Integrated Resource Plan Executive Summary

Transcription

1 Planning for Indiana s Energy Future Integrated Resource Plan Executive Summary

2 A Message From NIPSCO s CEO Investing In Indiana s Future There is no better time to think about tomorrow than today. NIPSCO has built a strong history of safely, reliably and costeffectively serving customers and the community. We are equally focused on the future. Through our 2014 Integrated Resource Plan (IRP), we chart our strategy for meeting the future energy needs of customers. The IRP outlines our long-term plan for providing cost-effective and reliable supplies of electricity to power life in northern Indiana for generations to come. A Balanced Approach Maintaining affordable energy is a key factor when designing our roadmap for the future. Several other complex factors and considerations must be evaluated. Key strategy drivers include environmental regulations, market conditions, fuel prices, economic conditions, and technology and renewable energy advancements. Integrated resource planning is one way to address each of these drivers. We rely on the process outlined in our IRP, which includes input from the public and multiple subject matter experts, to help determine the best path for serving our customers. The feedback we receive through ongoing dialogue with our regulators, customers and other key stakeholders continues to be an integral component of our planning process. 1

3 Our findings indicate that NIPSCO continues to have sufficient existing energy resources to meet the needs of our customers through At that point, our plan calls for replacing some existing coal-fired generation with new natural gas-fired generation. System Modernization and Upgrades Infrastructure is vital for reliably delivering energy to our customers. Maintaining NIPSCO s delivery system is foundational for northern Indiana s energy future to ensure homes and businesses have the reliable energy they need. To meet that need, we plan to invest more than $10 billion over the next 25 years in each of the three key areas of our electric system generation, transmission and distribution. We are upgrading our electric generating facilities with added environmental controls that will help improve air quality across the region. We are constructing nearly 170 miles of new electric transmission lines across Indiana. Like a super highway, these new lines will expand our energy delivery system, relieve congestion and improve access to regional power supplies. And, beginning in early 2014, we embarked on a long-term plan to modernize and replace essential components of our transmission and distribution infrastructure. Projects range from replacing aging poles and transformers to upgrading electric lines and constructing new substations. These investments are being made right here in Indiana, helping to create local jobs and providing a platform for continued economic growth within the communities we serve. Indiana s future economic success and sustainability depends on continued investment in modernizing the energy infrastructure and setting a direction for long-term resource needs. Providing the type of service our customers expect and deserve will always remain at the center of any plan for the future. It is a mission we are honored to undertake. Sincerely, Jim Stanley 2

4 About NIPSCO NIPSCO serves more than 457,000 electric customers across the northern third of Indiana with affordable, safe and reliable energy. NIPSCO s nearly 2,700 employees are dedicated to serving its unique customer base. Across our 30-county service territory, the company has a significant, positive impact on the communities where our employees and customers live and work. We are working to strengthen customer and community relationships by making it easy for our customers to do business with us, partnering with our communities to support economic development and create jobs, promoting environmental stewardship and serving as a strong corporate citizen. 3

5 Through long-term planning, NIPSCO looks for low-cost solutions for customers future energy needs, while supporting our area s economy, our environment and the company s longterm viability as a service provider. Member of Midcontinent Independent System Operators (MISO) NIPSCO serves as a member of the MISO network, along with electric utilities across 12 U.S. states and the Canadian province of Manitoba. As a participating member, NIPSCO is able to supplement its existing energy resources through markets operated by MISO.? Did you know? The industrial customers in NIPSCO s service area, primarily in steel and oil refining, account for less than one percent of our total customers. However, they make up more than 50 percent of our total energy sales and are among the top production facilities in the U.S. 4

6 What Is The Integrated Resource Plan? The IRP charts our strategy for the next 20 years for meeting the future electricity needs of our customers. The plan is developed and presented to the Indiana Utility Regulatory Commission (IURC) every two years. Our goal is to reliably and cost-effectively serve customers today and in the future, while addressing the inherent uncertainties and risks that exist for the electric utility industry. The plan assesses customer requirements for electricity and evaluates all available options to meet that need. It includes a discussion of the process, methods, models and assumptions utilized in the plan s development. Additionally, the plan includes various studies, analyses and reports generated by a combination of internal and external subject matter experts. The long-term plan may change over time as conditions change and information is updated. PUBLIC INVOLVEMENT A well-thought and thorough plan requires input from a diverse and knowledgeable range of information sources. New to the IRP process this year was the opportunity for increased public involvement. This enhancement provided open lines of communication for NIPSCO to inform stakeholders about the entire makeup and planning behind the IRP process. We also gathered input to aid in the planning of the IRP. Ultimately, because the plan outlined in the IRP impacts the customers and communities we serve, their involvement is essential. + This year, the IRP process included increased public involvement through three public meetings and 18 one-on-one meetings. The public provided input to aid in the planning and were given the opportunity to learn about the analysis, modeling and data assumptions used. 5

7 The IRP Process While NIPSCO s business planning process is updated regularly, the IRP is produced and submitted to the IURC every two years. Prior to submitting the IRP to the IURC, NIPSCO outlines a series of steps to help determine the most cost-effective, reliable and sustainable plan. The process includes: 1 An assessment of NIPSCO s current sources of electric generation 2 An analysis of NIPSCO s future customer demand and generation needs 3 An evaluation of all available options 4 An optimization of the plan and portfolio 5 An evaluation of the risks associated with each scenario 6

8 1 ASSESSING NIPSCO S ENERGY MIX NIPSCO studies its current generating facilities, purchased power agreements, demand-side management programs, and its transmission and distribution system to ensure we have the right mix to best meet the needs of our customers. It takes a diverse portfolio of options to serve our customers safely, to maintain reliability, to comply with multiple regulations, and to do it all cost-effectively. Coal remains the most prevalent fuel source for generating electricity in the nation because of its abundance and low-cost. In 2013, 39 percent of the U.S. s nearly four trillion kilowatt-hours (kwh) of electricity used coal as the source of energy (Source: Energy Information Administration). For NIPSCO, coal-fired generation accounted for 81.1 percent in The Environmental Protection Agency (EPA) regulations have resulted in the retirement of some smaller, older coalfired units across the nation where the investment in additional environmental controls were not a cost-effective solution. NIPSCO recognizes the danger of over reliance on any one fuel source, and instead focuses on a diverse supply mix as shown in the chart below. ELECTRIC GENERATION/FUEL MIX (2013) Hydro 0.1% Renewables 1.7% Natural Gas 17.1% Other 0.1% Petroleum Liquids 0.1% Hydro 0.4% Petroleum Coke 1.3% Renewables 3.5% Natural Gas 7.9% Coal 81.1% Coal 86.6% NIPSCO Indiana 7

9 2 PROJECTING CUSTOMER DEMAND AND GENERATION NEEDS NIPSCO evaluates customers needs and our existing resources in order to determine if extra generation is required. See Fig. No. 1 below as an example. The range of unforeseen variables primarily externally-driven makes it challenging to forecast future demand. Our forecasts show an increase in overall customer demand of approximately 11 percent over the next 20 years. The total number of NIPSCO electric customers is projected to increase from approximately 468,000 customers today to about 516,000 customers by Given the concentration of manufacturing especially steelrelated in NIPSCO s service area, forecasting economic activity for this cyclical sector is an important step in assessing expected future electric demand. Fig. No. 1 Example of IRP Supply & Demand Analysis NIPSCO Supply Customer Demand Forecast Megawatt IRP outlines preferred resources when a need is identified 5 year 10 year Time 15 year 20 year 3 EVALUATING ALL AVAILABLE OPTIONS Each source of electric generation has unique characteristics, ranging from total cost, environmental benefits, reliability and impact on the electric system. NIPSCO conducts a thorough evaluation of options to meet our customers future energy needs, including: Coal Nuclear Natural Gas Energy Efficiency Renewable Demand Response Hydroelectric Customer Generation Biomass Our electric portfolio includes a diverse mix of options that provides the most cost-effective, sustainable and reliable source of electricity for our customers. 8

10 4 OPTIMIZING THE PLAN AND PORTFOLIO NIPSCO s integration analysis matches the demand forecast with existing owned generation, energy efficiency and self-build, supply-side alternatives. The analysis then ranks the options available for NIPSCO to provide service at the lowest, reasonable cost with the most efficient, economical, flexible and reliable resources. Portfolio 3 Affordable 3 Reliable 3 Compliant 3 Efficient 3 Flexible 5 EVALUATING RISK To evaluate risk, NIPSCO first develops a base case portfolio which reflects NIPSCO s current view of the future. Then, NIPSCO develops distinctly different alternative portfolios. The scenario and sensitivity analyses are then performed to see how each portfolio performs under future changes. Multiple factors can affect the plan such as capital investments, revised assumptions, policy, legislative and regulatory changes, market opportunities and economic changes. 9

11 Addressing Key Industry Issues Our View ENVIRONMENTAL REGULATIONS Protecting the environment is critical to future generations, and NIPSCO has a proven track record when it comes to meeting environmental standards. The U.S. EPA continues to present new regulations seeking improvements in air and water quality, coal ash management and more. With more stringent regulations come increased costs to customers. So, we must comply with new requirements in a way that maintains Indiana s competitive electric rates. Since 2005, NIPSCO has cut greenhouse gas (GHG) emissions by 18 percent. That reduction has outpaced the national average for all industries combined (only 10 percent). Nationally, the biggest drivers of GHG reductions are low natural gas prices combined with coal plant retirements. At NIPSCO, a number of factors have contributed to the reduction in our carbon footprint, including: Diversifying our sources of electric generation, including the addition of the natural-gas fired Sugar Creek generating facility and 100 megawatts (MW) of purchased wind power. Upgrading existing coal fleets to use less fuel to generate the same amount of electricity. Adding customer programs such as the small distributed generation program, the green power rate program, multiple energy efficiency programs and more. 10

12 NIPSCO and its parent company NiSource Inc. are committed to meeting current and future environmental obligations. We will work collaboratively with our stakeholders in addressing the risks and opportunities associated with the climate change issue. We are also committed to continuing to reduce the carbon intensity of our operations. We plan to meet the energy needs of customers through business activities which promote sustained economic growth in a manner compatible with our environmental obligations. To these ends, NIPSCO and NiSource will: Remain an industry leader in accurately accounting for GHG emissions and providing timely reporting and transparency in climate-related activities. Increase the efficiency and reduce the carbon intensity with which we provide energy to our customers by taking steps to produce and obtain electricity from sources with lower carbon intensity, increase natural gas transportation efficiency and reduce methane losses from natural gas transmission and distribution. Encourage our customers to use energy wisely by working with them to develop demand-side management and energy conservation programs, along with ensuring that the revenue models under which regulated NiSource companies recover their costs are aligned with energy efficiency goals. Promote adoption of reasonable policies addressing climate change. RENEWABLE ENERGY We have taken steps to diversify our energy supply portfolio to include renewable energy resources. And, we are proud to provide customers with options to generate and even sell their own renewable energy or purchase green power for their homes and businesses. As we look to the future, it will be important to find the right balance of renewable energy that makes sense within our overall portfolio. We need creative solutions to continue providing customers with the ability to safely generate their own renewable energy. An environmental benefit of renewable energy whether owned by the utility or generated by customers makes a compelling case for those sources. However, renewable energy 11

13 primarily wind and solar lacks the same level of reliability offered by other options such as natural gas or coal-fired generation. The ability to have the power there for customers whenever it is needed is essential especially given the demands of the large, globally-competitive steel industry in our region. We recognize that the cost of renewable energy resources improves as the technology develops and we regularly evaluate the range of future opportunities. In the near-term, we believe renewable energy will serve as a supplemental supply of power within the overall mix, rather than a baseload source. ENERGY EFFICIENCY PROGRAMS Offering programs designed to help customers save energy is beneficial to both customers and NIPSCO, and they can play an important role in the long-term plans to meet customers future energy needs. 12

14 NIPSCO began offering energy efficiency programs to its natural gas customers in 2007 with added electric-focused programs beginning in Since then, offerings for homes, businesses and other institutions have steadily increased. In addition, many of NIPSCO s large industrial and commercial customers have taken their own creative steps to improve energy efficiency. Today, customers have a range of options, including: Appliance Recycling Energy Efficiency Rebates Air Conditioner Cycling Incentives Home Weatherization Multi-Family Direct Install Program Home Energy Report/Comparisons Despite the recent changes made to Indiana s uniform energy efficiency programs, NIPSCO maintains a strong commitment to continue making programs available now and in the future. NIPSCO recognizes the value and benefit of energy efficiency and we believe programs should be tailored to meet the specific needs of our customers, while providing a direct and immediate impact. Of course, we want to be sure the cost to offer these programs does not outweigh the benefits to our customers. Helping customers save energy is important and the programs in place today are showing results. In the longrun, we want to make sure they are cost-effective in meeting the desired savings goals while avoiding a negative burden on customer bills. 13

15 Modernizing The Energy Delivery System A reliable source of energy requires a modern energy infrastructure. And, just like the nation s current efforts to improve the transportation infrastructure, the utility industry is in need of an overhaul to ensure that it has a safe and reliable system to keep up with future demand. NIPSCO s Infrastructure Modernization Plan takes a comprehensive, long-term look at the best approach for prioritizing and identifying investments in both its electric and natural gas system which will provide significant benefits to customers in northern Indiana and across the state. Vast portions of the nation s electric and natural gas systems were built in the post-world War II era. After more than 50 years, portions of that system are nearing the limits of their original design. NIPSCO s Infrastructure Modernization Plan proactively tackles these critical areas before they become problematic. Through 2020, NIPSCO will be replacing 450 miles of underground electric cable that is unjacketed and prone to failure, rebuilding 500 miles of electric lines/circuits, replacing 75 substation transformers and 900 breakers, among a range of other projects. NIPSCO s plan will provide a number of direct benefits to customers and communities, including: A continued safe and reliable system for the future Identification and elimination of potential recurring outages caused by aging system failures A more modern energy system, a critical component to attracting new businesses and expanding existing businesses in this area Support for the equivalent of 1,200 direct and indirect jobs including local trades throughout the decade Ongoing external review and oversight to ensure the necessity of these investments Gradual/minimal bill impact over time Learn more at NIPSCO.com/Future. 14

16 Improving Air Quality We are in the process of completing a more than $800 million, multi-year investment at our R.M. Schahfer and Michigan City electric generating stations to install environmental controls that will improve air quality. By 2016, our coal fleet will be 100 percent scrubbed. The investments we are making have also created a positive impact on the local economy through building material and resource contracts with Indiana-based businesses, employment for the local trade unions and partnerships under the Indiana Plan to introduce a diverse workforce to the building trade. Learn more at NIPSCO.com/Environment. Transmission System Expansions Through our Reynolds-Topeka and Greentown- Reynolds electric transmission projects, we are investing $ million to construct 170 miles of new electric transmission lines in Indiana. Both projects are expected to be in-service in The improvements will provide greater market access to electricity at lower costs and improve service to our customers. Learn more about each project at ReynoldsTopeka.com and GreentownReynolds.com. Energy Spotlight: Green Power Rate Through NIPSCO s Green Power Rate program, customers have the power to choose how green they want to be. Participants can elect 25, 50 or 100 percent of their monthly electric usage to be attributable to power generated by renewable energy sources. At 100 percent, that s only a few dollars a month. Commercial and industrial customers have the added flexibility to designate 5 or 10 percent of their monthly usage. Recently, NIPSCO has partnered with Deep River Waterpark run by Lake County Parks Department and the South Shore Line as part of a broader marketing effort to promote further enrollments in the program. For more information or to enroll, visit NIPSCO.com/GreenPower. 15

17 Action Plan Short-Term Action Plan Based On Findings In summary, our findings indicate that in the short-term, through 2016, our current electric portfolio comprised of coal, natural gas, renewable and demand-side resources will meet our customers capacity, energy and reserve requirements. We will continue to invest in infrastructure modernization and protection to ensure safe and reliable delivery of energy services and continued compliance with standards established to ensure the security of critical assets. We will continue to offer service options for customers, including demand-side management and energy efficiency programs. And, as new regulations are proposed and implemented including EPA regulations we will work collaboratively with our stakeholders to develop compliance strategies and seek the necessary regulatory approvals to ensure continued compliance. 16

18 Long-Term Plan For Future Energy Needs Compared to the 2011 Integrated Resource Plan, the preferred portfolio reflects: Increased energy efficiency and demand-side management resources Increased market purchases Potential new gas-fired combined cycle gas turbine (CCGT) generation similar to the 2011 IRP Potential retirement of 980 MW of primarily coal-fired generation and expiration of the initial term of 100 MW of wind generation purchase power contracts, similar to the 2011 IRP NIPSCO s current generation incorporating required environmental controls is projected to operate through the period up to From 2017 through 2022, we plan to meet our customers needs using our current electric portfolio resources. If such resources do not meet our estimates, we will supplement with short-term capacity purchases to meet reserve margin requirements. During that time period, we expect to conduct a formal Request for Proposals to consider all available supply and demand-side resource options to meet the need for an intermediate, type capacity resource in 2023, such as a CCGT facility. All resource additions require approval from the IURC. The long-term plan is subject to change. Factors that can affect the plan include capital investments, revised assumptions, the retirement of aging units, policy, legislative and regulatory changes, market opportunities and economic changes. We will continue to monitor market conditions and evaluate potential options for our long-term energy resource plan, as appropriate, to ensure that the best decisions are made for customers now and in the future. 17

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20 RP 801 East 86th Avenue Merrillville, IN