1. What makes for a Smart Utility? Presentation at Advanced Energy 2012 October 31st, 2012 Mani Vadari Modern Grid Solutions Copyright Modern Grid Solutions - All Rights Reserved

2. Key Dimensions of Utility Transformation Copyright Modern Grid Solutions - All Rights Reserved Regulatory Organization Business Operations & Process Technology Customer Environmental Utility Transformation Traditional UtilityTransformed Utility

3. Utility Transformation- An Evolutionary Process Analogous to a Feedback Loop Copyright Modern Grid Solutions - All Rights Reserved Key Points:  The Smart Grid drivers impact various aspects/dimensions of a utility via the transformation process.  Factors such as disruptive technologies and retail choice can have a positive or negative impact on the transformation, depending on the specific utility and its processes.  The utility transformation process when applied in a phased manner to all dimensions of the utility, will lead to the achievement of some desired characteristics of a transformed utility.  However, the utility will continually need to take into account disruptive business models/processes that can have an amplified effect on the desired end-state, and adjust its transformation process accordingly.  Transformation is an evolutionary process and its adoption will put the utility on the path to the Smart Grid. Smart Grid Drivers Disruptive Technologies Retail Choice Utility Transformation Process Disruptive Business Models/Processes Desired Utility Transformation Characteristics +/-

4. Transformed Utility-Integrated Utility System Copyright Modern Grid Solutions - All Rights Reserved Picture Source: GTM Research

5. Smart Grid Implementation Methodology- A Process for Building the Utility Business Case that address all aspects of the Utility’s Business and not just Technology Copyright Modern Grid Solutions - All Rights Reserved Business Case Utility Smart Grid Vision Current State Assessment Desired Future State Assessment Gap Analysis Set of Solutions Implementation Plan Finalization of Business Case & Roadmap Optimization Source: Adapted from NETL

6. Smart Grid Technology Progression: 2012-2030 AMI CS DR DMS/DA TA AO DER ICT Copyright Modern Grid Solutions - All Rights Reserved 2012 2015 2020 20252030 Intro Growth Maturity R&D Intro Growth Intro Growth Maturity R&DIntroGrowth R&DIntroGrowth R&DIntroGrowth R&DIntroGrowth R&DIntroGrowth Source: Adapted from Zpryme

7. Smart Grid Roadmap: We believe that the Smart Grid marketplace will evolve into full adoption based on changing market drivers and availability of cost-justified @Scale technology Integrate Distributed Energy Smart Grid Experiments Playing around – Happening and predictable Market Drivers Optimize the grid and Sweat assets Incremental change w/known technologies - Happening and predictable Market redesign 2010 2012 2015 20202030? Smart Grid ExperimentsOptimize the grid and sweat assets Patch work and fragmented subsidy, incentive or regulatory support - Big focus ARRA funding Patch work implementation, synergistic benefits not realized Integration and interoperability barriers prevent realization of full potential of smart grid technologies. Standards for devices and device interoperability will be established but fragmented without economy of scale Some technology, business and policy "winners" and some "losers" Consumer behavior and program participation and benefits will be better quantified and understood Economically sound technologies (mostly on utility side of meter) deployed without special regulatory or subsidy support (e.g. IVVC, DA, PMUs, IEDs) Efficiency drives deployment of technologies where the rising price of power make the business case sound Regulatory support for proven smart grid technologies widespread Integration, interoperability and optimization of leading smart grid technologies demonstrated and deployed through use of standards PMUs in place in T, new for D. Key focus on reliability enhancement, grid optimization, demand response Aggregators (e.g. Comverge) arriving on scene Focus is on AMI implementation Operations focus on (DMS/OMS) and single source of model (GIS) is key. AMI penetration increasing – customer focus/DR is increasing. Aggregators gaining critical mass AMI Meter Private wireless PHEV/PEVs @scale Public wireless (Cellular?) Copyright Modern Grid Solutions - All Rights Reserved

8. Smart Grid Roadmap: While waves 1 and 2 are more predictable from a technology direction perspective, waves 3 and 4 are more unpredictable both from extent and timing perspective because of too many unknowns in policy, regulatory directions, and availability of economically feasible @scale technology Smart Grid Experiments Market Drivers Optimize the grid and Sweat assets 2010 2012 2015 20202030? Integrate Distributed Generation, Storage, Active Demand Response etc.Market Redesign Policy and regulatory drivers provide price signals that make customer sited DG cost competitive Storage breaks $500/kWh barrier and is widely deployed by C&I customers for load leveling and backup power Renewables become widely deployed due to national RPS and low capital costs. PHEVs/PEVs reach 15% penetration and provide backup power and demand reduction with smart grid technologies Utility portfolio combines traditional gen, renewables, DR and storage Electrical grid supports two way power/information flow and is produced and consumed at several nodes and energy/capacity priced@real time Significant in-roads by storage and renewable energy. Distributed Generation at 10% of total energy generation and dispatchable using digital control technologies C&I customers buy and sell energy/capacity both in advance and real time to optimize a variety of constraints Residential DR with dynamic energy products and pricing options commonplace Key grid focus is on self-healing grid and real-time analytics and optimization Core utility focusing on wires and reliability, aggregators servicing customers Customer fully engaged – DR is in High visibility/controllability in T and D – self-healing grid appears on horizon. Full retail choice everywhere Residential energy services integrated with other digital services like cellular, entertainment, automotive, home automation, security and health services. Storage @scale Renewables @scale V2G prevalent @scale/Adv storage Adv materials – superconductors, advanced transformers, and cdv controls (Distribution PMUs) prevalent Integrate Distributed Energy Depends on storage and renewables breaking reliability and economic barriers Market redesign Depends on national energy policy and regulatory directions Copyright Modern Grid Solutions - All Rights Reserved