aps top renewable transmission projects arizona public service company november 23, 2009 brian cole...

A subsidiary of Pinnacle West Capital Corporation

APS Top Renewable Transmission Projects

Arizona Public Service CompanyNovember 23, 2009

Brian ColeJohn Lucas

2 A subsidiary of Pinnacle West Capital Corporation

• Overview• Background & Objectives• Policy Issues

• Analysis of Candidate RTPs• Economic Analysis• Qualitative Assessment

• Cost Recovery

• APS’s RTP Projects

Outline of Presentation


Select a set of transmission projects that have the potential to advance renewable resource development within Arizona while minimizing the possible rate impacts to wholesale and retail transmission customers.

The key criteria for determining the top RTPs for APS customers is the economic evaluation of the resource/transmission pair options

Questions that are also relevant to achieving this balance include:

• What is the appropriate development approach?• Does the transmission project bring other benefits?• What is the renewable resource potential in the area?• Is success dependent upon actions outside of Arizona?

The Objective


• Advancement of renewable resources will require two types of transmission projects:

– Connecting renewable resource areas to the transmission system and market hubs

– Facilitating deliveries of renewable resources to the load center(s)

• Project timing (downside to being too early or too late)

• Importance of taking proactive steps to reduce the mismatch between development lead-times for transmission projects and renewable resource projects

• Recognizing a need for flexibility in the CEC permitting process– Allow for a more general description of need– Longer potential time frame before construction start requires a longer

duration CEC• Transmission projects that can provide multiple benefits are

preferred

• Assurance of cost recovery is critical:– RTPs advance timing and drive need which is beyond normal planning

needs

Review of Policy Comments


Utility Evaluation Process

Individual Utilities File “Top 3”along with plans and funding mechanisms (Due 10/31/09)

Individual Utility Evaluation of Renewable Resource and

Transmission Options

Utility Coordination & Common Projects Identification

Individual Utility Economic Evaluations

Policy Issues Consideration and

Analysis

2008 BTA Order 70635

Workshop Input

RTTF Finance

Group Work

RTTF ARRTIS

Group Work

RTTF Group Work



Workshop Input

RTTF Finance

Group Work

RTTF ARRTIS

Group Work

RTTF Group Work


Utility Evaluation Process Overview


APS conducted an economic analysis to compare the potential renewable transmission projects:

• Purpose was to identify which potential transmission projects could provide the best economic value to APS customers

• Export projects were analyzed as well

Some of the specifics:• Analysis looked at the resource sensitivity areas developed by ARRTIS and

the candidate transmission projects developed by the SWAT RTTF Subcommittee (based upon the ARTTIS work)

• Each resource area is coupled to one or more transmission segments to either:

– Deliver resources to load, or– Deliver resources to export point (CA border)

• Economic analysis assessed “value” (as opposed to simply comparing average delivered cost)

Economic Assessment


Wind Resource Evaluation Areas


Solar Resource Evaluation Areas


Summary of analysis steps:• Select appropriate renewable resource areas• Determine required transmission segments using RTTF map

» Segments from renewable resource area to load center or export point

• Estimate capital cost for renewable resource and transmission» Transmission is approximately $2 million per mile (includes right-of-way)

• Location-specific renewable resource performance:» NREL’s Western Wind Resource Dataset (WWRD)» DOE’s Solar Advisor Model (SAM)» Analyzed both solar thermal and solar PV

• Compute average delivered cost of renewable energy• Determine “value” components:

» Time of renewable energy production (daily and seasonal patterns)» Contribution to meeting summer peaks (capacity value)» System integration costs

• Compute “value-adjusted” delivered costs:» Compare resource/transmission pairs

Economic Analysis Process


APS Comparative Economic Analysis Results

Not showing 6 additional solar

areas

Resource Area Adjusted Delivered Costs $/MWh

Palo Verde (solar resource area)

$90.44

Delany (solar resource area)

$91.56

Gila Bend (solar resource area)

$92.23

Hyder (solar resource area)

$93.10

Meteor Crater (wind resource area)

$104.90

Moenkopi/Gray Mountain (wind resource area)

$107.77

Hilltop (wind resource area)

$111.29

Springerville (wind resource area)

$115.68

Bowie (solar resource area)

$120.37

Aubrey Cliffs (wind resource area)

$122.55


General Findings of Comparative Economic Analysis

• Solar resources were economically superior to wind resources

• Best solar resources are located west and southwest of valley and in relatively close proximity to APS load

• Palo Verde – East transmission was a common component for 3 of APS’s top RTPs


Qualitative Analysis Factors• Potential to support multiple potential renewable energy markets

• Potential to bring benefits beyond renewable resource access for APS customers

• Likelihood of attracting participants to the project

• Expected permitting sensitivity (resource and transmission)

• Interconnection queue robustness for resource area

• Expected immediate utilization level

• Ability to support phased implementation to spread out customer rate impacts

• Current requests for long-term transmission service that might help support cost recovery

• Potential ability to secure land for resource development in resource area (Bureau of Land Management (“BLM”) vs. private, etc.)

• Market test verification/availability of existing transmission/other


Legend:Highly Positive

Positive

Nuetral

Negative

Examples of Qualitative Analysis

Issue Area Ability to support multiple potential renewable energy markets

Resource/Transmission Pair

Delany Solar

This resource/transmission pair would support sales to both the Phoenix

market as well as the CAISO market at Palo Verde

Issue Area Interconnection queue robustness for resource area

Resource/Transmission Pair

Palo Verde Solar There are 1720 MW of interconnection requests in this area to SRP


Transmission Cost RecoveryAPS 10-Year

Plan Contains

Transmission Needs

Transmission Project In-

Service

File Annual Rate Update at FERC (FERC Approval)

TCA Adjustment (ACC Approval)

APS Applies for and Receives

CEC for Transmission Project from

ACCTransmission

Project Development & Construction

Note: Current transmission cost recovery split between retail and wholesale transmission customers is 80% retail and 20% wholesale

Biennial Review of Overall State

Transmission Plan Adequacy in BTA


Definition of RTP

Per the RTTF Finance Subcommittee Final Report:

Identification of RTPs, which includes the acquisition of transmission capacity, such as, but not limited to, (i) new transmission line(s), (ii) upgrade(s) of existing line(s), or (iii) the development of transmission project(s) previously identified by the utility (whether conceptual, planned, committed and/or existing), all of which provide either:

– Additional direct transmission infrastructure providing access to areas within the state of Arizona that have renewable energy resources, as defined by the Commission’s Renewable Energy Standard Rules (A.A.C. R14-2-1801, et seq.), or are likely to have renewable energy resources, or

– Additional transmission facilities that enable renewable resources to be delivered to load centers.


RTAP and RTP Approval

APS plans to file for approval of the APS RTAP and the individual RTPs (including the associated development plans)

– Approval needed for cost recovery certainty since RTAP/RTP plans are in excess of “normal” transmission needs

– ACC approval supports the FERC rate-setting process


RTP Approval & Cost Recovery Process

Transmission Project In-

Service

File Annual Rate Update at FERC (FERC Approval)

APS Requests ACC Approval of RTAP and RTP

Plans

RTP Development & Construction (includes CEC acquisition)

Note: Process depicted is for RTP projects only; the current cost recovery process continues to apply for traditional 10-Year Plan transmission projects

APS RTAP and RTP

Identification and Plans

APS Early Filing @ FERC (if applicable)

Occurs Either Within or in Parallel With BTA

Process

TCA Adjustment (ACC Approval)


APS’s Top RTPs

1)Palo Verde to Delany 500kV

2)Palo Verde to North Gila 500kV

3A)Palo Verde to Valley Load (Liberty)

3B)Gila Bend to Valley Load (Liberty)

4)Delany to Blythe 500kV


APS’s 10-year transmission plan identifies transmission required to meet APS’s future expected customer needs:

• Provides for system reliability• Provides sufficient transmission for import of remotely-located resources• Transmission to support renewable resources as specified by APS’s resource

plans

Transmission projects identified thru the BTA Order process are beyond the normal planning process:

• New project, or • Accelerated timeframes for previously identified project not required by

normal planning consideration

APS’s Existing Transmission Plans


APS 10-Year Plan Transmission Projects

Palo Verde

Pinnacle Peak

MorganSun

Valley

Delany

North Gila

Liberty/TS4

Gila River/ Gila Bend

Jojoba Kyrene

10-Year Plan Project


Solana

CEC

CECCEC

CEC

230kV Interconnection

Solar Resource Area

500kV Existing

500kV Planned

CEC Already AcquiredCEC

Harquahala

Westwing

To Navajo




APS 10-Year Plan and BTA Order Transmission Projects

Palo Verde

Pinnacle Peak

MorganSun

Valley

Delany

North Gila

Liberty/TS4

Gila River/ Gila Bend

Jojoba Kyrene



BTA Project

BTA Projects

Solana

CEC

CECCEC

CEC

CEC

230kV Interconnection

Solar Resource Area

500kV Existing

500kV Planned

CEC Already AcquiredCEC

Harquahala

Westwing

To Navajo


1

3B

3A

2

To Blythe (Devers II)

4

BTA Project

BTA Project


BTA Order Transmission Projects - Exports

Palo Verde

Delany

North Gila

BTA Projects

CEC

CECHarquahala

1

2

To Blythe (Devers II)

4

BTA Project

Blythe

California –Arizona Border

Imperial Valley

Potential Additional

Transmission Needed for Full Export Utilization

Phoenix Load Phoenix Load CenterCenter

Yuma Load Yuma Load CenterCenter

Los Angeles AreaLos Angeles AreaLoad CenterLoad Center

San DiegoSan DiegoLoad CenterLoad Center

California –Mexico BorderWind

Geothermal & Solar


Arizona Utilities' BTA Projects


Palo Verde to Delany RTP Development and Cost Recovery Approach

Development Approach– Acquire CEC – This step is already completed1

– File CEC compliance stating intent to utilize Delany to Palo Verde portion of the CEC

– Finalize participant agreements for project– Acquire ROW– Engineering Design– Construction-ready to meet an in-service date of December 2012

Cost Recovery Approach– APS Current Estimate of Project Cost (APS 80% Share): $55M– Cost recovery through annual formula rate filing at FERC– ACC approval of the FERC rate through the TCA will provide for cost

recovery from retail customers

1 ACC Decision No. 68063 (August 17, 2005)


Palo Verde to North Gila RTP Development and Cost Recovery Approach

Development Approach– Acquire CEC – This step is already completed1

– Develop participant agreements (in process)– Acquire land/ROW (on timeline to support current in-service date and

subject to second bullet)– Engineering design (on timeline to support current in-service date and

subject to second bullet)– Construction for in-service date of 2014 (subject to completion of work

described above)

Cost Recovery Approach– APS Current Estimate of Project Cost (APS 40% Share): $97M – Cost recovery through annual formula rate filing at FERC– ACC approval of the FERC rate through the TCA will provide for cost

recovery from retail customers– Note that additional transmission development within California may be

necessary to allow for the full export benefits of this line

1 ACC Decision No. 70127 (January 23, 2008)


Palo Verde to Valley and Gila Bend to Valley RTP Development and Cost Recovery Approach

Development Approach– Perform technical studies to determine the optimal electrical

connection and best project approach– Conduct open season– Prepare CEC application and file application for CEC approval– Acquire land/ROW (proceed once needed based on in-service date)– Engineering design (proceed once needed based on in-service date)– Construct line – Proceed once a need exists – either a load serving

need, PPA, or a TSA

Cost Recovery Approach– Cost recovery through annual formula rate filing at FERC– ACC approval of the FERC rate through the TCA will provide for cost

recovery from retail customers


Delany to Blythe (Arizona Portion of Devers II) RTP

• APS believes that this project could influence additional solar resource development – Potential export capability to California– Potential to allow for solar resources to be delivered to Arizona

utilities at the Delany switchyard • APS will continue to encourage and support other transmission

developers to move this project forward– Includes WAPA and the potential use WAPA’s ARRA borrowing

authority– Includes merchant transmission developers– APS currently has not concluded that an ownership participation in

this project is appropriate for its customers • Additional transmission development within California may be

necessary to allow for the full export benefits of this line


Thank You!

Questions?

aps top renewable transmission projects arizona public service company november 23, 2009 brian cole...

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