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TransmissionHub Quarterly Market Update June 10, 2015 Kent Knutson, Director Hub Services, PennWell Corporation
Sponsored by
• Load growth has been anemic and electric output down but transmission investment still strong
• End of the era of big policy driven programs . . . CREZ, CAPX2020 . . . TRTP (Tehachapi) & Gateway move along
• Final EPA carbon emission rules (111b and 111d) to roll out this summer to much chagrin by the states
• Interregional planning driven by Order 1000 progressing • Coal continues downward spiral – retirements reach peak • The dash to gas, solar and wind continues but slow load
growth and uncertainty over renewable tax incentives puts many projects on hold
Transmission Uncertainties
TransmissionHub data . . . . • 2015 good year; but lower than first expected • 2016 stronger than last quarter – wait and see • 2017 and beyond forecast stays robust but
includes a number of conceptual projects Driven by lower load growth and policy uncertainty the number of new project announcements is slowing with most focus on reliability
Transmission Investment Trends
US/Canada Planned Transmission Investments - $bn
• HVDC – $53.1bn • Underground and water – $19.6bn • $17.2bn in 2015 – lower than expected
– THub forecast $22.3bn in March 15’ • $17.2bn in 2015 – $8.6bn UC • $13.6bn in 2016 – $2.3bn UC • $24.2bn in 2017 – $7.4bn UC • $38.6bn in 2018 – $0.1bn UC • 2015 – 140 projects, 29 > $100m • 2016 – 128 projects, 40 > $100m • 2017 – 116 projects, 45 > $100m
Statistics Support Robust Transmission Market, but Slowing . . .
EEI: $19.6bn per year 2014-17
Transmission Investment by NERC ($M)
Transmission Investment by Objective ($M)
Transmission Development by Sponsor Type ($M)
Planned Transmission Projects Average Cost ($M/Mile)
• Aging infrastructure – reliability upgrades • First Quadrennial Review supports faster permitting
and public engagement – recommend national review • Compliance to CPP (Clean Power Plan) standards –
FERC supports Reliability Safety Valve (RSV) – outage costs estimated between $100bn and $150bn/year
• New NAAQS rule could deepen need for renewable energy into load centers – particularly California
• Continued interconnection projects for new generation • New transmission needed in high growth areas
Transmission Drivers
Top 2015 US/Canada Projects Already Energized through June ‘15
Top US/Canada Projects Scheduled Online in 2015 Under Construction as of June ‘15
Canada
Top US/Canada Projects Scheduled Online in 2016 Under Construction as of June ‘15
Since Last Quarter
In March . . . • Badger Coulee (ATC) gets approved by PSC of Wisconsin
and denies request for rehearing – 180 miles, $580m In April . . .
• Fargo to St. Cloud to Monticello completed – 240 miles, $750m
• Brookings County to Hampton completed – 250 miles $662m
• TDI New England sponsored Champlain to Hudson Power Express – project received Clean Water Act Permit from US Army Corps of Engineers – 333 miles, $2.2bn
Since Last Quarter
In May . . . • Susquehanna to Roseland completed – 150 miles $1.5bn • ITC Holding’s Michigan Thumb Loop Project completed –
140 miles, $510m • TransWest Express received BLM/WAPA EIS approval
In June . . .
• Mt. Storm to Doubs Rebuild completed – 100 miles, $370m • Gateway Central Sigurd to Red Butte Project completed –
160 miles, $400m • FirstEnergy’s Glenwillow to Bruce Mansfield completed –
119 miles, $151m
• ITC files Presidential Permit application for Lake Erie Connector Project
• Construction on ATC’s North Appleton to Morgan Project to Begin in July, 2016
• Ameren submits application in Missouri for Mark Twain transmission project – PSC deadline June 22
• Cal-ISO: updated analysis supports continued need for South Orange County Reliability enhancement project
Recent Project News Highlights
Recent Project News Highlights
• Texas regulators approve transmission line for 200 MW Salt Fork Wind project
• TDI: Transmission developer gets final permit for 1,000 MW Champlain to Hudson transmission line
• TDI: DOE: Clean Power Link construction in Lake Champlain will cause minor, temporary effects
Order 1000 and Other Policy Issues
• FERC Approves order conditionally accepting compliance filings by ISO-NE, NYISO, PJM involving Order 1000
• FERC accepts order 1000 interregional filings by SPP SERTP affirms 2013 Order for ISO-NE
• Texas House pass Senate Bill 933 – requiring sign off for interregional projects
• SPP/MISO identify four projects through Interregional Planning Stakeholder Advisory Committee – LA, KS and NE for congestion relief
Interesting Headlines . . .
• Citing David Letterman’s Top Ten segment NERC’s leader Cauley delivers list of considerations for grid transformation . . .
• At TransForum West TransWest executive: developing transmission is like trying to “finish an iron man transmission triathlon”.
Power Generation Drivers and Uncertainties
• Capital spend projected high for now but anemic load growth might dampen forecast
• Both generation and electric demand show decline • EPA and States set stage for CPP gunfight • MATS implemented in April – coal retirements surge –
expected to peak this year • New NAAQS Standard in October could be costly • Gas dominates the planning horizon but many projects
are being pushed out further • PTC/ITC fate weighs heavy for renewable industry • Energy Storage on the rise – opportunity and challenge
for transmission
Coal Plant Retirements (MW)
US Current Electric Capacity First Year Online by Fuel Type (MW)
• Gas, Wind and Solar Continue to Dominate the New Generation Landscape
Investment 2015-18 • Gas: 118.9 GW (66%) • Wind: 33.2 GW (18%) • Solar: 17.4 GW (10%) • GWS: 169.5 GW (94%) • All: 180.8 GW
Planned Gas Power by NERC Region – MW
US Wind Power Capacity – Annual and Cumulative (MW)
• AWEA supports extension of tax credits – costs down 58% in 5 years
• A lot of Christmas’s ruined – cycle of job losses and factory closures
• Is the PTC a tax revenue generator rather than subsidy
• Marchant-Pompeo bill (H.R. 1901) – supports phase out (by 2025) and is tax payer friendly – could save 35%
• Senator Grassley (R-IA) puts tax credits in context
• YieldCos – enough projects now to support investment
• ITC set to expire in 2016 – will affect solar development
Fate of Renewable Energy Hinges on Tax Incentives
Energy Storage on the Rise Opportunity or Challenge for Transmission
• 185 GW Globally • Costs coming down sharply -
- $2,000/kWh in 2009 to $700/kWh in 2013 . . . . consider battery costs for EV’s – $1,300/kWh in 2005 – now around $400/kWh with goal to reach $150/kWh for commercialization
• >95% Utilization rate • SCE – 50 MW required – 261
MW procured • Faster and more effective
response • Oncor announced in 2014
interest in spending $5.2 billion on 5 GW of storage to firm up the grid
• Next legislative session to act will be in 2017
US Energy Storage Market Forecast
NAAQS Ozone Rule Change Opportunity for Transmission?
• National Ambient Air Quality Standards (NAAQS)
• 2011 EPA study estimated cost of reducing from .075 ppm to .070 ppm at $11bn
• More recent studies peg cost at $22bn to reach .070 and; $38bn to reach .065
• Review stipulated a range of .060 to .070 as target
• Compliance will benefit Solar, Wind and long-haul transmission in the west
Ozone Non-Attainment Areas (2008 Standard, 0.075 ppm)
• Declining and flat load growth could slow development • The cost of outages if reliability is jeopardized by an
aging and inadequate grid is high • Diminishing incentives like lower ROE’s could stymie
investment • State compliance to the CPP and other EPA standards
like NAAQS mark opportunities for long haul projects
Transmission Development Challenges and Opportunities . . . Final Thoughts
Questions and Answers At this point I would like to field any questions . . . .
Thank You to Our Sponsor
To find out more about TransmissionHub and to schedule a demonstration of our online intelligence service call or email . . . . Laura Kresse (918) 831-9731 [email protected]
Thank You for Attending . . . .