ISO NE Capacity Market Overview January 6, 2016

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l Energy Pyramid

l Capacity Cost Calculations

l Capacity Fundamentals

l Historical / Future Capacity Costs

l Strategies for Managing Capacity Costs

"Agenda

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"The Energy Pyramid

3 Capacity Overview

l  Note: These percentages are approximate for all ISOs and are not meant to be taken as representative of your costs (Average % of overall energy spend on the left, average level of volatility on the right)

Capacity Costs

4 Capacity Overview

q Locational Reliability

l  Definition: Each Retail Electric Provider (REP) or Load Serving Entity (LSE) is charged for their daily unforced capacity obligation priced at the applicable zonal capacity price for the delivery period

l  Purpose: Charge collected from load and paid to generators to ensure that the ISO has sufficient generating capacity and that new resources are sited in the optimal location.

l  Cost Certainty: Suppliers wear both capacity tag and usage risk in some product structures

—  Capacity charged to REP/LSE on an absolute basis

—  Capacity is collected at times on a volumetric basis

l  Cost: Depends on term length, start / end dates within particular planning years, zone, and load factor

"Locational Reliability / Capacity

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"Capacity Cost Calculation Methodologies

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NEPOOL (Customer Load/Pool Peak Load * Capacity Load Obligation) times NRCP So for 1 MW of Peak Load (from Peak hour), bill for November 2010 1 / 24,707 (Pool Peak) x 30,985 = 1.254098 MW of Capacity Load Obligation times NRCP ($3.85584/kW/Month x 1000) = $4,835.60 for the month of November

NRCP = Net Regional Clearing Price

l  PLC (Peak Load Contribution)

—  PJM: 5 coincident peak (5 highest hours occurring on Summer weekdays from June – September for the entire PJM RTO)

—  NYISO:1 coincident peak (single highest hour)

—  NEPOOL: 1 coincident peak (single highest hour)

l  Capacity Planning Years

—  PJM: June through May

—  NEPOOL: June through May

—  NYISO: May through April

l  Capacity Costs

—  PJM: Base Residual Auction prices known three years in advance of effective planning year

—  NYISO: Three auctions, however, the wholesale product settles against the Spot Clearing Price.

•  Strip – 6 month Capability Period (occurs twice a year) flat block for all 6 months

•  Monthly – balance of Capability Period (occurs 12 times annually) shaped monthly

•  Spot – prompt month (occurs 12 times annually)

—  NEPOOL: Forward Capacity Auction (FCA) prices known three years in advance of effective planning year.

"How are PLCs Set, Planning Years, Capacity Costs

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"ISO New England Load Zones

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"Capacity Costs by ISO – NEPOOL

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Forward  Capacity   Market  Data  

ISO-­‐NE  FCM   Average  Price           Average  Capacity  Requirement   Scaling  Factor  

Capability  Year   Maine   NEMA   SEMA-­‐RI  Rest-­‐of-­‐Pool   Maine   NEMA   SEMA-­‐RI  

Rest-­‐of-­‐Pool  

CY  10/11  ¹               $3.932               1.36  CY  11/12  ¹      

$3.415      

1.29  

CY  12/13  ¹   $2.765  

$2.890   1.24  

1.24  CY  13/14  ¹   $2.924  

$2.789   1.43  

1.31  

CY  14/15  ¹      

$3.059      

1.26  CY  15/16  ²      

$3.434      

1.43  

CY  16/17  ³       $14.999  

$3.150      

   CY  17/18  ³      

$15.000      

   

CY  18/19  ³           $17.728   $9.551                  1:  Price  is  average  of  monthly  Net   Regional  Clearing  Prices.  

2:  Price  is  FCA  clearing  price;  Scaling  Factor  is  based  on  Jun.  and  Jul.  2015  preliminary  data.   3:  Price  is  FCA  clearing  price;  Scaling  Factor  not  available.  

 

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"Managing Capacity – Reducing Peak Demand Charges and Creating Revenues Using Storage

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Battery Storage

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Example$Showing$High$Load$Day$with$Current$Procedures$

Scheduled(Genera-on( Peaking(Plants( Demand(Response( Actual(Load( Forecasted(Load( Wind(DR(Capacity(

Regulation Market

Energy Opportunities

Load Shifting

Pre-charging

Economic Market

Peak Management Utility Demand Charges

PJM Grid

Customer

Leveraging  Storage  in  the  Energy  Markets  

•  Managing load response with energy storage is a key advantage in this market. Storage helps firm the service, but the performance of the batteries can unlock the highest available market revenue.

•  Utilizing battery storage businesses can reduce transmission and utility demand charges by offsetting grid capacity or monthly usage peaks

•  Battery Storage can also be used for frequency regulation, quickly injecting and removing small amounts of power to/from the grid, or in the economic market to receive lucrative payments. The battery can also be used in other economic market programs and for back-up power.

Using Solar PV to reduce PLCs

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•  If we view this in the context of capacity charges, the coincident peak used to determine PLCs could be reduced from 40-60%

•  The balance of the load still needs to be provided through a REP like GDF SUEZ; however, the value proposition of solar PV extends to the residual commodity contract as well

"Other means of lowering your PLC

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l  Permanent energy offsets

—  Retrofitting of lighting —  Installation of automatic controls —  Upgrades to windows, building insulation, HVAC systems —  Rooftop solar panel installations

"Thank you

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       Stephen Murphy, PE New England Regional Sales Manager  GDF SUEZ Energy Resources NA  20 City Square, 3rd Floor  Charlestown MA 02129  O: (617) 886-8711| F: (617) 381-8611| C: (781) 883-9498  Stephen.murphy@gdfsuezna.com    www.gdfsuezenergyresources.com  GDF SUEZ Energy Resources NA