State Allocation Board Hearing Solar Energy and Energy Efficiency Project Options for California Schools Mark Johnson, Energy Solutions Manager - Schools Segment Pacific Gas & Electric Company Kim Ngo, Program Manager – Solar and Customer Generation Pacific Gas & Electric Company December 5, 2011

Progressive Energy Policy Long-standing State policies lower carbon footprint 30+ years of energy efficiency programs facilitated by “decoupling” of rates California Energy Action Plan’s preferred loading order: 1. Customer Energy Efficiency and Demand Response 2. New Renewable and Distributed Generation 3. Clean gas-fired plants

PG&E Energy Efficiency Programs Impact on Schools Segment YEAR PEAK KW SAVINGS KWH SAVINGS THERM SAVINGS PAID INCENTIVES 2010 7,801 33,290,453 767,643 $ 6,811,483 2011 (9 months) 5,888 39,858,766 3,520,687 $ 10,953,148 Total 13,689 431,878,119 4,288,330 $ 17,764,631 From January 2010 – September 2011 Represents EE programs only (does not include DG programs) PG&E system wide, all projects under Schools segment NAICS codes.

Energy Efficiency Integrated with Solar Demand Response Self - Generation Carbon Offsets Solar projects typically take 2 – 3 times longer to payback verses Energy Efficiency projects. The “blended” financials (EE + Solar) typically result in EE making Solar more affordable when evaluated as an integrated project. Solar / DG size and cost can be reduced ( less power required ). This can result in lower overall project costs, less risk due to better financials, greater comfort & control usually result too!

PG&E Retrofit Incentive Programs Energy Savings Rebates The fastest and easiest approach for common retrofits Customized Retrofit Incentives Calculated approach for more comprehensive projects Retrocommissioning incentive program Focuses on “tuning up” controls Third Party Programs Over 80 select programs with offerings that address specific needs of a market segment (i.e. schools) OR a specific technology (i.e. lighting, HVAC, etc).

Energy Efficiency Supporting Programs Energy Efficiency Financing Program Bill Neutrality – Loan payments equal to estimated energy savings Zero Interest - no cost to customer for life of the loan Public Schools/Gov. - Up to 10 yr loan term, $250,000 per meter Large Integrated Audit Program Investment grade integrated energy audits for larger facilities (i.e. High Schools) that address evaluating Energy Efficiency, Demand Response, Solar, Distributed Generation. Project Engineering & Calculation Assistance Specialized local engineering support for project and energy saving calculation assistance.

California Solar Initiative Program Kim Ngo, Program Manager – Solar and Customer Generation Pacific Gas & Electric Company

Integration of EE and Renewables EE should be considered prior to Renewables Why? California’s loading order encourages that EE be implemented prior to DG EE is typically much more cost-effective than Renewables Decreasing a facility’s consumption with EE reduces the size (and cost) of a Renewable system necessary to offset facility’s load The capital investment on EE projects are typically a lot less and easier to implement than a large solar deployment. Energy Efficiency should be recommended prior to DG. EE is more cost-effective than DG and it is California’s loading order which means EE should be implemented prior to DG EE reduces the size and cost of the DG system necessary to offset the facility’s load Also note that PG&E has defined EE goals that we have to meet and we do not have explicit DG goals 9

The California Solar Initiative PG&E began administering program in 2007 PG&E will provide $1 billion in incentives over life of the program Statewide Objective: 3,000 MW by 2016 (PG&E’s goal 764.8 MW) Customers must perform energy efficiency audit to be eligible for incentives Includes retrofit, low income, and new homes elements PG&E CSI Received more than 39,000 applications Since January 2007 Completed over 33,000 projects for a total of over 365 MW (CEC AC) Data as of 11/21/11

The California Solar Initiative Expected Performance-Based Buydown (EPBB) Performance-Based Incentive (PBI) Payment basis PV system size and design (expected production) PV system actual energy output System size < 30 kW Any Payment frequency One time, up-front Monthly for 5 years

The California Solar Initiative Senate Bill 585: Increases the total cost of the CSI Program funded by customers of PG&E, Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) by $200 million statewide Revises the PBI payment rates for Steps 8, 9, and 10 for all new CSI applicants (both residential and non-residential) to incorporate a 4% discount rate rather than the 8% rate previously incorporated into PBI payments

CSI Schools (K-12) Participation Approximately 29% of Completed K-12 Projects are PPAs *Active includes reserved and projects under review

14 Questions ? Thank You !

Appendix

Customer Financing Overview Financing Option Cash Solar Lease Power Purchase Agreement Upfront cost to school Borrow $ or pay cash Low down payment Low down payment or pre-payment options System Ownership School Solar Company Payments Down payment and final payment upon completion Down payment and Monthly lease payments Monthly PV electricity payments Operations & Maintenance Federal Tax Credit N/A Performance Guarantee None Offered by Solar Company Term of Financing Up to 20 Years Approximately 29% of Completed K-12 Projects are PPAs

Financing Options Full Purchase (Cash or Financing) School District Solar Company Owner of system Borrow money or pay cash Full payment up front Maintain and monitor system Economics: Cash / total savings Loan pmt. / monthly savings Design and install Sell Honor warranties (equipment & labor) $ 17

Common Financing Options for Schools PPA School District Solar Company $ Low or no money down Monthly power payment Possible buyout in the future Economics: Monthly pmt. / monthly savings Owner of system Design and install Sell power Maintain and monitor system Honor warranties (equipment & labor) Remove system at end if needed 18