2010 Reliability Assessment

1. 2010 Reliability Assessment

2. About NERC: Mission • Develop & enforce reliability standards • Assess current and future reliability • Analyze system events & recommend improved practices • Encourage active participation by all stakeholders • Pursue mandatory standards in all areas of the interconnection To ensure the reliability of the North American bulk power system

3. NERC Long-Term Reliability Assessment NERC’s annual ten-year reliability assessment provides an independent view of the reliability of the bulk power system, identifying industry trends, emerging and continuing issues, and potential reliability concerns.

4. Overview • Progress since 2009 • 2010 Report Enhancements • Highlights for 2010 • Emerging Issues for 2010

5. Enhancements for 2010 • Enhanced transmission assessment • Gathered information on delays and causes of delays • Increased supply granularity • Individual unit data gathered for Planning Reserve Margin Calculation • Improved validation of capacity resources • Comprehensive assessment performed on the operating boundaries of Midwest ISO and PJM • Severity Risk Assessment

6. Progress on 2009 Key Findings

7. Highlights • The economic recession and demand-side management leads to higher Planning Reserve Margins. • An unprecedented change in the generation fuel mix is projected during the next ten years, • Increases in gas-fired, wind, solar, and nuclear generation. • Bulk transmission development begins to take shape. • Cross-industry communication and coordination is key to successful planning and operations.

8. HighlightHigher Reserve Margins MRO-US >2019/>2019 MRO-CAN >2019/>2019 (Winter) Quebec >2019/>2019 (Winter) Maritimes >2019/>2019 (Winter) WECC-CAN 2016/2017 (Winter) Ontario 2015/>2019 New England 2018/>2019 NWPP >2019/>2019 (Winter) New York >2019/>2019 Basin >2019/>2019 RFC >2019/>2019 RMPA >2019/>2019 VACAR 2019/>2019 Cal N >2019/>2019 Central 2018/2019 TRE Cal S >2019/>2019 SPP >2019/>2019 Southeastern >2019/>2019 Delta >2019/>2019 Desert DW >2019/>2019 TRE 2015/>2019 Gateway >2019/>2019 FRCC >2019/>2019 • Year when Reserve Margin (RM) drops below NERC Reference Margin Level: • Anticipated RM / Adjusted Potential RM

9. HighlightHigher Reserve Margins

10. HighlightHigher Reserve Margins • United States • 2010 peak demand down 4.1% from last year’s projections; 7.8% from 2008 projections • Lower growth rate compared to 2008 and 2009 • Canada • 2010 peak demand down 0.7% from last year’s projections; 1.0 % from 2008 projections • Higher growth rate compared to 2008 and 2009

11. HighlightHigher Reserve Margins • Demand-Side Management • By 2019: • 10 GW of Energy Efficiency • 4 years of growth deferred • Demand Response • 10,000 MW increase projected by 2013 and remains flat until 2019 • Largest growth in market areas where DR is bid to perform, similar to a generator

12. HighlightChange in Fuel-Mix • Very little coal projected to come online (less than 4 GW) • 10 GW of new nuclear capacity projected by 2019 • 34 GW of new gas-fired generation Planned; 13 GW Conceptual • 20 GW of new wind capacity expected on-peak (42 GW nameplate) • 13 GW of new solar capacity (California)

13. HighlightVital Transmission Development • 24,000 miles of Planned Transmission • An additional 12,000 miles of Conceptual Transmission • 50% of transmission miles projected to maintain reliability; 27% for renewable/variable generation interconntion

14. HighlightVital Transmission Development • By end of 2014:16,000 Miles of Planned Transmission

15. HighlightVital Transmission Development • 6,500 circuit-miles of transmission are currently considered delayed • Over 120 projects between 100-199kV are delayed at least three years • 40 projects delayed due to siting and permitting • Majority of delays are due to decreased demand forecasts

16. Severity Risk Assessment

17. Emerging Issues

18. Reserve Margins Become Opaque ? ? Firm Commitments? ? ? ? Capacity Queues Transmission? Reserve Margin Target Level ? Fuel Supply? ? Regulatory? ? ? Time

19. Risk Assessment of Emerging Issues • Emerging Issues is critical driver for: • Assessment focus • Scenario analysis • The approved process is: • Industry experts to identify Emerging Issues • Risk Ranking based on likelihood & severity • Scenarios are selected from the resulting prioritization • Platform to inform on the policy debate

20. Development Process NERC STAFF

21. Selection Process

22. 2009 Emerging & Standing Issues Higher Greenhouse Gas Regulations Transmission Siting Cyber Security Economy Issues Variable Generation Issues Workforce Issues Likelihood Smart Grid & AMI Reactive Power 1-5 Years 6-10 Years Energy Storage Consequence Lower Higher

23. 2010 Emerging & Standing Issues Impacts of Resource Mix Changes to System Stability and Frequency Response High Changing Resource Mix Diminishing Frequency Response Likelihood Transmission Operations with Vital Transmission Out-of-Service During Upgrades Uncertainty of Sustained Participation in Demand Response Low Consistent Modeling of Remote Resources Consequence High Low

24. Reliability Issue Assessment Example SWOT Analysis – Changing Resource Mix

25. Reliability Impacts of Climate Change Initiatives (RICCI): Technology Assessment

26. RICCI Draft Report: Objective Reliability impacts of climate change initiatives: • Supply resource responses • Fuel mix changes and associated technologies • large-scale integration of smart grids, • integration of renewable, nuclear, and energy storage resources. • Scenario Framework Preliminary Results – NOT FOR CITATION

27. RICCI Draft Report: System Design North America’s network designed for: • Large, centralized coal-fired plants located at a distance from major load centers • Relatively controllable and constant generation • The unidirectional flow of electricity from large-scale plants to consumers • Management practices that focus on altering the supply of energy rather than demand Preliminary Results – NOT FOR CITATION

28. RICCI Draft Report: Basis for Assessment • Basis for Technology Assessment assumes emission reductions below 2005 base • 3% by 2012, • 17% by 2020, • 42% by 2030 • 83% by 2050 • 3 timeframes between the years 2010 – 2050 Horizon I: 1–10 yrs., Horizon II: 10–20 yrs., & Horizon III: 20+ yrs. • Outlines a systematic way to evaluate future pathways/scenarios. Preliminary Results – NOT FOR CITATION

29. RICCI Draft Report: Report Contents • Climate Change Initiatives in North America • Overview of Published Scenarios and Models • Scenario Framework and Classification • Reliability Assessment of Technologies • 3 time horizons • Generation & DSM, Transmission, Distribution • Conclusion and Recommendations Preliminary Results – NOT FOR CITATION

30. RICCI Draft Report: 20+ YearsGeneration and DSM Preliminary Results – NOT FOR CITATION

31. RICCI Draft Report: 20+ YearsTransmission Preliminary Results – NOT FOR CITATION

32. RICCI Draft Report: 20+ YearsDistribution Preliminary Results – NOT FOR CITATION

33. RICCI Draft Report: Scenario Framework Preliminary Results – NOT FOR CITATION

34. RICCI Draft Report: Key Observations • Regional solutions are needed to respond to climate change initiatives, driven by unique system characteristics and existing infrastructure. • Carbon reduction from increasing demand-side management must be balanced against potential reliability impacts. • The timing of carbon reduction targets will require an unprecedented shift in North America’s resource mix. • Climate change efforts that increasingly depend on distribution system options and applications can, in aggregate, impact bulk power system reliability. • The addition of new resources increases the need for transmission and energy storage and balancing resources. Preliminary Results – NOT FOR CITATION

35. RICCI: Recommendations Preliminary Results – NOT FOR CITATION

36. Smart Grid

37. System: A Traditional View reliability reliability Conventional & Hydro Generation Demand Distribution Bulk Power System Over the past 60 years, we’ve divided the “grid” into two separate systems. Reliability requirements are different for each system.

38. System: A Traditional View reliability reliability Conventional & Hydro Generation Demand Local Drivers Policy Security Economic Regional Drivers Policy Security Economic Distribution Bulk Power System Policy and other drivers of development developed along the same line – factors that affected one system did not necessarily affect the other.

39. The System Begins to Change reliability reliability Demand Response Conventional & Hydro Generation Demand Energy Efficiency Nuclear Distribution Bulk Power System As new resources were added in the 1970’s and 80’s, bulk system reliability became more dependent on distribution-level assets like demand response and energy efficiency. This began to blur the line between the bulk power system and the distribution system.

40. The 21st Century Grid Emerges Plug-In Hybrid Electric Vehicles / Storage reliability reliability Wind & Variable Generation Demand Response CCS, Conventional & Hydro Generation Demand Energy Efficiency Nuclear Rooftop Solar / Local Wind Development Distribution Bulk Power System As we look to the future, new resources like rooftop solar panels, large-scale wind generation, PHEV’s, and storage will bring unique characteristics to the grid that must be understood and effectively managed to ensure reliable and cost-effective deployment. These new resources will be highly interdependent. Operational variability of large-scale wind generation can be effectively balanced by flexible resources like demand response, plug-in hybrids, and energy storage. Distributed variable generation will rely on conventional generation to ensure ancillary services and voltage and reactive support are available to maintain power quality. The development and successful integration of these resources will require the industry to break down traditional boundaries and take a holistic view of the system with reliability at its core.

41. The Smart Grid Plug-In Hybrid Electric Vehicles / Storage reliability Wind & Variable Generation Demand Response Conventional & Hydro Generation smart grid Demand Energy Efficiency Nuclear Rooftop Solar / Local Wind Development The “Smart Grid” completes the picture of a fully integrated system without boundaries. Stretching from synchro-phasors on the transmission system to smart appliances in the home, these systems will enable the visualization and control needed to maintain operational reliability.

42. Common Challenges Plug-In Hybrid Electric Vehicles / Storage reliability Wind & Variable Generation Demand Response CCS, Conventional & Hydro Generation smart grid Demand Energy Efficiency Nuclear cyber security Rooftop Solar / Local Wind Development Cyber security is one of the most important concerns for the 21st century grid and must be central to policy and strategy. The potential for an attacker to access the system extends from meter to generator.

43. Common Drivers Plug-In Hybrid Electric Vehicles / Storage reliability Wind & Variable Generation Demand Response CCS, Conventional & Hydro Generation “smart grid” Demand Energy Efficiency Nuclear cyber security Rooftop Solar / Local Wind Development Drivers Policy Security Economic Building the 21st century grid requires a comprehensive and coordinated approach to policy and resource development – looking at the grid as a whole, not as component parts.

44. The 21st Century Grid Plug-In Hybrid Electric Vehicles / Storage reliability Wind & Variable Generation Demand Response CCS, Conventional & Hydro Generation “smart grid” Demand Energy Efficiency Nuclear Rooftop Solar / Local Wind Development

45. Components to the Intelligent Network – Many are focused in vertical silos Generation Circuit Transformers AMI Load Management Consumer Portal • Wind • Solar • Geothermal • Hydro • Biomass • Biofuels • Carbon capture • Nuclear • Carbon cap and trade • Storage technology • Capacitors • Capacitor Bank Monitoring • Predictive Maintenance • Security (Video/Audio) • Load Management • OMS/DMS • Broadband over Power Lines • Advanced SCADA • Mesh networks • Voltage Monitoring • Outage Detection • Theft Detection • Asset Failure Alarms • Smart substation • High Temperature Superconducting (HTS) Cables • Underground Transmission • HTS Transformers • Real-Time Metering • TOU/CPP Pricing • Outage Monitoring • Voltage Monitoring • Smart switch • Smart thermostat • Real-time DLC management and verification • Load profiling • Aggregation of curtailed load

46. Electric Power: Players, Drivers, Etc. ENVIRONMENT $ - FINANCE RELIABILITY POLICITAL REALITIES & OBJECTIVES REGULATORS ELECTRIC POWER CONSUMERS NATIONAL SECURITY SOCIAL CONCERNS ENGINEERING FEASIBILITY POWER INDUSTRY

47. Smart Grid – Everybody has a vision…

48. The Smart Grid Landscape CONCEPT increasing uncertainty HAN IFM SHN HTS DTM STORAGE CLiC PHEV SST RTR increasingmaturity Smart Appliances DG/DER WAM DSCADA FACTS PLC PMU DSTATCOM RTU AMI PLC DSM CFL IED STATCOM distribution BPS utility-scale generation end users NOTE: Placement of items in the plane above is for concept discussion purposes.

49. The Smart Grid Landscape NERC’s Reliability Standards apply to all users, owners, and operators of the bulk power system and typically apply to facilities at the transmission and generation level. HTS STORAGE CLiC RTR WAM FACTS PMU RTU PLC IED STATCOM Bulk Power System increasing uncertainty increasingmaturity distribution BPS utility-scale generation end users

50. The Smart Grid Landscape Smart Grid may provide both system benefits and reliability considerations to the distribution system and bulk power system. SYSTEM BENEFITS RELIABILITY CONSIDERATIONS Bulk Power System HAN IFM SHN DTM increasing uncertainty PHEV SST increasingmaturity Smart Appliances DG/DER DSCADA RTR PLC DSTATCOM AMI DSM CFL distribution BPS utility-scale generation end users