Anjali Sheffrin, Ph.D. Chief Economist & Director, Market Design & Product Development Integration of Wind Resources in CAISO Markets and Grid Operation APEx 2007 Program October 15-16, 2007

Anjali Sheffrin 2 Individual States take lead in fight against global warming “Today California will be a leader in the fight against global warming,” said Governor Schwarzenegger. (United Nations' World Environment Day conference in San Francisco, June 1, 2007)

Renewable Portfolio Standards

Anjali Sheffrin 4 CAISO Renewables Integration Program ISO Corporate Goal: Support the integration of renewable resources on the California power grid in support of the State of California’s policy regarding renewables. Project encompasses the integration of renewable resources into CAISO’s  Transmission planning  Markets, and  Grid Operations Objective is to support the State’s goal of 20% of customer load being served by renewable resources by the end of 2010 and 33% by 2020.

5 Current Level of Renewable Generation in California

6 20% Renewables

7 Large amounts of renewable generation are needed to meet state requirements.

8 Altamont Pass Solano County Tehachapi/ Mojave Desert San Gorgonio Pass California’s abundant wind resources have a key role to play. Pacheco Pass Lassen Shasta Salton Sea Imperial Valley

9 What are the Major Challenges of Integrating Intermittent Resources ? Barriers to Efficient Interconnection and Transmission Planning  Funding challenges for transmission to remote locations and existing transmission policies distinguishing reliability and economic upgrades Operating Issues  Frequency regulation, load following, and operating reserves;  Ramping problems; over generation control  Importance of forecasting of renewable energy; Application of WECC standards for wind generators

10 Removing Barriers to Efficient Interconnection Policies Problem: Current Interconnection Policies Creating a Barrier  Long standing FERC policy offers two approaches for financing transmission upgrades: Network transmission facilities rolled into Transmission Access Charge “Tie-line” facilities paid for by power plant owners CAISO proposed solution: Distinct new category of transmission serving multiple power plants in areas where the energy sources cannot be transported  Facilitate capturing economies of scale associated with renewable energy development  Promote overall development of diverse renewable resource opportunities Key elements of new interconnection policy for locationally constrained resource areas  Financing Mechanism Allows Appropriate Sizing Lines paid for by transmission owners  Risk of Stranded Costs Systematically Mitigated California Energy Commission designation as a significant resource area Multiple projects in the area CAISO must find the project to be cost-effective

11 Eligibility Criteria for Transmission to Locationally Constrained Resource Areas Must be non-network Must provide access to an area with significant potential for development of locationally constrained resources (i.e., renewables) as designated by the CEC Must be turned over to ISO control Transmission to serve multiple facilities Cannot exceed 15% of the sum total of the high-voltage network plant included in the Transmission Access Charge Must meet a commercial interest test - i.e. sufficient generator interest through Large Generator Interconnection Process

12 Removing Barriers to Effective Transmission Planning Problem: Planning for reliability upgrades only and economic upgrades to be market driven ISO proposed solution:  New transmission planning process for reliability and economic projects Regional planning with all transmission providers in California Established Transmission Economic Assessment Methodology (TEAM) as standard measure for establishing economic need for major transmission projects  Proactive transmission planning for future clusters of renewable generation Tehachapi Transmission Plan »Approved on January 24, 2007 »First use of clustering approach

13 Transmission Study Results The Tehachapi Transmission Plan is sound and there are no serious transient stability or voltage control problems Key conclusions  Power factor control is critical - New wind generators must meet WECC criteria for ±0.95 power factor control  Low Voltage Ride Through Standard – all new units must meet WECC LVRT Standard.  New wind generators should be Type 3 or Type 4 units  Existing Type 1 Wind Generators in Tehachapi area do not meet LVRT standards and will probably be lost in event of voltage collapse

14 Ramping issues Forecasted Hourly Ramps due to Additional Wind Generation In California, the wind generation energy production tends to be inversely correlated with the daily load curve. The wind energy production peaks during the night and falls off during the morning load pick up. The net result will be morning ramps of 2000 to 4000 MW per hour for 3 hours – a total of 6000 to 12,000 MW over 3 hours.

15 Wind Generation Output may Change Quickly Will Affect Ramp Rates, Regulation Requirements, Load Following, Etc.

16 Wind Generation Output may Peak During Off-peak Periods May Lead to Cycling of Base Load Generation

17 Operational challenges to incorporating the 20% RPS Target Increases the amount of regulation resources  Add 170 MW to 500 MW of regulation resources to accommodate rapid changes in wind and other variables. Amount required varies with the season (winter, spring, summer, fall) Estimated cost of additional regulation is $30 million annually Ramping requirement increases  Fast ramping increases by ±15 MW/min to ±25MW/min  Regulation by hydro units will be most important Supplemental energy dispatches will increase  Morning ramp up will increase by 1000 to 2000 MW per hour  Evening ramp down will increase by 1000 to 1800 MW per hour Potential Over Generation problems will increase for light load periods  Pro rata cuts of up to 800 MW of wind generation production may be required for an estimated 100 hours per year

18 Enhanced Resource Adequacy requirements and market prices will drive integration of renewables Generation Portfolio Storage Demand Response Resources Required for Renewables Integration Quick Start Units Fast Ramping Wider Operating Range Regulation capability Shift Energy from off-peak to on-peak Mitigate Over Generation Voltage Support Regulation capability Price sensitive load Responsive to ISO dispatches Frequency Responsive Responsive to Wind Generation Production

19 How to make the 20% RPS Target work Build the planned transmission facilities for  Tehachapi  Sunrise Power Link Require all new wind generators to be Type 3 or Type 4 that meet Low Voltage Ride Through (LVRT) Standards Add SVC’s for dynamic VAR regulation Change Resource Adequacy requirements for generation facilities for more fast start units, increased ramping, and larger operating ranges. Integrate wind energy production with changes in hydro dispatch for meet the need for rapid energy ramps Increase storage options – 3 rd pump operation at Helms, Leaps, Compressed Air Storage, H.S. Flywheels for regulation and Hydrogen Storage. Increase Demand Response options

20 Conclusions The increasing cost of natural gas for fossil fired plants and declining cost of wind generation makes wind generation an attractive source of energy. We need new methods to control the wind generation ramps if we are going to accommodate 6000 to 8000 MWs of wind generation. New technology at the turbines site can provide for response for frequency control. The regulation and load following burden to accommodate wind generation is not trivial but can be managed with good forecasting techniques and mix of fast ramping generation resources.