# Presentation: 435914

## October 22, 2002
Philip MesaLead Technical Specialist
RTO Project Team

- October 22, 2002
- Philip MesaLead Technical Specialist
- RTO Project Team

- SMD, challengesfor hydro-based systems in the Pacific Northwest

**Notes:**
This presentation has been prepared by Philip Mesa.  The views expressed in this presentation are mine and do not necessarily reflect the official position of the Bonneville Power Administration or the RTO West Filing Utilities.

## General Observations

- The Pacific Northwest (PNW) and East Coast power markets have evolved along different paths due in large part to geography and resource mix. The RTO West proposal responds to Order 2000 and deals with the unique needs of Western transmission and generation.
- Can SMD be implemented in the PNW?  Technically yes, but resolving cost shifts and political debates will be as challenging as determining technical feasibility.
- Bonneville adds unique considerations being a large Federal PMA (non-jurisdictional) transmission owner.
**Major challenges**:
- preserving functionality of pre-existing agreements to meet the needs of the PNW,
- reconciling jurisdiction / governance issues,
- sorting out the net effect of cost shifts, and
- dealing with the magnitude of change (need for new systems)

**Notes:**
The PNW power system has adapted to its environment, evolving along a different path than the path taken by “East coast” tight power pools.  Because of this SMD appears to be more revolutionary for the PNW than a NYISO or PJM

That is not to say that SMD can not be done in the PNW, it just requires a substantial paradigm shift for PNW utilities.

An added complication for the PNW is BPA.  BPA, a major transmission owner in the PNW, is a non-jurisdictional federal power marketing agency.

The PNW faces some major challenges, especially in preserving functionality of pre-existing agreements, reconciling jurisdiction / governance issues, sorting out the net effect of cost shifts, and just the sheer magnitude.

## Topology of the PNW

- Large geographic footprint (258,000 square mile river basin)
- Low density of load
- Predominantly interlinked hydro, with base-loaded thermal resources.
- Federal Columbia River Power System (FCRPS) - 31 hydro projects, 1 nuclear plant, and several smaller renewable, contract resources
- Hydro generation output is controlled by regulated water storage releases (shared fuel supply used for power and non-power purposes).

**Notes:**
Large geographic footprint (includes parts of Canada) combined with low load density sets the stage for why the PNW has evolved differently from the East Coast.

This map shows the PNW area.  The RTO West area is larger since it includes Utah and Nevada.  

Predominantly hydro resources, for BPA over 60% of energy comes from hydro.  Thermal resource operations are typically base loaded with hydro resources operated to follow load.

Hydro generation is controlled by storage releases from reservoirs that are upstream of run-of-river projects which may have multiple owners and operators. 

## (NOTE - This is the amount that capacity exceeds energy, expressed in terms of percent of energy)

**Notes:**
This table shows the installed energy and capacity for the PNW as reported by the Northwest Power Planning Council for 2002.  It is important to note that energy values for hydro are based on average water and are actually smaller under critical water conditions.

Also note that the capacity value for hydro is approximately twice that of the energy value (see the column labeled “Capacity in % of energy”)

## PNW Hydro Characteristics

- Common fuel supply, affected by non-power constraints
- Hydro operationshave consequence, either immediately or in the future
- Hydro is used for regulation and load-following while thermal tends to be base loaded

**Notes:**
This schematic shows the layout of PNW major hydro projects in terms of river miles and elevation.  It is for general reference.

Hydro is a common fuel supply being used for power by the multiple owners and for other multiple non-power purposes (fish, power, navigation, etc.).  Non-power restrictions can also result in units being required to move fuel (water) downstream resulting in more generation at site and downstream.

Nearly every hydro operation has a consequence, either immediately or in the future.  Examples include drafting for power today and failing to refill reservoirs later on, Storing water in a reservoir when a downstream run-of-river project is trying to meet load.

Typically in the PNW Hydro is used for regulation and load-following while thermal tends to be base loaded

## PNW Hydro Characteristics

- BON

- TDA

- JDA

- MCN

- PRD

- WAN

- RIS

- RRH

- WEL

- IHR

- LMN

- LGS

- LGR

- JLK

- DWR

- HCN

- OXB

- BPR

- BLEE

- CHJ

- GCL

- ARW

- REV

- MCA

- DUN

- LIB

- ALF

- HGH

- NOX

- KER

**Columbia River Hydro Projects**

- MCHC projects

- reservoir

- Run of river

- Federal

- Non-federal

- Lower Columbia Projects

- Mid Columbia Projects

**Notes:**
This is a schematic of the hydro projects in the Columbia River drainage basin

## PNW Hydro Characteristics

- Reservoir

- Reservoir

- Run-of-river project

- forebay

- tailwater

- Lag time

- Encroachment
- (forebay of downstream project raising tailwater of upstream project resulting in a decrease in head)

- Head
- (forebay elevation – tailwater elevation, higher the head the more efficent the hydro unit is)

**Notes:**
This schematic shows the layout the general operating characteristics of hydro units and gives some sense of the interconnectiveness of PNW hydro resources.

## BPA’s Hydro Characteristics

- Firm Hydro
- 33%

- Nonfirm Hydro
- 0-18%

- Excess Hydro Capacity
- 49-67%

- Total FCRPS Hydro Capacity
- 20,445 MWs

- Annual generation ranges from 33 to 51% of capacity.
- Size of FCRPS projects range from nearly 7,000 MW at Grand Coulee to 1,500 kW Boise Diversion
- BPA does not own resources, must coordinate with Corps, Reclamation, Energy Northwest & others
- Energy constrained - capacity values are not sustainable for long periods

**Notes:**
As illustrated in the bar chart, the annual generation ranges from 33 to 51% of capacity. This is for BPA’s system but it is indicative of PNW hydro.  The values are based on annual average energy.  This range increases as the duration gets shorter (monthly, weekly, daily, hourly).

Energy constrained - capacity values are not sustainable for long periods.  The total capacity is the sum of all hydro projects’ capacity.  Typically these capacities are designed to accommodate peak flows at that part of the river.  Vary rarely will every project simultaneous experience peak flows.  Under normal conditions, there would not be enough storage in reservoirs to sustain that capacity for any period of time.

## BPA’s Hydro Characteristics

- Average runoff 106 million acre feet Jan-Jul (ranges from 50 to 150 MAF)
**STORAGE LIMITED SYSTEM **(useable storage down to 5 MAF in US and 15.5 MAF in Canada)
- When Federal PNW reservoirs are empty BPA can store approximately 25% of the annual runoff in reservoirs.
- The Colorado or Missouri systems can store 400% of the annual runoff

## BPA’s Hydro Characteristics

**Reservoir storage **converts spill, nonfirm, and unusable energy to firm energy and usable nonfirm energy.

## BPA’s Hydro Characteristics

**Notes:**
These graphics illustrate some of the components of hydro projects including equipment for fish passage.

## The Need for Resource Coordination in the PNW

- Agreements - Columbia River Treaty, PNCA, MCHC
- Coordination creates certainty for a variable resource (like hydro), maximizes generation output of limited fuel, and helps “shape” resources to meet load.
- Provides participants with protection from changes to anticipated upstream storage releases.
- Columbia River Treaty (with Canada) assumes that PNW resources are coordinated.

**Notes:**
Coordination in the PNW is accomplished through the Columbia River Treaty, the Pacific Northwest Coordination Agreement, the Mid-Columbia Hourly Coordination Agreement as well as other related agreements.

Coordination provides certainty as to what (firm) generation levels can be counted on from a resource with variable availability like hydro generation and also serves to reshape the generation output of resources to be useable to meet load.

Provides some protection for downstream parties from changes to anticipated upstream storage releases.

The return of half the US power benefits that the US makes to Canada under the Columbia River Treaty assumes that the US coordinates its river operation to maximize power benefits in the US.  Although this is not a requirement, the power benefits without coordination may result in greater than 50% of the benefits being returned to Canada.

## The Need for Resource Coordination in the PNW

- Treaty

- PNCA

- MCHC

- BPA

- Non-federal
- participants

- Canada

- Treaty
- Entitlement
- Return

- Canadian
- Entitlement
- Allocation

- Participation

- Power Delivery

**Notes:**
This is a conceptual diagram of the linkages between the agreements (Treaty, PNCA, MCHC), the players (Canada, BPA, Non-federal parties), and the power obligations (Entitlement return, Canadian Entitlement Allocation). This diagram gives some sense of the interrelationships that have evolved in the PNW over the years.

## The Need for Resource Coordination in the PNW

- Columbia River Treaty
- Canada built three large storage reservoirs in SE British Columbia. The US built Libby Dam in Montana; its reservoir extends into Canada
- Storage increased by 15.5 MAF resulting in US power benefits that are approximately 2400 MW (capacity) and 9.2 TWh (energy) of the system’s annual production.
- Treaty’s focus is on coordinated operations for flood control and power purposes.
- The US is obligated to return 1⁄2 the benefits to Canada (1200 MW capacity and 4.6 TWh annual energy) of which 27.5% is produced at non-federal hydro projects (Mid-C).

## The Need for Resource Coordination in the PNW

- Drivers that set the stage for coordination
- Uncertainty of hydro generation availability.
- Effects of being hydraulically interconnected created potential for inefficient hydro operations (spill) and loss of control over hydro generation.
- Needed support of PNW to get the Columbia River Treaty in place.
- Columbia River Treaty established an obligation to deliver half of the US power benefits that would be realized if coordination exists within the US.

## The Need for Resource Coordination in the PNW

- Basic assumptions of PNW coordination agreements:
- One utility principle – determine the optimum power operation within the bounds of non power constraints as if operated by a single entity.
- Power optimized on a monthly basis by directing the amount and timing of storage releases at specific reservoirs.
- Coordination will be safe for all parties (voluntary, changes allowed only if agreed to by all coordination parties).
- Recognize autonomy of owners to operate their resources for their own needs while providing certainty to other coordinated parties (using obligations for energy exchanges based on theoretical optimum hydro operation).
- Power benefits are independent of location (parties bring sufficient transmission capacity to make coordination work).

## The Need for Resource Coordination in the PNW

- What coordination provides to PNW parties:
- Captures benefits of diversity between hydro and thermal resources and diversity of load in a way that all benefit.
- Coordinated power planning.
- Provides a forum for owners/operators to coordinate operations and resolve problems in a collaborative manner.
- Provides certainty that US power benefits contemplated under the Columbia River Treaty can be realized.

## How the PNW responded to Orders 888 & 2000

- Preferred approach -  use collaborative process developing voluntary agreements to achieve objectives.
- Solves statutory & governance problems.
- Addresses compatibility problems for critical legacy agreements.
- The PNW has a proven track record of voluntary agreements working.
- Allows diverse interests to be taken into account in decision-making.

**Notes:**
Voluntary agreements developed using a collaborative process is the preferred approach in the PNW.

This approach solves statutory & governance problems for jurisdictional and non-jurisdictional utilities and it addresses compatibility problems for critical legacy agreements (such as the coordination agreements)

The PNW has a proven track record of voluntary agreements working.

This approach allows diverse interests to be taken into account.

## SMD, Challenges for the PNW 

- Technically, PNW hydro operations are allowed under SMD, but at what cost?  Can we assure access under all hydro conditions?
- Pre-existing contracts - how to preserve functionality and who pays for it?
- Hydro uncertainty – PNW network Tx rights are broadly define (not precisely defined), CRRs need to be precisely defined Tx rights.
- Cost shifts and cost uncertainty are basic problems.
- It may be impossible to sort out the net effect of all the various cost shifts.

**Notes:**
Governance and jurisdiction issues aside it appears that SMD can be technically implemented but there may be significant cost exposure as a result. Problems for PNW hydro that lead to cost shifts and uncertainty under SMD include involuntary schedule adjustments between day-ahead and real-time that are needed for non-power operations, cost consequences of forced generation due to a non-power requirement (the SMD concept of voluntary markets work for units that are shut down for non-power requirements but what about the reverse?), SMD’s method for allocating CRRs based on historic use when historic use may have no bearing on future use.

Pre-existing contracts, especially the legacy regional contracts are still needed today.   Loss of functionality or having the Transmission provider cover the cost consequences of the functionality are not very attractive alternatives.

Setting aside legal/jurisdictional issues, cost shifts and cost uncertainty are the PNW’s basic problems.  

Given the tremendous uncertainty of resource availability (how much and from where) evaluating the net effect of cost shifts is nearly impossible.

The RTO West Order may be the vehicle to implement FERC’s vision while accommodating NW needs