Bill Thomas provided an update on the impact and process evaluations of NWE’s 2007-2011 electricity, demand-side, natural gas, and Universal System Benefits demand-side-management (DSM) programs. Renewable energy programs that result in energy savings are also included in the evaluations. As discussed previously with the ETAC, NWE selected two contractors to conduct the evaluation, SBW Consulting and Research into Action. The contractors have been working for one year. The contract tasks proved to be larger and more complicated than the contractor anticipated because of the number and scope of the NWE demand-side resource programs. The contractors missed their deadlines for providing the draft and final report on the evaluations. The final report will be provided to NWE on January 11, 2013. NWE intends to have the contractors provide their results to the ETAC at its January 2013 meeting.
In reviewing early versions of the contractors’ draft report, NWE staff found problems with the spread sheet calculation of program costs, the calculation of life cycle costs, the allocation of costs to specific programs, and the application of the total resource cost test. For example, some appliance costs in the cost effectiveness calculation included the total appliance cost rather than the cost above what appliance efficiency codes require. NWE has had to educate consultant analysts about the cost allocations. NWE has not sought to challenge the consultants’ findings; it has sought to understand the consultants’ methodologies and ensure that they are correctly applied to NWE program data.
Some of the consultants’ findings are interesting:
DSM costs - DSM measure costs continue to be low compared to supply-side electricity source costs.
Compact florescent lighting (CFL) burn hours - The burn hours for CFLs in homes in NWE service territory have decreased to 2 hours per day from the 3.7 hours per day determined in the last program evaluation in 2007. The 2012 burn hours were measured using data logging. This result is not unexpected because customers are now installing CFLs in lower use lighting applications.
NWE weatherization events - For the last five years, NWE has given away weatherization kits at weatherization events held in communities in its service territories. The consultants’ evaluation determined the savings realization from these events to be low because people are not installing the weatherization measures. Since the events have now reached about 50% of its service territory population, the company faces the question of whether to continue them.
Process evaluation - The most cost effective method for contacting customers about their use of NWE DSM programs is the telephone survey. Customers, however, were less willing this year to participate in telephone surveys than during the 2007 DSM program evaluation.
Answer - This is a good question to ask the consultants at the January meeting. Surveying by computer and email would sub-stratify the sampling because not all customers have computers or use email.
Question - Are the costs of lighting using CFLs and light-emitting diodes (LEDs) crossing?
Answer - LED lights are cool, safe, and long-lived, and their cost is dropping. My guess is that LEDs may be cost competitive with CFLs in about two years. However, the incremental savings from the switch from CFLs to LEDs will be significantly less than from incandescent lighting to CFLs. We see nothing on the technology horizon beyond LEDs. Two disadvantages of LEDs are that people have concerns about the color of light they produce, and they require rare earth phosphors, 90% of the supply of which is controlled by China.
2012 Renewable Energy Production and RPS Compliance Status
Dave Fine and Todd Guldseth reported on these topics.
Judith Gap, Gordon Butte, and Spion Kop Production - The production from these three projects is summarized in the handout included below in Appendix 1.
Question - Energy production at Judith Gap during June was significantly higher this year than past year averages. Was this due to weather or something about the project?
Answer - The higher production was due to weather which produced more wind. Maintenance at this project was performed as normal during July and August, the low wind months. It is interesting to note that the Gordon Butte project outperformed Judith Gap during almost all months and for the year as a whole. This may be due to lower turbulence at the Gordon Butte site. Both the Judith Gap and Gordon Butte projects have capacity factors higher than typical wind projects in the northwest. Both projects use GE turbines which have a higher than usual Ride Through Capability so the machines need not shut down as often with high winds.
Spion Kop Status - The Spion Kop project went into NWE’s rate base on December 1, 2012. Ownership of the project transferred to NWE on November 15. The project will be managed by Jim Williams and Dusty Rhodes with the NWE Generation Group. GE will operate the project under a 10-year full service agreement (FSA) with NWE. The FSA covers each wind generator at the project from the bolts which hold the tower to the foundation upward including the turbine. GE has five people at Spion Kop, a site manager and four technicians.
RPS Compliance Status - Dave Fine provided a handout summarizing NWE’s past and projected compliance with the Montana Renewable Portfolio Standards (RPS). The handout in included below in Appendix 2. The numbers reported for 2009-2011 are actual production and numbers for 2012-2030 are projections. Projections for Judith Gap are based on the average of the past years of production. NWE will get renewable energy credits (RECs) for all energy produced by the Spion Kop project after commercial operation commences. The Musselshell and Musselshell 2 projects are on schedule; energy delivery is anticipated to begin about Christmas day and commercial operation should begin by December 31, 2012. Commercial operation of the Flint Creek project should begin in February 2013.
As the Appendix 2 table indicates, NWE should be in compliance with the RPS through 2017, although the margin in that year is small compared to the annual variation in energy production of the Judith Gap project. Compliance in 2017 will, therefore, depend on actual production at Judith Gap and the other listed projects.
Question - How many years can RECs be carried over?
Answer - Two years.
Question - What order does NWE use the carry-over RECs?
Answer - We use the oldest first, based on the calendar year.
Dave Gates Generation Station Status - The Dave Gates Generating Station (DGGS) consists of three units with two turbines each for a total capacity of 150 MW. As reported previously to the ETAC, in January 2011, the power turbines at this plant experienced a failure. As the turbines were under warrantee, their manufacturer, Pratt and Whitney, removed them from DGGS and shipped them to Connecticut for repair. Pratt and Whitney replaced the damaged turbines temporarily with loaned machines. All repairs have been completed and the repaired machines have been shipped to Anaconda for re-installation. The DGGS will be at full plant capacity by the end of this week. Pratt and Whitney has installed sensors with the turbines and is completing an analysis of the data gathered from them. A final fix with all issues resolved is expected in early 2013.
Question - What is meant by a final fix?
Answer - The component engineering including the analysis of the sensor data will be completed.
Question - Is Pratt and Whitney developing a root cause analysis and will it be included in the final fix?
Answer - Yes.
QF-1 Final Order
John Bushnell reported on this topic. MPSC rules require NWE to update its Qualifying Facility (QF) tariffs after filing its resource plan. In January 2012, NWE filed revised QF tariffs, basing them on the methodology prescribed in the previous MPSC order. The filing included a blended market and combined cycle generation price with market prices through 2017 and a combined cycle price beginning in 2018. The tariff levels set by the MPSC in its order responding to the NWE 2012 filing are shown in the table in Appendix 3 below.
Three issues were controversial in this filing: the natural gas price forecast, the capacity value of wind generation, and the limit on NWE QF wind acquisitions. In the filing, NWE incorporated the natural gas price forecast used in its 2011 resource plan. In the 2012 final order, the MPSC used NWE’s proposed forward market price curve until 2015, then escalated using information from the US Energy Information Administration’s Energy Annual Energy Outlook. Regarding the wind generation capacity, NWE used a 0% value in its filing, a reduction from the 15% value set in the previous 2010 QF order. In the final order, the MPSC approved a 5% capacity contribution for wind generation, the value adopted by the Northwest Power and Conservation Council. The wind integration rate in effect prior to the recent MPSC order was $2.35 per kilowatt month. In its pre-filed testimony, NWE proposed a wind integration rate of $1.48 per kilowatt month. The company reduced this amount in its rebuttal testimony to $1.46 per kilowatt month. The MPSC adopted in the final order a zonal approach to the wind integration rate. For zone 1 which is defined as less than 25 miles from the Judith Gap project, the rate was set at $1.09 per kilowatt month. Zone 2 was defined as from 25 to 60 miles from the Judith Gap project, and its rate was set at $.40 per kilowatt month. Zone 3 was defined to include areas greater than 60 miles from the Judith Gap project, and the corresponding rate was set at $.15 per kilowatt month. The MPSC final order set the long term wind integration WI-1 rates based off the long-term levelized value of $4.15 /kW-month with Zone 1 rate set to $1.58/kW-month, zone 2 set to $0.58/kW-month and Zone 3 set to $0.21/kW-month. The most controversial issue in this proceeding was the 50 MW limit on QF wind acquisitions that the MPSC had set in the 2006 QF tariff. NWE is bumping up against this limit. In the 2-12 order, the MPSC removed any limit on wind acquisition by NWE.
NWE has requested the MPSC to reconsider three issues, the zonal wind integration tariffs, the long-term levelized tariff, and the dropping of the 50 MW cap on QF acquisitions. NWE has also asked the MPSC to clarify to whom the QF tariff applies.
Dave Fine discussed why NWE supports a limit on QF wind acquisitions at present. NWE’s resource portfolio includes the Judith Gap, Spion Kop, and three QF wind projects, Musselshell, Musselshell 2, and Gordon Butte. These projects total 205 MW of capacity. Two other QF projects for which NWE has contracted but which have not yet been built total an additional 20 MW. The Horse Shoe Bend project for which NWE must provide regulation adds another 10 MW of wind. During light load hours in the, NWE’s load totals about 450 MW. The 225-235 MW of wind generation capacity total poses a significant challenge for NWE’s market operations during the light load hours. Also, NWE does not yet have real operating experience with the DGGS including all the intermittent wind resources listed above, so that we do not know what the operational limit on self-supply of regulating resources will be. NWE Transmission which regulates our balancing area, intends to run DGGS with two units (95-100 MW) operating and one unit (50 MW) spare. Historically, 60 MW was required for load regulation on the MPC and NWE systems. Based on this value, experience with the Judith Gap wind production, and the assumed 100 MW of the two operating units of DGGS, NWE uses a regulation requirement for all wind projects at 18% of their nameplate capacity.
Question - What was the origin of the QF wind acquisition cap?
Answer by Will Rosquist - The 50 MW cap was set by the MSPC in the 2006 QF tariff order due to uncertainty about resource avoided cost and wind integration cost. The order stated that the MPSC would reconsider the cap when NWE bumped up against it.
Question - Is NWE reluctant to acquire more non-QF wind?
Answer - We would like to get more experience managing the wind resources in the portfolio before acquiring more wind. Without the QF cap, we cannot limit QF wind acquisitions.
Comment - The MSPC QF decision appears to create an incentive to locate projects farther from Judith Gap.
Response - The GENIVAR Study found that locating new wind farther from Judith Gap reduced regulation requirements, but the relationship was not linear.
Question - What is Plan B for providing regulation other than the DGGS?
Answer - NWE Transmission conducts the planning for regulation resources. We assume that Transmission will use market resources in addition to DGGS.
Comment - Providing regulation is a growing concern in California and the northwest. Question - What are the analytical implications of the large amount of wind resources on NWE’s system for this planning cycle?
Answer - At a minimum, we must plan to ensure compliance with the RPS. As discussed above, NWE has sufficient resources through 2017 with uncertainty about 2017 depending on production at Judith Gap and other existing projects. We will have limited real experience with DGGS operation and wind integration requirements for this planning cycle.
Question - Can you model the interaction between fluctuating loads and intermittent resources? I am concerned about pancaking uncertainty.
Answer - In the GENIVAR study, all model runs used the same load information. The interaction between load fluctuation and intermittent resources is therefore buried in the results, and the wind in these studies captured the load diversity benefit. We cannot replicate the GENIVAR modeling in-house.
Comment - No one has figured out how to address all of the challenges due to integration of intermittent resources. Ideally, NWE would lay out the regulation costs of Plan B and take them to the MPSC for a policy decision.
Response - The Kenmile decision in which the MSPC ordered that 10 MW wind projects cannot be built one mile or less apart to take advantage of QF tariffs provides NWE some protection. Also, given the low level of QF rates in the recent order, if production tax credits (PTC) for wind are not extended by the Congress, we see few new wind generation projects in the near term so that the wind integration issue may not be large for this planning cycle.
Question - What are the prospects for QF development? Will it be more of an issue if the PTC are extended for wind generation? At what price point will QF become more of a concern?
Answer - NWE does not have access to wind developers’ business plans, and we don’t have a good forecast of the REC market; hence we can’t answer the price point question. If the PTC are not extended, wind developers will have to shave their profit margins. 100 MW of new QF wind is possible.
Comment - I assume that the utility will not end up in crisis because of wind development. Historically, utilities have been good at stalling if faced by a stampede of wind development. I assume that you will not sign contracts if they would be too risky.
Response - Under the QF tariffs, we do not have a choice about signing qualified QF contracts.
Comment - The MPSC expects NWE to monitor the rate of new wind development on its system, ensure FERC standards are met, and report to it if problems develop. CREP RFP Status Update
Dave Fine provided the update about NWE’s request for proposal (RFP) for community renewable energy projects (CREP). Responses to the RFP were due on September 28. NWE received 30 responses with total project capacity totaling over 500 MW, some for more than one technology at the same location. Most proposals were for wind projects that would be developed and sold to NWE. These projects are called build-transfer projects. Lands Energy has evaluated the responses ranking them by price and project attributes. The scoring system was previously discussed with ETAC. Lands has provided NWE a summary of the proposals and their scoring without identifying the project sponsor and a recommended short-list of projects that should be considered for acquisition. On December 4, Lands sent notices to all those submitting proposals notifying them of their proposal status. Since December 4, Lands has sought additional information from the short-listed projects so that they can be evaluated and modeled by NWE.
Question - What is the time line for a NWE decision on the proposals?
Answer - NWE does not have a specific schedule. The projects are being discussed internally and additional information has been requested of the project proposers so that the modeling can be finalized. NWE anticipates seeking a memorandum of understanding with those proposals the company wishes to acquire in February. No decision has been made to acquire any project.
Question - How are you addressing the extension of the wind generation PTC?
Answer - The RFP anticipated this question. If the PTC are extended, NWE will allow proposers to rebid their projects.
Question - You said that most of the proposals involved wind projects. I evaluated biomass projects for DOE in light of the availability of federal stimulus funding. Combined heat and power may make the biomass projects more viable. Are you looking at biomass projects?
Answer - Yes.
Question - What did Flathead Electric pay Stoltze Lumber for its biomass project?
Answer - $90 per megawatt hour.
Question - How would the build-transfer option affect the CREP requirements?
Answer - NWE would have to be the sole project owner for it to qualify as a CREP.
Resource Planning Model Review
Todd Guldseth provided a handout summarizing his review of possible alternatives to the GenTrader model used by NWE in its resource planning and acquisitions. The handout is included below in Appendix 4. About three to six months would be required to select a model vendor and an equal time to prepare the new model for use by NWE.
Question - Why are you looking at models other than GenTrader?
Answer - NWE has conducted this review in response to MPSC comments on NWE’s 2011 resource plan.
Question - What capabilities would the other models have that GenTrader does not?
Answer - GenTrader was designed as an hourly dispatch model rather than a long-term resource planning tool. Other models may better analyze different resources and tie them to the existing resource portfolio and have shorter run times for stochastic studies. NWE now has its own computer servers and has developed the inputs necessary to run GenTrader in the stochastic mode. We have become efficient in using GenTrader.
Comment - My experience is that GenTrader was built for dispatch rather than long-term planning studies.
Response - We augment GenTrader with spread sheet models. As is the case with GenTrader, the other models we have examined do not have modules for intermittent resources that can directly address wind integration.
Comment - The MPSC does not have anything against GenTrader, although NWE had difficulty applying it at our request in the context of a specific docket. The Commission’s main objective is for the company to stay apprized of other models and their uses. Question - Has the Northwest Power and Conservation Council made progress in documenting its planning models and making them available to utilities?
Answer - We are not aware of progress in this regard.
Electricity Resource Procurement Plan Discussion
Dave Fine led a discussion of the following topics.
ETAC Process and Input - The process issue that we are aware of from past planning cycles is providing adequate time for the ETAC to review the draft plan. Are there others?
Comment - Our past pattern has been for ETAC members to respond to technical issues cold at meetings. If materials were provided prior to meetings, we could review them before hand and be better prepared to discuss issues. Breaking this pattern would require scheduling meetings and the issues they would address ahead of time and members setting aside time to review the supplied materials.
Response - We are discussing how we can better forecast planning activities and do things differently including supplying agenda materials advance of meetings.
Comment - The interaction between the resource plan and acquisition of opportunity resources has also been an issue in the past. For example, I have heard rumors that Pennsylvania Power and Light (PPL) is seeking to sell its Montana assets.
Response - The resource plan provides a foundation for several needs including acquiring new resources via contracts or building them. NWE focuses on meetings its customer’s needs rather than merchant activities. Our planning is informed by power marketing activities and prices, including electricity, natural gas and RECs. The best we can do is analyzing the middle-of-the-road with higher and lower scenarios to identify a range of outcomes.
Issues of Interest and Concern - Dave Fine handed out a list of issues for the current planning cycle. This list is included below as Appendix 5.
Question - Will you consider siting a natural gas-fired generating plant during this cycle?
Answer - Acquiring a plant prior to 2017-18 is unlikely so that siting a plant will probably not be urgent. NWE’s generation group is focused on the DGGS and Spion Kop projects.
Comment - The primary impact of the adder is to make coal plants more or less cost effective. No US utility is building a coal plant.
Response - Some northwestern utilities are removing a carbon adder from its base planning.
Comment - It may be useful to bring to the ETAC aspects of integrated resource planning such as transmission constraints. Comments - We may also want to consider physical and financial hedges to accommodate uncertainty. Schedule - Dave Fine passed out a draft schedule for ETAC meetings with topics. See Appendix 6 below. The ETAC agreed to target meeting the fourth Wednesday of the month during this planning cycle.
The next meeting was scheduled for Wednesday, January 23, 2013 at a location in Helena to be determined. NWE will send out copies of the MPSC on the 2011 resource plan. These comments will be reviewed at the January meeting.
Committee members provide advice to NWE as individual professionals; the advice they provide does not bind the agencies or organizations that the members serve.