CALIFORNIA WIND ENERGY CONSORTIUM FORUM TUESDAY, DECEMBER 17, 2002 TO WEDNESDAY, DECEMBER 18, 2002 UNIVERSITY OF CALIFORNIA, DAVIS ALPHA GAMMA RHO ROOM DAVIS, CALIFORIA REPORTED BY: Kathy L. Swinhart, CSR 10150 REPORTED BY: Angela L. Weston EDITED BY: Henry Shiu AGENDA ------ TUESDAY, DECEMBER 17, 2002 KEYNOTE SPEECH: Terry Surles, California Energy Commission PANEL ON WINDPLANT DEVELOPMENT ISSUES: MODERATOR: Fred Schwartz, San Francisco Public Utilities Commission SPEAKERS: Kevin Jackson, Dynamic Design Engineering, Inc. Alan Lamont, Lawrence Livermore National Laboratory Prab Sethi, California Energy Commission Pramod Kulkarni, California Energy Commission PANEL ON WINDPLANT PLANNING CHALLENGES: MODERATOR: Charles Bennett, Environmental Science Associates SPEAKERS: Dick Anderson, California Energy Commission Rick Russell, Carlton Engineering Paul Migliore, National Renewable Energy Laboratory Hal Romanowitz, Oak Creek Energy Systems, Inc. WEDNESDAY, DECEMBER 18, 2002 KEYNOTE SPEECH: Randy Abernathy, California ISO PANEL ON METHODS FOR MARKET EXPANSION: MODERATOR: Bruce White, University of California, Davis SPEAKERS: Chuck McGowin, EPRI Nancy Rader, California Wind Energy Association Warren Byrne, Foresight Energy Company PANEL ON DISTRIBUTED GENERATION WIND SYSTEMS: MODERATOR: Kevin Jackson, Dynamic Design Engineering, Inc. SPEAKERS: James Foster, James Foster Enterprises Bob Yinger, Souther California Edison Company Mike Bergey, Bergey Windpower Company TUESDAY, DECEMBER 17, 2003, 1:05 P.M. MR. VAN DAM: Good afternoon. Welcome to our -- to Davis campus, and I'm glad that we have our meeting today and not a few days ago. I saw the sun today. Welcome. And I'm glad to see so many of you here at our first California Wind Energy Consortium Forum. Give you a little bit of background. The Consortium got started just nine months ago, and its funding from the California Energy Commission, but the idea is to focus on wind energy. But the mission of the Consortium really is to support the development of safe, reliable and environmentally sound and portable wind electric generation capacity within California. And to fulfill this, this mission, we plan to work with a wide range of organizations and people, including industry, state and federal agencies, academia, and everybody who's interested in wind in particular in the state of California. So, again, this forum is -- we hope to do this on an annual basis. This is kind of our trial balloon, and I'm glad to see that so many of you got our publications and notices that we have this event today and tomorrow. So, today from one until five o'clock, and then there is a reception with no-host bar that will be outside here. And then we start in the morning again at 7:30. We'll be available here for continental breakfast, and 8:15 then the program starts again until about noon tomorrow afternoon. One thing was left out of the packet that you got when you registered early today, and that was a questionnaire. And I'd like to kind of send this around, so if you have a chance in the coming weeks to fill it out and return it to us to give us some feedback about these events. Let's see. A few more things. The plan is to transcribe everything what we say here in the coming two days, so when we get into questions and answers later on in the program, I'd like you maybe to indicate who you are and your -- the organization you're with. That would really help us later on in terms of getting a whole report together of this forum. The report will include the transcribed material plus all the graphs and all the materials that are presented here today and tomorrow. And that will be available on our website probably some time in January. It will probably take us a few weeks to get everything together, but some time in January it will be available to you. And all of you will be getting an E-mail on that when that is available. I'm not sure yet whether it will be password protected, but if it is, then you'll also get the I.D. and password information in that E-mail. Let's see if there's anything else that I should be mentioning. I don't think so. I think without further ado I'm going to start the program. And the first speaker today, keynote speaker is Dr. Terry Surles from the California Energy Commission. Dr. Surles got his Ph.D. in chemistry, and he worked at the Argonne National Lab. He was a general manager for environmental programs until 1997, then moved on to the California EPA where he served as a deputy secretary for science and technology. In 1998, he started working for Lawrence Livermore National Lab right here in -- just down the road from here in Livermore as an associate lab director for energy programs. And then in 2000 he moved to the California Energy Commission as a PIER program manager and assistant director for science and technology since October of 2000. And we asked him to kind of talk today to you about the PIER program, that is the -- PIER stands for Public Interest Energy Research program at the CEC and in particular involving renewables and how they fit into that program. And I'd like to introduce Mr. Surles to the program. MR. SURLES: Thanks. This -- I'm going to talk a little bit today about the PIER program and some of the other things and then how the renewables and wind blend into it. But I suspect that as George Simons and Dora Yen are talking and working with you you'll be hearing more about that, so it'll be somewhat of an overview. And then talking about some of the issues we face in trying to innovate technology, get technologies into the marketplace and so on. And so with that, George and Dora insisted that this was a convivial group. At times some of our stakeholders can be obstreperous, but we -- they assured me that everybody is going to work together here. That's the advantage of having this Wind Consortium. UNIDENTIFIED SPEAKER: [Unintelligible]. MR. SURLES: I don't know. I think that looks more like George. Okay. You know, some of the background. Everybody -- again, as Case mentioned, I've spent more of my time in the Mid West. I'm actually not from the area, either. But, you know, they -- you know, a lot of times Californians think of themselves as unique, and there are unique issues we've got to work with, but some of them are the -- some of the issues, the majority of the issues are the same as all of the other parts of the country must face, in fact, other parts of the world. And basically it's built around the economic issues, the environmental issues and belatedly the security issues. But security for us has always been an important resource like oil, and now it takes on additional critical infrastructure issues that we have to be thinking about in terms of what we're doing. And clearly, energy costs fundamentally affect the overall economy. I mean, those of us who are old, you know, got into this game because in the '70s, we basically had a whole decade of stagflation because of -- in large part due to the spurred up energy situation. And in fact, to a large extent, the first Bush lost because after winning the Gulf War, we had a recession that in large part you could blame on the spike in energy prices. Well, having said that, you know, in California we do -- whenever I'm in larger areas where we want to gloat, we could say that we really are the fifth largest economy, although I think recently France has snuck up past us again. But basically we're -- and, you know, any Francophiles in here, I wouldn't want to say that. But at any rate, we're a large economy, so we do have the funding to -- to get on with things and do things significant for the state. And we historically have done them in a lot of energy and environmental areas. Having said that, this is -- this is not an easy task. We've actually done these for California, too. This is gratis Livermore developing these things. And this is -- you see this is very complicated, and for us to work on things, you know, we work on first of all the -- how do we make more efficient use of our energy, because we've got a lot of energy that is wasted. And then we have to be thinking about climate change, and I'm going to talk about that more later. So it's all the fossil fuels here that go into this. And finally, we really have to break the -- our harem fix on petroleum, and so all of these things are some things that we have to be thinking about for the future. And in that sense, because of what California's doing and trying to do, we can really take the lead. Now, we are different in the sense of production of electricity, that we clearly have a different mix from the rest of the country. But having said that, when people say we have no coal in the state, well, actually, we get a lot of coal by wire, and so we use a lot of coal by wire in terms of electricity. So we have to take into account a lot of these things. And clearly we're trying to build the renewables portfolio here and further the -- for the purposes of this meeting, the wind -- the wind energy activities. The renewables look something more like this. As you see, another way of looking at our mix for -- and this is 2001. The other slide is for 2000. Most of our renewables are geothermal, and wind currently 12 percent, and we're trying to build that -- that amount of wind. And -- UNIDENTIFIED AUDIENCE MEMBER: 12 percent wind is 12 percent of electricity consumption? MR. SURLES: 12 percent, 12 percent of renewables. UNIDENTIFIED AUDIENCE MEMBER: Oh, okay. MR. SURLES: Actually, I'm sorry. I breezed through that. Basically geothermals are half of the renewables, and then it works out so wind is 12 percent. And if you look at the renewable generation by type, this is how things have changed over the recent past. I think as you know for a while, we -- and I'll have some other slides on this -- there's actually -- the amount of generation from renewables was actually going down for a period of time. Now it's going back up and in large part due to the renewable -- the renewable public goods program. And I'll be talking about that in terms of a renewable portfolio standard later on. Okay. So with that as a background, we -- there are some things that were done under the Deregulation Act that established a large fund for end use energy efficiency run by the Public Utilities Commission, and that's about two hundred -- if I remember right, about 240 million a year. The renewable investment activities that are being run by the public goods program and California Energy Commission is at 135 million a year. And then finally the R&D program is funded at 62 million a year. And basically, this is founded on the fact that we have to develop a portable solution, and ultimately any of these solutions we're working on in any of the technologies, if they don't get into the marketplace and they're not economical, we fail. And that's our one big driver. We can't -- it's nice to think great thoughts, but we need to be developing technologies that are going to get into the marketplace. And given -- you know, the legislature is concerned over how well we're spending money. We need to be finding some near term solutions. Certainly over the 2000, 2001, reliability and availability became much more important, and some of our -- some of our technology development activities are geared towards those type of things. And finally, environment is important. We cannot be developing technologies that are going to harm the environment. And in the case of renewables, we need to be developing -- we should be developing technologies that are beneficial to the environment and particularly -- and in particular get at some of the greenhouse gas and climate change issues. So within our program, the vision statement is pretty much related to the three legs of the stool. What we want is clean, abundant and affordable energy that are tailored to the needs of smart and efficient customers. And the smart is in quotes because another area that we're spending a lot -- we're spending money funding is developing communications control and information systems technologies to make demand response and -- and demand side management more sensible in terms of how customers may choose to use that. We also have to be thinking about programs that will address a variety of scenarios, and where we're really going towards is the supermarket of choices. I mean, we are not going to be competing with the Department of Energy in terms of the things we're doing. We're going to be collaborating with them. And if you think of Department of Energy having in effect about a billion dollars spread through their energy programs, or it's actually a bit more than a billion dollars in fossil and renewable energy efficiency and nuclear, we're not going to be trying to replicate all those things. So we're going to be targeting a few areas where we think we could make a difference in California and providing more choices to the -- to the end user and to the -- and to people who wish to use the technology in the end. Now, some of the attributes for addressing these state issues are in terms of program integration, and I'll be talking about each of these a little bit more, is that we need to deal with -- we have to develop a balanced technology portfolio. And our -- and I'll be talking about that in a couple of minutes. And certainly, it's a -- in terms of a temporal initiative, we really want a lot of the things we're doing now to be nearer term because we have to show that this program is successful. And we certainly need the technology partnerships. I'll show -- also have a figure up on that in a second. And finally, the focus has to be on California. We are working a lot with Department of Energy, but if we're not doing something that is of interest to us here in California, it's no point working with them. So we need to provide benefits for the state. And our -- one of the things we do is develop programs where we get the Department of Energy money to help focus on some of the issues here in the state. Along those lines, moving to the collaboration, we have put out about 167 million dollars or we have about 167 million dollars of active programs, multi-year programs right now. And of that, we have essentially very targeted collaborative comprehensively funded programs to the tune of about 87 million dollars from the Department of Energy, and then smaller amounts of money from other federal, like the the National Oceanographic and Atmospheric Administration. And then from states like New York; we do work a lot with New York state on end use energy efficient technologies. And then private sector funding as well. So that's important to us. It's more important now that we build on those programs because of the budget situation here in the state. So if we could find a way to pull more federal money in, this is an advantage, and this is something we're really pushing at. Okay. Now, this is something that -- somebody told me this was kind of confusing, but it -- actually, Al Lamont is here. I'm actually from Livermore. I'm actually on loan from Livermore. As we talk about what we're good at and what we're okay at, I characterize it as two redwoods and an oak. We have to have an environmental program by law, and we're -- a portion of it is by law. You need to be focusing on certain things and to make sure technologies are not negatively impacting the environment, and also looking again at some climate change issues. We also have -- we also focus on end use energy efficiency and demand response. That's something that's very important to us. And then, finally, distributed energy resources, which is broadly stated as things where we're looking at renewables, not small scale nonrenewables like gas turbines and low NOx burners associated with gas turbines, fuel cells, et cetera. And this is also where we look at the end use these new technologies are trying to bring in to make, again, response simpler and the system operate more simply. And that also includes technologies and software systems we develop for, for example, California ISO is part of the -- our Consortium for Energy Reliability and Transmission Solutions program. That's CERTS; you may have heard of it. But bringing in software systems and models, Cal ISO can run their activities more simply as well as other transmission and distribution technologies we're working on. That all fits into this box. But certainly renewables fit into this box. So the -- we can talk about target management. As I was running out the door last night, I ended up managing to pick the only one with a typo on it. But this is another way of looking at the -- the carbon management activities that -- our research activities. And we're even looking at efficiency. And these are out of order; it obviously has efficiency twice here. But this is, if we're trying to reduce carbon emissions per BTU, renewables fit exactly into that. That's what we're trying to do. And then, finally, this is the sequestration idea where if you're going to produce the CO2, you've got to find some way of getting rid of it. And this is important not only to the state, but it's -- and it's important and the state considers it important, but it ties to some of the things we're doing with renewables, because decarbonization strategies like renewables are a no-regrets policy. We need to do these things for other reasons, for economic reasons, and we also do them for environmental reasons. The state runs significantly ahead of the rest of the country in terms of not growing greenhouse gas emissions. Although, I would -- fortunately for us we produce this report in -- in fact, going back to just '99 and I think 2000 and 2001, we show that we've had a real bump here because of the increase in the amount -- number of natural gas fired power plants in the state. But we are competitive with not only we look good versus the rest of the country, but we also look good as compared to other countries, such as -- as you see here. So a lot of people that complain about the United States, because of the Kyoto Protocol, we've been able to make -- to keep our emissions low and at a time when we're -- we were still growing our gross domestic product and gross state product, and we were also growing in terms of population, which has been one of the Kyoto issues because most of the European countries that buy in the Kyoto Protocol are flat in terms of population. So we're able to do this, and really our growth is effectively tied to transportation. So we -- in fact, in terms of increased gasoline use. Now, one thing you can see is that -- and I'll switch this in a little bit here to -- this is the last slide for -- before talking a little bit about renewables. But the -- we clearly are -- one of the reasons we do well is California is -- really has -- the electricity use per capita has not grown in about 20 years and in fact, going from 2000 to 2001, decreased because of conservation savings within the state. So that allows us to keep our overall emissions low. Now, switching to distributed energy resources and then to renewables, you know, what do we think this allows us? Well, it provides greater consumer choice. We are working in technologies that are going to improve the reliability and quality of electricity in the state. We certainly need to address transmission systems, and certainly for distributed resources and distributed generation, we start to answer those questions. Certainly with renewables there's potential for environmental benefits. The Homeland Security is a big deal any more. We should be thinking of distributed resources because the critical infrastructure associated with transmission lines and natural gas pipelines, you know, is -- they are vulnerable targets. And then, finally, to alleviate peak demand problems. Okay. Why California renewable energy research? Well, clearly, the RPS is going to be a forcing function for investor owned utilities, and there's going to be emissible utilities interest. The existing renewables really don't address these needs because they're too costly; there's -- they're limited at this point in addressing peak demand; they're not necessarily custom control choices. And, as you know, there's not only the environmental issues, but we have to be looking at the total fuel cycle and technology cycle for these new technologies, and so that becomes important. We don't want to overstate the renewables vis-a-vis other technologies that have much dirtier fuel cycles or more vulnerable fuel cycles. And then, finally, there's the setting in terms of wind. And so we have the limited ability to import other renewable options, but I think, you know, that California is in a great position to further develop renewables. Having said that, the -- here's what the RPS looks like, and I think most of you have been -- have known this. Again, we were going down in the production and the percentage of production of electricity, and we're now just starting to go back up. And this is an ambitious plan. And my sense is you're not going to see us reaching the 20 percent unless there's various other institutional incentives in terms of taxes or other incentives to get people on board, or there's new technologies, or more than likely there's going to be both. Because this is very ambitious, because it's 20 percent of wherever we're at in 2017, which is going to be -- even if we're -- even if we maintain or even reduce the electricity demand per customer, overall we're going to have more people and in all likelihood we'll be needing more electricity. So that's what -- so that's what we're faced. That's what we're working on. The renewables funding to date looks like this. I'm sure George Simons will be talking to you more about this later. And we've split this up by technology on the top in terms of wind, heat, solar, biomass, geothermal and others. And then also by the issue addressed, where we're primarily focused on [unintelligible]. Having talked about distributed energy resources, there's -- renewables still allows us to look at just base load. And so essentially what George Simons and his people are doing is looking and finding renewables at three levels. Either demand centered systems, we're going to be looking at zero energy housing initiatives at some point in the near future in fiscal -- or actually in calendar '03. We're working with -- we have an integrated program going on looking at mini grids and micro grids that are going to involve renewables. And then, finally, what we characterize as superclass bulk systems, looking at large scale wind systems and -- that we would use for base load. So I think in terms of what we've been doing so far is, in terms of setting the course, we had some big programs out, we've got the -- we've got the program with SMUD for 13.6, and these are -- these are multi-project programs. So, for any given -- for any given group that's working, we're -- we're working in a number of technology areas, believe me. And we also have a number of target solicitations. This is one area that I think George and his people have been very effective, because we've -- his target approach has allowed us to collaboratively and complimentarily fund activities to acquire energy with some of the things they're doing with small scale model mass. And we're planning to do something similar with the low cost wind energy and low wind speed areas. Okay. Switching to wind -- and Dora, again, will be talking to you about this more later on, but this is the overview. This is what we're trying to get at here. We've got the installed capacity. I think this probably -- you all know these numbers, 1700 megawatts. We have a potential capacity of 7,000. The idea is that these things are currently low, abundant and they're clean, although the issues are certainly -- there's aesthetic issues, we have the intermittent resource issue, and the fact of the matter is we've used up most of the sites that have optimal wind regimes, and we now have to be looking at lower speed wind regimes to work in. And, again, that's what we're working and funding our R&D in. The economic motivator certainly is -- this is the one that is far and away the most financed in our renewable investment program. About 90 percent of our -- about 90 percent of our -- of our awards have gone -- of our new technologies have gone to wind. And I think as you look at clearly the advantages, not only economic but -- but also -- and I'm starting to run out of time here -- also environmental. I think I'll skip some of these, but this gives you an example. I'll just show you one example that -- where the -- that we are working, for example, with wind forecasting. This is important to Cal ISO. We're trying to develop firm forecasting, methods for developing firm forecasting for 24 and 48 hours in advance. This is a collaborative effort between us, DOE and the University of California. And this is something that's ongoing as we speak. So I'll skip that, and I think I'll get to some of the things about -- just going back to the PIER program, the role of government. Certainly -- and this is something where we need your help as this consortium comes together. How do you help us work effectively and get technologies into the marketplace? And how can -- how can you help us modify our efforts? Because we certainly don't know all the answers. We just had a technical review committee come in for all six of the groups that report to me to basically give us some good advice on where we should be going. Certainly the public/private partnerships are important in focusing for addressing public good. And I think ultimately the question before us as a lot becoming an electricity issue is, is the electricity for public good or commodity? And that's something we need to talk about a lot. I'll mention the valley of death. Clearly, the government has to take the vote of public pulpit and use policy tools. And the 20 percent by 2017 is clearly a policy method and policy tool. How we get there, we probably have to develop other policy tools. That goes along with some standard setting, although that may be more appropriate for an efficiency program, how we're linking with building systems and building appliances with new standards. And certainly we need to do a better job of public education. And this has got to always be a bipartisan effort. In other words, public leadership is sustained. It can't be an on and off switch. I think you've all seen the valley of death. Quite honestly most programs funded by public goods charges at the federal or state level, you know, don't work too well, and we need to get over this. One of the interesting things, Greg Ander [phonetic] from Southern Cal Edison characterized it as it's not so much you get first buyers, but then you have a chasm and subsidies run out for first buyers. So it's the same thing. How do you get these new technologies in the marketplace. And certainly -- and this is for the point of discussion here, what's the road to innovation? And it's certainly littered with bodies, most of them governmental bodies. You know, innovation is an interim concept to most government folk, so that's why we need to be aggressive in doing this, work the ideas. The institutional mechanisms tend to inhibit creativity. History is not kind. And where it is kind, we -- there's the idea of one client. I mean, if I'm working for TRW, I know if I'm building great missile guiding systems, DOD is going to buy it. You know, on the other hand, you do have DOD and NASA being winters with big signs and particularly some of the DOE research facilities in winters. But the government typically cannot address a very competitive marketplace that's dealing with a multiplicity of activities. On the other hand, you get into other areas, and people aren't all that successful either. A lot of great ideas have not made it to market, so you can have people thinking great thoughts and it does not translate to how do you get this stuff out into the marketplace. Small businesses many times have great ideas but poor management skills. And they fail not because of the lack of ideas, but they could get into the marketplace but how do you manage the system? And the government programs, I'm an old enough guy, I had hair in the synfuels, and maybe I've lost of few hairs in the synfuels, but they go away. And having said that, the marketplace is always a moving target, always a moving target. So no matter how much government may stay the course and you may try to stay the course, things happen that are going to change the marketplace that actually occur outside the market. Skip that. So I think the final two slides, I'd like to say -- this is the PIER slide. This is kind of a come to Jesus thing, is that we can frame the debate on a national level. One thing we really are doing with the Department of Energy now, it's an interesting thing. When I first showed up at the Energy Commission, they had a -- they had a -- we -- with a new presidency, they didn't want to talk to us. They wanted to let us spin in the wind. So all of our friends in DOE were telling me that they weren't supposed to be talking to me and to not attribute anything that I heard to them. You know, but around May of 2001, it kind of changed, and things are better. We can frame the debate because they want -- the interesting thing about the Republican administration is they're not necessarily keen on renewables and efficiency, but they want to work with the states, and it plays to us to work with them. And we -- we not only can take advantage of it, but we are taking advantage of it right now. And so where we fund -- where we can make a difference, again, we're not going to fund clean coal technologies because we can't make a dent in those things. But we can make a difference in efficiency, renewables, and small scale distributed generation and then the technologies that go along with making those more cost competitive. Make collateral benefits that make those more cost competitive. We want to work market transformation. Our new law allows us to do this, so we want to do this. We think this is a great thing, because how do we -- how do we help things get into the marketplace better. And, of course, we want to prevent new crises. We know that they're going to come. We know that a lot of times within government there's fatalist decisions made that cause problems later on. And so, given that as a reality, we want to be able to do something to address these. And we certainly want to provide a stream of benefits. So I kind of leave you with the idea that -- this is actually from my days at Argonne that I kind of add to -- you know, we're driving to a sustainable future, and California can clearly take the lead in making this happen. All these things are linked, and if we think about how we do a better job linking them, we can really make a difference in this. So with that, thanks very much. MR. VAN DAM: Thanks very much, Terry. (Applause.) MR. VAN DAM: Any questions for Mr. Surles? MR. MILES: Yes, this is Larry Miles. Second-to-last slide, you -- you had a bullet titled Market Transformation. Do you -- MR. SURLES: Well, market transformation is how information technologies that have basically been through demonstration seemed to be -- in probably some early point, and how do you do a better job getting them in. Now, there's a one liner in our new law that allows us to do that. We -- there used to be more effective -- there used to be market transformation activities that the California Institute for Energy Efficiency ran with utilities, and because of the change of things that kind of went away. We need -- I would characterize that we need to do a better job of understanding how to do that and then do it. So I -- my sense is, do we have an answer on how to do it right now? I don't think so. And it gets back that we've had successes where we've sustained a relationship with some of our -- some of our contractors and technology developers like PowerLight, for example, where we were able to sustain that. And -- and the Berkeley Lab activities where we were able to sustain that. But the fact of the matter is, the beef of the tax law is still one off, I would think, so that we don't have a systematic way of taking things and rethink our successful technologies and pushing them into the marketplace. But the transformation is simply how do we get it from -- how do we get it from simply a government technology development project into where it's going to be used by a lot of people? And I should say that's something that's difficult even for government to understand, because they -- they think that, you know, we -- maybe we could do something with the new composite material activities. We're working with 3M and another consultant. And the idea is these are such significant technologies, utilities are going to need to tear down all those transmission lines and put up new things. Of course, it's incremental. So if we have success five years from now, we are going to have things entering the marketplace. But in truth, long-term success is going to be, 15 years from now, you will see a significantly changed system because of technologies we're pushing. MR. VAN DAM: Okay. Any other questions? I have a question, Terry. How is all this talk about the budget crisis in California and other states, but particularly in California, how is that affecting here? MR. SURLES: At the moment, it's not affecting it very much. What's happened is that for this fiscal year -- because money that's collected goes into a trust. For this fiscal year, the -- you know, our -- we're just moving along with the money we collect. However, the legislature did make the decision that while the trust money was nonrefundable, the interest that we accrued from the trust money was refundable. So we -- and basically the reason those monies are accumulated there is that we encumber the monies, but it takes awhile for contractors to expense the monies. So, you know -- and typically we've used the interest to pay for our administrative activities. Now we can't do that as much. There's still some interest there, but -- and so, we're okay for this year. But, you know, I mean, because we need to find, you know, 20 billion dollars next year, it's hard to say what decisions are going to be made at this point. I mean, on one level the whole Energy Commission is not part of the general fund. Any general fund monies that we had this year due to the energy crisis was simply given back to [unintelligible] finance. But -- so we don't -- I mean what happens, how we get into the fiscal year starting in July, we don't know. MR. VAN DAM: Any other questions? MR. LAVOY: Just follow up real quick. What about the 5 billion dollars in bonds set aside for the Wind Energy Commission? What are you doing -- MR. SURLES: That's not the Energy Commission. MR. LAVOY: Oh, that's not. [Unintelligible] San Francisco basically cost savings. MR. SURLES: Is there anybody from the Power Authority that wants to answer that? I don't have the answer to that question. MR. VAN DAM: Your name? Didn't get that. MR. LAVOY: I'm sorry? MR. VAN DAM: Your name. MR. LAVOY: David Lavoy. MR. VAN DAM: Any other questions? Okay. Thanks very much, Terry. (Applause.) MR. VAN DAM: A few minutes to switch, then we'll start to get the speakers here for the first panel. And are the speakers in -- would you all come forward. (Brief interruption in proceedings.) MR. SCHWARTZ: Okay. Folks, here we go. Sorry for the -- sorry for the delay. Modern technology, you know. My name is Fred Schwartz. I'm energy supply manager for the San Francisco PUC. I'll tell you a little bit about that, you know, throughout these proceedings, but what I wanted to do first off is just welcome you all here. I just think it's fantastic that the Consortium is pulling together, and it's really encouraging to see this -- this going on. I love the fact that Case is involved and U.C. Davis is involved, and I think with the speakers that we have, things this afternoon will be sort of very informative. You know, the first session here is focused on windplant development issues. Back in 1981, I guess, I first got involved in the wind industry when I was setting up a program for the Ontario government up in Canada called the Remote Power Program. And in Ontario there are 43 remote communities banging away up in Ontario on hydrodiesels at 50 and 60 cents a kilowatt-hour. So what I was tilting at at that time was, you know, economics that were easy to reach. And one of the things -- and I'll be brief about this. But one of the things we did was a wind diesel hybrid. It was one of the early attempts at this. And we actually connected a 50-kilowatt [unintelligible] machine to a diesel generator via a mechanical clutch. And when the wind was cranking, it was actually running a diesel. Served as about a 30-percent fuel saver on the diesels we got up on the cliffs of Hudson Bay. That was the 1980s. I'm really, really happy to see the developments that have occurred in the industry since then and groups such as this coming together. So one of the things that we're going to be focusing on these windplant development issues, a variety of things, but the valuation of the resource. You know, just how do you go about doing that with quite a varied resource over varied terrain? The hybridization of the resource, as we've all heard, is intermittent, and there may be things we can do about that. Transmission issues of how they interconnect with transmission and distribution systems can be accomplished, and what sort of support thinking about these things can be to the wind industry. And then, finally, a discussion of energy storage, which is one of those elements in the equation that really has not been at people's fingerprints. Utilities -- the only way that the utilities have had energy storage in the past, I guess, is large scale pump storage. But there has never been sort of site-able small scale modular storage to assist the renewables, especially the intermittent renewables. This is beginning to come along. We have some real experts with us here today, and I'm really, really privileged to introduce these folks to you. The first is Kevin Jackson, who is a -- had began his wind energy career during graduate study at the University of California 1982. That's about the same time. That's cool. Initially he focused on the unique vertical access wind turbine concept then undergoing development at the University. And in 1985, he began to provide engineering consultant services in California in the emerging wind power industry. Over the years, Dr. Jackson has managed a variety of wind turbine repair, retrofit and performance enhancement projects. He's been responsible for blade geometry definition, structure design, drive cam component analysis, loss system design, power structural analysis. Sounds like it's a pretty thorough background here. Dr. Jackson has also worked extensively in support of owners and wind site landowners on issues related to safety, reliability, quality and performance. And he will be talking today on wind energy variations and valuation. MR. JACKSON: Thanks. I'm going to talk a little bit about some generation trends and valuation and variations. I started off wanting to look at how wind power generation changes on an hour-by-hour basis over the course of a year for a typical site. And we wanted to come up with a methodology for doing that on an hour-by-hour basis. So how would we do time variable wind turbine performance? And what would that look like as a function of the time of day and the seasons of the year? And then compare that against electrical demand, so we could see how does generation meet with electrical demand. And then at some point incorporate the valuation in there to come up with cost of energy calculations. That's the overall goal. We started off with hourly data. Actually, I had ten-minute data that was disseminated hourly, data from the turbines. So I had wind data for a site in Tehachapi, and that data was normalized to average wind speeds of six, seven and eight meters per second. So I had it for a specific location from a number of mid towers at that site, and then it was all averaged to get it to six or seven or eight meters per second. So just basically mathematics, we moved it up or down to be in an average value. Then we took demand data from the Cal ISO website, hourly demand data for the whole state -- so that was the data coming in from them -- and used a model turbine that was a one-megawatt turbine. That actually turned out -- I picked that one just because that's a reasonable size these days. It actually turned out to be a nice number, because its unity and capacity factor in megawatts worked together quite nicely. They're the same number essentially. And then we looked at -- in each model we looked at rotor diameters of 50, 70 and 90 meters. So they were all one-megawatt turbines peak power, but increasing rotor size or decreasing the specific power. The specific power is the power out -- the rate of power out divided by the swept area. And then we had a time dependent valuation of the energy that was produced. As far as the turbine model, it's a one-megawatt rating, three different rotor diameters, and then the specific power goes from about 500 watts per square meter for the 50-meter rotor, to 260 watts per square meter for the 70-meter rotor. That's about the range we have in current practice in the industry. There's a -- there's a turbine, I think it's going into the German market primarily. It's a 1.5 megawatt with an 82-meter rotor. And then this 90-meter rotor with a specific power of 157 is actually off the charts. There's nothing that I know of in practice that has that large a rotor relative to the generated speed. But we wanted to see what would the effects be of specific power on things like capacity factor or energy value. So I took that model and incorporated dry [unintelligible] losses, aerodynamics, those sorts of things, and then came up with a power curve. So I've got a power curve for each of the different turbines. Also assumed that these oversized rotors probably would not go to 25 meters per second, which is a standard. That's a little over 50 miles an hour. And so I made an assumption that said the designers of these very large rotors, oversized rotors would probably try to do something below, and that might be restricting the other operator. We wanted to see if that happened relative to the economics. So the tip speeds come down with the larger rotor. That's another issue, is that you might opt to go to one of the larger rotors for noise issues. Because tip speed noise and tip speed are highly correlated, and these oversized rotors tend to run at a fairly low tip speed. And as you cut out, speeds are reduced, as I said, so the operating rate is smaller. Then we combine that with the hourly data that we had from a typical Tehachapi site. One of the things I want to make sure everybody understands, this is for a specific location. It's not necessarily representative of the state as a whole. And it's more the methodology we used that's going to be important later in time as we get more data to start to make representations about other parts of the state. But for now, this is just one particular site. This is the winter of 2001 in Tehachapi, and you can see there's periods where we're at rate of capacity, and then there were other periods where there's very little going on as storms are moving through. This is also for a particular set of the run. This is the 70-meter rotor at seven meters per second wind speed. So we ran a grid of three different rotors, three wind speeds. This is more of a typical summer in the wind speed, and you can see there's many more hours now where we're at capacity. There's a summary of the annual capacity factor for the three rotors. As you would expect, the oversized rotor does much better in terms of capacity factor over time or -- especially with increasing wind speed. But the 90-meter rotor didn't do as well as you might expect at the 8 meters per second. And that's due to the fact that I'm limiting the operating wind speed in high winds. And it would be inappropriate to put that big of a rotor at an 8 meter per second site anyway. It's probably not something that the designers would opt to do. The intention is that an oversized rotor is going to a low wind site. But you can see there's an effect of that assumption that we made. So overall, increasing the rotor size or reducing the specific power can be a way of improving the capacity factor, but it doesn't necessarily make sense economically. We're leaving out part of the equation, the cost of that rotor system, and that's important, going to be important. One of the other things I was looking at was trending and trying to get some feel for the diurnal trends, and there is a lot of data on here. The main thing I want to point out is that there are trends. And I think most people who work in the industry have a feel that, you know, the wind season and things follow some kind of predictable patterns. In effect, they do have predictable patterns by season. And if you go to a different site, they may -- they're going to be different. The goal would be to take these patterns and put them against the demand patterns and try to find sites with a good mix to where production and demand are in sync with one another. At times, in fact, in many parts of the year or parts of the day, we are out of sync with the demand. Wind is being delivered a little bit after typically when the demand peaks. So here's some of the demand data, again hourly demand data, 2001. This was for the state as a whole, and it was a peak value of about 41.2 gigawatts. So the demand was converted to a nondimensional form. So we took demand and divide by peak value of 41.2. So we have demand as a -- as a number relative to 41.2. So it's like a capacity factor. So when demand factor is one, you're basically at peak demand. And if you go to the next slide, I'll show you how the demand factor looks, what demand factor trend is. Again, fairly repeatable patterns of demand factor over the course of the day. If you look in the first graph, we've got January, February, March. And around 4:00 in the afternoon, lights start going on, and there's a peak, and then power goes up. We also wanted to look at some specific pieces of data just to see what the trending was. And this is a non-peak period, so it's in the summer, but it's not on one of the peak days. And typically the winds were blowing pretty well in those periods. Average wind generation capacity is fairly high. And we've got lulls in the late morning. So you can see the red line, which is the statewide demand. A good example would be -- that's okay. Let me just point to it right here. This is a good spot to look, where we're almost perfectly out of sync. We're low and demand is high. But there are other periods where we're not doing too bad. Earlier in that week, we're not doing too bad. Now, we've got summer peak periods, so this is the hottest week of the year, had the hottest day anyway. August 7th, 2001, was the peak demand day, and we've got -- essentially at peak we've got almost no wind being produced. One of the things that jumps out in looking at these kinds of trends is if you can shift it by a few hours earlier, we could probably do a lot better at matching. It could be just four hours or so. There's a -- yeah, here's a summary of the days. The periods -- this is 10 days showing, and it's generally around 3:00 p.m. It's generally around 3:00 p.m. that it's occurring. Here we had -- June 22nd was a little bit early at 1:00, and August 17th was at 2:00. And typically the wind is picking up, it's building about that period and isn't going to peak until -- well, Altamont tends to be around 11:00, midnight, something like that. Some say in Tehachapi it's probably just a little bit earlier. So one of the things I did was take this demand data capacity, so now it's capacity factor and demand factor, the two -- the two things we were looking at. And the demand -- a wind capacity factor, just like you would do if you were doing a power curve for a wind turbine, you would take a specific datapoint and say the power was this value, and the wind speed was this value, and then you average over time all of the datapoints. So I averaged all the capacity data as a function of the demand. And what it shows is that in general, when demand is high, wind generation capacity is also high. And this is -- this is those hot summer days when the wind is blowing in Tehachapi. And so that's the good news. I mean, we are actually providing a lot of generation capacity when it's needed, when the system is being stressed. The problem is right here, at peak, we're providing essentially nothing. And it's those few hot, windless days that are driving the peak. So in terms of air quality, we can make an argument here that this is a very good thing because we're preventing a lot of pollutants from being put into the area at a time when it's pretty hot and we're generating fairly high on the demand level. So that's a good -- the good part. But it's not going to limit the amount of peak requirements that are needed by the electrical system. So that's kind of the bad -- the good and the bad side of this. There's a lot of time when we're producing at good capacity when the demand is very low. This may be late in the evenings. Again, Altamont typically heats later in the day, so it would be 10:00 or 11:00. Tehachapi is not too far off. One of the hardest things we had was trying to get a time value, and we looked around for data on what is the time value of the energy provided, and we didn't really find what we wanted. What we were able to find was that there had been some time valuation for Title 24 efficiency standards for the state, and that was -- that was a methodology that had been put together, and so there was hourly data for the value of wind energy for a variety of locations in the state. It's for residential buildings, though, so that was a problem in trying to use it. Again, what we ended up doing was converting it into a factor, so it's a value factor. And the value is such that the average value was going to be one. So if somebody says, you know, the value of electricity is 5 cents per hour, you just multiply the value factor times 5 cents an hour. But it gives you an idea of what's happening to the value of energy versus time. And you can see at times in the summer the value of energy in Mojave, which is where this was taken, was about four times what it -- what the average was. One of the goals in the future is to do this same sort of valuation and get that in actual data from the generation site. But for this -- purposes of this work, we ended up using the Title 24 data. And I think it gives a reasonable view. You can see most of the time there's not -- there's not a big spike. It's really those few days in summer when things are really hot and when it's really hot on a weekday. So you can clearly see the weekends in some of these, too. So if you take a value factor and multiply by capacity factor at a given hour, you get a resident factor. And that was one of the things we were trying to get to in the end. What's the time value of this energy? So essentially what this is, is a time dependent revenue factor. It's the same chart or the table I had for the capacity factor earlier, but now it's got this valuation incorporated into it. And I think it's a fairly easy methodology that people who are now getting into the ISO market may need to look at it this way rather than a simple cost of energy, because they're really going to be selling energy depending on the time of day. In terms of a comparison, I compared against constant rates, which is what most people in the industry have been getting is constant rates. In California they have a lot of time of use, not hourly time of use. But most wind people sell at some kind of a fixed rate, so I wanted to compare to that. It turns out that when you include the time dependent value, it's negative. We're actually a little bit less than a value of one. I had been hoping that it was going to be -- that we were providing more than one, better than the constant. But because we have a bit of a mismatch with demand, it is down a little bit. It's also only a relatively small number. That's kind of the good news that comes out of this, is that while wind is intermittent, its value is not too far from being the same as constant. And so we're down probably in the neighborhood of, you know, two to seven percent is the range that's on here. But there may be ways of modifying the turbine design or looking at different siting to improve that number. And ideally what you'd like to do is get that number as high as possible. You're trying to get the most revenue, not the most kilowatt-hours. And as turbine designers, typically what people have done is work on kilowatt-hours, but really what we're after is economics. So the basic conclusions are that there's some strong seasonal trends in wind generation. And people should probably spend some more time with some of this data trying to fit that into the demand. And there may be sites out there that have lower wind speed but have a better fit to the demand and are, therefore, more valuable. Wind energy has high capacity in periods of high system demand. That's basically, I think, a good thing. It's good to get that sort of information out. We have this peak problem, and that may be there -- there needs to be work done on storage or some other things that could help with the fact that on these very peak days, they're often coinciding with a lower number. And that's a difficult problem for us to raise. Rotor optimization for specific power is really going to be dependent on how this time valuation is prepared. And if you look at different time valuations, you're going to get a different answer. So you really have to get that nailed down, and I think that's one of the things maybe working with Cal ISO or with others, we should try to get some good numbers so people can make economic decisions based on the time value of whatever you're creating. And I think we're going to hold questions till the end of the session, right? MR. SCHWARTZ: How do you want to handle that, Case? MR. VAN DAM: Yeah. (Applause.) MR. SCHWARTZ: Thank you very much, Kevin. Very interesting valuation methodology here that I have not seen presented something like this before. Certainly intriguing to me, because it's one of the things that I guess anybody in the business deals with, especially with respect to issues of predictability and so on. And so if this is sort of helping in that respect, I think you've done everybody a fairly big favor here, and I'd love to see more involvement in this type of, you know, valuation and predictability tool. That's good stuff. Next up, we have Alan Lamont from Lawrence Livermore National Laboratory. He's going to be talking about optimization and value analysis again and with respect particularly to hybrid systems. Alan is involved in the energy and environment director at Lawrence Livermore. He supports them in doing work on the economics of energy systems and water systems. And he's not quite set up yet, so I'm going to continue talking and basically say that the -- the City and County of San Francisco is involved in some sort of interesting speculation about what our energy future might look like. We'd like to see things head towards distributed generation as the energy of the utility of the future. We'd love to see more biprotectional controls developed. We'd like to see less top down planning. We are going to be involved in the development of -- and are involved in the development of some, I think what you might call, significant renewable energy programs as a result of passage of a couple of propositions a little over a year ago. And so now that Alan is -- are you? Okay. I'll keep talking. Basically, what we are doing is trying to take stock of the resources that might be at our fingertips. And one of the ways that we're doing that is in conjunction with the California Energy Commission, who have been very good in working with us to try to value the wind resource that we have. So there are two things that we're doing right now with the -- with the Energy Commission. One is an urban wind assessment that we have begun. And basically, you know, the stage that we're at right now is that we plan -- we plan to pick a number of sites throughout the city and county of San Francisco to do some wind monitoring, and we are proceeding with that. The second thing is that in the territory surrounding the county and the city of San Francisco, we're going to be doing some monitoring. So I'll tell you a little bit more about that in a couple of minutes and turn it over to Alan. MR. LAMONT: See how this works. Not too well. Don't you love computers? Okay. Well, this part of the program comes up. We're looking at some analysis that we're starting work on at Lawrence Livermore in conjunction with Case and Kevin Jackson. We're trying to look at the issues of combining the wind generator with -- coming up in just -- get it in the right place, various scenes we are looking at -- providing wind generators with some other kind of back-up generation in order to firm up the power. That's the first stage of what we're trying to look at. And the next stage will be looking more at issues combining wind generator power also with a storage device or something like that. Let me see if I can get -- I'll tell you what we're going to do, the old fashioned stuff here. There's nothing like paper. (Brief interruption in proceedings.) MR. LAMONT: All right. Thanks a lot. So we're beginning to work on this analysis and building an analytic base so we have a few preliminary results and some preliminary models to share with you today. And some of what we're going to tell you is really not news to many people in the audience here and some perhaps would be useful. So, fundamentally, in this work, we look at the -- this problem from the point of view of the wind generator owner, asking how the Consortium basically can maximize revenues given the various kinds of options that are available contracting and operating in wind turbines. And the owner has, of course, a number of choices available to him. And one is a choice of contracts, a firm contract or a written contract, which Cal ISO is developing. Some of the options are in the method of forecasting wind power. There's a business strategy, if you have a firm contract, you do have some options of how much you're going to bid. If you have a written contract, you don't have that option. And then you have a third potential option for using back-up power or working in conjunction with some other generator to provide new energy for your bid. So we're going to explore the implications of some of these choices. And our fundamental method is going to be how much net revenue can we expect in each arrangement here? And some of the questions that we really want to look at is how does the operating and bidding strategy affect that net revenue? And then the basic question that Case wanted to look at is, under what conditions is the back-up power possibly beneficial or not? And finally, you know, how important is forecasting and bidding strategy in this whole thing? Because is that going to make much of a difference? We do fuss about it a lot. So just to summarize what we basically did here, we developed a simple forecasting and bidding strategy. And you have two possible bidding strategies: One is just to bid the expected value of the power, what you expect to happen; that would be one logical strategy. But then we also look at an optimal bid, something that is statistically optimal to maximize net revenue over a year. We examined the net revenue from the intermittent contract and -- because it turns out it was kind of a benchmark that we're looking at since that's always available to you. In our analysis, we have kind of a conservative base case, and then we have variations from that. Now, the basic parameters that we've used -- and let me run through this very quickly. The pattern of electricity prices and the pattern of wind generation are based upon what Kevin has just presented, what he -- data that he developed. The base case, we basically made a few assumptions just to establish a case, and one is that Kevin mentioned the analysis that he did, energy valuation and then normalized to an average of one, and then multiply that by what you think the average value of electricity is. So we used an average value of 3 cents a kilowatt. That's with an interest rate of six percent. Some of the wind generators cost more than $50 a kilowatt, their capital cost. If you had to buy a back-up generator, this is -- I'll assume something like a combustion turbine, relatively cheap to buy, and it's about 50 cents a kilowatt-hour. I think I've already hit upon variations that we've looked at within strategies. The model of different kinds of contracts, you're pretty familiar with. And the intermittent contract, you always bid your expected power. And, you know, under the new rules, the proposed rules there's still accumulated under and over generation and just settle up at the end of the month. Straightforward. The firm power contract is the model of that contract that we use if you were to bid [unintelligible]. If the generation -- your generation is over your bid, you don't get paid. When the generation is under your bid, you're charged a penalty for the -- on top of replacement power. And our question is, how would you bid or how would you use back-up generation to your best advantage? And how much would a person expect to make out of this? There's two sort of technical issues here that in the interest of time I won't dwell on too much, but it's something I'd be happy to talk to you about off line, about the bid and what the implications are and what kind of improvements that some of you would think of that we should be thinking about. Wind generation is essential whether you're doing wind forecasting essentially or you're doing an intermittent contract or a firm power contract. The slight difference is that the intermittent contract, the really key thing, is that you've got to get the average, that expected value right. And if the rest of the distribution isn't estimated quite right, that's not going to kill anybody. If you're trying to do the optimal bid, then you do have to get the entire distribution over the wind generation over the next hour pretty much correct or it's not going to work out very well. Now, in this analysis, I used a pretty straightforward statistical forecasting method to basically calculate the expected value each hour of the year, and then it looks at the current -- you know, this hour's deviation from that expected value to help you forecast the next hour's deviation from the expected value. And it statistically works out pretty well. There's a very strong correlation between those, as you might imagine. And you examine the residuals between forcast and actual. The residuals, for the most part, look like a normal distribution, so you use that distribution to get the probability distribution for the actual wind forecast. You know, be glad to talk to somebody off line about that. The optimal bidding strategy is basically derived this way. You know, your problem -- the owner wishes to make a bid, B, each hour that maximizes his long-term expected revenue. Now, he needs to take into account the price of the electricity sold and the value of the electricity on BD here. His penalty if he's under -- if he generates less than he bids or possible back-up generation, whichever he's going to use, and the probability distribution over which -- over the wind power that's going to be produced. Now, you know there are lots of variations, and it works out to this simple formula right here for the optimal bid. And to say it is kind of a mouthful. We can interpret it probably a little bit easier. First you compute your ratio of the price of energy to -- to the cost of your back-up or your penalty, whichever you're going to be using, and that's a number that could be zero and actually greater than one, but typically between zero and one. And then you look at the probability distribution over the power you're going to expect to generate, and you look at -- this is the cumulative probability distribution over that. And you set your bid, B, so that your cumulative is equal to that ratio. Now, what's the interpretation of that? Well, basically you compute this ratio. Let's say it's 0.5. You set your power so you have a 50-percent chance that you're going to actually generate less than that, less than 0.5 of your capacity. The implications of that are that -- let's say that the value of energy and your cost of making up the back-up are equal to this ratio. Well, the implication of this formula is it gives you full power because you can't lose. If you're under power, if you're generating less than you bid, you can make it up and it will cost you nothing. Now, conversely, let's say that the price of value of energy in some particular hour is just one-tenth of the cost of back-up power. It's very unfavorable for you. You bid a very little number because if you generate less than you bid, you're going to get hammered. And so that's the logic behind this equation. So this -- I'm going to show you the numerical results of what we've got so far. It's just a little table, some idea what you're going to see. It's kind of a messy graph. Look at the following cases. One is the first or bench line intermittent contract. There's no back-up or penalty associated with that, and you bid your expected power and you're required to do that. In other cases, take a firm contract and you're going to purchase back-up generator; in this analysis, it's a combustion turbine. But you're going to bid optimally. Another case, firm contract. Here you'll make an arrangement to buy back-up energy from somebody else at some cost and make an optimal bid. Another firm contract, you'll purchase back-up energy, but you never take the penalty. And you'd like a connection here, in the optimal bid, every hour you're looking at whether you should adjust. If you're generating less than you bid, you're always looking at whether you should generate from my back-up or do I just accept the penalty? And you do whatever is cheaper in that particular hour. But one question that I had was, well, how important is it that you have this penalty option? So write out the case where you do not take the penalty; you always provide power, firm power. And then there's another case where you're looking at firm contract where you bid the expected power, rather than bidding optimally. So that helps us get a handle on how important this optimal bid is. Then we come to the one slide for which computer presentations is really nice because it is a complicated slide. It's easier to understand if it's presented in one piece at a time. We'll look at it this way and walk through it. Here we're looking at the net revenue that you generated per kilowatt or capacity per year, and here we're looking at the back-up capacity that you're going to bid your contract for or you're going to buy. So these cases here are zero back-up capacity. The first case you look at is intermittent contract. And that's going to earn you a little bit more than $15 per kilowatt capacity per year. It turns out to be pretty much the benchmark. We can contrast that with taking a firm contract, having no back-up, and always bidding your expected power. Not the optimal bid, just the expected. And it drops down here to $1.70. So the -- being able to bid the optimal is fairly important. Then we can look at a series of optimal bids, bidding strategies. And, now, right at this point, we'd have three different strategies going off here. If you bid optimally and you have zero back-up, you're going to make about $8.10 a year per kilowatt of installed capacity. But bidding optimally is considerably better than bidding your expected value. Now let's look at if you add back-up capacity to this problem. Now, if you buy a generator, a combustion turbine and you start adding more and more back-up capacity, it's basically a losing strategy under the analysis that we have here. The capital cost of the generator just kills you. Conversely, let's say if you contract with somebody at 6 cents a kilowatt-hour, and it's 6 cents a kilowatt-hour for power up to some maximum power level, and as you add power to that contract, you improve slightly your annual net revenue from this whole scheme. Now, I wouldn't be too surprised if you could find somebody to sell firming up power at 6 cents a kilowatt-hour. If you could get them to give you 4 cents a kilowatt-hour, you do considerably better. In fact, you even start to get the hope of beating the intermittent contract. Now, whether or not you could get somebody to offer 4 cents a kilowatt-hour is the another question. The question that this begs is, you know, would it be to some other generator's advantage to sell at 4 cents a kilowatt-hour? You have to look at that. Final case that we looked at here is the case where you always provide back-up energy. Now, here we did the analysis assuming that you're going to contract for up to a kilowatt, and you're going to pay 6 cents a kilowatt-hour, so presumably somebody would sell you that contract. And you never accept a penalty; you always provide the energy. And your revenue here is three something dollars per hour. So these kinds of strategies here don't look very favorable. Purchasing your own generator is not very favorable. But contracting with somebody else has a chance of actually working out, although it may be difficult to beat the intermittent contract. That's fundamentally what we've looked at up to now. I think it's important to look at some of the additional questions that this raises that we need to pursue. One, as I mentioned, this business of buying back-up power, when you demonstrate that this is going to be advantageous for both parties, it's not a trade that can be made. Now, the next issue that we want to get into is looking how this might couple with energy storage. Pramod is going to be talking about this, so I don't -- we haven't actually conversed yet, so I'm not sure what he's actually going to be covering. Storage requires a buy/sell type of strategy. Now, under the firm contract, there are hours of excess energy, and presumably these would be available to put into storage at very little cost. If you're not getting enough in revenue, put it into storage. And under the firm contract, you can adjust your bid to adjust that amount. So there might be strategies in there to make this advantageous to you. Basically you'd be bidding low when prices are low and putting that into storage. Another question that is always important here is to ask, would these strategies be viable in the long run under the ISO [unintelligible]? And the presumption of bidding a firm contract is that you're going to try to generate, not just going to try to take the penalty all the time. And under the optimal bidding strategy, you have a tendency many hours to overbid, bid more than you think you can generate, and you're taking a chance of taking a penalty. And you know that's not true. It raises the question whether or not in the long term that would be acceptable to the ISO, and they might just raise the penalty that you're going to have to pay. They made it very clear that the penalty they have right now is provisional. And if they raise the penalty very much, then it's -- this scheme is much less desirable. As we saw when we have a strategy to always provide firm power, never taking the penalty, your net revenue costs quite a lot compared to the option of the penalty. So, in conclusion, a few of the things that we've noticed at this point. Clearly your forecasting and bidding strategies are quite important to making this whole thing work. It seems possible firm contracts might still be viable, and, in fact, the strategy possibly may work if it's in the realm of possibility. An intermittent contract is pretty good. And we do hope that some of these strategies of firm contract in conjunction with [unintelligible] may still be viable. (Applause.) MR. SCHWARTZ: Thanks, Alan. It strikes me that really the first two talks that we've had here are really talking about strategy and strategy development, and some interesting ideas about how to convert storage and technologies and predictability in the technologies and so on. And as I guess this whole industry progresses, you know, these are some of the issues, predictability especially with respect to financing and types of contracts that are taken with utilities and other potential users, I think are really going to be key. So in a forward going way, I think some of the ideas that are being laid out here probably need to be examined over the next little while. The next talk that we have is from Prab Sethi and is on transmission and interconnection with transmission systems and the types of support that wind may be able to provide to transmission. Prab is working as a project manager for the PIER program at the CEC, and he's managed RD&D, research development and demonstration projects related to renewables for quite some time. Advanced generation and strategic technologies including an advanced combined cycle power plant, which is interesting to me. He has arranged and conducted focus meetings for ten targeted industries, and supervised Industries of the Future in California. This is a program at the Energy Commission. Previously Prab worked for more than 15 years with Bechtel and sergeant at Columbia as an engineering manager and project engineer for design, project management, licensing, construction and system testing of the power plants and large chemical and industrial plants. He has an MBA honors degree from the University of Chicago, a Master's degree in mechanical engineering from the University of Wisconsin, and he's a registered professional mechanical engineer in the State of California. So let's welcome Prab, please. (Applause.) MR. SETHI: Thank you very much. Ladies and Gentlemen, I like to give you some of my ideas here of renewable distribution generation, how to solve transmission and distribution problems in California, and we're going to go through what we call a strategy planning analysis approach. What we going to be looking here is -- actually, I understand most of the audience here is really interested in wind energy. I'm going to go a little bit higher level than that. I'm going to go to the renewable and the distribution system itself, and see what -- and I'm going to go over, like, one of these projects. It's a major project we're doing at the Commission to see how we can use these renewable systems to solve some of the existing problems or maybe even future problems. So some of the issue you see here is that we do have limited peak generated capacity. And in some cases, it will depend on the growth in certain areas, and you might have enough of a base load there. And second is here that the transmission distribution infrastructure is not something we can't do for the electric distribution. And there has been an uneven demand load in the infrastructure. So there are locations where they do have this problem there. And also we do have a diversified resource -- lack of resources. And now we -- we have the -- the new RPS, the Renewable Portfolio Standards, where we going to be having 20 percent of the renewables, which right now we have approximately 10 to 12 percent. And then by 2017, we want them to be 20 percent. Now, we do have this standard here, but there is no implant. How we going to go from here? How we going to approach that target? And so here, like the other slide before here, we do have different problems in different areas. San Francisco typically has a problem with capacity in the conventional layer. And the reason is, you know, its location. And so we have to solve -- find some kind of a, in the future, solution for that area. On the other hand, SMUD has a problem with peak energy; and in Southern Cal, in the Chino basin, it's a problem with the environment. So each of these areas need different type of solutions for it. And the California grid itself is a huge system which has interconnected a number of different tie lines from different states. So we have more than 53,000 megawatts of supply being transmitted to the system here. And -- but what we have to do is look at each of these areas, you know, target the local problem, maybe we can solve those ones. And this is basically typical components of the grid here. Under this plan that we -- under this project what we did here is we're taking the transmission system, which is under 115 and above 80, under 115 WK and above. And that there is -- then we take the distribution lines which are less than a hundred. Most of all, what we're trying to do is look at all of the categories, all of the resources, all of the problems, and try to get a big picture of what's happening here or how we can solve those problems. And then we will do, you know, some case studies to come under that 115 KB. One of the problems we found is that definitely the computer system that we are going to be using on that just doesn't have enough capacity to run all of, you know, power system at 100 KB and less. So these are the goals for the standard value project. But what we are trying to do here is, first of all, look at what we have here, identify the generation and the distribution problems in different areas. And the second one is look -- try to come up with the resource assessment, what different renewable resources. We going to be looking all over California, all kind of renewable resources: Interval, solar, biomass, wind energy. And then the -- doing all these details here, and we're going to -- imagine these hot spots without renewables. We're looking, okay, we have a problem in this area here. How can we solve that? What's the relevant loss? We have wind energy here, but can we -- can we solve it with wind energy? Would that solve it? Because each of these technologies or each of these resources have a little difference. With wind energy, it's not going to be every day. We look at, you know, what time and when we can -- you know, wind energy in that area and solve those problems. And when we come out after everything is done and completed and finished, what we want to do is come up with some hard area targets, which the Commission wants to make the funding for that and take these technologies for the long run. So we want to find, you know, what is going to be the performance characteristic needed to resolve these problems? So what are the economic characteristics required from these solutions? And on top of that, we are also looking at what are the public benefits of the Commission -- of the PIER programs? What we want to do is actually find the hot spot, find the renewables, find the technology to solve that problem. At the same time, come up with a -- solve this problem, but at the same time it's going to give us the public benefits. Those public benefits, they could be, you know -- they might be reducing your [unintelligible] burning problem. We might have, you know, reducing the land fills or creating some jobs in the economy, you know, [unintelligible], those kind of jobs. So by solving some of these problems, combining the resources at the hot spots, we can find the solutions for that. What that will do is bring up, you know, the -- provide customer choice. So there will be more resources available to come up with the right solutions for that. And the other one is that the -- the business systems, the distribution systems, they also solve the problem, the cases where the loads are very far from the generation sources. And in case there are changes in the load share, that we also have to come up with new solutions. And the next one is that these -- some of these solutions, they could really be cost effective instead of to use it, and they will also reduce these upgrades from the T&D, transmission and distribution. Because some of these equipment has been there does need replacement. So our -- so what this will do is, you know, delay some of the replacements for that or additions to that, too. At the same time, by solving these problems, we will also -- like I said before, we will also be providing some public benefits. The approach we are taking, in this case here, is that -- the first one is that we are going to be using these power flow models to look at the total distribution system in California. I mean, the system is actually going to be -- like I said before, was that 115 KB and above the transmission system. And the second one is that we will be finding some renewable resources for that. And so what we did here in this case is that in power flow models, we have endless energy, you know, along with the power flow, [intelligible], they will be doing [unintelligible] to complete the capacity of the system. And for the renewable resource assessment, we are getting cooperation from California Department of Forestry. They already have a number of that, a lot of database, a huge database in this case. So we are going to get a lot of data for this project, for our resource assessment, for the public benefits. So that will give us, you know, how we can compare these power flow models, the results from their distribution and GIS maps. And we already have people beginning off that with the technical and economical screening for these technologies, see what's the best one to come up with the best solutions for that. And finally, we will be able to come up with some final integrated results to solve these problems. And that will also include the case studies. And the other solutions are also going to be, you know, in some cases, just a renewable will be able to solve the problem. In some cases it's going to be that renewables has the right combination of the commercial technologies. Okay. How do we find these solutions? What we going to be doing here is that we are going to be -- they call it [unintelligible], basically going to be stressing the transmission system. We going to be -- we'll be looking at the goal in different areas for the next five years and ten years. And we're also going to be looking, you know, at the hot summer or the [unintelligible] and they going to be looking at what they call a ten-minus-one analysis, and try to predict what happens with the rest of the system? And so we really want to come up with the solutions for all of these. And that's the little details of this -- you know, the power flow models we're going to be doing here. This is going to give us what -- where these T&D problems are in this. And everybody knows right now from the System 15 is that, you know, we got a problem there. Actually right now, what we have done is that we have already found at least 150 spots where there are what we call the hot spots, where there is a congestion problem with the lines. And we are going to be backing in these hot spots, and which is the one where's there no way we're going to be able to solve everything. This is at much higher levels, so we want to come up with generation solutions for all those technologies and what's available in those areas. And once we have done this, when we're at about 115 KB, that is when we can solve it. And we look at the lower distribution level. In some cases, if you can solve some of the distribution problems, you want to see what's the effect on the transmission problems. And this is a way to just give you a feel what -- how we are doing is here. This is our power flow models. This one is typical. Right now -- I can't say every day. It's just a typical one. And it's just to give you a feel for that. If you look at that right now, these are -- the circle here, basically how much loading is in each line there, each of the distribution lines. So looking at that, make sure none of them is overloaded in this case here. And this next slide here, just taking -- okay, if there's a break in one line here, it does give you what happens on the rest of the system. So that one tells you, you know, here are the hot spots. We have to look at them and see how we can solve those problems. And we are also trying to combine loading. We have two different systems working in this case. You know, one is a power flow model; the other one is a GIS system, and they don't talk to each other. Locationwise, this transmission line is going to be 20 miles from one here on this slide here. So we have to convert, look at, you know, some of the -- find some piece of equipment there to tie these two together. And -- okay. This is actually -- this is a real analysis done. This is some of them done here. I just got those ones. We haven't got the time to really locate what these areas are, [unintelligible] calculate where they are. We are going to be pulling these maps on a county basis so we can really know, find -- exactly find where they are. And if you see that area here, that tell you that's the area of where you need more generation. And -- okay. In some cases, pure generation, it can help your system. But, on the other hand, if you don't have enough capacity, it can really hurt you. So these blue areas, that's what it's showing you here, that you can't put any more generation here. Because if you put that, there's going to be problems with the transmission system. So -- but maybe another month we will have all the details exactly pinpointing where the omissions are. So that's the power flow models, and the other one is the -- this one talk little bit about the GIS system here. So we are going to be doing the different schematic layers for different type of resources. And also the public benefits. What we're doing with -- my job is to get feedback from the GIS system back into power flow model of what's available there, what's not available, and then try to see how we can solve it in those areas, what kind of technology or how much, you know, is available, power is available which can be generated. And this is some of these different layers, and it's very -- you know, there's a lot more than that. It's very typical to see a few of these in what we going to be showing on the GIS map in here. As you see, that's forestry. It has to do with reliable energy resources. And we also going to be talking about the wind resources. We going to be -- there's the speed there, how much, you know, the energy available, and at different heights. So we have all different maps in that -- which we are going to be feeding back. Two million dollars has done a lot of work on this, so we'll be feeding all the information from that into these models here. So by the time we're done, actually it's going to be -- right now it's going to be two ways. Right now we're trying to feed in all the information we have into these models. And once we get that information, we're going to go back, these are the areas which are available and probable for additional generation. And this is one of the -- just to give you some feel for biomass and, you know, how much per acre available in that case here. We have similar maps for different items, and then we can come up with whatever we want. We can have one layer on top of the other one and find out where generation is needed. After we are done with these two, the power flow model and the GIS, we do want to take another look because of the technical and economical screening for that. We just want to make sure everything is economical, and we want to look at the performance data. And also we want to compare the renewables versus the existing conventional technologies. And in some cases, it's going to be renewables; in some cases, it's going to be a combination of that, maybe renewables in the systems here. And the final one is going to be in the case study where we actually go and pick up a number of the areas. We are looking in one in the Bay Area and one hopefully will be Chino, another one, but that's going to depend on this subsequent model. And we're looking at the implementation levels, where we going to be in the next five years or ten years. And we are working with a number of the utilities, and they've been very, very helpful with us. We are getting hard data from them and try to make sure our models are calibrated [unintelligible]. And at the same time, we have a number of other resource assessment projects which we are working on and trying to get all of the latest information from different resources for them. And time framewise, we are trying to rush this project through because it is important to finish it. And we are trying to see if we can finish by June of next year. Right now, it's like three or four months from that so we're trying to squeeze that and see if we can finish by then. Thank you very much. (Applause.) MR. SCHWARTZ: Thanks. We have been involved in a number of projects over the years. Actually, one of the things in his presentation that -- I don't know about you folks, but the one I liked the most is where not to put the stuff. You know, I think we have some ideas around the city of where some things might go, and we have our transmission corridor of about 160 or 170 miles from Yosemite down to the city, and we know where some of the locations are that we think we can begin installing some of this stuff and so on. But I think the slide that showed the hot spots and the spots -- the blue spots where, if you put additional generation in it, it would exacerbate the transmission problems, I'd never seen that done before. And I sort of like that one a whole lot myself. Anyway, the next talk we're having is from a fellow who has been in the energy business for quite some time, although he came originally from the finance business and segwayed from that into the wind industry business. Pramod Kulkarni has been at the Energy Commission for some 12 years now and has been -- and is known as a tremendous renewable energy advocate. I'm really pleased that he's here with us. He has for many, many years focused on energy storage, and, for California, I think has been one of the guiding lights in terms of pushing forward the agenda of energy storage. I've known him since around 1991 and have found him to be just, you know, completely focused on the public benefit of these resources and in strategically being involved in how to -- how to move them forward. So without further adieu, here's Pramod to talk about energy storage. MR. KULKARNI: Thank you. And I'm painfully aware that I am the only thing standing in between you and coffee break, so I better make it all the more interesting. Again, thanks. Yes, I do have tables. I do have charts and graphs, but I just encourage you to look forward. I researched renewable energy storage for 20 years, [unintelligible] with wind for last 20 years, since 1982. And the question I ask every five years, is the time right right now to use energy storage with wind to create a market value? And that is the question. Can wind electric generation and market storage create market value? Now, only two components of the situation I will talk about: Creating energy storage and market value. The rest I would like the audience [unintelligible] wind energy from day one. So there's no need for me to go into that market. Let me set the stage here. Why every five years I ask myself the question, is storage the right time as applied to wind? I think several things have happened over the last two years which have been ongoing in making me take a second look. There is rapid evolution of electricity storage technologies due to material sciences, electro-chemistry and power electronic advances. So technologies are rapidly advancing for people to set the stage, at least some of them, and not just looking at a single technology. I'm just talking about storage [unintelligible] casually. There have been -- there have also been power conversion, control and communication technologies. That's what we call in length. On the reverse side, immediately after deregulation there has been a lot more volatility in prices and much sharper price peaks. The energy crisis has brought forth an appreciation for reliability, load management and efficiency. And one problem is the possibility of [unintelligible] willingness to pay for it, if the price is right. And lastly, hopefully storage technoligies will provide a variety of solutions for multiple problems. The critical question is, what problems can storage solve? Which storage technologies? At what price and what value do you deliver? And for the audience the question is, can wind electric generation, wind management storage deliver the value? For those who aren't familiar with storage technology, it's very basic primary storage. There are two or three parameters one has to know. What is the power inherent to that box in terms of kilowatts, megawatts? How much energy can it deliver for what time duration? And lastly, what is the energy efficiency? These are basic things that we're going to be considering for viable electricity storage options when combined with wind. A little bit more elaboration. When we talk about storage, there are two [unintelligible]: One on the grid side; one on the load side. And also, storage can be applied from a few seconds to several hours. And so, if you divide that, you basically get six parts within which storage could be effective. And as far as the wind goes, [unintelligible] storage on UPS. So that puts in the power seconds on the load side. This is the lower part -- this is the upper part right here. But when we talk about wind, there are other squares where we were focusing most on, such as possibly peak shaving to avoid demand charges; possibly substitution for peak dispatchability for renewables; and in some situations, to relieve additional hot spots. So there is a broad situation when wind can possibly be used, but not exclusively. Let me quickly go down the type of storage technologies available today. Lead-acid. Okay. Lead-acid has been around for awhile, so there's not much developing in that area. What's really new is things such as high temperature sodium/sulfur batteries, Zn/Br batteries, Vanadium-redox batteries, Ni/Cd batteries. [Unintelligible] basic power at once and last 45 years. And they have different characteristics, and everything is far superior to that of lead-acid batteries. We have compressed air energy storage, like two [unintelligible]. We have a lifetime [unintelligible] for about eight to ten hours. We have pumped hydro, which has been around for a long time. Modular pumped hydro we thought for awhile [unintelligible]. There was some talk for awhile about that. SMES, super magnetic energy storage. That's storage for a few seconds up to two minutes, but a high amount of power is required. And lastly, high speed flywheels and low-speed flywheels, again, depending on what capacity, what power, what you are looking for. We have supercapacitors, again, which are capacitors with a lot more capability. They require high power and [unintelligible] duration. This is the current state of the menu of storage options which are available. All of them, in order to use for wind use, depends on what kind of application you're talking about. This graph primarily shows, depending on what kind of power you're looking at and for what duration. Accordingly, the whole menu of technologies is spread on this graph. For example, look at just less kilowatt, two kilowatt-hours or less, for few minutes to few seconds, high energy flywheels is a possible solution. If you're looking for hundreds of megawatts, tens of megawatts for several days, then you go to the other extreme. Compressed air becomes the solution for that. The question is, depending on the value and the application, wind might be able to manage some of these technologies. And that is a local question. Analysis needs to happen on a site specific basis. Now, this is a picture of a -- I think this is a SMES plant which provides a 15-second system with a microchip plant for ten megawatts. These are back to the [unintelligible] quality problem. We use this here to show that these are real technologies. These are not something that are just on the shelf in the labs right now. Some of them are, but some of them are peaking in the state. You are all aware of what the [unintelligible] factory require. A few seconds down, and they are bigger financial -- have a financial disaster on their hands. This is a 6-megawatt, eight-hour sodium/sulfur battery. [unintelligible] MGK, and that's based in Ohita, Japan, and that's been used for load management. These are batteries from a British company called Regenesys. And they are proposing one right now in the Tennessee Valley for [unintelligble], 12 megawatts for eight-hour flow. This is an ordinary [unintelligible] lead-acid battery in which -- in Puerto Rico that's been used for providing peak reserve and in the [unintelligible] economy and also the back-up generation. And the point I'm trying to make is they are [unintelligible] available, which could be managed at the right price at the right time, the right location. The point is we have to look into it further. For electricity storage to be commercially viable, the following conditions must be met: The right storage technology has to be matched to the right application. The deployment of storage of technology is often an exercise in risk aversion, an insurance service. So if somebody asks you what is the price of storage, that is not [unintelligible]. The question is, what is the value? What is the current [unintelligible] cost of not having storage over there? And that determines what price the market -- what price the market will pay for that specific storage technology. Value of the service and acceptable price depends on the benefits of avoiding risks. And what's the value of the application? For example, chip manufacturing, they are [unintelligible] for 15 seconds for what the price is going to be paid as compared to a coal mine [unintelligible] waiting to get on for a couple of hours doesn't make that much of a difference in terms of meeting production. Now, these are the barriers which we have been hearing about for the last two presentations in terms of transmission congestion, lack of dispatchability. And I think we have a full dispatch. I don't think it can be used for ancillary service to ISO, spinning reserve, frequency control and VAR support of reactive power. So what I'm trying to do is understand what electricity storage technologies are available and their attributes. I quickly went over them, and that's only the tip of the iceberg. And that is something which has to be done before we can appreciate what our wind storage and energy storage can be managed together. We have to select applications that may be cost effective after adding the cost of storage to wind generation cost, and determine the perceived value by the market for the services. Now, that's my presentation. I'm going to focus on the value. This is something which I have not [unintelligible] the ability of the USOC [unintelligible] talk about that. The values defined, I think it's a function of -- acceptable market value is a function of time, location, and application. The recent effort to define and establish -- to define and establish value has been done by the Department of Energy. They are funding a contract with Joe Iannucci of Distributed Utility Associates of Livermore, California. And an analysis focused on the use of storage for deferral of transmission, use of arbitrage and load management. These are general storage analysis, not usually for wind. What we need to do is find out if this is the value people are going to pay for arbitrage or load management or [unintelligible] relief. Can you successfully use wind in combination with storage to meet that kind of a relation. This is basically -- this is a poor presentation, but I'll try my best. Okay. Again, that agency is looking at right now bulk electricity arbitrage, buy low, sell high. I think Mr. Johnson mentioned about that. And then transmission constraint, which Prab talked about. Energy regulation, minute to minute load to generation matching; voltage regulation; central power environmental dispatch. All these issues is looked at as interconnected. From the customer side, application of storage for time of use savings, demand charge savings, as used in the micro-grid application and reliability ride-through. [unintelligible] load time a few seconds, high power applications like capacitors or flywheels. For renewables, we are looking at contractual time of production payments, capacity firming, renewable time shifting, green power supply avoids instantaneous oversupply penalties, two of those issues which were mentioned earlier in the presentations. The overview value analysis extends to bulk electricity arbitrage, T&D deferral, transmission constraints, renewables capacity firming, and renewables time of production. [Unintelligible] storage technology looked at that boxes to say, storage efficiency equals 80 percent, and charge/discharge ratio is one. I'll give you -- I'll select only a few examples because we don't have much time, but [unintelligible] appreciate how the value of that storage is being calculated. I'll stick to those that the renewables are in one, possibly wind. Basically buy low-cost energy off-peak and sell on-peak. This value analysis is based on the actual data used in PJM wholesale area, PJM wholesale price area. PJM I think basically came to ISO in California, and that is the use over year 2001, from January 1st to December 31st. What he's showing over here is how the price fluctuated, general prices, over 8760 hours in 2001. And the transition is using storage, you can cost effectively use storage if you use a certain approach strategy. For example, here is talking about energy arbitrage using one hour. This is storage discharge one hour, and that annual net benefit, if it's 90-percent efficiency, is about 24, $25 kilowatts per year. Now that's based not on these sharp peaks, but mostly managing these little variations up and down over the entire year. And that has to be noted. It starts off one time big storage they're using the small storage which can be used on an hour-to-hour basis. Now, you go a step forther, two hours of storage. So that is storage for additional two hours, and cumulative storage is other here. And if you have two hours of storage, in fact, you would have the value of about $38 per kilowatt per year. And so on and so forth up to ten hours. So the question is, when is optimal price and optimal load? Here is a one-cent kilowatt-hour opportunity of cost. The other [unintelligible] and again, there are several graphs from 30-percent efficiency to 90-percent efficiency. Now, the reason for that is storage technologies measure their efficiencies from hydro case, I think anywhere from 80- to about -- 75-, actually, to 80-, 85-percent efficiency, other storage [unintelligible] there. This is net present value factors, to find what the net present value of a storage is. To go back, here is found, for example, one-hour storage in 90-percent efficiency is about $24. If we do this for ten years, what is the net present value of having that storage for ten years? You need to start factors -- you need to start factors and duration to withstand that. Using those factors, basically came up with storage of one hour, one-hour storage. The net present value of that is almost $200 per kilowatt. In that situation the question is, can I provide storage at that price or lower so I can meet the value to lower my cost of storage? Now the question is, can you use wind technology or wind power to charge storage and then [unintelligible] lower than that price? This is energy arbitrage. What is the value of one or two or five hours of storage? Let's look now, transmission upgrades in PJM territory. Costs of proposed transmission project is 10.6 million dollars. If we can defer that specific transmission upgrade by one year, the value is $837,000. And load growth in 2002 at that point was 2.1 megawatts. So we basically calculated if you can defer transmission by one year at a value of $399 per kilowatt, and you can do storage duration for two hours, apply the same thing to California. Let me get back to the [unintelligible]. So if you combine the value of the arbitrage benefit and the value of the transmission deferral, we have a different set of curves depending on the duration. These are the most likely. These are arbitrage benefit and [unintelligible] benefit combined. And this is the most -- here's the optimistically. Here's not so optimistic. Here's the most likely case. So you can see, for example, the three-hour storage would provide $800 kilowatt value if you can defer transmission. And if you can defer -- and you can [unintelligible] arbitrage. Using this example of Path 15 in California, using the same calculation, he basically came up with a value of $625 per kilowatt. That's the value of storage. And I will quickly go through this, not go into detail. But the question you ask is, is that the price at which we can take any kind of resource, I'm not necessarily saying wind, any energy source, combine that with storage and still meet or beat that value? If we can, that means we can defer Path 15 conditions for what we were talking about. This is using the numbers that we had, some figures from ISO. Until now, here is the time of use per customer. Similar thing, that's the load curve using those A-6 tariffs for PG&E. And average load is then to be a thousand kilowatts. New storage is equal to that. And again, find out what is avoided summer benefit during peak load, avoiding peak cost and demand charges. How much time do I have? MR. SCHWARTZ: A few minutes. MR. KULKARNI: As if I'm not going fast. Demand charge reduction. Basically we will distribute this at the end of the -- when we have the -- at the end of the conference so you can go in detail and call back if you have any questions. Okay. Here's the demand charge reduction value, annual benefit up to $10 per kilowatt-year. And that's the situation in that site in that location. Combined fuel and demand charges, the annual benefit of using storage is $116 dollars per kilowatt per year. And if you can defer storage by 11 hours, then your benefit is $134 per kilowatt per year. Renewable enhancements, capacity firming. Actually that was part of the -- I will go with that. Okay. For example, here's assuming in the micro grid having a wind turbine, 1,000 kilowatt turbine, 200 hours per year, half of renewable energy is on-peak, half is off-peak. The contract on-peak is worth 10 cents a kilowatt-hour; off-peak is 2 cents a kilowatt-hour. And storage used in this situation is 80-percent efficient. Basically he shows revenue with storage and without storage. And with the storage benefit, it basically boils down to $60 per kilowatt per year. The question is, is that a realistic price? Can you get the storage in the market? Combine that with your wind power to generate that kind of revenue or make that kind of price. What you are seeing here is a table which talks about all different kind of applications: Energy arbitrage, T&D deferral, transmission constraints, time of use, renewables capacity firming. And the value of that particular application on a per kilowatt basis. And then he tried to estimate market potential. That's what we ask people in California. What is the market in California? Which storage technologies are commercially available? And people do use that. But this is rough estimate of how big the market is. Again, this is a very rough estimate; nothing precise about that. Just a ballpark figure. That's an estimate. So where are we today? We have just finished the work with DOE, and they are about to deliver a handbook for explaining the methodology for assessing valuation of storage technology benefits. That is, with wind power, how to value -- I'm sorry -- select an application, and see what is the value of that particular technology -- I mean application, in a certain location. And take about 10 to 12 examples within California, and develop the value so you can say, okay, some of the hot spots which Prab was talking about, if this was a hot spot, if we can provide storage, what is the value one can expect to get? So what does it mean for the wind industry? Can use it to assess if the wind energy systems in combination with storage meet or beat the values, especially California specific values. And can we use that to successfully compete in the market for [unintelligible]? Now, what does the Commission do? That's my own admission. Part of our position is basically to raise the awareness of storage technologies and what they can do. Start a detailed presentation. But nevertheless, just to make people aware of new developments, things that change. And I think we should take a second look at storage technologies. And lastly, we are quite likely to issue a solicitation, this summer, in which some of the [unintelligible] of storage technologies in various forums to come over and [unintelligible] the problems we face in California. So, that's that. Quick one. (Applause.) MR. SCHWARTZ: Very interesting. This is the first set of figures, actually the second time I've seen some of them, but that show presentation was awhile ago. This is the first set of figures that I've seen on the value of storage that -- that I think has been vented and could be more reliable. So having said that, we can take some questions of you, from you, of these four individuals: Kevin Jackson, Alan Lamont, Prab Sethi and Pramod Kulkarni. What I'm going to ask you to do is let's limit this to maybe five minutes, five, ten minutes at the most. And if you put your hand up, I will bring you the microphone, you can ask your question, so that our lady of the trans -- whatever it is -- can do her thing. Okay. So questions, please. Everybody is really hung here. There's one back here. Okay. MR. KLEIN: My name is Russ Klein. And my question is about, when you're talking about stored energy, how about generating hydrogen? You know, just ten miles that way they have a hydrogen tank for the hydrogen cars and, you know, type of hydrogen economy. So here's -- using that. Or just 20 miles that way is a liquid air storage plant that makes, you know, liquid nitrogen, liquid oxygen, things like that. What about using those kinds of stored energy? MR. KULKARNI: The answer is that's possible if two conditions are met: One, is the technology there right now, for the foreseeable future? And, two, is the price right? That's what basically it boils down to. In the sense, if there's definite interest in those technologies, I know people looking at hydrogen science, people looking at fuel cells in that capacity. You know, have a hydrogen pack next to the fuel cell and use that. The question is, the economy has to be right. The answer is, yes, that would look tempting for the right price. And that's the delay. MR. WORDESELL: Jake Wordesell. Where were those red spots on that map? Can you just give us a rough idea from a geographic standpoint. MR. SETHI: I think the number here is, you know, if you look at the Bay Area for sure, it's going to be in there. And I see some of those who are north and towards -- north from here and on, but I can't pinpoint those when I don't have the -- when I have not done that work as yet. So if you ask me the same question for two weeks, I will get you the exact answer. MR. SCHWARTZ: More questions? Anybody? Going once, going twice. UNIDENTIFIED AUDIENCE MEMBER: The blue spots? MR. SCHWARTZ: The blue spots are interesting. I think one of the things that I take from this session initially here is that there's -- you know, we've scratched the surface really. We didn't have a lot of time for the presentations. And each one of those presentations made me think about a bunch of stuff that I hadn't thought of previously. So I might suggest -- and I don't know if this is going to be an annual event or an every six month event or whatever, but it would be really interesting to take people's feedback on the -- on the forms that Case has asked you to fill out about some of the areas that you'd like to see maybe expanded from where we've set off today. So, with that, let's go get some refreshments. And, Case? MR. VAN DAM: 15 minutes. MR. SCHWARTZ: 15 minutes for refreshments. Back here in 15 minutes. Thanks very much, folks. (Recess taken.) MR. BENNETT: Let's get started on the second panel here, windplant planning challenges. Interesting wording. My name is Chuck Bennett, and I'm with the firm Environmental Science Associates. And this second panel here is going to shift the emphasis from talking about the mechanics to issues that affect people. Although, there are mechanical issues involved here. My background is in mechanical engineering, but I've spent my entire career working in environmental issues. And by environmental issues, one of the major things I've been dealing with is preparation of environmental impact reports, which are the bane of people that want to build wind turbine generators in California. But it's -- it's a fact of the structure and the approval process and what it takes to get your permit. And in dealing with environmental impact, you deal with noise, you deal with safety issues, you deal with effects on the environment. And you ultimately have -- well, you have visual impacts, and you have -- the ultimate goal is to paint a permit from a governmental body so that you can go forward with your project. And our panel today is going to deal with several of these issues from different perspectives, dealing with the perspective of the owner of the property, dealing with the perspective of noise caused by the systems and also interactions with birds. And our first panelist today is Dick Anderson. He's with the CEC, a wildlife biologist, and involved in wind energy development and bird issues since the mid '80s. And he is a member of the National Wind Coordinating Committee and the avian subcommittee of that coordinating committee. So let's just start right out and hear from Dick on avian issues. MR. ANDERSON: That means be quiet. I don't know. I didn't touch anything. I wanted to see if that worked. Well, now that I have everybody's attention, my name is Dick Anderson, and we're going to talk about birds. There are some issues that are very important to wind energy and are -- and also are very -- can be a barrier for permitting. So we can do the things we talked about this morning, but we still have to ultimately permit these things. And one of the discoveries years ago was that birds fly through wind turbines. So -- can you hear me? I'm afraid of this thing now. Does that help at all? So I'm going to talk a little bit about history. First I wanted to ask, how many wildlife biologists are there in the audience? Yeah, I see there -- I know there's two of you out there. How about bird watchers? A few more. Okay. Well, I won't bore everybody to death. A little history with the -- with the issue of birds is back in the mid 1980s, there were reports coming in, kind of rumors about birds being found injured and dead in both -- in the Altamont Pass, San Gorgonio and Tehachapi. There was a study done by a fellow named Jim Estep, kind of a survey study. He was hired by the Energy Commission to do this. And he interviewed fish and game wardens and federal agents and rehab facilities in the vicinity of wind resource areas that were commercially developed. And they all had reported getting birds that were injured and dead birds given to them. And so we -- we decided that maybe we should look into this a little bit more. We're very encouraging. We think wind energy is an excellent source of energy. We need to look at the -- both the pluses and the minuses. So a study was initiated that was paid for by the Energy Commission. It was sponsored by the three counties -- Alameda, Solano and Contra Costa. Thanks. And Sue Arloft did that study, and it was found that there were a lot of raptors especially dying in the Altamont Pass, hundreds a year. So it was alarming. We didn't understand what was going on. And -- but it had a national effect on the fledgling wind industry that was starting to develop in a number of other states as well as expanding in California. And it became quite a barrier. It got used both by industry -- let's say misinformation and misleading information was used both by industry and by environmental groups, environmental groups threw out birds in every project to stop projects, to delay projects, and the issue was downplayed on some projects by other sides. To deal with this, the National -- a group called the National Wind Coordinating Committee was formed. They were addressing barriers to wind development in general and had a number of subcommittees. One of them was avian, because the avian issue was becoming more and more important in terms of slowing development. Soon after that, a number of studies started both industry sponsored and paid for and public sponsored and paid for. And they weren't always the best methods, they weren't always done in a way that they could compare to anything else, and they weren't always credible. And so as the information started coming in, it wasn't as useful as we would like to have seen it. We're starting to get a picture that was -- that it was a site specific problem. So the avian subcommittee had a role, and it's not -- the National Wind Coordinating Committee is very similar I think to what this Consortium that's getting going here. I think it's an excellent idea. The avian subcommittee essentially brought experts together from most of the United States, but also from Europe and other parts of the world. And we tried to define the issues and identify gaps in information where we needed to do research. And we had four different planning meetings about a year and a half apart where we would take another step, another step, and we'd learn more and we'd identify more research that was needed. And it's still ongoing. Proceedings of those meetings are available from the National Wind Coordinating Committee. And I happen to have put their website here. We'll be talking about some other publications just briefly. The Energy Commission's website and the National Renewable Energy Labs website -- I didn't put the address up there -- but they often had a lot of good information if you happen to be interested in this particular issue or if you're developing and need more information about wind and birds. This avian subcommittee also provided technical advice and recommendations, and it wouldn't be unusual to meet in larger groups and talk about specific projects and the way to do the studies, standardizing -- oh, yeah. Thank you. So, anyhow, we also served as a coordination of communication amongst different stakeholders, and we developed some standard methods. We felt that if people were doing things in a credible scientific way, that the results then would be comparable and we could learn quicker from multiple studies. You've probably all seen this. This is an old map from '99 with -- the states that are in white are states that had commercial development going on at that time. There's several -- there's probably five, six more states that would be white today. But the idea is that it's a growing industry. It's expanding both in the United States and around the word. Quite a few studies have been done. Almost all of these studies now use the standard methods and metrics so that we can learn faster. We're starting to -- although we have a lot to learn, we understand a lot. We understand now how to at least avoid problem locations. I won't go through all those. This will give you an idea. The last planning meeting we had for the avian subcommittee, these were the topics that were presented. In some cases these are fleshed-out proposals; in other cases, they're results of studies, species impacts. Different species react differently. Some of them are more prone to collide with turbines. Tower types, size, number of towers, or placement. You've probably heard a lot about tubular towers versus lattice towers, big towers versus small towers. There's a lot of misinformation out there. And I'll talk a little bit more about that later. Vision turbine blade conspicuity, the concept that birds don't seem to see the turbine blades because they get hit by them. And it's kind of -- one of the -- one of the more interesting ideas is the -- I think it's called the smear. But anyhow, if you're driving down the interstate and you're looking at fence posts on the side of the road, and there's a raptor, a red-tail hawk, as it gets closer, it gets clearer and clearer. And then as it gets very close, it goes zoom by you, and you can't focus on it. Could be something on that order that allows birds to be hit by blades without them seeming to detect them. Acoustical monitoring. What do birds hear? Is there anything we can -- bells and whistles type of idea. Avian prey. Are the birds being attracted into an area because of prey? Potential deterrence. Other things that you could -- paint blades, anything you could do to alert them, microwaves, ultra low sound, low frequencies. We also are learning that bats also collide with wind turbines. In some areas, more bats are being found dead than birds, which so far hasn't been a problem. But depending upon the sensitivity of the bats, a sensitive bat species and the locations, it's just one more thing to take into consideration in siting. Each site is different. There have been enough information on a couple sites where location of turbines has been moved around a bit in order to avoid high use turbines. And I mentioned standard methods and metrics before. It's very important that we look at these -- every study gets done in a very similar way so that we can learn -- learn faster. We can also trust that the work is done objectively and has credibility. Then significance of the problem. Is one bird important, ten to a thousand? And then there's legal significance plus there's biological significance. Those are issues that will have to be dealt with on each project. Just a little bit of information. This is bird use mortality and variation and risk variation within a wind resource area. And the idea here is just to show that within a resource area, bird use can vary greatly. Now this is San Gorgonio. Use subdivision low, medium and higher elevation, but they also represent habitat types at the low elevation, and there's also some large recharge basins. And it's just that you can't just look at a small area. You have to look at the whole -- you have to have a nice -- a nice sample of the whole project site because things can be very different in different parts of the project. Same way between wind resource areas. This is Tehachapi and San Gorgonio. There's real differences in the bird use of the areas. There's also differences in the number of birds that die compared to the number of birds that use the area, which creates a different risk. And periods -- these are seasons. Actually, they're quarters of the year, January, February, March and so on. And so back to San Gorgonio, even though we know that each -- each habitat type or each elevation has differences in the birds that use the area, they're also compounded by their different use patterns seasonally. Where here we have essentially no birds second period, but here we have a lot of birds during the second period. So studies have to be at least a year long also. And then there's differences between bird groups. What we found was that raptors, which are of concern, are disproportionately prone to collision. So if we look at this many raptors and this many ravens, we end up having -- well, the risks of the raven colliding is very low; raptors are very high. And it's true for some of the other birds. We don't know about most of them, but the same pattern. This helps us in looking pre-permit at what birds are using the area and how they're using it to help predict if there will be a problem or not. And then this is -- these are raptors permanent, raptors permanent observed. San Gorgonio is very low, and we found very few dead birds in San Gorgonio. We don't consider it to be a problem. Tehachapi was twice -- twice the raptor use as San Gorgonio, but still it was low, and collision just wasn't a problem. Altamont during the lowest raptor use time of the year and the highest raptor use are between 10 and 20 times more than the use in Tehachapi. So it already gives you an idea of why we have the raptor problem and why a lot of raptors are dying in the Altamont Pass. Because if we were to go in there today and look at raptor use, we would say, wow, there's really high raptor use here compared to other places. We would predict that there's going to be a problem. This is Solano. Solano wind resource area has more raptors than the Altamont. So that's going to be a challenge for developers, future developers in the Solano wind resource area because of this. Well, just a quick update on some of the work that's going on. In the Altamont, currently PIER has two -- two studies -- well, has one study ongoing. And they're finding that some of the things that we'll -- we'll summarize in one minute here, are that tubular and lattice power issue. There's no difference being found, and there's no difference being found in many locations where they're being studied. Also finding that bird fatality numbers are higher than previous studies had recorded. And then the Golden Eagle study had just been completed. There's a couple copies I saw [unintelligible] and there are a couple copies and I put them on the back table that can be obtained I believe on the Energy Commission's website and both the PIER program. And what Ranger Hunt found was that pairs of golden eagles seem to be somewhat steady in the area. But the adult floaters, these are birds that replace the breeding adults if one of them dies, a floater moves in and replaces the bird. Those numbers are diminishing which means that we could have some future population problems. But currently the population of breeding birds is steady. Ranger also thinks that prey base or the ground squirrel base is what's attracting golden eagles into the area so that may be a solution there. Okay. Just briefly what we've -- what we've learned is that wind turbines kill birds, wind turbines kill bats, but the impacts may or may not be significant. Raptors are a high risk bird group; they're disproportionately killed compared to other birds. Bird use, mortality and risks vary between and within wind resource areas. It's a site specific issue. Birds die during day and night. There's no conclusive data as to whether a large or small turbine reduces the risks or a tube or a lattice tower reduces risks. And this is the result of several studies. So that's -- these rumors get started and then this information keeps -- goes from one person to another and pretty soon something is a solution or something is a problem. There's nothing known for sure that significantly reduces avian fatalities. Avoidance of areas with high bird uses has only given way currently to avoid avian fatalities. And I just wanted to remind everybody that the only place that we've really found in the United States that raises concern for bird -- for bird deaths currently is the Altamont Pass. There's been a lot of other studies done in other areas, and those areas that have been studied, although they kill birds, they seem to be killing them at a lesser rate and more or less in lower numbers. And for whatever reasons, there -- there aren't any areas that are of near the concern, if any, as the Altamont. But, it's an important issue that needs to be faced and dealt with during any committee. And the earlier the better, because it can be a project stopper. Thank you. (Applause.) MR. BENNETT: Thank you. Let's hold the questions until the end as we did with the first panel. Next speaker is Rick Russell, and he's going to provide us with a view back toward the industry here as a property owner's perspective. MR. RUSSELL: Thank you. This is the part of the proceedings where you relax, because it's obvious I don't bring the academic credentials that most everyone has brought to this forum or consortium today. But I do want to let you know that as a property owner in the Solano Montezuma Hills wind resource area, we have a family chant that goes, "Blow, wind, blow. Blow, wind, blow." Because we love wind power. It's been good for our family. There are a number of issues I've had to relate to and get smart about relative to wind farms on property. I want to start off and give you a little background about my family history, the issues I've had to deal with just in the last year, and then some of the concerns that I think the industry and myself as a property owner are just now starting to deal with and think about. My family has owned approximately 1200 acres in Solano County in the Montesuma Hills wind resource area for well over a hundred years dating back to the 1880s. For the first hundred-plus years, that ownership was dry farmed. There were grains grown out there, there were sheep ranched, and that was the extent of it. Honestly, my family, with the exception of the first 30 or 40 years, didn't actively ranch or farm that property. We have been an absentee landlord for the last eight years or so. We've been blessed with the fact that the family that has been ranching that property has been the same family through all those generations. They do pull those leases. So we've had the same tenant family out there for the last -- almost a hundred years, almost the entire time that we've owned this property. There are -- there's a considerable amount of tradition associated with this kind of lifestyle. It's sparsely populated. There's no more than one dwelling unit per thousand acres out there. In the 1970s or thereabouts, I went to -- went off to college. It was about the same time that the first oil embargo hit in the Ford Administration, and I came back from college with the idea that this would be a great place for a wind farm. Needless to say, the capital needed to put a wind farm on our own property was not in the cards for us, but we did begin the process of trying to find out who was -- who is this industry called the wind energy development community or industry? I had no idea at the time. I didn't -- I found Cal WEA, which was a small group. I got a little more information on the national end of it. I think, like now, there was very little in the way of open channels. It was very difficult to find information. The other thing that I think is key to this is that there were -- not only did the wind blow out there, but the wind seemed to blow at the right time. There was no existing data to verify that, you know, we had the sustained winds necessary to put in a wind farm. Well, anyway, we entered into a contract with U.S. Wind and started putting the pieces together, and that's where the history maybe gets a little more complicated. And actually this is the time -- I probably had a glass of wine, at least one, where I can then sit down with my family and explain to them all the chain of events that went into this process, because it is so amazingly convoluted and complex associated with how this wind farm came into being. And I'm just going to walk you through it so you get an idea. In the early '80s there was a very large turbine put -- installed by PG&E south and west of here in the Carquinez Straits that I think turned once, broke and just sat out there for the remaining six, seven years of its existence. Not long after that, there was the county-approved wind project, and shortly thereafter a residential builder started putting homes up in that wind -- within view shed and within -- probably within noise shed of this residential development. Anyway, about the time that the developer decided that they were going to put a wind farm in place next to this now new subdivision, you can imagine the signs, you know, the -- you know, everyone marching on city hall and all that sort of thing. That went down very quickly. But what the county did at that time was designate the Montesuma Hills as a wind resource area. Again, the population, the densities out there are such that we've got probably no more than one dwelling unit per thousand acres if that. It's very sparsely populated. At the time that we looked at contracting with U.S. Wind, our family was very interested not so much in some of the other proposals that were out there that were farming tax credits. We looked for a developer that really was going to be in for the long haul for this tower, and I believe we made the right choice. If we had a crystal ball, maybe the choice would have been different; I don't know. But it wasn't too long, about two years, going through the entitlement process from '86 to '88 where, you know, we supported U.S. Wind, Kenetech's effort to get this project entitled. At the time the neighbors didn't understand what that meant. I think now we'd find there's neighbors out there that would be very supportive, because they see it as maybe their own way of striking oil. It's interesting that after the entitlement process was complete, that there were, oh, approximately -- you know, the total project, 60 megawatts. I don't know if -- you know, how much information you have on this Solano project. But ours, our primary piece of property out there, 1200 acres, I think we've got the largest single piece. We have over 200 turbines on our property. The difficulty began somewhere down the road for U.S. Wind and Kenetech with some manufacturing issues. But, anyway, here's where the glass of wine really starts taking effect. We went from U.S. Wind and Kenetech, they held -- you might be able to help me with this -- they held the transmission agreement, they held the purchase agreement, they held -- they were in partnership and sold and actually held a small part of the actual turbines and, you know, the capital expense associated with this project. When they got into their difficulties, they basically had to start selling off pieces of what they owned. At that time, Florida Power & Light came in and -- and bought all that U.S. Wind had to offer. One of the difficulties was that U.S. Wind then sold off the substation separately. They sold that to SMUD. They also sold off -- actually, they couldn't sell off the towers and the turbines because that was another partnership, which was kind of typical I think for that time; may still be now. But the -- the partnership that held the towers and turbines, that was going to be dealt with on another day. Down the road, we kind of deal with at least two bankruptcies and one court-ordered sale. And as property owners, we can't do anything but, you know, raise issues and -- and, you know, raise concerns and that kind of thing. I think the industry is -- from my perspective is strong. I want to give you a little bit of a retrospect on what this last year has been for me in particular. I would have loved to believe that, you know, when the project originally came on line in '89, that all I would have to do is put my name on the back of checks. But that's not case at all. Just in the last year, I'm dealing with -- you know, we've got multiple tenants with conflicting uses. Ag tenants would love to be able to continue to take their discers and harvesters up and over and around the hills the way they always have and not have to deal with either turbines, roads, poles or other sorts of uses out there. They can no longer use aerial methods for either spraying or planting. In either case, it's difficult to run airplanes around towers. We actually negotiate every year the amount of additional fuel and take away from the usable acreage, you know, as it becomes a problem, you know, for our ag tenant. We have -- this last year has been a pretty busy year in terms of we lease easement agreements. The area has developed or has attracted, I should say, a fair amount of interest in new development. FPL has their highway's project which kind of forms a big horseshoe around our property. SMUD is moving forward again on their property just to the south and east of us. And there are some discussions, I believe, on additional property around us. So those, you know, have created a real need for me to -- you know, and I want to make sure it's very clear you understand, I am probably one of the strongest proponents of wind energy you'll find. It's been, like I said, very good for our family. One of the most difficult issues I've had to deal with, and I don't know that anyone would be smart enough to sort this out, is this issue on reassignment of agreements. Agreements were signed back in 1986 to 1988. Because of the partnership structures back then and then reassignments over time, they get lost. And it would take a -- I don't know what, you know, some Rubix cube sort of effort to get these agreements restructured. In particular, right now the substation that's on our property, like I said, SMUD owns that. But at the same time, it would be both my best interest and SMUD's best interest to actually determine who actually owns the underlying ground, not just the substation, but the plans for future, say, expansions of that substation. And if you can find, first, the agreements that formed that chain of change in title, you're a master. And if you can make sense out of those chains or those documents as you move through that chain of title, then you're a genius. It's just absolutely a nightmare. Setback waivers, noise waivers and environmental impact reports. I've looked at ESAs, EIR. I've looked at ERSs, EIRs, FPLs for the entitled project and the SMUD project. And then there's the issue of adjoining landowners. And I don't think that I'm all that untypical in that our family, the way the ownership is structured on our property, this property has been held in trust since 1980. We're bringing -- we're actually terminating the trust and redeeding to ourselves and then going into an LLC. I think you'll find, especially in these areas where you've got long-term ownership by families, the same type of ownership structures where you're no longer dealing with one owner, but you might be dealing with brothers, sisters, uncles, aunts, brothers, grandchildren. I mean, you could end up having to try to deal with, you know, 30 and 40 partners or owners. Depending on how that entity is structured, it could be a real challenge on the industry's part for having to deal with, you know, putting this agreement in place, a lot of paperwork. Building permits, not a huge issue, but the operator that we have needs to upgrade their -- their station area. Very simple process you would think. But, again, the county this time required the contractor, me to grant them power of attorney to go out and pull building permits. And what a pain, you know. Just to go pull the building permit, seems like it would be that simple. It doesn't seem like it really is. There are added complexities associated with wind power or wind power plant, wind power projects on your property. The one that I'm dealing with now, and I think that this is the primary reason that I accepted Case's invitation to speak to you because I need some help. I'm trying to get a fair appraisal, and there is no easy comp on property that has a wind farm on it. The appraiser I'm using is very well -- you know, very experienced in all aspects of appraisal and establishing fair market value. But I'm in a -- pardon me, Case. I gotta just do this. If anyone knows property that was sold under similar circumstances, would you see me after this or ask me after this? If anyone has any leads for buyers or sellers of this type of property, let me know. We'd like to talk to them just to see how they're structuring that. I spoke with Ellen earlier today. She might be able -- she might be the answer to my prayers, I think. You know, if anyone has responsibility for changes in ownership, and this is a key issue for us because we're changing now from a trust to an LLC. If in your job you have that responsibility, I'd like to talk to you. And then the last thing, I won't bore you any longer with that, is I really appreciate being put in touch with other property owners. One of the things I've found -- I'm really determined to use this opportunity to speak today to find other property owners and not just speak about the concerns or issues I've had, but find out what other kinds of issues and concerns other property owners had, and I can't find them. It's -- there is no association of property owners that have wind farms out there. It's just very difficult. Maybe we don't want one of those, I don't know. But it just seems like it would be a natural, you know, outreach program like this consortium here to find a way to give, you know, property owners an opportunity to hear what industry is doing and how they can best help and be partnered with the industry to make this thing go better. The last issue I had this year -- and I'm sorry for bringing this up -- who would have thought that I'd have to deal with PG&E's bankruptcy, but I have. I mean, it's interesting, and the chuckles I hear. You know, it's just amazing to me that -- I mean, it's still -- I'm dealing with that right now, and I'd be glad to talk to anyone here off line. I have some real concerns, and I'm not going to bore you because I'm not an expert. The panel I've seen speak today I think will be addressing most of these things. But the more I see how our property fits into the whole mix here, the more I -- I've been able to develop some of these concerns and maybe start to develop a rationale for how I'm going to address those. The first is repowering. We have a wind farm on our property that's 14 years old. It has absolutely demonstrated Newton's second law of physics that matter wants to go from a state of order to disorder, and it's absolutely true. 14 years is a lot of rattling and shaking out there. We want to see this thing get repowered. I know our operator wants to see this thing get repowered. And I'm going to make a big plug here, because I think they've been exceptional in how they've treated this plant. And that's enXco, who is our operator out there. And I don't know if you would care that I do that or not, but I just wanted to let you all know that enXco, they have had a masterful way, and John Operson [phonetic] in particular, of keeping that plant operating. They've actually taken, you know, those maybe underperforming turbines or those turbines that had good pieces left in that -- in that equipment and put them in places where they've been able to prolong the operation or the life of other turbines. And the proof is in the numbers we've seen. You know, the rents have not diminished, even though when you drive out there and take a look, it is -- it is and can be shocking to see the number of turbines or foundations that are inoperable. But we've been able to, you know, keep the level of performance of those that are operating. I have nothing to do with this. Going on a very high level, appears to be. They didn't pay me to say that. The other peak concern I have that it ties into this, and I'm hoping to hear maybe a little bit more about this in the next day or so, is development versus redevelopment. In my business, which is engineering, we're looking at that all the time. You know, does it cost more to develop a new project versus redeveloping an old project? You know, what goes into that equation. You've got the roads. You've got maybe your, you know, transmission in the ground. What you don't have is the turbines and the towers. So, I mean, it could be a real simple equation. But I really do believe that part of that cost is the entitlement structure, the entitlement process. There needs to be, I think, a dialogue of property owners in general. Because I don't know that this is happening, but it just makes sense to me. It's almost intuitive that if you could entitle a project one day, and you're not going to really change a whole lot out there, except increase the height of the towers by 150 feet and put a bigger turbine on it, so what? You know, I mean, maybe we could talk about just capacity issues, but it's -- I can see where that could be a real struggle for counties and the Energy Commission and bird studies and that sort of thing. But at the same time, I'd like to -- I think it needs to be a hand-in-hand kind of approach between the developers and the owners, the property owners. And so more and more we can talk about that. I think that's a key issue. At one time when I was thinking about what I would talk about today, and I got off this very, very quickly but I'm just going to say it. The plight is a real concern. I didn't do this. I was going to title my presentation at one time, "The risks you run of having green power become ground fuels." And that wasn't fair. It's just absolutely not fair, but I think with green power, you have a certain responsibility, and you need to make sure that, you know, these don't become brown fields. Because every time you drive through the Altamont, you see turbines -- or towers without turbines or something like that. When you see this out at my property, that's a bad thing for the industry. It's a bad thing for my property. I hear about it from neighbors, you know, parts falling off of towers, you know, certain Gs when they hit the ground. There's a lot of activity underneath those towers. So I think the industry as a whole needs to work with the owners, what's going on with that. A couple more key issues or concerns I have. Particularly because of the amount of activity in our area, upwind and downwind, wind brides. I don't know that I have much say in that, and I want to say that -- I would like to say that I have more say in that, but I really don't. I'm fortunate in that our property is in an upwind position, but we have a lot of new development coming in. There are -- you know, in retrospect, I think that, you know, there are certain advantages to being in the upwind position. But what happens when you in the upwind position go with larger equipment, larger turbines, that kind of thing? Is there going to be an issue down the road? I really think that this is probably unfortunately going to be one of those issues that is settled in a courtroom some day. And again, that's just me saying what I say as the property owner. I don't have any basis for that at all. Substation and transmission access. All I want to say on that is I have to trust that all the operators sending power through the transmission lines and substation on my property continue to do so without interruption due to equipment failure. And I also happen to believe that the purchaser of that property will continue to pay for electricity in as timely a manner as possible. And that's in -- you know, with this backdrop, some of the other issues that we've had to deal with this last year. And then the last thing, development encroachment. One of the key responsibilities that I feel is that until -- you know, I have a 40-year contract. Actually, I'm in year 13 of a 40-year contract for this particular wind project. But that's not to say I'll be the last. Russell that owns this property, I think we were talking grandkids and their grandkids even, too. In the Fairfield Rio Vista area, the residential encroachment and some of those issues are just knocking on our back door, and it's very difficult. And I like the idea of putting these turbines out where you've got -- kind of see the hills and you have to make an effort to go out and take a look at them. But at the same time, how we protect that and what that project looks like, you know, 14 years out, let alone 25 or 30 years out I think is a real fundamental issue. One of the problems right now is that the -- until there is -- until there is a method to come back and -- I think many of you that are involved in development or entitlement process know that counties typically put up a bond, you know, so that if the project is not no longer operable, that bond is supposed to take care of removing those towers and restoring that land. I don't think that works. There might be a better way to do that, and I'd like to explore that. I've been thinking about that, and I'm not really prepared to offer solutions to that idea right now. I think there probably is a way to do that. And then -- I said that was the last thing. Actually, this is the last thing. I'm facing renegotiating a decent contract, and that's going to be a challenge. You know, I have a pretty good sense of what it is that a developer has to do to go get financing and has to show. But I really, really like that contract that we have on there right now. You know, it's a -- you know, as much as a 14-year-old windplant is able to continue to operate at the level it is right now, it's still very, very attractive. And, you know, I think that there's obviously a way, that there needs to be a cooperative effort, a dialogue. Anything that all of us here can do to create a platform for setting the stage for that type of dialogue, I think we're all going to be all better for that. With that, I really appreciate having this opportunity to present my perspective today. And I don't know. You know, blow, wind, blow. (Applause.) MR. BENNETT: Thanks, Rick. Proceed now to the next speaker, who will talk about air acoustic issues and research activities. Our next speaker is Paul Migliore. And I was interested to find out that he served five years on the faculty here at U.C. Davis and Case now has his office. At the present time, he's working at the National Renewable Energy Lab, and he began there in 1992. And he's senior project manager at large wind turbine development projects. So with that, I'll turn it over to Paul. MR. MIGLIORE: Thank you, Chuck. Good afternoon, everyone. I was in my hotel room this morning when I realized that I have a 30-minute presentation in a 15-minute slot. So I've got a threefold strategy here: Talk fast, throw out half my slides, and finish late. But I want to tell you right now, I will not be the one to keep you from your cocktail hour. My plan is to let Hal Romanowitz do that. Just remember it's Hal and not me. Well, I'm an engineer and what do engineers do? They do experiments. So I've been doing an experiment today. I've been watching the noise level in this room with this little sound power here. And it's been going from between 55 and 60 decibels. And so now I want to finish the experiment. I want to ask all of you to be real quiet for just a minute. Okay? Shh. Okay. Thanks. Why would I do such a silly thing? I want to make a point. The noise level in this room, that was about 50 decibels. To put things in perspective relative to wind turbine noise, we're asking wind turbines to have sound intensities about ten times less than what's in this room right now when you guys were being at your quietest. So it's quite a challenge. I thought I would start out by setting up that perspective. Okay. So now I've got to put my glasses on so I can see what I'm doing here. A couple of slides seem to be missing. That would help. It's just the up, down and over. MR. RUSSELL: Right and left. MR. MIGLIORE: Right and left. Well, we saved a lot of time because the first two slides aren't there. I'll give you a quick overview of the presentation. I'll try to give you some indication of why wind turbine noise is important. I think you probably know that, but I have a perspective I'd like to share with you. I won't spend too much time talking about the sources of wind turbine noise, because I've been judging from this audience that it's probably not too important to you. I'll skim over that quickly. I'll talk about the current state of the art in terms of how loud, how much noise wind turbines actually make nowadays, and a little bit about the NREL Research Program, which is the part that I am contributing to. And finally some of our future plans. Let me -- I want to ask, is there anybody in the room that considers themselves to be knowledgeable about wind turbine air acoustics? I should know that before we start. Good. Because if anybody raises their hand -- Jerry, would you leave, please, because I'm not an air acoustician. I'm an engineer and an engineering project manager, and this topic is incredibly complicated, and I don't want to embarrass myself if there's somebody here that knows a whole lot more than I do. Anyway, so why are wind turbines important? I think our first speaker said we're moving towards a sustainable energy future, at least I hope we are. And to give you an example of what that means, the European Wind Energy Association estimates that 12 percent of the world's energy may come from wind turbines by the year 2020. 1,260,000 megawatts, that's equivalent to more than a thousand nuclear power plants. So this is big business, and it's going to impact people even more than it does today. So why are we pointing at wind turbines at lower wind speed sites? As already have been mentioned, it means that they're going to get closer to people. We need efficient turbines to exploit these sites. We have to get better at designing to take advantage of this, improving our cost effectiveness. At the same time, we need to minimize noise which is a deterrent to people. So we have a tradeoff. We can take our bag of tricks and our tools and apply them to improving performance and lowering the cost of energy. Or we can take some of the same tools and apply them to the sound emissions. And, in fact, what we do is somewhere in between. We have to make some choices. We'd like to make progress in both areas. The Earth is becoming crowded. I'm sure a lot of you have seen this satellite picture on the right. You see Western Europe, a pretty crowded place. On the left you see the East Coast, and, of course, that's pretty crowded. And when you look at California, it's quite a high population density here as well. The map that you see here is produced by a resource assessment group, and it's showing Class 3 and Class 4 wind power sites in the western United States. This is poignant. The red or the Class 4 power sites, which -- Class 4 and higher, which means average annual wind speed of 5.1 meters per second and higher, these are the sites you would expect to be exploited for utility plants. The green are lower wind speed sites, which tend to increase the resource area significantly. And we are now designing turbines to take advantage of those lower wind speed sites. Another thing you might observe, I guess, from this chart is that you might want to get friendly with your neighbors here in Nevada, because they're pretty well blessed with a large wind resource. This is a population density map of that same area. The darker colors represent the higher population densities. And if you superimpose that, those two on each other, you see the point I'm trying to make, which is that the wind resource areas in many cases, especially the expanded areas, are now closer to these population centers, and more people are going to be impacted by these turbine issues. The second topic I'll talk about, sources of wind turbine noise. And I'll eliminate a few from consideration right now. We tend to group a number of these sources as mechanical noise, things that come from gear boxes, generators, brakes. Power electronics, believe it or not, can be quite noisy if you don't do it right. And even towers make noise. But the fact is if you're careful and you do those things right, none of those things are going to become issues. Well, I shouldn't say they won't become issues, but it's possible to avoid having them become issues. Going back to -- yeah. The second broad source of air accoustic noise, which is what I'm going to be talking about today, virtually that's unavoidable. Because if you're going to have a rotor extracting the energy, it's going to make noise. The only question is, how quiet can you make it? As I said, I'm not going to spend a lot of time on different wind sources, but I did want to point out a couple of things here. There are about six primary sources of noise emissions from wind turbine blades. A colleague, [unintelligible], maybe some of you know him. He's an AIAA senior fellow at Georgia Tech. And he and I were talking one day. He said, you know, air acoustics is not rocket science. He said it's a lot harder than rocket science. Believe me, I know, because I teach both of them. I want to impress upon you just how complex this issue is. There are people who will spend a good portion of their lives working on just one of these particular components. I want to highlight two, because out of these six, again, if you're doing things right, you can probably make four of them go away. But two of them that are going to stay that need a lot of attention are these turbine boundary layer, trailing edge noise. Essentially what you have is you have an air flow over the trailing edge of the wind turbine blade. That flow is rather chaotic; it's unsteady. The unsteady pressures that are developed are responsible for the noise. And you have this nice resonator right here that tends to amplify that. The other item -- step through this quickly -- that we need to pay attention to in design is blade tip noise. We have a -- any sort of a finite lifting surface will develop a -- what's called a vortex, go around the -- around the edge of that. And this chaotic, unsteady flow causes noise in the interaction with the undisturbed flow and also with this trailing edge. So little did you think that we know they're going to be there and if you pay attention to them you can make some progress in mitigating them. On the upper right-hand side, I'm just showing you a -- well, it's a mathematical depiction of noise emission of a flyover jet. And the darker the color, the louder the source, the stronger the source. But I did want to point out that even though the strongest noises are right in these areas right here, there's still noticeable noise in the area of the wing tips. So the problem with airplanes is similar to the problem with wind turbines. So the current state of the art, where are we? This chart requires a little explanation. What we're looking at is the sound power level in decibels as a function of rotor diameter or the size of the wind turbine. There are two curves depicted or two trends, I should say. The higher one representing noisier turbines are old turbines. That's old technology. The lower curve represents newer technology. And the state of the art in terms of emissions is right about here. Turbines, modern turbines have rotor diameters in the neighborhood of 70 to 80 meters. And about the best we've been able to do is a sound power level of about 99 or 100 decibels. Sound power level, by the way, is a measure of the strength of the emission from the source. So if you can imagine wrapping a big sphere around a wind turbine and focusing all of the sound energy that's coming out of it at one location, which is the center of the rotor, that's the sound power level. We differentiate that from sound pressure level in this chart. Okay. So this is, again, a chart showing the trends. In this case, it's versus time. And it's trying to depict the amount of area that has to be set aside before we get to a location where the noise is not offensive. And everybody has a different idea of what that is. In this particular case, we're looking at a 40-decibel footprint. And what that means is that if you were standing at a typical location with a sound meter, that sound meter would read on average 40 decibels. Now, remember, what I just measured in this room is 50 decibels, and 40 decibels is a common standard in Europe. I remember years ago when I was working in wind farms down in Southern California, Riverside County, I had a 45 DBA standard -- maybe they still do -- at a receptor location. And that created a lot of problems, but I can tell you that it's probably not stringent enough. There have been entire wind farms in a particular case in Wisconsin where a utility wanted to buy a wind farm because the manufacturer did in fact meet a 45 DBA noise footprint, but that was not acceptable to the residents. So you have to be careful about setting up. What I'm trying to show here is simply that we have been making progress over time. This is a circular area, the area around the wind turbine that would have to be reserved to reach that 40 DBA level. And we're making quite a bit of progress. For large wind turbines, this is equivalent to about a 500- or 600-meter radius around the wind turbine. And that 40 DBA, by the way, is roughly equivalent to what you would experience in your livingroom at night, not watching television, sitting there reading a book; it's quiet. That's 40 DBAs. Okay. Now, NREL Research Program, what are we doing? We're trying to address these issues. We have a multifaceted program. We're doing some field tests. This year we're focusing on small wind turbines, and here's a list of them. Many of them are located right in the state. We're trying to help manufacturers and consumers to understand what these noise levels are. We're also conducting research for our own benefit so that we can understand what makes those noises and quiet it. This is a real good example of the kind of thing we do with these tests and also some of the progress that we've made. This is from a Burgey 10-kilowatt wind turbine, and I'm sure there are a number of those in California. We've -- this is sound pressure level, and we differentiate from sound power level as I mentioned earlier. Sound pressure level is what you receive, what you -- what you perceive. Not what's emitted, but what you perceive. So if there's a source here, and I go to the back of the room, naturally I'm going to perceive a lower sound pressure level. So if you look at these pink date -- I just want to point out, this is an early version of the Burgey turbine, and it has a particular noise signature as a function of wind speed. To Burkey's credit, they did a great deal of work to try and improve that. And with the next generation turbine and the new blades, they made a significant reduction to this grouping of light blue points right here. That's about a 10-decibel reduction in noise. So that -- not only do we know that and we want to know that they've been successful in doing that and replicate that type of design behavior. The other thing I'd like to point out is that these green data points right here are representative of the background noise. And you'll always be able to hear a wind turbine against the background noise. But ideally, if you can get these two to sort of be blended together, you've got a good situation in that the wind turbine is no noisier than the background. So this is the kind of progress that we've been able to make. It's a diligent effort. We're also doing wind tunnel tests. I won't spend too much time on this except to say that we're looking at both aerodynamic and air acoustic tests so that we can get designers the information that they need to make intelligent choices to trade off performance versus noise. And we're looking at families of wind turbines that are either being used or candidates for being used on current generation wind turbines. I won't spend any time describing those, but there they are. This is an anecdotal wind tunnel facility, and it happens to be in the Netherlands where we just completed some tests. We used a raised -- many, many, many microphones that can be used to sort through the background noise and filter it out and identify a particular source. There's a model of an air foil right there. And the kind of thing we get from those tests, remember I told you that trailing edge noise was a primary -- a primary interest. What you're looking at here, each grouping represents a particular frequency band -- 1600 Hz, 2000 Hz, 2500 and so forth -- and there's a scale, about a 15-decibel dynamic range that you can measure in these tests. The darker colors, the red colors are the more intense sources. The flow would be coming from left to right, and so this would be the leading edge of the model, and this would be the trailing edge. And you can see that the most intense noise sources are right at the trailing edge at all these different frequencies. In contrast, I want to show you one plot where the leading edge, there's another noise source that could come from the leading edge as a dominant source, and you can see that right here. Nothing shows up in the trailing edge, but it does show up in the leading edge. The reason I point this out, in this study we were looking for air foils that were particularly susceptible to leading edge noise because they're very bad candidates for downwind turbines. And we wanted to know that as far as research. If you take any one of these particular frequencies and integrate this noise signal over a particular area and then average it, you can come up with a single number that's representative of the sound intensity at that frequency. And this is the result of that kind of a plot. We have about 600 of these from this particular series of tests. What I want to point out is the distinction here between what's called broadband noise, which is this yellow here. Broadband noise is like this, shhhhh, as opposed to pure tones, which are bad news, and go look, [whistle]. And if we're lucky, I can show you that. You're only going to hear the signal -- boy, this thing is hard to point from one microphone. Actually, you're not going to hear a signal from anywhere. These guys assured me that this was going to work. Anybody have any ideas? Where's Case? Yeah, there you go. That's too bad. I wanted you to hear this, particularly this one. UNIDENTIFIED AUDIENCE MEMBER: Turn up the volume on the computer. MR. MIGLIORE: He already did that. But -- let me just take it further. This was a particularly important discovery because we tested about half a dozen air foils. About five of them exhibited this behavior. We wanted to know that because if you know that they do that and when they do it, under what conditions, you can take action to avoid it. Well, if you don't -- I just did it a moment ago. There you go [demonstrating]. Okay. Here's the broadband [demonstrating]. I wonder if you can hear that. It's not a very good replication of the actual sound, but let me play the pure tone for you. This is the particular test we did [demonstrating]. You don't want that in your backyard. And that's what we're trying to find out, these kinds of things. Okay. I'll finish up real quick. Okay. So these are the kinds of things that we learn in our research. And the whole point of this is to give designers tools that they need to make wind turbines quieter. The way we put that to work, this is a depiction of a new turbine that's being developed right now under contract with Southwest Windpower. It's not only one-and-a-half kilowatts, we're going -- what the designers are doing are choosing the air foils carefully to balance the advancement of air acoustic performance, optimizing the plan for using some computer codes that we're developing. And they are giving consideration to the downwind turbine which causes us to think about using some new and sophisticated computation air acoustic codes to analyze that situation. In terms of our future work, remember I told you about this five or six different sources of noise? Each of those can be modeled analytically, and then when you put them together, you can come up with a prediction scheme. What this is trying to find out is that we can do a pretty good job of this in some cases. The dots being datapoints from tests and this outline being predictions. We can do a pretty good job of these in some cases and at least determine relative differences in noise. And computation air acoustics has come a long, long way. What I'm trying to indicate here, all of this is work that's been done in NASA primarily on the airframe noise, blade tip noise, trailing edge noise depicted right here. This is the result of one trailing edge is you get a pure tone from that. So all of these things can be analyzed to a certain extent. And part of our research program in the future is to do this and develop our methods. So real quickly, you're likely to see wind turbines closer to people. Of course, that's an issue that becomes an annoyance. There are lots of complex sources to be considered. We need to do better, better state of the art. And it's doing its best to try to launch a research program. I'm optimistic. I think we can expect some improvements to both small and large wind turbines, and I'd like to leave you with this, you folks in California: If this is an important issue to you, I don't know if it is or isn't, but if it is, you really have a big impact on this. You control your own destiny to a certain extent by making some good decisions and making some choices about how you spend your time and money. So you really need encouragement. Sorry I went on so long, but Hal is the one -- (Applause.) MR. BENNETT: Okay. We're down now to Hal, who, as Paul said, is going to run over time. Hal Romanowitz is the president and chief operating officer of Oak Creek Energy Systems. He's an electrical engineer with an MBA in professional engineering in California. And he's listed several things here which I can't quite decipher, but there are some very interesting. One is his experience in repowering projects with large turbines and running a test site for these new large WDGs. So I'll just turn it over to you. MR. ROMANOWITZ: Thank you very much. And you left me with a handicap here with the time. We'll move along quickly. And sometimes I get long-winded. If I do, just let me know, and I'll promise not to do that today here. What I wanted to do is to focus quite narrowly on these subjects and hit a couple of real specific issues. Essentially I'm going to focus on the Kern County perspective, because I think that it gives some interesting insight into very complex and big issues, and I'm going to focus on that. I'm not going to talk at all about EIRs and that sort of thing. Talk about some of the core permitting issues, and I think the very substantial success that we have had over a period of five to ten years in adapting some very early permitting rules to large turbines, and also give a little bit of perspective about where I think things are going. Basically current permitting rules were written for turbines in the 25 to 65 KW size. Current wind turbines now are 900 KW to two-and-a-half megawatts. And we have turbines coming, clearly 5-megawatt turbines are not that far away, and I wouldn't be at all surprised to see 20 megawatts. And I'm not going to make a case for it, but I think we need to think about it. And even the 5-megawatt turbines present some very new substantial issues. There are a number of things that -- where we can -- the rules can be adapted to turbines. And sort of my prediction is up to about 3.6 megawatts, 4 megawatts maybe, things fit. You're going to stretch the rules at a 4-and-a-half or a 5-megawatt turbine. And you're really going to stretch them to go beyond that. So a lot of thought needs to be given to adapting rules ahead of time so the bigger turbines, as they come along, can happen. Also, tall towers which substantially raise the efficiency of energy production create a lot of issues as well. This picture has some shots. You can see these turbines across here are 700 KW. They're 750 KW at sea level; 700 KW at our 4,000 foot elevation. These little guys in here are all 65 KW turbines, 1983 vintage. These are 110 KW, '85 vintage. So you can see some of the perspective. These are really the -- those were the best ones the rules were written about. There were many other, you know, very early towers like, you know, the Carter and so on, the 25 KW turbines that the rules also were written around. And you're trying to make the new guys adapt. One of the big issues is setback. And you notice, like this guy right here -- incidentally there's a permitted site right there, and here is a main road. So the issue is how you get the turbines sited close to locations, property boundaries and other right-of-ways and that sort of thing. And that's what we have worked on for quite a period of time. In Kern County we've been quite successful. Oak Creek has probably the three precedent setting variances, zone variances that were achieved. But now other people can essentially latch onto and the rules are established at least in this size range. But essentially the underlying concept of permitting rules, separate again from the environmental issues, public and personnel safety. And the current rules basically were written with the 1982, 1983, 1984 view of safety. And again, one of the -- what we have done, taking this forward in two steps. One is, what are the safety issues? Secondly, segregate it from the certification. And certification has become a big business, I heard professional business, and it's done on a national/international scale, whereas the safety issue is very local and very significant. Basically the original rules were written as a fallover situation. So you'd have typically the tip height of the blade and the tower plus blade, plus maybe a factor of about one and a half or sometimes as much as four times under the circumstances, so that if there was a fallover, it was clear that that turbine wasn't going to hit the next guy's property or that sort of thing. And essentially what we have argued very successfully, and I think is the correct argument going forward for -- particularly for professionally engineered structures. And I think it's important when you consider this that the -- the full implication of that must be honored. And so we've been very careful to do this in Kern County, and I think we've been successful at it. And essentially the structure must be highly engineered, and the turbine must be certified essentially. I think there has not been, you know, periodic inspections, structural inspections required. But in my estimation that's something that's needed, and it's something that we do look at ourselves quite a bit. A second issue that's coming along as towers get taller is the poor guy that's got to climb it. Not that turbine, but in a day what do they climb, two, three, you know, five, six turbines? And I think that the requirement for a manlift device is -- is coming. Some turbines are getting them. This particular turbine is a 1.65 megawatt turbine, an 80-meter tower. It's got a manlift. And it sure -- it sure improves the operability of that particular turbine. And you see that the manlift really is simple; it's low cost generally. But, again, this is not a California installation. So the California rules, we've got to take a real hard look at them and get things fixed so that they work. And it's -- when you look at the issue of the alternative to a manlift, you know, the rules have got to be made right. As some of you may be aware, there have been at least one death due to a falling situation in a tower, not related to anything you were involved with, but there has been one in the state of California. And, you know, the manlift I think really helps as towers get big, really is essential, and I think that the State needs to get proactive in making the rules work, making them practical as things go forward. Another very significant issue and what I consider to be one of the most serious, you know, poor written permitting rules at this point, FAA warning lights. The rules are terrible. At Oak Creek we have taken a very proactive, much different approach than anybody else. The FAA has been to a number of sites through the country now. The Oak Creek site was one of the sites that the FAA has reviewed in depth, and they do like our scheme of doing it, of lighting turbines very well. They'll eventually hopefully get around to some rules that work better. We're handling this now by some quite good documentation and our own write-ups, and we are getting things through. But it's -- it really is a key and important issue. And you can see here our concept. We've got the turbine sitting here; the FAA light is sitting up there. So we're putting a light, one light on top of a separate tower separate from the turbines. We have currently three lights that cover 34-and-a-half megawatts worth of turbines. We will increase that to approximately five. But very few lights cut the -- the glare and all the emissions of light and noise down. Turbines that you see, you see other turbines around in the area. There are a lot more lights there. And the project that's over here has, like, 19 lights, and it's Christmas every evening. You know, it just -- it's expensive and it's inappropriate and it builds in public dislike to have the inappropriate things of that sort. One of the things that I should mention is that -- it's unique in Kern County -- we have complex terrain, and some of the things that I'm talking about will be different on, you know, flat terrain. But the permit, for example, the skyscraper-type rules and the other things associated with it are extremely critical for us. If you see here, you have turbines sited that if -- if we didn't site the turbines there -- and in our case, more than 50 percent of our sites were not usable by conventional rules. If we didn't get the rules changed, we wouldn't have much of a project. In this particular case right down here, the Pacific Crest Trail runs. There's public access and use of the trail. And in another ray you'll see in a couple of minutes the trail is only a hundred feet from the big turbines. Another issue of significance is code compliance and code conflicts. Basically there's -- there's three sets of standards in a way that govern wind turbines. You have the utility standards such as the CPUCs and the Geo 95, which covers immediate voltage, facility wiring and that sort of thing. The problem is, under the law, that code is really not legal. It -- it's the appropriate code to use, but the rules are too soft at this point, and there really could be some significant improvement of the rules. The second thing, the National Electric Code is really the governing law. However, the National Electric Code very, very poorly accomodates wind turbines. There are a number of practices that are written, for example, exceptions allowed for cranes. They're not allowed for wind turbines, although wind turbines use the technique. So there's really -- you end up having to get the local electrical inspectors, actually the permitting authorities to accept -- you know, to go along with exceptions. And we put a lot of effort into this, we documented it and carried it through, and we've had good success. But, again, there will be places where the electrical people aren't knowledgeable, and the practices that are good will not be allowed, and people will be put to a lot of expense that is unnecessary. A second point is one of my pet peeves or -- or pet issues, and that's grounding. I believe -- while most current wind turbine installations are solidly grounded, I quite strongly believe that that's a gross misapplication because of the impacts of physical damage to electrical equipment when it fails. High beam grounding is the type of equipment or type of grounding that is -- is very successfully used in large industry and in very large applications. And we have at Oak Creek used it; all of our turbines are high beams grounded. We have had a couple of generator failures now where the generators have failed. The high beams grounding system detects it. The turbine keeps running. We have mortally shut down without any significant loss of production. We change equipment, and the -- and there is no damage to the core of the generator, which means that after it's rewound, it's going to have the same efficiency as it had originally as opposed to maybe a 3- to 5-percent loss due to iron damage due to a -- you know, the ground fault explosion that occurs inside a generator when you have a failure. So it's the sort of thing that we need to move along as equipment gets bigger and bigger. We really need to adapt so that we go ahead. Basically Kern County has one thing that is great for the industry, and I think that we ought to make a major effort either at the state level or for each jurisdiction to get this adopted, and that's the standard plan. And essentially for each wind turbine tower foundation and electrical system -- and that's up to and including the transformer associated with the turbine -- all of that gets approved as a standard element. It costs a little bit to do this, but in the end it's a tremendous savings, and it affords a great degree of certainty and standardization to the process. So that -- that, you know, all of the controversial stuff really gets done early, and it isn't the last minute approval that you're going for. And I think it really, really helps avoid the kinds of errors that can be expensive and degrade the overall system. Erosion is another issue. And, again, in Kern County, we have erosion control rules and guidance from the County that are really defective. The rules cause erosion. These particular roads here are roads that have been designed to prevent erosion. If you notice essentially water running down the hillside, there's sheets right across the road and over. And we've done a lot of work like this. We received an award from the National Association of Resource Conservation Districts for our design work on roads. And it's really helped to clean up and control the erosion issue, and it is something that the industry really needs to pay a lot of attention to so that you are responsible citizens going forward. And we're also working with the County to have them change the rules and to adopt good practices. And we think that there will be a model ordinance sometime within the next -- it will be about a year by the time we get the work done, but it is underway. Another significant thing as you go through -- and, again, we talk about the electric system and the codes. This is -- this is well done to Geo 95 standards. Again, it's not -- it -- technically the rules want National Electric Code, but the point I did want to make here is that -- two things: We have found that the best -- the most economic electric system is not the least cost electric system; that by an overdesign has -- gives you significant economic return. The marginal increase in cost due to overdesign more than pays back in efficiency, savings and increase in production at the meter as opposed to at the turbine. So it pays for itself. The second thing we found is that in the Tehachapi grid they're notoriously bad, and with the overdesign that we have done, that our site is far less impacted than are other people. And the key thing coming -- this is a little bit off of permitting, but it's very related is, you know, bar consumption, voltage control is a major issue as turbine sizes increase and further and further dominate the grid. A lot of attention has to be paid to that. Here's a little bit of a twist. We had -- this is -- we talk about urban wind turbines, and we use the term slightly loosely here. This is the urban town of Tehachapi. There is a Big K, and there's a lot of houses over in here, but at least you see it. And this is where -- but this guy had its ribbon cut yesterday. This is -- in its first life, it was a 65 KW north tank turbine; in its second life it's a 30 KW slowed down Oak Creek turbine. And we've been operating this type of turbine for about two years now with great success. And when this thing went on, you almost could not hear the turbine run. It's just extremely quiet with its slowed down run, and it's a great producer. And this is an alternative for many locations. This particular turbine was the cause of the city getting a very substantial grant. It brought about a hundred thousand dollars of net value into the town with a donation of this turbine and some related services. So there's a lot of, you know, good things. You do -- you get some things; you give some things. And it really helps, and the city is just really enthused about it. They had two green car -- or two electric automobiles are -- been given to the city as a part of this process. And it's -- it's an emission control reduction thing. And then apparently they said yesterday was the first case in the state where there is 100-percent elimination or reduction of emissions. And this turbine, what we did is the turbine sits here. There's a sewage treatment plant right back over there. This runs the sewage -- part of the sewage treatment plant on a net billing basis, the credits are given to the charging station for the electric automobiles, and there's a very serious net benefit that's going on. And there ought to be more of this kind of -- this kind of thing. And the reception to it incidentally has been extremely positive in the community. Here's sort of where things are headed. You saw these, these guys are the 700 KW, 900 KW turbines. Here's a 1.5 megawatt machine. There's a good size Chevy, full-size Chevy pickup. There's the hub. Things are getting really pretty big and pretty serious. This is a large manage walk crane, about the largest crane around, and that does handle it. And it can go up higher, by the way. But you're getting into some really heavy equipment, and so there -- there need to be a lot of adaptations as things go -- go further and further. But, with that, we will say it's beer time. (Applause.) MR. BENNETT: Thanks. I don't want to rob you of your chance to ask questions, so if anybody has any questions, maybe pass the mic around and -- your name? MR. LOCKER: I just have a very quick question. My name's Ian Locker, and I'm from a company based in -- called QinetiQ, which you've probably never heard of. It's okay because we've got a U.S. subsidiary, Surplus Inc., which you've probably never heard of. What we are is just basically a U.S./British research organization. We're involved in many areas of technology research in the wind industry. The question is, in the U.K. and in Europe in general there's an issue currently regarding radar [unintelligible] and radar systems. I'd like to know the industry status in the U.S. MR. ROMANOWITZ: Yeah, we're actually right in the middle of some very major studies right now on it. The Air Force is using our site to do some studies. We were to have -- the last phase of the study was supposed to be done this week, and they've been shifted over into January now because of the bad weather that came through. But the Air Force is doing some very substantial radar reflectivity studies. They've done it. They've been out to the site, and we've had blades on the ground, and they -- they've done a number of different blades where they've done reflectivity on the ground. They're doing, you know, through the rotor reflectivity situations, and there should be some pretty good results from that soon. So it is a multiorganizational structure. The -- it started out with one Air Force entity doing it, but it's quickly expanding, and they got a bunch of people doing it. So it's really being looked at very, very thoroughly. MR. LOCKER: If you just wanted to chat off line, I could tell you in a little bit more detail about -- MR. ROMANOWITZ: Yeah, be glad to do it. We have some significant input on the issue. Yeah. MR. BENNETT: Any other questions? No questions. UNIDENTIFIED AUDIENCE MEMBER: Thank you to the person who [unintelligible] on power systems. Rick, thank you for sharing your story with us today. I think that was very, very interesting to all of us to hear it. Can you tell me some of the good news? We heard everything about all of your challenges, and you're saying you're still the advocate and fan of wind energy. What's the good part here? MR. RUSSELL: Does this work? No. There is an issue of a monthly check. Without getting into the details of, you know, what dollar amounts may be, I will say that my branch of the family, my brother's branch of the family, my sister's branch of the family was all very happy with the monthly checks that show up on a regular basis. I can talk to you a little bit more off line. MR. SULLIVAN: [unintelligible] Sullivan. I have a question on the avian bird issue. How does the mortality rate of birds vis-a-vis wind turbines compare with other types of mortality bird issues, which would be automobiles, power lines, airplanes, aircraft, things like this? Is there a pretty good comparison? Because as soon as you mention wind turbines, everybody mentions birds. MR. ANDERSON: That was a question that repeatedly came up during the last decade, and there have been some efforts to look into it. A publication that you can get if you go to the national wind support site, the National Wind Coordinating Committee site, and it compares -- it takes a look at bird kills from electrocution, from automobiles driving down the road, probably if any of us have hit a bird just traveling along, collisions with power lines and collisions with buildings. And it's very difficult to compare them because they're quite different. But wind turbine kills of birds are dwarfed by all those other things, but you would expect that because there's transmission lines, there's distribution lines everywhere, there's highways everywhere, there's buildings everywhere. And so how do you rate per -- per area something metric is very difficult. But -- but one of the reasons for putting that report together was to keep in perspective that in the big picture wind turbines are not killing, let's say -- they're killing a lot of birds, but compared to some of these other types of things that birds collide with, it's a small number. It doesn't mean, though, that it's not important. MR. MIGLIORE: I don't know a lot about birds, but you might be interested in this. I remember reading an article -- much better -- but I remember reading an article that the largest single source of mortality for song birds in the United States -- and we're talking about hundreds of millions -- is cats. MR. ANDERSON: Hundreds of millions. MR. BENNETT: Any other questions? MR. GOUGH: Bob Gough with the Intertribal Counsel Utility Policy working at great lengths particularly with tribes and wind power, but just a report on that last issue. Fish and wildlife -- U.S. Fish and Wildlife division reported last year that something on the order of 44 million birds a year are killed by communication towers, basically the interaction with birds and guy wires and those kinds of high towers, especially when the FAA lights attract migratory birds. And so it puts that into perspective. MR. BENNETT: One other question over here. MR. ANDERSON: Yeah, David Anderson with NOAA, and I had a question for Hal. You talked a lot about the need to improve some of the permitting regulations like electrical codes and that sort of thing. To what extent can you look towards some of the products that you're seeing at identifying better codes or better siting, better procedures? MR. ROMANOWITZ: Got one here. Yeah, there is significantly -- a significant increase in coordination between North American codes and European codes, and that will continue. Further, UL, Underwriters Laboratory is doing significant work with turbines, wind turbines going forward, and they are sited here in the United States, and they're also in a major operation in Denmark. It turns out that our turbines, we had some significant UL certification work on some of the turbines that are physically at our site right now. So there is -- so a lot of this is coming together, but yet there are some still major issues going forward where there are going to be some barriers like the -- fundamental things with, like, tower heights as you go above 500 feet where it -- there are going to be some obnoxious things happening, and so things need to be thought through carefully. Europeans seem to be quite a bit ahead of this, and here we're very backward. MR. BENNETT: Any other questions? MR. BOSLEY: Yes, I'm Ken Bosley, and I'm an independent consultant. I worked with Hal on his erosion control a few years ago and spent a heck of a lot of money like Oak Creek did on erosion control. But, like, down the road the gas pipeline spent very little money on erosion control and other types of those facilities. The question I'm getting to is how can we be so good at taking care of our backyard whereas other utilities so far are much sloppier proportionately? We're beyond the standards, but we're getting hit by all the sometimes bad publicity for finer things like birds and erosion. I guess that's my question. MR. ROMANOWITZ: I guess the simple answer is you just work with people to come to solutions, and it's coordinated action. Talking, jawboning, working together to make a level playing field. MR. VAN DAM: Thanks very much, you guys, for being here this first day. Tomorrow morning is starting at 8:15. At 7:30 there will be a continental breakfast here, so you're welcome to come here at that time. And right now the bar is open until about 7:30, 7:40. So go out and talk and enjoy a glass of wine. (Applause.) (Whereupon the proceedings adjourned at 6:00 p.m.) WEDNESDAY, DECEMBER 18, 2002 MR. WHITE: Good morning, we'd like to convene the morning session. My name is Bruce White, I'm a co-director of the consortium with Case van Dam, and I'll be hosting this morning's session, and I have a couple of announcements before we begin. The first one, for those of you interested, there will be a list of the attendees available at 11:00 a.m. at the front desk where you have checked in. Number two announcement, Mike Bergey will be running a workshop this afternoon at 1 o'clock in this room. For those of you interested in participating in that, my understanding on that is there is no charge. That's what I heard. Then the last one, at the end of this first session we're going to slip in Dora Yen from CEC to talk about the wind maps for about five minutes or so. We'll see Dora and coordinate that at the end of the first session. This morning we have our first speaker, keynote speaker, that is Randy Abernathy, vice-president of Cal ISO. And Randy was one of the original people that started PX and Cal ISO in 1997, and he tells me that he hired the first 250 people to form the organization. So he can take the credit or blame for that, we'll see how that goes. He has had an unusual path to lead to Cal ISO. He started off in telecommunications, health care and general consulting. He has a BA in psychology and business, and he has completed everything but the dissertation for a PhD in psychology. So that's necessary in administering Cal ISO, you have to have a little bit of psychology. He has been in HR and administration for the first three years, and then the last two years he has been in marketing and services. With that, I'll turn it over to Randy. MR. ABERNATHY: I'm going to check, does anybody need this to hear me? Can you hear me in the back? If I can't walk around, I can't talk. First of all, I want to thank everybody that showed up this morning. I know being the keynote speaker on the second day early in the morning is a much easier job than Hal had yesterday closing everything and getting everybody a glass of wine. Thank you for showing up this morning. I'm going to talk a little bit this morning about wind as it relates to what we do at the ISO, and we are going to go through a little history. As many of you know, a little bit earlier this year we passed a tariff amendment that will have an impact how intermittent resources will participate in our market, and that has served as a model that FERC has used in their standard market design. So you'll get a little bit of preview in California how to deal these days with how to best incorporate wind into the grid. I'm going to talk about a couple of things, and I was excited about yesterday's conversation because many of the things that are of interest to me were talked about yesterday afternoon, especially when we start to look at technologies that marry themselves well with wind. I'm going to talk about some of the challenges we have as a system operator and what it means when you start including more and more wind on the system. We are not necessarily of the belief that more wind is always better, we believe you have to be able to see it and you have to be able to control it before it has value. So I will talk a little bit about that. Another thing, I like to keep my presentations fairly informal and fairly conversational, if you have a question as we're going through, please stop me and I'll hopefully answer it. Some conversation yesterday about the fact that right now in California we have about 1,800 megawatts of installed wind generation, it's nameplate data, and on a pretty regular basis we see a maximum of about 1,200 megawatts. So of the 1,800 that is installed there, we look at the system every four seconds, we never really see more than 1,200 megawatts of wind at any single time. We understand that the state wants to encourage the development of additional renewable resources, and that conversation has included a recommendation that there be 2,000 to 3,000 megawatts of additional wind generation. The senate bill that was recently signed by the governor certainly has an impact, and everybody in this room is pretty interested in how that is going to convert into new projects. Like I said, we see wind data, and we have it tagged separately, so we see it on a four-second basis. This is wind output for the first ten months of this year. Is that right, David? I'm going to look to Dave Hawkins on some of this technical data. Some of you may have questions later about the technical aspect of this, and I'm going to direct you to Dave Hawkins, of course, in our operations department in developing a number of the quantitative pieces on this. We break it down by some of the different regions. And it's not showing up, but the light blue that you see here is Tehachapi, Altamont, San Gorgonio and then Pacheco. This output represents anywhere from between 1 to 2 percent of the generation needed to meet load in California at any particular time. So these output numbers represent 1 to 2 percent of what was required to serve load during those particular months. Now, this is what wind looks like to us on a daily basis. This is an example for May of 2002, and this picture is designed to depict something that's critical to the ISO, which is there is a lot of chaos in the wind. With intermittent resources there is a lot of unpredictability, and you can't really see it on a day-to-day basis well. So when I hear conversations, like I did yesterday, about trying to improve forecasting methodology, it is really near and dear to my heart. For us to be able to incorporate more wind onto the grid successfully, you have got to be better at knowing when these swings are going to happen. Because they are going to happen, we understand that. The idea is to be able to see them and then be able to respond to them. From an ISO perspective what are our responsibilities? I describe at the ISO that we have two primary responsibilities in California, move electrons and move money. If you look at the way the ISO is organized, there is a grid operations function and then there is a market services function. The grid ops is responsible for moving electrons; market services is responsible for all the market operations, settlements, all the commercial transactions that happen between the ISO and the participants. We are first and foremost though a reliability organization. Our responsibility above all other things is to make sure that the transmission grid in the State of California is operating safely and reliably. What does that mean? It means that on a four-second basis we balance load generation throughout the state. We have to maintain 60 hertz, and to give you guys a sense of that, on a 40,000-megawatt day, on a 40,000-megawatt peak day, we have to operate the grid within 116 megawatts. So that is the range that we have to be able to operate. Out beyond that and then we start to run into problems in terms of frequency, in terms of operation reliability, overload on the lines. So on a regular basis we are trying to make sure that we are maintaining that 60 hertz. We also need to be able to forecast the energy needs in the next 10 minutes and 20 minutes to be able to send dispatch notices to generators. There is a lot of different units in California. There was a lot of discussion yesterday about peaking units. The conversation that happened yesterday afternoon, I had a chance to talk to the gentleman that was here from Lawrence Livermore a little bit about that last night over a glass of wine. Peaking units in California as a balancing resource for wind are problematic because they are either on or they are off. You have a gas turbine, you flip it on you have 50 megawatts, you don't really have much room to adjust it. You flip it off, you have zero. So it's not really as smooth a balancing mechanism for us to be able to handle some of the issues that are related to wind. The ideal resource that everybody looks to, you know, you look at Denmark and you say, wait a minute, how do they balance. I saw an article yesterday that somebody handed me that at low-peak times they are addressing almost 50 percent of their load with wind generation. That's great. The wind profile looks quite a bit different than it does in California, and they have the perfected balancing resource on the other side, which is a nice big cable that runs to Norway with tons and tons of access to hydrogen. California, especially in certain years, because they are very hydro limited -- we were all excited earlier this week to see the rains, not so excited to see wind. Not that much wind. The rain is certainly a good thing. You are looking for snowpack. You look at the Pacific Northwest this year though, it looks like another dry year. A dry year in the Pacific Northwest means bad things for California. We get a lot of our power from that northwest hydro. What kind of challenges does the wind present for us? Because it is unpredictable, wind presents some unique challenges over some of the other kind of must-take resources that they have. The other most notable must-take resource in the State of California are the nuks, the Diablo Canyon, San Onofre. Both of those facilities are pretty predictable, I know what they are going to put out almost every hour usually within a megawatt or two. When we're unsure what is going to happen with the system we have to buy resources, we have to purchase from ancillary services to be ready and have resources on standby to be able to balance fluctuations in load generation that we may see. That comes at a cost. You know, for us to go out and say to the generator, okay, I'd like you to sit there and be ready, I want you to have everything spinning, I want you to be ready to turn on at a ten-minute notice, you have to be able to respond in ten minutes, and for that I'm going to pay you some kind of price. Depending on what's happening at any particular day or any particular hour, the amount of those resources that I have purchased varies. The more variability that I know I have, the more of those kind of resources I have to purchase. Additional wind, without some predicted capability, forces me into a situation where I have to buy a lot more resources. For the load, that means that wind is less valuable because then they not only have to pay for it, but they have to pay for somebody else to stand by and wait for them. One of the other challenges that we have with wind is that it comes on and runs exactly when we don't need it. You look at California and the peak times are the ones that everybody thinks about as we go through reliability issues. Two years ago when we were running out of power, that was something everybody understood. We run into a lot of situations, especially in spring and fall, when we have too much power. You look at those must-take units, you look at some -- look at Diablo Canyon, you look at some of the big coal units, it is very difficult for us to be able to shut those things on and off. You have to keep them running and running at minimum load. There was a lot of noise a couple of years ago, oh my God, the state is giving away power. They purchased these outrageously priced contracts and they were giving away power for free. Well, yes, they were. You give them away for free because you have to. You have got it running and everybody is asleep, it's a nice cool spring day so nobody has their air conditioner on, nobody has got much in the way of lights on, yeah, we have too much power, we have to do something with that. Too much power represents for us just as much of a liability as too little. Remember, what we're trying to do is balance that 60 hertz. Wind running at night exacerbates that problem. Now, there are some of the areas where that's not true, but we are seeing a lot of production that is happening between the 10:00 p.m. and 2:00 a.m. area, which is one of our worst problems in terms of overtime. MR. FOSTER: Randy, I have a question. Back up on your 116 -- MR. WHITE: Excuse me, If you could identify yourself. MR. FOSTER: Jim Foster. Randy, I had a question earlier, you were talking about a 40-megawatt day you need 116 megawatts in the system. MR. ABERNATHY: 40,000 megawatts. MR. FOSTER: 40,000. Is that including the spinning reserve that -- MR. ABERNATHY: We have to -- on a 40,000-megawatt peak day, we have to be within 116 megawatts of actual energy generating. We maintain between 5 and 7 percent reserve, depending again upon the nature of the reserve service that we're buying. So no, that's not in -- I mean, what we do is we use the reserves to make sure that we stay within that 116 megawatt band. We do have certain resources, like regulation resources, resources that are on automatic generation control that provide us a lot of the balancing capability that we have in the system. But again, when you talk to the people that own those units, they are happy to provide that service. It's designed for those units to move some, but big swings cause big problems. So all that being said, I'm actually a supporter of the wind. We are trying very hard to make sure that we are finding effective ways to include wind on the grid, because I think it's an important resource, not only environmentally, because in the summertime we are running up against some real problems with the Air Resource Board with some of these peaking units in certain areas. We have no other alternative but to run it because we don't have any other type of energy to be able to use in their place. I think wind provides an excellent opportunity to be able to offset some of that. If it offsets it at different times so that I can use these peaking resources when I absolutely have to, great. The other thing I like about wind is fuel diversity. Everything in California right now is turning toward gas/fire, and I don't know about you guys, but I remember two years ago when gas prices spiked and the electricity prices got really ugly and there wasn't much of an alternative, there were no other fuels to look at. So it disturbs me that we would be completely reliant on this type of fuel source, and anything that brings fuel diversity is a positive thing. So we are trying to help the state to increase the amount of wind it has on the grid. We are trying to forecast it far enough in advance so that we can actually use it. And for us that's not very far. We don't need days in advance. I'll take it two hours ahead. If I know two hours ahead how much wind is actually going to show up, I can operate the system pretty reliably. And we'll talk about it a little bit later, but as we look at forecasting methodologies, one of the things that the ISO is going to push is to get very good across the state at being able to predict close to real time how much wind is actually going to be able to show up. We care about that from a reliability standpoint; you guys are going to care about that because to the extent to which you can predict when those resources are going to show up, the more dollars you can make off of it, the more value they have. Obviously we're looking at finding no surprises. Operators hate surprises. They are very predictable guys, very normalized. All the chaos that they want they create outside inside their personal lives, they don't want any of it in their work environment. How many people have been in a control room in Folsom or in an electric control room? If you have some time, it's a fascinating experience because what you have are a group of guys who sit, sometimes for twelve hours at a time. When nothing happens it's very quiet, not a whole lot going on, a day like -- I shouldn't use a day like today because you have some ugly stuff happening with the wind. Normally on a day with this kind of temperature, it would be pretty quiet. Not a lot going on every hour, everybody making sure that things are balanced up, making sure things are running good, and then all of a sudden they have to be on. And I kind of liken them to airplane pilots. The big jets now run completely on autopilot, fly themselves, but it's that one circumstance when you have a really ugly landing and the autopilot doesn't work, you want to make sure that those people are trained and ready to be able to step into that spot. That's what those guys do. So they hate surprises because surprises cause them stress and they don't like stress. I don't like surprises in our market because surprises in our market cause the price to go up. The price goes up, then I start to get phone calls, usually from people in high political office who are very concerned about being re-elected, who don't like the fact that the price has gone up. I don't like the fact that the price has gone up because I am ultimately going to have to pay some of that as well. But if these are the only resources I have available, I, as an independent system operator, am not supposed to care. I'm supposed to let the market work those issues out. But I'm telling you that we obviously prefer when the market works well, but surprises make sense -- surprises make prices not make sense. That forecasting capability I said for you guys is important because it's going to lower the financial risk for you as a wind generation operator. It's going to enhance your ability to be able to go to the bankers and to be able to get them to fund your projects, it's going to increase your capability to sell those projects to some load somewhere who needs those resources. You know, a resource that comes out and says I have 50 megawatts I can give it to you 24 hours a day, seven days a week, absolutely predictable, is more valuable than one that says I can give you somewhere between zero and 50 megawatts. You know, I haven't got 50, I'm not sure when it's going to be there. The surprise with the changes in the output from wind and the changes that happen with load on a day-to-day basis is in an employment opportunity. Wind is responsible for that. Imbalanced energy gets expensive, it's bought in real time, it has to be very responsive. Somebody is sitting there waiting for the opportunity to sell it. At the point they get ready to sell it, one of the things that they know is, guess what, you need it, you don't have much of an option. So the price on this is obviously much more expensive than contracting on a long-term basis. We know that power production and usage will always deviate a little bit from what people predict. And the models have gotten pretty good, you kind of see where loads are going. All I'm saying, in the last couple of years the conservation efforts that happened two years ago, we ran into a problem with that. We had models built on years and years of usage in California that were really stable, and then all of a sudden people had a big incentive to conserve and we saw some strange behavior happen out of that that forced us into a couple of difficult situations in terms of just predicting what was going to happen. We were expecting lights to turn on, you know, it's wintertime, people go home, get home at 6:00 p.m. all the lights go on, we see a peak. Well, that peak was softening, it wasn't going up quite as high as we are expecting it to, so there was some overgeneration issues there. All of these kinds of deviations, whether it's load that shows up unexpectedly or whether it's generation that doesn't show up unexpectedly, causes us to have to replace it and incurs a charge. We're trying to find ways in our program to minimize the impact of those charges to the wind generators. For every other generator if they tell me that they are going to produce 100 megawatts at 9:50 in the morning and they don't show up with 100 megawatts, they only show up with 80 megawatts, I charge them to replace that 20 megawatts and I charge them a very high price. One of the things that is happening with the changes in our market, it used to be that we would just charge people for the replacement cost. Right, seems fair. It didn't show up, well, then we have to pay to buy something else, that is what we charge you guys for. What we saw were people were taking advantage of that and we couldn't predict what was actually going to happen. So we'd think at 9:50 that we were going to have 35,000 megawatts show up, and 9:50 would roll around and we'd have 30,000 megawatts show up, the other 5,000 would be looking at the prices going, you know what, I'd rather let the ISO buy it because this is cheaper than I can produce it. Which in a robust market, in a market that is healthy, in a market that has depth, that works. In another set of circumstances that we have, the generation here in California, it doesn't. 5,000 megawatts, we can make up, we have had days when we seen 15,000 megawatts. And again, operators hate surprises. So with the wind one of the big challenges was how do we find ways, knowing that it's going to vary -- and anybody think the wind is not going to vary on a regular basis? We all know it's going to happen. So if that is the case, how do we minimize the impact? Summer 2001 we got together with some folks from the governor's office, with WEA, with Cal WEA -- where is Hal? Hal and a whole bunch of folks, to try to come up with ways to make the wind work within the context of the rules of California. That was at times a contentious process, but a very productive one because everybody was motivated pretty much the same way, how do we include it. There is Nancy back there too. Nancy Rader is one of the other folks who participated in this in a big way. It started off kind of rough, but we really worked down into a process and a concept that we were getting more people to buy in and we were dealing with issues on both of the sides in terms of, one, being better at predicting and, two, making sure that nobody was beating the market. We developed the tariff language, which is Amendment 42 for those of you keeping track of the ISO. The amendments are just amendments to our tariff. And we filed it with the FERC in January. The FERC came back and said, yes, not only do we like it, but we really like it, so we are going to use it as the standard market design for everyone. One of the things that that output requires is that we're going to contract the forecasting service to develop some high-quality forecast for day-ahead and hour-ahead scheduling. Our belief is that using an independent entity to be able to do the forecasting should result in an unbiased forecast. And so by that all we're hoping for is we recognize there will be error, we hope that the error is truly random. Our early experience in this is in fact that it has been. And if it's random, then we can come up with a settlement process that deals with the deviations, because what we were allowing the wind -- the participating wind generators to do, and I should say participating intermittent resources to do, because it just doesn't apply to wind, there are other intermittents that are talking to us about application of this tariff, and if they are willing to come in under the same set of circumstances, then we are willing to participate with them. What this will result in, we're saying, okay, I'm going to allow wind, since it's going to be used in unbiased forecast, to net all those fluctuations over the course of the month. Some days are going to overgenerate; some days are going to undergenerate. For me that is going to generate costs. Well, not for me specifically, for the market that is going to generate costs. What we're going to allow wind to do, as opposed to everybody else, we say, okay, you have to settle on a ten-minutes basis. All the deviations you have are settled on a ten-minute basis. For wind we are going to say we are going to let you deviate over a month. Our early projections on this, and we have run a couple of studies now, show that when you have a random bias in your forecast, a random area in your forecast, that usually nets out nicely over the month. To the extent that it doesn't net out over the month, then the extra charges that are incurred balance out of that are actually charged back to what we call unbalanced load. In other words, people that showed up unexpectedly are the ones that are going to have to pay for the deviations that happen to us. Another important piece of what we are doing with our program is we're trying to put together a forecasting group. That group will be responsible for continually helping us upgrade the quality of the forecasting that we do, helping us identify the formula that we need to use, the models that we need to use, helping participating in the tests to make sure that we can get the data. It is the responsibility of the participants, part of the agreement for getting the deal, that they have to help us participate and get better and better at the forecasting so we get better in being able to see it. The intermittent resources that participated in this signed all the ISO agreements, sell ISO meters. There is a forecasting fee associated with that. Dave, correct me if I'm wrong, the tariff is not to exceed 10 cents a megawatt. Obviously if we get more participation it actually requires us to pay for the program, then it would be less. Right now it's set up at 10 cents a meg. That won't completely cover the cost that we have to incur, but it will cover a significant chunk of it. Intermittent resources are not going to be charged for deviation replacement reserves. Like I said, the deviation replacement will be charged back to the balanced load. Congestion charges still may apply, so we can't do a free walk on that because we want to make sure that as wind is participating in the market, they, like any other generator, are motivated to try to build in place or to help in the system upgrades to make sure we don't have congestion on the line. Each of the generated areas are going to provide met data, energy production data, and real time use in creating a forecasting model. This is -- what day is this? Is this recently? I think this is May. We have done some early projections and attempted to do some forecasting models. Primarily the one we are using right now is one that was created internally, it is a persistence model. Given the fact that we need close to real time data, what we're seeing is this isn't bad variations. You know, this is within a 5 percent band pretty much all of the time. That's the kind -- if we can predict like that and continue to predict like that, we get pretty comfortable about being able to operate the system. MR. GOUGH: Is that based on any one wind site or is that overall of your wind resources? MR. ABERNATHY: That is -- MR. WHITE: Could you introduce yourself? MR. GOUGH: Bob Gough, Intertribal Council. MR. ABERNATHY: This is all of the resources. And one of the things we are obviously concerned about, this takes all of the wind areas into account and it's easier to predict the whole system than it is to predict just a couple of small models. We certainly -- we think that as you develop the forecasting methodology, what we're hoping is that we can get areas to get a little more cooperative and really start to produce local forecasts and find ways to be able to use kind of that consolidation as a way to get a little bit more stable. You know, there is some financial implications of that that I believe we can work out for us as long as we keep to these kinds of numbers and this kind of variability from our forecasts, then we have got something we can work with. This is 1,800 megawatts of installed 1,200 megawatts of actual wind at the scene and this is the variation. 2,000, 3,000 megawatts of additional wind, that starts to put a lot of pressure on the operators because the swings get a lot bigger. Somebody was talking to me yesterday about what they have done in Texas, and in Texas they have basically clipped the top off the variability and said to the wind generators, hey, look, beyond a certain range you guys just can't produce. Well, you can't produce and dump it on the grid. Which is why I look at some of the storage alternatives and some of the conversations yesterday, I'm hopeful that we get better at some of that storage technology because I look at that wasted energy and think there has got to be a way to be able to take some of that and use it at times of need. Our goal, forecast the amount of wind energy production for each ten-minute segment for the next 90 minutes. That's all we care about in terms of the future. Well, it's not all we care about, but in that kind of time frame we can manage our system. We have done changes in that short calculation for supplemental energy, including wind energy, obviously we said no surprises. We did say overgeneration exists and there will be emergency situations that we get into, especially in the springtime. Units participating in this program in those situations are going to have to come up with mechanisms to be able to pull off the grid and not exacerbate that overgeneration situation. So what's next. I have got a couple of -- well, I shouldn't say a couple, I've gotten probably a dozen phone calls in the last month saying where is your program. We started off back in February, we got approval from FERC in May, we were ready to go, we sent out a survey and we said, okay, we need to know all the new projects that are coming on and are ready to build new generation, would you please raise your hands. DWR wasn't buying, the IOUs were bankrupt, they weren't buying, there was nobody to purchase the contracts, so nobody was developing anything. It's going to cost us in the neighborhood of a quarter of a million dollars to be able to put the systems in place to get this thing up and running, so we did not want to incur that cost until we actually saw we would have some generation that was going to participate in the program. We now have commitments from approximately 340 megawatts of new wind generation. That is very exciting. We can see the participation in that program grow to over 2,000 megawatts because Edison is talking about bringing all their current generation to the program. Originally a program was designed that was only going to allow new generation to participate. FERC came back and said why not everybody. We have found that you guys would want to participate because their contracts were better than some intermittent deals, but Edison came back and said, wait a minute, its my wind generation, so, yeah, maybe I'd like to participate. So we're excited. If they come in it is certainly going to lower some of that cost on a per-unit basis because 2,000 megawatts, we're going to have plenty of participation to fund the program. We're ready to contract with the wind generating forecasting service. Earlier this year we had gone out with an RFP, we have put that on hold when we didn't have any participation. In January we are going to start implementation of the program, we should be ready by this summer. Like I said, we at the ISO are very excited about trying to get some additional wind generation on the system, but I hope that what you take from this is for us we are much better able to bring you on the system and help you get the true value out of this resource if you can help us know when it's going to be there. So as the Wind Consortium, for Case and those guys, I'm certainly going to be asking them what are you guys doing to help with the forecasting models, what are you guys doing to improve the forecasting models. The storage resources, what are you doing to help find other types of services, other types of products, to combine with your wind generation to be able to participate effectively in our market. There was a conversation yesterday about the value of depth, right, the place where all of these really interesting technologies go between the time that somebody thinks them up and between the time they are actually commercially viable. I want to encourage this community to start thinking about your business models in ways that don't rely on things like what we're doing with the intermittent resources. I believe that this is an interesting program, but I don't believe long term it's the best and most viable option. To the extent to which the wind community finds ways to help use its resources in ways that are more predictable ultimately result in a need not to do it because in the current -- in the current format we don't believe that this is going to be much of a cost shift to other folks. We ran numbers last year and I think it was like -- it was ridiculously low. It was like a $12,000 to $15,000 shift of cost from the wind generators to the market, and the market is going to have to pick up. We felt like in the scheme of things, dollars that we dealt with in the energy market, that's pretty much around in there. So that kind of noise we can tolerate. But as we get more and more resources on, if that becomes bigger, I suspect that you will see other communities, other participants in the market, start to put pressure at the federal level to say, hey, wait a second, how come these guys are getting subsidies. So looking for ways that wind can incorporate itself so that it doesn't need those subsidies in long term for viability of this kind of energy. Questions I can answer? MR. O'KANE: Hi, my name is Stephen O'Kane with CH2M Hill. You spoke about managing the resources and ultimately controlling energy cost and the emphasis has been on the predictability of the resources; what I didn't hear today was anything about transmission and how the restrictions in the transmission system are restricting your ability to manage this. That is the first question. And secondly, you also talked about forecasting error analysis and talked about your tolerance on total production depending on total use in the state. Now, forecasting error will depend -- is seasonal, you can minimize the error in the forecast by season, and I guess it would apply the same thing to managing the power systems, depending on the total amount of power use in the state would be easier if you got a certain tolerance there to keep the 60 hertz that you are speaking about. Can you match those two realities in your tariff structure or penalty structure for the forecasting in that when Cal ISO demands more accurate forecasts that maybe occurred at the same time of the year when we can actually produce more accurate forecast. MR. ABERNATHY: The first question on transmission is one that's probably -- you know, another two days of discussion. We are working -- we have an annual planning process that takes a look at a five-year horizon. We're trying to work closely with the CEC and PUC to make sure that transmission upgrades are happening. I think in the last couple of years we have seen quite a bit of transmission upgrades. I recognize the interconnection for wind resources, especially in the south, has become really problematic. I know I've dealt with a couple of developers recently on some projects, we have tried to do interconnection, the process is not an easy one. Our goal is -- in fact one of the things we're doing is looking at transmission not just from a traditional reliability justification, but also from the economic justification. We're putting some efforts into finding ways to be able to demonstrate that in fact the traditional, you know, American WACC requirements about what you need for reliability. There may be some places where you can't say from a reliability standpoint this line, this upgrade, absolutely needs it, but if you look from an economic standpoint on the impact that it has, you know, Path 15 is a great example on that. Path 15 pays for itself in one bad summer. What is it? 500 million dollar upgrade? One summer, one bad hydro summer and it pays for itself. So should you build that? I mean, it's a tradeoff. We're certainly going to show the economic justification, but, you know, its transmission site, as I'm sure wind site, is a multi-jurisdictional process. What we're trying to do is facilitate as much as we can projects to help reliability. The second question I'm not sure I completely understand it. We -- you know, the 116 megawatt example that I gave you says 40,000 more peak day. As the days get lower the band gets narrower, it's a percentage basis. I'm not sure what you are asking in terms of -- MR. O'KANE: So when your total need is higher then your band gets wider and your tolerance on the forecast should be able to get higher as well? MR. ABERNATHY: The Thomas band is getting wider, it changes because the number is different. MR. MILES: My name is Larry Miles, I'm with the Wind Turbine Company and we're out of Bellevue, Washington. My question is you commented earlier about Bonneville Power Administration, a lot of the question is: what do you think Bonneville could do to integrate more wind energy into their basic hydrosystem, and are you pushing them at all to get more innovative? MR. ABERNATHY: We are really a customer of Bonneville, we have very little impact on their policy. We are certainly trying to coordinate with them as much as we can, but in terms of trying to put pressure on these other resources, I'm not in a position. UNIDENTIFIED SPEAKER: They have contracted for quite a bit of wind generation. MR. ABERNATHY: Yeah, they have. Bonneville has been pursuing wind generation. MR. BOSLEY: Ken Bosley, General Consultant in Wind. Is there any wind projects producing power out of state and having it wheeled in? MR. ABERNATHY: Unknown. There could be. The way we deal with our market, that would be an intertype transaction, it's not tagged to a resource. So could there be wind that's pushing power in the state? Could be. Do we know about it? No. MR. ROMANOWITZ: Hal Romanowitz of Oak Creek Energy Systems. Randy, one quick comment, I think the comment you made about the need for forecasting going away as other things come to fix the system I think is overly optimistic. I think that likely the storage and with the other coordination methods, you are still going to need forecasting to make things work. I think the good thing about it is you guys have done an unbelievably good -- the work that Yuri has done in making the models, I think it's really impressive and the quality of work you guys have done in the forecasting, but I think it's going to be necessarily long term. MR. ABERNATHY: If there is anything we believe, it is that we're going to be forecasting in the long term. I misspoke. I'm hoping some other pieces help to mitigate, you know, the criticality of it, but I believe -- well, the dependency on it, but I think in terms of its criticality, it's going to remain. It's like us predicting and forecasting the energy, that's not going to change. MR. ANDERSON: Dave Anderson with NOAA. Will the National Weather Service play a role in any of the forecasting on a 90-minute time scale? That is one question. The second question, is it also important to make forecast sort of interannual to the cable variability? What is going to happen in the next two or three years in terms of climate change on wind resource? MR. ABERNATHY: Is the National Weather Service going to be involved in forecasting and my understanding is that from the vendors, yeah, they use National Weather Service data, but I'm not sure, I think the local met data tends to be more critical for our purposes. In terms of the long-term predicitability of the wind. It's nice, it's a planning parameter, it's not as critical to us as is the real-time data. If you look at wind over a period of time, it's actually pretty predictable. If I can make predictions on an annual basis, I can tell you about how much output there is going to be. My problem is that in real time I may have all of it or I may have none of it, and that's the important thing for me. MR. HAWKINS: Probably Chuck and Dora, I think, understand a little bit more on this because they have done more work on using meteorological-type data for getting that forecasting. So as you start to use the Weather Bureau-type data and you are picking it up from airports and other types of sites like that, then you have -- you are further away from the sites where the generation is actually happening, but you get more predictablity what is coming at the site somewhere downstream. So we'll probably talk a little bit about that in more detail. MR. WHITE: As a matter of fact, that is going to be the next session. Other questions? Okay, well, thank you. Thank you, Randy. Just a minute or two we'll set up and be ready to go with the next session, so it's a good chance to grab a quick cup of coffee. (Break taken.) MR. WHITE: The first session this morning will be a panel discussion on the methods of market expansion. We'll have three speakers: Chuck McGowin, Nancy Rader and Warren Byrne. The first one, Chuck McGowin, has been with EPRI for 26 years. Before that he got his bachelor's degree in chemical engineering from Lehigh University, then a PhD from the University of Pennsylvania. Worked in the chemical industry before coming to EPRI, has been the manager of the wind program at EPRI for the last six years. So let's welcome Chuck McGowin. MR. McGOWIN: Thank you, Bruce, and good morning, everybody. It's great to be here in Davis and I particularly enjoyed Randy Abernathy's remarks on wind energy forecasting, it's probably a good segue into what I'm going to talk about. I've been interested in following the wind forecasting work that's been going on at ISO and talking with Dr. Yuri McGrath and David Hawkins about the next hour -- next two-hour forecasting focus of their work. EPRI together with the US Department of Energy and California Energy Commission has been focusing on longer-term forecasting, up to 48 hours in advance, and that's really what I'm going to be focusing on this morning. There are several questions that I'll address. I guess all of you are familiar with what we're talking about and what we mean by wind energy forecasting, and Randy did an excellent job of talking about why we need it, so I will focus mainly on the results of the EPRI California Energy Commission research project in California. And I'm pleased that Dora and Dennis are here from CEC -- George Simons is maybe here also, but Dora and I have been working together on this project and we're actually finishing up the first phase of the project at the end of this month, and will be publishing a report soon after the beginning of next year. I think there is some other topics that need to be addressed here, one of them is what do we need to do to improve the accuracy of these longer-term forecast models. And finally to perhaps address some of what Randy talked about, what additional resources are needed to develop a wind energy forecasting system for all of California. This is an example of a wind generation forecast that's been generated by one of the participating contractors in our program, and I'll talk more about the structure of the program. This one was actually generated by Risoe National Laboratory in Denmark, this is for October 17th, 2001. It's a period beginning at 1700 hours, which is 5 o'clock p.m., October 17th, 2001. It's a forecast generated for 90 megawatts of generation at Altamont, and we show actually three different forecasts on this chart. The blue line is the forecast based on meteorological modeling, and we'll talk more about that, that is really the main focus that's used in generation. The main focus that is used in these longer-term forecasts combine weather forecasting with wind generation forecasting. The green line that's flat across the bottom is what's called a persistence forecast. This assumes that the wind generation will remain the same over the whole period as it was at the beginning of the period. And the red line is what is called a climatology forecast. It's a forecast based on historical data, and we assume the diurnal behavior each day will be the same and that every day as the time varies from 12:00 midnight of one day to 12:00 a.m. the next day will behave the same. And we see of course, there is quite a cyclical character to it. I won't dwell on this because Randy did such a good job, but why do we need wind energy forecasting, the intermittent generation character of it. Wind generation rises and falls as the wind speed rises and falls, and that can have an impact on issues that are a concern to system operators. Wind energy forecasts are needed by different parts of the wind community for different reasons, help manage the interface between large wind plants and the electricity grid. Wind generators themselves want to minimize under- and overscheduling wind energy in the system in order to minimize their month-end penalties, and the system operator wants to dispatch other generation transmission resources to fault loads. In addition, I particularly, and perhaps I've seen this in Texas and it probably will occur in the future, many purchase agreements between wind plant operators and utilities that are purchasing wind energy require them to also deliver forecasts. And finally the operators produce a forecast to schedule their field work in turbine maintenance. Well, this program that we're generating, its objectives are to develop and test multiple systems in parallel. We are actually working with three different contractors that are all working and independently developing testing forecasting systems, including Risoe National Lab in Denmark, TrueWind Solutions, which is a U.S.-based company in New York that many of you are familiar with, they generated the nice wind maps for many of the states, and I think they were probably involved in developing the one that is available at the back of the room for California, and another company, Applied Anomaly, which has done some work in California on air quality monitoring. We have three projects underway, we have the EPRI/CEC project, which is doing forecasting for the PowerWorks 90 megawatt capacity for Altamont Pass, and for SeaWest Mountainview I and II, which is a brand-new wind plant in San Gorgonio Pass that totals about 66 or 67 megawatts. We also will be beginning soon some work to supplement forecasts for Southern California Edison that -- for the area -- the whole Tehachapi and San Gorgonio Pass wind resource areas. We also have a project funded by EPRI and the Department of Energy in Texas, at the 75 megawatt Southwest Mesa project in McCamey, Texas. There is a photograph of that project down at the bottom. You can see instead of having the rolling hills we have in Altamont, that is typical of the wind plants in west Texas. They are on top of these mesas that rise out of the flat land. Some people think that wind projects actually make the terrain look better there. I actually agree with them. Another, I think, very interesting part of this work is the work done here at UC Davis. Professor White, in the wind tunnel here, built a scale model of a slice of the Altamont Pass wind area that is aligned with the prevailing wind directions from the southwest to northeast and measured the wind energy as a function of wind velocity over this scale model that you can see in the lower right. Bruce tells me that he has somebody that's doing some additional research on this and has some interesting ideas of developing wind forecasting based on measurements made from this model. We have a lot of participants in this program. I know Bruce and his colleagues here at UC Davis participated in a budget review meeting they had in September here and we had somebody here that came all the way from Denmark for the meeting. It's quite an interesting group, and we have a lot of very interesting meetings, but it involves meteorological consultants, we have system developers that I mentioned, UC Davis, we also had the National Renewable Energy Lab involved to help review independently the performance of the wind forecasting models, and of course we had the wind plant operators which have been very cooperative, FPL Energy in Texas and PowerWorks CS here in California provide prevailing resource power generation and availability data to develop, calibrate and operate wind forecasting systems. As I mentioned, we're doing forecast modeling at two plants in California. The 90 megawatt plant operated by PowerWorks at Altamont Pass and 66 megawatt Mountainview I and II facility in San Gorgonio Pass. The Altamont Pass project is a 90 megawatt nameplate rating, however many of the turbines have been declared -- I forgot what the word is, but they are basically not operating. They have been shut down to borrow parts or have not been operating. Originally they had 900 kilowatt wind turbines there, these are the Kenetech US Windpower 56-100 wind turbines that are full stand, variable pitch regulation, they are on 63-, 83-foot-tall lattice towers. They were installed 1987, 1988 by partnerships involved by U.S. Wind Power. They were eventually sold to FPL Energy. Pacific Winds purchased three of these partnerships, and those are all part of the 90 megawatts that they are developing and the modeling. The power curve on the photograph of the wind turbine is shown on the right side of the slide. If you drive through Altamont Pass, as I'm sure most of the people here have, you see wind turbines up on the hill on both sides on I-580 or -680. 580. And they are actually owned by three different groups. The group that we are working with, the group owned by PowerWorks, are the ones that are in blue. With the help of Bob Szymanski of PowerWorks we divided these turbines up into ten different groups, each one associated with a met tower. These wind turbine locations are over considerable range, each of the blocks corresponds to a 10,000-foot square land area, so you can see quite a bit of variation in the wind resource that each of these ten groups of wind turbines are exposed to. We get 30-minute data every day for the previous day's wind generation, wind resource and availability data for each of these ten groups of wind turbines. This is kind of an interesting topographic map of the same area. In this case north is to the top and the wind rows for the site is shown on the left. This is kind of a general representation of the wind direction and wind speed, wind energy distribution. And we can see that there is quite a bit of emphasis on the southwest -- southwest direction of the wind direction at this plant. The topography at the lighter areas correspond to the highest elevation, and the darker areas correspond to the lowest elevation. In the upper right you can see the Central Valley area. And the blue area, I guess there are a couple of reservoirs that are out there. And the location of the met towers for each of the turbine strings is shown configured. Mountainview I and II we have much newer turbines. Although these turbines have been available for probably six or seven years, there are 600 kilowatt turbines produced by Mitsubishi Industries. They are 44 meter, three-blade rotor, full-span pitch regulation machines. 55 meter hub height, active yaw, and you'll see these are, of course, on tubular steel towers instead of the lattice towers. These were installed by SeaWest in 2001, and as part of the powering project it took out a lot of old turbines. This actually shows the layout of the wind turbines at the site. These are very visible, and I think adjacent to Interstate 10 that goes through San Gorgonio pass, so they are very visible. The group of turbines on the left is Mountainview I, it consists of 74 turbines, those are the westernmost turbines. The group in the middle is Mountainview II consists of 37 turbines. We receive data for this plant, ten-minute data, and they actually are received almost in real time. It's updated every hour, but we don't receive anything other than aggregated power generation data. There is no availability of information provided. Here is some more information for wind rows and the topography at Mountainview. You can see kind of the rectangular blue thing in the middle, it's up on the hill, I'm told it's a reservoir that is up there. I don't think it's quite that shape though, that's what the computer did to it. But you can see the extreme terrain that is in the area. The topography that funnels the winds through the pass and produces very high wind speed through the summer months. The wind energy forecasting model that we're using, as I said, they combine numerical weather prediction, weather forecasting and wind plant models. There are a sequence of steps that these models go through, they don't download American weather forecast data, they calculate the wind flow and wind plant using a model that is either the Mesoscale model that find a grid plant distribution around the wind points site or a correlation involved, and then they use some statistical adjustments based on historical data for wind speed, wind direction, power generation to estimate and forecast wind speed, and then the hourly power generation is calculated with the adjusted wind speed and wind direction. And then our contractors also issue 48-hour forecasts, issue them multiple times each day. On the right we see a representation of the wind flow over Southern California. You can see the arrows indicate the wind direction for this particular example and the location of Tehachapi and San Gorgonio Pass areas. We get a considerable amount of data from this project, and I won't attempt to show you what the data looks like, but a lot of it is posted automatically on the EPRI FTP server for Altamont. It includes wind resource generation, availability data for ten met tower turbine clusters, and Risoe and TrueWind Solutions also post forecasts on their FTP server four and two times per day respectively. Risoe forecasts are generated every six hours and TrueWind forecasts every two hours. At Mountainview we have a similar situation, except that the SeaWest data are updated every hour and they are ten-minute data and they are posted on the SeaWest website, which can be accessed by our contractors. Here are some results, I've simplified this, I've taken out the persistence and the climatology forecast just so there weren't so many lines to look at. On the left side we show forecasts on wind speed at the top and wind generation and kilowatts per average kilowatts on each hour over a 48-hour period for forecasts beginning at 1700 hours on October 17th, 2001. October is a time, as Randy was talking about, when wind speed begins to kind of settle down in California and so we see relatively low wind speeds during this period and corresponding low wind generation. The blue line representing the forecast generation, the solid black line represents the actual generation. I did not do any careful cherry picking to select this particular day, I just chose one where we had both the forecast and observed data. We don't always have valid data every day. We do eliminate those data points when we calculate our statistics. As you can see, on the top the wind speed generally does follow -- the wind speed forecast does generally agree with the pattern. We can see that on the top-left side the forecast wind speed does agree generally with what we actually have. There is a little less agreement on the wind generation forecast. We have to consider the fact that this is a very complex terrain and we have a lot of different wind environments, so it's a lot more difficult to forecast wind generation for this wind plant. On the right side we see a similar pair of forecast and observed data for a summer day, June 17th, 2002 beginning at 2300 hours or 11 o'clock in the evening. And actually the wind speed and wind generation is quite a bit higher, this is a summer evening and the marine layer is obviously in effect at Altamont Pass, and we can see pretty good agreement on both wind speed and wind generation in this figure. Bruce, I'll try to wrap this up quickly. In terms of how we measure the performance, we do have objective measures to measure the accuracy of the forecasts, and the one that we're using is the mean-average error, the monthly mean-average error. We also calculate the annual mean-average error for each pair of forecasts and observed values. We calculate the absolute value and then calculate the mean of those absolute values over the months. And we do this for the meteorological forecasts, the persistence forecasts and the climatology forecasts. We calculate skill scores for the meteorological forecast versus persistence to climatology shown at the bottom. If you can't do better in meteorology forecast with either persistence or climatology, you might as well not bother. It's a lot simpler to do than persistence climatology. Here is some charts showing the performance or mean-absolute errors for these three types of forecasts for the month of -- actually for the annual mean, for October 1st, 2001 through September 30th, 2002. We can see on the vertical axis is the mean-absolute error in meters per second. On the horizontal axis is the forecast hour number starting from the zero hour of forecast all the way out to the 48th hour of forecast. So each forecast hour number, the data point represents the average of the mean-absolute errors for that particular forecast. And I think what is interesting here is that the meteorologic forecast over the short term zero to maybe three hours is not as good as the persistence forecast. It's certainly consistent with the idea of focusing on persistence forecast the ISO is doing for their next two-hour forecasting. So I'm going wrap up now. This is a similar plot, but showing how these monthly mean-absolute errors vary with month. And you can see within a seasonal variation here that corresponds to the low-wind, high-wind periods. The errors tend to be lower during the low-wind months and higher during the high-wind months. In terms of sources of forecast error, there are numerous components in the meteorological models, there is American weather prediction models, the wind flow models, we have data errors that creep into the data we receive from the wind plants when we try to sort those out before we did this analysis. We don't always get turbine availability status, so we have to guess on what the turbine availability was. There are algorithms for adjusting forecasts, based on previous experience, certainly which ones are best to use. Errors, these are made just evaluating the performance of the forecast and there is some concern about the Brand meso turbulence and the wind flow and the effect of that on the observed data. We have a number of recommendations. I think generally what we see is that there is still a need to conduct additional research. Researchers always like to say that there is a need for additional research to reduce the forecast error. I think there is also a need for development and testing of wind forecasting systems in California with the goal of developing regional models to support operation in the state's electricity grid. And finally perhaps this might be something that would provide a starting point for further discussion on how to accomplish that goal, the proposed outline for a California collaborative project that would develop an automated system wind resource area that would provide forecast over a longer period than what the ISO is focussing on and would integrate development of statistical and persistence model. The ISO is using longer-term meteorological models, but also standardize the format of data collection of the wind plants and met towers and automated electronic communication of data and forecasts. And finally, for all interested in alternative energy sources, I found this in our local paper, it's kind of a humorous observation on alternative energy sources. Frank and Ernest say, "Wind and solar are fine, but nothing beats an extension cord plugged into your neighbor's outlet." With that, I'll wrap up. MR. WHITE: Thank you. In sticking with yesterday's format, we'll hold questions until all the speakers have spoken. Our next speaker is Nancy Rader, and she is with the California Wind Energy Association or known as CalWEA. A little bit of background, I'm pleased to say she was a UC Davis graduate in 1983 in poli-sci, then she went to our arch rival, Berkeley, and got her master's. So we'll forgive her for that. Currently she is the executive director for CalWEA for two and a half years. Prior to that she has been working in the wind industry for more than ten years, and more recently has authored a number of articles and discussions on the RPS system, and she'll talk about that now. Thank you. MS. RADER: Good morning. My name is Nancy Rader, California Wind Energy Association, a group that is about two and a half years old. Our members now include a number of developers, project owners and turbine manufacturers. We have fifteen members, but we are growing because everybody recognizes the importance of the market that has been created by SB 1078 by the California legislature this year, which is known as the California Renewables Portfolio Standard. It's a complicated piece of legislation and I think there are some good reasons for that. First, the legislature was in no mood to pass a major energy bill, given the experience we've had in the electricity markets over the last couple of years, without some kind of containment on cost, so there are some cost containment features which can complicate the bill. And to pass a renewables mandate of this magnitude through the California legislature, it was really essential to have the support of at least one of the major utilities. We found that in what we feel is not a likely source, Southern California Edison, but we worked well with Edison in the legislative process to come up with a framework that we thought made sense from an industry point of view, and that the state's largest consumer group, TURN, could also agree to. So we forged a framework that we felt worked for consumers and renewables and utilities. There are many sort of complications in the bill, and we have been criticized for the bill's complexity, that we feel are actually important to the bill's chances for the bill's success from our point of view. We put in it a number of protections for the wind industry, such as requiring standard contract terms, which of course are critical in determining the costs of wind energy. So with that said though, there are a lot of complications in the legislation, we have a lot of work ahead at the PUC Energy Commission in the next six months or so because the law requires the rules to be set by June 30th of next year. So I'm going to give you sort of the 30,000-foot view of the legislation because pretty much that is all that exists right now is the legislation. At the PUC, comments are due on January 6th for parties to scope out issues and also to process for implementing the law. So the basic requirement is that the investor-owned utilities, as well as the direct-access providers, increase the renewables portion of their energy mix each year by at least one percent of total retail sales. The renewables portion must reach 20 percent by 2017. Now, PG&E and Edison are likely to reach that goal more like 2010, 2012 time frame, but San Diego has until 2017 to catch up. To do that they would need to add renewables at a pace of 1.75 percent annually for -- you know, until 2017. I'm just going to skip ahead for a second to a graph to show you the size of market that that creates for renewables. And you can see this is a graph put together by the Union of Concerned Scientists showing all the RPS laws and all the states in the country and shows you how large California's is by comparison, and it creates a market of about 3,000 average megawatts for renewables. And if wind were to capture half of that market, it would be 4,500 megawatts nameplate capacity or roughly three to four times our current wind energy production in the state. So it's for no trivial purpose that we're about to go through a very complicated exercise. The renewables will be chosen from a competitive bidding process and the bids are to be compared on a so-called least-cost and best-fit basis. That term and those words have not yet been defined, but I think what we had in mind, when we put those words in the legislation is that the utilities don't necessarily have to pick the cheapest bid that comes in, but they can look at how well that resource fits into their portfolio and select the one that is -- you know, there is some balance between least cost and best fit. The least cost has to include total cost, including the indirect cost of the bid, including transmission, integration and operating expenses, which makes sense from a societal point of view, because you may have a bid that is relatively cheap that requires a huge transmission investment and you want to consider that as well. And that is another area certainly that led to complication, it's hard to argue that you shouldn't consider that in meeting that 20 percent mandate. The winning bidder's costs are going to be covered in two ways. First, by the contract with the utility up to a market-price benchmark to be determined by the PUC, and the benchmark is supposed to represent the nonrenewable product of equivalent value, that is a long-term fixed price equivalent nonrenewable product. And then if there are costs above that benchmark that are not covered in the utility contract, those will be covered by the Public Goods Charge funds, and currently the money that will support that is the new renewables account in the Public Goods Charge Fund, which is approximately 70 million dollars a year for ten years or 75 percent the first five of that. And then the cost containment, the cost is contained because the RPS obligation is waived if and when PUC funds run out, so there is a cap. We may not meet the 20 percent goal if we run out of PUC funds. So I just want to run through a little bit of an example how it might work. This assumes a benchmark of 5 cents, and of course the benchmark price is going to be critical in terms of whether we meet at goal because the more we cover in the utility contract, the less we have to rely on the Public Goods Charge Fund. Let's say a 5 percent benchmark we have two bids, a 5 and a half cent bid and 5 and a quarter cent bid, and 5 and a half ends up at 5.75 when we add indirect costs, and the 5 and a quarter bid ends up at 6 cents when we add indirect costs. Well, bidder A wins even though its bid price is lower -- its bid price is higher, its total cost is lower, so it wins. Bidder A receives 5 cents from the IOU contract and half a cent from the Public Goods Charge Fund. So you can see that the total cost of valuation -- the valuation of the indirect costs will affect the selection of the bidders, although it won't affect payments. That is bidder A still pays 5 and a half cents from the combination of sources. But the important point in general and for my next comments, is that the indirect cost valuation is going to affect the achievement of the RPS goals because if the indirect costs are high or falsely assumed to be high, it could result in a selection of higher cost bids, drain the Public Goods Charge funds more quickly and we hit the cost cap sooner and don't meet the 20 percent goal. So it's really quite critical that we properly evaluate those indirect costs. The components of wins and direct cost include integration cost and capacity or capacity value determination, which I'll get to next. CalWEA sponsored a workshop, which was held on November 22nd, to talk about these issues, where we brought in folks that had been thinking hard about these issues at NREL, Oakridge and Pacific North and other places. We had a day-long discussion about these issues, but I'm going to condense it down to about two minutes. It was what we felt was the first step in the consensus process that we are going to need to go through to try to come to an agreement of what wind integration costs really are. We are putting together our first-cut proposal on studies that we think are needed to answer some of these questions so that everybody can agree on what the costs are. But just to go over the cost briefly, the costs can be sort of sorted out into three categories: regulation, load following, contingency reserves. On regulation, which is minute-to-minute variations, various studies have been done at TJM and Excel, Bonneville Power and Civic Corp to show that the regulation costs are really quite modest, at almost 30 cents per megawatt hour. But it would be useful, we think, to have a California-specific study of these costs because, I think as we heard from Edison at the workshop, some believe that our costs in California are much higher than the cost in other areas of the country and a study we think would not be too difficult to do. And if, for example, we -- let's say California's regulation costs turned out to be three times what they were estimated to be at TJM, three times 30 cents and you end up with a dollar megawatt hour, conceivably that could tip the balance between bids. So it sort of gets out of the noise and into the realm of perhaps effective bid selection. So we think it would be useful to have a study on that point. On load following or energy imbalances, our view is that the tariff that Randy Abernathy described, which allows us to net our imbalances monthly, the FERC declared in approving that tariff that it does not impose costs on other market participants and therefore there are no indirect costs or they will be very small, associated with load following. And so we feel like that takes care of that, that cost has already been assessed. And to the extent that ISO will be monitoring what the actual costs are that are paid for by other market participants, we're going to know that because ISO is going to be monitoring and reporting back to FERC on that, so we don't really have to do more studies on that, it's done, it will be happening with ISO and everyone expects those costs to be quite minimal. On contingency reserves, the forced outages, that is one area where wind makes their credit because, you know, all the turbines don't go down at once. You may have one or two out, but you don't have the same kind of catastrophic failure you might have when a seagull comes into a water tank, takes the system out of use for example. So hopefully we may get some credit on that point. On capacity value, there are going to be different bed market price benchmarks, there is not going to be just one. We think there should be benchmarks for each type of product, not necessarily each resource type. Not a wind benchmark, but one that actually corresponds to the product. You might have a wind plus storage, that is a different product than wind alone, but the product won't be an as available benchmark for wind. And that's important, if not critical, that that benchmark reflect the capacity value of an as available resource because even though you can't turn a wind plant on and off like you can a gas plant, it doesn't mean that it doesn't add reliability to a system, and in fact studies have shown that wind does add significant capacity value to a system. And during our crisis a couple of summers ago, it was clear that wind prevented blackouts on at least a couple of occasions. Our own data suggests that we produce in the 30 percent of nameplate capacity range during the key periods, and that ought to be the range of our capacity value. Edison has suggested otherwise. They suggested our capacity is in the single digits, so clearly we have got some work to do there. NREL's work shows that you can do a simplified analysis of a wind capacity value by using the capacity factor of a wind resource during the top 20 percent load hours in a year, and we hope to calculate that number, it shouldn't be too difficult, over the next couple of weeks, and we think that calculation should be sufficient for the SB 1078 process, but for the long run -- and it's sufficient because it's been shown to underestimate the capacity value using a more sophisticated approach, PLTC approach, but in the long run we think it would be good to do a study of that type. So we hope to be working closely with the energy commission, ISO on these studies and to get them done in the time that's required for this implementation process, which begins in only six months, so we don't have a lot of time to spare. There are a number of implementation issues of general importance, not just to wind, but to all renewables, and it's up to the state in terms of whether we meet the 20 percent goal. One of the indirect costs that's going to have to be put on each bid is going to be the associated transmission cost, and that is going to be no small undertaking. First of all estimating it and allocating it among bids. We think what you probably want to do is not just lowball the cost on to the people that have to bid, but spread the cost over the whole scenario that is being developed, you know, to sort of spread the Tehachapi upgrade costs over all the known Tehachapi wind resources, not just those that happen to bid. I should point out that the law requires the transmission costs associated with network benefits to be rolled into the transmission rates and for the CEC to decide what transmission costs produce network benefits. That has been a huge source of contention and has resulted in delays and fights at the FERC over how to allocate transmission costs. That is sort of one of the complexities of legislation that we think is going to resolve with some clarity what their costs are going to be and avoid some fights at FERC. Another extremely important issue is going to be the development of standard contract terms and importantly, contract length. Obviously a 5-cent benchmark is much different under a ten-year contract than a twenty-year contract, so the longer we can get these contracts, the likelier we are to be able to make the 20 percent goal. Likewise, we need to appropriately divide risks and put the risks on the developers that have control and not on those that don't so we don't have to inflate our bids to cover risks. There are a couple of eligibility issues, the legislation got a little bit muddled up and -- how am I doing on time, Bruce? MR. WHITE: Halfway. MS. RADER: Then I'll go into that a little bit. There are two important eligibility issues. In general the eligible resources are wind, solar, biomass and geothermal, but one important thing about this law is that it's a net increase requirement, it's not a one percent new every year requirement. It's take your base and add one percent a year, which means you have to maintain the baseline, which is important because in the next, you know, seven to ten years we're going to see a lot of the contracts expiring or starting to expire, and it's important that those projects have a place to go and a market to go. So this law preserves the base and builds onto it. Well, one of the issues is that the geysers, one of the resources that used to be owned by PG&E, is now not in any of the utility's portfolio. And the way that we had worked it out with Calpine that owns these resources is the geysers would be counted if they were required by the utility to be counted toward the baseline and not toward the one percent increase. PG&E starts out at ten percent and buys geysers, well, their baseline bumps up to 12 percent and they still have to buy the one percent additional every year. If it doesn't work that way, if the geysers get to count toward the one percent, then all of a sudden, you know, three years at one percent requirement is taken up by the geysers and you don't get any new development. So while the 20 percent goal is still -- while it's still meeting the 20 percent goal, it wipes out the near term markets for billables, and so that issue got a little bit muddled in the last-minute figuring up of the legislative language. So it's important that we clarify that so that we don't eliminate the market in the first couple of years in northern California. Another issue, there is pretty well a wide consensus that out of state resources ought to qualify for the RPS. It's important to consumer groups, to increase competition and to access potentially lower cost resources, and it's important to developers that have the resource out of state, and of course the utilities are interested in accessing all the resources they can. So there is pretty well a consensus that absolutely out of state resources ought to be included, but again, that got a little bit wrecked up in one of the staffers dickering with the language. So that is one thing we didn't get a legislative amendment on, and it will be cleaned up in legislation on the bill, certainly. Another important issue is whether the energy commission overlays payment caps on top of what comes out of the bidding process at the PUC. Now, the legislation allows the energy commission to put caps on the amount of the PGC awards that are given to winning bidders and the legislation allows that and does require that, and our position is that they ought to hold off on doing that unless it appears to be necessary, because as you can see, the process that the PUC is doing is going to be quite intensive and rigorous and should result in robust competition. And the results of that competition ought to tell you what the costs of the different resources are, and we feel we don't need another sort of layer of uncertainty about what somebody else thinks the costs are because the costs are going to vary depending on the resources and all the other factors, the outcome of the competition is the best way to tailor what these costs are going to be, you don't need an additional overlay of artificial assessments of what those costs should be. Likewise, the energy commission currently has the authority to request bid bonds, and we think that would be duplicative of what the utilities are going to require. So there is some regulatory administrative issues that are yet to be worked out. Then there is the accounting system, actually making sure a kilowatt hour of renewable energy that is produced here is not counted again in Washington State or vice versa. We really need a west-wide accounting system. That is pretty clear to everyone. Actually, a trade credit system is the way to go, that is what Texas and Wisconsin hope to determine, that's what we hope to end up with here, although the legislation doesn't require that, for concerned reasons we will hopefully end up agreeing that is what is needed here. We have -- the energy commission has been talking with folks and WECC about the need for that. So hopefully the RPS will be the boost that gets that system going that everybody recognizes we've needed for years. And then finally the availability of Public Goods Charge funds, we have a huge availability crisis in California this year, or next year and the Public Goods Charge may look like a fat little target to help balance the budget. We need to protect the Public Goods Charge funds from the legislative process, we also need to protect the use of the Public Goods funds, and for example, we think the customer credit fund that supports the retail wind market in California is not one that is terribly relevant anymore, and move those funds toward meeting RPS goals and things like that. So that is about all I had to say. MR. WHITE: We'll hold questions until later. We were going to slip Dora in at the end to talk about the wind maps, this is a good opportunity because it will take a few minutes to set up this and I'll turn it over to Dora and it's my pleasure. MS. YEN: I actually don't have a presentation, I just wanted to mention a couple of things today that weren't mentioned yesterday, that I didn't get a chance to bring up yesterday. Anyway, my name is Dora Yen Nakafugi, and I am the technical lead on the wind energy resources for the PIER program for the California Energy Commission. So myself and Michael Kane, who is in the back, manage a series of PIER funded wind projects. And George Simons is also back there, he is our PIER R&D manager for the PIER renewables program. Anyway, the first thing I wanted to mention today was basically it's very exciting for us to see so many people turn out for this forum. We have been involved since the beginning of this in the concept of the forum, so it's been very exciting to see the turnout. We want to commend Dr. Van Dam, Dr. White and their staff for putting this thing together. From the discussions yesterday and the panels that were presented and the reception afterwards, there seems like there is a lot of interesting discussions and potential projects to come. Our goal really was to provide a forum to bring together wind interested parties within the State of California, and I think this has been very successful in bringing together a variety of interested parties from land developers all the way through manufacturers. So it's very encouraging for us to see this. The second thing I wanted to mention too is to bring up the fact that the energy commission has been involved in actively looking for ways to assist the development of wind resources. One of the most recent products is the development of our wind energy resource maps, and as many of you may have already seen, they are located in the back. We brought a couple of samples of 30 meter and 50 meter. These maps are high-resolution wind maps of our wind in the State of California. They are done at ranges from 30, 50, 70 to 100 meters to address the needs of residential wind developers as well as utility scale to give us some idea of our wind resource potential, and also siting new projects that may potentially be developed in wind energy resources. So I wanted to point out that that is available. You can access these maps through our cartography department if you need the more detailed larger-scale maps and also GIS data. So that information is in the back on the table if you haven't already seen it. Also in the back on the table there are some fact sheets that give a little more detail on the mapping effort, about some of the forecasting effort that Chuck McGowin had brought up, and other projects that PIER is funding this year through the wind projects. So those fact sheets are also available at the back on the table. With that, I'll look forward to further collaboration and hopefully continuing efforts for the next year on the consortium. Thank you. MR. WHITE: One question, Dora, I had for you, those maps were -- the data came from? MS. YEN: They were produced in conjunction with TrueWind Solutions. So they were numerical -- MR. WHITE: So it's a numerical anomaly evaluated by site data with TrueWind. Thank you. Our next speaker, and the last one for the morning session, is Warren Byrne and he was a co-founder of Foresight Energy Company and it was formed about the time of deregulation in energy with that purpose in mind, and he has been working for the last six years in California on renewables. That's on top of 30 years experience in the energy industry. He has a bachelor's degree from the University of California Santa Barbara, we'll forgive you for that too, and an MS from Yale in management. With that I'll turn it over to Warren. MR. BYRNE: Thank you very much. I was kind of hoping they would leave the pedestal here so I could have a big boost this morning, but I'm more concerned about the trap door that they have underneath that might open up at any time. Actually, I was brought in a bit as a pinch hitter for this talk here somewhat at the last moment, and I have to apologize if my presentation is perhaps a little bit on the thin side and perhaps not specifically California targeted, but I think it will be of some interest. I also wanted to get a feel for how much I might be preaching to the choir here, I'm wondering how many of you would consider yourselves to be wind industry professionals with a solid understanding of the costs of wind development. Can I see hands on that? Not too many. There is some people out there that are not fessing up, but in any case, I will roll on under the assumption that there are a lot of people out here who would like to understand the costs better. Also I have to make a few corrections in my introduction, I do not have 30 years worth of energy experience, I did not start at 15. I am getting closer to 20 now, which is a little scary. Okay, let's proceed. A little background on Foresight and why our history is relevant to these questions. We have a pretty varied background in California in specific, we started as a green retailer at the outset of competition and deregulation back in '96, and I started the company with a fellow by the name of Eric Miller, who was director of development for Kenetech Windpower, at the time the largest wind developer, subsequently bankrupt. As we all know, deregulation has some problems. We pretty quickly saw that retail was going to be a very tough business and we shifted over to focus on wholesale, and have the dubious distinction of being hired by ENRON to create a green wholesale market trading capability for them, which we did for a couple of years, and luckily pulled out before the collapse and even got paid and moved on to do a range of consulting in the renewables field, mostly around marketing structuring and brokering renewable supply deals for both buyers and sellers. We have brokered a sale on some major wind plants, including the SeaWest Mountainview project outside California that was discussed earlier today, have represented buyers on the market, including a number of Fortune 500 companies, IBM, DuPont, Alcoa, et cetera. So we have experience on both the buy and sell side. We also do a lot of consulting work in the policy area, recently acting as an expert witness for the Union of Concerned Scientists in the PUC hearings that are ongoing deciding how to bring utilities back into buying power and buying renewables, and subcontracting on a project for the CEC to help structure the renewable incentive programs. Recently we have started developing wind projects directly as a company. We are not doing that in California, but we are directly involved in our own projects and we also assist other developers, primarily on the marketing side, and so this will have a marketing slant. And the first concern in marketing is how competitive are you with the market that you are trying to sell into. This slide, I think, may take a little while to unwind, but the goal of it is to understand the costs of wind power relative to the costs of combined cycle gas plants and new generation to new generation, and -- let's see if I can get this pointer to work here. See, the pink line is the cost of a combined cycle gas plant. That's the average cost, including amortized capital cost and variable costs of generation, moving fuel. Generally speaking, if you talk to economists they will tell you that on a long-term basis the market price is going to be set by the cheapest generating source, the average cost of the cheapest generating source. On a short-term basis they might point to the variable cost, which would just be fuel and variable O&M, not including any of the capital cost. That is why I put both those lines on there. You have got on the Y axis the actual cost of the production in dollars per megawatt hour, on the X axis you have got gas price, the fuel price, for combined cycle plants, which is, of course, very critical to their costs. And as the fuel price goes up, you can see that those gas cost lines rise as well. The important point here is how does wind compare. I dropped those green lines in there that show the approximate cost of the production of wind energy for a wind plant at a 30 percent capacity factor, which in today's market is on the low side of acceptable capacity factor, and a 40 percent capacity factor, which is really an excellent one. You can see that the -- the cost of wind at 40 percent capacity factor comes in right around $30 per megawatt hour, that is the same as 3 cents a kilowatt hour, and will beat gas, beat a new gas plant, at any price down to about $3.50 per million BTU gas on a variable basis, and will easily beat the average cost of gas way down into gas prices approaching $2 per million BTU. The red dotted lines just kind of show the area of interest, those are the gas price ranges that were actually a little more prevalent -- this is an older chart, these gas prices are perhaps a little bit high for today, but if you look at the NYMAX futures prices for gas recently, gas prices are climbing again after a lull earlier this year. And those prices are actually, you know, kind of in range with what we might expect to see in the marketplace. So the punch line here is that wind can be the cheapest thing on the market. A good wind project can be the cheapest thing on the market and beat any other new source of generation. You know, typically combined cycle is viewed as the cheapest source, but you also see the impact on the fuel volatility, on the gas prices or on the total cost of gas generation. If that gas price goes up, the cost of generation goes up, but you notice wind stays dead flat. That is one of the key competitive values that wind brings in this market. A good wind project can bid in flat prices for 30 years, no other nonrenewable resource can do that. Coal, I don't follow coal pricing closely, but I understand that the coal market is getting a little volatile, even though it's far less volatile than gas. Gas, we can have a long discussion on that, but I think that we should expect to see some considerable volatility in gas prices over the next years as the -- all the new gas generation that is posted to come on line comes on line. And if the economy kicks into gear and demand for both gas and electricity pick up at the same time all this new gas is coming on line, we're going to see some very considerable volatility in the gas markets. That makes wind, with it's flat-pricing capability, a very good bet. And the utilities are actually starting to see wind as a really valuable piece of their portfolio, their generation portfolio, because it has these unique characteristics of hedging the gas volatility and so on and offering flat pricing over long periods of time. Now, on the capital cost end of wind, I'm just going to do a discussion here, I have some of the major factors. You probably all have heard this number that, you know, generally wind projects cost around a thousand dollars per kilowatt or a million dollars per megawatt, that is generally true. It's a little on the low side, I think, but I wanted to break out some of these pieces and talk about them a little bit, and also talk about the factors that influence cost when you are actually down in the nuts and bolts of putting a wind project together. The turbines, when I say turbines I generally include the cells where the generator is, the rotors that actually catch the wind, and the towers. There is a pretty wide kind of spread on cost per kilowatt in turbines these days. Those costs generally will run somewhere in the, say, $725 to $900 kilowatt range. You can see that takes up most of that $1,000 per kilowatt. It's interesting to note, though, that if you look at the market these days you'll see that the newer projects more and more are putting in large turbines, the megawatt amp of turbines. The reason I see for this is that those large turbines actually are very efficient at capturing wind, and per dollar of capital cost dropped into the turbine portion of the project you are going to capture more energy with the larger turbines. Not always the case, and there is a lot that the turbine vendors are doing pricingwise to calibrate for that factor so that the older smaller turbines are not priced out of the market. But as we'll discuss later on -- and as you saw in the last slide, I don't know how many people were lost when I was talking about capacity factor, capacity factor basically relates to how much of the time the wind project is at full nameplate production, and that's basically dependent on two things: the quality and strength of the wind resource and how efficient your turbines are to capturing the energy in that wind resource. So, you know, what's going to create the swing from 30 percent to 40 percent is, one, the quality of your resources and the efficiency of your turbines, so that's very important. It's worth paying more money for more efficient turbines in general and there is a balancing point there. The civil works refers to the foundations for the turbines, the roads that go into any kind of development, the fencing, also the cabling that is needed to gather the power from the turbines and take it out to the substation where you interconnect to the grid. You can also throw the turbine erection costs into that bucket, actually bringing in the cranes and standing them up. There is a lot of swing in the civil costs that's driven by a lot of things. Major factors include terrain. If you have got extremely rough terrain or hilly terrain, it's going to cost you a lot more to cut roads to bring cranes in to assemble the turbines. Other factors include the directionality of the wind resource. If you have a wind resource that just blows out of one direction, which for instance is pretty much the case down in Palm Springs, it allows you to place your turbines very close together without creating wind effects that are going to rob your plant of efficiency. When you site your turbines close together you get cost benefits, you spend a lot less money on roads, you spend a lot less money on cable running between the turbines. So all kinds of factors that go in there. And I don't know how many people out here are looking at doing project development in California, but some of the critical issues to look at are how flat is your site. If it's not flat, it's going to cost you extra money. If you have a wind resource that revolves around randomly and doesn't blow steadily out of one direction, you are going to have to site your turbines quite far apart from each other so that they don't rob each other of the wind as the wind clocks around. All very critical. Let's see, another important element in civil works too is the cranes. One of the largest elements of this civil part of a project is bringing these huge cranes in that are needed to assemble the turbines. And these larger new megawatt plus-size turbines that I touted earlier require really large cranes. If you have got a combination of a very rough site and large cranes, you might get yourself in real trouble because if the site is too rough it means that you'll need to tear down the crane and reassemble it between each turbine erection, versus on a flat site you can just move the crane without disassembling it and put up the next turbine in very nice neat flat roads. Another big cost driver. Another really critical component to the overall cost of the project is the interconnection costs. That is what will it cost you to attach this project to the grid. The key factors there are, well, what is your distance to a transmission line. If you have a viable transmission line running right across the site, you are not going to have to run additional transmission to get to your interconnect point; however, if you are some twelve miles away from the nearest transmission line, it may cost you a million dollars extra to run wire over that transmission line. The size of the transmission line that you want to interconnect with is also very critical. People don't realize this, but the cost in substations and interconnection between, say, a small transmission, say, a 69 kV transmission line, and a large one, a 500 kV transmission line, might swing by 5 million dollars. So if you have a small project, which these days, you know, I put in the 20-megawatt range, and you want to interconnect to a 500 kV transmission line, your economics are going to go right out the window because you are going to take, you know, a 20 million dollar base project cost and add 5 to 10 million dollars just to build the substation and buy the transformer that is needed to step your voltage up to the 500 kV level. If you are building a 200-megawatt project, it may be cost effective to interconnect with that 500 kV line because the substation transformer and all the equipment is amortized across the entire 200 megawatts, roughly 200 million dollar capital cost. Another part that often gets overlooked in the academic analyses of project costs are the bucket of transaction costs. These include the legal time that goes into writing all the contracts for a project, the expenses of putting together the financing, which, you know, might include investment banks, might include other parties that create fees, the lender is going to have their own fees, and then oftentimes the way renewable projects work is you have an early stage developer that goes and puts together the major pieces of the project, the land lease, the permitting, the power purchase agreement -- am I done already? I guess I'm running my mouth a little bit. Anyway that is an important bucket that can -- you know, transaction costs easily can exceed several million dollars for a project. Now, I wanted to just quickly talk about why all this talk of forecasting and understanding your wind resources are really critical. These are price strips from Cal ISO -- or from Cal PX. This is old data, but still very representative of what the world looks like out there. The upper graph is day-ahead pricing, which is a little -- you can still see -- these are month strips -- you can see how the cost of electricity in a wholesale market oscillates daily with the on-peak versus the off-peak periods. A day ahead, it's a flatter look. In real time we're basically an hour ahead, you see things get a lot more volatile and there are some spikes that occur when supply and demand get tight that drive prices way up. So the important message here is that you need to understand what your wind resource looks like versus the market. You know, when does the wind blow. Does it blow at a time that power is valuable is the basic question you need to ask. This chart is a little bit hard to see. The red line is a utility system lambda cost. Lambda is essentially a proxy for the cost of electricity. This is a look at a day that's 24 hours along the X axis, and the blue line is the average output of the wind project overlaid across the system lambda cost. The projected output is based on ten years of data from a region. This is a beautifully peaked coincidence wind resource. Often you don't see that. Often you might see the dead opposite, where when the utility's cost power goes up, the wind resource average output drops down. And that makes a huge difference to the way that the utility is going to value that power. If the blue curve were inverted and flipped over and actually lost value during the on-peak hours or lost output during the on-peak hours and produced mostly off peak, the power would be worth a heck of a lot less to the utility. And when you are a wind project developer marketing to a utility, you better know this stuff, otherwise you get blown out of the water pretty quickly. This is a look at seasonal peak coincidence. The yellow line is the price projectory across twelve months for NYMEX, which is an index, a market index. You'll see that the third quarter is when prices typically spike, that's true pretty much nationally. The pink line is a look at a Palm Springs wind resource and how its output tracks not too coincident with the pricing on a seasonal basis, but still some overlap. This seasonal peak coincidence is going to be a very important driver of value as well. I'm going to skip over this slide because the cost of transmission doesn't really apply to the California market. We have a postage-stamp approach where all you need to do is to get connected to the grid. The bottom line here is that you need to know your market and think of the commodity value of the power that you are going to create. That means understand the price dynamics of the market you are trying to sell into. You know, when is the price high, when is the price low. Understand your wind resource and its coincidence with the high pricing both on a daily and a seasonal basis. Better understand the scheduling rules in the utility area or control area that you want to interconnect with. Here in California we have kind of come to an agreement on that, but there are a lot of utility areas out there nationally where you will be penalized $100 a megawatt hour for underdelivering on your schedule in any hour. That can kill the economics of a wind project in a major hurry. Transmission, like I said, we have a region here that doesn't matter that much. This is a pitch for marketing. When you are a project developer, you have to really think of it, understand it, invest in it, and that will really help you sell projects going forward. So thank you, very much. MR. WHITE: If I could get the other two speakers to come up and we'll entertain some questions, if that is possible. I'll open the floor, if you can identify yourself. MR. O'KANE: This is Stephen O'Kane, CH2M Hill. Which numerical models were evaluated in the forecasting analysis? MR. McGOWIN: I'm not sure which, there are a number of models that are used in the forecast, the numerical weather models that were used, I think the Risoe uses the Aviation model, ETA and TrueWind Solution used the aviation. MR. O'KANE: Those are the only two then? MR. McGOWIN: Yes. MR. WHITE: Next? I saw a hand. MR. HAWKINS: Dave Hawkins, California ISO. Question for Warren, I was curious whether you had any insights into offshore placement of wind generators or large bonnet and Carquinez Strait; anything like that? Have you investigated any of that? MR. BYRNE: I'm not extremely familiar with offshore wind costs; however, generally your costs for installation are going to be significantly higher, your costs for O&M are -- there is an interesting balance, and then your overall cost of generation. Clearly there is a growing trend toward offshore generation, there must be something to it that offsets those higher costs to install the projects. What those -- what there is there typically is very consistent wind resource offshore, you have a resource that is typically not obstructed at all, which means you are going to have a very low turbulence factor, which is going to drive your O&M costs down. Some -- I've heard some of the Danes say they expect the O&M costs on offshore plants to be one-half what they are on your typical onshore plant. It is offset somewhat by the fact you need a lot of salt protection built into your turbine, so there is a balance on O&M, and I think part of the reason they're looking so hard at it long term, they expect the O&M costs to be much lower, and even though you may not have a wind resource that is quite as strong as some onshore plants, it's typically a lot more consistent offshore. So you might put out very large trubins that are very efficient at lower wind speed regions and get great output. I know that GE is testing right now, I think, a 3.6 megawatt offshore turbine that is actually in preproduction. A lot of other vendors are doing the same. So you are talking about some really big, really efficient machines. UNIDENTIFIED SPEAKER: Quick question: what new projects are getting on line in California by the end of next year? By the end of the ITC or index tax credits? MR. WHITE: Wait, that was to? UNIDENTIFIED SPEAKER: Anybody, Dr. Rader. MS. RADER: San Diego signed 7 wind contracts, and FPL has projects in Solano County, 150 megawatts, this year. I think that's all that comes to mind. What am I missing how? That's all that comes to mind. UNIDENTIFIED SPEAKER: But where are the new San Diego contracts, that's the repowers basically? MS. RADER: I don't think there are any repower in San Diego, they are all one or post 1996 project perhaps. MR. ANDERSON: Dean Anderson, Clipper Wind Power. Nancy, could you clarify what you meant by the -- it's the one percent per year RPS, but it's also 20 percent by 2017 and that creates a different obligation or target for the three IOUs depending on where they are now. And then could you please also clarify when you said this creates a market for 3,000 megawatts, but 4,500 nameplate for wind; could you clarify what you meant by that? MS. RADER: Each of the utilities currently has a different amount of renewables in their portfolio. PG&E is around 10, 12 percent, Edison is around 14 percent, and San Diego less than one percent. Each of the utilities is starting at that baseline and adding at least one percent per year to get to 20 percent by 2017. Edison will reach the target around 2010, 2012, and San Diego will reach 2017 on a 1.75 increase on average. The 3,000 average megawatts is an estimate on the -- that's average megawatts. That's at full capacity, the 3,000, I forgot to mention that. So one half, that is 1,500 megawatts at full capacity factor or 4,500 namely. MR. ALVAREZ: Manual Alvarez, I have two questions, one for Chuck and one for Nancy. Chuck, you mentioned difficulty of getting data on turbines availability, is that because you are not provided that data or it just doesn't exist? MR. McGOWIN: In one case, it was for the plant -- the Mountainview plant, we were not provided it, not that it doesn't exist. MR. ALVAREZ: They just don't make it available to you for analysis? MR. McGOWIN: There is a very important issue though with regard to turbine availability wind forecasting in that in order to -- in our project just to be sure we knew where we were in making the forecast, we adjusted the way we could observe generation for each plant, what our estimated output would be if our plants were operating one hundred percent capability. In other words, if all the turbins were operating according to their power curve, none of them were shut down for any reason otherwise, we have no basis for making a comparison with the forecaster's forecast, but on a real-time basis I know ISO has dealt with this, if you try to forecast on a real-time basis some way or another, you need to have some estimate of what the availability of the turbines is, how many of them are actually operating and are they operating at full capability. So it's an important issue. MR. ALVAREZ: Nancy, I have a question on your example where you had the bids of the indirect cost to find out the total cost of the process. I guess I don't understand your concern over the Public Goods Charge because indirects come out ultimately for payment, as I understand it, transmission costs, et cetera. MS. RADER: The addition of the indirect cost can result in the selection of a higher cost bid if you have a lower -- if you have a low -- low cost bid that you add a whole bunch of indirect cost, that bid will lose to a higher price bid, and it is the bid price that ends up drawing on the Public Goods Charge Fund, not the total cost evaluation. Does that make sense? MR. ALVAREZ: Yes. I guess the delta between bid price and benchmark could be a very high spread is what you are saying. You could have very little direct cost, but at some point they are going to cross over? MS. RADER: They are not going to be charged to the public goods cost of contract, they are going to transmission. They can tip the scales toward a higher price bid, which will draw more PGC funds. It's important we get those indirect costs right. MR. WHITE: One more question, then we'll take the break. UNIDENTIFIED SPEAKER: Thank you, this is for Warren, on the graph you showed to avoid the cost of gas and average cost grade project, I assume your installed cost for the wind project, the flat lines, was roughly $1,000 per killowatt; could you tell us what your implicit cost capital was based -- embedded in these numbers? And second of all, did you include the production tax credit. And third of all, could you comment a little on the effeciency that I see coming out of the larger machines? That is to say, if they are being weighted at lower wind speed and capacity factor than the larger machines are, is there ability to innervate the rotor so they generate higher wind on average; how do you feel that influences these efficiency comments that you made? MR. BYRNE: Let's see if I can answer those one at a time. Embedded cost of capital is 14 percent in these kinds of generic wind model, which may be actually on the low side. You know, out there in the market that the types of returns that investors are looking for probably in the high teens at this point. The PTC is definitely included in that wind would not be as competitive as I showed it to be without the PTC in there. And as far as turbine efficiency, from the data that I have seen at any particular hub height the larger turbines, at least the ones that I've looked at, appear to be more efficient at gathering energy than smaller turbines that are rated for the same class of wind. That's a generalization, I'm sure there are exceptions to that rule, but generally that's what I've seen. So I think I answered your entire question. MR. WHITE: I want to end this session and we'll thank the speakers and take a short five- to ten-minute break, give everybody a few minutes to get in. (Whereupon a break was taken.) MR. JACKSON: We're going to be talking about distributed generation, and distributed generation is something I think has a lot to offer. We saw some costs yesterday in terms of what it costs to upgrade transmission facilities and capital facility for transmission and distribution, and those costs are real and distributed generation are a way of eliminating or delaying. In many cases, though, the numbers are quite large if you delay installation of new transmission, so DGM has had a lot to offer in that. It's also kind of difficult from the utility's perspective to integrate all these small things into the system, there are a lot of challenges in distribution. Our first speaker is going to be Jim Foster. He was in the oil industry for about ten years, he worked with President Reagan's National Petroleum Council for about five years, he was a member of the Trade Mission to Saudi Arabia led by Secretary of Commerce Malcolm Baldrige, and he has also been involved in land development. He has developed large parcels of land, both on the big island of Hawaii and a golf course in Florida. He was an investor of Bunny Love Carrots, which are my personal favorite. They are the tiny ones you can get without having to clean them. He has become involved in renewables in the last couple of years because power and environment are really the top of society's concerns. Everybody give a big welcome to Jim Foster. MR. FOSTER: Let me correct something, that is I've been involved in the wind energy in terms of observing it and seeing if there is a role there for me all of nine months, so I kind of come to this not as an expert, but maybe as an observer with some experience in energy. Henry, of course, is very delighted I'm here because I have a -- I don't have a low-tech presentation, I have a zero-tech presentation, so he is delighted about that. Yesterday Bruce White introduced me to someone and said that I was interested in developing a wind project in Carmel where I reside, and I corrected him by saying that, no, that was in Monterey County, particularly the Salinas Valley and one other place, and that, you know, I could develop a wind farm in Carmel with the exception of one thing, insufficient wind access. So that's -- I don't know if you've -- that's probably not that funny to you, I could probably get away with developing one of the Bergey units out in Carmel Valley about 80 miles out, but I don't know about that either. Clint Eastwood won't let me develop in Pebble Beach, so that rules that out. When Case kind of tired of hearing me talk about matters non-technical and the wind energy, he asked that I talk about what I consider a very important beach opportunity heretofore consigned to a small segment of wind power generation. To begin with I refer to the wisdom of Mr. Will Rogers, he relates the story of a mountain lion after consuming an entire bull, felt so good that he started roaring, he kept it up until a hunter came along and shot him. Now the moral of that is if you are full of bull, you should keep your mouth shut. With that in mind, I'll try to maybe bring some perspective. And the other thing that I prepared, I was glad to see Mr. Abernathy here this morning, Randy, and also glad to see Warren. And Warren, if you are still here, I was serving in the energy council, we had a gentleman that was also there from ENRON, who will remain nameless right at this moment, I guess. The other thing I prepared for was I was invited to a conference on the supergrid by EPRI, Chuck's -- maybe you heard earlier -- company -- organization. I believe I was the only one there without a PhD, save the gentleman who wrote the quintessential book on hydrogen, Mr. Peter Hoffman, I'll share some of his stuff with you. I'd like to share some of the experiences for perspective and framing the debate, much like Randy did earlier. First of all, I'd like to read something from the godfather of EPRI, Chauncey Starr, and who shortly after the blackout in 1965 in the northeast EPRI was founded. And I'll read from this presentation to start us off with a common picture, I'll briefly summarize the concept that I presented to the American Nuclear Society in Reno on November 14th, 2001. "The continental supergrid concept ties the U.S. east and west coasts together with a superconductor energy pipeline, carrying both electric power and liquid hydrogen. For illustration assume about 40 sections each 100 kilometers long. Every connecting terminal has one or two gigawatt nuclear station supplying electricity to both the grid and the hydrogen electrolysis plant. Its core is one of the new superconductors," and he goes on to describe those. "There appears to be no limiting scientific issues, but numerous new engineering problems exist in the other facet arising from novelty-scale system integration, and the visionary payout is seductive. The magic words are superconductivity, hydrogen fuel, energy storage, no greenhouse gases and continental reliability." I think that, one, we're -- we get kind of tunnel vision sometimes when we think about one specific thing, as we should. Not get tunnel vision, of course, but we need to focus on the day-to-day technological, political and other problems in terms of developing wind power. I've been to a number of the national conferences for WEA and some of the other renewable -- State of Colorado, for example, and you really -- if you meet a lot of different people and you get, I think, a pretty good overview, and I've only been in it for about nine months, I think I can give you somewhat of a snapshot overview, if you will, about where I think there are some opportunities. The other thing that I wanted to read for you was from Dr. Paul Grant, who was there from EPRI and he mentioned -- he mentioned in Japan, on the west coast of Japan, they have recently installed an 8,000 megawatt project. It's next to a beach resort and it's been in operation now for about 18 months, and the area that the project is in is 2 miles by 1 1/2 miles, so it's a very small area. And when we start talking about all the vast areas of developing wind, I think it's important to, you know, keep that in mind as well. And then Dr. Paul Kruger from Stanford University, I'll just read just an axiom that he had put in there, I think this was a presentation prepared earlier, "Humans have progressed at energy sources at continuously increasing consumption of energy per unit; therefore, of useful work at any given growth rate of human population, total energy consumption will grow at a greater rate." I think that the other thing that he had mentioned at his presentation was that gas demand is exceeding supply in the U.S. I think about by 30 percent in 2050, and we're reaching the point where we are running out of gas, at least in this country, unless something happens. And of course the state is very mindful of the fact that all of the gas that we get and all the bulk of the gas that we get for our gas-fired generation plants comes from out of state, and not to mention the past volatility of gas. And lastly, I want to read something for you, this is from a book by Peter Hoffman on hydrogen. I thought this was very interesting, and it won't take too long to read it, hopefully. "On a conceptual level one of the most important figures in those early years was John Burdon Sanderson Haldane" what a name, "a physiologist turned geneticist. In 1923 when he was only in his late 20s, Haldane gave a famous lecture at Cambridge University in which he said hydrogen derived from wind power via electrolysis liquefied and stored would be the fuel of the future". Now the paper read at the University's Heretics Society, Haldane said, "Liquid hydrogen is weight for weight the most efficient known method of storing the energy as it gives about three times as much heat per pound as petroleum. On the other hand, it's very light and bulk for bulk is only 1/3 of efficiency of petroleum, this will not detract from the use of it in airplanes where weight is more important than bulk." In the same paper Haldane prophesied that 400 years in the future resident's energy needs would be met by rows of metallic windmills working electric motors, which in their turn supply current at a very high voltage to great electric mains." "At suitable distances there will be great power stations where during windy weather the surplus power will be used for the electrolytic decomposition of water into oxygen and hydrogen. These gasses will be liquefied and stored in vast vacuum jacketed reservoirs, probably sunk into the ground. At times of calm the gases would be recombined and explosive motors working like dynamos would produce electrical energy, once more are more probably oxidation cells. These use reservoirs of liquefied gas which will enable wind energy to be stored so it can be expanded for industry, transportation, heating and lighting as desired. The initial cost would be very considerable, but the running expense less than those of our present system. Among its most obvious advantages will be the fact that the energy will be as cheap in one part of the country as another, so that industry will be greatly decentralized and no smoke or ash would be produced." That was in 1923, I thought that was also very interesting. I'm not going to read my entire presentation here. And also, and in no particular order, are some things going on outside of PTCs and renewable production RPSs in Sacramento and Washington. Most recently the air force, which is in charge of wind energy for the military, is buying power from Tehachapi grid, Southern California Edison's grid, and saving millions of dollars. Vandenberg base is looking to generate its own power to save money also. At Travis air force base, across the nation, for all of the military, Mike Santori and his team down in Florida just recently received the prestigious air force Chief of Staff Award for their work at Edwards air force base. The other article I'd like to read to you, and again back to the reading part, and this is -- I think this is relative -- or related to our present situation. This comes from the San Francisco newspaper on November 22nd where, "Mayor Brown announced the 7.4 million dollar project Thursday to affix solar panels to the city's Mayor Moscone Convention Center a year after voters passed a 100 million dollar bond measure to install as many panels here as the rest of the nation does a year. The upgrade will reduce the building's electricity purchases and the power bills by $639,000 annually, says the city's PUC," public utility commission. "It's the first of many affordable alternate panels planned for the rooftops of hospitals and schools and other city and county owned buildings as San Francisco tries to generate more than 10 megawatts of electricity each year, enough to power 7,500 homes and end reliance on aging power plants." That's a pretty good payout, $639,000 a year on a 7.4 million dollar investment. Stanford University just received 100 million dollars from Exxon Mobil and IBM and others for research on energy. I don't know where all that is going to go, but apparently there is no strings attached to it and Stanford is the result of that. And also PIER's statement of driving to a sustainable future was a figurative one. Some renewables are participating in transportation fuels, such as the hydrogen car here at UC Davis, and I think that one needs to consider the possibilities of partnering in some way to take advantage of that. I think that is going to be a very very big thing in our future. The power industry is very shaky from bankrupt utilities to independent power producers, otherwise known as IPPs, and I'll read you just one thing that just was about ADS and applied to Calpine and Dynergy and all the other companies that were caught up in this and the deregulation, and for the problems we now have. Many power producers, the AES, and I believe they have developed worldwide about 60,000 megawatts, including coal, fire and hydro, et cetera, and others have been struggling to stay afloat with credit downgrades, power trading problems, battered stocks and bonds headed toward or arrived at junk bond status. Why is that relevant? Because you got -- a lot of the independent power producers have generated the incremental capacity over the past few years and they are in kind of a decimated situation. The power industry in general and the price of the power are almost frighteningly, frighteningly low when you look at the forward requirements. Dr. Whitty Clark now refers to this as the failed California experiment, and whether or not that's true, that's certainly -- one can make the determination that the results are pretty sobering. There has been a vast amount of plants that have been shelved, delayed or canceled. And Europe, I found something to read there, these are just little tidbits that I think are kind of important, and I hope to come to some kind of conclusion. "The president of the EC," European Commission, "announced a renewable energy goal of 22 percent by 2010 for the fifteen nation group. To achieve their goal, the EC has allocated 2 billion dollars for research over the next five years." And I -- I'm not participating at all in what's going on in Europe, but I do read about it, and I think they have -- of course they have a completely different situation from -- geographically and otherwise, from what's happening here. In Minnesota a good friend, Dan Juhl, is president of the Minnesota Wind Association, he is putting dozens of projects together for farmers, and the state pays one and a half cents a kilowatt hour for these projects. These farms have to be under 2 megawatts, but they have put these windmills close to the grid and got a pretty good return on them. I don't know what they are doing with their PTC. It's kind of difficult to find people that use PTCs these days. Dick Anderson, if you are here today, that's what's happening on the farm with property owners. In California on the farm, animal rights groups are challenging whether or not California cheese really comes from happy cows, and I just thought I'd throw that in. Several municipalities now, non-G&Ts, generators and transmitters, are looking to reduce their power bills by purchasing green power from sites installed on city and/or county property, practically all of them have substantially increased power costs. I know in Carmel we have, our electricity bills have gone -- about doubled. I'm talking about the City of Carmel, City of Monterey and places. And the local water company, their bill has gone up a million dollars, of course that translates in increased power bills. Large wind farms remain an unwelcome problem to the grid, and I don't know how else to say that, but I think that is the case. And I know that people are working to resolve the problems, but it is problematic now and will be, I think, into the future. Our depressed economy, as I believe our forward energy demands, and we live in a time when venture and capital strung together makes an oxymoron, so there is not much money out there, at least that I've been able to find, other than some of the larger companies like Forward Power. So what's missing from this picture? I think it means that we need a new focus on small- and medium-scale distributor generations. We need a fresh look at hybrid projects, especially hydrogen for both renewables and nonrenewables, such as gas. A true partnership with the grid slash utilities in both generation and distribution are renewables including larger-scale net metering over a larger geographic area. A direct relationship with the military bases for both on-site and off-site generation. A direct relationship between wind generation and municipalities and other large users, including the state and federal requirements. A meaningful pursuit of offshore wind. I have my serious doubts about what is happening on the east coast, particularly in the Nantucket area, Cape Code. I think that's kind of related to my Carmel example earlier. We need more R&D, I think, for low-end technology. I believe there was 6 million dollars allocated recently by the Department of Energy and I think we need more to study the technology. In fact, I know we do. Finally, I've got a Christmas list. One, a smaller rotor, Daimler, and lower kick-in speed, a shorter hub, zero irrevocables and something with storage capacity, and like in Tehachapi that Hal from Oak Creek mentioned yesterday, proudly described by all, especially kids, as our renewable DER, and maybe then those same kids will also start to conserve and notice the waste of all of our resources. Thank you. MR. JACKSON: Next speaker is Bob Yinger, he is coming from Southern California Edison. He is a senior engineer there working on distribution where he focuses on bringing new technologies into the business. He has been there for 26 years and been involved in a wide range of research and development activities, including transmission planning, solar, wind energy development, power quality, wireless data communications, electronic metering systems and substation automation. He is currently working on investigations of the electrical interactions that distribute generation with the distribution system. Bob graduated with honors from Cal State University, Long Beach with a degree in electrical engineering. He is a professional engineer, electrical engineer, and is a member of IEEE. So here is Bob Yinger. MR. YINGER: Thank you, Kevin. I was touted as representing the utility perspective, and I guess that is sort of a heavy burden in this group, but I can speak from the Southern California Edison viewpoint as opposed to the rest of the state. Although I think there is a fair amount of similarity between the utilities. Utility perspective, I was asked to address a couple of things. One, I'm going to talk a little bit about what the design of our system is and why we ask all these crazy questions when you go to interconnect your devices to our grid, especially in distributed generation sites and smaller units. Then I'm going to talk a little bit about why we are concerned about these things and then toss in a few things related to Tehachapi and what's going on up there and what we are doing about it. First of all, there is two types of electrical systems out there, network systems and radial systems. The network systems have multiple power sources and power can flow in from several sources, generation comes in, load goes out and there is multiple paths. Power flows in, sometimes it flows through here and goes back out. Multiple directions. Again, multiple paths. These systems are very robust and live through loss of like one piece or several pieces. If you do lose this kind of system, it's very difficult to put it back together again, as witnessed by when you lose a large transmission system. The second system is the radial system, which is much more common when you get out in the distribution system, there is very few network distribution systems out there. Power is designed generally to come in one source and flow out to loads. That is the way the protection is designed, that is the way all the wires are sized, that is the way all the equipment is put together. This has been the way utilities have done business for many many years. These systems have a very simple design, but they also are a lot less robust because they have basically a single source of speeding multiple loads. In our system for Edison, and this is pretty much true, I believe, for PG&E and others also, the transmission system and what we call the subtransmission system, which is the 115 66 kV side, is all pretty much network systems. When you get down into the distribution area, these systems are typically radial, with just a few exceptions. So when you start connecting into the distribution system you have one set of questions you ask; you connect into the subtransmission or transmission system, it's a different sets of issues and questions that you have to deal with. Another little sort of background piece, people talk about markets and I always, as a technical person, like to watch the market. People say we bring all this power into the system and we have all these loads, we take power out of the system. This would be considered sort of a lake model, basically generation goes into the lake and people draw out of that lake, which is an interesting way from the market standpoint to really address the question. The reality is a little bit more like this: generation comes in, goes down some transmission line pipe ultimately to get to some load center. There is other generation coming in other pipes going to other places, and it's kind of tough to go from, say, here to here to maybe that pipe without going through a lot of intervening pieces and areas. So you just sort of have to understand this is sort of the market model, but this is reality. We can build more lines and solve that. These issues -- with that little background, there are some issues relating to safety and reliability. That is one of your concerns when you run the system. You have to make sure people get power when they need it, you have to make sure it's safe for our employees who work on the system and also safe for anybody that is out there and uses the electrical system or comes in contact with it or works in it. A couple of issues that we're concerned about these days, one is backfeed. If you put a generator in your backyard and connect it up to your meter panel, you leave the switch closed back into the distribution system, even if it's dead, not heating your house today, if a utility worker goes out on that line and intends to work on it, he could be electrocuted. So we're concerned about backfeed. That's why we're real interested in these sort of transfer-type switches that make sure that you don't backfeed into the system. The second piece is a little bit more tutorial; we have a number of things we call trips, which are actually opening the circuits and stopping power flow for a moment so that you can remove problems that are out on the system. There are a number of kinds of problems you run across. Ground faults is when a wire touches a tree or touches the ground and the path of electricity goes through that tree or through the ground. That is something you need to send someone, you need to open up that because somebody could actually go out and touch that tree or touch that wire area and be hurt. So there is one set of trips. The second set of trips is something called a window trip. This is something you run across with the distributed generation area. There typically you want 60 hertz, 120 volts, this is sort of residential voltage levels. There is a certain window when you'll allow those generators to operate in. You don't want to go too far off 60 hertz, you don't want to go too far off 120 volts, so this is the window. If you go outside those areas or the system goes outside those areas, you actually want to disconnect the generation from the grid. The third type is something we call a transfer trip. If you have a generator on a distribution line and that distribution feeder has a problem, maybe one of these ground faults, it opens the circuit breaker to try and clear that problem off the system. If your generation is still running, you need to get that off so it will help clear that fault. There is another problem with reclosing that also hinges on that. If your generator is still running when that line is reclosed back in, power is reapplied to that line, your generator could be either out of step with the 60 cycles or could be a slightly different voltage. The grid is a lot larger than your generator, it will yank it back into the grid frequency, so that's not necessarily a good thing for your generator. So the idea is a transfer trip will allow when the breaker in the substation opens, the breaker on your generator would open. There is a communication link in there. The other thing that there is a lot of discussion in the distributed generation area is about anti-islanding. The idea, again, is if there is a problem in the system that causes your generator to be isolated with a number of your neighbor's loads. We want to make sure that those customers don't get a frequency that's 70 to 850 hertz, or the voltage doesn't go to 300 volts or doesn't go down to 50 volts, because those can all cause problems with refrigerators, your neighbor's equipment. So we do this anti-islanding protection so that if your generator goes outside of the prescribed limits it trips itself off the system. That keeps that generator from feeding into an islanded system that, you know, would possibly go outside of specifications. A couple other issues that come up; bottom line, a utility has the obligation to serve customers. And when you talk about using distributed generation on a feeder to eliminate the need for expansion of the grid or expansion of the distribution system. The utility has to look at it and say, how reliable is that distribution generation going to be? In other words, when I have to serve those customers during that peak time, is that generation going to be there or do I still have to put the backup in to make sure I have the ability to serve those customers. The other topic, balancing generation and load has been discussed, talked about quite a bit in the last couple of days from a market standpoint. The availability of the sun for formal takes or wind varies with the time of day, varies with the clouds, varies with the storm fronts passing through. So the market has to make proper provisions to allow that to happen. Spending reserve is kind of the same issue. If you have a large change in the wind generation or the sun and clouds come by and drop that piece of generation, you need to make up for it somewhere else so you can keep the utility frequency, as the gentleman said from the ISO this morning, at that 60 hertz. One other area in terms of looking at how generation applies from DG resources, the map yesterday that was talked about that had the red spots and the blue spots showing areas where you could impact transmission positively or negatively with generation, you need to understand that sometimes putting wind in one location isn't going to necessarily help a transmission problem someplace else. The location of that resource and where it goes into that system is very important. The other issue is on a distribution system you attempt to regulate the voltage on that line. Putting generation on that line will have a tendency to raise the voltage because it's reducing loading on that line, and you take that generation off, that voltage drops. We try to keep the voltage regulation at a certain point, so we have to take into account what that generator does to the voltage while it's running and while it's not running. So those are some other issues we need to look at when we connect generation. I'm going to diverge a little bit to the Tehachapi area. It turns out -- at least I talked to our interconnection people the other day, we interconnected a lot of distributed generation on our system, very little of it has been wind. The majority of it actually has been diesel generation. A few microturbines and a few fuel cells, mostly diesel, mostly used for backup. Wind generation typically has not been really distributed throughout the grid, it's mostly been concentrated in a few areas, the San Gorgonio area and the Tehachapi area, our service territory; the Altamont area for the Pacific Gas & Electric people. The existing transmission system, as many are aware, in Tehachapi, as much as anybody, is not capable of handling too much additional generation. In fact probably zero additional without some tweaking. We have experienced low voltages there due to reactive power flows coming up through the system. You actually do try to fix some of these reactive power flows. You probably can get some more generation through there. One of the issues we've run across, we use low-flow models and stability models to try to predict how the system will behave during various contingencies, during various amounts of generation. Those models have not given us good answers as to what the capability of the system is. The models might say we'll handle 320 megawatts, and then at 290 we have problems. So why is a model not giving us good answers. What we have done is there are several things going on right now in the Tehachapi area. One is a collaborative process where wind developers are getting together with Edison trying to look at how much generation we're going to bring on line in the near future and far future, to then look at what needs to be done to the system to try to solve those problems. We don't want to point fingers, we want to come up with a solution, we want to move forward. Some of those studies have been looking at possibly 2 and a half gigawatts of additional wind generation in the Tehachapi area. Those are very large numbers, probably all that won't show up, but the number could be substantial. In order to serve that, we need to actually put in additional transmission facilities, and quite a bit of additional facilities to get there. So we also need to look at what that means in terms of system operation implication. Again, this goes a little bit to some of the ISO work. Where you need to look at what happens to your spending reserve. Today we normally have reserve to cover the largest unit that you might lose during a problem. If you have got 2 and a half gigawatts of generation in one area and you have a storm come through or pass through, you could have changes in generation up and down that you would have to account for or at least operate around. So those are another set of issues. We have attempted to help us with the prediction. We are trying to make these models better so we can rely on the results. One study we did awhile back was with the Claremont Graduate University, this was kind of an engineering clinic. They came in and proposed a completely different way of looking at system stability and what was going on up there. They are actually going back and using the differential equations for the various pieces of the system, putting that in and looking at stability. Looking at the stability of those actual set of equations. It's a whole different approach specifically they looked at, gave us some interesting results. I'm not sure that we will ultimately be able to pinpoint the system capacity based on their results, but the results have the tendency to help us explain what is going on up there, what causes the instabilities. So interesting work there. Still needs some additional tuning to get that to a model we can use. Second set of studies that is going on now is jointly with the National Renewable Energy Lab folks. We are trying to come up with better models to use in a standard low flow and stability models that are used in the utility energy. Right now wind generation is typically put in as so many megawatts, so many megabars all the time and that is not really a proper representation. So the NREL folks are developing some models, we are going to try to verify those models using data that we have in the area already and potentially collection of some additional information in those areas to come up with models that ultimately we can use and we can rely on and depend on. So the goal here is to take these models and then apply them to those expansions in Tehachapi so that we can come forward with a reasonable plan for moving forward. Basically that's a quick overview of what we have been doing. We're always out looking for other people doing work in the area that we can build on, that can help us move forward. So we'll constantly be looking for that and trying to work with all of you out there. So thank you very much for your time. MR. JACKSON: Our next speaker is Mike Bergey, president and CEO of Bergey Windpower Company. He is mechanical engineer chair of AWEA's small wind turbine committee. Mike has also been a member of AWEA's board of directors since 1980, and had the longest tenure on the board of directors. He was past president of WEA twice, and was AWEA's 1994 Wind Industry Man of the year. So here is Mike Bergey. MR. BERGEY: Thank you very much. I had to comment on your talk when you mentioned Chauncey Starr and the supergrid thing, you know, about 2 gigawatt nuclear power plants every hundred kilometers. When you were saying that, I was going, man, what are they smoking. Then I remembered, I'm in California, it's medical marijuana. So maybe the impact and one of the unintended consequences of liberalizing your drug laws is you are going to get 2 gigawatt nuclear plants back. Anyway, I'd like to give you an overview. I know I have got negative minutes in the schedule, so I'll try to not keep you from lunch too much. I'd like to give you an overview of small wind and its role in the energy situation. It's never going to rival big wind, but I think it is an important technology that gives homeowners, small businesses and farmers an option for taking control of their energy destiny. I think it is something that is good for the marketplace because it does inject more competition, more choices into the marketplace, and that's something we need more of in the business, in the electricity marketplace. Just very quickly, Bergey Windpower manufactures small wind turbines; that's all we do. We've been at it for over 20 years now. We have about 3,000 installations, about 600, almost 700, dealers now. We have a subsidiary in China and a licensee in Australia. Small wind is an attractive distributed technology, renewable distributed technology. It doesn't get the limelight that solar has gotten, there aren't the BPs and Shells and Siemens involved in our industry, and the Department of Energy has really focused on solar as opposed to small wind. They have done a lot with large wind. In spite of all that, small wind is a pretty attractive option. It's about half the cost of solar, and we project as prices go down and solar goes down, small wind goes down. There never will be a day small wind isn't less expensive than solar. Now, solar is a fantastic technology, it's going to go places that small wind can't because of resource or land size limitations. We don't really see a time when small wind systems will be suitable for 1/6th acre suburban track homes, that is just not something that we think is realistic, but you will see a lot of those roofs covered with solar, and I think that would be a great part. We think we are quite competitive. Now, the modern small wind turbines are not like your grandfather's old wind charger. These are high-tech, very sophisticated products that are engineered for simplicity, and that's not always the easiest thing to do. It's actually easier to make something complex, but then you have to deal with the long-term realities of reliability and longevity. And what has come out of actually 60, 70 years of experience in building small wind turbines and putting them all around the world and going back to the Jacobs wind charger units in the 30s, is that simplicity is the key to the successful small wind turbine. So what you tend to see are technically sophisticated, but simple machines. One of the interesting things is that unlike large wind, which is dominated by European companies, solar, which is dominated by European and Japanese companies, it's American companies that are the technology and market leaders in small wind. And small wind is something that people want. They don't necessarily want small wind, they just want something that will give them more choices in the electricity marketplace. Fuel cells, solar, small wind, whatever, make it affordable, make it something I can use, give me an alternative the next time the utility company raises the rates. And just as one simple barometer in the level of interest, our website gets something from 20 to 30 thousand hits a day from people all over the world, but concentrated here in the U.S. The market that Bergey Windpower and a number of our competitors in the industry are mostly interested in is one that we generically call the rural residential market. What that is is a recognition that we are not going into those tight suburban areas. So it's people with, generally speaking, an acre of property or more, $100 to $150 a month utility bill and in a wind class two or better. So a typical system might be a 10 kilowatt turbine costing something -- here in California costing between $36- and $50,000. And, you know, it's rural residential because that's the big market. Now one of the interesting things, it certainly does save on pollution. And one of the questions we have been asked is how does that compare with the pollution that's created by driving SUVs. We did some analysis last year and figured out that if you had a Ford Explorer with a big engine and you had a 10 kilowatt wind turbine in your home, the CO2 offsets would make it equivalent to your driving a Honda Insight. So we call that a possible remedy for soccer moms' remorse. Now, it's very true that small wind is not as inexpensive as large wind, there are economies of scale. Also, large turbines are on about their sixth, or seventh or eight, depending on how you count them, generation of development. Small wind, because of a less active marketplace, largely due to lack of subsidies, is only on its second or third generation of technology. But it's important to -- even though we are maybe two, three, maybe four times as much per installed kilowatt, remember we are serving not the bulk power wholesale market, electricity valued at 3 to 5 cents, but we are out on the distribution grids on the customer side of the meter, offsetting retail consumption at a rate of 6 to 26 cents per kilowatt hour. So the power is worth more. Also in comparing with large wind, it's important to recognize small wind works effectively in lighter wind areas. You have to; that's where people want to live. They don't want to live on the top of the ridges where the wind farms are. Some people do, but they are not admired by their neighbors. So we have to use a much lower-class wind resource, and small winds do work with those. One of the misconceptions we get quite often is you have to really live in a hellishly windy area for wind to work, but small wind works in very light wind areas. And most places -- we think most, this map is so complex you have to spend some time figuring out whether -- you know, how much class two or better there is, but now with Dora's hard work at the CEC we have a computer and a GIS model that will someday tell us what percentage of California has class two or better, and we're looking forward to that. But anyway, the lesson here is that small wind works in many many places in California. The domestic market, overall I'm very pleased to say, having had to go overseas to earn a living during the bad old days, is back, and it's back with some good momentum. And that's because of state buy-down and rebate programs and growing consumer interest in clean energy. We have rebate programs in Illinois, California and New Jersey, and we see those really increasing, more and more programs and expansion assisting programs because the public is solidly behind them. Polls that were taken several times last year before and after the 911 tragedy, show overwhelming support for subsidies for renewable energy. And we think that the U.S. domestic market is quite large. There are over 20 million homes, 21 million homes that have an acre of property or more. And it's sort of interesting to note that the residential sector in America uses more electricity than either the industrial or commercial consumption sector. So there is a lot of electricity being burned there. A lot of people with enough space and a good number of them live in areas with sufficient wind. Back in 1991 AD Little did a study and they concluded that there was a national market for 3.8 million units, we think that translates to 4 or 8 million units today or in 2020. What's exciting for us, even though we've struggled along for decades now, is that once you make the numbers work for one home, it works for tens of thousands of homes. So what keeps our heart rate up is the fact that small wind has an exclusive growth potential, and that potential is quite large. The American Energy Association, working with DOE and NREL, just completed a small wind turbine technology road map through 2020, and it concluded that there is a potential of 140,000 megawatts of distributed small wind across homes, farms and small businesses. And we have set a goal to provide 3 percent of US electricity in 2020 or a little over 6 percent residential. That's not going to power the whole world, but it will make a contribution, and of course that would be a huge business. California is the most active market for small wind right now in the US. That's because of very high utility rates, up to 26 cents per kilowatt hour. There is approximately 50 percent rebate. When I say approximately, because it was 50 percent through the end of this year, but next year they are going to rejigger the numbers, likely to shrink to something below that, but the rebate has been extended five more years. There is a 7 and a half percent tax credit rate available this year and next year it shrinks to half of that in two more years. We have a great net metering program here in California with annual banking. We have prescribed interconnection, so we know if we meet certain requirements we are going to get a very painless interconnection agreement with the utilities, which is in stark contrast with parts of the country. The difficulty here for the industry is the chronic permitting difficulties. If you want to do something over 35 feet in California you have got a problem. That is too short for us. So recognizing those problems, the legislature two years ago passed AB 1207, which overrides city and county zoning ordinances and makes taller towers suitable for small wind turbines permitted use. So we are just now getting that implemented. It's still a problem here with permitting, but it's getting better. Why don't you see more small wind turbines? The basic barrier, the main one, is economics. You have had low production volumes. We say in the industry we aspire to be a cottage industry, so these are quite small production rates. And there are -- have not been the subsidies in place. We have had a federal production tax credit for large wind turbines since 1992 to propel the industry to a great position, but we have had nothing equivalent from the feds for small wind. We have permitting issues, there hasn't been enough investment in our industry, and then the DOE has pushed other technologies. What are we doing about the cost situation? Well, there is a couple of things that are very promising. First of all, I'll point out new technology; the U.S. Department of Energy, National Renewable Energy Laboratory have an advanced small wind turbine program, and it involves a lot of exciting technology breakthroughs, advanced airfoils, generators or alternators, low-cost manufacturing techniques, small electronics, very tall towers, and as Paul talked about yesterday, lowering the noise of the systems. We're trying to make them as quite as possible. So Bergey Windpower, for example, has an advanced 50 kilowatt development program. South West Windpower has an advanced 50 kilowatt, those are both exciting projects. And I wanted to mention that the Department of Energy anticipates NREL doing an analog to their very successful and well-crafted low-wind speed turbine program, and this one is aimed at the small wind turbines. So I don't know whether it will end up being 10 to 20 million. That's AWEA's small wind turbine committee's vision, but we'll have to talk to Congress about that. Anyway, it will be multi-millions of dollars, multi-years. And like the large wind program, it's very nice because it gives you multiple entry points from conceptual designs, trade-off studies, component development, full turbine development. I think that is all going to start in 2003. And I understand from Dora that the CEC, through the PIER research program, is going to follow along with their own sort of voltage speed program for large turbines. First large, and then small next summer. This is very exciting for our industry and I'll just point out that at companies like Bergey Power, we welcome the opportunity to partner with people who have bright ideas, and if you have a way of making our machines more competitive, we'd love to talk to you. Examples of the kind of high-tech stuff that is going on is the fueled advance airfoils, for example, on the 50 kilowatt. I brought a piece of protrusion, it's there on the table if you want to look at that. That's for the 10 kilowatt turbine. Protrusions make an incredibly strong blade. This is essentially high-tech spaghetti, lots of glass fibers and things, comes out in a continuous strip and it's cut to the length that is needed. It's very strong and can be much more efficient. There are also low-cost grid systems coming, and there are interest in companies like Hammacher Schlemmer and Target and Home Depot to carry these kind of low-cost, do-it-yourself direct grid intertie systems. The challenge for our industry is to make a converter that meets the national requirements, that costs less to build in the winter, which turns out to be a real challenge, but we're working on it. We hope to have that out, and our esteemed competitor, South West Windpower out in Flagstaff, is trying to beat us to the punch. Hopefully there will be some good products to choose from. We have a lot of potential in the industry to drive down costs as we increase production volumes. We really just produce so few units, there is so much labor in them and so little tooling, that we know we can drive cost down 30 to 40 percent. The vision of the industry is small wind as a new age appliance, a ceiling fan on steroids is what we aspire to be. So that's where we are headed. We will never get too cheap to meter, but we can drive the cost down. We are very appreciative of the US Department of Energy that is helping us to spread out the word, reduce barriers, and out of state programs, we are very thankful for that exposure. Finally, I have two slides; one is sources of the additional information. I understand this stuff is going to be up on the CWEC website, so you'll be able to access it this way. The first place to start would probably be the website of American Wind Energy Association, and then link to other companies, like Bergey Windpower and Southwest Windpower. And on this also let me just mention the UC Davis people have been kind enough to allow Bergey Windpower to use this room this afternoon starting at 1:30. We are going to have a dealer training seminar. We have a bunch of people coming, and it's open. We have a bunch of notebooks, we are going to go for three or three and a half hours. We have got 247 PowerPoint slides, 48 seconds apiece, so it's kind of like a movie. You are very welcome to sit in, I'd love to have you here and we'll have some refreshments. And finally, let me say that we have a very strong interest in the outcome of the national energy bill. We have proposed -- AWEA is proposing a 30 percent federal tax credit on residential and business purchases of small machines up to 75 kW. That will completely change the business environment for our industry. So we see this as a real window of opportunity, one that we don't get very often. We have a foothold in the senate version, we are not in the house version, but of course it's all up in the air now because of the election and the change in the majority in the senate. If you have an interest in that, I would very much appreciate your assistance. We are not one of the big dogs on K Street, so we need all the grassroots support we can get. AWEA has an web site, www.windenergyaction.com, which will allow you to send a fax to your senators and representatives in support. There is also a letter in there for the support of the production tax credits. So if you don't do it for small wind, go help support the production tax credits. With that, I want to thank the organizers at the CEC, at the University of California here for the opportunity, and thanks very much for having me. MR. JACKSON: Questions? MR. BYRNE: Warren Byrne with Foresight Energy. You mentioned that radial systems typically are designed to have power flow in one direction and if one places generation out of the far end of a radial system can you talk about what sort of specific problems that creates from a blind design operation perspective? MR. YINGER: The actual design is mostly related to protective elements that are on there for protection, overcurrent, the way those pieces are put though the system. You typically can put some generation on a radial feeder without causing major problems. When you get upwards of 20, 30 percent, then people start looking more closely to how that behaves. Most of the protection is designed to allow power to flow from the substation out to the loads. If it sees the power going in the other direction, it perceives something is wrong and trips the circuit. That is the way the simplest protection works today. Also, farther down that feeder there are fuses and other devices that are also coordinated. The idea being that if you have a fault on the system, you want to take the smallest piece of the system out of service as soon as possible and keep most of the customers happy. So there you may have to change the way those fuses are coordinated, the size of the fuses or how fast they act so that you don't take out more customers and have a fault on the system. It just has to do with the distribution of the current on those lines. MR. GOUGH: Bob Gough, Intertribal Council Utility Policy. I was wondering, the demand charges that are -- with regard to the utilities, what kind of demand charges are placed on those who put the distributed energy behind the meter? MR. YINGER: I'll admit I'm not a great expert on this. Specifically we charge customers the demand charge to -- you know, offset the requirements for the -- you know, the equipment, the size of the transformers and wires necessary to meet their peak flows. There is -- if you want standby backup, if you are generating all your own generation onsite and you want to be able to revert back to the utility grid at some point, the generation is out of service, then you need to sort of help defray some of the costs of holding that capacity on the system. That is sort of the way it is structured. MR. GOUGH: Any ball park numbers? MR. YINGER: I don't know those numbers. I can get you some numbers if you get me a card. UNIDENTIFIED SPEAKER: This is for Bob. I was just advised that the net distributed generation is going to be dropped from a megawatt to a megawatt and a half down to 400 kilowatts, AB 58; do you know anything about what is behind that? MR. BERGEY: Yeah, I think there was a lot of concern when the net metering went from 10 kilowatts to 1 megawatt in one step. Not concern among the wind and solar industry, but amongst the utilities and some other groups. And so there was an effort to peel that back last year and that's where that AB 58 or SB 58 came about. And I believe that under the new program they are -- they have lowered this net metering limit on solar to 500 kilowatts, 400 may be the final one. I heard it was 500 on small wind to 50 kilowatts. I believe at the other end they raised the cap, the amount of wind and solar that can go on before the utilities are no longer required to accept them under the net metering provision. So it was scaled back, the law, two years ago, but not in a way that I think will substantially hurt wind and solar. UNIDENTIFIED SPEAKER: If I want to put a 1 megawatt turbine on net metering, am I allowed to do that? MR. BERGEY: A wind turbine? UNIDENTIFIED SPEAKER: Yes. MR. BERGEY: No. UNIDENTIFIED SPEAKER: 50 kilowatts is it? MR. BERGEY: 50 kilowatts is it, and believe me, that was a struggle. There is no coincidence between the 50 kilowatt limit we shrunk it down to, and the fact that we had a 50 kilowatt turbine. We lobbied quite hard to keep wind in the program. The solar industry was great; they said to the utilities, you are concerned about solar metering, here take wind, we think if you just eliminate wind, you know, everyone will win. That was not the view that we shared and we managed to keep 50 kilowatt wind in that. We did try to keep the wind at the same level as solar, but we were unsuccessful in doing that. MR. JACKSON: Any other questions? I had a question. I was curious if we had small wind as an appliance, from the utility side what would that require into the system? How could you have this sort of ubiquitous appliance out there in your system or does it really require some changes in the way your designs are laid out? MR. YINGER: I guess that's a tough one. Small amounts of generation on our distribution system we have accommodated and we'll continue to accommodate, it isn't really a major problem. We do go through some -- look to make sure that everything lines up properly. We do follow the Rule 21 that is in California and we actively promote that. So if everything from the generator side meets those interconnected pieces, we shouldn't have a problem interconnecting those. MR. JACKSON: So is it at this point the interconnection is fairly straightforward and that problem is in some way solved? MR. McGOWIN: For the smaller devices I'd say, yes. MR. JACKSON: What is small? MR. McGOWIN: Typical distribution feeder has probably 10 megawatts of load on it. We probably do it until we get up around 1 megawatt or so on that feeder depending on how it's distributed, whether it's all at the beginning or all at the far end. It's a tough question because of some of the issues I mentioned earlier today. 10 percent usually we can handle, 20 percent generally, depending on where it is we need to look at. You get to 50 percent you get into issues. MR. ROMANOWITZ: Hal Romanowitz, Oak Creek Energy. I think -- you know, there is a very simple answer to your putting a lot of DG onto the grid. That is that you define the characteristic of the DG with essentially a grid voltage plus power factor equation, and that if the voltage on the grade is low, the DG must be at unity power factor or maybe supply some bars to the grid. That gives you the voltage support that you are asking for. If the grid voltage at that point of the node is on the high side, then you might -- you actually should specify that the DG be added on, is absorbing some bars, and that would give you inherently without any action, just would be an inherent characteristic of the DG, would fit the grid very well. And I think it's been sort of a mistake that this sort of a profile is just not specified, and it would really change the issues that all of you have, safety issues, and, you know, lock out grounding clamps on both ends of the line to solve that. So it seems to me that the issues could very quickly go away with just some proactive rules established to do it. MR. BYRNE: Following up on that assertion of Hal's, do you think that you could implement dynamic bar control in your types of units without it driving the costs crazy or anything like that? MR. BERGEY: Yes, I think we can. Just the standards -- the anit-island stuff requires us to have electronics that are sophisticated enough to protect laboratory white-coat scientists. You know, we have to sense that -- you know, they assume that the wind is constant, the load is constant, you have a lot of capacity and the grid goes away. So we have got sophisticated algorithms already to try and meet those safety requirements. So there is not very much -- and these are all power electronic fast switching, and so being able to control bars, I think is technically not difficult. I'm not sure about the patent situation on that. I think that there is some gray areas as to whether -- you know, who controls -- who is allowed to use the technology of adjusting the power factor on wind turbines in response to grid conditions. Technically it's not -- it's certainly possible within the power electronics in use or under development. MR. BYRNE: Thanks. MR. JACKSON: Any other questions? I have one more actually, Mike. On permitting issues, sounds like that is really the big problem currently; what could the consortium do or some other groups do to help with getting that permitting roadblock opened up? MR. BERGEY: AB 1207 encourages states and cities to enact wind friendly ordinances specifically for small wind systems, and that runs for another three years. The industry will be pushing particularly hard in some of the troublesome counties, Riverside, Los Angeles are the worst right now. Sonoma is not very good. Solano, here, is actually pretty good, you can get a permit readily. We can use support from the consortium and from the CEC for technical backstopping for more credible sources. The planning departments like to have an independent third-party tell them that safety issues are a certain magnitude versus the industry saying they are a certain magnitude. We'll handle the political stuff, and if you can handle the technical stuff it will make a good team. MR. JACKSON: Thank you. One more. UNIDENTIFIED SPEAKER: One of the problems I have -- if you look at the wind map, there is a lot of wind on the coast -- is the California Coastal Commission, they have stopped just about every wind program. I get an ag exemption if I do it on a farm, but other than that it's a nightmare. Have you considered anything policywise with the California Commission -- I mean, the Coastal Commission? MR. BERGEY: We are advised that the California Costal Commission is about as close to the third rail you have out here. If you touch it, you are dead. So we just grovel at their feet and beg for leniency, and that seems to be the best approach. That is one of the big expenses. It's a problem. There has to be more and more public support. There has to be more and more people who are denied the use of these systems who will get up at meetings and say, we don't mind any of them popping up on the horizon, we like that, and the public policy may move in that direction, but you won't find politicians who want to introduce bills to override the Coastal Commission. MR. JACKSON: Thanks very much. MR. VAN DAM: I know you are very anxious to get going, and hopefully many of you will stay this afternoon for Mike Bergey's workshop. A few final words: Bruce and I would like to thank the speakers and moderators for their tremendous efforts. And again, all the material that you saw through today, including the text, they will be on line in the coming weeks. Give it a few weeks to get everything together. But it will be on our website. Plans to have it password protected for the first six months for you because you made the effort to be here, and come summer we will open it up for everybody. So the text has all the PowerPoint material and will be available on our website. By the way, speaking of small wind, our website has a nice section on small wind and the CEC helped us in putting that together. So I want to make everyone aware of that too. I want to thank the speakers and moderators. Also thank you, all of you, for your enthusiastic participation. I think it was absolutely great and we hope to make this an annual event. Next year right around this time we hope to have a second meeting, maybe a week earlier. We'll figure it out. A few people I want to mention. In particular I want to mention Kevin Jackson and Dora for their help also in putting this event together. Very much I want to thank Henry for his valiant efforts getting all the computer stuff working and all the materials here and being able to display it here. Let's see, I think that is almost everything. So we'll e-mail you when all the information is available on-line. If you don't hear anything in one, two, three weeks, check the website once in a while and sometimes you'll see our materials pop up. And if you don't hear from us, it's password protected, send me or Bruce an e-mail and we'll get you that information. Thanks very much. Have a safe trip back if you go back home this afternoon, and we look forward to interacting with you in the coming weeks and months. Thanks.