Dale Osborn

ISU Tour

MISO

July 18,2011

1-14-20111

• Oversee the flow of power over the high voltage wholesale transmission system in all or part of 13 states

• Provide independent wholesale transmission system access• Manage power congestion • Reliability coordination• Regional transmission planning• Operate day-ahead and real-time energy markets• Independent market monitor • Set reserve margin requirements

MISO Services

MISO Wind

• MISO has about a 800,000 MW potential for wind generation development- Eastern Interconnection Load is 960,000 MW– Supply greater than demand by a factor of 40– What can be done?

• MISO has 9,400 MW of Wind Generation Connected– Almost all wind has a purchaser- Preferred Provider Agreement

as part of a Renewable Portfolio Standard or goal– Prices in MISO too low for a merchant plant– Gas prices are too low to sell surplus energy except over

existing transmission– Transmission to PJM( east) and others is limited

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1-14-20115

Like on highways, when the wires are too small there is congestion which raise prices

Whose Wind Generation Is Chosen?

• Wind Generation cost about the same-$1,800,000/MW• Wind energy depends on location

– 40% Capacity factor-orange-$80/MWH no tax credits

– 30% Capacity factor-yellow-$100/MWH no tax credits

– The difference could be use to build transmission to deliver wind competitively for an RFP

– 200 miles is roughly the competitive distance with 345 kV transmission- 500 MW to load line

– 1200 miles is the maximum possible today with 800 kV HVDC with 19,000 MW required to load a three line system that would not affect the underlying system.

– MISO can take about a 1500 MW contingency for resource loss, single HVDC lines limited to 1500 MW to be confirmed with a study

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Wind Generation RFPCompetitive Zone30-40%Capacity Factor Change

345 kV Chicago500 MW

345 kVMinneapolis500 MW

800 kV HVDCNYC19,000 MW

Set circle center on wind location to determine theMarketing Zone

Factors Affecting Wind Energy Marketing

• Wind energy is a social choice not an economical choice in most parts of the U.S.- RPS or goals determine the amount of wind being installed

• The price of natural gas determines the competitive level– Present price $4/MBTU- Prices level across U.S.– Price two years ago $8-14/MBTU-Prices high in the east– Price difference between regions pay for transmission

• Economic Development and Jobs keep wind supplies local– Present values of $856,000 per MW of wind generation for Economic

Development cannot be offset by the better performance of with the transmission cost

• Pancaked transmission costs exclude areas from competition- ND, SD, RTO borders except MISO-PJM

–

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1-14-201199

New Transmission Creates Jobs• U of Minnesota Duluth Bureau of Business

and Economic Research studied the economic impact of 700 miles of transmission Lines in MN, ND, SD, WI CAPX2020 from 2010 to 2015 at cost of $2B:– $3.4 Billion in sales generated from construction related activity– $1.6 Billion in construction related wages– $149 million in local, state and federal tax revenue

– $1.93 returned to economy for each dollar spent on project– Nearly 8,000 jobs in peak construction year (2013) including

construction and indirect jobs

• Full study at www.capx2020.com

For what levels of wind generation are there MISO plans?

• The Renewable Portfolio Standard for the year 2025 is 23,000 MW

• The Generation Interconnection Queue is 50,000 MW

• The Regional Generation Outlet Study(RGOS) established– Renewable Energy Zones to locate 23,000 MW of wind gen

• Midwest Governors Association

• State Regulators

• Stake Holders

– A overall transmission plan to deliver 23,000 MW of wind energy– Economic information about the plan in the 2010 MTEP

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1-14-2011DRAFT #9 "Master" 11

All Energy Zones

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Transmission and Substation Costs per Mw-mile by Transmission Voltage And Type of Construction

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

345 kVSteel

WoodedAreas

2-345kkVon Steel

500 kV 765 kV 765 HSIL 800 kV GIL 1200 mile-800kVHVDC

$/M

w-M

ile

Lowest cost options

600 1200 1300 2600 5400 5300 6400

345 kV - 765 kv Delivery Capacitywith a 5% voltage drop

on a losseles line

0

0.5

1

1.5

2

2.5

3

3.5

0 50 100 150 200 250 300 350

Miles

PU

SIL

16

Power Transfer Breakover by Voltage

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

200

1,20

0

2,20

0

3,20

0

4,20

0

5,20

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6,20

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7,20

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00

11,2

00

12,2

00

13,2

00Power Transfer MW

Co

st/M

ile

345 kV AC+600 Mw

1-765kV AC

1-800 kV HVDC

345 kV AC+1000 Mw

Average LMPs for Base, 765kv Overlay, and WIND

$30

$35

$40

$45

$50

$55

ON

HY

NY

PP

SU

NC

VP

PJM

EV

AC

AR

WP

SC

PJM

SM

IDW

WE

PL

KP

JMW

CE

CS

TH

RN

DE

TE

D FE

LB

WL

SO

LA

ES

PP

WA

EP

SO

LA

WD

P&

LS

AS

KC

GE

LG

&E

EM

DE

DQ

ED

PC

AR

LM

HE

CIP

&L

PS

IT

VA

SP

CIU

TW

RI

NIP

SB

RE

CM

GE

GR

ES

MM

PH

UC

WP

LS

IGE

WP

PI

NS

PM

PC

AS

EC

IND

NA

LW

ST

CO

ED

KC

PL

MIP

UW

PS

KA

CY

WE

PM

PW

OT

PM

PL

MID

AM

CIL

EE

IN

WP

SIL

PC

SIP

CM

HS

PC

IPS

WA

BN

IS

PR

ILW

AB

DA

UE

PM

DU

NP

PD

LE

SO

PP

D

Avg LMP - 765kV Overlay Avg LMP - Base Case Avg LMP - WIND

Interface AC Flows without an OverlayInterface Flows with an Overlayincluding HVDC

Loop Flow Patterns

Without Overlay

With AC Overlay

With HVDC Overlay

PR ICE

Distance

GenRevenueDifference

LoadSavings

HVDC Is Easier To Regulate Than AC

• Users are identifiable

• Terminals look like generators( supply-injection) and loads( receipt-withdrawal)

• Existing AC system processes can be used to allocate AC costs

• DC costs linked to the schedule and who scheduled

HVDC Easier to Operate than AC for Long Distance Power Transfers

• HVDC can be loaded to its limit– Cannot be overloaded due to contingency- easier to operate-

always know what is available for power transfer– AC power delivery may be decreased due to contingencies in

intervening systems- power transfer capabilities can change hourly

– HVDC only dependent on AC near terminals

HVDC Can Do Things That AC Cannot

• HVDC can skip over congested areas without having to pay a toll to fix the transmission system in intervening areas that are not involved in the market transactions

• HVDC can inject energy strategically

MISO Wind Variability Management

• Wind rich areas do not have much load or generation to manage the variability of the wind- problem

• Managing wind variability at presently projected levels is a political and organizational problem not a technical problem- cooperation solves a good part of the problem

• 5-6% energy curtailment of wind• Solutions

– MISO is one area of about 100,000 MW– MISO has a 5 minute dispatch period

• Less error can occur if adjustments are made every 5 minutes than every hour

• Total wind output cannot change too much in 5 minutes

– Geographic diversity of wind and load

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Wind Diversity

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Calculated from data provided though the DOE Eastern Wind Integration and Transmission Study

Study System ELCC Scenarios (1 - 4)Existing & Overlay Transmission Tie Limits - ELCC (%) {Shaded Area shows Increased ELCC of Overlay}

27.7% 27.3%26.6%

25.4%

28.0% 28.1%

24.8%

27.0%

32.8%

29.8%

28.3%

24.1%

20.4%

22.7%

18.8%

16.0%

20.6%

26.4%

24.2%

20.2%

24.6%

30.5%

23.8%

19.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Scenario-1 System Scenario-2 System Scenario-3 System Scenario-4 System

2004 Profile 2005 Profile 2006 Profile

Existing

OverlayTie

MISO Wind Diversity

• Capacity credit in 2009 8%

• Capacity credit in 2011 12%

• Difference due to wind in Michigan, Indiana and Illinois in addition to Buffalo Ridge in southwest Minnesota

• Adding more generation in an area with significant wind generation decreases the capacity credit as the probability of loss of a larger amount of generation is increased.

Transmission and Wind Diversity

• It may be possible to build HVDC transmission of about 1500 MW in capacity to exchange the diversity of wind

• Possibly paid for by– Reduction in generation capacity and fuel needed to manage

wind generation– Improvement in the capacity credit for wind that reduces the

need for other types of generation– Reduction in load on peak compared to the sum of two areas a

long distance apart– Savings in the operational cost of other generation due to cycling

that causes thermal stresses and increased maintenance

• HVDC could span the East-West ties and make wind more manageable in the west also

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Inputs

• Economic development costs- U of Illinois State– $650,000 per MW for wind for construction– $38,000/yr for maintenance

• HVDC line, terminal, ac substation costs

• CT Generation costs, O&M, heat rates

• Wind Generation costs

• EWITS Wind Diversity factors for variability and capacity credit

• Annual carrying charge 15%- annual values

• Discount factor-8%- used for present value

First Year Benefit/Cost Scenario

20.2 Wind Economic Value including Economic Development values

1.8 Without Wind Economic Development

3.1

Without Wind Economic Development but with carbon dioxide elimination credit supported by transmission

15.8 With transmission economic development.

Why Economic DevelopmentShould Be Includedin Analysis

Governors and legislatures have recognized the value of economic development for wind generation, but the regulation function has not used it. Projects could be justified and carbon dioxide production reduced if economic development were allowed.

Price and Quantity of Sources and Sinks Determine Transmission Requirements

West to East Interface Flows OH-PA

0

5000

10000

15000

20000

25000

0 720 1440 2160 2880 3600 4320 5040 5760 6480 7200 7920 8640

Hour of the Year

MW

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Transmission Overlay Design WorkshopExample Interface Duration CurveInterface Flow

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

3500

1

245

489

733

977

1221

1465

1709

1953

2197

2441

2685

2929

3173

3417

3661

3905

4149

4393

4637

4881

5125

5369

5613

5857

6101

6345

6589

6833

7077

7321

7565

7809

8053

8297

8541

Hours

MW

Flo

w

WAPA-MINN

Transmission Capacity designed to deliver 80% of desired energy flow

30%20%StrongWest

20%Distributed

20%StrongOffshore

MostEconomical

+ RPS

What Can Be Done with the Surplus

• Reduce the generation– Paying for the generation but not fuel– Must have transmission to deliver renewable energy to the load. The

system was designed to deliver from the fuel generation that most likely in another location.

• Sell the surplus for a profit– Profit helps reduce the generation payments– Need to be able to deliver energy to the market- pay for transmission-need

above $6/MBTU to pay for transmission in the energy market, other products may allow justification of transmission with lower gas prices.

– Need access to the markets- need a seller and a buyer pair

• Store the energy– Use surplus off peak capacity to drive a CAES plant with a 50% capacity

factor- would work in the west today– Manitoba offers a way to “store” energy, need transmission in ND,SD

Questions

• Dale Osborn

• Principle Advisor

• Regulatory and Economic Studies

• Email: dosborn@misoenergy.org

• Phone:651-632-8471

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