Helping to keep the lights on, businesses running and communities strong® Preliminary Wisconsin Public Utility Institute ENERGY UTILITY BASICS Systems within the Electric Utility Business Generation – Transmission – Distribution - Consumption RTOs and Markets Ken Copp October 2, 2012

SOURCE Generating Plant CONSUMER Transmission System Distribution System

Wisconsin Public Utility Institute Basics … Generation is the production of electric energy in a form which can be transported to be used elsewhere (near or far) by people.

Wisconsin Public Utility Institute Generation … Energy Conversion Electric energy for human use is converted from another form Batteries produce electricity from a reaction between different chemicals Solar cells produce electricity by changing light energy from the sun into electricity

Wisconsin Public Utility Institute Generation … Energy Conversion Prime mover generators use machines which rotate coils of wire through magnetic fields to convert mechanical energy to electrical energy Fuel cells convert chemical energy directly to electricity, like batteries with a constant supply of new chemicals to react with each other

Wisconsin Public Utility Institute Generation … Prime mover generators include: –Wind turbines –Water turbines –Steam turbines –Gas (combustion) turbines –Internal combustion engines Prime mover generators provide most of the electricity we use

Wisconsin Public Utility Institute Electricity … Electricity is a physical phenomenon in which an electric field exerts a physical force on charged particles of matter, causing them to move when they are not somehow constrained Lightning is an unconstrained example of electricity; an electric field between cloud and ground causes charged particles to move in great amounts and at high speed.

Wisconsin Public Utility Institute Electricity … An electric power system provides a controlled, constrained pathway for electricity to be safely generated, transmitted over large or small distances, and utilized by consumers The measure of electric field strength in an electric power system is the volt (V) The measure of electric current – the flow of charged particles within the system – is the ampere (A)

Wisconsin Public Utility Institute Electricity … Power is a measure of energy transfer Electric power is measured in watts One ampere flowing under a voltage of one volt represents one watt (W); a thousand watts is a kilowatt The energy represented by one watt flowing for one hour is one watt-hour; the typical unit used in the electric industry is thousands of watt-hours, or “kilowatt-hours”

Wisconsin Public Utility Institute Heroes … Electro-physicists and Electrical Engineers celebrate their heroes by naming physical quantities after them –Ampere: Andre-Marie Ampere developed the theory of electrodynamics/electromagnetism (France) –Volt: Count Allesandro Volta invented the electrochemical pile[(battery] (Italy) –Watt: James Watt developed the condensing steam engine (Britain)

Pleasant Prairie Power Plant (Coal) Pleasant Prairie Power Plant (Coal)

Kewaunee Nuclear Plant

Port Washington (Combined Cycle Natural Gas) Port Washington (Combined Cycle Natural Gas)

Big Q Generating Plant (Hydro) Big Q Generating Plant (Hydro)

Wisconsin Public Utility Institute Basics … Transmission is the movement of electric energy from a source (generator) location to a location where the energy can be distributed to multiple end-users (customers).

Wisconsin Public Utility Institute Basics … Distribution is the movement of electric energy from central delivery points to the points of end-use consumption – where people convert the electric energy to other forms

Wisconsin Public Utility Institute Basics … Network or Radial?

Wisconsin Public Utility Institute Basics … Loop Flows, Counter Flows Gen 1 Gen 2 Gen 3 Load

Wisconsin Public Utility Institute Basics … Physics and Economics –Locational Market Prices (LMP) Gen 1 Gen 2 Gen 3 Load GEN #1 $30/MWH GEN #2 $20/MWH GEN#3 $100/MWH

Lattice 345kV Dbl Cir

Steel pole 138 kV double circuit

138 kV H frame structure Shield wires intercept lightning strikes Phase conductors; always 3 per circuit Aerial patrol structure identification number (yellow tag)

Wood Pole 69kV & Dist Davit Arm

Typical 138 kV suspension insulators Suspension insulator Vibration damper

138 kV vertical break disconnect switch in the closed position. Disconnects are usually manually operated and used to isolate pieces of equipment from the transmission system for visual verification that a piece of equipment is safe to work on. Disconnect switches

138 kV vertical break disconnect switch in the open position. Disconnects are usually manually operated and used to isolate pieces of equipment from the transmission system for visual verification that a piece of equipment is safe to work on. Disconnect switches

345 kV Oil Circuit Breaker. Three tank design where circuit interruption for each phase is in a separate tank.

345 kV SF6 gas, live tank with ganged operation. There is only one operator for the three poles, so they all operate together. Circuit interruption takes place in the large tank on top of the porcelain column. This tank is at system voltage, hence the phrase live tank. External-mounted, free-standing CTs (current transformers) are used for relaying. Live tank Current transformer

345 kV/138 kV TransformersSUBSTATION

Pole with Transformer

Wisconsin Public Utility Institute Basics … [Consumption] is the conversion of electric energy to a different, useful form such as heat, light, radio waves, or mechanical work, by end-users for their own benefit

Wisconsin Public Utility Institute [Consumption] … The electricity customer drives everything The pattern of combined electricity use of all the customers connected to a system determines the amount and types of generators, transmission lines and distribution systems required to reliably serve those customers Customer behavior interacts with utility planning and programs to influence investment and cost of electric service What happens when you flip the switch?

Wisconsin Public Utility Institute Operations … When you flip the switch, your usage impacts the system. All generators and motors across the interconnected transmission and distribution systems slow down imperceptibly Their control systems react to restore the frequency of rotation to 60 Hertz or cycles per second

Wisconsin Public Utility Institute Markets Roles of Systems in Markets –Generators compete for customers –Transmission connects customer areas to distant generation options Federal Tariffs (FERC) govern access to transmission service and the terms of payment for use of the transmission system –Distribution is local and not involved in markets Very important for reliability

Wisconsin Public Utility Institute Types of Markets Energy Markets (8760 Hours/Year) –Day Ahead and Real Time Wholesale Retail Capacity Markets (1 Hour/Year) –Look 1 to 10 years into the future Ancillary Services Markets –Manage the Reserves needed for reliability

Wisconsin Public Utility Institute Types of Markets Energy Markets –Wholesale Utilities shop for energy for their customers –Retail Customers shop directly for their own energy Federal Regulators (FERC) governs the wholesale market State Regulators determine whether customers have access to a “Retail Market”

Wisconsin Public Utility Institute Types of Markets Day 1 Energy Markets –Day 1 Markets involve “Bi-lateral” contracts between individual suppliers and users Day 2 Energy Markets –A Market Operator creates a clearing house where load and generation can trade –Generation “Offers” energy –Load Serving Entities “Bid” their load –The market automatically matches buyers and sellers

Wisconsin Public Utility Institute Types of Markets Day 1 (Bilateral Markets) capture about 97% of the value in matching buyers and sellers of energy Day 2 Market systems are complex and costly Day 2 Markets cover very large areas to capture the remaining value and to offset their costs –MISO covers 13 states and one Canadian Province –MISO Day 2 Market costs $100 Million per year

MISO Day 2 Market

MISO Day 2 Market

MISO Real Time Market LMP Differential Example 52

Wisconsin Public Utility Institute Types of Markets Capacity Markets –Cover the adequacy of energy on the highest use hour of the year –Drive the need to build new resources Resources can be new generators Resources can be “Demand Response” loads –Capacity includes the generation to cover load and reserves to assure reliable operation –PJM has a capacity market, MISO does not.

Wisconsin Public Utility Institute Types of Markets Ancillary Services Markets –Create a market to manage the cost of “Operating Reserves” –MISO ASM set to begin in 2009

Wisconsin Public Utility Institute Focus on Markets Where are we going? –Demand Response –“Smart Grid” technologies –Global Warming Policy initiatives Wind Solar Storage –Record Low Natural Gas Prices Fracking

Questions and Answers