Interruption in the Utility Industry?

PUCO EnergyTech Conference

November 30, 2015

A More Diversified and Increasingly Distributed Energy Future

Distributed resources will co-exist with central station

generation. An integrated grid will be required for system optimization.

Technology development is advancing at unprecedented rate. Innovations in telecom, IT and energy storage will drive further evolution.

Our customer’s desire for more choices - and their expectations - are growing.

2

Solar is a distributed resource that is rapidly changing our business

3

Rapid Growth Expected for Distributed Solar PV in the U.S.

Drivers: Declining PV costs, increasing utility rates, state renewable energy policies, federal tax credits, innovative financing options for customers, NEM. 4

Distributed PV rises steadily

despite ITC stepdown

State policies continue to influence solar development

5

Beyond Solar: A Diversified Portfolio of Distributed Energy Resources

Large Solar Microgrids PEV

Combined Heat &

Power (CHP)

Energy Storage

Demand Side

Management

Wind Charging Stations

Rooftop Solar

6

Supply Side

Resources

Integrating

Resources

Demand Side

Resources

Combined Heat and Power (CHP)

Natural gas generation is something utilities understand well. Combined-heat and-power (CHP) is a smaller natural gas turbine where waste heat is used to make steam for a host (same technology as a combined cycle plant).

Customers want it

Potential to be the lowest cost generation asset on the grid

Significant reduction in CO2 emissions

Improved reliability

Much faster development cycles

Reduces T&D losses

Customer retention for industrials

Economic development

7

Microgrids

CHP is a complementary product for microgrid and distributed energy resource offerings

A microgrid is a localized energy system that comprises local generation, storage, distribution, and consumption that can operate with - or independently from - the broader system.

District energy is a microgrid that also provides steam and/or cooling, in addition to electricity, to the end customers

CHP is a growing product that can offer customers additional benefits around reliability, resiliency, and sustainability

Duke-owned CHP developments will enable greater participation in microgrid services

Customers benefit from coordinated site development

Company benefits from increased revenue channels

8

Electric Vehicles

9

Provide safe, reliable, affordable and clean electricity to power the movement of people and goods

Advance the infrastructure and technology to facilitate transportation electrification

Support our customers as the new fuel provider

Focus Areas:

Utility Readiness Customer Support Fleet Integration

Education, Outreach

& Collaboration

Potentially transformative to a utility:

Potential to manage short term grid variations more

efficiently

Support increased grid reliability

Support reliable distributed grid concepts (e.g.,

microgrid)

May avoid or defer construction of new peaking plants

Reduce power system demand peaks and valleys to

reduce system costs

Storage is accomplished by devices or systems that manage

the availability of energy across time

Energy Storage

10

Key Takeaways for Transitioning to a Distributed Energy Future

Public policy positions should be proactive, collaborative, and comprehensive

Traditional regulatory system planning does not resonate with increasing numbers of customers; they want more choices for renewable energy; and the option to use renewable energy themselves.

The DER market is becoming increasingly competitive and utilities need an opportunity to participate.

11

12

Questions?

* States implementing regulations to support planning and deployment of DERs; others will follow

5 STATES ∙ 26 IOUS ∙ 10% OF U.S. ELECTRICITY SALES

13

State Regulations on DER Planning

ACT 236 and SC Distributed Energy Resource Program

ACT 236 Vision and DER Program Objectives

(1) Work collaboratively to provide access to solar to a wide variety of customers

(2) Successfully integrate solar into SC communities

(3) Reach capacity goals of Act 236 (DE to grow footprint from less than 2 MW up to 170 MW)

Large Scale Solar

Solar PV Procurement through Requests for Proposals

Solar Rebate for rooftop or ground mounted up to 1MW

$1/per watt-dc residential and business

Shared Solar

Multiple customers share in benefits of a single solar facility

Policy case study: Germany

Residential electricity rates are very high relative to U.S.

Net cost is somewhat mitigated by lower usage relative to the U.S.

Low income households are struggling to pay the bills

Incumbent utilities are struggling financially

Continued dependency on coal following state decision to shut down nuclear

15

16