Sacramento Municipal Utility District Lupe Jimenez Manager, Energy Storage May 4, 2017

Sacramento Municipal Utility District Overview Sacramento County in Northern California 900 Square Miles 2nd largest muni in California, 6th largest in the US Not-for-Profit Municipal Electric Utility Governed by a Board of Seven Directors 2000 Employees $1.46B Budget 625,000 Accounts (1.46M Population) 550,000 Residential Accounts 75,000 Commercial Accounts Load Serving Capability SMUD-owned generation provides over 1800 MW of generating capacity Hydro - 11 reservoirs and 9 power plants Thermal - 5 plants and the gas pipeline Renewable - wind and utility-grade solar Generate enough power to serve ~65% of annual load Summer-peaking load is ~3300 MW (air conditioning) Sacramento residents voted in 1923 to form their own community-run electric utility. The investor-owned utility fought the voters’ wishes in the courts for more than 20 years before the California Supreme Court ruled in SMUD’s favor. SMUD began providing electric service in 1946. We’re now the nation’s sixth-largest public electric utility, serving a population of nearly 1.5 million. SMUD’s service territory encompasses 900 square miles in Northern California. SMUD’s budget in 2014 was $1.46 billion. SMUD is governed by a seven-member Board of Directors that determines policy and appoints the CEO/General Manager, who is responsible for SMUD’s daily operations. SMUD PURPOSE STATEMENT (Policy # SD-1A) SMUD's purpose is to provide solutions for meeting our customers' electrical energy needs. PURPOSE STATEMENT (Policy # SD-1A) SMUD's purpose is to provide solutions for meeting our customers' electrical energy needs

Preparing for the Future From Centralized To Distributed Energy Future Yesterday Centralized Power Tomorrow Distributed, Clean, Local These drivers of industry transformation are moving us from a centralized, one way power system to a dynamic two way power system. Today’s power systems are designed to support large generation plants that serve customers by transmitting energy on a transmission and distribution system that is essentially one-way. However, the grid of the future will necessarily be a two-way system where power is generated by many small, distributed sources. Energy will flow in both directions on a network rather than a hierarchical structure. Moving utilities to consider models in which energy can flow from utility to customer, customer to customer or customer back to the utility. Note: The CPUC has proposed three business models for electric utilities in the future. The first is the utility as a platform – where the utility is not the provider of energy but enables market transactions between third parties. The second is the utility as a platform in which the utility can also participate in the market providing energy services. The third is the utility as only a wires and poles company – in which the utility's role is limited to designing and maintaining the grid and another entity would operate the grid. By 2030, the utility business as we know it will likely be substantially different in terms of the utility business model or compact we have with customers, as well as how the utility system is planned and operated. One-Way Power Flow Utility Customer Multidirectional Power Flow Utility Customer Customer

The Changing Landscape Drivers Of Industry Transformation New Markets and Third Party Entrants Legislative mandates and concerns over climate change are changing utility landscape DR: Aggregation is creating new markets. CAISO piloting DR Auction Mechanism relying on 3rd Party Aggregators for capacity. Policies to allow third parties to provide grid services. CA AB 327 requires utilities to post distribution system planning maps for capacity bidding. Regulation and Disruptive Technologies Solar: Increased push for sustainability. SB 350 requires 50% renewable power by 2030. Storage: Scaling & becoming cost-effective . Three largest IOUs mandated by CPUC to procure 1325 MW of storage by 2020. EV: Policies are driving transportation electrification to reduce CO2 emissions. CA Executive Order to reach 1.5M EVs by 2025. EE: Sharp increase in goals. Double efficiency to 2% in CA by 2030. Climate Change: SMUD goal 90% OF 1990 levels by 2050, CA goal 80% by 2050 Customer Expectations So what things are driving these changes in the electric utility industry? Legislative mandates and concern over climate change will significantly reshape utilities’ resource portfolios, change business practices and grid operations These changes are driven by: Regulation and Disruptive Technologies Solar adoption is on the rise and will continue to do so in light of increased renewables goals. Storage is becoming cost-effective due to battery cost declines and subsidies. Policies are driving the electrification of the Transportation sector to reduce CO2 emissions. Energy Efficiency mandates are increasing – in California there are requirements to double energy efficiency goals by 2030 Climate Change to concerns continues to gain attention and requirements directly impact utility operations. New Markets and third party entrants are emerging Aggregation of demand response is creating new markets. Aggregators have the ability to bid services directly into the market Policies that allow and encourage third parties to provide grid services. CA Assembly Bill 327 required that electric utilities to post distribution system planning maps so that third parties can bid services into capacity constrained areas. Customer Expectations are changing We are seeing an increase in environmentally conscious customer Customers want choices – they want choices and options for increased control over their energy use and to control costs PG&E's target for the 2017 DRAM is 10MW of capacity. PJM is bidding in frequency regulation. Environmentally Conscious Customers Customer Choice for increased control and cost management. Smart grid technology advancements changing the customer relationship.

Privileged and Confidential Draft. For Internal Purposes Only. Market and Economics Technological Social Grid innovation Customer behavior and demographics Distributed energy resources Global and regional economy Smart home technologies Increasing expectations for customer choice for control and cost management Fuel prices Enabling devices, software and tools Utility business models New energy markets and third party entrants Cultural shift toward immediacy of information, response to needs, delivery of options and satisfaction of needs Customer energy-independence Environmental Political Environmentally conscious customers Policy Climate change GHG emissions Legislation Regulation Codes and standards The Changing Landscape Drivers of Industry Transformation Privileged and Confidential Draft. For Internal Purposes Only.

Privileged and Confidential Draft. For Internal Purposes Only. Technology and Services Excellence Safe and Reliable Grid Integration Leadership in Sustainability Strength in Economics and Markets Cultivate emerging technologies, advanced applications and innovative services to support smart customer and utility technology adoption to achieve operational excellence in delivery of products and services for our customers. Enable safe and reliable integration, control, and visibility of distributed energy resources, grid-scale storage, and large-scale renewables into the electric grid and prepare for the migration to a transactive grid. Further SMUD's environmental and sustainability leadership role in the energy industry by informing strategy to reduce regional GHG emissions, advancing sustainability technology, and directing climate readiness planning. Prepare for the delivery of progressive customer products and services, the enablement of customer participation in the energy market, and new approaches to SMUD’s participation in energy markets to maintain financial strength. ER&D Vision Privileged and Confidential Draft. For Internal Purposes Only.

Privileged and Confidential Draft. For Internal Purposes Only. RESEARCH PROGRAM AREAS Distributed Generation Renewables Energy Efficiency Climate Change Electric Transportation Grid Modernization Demand Response Electrification Energy Storage Privileged and Confidential Draft. For Internal Purposes Only.

Electric Transportation Research Areas Advanced Data Analytics Multi-family and Workplace Charging Managing Charging DC Fast Charging Grid Integration EV Infrastructure Medium- and heavy-duty vehicles Non-road vehicle applications Network and communications Electric Transportation Privileged and Confidential Draft. For Internal Purposes Only.

Distributed Generation Research Areas Biomass Distributed Wind In-conduit hydro PV Fuel cells Analytical tools Visibility and forecasting Distributed Generation Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Energy Efficiency Electric homes Electrification of end-uses Real-time savings verification Zero Net Energy Emerging Energy Efficiency Technologies Energy Efficiency Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Demand Response Dynamic Rates Direct Load Control Devices Automation Thermal Energy Storage for DR Customer-Owned Devices Behavior Modification Ancillary and Balance Services Demand Response Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Energy Storage Customer-sited storage Utility-sited storage Distribution investment deferral Shared cost and share-use scenarios Interoperability and interconnection Location and temporal valuation Communication reliability and standards Visibility and control platforms Energy Storage Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Renewables Biomass Methanization and GHG clean-up Hybrid technologies Low speed wind Biogas Renewables Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Climate Change Community partnerships Climate Forest thinning Biosequestration modeling Corporate and regional action plans Climate Change Privileged and Confidential Draft. For Internal Purposes Only.

Research Areas Grid Modernization Smart Inverters Distribution System Visibility and Automation DER Optimization Grid Modernization Privileged and Confidential Draft. For Internal Purposes Only.

Lupe Jimenez Research and Development lupe.jimenez@smud.org