BPA – History with Geothermal in the Pacific NW, Transmission Issues & Project Selection

1. BPA – History with Geothermal in the Pacific NW, Transmission Issues & Project Selection “Introducing Geothermal Power Generation Workshop” John Pease PE, MBA Project Manager, Renewables Bonneville Power Administration May 11, 2005

4. BPA Today – Facilitator Role to Develop New Renewables • History 2001 – BPA increases wholesale price of power due to additional load placed on the Agency – then Direct Service industries go out of business • BPA in surplus in to the future • Some customers want BPA out of resource acquisition – the Regional Dialogue • BPA helps its customers who want to develop their own renewable resources today

5. BPA has a long history of promoting geothermal • BPA funded the1985 Four-State Study, which assessed geothermal resource development prospects in BPA’s service area • NW Power & Conservation Council in 1986 – Power Plan determined that approx. 4,400 MW of cost effective electrical energy could be obtained by regional geothermal resource development

6. Geothermal Pilot Project Program Launched in 1991 • Initiate small but commercial-scale projects in areas with potential for large-scale development • Test ability to locate reservoirs and win public acceptance • RFP initiated by BPA in July, 1991

7. Vale Geothermal Project • 30-MW project developed by BPA, Trans-Pacific and Springfield Utility Board • Exploration drilling failed to locate a reservoir • Project relocated to Glass Mountain in 1994

8. Newberry Geothermal Project • 30-MW project developed by BPA, CalEnergy and EWEB • Well-conceived, successful public involvement effort • Project approved in 1994 • Exploration drilling failed to locate a reservoir • Project relocated to Glass Mountain in 1996

9. Pilot Project Locations

10. Activities in Support of Geothermal Development • From 1988-94, BPA spent over $1,000,000 on activities promoting geothermal • Economic impact studies in 5 counties • Hydrologic studies at 4 KGRAs • Impact analysis at 3 sites • Resource assessment in Cascades and SE Oregon • Environmental baseline at Newberry • Permitting guides • Geothermal teaching materials (see handout) • Outreach to public interest community

11. What Didn’t Work – the past • Federal regulations allow developers to spend millions on exploration and permitting, only to have their projects denied at the end • Federal permitting process allows special interest groups to have great influence on decision-making • This has changed under the current administration

12. What Worked • A well-planned and executed public involvement process can enhance the prospects for success • Power contracts are sufficient incentive to spur development at new sites

13. Challenges • No RPS in the Pacific NW – geothermal must compete on its own economic merits • Conservative utility response – “Why it won’t work.” Perception can change with education • Transmission constraints – solutions exist

14. Risk Mitigation 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 • Partnership lowers the cost for everyone.

15. The Good News! • 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 • Geothermal can now compete w/o PTC though PTC will help those who can use it (IOU’s, IPP’s, etc.) • Idaho Power IRP (2004) – Geothermal 3rd out of 15 alternatives for additional power ($55/MWh levelized) –ahead of gas & coal

16. 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

18. 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

19. 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 + 2 Years

20. 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)

21. 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)

22. 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!

23. 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

24. Accepting a Geothermal Proposal – Suggested Guidelines (BPA) • Project Summary – size of facility (nameplate), type of technology, expected annual output, Point of Delivery, operation date, term of contract & cost of power • Project Description – where will it be located (map needed of key facilities), generation technology, who will manufacture major equipment, can project be expanded and transmission facilities required

25. Accepting a Geothermal Proposal – Guidelines (continued) • Site Control – documentation of site control to include necessary access roads and transmission corridor easements (commercial terms blacked out) • Output Distribution – estimate, in tabular form, of monthly and hourly project output. Describe source of the data • Equipment – description of major equipment used at facility along with candidate manufacturers. Note: Steel up 30% last year

26. Accepting a Geothermal Proposal – Suggested Guidelines (BPA) 6. Transmission Availability – Describe the degree to which transmission capacity is available. Description of transmission work done to date, when accepted into the evil queue, what transmission studies have been done, capacity reserved with copies of all documents. 7. Environmental Review and Key Permits – Fish & Wildlife service up-to-date listing of candidate, listed and proposed endangered or threatened species habitat in the proximity of the project. Description of any potential environmental problems and the level of environmental review anticipated for the project. If potential opposition to the project, describe its source

27. Accepting a Geothermal Proposal – Suggested Guidelines (BPA) 7. Environmental Review and Key Permits cont.– Describe and provide copies of any wildlife or other environment studies related to the project area • Key permits required for the project • Progress made in obtaining them • Schedule for completing all Federal, state and country permitting processes that enable the project 8. Describe any potential interest Native American tribes may have in the project, contacts that have been made and all archeological surveys that have been done on the project.

28. Accepting a Geothermal Proposal – Suggested Guidelines (BPA) • Schedule for permitting and construction of the facility • Cost proposal – cost stream and if and how escalated (GDPIPD). Describe all contingent or key assumptions in the cost proposal. • Power Contract – Description of key elements needed in a power purchase agreements, expectations of confidentiality and shared development costs • Project Structure and Financing – Description of ownership structure, how the project will be financed. Will credit support or financing be needed from the utility?

29. Accepting a Geothermal Proposal – Suggested Guidelines (BPA) • Developer Experience – summary of the experience of key staff and contractors who will be involved in developing the project. • Description of the plans for operating and maintaining the facility. • Otherconsiderations developer considers important.

30. Questions and Comments?