1. Renewable Energy: Legal and Policy Issues Frank Prager Vice President, Environmental Policy Xcel Energy November 20, 2009 Frank Prager Vice President, Environmental Policy Xcel Energy November 20, 2009

2. 2 Northern States Power Company Minnesota Public Service Company of Colorado Southwestern Public Service Company Southwestern Public Service Company Northern States Power Company Wisconsin No. 1 wind energy provider No. 5 in solar capacity Largest green pricing program Industry-leading voluntary emission reductions Leader in pursuit of new technologies No. 1 wind energy provider No. 5 in solar capacity Largest green pricing program Industry-leading voluntary emission reductions Leader in pursuit of new technologies Xcel Energy Inc. Gas Customers 1.9 M Electric Customers 3.4 M Gas Customers 1.9 M Electric Customers 3.4 M

3. 3 Biomass Solar Wind Xcel Energy States Served Xcel Energy’s Renewable Energy Geography

4. 4 Coal 46% Coal 46% Natural Gas 16% Renewables 25% Renewables 25% Nuclear 13% Nuclear 13% Owned & Purchased Energy Coal 52% Coal 52% Natural Gas 22% Natural Gas 22% Renewables 13% Renewables 13% Nuclear 12% Nuclear 12% 2008 2020 Other* 1% Other* 1% Advanced Technology: Adding Clean Energy Resources

5. 5 Xcel Energy Wind Capacity Growth of Xcel Energy Wind Capacity MW

6. 6 Utility-scale Photovoltaic: — 8.2 MW plant in operation in Alamosa — 17 MW plant planned for 2010 Concentrating Solar Power: — Uses mirrors to concentrate sunlight — Can be combined with thermal storage Colorado Solar*Rewards: — Customer-sited distributed generation — 35 MW on line – over 4000 customers Proposed 280 MW of new advanced solar in latest Colorado Resource Plan Utility-scale Photovoltaic: — 8.2 MW plant in operation in Alamosa — 17 MW plant planned for 2010 Concentrating Solar Power: — Uses mirrors to concentrate sunlight — Can be combined with thermal storage Colorado Solar*Rewards: — Customer-sited distributed generation — 35 MW on line – over 4000 customers Proposed 280 MW of new advanced solar in latest Colorado Resource Plan Solar

7. 7 Other Technologies and Initiatives Biomass — Bay Front: Coal-to-biomass conversion (Wisconsin) — Co-firing or stand-alone generation options — Pine beetle forests in Colorado Geothermal Other environmental initiatives — Energy efficiency and conservation — SmartGridCity™ — Emission reduction programs Biomass — Bay Front: Coal-to-biomass conversion (Wisconsin) — Co-firing or stand-alone generation options — Pine beetle forests in Colorado Geothermal Other environmental initiatives — Energy efficiency and conservation — SmartGridCity™ — Emission reduction programs Proposed Xcel Energy CO 2 Reductions

8. 8 Utility Perspective on Renewable Energy Renewable energy advantages — No net emissions  Important piece of portfolio of clean energy resources — Generally high levels of public and political acceptance — Little or no fuel price volatility Renewable energy challenges — Transmission — Capital — Price — Intermittency Key: Technological advancement

9. 9 Questions About Renewable and Clean Energy Policy Where to spend clean energy dollar? — Repowering coal/natural gas? — Renewable energy  New wind energy?  Distributed Solar/CSP?  Other technologies — Energy efficiency What combination of mandates and incentives? National natural gas supply issues? How to address intermittency and transmission? Integration of state and federal policy? — Tax policy — RPS Where to spend clean energy dollar? — Repowering coal/natural gas? — Renewable energy  New wind energy?  Distributed Solar/CSP?  Other technologies — Energy efficiency What combination of mandates and incentives? National natural gas supply issues? How to address intermittency and transmission? Integration of state and federal policy? — Tax policy — RPS

10. 10 National Renewable Energy Standard American Clean Energy and Security Act RES targets: — 6% in 2012/20% in 2020 — Three quarters from renewables — Companion to Cap & Trade Targets similar to other legislation (Bingaman, Markey) Energy efficiency alternative compliance option Key Xcel Energy issues: — Controlling customer cost for both C&T and the RES — Access to federal market regardless of state standards American Clean Energy and Security Act RES targets: — 6% in 2012/20% in 2020 — Three quarters from renewables — Companion to Cap & Trade Targets similar to other legislation (Bingaman, Markey) Energy efficiency alternative compliance option Key Xcel Energy issues: — Controlling customer cost for both C&T and the RES — Access to federal market regardless of state standards

11. 11 Transmission Planning & Interconnect Lead times — Clogged queues Cost allocation LDC vs. export Operations Balancing wind vs. load patterns Intermittency Meeting reliability standards Incentives Planning & Interconnect Lead times — Clogged queues Cost allocation LDC vs. export Operations Balancing wind vs. load patterns Intermittency Meeting reliability standards Incentives

12. 12 Tax credits critical to deploying renewable resources — Wind PTC expires in 2012 — Solar ITC expires 2016 Tax credits likely to be under pressure — Cost — Industry maturity (especially wind) Challenge: Bridging the gap to technological advancement Tax credits critical to deploying renewable resources — Wind PTC expires in 2012 — Solar ITC expires 2016 Tax credits likely to be under pressure — Cost — Industry maturity (especially wind) Challenge: Bridging the gap to technological advancement Tax Subsidies

13. 13 Renewable Integration Tax Credit RIC designed to offset costs of integrating intermittent renewable energy onto utility system Tax credit per kWh of intermittent (wind and solar) renewables, graduated based on percent of sales Designed to encourage more renewables and defray system costs of higher levels of integration RIC designed to offset costs of integrating intermittent renewable energy onto utility system Tax credit per kWh of intermittent (wind and solar) renewables, graduated based on percent of sales Designed to encourage more renewables and defray system costs of higher levels of integration

14. 14 Renewable Integration Tax Credit Detail % Generation Portfolio Derived from Renewable Resources Renewable Integration Tax Credit Less than 4%No Credit At least 4%, but less than 12% 0.10 cents/kWh At least 12%, but less than 19% 0.30 cents/kWh At least 19%0.50 cents/kWh * Estimated Cost, $180 million / year for ten years

15. 15 Utility Regulation and Advancing Renewable Technology Utility ratemaking vs. Technology risk Markets and entrepreneurs Distributed generation incentives — Rebate structure — Utility costs Critical role of traditional utility function

16. 16 Xcel Energy Support for New Renewable Technologies Advanced technology programs — SolarTAC — Innovative Clean Technology program — Minnesota Renewable Development Fund — Energy storage demonstrations — Smart Grid — NREL/EPRI Partnerships Goal: Encourage development of more competitive renewable energy technologies — Emission reductions — Energy and capacity resource — Carbon reduction strategy Advanced technology programs — SolarTAC — Innovative Clean Technology program — Minnesota Renewable Development Fund — Energy storage demonstrations — Smart Grid — NREL/EPRI Partnerships Goal: Encourage development of more competitive renewable energy technologies — Emission reductions — Energy and capacity resource — Carbon reduction strategy