1. 1 DOES THE AC GRID STILL PROVIDE WHAT CUSTOMERS WANT? _______________________ Presented to PLATTS Transmission Planning and Development Conference By Craig R. Roach, Ph.D. June 15, 2015 _____________________

2. 2 I.Challenging the Presumptions of Planning A.Boston Pacific’s Report to the SPP Board¹ 1.Will the shale gas revolution continue? 2.Will EPA win its campaign on coal? 3.Will the courts preempt the states on resource planning? 4.Will customers who need power still turn to the AC grid? 1. See Boston Pacific’s “Annual Looking Forward Report: Strategic Issues Facing the Electricity Business,” available at www.bostonpacific.comwww.bostonpacific.com

3. 3 I.Challenging the Presumptions of Planning B.Looking Back: AC Grid Big Success 1.Make electricity available to and affordable by all – and assure reliable service 2. Robust AC Grid essential to… a.Economies of scale b.Economies of scope c.Diversity

4. I.Challenging the Presumptions of Planning C.Looking Forward 1.Price and availability still matter, but… a.“Local” reliability b.Environmental performance c.Choice 4 4

5. 5 II.For AC Grid: Emerging Doubts on “Local” Reliability A.Example: Superstorm Sandy 1.Significant damage: $12 billion; 7,300 jobs … 2.PSE&G’s “Energy Strong”: $3.9 billion 3.Settlement: $1.22 billion 4.Diagnosis

6. 6 B.Feeding the Doubts 1.PG&E 2.FERC report 3.Volatile weather (due to GCC) 4.Cyber attacks II. For AC Grid: Emerging Doubts on “Local” Reliability

7. 7 A.Microgrids (Princeton) 1.Grid on a smaller scale: Match customers with resources 2.Local reliability: Performance in Superstorm Sandy, polar vortex 3.Environmental performance: Open to full range of resources 4.Choice: Choose when to use grid or microgrid 5.Expensive, but… III. Microgrids and Personal Power

8. 8 B. Personal Power 1.Tesla’s Powerwall storage plus Solar City equals personal power 2.Local reliability: Intent of Powerwall storage 3.Environmental performance: Renewables 4.Choice: Choose when to use grid or personal power 5.Expensive plus technologic and policy issues remain, but… III.Microgrids and Personal Power

9. 9 IV.HVDC Transmission for Exports A.Example: SPP wind and solar to the Southeast via HVDC 1.Local reliability: Limited interregional, system impacts 2.Environmental protection: Renewables 3.Choice: Cleaner cost allocation, explicit ownership 4.Expensive, and policy issues remain, but …

10. 10 V.Conclusion A.No evidence showing imminent, sweeping change B.Combination better serves C.Best to view not as a threat but as an opportunity to give customers what they want

11. About Craig R. Roach, Ph.D. Craig Roach is the founder and President of Boston Pacific Company, Inc., a consulting and investment services firm in Washington, DC. He has forty years of experience with investments in, policies for, and litigation concerning the electricity and natural gas businesses. Craig advises on major power resource decisions for technologies ranging from natural gas-fired combined cycle to clean coal to on-and offshore wind. He also guides Boston Pacific’s wide ranging work on auction and RFP design and monitoring, and has been an advisor to the SPP RTO Board of Directors for eleven years. Craig is a nationally recognized expert and has served as an expert witness before thirty states plus the District of Columbia, FERC, three Canadian provinces, and in federal and state courts throughout North America. Craig’s previous positions include service as an economist at the U.S. Congressional Budget Office. Craig earned his Ph.D. in economics from the University of Wisconsin and has served on the Advisory Board to its Department of Economics. ________________________________________________________________________ 1100 New York Avenue NW Suite 490 East Washington, DC 20005 202.296.5520 croach@bostonpacific.com www.bostonpacific.com 13