Integrating More Renewable Energy in the Grid Bert Garvin Vice President, Regulatory Affairs July 21, 2008 NARUC Summer Meeting July 22, 2008

2 The United States has abundant wind resources It is estimated there are 8,000 GW of wind energy that can be economically delivered to customers….

3 No country—in a single year—has added the volume of wind that the US put in service last year Rising concerns over climate change and public policies favoring wind generation are spurring the tremendous growth in wind energy…

4 Compound Annual Growth Rate of 19% Installed GigaWatts (GW) Source: Emerging Energy Research The U.S. wind market is expected to double from 2006 to 2009, and double again by 2015 The U.S. wind market is growing rapidly and is forecasted to continue

5 Texas still leads all states in wind growth by a wide margin Source: AWEA; Cumulative megawatts (MW)/As of 1/08

6 Wind development is expected to be robust for the foreseeable future

7 FPL Energy operates wind generating facilities in 15 states and in Canada FPL Energy’s wind portfolio at year end of 2007

8 U.S. market leader with 30% market share –5,077 net MW in operation at 1/1/08 –1,100+ MW expected to be added during 2008 –FPL Energy wind investment ~$8 billion by year end 2008 Adding 8 – 10,000 MW in 2007 – 2012 –$ billion expected new investment FPL Energy is the U.S. leader in wind development FPL Energy was largest developer again in 2007

9 Source: Emerging Energy Research 2007 Installed Wind Capacity Top 10 U.S. Wind Developers The number of large wind developers is growing as US wind market tops over 5,000 MW added in 2007 New players are emerging in the U.S…..

10 And more are on the way….

11 Ensuring greater wind growth requires policymakers to address well known regulatory and transmission challenges Who will build? What is the cost? Who decides Who pays? How to maintain reliability? Surging wind growth is forcing policymakers to confront old challenges with new sense of urgency

12 Location constrained resource Resource constrained interconnection points Resource remote from load Transmission lines needed to support this variable resource Wind faces unique challenges Transmission is the critical path for wind development

13 Queue Management Transmission Planning & Investment Cost Allocation & Cost Recovery Transmission Siting Key Regulatory Challenges Transforming the transmission system for wind Eliminating barriers to greater transmission investment will determine pace and direction of renewable development in US

14 The Interconnection Problem First-come, first-served” queue management Minimum deposits Minimal Land Control Requirements 3-year, no-cost suspension period The interconnection process created in FERC Order 2003 is broken Lengthy process (Years) “Real” projects are unable to interconnect to grid State RPS Policies now at risk

15 The interconnection bottleneck is a national problem There are over 200 GW of wind interconnection requests mired in queues across the country

16 Wind interconnection queue is stalling wind development in the Midwest Wind now makes up 85 % of roughly 80,000 MW of interconnection requests in Midwest ISO queue Slide title in Arial 24 bold underlined

17 FERC & RTOs are leading efforts to reform the interconnection process FERC –December 2007 Technical Conference –Midwest ISO Proposed Tariff Changes (June 2008) –CAISO Proposed Tariff Changes (July 2008) –Other RTOs to File Proposed Tariff Changes by December 2008 Key Short Term Reforms –Meaningful Financial Milestones –Increased Deposits –Promotion of Conditional Energy Resource Service Finding a path forward on queue reform

18 Greater transmission investment is the long-term challenge Getting more lines built is the common denominator for getting more renewable resources to consumers

19 Transmission fixes have to occur in Midwest to harness wind’s potential According to Midwest ISO, wind farms and lines capable of delivering 16,000 MW of wind energy to consumers in East means 5,000 miles of new 765kV lines at a cost $13 billion

20 Competitive Renewable Energy Zones (CREZ) –Will set course for future transmission growth in Texas –PUCT approved significant transmission expansion ($4.9B for 11.5GW) last week –Largest build out in US history The CREZ process in Texas will deliver long term solutions for wind generation and transmission expansion CREZ process ensures transmission development critical to renewable growth will continue Texas

21 Benefits of transmission build out are clear Transmission costs make up less than 10% of delivered cost of energy Benefits far exceed the costs

22 Who pays? Proving a “direct benefit” of oversized line for your ratepayers is high hurdle Postage stamp or License Plate? Uncertainty over cost allocation is hampering transmission development across the country No one wants to pay for something that benefits many others…. Cost Allocation & Cost Recovery

23 Who Decides? –State jurisdiction –Federal backstop authority Fractured siting processes is stalling transmission development across the country Getting more clean energy on the grid will take more aggressive solutions on siting needed transmission lines No Silver Bullet on Transmission Siting

24 FERC Order 890 Regional Efforts State Efforts Renewed emphasis on regional planning to access renewables Success or failure of efforts will be measured by getting more lines built Greater Focus on Planning

25 QUESTIONS?