DG Toronto Hydro’s Perspective Task Force on Distributed Generation Richard Lü VP, Environment, Health & Safety March 5, 2003

2 DG Description and Technologies DG Description Relatively small generating units (less than 30 MW) operating at or near consumer sites to meet specific customer needs, to support economic operation of existing grid or both. Key DG Technologies Renewable Non-renewable Photovoltaic/Thermal Solar Internal Combustion Engine Wind Turbines Reciprocating Engine Biomass – based generators Combustion Turbine Microturbine Fuel Cell

3 Distributed Generation Environmental Scan Political  Industry resistance to funding/building large scale generation plants  Political drive to increase energy efficiency, DSM and green/clean energy production (Kyoto, Bill 210 incentives, initiatives in neighbouring US states) Economical  Need for Capacity  Bill 210 incentives on generation Social  Air quality/Kyoto ratification  Large % of DG technologies considered renewable/green  Perceived existing demand for green energy Technical  Identified problems with localized grid congestion in highly developed areas (e.g., downtown)  Market ready DG technologies

4 THC is very interested in distributed generation.  Potential applications of DG  Avoid peak load constraints and price spikes  Provide critical customer loads with emergency standby power  React to market changes with greater flexibility  Environmental leadership  DSM  Energy efficiency / line losses minimization  Green energy production  New technology development  Bi-directional distribution  Net metering  Potential business opportunities  Financially doable, small to mid-size green generation projects  Provide customer with lowest cost solution to meet a particular need

5 THC is challenged to participate in DG.  What are the impacts DG could have on LDC assets and revenues?  What are the legal and regulatory limits for LDC to participate in distributed generation businesses?  What are the corporate constraints on investment in distributed generation business opportunities?  Higher specific capital costs in $/kW than larger generating systems  Higher production costs in $/kWh than larger generating systems  Delays in commercialization of some technologies

Distributed Generation THESL Perspective Joe Bailey Sr. VP, Asset Management March 4, 2003

7 Toronto Hydro Wants  Contributor  Customer friendly  connection processes  interconnection agreement

8 Network Considerations  Safety  Metering & Billing  Net Metering  Billing  Standards  IEEE  OEB & IMO  Natural Resources Canada

9 Network Considerations cont’d.  Reliability  Availability  Power Quality  Reactive Power Co-ordination  Financial Impacts  Capital  Operating  Revenue

10 Summary  DG has a lot of appeal  DG has a lot of potential impacts both network and financial  Unknowns  Getting it right