100% Renewable Cities in Texas August 23 2017 100% Renewable Cities in Texas Enterprise Risk Consulting, LLC Presented to: Texas Energy Summit Nov 13-15, 2017 Neil McAndrews, Senior Principal www.enterprise-risk.com © 2017 Enterprise Risk Consulting LLC 11/14/2017 © 2017 Enterprise Risk Consulting, LLC

Introduction Two Texas cities, Denton and Georgetown, have set goals to achieve 100% renewable energy supplies. This presentation will discuss some of the decision background used to achieve this supply level of Renewables. © 2017 Enterprise Risk Consulting LLC 11/14/2017

Major questions in setting 100% Renewable Goals for Cities What is 100% renewable? Why pick that goal? How do you go about the acquisition process? How is uncertainty managed? © 2017 Enterprise Risk Consulting LLC 11/14/2017

What does it mean to be 100% Renewable? ERCOT is an energy only market For a City to be considered 100% renewable, it means buying all of its forecasted energy via renewable resources It does not mean that the City is completely renewable in each hour. It does mean the City will acquire a fixed-price hedge for all of its load similar to conventional supply hedges. It also means that in many hours of the year the market is used to complete the hedge by purchasing energy when supply is insufficient and selling excess supply. © 2017 Enterprise Risk Consulting LLC 11/14/2017

What are the conditions needed to set a 100% renewable goal? Legal status of a Non Opt In Entity (NOIE) - cooperatives and municipals that own their distribution systems An open load without a long term supply commitment A desire to avoid natural gas and power volatility A desire for sustained and secure rates A desire to lower water demand, lower pollution, lower regulatory risk A desire to improve Economic development and marketing benefits © 2017 Enterprise Risk Consulting LLC 11/14/2017

City Resource Policy types The 100% cites have developed a resource planning process - the resource plans select a Renewable Portfolio goal or minimum level. These goals were often informed by the prospect of stronger rules from the EPA such as the Clean Power Plan. Other cities often have no discernable resource plans, or have shorter term plans based upon ad hoc market supply options. Some cities copy what they see as low cost supplies and add them into their resource portfolio. © 2017 Enterprise Risk Consulting LLC 11/14/2017

Solar Prices Source: NREL © 2017 Enterprise Risk Consulting LLC 11/14/2017

Wind Prices Source: Lazard and Berkeley Lab © 2017 Enterprise Risk Consulting LLC 11/14/2017

Illustrative market and renewable supply prices (20 year projection starting in 2018) © 2017 Enterprise Risk Consulting LLC 11/14/2017

Winds can add or subtract due to annual variability from the Renewable Goal by a large amount © 2017 Enterprise Risk Consulting LLC 11/14/2017

Installation year and location create different capacity factors, but a higher capacity factor may not mean a better fit to a municipal’s load The wind profile over the year may be much more important than the capacity factor. © 2017 Enterprise Risk Consulting LLC 11/14/2017

The Day Ahead Market is used to dispose of excess supply and to purchase supply shortages © 2017 Enterprise Risk Consulting LLC 11/14/2017

Uncertainty and Risk Management Variability in the supply is controlled by accurate forecasting. This is often beyond the skill sets of most municipals. Congestion management is another uncertain process that is more difficult than conventional supplies. Congestion changes over time and therefore selection of resources needs strong planning as to location. Questions? © 2017 Enterprise Risk Consulting LLC 11/14/2017