Geothermal Energy Portfolio from a Utility Perspective Marilynn Semro Seattle City Light May 11, 2005 How do you know what you need and is Geothermal “it”?

2 §The long-term strategic integrated resource plan §What is a “good” resource §What is “good” about geothermal §What is not so “good” about geothermal §Geothermal in the NWPCC 5th Plan §Utility conclusions §Where do we go from here? Agenda Seattle City City Light Light

3 Integrated Resource Plan §What are IRP Strategic Long-Term Objectives? l Reliability. l Cost. l Risk. l Environmental and Societal Mitigation. §How much is the “gap”? l How much? - load growth? resource adequacy? l What? - capacity, energy l When? - timing Seattle City City Light Light

4 IRP continued §What are the options? Conservation, Gas, Coal & Wind are “in”, market is “out”. but what about geothermal? l Characteristics – base-load, highly reliable. l Cost – Production tax credit - Is it available and can you use it? l Societal and environmental impacts – site specific l Risk – Will there be environmental regulations? Is there a resource? Will it be there when you need it? Seattle City City Light Light

5 IRP continued §Identify or select portfolios. §Determine your “best fit” options. l tradeoff between minimizing risk and cost? §Chose a resource portfolio that balances costs and risks. Seattle City City Light Light

6 What is a “Good” Resource? §Varies from utility to utility. l Increase reliability by adding diversity. Reduce fuel availability risk (may look at coal, geothermal, landfill gas, and biomass if have hydro, natural gas, and wind). Reduce reliance on one or few resource (in event of plant or transmission outages). May provide a particular need (e.g. peaking or load following). l Minimize cost. Low capital/high operating cost (must manage operating cost). High capital/low operating cost (must manage investment and “out of money” potential - low fuel price risk). l Manage risk - capabilities to manage risk. l Environmental and societal values. Seattle City City Light Light

7 What is a “Good” Resource? §Other l I can get the resource when I need it. l I can get the amount that I want. l I can get the transmission in a “timely” manner. l The resource cost is competitive with alternatives. l The transmission costs are not “exorbitant”. l The resource “developer” is willing to meet my desire for a power purchase agreement or an ownership interest. l If there is going to be a long-term relationship with the developer/operator, the relationship must be “compatible”. l I can get value of PTC if it is a renewable resource. l The counter-parties are credit worthy. Seattle City City Light Light

8 What is “Good” About Geothermal? §Reliability l Very low outage rate. §Cost l Overall cost can be competitive. §Risk l Low fuel “volume” risk. l Low fuel price risk. §Environmental & Societal l Renewable and “Green”. l Green tags and tradable offsets. l Public generally accepting of idea. Seattle City City Light Light

9 What is “Not So Good” About Geothermal? §Hard to get in NW relative to other resource types. l Very limited candidate resource pool. l Difficulty in expanding candidate resource pool. §A lot of work to make happen relative to competitors. §Hard to put in Integrated Resource Plans with so little information. Seattle City City Light Light

10 Geothermal in NWPCC 5th Plan §Geothermal power generation is not considered in the 5th Power Plan. §Largely excluded due to potential for land use conflicts in the limited areas with potential geothermal. §Plan calls on utilities to acquire renewable energy (including geothermal) projects if cost- effective opportunities rise. Seattle City City Light Light

11 Utility Conclusions §Utilities are not going to put all their new resource eggs in the geothermal basket due to risk. l No resource l Doesn’t come on-line on time (or at all) §But if opportunities arise, and they are prepared to take advantage of those opportunities then yes. l Utilities continue to be concerned about lack of “good” renewable resources (e.g. wind and geothermal). Seattle City City Light Light

12 Where Do We Go From Here? §Very worthwhile resource and we should continue to pursue resolving issues. l availability and location of resource l land-use - leasing, permits, etc l transmission issues (applicable to all new resources but wind appears to try to be partnering with gas and coal) l cost - production tax credit, other financial incentives l Other Seattle City City Light Light

13 Questions §?§? Seattle City City Light Light