michigan electric capacity need forumchairman robert palmer, detroit edison company staff co-chair,...

Michigan Electric Michigan Electric Capacity Need ForumCapacity Need Forum

April 22, 2005April 22, 2005

AgendaAgenda

Capital markets and electric generation investmentCapital markets and electric generation investment–– Ellen Lapson, Managing Director Fitch Rating’s U.S. Global PowerEllen Lapson, Managing Director Fitch Rating’s U.S. Global Power

GroupGroup–– Jonathan Cho, Director Fitch Rating’s U.S. Global Power GroupJonathan Cho, Director Fitch Rating’s U.S. Global Power Group

Work group updatesWork group updates–– Work group chairsWork group chairs

Demand/ForecastDemand/ForecastCentral StationCentral StationTransmission/DistributionTransmission/DistributionRenewable/other generationRenewable/other generationIntegrationIntegration

Preliminary reliability numbersPreliminary reliability numbers–– Rao Konidena, MISORao Konidena, MISO

Next meetingNext meeting

Comments of Comments of FitchFitch RatingsRatingsMichigan Electric Capacity Need Michigan Electric Capacity Need

ForumForum

Ellen Lapson, Ellen Lapson, Managing Director Fitch Managing Director Fitch Rating’s U.S. Global Power GroupRating’s U.S. Global Power GroupJonathan Cho, Director Fitch Rating’s U.S. Jonathan Cho, Director Fitch Rating’s U.S. Global Power GroupGlobal Power Group

Demand ForecastDemand Forecast

Chairman Eric Baker, Wolverine Power Chairman Eric Baker, Wolverine Power Staff CoStaff Co--chair Don Mazuchowski, MPSC Staffchair Don Mazuchowski, MPSC Staff

Demand and Energy ForecastDemand and Energy Forecast

Three geographic regions Three geographic regions –– Southeast Southeast Michigan, balance of Lower Peninsula, Michigan, balance of Lower Peninsula, and Upper Peninsulaand Upper PeninsulaForecast period 2005 to 2025Forecast period 2005 to 2025Forecast based on individual Forecast based on individual participants’ forecastsparticipants’ forecastsBase forecast made along with low Base forecast made along with low and high scenariosand high scenarios

Michigan Monthly Electricity Sales

0

2,000

4,000

6,000

8,000

10,000

12,000

Dec-82 Dec-84 Dec-86 Dec-88 Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04

Mill

ion'

s of

kW

h's

1982 to 2004

Source: Energy Information Administration, Electric Power Monthly, prepared by MPSC Staffhttp://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html

Residential

Commercial

Industrial

Michigan Electric Demand and Michigan Electric Demand and Energy ForecastEnergy Forecast

Total energy sales growth 1.8%Total energy sales growth 1.8%–– Southeast Michigan energy growth 1.8%Southeast Michigan energy growth 1.8%–– Balance of Lower Peninsula growth 1.9%Balance of Lower Peninsula growth 1.9%–– Upper Peninsula growth .9%Upper Peninsula growth .9%Total electric demand growth 2.1%Total electric demand growth 2.1%–– Southeast Michigan growth 1.7%Southeast Michigan growth 1.7%–– Balance of Lower Peninsula growth 2.7%Balance of Lower Peninsula growth 2.7%–– Upper Peninsula growth .9%Upper Peninsula growth .9%

Michigan Electric Sales Michigan Electric Sales ForecastsForecasts

0

50000

100000

150000

200000Gwh's

2005 2010 2015 2020 2025

Low Base High

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2005 2010 2015 2020 2025

Low Base High

Michigan Demand ForecastsMichigan Demand Forecasts

Michigan Electric Demand by Michigan Electric Demand by Geographic RegionGeographic Region

0

5000

10000

15000

20000

2005 2010 2015 2020 2025

Southeast Balanc L.P. U.P.

Michigan Forecast Electric sales Michigan Forecast Electric sales by Geographic Regionby Geographic Region

0100002000030000400005000060000700008000090000

Gwh's

2005 2010 2015 2020 2025

Southeast Balance L.P. U.P.

Michigan Electricity Historical Sales and Projections

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1990 1995 2000 2005 2010 2015 2020 2025

Prepared by: Demand Working Group Capacity Needs Forum, April 2005

Gig

awat

t-hou

rs

Detroit Edison

Consumers Energy

Balance of Lower Peninsula

Upper Peninsula

Forecast

Michigan Electricity Non-Coincident Summer Peak Demand

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015 2020 2025

Prepared by: Demand Working Group Capacity Needs Forum, April 2005

Meg

a-W

atts

Detroit Edison

Consumers Energy

Balance of Lower Peninsula

Upper Peninsula

Forecast

Michigan Electricity Sales Forcast RangeBase Case + & - 10%

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

1990 1995 2000 2005 2010 2015 2020 2025Prepared by: Demand Working Group Capacity Needs Forum, April 2005

Gig

awat

t-hou

rs

Forecast

Fuel Price ForecastsFuel Price Forecasts

Department of Energy’s Energy Department of Energy’s Energy Information Agency’s (EIA’s) Annual Information Agency’s (EIA’s) Annual Energy Outlook 2005Energy Outlook 2005Global Insights longGlobal Insights long--term forecastterm forecastOther studiesOther studies

United States Natural Gas United States Natural Gas SupplySupply

2.990.44 1.54

5.66

6.49

4.850.43

2.3

6.37

1.08

5.02

8.61

4.89

2.23

0

5

10

15

20

25

30

35

2002 2025

Alaska

Off-shore

UnconventionalOnshoreConventionOnshoreAssociatedDissolvedLNG

Net Imports

TCF

United States Natural Gas United States Natural Gas Consumption by SectorConsumption by Sector

4.89

3.11

7.53

5.65

1.79

5.99

4.05

9

9.43

2.2

0

5

10

15

20

25

30

35

2002 2025

OtherElectric PowerIndustrialCommercialRsidential

TCF

Energy Information AgencyEnergy Information AgencyLongLong--Term Natural Gas Price Term Natural Gas Price

ForecastForecast

0123456789

10

2010 2015 2020 2025

Dol

lars

/Mcf

Real PriceNominal Price

2003 Price

Natural Gas Price ForecastNatural Gas Price Forecast

0123456789

1997 2000 2003 2006 2009 2012 2015 2018

Real 2003 Dollars Nominal Price

Source: American Gas Foundations

Forecast Price of Central Forecast Price of Central Appalachia Bituminous CoalAppalachia Bituminous Coal

0

10

20

30

40

50

60

2010 2015 2020 2025

Real 2003 PriceNominal Price

Source: EIA

Dollar/Short Ton

Forecast Price of Powder River Forecast Price of Powder River Basin Low Sulfur CoalBasin Low Sulfur Coal

0

2

4

6

8

10

12

14

16

2010 2015 2020 2025

Real 2003 PriceNominal Price

Source: EIA

Dollars/Short Ton

Central Station GenerationCentral Station Generation

Chairman Robert Palmer, Detroit Edison CompanyChairman Robert Palmer, Detroit Edison CompanyStaff CoStaff Co--chair, John King, Commission Staffchair, John King, Commission Staff

Michigan’s Current Generation Michigan’s Current Generation Capacity by RegionCapacity by Region

1110 780

9044

5127

841

1266 8094

240

02000400060008000

100001200014000

SoutheastMichigan

Balance of L.P. U.P.

Nuclear Steam Other

Mw’s of Capacity

Central Station Generation Central Station Generation TechnologiesTechnologies

Pulverized Coal Pulverized Coal –– supercritical and supercritical and subcriticalsubcriticalCirculating Fluidized BedCirculating Fluidized BedIntegrated Gasification Combined Integrated Gasification Combined CycleCycleNuclearNuclearNatural Gas Combined CycleNatural Gas Combined CycleCombustion TurbineCombustion Turbine

Generating Plant Cost Generating Plant Cost AssumptionsAssumptions

Greenfield siteGreenfield siteTransmission cost associated with Transmission cost associated with switchyard includedswitchyard includedOvernight costs includedOvernight costs includedNew pulverized coal would require New pulverized coal would require scrubber, baghouse, and SCR systemscrubber, baghouse, and SCR systemService life assumed to be sixty yearsService life assumed to be sixty years

Production Plant Estimated Production Plant Estimated CostsCosts

10,45010,4503.713.713.713.71350350160160Combustion Combustion TurbineTurbine

6,8006,8002.122.1212.7312.73500500250250Combined Combined CycleCycle

10,40010,400.53.5367.9067.902,2002,2001,0001,000NuclearNuclear

7,2007,2002.922.9238.7238.721,8991,899550550IGCCIGCC

9,5009,5004.004.0028.0028.001,6501,650300300Fluidized BedFluidized Bed

8,6008,6004.564.5627.5827.581,4001,400750750Pulverized CoalPulverized CoalSupercriticalSupercritical

8,8008,8004.564.5627.5827.581,3501,350600600Pulverized CoalPulverized CoalSubSub--criticalcritical

Heat RateHeat RateBTU/kwhBTU/kwh

Variable O&MVariable O&M$/Mwh$/Mwh

Fixed O&MFixed O&M$/Kw$/Kw

Construction Construction Cost $/KwCost $/Kw

Size (Mw’s)Size (Mw’s)TechnologyTechnology

Estimated Busbar CostEstimated Busbar Cost

17117110410466665%5%6.006.00Combustion Combustion TurbineTurbine

53531010434385%85%6.006.00Combined Combined CycleCycle

484842426690%90%.50.50NuclearNuclear

61613838232380%80%2.752.75IGCCIGCC

46463030161685%85%1.251.25Fluidized BedFluidized Bed

42422626151585%85%1.251.25Pulverized CoalPulverized CoalSupercirticalSupercirtical

41412525161685%85%1.251.25Pulverized Coal Pulverized Coal SubSub--criticalcritical

Busbar CostBusbar Cost($/Mwh)($/Mwh)

Fixed CostsFixed Costs(Cap+O&M)(Cap+O&M)

Dispatch CostDispatch Cost$/Mwh$/Mwh

Capacity Capacity FactorFactor

Fuel CostFuel Cost$/MMBTU$/MMBTU

TechnologyTechnology

Estimated Emissions by Estimated Emissions by Technology (#/MMBTU)Technology (#/MMBTU)

000000.03.03.001.001Combustion Combustion TurbineTurbine

1201200000.03.03.001.001Combined Combined CycleCycle

0000000000NuclearNuclear

.01.01.05.05.05.05IGCCIGCC

.015.015.10.10.02.02Fluidized BedFluidized Bed

200200.015.015.03.03.10.10Pulverized CoalPulverized CoalSupercriticalSupercritical

200200.015.015.03.03.10.10Pulverized Coal Pulverized Coal SubSub--criticalcritical

CO2CO2HgHgParticulatesParticulatesNOxNOxSO2SO2TechnologyTechnology

Other GenerationOther Generation

Chairman Donald Johns, Michigan Independent Power Chairman Donald Johns, Michigan Independent Power ProducersProducersStaff CoStaff Co--chair Mark Nida, MPSC Staffchair Mark Nida, MPSC Staff

Other Generation Resources Work GroupOther Generation Resources Work Group

Primary Objective:Develop a series of supply curves or other representations that can be used to model the non traditional technologies deemed capable of providing significant generation resources over the next decade or less.

Expected Deliverables:A set of equations and/or projections of supply that can realistically be expected to be made available I an economicallyfeasible fashion at a given price or prices along with output and emissions characteristics

Other Generation Resources Work GroupOther Generation Resources Work Group

General Principals:General Principals:Roughly Right approachRoughly Right approachCommercially AvailableCommercially AvailableSignificant ImpactSignificant ImpactAggregate Averages for Modeling Aggregate Averages for Modeling PurposesPurposesUse whatever data is practically Use whatever data is practically available available

eneration Resources Work Groupeneration Resources Work Group

Technologies Chosen to be Modeled:Technologies Chosen to be Modeled:Landfill GasLandfill GasAnerobic DigestionAnerobic DigestionOnshore WindOnshore WindIndustrial/large commercial Industrial/large commercial cogeneration at existing sitescogeneration at existing sitesOther emerging technologies to be Other emerging technologies to be addressed in a narrative and purhaps addressed in a narrative and purhaps included as an annual (small) increment included as an annual (small) increment to be added.to be added.

Other Generation Resources Work GroupOther Generation Resources Work GroupPreliminary Results:Preliminary Results:Landfill Gas: 79 MW existing with 70 MW Landfill Gas: 79 MW existing with 70 MW current potential growing at 5% per year@ 7 current potential growing at 5% per year@ 7 cents per kWh.cents per kWh.. 95% capacity factor must run generation . 95% capacity factor must run generation Farm Digestion: 56 MW potential @ 7 cents Farm Digestion: 56 MW potential @ 7 cents per kWh. 96% capacity factor must run per kWh. 96% capacity factor must run generation.generation.Wind:Wind: 420 MW potential @ 7 cents per 420 MW potential @ 7 cents per kWh or $1200 per kW. 25% average kWh or $1200 per kW. 25% average capacity factor.Assumes 50% of all h class 4 capacity factor.Assumes 50% of all h class 4 or greater.or greater.Cogeneration:Cogeneration: Sites greater 100 MLbs per Sites greater 100 MLbs per

TransmissionTransmission

Chairman Tom Chairman Tom VitezVitez, International Transmission , International Transmission CompanyCompanyStaff CoStaff Co--chair Peter chair Peter DerkosDerkos

IntegrationIntegration

Chairman John Dellas, Consumers Energy CompanyChairman John Dellas, Consumers Energy CompanyStaff CoStaff Co--chair Paul Proudfoot, MPSC Staffchair Paul Proudfoot, MPSC Staff

Function And Function And ResponsibilityResponsibility

Oversee integration Oversee integration function(modeling).function(modeling).Review other workgroup products for Review other workgroup products for input into the integration model.input into the integration model.Selection of sensitivities and scenarios.Selection of sensitivities and scenarios.Make sure data used is comparable.Make sure data used is comparable.Select/approve fuel and other Select/approve fuel and other economic data.economic data.

Function And Function And ResponsibilityResponsibility

Review model outputReview model output

Proposed Integration Proposed Integration MethodologyMethodology

Use MISO’s modeling capability to quantify Use MISO’s modeling capability to quantify capacity needs.capacity needs.Use ITC’s power flow modeling to determine Use ITC’s power flow modeling to determine import capacity.import capacity.Use New Energy’s Strategist to select a Use New Energy’s Strategist to select a resource additions plan.resource additions plan.Use Scenarios to quantify Energy Use Scenarios to quantify Energy Conservation and Emissions issues.Conservation and Emissions issues.Regional modeling to reflect constraint Regional modeling to reflect constraint issues.issues.

ScenariosScenarios

Traditional power sourcesTraditional power sourcesEmissionsEmissionsEnergy conservationEnergy conservationNonNon--Traditional sourcesTraditional sources

SensitivitiesSensitivities

High LoadHigh LoadLow LoadLow LoadHigh Gas CostHigh Gas CostMax ImportMax Import