuture.For example, in PJM, almost 15GW of existing fossilfired generationdid notbid into the capacitymarket.While thiscapacityhasnotallbeenofficiallyannounced to retire, thePJMplanningprocess,alongwith thisassessment,doesnotinclude thisgeneration in future reliabilityanalyses.Areaswithout this capabilityorothermethods toprovideplanningcoordinationwithsufficientleadtimetodeterminereliabilityimpactsareleftwithsignificantuncertaintyastotheamountandtimingofretirements.
Asa resultofgeneratoruncertainties, transmissionplansneeded toaccommodategenerator retirementsare impacted.Systemplannersresponsibilitiesincludeanalyzingexpectedfuturechangesingenerationandtransmissionassets,suchastheretirementofageneratingunit;customerdemand;andemergingreliabilityissues.Forexample,onceasystemplannerlearnsthatapowercompanyintendstoretireageneratingunit,thesystemplannergenerallystudiestheelectricsystemtoassesswhethertheretirementwouldcausereliabilitychallengesandthenidentifiessolutionstomitigateanyimpacts.Thesolutionscouldbeintheformofreplacementcapacity(generationordemandsideresources),newtransmissionlines,orotherequipment,eachwithitsownassociatedpermittingandconstructiontimelines.
Other compounding issues, such as dependency on gasfired generation, significant generator retrofit maintenanceoutages,andan increasingneed for system flexibility,willpose continued challenges forplannersandoperatorsof theperformanceoftheBPS.Asmoregasfiredgenerationisbroughtonlineinthebulkpowersystem,gasdependencyissuesmustbeaddressed.Increasedgasfiredcapacitymayrequireadditionalgaspipelineinfrastructure,increasedcoordinationwithpipelineoperators,anddevelopingoperationalstrategiestominimizepotentialfueldeliveryissues.TheseissueswerehighlightedinarecentNERCreport28ongasandelectricinterdependenciesandarealsohighlightedlaterinthisreport.
When a Planning Coordinator receives a deactivation request from a GeneratorOwner, it simulates power flows andstabilityofthebulkpowersystemandassessesresourceadequacybasedonforecastsystemconditions.DetailedmodelingstudiesanalyzesystemconfigurationsagainstNERCandRegionalReliabilityStandardsto identifytransmissionoverloads,voltage limitations,systemstability,andotherreliabilityperformanceconditions.ThePlanningCoordinator isrequiredtodevelopplansand implementsolutionsforeachpotentialviolation,whichcouldotherwise leadtooverloads,equipmentfailure,instability,and,inthemostextremecircumstances,uncontrolled,widespreadcascadingoutages.
282011NERCSpecialAssessmentReport:APrimeroftheNaturalGasandElectricPowerInterdependencyintheUnitedStates:http://www.nerc.com/files/Gas_Electric_
Interdependencies_Phase_I.pdf
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BasedoninformationgatheredfromstakeholdersandtheRegionalEntities,alargeamountofretirementsoccurringoverashort periodmay cause reliability concerns. In some cases, these reliability issues could result in violations of NERCReliability Standards and, therefore, pose a threat to reliability if not addressed. System impact studies, conducted byPlanningCoordinators,willbeable to identify impactsandpotentialmitigationstrategies toaddress theannouncedandplannedretirementoffacilities.
Overall, generation retirementsneed tobe evaluated and analyzed in an integrated fashion.While thehigh degreeofuncertaintysurroundingretirementdecisionscontinuestobeexceedinglydifficult,powersystemplannersmustcontinuenotonly to study the effectsof individual generator impacts,but also to recognize the cumulative impactsofmultiplegeneratorretirements.
RiskAssessmentSummary
ImpactedAssessmentArea(s)
PJM
MISO
SERC
ImpactType ResourceAdequacySignificantgeneratorretirementscancausecapacitydeficienciesandmayaffectthepowersystemsabilitytomeetpeakdemands.
MagnitudeofImpactOperatingReliabilityLocaltransmissionreliabilityimpactsduetolargeplantretirements
44GWofFossilFiredGenerationConfirmedtoRetire
24GWofFossilFiredGenerationProjectedtoRetire
LikelihoodofImpactConfirmedretirementcapacityisverylikelytoretirebasedonthecurrentschedule.However,itispossiblethattheseplanschangeinthefuturedependingonchangesinregulations,technologies,andfuelprices.
Shortterms;amajorityoftheretirementsareexpectedby2016
Recommendations
NERCNERCshouldcontinuetomonitorretirementsandemergingreliabilityissuesstemmingfromsignificantgeneratorretirementsintheLongTermReliabilityAssessments.
GeneratorOwnersandOperators
GeneratorOwnersandOperatorsthataredisconnectedfromwideareaplanningfunctions(e.g.,generatorownersoperatinginanISO/RTO),shouldprovidePlanningCoordinatorstimelyandaccurateinformationabouttheretirementplansfortheirunitsinordertoadequatelyassessanyreliabilityconcerns.Whilechangestomarketrulesarenotnecessarilyneeded,discussionsshouldoccurandexpectationsshouldbesharedwithindependentauthoritiesonreliability.
PlanningCoordinatorsAllPlanningCoordinatorsshouldemployavailabletoolsandprocessestoensurethatBPSreliabilityismaintainedthroughanyresourcetransition.Regionalwholesalecompetitivemarketoperatorsshouldensuremarketsarefunctioningeffectivelytosupportthedevelopmentofnewreplacementcapacitywhereneeded.
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Increased Risk of Capacity Deficiencies in ERCOT as Planning Reserve Margins Projected to Fall Below Targets Startingasearlyasnextyear,theElectricReliabilityCouncilofTexas(ERCOT)29PlanningReserveMarginisprojectedtobebelowtheNERCReferenceMarginLevel.Specifically,for2013theAnticipatedReserveMarginof13.4percentisbelowtheERCOTplanningtarget(NERCReferenceMarginLevel)of13.75percent.30Attheselevels,theriskofinsufficientgenerationresources tomeetpeakdemand increasesbeyond theaccepted target.Throughout the10yearassessmentperiod, thePlanningReserveMargincontinuestodegradeandisprojectedtofallbelowfivepercentby2017andapproximatelyzeroby2020ifmoreresourcesarenotacquired.BynotmeetingthePlanningReserveMargintargetof13.75percent,ERCOTisunabletomeetaoneeventintenplanningtarget.31WithERCOTPlanningReserveMarginsbelowtheNERCReferenceMarginLevel,ERCOTdoesnotappear tohave sufficient resourcesduring the summerpeak tomaintain target resourceadequacylevelsatanypointthroughouttheassessmentperiod(Figure7andTable2).
Figure7:ERCOTSummerPlanningReserveMargins
Table2:ERCOTPlanningReserveMarginsERCOTSummer 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022ANTICIPATED 13.40% 8.91% 6.02% 5.69% 3.72% 3.82% 2.33% 0.04% 1.02% 2.26%PROSPECTIVE 13.40% 8.91% 6.02% 5.69% 3.72% 3.82% 2.33% 0.04% 1.02% 2.26%ADJUSTEDPOTENTIAL 13.72% 9.75% 7.06% 7.03% 5.04% 5.34% 3.84% 1.52% 0.44% 0.82%NERCREFERENCE 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75%
ERCOTWinter 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022ANTICIPATED 53.03% 52.33% 47.01% 48.32% 40.96% 42.49% 40.71% 39.72% 37.78% 32.35%PROSPECTIVE 53.03% 52.33% 47.01% 48.32% 40.96% 42.49% 40.71% 39.72% 37.78% 32.35%ADJUSTEDPOTENTIAL 55.34% 57.43% 53.33% 56.81% 49.02% 52.00% 50.20% 49.10% 47.03% 41.24%NERCREFERENCE 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75%
The projected capacity deficiencies may result in an increased probability of interruptions of firm load to maintainreliability.Reservemarginsarecalculatedusinga50/50peakdemandforecast.32Therefore,thesevaluesrepresentwhatisconsidered a normal summerwith a normal electric peak demand.However, the onset of extreme and sustained hottemperaturesmaycauseERCOTto initiaterotatingoutagestomaintainthereliabilityofthe interconnectionandpreventuncontrolled,cascadingoutages.Asreservemarginsdecreasebelowreliabilitytargets,theprobabilityofrotatingoutages
29TheElectricReliabilityCouncilofTexas(ERCOT)istheIndependentSystemOperatorfortheERCOTInterconnectionandschedulespoweronanelectricgridthatconnects
40,500milesoftransmissionlinesandmorethan550generationunits.TexasReliabilityEntity(TRE)istheRegionalEntityresponsibleforassessingthereliabilityofthebulkpowersystemwithinERCOT.
30TheERCOTPlanningTargetof13.75percentisaplanningtargetappliedbasedonaprobabilisticanalysisperformedbyERCOT.See2010ERCOTLongTermSystemAssessment:http://www.ercot.com/content/news/presentations/2010/ERCOT%202010%20Long%20Term%20System%20Assessment.pdfERCOTsPlanningTargetisincludedastheNERCReferenceMarginLevelinthisassessment.
31Reliabilityplanningforthebulkpowersystem,orresourceadequacyplanning,hashistoricallybeenbasedstrictlyonLossofLoadExpectation(LOLE),orthenumberoffirmloadshedeventsanelectricsystemexpectsoveraperiodofoneormoreyears.TheelectricpowerindustryhasfordecadesusedanLOLEof1dayoffirmloadshedin10yearsastheprimary,ifnotsolemeansforsettingtargetreservemarginsandcapacityrequirementsinsuchresourceadequacyanalyses.WhilethisisnotaregulatoryrequirementinERCOT,thisplanningcriteriaisthegenerallyacceptedindustrystandardformaintainingsufficientresourcestomeetpeakdemands.
32Forecastscannotpreciselypredictthefuture.Instead,manyforecastsreportabaselineormostlikelyoutcome,andarangeofpossibleoutcomesbasedonprobabilitiesaroundthebaselineormidpoint.Actualdemandmaydeviatefromthemidpointprojectionsduetovariabilityinkeyfactorsthatdriveelectricityuse.Fortheseforecasts,thereisgenerallyalongrun50percentprobabilitythatactualdemandwillbehigherthantheforecastmidpointandalongrun50percentprobabilitythatitwillbelower.
4%
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increases.MeetingresourceadequacytargetsinERCOToverthenext10yearswilllargelybeafunctionoftheextentandfrequency of extreme and prolongedweather events andwhether timely capacity additions can be integrated.Mostimportantly,currentforecastsdonotappeartobesufficienttomeetanormalpeakdemandforecast.33
WithsignificantdemandgrowthexpectedinTexas,evenslightdeviationsfromthepeakdemandforecastcansignificantlyimpact theareas flexibilityonpeak.Over thenext10years,peakdemand inERCOT isexpected to increasebyalmost16,000MW(or23percent),whichisthelargestgrowthacrossallNERCassessmentareas(Figure8).
Figure8:ERCOTHighest10YearProjectionforPeakDemandandEnergyGrowth
The expectation that Planning ReserveMarginswill be below the NERC ReferenceMargin Level is a result of limitedknowledge of plans for future generation development and retirements, especially due to uncertainty in ERCOTsmarketplace.Uncertaintyinthesupplyoffutureresourcesiscausingsignificantreliabilityconcernsasprojectedresourcescannotkeepupwiththelargepeakdemandgrowth(Figure9).
Figure9:ERCOTCumulativeSummerPeakDemandGrowthProjectedtoOutpaceSupplyResources
ItisimportanttonotethatresourceadequacyanditsimpactonthePlanningReserveMarginisattheforefrontofpolicymakerdiscussionsinTexas,andthereareanumberofproposalstoincentmoregenerationdevelopmentaswellasothernontraditionalresources.Theprojections forPlanningReserveMargindeficitswillvaryassolutionsare implemented.Aprojecthasbeencreatedtodiscusstheoptions,opinions,andconcernsbythePublicUtilityCommissionofTexas(PUCT).34
33ERCOTPlanning2012LongTermDemandandEnergyForecasthttp://www.ercot.com/content/news/presentations/2012/2012%20Long
Term%20Hourly%20Peak%20Demand%20and%20Energy%20Forecast.pdf34SeeProjectNo.40000atthePublicUtilityCommissionofTexas.
320,000
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81,000
83,000
85,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Gigaw
atthou
rs(G
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SummerPeakDemand(MW) NetEnergyforLoad
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2.35% AnnualGrowthRate
0
2,000
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8,000
10,000
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Since ERCOToperateswithin itsown interconnection,opportunities to importmorepower fromneighboring areas arelimited.TheamountofcapacityimportsconsideredFirmbyERCOTisjustunder600MW.Assistancefromoutsideentitiesisrestrictedtoamaximumofapproximately1,100MW.WhiletherearesometransmissionprojectsbeingconsideredtoincreasethetransfercapabilitiesbetweenERCOTandEasternandWesternInterconnections,35theseprojectsaretooearlyindevelopmenttobeconsideredforthisassessment(Table3).
Table3:ERCOTCapacityTransactions(SummerPeak)ERCOTSummer 2013 2022ExpectedImports 0 0FirmImports 598 598
TOTALIMPORTS 598 598ExpectedExports 0 0FirmExports 317 0
TOTALEXPORTS 317 0TOTALNETCAPACITYTRANSACTIONS 281 598
ShortofbuildingmoregenerationwithinERCOTorrelyingonfuturetransmissionprojectstoincreasetransfercapabilities,thereareadditionalopportunitiestoprocuremoredemandsideresourcesinthefuture.
DemandSideManagement(DSM)programs,which includeConservation,EnergyEfficiency(EE),andavarietyofDemandResponse(DR)programs,providetheindustrywiththeabilitytoreducepeakdemandandtopotentiallydefertheneedforsome future generation capacity. EE concentrates on enduse energy solutions and targets permanent reduction ofelectricityconsumption,attemptingtoreducethedemandforpower.DRworkstochangethetimingofenergyusefrompeaktooffpeakperiodsbytransmittingchangesinprices,loadcontrolsignals,orotherincentivestoenduserstoreflectexistingproductionanddeliverycosts.
Currently,ERCOThasalmost1,300MWofexpecteddispatchableandcontrollabledemandresponseavailableformarketoperations. Load Resources (LRs)36,37, provide Responsive Reserve Service (RRS) and Emergency Response Service (ERS)designed tobedeployed in the late stagesofagridemergencyprior to shedding involuntaryFirm loadand representscontractually committed interruptible load.38,39Additionaldemand responseexists inERCOT,butmarket rules currentlylimit theamountcommerciallyavailable.Thiscommerciallyavailableamountequates toapproximately2percentof theforecastTotalInternalDemandfortheassessmentarea.ThisissignificantlylessthanboththeNERCwideaverage,whichisapproximately4percent,andthe ISO/RTOaverage,which isapproximately5.5percentandwill increaseto7percentby2022.
ERCOTalsohasanalmostuntappedresourcemarketintheresidentialsector.Increasingdemandresponsecapabilitiescanprovide some significantbenefits in the shortterm.Sincedemand responsecanbeinstalled ina relatively short timeframe, these resources have the potential to provide ERCOT operatorswith the flexibility that is needed during peakdemandperiods in theupcomingyears.The increasingamountof smartmetersandother smartgrid technology in thestateofTexasmayalsoprovideadditionaldemandsideresources,whichwillhelptopartiallyoffsetpotentiallyinsufficientgenerationresources(Figure10).40
35http://www.tresamigasllc.com/.36CategorizedasLoadasaCapacityResourceDemandResponseinthisassessment.37http://www.ercot.com/content/mktinfo/dam/kd/ERCOTPercent20MethodologiesPercent20forPercent20DeterminingPercent20AncillaryPercent20Service
Percent20Requir.zip.38The886MWrepresentLRparticipationinRRScapacityduringthepeakmonthofAugust2011acrossthepeakhours(36PM).39SeeSection3.14.3ofthecurrentERCOTprotocols:http://www.ercot.com/content/mktrules/nprotocols/current/03051012_Nodal.doc.40ERCOTAdvancedMeteringInitiative:http://www.ercot.com/services/projects/current/80027_01/index
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Figure10:ERCOTDemandResponseMixLessThanIndustryAverages
Whilesomeenhancementshavealreadybeenmadesuchas increasingthescarcitypricingcapERCOT,alongwiththePublicUtilityCommissionofTexas(PUCT),continuestoidentifyandevaluatepotentialsolutionstoincentivizenewcapacityresources. Some of these potential solutions include developingmore demandsidemanagement resourceswithmoredemand response programs and increasing conservation capabilities, implementing statemandated resource adequacytargets,andenhancingexistingmarketmechanisms,whichmay includefurther increasingscarcitypricingor integratingacapacitycomponenttothemarketstructure.
TheongoingresourceadequacychallengesinERCOTaredynamic.Thestateregulator(PUCT)continuestobeproactiveindeveloping solutions thatwill bemost beneficial to the electric stakeholders across Texas.41Most recently, changes inwholesalemarketrules forERCOTwereadopted inaneffort to increase incentives fornewcapacity investmentsand toensurereliabilitytargetscanbemet.42
Ultimately, the resource adequacy concerns in ERCOT aremore likely to impact the reliability of the BPS during peakconditions or in an extreme event. Since capacity deficiencies are likely to result in having to implement emergencyoperatingprocedureswhichmayincludesheddingfirmloaduncontrolledcascadingoftheBPSisunlikely.However,thelikelihoodofthisimpactishighlydependentonweatherconditionsandresultingimpactstopeakdemand,especiallyinthesummer. Ifactualpeakdemand increasesbeyondthesummer forecast,thepotentialforrotatingsystemoutagesgrows.Prolongedextremeconditionsalsoincreasethelastseveraldaysduringthesummerpeakseason.
41ResourceAdequacydocketatthePublicUtilityCommissionofTexas(DocketNo.40000)42http://www.puc.texas.gov/agency/rulesnlaws/subrules/electric/25.508/25.508.pdf
1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 2.0% 2.1% 2.1%2.2%
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atts(M
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RiskAssessmentSummaryImpactedAssessmentArea(s)
ERCOT
ImpactTypeResourceAdequacySignificantgeneratorretirementsandlackofnewresourcescancausecapacitydeficienciesandmayaffectthepowersystemsabilitytomeetpeakdemands.
MagnitudeofImpact
DegradingReserveMargins:AnticipatedReserveMarginbelowNERCReferenceMarginLevelineveryyearandiszeroby2020unlessmorecapacityisaddedRotatingSystemOutages:Capacitydeficienciescantriggeremergencyoperatingproceduresthatmayincludethesheddingoffirmload.
LikelihoodofImpactWithERCOTPlanningReserveMarginsprojectedtobebelowtheNERCReferenceMarginLevelin2013,theprobabilityofacapacitydeficiencyisincreasedandwillcontinuetoincreasethroughouttheassessmentperiodunlessmorecapacityisadded.
Recommendations
NERCNERCshouldcontinuetoassessplansandactionstoaddressresourceadequacyissues.Seasonalreliabilityassessmentswillprovideabettershorttermviewonthepreparationstomaintainreliabilitythroughtheupcomingseason.
ERCOT
ERCOT should consider alternative solutions to resource adequacy issues and provide a strategic plan outlining themeasuresitistakingtoincreasereservemarginsandensurereliability.ERCOTshouldcontinuetoprovideinformationtothePUCTforcontinueddevelopmentofpoliciesinsupportofasolutiontoinceasecapacityresources.
RegulatorsNERC strongly recommends that the PUCT and ERCOT identify and implement nearterm and longterm solutions todecreasethe likelihoodofacapacitydeficiency.WhiletherehasbeenasignificantamountofworkdoneatthePUCTonaddressingthisissue,43therehasbeenlittleprogressonbringingnewresourcesonline.
43TexasPublicUtilityCommissionProceedingtoEnsureResourceAdequacyinTexas,http://www.puc.texas.gov/industry/projects/electric/40000/40000.aspx
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Resources Sufficient to Meet Reliability Targets in Most Areas NERC assesses resource adequacy by evaluating each Assessment Areas Planning Reserve Marginsa deterministicmethodbasedon traditional capacityplanning.44 For themajorityof thebulkpower system,PlanningReserveMarginsappearsufficienttomaintainreliabilityduringthe longtermhorizon.However,therearesignificantchallengesfacingtheelectric industry thatmay shift industryprojectionsand cause theNERC reference case to change,adding considerableuncertaintynotonlyinthelongterm,butintheshorttermaswell.Wheremarketsexist,signalsfornewcapacitymustbeeffective for planning purposes, which can impact necessary lead times to construct new generation, as well as anyassociated transmission. A transition to reduce environmental impacts through policy, specifically through regulatorycompliance deadlines, could ultimately conflict with existing planning and approval processesboth regional andinterregional.
SupplyandPlanningReserveMarginprojectionsinthisassessmentdonotnecessarilytakeintoaccountallretirementsofgeneratorsdue toallpotentialenvironmental regulationsandother industry risks.While somegeneratorshavealreadyannounced and planned for retirement, the majority of vulnerable generation resources have not finalized plans. AsignificantamountofgenerationretirementscanhaveaconsiderableimpactonPlanningReserveMarginsifnewresourcesandassociatedtransmissioncannotbeconstructedoracquiredbeforethecompliancedeadlines.TheresultswoulddriveonpeakPlanningReserveMarginslowerthanforecastedinthisassessment.Theuncertaintyinherentinfuturegenerationretirements is representative of the future supply forecast aswell.Without a firm understanding of future generationretirements,plansforreplacementcapacityareleftuncertain(Figure11).
Longtermuncertaintycan increaseduetothegrowth indemandresponse,aswellasshorter leadtimesforbringingonlinenaturalgasandrenewablegenerationcapacity.Allofthesedriverscontributetofutureuncertaintyassystemplannerscandefer largecapacitydevelopmentprojects for longerperiodsof time,allowingdecisions tobemadeata later timewithoutanimpacttoreliability.
Figure11:NetCumulativeChangeinSupplyandDemandForecasts;SupplyCategoriesShowDifferentDegreesofResourceUncertainty;DemandGrowthOutpacesSupply
However,thelongleadtimesfordevelopingandconstructingtransmissionaredifficulttoalignwiththeshorterleadtimesfor resources.Althoughgeneratingplant inservice lead timeshavebeen significantly reduced (excludingenvironmentalpermitting processes), transmission planning and approval necessary to integrate these new resources have notexperiencedasimilarleadtimereduction(Figure12).
44PlanningReserveMarginsinthisreportrepresentmarginscalculatedforplanningpurposes(PlanningReserveMargins)notoperationalreservemarginsthatreflectrealtime
operatingconditions.SeeEstimatedDemand,Resources,andReserveMarginsforspecificvalues.
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atts(G
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Figure12:FutureNet10YearCapacityChangebyAssessmentArea
Asmentioned earlier in this report, Planning ReserveMargins in ERCOT are projected to significantly decline over theassessmentperiod.Additionally,theapproximately5,000MWofprojectedresourcesdoesnotappeartobesufficienttokeeppacewithpeakdemandgrowth.AconsiderableamountofConceptualresources(whichareincludedonlyasAdjustedPotentialResources),appearstobetheprimaryreasonthatOntario,PJM,andtheWECCassessmentareasfallbelowtheNERCReferenceMarginLevel(Figure13).
Figure13:AssessmentAreaswithAnticipatedReserveMarginsthatfallbelowtheNERCReferenceMarginLevelby201445(Left)and2022(Right)46
In general, longterm planning (beyond five years) is inherently uncertain due to, among other things, varyingmarketpracticesandregulatoryconditions,suchasenvironmentalregulations.IntheareaswhereAnticipatedResourcesfallshortofmeeting theNERCReferenceMarginLevel,AdjustedPotentialResourcesmustbeaccelerated, ifnecessary.However,Adjusted Potential Resources carry a higher degree of uncertainty because these resources are in the early stages of
45Whenevaluatingsystemrequirementsfornewgeneration,SaskPowerutilizesamostlikelyloadforecastaccountingforloadrisktoprojectdemandrequirements.Thisisnot
basedona50/50probability.Forthepurposeofthisstudy,utilizationofalessconservative50/50loadforecastprobabilitywouldresultinhigherreservemarginsrangingfromapproximately16to23percent.Furthermore,forthepurposeofthisassessment,theNERCReferenceMarginLevelis11percent(lowerendofprobabilisticEUErange)throughouttheassessmentperiod.Saskatchewanhasplannedforadequateresourcestomeetanticipatedloadthroughouttheassessmentperiod.
46AssessmentAreaswithnodatesinparenthesismaintainAnticipatedReserveMarginsthatareabovetheNERCReferenceMarginLevelthroughouttheassessmentperiod.
10,000
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atts(M
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MROSaskPower
(2014,2016,2020)
NPCCOntario(20192022)
PJM
WECCMEXW(2021 2022)
ERCOT
MISO(2022)
WECCROCK(2018 2019,20212022)
WECCBASN(20192022)
WECCCALN20182022
WECCNWPP(20192021)
MROMAPP(20202022)
WECCBC(20222022)
MROManitoba(20222022)
MROSaskPower
(2014,2016,2020)
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development.Therefore,considerableprogress inresourcedevelopmentmustbemade inordertobringtheseresourcesonline.Engineeringstudies,sitingandpermitting,andconstructionrepresenttheactivitiesrequiredbeforetheseresourcescan have reasonable expectation of going into service. Should peak demand grow faster than projected, additionalConceptualresourcesshouldbedeveloped,astheylikelywillbeneededtomaintainresourceadequacy.
RiskAssessmentSummary
ImpactedAssessmentArea(s)
ERCOTMISOMRONPCCOntarioPJMWECC
ImpactType ResourceAdequacyLowerthananticipatedcapacityadditionscancontributetoacapacityshortage
MagnitudeofImpactWith the exception of ERCOT, all other impacted areas have at least five years to enhance plans to ensure sufficientresourcesareconstructedorprocured.
LikelihoodofImpact
ThelikelihoodofaneventthatimpactsreliabilityisgreatlyreducedifproperplanningprocessessufficientlyreflectresourceuncertaintiesConceptualresourcesaregenerallyinearlyplanningstagesandhaveahighdegreeofuncertaintyassociatedwithprojectcompletion
Recommendations
NERCNERCshouldconsiderevaluatinggeneratoruncertaintiesusingaprobabilisticriskbasis,ratherthanadeterministicapproachinitsreliabilityassessment.
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Increased Dependence on Natural Gas for Electricity Generation Thegrowth innaturalgasdemandwithintheelectricsectorhas important implicationsonothergasconsumingsectors,suchascommercialandresidentialheatingorindustrialmanufacturing.Increaseddependenceonnaturalgasintheelectricsectorhas increased theneed forallgasconsumers,electricsystemplannersandoperators,andpolicymakers to focusmoresharplyontheinteractionbetweentheelectricandgasindustries.Foravarietyofreasons,includingtheadoptionofhighlyefficientcombinedcycletechnologybytheelectricpower industryandtheemergenceofshalegas,bothofwhichhavealteredtherelativeeconomicsofgasfiredgeneration,thedependenceonnaturalgasbytheelectricpowersectorhasincreased significantly. Trends in fuelmix changes highlighted in this assessment identify gasfired generation as thepremierchoicefornewcapacitywithalmost100GWexpectedoverthenext10years,whichrepresentsalmosthalfofallnewgenerationcapacity(Figure14).
Figure14:NERCWideFutureGasFiredCapacityServesOverHalftheProjectedPeakTotalInternalDemandby2016
Increasinggasfiredgenerationtomeetelectric loads in the futuredoesnot comewithoutdependency risks. Increaseddependenceonnaturalgascanamplifythebulkpowersystemsexposuretodisruptionsoffuelsupply,transportation,anddelivery.Inordertoaccommodateasignificantamountofgasfiredgeneration,BPSplannersmustunderstandthedifferentfunctions gasfired generation will perform (i.e., baseload and midrange support versus load following and peakingsupport). Risks to reliability must also be addressed through the three primary timeframes of system planning andoperations:LongandShortTermPlanning(110years),OperationalPlanning(1day1year),andOperations(1dayrealtime)(Table4).
Table4:ReliabilityConsiderationsforAccommodatingLargeAmountsofGasFiredGenerationLongandShortTermPlanning OperationalPlanning OperationsGassupplyandfuelsecurity Seasonalanddayaheadobservability Informationsharingandvisibility
Dualfuelcapabilities Coordinatedoperationalprocedures CommunicationandinformationexchangeFueltransportationexpectations Coordinatedoutageschedules Emergencyoperatingprocedures
Generatoravailability Increasingflexibility Resourceplanning
Reliabilityassessmentandresourceadequacystudies
NERCsPhaseIIeffortongasdependencytargetstheseveryissues.ThereportfocusesonthedifferentrisksthatcanaffectBPS reliability, identifying practices thatminimize vulnerabilities, and identifying approacheswhere coordinated interindustryeffortscouldprovideenhancedsystemreliability.
Akeyareaoffocusistheneedforincreasedcoordinationbetweenthetwoindustries,particularlyataregionallevel.Itisimportant to understand the fundamental differences between how the two industries plan for the long term,communicatewitheach respective stakeholder,andoperatewithindifferent regulatory frameworks.While solutions tomitigateincreasingriskswillbevastandRegionspecific,NERCshouldensurethatenhancementstoplanningprocesseswill
48.2% 48.2%
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account forexpecteduncertainty ingasfiredgenerationperformanceaswellaspotentialcontingencieson thepipelinenetwork. Furthermore, operational procedures should include a certain level of formalized coordination with the gaspipelineindustry,withspecificattentiononemergencyoperatingproceduresduringextremeevents.EachRegionwillhaveuniqueissuestoresolve;therefore,effortstoreducetheseriskswillvary.Thesenewchallengesincludeareductionoffuelsupplydiversificationwithin thepower industry, incorporating risks intoplanningprocessesandoperationalprocedures,andtheneedtoadaptfuelprocurement,transportation,andstoragestrategies(Figure15).
Figure15:RegionalDifferencesWillRequireRegionSpecificSolutions47
TheamountofgasfiredcapacityadditionsalsocontributestotheregionaldifferencesandvulnerabilitiesthatcouldimpactBPSreliabilityinthefuture.Withnaturalgasasthepremierfuelfornewgeneration,gasfiredcapacityadditionsarelargelyafunctionofforecastedpeakdemandincreasesandtheamountofcoalandoilfiredgenerationwithinagivenassessmentarea.Withsignificantgeneratorretirementsexpectedintheforecast,PJMisprojectingapproximately40,000MWofnewgasfiredgeneration;however,over37,000MWareConceptualandstillintheearlyplanningstages(Figure16).Nomorethan5,000MWareeitherPlannedorConceptualinallotherareas.
47Source:VentyxVelocitySuite,AnABBCompany;modifiedbyNERCstafftoreflectNERCfootprint.TextboxesaddedbyNERCstaff.
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Figure16:FutureGasFiredCapacityServesOverHalftheProjectedPeakDemand
Historically,thepowerindustryhasreliedheavilyonfueldiversificationforgeneratingelectricity.Whilethereareregionaldifferences,diversificationstrategieshavehadanumberofsignificantbenefitsforthepowerindustry.However,withtheprojected increases in capacity of gasfired generation alongwith the projected reductions in coal capacity, gasfiredgenerationwillbecalleduponmoreoften.Gasfiredgenerationwillbeused tomeetbase, intermediate,andpeak loadrequirements, effectively increasingoverall capacity factors.According to its2012Annual EnergyOutlook,48 the EnergyInformation Administration (EIA) is projecting an approximately 110 GWh increase in gasfired generation, effectivelyincreasinggasfiredgenerationtoover27percentofallelectricgenerationin2015andtrailingoffto25percentinthelongterm(Figure17).
Figure17:GasFiredGenerationSignificantlyIncreasesOverNextThreeYears
Asshown intheNERCPhaseIstudyon increasinggasdependencies,reliabilitychallengesaremore likelytooccurduringthewinter season.49Whileelectricgeneration isgenerallyable to scheduleand securegasduring the summer tomeetseasonalpeakdemand,thisflexibilitydecreasesduringwintermonthswhenpipelinestendtopeakandfirmtransportationcustomershavescheduled their fullentitlements.Coldweathercanalsobe responsible for increased infrastructureandsupplydisruptions,whicharegenerallycausedbyfreezing.Riskstogaswellheads,generators,andpipelineinfrastructureduetofreezingcanexposetheelectric industrytosignificantcapacityshortages.It is importanttounderstandthatwhilefirmgas transportationsignificantlydecreases the likelihood that fueldeliverywillbecurtailed,extremeevents,suchaswellhead freezeoffs causingdecreased gasproduction (a forcemajeureevent),50 couldpotentially lead to commonmodefailuresofasignificantamountofgasfiredgenerators.Additionally,pipelinecustomerswithgasuseisdesignatedas
48U.S.EnergyInformationAdministration's(EIA's)AnnualEnergyOutlook2012(AEO2012):www.eia.gov/forecasts/aeo/pdf/0383(2012).pdf.492011SpecialAssessmentReport:APrimeroftheNaturalGasandElectricPowerInterdependencyintheUnitedStates,
http://www.nerc.com/files/Gas_Electric_Interdependencies_Phase_I.pdf50Suchagreementsinfuelcontractsrelievethelesseefromliabilityforbreach,iftheparty'sperformanceisimpededastheresultofanaturalcausethatcouldnothavebeen
anticipatedorprevented.ThisactofGodmustcompletelypreventperformanceandmustbeunanticipated.
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humanuse(typicallylocaldistributioncompaniesandsomecommercialcustomers)alwaysreceivepriorityoverelectricgeneration,which during emergencies and restoration efforts can have an impact to gasfired generationevenwithpipelinesthathaveFirmcapacityrights.
Dualfuelcapabilitiesandavarietyofstorageoptionsmayhelpbridgethegapbetweentheuncertaintiesofgasavailabilityduringextremeeventsandmaintainingareliablesourceofcapacityavailabletomeetseasonalpeakdemands.Ultimately,the right balance of firm pipeline capacity, dualfuel capabilities, and a variety of storage options will be regionallydependent.Factorssuchasmarketstructure,geography,fuelmix,andpipelineinfrastructurewilldeterminetheextentofgasdependencyrisksaswellaswhatsolutionsareavailable.
Improvements in system reliability may be realized from having sufficient backup, dualfuel switching capabilities.Obstacles to achieving suchbenefits includeoperationalpreparedness and state, federal, andprovincial environmentalregulations,whicheffectivelylimittheamountofoilthatcanbeburned.Currentpoliciesandrulesthatregulatebackupoiluseandemissionsforelectricgenerationmayneedtobeevaluatedtoensuredualfuelcapabilitycanbemaintainedduringemergencies or other extreme conditions. Additionally, planning processes should consider backup fuel inventories,changes in ramp andunitpower capabilities, and the time requirements for fuel switchover.Without considering thisinformation,theamountofavailabledualfuelgenerationprojectedtobeavailablemaybeoverstated.Currently,125GWof gasfired generation has dualfuel capabilities, and 58 percent of gasfired generation is tied to firm supply,transportation,anddelivery(Figure18).
Figure18:NERCWideGasFiredGenerationFuelServicesandDualFuelCapabilities51
InearlyFebruary2011,acoldweatherevent impactedasignificantamountofelectricgeneration inTexas,Arizona,andNewMexico.52Whilemuchoftheimpactwasrelatedtoinsufficientweatherization,thereweresomeissueswithgassupplyand transportation. For the southwestasawhole,67percentof thegenerator failures (byMWh)wereduedirectly toweatherrelatedcauses,includingfrozensensinglines,frozenequipment,frozenwaterlines,frozenvalves,bladeicing,andlow temperature cutoff limits. At least another 12 percentwere indirectly attributable to theweather (occasioned bynaturalgascurtailmentstogasfiredgeneratorsanddifficulties infuelswitching).Naturalgasproduction lossesstemmedprincipallyfromthreecauses:gaswellheadfreezeoffs,icyroadslimitingfieldcrewsaccesstoremotewellheadsites,androllingelectricblackoutsorcustomercurtailmentsimpactinggasproductionequipment.
51Thisanalysisshowsresultsofwherefuelserviceisknown.Areaswhichdidnotprovideresults,andmayhaveunknownfuelservice,arenotshown.52JointFERC/NERCReportonOutagesandCurtailmentsDuringtheSouthwestColdWeatherEventofFebruary15,2011,http://www.ferc.gov/legal/staffreports/081611
report.pdf.
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While extreme cold weather is less common in the Southwest, these conditions can arise every few years, withoutsubstantialwarning.Significantprogresshasbeenmadetoboththegasandelectricindustriespreparationsformanagingextreme coldweather events.Weatherization and enhanced emergencyoperatingprocedureshavebeen implementedbecauseoftheeventandwillbehighlightedinthe2012/2013WinterReliabilityAssessment.53
It is inherent intheelectric industry'sroleofprovidingreliableelectricityto itscustomerstomanagerisks.However, it isimportanttorecognizethatreliabilitycomesatacost,andtheelectricindustrymustmaintainreliability,regardlessoftheconstantlyshiftingresourcemix.Theissueofdecidingbetweenreliabilityandcostmustbeaddressedappropriatelybyallparticipantsofbothindustries.Industryregulatorshaveaparamountresponsiblytofindcommonground.
NERC will soon release a second phase of its ongoing assessment of the increased dependency on natural gasfiredgeneration.54InitsroleofcontinuingtoassessthereliabilityoftheBPSthroughperiodicandspecialreliabilityassessments,NERC realized the necessity to identify more specific reliability needs. The NERC Phase II effort on increasing gasdependency focuseson thedifferent vulnerabilities that can affectBPS reliability, identifyingways that couldminimizethose vulnerabilities, and identifying approaches inwhich coordinated interindustry activities could provide enhancedsystem reliability.While solutionswill be vast and Regionspecific,NERCmust ensure that enhancements to planningprocesses aremade to account for any expected uncertainty in gasfired generation performance aswell as potentialcontingencieson thepipelinenetwork. Furthermore,operationalproceduresmust include a certain levelof formalizedcoordinationwiththegaspipelineindustry,withspecificfocusonemergencyproceduresduringextremeevents.
RiskAssessmentSummary
ImpactedAssessmentArea(s)
ERCOTNPCCNewEnglandMISOPJM
ImpactTypeResourceAdequacySignificant(commonmode)generatoroutagescancausecapacitydeficiencies.
OperatingReliabilityTransmissionsystemimpactscouldmanifestfromsignificantgasfiredgeneratoroutages.
MagnitudeofImpact
Duringextremecoldweatherconditions,gasfiredgenerationwithneitherfirmtransportationnordualfuelcapabilitiesmaynotbeavailabletoproduceelectricity.
Asignificantgassupplyorpipelinedisruptioncancauseasubstantialportionofgasfiredgenerationtobeunavailable.
LikelihoodofImpact
HighlydependentonwinterweatherconditionsIncreaseingasgenerationandcapacityisexpectedby2015Inthepast40years,at leastonesignificanteventhasoccurredduringeach10yearperiodat leasttwomajoreventsoccurredbetween2002and2011.
Recommendations
NERC
Identify guidelines, recommendations, alerts, or enhancements to reliability standards that supportminimizing risksassociatedwithnaturalgasdependencies.Considerincorporatingfuelrisksandcapacityimpactsintoresourceadequacyandreliabilityassessments.Enhanceseasonalassessmentsofgasfiredgenerationavailabilityby identifying fuel transportation typesanddualfuelreliabilitymetrics.Assessindustryplansandprocedurestomitigateseverefueldisruptions.
PlanningCoordinators,ReliabilityCoordinatorsandBalancingAuthorities
Enhancements toBPSplanningprocesses that account foruncertainty in gasfired generationperformance shouldbeconsidered.
Operational procedures should include a certain level of formalized coordination with the gas supply and pipelineindustry,aswellasemergencyproceduresduringextremeevents
Regulators
Stateregulatorsshouldevaluatetheassociatedrisksofgassupplyandtransportationdisruptionsandensuretheserisksareconsistentwithalevelofriskthatisknown,expectedandplanned.Currentpoliciesandrulesthatregulatebackupoiluseandemissionsforelectricgene