1. Utility Perspectives: Current and Emerging Opportunities ND Solar Workshop Tuesday, May 12 Bismarck, ND Allison Spector, Mgr Distributed Generation Montana-Dakota Utilities

2. Why Think About Solar? Because… Solar as an energy resource is rapidly expanding across the country Solar + storage, and smart grid technology is evolving quickly Solar markets are becoming increasingly sophisticated There is potential value from an environmental and resiliency standpoint A dialogue has begun that is worth continuation

3. Why Should an Investor Owned Utility Think About Solar? Because… Others are thinking about it already— and will require our support and coordination Solar is prolific in other parts of the country and is gaining traction much as other technologies have in the past (cell phones vs land lines, for example) Solar can have impacts on grid, and energy curves. – When done incorrectly can impact reliability, safety, and increase costs – When done correctly, potential value from resiliency standpoint It will arrive in North Dakota. It’s just a matter of time.

4. Under What General Conditions Does Solar Make Sense? Solar makes the most sense in circumstances where: Electric costs are high Technology costs are low(er) Market transformation has already taken place Strong policy mandates are driving solar forward Where societal/environmental benefits are highly favored Where there is an active community and market interest driving participation

5. Utilities May Engage in Solar Today… …because is a best/least cost resource in their state …in order to maintain relevance in light of new players in the market …to improve grid resiliency …for environmental stewardship purposes …in light of strong external mandates – Regulation – Legislation – Carbon mandates – Renewable portfolio standards

6. What are the Conditions for Solar in North Dakota? The production estimate* for a 30 degree fixed tilt, Solar World 315W module and SMA 500kW inverters is 1,967 MWh per year, or 19% DC capacity factor. By comparison: – Minnesota’s capacity factor is approximately 17.4% – Las Vegas capacity factor is approximately 23.2% *Based from estimates and solar installation experience from MDU Resources: Bombard Electric

7. What are the Potential Economics for Solar in North Dakota? MDU residential retail electric rate in ND = approx $.082/kWh MDU commercial = $.086/kWh All-in rate: includes transmission and distribution, etc. Levelized Cost of Solar = as much as $.10/kWh* Cost of generation only, not of storage or other necessities of off-grid operation. *Based on research performed on behalf of the Company

8. What is the Market Environment for Solar in North Dakota? Very minimal presence of distributed solar to date No known solar vendors operating from North Dakota Boutique interest from “true believers” w/ periodic inquiries from our customers on how to connect in ND No active market to date

9. What are the Policy Conditions for Solar in North Dakota? Billing Policy Investor owned utilities must offer net billing at avoided cost to all customers for systems up to 100kW MDU current avoided cost applicable under net billing at a rate of $.03189 per kWh for cogeneration and small power production facilities with a design capacity of 100 kW or less that are Qualifying Facilities under 18 CFR, Part 292 Tax Credits State tax credits available for solar projects in ND expired in 2014 Some federal provisions to allow for accelerated deprecation of solar resources

10. Renewable Portfolio Requirements 10% goal in ND Being readily met by MDU through wind resources Additional Mandates and Provisions Expectation of least cost/best cost IRP planning Environmental externalities not taken into consideration Straight forward, pragmatic approach to valuation of energy resources Additional Policy Considerations…

11. Solar in ND: No Easy Answers The Big Question/s Should utilities invest in an energy source that has not yet reached price parity with other energy sources? Will customers be willing to pay the cost difference to have access to on-site or near-site green energy? Are there non-energy benefits associated with solar that should be taken into consideration? – Can distributed solar help encourage resiliency? – What are the environmental benefits and should they be quantified (if so, how?) Who should be paying for solar? How do we approach a resource that is increasingly prolific on the national level, but not yet present or cost effective in ND?

12. MDU’s Position Today Providing affordable, reliable energy must remain the first priority of the utility under all circumstances Solar will arrive in North Dakota within the next decade, but will not be as prolific as in some other regions We must adequately prepare for solar from system standpoint to avoid the unintended consequences of solar experienced in other states, and Europe Solar may have value from a environmental stewardship and resiliency standpoint Best practices in safety standards and awareness for solar will be essential for anyone engaging in solar Open-minded to piloting or supporting promising solar technologies where customer interest exists and economics allow us to do so.

13. Conclusions Utilities must ensure customer and shareholder value and provide reliable electricity at the lowest possible cost Without external drivers, we may yet be a decade out from seeing solar “organically” develop in North Dakota Yet, solar is growing rapidly across the country so we should do more than “nothing,” and prepare for changing circumstances We can… – Stay the course and maintain the status quo, wait for solar to come, or not to the state – Begin to explore the appropriate infrastructure and coordination necessary to appropriately integrate solar We’re looking towards the second option– keep our minds open, be responsive to customer interest, maintain cost effectiveness, but consider pilots where logical

14. Questions? Allison Spector Manager, Distributed Generation Montana-Dakota Utilities 701-222-7937 allison.spector@mdu.com