National Energy Technology Laboratory Driving Innovation ♦ Delivering Results Steve Bossart, Moderator October, 2015 USAEE Pittsburgh North American Conference Plenary Session on Electricity Markets

2 National Energy Technology Laboratory Session Topic Wholesale electricity markets and electricity deregulation have been in place almost 20 years, and yet markets are still constantly evolving. Changes to ISO/RTO area footprints, the energy and capacity market structures, along with various layers of regulatory uncertainty and the unique perspective of the players create a dynamic environment. This session will profile some of the market opportunities and challenges facing the electricity industry today.

3 National Energy Technology Laboratory Panelists Mario DePillisHoward HaasIngmar Sterzing

4 National Energy Technology Laboratory Source: FERC.gov ISO/RTO Market Areas – Independent System Operators / Regional Transmission Organizations CAISO ERCOT ISO-NE MISO NYISO PJM SPP

5 National Energy Technology Laboratory US Status of Electricity Deregulation Source: Energy Information Administration. Data as of: September Next Release - none

6 National Energy Technology Laboratory Traditional utility vs. Unbundled utility Source: Dr. Marija Prica. NETL-ESPA Transmission 101 presentation. December 19, 2012 GenerationTransmission and distribution Customers Utility A A traditional utility is responsible for generation, transmission, and distribution of power in its service territory. Customers A Generation B Transmission and distribution providers Customers B Generation A Retail market Wholesale market Independent System Operator In a deregulated environment, generation, transmission, and distribution are unbundled. Customers can purchase from any supplier on the grid. Transmission owner has to provide open access. ISO/RTO manages the system.

7 National Energy Technology Laboratory Issues Aging Infrastructure Increasing Use of Technology & Equipment Security – Physical/cyber Changing outlook for the grid – generation portfolio & market Evolution of Markets –Are markets driving policy or policy driving markets? Review of Issues Impacting Markets & Risk Levels – Are Markets Responding Appropriately or Timely? – Market Design issues – Energy Only vs Energy + Capacity, future speculation on need for a Reliability Market (Essential Reliability Services such as VAR support, Reactive Power payments, etc. – much stronger than an ancillary services market or performance based) – Investment Structures – how to incentivize, is proper cost allocation occurring? – Regulations – federal, state, local, siting, environmental, policy, etc. – Fuel Costs – shift from low cost coal to low cost natural gas; – Security – reliance on different or non-traditional generation sources (no longer baseload concept) – Change in Generation Resources – shift from central station to more distributive, will infrastructure (G or T) be built in time to accommodate policies – Shift in Supply Side to Demand Side Opportunities – Intermittent Resources – increasing amounts due to RPS or other policy drivers – Reliability Impacts – how to design, finance & respond to operating a “tighter” grid – Transmission Opportunities – more wires for different resources Market Uncertainties – What are the Reliability/Planning Investment Opportunities? – How long can a market sustain these types of activities before requiring a change?