economic analysis of northeast reliability interconnection (second nb tie)

Economic Analysis of Northeast Reliability Interconnection

(Second NB Tie)

Monday, July 12, 2004Wayne Coste ISO-NE

Power Supply & Reliability

DRAFT For July 12, 2004 RC Meeting - SUBJECT TO REVISION

2

Issues Raised1. Seasonal nature of savings/benefits to allow comparison

to capacity availability in Maritimes2. Where is the Generation coming from that provides the

benefits of the added 150MW Orrington South.3. Inconsistency of economic impact of the Maine-New

Hampshire transmission upgrade4. Rationale for considering Case 9A as the basis5. A single gas-fired combined cycle unit to model

Maritime systems6. Capacity availability in Maritime7. Sub-area Savings8. ISO’s “LSE Expense” Methodology


3

Economic Assessment Review

• Based on RTEP 04 assumptions, several cases were investigated

• Simulation shows the NRI will provide benefits to NE over the six year period (2008-2013) – The total saving in LSE expense is about $98.9 million

– The total production cost reduction is $ 30.9 million

• Other qualitative benefits due to NRI


4

“LSE Expense” Methodology

• Production cost is basically fuel cost and some minor O&M cost

• LSE Expense is the product of sub-area LMP and the sub-area load.

• The LMP is calculated using a transportation model considering transmission constraints.


5

Economic Assessment Review

* 200 MW of “price-taker” energy was assumed in addition to energy transactions that are priced on gas-fired CC

Gas-fired CC

Based Energy in NB*

NB to BHE

Orrington South

Surowiec South

Maine New Hampshire Upgrades Included

Base Case 500 700 1050 1150 1400 Base Case

9A 800 700 1050 1150 1400 More Capacity Available in New Brunswick9A_1 800 1000 1200 1150 1400 NRI9B_1 800 1000 1200 1150 1500 NRI, Y-138

9C_1 800 1000 Infinite 1150 1500 NRI, Y-138, Orr-South Expansion

9D_1 800 1000 Infinite Infinite 1500 NRI, Y-138, Orr South, Sur-South Expansion

9E_1 800 1000 Infinite Infinite 1700NRI, Y-138, Orr South, Sur-South and MENH Expansion

Assigned Transmission Limits (MW)


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Monthly Flow Duration Curves

0

200

400

600

800

1000

1 2 3 4 5 6 7 8 9 10 11 12

M onth

Mo

nth

ly N

B-B

HE

Flo

w

Du

rati

on

Cu

rve

(M

W)

NB-BHE Flow with NRI upgrade NB-BHE Flow without NRI upgrade

•Based on NB to Maine Flows for Case 9A and 9A_1

•More energy flow imported in summer

•In April and May, maintenance in New England causes a large amount of energy imported from NB


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Historical Monthly Daily Flow Profile

Historical New Brunswick to New England Interface Flow Average, Minimum and Maximum for Hours 1 to 24 by Month

Daily Flow Profile of NB-NE in Each Month

-400

-200

0

200

400

600

800

2003

-1

2003

-2

2003

-3

2003

-4

2003

-5

2003

-6

2003

-7

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-8

2003

-9

2003

-10

2003

-11

2003

-12

2004

-1

2004

-2

2004

-3

2004

-4

2004

-5

2004

-6

Month

Ne

w B

run

sw

ick

to

NE

Inte

rfa

ce

F

low

(M

W)

Hourly Average Hourly Maximum Hourly Minimum

700 MW Limit


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Source of Increased Energy Available Due to 150 MW Orrington South Upgrade

• Increased Generation comes from New Brunswick

•Resource in BHE has minor competitive ($1.50/MWh) advantage over similar resource in NB due to through and out assumption.

• Results are based on the current assumptions

Year 2010 Dispatched Energy in BHE and NB (GWh)Case JAN FEB M AR APR M AY JUN JUL AUG SEP OCT NOV DEC TOTAL

BHE 620 565 638 549 383 572 560 551 554 610 608 624 6833

NBPC 149 138 150 182 179 154 258 257 221 150 152 151 2142

BHE 620 565 638 549 383 572 560 551 554 610 608 624 6833

NBPC 149 139 150 190 184 159 300 294 247 150 154 152 2267

BHE 0 0 0 0 0 0 0 0 0 0 0 0 0

NBPC 0 1 0 8 5 5 42 37 26 0 2 1 125

Exis ting Transm iss ion

(Case 9A)With NRI (Case

9A_1)

Diffe rence


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Consistency with Previous TEAC ME-NH Upgrade Analyses

• Previous TEAC presentations showed more benefits associated with Maine-New Hampshire upgrades than this analysis

•The difference is caused by the different assumptions

• TEAC 7 (RTEP01), New Brunswick modeled as a fixed 700 MW price taker. TEAC comments resulted in price sensitive (dispatchable) energy assumptions for NB and HQ

• In TEAC 17, ME/NH upgrade benefits was related to elimination of a “double whammy” due to unit specific interface limit reduction


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Use of Case 9A as the Base for NRI Analysis

• The only difference between base case and Case 9A is the amount of available capacity in New Brunswick;

•The difference of LSE expense and production cost between the two cases is relatively small.

•The difference attributed to maintenance scheduling

•Use of Case 9A as Base Case eliminates this source of model noise


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Use of Case 9A as the Base for NRI Analysis: Annual Sub-Area Effects

Change in NE of Production Cost: Base case minus Case 9A2008 2009 2010 2011 2012 2013 Total

BHE 0.0 0.0 0.0 0.0 0.0 0.0 0.0BOST 0.7 1.1 0.0 0.1 0.0 0.2 2.1CMAN -0.1 0.1 0.1 0.1 0.0 0.0 0.2CT 0.0 -0.5 0.1 -0.2 0.0 0.3 -0.3ME 0.0 0.0 0.0 0.0 0.0 0.0 0.0NH 0.0 0.0 0.2 0.1 0.0 -0.1 0.2NOR 0.0 0.1 0.0 0.0 0.0 -0.5 -0.4RI 0.6 0.2 1.1 1.1 2.1 0.3 5.4SEMA 0.0 0.2 0.3 0.4 -0.3 -0.1 0.5SME 0.0 0.0 0.0 0.0 0.0 -0.1 -0.1SWCT -0.1 -0.1 0.1 -0.1 -0.2 -0.1 -0.5VT 0.0 0.0 0.0 0.0 0.0 0.0 0.0WEMA -0.4 0.3 -0.2 -0.1 0.3 0.6 0.5Total 0.7 1.4 1.7 1.4 1.9 0.5 7.6


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Use of Case 9A as the Base for NRI Analysis – Annual Sub-Area Effects

Change in NE LSE Expense: Base case minus Case 9A2008 2009 2010 2011 2012 2013 Total

BHE 0.0 0.1 0.1 0.1 0.2 0.1 0.6BOST -0.4 -0.8 -0.6 -1.0 -1.4 -6.2 -10.4CMAN -0.2 -0.2 -0.2 -0.4 -0.5 -1.1 -2.6CT -0.2 -0.2 4.6 -0.1 6.0 6.2 16.3ME -0.1 -0.1 -0.1 -0.2 -0.3 -0.6 -1.4NH -0.1 -0.2 -0.2 -0.3 -0.5 -1.2 -2.5NOR 0.0 -0.1 -0.1 -0.1 -0.1 -0.2 -0.6RI -0.2 -0.3 -0.3 -0.4 -0.7 -1.5 -3.4SEMA -0.2 -0.3 -0.3 -0.5 -0.7 -3.1 -5.1SME -0.1 -0.1 -0.1 -0.2 -0.2 -0.7 -1.4SWCT -0.2 -0.2 -0.2 -0.1 1.0 0.7 1.0VT -0.1 -0.2 -0.2 -0.3 -0.3 -0.9 -2.0WEMA -0.1 -0.3 -0.2 -0.4 -0.5 -1.3 -2.8Total -1.9 -2.9 2.2 -3.9 2.0 -9.8 -14.3


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NB is Strongly Winter Peaking

Maritime Resource & Demand 2005

0

1000

2000

3000

4000

5000

6000

7000

8000

Me

ga

wa

tts

Peak Demand

Average Demand

Resources 2005

Maintenance Derated


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Appropriateness of Gas CC Proxy Price in NB

• Gas CC is proxy for willingness to sell available surplus energy

• Supply Curve of New Brunswick in Year 2005 is estimated– Capacity / heat rate from SGC Engineering’s reply– ISO fuel price assumption

• Monthly peak and average load from SGC Engineering’s reply


15

Reasonableness of Gas CC Proxy Price in NB

• The summer peak load in NB is ~3500 MW• Supply curve shows more economic units could be

used to export energy to NE– NB maintenance could have an effect– Supports 200 MW of price taker energy

• Gas-fired CC is a conservative assumption unit – Heat rate of 8400 Btu/kWh for summer energy– Lower heat rate resource provides more benefits– Effect of lower heat rate to be seen in a sensitivity case


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Supply Curve Illustrating Cost of Marginal EnergyMaritime Supply Curve

Maritime Supply Curve

0

10

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40

50

60

70

80

90

0 1000 2000 3000 4000 5000 6000 7000 8000

Supply (MW)

Mar

gina

l Cos

t ($/

MW

h)

July Average

July PeakJanuary Peak

January Average

Approximate Gas Fired CC

Maritime Supply Curve

0

10

20

30

40

50

60

70

80

90

0 1000 2000 3000 4000 5000 6000 7000 8000

Supply (MW)

Mar

gina

l Cos

t ($/

MW

h)

July Average

July PeakJanuary Peak

January Average

Approximate Gas Fired CC


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Sensitivity to Gas CC Proxy Price

Case 9A / 9A1 used to evaluate effect of lower strike price

Cheaper energy in NB brings more benefits from NRI

Year Higher HR Lower HR Higher HR Lower HR2008 3.1 16.7 6.9 19.22009 3.6 16.8 9.0 22.02010 4.1 17.4 10.3 23.22011 4.9 19.2 12.1 24.22012 6.4 21.2 24.0 38.02013 8.8 23.8 36.6 53.1Total 30.9 115.1 98.9 179.7

Production Cost Reduction LSE Expense Reduction


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Effect of Available Capacity in NB

• With the reduction of available capacity in New Brunswick, the economic benefits of NRI decrease

• When S396 out of service, 0 MW generation in Maritime is available, the benefit is zero

• If some units in New England are retired, more benefits from NRI will be seen


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Additional Sensitivity Cases: Available Capacity in NB

Case ListCapacity in

NB (MW) Notes

Case 9A 1000 Case 9A assumption, 200 MW price taker + 800 gas CC unit

Case 9A_1 1000 Case 9A_1 assumption, 200 MW price taker + 800 gas CC unit

Case_Sen1 700 Case 9A assum ption, 200 MW price taker + 500 gas CC unit

Case_Sen2 700 Case 9A_1 assum ption, 200 MW price taker + 500 gas CC unit

Case_Sen3 0 Case 9A assum ption, S396 out of service , no generation from NB

Case_Sen4 0 Case 9A_1 assum ption,S396 out of service , no generation from NB

Case_Sen5 1000Case 9A assum ption, but w ith unit re tirem ent in New England, 200 MW price taker + 800 gas CC unit

Case_Sen6 1000Case 9A_1 assum ption, but w ith unit re tirem ent in New England, 200 MW price taker + 800 gas CC unit


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Change in NE Production Cost Due to NRI ($ Millions)

YearCase 9A-

Case 9A_1 Case_sen1-Case_sen2

Case_sen3-Case_sen4

Case_sen5-Case_sen6

2008 3.1 2.8 0 3.92009 3.6 2.9 0 4.82010 4.1 3.4 0 5.22011 4.9 4 0 6.42012 6.4 4.9 0 8.32013 8.8 6.4 0 9.7Total 30.9 24.4 0 38.3


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Change in NE LSE Expense Due to NRI ($ Millions)

YearCase 9A-

Case 9A_1 Case_sen1-Case_sen2

Case_sen3-Case_sen4

Case_sen5-Case_sen6

2008 6.9 4.3 0 11.72009 9 5.1 0 11.12010 10.3 4.6 0 18.82011 12.1 6.2 0 32.92012 24 14.1 0 54.42013 36.6 12.4 0 65.6Total 98.9 46.7 0 194.5


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Sub-area Savings

• Question: In the sub-area saving charts, the sub-areas that would benefit the most economically by the second New Brunswick tie are Maine and Rhode Island and why?– The total sub-area savings are related to the sub-area

load level and influenced by the New England internal constraints

– The average LMP shows Maine has the largest LMP saving, and CT has the smallest LMP saving


23

Sub-Area Average Changes in Prices

-0.30

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

LM

P D

iffe

ren

ce (

Cas

e 9A

_1 -

Cas

e 9A

)Average for six years


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Potential “Insurance” Benefit of NRI

• One reason for additional transmission is to provide an insurance benefit– Low probability … high outcome events

– Assume that once in the 30 year life of the line• LMPs in Day-Ahead and Real-Time prevented from spiking to

$1000/MWh from $500/MWh affecting all of New England

• 25,000 MW affected across New England

• Price spike duration lasts 4 four hours

– 25,000 MW * 4 hours * $(1000 – 500)/MWh = $50,000,000


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Questions?

economic analysis of northeast reliability interconnection (second nb tie)

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