Renewable Energy: Legal and Policy IssuesRenewable Energy: Legal and Policy Issues

Frank PragerVice President, Environmental Policy

Xcel EnergyNovember 20, 2009

Frank PragerVice President, Environmental Policy

Xcel EnergyNovember 20, 2009

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Northern States Power Company

Minnesota

Northern States Power Company

Minnesota

Public Service Company of

Colorado

Public Service Company of

Colorado

Southwestern Public Service

Company

Southwestern Public Service

Company

Northern States Power

Company Wisconsin

Northern States Power

Company Wisconsin

No. 1 wind energy provider No. 5 in solar capacity Largest green pricing

program Industry-leading voluntary emission reductions Leader in pursuit of new technologies

No. 1 wind energy provider No. 5 in solar capacity Largest green pricing

program Industry-leading voluntary emission reductions Leader in pursuit of new technologies

Xcel Energy Inc.Xcel Energy Inc.

Gas Customers 1.9 M

Electric Customers 3.4 M

Gas Customers 1.9 M

Electric Customers 3.4 M

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BiomassBiomass

SolarSolar

Wind

Xcel EnergyXcel EnergyStates ServedStates Served

Xcel Energy’s Renewable Energy GeographyXcel Energy’s Renewable Energy Geography

4

Coal46%Coal46%

Natural Gas 16%

Natural Gas 16%

Renewables25%

Renewables25%

Nuclear13%

Nuclear13%

Owned & Purchased EnergyOwned & Purchased Energy

Coal52%Coal52%

Natural Gas 22%

Natural Gas 22%

Renewables13%

Renewables13%Nuclear

12%Nuclear

12%

20082008 20202020

Other*1%

Other*1%

Advanced Technology:Adding Clean Energy ResourcesAdvanced Technology:Adding Clean Energy Resources

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Xcel Energy Wind CapacityXcel Energy Wind Capacity

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2009 2015 2020

SPSPSCoNSP

Growth of Xcel Energy Wind CapacityGrowth of Xcel Energy Wind Capacity

MWMW

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Utility-scale Photovoltaic:

— 8.2 MW plant in operation in Alamosa

— 17 MW plant planned for 2010

Concentrating Solar Power:

— Uses mirrors to concentrate sunlight

— Can be combined with thermal storage

Colorado Solar*Rewards:

— Customer-sited distributed generation

— 35 MW on line – over 4000 customers

Proposed 280 MW of new advanced solar in latest Colorado Resource Plan

Utility-scale Photovoltaic:

— 8.2 MW plant in operation in Alamosa

— 17 MW plant planned for 2010

Concentrating Solar Power:

— Uses mirrors to concentrate sunlight

— Can be combined with thermal storage

Colorado Solar*Rewards:

— Customer-sited distributed generation

— 35 MW on line – over 4000 customers

Proposed 280 MW of new advanced solar in latest Colorado Resource Plan

SolarSolar

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Other Technologies and InitiativesOther Technologies and Initiatives

Biomass

— Bay Front: Coal-to-biomass

conversion (Wisconsin)

— Co-firing or stand-alone

generation options

— Pine beetle forests in Colorado

Geothermal

Other environmental initiatives

— Energy efficiency and conservation

— SmartGridCity™

— Emission reduction programs

Biomass

— Bay Front: Coal-to-biomass

conversion (Wisconsin)

— Co-firing or stand-alone

generation options

— Pine beetle forests in Colorado

Geothermal

Other environmental initiatives

— Energy efficiency and conservation

— SmartGridCity™

— Emission reduction programs

Proposed Xcel Energy CO2 Reductions

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Utility Perspective on Renewable EnergyUtility Perspective on Renewable Energy

Renewable energy advantages

— No net emissions

Important piece of portfolio of clean energy resources

— Generally high levels of public and political acceptance

— Little or no fuel price volatility

Renewable energy challenges

— Transmission

— Capital

— Price

— Intermittency

Key: Technological advancement

Renewable energy advantages

— No net emissions

Important piece of portfolio of clean energy resources

— Generally high levels of public and political acceptance

— Little or no fuel price volatility

Renewable energy challenges

— Transmission

— Capital

— Price

— Intermittency

Key: Technological advancement

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Questions About Renewable and Clean Energy PolicyQuestions About Renewable and Clean Energy Policy

Where to spend clean energy dollar?

— Repowering coal/natural gas?

— Renewable energy

New wind energy?

Distributed Solar/CSP?

Other technologies

— Energy efficiency

What combination of mandates and incentives?

National natural gas supply issues?

How to address intermittency and transmission?

Integration of state and federal policy?

— Tax policy

— RPS

Where to spend clean energy dollar?

— Repowering coal/natural gas?

— Renewable energy

New wind energy?

Distributed Solar/CSP?

Other technologies

— Energy efficiency

What combination of mandates and incentives?

National natural gas supply issues?

How to address intermittency and transmission?

Integration of state and federal policy?

— Tax policy

— RPS

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National Renewable Energy StandardNational Renewable Energy Standard

American Clean Energy and Security Act RES targets:

— 6% in 2012/20% in 2020

— Three quarters from renewables

— Companion to Cap & Trade

Targets similar to other legislation (Bingaman, Markey)

Energy efficiency alternative compliance option

Key Xcel Energy issues:

— Controlling customer cost for both C&T and the RES

— Access to federal market regardless of state standards

American Clean Energy and Security Act RES targets:

— 6% in 2012/20% in 2020

— Three quarters from renewables

— Companion to Cap & Trade

Targets similar to other legislation (Bingaman, Markey)

Energy efficiency alternative compliance option

Key Xcel Energy issues:

— Controlling customer cost for both C&T and the RES

— Access to federal market regardless of state standards

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Transmission Transmission

Planning & Interconnect

Lead times

— Clogged queues

Cost allocation

LDC vs. export

Operations

Balancing wind vs. load patterns

Intermittency

Meeting reliability standards

Incentives

Planning & Interconnect

Lead times

— Clogged queues

Cost allocation

LDC vs. export

Operations

Balancing wind vs. load patterns

Intermittency

Meeting reliability standards

Incentives

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Tax credits critical to deploying renewable resources

— Wind PTC expires in 2012

— Solar ITC expires 2016

Tax credits likely to be under pressure

— Cost

— Industry maturity (especially wind)

Challenge: Bridging the gap to technological advancement

Tax credits critical to deploying renewable resources

— Wind PTC expires in 2012

— Solar ITC expires 2016

Tax credits likely to be under pressure

— Cost

— Industry maturity (especially wind)

Challenge: Bridging the gap to technological advancement

Tax SubsidiesTax Subsidies

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Renewable Integration Tax CreditRenewable Integration Tax Credit

RIC designed to offset costs of integrating intermittent renewable energy onto utility system

Tax credit per kWh of intermittent (wind and solar) renewables, graduated based on percent of sales

Designed to encourage more renewables and defray system costs of higher levels of integration

RIC designed to offset costs of integrating intermittent renewable energy onto utility system

Tax credit per kWh of intermittent (wind and solar) renewables, graduated based on percent of sales

Designed to encourage more renewables and defray system costs of higher levels of integration

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Renewable Integration Tax Credit DetailRenewable Integration Tax Credit Detail

% Generation Portfolio Derived from Renewable Resources

Renewable Integration Tax Credit

Less than 4% No Credit

At least 4%, but less than 12% 0.10 cents/kWh

At least 12%, but less than 19% 0.30 cents/kWh

At least 19% 0.50 cents/kWh

* Estimated Cost, $180 million / year for ten years* Estimated Cost, $180 million / year for ten years

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Utility Regulation and Advancing Renewable TechnologyUtility Regulation and Advancing Renewable Technology

Utility ratemaking vs. Technology risk

Markets and entrepreneurs

Distributed generation incentives

— Rebate structure

— Utility costs

Critical role of traditional utility function

Utility ratemaking vs. Technology risk

Markets and entrepreneurs

Distributed generation incentives

— Rebate structure

— Utility costs

Critical role of traditional utility function

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Xcel Energy Support for New Renewable TechnologiesXcel Energy Support for New Renewable Technologies

Advanced technology programs

— SolarTAC

— Innovative Clean Technology program

— Minnesota Renewable Development Fund

— Energy storage demonstrations

— Smart Grid

— NREL/EPRI Partnerships

Goal: Encourage development of more competitive renewable energy technologies

— Emission reductions

— Energy and capacity resource

— Carbon reduction strategy

Advanced technology programs

— SolarTAC

— Innovative Clean Technology program

— Minnesota Renewable Development Fund

— Energy storage demonstrations

— Smart Grid

— NREL/EPRI Partnerships

Goal: Encourage development of more competitive renewable energy technologies

— Emission reductions

— Energy and capacity resource

— Carbon reduction strategy