Advancing Clean Energy Policy Goals · 2017. 6. 27. · Internal Market in Natural Gas Directive...

http://mit.edu/ceepr

Advancing Clean Energy Policy Goals:A Look at Experiences in Germany and Europe

Michael MehlingChatham, MA | 28 June 2017

http://mit.edu/ceeprhttp://mit.edu/ceepr

Source: Fraunhofer ISI, 2017


Cross-Border Physical Flows, Currently

Source: ElectricityMap.org, 2017

https://www.electricitymap.org/?wind=true&solar=false&page=country&countryCode=DE


Markets/Trading Platforms

Source: ETRM Systems, 2017

European Policy Framework ...

ENERGY

Directive 2008/92/EC Price Transparency

Directive 2009/72/EC Internal Market in Electricity

Directive 2009/73/EC Internal Market in Natural Gas

Directive 2012/27/EUEnergy Efficiency

Regulation (EC) 443/2009 Vehicle Performance Standards

Directive 2009/28/EC Promotion of Renewable Energy

Directive 2009/29/ECEmissions Trading

Directive 2003/96/EC Taxation of Energy Products

Directive 68/414/EECCrude Oil and Petroleum Stocks

Energy Market Focus

Environmental Focus

Market Operation

5

Regulation (EC) 443/2009 Vehicle Performance Standards

… and Implementation in Germany

Renewable Energy Act (EEG)Equalisation Ord. (AusglMechV)

Energy Savings Act (EnEG), Energy Savings Ordinance (EnEV)

Energy Tax Act (EnStG), Electricity Tax Act (ElStG)

Network Tariff Ordinances (StromNEV, GasNEV, KAV)

Greenhouse Gas Emissions Trading Act (TEHG)

Combined Heat and Power Act (KWKG)

Biomass Ordinance(BiomasseV)

Subsidy programs: solar thermal, energy efficiency, photovoltaics, storage

ENERGY

Affordability

Energy Market Act(EnWG)

Renewable Heat Act(EEWärmeG)

Provision of Basic Energy Access & Supply (NAV, NDAV, StromGVV, GasGVV)

Network Extension Act (EnLAG)Network Ext. Accel. Act (NABEG)

Network Connection Ordinances (StromNZV, GasNZV)

Incentive Regulation Ord. (ARegV)Reserve Capacity Ord. (ResKV)

Energy Market Focus

Environmental Focus


German Energy Strategy (Energiekonzept) of 2011

Climate Change

RenewableEnergy

Energy Efficiency

Year

Greenhouse Gases

(from 1990)

Share

Elec-tricity

Share

Total

Primary Energy

Use

Energy

Productivity

Building Retrofits

2020 - 40% 35% 18% - 20%

increase by

2.1%/year

doubling of annual increase

from 1% to 2%

2030 - 55% 50% 30%

2040 - 70% 65% 45%

2050 - 80-95% 80% 60% - 50%


Renewable Energy Act (EEG)

• “Renewable Energy Priority Act” (Gesetz für den VorrangErneuerbarer Energien) of 2000

• Multiple amendments of the EEG, most recently in 2016:4 pages, 12 articles in 2000;74 pages, 104 articles in 2014

• Based on the “Electricity Feed-in Act” of 1990 (Stromeinspeis-ungsgesetz): 2 pages, 5 articles


Impact: Generation Mix 1990-2016

Source: AGEE-Stat/CEW, 2016


Impact: Generation Capacity 2002-2016

Source: Fraunhofer/CEW, 2017


Electricity Generation, 5-11 June 2017

Source: Fraunhofer/ISI, 2017


Some Questions about the Energiewende

• Is Germany on track to meet its decarbonization targets?

• Has it had to compensate for the loss of base-load nuclear?

• Has this posed technical issues for maintaining reliability?

• How has this affected German wholesale power markets?

• What effect has the Energiewende had on utilities?

• (What are its broader economic effects?)


GHG Emission Trends by Sector, 1990-2016

Source: UBA/CEW, 2017


Power Imports v. Exports 1990-2016

Source: BMWi/CEW, 2017


Power Imports v. Exports, 24-27 June 2017

Source: Agora Energiewende, 2017


Cross-Border Physical Flows, 27 June 2017

Source: ENTSOE-E, Transparency Platform, 2017


Cross-Border Physical Flows, Currently

Source: ElectricityMap.org, 2017

https://www.electricitymap.org/?wind=true&solar=false&page=country&countryCode=DE


Impact on Reliability (1)

Source: CEER, www.energytransition.de


Impact on Reliability (2)

Source: CEER, EnergyPost.eu


Merit-Order Effect

Lignite

Gas

Marg

inal costs

Generation volume

Nuclear

Demand

Merit ordereffect

Wind,, Solar

Original merit order curve New merit order curve with additional wind generation

Anthracite

Peakers

Based on: Pöyry, 2014


Generation Mix, 24-27 June 2017



Wholesale Power Price, 24-27 June 2017



Intraday Prices, 24-30 April 2017

Source: Fraunhofer/ISI, 2017


Spot Market Price Trend

Source: Mayer, 2014; Data: EEX


Ownership of Renewable Generation Capacity

Source: BMU, 2014


RWE and E.On: Splitting as Strategy

E.On (2000) Uniper (2016)

RWE (1898) Innogy SE (2016)


Policy Trend: Quantity vs. Price

Source: www.energytransition.de, 2016


Comparing Prices for Retail and Industry


Reform Agenda: EEG 2017; “Strommarkt 2.0”

• EEG 2017: all larger projects (750 MW/150 MW) move to auctioning system, operated by BNetzAG in line with RES expansion corridor

• Smaller projects still receive self-adjusting feed-in tariff, with cap and incentive to self-market

• Decision against capacity market. Instead: “Power Market 2.0” with capacity reserve, lignite “security standby” and free price formation

• Strict liability for delivery of committed supply

• Flexibility options given access to the market

• Improved integration in the liberalized EU market


Reform Agenda: EEG 2017; “Strommarkt 2.0”

• EEG 2017: all larger projects (750 MW/150 MW) move to auctioning system, operated by BNetzAG in line with RES expansion corridor

• Smaller projects still receive self-adjusting feed-in tariff, with incentive to switch to market premium

• Decision against capacity market. Instead: “Power Market 2.0” with capacity reserve, lignite “security standby” and free price formation

• Strict liability for delivery of contracted power

• Flexibility options (load management, flexible generation, storage) given access to the market

Frank Mastiaux, CEO of EnBW (8 September 2016):

• “Don’t expect regulators to protect you from disruption in the medium and longer term”

• “Electricity delivery will no longer be based on a centralized system; be flexible and adjust to change – these are traditional U.S. strengths”

• “Never fall in love with your assets”

• “Different companies will choose different response strategies” (cf. E.On, RWE vs. EnBW)

Thank you for your attention!

6/28/2017

Questions? Please ask, or contact me at:

@ [email protected] (617) 324-7829


Center for Energy and Environmental Policy ResearchMassachusetts Institute of Technology (MIT)MIT Building E19-411400 Main Street, 4th FloorCambridge, MA 02142-1017@ [email protected]

617-253-3551 617-253-9845

NEPOOL, June, 2017Emilio Camacho, Esq.

Chief of Staff, Commissioner David HochschildCalifornia Energy Commission

California and the New Economy

Change in California GDP, Population and GHG Emissions since 2000

Metric Associated 2013 Value

GDP 2.05 trillion (2009 $)

Population 38.2 million

GHG Emissions 459.3 MMTCO2e

GHG Emissions Per Capita 12 metric tons CO2e per person Source: CA Air Resources Board

GDP

Population

GHG Emissions

GHG Emissions Per Capita

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ch

ange

Sin

ce 2

00

0

Year

1974: Jerry Brown elected Governor

California Today

Oil crisis in the 1970’s

Future electricity crisis

If California had 40 nuclear plants…

Diablo Canyon Nuclear Plant

California

today…

Energy Commission Responsibilities

Forecasting

EfficiencyStandards

Power PlantLicensing

Renewables &

Alternative Technologies

Research, Development

&Deployment Emergencies

California Advancing Energy Efficiency

2012: The Commission’s plug-in charger efficiency standards begin saving Californians $300M / year

2009: The Energy Commission’s TV efficiency standards

take effect, saving Californians $1 billion / year

Now Selling: The All-Electric Home

13

CityVentures all-electric homesBellflower, CA

The Electrification of Almost Everything

14

Largest Manufacturing Plant in CA Produces Electric Vehicles

Tesla employs over 12,000 people

Tesla FactoryFremont, CA

300,000 ELECTRIC VEHICLES IN CALIFORNIATODAY

15

$0

$10

$20

$30

$40

$50

$60

1891 1900 1909 1918 1927 1936 1945 1954 1963 1972 1981 1990 1999 2008 2017

Bill

ion

sRapid Growth of the Clean Energy Economy:

Market Cap of General Motors vs. Tesla

117 years for GMto become$50 billion company

117 years for GMto become$50 billion company

14 years for Teslato become$52 billion company

14 years for Teslato become$52 billion company

Based on market value as of 8/5/15

GM Founded

1908

Tesla Founded

2003

16

High speed rail is coming to California and it will be 100% powered by renewables…

17

2013 2020 2030 2045

18

In renewables the challenge is big...

20% 33% 50% 100%

Proposed in 2017

0%

5%

10%

15%

20%

25%

30%

2001 2002 2006 2008 2011 2014

SMALL HYDRO

GEOTHERMAL

BIOMASS

WIND

SOLAR

California Making Rapid Progress on Renewable Energy

19Source: California Energy Commission, Tracking Progress Report

Today vs 2020

More Californians Work in the Solar Industry Than for All Utilities Combined

Sources:

Solar Foundation, 2015 Solar Jobs Census

U.S. Securities and Exchange Commission, Form 10-K, 2014http://www.sec.gov/edgar/searchedgar/companysearch.html

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Solar Jobs IOU/POU Jobs

SDG&E PG&E SCE POU

56,800

100,000

22

The World’s Largest Thin Film Solar PV Project

Desert Sunlight Solar Project550 MWRiverside County, CA

The World’s 3rd Largest Silicon PV Project

Solar Star Project579 MWKern County, CA

23

The World’s Largest Solar Thermal Power Plant (Tower)

Ivanpah Solar Thermal Project393 MWSan Bernardino County, CA

24

The World’s Largest Solar Thermal Power Plant (Trough)

Solar Energy Generating System (SEGS)354 MWSan Bernardino County, CA

25

Geysers Geothermal Power Plant955 MWLake County, CA

The World’s Largest Geothermal Power Plant

26

California Leads the Nation in Biomass Energy Generation

27

Honey Lake Biomass Plant Lassen County, CA

The World’s Largest Wind Project

Alta Wind Energy Center 1550 MWKern County, CA

28

Cats74.16%

Wind Turbines0.01%

Buildings18.51%

Communication Towers0.20%

Vehicles6.18%

Power Lines0.95%

Annual U.S. Avian Mortality Caused by

Humans: 3 Billion Birds

29Source: The State of Birds Report, 2014

http://www.stateofthebirds.org/

Companies Committing to 100% Renewable Energy

30

Over 30 US military bases in CARepresenting approximately $130B annually to the California Economy

31Source: California Energy Commission, 2014Geographic Information Systems Data

Navy: 50% Renewables by 2020

Marines: Zero FossilFuels on Basesby 2025

Federal Subsidies Have Favored Fossil Fuels

32Source: What Would Jefferson Do?DBL Investors, September 2011

Federal Energy Subsidies

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

PRODUCTION TAX CREDIT (PTC)

INVESTMENT TAX CREDIT (ITC)

OIL DEPLETION ALLOWANCE (ODA)

1926: OIL DEPLETION ALLOWANCE ENACTED

2006: INVESTMENT TAX CREDIT ENACTED

ONGOING

1992: PRODUCTION TAX CREDIT ENACTED

SET TO EXPIRE 2022

SET TO EXPIRE 2020

*PTC Expired 6 times and Extended 7 times

Solar Expected to be half of all Renewable Energy in California by 2020

Source: CPUC RPS Report

Renewable Energy Represented 65% of New US Electric Generation Capacity in 2015

35

Renewables

Fossil Fuels

11,298 MW

5,974 MW

Source: FERC Energy Infrastructure Update, January-December 2015

• How will the new economy manifest itself in the energy sector?

DecentralizedTechnology-based

Fast-changingIntelligent

36

iPhone was first released in 2007

New Economy: Cleaner, Nimble Smarter and Distributed

38

Two paths

Drawing Lessons From Successful Campaigns: The Story of Acid Rain

40

Loons at Adirondack Park

Reduction in Acid Rain

Source: National Atmospheric Deposition Program, 2014http://nadp.sws.uiuc.edu/ntn/annualmapsByYear.aspx

41

1985 2012

The Ozone Hole

Source: NASA Ozone Hole Watch, 2014http://ozonewatch.gsfc.nasa.gov/monthly/SH.html

42

1979 2013 2050(expected)

Smoking in the US

43

0

10

20

30

40

50

60

70

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020Source: Centers for Disease Control and Prevention (CDC), 2014

http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig_smoking/index.htm

1965: Health warnings required on packaging

1983: Cigarette tax doubles

1988: U.S. Bans Smoking on Airplanes

Smoking Rate Falls to

15%

1970: Advertisements banned from TV

1998: CA Bans Smoking in Bars

2014: CVS Stops cigarette sales at 7,600

retail pharmacies

1992: U.S. Bans Sale to Minors

% of Americans Who Smoke

Emilio Camacho, Esq.

California Energy [email protected]

Thank you

2017 CAISO - Public Page 12017 CAISO - Public

Renewable Integration – The

California Experience

Mark Rothleder

Vice President, Market Quality and Renewable Integration

New England Power Pool

2017 NEPOOL Participants Committee Summer Meeting

June 28, 2017

2017 CAISO - Public Page 2

STATUS


CAISO by the numbers

Serves 80% of state

30 million consumers

26,000 miles of wires

72,000 MW plants

27,000 market transactions per day

$9 billion market


Industry in the midst of unprecedented change - Driven by fast-growing mix of interrelated issues

Community

Choice

Federal Administration

Changes

Grid

Modernization

Fossil Plant

Retirements

Regional

Collaboration

Consumer-

owned PowerTransmission &

Distribution Systems

Interface

Existing 50%

goal

NEW

100% goal

Gas Storage

Challenges


Wind

• Unpredictable Output

• 4,990 MW Peak – May 16, 2017

• 6,087 MW Installed Capacity

Solar Thermal / Photo Voltaic

• Semi – Predictable Output

• 9,914 MW Peak – June 17, 2017

•≈ 10,000 MW Installed Capacity

Roof Top Solar

• Semi – Predictable Output

• Behind the meter – Residential

• 5,000+ MW Estimated Capacity

Power industry transformation

Goals:

Higher expectation of

reliability

Higher expectation of

security

Smart Grid

Situational

awareness through

Visualization

Main Drivers:

California RPS

GHG reduction

Once-through-Cooled

plants retirement

* Simultaneous wind and solar has exceeded 13,000MW on April 23, 2017


Approximately 4,000 MW of additional transmission-

connected renewables by 2020 and an additional 10,000

to 15,000 MW by 2030

*All online resources that are not in test mode are included in the 2016 YTD amounts, including those yet to

achieve full commercial operation.

**Approximate

(IOU data through 2017 and RPS Calculator data 2018-2020)


Behind the meter solar PV build-out through

2020


Actual net-load and 3-hour ramps are approximately

four years ahead of ISO’s original estimate

Typical Spring Day

Deeper

belly

Steeper Ramps

Net Load of 8,507 MW

on May 14, 2017

Actual 3-hour ramp

of 12,960 MW on

December 18, 2016


Greenhouse gas reductions are occurring as

renewables increase


OPPORTUNITIES


The success of integrating renewables leads to

new grid opportunities

Maximum % of Load Served

• 58% by wind and solar

• 65% by renewable resources

• 83% by carbon free resources

Ramping

(12,500 MW from

HE16-HE21)

• Intertie: 47%

• Gas: 37%

• Hydro: 16%


• In 2017, approx. 2.6% of

potential solar production

was curtailed (1.3% of

potential renewable

production)

• Spring curtailments ran

as high as 1,775 MW

(approx. 8.8% of energy

demand in that hour)

• Current curtailment is

manageable. As we

approach 50% RPS,

curtailments will occur

year round and become

much larger unless a

suite of strategies to

contain curtailment are

pursued.

Opportunity 1: Manage oversupply minimize

curtailment and realize environmental goals

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May

2014 2015 2016 2017

ENER

GY

CU

RTA

ILM

ENTS

(M

WH

)


Opportunity 2: New price patterns incentivize

innovation in responsive demand and storage

Increasing real-time

negative energy price

frequency indicates over-

generation risk in the middle

of the day


Opportunity 3: Enhance operational performance

during periods of increased supply variability

CPS1 is NERC Control Performance Standard which is evaluated on a rolling 12-month average. Over the past few years, the rolling average has been declining as

a result of some poor daily performances.

Thus, the CAISO need to take measures to enhance daily performance on days with higher variability.


Opportunity 4: Enhance forecasting to manage

supply uncertainty

-500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

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8/20

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7/1

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0:0

5

Sola

r P

rod

uct

ion

(M

W)

CAISO - Solar Forecast and Actual (July 18, 2015)

Day-ahead forecast

30-minutes ahead forecast

10-minutes ahead Forecast

Actual

2,000 MW difference

between expected and

actual delivery

Example day with

monsoonal conditions

CAISO – Solar Forecast & Actual

July 18, 2015


Effect on the ISO balancing area

N. San Joaquin –

76%

Mojave – 65%

LA Basin – 62%

Coachella and Imperial

Valley – 58%

Colorado

River – 62%

S. San Joaquin –

69%

Las Vegas –

72%

100% Eclipse @10:19 a.m. 100% Eclipse @10:30 a.m.


Potential MW impact on grid connected solar


Opportunity 5: Evolve fault resiliency capability

Issue

• Between the months of August and November 2016 there have

been seven transmission system faults that occurred in the ISO

system, that resulted in the unanticipated loss of inverter based

generation

• All transmission line faults cleared in normal tripping time.

• The cause of the inverter based generation loss is under review

and remediation measures developed

Action Item

ISO is collaborating with other reliability organizations resources

and inverter manufactures to develop and implementing short,

medium and long term plan to address this issue


SOLUTIONS


20

A suite of solutions will be necessary


Western Energy Imbalance

benefits: $173 million

• Entities now in the implementation

phase

~ Portland General – Fall 2017

~ Idaho Power & Powerex – Spring

2018

~ BANC/SMUD, LADWP & Seattle City

Light – Spring 2019

~ Salt River Project – Spring 2020

• Entities exploring future entry

~ CENACE, Baja California, Mexico

~ Northwestern Energy


Energy imbalance market helps avoid curtailment

Year-to-date estimated metric tons of CO2 displaced = 176,241


The Long Game: Unlocking the “Dividend”

from California’s investment in renewables

• California has invested $billions in renewables

• A new “dividend:” Clean, plentiful energy that

can electrify a low-carbon economy

• New consumption opportunities for consumers:

– Electric vehicle charging

– Industrial processes

– Cooking and heating

– Bulk and local energy storage

• Then…incent these sectors to provide grid

balancing services

Lessons from California

June 2017

NEPOOL Summer Meeting

Calpine Corporation

Retail Presence

Retail Office

Wholesale Power Plant1

West

Retail load: ~8 MM MWh

Generation: ~26 MM MWh

Central



East



Figures reflect 2016 MWh.

1

Calpine: A Competitive Generation Developer/Operator And Retail Supplier With A National Portfolio of Generation and Load

Geographic Diversity

Dispatch Technology

• Geographically diversified portfolio: Scale in America’s most competitive power markets• Featuring one of smallest environmental footprints in America’s power generation sector• Largest operator of combined heat and power (cogeneration) technology in America• Largest geothermal power producer in America

Calpine Corporation

1 Map reflects pending sale of South Point.

Conclusions

• Administrative Entry in California Destroyed Wholesale Markets– Prescribed entry only, no merchant entry in 10 years

– Highly effective capacity price discrimination

– Significant financial stress – with no glide-path to retirement

– At the same time, proponents claim success

• But residential rates as high as $0.40/kwh1 ($400/Mwh)

• New England’s Choice Requires Decisive Action– Allow both administrative entry and unchanged market clearing

• Transition to “California-esque” command-and-control structure

– Create mitigation that insulates wholesale markets

• IMAPP, Two-Tier, FCEM, FCM

• Must move quickly and decisively

Calpine Corporation 2

1 Source: PG&E residential rate E-1, tier 4.

Are California and New England That Different?


As Trump Steps Back, Jerry Brown Talks Climate Change

in China

California Senate votes for 100% renewable energy target

by 2045

Source: NY Times, June 6, 2017

California’s Managed Administrative Entry

Calpine Corporation

Conventional generation under LTPP10,000 MW

Source: Graph: CPUC RPS Procurement Status Report Q4 2016, Conventional Gen from CEC Power Plant Data.

Central Planning Has Guaranteed Excess Capacity

• CPUC determines need for new resources with a 10-year forward look

• As capacity deficiencies emerge, CPUC authorizes long term contracting of new resources by IOUs through discriminatory RFPs

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Cumulative Additions

California RPS Laws Increasingly Aggressive

2002 20% by 2017

2011 33% by 2020

2015 50% by 2030

Proposed 100% by 2045

Renewables additions ~20,000 MW

Generous Net Energy Metering (NEM) Rules

• Significant Behind-the-Meter Solar Penetration At least 5,000 MW roof top

4

Wholesale Price Collapse


-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

Off

er

Pri

ce

Capacity (MWs)

~3000 MW offeredAt -$20 or higher

Self Scheduled MW

Estimated Solar offer Curve June 20th HE 13

($40)

($20)

$0

$20

$40

$60

$80

$100

$120

$140

$160

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Pri

ce

Hours

2014 CAISO FMM 2017 CAISO FMM

CAISO Fifteen Minute Market Prices from Same Day Three Years Apart

*CAISO Daily Renewables Watch: March 4th, 2013 & March 4th, 2017

57% decrease

Energy and A/S Revenues Crushed


Remedial Actions – necessary, but not sufficient• Flexible Ramp Product

• Flexible Forward Capacity requirements (Flex RA)

• Changes to Capacity Counting Rules

• ELCC for Solar (no marginal value, over-counting by 3-4 GW)

Source: Table 1.8: Department of Market Monitoring, 2016 Annual Review

Purposeful Discrimination


Source: CPUC 2015 Resource Adequacy Report; LTPP Contracts From Public Records Act Request

CAISO typically

designates for 1-2 months

Existing NewExisting – “Resource Adequacy”• Annual or monthly bilateral

capacity payments

• Time compression leaves no runway for decision-making

• Administrative entry whenever scarcity appears

New Resources• 10 to 20 year full cost of service

contracts for units administratively selected.

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

Delta Los Medanos Metcalf

Return on Net Investment (% Return onNBV)

Return of Net Investment (DepreciationExpense)

Fixed Operating Expenses (Inc. 5 YRAVG Major Maintenance)

Variable Operating Expenses

Energy and RA Commodity Margin

Discrimination Threatens Reliability

Source: Plants’ Cost of Service was created in accordance with CAISO Schedule F of Reliability Must-Run Tariff from Actual 2016 Costs. NBV as of Dec. 2016. Major Maintenance costs as of Nov. 2016. Energy and RA Commodity Margin curves from April 13, 2017 and is Calpine’s view.


And Fosters a Prisoner’s Dilemma

“Going Forward Costs”

Return of, and On

Invested Capital

But Many Plants Are Needed for Local Reliability

Calpine Corporation9

Case Study – 2017 Peakers

• 4 LM6000 GE turbines, ~45MW net, fast start, fast ramp, commissioned 2002• Recent history reveals their extensive use as “sunset peakers”• Ideal resource for meeting “duck curve”• Rolling off LT contracts 12/31/17

• No commercial interest from buyers• Significant over-supply• Fixed costs well-above prevailing capacity offers• Buyers very unsure of future load obligations

• Roof-top solar• Direct Access/ Aggregators

• Petitioned the ISO to determine reliability need• 2 needed, and negotiating full cost-of-service RMR• 2 unneeded and will be made unavailable for dispatch

• Question:

• Will the CAISO (ISONE?) be left in a position to pick RMR winners and losers?

Conclusions

• Administrative Entry in California Destroyed Wholesale Markets– Prescribed entry only, no merchant entry in 10 years

– Highly effective capacity price discrimination

– Significant financial stress – with no glide-path to retirement

– At the same time, proponents claim success

• But residential rates as high as $0.40/kwh1 ($400/Mwh)

• New England’s Choice Requires Decisive Action– Allow both administrative entry and unchanged market clearing

• Transition to “California-esque” command-and-control structure

– Create mitigation that insulates wholesale markets

• IMAPP, Two-Tier, FCEM, FCM

• Must move quickly and decisively


1 Source: PG&E residential rate E-1, tier 4.

Advancing Clean Energy Policy Goals · 2017. 6. 27. · Internal Market in Natural Gas Directive...

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