Renewable Energy in the Northwest ~ A Utility Perspective

1. Renewable Energy in the Northwest~ A Utility Perspective Thomas MacLean, Manager Customer Renewable Energy Programs August 27, 2008

2. Renewable Energy in the Northwest • Opportunities by Size • Utility Scale • Distributed Commercial • Distributed Residential • Opportunities by Technology

3. Utility Scale Renewable Resources

4. PSE Wind Projects

5. Wild Horse Solar Demonstration Project • Located at Wild Horse Wind Farm near Ellensburg, WA • First utility-scale wind-solar facility in nation • Excellent sun - same solar resource as Houston • Already disturbed land • Existing transmission and operational synergies • Added tax benefits from co-location • 500 kW Project – 300 homes at peak • Largest in the Pacific Northwest by a factor of three • ~5 Acre footprint • $4-5 million in capital costs • 90% of facility now operational; • final completion spring 2008 Primary Solar Site – Former quarry, too high for wind turbines (FAA airspace concerns) Wind Farm Layout – 127 Turbines

6. Renewable Energy in the Northwest Looking Forward

7. ≈240 aMW ≈85 aMW 10% PSE 10% Goal RPS Requirement Future Renewable Acquisitions Under Active Consideration Existing PSE Renewables PSE Renewable Acquisition Strategy

8. Pacific NW Renewable Projects Renewable Northwest Project

9. Renewable Energy in the Northwest Caveats

10. BPA Transmission Constraints

11. Levelized Resource Cost Comparison 20-year Levelized Cost $/MWh $104-155 $102-174 $42-74 $79-164 $74-118 $76-106 $44-62 $70-129 $64-67 $61-101 $60-85 $58-100 2004 2006 2008 2004 2006 2008 2004 2006 2008 2004 2006 2008 Wind Natural Gas Hydro System PPAs Notes: 2004 prices represent Mid-C delivery. 2006 and 2008 prices represent deliveries to PSE’s system System PPAs are offers that are shorter term in nature and not tied to a specific resource.

12. Rising Wind Turbine Costs Wind turbines comprise 60% of total project costs. Source: Berkeley Lab database.Thorndike Landing analysis.

13. Distributed Commercial Renewable Energy in the Northwest

14. Dairy Digesters Wood Waste Waste Water Treatment Plants Landfill Biomass -- Active Opportunities

15. Distributed Commercial Renewables • Green Power Program • Support for new, regional, small renewables • REC-based program • Primary supplier is Bonneville Environmental Foundation • Provides customer choice

16. Green Power – Sales Growth

17. Dairy Digester ProjectLynden, Washington • Single Farm- Anaerobic Digester • First in Washington State • Number of units -1 Reciprocating engine • Nominal output 300 kW (potential to 450 kW) • Project output ~2,000 MWh • Project costs ~$1M ($4,000/kW) • 1,500 Cows • PSE Involvement • Power Purchase • RECs • Interconnection • Construction completed fall 2004

18. Distributed Residential Renewable Energy in the Northwest

19. Customer Owned Generation

20. Growth in Customer Renewables

21. PSE Net Meter Customers

22. PSE Solar Demonstration Projects • Schools • Environmental Centers • Other Buildings

23. PSE “Green” Tariffs • Net Metering Services for Customer-Generator Systems (Schedule 150) • Net metering up to 100 KW • Surplus energy credited to customer bill • Eligible resources: wind, solar, anaerobic digester, hydro • Renewable Energy Production Incentive Payment Program (Schedule 151 works with either Schedule 150 or Schedule 91) • Production payments, meters AC energy before load • Eligible resources: wind, solar, anaerobic digester • Cogeneration and Small Power Production (Schedule 91) • Renewable production up to 2 MW • Current payment ~ $.077/kWh

24. Renewable Energy in the Northwest Emerging Technologies

25. Concentrating Solar Power

26. Proposed NW Geothermal Willow Springs Baker Neal Hot Springs Raft River China Cap Newberry Crater Crump Geyser Currently Operating: ~14 MW (Raft River) In Development: ~ 150 MW In Consideration: ~ 250 MW

27. Wave & Tidal Power in the Northwest Wave Projects Makah Bay (Finavera) OPT Reedsport (Ocean Power Tech.) Douglas County (Wavegen) OPT Coos County (Ocean Power Tech.) Humboldt County (Finavera) Tidal Projects Race Rocks (Pilot) Snohomish PUD (Planning) Tacoma Power (Halted) Willapa Bay (Planning)

28. Puget Sound Algae – Blue Marble

29. Technology Development Early Commercial Favorable High Market Economics Favorable Mass Market Economics Concept Pilot Wave Tidal Algae CPV CSP Solar Thermal Electric PHEV Biomass Gasification Batteries Solar PV Dairy Digester Fuel Cells Wind Traditional Biomass Geothermal

30. Technology Development and Financial Support Early Commercial Favorable High Market Economics Favorable Mass Market Economics Concept Pilot Founder Financing Venture Capital Private Commercial Financing • Government as Customer • Tax Credits for Investment (ITC) • Tax Credits for Production (PTC) • Tax Credits for Manufacturing RE (OR) • Promote export market • Reduce regulatory barriers. • Basic research: UW/WSU • Identify Washington advantages. • Grants & partnerships with • private entities. • Establish legal frameworks State & Federal

31. Basic Research Funding Source: Gallagher, K.S., "DOE Budget Authority for Energy Research, Development, and Demonstration Database," Energy Technology Innovation Policy, John F. Kennedy School of Government, Harvard University, February 2008.

32. Partnership Model for Early Commercial

33. Renewable Technology Outlook in the Northwest

34. Renewable Energy in the Northwest Discussion

35. Resources Vary by Region