1. Can Renewables Replace Coal? John Coggins, Manager Resource Planning & Development February 18, 2011

2. Electric Generation Terminology NGS Stakeholder Meeting J.D. Coggins 2/18/11 2 Capacity Generator capability at a moment in time Unit of measure is “megawatt” (MW) Energy Generator output accumulated over a period of time Unit of measure is “megawatt-hour” (MWh) Energy = Capacity (MW) x Time (h)

3. Electric GenerationCost Categories Construction or capital costs Cost to build a new generating facility Operating costs Cost to operate and produce electrical energy Delivery costs Cost to build transmission for delivery to customers Integration costs Cost to accommodate intermittency NGS Stakeholder Meeting J.D. Coggins 2/18/11 3

4. Meeting Customer Needs When available, renewables displace conventional resources Peak Intermediate Baseload Noon AM PM NGS Stakeholder Meeting J.D. Coggins 2/18/11 4

5. Customer Needs NGS Stakeholder Meeting J.D. Coggins 2/18/11 Summer Load Profile 5

6. Peak Capacity Firming - Wind Summer Load Profile Capacity Firming Wind Generation Profile Median Day 6

7. Peak Capacity Firming - Solar Summer Load Profile Capacity Firming Solar Generation Profile 7

8. Regulation Source: Jay Apt CMU, 4.6 MW TEP Solar Array (Arizona) NGS Stakeholder Meeting J.D. Coggins 2/18/11 8

9. Integration Costs Peak Capacity Firming $15-34/MWh Based on capital cost of a new gas turbine Regulation $4-9/MWh Results from wind integration cost studies, 2009 Wind Technologies Market Report, U.S. Department of Energy NGS Stakeholder Meeting J.D. Coggins 2/18/11 9

10. What about Storage? NGS Stakeholder Meeting J.D. Coggins 2/18/11 10

11. Conventional Resources NGS Stakeholder Meeting J.D. Coggins 2/18/11 11

12. Renewable Options NGS Stakeholder Meeting J.D. Coggins 2/18/11 12 * Limited Dispatchability

13. NGS Stakeholder Meeting J.D. Coggins 2/18/11 13 Generation Cost Comparison Total LevelizedCost

14. NGS Stakeholder Meeting J.D. Coggins 2/18/11 14 Generation Cost Comparison Total LevelizedCost

15. Capacity FactorTypical Wind Resource NGS Stakeholder Meeting J.D. Coggins 2/18/11 15

16. Capacity FactorTypical Wind Resource NGS Stakeholder Meeting J.D. Coggins 2/18/11 16 Wind

17. Capacity FactorWind Vs. Coal NGS Stakeholder Meeting J.D. Coggins 2/18/11 17 Coal 90% Wind

20. 7232 MW of WindNGS Stakeholder Meeting J.D. Coggins 2/18/11 18 Energy = Capacity x Time x Capacity Factor

21. Wind - Capital Cost 7232 MW of Wind Average Capital Cost: $1.54Million/MW NGS Stakeholder Meeting J.D. Coggins 2/18/11 19 $1.54 Million/MW x 7232 MW = $11.1 Billion

22. Wind - Land Requirements Land = 7232 MW x 158 Acres/MW = 1.14 million acres or 1780 Sq. Miles NGS Stakeholder Meeting J.D. Coggins 2/18/11 20

25. Summary – Solar PV Example NGS Stakeholder Meeting J.D. Coggins 2/18/11 23 Solar PV NGS Construction Costs ($ Millions) * New Emission Controls

26. Conclusions Intermittent renewables cannot meet operational needs Conventional resources are required Renewables have high integration and capital costs relative to existing coal High capital costs are compounded when building 3 times the capacity Large land requirements Extensive transmission requirements NGS Stakeholder Meeting J.D. Coggins 2/18/11 24

27. So Where do Renewables Fit in? Renewables can supplement, but not replace, conventional resources Reduce use of fossil fuels Reduce emissions Increase resource diversity Help to decrease water consumption Costs for renewables (and storage) must continue to come down to expand implementation NGS Stakeholder Meeting J.D. Coggins 2/18/11 25

28. Other Considerations If NGS is shut down for any reason, what resources would likely replace it? Where would the replacement resources be located? What would be the impact on the Navajo and Hopi people? NGS Stakeholder Meeting J.D. Coggins 2/18/11 26

29. Where is Gas Generation Located in Arizona? NGS Stakeholder Meeting J.D. Coggins 2/18/11 27

30. NGS Stakeholder Meeting J.D. Coggins 2/18/11 28

31. NGS Stakeholder Meeting J.D. Coggins 2/18/11 29

32. SRP Sustainable Portfolio NGS Stakeholder Meeting J.D. Coggins 2/18/11 30 FY11 Resource Plan

33. Dry Lake Wind Phase I Iberdrola Renewables 63 MW 18 miles northwest of Snowflake, AZ, adjacent to State Route 377 Located on a combination of private, State and BLM land Contract Term: 20 years September 4, 2009 Commercial Operation 31 NGS Stakeholder Meeting J.D. Coggins 2/18/11

34. Dry Lake Wind Phase II Iberdrola Renewables 64 MW 3 miles east of Phase I Contract Term: 20 years November 28, 2010 Commercial Operation 32 NGS Stakeholder Meeting J.D. Coggins 2/18/11

35. Hudson Ranch Geothermal Phase I Energy Source 50 MW Imperial Valley, CA Contract Term: 30 years Status: Construction began in June Commercial operation estimated Q2 2012 SRP has rights to additional development 33 NGS Stakeholder Meeting J.D. Coggins 2/18/11

37. 20 MW

38. SunPower polycrystalline panels

39. Single axis tracking

40. Florence, AZ

41. Contract Term: 25 years

42. Status:

43. Contracts executed

44. Construction underway

45. Commercial operation estimated Q3 201134 NGS Stakeholder Meeting J.D. Coggins 2/18/11

47. Power Operations Building (75 kW)

48. Newly constructed call center in Pinal County LEED Certified (180 kW)35 NGS Stakeholder Meeting J.D. Coggins 2/18/11

49. City Partnerships Phoenix Pecos Park Community Center Scottsdale Senior Center Phoenix Pecos Park & Ride U.S. Bureau of Reclamation 36 NGS Stakeholder Meeting J.D. Coggins 2/18/11

51. 9.2 kW system

52. Completed 2006

53. Body Sculpting Center

54. 29 kW system

55. Completed 2007

56. Optima

57. 8 kW system

58. Completed 2006

59. Integrity Building Corp.

60. 19 kW system

61. Completed 200837 NGS Stakeholder Meeting J.D. Coggins 2/18/11

63. 500 kW solar electric system containing 2,448 solar panels

64. System spans 68,000 sq ft

65. Estimated CO2 reductions of approximately 392 metric tons per year

66. Operational October 200838 NGS Stakeholder Meeting J.D. Coggins 2/18/11

68. $3 per month

69. 5,500 residential customers and 100 business customers

70. New projects – Nina Mason Pulliam Rio Salado Audubon Education Center, Liberty Wildlife, Sunshine Acres Children’s HomeHabitat for Humanity The Phoenix Zoo 39 NGS Stakeholder Meeting J.D. Coggins 2/18/11

72. Educational materials and educator training related to solar energy

73. System will allow students to monitor energy output and use data for “real-world” math learning and application40 NGS Stakeholder Meeting J.D. Coggins 2/18/11

74. NGS Stakeholder Meeting J.D. Coggins 2/18/11 41

75. NGS Stakeholder Meeting J.D. Coggins 2/18/11 42 Wind Farm’s Second Phase Is Completed And Working By Tammy Gray-Searles In late December, the second phase of Dry Lake Wind Farm was completed and quietly began operation. According to Iberdrola public relations representative Jan Johnson, the testing phase is complete and power is being sold to Salt River Project (SRP). Construction was completed slightly ahead of schedule, and the turbines began running on Dec. 22. “The weather was cooperative over the construction season,” Johnson noted. “Even the wind was cooperative and didn’t blow too hard when we needed to use the cranes.” A total of 31 Suzlon turbines were constructed at the site. They are capable of generating up to 65 megawatts. Johnson noted that the energy produced is enough to power about 9,000 “typical homes served.” According to Iberdrola Business Developer Chris Bergen, the second phase represents a $110 million investment by the company. The latest addition to the wind farm is located just west of Highway 77, about two miles north of the Snowflake town limits, or about five miles north of the start of the business district. In relation to the first phase, it is about four miles southeast of the existing set of turbines. If the two phases were mapped out as squares on a chessboard, they would be diagonal to each other, touching at one corner. Phase II encompasses approximately 10,240 acres. Completion of the second phase just more than doubles the total number of wind turbines in the project, bringing the total to 61. The first phase of the project, which included 30 turbines, was completed in August 2009. According to Johnson, the second phase adds five more full-time permanent jobs. About 200 workers were employed during the construction phase. Power from both phases is sold to SRP as part of a contract between the companies. Now that the second phase is complete, Johnson noted that Iberdrola is making plans for a third phase of construction. “It is in permitting,” she said. “We’re hoping to have additional phases.”