Increasing the Role of Renewable Energy Sources

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 • 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

3. Regulatory Climate and Renewable Energy • 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 • Economic Development • Environmental Improvement • 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 • Common Opportunities: • These standards create new sources of revenue for clean energy investments • Tax credits and emissions credits can also support clean energy investments • 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

6. Regulatory Climate for Renewable Energy • State Programs often vary in policy objectives and regulatory design • Mix of Renewable Energy Resources • Inclusion of Energy Efficiency • Preferences for in-state or specific types of renewables • Increasingly, States are considering Renewable Energy Policies in their environmental compliance strategies • State Air Quality Plans • 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 • Voluntary Renewable Energy purchasing programs complement mandatory programs and aid market and political acceptance • Corporate and Government purchasing initiatives • Voluntary Utility 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 • Measurement and verification of performance • Integration of energy performance and environmental objectives • 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 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.

11. Illinois Sustainable Energy Plan: RPS • 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: 10% in 2007 - 2008 15% in 2009 – 2011 20% in 2012 – 2014 25% in 2015 - 2017

13. Illinois Pilot—Participants • State IL Dept. of Commerce & Econ. Opportunity IL Environmental Protection Agency Illinois Commerce Commission • Federal U.S. Department of Energy U.S. Environmental Protection Agency NREL • Research Shaw 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 (SO2) • Nitrogen oxides (NOx) • Mercury (Hg) • Carbon dioxide (CO2)

15. Modeling the Impact of RPS Measures on Electric Generation • 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 • 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 • 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 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 • 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 • Improved modeling • 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 • 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 • 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