1. Stimulating Renewables Do We Need A Federal RPS? David K. Owens Executive Vice President Edison Electric Institute NARUC Summer Meeting 2007 July 2007

2. Energy Mix 2005

3. Electricity Generated from Renewables Benefits : n Fuel supply diversification n Renewables becoming bigger part of fuel mix Wind, solar, geothermal, and biomass n Generally less environmental impact n According to EIA non-hydro renewables: 2.9% Today  3.7% by 2030 Biomass produces 1.5% of generation Wind 0.4% Geothermal 0.4% Solar 0.01% n Largely CO 2 emission free All resource options are needed to meet our energy challenges

4. Electricity Generated from Renewables Challenges: n High initial capital costs Need tax credits or other incentives n Geographic limitations n Intermittent nature of supply (i.e., wind and solar) n Transmission availability n Frequent expiration of production tax credit n Environmental and aesthetic challenges

5. States Already Stimulating Renewables Through RPSs n State RPSs already mandating renewables, based on their own unique circumstances and available resources 24 states and DC have RPS 90+ electric companies in over 30 states have implemented or announced green pricing programs 48 states support programs that offer incentives, grants, loans or rebates to consumers using renewable energy resources n Electricity suppliers in 9 states with competitive retail markets are offering green power products to consumers n Bottom line State RPSs balance available renewables with consumer benefits States balancing fuel diversity and energy supply

6. 24 States & D.C. Mandate Renewable Portfolio Standards (RPS)

7. Congress Stimulating Renewables Through Production Tax Credits (PTC) n A long-term extension of the PTC could be the single most effective action Congress could take to promote renewables n Credits are a proven means of getting renewable generation built and brought online Current PTC to expire on 12 / 31/ 08 Short-term, start-and-stop tax credits discourage utilities, developers, manufacturers and investors from maximizing the potential of renewable technologies and other resources Extending the credit for at least 5 years will provide the necessary stability to the private sector to plan and finance renewable energy projects –Senate Finance energy tax bill provides 5-year extension (inflation adjustment deleted for future projects) –House bill includes a 4-year extension but it changes the calculation of the credit for future projects.

8. Congress Stimulating Renewables Through Investment Tax Credits (ITC) n Another vehicle for stimulating development of renewable and decentralized technologies is extending ITC beyond 2008 n Senate and House tax bills would support such extension New 10% ITC for combined heat and power (Senate) Solar 30% ITC extended for 8 years (House and Senate) Geothermal ITC permanent (House) Utilities would be able to claim solar and geothermal ITC (House) n Senate failed to get cloture on its tax package during energy bill debate n House tax bill expected to be considered as part of House energy bill later this month

9. Renewables Key to Climate Change CEO Perspective Source: GF Energy 2007 Electricity Outlook Entering the Climate Zone June 18, 2007

10. Commitment To Renewables n Non-hydro renewables increasing n Wind is fastest-growing renewable n Wind farms operate in 32 states with > 10,000 MW 2005 Note: Numbers exceed 100% due to rounding. Source: U.S. DOE/EIA Form EIA-906, Power Plant Report, Form EIA-920 Combined Heat and Power Plant Report; 2005 preliminary data *Includes agricultural byproducts, landfill gas, municipal solid waste, sludge waste and tire-derived fuels.

11. A Federal RPS? Key Questions n Should a Federal RPS preempt existing state programs? n Which renewables should be included? n Should energy efficiency count? n What should be the target percentage? n What is the timeframe for implementation? n Who should be required to meet a Federal RPS standard?

12. One-Size-Fits-All RPS Doesn’t Work n Individual states have chosen energy resources based upon local factors Geographic availability of renewable energy resources Technologies, including energy efficiency Timetable for implementation Ability to integrate into grid Cost implications Economic development implications Environmental implications

13. Federal RPS Mandate Could Undercut or Preempt State Efforts n Each state RPS plan includes carefully considered Resources and technologies to be included Timetables Targets based on what makes sense in that particular state Impacts on consumers n Mandating a national target, timetable and technologies could undercut or preempt state efforts E.g., 10 of the 25 existing state plans would fail to meet currently proposed federal RPS target of 15% by 2020 All state RPS plans include eligible resources that would not be counted under federal proposals n A federal RPS mandate that does not provide the flexibility to be inclusive of state programs would undermine state programs and increase costs

14. A Federal RPS Will Do Little For Energy Independence n 10% RPS mandate would save the equivalent of less than one gallon of gasoline per household per year! (EEI estimate based upon EIA analysis of electricity savings from oil-fired generating plants) n Only 3% of electricity comes from oil Mainly in Hawaii and Alaska or for backup Electricity industry is not a significant contributor to our oil dependence Plug-in hybrid vehicles and other electric transportation technologies should be part of our plan to reduce dependence on foreign oil –Direct offsets to dependence on petroleum products

15. Federal RPS Results In A Wealth Transfer n Many retail electric suppliers / retailers will not be able to meet an RPS requirement through their own generation They will have to purchase renewable energy credits or renewable generation from others n Potentially massive wealth transfer Consumers in states with little or no renewable resources... to... Federal government or states where renewables are more abundant

16. RPS Mandate Will Also Require Additional Indirect Costs n New high-voltage transmission lines often must be built Wind turbines usually located in remote areas requiring transmission over long distances to populated areas n Transmission expansions can cost ~ $1-3 million / mile Problems include crossing federal lands, and private lands “Not In My Back Yard” (NIMBY) Transmission one of the most significant challenges to promoting growth in renewable generation –Adequacy, siting, financing and construction of transmission n System upgrades to accommodate the intermittency

17. Summary n Renewables must be part of our overall energy strategy for meeting our energy and climate change challenges n Extension of the federal production tax credit and investment tax credit for renewables is essential n Existing state programs carefully balance Availability of renewable resources and technologies Cost effectiveness of such technologies Environmental benefits n Federal RPS would undermine state programs and increase costs to consumers