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Draft 2012 Integrated Resource Planfor Connecticut

Summary of Findings and Recommendations

Prepared by:The Connecticut Department of

Energy & Environmental Protection (DEEP)

March 14, 2012

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Steering CommitteeDEEP and EDCs

2012 Integrated Resources Plan Development

DEEP Technical Meetings

Public Hearing

Stakeholder Input

TransmissionRenewables Resource Adequacy

Natural Gas

DSMEnvironmentalEmerging Technologies

DEEP Stakeholder Workshops on  IRP Framework and Sub team Efforts

August 2011

Sept.-Oct 2011

Steering CommitteeDEEP and EDCs Review Working 

Draft

December 2011

January 2012

CEAB

E&T 

E&T

February 1, 2012Stakeholder Input

Stakeholder Input

March 15 , 2012 DEEP Reviews, Modifies and Approve Plan

March 30, 2012

Stakeholder Input

Economic Analysis

PURA 

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♦ Introduction: Purpose and Context

♦ Ten-Year Energy Outlook• Rates• Consumption• Reliability• Environment: emissions and renewables development• Uncertainty under alternative “Futures”

♦ Resource Scenario Impacts on Rates, Costs, Emissions, and Jobs• Expanded Energy Efficiency• RPS Flexibility• New Cost-of-Service Generation• Future considerations

♦ Recommendations

Agenda

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♦ Identify strategies to improve Connecticut’s energy future: “cheaper, cleaner, and more reliable.”

♦ One of the measures of success will be for Connecticut to be recognized as a national leader in achieving cost-effective energy efficiency.

♦ Policies should support increased employment in-state.

Purpose

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Market and Regulatory Context of this IRP

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Ten-Year Energy Outlook

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Transmission♦ In 2013-16, the New England East-West Solution (NEEWS) will address reliability

(transmission security) issues in and surrounding Connecticut♦ Already addressed long-standing reliability problems in SWCT (2006-08)

Generation♦ New long-term contracts with Kleen Energy (620 MW CC), new peakers for local

contingencies (506 MW GTs), Waterbury (96 MW GT)♦ Earlier generation added by the market: Bridgeport Energy (461 MW CC), Milford (507

MW CC), Cos Cob (39 MW GT)

Demand-Side♦ Has been funding energy efficiency programs at ~$100 million per year, and policies

recognized by the American Council for an Energy Efficient Economy (ACEEE) as the 8th best state; indicates room for improvement

♦ More than 500 MW Active DR, much of this provided by the market

Special Renewables Programs♦ Project 150♦ ZREC, LREC, and other programs

Recent Connecticut Infrastructure Developments

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Energy

Capacity

RECs

0¢

2¢

4¢

6¢

8¢

10¢

12¢

14¢20

07

2010

2011

2012

2015

2016

2017

2018

2019

2020

2021

2022

Actual Standard Service GSC

GSC Forecast

Rates: Generation Service Charge Relief Expected through 2016, Followed by Increases

Projected Generation Service Charges (2012 ¢/kWh)

Falling natural gas prices Rising capacity prices, renewables portfolio standards

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Consumption: Connecticut Energy Demand is Projected to Recover at 0.9% per Year

Connecticut Annual Energy Consumption (TWh)

Sources: 2005-08: ISO-NE; 2009-10: Brattle analysis based on ISO-NE’s 2011 CELT report. 2012-22: 2011 CELT report, the 50/50 base economic growth load forecast through 2020, then extrapolated at the 2019-20 growth rate.

31

32

33

34

35

36

2005 2007 2009 2011 2013 2015 2017 2019 2021

Actual (Weather Normalized)

"Business as Usual" Base Case Forecast

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Reliability: Many Components

Resource Adequacy Transmission Security Distribution ResilienceReliability Issues

Must be enough gen (and load management) to meet peak loads, with margin for forecast uncertainty and gen outages

Grid must be maintained and operated to protect individual facilities, and the voltage and stability of the system; plan and operate against contingencies

“Last mile” must be sized and properly maintained to handle peak loads; storm preparedness and response

Primary Criteria

Resource Adequacy Standards Transmission SecurityStandards

Duration and Frequency of Outages

Who Ensures

Traditionally, IRP/state;Now primarily ISO-NE

ISO-NE, FERC, NERC, Transmission Owners

Electric Distribution Companies w/DEEP oversight; currently Gov’sinvestigation on storms

Related Factors

Age of equipmentFuel deliverability

Age of equipmentCyber-security and other terrorism

Local policies affectingasset hardening

Scope of Reliability Analysis in IRP

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Connecticut Resources Appear Sufficient toMeet Local Resource Adequacy Needs for 10+ Years

Existing Generation

Incl. of Lake Road

New RenewablesNew Conventional

Energy EfficiencyActive DR

Exports

-1,000

1,000

3,000

5,000

7,000

9,000

11,000

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

MW

NEEWS Assumed Installed by 2016

Local Sourcing Requirement

Projected Retired Capacity*

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Resource Shortages Not Anticipated for the Region

Net ImportsNew ConventionalNew RenewablesEnergy EfficiencyActive DR

0

5

10

15

20

25

30

35

40

45

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

MW

Net Installed Capacity Requirement

Capacity Price Floor Eliminated

Projected Retired Capacity*

Existing Generation Projected Not to Retire

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Connecticut Emissions Are Decreasing, MostlyDue to a Shift from Coal & Oil to Natural Gas Generation

Coal

Gas

Oil

Other

0

2

4

6

8

10

12

2007 2010 2015 2017 2022

Annual CO2 Emissions (Millions tons/yr)

RGGI TargetActual Forecast

RPSClass I

Coal

Gas

Oil

Other

0

1

2

3

4

5

6

7

8

2007 2010 2015 2017 2022

Annual SO2 Emissions (Thousands tons/yr)

RPSClass I

Actual Forecast

Coal

Gas

Oil

Other

0

1

2

3

4

5

6

2007 2010 2015 2017 2022

Annual NOx Emissions (Thousands tons/yr)

Actual Forecast

RPSClass I

Notes: “RPS Class I” includes refuse and fuel cells that are RPS qualified. “Other” includes all other refuse and fuel cells that are not RPS qualified.

Coal

Gas

Oil

0

5

10

15

20

25

30

35

40

45

2015 2017 2022

15 16

21

OTC HEDD NOx Target

OtherRPSClass I

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Regional Class I RPS Shortage Projected After 2017

Biomass/ Biofuels

Fuel CellsSmall HydroLandfill Gas

Onshore Wind

Offshore WindSolar PV

Imports

Class I RPS Demand

0

5,000

10,000

15,000

20,000

25,00020

11

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

GW

h pe

r ye

ar

New England Class I Renewable Resource Supply and Demand Balance

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Other Market-Related Uncertainties Analyzed Through Alternative “Futures”

♦ High/Low Gas Prices♦ Abundant Supply: -1,150

MW load, VT Yankee online♦ Tight Supply: +1,150 MW

load, DR static, Boston shortages solved by transmission

Findings:♦ Adequate CT resources across all Futures analyzed.♦ New generation could be needed regionally as soon as 2018. ♦ Gas prices could drive rates about 2 c/kWh higher or lower.

Relatedly, the costs and benefits of alternative resource options differ as external factors vary

Natural Gas Price Trajectories

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Evaluation of Resource Scenarios

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“Expanded EE” Scenario (Based on 2010 Potential Study) Would Support a Growing Economy that Uses Less Energy

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31

32

33

34

35

36

2005 2007 2009 2011 2013 2015 2017 2019 2021

Est. Actual (Weather Normalized)

Forecast

Expanded EE:0.4% Annual Decline

Base Case:0.9% Annual Growth

Connecticut Annual Energy Consumption (TWh)

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Expanded EE Would Lower Costs in the Long-Term

Annual Incremental Cost Impacts of Expanded EE

‐1045

‐845

‐645

‐445

‐245

‐45

155

-$800

-$600

-$400

-$200

$0

$200

$400

2012

$ M

illio

ns

Capacity Savings

Participant Cost

Energy Savings

Program Cost

RPS Savings

2015 20222017

Net Cost$5 M

Net Cost $107 M

Net Savings $534 M

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Expanded EE Would Support In-State Jobs

Category of Spending Change in Jobs(FTE/year)

Change in state GDP (million/year)

Expanded EE Spending 1,553 193

Lower Cost of Electricity 4,207 776

Reduced spending on in-staterenewables

−253 −32

Estimated Net Effect Relative to Base Case

5,507 938

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Value depends on market conditions, with energy efficiency serving as a hedge

The quantity and cost of the potential are uncertain

Risk can be mitigated by adjusting programs over time

Uncertainties about Expanded EE

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Class I Flexibility with Expanded EE Would Lower Costs, Rates, and Emissions, and Create Jobs

2022 Benefits of Allowing ¼ of the Class I Requirement to be Met by Expanded EE

Expanded EE Expanded EEExpanded EE w/ Class I Flex w/ Class I Flex

vs. Base Case vs. Expanded EE vs. Base CaseConnecticut Customer Costs

Net Cost (millions) = ($534) ($152) ($686)Average Rate (¢/kWh) = (0.60) (0.55) (1.15)

Connecticut EmissionsCO2 (kTons) = (434) -- (434)SOX (Tons) = (234) -- (234)NOX (Tons) = (218) -- (218)

Macroeconomic EffectsIn-State Jobs (count) = 5,507 636 6,143

State GDP (millions/yr) = $1,549 $245 $1,795

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Cost-of-Service (COS) Generation Likely to Lead to Above-Market Payments

Annual Costs and Revenues of a COS Plant Built in 2017 656 MW, $929/kW Combined-Cycle at 6.7% ATWACC

$0

$20

$40

$60

$80

$100

$12020

17

2022

2027

2032

2037

2042

Gross COS CostsRegulated Revenue Requirement

Capacity Paymentsto COS Unit

Energy Marginsto COS Unit

Energy PriceSavings

to Customers

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Emerging Technologies♦ Plug-in electric vehicles (PEVs), advanced metering infrastructure

(AMI), energy storage, geothermal energy, and advanced waste-to-energy technologies are all unlikely to have major penetration in the next ten years.

♦ PEVs and AMI, however, have the potential to be important in the long term. The IRP identifies some enabling actions.

Transmission♦ No transmission projects or non-transmission alternatives (NTAs) were

evaluated in this IRP.♦ ISO New England’s NTA process will be important over the next year

when the ISO conducts a reliability needs analysis including consideration of NTAs for Central Connecticut and Hartford.

Future Considerations

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Recommendations

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Pursue Expanded Energy Efficiency♦ Provide for additional customer funding of EDC programs to support

Expanded EE, at $105 million larger annual utility budget than the Base Case ($206 million total).

♦ Develop innovative approaches to achieving all cost-effective energy efficiency. Consider providing participants low-cost financing through further development of the Green Bank, implementing more aggressive codes and standards, motivating behavioral changes, and other initiatives.

♦ Adjust size, scope, and approach as appropriate over time.

Recommendations

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Increase flexibility in meeting renewable energy targets ♦ Given the relative cost-effectiveness of energy efficiency as a clean

energy resource, allow Class III RECs associated with new energy efficiency to meet a portion of the “Class I” goal.

♦ Consider allowing other resources, such as out-of-region large hydro-electric or wind power projects, to serve clean energy goals.

♦ Consider adjusting the ACP level over time.

Do not pursue new cost-of-service generation at this time♦ Consider again in the next IRP.♦ Meanwhile, monitor resource adequacy, engage with ISO-NE on

capacity market evolution, and ensure backstop procurement mechanisms are in place.

Recommendations

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Other reliability-related recommendations♦ Work with ISO-NE to maintain reliability during winter cold snaps.

Assess the compliance of Connecticut generators with their Siting requirements and contractual obligations regarding backup fuel capabilities.

♦ Pursuant to Governor Malloy’s Two Storm Panel Review and recent announcement of additional potential measures for Connecticut to address storm disaster preparedness and recovery, DEEP will continue to investigate the deployment and funding of smartgrid technology in city centers and the use of energy improvement districts as a mechanism to support micro-grids.

Recommendations

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DEEP’s Schedule for Public Review, Commentand IRP Approval

Issuance of Notice of Technical Meetings and Hearing and Notice of Request for Written Comment

January 17, 2012

Issue Draft IRP January 17, 2012

Technical Meeting on Overall IRP February 1, 2012 10:30 am HR 1

Technical Meeting on C&LM Program Expansion February 1, at 1:00 pm HR1

Technical Meeting (Additional Meeting if Necessary) February 6, 2012 9:00 am -500 pm HR 2

Comments on Draft IRP Due (45 days) March 2, 2012

Public Hearing March 2, 2012 9:30 am HR 1

Issuance of Draft Final IRP March 30, 2012

Comments on Draft Final IRP Due April 11, 2012

Final Approval April 23, 2012

Submission to General Assembly and PURA April 23, 2012