Re: Comments on the 12/7/09 Dynamic Transfer Stakeholder Meeting

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1 Joseph H. Rowley Vice President Project Development 101 Ash Street, HQ14A San Diego, CA Tel: Fax: December 15, 2009 Ms. Anjali Sheffrin Mr. Kyle Hoffman Mr. Clyde Loutan Mr. Jim Price California Independent System Operator 151 Blue Ravine Road Folsom, CA Re: Comments on the 12/7/09 Dynamic Transfer Stakeholder Meeting Sempra Generation appreciates this opportunity to provide follow up comments on the Dynamic Transfer Stakeholder Meeting held by the CAISO on December 7, Threshold Fairness Test Providing non-discriminatory access to transmission is a primary mission of the CAISO, and fulfilling this mission is primary objective of the CAISO Tariff, information systems, and grid operations. With that in mind, any proposed concept for implementing dynamic transfers must be able to pass the following threshold fairness test, which poses the simplest possible scenario: Generator A is directly connected to a bus that is also a CAISO intertie. Lines that are part of the CAISO-controlled grid are connected to the same bus, but the bus itself is in a neighboring balancing authority area. As a result, there are no intervening transmission facilities between Generator A and the CAISO-controlled grid, other than the intertie bus itself. Generator B is connected to a hypothetical, CAISO-controlled bus that is (electrically speaking) an insignificant distance away from the intertie bus. In testing any proposed concept for implementing a dynamic transfer of Generator A into the CAISO balancing authority area, will Generator A have materially the same access (both physically and economically) to transmission as Generator B? If the answer is yes, then certainly there are other criteria that should be considered before adopting the concept being tested. However, if the answer is no, the concept should be rejected without further consideration. Otherwise, Generator A would be incentivized to make an interconnection request to the CAISO that would compel actual construction of the hypothetical second bus. A concept that results in the proliferation of nearby, otherwise unnecessary highvoltage buses is clearly not in the interest of either generators or end users. Sempra Generation is not the same company as the utility, SDG&E or SoCalGas, and the California Public Utilities Commission does not regulate the terms of Sempra Generation s products and services.

2 Dynamic Transfer Stakeholder Comments December 15, 2009 Mesquite Solar The threshold fairness test described above is not merely a construct that is useful for screening proposed concepts for implementation of dynamic transfers. In fact, this scenario is exactly the circumstance presented by the Mesquite Solar project. Mesquite Solar is a 500 MW photovoltaic project that will be directly connected to the Palo Verde Hub. Located in the SRP balancing authority area, the Palo Verde Hub is comprised of the 500 kv Palo Verde bus, the nearby 500 kv Hassayampa bus, and three bus ties. Two CAISO-controlled 500 kv lines are also connected to the Palo Verde Hub, these being Palo Verde-Devers and the Southwest Powerlink. Both of these CAISO-controlled lines pass close by the six square mile Mesquite Solar site owned by Sempra Generation, which is situated in between the two lines a short distance west of the Palo Verde Hub as shown on Figure 1. Interconnection of Mesquite Solar with either Palo Verde-Devers or the Southwest Powerlink would have required construction of a new 500 kv switchyard a short distance from the Palo Verde Hub. Given the close proximity of the Palo Verde Hub, and the fact that the Hassayampa Switchyard was constructed in 2002 expressly for the purpose of providing a point of interconnection for new generators in the vicinity as well as new 500 kv lines, it made no sense for the Mesquite Solar project to request the construction of yet another 500 kv switchyard in the immediate vicinity. Accordingly, on May 14, 2007, Sempra Generation submitted a request for interconnection to the Hassayampa Switchyard (which forms part of the Palo Verde Hub). As stated in the attached letter dated November 9, 2009, Mesquite Solar has received final approval of its interconnection request, as well as authorization to proceed to an interconnection agreement, from the ANPP High Voltage Switchyard Engineering & Operating Committee (often referred to as the Palo Verde E&O Committee). The approval was unanimous and included Southern California Edison, Arizona Public Service, Salt River Project, El Paso Electric, Public Service of New Mexico, Southern California Public Power Authority, and Los Angeles Department of Water and Power. With its interconnection already approved and its final permitting approval anticipated on January 13, the Mesquite Solar project will move forward with procurement and construction as soon as power purchase arrangements are in place. However, in order to sell to California investor-owned utilities, a dynamic transfer of Mesquite Solar to the CAISO balancing authority area is necessary. Participation in PIRP Once a pseudo-tie is implemented, there is no practical difference between a generator situated as is Mesquite Solar and a generator that is located elsewhere within the CAISO balancing authority area. Especially in the post-mrtu environment that now exists, issues such as congestion management and energy balancing must be handled in a consistent manner across the 3,000+ buses, including intertie buses, included in the CAISO s Full Network Model. Likewise, the CAISO-controlled line segments connected to the Palo Verde Hub must be handled in a consistent manner with the multitude of other CAISO-controlled line segments. Accordingly, if PIRP is available to any solar project in the CAISO balancing authority area, it must also be available to Mesquite Solar.

3 Dynamic Transfer Stakeholder Comments December 15, 2009 Dynamic Transfer of a Portion of a Project Sempra Generation believes that the most straightforward way to implement the dynamic transfer of a portion of a project is to physically segregate and separately meter that portion of the project. As renewable energy projects require long term power purchase agreements in order to be economically viable, and as such agreements normally correspond to specific generation facilities, such segregation and separate metering is generally feasible and is a practical and simple approach to accomplishing the transfer. Once a generator has been dynamically transferred into the CAISO, the short term export of a portion of the generator s output to a neighboring balancing authority area should be handled in the same manner as the export of any other such energy (i.e., energy that originates inside the CAISO balancing authority area but does not flow across CAISO-controlled transmission facilities). For such exports, the Wheeling Access Charge (i.e., the charge based on the revenue requirements of CAISO-controlled transmission facilities) should not apply. Response to Dispatch Instructions from the CAISO By their nature, renewable energy projects, including Sempra Generation s photovoltaic projects, normally produce the maximum output achievable under any given operating conditions. As a result, renewable energy projects are generally not able to respond to dispatch instructions for increased output. While response to a dispatch instruction for reduced output is possible, such an instruction should be given only for the purpose of preserving grid reliability. Restricting downward dispatch instructions is important for both economic and societal reasons. Renewable energy projects generally have zero or near-zero variable costs, so such projects should be the last generators considered when the CAISO selects units for downward dispatch in order to preserve grid reliability. Because such projects create Renewable Energy Credits (RECs) only when energy is generated, power purchasers would not receive RECs for energy that would have been generated if not for downward dispatch instructions. Furthermore, the selection of fossil fuel units for downward dispatch reduces air emissions and conserves non-renewable resources, whereas the selection of renewable energy units for downward dispatch would waste the capacity that has been constructed expressly for the purpose of meeting environmental objectives. Many, if not most renewable energy projects, including Sempra Generation s photovoltaic projects, do not have the ability to ramp down in a continuous, governor-controlled manner. However Sempra Generation s projects will have the ability to provide instantaneous output reductions in multiple controlled steps. Our projects are designed with multiple, medium voltage (e.g., 34.5 kv) collection circuits of up to 30 MW each, and each circuit is provided with a remotely-controllable breaker. Accordingly, output reductions needed to preserve grid reliability can be provided quickly by opening these breakers in succession. Conclusion We offer these comments as practical approaches for quickly resolving key issues involved in dynamic transfers. We look forward to continued participation in the stakeholder process, and an outcome that will support construction and initial operation of Mesquite Solar in While this letter is focused on key issues discussed at the December 7 Stakeholder Meeting, Sempra

4 Dynamic Transfer Stakeholder Comments December 15, 2009 Generation will separately submit a response to certain matters addressed in the CAISO Issue Paper dated November 30, Sincerely, Joseph H. Rowley

5 Figure 1: Palo Verde Hub, Mesquite Solar, and CAISO-Controlled Lines Palo Verde Nuclear Generating Station PVNGS Palo Westwing Westwing Rudd Palo Verde Devers (CAISO) Verde Palo Verde Harquehala Bus Tie #3 Bus Tie #2 Bus Tie #1 Hub Arlington Valley Energy Facility Mesquite Generating Station Mesquite Solar Generation-tie Southwest Powerlink (CAISO) Palo Verde Jojoba

6 SALT RIVER PROJECT GARY W. HARPER P 0 Box POB009 MANAGER Phoenm, Arizona SYSTEM OPERATIONS (602) Fax (602) gary harper@srpnet com November 9, 2009 Mr. Joseph H. Rowley Vice President Sempra Generation 101 Ash Street, HQ14A San Diego, CA RE: APPROVAL OF TWO INTERCONNECTIONS Dear Mr. Rowley: I am pleased to inform you that the ANPP High Voltage Switchyard Engineering and Operating Committee ("ANPP E&O") has unanimously approved the two pending interconnection requests from Sempra. The ANPP Legal and Negotiating Committee ("ANPP L&N") will work with you to develop appropriate agreements for both the new second 500 kv tie-line between the existing Mesquite Switchyard and the Hassayampa Switchyard and the new photo voltaic ("PV") solar facility that will interconnect into the Mesquite Switchyard. Please contact the ANPP L&N Chair Margaret Rostker at or Marqaret.Rostker(5jsrpnet,com for additional information. On behalf of the ANPP participants we appreciate your interconnection requests and look forward to the two new interconnections in the near future. Sincerely, Gary W. Harper Chair, ANPP ANPP HVS E&O Committee xc: Margaret Rostker, ANPP LSN Committee Chair