This webinar session discusses changes to the generation portfolio, the introduction of significant renewable resources, and the deployment of customer-side resources.

1. The Changing Utility Landscape and its
Implications for Transmission
Transmission Summit West
September 24, 2013
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

2. Table of Contents
Demand Growth and Implications
Changes to the Generation Portfolio
Technology Innovation
Utility Business Model
Implications for Utilities and for Transmission
1
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

3. Electricity Use Trends and Forecast
US Demand Growth 1950-2040
 The Energy Information Administration (EIA)
projects growth in electricity use in the United
States to remain below 1% for the
foreseeable future
 All types of end-use demand declined,
beginning in 2008
 Industrial end-use saw the greatest decrease
of all sectors in 2009
 Residential saw an uptick in 2010 but has
been declining since
Electricity Sales by End-Use Sector, in Trillion KWHs
 Commercial use has been the most stable
but is still below pre-recession levels
110%
105%
 Direct energy use has increased in the years
2009–2012, possibly at the expense of other
types of demand
100%
95%
90%
85%
80%
2007
Residential
2
2008
2009
Commercial
2010
Industrial
Source: EIA, Electric Power Monthly, April 2013
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
2011
2012
Direct Use

4. In the Intermediate Term – Significant
Coal Plant Retirements Will Occur
Selected U.S. Coal Plant Retirement Forecasts (including
2012): 30 GWs to 100 GWs between 2015 and 2020
Analyst
Projected Retirements
Union of Concerned
Scientists
59 GWs “ripe for retirement” in
add’n to est. 41 GWs announced
Brattle
59–77 GWs
EIA
49 GWs by 2040
Sanford Bernstein
75 GWs by 2033
Reuters/Factbox
36 GWs by 2015
Barclays
24–29 GWs by 2015 (exclusive of 9
GWs retired in 2012)
Black & Veatch
62 GWs by 2020
Standard & Poor’s
35–50 GWs by 2016
BMO Capital Markets
Announced Coal-Fired Plant Retirements
as of Jan. 2013 (Focus on WECC and ERCOT)
30 GWs by 2020 (exclusive of 9
GWs retired in 2012)
 Significant coal retirements are underway: Environmental regulations are increasing pressure on coal-fired
generators to invest in new air quality controls or to retire (before year-end 2015); this capacity will largely be
offset by new gas-based generation
3
Sources: Industry news; SNL Financial; ScottMadden analysis
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

5. Coal Retirements in WECC
Planned Coal Unit Retirements for WECC, 2013–2018
Unit
Arapahoe ST 3
W N Clark ST 1
W N Clark ST 2
Port of Stockton District
Ener CFG STG
Ben French ST1
Neil Simpson ST5
Osage (WY) ST1
Osage (WY) ST2
Osage (WY) ST3
Reid Gardner ST1
Reid Gardner ST2
Reid Gardner ST3
Carbon ST1
Carbon ST2
Cherokee (CO) ST3
San Juan ST2
San Juan ST3
Valmont ST5
Cherokee (CO) ST4
Reid Gardner ST4
Kennecott Utah Copper
ST1
Kennecott Utah Copper
ST2
Kennecott Utah Copper
ST3
4
State
CO
CO
CO
Operating Original
Capacity In-service
(MW)
Year
44
1951
18
1955
25
1959
Date to be
Retired
12/1/13
12/1/13
12/1/13
Age at
Retirement
Ultimate Parent
62
Xcel Energy Inc.
58
Black Hills Corp.
54
Black Hills Corp.
CA
SD
WY
WY
WY
WY
NV
NV
NV
UT
UT
CO
NM
NM
CO
CO
NV
44
22
19
10
10
10
100
100
98
67
105
152
320
495
184
352
255
1987
1961
1969
1948
1949
1952
1965
1968
1976
1954
1957
1962
1973
1979
1964
1968
1983
2013
3/1/14
3/1/14
3/1/14
3/1/14
3/1/14
2014
2014
2014
1/1/15
1/1/15
2015
12/17/13
12/17/13
12/17/13
2017
2017
26
53
45
66
65
62
49
46
38
61
58
53
44
38
53
49
34
DTE Energy Co.
Black Hills Corp.
Black Hills Corp.
Black Hills Corp.
Black Hills Corp.
Black Hills Corp.
NV Energy Inc.
NV Energy Inc.
NV Energy Inc.
Multi-owned
Multi-owned
Xcel Energy Inc.
Multi-owned
Multi-owned
Xcel Energy Inc.
Xcel Energy Inc.
Multi-owned
UT
50
1943
1/18/13
75
Rio Tinto
UT
25
1943
1/18/13
75
Rio Tinto
UT
25
1946
1/18/13
72
Rio Tinto
Sources: SNL Financial; NERC 2012 Long Term Reliability Assessment
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Comments
 Of the proposed retirements
between 2013–2018, the majority
are slated to occur in the MidAtlantic and parts of the Midwest
and South
 A total of 2530 MWs of coal is
scheduled to be retired in WECC
 Coal retirements are not the
primary driver of new
transmission needs in WECC

6. Wind
Industry Trends
 WECC experienced the largest annual capacity increase
of the NERC regional entities
• Of the 13,129 MW of wind added in the U.S. in
2012, 3,918 MW were added in WECC
• Total WECC utility wind capacity as of 2012 was
18,327 MW
 At the end of 2012 there were 125 GWs of wind capacity
in the interconnection queues in the US
Top 10 WECC Wind
Projects by Capacity in Advanced Development or Construction
Phase with Estimated Cost
Power Plant
Owner Name
Mescalero Ridge
Wind Project
Caithness
Energy LLC
Portland
Tucannon River Wind
Farm (Lower Snake
General
River Phase II)
Electric Co.
Summit Ridge Wind Lotus Group
Farm
USA
ArcLight
Alta East Wind
Capital
Project
Partners LLC
New
Estimated
Estimated
Capacity State Completion Construction
(MW)
Date
Cost ($000)
800
NM
-
$1,760,000
267
WA
2015
$535,000
200
OR
01/2015
$440,220
153
CA
-
$336,600
Global
Infrastructure
Mgmt LLC
153
CA
-
$336,600
Alta Wind X
ArcLight
Capital
Partners LLC
138
CA
01/2015
$303,600
Alta Wind X
Global
Infrastructure
Mgmt LLC
138
CA
01/2015
$303,600
North Sky River
Wind Energy
Project
 On a cumulative basis, Texas remained the leader
among states, with 12,214 MWs installed at the end of
2012—more than twice as much as the next-highest state
(California, with 5,542 MWs)
Alta East Wind
Project
NextEra
Energy
135
CA
-
$295,812
110
CA
2013
$242,000
104
OR
-
$300,000
Pacific Wind
Echanis Project
5
Sources: WECC 2012 Power Supply Assessment, Wind Technologies Report, California ISO, SNL
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
EDF
Renewable
Energy
Columbia
Energy
Partners

7. Solar
Industry Trends
 In 2013, the U.S.’s cumulative installed solar capacity
will surpass 10 GWs (utility scale + DG), with 4.4
GWs of PV and 912 MWs of concentrating solar power
(CSP) installed so far in 2013
 There were 38 individual utility scale PV projects
totaling 452 MWs completed in Q2 2013. All ten of
the largest projects completed were installed in either
California or Arizona
6
Top 10 WECC Solar Projects by Capacity in Advanced Development or
Construction Phase with Estimated Cost
New
Estimated Estimated
Power Plant
Owner Name Capacity State Completion Construction
(MW)
Date
Cost ($000)
Desert Sunlight
NextEra
550
CA
2015
$2,300,000
Project
Energy
Sumitomo
Desert Sunlight
Corp. of
550
CA
2015
$2,300,000
Project
America
GE Energy
Desert Sunlight
Financial
550
CA
2015
$2,300,000
Project
Svcs
Palen Solar Electric
Chevron
Generating System
Energy
500
CA
06/2016
$2,000,000
(CA Solar 10)
Solutions
Palen Solar Electric
Caithness
Generating System
500
CA
06/2016
$2,000,000
Energy LLC
(CA Solar 10)
Palen Solar Electric
BrightSource
Generating System
500
CA
06/2016
$2,000,000
Energy Inc.
(CA Solar 10)
Blythe Solar Power
NextEra
Project
485
CA
2018
$1,130,000
Energy
(Photovoltaic)
Sustainable
Nevada 300 Solar
Energy
300
NV
12/2014
$800,000
Project (Techren)
Capital
Nevada 300 Solar
POSCO
300
NV
12/2014
$800,000
Project (Techren)
Power
First Solar
Stateline Solar
Development
300
CA
12/2016
$1,590,000
Project
LLC
Sources: EIA (latest data as of Aug. 2013), SEPA, GTM, SNL, Sustainable Business News, NY Times, ScottMadden analysis
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

8. Technology Innovation and Reduction of Load
Automated Metering Infrastructure
Improving Functionality:
 Demand side management (DSM) , DR, and EE
programs have been around for a long time
 Emerging technologies are increasing the capability
and reach of these programs

DSM and Energy Efficiency
AMI enables direct control of customer
devices during peak-load conditions and
two-way communication about load
reductions

DA is increasing the reliability and resiliency
of the distribution grid
 Markets and aggregation of DR are creating a new
“supply” source
 DR and EE programs can be used to reduce load
and to defer expenditures on utility infrastructure
7
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

9. Technology Innovation and
Customer Alternatives
Distributed Energy Resources
Enabling customer alternatives:
 Facilitated by Smart Grid, net metering
policies, and subsidies, more and more
distributed energy resources are being
deployed

There are approximately 71,000 MWs
of CHP on the grid today

As of 2012, there were 3.5 GWs of net
metered projects on the grid; 80% were
in five states (Source: SEPA)
 Microgrids are emerging as a viable option for
commercial customers and are a substitute for
generation, transmission, and distribution

Drivers for microgrid implementations
include increased reliability, economics,
and “green” alternatives
 As storage technologies mature, they will
enable more customer-side resources
8
Sources: EIA Form 860 data as of Jan. 2013 for Distributed Energy Resources chart; SEPA, EIA
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Microgrids

10. Microgrids: An Overview
Definition: A group of interconnected loads and distributed energy resources within
clearly defined electrical boundaries that acts as a single-controllable entity with
respect to the main grid
Description
Industry Trends
 A microgrid can connect and disconnect from the
grid to enable it to operate in grid-connected or
island mode. In island mode, the microgrid neither
draws power from the main grid nor supplies power
to it
 Microgrid configurations are based on the number of
end users, real estate parcels to be served,
ownership of real estate parcels, and whether
infrastructure crosses a public street
 Consumer base has traditionally been university
campuses, military bases, and municipalities for
mission critical needs
 According to Navigant Research, as of April 2013,
North America has 1,459 MWs of microgrid capacity
online and more than 1,122 MWs in the
planned/under development or proposed phase
 By 2020, capacity is projected to be 5,973
MWs
 The institutional/campus segment is the largest
sector for microgrids globally
 Several drivers are contributing to the current
interest in microgrids—reliability, RPS, grid security,
and economics
 Reliability has been the primary driver of
demand, as it enables consumers to be selfsufficient during times of power disruption—
storms highlight the issue
 Smaller scale renewables can be utilized
 Certain customers are attracted by economics
 Fuel choices are increasing (e.g., natural gas, solar,
biomass); however, economic viability varies by
region
 Studies show that microgrids are economically
viable for commercial and industrial customers
ranging in size from 4–40 MWs and universities
ranging from 2–40 MWs
 Example:
 All 23 of the California State System
campuses have some form of a microgrid; four
plan to upgrade
9
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

11. Distributed Generation
State Ranking by Net Metered Customers, 2011
Net Metered Customers by Customer Class, 2007–2011
Net Metered Customers
250,000
200,000
Rank
State
Customers
% of U.S.
Total
1
California
115,921
52%
2
3-Year CAGR: 48%
5-Year CAGR: 46%
New Jersey
12,959
6%
3
12,654
6%
4
Arizona
11,450
5%
Commercial
100,000
Colorado
Industrial
150,000
5
Hawaii
9,822
4%
Residential
50,000
State Ranking by Net Metered Capacity, 2011
Capacity (MW)
% of U.S.
Total
1,192
44%
0
2007
2008
2009
2010
2011
Rank
State
1
2
Observations
 Net metered systems are examined to understand trends in distributed
generation
 Driven by strong deployment in a few states, the number of net
metered customers continues to grow steadily
 In 2011, the residential sector accounted for 90% of net metered
customers and 39% of net metered capacity; commercial customers
accounted for 9% of net metered customers and 44% of net metered
capacity
 California is a clear leader in net metered customers and capacity
 In 2011, Arizona ranked first in the sale of excess energy, and
Massachusetts ranked a surprising second
California
New Jersey
442
17%
3
Pennsylvania
146
5%
4
Colorado
137
5%
5
Massachusetts
79
3%
State Ranking by Sale of Excess Energy, 2011
Rank
State
Sale of Excess
Energy (MWh)
Percent of
U.S. Total
Note:
Net metering data represents systems with nameplate capacity of 2 MWs or less.
Sources: EIA, ScottMadden analysis
Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Arizona
118,983
47%
2
Massachusetts
58,394
23%
3
Nevada
15,350
6%
4
California
8,713
3%
5
10
1
Hawaii
7,402
3%

12. Implications for Utility Business Models
Control is dispersed, many
systems loosely tied
Controlled centrally,
one integrated system
High
Low
Increasing change and complexity
Traditional Vertically Integrated Utility
Disaggregated Supply and Demand
 Focus continues on central station
generation, long-haul transmission
 High penetration of distributed
generation (combined heat & power
and renewables)
 Technology initiatives focus on
improving the existing integrated
system
 Emergence of microgrids
 Customers driving the “discussion”
 May see reduced loads due to
energy efficiency and distributed
resources but customers remain
 Utilities driving the “discussion”
Drivers
 High cost/kWh, favorable policies
 Customer requirements (cost, reliability, “green-ness”)
 Regulatory “enticements” (subsidies for certain resources, net metering)
Not all utilities will face the same pressures in the same timeframe;
they will focus on different types of infrastructure in the near term.
11
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

13. Where Will Utilities be Most Impacted?
Contributing Factors
ScottMadden believes that several factors will contribute to a region’s attractiveness for
alternative supply sources:
 Electricity rates
 Net metering and interconnection policies
 Prevalence of and policy toward solar and third-party providers
 RPS carve outs for solar
12
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

14. Contributing Factor:
Average Retail Electricity Prices (2012)
2012 Average Retail Electricity Prices (Cents/KWh)
DC
6.5 cents to 8 cents
8.01 cents to 9.5 cents
9.51 cents to 12 cents
12.01 cents to 14 cents
14.01 cents to 35 cents
13
Source: U.S. Chamber of Commerce, Institute for 21st Century Energy
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

15. Contributing Factor:
Net Metering
 43 jurisdictions have
net metering rules,
which allow the sale
to the local
distribution utility of
excess distributed
generation output
State Grading of Net Metering Policy
Encouraging Customer-Sited Generation (as of Late 2012)
 The ability to
monetize this extra
power provides
additional financial
benefits to distributed
generation
 As shown, the MidAtlantic, California,
and parts of the
Mountain West have
more distributed
resource-friendly
policies
Relative Ranking*
A
B
C
D
F
Better
NA
Puerto Rico
Note:
*Relative rankings are based upon the following factors: system capacity (accommodates broader and larger DG capacities); higher total program limits (caps); lenient
“rollover” provisions that allow more excess electricity (vs. consumption) to be rolled over to future months and credited then; less onerous-metering requirements;
customer ownership of renewable energy credits (customer ownership is better); range of eligible technologies (broader is better); customer class eligibility (less restrictive
is better); permissible aggregation (aggregation is better); community-shared renewables (shared is better); additional fees (safe harbor protecting against fees is better);
types of utilities applicable (all types are better); third-party treatment (third-party PPA permission is better).
Source: Interstate Renewable Energy Council, “Facing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures,” November 2012
14
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

16. Prospects for Distributed Resources
Map Score
Better
0–2
3–5
6–8
9–11
12–14
 Where jurisdictions are “better” on more factors (e.g., easier interconnection; third-party solar PPAs
permitted; net metering; lower differential between utility-supplied power and installed solar PV), they
scored higher on the map
 The states that score highest are most likely to a significant influx of distributed resources
15
Sources: ScottMadden analysis; inputs from DSIRE, IREC, American Council for An Energy-Efficient Economy;
U.S. Energy information Administration; and other sources
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

17. What Does This Mean?
What Should Utilities Do?
Area of
Concern
Implications
For Consideration
Strategy
 The utility will face
competition and
possibly loss of
revenue
 What business(es) should we be in?
 Is there an opportunity to become the “single
point of contact” to the customer?
Financial
 Customers are using
less electricity or selfsupplying
 Does decoupling make sense?
 How should we address net metering?
 Is there a need for alternative rate structures?
Real Time
Operations
 Operators will be
challenged to see and
operate new resources
 How should visualization in operations be
expanded?
 In an RTO environment, who works with the
alternative providers? In a non-RTO
environment?
System
Planning
 Traditional utilities plan
for central station
generation, long-haul
transmission
 How do our models account for non-traditional
resources?
 How should we address spatial and temporal
questions?
Stakeholder
Management
 Customers may have
various new “energy
providers”
 How do we work with all our new and existing
stakeholders?
 What is our strategy?
19
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

18. What Do These Changes Mean for Transmission?
Its Complicated…
System planning will become more complicated
 Regional differences will become more acute
 Transmission planning may need to consider the availability of different types of resources
 Load forecasting may change or need to become more granular
 Location and timing will matter more and more as the system is assessed
Operation of the grid requires more sophisticated visualization and tools
 Visualization of myriad resources will become important in areas of high penetration
 Utilities, RTOs, and ISOs will need to consider these resources as they manage the real-time
environment
Transmission owners and operators will have to work with many more parties to manage
the grid
 The shifting business model has opened markets to new participants
Transmission owners and operators are being pulled in two directions:
integrate utility-scale renewables and accommodate distributed resources
17
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

19. In Summary
We are living in a world of:
 Declining demand growth
 A shift away from coal
 A move toward renewables
 Increasingly distributed resources
We need to think hard about:
 Meeting the reliability needs of the system with new participants and resources
 Integrating both large and small scale resources to ensure reliability
18
Copyright © 2013 by ScottMadden, Inc. All rights reserved.

20. Cristin M. Lyons
Partner
ScottMadden, Inc.
2626 Glenwood Avenue
Suite 480
Raleigh, NC 27608
cmlyons@scottmadden.com
O: 919-781-4191 M: 919-247-1031
19
Copyright © 2013 by ScottMadden, Inc. All rights reserved.