Thomas P. Meissner Jr.Thomas P. Meissner Jr.Senior Vice President, Chief Operating Officer
Unitil Corporation
New York City ~ July 17, 2007NARUC Committee on Energy Resources and the Environment
What Utilities Can Do With
Renewable Energy
2
Committee on Energy Resources and the EnvironmentJuly 17, 2007
Small, investor-owned utility
Three territories – NH and MA
Gas and electric operations
Fully restructured
“Distribution only”
Not allowed to own or invest in generation of any kind, except through unregulated affiliate.
About UnitilAbout Unitil
3
Committee on Energy Resources and the EnvironmentJuly 17, 2007
Centralized Generation Hydroelectric Wind farms Biomass Solar concentrators Landfill gas Etc.
Renewable GenerationRenewable GenerationDistributed Generation
Small wind turbines
Photovoltaics
Fuel cells
Net metered installations
Etc.
Load serving resources Displacement resources
More closely aligned with distribution/deliveryCompetitive markets
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Committee on Energy Resources and the EnvironmentJuly 17, 2007
Displacement Options
1. Eliminate unnecessary consumption; remove load from the system
2. Better manage load between time periods
3. Produce electricity directly at the point of utilization
Displacement ResourcesDisplacement Resources
Technology Options
Energy Efficiency
Fuel substitution
Demand Response
Energy Storage
Distributed Generation
Distributed Energy Resources = Displacement Resources
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Committee on Energy Resources and the EnvironmentJuly 17, 2007
Typically do not have the ability to vary output in response to electric demand.
Need the ability to disassociate generation from consumption.
A connection to the utility grid provides this functionality without the need for energy storage or other expensive alternatives.
Best example – net metering.
Small Renewable GeneratorsSmall Renewable Generators
Connection to the utility grid provides the functional equivalent of energy storage, supplemental service, and back up and standby.
Customer Load vs. Generator OutputTypical Photovoltaic Installation
0
0.2
0.4
0.6
0.8
1
1.2
1.4
12:00 AM 6:00 AM 12:00 PM 6:00 PM 12:00 AM
PV Output
Electricity Consumption
6
Committee on Energy Resources and the EnvironmentJuly 17, 2007
Will no longer be planned exclusively around centralized generation.
Will no longer be a strictly radial load-serving system.
A hybrid system will emerge in which load is served from a combination of centralized and distributed resources
Integrates load, generation and displacement resources.
Two-way power flow at the local network.
Will evolve to a network topology with more sophisticated protection, com-munication, metering, and intelligence.
Utilities will provide energy services and grid integration; not just delivery.
2121stst Century Grid Century Grid
Grid Modernization Characteristics*
1. Self-healing.
2. Motivates and includes the consumer.
3. Resists attack.
4. Provides power quality for 21st century needs.
5. Accommodates a wide variety of generation options.
6. Enables markets.
7. Optimizes assets and operates efficiently.
* U.S. National Energy Technology Laboratory
7
Committee on Energy Resources and the EnvironmentJuly 17, 2007
ENABLER: Provide the services to help consumers reduce energy consumption and shift to renewable energy alternatives.
Role of Distribution UtilitiesRole of Distribution Utilities
Grid Integration Services Painless interconnection
Energy storage functionality
Supplemental service
Backup & standby
Integration of load and displacement resources
Time differentiated pricing
Energy Services Subsidies/grants
Tax credits
Financing
REC’s
Forward Capacity Markets
Value streams
8
Committee on Energy Resources and the EnvironmentJuly 17, 2007
Conceptual Regulatory FrameworkConceptual Regulatory FrameworkThe Evolving Utility Distribution Grid
Customer Behavior
Infrastructure Investment
Pricing of Energy
Services
• DER/DG/renewable energy
• Proper price signals
• Demand Response
• Energy Efficiency
• Lower customer bills
• Environmental objectives
• Enable displacement resources
• Empower & incorporate consumers
• Enable competitive markets
• Enhance reliability, power quality
• Optimize assets
• Modernize the grid
• Achieve environmental/energy policy objectives
• More efficient use of system
• Potential for lower unit costs
• Increased capital requirements• Decline in use per customer
• Increased use of renewable DER
• Migrate away from volumetric pricing of delivery
• Remove utility disincentives to energy displacement
• Align incentives to achieve desired outcomes
• Pricing: energy services vs. energy delivery
9
Committee on Energy Resources and the EnvironmentJuly 17, 2007
Completing Advanced Metering Infrastructure (AMI) installation for all customers.
Evaluating new regulatory models and ratemaking methods to achieve desired energy policy objectives.
Experimenting with small renewable technologies.
Seeking legislative authority to invest directly in small renewable generation.
What Are We Doing?What Are We Doing?
It is our belief that rapid adoption and penetration of renewable DER technologies will not occur without the direct, active involvement of the local distribution utilities as determined and motivated partners.
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Committee on Energy Resources and the EnvironmentJuly 17, 2007
Thank YouThank You
Utility Ownership of Renewable Energy Facilities
Brent E. GaleSr. Vice President, Regulation and LegislationMidAmerican Energy Holdings CompanyJuly 2007
12
PacifiCorp Net Plant Capability Capacity Mix
Resource Type 2007 2013
Pulverized Coal 6,097.0 48% 6,437.0 43%
Existing Purchases 1,835.8 14% 628.2 4%
Gas-CCCT 1,697.7 13% 2,654.7 18%
Hydroelectric 1,556.4 12% 1,384.1 9%
Renewable 799.0 6% 2,143.0 14%
Gas-SCCT 384.8 3% 384.8 3%
Interruptible 233.0 2% 308.0 2%
Class-1 DSM 153.2 1% 267.6 2%
Front Office Transactions 0.0 0% 660.0 4%
Gas-CHP 0.0 0% 100.0 1%
Nuclear 0.0 0% 0.0 0%
Oil 0.0 0% 0.0 0%
Total 12,756.9 14,967.4
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PacifiCorp Net Energy Mix (GWh)
Resource Type 2007 2013
Pulverized Coal 47,200.5 65% 37,259.9 45%
Purchases 9,571.7 13% 17,871.1 22%
Hydroelectric 6,989.4 10% 5,822.2 7%
Gas-CCCT 6,214.5 9% 10,930.9 13%
Renewable 2,631.8 4% 7,248.2 9%
Gas-SCCT 162.8 0% 441.2 1%
Interruptible 88.8 0% 78.8 0%
Class-1 DSM 22.8 0% 6.8 0%
Front Office Transactions 0.0 0% 2,465.5 3%
Gas-CHP 0.0 0% 143.1 0%
Nuclear 0.0 0% 0.0 0%
Oil 0.0 0% 0.0 0%
Total 72,882.3 82,267.7
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MidAmerican Energy Company Net Capacity Mix
Resource Type 2007 2013
Pulverized Coal 3,574.8 53% 3,574.8 47%
Gas-SCCT 921.9 14% 921.9 12%
Gas-CCCT 576.3 9% 576.3 8%
Renewable 459.5 7% 1,122.5 15%
Nuclear 456.0 7% 456.0 6%
Existing Purchases 364.0 5% 107.0 1%
Interruptible 272.0 4% 272.0 4%
Oil 56.0 1% 56.0 1%
Class-1 DSM 51.0 1% 56.0 1%
Hydroelectric 3.6 0% 3.6 0%
Front Office Transactions 0.0 0% 480.0 6%
Gas-CHP 0.0 0% 0.0 0%
Total 6,735.1 7,626.1
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MidAmerican Energy Company Net Energy Mix (GWh)
Resource Type 2007 2013
Pulverized Coal 20,625.6 69% 22,904.8 70%
Nuclear 3,631.1 12% 3,568.2 11%
Purchases 2,868.7 10% 482.7 1%
Renewable 1,541.0 5% 3,616.6 11%
Gas-CCCT 1,054.4 4% 1,345.2 4%
Gas-SCCT 75.1 0% 445.6 1%
Hydroelectric 25.5 0% 26.0 0%
Class-1 DSM 0.2 0% 0.2 0%
Interruptible 0.1 0% 0.1 0%
Front Office Transactions 0.0 0% 234.0 1%
Gas-CHP 0.0 0% 0.0 0%
Oil 0.0 0% 0.0 0%
Total 29,821.8 32,623.4
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Why develop a renewable energy portfolio?• Diversify fuel risk• Diversify environmental risk• Utilize available tax benefits • Positive customer response• Economic benefits
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Why should utilities consider owning renewables?
• Right to assets and production after typical PPA contract term
• Terminal value• Control over maintenance• Ownership of renewable energy credits and any
associated revenues• Ability to pass tax credit saving to customers• Near zero dispatch cost• Revenues from incremental wholesale energy sales• Gain expertise and reliable cost information regarding the
technology
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Issues to Consider for the Wind Energy Power Purchase Alternative
• Debt leverage risk• Developer business risk• Operational risk• Terminal value• Managing unneeded deliveries during minimum
load• Class cost allocation• Ownership of renewable and environmental
credits• Contract renewal or replacement at end of PPA
term will likely be more expensive
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Issues for Wind Energy Ownership or Purchase• Transmission Availability and Cost
– Our Iowa projects provide an instructive example. The first 460 MW required about $7 million in transmission upgrades or about $15.25/kW installed. The next 75 MW will require about $12 to $14 million in upgrades or about $160 or more/kW.
• Tower & Turbine Availability and Cost– 2004 - $1050/kW total project cost– 2005 - $1250/kW total project cost– 2006 - $1800/kW total project cost– 2007 - $2000/kW total project cost
– Tower & turbine cost is roughly 75% of total project cost• Each $100/kW change in cost equates to about 0.3
cents/kWh change in all-in cost at 40% capacity factor and 0.4 cents/kWh at a 30% capacity factor.
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Issues for Wind Energy Ownership or Purchase• Locational Economics
– Annual Capacity Factors• Oregon/Washington – 30 to 34%• Iowa – 34 to 40%• Wyoming & Dakotas – 38 to >40%• Each 1 percentage point change in capacity factor equates to roughly
0.2 cents/kWh change in all-in cost.– Peak Availability
• Impact on Planning Reserves– Non-dispatchability & low summer peak availability of wind
facilities will require greater nameplate capacity reserves– 12% to 20% summer peak availability if multiple sites; individual
sites are often much less– Geographic diversity can mitigate but will not eliminate.
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What Is Needed to Spur Development of Renewables?
• Reconciliation of state least cost standards with renewable energy costs
• Flexible and expedited federal and state permitting processes
• Matching of benefits and cost recovery• Continuation of the federal production tax credit
at some level until the credit trading market is robust
• A national renewable credit trading program
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State Renewable Production Standard mandates are NOT required and can be counterproductive
• Inconsistent definitions of qualified renewables• Lack of sound economic basis for targets• Limits on qualified renewables (e.g., must be in
state)• Limits on use of renewable energy credits
Integrating Renewable EnergyIntegrating Renewable Energy
NARUC NARUC
July 17, 2007July 17, 2007
David M. SparbyDavid M. Sparby
Xcel Energy Service TerritoryXcel Energy Service Territory
Northern States Power
Company- Minnesota
Public Service
Company of Colorado
Southwestern Public Service
Northern States Power
Company- Wisconsin
3.3 Million Combined Electric and Gas Customers
in 8 States
3.3 Million Combined Electric and Gas Customers
in 8 States
Largest provider of retail wind energy in U.S.
Context: Strong Commitment to Context: Strong Commitment to DSM and Renewables (NSPMN)DSM and Renewables (NSPMN)
Peak Load (without CL):Peak Load (without CL): 10,000 MWs10,000 MWs
Wind:Wind: 800 MWs800 MWs
Biomass:Biomass: 150 MWs150 MWs
Controllable Load:Controllable Load: 932 MWs932 MWs
Electric Conservation:Electric Conservation: 256 GWh256 GWh
Gas Conservation:Gas Conservation: 900,000 MCF900,000 MCF
Renewable Development Fund:Renewable Development Fund:$20M/Year $20M/Year
AverageAverage
WindWind and Xcel Energy and Xcel EnergyWindWind and Xcel Energy and Xcel Energy
Biomass and Northern States Power Co.Biomass and Northern States Power Co.
2007 Minnesota Legislative Session2007 Minnesota Legislative Session
Renewable Portfolio Standard (MN and ND)Renewable Portfolio Standard (MN and ND)
Community Based Wind DevelopmentCommunity Based Wind Development
Carbon Emissions Reduction ObjectiveCarbon Emissions Reduction Objective
DSM and Conservation GoalsDSM and Conservation Goals
NSP 2020NSP 2020Energy MixEnergy Mix
2005 NSP Energy Mix
Coal
46%
Purchase
6%
Bio
2%Hydro +
Hydro PPA13%
Wind
3%
CT
1%
Nuclear
28%
CC
1%
2020 NSP Energy Mix
Coal
30%
Purchase
2%
Bio
2%Hydro +
Hydro PPA5%
Wind
21%
CT
1%
Nuclear
29%
CC
10%
NSP Load Duration Curve in 2020NSP Load Duration Curve in 2020
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
4
27
3
54
1
80
7
1,0
73
1,3
38
1,6
04
1,8
67
2,1
25
2,3
87
2,6
51
2,9
18
3,1
85
3,4
50
3,7
16
3,9
81
4,2
45
4,5
09
4,7
75
5,0
38
5,3
03
5,5
68
5,8
33
6,0
99
6,3
65
6,6
30
6,8
93
7,1
59
7,4
22
7,6
88
7,9
53
8,2
19
8,4
87
8,7
51
Non Dispatchable (Wind&Hydro)ST PurchGas PeakerGas CC
Coal NUGBioNuke
Midwest Transmission EffortMidwest Transmission EffortMidwest Transmission EffortMidwest Transmission Effort
South DakotaSouth Dakota
IowaIowa
MinnesotaMinnesota
WisconsinWisconsin
North DakotaNorth Dakota
Post- Group Post- Group I projectsI projects
Group IGroup I
Group I – four projectsGroup I – four projects
600 + miles of600 + miles oftransmission linestransmission lines
$700 million over 7 years$700 million over 7 years
Group I – four projectsGroup I – four projects
600 + miles of600 + miles oftransmission linestransmission lines
$700 million over 7 years$700 million over 7 years
Other Wind Integration IssuesOther Wind Integration Issues
ReliabilityReliability
OperationsOperations
CostsCosts
Wind Assisting Assets and PracticesWind Assisting Assets and Practices
MN Summer System Peak DayMN Summer System Peak Day
Actual System Load vs. Expected System Load
6000
6500
7000
7500
8000
8500
9000
9500
10000
10500
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour Ending
MW
Expected SystemLoad
System Load
Conclusion: Opportunities and ChallengesConclusion: Opportunities and Challenges
2007 legislative goals set a high 2007 legislative goals set a high benchmark benchmark
The necessary technology and The necessary technology and delivery mechanisms are available delivery mechanisms are available to meet these objectivesto meet these objectives
Constructive regulation will be Constructive regulation will be required to insure successfully required to insure successfully adding these resourcesadding these resources
What Utilities Can Do With Renewable
Energy
What Utilities Can Do With Renewable
EnergyRalph LaRossa
President and Chief Operating Officer PSEG
Ralph LaRossaPresident and Chief Operating
Officer PSEG
NARUC Committee on Energy Resources and the Environment
New York City – July 17, 2007
NARUC Committee on Energy Resources and the Environment
New York City – July 17, 2007
PSE&GPSE&G 6,400 employees 2.1 M electric customers 1.7 M gas customers 24/7 operation 2,600 sq miles service
territory Serving 6 major cities
and 300 communities 150,000 miles of wire 15,000 miles of pipe
0 10ml1 2 3 4 5 6 7 8 9
Warren Co.
Hunterdon Co.
Morr is Co.
Bergen Co.
Essex Co.
Hudson Co.
Union Co.
Middlesex Co.
Mercer Co.
Monmouth Co.
Ocean Co.
Burlington Co.
Camden Co.
Sussex Co.
Passaic Co.
Somerset Co.
STATEN ISLAND
Gloucester Co.
COMBINED ELECTRIC & GAS TERRITORIES
ELECTRIC TERRITORY
GAS TERRITORY
KEY:
N
EW
S
PSE&GPSE&G Named the America’s Most Reliable Electric
Utility for the last two years
Awarded the Mid-Atlantic reliability award for the past five years
Electric Customers: 2.1M
Gas Customers: 1.7MNuclear Capacity: 3,500 MW
Total Capacity: 15,000 MW*
Traditional T&D
Leveraged Leases
Domestic/Int’l Energy
Regional Wholesale Energy
* 13,000MW in NJ, NY, CT and PA. 2,000MW in Texas
PSEG Family of CompaniesPSEG Family of Companies
Convergence of Energy and the EnvironmentConvergence of Energy and the Environment Convergence of energy and the environment
creates the need to address:
• Critical infrastructure requirements
• Environmental requirements
• Capacity requirements in constrained markets
CO2 Reductions – Multiple Strategies RequiredCO2 Reductions – Multiple Strategies Required
PSEG’s Multi-Pronged ApproachPSEG’s Multi-Pronged Approach
Conservation through energy efficiency improvements
Development of renewable energy resources
Clean, zero- and low-carbon central station electric generating capacity.
NJ’s Energy Master Plan & Global Climate Change LegislationNJ’s Energy Master Plan & Global Climate Change Legislation PSE&G is a strong supporter of global climate change
legislation and NJ’s Energy Master Plan.
Global climate change legislation is a blueprint for other states to follow in reducing carbon emissions and promoting sustainable energy systems.
Legislation and Master Plan’s goals:• Reduce projected energy use by 20% by 2020 and
meet 20% of the State’s electricity needs with renewable energy sources by 2020.
Solar and Wind in New JerseySolar and Wind in New Jersey Renewables can contribute to our total energy mix, but won’t meet our
total energy needs:• Intermittent generation for solar -12%; Wind - 30%.
• Land availability and weather are key considerations for both sources.
• Estimated 12,820 wind turbines would be necessary to replace electric power input of all NJ’s nuclear power plants.
Solar energy holds greater promise than wind energy for New Jersey.
Economics of solar energy require participation from both the public and private sectors – along with significant financial incentives through regulated incentive rates of return, rebates and federal investment tax credits.
PSE&G supports extension of the Solar ITC to allow direct utility investment in solar.
PSE&G currently has a solar proposal designed to maximize ratepayer benefits while leveraging the long-term support of the utility.
Creating Solutions with Solar PowerCreating Solutions with Solar Power PSE&G proposed in April 2007 to invest $100 million in a solar
energy initiative.
Program will help meet the aggressive goals of the Energy Master Plan and the NJ Board of Public Utilities’ renewable portfolio standards (RPS) requirements.
The utility will provide financing to solar photovoltaic developers or end-use customers over a 15-year period, covering about 40-50 percent of a project’s cost.
Program will fund installation of 30 megawatts of solar power; about one half of the RPS requirements in PSE&G’s service territory in the years 2008 through 2010.
If successful, the program may be expanded to support additional solar development.
Energy efficiency and conservation is another key component to combating climate change...
Conservation through Energy Efficiency ImprovementsConservation through Energy Efficiency ImprovementsEnergy Efficiency Investments in our Plant and Systems: Usage of more energy efficient primary and secondary wires for new
overhead installations. Installation of energy efficient transformers. Replacement of aging transformer banks with state-of-the-art units.
The Bottom “Green” Line:
Cumulative impact through 2020: • Reduction of approximately 100 million kilowatt hours and
approximately 60,000 tons of CO2.• Carbon reduction equivalent to removing the emissions of
14,000 cars
Investments in Hybrid Vehicles: PSE&G currently replacing 1,300 vehicles with hybrid cars, light trucks
and hybrid bucket truck prototypes. PSE&G will become the first utility in the nation to use hybrid aerial lifts
on bucket trucks. Since 2003, PSE&G has used bio-diesel as fuel for its diesel-powered
vehicles.
The Bottom “Green” Line:
Cumulative impact through 2020: • 8,500 tons of CO2 and 850,000 gallons of gasoline
Bio-Diesel contributions since 2003:• 7,700 tons of CO2
Conservation through Energy Efficiency ImprovementsConservation through Energy Efficiency Improvements
• Examine regulatory reform options to give utilities incentives to invest in efficiency:
• Take away disincentives• Provide utilities with direct incentives to invest in
energy efficiency
• With systems in place, new investments can be made in efficient lighting, heating or cooling for residential and commercial and industrial customers.
• With proper incentives, utilities can be the catalysts for large scale efficiency gains.
Next Steps for PSE&GNext Steps for PSE&G
Working together for a green and bright futureWorking together for a green and bright future Working with our government and regulators, environmental
groups, academic institutions and industry we can:• Apply our experience• Leverage our customer relationships• Utilize our resources
Dramatic actions to make renewable and conservation work as part of the solution.
Thank You