20080407Virtual Peaker Program Update.pdf

eslDA~POR~
An IDACORP Company
Barton L. Kline
Senior Attorney
April 4, 2008
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
. P. O. Box 83720
Boise, Idaho 83720-0074
Re: Virtual Peaker Program Update
Dear Ms. Jewell:
On June 1 , 2007, Idaho Power filed a report with the Commission in compliance with
Order No. 30201 (Case No. IPC-E-06-09) detailing the Company's investigation into the
implementation of a 'virtual peaking plant' program. In the June 1 report, the Company
indicated it would submit to the Commission a detailed report of its findings following
additional investigation into the costs of interconnecting customer-owned back-up
generation into its system. Attached is the Company's updated report.
As detailed in the updated report, the Company has determined that it is economic
to operate customer-owned diesel generators during short periods of high demand.
However, the Company has received several inquiries asking about the environmental
ramifications associated with operating diesel generators as a part of the 'virtual peaker'
program. In order to allow interested parties the opportunity to provide input regarding the
implementation of a diesel generator peaking program, Idaho Power believes convening a
workshop is the logical next step. In the report, the Company respectfully requests that the
Commission schedule a workshop for the purpose of receiving feedback from interested
parties.
If you have any questions, please feel free to contact either me or Maggie Brilz at
388-2848.
r-
Barton L. Kline
BLK:sh
Enclosures
P.O. Box 70 (B3707)
1221 W. Idaho St.
Boise, ID 83702
eslDA~POR~
An IDACORP company
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April 4, 2008
VIRTUAL PEAKER PROGRAM
UPDATE
Background
Over the past ten years, Idaho Power has periodically investigated the possibilty of
implementing a distributed generation program as an alternative resource to help meet
peak demands. In the fall of 2006, the Company once again began investigating the
potential for a program. Shortly after, the Industrial Customers of Idaho Power (ICIP)
and the Idaho Public Utilties Commission (i PUC) expressed an increased interest in
this type of program and on December 15, 2006, the IPUC issued Order No. 30201,
which directed Idaho Power to "investigate and submit a report for the implementation of
a 'virtual peaking plant' program based upon the use of existing emergency generator
resources in the Company's service territory." This report was filed with the
Commission on June 1, 2007 and is included as Attachment 1. The June 1 report
details the Company's investigative activities, the potential design of the program, the
results of the Company's initial feasibilty analysis, and the Company's plans to conduct
an interconnection cost analysis through a pilot program.
At the time the report was filed, the Company planned to conduct the interconnection
cost estimate analyses during the summer of 2007. With this detailed interconnection
cost information, the Company would update its financial analysis to determine if a
virtual peaker program is economically viable.
Program Update
Following the filing of the June 1 report, Idaho Power's Delivery Service
Representatives (DSRs) contacted those customers whom they knew had existing
generation, those customers who had expressed an interest in adding generation, and
those customers whom they thought might have generation. Based on the leads of the
DSRs, the Company held numerous customer meetings and conference calls detailing
the potential program. Additionally, in an effort to gain more awareness of the program,
the Company met with representatives of the ICIP and requested the ICIP forward the
names of any customers who might be interested in participating. The Company also
described the program during meetings held with industrial customers in June, 2007 to
explain the recently filed general rate case and the energy efficiency opportunities
offered by the Company. Through this process, Idaho Power received the names of two
customers from the ICIP and talked with a total of forty-five customers about the
potential for a virtual peaker program. Of those customers, twelve expressed an
interest in having more in-depth talks and ultimately five customers committed to
allowing the Company to perform an on-site interconnection cost analysis.
In an attempt to be more economical and timely, the Company engaged the services of
a consultant to perform the interconnection cost analyses of the five customers. Idaho
Power issued a Request for Proposal (RFP) in order to obtain the most competitive
price for the cost analyses. A negotiated contract was finalized with Power Engineers
on August 24, 2007 and the on-site work was conducted between September 18, 2007
and September 24, 2007. The cost data associated with the on-site analysis was
provided to the Company on November 14, 2007. The Company took this data and
updated its initial financial analysis to incorporate the detailed interconnection cost data.
Based on the comparatively low capital cost per kilowatt to interconnect customers'
back-up generators and the relatively high dispatch cost per kilowatt-hour, the
Company's analysis indicated it is economic to operate diesel generators during short
periods of high demand. With this conclusion, the Company began investigating air
quality and permitting issues.
To better understand the environmental ramifications of running diesel generators, the
Company began its investigation into air quality and permitting issues by holding
discussions with the Department of Environmental Quality (DEQ). Through these
discussions it was determined that participation in the virtual peaker program would
require customers with existing generators to modify their current permits because they
would no longer be using the generators exclusively for emergency purposes. To
modify their permits, the Company's research indicated customers would be required to
submit an application along with an air quality analysis based on total emissions on the
customers' premises. Costs of the permit alone are a minimum $1,000 plus an
additional amount based on the amount of the customer's emissions (estimated to be
about $5,000).
Following the talks with the DEQ, the Company solicited input from the environmental
community. A few concerns were raised during these discussions including the impact
of the generators on air quality, the new ozone requirements expected to be issued by
the Environmental Protection Agency (EPA), and the current carbon concerns. If a
virtual peaker program was approved and implemented, the Company would most likely
be dispatching customers' generators, almost all of which utilize diesel fuel, at times of
peak system demand, which is most often on hot, summer afternoons - times when air
quality may already be troubled. Based on the Company's research, a diesel generator
emits approximately fifty times more nitrous oxide and approximately five to ten times
more carbon monoxide than a natural gas fired simple cycle combustion turbine.
Biodiesel and natural gas conversions could be options that might reduce air quality
concerns, however it is not known if existing customer-owned generators could switch
to this fueL.
2
Conclusion of Findings and Next Steps
The Company's actions described above demonstrate a serious commitment to
pursuing a virtual peaker program in the Company's service territory. While its current
program design may prove to be cost effective, environmental ramifications may exist if
the program is implemented. It is because of these impacts that Idaho Power believes
the next logical step is to hold a workshop soliciting customer input regarding the
implementation of a virtual peaker program in the Company's service territory. If the
Commission agrees, Idaho Power respectfully requests the Commission schedule a
workshop for the purpose of receiving feedback from interested parties. Based on the
results of the workshop, Idaho Power would then submit to the Commission its
recommended course of action.
3
ATTACHMENT 1
~
An IOACORP Compa~y
VIRTUAL PEAKER PROGRAM
Background
Over the past ten years, Idaho Power has periodically investigated the possibilty of
implementing a distributed generation program as an alternative resource to help meet
peak demands. In the fall of 2006, the Company once again began investigating the
potential for a program. Shortly after, the Industrial Customers of Idaho Power and the
Idaho Public Utilties Commission (I PUC) expressed an increased interest in this type of
program and on December 15, 2006, the IPUC issued Order No. 30201, which directed
Idaho Power to "investigate and submit a report for the implementation of a 'virtual
peaking plant' program based upon the use of existing emergency generator resources
in the Company's service territory." This report is filed in compliance with Order No.
30201.
As part of our research, the Company reviewed virtual peaking programs other utilties
have successfully operated and focused on two designs: The Dispatchable Standby
Generation program conducted by Portland General Electric Company (PGE) and
Madison Gas and Electric's (MGE) Backup Generation Service. The primary difference
between the two programs is in regards to the ownership of the generator: MGE owns
the generator located on the customer's premises whereas PGE's customers own their
generator. Also, MGE customers pay a monthly service charge based on their
maximum annual kilowatt demand for electricity. Idaho Power chose PGE's program
model to use as a basis for our program development.
Program Description
A dispatchable standby generation program would allow the Company to use
nonresidential customers' standby generators for up to 400 hours a year to meet system
peak power demands. Customers' generators would operate in parallel with Idaho
Power's system while also being available to back up their facilty when needed. The
Company's design will be such that during an outage situation, the customer's
generator(s) wil automatically start and provide backup power to the customer for as
long as needed as originally intended by the customer. During times when customers'
generators can be beneficial to the Company's system, the generators wil be started
remotely by the Company's dispatch center.
The following are the responsibilities of the customer and the Company under the
proposed program design:
Customer Responsibilities: Customers will be responsible for purchasing
the generator(s) and providing the site for generator installation. In
addition, customers wil grant the Company access to their generation
such that the Company can control operation of the generator(s) remotely
in parallel with the Company's distribution system from the Company's
dispatch center for up to 400 hours per year. Customers may operate the
generator(s) at their sites as needed for emergency back-up power.
Company Responsibilties: The Company wil conduct an analysis of the
customer's generator project and develop a comprehensive cost estimate.
The Company wil be responsible for providing interconnection
engineering, facilities, and installation and any other equipment necessary
for participation in the program. The Company will pay for and own all
communications and metering equipment.
In addition, the Company will be responsible for routine maintenance of the generator(s)
including overhauls over the term of the service agreement. The Company will also pay
for all fuel used to operate the customer's generator(s) throughout the term of the
service agreement. The Company wil penorm monthly full-load testing of the
customer's generator(s) and control system and testing of the Company's dispatch
control and interconnection facilities. All energy consumed by the customer while
participating in the program wil be billed at standard tariff rates.
The following is a partial listing of the infrastructure that would need to be in place for
such a program to run:
. Utilty Paralleling Power System (UPPS) - The UPPS wil ensure that
the customer is provided with a continuous supply of electric power by,
almost instantaneously, switching from the Company's power supply to
the back-up generator's power supply in the event of a power failure.
. Metering - For an existing generator to be retrofitted, an additional
time-based meter would be required. New generators would require two
time-based meters be installed. The time-based meters would ensure that
whether customers are drawing energy from the Company's system or
from the back-up generator, their usage is tracked and biled under the
standard service schedule.
. Communication Node Network - For communication between the
customer's system and the Company's system, a frame relay based
network would be installed in order to provide a secure network.
. Energy Management System (EMS) - The EMS would need to be
programmed to accept the data from the UPPS.
Feasibility Analysis
In our feasibility analysis, the Company looked at the various costs involved in the
interconnection of a back-up generator as well as the resulting operations and
maintenance costs which will be covered by the Company. Both initial generator
installations and existing retrofis were considered. The initial analysis indicated there is
enough potential benefit associated with the program to continue pursuing its
investigation.
Pilot Program
The feasibility analysis concluded that Idaho Power would need to make an investment
in infrastructure of approximately $1 million in order to integrate customer-owned
generators into our system. Because of the investment size and the potential
complexity of the interconnection of some generators, the Company determined it was
necessary to do an in-depth analysis of the interconnection costs, targeting generators
of different sizes, ages, and locations. This thorough analysis would provide more
detailed costs of interconnection and a more accurate determination of the program's
potential viability.
In order to complete the in-depth cost analysis, Idaho Power met with numerous
customers, as well as representatives of the Industrial Customers of Idaho Power, to
describe the potential program and solicit participation in an "Engineering Analysis Pilot
Program". Through this process, Idaho Power hopes to identify four to six customers
who are willng to work with Company personnel in the development of this initial cost
estimate for their specific facilities. The Company is targeting customers whose existing
generators vary in size and customers who do not currently have back-up generators
but would consider installng one if a "virtual peaker" program were offered.
The Company plans to conduct the interconnection cost estimate analyses over the
next three months. Once detailed interconnection cost information is available, the
Company will update its financial analysis to determine if a "virtual peaker" program is
economically viable and submit a detailed report of its finding to the Commission.