IEEE Power & Energy Magazine - November/December 2014 - 80

Pricing the Polar Vortex
IESO

NE

O-

NYISO
PJM

MISO

IS

TVA

figure 1. A geographic overview of the study region.

regulatory commission (Ferc), the north american electric reliability corporation (nerc), and state regulatory
commissions in the gas-electric interfaces that affect infrastructure adequacy. accordingly, in February 2013 doe
directed the eastern interconnection Planning collaborative
(eiPc) to investigate these issues under an extension to an
existing grant known as the gas-electric system interface
study. By august, the PPas developed and posted a statement of work that set forth a four-part study framework:
✔✔ Target 1: a baseline assessment of the current gas
infrastructure in the regions served by the six PPas
(collectively known as the "study region")
✔✔ Target 2: quantification of natural gas required by
generation plants and residential, commercial, and
industrial (rci) customers during the peak winter and
summer periods of 2018 and 2023, including identification of likely pipeline and/or local distribution company
(Ldc) bottlenecks affecting deliverability as well as the
frequency and duration of such locational constraints
✔✔ Target 3: hydraulic simulation analysis of infrastructure capability to meet both rci and generation gas
demands when disruptive gas-side or electric-side
contingencies are postulated
✔✔ Target 4: engineering and economic analysis of dualfuel capability in comparison with the incremental
cost of firm pipeline transportation rights.
in october 2013, eiPc selected Levitan & associates
(Lai) to commence work on the four-part target research
sponsored by doe. the project is scheduled for completion
in June 2015. the eiPc gas-electric study region is shown
in Figure 1.
this article was prepared for publication in early July
2014. at that time, only the target 1 results were available to
the PPas and stakeholders. emphasis is therefore placed on
the study approach and modeling framework formulated by
Lai, including the assumptions and sources of input data. We
also address how the stakeholder process informed and guided
eiPc's research goals and objectives. all relevant information
and study results are posted on the eiPc Web site.
80

ieee power & energy magazine

during the polar vortex of 3-7 January 2014 and the subsequent vortex-like conditions that occurred later that month,
gas prices soared to new highs at key pricing points across
the eastern interconnection, signaling unprecedented and
extreme economic and operating conditions on the pipelines
and storage facilities that serve Ldcs and generation companies. against the backdrop of major pipeline construction to
accommodate shale gas production, never before had so many
pipelines experienced congestion simultaneously. this was
coupled with declarations of force majeure and the systematic
posting of "critical notices," in effect, flash bulletins issued by
the pipelines warning shippers of either current or anticipated
short-term operational constraints. Widespread congestion on
the gas pipeline system across the eastern interconnection
caused cascading performance constraints across the region.
the cold weather events that occurred during the winter of
2013-2014 resulted in conditions that pushed the natural gas
and electric systems serving the eastern interconnection very
close to their performance limits.
spot gas prices for delivered natural gas exceeded Us$100/
million Btu on several occasions at major gas trading points
serving new York and PJM, i.e., transco Z6 non-new York
(tZ6-nY), transco Zone 6 new York, and transco Zone 5.
Prices at algonquin citygates (agt-citygates), the index
of relevance for new england, reached Us$73/million Btu.
Prices at chicago citygates, the index of relevance for the
western portion of PJM's rto and a portion of Miso-north,
exceeded Us$40/million Btu. the daily spot prices for these
trading points from January to March 2014 are shown in
Figure 2. the inset graph on the upper right-hand side captures the unprecedented regional-basis differential for brief
intervals between nYiso and iso-ne, reflecting the blowup
in the tZ6-nY price during the polar vortex and subsequent
cold snap in late January and the less radical spike in the agtcitygates price. Paradoxically, nYiso realized more than a
billion cubic feet per day of new pipeline capacity into downstate new York in november 2013 but still witnessed volatile
and sky-high gas prices on many days in January 2014. Pipeline constraints in new england resulted in greater use of oilfired resources to supplant gas-fired generation during the cold
snaps, thus tempering the run-up in the agt-citygates price.
dual fuel units in nYiso ran largely on oil but did not temper
the run-up in gas prices during the polar vortex.
electricity prices reflected high gas prices and scarcity
conditions attributable to new winter peak demands and
higher-than-normal forced outage rates on both conventional
thermal and renewable generation facilities. all-time highs
in winter peak electric demand were set in the PJM, Miso,
and nYiso service areas, while iso-ne's peak demand fell
just short of the all-time winter peak. real-time energy prices
exceeded Us$700/MWh in PJM, Us$500/MWh in nYiso,
and approached Us$300/MWh in both iso-ne and Miso.
in response to the drawdown of conventional storage volumes serving Ldcs throughout the eastern interconnection,
november/december 2014



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2014

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IEEE Power & Energy Magazine - November/December 2014 - Cover3
IEEE Power & Energy Magazine - November/December 2014 - Cover4
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