Michael Kotara, CPS Energy - Speaker at the marcus evans Generation Summit 2012 held in San Antonio, TX, delivered his presentation entitled Moving towards a More Sustainable and Secure Energy Future

1. Moving Towards a More Sustainable
and Secure Energy Future
Michael Kotara, P.E.
,
SVP Power Generation, CPS Energy
Generation S
G ti Summit
it
February 6, 2012
San Antonio, Texas

2. Overview of CPS Energy
gy
• Electric & Gas utility serving the greater San Antonio area
Electric & Gas utility serving the greater San Antonio area
• Oldest energy utility in Texas – Founded in 1860
• First service was gas lights in front of The Alamo
• One of the largest municipally‐owned utilities in the U S
One of the largest municipally owned utilities in the U.S.
• 717,000 electric customers
• 323,000 natural gas customers
• 3,600 employees
, p y
• Nearly $10B in assets with AA credit rating by S&P
• Outstanding customer satisfaction track record
/
• Low electric rates – 2011 Residential rates averaged about 9¢/kwh
g
J.D. Power Survey – Southern Region 2009 2010 2011
Electric Residential Customers 1st 3rd 2nd
Gas Residential Customers 1st 1st 1st
2

3. CPS Energy’s Vision 2020
gy
• Goals for Renewable Energy
Goals for Renewable Energy
• 1,500 MW of renewable energy capacity by 2020
• Approximately 20% of generation capacity
• 100 MW from renewable sources other than wind by 2020
00 o e e ab e sou ces o e a d by 0 0
• Goals for Energy Efficiency & Conservation
• Save for Tomorrow Energy Plan (STEP) will help avoid 771 MW of
Save for Tomorrow Energy Plan (STEP) will help avoid 771 MW of
electric load growth by 2020
• Drive local economic development by:
Drive local economic development by:
• Maintaining affordable retail electric rates
• Partnering with suppliers and vendors who are committed to
investing in the New Energy Economy in San Antonio
investing in the New Energy Economy in San Antonio
3

4. Main Take-Aways
y
• Energy diversification and energy independence have
gy gy p
been cornerstones of CPS Energy’s strategy for the past
four decades
• Ab d t h l
Abundant shale gas provides an opportunity to enhance
id t it t h
sustainability over the next decade and possibly longer
• Less expensive to reduce emissions by “rebalancing” generation
portfolios
• Pursuing low‐emissions strategy is the path with least
incremental risk
incremental risk
• Measured, incremental changes have nominal cost impact
• Economic development adds considerable value and offsets cost
4

5. Four Decades of Energy Mix
Diversification
Di ersification at CPS Energy
Energ
1970 1980 Nuclear 1990
16.3%
Coal
25.2%
Coal
30.9%
Gas – Steam Gas – Steam Gas – Steam
100.0% 74.8% 52.8%
1,701 MW 3,452 MW 4,632 MW
Gas – CC Gas – CT & CC
9.4% 10.2% Gas – Steam
29.1%
Nuclear
14.8% Renewables
2000 10.9% 2010
Nuclear Coal
Coal 16.4%
Gas – 33.5%
28.0% Steam
47.8%
5,113
5 113 MW 6,800
6 800 MW
Installed Capacity 5

6. CPS Energy’s
Near-Term Focus
Near Term Foc s
• Deactivate 860 MW coal‐fired Deely Plant in 2018
y
– Avoid $500M‐$600M for additional emission controls
• Partnering with OCI Solar/Nexolon for 400 MW of
“utility‐scale” solar by 2017
• Partnering with Summit Power for a new 200 MWnet
coal‐fired IGCC plant in West Texas in 2015
• Aggressive “STEP Program” for energy efficiency and
conservation to avoid 771 MW of load growth by 2020
conservation to avoid 771 MW of load growth by 2020
• Considering “Buy vs. Build” for additional gas‐fired
generation assets to leverage new shale gas supplies
generation assets to leverage new shale gas supplies
6

7. CPS Energy’s Existing
Renewable Energ
Rene able Energy Projects
Commercial Operation
Wind 859 MW
Solar 14 MW
Landfill Gas 10 MW
Total 883 MW
Development / Construction Sweetwater 3 & 4 Wind
Wind 200 MW
Solar 30 MW
Desert Sky Wind
Landfill Gas 3 MW
Total 233 MW
CPS Energy is a leader in
gy
Covel Gardens Landfill Gas
renewable energy with Blue Wing Solar
Dos Rios & Somerset Solar
more than 1,100 MW
under Power Purchase Cedro Hill Wind
Papalote Creek Wind
Agreements (PPAs)
Agreements (PPAs) Penascal Wind
Los Vientos Wind
7

8. Outlook for
Solar Energy is Bright
Energ
• Solar energy costs continue to drop
gy p
• Solar PV efficiencies continue to improve
• Solar generation profile is significantly better than wind
generation
• Solar generation output is more predictable than wind
generation
– Significantly less financial risk in ISO markets where generation
imbalance is financially settled
• Economic development benefits add significant value to
Economic development benefits add significant value to
solar energy
8

9. CPS Energy’s Vision for
Large Scale Solar
• Combine large‐scale solar energy PPA with local
g gy
economic development
– Leverage a multi‐year commitment for new solar farms in
exchange for local jobs and capital investment
exchange for local jobs and capital investment
– 400 MW of new solar capacity through 2017
• Economic development goals
– At least 800 local jobs
• Solar or clean technology jobs
– Minimum annual payroll of $30 million
– At least $100 million in local, clean tech capital investment
• Ground breaking within 12 months, operational within 36 months
g , p
– Commitment to local education programs
9

10. CPS Energy’s Recent
Solar RFP
• Issued November 2011
• Received 19 proposals in December 2011
• Evaluation criteria explicitly included economic
development goals CATEGORIES WEIGHT
Price 40%
Financial Strength 25%
Economic Development 25%
Local Diversity 5%
Industry Expertise 5%
• Interviewed 7 respondents
Interviewed 7 respondents
• Selected OCI Solar / Nexolon
– Ongoing PPA negotiations began in January 2012
10

11. Partnering with Summit Power for
Texas Clean Energy Project
• CPS Energy entered into a PPA with Summit Texas Clean
Energy for 200 MW of net capacity and energy from the
Texas Clean Energy Project (TCEP)
• Overview of TCEP
Overview of TCEP
• 400 MW gross power output
• Low Sulfur Powder River Basin Coal
• First U.S.‐based power plant that combines both IGCC technology and
Fi t U S b d l t th t bi b th IGCC t h l d
90% carbon capture
• Siemens gasification & F‐class combustion turbine technology
• Located in West Texas just outside Odessa, TX
Located in West Texas just outside Odessa TX
• Expected COD of 2015
• Summit Texas Clean Energy will open a local office in San
Antonio and support energy‐related research at UTSA
d l d h
11

12. Partnering with Consert, Inc. to
Deploy HAN Technology
• CPS Energy entered into 10 year The Smart Grid Home
agreement with Consert, Inc. to
deploy its Home Area Network
(HAN) technology
• Targeting 140 000 homes & small
Targeting 140,000 homes & small
businesses in San Antonio
• Consert’s “Virtual Peak PlantSM”
is expected to provide 250 MW
is expected to provide 250 MW
of peak load reduction
• Consert is relocating its
headquarters to San Antonio
• 50 jobs in 2012
• 150 jobs by 2014
12

13. Partners Bringing Economic
Development Val e
De elopment Value
• Home Area Networks (HAN) • Electric refrigerated trucks • 30 MW Solar
• Headquarters in SA
q • Headquarters in SA • Up to 40 jobs by 2012
• Up to 150 jobs by 2015 • Manufacturing in SA • Regional office in SA
• UTSA partnership • Up to 50 jobs by 2012 • $600k education investment
• LEDs (light-emitting diodes) • 400 MW Solar
• Clean coal
• Headquarters in SA • 800+ jobs
• Manufacturing in SA • Up to 15 jobs by 2013
• $100m capital investment
• Up to 30 jobs by 2012 • R&D council to SA
• $40m annual payroll
• University equipment funding
• Education investment
• $10/light produced in SA for
education
13

14. Emphasizing STEP and
Renewable
Rene able & Gas Capacity
Capacit
2010 Capacity Projected Capacity 2020
Wind Solar Solar Landfill Gas
12.39% 0.21% 5.08%
Landfill Gas 0.14%
0.14% Wind
STEP
2.06% 15.18%
Gas
Nuclear Gas 40.16%
15.58% 37.81% STEP
10.23%
Nuclear
12.06%
Coal Coal
31.82% 17.15%
Traditional Sources = 85.20%
S 85 0% Traditional Sources = 69.37%
S 69 3 %
Renewable Sources = 12.74% Renewable Sources = 20.40%
Demand Reduction = 2.06% Demand Reduction = 10.23%
14

15. Changes in Projected Energy Mix are
Most Pronounced for STEP and Gas
Prono nced
2010 Generation Projected Generation 2020
Solar Landfill Gas
0.2%
0 2% Solar Landfill Gas
Wind 0.03%
Purch Pwr Wind 2% 0.2%
8% 5% 12% Purch Pwr
STEP Gas 1% Gas
2% 7% 20%
STEP
8%
Nuclear
Coal
32% Nuclear
uc ea
46%
23% Coal
34%
Total Generation = 26.3 Million MWh Total Projected Generation = 33 Million MWh
j
Traditional sources = 85% Traditional sources = 77%
Renewable sources = 8% Renewable sources = 14%
Demand Reduction, Purchases = 7% Demand Reduction, Purchases = 9% 15

16. Moving Forward into the
New Energy Economy
N E E
CPS Energy wants to achieve Vision 2020 Goals as
CPS E t t hi Vi i 2020 G l
well as future goals:
Keep prices to our customers affordable
Provide reliable, clean energy for decades to
come
Build the New Energy Economy in San Antonio
16

17. Questions
Contact Information
Michael Kotara
Phone: 210‐353‐2285
h
Email: MKotara@CPSEnergy.com
17