January 2010 Southwest Renewable Energy Transmission Conference: Renewable/Transmission Developer Panel Moderator: Dian M. Grueneich, Commissioner California.

January 2010

Southwest Renewable Energy Transmission Conference:

Renewable/Transmission Developer Panel

Moderator: Dian M. Grueneich, Commissioner

California Public Utilities Commission

2January 2010

Our Panel

Robert Jenkins, Director of Transmission, First Solar

Lawrence Willick, Senior Vice President, LS Power

Arthur Haubenstock, Chief Counsel & Director, Regulatory Affairs, BrightSource

Jerry Vaninetti, Western Transmission Development, NextEra

James Caldwell, President, Solar Millennium Tom Wray, Project Manager, SunZia

Transmission Project

3January 2010

Our Task

Renewable energy project and merchant transmission developers will present their views on plans for and barriers to renewable energy transmission, with a focus on perceived bottlenecks in the existing utility infrastructure system and challenges associated with financing projects.

Dimbach, Germany (1.4 MW); Blitzstrom / Beck Energy

Southwest Renewable Transmission Conference

Robert JenkinsMay 21, 2010

© First Solar, Inc.First Solar Confidential & Proprietary 5

First Solar/NextLight Advanced Development

Gates Peaker

Devers

Miguel

Lugo

Vincent

Midway

N. Gila

Moenkopi

Navajo (SRP)

Crystal River

Imperial Valley

Hassayampa

El Dorado

Palo Verde

Project Size COD

Sunlight 550 MW Q4 2014

Topaz 550 MW Q2 2014

Stateline 300 MW Q4 2015

Agua Caliente 290 MW Q2 2014

AV Solar Ranch 230 MW Q4 2013

Silver State 2 50 MW Q4 2011

© First Solar, Inc.First Solar Confidential & Proprietary 6

• PPA Structures are typically volumetric energy based– Project revenues entirely dependent on energy deliveries to the grid– Physical congestion that results in curtailment of energy reduces project

revenues– Financing entities are very sensitive to risk to project revenues

– If project bears curtailment risks, it needs to be bounded– Pressure for Firm Transmission/Network Service (or Full Delivery in

CA markets) as congestion mitigation• Firm Transmission/Full Delivery Service

– Involves the engineering analysis of boundary, or extreme, conditions– Presumption that if transmission capacity is available under the

boundary condition(s), then Available Transmission Capacity (ATC) exists– If ATC is not available under the boundary condition(s), little

information is generated to quantify the extent of the deficiency– Transmission Upgrades are identified, potentially involving large,

expensive new lines in order to satisfy the boundary conditions (and the financing parties)

PPA Structure/Project Financing/Transmission

© First Solar, Inc.First Solar Confidential & Proprietary 7

• Underutilized Transmission Assets– Boundary conditions seldom, if ever,

experienced– 25% (+/-) capacity factor resource vs

24x7 transmission• Unclear Justification for Large Investments in

New Transmission Facilities – Cost versus value assessment is not

comprehensive and is dispersed in the LSE procurement processes

– Few tools available for risk management if the value/cost ratio is low– Tools such as Conditional Firm

Transmission have nominal value when the risk/financing question is not addressed.

• Long Delay and Great Uncertainty in Renewable Generation Development

– 7-10 year lead time for major new transmission lines.

– Many renewable generation projects cannot sustain such delays

Outcome of Current PPA & Transmission Practices

•Path 46 (West of River) Rating - 10,623 MW•Path 49 (East of River) Rating - 9,300 MW

Bringing Energy ForwardBringing Energy Forward

Lawrence WillickSenior Vice President

LS Power

9

LS Power Transmission Portfolio

10

Current Project Status and HurdlesProject description

Purpose Planning Permitting Cost Recovery

Cross Texas Transmission

200+miles double circuit 345 kV

Renewables within Texas – CREZ

Complete Underway Complete

SWIP Phase 1

SWIP Phase 2

235 mile single circuit 500 kV335 mile single circuit 500 kV

Renewables, energy, capacityRenewables, energy, capacity

Complete

Complete

Complete

Underway

Underway

Initiated

Wyoming-Colorado IntertieHigh Plains Express

180 miles single circuit 345 kV >1,000 miles 500 kV

High-capacity factor wind to marketEconomic resource benefits

Complete

Underway

Future

Future

Future

Future

Overland 560 mile DC High-capacity factor wind

Underway Underway Underway

LaSalle 160 mile double circuit 345 kV

Congestion relief with renewable access

Initiated Future Initiated

11

Independent Transmission Barriers

• Planning, Permitting, Cost Recovery

• RTO Practices and the Right of First Refusal

• Transmission Interconnection Process

• Regulatory Wish List: Level Playing Field• Project evaluation, approval, and cost recovery or• Competitive process after planning is complete

12

The need for Southwestern planning and coordination has never been greater. Renewable integration and balancing demands interlinking Southwestern load with renewable resources.

• 2001-2005 STEP (Southwest Transmission Expansion Plan)• By 2007, STEP was to be succeeded by a CAISO-led sub-regional

planning group • In 2008, SCE convened a Pacific Southwest Planning Association (PSPA)• In 2009, PSPA was overtaken by the California Transmission Planning

Group (CTPG)• DOE/WECC transmission planning process is taking broad view of

overall transmission plan• Currently, there is no forum for working out cooperative approaches

to transmission planning , permitting, cost allocation and operation specific to the Southwestern states.

Regional Transmission Planning : Prerequisite to a Robust Renewable Energy Supply & VERS Balancing

13

Allocating Cost to Ratepayer and Renewable Energy Advantage

• FERC & Order 2003Financing burden intended to provide incentives for efficient transmission use and lessen need for new transmission by influencing generator siting- not anticipating location-constrained renewable resources in remote locations.

•Texas SB 20 ApproachTexas approach provides for lines to Competitive Renewable Energy Zones (CREZs).

• Southwest Solution: Promote Interstate Flow of Renewable Energy, Enhancing Reliability & Reducing Overall Cost

Without a cost allocation solution, pancaking will deter southwest solar development and create a barrier to the lowest-cost, reliable renewables infrastructure.

14

Beginning this important journey with a few sure steps

• Ultimately, we need a comprehensive, robust Southwestern transmission web.

• This journey will never reach its destination unless we begin with some concrete steps immediately.

• Joint nomination of pilot projects by any two states would provide sufficient lines for a proof of concept, with planning and permitting completed to commence construction in 2013.

• With demonstrated progress, mid- and longer-term planning is more likely to achieve results- and maintain renewables investment.

15

M

M

M

M

M+

High Plains Express (Renewables)

12 Parties – 1,300 miles

>3,500 MW

2-500 kV (AC)

2015-2020

Wyoming-Colorado Intertie (Wind)

LS Power, WIA & WAPA

850 MW – 180 miles

345 kV (AC)

2013-2015

Blythe Gentie (Gas & Solar)

NextEra

>600 MW – 67 miles

230 kV (AC)

2010

Peetz Logan Gentie (Wind)

NextEra

>600 MW – 75 miles

230 kV (AC)

2007

Jerry Vaninetti, NextEra EnergyWECC Transmission Project

Development Experience

16

• Double-Circuit vs. Single-Circuit Lines– Double-circuit more

expensive but more cost-effective, when fully utilized

– Optimal use of ROW

– Install the second circuit when needed

– Path rating limitations

• Who pays & how do they recover their costs?– Cost allocation

– Cost recovery

Right-Sizing Transmission Lines

Single-Circuit Structures

Double-Circuit Structures

17

Cost Allocation/Recovery for HPX

600 mile 500 kV example, based on WREZ model

• Cost allocation doesn’t apply for non-RTO regions that dominate WECC

– Voluntary agreements for cost-sharing

• Investments typically justified for serving load & for reliability

– How to fund to meet public policy goals?

– Who pays for right-sizing?

– How to assure cost recovery?

• HPX & PacifiCorp-Gateway Dilemma– Double vs. single-circuit 500 kV

– Matching need with cost over time

$-

$0.5

$1.0

$1.5

$2.0

$2.5

Single-Circuit 1st Line Double-Circuit Double-Circuit

$ B

ILL

ION

S

$-

$500

$1,000

$1,500

$2,000

$2,500

$/M

EG

AW

AT

T-M

ILE

$ BB (left axis) $/MW-MI (right axis)

20% more

30% less

18

Issues to be Addressed by State Regulators

• Cost recovery to meet need & public policy goals– Nothing gets built without the assurance of cost recovery– How to assure cost recovery in non-RTO regions & for non-

jurisdictionals?– Right-sizing to optimize land use & future demand– Potential solution: socialize the incremental costs for the 2nd circuit

• Regional cooperation between states– Clarity in public policy: siting, permitting, RPS & cost recovery

• Without the foregoing…..– Some renewable projects will continue to be sited in sub-optimal

locations ……to the detriment of consumer costs & renewable development

– Incremental transmission expansion will be the norm…...to the detriment of land use optimization where economies of scale are forgone

Near Term Transmission Enhancements to Serve CA

Renewable Projects

Southwest Renewable Energy Transmission Conference

Arizona State University

Tempe, Arizona

May 21, 2010

James H Caldwell Jr.

President, Solar Millennium, LLC

Page 20Solar Millennium LLC Presentation to REPG – 1.22.10

Company OverviewStructure Solar Trust of America (STA) – joint venture of Solar Millennium AG and MAN Ferrostaal AG. 75 years of EPC market experience; 25 years of solar thermal experience. Solar Millennium, LLC is wholly owned subsidiary of Solar Trust of America.

Development Projects Developed and built first parabolic trough plants in Spain (Andasol) 1–3 plants, total 150 MWs, with 7.5 hours of molten salt storage. 30 MW Solar field integrated into 150 MW CCGT plant in Egypt (under construction). More than 2,000 MWs currently in development in the U.S. Southwest.

Page 21Solar Millennium LLC Presentation to REPG – 1.22.10

Southern California Transmission Projects

DSWL (500 kV)

Page 22Solar Millennium LLC Presentation to REPG – 1.22.10

Near Term CA Transmission Enhancements

Up to 5000 MW of new transfer capacity from the Colorado River to California load centers could be available in the near term.

Each of the new projects comprising this capacity has “essentially” been through the planning, siting, permitting, cost allocation, “approval” hurdles, however none are completely cleared for construction.

In addition, roughly 2500 MW of new transfer capacity should become available over the next eight years as California phases out coal imports in compliance with SB 1368.

The focused attention of state/federal policy makers is required to allow the bulk of this potential new transmission capacity to be made available to renewable energy projects to achieve state/regional renewable energy generation targets.

MAY 21, 2010SUNZIA SOUTHWEST TRANSMISSION PROJECT 24

• 470 miles• Two 500 kV lines; five substations• AZ and NM; 14-county study area

MAY 21, 2010SUNZIA SOUTHWEST TRANSMISSION PROJECT 25

MAY 21, 2010SUNZIA SOUTHWEST TRANSMISSION PROJECT 26

Renewables are remotely located in the West

New long-distance EHV RTPs are needed

RTP investors need assurances that: Competitive interstate wholesale supply markets exist

Regulatory impediments to utility supply choices do not exist

Not all proposed RTPs will be permitted

Resulting in a scarce supply of deliverable renewable energy from remote sources

MAY 21, 2010SUNZIA SOUTHWEST TRANSMISSION PROJECT 27

National policy of more renewable energy requires significant capital for RTP development on the grid:

SENR is considering a national RPS

FERC is requesting siting authority for interstate EHV lines

Some state procurement policies disregard benefits of higher capacity factors and lower delivered prices in favor of in-state renewable generation resources

Procurement policies favoring in-state generators are eliminating incentives for investment in RTPs across the western grid

MAY 21, 2010SUNZIA SOUTHWEST TRANSMISSION PROJECT 28

How can PUC regulatory procurement policy be coordinated to reduce interference with interstate commerce of renewable energy?

How is “economical” electricity provided to customers by reducing wholesale competition across state lines?

What is better than the market for allocating scarce commodities?