Integrating Wind Power into the Integrating Wind Power into the Electric Power SystemElectric Power System

Michigan Public Service Commission Wind ForumMichigan Public Service Commission Wind ForumApril 25, 2007 Lansing, MichiganApril 25, 2007 Lansing, Michigan

Ed DeMeoRenewable Energy Consulting Services, Inc.Technical Advisor: Utility Wind Integration Group

Key Integration IssuesKey Integration Issues

CostsCosts (capital, energy, O&M)

VariabilityVariability Impacts (ancillary services costs)

EnergyEnergy (fuel displacement) and CapacityCapacity

(serving demand growth) Contributions

EnvironmentalEnvironmental Considerations

Natural Gas SituationNatural Gas Situation

“Today’s tight natural gas markets have been a long time in coming, and distant futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon.”

– Alan Greenspan, Federal Reserve Chairman,

Testimony at Senate hearing, July 10, 2003

Wellhead gas costs - 2002-2003: $3 - $5/MMBTUWellhead gas costs - 2002-2003: $3 - $5/MMBTU

Current prices and projections exceed $6/MMBTUCurrent prices and projections exceed $6/MMBTU

Wind Energy Compared to Wind Energy Compared to Conventional Electricity GenerationConventional Electricity Generation

Wind displaces natural gas primarilyWind displaces natural gas primarily Wind energy costs: 4¢ to 7¢/kWh total Gas fuel only costs: 4¢ to 10¢/kWh today Wind costs stable; fuel costs are not

Wind - gas synergy: save gas when wind Wind - gas synergy: save gas when wind blowing, burn gas when wind calmblowing, burn gas when wind calm

But wind’s variability complicates power-But wind’s variability complicates power-system operationsystem operation Does wind variability compromise reliability? Will variability reduce wind’s value

substantially?

4¢

7¢

10¢

gas

wind

Minnesota 25% Wind Energy Minnesota 25% Wind Energy Penetration Study (MN DOC 2006)Penetration Study (MN DOC 2006)

3500 to 5700 MW of wind generation 3500 to 5700 MW of wind generation delivered to Minnesota customers (15 to delivered to Minnesota customers (15 to 25% of retail electric energy sales in 2020)25% of retail electric energy sales in 2020)

System Operating Cost ImpactsSystem Operating Cost Impacts Ranged from 0.21¢0.21¢ to $0.44¢$0.44¢ per kWh of wind Includes all costs related to wind uncertainty and

variability

Similar results from 10+ studies nationwideSimilar results from 10+ studies nationwide

Impact generally less than 10% less than 10% of wholesale value

Inte

grat

ion

Cos

t ($/

MW

h )

Wind Penetration (% of System Peak Load)

6

4

2

00 5 10 15 20 25 30

Range of System Operating Cost ImpactsRange of System Operating Cost Impacts

Studies Conducted To Date

1/2 ¢/kWh

All results to date fall within the crosshatched area

Wind’s Contributions Wind’s Contributions to Electric Powerto Electric Power

Energy: displacement of fossil fuels

In most cases, this is the primary motivation. Previously existing power plants run less, but continue to be available to ensure system reliability.

Contrary to common lore, addition of a wind plant requires NO new conventional backup generation to maintain system reliability.

In many cases, natural gas is saved, reducing total system operating costs. In all cases, overall emissions are reduced.

IEEE Power Engineering Society Magazine, November/December 2005

Utility Wind Integration Group (UWIG): Operating Impacts and Integration Studies User Group

www.uwig.org

UWIG Summary: Key Points from IEEE Power Engineering Society Magazine, Nov/Dec 2005

www.uwig.org

Environmental Environmental TradeoffsTradeoffs

We need to evaluate environmental impacts on a relative basis.

No energy-generation approach is without impacts.

The choice is wind vs. something -- not wind vs. nothing.

“We can’t lose sight of the larger benefits of wind,” says Audubon Washington’s Tim Cullinan. “The direct environmental impacts of wind get a lot of attention, because there are dead bodies on the ground. But nobody ever finds the bodies of the birds killed by global warming, or by oil drilling on the North Slope of Alaska. They’re out there, but we don’t see them.”Audubon MagazineAudubon Magazine,

September 2006 feature article on wind power

Environmental Environmental Benefits of WindBenefits of Wind

No emissionsNo emissions of any kind during operation No SOx, NOx, particulates or mercury No contributions to regional haze Hedge against environmental regulations No greenhouse gases

No toxic wastes or health impactsNo toxic wastes or health impacts Nuclear waste transport and storage unresolved Respiratory diseases of growing concern

No water consumption or use during operationNo water consumption or use during operation Water availability a looming crisis in the Western US

Environmental Environmental Benefits of WindBenefits of Wind

Global climate change concerns can no longer Global climate change concerns can no longer be ignored by any legitimate political entitybe ignored by any legitimate political entity Most environmental scientists view this as by far the

most serious environmental issue facing society Unavoidable evidence mounting Very few doubters remain

Not many arrows in the quiver to address this Not many arrows in the quiver to address this concernconcern

We need them allWe need them all

Wind energy is one of themWind energy is one of them

Paul Anderson, CEO of Duke EnergyPaul Anderson, CEO of Duke Energy(Southeastern Utility, Coal/Nuclear)(Southeastern Utility, Coal/Nuclear)

Lobbying for tax on carbon dioxide emissions

“Personally, I feel the time has come to act - to take steps as a nation to reduce the carbon intensity of our economy. And it’s going to take all of us to do it.”

– Paul Anderson, quoted in AP press release, published April 7,

2005

The Climate Change Threat Is A The Climate Change Threat Is A Major Business OpportunityMajor Business Opportunity

Technologies to reduce CO2 emissions are

needed worldwide

Industries producing them will provide employment and profits

Countries that produce them will enjoy export potential and trade-balance benefits

Countries that do not may miss out on one of the 21st Century’s best business opportunities

Wind Contributions in Europe Wind Contributions in Europe and the United States (2006)and the United States (2006)

GermanyGermany

SpainSpain

IrelandIreland

DenmarkDenmark

USAUSA

85,000

50,000

5,500

4,200

900,000

Generation Generation Total (MW)*Total (MW)*

Wind % of Wind % of ElectricityElectricity

Wind Wind (MW)(MW)

22,000

11,600

600

3,100

11,300

7

8

6

30

0.6

* Approximate values

Contrasting Approaches to Accommodating Contrasting Approaches to Accommodating Wind Power in Europe and in the U.S.Wind Power in Europe and in the U.S.

Europe Wind power is environmentally preferred. How can we best accommodate it within the existing power system?

U.S. OK, we’ll accept wind into the existing system, but it will follow our traditional rules and procedures.

A change in mindset is needed in the U.S. It will not come from within the power sector, whose responsibility is reliability, not change. Change, and the incentives to

enable it, must originate in the policy sector.

Bottom Line on Bottom Line on Wind PowerWind Power

Wind power is a very low carbon, affordable, domestic energy source

It can make a large contribution to the US economy -- 20% of electricity and more

As a responsible society, we need to use it -- and use our ingenuity to resolve the tactical issues it presents