OPPORTUNITY FOR 2016 -2017 - Tres Amigas SuperStationtresamigasllc.com/docs/2016-2017-Opportunity.pdf · 2016. 11. 18. · 1) 2012 annual arbitrage opportunity based on TA’s Throughput

PRIVILEGED & CONFIDENTIAL

OPPORTUNITY FOR 2016 -2017


Discussion Topics

Section

Executive Summary I

Overview II

Tres Amigas Buildout III

Storage IV


I: Executive Summary


Executive Summary

• In Dec – 2015, Tres Amigas closed a transaction with Pattern Energy which provides it with the following:

• Fixed, guaranteed annual revenue for 25 years

• Transmission rights from Tres Amigas all the way to California

• Upgrades on the PNM system to unlock its full thermal capacity

• A guaranteed path to construction of Tres Amigas’ WECC Interconnection

• Tres Amigas at this stage represents a unique opportunity for new partners to come into

3

Tres Amigas is at an exciting phase of its journey and is inviting new partners to participate


Joint Venture Opportunity

• Tres Amigas would like to invite qualified advocates to participate in the development of this next phase under the following construct:

• An earnest money contribution to finalize the development of Tres Amigas’ next phase and demonstrate financial viability of advocates

• In exchange, advocates will receive the following:

• The right to provide the equipment for construction of Tres Amigas

• The right to provide capital for the construction of future phase of Tres Amigas

• Joint rights to all the technology being developed by Tres Amigas

4

Tres Amigas is at an exciting phase of its journey and is inviting new partners to participate


II: Overview


The Tres Amigas ProjectThe Tres Amigas (TA) Transmission Superstation will utilize high voltage direct current (HVDC) technology to link the Eastern, Western, and Texas U.S. Interconnections at a single location in New Mexico via a multi node, multi terminal interconnection.

WesternInterconnection(“WECC”)166 GWPeak Load

TexasInterconnection (“ERCOT”)64 GWPeak Load

585 GWPeak Load

EasternInterconnection (“SPP”)

Clovis,NM

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TA will utilize its expertise to deploy proven technology in an innovative way to create a template for the industry

Implementation: Innovation Using Proven Technologies

Voltage Source Converter Controls and Trading Platform

• Utilize expertise from building PJM

• Integrate off-the-shelf solutions to create a state-of-the-art platform

Proven Hardware Software Solution

345kV AC Transmission Lines Under ConstructionContainerized Battery Systems

The world’s first dynamic multi node VSC three-way interconnection of AC grids over HVDC systems


$531.8

$309.7

$98.7

$86.6

$36.8

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

2012 Gross ArbitrageOpportunity (1)

(A)

Third-PartyTransmission Costs

(B)

Customer's Share:20% of Net Opportunity

(C)=20%*(A)-(B)

Tres Amigas'O&M(2)

(D)

Free Cash Flowto Tres Amigas(A)-(B)-(C)-(D)

($ in

milli

ons)

8

If Tres Amigas Existed in 2012 – A Demonstration of Economic Vitality

Notes: 1) 2012 annual arbitrage opportunity based on TA’s Throughput of 750MW between WECC-SPP and WECC-ERCOT, and 1,500MW between ERCOT-SPP2) O&M figures based on 2018 revenue pro-rata calculations, inclusive of lease payments

Sum of the Price Differences Across All Hours in 2012

Customer Share 20% (TA Share 80%)

No fuel cost or significant variable

costs

TA would have generated $310mmof free cash flow in 2012, on a $1.2bn

investment


The Economic Case for Tres Amigas Continues to be Strong

9

The Economic Opportunity Unlocked by Tres Amigas is Large, Stable and Sustainable


The Interconnect Line to WECC

10

Tres Amigas’ WECC Interconnection will link the

wind farms to PNM’s Blackwater Substation


Schematic (Tres Amigas to CAISO)

11

Tres Amigas’ WECC Interconnection Plus Downstream Transmission Rights Provide Pathway to California


Wind Pattern Leaves Plenty of Unused Capacity for Tres Amigas

12

Wind Farms Leave Plenty of Unused Capacity for Tres Amigas

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

138

376

51,

147

1,52

91,

911

2,29

32,

675

3,05

73,

439

3,82

14,

203

4,58

54,

967

5,34

95,

731

6,11

36,

495

6,87

77,

259

7,64

18,

023

8,40

5

% o

f Tot

al T

rans

mis

sion

Cap

acit

y

Hours in the Year

Capacity Used by Wind TA Capacity

Capacity Used by Wind Never Exceeds 86.6%

Capacity Used by Wind is Below 47.35% for Half the Year

Capacity Used by Wind is Below 22.43% for a Third of the Year


III: Tres Amigas Buildout


Tres Amigas Build Out Strategy

• Identify the “right-size” VSC to link SPP to CAISO utilizing Tres Amigas’ WECC Interconnection and the Downstream Transmission Rights

• The size of the VSC will be based on the following considerations:

• Amount & tenor of contracted revenue that can be obtained between SPP & CAISO

• Construction Time

• Minimizing it is important to receive the most value from trading firms that will be the counter-parties for the contracted revenue

• Build modularly and expand over time to preserve economics and allow efficient project financing

14

Tres Amigas will Expand Modularly Leveraging the Assets That are Currently Being Built


Backup Center

Tres Amigas Site

Next Expansion: Add the SPP LinkageTres Amigas can build on the WECC Interconnection and add a SPP linkage by installing a Voltage Source Converter at its site

Connection into NRS Wind Farm

Connection into PNM Blackwater

345KV line(4.5 mile )

CLOVIS 345KV Station

PNM Ownership

NRS Ownership

345 KV Line(25.5 miles)

Admin BidgWarehouse

VSC

230 KV Line to Tolk Station

SPS Ownership

Legend:AC LineCommunicationsAC-DC-AC System

SPPWECC

ABQ HeadquartersMain Control Center

15

Tres Amigas WECC Interconnection

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Tres Amigas will Interconnect Opportunistically to SPP & to ERCOT

Tres Amigas Buildout


IV: Storage Park


The Near Term Opportunity for Storage

• Tres Amigas has the opportunity to build a 20MW or more storage park at its interconnection with PNM and WECC

• Storage capabilities in an interconnected Bulk power system is a highly desired product Worldwide

• With the transmission rights Tres Amigas currently has to the WECC, the opportunity now exists for TresAmigas to develop a “Storage Park” with a fleet of storage technologies.

• The economic opportunities of this are:

• Energy arbitrage on the price differentials between least cost storage and maximum price delivery

• Wind Firming

• Regulation

• Spinning Reserve

• Black Start


The Current Advantage

• With the WECC construction complete, Tres Amigas needs only to:

• Construct the Storage Park

• Implement the software to provide the economic services.

• Next step would be to connect with the SPP grid, hugely multiplying the opportunity


The Tres Amigas Advantage

• Tres Amigas provides an opportunity that is currently not present:

• Tres Amigas is a public utility

• Tres Amigas is only regulated at Wholesale

• Tres Amigas can provide a storage tariff

• Tres Amigas can approve the storage Interconnect

• Tres Amigas can provide the billing and settlement function

• Tres Amigas is ready to Interconnect

• Tres Amigas provides the first mover advantage to those participating in this development


TA Energy Storage

Rationale in operating energy storage


TA Energy Storage

Battery technology has progressed allowing good performance over long life time.

One of the vendors: Xtreme Power PowerCell Warranty Curve [1]


TA Energy Storage

Battery arrays

Modules Installed at Duke Notrees Wind Storage Project(batteries at left, PCSs at right)

Modular design



TA Energy Storage

Connected at the transmission system voltage level; Simple and straight forward modular design; Rely on Standard Equipment for connection and switching Designed to segregate different technologies; Designed to keep different functionality in isolated operation; Accommodates all storage solutions such as different battery

designs, supercaps and flywheel; Uses robust and standard MV designs for maximum reliability, Communication and control requirements are conventional, Emergency and restoration through auxiliary generation and

independent utilities. Early estimated Construction cost 30 MUSD for 15 MW and 45

MUSD for 25 MW


TA Energy Storage

Standard power converters up to 10 MW are in the market today


TA Energy Storage

Standard Power Distribution Transformers



TA Energy Storage

Battery technology has progressed allowing good performance

Plant can be built in stages due to highly modular arrangement


Artist Rendering

Duke Energy Notrees 24 MW Energy Storage


Pricing for storage based on the

market.Each transaction is

done based on physical energy buying/selling

conditions taking into account what was prevailing a

the time of storage and at the time of

the energy release.Premium would

apply for ancillary services.

How to treat losses?

PricingEnergybought

EnergyLost

EnergyStored

EnergyReleased

Balancing capability;

Grid connection

Own and third party Physical storage assets

+

Metering points for “bought” or “released” energy must be at the 230 / 345 kV TA AC Busses

TA Energy Storage


What can it do?

Illustration of BESS Arresting Extreme Frequency Deviation (Source:Xtreme Power) @Notrees Storage station Duke Energy Texas

Documents

OPPORTUNITY FOR 2016 -2017 - Tres Amigas SuperStationtresamigasllc.com/docs/2016-2017-Opportunity.pdf · 2016. 11. 18. · 1) 2012 annual arbitrage opportunity based on TA’s Throughput