1. Mitchell Rothman mrothman@poweradvisoryllc.com Tel: 416 534-4152 A Continental Renewable Portfolio Standard: A Better Way ? USAEE Washington, DC October 11, 2011

2.  Prevalence and Rationale for RPS  Current RPS practice United States Canada  Savings from eliminating constraints in RPS  What might a continental RPS look like? Presentation Outline Power Advisory LLC 2011 All Rights Reserved 2

3.  An RPS sets a minimum for electricity from renewable resources  Primary rationale for an RPS is concern over environmental impact of electricity generation, particularly global warming effects. But often a secondary objective is to increase local economic activity.  Building the generation facilities  Manufacturing the equipment to be used. Another objective is to reduce price volatility by introducing fixed-price supply. Rationale for RPS Power Advisory LLC 2011 All Rights Reserved 3

4.  An RPS sets a minimum for electricity from renewable resources  Most jurisdictions in North America have some form of RPS  RPS key design features: % of demand from renewables Who must meet the % requirement? What renewables qualify?  What technologies/renewable resources?  In what geographic locations? Prevalence and Rationale for RPS Power Advisory LLC 2011 All Rights Reserved 4

5.  Most North American jurisdictions have some form of RPS. Chart shows states; several Canadian provinces have RPS-like provisions. Prevalence of RPS Power Advisory LLC 2011 All Rights Reserved 5 Source: DSIRE

6.  RPS require installation of about 77,000 MW of new renewable capacity by 2025. Over the same period, total installed capacity in the United States is forecast to grow by 36,300 MW. Total renewable capacity in the United States in 2010 was 123,000 MW, of which 77,000 was conventional hydro and 42,000 was wind.  So RPS requirements not only drive growth in generation capacity from renewable resources, but also drive generation capacity growth as a whole. Importance of RPS Power Advisory LLC 2011 All Rights Reserved 6

7.  Most RPS programs allow the responsible entity (typically, a load or load-serving entity) to meet the RPS requirement by purchasing Renewable Energy Credits (RECs). As opposed to requiring that they contract directly for delivery of renewable power The RPS program defines what resources can create RECs. Some require that the renewable electricity be generated locally. Others allow the renewable electricity to be generated elsewhere and delivered in the jurisdiction imposing the RPS. RPS Mechanisms Power Advisory LLC 2011 All Rights Reserved 7

8. Eligible resources vary dramatically from state to state Power Advisory LLC 2011 All Rights Reserved 8  Lack of consistent eligibility requirements frustrates development of broader REC market.  Which would reduce RPS compliance costs and facilitate renewable project development.

9.  Only two Canadian provinces have RPS programs like those in the United States: New Brunswick and Nova Scotia  Others have various policies to promote generation from renewables Ontario has set a goal in terms of fraction of electricity supply from renewables and has instituted a a feed-in-tariff to procure it. It has also purchased renewables directly through an RFP. Québec, Manitoba and British Columbia generate almost all of their electricity from large-scale hydroelectric resources and have also procured renewables. Québec has used RFPs for capacity; BC has used RFPs for energy. Manitoba and Saskatchewan have ordered their provincially-owned utilities to purchase power under contract from renewables, mainly wind. All of these require that the renewables be generated in-province. Alberta has no government policies requiring electricity supply from renewables. RPS in Canada Power Advisory LLC 2011 All Rights Reserved 9

10.  Potential Impacts of Relaxing Renewable Portfolio Constraints on Canada-US Electricity Trade  Study compared the cost of meeting US RPS requirements under current rules versus under a North American harmonized RPS.  The harmonized RPS can be expected to increase trade in renewable electricity.  Study’s basic methodology was to compute the cost of the cheapest generation to meet the RPS under two conditions: Existing rules North American RPS. Study for Natural Resources Canada Power Advisory LLC 2011 All Rights Reserved 10

11.  Study compared the cost of meeting US RPS requirements under current rules versus under a North American harmonized RPS.  The harmonized RPS can be expected to increase trade in renewable electricity.  Study’s basic methodology was to compute the cost of the cheapest generation to meet the RPS under two conditions: Existing rules North American RPS.  Results included cost savings and resulting electricity trade flows Study approach Power Advisory LLC 2011 All Rights Reserved 11

12.  The marginal renewable resource in most jurisdictions is wind.  We therefore computed the cost of meeting the RPS by computing the cost of using wind under the current rules.  Some major jurisdictions – notably New England – accept RECs from other jurisdictions if the power can be delivered to the RPS jurisdictions. New England has relatively few efficient renewable resources of wind and small hydro. But most New England states restrict the size of hydro resources that are eligible to create RECs. Methodology Power Advisory LLC 2011 All Rights Reserved 12

13.  The most important trade barriers are the requirements for local generation and the restrictions on the size of hydroelectric generation resources.  We also considered the capacity of the transmission system, especially the international system, to accommodate increased trade. Most Canadian provinces are already net exporters of electricity to the United States. Canada can export renewables to more remote states, like California. It has strong ties to the Pacific Northwest, which in turn connects to British Columbia. California also has a need for renewable power to meet its RPS. But there is limited capacity to increase exports on the existing transmission lines, and only one (between Montana and Alberta) is currently under construction. Trade barriers Power Advisory LLC 2011 All Rights Reserved 13

14. Trade has potential for significant savings  Most dramatic savings provided by large hydro Wind cost differences relatively small Hydro cost savings significant  If large hydro participates in New England RPS RPS costs reduced Can$ 196 million in 2030 $9.6/MWh decline in RPS costs  Total savings in US of $829 million in New England alone $3.4/MWh decline in RPS costs  Savings realized by all customers; economic benefits from local resource development captured by relatively few parties Power Advisory LLC 2011 All Rights Reserved 14

15. Trade could produce significant savings Power Advisory LLC 2011 All Rights Reserved 15  The table below shows the savings to the US from using renewable resources located in Canada to meet RPS requirements.  RPS costs are reduced by over $800 million in 2030.  By then, 9% of the US RPS requirements are satisfied by Canadian resources.

16. Most of the savings come from large hydro Power Advisory LLC 2011 All Rights Reserved 16  Before 2015, most of the gain comes from wind. But except for Atlantic Canada, Canada does not have a significant cost advantage in wind.  Canada has significant advantage in hydro, and potential for additional development.  The table shows only projects that could not be in operation or under construction by 2015, our estimated date for a continental RPS.  This shows over 10,000 MW of hydrolectric projects in Canada that are now under active consideration that could help meet a US RPS.

17. Design considerations for a continental RPS  Does it replace current state/provincial RPS? If not, then how is it continental? If yes, then it requires federal legislation  Interaction with or replacement of existing or poential new programs GHG initiatives such as RGGI or WCI Incentives such as PTC or WPPI Carbon taxes Power Advisory LLC 2011 All Rights Reserved 17

18. Elements of a continental RPS  Scope: to which entities does it apply?  Harmonization: do all states/provinces have same RPS? Same resources allowed?  Level: % of resource requirement and timing to reach it.  Resources accepted: do they depend on availability, native or through trade? Geographical restrictions?  Are there provisions (ACP?) to mitigate price impacts?  How is achievement of the RPS monitored? Power Advisory LLC 2011 All Rights Reserved 18

19. Conclusions: Trade offers opportunities for significant reduction in RPS compliance costs  Focus RPS eligibility on resources that Meet Environmental objectives Provide desired long-term price stability  Reductions in RPS compliance costs benefit all electricity customers The available cost savings are meaningful Power Advisory LLC 2011 All Rights Reserved 19

20. I look forward to your questions Mitchell Rothman Power Advisory LLC mrothman@poweradvisoryllc.com (416) 534-4152 www.poweradvisoryllc.com Power Advisory LLC 2011 All Rights Reserved 20

21. Power Advisory LLC 2011 All Rights Reserved 21 Existing Canada/US electricity trade

22. Power Advisory LLC 2011 All Rights Reserved 22 Enabled New Canada/US electricity trade

23. Introducing Power Advisory  Power Advisory specializes in electricity market analysis and strategy, power procurement, policy development, regulatory and litigation support, resource planning and project feasibility assessment. We have assisted in the development and evaluation of Feed-in Tariffs and Standard Offers in Florida, Vermont, Ontario and Nova Scotia. Staff have assisted with the development of over 25 power supply RFPs and evaluation of proposals in response to RFPs. We have testified on behalf of project developers and utilities on the need for power, the economics and costs of the proposed project relative to alternatives and economic benefits from the development of the project. We have performed market studies of all renewable energy technologies including offshore and on shore wind, landfill gas, biomass, hydro, and first of kind technologies.  For additional information regarding our service offerings, please contact: John Dalton jdalton@poweradvisoryllc.com 978-369-2465

24. Introducing Power Advisory  Clients include: Accoina Algonquin Power Atlantic Power Bluewater Power Generation Bruce Power Canadian Wind Energy Association Canadian Electricity Association Capital Power Connecticut Resources Recovery Authority Direct Energy EDP Renewables Enbridge EnXco Great Lakes Power Green Mountain Power Hydro One International Power Invenergy Mitsui Nalcor Energy National Energy Board Natural Resources Canada NextEra Energy New Jersey Resources NewPage Northland Power Nova Scotia Department of Energy Office of Environmental Commissioner of Ontario Ontario Energy Board Ontario Power Authority Suncor TransAlta TransCanada Tribute Resources Vermont Public Service Board Vestas Offshore Wheelabrator Technologies, Inc.