Competitive Renewable Energy Zones: Texas Solution to the Poultry Dilemma? Dan Woodfin Manager, Regional Planning 03/16/2007

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1 Competitive Renewable Energy Zones: Texas Solution to the Poultry Dilemma? Dan Woodfin Manager, Regional Planning 03/16/2007 HEPG - 03/16/2007

2 Transmission Policy Background ERCOT-wide postage-stamp transmission rate, paid by load Generators post security for new interconnection facilities Utilities are responsible for transmission upgrades Transmission upgrades (including interconnectionrelated) are ultimately rolled into regional rate 2 HEPG - 03/16/2007

3 Texas Renewable Energy Program 1999 legislation established Renewable Portfolio Standard Renewable energy goal of 2,000 MW of new renewables by 2009 Renewable Energy Credit (REC) program to facilitate liquidity and tracking Load serving entities must buy sufficient RECs to meet their share of the RPS requirement 3 HEPG - 03/16/2007

4 Current Wind Development ~3000MW installed capacity of wind generation in-service ~1700MW additional wind development with signed interconnection agreements Additional bulk transmission lines will be required for > ~5000MW ~21,000 MW additional wind development in interconnection study process 4 HEPG - 03/16/2007

5 ERCOT Load ~62,000 MW summer peak demand Majority of load is concentrated in eastern half of state Dallas Austin Houston San Antonio HEPG - 03/16/2007

6 Potential Wind Resource Nearly 100,000 MW above 35% capacity factor (CF) Concentrated in western half of state Approximate west to east transfer capacity 3200MW Approximate wind capacity (in MW) potential in each area is indicated by pink bars 6 HEPG - 03/16/2007

7 New Transmission Required miles miles Existing system from west Texas is significantly congested Significant distances and costs associated with adding bulk transmission 7 HEPG - 03/16/2007

8 Chickens or Eggs TSPs need assurance that transmission would be used To develop transmission project and file CCN, TSPs want interconnection agreements, backed by security from wind developer Wind developers were unwilling to commit security for 4-7 years needed to complete new transmission 8 HEPG - 03/16/2007

9 TX Senate Bill 20 (2005) Increased renewable energy goal 5,880 MW in ,000 MW target in 2025 Set up process to allow PUCT to preapprove transmission for renewables through the designation of Competitive Renewable Energy Zones (CREZs) 9 HEPG - 03/16/2007

10 CREZ Determination PUCT, after consultation with ERCOT and SPP, shall: Designate CREZs in areas with sufficient renewable resource potential Consider level of financial commitment by developers Designate a plan for transmission to deliver resource to consumers 10 HEPG - 03/16/2007

11 ERCOT CREZ Study ERCOT led study during 2006 to support PUCT determination Hired wind modeling consultant to identify best wind resource sites and provide expected characteristics of wind generation Developed transmission plans through open stakeholder process to accommodate many of the potential zones in various combinations Filed results with PUCT in December HEPG - 03/16/2007

12 ERCOT Study Results Scenario New Wind Capacity (MW) Transmission Capital Cost ($M) Annual System Production Cost Savings ($M/Yr) 12 HEPG - 03/16/2007 Annual System Generator Revenue Reductions ($M/Yr) New Wind Average Capacity Factor (%) New Wind Generator Capital Cost ($M) Average New Wind Generator Revenue ($/MWh) Annual System Production Cost Savings per kw New Wind ($/kw-yr) Annual System Generator Revenue Reductions per kw New Wind ($/kw-yr) Transmission Capital Cost per kw New Wind ($/kw) Ratio of All Investment Costs to Production Cost Savings Coastal Projects A B C D E C/A D/A B/A (E+B)/C Coastal Level 1 1, , Coastal Level 2 2, , Coastal Level 3 3, , Central Western Texas Projects Level 1 2, , Level 2 3, , Level 3 3,800 1, , McCamey Projects Level 1 1, , Level 2 3, , , Panhandle Projects Level Level 2 1, , Level 3 2, , Level 4 4,600 1, , , Combination Projects Central Level 2 with New Wind in Central (2,000 MW) and McCamey (1,250 MW) 3, , Central Level 3 with New Wind in Central (3,000 MW) and McCamey (1,000 MW) 4,000 1, , Central Level 2 and Coastal Level 2 with New Wind in Central (2,000 MW), McCamey (1,250 MW) and Coastal (2,000 MW) 5, , , New Wind Capacity for each scenario is the level of new installed wind generation that results in ~2% overall wind energy curtailment Transmission Capital Cost for each scenario does not include the cost of projects that may be needed to mitigate the impact of the added CREZ generation on existing resources (as described in Section IV (I) of the report).

13 PUCT CREZ Case Initiated in January with 180 day calendar Parties nominated CREZs and related lines for consideration Most proposed CREZs based on ERCOT study Some proposed transmission plans are significantly different PUCT will select CREZs and designate transmission, considering: Renewable resource and suitable land Financial commitments of developers Other factors, including transmission costs and benefits of renewable energy 13 HEPG - 03/16/2007

14 Financial Commitments PUCT will consider level of financial commitment by developers toward different CREZs, including: Existing renewable development Executed or pending interconnection agreements Leases for land in zone Commitment of dollars/mw through letters of credit Interconnection studies and other factors Non-utility commitment to build or fund transmission 14 HEPG - 03/16/2007

15 CREZ Selection The question seems to be WHICH PUCT rule gives PUCT significant latitude on criteria for selecting CREZs and associated transmission Diverse options Many competing influences Not IF It appears that some amount of new bulk transmission to wind zones will be initiated 15 HEPG - 03/16/2007