Wind Integration in Alberta: M arket & Operational Framework Implementation

1. Wind Integration in Alberta:Market & Operational Framework Implementation AESO Stakeholder Information Session October 19, 2007 Warren Frost Vice President, Operations & Reliability Laura Letourneau, Director, Market Services

2. Purpose of Today’s Session • Ensure understanding of the Market & Operational Framework (MOF) for Wind Integration in Alberta • Communicate our plans for MOF implementation and ensure stakeholders understand when and how they can participate • Provide opportunity to receive input and feedback on our approach and plans for developing and implementing MOF

3. Outline • Role of AESO and facts about Alberta • Reviewing Wind Integration Challenges • Wind Integration Journey in Alberta • Market and Operational Framework Addresses the Challenges • MOF Implementation Plans • Next steps

4. Independent System Operator for the Alberta Interconnected Electric System System Operations: direct the reliable operation of Alberta’s power grid Markets: develop and operate Alberta’s real-time wholesale energy market to facilitate fair, efficient and open competition Transmission System Development: plan and develop Alberta’s transmission system to ensure continued reliability and facilitate the competitive market and investment in new supply Transmission System Access: provide system access for both generation and load customers Role of Alberta Electric System Operator (AESO)

5. Alberta’s Electric Industry • 9,661 MW peak and 80% LF • 11,849 MW total generation • Over 280 generating units • Wholesale market with about 200 market participants • > 21,000 km of transmission • Interties BC (up to 780 MW) & Sask. (up to 150 MW) (Wind)497 MW 5,893 MW BC (Other renewables)178 MW 4,412 MW Alta 869 MW Sask

6. Reviewing the challenges to integrating wind • Reliability issues beyond 900 MW – need mitigating measures, resources and the scale/costs escalate rapidly beyond 900 MW • Wind power is variable – sometimes unpredictable, increases or decreases rapidly and wind patterns can be counter to load • Need dispatchable generation – capability from conventional generation considering physical limits (ramping limits and start up times) • Transmission upgrades – need upgrades in SE/SW of the province • Large wind potential in Alberta – framework, mitigating measures, obligations and costs were not defined

7. 2006 DataGeneration Characteristics 12000 Off-Line Generation (Maint or Economics) 10000 Ancillary Services 8000 Dispatchable Generation MW Capacity 6000 4000 Non-Dispatchable Generation 2000 0 2006 Data 2weeks per division Disp. MW Non-Disp. Reserves (Active+Standby) Off

8. Need Dispatchable Resources to Accommodate Wind Amount of dispatchable generation varies according to market conditions Market Capability Above Baseload Baseload Generation

9. Adding more wind • To integrate more wind the operator needs to “know what to do” and “have the necessary resources/tools” • Current resources/tools • The energy merit order • Regulating reserves • New resources/tools • Wind power forecasting • Additional regulating reserves • Supply / load following service, (i.e. the service would accommodate pumped storage, batteries, others?) • Power and/or ramp-rate limiting of wind power facilities

10. Wind Integration Journey 2003 2004 2005 2006 2007 Initiate study on large scale wind1200 MW Wind Power Facility Standard put in place with caveats on wind power management Further studies on operational issues and need for Wind Power Management Wind Variability study released Phase 1 System Impact Studies Confirms need for additional mitigating measures Phase 2 System Impact Studies Confirms need for additional mitigating measures Develop and finalize market and operational framework (MOF) Replace temporary threshold with MOF Initiate joint AESO-CANWEA collaboration 900 MW Threshold

11. Market and Operational Framework • Market and Operational Framework (March 2007) replaced the temporary 900 MW threshold – effective September 26, 2007 • Premise of framework - If the System Operator receives a reasonable forecast of wind power generation, then they can establish an operating plan to accommodate the forecast wind energy by using the following resources/tools: • Forecasting • The Energy Market Merit Order • Regulating Reserves • Wind Following Services • Wind Power Management

12. Challenges and Solutions CHALLENGES MOF SOLUTIONS Predictability of wind power Wind power forecasting rules and requirements Backup generation for wind power Energy Market, Regulating Reserves, Wind Following Wind variability, supply surplus, ramping events Wind power management, forecasting & OPPs Transmission development Credible forecasts of wind project development Wind interconnection projects Queue management Load Transmission and ancillary services Wind Facility Owners Forecasting and Power management Cost Allocation

13. Key MOF Conclusions • Wind is not fully dispatchable therefore: • Wind Must Forecast supply ‘offer’ (Must Offer = Must Forecast for wind generationWind Power forecasts will not set price - $0/price taker • Regulating Reserves and/or Load/Supply Following are Ancillary Services • therefore according to current Policy (TDP) and Regulation (TReg) costs will be allocated to load • level of reasonable procurement of additional ancillary services is less clear and will be monitored • Market participants are obligated to comply with dispatch instructions and directives from the system controller. Wind generators will meet this obligation by: • installing power management technology as a condition of service • complying with instruction from the system controller to limit output in the event the system cannot absorb all the forecasted or actual wind generation • As per TDP, “constrained down payments will not be paid to generators”

14. What’s Changed?Replacing Threshold with MOF • Industry acceptance of mitigating tools to manage load-supply balance with increasing supply variability • Wind responsibility for power management • Industry acceptance order of use of tools • Forecasting > Energy Market > Ancillary Services > Wind Power Management • Industry acceptance on cost allocation • Forecasting – wind generators • Ancillary Services – load • Power Management costs (operating & capital) – wind generators • We have made progress on forecasting and system operator tools

15. Next Steps in Wind Integration • Currently 497 MW operating on the grid today with; • No major operational issues & no increased ancillary services • Gaining experience with wind and learning from events • 545 MW anticipated by end of 2007 • 1400 MW can be accommodated with approved transmission upgrades • Continued strong interest in wind development in Alberta • Implement Market and Operational Framework over the next year or so

16. Technical Requirements for Power Management Integration Beyond 2000 MW Diversity? Implementing the Market and Operational Framework Wind Forecasting Interconnection Queue Management System Operator Tools Generation Scenario Development & Tx Planning Market & Operational Rules

17. Next – Implementation Plans • Introduce leader for each work activity who will speak to: • Focus/objective for work • Work approach & plan • If / how / when stakeholders participate • Progress to date • Stakeholder Input / Feedback (please hold comments and questions until all work leaders have presented, unless needed to clarify understanding) • Conclusion & Next Steps

18. Wind Integration Work Streams • Market & Operating Rules (Laura Letourneau) • Power Management (John Kehler) • Forecasting (Darren McCrank) • System Operator Tools (Ming Hu) • Interconnection (Fred Ritter) • Queue Management Practices • Standards for Interconnection (Power Management & Forecasting Requirement) • Generator Scenario Development Methodology (Jeff Nish) • Transmission Planning (Ata Rehman) • Diversity (John Kehler)

19. Market & OperationsRules & Procedures Laura Letourneau

20. Structure of the ISO Rules • Primarily the combination of three documents: • Market Participation Rules • Settlement System Code (Load Settlement) • Operating Policies & Procedures • Public document posted on the AESO web site “www.aeso.ca”

21. How are ISO Rules made? • Need identified and reviewed by applicable business area • Rule change analysis (add, modify, delete) • Initial proposal • Stakeholder consultation • Recommendation • Decision • Implementation The ISO Rules Change Process is a quarterly cycle and typically takes 4-5 months to complete. Implementation may be delayed, depending on complexity.

22. ISO Rule Change Process

23. MOF – Anticipated Rule Changes • Forecasting requirements • Frequency/timing • Accuracy/Compliance • Power Management procedures • Supply Surplus - $0 offer dispatch procedures • Other wind power management conditions & curtailment protocol • Ancillary Services • Refinement/improvements to Operating Reserve Market • Development of Supply Following Service • Other?

24. Approach/Timelines • AESO has well established processes for the development and approval of all rule changes (Market/OPP/Settlement) • These processes will be used for all rules developed to implement MOF • Stakeholders, therefore, have opportunity to provide input/feedback during the consultation stages • Timelines for changes are dependent on other work activities • Forecasting (interim-earliest mid-08; final-earliest Dec ‘08) • Power Management (earliest mid ’08) • Ancillary Services

25. Operating Reserves Market Redesign Proposal • Timing • Proposal will be circulated to industry in October. • Opportunities for changes to product on current NGX platform as first phased in step. Interim proposal could envision: • change of contract with NGX to address design issues • change of procurement to auction format • Decisions for Operating Reserve market will be made following normal consultation • In the interim, the AESO will continue to procure Operating Reserves to meet forecasts developed by the Operations Planning Group. • expect increase in levels as wind is added. 25

26. Operating Reserves Market Redesign Proposal • Current design overly complex for size • AESO forecasts operational need at least day ahead • AESO as single buyer • Price established at equilibrium between bid and offers • Misalignment with energy market • Proposal to align Operating Reserves (OR) with energy at T-2 • Dispatch OR offers from merit order instead or “pre-purchasing” • Changes to pricing • Moving Operating Reserves closer to real time allows for: • use of near real-time forecasts • Integration of the active and standby products – increasing market depth • Convergence and efficiencies of assets across energy and OR 26

27. Operational Overview John Kehler

28. Real-time system operation Supply-demand balancing seems simple at first - When demand changes, supply is dispatched up or down to match The trick is keeping up with changes to prevent large imbalances from occurring - So operators need additional information to help out Demand Supply

29. Supply-Demand Balancing InputWhat is Changing? How good is the load forecast today? What are the Interconnection schedules? What is the load forecast change? What is the ramp rate? What generators are still ramping from the last dispatch? How much energy is still to come? Is the merit order changing? How good is the wind power forecast today? What is the wind power forecast? What is the ramp rate? Net Change Ramp rate requirement

30. Supply-Demand BalancingDispatch Decision What is the ramp rate capability in the merit order over the next 10, 20, 30 minutes? What are the Regulating Reserve units doing? How much capacity to dispatch to get the required ramp rate? Do I need to dispatch more ancillary services? Will I need to activate any Wind Power Management procedures? Will I need to activate Supply Surplus / Shortfall procedures? Dispatch Decision

31. Repeat When Necessary

32. Wind Power Management John Kehler

33. Review of Wind Power Management and the Market and Operational Framework • “ In situations where the system cannot absorb all the forecasted or actual wind power generated, maintaining system security will call for wind power to be dispatched down, ramp rate limited or dispatched off” • “This may occur during the following conditions: • Forecast loss of wind and insufficient ancillary services or ramping services • Supply surplus – thermal units will not be dispatched below minimum stable operating limits • Insufficient ancillary services • Unforeseen wind conditions

34. Workgroups and Industry Representation for Wind Power Management • Work groups will implement the Market and Operational Framework for wind power management • Work groups will develop recommendations to put forth to industry and stakeholders for consultation • Three work groups are proposed primarily due to the different mix of participants required. • Work Group #1 - WPF technical requirements • AESO, manufacturers, technical staff from wind power developers with operational facilities, new wind developers • Work Group #2 - Supply Surplus protocol • AESO, Merchant generators, Industrial generators, Importers, Wind power developers from existing facilities, new wind power developers • Work Group #3 - Wind power management protocol • AESO, Wind power developers from existing facilities, new wind power developers, regulating reserve providers

35. Purpose of Workgroup #1 • Wind Power Facility technical requirements • Provide recommendations to the AESO on; • Technical specifications at WPFs for ramp rate limiting, power limiting and supplemental over frequency control • Technical specifications for WPF operators to activate / deactivate ramp rate limiting and power limiting from AESO dispatch systems • The recommendations are planned to be complete during early Q1 2008 and posted for industry feedback • The recommendations once approved by the AESO will be forward to the Standards group for implementation using existing consultation processes

36. Purpose of Workgroup #2 • Supply Surplus protocol • Provide recommendations to the AESO on a new protocol for out of market $0 offer dispatch • Recommendations will include considerations for generation curtailment from the merchant, industrial and wind generation when supply surplus conditions exist. • The recommendations are planned to be complete by Q1 2008 and posted for industry feedback • The recommendations once approved by the AESO will be forward to the OPP groups for implementation using existing consultation processes

37. Purpose of Workgroup #3 • Wind power management protocol • The purpose of the workgroup is to provide recommendations to the AESO to implement ramp and power limiting protocol for; • Forecast loss of wind and insufficient services • Insufficient ancillary services • Unforeseen wind conditions • Disturbances and emergency conditions • The recommendations are planned to be complete by Q1 2008 and posted for industry feedback • The recommendations once approved by the AESO will be forward to the OPP groups for implementation using existing consultation processes

38. Next Steps • Kickoff meeting will include all 3 work groups and proposed date is Wed. Nov 7 from 9:00 to 12:00 AM. • Industry or stakeholders seeking interested in participating on a work group or work groups please contact john.kehler@aeso.ca

39. Wind Power Forecasting “If the System Operator receives a reasonable forecast of wind power generation, then …” Darren McCrank

40. The Pilot Project Defining a Reasonable Forecast Purpose: • To evaluate different forecasting methods in order to find the most effective means to forecast wind power in Alberta. • To leverage the experience of other jurisdictions globally • To educate Alberta’s power industry, including the AESO, on wind power forecasting techniques and capabilities • To recommend wind power forecasting requirements to be implemented in Alberta

41. Trial three very different forecasting methods over a one year period: AWS Truewind (US) WEProg (Denmark) energy and meteo (Germany) 4 different geographic terrains / wind regimes in Alberta T-1 to T-48 hrs refreshed hourly 7 existing and 5 future facilities to represent geographic diversity and future expansion Data Collection by Phoenix Eng. (Calgary) – 1 met tower/site Independent analytical analysis from ORTECH (Canada) The Pilot Project Design Funded by AESO Alberta Energy Research Institute Alberta Department Of Energy

42. The Pilot Project Schedule • Feb 2007 - April 2007 • Data Collection, model training (using historical information) • April, 2007 • Forecast Delivery Began • Quarterly Reports • Sept 07, Nov 07, Feb 08 • Final Report • Draft End May 08 • Final End Jul 08

43. Wind Forecasting Work GroupEstablished in July 2006 • Implied task: Be prepared to complete any additional tasks assigned by the AESO • Additional tasks could include designing an interim method of forecasting until the pilot project is complete • This task could be triggered by operational issues or inefficient use of Ancillary Services • No change to current work group membership, meetings and timelines

44. September 6, 2007Day Ahead Forecasts (delivered 7am Sept 5)

45. The forecasts delivered at noon on Sept 6 Unforeseen Wind Condition

46. October 10, 2007Day Ahead Forecasts (delivered 7am Oct 9)

47. System Operator Tools Ming Hu

48. Purpose • Engineering tool • To design and test protocols, procedures before implementation into OPPs • Real-time system operation tool • To effectively manage: • The procedures in the real-time • complicated real-time system operation with Efficiency, Consistency and Transparency • Common basis for knowledge sharing, experience and continuous improvement

49. Status and Consultation • Status • Design and development started in Q4 2006 • Testing started July 2007 with System Operators • Several improvements based on operator feedback • Ready to help out the workstreams • Workgroup and Consultation • No external working groups due to the confidential nature of the tools and the data • The AESO will update progress and demonstrate tools when applicable

50. Architecture of the Tool • System Supply and Control • Energy Market Merit Order • Generator ramping characteristics • Regulating reserve merit order • Load Supply Following (new) • Wind Power Management (new) • System Change • Load forecast • Actual and forecast Interchange Schedules • Wind power forecast (new) • System Considerations • ATC Limits • Uncertainty Analysis (new) • System Status • What has been dispatched • Actual generator output • Tool • Assess the situation & risk of: • - System Ramping Capability • - Supply Shortfall issue • - Supply Surplus (Zero-offer) issue • - Minimum technical output issue • OTC violation issue • Energy Market Dispatch • Trigger Supply surplus procedure • Trigger Supply shortfall procedure • Trigger Additional AS procedure • Trigger WPM procedure