This document summarizes the views of a utility manager on integrating renewable energy resources like wind and solar power. The manager expresses concerns that (1) adding more intermittent renewables could exacerbate technical grid issues before they are fully resolved, (2) the high costs of renewables may not create enough permanent jobs to justify the rate increases borne by customers, and (3) public policy priorities should not ignore technical grid constraints or total cost impacts to customers.

1. Washington Ocean Energy
Conference
Views of a Utility Manager
Presented November 8, 2011

2. Who am I
• I am a General Manager of a consumer owned
electric utility located on the coast of
Washington, but the views expressed here are my
own
• My background is:
– 11 plus years as GM
– 22 plus years as an Electrical Engineer
• My job is to provide reliable electricity at the
lowest practical cost
• My Utility has been in the power markets for
almost 4 decades

3. View from the Old Grid
• The Grid was designed to be in –Load/Resource balance
• Load determines resource requirements
– Base load is met with firm, base resources
– Increased loads are met with reserves on a dedicated and
predictable basis
– Worst resources penalized or rejected
• New resources are added as load demands
– Conservation is valuable in delaying resource requirements
• Transmission is built as needed to serve loads
• Transmission basically works well
• Cost Control is a policy objective

4. View from a Newly Evolving Grid
• Build resources based upon Public Policy objectives—not need
– A number of utilities now have excess resources and will have to get more
• Encourage the development and operation of renewable resources
through incentives
• Incentives rather than Load growth drives the development of
resources
• With excess resources, conservation is now becoming a costly problem
• Integration is driven by policy in spite of problems
• Transmission and power are separated to a large degree
• Transmission usually gets the blame even when I don’t believe it is the
problem
• Cost control not a priority

5. Power Purchase Contracts
• Contracts used to be much simpler and were based
upon:
– Purchases among utilities
– Few counter parties
– No independent power producers
– Little or no intermittent (wind, solar) resources
• What there was mostly existed under PURPA
– Utilities made the decisions
– Utilities controlled the transmission (for good or bad)
• If you’re in the markets now you’ll need a lot more
employees or consultants and contractors
– Oh, by the way you better have transmission rights

6. What has changed in markets
• Introduction of intermittent (wind and solar) resources
• Various amounts of deregulation in the markets
– None, some and total (states and regions are different)
• Separation of power, and transmission within markets (you can have
the water, but you better have the pipe to move it)
• Many different counter parties
• Prices are based upon Natural Gas and heat rates
• Utilities large and small have significantly higher costs
• Resources that seem to have preference rights and expectation to
generate, regardless of problems or system security
• Policy makers are getting much more involved in utility world with:
– Oversight of Integrated Resource Plans (IRP’s)
– Enforcement of Renewable Portfolio Standards (RPS’s)
– Obvious desire to push the utility industry towards specific resources

7. Concerns
• Adding additional large wind renewables
before resolving some key technical issues:
• Transient stability
• System response
• Load resource imbalance
• Voltage collapse—low voltage ride through(lvrt)
• WPP collector issues
• Harmonics and resonance
• Undesirable dc loop flows

8. Concerns Continued
Insufficient System Flexibility
• The need to reduce response time for conventional
generation
• Turning demand into a flexible resource
– Why continue conservation when we desire to add instantaneous
loads to absorb too much generation?
– Insufficient System Operational Tools
• Need more accurate wind forecasts
• More accurate real time information on generation levels
• Constant assessments of the power system stability to keep
the power system secure (need to be able to turn off wind
sometimes which is counter to incentives to operate)

9. Concerns Continued
– Offshore wind generators are much larger than
onshore, usually 7MW’s per tower vs. 2.5MW’s
– Offshore wind generators are much more
complicated to connect and to integrate
– Offshore wind is very costly to build and to
connect to the system (likely billions of dollars)

10. Possible Solutions
• Regional Transmission
Organizations (RTO)
• FEED-IN-TARIFFS (TIF)
• SMART GRID

11. RTO’s
• The transmission system is often blamed for
integration problems
– When the problem is usually that there is too much
intermittent generation in the wrong place creating
those irritating technical problems
– The belief seems to be that more transmission solves
all the problems, to me this is a lack of understanding
of technical problems
• Shouldn’t we have a Regional Transmission
Organization to solve the problem?
– Some areas think so but this was rejected in the West
several years ago for a number of reasons, but that
apparently is old grid stuff

12. RTO’s Continued
• It was regionally determined during anti RTO
campaign (WECC wide Grid West was created as
alternative) back in 2002 that an RTO would have:
– Startup costs of at least $80 million
– Annual operating costs of $125-150 million
– Taxing authority of $160-210 million annually
– Would not necessarily get much for that as it basically
becomes a market bidding and clearing entity
• Why would generation developers like RTO?

13. RTO’s Continued:
• Developers probably like this concept because with an RTO much of
the financial burdens of transmission expansion for renewable projects
is removed from the generators through a cost allocation system. With
this system the cost is assigned to the loads served by those
transmission systems, not to the developers.
• These transmission systems are very expensive and offshore dc
systems are even more so, but from whose perspective the beneficiary
or the payer
• We don’t have sufficient loads in the NW to absorb this so they appear
to be targeting California which would require a 1100+ mile submerged
500kV direct current (dc) cable (about $2.3 billion)
– This also requires two very large and complicated intertie substations to
connect to existing grids (about $500 million)
• To my knowledge no one has studied the impacts to marine life of this
type line over that distance and dc has a nasty objection to being
interrupted especially at very high voltages and now its underwater

14. RTO’s Continued
• Federal Energy Regulatory Commission’s recent order 1000
– New transmission can be built:
• Not just for least cost reasons
• Not just for reliability needs
• Can be built now because it is good Public Policy
– Who stands to benefit from this?
• Developers who build generation where it is not needed so they can get the energy to
distance loads.
• Does this mean the distant grid can do any better at integrating this resource than the
local grid?
• Europe is held up as a good example yet most European Utilities
are national entities, so the work being done there falls on the
citizens as added costs. I worry that this is the direction we’re
heading when things become based upon some ones
interpretation of good Public Policy. Is this a good thing? I
certainly don’t know but I wonder

15. Feed In Tariffs (FITs)
• Feed in Tariffs are fees paid to individuals or businesses
that install renewables that can be net metered or
integrated into the electric grid at the local level
• These are great for those who receive them but
expensive for ratepayers who absorb the costs
• Germany is one of the models for this:
– In Germany the FIT for renewables is 0.50 Euros or $0.70
US.
– Germans pay their national utility a high rate per kwH
• In 2010 it was 0.229 Euros or $0.32 US
• In 2011 this was 0.267 Euros or $0.37 US (a 15% inc)

16. Denmark-A case study for Renewables
• Denmark's wind penetration is 28% in the west and 13% in
the east
– California is aiming for 33%
• To integrate wind, they mostly use natural gas and because
of this they have one of the highest CO2 footprints in
Europe (Denmark is flat and has no hydro).
– Now for load increases to absorb wind the Danes are looking at
electric boilers at CHP’s, is this conservation
• The Danes electricity rates:
– In 2010 it was 0.255 Euros or $0.357 US
– In 2011 it is 0.2947 Euros or $0.41 US (a 15% increase)
– Europe avg. in 2011 was 0.165 Euros or $0.23
– In Washington the avg. is around $0.075 (82% less than the
Danes, 80% less than Germany and 64% less than Europe)

17. Smart Grid to the Rescue
• Technology is making the system more responsive
and reliable
• We are getting better at more real time operation
• We are getting smarter at how we run the
system, but the term “Smart Grid” is more hype
than fact, at least as it exists now
• We cannot defy physics and intermittent
resources present real time problems that must
be solved

18. Jobs Creation
• Lets make sure any job creation is permanent and
worth the public money put into it if that’s the
point
• We should ensure in this struggling economy that
we don’t sacrifice jobs in other industries to
promote one or two industries
• Does this generate a lot of jobs?
– Michelle Malkin reported that in Spain:
• Every green job created resulted in the net loss of 2.2 jobs.
• Only 1 in 10 of those green jobs became permanent
• The study was done by Dr. Gabriel Calzada, an economics
professor at Juan Carlos University in Madrid

19. Conclusion
• If this is about permanent job creation and business in the NW and not
being just a distant resource it would be a good thing, but I’m very
concerned that this would not be the case. Whatever we do with jobs
should be permanent not just a flash in the pan
• Our economy is not growing and loads are declining. Adding expensive
renewable cost burdens doesn’t make economic sense at this time
• There are many problems associated with intermittent generation that
must be solved before we build more and make a much bigger problem
– We can’t always override physics
• Public Policy will ultimately determine what happens, I just hope that all
elements and costs are considered so that we make wise policy decisions