20170705Hemstreet Direct.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.PAC-E-17-06
OF ROCKY MOUNTAIN POWER FOR )BINDING RATEMAKING TREATMENT )DIRECT TESTIMONY OF
FOR WIND REPOWERING )TIMOTHY J.HEMSTREET
ROCKY MOUNTAIN POWER
CASE NO.PAC-E-17-06
June 2017
l Q.Please state your name,business address and present position with PacifiCorp
2 A.My name is TimothyJ.Hemstreet.My business address is 825 NE Multnomah Street,
3 Suite 1500,Portland,Oregon 97232.My present position is Director of Renewable
4 Energy Development.I am testifying on behalf of Rocky Mountain Power
5 ("Company"),a division of PacifiCorp.
6 QUALIFICATIONS
7 Q.Briefly describe your education and business experience.
8 A.I hold a Bachelor of Science degree in Civil Engineering from the Universityof Notre
9 Dame in Indiana and a Master of Science degree in Civil Engineering from the
10 Universityof Texas at Austin.I am also a Registered Professional Engineer in the state
11 of Oregon.Before joining the Company in 2004,I held positions in engineering
12 consulting and environmental compliance.Since joining the Company,I have held
13 positions in environmental policy,engineering,project management,and hydroelectric
14 project licensing and program management.In 2016,I assumed the role of Director of
15 Renewable Energy Development,in which I oversee the development of renewable
16 energy resources.
17 PURPOSE OF TESTIMONY
18 Q.What is the purpose of your testimony?
19 A.In support of the Company's application for approval of wind repowering and
20 associated ratemaking treatment,my testimony provides technical information
21 regarding the Company's proposal to upgrade,or "repower,"most of its wind fleet.
22 Specifically,my testimony addresses:
23 The scope of the project;
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l The benefits of repowering resulting from the qualification for federal
2 production tax credits ("PTCs");
3 The increased energy benefits followingrepowering;
4 The reduced ongoing operating costs followingrepowering;
5 System transmission reliability related to the project;
6 The extension of wind facility asset lives after repowering;
7 Project contract status and construction schedule;and
8 The disposition of removed equipment.
9 OVERVIEW OF WIND REPOWERING AND PROJECT SCOPE
10 Q.Please briefly describe what repowering a wind facility entails.
11 A.Repowering broadly describes the upgrade of an existing,operating wind facility with
12 new wind-turbine-generator ("WTG")equipment that can increase a facility's
13 generating capacity and the amount of electrical generationproduced from the facility.
14 Exhibit No.1 is a depiction of a wind turbine and its various components.The
15 Company proposes to repower its wind facilities by replacing the nacelle hub and rotor
16 of the WTG.
17 Q.Which facilities does the Company propose to repower?
18 A.The Company is planning to upgrade all of its wind facilities in Wyoming except the
19 Foote Creek facility (Glenrock I,Glenrock III,RollingHills,Seven Mile Hill I,Seven
20 Mile Hill II,High Plains,McFadden Ridge,and Dunlap);the Leaning Juniper facility
21 in Oregon;and the Marengo I,Marengo II,and GoodnoeHills facilities in Washington.
22 Q.Please explain why repoweringis feasible for these wind facilities.
23 A.The wind facilities the Company proposes to repower began commercial operations
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l between 2006 and 2010.Because they were recently developed,they can be
2 economically repowered,or upgraded,with new technology that will improve their
3 efÏiciency and increase their generation output,while retaining the existing towers,
4 foundations,and energy collection systems.The existing foundations and towers,
5 although more than 10 years old in some instances,are adequately designed to
6 accommodate larger,more modern WTG equipment and have a sufficient remaining
7 useful life to economically justifythe associated investment.
8 In contrast,at facility sites developedmore than about 15 years ago,the WTG
9 equipment typically has a low generating capacity (i.e.,sub-1,000 kilowatt)and the
10 towers and foundations supporting the nacelle and rotor do not have the height or
11 design strength to accommodate the installation of modern,larger nacelles and rotors
12 capable of generatinga much greater amount of electricity per WTG.With these older
13 facilities,repowering usually involves the entire removal of the old wind turbine
14 equipment and the redevelopmentof the site with modern wind turbines that have much
15 greater generatingcapacity.This can result in significantlyfewer wind turbines needed
16 to produce an equivalent generatingcapacity,while also increasing energy output.
17 The ability to repower facilities while reusing the existing infrastructure of the
18 towers,foundations,and energy collection system is highly beneficial because the
19 energy and PTC benefits can be realized with a lower capital investment,as compared
20 to the more comprehensive site redevelopment required for older facilities.
21 Q.Did the Company's 2017 Integrated Resource Plan ("2017 IRP")evaluate
22 repowering all of the resources covered by the application?
23 A.Yes,except for Goodnoe Hills.When the 2017 IRP was developed,the Company had
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1 not assessed repowering Goodnoe Hills.Since that time,however,the Company has
2 evaluated the facility and believes Goodnoe Hills can be economically repowered
3 similar to the facilities evaluatedin the 2017 IRP.
4 Q.Why did the Company exclude Foote Creek in Wyoming from the proposed wind
5 repowering projectat this time?
6 A.As noted in the 2017 IRP action plan item la,the Company is still evaluating the
7 potential of repowering Foote Creek.Repowering this older facility would involve
8 more comprehensive site redevelopment,as described above,which is different in
9 scope than the repowering projects proposed here.If the Company determines that
10 repowering Foote Creek is economic for customers,it will pursue the appropriate
11 regulatory process for doing so.
12 Q.How many megawatts ("MW")of installed wind capacity is the Company
13 proposing to repower?
14 A.The Company is proposing to repower 12 of its 13 wind facilities,representing
15 999.1 MW of installed wind capacity.Broken down by state,this consists of eight
16 facilities in Wyoming comprising 594 MW,one facility in Oregon of 100.5 MW,and
17 three facilities in Washington comprising 304.6 MW.Detailed information about the
18 wind facilities the Company proposes to repower is included in Exhibit No.2.
19 BENEFITS OF REPOWERING INCLUDING REQUALIFICATIONFOR
20 PRODUCTION TAX CREDITS
21 Q.What benefits will customers realize from wind repowering?
22 A.Repowering the proposed wind facilities will requalifythem for PTCs,and the benefits
23 will be fully passed on to the Company's customers with the ratemaking treatment
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l discussed by Company witness Mr.Jeffrey K.Larsen.Additionally,repowering will
2 increase the amount of zero-fuel-cost energy produced from the repowered turbines
3 which will range from 13 to 35,percent depending on the facility'.It will reduce
4 ongoing operating costs as a result of replacing older WTG equipment subject to more
5 failure and maintenance issues than newer equipment.Finally,repowering the wind
6 facilities with new WTG equipment will extend the useful lives of the facilities by at
7 least 10 years,creating substantial energy benefits for customers in the future when
8 these wind facilities would otherwise have been retired from service.
9 Q.How are the repowered wind facilities able to requalify for PTCs?
10 A.On December 18,2015,Congress enacted changes to the federal Internal Revenue
11 Code that extended the full value of the PTC for wind energy facilities that begin
12 construction in 2015 and 2016.The legislation also provided for a phase-out of the PTC
13 over three years,reducing the PTC value by 20 percent for wind facilities beginning
14 construction in 2017,40 percent for wind facilities beginning construction in 2018,and
15 60 percent for wind facilities beginning construction in 2019.The Internal Revenue
16 Service ("IRS")has issued guidance that establishes a "safe harbor"for taxpayers to
17 demonstrate the year a facility will be deemed to "begin construction,"thereby setting
18 the value of the PTC.If at least five percent of the total project costs are incurred in
19 2016,then the facility qualifies under the IRS safe harbor for the full value of the PTC,
20 provided the taxpayer can demonstrate continuous-efforts to complete construction.
21 The IRS has issued additional guidance that establishes a safe-harbor for satisfying this
O I This range reflects increases under existing transmission interconnection agreements.The range is 15 percent
to 38 percent if transmission interconnection agreements are modifiedto reflect the additional capacity available
from the repowered turbines.
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l continuous-efforts standard.Under the continuous-efforts safe harbor,the wind
2 facilities must be in service by the end of the fourth calendar year followingthe
3 calendar year in which construction began.Thus,wind facilities that began construction
4 in 2016 must be in service no later than December 31,2020,to satisfy the continuous
5 efforts safe-harbor provisions.If not installed by December 31,2020,the projects must
6 satisfy IRS requirements that continuous-efforts were expended to repower the
7 facilities,which is a difficult standard to meet.
8 Q.Does the Company's repowering project qualify for the full value of the PTC
9 under these rules?
10 A.Yes.Consistent with IRS guidance,a facility owner can demonstrate that construction
11 of a facility has begun in the year in which at least five percent of the applicable project
12 costs are incurred.If wind turbine equipment is purchased and delivered in 2016,and
13 the equipmentcomprises at least five percent of the applicable project costs,a PTC safe
14 harbor is created for the wind facilities subsequently constructed.To meet this
15 requirement,the Company executed safe-harbor equipment purchases with General
16 Electric International,Inc.("GE")and Vestas American Wind Technology,Inc.in
17 December 2016,and took delivery of equipment with a value sufficient to give the
18 Company the ability to repower its entire wind fleet and qualify the repowered wind
19 facilities for 100 percent of the PTC value.
20 Q.What is the value of the PTC for wind facilities?
21 A.For 2017,wind facilities that are qualified for the PTC receive 2.4 cents per kilowatt-
22 hour,or $24 per megawatt-hour.This PTC value is adjusted annuallybased upon an
23 inflation index,and the PTC is available for energy produced during the 10-year period
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l after the wind facility begins commercial operation.
2 Q.What other requirementsmust repowered projectssatisfy to qualifyfor the PTC?
3 A.On May 5,2016,the IRS issued Notice 2016-312 ("Notice"),which provides guidance
4 on various aspects of qualifying for the PTC and whether new tax credits can be
5 claimed when wind turbines are repowered or retrofitted.The Notice generally
6 provides that the repowering costs must equal at least four times the fair market value
7 of the equipment that the owner retains from the original facility for the repowered
8 turbines to qualify for new PTCs.Thus,80 percent of the fair market value of the
9 repowered WTG must result from repowering project costs while the value of the
10 retained components cannot exceed 20 percent of the fair market value of the new
11 facility.This "80/20"test is applied on a turbine-by-turbinebasis.Each wind turbine -
12 composed of a foundation,tower,and machine head (includingnacelle,hub,and rotor)
13 -is considered a separate facility.
14 Q.Do all of the wind turbines the Company is proposing to repower meet this 80/20
15 test?
16 A.Yes.The repowering project has been scoped to ensure that the 80/20 test,which is
17 applied at the time the turbine is repowered,will be met for each turbine repowered.
18 Not all turbines at all wind facilities,however,will be repowered because the retained
19 value of the towers and foundations at certain wind turbines does not allow them to
20 meet the 80/20 test before the end of 2020,when the repowered wind facilities must be
21 completed to obtain the full PTC value.
2 The IRS Notice 2016-31 is available at:https://www.irs.gov/irb/2016-23 IRB/ar07.html.
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l Q.Which wind facilities will not have all wind turbines repowered?
2 A.Repowering at Glenrock I,RollingHills and Glenrock III,located near Glenrock,
3 Wyoming,will not include all wind turbines.At this location,32 of the 158 wind
4 turbines will not be repowered because the facilities were developedat the Company's
5 reclaimed Glenrock coal mine.These 32 wind turbines were constructed atop mine
6 tailings and required special pile foundations.These special foundations were more
7 expensive to construct than the standard foundations found elsewhere on those facility
8 sites and at other Company wind facility locations.Because the original construction
9 cost of these foundations was higher than for standard foundations,the retained value
10 of these foundations,which is based on net book value,is also higher than other
11 foundations.For these 32 wind turbine locations,the higher retained value of the
12 foundations means that repowering,while technicallyfeasible,would not qualify those
13 turbines for PTCs,which is necessary for the repowering to be economic.The
14 Company plans to repower all of the turbines at the other wind facilities discussed
15 above.
16 Q.How else has the Companyscoped the repoweringproject to maximize the benefits
17 of available PTCs?
18 A.As shown in Exhibit No.2,the majority of the wind facilities the Company proposes
19 to repower,with the exception of Leaning Juniper,are still within 10 years of their
20 original commercial online date.Thus,the PTCs from original construction are still
21 accruing to the benefit of the Company's customers.The existing PTCs for these wind
22 facilities will expire 10 years after the facilities'commercial online date.Between
23 August 2017 and October 2020,the PTCs associated with approximately 2.64 terawatt-
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l hours ("TWh")of electricitygenerated at the Company's wind facilities will expire.On
2 an annual basis,in 2017 dollars,the expiration of these PTCs represents the loss of
3 approximately $100 million per year in customer PTC benefits,as shown in Exhibit
4 No.2.
5 To maximize the benefits of the existing PTCs available from the wind
6 facilities,the Company will generally delay repowering until the original PTCs have
7 expired.The exception to this is Dunlap,where the PTCs expire in October 2020.To
8 repower Dunlap by the end of 2020,as required to re-qualify for PTCs,repowering
9 must begin before October 2020 so construction can be completed before the winter
10 season.This results in a slight truncation of the existing,original 10-year PTC period
11 for that facility.As with all of the wind facilities,however,once Dunlap is repowered,
12 it will then re-start a 10-year period where its generation is eligible for the full value of
13 PTCs.
14 INCREASED ENERGY BENEFITS FOLLOWING REPOWERING
15 Q.Once repowered,how do the energy benefits of the wind facilities increase?
16 A.Repowering will involve the replacement of the existing machine heads including the
17 nacelle hub and rotor.The new nacelles have generators that,in most instances,have a
18 greater nameplate generating capacity than the equipment that is removed.For
19 example,the nameplate of each turbine at the Wyoming facilities will increase from
20 1.5 MW to 1.6 MW,while at the Marengo facility,the generator nameplate rating will
21 increase from 1.8 MW to 2.0 MW.Details regarding the proposed wind turbine
22 upgrades,capital project costs,in-service dates,and resulting energy benefits are
O 23 shown in Confidential Exhibit No.3.
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1 In addition to the larger generators in the repoweredturbines,the Company will
2 also install larger blades.With the larger blades,the rotor-swept area of the wind
3 turbines will increase between 28 to 56 percent,depending on the type of turbine.A
4 larger rotor-swept area allows more of the wind energy flowingpast the wind turbine
5 to be captured and converted by the wind turbine into electricity.Because the size of
6 the rotors will increase,the repowered turbines will also include more robust hubs,
7 main shafts,bearings and couplings,and gearboxes suitable to handle the greater torque
8 exerted by the larger rotors.
9 Q.Will the larger blades installed with repowering increase the potentialfor avian
10 impacts at the Wyoming wind facilities?
11 A.Although the larger blades will increase the overall risk zone (rotor-swept area)of the
12 repowered wind turbines,this does not necessarily correlate with an increased risk of
13 avian impacts at existing turbine sites.The Company will continue to implement its
14 current informed-curtailment protocols after repowering to minimize avian impacts.
15 Informedcurtailment involves the shutdown of wind turbines when species of interest
16 are in the vicinity.The Company's informed-curtailment protocols avoid avian impacts
17 regardless of the swept area of the rotor.The Company performs monthly monitoring
18 at all Wyoming wind facilities and reports all findings to both the Wyoming Game and
19 Fish Department and the U.S.Fish and Wildlife Service.The Company will continue
20 this monthlymonitoring to determine if the new turbine blades cause additional impacts
21 to avian species and will engage with the appropriateagency to discuss and,if prudent
22 and practicable,implement additional avoidance,minimization,or mitigation
O 23 measures.
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l Q.How did the Company determine the amount of additional generationthat will be
2 produced from the repowered wind turbines?
3 A.The Company retainedthe engineering consulting firm of Black &Veatch,Inc.("Black
4 &Veatch")to evaluate increased energy production expected at each of the wind
5 facilities from repowering.To complete this assessment,Black &Veatch used site wind
6 data,wind turbine location data,operationalperformance data,and other available site-
7 specific information for each facility to model this increased generation.The wind
8 model also evaluated generation losses resulting from the wake losses at each turbine
9 location.Wake losses are the reduction in generation at turbines downwind of other
10 turbines due to reduced wind speed and increased turbulence in the airflow -or wake
11 -behind a turbine.
12 Q.What are the majorpower production advantages of the new equipment?
13 A.The larger rotor size and improvements in blade design of the new equipment generate
14 more power at all ranges of wind speeds.Additionally,some of the new turbines begin
15 producing power at a lower wind speed than the existing equipment;thus,the turbines
16 can produce energy during lower wind conditions in which the current equipment may
17 sit idle.Because the new turbines,at most facilities,will have an increased generator
18 capacity,the turbines will also produce more energy when wind speeds are high and
19 the turbines are at their maximum output.These power production advantages are
20 illustrated in Exhibit No.4.This exhibit compares the power curves of an existing wind
21 turbine to those of a repowered wind turbine.
O
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l Q.Why wasn't this larger equipment installed when the wind facilities were initially
2 constructed?
3 A.Wind turbine technology has continued to advance since the facilities were first
4 constructed between 2006 and 2010.The use of new composite materials has allowed
5 blade lengths to increase without adding weight,allowing for the extraction of more
6 energy from the available wind resources at the facility sites.In addition,more
7 sophisticated sensor and control systems in the wind turbines,combined with improved
8 blade pitch control systems,increase the ability of the wind turbine control systems to
9 implement load mitigation strategies on the wind turbines to reduce the loading on the
10 power train,towers and foundations.For new wind facilities,these technology
11 improvements mean that longer blades and additional generating capacity is possible
12 without a commensurate increase in cost to strengthen the turbine structural
13 components (includingthe tower and foundation).For new wind facilities,this is one
14 of the drivers towards reduced energy costs.For existing wind facilities,these new load
15 mitigation technologies mean that the existing towers and foundations are suitable for
16 the installation of larger equipment through repowering.
17 Q.How much additional energy will the repowered wind facilities produce?
18 A.As shown in Confidential Exhibit No.3,across the wind fleet,the proposed repowered
19 wind facilities are estimated to increase generation by 550,601 megawatt-hours
20 ("MWh")per year if the facilities are operated within the limits of their existing large
21 generator interconnection agreements -an increase of 19 percent.If the facilities are
22 operated at their full generating capability following a modification to their
O 23 interconnection agreements,the additional generation increases to 597,671 MWh per
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l year,or an increase of 21 percent.
2 Q.Is the Company planningto use the additional generating capacity provided by
3 the repowered wind turbines?
4 A.Yes.The Company has submitted generation interconnection applications to request
5 increased output from the repowered wind facilities and transmission service requests
6 to transmit power so that the full generation capability of the repowered facilities can
7 be delivered to customers.
8 Q.Is the repowering project economic even without the ability of the wind facilities
9 to generate at their full repowered nameplate capacity?
10 A.Yes,as Company witness Mr.Rick T.Link demonstrates in his testimony,the
11 repowering projects are economic even ifthe facilities are operated within their existing
12 transmission capacity limits.An adjustment to the large-generator interconnection
13 agreements allows the facilities to be operated at full nameplate capability following
14 repowering and simply improves the economics of the repowering project.
15 Q.With the rapid technologicaladvances in the wind industry,will the Companybe
16 able to leverage any advancements for the repowering projects before the new
17 equipment is installed?
18 A.Yes.Turbine manufacturers continue to develop new technologies and offerings to
19 improve efficiency and reliability and reduce the overall cost of wind energy -both
20 for new and repowered facilities.To the extent the Company's repowering projects can
21 leverage these advancements,the Company will evaluatethem and negotiate with the
22 turbine suppliers to incorporate new product offerings to further enhance the benefits
23 of the repowering the facilities for customers.For example,GE is developing a
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l 91-meter rotor for repowering projects like the Company's that is based upon the
2 proven designs of its existing rotor offerings.This new rotor will be compatible with
3 the safe-harbor equipment the Company purchased in December 2016,and with the
4 nacelles the Company is purchasing as follow-on equipment consistent with the
5 contract with GE.This new rotor,if it can be applied to the Company's repowering
6 project,would further increase the amount of energy produced as a result of
7 repowering,resulting in additional customer benefits.
8 REDUCED ONGOING OPERATIONAL COSTS FOLLOWING REPOWERING
9 Q.Aside from increased generation and the associated PTC benefits,what other
10 benefits will be realized with the repowering project?
11 A.The repowering project will lower the ongoing costs of operating the existing wind
12 facilities.The Company's turbine-supply contracts for repowering,consistent with
13 wind industry standards for new equipment,will include a two-year warranty on the
14 new equipment.This will reduce capital costs associated with replacing or refurbishing
15 the equipment currentlyin service.Additionally,the new turbine equipment associated
16 with repowering,will obviate,to a large extent,capital costs associated with major
17 turbine component replacements and refurbishments (generators,gearboxes,blades,
18 and small components).After the two-year warranty period for the new equipment
19 expires,these costs are expected to be lower than the costs for the current equipment
20 that has now been in service for up to 11 years.Further,capital costs will be reduced
21 before repowering as the investment horizon for the existing wind turbines closes and
22 various capital replacements no longer make economic sense given the short remaining
23 installed life of the turbines to be repowered.
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l Q.Will the Company's reduced capital investments during the transition to
2 repowering cause a reduction in the generation from the facilities?
3 A.Yes,before repowering is complete,some of the existing turbines may experience
4 component failures that render them unable to provide economic service.It will be
5 more economic for customers to idle these turbines than repair them given the short
6 period before repowering.As a result,the Company estimates that generationfrom the
7 wind facilities targeted for repowering will be reduced before repowering.These
8 pre-repowering generation impacts are factored into the economic analysis.
9 Q.Will the new equipment address any other operational cost issues?
10 A.Yes.In addition to the reduced capital run rate of the new equipment in its early years
11 after installation,repowering will avoid costs from replacing certain major turbine
12 components that are experiencing high failure rates.One category of avoided costs
13 relates to failures of certain models of gearboxes found in the Wyoming wind fleet and
14 Leaning Juniper and Marengo.These gearboxes,which are original equipment from
15 the manufacturer,are experiencing high failure rates compared to other models of
16 gearboxes installed in WTGs at these facilities and elsewhere within the wind fleet.
17 Consequently,the Company has experienced increased capital costs in recent years to
18 address the gearbox failures,and these models are no longer being re-installed as long-
19 term replacement equipment after failure,given their poor historical performance.
20 Q.Why are these gearbox failures significant?
21 A.These gearbox failures generally cannot be repaired "up-tower."The repair cannot be
22 completed within the nacelle without removing the damaged equipment by crane.
23 These failures cost approximately $400,000 per occurrence,includingequipment and
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1 labor costs to purchase and install a replacement gearbox and the costs of mobilizinga
2 large crane to the site to remove and replace the equipment.These costs also do not
3 account for the lost generation from the time the turbine is down until the repair is
4 completed.
5 Q.How many gearbox failures of this type are expected if there is no repowering?
6 A.There are 230 of these gearbox models remaining in the wind fleet,and the Company
7 anticipates that all of these remaining gearboxes will fail within the next 15 years.
8 Q.Will repowering completely address these gearboxes with shorter-than-
9 anticipated service lives?
10 A.No.Ten of the 32 wind turbines that will not be repowered at Glenrock I,Glenrock III,
11 and RollingHills have these gearbox models that will need to be replaced,which is
12 factored into the economic analysis.Followingrepowering,these gearboxes -as well
13 as potential failures of other gearbox models at the non-repowered units -can be
14 replaced with those removed from the existing turbines as part of the repowering effort,
15 reducing the repair costs of the remaining gearboxes.The cost savings of doing so,
16 however,have not been factored into the Company's economic analysis because the
17 Company is still evaluating how best to realize value for customers from the removed
18 equipment.
19 Q.Are other significant capital costs avoided with repowering?
20 A.Aside from the gearbox issues,repowering will also avoid ongoing capital expenditures
21 related to blade costs at Goodnoe Hills.Blade expenditures at this facility represent
22 approximately 60 percent of the budgeted capital costs associated with blade failures
23 and refurbishments across the Company's wind fleet,even though Goodnoe Hills
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l accounts for only seven percent of the turbines.Repowering is expected to bring blade
2 costs for that facility in line with the Company's expenditures at its other facilities,
3 resulting in reduced capital costs to keep the wind fleet meeting its operational
4 performance targets.
5 Given these ongoing gearbox and blade failure costs,repowering is particularly
6 attractive because repowering avoids significant forecast capital expenditures to
7 maintain turbine production.This addresses the predicted turbine failure,replaces the
8 turbine equipment with new equipment that extends the asset life,and provides the
9 benefit of increased generation from the turbine,while requalifyingthe wind turbine
10 for PTCs for another 10-year period.
11 Q.Will the new repowering equipment have similar failure issues as the old
12 gearboxes?
13 A.No.The gearbox models in the fleet that are experiencing high failure rates will not be
14 included in the equipment installed for repowering because the gearbox specifications
15 for the new equipment differ from the existing equipment.Thus,the Company does not
16 expect to see these same gearbox models and their attendant reliability concerns.
17 Further,the equipment that will be installed has evolved from the product lines of the
18 existing turbines,rather than arising from new product offerings.Thus,the turbine
19 suppliers have presumably learned from past experience with these turbine models and
20 made adjustments in their designs,specifications,and choice of subcomponent
21 suppliers to enhance turbine reliability.Because of the warranty service requirements
22 in the turbine-supply contracts and because the turbine suppliers are often under long-
23 term service agreements for the turbines they supply,the turbine suppliers have an
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l incentive to improve the reliability of their turbines.
2 MAINTAINING TRANSMISSION SYSTEM RELIABILITY
3 Q.With the high concentration of wind in eastern Wyoming,and the increased wind
4 turbine capacity from the repowering project,what measures are being taken by
5 the Companyto assure continued transmission system reliability?
6 A.In addition to adding new transmission infrastructure necessary to support the new
7 wind resources that are the subject of the concurrently filed application for a Certificate
8 of Public Convenience and Necessity ("CPCN"),the Company has identified the need
9 to add two features to the wind turbine capabilities of the repowered facilities that will
10 improve the reliability of the transmission system for eastern Wyoming.These
11 reliability features will provide added support for system voltages during a wide range
12 of operating conditions and increased system inertia to provide needed transmission
13 system support during under-frequency system events.3 These two features are
14 summarized below and will be installed on the repowered units of the GE wind fleet in
15 Wyoming:
16 The WindFREETM Reactive Power feature has been developed by GE for wind
17 turbines to provide smooth fast voltage regulation by delivering controlled
18 reactive power through all operatingconditions.By supervising individual wind
19 turbines,the WindCONTROLTM System ensures that the reactive power
20 performance of a wind power plant can meet-and often exceed-the
21 performance of a conventional (non-wind)power plant.Even when wind
22 turbines are not generating active power,GE's wind turbine generators
'Under-frequency events occur when imbalances in system generation resources and load cause transmission
system frequency to drop below 60 hertz,which can result in load shedding to restore system frequency.
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l equipped with the WindFREETM Reactive Power control feature can provide
2 reactive power.The provision of continued voltage support and regulation
3 provides grid benefits not possible with conventional generation,while
4 mitigating adverse voltage impacts of wind turbines being off-line due to wind
5 conditions.This feature can eliminate the need for grid reinforcements
6 specifically designed for no-wind conditions,and may allow for more economic
7 commitment of other generating resources that will enhance grid security by
8 reducing the risk of voltage collapse.
9 The WindINERTIATM COntrol has been developed by GE to provide an inertial
10 response capability for wind turbines that is similar to that of conventional
ll synchronous generators during under-frequency grid events.By utilizing the
12 mechanical inertia of the rotor,GE has designed the WindINERTIATM pOWCT
13 pulse characteristics to provide a five percent to 10 percent increase in turbine
14 power over operational wind speeds.The duration of the power pulse is up to
15 several seconds and benefits the grid by allowing other non-wind power
16 generation assets time to respond by increasing power production.
17 Q.Are these features part of the current Wyoming GE wind fleet?
18 A.No,but with the additional capacity from repowering,and the increased amount of
19 wind generation anticipated as part of the Company's current CPCN application,the
20 Company believes these features will provide important system support capabilities
21 after the facilities are repowered.
22 Q.How will these features benefit customers?
23 A.These features will improve transmission system reliability and will allow the
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1 Company greater flexibilityin managing the transmission system in Wyoming.These
2 features should defer the need to separately provide for transmission system voltage
3 support through the construction of synchronous condensers or static VAr (volt-amp
4 reactive)compensators.
5 Q.Have these reliability and deferred transmission system support costs been
6 factored into the economic analysis of the repowering project?
7 A.No,these customer benefitsare not currentlyincluded in the economic analysis because
8 transmission studies are needed to quantify these benefits as compared to other
9 alternatives.The Company is currentlyundertaking these studies.
10 EXTENSION OF WIND FACILITY ASSET LIFE AFTER REPOWERING
11 Q.What is the current asset life of the wind facilities that will be repowered?
12 A.All of the existing wind facilities are currentlybeing depreciated assuming a 30-year
13 asset life.Thus,the facilities the Company plans to repower are currentlyscheduled to
14 be retired between 2036 and 2040.
15 Q.Will repowering the wind facilities extend their useful operating lives beyond the
16 currently planned retirement dates?
17 A.Yes,repowering the wind facilities will extend their life an additional 30 years from
18 the repowering date,extending their useful lives by at least 10 years.
19 Q.How will repowering extend the useful life for an additional 30 years?
20 A.The repowering projects are being designed by the turbine equipment suppliers to meet
21 the same design requirements that apply to complete wind turbine generators used in
22 new wind facility construction.The wind turbine equipment suppliers are contractually
23 required,as would be the case with a new wind facility,to have their wind turbine
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l designs for the repowering projects certified by an independent third party to ensure
2 that they meet or exceed applicable International Electrotechnical Commission ("IEC")
3 design standards used in the wind turbine industry.These design standards are intended
4 to ensure that the equipment is appropriate for the site conditions and will perform
5 satisfactorily over the standard design life.
6 Q.What factors will be independentlyreviewed to assess and certify the design?
7 A.The third-partydesign assessment evaluates the site-specific load assumptions based
8 upon the climactic conditions at each facility and will assess the control and protection
9 systems for the wind turbines and their ability to meet the site design conditions.It will
10 also assess the electric components,the rotor blades,hub,machine components (i.e.,
11 drivetrain,main bearing and gearbox),and the suitability of the existing tower upon
12 which the new wind turbine equipment will be installed.
13 Q.Does the design certification also evaluate the ability of the existing foundations
14 to handle the loads associated with the repowered turbines?
15 A.No.The design certification will assess the design loads and the design assumptions
16 regarding the ability of the new turbines and the existing towers to handle those loads.
17 But as with new wind facility development,the facility owner must provide a
18 foundation suitable to handle the loads imparted by the tower on the foundation.
19 Q.Has the Companyreviewed the foundations to ensure they are capable of handling
20 the new turbines?
21 A.Yes.The Company retained Black &Veatch to evaluate the ability of the existing
22 foundations to handle the loads of the repowered turbines.For the Wyoming facilities
23 and Marengo I and Marengo II,which have been fully designed,Black &Veatch's
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l evaluation indicates that the existing foundations are suitable for the repowered
2 turbines.For Leaning Juniper and Goodnoe Hills,foundation load evaluationshave not
3 yet been completed because those facilities are still under design review,which is
4 expected to be completed by this fall.The suitability of the foundations will be
5 confirmed when the design process is completed for those facilities and before
6 executing contracts.Because of the load-mitigation controls now available with newer
7 equipment,the future foundation loads at some of the facilities,even with the larger
8 equipment,are less than the original design loads the foundations were engineeredto
9 withstand.
10 Q.Has the Company evaluated the foundations to determine if they are suitable for
11 an additional 30-year service life followingrepowering?
12 A.Yes,for the foundations in which fatigue loading is a controlling design variable,and
13 for which foundation load specifications are now available,the Company's consultant
14 assessed the ability of the foundations to handle the estimated fatigue loading
15 anticipated from an additional 30-year life followingrepowering and determined the
16 foundations are able to accommodate the additional loading.
17 PROJECT CONTRACT STATUS AND CONSTRUCTION SCHEDULE
18 Q.What is the status of contracting related to the proposed repowering projects?
19 A.For the facilities that will be repowered with GE equipment,the Company is
20 negotiating a turn-keymaster retrofit contract with GE to perform the repowering at a
21 fixed price per turbine.This fixed-price contract will provide the Company the ability
22 to execute retrofit work orders for the facilities to be repowered and will significantly
23 mitigate cost uncertainty related to the facilities.For the facilities that will be
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1 repowered with Vestas equipment,the Company executed a master turbine-supply
2 agreement on December 28,2016,that facilitates future equipment supply in support
3 of repowering,and will negotiate an installation contract with Vestas or with other
4 qualified wind energy contractors.
5 Q.When must the Company execute contracts with the equipment suppliers to
6 proceed with the repowering projects?
7 A.Under the terms of the master retrofit contract being negotiated with GE,for
8 repowering projects to be completed before March 31,2020,the Company must notify
9 GE of its intent to execute a retrofit work order eight months before the date requested
10 by the Company for commissioning of the first retrofitted unit for any facility.For
11 repowering projects to be completed on or after March 31,2020,the Company must
12 notify GE of its intent to execute a retrofit work order 12 months before the date
13 requested by the Company for completion of commissioning of the first retrofitted unit
14 for that project.Similarly,the Company will need to execute a contract with Vestas 12
15 months before equipment deliveries begin for a particular repowering project.The
16 Company's construction schedule has been developed to optimize the PTC benefits of
17 the facilities and ensure that the facilities can be constructed during the low-wind
18 season -between March and November.To meet the equipment supply lead times
19 requires contract execution beginning in early April 2018.Allowingtime to finalize
20 and execute the repowering contracts,the Company must be in a position by March
21 2018 to proceed with these facilities.A detailed project schedule for the repowering
22 projects is attached as Exhibit No.5.
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l Q.Why is there such a long lead time between the execution of retrofit contracts and
2 the time that turbines can actuallybe repowered or delivered to the site to support
3 the repowering projects?
4 A.Like all equipment suppliers in the wind industry,both GE and Vestas are currently
5 responding to unprecedented demand to supply equipment for wind facilities that are
6 slated to be installed before December 31,2020,to qualify the facilities for the full
7 value of the PTC.Because this equipment is manufactured to order,long lead times are
8 required to ensure manufacturing capacity is available and to meet specific project
9 deliveryrequirements.In some cases,additional manufacturing capacity may need to
10 be sourced or constructed to meet the equipment supply demands.
11 Q.Aside from manufacturinglead times,are there other drivers for the lead times
12 associated with constructing these facilities?
13 A.Yes,in addition to the manufacturing constraints,lead times are necessary to ensure
14 that construction contractors and work crews and cranes are available to install the
15 repowering equipment.Because of the large-scale efforts involved in repowering the
16 facilities,these resources must be secured well in advance of project construction to
17 ensure project schedules are met.Also,both skilled labor resources and construction
18 cranes are likely to be in short supply given the amount of activity involved in new
19 wind facility construction and wind repowering projects across the country that must
20 achieve commercial operation by December 31,2020,to meet the safe-harbor rules
21 summarized above in my testimony to qualify for the full value of the PTC.Thus,
22 securing these necessary resources well before beginning these time-sensitive projects
23 mitigates both cost and schedule risk for these beneficial projects.
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l Q.How has the Company designed the repowering projects to work within these
2 constraints?
3 A.As discussed above,the 2019 construction schedule for most of the facilities,other than
4 Dunlap,optimizes the existing PTC benefits of the facilities and also allows for their
5 construction,generally,more than a year in advance of the December 31,2020 deadline
6 to achieve commercial operation.
7 Q.What permittingrequirements apply to repowering projects and what steps has
8 the Company taken to acquire any needed regulatory approvals for the
9 repowering projects?
10 A.Because repowering does not increase the footprints of the existing wind facilities,and
11 since the facilities are operating under current local,state and federal permits and
12 authorizations,the permitting requirements for repowering are minimal.Because the
13 facility footprints are not altered and since repowering is unlikely to disturb additional
14 acreage not already covered by existing permits,additional standard construction
15 permits,such as storm-water permits and fugitive dust permits,are likelynot required.
16 Throughoutthe repowering process the Company will ensure that the requirements of
17 the existing permits and authorizations are met,and will provide needed information to
18 permitting authorities to amend or modify the existing permits for the facilities to
19 reflect the change in turbine equipment,if needed.This involves assessing whether
20 amendments to the existing Wyoming Industrial Siting Division ("ISD")permits are
21 required to reflect the new wind turbine equipment installed in Wyoming,as well as
22 similar processes to amend existing county authorizations in other states,as well as
O 23 modifications to Federal Aviation Administration authorizations to reflect the increased
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l height of the turbine blades.
2 The Company has engaged with the Wyoming ISD to determine requirements
3 for performing the repowering activities and based on those discussions,no additional
4 permitting or permit amendments are anticipated,as the repowering efforts can be
5 performed as operations and maintenance activities under the existing permits.
6 Additionally,the Company has spoken with county authorities to determine local
7 permitting requirements.Based on those discussions,the Company has identified the
8 need for new buildingpermits and/or amendments to existing county authorizations in
9 several counties.The Company will obtain these permits/amendments before
10 beginning the repowering project.The Company will continue to work with the
11 appropriate regulatory and permitting authorities to provide information necessary to
12 obtain any needed permits or to process any amendments or modifications to the
13 existing facility permits.
14 DISPOSITION OF REMOVED EQUIPMENT
15 Q.What is the Company planningto do with the existing equipment that will be
16 removed?
17 A.The Company has not yet determined how it will dispose of this equipment,but will
18 explore various options to realize the greatest customer benefit from the equipment.
19 Because the Company will be replacing the entire machine head (nacelle,hub,and
20 rotor)of the repoweredturbines,the removed equipmenthas the potential to be reused
21 and redeployed to another site location.This may make the equipment valuable for
22 redeployment elsewhere in the country,or perhaps elsewhere in North America.
23 The Company understands that a significant number of turbines of all makes
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l and models will be repowered before 2020.This creates potential value for the removed
2 equipment as spare parts for similar type turbines that will remain in service.This also
3 makes it difÏicult,however,to use current market pricing for used turbines as a proxy
4 for the potential salvage value of the equipment given the large number of repowered
5 turbines and associated spare parts that will become available in the next several years.
6 Because not all the Company's GE turbines will be repowered,some of the equipment
7 can potentiallybe used as spare parts to service the non-repoweredturbines.
8 Q.Given the uncertainty of the market for the removed equipmenteither for
9 redeployment or as spare parts,what was assumed in the economic analysis for
10 the salvage value of the equipment?
11 A.The Company did not assume any salvage value for the removed equipment in its
12 economic analysis,which is a conservative assumption given the potential for the
13 equipment to be reused,repurposed as spare parts,or merely salvaged for scrap metal
14 value.To the extent the Company determines any salvage value by reusing the
15 equipment,or by selling or auctioning it to third parties,the Company will pass through
16 any and all additional financial benefits to its customers.
17 SUMMARY AND CONCLUSION
18 Q.Please summarize your testimony.
19 A.The wind repowering project presents the opportunity to leverage prior investments in
20 the wind fleet and enhance its future value for customers.By executing wind turbine
21 equipment purchases in late 2016,the Company was able to secure the opportunityto
22 repower and renew the wind fleet and deliver the maximum value of these facilities to
23 customers by qualifying for the full value of the PTC.Repowering now provides a
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l unique opportunity to return the Company's wind turbines to like-new condition while
2 enhancing their performance and avoiding expenditures that maintain but do not
3 enhance the value of the wind fleet.
4 By incorporating recent technical advances that allow for longer blades to be
5 installed on the existing towers and foundations,repowering will result in significantly
6 more low-cost energy for customers -550 TWh annually,or an increase of 19 percent.
7 With increases to the allowable transmission capacity of the facilities,these generation
8 benefits will be 598 TWh,or an increase of 21 percent.If new equipment now being
9 developed by GE for repowering projects can be successfully applied to these facilities,
10 generation will be further increased with resulting benefits to customers.Further,
11 repowering with new equipment will extend the asset lives of the wind facilities by at
12 least 10 years -allowing the wind facilities to continue serving customers well into
13 the future.
14 Finally,these benefits from repowering can be delivered to customers while
15 reducing rather than increasing costs to customers,as further described by Company
16 witness Mr.Link.
17 Q.What is your recommendation to the Commission?
18 A.I recommend the Commission enter a finding that the decision to repower certain wind
19 facilities is prudent and in the public interest and approve the Application as filed,
20 including the request for continued cost recovery of the wind equipment that will be
21 replaced and the proposed rate-making treatment for the new costs and benefits of the
22 wind repowering project.
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l Q.Does this conclude your direct testimony?
2 A.Yes.
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