Meeting withRep. _______________

Solar Industry Representatives

May 5, 2010

Solar Industry is growing and competitive globally

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The Solar Industry Supported 17,000 New U.S. Jobs in 2009 SEIA estimates 24,000

people were directly employed in the U.S. solar energy business in 2009

An additional 22,000 worked for companies that supply services and materials

Solar supported 33,000 induced jobs in 2009

In sum, the U.S. solar industry supported 79,000 jobs in 2009, 17,000 more than the 62,000 jobs supported in 2008

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Overview of Resource Trends

Capital Cost(Technology)

Operation Cost(Fuel)

T&DCost(Grid)

Emissions Cost(Environment)

Coal

Natural Gas

Nuclear

Wind

Solar

4

$90

Solar Costs Competitive With Other Generation Alternatives

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States Across the U.S. Are Responding to the Opportunity 29 States + DC have

RPS Standards 16 States + DC have

Solar Shares Half of those (NJ, DE,

MD, IL, CO, NM, AZ, NV) have Solar Shares that exceed Pennsylvania

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PA Responding Also:HB2405 Solar ProvisionsGoals: Maximize rate-payer &

state-wide benefits Increase near-term targets,

to match industry capacity for growth

Double the goal in 2021 (0.5% to 0.97%)

Extend the goal to 2026 (growth to 3%)

Market Mechanisms: Rate Payer Protection

• “Force Majeure” and regular PUC Review

Fixed Compliance Incentive (ACP) with Banking

• $450, declining 3%/yr

• 4 year AEC Banking

Cost reduction through Long-term Contracting

• 10 year contracts & other “least-cost” provisions

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Increasing the Solar Share: Modest Now, Clear Signal Later

Solar ShareTotal MW of

Solar CapacityRevised Revised

Year 1_Curr 2_HB80 Current HB802010 0.0120 0.0120 4.3 4.32011 0.0203 0.0203 19.5 19.52012 0.0325 0.0504 48.7 75.62013 0.0501 0.0752 75.9 113.92014 0.0840 0.1218 127.5 184.92015 0.1440 0.2016 219.6 307.52016 0.2500 0.3000 382.9 459.52017 0.2933 0.4100 452.2 632.12018 0.3400 0.5000 528.4 777.02019 0.3900 0.6200 611.1 971.42020 0.4433 0.7500 700.5 1185.22021 0.5000 0.9700 796.1 1544.42022 0.5000 1.3500 800.8 2162.12023 0.5000 1.9000 806.2 3063.62024 0.5000 2.4500 813.7 3987.32025 0.5000 3.0000 822.5 4935.0

Reporting Year 2011: June 2010 - June 2011

0

1000

2000

3000

4000

5000

6000AEPS Scenarios

Current HB80

Cap

acity

(M

W)

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PA Solar Share Requirement

0.02 0.17 0.73 4.30 19.46 48.70 77.57129.70

225.72

397.82

473.81

557.60

649.33

749.30

858.02

0

100

200

300

400

500

600

700

800

900

1,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

MW

Cap

acity

SRECs in PA

~ 74 MW projected between grants awarded for 2010 (Sunshine, CFA, PEDA/ARRA, etc.) and existing projects.

Over 7 MW in operation in PA right now

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PA Sunshine – Rebate Schedule40 MW in Residential

35 MW inSm. Comm.

75 MW Total in Small PV Systems

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Pennsylvania Statewide Benefits from Solar Direct net benefit is estimated to be $300-500MM through

2025, and $2.5B+ through 2035 (Includes cost of AECs, off-set by energy savings from the installed

systems and lower wholesale prices for all)

Indirect benefits are estimated to be much larger and include76,500 to 153,000 direct jobs and 341,190 to 682,380 indirect/induced jobs (Based on a study by Navigant Consulting)

Benefits are consistent with overall impact cited by Black & Veatch Study but include more specific estimates for solar

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Estimated Rate Payer Impact of PA Solar Share

Average net impact on residential rates over next 15 years is almost zero Average impact over next 25 years will be a reduction of 0.4%  The reduction of rates increases over time as rate stabilization from solar

energy takes effect On an annual basis, there is little to no impact over the next 5 years:

• Less than $1.00 per year increase through 2012

• Less than $3.00 per year increase through 2015

• Less than $4.50 (0.3%) per year increase at the highest point in 2019

• Then A DECREASE that will exceed $12 (-0.6%) per year by 2025 and may grow to over $30 (-1.3%) per year by 2035

Even if all benefits are excluded, estimated cost of AECs alone never exceeds 1% of residential retail rates or approx. $18 for an entire year.

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Market Development and Long Term Contracting 10 year or longer AEC

contracts make it possible to finance projects by reducing risk which, in turn, bring down costs.

Different segments have substantially different requirements

Certain contracting provisions can have significant bearing on cost & project development and must be managed carefully

Scenario 1 Scenario 2 Scenario 3Revenue Required 3,000,000$ 3,000,000$ 3,000,000$

Nominal Contract Value 3,000,000$ 3,000,000$ 3,000,000$

Term of Contract 20 Years 10 Years 5 YearsTotal SRECs Delivered 20,000 10,000 5,000

Price per SREC Procured 150$ 300$ 600$

YearSRECs Delivered

by Year1 1000 150,000$ 300,000$ 600,000$ 2 1000 150,000$ 300,000$ 600,000$ 3 1000 150,000$ 300,000$ 600,000$ 4 1000 150,000$ 300,000$ 600,000$ 5 1000 150,000$ 300,000$ 600,000$ 6 1000 150,000$ 300,000$ 7 1000 150,000$ 300,000$ 8 1000 150,000$ 300,000$ 9 1000 150,000$ 300,000$

10 1000 150,000$ 300,000$ 11 1000 150,000$ 12 1000 150,000$ 13 1000 150,000$

Nominal Revenue Required by Year

Sample SREC Contract Scenarios

… … …

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Setting a firm Solar ACP Existing: “200% of the average market value of solar renewable energy

credits sold during the reporting period within the service region of the regional transmission organization, including, where applicable, the levelized upfront rebates received by sellers of solar renewable energy credits in other jurisdictions in the PJM Interconnection, LLC transmission organization (PJM) or its successor.”

New: “The alternative compliance payment for the solar alternative share shall be set at $450 per megawatt hour (MWH) per year beginning on January 1, 2011, and the amount shall be reduced by 3% each year thereafter”

Rationale: The ACP directly impacts solar development activity but not long-term SREC prices. A fixed schedule is a simple but effective signal to developers and investors that there will be sufficient incentive for utilities to buy SRECs as long as projects can be completed at SREC pricing lower than the ACP. NJ, MD, DE, MA, OH all have fixed ACP schedules.

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East Coast Market Summary

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Definitions: Solar thermal Existing language: Solar thermal energy – defined as

“technology utilizing solar energy for water heating or for generating electricity

New: Section 3. (b) adds “and solar thermal energy shares” to include this resource in the technologies qualifying for AEPS AECs and adds language in (4) to locate within the Commonwealth with an effective date of “after December 31, 2010.

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Solar In Your District…

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