Overview of MISO Gas-Electric Infrastructure Analyses and Workshops Industrial Energy Consumers of America (IECA) Presentation November 27, 2012 Washington, D.C.
Disclaimer • Disclaimer: The reports and this presentation was prepared by Gregory L. Peters, President, EnVision Energy Solutions for the benefit of the Midwest Independent Transmission System Operator (“MISO”). This work involves detailed analyses of interstate pipeline daily flow and capacity data and data obtained and compiled by an independent third party. The appropriate professional diligence has been applied in the preparation of this analysis, using what is believed to be reasonable assumptions. However, since the report also necessarily involves assumptions regarding the future and the accuracy of the data, no warranty is made, expressed or implied. 2
Purpose of the Phase 1 and Phase 2 Studies • The purpose of Phase 1 of the Gas/Electric Infrastructure Interdependency Analysis is to: Review and analyze current and future natural gas pipelines, storage facilities and related infrastructure, and extrapolate the impact for natural gas-fired electric power generation from 2011 – 2030 in the MISO region. • The purpose of Phase 2 of the Gas/Electric Infrastructure Interdependency Analysis is to: Build upon the Phase 1 analysis and incorporate the impacts of lower gas prices; and, correspondingly higher capacity factors on the existing gas fleet, on the existing pipeline infrastructure in the MISO region. 3
Analysis Concept CT and CC Gas Requirements Maximum Pipeline Capacity 12k Retirement (General Findings) Starting 2016 Embedded Facilities Embedded Facilities 2011 – 2015 2011 - 2015 Note: box size not precisely to requirements scale 4
Overview of MISO Region Major Pipelines 5
MISO Region Major Interstate Pipelines (All pipelines were analyzed) Pipeline Name Principal Supply Source(s) System Configuration 1. Alliance Pipeline LP Canada Trunk 2. ANR Pipeline Company Louisiana, Kansas, Texas Trunk/Grid 3. Bison Pipeline LLC Wyoming, Montana, North Dakota Trunk 4. Mississippi River Trans. Corp. Arkansas, Oklahoma Trunk 5. Crossroads Pipeline Company Interstate System (feeder) Trunk 6. Great Lakes Gas Trans. Ltd Canada/Canada export Trunk 7. Guardian Pipeline Interstate System (feeder) Trunk 8. KO Gas Trans Co (KY-OH) Interstate System (feeder) Trunk 9. Midwestern Gas Trans. Interstate System (feeder) Trunk 10. Northern Border Pipeline Canada, ND (Bakken) and Bison PL Trunk 11. Natural Gas PL Co. of America Kansas, Oklahoma, Louisiana, Texas Trunk 12. Northern Natural Gas Co. Kansas, Oklahoma, Texas Trunk/Grid 13. Panhandle Eastern Pipe Line Co. Kansas, Oklahoma, Texas Trunk 14. Texas Eastern Transmission Louisiana, Texas Trunk 15. Texas Gas Transmission Louisiana, Texas Trunk 16. Trunkline Gas Company Louisiana, Texas Trunk 17. Viking Gas Transmission Canada Trunk 18. Vector Pipeline LP Interstate/export Canada System Trunk 19. Rockies Express Pipeline Co. Wyoming, Colorado Trunk 20. Southern Star Central Pipeline Kansas, Oklahoma, Wyoming Trunk/Grid 21. Williston Basin Interstate PL ND, WY, MT , Canada Trunk/Grid Trunk - systems are large-diameter long-distance trunklines that generally tie supply areas to natural gas market areas. Grid - systems are usually a network of many interconnections and delivery points that operate in and serve major natural gas market areas . 6 Bolded pipelines indicate MISO-identified facilities
Results – Phase 1 • Wellhead Gas supply is not expected to be an issue • Additional gas pipeline infrastructure is needed to accommodate fuel switching – Additional inter-regional and intra-regional (solely within MISO) main line development needed – Lateral pipelines and compressor additions development needed • Timing for development of new pipeline infrastructure is the main issue – Planning, siting, regulatory and construction of new main line gas pipelines will be on the order of 3-5 years, if started now – Compliance with Mercury and Air Toxics Standards is 3-5 years 7
Phase 1 - Pipeline Capacity Assessment • New pipeline infrastructure is needed to manage volatility and ensure reliability • 21 major pipelines are in the MISO footprint • With the advent of shale gas, the pipeline flow usage is in a state of flux • Some are essentially fully subscribed and some are not • New gas-fired generation will be served off different lines • New main lines as well as lateral lines (line from the main line to the power plant) will be needed • On-site storage of fuel, either diesel or LNG, may substantially lessen the need for new pipeline capacity. The costs and trade-offs need to be studied going forward. 8
Phase 2 Scenarios Analyzed • Expected Capacity Case Embedded Units with Phase 1 Incremental 12K Retirement Units scenario (reduced capacity factors). • Maximum Capacity Case (worst Case): Embedded Units with Phase 1 Incremental 12K Retirement Units scenario. • Capacity Factors: 9
Summary Insufficient Seasonal Capacity Nov.1, 2009 – Oct. 31, 2011 - View from relative comparison basis. EXPECTED CASE MAXIMUM CASE * Crossroads and Vector: Allocated units from LDCs. Crossroads & Guardian restricted by upstream pipelines. 10 ** ANR requires further analysis and explanation of Market Area operations behind measurement points. *** Tested w/ 1 CT & 1 CC unit. Note: Period Nov. 1, 2009 – Oct. 31, 2011 used as REX became fully operational in Nov. 2009.
Results – Phase 2 • Modified-Backcast analysis based on the existing gas infrastructure with existing and new gas capacity were not intended to be a detailed market-area engineering analysis that uses sophisticated forward looking flow analysis. • Over 65% of the Pipelines have insufficient capacity at measurement points into their market area to fully meet the needs of the existing (embedded) units operating at expected capacity factors. • For the period 2016 – 2030, almost 90% of the pipelines have insufficient capacity based on current capacities for the existing units plus an incremental 12,000 MW of coal-to-gas retirement. • Gas industry participants reviewed the report and provided comments of Phase 1 and 2 Analyses. Pipelines comments in general are more optimistic. 11
Results – Phase 2 continued • Some pipelines sourcing gas supply from the Gulf Coast have higher levels of insufficient capacity compared to other Southwest and Mid-Continent pipeline sources. – Additionally, Shale gas supplies in proximity to MISO will need pipeline flow changes and infrastructure build-out. • To ensure generator availability, gas storage may be required • Storage options need to be addressed further. • On site diesel or liquid natural gas (LNG) appear as viable options • Tariff changes may be needed to add qualifications to generators • Regional coordination of MISO members will produce a better solution than each stakeholder acting alone 12
Challenges to Moving Forward • Regional coordination will have greater benefits than each stakeholder acting separately • Cost allocation, who pays and how are the costs recovered for gas infrastructure • Changing regulatory policy creates cost recovery uncertainty • Cost to MISO members will be determined based on the level of retirements as well as location of the new gas-fired power plants • Costs are allocated to main line pipeline development with a complex cost recovery mechanism and to lateral pipelines, which are generally the responsibility of the power plant owner 13
Next Steps • MISO has conducted regional meetings with its Stakeholders to develop a keys issues lists of their concerns. • The FERC held 5 regional Technical Conferences to take input on Gas/Electric Infrastructure issues. • MISO participated in those Technical Conferences and presented concerns and issues. • After the FERC Technical Conferences, MISO and its stakeholders will hold additional workshops with gas industry participants to continue the dialogue between our two industries, identify infrastructure needs and move forward on solutions. 14
MISO regional workshops – Overview Issues • Issue 1 - Inconsistencies between the way natural gas is bought, sold, and nominated and electricity is offered in the RTO will become more of a problem than it is today. • Issue 2 – Pipeline contracting procedures and subtleties; need for firm service that is not economic • Issue 3 - Risks associated with Natural Gas curtailment practices • Issue 4 - Planning for new pipelines 15
Issue 1 – Gas Nomination/RTO dispatch • Alignment of Natural Gas pipeline nomination deadlines and the MISO dispatch processes • Regulated pipeline and electric tariff issues need refinement for transmission of power and natural gas at wholesale level: – Timing – Notification – Prioritization 16
Issue 2 - Pipeline contracting procedures • Additional pipeline capacity will be required to serve the demands of gas fired generators; – the process for adding pipeline capacity requires a commitment for firm transportation service for multiple years; currently it is uneconomic for gas fired generators to procure firm service. • Firm capacity sold on 24x7 basis; whereas, peaking and intermediate capacity needs are volatile 17
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