Exports To The Us Northeast

John Dalton

poweradvisoryllc.com

Tel: 978 369-2465

Insight Info’s7th Annual Atlantic Canada Power Summit

Opportunities Offered by the New England Power Market

October 5, 2009

Maritime Electricity Market New England Electricity Market

Need for Capacity Need for Energy Need for Low Carbon and Renewable Generation

Conclusions

Overview of Presentation

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Maritime electricity sector peak load about 5,500 MW Annual peak load growth about 100 MW

Making it harder to integrate major new supply resources Given limited need for capacity and additional energy

Significant opportunity to displace higher carbon emitting resources Uncertainty regarding the value offered

Output for major new generation resources will be offered to more than one province Possibly New England

Maritime electricity market small relative to output of many new large supply resources

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Regional System Plan suggests no need for additional capacity until about 2015

Forward Capacity Market (FCM) auction clearing at floor price $3.6/kW-month Significant amount of demand response being

offered Connecticut contracted capacity through other

mechanism Low FCM prices likely to result in retirements of

capacity Significant portion of capacity over 50 years

New England has little need for new capacity


Gas-fired units set prices 62% of the time Both constrained and unconstrained periods

Gas-fired generation sets prices during peak periods Natural gas prices critical determinant of energy prices

Value in energy market driven by natural gas prices


Marginal Fuel Type during Unconstrained Pricing Intervals - 2008

Source: ISO-NE 2008 Annual Markets Report

Load centres are located in Southern New England

Maine has surplus of generation and transmission constraints

LMPs in New Brunswick about 8 to 10% less than at Mass Hub

Energy prices vary given Locational Marginal Pricing


Nodal LMPs in 2008

Source: ISO-NE, 2008 Annual Markets Report

Future energy value determined by natural gas prices

Declining natural gas pricing reducing value of energy in New England


Source: ISO-NE, August 2009 Monthly Market Report

This increase in energy prices is driven by anticipated increases in natural gas prices

Key issue development costs for shale gas plays Significant risk prices won’t reach these levels,

particularly near-term

NYMEX Futures prices indicate energy prices will recover


Source: NYMEX, Power Advisory Analysis

Mass Hub $/MWh

Henry Hub $/MMBtu

2009 44.75$ 4.72$ 2010 56.14$ 6.03$ 2011 62.15$ 6.79$ 2012 64.04$ 7.01$ 2013 65.21$ 7.12$

Prices in US$

Lack of fuel diversity and GHG constraints causing region to seek lower cost, non-carbon generation

New England renewable energy demand driven by Renewable Portfolio Standards (RPS) Regional Greenhouse Gas Initiative Federal CO2 Cap and Trade increasingly likely

RPS require growing fraction of electricity supplied come from renewable resources Most RPS programs use Renewable Energy

Certificates (REC) Renewable power from Maritimes eligible for RPS if

power also delivered

New England offers premium prices for renewable energy


The RPS requirements are expressed in energy, but converted to a renewable capacity requirement (Blue Line)

New England renewable energy demand driven by RPS requirements


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Demand for Class I Renewable Energy Resources in New England

Capacity Requirement assumes that 60% of the capacity is provided by resources with a capacity factor of 34% (e.g., wind) and that 40% is provided by resources with a capacity factor of 80%.

Constraints on renewable resource availability and siting limiting ability of local renewables to meet RPS Massachusetts RPS had its first surplus in 2007 States are addressing supply constraints

Massachusetts: One Stop Permitting Maine: Designating areas for wind project

development New England Governors’ Conference recently

released a Renewable Energy Blueprint More than 10,000 MW of wind potential in region “Each state seeking aggressive development of

potential”

New England attempting to develop its resource potential


Value of Renewable in New England from Maritimes = REC value + energy value in market

REC Ceiling value: alternative compliance payment Electricity supplier penalty if not enough RECs

($61/REC in 2009) Floor value of RECs cost of renewable generation

needed to meet RPS less value of energy Estimated to be about $98 per MWh in 2010

All US$

Renewable energy values depends on market conditions


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Limited need for capacity Energy value influence by low natural gas prices Significant growth required in renewable energy market

Market opportunity will be influenced by ability to site and develop projects in region

Rebound in economy will offer increased opportunities

Attractiveness of New England affected by economic conditions


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Thank you for your attention

John DaltonPower Advisory LLC [email protected](978) 369-2465www.poweradvisoryllc.com


Introducing Power Advisory

Power Advisory specializes in electricity market analysis and strategy, power procurement, policy development, regulatory and litigation support, resource planning and project feasibility assessment. We offer clients insightful analyses based on detailed understanding of

market fundamentals and sources of competitive advantage. We have extensive experience with renewable energy technologies,

having assisted Ontario develop its Standard Offer and Feed-in Tariff Programs and advised numerous clients on renewable energy investment opportunities.

For additional information regarding our services, please contact:John [email protected]


Introducing Power Advisory

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Exports To The Us Northeast

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