>>James: Welcome to everyone. I'm James Jensen, today's webinar chair, and a contractor supporting the Office of Indian Energy Policy and Programs, Tribal Energy Webinar Series. Today's webinar, titled, "Fundamentals of the Tribal Energy Industry," is the first webinar of the 2019 DOE Tribal Energy webinar series. Let's go over some event details.

 

Today's webinar is being recorded and will be made available on DOE's Office of Indian Energy Policy and Programs website along with copies of today's PowerPoint presentations. They will be available in about one week. Everyone will receive a post-webinar with the link to the page where the slides and recording will be located.

 

Because we are recording this webinar all phones have been muted. We will answer your written question at the end of both the first and final presentation. You can submit a question at any time by clicking on the question button located in the webinar control box on your screen and typing your question. Let's get started with some opening remarks from Lizana Pierce.

 

Ms. Pierce is a senior engineering deployment supervisor in the office of Indian Energy Policy and programs, to be stationed in Gulden, Colorado. Lizana is responsible for managing technical assistance and education and outreach activities on behalf of the office implementing national funding opportunities, and administering the resultant Tribal Energy project grants and agreements. She has 25 years of experience in project development and management and has been assisting tribes in developing their energy resources for nearly 20 years. She holds a bachelor's of science degree in mechanical engineering from Colorado State University and pursued a master's in business administration through the University of North Colorado.

 

Lizana, the virtual floor is now yours.

 

>> Lizana: Thank you, James, and hello everyone. I join James in welcoming you to the first webinar of the 2019 series. This webinar series is sponsored by the Office of Indian Energy Policy and Programs, otherwise referred to as the Office of Indian Energy for short.

 

The Office of Indian Energy directs, fosters, coordinates and implements energy planning, education, management and programs that assist tribes with energy development, capacity building, energy infrastructure, energy costs, and electrification of Indian lands and homes. To provide this assistance our deployment program works within the Department of Energy across government agencies and with Indian tribes and organizations to help Indian tribes and Alaska Native villages overcome the barriers to energy development.

 

Our deployment program is composed of a three-prong approach consisting of financial assistance, technical assistance and education and capacity building. This Tribal Energy webinar series is just one example of our education and capacity-building efforts.

 

This webinar series, part of the Office of Indian Energy's efforts to support fiscally-responsible energy business and economic development decision making and information sharing among tribes is intended to provide attendees with information on tools and resources to develop and implement Tribal Energy plants, programs and projects. It's also intended to highlight tribal energy case studies and identify business strategies that tribes can use to expand their energy options and develop sustainable local economies.

 

Given that today's webinar is the first of the 2019 series we decided to take a step back and cover energy industry basics to lay a strong foundation for the rest of the series. So this webinar is intended for individuals who are new to energy, and where understanding the energy jargon and energy concepts can be barriers to getting started. The webinar will provide individuals with an introduction to energy and familiarize attendees with important concepts and terminology. Attendees will also learn about publicly-available resources that can help build their energy knowledge base. We hope the webinar and webinar series is useful to you and we also welcome your feedback, so please let us know if there are ways that we could make the series better.

 

And with that I'll turn the virtual floor back to James.

 

James?

 

>>James:

 

 

>> Female: Lizana, it looks like we lost James.

 

 

 >> Lizana: That's what I was wondering. Okay, so --

 

 

 >>James: So James is back. I apologize for that. Can you hear me?

 

 

>> Lizana: Yes. Thank you. Sorry about that, everyone.

 

 

 >>James: All right, thank you, Lizana.

 

On today's agenda we have three presentations. I will introduce all of the presenters now. Our first presenter is Pete Miller. Pete started his career in the electrical utility industry in 1986, after completing four years of service in the United States Marine Corps. Working at Southern California Edison Company he worked his way up to electrical systems operations from substation operations in the Long Beach district to a transmission system operator at a major 500 kV intertie between Southern California Edison and PG&E out in the High Desert of Los Angeles County.

 

As California transitioned to a deregulated utility, a first in the nation, all utilities in the states shuffled assets around in an attempt to find a new normal. After the shuffle Pete found himself in Anoka, Minnesota, working for a rural electric cooperative. Shortly after that Pete was hired by the Department of Energy Western Area Power Administration in Watertown, South Dakota, the Upper Great Plains region, as a transmission system operator working with the Federal Power System in Montana, North Dakota and Northern Minnesota. After a short stay in South Dakota Pete transferred to WAPA's Sierra Nevada region office in Folsom, California.

 

Since 1998 Pete has held various positions in the operations office generation of energy scheduling e-tagging system and transmission switching. Currently Pete is operations trainer. Pete has been involved in DOE ESF 12 slash FEMA program for the last ten years as a field responder and regional coordinator to assist FEMA in federal-declared national emergencies with a focus on energy infrastructure system restoration. Pete has been a NERC-certified system operator for over 20 years. Pete will not be able to stay on for the entire webinar so we will answer questions for him immediately after his presentation.


Following Pete we will hear from Tony Jiménez. Tony has been at NREL since 1996. He has experience in performance and economic modeling of wind, PV and hybrid systems, system projects, project pre-feasibility analysis, wind data analysis, economic impacts analysis and project management. His current assignments include coordinating NREL activities under the DOE Tribal Technical Assistance Program and providing support to various DOE projects.

 

Past NREL work includes leading the small wind regional test center project in the analysis of the potential economic impacts of large-scale renewable energy development, administration of the Native American anemometer loan program, renewable energy project pre-feasibility analysis on behalf of a variety of clients, and support for the Air Force in its efforts to increase the resiliency of the electrical energy infrastructure on Air Force installations.

 

Tony is a retired Army Reserve engineer officer. In his two overseas deployments he served as a project manager with the U.S. Army Corps of Engineers in Iraq and as director of public works for U.S. Army installations in Kuwait.

 

Our final presenter will be Travis Lowder. Travis is a project manager with the Integrated Applications Center at the National Renewable Energy Laboratory focusing on policy and finance, distributed energy resource innovation, and decision support for policy makers via analysis and training. Prior to joining the Integrated Applications Center Travis served as the head of policy and regulatory affairs for a national solar company, coordinating the company's internal strategy with the dynamics of the external solar market. He began his career as an analyst with NREL's Strategic Energy Analysis Center performing both qualitative and quantitative analyses on a range of renewable energy technologies and markets. Travis has a master's of arts in international development from the University of Denver.

 

So with that we will jump to our first presenter, Pete Miller's presentation. Pete, as soon as it comes up you're welcome to start.

 

>> Pete: Good morning everyone. My name is Pete Miller; I work for Western Area Power Administration in Sierra Nevada Region in Folsom, California. I'm going to talk to you today about interconnected system operations and the people who operate it, and the equipment you might find in a substation and power plants. Next slide.

 

I have one objective today:  I would like for you guys to be able to obtain a better understanding of how the electrical grid functions in order to ask the right questions and to formulate a plan to become an active member of the interconnected electrical grid.

 

Here's a basic structure of the electrical system. Starting on the left side of the screen you can see we have a power plant, and from there they create electricity, and then it's transformed -- normally we create electrical, generally speaking, around 13.8 kW and then it steps up through the transformer, up to a transmission voltage, and that voltage can range between 230 to 115, 69 kV, and from there it's tapped off to the transmission customer and it eventually heads to a substation. And from that substation the voltage is stepped down to a different level, and from that point it's sent out to the end user.

 

So what we're going to talk about today is some of those pieces of equipment that is outlined in this graphic, and some of the folks that are responsible for operating the bulk electric system reliably.

 

Overall here's a picture of the federal government's involvement in the electrical system. WAPA is just one of the four power marketing administrations. There's another organization out there called Tennessee Valley authority. It's not on this slide but we have, in the lower right-hand corner we have the Southeast Power Administration, and then we have, in the middle of the country there we have the Southwest Power Administration, their headquarter's based out of Oklahoma. And then in the upper left we have Bonneville Power Administration. And of course in the middle in blue there we have the Western Area Power Administration, and our headquarters are in Lakewood, Colorado.

 

So here's the different regions of WAPA. Like James had said, I started my career with DOE in the Upper Great Plains region, and they're headquartered in Billings, Montana. Their operations office is Watertown, South Dakota. Our headquarters you can see in Lakewood, Colorado, and then we have the Rocky Mountain Region operations control center in Loveland, Colorado. And then we have the CRSP office, and they're based out of Utah. Then we have the Desert Southwest Region and they're based out of Phoenix. And then my region is on the left there, Sierra, Nevada region and we're headquartered in Folsom, California.

 

Here it is:  here is North America. Basically these are the four interconnections. And so over here on the west we have the WECC, the Western Interconnection, and then we have the Eastern Interconnection, and then we have the Quebec Interconnection and then we have the Electric Liability Council of Texas. Texas is separate from the rest of the United States, and back in the old days, whatever that means to you, they tried to run a transmission line from North Carolina to California. They were unsuccessful. The voltage was virtually non-existent at the other end of the line. It's just impossible to do. So engineering folks, back in the day, decided that we should break out interconnection into different pieces.

 

Now between the Western Interconnection and the Midwestern part of the United States there's a handful of DC converter stations. Our electrical system has a three-phase AC system. You're learn a little bit more about that in the next presentations, but basically we use alternating current electricity. And we want to transfer power from the West to the East. And so we do it through a DC converter station. When I was in Watertown, South Dakota, there was a Mile City, Montana DC converter station that I was responsible for. And you can transfer on that particular station from zero to 200 megawatts across that path. And so we've got -- I believe there's nine between the West and the East, different DC ties. And there's a couple of DC ties between Texas and the Eastern Interconnection.

 

So who is it that's responsible for operating the electrical system? The one person I left off of here is the lineman, and it's a very notable and hard profession and the linemen are great people, but I wanted to focus today on the people who actually operate it. Linemen and the electricians are responsible for repairing the equipment and they do great work, but the handful of people I'm talking about will be the transmission system operator, the automation generation control operator, the transmission scheduling and security operator, the distribution system operator, and the generation operator, and then there's this position that came in about 20 years ago called the reliability coordinator. And I'll just touch a little bit on some of their responsibilities.

 

The transmission operator, he's the guy that is responsible for the transmission, the substation side of the house and the higher voltage type of equipment. Keeping the transmission substation equipment at peak performing capability is the number two priority. His number one priority is the safety of the worker. The safety of the public and the safety of the worker. And what I mean by the field worker I mean the electricians, meter relay technicians and the line crews.

 

Monitoring the bulk electric system, enabling personnel to respond immediately to emergency situations so that uncontrolled separation will not happen with the loss of a single element. So what does that really mean? Say, for example, if we had a 500 kV line that trips we operate our system to keep the loss of one line in an electrical system from causing a cascading outage, or to cause the system to go unstable. Especially if the next line could create that stability issue the TSO makes sure that the system is ready for the next line loss.

 

The automatic generation control operator, that person has a view of the system, and I like to compare the AGC operator like a pilot flying the plane. And the pilot is the heart of the plane and the pilot is charged with maintaining the balance of the plane. And so the automatic generation control operator's job, that balance is the balance of the bulk electric system. That means the balance of load and generation. And so the load is the electricity that our customer's use and it's generated from hydro plants primarily, and also the Army Corps of Engineers' hydroelectric facilities. So load and generation must always be balanced.

 

The trick here for the AGC operator is balance at 60 Hertz, 60 cycles. In the United States the standard to maintain that balance of load and generation is at 60 cycles. And I can tell you that load and generation will always be balanced, but the key is to keep it at 60 cycles. If it settles at 58 we're going to damage equipment.

 

Here's a graphic, so what preference would you prefer for balance? Like I said, the AGC is like flying a plane:  on the left side of the wing you'll have the scheduling side of the house; on the right side I have the transmission. If all of the schedules are flowing like they're supposed to and the transmission lines are in service we're flying perfectly. When we lose a line or we lose a generator then we start to have a flameout and the plane starts to tilt. I don't know if anyone's experienced a tilting plane. I have, in the Marine Corps. It was not a good experience.

 

But how we do that in real time operations you can see on the lower left-hand side of the screen, that's our ACE chart. So you can see a faint red line, and that's the zero line. As long as that green line squiggles up and down across that red line as time passes we're doing pretty good. If that line starts to go below that red line and goes south for quite some time we're in a dive and the system might go a little unstable. So his job is to keep that balance of load and generation that's going across that zero line as time progresses through the day.

 

The first position you'll find in every utility control room is the transmission scheduling and security. That person is responsible to make sure that energy schedules flow on the transmission line and the customers have the right to flow power across the transmission system. Energy scheduled to flow on the transmission system is scheduled using electronic tag system referred to as an e-tag. Energy moved across boundaries with other entities must also be e-tagged.

 

If a tag is missing or incorrect the system will start to go out of balance, if you can think about that graphic where the airplane starts to dive a little bit one way or the other, and so these tags are fed into that automatic generation control system, and that's how we keep the balance on the system.

 

Another important individual that helps maintain reliability of the bulk electric system is the distributor operator. A lot of times these are municipalities and rural electric cooperatives and they provide and operate the wires between the transmission system and the end use customer. For end use customers who are served by transmission voltages, sometimes the transmission operator and the distribution provider or operator can be the same thing. For example, at Southern California Edison you have transmission operators and distribution operators and they work for the same company. In that example that's an investor-owned utility.

 

And then we have the generator operator. Like I say for us at WAPA it's either the Bureau of Reclamation or the Army Corps of Engineers. That's the entity that operates the generating units and performs the functions supplying the energy through interconnected operations services, and that's also the entity that owns and maintains the generating units.

 

And then the last position I want to talk about is the reliability coordinator. That's the guy who's responsible for the overall safe, stable and reliable operations of the bulk electric system. They have a wide area view of the bulk electric system and they have a special set of tools and processes and procedures and they also are given the authority by NERC to prevent or mitigate emergency operations systems in both the next day analysis and real time operations. So for example in the WAPA system if we need to take a transmission element out of service we will coordinate that with our neighbors and also with the reliability coordinator.

 

So here's some typical voltage levels that you will find on the grid. Let's start at the top. We have the extra high voltage. Here on the Western Interconnection our EHV system is 500 kV and some 345 kV. I know that in the Eastern Interconnection they have some 76.5 kV. The reason we have an extra high voltage system is so we can transfer more power greater distances. Every electrical circuit has some type of loss, and to help minimize those losses we have to crank up the voltage to a higher level. Because power plants traditionally are a long ways away from the end use customer.

 

And then we have just your high voltage transmission system, 230 kV, 161, 138, 115, 72 kV. And again, this is not all-inclusive; there's some other oddball voltages you might see out there. Then you have a sub-transmission system which is 69 kV, 60 kV, 34.5 kV. And then we kind of get down into the neighborhoods:  21 kV, 16 kV, 13 kV, 12 and 4 kV. Again, this is not an all-inclusive list.

 

I know this is kind of hard to read. I apologize for that. But this is typical equipment that you'll find on the grid. On the left I have the category of substations and then on the right I have lines and power plants. So you can see that some of the equipment, same type of equipment you'll find in the substation that you'll find on a transmission line or in a power plant. For example, in substations you'll find reactors -- you can find reactors out on lines and you can find reactors in power plants.

 

You can look at this list and you can hop on Google and you can google some of these devices to take a look and see what their functionality is all about. A capacitor, for example, if you put a capacity in service, whether you're talking a line, a substation or a power plant, that's going to increase the voltage on a line. And if you remove that from service it's going to lower the voltage on a line or a piece of equipment.

 

So here's a physical perspective. This is a picture of a little pumping plant near Fresno, California. The line crew is in a bucket and then he snapped this photo for me. So the field worker out there who's working on equipment this is what it looks like to them. The line comes in at the top of the screen, it kind of goes left and goes through a circuit breaker, and then is split on a little jack bus and then it feeds down to a pumping plant where there's a couple of transformers.

 

Here's what we call a single line perspective. That's the same as what we just saw in the last picture. And so on the left side of the screen you can see a couple of pole switches, pole switch 17 and 19, it's a 70 kV line, comes in through some metering potential transformers and current transformers so we can see how much load's flowing through there, and then 1154 is an example of a circuit breaker, and then a bypass disconnect, and then it swings over to the right, and there we have a couple examples of some 70 kV to 4.16 kV transformers down to the pumping plant. This is what your system operator looks like when he is going to be working on the equipment.

 

So almost every utility has a SCADA. It stands for Supervisory Control and Data Acquisition. It's part of an energy management system. And what a SCADA system does for you, it allows the system operators to operate the equipment remotely. This is a completely different station; this is not the one we looked at in the two previous slides, but here you can see that we can select the common thing we want to see is you see the red squares? Those are circuit breakers. So the system operator can click on that and open that breaker and de-energize the line. And this happens to be 500 kV.

 

Here's another system line of the Federal Power System in Northern California. On the left side of this map is Oregon. There's a little station up there called Captain Jack. It's an intertie between the California Independent System Operator and Bonneville Power Administration. This is the system that I'm responsible for. It's a beast. It's a big system that goes all the way from Oregon all the way down to Turlock, which is south of San Francisco and inland a little bit.

 

Here's where our arrow was on the last slide and we've taken a look at Folsom substation, which is a 230 to 113 kV substation and it has three generators on it. They're owned by the Bureau of Reclamation and they are our black start resource. One of my specialties is system restoration. And so most utilities have a black start generator.

 

What I mean by black start is they can start without power from the grid. Because when we lose voltage and frequency on the system and the system blacks out then we have to start the system up. And what we do is we have a generator that's capable of starting without power from the grid. Normally generators use power from the grid to start. But when we have no voltage or frequency how do we do it? Well, we have sources built within the station to start it without power from the grid.

 

Here's an example of substation and it's a collection of various equipment. Starting on the left side of the screen it comes in on a 345 kV line and it goes down in through a couple of disconnects and some other devices and it ends up in a circuit breaker. That's right, it's just a larger version of the circuit breaker you'll find in your panel at your house. And it steps over into the middle of the page there; a step-down transformer steps it down to I believe a 7.2 kV distribution line, and it goes through a voltage regulator and then another 12 kV, or a 7 kV circuit breaker, and then it steps out on the distribution system on the right. So sometimes folks ask me, "How can I tell the difference between 34.5 kV and 12 kV?" Well the higher the voltage the further apart the lines will be. So if you're heading across the nation and you're looking at transmission towers and it looks like the three-phase electrical system, the conductors are bundled or they're spread out really far apart, chances are they're a higher voltage like high voltage or maybe EHV transmission lines.

 

So power plants, there's a variety of facilities that can generate electricity. Here's a few examples:  coal, natural gas, hydroelectric, nuclear, we've got wind, solar and then we also have diesel. So the location of these generators from the end users, is varies widely.

 

The technology by which we create energy is also physically different, and they are used to manipulate differently on the power grid as a result. For example, certain types of power plants we may keep base loaded, like coal plants and nuclear plants. What we do is -- they're not very flexible so we run them at baseload. So for example 1,000-megawatt nuclear plant we may always run it at 900 megawatts. So they don't respond to system deviations very well.

 

For example, hydroelectric power plants, they respond well to frequency deviations, so we'd use those guys across the peak of the day because they're a little bit more flexible on how we adjust them.

 

Here's what I talked about where different types of generation can handle the swings and the changes of a load pattern throughout the day. So your renewable resources such as wind and solar, those are excellent sources of power. Unfortunately they come with some challenges. A lot of the times with wind when it gets hot the wind stops blowing, and then the utilities are faced with having the adequate reserve margin to back up those renewable resources.

 

What is a transmission line? Transmission lines are necessary to carry high voltage electricity over long distances that connect generators with the customers. They're either overhead or underground power cable. The challenges with underground systems are they have to be oil-cooled and they have to be -- the oil has to be circulated. And so some of those pumping facilities are fed by the distribution system. So there are special characteristics that come with underground transmission power cables. Overheads are not insulated with oil, they're just air-cooled, but they're also susceptible to weather, lightning strikes and those type of things. And when those lines trip out because of lightning the system operator, again, has got to keep the system stable.

 

Here's some examples of power plants. On the left we have coal and on the right we have a nuclear plant.

 

On the left we have a hydroelectric facility, hydroelectric dam; on the right we have a typical natural gas plant.

 

So what is the distribution system? The distribution system is a network of wires that basically go from the transmission substation and they go to the end customer, which is to homes, schools and businesses. The grid comes to an end when electricity finally gets to the consumer, allowing us to turn our lights on and watch television and charge our cellular devices.

 

One of the big pieces of equipment that is out there on the system is the transformer. They come in various sizes. And again, they can either step it up to a different voltage level or step it down. Transformers are really expensive and hard to come by the bigger they get. Your average pole top transformer, that we'll take a look at here in a couple minutes, those are fairly inexpensive to maintain and replace. But when you talk about power transformers at EHV substations those things take years to build. And so they're kind of costly.

 

What do we see in this picture here? Well the first thing I'd like to focus on is that green box. That's a transformer. That's what we call a pad-mounted transformer. It feeds underground service to the homes behind it. And in front of it is also another type of infrastructure, it's the water meter for those houses.

 

So what am I seeing here? I see the same exact thing. Let's start on the left. Yes, that is a yellow Camaro and it's a transformer. It's Bumblebee. It's a transformer, but not the type of transformer that I'm talking about. In the example in the middle there we have a 500 kV line reactor that looks like a transformer, but its purpose as a reactor, as I said a few slides ago, was to -- if you put a reactor in it lowers the voltage; if you remove the reactor from service it raises the voltage. And then on the right is your traditional 115 kV, stepping it down to 12 kV transformer.

 

So I've got the same thing in this picture as the last slide. I have a bunch of transformers. On the truck there there's a picture of some transformers over in Saipan when we responded last year to Typhoon Wutip, and -- or Yutu -- and then on the right we have a typical pole-mounted transformer. And so it comes in single phase there, goes through a fuse and comes into that transformer. And on the right side of that can, the can is the transformer, there's insulated service wires that go to the house. And you can see past that transformer is what they call a weather head. And that's where the overhead connection is made and goes into the customer's meter.

 

Here's what you call an abnormal situation -- what happens to transformers after typhoons, hurricanes and tornadoes and those type of things go through an area. These are pictures from St. Croix after Hurricane Maria in 2017. I was deployed for that. You can't really see it in the picture on the left but there's conductors that are attached to that, and it's always safe to recognize those hazards and avoid them.

 

What is a circuit breaker? What's its purpose? It's as simple as it breaks the circuit. A circuit breaker is an automatically operated electrical switch designed to protect some electrical circuit or equipment from damage caused by excessive current, from an overload or a short circuit. The basic function is to interrupt current flow after a fault is detective.

 

Here's something that's very familiar. This is the panel at my house. At the top of the gray box there is my main circuit breaker and then below it are the different circuit breakers that are like little mini distribution circuits in my house. And so if I open that breaker on the top, the very top one, my house is the de-energized.

 

Now how does the circuit breaker look on the grid? How does it look in the transition in substations and power plants? On the left is an example of a circuit breaker, the 230 kV oil circuit breaker. And so if you could imagine -- there's a game I like to play called Mr. Megawatt. Let's follow Mr. Megawatt down the electrical system.

 

He comes in from the left there and it's a three-phase system, that's why we have three of those -- actually six of those brown bushings, and Mr. Megawatt comes in, goes through those brown bushings on the left side, he goes through contacts in the circuit breaker and he pops out on the right and he goes on down the stream to where he's supposed to go.

 

On the right is a 34.5 kV circuit breaker, an older style, and the same thing. In this case he comes in on the left and he goes through the interrupters and the contacts in the middle and he pops his way out on the right and he carries on down the line.

 

Here's an example of a 500 kV breaker. This is at one of our stations here in Northern California. And you can see it's a three-phase electrical system and the one on the left, they're all the same circuit breaker but look at the distance between them. I said earlier the higher the voltage the more space you need between the conductors because you don't want them too close because they'll flash over and short out on each other. So that's one circuit breaker. And again, it comes in from the left, goes down through that bushing, the conductor goes through the middle of that bushing and through the bottom of the tank where there's a bunch of contacts. That's what we call an SF-6 breaker. And it pops up and goes out to the right and it heads on down the road. Over on the right is a 230 kV breaker and you can see it's all in one nice little neat area.

 

Here's an example of a 69 kV circuit breaker and then on our distribution system on the right-hand side of the screen is an example of a pole top mounted 13.8 kV circuit breaker. A lot of the times on the distribution system they'll put these out on different sections of the line. So as faults occur on the line they'll just isolate a smaller section of the system.

 

Here's a typical example of a metal-clad switchgear circuit breakers. Inside these cabinets are circuit breakers that will be racked in, racked out, closed. A lot of the times when folks are dealing with these things they're indoors and they require special personal protective equipment and face shields when dealing with those because if there's a fault in there they're going to blow out through the door. They're a very versatile piece of equipment but they have special challenges when operating.

 

Here's an example of the end customer. And so on the left is a pole top mounted transformer, and again, you can see on the right where the service wires come in and there's our weather head, and the weather head goes down and ends up in the meter there.

 

One thing I want to touch on here before I finish up is some of the interdependencies between the water service, the gas service and the electric utility. Here's an example of just the typical gas meter you'll see on a home in -- actually I think this picture's from Colorado. And one of the things you need to be aware of as a consumer is if there's a problem on the system, maybe such as an earthquake or something you need to find out where your gas shutoff is at. And on the right is an example of an understand service to a customer. It's underground. You can see it comes up and it goes right to the meter. I had a discussion with the neighbor there in Colorado and I said, "Hey, what if that piece of wire from your meter to the transformer has a fault or has a problem? It's not the utility's job to replace that it's the customer." Because they kind of stop there at the transformer. And they go, "Wow, I wish I'd have thought about that before I put all that concrete in.

 

That's it for me, pending any questions.

 

 >>James: Thanks, Pete. Appreciate the presentation. Excellent. We have a few questions here.

 

First question:  can you elaborate a little bit more on the metal clad switchgear, how it differs in function from a circuit breaker or why it's different?

 

>> Pete: Yeah. Metal clad switch gear, a lot of the times, are used on the 4 kV system, on industrial customers. And what it is it has the substation bus work in there, and the circuit breakers, and the metering, and the protection, and so it's a very neat, compact way to put a lot of equipment. But it's more for like industrial type of customers. Or you'll find those in power plants and power plants have feeders in there. And so they have circuit breakers, just like those examples of those air circuit breakers we saw in the switch yard. It's just it's a way to stuff a lot of equipment in a short, compact area and it's insulated to where you can have multiple breakers in a small area.

 

 >>James: Can a separate entity own a substation? I think it's kind of like saying rather than the utility-owned substation could maybe an end user own the substation or [crosstalk] a third party, I guess?

 

>> Pete: Yes, absolutely. Someone other than the actual utility could own the substation, like there's customer substations, and in a lot of cases in the Midwest area specifically there'll be substations that we own these three circuit breakers here, and the next three circuit breakers are owned and operated by a rural electric cooperative. So there's lines of jurisdiction that we have that we know, "This is my equipment; this is that equipment," even though we may be in the same substation. So absolutely that's definitely a possibility.

 

 >>James: If energy is not sold how is this balanced in the system?

 

>> Pete: I believe the question is if the energy is not sold how does it balance in the system. Okay, there's a couple of things going on. If I was to take hydroelectric power plant up at Shasta Dam in Northern California, make adjustments on it and push 100 megawatts out onto the system -- you guys remember that little graphic I showed next to the airplane where the green line was going over the red line? I'm going to see that and my green line is going to go way above the red flat zero line and I'm going to see that there is too much generation on the system and I'm -- so we call that unscheduled flow in the world.

 

Every megawatt that's created has got to be accounted for. It's got a source area and it's got a sink area. And it's all got to balance out and go across those viewer lines on this ACE starts. For everyone in your interconnected system. And so the trick is we have to track that down and we have to account for it, and it could be, depending if we have an excess or a deficiency we're going to have to balance that out. And so the generator operators can't just willy-nilly crank out an additional 100 megawatts. But with that being said, very every amount of load we have on the system we have to have generation -- they call it operating reserve.

 

And so it's unloaded generation just setting there spinning so if there's problem the governors on the generator will naturally respond and arrest that decay, and then we'll ramp in a new schedule to replace whatever that loss was. So we have operating reserves on the system, but we normally don't create extra energy because how do you create energy? You have to use fuel. And so we don't want to waste fuel; we have requirements and standards set forth by NERC and FERC and local regional councils that say, "This is how you've got to operate the system. You've got to have a certain amount of operating reserve, and we're very aware and careful about our fuel consumption, and we won't consume the fuel to create the power unless we have to. And so for hydro, for us guys at WAPA it's water; water is the fuel. Hopefully that answers your question. I know it's kind of longwinded.

 

 >>James: No problem. Thanks, Pete. And we've got quite a few coming in. Let me know if you're out of time and then we'll obviously end, but I'll just keep asking them, at least for the time being.

 

Can you please compare and contrast a regional transmission approach to a collocating approach in terms of pros and cons of system design and equipment needs for transmission and distribution of electricity?

 

>> Pete: Okay. Let's see if I can --

 

>> James: So I think the question is -- as I interpret it it's like regional transmission versus locating generation next to load.

 

>> Pete: Okay, well there's a couple of things that are bounced around on that one. Now regional transmission are you talking like a regional transmission organization like a California ISO, an RTO type of thing? Or are you talking about an engineering design specification where I want to build my generators near my load? So it could go a couple of ways, but let me just -- I probably -- I don't quite understand or grasp what you're asking me but let me tell you a couple of things.

 

The big thing that's been around for a couple of years now is distributed generation. And that's solar on top of people's houses. And that's something that utilities are aware of. I mean and the renewable resource is excellent, but the trick is they push back onto the system. And then when the system has trouble, or it's a cloudy day your solar's not working and so they have to pull off the grid. So there's a fine balance there between distributed generation and how it impacts all utilities.

 

Case in point:  down in St. Croix a few years back they offered solar to a lot of customers on the island, which is great. But now the electrical utility meters are not spinning. And so it caused water and power authority of the Virgin Islands to have some financial difficulties because they have those resources, those generation facilities that they have to still pay for and maintain. And so there's a fine line there on distributed generation.

 

The trick, generally speaking, in the industry is a lot of folks says, "I don't want transmission lines in my backyard because they're ugly," and as load goes up on the system you've got to build generation facilities and transmission facilities to get the power to the people, and that's a challenge. And of course you have the environmental impact. What's that do to the environment? Because I mean think about how many cell phones you have out there. We have electric cars and things like that. And so the demand will be greater on the electrical system over the next few years, and the challenge is how do we build that infrastructure to where we can still operate the system electrically and reliably?

 

 >>James: Thank you. Another question here:  What is WAPA doing with Tribal Renewable Energy Electrical Project?

 

>> Pete: I don't have an answer to that question. I'm sorry. I'm in system operations and I'm sure that I could reach out to some folks at WAPA and put you in touch with those guys.

 

 >>James: Thank you. Another question:  Any thoughts on the future of storage in the electric power system?

 

>> Pete: Yeah, that's a great question:  Any thoughts on the electrical storage with the system. And so there's something that's been around for quite some time, it's called pump storage generation. We have a system in Central California, San Luis Reservoir, to where the reservoir is full and during the day they generate electricity and put it in a four-bay and then at night they flip them around, so to speak, and they pump the water back into the lake. So we keep reusing the same water over and over. That's one that's not mentioned too much anymore but it's actually really effective.

 

Now as far as battery storage and those type of things, you know, if you have a solar farm and then you have battery storage next to it, I don't know if the technology is there to where we could do that. Part of the problem with that type of storage is -- I'm going to go deep for just a moment, so I apologize. There's this thing on the electrical system called spinning mass. And that's the generators that are spinning. And when there's deviations on the electrical system the frequency starts to deviate and it's the mass of those big hydro units that we use to catch that frequency as it deviates. So if you have gas turbines in those guys the shafts on those generators are small, lightweight, they spin at like 3,600 RPMs or higher, and they can't take that twist and that torque as the frequency deviates on the electrical system. Our hydro units are the guys that can ride through that and kind of help us pull that frequency back a little bit.

 

And so if you throw out a bunch of 50 megawatt gas turbines out there they don't have any spinning mass behind it. And when those problems happen on the electrical system -- and trust me they're happening every day, we need the strength of the interconnected system and our large generating units, especially hydro, to where we can ride through those frequencies. And if you start creating all these storage units -- and yeah, you may be off peak where you're discharging those storage units, what happens when there's a fault on the system? And I'm sure there's an electrical engineer or two around the world can say, "Pete, I don't know what you're talking about, or you're crazy," and that's okay. But from a real practical, system operator, one of the guys that's been responsible since 1986 operating the electrical system, that's something we need to keep in our back pocket and be aware of. I mean it's a great concept, I’m all for it, man I love technology. I love new types of things and I'm not the type of guy that says, "Oh, we've always done it that way." No. let's do some exploring. Let's look at these new things and see how we can operate them. But it's also keep the lights on and let's think about system reliability. And I know folks are thinking about that. Hopefully that answered your question.

 

 >>James: Thanks, Pete. We've got a few more but just let me know if you have to run.

 

>> Pete: Okay, we'll take two more.

 

 >>James: Okay, great. Do utilities prefer having wind and solar generation equipment that may be installed in their grid included in their internal monitoring system and control system?

 

>> Pete: Are you asking do we like it? [Crosstalk] --

 

 >>James: Do you like to have monitoring and control of those removals, yes.

 

>> Pete: Yes, most definitely. If we have a renewable out there we want to be able to see it and account for it because when the wind stops blowing or the clouds come over we have to make up for that load that was being served by that generation with traditional generation. So absolutely, without a doubt, we need to see it. Control of it, I don't know. It's some other company's asset but we definitely need to see it and account for it and calculate it. So if and when it does go away we can replace that energy with some of our traditional generation so we keep the lights on and the system stable. So yes.

 

 >>James: Great. And then the last one here:  Can you talk a little bit about day ahead purchase of power and how that system is managed.

 

>> Pete: Okay so day ahead purchase of power. So every day of the year we are tracking our load patterns. And so we have historical dates. And so when that automatic generation control system operator sets down in the chair he has a load curve that he's looking at. He looks at the Weather Channel, the weather things, he goes, "Okay, here's what the weather is going to be today. Let me go back into history and see what the load pattern was for Northern California July 15th and the temperatures were about the same." He'll look at them over the three of four years and he looks at his load curve, and he goes, "Okay." And so he makes adjustment throughout the day in real time to match the load and generation to maintain that balance of 60 cycles. That's how it's handled in real time.

When there's shortages he buys additional power; when there's excess he'll sell it off. He's got his margins he has to regulate also.

 

So what happens in the day ahead or pre-schedules world is there's folks doing all the same thing. They're looking at all those things. And they are taking their best guess on what they think all that criteria is going to add up to and they try to match it to the customer's load requirements and all that's thrown into preschedule and then they go out and they try again. There's a science to it, and there's a little bit of guessing, and they make their best guess and then they give that load pattern to the generation dispatcher the next day, it rolls over at midnight and he starts looking at what the guess was to where things are actually shaping up.

 

And so a lot of the times we have long-term contracts with certain utilities, or certain companies to where we get a certain rate on the energy. But what you have to realize, too, if it's not our own internal generation we have to buy transmission to get the power into our system, or through our system. And so there's some tagging issues that go along with that prescheduled and purchase of energy. Hopefully that answers your question.

 

Again, if there's other questions you guys saw my email. Please feel free to throw those questions at me at WAPA, and the great thing about WAPA and DOE is we have a great reach back to DOE headquarters and folks within the Western Area Power Administration that if I can't answer those questions for you I have folks I can put you in touch with that will help answer some of your questions.


So I've got time for one more, James.

 

 >>James:  Oh okay. Let me bring them back up here.

 

When a system goes down where does the generator that turns it back on if it can't get its energy from the grid, where does the energy to turn it back on come from? Okay, I'm sorry I didn't read it in advance. So basically [crosstalk] question.

 

>> Pete: I understand. So the question, if I may summarize, was when the system goes down we had no voltage and frequency; the system is off. How does the black start generator start if the grid isn't energized? And so how we do that -- I'll do the example of one of our hydro plants here in Northern California -- what they have is they have two 500 kW diesel generators that are testing weekly. And when they lose potential at the power plant, whether it's a system wide outage or if it's just the power plant outages, these guys start a lost potential. Certain devices open up; these generators automatically diesel generators are on they can start up the go to 60 cycles and they set there. And then the generator operator goes over, flips a couple of switches, gets the auxiliary circuits energized on the units and then he goes ahead and goes to the automatic startup process and he starts that generator. And then the generator operator reaches out to the system operator of WAPA and says, "Hey, this is what I'm seeing, what you're seeing," they talk about it. And then what they do is they energize the bus on the station and then we talk to our distribution provider and get some load, and we kind of go start going down the restoration process.

 

So typically there's backup diesel generators a lot of times that start on loss of potential with the power plant that will start automatically to where we can do black start and system restoration.

 

 >>James: Thanks, Pete. There are a few more questions. I'll just forward those to you with contact information and when you have a chance you can field those. But we really appreciate your time, Pete. Excellent information and excellent presentation. And with that we'll let you go and we'll move on. Thanks, Pete.

 

>> Pete: Thank you, bye.

 

 >>James: Our next presentation is from Tony Jimenez. Ideally we would have had Tony go first but due to scheduling constraints Pete went first. Tony is going to talk a little bit more about energy at a very basic level. So that will be kind of the most foundational kind of topic and ideally Pete's would have built off that. But this is the way it is. So thanks for your time, Tony, and your slides are up.

 

>> Tony: All right, well thanks everybody. I'm going to go really, really basic.

 

The purpose of this presentation really is to go over fundamental material that is usually assumed that the audience knows in other presentations. It could also probably be called "Random Topics:  Related Energy Basics," but I guess energy basics sounds better. This is what I'm going cover:  energy vs. power, common units, forms of energy, work vs. heat, three laws of thermodynamics, a little bit on electricity. Peter gave a great presentation on the whole system so luckily I'm going to talk about it really at a basic level. And then I'm going to end with three slides that kind of show U.S. energy flows and kind of where the U.S. uses -- where we get most of our energy or what sources produce most of our energy and the energy sector.

 

Without any further ado:  first, energy versus power. This is something that even people in the industry tend to sometimes get sloppy in their terminology, so I just want to parse it out and be really clear about what the difference is.

 

Energy is defined as the ability to do work. That's probably not that helpful to you, maybe only conceptually. You consider it -- you go back to a physics class:  force times distance, so if you imagine somebody, a friend sitting on a skateboard and you're pushing him up a hill, how hard you're pushing and how long you push them for, that's the amount of energy that you have expended. And finally, energy is a quantity. So you can consider it an amount of stuff, like the amount of water in a bathtub or amount of champagne in a champagne class, it's a quantity.

 

So what's power? Power is the rate at which energy is being created, moved or used. So it's energy divided by time. As you can imagine water coming out of a sprinkler, or out of a shower head, or a liquid being out of a dropper, you know, one being the equivalent more to high power and one being the low power. And again, it's energy divided by time, so it's what I call a rate. And so almost any energy equipment item is going to be rated in terms of its peak power.

 

So for example a 100-kilowatt generator, a 5-horsepower motor, switches and what-not, they'll all be rated to how much peak they can handle before they break or bad things start happening. So again, energy versus power, that's probably the most fundamental aspect. Energy is a quantity; power is a rate, and power is the rate at which energy is being created, moved or used.

 

So our units. Units of energy -- and again, energy is power times time. The most common SI, stands for System Internationale, that's French for International System, i.e. metric. And our standard unit of energy is called the joule, and it's defined as one kilogram -- a kilogram is about 2.2 pounds times a meter squared divided by seconds squared. So it has units of mass times length squared divided by time squared. We often use the megajoule, which is a million joules because a joule is a pretty tiny amount of energy.

 

In electrical terminology we often use the watt-hour, or more commonly the kilowatt-hour, where a watt hour is 3600 joules; a kilowatt is 3.6 million joules. And I'll explain in a moment how we got those. And then finally if we're talking heat, because it came from kind of a different time period, in the United States we still use the British Thermal Unit, or the BTU. And the conversion is one kilowatt hour is equal to about 3,400 BTUs, and a BTU is the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. So unfortunately in the U.S. they have all these different kinds of unit for energy. Typically you use different types of units in different contexts, and if you want to try to do an apples to apples comparison you often have to do the math and stuff with the conversion.

 

All right, power:  energy divided by time. So our metric unit of power is the watt. One watt is one joule per second. Again, a very tiny rate, so we often use the kilowatt, which is 1,000 watts. So the English unit is the BTU per hour, and one kilowatt is 3,400 BTUs per hour. Most have probably heard of the horsepower, especially when you see car commercials. And horsepower is -- the conversion is one horsepower is equal to about three-quarters of a kilowatt.

 

So how do we get all of these, especially of the kilowatt-hour, where did that come from? Well, we started with our SI unit, our joule; we have our SI unit of power, which is the watt, and then when we start forming electrical systems it just because really handy to say, "Well a watt for an hour is a watt hour, or a kilowatt for an hour is a kilowatt hour." And that's just a very handy unit of measurement and so they ran with it. So that's kind of -- if you follow the steps 1-2-3 that's kind of historically why -- how those developed.

 

Forms of energy. Broadly speaking there's kinetic energy and potential energy. Kinetic energy is basically something in motion, whether it's a cannonball, an artillery shell -- my military background there -- somebody -- a kid on a skateboard all have kinetic energy. Also kind of more of a stretch is radiant energy, so basically light or the electromagnetic radiation moving along could be found, or it could be electricity in a wire all forms of kinetic energy.

 

Now potential energy, which is energy that is stored or energy's position. And so for example if you take a cannonball and put it up on a shelf it has potential energy because it could fall off the shelf, it will move faster and faster until it hits the ground and there'll be energy from that position. Mechanical energy:  you could stretch a spring and there'll be energy in the spring, depending on how much you stretch it. You could have nuclear energy. This is where we kind of expand our energy is conserved to matter energy is conserved, and in a nuclear power plant if you split apart a large atom the resulting small atoms don't weigh quite as much, so some of their weight -- isn't quite as much as the big atom, and the difference is converted energy. And finally, gravitational energy. So if you think of water falling down a spillway and running a generator, that's gravitational energy, again, energy of position. So again, we have kinetic energy, which is something in motion, and potential energy, which is something high up because it could fall, or a spring that's stretched or some such think like that.

 

The other thing I want to discuss is work versus heat. They're both forms of energy and you may say, "Well duh," but actually that was only figured out about 200, 250 years ago and represents a really big advance in physics and science. And the difference is work can be thought of as organized energy. So if you think of a shaft moving or some object is moving along, that's organized energy, or a spinning shaft or electricity in a wire, all organized energy.

 

You can think of heat can be thought of as disorganized energy, and so why do we care? Why am I flogging this dead horse? The reason is is there's a big efficiency hit when you go from heat to work. You can imagine if you have a mob of people and you're trying to get them to all do something the effort required to get them all moving in the right direction - that's kind of an analogy. The same thing going from heat to work is you have to do a lot of engineering and go through a lot of hoops to do that, and you lose a lot of it.

 

So typically when you're going from heat to work you're going to lose two-thirds, 80 percent, 90 percent of the energy, depending on how efficient your system is. Where if you go from work to heat or from one form of work to another typically the losses might only be a few percent or less. And so examples would be the transmission in your car, where it moves the high speed shaft for your engine to the low speed shaft needed to drive your wheel. That's the form of converting work from one form to another, it's kind of the same thing, but you don't lose that much going through your transmission. Whereas if you're burning coal to create electricity you lose a lot of the energy embedded in the coal; only a small portion of that comes out as electricity on the other end, so work versus heat.

 

I've given you probably a lot of pie in the sky stuff so maybe some examples to help with your intuition. Think of your typical hairdryer. I look at the ones that I had as a kid or my sister had when I was a kid -- I haven't had hair that I've used to blow dry in almost 40 years now, but typically 1,000 to 1,500 watts or one to 1.5 kilowatts. That's the amount of power consumed by a hair dryer. Average U.S. single family home, the average load is about a kilowatt -- obviously it's a lot more during the day and maybe close to zero at night. So if we look at our monthly consumption you're looking at maybe 600 to 1,000 kilowatt hours per month consumed by your average single-family house.

 

Output of a large power plant on the order of 1,00 megawatts. Some or maybe 2,000 or 3,000 megawatts, depending. But that's kind of -- you think of a large power plant think about 1,000 megawatts. Finally, total U.S. energy consumption -- and I'll touch on this toward the end of my presentation -- 97 quadrillion BTUs, that's a 97 followed by 15 zeroes, or 28 trillion kilowatt hours, or 97 quad, where a quad is a quadrillion BTUs. That's total electric consumption, total heat, total everything.

 

Some other -- this is more on fuel sources and how much energy is embedded in the different fuels. So coal, we have -- depending on what type of coal, anywhere from 2,400 to -- I'm sorry, 24 to 34 megajoules per kilogram. Again, a kilogram is 2.2 pounds. And a megajoule is a million joules. And especially -- you're wondering where you see joules often in this type of thing where it's the energy in fuel sources. So about six to ten kilowatt hours.

 

Thermal -- I put the TH there to show that you're not going to get that much electricity out of it but if you -- electricity and heat determines how much you get. Natural gas about 50 megajoules per kilogram, about 15 kilowatt hours thermal per kilogram. Diesel fuel a little less. Dry wood a lot less -- you're talking about 18 megajoules per kilogram, maybe 5 kilowatt hours thermal per kilogram. And then looking at some of the renewable energy resources, in the U.S. average global insulation within the continental United States, officially the amount of sunlight hitting the ground you're looking at about 3 to 6 kilowatt hours per meter squared per day. Meters squared is about ten square feet. Wind power density, so the energy of the air moving across the landscape, looking at anywhere from under 20 watts per meter squared to over 600 where the majority of that is under I'd say 250; the wind farms are mostly in the areas that have more than about 300. So you could say for taking that wind, for example, let's say you had 100 watts per meter squared; there is about 9,000 hours per year. So if you go the math there's be about 900 -- I'm sorry, about 90 kilowatt hours per year through that notional square meter. So this is a way to help you kind of do back of the envelope calculation.

 

Some other terms and conversion factors that are really handy:  a year is 8,760 hours in a non-leap year; a 30-day month has 720 hours. And one hour has 3,600 seconds. So kind of useful things to know when you're trying to do conversions.

 

Other items you often year about in energy is capacity factor. What that is is actual energy production over some timeframe, typically a year or longer divided by the possible energy production if that facility produced at rated power over the whole of that time frame. Nothing every produces at 100 percent capacity factor; some might be 80-90 percent base load say coal plant or nuclear plant, it's on most of the time and it's at or near rated power most of the time. Renewable energy facilities might be on the order of 25 or 40 percent, depending if it's PV or wind, and that's a lot of times because sometimes the wind's not blowing, sometimes the sun's not shining, and also sometimes the resource may be just enough to run that facility at partial load, rather than at full rated power. But it's a useful term, you get a lot especially doing financial analysis or kind of high level analysis is the capacity factor of the given facility.

 

I'm going to summarize the laws of thermodynamics for non-technical people. You'll see a lot of some analogies to going to Vegas, I guess I'll say it that way. One:  you can't get more energy out than you put in, i.e. you can't win. So you can send the perpetual motion machine people away if they come to your door. Second law says that every time you convert energy from one form to another, you lose a little bit, so you can't even break even. And the third law is a bit technical but basically it comes down to you can't quite the game. So even if you're sitting here staring at the screen your body is doing processes that are limited by the three laws of thermodynamics, your computer is being run by processes, limited by the laws of thermodynamics so this is happening all the time. But the first two are the really most important ones, you know, it's accounting -- you're not going to get more energy out of a system than you put in. And there's always losses every time you convert from one to another.

 

Very, very briefly, the very basics of electricity. This is what's going on physically and there's this big network that Peter described. I'm going to talk about three things:  charge, current and voltage. So the definition of charge -- it's actually not very intuitive. If you look at note one it says the physical property of matter that causes it to experience a force and placed in the electromagnetic field. Probably not helpful that much but I think most of us have some sort of intuitive sense of what charge is:  there's plus charge and minus charge, and like charges repel and the opposite charges attract. Our SI unit of charge is the coulomb, and a coulomb is 6.2 times 10 to the 15th. The charge in 6.2 times 10 to the 15th electrons or protons, where an electron or a proton has the fundamental unit of charge you can't have a smaller unit than that.

 

Current is -- and charge, like energy, you can think of it as a quantity. All right, current charge times time, so that's charge moving along say a power line. It's analogous to flow in a pipe. Our SI unit is the amp for the ampere, and it's defined as coulombs per second. So if you have one amp moving in a wire you have 6.2 times 10 to the 15th charge carriers moving past that point every second. And finally voltage, which is you kind of think of as pressure in a pipe, is the energy per unit charge. So if something is high voltage those charges have a lot of energy, and if it's low voltage they have not very much energy. And the SI definition is the joule/coulomb, and the SI unit is the volt. And I'll point you to the last note on the slide, or the footnotes that electric current is given by -- it's current times voltage, and if you do the math you get joules per second, which is the units of power. So current times voltage gives you power and that tells you how much power is just flowing through the power line.

 

The only other thing I'm going to talk about, electricity is AC versus DC, and basically direct current:  all the charge carriers are moving in the same direction all the time, and in alternating current they're moving back and forth. So this is kind of where our analogy with water breaks down a little bit because of the water molecules in your pipe move back and forth all the time you would never be able to fill your bathtub. In electricity, even though they're moving back and forth we can still get the energy out of them and life is good and your TV runs and your lights turn on and life is good.

 

Looking at the figure below if you kind of graph voltage and current over time in a direct current they're not say constant but they're always above zero. And they're just constant over time, whereas alternating current you can see they go back and forth crossing the zero line each time. And that's basically the difference.

 

Why do we have alternating current? It sounds more complicated. Mainly because it's easier to move electricity more than a short distance with alternating current than with direct current. So it's the engineering realities pushed us in that direction. And that's all I'm going to say about electricity. There's certainly a lot more that could be said.

 

Okay, a few more slides. Energy sources. So this is -- and this is a great chart from the website of the EIA, the Energy Information Administration. The U.S. energy consumption by energy source, so this is everything, the power, the energy we use to make electricity, the energy we use to run our cars, the energy we use to heat everything. And so you can see there's six elements of that pie chart. The biggest single source is petroleum; next followed by natural gas; coal gave us 4 percent; nuclear power gave us 9 percent and renewable energy gave us 11 percent, and then the pie segment, representing renewable energy is then further broken down into hydroelectric, wind, solar, geothermal and the various biomass.

 

You can see we get most of -- the vast majority of our energy by -- if you add up the petroleum, the natural gas, the coal and biomass like burning stuff. And so going back to that slide, heat versus work, that means we're losing a lot of energy just because of losses that cannot be overcome. Those are our main energy sources as of 2017.

 

Next slide shows the energy flows from our sources to the sectors. This shows four sectors, there's transportation, industrial, residential commercial and electric power and you can see kind of where the sources go. So for example about three-quarters of petroleum is used in the transportation sector to drive cars, trucks, trains, boats, whatever. Most of the rest is used in the industrial sector.

 

Natural gas is split between industrial, residential, commercial and electric power. And then just a tiny bit in transportation. And you can see how the rest go. You can see we have our sources on the left:  petroleum, natural gas, coal, renewable energy and nuclear. And then the sectors much define how they're used on the right.

 

Next slide is going to expand on this a little bit more, and I personally love this chart. I saw a version of this back in 1990 when I was a college student in -- I think in an issue of Scientific American and I loved it because it just had so much information in it. A few changes from the previous slide:  one thing this slide makes clear is that electricity -- we call it the electric sector but it's not really an end use. We don't make electricity just for the sake of making electricity, we make electricity because it's a really useful form of electricity, but then it's used in the other sectors, mostly residential, commercial and industrial at this point in time. You can see just a tiny bit going to transportation, but we expect that that's going to change dramatically in the coming years as we get more and more electric vehicles coming along. And you can see the size -- the fatness of the different arrows and flows, shows the relative size of those flows.

 

The other thing this is different is it actually splits residential and commercial into separate sectors. And finally the last thing, the light gray is you can see what's called rejected energy. Those are the losses. You can see of this almost 100 quads of energy that use we only really got about 30 quads of useful service out of it, and the rest was lost. And some of that reflects fundamental limits on converting heat to work, and some of it is the fact that some of our stuff is not as efficient as it could be. And so you can see electric generation, which usually involved burning something to make electricity, you lose two-thirds of the incoming energy. The residential and commercial sectors are a little bit more efficient overall, and again, the transportation sector also has a lot of losses because you're converting -- again, you're burning fuel and you convert it into mechanical motion and you have some hard thermodynamic limits which we don't even come close to approaching. So you can see a large proportion of that energy is lost. And so a lot of losses. And so I guess it makes the pitch for energy efficiency to reduce those as much as possible.

 

So that concludes my presentation. A few resources and links here, and I guess I'll be taking questions after Travis gives his presentation.

 

 >>James: Thanks, Tony. Excellent presentation. Those are challenging topics to cover all of that. Yeah, some interesting stuff there, and valuable slides, hopefully people will keep these slides available and reference them in the future.

 

So Tony talked about the basics of energy and then Pete earlier talked about how the electric grid works. Now we're going to go on to Travis's presentation, who's going to kind of help us better understand how we can utilize energy projects on tribal lands or within tribal communities to help out tribes in an academic manner. So kind of the last building block is this presentation which is financing energy projects on tribal lands. So with that, Travis, jump on in.

 

>> Travis: Thank you, James.

 

Thanks everyone for your time today. My presentation is decidedly a little less technical than the two excellent preceding presentations that we've had. But I'm going to keep it basic, as the other two did, sort of the themes of today's webinar and really just run through some high-level considerations and concepts involved in financing energy projects on tribal lands.

 

So here's the agenda, very quick. We're going to discuss tribal roles vis-à-vis energy projects:  what role the tribe can play and what the benefits could be attached to each of those roles and then we'll go through some sources of capital. And then we'll talk about ownership structures.

 

As an initial matter just wanted to go through or bring this in up front. When we talk about financing projects there's really three major phases that you are -- [off mic conversation].

 

So the three major phases that you will be paying for, the reason that you will be sourcing financing it begins with feasibility -- that's kind of the technical economic analysis you do to determine what are your resources, what kind of project you want to do, what's the business case, what do the economics look like. And then once you sort of have identified what kind of technology you will be working with, size of project and then the business case for it you go into the development preconstruction phase where you get site control, on tribal lands it might not be such a difficult matter as it is for private companies operating with an ownership structure outside their -- on private lands. But you also work with permitting processes, you go to AHJs and determine what kind of permits we'll need and what regulations you need to follow. You'll do some equipment procurement this phase or at least sort of investigate what energy you're going to be working with. And then this phase generally encompasses the period when you will close on your financing before you go to construction at which phase you typically will take out a construction loan -- this is a high-cost, high-risk phase. So putting capital at risk is usually something you might want to outsource to a third party.

 

The operations phase, which I don't mention here, if your project is sound -- hopefully it is -- the idea is that operations will pay for the cost of the system. So these three phases I've got right here that's your cap ex all leading up to capital expenditure and then once you tip over into operations you go into your operating expenditures, your op ex and those are paid for with operating revenue.

 

We'll launch right into tribal roles. Before we get into the actual role a tribe may play in an energy project you want to ask some basic questions first, and these will sort of result from your feasibility study, but what's the technology you're working with? Are you working with -- if this is going to be a gas plant, solar plant, wind farm, biomass? What's the size of the project? Is this going to be distributed such that you are going to be offsetting facility level or regional or a district level load? Or is this going to be truly scaled such that you're going to be selling the energy to an offtaker, a utility, or some such entity? What's the goal of the tribe? Is this going to try to generate savings from offset of local load? Or is this a business opportunity? Are you selling the energy? Is this a revenue generation opportunity?

 

Before you even get into the types of financing that you're going to need and where you're going to source it from these are the basic questions you want to ask, and you also want to know what role the tribe is going to play in relation to the project. So here we've got a graphic that shows your basic classic risk-reward correlation and that is not accidentally also correlated with how much money you're willing to put into the endeavor.

 

So at the top here we've got developer/owner. That's the role where you basically do all the work to investigate the project, secure the site, get the permitting done, and advance the project to let's say where you can begin construction. You can be an equity investor, so take a little less of an active role as a developer, where you're doing all the work to get to the project to construction phase. You're more just putting up the money and being promised a return if certain conditions are met and the project operates as forecasted.

 

You can be a lender, which is a little lower risk than an equity investor; I'll talk about that a little later. Basically loan the project money and earn an interest rate off of that and reap regular payment. Typically because that's lower risk your return is not as high as an equity investor or even as a developer/owner.

 

And then moving on to the les capital-inventive roles the tribe can act as an offtaker, in other words and energy purchaser, and usually that's through a power purchase agreement and there's got to be usually some stipulation through the power purchase agreement to make economic sense. There'll be a stipulation that the energy purchased from the system will be less than what the tribe is purchasing from the utility, or whatever entity it currently procures its energy from. As a landowner the tribe can also lease its land to the system and in some cases earn royalties if there's an extraction operation going on there. And then finally O&M subcontractor, which basically means you operate the system for a fee for payments.

 

I'm not going to get into the details of this slide but there are various business structures that the tribe will want to consider, based on what role it is playing. But the primary considerations you'll want to investigate up front are what are the capital requirements? What are the return requirements? What's the tribe's risk tolerance? And if it's something that they'd like to sort of seal off _____ in an incorporate entity like an LLC. What kind of protection does the tribe want for its assets? Again, ring fencing through an LLC or some other type of incorporated entity can protect the tribal assets. Usually that comes with a waiver of sovereign immunity, though. So the LLC does not have access to sovereign immunity, which in some cases can be challenging for tribes. Preserving tribal sovereignty -- that gets to that sort of outcome, and minimizing liability and facilitating construction -- these are all things that the business structure will -- or these are all considerations that will inform the business structure in addition to what role the tribe can play.

 

So moving on to the sources of capital that the tribe would investigate once it has decided on what kind of business structure and what kind of project it's going to do. Generally when we talk about energy project finance where is really two general buckets of capital that you're working with:  debt, or loanership, to coin a phrase or term, and equity, or ownership. And so within those two broad categories, debt being you borrow money to build and perhaps own the facility; equity is you do own this facility. That's money you put up as a tribe coming from your own reserves, etc. But given these two buckets there are a few different flavors of capital that could contribute to either one of those buckets. So cash on hand from the tribe, that's generally what we would throw into the equity bucket. Debt -- I want to just sort of enumerate that there's lots of different types of debt there, and I've got a slide coming up here which will go into some more detail about the specific types of all these sources that I'm listing here.

 

Grants. There are a number of grant opportunities usually that will come or it can come with some sort of skin in the game, some sort of cost-sharing requirement. But generally grants we would count as equity and then the cost share would also be in-kind contributions that you can put up for that.


Incentives can also be leveraged. Usually they can -- incentives are complicated because they can fall into any one of these categories of debt or equity and sometimes they will be investment-based in which case there might be equity; something they'll be production-based, which would fall into the operating revenues category. Guaranteed savings contracts, that would be a contractual mechanism such as an ESPC where you are earning savings on your operating revenues and that allows you to cover the cost of a project, or cover the cost of investment in a project. And then operating revenues, or savings, that's if you are offsetting electricity use at a facility that will be the savings side of that and operating revenues would be the what you earn from selling the electricity if it's a revenue generation project.

 

Here's a breakout of various examples. I won't go through each of these; I sort of did that on the last slide. But as these slides will be available after this presentation this is available for your reference. And again, these are just skimming the surface for some of these. Obviously the loan category, debt, you are working with all kinds of flavors of capital sources.

 

This next slide real quick on the incentives side these are the incentives available to renewable energy projects specifically. Obviously incentives in oil and gas you've got your offsets for drywall drilling and drilling costs. But these are available from the federal government, PTC, production tax credit used for wind, and other technologies:  ITC, solar and other technologies. They operate fundamentally differently and it is of note that they can be difficult for tribes to access because tribes are not federally taxpaying entities. So I mention them here just because they are extremely important to renewable energy finance in particular and I've got some definitions at the end of this presentation for reference.

 

In the process of securing debt I wanted to highlight that it can be a thorough process and generally pretty difficult to meet some of the requirements of lenders and achieve an interest rate that makes sense for the project's economics. The lender will typically go through a process called due diligence where they will investigate everything from who's borrowing, what's it for, what's the collateral you've going to put up on a project. Usually in projects we call debt at the project level non-recourse, which means that the lender has recourse to the assets but not the balance sheet. They do not have recourse, in other words, to the balance of the borrower. That would be recourse debt if they do have access. But typically in a project finance situation, and what makes project finance a successful arrangement for building infrastructure such as energy projects is that the lenders don't have access to the borrower, they only have access to the liquidation value of the asset, so it would be -- or the revenue generation value of the asset such that if there's a default some sort of breach of the loan contract then they can only go to the assets to recover their capital.

 

But because they are in a position where they have to put themselves at risk they want to make sure that the partner they're working with is sound, they want to make sure that the project is sound, and so they will generally make borrowers do their work to prove that this is the right investment for the debt provider. And this is just a high level list of criteria right here to give you a sense of what you'd be working with when seeking lender capital.

 

Now we've talked about the various types of capital sources, roles that the tribe can play we'll mash them together and talk about ownership structures. The first one going into it, direct ownership is the simplest structure you can work with. The tribe would own the project outright. They may on the back end have some debt that they're doing it with but the debt is not at the project level. So the cash flow is pretty clean. The tribe either -- well, I should mention that because the tribe would need to put up all the capital for this project, generally this might be a smaller-scale project because the larger-scale projects can be quite costly. And sometimes you will need to leverage your debt and an equity investor to drive those to the finish line.

 

But in this case let's call this a -- you'll see in the top left corner there community or facilities scale, right? So it serves a cluster of buildings or it serves one building, and it was small enough that the tribe had enough capital on hand to purchase the system. So they're using the system to offset energy purchases from the utility; that offset comes at a discount so they generate energy at a cost that is less than what they pay the utility. They're earning savings on that. And that's their operating revenues, essentially, is the savings they're getting there. And it's all very clean:  the tribe owns the project and they make their payments to the utility and it's more or less business as usual with you've got an offsetting generator there onsite.

 

It gets a little more complicated with debt because the lender is going to track cash, which means that they're going to get their payment, which includes principal, which is the original loan amount and interest at regular intervals specified in the debenture, or the debt contract. And so the tribe in this case owning the project but having debt at the project level is earning less of those savings. So previously where they may have been getting a dollar of savings on every kilowatt hour they purchased that's not a real world example, that's a very high amount and most times kilowatt hours don't even get up to the dollar level.

 

But let's say they earn a dollar for every kilowatt hour in savings that they avoid from purchasing from a utility; debt might take 50 percent of that dollar, or 50 cents on that dollar, or more as the case may be, depending on how the debt agreement is and how the project actually operates in the field.

 

I'll jump right to PPAs. A power purchase agreement stipulates that the tribes have not owned the project. The project is owned by a third party. That's that box you see on the right there:  developer and financial partner. But the tribe can host that system, doesn't have to but commonly that's what happens. And you've got a system generating energy onsite that's owned by a third party and the tribes purchases the energy from that system. So instead of owning it and earning those savings that they would get from having the project themselves they get a dollar per kilowatt hour agreed upon price for energy from the system, and generally that should be lower than what they pay the utility on an average basis so they can realize savings from that contract. PPAs generally are something that people execute when they are looking for economic return.

 

The issue here that because a third party owns the system generally that third party it's got its own financial structure and it's got its own return requirements. So it's often challenging for them to offer a tribe the same economics they could get were the tribe to own the system itself.

 

Advantages and disadvantages of PPAs. PPAs do not require any upfront costs, so there's no capital expenditure generally. You're only paying for the energy. So it's an advantageous situation if the tribe is limited with capital and wants to recognize savings on Day One; PPAs can be one way to do that. Because you don't own the system there's no operations and maintenance. For some systems you can still benefit from the tax incentives, federal tax incentives. So if the tribe can't access those because it doesn't have a federal income tax liability it can still benefit from federal taxes.

 

A locked in energy price. Generally a PPA is in agreement for energy purchase in Day One and in some cases they include an escalator; some cases they'll include a floater. But generally it's all spelled out in the contract and it's easy for the tribe to sort of track what its liability for payments would be over the course of a contact, 20 years. Generally what you see for PPA in the market. And in some cases the PPA can allow a path to ownership. So if the tribe doesn't have the resources to own the system on Day One it can pay for the energy and over time it can build up some capital and purchase the system outright at some later date. Generally with renewal energy projects that have tax incentives attached to them that have to be [inaudible], so after Year Six, or after Year Five of project operations in Year Six.

 

Some disadvantages are that, as I mentioned, you don't get the best deal because you have to pay for somebody else's financial structure and return. So it may not beat your current electricity rate; can be difficult for small projects because you're not achieving those economies of scale. Transaction costs can be higher, which you would pay for through your energy rates. But transaction costs can also be high as you've got your own project so that may or may not be the case. And in a lot of cases you don't have ownership of the RECs, which means that you can't be claiming to generate clean energy because you're selling those environmental attributes when you have a PPA. Generally the PPA provider will retain ownership of the REC to make the system more economic and less the offtaker or the energy purchase in the PPA wants to hold onto those RECS bad enough that they are willing to forego the economic advantage that those can provide. RECs generally only come from certain types of systems. We're talking renewable energy here, or in some cases nuclear energy has got an environmental credit or some kind of low emissions credit attached to them as well in some jurisdictions.

 

So that's PPA. Tribe does not own the project. If the tribe does want to own a project, it's a larger project and they need heavier investment they might seek an investor to participate on top of a lender. And so this chart demonstrates the tax equity arrangement, which is sort of an animal you see when there is tax advantage financing. Could be renewable energy project; could be historic rehabilitation, could be low-income housing. But generally you work with a structure such that a third party can come in and take advantage of tax credits. It doesn't have to be a tax advantage structure, it could be you're just looking for a secondary equity investor because that person brings money that can really pump up the ability of a project to build out a larger system which makes the most economic sense both from an economies of scale standpoint but also if it's a revenue-generating project you obviously want to generate as much revenue as possible.

 

So in this structure you're got your project entity in the middle there; that's generally an LLC, some kind of shell corporation, and down at the bottom right, project developer, that might be the role of the tribe. Also let's say that the tribe has an ownership stake, so as a developer/owner the tribe is participating and investing in the project. The third party investor comes in at the left. If there's a tax credit situation the investor will usually get those tax credits and there'll be some kind of flip mechanism. I won't go into that here. But that's generally how a partnership ____ works and tax advantage structures.

 

The utility or the offtaker of the project gets the electricity. The debt or debt provider or lender gets its debt payments and interest and then the resource owner or the land provider, in this case imagined to be the tribe, might earn a royalty payment or a rental payment off of what they provide for the project to be sited.

 

Generally when the tribe owns or has an equity stake in the project there may not be a lease payment for the land, just because that's another project cost, or operating cost that has to be accounted for and generally will drive up the price of energy. So to make the project competitive you might want to balance the interests of earning the lease rights on the land versus trying to get the lowest cost energy such that you could be competitive in the marketplace.

 

Generally when you're working with a third party investor or any other investor in the project you've got what's called a waterfall structure. And so when money comes into the project through those energy sales you've got your reserve accounts up to -- this is a generalized version so waterfalls will differ project to project depending on who's involved and what's required in the various contracts of the project's financial structure. But in this example you've got a reserve account up front, and then you've got a operating account. And once the money goes into that operating account it gets disbursed to the various parties. You've got the debt payment -- notice that is ahead of any of the equity payments. The debt service account generally is the same piece of that, say the debtholder. And then you've got your reserve accounts _____ go to subordinated debt, and then the distribution account at the very bottom is where your equity comes in _____ a distribution account are subordinated or what we say to the debt holders because the debt, as I mentioned very early in this presentation, is a lower risk with the stipulation that they get paid first in the case of not only the waterfall but if there is a default of the project, breach of contract somehow then the debt provider is going to get its pound of flesh before any of the other parties are going to get their equity distribution.

 

So this distribution account at the bottom generally what happens is that you've got a third party investor; the third party investor may trap most of that to earn its return in its stipulated amount of time. A lot of times on renewable energy projects particularly you'll see the tax equity needs to turn its return in five years or so, and so they will take as much cash as is required to do that. And then what's left over goes to what's called the sponsor equity which is the developer owner we saw in that previous slide there.

 

And so the developer/owner is long term owner generally they're in it for the long haul particularly if it's the tribe and it's on their land they're going to own the project and they're going to earn long-term revenue, so it's a bit of a longer-term play for them. There is also the option for the long-term owner to sell and earn some revenues right up front in any given year of the project but generally the easiest way to sell is when all the financing gets paid off from the debt and/or the third party equity provider.

 

So that is just some very high-level concepts. Any one of those slides, as is the case of my colleagues on today's presentation, could have spent a number of presentations just going through. But I've got some definitions and some resources at the end of my presentation. Please make use of them. My email is also in the presentation. Please send me any questions and I want to thank you again for your time today.

 

 >>James: Thanks, Travis. Appreciate your time as well. Excellent presentation in a very broad subject, again, and you did a good job covering it at a high level. Thank you.

 

We do have a few questions, just a couple though and we have a few more minutes so feel free as an audience to continue to submit written questions and we expect to be able to get to them.

 

First off a question for Travis:  on the waterfall you listed a cash sweep lender after the debt payments. Can you describe what that is?

 

>> Travis: Yes, so the cash sweep generally just means there's a principle and an interest amount you have to pay, and on top of that there's something called a debt service coverage ratio, which is an amount of money you need on hand to make sure you can cover more than just your basic debt service. Usually debt service coverage ratios is expressed as a decimal number, so it will be like 1.3 or something like that. So not only do you need your debt service, which is 1, but you need your .3 more than your debt service to be sure that you have enough in reserve in the case that the project doesn't generate enough revenue at any given time period or there's some other issue where the project turned out not earning enough, you have that debt service on hand to be able to meet loan payments for a period out, or more than one period out. So when I talk about a sweep whatever cash is coming in that gets picked up, whatever you need to service your principle and interest and your debt service coverage ratio and then whatever cash is left over flows on down that waterfall.

 

 >>James: Thank you.

 

I guess just an overview:  so we received a lot of questions about getting access to the slides. Shortly we'll show the last slide here again that has the link to where the slides will be posted. However, the slides won't be posted immediately so it will take us a little bit of time to get the slides up on the web page. But I recommend you check back in and that link there at the bottom of the page you'll be able to access the slides there but may not for a few days, certainly in a week if you check back they should be posted and at that time we will also have a recording of this webinar posted there so you can rewatch the whole thing.

 

And I guess to wrap it up:  you also should receive an email in the next day or so from Go-To-Webinar that will have that same link in the email. So with that -- a question here for Tony:  going back to that interesting slide on how energy is used in the United States and where it goes. In the rejected energy total, the light gray, how much of that is actually generated electricity that is not matched with load, as opposed to energy conservation and efficiencies, etc.?

 

>> Tony: I don't think hardly any of it is a mismatch between electricity generation and load because we work very hard to match it. So it's not like -- there's hardly ever any electricity that's generated that's just not used somewhere. What'll happen is you'll see the frequency might go up a little bit and then they'll turn something down a little bit and get it back to match. So probably none I guess is the short answer.

 

What you see out of there is the energy and the various inputs that was not converted to electricity. If you see the gray coming out of the electricity generation that's what that is, is it's basically incoming energy that was not converted into electricity but generally heat that went up the stack essentially.

 

 >>James: Great. Yeah. Exactly. I think that answers it. Yeah, so the various thermal generation sources are relatively inefficient and so a lot of it is just waste heat at the end. Thanks, Tony.

 

So I believe that's all of the -- let's see -- yeah, I don't see any new questions on these topics. We'll give it a moment to wrap up here but submit it and we might be able to grab it just before we end.

 

So with that, once again, I want to thank everybody for their time today, both as an audience and as presenters. We are very interested in your suggestions on how to strengthen the value of this training, so please send us your feedback. We are currently finalizing the rest of the 2019 series, both the topics and the schedule, so please keep an eye out for those details. Thank you again for your interest and attendance and we look forward to you joining us on future webinars.

 

I'm checking one last time for any questions. And there are a couple questions that I'm not going to ask to the full audience here but I'll submit them to the specific presenters and they should be able to get back to you directly over email.

 

So with that this concludes our webinar for today. Thanks for your time and have a good day.

 

 

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