Q&A Responses

Questions may be submitted to us via the RFP e-mail address at IMAllSourceRFP@crai.com. Responses to questions will be posted on this page to all participants without any information that would identify the questioner.

Responses to Questions

No.QuestionResponse
1Can we bid a non-conforming bid if we have a MI solar MISO project with a 2024 COD and DPP2 and have NOT secured Firm Transmission into PJM? Or will it be thrown out?Under the threshold requirements noted in Section 9.1.5 of the RFP, proposed solar projects connected to MISO must have a completed MISO Final DPP SIS and Network Upgrade Facilities Study and have Firm Transmission from the Project into PJM (ref: Section 3.9.3 of the RFP). In the proposal noted in your question, firm transmission has not been secured into PJM. This proposal would not pass the threshold evaluation per Section 9.1 of the RFP.
2If bidding a solar/wind + storage option, can the storage component tenor be less than the wind or solar component tenor?Yes. Under the RFP rules, the storage option is considered a supplemental capacity resource that can be bid in accordance with its design life. Per Section 3.8.7, the tenor is technology dependent with a preference for 30 years and a minimum of 15 years.
3If bidding a standalone storage option, can the tenor be less than 30 years?Yes. Per Section 3.8.7, the tenor is technology dependent with a preference for 30 years and a minimum of 15 years.
4Proposal requirements seem to ask for a list of exceptions to the AEP Generation Facility Standard (Appendix F) and Connection of Facilities (Appendix G).
 
Assuming we plan to bid in solar without battery storage, would we need to respond with exceptions to the “Gen-4550 Solar Facility Technical Specification and Design Criteria” as well as “Requirements for Connection of New Facilities or Changes to Existing Facilities Connected to the AEP Transmission System”?
 
Would you require this exception list if we were only submitting a PPA?
Yes, where a bidder wishes to propose a Solar project, whether PPA or PSA, then exceptions to the following documents is required:
– Appendix F (Exceptions to AEP Wind or Solar Generation Standard)
– Appendix G (Exceptions to AEP Requirements for Connection of Facilities)
 
Exceptions to these documents are required regardless of whether the bidder proposes to submit a PPA and/or a PSA.
5Regarding exceptions to the form PSA, PPA, specifications, and connection requirements — how would you like us to present those exceptions? Would those attachments redlined make sense?Yes. Redlined attachments with specific language or change request is acceptable.
6Could you please lay out a list of each item that is specifically required for a solar PPA and create a second list for each item that is specifically required for a solar PSA?Bidders are directed to review Appendix Q for a convenient list of documents which are required as part of their bid submittal.  Certain documents, as noted, are not required depending on the technology and form agreement.  For example, for those bidding a Thermal resource, all requests for documentation related to other technologies (Solar, Storage, etc.) would not be applicable nor required to be submitted.  If bidding a PPA option only and not a PSA, then exceptions to the PSA would not be required as part of the bidder’s submittal.  Likewise, if bidding a PSA only, exceptions to the PPA would not be required.  It is acceptable to provide both exceptions to the PPA and PSA when bidding both options, in conjunction with other required documents when the submitted information does not differ for the same project.
 
For clarity, all documents noted in Appendix Q are required for a Solar PPA proposal with no storage option, except for the following non-applicable items:
·         Exceptions to the form PSA
·         Exceptions to Wind Technical Specs
·         Exceptions to BESS technical Specs
·         Exceptions to Battery fire safety standards
·         Appendices H, J, K, L

 
For clarity, all documents noted in Appendix Q are required for a Solar PSA proposal with no storage option, except for the following non-applicable items:
·         Exceptions to form PPA
·         Exceptions to Wind Technical Specs
·         Exceptions to BESS technical Specs
·         Exceptions to Battery fire safety standards
·         Appendices H, J, K, L
7In the final RFP specifications document, on Page 5, Section 3.2, for PPA Products the requirement is :
 
For PPA Proposals, the Company is seeking to purchase the Renewable Energy Products and Supplemental Capacity Products from a low cost Product to deliver energy into 1) PJM, 2) MISO with firm deliverability rights into PJM, or 3) I&M’s distribution electrical system via a PPA.
 
The same requirement is also stated under Section 3.6: Location.
 
It would be very helpful to get further details on the requirement of ‘delivering energy into MISO with firm deliverability rights into PJM’. By firm deliverability, is the RFP looking for firm point-to-point transmission from any zone within MISO to a zone in PJM?
Yes, firm transmission service would be required to effectuate deliverability from the eligible states within MISO to PJM.

Responses to Stakeholder Questions Received

These questions were received during the stakeholder feedback period during the development of the RFP.

No.QuestionResponse
1Will I&M consider projects in Illinois?Under the framework presented on January 18, I&M projects must be located in the states of Indiana or Michigan (or Illinois for Wind Projects) and interconnect to 1) PJM, 2) MISO with firm deliverability rights into PJM, or 3) I&M’s Distribution System. I&M has a preference for projects that provide economic benefit to the states of Indiana or Michigan.
2Would AEP I&M consider projects in the MISO interconnection queue?Projects must be located in the states of Indiana or Michigan (or Illinois for Wind Projects) and interconnect to 1) PJM, 2) MISO with firm deliverability rights into PJM, or 3) I&M’s Distribution System. I&M has a preference for Projects that provide economic benefit to the states of Indiana or Michigan.

Projects in PJM must have a completed PJM System Impact Study. Projects interconnecting to MISO must have completed Phase 3 of MISO’s Definitive Planning Phase and have the Final DPP SIS and Network Upgrade Facilities Study and have secured Firm Transmission into PJM. Projects interconnecting to I&M’s distribution electrical system must have a completed Distribution Impact Study from the I&M Distribution Planning Group. The interconnection point with PJM or I&M’s distribution electrical system will be the Point of Delivery.
3Can you explain how debt equivalency costs plays a role in the RFP?Debt equivalency costs are intended to account for the “debt-like” financial obligation impact that Power Purchase Agreements have on the credit metrics of Utilities. Debt equivalency costs are included in the Levelized Adjusted Cost of Energy (LACOE) for all PPAs to ensure bids are compared on an equivalent basis.

Response updated on February 24, 2022 to reflect that the adjustment is initially made to the Levelized Adjusted Cost of Energy (LACOE), which is later updated and included in the Levelized Adjusted Net Cost of Energy (LANCOE). Also, last sentence “bids” replaces “projects”.
4Are there inflection points considered for debt equivalency?No, debt equivalency costs are estimated by I&M and applied in the Levelized Adjusted Cost of Energy (LACOE) to all PPA proposals.

Response updated on February 24, 2022 to reflect that the adjustment is initially made to the Levelized Adjusted Cost of Energy (LACOE), which is later updated and included in the Levelized Adjusted Net Cost of Energy (LANCOE).
5Will a demand response program be an acceptable way to meet the capacity requirements of this RFP?
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While RFPs may not be the best way to acquire demand-side resources, we believe they should be eligible to respond. We do not think any energy efficiency resources are likely to respond, but a demand response aggregator may and should be allowed to make an offer.
No.  A demand response program (DR) will not be considered as a qualifying resource within this RFP.
6Emerging long duration energy storage technologies have the potential to provide significant performance and economic optimization benefits. These technologies are commercially available today and development is already underway for several projects for customers in the US with COD in the next couple of years. The requirement to have a completed interconnection study before proposal submission prevents the majority of technologies (beside li-ion) from being considered, despite the willingness of technology providers to financially guarantee the performance of the system.

Is there an avenue available to discuss non-conforming bids that address the biggest pain points faced by IMP?
The interconnection study status requirements in the RFP are designed to ensure that: 1) projects have reached a level in the interconnection process that ensures they can be reliably delivered within the required timeframe, and 2) that estimated interconnection and network upgrade costs can be incorporated into the bid selection process.

One exception to this requirement is that storage projects that are being proposed to enhance the capacity of existing I&M-owned solar facilities will either require a completed system impact study or have established capacity injection rights into PJM.
7Can prospective bidders begin the process of signing a CA and gaining access to the documents listed in Section 6.4 of the draft RFP or is this not allowed until the final RFP documents are released?I&M will process requests for the confidentiality agreements prior to the release of the RFP. Companies who execute the CA prior to the RFP release will receive the documents on the RFP release date.
8Does the RFP allow for I&M or other AEP affiliates to submit bids?No.
9Is I&M limiting the bid selection to only 800 MW of wind and 500 MW of solar resources?No. I&M has used the results of the IRP process to establish approximate targets for annual resource additions by type. However, the actual MW totals by resource type may differ depending on the characteristics of the bids themselves. Ultimately, I&M will select a set of projects that best meets the capacity and energy needs of the company while providing the best overall value to our customers.

Response updated on February 25, 2022 to add “approximate” in first sentence.
10Will I&M use Aurora or a similar resource modeling tool to determine what types of resources will be selected from the bids to meet its capacity needs?

________

As part of the detailed evaluation process, could you consider performing detailed modelling on the portfolio of proposals received?
No. I&M has recently completed a comprehensive IRP development process which included both detailed generation resource modeling (using Aurora) and a stakeholder input process. The IRP process culminated in the identification a Preferred Portfolio which identified annual resource additions by resource type to meet customers’ future capacity and energy needs. I&M is using the resource additions identified in the Preferred Portfolio as targets for the RFP, but will ultimately select those bids that best meet the capacity and energy needs of the company while providing the best overall value to our customers.
11Please make sure to include language in the RFP that informs the bidders that stakeholders with NDAs and without competing interests to the bidders will be able to review the bids.

___________

For transparency of this process and to allow a thorough regulatory review, the bid information should be available to stakeholders without competitive interests under a non-disclosure agreement.

In addition, non-competitive stakeholders should be able to review the information used to evaluate the bids. There are several non-trivial and black box cost adders that I&M proposes to use in its evaluation including congestion cost, capacity value, and debt equivalence cost, and it will be very important for stakeholders to have an opportunity to review the basis for these cost adders as well as the application of those adders to the bid evaluation.
Language has been added to the NDA between AEP and potential RFP Participants that outlines a procedure for the confidential disclosure of RFP bid results and analyses of RFP bid results to interested stakeholders that are not competitive entities
12Given the challenges around interconnection of new generators, we feel it is very important to explore the possibility of siting new renewables and storage at locations that can interconnect to the delivery points of retiring assets and not merely evaluate those sites for conversion to a different type of thermal generator. However, RFP respondents certainly won’t provide such a bid for renewables or storage at existing asset locations unless it is explicitly stated in the RFP that such proposals would be considered, that existing interconnection rights could be used, and providing the window of time in which such a proposal would need to come online. Even with this information, it may be that the timeframe of the RFP is too accelerated to garner such bids, which would not already be under development by potential respondents. Because of this, it would be very important for the Company also to evaluate replacing retiring generators with renewables and storage. It’s our understanding that affiliate transactions won’t be eligible to participate in this RFP, but we would expect that the Company will also be considering “self-build” options in its analysis of potential replacement generation. In that modeling, the Company should not limit replacement generation at existing sites to thermal generation only, but instead think broadly and creatively about the possibility of locating renewables and storage facilities at or near the site and tying those assets into a retiring generator’s interconnection point.

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It is our understanding that the respondents to this RFP do not constitute the universe of potential projects that I&M would consider acquiring or developing. We would expect I&M to also be considering self-build options. Furthermore, we would expect I&M to be utilizing its existing interconnection rights. In order to achieve a fulsome consideration of resource types, all technology types should receive fair and equal consideration (when I&M makes a future decision as to which resources to acquire) for use of I&M’s existing interconnection rights regardless of whether renewable or storage projects utilizing I&M’s existing interconnection rights respond to this RFP (indeed, we think it is likely they will not).
Second, in whatever decision-making process I&M undertakes to develop any self-build proposal, the same evaluation criteria should be applied to those projects as are applied to any third-party proposals, before settling on a final project(s) for submission for approval at the IURC and the MPSC.
I&M is seeking proposals for projects that would use their own interconnection facilities or existing interconnection rights.

This RFP will not consider bids from I&M nor any of its affiliates or the reuse of any of I&M’s existing interconnection rights from retiring facilities.
13We would recommend that the maximum duration of storage be lifted rather than capped at 8 hours (section 3.8.8) so that emerging storage technologies can also respond.
To align with the Rockport Unit 2 settlement agreement (IURC Cause No. 45546), we also think the language around hybrid projects could be strengthened to encourage such responses. As a reminder, the settlement agreement states, “I&M shall use a non-discriminatory [bidding process] (i.e. such Request for Proposals (RFP) shall not discriminate against renewable generation paired with storage, shall not discriminate by type or by size[] ).”
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Standalone energy storage offers are limited to 8 hours in this draft RFP. While 4-8 h storage systems provide considerable value, longer durations (10+ h) can further support renewable integration. Moreover, longer durations are better able to provide valuable resilience during extreme weather events.
Additionally, the draft RFP provides the option to bid a solar or wind project with a battery energy storage system (BESS) but overlooks non-battery storage systems. A long duration storage system—which may or may not be an electrochemical battery—can further benefit Indiana Michigan Power.
I&M has considered this input and will remove the 8 hour limit on storage technologies as a requirement and will also consider non-battery storage systems. However, please note that per the RFP, any emerging technologies must also have demonstrated feasibility, be commercialized, and qualify as a capacity resource under the PJM tariff.
14Given recent inflation uncertainty, we are quite concerned about the potential implications of requesting firm pricing for both PPAs and PSAs. If I&M were to self-build new capacity, we do not envision that it would ask for approval of a lump-sum turnkey (“LSTK”) project either. Indeed, when CenterPoint Energy Indiana South recently tried to secure an LSTK arrangement for its proposed combustion turbines, it concluded that the premium it would have to pay to secure such an agreement was unaffordable. Potential respondents should not be treated differently merely because the origin of the potential project is from a different entity than AEP/I&M.Requiring firm pricing ensures that I&M can review and vet all bids on a common basis. Furthermore, I&M has designed the all-source RFP to capture a wide range of potential project types, sizes, configurations, and geographies to ensure a competitive bid process.
15We believe that this draft RFP could be improved by opening up the “Supplemental Capacity Resources” category to any resource that can demonstrate that it can meet specified energy and capacity needs. This includes renewable resources excluded from the Wind and Solar categories, such as those projects below the minimum acceptable size of 20 MW, aggregations of otherwise viable projects, battery energy storage systems paired with wind or solar that do not fall within category specifications (a ratio of 5:1 to 3:1 of the nameplate rating of the companion facility and 4 to 8 hours of capacity2), and other distributed and demand-side resources.Technologies are not restricted in the Supplemental Capacity Resources category. I&M has reviewed comments received and has decided to remove the upper limit for storage and reduce the threshold nameplate capacity to 5 MW.
16The draft RFP does not currently allow participation by distributed energy or other demand side resources, including demand response, energy efficiency, or aggregated residential and commercial solar and storage, but opportunities for these resources to provide meaningful capacity contributions are growing as many are proving to be cost-competitive when compared to new generation. For example, recent studies from Lawrence Berkeley National Laboratory have found that passive peak load reductions from energy efficiency programs can be substantial, and that the programs are a “relatively low-cost way for utilities to meet peak demand, compared to the capital cost of other resources.” DER participation via aggregation services in wholesale markets, including the Midcontinent Independent System Operator (“MISO”), will create new value streams for DERs that may make some resources newly cost-competitive with other RFP bids. The incremental nature of these resources can also protect the utility and its customers against over-investment if the expected load never fully materializes. These bids, if selected, need not replace demand-side management programs (“DSM”) that I&M already offers or will create in its future DSM plans. Instead, an open RFP allows third-party providers and market participants to find and offer additional cost-effective demand savings options that complement the utility’s other efforts. As all-source RFPs that allow participation from DERs become more common, utilities and customers are beginning to realize real benefits. In 2018, Glendale Water & Power received and selected bids for 28 MW of demand-side management, 75 MW of battery storage, 153 MW of solar, and 130 MW of wind. Together, these procurements allowed them to downsize a new gas plant by over 150 MW and save customers $125 million. Northern Indiana Public Service Company, Indianapolis Power & Light Company, and Vectren have also run all-source RFPs that allowed participation by demand-side resources, leading to the identification of portfolios of resources expected to lower total costs. We recommend that I&M follow suit to see what the energy industry can provide.Demand-side resources will not be considered as a qualifying resource within this RFP. The RFP is open to all technologies directly interconnected to the PJM, MISO (with interconnection rights), or I&M distribution system.
17I&M should prioritize projects that are “least-regret.” This means explicitly considering long-term fuel and cost risk, which can be done by assessing how likely a proposed asset is to become operationally stranded by lower-cost advanced energy resources before the end of its useful life. It also includes consideration of potential policy changes that raise the cost on fossil fuel generation or place restrictions on their operations. This criterion is related to I&M’s consideration of asset-specific benefits and risks, but the RFP should be more explicit for the benefit of bidders. I&M may also choose to require that bidders submit information related to these risks in item 5.3.2 alongside necessary fuel adders, fuel arrangements, and pricing mechanisms.The fuel price risk will be evaluated with appropriate levels of fuel adders to reflect potential cost risk in the price evaluation. In the non-price evaluation, this risk will also be addressed as part of the “asset-life related market risks” to the extent the price of fuel can deviate from projections and exhibit price volatility. Finally, under the Carbon Emissions Goal non-price category, each bid will be reviewed with respect to its emissions rate, carbon capture technology, and potential to facilitate non-carbon based fuel sources.
18Please provide the numbers behind the debt equivalency price factor.I&M will calculate the present value (PV) of the PPA payments using a discount rate equivalent to the Company’s cost of debt, a 40% adjustment for an implied capacity payment and a 25% risk factor. The product is an estimate of the imputed debt amount applied by Standard & Poor’s Rating Services. An annual imputed interest cost will be calculated by applying the Company’s cost of debt to the estimate of the imputed debt amount for each year of the PPA contract term. The levelized cost per MWh will be calculated by dividing the present value of the annual imputed interest cost by the present value of the MWhs delivered during the contract term. The debt equivalency value will be calculated for each bid based on the proposed offer price and terms of the bid.
19Since it is within the AEP transmission system, we would recommend that Ohio also be an eligible location (section 3.6).I&M has considered this input and will expand the geographic scope of the RFP to consider Ohio-based wind projects.  Location requirements for solar and Supplemental Capacity Resources will remain limited to Indiana and Michigan.