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1. Transmission in the Pacific NW & Power Purchase Agreement Guidelines
Utility Geothermal Working Group - UGWG
Geothermal Power Production
Webcast
John Pease PE, MBA
Project Manager
Bonneville Power Administration
January 24, 2006
2. BPA Transmission BPA Transmission – 75% of high voltage in the Pacific NW
BPA building 770 miles of 500 kV circuits – Largest transmission building program in North America
Yet, transmission system is over subscribed and underutilized. What does this mean?
Song “You can’t get there from here” – Lee Roy Parnel – 1978 Country Classic
4. BPA (FERC) Generation Interconnection Process (>20 MW) Interconnection initiated by:
Letter requesting generating interconnection to BPA transmission (TBL) – see TBL website
Completed Interconnection Study Request
Identify service requested – Network or Energy
Refundable deposit of $10k
Once complete, generator is now in the “Queue”
TBL transmission A/E’s will help you
5. Once Interconnection Request Completed, Other Studies Follow Interconnection generator now responsible for:
Interconnection Feasibility Study - $10k deposit
Interconnection System Impact Study - $50k deposit
Interconnection Facilities Study - $100k deposit
Standard Large Generator Agreement (>20 MW) is signed if transmission is available
Process is now taking 1 ˝ + Years
6. Once Interconnection Request - Continued Studies may indicate Interconnecting generator may be “blocked” by someone higher in the Queue who needs, but does not have, transmission capacity
Consequently, upgrades then paid by pro rata need for the transmission, if the generators agree to
“Paid back” by transmission credits after construction – approximately five years
Unfortunately, this process has never worked in eight years since FERC Order 888 & 889 created Open Access Transmission Tariff system (OATT)
7. Conditional Firm – New (at least a little) Hope On the Horizon Access to transmission determined by Firm and non-Firm rights
Firm transmission – guaranteed on all hours – most expensive, curtailed last (usually in an emergency)
Non-Firm – firm rights not used or unallocated transmission made available daily, weekly, monthly or annually (higher chance of curtailment – daily goes first, then weekly, monthly etc.)
Conditional firm – Firm except in months when curtailment may occur, then non-Firm, but curtailed last (non-firm curtailment order)
8. Conditional Firm – A Little Hope - continued Presented by BPA to FERC March 16th, 2005 in Portland
Conditional firm holder knows maximum curtailment exposure – 100’s hours/month
If not told in preschedule (24 hour notice) that a curtailment may occur, then considered firm
Uses additional Available Transmission Capacity (ATC) that currently goes unused
Bounds transmission availability risk to enable project financing!
9. Economic Redispatch – A Little More Hope Presented by BPA to FERC March 16th, 2005 in Portland
Transmission provider will adjust generation within the hour (TBL – hydro) to alleviate a transmission curtailment, increasing available ATC
Currently being priced by BPA
Other generators may participate if an economic incentive is provided
BPA currently only redispatches to meet load
10. Fundamentals of a Power Purchase Agreement A good contract provides value to each party
Definition of terms in the language used must be well understood by both parties
Legal protections are fairly standard
Valuation - benefits vs. cost and risk to develop must be well understood and monetized
Conditions and terms are where the negotiations take place
11. Fundamentals of a PPA Cont. Contract Definitions
Term of the agreement
Project permitting and construction
Purchase and sale of energy
Environmental attributes
Scheduling of energy & measurement
Purchase price
Defaults & remedies
12. Fundamentals of a PPA Cont.
Transmission and interconnection
Warrantees – seller and purchaser
Dispute resolution
Defaults and remedies
13. Valuation – The Heart of a Project Valuation of the project – risk adjusted avoided cost, npv
Impacts on typical utility planning and operations
NEPA, environmental permitting
Transmission availability and alternatives
Distribution of benefits and risk mitigation
14. Risk Mitigation & Valuation Someone Else’s Problem? Developers face a multitude of risks (ORMAT, 4/2005)
Exploration
Resource capacity
Regulatory
Drilling
Plant construction
Financing
Risk eventually shows up in the PPA power price
Potentially jeopardizing project development
15. Risk Mitigation & Valuation - Solutions
Least Cost Marginal Power for base load resources in the Pacific NW - $50+ MWh – and not going away
Risk Adjusted Avoided Cost methodology or “How would you value a CCCT today?”
Energy, capacity credit, green tags, fuel risk, environmental and societal cost/benefits compared to natural gas
A great example – Idaho Power 2004 IRP – please see link http://www.idahopower.com/energycenter/irp/2004/2004IRParchive.htm
BPA helps support environmental permitting, transmission acquisition, scheduling and operations
Partnership lowers the cost for everyone.
16. Questions and Comments?