Pushing the Renewable Energy Policy Envelope American Bar Association November 20, 2009

1. Pushing the Renewable Energy Policy Envelope American Bar Association November 20, 2009 Matt Futch Utilities Program Manager Governor’s Energy Office

2. Presentation Topics THE RECOVERY ACT FUNDS AND THE GEO • Governor’s Energy Office: The State Energy Plan • The long term potential impacts on RE/EE development in Colorado CHALLENGES: REGULATORY AND POLITICAL LANDSCAPE • Disaggregation amongst the electric utility markets • Coordination on long term generation and transmission planning • Putting a price on carbon • GEO actions in this area of challenge FINANCING AND CAPITAL MARKETS • Financing energy efficiency • Mitigating risk for capital investors • GEO actions in this area of challenge

3. Presentation Topics SYSTEM RELIABILITY AND INTEGRATION • The learning curve on RE integration • Central station versus distributed generation • The disruptive potential of smart grid deployment • GEO actions in this area of challenge THE MIND OF THE CUSTOMER • What is a kWh….and why should I care? • Cheap, clean and not in my backyard please • GEO actions in this area of challenge

4. THE RECOVERY ACT AND THE GEO • The GEO has identified three primary market barriers to RE and EE in CO • Information – where is it? • Services – who can do it? • Finance – reducing up front costs • The GEO has created infrastructure for information outreach, rebates, and grant programs that address these barriers. • The graph represents how the State Energy Program grant of 50M is being spent by program.

5. State Energy Program (SEP) • Colorado energy office $49M • Primary way in which state offers energy efficiency and renewable energy services ACCESS TO INFORMATION ACCESS TO CAPITAL/FINANCING ACCESS TO SERVICES PROJECT GRANTS

7. Nationwide Competitive Grants to be announced in the fall 2009 $400M – state, all local governments $ 50M – non-entitled local governments $42,618,700 total to Colorado $ 32,878,300 directly to 20 cities and 10 counties, based on a population-related formula grant $ 9,593,500 to the state energy office, of which GEO will issue no less than $5,756,100 in subgrants to non-entitled municipalities and counties     Southern Ute Indian Tribe of the Southern Ute Reservation, Colorado $ 71,900 CO/NM/UT Ute Mountain Tribe of the Ute Mountain Reservation, Colorado, New Mexico &Utah $ 75,000

8. CHALLENGES: REGULATORY AND POLITICAL LANDSCAPE • Disaggregation amongst the electric utility markets • There is a degree of difficulty in defining statewide energy policy and renewable energy resource development due to a bifurcated utility market. • 09I-041E: Current docket exploring what level of regulatory analysis should be imposed upon the current resource plans of Tri-State Generation and Transmission. • Coordination on long term generation and transmission planning • Currently, there is no statewide land use permitting authority. This is an obstacle to efficient and equitable decision making for transmission development. • The current system for transmission planning works on an as needed CPCN basis. To achieve market transformation we will need an integrated approach which uses carbon as a systemic driver for blueprint planning

9. CHALLENGES: REGULATORY AND POLITICAL LANDSCAPE • Putting a price on carbon • Utilities and regulators are making some progress on assessing environmental externalities for electric resource planning. • A high tax or price per ton ($60/ton or higher?) on carbon is required to move past incremental gains in renewable generation • GEO actions in this area of challenge: • Analytical work on generation and transmission – REDI and CAP • Increasing resource modeling capacity at the State level • Working with Governor’s office on legislative agenda

10. CHALLENGES:FINANCING AND CAPITAL MARKETS • Financing energy efficiency and renewable energy projects • Capital markets are beginning to better understand energy service contract model using energy savings as loan payment • Relative low cost of gas and electric power remain a motivational obstacle • Mitigating risk for capital investors • Credit crisis increased real cost of capital and total transaction cost • Recession induced downward pressure on electric demand • GEO actions in this area of challenge • PACE model – working on a potential statewide application for this vehicle • GEO currently leveraging ARRA funds for a large scale clean energy fund • Clean Energy Financing Fund may exceed $100M

11. CHALLENGES: SYSTEM RELIABILITY AND INTEGRATION • Integrating intermittent resources • Utilities are on the learning curve: Xcel has achieved 35% wind penetration during specific night loads • Existing base load plant system must be converted to a flexible, firming system • Central station versus distributed generation • Healthy policy and technology tension existing between DG and utility scale renewables • Troubles in transmission build out is providing a significant market vacuum for DG to prove out its business case

12. CHALLENGES: SYSTEM RELIABILITY AND INTEGRATION • The disruptive potential of smart grid deployment • Granular view of demand and demand response have the potential to become a “dispatch resource” reducing generation requirements • Energy savings of up to 9% have been achieved with in-home energy monitors and other technologies • Smart grid has the capacity to accelerate transportation electrification • GEO actions in this area of challenge • GEO has proposed a new Distributed Generation rate • GEO updating State energy emergency plan to incorporate smart grid and distributed generation for increased resiliency and integration • Smart Grid policy consortium in development

13. CHALLENGES: THE MIND OF THE CUSTOMER • What is a kWh….and why should I care? • Electric power industry and policymakers have work to do on communicating energy issues • Energy literacy is a major challenge in encouraging a new relationship between customer and energy use • Cheap, clean and not in my backyard • Polling and voting trends indicate sometimes contradictory directives to policymakers • Energy technology advocates must be honest with public of environmental and economic impact. • GEO actions in this area of challenge • Creation of a call center, database of all RE / EE programs statewide • Energy Education and Outreach : • http://www.colorado.gov/energy/index.php?/resources/profile/flash-map

14. Governor’s Energy Office Primary Mission – “Closing the Gap”

15. Thank you Matt Futch, Utilities Program Manager Colorado Governor's Energy Office (303)-866-4663 matt.futch@state.co.us www.colorado.gov/energy