FERC OMTR MEETING

							NREL Energy Analysis Forum
 Market Outlook for Wind
       James H. Caldwell Jr.
 American Wind Energy Association
         August 13, 2001
   NREL Energy Analysis Forum
   Wind Energy Projects, Nameplate MW Capacity
Region    On-Line   In-Development     Economic Potential
                                     @$2 gas       @$4gas
West       1800       3000           35,000       200,000

Midwest     610        700             400        350,000

East         35        225             500          7,000

Texas       200        900             --          40,000

South         2         20            100            600

Total       2647      4800           36,000       600,000
NREL Energy Analysis Forum
                  What Wind Needs
–   Flexible near-real time scheduling
–   Penalty free imbalance settlement in liquid spot market
–   Long term non-firm transmission at volumetric pricing
–   Other market structure features common to needs of other
    resources
   • No pancaking
   • Robust secondary market in transmission rights
   • Network transmission access fees paid by load
– Robust regional least cost planning process
   NREL Energy Analysis Forum

                    Current Environment
• Rigid scheduling protocols with strong deviation penalties
• Imbalance settlements in dysfunctional “markets” or punitive cost
  based penalties
• Order 888 balkanization/pro-forma tariff as gospel
• Inflexibility of the “balanced schedule” and “firming services”
• Bias towards commodity strips and firm unit sales
• No short term transmission rights. No flexibility on partial resale
• No planning process
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                      Forecasting
• Real time (0-6 hrs): “smart persistence.”

• Near term (6-72 hrs): “smart climatology.”

• If forecast both of above with ~ 80% accuracy @ 95%
  confidence, then most of intermittency problem is
  mitigated.
• Load shape issues remain.
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                      What wind wants
• Recognition as an economically viable generating resource with
  certain characteristics that need to be accommodated by the grid just
  like all other generation resources
• Quick, complete, universal implementation of FERC Order 2000
• RTO “Function 9” to offer tariffed imbalance service for as available
  resources
• Public support for coordinated output forecasting research and data
  collection
• Support for temporary exemptions/special treatment pending
  maturation of wholesale markets
• Support for least cost long term transmission planning
• Public financing of major regional transmission infrastructure
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          Specific Upcoming RTO Issues
• CA ISO Tariff Revisions – July 27 Board Meeting

• RTO West Imbalance penalties

• MISO Imbalance penalties

• BPA/WAPA concurrence