UNITING THE NATIONS ELECTRIC POWER GRID KEY CONVERGENCES

UNITING THE NATION’S ELECTRIC POWER GRID KEY CONVERGENCES IN THE GLOBAL ELECTRICAL INDUSTRY IEEE April 2016

Worldwide Interconnected AC System Challenges One thing affects everything else Long Distance Transmission • Line losses Single mistake can have huge consequences Interconnections • Steady state • Uncontrolled Load flow problems and bottlenecks – Congestion Issues – Inter Area loop flow – Cascading Blackouts • Transient Stability • Oscillation Stability • Subsynchronous Oscillations • Frequency control • Latency issues (ie Spinning Reserves) • Voltage Stability • Inductive and Capacitive limitation factors • Physical interactions between power systems • System Voltage Stability/Levels • Reactive Power Loading 1

1 st ± 1100 k. V UHVDC application • Zhundong-Wannan Project • • • ± 1100 k. V/12 GW, world’s largest UHVDC project under construction A key part of China’s “West-to-East Power Transmission Drive” A power artery to meet the increasing power demand of eastern load centers Running through 6 provinces stretching over a distance of 3400 km • +-1100 Valve, Converter Transformers & Smoothing Reactors passed type tests • Expected in Operation: End of 2016

Other ± 1100 k. V planned by 2020 Zhundong-Chengdu ± 1100 k. V/5500 A (2460 km) Zhundong-Mianyang ± 1100 k. V/5500 A (2520 km) Zhundong-Wannan ± 1100 k. V/5500 A (3400 km) Yili-Ganzhou ± 1100 k. V/5500 A (3800 km) Tibet-Quanzhou ± 1100 k. V/5500 A (3100 km)

Development of HVDC multi-terminal hardware and software in China 2014 Jan 2013 Dec. 2012 Jun 2012 • Multi terminal hardware and software • Hybrid dynamic/analog simulation platform (10, 000 + nodes, 401 level) • Valve for Dalian project passed type tests • System design for +/- 320 k. V/ 1000 MW Dalian City-Infeed Project May 2011 • Shanghai Nanhui Wind Farm Integration Project Apr 2010 • Prototype of MMC valve Jan 2005 • Started fundamental research 4

China Overlay on North America Grid 5

Hierarchical View of the Issues facing the European Transmission System Operators (TSOs) Single European Electricity Market • Pan-European Transmission Grid • Load-Generation Balance • Congestion management • Ancillary services • Settlement • Balancing Mechanisms • Variable Renewable energy Generation • Storage • Demand Side Management Source: ENTSO-E: The pathway towards common European network operation 6

The European HVDC “Supergrid” Quotes from Friends of the Supergrid (FOSG) (an organization promoting the European Supergrid) “The full significance of a switchable HVDC innovation has not yet been appreciated by policy makers or by the business community. It is clear that a network incorporating a HVDC grid with the redundancy and reliability of current AC grids is now a reality and that the limits of what is technologically possible have been greatly expanded. ” “HVDC technology will open markets, strengthen security of supply and create another global opportunity for European companies to export sustainable energy technology. The technology underpinning the Supergrid will give competitive advantage to the companies involved with its specification and design. This type of integrated AC/DC grid will be a template for what will be needed in other global markets including the US and China. ” 7

Timetable - Phase 1 and Phase 2 8

Supergrid Technology Supergrid will involve the creation of “Super. Nodes” to collect, integrate and route energy sources to the best available markets. 9

Multi-node HVDC Core Capabilities • Normal Active and Reactive power exchange determined and controlled independently • Damping of electro-mechanical • Active and reactive power controlled electronically accurate in real time to the millisecond • Sharing Spinning reserves • Emergency power imports/exports • Fire-wall for system disturbances losses) • Emergency power control and power modulation as well as runback programmed as prescribed by network planning studies • Emergency assistance • Strategic operation supported by powerful simulation center with state of the art tools and capability to adapt control algorithms as needed • Voltage and Frequency control oscillations • Dynamic voltage support (reduces 10

Towards the Single European Power Market: Next steps Markets included in PCR - 2872 TWh Markets in the process of joining PCR Markets associate members of PCR Markets that could join next as part of an agreed European roadmap © EPEX SPOT All rights reserved – strictly confidental 11

Trading on the Exchange Sending of trades Settlement CLEARING MEMBER (BANK WITH AGREEMENT AT ECC) Trading EXCHANGE MEMBERS Scheduling TRANSMISSION SYSTEM OPERATORS Settlement Balance Responsible Agreement © EPEX SPOT All rights reserved – strictly confidental 12

South American HVDC projects in operation, construction or planned Under Planning: Colombia – Panama 600 MW – 400 k. V Under Planning: Central - North 1000 MW – 500 k. V Under Planning: Chile - Argentina 2000 MW – 500 k. V Under Planning: Central - South 2000 MW – 500 k. V Under Planning Manaus - Roraima – Venezuela 600 MW – 400 k. V Under Planning: B Monte Tapajos 2 x 4000 MW 800 k. V Under Construction: Rio Madeira 2 x 3150 MW 600 k. V In operation: Itaipu 2 x 3150 MW 600 k. V In Oeperation: Garabi 2 x 1000 MW Bt. B In Oeperation: Rivera 70 MW Bt. B Under Construction: Melo 500 MW Bt. B Under Planning: Brazil – Uruguay 500 MW Bt. B 13

Opportunity Need to interconnect asynchronous regions, integrate renewables, increase reliability, move power over long-distances and optimize grid utilization create the need for comprehensive multi-terminal HVDC + trading solutions which Tres Amigas will pioneer • Cumulative global investment in HVDC is expected to exceed $120 bn by 2020 Geographies most Impacted by Type of HVDC Technology 14

21 st century smart grid technologies compared with those in use today. Source: IBM Institute for Business Value 15

Fortnightly Quotes Today, over $600 billion worth of controllable devices laptops, coffeepots, electric cars, building HVAC systems - is plugged into the grid at any one time. By 2020, this number will have grown to $1. 7 trillion. As the Edison Electric Institute has written, "The grid increasingly is becoming a multi-directional network interconnecting millions of consuming devices, flexible distributed energy resources including DG [distributed generation], and backup generation. " 16

Marching to light speed management of the grid Source: The National Institute of Standards and Technology (NIST) Smart Grid Conceptual Model 17

The “double nickel” world of the 21 st Century • The consequences of the business unit moving to an integrated 5 minute market and the needs to control in 5 milliseconds leads to a challenge to manage extraordinarily large volumes of data, more automation and truly space age control systems. • RM 15 -24 NOPR requires PJM, MISO and ISO-NE to go to 5 minute settlements • The industry will need to learn from industries that have such data management expertise; Google and Areospace industries.

Advanced Grid Innovation Lab for Energy (AGILe) Utility SM

Value Proposition and Technology Roadmap • Key energy & environmental policy drivers addressed • Substantial economic benefit as a smart grid leader - Global market estimated at $36 billion in 2013 and $60 billion by 2020 AGILe Focus Areas

Value Proposition and Technology Roadmap AGILe Optimize Bulk Generation Key Drivers Instill Flexibility Lower Congestion Costs Improve Reliability Reduce Emission Levels Cyber Security Programs Power Electronic Controls Technology & Capabilities Sensor Development Integration of Bulk Renewables Power System Economics Advanced Transmission Applications Integration of Distributed Generation Microgrids Large Array of Networked Super Computers Equipment Validation via Simulation Expand Renewables Integration Reduce Installed Reserve Margin Automation Grid Simulation Increase Energy Efficiency & Smart Grid Investments Improve Security Optimization of Generation, Transmission & Distribution Simulate Systems Integration Flexible Lab Space High Bay Space End to End Cyber Testing Grid Reliability & Resiliency External Test Space Access to Unique Grid Data & Modeling 21

Key Convergences in the Global Electric Industry • Estimated market $120 B by 2020 – UHVDC Point to point transmission – Multi-node (terminal) connecting networked HVDC to the AC synchronous Grid • Estimated market $60 B – 5 Ms system operations with integrated 5 minute energy and ancillary services – The double nickle world • Massive efficiency savings – Market coupling – Clearing of energy transactions

HVDC Network based on capacity optimization -3 GW +3 GW 6. 25 GW +15 GW -2 GW + 2 GW 6. 25 GW -10 GW +7. 5 GW

HVDC Network based on Frequency Response and Load Diversity Jan 8 th, 2014 • • Bottom Up Topology Based first on Frequency Response 2012 load data 23, 000 MW of diversity and renewables Oct 16 th, 2014 • • Top Down Topology Based first on Load Diversity 2006 -2012 Load Data 70, 100 MW of diversity and renewables Increased scope by ~33% of MISO total load

HVDC Network based on Wind to Load Optimization FIGURE 1: Nationwide Green Power Superhighways: A Conceptual Vision Wind Solar Geothermal Cite: AWEA and SEIA 25

HVDC Network based on CO 2 Reduction and Geographic Optimization Onshore wind Hydroelectric Offshore wind Natural gas Solar PV Nuclear 3 G W transmission 26

± 1100 k. V application prospective The Global Grid “Intercontinental Transmission Highway for Optimization of Global Energy Resources” -CIGRE 2012 Session Keynote speech Global Energy Interconnection (GEI) -A vision proposed SGCC president

Tres Amigas Super. Station…. Uniting the Electric Gri 28