Growing the Energy Hub New Brunswick System Operator Its Mission and Vision Sylvain Gignac, President & CEO New Brunswick System Operator 1
Presentation Outline The Energy Hub A Definition Regional Challenges & Opportunities The NBSO Its Role Planning for the Hub Strategic Initiatives to Support the Hub 2
The Energy Hub A Definition 3
Definition The Government of New Brunswick is interested in developing the province as an energy resource hub, through the development of renewable and non-carbon emitting resources, such as wind, hydro and nuclear for domestic load and export to surrounding markets. 4
Interconnections in the Maritimes 800 1200 Québec 100 New Brunswick 222 500 350 PEI Maine 30 300 New Hampshire 1000 Nova Scotia 5
Installed Capacity in the Maritimes PEI, 188 NM, 158 NS, 2340 NB, 4175 6
7 The Energy Hub Regional Challenges & Opportunities
Political & Economical Increased Regional Demand: The New England Governors and Eastern Canadian Premiers (NEG/ECP) have resolved to enhance the region s energy independence, increase development of renewables, and reduce the volatility of electricity prices. ISONE New England Long Term Transmission Plan & Possible Market Coordination with New Brunswick: For the New England region, the potential benefits include access to possibly significant amounts of potentially lowercost energy, and non-carbon emitting and renewable resources to help the region meet both RPS and RGGI requirement. 8
Political & Economical State RPS Policies in ISO New England 9
Political & Economical Financial Crisis: Stock-valuations for utilities plummeted; The slowing economy ate into some of the demand for electricity; and, In the short term, power companies, the third largest borrowers after the government and the financial-services industry, can no longer rely on mountains of cheap credit. 10
Political & Economical Nex WilderHill Energy Index 11
Political & Economical Oil Prices: At $50 USD or less per barrel, the economical incentive to add renewable capacity may have lost its financial appeal. However, on the long run, in the US, the consumption of fuels is tending to be made more expensive while renewable sources of energy and nuclear will continue to enjoy government promotion partly to secure supplies. Increased interest in North South transmission capacity. 12
Political & Economical 2800 MW Hydro 1500 MW Wind Lower Churchill Transmission Options 13
Political & Economical Energy Policy for America: Security of Supply Economic Efficiency Sustainability Environmental Protection 14
Political & Economical US President Elect - New Energy Policy for America: Help create five million new jobs by strategically investing 150 billion over the next ten years to serve as a catalyst for private efforts to build a clean energy future. Put 1 million Plug-In Hybrid cars - cars that can get up to 150 miles per gallon - on the road by 2015, cars that the US will work to make sure are built here in America. Ensure 10 percent of their electricity comes from renewable sources by 2012, and 25 percent by 2025. Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050. 15
Political & Economical President Obama's first weekly address: "To accelerate the creation of a clean energy economy, we will double our capacity to generate alternative sources of energy like wind, solar, and biofuels over the next three years. We'll begin to build a new electricity grid that lay down more than 3,000 miles of transmission lines to convey this new energy from coast to coast. We'll save taxpayers $2 billion a year by making 75% of federal buildings more energy efficient, and save the average working family $350 on their energy bills by weatherizing 2.5 million homes. 16
Political & Economical Transmission & System Operations Study in Nova Scotia: The NS DOE is moving forward with a major transmission and system operator study which will help facilitate renewable opportunities beyond 2013 by plotting a flexible path forward for renewable policy development. This includes: 1. A review of options for NS transmission system to maintain reliability. 2. A review of options to expand the transmission system to accommodate renewable energy supplies in NS to meet NS targets and also import/export of renewables. 3. A review of options for system operations - Existing NSPSO - Independent NS system operator - Integration of NSPSO with NBSO -New regional SO for at least NS, NB and PEI ( NS RFP Dec. 2/08) 17
Current Supply Mix In New England Maritimes 18
Net Potential Generation in NB Lepreau II Lepreau III Natural Gas Other co geneneration Hydro Biomass Wind Newfoundland injection 1100 MW 1100 MW 500 MW 500 MW 400 MW 100 MW 3,000 MW 800 MW 19
Wind Generation for the Maritimes Area Area Present Within 2 Years Within 5 or 6 Years NB 96 300 600 NM 42 350 850 NS 60 300 550 PEI 72 150 500 Total 270 MW 1100 MW 2500 MW Kent Hills Wind Farm: Workers are ready to bolt the rotor or blade assembly to the nacelle, which sits atop of the tower 20
System Impact Studies for Wind SIS Queue for NB Over 3000 MW NS 2000 MW PEI 1400 MW 21
Wind Capacity in NB Exploitable Potential 42,000 MW (as per NB wind atlas) Economically Feasible (NB) 3,000-4,000 MW Economically Feasible (Maritimes) 5,500-7,500 MW 22
Wind Integration Cost Study 23
Large Wind Integration Requirements Large Geographic & Electric Size: Larger footprint of traditional generation is needed in order to reduce load volatility and the cost of balancing load with aggregate generation. Five-to-Fifteen-Minute Dispatch: In terms of load following, costs are higher in areas that have only hourly energy markets or hourly-adjustable contracts. 24
Large Wind Integration Requirements Hourly Scheduled between Markets to be reviewed: Fixed hourly schedules; Dispatch signals sent on hourly basis; and, Within-hour variation in output is handled by Automatic Generation Control Unit or Load Following with significant opportunity costs. 25
Opportunities for the Hub: Increasing environmental requirements; Major investment on grid infrastructures throughout the US; A regional willingness to buttress coordination; and, Unstable and potential rising fossil fuel prices. The marginal cost of producing alternative fuels, such as oil sands, is probably around $70/b. Set against this, the Basket price fell below $60/b on October 24, and below $50/b on November 21, before continuing down to $42/b. There is a clear mismatch along the time-horizon, with many longer-term investment needs not being supported by shorter-term price movements. 26 Increasingly, delays, cutbacks and cancellations of projects are being announced throughout the industry, together with other responsive measures, as crude prices drop from one investment-breakeven level to the next and the realization dawns that this is no overnight phenomenon. Moreover, this trend has been reinforced by the present severe restrictions on credit and the gloomy world economic outlook.
Challenges for the Hub: Market access to neighboring areas: Stronger transmission ties with our neighbors; and, Better dispatch integration with our neighbours to integrate large amounts of wind resources into the bulk power system reliably. 27
28 Challenges for the Hub: Sharing the Costs of Transmission: Transmission Pool Funding: as an example, in New England, transmission assets have to meet the test as Market Efficiency Transmission Upgrade to be paid regionally: The need to address specific reliability needs; and, They should not be limited to economic or environmental benefits. Participant funding may have to be agreed by the beneficiaries of the projects: merchant transmission line versus private line.
Certainty in our resources and the region s need for these New Brunswick has the potential to add generation and transmission capacity to answer the growing needs of our neighbours. The NBSO needs to develop and cultivate a robust energy partnership with developers and regional policy makers. 29
30 The NBSO Its Role
31 An Independent System Operator Established in October, 2004. Performs Independent System Operator functions. Non-profit organization independent of all other electricity market participants. Governed by an independent board. Regulated by the EUB; and, Operations of the NBSO funded through Schedule 1 (Scheduling, System Control and Dispatch Service) of Transmission Tariff.
Core Activities Maintain the adequacy and reliability of the integrated electricity system Procure and provide ancillary services Enter operating and interconnection agreements Participate with standards authorities (NPCC, NERC, etc) Undertake and coordinate power system planning and development responsibilities For present and future needs For adequacy and reliability For efficient operation of a competitive market Facilitate the operation of a competitive market Design and administer Open Access Transmission Tariff Implement Market Rules 32
North American Reliability Corporation The North American Electric Reliability Corporation (NERC): its mission states that it is to "ensure that the bulk power system in North America is reliable. Northeast Power Coordinating Council (NPCC) is one of nine regional electric reliability councils under NERC authority. In terms of load served, NPCC covers 20% of the Eastern interconnection's total load demand, and 70% of Canada's entire demand. The NBSO, which is an ISO, coordinates, controls and monitors the operation of the electrical power system. 33
North American Electric Reliability Council SPC - Member of the NPCC 34 -One of 18 Reliability Coordinators
Blackout of 2003 35
36 The NBSO Planning for the Hub
Comprehensive Power System Planning Substantial investment needed in transmission. To the extent that power projects are stalled by the planning process, this would impede progress; Planning is consistently one of the top concerns for inward investors. A 2006 report by Ernst & Young on the relative attractiveness of countries for investment found that the countries position will fall because of concerns about planning issues; CPSP will integrate local, provincial and regional benefits, as well as economic, environmental and social objectives; and, Cost, delay and uncertainty that may be created by the energy planning system and the impact on our energy policy goals compel us to put planning at the forefront. 37
Policy NB/NS/Adjacent markets -Federal Gov t -Utilities -NERC/NPCC -Regulators Integrated System Load -Generators -Transmission -Etc Resource Availability Wind -Tidal -Natural gas -Etc Technology Availability Infrastructure -Controls -Etc Environment Siting -Emissions -Etc NBSO Scenario Analysis Scenarios NBSO Strategic Planning Process Various Stakeholders Comprehensive System Plan(s) Analysis SO Analysis Policy Decisions Investment Decisions NBSO Decisions 38
39 The NBSO Strategic Initiatives to Support the Hub
Strategic Objectives Transmission Access; Coordination Between Markets; and, Renewable Capacity. 40
Transmission Access Strategies Access to Transmission Capacity - Access rights need to be redefined in the context of the Energy Hub so that all generators may access transmission for export purposes. Expansion Projects within New Brunswick that may be necessary to integrate remote renewable resources to the power grid with the aim of serving domestic load and exports; Interconnection Projects that may be needed in order to export more power into New England; Allocation of Transmission Costs - In order to make more efficient use of existing and new capacity there needs to be better arrangements for sharing transmission capacity costs; and, Transmission Upgrades in Adjacent Markets. 41
Transmission Access Initiatives To seek Expressions of Interest & RFP to solve emerging constraints within the Province and for exports: In December 2008, the NBSO released its Discussion Paper on Potential Generation and Transmission Developments. To participate in Joint Coordinated System Plan; To review and redesign the NB Tariff; and, To increase our involvement in ISO-New England, FERC, and state committee activities, regulatory proceedings relative to transmission planning (technical, economic & policy). 42
Coordination Between Markets Initiatives To explore more advanced market coordination and potential integration with ISO-NE, including: Alternative 1: Increase the frequency and the flexibility of scheduling transactions; Alternative 2: Actively coordinate dispatch; or Alternative 3: Conduct a single dispatch within a unified market across New England and New Brunswick/Maritimes. To investigate the possibility of developing a NORDPOOL arrangement for a region consisting of NB, NS, PEI, New England and Québec. (e.g. access to regional resources for regulation and load following - balancing) 43
Coordination Between Markets - Initiatives To propose regional approach to intra-hour scheduling & dispatch between markets; To implement with ISO-NE the half-hour scheduling: Pilot; and, Automation. To work with HQTE and NSPI on intra-hour schedule changes; 44
Renewable Capacity Initiatives: Tariff and market rules revisions specific to variable nondispatchable generation (e.g. wind power forecasting, settlement, dispatch); To develop capacity in wind forecasting; To promote the recognition of New Brunswick s renewable capacity within the adjacent market s generation mix. 45
The NBSO, through our leadership role, is recognized as a key contributor to the development of generation, transmission and export energy for the attainment of social, environmental and economic benefits for the region. 46