PJM©2014
EPA’s Clean Power Plan Proposal
Review of PJM Analyses Preliminary Results
www.pjm.com
Paul Sotkiewicz
Chief Economist
Muhsin Abdur-Rahman
Senior Engineer, Market Simulation
Members Committee Webinar
November 17, 2014
PJM©2014 2
PJM’s Role
PJM has been tasked with assessing potential impacts of the EPA Clean Power Plan Proposal on PJM states; however, as an RTO, PJM:
• Maintains neutrality on carbon policy
• Acts as an independent source of information on carbon policy implications
• Does not forecast market outcomes but rather models outcomes based on a
specific set of assumptions
www.pjm.com
PJM©2014 3
Overview of PJM Analyses
Analysis Emissions Target Utilized Regional Economic Modeling Mass target using June 2 EPA guidance for
conversion from rate based targets Mass target using November 6 EPA guidance for conversion from rate based Rate based target
State by State Economic Modeling
Mass target using November 6 EPA guidance for mass conversion from rate based targets
Reliability Analysis (to be completed) Power flow analyses modeling retirement of “at-risk” units identified from the regional economic modeling
www.pjm.com
PJM©2014
Section I: Modeling Approach
www.pjm.com
PJM©2014 5
Overview of Regional Compliance Modeling Approach
Using Mass-Based Emissions Targets
Used PROMOD for simulation modeling • PROMOD models hourly security constrained economic generation commitment and dispatch • Assumptions consistent with 2014 RTEP Market Efficiency Analysis • 14 scenarios adjusted new generation, energy efficiency, renewable energy, nuclear retirements,
and gas price assumptions. (PJM is not modeling each EPA Building Block independently)
Convert to mass-based emissions targets • Converted rate-based emissions targets to mass-based targets for the states / portion of states
within PJM; aggregated to represent the emissions target for PJM region • Input CO2 price to re-dispatch generation until emissions target achieved
Assume new gas units are regulated under 111(b), not 111(d) • Emissions from new gas units are not counted toward the emissions target
www.pjm.com
PJM©2014 6
Overview of Regional Compliance Modeling Approach
Using Rate-Based Emissions Targets
Used PROMOD for simulation modeling • PROMOD models hourly security constrained economic generation commitment and dispatch • Assumptions consistent with 2014 RTEP Market Efficiency Analysis • 14 scenarios adjusted new generation, energy efficiency, renewable energy, nuclear retirements, and
gas price assumptions. (PJM is not modeling each EPA Building Block independently)
Used rate-based emissions targets
• Calculate performance credit and penalty for each 111(d) covered source based on unit emissions rate and EPA provided benchmark target rate
• Model CO2 performance credit / penalty as a bid adder/decrement to the simulation until emissions rate target is achieved
Assume new gas units are regulated under 111(b), not 111(d) • Emissions from new gas units are not counted toward the emissions target
www.pjm.com
PJM©2014 7
Existing Source vs. New Source Performance Standards Proposals
111(d) 111(b)
Relevant dates Interim compliance 2020-2029. Final compliance
2030 and beyond
Scheduled promulgation January 2015
Units impacted Existing and Under-construction: ST Coal,
NGCC, ST Gas/Oil, High-utilization CT Gas/Oil,
IGCC and some CHP
New Gas-Fired CT, fossil-fired utility boilers and
IGCC units
Standard State-based compliance with a CO2 emissions
rate target or converted to a mass-based target
Federal compliance (NSPS):
• Large CT - 1,000 lbs/MWh
• Steam Turbine and IGCC:
• 1,100 lbs/MWh (12 mos.)
• 1,000-1,050 lbs/MWh (84 mos.)
Impact on units Reduced net energy market revenues
Potentially CO2 allowance price or restrictions
on unit operation
New gas/dual fuel CCs meet limit
New coal units require partial carbon capture and
sequestration or similar to meet limits
www.pjm.com
PJM©2014 8
Calculating Costs
www.pjm.com
• Production cost – resulting incremental variable cost due to re-dispatch from one
higher emitting resource to another lower emitting resource until the mass-based
emissions target is achieved
• Carbon Price – Price on emissions for 111(d) covered sources that is derived from
re-dispatching lower variable cost/ higher emitting sources to higher variable cost/lower
emitting sources
• Load energy payment – energy costs borne by load; Through simulation
implementing a CO2 price will increase the marginal cost of energy, thus increasing load
energy payments (congestion and marginal losses may also change but were not
separately identified)
Incremental production cost is a 111(d) compliance cost
PJM©2014 9
Calculating Costs
• Capital cost – estimated total new investment associated with addition of new
generation (PJM Interconnection Queue and State based RPS) and Energy Efficiency
– Based on generic overnight capital costs in 2012 dollars
• Transmission cost – Based on transmission upgrades made necessary as a result of generation retirements
www.pjm.com
Incremental investments in new generation, energy efficiency programs and transmission upgrades also may be 111(d)
compliance costs
PJM©2014 10
Model Years
• Clean Power Plan "Glide Path" – interim goal allows averaging emissions compliance from 2020-2029
• PROMOD is not capable of dynamically modeling a “glidepath”
• Similar to EPA’s modeling approach, PJM modeled individual years
• OPSI requested PJM analyze three years: 2020, 2025 and 2029
• PJM’s modeling, therefore, should not be interpreted to suggest that
compliance must be achieved by 2020, 2025 or 2029.
www.pjm.com
PJM©2014
Section II: Mass-based and Emission Rate Targets
www.pjm.com
PJM©2014 12
Historic Trends and Policies Affecting CO2 Mass Reduction Pre-2020
MATS compliance has led to many announced coal steam retirements by 2016 and is independent of 111(d) policy
Sustained low natural gas prices combined with sluggish load growth exert economic pressure on less efficient coal units to retire independent of 111(d) policy
PJM announced deactivation’s mitigate impacts of 2020 emissions target and provide some margin for output increases consistent with load growth
www.pjm.com
PJM©2014 13
Impact of Retirements and New Resources Relative to 2012 Baseline:
Mass Basis
www.pjm.com
2012 CO2 Emissions (Millions of Short Tons)
2012 NGCC ICAP Versus 2020 Modeled ICAP (MW)
442 392
200
250
300
350
400
450
500
111(d) Covered Units 111(d) Covered UnitsLess: Announced Generator
Deactivations
32,755
13,621
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2012 2020
111(b)111(d)
26,895
PJM©2014 14
Target Mass Calculation
EPA Eq.1 - Implied in June 2 TSD Mass Target =State Rate x (2012 Covered Sources + Renewables + Nuclear,ar-new + Incremental EE)
• State with higher EE and RPS targets has higher mass limit
• Constant mass target as EE and RPS are only variable to change as rate declines
EPA Eq. 2 - Implied in November 6 TSD Mass Target = State Rate x ( 2012 Covered Source + 2012 Renewable + Nuclear,ar-new + Net New Load growth )
• No crediting for new renewables and incremental EE
• Declining mass target over interim compliance period
www.pjm.com
PJM©2014 15
PJM Historic Emissions vs 111(d) Mass-Based Limits
June 2nd TSD
www.pjm.com
534 519 482
434 415 414 415 415 415
200
250
300
350
400
450
500
550
600
2005 2008 2011 2013 Interim Goal(2020 - 2029
average)
Modeled2020
Modeled2025
Modeled2029
Final Goal(2030 andthereafter)
CO2 Historic Emissions
111(d) CO2 Emission Limit
CO
2 Sho
rt T
ons
(Mill
ions
)
PJM©2014 16
PJM Region Carbon Emissions Target Mass Limits:
November 6 Guidance
www.pjm.com
442 402 398 394 389 384 377 373 368 364 358
2012 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Tons (Short Millions)
PJM©2014 17
State-Wide CO2 Mass Limits (Nov. 6 EPA Guidance)
PA, OH and WV
www.pjm.com
2012 Adjusted = 2012 Total CO2 Emissions Less: 2012 Emissions From PJM Announced Unit Deactivations
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Pennsylvania Ohio West Virginia
2012 Actual
2012 Adjusted
2020 Goal
Interim Goal
Final Goal
PJM©2014 18
State-Wide CO2 Mass Limits (Nov. 6 EPA Guidance)
IL*, VA, IN*, MD, KY*, NJ, DE and NC*
www.pjm.com
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Illinois Virginia Indiana Maryland Kentucky New Jersey Delaware NorthCarolina
2012 Actual2012 Adjusted2020 GoalInterim GoalFinal Goal
*Limit Calculated based upon generation MWh’s and associated CO2 tons serving load within PJM Balancing authority
2012 Adjusted = 2012 Total CO2 Emissions Less: 2012 Emissions From PJM Announced Unit Deactivations
PJM©2014 19
PJM Region Carbon Emissions Target Rates
www.pjm.com
1,721
1,417 1,406 1,393 1,379 1,363 1,344 1,324 1,305 1,283 1,261
500
700
900
1,100
1,300
1,500
1,700
1,900
2012 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
lb per MWh
PJM©2014
Section III: Scenario Descriptions
www.pjm.com
PJM©2014 21
Planning Model Resource Capacity
• The PJM Planning model already consists of a significant amount of renewables due to the inclusion of interconnection queue projects with an Interconnection Service Agreement and or Facilities Study agreement
– Commercial Likelihood of ISA projects > 70% – Commercial Likelihood of Completion for FSA Projects > 50%
• Resources from the interconnection queue are modeled at their full energy resource value
– Most resources have an in-service date prior to the start of the interim compliance period
• Base planning model meets PJM IRM Target in all years
www.pjm.com
PJM©2014 22
OPSI Compliance Alternatives Evaluated
www.pjm.com
OPSI Scenarios
Fossil & Nuclear Resources
Renewables Energy Efficiency (EE)
OPSI 2a Existing and Planned Resources (ISA and FSA only) PJM RPS Requirement 100% EPA EE
OPSI 2b.1 Existing and Planned Resources (Non-Renewable: ISA and FSA only,
*Wind/Solar – FSA, ISA, SIS and FEAS
OPSI 2b.2 Existing and Planned Resources (ISA and FSA only)
PJM RPS Requirement
50% EPA EE Goals
OPSI 2b.3 Existing and Planned Resources (ISA and FSA only) Increase Natural Gas Price by 50%
100% EPA EE OPSI 2b.4 Existing and Planned Resources (ISA and FSA only)
50 % Reduction in Nuclear Capacity
OPSI 2c Same as OPSI 2a – but state-by-state compliance
PJM©2014 23
PJM Compliance Alternatives Evaluated
www.pjm.com
Fossil Resources Nuclear Renewables Energy Efficiency (EE)
PJM 1 Existing and Planned Resources (ISA and FSA only) EPA Expected
Renewables 50% EPA EE
PJM 2 Existing and Planned Resources (ISA and FSA only) Adjust planned natural gas capacity based on historic commercial probability
Existing Wind & Solar 17/18 BRA Cleared
PJM 3 Existing Wind & Solar 100% EPA EE
PJM 4 Existing and Planned Resources (ISA and FSA only)
Trend Wind/Solar and Energy Efficiency Based on historic growth Rates: Wind and Solar – IS, UC Energy Efficiency - PJM BRA Cleared MW
PJM 5 Existing and Planned Resources (ISA and FSA only) Adjust planned natural gas capacity based on historic commercial probability
PJM 6 Existing and Planned Resources (ISA and FSA only) Adjust planned natural gas capacity based on historic commercial probability 10% Nuclear Retirement
PJM 7 Same as PJM 5 except Reduce new NGCC capacity to not exceed IRM Target
PJM 8 Same as PJM 7 with Henry Hub gas price set to 50% higher
PJM 9 Same as PJM 4 Scenario – but simulated for state-by-state compliance
PJM 10 Same as PJM 4 Scenario – but simulated to achieve regional mass target
PJM©2014
Section IV: Regional Compliance Mass Target Emissions
and Price Comparisons
www.pjm.com
PJM©2014 25
CO2 Emissions With no Carbon Price
www.pjm.com
Tons (Millions)
0
100
200
300
400
500
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
2020
2025
2029
PJM©2014 26
Implied Carbon (CO2) Price in 2020, 2025 and 2029
Comparison of June 2 EPA guidance versus Nov 6 guidance
www.pjm.com
$ Per Ton
$0
$20
$40
$60
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
EPA Eq. 1
EPA Eq. 2
$0
$20
$40
$60
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
2025
$0
$20
$40
$60
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
2020
2029
PJM©2014 27
2020 & 2025 Load Energy Payment
Comparison of June 2 EPA guidance versus Nov 6 guidance
www.pjm.com
$ Billions
$0
$20
$40
$60
$80
OPSI2a
OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
PJM1
PJM2
PJM3
PJM4
PJM5
PJM6
PJM7
PJM8
111(d) BASE
EPA Eq. 2
$0
$20
$40
$60
$80
$100
OPSI2a
OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
PJM 1PJM 2PJM 3PJM 4PJM 5PJM 6PJM 7PJM 8
111(d) BASE
EPA Eq. 1 2020
2025
$0
$20
$40
$60
$80
OPSI2a
OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
PJM1
PJM2
PJM3
PJM4
PJM5
PJM6
PJM7
PJM8
111(d) BASE
$0
$20
$40
$60
$80
$100
OPSI2a
OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
PJM1
PJM2
PJM3
PJM4
PJM5
PJM6
PJM7
PJM8
111(d) BASE
PJM©2014 28
2029 Load Energy Payment
Comparison of June 2nd EPA guidance versus Nov 6th guidance
www.pjm.com
$ Billions EPA Eq. 2
EPA Eq. 1
$0
$20
$40
$60
$80
$100
$120
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
111(d) BASE
$0
$20
$40
$60
$80
$100
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
111(d) BASE
PJM©2014 29
2020 & 2025 PJM Average Locational Marginal Price
Comparison of June 2 EPA guidance versus Nov 6 guidance
www.pjm.com
$ Per MWh
$0
$20
$40
$60
$80
$100 111(d) Base
$0$20$40$60$80
$100$120
111(d) Base
2020
2025
$0
$20
$40
$60
$80
$100111(d) BASE
$0
$20
$40
$60
$80
$100111(d) BASE
PJM©2014 30
2029 PJM Average Locational Marginal Price
Comparison of June 2 EPA guidance versus Nov 6 guidance
www.pjm.com
$0
$20
$40
$60
$80
$100
$120
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
111(d) BaseEPA Eq. 2
$0
$20
$40
$60
$80
$100
$120
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
111(d) BASEEPA Eq. 1
PJM©2014 31
Variable Compliance Costs (Implied CO2 Allowance Value Not Included)
∆ in Fuel and Variable O&M Costs due to 111(d) Policy
www.pjm.com
$0.0
$1.0
$2.0
$3.0
$4.0
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
2020 2025 2029
$ Billions EPA Eq. 2
$0.0
$0.5
$1.0
$1.5
$2.0
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
2020 2025 2029EPA Eq. 1
PJM©2014
Section V: State Versus Regional Compliance
Notes:
Unless otherwise noted All results are based on November 6th guidance, EPA Equation #2
www.pjm.com
PJM©2014 33
Regional vs. State Compliance Modeling
Regional Approach • A single price on CO2 is applied to all carbon
emitting resources across PJM.
• This in turn raises the costs of carbon intensive
resources, impacting dispatch, which is done
on a lowest cost basis.
• The approach results in satisfying the emissions
target with the least cost mix of resources to
meet PJM load requirements.
State by State Approach • Each state has an individually determined
price on CO2 applied to the carbon emitting
resources located within it to ensure satisfaction
of emissions target.
• Those prices are applied, and PJM dispatches
the resources across the region to determine
the least cost mix to meet the total PJM load
requirements.
• The approach results in each state satisfying its
emissions target and the resource mix being the
least-cost combination, as influenced by disparate
CO2 prices, to meet the PJM load requirements.
www.pjm.com
PJM©2014 34
Description of Scenarios Evaluated For State Analysis
www.pjm.com
Driver OPSI 2a PJM 4 Renewables 81.9 GWH 50.2 GWH New NGCC 19 GW 19 GW
Nuclear 33.4 GW 33.4 GW Gas Price Economic Forecast Economic Forecast
Energy Efficiency 23.3 GWh 9.2 GWh
States only evaluated for compliance with 2020 interim target
PJM©2014 35
Carbon Price under State Compliance Versus Regional Compliance
For year 2020
www.pjm.com
$ Per Ton
340
350
360
370
380
390
400
410
PJM 4 OPSI 2a
State Compliance
Regional Compliance
0.00
2.00
4.00
6.00
8.00
10.00
12.00
PJM 4 OPSI 2a
State Compliance
Regional Compliance
Tons (Millions)
PJM©2014 36
Individual State Implied Carbon (CO2) Prices
For year 2020
www.pjm.com
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
DE IL IN KY MD MI NC NJ OH PA VA WV
PJM 4OPSI 2a
$ Per Ton
PJM©2014 37
PJM Total Load Payment
State Versus Regional Compliance For Year 2020
www.pjm.com
$ Billions
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
PJM 4 OPSI 2a
State Compliance Regional Compliance
PJM©2014 38
Implied CO2 Allowance Cost Comparison and State Energy Cost
Impact of Individual State Compliance Versus Regional Compliance For 2020
www.pjm.com
CO2 Allowance Implied Value $ Millions Change in Energy Costs to Load $Millions (Exclude Congestion Component)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
DE DC IL IN KY MD MI NJ NC OH PA TN VA WV
OPSI 2a Scenario
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
IL IN OH WV
OPSI 2a Scenario
Regional Compliance Case did not result in redispatch – Consequently, there is no additional compliance costs
PJM©2014 39
Implied CO2 Allowance Cost Comparison and State Energy Cost
Impact of Individual State Compliance Versus Regional Compliance For 2020
www.pjm.com
CO2 Allowance Implied Value $ Millions Change in Energy Costs to Load $Millions (Exclude Congestion Component)
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
DE DC IL IN KY MD MI NJ NC OH PA TN VA WV
PJM 4 Scenario
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
DE IL IN KY MD NC NJ OH PA VA WV
State Compliance
Regional Compliance
PJM 4 Scenario
PJM©2014 40
Section VI: Rate Based Versus Mass-Based Compliance
Notes:
Rate Based Compliance Impacts were measured using the PJM #4 Scenario for 2025 and 2029
2025 CO2 rate target is equivalent to the interim (average) target for 2020 through 2029
All results are based on November 6th guidance, EPA Equation #2
www.pjm.com
PJM©2014 41
Implementation of Rate-Based Method
• Individual Resource Price adder to be applied to all covered units
– Unit Price Adder = Heat Rate x (Emissions Rate – Target Rate) x CO2 price – Emissions Rate < Target Rate yields production credit – Emissions Rate > Target Rate yields transfer payment
• Unit’s bid price reflects either production credit or penalty as a function of
performance
System CO2 Target Rate = lbs of CO2 from affected Sources
Nuclear, ar + Renewables + Incremental EE + Affected Source MWh’s
www.pjm.com
PJM©2014 42
PJM Locational Marginal Price: PJM 4
Rate Based (Performance) Versus Mass-Based Regional Compliance
www.pjm.com
$ Per MWh
$0
$10
$20
$30
$40
$50
$60
$70
$80
2025 2029
Rate Based
Mass Based
PJM©2014 43
PJM Implied Carbon (CO2) Price: PJM 4
Under Rate Based (Performance) Versus Mass Based Compliance
www.pjm.com
$0
$10
$20
$30
$40
$50
$60
2025 2029
Rate Based CO2 Price
Mass Based CO2 Price
PJM©2014 44
Total PJM Load Payment: PJM 4
Rate Based (Performance) Versus Mass-based Compliance
www.pjm.com
$ Billions
$30
$35
$40
$45
$50
$55
$60
$65
$70
2025 2029
Rate BasedMass Based
PJM©2014 45
Total PJM Production Costs Comparison: PJM 4
Rate Based (Performance) Standard Versus Mass Based Standard
www.pjm.com
$20
$22
$24
$26
$28
$30
$32
$34
$36
2025 2029
Rate Based
Mass Based
$ Billions
PJM©2014 46
Total PJM CO2 Simulated Emissions: PJM 4
Rate Based "Performance" Versus Mass Based Standard
www.pjm.com
320
330
340
350
360
370
380
2025 2029
Rate
Mass
CO2 Tons (Millions)
PJM©2014 47
Section VII: Economic Analysis of Steam Turbine Retirement
Risk
Note:
units that have already announced deactivation are not included in this analysis; the analysis focused on
“incremental” retirement risk
www.pjm.com
PJM©2014 48
Economic Retirement Risk Analysis Key Variables
• Technology type and Avoidable Cost Rates (ACR) Determines annual avoidable costs used in calculating Market Seller Offer Caps in RPM
• Net Energy Market Revenues are based on simulation and exclude ancillary service revenue
• In the RPM Capacity Market, the price of capacity, and the quantity of capacity resources are determined within the auction framework
• Net Cost of New Entry (Combustion Turbine) is the benchmark price at which resource adequacy is achieved at the Reliability Requirement.
– For a regulated utility, this would be a reasonable benchmark for making the decision to retain
an existing unit, or retiring the unit and building a natural gas CT
www.pjm.com
PJM©2014 49
Economic Retirement Risk Criteria
> 1.5 Net CONE Net CONE – 1.5 Net CONE
½ Net CONE – Net CONE
< ½ Net CONE
Financial Viability Above max RPM LDA
price
Above the cost of new
entry gas CT
Would clear before new
entry gas CT
Likely to clear
Assuming no additional
capital costs
Risk “Very High” or “Most at
Risk” “High”
“at Risk” or “at some
Risk” “Low”
www.pjm.com
Economic Risks is assessed based on Energy Market Revenues Net of Fixed (ACR) and Variable Operating Costs benchmarked against the
following criteria:
PJM©2014 50
MAAC Region Steam Turbine
2020 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
01,0002,0003,0004,0005,0006,0007,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone1/2 Net Cone - Net ConeNet Cone - 1.5 Net Cone
MW
-1,000
0
1,000
2,000
3,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone
1/2 Net Cone - Net Cone
> 1.5 Net Cone
EPA Eq. 2
EPA Eq. 1
PJM©2014 51
Rest of RTO Region Steam Turbine
2020 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
0
5,000
10,000
15,000
20,000
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone
1/2 Net Cone - Net Cone
Net Cone - 1.5 Net Cone
MW
0
2,000
4,000
6,000
8,000
10,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone
1/2 Net Cone - Net Cone
> 1.5 Net Cone
EPA Eq. 1
EPA Eq. 2
PJM©2014 52
MAAC Region Steam Turbine
2025 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
0
1,000
2,000
3,000
4,000
5,000
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone1/2 Net Cone - Net ConeNet Cone - 1.5 Net Cone
MW
0
1,000
2,000
3,000
4,000
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone1/2 Net Cone - Net Cone> 1.5 Net Cone
EPA Eq. 2
EPA Eq. 1
PJM©2014 53
Rest of RTO Region Steam Turbine
2025 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
0
5,000
10,000
15,000
20,000
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone1/2 Net Cone - Net ConeNet Cone - 1.5 Net Cone
MW
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
OPSI 2a OPSI 2b.1OPSI 2b.2OPSI 2b.3OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone
1/2 Net Cone - Net Cone
> 1.5 Net Cone
EPA Eq. 2
EPA Eq. 1
PJM©2014 54
MAAC Region Steam Turbine
2029 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
0
1,000
2,000
3,000
4,000
5,000
6,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone1/2 Net Cone - Net ConeNet Cone - 1.5 Net Cone
MW
0
500
1,000
1,500
2,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone1/2 Net Cone - Net Cone> 1.5 Net Cone
EPA Eq. 2
EPA Eq. 1
PJM©2014 55
Rest of RTO Region Steam Turbine
2029 Regional Mass Compliance Related Retirement Risk Analysis
www.pjm.com
0
10,000
20,000
30,000
40,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
> 1.5 Net Cone
1/2 Net Cone - Net Cone
Net Cone - 1.5 Net Cone
MW
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Net Cone - 1.5 Net Cone
1/2 Net Cone - Net Cone
> 1.5 Net Cone
EPA Eq. 2
EPA Eq. 1
PJM©2014 56
State By State Versus Regional Mass Based Compliance
Steam Turbine Units Requiring > ½ Net Cone to cover Fixed Costs
Evaluated in 2020
www.pjm.com
1,263 1,306
6,939
17,732
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
OPSI 2a Regional OPSI 2a State
Rest of RTOMAAC
MW
OPSI 2a (Regional) – High Renewables and High EE Case does not require re-dispatch of resources consequently there are no new retirements due to regional policy implementation
PJM©2014 57
State By State Versus Regional Mass Based Compliance
Steam Turbine Units Requiring > ½ Net Cone to cover Fixed Costs
Evaluated in 2020
www.pjm.com
MW
1,845 3,182
6,040
16,723
0
5,000
10,000
15,000
20,000
25,000
PJM 4 Regional PJM 4 State
Rest of RTOMAAC
PJM©2014 58
Rate Versus Mass Based Compliance (PJM 4)
Steam Turbine Units Requiring > ½ Net Cone to Cover Fixed Costs
www.pjm.com
MW MW 2025 2029
3,410 2,196
7,899 11,582
0
2000
4000
6000
8000
10000
12000
14000
16000
PJM 4 Mass PJM 4 Rate
Rest of RTO
MAAC
2,992 1,554
18,362 20,057
0
5000
10000
15000
20000
25000
PJM 4 Mass PJM 4 Rate
Rest of RTO
MAAC
PJM©2014 59
Section VIII: Natural Gas Combine Cycle Operational Analysis
www.pjm.com
PJM©2014 60
PJM Historic Capacity Factors vs Gas Price
www.pjm.com
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
15%
25%
35%
45%
55%
65%
75%
85%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Hen
ry H
ub
Gas
Pri
ce (
$/m
mB
tu)
Cap
acit
y F
acto
r (%
)
Coal Steam Capacity Factor
Henry Hub Gas Price ($/MMBtu)
Natural Gas Combined Cycle
PJM©2014 61
2020 NGCC Capacity Factors by Scenario
Impact of 111(d) Policy
www.pjm.com
0%
10%
20%
30%
40%
50%
60%
70%
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
2020
2025
2029
OPSI 2a OPSI 2b.1 OPSI 2b.2 OPSI 2b.3 OPSI 2b.4 PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
Policy Base
Capacity Factor (%)
PJM©2014 62
Capacity Factor Impacts Policy
CF (%) Ratio of Resources under 111(b) Versus Under 111(d)
www.pjm.com
4.56
1.98 1.60
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
OPSI 2a OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8 Average Average(no OPSI
2b.3)
Ratio with 111(d) Policy
Ratio Without 111(d) Policy
PJM©2014 63
NGCC Average Revenue Requirement 2020,2025 & 2029
With and Without 111(d) Policy
www.pjm.com
-$350
-$300
-$250
-$200
-$150
-$100
-$50
$0
$50
$100
111(b) NGCC
111(d) NGCC-$200
-$150
-$100
-$50
$0
$50
$100
111(b) NGCC
111(d) NGCC
111(d) Policy No Policy $/MW-Day
PJM©2014 64
Section IX: Appendix
www.pjm.com
PJM©2014 65
Reliability Analysis
• PJM expects to have initiated the reliability analysis and have preliminary results for some of
the reliability criteria tests by the end of November
– Using the mass based and rate based economic modeling of regional compliance, identify potential retirements
– Through power flow analysis using the 2022 RTEP case, identify potential reliability criteria violations that would result due to the potential retirements
– Estimate potential transmission infrastructure costs based: • Generally, on the level of transmission upgrades required for the recent Mercury Air
Toxics Standard (MATS) related generation retirements, and • Specifically, on the average cost to upgrade identified limiting transmission facilities
– Reliability criteria testing will continue beyond the end of November and be reviewed with stakeholders at the TEAC
www.pjm.com
Actual transmission costs may vary (significantly) depending on whether upgrades to
existing facilities or new green field transmission projects are needed.
PJM©2014 66
Generic Capital Investment Costs By Scenario
$2012 Total Overnight Construction Costs (2020-2029)
www.pjm.com
$-
$20
$40
$60
$80
$100
$120
PlanningOPSI 2a OPSI2b.1
OPSI2b.2
OPSI2b.3
OPSI2b.4
OPSI 2c PJM 1 PJM 2 PJM 3 PJM 4 PJM 5 PJM 6 PJM 7 PJM 8
EE
NGCC
Solar
Wind
$Billions
These costs are generic total build costs and should not be misinterpreted as resulting from compliance with the
Clean Power Plan. These costs may be incurred before, during or after the interim compliance period for 111(d).
PJM©2014 67
Sources for Generic Capital Cost Assumptions
• Lazard’s Levelized Cost of Energy Analysis version 7.0 (referred to as the
Lazard Report)
• United States Energy Information Administration Updated Capital Cost
Estimates for Utility Scale Electricity Generating Plants, April 2013 (referred to
as the EIA report)
• National Renewable Energy Laboratory Distributed Generation Energy
Technology Capital Costs (referred to as the NREL report)
www.pjm.com
