1. Efficiency and Demand Response NARUC Washington, DC February 14, 2006 Steve Specker President & CEO

2. 2 © 2006 Electric Power Research Institute, Inc. All rights reserved. Key Points Energy efficiency (EE) and demand response (DR) can be cost-effective alternatives to adding new capacity Programmatic approaches to EE and DR have been successful, but have only “scratched-the-surface” of what’s possible Huge opportunity to utilize technology, innovation, and markets to drive EE, DR, and overall electricity utilization

3. 3 © 2006 Electric Power Research Institute, Inc. All rights reserved. 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 01020304050 Price of CO 2 Credits, $/metric ton Levelized Cost of Electricity, cents/KWh Wind@29% CF Nuclear PC w/o cap IGCC w/o cap Biomass NGCC@$6 Comparative Costs of “CO 2 -Free” Generation

4. 4 © 2006 Electric Power Research Institute, Inc. All rights reserved. Cost Effective Efficiency 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 01020304050 Price of CO 2 Credits, $/metric ton Levelized Cost of Electricity, cents/KWh PC w/o cap Region of Cost-Effective Efficiency

5. 5 © 2006 Electric Power Research Institute, Inc. All rights reserved. 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 01020304050 Levelized Cost of Electricity, cents/KWh Residential Appliance Removal Residential Audits Residential Lighting PC w/o cap Cost Effective Efficiency Commercial Lighting Industrial Motors Industrial Compressed Air Price of CO 2 Credits, $/metric ton

6. 6 © 2006 Electric Power Research Institute, Inc. All rights reserved. 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 01020304050 Price of CO 2 Credits, $/metric ton Levelized Cost of Electricity, cents/KWh Cost Effective Efficiency Cost Effectiveness Depends on Available Generation Alternatives and the Price of CO 2

7. 7 © 2006 Electric Power Research Institute, Inc. All rights reserved. 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 01020304050 Price of CO 2 Credits, $/metric ton Levelized Cost of Electricity, cents/KWh Cost-Effective Demand Response CT Peaker@$6 Region of Cost-effective Demand Response 2010 Portfolio

8. 8 © 2006 Electric Power Research Institute, Inc. All rights reserved. Key Points Energy efficiency (EE) and demand response (DR) can be cost-effective alternatives to adding new capacity Programmatic approaches to EE and DR have been successful, but have only “scratched-the-surface” of what’s possible Huge opportunity to utilize technology, innovation, and markets to drive EE, DR, and overall electricity utilization

9. 9 © 2006 Electric Power Research Institute, Inc. All rights reserved. Key Points Energy efficiency (EE) and demand response (DR) can be cost-effective alternatives to adding new capacity Programmatic approaches to EE and DR have been successful, but have only “scratched-the-surface” of what’s possible Huge opportunity to utilize technology, innovation, and markets to drive EE, DR, and overall electricity utilization

10. 10 © 2006 Electric Power Research Institute, Inc. All rights reserved. Smart End-use Devices Communications Infrastructure Innovative Regulation and Rates Innovative Markets The Four Building Blocks Improving the Efficiency of Electricity Utilization

11. 11 © 2006 Electric Power Research Institute, Inc. All rights reserved. Communications Infrastructure Overview Utility Consumer Meter The Grid: Secure Private Network Local Area Network Internet* Multiple Networks Can Be Utilized *Or other standardized wide area communications

12. 12 © 2006 Electric Power Research Institute, Inc. All rights reserved. Communications Infrastructure…Key Enabler Utility Consumer Meter The Grid: Secure Private Network Local Area Network Internet Key Enabler of EE and DR Innovation 2-way Information Exchange Between Energy Services Providers and Specific Energy Consuming Devices

13. 13 © 2006 Electric Power Research Institute, Inc. All rights reserved. Utility Consumer Internet Illustrating the Opportunity Internet used for information exchange only… No control functions and no connection to the grid

14. 14 © 2006 Electric Power Research Institute, Inc. All rights reserved. Internet* Enables Two-way Information Exchange With Specific End-use Devices Future Direction of the Internet Ubiquitous Internet Connectivity Proliferation of Internet Addressable Devices –Could Include Air-conditioners, Thermostats, Major Appliances, Motors, Pumps, Lighting Systems, Etc. *And other standardized wide area communications

15. 15 © 2006 Electric Power Research Institute, Inc. All rights reserved. Innovative Regulations and Rates Electricity prices delivered directly to specific end-use devices Time-of-use Rates Day-ahead hour-by-hour rates Real-time rates Special rates for specific end-use devices

16. 16 © 2006 Electric Power Research Institute, Inc. All rights reserved. Smart End-use Devices Smart, network addressable devices – Air-conditioners, Major Appliances, Motors, Pumps, Lighting Systems, etc. Receive electricity rates through the network Optimize operation to minimize energy costs Measure and communicate power usage through the network to energy service provider

17. 17 © 2006 Electric Power Research Institute, Inc. All rights reserved. Innovative Demand Response Example Air-Conditioning Scenario AC receives day-ahead hour-by-hour electricity prices and day-ahead weather forecast through the internet Consumer sets thermostat at 75° (-5°/+3°) AC “learns” rate of house cool-down/heat-up based on consumer habits, outside temperature, time of year, etc. AC optimizes operation to minimize consumers energy costs AC measures hourly power consumption and communicates it to energy service provider through the internet

18. 18 © 2006 Electric Power Research Institute, Inc. All rights reserved. Innovative Efficiency Example Rates specifically designed to encourage purchase of new, more energy efficient devices Example 5 yr. favorable rates “packaged” with purchase of specific new model of a smarter, more energy efficient air- conditioner, refrigerator, or other major energy consuming device

19. 19 © 2006 Electric Power Research Institute, Inc. All rights reserved. Innovative Electricity Utilization Example Rates specifically designed to encourage new off- peak utilization of electricity Examples 10 yr. favorable off-peak rates packaged with purchase of electric heating system 5 yr. favorable off-peak rates packaged with purchase of new Pluggable Hybrid-Electric Vehicle

20. 20 © 2006 Electric Power Research Institute, Inc. All rights reserved. Advanced Metering Infrastructures Utility Consumer Meter The Grid: Secure Private Network Local Area Network Internet* *Or other standardized wide area communications Integrating AMR, Grid Mgmt & Operations, Energy Procurement And Customer Services

21. 21 © 2006 Electric Power Research Institute, Inc. All rights reserved. Advanced Metering Infrastructures Utility Consumer Meter The Grid: Secure Private Network Local Area Network Internet* Need to Provide Future Capability for… 2-way Information Exchange Between Energy Services Providers and Specific Energy Consuming Devices *Or other standardized wide area communications

22. 22 © 2006 Electric Power Research Institute, Inc. All rights reserved. Moving Forward…The IntelliGrid Consortium Developing open, standards-based solutions for the communicating power grid of the future IntelliGrid architecture published –A “building-code” for the communicating power grid –Being utilized by some of your companies in real applications Advanced Metering Infrastructure Users Group Consumer Portal Projects

23. 23 © 2006 Electric Power Research Institute, Inc. All rights reserved. Summary Energy efficiency (EE) and demand response (DR) can be cost-effective alternatives to adding new capacity Programmatic approaches to EE and DR have been successful, but have only “scratched-the-surface” of what’s possible Huge opportunity to utilize technology, innovation, and markets to drive EE, DR, and overall electricity utilization