1. Wind Development in Texas:
History and Future Growth
November 9, 2011!
Legislative advertising paid for by: John W. Fainter, Jr. • President and CEO Association of Electric Companies of Texas, Inc.
1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net

2. AECT Principles!
• AECT is an advocacy group composed of member companies committed to:
- Ensuring a modern, reliable infrastructure for the supply & delivery of
electricity.
- Supporting efficient competitive markets that are fair to customers and
market participants.
- Supporting consistent and predictable oversight and regulation that will
promote investment and ensure the stability of Texas’ electric industry.
- Promoting an economically strong and environmentally healthy future for
Texas, including conservation and efficient use of available resources.
• AECT member companies remain dedicated to providing Texas customers with
reliable service and are committed to the highest standards of integrity.
The Association of Electric Companies of Texas, Inc. (AECT) is a trade organization of investor-
owned electric companies in Texas. Organized in 1978, AECT provides a forum for member
company representatives to exchange information about public policy, and to communicate with
government officials and the public. For more information, visit www.aect.net.
2

3. U.S. Divided into Eight!
Reliability Regions!
• The eight reliability regions in the FERC
continental U.S. are subject to the
oversight and enforcement authority of NERC
the North American Electric Reliability
Corporation (NERC), which is subject to
the Federal Energy Regulatory
Commission’s (FERC) oversight. NERC
is responsible for developing standards
to ensure and improve reliability for
delivery of electricity on the bulk power
system.
• Electric systems in Texas are located
within four separate reliability regions:
- Texas Reliability Entity (TRE),
which oversees participants in the
Electric Reliability Council of
Texas (ERCOT);
- SERC Reliability Corporation;
- Southwest Power Pool (SPP); and
- Western Electricity Coordinating
Council (WECC).
(ERCOT)
3

4. AECT Member Companies!
Within ERCOT!
Retail Electric Providers
Transmission and Distribution Utilities
Generation Companies
4

5. AECT Companies!
Outside of ERCOT!
SERC Reliability Corporation
Southwest Power Pool (SPP)
Western Electricity Coordinating
Council (WECC)
5

6. ERCOT: Separate companies provide
retail, transmission & distribution and
generation services!
Power Flow
Financial Flow
Regulated
• In competitive markets, consumers have multiple retail electric providers
(REPs) and service plans to choose from.
• Wholesale and retail prices are set by competitive market forces, while the
PUC sets transmission and distribution rates. 6

7. ERCOT: Separate companies provide
retail, transmission & distribution and
generation services!
Power Flow
Financial Flow
Regulated
• Because wholesale electric prices are set by the competitive market, the
risks associated with the cost of construction, operations and maintenance
of a generation plant are borne entirely by the generator and its investors,
not by end-use customers.
7

8. Outside ERCOT: A single company
provides retail, transmission & distribution
and generation services in each area!
Power Flow
Financial Flow
Regulated
• In fully regulated markets, the PUC sets retail rates charged to end-use
customers.
• Each of these service areas is part of multi-state electric grids, with
differing regulations. In many cases, vertically integrated utilities purchase
wholesale power from certain unregulated entities. 8

9. Outside ERCOT: A single company
provides retail, transmission & distribution
and generation services in each area!
Power Flow
Financial Flow
Regulated
• New power plants in these regions can be built by both regulated entities
and certain unregulated entities or qualifying facilities.
• Regulated utility power plants, however, must be approved by the PUC
after a rigorous review of need and siting.
9

10. Wind-Powered Generation
Type of Generation
+ Wind is plentiful in certain parts of Texas.
- Wind blows intermittently, making it a less reliable power
source.
Environmental Issues
+ No air emissions.
- Can affect migratory birds.
- Concerns about aesthetic impact.
Cost of Construction and Fuels
+ No fuel cost.
- Limited ability to replace other generation to satisfy reserve margins.
- Imposes other costs on the system, such as increased ancillary service
requirements, backup capacity and the need for transmission lines to reach rural
wind farms.
10!

11. Texas Generation Mix Compared to U.S.
Average!
Texas U.S. Average
Renewable
Petroleum Other (Mostly Petroleum)
Energy (MWh)
(Mostly Wind) Renewable
5.6% (Mostly Hydro) 0.9%
0.4%
Natural Gas
Nuclear 10.1%
10.5% 23.3%
Nuclear
47.6% 20.2%
35.0%
Natural Gas
44.5%
Coal
Coal
Renewable
Petroleum Other (Mostly
Summer Capacity (MW)
(Mostly Wind)
9.9% Petroleum)
7.7% Natural Gas
Nuclear 4.8% 0.2%
Renewable
(Mostly Hydro)
12.4%
39.1%
19.7% Nuclear 9.9%
Coal
64.9%
30.7%
Natural Gas
Coal
Note: Numbers may not add up to 100% due to rounding.
Source: EIA (2009 Data) 11

12. Renewable Development:!
Legislative and Regulatory Steps
• The Texas Legislature mandated steady increases in renewable
power in TX76RSB 7 (1999) and TX791RSB 20 (2005).
– Starting Line: 880 MW in 1999
– Old Goal 1: 2,880 MW by 2009 (Achieved by 2007)
– New Goal 1: 5,880 MW by 2015
– New Target 1: 10,000 MW by 2025
– New Target 2: 500 MW non-wind renewable generation
12!

13. Renewable Development:!
Legislative and Regulatory Steps
• TX791SB 20 (2005) also required PUC to:
– designate Competitive Renewable Energy Zones (CREZs) in areas
in which renewable energy resources and suitable land areas are
sufficient to develop generating capacity from renewable
technologies;
– develop a plan to construct necessary transmission capacity in a
manner that is most beneficial and cost effective to customers; and
– take into account transmission constraints, the need for generation
and the level of financial commitment by generators when defining
CREZs.
• PUC adopted Substantive Rule 25.174 in December 2006,
which creates framework for determining CREZs.
• Texas currently has 10,135 MW of installed renewable
generation capacity (March 2011).
13!

14. Map of Adopted!
Competitive Renewable Energy Zones!
14!

15. Texas Has the Most Installed !
Wind Energy Capacity
23% of the nation’s installed wind generation capacity
is located in Texas.
Source: American Wind Energy Association, Through Q3 2011 15!

16. Wind Filling Energy Needs in ERCOT
ERCOT Overview
The ERCOT market covers roughly
85% of Texas overall power
usage
Record peak demand: 68,379 MW
• Occurred on August 3, 2011
Total installed wind capacity of
9,500 MW
• 33,921 MW of new wind
capacity generation requests
under review
Wind generation record: 7,400 MW
• Representing 15.2% of load
• Occurred on October 7, 2011
at 3:06 pm
Source: ERCOT, “ERCOT Successes and Challenges,” Presentation to the Texas Renewable Energy
Industries Association, November 7, 2011 16!
Nov. 7, 2011 2 Texas Renewable Energy Industries Association

17. Wind Filling Energy Needs in ERCOT
Summer 2011 – A Record-breaking Year
New Peak Demand Record: 68,379 megawatts, August 3, 2011
68 379 megawatts 3
- 4 percent increase over 2010 record
The 2010 peak demand – 65,776 MW, Aug. 23, 2010 – was broken 3 consecutive days:
- Aug. 1 66,867 MW
- AAug. 2 67 929 MW
67,929
- Aug. 3 68,379 MW
New Weekend Record: 65,159 MW, Sunday August 28
y g
- 5 percent increase over 2010 previous record – 62,320 MW
ERCOT Monthly Records since May 2011
September – 63 184 MW (Sept. 2); beats previous record of 59 524 MW by 6 1 percent
63,184 (Sept 59,524 6.1
July – 65,195 MW; beats previous record of 63,400 MW (July 13, 2009) by 7.8 percent
June – 63,102 MW; beats previous record of 62,278 MW (June 25, 2009) by 3.8 percent
May – 57,356 MW ; beats previous record of 56,344 MW (May 23, 2008) by 4.8 percent
Source: ERCOT, “ERCOT Successes and Challenges,” Presentation to the Texas Renewable Energy
Industries Association, November 7, 2011 17!
Nov. 7, 2011 3 Texas Renewable Energy Industries Association

18. Federal Production Tax Credit!
Set to Expire!
• The federal production tax credit (PT) began with the Energy
Policy Act in 1992.
– PTC is a 10-year inflation-adjusted tax credit that started at 1.5¢/
kWh
– Credit based on amount of electricity produced.
• Wind PTC set to expire on December 31, 2012
• Legislation has been filed to extend the tax credit.
18!

19. Federal Production Tax Credit!
Strongly Influences Investment!
Wind Investment by Year
Wind PTC Allowed to Expire in 2000, 2002 and 2004
Source: American Wind Energy Association
19!

20. Web: AECT.net
Blog: AECTnet.wordpress.com
Twitter: twitter.com/AECTnet
Facebook: Association of Electric Companies of
Texas, Inc.
Email: info@aect.net
20!