Audrey Zibelman President & CEO Viridity Energy azibelman@viridityenergy

1. ELCON – 2010 Annual MeetingThe National Action Plan for Demand Response – The Good, the Ok and What is Left to be Done Audrey Zibelman President & CEO Viridity Energy azibelman@viridityenergy.com

2. The National Action Plan (Background) 2007 Energy Independence and Security Act directed FERC to develop National Action Plan on Demand Response (DR) to meet these objectives: • Technical Assistance to States • National Communications Program • Analytical, regulatory and contractual tools • FERC published Plan in June 2010

3. Why it is this so Important? Grid Reliability and Security System Efficiency and Economics Markets for Efficiency and Distributed Resources

4. The Power Grid is a Single Machine Supply Demand Industrial Local Utility Residential IPP Transmission Substation Generators Commercial Distribution Substation Renewables The grid must constantly balance Supply and Demand Highly Confidential

5. The Power Grid of Tomorrow

6. The Marginal Price of Electricity is Established at the Real Time Intersection of Supply and Demand

8. Today Demand Response Represents a Small Share of Composite Market Revenues $5.7 billion PJM DR Revenues, 2008: Energy: $27 million Capacity: $183 million Total: $210 million $1.4 billion $2.5 billion $27.4 billion Total: $36.9 billion By way of example, Demand Response today in PJM accounts for less than 1% of wholesale market revenues – and a majority of DR revenues are capacity

9. Estimated Market Potential • The demand response [/ smart grid 2.0] industry is expected to exceed $8 billion by 2015 • Over 80% of Regional Transmission Operators (“RTOs”) in North America are currently Demand Response-capable • Demand Response today accounts for less than 1% of wholesale market revenues 9

10. U.S. Organized Electricity Markets – with Demand Response Exchanges(ICE, NYMEX) Financial MarketsRegulatory agencies: SEC, CFTC RTO MarketsGrid Operators Wholesale Physical MarketsRegulatory agency: FERC Buy Generation Transmission Sell Retail MarketsRegulatory agencies: states Distribution Utilities Retail Energy Suppliers Sell Sell Sell Load Highly Confidential 10

11. Large energy users that ignore the full market value of their energy resources leave money on the table $ Sell energy The stored value of a company’s “virtual resources” is roughly twice that achievable through reduced supply cost and usage savings $ Use energy $ Buy energy $ Price Savings Procure it at lowest possible cost Usage Savings Reduce or shift usage to maximize bill savings Resource Revenue Sell resources optimally to maximize revenue

12. Demand Response Historically has been Limited to Peak Shaving Traditional Demand Response Capacity • leverage assets under control to participate in traditional Demand Response (“DR”) • Traditional DR provides the opportunity to secure revenues, while also preparing for full spectrum energy services Energy Services • Optimize distributed generation, storage and building loads to monetize the virtual generation created by integrating the aggregated assets in the day-ahead and real-time markets (e.g. Drexel) • Enable clients to maximize their participation in the energy markets (over 1200 hrs a year versus 100 hrs for traditional DR) Ancillary Services • Create additional revenue opportunities through participation in ancillary markets, such as synchronous reserve and regulation • Use fast responding load to balance intermittent generation on the grid (storage, motors) • Participation can be 8760 hours per year Efficiency and Reliability Services • Combine advanced optimization/simulation capabilities with advanced distribution management applications to ensure optimal and secure operation of the micro/distribution grids (e.g. UCSD, Con Edison) • This capability addresses one of the key challenges to the future integration of microgrids into the “Smart Grid” Traditional Demand Response Virtual Generation

13. Increasing the Value of Customer Participation in the Wholesale Energy Markets • The economic potential for individual customers is enormous

14. Inputs: • Load Forecasts • Weather Forecasts • Pricing Forecasts • Outputs: • Optimized Energy Asset Operating Schedules • Market Revenues and Retail Savings Wind VPowerTM Redefines Power Economics PV Generator VPowerTM Building Load Battery Highly Confidential

15. Economic Benefit for a Typical Large Load Customer • The following chart outlines the net annual benefit to an illustrative customer with 10+ MW of controllable load and distributed generation, and 1,200 hours of annual Demand Response availability • Viridity’s services generate meaningful revenue for clients with little or no upfront cost Note: LMP data is PJM PECO Zone average for 2007, 2008, Capacity ILR payment is 2010/2011 planning year

16. Solar-Storage-VPower™: An Integrated Green Solution VPower™ creates new revenue streams for solar and storage, making them more financially viable options • Battery-VPower™ combinations can increase the value of solar installations, by turning intermittent electricity into a “firm” energy resource that can be dispatched into the wholesale market at hours of peak loads and peak pricing • Representative one-day example: • 1 MWh battery with a 1.5 MW inverter; 200kW solar installation • High-LMP day: July 6, 2010 (prices well above $150/MWh during peak hours) • Regulation price is $32.29/MWh (Average rate for 2008 - 2009) • Summary of Benefits: 11/12/2014 Proprietary Information - Strictly Confidential

17. Blueprint to Achieve Demand Response Potential Aspiration - Maximize participation Definition - Demand Response is a service that is comparable to traditional generation on the grid Information - Transparent and Abundant Compensation - Compensation will be comparable to traditional supply resources Market Barriers - Eliminate discriminatory market barriers Rules and Contracts - Standardize rules and contracts

18. What has been Accomplished (the “Good”) Aspiration: The objective is to maximize DR participation The Plan recognizes that Smart Grid without full DR is one hand clapping 2. Definition: The Plan recognizes that DR includes peak scheduling, real time price response, ancillary services The definition compliments Rule 719.

19. What Has Been Accomplished (the “ok”) 1. Information: The plan has a roadmap for communication focused on States and residential consumers Clearinghouses will be created There will be opportunities for collaboration 2. Standardization/Tools: Recognized need of tools for best practices

20. What Remains to be Done • Information - Policy makers must be educated on the value of having customers participate on the grid as virtual power • You can’t have a smart grid with dumb regulation and markets! • Compensation - Demand Response should be compensated at marginal price! • A megawatt = a negatwatt in the markets • Market Barriers – Artificial market barriers must be eliminated – • In Markets – Unnecessary and unconstitutional limits on participation Measurement and Verification Rules should not be used as a weapon to limit participation • Outside of Markets – Failure to develop equitable tariffs and rules • Standardization of technology platforms, rules and contracts • There should be common market interfaces • Measurement and verification should be standardized • We should look at contract standardization

21. How Can ELCON Help? Promote DR in the government and with FERC Stress the need for the related regulation and market changes with policy makers Activate large industrial users within the association: organizing educational workshops, events, etc. Relate these efforts to jobs, jobs, jobs!

22. Thank You.