1. CTOTF Special Workshop: Integrating Renewables into the Generation Mix: Challenges and Unknowns Jason Makansi President, Pearl Street Inc Executive Director, CAREBS 314.495.4545 www.pearlstreetinc.com Integrating Renewables and Conventional Generation

2. Today’s Landscape 60-90% of all generation interconnection requests in six ISO/RTOs are renewable energy “Environmental gauntlet” forcing smaller coal plants into retirement, new plants cancelled or postponed States RPS in place, Federal RPS lurking Renewable energy more bipartisan than most energy issues, especially when positioned as clean or non-carbon energy (including nukes) Pearl Street

3. Today’s Landscape Renewable energy more bipartisan than most energy issues, especially when positioned as clean or non-carbon energy (including nukes) Wind energy can drive prices into negative territory within a balancing authority Wind capacity factors average 30%, blows least when needed the most Fossil units undergoing deeper, more frequent cycling to fill in around wind. Costs not typically visible, but significant. Overall emissions profiles exacerbated. Pearl Street

4. Environmental Gauntlet Ozone PM 2.5 '08'09'10 '11'12'13 '14 '15 '16 '17 Beginning CAIR Phase I Seasonal NOx Cap HAPs MACT proposed rule Beginning CAIR Phase II Seasonal NOx Cap Revise d Ozone NAAQS Begin CAIR Phase I Annual SO 2 Cap -- adapted from Wegman (EPA 2003) Updated 2.15.10 Beginning CAIR Phase II Annual SO 2 & NOx Caps Next PM-2.5 NAAQS Revisio n Next Ozone NAAQS Revision SO 2 Primary NAAQS SO 2 /NO 2 Secondary NAAQS NO 2 Primar y NAAQ S SO 2 /NO 2 New PM-2.5 NAAQS Designations CAMR & Delisting Rule vacated Hg/HAPS Final EPA Nonattainment Designations PM-2.5 SIPs due (‘06) Proposed CAIR Replacement Rule Expected HAPS MACT final rule expected CAIR Vacated HAPS MACT Compliance 3 yrs after final rule CAIR Remand ed CAIR Begin CAIR Phase I Annual NOx Cap PM-2.5 SIPs due (‘97) 316(b) proposed rule expected 316(b) final rule expected 316(b) Compliance 3-4 yrs after final rule Effluent Guidelines proposed rule expected Water Effluent Guidelines Final rule expected Effluent Guidelines Compliance 3-5 yrs after final rule Begin Compliance Requirements under Final CCB Rule (ground water monitoring, double monitors, closure, dry ash conversion) Ash Proposed Rule for CCBs Manageme nt Final Rule for CCBs Mgmt Final CAIR Replacement Rule Expected Compliance with CAIR Replacement Rule CO 2 CO 2 Regulation Reconsider ed Ozone NAAQS

6. Integration Options Enhanced wind monitoring, forecasting, and communications with grid operators combined with demand side management– The “Smart Grid Option” Cycling, dispatching existing gas-fired assets and adding to the fleet- the “gas + wind” option Build a new layer of bulk and distributed energy storage infrastructure – the storage option Run old fossil units into the ground – the “these assets are already paid for anyway” option Pearl Street

7. We’ve been here before! Baseload nuclear build out of the 1960s-1980s. No cycling allowed Pumped storage hydroelectric (PSH) built so nukes could continue baseload operation 24,000 MW of PHS facilities operate today Bulk natural gas storage emerged with the creation of the dereg, wholesale gas market Renewables are opposite problem of nukes – unpredictable cycling and on-off within minutes Pearl Street

8. Intermittent, Unpredictable Wind In ERCOT, less than 10% of total wind capacity counted as being “available” during peak summer days Wind credited with 13% of its capacity value in PJM during peak periods MISO operators curtail thousands of MWs of wind daily; 1800 MW swings over hourly period common Wind resources shift suddenly and dramatically Pearl Street

10. Cycling Old, Small Fossil Units Stomp on the accelerator of your car enough times when cold and see what happens Cycling costs, not transparent, are nevertheless known to be significant Studies have shown that emissions from cycling fossil plants in Colorado and Texas may actually create a higher emissions burden because of wind fill-in Pearl Street

11. Gas + Wind Option A favorite one with this crowd, certainly! Gas turbine plants lose efficiency at part load. Metallurgical degradation similar to coal units Emissions profile much better than coal but an emissions-free MWh from wind still being traded for an emissions-laden MWh from fossil Emerging fast response turbine technology may alleviate some of these problems Pearl Street

12. Integrating Renewables: Killer App for Bulk Energy Storage Bulk storage options PHS and Compressed Air Energy Storage (CAES) are fully proven systems, cost effective, and available with full commercial warranties Bulk storage most expediently enables renewable energy integration with no additional reliability and technology risk to the grid and offers enhanced grid operations in other ways Pearl Street

14. Storage Goes Both Ways Unlike other options for renewable energy integration, bulk storage systems function both as load and generation, – ideal for ancillary services. Pearl Street

15. Other PHS, CAES Characteristics Both types of systems can move from idle position to full load in less than ten minutes, sometimes in as little as three minutes CAES and PHS comfortably charge or discharge for two, six, even twelve hour periods if necessary PHS has no emissions profile; CAES requires a minimum nat. gas input (in commercial versions) but emissions benefit compared to fossil units is considerable Both can act as a transmission resource, optimize transmission line loadings Pearl Street

16. CAES vs GTs and CCs Advanced commercially available CAES plant suffers only 7% deterioration in cycle efficiency between 25-100% output. CC can suffer 30% or more, GT even higher CCs require at least 40 minutes to come up to full load from warm condition, and several hours from a cold condition Simple cycle GTs are more flexible but limited by decremental reserves provided to grid operator Pearl Street

18. Bulk Storage Project Activity Up to forty new PHS facilities either have obtained a preliminary permit or have applied for one Between a dozen and two dozen CAES facilities are known to be under development CAES facility in Alabama operating for almost 20 years Numerous PHS facilities operating around the country for one to three decades Pearl Street

19. Putting Policies in Place Technology-neutral investment tax credit (ITC) is being considered by Congress California has a bill awaiting the Governator’s signature that could support storage procurement New York has instituted its “Limited Energy Storage Resource” (LESR) Policy PJM, MISO, ERCOT have grid policies that allow storage to provide ancillary services under market- based pricing. MISO considering a “ramping” product Several bulk storage projects were selected for funding through the ARRA Stimulus program Pearl Street

20. CAREBS – Storage Policy Voice The Coalition to Advance Renewable Energy through Bulk Storage (CAREBS) is dedicated to: – developing policy frameworks that support bulk storage – promoting the core message that a network of strategically located bulk storage facilities will bring more renewable energy to more people more of the time – optimizing grid operations through bulk storage use WWW.CAREBS.ORG Pearl Street

21. Thank you! Jason Makansi - 314-495-4545 jmakansi@pearlstreetinc.com President, Pearl Street Inc www.pearlstreetinc.com Principal, Pearl Street Liquidity Advisors LLC www.psliquidityadvisors.com Executive Director, Coalition to Advance Renewable Energy through Bulk Storage www.carebs.org Pearl Street