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RenewElec October 21, 2010

FERC’s Role in Renewable Electricity Integration: The Bulk Power System, Wholesale Markets and Reliability Standards. Robert Nordhaus, David Yaffe Van Ness Feldman 1050 Thomas Jefferson Street, NW Washington, DC 20007-3887 (202) 298-1800. RenewElec October 21, 2010. Overview. FERC’s Role

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RenewElec October 21, 2010

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  1. FERC’s Role in Renewable Electricity Integration:The Bulk Power System, Wholesale Markets and Reliability Standards Robert Nordhaus, David Yaffe Van Ness Feldman 1050 Thomas Jefferson Street, NW Washington, DC 20007-3887 (202) 298-1800 RenewElec October 21, 2010

  2. Overview • FERC’s Role • Ongoing Proceedings at FERC that Address Key Renewable Issues • Opportunities for RenewElec Input RenewElec

  3. FERC’s Role Regulates rates, terms and conditions of unbundled • transmission services over the interstate transmission grid and wholesale power sales using that grid • Tariff and contract approvals • General rules, including pro forma OATT • Regulates RTOs and ISOs (outside ERCOT) • Supervises NERC, which sets mandatory reliability standards for the bulk power system • Limited role in transmission planning and siting • Establishes, with state commissions, ground rules for small renewable projects under PURPA Transmission and Wholesale Sales OrganizedMarkets Reliability New Transmission Small Renewables States (not FERC) regulate retail power sales, local distribution, generation and most transmission siting, and “bundled” retail energy and transmission services RenewElec

  4. Ongoing Proceedings at FERC Impacting Renewables RenewElec

  5. Integration of Variable Energy Resources (VERs) • Jan. 2010 FERC Notice of Inquiry takes a “fresh look” at barriers to transmission service and wholesale markets for VERs (e.g. wind, solar) • Comments solicited on 7 topics: • Data and Reporting Requirements • Scheduling Practices and Incentives • Forward Market Structure; Reliability Commitment • Balancing Authority Coordination • Reserve Products and Ancillary Services • Capacity Markets • Redispatch and Curtailment Practices RenewElec

  6. Transmission Planning and Cost Allocation • June 2010 proposed rulemaking • If finalized as proposed, transmission providers must amend OATTs (or safe harbor tariffs) to reflect: • Region-wide transmission planning • Elimination of rights of first refusal • Interregional transmission planning agreements • Regional and inter-regional cost allocation methodologies • Could stimulate new investment in renewables-oriented transmission (including merchant lines) RenewElec

  7. Demand Response • Two areas of demand response (DR) being addressed that could expand use of DR in wholesale markets (i) April 2010 – Standard DR performance metrics adopted • FERC codified industry-standard terms and protocols for evaluating DR performance in wholesale markets (ii) March 2010 – Proposed Rule to set DR pricing scheme • RTOs/ISOs that allow DR as generation resource would be required to pay DR providers, at all hours, the locational marginal price (LMP) for energy reduced • Pushback from commenters RenewElec

  8. Electric Storage Technologies • Electric storage has many uses • A generation resource • An ancillary service for transmission • A distribution asset • March 2010 – FERC Staff requests comments on rates, accounting and financial reporting for electric storage technologies to lay foundation for categorizing varied storage services for rate purposes • Clear rules for electric storage compensation could expand quick-ramping electric storage ancillary services to complement renewable integration RenewElec

  9. OATT Rules • Ancillary Service Charges • Charges for “wind following” ancillary services, like generator imbalance  Approved, but no clear precedent • “Proxy generator” approach to calculate marginal cost of wind following ancillary service  Rejected in 2010 • Interconnection Rules • Special interconnection rules and procedures for large wind generators (> 20 MW) • Exempt from power factor requirement for synchronous generators • Mandatory low voltage ride-through capabilities • Reactive power requirement evaluated on basis of need, case-by-case RenewElec

  10. NERC Reliability Standards • NERC develops and enforces reliability standards, subject to FERC approval • 2009 NERC Report: off-peak nature of most new renewables requires “significant changes” to traditional grid planning and operations to maintain reliability. • Wind - 229 GW total new capacity, 38 GW on-peak • Solar - 20 GW total new capacity, 17 GW on-peak • Over the next two years, NERC’s Integrating Variable Generation Task Force will publish reports recommending “significant changes” to reliability standards to accommodate large-scale renewable electricity integration RenewElec

  11. Conclusion • Capacity and accessibility of bulk power system and wholesale markets to accommodate renewables is major issue within FERC’s (and NERC’s) domain • Renewables will also be indirectly impacted by FERC rules on electric storage and demand response • RenewElec opportunities to inform FERC: • Filing comments in ongoing proceedings • Briefing Commission staff RenewElec

  12. Thank you. Questions? ROBERT NORDHAUS RRN@vnf.com DAVID YAFFE DPY@vnf.com RenewElec October 21, 2010

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