Deborah Cooke dcookeisonecom 4135404488 Revisions to Market Rule 1 Cost of New Entry and Offer Review Trigger Prices 1 2 Cost of New Entry and Offer Review Trigger Prices WMPP ID 100 ID: 808024
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December 6, 2016 | MARKETS COMMITTE
Deborah Cooke
dcooke@iso-ne.com | 413.540.4488
Revisions to Market Rule 1
Cost of New Entry and Offer Review Trigger Prices
1
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Cost of New Entry and Offer Review Trigger Prices
WMPP ID:
100
Proposed Effective Date:
Spring 2017 (
Show of Interest Window, FCA 12)
Net Cost of New Entry (CONE) is an estimate of capacity revenue needed by a new generator in its first year of operation to make it economically viable to build a power plant in New England
Offer Review Trigger Prices (ORTPs) represent low-end estimates of Net CONE for a class of
technology
Concentric Energy Advisors has recalculated CONE, Net CONE, and ORTP values for the Capacity Commitment Period beginning June 1, 2021 (FCA 12)
Methodology and updated values can be found in the
Concentric Energy Advisors “ISO-NE CONE and ORTP Analysis” report
Slide3Tariff changes support the new values for CONE, Net CONE, and ORTPs
3
CONE, Net CONE, and ORTP values that will be used for Capacity Commitment Period beginning June 1, 2021 (FCA 12) must be updated to reflect the new values
The revised values, as well as the methodology and inputs used in the calculations, are detailed in the Concentric Energy Advisors “
ISO-NE CONE and ORTP Analysis” report
Slide4CONE, Net CONE, and ORTP Values for FCA
12Revised from November 9, 2016
4
Offer Review
Trigger Price
Value
$/kW-month
Combustion Turbine
$6.488
/ $6.503
Combined Cycle Gas
Turbine
$ 7.856
On-shore Wind
$ 11.025Load Management and/or previously Installed Distributed Generation – C&I $ 1.008Energy Efficiency – C&I and Residential $ 0.00Load Management – Residential $ 7.559Previously Installed Distributed Generation – Residential $ 1.008
Cost of New Entry
Value
$/kW-month
CONE
$ 11.35
Net CONE
$8.03
/ $8.04
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Latest Revisions in Response to Stakeholder
Feedback
Recommendation
Disposition
Impact on Net CONE
Improve the Energy and Ancillary
Services revenue calculations
+ $0.01
Verify the model properly reflects the reference unit capability in 10 minutes and 30 minutes.
After
consultation with GE, the unit was modeled to provide 100 MW in 10 minutes and 238 MW in 30 minutes (from a cold start)
Improve the
Ancillary Services rate development to make the
methodology more transparent
Hourly
values for the forward reserve market and real-time reserve market were recalculated using actual clearing prices rather than average revenues. Specific details of the calculation are included in a separate memo.
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No.
Concern/Feedback
Comments
1
Selection of the Combustion
Turbine Unit as the reference technology
ISO supports the Frame CT as the reference technology:
It is the lowest cost (i.e., most profitable) commercially-available technology for new entry in New England, among all generation technologies examined
Unit flexibility allows it to participate in ancillary services as well as energy markets
2
Capacity factor
calculation for the Wind Offer Review Trigger Price
The
recommended capacity factor of 32% is
appropriate:
Based on up-to-date data from ISO New England, through 2016, for newer wind facilities in appropriate siting areas of systemTechnology improvements and wind speed are not the only determinants in the CF; location and size must also be consideredORTPs do not disadvantage a future entrant that may have a higher expected CF; ORTPs are a review thresholdAdditional stakeholder feedback and ISO’s perspective
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Stakeholder additional requests to the final report
No.
Recommendation
Disposition
1
Breakdown
the Energy and Ancillary Services revenue offsets individually
The report and models will be updated to clearly delineate
these
values and explain the A/S revenue methodology
2
Include an Appendix in tabular format to the report, detailing model assumptions such
as capacity added by year; fuel prices by
year; etc., for future reference
The final report will be updated to provide these values in an Appendix for future reference
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For years in which no major recalculation is performed, the CONE, Net CONE and ORTPs are updated to reflect changes in capital costs and energy market conditions
Indices are specified in the Tariff (III.A.21.1.2)The calculation to update the Energy and Ancillary Services (E&AS) revenue offset is being modified, as discussed today and further detailed in
the Concentric Energy Advisors “ISO-NE CONE and ORTP Analysis” report
The E&AS revenue offset calculations will be consistent for Net CONE and ORTPsThe revenue offset for gas-fired resources (impacting Net CONE, and ORTPs) will incorporate the spread between the electric prices and delivered gas prices
The energy revenue offset for wind resources (ORTP) will be based only energy prices only
The specific gas and electric indices used in these revised calculations are reflected in the red-lined Tariff language
Modifications to the E&AS revenue offset calculations in the annual update process require Tariff revisions
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Required Tariff
changes to revise CONE and Net CONE values
Tariff Section
Summary of Tariff Change
Tariff Section
Summary of Tariff Change
III.13.2.4
Specify the CONE value for the Capacity Commitment Period beginning June 1, 2021
Specify the Net CONE value for the Capacity Commitment Period beginning June 1, 2021
Update the language for the updates to the energy
and ancillary services offset
to reflect the modified approach
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Required tariff changes to revise ORTP values
Tariff Section
Summary of Tariff Change
III.A.21.1
Update
the ORTP values for each technology type that will be used
for the Capacity Commitment Period beginning June 1, 2021
III.A.21.2 (e)(4)
Revise the gas and electric indices to be used for
the E&AS revenue offset calculation for updates between major recalculations,
to reflect the modified approach
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Stakeholder Schedule
Stakeholder Committee and
Date
Scheduled
Project Milestone
Markets
Committee
July 19, 2016
Overview of project;
approach to technology selection; financial model overview
Markets
Committee
August 2016
Follow-up
on questions from July MC meeting; Net CONE financial model; E&AS calculation assumptions; ORTP detailsMarkets CommitteeSeptember 2016Follow-up on questions from August MC meeting;Additional modeling detailsMarkets CommitteeOctober 2016Draft report with updated CONE, Net CONE and ORTP values for stakeholder review; Proposed Tariff languageMarkets CommitteeNovember 2016Discussion on Tariff language and resultsMarkets CommitteeDecember 2016Discussion and Markets Committee vote on Tariff language and amendments, if anyParticipants CommitteeJanuary 2017Discussion and Participants Committee vote on Tariff language
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Acronyms Used in this Presentation
CT = Combustion Turbine
CF = Capacity Factor
CONE = Cost of New Entry
E&AS = Energy and Ancillary Services
FCA = Forward Capacity Auction
IMM = Internal Market
Monitor
NCPC = Net Commitment Period Compensation
ORTP = Offer Review Trigger Price
SOI = Show of Interest