Comment from Bain, Don

Wind Diversity The temporal diversity of production at different wind sites across the NW is a key issue which needs to be better addressed in the Plan regarding regional wind integration, utility integrated resources plans and procurements of wind resources. Prior studies (decades ago) by GE, EPRI, NREL, OSU and others have all shown higher diversity and hence portfolio value from using the different wind patterns at scattered NW locations. However, the current BPA integration charge is flat across the NW, regardless of whether use of wind sites outside the Lower Columbia help or aggravate today's integration issues. But BPA's assumption of a uniform wind integration cost is only consistent with an assumption of no forthcoming diversity across NW wind facilities. This is not justifiable in the context of NW wind development elsewhere, a diversifying future and other locations which have the potential to actually reduce the current integration issues - unless we think NW wind development will stop when the Lower Columbia is fully built. The Lower Columbia has been fully leased for development within the next ~5 years, so it is most likely additional wind capacity above that will not be from that area and will not have the same production pattern (because other NW locations have different meteorological drivers). And there will be interim wind development at other NW locations. The Plan and it's Action Plan should seek review the potential benefits of a wind supply strategy guided by efficient pricing signals based on portfolio value from diversified wind resources. The Plan asks about what should best be done in the future, which should not be constrained by an extrapolation of today's integration process, solution or focus of wind development activity. Since we already know that build out of the Lower Columbia will be complete within the next few years, current integration issues, impacts and costs will be affected by subsequent wind development elsewhere. If NPCC, BPA and NW utilities were to evaluate the portfolio value of wind diversity at different sub regional locations and translate that into locational pricing adjustments in coming wind supply acquisitions, this would be a more likely successful and economically efficient way to address portfolio value and operational optimization than to assume no diversity and then plan for and acquire resources in way which obscures it. It's entirely within the buying utility's choice whether or not to do this. This should be addressed as a non wires strategy in the Plan. NW utilities have a similar choice about whether to acquire wind projects using peak, shoulder and base pricing instead of flat pricing across the day, week and season. If the value of wind MW & MWh were evaluated during such periods and translated into announced pricing adjustments in future wind acquisitions, this would be a way to use market forces to elicit development of resources which better meet the NW's needs - which also would address some types of integration issues and enable use of supply-side storage. Currently, flat MWh pricing of NW wind acquisitions provides no incentive whatsoever for industry to explore and offer resources better matched to portfolio needs or any storage solutions. Again, such strategies should be evaluated. Also, it's NW utility's choice whether or not to acquire more wind from the Lower Columbia area wind regime and being guided solely by undifferentiated pricing. The results of neglecting diversity value will incur opportunity costs in portfolio robustness and the diversity benefits/value of additional wind at other locations. The absence of potential wind diversity in any evaluated portfolios having wind will distort the results of that evaluation and subsequent portfolio and acquisition decisions. The above issues also need to be addressed in the context of a discussion of utility ownership versus buy (competitive PPAs). If a utility is going to develop and own new wind resources, then their IRP is the only venue where temporally and locationally differentiated pricing/value/opportunitites can be addressed. Also needing discussion is whether and how a utility ownership strategy can achieve the same potential results as market pricing signals in competitive marketplace acquisitions (using the strategies outlined above). The status quo does not present any motivation for utilities or the wind industry to supply a more economically and operationally efficient mix of wind resources, nor any storage solutions (which has value and helps mitigate integration issues). A Surplus Transmission Trading Market This is an action only BPA is positioned to do: establish a centralized transparent & liquid marketplace for surplus transmission transactions and then facilitate the underlying transactions & admin - a non wires solution. Lots of TSAs are out there which aren't fully utilized and their holders are paying 'full fare' for unused firm ATC - BPA's been publishing data for a long time showing annual hourly ATC utilization at various cut planes which illustrates this. Currently there's no way for sellers of surplus transmission capacity to match with buyers except to serially and personally contact each potential buyer - an archaic and highly inefficient approach. At the same time there's universal angst about the need for major network upgrades to get more ATC into the marketplace and the financing of those upgrades. The current menu of solutions consist of Conditional Firm (which only marginally shrinks the issue) and NOS. NOS is a blunt instrument which puts enormous stress on the applicants and seriously distorts resource development activity because of the demands it places on the financial backing, risk management and strategies of the pool of potential queue applicants and resource developers. It's a game only the most financially hefty can play and only if they're willing to take on much more risk (earlier in the greenfield development cycle) or to stretch out project lead times (which also is costly and more risky). From an economic perspective, it's highly inefficient to be out doing major upgrades and NOS without first fully utilizing the existing infrastructure. The opportunity cost for the region is huge. One result of the status quo is squeezing out the supply of middle-sized projects, leaving standing only struggling 'community scale' projects and large projects by the most financially hefty players - exactly what we see here. A rational response to the higher risk profile of NOS participation is developers focusing on building out successive phases of a project site area instead of moving to new greenfield site areas. Phased build out of an area geographically concentrates industry development activity, e.g., the Lower Columbia - and this creates the huge ramp rates that cause integration difficulties, more system costs, etc. At the same time, there's no pricing signals (in IRPs, utility resource procurements or the BPA integration fee) motivation to geographically diversify development work, so the business choice is obvious: priority #1 is keep expanding wherever you are. Which also is quite evident. We are not saying these ideas would slow the wind buildout of the Lower Columbia; that area is a good seasonal match for the high-paying CA markets and that market is so far accessible. But a lot of the opportunity costs and inefficiencies presented herein come home to roost in the NW market, which presumably is a higher priority for the applicable NW institutions to focus on. The Culture of Transmission Problem Solving A lot of the issue is the cultural, i.e., the current approach to integration issues is technological and not economic. Not to say there's plenty of technical issues involved. But there's insufficient economics 'horsepower' being applied to the problem. There are opportunities to think about how markets can be reworked to bring solutions that groups of technologists are unlikely to bring forth. The underlying thesis is simple: if there's value in diversity, then it needs to be seriously evaluated. If price signals are powerful ways to elicit desired marketplace responses, then serious attention should be focused on using that approach. If liquidity and transparency raise the efficiency of infrastructure utilization, then these aspects should be built into the marketplace. Don Bain Aeropower Services Inc. 2502 NW 35th Cir. Camas, WA 98607-8237