S E P T E M B E R 2 9 , 2 0 1 4 | C O N C O R D , N H

Eric JohnsonD I R E C T O R , E X T E R N A L A F F A I R S

New Hampshire Energy Summit

Lessons Learned from Winter 2014 and How the ISO Is Preparing for Winter 2015

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Dramatic Changes in the Energy Mix

Nuclear Oil Coal Natural Gas Hydro and Other

Renewables

Pumped Storage

31%

22%18%

15% 13%

2%

33%

<1%6%

46%

14%

1%

2000 2013

Percent of Total Electric Energy Production by Fuel Type (2000 vs. 2013)

Source: ISO New England Net Energy and Peak Load by Source

Region Has Not Developed Gas Infrastructure to Keep Pace With Growth of Gas-fired Generation

3

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1997 1999 2001 2003 2005 2007 2009 2011 2013

Natural Gas

Oil

Biomass

Fuel Cell

Hydro

Solar

Wind

Nuclear uprate

Cumulative New Generating Capacity in New England

Region Is Losing Non-Gas Resources

• Salem Harbor Station (749 MW)– 4 units (coal & oil)

• Vermont Yankee Station (604 MW)– 1 unit (nuclear)

• Norwalk Harbor Station (342 MW)– 3 units (oil)

• Brayton Point Station (1,535 MW)– 4 units (coal & oil)

• Additional retirements are looming

Major Retirement Requests:

4

5

Proposed Generation Is Primarily Gas and Wind

MA 480 MW

ME3,080MW

NH65

MW

VT30

MW

Developers propose >5 GW of gas-fired generation and >3 GW wind; wind is mostly onshore in northern New England and offshore in southern New England

Source: ISO Generator Interconnection Queue (September 2014)FERC Jurisdictional Proposals Only

ME3,080MW

NH65

MW

VT30

MW

MA 470 MW

Natural gas55%

Wind44%

Other 1%

Additional transmission infrastructure will be required

All Proposed Generation Wind Proposals

Lessons and Observations from Winter OperationsOperational options are very limited and becoming more constrained

• Gas pipelines are severely constrained when weather is cold, limiting gas generation to minimal levels

• Oil-supply chain is fragile and unable to respond quickly during adverse weather conditions and/or when demand is high

• Imported Canadian hydropower is limited during very cold weather (because Québec is a winter-peaking system)

• The region is very vulnerable to the loss of large non-gas generators during cold weather (e.g., nuclear units)

6

Current Pipeline Infrastructure is Inadequate to Serve Region’s Natural Gas-fired Generation

Coal Hydro Natural Gas

Nuclear Oil Other Renewable Wind0

2,000

4,000

6,000

8,000

10,000

12,000

Generator Capacity Supply Obligations (CSO) vs. OutputJanuary 28, 2014

Total CSO Total MW

Meg

awatt

s (M

W)

Of the more than 11,000 MW of gas-fired generation with a capacity supply obligation, only about 3,000 MW were generating during the peak hour.

7

High Gas Prices Drove Wholesale Electricity Prices to Record Levels Over the Past Two Winters

8

Elec

tric

Ene

rgy

$/M

Wh

Fuel $/MM

Btu

$0

$5

$10

$15

$20

$25

$30

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Wholesale Electricity at New England Hub (Real-Time LMP) Natural Gas

Winter 2012-13 and 2013-14

Pipeline Constraints Last Winter Resulted in a Shift to Coal and Oil Resources and Higher EmissionsSO2, NOX, CO2 from Power Generation, Winter 2013 - 2014

October November December January February March0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

0

500

1000

1500

2000

2500

3000

3500

4000

4500

SO2 (tons)

NOx (tons)

CO2 (tons)

CO2

Emis

sion

s (t

ons)

NO

x, S

O2

Emis

sion

s (t

ons)

Source: US EPA Continuous Emissions Monitoring System

9

10

Preparations for This Winter, and Beyond

• Winter reliability program will improve fuel security

• Better alignment between gas and electricity markets will improve performance of gas-fired generators

• Recent market rule changes will drive resources to make secure fuel arrangements over the long term

Challenges Ahead

• We are in a precarious operating position for several winters due to inadequate gas pipeline infrastructure and retirements that have already taken place

• Further non-gas generator retirements and/or outages will exacerbate reliability concerns

• Changes to ISO’s electricity markets will strengthen resource performance and seek the most economic market solutions, but these changes alone won’t spur long-term investment in natural gas infrastructure

• The region needs to find a way forward to secure the natural gas infrastructure it needs to ensure a reliable electric system

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