NCAI Energy Schell 20081021

Value Proposition of Solar Photovoltaics and Fuel Cells in California : 

Value Proposition of Solar Photovoltaics and Fuel Cells in California National Congress of American Indians 65th Annual Convention Phoenix, Arizona October 21, 2008 Lori Smith Schell, Ph.D. www.EmpoweredEnergy.com

Renewable Portfolio Standards and State Renewable Goals : 

October 21, 2008 www.EmpoweredEnergy.com 2 State Goal PA: 18%** by 2020 NJ: 22.5% by 2021 CT: 23% by 2020 WI: requirement varies by utility; 10% by 2015 goal IA: 105 MW MN: 25% by 2025 (Xcel: 30% by 2020) TX: 5,880 MW by 2015 AZ: 15% by 2025 CA: 20% by 2010 *NV: 20% by 2015 ME: 30% by 2000 10% by 2017 - new RE State RPS Minimum solar or customer-sited RE requirement * Increased credit for solar or customer-sited RE **Includes separate tier of non-renewable “alternative” energy resources HI: 20% by 2020 RI: 16% by 2020 CO: 20% by 2020 (IOUs) *10% by 2020 (co-ops & large munis) DC: 20% by 2020 NY: 24% by 2013 MT: 15% by 2015 IL: 25% by 2025 VT: (1) RE meets any increase in retail sales by 2012; (2) 20% by 2017 Solar water heating eligible *WA: 15% by 2020 MD: 20% by 2022 NH: 23.8% in 2025 OR: 25% by 2025 (large utilities) 5% - 10% by 2025 (smaller utilities) *VA: 12% by 2022 MO: 11% by 2020 *DE: 20% by 2019 NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) NC: 12.5% by 2021 (IOUs) 10% by 2018 (co-ops & munis) ND: 10% by 2015 SD: 10% by 2015 *UT: 20% by 2025 OH: 25%** by 2025 MI: 10% by 2015 MA: 15% by 2020 +1% annual increase(Class I Renewables) Renewable Portfolio Standards and State Renewable Goals Source: www.dsireusa.org

Samson and Goliath Proved that Bigger is Not Always Better : 

October 21, 2008 www.EmpoweredEnergy.com 3 Samson and Goliath Proved that Bigger is Not Always Better Central Station Generation Big, bigger, biggest Located far from electricity consumers Requires long-distance transmission lines and local distribution networks Distributed Generation (“DG”) Small, smaller, smallest Typically located on the electricity consumer’s property “behind the meter” Grid-connected (electric company still plays a role) Off-grid or islanded (all electricity self-generated) Avoids transmission and distribution & related losses

RPS: Solar and DG Set-Asides Ensure Participation : 

October 21, 2008 www.EmpoweredEnergy.com 4 RPS: Solar and DG Set-Asides Ensure Participation NM: 4% solar electric by 2020 0.6% DG by 2015 AZ: 4.5% DG by 2025 NV: 1% solar by 2015; 2.4 to 2.45 multiplier for PV MD: 2% solar electric in 2022 CO: 0.8% solar electric by 2020 DC: 0.4% solar by 2020; 1.1 multiplier for solar NY: 0.1542% customer-sited by 2013 DE: 2.005% solar PV by 2019; triple credit for PV Solar water heating counts towards solar set-aside WA: double credit for DG DG: Distributed Generation NH: 0.3% solar electric by 2014 NJ: 2.12% solar electric by 2021 PA: 0.5% solar PV by 2020 NC: 0.2% solar by 2018 OH*: 0.5% solar by 2025 * It is unclear at this point if solar water heating is eligible for OH’s solar carve-out. MA: TBD by MA DOER MI: triple credit for DG Source: www.dsireusa.org

Traditional Economic Analysis Limits Value Proposition : 

October 21, 2008 www.EmpoweredEnergy.com 5 Traditional Economic Analysis Limits Value Proposition Only benefits and costs with transparent “$” and “¢” market prices are included Externalities (+/-), by definition not reflected in market prices, may be significant, but are essentially ignored Quantification difficult and contentious Intuitively valuable attributes of DG implicitly valued at zero Health benefits associated with reduced emissions Ability to add capacity in small chunks to meet incremental load

PLEASE Matrix: Valuable DG Attributes Often Not Quantified : 

October 21, 2008 www.EmpoweredEnergy.com 6 PLEASE Matrix: Valuable DG Attributes Often Not Quantified

Unique Attributes = Technology-Specific Value Proposition : 

October 21, 2008 www.EmpoweredEnergy.com 7 Unique Attributes = Technology-Specific Value Proposition Solar Photovoltaics (“PV”) – Distributed on-peak power, no fossil fuel, no emissions, no noise, modular; weather-dependent, visual impact Fuel Cells – High electrical efficiency, 24/7 distributed power, cogeneration potential, low noise, modular; fossil or renewable fuel Wind Farms – Significant but remote intermittent power, requires transmission capacity, no fossil fuel, no emissions; visual and avian impact Hydro – Pumped storage enables price arbitrage, no fossil fuel; precipitation dependent, fish impact

Solar PV: Value Proposition Varies Across the Country : 

October 21, 2008 www.EmpoweredEnergy.com 8 Solar PV: Value Proposition Varies Across the Country

Technology-Specific Contribution to CAISO On-Peak Capacity: 2006 : 

October 21, 2008 www.EmpoweredEnergy.com 9 Technology-Specific Contribution to CAISO On-Peak Capacity: 2006 Source: Itron, CPUC Self-Generation Incentive Program Sixth Year Impact Evaluation Draft Report, July 31, 2007.

Comparison of Solar PV and Fuel Cell Characteristics : 

October 21, 2008 www.EmpoweredEnergy.com 10 Comparison of Solar PV and Fuel Cell Characteristics

Solar PV and Fuel Cells in California: Avoided Costs : 

October 21, 2008 www.EmpoweredEnergy.com 11 Solar PV and Fuel Cells in California: Avoided Costs Solar PV and Fuel Cell Power Generation Avoid: On-Peak Central Plant Generation Capacity Costs Operating & Maintenance Costs Fuel Costs Related Emissions On-Peak Transmission and Distribution Related Losses Avoided Emissions Value Depends on Location of Avoided Generator Allowances Not (Widely) Traded Lack Market Transparency Value of Health Benefits Limited to Avoided In-State Emissions

Renewable Energy – Protection From Volatile Fossil Fuel Prices : 

October 21, 2008 www.EmpoweredEnergy.com 12 Renewable Energy – Protection From Volatile Fossil Fuel Prices $/barrel $/MMBtu or ¢/kWh Data Source: NYMEX, EIA (U.S. Averages)

Fuel Cells in California: Additional Value Components : 

October 21, 2008 www.EmpoweredEnergy.com 13 Fuel Cells in California: Additional Value Components Additional Fuel Cell Attributes: Natural Gas Savings (& Related Emissions) due to: Higher Fuel Cell Electrical Efficiency vs. Avoided Generator Avoided Boiler Input due to Cogeneration Avoided Flared Gas Emissions due to Use of Digester Gas Increased Power Quality Fuel Cells and Solar PV Share: Increased Reliability & Blackout Avoidance Value Increases as Market Penetration of DG Increases Job Creation Potential Initially Installation Labor Only Potential for Additional In-State Manufacturing Capacity

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24/7 Fuel Cell Operations = Greater Avoided Emissions than PV & Wind : 

October 21, 2008 www.EmpoweredEnergy.com 19 24/7 Fuel Cell Operations = Greater Avoided Emissions than PV & Wind Fuel Cell @ 91% Capacity Factor; 30% Renewable Fuel; 60% Cogen. Wind @ 25% Capacity Factor. Solar PV @ 20% Capacity Factor. (9,100 Btu/kWh Average Heat Rate) lbs/MWh lbs/year (9,100 Btu/kWh Average Heat Rate)

Complementary Technologies: The Best of Both Worlds : 

October 21, 2008 www.EmpoweredEnergy.com 20 Complementary Technologies: The Best of Both Worlds Fuel Cells + PV = Baseload + Peak-Shaving Maximizes the most valuable attributes of each DG technology Fuel Cells + Wind = Intermittent wind power could be used to produce “green” hydrogen To fuel the California Hydrogen Highway To fuel distributed hydrogen-based fuel cells To avoid need for transmission lines to bring remotely located wind power to lead centers.