A Road Map To Rational Policy Discussion Green Summit, March 8, 2012 Duane T. Kexel President, Duane T. Kexel Consulting, LLC

 Polarization Does Not Promote Progress – Can We Find The Common Ground?  Economics, Not Politics Nor Religion Should Guide Renewable Energy Policy  Issues Are Consequential and Immediate in Wisconsin  Identify Stakeholder Groups Roles for Each and Research Agendas In Moving Policy Forward

 Generally Seen As An Acid Test Frontier For Policy  Cottage Glen Project Provides 2011 Test Case 14.1 kW Condo Rec Center PV Project – HOA NFP Sponsor One Year of Project Evaluation and Development July 11 – Feb Minute Production History Installed Cost Per Watt  Total$  FOE/WPS Grant$  Fed Tax Credit$  Total Net$

 Communicate Willingness To Pay Tied to Payback  Assess Potential  Demonstrate Impact of Various Incentives  Expose Critical Barriers  Champion Programs That Work Must Let Policy Makers Know What Incentives Are Needed and Likely Impacts !!!

61% Decisive or Strong Influence

 Co-op Panel Leasing Programs Sell Out Quickly With 12 Year Payback  Full Cost Leasing – 30 to 40 Year Paybacks  Consumers Power 25 Cents/kWh for 15 Years Oversubscribed  MGE Green Pricing Cents?

Commit To Cost and Performance Goals Demonstrate That Incentives Are Transitory

CONTRARIAN VIEWSADVOCATE VIEWS  Solar Expensive, Rates Up  Solar Not Firm – No Capacity Value  MISO Prices Do Not Support  DOE Sunshot – 10 Years $1.00 Per Watt  Green Pricing Now Provides Choice for Those WTP  CG Prodn At WPS Peaks ~50 – 55% of Capacity  Synergistic Solar Wind, DR, Seasonal Cap Plans  Nor Any New or Some Existing Capacity

 Utility Builds, Owns and Operates Solar Plant  Financing Costs Much Lower Than Fossil Plants  Smaller Projects, Modular Designs  Strong Long-Term Warranties  Federal ITC – 30%  Dramatic Risk Reduction Compared to Fossil Plants – WACC Less 3.0%  Sell 25 Year Panel Leases At Cost With Proportionate Bill Reductions – Customers Finance New Capacity  Allows Solar Participation in $1,000 blocs – Better than Packer Stock  Mitigates Affordability Barrier

 Design Incentives To Yield 5.0% Return & 10 to 15 Year Payback on Roof Top Solar – Say 50% of Investment  Utility Gets 40 Year Load Reduction of X kW and kWh at 50% Of Known Up-front Cost + Admin (20%)  Load Reduction of X equals (1+Loss %) X Capacity Addition – Reduces Future T&D Needs  Utility Expenses Incentives and Admin Costs – After Tax Cost = 60% of 60% = 36%.   Customer/Owner Pays All Future Costs  Tune Design To Response to Match Needs  Incentives Reduced Over Time As Solar Costs Decrease

 Federal – Investment Tax Credit Is Key  State – Shaw-WPSC Redesigning Renewable Incentives Q  Believe “Incentives to Renewables Were Excessive”  “Overcommitment Harmed Cost Effectiveness of FOE”  “Incentives Artificially Inflate Renewable Costs”  “TRC > 1.0 Is Relevant Test for FOE Portfolio”  “Select Non-Monetary Criteria – Maturity, Risk, Jobs  Will Public Be Engaged To Provide Input In A Transparent Process On This Major Policy Revision?

 TRC Test – Should Measure Public Interest  Societal Test – Should Include Externalities  Utility Test – Impact on Revenue Requirements  Participant Test – Impact on Adoptions (Payback?)  Non-Participant Test – Impact on Rates  All Tests Combine To Inform Public Policy

 Detailed TRC Requires Specific Data on Marginal Resources and Avoided Costs Over Time  Results Suggest That Utility Solar May Pass TRC Test  If Solar Passes Test, Combined Solar-Wind, Solar DR, Solar EE, Programs Will Certainly Pass  Solar Incentives That Yield Paybacks in the 10 – 15 Year Range Should be Possible and Beneficial  Cottage Glen Incentives Were Just Sufficient to Proceed and Can Be Justified In the Public Interest  All Stakeholders Must Contribute To Gain Ideal Share