Austin Electricity Conference Austin, Texas April 12, 2018 Achieving High Renewable Penetration with Grid-Friendly Operations Austin Electricity Conference Austin, Texas April 12, 2018 Arne Olson, Senior Partner

2013 California utility study found that 50%+ RPS penetrations are feasible 50% (and higher) renewable penetration is feasible, under one condition: Renewables must be dispatchable based on the needs of the system Renewable dispatch has little to no cost* Lost PTC and REC values Curtailment increases at higher penetrations Significantly impacts economics of incremental investments Portfolio diversity, flexible loads, flexible thermal generation, energy storage become interesting Source: E3, “Investigating a High RPS in California,” https://ethree.com/documents/E3_Final_RPS_Report_2014_01_06_with_appendices.pdf

Solar can be operated very flexibly Results from CAISO/NREL/First Solar demo Demo of 300 MW solar project in California Solar PV resources with smart inverters and advanced plant controls can enhance reliability by providing: Essential reliability services during periods of over-supply, e.g. Regulation Voltage support (daytime and nighttime) Fast frequency response Frequency response for low and high freq. events

Mix of Overbuild and Storage Optimal portfolio minimizes cost by balancing investment in solutions against increasing renewable curtailment Mix of Overbuild and Storage All Overbuild All Storage

Over 100 GW of solar and 50 GW of storage by 2050 California’s long-term strategy looks like a mix of solar and batteries Over 100 GW of solar and 50 GW of storage by 2050 Nearly 40 GW of solar by 2030 Electric sector reduces emissions to 20 MMT by 2050 while serving much higher loads from electrification Other regions may have a different mix

Solar is the new hydro Curtailment of solar will become routine and commonplace Occasional spill is a reality at every hydroelectric facility Solar can be operated very flexibly Solar must contribute to meeting grid needs Abundant, low-cost solar power will become the dominant issue for planning and investment in the West

Natural gas generation will still be needed for reliability and is a good complement to hydro/wind/solar Gas generation is dispatched to help meet electric loads during cold weather events Cold Winter Day under 80% Reduction Without thermal generation, there is not enough energy to serve load during all hours Cold Winter Day Without Gas Production capacity Actual production Energy from Zero-Carbon Resources Pacific Northwest: most challenging conditions system are multi-day cold snaps that occur during drought years Wind and solar production tends to be very low during these conditions, even under “100%” RPS Absent a technology breakthrough, gas generation appears to be needed for reliability

Thank You! Energy and Environmental Economics, Inc. (E3) 101 Montgomery Street, Suite 1600 San Francisco, CA 94104 Tel 415-391-5100 www.ethree.com Arne Olson, Senior Partner (arne@ethree.com)