Transmission Barriers to Transmission Barriers to Wind Energy in the West Wind Energy in the West

Presented by:

Pamela JacklinStoel Rives LLP

POWER-GEN Renewable Energy & Fuels 2007 ConferenceMandalay Bay Convention Center - Las Vegas, Nevada

March 6-8, 2007

What are the Transmission Barriers to What are the Transmission Barriers to Wind Energy in the West?Wind Energy in the West?

Five Key Barriers

• Lack of investment in transmission over the last 20 or more years

• Inefficient Use of Available Transmission

• Ownership Structures and Balkanization of the Transmission System

• Lack of understanding or experience with wind resource

• Transmission Policies and Commercial Practices that do not facilitate increased wind penetration

Poorly Understood TransmissionPoorly Understood TransmissionBarriers to Wind Energy Barriers to Wind Energy

Lack of understanding or experience with wind resource by engineers, operators and regulators

• Wind doesn’t behave like a typical capacity or energy resource

• The hydro-thermal system in the West has been designed to integrate base load thermal generation and once-plentiful hydro power

• Wind integration requires new approaches and imposes new costs

Poorly Understood TransmissionPoorly Understood TransmissionBarriers to Wind Energy Barriers to Wind Energy

Transmission Policies and Commercial Practices that do not facilitate increased wind penetration

• Transmission Planning Methodologies driven by capacity needs

• Transmission Financing Models that fail to consider Wind’s value proposition

• Generator Interconnection policies or rules that fail to take into account the nature of wind generation or generators

• Commercial Practices that penalize wind unnecessarily

Transmission Barriers to Wind Energy Transmission Barriers to Wind Energy in the West—What’s Being Donein the West—What’s Being Done

There are Activities on Many Fronts

• EPAct 2005 and FERC Implementation

• Western Governors-Providing a Policy Framework

• State Initiatives

• CAISO

• Northwest and Southwest Initiatives

• Transco and other Tie Line Proposals

Transmission Barriers-- What’s Being Done Transmission Barriers-- What’s Being Done to Improve Understanding & Planningto Improve Understanding & Planning

• More meaningful efforts to bring wind industry and transmission operators together to address issues

• FERC OATT Reform on planning

• Models for Transmission Studies (SSG-WI, RMATS, Frontier)

• Northwest Wind Integration Forum— call for new planning methodology to evaluate cost-effective transmission for wind

• Transmission Initiatives focused on Wind Rich Areas

Transmission Barriers-- What’s Being Transmission Barriers-- What’s Being Done to Encourage InvestmentDone to Encourage Investment

• FERC Pricing Reform--Incentive-based rate treatments

• National Electric Transmission Corridors and FERC siting authority

• FERC Standardization of the Generator Interconnection process

• California Examples– Transmission Cost Recovery under Section 399.25, Cal. Pub. Utility Code– CAISO proposal to FERC for Gen-Tie Recovery for Location-Constrained

Generation

Transmission Barriers-- What’s Being Done Transmission Barriers-- What’s Being Done to Improve Efficient Use of Transmissionto Improve Efficient Use of Transmission

• FERC’s Focus on Improvements in Organized RTO Markets Continues

• FERC OATT Reform

– Energy Imbalance Penalty—Carve out for Wind

– New Transmission Service

• Conditional Firm

• Redispatch

• Small Steps in the Northwest and Southwest

– Northern Tier ACE Diversity Exchange

– WestConnect and WestTrans Common OASIS format

Transmission Barriers to Wind in the Transmission Barriers to Wind in the West-- What’s Left to Do?West-- What’s Left to Do?

• Continued Efforts to Create More Efficient Use of Transmission Capacity

• Develop New Approaches to Cost-Effective Transmission Expansion

• Find Creative Solutions to Transmission Issues that Impede Project Financing

Transmission Barriers to Wind in the Transmission Barriers to Wind in the West-- What’s Left to Do?West-- What’s Left to Do?

Continued Efforts to Create More Efficient Use of Transmission Capacity

• Develop effective Redispatch Service

• Consolidate Control Areas

• Develop Ancillary Services markets

• Reduce Rate Pancaking

Transmission Barriers to Wind in the Transmission Barriers to Wind in the West-- What’s Left to Do?West-- What’s Left to Do?

Transmission Expansion

• Improve regional resource planning

• Keep the focus on efforts to streamline the siting process

• Find better ways to allocate costs for tie lines in areas outside the CAISO

Moving Forward: Always Remember Moving Forward: Always Remember Wind’s Value PropositionWind’s Value PropositionWind is primarily an energy resource, but a variable one with

unique benefits:

The fundamental value of Wind Power to a utility portfolio is its ability to:

• Displace fossil fuel consumption• Limit exposure to volatile fossil fuel prices• Hedge against possible greenhouse gas control costs • Match resource additions to timing and scale of load

growth

For More Information, Please Contact:For More Information, Please Contact:

Stoel Rives LLP900 SW Fifth Avenue, Suite 2600

Portland, Oregon 97204

www.stoel.com

Pamela Jacklin (direct: 503.294.9406)

Marcus Wood (direct: 503.294.9434)

Steve Hall (direct: 503.294.9625)

Jennifer Martin (direct: 503.294.9852)

Seth Hilton (direct: 415.617.8943)

Kevin Fox (direct: 415.617.8904)