Meeting with Rep ________ Solar Industry Representatives May

Meeting with Rep. ________ Solar Industry Representatives May 5, 2010

Solar Industry is growing and competitive globally 2

The Solar Industry Supported 17, 000 New U. S. Jobs in 2009 l SEIA estimates 24, 000 people were directly employed in the U. S. solar energy business in 2009 l An additional 22, 000 worked for companies that supply services and materials l Solar supported 33, 000 induced jobs in 2009 l In sum, the U. S. solar industry supported 79, 000 jobs in 2009, 17, 000 more than the 62, 000 jobs supported in 2008 3

Overview of Resource Trends Capital Cost (Technology) Operation Cost (Fuel) T&D Cost (Grid) Emissions Cost (Environment) Coal Natural Gas Nuclear Wind Solar 4

Solar Costs Competitive With Other Generation Alternatives 5

States Across the U. S. Are Responding to the Opportunity l 29 States + DC have RPS Standards l 16 States + DC have Solar Shares l Half of those (NJ, DE, MD, IL, CO, NM, AZ, NV) have Solar Shares that exceed Pennsylvania 6

PA Responding Also: HB 2405 Solar Provisions Goals: l l Maximize rate-payer & statewide benefits Increase near-term targets, to match industry capacity for growth Market Mechanisms: l • l l “Force Majeure” and regular PUC Review Fixed Compliance Incentive (ACP) with Banking • • Double the goal in 2021 (0. 5% to 0. 97%) Extend the goal to 2026 (growth to 3%) Rate Payer Protection $450, declining 3%/yr 4 year AEC Banking Cost reduction through Long -term Contracting • 10 year contracts & other “least-cost” provisions 7

Increasing the Solar Share: Modest Now, Clear Signal Later Capacity (MW) Solar Share Total MW of Solar Capacity Reporting Year 2011: June 2010 - June 2011 8

SRECs in PA ~ 74 MW projected between grants awarded for 2010 (Sunshine, CFA, PEDA/ARRA, etc. ) and existing projects. Over 7 MW in operation in PA right now 9

PA Sunshine – Rebate Schedule 40 MW in Residential 35 MW in Sm. Comm. 75 MW Total in Small PV Systems 10

Pennsylvania Statewide Benefits from Solar l Direct net benefit is estimated to be $300 -500 MM through 2025, and $2. 5 B+ through 2035 (Includes cost of AECs, off-set by energy savings from the installed systems and lower wholesale prices for all) l Indirect benefits are estimated to be much larger and include 76, 500 to 153, 000 direct jobs and 341, 190 to 682, 380 indirect/induced jobs (Based on a study by Navigant Consulting) l Benefits are consistent with overall impact cited by Black & Veatch Study but include more specific estimates for solar 11

Estimated Rate Payer Impact of PA Solar Share l Average net impact on residential rates over next 15 years is almost zero l Average impact over next 25 years will be a reduction of 0. 4% l The reduction of rates increases over time as rate stabilization from solar energy takes effect l On an annual basis, there is little to no impact over the next 5 years: • • l Less than $1. 00 per year increase through 2012 Less than $3. 00 per year increase through 2015 Less than $4. 50 (0. 3%) per year increase at the highest point in 2019 Then A DECREASE that will exceed $12 (-0. 6%) per year by 2025 and may grow to over $30 (-1. 3%) per year by 2035 Even if all benefits are excluded, estimated cost of AECs alone never exceeds 1% of residential retail rates or approx. $18 for an entire year. 12

Market Development and Long Term Contracting l 10 year or longer AEC contracts make it possible to finance projects by reducing risk which, in turn, bring down costs. l Different segments have substantially different requirements l Sample SREC Contract Scenarios Certain contracting provisions can have significant bearing on cost & project development and must be managed carefully … … … 13

Setting a firm Solar ACP l Existing: “ 200% of the average market value of solar renewable energy credits sold during the reporting period within the service region of the regional transmission organization, including, where applicable, the levelized upfront rebates received by sellers of solar renewable energy credits in other jurisdictions in the PJM Interconnection, LLC transmission organization (PJM) or its successor. ” l New: “The alternative compliance payment for the solar alternative share shall be set at $450 per megawatt hour (MWH) per year beginning on January 1, 2011, and the amount shall be reduced by 3% each year thereafter” l Rationale: The ACP directly impacts solar development activity but not longterm SREC prices. A fixed schedule is a simple but effective signal to developers and investors that there will be sufficient incentive for utilities to buy SRECs as long as projects can be completed at SREC pricing lower than the ACP. NJ, MD, DE, MA, OH all have fixed ACP schedules. 14

East Coast Market Summary 15

Definitions: Solar thermal l l Existing language: Solar thermal energy – defined as “technology utilizing solar energy for water heating or for generating electricity New: Section 3. (b) adds “and solar thermal energy shares” to include this resource in the technologies qualifying for AEPS AECs and adds language in (4) to locate within the Commonwealth with an effective date of “after December 31, 2010. 16

Solar In Your District… 17