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imbalance, integration charges• It will allow money-making opportunities and add value to
competitive markets:– Redispatch around transmission constraints– Support the integration of wind (indirectly or directly)– Pool transmission
• It will allow generators: – Greater autonomy – To play by market rules, not just BPA’s rules– New opportunities as well as new responsibilities– Last chance to operate as merchants
• These opportunities need to be prioritized and sequenced
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OverviewWhat is the IIBA?
• CECD sets-up/implements/certifies the BA– The BA is a reliability function– The BA function requires communications links and AGC
• The participating generators separately contract with CECD in order to:– Integrates resources– Maintains interchange-generation balance– Supports interconnection frequency– Manages transmission for these purposes
• As a BA, the participating generators will be enabled to:– Sell regulation to support the integration of wind– Participate in operating reserve sharing (through the NWPP)– Self-providing or contracting with third-parties for operating
reserves
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OverviewHow is a BA Established?
– Certification Decision• Prepare Questionnaire for NERC and WECC• On-site Visit
– Address Minimum Operating Reliability Criteria• Generation Control Performance• Transmission• Interchange• System Coordination• Emergency Operations• Operations Planning• Telecommunications• Operating Personnel and Training
– This Process Takes About Six Months; there is a Six Month Probation
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OverviewWhen does this make sense to do?• Why not now?• There is a recognize lack of business opportunities in the
region• There are no plans to aggregate BAs in the PNW• The region is hamstrung by hourly block markets• Transmission constraints are being operated through BPA
federal resource redispatch and curtailment• BPA is projecting significant wind integration through 2010
(i.e., 6,000 MW)• The region is now “capacity” constrained
– Light-load hours– Heavy-load hours
• There is a need for within hour regulation• Renewable portfolio standards are drivers
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OverviewWho could participate?
• Operating Resources– Calpine
• Hermiston, OR 630 MW gas CCCT– EPCOR
• Fredrickson/Tacoma, WA 125 MW gas CCCT– Mint Farm Energy Center LLC
• Longview, WA 286 MW gas CCCT– NESCO
• Sumas, WA N/A gas CCCT
– Sierra Pacific• Mt. Vernon, WA 28 MW biomass/cogen
– Suez Energy America• Chehalis, WA 520 MW gas CCCT
– TransAlta• Centralia, WA 1404 MW coal
248 MWgas CCCT
• Resources Under Construction– Grays Harbor Energy Center LLC 650 MW gas CCCT– NW Energy Partners (enXco) 125 MW wind
• Resources Permitted but Not Constructed– Horizon
• Ellensburg, WA 125 MW wind• Arlington, OR 125 MW wind
Source: Robert Kahn
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Costs/BenefitsWhat will this Arrangement Cost?
• Estimated Cost of Arrangement– Start-up/Implementation/Certification
• $175,000 first entrant• $35,000 for each additional
– Communications and hardware
– Balancing Authority Service Operations• $60,000/month first entrant• $12,000/month for each additional
• The CECD Balancing Authority Services Agreement is an instrument already in operation
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Cost/BenefitsExperience of Other BAs
• Value of Load-only or Gen-only BA– Greater control over future commodities
purchasing, risk and price management– Eliminate exposure to Generation Imbalance
charges– Become a front runner rather than a follower– Take active role in Business Management and
Regulatory and Compliance Issues– Actively involved in managing Transmission
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Cost/BenefitsWhat will this Arrangement Save?
• The BA will result in direct savings– Generation Imbalance Charges – Integration Charges ($3.10 – $4.80/MWh)– Operating Reserves (BPA’s rate is $7.93/MWh)
• The BA will enable intangible benefits– Provide needed in-hour services – Enhance redispatch opportunities
• Reliability• Planning
– Pool transmission– Avoid/reduce regulatory interface costs– Improve output profile (wind farm diversity)– Enhance Renewable Portfolio Standard Opportunities
– Diversity among same Fuel type, e.g., wind– Geographic Diversity in terms of Resource Location– Geographic Diversity in terms of Location of Loads– Various Renewable Portfolio Standards– Transmission Access
• Constraints can further enable redispatch• Opportunities (e.g., counter-flows)
• Any resource can be the anchor tenant– Needed to initiate the BA certification process– Realize cost savings
• Fossil fuel resource can support wind integration– In-hour shaping– Between hour shaping– Back-off generation during off-peak hours
• Wind can provide other opportunities– Enable RPS opportunities– Further cost savings through avoidance of integration charges– Potential wind farm diversity to improve capacity factor
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Contractual Structure
• Contractual Arrangement– The Balancing Authority
• Execute BA Services Agreement• The BA will not engage in commercial transactions• The BA will offer services to enhance the value of member generators• The BA generators can be “interconnected” through transmission and
dynamic schedules– The Generators
• Execute the BA Services Agreement (cross contracts)• The Generators will sell to end-users• The Generators will address pooling opportunities• Advise was to not limit participants
– No “Anti-trust” issues identified• The purpose is to facilitate commerce – enhance competition• A bid structure will need to be designed for services• Information sharing as long as such doesn’t impact competition
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Procedural Next Steps
• Simple Start– Stage this Concept– Arrange Policy Representation (NIPPC)– Allow for full Expansion
• NERC certification– Process requirements
• WECC recognition– Process requirements
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Procedural Next Steps
• The IIBA would need to– Become a member of the WECC– Become a member of the PNSC– Become a member of the NWPP
• Reserve Sharing Group
– Consider signing the Western Interconnection Agreement (release of liability)
– Consider joining ACE Diversity Interchange
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Timeline
• Other questions? • Define policy/PR needs for this effort.• Execute Balancing Services Agreement
(December 2007)• Initiate certification process
(January 2008)• Engage in BPA’s wind integration pilot