Energy Siting Challenges:Getting Out of A Dead End --

Honorably

CAMPUT: May 3, 2005

Michael Dworkin

Quebec City

First, Let Us Ask: Is There A “Dead End” ? and Should We Get Out of It?

Some Thoughts Seem Clear: Siting May not be a “Dead End;” but it is very, very, hard. There are good reasons that siting should be hard; yet some facilities are needed.

“Getting out of the dead end” honorably means judging the difference between what is needed and what is not:

Supply/Demand Plans & Resource Parity are vital So is a regulatory commitment to workable process

Technology advances can reduce tensions Project applicants can influence their own fate

Why do I say siting is not a dead end ?

* Vermont just approved 72 miles of new transmission through beautiful farmland

* Connecticut just approved 69 miles of transmission through wealthy suburbs.

*Massachusetts just approved 36 miles of transmission through Boston’s dense urban ring

* New England approved and installed 8,000 MW of generation in 1990 – 2003

* AEP’s proposed coal gasification plant is seeing a bidding war by states seeking to attract it.

Why do I say siting is very very hard?

A few current examples:

* LNG referendum for Casco Bay in Maine

* Cape Cod offshore wind opposition

* Kansas transmission line delays

* Wind turbines opposition in Vermont

* Quebec gas generation – “useful, but not essential“

Why Do I Say Siting Should Be Hard?

Energy facilities are long-lasting and intrusive, precluding many other uses of land and facilities

They have many uncompensated “externality” effects

They are not the results of voluntary contracts:The threats of eminent-domain ‘takings’ and

regulatory open-access orders underlie the purchase prices of land and of transmission wires for transport.

Overcoming grid-lock means respecting these concerns, not denying them!

Why Do I say Some Facilities Are Needed ?

* People seek heat, light, power & digital communication

* Reliability is increasingly vital to society

* Population grows & demand grows

* Markets, trades, and least-cost dispatch all put new strains on current generation and transmission

* Controlling GHG through clean, renewable, and

efficiently dispatched systems requires new facilities.

Within minutes, 50 million North Americans lost electric power: the

largest, the most recent, in a series of increasing frequency and magnitude.

Contract Path vs Electron Path

Transmission is, functionally, a single economic unit

Why do we need to judge whether projects are really needed?

Policy: The adverse effects deserve respect, and should be imposed only if they are needed, and not if they are ‘undue’

………………………………

Law: Generation and transmission construction is allowed only if:

* required to meet the need for … service which could not otherwise be provided in a more cost effective manner (and)

* (without) an undue adverse effect on esthetics, historic sites, air and water purity, the natural environment and the public health

and safety. 30 VSA Sec. 248(b)

The Environmental Duties of Public Utility Commissions (Dworkin, Farnsworth & Rich), 18 Pace

Envtl. L. Rev. 325 (2001).

Why are Resource Plans and Resource Parity vital ?

They let the applicant rationally judge what is needed, and what the alternatives are.

They offer the public, and its representatives, a chance (and obligation) to judge the credibility of claims of need

in context, not just in one-at-a-time series

Resource parity offers equal funding incentives (level playing fields) to alternatives so least-cost solutions can

move forwards.

They offer energy investors a chance to judge claims of need and, thus, predict what projects will be approved.

Two keys to Resource Parity and Planning

A least-cost standard for choosing: Priority for the lowest-cost solutions that are highly

likely to solve the problem, within needed time frames.

Resource parity for funding: Generation,transmission, efficiency, load

management, demand-side bidding, and distributed resources, can all be cost-effective for meeting common needs identified by system operators.

If pooled cost recovery is offered, resources must be treated comparably, both in analysis and in funding.

What Do Regulators Need to Do to Make Resource Plans – and Good Siting – Meaningful ?

* Timely Review –with predictable scheduling, leading to decisions that are not reversed later.

* Unitary Review – determinations of need and of “due and undue” adverse effects in the same tribunal.

* Meaningful early public involvement, to get better decisions, and to get more predictability.

* Checking for consistency with resource plans, then honoring hard choices consistent with those plans.

* Public defense of projects that show real need.

Why Do I say Technology Can Ease Siting Problems?

* Smart (digitally automated) dispatch reduces needs for generation sites

* Smart metering allows customers to choose more wisely

* New transmission wires reduce glare; others carry more current

* Flexible AC transmission systems (FACTS) allow greater use of existing corridors

* Fast simulation modeling lets system operators in control areas define reliability needs better

Fast Simulation and Modeling Software System (FSM)

Electricity transmission and distribution system Faster-than-real time for multiple timescales Key to automated grid control and recovery

Four Steps to A Digitally Smart Electric GridMichael Dworkin August 4, 2003 (Conceptual Only, Numbers Merely Illustrative)

Concept Smart Load Smart Monitoring of Grid Status

Smart Dispatch of Transmission & Generation

Smart Grid System

Date In Service? 1-5 years 2-6 years 5-8 years 10-30 years

Funding? 95% private $ 50% private $ 90% private $ 80% private $

Cost Guesstimate

$ 3-5 billion $ 5-10 billion $ 15-30 billion $ 100-200 billion ?

Scope of Task 8-10 wholesale markets each with ca. 500 large end users reading wholesale prices then telling System Operators how they will respond.

8-10 System Operators each monitor around500 generators3,000 switches 3,000 substations and report status to DHS

Each of 8-10 System Operators /or Control Regions semi-digitally dispatch around5,000 generators 5,000 switches,5,000 substations

Each of 8-10 Control Regions integrate up to 100 million appliances, plus 10,000 transmission points, plus 10,000 generators

Sample Players Sempra/IBM/Alstom,DOE, etc., etc.

Homeland Security, E2I, Cisco, RTOs, NERC, others.

DOE, E2I, EPRI, RTOs, IBM, System Architects, ??

DOE, E2I, Nat’l Labs (PNNL), Appliance makers, System Architects

Why Do I say Project Applicants Can Influence Their Own Fate?

* Good resource planning and parity build credibility

* Good evaluations of need –and alternatives – offer a strong story to tell to regulators and the public

* Early contacts with affected parties avoids surprises, allows mitigation, and reduces later appeals

* Sustained candor, openness and quality control are vital to legitimacy and speed of review

What can we hope for beyond today’s”dead-end”?

* Applications with fair consideration of alternatives.

* Timely reviews that demand rigorous testing of alternatives – then honor the results

* Public belief that choices have been fairly weighed

* Regulatory commitment to the results of good resource plans, solid enough for low investment risk

and, most importantly of all,

* Investments that meet real needs in least-cost ways