Michigan IRP
Working Group Meeting
June 10, 2005
Energy Business Solutions
Objectives and Agenda
 The objective is to close out a number of data and modeling assumptions
so that we can move on the next milestone – Representative Market Model
of Michigan (6/27/2005)
 Agenda
 Data Assumptions
 Transmission Interface Limits
 Model Representation
 Fuel Forecast
 Firm Gas Transportation Requirements for CC’s and CT’s
 Emissions – SO2, NOX, Hg
 Unit Retirements
 Demand Side Alternatives
 Blocks for Land Fill Gas and Digestion
 Modeling Assumptions
 Objective Function and Constraints
 External Capacity
 Matrix of Scenarios and Sensitivities
Energy Business Solutions
Transmission Interface Capability
 ISSUE: The Michigan to ROW transmission interface limits are highly
dependent upon loop flows through Michigan and into Ontario
 Assumption to Resolve
 Do we take a conservative approach?
 Assume that 1500 MW of loop flow occurs all the time
 Do we take a “problem resolved” approach?
 Assume that loop flow problem does not exist or is corrected by
phase shifters
 Do we take an “in-between” approach?
 Assume that loop flow happens half the time and take an
average of the two previous numbers
 Do we know a seasonal pattern of loop flow?
 Assume that loop flow happens for a schedule of particular
months
Energy Business Solutions
Transmission Interface Capability
 Example: Interface Capability from the Southern Market into Michigan
 Assumption effects
 Do we take a conservative approach?
 1,450 MW
 Do we take a “problem resolved” approach?
 3,000 MW
 Do we take an “in-between” approach?
 2,225 MW
 Do we know a seasonal pattern of loop flow?
3000
2500
2000
1500
1000
500
0
1
2
3
4
5
6
7
8
9
10
11
12
Energy Business Solutions
Model Representation
Upper Peninsula
?
?
TN
?
METC
Ontario
0
?
- Areas
ITC
MAPP
?
1400
1450
- Tie Lines
1350
TN
1450
1450
TN
MAIN
MAAC
1450
1450
TVA
Interfaces based
On Conservative Estimate
VACAR
Energy Business Solutions
Fuel Forecasts
 ISSUE: The EIA Annual Energy Outlook does not represent the recent run
up in Appalachian Coal, Gas and Oil prices
Gas Prices
$/MMBTU
10
8
History HH
Forecast WH
NYMEX HH
6
4
2
10
09
08
07
06
05
04
0
Time
 June 1 2005 NYMEX Henry Hub futures
 Forecast adjusted monthly based on Platt’s shape
Energy Business Solutions
Fuel Forecasts
 ISSUE: The EIA Annual Energy Outlook does not represent the recent run
up in Appalachian Coal, Gas and Oil prices.
3.5
3
2.5
2
1.5
1
0.5
0
History App
Forecast App
7
0
6
0
5
NYMEX C.
App
0
0
4
$/MMBTU
Coal Prices
Time
 based on May 31, 2004 NYMEX Central Appalachian Coal Futures
 adjusted for an average heat content of 25.01 MBTU/Ton and .40
$/MMBTU for transportation for a delivered price to PJM
Energy Business Solutions
Fuel Forecasts
 Recommendation
 Use current NYMEX Strip for Appalachian Coal, Henry Hub Gas, and Oil
 Escalate beyond strip using EIA escalation assumptions, roughly 2.3%
 Scale Midwest Coal forecast according to ratio of Platt’s Appalachian Coal
to Platt’s Midwest Coal
 The EIA forecast for Powder River Basin looks consistent, use as
forecasted.
Energy Business Solutions
Firm Gas Transportation - CC
 ISSUE: The current economic assumptions for new Combined Cycle
Technology do not include any provisions for reserving firm pipeline
capacity to ensure delivery of gas to support CC operations.
 Failure to reserve gas pipeline capacity may limit energy operations
for CC’s.
 RECOMMENDATION:
 Include a Firm Gas Transportation charge of $1.71/kW-Month in the
CC’s Fixed O&M expenses (represents a blend of reservation
charges for ANR and Trunkline).
 Include a Commodity charge of .014 $/MBTU to CC fuel.
Energy Business Solutions
Firm Gas Transportation - CT
 ISSUE: The current economic assumptions for new Combustion Turbine
Technology do not include any provisions for reserving firm pipeline
capacity to ensure delivery of gas to support CT operations.
 Failure to reserve gas pipeline capacity may limit energy operations
for CT’s
 Options:
 Assume dual fuel capability on all new CT’s. This provides CT’s with
an alternative fuel to support quick start reserves and peak operation
needs.
 Assume a Firm Gas Transportation charge of $1.71/kW-Month in the
CT’s Fixed O&M expenses (represents a blend of reservation charges
for ANR and Trunkline) for peak requirement months.
 Summer
 Summer and Winter
Energy Business Solutions
Emissions – SO2, NOX, Hg
 Verification of Emission Spreadsheets
 Mercury Emissions
Energy Business Solutions
Unit Retirements
 ISSUE: We have attempted to extend the life of units, such that, we are
not seeking capacity alternatives to unit retirements. However, several
Michigan unit’s retire prior to the study period and during the study period.
 The Participants desire to not replace retiring units as a part of this
study.
 RECOMMENDATION: Set retirements of all existing units to beyond the
study horizon.
Energy Business Solutions
Demand Side Alternatives
Energy Business Solutions
Blocks for Land Fill Gas and Digestion
Energy Business Solutions
Objective Function and Constraints
 OBJECTIVE FUNCTION
 Minimize Utility Cost
 Minimize Average Rate
 Subject To:




Minimum Reserve Margin of
Maximum Reserve Margin of
Combinations
Restricted Combinations
Energy Business Solutions
External Capacity
 ISSUE: Are capacity purchases, external to Michigan, available as
resource alternatives to count toward the reserve requirements of
Michigan?
 Point of Clarification: in the Capacity Need Forum Proposed Integration
Scenarios there is a footnote associated with a Max Import Sensitivity that
indicates capacity pricing based on 50% CT and 50% CC.
 NewEnergy can generate a capacity and energy price for the various
markets represented as an alternative.
Energy Business Solutions
Other Critical Data Needs
 Data Review by Lansing Water & Board and Wolverine
 Review of Assumptions and Model Development
Energy Business Solutions