A subsidiary of Pinnacle West Capital Corporation
APS Top Renewable Transmission Projects
Arizona Public Service CompanyNovember 23, 2009
Brian ColeJohn Lucas
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• Overview• Background & Objectives• Policy Issues
• Analysis of Candidate RTPs• Economic Analysis• Qualitative Assessment
• Cost Recovery
• APS’s RTP Projects
Outline of Presentation
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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
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• 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
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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
2006 BTA Order 69389
2008 BTA Order 70635
Workshop Input
RTTF Finance
Group Work
RTTF ARRTIS
Group Work
RTTF Group Work
2006 BTA Order 69389
Utility Evaluation Process Overview
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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
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Wind Resource Evaluation Areas
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Solar Resource Evaluation Areas
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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
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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
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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
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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
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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
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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
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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.
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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
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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)
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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
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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
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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
10-Year Plan Project
Solana
CEC
CECCEC
CEC
230kV Interconnection
Solar Resource Area
500kV Existing
500kV Planned
CEC Already AcquiredCEC
Harquahala
Westwing
To Navajo
10-Year Plan Project
10-Year Plan Project
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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
10-Year Plan Project
10-Year Plan Project
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
10-Year Plan Project
1
3B
3A
2
To Blythe (Devers II)
4
BTA Project
BTA Project
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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
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Arizona Utilities' BTA Projects
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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)
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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)
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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
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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
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Thank You!
Questions?