TREIA

1. TREIA The Texas Renewable Energy Industries Association (TREIA) is a trade association with over 600 members representing over 350 companies, organizations and institutions involved in all aspects of the renewable energy industry in Texas. PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

2. Presentation Outline • Why the non-wind RPS requires higher Alternative Compliance Payment values • Costs of non-wind resources • Benefits of meeting renewable energy goals • Program elements that may be modified to address costs PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

3. A Perspective on Scale • Texas RPS: 2,000 MW, 5,000 MW, 10,000 MW • Non-wind RPS: • 500 MW “Wind generation has had the impact of reducing wholesale and retail prices of electricity… For each additional 1,000 MW of wind that was produced, the analysis showed that the clearing price in the balancing energy market fell by $2.38.”Report to the 81st Legislature: Scope of Competition in Electric Markets in Texas, Public Utility Commission of Texas, 2009 100 MW Tier 1 500 MW Tier 2 PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

4. Costs of Non-Wind Resources Levelized Cost of Energy, $/MWh • Clusters of non-wind technologies are evident • Biomass and Geothermal • Solar • Both clusters can potentially offset gas peaking generation • If solar is to play a significant role, a higher ACP may be necessary Gas Solar PV Solar Thermal Biomass Geothermal CC Peaking Sources: Lazard Capital Markets, 2009 TREIA, 2010 PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

5. Benefits of Meeting Renewable Energy Goals • Electricity supply diversity • Fuel resource • Geographic • Scale • Increased utilization of transmission investments • Reduced energy costs by replacing highest marginal cost energy • Stability of costs provides hedge against fuel price volatility • Emissions benefits (geothermal and solar) • Jobs, economic opportunity, increased land productivity Option values increase system stability and economic stability PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

6. Fuel Resource Diversity Solar + Wind Profiles Average Annual Wind, Solar and Combined Production by Hour Base Case Wind Profile ERCOT System-Wide Load ERCOT West Zone MCPE Solar Profiles Source: Opportunities for Solar Development on Wind-Constrained Transmission Systems, CEA for Austin Energy, 2009. PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

7. Geographic and Scale Diversity Solar<10 kW-100 MWs Wind Geothermal <1 MW Biomass 2 MW – 100 MWs PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

8. Value of Solar Generation • Negative correlation to west Texas wind; positive correlation to loads and prices = Increased utilization of CREZ investment • Zero emissions • Large-scale – CSP • 1.5-3 year project lead time • Spinning generator provides grid support • Offers storage and ride through capability • 64 MW CSP plant in NV employed 500 people for 1.5 years in construction; 30 people to operate; benefits local community through property taxes, utility fees, land rents • Large-Scale – PV • 12-18 month project lead time • No water requirements • Prices declining (23% in past 2 years) • Distributed (customer-sited) • No transmission losses • Can be deployed (and is being deployed) right now • Leverages skilled workforce developing in Texas PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

9. Value of Biomass and Geothermal Generation • Woody and Agricultural Biomass • 3-5 year lead times • Tends to be closer to markets • Can result in land improvements, restoration of water tables • Can restore ranch and agricultural land uses, wildlife habitats • Opportunities for sustainable agricultures (including forestry) • Landfill Gas • 1-2 year lead time • 53 sites in Texas ready to provide 85 MW of capacity • Controls emissions, avoids flaring of harmful gases • Biofuel Energy • Can hedge electricity and transportation uses • Geothermal • Downwell, low temperature applications under development in several areas of Texas • • Provides baseload capacity • Utilizes a waste stream • • High capacity factor • Carbon neutral PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered by Steve Wiese, Board President

10. Addressing RPS Costs • Designed and implemented well, the RPS can be an efficient and effective tool to encourage competition, enable price discovery, and limit ratepayer impact • RPS has worked well in Texas, works within existing regulatory and market structures, and with experienced local market participants • In order to function well, RPS must: • Reliably signal incremental capacity requirements ahead of time; and, • Provide adequate headroom to enable market price discovery under the ACP PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

11. Addressing Costs • Implement while federal tax credits are available • EOY 2013 for PTC (biomass/LFG, geothermal, small hydro), or • EOY 2016 for ITC (solar, geothermal) • Best possible outcome is a responsive market which results in new renewable energy capacity in service • Worst possible outcome is zero new capacity and payment of ACPs • Tier structure • Consider cascading eligibility to expand opportunity in smaller tiers without subjecting ratepayers to higher risk • Consider RPS phases separately: • Ramp-Up Phase – consider adjusting ramp rates • Maintenance Phase – consider a declining ACP PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

12. Cascading Eligibility Tier 1 ACP Tier 1 Capacity 100 MW • Tier 1 – Solar 100 MW • Solar can earn Tier 1 RECs • Tier 1 RECs can be used to satisfy Tier 1, Tier 2, or Tier 3 RPS obligations • Any “overflow” Tier 1 RECs would need to be sold into Tier 2 or Tier 3 markets, limited by lower ACPs • Tier 2 – Non-Wind 500 MW • Non-wind, non-solar can earn Tier 2 RECs • Tier 2 RECs can be used to satisfy Tier 2 or Tier 3 RPS obligations • Any “overflow” Tier 2 RECs would need to be sold into the Tier 3 market, limited by lower ACP Tier 2 ACP Tier 2 Capacity 500 MW Tier 3 ACP Tier 3 Capacity 10,000 MW $0 Floor PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

13. Modifying the ramp shape Ramp-Up Phase – 2010-2015 Potential cost reduction relative to Current Staff ProposalAssuming worst case: REC prices = ACP Target Ramp Shapes Should Provide Adequate Market Signaling and Reflect Likely Lead Times and Deployment Schedules for affected Technologies 17% Lower 32% Lower PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

14. Declining ACP Maintenance Phase - 2016-2025 Savings relative to Current Staff Proposal Assuming worst case: REC prices = ACP ACP 12% Savings (NPV at 5% DR) ACP declines at 3% annually PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

15. Costs and Subsidies in Perspective • Federal renewable energy subsidies such as the PTC were designed to even the playing field, in recognition of subsidies provided to conventional generation • Different technologies/resources/fuels are subsidized in different ways • State, federal, local tax treatments • Direct incentives, financing • Regulatory exemptions • The RPS is the primary way we have subsidized renewable energy development in Texas to date PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

16. Costs and Subsidiesin Perspective Source: The Energy Report, Chapter 28, Government Financial Subsidies, Texas Comptroller of Public Accounts, 2008 PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

17. Costs and Subsidies in Perspective • Estimates of non-wind RPS cost • EDF – 500 MW w/ 100 MW solar tier as currently proposed – $0.53 - $0.67/month residential • Recurrent Energy (previously presented to the Commission) – 500 MW solar-only w/ $130 ACP – $0.62/month residential PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

18. In Sum • TREIA strongly supports implementation of the 500 MW non-wind RPS • We, along with the Texas Legislature, recognize that non-wind renewables will require a higher ACP in order to initiate the market • We recognize that there are technical challenges involved in integrating some renewable resources in the Texas energy market, but believe those challenges can and will be overcome • Along with challenges there will be benefits to Texas electricity consumers which will outweigh costs • TREIA urges the Commission to proceed toward an RPS implementation that provides clear direction to the market and facilitates robust competition PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President

19. Steven M. Wiese, Principalsteve.wiese@cleanenergyassociates.com512-323-6629 PUCT Workshop on Energy Efficiency and Renewable Energy, June 30, 2010, Austin Texas Presentation of the Texas Renewable Energy Industries Association (TREIA), delivered b y Steve Wiese, Board President