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SPP, Wind, and Transmission Expansion

Oklahoma Clean Energy Independence CommissionFebruary 25, 2010

Les Dillahunty, Senior Vice President, Engineering and Regulatory Policy

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Introduction

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Our Beginning

• Founded 1941 with 11 members

Utilities pooled resources to keep Arkansas aluminum plant powered for critical defense

• Maintained after WWII for reliability and coordination

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3 Interconnections / 8 NERC Regions

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Operating Region

• 370,000 square miles service territory

• 50,575 miles transmission lines:

69 kV – 16,182 miles115 kV – 10,041 miles138 kV – 9,284 miles161 kV – 4,469 miles230 kV – 3,831 miles345 kV – 6,662 miles500 kV – 106 miles

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Members in nine states:

Arkansas

Kansas

Louisiana

Mississippi

Missouri

Nebraska

New Mexico

Oklahoma

Texas

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56 SPP Members

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Quick Statistics

• 66,175 megawatts capacity resources

• 847 plants – 6,079 substations

Fuel Type Percentage Capacity

Coal    40% 

Gas/Oil      42%

Nuclear     3% 

Hydro    4%

Wind     4%  

Other 7%

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Wind Integration and Transmission Expansion

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Wind In Service: 2001

Source: NREL

2009

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Wind Installed by Year (2002-2009)

13Source: SPP

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Renewable Energy Standards By State

Source: SPP

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w/ HVDC Proposals

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Generation Interconnection Requests

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Generation Interconnection Clusters and Major Cities

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500 kV-DC

116’

800 kV-DC

138’

765 kV-AC

133’

345 kV-AC

88’

500 kV-AC

103’

50m Wind Turbine

164’

92’

80m Wind Turbine

262’

151’

100m Wind Turbine

328’

164’

To Scale Height Comparison

Made by JT

Produced by Midwest ISO

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Correlation Between Wind and Load

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Wind Status in Oklahoma

• 865 MW installed through 3Q 2009

• 3% wind generation in 2008

• Ranks 12th total wind installation

Installed WindOnline Manufacturing

21Source: AWEA, NREL

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Oklahoma Weatherford Wind Energy Center

• $300,000 in annual lease payments to landowners

• $17 million in property taxes over 20 years

• 147 MW

• 150 workers during construction peak; 6 full-time O&M positions

22Source: NREL

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Oklahoma CPV – OU Spirit project

• Annual allocations from addition of 2.3 MW Siemens turbines

$1,057,000 in new tax dollars for two school districts

CareerTech allocation from county revenue will increase by $227,000

County general funds will increase by $190,000 –will assist with building new jail

EMS services will receive $57,000 increase

County Heal services will receive $20,000 increase

23Source: Woodward County Assessor

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Oklahoma, Wind, and Economic Development

24Source: NREL; Cole, Hargrave Snodgrass, and Associates; Oklahoma Department of Commerce

• Economic benefit of 1,000 MW = $1.25 billion

5,530 construction jobs, 215 permanent jobs

• Average wages in component manufacturing industry = $40,709 - 15% higher than average state wage

• Strong correlation between Western OK counties that have lost population in recent decades with counties that have significant wind resources

• In many cases, land suited for wind development has lower per-acre returns for agricultural use

• Sooner Survey of 600 registered voters:

72% of Oklahomans willing to pay more for wind-generated electricity

91% approve of further development of wind farms

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Component Manufacturing-Oklahoma, Kansas

• Bergey WindPower (Oklahoma)

Employs 42, manufactures one turbine per day

• DMI Industries (Oklahoma)

Employs 215

• Siemens (Kansas)

• Broke ground September 2009

• Will invest $50 million in new facility

• Expected to employ 400 workers by 2012 @ >$16/hour

• Planned annual output = 650 nacelles

25Sources: NREL, Wichita Eagle

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Arkansas Becoming Manufacturing Hub• LM Glasfiber

Employs 300 workers @ $12-$15/hour

Invested $95 million in Little Rock

• Mitsubishi Power Systems

Announced October 2009

$100 million plant will bring 400 jobs in 2011

• Nordex

Sept 2009 - Broke ground on $100 million plant

Expected to employ 700 by 2014

• Emergya Wind Technologies/Polymarin

Plans to invest $16 M and create 830 jobs @ $15/hour26

Installed WindExisting Manufacturing

Announced manufacturing

Sources: NREL, AR Economic Dev. Commission, Nordex, Arkansas Business

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SPP is Building TransmissionNEW SPP Transmission - Circuit Miles

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010

YEAR

Cir

cuit

Mile

s 700 kV

300 kV

200 kV

100 kV

69 kV

ProjectedHistorical

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Transmission Expansion - CostsCost of New SPP Transmission - Circuit Miles and

Associated Upgrades

0

50

100

150

200

250

300

350

400

2006 2007 2008 2009 2010

YEAR

Co

st in

Mill

ion

s

Historical Projected

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Transmission Expansion - MilesNEW SPP Transmission - Circuit Miles

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010

YEAR

Cir

cuit

Mile

s 300 kV

200 kV

100 kV

69 kV

ProjectedHistorical

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Draft EHV Overlay

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Group 2

Priority Projects

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Quantitative Benefits

• Study quantified NPV benefits of $1.5 billion over 40 years

• B/C Ratio of 0.74

Total $$ B/C Ratio

APC $819 M 0.41

Losses $ 26 M 0.01

Wind Revenue* $266 M 0.13

Fuel Diversity $399 M 0.20

Reliability $ -20 M (0.01)*(Adjusted down) $1.5 B 0.74

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Qualitative Benefits

Total (B/C at 20% of $$) $$ B/C Ratio

Taxes (table 28): $ 34 M 0.00

Econ. Trans (table 27) $1,000 M 0.10

Wind Earning (table 5a) $ 560 M 0.06

Econ Operating (table 5a) $1,900 M 0.19

Wind Earning Construct (table 5a) $ 766 M 0.08

Econ Construction (table 5a) $2,300 M 0.23

Total $6,500 B 0.66

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Examples of Other Transmission Benefits

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Larger Transmission Reduces Right of Way

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Cost Allocation

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Regional State Committee (RSC)

Cost Allocation Working Group (CAWG)

Arkansas Chairman Suskie Sam Loudenslager / Pat Mosier

Kansas Commissioner Wright Tom DeBaun / Jim Sanderson

Oklahoma Commissioner Cloud Bob Vandewater / Bill Reid

Missouri Chairman Davis Adam McKinnie

Nebraska Chairman Siedschlag Tim Texel

New Mexico Commissioner King Craig Dunbar

Texas Chairman Smitherman Richard Greffe / Bridget Headrick

3737

RSC and CAWG

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Highway/Byway Cost Allocation

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Voltage Regional Zonal

300 kV and above 100% 0%

100 kV - 299 kV 1/3 2/3

Below 100 kV 0% 100%

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Current and Future Markets

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What kind of markets does SPP have now?

• Transmission: Participants buy and sell use of regional transmission lines that are owned by different parties

2009 transmission market transactions = $486 million

• Energy Imbalance Service (EIS): Participants buy and sell wholesale electricity in real-time

Market uses least expensive energy from regional resources to serve demand (load) first

SPP monitors resource/load balance to ensure system reliability

2009 wholesale market transactions = $1.14 billion

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• Provides “one-stop shopping”for use of regional transmission lines

• Consistent rates, terms, conditions

• Independent

• Process > 12,000 transactions/month

• 2009 transmission market transactions = $486 million

Transmission Service

…a 1,621 page transmission tariff on behalf of our

members and customers.

As “Sales Agents,” we administer …

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Transmission Service

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Transmission Service

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EIS Market Operation

…and follows over 200 pages of market protocols.

SPP’s energy market is like the “NYSE”…

• Monitors supply/demand balance

• Ensures economic dispatchwhile meeting system reliability

• Provides settlement data

• 2009 wholesale market transactions = $1.14 billion

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Benefits of current real-time energy market

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SPP Pricing Zone Information

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Impact of Congestion on Locational Prices

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Impact of Congestion on Locational Prices

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Why develop new markets?

• SPP conducts complex cost-benefit studies before beginning any new market development

Under Regional State Committee oversight

2005 Charles River and Associates (CRA) analysis of the EIS market:

Estimated benefit of $86 million for first year

Actual benefit of $103 million for first year

• New markets will bring estimated average additional benefits of $100 million

According to 2009 Ventyx analysis

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What type of new markets is SPP implementing?

• Day Ahead: SPP determines what generating units should run the next day for maximum cost-effectiveness

• Ancillary Services: Market to buy and sell reserve energy that:

Meets emergency needs

Regulates instantaneous load and generation changes

Maintain electricity quality (keeping voltage up, etc.)

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Day Ahead market makes regional generation choices

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Day Ahead market offers regional diversity

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Benefits of Ancillary Services market• Greater access to reserve electricity

• Improve regional balancing of supply and demand

• Facilitate the integration of renewable resources

Perfect Storm of Complex Issues

Growth in demand

Aging infrastructure

Rising gas prices

Lack of transmission

Growth in uncommitted capacity

Challenges with integrating

renewables into grid

Political and technical challenges

Greenhouse gas emissions

Lengthy permitting for

new generation

Trade imbalance

SPP.org 58Source: EPRI

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Summary/Recommendations/Next Steps

• Know the players

• Is it local, state, national, or international?

• Are you really “green”?

• Know the facts – take a position.

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