1. 1 State Allocation Board Hearing Solar Energy and Energy Efficiency Project Options for California Schools Mark Johnson, Energy Solutions Manager - Schools Segment Pacific Gas & Electric Company Kim Ngo, Program Manager – Solar and Customer Generation Pacific Gas & Electric Company December 5, 2011

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3. 3 Long-standing State policies lower carbon footprint 30+ years of energy efficiency programs facilitated by “decoupling” of rates California Energy Action Plan’s preferred loading order: 1. Customer Energy Efficiency and Demand Response 2. New Renewable and Distributed Generation 3. Clean gas-fired plants Progressive Energy Policy

4. 4 PG&E Energy Efficiency Programs Impact on Schools Segment  From January 2010 – September 2011  Represents EE programs only (does not include DG programs)  PG&E system wide, all projects under Schools segment NAICS codes. YEARPEAK KW SAVINGS KWH SAVINGS THERM SAVINGS PAID INCENTIVES 20107,80133,290,453767,643$ 6,811,483 2011 (9 months) 5,88839,858,7663,520,687$ 10,953,148 Total13,689431,878,1194,288,330$ 17,764,631

5. 5 Energy Efficiency Integrated with Solar  Solar projects typically take 2 – 3 times longer to payback verses Energy Efficiency projects.  The “blended” financials (EE + Solar) typically result in EE making Solar more affordable when evaluated as an integrated project.  Solar / DG size and cost can be reduced ( less power required ).  This can result in lower overall project costs, less risk due to better financials, greater comfort & control usually result too! Energy Efficiency Demand Response Self - Generation Carbon Offsets

6. 6 PG&E Retrofit Incentive Programs Energy Savings Rebates  The fastest and easiest approach for common retrofits Customized Retrofit Incentives  Calculated approach for more comprehensive projects Retrocommissioning incentive program  Focuses on “tuning up” controls Third Party Programs  Over 80 select programs with offerings that address specific needs of a market segment (i.e. schools) OR a specific technology (i.e. lighting, HVAC, etc).

7. 7 Energy Efficiency Supporting Programs Energy Efficiency Financing Program  Bill Neutrality – Loan payments equal to estimated energy savings  Zero Interest - no cost to customer for life of the loan  Public Schools/Gov. - Up to 10 yr loan term, $250,000 per meter Large Integrated Audit Program  Investment grade integrated energy audits for larger facilities (i.e. High Schools) that address evaluating Energy Efficiency, Demand Response, Solar, Distributed Generation. Project Engineering & Calculation Assistance  Specialized local engineering support for project and energy saving calculation assistance.

8. 8 California Solar Initiative Program Kim Ngo, Program Manager – Solar and Customer Generation Pacific Gas & Electric Company

9. 9 Integration of EE and Renewables EE should be considered prior to Renewables Why? California’s loading order encourages that EE be implemented prior to DG EE is typically much more cost-effective than Renewables Decreasing a facility’s consumption with EE reduces the size (and cost) of a Renewable system necessary to offset facility’s load The capital investment on EE projects are typically a lot less and easier to implement than a large solar deployment.

10. 10 PG&E began administering program in 2007 PG&E will provide $1 billion in incentives over life of the program Statewide Objective: 3,000 MW by 2016 (PG&E’s goal 764.8 MW) Customers must perform energy efficiency audit to be eligible for incentives Includes retrofit, low income, and new homes elements PG&E CSI Received more than 39,000 applications Since January 2007 Completed over 33,000 projects for a total of over 365 MW (CEC AC) The California Solar Initiative Data as of 11/21/11

11. 11 The California Solar Initiative Expected Performance-Based Buydown (EPBB) Performance-Based Incentive (PBI) Payment basis PV system size and design (expected production) PV system actual energy output System size< 30 kWAny Payment frequency One time, up-frontMonthly for 5 years

12. 12 The California Solar Initiative Senate Bill 585: Increases the total cost of the CSI Program funded by customers of PG&E, Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) by $200 million statewide Revises the PBI payment rates for Steps 8, 9, and 10 for all new CSI applicants (both residential and non-residential) to incorporate a 4% discount rate rather than the 8% rate previously incorporated into PBI payments

13. 13 CSI Schools (K-12) Participation Approximately 29% of Completed K-12 Projects are PPAs *Active includes reserved and projects under review

14. Questions ? Thank You ! 14

15. 15 Appendix

16. 16 Customer Financing Overview Financing OptionCashSolar LeasePower Purchase Agreement Upfront cost to school Borrow $ or pay cash Low down paymentLow down payment or pre-payment options System OwnershipSchoolSolar Company PaymentsDown payment and final payment upon completion Down payment and Monthly lease payments Monthly PV electricity payments Operations & Maintenance SchoolSolar Company Federal Tax CreditN/ASolar Company Performance Guarantee NoneOffered by Solar Company Term of FinancingN/AUp to 20 Years Approximately 29% of Completed K-12 Projects are PPAs

17. 17 Financing Options Full Purchase (Cash or Financing) Owner of system Borrow money or pay cash Full payment up front Maintain and monitor system Economics: Cash / total savings Loan pmt. / monthly savings Design and install Sell Honor warranties (equipment & labor) School DistrictSolar Company $

18. 18 PPA Low or no money down Monthly power payment Possible buyout in the future Economics: Monthly pmt. / monthly savings Owner of system Design and install Sell power Maintain and monitor system Honor warranties (equipment & labor) Remove system at end if needed School District Solar Company Common Financing Options for Schools $