Nuclear’s Role in ISONE’s Energy Mix Capacity (and Energy) Market Design in New England Roundtable Feb. 28, 2014 0
The Market Context: Illustrative Conditions Affecting Vermont Yankee and Other Nuclear Generators (2005 – 2013) Natural Gas Prices ISO-NE Wholesale Power Prices Henry Hub Spot; $/MMBtu Mass Hub DAM*; $/MWh - annual average clearing price 100 10 Low gas prices lead The shale gas 80 8 to low power prices revolution 60 6 40 4 20 2 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 ISO-NE Capacity Prices Nuclear Cost $/kW-month $/MWh 6 Nuclear cost escalation exceeds Inflation 4 Surplus capacity and 2 poor market design lead to weak capacity values 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 1/05-11/06 – Installed Capacity Market, 12/06-5/10 – Transition Period, * Day ahead market price 1 6/10-5/17 – Forward Capacity Market
Combined Cycle Plant Economics in New England Range of Estimated EBITDA Cash Flows for All New England CC Plants (Energy + Capacity + AS Revenues – All Operating Costs – CAPEX); $/kW-yr 110 New Economic Entry EBITDA Cash Flow Requirement (Generic CC) 90 Missing Revenues 70 Generic CC (Brattle*) for New Entry Generic CC (EWC) 50 30 Existing 10 ISONE CCs -10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Calculated using Brattle’s Aug 7 th report, adjusted for additional Capex needs and ISONE operating challenges 2
Addressing Energy Pricing Issues Is As Important As Fixing the Capacity Market The capacity market is designed to provide the missing money; If the energy market isn’t performing sufficiently, it means that everyone has to lean more heavily on the capacity market. New England Generating Plants’ Revenue Source* by Technology 100% AS 75% Capacity 50% Energy 25% 0% Nuclear Wind NG-CC ST-Coal NG/Oil ST NG/Oil GT * Average estimated for the last five years 3
Retaining Existing Low-Carbon Generation May be More Economic Than Introducing New Capacity in the Near Term Average Cost for New Generation vs. Existing Nuclear Cost $/MWh; PTC and ITC 1 not Included for Wind and Solar Out of $270 Market 200 Subsidies Subsidies depressing 150 prices 100 Shutdown Market 50 Prices (Energy + Capacity) 0 Existing New CCGT* New Wind New Solar New Wind Nuclear** On-Shore PV Off-Shore * Average of Advanced and Conventional CC; Source EIA ** Existing nuclear cost range is an estimate based on internal analysis 1 PTC and ITC are considered as subsidies, which lower the average cost of new generation 4
Declining Generation Diversity ISONE Power Generation Fuel Mix* 1990 – 2020, % 100% Existing nuclear plants provide a key fuel- diversity benefit with 75% significant climate- related advantages, 50% which should not be taken for granted in 25% policy and market rules 0% 1990 2000 2010 2020* illustrative Nuclear Coal NG Oil Renewables Other * Based on local generation; Imports are not shown 5
Loss of Generation at Existing Nuclear Plants Will Make it Harder to Meet CO 2 Emissions-Reduction Commitments New England States’ RGGI CO 2 Emissions Assume that: 2009 – 2015; million short tons 60 All of the nuclear fleet in the 6 New England CO 2 Cap RGGI States (~4.5 GW) w/o All are replaced by output Nuclear at gas-fired power 40 plants*: w/o ETR Nuclear ▲ 16 M St CO 2 Emissions Actual CO 2 New Cap (+50% ↑ ) Emission ▲ 0.7 bcf/d Gas Demand (+30% ↑ ) 20 2009 2010 2011 2012 2013 2014 2015 Keeping emissions below the cap without nuclear will mean higher CO 2 allowance prices 6 * This assumes natural gas combined cycle plants; Based on CO2 emissions from the states that are part of the Regional Greenhouse Gas Initiative
Aggressive Renewable Energy Growth Policies Can Create System Reliability Problems, Which Can Be Costly to Fix California Duck Curve Source: California ISO 7
A Case Study: Germany’s Renewable Subsidies Electric Generation by Fuel Type 2000 Renewable Energy Act 100% created strong incentives for Hydro renewables 90% Wind 80% Subsidies accelerated Solar renewable growth 70% Nuclear 60% Post Fukushima, Germany Coal/Gas/ decided to shut down all 50% Oil nuclear plants by 2022, and 1990 1995 2000 2005 2010 2012 shift to all renewables by 2050 Electric Rates in Germany; cents/kWh 40 Government subsidies in 2012: 30 Residential $22.7 billion 20 Increasing electric rates 10 threatening Germany’s Industrial competitiveness 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Sources: International Energy Agency, EnergyAgency.NRW 8
Conclusions • ISONE’s current market design is not sustainable in the long run; both Capacity and Energy market designs need to be reassessed so that they are producing prices at competitive levels. This is urgent. • Out-of-market contracts and subsidies for new resources further distort competitive markets • Nuclear generators currently provide many desirable attributes including high capacity factors, fuel diversity, and avoidance of greenhouse gases, on a scale much larger than competing technologies. But these nuclear plants are being forced to compete on an uneven playing field and may end up leaving the market. • We’re working with ISONE, and other stakeholders on several options that dovetail with the State’s clean energy goals to solve this issue, because we think it’s an expensive failure in today’s markets and we think that the solutions – while outside the box – may be very sensible and cost-effective compared to some of the alternatives currently under discussion. 9
Recommend
More recommend
