MISO Market Transformation The Intersection Of Renewables Transmission

MISO Market Transformation The Intersection Of Renewables, Transmission And Technology Raj Singamsetti Executive Director of Portfolio Strategy, ACES

Agenda: • Impacts of Emerging Technologies – Fracking (Market Prices) – Energy Efficiency – Declining Costs of Wind & Solar Generation • Impacts of New Technologies – Clean Line HVDC Transmission – Energy Storage 2

Who Is ACES? • Owned By 21 G&Ts and 1 Distribution Co-Op • Provide Services to Additional 40+ Customers – Municipals, Cooperatives, IPPs, Financial Institutions, Joint Action Agencies, Renewable Developers • Individual Portfolio Management; Combined Assets Total: – 50, 000 MW of Generation From 300 Plants – 50, 000 MW of Load – 3. 0 Bcf/Day Peak Natural Gas • 4 Regional Trading Centers – Arizona, Indiana, Minnesota, and North Carolina • Approximately 250 Employees 3

ACES Business Model • ACES is Active in the National Marketplace – Does Not Trade Its Own Book • ACES Operates Similar to a Fund or Trust Manager • ACES is Owned By Not-For-Profit Entities – Shares Similar Values as Members • ACES Keeps Costs Down – Sharing Costs of Systems and Resources Across Members/Customers • ACES’ Approach to Portfolio Optimization & Risk Management is Participatory & Hands-On 4

Natural Gas Forward Curve Henry Hub Natural Gas Calendar Strips $3. 50 $3. 00 $ 3. 159 $ 3. 059 $ 2. 867 $ 2. 784 $ 2. 769 $/MMBtu $2. 50 $2. 00 $1. 50 $1. 00 $0. 50 $0. 00 2017 2018 2019 2020 2021 5

Shale Producer Cost Example 6

Forward Gas Prices Forward Natural Gas Curves $ 4. 00 $/MMBtu $ 3. 50 $ 3. 00 $ 2. 50 $ 2. 00 $ 1. 50 $ 1. 00 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Consumers Oct-22 Oct-23 Chicago C/G Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Oct-29 Ventura • 10 -Year Strip, Consumers and Chicago Citygate: ~$2. 85/MMBtu • NE Gas Averages 12% Lower 7

Impacts of Energy Efficiency 8

Energy Efficiency Savings From Electricity Efficiency Programs in 2015 Totaled Approximately 26. 5 Million MWh 30, 000 MWh 25, 000 20, 000 15, 000 10, 000 5, 000 Source: ACEEE 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 9

MISO Load Decline Demand Forecast (GW) Reserve Margin Requirement (GW) Supply (GW) Reserves (GW) 2015/16 PY 127. 3 145. 5 150. 3 23. 0 (18%) 2016/17 PY 125. 9 145. 1 148. 8 22. 9 (18. 2%) 2017/18 PY 125. 0 144. 8 148. 5 23. 5 (18. 8%) 2017/18 Minimum Reserve Requirements: 15. 8% 10

Declining Cost of Wind Historical LCOE of Un-Subsidized Wind $ 180 $169 $ 160 Dec $148 rea % $ 140 $/MWh se o f 66 $ 120 $ 101 $ 99 $92 $95 $81 $ 80 $77 $62 $ 60 $ 50 $ 48 $ 45 $ 37 $ 20 $Source: Lazard 2009 2010 2011 2012 2013 2014 $ 32 2015 2016 11

U. S Installed Wind Annual Additions 90, 000 Cumulative 83, 515 80, 000 70, 000 MW 60, 000 50, 000 40, 000 30, 000 20, 000 10, 000 0 Source: EIA 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 12

MISO Wind Capacity Source: MISO 13

Declining Costs of Solar LCOE of Un-Subsidized Utility Scale Solar 450 400 394 350 $/MWh 300 323 270 Dec re ase 250 226 200 166 150 104 101 50 0 Source: Lazard 2009 2010 2011 5% 149 148 100 of 8 2012 91 2013 86 72 2014 70 58 2015 61 49 2016 14

Cumulative U. S. Solar PV Installations Residential Commercial Industrial Utility Scale 40, 000 MWAC 32, 000 24, 000 16, 000 8, 000 0 Source: NRCO / ACES 2011 2012 2013 2014 2015 2016 15

MISO Solar Capacity Source: MISO 16

New Products Changes in Locational Marginal Price Shapes Morning Ramp 7: 00 - 8: 00 Duck Belly 9: 00 - 16: 00 Evening Ramp 17: 00 - 22: 00 CAISO / WECC 17

Low Energy Prices • MISO Minn Hub’s Low Prices Reflect Wind Penetration 7 x 24 Day-Ahead LMP Indiana Hub Illinois Hub MN Hub $ 45 $ 30 $ 25 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 $ 20 2012 $/MWh $ 40 18

Clean Line HVDC Projects Source: cleanlineenergy. com 19

Current Status of Projects Contingencies Project Cost Project Miles Project MW Announced PPA MW FERC Approval? State Permitting Rock Island $2. 0 Billion 500 3, 500 Grain Belt $2. 2 Billion 780 4, 000 0 200* May 2012 May 2014 Waiting on Iowa, Waiting on Missouri IL Supreme Court Plains & Eastern $2. 5 Billion 700 4, 000 100** DOE Arkansas Contesting Interconnect PJM, MISO SPP, MISO, PJM SPP, MISO, TVA Approval Needed *Missouri Joint Municipal Electric Utility Commission **Tallahassee, FL (50 MW), East Texas Cooperatives (50 MW Option); TVA Has Agreed to Consider Project 20

Who Is Buying ? 1) Simplify and Standardize Direct Renewable Energy Transactions 2) Address Unique Renewable Contract Needs of Internet and Data Center Companies 21

Corporate PPA Locations 22

U. S. Storage Projects Source: UBS 23

Common Theme: Rapid Decline in Costs 24

Revenue Streams • Energy Arbitrage – Storing Energy When Market Prices Are Low, Dispatching When Prices Are High – Value is Dependent on Wholesale Power Prices • Regulation Payments – Compensation Varies From Market to Market – PJM Dynamic Regulation Signal (Reg. D) 25

Deferring Transmission Investment • Provide Local Generation During 20 to 30 Peak Power Demand Days Per Year • One of the First Projects in the Nation to Be Proposed Solely to Cost-Effectively Defer Transmission Investment 26

Market Phases For Technology Adaption in Markets • Phase 1: Market Experiments • Phase 2: Market Integrates • Phase 3: Market Coordinates 27

Questions?