33% Staff Analysis: Methodology and Timeline

1. 33% Staff Analysis: Methodology and Timeline August 26, 2008 Arne Olson, Senior ConsultantEnergy and Environmental Economics, Inc.

2. Overview • What the analysis will do: • Develop a reasonable, plausible resource buildout for analysis and planning purposes • Provide information about the actions needed to make 33% RPS a reality and what the impacts of those actions would be • Inform the LTPPs by developing a methodology for estimating the cost of renewable energy and serving as a point of reference • What the analysis will NOT do: • Develop an “optimal” buildout for meeting 33% • Pick “winners” from among multiple zones or projects • Supplant other CPUC proceedings

3. 33% Staff Analysis Work Products • Net cost and rate impacts • Cost and rate impacts of the 33% buildout relative to a “reference case” baseline • Implementation and barrier analysis • Identify potential barriers to achieving 33% by 2020 including environmental issues, manufacturing capacity, regulatory hurdles and other barriers • Transmission and integration analysis • Identify new transmission, generation and/or demand-side resources needed to integrate new resources reliably and cost-effectively into the grid

4. Lead Entity for Each Work Product

5. Inputs to 33% Staff Analysis • Scenario definitions • Load forecasts • Existing and contracted resources • New resource cost and availability data (RETI) • Other data and assumptions, e.g., gas price forecasts, CO2 price forecasts, etc. Staff analysis will use inputs developed through LTPP working groups to the extent possible

6. Supply Curves for Renewable Resources • Need methodology for ranking and selecting renewable resources • Need to incorporate multiple criteria: • Capital and financing costs • O&M costs • Transmission costs* • Integration costs* • Environmental attributes* • Goal of ranking methodology is to produce reasonable, plausible (not optimal!) resource buildout Items marked with * will be subject to more detailed analysis after resources are selected

7. Relationship to RETI • Goal of RETI is to produce transmission plans to integrate renewable resources for California • RETI should provide useful inputs for the Staff analysis, but is not sufficient by itself for this purpose: • RETI will select more than enough zones to meet 33% to reflect development uncertainty • Reach of RETI is limited to California and neighboring states • RETI will not include needed scenario analysis for 2010 LTPPs • Staff analysis will use RETI inputs wherever possible and supplement whenever needed

8. Processes and Timeline: 2008

9. Processes and Timeline: 2009

10. Possible Cases to Run for 33% Staff Analysis • Reference case: Existing policy, medium gas prices, medium CO2 prices, etc., as defined by LTPP working groups • 33% RPS cases: Scenario matches up with 33% RPS Scenario as defined by LTPP SMWG. New 33% RPS Working Group will help define useful 33% cases such as: • High wind case: Probably the base case for 33%, depending on resource cost data • High CSP case: Market transformation reduces cost of central station solar thermal • High distributed resource case: High efficiency plus market transformation reduces cost of PV • Out-of-state case: Maximum reliance on RECs and remote resources

11. Contact Information Energy and Environmental Economics, Inc. (E3)101 Montgomery Street, Suite 1600San Francisco, CA 94104Phone: 415-391-5100Fax: 415-391-6500 Arne Olson, Senior Consultant (arne@ethree.com)