ERTAC EGU MACE/MACW Case Study December 10, 2012 DRAFT - DO NOT DISTRIBUTE1

MACE/MACW: Unrealistic Growth of Coal Issue: Discovered unrealistic creation of new coal units MACE: 4 new units MACW: 1 new units Reminder: “Proof of Concept” Run used 2010 growth rates that were predicted prior to boom in cheap gas Preliminary sensitivity runs using AEO 2011 growth rates suggest that no new coal facilities will be built in the MACE and MACW regions DRAFT - DO NOT DISTRIBUTE2 MACW LILC NYC

New Units: Due to Peak or Base Growth? Important question to ask: Why are the new units generated? Two possibilities: 1 - A few high demand hours needing capacity, or: 2 - Base load is lacking throughout the year Useful reports for analysis Calc Generation Params CSV and; Hour Specific Growth Rate (HSGR) v. Average Future Year Growth Rate (AFYGR) graphs Contain all hours of the year for each region/fuel bin Can identify hours with positive AFYGRs Demand Generation Deficit CSV Shows only hours with lacking capacity for a region/fuel bin and by how much the generation lacks For region/fuel bins that have a problem – If it is during peak hours this file will have 20 or less entries – If it is a base load issue this file will have 1000’s of entries DRAFT - DO NOT DISTRIBUTE3

HSGR v. AFYGR Explanation (MACW Coal Ex.) DRAFT - DO NOT DISTRIBUTE4 Hours from 1/1 00:00- 12/31 11:00 Hours from highest base year activity to lowest Peak HoursTransition HoursNon-peak Hours Hourly Specific Growth Rates Adjusted Future Year Growth Rate

MACE and MACW Annual Growth Rates Peak Growth Rates DRAFT - DO NOT DISTRIBUTE5 Growth Rates BaseFuel Switch Retire ment New Units Future MACE MACW47011 Planned Units

MACW Coal: HSGR v. AFYGR DRAFT - DO NOT DISTRIBUTE6 HSGR consistently > AFYGR indicative of a lack of retirements AFYGR > 1 at peak hint at, but don’t confirm generic unit creation

MACE Coal: HSGR v. AFYGR DRAFT - DO NOT DISTRIBUTE7 AFYGR consistently > HSGR indicative of many retirements AFYGR > 1 at peak hint at, but don’t confirm generic unit creation

Diagnosis HSGR v. AFYGR Graphs MACE appears to be a base load problem MACW appears to be a peak problem Demand Generation Deficit CSV confirms Hours needing additional coal generation MACE: ~4,500 hours MACW: 2 hours New units were being generated in MACE due to base load lacking MACW due to a peak load problem DRAFT - DO NOT DISTRIBUTE8

Sensitivity Runs Conducted 4 sensitivity runs Updated growth rates: 2011 coal growth rates are substantially lower than 2010 So we updated peak and base growth rates to 2011 Nominal heat rates: The software allows you to: manually input an annual unit level heat rate or; use BY data to calculate unit level heat input Many units had nominal heat rates that were higher than the calculated rates, meaning they ran less efficiently than they could have in the future year So we removed all manually inputted nominal heat rates DRAFT - DO NOT DISTRIBUTE9 RegionUpdated Growth Rate Better Unit Efficiency Estimates Both MACEXXX MACWX

Results New generic coal units: Better Unit Efficiency Estimates: Both regions can use existing plants to cover the generation of one new 600 MW plant Growth rate impact: Reduction in predicted growth of coal reduced the need for two new 600 MW plants But wait… there is still 1 new coal unit… but there is more DRAFT - DO NOT DISTRIBUTE10 RegionV1.0Updated Growth Rate Better Unit Efficiency Estimates Both MACE4231 MACW10

Regional boundaries changed from AEO 2010 to AEO 2011 Essentially MACE expanded into MACW MACW has excess existing coal capacity since it only had a peaking problem Conclusion: We have preliminary results showing that updating regional boundaries will remove the last generic coal plant Regional Boundaries DRAFT - DO NOT DISTRIBUTE LILC NYC NYCW NYLI MACW RFCE

Conclusions Updating inputs with newer and better information cleans up the new coal unit issue Rather than taking outputs as given ERTAC team used the models traits to fix the problem State input: Determined that results were unrealistic Transparency: Determined cause of the problem – for instance whether capacity was needed at peak or base Low Operational Cost: Only staff and computing time needed to conduct sensitivities to troubleshoot the problematic results, no high consulting fees are necessary DRAFT - DO NOT DISTRIBUTE12