Offshore Wind and the Prospects for Intermittent Renewables in BC

1
Offshore Wind and the Prospects for Intermittent
Renewables in BC

• Canadian Institute of Energy
• June 15, 2005
• Michael Margolick, Ph.D.
• Vice President Technology
• Nai Kun Wind Development Inc.

2
Topics

• Update on Nai Kun
• Offshore wind costs
• BC Hydro 2005 Call IEP
• Back to basics?

3
Update on Nai Kun

• Jul 2004 BC Wind Integration System Expansion
  WISE study
• Nov 2004 Agreement with Council of the Haida
  Nation
• Feb 2005 Milt Woensdregt appointed to Board
• May 2005 Joint Procurement Agreement with Cape
  Wind

4
BC WISE Study

• BCTC upgraded system models for large scale wind
  integration
• Case study 320 MW wind farm in Hecate Straight
  assumes slightly different base case grid
  configuration from reality
• The requirements for regulating power, required
  exclusively due to this particular wind farm,
  should not present any problems to a power system
  like BCTC.
• The overall conclusion is that the connection of
  the 320 MW works surprisingly well without
  overwhelming problems.

5
Hecate Resource

• 10 m/s wind
• 30m water depth
• ? 10,000 MW using todays commercial technology

6
Haida Agreement

• Mar 2002 - informal discussion, Sep 2003 - formal
  consultation, Nov 2004 - agreement
• Haida Nation treated as a government
• Permission granted for sea mast and seabed survey
• Partnership - full transparency joint working
  group
• Haida Nation has financial interest (warrants)

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Offshore wind costs

• EU lessons learned
• Offshore construction project, not turbines with
  different foundations
• Civil, turbines and electrical jointly optimized
  ? effective use of consultants
• Weather delay risk management
• Quality control
• Turbine design
• Economies of scale
• Canadian equity financing favours large-scale
  infrastructure

8
BC Hydro self sufficiency, Burrard and the
cutting of tie lines

• BC Hydro self-sufficiency goal is based on a
  physical, not economic criterion
• Physical self-sufficiency can be expensive for
  the ratepayer
• The usual planning basis is economic price and
  price risk uncertain, but commitment-free
  border prices versus fixed-price, long term
  contracts
• A risk-averse utility is willing to pay a premium
  for assured prices and accept some mark-to-market
  risk if water levels are high

9
2005 Call - monthly firm requirement

• Even utilities with no storage do not require it
• Non-firm sources contribute to firm load even on
  a 100 thermal system
• Just as for ELCC, need a statistical approach for
  the whole system
• But BC Hydro one of the best utilities for
  converting non-firm to firm direct cost is 0
  effect on value of water depends on seasonal
  patterns
• A deal-breaker for intermittent renewables
• No better, maybe worse for small hydro vs wind
• Liquidated damages for low wind or streamflow
• Must bid 100 /MWh for firm to realize 60/MWh
  average revenue and avoid excessive liq damages
• Purchase firming service? coals to Newcastle

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BC Hydro response

• Need to buy firm energy for firm load
• Storage all committed cannot firm up new
  intermittent supply
• Constraints on reservoir operations
• Some intermittents will be able to bid
• The terms must also apply well into the future
  when intermittents are a large of supply
• 2005 Call is only a make-up (for 2002 Call and
  LTEPA recall) things will change in the next
  RFP

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BC Hydro other issues

• Dependable capacity ELCC adopted
• Resource Options/Garrad Hassan report costs not
  reliable indicator of bid prices due to financing
  assumptions
• BCTC interface OATT/FERC versus BCH proposed
  approach

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Back to Basics?

• Provide a realistic assessment of prices and
  risks and plan accordingly
• Issue pro forma EPAs with simple pricing terms
  one price for all MWh delivered in a given month
• Accept intermittent supply as it comes
• Link contract terms to the economic value of new
  resources on the system