1. Modeling the Penetration of Wind Energy Into the U.S. Electric Market Presentation to CNLS 26 th Annual Conference August 16, 2006 Walter Short, Nate Blair, Paul Denholm, Donna Heimiller

2. Contents Wind Energy in the U.S. Electric System Brief Description of the WinDS Model Results Issues

3. Wind Energy in the U.S. Electric System 9.1 GW of existing U.S. wind capacity (1%) 2.4 GW added in 2005 –Incentivized by 1.9 cents/kWh federal production tax credit State mandates, e.g. Renewable Portfolio Standards Clean, renewable –Impeded by Transmission availability System integration of a variable resource Recent rise in wind turbine capital costs ($1600/kW)

4. Wind Resources >5000 GW of onshore capacity >3000 GW of offshore capacity

5. The U.S. DOE EIA Uses its National Energy Modeling System to Project Future Wind Energy Potential –13 large electric regions –No new transmission –No cost or limits on use of transmission within regions –Can’t accurately capture wind correlation between regions –Wind considered a mature technology (1% learning rate on capital costs and capacity factors) –Wind capacity value< 20% –Eliminates 91% of U.S. wind resource base

6. EIA’s NEMS Could Not Address Questions for the DOE Wind Research Program Access to and cost of transmission –Light wind close to the load or high speed wind far away? –How much wind can be transmitted on existing lines? –Will wind penetrate the market if it must cover the cost of new transmission lines? –Will offshore wind close to seaboard loads penetrate? Resource Variability –How does wind capacity credit change with penetration? –How do ancillary service requirements increase with wind market penetration –How much would dispersal of wind sites help? –Is on-site storage cost effective?

7. WinDS Model (Wind Deployment Systems Model) A multi-regional, multi-time-period model of capacity expansion in the electric sector of the U.S. Designed to estimate market potential of wind energy in the U.S. for the next 20 – 50 years under different technology development and policy scenarios

8. WinDS Regions

9. Transmission in WinDS

10. General Characteristics of WinDS Linear program cost minimization for each of 26 two-year periods from 2000 to 2050 Sixteen time slices in each year: 4 daily and 4 seasons 5 levels of regions – wind supply/demand, power control areas, RTOs, NERC areas, Interconnection areas Existing and new transmission lines 5 wind classes (3-7), onshore and offshore shallow and deep All major power technologies – hydro, gas CT, gas CC, 4 coal technologies, nuclear, gas/oil steam State-level incentives Fed by extensive GIS input data bases Stochastic treatment of wind resource variability – planning reserves, operating reserves, surplus wind

11. WinDS Logic Flow GIS Wind resources Conventional plant locations Transmission lines LP Optimizer EIA – Electric loads, Fuel prices, Plant costs Update LP coefficients t=now T= 2050? no yes t=t+2 Stop ∂ capacity credit/ ∂W ∂ oper reserve/ ∂W ∂ wind surplus/ ∂W Retirements Minimize PV of Costs Subject to: Gen s > Load s + losses s Cap > Peak *(1+RM) Regional energy balances

12. Base Case Electricity Capacity

13. Base Case Capacity by Wind Class

14. Base Case Key Inputs Wind R&D-driven Cost/Performance improvements 8% wind learning rate 1.9 cent/kWh PTC through 2007 No carbon caps/tax Gas prices

15. High Gas Prices Do Not Increase Wind Penetration in the Long Term

16. $100/ton Carbon Case - Capacity

17. $100/ton Carbon Case - Generation

18. $100/ton Carbon – No New Nukes Capacity

19. Production Tax Credit Extension

20. A PTC Extension to 2020 Could Result in 20% of Generation from Wind by 2020 4.1% 20%

21. * PTC to 2010 with ramp down by 2020 Regional Wind Installations by 2020 with PTC*

22. Major Modeling Issues in WinDS Transmission –Load modeling/loop flow –Multiple interchanges Non-economic factors/siting –Environmental – emissions, views, birds, bats, radars Competitive technologies –Conventional fuels/technologies –Other renewables Electric industry dynamics –Restructuring –RTO’s Model scope – electric loads, fuel prices, Linear Programming Optimization

23. New Website (documentation and results) at: http://www.nrel.gov/analysis/winds

24. Backup slides follow

25. Annual Electric Generating Capacity Additions Fossil, Nuclear and Non-Hydro Renewables Natural Gas: 63 GW in 2002 Coal declines CAAA Gas increases PIFUA changed PURPA CC Efficiency Low price through deregulation Nuclear emerges Technology available “Too cheap to meter” Gas declines PIFUA prohibits Nuclear declines 3-Mile Island (1979) Chernobyl (1986)

26. WinDS Constraints on Wind Transmission Supply/demand regions Existing transmission line New wind transmission line Class x wind Class y wind New transmission line PCA 1 PCA 2

27. Disclaimer and Government License This work has been authored by Midwest Research Institute (MRI) under Contract No. DE-AC36-99GO10337 with the U.S. Department of Energy (the “DOE”). The United States Government (the “Government”) retains and the publisher, by accepting the work for publication, acknowledges that the Government retains a non-exclusive, paid-up, irrevocable, worldwide license to publish or reproduce the published form of this work, or allow others to do so, for Government purposes. Neither MRI, the DOE, the Government, nor any other agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe any privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not constitute or imply its endorsement, recommendation, or favoring by the Government or any agency thereof. The views and opinions of the authors and/or presenters expressed herein do not necessarily state or reflect those of MRI, the DOE, the Government, or any agency thereof.