Future Generation Mix in PJM
Governor’s Conference on Energy
Richmond, VA
Steven R. Herling
Vice President, Planning
PJM Interconnection
October 17, 2013
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PJM Well Positioned for Growth in Gas-Fired Generation
2
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Where the Drilling Action is Today
3
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Shale Gas Production Continues to Climb
4
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Delivered Fuel Price
$/MMBtu
10
PJM-Eastern Hub
9
Henry Hub
8
Coal Delivered Price
7
6
5
4
3
2
1
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
0
Source: IHS-CERA, September 2013
5
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Lingering Low Electricity Demand
Load, MW
190,000
185,000
180,000
175,000
170,000
165,000
160,000
2011 Load Forecast
2012 Load Forecast
2013 Load Forecast
155,000
150,000
145,000
140,000
Year
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7
$80
July 2020
$100
January 2020
$120
July 2019
$140
January 2019
$160
July 2018
January 2018
July 2017
January 2017
July 2016
January 2016
July 2015
January 2015
July 2014
January 2014
July 2013
January 2013
July 2012
January 2012
July 2011
January 2011
July 2010
January 2010
July 2009
January 2009
July 2008
January 2008
Spot Power Price Projections
East, On-Peak
East, Off-Peak
West, On-Peak
West, Off-Peak
AEP-Day, On-Peak
AEP-Day, Off-Peak
N. Ill, On-Peak
N. Ill, Off-Peak
$60
$40
$20
$0
Source: IHS-CERA, September 2013
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Evolving Generation Mix in PJM
Cleared Installed Capacity
70,000
Coal
60,000
Gas
ICAP MW
50,000
40,000
Nuclear
30,000
20,000
Renewables
10,000
0
Demand Response
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
Delivery Year
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Evolving Generation Mix
100%
90%
80%
Wind
S. Waste
Hydro
Oil
Nuclear
Natural Gas
Coal
70%
60%
50%
40%
30%
20%
10%
0%
2007
2008
2009
2010
2011
9
2012
2013
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Projected Generation Mix
100%
90%
80%
Solar
70%
Wind
60%
Other
50%
Hydro
40%
Oil
Nuclear
30%
Gas
20%
Coal
10%
0%
2013
2014
2015
2016
2017
2018
2019
2020
Source: IHS-CERA, September 2013
10
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Generation Deactivations
Over 20 GW of Actual & Announced
Deactivations 2011-2016
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Natural Gas Dominates Current Active Projects in the Queue
Nuclear
2,556
5% Coal
2,188
4%
Other
1,934
4%
MW Capacity Value
Wind
2,623
5%
Natural Gas
Wind
Natural Gas
43,701
82%
Coal
Nuclear
Other
As of July 2013
Nuclear Other
2,696 4,542
6%
Coal 4%
2,201
3%
Wind
17,293
24%
MW Energy Value
Natural Gas
Natural Gas
45,722
63%
Wind
Coal
Nuclear
Other
As of July 2013
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Evolving Generation Mix in Virginia
Capacity By Fuel Type 2005 (MW)
Nuclear, 3432
Gas, 6790
Coal, 5735
Hydro, 3654
Oil, 2245
Capacity By Fuel Type 2009 (MW)
Waste, 142.6
Gas, 7510
Nuclear, 3425
Coal, 5801
Hydro, 4007
Oil, 2236
Waste, 169
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Evolving Generation Mix in Virginia
Capacity By Fuel Type 2013 (MW)
Gas, 8660
Nuclear, 3581
Coal, 5767
Hydro, 4038
Oil, 2213
Waste, 339
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Generation Under Construction in Virginia
Nuclear
Natural Gas
15
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Active Queued Generation in Virginia
16
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Evolving Generation Mix in Virginia
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Decreasing Emission Rates
PJM Average Emissions (lbs/MWh)
Carbon Dioxide
Sulfur Dioxides
Nitrogen Oxides
1,300
1,250
9
8
7
6
1,200
CO2
5
1,150
4
1,100
3
1,050
2
1,000
1
950
0
2005
2006
2007
2008
2009
2010
2011
SO2 and NOx
1,350
2012
Source: PJM EIS
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Natural Gas Impact to PJM Capacity Pricing
from $167.46
from $357.00
from $167.46
from $136.00
2015/2016 Base Residual Auction Results (last year)
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Increasing Power Generation Natural Gas Consumption
Most other categories of
natural gas consumption
have had flat or decreasing
usage trends!
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Power Generation is NOT the Ideal Gas Customer
Power generation gas use does not fit neatly into
the gas contractual construct
• Electricity demand, like gas demand, fluctuates and is
subject to steep ramps, especially in winter
• Increased wind and other intermittent resources don’t
help
• Fastest starting generation resources, generally are gasfired combustion turbines which can go to full output in
about 10 minutes or less
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Some Electric/ Gas Coordination Issues
• Language barrier
• “Intermittency” of electric demand
• Power generation use of interruptible service
• Gas Day vs. “Electric Day”
• Natural gas has some storage -- “just-in-time”
fuel source
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Firm vs. Interruptible Service
Majority of PJM gas-fired generators have interruptible
gas delivery service
• Generators buy available firm service from others, via capacity
release or bi-lateral arrangement
• Use marketers to acquire a bundle of commodity and delivery
• Risk curtailment for local delivery issues
– Northern NJ – January 2013
– Cleveland – July 2013
What PJM is doing: Discussing changes to market
rules, dual fuel requirements, etc. as part of the PJM
Gas Electric Senior Task Force
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Gas Day vs. Electric Day
Issue: Timely gas nominations are due at 10 a.m.
the day before (Day 1); electric “awards” are made
at 4 p.m. the day before (Day 1) = 6 hours later;
actual gas flow occurs starting at 10 a.m. on Day 2
What PJM is doing: Discussing potential for market
timing changes (INGAA has signaled a willingness to
change nomination timing)
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Natural Gas is a Just-in time Fuel Source
• We’re used to having significant fuel at the generation site—coal
piles, nuclear fuel, etc.
• Gas moves at ~35 mph – it takes days to arrive from the Gulf of
Mexico, although proximity to Marcellus/Utica helps
• Pipeline can “line pack” to some degree, but advanced planning
is necessary
• Pipelines do have storage to some degree, but generators have
to contract for it
What PJM is doing: Learning about gas pipeline
capabilities and anticipating “big picture” look from the
EIPC Gas Study
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What is FERC Doing?
• Bringing the industries together
– Series of technical conferences
• Some finger pointing, but also
• Some very useful information exchange
– Trying to exert leadership to bring solutions (Moeller)
• NOPR on communications
– Remove barriers between gas control and system
operators to exchange non-public information
What PJM is doing: Supporting the FERC efforts
through participation and comments
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In the Meantime….
• Pipeline expansion process is working (hopefully, in time
to save New England!)
• Large majority of gas-fired generators use interruptible
service in PJM and other markets (and PJM has had
some operational issues)
• We continue to exchange large amounts of data via
electronic bulletin boards, but is minimally useful in
operations
• Operators on both sides stand ready to respond to
surprises that will pop up periodically (daily in New
England!)
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Summary
• Power generation is a “double edged sword” for
the gas business
– Largest growth market
– Potential to cause problems in operations
• Working together, we can minimize the
operational problems
– Awareness of the limitations on each side
– Increased real time communications across the aisle
– Use of the demand side resources on each side
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Questions
29
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