Illinois Energy Industry
in Flux
P R ESENTATION TO T HE I L L I NOIS M U N I CI PAL U T I L I TY A S S OCIATI ON
2 0 1 5 A N N UA L CON F E R E NCE
M AY 9 , 2 0 1 5
Outline
Background
Wholesale
Retail
Regulation
Legislation
Technology
Themes / Discussion
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Background
Personal
◦ Current Role: Energy Consultant and Sector Analyst
◦ Represent buyers in electricity and natural gas transaction
◦ Advise on energy regulation and legislation
◦ Past Role: Utility Regulator / Energy Buyer
◦ Director of Illinois Power Agency
◦ Energy Program Manager, UIC / State of Illinois agencies
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Background
Personal
◦ Current Role: Energy Consultant and Sector Analyst
◦ Represent buyers in electricity and natural gas transaction
◦ Advise on energy regulation and legislation
◦ Past Role: Utility Regulator / Energy Buyer
◦ Director of Illinois Power Agency
◦ Energy Program Manager, UIC / State of Illinois agencies
Presentation
◦ ‘Flux’ as a theme
◦ ‘Flux’ is not a negative – it just means change
◦ ‘Flux’ describes simultaneous moving targets – usually at different levels and directions
◦ ‘Flux’ can only be managed – not controlled
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Wholesale
PJM
◦ Energy
◦ Outside of Polar Vortex, prices are lower
◦ Forward market is flat
◦ Capacity
◦ Proposed rules to ‘enhance reliability’
◦ Defines ‘Capacity Performance’ product
◦ Phases in ‘Capacity Performance’ through 2020
◦ Expectations are that capacity prices could rise up to
net-CONE levels
◦ Auction to be delayed until July/August
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Wholesale
PJM
MISO
◦ Energy
◦ Energy
◦ Outside of Polar Vortex, prices are lower
◦ Outside of Polar Vortex, prices are lower
◦ Forward market is flat
◦ Forward market is flat
◦ Capacity
◦ Capacity
◦ Proposed rules to ‘enhance reliability’
◦ Illinois zone clears at $150/MW-Day, up from $16.75
◦ Defines ‘Capacity Performance’ product
◦ All other zones clear at ~$3/MW-Day, down from $16.75
◦ Phases in ‘Capacity Performance’ through 2020
◦ Significant questions concerning
◦ Expectations are that capacity prices could rise up to
net-CONE levels
◦ Auction to be delayed until July/August
◦ Auction design
◦ Gaming
◦ Transparency
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Wholesale
PJM
MISO
◦ Energy
◦ Energy
◦ Outside of Polar Vortex, prices are lower
◦ Outside of Polar Vortex, prices are lower
◦ Forward market is flat
◦ Forward market is flat
◦ Capacity
◦ Capacity
◦ Proposed rules to ‘enhance reliability’
◦ Illinois zone clears at $150/MW-Day, up from $16.75
◦ Defines ‘Capacity Performance’ product
◦ All other zones clear at ~$3/MW-Day, down from $16.75
◦ Phases in ‘Capacity Performance’ through 2020
◦ Significant questions concerning
◦ Expectations are that capacity prices could rise up to
net-CONE levels
◦ Auction to be delayed until July/August
◦ Auction design
◦ Gaming
◦ Transparency
Conclusion: Rising wholesale and retail prices in Ameren and ComEd service regions
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Retail
Suppliers
◦ Consolidation / Market Exits
◦ Exelon purchases Integrys
◦ FirstEnergy Solutions exits certain sectors in Illinois
◦ Credit Issues
◦ Credit calls resulting from polar vortex
◦ Retail Utility Affiliates are being shed
◦ Integrys Solutions excised from WE Energies purchase
◦ Ameren offloads retail unit (Homefield)
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Retail
Suppliers
Municipal Aggregation
◦ Consolidation / Market Exits
◦ Program competitive is diminishing
◦ Exelon purchases Integrys
◦ Program – Utility convergence
◦ FirstEnergy Solutions exits certain sectors in Illinois
◦ Ameren: 5.7 – 5.9 cents (+/- PEA)
◦ Aggregations: 5.679 cents
◦ Credit Issues
◦ Approximately 20% of programs have gone back to default
◦ Credit calls resulting from polar vortex
◦ Ameren 12-month average: 3.675 cents
◦ Retail Utility Affiliates are being shed
◦ Integrys Solutions excised from WE Energies purchase
◦ Ameren offloads retail unit (Homefield)
◦ Aggregations 12-month average: ~4.3 – 4.5 cents
◦ Aggregation 2.0
◦ Communities like the consumer protection angle
◦ Community leaders do not like the political risk
◦ New approach will allow communities to shortlist suppliers
◦ High customer satisfaction
◦ No contract cancellation fees
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Retail
Suppliers
Municipal Aggregation
◦ Consolidation / Market Exits
◦ Program competitive is diminishing
◦ Exelon purchases Integrys
◦ Program – Utility convergence
◦ FirstEnergy Solutions exits certain sectors in Illinois
◦ Ameren: 5.7 – 5.9 cents (+/- PEA)
◦ Aggregations: 5.679 cents
◦ Credit Issues
◦ Approximately 20% of programs have gone back to default
◦ Credit calls resulting from polar vortex
◦ Ameren 12-month average: 3.675 cents
◦ Retail Utility Affiliates are being shed
◦ Integrys Solutions excised from WE Energies purchase
◦ Ameren offloads retail unit (Homefield)
◦ Aggregations 12-month average: ~4.3 – 4.5 cents
◦ Aggregation 2.0
◦ Communities like the consumer protection angle
◦ Community leaders do not like the political risk
◦ New approach will allow communities to shortlist suppliers
◦ High customer satisfaction
◦ No contract cancellation fees
Conclusion: Less competitive pressure, less ‘savings’, some portfolio shift back to default rate
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Regulatory
Federal
◦ FERC Rulings
◦ Capacity market / import and export rules
◦ Supreme Court
◦ Demand response as a capacity asset
◦ EPA Clean Power Plan
◦ Final rules
◦ Resulting state-level planning activities
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Regulatory
Federal
◦ FERC Rulings
◦ Capacity market / import and export rules
◦ Supreme Court
◦ Demand response as a capacity asset
◦ EPA Clean Power Plan
State
◦ ICC Changes
◦ New Chairman
◦ New Commissioner
◦ 111(d) Planning
◦ IEPA leading the initiative
◦ Final rules
◦ Retained nuclear assets
◦ Resulting state-level planning activities
◦ Energy Efficiency
◦ Renewable Energy
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Regulatory
Federal
◦ FERC Rulings
◦ Capacity market / import and export rules
◦ Supreme Court
◦ Demand response as a capacity asset
◦ EPA Clean Power Plan
State
◦ ICC Changes
◦ New Chairman
◦ New Commissioner
◦ 111(d) Planning
◦ IEPA leading the initiative
◦ Final rules
◦ Retained nuclear assets
◦ Resulting state-level planning activities
◦ Energy Efficiency
◦ Renewable Energy
Conclusion: New market rules and compliance requirements, but same fractured regulatory controls
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Legislative
Federal
◦ Production Tax Credit
◦ Expired in 2013
◦ Used by wind developers to claim $22/MWh credit
◦ Some developers still qualify
◦ Investment Tax Credit
◦ Set to expire December 2016
◦ Used by solar developers to claim 30% tax credit
◦ Critical to developers
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Legislative
Federal
◦ Production Tax Credit
State
◦ Exelon – Low Carbon Portfolio Standard
◦ Expired in 2013
◦ Keep at-risk nuclear plants in operation
◦ Used by wind developers to claim $22/MWh credit
◦ Requires Ameren and ComEd to purchase credits
◦ Some developers still qualify
◦ ~$300 million/year
◦ Investment Tax Credit
◦ ComEd –
◦ Set to expire December 2016
◦ Numerous efficiency and demand response proposals
◦ Used by solar developers to claim 30% tax credit
◦ Convert distribution rates to demand basis
◦ Critical to developers
◦ Install microgrids, charging stations, community solar
◦ Clean Jobs Bill –
◦ Numerous efficiency and demand response proposals
◦ ‘Fix’ the RPS / Expand Energy Efficiency
◦ Starts Carbon Trading evaluation
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Legislative
Federal
◦ Production Tax Credit
State
◦ Exelon – Low Carbon Portfolio Standard
◦ Expired in 2013
◦ Keep at-risk nuclear plants in operation
◦ Used by wind developers to claim $22/MWh credit
◦ Requires Ameren and ComEd to purchase credits
◦ Some developers still qualify
◦ ~$300 million/year
◦ Investment Tax Credit
◦ ComEd –
◦ Set to expire December 2016
◦ Numerous efficiency and demand response proposals
◦ Used by solar developers to claim 30% tax credit
◦ Convert distribution rates to demand basis
◦ Critical to developers
◦ Install microgrids, charging stations, community solar
◦ Clean Jobs Bill –
◦ Numerous efficiency and demand response proposals
◦ ‘Fix’ the RPS / Expand Energy Efficiency
◦ Starts Carbon Trading evaluation
Conclusion: Possibly higher costs and shifting incentives for nuclear, wind, solar, and EE
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Technology
Generation
◦ Dropping prices for alternative resources
◦ Solar / Wind
◦ Better efficiencies
◦ Private sector interest
◦ 23% of recent wind PPA’s are with non-utility entities
◦ Attraction is based on financial hedging and compliance
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Technology
Generation
◦ Dropping prices for alternative resources
◦ Solar / Wind
◦ Better efficiencies
◦ Private sector interest
◦ 23% of recent wind PPA’s are with non-utility entities
◦ Attraction is based on financial hedging and compliance
Microgrids / Smartgrid
◦ Supply stability
◦ Data issues / Privacy
◦ Cross-subsidization
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Technology
Generation
Efficiency
◦ Dropping prices for alternative resources
◦ Storage
◦ Solar / Wind
◦ Tesla: $3500 for 10 kWh electricity storage unit
◦ Better efficiencies
◦ Initial view: Integrate with solar
◦ Alternate view: Alternative to solar in some regions
◦ Private sector interest
◦ 23% of recent wind PPA’s are with non-utility entities
◦ Attraction is based on financial hedging and compliance
Microgrids / Smartgrid
◦ Supply stability
◦ Data issues / Privacy
◦ Cross-subsidization
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Technology
Generation
Efficiency
◦ Dropping prices for alternative resources
◦ Storage
◦ Solar / Wind
◦ Tesla: $3500 for 10 kWh electricity storage unit
◦ Better efficiencies
◦ Initial view: Integrate with solar
◦ Alternate view: Alternative to solar in some regions
◦ Private sector interest
◦ 23% of recent wind PPA’s are with non-utility entities
◦ Attraction is based on financial hedging and compliance
Microgrids / Smartgrid
◦ Supply stability
◦ Data issues / Privacy
◦ Cross-subsidization
Other
◦ LED lighting
◦ Controls
◦ Variable speed drives
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Technology
Generation
Efficiency
◦ Dropping prices for alternative resources
◦ Storage
◦ Solar / Wind
◦ Tesla: $3500 for 10 kWh electricity storage unit
◦ Better efficiencies
◦ Initial view: Integrate with solar
◦ Alternate view: Alternative to solar in some regions
◦ Private sector interest
◦ 23% of recent wind PPA’s are with non-utility entities
◦ Attraction is based on financial hedging and compliance
Microgrids / Smartgrid
◦ Supply stability
◦ Data issues / Privacy
◦ Cross-subsidization
Other
◦ LED lighting
◦ Controls
◦ Variable speed drives
Conclusion: Technology solutions allow for greater customization by end-users
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Themes / Discussion
Themes
◦ Central vs. Distributed
◦ ‘Off the Grid’ is not just for hippies
◦ Private vs. Utility
◦ More options to operate outside of utility structure
◦ Value vs. Price
◦ Stability/sustainability appear to be factors
◦ Transparency vs. Competition
◦ Suspicions that market structures are being gamed
◦ Existing Interests vs. New Options
◦ Significant pressure to maintain status quo
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Themes / Discussion
Themes
◦ Central vs. Distributed
Discussion
◦ Time permitting
◦ ‘Off the Grid’ is not just for hippies
◦ Private vs. Utility
◦ More options to operate outside of utility structure
◦ Value vs. Price
◦ Stability/sustainability appear to be factors
◦ Transparency vs. Competition
◦ Suspicions that market structures are being gamed
◦ Existing Interests vs. New Options
◦ Significant pressure to maintain status quo
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Thank You
Mark J. Pruitt
Principal
The Power Bureau. LLC
219/921-3828
[email protected]
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