1. January 2010 Southwest Renewable Energy Transmission Conference: Renewable/Transmission Developer Panel Moderator: Dian M. Grueneich, Commissioner California Public Utilities Commission

2. January 2010 2 Our Panel  Robert Jenkins, Director of Transmission, First Solar  Lawrence Willick, Senior Vice President, LS Power  Arthur Haubenstock, Chief Counsel & Director, Regulatory Affairs, BrightSource  Jerry Vaninetti, Western Transmission Development, NextEra  James Caldwell, President, Solar Millennium  Tom Wray, Project Manager, SunZia Transmission Project

3. January 2010 3 Our Task Renewable energy project and merchant transmission developers will present their views on plans for and barriers to renewable energy transmission, with a focus on perceived bottlenecks in the existing utility infrastructure system and challenges associated with financing projects.

4. Dimbach, Germany (1.4 MW); Blitzstrom / Beck Energy Southwest Renewable Transmission Conference Robert Jenkins May 21, 2010

5. © First Solar, Inc. First Solar Confidential & Proprietary 5 First Solar/NextLight Advanced Development Gates Peaker Devers Miguel Lugo Vincent Midway N. Gila Moenkopi Navajo (SRP) Crystal River Imperial Valley Hassayampa El Dorado Palo Verde ProjectSizeCOD Sunlight 550 MWQ4 2014 Topaz 550 MWQ2 2014 Stateline 300 MWQ4 2015 Agua Caliente 290 MWQ2 2014 AV Solar Ranch 230 MWQ4 2013 Silver State 2 50 MWQ4 2011

6. © First Solar, Inc. First Solar Confidential & Proprietary 6 PPA Structures are typically volumetric energy based –Project revenues entirely dependent on energy deliveries to the grid –Physical congestion that results in curtailment of energy reduces project revenues –Financing entities are very sensitive to risk to project revenues – If project bears curtailment risks, it needs to be bounded – Pressure for Firm Transmission/Network Service (or Full Delivery in CA markets) as congestion mitigation Firm Transmission/Full Delivery Service –Involves the engineering analysis of boundary, or extreme, conditions –Presumption that if transmission capacity is available under the boundary condition(s), then Available Transmission Capacity (ATC) exists –If ATC is not available under the boundary condition(s), little information is generated to quantify the extent of the deficiency –Transmission Upgrades are identified, potentially involving large, expensive new lines in order to satisfy the boundary conditions (and the financing parties) PPA Structure/Project Financing/Transmission

7. © First Solar, Inc. First Solar Confidential & Proprietary 7 Underutilized Transmission Assets –Boundary conditions seldom, if ever, experienced –25% (+/-) capacity factor resource vs 24x7 transmission Unclear Justification for Large Investments in New Transmission Facilities –Cost versus value assessment is not comprehensive and is dispersed in the LSE procurement processes –Few tools available for risk management if the value/cost ratio is low – Tools such as Conditional Firm Transmission have nominal value when the risk/financing question is not addressed. Long Delay and Great Uncertainty in Renewable Generation Development –7-10 year lead time for major new transmission lines. –Many renewable generation projects cannot sustain such delays Outcome of Current PPA & Transmission Practices Path 46 (West of River) Rating - 10,623 MW Path 49 (East of River) Rating - 9,300 MW

8. Bringing Energy Forward Lawrence Willick Senior Vice President LS Power

9. 9 LS Power Transmission Portfolio

10. 10 Current Project Status and Hurdles Project description PurposePlanningPermittingCost Recovery Cross Texas Transmission 200+miles double circuit 345 kV Renewables within Texas – CREZ CompleteUnderwayComplete SWIP Phase 1 SWIP Phase 2 235 mile single circuit 500 kV 335 mile single circuit 500 kV Renewables, energy, capacity Complete Underway Initiated Wyoming- Colorado Intertie High Plains Express 180 miles single circuit 345 kV >1,000 miles 500 kV High-capacity factor wind to market Economic resource benefits Complete Underway Future Overland560 mile DCHigh-capacity factor wind Underway LaSalle160 mile double circuit 345 kV Congestion relief with renewable access InitiatedFutureInitiated

11. 11 Independent Transmission Barriers Planning, Permitting, Cost Recovery RTO Practices and the Right of First Refusal Transmission Interconnection Process Regulatory Wish List: Level Playing Field Project evaluation, approval, and cost recovery or Competitive process after planning is complete

12. 12 The need for Southwestern planning and coordination has never been greater. Renewable integration and balancing demands interlinking Southwestern load with renewable resources. 2001-2005 STEP (Southwest Transmission Expansion Plan) By 2007, STEP was to be succeeded by a CAISO-led sub-regional planning group In 2008, SCE convened a Pacific Southwest Planning Association (PSPA) In 2009, PSPA was overtaken by the California Transmission Planning Group (CTPG) DOE/WECC transmission planning process is taking broad view of overall transmission plan Currently, there is no forum for working out cooperative approaches to transmission planning, permitting, cost allocation and operation specific to the Southwestern states. Regional Transmission Planning : Prerequisite to a Robust Renewable Energy Supply & VERS Balancing

13. 13 Allocating Cost to Ratepayer and Renewable Energy Advantage FERC & Order 2003 Financing burden intended to provide incentives for efficient transmission use and lessen need for new transmission by influencing generator siting- not anticipating location-constrained renewable resources in remote locations. Texas SB 20 Approach Texas approach provides for lines to Competitive Renewable Energy Zones (CREZs). Southwest Solution: Promote Interstate Flow of Renewable Energy, Enhancing Reliability & Reducing Overall Cost Without a cost allocation solution, pancaking will deter southwest solar development and create a barrier to the lowest-cost, reliable renewables infrastructure.

14. 14 Beginning this important journey with a few sure steps Ultimately, we need a comprehensive, robust Southwestern transmission web. This journey will never reach its destination unless we begin with some concrete steps immediately. Joint nomination of pilot projects by any two states would provide sufficient lines for a proof of concept, with planning and permitting completed to commence construction in 2013. With demonstrated progress, mid- and longer-term planning is more likely to achieve results- and maintain renewables investment.

15. 15 M M M M M+ High Plains Express (Renewables) 12 Parties – 1,300 miles >3,500 MW 2-500 kV (AC) 2015-2020 Wyoming-Colorado Intertie (Wind) LS Power, WIA & WAPA 850 MW – 180 miles 345 kV (AC) 2013-2015 Blythe Gentie (Gas & Solar) NextEra >600 MW – 67 miles 230 kV (AC) 2010 Peetz Logan Gentie (Wind) NextEra >600 MW – 75 miles 230 kV (AC) 2007 Jerry Vaninetti, NextEra Energy WECC Transmission Project Development Experience

16. 16 Double-Circuit vs. Single- Circuit Lines –Double-circuit more expensive but more cost- effective, when fully utilized –Optimal use of ROW –Install the second circuit when needed –Path rating limitations Who pays & how do they recover their costs? –Cost allocation –Cost recovery Right-Sizing Transmission Lines Single-Circuit Structures Double-Circuit Structures

17. 17 Cost Allocation/Recovery for HPX 600 mile 500 kV example, based on WREZ model Cost allocation doesn’t apply for non- RTO regions that dominate WECC –Voluntary agreements for cost-sharing Investments typically justified for serving load & for reliability –How to fund to meet public policy goals? –Who pays for right-sizing? –How to assure cost recovery? HPX & PacifiCorp-Gateway Dilemma –Double vs. single-circuit 500 kV –Matching need with cost over time 20% more 30% less

18. 18 Issues to be Addressed by State Regulators Cost recovery to meet need & public policy goals –Nothing gets built without the assurance of cost recovery –How to assure cost recovery in non-RTO regions & for non- jurisdictionals? –Right-sizing to optimize land use & future demand –Potential solution: socialize the incremental costs for the 2 nd circuit Regional cooperation between states –Clarity in public policy: siting, permitting, RPS & cost recovery Without the foregoing….. –Some renewable projects will continue to be sited in sub-optimal locations ……to the detriment of consumer costs & renewable development –Incremental transmission expansion will be the norm…...to the detriment of land use optimization where economies of scale are forgone

19. Near Term Transmission Enhancements to Serve CA Renewable Projects Southwest Renewable Energy Transmission Conference Arizona State University Tempe, Arizona May 21, 2010 James H Caldwell Jr. President, Solar Millennium, LLC

20. Page 20Solar Millennium LLC Presentation to REPG – 1.22.10 Company Overview Structure  Solar Trust of America (STA) – joint venture of Solar Millennium AG and MAN Ferrostaal AG.  75 years of EPC market experience; 25 years of solar thermal experience.  Solar Millennium, LLC is wholly owned subsidiary of Solar Trust of America. Development Projects  Developed and built first parabolic trough plants in Spain (Andasol) 1–3 plants, total 150 MWs, with 7.5 hours of molten salt storage.  30 MW Solar field integrated into 150 MW CCGT plant in Egypt (under construction).  More than 2,000 MWs currently in development in the U.S. Southwest.

21. Page 21Solar Millennium LLC Presentation to REPG – 1.22.10 Southern California Transmission Projects DSWL (500 kV)

22. Page 22Solar Millennium LLC Presentation to REPG – 1.22.10 Near Term CA Transmission Enhancements Up to 5000 MW of new transfer capacity from the Colorado River to California load centers could be available in the near term. Each of the new projects comprising this capacity has “essentially” been through the planning, siting, permitting, cost allocation, “approval” hurdles, however none are completely cleared for construction. In addition, roughly 2500 MW of new transfer capacity should become available over the next eight years as California phases out coal imports in compliance with SB 1368. The focused attention of state/federal policy makers is required to allow the bulk of this potential new transmission capacity to be made available to renewable energy projects to achieve state/regional renewable energy generation targets.

24. M AY 21, 2010 S UN Z IA S OUTHWEST T RANSMISSION P ROJECT 24 470 miles Two 500 kV lines; five substations AZ and NM; 14-county study area

25. M AY 21, 2010 S UN Z IA S OUTHWEST T RANSMISSION P ROJECT 25

26. M AY 21, 2010 S UN Z IA S OUTHWEST T RANSMISSION P ROJECT 26  Renewables are remotely located in the West  New long-distance EHV RTPs are needed  RTP investors need assurances that:  Competitive interstate wholesale supply markets exist  Regulatory impediments to utility supply choices do not exist  Not all proposed RTPs will be permitted  Resulting in a scarce supply of deliverable renewable energy from remote sources

27. M AY 21, 2010 S UN Z IA S OUTHWEST T RANSMISSION P ROJECT 27  National policy of more renewable energy requires significant capital for RTP development on the grid:  SENR is considering a national RPS  FERC is requesting siting authority for interstate EHV lines  Some state procurement policies disregard benefits of higher capacity factors and lower delivered prices in favor of in-state renewable generation resources  Procurement policies favoring in-state generators are eliminating incentives for investment in RTPs across the western grid

28. M AY 21, 2010 S UN Z IA S OUTHWEST T RANSMISSION P ROJECT 28  How can PUC regulatory procurement policy be coordinated to reduce interference with interstate commerce of renewable energy?  How is “economical” electricity provided to customers by reducing wholesale competition across state lines?  What is better than the market for allocating scarce commodities?