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Transcript of Transmission Summit West 2013
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
The Changing Utility Landscape and its
Implications for Transmission
Transmission Summit West
September 24, 2013
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Table of Contents
Demand Growth and Implications
Changes to the Generation Portfolio
Technology Innovation
Utility Business Model
Implications for Utilities and for Transmission
1
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
2
Electricity Use Trends and Forecast
80%
85%
90%
95%
100%
105%
110%
2007 2008 2009 2010 2011 2012
Electricity Sales by End-Use Sector, in Trillion KWHs
Residential Commercial Industrial Direct Use
Source: EIA, Electric Power Monthly, April 2013
The Energy Information Administration (EIA)
projects growth in electricity use in the United
States to remain below 1% for the
foreseeable future
All types of end-use demand declined,
beginning in 2008
Industrial end-use saw the greatest decrease
of all sectors in 2009
Residential saw an uptick in 2010 but has
been declining since
Commercial use has been the most stable
but is still below pre-recession levels
Direct energy use has increased in the years
2009–2012, possibly at the expense of other
types of demand
US Demand Growth 1950-2040
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
In the Intermediate Term – Significant
Coal Plant Retirements Will Occur
3
Significant coal retirements are underway: Environmental regulations are increasing pressure on coal-fired
generators to invest in new air quality controls or to retire (before year-end 2015); this capacity will largely be
offset by new gas-based generation
Announced Coal-Fired Plant Retirements as of Jan. 2013 (Focus on WECC and ERCOT)
Selected U.S. Coal Plant Retirement Forecasts (including
2012): 30 GWs to 100 GWs between 2015 and 2020
Analyst Projected Retirements
Union of Concerned
Scientists
59 GWs “ripe for retirement” in
add’n to est. 41 GWs announced
Brattle 59–77 GWs
EIA 49 GWs by 2040
Sanford Bernstein 75 GWs by 2033
Reuters/Factbox 36 GWs by 2015
Barclays 24–29 GWs by 2015 (exclusive of 9
GWs retired in 2012)
Black & Veatch 62 GWs by 2020
Standard & Poor’s 35–50 GWs by 2016
BMO Capital Markets 30 GWs by 2020 (exclusive of 9
GWs retired in 2012)
Sources: Industry news; SNL Financial; ScottMadden analysis
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Coal Retirements in WECC
Comments
Of the proposed retirements
between 2013–2018, the majority
are slated to occur in the Mid-
Atlantic and parts of the Midwest
and South
A total of 2530 MWs of coal is
scheduled to be retired in WECC
Coal retirements are not the
primary driver of new
transmission needs in WECC
4
Unit State
Operating
Capacity
(MW)
Original
In-service
Year
Date to be
Retired
Age at
Retirement Ultimate Parent
Arapahoe ST 3 CO 44 1951 12/1/13 62 Xcel Energy Inc.
W N Clark ST 1 CO 18 1955 12/1/13 58 Black Hills Corp.
W N Clark ST 2 CO 25 1959 12/1/13 54 Black Hills Corp.
Port of Stockton District
Ener CFG STG CA 44 1987 2013 26 DTE Energy Co.
Ben French ST1 SD 22 1961 3/1/14 53 Black Hills Corp.
Neil Simpson ST5 WY 19 1969 3/1/14 45 Black Hills Corp.
Osage (WY) ST1 WY 10 1948 3/1/14 66 Black Hills Corp.
Osage (WY) ST2 WY 10 1949 3/1/14 65 Black Hills Corp.
Osage (WY) ST3 WY 10 1952 3/1/14 62 Black Hills Corp.
Reid Gardner ST1 NV 100 1965 2014 49 NV Energy Inc.
Reid Gardner ST2 NV 100 1968 2014 46 NV Energy Inc.
Reid Gardner ST3 NV 98 1976 2014 38 NV Energy Inc.
Carbon ST1 UT 67 1954 1/1/15 61 Multi-owned
Carbon ST2 UT 105 1957 1/1/15 58 Multi-owned
Cherokee (CO) ST3 CO 152 1962 2015 53 Xcel Energy Inc.
San Juan ST2 NM 320 1973 12/17/13 44 Multi-owned
San Juan ST3 NM 495 1979 12/17/13 38 Multi-owned
Valmont ST5 CO 184 1964 12/17/13 53 Xcel Energy Inc.
Cherokee (CO) ST4 CO 352 1968 2017 49 Xcel Energy Inc.
Reid Gardner ST4 NV 255 1983 2017 34 Multi-owned
Kennecott Utah Copper
ST1 UT 50 1943 1/18/13 75 Rio Tinto
Kennecott Utah Copper
ST2 UT 25 1943 1/18/13 75 Rio Tinto
Kennecott Utah Copper
ST3 UT 25 1946 1/18/13 72 Rio Tinto
Planned Coal Unit Retirements for WECC, 2013–2018
Sources: SNL Financial; NERC 2012 Long Term Reliability Assessment
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
5
Wind Top 10 WECC Wind
Projects by Capacity in Advanced Development or Construction
Phase with Estimated Cost
Power Plant Owner Name
New
Capacity
(MW)
State
Estimated
Completion
Date
Estimated
Construction
Cost ($000)
Mescalero Ridge
Wind Project
Caithness
Energy LLC 800 NM - $1,760,000
Tucannon River Wind
Farm (Lower Snake
River Phase II)
Portland
General
Electric Co.
267 WA 2015 $535,000
Summit Ridge Wind
Farm
Lotus Group
USA 200 OR 01/2015 $440,220
Alta East Wind
Project
ArcLight
Capital
Partners LLC
153 CA - $336,600
Alta East Wind
Project
Global
Infrastructure
Mgmt LLC
153 CA - $336,600
Alta Wind X
ArcLight
Capital
Partners LLC
138 CA 01/2015 $303,600
Alta Wind X
Global
Infrastructure
Mgmt LLC
138 CA 01/2015 $303,600
North Sky River
Wind Energy
Project
NextEra
Energy 135 CA - $295,812
Pacific Wind
EDF
Renewable
Energy
110 CA 2013 $242,000
Echanis Project
Columbia
Energy
Partners
104 OR - $300,000
Industry Trends
WECC experienced the largest annual capacity increase
of the NERC regional entities
• Of the 13,129 MW of wind added in the U.S. in
2012, 3,918 MW were added in WECC
• Total WECC utility wind capacity as of 2012 was
18,327 MW
At the end of 2012 there were 125 GWs of wind capacity
in the interconnection queues in the US
On a cumulative basis, Texas remained the leader
among states, with 12,214 MWs installed at the end of
2012—more than twice as much as the next-highest state
(California, with 5,542 MWs)
Sources: WECC 2012 Power Supply Assessment, Wind Technologies Report, California ISO, SNL
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
6
Solar
Industry Trends
In 2013, the U.S.’s cumulative installed solar capacity
will surpass 10 GWs (utility scale + DG), with 4.4
GWs of PV and 912 MWs of concentrating solar power
(CSP) installed so far in 2013
There were 38 individual utility scale PV projects
totaling 452 MWs completed in Q2 2013. All ten of
the largest projects completed were installed in either
California or Arizona
Top 10 WECC Solar Projects by Capacity in Advanced Development or
Construction Phase with Estimated Cost
Power Plant Owner Name
New
Capacity
(MW)
State
Estimated
Completion
Date
Estimated
Construction
Cost ($000)
Desert Sunlight
Project
NextEra
Energy 550 CA 2015 $2,300,000
Desert Sunlight
Project
Sumitomo
Corp. of
America
550 CA 2015 $2,300,000
Desert Sunlight
Project
GE Energy
Financial
Svcs
550 CA 2015 $2,300,000
Palen Solar Electric
Generating System
(CA Solar 10)
Chevron
Energy
Solutions
500 CA 06/2016 $2,000,000
Palen Solar Electric
Generating System
(CA Solar 10)
Caithness
Energy LLC 500 CA 06/2016 $2,000,000
Palen Solar Electric
Generating System
(CA Solar 10)
BrightSource
Energy Inc. 500 CA 06/2016 $2,000,000
Blythe Solar Power
Project
(Photovoltaic)
NextEra
Energy 485 CA 2018 $1,130,000
Nevada 300 Solar
Project (Techren)
Sustainable
Energy
Capital
300 NV 12/2014 $800,000
Nevada 300 Solar
Project (Techren)
POSCO
Power 300 NV 12/2014 $800,000
Stateline Solar
Project
First Solar
Development
LLC
300 CA 12/2016 $1,590,000
Sources: EIA (latest data as of Aug. 2013), SEPA, GTM, SNL, Sustainable Business News, NY Times, ScottMadden analysis
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
7
Technology Innovation and Reduction of Load
Automated Metering Infrastructure
Improving Functionality:
Demand side management (DSM) , DR, and EE
programs have been around for a long time
Emerging technologies are increasing the capability
and reach of these programs
AMI enables direct control of customer
devices during peak-load conditions and
two-way communication about load
reductions
DA is increasing the reliability and resiliency
of the distribution grid
Markets and aggregation of DR are creating a new
“supply” source
DR and EE programs can be used to reduce load
and to defer expenditures on utility infrastructure
DSM and Energy Efficiency
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
8
Technology Innovation and
Customer Alternatives
Microgrids
Sources: EIA Form 860 data as of Jan. 2013 for Distributed Energy Resources chart; SEPA, EIA
Distributed Energy Resources
Enabling customer alternatives:
Facilitated by Smart Grid, net metering
policies, and subsidies, more and more
distributed energy resources are being
deployed
There are approximately 71,000 MWs
of CHP on the grid today
As of 2012, there were 3.5 GWs of net
metered projects on the grid; 80% were
in five states (Source: SEPA)
Microgrids are emerging as a viable option for
commercial customers and are a substitute for
generation, transmission, and distribution
Drivers for microgrid implementations
include increased reliability, economics,
and “green” alternatives
As storage technologies mature, they will
enable more customer-side resources
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Industry Trends
Several drivers are contributing to the current
interest in microgrids—reliability, RPS, grid security,
and economics
Reliability has been the primary driver of
demand, as it enables consumers to be self-
sufficient during times of power disruption—
storms highlight the issue
Smaller scale renewables can be utilized
Certain customers are attracted by economics
Fuel choices are increasing (e.g., natural gas, solar,
biomass); however, economic viability varies by
region
Studies show that microgrids are economically
viable for commercial and industrial customers
ranging in size from 4–40 MWs and universities
ranging from 2–40 MWs
Example:
All 23 of the California State System
campuses have some form of a microgrid; four
plan to upgrade
Definition: A group of interconnected loads and distributed energy resources within
clearly defined electrical boundaries that acts as a single-controllable entity with
respect to the main grid
9
Microgrids: An Overview
Description
A microgrid can connect and disconnect from the
grid to enable it to operate in grid-connected or
island mode. In island mode, the microgrid neither
draws power from the main grid nor supplies power
to it
Microgrid configurations are based on the number of
end users, real estate parcels to be served,
ownership of real estate parcels, and whether
infrastructure crosses a public street
Consumer base has traditionally been university
campuses, military bases, and municipalities for
mission critical needs
According to Navigant Research, as of April 2013,
North America has 1,459 MWs of microgrid capacity
online and more than 1,122 MWs in the
planned/under development or proposed phase
By 2020, capacity is projected to be 5,973
MWs
The institutional/campus segment is the largest
sector for microgrids globally
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
10
Distributed Generation
Observations
Net metered systems are examined to understand trends in distributed
generation
Driven by strong deployment in a few states, the number of net
metered customers continues to grow steadily
In 2011, the residential sector accounted for 90% of net metered
customers and 39% of net metered capacity; commercial customers
accounted for 9% of net metered customers and 44% of net metered
capacity
California is a clear leader in net metered customers and capacity
In 2011, Arizona ranked first in the sale of excess energy, and
Massachusetts ranked a surprising second
Rank State
Capacity (MW)
% of U.S.
Total
1 California 1,192 44%
2 New Jersey 442 17%
3 Pennsylvania 146 5%
4 Colorado 137 5%
5 Massachusetts 79 3%
State Ranking by Net Metered Capacity, 2011
Rank State
Customers
% of U.S.
Total
1 California 115,921 52%
2 New Jersey 12,959 6%
3 Colorado 12,654 6%
4 Arizona 11,450 5%
5 Hawaii 9,822 4%
State Ranking by Net Metered Customers, 2011
Rank State
Sale of Excess
Energy (MWh)
Percent of
U.S. Total
1 Arizona 118,983 47%
2 Massachusetts 58,394 23%
3 Nevada 15,350 6%
4 California 8,713 3%
5 Hawaii 7,402 3%
State Ranking by Sale of Excess Energy, 2011
0
50,000
100,000
150,000
200,000
250,000
2007 2008 2009 2010 2011
Ne
t M
ete
red
Cu
sto
me
rs
Industrial
Commercial
Residential
Net Metered Customers by Customer Class, 2007–2011
3-Year CAGR: 48%
5-Year CAGR: 46%
Note: Net metering data represents systems with nameplate capacity of 2 MWs or less.
Sources: EIA, ScottMadden analysis
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11
Implications for Utility Business Models
Disaggregated Supply and Demand
High penetration of distributed generation (combined heat & power and renewables)
Emergence of microgrids
Customers driving the “discussion”
Traditional Vertically Integrated Utility
Focus continues on central station generation, long-haul transmission
Technology initiatives focus on improving the existing integrated system
May see reduced loads due to energy efficiency and distributed resources but customers remain
Utilities driving the “discussion”
High Low
Drivers
High cost/kWh, favorable policies
Customer requirements (cost, reliability, “green-ness”)
Regulatory “enticements” (subsidies for certain resources, net metering)
Controlled centrally,
one integrated system
Control is dispersed, many
systems loosely tied
Increasing change and complexity
Not all utilities will face the same pressures in the same timeframe;
they will focus on different types of infrastructure in the near term.
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Contributing Factors
ScottMadden believes that several factors will contribute to a region’s attractiveness for
alternative supply sources:
Electricity rates
Net metering and interconnection policies
Prevalence of and policy toward solar and third-party providers
RPS carve outs for solar
Where Will Utilities be Most Impacted?
12
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Average Retail Electricity Prices (2012)
Contributing Factor:
13
6.5 cents to 8 cents
8.01 cents to 9.5 cents
9.51 cents to 12 cents
12.01 cents to 14 cents
14.01 cents to 35 cents
DC
Source: U.S. Chamber of Commerce, Institute for 21st Century Energy
2012 Average Retail Electricity Prices (Cents/KWh)
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Net Metering
Contributing Factor:
14
43 jurisdictions have
net metering rules,
which allow the sale
to the local
distribution utility of
excess distributed
generation output
The ability to
monetize this extra
power provides
additional financial
benefits to distributed
generation
As shown, the Mid-
Atlantic, California,
and parts of the
Mountain West have
more distributed
resource-friendly
policies
Note: *Relative rankings are based upon the following factors: system capacity (accommodates broader and larger DG capacities); higher total program limits (caps); lenient
“rollover” provisions that allow more excess electricity (vs. consumption) to be rolled over to future months and credited then; less onerous-metering requirements;
customer ownership of renewable energy credits (customer ownership is better); range of eligible technologies (broader is better); customer class eligibility (less restrictive
is better); permissible aggregation (aggregation is better); community-shared renewables (shared is better); additional fees (safe harbor protecting against fees is better);
types of utilities applicable (all types are better); third-party treatment (third-party PPA permission is better).
Source: Interstate Renewable Energy Council, “Facing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures,” November 2012
A
B
C
D
F
NA
Relative Ranking*
Better
State Grading of Net Metering Policy
Encouraging Customer-Sited Generation (as of Late 2012)
Puerto Rico
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
15
Prospects for Distributed Resources
0–2
3–5
6–8
9–11
12–14
Map Score
Better
Sources: ScottMadden analysis; inputs from DSIRE, IREC, American Council for An Energy-Efficient Economy;
U.S. Energy information Administration; and other sources
Where jurisdictions are “better” on more factors (e.g., easier interconnection; third-party solar PPAs
permitted; net metering; lower differential between utility-supplied power and installed solar PV), they
scored higher on the map
The states that score highest are most likely to a significant influx of distributed resources
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
What Does This Mean?
What Should Utilities Do?
Area of
Concern Implications For Consideration
Strategy The utility will face
competition and
possibly loss of
revenue
What business(es) should we be in?
Is there an opportunity to become the “single
point of contact” to the customer?
Financial Customers are using
less electricity or self-
supplying
Does decoupling make sense?
How should we address net metering?
Is there a need for alternative rate structures?
Real Time
Operations
Operators will be
challenged to see and
operate new resources
How should visualization in operations be
expanded?
In an RTO environment, who works with the
alternative providers? In a non-RTO
environment?
System
Planning
Traditional utilities plan
for central station
generation, long-haul
transmission
How do our models account for non-traditional
resources?
How should we address spatial and temporal
questions?
Stakeholder
Management
Customers may have
various new “energy
providers”
How do we work with all our new and existing
stakeholders?
What is our strategy?
19
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Its Complicated…
System planning will become more complicated
Regional differences will become more acute
Transmission planning may need to consider the availability of different types of resources
Load forecasting may change or need to become more granular
Location and timing will matter more and more as the system is assessed
Operation of the grid requires more sophisticated visualization and tools
Visualization of myriad resources will become important in areas of high penetration
Utilities, RTOs, and ISOs will need to consider these resources as they manage the real-time
environment
Transmission owners and operators will have to work with many more parties to manage
the grid
The shifting business model has opened markets to new participants
What Do These Changes Mean for Transmission?
17
Transmission owners and operators are being pulled in two directions:
integrate utility-scale renewables and accommodate distributed resources
Copyright © 2013 by ScottMadden, Inc. All rights reserved. Copyright © 2013 by ScottMadden, Inc. All rights reserved.
In Summary
We are living in a world of:
Declining demand growth
A shift away from coal
A move toward renewables
Increasingly distributed resources
We need to think hard about:
Meeting the reliability needs of the system with new participants and resources
Integrating both large and small scale resources to ensure reliability
18
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Cristin M. Lyons
Partner
ScottMadden, Inc.
2626 Glenwood Avenue
Suite 480
Raleigh, NC 27608
O: 919-781-4191 M: 919-247-1031
19