National Transmission Issues for Wind: A Perspective

1. National Transmission Issues for Wind: A Perspective Nebraska WindPower 2009 November 9-10, 2009Kearney, NE Robert ZavadilVice President620 Mabry Hood Road, Suite 300Knoxville, Tennessee 37932Tel: (865) 218-4600 ex. 6149bobz@enernex.com www.enernex.com

2. Why is Transmission an Issue for Wind? • Current situation: • Installed U.S. wind generation capacity ~30 GW • <2% of annual U.S. electric energy use • Transmission is already a limitation on wind development in many regions of the country • ERCOT • MISO: Dakotas, Minnesota, Iowa • Inter-Mountain West and Desert Southwest • Development still continuing, but congestion and curtailment are facts of life Nebraska Wind Power 2009

3. Lots of wind, Lots of load, Lots of distance Best Onshore Wind Resources Highest Load Nebraska Wind Power 2009

4. Traditional Transmission Expansion: How we got the grid we have • Established rationale for transmission expansion • Connect generation to load • Maintain system reliability • Economic energy exchanges with neighbors • Perspective • Initially on an individual company basis • Interconnections with neighbors increased scope • Emergence of wholesale energy markets has lead to a regional view • Is the regional view adequate for remote renewable resources? Nebraska Wind Power 2009

5. Going Forward • Further substantial wind energy development and transmission are tightly linked • Regional transmission can support additional development in near term • Aggressive wind development requires a broader view Nebraska Wind Power 2009

6. What does 20% Wind Energy Look Like? 5-10 GW Nebraska Wind Power 2009

7. Eastern Wind Integration & Transmission Study (EWITS) • Create three versions of a 20% wind scenario for the Eastern Interconnection & one to 30% • Transmission Study – Develop transmission concepts for different wind scenarios • Integration Study – evaluate operational challenges and quantify cost Nebraska Wind Power 2009 November 9, 2009

8. Some Key Questions • What system operational impacts and costs are imposed by wind generation variability and uncertainty? • What are the benefits from long distance transmission that accesses multiple wind resources that are geographically diverse? • What are the benefits from long distance transmission that move large quantities of remote wind energy to urban markets? • How do remote wind resources compare to local wind resources? • How much does geographical diversity help reduce system variability and uncertainty? • What is the role and value of wind forecasting? • What benefit does balancing area cooperation or consolidation bring to wind variability and uncertainty management? • How does wind generation capacity value affect resource adequacy? Nebraska Wind Power 2009

9. Regional Wind Penetration by Scenario • Very high penetrations in SPP for all scenarios • Atlantic off-shore amount increases substantially in S3 & S4. • Installed wind generation capacity • 20%  230 GW • 30%  330 GW Entire Database Scenarios Capacity Factor Comparisons: West = MISO + SPPEast = ISO-NE + NYISO Nebraska Wind Power 2009

10. Evaluating Transmission Requirements • Transmission need identified through economics-based planning methodology • Whole interconnection considered, rather than regions • Connect energy “sources with sinks” • The resulting conceptual transmission overlays consist of multiple 800kV HVDC and EHV AC lines Nebraska Wind Power 2009

11. Overlays for 4 Scenarios Scenario 2 Scenario 1 Scenario 4 Scenario 3 Nebraska Wind Power 2009

12. Nebraska Wind Power 2009

13. Line-miles & Estimated Cost • Many common elements across all four scenarios • Benefit/Cost ratios > 1 based on production cost offsets • Overlays would have additional benefits • Reliability • Security Nebraska Wind Power 2009

14. Operational Impacts • Challenges are manageable given adequate transmission • Costs for integrating wind about 10% of wind energy cost • Wind energy offsets fossil generation in west, gas-fired generation in the east Nebraska Wind Power 2009

15. Diversity Benefits • Both variability and uncertainty of aggregate wind decrease percentage-wise with more wind, more geographic area • Transmission is key to exploiting this phenomena Nebraska Wind Power 2009

16. Effects on Regional Energy Transactions • MISO & SPP are net exporters in all scenarios • PJM is net exporter in Scenario 3 • Scenario 3 has lowest transaction energy Nebraska Wind Power 2009

17. Some Other Findings and Conclusions • Achieving 20% energy penetration across the Eastern Interconnect will require very substantial wind development and therefore significant grid expansion. • A single iteration of the economic transmission expansion methodology provides useful results and insights • Wind generation curtailment across the footprint ranges from a low of 3.9% in Scenario 3 to 10.5% in Scenario 4 • Further iterations would allow overlays to be improved, wind curtailment to be minimized Nebraska Wind Power 2009

18. EWITS Summary… • What system operational impacts and costs are imposed by wind generation variability and uncertainty? With large balancing areas and comprehensive markets, the costs of integration for all scenarios is less than $10/MWH of wind, or less than $0.002/kWH of load. • What are the benefits from long distance transmission that accesses multiple wind resources that are geographically diverse? The study results show that long-distance (and high capacity) transmission can assist smaller balancing areas with wind integration, allowing penetrations otherwise not feasible. • What are the benefits from long distance transmission that move large quantities of remote wind energy to urban markets? The cost of transmission can be overcome by the higher quality of wind resources in remote areas. Transmission has other value for the robustness of the system that were not evaluated in this study. • How do remote wind resources compare to local wind resources? In the Eastern Interconnection, the NREL meso-scale data shows that the higher quality winds in the Great Plains have capacity factors 6 top 7% higher than on-shore wind resources close to the high-load density urban centers in the east. Off-shore plants have capacity factors on par with Great Plains resources but cost of energy is higher due to higher capital costs. Nebraska Wind Power 2009

19. Continued… • How much does geographical diversity help reduce system variability and uncertainty? Quite substantially. • What is the role and value of wind forecasting? With significant wind generation, forecasting will play a key role in keeping energy markets efficient and reducing the amount of reserves carried while maintaining system security. • What benefit does balancing area cooperation or consolidation bring to wind variability and uncertainty management? This and other recent studies reinforce the concept that large operating areas - in terms of load, generating units, and geography – combined with adequate transmission, are the most effective measures for managing wind generation. • How does wind generation capacity value affect reliability? Wind generation can contribute to system adequacy, and transmission can enhance that contribution. Nebraska Wind Power 2009

20. Innovative Approaches to Breaking the Transmission Logjam • Achieving 20% energy penetration across the Eastern Interconnect will require very substantial wind development and therefore significant grid expansion. • Transmission is stymied in many regions due to cost allocation, cost recovery, siting and permitting, and NIMBY issues • Identify renewable energy zones • Build transmission in advance of need • Transmission lead times are 7-10 years • Wind plant lead times are 1-2 years • Break out of traditional cost recovery methods • Socialize the cost • Pay for lines with LMP differences • Let TSO recover cost in rates until wind plants come • If you love wind, you gotta at least liketransmission! Nebraska Wind Power 2009