(L)earning from Windpower - NCAC-USAEE · (L)earning from Windpower Mike Jacobs NCAC U.S....

American Wind Energy Association

(L)earning from Windpower

Mike Jacobs

NCAC U.S. Association Energy Economists

June 17, 2005Image courtesy of NEG Micon


Overview• Wind in Competition with fuel types• Examine the need for Transmission• Allocation of Transmission in the West• Initiatives by Wind Industry on

Transmission


What is our recentenergy policy?

• Gas pipeline permitting advantages moving fuel, and

• Air pollution regulation internalizes some costs, giving us…


Plant additions by fuel

CourtesyFitch Ratings

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Cap

acity

Inst

alla

tions

(MW

)

Coal Hydro Renewables Uranium Fuel Oil Natural Gas

The Oil Embargo1973-4

PURPA1978

PURPAQF Era

EPACT1992

EWGs

CAA1970

Vertically Integrated Utilities

RTO NOPR1999

Rise of the Merchant

Credit Crash

CAA Amendments

1990


What are the economic drivers for wind energy?

• Cost-effective energy vs. gas• Pulverized coal’s risks of pollution

controls• IGCC and nuclear technology risks


Wind’s Cost Decline40

30

20

10

1980 1990 2000 2010 2020

NREL Energy Analysis Office


Competitive pricesWind energy cost: about 3.5¢/kWh Wind energy cost: about 3.5¢/kWh (5¢ without PTC)(5¢ without PTC)

Includes 0.5 to 1.0¢/kWh for O&MWind energy costs are Wind energy costs are stable stable over plant lifetimeover plant lifetime

Natural-gas plant fuel cost (HR 7,000 - 10,000)

$/MMBTU: 4 5 6 8 gas cost

¢/kWh: 2.8 - 4 3.5 - 5 4.2 - 6 5.6 - 8 fuel only


Got Transmission?• Much truth to the concern that

windpower is dependent on transmission.

• Considerable efforts to plan the transmission expansions to bring distant wind to population centers


Anyone Got Transmission?• Many market impacts come with

changes in supply of transmission.

• Divestiture of generation, with transmission owner as common carrier was the plan in deregulation, but only implemented in some places.


SMD Dereg Responses• Develop electric markets, integrated

with transmission access• Allocate transmission every hour on

marginal energy price• Several players able to fund new

transmission, clearly recognizing market impacts and interests


Conventional Industry Responses

• Develop transmission configurations• Discuss transmission permutations• Analyze, but rarely build, transmission


Before we build more, are we making the best use of what we have?

• Do we use economic sense to allocate this scarce resource?

• Utility industry has low capacity utilization, with attention on peak demand. Wind use mostly off-peak.


Pursuit of efficient use, or how the West was lost

• Physical transmission rights still reign • Original approach is “advance reservations”:

– Perpetual rights for those that came 1st

– Reserved, based on shipper using on peak– Presently, no space available, huge hurdle for new

entrants


Reform that became SMD• Financial Rights (PJM, NY, NE, MISO

adopted in that sequence)• Allocation of transmission by economic

merit• Economic dispatch of generation• Value of transmission returned to

ratepayers, new investors in financial rights


What the West could do• Economic Re-dispatch

– Automatic in the Eastern power pools– Barely contemplated in the West

• Would be done by RTO, if we had RTOs… • Or every asset owner rewarded through

bilateral arrangements that allocate transmission and value without jeopardizing system integrity


Wind as Economic Energy

• Canary in the Coal Mine• The treatment of economic energy is an

indicator of the health of the wholesale market


Topics at FERC

• Transmission utilization– FERC technical conference on “Conditional

Firm” in March with Bonneville Power Administration

• Review punitive imbalance penalties


Wind industry efforts

• Propose Conditional Firm in Rocky Mountains, BPA

• Develop Reliability standards for wind• Integration Studies


Wind efforts –Conditional Firm

• Part of Governors’ sponsored Rocky Mountain Area Transmission Study (“RMATS”)

• Introduced by wind advocates in BPA new products forum, FERC wind policy


AWEA efforts- Reliability • Proposed Grid interconnection Code for

windfarms– Approved by FERC and Western Electric

Coordination Council (WECC)

• Promote wind forecasting for system operators– Cal ISO program1st example


Wind efforts- Integration• Integration Studies funded by state

authorities (California Energy Commission, Minnesota Commerce Dept, NYSERDA)

• Solid consensus with RPS volumes of wind:– Reliability not impacted- no need for MW backup– Operational impacts cost $1-$4/MWHr of wind,

and similar reduction in market prices


Integration Studies Study Relative Wind

Penetration Regulation$/MWH

Total $/MWH

NYSERDA 10% 0 0 Xcel- MN 2004 15 0.23 4.60 UWIG/Xcel 3.5 0 1.85 PacifiCorp 20 0 5.50 BPA 7 0.19 1.47 - 2.27Hirst 0.06 - 0.12 0.05 - 0.30 na Great River Cooperative I 4 3.19 Great River Cooperative II 29 4.53 We Energies I 4.3 1.12 1.90 We Energies II 16.6 1.20 2.92 CA RPS Phase 1 4 0.17 na


Questions?

Mike JacobsAmerican Wind Energy Association

[email protected]

(L)earning from Windpower - NCAC-USAEE · (L)earning from Windpower Mike Jacobs NCAC U.S....

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