1. Department for Energy Development and Independence – Energy Efficiency Programs Environmental Quality Commission Kentucky State University Thursday, February 21, 2013 Greg Guess Kentucky Department for Energy Development and Independence 1

2. Environmental Mitigation Funding Environmental Mitigation Funding a result of settlement of a suit filed against TVA (EPA + 4 states) Kentucky’s share = $11.2 million Five payments over 5 years @ ~ $2.2 million/yr Two payments have been made, pool of $4.4 million Preference for funds to be spent in TVA service territory, but not required RFP resulted in 88 proposals, 13 selected for funding 2

3. Environmental Mitigation Funding 1.Kentucky School Boards Association (KSBA): KSBA is awarded $700,000 to support the School Energy Managers Project in school districts in and adjacent to the TVA service counties. Based on actual progress of the program to date, the project expects to produce $2.4 million in annual energy cost avoidance by FY 2016. 2.Pennyrile RECC: Pennyrile RECC is awarded $3.1 million to support construction of a 5MW solar photovoltaic project at Fort Campbell in Christian County. The grant is leveraged with more than $15 million in financing support from Fort Campbell. The completed system will generate more than 6,651 mWh/year of electricity, enough to power 463 homes, while avoiding 4.7 million tons per year of CO2 emission. 3.Kentucky Housing Corporation (KHC), Frankfort: KHC is awarded $3 million to support the ongoing KY Home Performance Program. The grant will fund three years of program operations during which at least 611 additional energy efficient units will be completed. The program will focus primarily on owner-occupied, single-family energy efficiency loans ranging from $1,000-$25,000 per home. 3

4. Environmental Mitigation Funding 4.Governor’s Office of Agricultural Policy (GOAP): GOAP is awarded $750,000 to support the KY On-Farm Efficiency and Production project. This is a statewide loan program that offers farmers up to $15,000 to adopt new technologies, renovate existing facilities, produce energy related crops and invest in other energy efficient measures. GOAP will invest half of the program loan funds in TVA service area counties. 5.Murray State University: Murray State University is awarded $309,000 to install, test and demonstrate a biomass heating system at the MSU Equine Center. The Bio Burner Units will offset fossil fuel energy with renewable energy at a rate of 40 mWh per year of electricity. One of the units will be portable in order to demonstrate a biomass-to-energy model to area farmers, industry and others. 6.Fayette County Public Schools: Fayette County Public Schools is awarded $335,000 to support completion of the integrated live energy metering project. The project comprises live energy monitoring equipment, live data analysis software, and a district-wide public-facing energy and sustainability education portal. The completed project will save more than $1.1 million a year in energy costs and reduce CO2 emissions by more than 11,000 tons per year. 4

5. Environmental Mitigation Funding 7.Perdue Farms Incorporated, Beaver Dam: Perdue Farms is awarded $145,000 to support a project to divert poultry waste from the landfill to an anaerobic digestion and generator system. The result of the project will be the removal of 1,500 tons per year of organic waste from the county landfill and the subsequent generation of 620 mWh/year of electricity 8.Bowling Green Independent Schools: Bowling Green Independent Schools is awarded $34,000 to purchase and install a solar thermal domestic hot water system for the school kitchen as well as a solar photovoltaic system to offset a portion of the total building energy. In addition to saving over 140 Mbtu/year of fossil fuel heating, the systems will be incorporated into the school’s science curriculum as teaching tools. 5

6. Environmental Mitigation Funding 9.Southern Tier Housing Corporation, London: Southern Tier Housing Corporation is awarded $504,000 to support energy modeling and design research to develop generation systems to be installed in the Kentucky TVA service area. more cost effective and energy efficient Houseboats to Energy Efficient Residences (HBEER) factory-built structures. The project will include construction of four new energy efficient, factory-built structures equipped with photovoltaic generation systems to be installed in the Kentucky TVA service area. 10.Hickman-Fulton Counties RECC: Hickman-Fulton RECC is awarded $316,000 to support a project to replace inefficient outdoor lighting fixtures with energy efficient, long-life bulbs. The project will save more than 600 mWh/year of electricity and reduce CO2 emission by more than 440 tons/year. The project is leveraged dollar-for-dollar by HFCRECC. 6

7. Environmental Mitigation Funding 11.Mountain Association for Community Economic Development (MACED), Berea: MACED is awarded $300,000 to support the On-Bill Financing Residential Energy Efficiency Retrofit Program. Under the grant funding the program will perform 150 energy efficient retrofits in area residences. The retrofits will save approximately 825 mWh/year of electricity representing more than $90,000 a year of savings on participating customers’ utility bills. 12.Department for Local Government (DLG): DLG is awarded $1.2 million to support continuation of the Energy Efficiency and Conservation Block Grant (EECBG) program. The EECBG program provides grants to local governments for programs that reduce energy consumption, greenhouse gas emissions, and utility costs for local governments. 13.Lord Corporation, Bowling Green: Lord Corporation, manufacturer of adhesive, coating and motion management technologies, is awarded $504,000 to facilitate improvements to the site’s chilled water and boiler plants. Savings achieved from the project comprise more than 1,256 mWh/year of electricity and more than 113,000 therms/year of natural gas. Lord is leveraging the grant dollar-for-dollar. 7

8. Stimulating Energy Efficiency in Kentucky (SEE KY) What I will cover: – Project Description – Project Need – Process – Preliminary Findings – Next Steps Questions/Comments 8

9. Stimulating Energy Efficiency in Kentucky (SEE KY) Cooperative agreement between the Federal Dept of Energy (DOE) and the Kentucky Department for Energy Development & Independence (DEDI) Goal: Achieve 1% increase in electrical energy efficiency across the Commonwealth and all economic sectors Concentrated on electricity energy savings, but including natural gas DEDI has secured support for this project from: Midwest Energy Efficiency Alliance (MEEA) American Council for an Energy Efficient Economy (ACEEE) Smith Management Group (SMG) 9

10. Stimulating Energy Efficiency in Kentucky: Project Roles & Responsibilities DEDI: Program management MEEA: Stakeholder processes ACEEE: Analytical products, e.g. Price-consumption forecast, Utility program comparison, Kentucky utility program analysis, macro-economic analysis, etc. Smith Management Group: Subcontractor to MEEA 10

11. Heightened need for Energy Efficiency Historically, Kentuckians have enjoyed some of the lowest electricity rates in the Nation. However, that is likely to change in the near future. In 2008, Governor Beshear released his 7-point energy security strategy, and articulated a goal of meeting 18% of Kentucky’s projected energy needs by 2025 through energy efficiency. 11

12. Heightened need for Energy Efficiency Utilities are preparing for rate increases in the face of proposed EPA Clean Air Act regulations that will cost billions in $$ to comply with Given this increasing pressure, EE may be the lowest-cost alternative to help better manage energy bills across sectors, and is a risk avoidance strategy to mitigate future increases in costs 12

13. Process to Achieve the SEE KY Goal Individual stakeholder meetings DEDI and MEEA are meeting with individual stakeholders to discuss with them what they think is and is not working in achieving energy efficiency in KY and what they think would work to realize this goal. Have met with utilities, manufacturers, legislators, nonprofit and advocacy organizations, state and local government, agricultural representatives 13

14. Summary of Preliminary Common Findings Overall, almost no support for mandatory energy efficiency standards Support for the current DSM statute -- IOUs Programs for low income consumers are needed Rate Design – Co-ops Older manufactured housing/mobile homes negatively impact energy efficiency Industry opt-out 14

15. Insights on Barriers to Energy Efficiency Current appraisal and mortgage systems do not value energy efficiency Zoning can impact replacement of energy inefficient manufactured housing/mobile homes The cost recovery of energy efficiency upgrades is generally limited to a 1.5-5 year time frame Lack of standardized metrics to compare EE programs 15

16. Next Steps in This Initiative Sector-specific stakeholder meetings held late Summer/early Fall 2011 to assess the effectiveness of current EE programs and policies within Kentucky, and practices in other similar states Large stakeholder meetings will take place in November- January 2011 to narrow a suite of program and policy measures to achieve energy savings through EE For specific questions about this initiative and to ensure involvement in the stakeholder process contact: Lee Colten -- Lee.Colten@ky.govLee.Colten@ky.gov Samantha Williams—MEEA, swilliams@mwalliance.orgswilliams@mwalliance.org Scott Smith— Smith Management Group, scottr.smith@smithmanage.com scottr.smith@smithmanage.com 16