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PJM©2016
PJM Analysis of the EPA Clean Power Plan
PJM Interconnection October 6, 2016
PJM©2016 2
PJM CPP Study Objectives
Evaluate potential impacts to:
– Resource adequacy
– Transmission system operations
– PJM energy and capacity market prices
Determine compliance costs
The results are not a forecast, but are a function of assumptions
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PJM as Part of the Eastern Interconnection
As of 09/2015
• 27% of generation in Eastern Interconnection • 28% of load in Eastern Interconnection • 20% of transmission assets in Eastern Interconnection
Key Statistics Member companies 940+ Millions of people served 61 Peak load in megawatts 165,492 MW of generating capacity 183,604 Miles of transmission lines 62,556 2014 GWh of annual energy 797,461 Generation sources 1,376 Square miles of territory 243,417 States served 13 + DC 21% of U.S. GDP
produced in PJM
PJM©2016
Historic and Current Context for Understanding PJM’s Analysis of the Clean Power Plan
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Natural Gas Rig Productivity Rises and Prices Decline
0
2
4
6
8
10
12
14
16Henry Hub Historic Monthly Price
* Source: EIA. Drilling Productivity Report. September 2016.
* Source: EIA. Henry Hub Monthly Spot Price Series September 25, 2016.
-
2,000
4,000
6,000
8,000
10,000
12,000
Rig Productivity (mcf/rig/day)
Marcellus UticaHaynesville Eagle FordNiobrara BakkenPermian
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Demand has Been Declining in the PJM Region
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
2014 2017 2020 2023 2026 2029
MW Summer Peak Demand Forecast
2013201420152016
700,000
750,000
800,000
850,000
900,000
950,000
1,000,000
1998 2004 2010 2016 2022 2028
GWh Evolution of Total Energy Demand and Total
Energy Forecasts
2013 Forecast2014 Forecast2015 Forecast2016 ForecastActual Energy
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Gas is Gaining Prominence in the Energy Mix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
WindWasteHydroOilNuclearNatural GasCoal
* Source: Monitoring Analytics, LLC. 2016 State of the Market Report for PJM. August 11, 2016.
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Declining Emission Rates
0
1
2
3
4
5
6
7
8
9
900
950
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SO2 and NOx CO2 PJM Fleet Average Emissions (lbs/MWh)
Carbon Dioxide
Sulfur Dioxides
Nitrogen Oxides
Source: PJM Generation Attributes Tracking System. 2016 data is through July.
PJM©2016
PJM’s Analysis of the Clean Power Plan:
Key Model Features
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Mass-Based Compliance Pathway Scenarios
Single CO2 limit applied to the PJM region for 111(d) existing resources
Trade-Ready
Single CO2 limit applied to the PJM region for 111(d) existing and 111(b) new sources
New Source Complement
Each state applies a CO2 limit covering all 111(d) existing resources
State Mass
Each state applies a CO2 limit covering all 111(d) existing resources and 111(b) new sources
State Mass New Source Complement
[1] Proposed Federal Plan for the Clean Power Plan (PDF) - http://www.gpo.gov/fdsys/pkg/FR-2015-10-23/pdf/2015-22848.pdf
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Rate-Based Compliance Pathway Scenarios
[1] Proposed Federal Plan for the Clean Power Plan (PDF) - http://www.gpo.gov/fdsys/pkg/FR-2015-10-23/pdf/2015-22848.pdf
Emissions performance measured against the sub-category CO2 emission rate targets for combined cycle and steam turbine resources
Trade-Ready Rate
Emissions performance measured against a weighted average of PJM states’ CO2 emissions rate targets
Regional Blended Rate
Emissions performance measured against the state CO2 emissions rate target
State Blended Rate
PJM©2016
PJM’s Analysis of the Clean Power Plan:
Key Findings from Reference Gas Scenario
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It is Feasible for PJM States to Achieve CO2 Emissions Targets…
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…Compliance Costs are 1% to 3% of recent Wholesale Market Costs to Load
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Resource Adequacy is Maintained…
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*Analysis focused on transmission limitations in 2025 at the 230 kV system and up. Limited set of 138 kV or below constraints evaluated.
The High Voltage Transmission System is Utilized Less Transmission Congestion in 2025
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Energy Market Prices Increase Over-Time in Response to Higher Fuel Cost, Load Growth and Emissions Market Prices
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Capacity Market Prices Increase to Offset Resource Retirements and Load Growth
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Rate- and Mass-based Trading Implies Differing Allocations of Money, Flexibility, and Affects Resource Development Incentives
www.pjm.com
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PJM Markets and Emissions Markets Drive Varied Resource Outcomes
Nameplate Capacity (2018-2037)
PJM©2016
PJM’s Analysis of the Clean Power Plan:
Security Constrained Economic Dispatch Virginia 2025
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Virginia’s 2025 Energy Costs (LMP) are Not the Highest but also Not the Lowest in the PJM Region
$/MWh
48.7 48.0
49.1
52.8
48.0 49.1
52.8
48.1
44
46
48
50
52
54
56
Reference RegionalRate
State Mass State MassNSC
State Rate Trade ReadyMass
Trade ReadyMass NSC
Trade ReadyRate
MaximumMinimumVirginia
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Virginia 2025 CO2 Prices Under State-Compliance are Lower than Other States in the PJM Region
4.7
12.3
10.8
1.3
8.4
0.1
5.3 5.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Regional Rate State Mass State MassNSC
State Rate Trade ReadyMass
Trade ReadyMass NSC
Trade ReadyRate
MaximumMinimumVirginia
$/ERC or $/Ton
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State Compliance Leads to Higher In-State CO2 Emissions by 2025
Tons
(Millions)
14 17 15 14 14 13 13 10 10
10 10
8 7 6 6 7 9 8
4 2 2
2 2 2 3 3
2 29.5
27.4 26.1 24.8 22.6 22.4 22.2 22.1 21.6
0
5
10
15
20
25
30
35
State MassNSC
Baseline(2012)
State Mass Reference State Rate TradeReadyRate
TradeReadyMass
RegionalRate
TradeReady
Mass NSC
Combined Cycle Gas (111b)Combined Cycle Gas (UC)Combined Cycle GasFossil Steam
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Virginia’s Energy Mix in 2025
29.30% 33.30% 33.34% 33.88% 34.74% 34.89% 35.59% 36.33%
14.51% 12.13% 18.04% 12.11%
17.18% 16.78% 18.29% 16.52%
41.61% 36.10% 32.97%
36.10% 27.81% 28.53% 33.88% 31.32%
6.15% 9.19% 8.88% 8.05% 9.01% 10.20%
10.45% 10.62%
7.01% 8.01% 5.45% 8.11% 10.05% 8.39% 3.73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
State MassNSC
Regional Rate State Mass Trade ReadyMass NSC
State Rate Trade ReadyRate
Reference Trade ReadyMass
Wind
Utility Scale Solar
Other
Fossil Steam Oil/Gas
Combustion TurbineOil/GasCombined Cycle Gas
Fossil Steam Coal
Nuclear
76,467 81,728 81,641 92,891 78,340 74,914 80,328 78,003
Total Energy (GWh)
PJM©2016
PJM’s Sensitivity Analysis:
Low Gas Price Sensitivity Short-Term Retirement Decision Sensitivity
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Henry Hub Natural Gas Price Comparison
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If Gas Prices Remain Low… Compliance with CPP Mass Targets are not Binding
Existing Resources Existing and New Resources
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Low Gas Price and Short-term View Impact on Coal and Nuclear
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If Generation Takes a Short-Term View… Compliance Cost Goes Up
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Low Gas Price and Short-term View Impact on CO2 Emissions
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Key Observations and Conclusions
1. It is feasible for the PJM states to comply with the CPP and do so with compliance costs between 1.1%-3.3% of current total wholesale costs.
2. Resource adequacy is maintained, but with a shift from coal and other fossil steam generation to new combined cycle natural gas and renewable generation.
3. Compliance with the Clean Power Plan leads to lower transmission congestion overall and shifting of congestion patterns relative to the reference case but transmission reliability studies are ongoing.
4. Mass-based, trade-ready compliance leads to the lowest compliance costs.
PJM©2016 33
Key Observations and Conclusions
5. If natural gas prices remain low as they have been in the past several years, the PJM states would achieve or exceed the EPA mass-based emission reduction goals even in the absence of the Clean Power Plan
6. Shortening the retirement decision horizon to a 5 year window leads to nuclear retirements and an increase in compliance costs with reference case gas prices, with compliance costs remaining below 2% of current total wholesale costs for the model scenarios examined.