Business Meeting #28

Meeting Summary and Action Items

Welcome and Introductions

Abby Arnold, RESOLVE, Inc., brought the meeting to order at 8:45 am and lead participant introductions. The agenda was reviewed and adopted by the participants. Approximately thirty participants attended the business meeting. The Meeting Agenda and Final Participants List are attached.

Perspectives from and Existing RTO – PJM

Craig Glazer, manager of regulatory affairs for PJM Interconnection, joined the meeting via conference call to offer his perspective on transmission issues. Mr. Glazer discussed the NWCC RTO Principles and clarified how PJM policies address those principles. Mr. Glazer stated that PJM agrees with the NWCC assumption that RTOs should cover large contiguous areas. These large systems present the best way to achieve a robust competitive market. PJM encompasses seven states and represents the largest competitive electricity market in the nation. PJM intends to develop a joint market with MISO, and currently has in place a stakeholder development process to determine the best methods for moving forward.

Mr. Glazer noted other important aspects of PJM policies with respect to the NWCC RTO Principles:

• Pancaking: There are no rules that encourage pancaking within PJM
• Decision-making: Stakeholder participation is an integral part of the PJM decision-making process. A weighted survey process is in place to prevent dominance of any group, while a representative independent board serves the RTO to make final decisions.
• Mitigation of seam issues between RTOs: The creation of a PJM-MISO marketplace attempts to be ahead of the curve. PJM acknowledges that some standardization is needed while respecting regional differences (single market, separate control centers)
• Interconnection: PJM interconnection is dedicated to making interconnection fast and efficient, especially for smaller technologies
• Balancing rules: PJM has no balanced schedules; all producers are paid at marginal values. A twenty minute notice is required before changing output levels; however, the system operator tends to be flexible about these output notices. All electricity resources are considered network resources. These resources are bid in day ahead and real time markets, with the system operator using these bids to balance the market at that time. PJM thus acts as a power exchange, integrated into the ISO.
• Ancillary Services: PJM has a number of ancillary service markets and is currently in the process of developing a spinning market
• Transparency: PJM is an open, transparent process; plan for economic solutions, particularly to address; more issues will need to be addressed, need wind to participate; for example through webcasts held to involve all stakeholders.

Mr. Glazer discussed the need for wind developers and proponents to provide more information about how wind can impact electricity capacity. PJM must be sure that reserves are available and needs to know how wind can be involved in maintaining those reserves, given the variable nature of wind. He mentioned that the utilization of probabilistic models for determining wind power outputs would be worthy discussion.

Mr. Glazer addressed attribute tracking within PJM. A number of PJM states have retail competition. These states require labeling requirements on energy portfolios for customers. The Independent System Operator (ISO) holds that information. PJM is committed to develop a tracking system region-wide, adding fuel mix and emissions data and integrating this information into a label. This system will be separate from trading certificates (will be developed as states adopt Renewable Portfolio Standards; ISO needs to be involved as the system is developed). PJM expects that the attribute tracking program will be coordinated with state programs for sulfur dioxide (SOx) and nitrogen oxides (NOx). Mr. Glazer noted that attempts to develop attribute systems are state driven efforts, where PJM serves their interests. In developing this system, PJM receives two tracks of input: a. state regulators, environmental groups, market participants; and b. customers of this product including rate regulators and environmental regulators

The group suggested taking NWCC RTO Principles and documenting how PJM policies address those concepts. This information could then be developed is a white paper and shared with other RTOs and with the FERC.

Perspectives from the Midwest Transmission Workshop

Ed DeMeo, Renewable Energy Consulting Services, Inc., summarized the activities of the Midwest Transmission Workshop.

The NWCC continues its involvement in transmission issues in an effort to move the transmission agenda forward, which is helpful to wind interests. Mr. DeMeo noted that the workshop was important because it offered a forum for various perspectives to be represented in the same discussion. Several different perspectives were represented at the workshop, including the reliability issues of system planners, market needs of consumer groups, land-owner concerns, state and federal regulatory matters, and environmental interests.

The purpose of the meeting was to encourage a long-term planning view as opposed to incremental planning. NWCC organizers hoped to encourage different viewpoints in the discussion. A key objective was to develop an ongoing process with local leadership involved in the MISO transmission planning process.

Mr. DeMeo noted the following highlights from the meeting:

• Enhanced communication links between regulators, other stakeholders
• Heightened awareness of other perspectives activities
• Proactive planning approach needed
• MISO 5-yr planning process underway; wind encouraged to submit plans
• Separation of technical, policy issues; MISO can address technical, not policy
• Incorporation of stakeholder issues into the planning process

One recommendation from the meeting is that thethe the NWCC conduct a workshop in the fall to discuss wind industry input to transmission planners and to solicit a response from MISO-MAPP officials. Mr. DeMeo suggested thethatthethat the NWCC chould develop criteria for broad acceptance of transmission additions.

Next Steps for NWCC on Transmission Issues

Ms. Arnold presented a memo from the Transmission Subcommittee to the Coordinating Committee outlining proposed activities for the next nine months. The memo included the following recommendations:

• Hold a second Midwest Transmission Workshop in October to hear the outcome of MISO’s version of a wind alternative.
• Convene a one-day workshop to discuss Western transmission issues.
• Initiate a small workshop or series of discussion designed to foster a conversation between landowners and regulators.

Participants agreed with the proposals for the Midwest and Western transmission workshops. Two small planning committees will be drawn from the transmission subcommittee to provide guidance in identifying purposes, objectives, and audiences for the two workshops. Committee members observed that NWCC members are already involved in the MISO planning process, and the proposed Midwest workshop would offer a good opportunity to assess progress made by MISO to incorporate wind interests into planning efforts. Committee members suggested the planning group engage Craig Glazer from PJM Interconnection in planning efforts for the Midwest workshop.

Several participants offered contacts with Western utility and industry officials for the Western Workshop. Currently, Ron Lehr is working with the Water Fund of the Rockies on a Hewlett-funded study to assess the potential of renewables to meet Western power needs and the challenges that will pose problems for integration into the transmission system. Mr. Lehr expects that his work will help inform the Coordinating Committee about Western transmission needs and will provide discussion topics for the workshop. The small workshop for landowners and regulators was tabled for the foreseeable future.

Review of Credit Trading Structured Interviews

Gabe Petlin, Center for Resource Solutions and consultant to the NWCC, presented findings and recommendations from his report on interviews conducted with environmental and energy regulators. The Structured Interviews were conceived from the NWCC Resource Document Credit Trading and Wind Power: Issues and Opportunities. That report cited the need to educate regulators on basic concepts associated with the trading and tracking of renewable energy credits (RECs) in order to promote the development of regulatory systems that would promote trading structures. To help NWCC understand how to accomplish this task, Mr. Petlin conducted interviews with environmental and energy regulators throughout the nation to gain insight.

Mr. Petlin noted a low level of overall awareness among regulators. In particular, these officials were unsure how credit trading may be directly related to their jobs as air quality regulators or energy officials. The interviewees also seemed to confuse trading of RECs with cap-and-trade systems currently in place, most notably in the Northeast, to address SOx and NOx emissions. The officials interviewed did not understand trading in the context of green power markets, leading to the suggestion of using green tags as a better term, capturing separate trading of energy and environmental attributes.

Mr. Petlin suggested that energy and environmental regulators consider the need to deal with technical issues to facilitate green power markets, discouraging their involvement in the area. Finally, he pointed to a need for regulators to see how renewables generated in remote locations will help to meet air quality requirements in their urban airsheds (how does the purchase of the credits count toward air pollution goals).

Mr. Petlin advised the group to bring the NWCC message on credit trading directly to regulators. The NWCC needs to get basic information about credit trading, RECs, and green tags in front of regulators; these officials need to understand that green tags are part of an existing green power market), where trading of the commodity and attributes is already happening. He urged the NWCC to develop a clear message for regulators on credit trading and green tags/credits clarifying how why such a system would be beneficial to regulatory efforts. Mr. Petlin also encouraged the NWCC to become involved with pollution trading to address wind/air trading markets and the technical issues that need to be overcome to make such markets possible.

The participants agreed to develop activities to provide a basic understanding of credit trading and green tags to energy and environmental regulators. The group decided that a workshop addressing these issues would be appropriate. The group also decided to develop outreach materials, per the 2002-03 Blueprint, that would convey basic messages about credit trading and green tags to policymakers. Several members discussed the need to recommend that RTOs collect information on renewable energy credits in their Standard Market Design (SMD), and that the Federal Energy Regulatory Commission (FERC) should include suggestions for mechanisms to track credit trades in their SMD policy framework. The group also acknowledged a need to help federal and state agencies, such as the Department of Energy (DoE), understand why trading concepts are of importance to the NWCC in particular and to wind development in general. The Coordinating Committee intends the workshop to help develop some clarity on the NWCC messages on credit trading and green tags. Members suggested that the Coordinating Committee should reach out to other organizations and particularly seek cooperation from the National Association of Regulatory and Utility Commissioners (NARUC) and the National Conference of State Legislatures (NCSL) for involvement in designing the workshop.

Credit Trading Activities

Ed Holt, Ed Holt and Associates, Inc., and Van Jamison, POWAIR, then offered some insight on current activities under the credit trading banner. The REC System has been established in Europe and involves several countries trading green tags across borders.

Mr. Holt discussed the National Energy, Environment, and Transportation Summit held in New York City May 15-17, 2002. The primary theme of the conference was integration. The conference highlighted the fact that air emissions reductions and energy issues are important to wind. Several states have NOx standards part of State Implementation Plans (SIPs); the NWCC should consider partners to let them know about the value in NOx trading markets. The summit featured a Texas model that showed emission reductions due to wind energy production. EPA has developed similar tools. These activities/models could be featured in NWCC workshop learning sessions.

Mr. Jamison noted that forty states currently have developed greenhouse gas registries. These markets, however, tend to be small, limiting the power that would be afforded to a larger market through more buyers and sellers, greater transparency, and increased clarity for developers about where to build facilities and buy credits. The NWCC should encourage the establishment of large trading and green power markets to reap these benefits, with RTOs the obvious home for these efforts due to jurisdiction and technical capability. The Center for Resource Solutions (CRS) is currently promoting an Association of Issuing Bodies that would track green tag/REC trades throughout large areas of the country. A Western registry for RECs has been suggested, while a New England registry is under development. PJM currently is developing such a system.

Credit Trading Simulation Exercise

Mr. Holt introduced the participants to the Credit Trading Simulation Exercise. The purpose of the exercise was to give participants a sense of how a trading market would work at its most basic levels. Each participant was given an envelope containing roles for the exercise. During lunch, participants conducted trades with one another. Results of the exercise were shared after lunch.

After announcing winners, Mr. Holt discussed the exercise with the group. Many participants stated an interest in seeing the exercise conducted with more complexity. For instance, some in the group would have liked to have information about prices over time. Others believed the simulation should be more structured, with indications of volume to buy and sell; a “trading floor” could be created to provide information.

Several participants pointed out the need to be clear about messages and objectives with the exercise and create a methodology based on a set of desired lessons for the participants to learn. Particularly, there is a need in future simulations to clarify what dollar values mean in light of environmental attributes; including green tags/RECs in the simulation was highly recommended. Another suggestion was to make the exercise more complex – provide prices over time, indicate volumes of RECs available to buy and sell, and establish a “trading floor” to provide information. The participants recommended that the simulation exercise would be a good activity for a credit trading workshop. Mr. Holt will continue to refine the simulation for future use.

Offshore Wind Development

Brian Parsons began the afternoon session with a brief overview of offshore wind development issues. Mr. Parsons identified reasons for the new interest in offshore wind development, including the high-quality wind resources located offshore, proximity to load centers, and the access of such sites to less heavily loaded lines. He also noted potential issues, such as capital and maintenance costs, possible impacts to shipping lanes and marine and migratory avian life, and public perception of turbines located offshore, particularly in linesight of recreational areas. Mr. Parsons pointed to the East Coast as the location with significant potential resources and mentioned several groups, such as the Cape Cod Compact, Long Island Power, and the state of New Jersey, that are investigating the possibility of developing offshore sites.

The participants noted European efforts to establish offshore wind sites as a good model for activities in the U.S. The group recognized, however, several differences between the US and EU circumstances. Offshore wind development is driven by EU efforts to meet Kyoto Protocol targets, while the US does not operate under the same regulatory motives. Additionally, different market drivers exist in the US and the EU. Participants also noted recent interest that has emerged in the U.S.

Ms. Arnold summarized results from a conference call held to decide whether to recommend conducting a workshop on offshore wind development. The group proposed that the NWCC hold a workshop during the fall on offshore wind issues. This workshop would cover issues involved in offshore wind development such as the mechanics of offshore wind development, costs, environmental issues, economic impacts, and state and federal policies being developed relating to offshore wind development. No objections were made by meeting participants to convening the workshop. A planning group will be convened to plan the event; the group should include representatives outside the NWCC membership.

Wind Facility Siting on Federal Lands

Lee Otteni, Bureau of Land Management, provided an update on efforts within the Bureau of Land Management (BLM) to establish new policies for wind facility development on federal lands. He described the move to site wind power generation facilities on federal lands as consistent with existing land use plans and conforming to pre-existing regulatory authority. The inclusion of renewables in federal land use planning shortens the NEPA process for BLM. Four project managers from Washington headquarters will assist developers with bringing projects on line. The initial phase for each project will consist of three-year testing and monitoring period to determine the feasibility of wind power generation on the proposed site. NEPA analysis will be limited in scope unless new roads need to be built. In cases where there is significant public opposition, a more comprehensive environmental Impact Statement should be developed. The policy was to be finalized at the end of May 2002, and applications already submitted will be processed concurrently.

Mr. Otteni referenced a NREL/BLM report, found at www.windpoweringamerica.gov, that assesses the wind power generation potential on public lands. The researchers developed criteria to rank renewables in potential for power generation on federal lands. The report will be up for public comment for sixty days. Mr. Otteni did not see a need for an NWCC workshop about siting wind facilities on federal lands at this time.

Economic Development

Alan Fox, Northwest Economic Associates, discussed the initial draft report Assessment of Economic Impacts of Wind Power. The goal of project was to show how to measure economic impacts, not to develop an opinion of whether resultant economic impacts were good or bad. The report offers a standard set of criteria for economic studies. The report is intended to educate local land owners, government officials, economic development practitioners, taxpayers, and local business developers.

Mr. Fox described the report methodology. The researchers used three case study areas to give a range of economic conditions. To perform the analysis, researchers used the following tools:

• Input-output data (IMPLAN) to depict local economies
• I-O to measure multiplier effects
• local data to determine direct effects
• local data to determine tax effects
• local data to determine other effects

From its research, NEA generated several conclusions. First, only modest increases in jobs and income were identified from wind energy development; county economic fortunes were not reversed as a result of a single wind project. However, these projects did provide significant tax base increases with little government expenditure, and a multiplier effect on local income was observed (redistributive through taxes). Local conditions, such as tax structures and existing economic conditions, were very significant in determining the economic impacts of wind projects in the case studies, particularly with equipment purchases necessary in rural areas. Minimal opportunity costs (small land areas needed, building projects in low dollar productivity areas) make the projects particularly attractive in these areas.

Participants noted that overall the report offers lots of detail for small budget; there was also a recognition that there exists a huge information need on this subject. Mr. Fox suggested that understanding the end result was key to determining ways to improve the study. He advised the group on the need to collect data on project-by-project basis, possibly establishing an ongoing database for information relating to economic impacts at various proposed sites. This process would aid in providing accurate data for measurement. He described the difficulty in acquiring information due this lack of institutional record-keeping, as well as business confidentiality barriers. The subcommittee was charged with addressing comments on the report and determining whether it would be a resource or consensus document.

Participants continued to point to economic development as a driver for wind development, underscoring a need to develop data and information that can be used by state and local policymakers. Equally important was the need for a summary of the factors involved in assessing economic impacts. NREL currently is developing an economic modeling tool with IMPLAN spreadsheet data. One suggestion was to conduct a workshop using this model. The subcommittee will examine this possibility.

Avian Subcommittee

Ms. Arnold commented on status of the Avian Fact Sheet. A draft copy of the report has been distributed. The Avian Subcommittee will attempt to reach consensus on the document by June 7. The Electric Power Research Institute announced its Avian Wind Interaction Conference in Jackson, WY October 16-17. The event is being co-sponsored by the NWCC and UWIG. Information will be available on the NWCC website.

Siting Subcommittee

Kevin Bryan announced that the revised Permitting of Wind Energy Facilities: A Handbook has been sent out to NWCC members for consensus review. The committee hopes to reach consensus on the document and print the document within the next couple of months.

NWCC Meeting Schedule

Ms. Arnold presented a memo outlined several proposed workshops and business meetings for the NWCC. Participants agreed to the following workshops:

• Midwest Transmission Workshop
• Western Transmission Workshop
• Credit Trading Workshop (basic materials)
• Offshore Wind Workshop

The Economic Development workshop for state and local economic development professionals was postponed. Upon completion of the economic development case study report and determination will be made as to whether to hold a workshop later in the fall or winter.

Additionally, the group agreed to hold two Business Meetings in October and December or January 2003. The December/January meeting will focus on development of the Blueprint for 2003-04. Dates and locations for the meetings and workshops will be determined by the subcommittees over the next few weeks.

Sector Reports

Members offered the following sectoral updates:

• Gabe Petlin, CRS: Announced a CRS press conference to announce certification of six products; also certified Green Mountain’s Texas products.
• Larry Flowers, NREL: Multi-stakeholder group being interviewed about value of wind to various stakeholders; to be posted on website.
• Heather Rhoads Weaver, NWSEED/AWEA: Announced direct mail campaign in CA; the campaign will examine how a targeted campaign works for small turbines (5-0% rebates).
• Dave Warren, Last Mile Electricity Co-op: Gas fired plant giving funds to BEF, his group to fund renewable energy activities; TBL entering proceeding to remove imbalancing penalties.
• Larry Bean, NASEO: Significant development in KS farm bill supporting wind development.
• Charlie Smith, UWIG/Electrotek: UWIG meeting held in Hawaii; discovered a significant interest in wind there.
• Tom Gray, AWEA: GE has acquired Enron Wind; Sell has bought facility in CA, seeking to be international player in wind development.

The meeting adjourned at 5:15 pm.