1. Increasing the Role of Renewable Energy Sources Bill Abolt Chicago District Manager Shaw Environmental & Infrastructure, Inc. May 10, 2007

2. Regulatory Climate and Renewable Energy Renewable Energy Portfolio Standards (RPS) require that a specified amount of energy come from renewable sources Renewable Energy Portfolio Standards (RPS) require that a specified amount of energy come from renewable sources These portfolio requirements are often adopted by states and applied as mandates to electricity providers These portfolio requirements are often adopted by states and applied as mandates to electricity providers Portfolio standards can also be adopted on a voluntary basis as purchasing preferences Portfolio standards can also be adopted on a voluntary basis as purchasing preferences

3. Regulatory Climate and Renewable Energy Renewable Energy Portfolio mandates and preferences are being adopted in increasing numbers Renewable Energy Portfolio mandates and preferences are being adopted in increasing numbers These programs often seek to achieve multiple objectives often associated with both improved energy performance and sustainability goals These programs often seek to achieve multiple objectives often associated with both improved energy performance and sustainability goals Economic Development Economic Development Environmental Improvement Environmental Improvement Energy Independence, Reliability and Cost Control Energy Independence, Reliability and Cost Control

4. Regulatory Climate and Renewable Energy Mandatory and voluntary portfolio programs promote the use of renewable energy and energy-efficient practices Mandatory and voluntary portfolio programs promote the use of renewable energy and energy-efficient practices Common Opportunities: Common Opportunities: These standards create new sources of revenue for clean energy investments These standards create new sources of revenue for clean energy investments Tax credits and emissions credits can also support clean energy investments Tax credits and emissions credits can also support clean energy investments Clean energy investments can reduce both capital and operating costs Clean energy investments can reduce both capital and operating costs

5. Regulatory Climate for Renewable Energy 22 states and the District of Columbia have implemented Renewable Portfolio Standards 22 states and the District of Columbia have implemented Renewable Portfolio Standards

6. Regulatory Climate for Renewable Energy State Programs often vary in policy objectives and regulatory design State Programs often vary in policy objectives and regulatory design Mix of Renewable Energy Resources Mix of Renewable Energy Resources Inclusion of Energy Efficiency Inclusion of Energy Efficiency Preferences for in-state or specific types of renewables Preferences for in-state or specific types of renewables Increasingly, States are considering Renewable Energy Policies in their environmental compliance strategies Increasingly, States are considering Renewable Energy Policies in their environmental compliance strategies State Air Quality Plans State Air Quality Plans Climate Change Strategies Climate Change Strategies

7. Regulatory Climate for Renewable Energy Tax expenditures and other government assistance also support the trend towards increased development of renewable energy Tax expenditures and other government assistance also support the trend towards increased development of renewable energy Voluntary Renewable Energy purchasing programs complement mandatory programs and aid market and political acceptance Voluntary Renewable Energy purchasing programs complement mandatory programs and aid market and political acceptance Corporate and Government purchasing initiatives Corporate and Government purchasing initiatives Voluntary Utility Programs Voluntary Utility Programs Retail programs Retail programs

8. Regulatory Climate for Renewable Energy Existing regulatory schemes may not be sufficient to address the increased reliance on renewables to meet energy and environmental objectives Existing regulatory schemes may not be sufficient to address the increased reliance on renewables to meet energy and environmental objectives Measurement and verification of performance Measurement and verification of performance Integration of energy performance and environmental objectives Integration of energy performance and environmental objectives Proliferation of programs that splinter incentives and increase transaction costs and complexity Proliferation of programs that splinter incentives and increase transaction costs and complexity

9. Illinois and Renewable Energy State of Illinois is working to expand renewable energy sources and account for the full range of environmental benefits associated with those sources State of Illinois is working to expand renewable energy sources and account for the full range of environmental benefits associated with those sources State energy and environmental officials are working closely with US Department of Energy and National Renewable Energy Lab (NREL) to evaluate the environmental impacts of RPS policies in a national pilot project State energy and environmental officials are working closely with US Department of Energy and National Renewable Energy Lab (NREL) to evaluate the environmental impacts of RPS policies in a national pilot project

10. Illinois Pilot—Purpose Determine the extent to which the Illinois Sustainable Energy Plan - which includes a Renewable Portfolio Standard and an Energy Efficiency Portfolio Standard (EPS) - will result in emissions reductions that are quantifiable, replicable and scaleable, and that can be incorporated into the State Air Quality Plans. Determine the extent to which the Illinois Sustainable Energy Plan - which includes a Renewable Portfolio Standard and an Energy Efficiency Portfolio Standard (EPS) - will result in emissions reductions that are quantifiable, replicable and scaleable, and that can be incorporated into the State Air Quality Plans.

11. Illinois Sustainable Energy Plan: RPS Percent of electricity sold to customers from renewable sources: Percent of electricity sold to customers from renewable sources: 2% by 2007 3% by 2008 4% by 2009 5% by 2010 6% by 2011 7% by 2012 8% by 2013

12. Illinois Sustainable Energy Plan: EEPS Procure energy efficiency and demand reduction to reduce projected annual load growth by: Procure energy efficiency and demand reduction to reduce projected annual load growth by: 10% in 2007 - 2008 15% in 2009 – 2011 20% in 2012 – 2014 25% in 2015 - 2017

13. Illinois Pilot—Participants StateIL Dept. of Commerce & Econ. Opportunity StateIL Dept. of Commerce & Econ. Opportunity IL Environmental Protection Agency Illinois Commerce Commission FederalU.S. Department of Energy FederalU.S. Department of Energy U.S. Environmental Protection Agency NREL ResearchShaw Environmental, Inc. ResearchShaw Environmental, Inc. UIC Energy Resources Center PowerWorld Corporation Western Illinois University

14. Illinois Pilot—Process  Determine the amount, type and location of electric generation that will be displaced by RPS/EEPS measures stipulated in the Sustainable Energy Plan (SEP)  Determine the impact of SEP measures on air emissions for: Sulfur dioxide (SO 2 ) Sulfur dioxide (SO 2 ) Nitrogen oxides (NOx) Nitrogen oxides (NOx) Mercury (Hg) Mercury (Hg) Carbon dioxide (CO 2 ) Carbon dioxide (CO 2 )

15. Modeling the Impact of RPS Measures on Electric Generation Illinois is a significant exporter of power Illinois is a significant exporter of power Where air quality benefits specifically from renewables will accrue is unknown; increased use of renewables may result in emission reductions outside the non-attainment areas Where air quality benefits specifically from renewables will accrue is unknown; increased use of renewables may result in emission reductions outside the non-attainment areas Regional model of economic dispatch of generation needed because power flows across state lines according to economics and the physical constraints of the system Regional model of economic dispatch of generation needed because power flows across state lines according to economics and the physical constraints of the system

16. Illinois Pilot Coal is the primary fuel that will be displaced by the Illinois RPS/EPS Coal is the primary fuel that will be displaced by the Illinois RPS/EPS The RPS/EPS will result in pollution reductions for all pollutants in a multi-state area The RPS/EPS will result in pollution reductions for all pollutants in a multi-state area The RPS/EPS displaces fossil fuel generation in multiple states The RPS/EPS displaces fossil fuel generation in multiple states The RPS/EPS produces emission reductions that may not be adequately captured under current air quality regulatory schemes The RPS/EPS produces emission reductions that may not be adequately captured under current air quality regulatory schemes

17. Illinois Pilot Portfolio mandates can impact the order in which power is dispatched Portfolio mandates can impact the order in which power is dispatched The mix of renewable resources that are deployed to the grid impact both the extent and the timing of emission reductions The mix of renewable resources that are deployed to the grid impact both the extent and the timing of emission reductions A state’s RPS program can be structured to address specific air quality objectives A state’s RPS program can be structured to address specific air quality objectives Improved modeling Improved modeling Increased collaboration between state energy and environmental officials Increased collaboration between state energy and environmental officials

18. Metropolitan Mayors Caucus Initiated a pilot project to promote the expansion of renewable energy and energy efficiency in municipal projects Initiated a pilot project to promote the expansion of renewable energy and energy efficiency in municipal projects Seek to capture the energy and environmental attributes of municipal clean energy investments Seek to capture the energy and environmental attributes of municipal clean energy investments Created Clean Tags for inclusion in both Climate Change and Portfolio Programs Created Clean Tags for inclusion in both Climate Change and Portfolio Programs Caucus will serve as aggregator of Clean Tags Caucus will serve as aggregator of Clean Tags

19. Questions? Shaw E & I – Chicago Bill Abolt Phone: (312) 499-3525 E-mail: bill.abolt@shawgrp.com