1. Southwest Alaska Rural Energy Project

2. Community: March 06 Fuel # 1 March 06 Gasoline Avg. Resid. Electric Rate 06-30-06 After PCE 06-30-2004DieselUsed By Utility Dillingham$3.95/gal$4.4424.39 cents per kwh 16.58 1,242,522gallons Manokotak$6.05/gal$7.00/gal34.00 27.27 Cents per kwh 97,052gallons High Cost Energy

3. Peak Oil: The point we have recovered half of all available oil “Our ignorance is not so vast as our failure to use what we know” Dr. M. King Hubbert After making a prediction in 1956 that U.S. oil production would peak in 1970 and decline thereafter, he was laughed out of the industry. His prediction was only one year off.

4. Peak Oil: Has it happened yet on a global scale? A number of theorists believe some peak in world oil production has already occurred. Colin Campbell of the Association for the Study of Peak Oil & Gas (ASPO) has calculated that the global production of conventional oil peaked in the spring of 2004.Colin Campbell2004 Kenneth S. DeffeyesKenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on Thanksgiving Day 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16 2005).Thanksgiving Day “Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.”

5. Volatilit Volatility Crude Oil Imports (Top 15 Countries) (Thousand Barrels per Day) Country Mar- 06 Feb- 06 YTD 2006 Mar- 05 Jan - Mar 2005 CANADA 1,7161,7101,7321,4511,509 MEXICO 1,6971,7741,7221,5901,500 SAUDI ARABIA 1,3221,4181,3561,5531,561 VENEZUELA 1,1831,1781,1971,3151,340 NIGERIA 1,1141,3421,191879996 ANGOLA 510464465675493 IRAQ 476450487548516 ALGERIA 281163228134165 ECUADOR 242222281305322 COLOMBIA 170126156108110 UNITED KINGDOM 1458288290215 BRAZIL 1231641143238 NORWAY 1217187165128 KUWAIT 111152111179184 CHAD 8477794673

6. Renewable Energy Environmentally Friendly Harnessed Locally Endless Supply Economical Decentralized Diversified Sources

7. Financial Incentives Avoided Fuel Costs Avoided Fuel Costs Predictable Life-Cycle Costs Predictable Life-Cycle Costs Green Tag Earnings Green Tag Earnings Federal Production Tax Credit Federal Production Tax Credit Accelerated Equipment Depreciation Tax Credit Accelerated Equipment Depreciation Tax Credit Renewable Energy

8. Renewable Portfolio Standards Currently 22 States have a mandated Renewable Energy Requirement

9. Green Tags UtilityAnnualkwhCO2Emissions(lbs) Green Tag Value Utility A Earnings Utility B Earnings Unalaska31,106,87541,305,886$626,982$139,981$93,321 UmnakNikolski145,631193,379$2,935$655$437 Created from the generation of 1 MWh of green electricity Sold separately from electricity ($20 per tag) Represent the environmental, social benefits, etc. of renewable energy and approximately 1,400 lbs. of avoided Carbon Dioxide emissions Life Cycle Earnings$2,333,025 $10,925

10. Green Tags: Utilities required to meet RPS Utilities required to meet RPS Organizations looking to green operations Organizations looking to green operations Individuals in areas without local green energy purchasing options Individuals in areas without local green energy purchasing options Who Buys Them?

11. Systems Benefits Charges System benefit charges are generally expressed in terms of mills per kilowatt hour generated. One mill is equal to 1/10 ($0.001) cent. In other words, for every one million kilowatt hours generated, a one mill charge would raise $1,000 (1,000,000 kilowatt hours times $0.001). A systems benefits charge is an additional charge added to a consumers electric bill each month. The money is utilized to fund a specific initiative outlined by the utility. Examples Include: Scholarship Funds Low-Income Power Assistance Programs Renewable Energy Development

12. Production Tax Credit Private company with tax appetite provides initial investment & owns turbines Private company with tax appetite provides initial investment & owns turbines Sells electricity to utility Sells electricity to utility Hires utility to do O&M Hires utility to do O&M Receives tax credit for 10 years Receives tax credit for 10 years $0.019/kWh (adjusted for inflation) $0.019/kWh (adjusted for inflation) Turns ownership of system over to local entity Turns ownership of system over to local entity

13. PTC Example Installed cost = $8 million Electricity generated = 8,100,000 kWh/yr Investor: PTC = $121,500/yr ($1,215,000 over 10 yrs) Sales to utility = $810,000/yr (8,100,000 over 10 yrs) Utility: Payments to turbine owner = $810,000/yr (8,100,000 over 10 yrs)

14. Wind Energy United States Installed Capacity

15. Wind Energy Alaska Wind Energy Development Existing Project or Area OwnerDate Online MWPower Purchaser/ User Turbine / Units 1. KotzebueKotzebue Electric Assoc. (KEA) 19970.15Kotzebue Electric Assoc.Atlantic Orient (3) St. Paul IslandTanadgusix Corp.March 1999 0.225Tanadgusix Corp.Vestas (1) 1. Kotzebue (Phases II and III) Kotzebue Electric Assoc. May 19990.35Kotzebue Electric Assoc.Atlantic Orient 15/50 (7) Wales Wind Energy Project Kotzebue Electric Assoc.Oct 20000.1Alaska Village Electric Coop Atlantic Orient 15/50 (2) 1. KotzebueKotzebue Elec. Assoc.20020.1Kotzebue Elec. Assoc.NPS Northwind 100 (1) Selawik Wind ProjectKotzebue Electric Assoc.20030.2Alaska Village Electric Coop AOC 15/50 (4) Selawik Wind ProjectKEA/ Alaska Village Electric Coop 20040.15Alaska Village Electric Coop AOC 15/50 (3) Kotzebue Wind ProjectAlaska Village Elec Coop20050.3Alaska Village Elec CoopNorthern Power Systems 100 kW (3) 1.6 MW Alaska Installed Capacity

16. What Can We Do?