Analysis of Regulated Contract Based Procurement Versus Tradable Renewable Energy Credits:

1. Analysis of Regulated Contract Based Procurement Versus Tradable Renewable Energy Credits: What is the best policy option for California to achieve its Renewable Portfolio Standard goals?

2. Outline California RPS California RPS Background IOU Regions Renewables Potential Significance Approach Sources Questions

3. California RPS California RPS IOUs are required to procure 20% renewable energy by the year 2017 IOUs include: • PG&E • SDG&E • SCE California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions

4. Background Possible RPS Compliance Mechanisms: 1) Regulated Contracts: “Bundled” Energy • Procure/transmit own RE • Purchase RE from 3rd party 2) TRECs: “Unbundled” Energy • Procure own RE • Purchase RE from 3rd party • Purchase RE credits California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions

5. IOU Regions IOU Regions California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions Source: California ISO

6. Renewables Potential California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions Source: DOE EIA

7. Significance • Purpose of RPS: Promote stable electricity prices, protect public health, improve environmental quality, stimulate stable economic development, create new employment opportunities, reduce reliance on imported fuels • RPS policy design will have long-term impact on RE development in CA • Immediate need for objective analysis California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions

8. Approach Stage I: Gather Data • Projected electricity demand • Projected cost of RE • Regional differences for IOUs • Baseline RE generation for each IOU • Transmission costs • Size of SEP account California RPS Background IOU Regions Renewables Potential Significance Approach: Stage I of III Sources of Information Questions

9. Approach Stage II: Calculate Baseline Cost of RPS • Assume least flexible compliance mechanism Compare Cost with SEP Funds California RPS Background IOU Regions Renewables Potential Significance Approach: Stage II of III Sources of Information Questions

10. Approach Stage III Calculate Cost of TREC Scheme • Compare baseline with tradable credit scheme • Conduct sensitivity analysis on policy parameters • Determine optimal policy design California RPS Background IOU Regions Renewables Potential Significance Approach: Stage III of III Sources of Information Questions

11. Impact on RE diversity Overall environmental impacts Equity of environmental attribute distribution Administrative costs Approach California RPS Background IOU Regions Renewables Potential Significance Approach: Costs/Benefits Sources of Information Questions Other Costs/Benefits:

12. Information • 2002-2012 Electricity Outlook Report (CEC) • CA Energy Demand 2000-2010 (CEC) • Comparative Cost of CA Central Station Electricity Generation Technologies (CEC) • Energy Information Administration (DOE) California RPS Background IOU Regions Renewables Potential Significance Approach: Sources of Information Questions

13. Major Obstacles/Questions • In your opinion, what would be an appropriate baseline that will be used in our model to represent the least flexible compliance mechanisms? • (a)- How do you see transmission costs as an issue of equity among IOUs? What are the significant limitations or rules currently in place by FERC, WECC or CAISO? (b)- In your opinion, is transmission a vital element to consider as a parameter in our project? And, if so, how could it be incorporated? 3) What other significant parameters have we neglected? • What is your feedback on our methodology? What are the applicable models for this study? California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions/Major Obstacles

14. Major Obstacles/Questions • In your opinion, what would be an appropriate baseline that will be used in our model to represent the least flexible compliance mechanisms? • (a)- How do you see transmission costs as an issue of equity among IOUs? What are the significant limitations or rules currently in place by FERC, WECC or CAISO? (b)- In your opinion, is transmission a vital element to consider as a parameter in our project? And, if so, how could it be incorporated? 3) What other significant parameters have we neglected? • What is your feedback on our methodology? What are the applicable models for this study? California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions/Major Obstacles

15. Major Obstacles/Questions • In your opinion, what would be an appropriate baseline that will be used in our model to represent the least flexible compliance mechanisms? • (a)- How do you see transmission costs as an issue of equity among IOUs? What are the significant limitations or rules currently in place by FERC, WECC or CAISO? (b)- In your opinion, is transmission a vital element to consider as a parameter in our project? And, if so, how could it be incorporated? 3) What other significant parameters have we neglected? • What is your feedback on our methodology? What are the applicable models for this study? California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions/Major Obstacles

16. Major Obstacles/Questions • In your opinion, what would be an appropriate baseline that will be used in our model to represent the least flexible compliance mechanisms? • (a)- How do you see transmission costs as an issue of equity among IOUs? What are the significant limitations or rules currently in place by FERC, WECC or CAISO? (b)- In your opinion, is transmission a vital element to consider as a parameter in our project? And, if so, how could it be incorporated? 3) What other significant parameters have we neglected? • What is your feedback on our methodology? What are the applicable models for this study? California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions/Major Obstacles

17. Major Obstacles/Questions Any additional questions or comments? California RPS Background IOU Regions Renewables Potential Significance Approach Sources of Information Questions/Major Obstacles

18. Thank You Special note of thanks to: Pamela Doughman (CEC) Marwan Masri (CEC) Dan Adler (CPUC) Melvyn Manalis (UCSB Environmental Studies) Antonio Bento (Bren School) Dennis Aigner (Bren School) Charles Kolstad (Bren School) California RPS Background IOU Regions Renewables Potential Significance Approach: Sources of Information Questions THANK YOU!