Presentation of the Power Supply Plan BURNS~ DONNELL. Grand Haven - PowerPoint PPT Presentation

Presentation of the Power Supply Plan BURNS~ £DONNELL. Grand Haven Board of Light & Power November 2018

Agenda ► Power Supply Plan Highlights ► Industry Overview and Trends ► Utility Planning Requirements ► Planning Efforts from 2012 to Present ► Power Supply Options ► Economic Analysis ► Conclusions & Recommendations 1 BURNS~M~DONNELL "

Agenda ► Power Supply Plan Highlights ► Industry Overview and Trends ► Utility Planning Requirements ► Planning Efforts from 2012 to Present ► Power Supply Options ► Economic Analysis ► Conclusions & Recommendations 2 BURNS~M~DONNELL "

What is a power supply plan? Internal & Independent Condition Integrated Resource Planning Studies Assessment of Existing Plant Supply Portfolio Paths Economic MISO Network Replacement Plant Screening/ Cost­ Compatibility Siting Studies Assessment Benefit Evaluation Power Supply Primary goal of a power supply plan Plan is to provide an economic evaluation of a utility’s power supply portfolio over both short-term and long-term planning horizons. Need to focus on short-term decisions that position utility for long-term success. 3 BURNS~M~DONNELL ~

Power Supply Plan Highlights ► GHBLP has evaluated its power supply comprehensively since 2012 ► Within the electric utility industry, older, less efficient steam plants are now higher cost. This is true for J.B. Sims Unit 3. There are less expensive resources available. ► Having Network Integrated Transmission Service (NITS, full service transmission rights), the GHBLP electrical system will be more reliable and also provide the opportunity to access low cost capacity and energy. ► Maintaining appropriate level of on­system generation allows GHBLP to retain local generating capacity while taking advantage of low MISO power prices. ► Snowmelt system can be operated in a “decoupled” configuration with a new natural gas­fired heat generator and electric pumps. A combination of local on-system resources, market capacity, and renewables would provide GHBLP a well diversified power portfolio. 4 BURNS~M~DONNELL "

Agenda ► Power Supply Plan Highlights ► Industry Overview and Trends ► Utility Planning Requirements ► Planning Efforts from 2012 to Present ► Power Supply Options ► Economic Analysis ► Conclusions & Recommendations 5 BURNS~M~DONNELL "

Industry Overview and Trends ► Many coal­fired power plants have retired due to economics, more are expected ► Natural gas prices are low, expected to stay low ► Relatively low overall load growth across the U.S. ► Increasing amounts of renewable power, especially wind in the Midwest ► Wholesale electricity prices remain low 6 BURNS~M~DONNELL "

Municipal Utility Trends ► Municipal utilities are retiring uneconomic generation • Mainly small­scale coal plants ► Membership in municipal joint action agencies provides economies of scale and additional reliability for small communities ► Low wholesale electricity prices support “relying on the market” for capacity ► Low load growth along with increases in energy efficiency reduce need for new on­system generation ► Municipal utilities are increasingly installing reciprocating engines as a source of new­build capacity in cooperation with renewable energy purchases 7 BURNS~M~DONNELL "

~ ✓ ~ Wholesale Energy Market Prices (2006-2018) Historical Wholesale Energy Price $90 Polar Vortex ► Prior to 2009, market Average $80 energy prices significantly $48/MWh [ $70 higher than today ­ :::!!: ~ ;$60 • Recession reduced demand CJ ·;:: • Natural gas fracking lowered $50 IO fuel price .5 ~$40 • Increased energy efficiency :::!!: .. • Increased renewables $30 0 ► Post 2009, market prices IO g $20 Average ...I have been lower $33/MWh $10 ► J.B. Sims Unit 3 is $0 unprofitable at current ..... N <D I'­­ 00 0) 0 ..... ..... ..... (") ..... ..... s:::t ..... LO <D ..... I'­­ ..... ..... 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 market prices N N N N N N N N N N N N N 8 BURNS~M~DONNELL ~

Agenda ► Power Supply Plan Highlights ► Industry Overview and Trends ► Utility Planning Requirements ► Planning Efforts from 2012 to Present ► Power Supply Options ► Economic Analysis ► Conclusions & Recommendations 9 BURNS~M~DONNELL "

Pillars of Utility Mission Statement ► Low cost energy ► Reliable energy ► Safe energy ► Environmentally compliant energy 10 BURNS~M~DONNELL ~

GHBLP Key Considerations ► Previous studies recommended the following actions: • Retire Sims Unit 3 on an economic basis • Invest in transmission and distribution to prepare for increase reliance on market imports • Most economical option for on­system generation is a small, quick­start natural gas resource such as reciprocating engines ► Community and policy drivers: • Maintain some form of on­system generation • Move away from coal­fired generation • Shift toward a more sustainable power supply and increase usage of renewable resources • Continue operation of snowmelt system regardless of J.B. Sims retirement Ideal power supply plan for Grand Haven balances economics and community drivers 11 BURNS~M~DONNELL "

GHBLP’s Obligations ► Provide sufficient capacity (MW) to meet demand • Based on NERC rules, MISO sets capacity requirement based on GHBLP’s load forecast • Capacity comes from units that GHBLP builds, contracts through bi­ lateral agreement, or demand side management • Capacity typically has to be dispatchable, renewables are intermittent and don’t provide significant capacity ► Provide sufficient energy (MWh) to meet customers’ needs • Electrical energy comes from units that GHBLP builds, contracts, net metering, conservation, or MISO market ► Energy must be compliant with regulations • Renewable and solar mandates • Environmental regulations 12 BURNS~M~DONNELL ~

~ Balance of Loads & Resources (BLR) ► MISO requires utilities to Path 1 - Sims Operational Capacity Surplus I (Defici t) maintain capacity reserves 21 21 20 20 20 5 4 4 4 3 3 4 19 19 18 17 17 6 6 5 90 of 7.8% in excess of demand I I 80 -~ . ~ .. r. .. r. .. r. .. r ri f'J ► GHBLP must secure “firm” ­ . . . . . ··························· 70 capacity to meet its demand - 60 ~ !. plus reserve requirements 50 ::, -~ 40 ► Renewables do not get full C. "' o 30 credit due to intermittency 20 (i.e. non­firm) 10 • Wind receives 15.6% 0 v a, r­­­ co a, v r­­­ co 0 C") Lt) <O 0 C") Lt) <O N N N N N N N N N N N N C") C") C") C") C") C") C") C") C") 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 • Solar receives 50% N N N N N N N N N N N N N N N N N N N N ­ JBSims :3 MPPA Solar Project ­ MPPA Landfill Gas Project • Dependent on actual generation ­ Beebe 1 B \Mnd Project ­ Pegasus Wind Project ­ CMS Energy Contract Market Capacity Purchases ­ System Peak •• • • System Peak+ Reserve 13 BURNS~M~DONNELL ~

Agenda ► Power Supply Plan Highlights ► Industry Overview and Trends ► Utility Planning Requirements ► Planning Efforts from 2012 to Present ► Power Supply Options ► Economic Analysis ► Conclusions & Recommendations 14 BURNS~M~DONNELL "

Power Supply Planning Efforts GHBLP has completed numerous comprehensive studies over the past several years assessing its power supply plan. Sims Plant Closure Recommendation Report Board Approved S&L Integrated MISO Report Policy Statements Resource Plan B&V Natural Gas Organization I RP Considerations .....,_ Generation Siting Study Check Up Snowmelt Sims Internal 2013 I I Condition Assessment Study 1 l 2014 1 2012 2015 2016 2017 2018, Sims Staffing Key Policy Report Statements B& V Natural Gas Generation Siting GHBLP Study Supplement B&V Sims Life Strategic Plan Assessment Report 15 BURNS~M~DONNELL ~

Power Supply Planning Efforts Sims Plant Closure Recommendation Report Board Approved S&L Integrated MISO Report Policy Statements Resource Plan B&V Natural Gas Organization I RP Considerations .....,_ Generation Siting Study Check Up Snowmelt Sims Internal 2013 I I Condition Assessment Study 1 l 2014 1 2012 2015 2016 2017 2018, Sims Staffing Key Policy Report Statements B& V Natural Gas Generation Siting GHBLP Study Supplement B&V Sims Life Strategic Plan Assessment Report 16 BURNS~M~DONNELL ~

Initial Planning Efforts ► Since 2012, GHBLP has been gathering information to address the need to replace aging power supply resources ► Sargent & Lundy (S&L) Integrated Resource Plan (April 2012) • Formulated a long­term plan to meet GHBLP’s future power supply requirements • Performed condition assessment and environmental compliance evaluation of J.B Sims Unit 3 and Diesel Plant • Identified that Unit 3 and the diesel plant would retire in 2020 • Extensive evaluation of power supply options Identified that Sims Unit 3 and the diesel plant would retire in 2020 17 BURNS~M~DONNELL "