Antitrust/Competition Commercial Damages Environmental Litigation and Regulation Forensic Economics Intellectual Property International Arbitration International

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  • Antitrust/Competition Commercial Damages Environmental Litigation and Regulation Forensic Economics Intellectual Property International Arbitration International Trade Product Liability Regulatory Finance and Accounting Risk Management Securities Tax Utility Regulatory Policy and Ratemaking Valuation Electric Power Financial Institutions Natural Gas Petroleum Pharmaceuticals, Medical Devices, and Biotechnology Telecommunications and Media Transportation Copyright 2013 The Brattle Group, Inc. www.brattle.com ERCOT Business Case for Economic Transmission Planning Presented to: ERCOT RPG Meeting Presented by: Johannes Pfeifenberger Judy Chang March 26, 2013
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  • 1 Content Objectives of the Effort Similar previous engagements Work Plan (Tasks 1-7) Timeline Appendix (Tools, Example Metrics)
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  • 2 Objectives of this Effort Review long-term system assessment (LTSA) process and develop recommendations to enhance/expand business case for (and include additional methods of valuing) transmission. Provide ERCOT with a careful review and critique of the existing LTSA transmission planning process Investigate key stakeholder and industry-wide concerns Review LTS and compare to processes in other jurisdictions Provide ERCOT options for expanding its planning processes to include more comprehensive assessments of transmission expansion benefits Develop and demonstrate methodologies for valuing additional (non-conventional) transmission-related societal benefits Assist ERCOT in optimizing the use of its modeling platforms and tools Identify the strengths and weaknesses of models and tools Recommending best practices in modeling applications and procedures Enable ERCOT deliver repeatable study results in future LTSA planning cycles Review and critique post-processing tools and automation procedures Conduct workshop to educate stakeholder and present results and recommendations
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  • 3 The Business Case for Transmission Effective planning for economic and public-policy projects requires developing a proper analytical approach to evaluate projects Projects often present different options (with different benefits and costs) that can meet the same objective Some projects serve different purposes and offer different benefits that require different analytical approaches to quantify of explain Standard analytical tools capture only a portion of economic benefits and can limit the scope of benefit-cost analyses Lack of established evaluation processes also limits the approach to only using standard analyses We helped numerous clients in similar engagements to improve their analytical approach and planning frameworks for new transmission, including developing methods to quantify non-conventional benefits. Clients include planning authorities, both traditional and independent transmission owners, and industry groups: SPP, ITC, ATC, AEP-ETA- Exelon, SCE, WIRES, AWC, Cleanline, Greenline
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  • 4 Similar Engagements: SPP Helped SPPs Metrics Task Force and improve its planning framework for transmission benefit-cost analyses to support Regional Cost Allocation Review effort by Regional State Committee SPP previously defined numerous robustness metrics that did not monetize benefits and double-counted similar benefits Helped the task force to: (1) define limitations of standard benefit metrics (2) develop methodologies that can monetize additional benefits (3) avoid double-counting of similar benefits Task force confirmed 5 standard metrics and added 8 new metrics to monetize transmission benefits (shown on next slide) Also recommended additional benefit metrics for future implementation, including mitigation of weather uncertainty and reduced cycling of baseload units Now working with SPP to implement recommendations and quantify some of the recommended benefit metrics
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  • 5 Similar Engagements: SPP (contd) BenefitsMetricStandard Metric Recommended New Metric Adjusted Production Cost Benefits Adjusted Production Costs Energy losses benefits Mitigation of transmission outage costs Capacity for Losses Reduced capacity costs Improvements in Reliability Avoided or delayed reliability projects Capital savings associated with reduced capacity margin Reduced loss of load probability Reduced cost of extreme events Assumed benefits of mandated reliability projects Reduction of Emission Rates and Values Reduction of emission rates and values Reduced Operating Reserves Benefits Lower ancillary services needs and costs Improvements to Import/Export Limits Increased wheeling through and out revenues Public Policy Benefits Meeting policy goals
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  • 6 Similar Engagements: ITC Analyzed for ITC both societal and customer benefits for a portfolio of strategic projects in the Entergy footprint : Production cost savings due to congestion and RMR relief Increased transfer capabilities to Western region, SPP, TVA and associated resource adequacy benefits to Entergy, IPPs, ERCOT, and others Increased wheeling out and through revenues Avoided or deferred future reliability projects Storm hardening in eastern Texas, southern Louisiana & New Orleans Low-cost options to increase load serving capability in industrial corridors of eastern Texas and southern Louisiana Economic development benefits More robust grid, increased system reliability and operating flexibility Improved market access and competitive choices, including future options for lower-cost renewable generation imports into the region
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  • 7 Similar Engagements: Others AEP-ETA-Exelon: helped AEP improve internal modeling capabilities and quantify wide range of benefits for proposed RITELine project; AEP-ETA: helped AEP understand full range of benefits provided by proposed regional SMARTransmission overlay ATC: helped ATC improve internal modeling capability and develop new methodologies to quantify non-traditional benefits in context of several proposed transmission projects and overall planning framework Southern California Edison: helped quantify and explain wide range of California and Arizona benefits for proposed Devers-Palo Verde No. 2 line Atlantic Wind Connection: quantify range of benefits related to offshore wind integration grid Cleanline: conducted renewable integration benefit analysis for its project Anbaric: helped independent developer improve benefits framework WIRES: 2011 report on economic stimulus and other benefits of transmission; currently working on report document best practices in transmission benefit- cost analyses SPP RSC: helped develop inter-regional planning and cost allocation framework
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  • 8 Workplan: Overview Task 1: Kick-off meeting (Feb 13) Task 2: Review and Critique ERCOTs Existing LTS Planning Process (mid Feb end of March) Task 3: Evaluate Existing Production Modeling Procedures, Training, and Planning Results (late Feb mid April) Task 4: Develop Recommendations and Additional Benefit Metrics (late March early June) Task 5: ERCOT Staff Briefing (May 17) Task 6: Stakeholder Workshop (June 3) Task 7: Prepare Report (early May June 30, early July)
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  • 9 Task 1. Project Kick-off (completed) Confirmed the scope of the analyses and proposed tasks Agreed on a detailed work plan Identified key ERCOT staff that will be available to provide data and technical information Identified key ERCOT, stakeholder, and other documents and data that need to be considered in the review effort Assemble a list of stakeholders that should be interviewed
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  • 10 Task 2. Review and Critique ERCOTs Existing LTS Planning Process (ongoing) Review ERCOTs current process for screening economic transmission projects over its long-term study horizon Interview ERCOT planning staff to ensure complete understanding Interview the investors and other stakeholders identified during the kick-off meeting to obtain their thoughts about existing planning process, concerns, and possible improvements Identify gaps and options to address them
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  • 11 Task 3. Evaluate Existing Production Modeling, Training, and Planning Results (ongoing) Review relevant documentation Interview ERCOT staff and meet with ERCOT staff on site (and, where efficient, over Web-Ex) to review: Production cost modeling procedures, including a review of how each modeling tool is being used. (e.g., PROMOD IV, UPLAN, and KERMIT.) In-house training materials and methodologies Preliminary modeling results of ERCOTs most current economic planning efforts Identify strengths of current analytical and modeling capabilities and identify gaps that should be filled to improve planning process
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  • 12 Task 4. Develop Recommendations and Additional Benefit Metrics Recommend improvements to existing planning and screening process Propose potential refinements to existing methodology, calculations, and metrics associated with production cost savings Develop and propose additional metrics of potential benefits to be used in evaluating the societal benefits Describe and demonstrate through examples how to calculate the new metrics based on existing ERCOT modeling tools and additional analyses Explain how value metrics and evaluation techniques fit with ERCOTs cost recovery mechanisms Consolidate findings and draft recommendations
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  • 13 Task 5. ERCOT Staff Briefing Task 6. Stakeholder Workshop Conduct day-long on-site meeting with ERCOT staff to review our draft findings and recommendations, prior to workshop Include demonstration of the proposed additio