Senator Harris B. McDowell III Chair, Delaware Sustainable Energy Utility Task Force

1. OVERVIEW OF THE SUSTAINABLE ENERGYUTILITY Presentation to NCSL Energy Policy Summit Senator Harris B. McDowell III Chair, Delaware Sustainable Energy Utility Task Force Chair, Delaware Senate Energy and Transit Committee August 5, 2007

2. Environmental Leadership from Long Experience State Senator Harris B. McDowell, III,Chair, Delaware Sustainable Energy Utility Task Force, and Chair of the Senate Energy and Transit Committee since 1977. Among other accomplishments Sen. McDowell is credited with creating the Delaware Energy Office, the first Low Income Heating Assistance Program in the country, as well as passage of two RPS bills, a Performance Contracting bill, and the Sustainable Energy Utility legislation. Dr. John Byrne,Co-chair, Delaware Sustainable Energy Utility Task Force, Founder (1981) and Director, Center for Energy and Environmental Policy, and Distinguished Professor of Public Policy, University of Delaware. Since 1992, Dr. Byrne has contributed to the assessments of theIntergovernmental Panel on Climate Change.

3. SEU Task Force Members • Senator Patricia BlevinsSenator Charles CopelandSenator Gary SimpsonRepresentative Bethany Hall-LongRepresentative Vincent LofinkRepresentative Teresa SchooleyRepresentative Pamela ThornburgArthur Padmore, Public AdvocateCharlie Smisson, State Energy CoordinatorKeith Lake, Executive Director, Peoples Settlement AssociationDominique Baron, Delaware Nature SocietyAndrew Slater, Delaware State Senate Office

4. SEU Research Team Technical Consultant Ralph Nigro, Vice President, Applied Energy Group, CEEP Policy Fellow CEEP Researchers Dr. John Byrne Dr. Aiming Zhou Jason HouckRebecca WalkerLado Kurdgelashvili Huei WongJackson SchreiberRyan HarryEric Partyka

5. Savings Center for Energy and Environmental Policy U.S. Energy Supply by Source (Quadrillion Btu) 250 200 Savings from Efficiency Gains 150 100 50 0 1970 1975 1980 1985 1990 1995 2000 2005 Coal Oil Gas Nuclear Renewables Note: Data from U.S. EIA, Annual Energy Outlook (2007)

6. Savings Center for Energy and Environmental Policy Projected U.S. Energy Supply by Source (Quadrillion Btu) 450 Savings from Efficiency Gains 400 350 300 250 200 150 100 50 0 2005 2010 2015 2020 2025 2030 Coal Oil Gas Nuclear Renewables Note: Data from U.S. EIA, Annual Energy Outlook (2007)

7. 20 16 Cents per kWh 12 8 4 0 CA CT MA NJ NY VT Cost per kWh Saved Retail Price of Electricity Center for Energy and Environmental Policy U.S. Cost per kWh Saved versus kWh Supplied Source: Delaware Sustainable Energy Utility Task Force (2007) http://www.seu-de.org/docs/Section_F.pdf http://www.seu-de.org/docs/Section_H.pdf and http://www.seu-de.org/docs/App_A.pdf

8. 1200 1000 800 600 400 200 0 2003 Average Plant Size Generation Capacity Center for Energy and Environmental Policy U.S. Power Plant Capacity 500 450 400 Megawatts 350 Gigawatts 300 250 200 150 100 50 0 1930 1950 1970 1980 1990 2000 Sources: T. R. Casten (1995) The Energy Daily (September 7), Hirsh. 1999: 274; and EIA Electric Power Annual (1981, 1990, 2000, 2003)

9. StateRenewable Portfolio Standards in the U.S. 24 states and Wash DC have passed legislation 14 states with pending legislation HI: 20% by 2020 Center for Energy and Environmental Policy WA: 15% by 2020 MN: 25% by 2020 ME: 30% by 2000 MT: 10% by 2015 NY: 24% by 2013 NH: 23% by 2025 MA: 10% by 2015 CT: 10% by 2010 PA: 8% by 2010 NV: 20% by 2015 NJ: 23% by 2021; 2% PV Delaware: 20% by 2019; 2% PV CO: 20% by 2020 Delaware: 10% by 2019 CA: 20% by 2010 CA: 20% by 2015 Wash DC: 11% by 2022 AZ: 15% by 2025 NM: 10% by 2011 TX: 3% by 2009 29 states have completed Climate Change Action Plans Sources: CEEP Survey, 2007; DSIRE, 2007; UCS, 2007 http://yosemite.epa.gov/oar/globalwarming.nsf/content/ActionsStateActionPlans.html

10. Levelized Cost per kWh of PV Retail Price of Electricity Center for Energy and Environmental Policy U.S. Cost per kWh Saved versus kWh Supplied 20 16 Cents per kWh 14.8 cent premium 12 11.9 cent premium 11.5 cent premium 9.4 cent premium 8 7.6 cent premium 7.0 cent premium 4 0 CA CT MA NJ NY VT Source: Delaware Sustainable Energy Utility Task Force (2007) http://www.seu-de.org/docs/Section_F.pdf http://www.seu-de.org/docs/Section_H.pdf and http://www.seu-de.org/docs/App_A.pdf

11. By 2015 Participating Delaware residents and businesses cut conventional energy use by 30%: ALL FUELS, ALL SECTORS Utilize Market Transformation Rebate Programs: pay the incremental cost difference between standard and high-efficiency models Create a Green Buildings Initiative: reward green renovations of existing buildings and provide tax and other incentives for new construction that contributes to Low/No Emissions Buildings Adopt a Sustainable Transport Plan: set Clean Energy Vehicle Portfolio Standards; reward Employee Commute Planning; incent Carsharing New Direction – Goals of a Sustainable Energy Utility By 2019 • 20% of electrical generation serving the State to come from Renewables • Upgrade the Renewable Portfolio Standard (RPS) to 20% by 2019 • Include a Solar Carveout of 2% by 2019 with High-Value Solar RECs • Encourage a Renewable Energy Credits (RECs) Market, providing a revenue stream to customer-sited renewables Both Goals= 25-30% reduction in Delaware’s carbon footprint

12. Green Energy Fund (GEF) Support Rebates for customer-sited renewables, energy efficiency & affordable energy services from a Public Benefit Charge on electricity use ($0.000356 /kWh) Cost increase for the average consumer of 18 cents per month Sustainable Energy Bond Authorize $30 million in Sustainable Energy Bonds that creates jobs, lowers energy bills and improve the environment Reinvest through Shared Savings and RECs In return for assumption of initial capital cost of Sustainable Energy investments, sign agreements with participants to share savings (e.g., 33% for 5 years) and REC revenues (e.g., 25% for 8 years) Encourage implementation contractors to acquire volume discounts in return for SEU market development and share benefits with the SEU New Direction – Funding a Sustainable Energy Utility

13. SEU Share Customer Savings Share Center for Energy and Environmental Policy Performance Contracting SEU Savings Share Customer Savings Share Source: King, 2003

14. Center for Energy and Environmental Policy Renewable Energy Credits (RECs) Markets for Sustainable Energy

15. Administered by the Delaware Energy Office New Direction – A Sustainable Energy Utility

16. Renewable Portfolio Standard (RPS) Upgrade to proven ‘best practice’: 20% by 2019 Add 2% Solar Carveout Green Energy Fund (GEF) Support customer-sited renewables &energy efficiency Cost to the average residential customer = ~ 18 cents per month Net Metering Standards Enable commercial and industrial customers to generate up 2 MW Enable residential customers to generate up to 25 kW Net meter customer generation at full retail rates (including generation and T&D) Authorize a Sustainable Energy Bond Authorize the State to initially invest $30 million in a Sustainable Energy Future that creates jobs, lowers energy bills and improves the environment Create the Delaware Sustainable Energy Utility An incentive-based institution that utilizes performance contracting Offers one-stop, comprehensive sustainable energy services to all Policy Agenda

17. Major Banking Group with Extensive Bond Management Experience reviewed the SEU pro forma and concluded it is financeable by a private activity bond at investment grade.

18. $80,000,000 2nd Bond Float = $15.3 m (1st Bond retired) $60,000,000 2nd Bond retired $40,000,000 1st Bond Float = $7.7 m $20,000,000 $0 2012 2013 2011 2014 2017 2018 2016 2019 2015 2008 2009 2010 -$20,000,000 -$40,000,000 -$60,000,000 Year Annual Revenue + Bonds Annual Costs SEU Net Cash Balance SEU Annual Costs, Revenues & Cash Balance Prepared for the Delaware Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

19. 8 6 Additional Emissions without State Policies New Fossil Fuel Emissions after SEU 4 SEU Carbon Savings from Energy Efficiency Programs SEU Carbon Savings from Upgraded RPS and RE Initiatives 2 State RGGI Carbon Savings (illustrative only) Assumes 33% participation rate by 2015 in SEU E-E programs 0 Million Tons CO2 -2 2020 2003 2008 2013 2018 -4 -6 -8 Delaware Sustainable Energy UtilityOur Best Environmental Policy Data sources Center for Energy and Environmental Policy (CEEP). 2000. Delaware Climate Change Action Plan http://ceep.udel.edu/publications/energy/reports/energy_delaware_climate_change_action_plan/deccap.htm Oak Ridge National Laboratory (ORNL). 2004. Estimates of Annual Fossil-Fuel CO2 Emitted for Each State in the U.S.A. and the District of Columbia for Each Year from 1960 through 2000 http://cdiac.esd.ornl.gov/trends/emis_mon/stateemis/data/datacsv.html Energy Information Administration (EIA). 2006a. State Energy Consumption, Price, and Expenditure Estimates (SEDS). http://www.eia.doe.gov/emeu/states/_seds.html Energy Information Administration (EIA). 2006b. 1990 - 2005 U.S. Electric Power Industry Estimated Emissions by State (EIA-767 and EIA-906) http://www.eia.doe.gov/cneaf/electricity/epa/emission_state.xls Bureau of Economic Analysis (BEA). 2006. Regional Economic Accounts http://www.bea.gov/regional/gs/ The Regional Greenhouse Gas Initiative (RGGI). 2007. Regional Greenhouse Gas Initiative http://www.rggi.org/docs/mou_12_20_05.pdf Estimates prepared for the Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

20. Future Growth of Sustainable Energy Markets – Policy Drivers • Pioneer New Policies for Investment in Sustainable Energy • Solar Lifeline • Energy Efficiency Portfolio Standards across end-use sectors • Develop Energy Savings Certificates • Carbon Reduction Certificates • Car-less Development / Transit Communities • Send us your IDEAS!

21. Sustainable Energy Utility Website: http://www.seu-de.org For information, please contact: Senator Harris B. McDowell, III Chair, SEU Task Force Dr. John Byrne Co-chair, SEU Task Force Terri Brower Assistant to the Director Center for Energy & Environmental Policy University of Delaware 278 Graham Hall Newark, DE 19716 Phone: (302) 831-8405 harris.mcdowell@state.de.us jbbyrne@udel.edu tbrower@udel.edu

22. Incentive Estimation Detail: Example of Efficiency Upgrades in Residential Electricity-Using Equipment 1 Based on U.S. EIA State Energy Data System (SEDS) data. 2 Based on SEU target of 30% savings through energy efficiency upgrades multiplied by the appropriate participation rate. 3 Based on survey of 6 ‘best practice’ States. See SEU Task Force Briefing Book, Sections F-H. Available at: http://www.seu-de.org/documents.html 4 100% rebate equal to the incremental cost of the high efficiency option (capped by size/capacity of the device in order not encourage purchase of above-average equipment). Taken from ‘best practice’ State survey. See SEU Task Force Briefing Book, Sections F-H. Available at: http://www.seu-de.org/ documents.html Prepared for the Delaware Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

23. Revenue Estimation Detail: Example of RECs Note: Installed capacity of PV systems is based on the proposed Solar Carveout to be submitted as an amendment to the State’s current RPS policy. Installed capacity of non-PV renewable energy systems is based on the proposed upgrade of the RPS schedule, also to be submitted as an amendment to current policy. Prepared for the Delaware Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

24. SEU Cash Flow Detail (not including Sustainable Energy Bond) Prepared for the Delaware Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

25. SEU Prospectus * Revenue Assumptions $25 million in Sustainable Energy Special Purpose Revenue Bonds are authorized. GEF mill rate is doubled. REC revenues are based on declining price schedule. Prepared for the Delaware Sustainable Energy Utility Task Force by the Center for Energy & Environmental Policy, University of Delaware.

26. World Capacity (MW) (1.6%, 7.3%) 80,000 600,000 70,000 500,000 (1.3%, 5.9% ) 60,000 400,000 50,000 (0.7%, 4.4%) US Capacity, MW 40,000 300,000 30,000 200,000 20,000 100,000 10,000 0 0 2005 2010 2015 Predicted DG Shares of U.S. & World Generation Capacity Predicted U.S. Market Predicted World Market SAIC1 GTI2 ABI 3_low ABI 3_high 2 Gas Technology Institute 3 Allied Business Intelligence 1 Science Applications International Corp. Center for Energy and Environmental Policy Projected Growth in Distributed Generation

27. 1.000 1.000 0.900 Residential Sector Electricity Intensity 0.800 0.830 0.700 0.726 0.600 0.570 0.500 0.533 0.501 0.498 0.400 0.456 0.300 0.200 0.100 0.000 NY CA MA NJ CT VT PA DE DELAWARE – A PORTRAIT OF UNSUSTAINABILITY Sources: Sustainable Energy Utility Task Force (2007) Available at: http://www.seu-de.org/docs/fina_report_brief.pdf Statistical details available at: http://www.seu-de.org/docs/IRP_submission_4-10-07.pdf (especially pp. 9-12).

28. 1.000 0.775 0.754 0.735 0.702 0.698 0.677 0.612 1.000 0.900 Commercial Sector Electricity Intensity 0.800 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 CT CA MA NY VT NJ PA DE DELAWARE – A PORTRAIT OF UNSUSTAINABILITY Sources: Sustainable Energy Utility Task Force (2007) Available at: http://www.seu-de.org/docs/fina_report_brief.pdf Statistical details available at: http://www.seu-de.org/docs/IRP_submission_4-10-07.pdf (especially pp. 9-12).