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OMPA’s Wind Power Project

OMPA’s Wind Power Project. Who We Are. State Governmental Agency Municipally governed Wholesale electric provider to 35 of Oklahoma’s 64 Municipal Electric Systems. Why Wind?. Need for additional generation (plus diversity) City customers’ growing interest in Green Power

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OMPA’s Wind Power Project

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  1. OMPA’s Wind Power Project APPA: New Generation - Emerging Technologies

  2. Who We Are • State Governmental Agency • Municipally governed • Wholesale electric provider to 35 of Oklahoma’s 64 Municipal Electric Systems APPA: New Generation - Emerging Technologies

  3. APPA: New Generation - Emerging Technologies

  4. Why Wind? • Need for additional generation (plus diversity) • City customers’ growing interest in Green Power • Draft bills at national level, state government interest; OREC • Other state utilities’ interest • Suppliers/marketers APPA: New Generation - Emerging Technologies

  5. Generation Fuel Mix for 2004 APPA: New Generation - Emerging Technologies

  6. Consumer Benefits • Helps protect the consumer against increases in fuel prices • Project scale allows a competitive low price - consumer prices should not increase due to the addition of wind especially versus current and forecasted marginal costs • Allows utilities to offer customers the choice of purchasing clean power • Project provides enough energy to power almost 20,000 Oklahoma homes • Adds another “fuel type” to OMPA’s mix of coal, Natural gas, and Hydro APPA: New Generation - Emerging Technologies

  7. Supply Portfolio Benefits • Long-term fixed price contract provides hedge against volatility in fuel prices • Wind is competitively priced against other new fossil generation • Wind is a prudent part of a diversified portfolio • Easily blended into a system with virtually no incremental system costs • Quick to market - from conception to commercial operation versus other generation alternatives - six months of construction time • Reduces the need to purchase renewable energy from out-of-state if a RPS (Renewable Portfolio Standard) adopted APPA: New Generation - Emerging Technologies

  8. Rural Economic Benefits • Jobs • Short-term - 80 to 120 construction positions • Long-term - 5 to 8 permanent well-paying positions ($20k to $70k) • Creates business opportunities in rural areas with few other significant economic development opportunities • Increases/diversifies income for ranchers – oil/gas royalties declining • Increases local tax revenue - typically composes a significant percentage of the historical annual operating budget • Use of local contractors, suppliers, and services: land surveys, legal services, fuel, concrete and rock, food, and lodging • Increases local tourism APPA: New Generation - Emerging Technologies

  9. Some Issues OMPA Considered in its Wind Program • How will wind power fit OMPA’s program? • Transmission • Intermittency • Major issue, FERC OATT major impediment • Tax credits • PTC’s Federal $0.018/kwh, State $0.0075 Kwh • 5 year depreciation with a bonus • Short-term forecasting • Capacity value APPA: New Generation - Emerging Technologies

  10. APPA: New Generation - Emerging Technologies

  11. APPA: New Generation - Emerging Technologies

  12. Green power 40. How important is it to you that your utility company offers “Green Power” programs, or more environmentally friendly sources of energy, to the customer like Wind Energy? APPA: New Generation - Emerging Technologies

  13. OMPA’s RFP • 50 MW Must Take Purchase • OMPA shall take the output of up to 50 MW (rated capacity) of wind generation • Priced at a discount to OMPA’s avoided cost • Avoided cost estimated using coal energy (Nov – Feb), 7,000 Btu/kWh gas energy on peak and coal energy off peak (Mar – May, Oct) and 10,000 Btu/kWh gas energy on peak and coal eneergy off peak (Jun – Sep) APPA: New Generation - Emerging Technologies

  14. Responses to RFP • FPL Energy • Sleeping Bear, LLC (RES and Chermac) • Zilkha (2 responses – Durham and Blue Canyon) • Sea West • Cuatro Vientos Power Partners, LLC (enXco) APPA: New Generation - Emerging Technologies

  15. FPL Energy Response • Term – 25 years • Pricing • $23.60 on peak, $12.00 off peak ($18.50/MWh average) for years 1-5 • Greater of $23.60 on peak or 90% of OMPA’s avoided cost, $28.00 cap for years 6-25 • Required equity participation by OMPA APPA: New Generation - Emerging Technologies

  16. …FPL Energy Response • Point of delivery – WFEC Mooreland Substation, where OG&E also has an interconnect • Availability by 2nd quarter of 2003 • Actually came on line September 29, 2003 • First commercial wind farm in Oklahoma APPA: New Generation - Emerging Technologies

  17. Evaluation of Responses • FPL Energy response most attractive • Met OMPA’s internal economic hurdle of not increasing costs to participants • Debt financing required, credit support critical • Other proposals • One met internal hurdle, credit support doubtful • Lowest cost purchase power proposal did not meet OMPA’s internal hurdle APPA: New Generation - Emerging Technologies

  18. Wind Power Assessment Committee Oklahoma Wind Generators APPA: New Generation - Emerging Technologies

  19. Oklahoma Wind Generators • Oklahoma Utilities purchase wind energy from wind power developers under long term contracts • OG&E • Oklahoma Wind Energy Center near Woodward; Operated by FPLE; 34 wind turbines • 51 MW, Commercial Operation Sept. 2003 • OMPA • Oklahoma Wind Energy Center near Woodward; Operated by FPLE; 34 wind turbines • 51 MW, Commercial Operation Sept. 2003 • WFEC • Blue Canyon Wind Farm; near Lawton, 45 wind turbines owned and operated by Zilkha • 74.25 MW • Commercial Operation Dec. 2003 APPA: New Generation - Emerging Technologies

  20. OK Wind Generation Capacity (MW) APPA: New Generation - Emerging Technologies

  21. APPA: New Generation - Emerging Technologies

  22. Operational Issues Associated with Wind APPA: New Generation - Emerging Technologies

  23. Summary Statistics • OG&E, OMPA, and WFEC together generated approximately 500,000 MWH of wind energy during first year of operation • The cost of this generation was approximately $12.5 million, or about $25/MWH • Installed Wind Capacity: • WFEC 74.25 MW • OG&E 51 MW • OMPA 51 MW • Total installed = 176.25 MW APPA: New Generation - Emerging Technologies

  24. Good Things • Wind equipment and facilities operating well • Communities have accepted wind facilities and have benefited • Good jobs; property tax revenue • Capacity factor approximately 36% (near forecast) • Stable wind energy contract rates attractive compared with gas prices at or above $5/MMBtu • Environmentally clean green power resource for Oklahoma customers APPA: New Generation - Emerging Technologies

  25. Not so Good Things;Wind Timing Issues • Over half of wind energy produced during off peak hours • Wind generation moves in opposite direction of load more often than not • Wind is uncertain; difficult to forecast and schedule, but this is improving APPA: New Generation - Emerging Technologies

  26. Wind Production Curve v. Load Curve (Annual Hourly Averages) Average Production by Hour Average Hourly Load 45 900 800 40 700 35 600 500 30 400 25 300 200 20 100 15 0 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 0:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 APPA: New Generation - Emerging Technologies

  27. Operational Integration APPA: New Generation - Emerging Technologies

  28. Impacts of Wind Generationon Utility Operations • When wind production occurs off peak • Wind energy sometimes backs down gas generation, but sometimes coal • Wind cost approximately $25 MWH • Compared to other generation - examples: • Coal at $11 MWH ($1.25 coal) • Gas combined cycle at $42 MWH ($6 gas) • Gas-steam at $63 MWH ($6 gas) • Larger quantities of wind production off peak will displace larger proportions of coal generation off peak APPA: New Generation - Emerging Technologies

  29. Impacts of Wind Generation (cont.) • Must be backed up with spinning capacity to maintain reliability. At this point we don’t know what back-up level is required but the level does depend on the wind penetration level and the accuracy of wind power production forecasting • Wind energy runs counter to load during many hours, which increases generation regulation duty • Generator Imbalance Penalties on Transmission System for wind generation forecasting errors; this will improve with implementation of the SPP’s EIM in late 2005 APPA: New Generation - Emerging Technologies

  30. SPP Tariff Scheduling Penalties • SPP OATT Ancillary Service Schedule #4 • Problem is wind forecasting • OMPA SPP penalties for load following services would have exceeded cost of wind energy itself • OMPA cost of wind energy $2.5 million • AS #4 penalties for undersupply would have been $3.4 million if under SPP tariff (135% of energy cost) • A TDU issue – control area operators not subject to these charges • Major barrier for further wind development APPA: New Generation - Emerging Technologies

  31. Summary of First Year Operations • Energy produced: 154,019 MWh • Undersupply 40,668 MWh (+/- 2 MW) • Oversupply 14,320 MWh (+/- 2 MW) • Cost of undersupply (if under tariff) • $3,403,000 compared to wind • $1,370,000 compared to gas @ 10,000 HR • Studies say $3.11/MWh; however, SPP is in the $13.2 – 22.1/MWh range APPA: New Generation - Emerging Technologies

  32. SPP Capacity Credits for Wind • Dependable capacity in SPP • SPP proposes to allow only 4% of nameplate • Other RTOs allow up to 30% • Cost ~ $28,900/kW installed capacity • Nearly 10x nuclear capacity cost • Most restrictive of all NERC regions • SPP methodology is a barrier to future wind production and a penalty to investment in Oklahoma APPA: New Generation - Emerging Technologies

  33. Operational Integration APPA: New Generation - Emerging Technologies

  34. Interconnection Issues • Transmission Expansion Costs are significant; • Wind resource is frequently remote from load • Radial lines to wind sites required • Southwest Power Pool Transmission Tariff penalizes wind scheduling errors • Hourly wind forecasting not that accurate (data from OK production thus far shows 85% to 90% of the hourly errors are between –5 MW and +15 MW) • SPP imbalance penalties for load following services exceeded cost of wind energy itself for OMPA during 2004; SPP EIM may improve or eliminate this situation APPA: New Generation - Emerging Technologies

  35. Issues for Future Wind Development in Oklahoma • Larger quantities of wind energy could displace larger proportions of low cost coal energy due to generally off peak nature of wind production • Transmission costs • Non-discriminatory transmission construction and cost allocation of transmission costs • Transmission System expansion needs are expensive and may only be useful to connect additional wind generation • SPP Transmission penalties for forecasting errors are high APPA: New Generation - Emerging Technologies

  36. Issues for Future (Cont.) • High Installation Costs • SPP recognizes only a small percentage of a wind facility’s nameplate capacityas dependable • This results in very high effective installation costs for wind facilities (from $8,000/kW (@ 15% capacity factor) to $30,000/kW (@ 4% capacity factor) • Wind forecasting needs to improve • Scheduling errors lead to imbalance penalties, which are high APPA: New Generation - Emerging Technologies

  37. Issues for Future (Cont.) • Technologies to improve wind production load shape and capacity factor • Compressed air storage • Combination with other renewable generation, e.g., hydro, biomass • Combination with low cost fossil generation, e.g., waste gas, re-cycled oil • Multiple wind farms operating together taking advantage of the diversity in the timing and level of production across the farms APPA: New Generation - Emerging Technologies

  38. Edmond’sProgram • Customer can purchase • 100% wind energy, or • 100 kWh blocks • Additional cost is 1.8 c/kWh, but • Fuel cost adjustment is waived • Note – OG&E customers pay 2c/kWh, and fuel cost adjustment is also waived

  39. Marketing materials available to OMPA cities • Edmond and OMPA will modify appropriately • Participating city pays printing and distribution costs

  40. OMPA Cities participating (so far): • Edmond • Altus • Tonkawa • Frederick • Okeene • several others in process

  41. Oklahoma Municipal Power Authority Oklahoma Wind Energy Center Woodward, Oklahoma

  42. Economic Impacts of Forecasting Constraints on Wind Park Operations Oklahoma Municipal Power Authority Presented by Jonathan Horn APPA: New Generation - Emerging Technologies

  43. Introduction • Forecasting techniques • FPLE forecaster employed by OMPA • Economic impacts of forecast error on OMPA • Conclusions APPA: New Generation - Emerging Technologies

  44. Forecasting Horizons • Short-term: Time horizons of zero to six hours. • Serve a market function • Long-term: Time horizons of six hours to one week. • Serve a scheduling function APPA: New Generation - Emerging Technologies

  45. Short-Term Forecasting Techniques • Physical approach • Statistical approach • Combination of physical and statistical APPA: New Generation - Emerging Technologies

  46. APPA: New Generation - Emerging Technologies

  47. Long-Term Forecasting Techniques • Take relevant NWP data • Downscale data to hub height • Convert wind speed to power output using the power curve • These models are generally outperformed by statistical models in the short-term APPA: New Generation - Emerging Technologies

  48. FPLE Model Employed by OMPA • Produces a forecast for “today” and each of the next five days • Out to 21 hours the model uses Aviation Model Output Statistics (AVN MOS) or Forecast System Laboratory Rapid Update Cycle (FSL RUC) wind speed maps • The data is graded and the best available data is used to determine surface wind speed • Corrections are applied based on wind gust up logic, thunderstorm logic, and direction change logic APPA: New Generation - Emerging Technologies

  49. FPLE Model Employed by OMPA • Medium term model from 21 hours to 2 days uses AVN MOS when available, otherwise uses NGM MOS • Applies correction based on wind direction change logic • Long term forecast for 2-5 days uses NWS MRF data APPA: New Generation - Emerging Technologies

  50. Forecasting Impacts on OMPA • Cannot follow load dynamically with few exceptions • Must adjust next hour tags by 20 minutes till the top of the hour • Conduct market trades three hours out APPA: New Generation - Emerging Technologies

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