1. CALIFORNIA ENERGY COMMISSION Terry Surles, Director Technology Systems Division California Energy Commission November 6, 2001 Industry Growth Forum Connecting to the Market: Navigating the Valley of Death

2. CALIFORNIA ENERGY COMMISSION California Must be Prepared to Face the Same Issues as Others Must  Economics w Resource Competition w New technology market penetration  Environment w Climate change w Life cycle analysis  Security w Oil, Nuclear materials Energy Costs Fundamentally Affect our Overall Economy

3. CALIFORNIA ENERGY COMMISSION A g l] l l’

4. CALIFORNIA ENERGY COMMISSION 2000 Net Power System Eligible Renewables Biomass & Waste- 2.0 Geothermal - 4.6 Small Hydro - 3.0 Solar - 0.4 Wind - 2.0

5. CALIFORNIA ENERGY COMMISSION California: policy really does work MWh per person-year

6. CALIFORNIA ENERGY COMMISSION Contribution to ISO Peak Demand August 16, 2001 (MW) Commercial AC Commercial Lighting Residential AC Other MW 6000 5000 6000 26,509

7. CALIFORNIA ENERGY COMMISSION Any R&D Program Must Consider  Near-term realities w political w attributes: affordable, reliable, safe  Longer-term vision w resource competition w future regulatory/environmental issues  For both w limited budget w uncertainties associated with life-cycle costs and competing technologies and lifestyles

8. CALIFORNIA ENERGY COMMISSION Carbon Management:An Approach for Integrated Energy Systems R&D Carbon Management Efficiency < Btu/GDP Decarbonization CO 2 Btu Sequestration CO 2 atm CO 2 produced < <

9. CALIFORNIA ENERGY COMMISSION Vision Statement The future electrical system of California will provide a clean, abundant and affordable supply tailored to the needs of “smart”, efficient customers and will be the best in the nation. Tailored, clean, abundant, affordable supply Smart, efficient customers

10. CALIFORNIA ENERGY COMMISSION PIER Mission Statement Priorities California’s Energy Future Economy: Affordable Solutions Quality: Reliable and Available Environment: Protect and Enhance

11. CALIFORNIA ENERGY COMMISSION Attributes for Addressing State Issues Program Integration Balanced Technology Portfolio - Temporal -Technology -Risk Technology Partnerships - Universities - Industry - Federal Focus on California - Specific to State needs

12. CALIFORNIA ENERGY COMMISSION Technology Development Continuum - Innovation to Market PIER Program (CEC) Renewables Prog. (CEC) DG & Energy Efficiency Prog(CPUC) CA Mun. Utility Programs

13. CALIFORNIA ENERGY COMMISSION Investment Existing, New and Emerging Renewables Emerging Renewables Buydown Program Export Program

14. CALIFORNIA ENERGY COMMISSION EXPORTING ENERGY TECHNOLOGY Data from export brochure; Export Program The World Bank estimates that over $30 trillion in investments are required for power generation projects over the next 20 years to meet global electricity demand. Developing and industrializing nations throughout the world are improving their electricity resources by investing in and developing new and efficient energy technologies. The California energy industry is viewed as a model for technology innovation and implementation. Since 1988, $400 million in energy export sales has resulted from the program’s assistance to California companies.

15. CALIFORNIA ENERGY COMMISSION Lighting Advances: The Berkeley Lamp  Increased lighting quality  Energy savings- 30-50%  Low glare - computer  Unique control features  Up or down lighting  Lots of light  450 W worth of incandescent and halogen lighting for 150 W

16. CALIFORNIA ENERGY COMMISSION PowerLight PowerLight achieved a 57% reduction in manufacturing costs of the PowerGuard and opened an 18,000 ft 2 automated tile manufacturing facility in Berkeley PowerLight is the U.S. leader in BIPV with PowerGuard 2/29/00 - PowerLight installed the largest roof-integrated, thin- film solar electric system in North America a 10,000 ft 2 installation at the Port of Cape Charles, Virginia The PowerGuard system are joined by a tongue-and-groove design that requires no roof penetration or adhesive, thus eliminating leakage and related maintenance

17. CALIFORNIA ENERGY COMMISSION PowerLight Corporation Building- Integrated PV Roof System

18. CALIFORNIA ENERGY COMMISSION The Wind Turbine Company  Design, develop and demonstrate a utility-scale wind turbine  Horizontal axis, two-blade, downwind design  Prototype developed for PIER and tested at NREL rated at 250 kW  Commercial prototype demonstration sited at the Fairmont Reservoir in LADWP territory for a 500 kW - scaled up to 750 kW - wind turbine demonstration to begin in October 2001  Goal is to produce electricity  $0.035 cents per kWh per 100 unit wind farms with wind resources  15 mph.

19. CALIFORNIA ENERGY COMMISSION Alzeta Gas Turbine Semi-Radiant Burner (GTSB) PIER is helping develop low- or no- emission electric production methods, including gas turbines for use in DG Alzeta’s GTSB combustors successfully demonstrated simultaneous readings  2 ppm emissions of NOx, CO and unburned hydrocarbon on gaseous fuels during prototype testing. Goal is to lower cost of emission reduction by $100/kW for smaller facilities Alzeta has paid $24,464 to date in royalty repayment to the PIER Program based on direct sales and licensing of the product

20. CALIFORNIA ENERGY COMMISSION Catalytica Energy Systems Xonon Catalytic Combustion  Ultra-low NO x < 3 ppm provides pollution prevention vs. exhaust cleanup  Addresses forecast that 90% of proposed new capacity in U.S. by 2020 (390 GW) will be gas fired  Commercialization agreement with Kawasaki (>50% of small turbine market) currently offering Xonon-equipped 1.4 MW turbine  Commercial Xenon modules shipped 3Q 2001; 4Q 2001 VA hospital installation  GE (50% of world turbine market) launch order for up to six Xonon-equipped 10 MW turbines

21. CALIFORNIA ENERGY COMMISSION Kalina Cycle Canoga Park Facility Kalina Cycle uses working fluid of 70% ammonia and 30% water Ammonia has much lower boiling point than water and spins the steam turbine at lower temperatures 3.2 MW plant at Canoga Park, CA GE has purchased exclusive license to use Kalina in their combined- cycle gas turbine systems worldwide $505,000 royalties received from Exergy, Inc.

22. CALIFORNIA ENERGY COMMISSION Real Time Transmission Line Monitoring/Rating tension monitoring increases transmission capabilities by 15-30% highly accurate - measures line sagging to within 1-3 inches increased safety - provides the actual real time rating and provides alarms of impending clearance violations system 1-3 were built for utilities in Virginia, Colorado and Finland 200th system was sold on 8/4/00. The systems are in use on five continents by 70 utilities.

23. CALIFORNIA ENERGY COMMISSION High Performance Fume Hood reduces airflow and energy requirements by 30-50% flow reduction from each hood cuts energy costs by $1000/yr maintains or enhances worker safety ASHRAE standard test achieved containment with 70% flow reduction with 30,000 hoods in state, the new Hood could save about 360 million kWh/yr, totaling nearly $30 million

24. CALIFORNIA ENERGY COMMISSION California Energy Commission Thoughts on Market Connectedness  R&D, with the wrong set of attributes, will fail on a commercial basis  Attributes must include factors for successfully reaching the marketplace  Even technologically mature products need governmental support due to market failures w environmental externalities of fossil fuel-based energy technologies are not reflected in the market price w unbalanced distribution of energy subsidies  CEC supports existing, new and emerging renewables through production incentives, capital cost buydowns, and rebates to customers  Venture capital can catalyze movement into marketplace

25. CALIFORNIA ENERGY COMMISSION Conclusion: Still an Open Question as to Our Success  Need near-term successes to establish variability of program  Must establish substantive collaborations with other funding agencies  Must establish long-term relationships with successful performers  Better linkage between existing state programs is mandatory Interaction with venture capital community critical to our future success

26. CALIFORNIA ENERGY COMMISSION Will California Lead Change? OLD  Electricity by nuclear, gas, coal-by-wire, hydroelectric  No choice to consumers - tax mentality  Laissez-faire NEW  Base load central stations with reliance on distributed generation - “Community systems”  Choice of supplier and technology  Government catalyzes true paradigm shift