New England Governors’ Renewable Energy Blueprint, September 15, 2009 (“Blueprint”)

1. Perspectives on the New England Governors’ Renewable Energy BlueprintImplications for Policymakers

2. NRG, with the assistance of Charles River Associates, examined the New England Governors’ Renewable Energy Blueprint and the underlying ISO New England 2030 Power System Study • NRG applauds the Governors for taking this important look at the long-term energy future of the region • NRG strives to be a partner in providing safe, reliable and economical energy in all regions in which we operate

3. New England Governors’ Renewable Energy Blueprint, September 15, 2009 (“Blueprint”) • http://www.nescoe.com/uploads/September_Blueprint_9.14.09_for_release.pdf • ISO New England, Draft New England 2030 Power System Study, September 8, 2009 (“ISO”) • http://www.iso-ne.com/committees/comm_wkgrps/prtcpnts_comm/pac/reports/2009/eco_study_report_draft.pdf

4. The Blueprint’s Overall Conclusions • New England has substantial renewable resources, especially wind, that can be developed with appropriate transmission expansion • Adding renewable resources with low energy costs reduces system-wide costs, as does repowering/replacing older fossil plants with new, efficient combined cycle resources • Repowering or replacing older units with new, efficient, local generation is the most effective strategy for reducing air emissions and among the most effective for reducing costs • Developing renewable resources in and near New England is more economical than importing additional energy from distant regions

5. Several Key Quantitative Points Emerge • The extensive wind and import scenarios include substantial investments in transmission whose costs are not explicitly accounted for in this study • Pursuing Midwest renewable and other resources would require New England to bear transmission investment costs between $20 and $47 billion (ISO, p. 59) • Three local options were identified that result in lower energy costs for New England consumers • Renewable resources, especially wind • Repowering/replacement of older resources • High penetration of demand-side resources • Replacement and repowering of older fossil units results in the lowest projected emissions of SO2, NOx and CO2 • Fixed cost recovery • With lower energy costs, all generators see lower revenues, raising concerns about the adequacy of energy-market revenues to recover fixed costs – “other sources of revenue may need to be considered to ensure the economic viability of resources.” (ISO, p. 50)

6. The Blueprint is A forward-looking, “what-if” scenario analysis A high-level analysis of benefits of particular capacity mix scenarios A mixture of strategies which assumes “all-or-nothing” technology implementation But it is not An analysis of what resources will meet consumer needs in 2030 A cost-benefit analysis of planning options An analysis of market participant behavior An analysis which provides an evolutionary strategy What the Blueprint Is, and Is Not

7. Existing Sites Have Economic Value • Some aspects of the value of existing sites are not quantified in the ISO’s analysis • Existing generation sites are already integrated into the transmission network • Existing plants are on industrial sites, and already largely have community acceptance • Repowering maintains/renews tax base • Repowering is a net improvement in environmental performance • Existing permits may be transferable to new development • Most repowering candidates are near load centers, where greenfield development is difficult, even if sites exist • Existing sites have skilled workforces which can be retrained at low cost

8. Repowering Has Technical Benefits • Repowering can achieve 30% - 40% improvements in unit efficiencies • Repowering units is among the lowest-cost options for development and provides ‘bang for the buck’ • Repowering is a mature technology with stable and predictable costs • The supply-chain issues with gas turbines are minimal • Fewer transmission upgrades are necessary, with lower transmission losses, to support existing sites • Repowering older units will effect substantial reductions in local NOx and SOx emissions, often located near population centers • Dispatchable resources near load centers create a more robust grid that can accommodate intermittent resources • Repowering and replacement can be targeted towards specific sites and can be done incrementally

9. Implications for Policymakers (1) • None of the study’s ‘all or nothing’ scenarios is likely, or even advisable • Comparatively, off-shore wind and retirement/repowering scenarios show the greatest benefits for consumers. Near-term strategies should include these resource types. • The extensive wind and import scenarios include substantial investments in transmission whose costs are not explicitly accounted for in this study • The study did not attempt to assess economic viability from an investor’s perspective – we don’t know whether any of these investments is viable on a merchant basis • To achieve the benefits suggested by the Blueprint, state policy makers must consider pro-active steps

10. Implications for Policymakers (2) • States should adopt policy instruments to encourage desirable changes in the resource mix – achieving efficiency and environmental improvements may require public investment support • Competitive markets are unlikely to provide the financial stability to support investments to achieve state and regional environmental and cost objectives • The penetration of lower-cost resources jeopardizes the economic viability of such resources by lowering market energy prices – each wind plant or repowering project reduces the incentive for the next one to enter • Long-term contracts with credit-worthy counterparties for wind development and repowering existing generation sites will advance the regional goals of lower emissions, lower cost, enhanced reliability and regional energy independence

11. Annual LSE Expense Source: ISO New England, Preliminary Results for New England Governors’ 2009 Economic Study, August 14, 2009, slide 33

12. Source: ISO New England, Preliminary Results for New England Governors’ 2009 Economic Study, August 14, 2009, slide 45