1. ERCOT PUBLIC 3/25/2014 1 2014 LTSA Scenario and Data Assumptions March 25, 2014

2. ERCOT PUBLIC 3/25/2014 2 Outline  Scenario Assumptions  Capital Cost Projections  Fuel Price Projections  Emission Price Projections  Load Forecast  Retirement Process  Generation Siting Process  Additional Information

3. ERCOT PUBLIC 3/25/2014 3 Scenario Assumptions

4. ERCOT PUBLIC 3/25/2014 4 Capital Cost Projections

5. ERCOT PUBLIC 3/25/2014 5 Current Trends Capital Cost Assumptions (Nominal $/kW) Thermal Costs are increased 2.4% annually (EIA AEO 2014 early release) Solar PV costs are developer supplied

6. ERCOT PUBLIC 3/25/2014 6 High Capital Cost Assumptions (Nominal $/kW) High costs are 10% higher than those in Current Trends scenario

7. ERCOT PUBLIC 3/25/2014 7 Low Capital Cost Assumptions (Nominal $/kW) Low costs are 10% less than those in Current Trends scenario

8. ERCOT PUBLIC 3/25/2014 8 Fuel Price Projections

9. ERCOT PUBLIC 3/25/2014 9 NG Price for Scenarios Selected EIA AEO 2014 as price for Current Trends scenario Added $1.5/mmBtu for high price, $3.50/mmBtu for High Gas scenario Subtracted $1.00/mmBtu for low gas price

10. ERCOT PUBLIC 3/25/2014 10 Coal Price for Scenarios Average of price forecasts from 2014 and 2012 EIA AEO and SNL

11. ERCOT PUBLIC 3/25/2014 11 Emission Price Projections

12. ERCOT PUBLIC 3/25/2014 12 CO2 Price Forecast Average of price forecasts from Synapse and Fraunhofer for use in the Stringent Environmental scenario

13. ERCOT PUBLIC 3/25/2014 13 SO2 Price for Scenarios Average of price forecasts from EPA and Black & Veatch

14. ERCOT PUBLIC 3/25/2014 14 NOx Price and Mercury Trading for Scenarios Average of price forecasts from EPA and Black & Veatch Because MATS will be effective in 2016, no mercury emission allowance trading is assumed.

15. ERCOT PUBLIC 3/25/2014 15 Emission Assumptions for All Scenarios

16. ERCOT PUBLIC 3/25/2014 16 Load Forecast

17. ERCOT PUBLIC 3/25/2014 17 Peak increases at an average of 1.25% per year and energy increases at an average 1.68% per year Current Trends Load Forecast Peak Forecast

18. ERCOT PUBLIC 3/25/2014 18 LNG Exports Overview 9 Proposed LNG facilities in ERCOT 3 general locations (Freeport, Corpus Christi region, Brownsville) Assume principally powered from grid. Assume 2018-2019 online dates Assume each Bcf/d of LNG capacity has a load of several hundred MWs, based on indicative proprietary data available to ERCOT, but we expect public load data will become available soon. Available data indicates each Bcf/d of LNG capacity could used 300 to 500 MW. These numbers show the large load impact LNG facilities could have. LowCurrent Trends High Total LNG Capacity 1.8 Bcf/d5.8 Bcf/d9.8 Bcf/d 20180.6 Bcf/d Freeport 0.6 Bcf/d Freeport, 1.0 Bcf/d Corpus, 1.0 Bcf/d Brownsville 0.6 Bcf/d Freeport, 1.5 Bcf/d Corpus, 2.0 Bcf/d Brownsville 20191.2 Bcf/d Freeport 1.2 Bcf/d Freeport, 1.0 Bcf/d Corpus, 1.0 Bcf/d Brownsville 1.2 Bcf/d Freeport, 1.5 Bcf/d Corpus, 3.0 Bcf/d Brownsville Range of potential load additions 540 MW to 900 MW 1,740 MW to 2,900 MW 2,940 MW to 4,900 MW

19. ERCOT PUBLIC 3/25/2014 19 Retirement Process

20. ERCOT PUBLIC 3/25/2014 20 Wind units will be retired at 25 years Thermal retirements –All gas units will be retired at 50 years –All coal units will be retired at 55 years Need to evaluate UPLAN’s retirement process Fixed Length Retirements

21. ERCOT PUBLIC 3/25/2014 21 Age, efficiency, profit margins and cost of retrofits are considered Each category was broken into different groups and each group was given a value from 1-6 depending on number of groups –Age: 40 yrs (5) –Efficiency: 12 MMBtu (6) –Profit margins: >25% (1), 10-25% (2), 0-10% (3), -10-0% (4), -10- (-25)% (5), <- 25% (6) –Retrofit: need to define retrofit process UPLAN results will be used to determine profit margin values Each unit was given a total score (sum of values for each category) –∑ = A (Wa) + E (We) + P (Wp) + R (Wr) Retirement decision: if the unit’s total score was higher than 1 standard deviation above the mean of the sum of all units scores Economic Retirement Process

22. ERCOT PUBLIC 3/25/2014 22 Retrofit Costs for Emission Control

23. ERCOT PUBLIC 3/25/2014 23 Generation Siting Process

24. ERCOT PUBLIC 3/25/2014 24 Used process developed in the DOE LTS where consideration was give to: –Gas pipeline density –Railroad density –Urban population density –Wind and solar conditions –Surface water conditions –Non-attainment zones Also consider brownfield sites and other sources of water to determine a list of available 345 kV buses for the siting of new generation Expansion wind generation will use site profile information supplied by AWS Truepower from the 130 hypothetical sites delivered Sept 2012 Similar information will be used for the siting of solar projects. Profiles from URS delivered in March 2013 for potential sites in Texas Generation Siting Method

25. ERCOT PUBLIC 3/25/2014 25 Each new generator the UPLAN model builds (including wind and solar) will be given a list of potential 345 kV buses for siting UPLAN evaluates each site and will place the new unit at the site that results in the highest revenue ERCOT will review the site selection by UPLAN and re-site if it is appropriate to do so Generation Siting Method

26. ERCOT PUBLIC 3/25/2014 26 Additional Information

27. ERCOT PUBLIC 3/25/2014 27 Renewable Installations by Year Average installations per year for all years is 801 MWs. Average installations per year for the years 2006 thru 2009 is 1,766 MWs ERCOT Wind installations per year Wind installations per year up to 2,500 MW Solar installations per year up to 1,500 MW

28. ERCOT PUBLIC 3/25/2014 28 Next Steps Complete load data adjustments for Current Trends scenario o LNG additions o Oil and gas drilling additions Input all data for Current Trends scenario into UPLAN model Run UPLAN model and test/adjust processes developed for generation expansion and unit retirement Finalize data gathering and assumptions for all scenarios o EE and DR assumptions o LNG and drilling load o Other data

29. ERCOT PUBLIC 3/25/2014 29 Appendix

30. ERCOT PUBLIC 3/25/2014 30 Henry Hub forecast by Wood Mackenzie Source: Wood Mackenzie, “North America Natural Gas Outlook – ERCOT Planning Workshop”, Jan. 2014.

31. ERCOT PUBLIC 3/25/2014 31 Fraunhofer CO2 Price Projections Source: C. Kost, J. N. Mayer, J. Thomsen, N. Hartmann, C. Senkpiel, S. Philipps, S. Nold, S. Lude, N. Saad, T. Schlegl, “Levelized Cost of Electricity Renewable Energy Technologies”, Nov. 2013, Fraunhofer Institute for Solar Energy Systems ISE

32. ERCOT PUBLIC 3/25/2014 32 Source: EPA, Office of Air and Radiation, “Estimating Future Air Emissions Allowance Values”, Nov. 2006

33. ERCOT PUBLIC 3/25/2014 33 Source: Black & Veatch, “City of Ames Energy Resource Options Study”, Mar. 2013 Black & Veatch March 2013

34. ERCOT PUBLIC 3/25/2014 34 Ventyx Fall 2013 - NOX Source: Ventyx, “National Database Release Notes”, Fall 2013.

35. ERCOT PUBLIC 3/25/2014 35 Ventyx Fall 2013 – SOX

36. ERCOT PUBLIC 3/25/2014 36 Synapse CO2 Prices Source: P. Luckow, E.A. Stanton, B. Biewald, J. Fisher, F. Ackerman, E. Hausman, “2013 Carbon Dioxide Price Forecast”, Synaps Energy Economics, Nov. 2013.

37. ERCOT PUBLIC 3/25/2014 37 Ventyx Fall 2013 – CO2

38. ERCOT PUBLIC 3/25/2014 38 Technology Price Projections - 2012$ Capital cost estimates from 2013 EIA Capital Cost Projections Update, April 2013

39. ERCOT PUBLIC 3/25/2014 39 Technology Price Projections - 2012$ Capital cost estimates from August 2013 Lazard’s Levelized Cost of Energy Analysis

40. ERCOT PUBLIC 3/25/2014 40 Capital Cost Assumptions Average conventional capital cost assumptions GDP growth rate from EIA AEO 2014 Early Release - 2.4%

41. ERCOT PUBLIC 3/25/2014 41 Capital Cost Assumptions – Cont. Average renewable capital cost assumptions GDP growth rate from EIA AEO 2014 Early Release - 2.4%

42. ERCOT PUBLIC 3/25/2014 42 2013 Brattle ERCOT Study for Clean Energy Council assumed in the Reference Case that wind costs fall to 1,800 2012$/kW in 2015 and then remain constant in real terms through 2030. In the Low Cost Renewable case, they decline to 1,500 2012$/kW by 2030. The NREL 2012 Wind Technologies Market Report shows a range of $1,500 – 2,400/kW for recent capital costs for the Interior region (including Texas) Wind Cost Trends Source: NREL. 2012 Wind Technologies Market Report. August 2013.

43. ERCOT PUBLIC 3/25/2014 43 Recent performance improvements in wind turbines could increase capacity factors by 10% in the near term Projections for levelized cost of energy (LCOE) provide insight into both capital cost and performance trends Wind Capacity Factor Trends Source: NREL. IEA Wind Task 26: The Past And Future Cost Of Wind Energy, Work Package 2. May 2012.