NRCO Background NRCO 7/16/2014 THE NEW NORMAL. Formed in G&Ts 4 Distribution Cooperatives. What is Being Done in Distributive Generation

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1 THE NEW NORMAL What is Being Done in Distributive Generation Amadou Fall NRCO CEO NSAC ANNUAL CONFERENCE August 4 th, NRCO Background 2 2 NRCO Formed in G&Ts 4 Distribution Cooperatives 3 1

2 NRCO Utility Scale Projects Mehoopany Stony Creek Pioneer Trail SMECO Solar Shooting Star Flat Ridge II Stony Creek Mehoopany Pioneer Trail 52.5MW 140MW 40MW Rockfish Solar Shooting Star 104MW Origin Flat Ridge II SMECO Solar 51.2MW 5.5MW Origin 150MW Rockfish Solar 10MW Total 553.2MW 4 Renewables Efforts Solar Wind Biomass Other 2 RFPs MW Community & Distributed Solar Solution 2013 SPP 2 COD (7/2012 &12/2012) MISO 1 COD (12/2011) PJM 2 COD (5/ /2012) Woody Proposed: Texas & Kentucky LFG Projects Reviewed GA, OK, IN Small Hydro ~300MW License Acquisition Analyzed Cooperative Owned COD (11/2012) ERCOT Projects Analyzed Northeast Projects Analyzed Biodigesters Technology Reviewed Coal Bed Methane Technology Reviewed 5 RENEWABLES TRENDS 6 2

3 Cooperative (Load Serving Entities) Generating Capacity Source MW Coal 21,300 Natural Gas 26,000 Transactions 8,600 RE Non Hydro 3,900 RE Hydro 2,900 Nuclear 2,600 Total 65,300 3,900MW (Non Hydro) 2800MW Wind Mostly Wind PPAs ~ 70MW Utility Scale Solar < 6% Owned 4 Coops > 50% of Renewable Capacity (Wind) in the Plains States 7 Cooperative (Load Serving Entities) Energy Sources Source MWh Coal 138,113,000 Natural Gas 32,610,800 Transactions 47,452, RE Non Hydro 13,596,600 RE Hydro 7,637,600 Nuclear 20,129,100 Total 259,539,800 8 Wind Market Trends 9 3

4 Wind On Shore Lowest Cost Renewable Taller/ Larger turbines Off Shore 4,000,000 MW Potential. ~4x current US Capacity Capacity Mix Nat. Gas 43% Coke 0% Coal 29% Nuclear 9% Oil 3% Other 0% Renewables 14% Biomass 1% Geothermal 0.3% Hydro Wind 5% 9% LFG 0.2% Solar 0.4% 11 Velocity:EIA US Wind Capacity (Utility Scale) 12,500 10,000 7,500 5,000 Assumes no PTC Extension 2, e 2014e 2015e 2016e 12 Source: BNEF 4

5 PTC High US Demand Assumes no federal policy support Base Low 2 0 RPS driven Source:BNEF 13 Biomass Market Trends 14 Us Biomass Resources by County 15 Source: NREL 5

6 New Biomass in 2013 Only 3 major US additions Dominion Virginia Power converted 3 coal plants to Biomass 145 MWs total Altavista Hopewell Southampton Challenges EPA Financing Fuel Supply Risk Lower Incentives 16 Other Technologies Biodigesters/Hydro/LFG 17 Solar Market Trends 18 6

7 Solar Resource 19 Source: NREL 2013 Capacity Mix Nat. Gas 43% Coke 0% Coal 29% Nuclear 9% Oil 3% Other 0% Renewables 14% Biomass 1% Geothermal 0.3% Hydro Wind 5% 9% LFG 0.2% Solar 0.4% 20 Source: Velocity and EIA Introduction U.S. Q Solar PV Capacity Solar PV installations accounted for 74% of all new electricity generation capacity in Q Q Additions to U.S. Electricity Generation Capacity (%) 6.6 GWs forecasted for 2014, up 39% over 2013, nearly 2x the market size in 2012 Key Drivers: Federal tax incentives State Renewable Portfolio Standards (RPS) with solar or distributedgeneration carve outs State and utility rebates and tax incentives Financing and ownership models Declining costs of technology components Source:SEIA, GPRT 21 7

8 U.S. Solar PV Capacity In Q1 2014, the U.S. installed 1,330 MWs of solar PV in Q1 2014, a 79% increase over Q and the second largest quarter for solar installations in market history Cumulative operating PV capacity: 13,395 MWs Expected Solar PV Installations through 2016 Total systems: 482,000 as of the end of Q (across utility, nonresidentialand residential market segments) Residential system installations surpassednon residential for the first time in Q Source:GTMResearch;SEIA, GPRT 22 Annual Installation Breakout U.S. Historical Forecast 47% 47% Utility 45% 43% Commercial 40% 40% 42% 32% 41% 15% 39% Residential 49% 13% 36% 29% 15% 13% 13% Source: BNEF 23 The Experience Curve For PV Modules (logarithmic scale) 100 Cost per W (2013 $) Experience curve Chinese c-si module prices (BNEF) Q ,000 10, ,000 1,000,000 Historical prices (Maycock) Thin-film experience curve Cumulative capacity (MW) Source: Maycock, BNEF 24 8

9 System Costs $/Watt AC $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $ Utility Residential Source: BNEF 25 DISTRIBUTED GENERATION IMPACT Everyone Wants My Member!!! 27 9

10 Solar Companies Business Model Solar City Sunrun Clean Power Finance Vivint Astrum SunPower Sungevity 31 Source:energysage.com US Distributed PV Demand Forecast, (GW) 5,860 5,463 4,759 2,344 3,955 2,167 3,824 3,519 1,903 2,852 1,606 1,517 1,407 1,943 1,200 1, ,296 3, , , ,307 2, , , Commercial Residential Source: BNEF, EIA 28 Top 10 IOUs By NEM Capacity As APercentage Of Total Capacity, 2012 (%) Hawaiian Electric Pacific Gas & Electric Public Service Electric & Gas San Diego Gas & Electric Jersey Central Power Atlantic City Electric City of Palo Alto Trico Electric Cooperative Xcel Arizona Public Service Source: BNEF, EIA 29 10

11 High Level Estimate Of Potential Gross Revenue Loss To US Utilities From Residential PV ($m) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Other Texas Massachusetts New York New Jersey Colorado Hawaii Arizona California Note: The analysis considers the impact of residential PV relative to 2008 levels (ie, PV installed since 2008 is included as having contributed to revenue loss). For the unit price that is cannibalised, we take the average summer residential retail electricity price (this likely results in overestimate, as summer prices are typically higher than prices at other times of year). In the case of California, which has multiple tiers, we use the rate of 27 /kwh, equivalent to the highest tier retail rate. Assumes 2% annual escalation of the electricity price. Assumes all distributed PV is net metered. This only represents potential revenue loss and is not a cost benefit analysis, which looks at the net gains or losses due to DG. Source: BNEF, EIA 30 Solar Impact Bill Simulation Net metered at retail rate 5% of residential revenue Charges that should cover customers fair share of the back up left for remaining members 32 Solar Impact Customer View $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $500 $1,000 Residential Utility Bill No Solar Customer (Savings)/Expense Total Bill (Utility Bill + Solar Bill) $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $5,000 Utility Bill No Solar Total Bill (Utility + Solar) Commercial Customer (Savings)/Expense YR: $3,683 Customer Savings vs.. Straight Utility Bill Assumes utility bill grows at 5% (Competitor Growth Assumption) 20YR: $34,000 Customer Savings vs.. Straight Utility Bill Assumes utility bill grows at 2% (EIA Growth Assumption) 33 11

12 Solar Impact (Net Metering) Coop View Single Residential Customer Single Commercial Customer Energy EE Program Distribution Regulatory/ Taxes Energy EE Program Distribution Regulatory/ Taxes Impact of Distributed Generation State Changes Arizona: Regulators approved a fee of 70 cents/kw on residential PV, ~10% of utilities request California: Report released in September said policy will cost nonsolar customers $1.1 billion PER YEAR by 2020 Colorado: Xcel Energy, Colorado s dominant electricity provider, will have its 2014 Renewable Energy Standard Compliance Plan reviewed by the state Public Utilities Commission in February. Georgia: In November Georgia Power withdrew proposed $22 fee on solar customers after PSC staff recommended against adoption. Idaho: In July the state commission overruled the utility s attempt to scale back net metering Louisiana: At the end of June, ina 3 2 vote, the Louisiana Public Service Commission (PSC) opposed a motion to replace retail to retail net metering credit for a much lower avoided cost credit. Maryland: PSC initiative to draft a net metering guidebook. Minnesota: Passed a sweeping solar energy bill, which among other things requires the MN Department of Commerce to develop a statewide methodology for a Value of Solar Tariff (VOST). Nevada: This August the Public Utilities Commission of Nevada (PUCN) kicked off a legislatively required process to evaluate the benefits and costs of net metering. Ohio: Regulators ordered electric utilities to propose new rate structures beginning next year, mimicking gas companies fixed charges, saying it will encourage competition and make it easier for customers to conserve or use solar panels State Incentives 36 DSIREUSA.org 12

13 Impact of Solar on Power Supply Planning Austin Energy City owned utility Austin Energy is about to sign a 25 year PPA (power purchase agreement) with Sun Edison for 150 megawatts of solar power at just below 5 cents per kilowatt hour. The power will come from two West Texas solar facilities, according to reports in the Austin American Statesman Minnesota PUC Ruled in Favor of Solar as a Cost Competitive Energy Resource for Xcel Energy Aurora Solar project competed with natural gas plants and was cost competitive part of the overall solution and would helpxcelenergymeeting MN s energy policy goals 100MW ac sites ranging from 2 10MW around Xcel system

14 MN Value of Solar Minnesota passed legislation in 2013 that allows Investor Owned Utilities (IOUs) to apply to the Public Utility Commission (PUC) for a Value of Solar ( VOS ) tariff as an alternative to net metering and as a rate identified for community solar gardens. The Department of Commerce ( Commerce ) was assigned the responsibility of developing and submitting the VOS methodology to the PUC by January 31, Energy Storage Energy Storage = 43 Transformation 44 1 st 75 years Next 75 years? 14

15 Flight Do Nothing Strategic Responses Fight Adjust Tariff So Utility Is Neutral On Net Metering Subject To State / PUC Rules? Could Lead To Customer Islanding / Self Supply Force Consumer Finance Disclosure For Solar Contracts Under Consumer Protection Laws Adapt Cooperative Solar Solutions Portfolio Approach Focus On Utility Scale Risk Of Being Leap Frogged By Customer 37 Examples Of US IOUs Pursuing Specific Adapt' Strategies For Distributed PV REGULATED DEVELOPMENT UNREGULATED DEVELOPMENT PASSIVE INVESTMENT (ie projects) ACTIVE INVESTMENT (ie platforms) ENABLING TECHNOLOGY INVESTMENT SERVICE PROVISION Builds, owns and Builds, owns and Invested equity in operates 50MW of operates 25MW of CPF in 2013 Acquired commercial/ industrial developer distributed PV in distributed PV in SoCore Energy in territory; pays rental various states After new regulations August 2013 fees to property passed by the NRG Residential Solar Invested equity in commission, HECO owners Solutions offers a full CPF in 2013 can now invest in grid suite of installation and Acquired Solar Power technology or financing options as a Partners to enter technology stand alone company Invested tax Solar Partnership distributed market in companies that (NRG is an IPP; there equity in 2011 Program: owns 30MW November 2011 support DG growth. are no examples for with SolarCity of leased rooftop PV regulated utilities) for PV portfolios Develops commercial PV Acquired Smart Offers battery Solar 4 All Program: outside NY Energy Capital to storage along with Develops and owns developer commercial PV system larger commercial Through Constellation, Invested in CPF projects in May 2013 installations projects and utility develops distributed PV through its investment pole installations across US arm Clear Sky in April 2013 Created $50m fund with Will build, own and SolarCity to build PV for operate 3 commercial commercial & industrial projects in DC, HI and sector MD The German company has started offering auxiliary services, such as O&M (no US examples) 38 Source: BNEF, EIA Q & A 45 15

16 Solar Adoption Drivers State Mandates (RPS and Solar Carve Outs) Rapid Decrease In The Cost Of Solar Systems Tax Incentives ITC(Federal and State) Environmental / Compliance / Legal Settlements Entrance Of 3 rd Party Providers With New Financing and Ownership Models Influx Of Financing from Tax Equity Investors Treatment As A Fixed Income Instrument By Investors Corporate Sustainability / Branding / Social Goals State, Local And Utility Rebates and Grants Consumer Awareness Move beyond early adopters and environmentally conscious to broader market 46 Values of Solar Peak Coincidence Capacity Value REC Value Risk Management Portfolio Diversification Fixed Costs Solar=95% fixed costs Relieve Grid Stress Community Investment Highly visible Voluntary market sales/green power program Partnerships Policy Driven RPS compliance Grid modernization Carbon emissions reduction 47 16