Chuck Tremel, P.E. Principal Technical Manager Advanced Energy Program

1. 2005 REGION 4 EPA/ DoD/STATES/ ENVIRONMENTAL CONFERENCE“Small is beautiful!” (and better!)June 29, 2005 Chuck Tremel, P.E. Principal Technical Manager Advanced Energy Program

2. Topics • Drivers for Distributed and Renewable Energy • Distributed Energy and Combined Heat & Power • Renewable Portfolio Standards • Renewable Energy Opportunities & Examples • Interconnection Issues • Renewable Energy Prognosis

3. The Drivers of Distributed and Renewable Energy for Energy Security Electric power sector returns to pursuing future resources, while confronting electric delivery system issues Log-jam of liquified natural gas (LNG) terminal additions • Just how many will be built, and when? • Will it solve the supply/price problems? Coal plant construction discussions growing (but what of carbon dioxide & mercury?) Nuclear talk grows (100 new plants in 20 years?), but no orders yet A tenuous balance between supply and demand • FERC worries PNW drought could push up prices short-term, even lead to interruptions • Longer term, early hints of integrated resource planning coming back

4. High Natural Gas Prices Will Continue Source: NYMEX, natural gas end-of-month closing price through 5/05, with futures price through 12/08

5. Fuel-driven DE Prime Mover Technologies * For units less than 10 MW ** Stirling engines 2005 estimate

6. Payback for CHP Lengthened by High Gas Prices, Public Sector still Attractive Source: Primen’s 2003 Distributed Energy Market Survey

7. Microturbines Initiate a Turn-Around • Shipments rose for first time since 2001 • Up 3.2 MW (three projects) • But far below peak year of 67 MW shipments • Inventory at distributors nearly gone

8. Fuel Cells Challenged; Progress Continues • Shipments of stationary fuel cells are flat, roughly 10 MW/year • PEM companies continue to face stack life issues, while sales of hydrogen products weak • Solid oxide companies remain challenged by technology, economics • Rolls-Royce, however, picks up $100 million investment from Singapore consortium • UTC abandons PEM stationary plans in favor of modified Phosphoric Acid FC product • 400-kW stack to have 80K hour life, new power electronics package • Starwood Hotels proves to be repeat customer with FuelCell Energy • Three projects operating; fourth signed, potential for more

9. CTC 5 KW Fuel Cell Project - Ft Meade • 3 kWe @ 208/120 VAC, 3 phase; 3 kWth • Combined Heat & Power • Natural gas input; electricity and heat output • Heat used to dehumidify locker room

10. The Upshot for Distributed Energy • Backup market growing again for critical loads • Peaking and CHP growth slow, primarily due to high gas prices

11. 20 Renewable Portfolio Standards Now Approved, with More on the Way RPS mandates in IL and VT are pending

13. Wind Boom Continues • Global wind capacity at 48 GW end of 2004, was 8.2 GW capacity on-line 2003 • Forecast of 117 GW by 2009 • U.S. capacity at 6.7 GW, 389 MW added in 2004 • AWEA predicts 2-2.5 GW in 2005 • RPS laws-on-the-books could lead to as much as 40 GW in next 15 years • 5 MW turbine commissioned by REPower (Germany); 94% availability

14. Wind: System Design Challenges? Western Denmark facing T&D issues from too much wind, which now makes up 23% of power produced in the region Similar problems cropping up in US (Texas, etc.) and solutions sought • Inadequate load-following capability, and unlikely that new firm capacity will be built • Poor predictability of wind power, with wires company purchasing costly regulating power • Reactive power needs balancing, with increased grid losses and expensive compensation • Unpredictable local networks (distribution systems), leading to an increased risk of serious system disturbances

15. Wind at Guantanamo Bay • Four NEG Micon 950 KW Turbines • 275 feet tall; 177 ft. Blade rotor diameter • Augments 22.8 MW diesel fired stand-alone system • Cost: $12 Million • Avg. Production – 8 Million KWH/ Year • Savings of $1.2 million energy costs • Environmental Benefits • Reduce 26 tons SO2 • Reduce 15 tons NOX • Reduce GHG 13 Million pounds

16. USA Photovoltaics Market Installations • 2003 – 66 MW; 574 MW World • 2004 – 84 MW; 927 MW World • 2010 – ????; 3200 MW World Source: Solarbuzz Inc.

18. North American Solar Boom to Continue, but Without Coordination Status of PV varies state-by-statean “archipelago” State subsidies/programs expanding • Nearly 1/3 of states with buy-down programs • California’s Million Solar Roofs initiative moving in state legislature • Market potential for rooftop PV of nearly 3 GW/year by 2010 State mandates expanding, too • Renewable portfolio sub-requirements in • Arizona • Colorado • Nevada • Pennsylvania

19. PV at 29 Palms USMC Air Ground Combat Center • BP Solar EnergyMax System • 320 sunny days/year • 1,291 KW (Peak) • 2,530,000 KWH/ Year • ~ 5% of annual electricity needs • 8000 solar modules over 7 acres • Peak output coincides with summer demand

20. Biomass Opportunities Growing, Too, Though Less on a Single Industry • Catch-all term, includes alternative fuels • Land-fill & digester gases • Other “organics recycled to energy” fuels (e.g. BioDiesel from Soybeans) • “Healthy Forests” initiative slash/thinning • Cofiring in coal fired plants (e.g., Switchgrass) • Significant environmental benefits

21. Distributed Energy Resources Interconnection Technologies Electric Power Systems Utility Grid • Functions • Power Conversion • Power Conditioning (PQ) • Protection • DER and Load Control • Ancillary Services • Communications • Metering Fuel Cell PV Inverter Utility Grid Simulator Micro Grids Microturbine Wind Loads Energy Storage Local Loads Load Simulators Switchgear, Relays, & Controls Generator

22. The Upshot for Renewable Energy • Renewable energy mandates expanding; though very uneven, inconsistent, government support • Wind having a record year, but challenges beginning to surface • Solar photovoltaic markets growing, with more to come • Green pricing still growing, despite RPS mandate proliferation • Expect more policy support