Earthshot Foundation – Terranaut Almanacs Solar Best Practices in the Mid-Atlantic June 28, 2010 - Washington, DC Full Transcript Jeff Weiss: Welcome everyone, welcome to the Earthshot Foundation. Decades ago, we tried to get to the moon and now we’re working closer at home on very weighty matters. And thank you Reid, Reid’s going to launch us through a Socratic Dialogue. We were talking before and saying this arrangement is a little bit like a boxing ring, so if you guys want to jump out of your chairs and have verbal fisticuffs with one another… Reid: Excuse me, can you move to the middle in front of the lighted sign, please? Jeff Weiss: So before Reid launches into feed-in tariffs and renewable energy credits and various policy forms that everyone is very interested in, I just wanted to first thank the people and groups that have sponsored us tonight and thank them for dinner and for hosting us here at the Council on Foreign Relations. So we’ve got some unusual and wonderful groups and companies who have sponsored us. We want to thank Panel Claw and Power Up. They are interesting in that Panel Claw is innovating on the materials side of solar installation, and Power Up is similarly innovating on the installation side. They’re quite large and internationally are in over 300 locations and working with governments and industry. We also want to thank the Buccini-Pollin group, which is a large, multi-billion dollar commercial real-estate company. It is innovating in the Mid-Atlantic by installing solar on its headquarters, by installing solar on a brewery, by installing solar on a wide variety of building types throughout the Mid-Atlantic. And, of course, we want to thank Distributed Sun, who is innovating in solar operation and finance now throughout the Mid-Atlantic. There is an additional sponsor who is in confidence, we thank that individual, as well. So, this is quite a group, they are all paying rapt attention. Now, before they get to talk, what we want to do is to welcome you to the energy of tomorrow, and we’ll ask you to cast your attention just beyond them. [Movie plays] Chase Weir: That’s the first time we’ve shown that, it’s pretty neat. So the third time’s the charm; this is our third event in the Terranaut Almanacs series. I want to echo Jeff’s remarks and thank all of you for coming out tonight and, of course, our panelists that we’ll introduce in just a moment. And I want to go ahead and out our private donor…hearing that we were considering charging admission for these seats, she objected to that idea and decided to buy all those seats for you, so let’s have a quick round of applause for Cynthia. [Applause]

Chase Weir: On that note, if there’s anything that we can do or consider doing that any one of you might object to so much so that you would want to make a contribution to the Earthshot Foundation, please let us know. [Laughter] Chase Weir: So this is our third event, and each time we adapt it a little bit, we learn from the last one. Tonight we’re going to focus on solar industry policy and investment practice in the Mid-Atlantic. We’ve got quite a group of expert practitioners, thought-leaders, and some of the most accomplished doers there are, and that’s really the thesis behind the Terranaut series. On a very simple level, we’re trying to do our part to accelerate the adoption of clean energy and clean technology in the U.S. We believe that, in part, requires you to focus on the quality and the content of the dialogue that we’re having amongst ourselves. So we invited these folks to show up and leave their canned remarks at home, do a little homework—in fact, what was it, several hundred pages? You all did your homework, right? And to be open minded to the idea that they might learn something new tonight. Frankly, I showed up at one event after the other, public and private, all over the United States for the better part of a year, and I started realizing that people were saying the same thing again and again and again, and I just feel like it should be more iterative. When I left one event not feeling quite as smart as when I’d gotten there, it occurred to me that maybe somebody could do something with a format that over time begin to develop a reputation that we are having a different kind of conversation here. So that’s what we’re going to try to do tonight, and I’m going to go ahead and tell you a little bit about who’s sitting around the table. But before I do that, I gave them ten questions and the last question was how many people does it take to screw in a solar panel? I’m sure they all have a witty rejoinder, but if that question is analogous to how many people does it take to stand up the solar industry in the United States, it takes a lot more people than are gathered here tonight. But the good news there is that we’re not alone; these sorts of things are happening all over the United States. Beginning with Reid Detchon, Reid is the Vice President of Energy and Climate at the United Nations Foundation. He is also the director of the Energy Future Coalition, was Assistant Secretary of Energy, and he’s going to be our shepherd tonight. He’s going to make sure they keep the gloves on or help them take them off as he sees fit. Jennifer DeCesaro is in the event material, she couldn’t make it tonight, but Mike Li from DOE who’s an expert on state renewable energy policies has joined us. And then we’ve got Gerry Braun, he’s the Associate Director of the UC Davis Energy Institute, he’s been a director at the California Energy Commission, PG&E, BP Solar…he comes with a deep, deep resume on these topics. Let me just interject for a second; we’re focusing on the Mid-Atlantic and on state policy, but we’ve got folks from California and Nevada and North Carolina, and then we’ve got folks from Congress and DOE, so it’s going to be a really interesting conversation. And we’ve got folks from industry; Yuri Horwitz, President of Sol

Systems is doing a lot to sand up the solar renewable energy credit marketplace in the Mid-Atlantic. In fact, he recently designed one of the nation’s first community owned solar power purchase agreements, so he’s advocating on a lot of different levels in the industry. Mike Hartley from Maryland, program manager of the Maryland Energy Administration, formerly at GE Renewable Energy. He’s currently working with twenty public partners on Project Sunburst in Maryland, putting pretty large installations on a variety of buildings. John Byrne, from Delaware, is currently the director for Center for Environmental Policy. He co-chairs the Sustainable Energy Utility Oversight Board in Delaware. And he shares the 2007 Nobel Peace Prize with the UN Intergovernmental Panel on Climate Change. We also have Larry Barth from New Jersey—I think we know that New Jersey has been trailblazing, let me tell you a little bit about what they’ve been doing. He and his team have approved over 2500 renewable energy projects representing seventy-five megawatts of capacity. They’ve administered over $100 million of incentive payments and facilitated the generation of sixty thousand solar renewable energy credit certificates. Emile King, from DC, is a policy analyst at DOE and is leading the charge for solar in our nation’s capital. He is formerly program manager for the Anacostia Watershed Society. We have Rose McKinney-James from Nevada, let me tell you what Rose is up to, and I’m not sure how you have enough time in a day. She’s currently a director of MGM Mirage Employee Holdings, Inc., Toyota Financial Savings Bank, The Energy Foundation, and the American Council for an Energy Efficient Economy. And that’s what she does in her spare time, she’s also managing principal of Energy Works Consulting. John E.P. Morrison…can I call you Jeep? Jeep is the CEO of Strata Solar, he was formerly the Assistant Secretary of Solar Energy at the North Carolina Department of Commerce. He’s going to tell us about some remarkable things that are happening in North Carolina that are standing up the solar industry. We are very fortunate to have a last minute addition. Derek Dorn, after our repeated request to bring his remarkable expertise as to what’s going on in Congress has joined our group. He’s Senior Council to Senate Energy and Natural Resource Committee Chairman Jeff Bingaman. He’s Staff Director of the Energy and Finance Subcommittee of Natural Resources and Infrastructure, and he’s an adjunct professor of law at Georgetown. If you want to know if the Treasury Grant will be extended, or about the climate energy legislation in Congress, you couldn’t ask someone with a more informed answer and we’re very happy you could join us this evening. With that, I’m actually going to briefly introduce you to an award winning film director who’s going to sneak through those doors right now and say a few words to you. Before you start…you’ve got a documentary coming up, you’re releasing that next month. It’s called Shattered Sky; tell us a little bit more about it. Steve Dorst: Thanks, Chase. Well, it’s just a real pleasure to support the work the EarthShot Foundation does, my film-making partner Dan and I, we really believe in what’s going on here. We just want to support and come every few months and volunteer to film some of the thoughts and solutions and ideas, and hopefully some of the things that get thrown around at this table can then get thrown up into the ether on the internet in all sorts of little videos and inspire tomorrow and in the

months and years to come. The last three times we’ve been here—we learn every time—today’s a little bit different. Dan and I are just putting the finishing touches on Shattered Sky, which is a feature documentary film that calls for American action on climate and energy and the chief conceit of the film is that we’re comparing the ozone issue from the 70s and 80s to the challenge we face today. It really calls for action for a price on carbon and we hope that it makes a big impact, so hopefully after we’ve finished doing our job in the back, and while we’re exchanging ideas afterword, if you all could share with me what your thoughts are from your states, if your people would be receptive to the ideas in this film, I’d love to learn a little bit from your perspective. Thanks and good luck. Chase Weir: So with that, why don’t we give an encouraging round of applause to what we’re about to hear? [Applause] Reid Detchon: Well thanks, Chase. I’m going to give a bit of an introduction in ground rules so that you know what we’re going to be doing here. We’ll be doing this in two parts, we’ll do a first section of about forty five minutes and then we’ll take a little break and then come back for another time. It’ll be an opportunity for you all to get engaged, but thanks first to Chase and to Jeff for doing this. This feels a little bit like a TV set, you know, but the idea there is to inspire conflict, I think what I’d like to do, I’m going to take the role of the moderate part of the moderator title. I’d like to see us inspire agreement, and I think that one of the things we can do from the different parts of the country we’re from, I think we’re aimed at the same goal. So if we can share good ideas, best practices, I think there’s so much good going on that we ought to try to build on that to try to see what could be done to take this industry forward. So with that, our conversation is going to be free-floating, but the first time around, I want to get everyone in and let everybody have a chance to say something, and so I’m going to start off with Rose. The general idea is, what’s going on in your area with solar? It could be a nugget of good news, or it could be a policy of opportunity that’s coming up…tell us a little bit about what you’re seeing. Rose McKinney-James: Well, Nevada is a relatively small state by population, but with respect to solar, we have what we think is a tremendous potential. And so, for the last couple of decades now, we’ve been trying to put in place the right policy signals, with all the tools that everybody else talks about, we’ve got a portfolio standard, we have net metering, we’re trying to work through many of the obstacles that seem to present themselves fairly consistently when it comes to land use for large scale and sometimes a little bit of utility pushback when it comes to distributing. I think the good news is that we have finally broken through with respect to some of our policy makers at the state legislative level, we now have champions. So as an advocate on the ground, I’m no longer begging for an audience,

I’m being called to the state capital, and that is a shift that I think is very promising in Nevada. Reid Detchon: That’s great, Rose. It is, I think, the people’s choice, and so how do we get that embodied into regulation? Larry in New Jersey, there’s been a lot of leadership there, tell us a little bit about how this plays in New Jersey. Larry Barth: We just crossed one hundred fifty megawatts, we’ve got pipelines equally that large in terms of projects. There’s actually a cue that PJM wholesale market has that says we have about six hundred megawatts of projects, so people that wondered about the role of capitalism in these markets and what SRECs can do to stimulate interest, it’s out there. Costs have come down significantly; this past year we and the world, I think, have enjoyed that. We’ve got hundreds of new installers, new jobs created. We’re actually in a world now where our installers are saying, “We don’t really need a rebate anymore,” which is a real inflection point where people are actually saying they’re trusting the SREC market. Reid Detchon: Okay, and right off the bat, we’re going to say an SREC is a Solar Renewable Energy Credit equal to one Megawatt-Hour. We’re going to deconstruct the technical jargon here. So John, Delaware’s been in the news for its big wind development, but maybe not so much for its big solar development, what’s going on there? John Byrne: We, too, are a small state, both in terms of area as well as population, but I think we’ve have a very dynamic solar market developing. We created a sustainable energy utility so that we took the investment requirements and aggregated the kind of need throughout the state to make that happen. We’ve had the license for this particular utility for only about ten months and we just penned two weeks ago plans for a ten megawatt solar power plant that will be in a community of only thirty thousand people, so we’re building big even in small context. We have a pipeline that’s a little bit smaller than New Jersey, but if you look at our performance, by the end of this year we will creep up and probably be just behind Nevada to be number three in the country for amount of solar installed per person. So we’ve been given ten months to go out and drive the vehicle, and I think we’ve done pretty well. Reid Detchon: And Delaware’s a state where you emphasize the per person measurement, right? John Byrne: We have to. [Laughter] Reid Detchon: Mike, at the Department of Energy, you’ve got to take a little bigger view, what’s exciting these days?

Mike Li: I think I’ll say that, first and foremost, on behalf of the administration and the President, what we believe is going to be able to do the most for solar and a lot of renewable energy resources is setting a price on carbon and so we’re really hopeful that Congress can come through and put something in place that will set a price on carbon. I think the second thing that I’ll mention really is with a lot of the investments we’ve made in the smart grid, through the several billion dollars in investments we did, through the recovery act, the deployment of the smart grid is really going to be useful in how we figure out how to integrate variable resources into the grid. We’ll figure some of those things out along the way as our smart grid deployment dollars get installed and we do a little bit more research along the way. Reid Detchon: And we might come back to that topic later, which is going to be interesting for large scale solar. So Yuri, you’re in the business, you’re kind of a regional player, I’d say here, you can take a little larger perspective for the Mid-Atlantic region. Yuri Horwitz: Sure. So SRECs are sort of what we do, we’re an aggregator in the market space, we recognized a couple years ago that if solar was going to succeed on the East Coast, then the SREC market had to succeed, as well. We’ve been focused and having success in building SREC markets in multiple states so that they are accessible not just to large ten megawatt projects, which are terrific, but to the common homeowner or small business owners that want to get what they needed, which is also incredibly important. I think what we’re seeing right now is a tug-of-war between utilities and energy suppliers, between them controlling those markets and participating in them. And also, a very important distinction for all of us, we are out there as what we think of as a bridge between the solar community and the traditional energy supplier community, bridging that gap between those interests, and our hope is to do so successfully. It takes some nuance, but that’s what we’re trying to. I think we’re starting to see some success, which is great, and I’m seeing large utilities, large energy suppliers starting to come to the table. Fundamentally, their view is a bit different than ours and most customers and most homeowners and businesses who see this as a market. What they see it as is, “I’ll pay what I need to to get my SREC to get my developer over the hurdle rate.” But there’s a whole other secondary market, so I think that’s going to be an interesting dynamic, as well, but I’ll leave that for further in the discussion. Reid Detchon: And now we go to a jurisdiction that’s even smaller than Delaware. Emil, the district has actually had a great deal of interesting and progressive legislation of the last several years dealing with solar. What do you see on the radar right now? Emil King: The district is a small but important solar market because it’s the nation’s capital; people are watching what we’re doing here. We have unique geographic conditions, it’s quite a dense urban environment, and we’re looking to expand our solar resources. So there’s legislation, there’ the Clean and Affordable Energy Act, which essentially established an energy utility like Dr. Byrne in

Delaware, and it sounds like it’s been a great resource in helping with that. Also, RPS, interconnection laws just like everywhere else, are essentially driving that market. We’ve had a lot of interesting solar cooperatives from neighborhoods, five or six communities, which are helping to drive the residential solar market and we’re looking to move into commercial space as well; the short, squat federal buildings we have. It’s quite exciting, and I’m glad to be a part of it. Reid Detchon: Great, thank you. John, perhaps more than any other state here except perhaps California, you’ve got some big, dominant utilities in North Carolina. How has that affected the solar market and how has it developed in your state? John Morrison: And we’re a state that did not restructure our utilities, so they’re very big and very dominant in the energy scene in North Carolina. The state, two and a half years ago, passed an RPS and it is really up to those utilities to really implement that. We’re proud that we were the first state in the southeast to pass an RPS, but in most cases, as the panelists here know, the devil is in the details in how the utility commission has chosen to implement that legislation. It has been a little problematic in terms of how transparent the market is in making it possible for developers, installers, and the like. That being said, the industry has developed in the state, but it’s still very much a case of an uncertain future; it’s not clear exactly how the utilities are going to play out. They’ve both chosen different strategies for playing out the market; the utility appears to want to own and control the solar installations. It’s a rather complicated picture for anybody who’s trying to develop solar in the state. Reid Detchon: Okay, Mike. Maryland has been a real leader in the last few years in this area. I’m sure that John wished he could change places with you; tell us more. Mike Hartley: Sure, Maryland also has a Renewable Energy Portfolio Standard an I believe in 2007 included a solar carve-out, a fairly ambitious one of two percent solar by 2022, and as well has a residential rebate program, very popular, well subscribed to help the residential market segment, which has seen quite a bit of growth over the past several years. I think a big plus for Maryland is this legislative session is we went back and did some tweaks to the solar carve-out, which had been very modest in the early years of the program. That’s why I wanted to accelerate the phase-in of that side to bring more of those clean energy jobs now, when folks need them, especially when the construction industry has been hard-hit by the recession. We also wanted to bump up the penalty that electricity providers would pay if they didn’t purchase solar RECs. Even in an election year, proposing to slightly increase electric prices through this legislation, we were able to get that passed. So I think it really showed a lot of leadership in legislature and industry really coming together to advocate for additional solar capacity, and it felt like a very big win for us. Reid Detchon: Great. And Gerry, you come from the state that’s been the national leader. Is everything bright and sunny in California?

Gerry Braun: Everything is bright and sunny for solar in California. One thing that California does is try to integrate its policies and relate to clean energy. There are a lot of policies in place; I’ll just mention the ones that I think are not so well-known that will affect solar. One is that all new residential buildings will be net zero by 2020, which has big implications for solar, and all commercial buildings by 2030. We have climate legislation that the state takes seriously that is trying to get us back to 1990 greenhouse emissions by 2020. We have a portfolio standard that by law is 20% but is really 33% by executive order and will probably be recognized by legislation. In a funny way, that is driving the whole solar market in that the utilities are obligated to purchase a lot of renewables. Ostensibly, from independent power projects, but as the issues related to transmission begin to be understood, there’s now an interest in distributing renewables at the distribution level in large quantities. There’s ongoing and immanent consideration of feed-in tariffs that just apply to small customer-sighted systems but also apply to utility scale projects. So there’s a lot going on, but we have a lot of balls in the air and we need to catch them or they need to land without breaking, and there’s a lot ahead. Reid Detchon: So we went from Nevada to the Mid-Atlantic to California; we got the whole country covered, Derek. You’re sitting in the Senate working on tax initiatives that affect Renewable Energy in the Senate Finance Committee that’s coming up. So many of the things that we hear have relatedness to what you’re doing. Are the state initiatives on climate going to be overridden, or REGI, the Regional Greenhouse Gas Initiative. What’s the future of the solar tax credit? So in the next hour and a half, tell us everything you know about what’s going to happen in Congress. Derek Dorn: Well, thank you, I think we need to learn from states often in the Capitol, so I should keep my remarks briefest and learn from the states around the table. I think it’s a very exciting time, but also a very challenging time to be working on federal policy for clean, renewable energy. It’s exciting because we have an administration that’s very focused on both a price on carbon and also doing it so that the transition to a low-carbon economy is one that can be achieved. And I think that at the same time we can be quite enthusiastic about Congress’ first major initiative at the beginning of last year passing the Recovery Act, which was a $787 billion package, of which one out of every five dollars was spent on clean, renewable energy or energy efficiency. We have what I think are significant innovations—I work on the financing side, so the 1603 grant program was very significant, the first ever manufacturing tax credit was quite significant. The House of Representatives passed a climate bill in the middle of last year, and they sent an energy committee called the ACELA Clean Energy Leadership Act just over a year ago, and now we’re still debating, should we bring up an energy bill or a climate bill, which should come first? What I can say to the favor of ACELA, which was Senator Bingaman’s committee, was that it’s the only bill that Congress voted on a significant bipartisan basis. So take out all the Post Office naming bills and this is the only bill in the Senate in almost two years that has very strong bipartisan support. So I think the

odds are that if it were brought to the floor, it could pass and probably get over the sixty vote threshold. I think with the Kerry-Lieberman bill, it’s less clear that it could even unify or attract all the Democrats. That’s really the next big question right now, what will be the next thing to move? And every bill that goes through or doesn’t go through makes everyone who works in the Senate ask, “Is the climate just getting more and more difficult?” So bills that would routinely pass in the past, like the Tax Extenders Bill, failed last week for the third time to get the magic sixty votes. That’s kind of what we’re trying to do on the federal level. There’s a lot of enthusiasm around climate issues, around clean energy issues. I think the economic slowdown has created an imperative in thought as to how do we marry these two goals of creating a clean energy future and creating jobs, but the path forward I don’t think is very clean right now. I think we’ll continue to try to figure out what works and what would be the appropriate path forward. Reid Detchon: So Derek attempted to do a sunny answer there but you have a lot of clouds in the sky, at least to a lot of uncertainty. Now that we’ve all been upbeat, let’s think a little bit about what worries us the most. You know, what happens if a bill does pass and RGGI goes away? Or what happens if a bill doesn’t pass and you don’t have a price on carbon? I think Derek cued it up nicely at the beginning, the leadership has been at the state level in these areas. What’s the biggest worry that you all have in your state or your region as you think about how to move forward? John? John Byrne: I think the really tough issue, but the most important issue is getting the signal right on carbon. Right now the REGI states on the East Coast have put up something on the absence of federal leadership on this issue and I think it’s very important that we find a way to make that happen. Our planet came with a capacity to recycle 3.3 tons of carbon per person per year, and an American lifestyle clocks in at about 20 tons. So those molecules are going to stay in the atmosphere for a hundred years or more, this is a problem that can only get worse by inaction. As a result, we really do need some leadership on this issue and clarity that the states will, the Regional Greenhouse Gas Initiative is performing reasonably well. We’re all receiving in Maryland, Delaware, and all the other jurisdictions, we’re receiving funds for these kinds of projects in the absence of a climate bill. But we really need a signal, otherwise, I think we’re going to fall far short of that goal we have to hit. Reid Detchon: So uncertainty has always been the enemy here. Do others have some thoughts? Mike, what do you think in Maryland? What does this uncertainty about federal legislation mean? Mike Hartley: The Maryland Energy Administration gets its own budget—it’s not on general funds at all anymore. All of our funding comes in through REGI, and a significant portion of our funding came in through the stimulus act, as well. Looking into the future, there’s a lot of uncertainty about future funding with the end of stimulus and then some uncertainty about whether REGI will continue, if there will be a national standard that will invest some of the proceeds from carbon into state

energy offices. So I think that’s something we’re certainly concerned about funding, looking forward. Reid Detchon: Others on your biggest worries right now. Rose McKinney-James: Well, you know Reid, my biggest worry is that we tend to have these conversations amongst ourselves. There are a whole host of us, I think, with a vested interest in advancing clean energy policy. We want to put a price on carbon, but there’s a wall of folk who don’t have the same interest. We’ve developed some momentum here, but we’re not either speaking the right language, or there’s the question about the reliability of our data, we just have tremendous pushback from large business. Large businesses who have political clout and who will influence this process more than we like to admit. And so finding a way to communicate with them, and pushing back that wall in a timely way is my biggest fear. John Morrision: Exactly, that’s the problem we have in North Carolina. And that’s what worries me, is that the perception that any action we take leads us to a higher-cost future, and that includes renewables. What I see is price trends for conventional sources of energy are only going up and price trends for renewable energy are only going down, and our policy makers don’t seem to appreciate that and recognize that we are near a crossing point. We probably aren’t quite there yet, but we are near it. So rather than embrace that future, where renewables will be the lost cost alternative, our policy makers seem to step back from that. And the difficulty is comparing any future move to the status quo of the current situation as opposed to comparing to future scenarios, between conventional and renewable and helping the policy makers understand that and understand the future economics that we face. Reid Detchon: Mike, you wanted to come in? Mike Li: To go in a little bit of a different direction, I think one of the biggest challenges that we as a department see out there is high-voltage transmission lines, which span multiple states. There is increasing opposition about building these new lines if we’re talking about solar, and we’re talking about scaling up solar plants. There are going to be instances where we need those lines, so I think that’s going to be a decision that’s looming, and one of the things we’re doing as a department is we’re leading these interconnection planning efforts. So, to summarize, what we’re saying to stakeholders, to local governments, is, “What do you envision the future to be?” in terms of the electricity sector in general. And then let’s do some modeling in general to see what it’s going to take to get us there. So if you want 33% renewables in California, we need to go back and figure out what does that mean from a planning perspective. Interestingly enough, we’ve been criticized at the Department for being too supportive of building new transmission, and we have also been criticized for not being supportive enough of building new transmission. I think

we’re doing a good job of trying to evaluate all of the options to meet our electricity demand forecast for the future. Reid Detchon: Larry, what do you think about that PSE&G in New Jersey? It’s been a big opponent of these long distance transmission lines. They’d rather build out their renewables locally. And everybody, does this feel like a threat to Distributed Generation, to import long-distance renewables from…Nevada? Larry Barth: Well, I think a big piece of this is the technical issue, I think a bigger piece of it, though, is a jurisdictional issue. I think people in Pennsylvania, for example, would love to connect to the transmission system and to say that they should be able to sell their Renewable Energy Credits in the New Jersey market. There’s a transmission case up in Massachusetts that it’s not fair Massachusetts has created their own in-state market, we should be able to sell our power from Maine into that market. That, I think, is a big question. We’re seeing actually at the distribution level now, so New Jersey being a state where we do have great momentum, we have the power system in place, so there are a lot of projects being developed, we’re now getting some of the local distribution companies kicking back and saying, “Wait a minute, I’ve got a 12kV line here and I’ve got 50MW of solar wanting to come on.” And that is a big conflict between, well there’s this net metering connection law that says you’ve got to do it, yet these guys have a legitimate claim to say “I’ve got this single feeder and I can’t put 10-50MW plants on here. So that’s sort of a good problem, but it’s a problem you’ve got to address. There are going to have to be some upgrades to that local network. Reid Detchon: Yuri, what do you think? Is this a regional problem, whether we’re looking for transmission of renewables or building them out locally? Yuri Horwitz: The only thing I was going to say is first of all, it’s just part of the maturation of the technology that you face. The Blue Water PPA in Delaware, for example, its LMP charges upgrades to the transmission grid. What you’re seeing is solar coming into its own on the utility scale, which we never saw before. And I think it’s to be expected, and you’re going to have to pay for that. It’s why distributed solar makes more sense. On the other hand, Larry, you make a good point, which is even if you distribute solar, you have to upgrade local grids, and to be honest, I think it’s going to be absolutely critical to building what’s going to be the new energy infrastructure, it’s going to be some of these local grids. We want fundability amongst homeowners and businesses, we want to be able to share electricity regionally and locally, to use it locally in a way that’s more efficient, and shifting that over DC transmission lines for hundreds of miles. I would just point out that these are growing pains that we’ll have to deal with; we’ve gotten along pretty well so far and upgrades are upgrades, and if they’re important, I think we should pay for them. That would be my take. Reid Detchon: Is push coming to shove with the utilities? Is solar getting big enough to start to pose some challenges for the utilities in how they deal with it?

We heard in the first round a little undercurrent of concern with utility pushback. Are there success stories or failures here in how we get utilities engaged in a positive way? Gerry? Gerry Braun: Well, we have a case in California where the utilities are seeing solar and other renewables as actually a positive thing in their current situation. In California, we are deregulated and as a result our utilities essentially had to get out of the new generation business. As a result in some changes at the state level, looking at things in an integrated way the last couple of years, our PUC has been receptive to proposals to utilities to invest in solar. They’re investing and their proposals have been modest, in the hundreds of megawatts range, so modest for them, but not for solar. I see that as a positive thing, as long as it’s done in a way that doesn’t unfairly compete with other solar development. At the same time, we’ve dodged a bullet in California with the referendum that would have essentially required a supermajority vote on any public power expansion at all, and even new customers in public power. But that was basically an attempt to shut down community scale renewable energy, and fortunately it didn’t succeed, but it’s a sign that it’s not the last pushback we’re going to see. Reid Detchon: John, you’re in the pushback state. John Morrison: Yes and no, there’s an interesting phenomenon going on that when the utilities are engaged at the policy conversation about renewables in general, there seems to be some pushback, but when you sit down in a room with just utility folks, they’re talking about a future of Distributed Generation, talking about a future of the smart grid, and how are they going to make that happen. So it’s almost as if the people at the utilities dealing with the policy side aren’t talking to the rest of the organization, because I see organizations saying, “This is what they future’s going to be looking like, we’d better get ready for it and make sure we have those things in place.” But their public face, their publicity face is neutral at best, and in some cases, a bit obstructionist. I don’t know if it’s a schizophrenia or they’re just trying to manage demands placed on them and recognizing what the future really will be. Rose McKinney-James: I think there is a challenge for them internally, in terms of managing the requirements around the portfolio standard and complying and figuring out the best way to do that. At least in Nevada, we’ve had some disappointments where we’ve gone through an RFP process and they have relied on the ability what they thought would be able to comply, but things sort of fall apart. But there is sort of an interesting issue for us, we share a border with California, Gerry’s indicated that they have a 33% portfolio standard. So from our standpoint, that means opportunity. There’s a lot of discussion around export. I think, as you say, everyone wants to focus on their in-state opportunity, but when you’ve got a really small capacity within the state, you’ve got opportunities to see how you export it. And with respect to the utility, the issue has been who controls it, who pays for it. Who pays for infrastructure? It will be at the top of the list for land use right now, how do we make this happen. Nevada has a 14% unemployment rate, the

highest rate in the country, and so it’s heartening to know they’re looking at solar and renewables as an opportunity to fill that void. But finding the path forward is turning into a very challenging discussion. Reid Detchon: This is such a rich topic because you get pulled in so many different directions. The Southern Energy Company has opposed solar renewable standards for years in its region because it said, “We don’t have any renewables!” Well, there’s two answers to that, one is that I think the sun shines in the south, I’ll check on that, but I think that’s true. The other is…where do they get their coal? It’s not like there’s a lot of coal in the south, either. I won’t pick on New Jersey, but Massachusetts has been pushing back on the idea of long distance transmission of renewables because it wants to develop its own, but we also want to see this great resource in the Midwest or the southwest developed. So how we sort this out is a difficult question. Should we be thinking about renewable principally as a distributed source, should we resist this idea of bringing it in from outside. Gerry, you public energy commission said to me, “We’re going to make that 33% in-state.” So that makes Rose very unhappy, I would think. Gerry Braun: And we are confident. But I think what we are beginning to understand is that it works better if you do things in an integrated way, and I used the term integrated when I talked about out policy developing process. And you can see it in solar, particularly because if you deploy photovoltaics on buildings and at the community scale feeding in at the distribution level, what you’re doing, as with efficiency, is unloading the transmission system, buying time. And in time, there are technical solutions for the carrying capacity for the transmission system. There are new technologies that are going to make the existing infrastructure better, and so if we are able to do things in parallel instead of picking what appears the easy approach and then finding out that it isn’t so easy, if we can keep moving at all levels of the market, I think it’s a better solution. Reid Detchon: Derek, I’m going to let you off the hook with just one federal question. You’re also from New Mexico, some of these issues are playing out in your state, and I’m interested in what Gerry was particularly saying at the end about how do we properly account for the value in unloading PV or distribution? That may be a little outside your jurisdiction, but take a crack at it. Derek Dorn: Well, I think for the state of New Mexico, I’ll echo a lot of what Rose said. The state of New Mexico itself is strategically located because it’s close to two really major grids. And when the state of New Mexico, which is the second sunniest state after Nevada, it thinks more about southern California than it thinks about serving its own population of only two million people. So there’s going to be this tension between states that view their future as export states, simply for the reason that New Mexico, if it’s going to tap into its full capacity, it won’t have the demand for that level of an intermittent resource. So I think you’ll see the New Mexicos, the Nevadas, the Utahs looking west and east, looking at transmission. And of course, New Mexico itself is all about the San Diego market, it’s not terribly far.

Reid Detchon: Of course, your boss Jeff Bingaman has in the energy bill that came through the Senate Energy Committee, has more authority to get the interstate transmission lines sited for renewables. Derek Dorn: In fairness, though, I think I’d say that a lot of the fight is around wind, because wind is truly in the areas that are not population dense. I think solar is a bit of a different case because you will often have solar resources present in states that often have very large populations. You know, California being the prime example. But you have interests from the upper Midwest, the windiest part of the country where they are very far from a population center. So I think that the impetus behind that is for the wind interests than the solar interests, but it is an issue that we will hear from. Reid Detchon: Of course another interest of solar is that it’s more likely to be on peak than wind is. So Emil, you’re in a location that’s unlikely to be an exporter. Do you have a dog in this fight? Emil King: We have two local generation facilities that slated to retire in the next couple of years, so we are interested in what’s going on in Maryland and Delaware, Pennsylvania…but I don’t think that energy independence has really been an issue that’s come to the fore in this discussion with renewables, but it’s something that we’re looking at. Democritization of solar, we have 120 plus homes with distributed solar that have small loads—typically row houses. Two to three kilowatts would be sufficient. There’s the price parity issue that we’re looking at, bringing the cost down so that everyone can have access. Also, the employment issue is important, we have a couple wards that have really high unemployment and not really much manufacturing, obviously. So what we want to do is produce what we can in terms of equipment, get training going and also sighting generation facilities on homes of policy makers. I don’t know how many of the people in the room here are DC residents, but we want to start with those folks. Reid Detchon: Yuri, I’ll give you the last word and then we’ll get folks out to have a little break. Yuri Horwitz: Well I didn’t mean to have the last word, but I was just going to add on to what Emil was saying, which is one of the real positives about solar is you can build this political constituency. A windfarm in the Midwest does not build a constituency that votes. A solar cooperative in Mount Pleasant does. That’s one of the positives of solar, besides distribution that I think we are missing and we need to get if we’re going to push it. There’s a political component to everything we do in the renewable energy space and I can see people that are going solar and giving money to candidates and that makes a big deal in the end. I was just going to emphasize and agree completely. [Break]

[Part 2] Reid Detchon: Okay, guys, we’re going to get started here again. I am going to call on Derek first and say are we going to get a bill? Are we going to have an energy bill this year? Derek Dorn: I think the Congress, before it adjourns, will pass some kind of energy legislation. Reid Detchon: And, Mike, what else is the Federal government going to do for us? Mike Li: What we’re really focused on is helping states address the issues that they’re facing as it relates to renewables and energy efficiency. We really want to make sure that the money we’ve invested through the Recovery Act is going to be invested well. And not only not only invested well today, but we want to create a platform for more sustainable industries in renewable energy. Reid Detchon: Okay, so I’ve set you guys up. Yeah, we’re not going to have a bill and we gave you money, we’re going to help you use it. Forget about the Federal government! You guys in the states are all on your own. So now what are we going to do? What I’m interested in is, what’s the next new thing? We’ve had RPS, we’ve got interconnection standards, we’ve got net metering…what’s the next thing that’s going to bring the next wave of investment at the state level? And kind of related to that, you think about the Renewable Portfolio Standard, we have about 29 states who now have it, and, to my knowledge, no state has ever reduced an RPS, all they do is increase them. So we don’t need anymore proof that the popular support is there for this stuff. How do we translate that public support into public policy? And in particular, how do we change the way utilities are rewarded so that they want to do what the people want to do? How do we get utility desires aligned with customer interest? So, the next new thing, or how do we get utilities going? Who wants to go first…Gerry? Gerry Braun: I think you said it, Reid, there have got to be investment opportunities for utilities. And one way I can see that happen is…I see it’s difficult at the individual customer level, but it could be very easy at the community level, at the developer level, you know, neighborhoods, public jurisdictions that all have the ability to co-finance infrastructure and do finance infrastructure… Reid Detchon: But Gerry, you just said you saw in California the most progressive utility in America, PG&E, attempt to smush out community generational…so is this a hopeless cause or can we do this? Gerry Braun: Well, I hope they learn something. And I really do think that the alternative from the view that, “Let’s stay in the 20th Century if we can,” is asking “Where do we want to be in the 21st Century?” I think I understand why PG&E did

what they did, but I also think that there are a lot of people in the utilities who really could see their way to a win-win strategy with public agencies. John Byrne: Well, I’d like to reinforce Gerry’s point; we’re at a crossroads, and we have to start thinking about the utility that we want in the 21st Century and not simply the utility we had in the 20th. And I’d like to offer an analogy for that purpose. It’s like somebody knocked on your door at the beginning of the 20th Century and said, “I heard about this new really interesting energy source, it’s called electricity.” And you went down to the store to get the electricity and the storeowner said, “Well, you need to go to the bank and withdraw sufficient capital to build a power plant and I’ll build your power plant and you’ll get electricity.” If each of us got electricity by that model, we would have never had electricity the way we did. But interestingly, on the sustainable energy side, we are facing essentially the same thing. If a community now wants to do renewables, if it wants to get involved in efficiency upgrades so the renewables go even longer, we basically have to go individually to the bank and borrow the money in order to buy that kind of service. I think that the next big thing is to create the next 21st Century utility that will allow us to buy factories that will have the ability to provide farms, factories with the sustainable energy services in the same way that we did conventional electricity services in the 20th Century. If the investor owned utilities can do that, and they can because they have the technical talent and the financial ability to think this through, that’s good, but if they stay in the 20th Century, we’re going to go ahead and keep building utilities of the 20th Century. Reid Detchon: Let’s stay with that, unless Rose, you’re dying to come in? Rose McKinney-James: Well, three things. So Derek’s answer to the question was, we may have an energy bill, and I’m hoping you would say we’re having an energy and climate bill because the climate bill deals with carbon. And I think, having read the energy bills, I’m a former utility commissioner sitting here; with respect to changing the dynamic of utility, I think we should change how they are regulated. If we force them to look at the same metrics, we’re going to get the same result. As far as the next new thing, people are talking about feed-in tariffs as a way of using distributed generation as a way to meet our goals and to your point, there’s now a greater emphasis on energy efficiency and trying to find out how to marry greater renewable energy development with energy efficiency because, collectively, we achieve so much in terms of savings that we can make the argument to help move public opinion along. And that’s what’s missing from this equation is how do we get public opinion along so that we get the support we need to get an energy and climate bill. Reid Detchon: Okay, Larry, I’m going to get to you. So let’s follow up with what Rose was saying, I’m just going to throw out a hypothetical here. One thing I haven’t heard around this table is maybe we don’t need utilities, maybe we just go around utilities and we create minigrids and distributed solar and we disempower utilities until where if they don’t get in the game, they’ll keep losing load until they’re going

to be in a death spiral. Do we use the public support that’s clearly there to reengineer the incentives systems for utilities to deliver what customers want, or do we go around them? Larry Barth: I don’t think you can literally come up with a strategy that says we’re going to go around them. The reality is you need them at night and you need them when it’s cloudy, so they do an incredible service to keep the lights on days like today. So deep down we all know how much value the utility has, but I do think then that it means the boards that regulate the utilities really need to drive them in a direction, saying, “No, we really have to have accommodative net metering connection laws, we do have to give you incentives to get in the game.” So in New Jersey, for instance, PSE&G has the funds that the board has approved and that’s going to help us meet our RPS and it’s going to help bring some financing into the market. Reid Detchon: Can public sentiment drive that? Larry Barth: I think so, but it takes real leadership at the board level and at the legislative level to really tap into that and make the changes needed. I think if you couple that with enlightened utility management, people in New Jersey deregulated the markets already. I think the CEO of PSE&G understands that it doesn’t actually matter to him who is generating the power, so it could be from a power plant in Pennsylvania, it could be from a solar system on somebody’s house. Now how does he capitalize on that, is he putting the utilities capital to work and keeping a customer. So you couple enlightened regulators with enlightened utility management and some of them will make the leap. Not all of them, but that’s just the way markets operate. Reid Detchon: So Yuri, you were trying to get in there, can public sentiment drive…there’s an interesting case in Maryland where smart meters got rejected by the public service commission. How are we going to get utility commission public interface worked out? Yuri Horwitz: I would let John answer that question, frankly, he knows a lot more about it than I do. I hope so. I hope there’s a nexus between what the public wants and what the utility commission advocates on their behalf. There often are significant interests at hand that the utilities make with some of those decisions. John, what you’re doing is to try to help decouple some of those interests, to realign the interests of the public with the public service commission. What I actually wanted to jump in on is I think as advocates of renewable energy, we have to be careful of the tools that we advocate for and tailor them. So I am wary of carbon Cap & Trade, and I’m also wary of feed-in tariffs. The reason I’m wary of the first is I think we’re going to have to give so much up to get it done, and as a pragmatist, incrementalism may serve us better in the long-run. Given what current bills look like, I’m not sure they’re going to serve our purposes all that well, especially if we want to invest in renewable energy. It may serve nuclear energy pretty well and

injection of carbon into the ground pretty well, but I don’t know how well they’re going to serve solar when solar, on a per capita basis doesn’t offset carbon all that much. And in terms of FIT, I have a lot of respect for what’s going on in Europe, but I think it’s about to evaporate, and it evaporated in Vermont and in Gainesville. I think we’ve got to be very careful in the way we structure some of these incentives, and specifically what we spend our energy on advocating because they can have unintended consequences and they spend precious political capital. Reid Detchon: And now we’re going to jump ball between the two Johns, I’ll go with John Morrison. John Morrison: An additional, third element to the utility discussion, an additional schema that we could address, and that is how we can set prices for energy. The current mechanism dates back to the late 60s, early 70s, and really doesn’t serve us as well as it should, and that has to do with the fact that the cost of electricity varies over the course of the day, and for the most of us, our bills don’t. Most of us are indifferent to the way we use energy, and I think we need a different regulatory that makes that schema much more visible to all consumers. Large industrial consumers see that already, but for small consumers, because I think when that happens, the varying costs we see when large shares of renewable energy are on the grid, that can translate to good consumer behavior that I think will make possible for utilities to make energy, but also see a much greater share for renewable energy, because what you’ll see are the requirements for electricity being much more responsive to the supply and cost of it. Reid Detchon: Well, if you have time-of-day rates, at peak, it’s going to be a lot easier to make the case for a PV panel, right? John Morrison: Right. And most of the time-of-day rates I see today are not sufficiently fine-grained; they’re very crude in their approach. And we have the technology in development that can be made in the smart grid that I think will enable us to do that. I’m a big fan of the smart grid and supply-varying costs or pricing such that we see demand much, much more responsive to the availability of energy on the grid at any point in time. John Byrne: We got the electricity system that we have today by building an institution that didn’t exist before the early part of the 20th Century. And if we want a 21st Century situation that doesn’t cause the threats in climate change and it doesn’t cause the economic problems, we’ve got to be prepared to build the institution that’s right for that. I do not mean by that that we just throw out the 20th Century utility, but I do think that we’ve got to be prepared to build new if we want something different from what we’ve got now. That part of that dialogue I think we have been a little skittish to take on; I understand why, but I don’t think that we’re going to get these kinds of goals we want to meet in these next forty years if we don’t start building these institutions.

Reid Detchon: Well, one step that you took in Delaware was the efficiency utility, and Emil in DC, that’s a big move as well. What kind of resistance does that run into? Emil King: I think it’s important to look at how we develop that advocacy role. A lot of pushback is coming from consumers maybe on fixed income or from older constituents who aren’t quite sure what the smart grid stuff’s all about. And so that’s a big challenge for us, is education. That’s what happened in Maryland with BGE not having a sufficient outreach effort in explaining what these things are and what they mean for consumers. That’s our major challenge, is getting out in public and explaining, “You think your electricity’s already expensive, well it’s going to become more costly, and how can we head that off?” Reid Detchon: Mike, you were seeing the same thing in Maryland, weren’t you? Mike Hartley: Yeah, and something comes to mind with the efficiency programs that some of the utilities are tasked with running and have really lagged behind in their execution of these programs. Now the public service commission is really questioning whether they’re good investments. Clearly they are, but not if they’re mismanaged. The criticism should be on the management, not on the investment. Until we get some strong demand across the state for wise efficiency investments, we’re going to struggle there. Reid Detchon: So the case where they knocked out the smart grid from the government investment, there has been a back-and-forth, is that because there was overreaching on the part of the utility, they couldn’t see the value of the consumer. Mike Hartley: I wasn’t involved in those hearings, so unfortunately, I’ll have to plead ignorance with that one. Reid Detchon: Alright so Derek, I’ve been picking on you, and that’s unfair. But I think that the best outcome…we’re very concerned about giving away too much to get some sort of a Cap & Trade, and in particular, we’re very worried about prevention of EPA’s authority to regulate under the Clean Air Act. The EPA can do a lot in terms of conventional air pollution, that’s going to move us toward cleaner energy resources and the deal seems to be that if you’re going to have a Cap & Trade, you’re going to pre-empt EPA regulation. We saw an analysis just the other day that if you add up what you can get out of the Senate Bill and you compare it to EPA regulation in terms of greenhouse gas emission, it’s about a wash. The best thing would be a Bingaman Bill with a strong efficiency standard, forget the Cap & Trade and let EPA regulate it. Does that make sense to you? Derek Dorn: Well, I think the recent vote on EPA pre-emption without doing anything more was perhaps more successful than many expected. I think there were a lot more industrial or coal-state Democrats who said, “No we’re not going to do this if there isn’t something in conjunction with it.” I would be inclined to agree with

Yuri’s comment before about incrementalism and I hate to disagree with my friend Rose over there. But I just don’t know if we hold out for a climate bill, if that fails, do we end up with nothing? Or if we do hold out for a climate bill and it does pass, will it be what some stakeholders say is a wash? One more thing I would say is when ACE is passed, I think a lot of members of the Senate said, “Wait a minute, there are free allowances being given to just about every stake-holder under the sun.” So small investors get their allowances, utilities get their allowances, and I think that it might give rise to a Cap & Dividend plan which is very straightforward and bipartisan. It doesn’t quite give allowances to all these entrenched interests, because I think that the EPA issue is a very important one, but also we’re creating a cost to give pad shareholder dividends for energy interests, and I think that’s a critical challenge in the Cap & Trade system, which is how do we buy off the interested parties? Reid Detchon: Okay, I see Rose is reaching for her microphone, but you guys get ready out there, I want you to prepare a question and we’ll give Rose another crack here. Rose McKinney-James: Just quickly, because when the tape is rewound, you will not have me on record having said anything about Cap & Trade, I said climate and carbon. And with respect to the feed-in tariff, I couldn’t agree with you more. We were just talking about the next new thing and I have people for Nevada who are clamoring for feed-in tariffs. The solar industry, on the other hand, has been very quiet about it because they have the same reservations that you do. We watch what happens in other countries, everybody wants to see something aggressive because they want to see solar now. Reid Detchon: Do we have any questions out there? Stand up there. [Anonymous]: [Inaudible]…So what kind of planning framework could be evolved coming out of the foundations being laid through the ARA funding? Mike Li: That’s a great setup. Planning is central to what we’re talking about in terms of the energy of the future, and I can’t stress more the fact that we are going through this scenario development process where we take stakeholders and try to get their perspectives on what the future should look like. We’re really just facilitating policy makers in figuring that out for themselves, and you look at the East, we have twenty-nine states and two jurisdictions trying to plan together what the system looks like by 2030, and undertaking that has never been done before. We’re critically interested in every stakeholder’s input, and we’re actually trying to find them in Texas because we don’t have enough environment NGOs coming out there to try and find them. We’re in the early stages. Reid Detchon: So Mike, let me ask you, you can imagine the solar people coming in and making a case or the wind people or the coal people…how does distributed

solar get a voice, how do people say, I might be putting distributed solar up on my house, how does that get reflected in the process? Mike Li: There’s actually a big debate about local versus long distance which is in the early stages right now, but we’re still figuring that out. There are people that think we should be able to meet our future energy needs through demand-side resources and through distributed generation. And to the extent that we have policy makers that want to see that future envisioned happen, we’re going to take that into account as we foster this planning effort. [Anyonymous]: [Inaudible] Mike Li: That’s probably a very complicated answer we could talk about offline, but one of the things we’re doing is we’re creating eight futures with a bunch of sensitivity and analysis around that, which would optimize a lot of different variables that you’re talking about. And out of those eight futures, we’re going to actually model three scenarios. That’s very cumbersome language, but the reality is we’re going to keep trying to do what we’re doing. One other thing I want to say is that before I worked for DOE, I worked for state for ten years, and that was one of the big challenges is that when we have communities that are opposed to citing new transmission lines that run through their neighborhoods, they really forced state regulators to look at what are the other options. Yuri mentioned locational marginal pricing in terms of what’s the biggest benefit. Reid Detchon: So how do planners, John, take on what seems like an impossible assignment, to figure out efficiency, how much distributed generation, what kind of utility regulation there will be in the future… How is anybody capable of taking that on? John Byrne: This is a balancing issue and we’ll have to figure out how to take into account both what local levels of planning want and more regional and national. But we do have an empirical case on this, which is our interconnections, which do exactly this plan. They plan in large regions, they transfer power from one region to the next, they do this as a part of our process that’s very sophisticated. Anyone that’s been in one of the offices for how they plan for outages and all the rest can quickly recognize it. I just want to indicate that in the context of real planning for how much transmission or how much distribution to put in, for example in our region, which is run by the PJM, they send us very clear signals through balanced LMPs that bounce around if we have constraints in parts of that system. That process has led to a set of constraints that were predicted by PJM two years ago, that required significant transmission capacity. We’ve now cancelled the largest transmission line that was planned for PJM, which was going to run from Maryland to New Jersey. It was cancelled because of the effectiveness of distributed generation and efficiency. I would agree that it’s difficult, it’s tough, but we also have a plan in process that is trying to take that into account now and it looks like lower cost options are in the camp of distributed generation and efficiency. At some

point, obviously, we’re going to need to move that to the next step and that’s we need to be planning on those scenarios that will be playing out. I just want to say I do think we have a plan in process, it’s pretty good. Reid Detchon: And that’s one place where New England, and now PJM has led the way in taking efficiency and demand-side resources on the same basis as supply-resources. It’s been shocking to the suppliers. John Byrne: That’s right, in fact the latest auction PJM had, the largest wedge for new capacity came from the demand side. It’s the distributed generation efficiency opportunity. It is an empirical problem, but before, functionally when I put in a distributed generation system into a community, I will decongest the lines that have to serve me during these high-peak periods. That makes it a whole lot easier for the rest of the system to work. From the standpoint of the grid operator, it looks like the demand side response to a problem. Larry Barth: I don’t think the solar side has figured that out yet, as well as the energy efficiency side. I think that’s an opportunity for solar, it has not really monetized is capacity value yet. How it does that on a day like today, the cloud passes over and it’s still 99 degrees and you still need to run your air conditioner, there are still some technical things to figure out. But I believe some solar resources did just bid into the capacity market and those will be the early pioneers. I think the people that will understand that will be the people that are experienced and operating in the wholesale market. It’s not necessarily the guys with the ladders and trucks that are putting up solar. Reid Detchon: Good. Okay, there’s a hand out there. [Anonymous]: I wish the panel would dig a little bit deeper on the issue of policy. You look at any well-optimized market, and it’s optimized at the highest level so you can load-balance supply and demand. Considering the scenario where everybody’s going to be connected all the time with our little devices where solar produces energy and you can consume it locally, you have to connect to the grid. The grid has to be able to move this electricity north, south, east, west. So short of all the states getting together, how do we optimize generation through solar, but link into power sources. Twenty years down the road, unless the Federal government stands up and says, “This is how we’re going to harmonize policy to cross all fifty states.” Reid Detchon: Gerry, you look semi-eager. Gerry Braun: I’ll answer it in a way that might be helpful. One of the things that I would say is that in California, we do have a policy process that repeats itself every two years. The fundamental part of it is looking at demand and supply out twenty years and then correcting the assumptions on what efficiency can do. By the way, California’s investments in efficiency run to several billion dollars now, and we just invested another three billion. And so that is taken into account in this process and

these policies are adjusted. I think the unique thing about California is that we have essentially three regulatory agencies for—I’m not advocating that—but we have three, and in a sense there are checks and balances. The Public Utilities Commission is the economic regulatory arm, the California Integrated System Operator is increasingly an economic regulatory arm as well as an operator, and the Energy Commission is, in principal, the planning organization and also has regulatory authority for citing large power plants. And somehow having the process requiring all three converge very regularly get at some of these issues. I don’t think we’re doing a great job in figuring out what does this mean in a regional context, because our studies are very good studies, but we didn’t look at exchanging power with the rest of the western states. And then, just to show us a thing or two, when DOE did their solar integration study, they didn’t look at California. So we do have some work to do in pulling some things together, and I think it will help if we can have visibility into the kinds of studies that Mike was talking about. Reid Detchon: John, did you want to get on this question? It seems as though we circled several times around how you optimize the grid and how you balance the state versus a wider interest. Is that something that plays into North Carolina? John Morrison: Yes, but for a different reason. We haven’t restructured, we don’t have regional system operators. We still look like the 20th Century utility, vertically integrated. A lot of these conversations are interesting to hear, but for North Carolina, not particularly relevant. I would wish that we were taking a much larger perspective, but for the southeast part of the country, it’s a very different story, and one of the places in which state versus Federal really plays out in a big way. There’s a wariness of Federal action and not a whole lot of interest in any sort of state collective action in a regional basis. I don’t know if that’s an answer, but it’s more of a description. Reid Detchon: How about somebody else out there…there’s a hand. [Anonymous]: I believe it was Rose that brought up the issue of public opinion. When you see other countries around the world pushing for grid parity aggressively, is there a role in legislature to get us there first, or do you think the free market will get us there? By the way, there is a great consensus that when PV reaches grid parity, there will be a paradigm shift, and the utilities will have to adopt. Is that a push that we have to be making today, and do you believe that we’ll get there before other countries do? Yuri Horwitz: One of the first things we have to ask ourselves is, “What is grid parity?” That’s maybe part of the paradigm shift you were talking about, and what we’re effectively trying to do with RPS markets. What I say the best thing we can do is not have rules of supply and demand legislated or regulated by entities, but have them regulated by markets that are then regulated by entities. These markets are far too complex for individual stakeholders to be making decisions about what’s right and what’s wrong. You put a playing field out there, you allow people to play,

and you adjust those rules. A regional RPS is most likely to let solar succeed, and once you see solar succeed, you’ll see a paradigm shift. But to go back to what Derek was talking about earlier, perhaps the goal for us now is not carbon Cap & Trade but a regional RPS. That may take us where we want to go with a lot more political capital. Gerry Braun: Just a quick thought on grid parity, that has been the industry’s mantra for quite a while. I think it’s a really important term for us to understand, what we mean by grid parity because it’s going to mean a different thing at every level of the market and in every state. I would be so bold as to suggest that grid parity is already here in certain cases, and it can only expand from where it is. But there are many people who are worried that we are at a tipping point and if we are not careful, we’re going to end up with some markets that are mismanaged and are going to crash, and it’ll take a long time to recover. More that the sort of programs that are in place in California, where you have three billion set aside in PV incentive being doled out for three gigawatts of supply. But if you don’t do what is working in California and you have a mechanism to prevent overshoot and having the industry oversupply and go through wild swings of changes in demand, which in some instances may be catastrophic. If you’re not careful, you might end up putting a lot of people out of business right after you put them in business. We’ve got to understand this grid parity business a lot better than we do because industry is driving the costs down—they’re pretty close right now—and they need help to get started in markets where they’re not active, but that help needs to be measured very carefully in relation to what the cost and value propositions are. All kilowatt hours are not created equal, we need to understand that and somehow need to factor that into our regulatory policies. Reid Detchon: Derek, you must need to worry about that on a regular basis, how to take Federal tax incentives and on that basis create a boom and bust cycle and how do you sort that out? Particularly in the solar area, this comes up. Derek Dorn: Well, there’s the uniformity clause of the Constitution that makes it hard to distinguish incentives state by state. But I think the fact that New Jersey is a leader in solar shows that if you have the right incentives, even if you’re not the sunniest state for solar, you can be quite advanced. And Germany as well. So at the Federal level, I think it’s hard to craft policies state by state just because of political concerns and constitutional ones. But I think we can rely on states to create baskets for their own citizens. Reid Detchon: Okay, I think we can get one more question out there before I hammer these guys with another hard one. [Anonymous]: I’d just like to hear a little more about feed-in tariffs and where that’s going in some states, because the solar industry doesn’t seem to be behind it, which is surprising. So anymore talk on that?

Rose McKinney-James: We’re hearing a great deal, as a matter of fact, we have the state legislative committee meeting tomorrow, and the feed-in tariff is something that’s on the top of their agenda because there’s been a great push for grassroots folk who think it is maybe a silver bullet for pushing the ball forward. And I had a conversation with a senior representative of the solar industry because I’ve met with representatives who are not that excited about it. I think what they’re going to do is put if back in the court of the utility regulators to design something that makes sense for the state. Reid Detchon: Emil, do you hear about that in the district at all? Emil King: Crickets. [Laughter] Reid Detchon: Okay, Mike, it’s up to you. Mike Hartley: I think to do feed-in tariffs right, you can’t have a cap on the amount of systems that get installed and you have to have the manufacturers as well as the installers so that you create a virtual cycle for the funds. If you put a cap on it, it’ll expire in hours or days, and that’ll be it. If you don’t have the manufacturing capacity in the same region, you’re bleeding your rate-payers to a manufacturer in another state. There are some nasty political consequences of trying to support that. Lastly, as a policy maker looking at feed-in tariffs, I know that with my best modeling and all the consultants in the world, I can figure out what my price should be on day one. But on day two, it’s probably wrong. And half a year later, it’s dead wrong. Do these tariffs need to be reset, and what kind of boom and bust cycle does it create? Whereas if you have an SREC, the market figures that out. Larry Barth: And regulatory processes to update any processes are cumbersome and they’re not responsive. By the time you find a problem and fix it, you’re already on to another problem. Reid Detchon: So you all don’t know this, but we’re supposed to prep with ten questions. The tenth question, which I think was alluded to earlier, is how many people does it take to screw in a solar panel? But I asked people that beforehand, they all had good answers, and none of them were funny. [Laughter] Reid Detchon: I’m not going to ask that question. So I’ve got a better one here; if you had the freedom to revamp your state solar policy exactly as you believe it needed, without having to worry about approvals from legislative bodies or commission boards, what changes would you make? Who wants to be god in this case?

Gerry Braun: Actually, this may not apply outside of California, but we had a bit of a train wreck in the 80s with our solar water heating incentives. We had the kind of thing I was just talking about, where too many people came in too fast, who weren’t prepared to do good work. In relation, we are not doing much to the rest of the world to renewable heating and cooling, and I think it’s a tremendous complement to solar electricity. The two things go together because it’s almost like efficiency, and they need each other in the market more and more as penetration increases. So I would attack the problem of renewable energy in heating and cooling industries. Reid Detchon: Derek and Mike, I’m going to give you a special privilege here, if you could be god for the country, one thing you would do for national solar policy. Derek Dorn: I guess I’ll speak about what I work on, which is financing incentives. To develop an incentive which takes performance into account. I think that perhaps finding some common ground on a distributed system, we would incentivize good planning, because it’s not clear that the Federal government should be making incentives for all kinds of systems across the board. Rose McKinney-James: I would love to be able to come up with the right language. I need a language that allows me to communicate with corporate America, I want to help them understand the value added of renewables. I’m very disheartened with the collective view that we’re not ready. Finding a way to make that case would be what I’d like to do if I were god, is be able to find that magic set of words or metrics that gets over the hump so that they engage. Reid Detchon: Well, a little editorial comment while Larry thinks about his God act. Our corporations don’t necessarily have our national interest at heart anymore, and if we’re going to think about and develop our next American industry with jobs and manufacturing, that might be another reason for you to pick them. Larry? Larry Barth: Yeah, I come at it from the standpoint of a state that has good policy and is ramping up and now you have to ask the question, “How are we going to meet these aggressive goals?” 567 gigawatt-hours by 2026 and that’s a lot more than where we are now. I think one of the things we need to start thinking about is community energy, it was mentioned before. But that’s a really hard thing to do, you’re not protected by net metering laws on something like that. It’s kind of a hybrid between a full-scale power plant and an on-meter system. But I think if we could do that, we’d see in New Jersey six hundred communities have a couple megawatt facility. John Byrne: These are really great gods, there’s really not much left. I would certainly think that we need to build and finance a system that can keep up with these opportunities. In that vein, I would suggest trying to build infrastructure like we tried to do in the past, which create conditions for tax-exempt bonds, that is how we built our hospitals, our schools, our roads. I can do all those things and qualify for tax exemption if I create a sustainable, I do not qualify for tax exemption. I think

that would be a game changer if that were to happen. And just briefly, the other part of this is all in the paradigm shift question; there is so much opportunity out there on the efficiency of solar cells. My university has demonstrated 42% efficient cell, we’re in the market with 20% efficient. If this country doesn’t get an R&D policy that doesn’t keep up with the future, we’re going to lose those jobs, that manufacturing capability. Mike Li: I’ll answer the question by talking about one of the things we are doing n the energy efficient side, which is, we’re trying to figure out if we’re going to achieve energy efficiency at a speed and scale we haven’t seen before, we need to think about the frameworks, the regulatory incentives. So maybe one thing we could do on the solar side is bring the key stakeholders together to talk about what are new frameworks that we could think up that might apply to energy efficiency so we can dramatically improve the speed and scale. Yuri Horwitz: I think, first, we advocate for private contractors to get involved in general because in order to facilitate financing on the grassroots level, you need people that get involved. I think eventually there will be a dichotomy between financing solar on the small commercial level and on the utility level. But I also think that Larry’s point is very important, which is that we can fiddle with innovation a lot, but eventually we’ve got to fiddle on the finance side of things, as well. We need to make it so that people who want to invest in solar can do so. That’s going to require us to innovate mechanisms which allow them to do so, and it’s really important. Emil King: Well, basically I echo everything that’s already been said and maybe add building codes. They are very lax in a lot of states, and here in the district, it’s an extremely old building stock. It’s extremely important—also tax incentives, which we currently don’t have. John Morrison: In North Carolina, there are two issues holding the solar market back. One is the transparency of the REC mark, it makes it very hard for a developer who’s putting the system in to really know what they’re going to get for their REC. The second has to do with the whole permitting and inspection process. That process is very, very local and differs widely, making it difficult for anyone who’s in the business to be efficient. It’s a cost-adder to people who are trying to drive down costs. Reid Detchon: Mike, you get to be clean-up god. Mike Hartley: I think financing, as a lot of folks have said, is a critical component, and I would like to make the financing options for a PV system as ubiquitous as financing options for a car. And the other thing I’d like to do is couple an electric car with every PV panel system so that people get the association of electric energy as this virtuous system.

Reid Detchon: Well that was a truly god-like statement. Or maybe it was more Oprah-like, everyone in the audience gets an electric car! I thought that last round was particularly interesting and just to build on some of the things we’ve heard: we’ve heard about community energy, financing, utility regulatory reform, better understanding from corporate America about the value of solar, performance based taxes incentives, a whole lot of very interesting things there. So I think that’s a good place to stop, and if you’d join me in thanking this panel in everything they contributed.

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