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Energy System Challenges
in New England
Marion S. Gold, Ph.D. Commissioner
Rhode Island Office of Energy Resources
RI Office of Energy Resources (OER)
The OER is the lead state agency on energy policy and programmatic matters
“Leading Rhode Island to a secure, cost-effective, and sustainable energy future.”
Energy Security Energy
Efficiency
Renewable Energy
Transportation
2
A secure, cost-effective,
sustainable energy future
Electric Sector
Thermal Sector
Transportation Sector
“In 2035, Rhode Island provides energy services across all sectors—electricity, thermal,
and transportation—using a secure, cost-effective, and sustainable energy system.”
RI State Energy Plan
3
RISEP Targets
• Scenario modeling shows Rhode Island can:
A Secure, Cost-
Effective, and Sustainable
Energy Future
Increase fuel diversity in each sector above 2013 levels
Produce economy-wide net benefits
Reduce greenhouse gas emissions 45% below 2013 levels
4
Rhode Island Energy Use Today
63 Trillion BTU
$1.1 Billion/Year
2.9 Million Tons CO2
63 Trillion BTU
$1.1 Billion/Year
3.9 Million Tons CO2
64 Trillion BTU
$1.4 Billion/Year
4.5 Million Tons CO2
RI spends $3.6 billion annually on 190 trillion BTU of energy, emitting 11 million tons of CO2
Source: EIA SEDS, 2010 data 5
Last winter…
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“Utilities panel
approves 12.1
percent rate
hike for National
Grid electricity”
-G. Wayne Miller,
Providence Journal
December 20, 2013
http://www.providencejournal.com/breaking-news/content/20131220-utilities-panel-approves-12.1-percent-rate-hike-for-national-grid-electricity.ece
“The “overwhelming majority” of
the increase, the utility said, is
derived from a rise in the cost of
wholesale production of
electricity — costs that National
Grid does not control…”
New England’s Energy Supply
Costs are driven by Natural Gas
7
4,255 17.7%
13,76443.0%
16,15914.7%
60,59851.8%
8,150 34.0%
6,89521.6%
24,19022.0%
715 0.6%
4,359 18.2%
4,62814.5%
34,34531.2%
36,11630.9%
2,814 11.7%
2,4847.8% 19,769
17.9%
3,701 3.2%1,679 7.0%1,698 5.3%
1,902 1.7% 1,129 1.0%
1,626 6.8%1,483 4.6%
5,565 5.1% 6,805 5.8%
1,092 4.6% 920 2.9%8,286 7.5% 6,706 5.7%
1,092 4.6% 920 2.9% 8,268 7.5% 6,503 5.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2012 2000 2012
Percent
Year
Wind
Other Renewables
Hydro
Pumped storage
Coal
Nuclear
Oil
Natural Gas
23,975 MW 31,969 MW 110,198 GWh 116,942 GWh
1,172 1.0%97 0.3%
Capacity (MW & %) Energy (GWh & %)
8 Chart taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC , 5/2/14, Boston, MA.
Compare to future market expectations of $11.75
as of October 2013…
9
Chart taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC , 5/2/14, Boston, MA.
Compare to future market expectations of $11.75
as of October 2013…
$100 = futures prices as of Oct. 2013
Keeping the lights on
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Oil and Gas Price Inversion
11
Data taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC, 5/2/14, Boston, MA.
Keeping the lights on
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Data taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC, 5/2/14, Boston, MA.
At the wholesale level…
• Energy market costs exceeded $5 billion in the Winter of 2014
• Compared to $5.2 billion…for ALL of 2012
13
Data and phrasing taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC , 5/2/14, Boston, MA.
Was It The Weather?
• January, 2014 was among the coldest months in recent history - 9 days were in coldest 5% of days in past 20 years
• Yet, there was no prolonged, extreme cold snap
• Problem not exclusively the weather
14
Data and phrasing taken from ISO NE presentation on Winter 2013/14 to NEPOOL PC , 5/2/14, Boston, MA.
Significant Prices Increases
for Winter 2014/2015
• Expectations are for residential standard offer service rates to increase by 30-40%
• Industrial rates will double from last November --- an over-the-year increase of 58%
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16
Energy Futures for New England
Notes and Sources:
2013 and 2014 prices from October 17, 2013 FERC Division of Energy Market Oversight 2013-2014 Winter Energy Market Assessment, available at http://www.ferc.gov/market-oversight/reports-
analyses/mkt-views/2013/10-17-13.pdf.
2015 prices were calculated in a manner consistent with the FERC analysis. Electric prices are the average of January and February 2015 monthly peak day-ahead LMP futures and gas prices are the
average of January and February 2015 basis futures quotes as of 3pm on September 10, 2014, available at http://www.cmegroup.com/trading/products/. Locational gas prices are the sum of the basis
and Henry Hub futures.
Natural Gas Electricity
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2013 2014 2015
$ M
Mb
tu
New England (Algonquin) Mid-Atlantic (Dominion South)
Southern California Border Henry Hub
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
2013 2014 2015
$ / M
Wh
Massachusetts Hub PJM Western Hub
Northwest (Mid-C) Southern California (SP-15)
Challenges are Increasing
17
• Generation retirements place additional strain on natural gas system and available supply
• Many more MWs of older fossil fuel (oil and coal) plants are at risk of retirement by 2020 due to economic and environmental factors
Text taken from ISO’s FERC filing on Winter Reliability program, July 11, 2014
What can we do about it?
18
Think Locally…
• RI is committed to continuing to robustly invest in clean energy and energy-alternative resources…
– Energy efficiency
– Distributed Renewable Generation
– Renewable Energy Standard
– Long-term Contracting Standard for Renewable
Energy
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…but also act Regionally
• The problem is much bigger than Rhode Island
• Our energy system crosses borders and is highly integrated
• A reliable bulk electric system is a necessity to local health and safety, and for our economy
20
New England Energy
Infrastructure Initiative
• Make strategic, coordinated investments in regional energy infrastructure that will: – Improve energy system reliability
– Strengthen economic competitiveness
– Meet common energy/environmental policy goals
– Mitigate energy price volatility
Achieve what no single state could
on its own 21
Regional Efforts
• Expand pipeline capacity to increase natural gas supply into New England
• Expand electric transmission to facilitate utility-scale development and delivery of no-to-low carbon energy resources, such as hydroelectricity
22
Pipeline Investments
• Drive investment in pipeline infrastructure by allowing for recovery of costs through FERC electric tariffs
– Costs shared appropriately across the six
New England states
– Ensure any new capacity will be made
available in a manner that primarily benefits
electricity customers
23
Pipeline Investments
• Proposed to have tariff & cost allocation managed through FERC process and requiring FERC approval
• Request proposals priced in increments of 200 mmcf/day to allow the evaluation of the cost of adding sufficient increments of additional capacity to achieve levels of at least 1bcf above 2013 levels
• Proposal on hold for now
24
Fall, 2014 - Next Steps
• States/stakeholders now considering:
– Electric market modifications that may mitigate
gas-electric challenges
– Natural gas resources & infrastructure projects
that may improve natural gas constraints
– Consideration of market reforms that could
improve the natural gas infrastructure situation in
New England
25
Expanding Transmission to
Facilitate Clean Energy
• Issue one or more coordinated RFPs to deliver at least 1000+ MWs of clean energy into New England
• Transmission infrastructure costs recovered through ISO-NE tariff or through merchant projects – ensure that costs are shared appropriately among the states
• Depending on procurement structure, a subset of states (directly or through their utilities) may procure the power to ensure its delivery into the region 26
Other Regional Efforts
• Ensure that state-level investments in EE and local renewables are appropriately accounted for in energy system planning
27
Regional Efforts
• Share best practices and jointly pilot innovative technologies and energy-saving solutions
• EE, Demand Response and Distributed Generation to Shave Peak Demand
28
Regional Efforts
• Get out in front of price increases: coordinated public messaging campaign centered around the importance of conservation and EE
• Joint effort – NASEO, NECPUC, NEEP, SEO and Utilities
29
30
Communications Strategy
Use press releases and traditional media outreach to
prepare customers for higher winter bills and explain how
National Grid can help them (EE, billing options, etc.)
Use advertising to generate awareness of issue, National
Grid’s concern for its customers and provide information on
ways customers can mitigate price volatility
Utilize owned assets (web, social media, bill inserts, email,
call center IVR messaging) to drive further engagement
Leverage Energy Efficiency in market activities to link high
bills and benefits of EE program participation
Shared Vision of Energy Future
• New England is moving toward cleaner generation, improved energy networks, and additional customer-side choices and services at affordable prices
• A clear and coordinated set of state, regional, national energy policies will expedite progress: – Energy efficiency, new and integrated technologies
– Renewable energy policies
– Environmental policies (influencing generation mix)
– Cost sharing and collaboration for transmission/pipelines
31
