2008 Wind Integration Team

Final Report

December 1, 2008
 2008 Wind Integration Report

Section 1 - Summary

In the 2003 Resource Plan for Colorado and the 2005 Resource Plan for the
Northern States Power system, Xcel Energy set in motion a plan to accelerate wind
additions to its utility systems. At the same time, we started to see a push for additional
wind additions on the SPS system. In total, as a result of these regulatory and resource
planning strategies, Xcel Energy planned to add significant wind capacity on its systems
between 2006 and 2007. The majority of that wind came on line in the fall of 2007. The
largest and most concentrated addition of wind was on the PSCo system where wind
capacity quadrupled with the addition of 775 MW of wind in the fall of 2007. In total the
three Xcel Energy systems had about 2700 MW of wind generation on line by the end of
2007, roughly double what was installed at the end of 2006.
Over the last few years as we evaluated wind additions, we used a combination of
peer-reviewed cost and system impact analyses, internal cost and system impact studies,
transmission system analyses, reserve margin studies, effective load carrying capability
analyses, and production cost simulations to estimate the impact of wind on the systems.
For the additions to the PSCo system, we estimated that the 775 MW of wind additions
would be accommodated through coordinated operation of the generating plants at
Pawnee and Brush (for the 400 MW Peetz and Logan project) and from Rocky Mountain
Energy Center and Blue Spruce for the 300 MW Cedar Creek project. We expected the
costs of integration to be predominately fuel costs resulting from 1) the inefficiency of
generation due to wind generation uncertainty at the time of unit commitment and 2) the
cost of additional gas storage. While we have found that our models and studies came
close to predicting the economic cost of wind integration, they seemed to have
underestimated the fluctuation of wind generation, the speed with which total wind
generation can change, restrictions on the ability of our owned and purchased units to
keep up with wind generation variation, and the occasional need to curtail wind
generation, among other things.
In November of 2007 and at the request of David Wilks, President, Energy
Supply, we formed a cross-functional study team to begin understanding these issues and
finding ways to reduce the cost and impact of wind integration. Although many utilities
and interested parties have done wind integration studies, the penetration levels in
Colorado are leading edge – we have higher penetration levels than all but small pockets
in Europe and our region is less well electrically interconnected than those European
pockets. Therefore, we found that it would not be appropriate to just extrapolate from
others studies or just do another version of the studies that we had already done, which
themselves were leading edge. We decided that we needed a fresh look and a look that

2008 Wind Integration Report Page 2 of 14

concentrated on our system and situation. That specific situation in Colorado is an on-
peak wind penetration of 15% (nameplate divided by peak load) and a current off-peak
penetration of over 30% at times (actual wind production compared to actual load),
limited transmission import capability, limited interconnection to other balancing areas,
no regional transmission organization, and even more importantly, no organized regional
balancing market. The reason why the regional balancing market is important is that it
means that Public Service must accommodate the wind on its system by itself – we
cannot rely on other balancing authorities to help control for our wind generation 1 .

PSCO 1/1/2007 thru 7/8/2008 Wind as a Percentage of Obligation Load

35%

30%

25%

20%

15%

10%

5%

0%
07

07

07

07

07

07

07

07

07

08

08

08

08

08

08

08
7

7
00

00

00
20

20

20

20

20

20

20

20

20

20
20

20

20

20

20

20
/2

/2

/2
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
/1

/1

/1
1/

2/

3/

4/

5/

6/

7/

8/

9/

1/

2/

3/

4/

5/

6/

7/
10

11

12

Hourly Annual

We also looked at wind generation issues on the NSP and SPS systems, but much
of the focus of these efforts was the PSCo system. The work of this team focused on
things that Xcel Energy could implement to allow lower cost integration and allow more
wind penetration without large industry restructuring – such as implementing a western-
wide balancing market or large transmission interconnection and overlay projects.
The study team found several broad themes and ideas and has started several
subsequent activities to further develop these ideas. First, we have found that our

1
PSCo has executed an agreement to participate in the Ace Diversity Interchange (ADI) initiative along
with a number of utilities in the WestConnect, Northern Tier Transmission Group and Columbia Grid
regions. While we expect this effort to improve our ability to regulate our loads and resources, including
wind, the maximum amount of relief that any party can supply or receive in terms of regulation and
balancing energy is 30 MW.

2008 Wind Integration Report Page 3 of 14

forecasting of wind energy could be greatly improved by having access to wind farm or
wind turbine specific weather information, and by having information on the arrangement
of turbines on the site, the orientation of the wind farm, the availability of the wind
turbines, and the generation characteristics of the turbines. In November 2008, we started
receiving data from 283 turbines and two meteorological towers installed at Cedar Creek.
The data is being analyzed for patterns of wake/terrain effects and wind propagation and
associated ramp across the farm. We are in discussions with about 30 other wind farms
across the systems to obtain similar data.

We have also taken steps to improve forecasting accuracy. The benefits of this
effort could be lower integration costs and the ability to integrate more wind into the
system. The integration costs to date have been dominated by the cost of fuel associated
with system dispatch inefficiency. If we could improve forecasting accuracy and use less
fuel then these efforts could also result in lower CO2 emissions associated with the
integration of wind. The Company has contracted for a new forecasting system.
Second, we found that it was important to make the generating system that we
have as responsive as possible – most of our on-line units across the system need to assist
in high wind ramp events. Energy Supply completed a program of testing and assessing
the capability of each owned fossil-fired generator to ramp and to reach their minimum
operating levels. The next step in the process is to look at the cost and cost-effectiveness
of projects to remove limitations in those operating levels. We are concentrating on the
coal units first because they are always on-line and generating.
It is worth noting that we cannot address operational constraints such as ramp
rates and minimum operating levels on units that we do not own without negotiations
with the generation owner and therefore our initial efforts are on owned plants.
Third, we continue to analyze incidents on the systems in which wind had
significant ramps (up or down) to look at our response and see if there are opportunities
for lessons learned.
Fourth, we are looking at the effects of wind when our owned generators and
scheduled and dispatched purchases are at minimum levels and how this situation will
change over time as base load contracts expire. We are looking at how this “bottoming”
effect impacts curtailment of wind energy. We are considering issues that include but are
not limited to operating reserves, the value of ramping capability and quick start
capability (ability for a generator to be on-line in 10 minutes), and the value of generators
capable of multiple starts and stops in a day. We are looking at the potential value of
dump energy, energy which in production cost models exceeds that needed to meet load
but which cannot be taken offline. We are looking at geographic diversity to see if
locating wind farms in different areas would allow more wind to be incorporated onto the
PSCo system. In short we are trying to take a comprehensive look at these issues with an
eye toward what changes to our existing units or our future resource additions are needed
in order to continue to expand the use of wind generation on the Public Service system.
The initial work from the team is completed and the following is a summary of
the findings on each item in the work plan. Section 4 describes some of the follow-up
activities that subsequent teams are working on to continue the assessment of the impact

2008 Wind Integration Report Page 4 of 14

of wind generation and ways to mitigate the costs and impacts of wind generation on the
systems. Teams are taking a positive “can-do” approach in looking at the various aspects
of wind integration in order to meet and/or exceed renewable portfolio standards on all
systems.

Section 2 - Study Team members

Team members were from Resource Planning and Acquisition, Risk Management,
Commercial Operations, Energy Supply Operations, Technical Services, Portfolio
Strategy, Transmission, and Transmission System Operations.

Karen Hyde Betsy Engelking Ed Loye

James Schetter Craig Berg Charles Janecek
Brett Oakleaf Tom Imbler Frank Novachek
Tim Woolley Camille Abboud Russell Bigley
Greg Pieper Mark Freeman Kenneth Langr
Kurt Haeger Lou Matis Tom Smith
Jim Hill Rick Halet Shane Gutierrez
Philippa Narog Nick Detmer Dana Echter
Joe Taylor Tom Ferguson Eric Pierce
Steve Beuning Kenneth Langr David Low
Gene Danneman Howard Kiyota Jannell Marks
Bernie Pastorik James Dominick Steve Mills
Ramsay Sawaya Keith Parks Lloyd Hilgart
Dave Horneck Paul Rhodes Betsy Engelking
Sean Connolly

Section 3 - Summaries of Findings (Numbering ties to the Initial Outline attached as

Exhibit 1 to this report)

In general, the Company theorizes that more wind can be integrated onto
the systems and the integration costs can be reduced if we have more
certainty in system operating plans for the next day and next hour and if
the non-wind units on the system can respond quickly to changes in wind
generation and if they can be modified to have lower operating minimum
or cycle off-line more quickly and/or more frequently. This first set of
activities for the team was designed to understand any current limitations
and to see what quick hitting items could be accomplished to improve
current wind integration. These activities also start the groundwork for
future teams to continue to investigate improvements.

1a. Prioritize system and generating units for study: The group determined that the
first priority for study, to the extent that efforts needed to be allocated between systems,
was the PSCo system, because of the high level of wind penetration and the fact that the
system was not part of a larger market (MISO or SPP). The group determined that the
first priority for unit type, again to the extent that efforts needed to be allocated, was the

2008 Wind Integration Report Page 5 of 14

coal units because they were always on line and therefore might always be available to
assist in system ramping and were clearly part of the solution to minimum loading
constraints.

1b. Deconstruct wind related events: Nick Detmer and Jeff Pavlovic led early efforts to
look at system and operator response to events involving significant variation in wind
generation output in the fall of 2007 and into the spring of 2008. All key events were
analyzed in detail and the analysis shared with system operators and other interested
parties. It was quickly determined that many people in the Company needed to better
understand the impact of high levels of wind generation on the systems and Nick has
made presentations to in-company modelers, wholesale customer groups, and many
others. Exhibit 2 to this report is a training presentation that was developed and has been
presented to PSCo system operators so that they gain familiarity with the type of changes
in wind generation that they can expect to see in system operation and their options and
responsibilities in dealing with these types of events. This effort is ongoing and will
continue to be modified over time, based on real operating experience and changes to the
systems. Note in the presentation that responsibilities during wind events are divided
between the Wholesale Merchant function (noted at Real Time or RT) and the
Transmission Function (noted at LOC or Lookout Center).

1c – Improve forecast frequency – There was an early theory that if we updated weather
forecasts and associated wind generation forecasts more often, they would get more
accurate. It was quickly determined that (1) the weather variables and forecasts that we
had access to were not well correlated with the location and weather at our wind farms
and that (2) forecasts would never be very accurate without knowledge of the availability
of specific wind turbines, the orientation of the turbines on the sites, and other site
specific data. The focus of this effort quickly became two fold – (1) how to access site
specific data from existing wind farms and (2) how to develop a forecasting system that
would use that data to more accurately predict wind generation at each wind farm.

A team was formed to investigate forecasting methods and the viability of

collecting data from the wind farms in as near a real time manner as possible.
Commercial Operations took the lead on investigating forecasting tools and IT
requirements to access and retain data and Purchased Power took the lead in contacting
wind farms for access. This team has selected a proposed forecasting package – Wind
Predictor (WiP). Work on this team will continue over the next couple of years with the
expectation that improved forecasting accuracy will both reduce the cost of integration
and allow more wind to be integrated.

1d – Real-time data from wind farms – As noted above, Xcel Energy generally had access
to overall wind plant output in real time operations but had little or no information
regarding turbine availability or weather at each wind farm. In April 2008, we began
contacting all of the major wind farms on the system, all of which are currently under
purchased power agreements (PPAs), to find out what kind of control systems and real
time information they had and how we might be able to tap into that information. We
sent IT site surveys and draft PI server letter agreements to 31 PPA wind projects in

2008 Wind Integration Report Page 6 of 14

September 2008. Although the wind projects owners have generally been supportive of
the efforts and of Xcel Energy’s goals, the process to acquire the data has been slow due
to concerns over confidentiality of the data and IT issues. In November 2008, Xcel
Energy began receiving real-time data from the Cedar Creek wind farm. It appears that
we will be able to receive this data for multiple wind projects from a single server for
several of the larger developers (typically developers with multiple wind farms across the
Xcel Energy systems, like Iberdrola, FPL, enXco, and Edison Mission). Xcel Energy
continues to negotiate with all other major wind farms on the systems to arrange to
receive similar information. This information will form a key factor in improving the
weather and generation forecasts.

1e - Ramping capability – The team theorized that having a higher system capability to
ramp units (both owned and PPA resources) would both reduce the cost of integration
and allow additional wind to be integrated. We found significant changes in wind
generation from hour to hour on each system. To date, the intra-hour changes for wind
generation have been:

• PSCo - max hour-to-hour wind output change +743 MW and –485 MW (2008)
• NSP - max hour-to-hour wind output change +517 MW and –488 MW (2008)
• SPS - max hour-to-hour wind output change +260 MW and –233 MW (2008)

Energy Supply catalogued the capability of all generating units to ramp up and
down. The investigation generally looked at whether the unit was capable of receiving
and acting on a signal from the dispatch center to change unit output, whether that signal
was being received and how the unit was responding, what the unit ramping capability
were and how was a unit performing relative to expectations. Work continues to ensure
that all plants receive and respond to signals. A team has been formed to look at ways to
improve the ramping capabilities of owned generating units with a goal of assessing the
cost effectiveness of potential expenditures to increase ramping capabilities.

1f - Minimum Unit operating capability – Energy Supply catalogued the lowest level of
generation in which unit stability can be maintained. Such capabilities are dependent on
system operating conditions at any point in time. A team has been formed to look at
ways to reduce minimum unit operating levels because there is an expectation that in the
future wind generation could impinge upon minimum unit operation. The goal of the
follow-up work is to assess the viability and cost effectiveness of potential plant changes.

1g – Gas Scheduling – This group looked at the adequacy of storage and imbalance
services. The group found that when the Totem storage field (2009) and the High Plains
pipeline (2008) come on-line, the PSCo system will have adequate gas storage to support
gas unit operation and regulation in support of the existing wind and the next traunche of
wind additions. With the storage and the scheduling flexibility that offers, the group
found that imbalance service is sufficient. Gas storage was also added this year on the
NSP system (ANR and NNG) and on the SPS System (NNG).

2008 Wind Integration Report Page 7 of 14

1h – Establish Texas wind priority – It is unclear if the Company has the right to curtail
QF wind in the Texas panhandle. It is clear that the facilities are not currently equipped
for curtailment. This issue was submitted to the Texas PUC in the JD Wind complaint
case that was heard in October 2008. Note that we don’t expect a decision in that case
until early 2009.

1g – NSP System – Multiple unit starts and potential tie to wind – the group decided to
concentrate on system operating issues for the PSCo system first. Additional study will
be needed to determine (1) whether units are starting more than in previous years and (2)
if so, why.

The second set of inquires was designed to see if it was necessary or

beneficial to change any of the parameters of wind evaluation in current or
upcoming solicitations for Requests for Proposals (RFPs) for wind power.

2a - Value of geographic diversity – Exhibit 3 shows the results of an analysis of

geographic diversity on the PSCo system. There is some value to geographic diversity,
both financially and operationally. Financially, the Company expects that geographic
diversity could save up to a few million dollars per year (on the PSCo system with 1400
MW of wind) if the wind is highly dispersed versus concentrated in a few areas the way it
is currently. However, geographic diversity of wind also impacts reliability by
decreasing the uncertainty associated with wind. While the diversification that PSCo
could achieve with the next 800 MW of wind added to our system could not result in
“steady” wind generation across the state, it could do at least two things: (1) reduce the
upward or downward slope of wind transient events, and (2) reduce the overall magnitude
of ramps compared to a situation where all of the wind farms are very closely clustered.

For the upcoming PSCo RFP (to be issued early in 2009), the location of wind
farms is likely to be limited based on the parameters of the evaluation and expected
transmission system expansion. We will continue to analyze geographic diversity as we
look to inform future transmission expansion planning efforts. In summary, we do not
think that any significant changes are needed for the upcoming all-source solicitation in
Colorado and will continue to study geographic diversification for consideration in future
resource plans and it’s impact on reliability. We will also continue to look at geographic
diversification on all of the Xcel Energy systems.

2b - Are some wind turbines capable of operating at lower wind speed – This question
intended to determine if we should give a bonus to certain turbines or a negative factor to
others based on the characteristics of the turbines themselves and their specific ability to
operate at lower wind speed levels either because of the value of additional energy or
because of the dampening of wind ramps with such turbines. The sub-team determined
that, while there is some difference in the capability of certain wind generating
equipment, there is no evidence that these differences should influence project selection
in upcoming RFPs. It was also not clear how, in our evaluation we would separately
assess how the turbine capability was influenced by location terrain and wind patterns
and project layout. In determining expected wind farm output, it is our expectation that

2008 Wind Integration Report Page 8 of 14

bidders will give some consideration to these factors and internalize them into the bid
pricing and expected generation profiles.

2c - Are models best reflecting operational issues and curtailment – Based on operations
to date, there are two major challenges in system operation regarding changes in wind
generation from time to time – when wind generation ramps up quickly and when wind
generation ramps down quickly. When wind generation ramps up quickly in real time,
the Company must respond by ramping down generation at other power plants. The
ability to accomplish this is limited by two high level categories – the ability for
generating units to change output levels while remaining on-line and stable and the
ability for generating units to reliably operate at minimum levels, which itself is often
limited by environmental issues. We refer to the ability for a unit to change output levels
as its ramping capability. We refer the phenomenon when wind picks up when units are
at or near their operating minimums as “bottoming”. When units are operating at or near
minimum levels usually because customers loads are low and wind picks up, the system
has little ability to balance loads and resources by ramping units down and other actions
typically need to happen, which include cutting off-system purchases, selling energy off-
system, taking some units off-line, typically gas units, and curtailing wind generation.

The team looked at how the chronological production costing models represent
minimum system operating conditions and ramping events and found that they were
satisfactory. The Company uses a variety of tools to estimate how the generating system
will operate and those tools each use techniques to simplify real-time system operation so
that multiple studies can be run in time frames much different from real system operation.
The Company modelers are well aware of the limitations of these models and will
continue to explain and document differences. However, the group determined that it
was impractical to model the uncertainty in wind forecasts and the impact of that on
production costs for most routine runs. The group reviewed the methodologies used for
the wind integration studies to date and determined that the methodologies, models, and
the results were reasonable and determined that the best approach to ensure that modeling
for the upcoming PSCo CRP All-Source solicitation was as accurate as possible was to
complete the 20% integration study and use that result to represent the cost of wind
integration in the evaluation. Representatives from Commercial Operations, Energy
Supply, Resource Planning, and Risk Management will actively review the 20% wind
integration study as it is being developed. It is noted that the Company still has work to
do on two fronts that may impact future modeling: costs of cycling and emissions
associated with wind integration.

With the high penetration of wind on the PSCo system and the expected
continued growth of wind penetration on all three systems, we are starting to see more
cycling of base load units. In this case, cycling of base load units means ramping those
units up or down more than 15% of their name plate capability. In this sense, “cycling”
does not mean turning base load units off and requiring hot, warm, or cold restarts. This
difference is key. As we increase penetration of wind on all systems, we are likely to see
more ramping of base load units. At the levels looked at over the next few years, we do
not anticipate needing to turn off-based load units to integrate wind generation. We have

2008 Wind Integration Report Page 9 of 14

concerns about turning on and off base-load units, due to both the cost and the time
required to do so. If a base load unit were turned off, it would be unlikely to be available
to meet load the next day at its full output. Therefore the Company must take other steps,
like curtailing wind generation, in order to keeps its loads and resources in balance and
maintain system reliability.

To assess the costs of both cycling and turning units off and on, Energy Supply
has contracted with Aptech to study cycling costs on three power plants: Pawnee
(PSCo), Sherco 2 (NSP), and Harrington 3 (SPS). The draft top-down study for Pawnee
indicates increased ramping (cycling), increased cost of ramping, and increased costs to
shutdown and start-up the unit. The executive summary from the first deliverable in that
effort is included as Exhibit 4 to this report. This work will continue to be refined and
expanded over upcoming months.

In addition, we need to determine the amount of additional unit cycling (ramping)

that is driven by wind generation on the system. Initial study indicates that cycling will
increase, but that some cycling will be driven by the need for unit deslagging and other
restrictions and that wind generation may enable the system to better withstand those
derates.

When we determine the expected cost of wind integration through peer reviewed
wind integration studies, the majority of the costs are additional fuel that is expected to be
burned due to committing additional units on a day-ahead or hour-ahead basis because of
uncertainty in the wind forecast and/or the cost of operating units at less than optimal
points on their heat rate curves because more units are committed. In our models, we
include the cost of this fuel, but we have not quantified the emissions impact of this fuel.
For the 2009/2010 interim CRP, when we will be presenting plans to meet the
Governor’s Climate Action Plan goals, we will need to determine a methodology for
including at least the carbon dioxide emissions impact of integrating wind on our system.
In addition, we will continue to review the impact of additional wind on base load unit
cycling and on changes in operations of gas plants.

2d – Problem Turbines – In 2007 and 2008, two types of turbines had operational
difficulty on the Xcel Energy system: Clipper Liberty and Suzlon S-88 with V2 blades.
Turbine hardware and software problems delayed commercial operation on at least four
wind projects – three on the NSP system and one on the SPS system. We sought legal
research on any lawsuits involved with the turbines across the US and read news reports
of issues with the same turbines in other installations around the country. No lawsuits
were found. As 2008 progressed, the projects have started to come on-line and all are
now in Commercial Operation and the manufacturers seem to have resolved technical
problems reportedly under warranty. On October 28th, two of these wind projects ceased
operations due to owner caution as the projects performed blade inspections due to a
failure at a sister wind farm. At this time, we do not have evidence that any turbine type
should be avoided in future solicitations, but we will continue to monitor developments in
this area.

2008 Wind Integration Report Page 10 of 14

 The third set of inquiries looked at whether we should change any
parameters in evaluating non-wind bids in order to encourage resources
that may increase the ability to add incremental wind resources.

3A – Value of resource characteristics – faster regulating response, reg-up and reg-down

response, lower minimum operation, higher wind penetrations – The group included this
in the scope of the 20% peer reviewed wind integration study.

3B – Value of generating resources with dispatchable load – Common sense and

commercial operations finds that the ability to increase Cabin Creek load is invaluable in
integrating wind during times when wind generation picks up when load is otherwise
low. Operating procedures on the PSCo system include this action in response to high
wind, low load, and generators at minimum operating levels (See Exhibit 5).

The Company is investigating a pilot program regarding compressed air storage,

has participated in a wind-to-hydrogen pilot with NREL, and has recently been testing a
wind-to-battery project in Minnesota. We do not anticipate that any of these projects will
be commercially ready for deployment in this resource planning cycle. In general, the
Company looks at all of these storage options as providing the most value to customers if
the storage is used as a system resource rather than being coupled only with wind
generation, although the ability to both pick-up load when wind generation is at its
highest and load is lowest could allow integration of higher levels of intermittent
generation and being able to transfer that generation to on-peak periods will provide
overall system value.

3c – Are we forecasting minimum system load accurately – Exhibit 6 shows our current
forecasts for minimum loads on the PSCo system. This forecast is reasonable for use in
most modeling applications. However, we will continue to evaluate if the forecasted fall-
off in load for the lowest couple hundred hours of the year are reasonable as we look at
higher wind penetration levels.

The last section of work looked at specific issues that might influence the
next round of resource planning and future solicitations.

4 a, b, c, and d – Evaluation of generating unit capabilities – Energy Supply assessed the

capabilities of owned non-wind generating units on all three systems to receive and
respond to AGC signals. After assessment, the first step was to determine what, if
anything, was interfering with the process of receiving and responding to signals. Steps
were taken to ensure that all units that were equipped for response were responding.

The next step in the process is to determine ways to improve ramping response
and minimum operating level performance, price those changes, and then compare them
to each other and to the values assessed in the 20% wind integration study to determine
which upgrades are most cost-effective and will best help integrate additional wind and
solar generation.

2008 Wind Integration Report Page 11 of 14

4e – Do we need additional gas storage? For the PSCo system, we have determined that
the addition of Totem will be sufficient for the mid-term. We recently acquired storage
for the SPS and NSP systems from ANR and will begin operating the systems with
releases from storage this winter. Operating experience and an analysis of how we will
provide gas to any additional gas-fired resources on each system will be the best guide as
to the need for additional gas storage capability and will need to be assessed as additional
gas-fired resources are planned for the system.

4f – Can we detune owned wind and regulate ramp-up electronically – Analysis of

manufacturer capability indicate that it is likely that we could control wind turbine pick-
up to slow the ramp up in energy production to enable smoother ramping of other units or
to better control curtailment. The new Grand Meadow wind project, a 100.5 MW owned
wind project on the NSP system with in-service expected late in 2008 was purchased with
an enhanced DCS which will be capable of integration, optimization, and detuning. The
Company plans to experiment with these capabilities in 2009.

4g – MISO and SPP market interaction – It is clear that wind integration efforts benefit
from a larger market and from near real-time market interaction. These should be
included in evaluating the level of wind that can be cost-effectively and operationally
integrated onto those systems. However, to accomplish that, it is not necessary to model
the entirety of those systems but rather to have a market unit available for dispatch in
modeling representing likely market transfers and to reflect the benefit of the market in
the calculation of estimated wind integration costs. We will continue to consider this as
MISO moves to a Day three market and SPP moves to a Day two market.

4h – How much wind will other utilities add – Using information provided by the
participants in the Colorado Coordinated Planning Group in early 2008, we have
estimated, based on an average 33% annual capacity factor, the amount of wind
generation that the other load serving entities in Colorado will need to add to meet their
Colorado House Bill 07-1281 requirements. This information is shown in more detail on
Exhibit 7. Based on this analysis, the other utilities in Colorado, Tri-State, Black Hills
Energy, Colorado Springs, Platte River and MEAN, will need to add about 250 MW of
wind by 2013 and an additional 270 MW by 2018.

4i – Dump Energy – Production cost models typically allow the simulated system to
generate more energy than needed to meet load rather than violate unit operating
parameters. As it relates to wind, this is somewhat equivalent to sending energy to
neighboring control areas without compensation or schedule in order to accommodate
wind during minimum load conditions or when wind generation increases faster than
other generation can be decreased. The concern is that the models may be overutilizing
this feature and modelers may not appreciate the magnitude of a potential system
operating problem. Currently, this energy is modeled at $0/MWh, which means that a
portfolio of resources that results in higher dump energy will be penalized because the
cost of fuel burn is quantified and then there is no revenue credit for dump energy.

2008 Wind Integration Report Page 12 of 14

4j – Can we use the assets of others to help regulate? – Because the SPS and NSP
systems are already part of a larger market, they effectively do have access to some other
generation to help regulate for wind (although certainly less than all generation in each
market), so the focus of this investigation was the PSCo system. Brett Oakleaf asked
Western Area Power Administration if it was possible to consider using some of their
hydro assets in this way and he was told that it was not.

Section 4 – Sample of follow-up studies

As noted throughout the report, activities are continuing all over the Company to
further study certain ideas initially mentioned in meetings of this team. It would be
impossible to catalog all of the efforts in innovation and all of the ideas being generated
and studied. In addition, many efforts, just as regional transmission planning, efforts to
influence market structure and options, and reliability rules also are likely to have
benefits for integrating intermittent resources. The following is just a sampling of efforts:

Combined Cycle Minimum operation: This project investigates the possibility of

reducing the minimum operating loads for combined-cycle and simple-cycle combustion
turbines in order to increase overall operating range. The theory behind this is that, since
combustion turbines (whether in simple-cycle or combined-cycle configurations) can
change load much faster than conventional-cycle coal plants, they will be more valuable
for chasing wind on the system. The turndown study looks at combustion tuning in order
to allow operation within air permit limits at lower load levels (typically 40% combustion
turbine load or so) than original design (typically around 70% CT load). This work will
look first at Black Dog 5/2, a combined cycle plant on the NSP system. Phase I, a data
gathering effort, is on track to be completed by the end of 2008.

Wind Predictor (WiP) – The Company is proceeding with developing a new wind
forecasting system. Weather models are traditionally generalized to identify extreme
events that pose risk to life and property, not wind energy production. In addition, these
models cover large geographic areas such as the entire Western United States, thereby
losing the resolution necessary to accurately forecast wind speeds and direction on a
localized basis. Lastly, traditional models are restricted in the number and timeliness of
meteorological inputs used to capture the state of the atmosphere. An improved forecast
begins with better tuning of the model and timely inclusion of voluminous meteorological
data. The new forecasting tool will use the latest in weather prediction technology to
create a much more granular forecast optimized for the needs of wind energy production.
It will incorporate a much larger amount of real-time meteorological information.

Impact of Cycling – In addition to Exhibit 4, the Company has contracted with Aptech to
complete a similar study for two other units and to perform two subsequent studies: (1) a
similar top-down analysis for a future year operating pattern when more wind generation
is on-line and (2) an engineering bottom-up approach.

2008 Wind Integration Report Page 13 of 14

List of Exhibits

1 – Initial list of assignments

2 – PSCo Integrated Reliability Training
3 – Geographic Diversification
4 – Cost of Cycling – Executive Summary
5 – PSCo operating procedures
6 – PSCo load duration curve
7 – RPS Analysis

2008 Wind Integration Report Page 14 of 14