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Klondike Wind Power Project, Oregon

Energy Bar Association Mid-Year Meeting Integrating Renewables into the Electricity Grid-Tariff and Market Issues. Donald Furman Senior Vice President - Business Policy and Development December 3, 2009. Klondike Wind Power Project, Oregon. Iberdrola Renewables: A Leader in Execution.

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Klondike Wind Power Project, Oregon

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  1. Energy Bar Association Mid-Year Meeting Integrating Renewables into the Electricity Grid-Tariff and Market Issues Donald Furman Senior Vice President - Business Policy and Development December 3, 2009 Klondike Wind Power Project, Oregon

  2. Iberdrola Renewables:A Leader in Execution A collection of exceptional assets… US Renewables #2 developer in the U.S. with 3.1 GWs(1,337 MWs of new wind in 2008) U.S. represents 1/3 of earnings 40% of the industry’s largest development pipeline is in the U.S. 826 employees in 28 U.S. states, DC, India and Canada Wind Gas Power 536 MW CCGT100 MW peaking 155 BCF Owned & Contracted 2,876 MW in‘08 636 MW of CCGT & peaking capacity on the strategic CA-OR border Corporate Support 155 BCF of owned & contracted natural gas storage positioned for a volatile future … with excellent growth prospects 2

  3. North American Asset Portfolio Wind projects owned or controlled Wind projects under construction Gas storage owned Thermal generation Biomass under construction Biomass cogeneration Updated September 1, 2009

  4. Wind Energy’s Impact to the Power System • Four unique characteristics that affect integration: • variability • near-zero variable cost • difficulty of forecasting • remoteness • These characteristics can be better accommodated in some markets structures than others Balkanized US markets makes integration difficult

  5. Optimal Wind Integration Conditions • Large balancing area with access to neighboring markets • Short-term generation markets • Ancillary services markets • Effective use of wind forecasts by system operators • Flexible transmission services Organized markets are far better for integration

  6. Benefits of Larger Balancing Areas • Diversity benefit • Greater logistical flexibility - Larger pool of resources to manage variations in electric supply or demand • Reduced correlation of wind resource • Result is substantial cost savings • Midwest ISO estimates savings from consolidating its 26 balancing areas into one are 3.7 to 6.7 times greater than the costs • Savings are large even on power systems without wind energy • Consolidation can be done physically or virtually

  7. Consolidate Balancing Areas

  8. Short-term ElectricityGeneration Markets • Hourly markets = high integration costs • Variations accomodated using regulation services • Expensive • 10 minute markets = low integration costs • Schedules and transactions can change 6 times per hour • Parties to the transaction adjust rather than system operator RTOs tend to provide lower integrations costs

  9. Expanded Market Use • Ancillary services markets provide incentives for generators, demand response, and other flexible resources to offer their services to the grid • Markets ensure that lowest-cost resources provide needed flexibility services

  10. Wind Forecasting • Wind integration costs are largely due to uncertainty about the next day’s wind output • Wind energy forecasts are already remarkably accurate • Reliable wind forecasts allow system operators to significantly reduce their uncertainty about future wind output, thereby lowering the amount of reserves they need to hold to accommodate variations in wind output • Largest opportunities for improvement: • Better integrating forecasts into power system operations • Providing grid operators with useful information

  11. Flexible Transmission Services • Transmission capacity is often physically available when wind output is highest, but contractual and operating rules prevent use of this capacity • Conditional firm allows available transmission capacity to be used by others outside of a few peak hours • Dynamic line rating determines real-time capacity of a line, instead of relying on rules of thumb that greatly underestimate available capacity

  12. Wind Integration Solutions Storage Additional Flexible Generation Pumped Storage Batteries Flywheels SMES CAES Capacitors PHEV Wind Curtailment Simple Cycle GT Combined Cycle GT Markets In Range of 1-2% AccurateForecasting Accessing Intra-hour flexibility Price Responsive Load Demand ResponseDynamic Scheduling Real time forecastingCentralized Forecasting High Cost Low Cost High Wind Penetration Level Low Wind Penetration Level Source: UWIG

  13. Questions? Big Horn Wind Power Project, Washington

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