Moving Towards a More Sustainable and Secure Energy Future

Michael Kotara, P.E.,

SVP Power Generation, CPS Energy

G ti S itGeneration SummitFebruary 6, 2012

San Antonio, Texas

Overview of CPS Energygy

• Electric & Gas utility serving the greater San Antonio areaElectric & Gas utility serving the greater San Antonio area• Oldest energy utility in Texas – Founded in 1860• First service was gas lights in front of The Alamo

• One of the largest municipally‐owned utilities in the U SOne of the largest municipally owned utilities in the U.S.• 717,000 electric customers• 323,000 natural gas customers• 3,600 employees, p y• Nearly $10B in assets with AA credit rating by S&P

• Outstanding customer satisfaction track record• Low electric rates – 2011 Residential rates averaged about 9¢/kwhg /

J.D. Power Survey – Southern Region 2009 2010 2011

Electric Residential Customers 1st 3rd 2nd

Gas Residential Customers 1st 1st 1st

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CPS Energy’s Vision 2020gy

• Goals for Renewable Energy• Goals for Renewable Energy• 1,500 MW of renewable energy capacity by 2020

• Approximately 20% of generation capacity• 100 MW from renewable sources other than wind by 202000 o e e ab e sou ces o e a d by 0 0

• Goals for Energy Efficiency & Conservation• Save for Tomorrow Energy Plan (STEP) will help avoid 771 MW ofSave for Tomorrow Energy Plan (STEP) will help avoid 771 MW of 

electric load growth by 2020

• Drive local economic development by:• Drive local economic development by:• Maintaining affordable retail electric rates• Partnering with suppliers and vendors who are committed to 

investing in the New Energy Economy in San Antonioinvesting in the New Energy Economy in San Antonio

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Main Take-Awaysy

• Energy diversification and energy independence have gy gy pbeen cornerstones of CPS Energy’s strategy for the past four decades

Ab d t h l id t it t h• Abundant shale gas provides an opportunity to enhance sustainability over the next decade and possibly longer

• Less expensive to reduce emissions by “rebalancing” generation portfolios

• Pursuing low‐emissions strategy is the path with least incremental riskincremental risk

• Measured, incremental changes have nominal cost impact

• Economic development adds considerable value and offsets cost

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Four Decades of Energy Mix Di ersification at CPS EnergDiversification at CPS Energy

1970 1990Nuclear19801970 1990Nuclear16.3%

Coal30.9%

1980Coal

25.2%

Gas – Steam100.0%

1,701 MW

Gas – Steam52.8%

4,632 MW

Gas – Steam74.8%

3,452 MW

2010

Gas – CT & CC 10.2%

Renewables

Gas – Steam29.1%

2000

Gas – CC 9.4%

Nuclear14.8%

201010.9%

Nuclear16.4%

Coal33.5%

6 800 MW

2000Coal

28.0% Gas –Steam47.8%5 113 MW 6,800 MW47.8%5,113 MW

5Installed Capacity

CPS Energy’s Near Term Foc sNear-Term Focus

• Deactivate 860 MW coal‐fired Deely Plant in 2018y

– Avoid $500M‐$600M for additional emission controls

• Partnering with OCI Solar/Nexolon for 400 MW of “utility‐scale” solar by 2017

• Partnering with Summit Power for a new 200 MWnetcoal‐fired IGCC plant in West Texas in 2015

• Aggressive “STEP Program” for energy efficiency and conservation to avoid 771 MW of load growth by 2020conservation to avoid 771 MW of load growth by 2020

• Considering “Buy vs. Build” for additional gas‐fired generation assets to leverage new shale gas suppliesgeneration assets to leverage new shale gas supplies

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CPS Energy’s ExistingRene able Energ ProjectsRenewable Energy Projects

Commercial Operation

Wind 859 MWWind 859 MW

Solar 14 MW

Landfill Gas 10 MW

Total 883 MW

Sweetwater 3 & 4 Wind

Desert Sky Wind

Development / Construction

Wind 200 MW

Solar 30 MWDesert Sky Wind

Landfill Gas 3 MW

Total 233 MW

CPS Energy is a leader in Covel Gardens Landfill Gas

Papalote Creek WindCedro Hill Wind

Dos Rios & Somerset SolarBlue Wing Solar

gyrenewable energy with more than 1,100 MW under Power Purchase Agreements (PPAs) Penascal Wind

Los Vientos Wind

Agreements (PPAs)

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Outlook for Solar Energ is BrightSolar Energy is Bright

• Solar energy costs continue to dropgy p

• Solar PV efficiencies continue to improve

• Solar generation profile is significantly better than wind generation

• Solar generation output is more predictable than wind generationgeneration– Significantly less financial risk in ISO markets where generation 

imbalance is financially settled

• Economic development benefits add significant value to• Economic development benefits add significant value to solar energy

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CPS Energy’s Vision for Large Scale SolarLarge Scale Solar

• Combine large‐scale solar energy PPA with local g gyeconomic development– Leverage a multi‐year commitment for new solar farms in 

exchange for local jobs and capital investmentexchange for local jobs and capital investment

– 400 MW of new solar capacity through 2017

• Economic development goals– At least 800 local jobs

• Solar or clean technology jobs

– Minimum annual payroll of $30 million

– At least $100 million in local, clean tech capital investment • Ground breaking within 12 months, operational within 36 monthsg , p

– Commitment to local education programs

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CPS Energy’s Recent Solar RFPSolar RFP

• Issued November 2011

• Received 19 proposals in December 2011

• Evaluation criteria explicitly included economic development goals CATEGORIES WEIGHT

Price 40%

Financial Strength 25%

Economic Development 25%

• Interviewed 7 respondents

Economic Development 25%

Local Diversity 5%

Industry Expertise 5%

Interviewed 7 respondents

• Selected OCI Solar / Nexolon– Ongoing PPA negotiations began in January 2012

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Partnering with Summit Power for Texas Clean Energy ProjectTexas Clean Energy Project

• CPS Energy entered into a PPA with Summit Texas Clean Energy for 200 MW of net capacity and energy from the Texas Clean Energy Project (TCEP)

• Overview of TCEP• Overview of TCEP • 400 MW gross power output

• Low Sulfur Powder River Basin Coal

Fi t U S b d l t th t bi b th IGCC t h l d• First U.S.‐based power plant that combines both IGCC technology and 90% carbon capture

• Siemens gasification & F‐class combustion turbine technology

• Located in West Texas just outside Odessa TX• Located in West Texas just outside Odessa, TX

• Expected COD of 2015

• Summit Texas Clean Energy will open a local office in San d l d h

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Antonio and support energy‐related research at UTSA

Partnering with Consert, Inc. to Deploy HAN TechnologyDeploy HAN Technology

The Smart Grid Home• CPS Energy entered into 10 year agreement with Consert, Inc. to deploy its Home Area Network (HAN) technology

• Targeting 140 000 homes & small• Targeting 140,000 homes & small businesses in San Antonio

• Consert’s “Virtual Peak PlantSM” is expected to provide 250 MWis expected to provide 250 MW of peak load reduction

• Consert is relocating its headquarters to San Antonio

• 50 jobs in 2012

• 150 jobs by 2014

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Partners Bringing Economic De elopment Val eDevelopment Value

• Home Area Networks (HAN) • Headquarters in SA

• Electric refrigerated trucks• Headquarters in SA

• 30 MW Solar• Up to 40 jobs by 2012q

• Up to 150 jobs by 2015• UTSA partnership

• Manufacturing in SA• Up to 50 jobs by 2012

• Regional office in SA • $600k education investment

• LEDs (light-emitting diodes)• Headquarters in SA • Clean coal

• Up to 15 jobs by 2013

• 400 MW Solar• 800+ jobs

• Manufacturing in SA• Up to 30 jobs by 2012• University equipment funding• $10/light produced in SA for

education

• Up to 15 jobs by 2013• R&D council to SA

• $100m capital investment• $40m annual payroll• Education investment

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education

Emphasizing STEP and Rene able & Gas CapacitRenewable & Gas Capacity

2010 Capacity Projected Capacity 2020

Solar

Wind15.18%

Solar5.08%

Landfill Gas0.14%

STEP2.06%

Wind12.39%

Solar0.21% Landfill Gas

0.14%

Gas40.16%

STEP10.23%

Gas37.81%

Nuclear15.58%

Nuclear

Traditional Sources = 85.20% Traditional Sources = 69.37%

Coal17.15%

12.06%

Coal31.82%

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S 85 0%Renewable Sources = 12.74%Demand Reduction = 2.06%

S 69 3 %Renewable Sources = 20.40%Demand Reduction = 10.23%

Changes in Projected Energy Mix are

Most Prono nced for STEP and Gas

SolarSolar Landfill Gas

0 2%

Most Pronounced for STEP and GasProjected Generation 20202010 Generation

Gas20%

Wind12%

Solar2%

Landfill Gas0.2%Purch Pwr

1%Gas7%

STEP2%

Wind8%

0.03% 0.2%Purch Pwr

5%

STEP8%

7%

NuclearCoal46%

Nuclear32%

Coal34%

uc ea23%

46%

Total Generation = 26.3 Million MWh Total Projected Generation = 33 Million MWh

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j

Traditional sources = 77% Renewable sources = 14%

Demand Reduction, Purchases = 9%

Traditional sources = 85% Renewable sources = 8%

Demand Reduction, Purchases = 7%

Moving Forward into the N E ENew Energy Economy

CPS E t t hi Vi i 2020 G lCPS Energy wants to achieve Vision 2020 Goals as well as future goals:

Keep prices to our customers affordable

Provide reliable, clean energy for decades to come

Build the New Energy Economy in San Antonio

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QuestionsQuestions

Contact Information

Michael Kotara

hPhone:  210‐353‐2285

Email:  MKotara@CPSEnergy.com

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