1. CERAWEEK ® 2007 Technology Needs for a Carbon-Constrained World Jeff Sterba Chairman, President, CEO PNM Resources, Inc. February 15, 2007

2. 2 PNM Resources

3. 3 PNM Resources Generation Portfolio MW coal nuclear gas wind coal nuclear gas wind 49% 15% 28% 8% 68% 25% 2% 5% MW as of June 2006, MWh generated during 2005 MWh

4. 4 Electricity Technology in a Carbon-Constrained Future …But what is technically feasible??? Growing scientific and public opinion that GHG emissions are contributing to climate change… Priority of 110 th Congress … U.S. responsible for 1/4 of worldwide CO 2 emissions… Electric utilities responsible for 1/3 of U.S. CO 2 emissions… Agreement that technology solutions are needed…

5. 5 Comparative Costs 2010 to 2015 Source: EPRI 2007

6. 6 Comparative Costs 2020 to 2025 An extraordinary opportunity to deploy an affordable, low-carbon electricity generation portfolio. Source: EPRI 2007

7. 7 EIA 2007 Annual Energy Outlook - Forecast U.S. Electric Sector CO 2 Emissions Based on preliminary EIA 2007 Annual Energy Outlook data available as of December 2006. EIA analysis includes some efficiency, new renewables, new nuclear EIA analysis assumes that no CO 2 capture or storage will emerge due to high costs. 2006 level Source: EPRI 2007

8. 8 technologyEIA 2007 referenceEPRI Analysis Target efficiencyload growth ~ +1.5%/yrload growth ~ +1.1%/yr renewables30 GWe by 203070 GWe by 2030 nuclear12.5 GWe by 203064 GWe by 2030 advanced coal generation no existing plant upgrades 40% new plant efficiency by 2020–2030 150 Gwe plant upgrades 46% new plant efficiency by 2020; 49% in 2030 carbon capture and storage (CCS) none widely available and deployed after 2020 electric transportationnone 10% of new vehicle sales by 2017; +2%/yr thereafter distributed energy resources (including distributed solar) < 0.1% of base load in 2030 5% of base load in 2030 Source: EPRI 2007 Technology Targets

9. 9 EIA Base Case 2007 9% reduction in base load by 2030 Benefits of Achieving Efficiency Target TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

10. 10 EIA Base Case 2007 Benefits of Achieving Renewables Target 50 GWe new renewables by 2020; +2 GWe/yr thereafter TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

11. 11 EIA Base Case 2007 Benefit of Achieving Nuclear Generation Target 24 GWe new nuclear by 2020; +4 GWe/yr thereafter TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

12. 12 EIA Base Case 2007 Benefit of Achieving Advanced Coal Target 46% efficiency by 2020, 49% efficiency by 2030 TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

13. 13 EIA Base Case 2007 Benefit of Exercising the CCS Option After 2020, all new coal plants capture and store 90% of their CO 2 emissions TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

14. 14 EIA Base Case 2007 Benefits of Achieving PHEV and DER Targets 5% shift to DER from base load in 2030 PHEV sales = 10% by 2017; 30% by 2027 TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 Source: EPRI 2007

15. 15 CO 2 Reductions…What’s Technically Feasible TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.0%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation 40% New Plant Efficiency by 2020–2030 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and StorageNoneWidely Deployed After 2020 Electric TransportationNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources< 0.1% of Base Load in 20305% of Base Load in 2030 2006 level Source: EPRI 2007 EIA Base Case 2007

16. 16 Source: EPRI 2007 The U.S. electricity infrastructure will need ALL of the following components to stabilize and then reduce CO 2 emissions over the coming decades: 1.Smart grids and communications infrastructures to enable end-use efficiency and demand response, distributed generation, and PHEVs. 2.A grid infrastructure with the capacity and reliability to operate with 20-30% intermittent renewables in specific regions. 3.Significant expansion of nuclear energy enabled by continued safe and economic operation of existing nuclear fleet; and by a solution for managing spent fuel. 4.Commercial-scale coal-based generation units operating with 90+% CO 2 capture and storage in a variety of geologies. Key Technology Challenges

17. 17 Technology Funding Potential MechanismGovernance voluntary industry fundingindustry control federal appropriation fundingcongress/ DOE control federally sanctioned fee flexible Need: 2 to 3 $B per year