September 27-28, 2007 Ft. Collins, CO MEETING SUMMARY

Transcription

1 INCREASING RENEWABLE ENERGY IN THE WESTERN GRID SUMMIT September 27-28, 2007 Ft. Collins, CO MEETING SUMMARY Over 200 leaders participated in the Increasing Renewable Energy in the Western Grid summit, co-hosted by the Western Governors Association (WGA), the National Wind Coordinating Collaborative (NWCC), and the Geothermal Energy Association (GEA). Representatives from the wind, solar, and geothermal industries, state and federal regulatory and technical agencies, transmission experts, and others convened to discuss the urgent need to build new transmission to bring renewable energy sources to market and help states and utilities achieve their renewable portfolio goals. Summit presentations are online at A brief summary of each session appears below. The summit agenda and final participant list appear in the Appendix. Welcoming Remarks Pam Inmann, WGA s Executive Director, welcomed everyone to the summit. She noted the tremendous progress towards the Western Governors goal of 30,000 MW of clean energy by 2015, with the region on target to add 7,500 MW of clean energy by the end of Many of the recommendations outlined in the Governors Clean and Diversified Energy Advisory Committee (CDEAC) report have been implemented, especially the recommendations to the Federal Energy Regulatory Commission (FERC). Ms. Inmann suggested future priorities include increased renewable energy integration and addressing greenhouse gases. Representative Randy Fischer represents Ft. Collins in the Colorado House of Representatives and welcomed attendees to the city. He provided examples of how businesses, cities, and communities in Colorado embrace sustainability and smart energy use. The Colorado Legislature expects to continue working in conjunction with Gov. Ritter to establish Colorado as an energy leader. Renewables Development: The Western and U.S. Landscapes Renewable energy is growing across the country, particularly in the West. This session framed some of the policy and regulatory mechanisms contributing to that growth and how transmission factors into renewable energy development. Dave Olsen, Director of the Center for Energy Efficiency and Renewable Technologies (CEERT), suggested that U.S. goals to increase energy security and decrease carbon emissions are intertwined. Increasing renewable energy works towards both goals and important steps include:

2 Integrating generation and transmission planning Pursuing renewables-first transmission mega-projects Promoting regional markets and coordinated procurement Combining control areas to facilitate renewables integration Improving forecasts so operators gain confidence with variable-output resources Mr. Olsen also endorsed energy-first planning, where planning and system operations are conducted such that low carbon energy sources are used first. Commissioner Jon Wellinghoff, Federal Energy Regulatory Commission (FERC), highlighted three areas where FERC has taken actions related to renewable energy and transmission. 1. Orders on CAISO s Proposed Financing Mechanism for Transmission to Location-Constrained Resources Since renewable energy projects tend to be smaller than traditional generation and in locations far from load centers, financing transmission to access these projects has proven challenging. The California ISO (CAISO) proposed a new financing mechanism where each generator interconnecting would be responsible for paying its pro rata share of the going-forward costs of the line. Unsubscribed portions of the line would be paid by all grid users through CAISO transmission access charges until the line is fully subscribed. 2. Order 890: OATT reform FERC s Order 890 reformed its Open Access Transmission Tariff (OATT) to facilitate greater use of renewables through tools like conditional firm transmission service. The order also adjusted energy and generator imbalance charges to account for the intermittent nature of resources like wind. Finally, Oder 890 required open and coordinated regional transmission planning. 3. National Interest Electric Transmission Corridors Section 1221 of the 2005 Energy Policy Act (EPAct 2005) gives the U.S. Department of Energy Authorization to designate National Interest Electric Transmission Corridors (NIETC). Section 1221 also gives FERC limited backstop siting authority for transmission facilities in NIETCs. Jonathan Weisgall, MidAmerican Energy s Senior VP for Legislative and Regulatory Affairs, talked about development of geothermal energy and geothermal s transmission needs. Almost 3,000 MW of geothermal energy are installed in the U.S. and all in the West (Alaska, California, Hawaii, Nevada, and Utah). The Western Governors CDEAC report identified 13,000 MW of geothermal capacity in its territory, with 5,600 MW viable for commercial development by MidAmerican is collaborating with Arizona Public Service and National Grid to explore building new transmission that will access renewable resources. Mixing geothermal with wind is one method that MidAmerican is looking at to help firm transmission. Streamlining siting processes and providing financial incentives for building transmission would expedite increased transmission for renewables. Santiago Seage, Chairman and CEO of Abengoa Solar, described how the Southwest U.S. is one of the best resources in the world for concentrated solar power (CSP). New Mexico, Arizona, Nevada, and Southern California in particular have great CSP potential. Transmission is a barrier to CSP development, due to costs for building new transmission or reinforcing existing transmission and long queues. Exporting solar power also requires big transmission investments. Mr. Seage said transmission is the biggest challenge holding CSP back and that the time horizon for getting transmission built needs to fundamentally change.

3 Michael Skelly, Chief Development Officer at Horizon Wind Energy, described U.S. wind power potential and how the industry s target of 20% wind power would mean 304 GW of wind energy by Achieving that target would reduce electric sector CO2 emissions by 25%, in addition to other environmental and economic benefits. However, the goal also requires a substantial increase in transmission capacity. Mr. Skelly urged more regional transmission projects, rather than in state or between states, as a way to achieve capacity needs. Q&A Session presenters answer questions from meeting participants, providing the following comments: If we collectively decide we have to accelerate a low-carbon future, then we will have to pursue the legislation and organizations needed. Parochialism in local areas that have been a hindrance are beginning to be overcome. There is a growing sense at the national level that action is needed and more collaboration is resulting. Three myths need to be debunked: 1) we can achieve all carbon goals through renewable energy; 2) we can achieve all carbon goals without any cost to the economy; 3) we can achieve all carbon goals only by wrecking the economy. The public wants renewable energy but communicating the true cost is challenging because CO2 costs are not properly accounted. Until we have systems in place to force CO2 costs to be taken into account, renewable development will face difficulties. The NIETCs are not intended for renewable energy per se but rather to relieve congestion. To address greenhouse gases, we have to go beyond the electricity sector. Reducing demand and increasing storage are other important measures. Public Policies and Business Strategies for Energy & Climate Security Governors Ritter and Freudenthal led this dialogue on how energy and climate security are being addressed in the West and what further actions are needed. Utility executives Pat Vincent, PNM s Utilities President and Paul Bonavia, Xcel Energy s Utilities Group President joined FERC Commissioner Jon Wellinghoff and Idaho PUC Commissioner Marsha Smith in this session with the governors. Governor Bill Ritter, State of Colorado, said his state is establishing a new energy economy. Colorado doubled its renewable energy standard to 20% by The legislature established a Colorado Clean Energy Development Authority and passed legislation for renewable energy zones, both to foster transmission for renewables. Gov. Ritter emphasized Colorado s desire to coordinate with other states, integrating renewables and thereby decreasing the need to do firming with other generation. Governor Dave Freudenthal, State of Wyoming, encouraged a global perspective, with energy demands growing despite efficiency gains. Energy providers and the rest of society must learn how to operate in a carbon constrained environment. Gov. Freudenthal called for a broad energy portfolio, recognizing the interplay among resources. Intermittent renewables must be firmed by other generation, at least in the near term, and increasing renewable energy provides more time for developing carbon capture and sequestration technologies. Transmission is important to this range of resources; success on transmission is needed to succeed with the other energy endeavors. Gov. Freudenthal asked the panelists to comment on what the private sector or states can do to generate a regional picture for looking at demand and delivery. Mr. Bonavia responded that Xcel Energy supports regional markets and regional integration. For this to happen, states need to embrace the concept that energy planning must extend beyond state boundaries. Also, in the absence of RTOs and ISOs, utilities and the federal power administrations (WAPA, BPA) need to get together, develop a regional tariff proposal, and take it to FERC for approval. Ms. Vincent said PNM has an eye towards regionality, working with WestConnect on virtual control areas and pricing experiments to help avoid rate pancaking.

4 Commissioner Smith expressed that states are working together but could step up these coordination efforts. Addressing cost allocation and mechanisms for expediting transmission proposals are areas where regional coordination would be especially beneficial. Groups like the Northern Tier Transmission Group (NTTG) are working towards increased integrated resource planning on a regional basis. Commissioner Wellinghoff mentioned that FERC Order 890 could be considered a federal catalyst for regional planning. All utilities will have to adhere to the nine principles outlined in the Order, which adds a degree of consistency to base coordination on. Gov. Ritter inquired about how to mitigate wind s variability by having transmission projects that capture alternate peaking in different states and what some of the obstacles are. Ms. Vincent responded that PNM is doing technical studies on this topic and would like to have more public involvement in the process. She said that utilities need a way to bring in certainty about cost recovery on a regional basis. Mr. Bonavia suggested that large operating footprints are crucial to integrating renewables because geographic diversity is increased, as well as diversity of customers and generating resources. He agreed with Ms. Vincent that financing transmission is the big hurdle. Utilities working together may make requests for capital more attractive. Commissioner Smith encouraged creative thinking to increase success within existing frameworks. The governors emphasized that WGA is technology neutral in figuring out how to achieve its clean energy objectives. They want to see energy sources competing on a level playing field. Q&A In response to audience questions, the following comments were made: The infrastructure authorities could help convene parties and mimic or serve the same function as a RTO to help come up with a system for allocating transmission costs for interstate lines. Utilities would prefer incentives to mandates. Recognizing unbundled RECs (renewable energy credits) as meeting renewable portfolio standard (RPS) requirements and regional generation planning would also help utilities. FERC gives utilities a 50 basis point kicker for participating in a RTO, so an incentive is already in place for utilities to join RTOs. Renewable Energy Integration Studies are demonstrating how renewable energy can be successfully integrated into the transmission grid. This session began with a summary of lessons learned from integration studies and then transitioned to a panel discussion about how renewable energy integration can move forward and the necessary elements to do so. Brian Parsons, Project Manager Wind Applications at the National Renewable Energy Laboratory (NREL), presented on renewables integration studies. Renewable energy generation is known for increasing variability and uncertainty for system operators, since its output cannot be controlled and scheduled with a high degree of accuracy. However, fluctuations in output happen gradually and the power system is designed to handle large variations in loads. As a system carrying diverse resources, it is not necessary to have one-to-one backup for renewable energy. Studies of costs imposed by wind variability have shown moderate costs averaging about $5/MWh. Factors influencing wind integration costs include wind penetration, balancing area size, balancing area practices, geographic diversity, ancillary services, electricity market size, forecasting accuracy, and hydro and gas operations. Improving operational practices and market structures would facilitate greater renewable energy integration. Yakout Mansour, President and CEO of the California ISO (CAISO), talked about California s experience working towards 20% renewable energy. Although the state has over 3,000 MW of wind power, on some hot days only 100 MW was available, underscoring a need for ramping capability. To achieve California s 33% renewable energy goal, 26,000 nameplate megawatts are needed versus 13,614

5 nameplate megawatts under a 20% RPS. California plans to meet the majority of its growth with renewables, primarily wind. However, the majority of cost effective wind is located far from load and transmission is standing in the way of accessing this resource. Transmission siting and cost recovery are the major hurdles and the Western Governors could push regulators to address these issues. Regional transmission planning and operation coordination similarly assist with renewable energy integration. Tim Meeks, Administrator of the Western Area Power Administration (Western), suggested that renewable integration challenges can be overcome. Western s primary charge is getting federal hydropower generation to load, but it wants to acquire additional generation resources. To do this, Western must appeal to its customer base and ensure that only beneficiaries of their actions pay and those who do not benefit do not pay. Western is helping remove barriers to Native Americans accessing hydropower and doing a feasibility study on wind/hydro integration. Tribes were also approached by Western about their interest in doing wind projects on tribal lands. Western is working on implementation of FERC Order 890, including the conditional firm requirement. A lengthy queue is another issue that Western is tackling there is almost 13,000 MW of wind in the queue. Western as a federal entity is looking for further feedback and guidance to move its renewable integration efforts forward at an accelerated pace. Steve Wright, Administrator of the Bonneville Power Administration (BPA), said BPA is 90% hydro generation but that wind development is booming. Wind requires flexible resources to compensate for its variability and uncertainty and hydro is fairly flexible but increasingly constrained by fish protection, recreation, agriculture, and other water uses. BPA built new high voltage transmission in the last 10 years but still has considerable transmission needs. It partnered with the Northwest Power and Conservation Council, utilities, wind developers and the environmental community to develop a common understanding of issues and talk about how to solve problems associated with wind integration. The process engaged senior leaders and technical experts and they concluded that 6,000 MW of wind power is technically feasible for the Northwest but has significant costs. Cost of integrating wind with hydro is low, but hydrosystem constraints and explosion of wind power development means further opportunity for integrating wind and hydro is low Costs of integrating wind beyond hydro are not insignificant, but there are opportunities to lower these costs e.g.: o Encouraging wind locational diversity through transmission expansion. o Developing common definitions for wind integration services in order to promote more effective markets. o Encouraging development of new flexibility/storage technologies o Improving wind forecasting and wind data Wind is primarily an energy not a capacity resource. There were 16 recommendations overall and there has been substantial progress on implementing the recommendations. There are many new proposals for transmission construction including BPA s proposal for a network open season to address the issues of queue management slowing transmission construction and looking at alternatives to 100 percent participant funding. BPA is including a proposal for conditional firm service in its FERC Order 890 tariff filing, as well as working on a new product, dynamic load following, which will enable Northwest utilities to buy and sell system flexibility services. Q&A Speakers provided the following responses to questions: The West is unlikely to become a RTO anytime soon. Western is considering consolidating its three control areas.

6 BPA is considering using clustering to manage its transmission queue. One disadvantage of clustering is that if participants drop out, studies must be redone. Decreasing solar cost and mixing it with wind power would increase its integration. Transmission Expansion to Accommodate Renewables: Putting the Puzzle Pieces Together This heading contained four sessions, all delving into how to expand transmission to accommodate renewables. Project planning, project design, regulatory and policy mechanisms, operations, and technologies are all taken into account and addressed. How Can Western Transmission Expansion Planning Evaluate Maximum Renewable Energy Penetration? Rob Kondziolka is a Transmission Planning Manager with Southwest Area Transmission (SWAT), a subregional planning group. SWAT strives to plan transmission in a manner that maximizes regional benefits and ensures efficient use of existing transmission. SWAT coordinates with other subregional planning groups and TEPPC (Transmission Expansion Planning Policy Committee), particularly with study planning. Other activities include a SWAT task force working on identifying renewable energy zones in Arizona and a subcommittee in New Mexico looking at where there are interconnection requests and proposed wind projects so that integrated transmission planning can be done to access many projects. NREL is doing data gathering for an integration study to support multi-state interests in understanding the operating and cost impacts due to the variability and uncertainty of wind and solar power on the grid. The study footprint part or all of Arizona, Nevada, New Mexico, Colorado, Wyoming, and Utah, and it aims to address such factors as: How utilities can manage the incremental variability and uncertainty of wind and solar Whether geographic diversity of wind and solar resources reduces variability and increases transmission utilization The role and value of wind forecasting How hydro can help with wind/solar integration Whether balancing area cooperation can help manage variability How wind and solar contribute to reliability and capacity value Jim Filippi, Principal Planning Engineer with Pacific Gas and Electric, elaborated on the role of WECC and TEPPC. WECC is the Western Electricity Coordinating Council, a regional reliability council. WECC created the Transmission Expansion Planning Policy Committee (TEPPC) to address the need for impartial and reliable information on the value of expanding the transmission grid so that economic transmission projects can be developed, financed and permitted. TEPPC maintains a database of regional transmission expansion planning, guides analyses and modeling for this planning, conducts studies of congestion and congestion costs, and provided policy direction and management of the planning process. The Committee does not do project-specific studies or planning, nor does it advocate for specific projects or weigh in on cost allocation. TEPPC uses computer modeling to simulate how the electric system may operate in the future and thereby help identify potential transmission solutions to reduce electric energy costs. Emerging technologies like demand response, energy efficiency, and storage add to the uncertainty of these exercises. TEPPC has a Technical Advisory Subcommittee with four workgroups Data, Models, Studies, and Historical Analysis that work with WECC s staff to maintain the database and perform studies for TEPPC. Their work is being shared through workshops and webinars for feedback. Mr. Filippi emphasized the importance of information sharing so that simulation tools are improved and investors feel more confident moving forward with transmission projects. Q&A

7 Mr. Kondziolka and Mr. Filippi provided the following responses to questions: Since 2005, we have seen a shift towards looking for ways to access renewables and a regional rather than state-by-state focus. Stakeholders participation in the planning process is also diversifying. The greatest challenge to getting transmission built is getting generators to think about transmission earlier. Some sources suggest that plug-in hybrids will be on the market by 2009, but there are many challenges to overcome, e.g. battery technology. How Can Large Transmission Projects Be Designed and Subscribed to Maximize Renewable Energy Generation? Bob Smith, Manager of Transmission Planning and Engineering with Arizona Public Service (APS), spoke about one of the large transmission projects proposed, the TransWest Express. TransWest Express entails two new AC or one new DC transmission line(s) from Wyoming through Utah, Colorado, and/or Nevada to Arizona with the capability to carry 3,000 MW. Besides providing greater access to renewables (primarily wind), the TransWest Express project is anticipated to improve grid reliability, improve resource diversity, encourage advanced coal technology, and enhance wholesale market vitality. APS expects that it needs to add 8,000 MW of capacity by The Arizona RPS requires 15% renewable energy by 2025, 30% of which must come from distributed resources like rooftop solar. The TransWest Express project could be used by APS to obtain the renewable energy necessary for meeting demand within the RPS requirements. APS led a feasibility study, which included stakeholder input through public meetings, showed all alternatives studied were technologically feasible. Economic analysis supported either an all DC line or a DC/AC hybrid. Three other load serving entities Southern California Edison, Salt River Project, and Tucson Electric Power also expressed interest in capacity. National Grid indicated interest in being the project manager. These parties are engaged in negotiations with the Wyoming Infrastructure Authority for a Phase 2 agreement. In the meantime, APS is also involved with the Frontier Line study (where TransWest Express is a transmission option listed) and PacifiCorp s Gateway projects where APS entered into a co-development agreement. Jerry Vaninetti is Trans-Elect s Vice President of Western Development and he described Trans-Elect s involvement in the Wyoming-Colorado Intertie and High Plains Express transmission projects. Both projects aim to bring wind resources from Wyoming to states like Colorado, New Mexico, and Arizona. The Wyoming-Colorado Intertie is a lead-in project to the High Plains Express (HPX). The modeling being done starts with renewables and back-fills with existing resources. The aim is to increase geographic diversity so that, for example, wind in Wyoming can help firm Colorado wind resources. Getting transmission built requires support at the state and interstate level. Questions about cost recovery must be addressed, which requires regulatory support to engage in regional discussions. Mr. Vaninetti underscored that transmission is most cost-effective when it is fully utilized and integrated, which regional projects like HPX help to achieve. Regional projects also create opportunities for import and export and provide improved state connections for greater reliability. Robert Sims, Director of Engineering and System Planning for AES SeaWest, outlined areas for potential wind power development in the West but pointed out that they are all transmission constrained. One of the most common transmission obstacles is lack of available transmission capacity. Conditional firm service is one tool for overcoming this challenge; re-rating lines for coincidental wind or building new lines are other solutions. Another obstacle is pancaked tariffs, which is best addressed by establishing regional ISOs but can also be eased through control area consolidation. Interconnection costs

8 are proving to be a quagmire and Mr. Sims encouraged letting ratepayers pay directory for transmission upgrades, rather than having developers bear the up-front costs, as a way to streamline the process. Finally, deviation penalties are an obstacle that may be diminished through tariff reform and improved wind forecasting. Fred Morse is a Senior Advisor for the U.S. Operations of Abengoa Solar and he described the transmission needs of Concentrating Solar Power (CSP). CSP concentrates the sun s energy using mirrors or lenses and the resulting heat is used to make steam and generate electricity using conventional technologies. Part of CSP s appeal is that it can provide firm, dispatchable power using thermal energy storage or hybrid with a fossil fuel. Dr. Morse described a renewables scenario where there is a biomass and geothermal base; then wind generation comes into play; finally solar, with storage capacity, is able to provide for peak demand. The United States CSP resources are located primarily in the Southwest and transmission is needed to access the most economical generation areas. Transmission challenges for CSP are: High voltage transmission capacity is generally not available in the best solar resource areas CSP plants can be built 4-5 years after a power purchase agreement is signed but transmission often takes longer to put in place The CSP industry has not historically participated in state and regional transmission planning studies If CSP developers must include the cost of new transmission or upgrades in their contract cost, those projects often will not be competitive CSP does not have a transmission study group, though this may be addressed through California s Renewable Energy Transmission Initiative The ongoing perception of CSP as intermittent despite storage and hybrid operational modes needs to be changed. The CSP industry recognizes transmission as a serious impediment to expansion and would like to increase its involvement in transmission planning activities and decisions. Tom Fair with Nevada Power Company stepped in for Daniel Schochet, ORMAT, to present geothermal transmission needs. Geothermal development is most active in California and Nevada but some growth is also happening in Idaho, Utah, and other states. The WGA Geothermal Task Force report says there is 6,000 MW of near-term additional geothermal potential. Geothermal plants run around-the-clock, have a high capacity factor, and are considered baseload, so variability questions do not apply as they do for wind. However, additional transmission linking geothermal resources to more of the grid would allow it to access additional markets and provide firming to wind. In Nevada, current transmission in Sierra Pacific Power Company s territory supports many projects, but more transmission is required to access the state s full geothermal potential. SPPC is studying a corridor from northern Nevada to southern load centers, as well as other transmission corridors. Governor Jim Gibbons also formed a Renewable Energy Transmission Access Advisory Committee charged with recommending transmission to access renewable energy. Their report, due in December 2007, will discuss transmission capacity, transmission needs, and potential renewable energy zones to build transmission to. Mr. Fair closed by saying that while small geothermal projects should continue to come online relatively easily, larger projects will require new transmission to access markets. Q&A Speakers provided the following comments in response to audience questions: States have not dictated before what generation source should be built. We are entering new territory by calling specifically for construction of renewables. This movement calls for recognition of the transmission needed to meet renewable goals. Aggregating projects is a good idea, particularly small projects, so transmission can be built to multiple generators.

9 To optimally develop CSP, the prime sites should be identified and transmission built to access those areas. Vandalism does not appear to be a concern for CSP facilities thus far. How Can Transmission Be Built to Location-Constrained Resources in Advance of Generation Construction? Cindy Hinman, Senior Market Design Project Developer with the California ISO (CAISO), led off this session on innovative approaches to accessing location-constrained renewable energy resources, particularly before the renewable facilities are built. The CAISO is looking at a new financing mechanism for facilitating the construction of transmission interconnection facilities intended to connect location constrained resources to the grid. Under the new mechanism, participating transmission owners finance the cost of the interconnection through their revenue requirement. As generators come online, they become responsible for their pro rata share of the costs, essentially taking over paying for the line. There are seven eligibility principles that a proposed project must meet to utilize this approach: 1. It is not otherwise eligible for rate treatment that allows the costs to be incorporated into the Transmission Revenue Requirement of a participating transmission owner; 2. It will permit wholesale transmission access to an area where there is significant energy resources that are not transportable; 3. It will be turned over to the CAISO operational control; 4. It is designed to serve multiple power plants; 5. It is evaluated within a prudent grid planning process involving the CAISO and affected utilities and stakeholders; 6. A rate impact cap of 15% of the sum total of the net high-voltage transmission plant of all participating transmission owners will be imposed to Transmission Access rates to mitigate the short-term cost impact on ratepayers; 7. The transmission project will be able to demonstrate adequate commercial interest among multiple generation developers through satisfying a two-prong test. In January 2007, the CAISO petitioned FERC for declaratory order to use this new approach; FERC approved the petition in April At the meeting time, the CAISO planned to post draft tariff language on October 1 st for public comment and file a tariff amendment with FERC by October 31, (Note: The tariff amendment was filed with FERC on October 31, 2007 and is on the agenda for the next FERC meeting on December 20, 2007). California is also pursuing another endeavor to increase transmission access for renewables, the Renewable Energy Transmission Initiative (RETI). RETI is focusing on identifying transmission projects needed to help meet the state s renewable energy goals and help with transmission and generation siting and permitting. The California Energy Commission, the California PUC, the CAISO, and publiclyowned utilities are all participating. A Coordinating Committee, Stakeholder Steering Committee, and Plenary Committee were formed to carry out RETI s work. The RETI website is Joseph Rossignoli is Regulatory Policy Manager with National Grid, a transmission owner and operator. National Grid is the development manager for the TransWest Express and Gateway South transmission projects, working with PacifiCorp and APS. These projects aim to give customers in Phoenix and central Utah access to renewable resources in Wyoming. Mr. Rossignoli spoke about the CAISO location constrained resources tariff and RETI process as endeavors that will help make transmission available for tapping renewable energy resources. However, it is unclear weather the CAISO approach works in other Western states where retail rates are bundled. Mr. Rossignoli encouraged cost allocation regimes that cover multiple states, coupled with rate treatments like the CAISO s that uses a phased shift in costs back

10 to generators for renewable resource interconnection facilities, to identify transmission needs more efficiently across the region. Mike Sloan, the Managing Consultant of The Wind Coalition, described tools used in Texas to grow wind power development to over 4,000 MW by year s end. There are financial mechanisms such as the production tax credit (PTC) and renewable energy credits (RECs) that drive development, as well as policies like a renewable portfolio standard. Texas took an innovative step by introducing the idea of Competitive Renewable Energy Zones (CREZ). The CREZ approach calls for: 1. Identifying the best resources zones 2. Developing a transmission master plan 3. Begin building transmission to the zones. The Texas PUC is tasked with designating the CREZ. As of the meeting, the PUC s interim final order was not yet released. 1 The CREZ final order is expected in the first quarter of Mr. Sloan suggested that Texas history of efficient, competitive markets helped make the CREZ approach work. Texas uniquely has its own grid, the Electric Reliability Council of Texas (ERCOT), with many efficient features, including: a single control area, no interconnection queue, and the load always pays for transmission. Under this framework, the key question is whether transmission investments to serve CREZ are cost effective. Wind power s lack of fuel costs helps make the argument for cost effectiveness. Analysis by Brendan Kirby of Oak Ridge National Laboratory showed that adding 5,250 MW of new wind in ERCOT will reduce customer payments by over $1 billion/year and reduce emissions statewide by 3-5%. State leaders are supporting the CREZ idea and it is expected to support significant additional wind power development in Texas. Q&A Speakers made the following comments in response to participants questions: Streamlining regulatory approaches fosters greater renewable energy development. Bundled rates are expected to continue in the West. In order to get transmission built and provide customers with supply choices, better cost allocation is needed. Portions of the CAISO control area extend into Nevada and Baja and therefore are applicable for cost recovery under the location constrained resource approach. For other states, the CAISO is still considering how to recover costs under the seven eligibility criteria, one of which is that they be an energy resource area. In the interim process, the CAISO is proposing that if projects outside California meet the other six criteria, they can come before the CAISO Board of Governors for a decision. CREZ is starting for wind but could include other resources like solar when there is more market interest. National policies and investor interests are factoring in to generation development decisions at the state level in Texas. Accommodating Renewables? What are the Options? This session focused on operational tools and generation technologies for facilitating greater renewables integration into the grid. Carol Opatrny, President of Opatrny Consulting Inc., is Project Manager for the ACE Diversity Interchange (ADI) project. ACE stands for Area Control Error, a measure of the difference between an electrical control area s (or balancing authority s) actual and scheduled generation, taking frequency bias 1 The Texas PUC issued the interim final order on October 2, 2007.

11 into account. ADI is the pooling of individual ACEs to take advantage of control error diversity so participants will likely be able to: Reduce control burden on individual control areas Reduce unnecessary generator control movement Reduce sensitivity to resources with variable output such as wind projects Realize improvements in Control Performance Standards. Participating Balancing Areas include Idaho Power Company, NorthWestern Energy, and PacifiCorp Eastern and Western Balancing Areas, with British Columbia Transmission Corporation (BCTC) hosting the activity. Any balancing area operator located in WECC and adjacent to one or more participants may join ADI. Participating balancing areas are linked to one another and the host. Timestamped ACE values are sent to the host and evaluated for diversity. If there is diversity, the host calculates ADI adjustment and sends it to participants; those balancing areas determine whether to control to their original ACE or the ADI-adjusted ACE. If there is no diversity, no ADI adjustment is made. ADI is considered a first step in coordinating balancing services and future plans include a project evaluation and establishment of operating standards. Charlie Reinhold, WestConnect s Project Manager, provided an overview of the organization and its activities. WestConnect is a group of transmission owners in the Western Grid organized under a MOU to: Continue investigation of feasibility of cost-effective wholesale market enhancements Work cooperatively with other Western Grid organizations and market participants Address seams issues in appropriate forums. WestConnect s members include public power, municipals, and federal transmission owners that oversee 34,000 miles of transmission lines serving 7 million retail customers. Mr. Reinhold described WestConnect s workgroups and highlighted some of their activities: The Virtual Control Area Workgroup is actively working on joining the ADI process and is designing a study of reserve sharing opportunities and regulation enhancements. The Transmission Products Workgroup developed and posted regional business practices on conditional firm transmission service pursuant to FERC Order 890. The TTC/ATC Process Workgroup conducts annual workshops on transfer capabilities and expected changes from annual planning studies. The Regional Pricing Experiment Workgroup has preliminary approval to create a FERC filing to put such an experiment in place. Under the experiment, transmission rate pancaking for limited transactions (hourly and daily firm/non-firm) is eliminated while ancillary services and losses would continue to pancake. Elliot Mainzer, Manager of Transmission Policy and Strategy at Bonneville Power Administration (BPA), focused on how to build on ACE Diversity to implement virtual balancing area consolidation. Larger balancing areas lower wind integration costs and make managing uncertainty easier. A working group was formed to figure out how to leverage the benefits of larger balancing areas without fundamental market structure changes. A first step is to promote ACE diversity and increase the number of participants. Defining new products and services is the second step. A proposal for a new service, Dynamic Load Following (DLF), is being evaluated by market participants. DLF aims to allow a balancing area or individual generator to sell within-hour flexibility (basepoint adjustments) to another balancing area to assist in the management of system variability and uncertainty. The team is also developing a standardized term sheet for one or more hourly storage and shaping services. Mr. Mainzer underscored that there is room for creativity and innovation on both the supply and demand side.

12 Step Three is dynamic scheduling swaps, in which a generating resource (or load) is electronically transferred from one balancing area to another to synthesize a more geographically diversified wind fleet. Under this approach, balancing areas can exchange wind signals to dampen the variability of their system operations. Dynamic scheduling does require firm transmission. The fourth step is planning for flexibility by ensuring that the next generation of dispatchable capacity resources (e.g. natural gas plants) can also help manage balancing area variability which will likely increase with more wind energy on the system. The key is ensuring that BPA s dispatchable capacity resources can work in tandem with nondispatchable renewable energy resources such as wind energy. The marketplace for new gas turbines has already begun to respond to the demand for this type of technology (see Hamid Elahi presentation below). Ed Hulls is Western Area Power Administration s Rocky Mountain Region Operations Manager and he made a presentation on minimum operating reserves. Reserves can be held by either a balancing authority or reserve sharing group. The existing WECC reserve requirement has two components: 1) regulating reserve and 2) spinning and non-spinning reserves (half of reserve must be spinning). The current guidance leaves several uncertainties about how wind and other renewables fit in. WECC has proposed a new minimum operating reserve standard calling for: An amount of reserve equal to the loss the most severe single contingency or an amount of reserve equal to the sum of 3% of the Balancing Authority load and 3% net generation Half the contingency reserve to be spinning reserve. Spinning reserve should respond automatically to frequency deviations and be capable of fully responding within 10 minutes. For the renewable energy industry, this new standard clarifies what reserves need to be held. The renewable industry could greatly enhance their products and add significant value to the system if they could become dispatchable resources. By incorporating a means of energy storage and having the ability of a system operator to vary the output of the generator, the value of the resource would increase significantly. Western Area Power Administration s Rocky Mountain Region has supported renewable resources in several ways. One, it developed a long term non-firm transmission rate. Second, Western now allows wind to be considered a network transmission resource. Third, there is no energy imbalance bandwidth for renewable resources. Hamid Elahi, an Energy Consulting General Manager with GE, spoke about the role of thermal generation in accommodating renewables. Recent studies have shown the thermal fleet s flexibility, which is desirable for pairing with renewable technologies. Besides flexibility, higher efficiency, higher reliability, and lower emissions are drivers for thermal generation investment. Dr. Elahi described new gas turbines with either peaking or base and mid-range applications. He emphasized that greater adoption of these newer technologies depends on having market structures that reward the value of operational flexibility. Amol Phadke is with Lawrence Berkeley National Laboratory and presented on the Western Interstate Energy Board s (WIEB) initiation of a screening level analysis of the economic merit and technical feasibility of a clean-coal wind hybrid generation option. National lab and WIEB staffs are carrying out the analytics with stakeholder input. The study results are expected in late In the study, a clean-coal wind hybrid facility entails an integrated gasification combined cycle (IGCC) coal plant with carbon capture and sequestration operating at full capacity when wind is not blowing. If wind power is available, the IGCC generation can be backed down with some gasifier output used for power generation and some used for fuel production. This method results in high transmission utilization (over 90%), firm power supply to load, and cleaner generation (with 90% CO2 capture). There are

13 economic tradeoffs because backing down coal generation for wind increases generation costs per unit of output but reduces transmission costs per unit of electricity transmitted. The preliminary results show there are no major technical barriers to this approach. In comparison to other hybrid options, the clean-coal wind combination may be the most economic depending on assumptions made about fuel costs. Dr. Phadke noted that the results will be at a screening level only and further work is needed for precise estimates. Achieving More Renewable Energy in the Western Grid: How Can It Be Accomplished and Who Will Be Involved At the meeting outset, participants were asked to record their suggestions for: Policies and resource investments needed at the federal level, e.g. President Congress, FERC, etc.; Policies and resource investments needed at the state level, e.g. Governors, Commissioners, legislators, ISOs, WIEB, WECC, etc.; and What participants need to do to move these initiatives forward. Summit facilitators collected and summarized the participants responses. The floor was opened for further suggestions, which are also summarized below. In addition, two next steps concepts were proposed to the group. The first concept called for establishing State Project Facilitation and Review Teams to address siting of a proposed multi-state transmission project. The second concept involves creation of renewable energy zones in the Western Interconnection, building on the competitive renewable energy zone (CREZ) concept under development in Texas, California, Colorado and other locations. Participants provided feedback on these ideas and volunteered to help move these activities forward. MEETING PARTICIPANTS NEXT STEP SUGGESTIONS FEDERAL POLICIES AND INVESTMENTS - Pursue national transmission grid or backbone transmission system; consider having the federal government underwrite or move private investment to reduce financial risk barriers faced by transmission developers - Assess processes for federal land entities involvement in building transmission, including staffing needs - Federal carbon tax or carbon emissions fee; use proceeds for energy research and/or encouragement of low-carbon technologies - Federal investment CO2 emissions reduction and transmission technologies - Extend tax credits for renewables - Expand federal transmission siting authority. Consider doing this incrementally, beginning with federal siting control for interstate transmission lines that are necessary to support renewable energy development - National lab research on wind forecasting, impacts of renewables on system operation, etc - Provide incentives for transmission development and remove barriers - Apply Federal Highway System approach to transmission: initially local, then regional, and ultimately federal - Improve resource characterization of baseload renewables to couple with intermittents - Include plug-in hybrid electric vehicles (PHEV)-to-grid (V2G) resources in the planning process - FERC evaluate cost allocation of new multi-state transmission - Congress change the mission of Power Marketing Associations (PMAs) to focus more on energy efficiency and renewable energy

14 - Look for a way to get a revenue stream to people who allow transmission towers on their property or perhaps to those with a transmission line in their viewshed. - Renewable entities could review the Attachment K planning proposals, currently filed as strawmen at FERC, and come forward to how the proposals can be more responsive to their concerns STATE POLICIES AND INVESTMENTS - Identify cross-state renewable energy zones throughout the Western Interconnect and talk about what needed to get renewable generation from those zones to market - Support interstate groups and see to establish common objectives with other states - Increase across and within state coordination on transmission construction - Governors establish State Project Facilitation and Review Teams on interstate transmission projects like High Plains Express and TransWest Express to evaluate power needs, negotiate agreement on cost allocation principles for proposed expansions, coordinate permitting studies, etc. - Work across state boundaries to identify resource zones and support transmission to those zones - Support regional activities that facilitate greater transmission access for renewables such as elimination of multiple queues and rate pancaking - Utilities and regulators fund innovative formulas for transmission construction and upgraded cost sharing - State tax incentives for renewables - Provide funds for utility and other efforts to more cost effectively use and expand existing and new generation and transmission - Apply inverse block pricing to incentivize renewable energy and energy efficiency. - State legislation directing public utility commissions towards regional planning and allowing regional tariffs - Move in the direction of uplifting transmission costs to general customer rates. - Develop the right financial / incentive signals so that investor-owned utilities (IOUs) invest in renewables and energy efficiency and receive the same or better rate of return than fossil fuels - Provide region-specific forums for regulators and legislators on the importance of and successful methods for achieving regional collaboration - Address queue problems, drawing from FERC Order 890 and economic transmission studies. Consider using open seasons instead of queues, which would cluster requests - Gain Western Governors support for DOE efforts to expedite federal transmission permitting and corridor designation, as outlined in Section 1221 of EPAct WECC studies congestion and how transmission can help alleviate congestion WHAT DO WE NEED TO DO? - Promote these activities - Play an active role initiate and participate in public dialogue focused on finding common ground and develop diverse energy strategies - National PR initiatives that appeal to the common man (speak a language they understand) - Lobby legislatures and PUCs - Increase utility staffs, both through experienced personnel and new training - Educate legislators on these issues and better explain what they can do to help - Disseminate information - Participate in advisory groups - Provide state / federal loan guarantees and bonding authority - Tell the public benefits story, i.e. benefits from renewable power options - Proactively get the environmental community engaged with transmission lines that there is interest in developing to help avoid potential conflicts

15 - Promote transmission projects that have been named and do not work to jeopardize the projects chances of to moving forward - Exercise caution in considering new transmission-related processes or governance so that they do not become another hurdle to jump over. Rather, design processes to assist and be a support mechanism. The goal should be finding effective and efficient means of supporting projects to get maximum renewable resource generation to load - Rethink who are the stakeholders in energy issues it is now the whole society. Include stakeholders in transmission siting from the beginning and think about how to bring the public along and thereby avoid roadblocks. DISCUSSION Meeting participants made the following comments and suggestions after hearing about the interconnection-wide CREZ and transmission line facilitation and review team concepts: The High Plains Express and TransWest Express projects carry essentially the same sources and load. High Plains Express developers invited the Colorado PUC to participate in the planning process. As of the meeting date, TransWest Express has not asked for Colorado PUC involvement. For the transmission line siting concept, consider modeling the approach after the Western Climate Initiative. Participating states would voluntarily join and begin to address need, cost allocation, financing, siting, and other barriers to transmission implementation. It is important to remember that a CREZ is not an area with a whole lot of wind but rather a predesignated area where there are energy sources and transmission will be useful, i.e. the need has been established and the cost recovery process has started. The longer the question of cost recovery is put off, the longer putting transmission in the ground is postponed, so it is important to move as quickly as possible. Maintaining flexibility is important since the federal corridor designation is not yet finalized. A regional entity with authority to make decisions is needed, such as PUC commissioners from 2 or more states that sit as a body to address the question of need. States would still have routing, siting, and operating authority, but this approach could be used for lines that deliver largely renewable energy to multiple states. This tactic could potentially be incorporated into Senator Reid s proposed legislation that looks for an alternative to FERC backstop siting authority. Create a leadership team to think about how to move these proposals forward. Building on this final suggestion to form teams, the following people volunteered to assist with considering how to move the proposals forward. CREZ Team: - Brian Parsons / Debbie Lew, NREL - Elliot Mainzer, Bonneville Power Administration - Dave Olsen, CEERT - Traci Bone, California PUC - Mike Sloan, The Wind Coalition - Morey Wolfson, Colorado Governor s Energy Office - Lisa Szot, BP Alternative Energy - Rob Kondziolka, Salt River Project - Steve Munson, Vulcan Power Company (volunteering Jim Kritckson) State Project Facilitation and Review Team - Jim Tarpey, Holland & Hart, LLP - Steve Munson, Vulcan Power Company (volunteering Jim Kritckson)

16 After this next steps discussion, the meeting adjourned.

17 APPENDIX Increasing Renewable Energy in the Western Grid Summit Sept 27 28, 2007 Ft. Collins, CO FINAL Participants List Ed Ahlstrand Little Rose Wind Farm 2885 E. AuroraSuite 17 Boulder, CO Ph: Glen Andersen NCSL 7700 East First Place Denver, CO Ph: Bob Anderson PO Box Zephyr Cove, NV Ph: Grace Anderson Assistant Executive Director California Energy Commission 1516 Ninth Street Sacramento, CA Ph: Layne Ashton Raser Technologies 5152 Edgewood DriveSuite 375 Provo, Utah Ph: Ed Beck Superintendent, Planning Tucson Electric Power Company P.O. Box 711 Tucson, AZ Ph: Charles Benjamin Director, Nevada Office Western Resource Advocates 769 Basque Way, Suite 300 Carson City, NV Ph: Keith Bennett Project Officer U.S. Dept of Energy DOE Golden Field Office 1617 Cole Blvd Golden, CO Ph: Increasing Renewable Energy in the Western Grid summary FINAL Page 17 of 38

18 Stephen Beuning Director Market Operations Xcel Energy th Street, Suite 3000 Denver, CO Ph: John Bleem Platte River Power Authority 2000 East Horsetooth Road Fort Collins, CO Ph: Paul Bonavia President, Utilities Group Xcel Energy, Inc. 414 Nicollet Mall, Fifth Floor Minneapolis, MN Ph: Traci Bone Advisor, Commissioner Dian Grueneich CPUC 505 Van Ness Avenue San Francisco, CA Ph: Robert Boyd MGR. Govt. Relations GE 6130 Stoneridge Mall Road, Suite 300 Pleasanton, CA Ph: Michael Brairton Transmission Siting Analyst U.S. Department of Energy 1000 Independence Avenue, SW Washington, DC Ph: Mark Brown Business Development Executive - Power OSIsoft 569 Rainbow Place Windsor, CO Ph: mark.brown@osisoft.com Nea Brown Partner Holme Roberts & Owen, LLP 1700 Lincoln Street, Suite 4100 Denver, CO Ph: nea.brown@hro.com Stephen Brown Staff Professional Engineer Colorado Public Utilities Commission 1560 Broadway, Suite 250 Denver, CO Ph: Stephen.Brown@dora.state.co.us Jeff Burks Director, Env. Sustainability PNM Resources, Inc. Alvarado Square Albuquerque, NM Ph: jeffrey.burks@pnmresources.com Mary Byrnes Commissioner Wyoming Public Service Commission 2515 Warren AvenueSuite 300 Cheyenne, WY Ph: mbyrne@state.wy.us Nora Caley Reporter North American Windpower 2870 Perry Street Denver, CO Ph: noracaley@comcast.net Thomas Carr Attorney/Economist Western Interstate Energy Board 1600 Broadway, Suite 1700 Denver, CO Ph: tcarr@westgov.org Vladimir Chadliev Development Manager, Renewables Nevada Power Company PO Box 98910, MS 13 Las Vegas, NV Ph: vchadliev@nevp.com Increasing Renewable Energy in the Western Grid summary FINAL Page 18 of 38

19 Laurence Chaset Staff Attorney California Public Utilities Commission Legal Division, 5th Floor 505 Van Ness Avenue San Francisco, CA Ph: Cliff Chen Union of Concerned Scientists 2397 Shattuck Ave Suite 203 Berkeley, CA Ph: Marcus H. Chong Tim Attorney Advisor Bonneville Power Administration 905 N.E. 11th Ave., LT-7 Portland, OR Ph: Dick Clayton General Counsel Raser Technologies 5152 N Edgewood Dr.Suite 375 Provo, Utah Ph: dick.clayton@rasertech.com Steve Cochran Public Utilities Specialist Western Area Power Administration 5555 E Crossroads Blvd Loveland, CO Ph: scochran@wapa.gov Chip Comins Producer American Spirit Productions PO Box 1799 Carbondale, CO Ph: ccomins@rof.net Brian Conrad Business Development Manager John Deere Wind Energy 6400 NW 86th Street PO Box 6600 Johnston, IA Ph: ConradBrianL@johndeere.com Sheila Cook Manager, Rates Western Area Power Administration 5555 E Crossroads Blvd Loveland, CO Ph: scook@wapa.gov Craig Cox Executive Director Interwest Energy Alliance P.O. Box 272 Conifer, CO Ph: cox@interwest.org Angus Coyle Senior Business Developer BP Alternative Energy NA 1611 Telegraph Ave. Suite 1515 Oakland, CA Ph: Angus.Coyle@bp.com James Cruz Namaste Energy West Hampden Ave Lakewood, CO Ph: priyasith@mac.com Tom Darin Energy Transmission Attorney Western Resource Advocates 2260 Baseline Rd.,Suite 200 Boulder, CO Ph: tom@westernresources.org Alan Davis Senior Advisor NorthernLights Transmission 1211 Hollins Helena, MT Ph: alan@enventure.com Edgar DeMeo Renewable Energy Consulting Services, Inc Emerson Street Palo Alto, CA Ph: edemeo@earthlink.net Increasing Renewable Energy in the Western Grid summary FINAL Page 19 of 38

20 Tanuj Deora Project Manager Horizon Wind Energy 808 Travis Ste 700 Houston, TX Ph: Patrick Dinkel Director of Planning & Resource Aquisition Arizona Public Service P.O. Box 53999, MS 9674 Phoenix, AZ Ph: Maury Dobbie President / CEO Northern Colorado Economic Development Corporation 3553 Clydesdale Parkway, Suite 230 Loveland, CO Ph: mdobbie@ncedc.com Loyd Drain Development Director Wyoming Infrastructure Authority 200 East 17th, Suite B Cheyenne, WY Ph: loydd@wyia.org Peggy Duxbury Director, Governmental & Legislative Affairs Seattle City Light 700 Fifth Avenue (PO Box 34023) Seattle, WA Ph: peggy.duxbury@seattle.gov Pamela Eaton Deputy Vice President, Public Lands Campaign The Wilderness Society 1660 Wynkiip Street, Suite 850 Denver, CO Ph: pam_eaton@tws.org Shannon Eddy Consultant Energy Foundation 2501 Portola Way Sacramento, CA Ph: shannon@consciousventuresgroup.com Alan Edwards Owner AE Consulting 843 Munich Drive Bismarck, ND Ph: galanedwards@aim.com Hamid Elahi General Manager, Energy Consulting General Electric One River RoadBuilding 2, Room 600 Schenectady, NY Ph: hamid.elahi@ge.com Steve Ellenbecker Energy Policy Advisor Wyoming Governor's Office 3950 Goodpasture Loop, Apt. R112 Eugene, OR Ph: sellen@state.wy.us Thomas Fair Executive, Renewable Energy Program Nevada Power Company PO Box MS 13 Las Vegas, NV Ph: tfair@nevp.com Erica Ferro Solutions Portfolio Manager IBM 6300 Diagonal Highway, Building 21, Office G3-11 Boulder, CO Ph: ehferro@us.ibm.com Jim Filippi Principal Planning Engineer Pacific Gas and Electric Mail Code B15A, P.O. Box San Francisco, CA Ph: JLFa@pge.com Randy Fischer Colorado House of Representatives 200 E. Colfax Denver, CO Ph: randyfischer@frii.com Increasing Renewable Energy in the Western Grid summary FINAL Page 20 of 38