1. The Impact of Renewable Energy, Distributed Generation, Storage & Energy Efficiency on the Grid Southern California Energy Summit Governor Angelina Galiteva ISO Board of Governors October 4, 2013

2. California ISO  58,698 MW of power plant capacity  50,270 MW record peak demand (July 24, 2006)  26,500 market transactions per day  25,627 circuit-miles of transmission lines  30 million people served  309 million megawatts of electricity delivered annually The ISO, a nonprofit public benefit corporation, maintains the constant and reliable flow of electricity for the health, safety and welfare of consumers Slide 2

3. Environmental goals and policies drive the evolution to the future grid. Electric industry faces changes:  Ambitious environmental goals  Reliability with fewer gas-fired plants  Cost containment Need to strike a balance between reliability, renewables and reasonable cost. Slide 3

4. California energy and environmental policies create reliability challenges Greenhouse gas reductions to 1990 levels by 2020 33% of load served by renewable generation by 2020 12,000 MW of distributed generation by 2020 Ban on use of once-through cooling in coastal power plants Limits on availability of air emission credits for replacement generation 4

5. Slide 5 Current installed capacity: 3,700 MW solar (expected) Peak 2,794 MW on Sept 18, 2013 @ 12:46 p.m. 6,900 MW wind (expected) Peak 4,302 MW on June 23, 2013 @ 12:22 a.m. Expected 2020 capacity: 10,800 MW solar 7,900 MW wind California renewable policies are succeeding. For Operating Day Sunday, September 22, 2013

6. Significant renewable generation in ISO queue 6 as of September 27, 2013

7. The future grid includes diverse resources with various operating attributes. 7 grid scale solar energy storage wind Conventional generation electric vehicles smart homes Slide 7

8. To keep the system reliable, the ISO must match supply and demand instantaneously. Slide 8

9. The ISO reacts to the instantaneous changes in electricity demand to maintain reliability. Load & Net Load (MW) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 Electricity demand (load) changes over the day Load Wind & Solar (MW) Hour Slide 9

10. The ISO must also react to variability in wind and solar energy production. Load & Net Load (MW) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 Solar Wind & Solar (MW) Electricity demand (load) and wind and solar output changes over the day Load Hour Wind Slide 10

11. The ISO must manage to the net load curve by controlling resources. Load & Net Load (MW) 0 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 Wind & Solar (MW) 1,000 Solar Load Wind Net Load Hour Net load captures variability from electricity demand and wind and solar output Slide 11

12. The ISO needs flexible resources to manage reliability of the future grid. Load & Net Load (MW) 0 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 Wind & Solar (MW) Net Load Hour One measure of flexibility is ability to change output over a short time 6,700 MW in 3-hours 7,000 MW in 3-hours 12,700 MW in 3-hours Slide 12

13. California’s success is driving the need for smarter grid applications. Flexible generation Non-generation capability Demand response Energy storage Targeted energy efficiency Better forecasts Better visibility Technology pilots Improved regional coordination Slide 13

14. A diverse resource mix can meet the needs of the future grid. Resource type Traditional Use Future gridValue Conventional generation Baseload Peaking Ability to start and stop frequently Low minimum operating levels Supports ramping needs Mitigates overgeneration Renewable generation Must takeAbility to modify output Decreases ramping needs Provides voltage support Demand response EmergencyFrequent, short duration events Automated response Defers or offsets generation or transmission investment Mitigates overgeneration Energy storage Peak-shiftingAbility to start and stop frequently Frequent, short duration events Supports ramping needs Mitigates overgeneration Provides frequency response Electric vehicles Not applicableFrequent, short duration events Automated response Mitigates overgeneration Provides frequency response Slide 14

15. Page 15 PacifiCorp will pay the ISO for 5-minute automated balancing services. California and PacifiCorp ratepayers will benefit from automated optimization of generation dispatch. Enables higher levels of renewable integration at lower cost. California smart technology will benefit ratepayers and improve renewable integration in the West.

16. Reality of Southern California’s Grid post-San Onofre Details San Onofre represented 16% of local generation or ~1.4 million homes More importantly its location was on a critical transmission path that was crucial to voltage support Challenge Once through cooling retirement timeline of 5,000 MW Annual load growth of 400 MW Difficult to move limited energy to load without adequate voltage support Page 16

17. Summary of staff approach Requirements: Maintain reliability – Number 1 priority Establish a common understanding Approach: Utilize existing processes to get final decisions on long-term solutions by mid-year 2014. Solutions could include: −50% of incremental need from energy efficiency, demand response, distributed generation, and storage. −Authorize transmission upgrades to reduce needs −Authorize conventional resources where preferred resources and transmission development is insufficient −Establish contingency plans to address key risks −Manage critical risks for air permits, transmission siting, preferred resource deployment/effectiveness, natural gas supply Page 17

18. San Onofre closure causes reliability problems in Southern California because Los Angeles and San Diego are load pockets with limited options All three characteristics are needed – not all resources can provide. Compliance with once-through cooling schedule compounds the issues. San Onofre provided: 2,246 MW in the LA Basin 1,100 MVars supporting voltages between Los Angeles & San Diego Real power (Watts) Runs lights and appliances Requires correct voltage for delivery (like pressure in water pipes) Reactive power (Vars) Over or under supply of Vars causes voltages to climb or fall Local needs must be met locally Real-time changes (“contingency” response) System must be ready to respond to events Some events are instantaneous; others allow 30 minutes Page 18

19. Expected resource needs and potential solutions Total load in LA Basin & San Diego: 2018 = 27,500 MW 2022 = 29,000 MW *1,800 MW authorized May include additional preferred resources Transmission could further reduce need Page 19

20. Specific near term actions (2013 - 2018) VARsMWVARs & MW Review permits for Talega & San Onofre Mesa projects Flex-Alert funding beyond 2014 Maintain capacity at Cabrillo II Extend Huntington Beach synchronous condensers Permit construction of Sycamore-Penasquitos 230kv line Timely action on Pio Pico Modify San Onofre voltage criteria (w/SCE) Authorize acceleration of EE, DR, DG, and storage procurement in target areas Authorize procurement to replace Encina Evaluate conversion of one San Onofre unit to a synchronous condenser Evaluate transmission alternatives Timely decisions to license replacements for OTC capacity Develop & implement multi- year auction for DR and EE Create contingency permitting process CPUC CEC ISO Page 20

21. Ensuring reliability 2019 & beyond CPUC Authorize additional resources thru LTPP and other proceedings, including EE, DR, DG, storage Direct SDG&E and SCE to pursue contingency permits in Northern San Diego County and LA Basin that will be competitively bid to independent generation developers Address potential need for gas infrastructure in San Diego CEC Conduct siting review of contingency generation Establish contingency approach to OTC compliance deadlines in consultation with the State Water Resources Control Board ISO Consider transmission alternatives - AC, DC, sub-marine cables Monitor system upgrades in collaboration with the CEC and CPUC Trigger contingency backups Page 21

22. Commitment to Preferred Resources CPUC will seek to add 800 MW to 1000 MW of Distributed Generation, Demand Response, Efficiency, and storage on top of the 3,000 MW already targeted for the state. This commitment has several key challenges. –The additional resources will need to be geographically located –Resource mix will need to be established so that it offsets need for voltage support –Timing is critical. Page 22

23. The Grid of the Future Greener, smarter and more secure electric future Wind and solar capacity nearly doubles by year 2020 Diverse, flexible resources key to reliability Improved regional coordination 23

24. Changing usage patterns Page 24 Smart technologies help consumers manage bills Nighttime electric vehicle charging expands Electricity usage harder to forecast Electric light-duty vehicles increasing Electric mass transportation (including people movers) increasing 24

25. For more information go to www.caiso.comwww.caiso.com Page 25 Sign up to receive Flex Alert notices via twitter or RSS feed @CalifornialSO Or download ISO Today to monitor ISO real-time power grid conditions, receive alerts and track calendar events To subscribe, simply copy and paste the link to the RSS feed you are interested in into your feed reader or news aggregator software Go to flexalert.org for more informationflexalert.org

26. THANK YOU Slide 26