Wind Development in Texas

Austin Energy Renewable Conference

October 21, 2004 Henry Durrwachter TXU Energy

Texas Unique Position

Need for renewable resources caused by Renewable Portfolio Standard (RPS) Transmission and generation interconnection is simple and low cost Blessed with good renewable resources

Texas Renewable Portfolio Standard

Add 2,000 MW of renewable capacity in Texas by January 2009 Phased-in approach Flexibility Allows trading of Renewable Energy Credits (RECs) to comply Choice of technologies Applicable only to retail companies who choose to compete (IOUs and opt-ins)

Renewable Resource Requirement

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2002 2003 2004 2005 2006 2007 2008 2009
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Required Actual

MW

Renewable Energy Credits (RECs)*

1 REC = 1 MWh of renewable energy produced and metered in Texas; REC requirement among competitive retailers will be based on the retailers percent of total state-wide retail sales; RECs will be:

- generated by the renewable facility,

- transferred to the retailer that purchased the REC and - retired by the retailer to meet its REC requirement in a particular year (i.e., compliance period); RECs have a 3-year life (i.e., 3 compliance periods).

*PUC Substantive Rule 25.173

Ease of Interconnection
Generator interconnection requires only the driveway, not the entire highway Texas use of postage stamp pricing for transmission service (all loads pay equal rate) Lower cost of interconnection for new wind farms

Why Wind?
Wind is the renewable resource of choice in Texas because:

Readily available Low cost (competitive with gas-fueled generation) Publicly accepted Short development and construction time (1218 months)
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Texas Wind Potential

Wind Energy Projects in Texas

Llano Estacado Wind Ranch 80 MW

Delaware Mountain Wind Farm 30 MW Hueco Mountain Wind Ranch 1.3 MW West Texas Windplant 35 MW

Sweetwater 37.5 MW West Texas Project 6.6 MW Trent Mesa Big Spring Wind Farm 150 MW 34 MW DKR Development 362.5 MW Green Mountain - Brazos 160 MW Orion Energy King Mountain Ranch 175 MW 278 MW Clipper Windpower 60 MW

Woodward Mountain Ranch 160 MW

Southwest Mesa 75 MW Indian Mesa 82.5 MW

Desert Sky 160 MW

Wind Generation in Texas Existing Announced Total

No. of Projects 14 3 17

Capacity (MW) 1,290.0 597.5 1,887.5

Source: Public Utility Commission of Texas and American Wind Energy Association

REC Market Activities

Market opened in July, 2001 Prices for RECs ranged from $4 to $15 Current price for a REC ranges from $10 to $12 REC annual trade volumes have exceeded 100,000 Over 60 REC brokers, traders and aggregators Emergence of new renewable products/programs
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Renewable Generation*
3,500,000 3,000,000 2,500,000
Renewable Generators in operation prior to 9-1-99

MWh

2,000,000 1,500,000 1,000,000 500,000 0 2002

Minimum generation from new renewable resources per mandate

Renewable Generators added since 9-1-99

2003

* ERCOT only, includes wind, hydro and biomass

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REC Retirements

1,400,000 1,200,000

RECs Retired

1,000,000 800,000 600,000 400,000 200,000 0 Mandatory Voluntary 2002 2003

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Issues
Variation and Timing of Production Transmission Congestion

Operational Impacts

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Wind Variability
Seasonally Daily Hourly

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Monthly Wind Farm Generation 2003

Projected
16,000

Actual

Wind Farm Production (MWh)

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Month

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Summer Peak Month Coincidence

Average Hourly Profiles - August 2000
TXU Load
24,000 22,000 20,000 18,000

Wind Project Output

20,993 MW

24 22 20 18 16 14 12

TXU Load (MW)

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Capacity Value at Peak = 10.9% 3.7 MW

10 8 6 4 2 0

Hour

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Wind Project Output (MW)

Settlement Interval Production

February 2003
40.00 30.00
MW

20.00 10.00 1 1021 1191 1361 1531 1701 1871 2041 2211 2381 2551
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171

341

511

681

851

Interval
Note: Settlement Interval = 15 minutes

Transmission Congestion

Local Transmission Congestion (138 and 69 kV)

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Causes of Transmission Congestion

Rapid development and construction of wind farms in West Texas (680 MW added in 2001 alone)(12 to 18 months to develop new sites)

Long time required to certify, route and construct new transmission lines (3-5 years minimum) Inadequate transmission infrastructure to accommodate existing wind farms in West Texas

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Answers
Improve existing 69 kV and 138 kV transmission system to accommodate wind generation Expedited transmission line certification process (PUC Project No. 25819) Add new 345 kV lines when needed

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McCamey Transmission Plan

Phase 1 (Complete by 2005) Rebuild and upgrade of 69 kV and 138 kV network in McCamey

Increase export capability from 400 MW up to 1,200 MW $150+ million

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Transmission Congestion

Phase III 345 kV

Phase II 345 kV Phase I - Local Transmission Congestion (138 and 69 kV)

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Market Solutions
Pay for RECs and PTC lost due to ERCOT-ordered curtailments
Requires estimate of lost generation (uses actual wind speed at the time of curtailment) Reimbursement limited to $10 million max. and expires on 12-31-2006

Create Tradeable Generation Rights (TGRs)

Allows for 1 MW of wind generation to flow on the constrained transmission line Allocated to wind generation facilities based on their capacity share May be bought and sold among wind generators Provides a financial hedge 23

Operational Issues
Nothing major so far, but
- Power system dynamics and stability - Voltage support (reactive)

- Frequency control

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Success in the Wind!

Ahead of schedule in meeting the SB 7 mandate
Wind is a good resource
- Low cost energy source - Plentiful - Renewable with no emissions

Congestion is being addressed Operational problems are minimal (as long as wind remains a small portion of the total resource mix)
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Questions?

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