TRANSFORMING THE NATION'S ELECTRICITY SYSTEM THE SECOND INSTALLMENT OF THE QUADRENNIAL ENERGY REVIEW January 2017 QER Report Energy Transmission Storage and Distribution Infrastructure April 2015 1 QUADRENNIAL ENERGY REVIEW TRANSFORMING THE NATION’S ELECTRICITY SYSTEM THE SECOND INSTALLMENT OF THE QER January 2017 3UHIDFH Ŷ ƵŶĞ ϮϬϭϯ͕ ƚŚƌŽƵŐŚ ƚŚĞ WƌĞƐŝĚĞŶƚ͛Ɛ ͞ ůŝŵĂƚĞ ĐƚŝŽŶ WůĂŶ͟ ĂŶĚ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ Ă ϮϬϭϭ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶ ďLJ ƚŚĞ WƌĞƐŝĚĞŶƚ͛Ɛ ŽƵŶĐŝů ŽĨ ĚǀŝƐŽƌƐ ŽŶ ĐŝĞŶĐĞ ĂŶĚ dĞĐŚŶŽůŽŐLJ͕ WƌĞƐŝĚĞŶƚ KďĂŵĂ ŝŶŝƚŝĂƚĞĚ Ă ƋƵĂĚƌĞŶŶŝĂů ĐLJĐůĞ ŽĨ ĞŶĞƌŐLJ ƌĞǀŝĞǁƐ ƚŽ ƉƌŽǀŝĚĞ Ă ŵƵůƚŝͲLJĞĂƌ ƌŽĂĚŵĂƉ ĨŽƌ h͘ ͘ ĞŶĞƌŐLJ ƉŽůŝĐLJ͘ Ŷ Ă WƌĞƐŝĚĞŶƚŝĂů DĞŵŽƌĂŶĚƵŵ ƌĞůĞĂƐĞĚ ŽŶ ĂŶƵĂƌLJ ϵ͕ ϮϬϭϰ ;ƐĞĞ ƉĂŐĞ ŝŝŝ ĨŽƌ ĨƵůů ƚĞdžƚͿ͕ WƌĞƐŝĚĞŶƚ KďĂŵĂ ĚŝƌĞĐƚĞĚ ŚŝƐ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ƚŽ ĐŽŶĚƵĐƚ Ă YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ;Y ZͿ ϭ ĂŶĚ ĂŶŶŽƵŶĐĞĚ ƚŚĞ ĨŽƌŵĂƚŝŽŶ ŽĨ Ă tŚŝƚĞ ŽƵƐĞ dĂƐŬ ŽƌĐĞͶĐŽͲĐŚĂŝƌĞĚ ďLJ ƚŚĞ ŝƌĞĐƚŽƌ ŽĨ ƚŚĞ KĨĨŝĐĞ ŽĨ ĐŝĞŶĐĞ ĂŶĚ dĞĐŚŶŽůŽŐLJ WŽůŝĐLJ ĂŶĚ ƚŚĞ ƉĞĐŝĂů ƐƐŝƐƚĂŶƚ ƚŽ ƚŚĞ WƌĞƐŝĚĞŶƚ ĨŽƌ ŶĞƌŐLJ ĂŶĚ ůŝŵĂƚĞ ŚĂŶŐĞ ĨƌŽŵ ƚŚĞ ŽŵĞƐƚŝĐ WŽůŝĐLJ ŽƵŶĐŝů ĂŶĚ ĐŽŵƉƌŝƐŝŶŐ ϮϮ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ǁŝƚŚ ĞƋƵŝƚŝĞƐ ŝŶ ĞŶĞƌŐLJͶƚŽ ĚĞǀĞůŽƉ ƚŚĞ Y Z͘ dŚĞ dĂƐŬ ŽƌĐĞ ŝƐ ĚŝƌĞĐƚĞĚ ƚŽ ĚĞůŝǀĞƌ Ă ƌĞƉŽƌƚ ƚŽ ƚŚĞ WƌĞƐŝĚĞŶƚ ƚŚĂƚ ĚŽĞƐ ƚŚĞ ĨŽůůŽǁŝŶŐ͗     WƌŽǀŝĚĞƐ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ǀŝĞǁ ŽĨ͕ ĂŶĚ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĨŽƌ͕ ĞĚĞƌĂů ĞŶĞƌŐLJ ƉŽůŝĐLJ ŝŶ ƚŚĞ ĐŽŶƚĞdžƚ ŽĨ ĞĐŽŶŽŵŝĐ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů͕ ŽĐĐƵƉĂƚŝŽŶĂů͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ŚĞĂůƚŚ ĂŶĚ ƐĂĨĞƚLJ ƉƌŝŽƌŝƚŝĞƐ͕ ǁŝƚŚ ĂƚƚĞŶƚŝŽŶ ŝŶ ƚŚĞ ĨŝƌƐƚ ƌĞƉŽƌƚ ŐŝǀĞŶ ƚŽ ƚŚĞ ĐŚĂůůĞŶŐĞƐ ĨĂĐŝŶŐ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĞŶĞƌŐLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ZĞǀŝĞǁƐ ƚŚĞ ĂĚĞƋƵĂĐLJ ŽĨ ĞdžŝƐƚŝŶŐ ĞdžĞĐƵƚŝǀĞ ĂŶĚ ůĞŐŝƐůĂƚŝǀĞ ĂĐƚŝŽŶƐ ĂŶĚ ƌĞĐŽŵŵĞŶĚƐ ĂĚĚŝƚŝŽŶĂů ĞdžĞĐƵƚŝǀĞ ĂŶĚ ůĞŐŝƐůĂƚŝǀĞ ĂĐƚŝŽŶƐ ĂƐ ĂƉƉƌŽƉƌŝĂƚĞ ƐƐĞƐƐĞƐ ĂŶĚ ƌĞĐŽŵŵĞŶĚƐ ƉƌŝŽƌŝƚŝĞƐ ĨŽƌ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ƉƌŽŐƌĂŵƐ ƚŽ ƐƵƉƉŽƌƚ ŬĞLJ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ŐŽĂůƐ ĚĞŶƚŝĨŝĞƐ ĂŶĂůLJƚŝĐĂů ƚŽŽůƐ ĂŶĚ ĚĂƚĂ ŶĞĞĚĞĚ ƚŽ ƐƵƉƉŽƌƚ ĨƵƌƚŚĞƌ ƉŽůŝĐLJ ĚĞǀĞůŽƉŵĞŶƚ ĂŶĚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ͘ dŚĞ WƌĞƐŝĚĞŶƚ ĨƵƌƚŚĞƌ ĚŝƌĞĐƚĞĚ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ ; K Ϳ ƚŽ ƉƌŽǀŝĚĞ ĂŶĂůLJƚŝĐĂů ƐƵƉƉŽƌƚ ĨŽƌ ƚŚĞ Y Z ĂŶĚ ƚŽ ŚĞůƉ ŵĂŶĂŐĞ ƚŚĞ ŝŶƚĞƌĂŐĞŶĐLJ ƉƌŽĐĞƐƐ ƚŚƌŽƵŐŚ Ă ƐĞĐƌĞƚĂƌŝĂƚ Ăƚ K ͘ dŚŝƐ ŝƐ ĐŽŶƐŝƐƚĞŶƚ ǁŝƚŚ K ͛Ɛ ŵŝƐƐŝŽŶƐ ĂŶĚ ƐƚĂƚƵƚŽƌLJ ƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐ͘ K ŚĂƐ ƵŶĚĞƌƚĂŬĞŶ ƉĞƌŝŽĚŝĐ ƌĞǀŝĞǁƐ ĂŶĚ ĂŶĂůLJƐĞƐ ŽĨ ƚŚĞ ĞŶĞƌŐLJ ƐĞĐƚŽƌ ;ŝŶĐůƵĚŝŶŐ ŝŶ ƚŚĞ ͞EĂƚŝŽŶĂů ŶĞƌŐLJ ƚƌĂƚĞŐLJ͟ ŽĨ ϭϵϵϭ ĂŶĚ ƚŚĞ ͞ ŽŵƉƌĞŚĞŶƐŝǀĞ ŶĞƌŐLJ ƚƌĂƚĞŐLJ͟ ŽĨ ϭϵϵϴͿ ĂŶĚ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƚŚĞ ǁŽƌŬ ŽĨ ƚŚĞ EĂƚŝŽŶĂů ŶĞƌŐLJ WŽůŝĐLJ ĞǀĞůŽƉŵĞŶƚ 'ƌŽƵƉ ůĞĚ ďLJ ƚŚĞ sŝĐĞ WƌĞƐŝĚĞŶƚ ŝŶ ϮϬϬϭ͕ ďƵƚ ƚŚĞ ůĂƐƚ ŶĂƚŝŽŶĂů ĞŶĞƌŐLJ ƉŽůŝĐLJ ƌĞƉŽƌƚ ǁĂƐ ƉƵďůŝƐŚĞĚ ŶĞĂƌůLJ ϭϰ LJĞĂƌƐ ĂŐŽ͕ ĂŶĚ ƚŚĞ h͘ ͘ ĞŶĞƌŐLJ ƐLJƐƚĞŵ ŚĂƐ ĐŚĂŶŐĞĚ ǀĞƌLJ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŽǀĞƌ ƚŚĂƚ ƉĞƌŝŽĚ͘ dŚĞ WƌĞƐŝĚĞŶƚŝĂů DĞŵŽƌĂŶĚƵŵ ŽŶ ƚŚĞ Y Z ĂĐŬŶŽǁůĞĚŐĞƐ ƚŚĂƚ ƐƵĐŚ Ă ƌĞǀŝĞǁ ŝƐ ŽǀĞƌĚƵĞ ĂŶĚ ƌĞĐŽŐŶŝnjĞƐ ƚŚĞ ŚŝŐŚ ǀĂůƵĞ ŽĨ ƚŚĞ tŚŝƚĞ ŽƵƐĞ ĂƐ ƚŚĞ ĐŽŶǀĞŶĞƌ ŽĨ ƐƵĐŚ ĂŶ ĞĨĨŽƌƚ͘ ƚ ĂůƐŽ ƌĞŝŶĨŽƌĐĞƐ ƚŚĞ ĞƋƵŝƚŝĞƐ ƚŚĂƚ ŵƵůƚŝƉůĞ ĂŐĞŶĐŝĞƐ ŚĂǀĞ ŝŶ ĞĚĞƌĂů ĞŶĞƌŐLJ ƉŽůŝĐLJ͘ Ɛ ĚŝƌĞĐƚĞĚ ďLJ ƚŚĞ WƌĞƐŝĚĞŶƚ͕ ƚŚĞ Y Z ŝƐ ĞŶǀŝƐŝŽŶĞĚ ĂƐ Ă ĨŽĐƵƐĞĚ͕ ĂĐƚŝŽŶĂďůĞ ĚŽĐƵŵĞŶƚ ĚĞƐŝŐŶĞĚ ƚŽ ƉƌŽǀŝĚĞ ƉŽůŝĐLJŵĂŬĞƌƐ͕ ŝŶĚƵƐƚƌLJ͕ ŝŶǀĞƐƚŽƌƐ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂŬĞŚŽůĚĞƌƐ ǁŝƚŚ ƵŶďŝĂƐĞĚ ĚĂƚĂ ĂŶĚ ĂŶĂůLJƐŝƐ ŽŶ ĞŶĞƌŐLJ ĐŚĂůůĞŶŐĞƐ͕ ŶĞĞĚƐ͕ ƌĞƋƵŝƌĞŵĞŶƚƐ͕ ĂŶĚ ďĂƌƌŝĞƌƐ ƚŚĂƚ ǁŝůů ŝŶĨŽƌŵ Ă ƌĂŶŐĞ ŽĨ ƉŽůŝĐLJ ŽƉƚŝŽŶƐ͕ ŝŶĐůƵĚŝŶŐ ůĞŐŝƐůĂƚŝŽŶ͘ ĂĐŚ ŝŶƐƚĂůůŵĞŶƚ ŽĨ ƚŚĞ Y Z ǁŝůů ĂŶĂůLJnjĞ ĂŶĚ ŵĂŬĞ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĨŽƌ Ă ŬĞLJ ĐŽŵƉŽŶĞŶƚ ŽĨ ƚŚĞ ĞŶĞƌŐLJ ǀĂůƵĞ ĐŚĂŝŶ͘ KŶ ĞďƌƵĂƌLJ ϰ͕ ϮϬϭϲ͕ ƚŚĞ dĂƐŬ ŽƌĐĞ ĐŽŶǀĞŶĞĚ Ă ƉƵďůŝĐ ŵĞĞƚŝŶŐ ƚŽ ŝŶƚƌŽĚƵĐĞ ƚŚĞ ƚŽƉŝĐ ŽĨ ƚŚĞ ƐĞĐŽŶĚ ŝŶƐƚĂůůŵĞŶƚ ŽĨ ƚŚĞ Y Z ;Y Z ϭ͘ϮͿ͕ Ŷ ŶƚĞŐƌĂƚĞĚ ƚƵĚLJ ŽĨ ƚŚĞ h͘ ͘ ůĞĐƚƌŝĐŝƚLJ LJƐƚĞŵ͘Ϯ dŚŝƐ ŝŶƐƚĂůůŵĞŶƚ ĂŶĂůLJnjĞƐ ƚƌĞŶĚƐ ĂŶĚ ŝƐƐƵĞƐ ĐŽŶĨƌŽŶƚŝŶŐ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŽƵƚ ƚŽ ϮϬϰϬ͕ ĞdžĂŵŝŶŝŶŐ ƚŚĞ ĞŶƚŝƌĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ ĐŚĂŝŶ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ĞŶĚ ƵƐĞ͕ ĂŶĚ ǁŝƚŚŝŶ ƚŚĞ ĐŽŶƚĞdžƚ ŽĨ ƚŚƌĞĞ ŽǀĞƌĂƌĐŚŝŶŐ ŶĂƚŝŽŶĂů ŐŽĂůƐ ƚŽ͗ ;ϭͿ ĞŶŚĂŶĐĞ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ͖ ;ϮͿ ƉƌŽŵŽƚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƐƉŽŶƐŝďŝůŝƚLJ͖ ĂŶĚ ;ϯͿ ƉƌŽǀŝĚĞ ĨŽƌ ƚŚĞ EĂƚŝŽŶ͛Ɛ ƐĞĐƵƌŝƚLJ͘ 4 5 5HSRUW $Q QWHJUDWHG 6WXG RI WKH 8 6 OHFWULFLW 6 VWHP _ -DQXDU L 3UHIDFH ϭ dŚĞ tŚŝƚĞ ŽƵƐĞ͕ ΗWƌĞƐŝĚĞŶƚŝĂů DĞŵŽƌĂŶĚƵŵ ͲͲ ƐƚĂďůŝƐŚŝŶŐ Ă YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ͕Η dŚĞ tŚŝƚĞ ŽƵƐĞ͕ KĨĨŝĐĞ ŽĨ ƚŚĞ WƌĞƐƐ ĞĐƌĞƚĂƌLJ͕ ĂŶƵĂƌLJ ϵ͕ ϮϬϭϰ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ǁŚŝƚĞŚŽƵƐĞ͘ŐŽǀͬƚŚĞͲƉƌĞƐƐͲŽĨĨŝĐĞͬϮϬϭϰͬϬϭͬϬϵͬƉƌĞƐŝĚĞŶƚŝĂůͲŵĞŵŽƌĂŶĚƵŵͲ ĞƐƚĂďůŝƐŚŝŶŐͲƋƵĂĚƌĞŶŶŝĂůͲĞŶĞƌŐLJͲƌĞǀŝĞǁ͘ Ϯ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ͖ EŽƚŝĐĞ ŽĨ WƵďůŝĐ DĞĞƚŝŶŐ͕ ϴϭ ĞĚ͘ ZĞŐ͘ ϰϬϮϱ ; ĂŶƵĂƌLJ Ϯϱ͕ ϮϬϭϲͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨĞĚĞƌĂůƌĞŐŝƐƚĞƌ͘ŐŽǀͬĚŽĐƵŵĞŶƚƐͬϮϬϭϲͬϬϭͬϮϱͬϮϬϭϲͲϬϭϯϳϮͬƋƵĂĚƌĞŶŶŝĂůͲĞŶĞƌŐLJͲƌĞǀŝĞǁͲŶŽƚŝĐĞͲŽĨͲƉƵďůŝĐͲ ŵĞĞƚŝŶŐ͍ƵƚŵͺĐŽŶƚĞŶƚсΘƵƚŵͺŵĞĚŝƵŵсĞŵĂŝůΘƵƚŵͺŶĂŵĞсΘƵƚŵͺƐŽƵƌĐĞсŐŽǀĚĞůŝǀĞƌLJΘƵƚŵͺƚĞƌŵс͘ ŝŝ 4 5 5HSRUW $Q QWHJUDWHG 6WXG RI WKH 8 6 OHFWULFLW 6 VWHP _ -DQXDU 3UHVLGHQWLDO 0HPRUDQGXP The White House ĂŶƵĂƌLJ Ϭϵ͕ ϮϬϭϰ Presidential Memorandum -- Establishing a Quadrennial Energy Review D DKZ E hD KZ d K y hd s W ZdD Ed E ' E ĨĨŽƌĚĂďůĞ͕ ĐůĞĂŶ͕ ĂŶĚ ƐĞĐƵƌĞ ĞŶĞƌŐLJ ĂŶĚ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞƐ ĂƌĞ ĞƐƐĞŶƚŝĂů ĨŽƌ ŝŵƉƌŽǀŝŶŐ h͘ ͘ ĞĐŽŶŽŵŝĐ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ĞŶŚĂŶĐŝŶŐ ŽƵƌ ƋƵĂůŝƚLJ ŽĨ ůŝĨĞ͕ ƉƌŽƚĞĐƚŝŶŐ ŽƵƌ ĞŶǀŝƌŽŶŵĞŶƚ͕ ĂŶĚ ĞŶƐƵƌŝŶŐ ŽƵƌ EĂƚŝŽŶ͛Ɛ ƐĞĐƵƌŝƚLJ͘ ĐŚŝĞǀŝŶŐ ƚŚĞƐĞ ŐŽĂůƐ ƌĞƋƵŝƌĞƐ Ă ĐŽŵƉƌĞŚĞŶƐŝǀĞ ĂŶĚ ŝŶƚĞŐƌĂƚĞĚ ĞŶĞƌŐLJ ƐƚƌĂƚĞŐLJ ƌĞƐƵůƚŝŶŐ ĨƌŽŵ ŝŶƚĞƌĂŐĞŶĐLJ ĚŝĂůŽŐƵĞ ĂŶĚ ĂĐƚŝǀĞ ĞŶŐĂŐĞŵĞŶƚ ŽĨ ĞdžƚĞƌŶĂů ƐƚĂŬĞŚŽůĚĞƌƐ͘ dŽ ŚĞůƉ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ďĞƚƚĞƌ ŵĞĞƚ ƚŚŝƐ ƌĞƐƉŽŶƐŝďŝůŝƚLJ͕ Ăŵ ĚŝƌĞĐƚŝŶŐ ƚŚĞ ƵŶĚĞƌƚĂŬŝŶŐ ŽĨ Ă YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ͘ dŚĞ ŝŶŝƚŝĂů ĨŽĐƵƐ ĨŽƌ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ǁŝůů ďĞ ŽƵƌ EĂƚŝŽŶ͛Ɛ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĨŽƌ ƚƌĂŶƐƉŽƌƚŝŶŐ͕ ƚƌĂŶƐŵŝƚƚŝŶŐ͕ ĂŶĚ ĚĞůŝǀĞƌŝŶŐ ĞŶĞƌŐLJ͘ KƵƌ ĐƵƌƌĞŶƚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ŝŶĐƌĞĂƐŝŶŐůLJ ĐŚĂůůĞŶŐĞĚ ďLJ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶƐ ŝŶ ĞŶĞƌŐLJ ƐƵƉƉůLJ͕ ŵĂƌŬĞƚƐ͕ ĂŶĚ ƉĂƚƚĞƌŶƐ ŽĨ ĞŶĚ ƵƐĞ͖ ŝƐƐƵĞƐ ŽĨ ĂŐŝŶŐ ĂŶĚ ĐĂƉĂĐŝƚLJ͖ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͖ ĂŶĚ ĐLJďĞƌ ĂŶĚ ƉŚLJƐŝĐĂů ƚŚƌĞĂƚƐ͘ ŶLJ ǀƵůŶĞƌĂďŝůŝƚLJ ŝŶ ƚŚŝƐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŵĂLJ ďĞ ĞdžĂĐĞƌďĂƚĞĚ ďLJ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ŽĨ ĞŶĞƌŐLJ ƐLJƐƚĞŵƐ ǁŝƚŚ ǁĂƚĞƌ͕ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ĂŶĚ ĞŵĞƌŐĞŶĐLJ ƌĞƐƉŽŶƐĞ ƐLJƐƚĞŵƐ͘ dŚĞ ĨŝƌƐƚ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ ǁŝůů ƐĞƌǀĞ ĂƐ Ă ƌŽĂĚŵĂƉ ƚŽ ŚĞůƉ ĂĚĚƌĞƐƐ ƚŚĞƐĞ ĐŚĂůůĞŶŐĞƐ͘ dŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ ŚĂƐ Ă ďƌŽĂĚ ƌŽůĞ ŝŶ ĞŶĞƌŐLJ ƉŽůŝĐLJ ĚĞǀĞůŽƉŵĞŶƚ ĂŶĚ ƚŚĞ ůĂƌŐĞƐƚ ƌŽůĞ ŝŶ ŝŵƉůĞŵĞŶƚŝŶŐ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͛Ɛ ĞŶĞƌŐLJ ƌĞƐĞĂƌĐŚ ĂŶĚ ĚĞǀĞůŽƉŵĞŶƚ ƉŽƌƚĨŽůŝŽ͘ DĂŶLJ ŽƚŚĞƌ ĞdžĞĐƵƚŝǀĞ ĚĞƉĂƌƚŵĞŶƚƐ ĂŶĚ ĂŐĞŶĐŝĞƐ ĂůƐŽ ƉůĂLJ ŬĞLJ ƌŽůĞƐ ŝŶ ĚĞǀĞůŽƉŝŶŐ ĂŶĚ ŝŵƉůĞŵĞŶƚŝŶŐ ƉŽůŝĐŝĞƐ ŐŽǀĞƌŶŝŶŐ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ĐŽŶƐƵŵƉƚŝŽŶ͕ ĂƐ ǁĞůů ĂƐ ĂƐƐŽĐŝĂƚĞĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ŶŽŶͲ ĞĚĞƌĂů ĂĐƚŽƌƐ ĂƌĞ ĐƌƵĐŝĂů ĐŽŶƚƌŝďƵƚŽƌƐ ƚŽ ĞŶĞƌŐLJ ƉŽůŝĐŝĞƐ͘ ĞĐĂƵƐĞ ŵŽƐƚ ĞŶĞƌŐLJ ĂŶĚ ƌĞůĂƚĞĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ŽǁŶĞĚ ďLJ ƉƌŝǀĂƚĞ ĞŶƚŝƚŝĞƐ͕ ŝŶǀĞƐƚŵĞŶƚ ďLJ ĂŶĚ ĞŶŐĂŐĞŵĞŶƚ ŽĨ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ ŝƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ĚĞǀĞůŽƉ ĂŶĚ ŝŵƉůĞŵĞŶƚ ĞĨĨĞĐƚŝǀĞ ƉŽůŝĐŝĞƐ͘ ƚĂƚĞ ĂŶĚ ůŽĐĂů ƉŽůŝĐŝĞƐ͖ ƚŚĞ ǀŝĞǁƐ ŽĨ ŶŽŶŐŽǀĞƌŶŵĞŶƚĂů͕ ĞŶǀŝƌŽŶŵĞŶƚĂů͕ ĨĂŝƚŚͲďĂƐĞĚ͕ ůĂďŽƌ͕ ĂŶĚ ŽƚŚĞƌ ƐŽĐŝĂů ŽƌŐĂŶŝnjĂƚŝŽŶƐ͖ ĂŶĚ ĐŽŶƚƌŝďƵƚŝŽŶƐ ĨƌŽŵ ƚŚĞ ĂĐĂĚĞŵŝĐ ĂŶĚ ŶŽŶͲƉƌŽĨŝƚ ƐĞĐƚŽƌƐ ĂƌĞ ĂůƐŽ ĐƌŝƚŝĐĂů ƚŽ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ĂŶĚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ ĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ƉŽůŝĐŝĞƐ͘ Ŷ ŝŶƚĞƌĂŐĞŶĐLJ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ dĂƐŬ ŽƌĐĞ͕ ǁŚŝĐŚ ŝŶĐůƵĚĞƐ ŵĞŵďĞƌƐ ĨƌŽŵ Ăůů ƌĞůĞǀĂŶƚ ĞdžĞĐƵƚŝǀĞ ĚĞƉĂƌƚŵĞŶƚƐ ĂŶĚ ĂŐĞŶĐŝĞƐ ;ĂŐĞŶĐŝĞƐͿ͕ ǁŝůů ĚĞǀĞůŽƉ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ƌĞǀŝĞǁ ŽĨ ĞŶĞƌŐLJ ƉŽůŝĐLJ ƚŚĂƚ ŝŶƚĞŐƌĂƚĞƐ Ăůů ŽĨ ƚŚĞƐĞ ƉĞƌƐƉĞĐƚŝǀĞƐ͘ ƚ ǁŝůů ďƵŝůĚ ŽŶ ƚŚĞ ĨŽƵŶĚĂƚŝŽŶ ƉƌŽǀŝĚĞĚ ŝŶ ŵLJ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͛Ɛ ůƵĞƉƌŝŶƚ ĨŽƌ Ă ĞĐƵƌĞ ŶĞƌŐLJ ƵƚƵƌĞ ŽĨ DĂƌĐŚ ϯϬ͕ ϮϬϭϭ͕ ĂŶĚ ůŝŵĂƚĞ ĐƚŝŽŶ WůĂŶ ƌĞůĞĂƐĞĚ ŽŶ ƵŶĞ Ϯϱ͕ ϮϬϭϯ͘ dŚĞ dĂƐŬ ŽƌĐĞ ǁŝůů ŽĨĨĞƌ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ŽŶ ǁŚĂƚ ĂĚĚŝƚŝŽŶĂů ĂĐƚŝŽŶƐ ŝƚ ďĞůŝĞǀĞƐ ǁŽƵůĚ ďĞ ĂƉƉƌŽƉƌŝĂƚĞ͘ dŚĞƐĞ ŵĂLJ ŝŶĐůƵĚĞ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ŽŶ ĂĚĚŝƚŝŽŶĂů ĞdžĞĐƵƚŝǀĞ Žƌ ůĞŐŝƐůĂƚŝǀĞ ĂĐƚŝŽŶƐ ƚŽ ĂĚĚƌĞƐƐ ƚŚĞ ĞŶĞƌŐLJ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨĂĐŝŶŐ ƚŚĞ EĂƚŝŽŶ͘ dŚĞƌĞĨŽƌĞ͕ ďLJ ƚŚĞ ĂƵƚŚŽƌŝƚLJ ǀĞƐƚĞĚ ŝŶ ŵĞ ĂƐ WƌĞƐŝĚĞŶƚ ďLJ ƚŚĞ ŽŶƐƚŝƚƵƚŝŽŶ ĂŶĚ ƚŚĞ ůĂǁƐ ŽĨ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŽĨ ŵĞƌŝĐĂ͕ ŚĞƌĞďLJ ĚŝƌĞĐƚ ƚŚĞ ĨŽůůŽǁŝŶŐ͗ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU LLL 3UHVLGHQWLDO 0HPRUDQGXP Section 1 Establishing the Quadrennial Energy Review Task Force ;ĂͿ dŚĞƌĞ ŝƐ ĞƐƚĂďůŝƐŚĞĚ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ dĂƐŬ ŽƌĐĞ ;dĂƐŬ ŽƌĐĞͿ͕ ƚŽ ďĞ ĐŽͲĐŚĂŝƌĞĚ ďLJ ƚŚĞ ŝƌĞĐƚŽƌ ŽĨ ƚŚĞ KĨĨŝĐĞ ŽĨ ĐŝĞŶĐĞ ĂŶĚ dĞĐŚŶŽůŽŐLJ WŽůŝĐLJ ĂŶĚ ƚŚĞ ŝƌĞĐƚŽƌ ŽĨ ƚŚĞ ŽŵĞƐƚŝĐ WŽůŝĐLJ ŽƵŶĐŝů͕ ǁŚŝĐŚ ƐŚĂůů ŝŶĐůƵĚĞ ƚŚĞ ŚĞĂĚƐ ŽĨ ĞĂĐŚ ŽĨ ƚŚĞ ĨŽůůŽǁŝŶŐ͕ Žƌ ƚŚĞŝƌ ĚĞƐŝŐŶĂƚĞĚ ƌĞƉƌĞƐĞŶƚĂƚŝǀĞƐ͗ ;ŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ƚĂƚĞ͖ ;ŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ƚŚĞ dƌĞĂƐƵƌLJ͖ ;ŝŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞ͖ ;ŝǀͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ƚŚĞ ŶƚĞƌŝŽƌ͖ ;ǀͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŐƌŝĐƵůƚƵƌĞ͖ ;ǀŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽŵŵĞƌĐĞ͖ ;ǀŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ĂďŽƌ͖ ;ǀŝŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĂůƚŚ ĂŶĚ ƵŵĂŶ ĞƌǀŝĐĞƐ͖ ;ŝdžͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽƵƐŝŶŐ ĂŶĚ hƌďĂŶ ĞǀĞůŽƉŵĞŶƚ͖ ;džͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ dƌĂŶƐƉŽƌƚĂƚŝŽŶ͖ ;džŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͖ ;džŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ sĞƚĞƌĂŶƐ ĨĨĂŝƌƐ͖ ;džŝŝŝͿ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽŵĞůĂŶĚ ĞĐƵƌŝƚLJ͖ ;džŝǀͿ ƚŚĞ KĨĨŝĐĞ ŽĨ DĂŶĂŐĞŵĞŶƚ ĂŶĚ ƵĚŐĞƚ͖ ;džǀͿ ƚŚĞ EĂƚŝŽŶĂů ĐŽŶŽŵŝĐ ŽƵŶĐŝů͖ ;džǀŝͿ ƚŚĞ EĂƚŝŽŶĂů ĞĐƵƌŝƚLJ ƚĂĨĨ͖ ;džǀŝŝͿ ƚŚĞ ŽƵŶĐŝů ŽŶ ŶǀŝƌŽŶŵĞŶƚĂů YƵĂůŝƚLJ͖ ;džǀŝŝŝͿ ƚŚĞ ŽƵŶĐŝů ŽĨ ĐŽŶŽŵŝĐ ĚǀŝƐĞƌƐ͖ ;džŝdžͿ ƚŚĞ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJ͖ ;dždžͿ ƚŚĞ ŵĂůů ƵƐŝŶĞƐƐ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͖ ;dždžŝͿ ƚŚĞ ƌŵLJ ŽƌƉƐ ŽĨ ŶŐŝŶĞĞƌƐ͖ ;dždžŝŝͿ ƚŚĞ EĂƚŝŽŶĂů ĐŝĞŶĐĞ ŽƵŶĚĂƚŝŽŶ͖ ĂŶĚ ;dždžŝŝŝͿ ƐƵĐŚ ĂŐĞŶĐŝĞƐ ĂŶĚ ŽĨĨŝĐĞƐ ĂƐ ƚŚĞ WƌĞƐŝĚĞŶƚ ŵĂLJ ĚĞƐŝŐŶĂƚĞ͘ ;ďͿ dŚĞ ŽͲ ŚĂŝƌƐ ŵĂLJ ŝŶǀŝƚĞ ŝŶĚĞƉĞŶĚĞŶƚ ƌĞŐƵůĂƚŽƌLJ ĂŐĞŶĐŝĞƐ ǁŝƚŚ ĞŶĞƌŐLJͲƌĞůĂƚĞĚ ƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĞĚĞƌĂů ŶĞƌŐLJ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ ĂŶĚ ƚŚĞ EƵĐůĞĂƌ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ͕ ƚŽ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ƚŚĞ dĂƐŬ ŽƌĐĞ͕ ĂƐ ĚĞƚĞƌŵŝŶĞĚ ƚŽ ďĞ ĂƉƉƌŽƉƌŝĂƚĞ ďLJ ƚŚŽƐĞ ĂŐĞŶĐŝĞƐ͘ ;ĐͿ dŚĞ ŽͲ ŚĂŝƌƐ ƐŚĂůů ƌĞŐƵůĂƌůLJ ĐŽŶǀĞŶĞ ĂŶĚ ƉƌĞƐŝĚĞ Ăƚ ŵĞĞƚŝŶŐƐ ŽĨ ƚŚĞ dĂƐŬ ŽƌĐĞ ĂŶĚ ƐŚĂůů ĚĞƚĞƌŵŝŶĞ ŝƚƐ ĂŐĞŶĚĂ͘ hŶĚĞƌ ƚŚĞ ĚŝƌĞĐƚŝŽŶ ŽĨ ƚŚĞ ŽͲ ŚĂŝƌƐ͕ ƚŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů͗ ;ŝͿ ŐĂƚŚĞƌ ŝĚĞĂƐ ĂŶĚ ĂĚǀŝĐĞ ĨƌŽŵ ƚĂƚĞ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ͕ ƚƌŝďĞƐ͕ ůĂƌŐĞ ĂŶĚ ƐŵĂůů ďƵƐŝŶĞƐƐĞƐ͕ ƵŶŝǀĞƌƐŝƚŝĞƐ͕ ŶĂƚŝŽŶĂů ůĂďŽƌĂƚŽƌŝĞƐ͕ ŶŽŶŐŽǀĞƌŶŵĞŶƚĂů ĂŶĚ ůĂďŽƌ ŽƌŐĂŶŝnjĂƚŝŽŶƐ͕ ĐŽŶƐƵŵĞƌƐ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂŬĞŚŽůĚĞƌƐ ĂŶĚ ŝŶƚĞƌĞƐƚĞĚ ƉĂƌƚŝĞƐ͖ ĂŶĚ LY 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ;ŝŝͿ ĐŽŽƌĚŝŶĂƚĞ ƚŚĞ ĞĨĨŽƌƚƐ ŽĨ ĂŐĞŶĐŝĞƐ ĂŶĚ ŽĨĨŝĐĞƐ ƌĞůĂƚĞĚ ƚŽ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ͕ ĂƐ ĚĞƐĐƌŝďĞĚ ŝŶ ƐĞĐƚŝŽŶƐ ϭ ĂŶĚ Ϯ ŽĨ ƚŚŝƐ ŵĞŵŽƌĂŶĚƵŵ͘ ;ĚͿ dŚĞ ĞĐƌĞƚĂƌLJ ŽĨ ŶĞƌŐLJ ƐŚĂůů ƉƌŽǀŝĚĞ ƐƵƉƉŽƌƚ ƚŽ ƚŚĞ dĂƐŬ ŽƌĐĞ͕ ŝŶĐůƵĚŝŶŐ ƐƵƉƉŽƌƚ ĨŽƌ ĐŽŽƌĚŝŶĂƚŝŽŶ ĂĐƚŝǀŝƚŝĞƐ ƌĞůĂƚĞĚ ƚŽ ƚŚĞ ƉƌĞƉĂƌĂƚŝŽŶ ŽĨ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ͕ ƉŽůŝĐLJ ĂŶĂůLJƐŝƐ ĂŶĚ ŵŽĚĞůŝŶŐ͕ ĂŶĚ ƐƚĂŬĞŚŽůĚĞƌ ĞŶŐĂŐĞŵĞŶƚ͘ ;ĞͿ dŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů ƐƵďŵŝƚ Ă YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ ƚŽ ƚŚĞ WƌĞƐŝĚĞŶƚ ĞǀĞƌLJ ϰ LJĞĂƌƐ ďĞŐŝŶŶŝŶŐ ǁŝƚŚ Ă ƌĞƉŽƌƚ ĚĞůŝǀĞƌĞĚ ďLJ ĂŶƵĂƌLJ ϯϭ͕ ϮϬϭϱ͘ ŶƚĞƌŵĞĚŝĂƚĞ ƌĞƉŽƌƚƐ ĂŶĚ ŽƚŚĞƌ ŵĂƚĞƌŝĂů ŵĂLJ ďĞ ƉƌĞƉĂƌĞĚ ďLJ ƚŚĞ dĂƐŬ ŽƌĐĞ ĂƐ ƌĞƋƵŝƌĞĚ ďLJ ƚŚĞ WƌĞƐŝĚĞŶƚ͘ Sec 2 The Quadrennial Energy Review Report dŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů ĞƐƚĂďůŝƐŚ ŝŶƚĞŐƌĂƚĞĚ ŐƵŝĚĂŶĐĞ ƚŽ ƐƚƌĞŶŐƚŚĞŶ h͘ ͘ ĞŶĞƌŐLJ ƉŽůŝĐLJ͘ ƵŝůĚŝŶŐ ŽŶ ƚŚĞ ůƵĞƉƌŝŶƚ ĨŽƌ Ă ĞĐƵƌĞ ŶĞƌŐLJ ƵƚƵƌĞ ĂŶĚ ƚŚĞ ůŝŵĂƚĞ ĐƚŝŽŶ WůĂŶ͕ ĂŶĚ ƚĂŬŝŶŐ ŝŶƚŽ ĐŽŶƐŝĚĞƌĂƚŝŽŶ ĂƉƉůŝĐĂďůĞ ůĂǁƐ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ͕ ƚŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů ƉƌĞƉĂƌĞ Ă YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ ƚŚĂƚ͗ ;ĂͿ ƉƌŽǀŝĚĞƐ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ǀŝĞǁ ŽĨ͕ ĂŶĚ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĨŽƌ͕ ĞĚĞƌĂů ĞŶĞƌŐLJ ƉŽůŝĐLJ ŝŶ ƚŚĞ ĐŽŶƚĞdžƚ ŽĨ ĞĐŽŶŽŵŝĐ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů͕ ŽĐĐƵƉĂƚŝŽŶĂů͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ŚĞĂůƚŚ ĂŶĚ ƐĂĨĞƚLJ ƉƌŝŽƌŝƚŝĞƐ͕ ǁŝƚŚ ĂƚƚĞŶƚŝŽŶ ŝŶ ƚŚĞ ĨŝƌƐƚ ƌĞƉŽƌƚ ŐŝǀĞŶ ƚŽ ƚŚĞ ĐŚĂůůĞŶŐĞƐ ĨĂĐŝŶŐ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĞŶĞƌŐLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ͖ ;ďͿ ƌĞǀŝĞǁƐ ƚŚĞ ĂĚĞƋƵĂĐLJ͕ ǁŝƚŚ ƌĞƐƉĞĐƚ ƚŽ ĞŶĞƌŐLJ ƉŽůŝĐLJ͕ ŽĨ ĞdžŝƐƚŝŶŐ ĞdžĞĐƵƚŝǀĞ ĂŶĚ ůĞŐŝƐůĂƚŝǀĞ ĂĐƚŝŽŶƐ͕ ĂŶĚ ƌĞĐŽŵŵĞŶĚƐ ĂĚĚŝƚŝŽŶĂů ĞdžĞĐƵƚŝǀĞ ĂŶĚ ůĞŐŝƐůĂƚŝǀĞ ĂĐƚŝŽŶƐ ĂƐ ĂƉƉƌŽƉƌŝĂƚĞ͖ ;ĐͿ ĂƐƐĞƐƐĞƐ ĂŶĚ ƌĞĐŽŵŵĞŶĚƐ ƉƌŝŽƌŝƚŝĞƐ ĨŽƌ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ƉƌŽŐƌĂŵƐ ƚŽ ƐƵƉƉŽƌƚ ŬĞLJ ĞŶĞƌŐLJͲŝŶŶŽǀĂƚŝŽŶ ŐŽĂůƐ͖ ĂŶĚ ;ĚͿ ŝĚĞŶƚŝĨŝĞƐ ĂŶĂůLJƚŝĐĂů ƚŽŽůƐ ĂŶĚ ĚĂƚĂ ŶĞĞĚĞĚ ƚŽ ƐƵƉƉŽƌƚ ĨƵƌƚŚĞƌ ƉŽůŝĐLJ ĚĞǀĞůŽƉŵĞŶƚ ĂŶĚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ͘ Sec 3 Outreach Ŷ ŽƌĚĞƌ ƚŽ ŐĂƚŚĞƌ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĂŶĚ ƚŽ ƉƌŽǀŝĚĞ ĨŽƌ Ă ƚƌĂŶƐƉĂƌĞŶƚ ƉƌŽĐĞƐƐ ŝŶ ĚĞǀĞůŽƉŝŶŐ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ZĞƉŽƌƚ͕ ƚŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů ĞŶŐĂŐĞ ǁŝƚŚ ƚĂƚĞ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ͕ ƚƌŝďĞƐ͕ ůĂƌŐĞ ĂŶĚ ƐŵĂůů ďƵƐŝŶĞƐƐĞƐ͕ ƵŶŝǀĞƌƐŝƚŝĞƐ͕ ŶĂƚŝŽŶĂů ůĂďŽƌĂƚŽƌŝĞƐ͕ ŶŽŶŐŽǀĞƌŶŵĞŶƚĂů ĂŶĚ ůĂďŽƌ ŽƌŐĂŶŝnjĂƚŝŽŶƐ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂŬĞŚŽůĚĞƌƐ ĂŶĚ ŝŶƚĞƌĞƐƚĞĚ ƉĂƌƚŝĞƐ͘ dŚĞ dĂƐŬ ŽƌĐĞ ƐŚĂůů ĚĞǀĞůŽƉ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ŽƵƚƌĞĂĐŚ ƐƚƌĂƚĞŐLJ ƚŚĂƚ ƌĞůŝĞƐ ŽŶ ďŽƚŚ ƚƌĂĚŝƚŝŽŶĂů ŵĞĞƚŝŶŐƐ ĂŶĚ ƚŚĞ ƵƐĞ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ͘ Sec 4 General Provisions ;ĂͿ dŚŝƐ ŵĞŵŽƌĂŶĚƵŵ ƐŚĂůů ďĞ ŝŵƉůĞŵĞŶƚĞĚ ĐŽŶƐŝƐƚĞŶƚ ǁŝƚŚ ĂƉƉůŝĐĂďůĞ ůĂǁ ĂŶĚ ƐƵďũĞĐƚ ƚŽ ƚŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ĂƉƉƌŽƉƌŝĂƚŝŽŶƐ͘ ;ďͿ EŽƚŚŝŶŐ ŝŶ ƚŚŝƐ ŵĞŵŽƌĂŶĚƵŵ ƐŚĂůů ďĞ ĐŽŶƐƚƌƵĞĚ ƚŽ ŝŵƉĂŝƌ Žƌ ŽƚŚĞƌǁŝƐĞ ĂĨĨĞĐƚ͗ ;ŝͿ ƚŚĞ ĂƵƚŚŽƌŝƚLJ ŐƌĂŶƚĞĚ ďLJ ůĂǁ ƚŽ ĂŶLJ ĂŐĞŶĐLJ͕ Žƌ ƚŚĞ ŚĞĂĚ ƚŚĞƌĞŽĨ͖ Žƌ ;ŝŝͿ ƚŚĞ ĨƵŶĐƚŝŽŶƐ ŽĨ ƚŚĞ ŝƌĞĐƚŽƌ ŽĨ ƚŚĞ KĨĨŝĐĞ ŽĨ DĂŶĂŐĞŵĞŶƚ ĂŶĚ ƵĚŐĞƚ ƌĞůĂƚŝŶŐ ƚŽ ďƵĚŐĞƚĂƌLJ͕ ĂĚŵŝŶŝƐƚƌĂƚŝǀĞ͕ Žƌ ůĞŐŝƐůĂƚŝǀĞ ƉƌŽƉŽƐĂůƐ͘ ;ĐͿ EŽƚŚŝŶŐ ŝŶ ƚŚŝƐ ŵĞŵŽƌĂŶĚƵŵ ƐŚĂůů ďĞ ĐŽŶƐƚƌƵĞĚ ƚŽ ƌĞƋƵŝƌĞ ƚŚĞ ĚŝƐĐůŽƐƵƌĞ ŽĨ ĐŽŶĨŝĚĞŶƚŝĂů ďƵƐŝŶĞƐƐ ŝŶĨŽƌŵĂƚŝŽŶ Žƌ ƚƌĂĚĞ ƐĞĐƌĞƚƐ͕ ĐůĂƐƐŝĨŝĞĚ ŝŶĨŽƌŵĂƚŝŽŶ͕ ůĂǁ ĞŶĨŽƌĐĞŵĞŶƚ ƐĞŶƐŝƚŝǀĞ ŝŶĨŽƌŵĂƚŝŽŶ͕ Žƌ ŽƚŚĞƌ ŝŶĨŽƌŵĂƚŝŽŶ ƚŚĂƚ ŵƵƐƚ ďĞ ƉƌŽƚĞĐƚĞĚ ŝŶ ƚŚĞ ŝŶƚĞƌĞƐƚ ŽĨ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ Žƌ ƉƵďůŝĐ ƐĂĨĞƚLJ͘ ;ĚͿ dŚŝƐ ŵĞŵŽƌĂŶĚƵŵ ŝƐ ŶŽƚ ŝŶƚĞŶĚĞĚ ƚŽ͕ ĂŶĚ ĚŽĞƐ ŶŽƚ͕ ĐƌĞĂƚĞ ĂŶLJ ƌŝŐŚƚ Žƌ ďĞŶĞĨŝƚ͕ ƐƵďƐƚĂŶƚŝǀĞ Žƌ ƉƌŽĐĞĚƵƌĂů͕ ĞŶĨŽƌĐĞĂďůĞ Ăƚ ůĂǁ Žƌ ŝŶ ĞƋƵŝƚLJ ďLJ ĂŶLJ ƉĂƌƚLJ ĂŐĂŝŶƐƚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŝƚƐ ĚĞƉĂƌƚŵĞŶƚƐ͕ ĂŐĞŶĐŝĞƐ͕ Žƌ ĞŶƚŝƚŝĞƐ͕ ŝƚƐ ŽĨĨŝĐĞƌƐ͕ ĞŵƉůŽLJĞĞƐ͕ Žƌ ĂŐĞŶƚƐ͕ Žƌ ĂŶLJ ŽƚŚĞƌ ƉĞƌƐŽŶ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Y 3UHVLGHQWLDO 0HPRUDQGXP ;ĞͿ dŚĞ ŝƌĞĐƚŽƌ ŽĨ ƚŚĞ KĨĨŝĐĞ ŽĨ ĐŝĞŶĐĞ ĂŶĚ dĞĐŚŶŽůŽŐLJ WŽůŝĐLJ ŝƐ ĂƵƚŚŽƌŝnjĞĚ ĂŶĚ ĚŝƌĞĐƚĞĚ ƚŽ ƉƵďůŝƐŚ ƚŚŝƐ ŵĞŵŽƌĂŶĚƵŵ ŝŶ ƚŚĞ ĞĚĞƌĂů ZĞŐŝƐƚĞƌ͘ Z K D YL 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Table of Contents Preface i Presidential Memorandum iii List of Figures x List of Tables xiv Summary for Policymakers S-1 Chapter I Transforming the Nation’s Electricity System The Second Installment of the QER 1-1 1 1 Electricity from Generation to End Use Quadrennial Energy Review 1 2 1-2 1 2 The Nation’s Critical Infrastructures Depend on Electricity 1-7 1 3 Electricity-Connected Systems and Digitization Create Significant Economic Value 1-9 1 4 Electricity Systems and Grid Management Are Facing New Challenges 1-18 1 5 The Electricity Sector Is Enabling a More Productive Economy and Reducing Carbon Emissions… 1-27 1 6 Electricity Dependency Is a National Security Vulnerability 1-31 1 7 The Federal Role in Modernizing and Transforming the Grid 1-37 1 8 Endnotes 1-41 Chapter II Maximizing Economic Value and Consumer Equity 2-1 2 1 Maximizing Economic Value and Consumer Equity 2-3 2 2 The 21st-Century Energy Consumer…………………………………………………………………………………………2-4 2 3 Maximizing the Value of Energy Efficiency 2-27 2 4 Maximizing Value of Dynamic Consumer Assets 2-35 2 5 The Changing Preferences of Electricity Consumers Impacts on Policies and Regulations 2-42 2 6 Federal and State Jurisdictional Issues 2-58 2 7 Endnotes 2-61 Chapter III Building a Clean Electricity Future 3-1 3 1 Building a Clean Electricity Future 3-3 3 2 CO2 Emissions and the Electricity System 3-4 3 3 Multiple Paths Forward for CO2 Emissions Reductions from the Electricity Sector 3-36 3 4 Environmental Impacts of Electricity on Air Water Land Use and Local Communities 3-53 3 5 Endnotes 3-77 Chapter IV Ensuring Electricity System Reliability Security and Resilience 4-1 4 1 Reliability Resilience and Security Grid Management and Transformation 4-3 4 2 The Changing Nature of Reliability 4-4 4 3 Growing Vulnerabilities for the Electric Grid 4-27 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 vii Table of Contents 4 4 Markets and Their Impact on Reliability and Resilience 4-41 4 5 Grid Operations Planning and Resilience 4-45 4 6 Endnotes 4-59 Chapter V The Electricity Workforce Changing Needs New Opportunities 5-1 5 1 A Modern Workforce for the 21st Century Electricity Industry 5-3 5 2 Overview of the Electricity Industry Workforce 5-4 5 3 Electricity Industry Workforce Challenges 5-10 5 4 Electricity Industry Sectoral and Regional Variations Training Opportunities 5-13 5 5 Endnotes 5-26 Chapter VI Enhancing Electricity Integration in North America 6-1 6 1 Cross-Border Electricity Integration 6-3 6 2 U S -Canada Integration 6-5 6 3 U S -Mexico Integration 6-9 6 4 Emerging Integration Opportunities across North America 6-14 6 5 Policy Options for North America 6-16 6 6 Endnotes 6-21 Chapter VII A 21st-Century Electricity System Conclusions and Major Recommendations 7-1 7 1 Key National Security and Reliability Priorities for a 21st-Century Electricity Sector 7-2 7 2 Maximizing Economic Value and Consumer Equity 7-11 7 3 Enable a Clean Electricity Future 7-17 7 4 Ensure Electricity System Reliability Security and Resilience 7-22 7 5 The Electricity Workforce Changing Needs New Opportunities 7-27 7 6 Targeted Opportunities to Enhance Electricity Integration in North America 7-30 7 7 Endnotes 7-32 Chapter VIII Analytical and Stakeholder Process 8-1 8 1 Systems Analysis 8-2 8 2 Crosscutting Analysis 8-3 8 3 QER Stakeholder Engagement 8-8 8 4 QER Interagency Engagement 8-12 Appendix QER 1 2 Appendix A Electricity System Overview A-1 A 1 Elements of the Electricity System A-1 A 2 Brief History of the U S Electricity Industry A-7 A 3 Laws and Jurisdictions A-11 A 4 Federal Authorities Policies and Frameworks for Electric Grid Resilience and Security A-19 A 5 Electricity System Operations Business Models and Markets A-24 viii Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 A 6 Endnotes A-34 List of Acronyms and Units B-1 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 ix List of Figures List of Figures Figure S-1 Organization Areas of Focus in QER 1 2 S-2 Figure S-2 Critical Infrastructure Interdependencies S-3 Figure S-3 Emerging 21st Century Electricity Two-Way Flow Supply Chain S-5 Figure S-4 Trendlines in CO2 Emissions Drivers 2005–2015 S-7 Figure S-5a Time Scales of Traditional Grid Operation S-9 Figure S-5b Changing Time Scales for Grid Operators Managing Two Way Electricity Flows S-9 Figure S-6 Percentage of Employers Reporting Very High Hiring Difficulty by Census Region and Subsector Q4 2015 S-11 Figure S-7 Border Crossings of Electric Transmission Lines S-13 Figure 1-1 Goals Objectives and Organization of QER 1 2 1-4 Figure 1-2 Critical Infrastructure Interdependencies 1-8 Figure 1-3 Company Survey Approximately How Many Minutes of IT Downtime Can Occur before Business Is Negatively Impacted 1-12 Figure 1-4 Electric Utility Control Systems Past to Present 1-14 Figure 1-5 Grid Modernization Laboratory Consortium Locations and Regional Projects 1-17 Figure 1-6 Comparison between Generation Fuel Mix in 2016 and 2040 by North American Electric Reliability Corporation Region 1-19 Figure 1-7 Cumulative Net Utility-Scale Net Capacity Additions from 2015 to 2040 1-21 Figure 1-8 Current Age and Expected Life of Generation Fleet by Nameplate Capacity 2015 1-22 Figure 1-9 Utility Operating Company Annual Capital Expenditures Depreciation and Net Capital Additions 2004–2015 1-23 Figure 1-10 Traditional One-Way Flow Electricity Supply Chain 1-24 Figure 1-11 Emerging 21st Century Electricity Two-Way Flow Supply Chain 1-24 Figure 1-12 Aggregator Sources Markets and Services 1-26 Figure 1-13 U S GDP and Electricity Demand Growth Rates 1950–2040 1-28 Figure 1-14 Net Generation Capacity Additions 1950–2015 1-30 Figure 1-15 Example Cyberattack Vectors for an Electric Utility 1-33 Figure 1-16 Summary of the Cybersecurity Characteristics and Risks Confronting Smart Grid Deployment 1-34 Figure 2-1 U S Electricity Consumption Projections to 2040 2-5 Figure 2-2 U S Industrial Electricity Consumption in 2014 Million Kilowatt Hours 2-7 Figure 2-3 Comparison of Commercial End-Use Electricity Consumption between 2003 and 2012 2-9 Figure 2-4 Corporate Procurement of Renewable Energy-Based Electricity 2010–2016 2-11 Figure 2-5 Electricity Use by the U S Government and Department of Defense 19752015 2-13 x Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 Figure 2-6 Distributed Solar PV Capacity Top 10 States As Of August 2016 in MW Alternating Current AC 2-18 Figure 2-7 Gross Residential Customer Electricity Bill Savings for the Flattened and Arbitraged Demand Profiles 2-20 Figure 2-8 Electricity Costs in Rural Alaska 2-24 Figure 2-9 Multiple Benefits of Energy Efficiency Improvements 2-27 Figure 2-10 Share of Miscellaneous Electric Loads Compared to All Other Building Electric Loads Residential and Commercial Sectors 2014 and 2040 2-29 Figure 2-11 U S Building Benchmarking and Disclosure Policies 2-31 Figure 2-12 Percent Electricity Savings in 2014 from Energy Efficiency Programs Funded by Utility Customers 2-32 Figure 2-13 Potential Electricity Savings from Residential Energy Efficiency Upgrades by State 2-33 Figure 2-14 Aggregations of Demand Response and Distributed Generation 2-40 Figure 2-15 Timeline of a Typical Rate Case Proceeding 2-45 Figure 2-16 Current Net Metering and Distributed Generation Compensation Policies 2-49 Figure 3-1 Trendlines in Emissions Drivers 2005–2015 3-5 Figure 3-2 U S Energy-Related CO2 Emissions 2005–2015 top and Change in U S Energy-Related CO2 Emissions by Sector 2005–2015 bottom 3-7 Figure 3-3 Utility-Scale PV Installed Capacity Top 10 States as of August 2016 in MWAC 3-10 Figure 3-4 Relationship between the Production Tax Credit and Annual Wind Capacity Additions 3-11 Figure 3-5 State RPS Policies August 2016 3-13 Figure 3-6 U S Natural Gas Generation 1950–2015 in TWh 3-15 Figure 3-7 NGCC Capacity Factors by State 2014 3-16 Figure 3-8 U S New Stream-Reach Development Potential by Subbasin for the United States 3-18 Figure 3-9 Age Profile of U S Hydropower Generation Fleet 2014 3-19 Figure 3-10 Current and Projected Nuclear Capacity Assuming No Subsequent License Renewals 3-22 Figure 3-11 Nuclear Units at Risk or Recently Retired by Census Region 3-24 Figure 3-12 PEV Registrations per 1 000 People by State in 2015 3-31 Figure 3-13 Qualified Plug-In Electric Drive Motor Vehicle Credit 2009–2012 3-32 Figure 3-14 Steady RD D Funding and Time-Limited Tax Credit Led to Increase in U S Shale Gas Production 1976–2009 3-39 Figure 3-15 LED Costs and Installations 2008–2015 3-40 Figure 3-16 Long-Term Solar PV Cost Decline and Global Deployment Growth 1976–2015 3-41 Figure 3-17 Global CO2 emissions left and Probabilistic Temperature Outcomes right of United Nations Framework Convention on Climate Change’s 21st session of the Conference of the Parties in Paris in December 2015 COP 21 1990–2100 3-42 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 xi List of Figures Figure 3-18 U S Energy CO2 Emissions 2005–2040 top and U S Electricity-Sector CO2 Emissions 2005–2040 bottom 3-45 Figure 3-19 Total Direct and Indirect CO2 Emissions by End-Use Sector 2005–2040 3-47 Figure 3-20 Electricity Demand by the Transportation Sector 2005–2040 3-49 Figure 3-21 Hybrid Sankey Diagram of 2011 U S Interconnected Water and Energy Flows 3-57 Figure 3-22 U S Power Generation Water Withdrawal and Water Consumption by Cooling Type 2015 3-58 Figure 3-23 Water Withdrawal and Generation by Region 2015 3-59 Figure 3-24 Water Withdrawals for Thermoelectric Generation and Other Sectors 3-60 Figure 3-25 2015 Cooling System Capacity Factors vs Generation Capacity Factors 3-61 Figure 3-26 Carbon Emissions and Water Consumption Intensity Tradeoffs 3-62 Figure 4-1 System Average Interruption Duration Index SAIDI in 2015 by State 4-5 Figure 4-2 System Reliability Depends on Managing Multiple Event Speeds 4-7 Figure 4-3 System Reliability Depends on Managing Multiple Event Speeds 4-10 Figure 4-4 The Storage Technology Development Map 4-16 Figure 4-5 Advanced Metering Infrastructure Growth Has Contributed to Expanded Role of DR Programs 4-18 Figure 4-6 Network Geography and Topography Impact Real-Time Operations Management and Influence How System Planning Is Done for Grid Operations and Related Markets 4-21 Figure 4-7 Major Technology Policy and Infrastructure Enablers of DER Adoption 4-23 Figure 4-8 Integrated Assessment of Risks to Electricity Sector Resilience from Current Threats 4-29 Figure 4-9 U S Electric Customer Outage Events by Cause and Magnitude 2015 4-31 Figure 4-10 Major Weather-Related Outages Requiring a National Response 2002–2012 4-32 Figure 4-11 Heating and Cooling Degree Days in the Contiguous 48 States 1970–2015 Fahrenheit …… 4-33 Figure 4-12 Median Change in Cooling Degree Days from Historical 1981–2010 Average for Average Year between 2030 and 2049 under Two Emissions Scenarios 4-34 Figure 4-13 Information Drives Solution Sophistication which Drives New Benefit Realization for Grids 4-51 Figure 4-14 Phasor Measurement Units Technologies that Enable Superfast Network Management across Large Interconnected Systems Are Being Deployed to Improve Grid Operations 4-53 Figure 4-15 Cost of Equity by Company Type and Size for Sampled Power Sector Companies 4-55 Figure 5-1 Injury Rates and Employee Age Group Distribution for Electricity Utilities 1995–2013 5-8 Figure 5-2 Electricity and Related Industry Employment Demographic Indicators 2015 5-9 Figure 5-3 Age Distribution in Electric and Natural Gas Utilities in 2006 and 2014 5-11 Figure 5-4 Percentage of Employers Reporting Very High Hiring Difficulty by Census Region and Subsector Q4 2015 5-12 xii Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 Figure 5-5 Historic and Projected Coal Production 1985–2040 5-14 Figure 5-6 Coal Industry Employment and Production January 1985–September 2016 5-15 Figure 5-7 Change in Coal Mining Employment by County 2011–2015 5-16 Figure 5-8 Economic Wellbeing of Appalachian Counties 2016 5-17 Figure 5-9 Average Monthly Cost of Delivered Fossil Fuels in the U S Electricity Industry 19932015… 5-19 Figure 5-10 Historic and Projected Annual Coal and Natural Gas Production 1985-2040 5-20 Figure 5-11 Distribution of Solar Industry Jobs top and Wind Industry Jobs bottom by State 2015 5-21 Figure 6-1 Transmission Capacity and Electricity Trade across Major Interconnections June 2015–May 2016 6-5 Figure 6-2 Overall U S Electricity Trade with Canada in Four Regions 6-7 Figure 6-3 Electricity Flows between the United States and Mexico 6-10 Figure 6-4 Structural Changes Following Mexico’s Energy Industry Reforms 6-11 Figure 6-5 Industrial and Residential Electricity Rates in the United States and Mexico 1993–2013 6-12 Figure 6-6 Possible Long-Term Impacts of Cross-Border Transmission on Regional Generation Mix in the United States 2018–2040 in the Regional Energy Deployment System Model 6-18 Figure 7-1 Goals Objectives and Organization of QER 1 2 7-2 Figure 7-2 Primary Data Centers for Major Service Providers 7-4 Figure 7-3 October 21 2016 Hack Had Global Reach 7-4 Figure 7-4 Current Jurisdictional Boundaries and the Security of the Electricity System 7-5 Figure 7-5 Electric Service Reliability Increasingly Interactive between Grid and Consumer 7-12 Figure 8-1 Inputs to QER 1 2 8-2 Figure A-1 Schematic Representation of the U S Electric Power System A-2 Figure A-2 Electric Power Regional Fuel Mixes 2015 A-3 Figure A-3 Wind and Solar Energy Resource Maps for the United States A-4 Figure A-4 High-Voltage Transmission Network and Substations of the 48 Contiguous States 2015 A-5 Figure A-5 Broad Overview of Jurisdictional Roles in the Electricity Industry A-12 Figure A-6 North American Interconnections and Reliability Regions A-25 Figure A-7 Electricity System Interconnections and Balancing Areas A-26 Figure A-8 Regional Transmission Organizations RTOs 2015 A-27 Figure A-9 Spectrum of Electricity Markets A-31 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 xiii List of Tables List of Tables Table 1-1 National Data Centers Are Electricity Dependent 1-11 Table 1-2 Sample Grid Modernization Initiative Projects 1-17 Table 2-1 Potential Annual Cost Savings from Customer Engagement Solutions 2-37 Table 2-2 Alternative Rate Options for Distributed Solar 2-51 Table 2-3 Energy Efficiency Business Models 2-55 Table 2-4 Business Models for Distributed Generation 2-56 Table 3-1 Change in Generation from Major Fuel Type 2009–2014 3-9 Table 3-2 Potential Reductions in Electricity-Sector Energy and CO2 Emissions in 2030 Attributable to Smart Grid Technologies 3-26 Table 3-3 Summary of DOE QER Analysis Cases using EPSA-NEMS 3-44 Table 3-4 Percent of Utility-Scale Generation by Fuel Source 2015 and Projected to 2040 for Selected Cases 3-46 Table 3-5 Summary of Physical Impacts of the Most Common Air Pollutants 3-55 Table 3-6 Federal and Sub-National Initiatives to Modernize Electric Infrastructure Permitting and Review Processes 3-69 Table 4-1 Potential Peak Reduction from Retail Demand Response Programs by Region and Customer Class 4-20 Table 5-1 Direct Employment and Income in Industries Related to Electric Power Supply as Tracked by BLS 2015 5-4 Table 5-2 Electric Power Generation and Fuels Extraction and Mining Employment Estimates by Technology First Quarter 2016 5-5 Table 5-3 Typical Electricity Workforce Roles and Required Education or Training 5-6 Table 6 1 New Carbon Trading and Pricing Policies in Canada and Mexico Are a First for North American Federal Governments 6-15 Table 6 2 Analysis of Variables That Have Led to Current Levels of Cross-Border Trade in Cross-Border Trade Relationships 6-19 Table 8-1 List of Chapter Specific Analyses for QER 1 2 8-4 Table 8-2 List of QER 1 2 Formal Public Stakeholder Meetings with Topic Location Date and Administration Officials 8-10 Table A-1 Current and Projected Distributed Generation Market Penetration 2015 and 2040 A-7 Table A-2 Additional Key Electricity Industry Laws and Orders A-17 Table A-3 Key Electricity Industry-Related Environmental Laws and Regulations A-18 Table A-4 Characteristics of Major Utility Types A-28 Table A-5 Taxonomy Ownership Scope of Utility Business Models with Representative Firms A-30 xiv Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 Transforming the Nation’s Electricity System The Second Installment of the Quadrennial Energy Review Summary for Policymakers The second installment of the Quadrennial Energy Review QER 1 2 focuses on the electricity system and its role as the enabler for accomplishing three key national goals improving the economy protecting the environment and increasing national security As a critical and essential national asset it is a strategic imperative to protect and enhance the value of the electricity system through modernization and transformation Reliable and affordable electricity provides essential energy services for consumers business and national defense The electricity system we have today was developed over more than a century and includes thousands of generating plants hundreds of thousands of miles of transmission lines distribution systems serving hundreds of millions of customers a growing number of distributed energy resources and billions of enduse devices and appliances These elements are connected together to form a complex system of systems The electricity sector is however confronting a complex set of changes and challenges including aging infrastructure a changing generation mix growing penetration of variable generation low and in some cases negative load growth climate change increased physical and cybersecurity risks and in some regions widespread adoption of distributed energy resources DER How these changes are managed is critical and could fundamentally transform the electricity system’s structure operations customer base and jurisdictional framework QER 1 2 analyzes trends and issues confronting the Nation’s electricity sector out to 2040 examining the entire electricity supply chain from generation to end use and within the context of three overarching national goals to 1 enhance economic competitiveness 2 promote environmental responsibility and 3 provide for the nation’s security The report builds on analysis and recommendations in the first installment of the QER QER 1 1 on improving energy transmission distribution and storage infrastructures and provides recommendations that must be implemented to optimize and modernize the electricity sector Scope and Structure of the Second Installment of the QER In 2013 President Obama directed the Administration to conduct an interagency QER in order to “establish integrated guidance to strengthen U S energy policy” The first installment of the QER QER 1 1 published in April 2015 focused “on infrastructure challenges and identified the threats risks and opportunities for U S energy and climate security enabling the Federal Government to translate policy goals into a set of analytically based clearly articulated sequenced and integrated actions and proposed investments ” Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-1 Summary for Policymakers QER 1 2 analyzes trends and issues confronting the Nation’s electricity sector examining the entire electricity supply chain from generation to end use It builds on analysis and recommendations in QER 1 1 which included electricity as part of an examination Figure S-1 Organization Areas of Focus in QER 1 2 of energy transmission distribution and storage infrastructures The scope of QER 1 2 includes generation transmission distribution and end-use application in the electricity sector It does not explore other energyrelated sectors except where they directly affect the electricity system such as the critical role of natural gas supply in generation and reliability This summary follows the organization of the main report starting with an introduction to electricity Figure S-1 A comprehensive set of interactions and overlapping objectives generation issues and the and goals must be analyzed to inform policies that will enable the electricity changing context sector of the 21st century Analysis in QER 1 2 is organized around a set corresponding to the first of national goals integrated objectives and cross-cutting issues chapter of the main report The summary then highlights key findings based on deep analysis from several sections on the integrated objectives of the report This summary also includes brief summaries of select recommendations to modernize and transform the electricity sector Specific descriptions of and rationale for the 76 QER recommendations are in the 21st Century Electricity System chapter The QER also includes an Appendix with an Electricity System Overview The Electricity Sector and National Goals While respecting state regional and tribal prerogatives the QER 1 2 supports development of consistent Federal strategy that accounts for the complex electricity sector context The analysis conducted for the QER 1 2 identified three major integrated objectives that address the needs and challenges to enable the electricity sector of the 21st century These objectives—discussed in detail in several QER 1 2 chapters— include 1 Maximizing Economic Value and Consumer Equity 2 Enabling a Clean Electricity Future and 3 Ensuring System Reliability Security and Resilience In addition to these objectives QER 1 2 also explores several cross-cutting issues and includes in-depth chapters on two of these workforce issues and North American electricity system integration The nation’s critical infrastructures depend on electricity Electricity is at the center of key infrastructure systems that support these sectors including transportation oil and gas production water S-2 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 communications and information and finance These electricity-dependent critical infrastructures represent core lifeline networks that supports the American economy and society These critical networks are increasingly converging sharing resources and synergistic interactions via common architectures see Figure S-2 Figure S-2 Critical Infrastructure Interdependencies Key critical infrastructure interdependencies represent the core underlying framework that supports the American economy and society The financial services sector not pictured is also a critical infrastructure with interdependencies across other major sectors supporting the U S economy Rapidly Evolving Context The QER 1 2 identifies a number of key trends that will shape the future electricity sector including the changing generation mix low load growth increasing vulnerabilities to severe weather climate change the proliferation of new technologies services and market entrants increasing consumer choice emerging cyber physical threats aging infrastructure and workforce and the growing interdependence of regulatory jurisdictions Each topic is introduced here and discussed in more detail in Chapter 1 Transforming the Nation’s Electricity Sector The Second Installment of the QER Increasing Importance of “Internet of Things” IoT and Digitization IoT is “sensors and actuators embedded in physical objects—from roadways to pacemakers— that are linked through wired and wireless networks often using the same Internet Protocol IP that connects the Internet ” The rapid growth of IoT is both a manifestation and key enabler of this major change in the economy Electricity enables this information-intense economy while at the same time gaining new value through digitization and interconnectedness Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-3 Summary for Policymakers Increased Productivity Lower Load Growth Since the 1950s growth in U S electric consumption has gradually slowed each decade due to a number of factors including moderating population growth improvements in the energy efficiency of buildings and industry market saturation of certain major appliances and a shift in the broader economy to less energy-intensive industries Looking forward to 2040 electricity use is projected to grow slowly Decarbonizing the Electricity System U S electricity system emissions declined since 2005 by 20 percent largely due to a slowing of electricity demand growth and the accelerated deployment of lower-carbon generation Low natural gas prices have led to substantial substitutions of lower-emitting gas for highemitting coal The electricity sector has been and—depending on the interplay of technology innovation market forces and policy—is likely to continue to be the first mover in economy-wide GHG emissions reductions This is in part because the electricity sector has the broadest and most cost-effective abatement opportunities of any sector including multiple zero-carbon and low-carbon generation options—such as nuclear hydropower solar wind geothermal biomass and fossil generation with carbon capture and storage—as well as many operational and end-use efficiency opportunities It will also play a major role in the levels of decarbonization needed from other sectors such as transportation National Security Vulnerability Without access to reliable electricity much of the economy and all electricity-enabled critical infrastructures are at risk These include our national security and homeland defense networks which depend on electricity to carry out their missions to ensure the safety and prosperity of the American people As U S policies establish new pathways to enhance economic competitiveness and environmental objectives it is also essential that these policies work in concert with national security objectives Growing Importance of Back-up Generation The loss of significant economic value from even short power outages places a very high premium on customer as opposed to system reliability and has helped to create a growing market for back-up generation to meet individual customer needs Such back-up solutions sometimes have multiple components to ensure necessary redundancy Information Technology and the Electricity System Information and Communications Technology ICT as well as grid control technologies for electricity systems—both large and small scale—have evolved enabling increased interconnection and capture of economies of scale and scope The electricity industry’s early adoption of analytical and computer techniques to coordinate the generation and transmission of power facilitated increased interconnection and inter-utility power transfers A Smarter Grid The “smart grid” refers to an intelligent electricity grid—one that uses digital communications technology information systems and automation to detect and react to local changes in usage improve system operating efficiency and in turn reduce operating costs while maintaining high system reliability Smart meter infrastructure sensors and communication-enabled devices and controls give electricity consumers and utilities new abilities to monitor electricity consumption and potentially lower usage in response to time local distribution or price constraints Smart meters also provide a number of other benefits including enhanced outage management and restoration improved distribution system monitoring and utility operational savings Changing Generation Profile The national generation mix has realigned over the past few decades and is likely to continue changing The U S generation fleet is transitioning from one dominated by centralized generators with high inertia and dispatchability to one that is more “hybridized ” relying on a mixture of traditional centralized generation and variable utility-scale and distributed renewable generation Aging Infrastructure Like any infrastructure the physical components of the electricity system are constantly aging The continual maintenance and replacement of electricity system infrastructure components provides an important opportunity to modernize the electricity system S-4 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 Two-way Flows For over 100 years the electricity system has been operated through one-way flows of electricity and information The generation and smart grid technology innovations described earlier can reduce grid costs and improve efficiency as well as save time and effort These technologies have also enabled an electricity system where two-way flows are possible and more common and where digitization is a key enabler of a new range of services including increased flexibility higher system efficiency reduced energy consumption and increased consumer options and value Customer Engagement New Business Models and the Emerging Role of Aggregators Throughout the electricity industry’s development the electricity customer was viewed as “load”—the aggregate accumulation of demand that utilities served supported by a “ratepayer ” This view of customers as load and ratepayer largely passive because there were no real alternative options to utility service was operative through the early 1980s Changes in the electricity sector starting in the mid-1980s however have prompted utilities and emerging competitors to slowly shift their “customer as load” views to a point of view that is more customer-centric Workforce Challenges Realizing the full potential of shifts in generation technologies operations tools and industry structure will require an electricity industry workforce capable of adapting and evolving to meet the needs of the 21st century electricity sector A skilled workforce that can build operate and manage a modernized grid infrastructure is an essential component for realizing the full value of a modernized electricity sector Extreme Weather The increased severity of extreme weather events over time has been a principal contributor to an observed increase in the frequency and duration of U S power outages between 2000 and 2012 Many weather-related threats to the electricity system are increasing in frequency and intensity and are also projected to worsen in the future due to climate change The Electricity Sector Maximizing Economic Value and Consumer Equity This chapter discusses the role of the electricity sector Figure S-3 Emerging 21st Century Electricity Two-Way Flow Supply Chain in creating economic value The electricity sector has been an economic engine for the United States for over a century providing reliable and competitively priced electricity that is critical for the United States’ productivity The vast majority of American consumers—encompassing households businesses and institutions—enjoy reliable and affordable electricity that enables a modern economy and a high standard of living Consumers can now both produce and consume power and increase efficiency through advanced distribution infrastructure and increasingly can provide energy capacity and ancillary services This changing relationship between consumers and the grid is further Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-5 Summary for Policymakers driving the convergence of systems business models services policies and new technologies in a development feedback loop Key Findings                 S-6 Advanced metering infrastructure has had a significant impact on the nature of interactions between the electricity consumer and the electric system allowing two-way flow of both electricity and information and enabling the integration of assets behind the meter into the larger electric grid Interconnection standards and interoperability are critical requirements for seamless integration of gridconnected devices appliances and building energy management systems without which grid modernization and further energy efficiency gains may be hindered Evolving consumer preferences for electricity services are creating new opportunities The convergence of the electric grid with information and communications technology creates a platform for value creation and the provision of new services beyond energy There is enormous potential for electric end-use efficiency improvement based on 1 technical analyses and 2 the differences in energy efficiency performance between states and utilities with and without ambitious electric end-use efficiency policies and programs Tribal lands and American territories have the highest rates of un-electrified homes—more than half of a million homes The extreme rurality of some tribal communities coupled with high levels of poverty present an economic challenge for the electric utilities trying to serve them Optimization of behind-the-meter assets will require the design of coordination communication and control frameworks that can manage the dispatch of these devices in a way that is both economical and secure while maintaining system reliability Mobile internet-connected devices foster new ways of consumer engagement as well as enable consumers to have more efficient and real-time management of their behind-the-meter assets Consumers and third party merchants that produce electricity can provide economic environmental and operational benefits New grid services modern technologies and evolving system topologies and requirements are straining traditional methods of valuation Appropriate valuation of the grid services by various technologies is technically and administratively challenging and may depend on spatial and temporal variables unique to different utilities states and regions Currently about 90 percent of the residential electricity consumption 60 percent of commercial and 30 percent of industrial is used in appliances and equipment that are subject to Federal minimum efficiency standards implemented and periodically updated by the Department of Energy Between 2009 and 2030 these cost-effective standards are projected to save consumers more than $545 billion in utility costs reduce energy consumption by 40 8 quads and reduce carbon dioxide emissions by over 2 26 billion metric tons Miscellaneous electric loads MELs devices that are often inadequately addressed by minimum standards labeling and other initiatives are expected to represent an increasing share of total electricity demand particularly for the residential and commercial sectors Connected devices and energy management control systems are decreasing in cost and improving in functionality although their market penetration is still low particularly in residences and small–tomedium-sized commercial buildings These new technologies and systems and the broader ‘Internet of Things’ provide a wide range of options for consumers to manage their energy use either passively using automated controls or through active monitoring and adjustment of key systems Energy management control systems with communication capabilities are increasing opportunities for demand response services in support of grid operations Third-party aggregators and other business models are facilitating the expanded use of demand response but the regulatory environment remains unsettled in many states Lower-income households use less energy but pay a considerably higher fraction of their after-tax income for electricity services Insufficient broadband access in rural areas could inhibit the deployment of grid modernization technologies and the economic value these technologies can create Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 Building a Clean Electricity Future A clean electricity system reduces air and water pollution lowers GHG emissions and limits the impacts to the ecosystem in areas such as water and land use Addressing Figure S-4 Trendlines in CO2 Emissions Drivers 2005–2015 climate change will require the United States to greatly reduce our carbon emissions while simultaneously addressing new grid management challenges that have arisen due to recent trends in electricity generation and demand the changing climate and the national security implications of grid dependency Keeping this context in mind this Chapter explores the essential elements of a clean electricity system and identifies the policy market and technology innovations needed to achieve it In short we have made substantial progress in reducing the environmental impact of the electricity system but much work remains Key Findings          A clean electricity system reduces air and water pollution lowers GHG emissions and limits the impacts to the ecosystem in areas such as water and land use Deep decarbonization of the electricity system is essential for meeting climate goals this has multiple economic benefits beyond those of environmental responsibility The United States is the largest producer and consumer of environmental technologies In 2015 the U S environmental technology and services industry employed 1 6 million people had revenues of $320 billion and exported $51 billion worth of goods and services Though the U S population and economy have grown between 1970 and 2014 aggregate emissions of common air pollutants from the electric power sector dropped 74 percent even as electricity generation grew by 167 percent U S carbon dioxide CO2 emissions from the power sector have substantially declined Between 2006 and 2014 61 percent of these reductions are attributed to switching from coal- to gas-fired power generation and 39 percent to increases in zero-emissions generation The increasing penetration of zero-carbon variable energy resources VERs and deployment of clean distributed energy resources DERs including energy efficiency are critical components of a U S decarbonization strategy It is beneficial to a clean electricity system to have many options available as many of the characteristics of clean electricity technologies complement each other Currently 29 states and D C have a Renewable Portfolio Standard and 23 states have active and binding Energy Efficiency Resource Standards EERSs for electricity States that have actively created and implemented such electricity resource standards and other supporting regulatory policies have seen the greatest growth in renewables and efficiency The integration of variable renewables increases the need for system flexibility as the grid transitions from controllable generation and variable load to more variable generation and the need and potential for controllable load There are a number of flexibility options such as demand response DR fast ramping natural gas generation and storage Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-7 Summary for Policymakers              Energy efficiency is a cost-effective component of a clean electricity sector The average levelized cost of saved electricity from energy efficiency programs in the United States is estimated at $46 MWh versus the levelized cost of electricity for natural gas combined-cycle generation with its sensitivity to fuel prices at $52 to $78 MWh Electricity will likely play a significant role in the decarbonization of other sectors of the U S economy as electrification of transportation heating cooling and industrial applications continues In the context of the Quadrennial Energy Review QER electrification includes both direct use of electricity in end use applications as well as indirect use whereby electricity is used to make intermediate fuels such as hydrogen Realizing GHG emissions reductions and other environmental improvements from the electricity system to achieve national goals will require additional policies combined with accelerated technology innovation Improving understanding of the electricity system and its dynamics through enhancements in data modeling and analysis is needed to provide information to help meet clean objectives most costeffectively Decades of federal state and industry innovation investments have significantly contributed to recent cost reductions in renewable energy and energy efficiency technologies Innovation in generation distribution efficiency and demand response technologies is essential to a low carbon future Innovation combined with supportive policies can provide the signal needed to accelerate deployment of clean energy technologies providing a policy pull to complement technology push Nuclear power currently provides 60 percent of U S zero-carbon electricity but existing nuclear merchant plants are having difficulty competing in restructured electricity markets due to low natural gas prices and flat or declining electricity demand Since 2013 six nuclear power reactors have shut down earlier than their licensed lifetime and eleven 1 others have announced plans to close in the next decade In 2016 two states Illinois and New York put policies in place to incentivize the continued operation of existing nuclear plants Enhanced oil recovery EOR operations in the United States are commercially demonstrated geologic storage and could provide a market pull for the deployment of carbon capture utilization and storage CCUS Federal laws currently limit the ability of regulated utilities to utilize federal tax credits in the same manner as private and unregulated developers Publicly owned clean energy projects cannot benefit from the clean energy tax credits because tax equity investors cannot partner directly with tax exempt entities to monetize tax credits Low-income and minority communities are disproportionately exposed to air quality and water quality issues associated with electric power generation Compared to the U S population overall there is a greater concentration of minorities living within a three-mile radius of coal- and oil-fired power plants In these same areas the percentage of the population below the poverty line is also higher than the national average Some energy technologies that reduce greenhouse gas emissions such as carbon capture utilization and storage CCUS concentrated solar power and geothermal generation have the potential to increase energy’s water intensity others such as wind and photovoltaic PV solar power can lower it Dry cooling can reduce water intensity but may increase overall GHG emissions by decreasing generation efficiency Though there can be a strong link between energy and water efficiency in energy technologies many research development demonstration and deployment RDD D funding criteria do not incorporate water use or water performance metrics Designing technologies and optimizing operations for improved water performance can have both energy and water benefits There is currently no centralized permanent-disposal facility for used nuclear fuel in the United States so this radioactive material is stored at reactor sites in 35 states awaiting development of consolidated storage facilities and or geologic repositories Coal combustion residues such as coal ash and scrubber slurry are the second most abundant waste material in the United States after household waste 1 Note that six of these reactors the New York and Illinois reactors are expected to remain open with the passage of Clean Energy Standards CESs in those states S-8 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017  There is a range of decommissioning needs for different types of power generation facilities Ensuring Electricity System Reliability Security and Resilience This chapter addresses a range of possible risks to the electricity system and the broader economy and suggests options to mitigate and prepare for these risks Traditional electricity system operations are evolving in ways that could enable a more dynamic and integrated grid The growing interconnectedness of the grid’s energy communications and data flows creates enormous opportunities at the same time it creates the potential for a new set of risks and vulnerabilities Also the emerging threat environment particularly with respect to cybersecurity and increases in the severity of extreme weather events poses challenges for the reliability security and resilience of the electricity sector as well as to its traditional governance and regulatory regimes Figure S-5a Time Scales of Traditional Grid Operations Figure S-5b Changing Time Scales for Grid Operators Managing Two Way Electricity Flows Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-9 Summary for Policymakers Key Findings            The reliability of the electric system underpins virtually every sector of the modern U S economy Reliability of the grid is a growing and essential component of national security Standard definitions of reliability have focused on the frequency duration and extent of power outages With the advent of more two-way flows of information and electricity communication across the entire system from generation to end use controllable loads more variable generation and new technologies such as storage and advanced meters reliability needs are changing and reliability definitions and metrics must evolve accordingly The time scales of power balancing have shifted from daily to hourly minute or second-to-second to millisecond to millisecond at the distribution end of the supply chain with the potential to impact system frequency and inertia and or transmission congestion The demands of the modern electricity system has required and will increasingly require innovation in technologies e g inverters markets e g capacity markets and system operations e g balancing authorities Electricity outages disproportionately stem from disruptions on the distribution system over 90 percent of electric power interruptions both in terms of the duration and frequency of outages this is largely due to weather-related events Damage to the transmission system while infrequent can result in more widespread major power outages that affect large numbers of customers with significant economic consequences As transmission and distribution system design and operations become more data-intensive complex and interconnected the demand for visibility across the continuum of electricity delivery has expanded across temporal variations price signals new technology costs and performance characteristics socioeconomic impacts and others However deployment and dissemination of innovative visibility technologies face multiple barriers that can differ by the technology and the role each plays in the electricity delivery system Data analysis is an important aspect of today’s grid management but the granularity speed and sophistication of operator analytics will need to increase and distribution- and transmission-level planning will need to be integrated The leading cause of power outages in the United States is extreme weather including heat waves blizzards thunderstorms and hurricanes Events with severe consequences are becoming more frequent and intense due to climate change and have been the principal contributors to an observed increase in the frequency and duration of power outages in the United States Grid owners and operators are required to manage risks from a broad and growing range of threats These threats can impact almost any part of the grid e g physical attacks but some vary by geographic location and time of year Near-term and long-term risk management is increasingly critical to the ongoing reliability of the electricity system The current cybersecurity landscape is characterized by rapidly evolving threats and vulnerabilities juxtaposed against the slower-moving deployment of defense measures Mitigation and response to cyber threats are hampered by inadequate information-sharing processes between government and industry the lack of security-specific technological and workforce resources and challenges associated with multi-jurisdictional threats and consequences System planning must evolve to meet the need for rapid response to system disturbances Other risk factors stem from the increasing interdependency of electric and natural gas systems as natural gas–fired generation provides an increasing share of electricity However coordinated longterm planning across natural gas and electricity can be challenging since the two industries are organized and regulated differently As distributed energy resources DERs become more prevalent and sophisticated—from rooftop solar installations to applications for managing building electricity usage—planners system operators and regulators must adapt to the need for an order of magnitude increase in the quantity and frequency of data to ensure the continuous balance of generation and load Demand response technologies and programs offer a particularly flexible grid resource that is capable of improving system reliability reducing the need for capital investments to meet peak demand reducing electricity market prices and improving the integration of variable renewable energy resources It can be used for load reduction load shaping and management of consumption to help grid operators mitigate the impact of variable and distributed generation on the transmission and distribution systems S-10 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017    Information and communications technologies are increasingly utilized throughout the electric system and behind the meter These technologies offer advantages in terms of efficient and resilient grid operations and opportunities for consumers to interact with the electricity system in new ways They also expand the grid’s vulnerability to cyber attacks by offering new vectors for intrusions and attacks making cybersecurity a system-wide concern There are no commonly used metrics for measuring grid resilience Several resilience metrics and measures have been proposed however there has been no coordinated industry or government initiative to develop a consensus on or implement standardized resilience metrics Low-income and minority communities are disproportionately impacted by disaster-related damage to critical infrastructure These communities with fewer resources may not have the means to mitigate or adapt to natural disasters and disproportionately rely on public services including community shelters during disasters This chapter was developed in conjunction with the closely-related and recently-published “Joint United States-Canada Electric Grid Security and Resilience Strategy ” The Electricity Workforce Changing Needs New Opportunities This chapter provides an overview of current and projected employment in and related to the electricity sector and it discusses options to assist workers and develop a workforce that has the skills to build maintain and operate the electricity system of the future The broader changes in the electricity industry have created both new opportunities and new challenges for the electricity industry workforce including new workforce opportunities in the renewable energy industry and information and communications technologies and the Figure S-6 Percentage of Employers Reporting Very High Hiring challenges of the skills gap Difficulty by Census Region and Subsector Q4 2015 for deploying and operating new technologies the shift in the geographic location of jobs and the need to recruit and retain an inclusive workforce The electricity industry is the dominant consumer of coal natural gas and renewable energy technologies so changes in electricity industry demand for these resources can cause regional and sectoral dislocations in these industries Each industry has distinctive workforce skills requirements and geographic concentrations so employment gains in one industry do not always translate to opportunities for those workers affected by employment loss in other industries that may be geographically distant and require different skills Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-11 Summary for Policymakers Key Findings       Over 1 9 million people are employed in jobs related to electric power generation and fuels while 2 2 million people are working in industries directly or partially related to energy efficiency Job growth in renewable energy is particularly strong Employment in the solar industry has grown over 20 percent annually from 2013 to 2015 From 2010 to 2015 the solar industry created 115 000 new jobs In 2016 approximately 374 000 individuals worked in whole or in part for solar firms with more than 260 000 of those employees spending most of their time on solar There were an additional 102 000 workers employed at wind firms across the Nation The solar workforce increased by 25 percent in 2016 while wind employment increased by 32 percent The oil and natural gas industry experienced a large net increase in jobs over the last several years adding 80 000 jobs from 2004 to 2014 Unlike coal production natural gas production is projected to increase over the coming decades under a business-as-usual scenario sustaining natural gas industry employment Employment in the natural gas industry is regionally and temporally volatile 28 000 jobs were lost between January 2015 and August 2016 Shifts in locations pose challenges for employees and the economies of the areas where they live and work Between 1985 and 2001 coal production increased 28 percent as industry employment fell by 59 percent due to efficiencies gained by shifting production from Appalachia to the West In 2015 annual coal production was at its lowest level since 1986 and it is forecast to continue declining over the coming decades Aside from a minor employment increase from 2000 to 2011 141 500 domestic coal jobs were lost between 1985 and 2016 and the industry shrank by 60 percent Today the coal mining industry employs about 53 000 people  Despite ongoing economic challenges in the Appalachian region the non-highway appropriated budget for the Appalachian Regional Commission ARC a federally-funded regional economic development agency has fallen from roughly $600 million in the early 1970s to around $100 million in the 1980s and remained roughly constant until 2016 The ARC budget recently increased from $90 million in fiscal year 2015 to nearly $150 million in fiscal year 2016  The Abandoned Mine Lands Reclamation Fund’s AML Fund’s inability to fully support the reclamation of lands disrupted by the coal mining industry has the potential to leave communities in regions with declining local revenues with polluted and unsafe lands and few means to repair the damage The AML Fund’s increased ability to support coal mine reclamation would provide local employment opportunities and help coal communities transition to new industries  The continued fiscal difficulties of coal miner pensions threaten the solvency of the Pension Benefit Guaranty Corporation a Federal agency that insures private-sector pension funds and is funded out of insurance premiums paid by member funds  Proliferation of information and communications technology and new technologies like distributed generation smart home devices and electric battery storage have led to new businesses and employment opportunities which will require a wide array of new skills  The electricity industry will need a cross-disciplinary power grid workforce that can comprehend design and mange cyber-physical systems the industry will increasingly require a workforce adept in risk assessment behavioral science and familiarity with cyber hygiene  A dip in the number of electricity industry workforce training programs in the 1980s contributed a shortage of middle and upper management positions in the sector today creating a workforce gap as the large number of baby boomers retire  Workforce retirements are a pressing challenge Industry hiring managers often report that lack of candidate training experience or technical skills are major reasons why replacement personnel can be challenging to find—especially in electric power generation  Electricity and related industries employ fewer women and minorities than the national average but have a higher proportion of veterans Only 5 percent of the boards of utilities in the United States in S-12 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 2015 include women and approximately 13 percent of board members among the top 10 publicly owned utilities were African American or Latino Underrepresentation in or lack of access to science technology engineering and mathematics educational opportunities and programs contribute to the underrepresentation of minorities and women within the electricity industry  From 1995 to 2013 the number of injuries per 100 employee-years in the electricity utility industry decreased from 4 7 to 1 3 However line workers continue to experience hazardous working conditions In 2014 electrical power line installers and repairers suffered 25 fatal work injuries—a rate of 19 per 100 000 full-time equivalent workers which is over five times the national work fatality rate  While data on energy sector workforce are improving there are still major shortcomings in the data availability precision and categorization of energy sector jobs Enhancing Electricity Integration in North America This chapter details the interconnectivity of the United States Canada and Mexican electric systems and opportunities for enhancing integration The potential for electricity integration to provide economic benefits and support the development of more Figure S-7 Border Crossings of Electric modern and resilient energy infrastructure has Transmission Lines been a longstanding theme for North American diplomacy Earlier this year at the North American Leaders’ Summit President Barack Obama President Enrique Peña Nieto and Prime Minister Justin Trudeau signed a statement agreeing to collaborate on crossborder transmission projects in order to achieve the mutual goal of advancing clean and secure power The extensive electricity integration that already exists between the United States and Canada and the potential to increase existing integration between the United States and Mexico suggests that North America has much to gain from collaborative planning strategy and cooperation in the power sector Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-13 Summary for Policymakers Key Findings              Integration of the power systems of Canada Mexico and the United States historically occurred by gradual ad hoc and regional adjustments implemented by an array of regional public and private stakeholders reflecting the complex and fragmented jurisdictions in all countries Many opportunities for enhanced integration have included a collection of stakeholders and were pursued on a sub-regional basis One model for shared power sector governance is demonstrated by the reliability planning under the North American Electric Reliability Corporation NERC however this engagement has been limited to Canada the United States and the Baja California region of Mexico Canada Mexico and the United States governments have all made significant climate commitments and indicated a desire to shift towards greater renewable energy penetration Greater cross-border integration could be a tool to maximize gains from the deployment of clean energy generation but the complexity and current asymmetry of national and subnational policy frameworks may impede implementation The design of domestic U S clean energy policies both at the federal and state level have implications for cross-border trade and continental emissions reductions Currently there are significant disparities between U S states’ policies for recognition or exclusion of international clean energy imports Continued study of the context and levels of integration of each subregional cross-border interconnection will allow for a deeper understanding of which policies have shaped current levels of cross-border trade Table 7-1 Canada has additional hydropower resources which could be exported to the United States to provide a reliable source of firm low-carbon energy There are concerns among stakeholders that increased imports of Canadian hydropower could reduce U S renewable energy competitiveness however there are examples of arrangements where Canadian hydropower decreases curtailments of U S renewable resources Trade has been increasing across the North American bulk power system but cross border flows especially between Canada and the United States are now using the full capacity of existing transmission infrastructure Under a low carbon future scenario current modeling results show that transmission with Canada becomes increasingly important for sustaining emissions reductions and has a significant impact on the generation mix in border regions While many electricity system models exist for the United States and in some cases the United States and Canada detailed modeling tools to explore the economic social and or reliability impacts of electricity trade across all of North America are currently insufficient to inform opportunities for enhancing integration While extensive integration between the United States and Canada can inform the potential for increased future U S -Mexico integration these situations are fundamentally dissimilar in four main ways lack of a dominant exporting country on the U S -Mexican border the different regional approaches to integration on the U S side the nascent regulatory framework in Mexico and the lack of parity in open access transmission agreements and reliability coordination between the United States and Mexico The United States and Mexico agreed to a set of principles for electricity integration in early January 2017 Mexico’s ongoing electricity utility industry reforms could have significant impacts on the future of crossborder integration The reforms are focused on the overall goal of competitiveness with the twin objectives of reducing electricity costs and developing more clean energy A transition in Mexico from oil to natural gas in electricity generation could have significant impacts in the manufacturing sector reducing electricity prices boosting manufacturing output and increasing overall GDP for Mexico Mexico’s increasing importation of U S natural gas could be an economic and environmental opportunity for both sides by offsetting expensive and high-GHG-emitting diesel generation in Mexico and creating economic opportunities for U S exporters The resulting reduction in electricity costs in Mexico could also boost overall North American competitiveness The Electric Reliability Council of Texas ERCOT could benefit from greater integration with Mexico through access to enhanced imports or as a business opportunity for power exporters S-14 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017  California’s ambitious clean energy policy provides an opportunity for energy exporters in Mexico especially in the Baja California region to supply clean energy dispatchable power or ancillary services A 21st-Century Electricity System Conclusions and Recommendations This chapter highlights many recommendations that are enablers of the modernization and transformation necessary The recommendations build on the analysis and findings in earlier chapters Many of the recommendations will provide the incremental building blocks for longer-term planned changes and activities undertaken in conjunction with state and local governments policy-makers industry and other stakeholders The policy research and investment choices made today will establish critical pathways for decades Recommendations in Brief QER 1 2 provides 76 recommendations divided into six sections The first section addresses recommendations that are crosscutting addressing all three high level goals national security economic competitiveness and environmental responsibility Following this section in the QER three sections make more specific recommendations that will help meet the strategic objectives maximizing economic value and consumer equity building a clean electricity future and ensuring grid reliability security and resilience There are also recommendation sections on the electricity sector workforce and on enhancing electricity integration in North America These recommendations are summarized here with full details in Chapter 7 Key Crosscutting Recommendations to Support the Security and Reliability of the Electricity System Protect the Electricity System as a National Security Asset The Federal Power Act provides a statutory foundation for an electricity reliability organization to develop reliability standards for the bulk power system Pursuant to this authority FERC has certified NERC as the Electric Reliability Organization Under this arrangement NERC and FERC have put into place a comprehensive set of binding reliability standards for the bulk power system over the past decade including standards on cybersecurity and physical security However the Federal oversight authority is limited FERC can approve or reject NERC-proposed reliability standards but it cannot author or modify reliability standards The nature of a national security threat however as articulated in the FAST Act stands in stark contrast to other major reliability events that have caused regional blackouts and reliability failures in the past In the current environment the U S grid faces imminent danger from cyber attacks Widespread disruption of electric service because of a transmission failure initiated by a cyber attack at various points of entry could undermine U S lifeline networks critical defense infrastructure and much of the economy it could also endanger the health and safety of millions of citizens Also natural gas plays an increasingly important role as fuel for the Nation’s electricity system a gas pipeline outage or malfunction due to a cyber attack could affect not only pipeline and related infrastructures but also the reliability of the Nation’s electricity system  Amend Federal Power Act authorities to reflect the national security importance of the Nation’s electric grid Grid security is a national security concern—the clear and exclusive purview of the Federal Government The Federal Power Act as amended by the FAST Act should be further amended by Congress to clarify and affirm the Department of Energy’s DOE’s authority to Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-15 Summary for Policymakers develop preparation and response capabilities that will ensure it is able to issue a grid-security emergency order to protect critical electric infrastructure from cyber attacks physical incidents EMPs or geomagnetic storms In this regard Federal authorities should include the ability to address two-way flows that create vulnerabilities across the entire system DOE should be supported in its development of exercises and its facilitation of the penetration testing necessary to fulfill FAST Act emergency authorities In the area of cybersecurity Congress should provide FERC with authority to modify NERC-proposed reliability standards—or to promulgate new standards directly—if it finds that expeditious action is needed to protect national security in the face of fast-developing new threats to the grid This narrow expansion of FERC’s authority would complement DOE’s national security authorities related to grid-security emergencies affecting critical electric infrastructure and defense-critical electricity infrastructure This approach would maintain the productive NERC-FERC structure for developing and enforcing reliability standards but would ensure that the Federal Government could act directly if necessary to address national security issues  Collect information on security events to inform the President about emergency actions as well as imminent dangers DOE should collect targeted data on critical cyber physical EMP and geomagnetic disturbance events and threats to the electric grid to inform decision making in the event of an emergency or to inform the anticipatory authorities in the FAST Act DOE should concurrently develop appropriate criteria processes and definitions for collecting these targeted data using a dedicated information protection program to safeguard utility data consistent with FERC rules Reporting will be done on a confidential basis Updating will be required to address evolving threats DOE will coordinate the development of analytical data-surveillance and dataprotection tools with the National Labs states universities industry Federal agencies and other organizations as appropriate  Adopt integrated electricity security planning and standards FERC should by rule adopt standards requiring integrated electricity security planning on a regional basis to the extent consistent with its statutory authority Such requirements would enhance DOE’s effectiveness in carrying out its responsibilities and authorities to address national security imperatives and new vulnerabilities created by 1 two-way flows of information and electricity and 2 the transactive role of customers and key suppliers such as those providing stored fuel for strategic generators Important national security considerations warrant careful consideration of how generation transmission distribution and end-user assets are protected from cybersecurity risks Vulnerabilities of distribution and behind-the-meter assets which may provide an increasing number of potential entry points for access to utility control systems are threats that can adversely affect the operation of the transmission system for these vulnerabilities a careful review of protections is required To adequately address and support the security requirements of the FAST Act and DOE’s implementation of the FAST Act this review should be performed on an integrated basis rather than separating the review into bulk power system and other assets To ensure that there are no unnecessary vulnerabilities associated with state-to-state or utilityto-utility variations in protections integrated electricity security planning should be undertaken to cover the entire United States including Alaska Hawaii and U S territories FERC should consider having existing regional organizations undertake such planning as it deems appropriate FERC should evaluate whether the costs of implementing security measures identified in the integrated electricity security plan are appropriate for regional cost allocation where such measures are found to enhance the security of the regional transmission electric system S-16 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 To the extent necessary appropriate statutes should be amended to clearly authorize FERC to adopt such integrated electricity security planning requirements However FERC should immediately begin to advance this initiative to the maximum extent possible under its current authority by initiating a dialogue including discussions with DOE and state authorities and driving consensus on Integrated Electricity Security Plans  Assess natural gas electricity system infrastructure interdependencies for cybersecurity protections DOE pursuant to FAST Act authorities and in coordination with FERC should assess current cybersecurity protections for U S natural gas pipelines and associated infrastructure to determine whether additional or mandatory measures are needed to protect the electricity system If the assessment concludes that additional cybersecurity protections—including mandatory cybersecurity protocols—for natural gas pipelines and associated infrastructure are necessary to protect the electricity system such measures and protocols should be developed and implemented This work should build on existing assessments including those underway at the Transportation Security Administration Increase Financing Options for Grid Modernization Estimates of total investment requirements necessary for grid modernization range from a low of about $350 billion to a high of about $500 billion Grid modernization is the platform for the 21st-century electricity system bringing significant value associated with lower electricity bills due to fuel and efficiency savings more electricity choices and fewer and shorter outages The Federal Government currently plays a role in providing tax incentives for deployment of clean energy technologies as well as Federal credit assistance to facilitate early deployment of innovative technologies  Expand DOE’s loan guarantee program and make it more flexible to assist in the initial deployment of innovative grid technologies and systems The design of the current DOE loan guarantee program is focused primarily on financing deployment of innovative generation technologies Most DOE loan guarantee recipients for example are structured as special project entities that can raise equity outside of regulated business structures and can provide credit security in the form of power purchase agreements This financing model is not amenable to grid modernization financing by regulated entities especially in cases of some technological uncertainty associated with initial commercial deployments In addition there will an ongoing need for innovation in grid technologies beyond the likely availability of current DOE loan guarantee authority Also the limitations of the loan program restrict the program to a very small and ever-changing portion of new transmission capacity more projects and innovation are necessary to transform the grid Modifications to the current DOE Title XVII loan guarantee program are needed to 1 reduce restrictions on numbers types of projects and timeframes e g in order to adequately address innovative transmission capacity needs and 2 provide clear statutory authority for lending to other public or public private entities that support transmission and other grid modernization projects e g state agencies regional power pools through on-lending or equity investing By their nature transmission projects especially big projects involve many entities and jurisdictions Statutory clarification is needed on indirect lending authorities to such entities for multijurisdictional projects Some of the benefits of grid modernization are realized over time as the electricity system itself is changed by technology and market innovations Additional funding resources would bridge the gap between investment costs and realization of benefits and would enable utilities to invest in Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-17 Summary for Policymakers grid modernization A relatively low-cost permanent Federal financing system could be established by setting up a revolving loan fund with one-time seed capital Increase Technology Demonstrations and Utility Investor Confidence The future electric grid will require that utilities deploy a wide range of new capital-intensive technologies Primary technologies are needed to support increased reliability security value creation consumer preferences and system optimization and integration at the distribution level Demonstrating the technical readiness and economic viability of advanced technologies is needed to inspire the confidence of utilities and investors  Significantly expand existing programs to demonstrate the integration and optimization of distribution system technologies The complexity of the issues facing distribution systems— including new technologies the need for systems approaches and geographical differences in markets and regulatory structures—points to a significant need for multiple solution sets to enable two-way electricity flows on distribution systems enhance value maximize clean energy opportunities optimize grid operations and provide secure communications Building on existing demonstration programs and reflecting the Administration’s commitment to the doubling of Federal clean energy innovation over 5 years as part of its Mission Innovation initiative DOE should develop a focused cost-shared program for qualifying utilities to demonstrate advanced distribution system technologies at the community scale including advanced voltage control optimization systems dynamic protection schemes to manage reverse power flows communications sensors storage switching and smart-inverter networks and advanced distribution management systems including automated substations Demonstrations supported by the cost-shared cooperative agreement program would be specifically designed to inform standards and regulations and increase regulatory and utility confidence in key technologies or technology systems Under this program utilities would have to make a positive business case for projects and obtain regulatory approvals for their proposed demonstrations Preference would be given to multi-utility partnerships with diverse customer profiles and to projects that promote education and training in key academic disciplines that are essential for distribution system transformation Cybersecurity plans for all projects would be required and supported by programmatic review of plans and deployments Existing DOE programs including advanced distribution management systems microgrids communications and sensors storage and cybersecurity should be leveraged to provide technical assistance regarding technological issues planning and performance evaluation and institutional needs A percentage of funding could be dedicated to small publicly-owned utilities The program should be of sufficient size to have a material impact it should start in fiscal year FY 2018 and be ramped up over the time period identified in the Mission Innovation initiative Build Capacity at the Federal State and Local Levels The 21st-century electricity system is becoming increasingly transactive and properly valuing attributes is key to an efficient system Application of lessons learned that pair economic and system analysis will lead to a power system that cost-effectively serves customers while providing nationally valued public goods e g reliability resilience and acceptable environmental performance Advances in electricity technologies i e smart grid processes and solutions require enhanced capabilities in human resources to ensure the cost-effective selection deployment and operations of key technologies  S-18 Provide funding assistance to enhance analytical capabilities in state Public Utility Commissions and improve access to training and expertise for small and municipal utilities Federal support should be provided to states and small utilities to enable them to better manage the increasing Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 complexities in the electricity system such as integrating variable energy resources incorporating energy efficiency demand response DR and storage into planning developing competencies in various technologies and making investment and security decisions within uncertain parameters These issues are highly technical and require a new knowledge base and skillset often within the domain of computer sciences economics and cybernetics At the same time these entities are dealing with the workforce issues of outside recruitment or retirement across the electricity industry which are referenced in the QER DOE should build and cultivate much-needed analytical capacity at the state level over a limited period of time by allocating funding to state public utility commissions to allow them to hire new or train existing analysts with more sophisticated and advanced skills and build institutional knowledge Eligibility for state and local funding should be contingent upon demonstration of consideration for Integrated System Planning which is outlined in this chapter DOE should support these analysts through an online interactive education and training platform with access to nationally recognized experts This platform would also be available and tailored to the needs of small utilities On a national scale these actions will serve to sustain system reliability and security and bolster resilience  Create a Center for Advanced Electric Power System Economics DOE should provide two years of seed funding for the formation of a center designed to provide social science advice and economic analysis on an increasingly transactive and dynamic 21st-century electricity system The center should be modeled after the National Bureau of Economic Research and be managed by a university consortium The consortium will establish and maintain a network of experts in economics the social sciences and the electricity system these experts should be from academia industry nonprofit institutions and the National Laboratories The center will develop new methods where appropriate serve as advisor and consultant to stakeholders preparing germane analyses and foster the advancement of students and professionals who are developing expertise in these disciplines The focus of the center will include power systems evaluation e g valuation benefit-cost and competition analysis Inform Electricity System Governance in a Rapidly Changing Environment The rapid rate of change in the electricity sector today often exceeds the ability of institutions and governance structures to respond in a manner sufficient to meet critical national goals and objectives This is particularly true in the resolution of jurisdictional disputes over responsible price formation and valuation Clarification and harmonization of roles and responsibilities for developing pricing can reduce market uncertainty facilitate the achievement of policy goals and reduce costs to ratepayers  Establish a Federal Advisory Committee on Alignment of Responsibilities for Rates and Resource Adequacy DOE in collaboration with the National Association of Regulatory Utility Commissioners should convene a Federal advisory committee that reports to the Secretary or the Secretary’s designee to examine potential jurisdictional concerns and issues associated with harmonizing wholesale and retail rates and tariffs This advisory committee will evaluate and make recommendations where appropriate on the way in which the organized markets reflect state policy pricing mechanisms for maintaining resource adequacy state and Federal roles in pricing and operation of distributed energy resources DERs storage and microgrids the role of aggregators and mechanisms for implementing consumer protection across the various markets and jurisdictions The advisory committee will represent a broad cross-section of industry and stakeholders An annual report will be prepared by this advisory committee for the Secretary that identifies the impact of governance issues and recommends solutions In the remainder of this Summary we highlight a few recommendations from a much more extensive set in the full report Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-19 Summary for Policymakers Maximize Economic Value and Consumer Equity Tailor and Increase Tools and Resources for States and Utilities to Effectively Address Transitions Underway in the Electricity System States and electric utilities are responsible for making critical decisions regarding how to improve the reliability affordability and sustainability of the electric grid and officials from state agencies and utilities provided comments as part of the QER Stakeholder process on the federal role in informing these decisions Technical assistance improved regional consideration in program offerings and new analysis for decision-making will allow the federal government to respond to the needs of states and utilities in ensuring consumer value and equity in the electricity system of the 21st Century Recommendations include   Improve energy management and demand response in buildings and industry Increase Federal support for state efforts to quantitatively value and incorporate energy efficiency demand response distributed storage and distributed generation into resource planning Expand Federal and State Financial Assistance to Ensure Electricity Access for Low-income and Underserved Americans Analysis indicates that electricity costs represent a disproportionate share of total income for low-income Americans Increased funding for proven state-administered programs and enhanced data and tools for targeting assistance can reduce this “electricity burden ” Ensuring that the costs of the rapid transition of the electricity system are not disproportionately borne by low-income Americans is a top priority low-income Americans should also be able to share in the benefits from an electricity system transition Recommendations include   Encourage public-private partnerships to underwrite and support clean energy access for low and moderate income households Provide assistance to address rural islanded and tribal community electricity needs Increase Electricity Access and Improve Electricity-related Economic Development on Tribal Lands The interdependencies of electricity access health economic wellbeing and quality of life underscore the importance of universal access to electricity While recent data on electricity access on Tribal Lands is limited there are still areas that lack adequate access to electricity despite the nation’s commitment to full electrification dating back to the Rural Electrification Act of 1936 More recent anecdotal evidence suggests that the problem broadly persists It is a moral imperative that the Federal Government support Tribal leadership and utility authorities to provide basic electricity service for the tens of thousands of Native Americans who currently lack access to electricity and to foster the associated economic development on tribal lands Federal agencies should also support renewable energy acceleration and economic development opportunities through renewable energy incentives workforce development financing program improvements and improved consultation with Tribes Recommendations include   Support the achievement of full tribal land electrification Support advanced technology acceleration and economic development opportunities for tribal lands Strengthen Rural Electricity and Broadband Infrastructure The Federal government has historically supported the expansion of access to affordable electricity and communications service in rural America with major initiatives continuing today mainly through the USDA The lack of access to broadband in rural areas means that these consumers lack access to demand response technologies such as smart meters smart thermostats and other technologies can reduce pollution help consumers save electricity improve overall grid resilience and reliability and enhance economic development Broadband expansion into these regions would significantly advance grid modernization goals while providing significant S-20 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 communications connectivity and educational benefits to numerous regions of the country Supporting broadband access in sparsely-populated rural areas many of which are low-income is not however profitable for the private sector Federal support would help enhance security environmental and economic development goals Recommendations include   Leverage utility broadband build-out to expand public broadband access in rural areas Increase opportunities for small and rural utilities to utilize USDA’s electricity financing programs Enable a Clean Electricity Future Transform the Electricity System through Leadership in National Clean Electricity Technology Innovation Private sector investment in clean energy technology faces many barriers e g prices do not reflect the costs and benefits of clean energy investments are made in a highly-regulated environment and there are high capital costs and the long time horizons for R D and capital stock turnover in comparison to many other sectors e g IT Increased investments in electricity technology innovation is essential for transformation of the electricity system Federal investments have a history of success and have been leveraged by the private sector to create significant economic value case studies on nuclear energy shale gas and solar PV among many other electricity-related technologies demonstrate the instrumental role of federal investment in early-stage R D Recommendations include   Significantly increase federal investment in clean electricity RD D Implement Regional Clean Energy Innovation Partnerships Address Challenges to Large-scale Centralized Clean Generation Regardless of the energy source there are a number of challenges to deploying large centralized power generation facilities Lower electricity prices largely related to low-cost natural gas are reducing the economic viability of other clean generation resources especially nuclear energy Nuclear power currently provides 60 percent of zerocarbon generation in the United States Hydropower is one of the oldest and most established forms of electricity generation contributing 6 percent of the electricity generated in the U S in 2015 and 19 percent of zero-carbon generation Non-hydropower renewables – including wind solar geothermal and biomass – accounted for about 7 percent of electricity generated in the U S in 2015 Each of these technologies face a range of siting constraints licensing and permitting processes or environmental concerns which can be broad and extensive this can make new large-scale deployments difficult in some cases taking a decade or more to build A combination of federal coordination licensing support analysis of financing opportunities and RD D can help address these barriers Recommendations include    Increase funding for the life-extension R D program to ensure maximum benefits from existing nuclear generation Increase support for advanced nuclear technology licensing at NRC Develop environmental mitigation technologies for hydropower Address Significant Energy-water Nexus Issues Affecting – and Affected by – the Electricity Sector Electricity systems and water systems are in many cases interconnected Water is a critical requirement for many electricity generation technologies Two-thirds of total U S electricity generation—including many coal natural gas nuclear concentrated solar power CSP and geothermal plants—requires water for cooling In addition carbon capture utilization and storage CCUS technologies have significant water demands Electricity is also required for water and wastewater conveyance treatment and distribution From a full-system perspective the joint reliance of electricity and water systems can create vulnerabilities e g drought impacts on thermoelectric generation and hydropower but it can also create opportunities for each system to benefit from well-designed integration Such challenges and Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-21 Summary for Policymakers opportunities can be addressed through improved policy integration data collection modeling analysis RDD D and engagement with stakeholders Recommendations include  Launch an electricity-related Energy-Water Nexus Policy Partnership with Federal state and local partners Provide Federal Incentives for a Range of Electricity-related Technologies and Systems A package of tax incentives targeted at specific market segments can support an all-of-the-above energy strategy by helping to reduce the costs of deploying and using innovative commercially available energy technologies The economies of scale and “learning by doing” promoted by such deployments support continued technology cost reductions and greater market competition Recommendations include    Expand the timeframe and the total capacity allowed under the PTC for nuclear generation Provide tax credits for Carbon Capture Utilization and Storage Increase power purchasing authorities for the Federal Government from 10 to 20 years Address a Range of Power Plant Siting Issues The land use requirements for different types of power generation reflect significant differences between the various types of infrastructure and their operational requirements Recommendations include   Evaluate and develop generation siting best practices Modernize electricity transmission permitting procedures Grid Operations and Planning for Electricity System Reliability Security and Resilience Support Industry State Local and Federal Efforts to Enhance Grid Security and Resilience Some types of extreme weather events are projected to increase in frequency and intensity due to climate change Cyber threats to the electricity system are increasing in sophistication magnitude and frequency Physical threats remain a concern for industry These challenges could be mitigated through a combination of costbenefit analyses standards and collaboration across industry state local and federal stakeholders The recommendations build upon and extend current initiatives such as DOE’s Grid Modernization Initiative and Partnership for Energy Sector Climate Resilience Recommendations include       Develop uniform methods for cost-benefit analysis of security and resilience investments for the electricity system Provide incentives for energy storage Support grants for small utilities facing cyber physical and climate threats Support mutual assistance for recovering from disruptions caused by cyber threats Support the timely development of standards for grid-connected devices Require states to consider the value of DER funding for public purpose programs energy and efficiency resource standards and emerging risks in integrated resource or reliability planning under PURPA Improve Data for Grid Security and Resilience As the nation increasingly relies on electricity to power the economy and support consumer options and choices the consequences of electricity outages are rising The U S currently lacks sufficient data on all-hazard events and losses Such data would help utility regulators planners and communities analyze and prioritize security and resilience investments Recommendations include S-22 Transforming the Nation’s Electricity System The Second Installment of the QER January 2017  Enhance coordination between Energy Sector Information Sharing and Analysis Centers ES-ISACs and the intelligence communities to synthesize threat analysis and disseminate it to industry in a timely and useful manner Encourage Cost-effective Use of Advanced Technologies that Improve Transmission Operations Permitting and planning are necessary but complex processes that can slow transmission development and increase costs Other barriers restrain the use of new technologies that can increase transmission system capacity utilization and improve reliability and security and other planning priorities Recommendations include  Promote deployment of advanced technologies for new and existing transmission Improve EIA's Electricity Data Modeling and Analysis Capabilities EIA provides all levels of stakeholders--government companies and customers--with data to inform the evaluation and development of policies that affect the electricity grid More timely and publicly accessible data on how system operations are changing and how efficiency and renewable energy are specifically affecting them would facilitate the development of federal and state policies and investments needed to ensure the reliability resilience and security of the grid Substantially improved electricity transmission data and related analyses by EIA would support significant improvements in the effectiveness of a broad range of government policies and programs including market design and transmission planning Recommendations include    Expand economic modeling capability for electricity Expand EIA data collection on energy end-use Support EIA’s collection of additional data on electricity and water flow for water and wastewater Electric Workforce of the 21st Century Support the Electricity Sector Workforce The electricity sector is undergoing a number of significant shifts in structure energy sources and applications as the industry modernizes and evolves The full potential of these shifts will however only be realized if the electricity sector workforce appropriately adapts and grows to meet the needs of the 21st century electricity system The federal government has both an interest in development of this workforce Recommendations include   Support Cyber Physical Systems CPS curriculum training and education for grid modernization and cybersecurity Support Federal and regional approaches to electricity workforce development and transition assistance Meet Federal Commitments to Communities Affected by the Transformation of the Electricity Sector To achieve the transition to the electricity sector of the 21st century smoothly quickly and fairly the Federal government should offer a synthesized package of incentives that address the needs of the most important stakeholders both within and outside of the electricity sector Many of these needs are addressed through other recommendations on this list including incentives to reduce the cost of flexible and clean assets encourage the deployment of new and improved technologies throughout the electricity supply chain and train workers for 21st century electricity jobs Recognizing that the shift to the 21st century electricity system can impact communities dependent on 20th century resources the following recommendations provide transition assistance for communities affected by the multi-decadal decline in coal production Recommendations include  Meet the Federal commitment to appropriate sufficient funding to accomplish the mission of the Abandoned Mine Lands Fund Transforming the Nation’s Electricity System The Second Installment of the QER January 2017 S-23 Summary for Policymakers Enhance Electricity Integration in North America Increase North American Cooperation on Electric Grid and Clean Energy Issues Electric reliability cooperation is needed to strengthen the security and resilience of an increasingly integrated cross-border electricity grid A clear understanding of the regulatory requirements at the federal and state levels for the permitting of cross-border transmission facilities sharing of best practices and exploration of potential future cooperation on grid security issues will limit uncertainties and improve policy coordination at the multilateral and international levels Recommendations include    Increase U S and Mexican cooperation on reliability Advance North American grid security Modernize international cross-border transmission permitting processes Conclusion The electricity sector has been and 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ŶĞĞĚƐ ŝŶ Ă ϮϭƐƚ ĐĞŶƚƵƌLJ ĞĐŽŶŽŵLJ͘ dƌĞŶĚƐ ĨŽƌ Y Z ϭ͘Ϯ ŝŶĐůƵĚĞ ƚŚĞ ĐŚĂŶŐŝŶŐ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž͖ ůŽǁ ůŽĂĚ ŐƌŽǁƚŚ͖ ŝŶĐƌĞĂƐŝŶŐ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ ƚŽ ƐĞǀĞƌĞ ǁĞĂƚŚĞƌͬĐůŝŵĂƚĞ ĐŚĂŶŐĞ͖ ƚŚĞ ƉƌŽůŝĨĞƌĂƚŝŽŶ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐĞƌǀŝĐĞƐ͕ ĂŶĚ ŵĂƌŬĞƚ ĞŶƚƌĂŶƚƐ͖ ŝŶĐƌĞĂƐŝŶŐ ĐŽŶƐƵŵĞƌ ĐŚŽŝĐĞ͖ ĞŵĞƌŐŝŶŐ ĐLJďĞƌͬƉŚLJƐŝĐĂů ƚŚƌĞĂƚƐ͖ ĂŐŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ǁŽƌŬĨŽƌĐĞ͖ ĂŶĚ ƚŚĞ ŐƌŽǁŝŶŐ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐĞ ŽĨ ƌĞŐƵůĂƚŽƌLJ ũƵƌŝƐĚŝĐƚŝŽŶƐ͘ ZĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĨŽĐƵƐ ŽŶ ƌĞƐĞĂƌĐŚ ĂŶĚ ĚĞǀĞůŽƉŵĞŶƚ ;ZΘ Ϳ͕ ƐƚŽƌĂŐĞ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉůĂŶŶŝŶŐ͕ ƚĂƚĞ ĨŝŶĂŶĐŝĂů ĂƐƐŝƐƚĂŶĐĞ͕ ǀĂůƵĂƚŝŽŶ ŽĨ ŶĞǁ ƐĞƌǀŝĐĞƐ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĂŶĚ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ĚĚĞĚ ƚŽ ƚŚŝƐ ŵŝdž ŝƐ ƚŚĞ ŐƌŽǁŝŶŐ ĂŶĚ ŶĞĂƌͲĐŽŵƉůĞƚĞ ĚĞƉĞŶĚĞŶĐĞ ŽĨ ŽƚŚĞƌ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ͕ ŝŶĐƌĞĂƐŝŶŐ ĐŽŶƐƵŵĞƌ ĐŚŽŝĐĞ ŽƉƚŝŽŶƐ ĨŽƌ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ŶĞǁ ŚŝŐŚͲǀĂůƵĞ ŝŶĨŽƌŵĂƚŝŽŶͬĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŝŶĚƵƐƚƌŝĞƐ ĂŶĚ ďƵƐŝŶĞƐƐĞƐ͘ hŶĚĞƌůLJŝŶŐ ƚŚŝƐ ŝƐ ƚŚĞ ŶĞĞĚ ĨŽƌ ĞǀĞƌͲŐƌĞĂƚĞƌ ƐLJƐƚĞŵ ƐĞĐƵƌŝƚLJ͕ ĚƌŝǀĞŶ ďLJ ŐƌŽǁŝŶŐ ĐLJďĞƌ ĂŶĚ ƉŚLJƐŝĐĂů ƚŚƌĞĂƚƐ͕ ĞdžƉĂŶĚŝŶŐ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚŶĞƐƐ͕ ĂŶĚ ƚŚĞ ŝŶĐƌĞĂƐĞ ŝŶ ĞdžƚƌĞŵĞ ǁĞĂƚŚĞƌ ĞǀĞŶƚƐ ďĞĐĂƵƐĞ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ dŚŝƐ ĞǀŽůƵƚŝŽŶ ŝƐ ĂŶĚ ǁŝůů ďĞ ͞ďƵŵƉLJ͟ͶƚŚĞ ĐŽƐƚƐͬďĞŶĞĨŝƚƐ ĂŶĚ ŝŶǀĞƐƚŵĞŶƚ ƌĞƋƵŝƌĞŵĞŶƚƐ ŶĞĞĚĞĚ ƚŽ ĂĐĐŽŵŵŽĚĂƚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ŐƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ĂƌĞ ĐŚĂůůĞŶŐŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ ĂŶĚ ƌĞŐƵůĂƚŽƌƐ ĂůŝŬĞ ƚŽ ƵŶĚĞƌƐƚĂŶĚ ƐĐĂůĞ͕ ƐĐŽƉĞ͕ ĂŶĚ ŽƉĞƌĂƚŝŶŐ ĐŚĂŶŐĞƐ ƌĞƋƵŝƌĞĚ ĂƐ ƚŚĞ ŐƌŝĚ ŐĞƚƐ ƐŵĂƌƚĞƌ͕ ǁŝƚŚ ƚŚĞ ƵƉƌĞŵĞ ŽƵƌƚ ŶŽǁ ŝŶ ƚŚĞ ƉŽƐŝƚŝŽŶ ŽĨ ƌĞƐŽůǀŝŶŐ ŬĞLJ ũƵƌŝƐĚŝĐƚŝŽŶĂů ŝƐƐƵĞƐ͘ National Goals for a 21st Century Electricity Sector tŚŝůĞ ƌĞƐƉĞĐƚŝŶŐ ƚĂƚĞ͕ ƌĞŐŝŽŶĂů͕ ĂŶĚ ƚƌŝďĂů ƉƌĞƌŽŐĂƚŝǀĞƐ͕ Y Z ϭ͘Ϯ ƐƵƉƉŽƌƚƐ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ĐŽŶƐŝƐƚĞŶƚ ĞĚĞƌĂů ƐƚƌĂƚĞŐLJ ƚŽ ƐƵƉƉŽƌƚ Ă ϮϭƐƚ ĐĞŶƚƵƌLJ ĞŶĞƌŐLJ ƐLJƐƚĞŵ͘ Y Z ϭ͘Ϯ ǁŝůů ĂŶĂůLJnjĞ ƚŚĞƐĞ ŝƐƐƵĞƐ ŝŶ ƚŚĞ ĐŽŶƚĞdžƚ ŽĨ ƚŚƌĞĞ ŽǀĞƌĂƌĐŚŝŶŐ ŶĂƚŝŽŶĂů ŐŽĂůƐ ƚŽ ;ϭͿ ĞŶŚĂŶĐĞ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ͕ ;ϮͿ ƉƌŽŵŽƚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƐƉŽŶƐŝďŝůŝƚLJ͕ ĂŶĚ ;ϯͿ ƉƌŽǀŝĚĞ ĨŽƌ ƚŚĞ EĂƚŝŽŶ͛Ɛ ƐĞĐƵƌŝƚLJ͘ dŚĞ ŽǀĞƌĂůů ƐƚƌƵĐƚƵƌĞ ŽĨ ƚŚĞ ƐƚƵĚLJ ĂŶĚ ŝƚƐ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ŝƐ ĚĞƉŝĐƚĞĚ ŝŶ ŝŐƵƌĞ ϭͲϭ͘ ĞĐƵƌŝƚLJ͕ ĞĐŽŶŽŵLJ͕ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƐƉŽŶƐŝďŝůŝƚLJ ĂƌĞ Ăůů ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ ĂŶĚ ĐƌŽƐƐĐƵƚƚŝŶŐ͘ dƌĂŶƐĨŽƌŵĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŵƵƐƚ ĂĚĚƌĞƐƐ Ăůů ƚŚƌĞĞ ŶĂƚŝŽŶĂů ŐŽĂůƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-1 Goals Objectives and Organization of QER 1 2 7KH RUJDQL DWLRQ RI 4 5 UHIOHFWV WKH FRPSUHKHQVLYH VHW RI LQWHUDFWLRQV DQG RYHUODSSLQJ JRDOV DQG REMHFWLYHV IRU HQDEOLQJ WKH HOHFWULFLW V VWHP RI WKH VW FHQWXU ŶĂůLJƐĞƐ ǁĞƌĞ ĐŽŶĚƵĐƚĞĚ ǁŝƚŚ ŚŝŐŚͲůĞǀĞů ŶĂƚŝŽŶĂů ŐŽĂůƐ ĂƐ ŐƵŝĚĞƉŽƐƚƐ͗ ;ϭͿ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ͕ ;ϮͿ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƐƉŽŶƐŝďŝůŝƚLJ͕ ĂŶĚ ;ϯͿ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ͘ ĞŶƚƌĂů ƚŽ ƚŚĞ Y Z ϭ͘Ϯ ŝƐ Ă ƐĞƚ ŽĨ ƚŚƌĞĞ ĂŶĂůLJƚŝĐĂůůLJ ĚĞƌŝǀĞĚ ŽďũĞĐƚŝǀĞƐ ƚŚĂƚ ƌĞƉƌĞƐĞŶƚ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ĂƉƉƌŽĂĐŚ ƚŽ ĞŶĂďůŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŽĨ ƚŚĞ ϮϭƐƚ ĐĞŶƚƵƌLJ ƚŚƌŽƵŐŚ ƚŚĞƐĞ ŚŝŐŚͲůĞǀĞů ŐŽĂůƐ͘ dŚĞƐĞ ŽďũĞĐƚŝǀĞƐ ĂƌĞ ;ϭͿ ĞŶƐƵƌŝŶŐ ƐĞĐƵƌŝƚLJ͕ ƐLJƐƚĞŵ ƌĞƐŝůŝĞŶĐĞ͕ ĂŶĚ ƌĞůŝĂďŝůŝƚLJ͖ ;ϮͿ ĞŶĂďůŝŶŐ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ĨƵƚƵƌĞ͖ ĂŶĚ ;ϯͿ ŝŶĐƌĞĂƐŝŶŐ ĞĐŽŶŽŵŝĐ ǀĂůƵĞ ĂŶĚ ĞŶƐƵƌŝŶŐ ĐŽŶƐƵŵĞƌ ĞƋƵŝƚLJ͘ Y Z ϭ͘Ϯ ĂůƐŽ ƉƌŽǀŝĚĞƐ Ă ĐŽŵƉƌĞŚĞŶƐŝǀĞ ƌĞǀŝĞǁ ŽĨ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂŶĚ ĐŽǀĞƌƐ ƚŚĞ ŚŝƐƚŽƌLJ ĂŶĚ ŬĞLJ ƚƌĞŶĚƐ ƌĞůĂƚĞĚ ƚŽ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ŝŶĐůƵĚŝŶŐ ;ϭͿ ŐĞŶĞƌĂƚŝŽŶ͕ ;ϮͿ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ;ϯͿ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ĂŶĚ ;ϰͿ ĞŶĚ ƵƐĞ͘ Economic Competitiveness and the Electricity System ŬĞLJ ĚƌŝǀĞƌ ĨŽƌ h͘ ͘ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ ŚĂƐ ďĞĞŶ ƚŚĞ ƐƵƉƉůLJ ĂŶĚ ĚĞůŝǀĞƌLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĂƚ ŝƐ ĂĨĨŽƌĚĂďůĞ͕ ĂĐĐĞƐƐŝďůĞ͕ ĂŶĚ ƌĞůŝĂďůĞ͘ dŚĞ ƌĞůŝĂďŝůŝƚLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚŝƌĞĐƚůLJ ĂĨĨĞĐƚƐ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ƉƌŽĚƵĐƚŝŽŶ ƉƌŽĐĞƐƐĞƐ͕ ĞŶĂďůŝŶŐ ƚŚĞ ĞĨĨŝĐŝĞŶƚͬĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĐŽŽƌĚŝŶĂƚŝŽŶ ŽĨ ĞĐŽŶŽŵŝĐ ĂĐƚŝǀŝƚLJ ǁŝƚŚŽƵƚ ĚŝƐƌƵƉƚŝŽŶ͘ tŝƚŚ ƐŽŵĞ ŽĨ ƚŚĞ ůŽǁĞƐƚ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŝĐĞƐ ŝŶ ƚŚĞ ĚĞǀĞůŽƉĞĚ ǁŽƌůĚ͕ϭϭ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ƐƵƉƉŽƌƚƐ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ ŽĨ h͘ ͘ ŐŽŽĚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ŝŶ ďŽƚŚ ĚŽŵĞƐƚŝĐ ĂŶĚ ŐůŽďĂů ŵĂƌŬĞƚƐ͘ ŶĞƌŐLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ƐŚŽƵůĚ ĞŶĂďůĞ ŶĞǁ ĂƌĐŚŝƚĞĐƚƵƌĞƐ ƚŽ ƐƚŝŵƵůĂƚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ŶĞǁ ĞĐŽŶŽŵŝĐ ƚƌĂŶƐĂĐƚŝŽŶƐ͕ ĂŶĚ ŶĞǁ ĐŽŶƐƵŵĞƌ ƐĞƌǀŝĐĞƐ͘ dŚĞ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ŽĨ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵͶƚŚƌŽƵŐŚ ƚŚĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŐƌŽǁƚŚ ŽĨ ĐůĞĂŶ͕ ƐŵĂƌƚ͕ ĂŶĚ ƌĞƐŝůŝĞŶƚ ƐLJƐƚĞŵƐ ĂŶĚ ƐĞƌǀŝĐĞƐͶǁŝůů ĐƌĞĂƚĞ ĚĞŵĂŶĚ ĨŽƌ ĂŶ ĞŶŚĂŶĐĞĚ ǁŽƌŬĨŽƌĐĞ ƚŽ ĞŶĂďůĞ ƚŚŝƐ ƚƌĂŶƐŝƚŝŽŶ͘ Environmental Responsibility and the Electricity System dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƐŚŽƵůĚ ďĞ ĚĞǀĞůŽƉĞĚ ĂŶĚ ŵĂŶĂŐĞĚ ŝŶ ĂŶ ĞŶǀŝƌŽŶŵĞŶƚĂůůLJ ƌĞƐƉŽŶƐŝďůĞ ŵĂŶŶĞƌ ďLJ͕ ŝŶ ƉĂƌƚ͕ ĂĚĚƌĞƐƐŝŶŐ ƚŚĞ ĐĞŶƚƌĂů ĐŚĂůůĞŶŐĞ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ĂŶĚ ŵŝƚŝŐĂƚŝŶŐ ŝƚƐ ŝŵƉĂĐƚƐ͘ dŚĞ ŶĂƚŝŽŶĂů ŽďũĞĐƚŝǀĞ ŽĨ ͞ĚĞĞƉ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ͟ ďLJ ŵŝĚͲĐĞŶƚƵƌLJ ǁŝůů ĐŚĂůůĞŶŐĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŝŶ ŵĂŶLJ ǁĂLJƐ͘ ĐŚŝĞǀŝŶŐ ƚŚŝƐ ŬĞLJ ŽďũĞĐƚŝǀĞ ǁŝůů ŝŵƉƌŽǀĞ ƚŚĞ ŚĞĂůƚŚ ŽĨ ŵĞƌŝĐĂŶƐ ĂŶĚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͕ ďŽƚŚ ŽĨ ǁŚŝĐŚ ĂƌĞ ƉŽƐŝƚŝǀĞ ĐŽŶƚƌŝďƵƚŝŽŶƐ ƚŽ ŵĂƚƚĞƌƐ ŽĨ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ ĂŶĚ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ͘ ƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ͕ ƉŽůŝĐLJŵĂŬĞƌƐ͕ ŝŶǀĞƐƚŽƌƐ͕ ĂŶĚ ŝŶĚƵƐƚƌLJ ŵƵƐƚ ĐŽŶƐŝĚĞƌ ĂŶĚ ĂĚĚƌĞƐƐ ƚŚĞ ůŽŶŐƐƚĂŶĚŝŶŐ ŶĞĞĚƐ ŽĨ ƚŚĞ ǀƵůŶĞƌĂďůĞ ƐĞŐŵĞŶƚƐ ŽĨ ƚŚĞ ƉŽƉƵůĂƚŝŽŶ ĂŶĚ ĂƉƉƌŽƉƌŝĂƚĞůLJ ĂĚĚƌĞƐƐ ƚŚĞƐĞ ŝƐƐƵĞƐ ĂƐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝƐ ƚƌĂŶƐĨŽƌŵĞĚ͘ KƚŚĞƌ ĐƌŝƚŝĐĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶĐĞƌŶƐ ŝŶĐůƵĚĞ ĐůŝŵĂƚĞ ĂĚĂƉƚĂƚŝŽŶ͖ ĨƵƌƚŚĞƌ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ĐŽŶǀĞŶƚŝŽŶĂů ƉŽůůƵƚĂŶƚƐ͖ ĂĚĞƋƵĂƚĞůLJ ĂŶĂůLJnjŝŶŐ͕ ĂĚĚƌĞƐƐŝŶŐ͕ ĂŶĚ ŵĂŶĂŐŝŶŐ ƚŚĞ ĞŶĞƌŐLJͲǁĂƚĞƌ ŶĞdžƵƐ͖ ƌĞĚƵĐŝŶŐ ůĂŶĚͲƵƐĞ ĂŶĚ ŽƚŚĞƌ ŝŵƉĂĐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͖ ĂŶĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ůŝĨĞĐLJĐůĞ ŵĂŶĂŐĞŵĞŶƚ͘ National Security and the Electricity System ůĞĐƚƌŝĐŝƚLJ ŝƐ ĞƐƐĞŶƚŝĂů ĨŽƌ ƐƵƉƉŽƌƚŝŶŐ ĂŶĚ ƐƵƐƚĂŝŶŝŶŐ ŝŶĚƵƐƚƌŝĂů ŽƵƚƉƵƚ͕ ŐŽǀĞƌŶŵĞŶƚ͕ ĞŵĞƌŐĞŶĐLJ ƐĞƌǀŝĐĞƐ͕ ŝŶƚĞƌĚĞƉĞŶĚĞŶƚ ůŝĨĞůŝŶĞ ŶĞƚǁŽƌŬƐ͕ ĂŶĚ ƚŚĞ h͘ ͘ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ĂƉƉĂƌĂƚƵƐ͘ ŝĨĞůŝŶĞ ŶĞƚǁŽƌŬƐ ŝŶĐůƵĚĞ ƉŚLJƐŝĐĂů ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƚŚĂƚ ĂƌĞ ƌĞƋƵŝƌĞĚ ĨŽƌ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ĂŶĚ ĂůŵŽƐƚ ĞǀĞƌLJ ŽƚŚĞƌ ĞůĞŵĞŶƚ ŽĨ ĞĐŽŶŽŵŝĐ ĂŶĚ ƐŽĐŝĂů ĂĐƚŝǀŝƚLJ͘ ǀĞŶ ƚŚŽƵŐŚ ŝƚ ŝƐ ĞƐƐĞŶƚŝĂů ƚŽ ƚŚĞ ĞĐŽŶŽŵLJ͕ ůŝĨĞůŝŶĞ ŶĞƚǁŽƌŬƐ͕ ĞŵĞƌŐĞŶĐŝĞƐ͕ ĂŶĚ ƚŚĞ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ĂƉƉĂƌĂƚƵƐ͕ ĞůĞĐƚƌŝĐŝƚLJͶƵŶůŝŬĞ ŽŝůͶĐĂŶŶŽƚ ďĞ ƐƚŽƌĞĚ Ăƚ ƐĐĂůĞ͘ dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƐŚŽƵůĚ ďĞ Ă ĐŽŶƐŝĚĞƌĂƚŝŽŶ ĂŶĚ ŝŶĐůƵĚĞĚ ŝŶ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ĚŽĐƚƌŝŶĞ͕ ƉŽůŝĐŝĞƐ͕ ĂŶĚ ƉůĂŶƐ͘ ĐŽŶƚŝŶƵŽƵƐ ĞĨĨŽƌƚ ƚŽ ŵĂŝŶƚĂŝŶ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůŝĞƐ ŝŶ ƚŚĞ ĨĂĐĞ ŽĨ Ă ŐƌŽǁŝŶŐ ŶƵŵďĞƌ ŽĨ ƉŽƚĞŶƚŝĂů ƚŚƌĞĂƚƐ ;ĐLJďĞƌ͕ ĞůĞĐƚƌŽŵĂŐŶĞƚŝĐ ƉƵůƐĞ͕ ƚĞƌƌŽƌŝƐƚ ĂƚƚĂĐŬƐ͕ ĂŶĚ ŶĂƚƵƌĂů ĚŝƐĂƐƚĞƌƐͿ ŝƐ ƌĞƋƵŝƌĞĚ ĨŽƌ ƚŚĞ ŶĂƚŝŽŶĂů ĚĞĨĞŶƐĞ͕ ĐŽŶƚŝŶƵŝƚLJ ŽĨ ŐŽǀĞƌŶŵĞŶƚ͕ ĞĐŽŶŽŵŝĐ ƉƌŽƐƉĞƌŝƚLJ͕ ĂŶĚ ƋƵĂůŝƚLJ ŽĨ ůŝĨĞ ŶĂƚŝŽŶǁŝĚĞ͘ Turning National Goals into Actionable Priorities for Electricity System Transformation Integrated Objectives for QER 1 2 dŚĞ ĂŶĂůLJƐŝƐ ĐŽŶĚƵĐƚĞĚ ĨŽƌ ƚŚĞ Y Z ϭ͘Ϯ ŝĚĞŶƚŝĨŝĞĚ ƚŚƌĞĞ ŵĂũŽƌ integrated objectives ƚŚĂƚ ĂĚĚƌĞƐƐ ƚŚĞ ŶĞĞĚƐ ĂŶĚ ĐŚĂůůĞŶŐĞƐ ƚŽ ĞŶĂďůĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŽĨ ƚŚĞ ϮϭƐƚ ĐĞŶƚƵƌLJ͘ dŚĞƐĞ ŽďũĞĐƚŝǀĞƐͶĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ƐĞǀĞƌĂů Y Z ϭ͘Ϯ ĐŚĂƉƚĞƌƐ͘ Maximize Economic Value and Consumer Equity dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ƌĞůĂƚŝǀĞůLJ ůŽǁͲĐŽƐƚ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ Ă ŚŝŐŚůLJ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞůŝǀĞƌLJ ƐLJƐƚĞŵ ;ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶͿ͘ WŽǁĞƌ ŝƐ ŐĞŶĞƌĂƚĞĚ ĨƌŽŵ ďŽƚŚ ĐĞŶƚƌĂů ĂŶĚ ŽŶƐŝƚĞ ƐŽƵƌĐĞƐ͕ ƐƵĐŚ ĂƐ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ ĂŶĚ ĐŽŵďŝŶĞĚ ŚĞĂƚ ĂŶĚ ƉŽǁĞƌ ŝŶƐƚĂůůĂƚŝŽŶƐ͘ dŚĞ ƐƵŵ ŽĨ ƚŚĞƐĞ ĐĂƉĂďŝůŝƚŝĞƐ ŝƐ Ă ƉůĂƚĨŽƌŵ ŽŶ ǁŚŝĐŚ Ă ǀŝďƌĂŶƚ ŐůŽďĂůůLJ ĐŽŵƉĞƚŝƚŝǀĞ ĞĐŽŶŽŵLJ ƚŚƌŝǀĞƐ͘ ůƚŚŽƵŐŚ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ĂŶ ĞŶĞƌŐLJ ĐĂƌƌŝĞƌ ĂŶĚ ŶŽƚ Ă ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ƐŽƵƌĐĞ͕ ĞůĞĐƚƌŝĐŝƚLJ ĞdžŚŝďŝƚƐ ƚŚĞ ŝŶƚĞƌĐŚĂŶŐĞĂďůĞ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ŽĨ Ă ĐŽŵŵŽĚŝƚLJͶĂ ŬŝůŽǁĂƚƚͲŚŽƵƌ ŐĞŶĞƌĂƚĞĚ ďLJ ĂŶLJ ƌĞƐŽƵƌĐĞ ĐĂŶ ďĞ ĞĂƐŝůLJ ƵƐĞĚ ďLJ ĂŶLJ ƚLJƉĞ ŽĨ ĐƵƐƚŽŵĞƌ͘ ůĞĐƚƌŝĐŝƚLJ ŝƐ ƵŶŝƋƵĞ ĂƐ Ă ĐŽŵŵŽĚŝƚLJ͕ ŚŽǁĞǀĞƌ͕ ďĞĐĂƵƐĞ ŝƚ ƌĞƋƵŝƌĞƐ ƌĞĂůͲ ƚŝŵĞ ďĂůĂŶĐŝŶŐ ĂĐƌŽƐƐ ŵƵůƚŝƉůĞ ƐƉĂƚŝĂů ĂŶĚ ƚĞŵƉŽƌĂů ƐĐĂůĞƐ ;ůŽĐĂƚŝŽŶͲƐƉĞĐŝĨŝĐ ƉƵŵƉĞĚ ŚLJĚƌŽ ŝƐ ĂŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ĞdžĐĞƉƚŝŽŶͿ͘ dŚŝƐ ƌĞƋƵŝƌĞŵĞŶƚ ĨŽƌ ŝŵŵĞĚŝĂƚĞ ŵĂƚĐŚŝŶŐ ŽĨ ĚĞŵĂŶĚ ĂŶĚ ƐƵƉƉůLJ ĐĂŶ ƌĞƐƵůƚ ŝŶ ƉƌŝĐĞƐ ƚŚĂƚ ǀĂƌLJ ƐŝŐŶŝĨŝĐĂŶƚůLJ ĨƌŽŵ ŵŝŶƵƚĞ ƚŽ ŵŝŶƵƚĞ Žƌ ƐĞĂƐŽŶ ƚŽ ƐĞĂƐŽŶ͘ ĞĐĂƵƐĞ ŵĂŶLJ ĂƐƉĞĐƚƐ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵͶŝŶĐůƵĚŝŶŐ ZΘ ŝŶ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĞŵŝƐƐŝŽŶƐ ŵŝƚŝŐĂƚŝŽŶ͕ ĂŶĚ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJͶĂƌĞ ƉƵďůŝĐ ŐŽŽĚƐ ĂŶĚ ǁŝůů ďĞ ƵŶĚĞƌƉƌŽǀŝĚĞĚ ďLJ ƉƌŝǀĂƚĞ ŝŶĚƵƐƚƌLJ͕ ƚŚĞ h͘ ͘ ŐŽǀĞƌŶŵĞŶƚ ŚĂƐ ƉůĂLJĞĚ Ă ĐƌŝƚŝĐĂů ƌŽůĞ ŝŶ ĚĞǀĞůŽƉŝŶŐ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ĞĐŽŶŽŵLJ ĂŶĚ ŵĂŬŝŶŐ ƐƵƌĞ ƚŚĂƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ ŚĂƐ ĐŽŶƚŝŶƵĞĚ ƚŽ ďĞ ĂǀĂŝůĂďůĞ͕ ĂĨĨŽƌĚĂďůĞ͕ ĂŶĚ ƌĞůŝĂďůĞ ƚŽ h͘ ͘ ŝŶĚƵƐƚƌLJ ĂŶĚ ĐŝƚŝnjĞŶƐ͘ ŝƐƚŽƌŝĐĂůůLJ͕ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ŐƌŽƐƐ ĚŽŵĞƐƚŝĐ ƉƌŽĚƵĐƚ ;' WͿ ŚĂǀĞ ƚĞŶĚĞĚ ƚŽ ŵŽǀĞ ŝŶ ƚĂŶĚĞŵͶ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ŚĂƐ ƚĞŶĚĞĚ ƚŽ ƌŝƐĞ ĚƵƌŝŶŐ ĞĐŽŶŽŵŝĐ ĞdžƉĂŶƐŝŽŶƐ ĂŶĚ ĨĂůů ĚƵƌŝŶŐ ƌĞĐĞƐƐŝŽŶƐ ;ďĞƚǁĞĞŶ ϭϵϱϬ ĂŶĚ ϮϬϭϯ͕ ƚŚĞƌĞ ǁĂƐ Ă ϲϲ ƉĞƌĐĞŶƚ ĐŽƌƌĞůĂƚŝŽŶ ďĞƚǁĞĞŶ ' W ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞͿ͘ϭϮ KǀĞƌ ƚŚĞ ůĂƐƚ ƐĞǀĞƌĂů ĚĞĐĂĚĞƐ͕ ŚŽǁĞǀĞƌ͕ ŐƌŽǁƚŚ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŚĂƐ ďĞĞŶ ůŽǁĞƌ ƚŚĂŶ ŐƌŽǁƚŚ ŝŶ ' W͘ dŚŝƐ ŝƐ ĚƵĞ ŝŶ ƉĂƌƚ ƚŽ Ă ƌĞƐƚƌƵĐƚƵƌŝŶŐ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ͖ ĂůƐŽ͕ ĂĐƌŽƐƐ Ăůů ĞĐŽŶŽŵŝĐ ƐĞĐƚŽƌƐ͕ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŚĂƐ ďĞĞŶ ƌĞŵĂƌŬĂďůLJ ƐƵĐĐĞƐƐĨƵů ŽǀĞƌ ƐĞǀĞƌĂů ĚĞĐĂĚĞƐ ŝŶ ŚĞůƉŝŶŐ ĐŽŶƚƌŽů ĐŽƐƚƐ ĂŶĚ ŝŵƉƌŽǀŝŶŐ ƉĞƌĨŽƌŵĂŶĐĞ ĂŶĚ ƉƌŽĚƵĐƚŝǀŝƚLJ͘ Enable a Clean Electricity Future DƵĐŚ ŽĨ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐ ƐLJƐƚĞŵ ǁĂƐ ďƵŝůƚ ŽƵƚ ďĞĨŽƌĞ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂĚ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĐŽŵƉůĞŵĞŶƚ ŽĨ ŵŽĚĞƌŶ ĞŶǀŝƌŽŶŵĞŶƚĂů ůĂǁƐ͕ ĂŶĚ ǁŝƚŚŽƵƚ ƚŚĞ ƌĂŶŐĞ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ŚĂǀĞ ďĞĞŶ ĚĞǀĞůŽƉĞĚ ĂŶĚ ĚĞƉůŽLJĞĚ ƚŽ ƌĞĚƵĐĞ Ăŝƌ ĞŵŝƐƐŝŽŶƐ ĂŶĚ ŽƚŚĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ŽĨ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ƵƐĞ͘ dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ƚŽĚĂLJ ŝƐ ƚŚĞ ůĂƌŐĞƐƚ ƐŽƵƌĐĞ ŽĨ h͘ ͘ ŐƌĞĞŶŚŽƵƐĞ ŐĂƐ ;' 'Ϳ ĞŵŝƐƐŝŽŶƐ͕ ƉĂƌƚŝĐƵůĂƚĞ ŵĂƚƚĞƌ͕ ĂŶĚ ĂĐŝĚ ƉƌĞĐŝƉŝƚĂƚŝŽŶ͖ ŽŶĞ ŽĨ ƚŚĞ ůĂƌŐĞƐƚ ƵƐĞƌƐ ŽĨ ĨƌĞƐŚ ǁĂƚĞƌ͖ Ă ŵĂũŽƌ ĐĂƵƐĞ ŽĨ ůĂŶĚ ĂŶĚ ĞĐŽƐLJƐƚĞŵƐ ŝŵƉĂĐƚ͖ ĂŶĚ ƚŚĞ ƉƌŝŶĐŝƉĂů ƐŽƵƌĐĞ ŽĨ ƌĂĚŝŽĂĐƚŝǀĞ ǁĂƐƚĞ͘ ĚĚƌĞƐƐŝŶŐ ƚŚĞƐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶĐĞƌŶƐ ŵĂLJ ƌĞƋƵŝƌĞ Ă ƌĂŶŐĞ ŽĨ ŶĞǁ ƉŽůŝĐŝĞƐ͕ ĂĐĐĞůĞƌĂƚŝŽŶ ŽĨ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ĂŶĚ ĂĚĚŝƚŝŽŶĂů ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͘ Ɛ ŶŽƚĞĚ͕ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝƐ ĚĞĞƉůLJ ůŝŶŬĞĚ ƚŽ ĞŶǀŝƌŽŶŵĞŶƚĂů ƋƵĂůŝƚLJ͖ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉŽůŝĐŝĞƐ ŵƵƐƚ ďĞ ĐĂƌĞĨƵůůLJ ĂŶĚ ƉƵƌƉŽƐĞĨƵůůLJ ďĂůĂŶĐĞĚ ǁŝƚŚ ŽƚŚĞƌ ŽďũĞĐƚŝǀĞƐ͘ Ŷ ĂĚĚƌĞƐƐŝŶŐ ĂƐƐŽĐŝĂƚĞĚ ŝƐƐƵĞƐ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ƐŚŽƵůĚ ďƵŝůĚ ŽŶ ƉĂƐƚ ƐƵĐĐĞƐƐĞƐ ŝŶ ƌĞĚƵĐŝŶŐ ƚŚĞ ƉƵďůŝĐ ŚĞĂůƚŚ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ĨƌŽŵ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ďĂƐĞĚ ŽŶ Ă ŵƵƚƵĂůůLJ ƌĞŝŶĨŽƌĐŝŶŐ ĐLJĐůĞ ŽĨ ƚĞĐŚŶŽůŽŐŝĐĂů ŝŵƉƌŽǀĞŵĞŶƚƐ ĂŶĚ ƉŽůŝĐŝĞƐ͘ ƋƵŝƚLJ ŝƐ Ă ƉĂƌƚŝĐƵůĂƌ ĐŽŶĐĞƌŶ ǁŚĞŶ ĂĚĚƌĞƐƐŝŶŐ ƉŽůůƵƚŝŽŶ ĨƌŽŵ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͘ WŽǁĞƌ ƉůĂŶƚƐ ĂŶĚ ŽƚŚĞƌ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂƌĞ ŽĨƚĞŶ ůŽĐĂƚĞĚ ŝŶ Žƌ ŶĞĂƌ ůŽǁͲ ŝŶĐŽŵĞ ĂŶĚ ŵŝŶŽƌŝƚLJ ĐŽŵŵƵŶŝƚŝĞƐ͕ ĐƌĞĂƚŝŶŐ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞ ŝŵƉĂĐƚƐ ŽŶ ƚŚĞƐĞ ƉŽƉƵůĂƚŝŽŶƐ͘ ůƐŽ͕ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŝŵƉĂĐƚƐͶƐƵĐŚ ĂƐ ŚĞĂƚ ǁĂǀĞƐ͕ ĚĞŐƌĂĚĞĚ Ăŝƌ͕ ĂŶĚ ĞdžƚƌĞŵĞ ǁĞĂƚŚĞƌͶǁŝůů ĂĚĚ ĂĚĚŝƚŝŽŶĂů ƐƚƌĞƐƐŽƌƐ ƚŚĂƚ ǁŝůů ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞůLJ ĂĨĨĞĐƚ ůŽǁͲŝŶĐŽŵĞ ĐŽŵŵƵŶŝƚŝĞƐ͘ Ensure Electricity Reliability Security and System Resilience dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĨĂĐĞƐ ĐŽŵƉůŝĐĂƚĞĚ ĂŶĚ ĞǀŽůǀŝŶŐ ĐŚĂůůĞŶŐĞƐ ƚŚĂƚ ĂĨĨĞĐƚ ƚŚĞ ƌĞůŝĂďŝůŝƚLJ͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ 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ƉƌĂĐƚŝĐĞƐ͕ ĂŶĚ ŝŶǀĞƐƚŵĞŶƚƐ ƚŚĂƚ ŚĞůƉ ĞŶƐƵƌĞ ƐLJƐƚĞŵ ƐĞĐƵƌŝƚLJ͕ ƌĞůŝĂďŝůŝƚLJ͕ ƌĞƐŝůŝĞŶĐĞ͕ ĂŶĚ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ĨƵƚƵƌĞ͘ dŚĞƐĞ ŽďũĞĐƚŝǀĞƐ ŚĂǀĞ ŽǀĞƌůĂƉƉŝŶŐ ĂŶĚ ĐƌŽƐƐĐƵƚƚŝŶŐ ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ƚŚĂƚ ŵƵƐƚ ďĞ ƌĞĐŽŐŶŝnjĞĚ ĂŶĚ ŵĂŶĂŐĞĚ͘ dŚĞ ĐƌŽƐƐĐƵƚƚŝŶŐ ŝƐƐƵĞƐ ĞdžĂŵŝŶĞĚ ŝŶ Y Z ϭ͘Ϯ ŝŶĐůƵĚĞ ǀĂůƵĂƚŝŽŶ͖ ŵĂƌŬĞƚƐ͕ ĨŝŶĂŶĐĞ͕ ĂŶĚ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͖ ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ZΘ ͖ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ͖ ǁŽƌŬĨŽƌĐĞ͖ EŽƌƚŚ ŵĞƌŝĐĂͲǁŝĚĞ ŝŵƉĂĐƚƐ͖ ĂŶĚ ŝŶƐƚŝƚƵƚŝŽŶĂů ĂƌƌĂŶŐĞŵĞŶƚƐ ƚŚĂƚ ĂƌĞ ĨŽƵŶĚĂƚŝŽŶĂů ƚŽ ƚŚĞ ƐĞĐƚŽƌ͘ dƌĞĂƚŵĞŶƚ ŽĨ ŵŽƐƚ ŽĨ ƚŚĞƐĞ ĐŽŵƉůĞdž ƚŽƉŝĐƐ ŝƐ ĞŵďĞĚĚĞĚ ŝŶƚŽ ĞĂĐŚ Y Z ϭ͘Ϯ ĐŚĂƉƚĞƌ͘ The Nation’s Critical Infrastructures Depend on Electricity Y Z ϭ͘Ϯ͛Ɛ ĞdžĂŵŝŶĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ĞŶĚ ƵƐĞ ŶĞĐĞƐƐĂƌŝůLJ ƐƚĂƌƚƐ ǁŝƚŚ Ă ĚŝƐĐƵƐƐŝŽŶ ŽĨ ƚŚĞ ĚĞƉĞŶĚĞŶĐĞ ŽĨ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ͘ ƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĚĞƉĞŶĚĞŶĐŝĞƐ ĂŶĚ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ƌĞƉƌĞƐĞŶƚ ƚŚĞ ĐŽƌĞ ƵŶĚĞƌůLJŝŶŐ ĨƌĂŵĞǁŽƌŬ ƚŚĂƚ ƐƵƉƉŽƌƚƐ ƚŚĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ŵĞƌŝĐĂŶ ĞĐŽŶŽŵLJ ĂŶĚ ƐŽĐŝĞƚLJ͘ ůĞĐƚƌŝĐŝƚLJ ŝƐ Ăƚ ƚŚĞ ĐĞŶƚĞƌ ŽĨ ŬĞLJ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŶĞƚǁŽƌŬƐ ƚŚĂƚ ƐƵƉƉŽƌƚ ƚŚĞƐĞ ƐĞĐƚŽƌƐ͕ ŝŶĐůƵĚŝŶŐ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ Žŝů ĂŶĚ ŐĂƐ ƉƌŽĚƵĐƚŝŽŶ͕ ǁĂƚĞƌ͕ ĂŶĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͘ dŚĞƐĞ ĞůĞĐƚƌŝĐŝƚLJͲĚĞƉĞŶĚĞŶƚ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ƌĞƉƌĞƐĞŶƚ ĐŽƌĞ ůŝĨĞůŝŶĞ ŶĞƚǁŽƌŬƐ ƚŚĂƚ ƐƵƉƉŽƌƚ ƚŚĞ ŵĞƌŝĐĂŶ ĞĐŽŶŽŵLJ ĂŶĚ ƐŽĐŝĞƚLJ͘ dŚĞƐĞ ĐƌŝƚŝĐĂů ŶĞƚǁŽƌŬƐ ĂƌĞ ŝŶĐƌĞĂƐŝŶŐůLJ ĐŽŶǀĞƌŐŝŶŐ͕ ƐŚĂƌŝŶŐ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ƐLJŶĞƌŐŝƐƚŝĐ ŝŶƚĞƌĂĐƚŝŽŶƐ ǀŝĂ ĐŽŵŵŽŶ ĂƌĐŚŝƚĞĐƚƵƌĞƐ ;ƐĞĞ ŝŐƵƌĞ ϭͲϮͿ͘ dŚĞ Žŝů ĂŶĚ ŐĂƐ ƐĞĐƚŽƌƐ ƌĞůLJ ŚĞĂǀŝůLJ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ͘ dƌĂŶƐƉŽƌƚĂƚŝŽŶ ŝƐ ĐƌŝƚŝĐĂů ƚŽ ƉŽǁĞƌ ƉƌŽĚƵĐƚŝŽŶ ďĞĐĂƵƐĞ ŝƚ ĞŶĂďůĞƐ ƚŚĞ ƐŚŝƉƉŝŶŐ ŽĨ ĨƵĞůƐ͖ ƚŚĞ ƐĞĐƚŽƌ ĂůƐŽ ĚĞƉĞŶĚƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ĨŽƌ ŬĞLJ ŶĞĞĚƐ͕ ƐƵĐŚ ĂƐ ƉŽǁĞƌ ĨŽƌ ƐŝŐŶĂůŝŶŐ ĂŶĚ ƐǁŝƚĐŚŝŶŐ ĂŶĚ ǁŝůů ďĞĐŽŵĞ ŵŽƌĞ ƐŽ ĂƐ ŵŽƌĞ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞƐ ĂƌĞ ĚĞƉůŽLJĞĚ͘ tĂƚĞƌ ƐLJƐƚĞŵƐ ĂƌĞ ĂůƐŽ ͞ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘͟ tĂƚĞƌ ƉƵƌŝĨŝĐĂƚŝŽŶ͕ ŵŽǀĞŵĞŶƚ͕ ĂŶĚ ƚƌĞĂƚŵĞŶƚ ĐƵƌƌĞŶƚůLJ ĐŽŶƐƵŵĞ ƌŽƵŐŚůLJ ϰ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĂŶŶƵĂů ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͖ϭϴ ŝŶ ĂůŝĨŽƌŶŝĂ͕ ƚŚŝƐ ĂŵŽƵŶƚ ĐĂŶ ďĞ ƵƉ ƚŽ ϮϬ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ϭϵ DĂŶLJ ǁĂƚĞƌ ĨĂĐŝůŝƚŝĞƐ ůĂĐŬ ƐƵĨĨŝĐŝĞŶƚ ƉŽǁĞƌ ďĂĐŬͲƵƉ ĐĂƉĂďŝůŝƚŝĞƐ͖ Ăƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ͕ ƚŚĞLJ ŵĞĞƚ ŬĞLJ ĐŽŽůŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͘ tĂƚĞƌ ĂǀĂŝůĂďŝůŝƚLJ ŝƐ ĂůƌĞĂĚLJ Ă ĐŽŶĐĞƌŶ ŝŶ ŵĂŶLJ ƉĂƌƚƐ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͕ ĂŶĚ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ĞdžĂĐĞƌďĂƚĞ ƚŚŝƐ ƉƌŽďůĞŵ ŝŶ ŬĞLJ ƌĞŐŝŽŶƐ ŽĨ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϮϬ Figure 1-2 Critical Infrastructure Interdependencies21 H FULWLFDO LQIUDVWUXFWXUH LQWHUGHSHQGHQFLHV UHSUHVHQW WKH FRUH XQGHUO LQJ IUDPHZRUN WKDW VXSSRUWV WKH $PHULFDQ HFRQRP DQG VRFLHW 7KH ILQDQFLDO VHUYLFHV VHFWRU QRW SLFWXUHG LV DOVR D FULWLFDO LQIUDVWUXFWXUH ZLWK LQWHUGHSHQGHQFLHV DFURVV RWKHU PDMRU VHFWRUV VXSSRUWLQJ WKH 8 6 HFRQRP dŚĞƌĞ ŝƐ ĂůƐŽ Ă ĚŝƌĞĐƚ ĂŶĚ ĐƌŝƚŝĐĂů ůŝŶŬ ďĞƚǁĞĞŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂŶĚ ƚŚĞ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŶĞƚǁŽƌŬƐ͘ϮϮ dŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽŵĞůĂŶĚ ĞĐƵƌŝƚLJ ; Ϳ ŝĚĞŶƚŝĨŝĞƐ ƚŚĞ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐLJ ; dͿ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂƐ Ă ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ďĞĐĂƵƐĞ ŝƚ ƉƌŽǀŝĚĞƐ ĂŶ ͞ĞŶĂďůŝŶŐ ĨƵŶĐƚŝŽŶ͟ ĂĐƌŽƐƐ Ăůů ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƐĞĐƚŽƌƐ͘ d ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ĐƌŝƚŝĐĂů ƚŽ ĞĂĐŚ ƐƚĂŐĞ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ ĐŚĂŝŶ ĂŶĚ ƚŽ Ăůů ŽƚŚĞƌ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ƐĞĞŶ ŝŶ ŝŐƵƌĞ ϭͲϮ͘ tŝƚŚŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ͕ d ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ŝŶĐƌĞĂƐŝŶŐůLJ ŝŵƉŽƌƚĂŶƚ ĨŽƌ ŐƌŝĚ ŵĂŶĂŐĞŵĞŶƚ͕ ĂƐ ǁĞůů ĂƐ ĨŽƌ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ǁŝƚŚ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ǀĂƌŝŽƵƐ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĚŝƐƚƌŝďƵƚĞĚ ĂƐƐĞƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ĞůĞĐƚƌŝĐŝƚLJ ƉŽǁĞƌƐ d ƐLJƐƚĞŵƐ ĞƋƵŝƉŵĞŶƚ͖ ŝƚƐ ĐĞŶƚƌĂů ĐŽŶƚƌŽů ĂŶĚ ŽƉĞƌĂƚŝŶŐ ƐLJƐƚĞŵƐ͖ ĂŶĚ ĞǀĞŶ ŝƚƐ ŚĞĂƚŝŶŐ͕ ǀĞŶƚŝůĂƚŝŽŶ͕ ĂŶĚ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ ƐLJƐƚĞŵƐ͘ dŚĞ ĨŝŶĂŶĐŝĂů ƐĞĐƚŽƌ ŝƐ ĂŶŽƚŚĞƌ ůŝĨĞůŝŶĞ ŶĞƚǁŽƌŬ ƚŚĂƚ ĚĞƉĞŶĚƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ;ƚŚƌŽƵŐŚ ŝƚƐ ƌŽůĞ ŝŶ ĞŶĂďůŝŶŐ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐͿ ĂŶĚ ŽƚŚĞƌ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŶĞƚǁŽƌŬƐ͘ ͛Ɛ ϮϬϭϱ ͞ ŝŶĂŶĐŝĂů ĞƌǀŝĐĞƐ ĞĐƚŽƌͲ ƉĞĐŝĨŝĐ WůĂŶ͟ ŶŽƚĞĚ ƚŚĂƚ͕ ͞DŽƐƚ ŽĨ ƚŚĞ ƐĞĐƚŽƌ͛Ɛ ŬĞLJ ƐĞƌǀŝĐĞƐ ĂƌĞ ƉƌŽǀŝĚĞĚ ƚŚƌŽƵŐŚ Žƌ ĐŽŶĚƵĐƚĞĚ ŽŶ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐLJ ƉůĂƚĨŽƌŵƐ͕ ŵĂŬŝŶŐ ĐLJďĞƌƐĞĐƵƌŝƚLJ ĞƐƉĞĐŝĂůůLJ ŝŵƉŽƌƚĂŶƚ ƚŽ ƚŚĞ ƐĞĐƚŽƌ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞ ƐĞĐƚŽƌ ĨĂĐĞƐ ŽŶŐŽŝŶŐ ƌŝƐŬƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŶĂƚƵƌĂů ĚŝƐĂƐƚĞƌƐ͕ ĂƐ ǁĞůů ĂƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ƉŚLJƐŝĐĂů ĂƚƚĂĐŬƐ͘ ƵƌƌŝĐĂŶĞƐ͕ ƚŽƌŶĂĚŽĞƐ͕ ĨůŽŽĚƐ͕ ĂŶĚ ƚĞƌƌŽƌŝƐƚ ĂƚƚĂĐŬƐ Ăůů ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ĐĂƵƐĞ ƉŚLJƐŝĐĂů ĚŝƐƌƵƉƚŝŽŶƐ ƚŚĂƚ ŚĂǀĞ ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚƐ ŽŶ ŝŶĂŶĐŝĂů ĞƌǀŝĐĞƐ ĞĐƚŽƌ ŽƉĞƌĂƚŝŽŶƐ͘͟Ϯϯ EĂƚƵƌĂů ŐĂƐ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ĂƌĞ ĂůƐŽ ŐƌŽǁŝŶŐ͘ dŚĞ ĨŝƌƐƚ ŚĂůĨ ŽĨ ϮϬϭϲ ǁĂƐ ƚŚĞ ĨŝƌƐƚ ƉĞƌŝŽĚ ǁŚĞƌĞ ŶĂƚƵƌĂů ŐĂƐ ǁĂƐ ƚŚĞ ůĂƌŐĞƐƚ ƐŽƵƌĐĞ ŽĨ ƉƌŝŵĂƌLJ ĨƵĞů ĨŽƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ dŚĞ ŝŶĐƌĞĂƐĞĚ ƵƐĞ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ĨŽƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŝŶƚƌŽĚƵĐĞƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ĐŽŵƉůŝĐĂƚŝŽŶƐ ĂŶĚ ĚŝƐƌƵƉƚŝŽŶƐ͕ ĂŶĚ ŝƚ ŚĂƐ͕ ŝŶ ĨĂĐƚ͕ ƌĞƐƵůƚĞĚ ŝŶ Ă ĨƵƚƵƌĞƐ ŵĂƌŬĞƚ ŵĞƚƌŝĐ ĐĂůůĞĚ ƚŚĞ ͞ƐƉĂƌŬ ƐƉƌĞĂĚ͟ ƵƐĞĚ ƚŽ ŝŶĨŽƌŵ ŵĂƌŬĞƚƐ ĂďŽƵƚ ƚŚĞ ŐĂƐͬĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ ƌĞůĂƚŝŽŶƐŚŝƉ͘ dŚĞ ŐĂƐ ƐĞĐƚŽƌ ĂůƐŽ ƌĞůŝĞƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƐĞŐŵĞŶƚƐ ŽĨ ƚŚĞ ƉƌŽĚƵĐƚŝŽŶ ĐŚĂŝŶ͕ ŝŶĐůƵĚŝŶŐ ƵƐĞ ĨŽƌ ĨŝĞůĚͲŐĂƚŚĞƌŝŶŐ ƉƵŵƉƐ͕ ƐĞůĞĐƚĞĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉŝƉĞůŝŶĞƐ͕ ĂŶĚ ŐĂƐͲ ƉƌŽĐĞƐƐŝŶŐ ƐƚĂƚŝŽŶƐ͘ dŚĞ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ŽĨ ŬĞLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ƚŚĞ ĞƐƐĞŶƚŝĂů ƌŽůĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂƌĞ ŝůůƵƐƚƌĂƚĞĚ ďLJ ƌĞĐĞŶƚ ǁĞĂƚŚĞƌ ĞŵĞƌŐĞŶĐŝĞƐ͘ džƚƌĞŵĞůLJ ĐŽůĚ ǁĞĂƚŚĞƌ ŝŶ EĞǁ DĞdžŝĐŽ ŝŶ ϮϬϭϭ ƌĞƐƵůƚĞĚ ŝŶ ďŽƚŚ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ŽƵƚĂŐĞƐ͖ ůŽƐƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĨƵƌƚŚĞƌ ƌĞĚƵĐĞĚ ŐĂƐ ƉƌŽĚƵĐƚŝŽŶ ĂƐ ĨŝĞůĚͲŐĂƚŚĞƌŝŶŐ ƉƵŵƉƐ ůŽƐƚ ƉŽǁĞƌ͘Ϯϰ ŶŽƚŚĞƌ ĞdžĂŵƉůĞ ŝƐ ĂĨƚĞƌ ƵƉĞƌƐƚŽƌŵ ĂŶĚLJ ŝŶ ϮϬϭϮ ǁŚĞŶ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƚŚĞ ƉƵďůŝĐ ĞdžƉĞƌŝĞŶĐĞĚ ŵĂƐƐŝǀĞ ƉŽǁĞƌ ŽƵƚĂŐĞƐ ŝŶ ƚŚĞ EŽƌƚŚĞĂƐƚ͘ ZĞĐŽǀĞƌLJ ĐƌĞǁƐ ǁĞƌĞ ŚĂŵƉĞƌĞĚ ďLJ ƐŝŵƵůƚĂŶĞŽƵƐ ĨĂŝůƵƌĞƐ ŽĨ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƐLJƐƚĞŵƐ ƚŚĂƚ ĂƌĞ ĂůŵŽƐƚ ĞŶƚŝƌĞůLJ ĚĞƉĞŶĚĞŶƚ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ;ďĂĐŬͲƵƉ ƐLJƐƚĞŵƐ ŐĞŶĞƌĂůůLJ ƉƌŽǀŝĚĞ ϳϮʹϵϲ ŚŽƵƌƐ ŽĨ ƉŽǁĞƌͿ͘ Electricity-Connected Systems and Digitization Create Significant Economic Value dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƐƵƉƉŽƌƚƐ ƚŚĞ ŝŶĐƌĞĂƐĞĚ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ Ăůů ƐĞĐƚŽƌƐ ŽĨ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ͘ ƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ͕ ĂůŵŽƐƚ ĞǀĞƌLJ ĞĐŽŶŽŵŝĐ ƐĞĐƚŽƌ ŶŽǁ ƌĞůŝĞƐ͕ ŝŶ ǀĂƌLJŝŶŐ ĚĞŐƌĞĞƐ͕ ŽŶ ŚŝŐŚůLJ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ͕ ĚĂƚĂͲĚƌŝǀĞŶ͕ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJͲĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵƐ ƚŽ ŵĂŶĂŐĞ ŽƉĞƌĂƚŝŽŶƐ ĂŶĚ ƉƌŽǀŝĚĞ ƐĞƌǀŝĐĞƐ͘ dŚĞ ĞǀŽůǀŝŶŐ electricityinformation nexus ƐƵƉƉŽƌƚƐ Ă ǁŝĚĞ ƌĂŶŐĞ ŽĨ ƉƌŽĚƵĐƚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ĂŶĚ ŚĂƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ĞǀĞŶ ŐƌĞĂƚĞƌ ǀĂůƵĞ ĐƌĞĂƚŝŽŶ͘ ƚ ƐƵƉƉŽƌƚƐ ŶĞǁ ŝŶĨŽƌŵĂƚŝŽŶͲĚƌŝǀĞŶ ĞŶƚĞƌƉƌŝƐĞƐ͕ ŚĞůƉƐ ůŽǁĞƌ ŝŶŝƚŝĂů ĂŶĚ ŽŶŐŽŝŶŐ ĐŽƐƚƐ͕ ŝŵƉƌŽǀĞƐ ĐŽŶƚƌŽů ŽĨ ƌŝƐŬƐ͕ ƐĂǀĞƐ ƚŝŵĞ ĂŶĚ ĞĨĨŽƌƚ͕ ĞŶŚĂŶĐĞƐ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ĂŶĚ ĐĂŶ ĐƌĞĂƚĞ ŶĞǁ ŵĂƌŬĞƚ ĐĂƚĞŐŽƌŝĞƐ͘ dŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŶŽǁ ĂŶĚ ŝŶ ƚŚĞ ĨƵƚƵƌĞͶĚĞƐĐƌŝďĞĚ ŝŶ Ă ƌĞĐĞŶƚ ƐƚƵĚLJ ĂƐ ƚŚĞ ͞ĐĞŶƚƌĂů ŶĞƌǀŽƵƐ ƐLJƐƚĞŵ ŽĨ Ă ĚĂƚĂͲĚƌŝǀĞŶ ĞĐŽŶŽŵLJ͟ͶĐĂŶŶŽƚ ďĞ ĨƵůůLJ ĂƉƉƌĞĐŝĂƚĞĚ ǁŝƚŚŽƵƚ Ă ĚŝƐĐƵƐƐŝŽŶ ĂďŽƵƚ ŚŽǁ ĚŝŐŝƚŝnjĂƚŝŽŶ ŚĂƐ ĞŶĂďůĞĚ ƚŚĞ ŶƚĞƌŶĞƚ ŽĨ dŚŝŶŐƐ ; ŽdͿ͘Ϯϱ Value of the Electricity-Dependent “Internet of Things” dŚĞ Žd ŝƐ ĚĞĨŝŶĞĚ ĂƐ “ƐĞŶƐŽƌƐ ĂŶĚ ĂĐƚƵĂƚŽƌƐ ĞŵďĞĚĚĞĚ ŝŶ ƉŚLJƐŝĐĂů ŽďũĞĐƚƐͶĨƌŽŵ ƌŽĂĚǁĂLJƐ ƚŽ ƉĂĐĞŵĂŬĞƌƐͶ΀ƚŚĂƚ΁ ĂƌĞ ůŝŶŬĞĚ ƚŚƌŽƵŐŚ ǁŝƌĞĚ ĂŶĚ ǁŝƌĞůĞƐƐ ŶĞƚǁŽƌŬƐ͕ ŽĨƚĞŶ ƵƐŝŶŐ ƚŚĞ ƐĂŵĞ ŶƚĞƌŶĞƚ WƌŽƚŽĐŽů ; WͿ ƚŚĂƚ ĐŽŶŶĞĐƚƐ ƚŚĞ ŶƚĞƌŶĞƚ͘͟Ϯϲ dŚĞ ƌĂƉŝĚ ŐƌŽǁƚŚ ŽĨ ƚŚĞ Žd ŝƐ ďŽƚŚ Ă ŵĂŶŝĨĞƐƚĂƚŝŽŶ ĂŶĚ ŬĞLJ ĞŶĂďůĞƌ ŽĨ ƚŚŝƐ ŵĂũŽƌ ĐŚĂŶŐĞ ŝŶ ƚŚĞ ĞĐŽŶŽŵLJ͘ ůĞĐƚƌŝĐŝƚLJ ƉƌŽǀŝĚĞƐ ĨŽƵŶĚĂƚŝŽŶĂů ƐƵƉƉŽƌƚ ƚŽ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐůLJ ŝŶĨŽƌŵĂƚŝŽŶͲŝŶƚĞŶƐĞ h͘ ͘ ĞĐŽŶŽŵLJ͘ ŝŐŝƚŝnjĂƚŝŽŶ ĂŶĚ d ŚĂǀĞ ĞŶĂďůĞĚ ǀŝƌƚƵĂůůLJ ŝŶƐƚĂŶƚĂŶĞŽƵƐ ŐůŽďĂů ĐŽŵŵƵŶŝĐĂƚŝŽŶ͘ dŚĞƐĞ ŶĞƚǁŽƌŬƐ ĂŶĚ ƚŚĞŝƌ ĂƐƐŽĐŝĂƚĞĚ ĚĞǀŝĐĞƐ ĂƌĞ ůĂƌŐĞ ĂŶĚ ŐƌŽǁŝŶŐ͘ ĐĐŽƌĚŝŶŐ ƚŽ Ă ĞĚĞƌĂů dƌĂĚĞ ŽŵŵŝƐƐŝŽŶ ƌĞƉŽƌƚ ŝƐƐƵĞĚ ŝŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ĂŶƵĂƌLJ ϮϬϭϱ͕ ͞ ŝdž LJĞĂƌƐ ĂŐŽ͕ ĨŽƌ ƚŚĞ ĨŝƌƐƚ ƚŝŵĞ͕ ƚŚĞ ŶƵŵďĞƌ ŽĨ ͚ƚŚŝŶŐƐ͛ ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚĞ ΀ŐůŽďĂů΁ ŶƚĞƌŶĞƚ ƐƵƌƉĂƐƐĞĚ ƚŚĞ ŶƵŵďĞƌ ŽĨ ƉĞŽƉůĞ͙ džƉĞƌƚƐ ĞƐƚŝŵĂƚĞ ƚŚĂƚ͕ ĂƐ ŽĨ ƚŚŝƐ LJĞĂƌ͕ ƚŚĞƌĞ ǁŝůů ďĞ Ϯϱ ďŝůůŝŽŶ ĐŽŶŶĞĐƚĞĚ ĚĞǀŝĐĞƐ͕ ĂŶĚ ďLJ ϮϬϮϬ͕ ϱϬ ďŝůůŝŽŶ͘͟Ϯϳ dŚĞ ŵĂŶŝĨĞƐƚĂƚŝŽŶƐ ŽĨ ƚŚĞ ŐƌŽǁŝŶŐ ĚŝŐŝƚŝnjĂƚŝŽŶ ŽĨ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ ŝƐ ƐƚƵŶŶŝŶŐ͗ ϴϵ ƉĞƌĐĞŶƚ ŽĨ ŵĞƌŝĐĂŶƐ ŚĂǀĞ ĂĐĐĞƐƐ ƚŽ ŚŝŐŚͲƐƉĞĞĚ ďƌŽĂĚďĂŶĚ ƐĞƌǀŝĐĞƐ ŽĨ Ϯϱ ŵĞŐĂďŝƚƐ ƉĞƌ ƐĞĐŽŶĚ ĨŽƌ ĚŽǁŶůŽĂĚƐ ĂŶĚ ϯ ŵĞŐĂďŝƚƐ ƉĞƌ ƐĞĐŽŶĚ ĨŽƌ ƵƉůŽĂĚƐ͖Ϯϴ ϳϯ ƉĞƌĐĞŶƚ ŽĨ ŵĞƌŝĐĂŶ ŚŽƵƐĞŚŽůĚƐ ƵƐĞ Ă ĐŽŵƉƵƚĞƌ ǁŝƚŚ ŚŝŐŚͲƐƉĞĞĚ ŶƚĞƌŶĞƚ Ăƚ ŚŽŵĞ͖Ϯϵ ϵϱ ƉĞƌĐĞŶƚ ŽĨ ĐŽůůĞŐĞ ĞĚƵĐĂƚĞĚ ĂĚƵůƚƐ ƵƐĞ ƚŚĞ ŶƚĞƌŶĞƚ͖ ϴϳ ƉĞƌĐĞŶƚ ŽĨ ƚĂdž ƌĞƚƵƌŶƐ ĂƌĞ ĞͲĨŝůĞĚ͖ϯϬ ĂŶĚ ϲϰ ƉĞƌĐĞŶƚ ŽĨ ĂĚƵůƚƐ ƵƐĞ ƐŵĂƌƚƉŚŽŶĞƐ͘ϯϭ EŽƚ ƐƵƌƉƌŝƐŝŶŐůLJ͕ ĚĂƚĂͲ͕ ŝŶĨŽƌŵĂƚŝŽŶͲ͕ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐͲĐĞŶƚƌŝĐ ŝŶĚƵƐƚƌŝĞƐ ĂƌĞ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞŝƌ ǀĂůƵĞ ƚŽ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ ƚŚƌŽƵŐŚ ĚŝŐŝƚŝnjĂƚŝŽŶ͘ ŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽŵƉƌŝƐĞĚ ƌŽƵŐŚůLJ ϱ ƉĞƌĐĞŶƚ ŽĨ ' W͕ ďĂƐĞĚ ŽŶ ϮϬϭϰ ŵĞƚƌŝĐƐ͕ϯϮ ĂŶĚ ƚĞĐŚŶŽůŽŐLJͲĚƌŝǀĞŶ ƉƌŝĐĞ ĚĞĐůŝŶĞƐ ĂƌĞ ŵĂŬŝŶŐ d ĞǀĞŶ ŵŽƌĞ ĂƚƚƌĂĐƚŝǀĞ ĨŽƌ ďƵƐŝŶĞƐƐĞƐ͘ ƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚƌĞĞ ĂƌĞĂƐ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ ĂůŽŶĞͶŽŶůŝŶĞ ƚĂůĞŶƚ ƉůĂƚĨŽƌŵƐ͕ ďŝŐͲĚĂƚĂ ĂŶĂůLJƚŝĐƐ͕ ĂŶĚ ƚŚĞ ŽdͶĐŽƵůĚ ŝŶĐƌĞĂƐĞ ' W ďLJ ĂƐ ŵƵĐŚ ĂƐ ΨϮ͘Ϯ ƚƌŝůůŝŽŶ ŝŶ ϮϬϮϱ͘ϯϯ dŚĞ Žd ŝƐ ŝŶĐƌĞĂƐŝŶŐůLJ ƵƐĞĚ ďLJ ĐƌŝƚŝĐĂů ƐĞĐƚŽƌƐ ŽĨ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ͘ dŚĞ ŚĞĂůƚŚĐĂƌĞ ŝŶĚƵƐƚƌLJ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ŝƐ ƌĞǀŽůƵƚŝŽŶŝnjŝŶŐ ĐĂƌĞ ŽƉĞƌĂƚŝŽŶƐ ƚŚƌŽƵŐŚ ĚŝŐŝƚĂů ƌĞĐŽƌĚƐ͕ ŝŵƉƌŽǀŝŶŐ ƉĂƚŝĞŶƚ ƚƌĞĂƚŵĞŶƚ ĂŶĚ ĐĂƌĞ ďLJ ƐŚĂƌŝŶŐ ƉĂƚŝĞŶƚ ŝŶĨŽƌŵĂƚŝŽŶ ďĞƚǁĞĞŶ ŚŽƐƉŝƚĂůƐ͘ dŚĞ ĂƵƚŽŵŽƚŝǀĞ ŝŶĚƵƐƚƌLJ ŝƐ ƉŝŽŶĞĞƌŝŶŐ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞ ƚĞĐŚŶŽůŽŐLJ ĨŽƌ ƵƐĞ ŝŶ ŚĞĂǀLJ ĞƋƵŝƉŵĞŶƚ͕ ůŽŶŐͲŚĂƵů ĂƵdžŝůŝĂƌLJ ƉŽǁĞƌ ƵŶŝƚƐ ĂŶĚ ƚƌƵĐŬ ƐƚŽƉƐ͕ ůŽĐĂůŝnjĞĚ ƐĞƌǀŝĐĞ ĨůĞĞƚƐ͕ ĂŶĚ ƉĞƌƐŽŶĂů ǀĞŚŝĐůĞƐ͘ ŝƚŝĞƐ ĂƌĞ ŝŶƚĞŐƌĂƚŝŶŐ ͚ƐŵĂƌƚĞƌ͛ͶŝŶŚĞƌĞŶƚůLJ ŵŽƌĞ ĞůĞĐƚƌŝĐŝƚLJͲŝŶƚĞŶƐŝǀĞͶĐĂƌƐ ƚŽ ŝŵƉƌŽǀĞ ƉĂƐƐĞŶŐĞƌ ƐĂĨĞƚLJ͘ hƌďĂŶ ĂƌĞĂƐ ǁŝƚŚ ŐƌĞĂƚĞƌ ĂƉƉůŝĐĂƚŝŽŶ ŽĨ Žd ƚĞĐŚŶŽůŽŐLJ ĂŶĚ d ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ƌƵŶ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚůLJ ĂŶĚ ƐƵƐƚĂŝŶĂďůLJ͘ ƐƚƵĚLJ ďLJ dĞdžĂƐ ΘD hŶŝǀĞƌƐŝƚLJ ĨŽƵŶĚ ƚŚĂƚ ƚƌĂĨĨŝĐ ƉƌŽďůĞŵƐ ĂŶĚ ĐŽŶŐĞƐƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂůŽŶĞ ĐŽƐƚƐ ŵŽƌĞ ƚŚĂŶ ΨϭϮϬ ďŝůůŝŽŶ ĂŶŶƵĂůůLJϯϰ ǁŝƚŚŽƵƚ ĐŽŶƐŝĚĞƌŝŶŐ ĂĚĚŝƚŝŽŶĂů ĞĨĨĞĐƚƐ ĨƌŽŵ ŝŶĐƌĞĂƐĞĚ ƉŽůůƵƚŝŽŶ͕ ĚĞĐƌĞĂƐĞĚ ǁŽƌŬ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ Žƌ ĚĞůĂLJĞĚ ĚĞůŝǀĞƌLJ ĞĨĨĞĐƚƐ͘ dŚĞ ĂďŝůŝƚLJ ƚŽ ĐŽŽƌĚŝŶĂƚĞ ǀĂƌŝŽƵƐ ƵƌďĂŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ;Ğ͘Ő͕͘ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ďƵŝůĚŝŶŐƐ͕ ĂŶĚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵͿ ƚŚĂƚ ĐĂŶ ĂƉƉůLJ ĚĂƚĂ ŝŶƚĞůůŝŐĞŶƚůLJ ǁŽƵůĚ ŚĞůƉ ŝŵƉƌŽǀĞ ŽƉĞƌĂƚŝŽŶĂů ĞĨĨŝĐŝĞŶĐLJ͕ ŝŶĐƌĞĂƐĞ ƐĂĨĞƚLJ͕ ůŽǁĞƌ ĐŽƐƚƐ͕ ĂŶĚ ĐŽŶƚƌŝďƵƚĞ ƚŽ ƐLJƐƚĞŵ ƐƚĂďŝůŝƚLJ͘ dŚĞ Žd ŶŽƚ ŽŶůLJ ĂĨĨĞĐƚƐ ŝŶĨŽƌŵĂƚŝŽŶ ĨůŽǁƐ ŽŶ ůĂƌŐĞ ƐLJƐƚĞŵƐ͕ ŝƚ ŝƐ ĂůƐŽ ĂĨĨĞĐƚŝŶŐ ŚŽǁ ĞŶĞƌŐLJ ĐŽŶƐƵŵĞƌƐ ŝŶƚĞƌĂĐƚ ĂŶĚ ĐŽŶƚƌŽů ƚŚĞŝƌ ŚŽŵĞ ĞŶǀŝƌŽŶŵĞŶƚƐ͘ ĚǀĂŶĐĞĚ ƚŚĞƌŵŽƐƚĂƚ ĚĞǀŝĐĞƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ĂƵƚŽŵĂƚĞ ƚĞŵƉĞƌĂƚƵƌĞ ĐŽŶƚƌŽů͕ ǁŚŝůĞ ůĞĂƌŶŝŶŐ ƐŽĨƚǁĂƌĞ ĞŵďĞĚĚĞĚ ŝŶ ƚŚĞ ƚĞĐŚŶŽůŽŐLJ ŝŶƚĞŐƌĂƚĞƐ ƉƌĞƉƌŽŐƌĂŵŵĞĚ ƐĞƚƚŝŶŐƐ ďLJ ƚŚĞ ƵƐĞƌ ǁŝƚŚ njŝƉ ĐŽĚĞ ůŽĐĂƚŝŽŶ ƚŽ ŝĚĞŶƚŝĨLJ ƚŚĞ ƌĞĂůͲƚŝŵĞ ǁĞĂƚŚĞƌͶƚǁŽ ŝŶƉƵƚƐ ƚŚĂƚ ƚŚĞ ĚĞǀŝĐĞƐ ƵƐĞ ƚŽ ƐĞůĨͲĂĚũƵƐƚ͘ dŚŝƐ ĂŶĚ ŽƚŚĞƌ ŚŽŵĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ĐŚŽƌĞ ĂƵƚŽŵĂƚŝŽŶ ĂŶĚ ƌĞŵŽƚĞůLJ ĐŽŶƚƌŽůůĞĚ ƐĞĐƵƌŝƚLJ ƐLJƐƚĞŵƐ͕ ĂƌĞ Ăůů ƉĂƌƚ ŽĨ Ă ŶĞǁ ĞƌĂ ŝŶ ǁŚŝĐŚ ƚŚĞ Žd ŝƐ ƵƚŝůŝnjĞĚ ƚŽ ƉƌŽǀŝĚĞ ŐƌĞĂƚĞƌ ĐŽŵĨŽƌƚ͕ ĞĨĨŝĐŝĞŶĐLJ͕ ƐĞĐƵƌŝƚLJ͕ ĨůĞdžŝďŝůŝƚLJ͕ ĂŶĚ ƐĂǀŝŶŐƐ͘ ZĞĐĞŶƚ ĂŶĂůLJƐŝƐ ƐƵŐŐĞƐƚƐ ƚŚĂƚ ƚŚĞ ĞĐŽŶŽŵŝĐ ǀĂůƵĞ ŽĨ ŚŽŵĞ ĂƵƚŽŵĂƚŝŽŶ ĂŶĚ ďĞƚƚĞƌ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ Žd ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽƵůĚ ďĞ ĂƐ ŚŝŐŚ ĂƐ ΨϯϱϬ ďŝůůŝŽŶ ĨŽƌ ƚŚĞ h͘ ͘ ŵĂƌŬĞƚ ĂůŽŶĞ͘ϯϱ ůů ƐĞĐƚŽƌƐ ƚŚĂƚ ƌĞůLJ ŽŶ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ŽŶůŝŶĞ ĂĐƚŝǀŝƚLJͶŝŶĐůƵĚŝŶŐ ĞŵĂŝů͕ ƐŽĐŝĂů ŵĞĚŝĂ͕ ĂŶĚ ŶƚĞƌŶĞƚͲ ĐŽŶŶĞĐƚĞĚ ďƵƐŝŶĞƐƐͶĂƌĞ ƐƵƉƉŽƌƚĞĚ ďLJ ĚĂƚĂ ĐĞŶƚĞƌƐ͘ϯϲ dŚĞƐĞ ĚĂƚĂ ĐĞŶƚĞƌƐ ŚĂǀĞ ďĞĞŶ ĐĂůůĞĚ ͞ƚŚĞ ďĂĐŬďŽŶĞ ŽĨ ƚŽĚĂLJ͛Ɛ ĚŝŐŝƚĂů ĞĐŽŶŽŵLJ͕͟ ƉŽǁĞƌŝŶŐ ďƵƐŝŶĞƐƐĞƐ͕ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͕ ĂŶĚ ŽŶůŝŶĞ ĐŽŶƐƵŵĞƌ ƐĞƌǀŝĐĞƐ ĂŶĚ ŚĞůƉŝŶŐ ƚŽ ŵĂŬĞ ƐŽĐŝĞƚLJ ŵŽƌĞ ƉƌŽĚƵĐƚŝǀĞ ĂŶĚ ĞĨĨŝĐŝĞŶƚ͘ dŚĞƐĞ ĐĞŶƚĞƌƐ ĂƌĞ ĚŝƐƚƌŝďƵƚĞĚ ĂĐƌŽƐƐ ƚŚĞ ĐŽƵŶƚƌLJ͕ ŚŽƵƐĞ ƌŽƵŐŚůLJ ϭϰ ŵŝůůŝŽŶ ĐŽŵƉƵƚĞƌ ƐĞƌǀĞƌƐ͕ ĂŶĚ ƉƌŽǀŝĚĞ ďŽƚŚ ĚŽŵĞƐƚŝĐ ĂŶĚ ŐůŽďĂů ƐĞƌǀŝĐĞƐ͘ ĂƚĂ ĐĞŶƚĞƌƐ ĂƌĞ ŽŶĞ ŽĨ ƚŚĞ ĨĂƐƚĞƐƚͲŐƌŽǁŝŶŐ ƐŽƵƌĐĞƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ DŽƌĞ ƚŚĂŶ ϯ ŵŝůůŝŽŶ ĚĂƚĂ ĐĞŶƚĞƌƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ;ŽĨ Ăůů ƐŝnjĞƐͿ ŶŽǁ ƵƐĞ ƌŽƵŐŚůLJ ϳϬ ďŝůůŝŽŶ ŬŝůŽǁĂƚƚͲŚŽƵƌƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂŶŶƵĂůůLJ͘ϯϳ dŚŝƐ ŝƐ ĂďŽƵƚ ϭ͘ϴ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŶĂƚŝŽŶĂů ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͕ϯϴ ǁŚŝĐŚ ŝƐ ĞƋƵŝǀĂůĞŶƚ ƚŽ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŽĨ Ϯϱ ůĂƌŐĞ ;ϱϬϬ ŵĞŐĂǁĂƚƚͿ ĐŽĂůͲĨŝƌĞĚ ƉŽǁĞƌ ƉůĂŶƚƐ͘ϯϵ dĂďůĞ ϭͲϭ ŝŶĐůƵĚĞƐ ĚĂƚĂ ĨŽƌ ůĂƌŐĞ ĚĂƚĂ ĐĞŶƚĞƌƐ ;хϮϬ ƚŚŽƵƐĂŶĚ ƐƋƵĂƌĞ ĨĞĞƚͿ͕ ǁŚŝĐŚ ĐƵƌƌĞŶƚůLJ ĂĐĐŽƵŶƚ ĨŽƌ ĂďŽƵƚ ŚĂůĨ ŽĨ ƚŽƚĂů ĚĂƚĂ ĐĞŶƚĞƌ ĞŶĞƌŐLJ ƵƐĞ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Table 1-1 National Data Centers Are Electricity Dependent40 Large Data Centers 20K square feet 1XPEHU 6L H 6HUYHU FRXQW 3RZHU ORDG 6WRUDJH QHUJ FRQVXPSWLRQ Nationwide a PLOOLRQ VTXDUH IHHW PLOOLRQ JLJDZDWWV PLOOLRQ WHUDE WHV ELOOLRQ NLORZDWW KRXUV %DFN XS SRZHU GHVFULSWLRQ  ³5HGXQGDQW DQG PDLQWDLQDEOH´ 7LHU RQO  XOO UHGXQGDQW SRZHU SDWK WR DOO HTXLSPHQW 1 VXEVWDWLRQ WR VHUYHU  'XDO XWLOLW SRZHU IHHG  9HQGRU RZQHG VXEVWDWLRQ  V RI EDFN XS JHQVHWV GLHVHO QDWXUDO JDV  HQHUDOO GHVLJQHG IRU KRXU RXWDJH RPPHUFLDO GDWD FHQWHUV DUH DQ LPSRUWDQW HFRQRPLF VHJPHQW WKDW VXSSRUWV PXFK RI WKH LQWHUQHW EXVLQHVV DFWLYLW DQG H FRPPHUFH DFWLYLW 7KHVH GDWD FHQWHUV DOVR UHTXLUH DYDLODEOH DQG UHOLDEOH HOHFWULFLW VHUYLFH DQG LQYHVW VLJQLILFDQW PRQH LQ RQ VLWH JHQHUDWLRQ DQG EDFN XS V VWHPV WR HQVXUH SRZHU DYDLODELOLW ůů ƚŚĞ ǀĂůƵĞ ĨƌŽŵ ĚĂƚĂͲĚƌŝǀĞŶ͕ ĚŝŐŝƚŝnjĞĚ ĞŶƚĞƌƉƌŝƐĞƐ ŝƐ ĞŶĂďůĞĚ ďLJ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĂƚ͕ ďLJ ĐƵƌƌĞŶƚ ƐƚĂŶĚĂƌĚƐ͕ ŝƐ ŚŝŐŚůLJ ƌĞůŝĂďůĞ͘ EĂƚŝŽŶĂůůLJ͕ ƚŚĞ ĂǀĞƌĂŐĞ ĐƵƐƚŽŵĞƌ ĞdžƉĞƌŝĞŶĐĞƐ Ă ůŝƚƚůĞ ŽǀĞƌ ϯ ŚŽƵƌƐ ŽĨ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƵŶĂǀĂŝůĂďŝůŝƚLJ ƉĞƌ LJĞĂƌ͘ϰϭ ď Ƶƚ ĞǀĞŶ Ă ƐŚŽƌƚ ĚŝƐƌƵƉƚŝŽŶ ŝŶ ƉŽǁĞƌ ĐĂŶ ĐĂƵƐĞ ƐĞƌŝŽƵƐ ŝŵƉĂĐƚƐ ŽŶ ĚĂŝůLJ ůŝĨĞ ĂŶĚ ƐŝŐŶŝĨŝĐĂŶƚ ĞĐŽŶŽŵŝĐ ůŽƐƐĞƐ ĨŽƌ ŝŶĨŽƌŵĂƚŝŽŶͲĚĞƉĞŶĚĞŶƚ ďƵƐŝŶĞƐƐĞƐ͘ ŝŐƵƌĞ ϭͲϯ ƐŚŽǁƐ ƚŚĞ ƌĞƐƵůƚƐ ŽĨ Ă ůĂƌŐĞ ƐƵƌǀĞLJ ŽĨ ĚĂƚĂ ĐĞŶƚĞƌ ƉƌŽĨĞƐƐŝŽŶĂůƐ ǁŚŽ ŝŶĚŝĐĂƚĞĚ ƚŚĂƚ Ă ƉŽǁĞƌ ŽƵƚĂŐĞ ƌĞƐƵůƚƐ ŝŶ ŝŵŵĞĚŝĂƚĞ ĞĐŽŶŽŵŝĐ ůŽƐƐĞƐ ĨŽƌ ϭϳ ƉĞƌĐĞŶƚ ŽĨ ƚŚŽƐĞ ƐƵƌǀĞLJĞĚ͖ ϰϱ ƉĞƌĐĞŶƚ ĞdžƉĞƌŝĞŶĐĞ ƐŝŐŶŝĨŝĐĂŶƚ ůŽƐƐĞƐͶĨƌŽŵ ΨϮϬϬ͕ϬϬϬ ƚŽ Ψϭ ŵŝůůŝŽŶ ĂŶ ŚŽƵƌϰϮͶǁŝƚŚŝŶ ϭϱ ŵŝŶƵƚĞƐ͘ϰϯ ď ĂƐĞĚ ŽŶ ƉƌĞůŝŵŝŶĂƌLJ ϮϬϭϱ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ĚĂƚĂ͘ ŶĨŽƌŵĂƚŝŽŶ ƌĞƉŽƌƚĞĚ ƚŽ ƚŚĞ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŽ ĐŽǀĞƌ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϳϬʹϴϬ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-3 Company Survey Approximately How Many Minutes of IT Downtime Can Occur before Business Is Negatively Impacted 44 KHQ WKH JULG JRHV GRZQ GDWD FHQWHUV IDFH VLJQLILFDQW ULVNV DV EDFNXS SRZHU GRHV QRW DOZD V ZRUN 7KH NH LV WR WU WR PLQLPL H WKH OLNHOLKRRG RI JULG SRZHU RXWDJHV RFDO SRZHU JULG UHOLDELOLW VKRXOG EH D IDFWRU FRQVLGHUHG ZKHQ FKRRVLQJ GDWD FHQWHU ORFDWLRQV dŚŝƐ ůŽƐƐ ŽĨ ƐŝŐŶŝĨŝĐĂŶƚ ĞĐŽŶŽŵŝĐ ǀĂůƵĞ ĨƌŽŵ ĞǀĞŶ ƐŚŽƌƚ ƉŽǁĞƌ ŽƵƚĂŐĞƐ ƉůĂĐĞƐ Ă ǀĞƌLJ ŚŝŐŚ ƉƌĞŵŝƵŵ ŽŶ customer as opposed to system reliability ĂŶĚ ŚĂƐ ŚĞůƉĞĚ ƚŽ ĐƌĞĂƚĞ Ă ŐƌŽǁŝŶŐ ŵĂƌŬĞƚ ĨŽƌ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ŵĞĞƚ ŝŶĚŝǀŝĚƵĂů ĐƵƐƚŽŵĞƌ ŶĞĞĚƐ͘ ƵĐŚ ďĂĐŬͲƵƉ ƐŽůƵƚŝŽŶƐ ƐŽŵĞƚŝŵĞƐ ŚĂǀĞ ŵƵůƚŝƉůĞ ĐŽŵƉŽŶĞŶƚƐ ƚŽ ĞŶƐƵƌĞ ŶĞĐĞƐƐĂƌLJ ƌĞĚƵŶĚĂŶĐLJ͘ ĂƌŐĞƌ dŝĞƌ н ĚĂƚĂ ĐĞŶƚĞƌƐĐ ŚĂǀĞ ƚŚĞ ŵŽƐƚ ĞdžƚĞŶƐŝǀĞ ĂůƚĞƌŶĂƚŝǀĞ ƉŽǁĞƌ ĂƌƌĂŶŐĞŵĞŶƚƐ ǁŝƚŚ ƌĞĚƵŶĚĂŶƚ ƉŽǁĞƌ ƐLJƐƚĞŵƐ ĂŶĚ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ͖ ƚŚĞƐĞ ĂƌĞ ůŝŵŝƚĞĚ͕ ŚŽǁĞǀĞƌ͕ ďLJ ĂǀĂŝůĂďůĞ ďĂƚƚĞƌLJ ƐƚŽƌĂŐĞ ĐĂƉĂĐŝƚLJ͕ ŽŶƐŝƚĞ ĨƵĞů ƐƚŽƌĂŐĞ ;ϳϮʹϵϲ ŚŽƵƌƐͿ͕ϰϱ ĂŶĚ ůŝƋƵŝĚ ĨƵĞů ƌĞƐƵƉƉůLJ ĂŐƌĞĞŵĞŶƚƐ͘ϰϲ Ŷ ϮϬϭϰ͕ h͘ ͘ ĐƵƐƚŽŵĞƌƐ ƐƉĞŶƚ ŶĞĂƌůLJ ΨϮ͘ϱ ďŝůůŝŽŶ ŝŶ ĐĂƉŝƚĂů ĐŽƐƚƐ ƚŽ ƉƵƌĐŚĂƐĞ ĂŶĚ ŝŶƐƚĂůů ďĂĐŬͲƵƉ ĂůƚĞƌŶĂƚŝŶŐ ĐƵƌƌĞŶƚ ŐĞŶĞƌĂƚŝŽŶϰϳ ĂŶĚ Ψϯ͘Ϯ ďŝůůŝŽŶ ĨŽƌ ƵŶŝŶƚĞƌƌƵƉƚŝďůĞ ƉŽǁĞƌ ƐƵƉƉůŝĞƐ͘ϰϴ ƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚŝƐ ďĂĐŬͲ ƵƉ ŐĞŶĞƌĂƚŝŽŶ ƌĞƉƌĞƐĞŶƚƐ ƌŽƵŐŚůLJ ϮϬϬ ŐŝŐĂǁĂƚƚƐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ƉŽƚĞŶƚŝĂůϰϵ ;ŝŶ ĐŽŶƚƌĂƐƚ ƚŽ Ă ƉƌŝŵĂƌLJ ŝŶƐƚĂůůĞĚ ĐĂƉĂĐŝƚLJ ŽĨ ϭ͕ϭϬϬ ŐŝŐĂǁĂƚƚƐͿ͘ 'ĞŶĞƌĂůůLJ͕ ƚŚĞƐĞ ďĂĐŬͲƵƉ ƐLJƐƚĞŵƐ ĐŽŵĞ Ăƚ Ă ĐĂƉĂĐŝƚLJ ĐŽƐƚ ŽĨ ΨϮϬϬʹ ΨϲϬϬ ƉĞƌ ŬŝůŽǁĂƚƚ͕ ďƵƚ ƚŚŝƐ ĐŽƐƚ ƉƌŽĨŝůĞ ŝƐ ĨŽƌ Ă ŶĂƌƌŽǁ ƐĞƚ ŽĨ Ă ŵƵĐŚ ǁŝĚĞƌ ƵŶŝǀĞƌƐĞ ŽĨ ĂƐƐĞƚ ƚLJƉĞƐ ƚŚĂƚ ŝŶĐůƵĚĞ ĐŽŵďŝŶĞĚ ŚĞĂƚ ĂŶĚ ƉŽǁĞƌ͕ ŶĂƚƵƌĂů ŐĂƐͲĨŝƌĞĚ ƵŶŝƚƐ ŽĨ ǀĂƌLJŝŶŐ ƐŝnjĞƐ͕ ĨƵĞů ĐĞůůƐ͕ ĂŶĚ ǀĂƌŝŽƵƐ ƐƚŽƌĂŐĞ ƐŽůƵƚŝŽŶƐ͘ϱϬ ƵƐŝŶĞƐƐĞƐ ďƵŝůĚ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ ďĞĐĂƵƐĞ ƚŚĞLJ ĨĂĐĞ ƐŝŐŶŝĨŝĐĂŶƚ ĞĐŽŶŽŵŝĐ ůŽƐƐĞƐ ĨƌŽŵ Ă ŵŽŵĞŶƚĂƌLJ ůŽƐƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ Žƌ ƐůŝŐŚƚ ǀĂƌŝĂƚŝŽŶ ŝŶ ĨƌĞƋƵĞŶĐLJ͘ dŚŝƐ ƌĞƉƌĞƐĞŶƚƐ Ă ƐŽƵƌĐĞ ŽĨ ůŽƐƚ ƌĞǀĞŶƵĞ ĨŽƌ ƵƚŝůŝƚŝĞƐͶĂ ĨŽƌŵ ŽĨ ͞ĚĞĨĞĐƚŝŽŶ͖͟ ŝƚ ĐŽƵůĚ ĂůƐŽ ƉƌĞƐĞŶƚ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ĨŽƌ ƵƚŝůŝƚŝĞƐ ƚŽ ƉƌŽǀŝĚĞ ŚŝŐŚĞƌͲƋƵĂůŝƚLJ ƐĞƌǀŝĐĞƐ ƚŚĂŶ Đ ĂƚĂ ĐĞŶƚĞƌƐ ĂƌĞ ĐůĂƐƐŝĨŝĞĚ ďLJ ƵƐĞ ŽĨ Ă ĨŽƵƌ ƚŝĞƌ ƐLJƐƚĞŵ ĞƐƚĂďůŝƐŚĞĚ ďLJ ƚŚĞ dĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŶĚƵƐƚƌLJ ƐƐŽĐŝĂƚŝŽŶ͘ dŝĞƌ ŝƐ ƚŚĞ ƐŝŵƉůĞƐƚ ůĞǀĞů͕ ǁŚŝůĞ dŝĞƌ s ŝƐ ƚŚĞ ŵŽƐƚ ƐƚƌŝŶŐĞŶƚ ůĞǀĞů ĚĞƐŝŐŶĞĚ ƚŽ ŚŽƐƚ ŵŝƐƐŝŽŶ ĐƌŝƚŝĐĂů ĐŽŵƉƵƚĞƌ ƐLJƐƚĞŵƐ͘ dŝĞƌ н ĚĂƚĂ ĐĞŶƚĞƌƐ ĂƌĞ ĂǀĂŝůĂďůĞ Ăƚ ůĞĂƐƚ ϵϵ͘ϵϴϮ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ƚŝŵĞ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ƚŚŽƐĞ ƌĞƋƵŝƌĞĚ ďLJ ƚŚĞ ƚLJƉŝĐĂů ĐƵƐƚŽŵĞƌ͘ ǀŝĚĞŶĐĞ ƐƵŐŐĞƐƚƐ ƚŚĂƚ ƐŽŵĞ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌƐ ĂƌĞ ǁŝůůŝŶŐ ƚŽ ƉĂLJ ǀĞƌLJ ŚŝŐŚ ƉƌŝĐĞƐ ĨŽƌ ƚŚĞ ŝŶĐƌĞŵĞŶƚĂů ĚŝĨĨĞƌĞŶĐĞ ďĞƚǁĞĞŶ ƚŚĞ ĐƵƌƌĞŶƚ ŵĞĂƐƵƌĞ ŽĨ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ǁŚĂƚ ƚŚĞLJ ƌĞƋƵŝƌĞ ĨŽƌ ƚŚĞŝƌ ďƵƐŝŶĞƐƐ͘ϱϭ hƚŝůŝƚLJ ĐƵƐƚŽŵĞƌƐ ƚŚĂƚ ŝŶƐƚĂůů ďĂĐŬͲƵƉ ƐLJƐƚĞŵƐ ĂŶĚͬŽƌ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ͕ ƵŶĚĞƌƐƚĂŶĚĂďůLJ͕ ŚĞĚŐŝŶŐ ƚŚĞ ƌŝƐŬƐ ƚŽ ƚŚĞŝƌ ďƵƐŝŶĞƐƐĞƐ ǁŝƚŚŽƵƚ ƌĞŐĂƌĚ ƚŽ ƚŚĞ ŽǀĞƌĂůů ŝŵƉĂĐƚƐ ŽŶ ƚŚĞ ƐLJƐƚĞŵ͘ dŚŝƐ ƌĂŝƐĞƐ Ă ƌĂŶŐĞ ŽĨ ĐŽŶĐĞƌŶƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ƉŽƐƐŝďůĞ ŶĞĞĚ ĨŽƌ ŶĞǁ ƐƚĂŶĚĂƌĚƐ ŽĨ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ĂƐƐŽĐŝĂƚĞĚ ƉŽůŝĐLJ ƉĂƌĂŵĞƚĞƌƐ͖ ƚŚĞ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ŽĨ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ ĂƐ ƉĂƌƚ ŽĨ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ŽĨ ƚŚĞ ŐƌŝĚ͖ ƉŽƐƐŝďůĞ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ŽŶƐŝƚĞ ĂŶĚ ďĂĐŬͲƵƉ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͖ ĂŶĚ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ŶĞĞĚƐ ĂŶĚ ƐƚĂŶĚĂƌĚƐ͘ Ŷ ĂŐŐƌĞŐĂƚĞ ĂǀĞƌĂŐĞ ĐŽƐƚ ĨŽƌ Ăůů ƚLJƉĞƐ ŽĨ ŝŶƐƚĂůůĞĚ ďĂĐŬͲƵƉ ƉŽǁĞƌ ŝƐ ŶŽƚ ŵĂŝŶƚĂŝŶĞĚ ďLJ ŝŶĚƵƐƚƌLJ Žƌ ŐŽǀĞƌŶŵĞŶƚ͕ ĂŶĚ ƚŚĞ ƚŽƚĂů ŝŶƐƚĂůůĞĚ ďĂƐĞ ŽĨ ĂĐĐĞƐƐŝďůLJ ŽƉĞƌĂƚŝŽŶĂů ďĂĐŬͲƵƉ ƉŽǁĞƌ ŶĂƚŝŽŶǁŝĚĞ ŝƐ ŶŽƚ ŬŶŽǁŶ͖ ƚŚĞƌĞ ŝƐ ŶŽ ĞĚĞƌĂů Žƌ ŽƚŚĞƌ ĚĂƚĂďĂƐĞ ƚŚĂƚ ƚƌĂĐŬƐ Ăůů ŝŶƐƚĂůůĞĚ ĂƐƐĞƚƐ͕ ƚŚĞŝƌ ƐĐĂůĞ͕ ĨƵĞů ƐŽƵƌĐĞƐ͕ ƚLJƉŝĐĂů ĂŶŶƵĂů ƌƵŶ ƚŝŵĞƐ͕ ĐƵŵƵůĂƚŝǀĞ ĞŵŝƐƐŝŽŶƐ ĞĨĨĞĐƚƐ͕ Žƌ ƉĞƌĨŽƌŵĂŶĐĞ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ƐƵĐŚ ĂƐ ŚŽǁ ŽĨƚĞŶ ƚŚĞLJ ĨĂŝů ǁŚĞŶ ĐĂůůĞĚ ŝŶƚŽ ŽƉĞƌĂƚŝŽŶ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĚŽĞƐ ŶŽƚ ŚĂǀĞ ĂŶLJ ĞdžƉůŝĐŝƚ ŐŽǀĞƌŶŵĞŶƚͲǁŝĚĞ ďĂĐŬͲƵƉ ƉŽǁĞƌ ƐƚĂŶĚĂƌĚƐ ƚŚĂƚ ĐŽŶĐĞƌŶ operational ƌĞƋƵŝƌĞŵĞŶƚƐ͖ ĂůƚŚŽƵŐŚ ŵĂŶLJ ƐƚĂƚĞƐ ŚĂǀĞ ĞŵŝƐƐŝŽŶƐ ĐŽŶƚƌŽů ƐƚĂŶĚĂƌĚƐ Žƌ ďƵŝůĚŝŶŐ ĐŽĚĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ƚŚĂƚ ŝŵƉĂĐƚ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ͘ Information and the Electricity Sector d ĂŶĚ ŐƌŝĚ ĐŽŶƚƌŽů ƚĞĐŚŶŽůŽŐŝĞƐ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐͶďŽƚŚ ůĂƌŐĞ ĂŶĚ ƐŵĂůů ƐĐĂůĞͶŚĂǀĞ ĞǀŽůǀĞĚ͕ ĞŶĂďůŝŶŐ ŝŶĐƌĞĂƐĞĚ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶ ĂŶĚ ĐĂƉƚƵƌĞ ŽĨ ĞĐŽŶŽŵŝĞƐ ŽĨ ƐĐĂůĞ ĂŶĚ ƐĐŽƉĞ͘ dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ͛Ɛ ĞĂƌůLJ ĂĚŽƉƚŝŽŶ ŽĨ ĂŶĂůLJƚŝĐĂů ĂŶĚ ĐŽŵƉƵƚĞƌ ƚĞĐŚŶŝƋƵĞƐ ƚŽ ĐŽŽƌĚŝŶĂƚĞ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ŽĨ ƉŽǁĞƌ ĨĂĐŝůŝƚĂƚĞĚ ŝŶĐƌĞĂƐĞĚ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶ ĂŶĚ ŝŶƚĞƌͲƵƚŝůŝƚLJ ƉŽǁĞƌ ƚƌĂŶƐĨĞƌƐ͘ dŚĞ ƵƐĞ ŽĨ ƐƵƉĞƌǀŝƐŽƌLJ ĐŽŶƚƌŽů ĂŶĚ ĚĂƚĂ ĂĐƋƵŝƐŝƚŝŽŶ ; Ϳ ƐLJƐƚĞŵƐ ďLJ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ ŚĂƐ ĞǀŽůǀĞĚ ŽǀĞƌ ƚŚĞ ůĂƐƚ ϵϬ LJĞĂƌƐ ĂůŽŶŐƐŝĚĞ ĂĚǀĂŶĐĞƐ ŝŶ ŐƌŝĚ ĐŽŶƚƌŽů ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ŝŶĐƌĞĂƐĞƐ ŝŶ ĐŽŵƉƵƚŝŶŐ ĂŶĚ ŶĞƚǁŽƌŬŝŶŐ ĐĂƉĂďŝůŝƚŝĞƐ͘ ĂƌůLJ ĐŽŶƚƌŽů ƐLJƐƚĞŵƐ ŝŶ ƚŚĞ ϭϵϮϬƐ ǁĞƌĞ ŝŶƐƚĂůůĞĚ ƚŽ ƌĞĚƵĐĞ ƚŚĞ ŶĞĞĚ ĨŽƌ ƵƚŝůŝƚLJ ƉĞƌƐŽŶŶĞů ƚŽ ƐƚĂĨĨ ƐƵďƐƚĂƚŝŽŶƐ Ϯϰͬϳ͘ ŶƚĞƌͲƵƚŝůŝƚLJ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶƐ͕ ĚĞǀĞůŽƉĞĚ ƚŽ ƐƵƉƉŽƌƚ ƚŚĞ ǁĂƌ ĞĨĨŽƌƚ ŝŶ tŽƌůĚ tĂƌ ͕ ĚĞŵŽŶƐƚƌĂƚĞĚ ƚŚĞ ĂĚǀĂŶƚĂŐĞƐ ŽĨ ŝŶƚĞƌͲƵƚŝůŝƚLJ ƚƌĂŶƐĂĐƚŝŽŶƐ ĂŶĚ ƐƉƵƌƌĞĚ ƚŚĞŝƌ ĂĚŽƉƚŝŽŶ͘ LJ ƚŚĞ ϭϵϱϬƐ͕ ĂŶĂůŽŐ ĐŽŵƉƵƚĞƌ ƐLJƐƚĞŵƐ ǁĞƌĞ ĂĚŽƉƚĞĚ ƚŽ ĂĐĐƵƌĂƚĞůLJ ŵŽŶŝƚŽƌ ĞůĞĐƚƌŝĐŝƚLJ ĨůŽǁƐ͘ dŚŝƐ ŚĞůƉĞĚ ĞŶĂďůĞ ĨĂƐƚĞƌ ĂŶĚ ŵŽƌĞ ĐŽŵƉƌĞŚĞŶƐŝǀĞ ƉƌŽĐĞƐƐŝŶŐ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ͕ ǁŚŝĐŚ͕ ŝŶ ƚƵƌŶ͕ ƐƵƉƉŽƌƚĞĚ ŝŵƉƌŽǀĞĚ ŽƉĞƌĂƚŝŽŶƐ͕ ƉůĂŶŶŝŶŐ͕ ĂŶĚ ŽǀĞƌĂůů ĞŶƚĞƌƉƌŝƐĞ ŵĂŶĂŐĞŵĞŶƚ͘ dŚĞ 'ƌĞĂƚ EŽƌƚŚĞĂƐƚ ůĂĐŬŽƵƚ ŽĨ ϭϵϲϱ͕ ĚƵƌŝŶŐ ǁŚŝĐŚ ϯϬ ŵŝůůŝŽŶ ƉĞŽƉůĞ ŝŶ ĂŶ ϴϬ͕ϬϬϬ ƐƋƵĂƌĞ ŵŝůĞ ĂƌĞĂ ŽĨ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂŶĚ ĂŶĂĚĂ ǁĞƌĞ ůĞĨƚ ŝŶ ƚŚĞ ĚĂƌŬ͕ ƵŶĚĞƌƐĐŽƌĞĚ ƚŚĞ ŶĞĞĚ ĨŽƌ ŝŶĐƌĞĂƐĞĚ ŝŶĨŽƌŵĂƚŝŽŶ ĐŽŽƌĚŝŶĂƚŝŽŶ ƚŽ ƐƵƉƉŽƌƚ ƚŚĞ ƌĞůŝĂďŝůŝƚLJ ŽĨ Ă ĚLJŶĂŵŝĐ ŐƌŝĚ͘ ŶƐƚŝƚƵƚŝŽŶĂů ƐƚƌƵĐƚƵƌĞƐͶƉŽǁĞƌ ƉŽŽůƐ ĂŶĚ ƌĞůŝĂďŝůŝƚLJ ĐŽƵŶĐŝůƐͶǁĞƌĞ ŝŵƉƌŽǀĞĚ ĂŶĚ ĞŶŚĂŶĐĞĚ ĂĨƚĞƌ ƚŚĞ ďůĂĐŬŽƵƚ͘ LJ ƚŚĞ ůĂƚĞ ϭϵϲϬƐ ĂŶĚ ϭϵϳϬƐ͕ ƚŚĞ ĂĚǀĞŶƚ ŽĨ ĚŝŐŝƚĂů ĐŽŵƉƵƚĞƌƐ ĂŶĚ ƚŚĞ ƌŝƐĞ ŽĨ ŵŝĐƌŽƉƌŽĐĞƐƐŽƌƐ ĂŶĚ ƉƌŽŐƌĂŵŵĂďůĞ ůŽŐŝĐ ĐŽŶƚƌŽůůĞƌƐ ĂůůŽǁĞĚ ĨŽƌ ŐƌĞĂƚĞƌ ĐŽŶƚƌŽů ĂŶĚ ŵŽŶŝƚŽƌŝŶŐ ŽĨ ĂƵƚŽŵĂƚĞĚ ƵƚŝůŝƚLJ ƉƌŽĐĞƐƐĞƐ͘ dŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ůŽĐĂů ĂƌĞĂ ŶĞƚǁŽƌŬƐ ŝŶ ƚŚĞ ϭϵϵϬƐ ĞŶĂďůĞĚ ĨŽƌŵĞƌůLJ ŝƐŽůĂƚĞĚ ĂŶĚ ŝŶĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵƐ ƚŽ ĐŽŶŶĞĐƚ ƚŽ ĞĂĐŚ ŽƚŚĞƌ͘ ƌŽƵŶĚ ƚŚĂƚ ƐĂŵĞ ƚŝŵĞ͕ ƌĞƐƚƌƵĐƚƵƌŝŶŐ ŽĨ ƚŚĞ ƉŽǁĞƌ ŝŶĚƵƐƚƌLJ ĂŶĚ ŶĞǁ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ĐƌŽƐƐͲďŽƌĚĞƌ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶƐ ŚĂĚ ŵĂũŽƌ ŝŵƉĂĐƚƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ ƐƚƌƵĐƚƵƌĞ ĂŶĚ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͘ tŚŝůĞ ƵƚŝůŝƚŝĞƐ ŝŶ ƐŽŵĞ ƌĞŐŝŽŶƐ ďĞŐĂŶ ƐƉĞĐŝĂůŝnjŝŶŐ ŝŶ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ Žƌ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ƚŚĞƌĞ ǁĞƌĞ ĂůƐŽ ŝŶĐƌĞĂƐŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ĞŶƚŝƚŝĞƐ ƐƵĐŚ ĂƐ ƌĞŐŝŽŶĂů ƚƌĂŶƐŵŝƐƐŝŽŶ ŽƌŐĂŶŝnjĂƚŝŽŶƐ ;ZdKƐͿ ĂŶĚ ŝŶĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵ ŽƉĞƌĂƚŽƌƐ ; KƐͿ ƚŽ ŵŽŶŝƚŽƌ ĂŶĚ ŐĂƚŚĞƌ ĞůĞĐƚƌŝĐŝƚLJ ĚĂƚĂ ĂĐƌŽƐƐ ůĂƌŐĞ ƌĞŐŝŽŶƐ ĂŶĚ ŵƵůƚŝƉůĞ ƐƚĂƚĞƐ͘ ŽƚŚ ƚƌĞŶĚƐ ƌĞƋƵŝƌĞĚ ŐƌĞĂƚĞƌ ŶĞƚǁŽƌŬ ŵĂŶĂŐĞŵĞŶƚ͕ ǁŝƚŚ ƐŝŐŶŝĨŝĐĂŶƚ ŝŶĐƌĞĂƐĞƐ ŝŶ ĚĂƚĂ ĨůŽǁƐ ƌĞůĂƚĞĚ ƚŽ ĐŽŵƉƌĞŚĞŶƐŝǀĞ ĂŶĚ ƌĞĂůͲƚŝŵĞ ƐLJƐƚĞŵ ŵĂŶĂŐĞŵĞŶƚ͕ ŝŶ ƚƵƌŶ ŵĂŬŝŶŐ ƐLJƐƚĞŵƐ ĐƌŝƚŝĐĂůůLJ ŝŵƉŽƌƚĂŶƚ ƚŽ ŐƌŝĚ ŵĂŶĂŐĞŵĞŶƚ͘ϱϮ͕ ϱϯ ŝŐƵƌĞ ϭͲϰ ǀŝƐƵĂůŝnjĞƐ ƚŚĞ ĚƌĂŵĂƚŝĐ ĐŚĂŶŐĞ ƐĞĞŶ ŝŶ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚLJ ĐŽŶƚƌŽů ƐLJƐƚĞŵƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-4 Electric Utility Control Systems Past to Present 54 7KH LPDJH RQ WKH OHIW GHSLFWV DQ HDUO HOHFWULFLW FRQWURO V VWHP 7KH LPDJH RQ WKH ULJKW VKRZV D W SLFDO FRQWURO V VWHP WRGD Digitization Creates Value for the Electricity Sector ŝŐŝƚŝnjĂƚŝŽŶ ĐĂŶ ƌĞƐƵůƚ ŝŶ ŝŵƉƌŽǀĞĚ ĞĨĨŝĐŝĞŶĐŝĞƐ ĂĐƌŽƐƐ Ă ƵƚŝůŝƚLJ͕ ĂůůŽǁŝŶŐ ĨŽƌ ŽƉƚŝŵŝnjĞĚ ŐĞŶĞƌĂƚŝŽŶ͕ ŝŵƉƌŽǀĞĚ ǁŽƌŬĨŽƌĐĞ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ďĞƚƚĞƌ ǀŝƐŝďŝůŝƚLJ ŝŶƚŽ ĐƵƐƚŽŵĞƌ ďĞŚĂǀŝŽƌ͕ ĂŶĚ ĨĂƐƚĞƌ ĚŝĂŐŶŽƐƚŝĐƐͶĂůů ŽĨ ǁŚŝĐŚ ĐĂŶ ŝŵƉƌŽǀĞ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƌĞĚƵĐĞ ĐŽƐƚƐ ƚŽ ƚŚĞ ƵƚŝůŝƚLJ ĂŶĚ ĐƵƐƚŽŵĞƌ͘ ĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ; ZͿ ĂŶĚ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ; 'Ϳ ĐĂŶ ďĞ ŵŽƌĞ ĨƵůůLJ ŝŶƚĞŐƌĂƚĞĚ ĂŶĚ ŵĂŶĂŐĞĚ ďLJ ƵƚŝůŝƚŝĞƐ ƚŚƌŽƵŐŚ ĚŝŐŝƚŝnjĂƚŝŽŶ͕ ƉĂƌƚŝĐƵůĂƌůLJ ƚŚƌŽƵŐŚ ƐŵĂƌƚ ŵĞƚĞƌƐ͘ ƐƚŝŵĂƚĞƐ ĚŽŶĞ ĨŽƌ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͛Ɛ ; K ͛ƐͿ 'ƌŝĚ DŽĚĞƌŶŝnjĂƚŝŽŶ ŶŝƚŝĂƚŝǀĞ ;'D Ϳ ƐƵŐŐĞƐƚ ƚŚĂƚ ŝĨ ĞǀĞƌLJ h͘ ͘ ƌĞƚĂŝů ƐĞůůĞƌ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞƉůŽLJĞĚ ŐƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ ƚŽ ƌĞĚƵĐĞ ƚŚĞ ĂǀĞƌĂŐĞ ƉůĂŶŶŝŶŐ ƌĞƐĞƌǀĞ ŵĂƌŐŝŶ ĨƌŽŵ ϭϯ ƉĞƌĐĞŶƚ ƚŽ ϭϬ ƉĞƌĐĞŶƚ͕ ŝƚ ǁŽƵůĚ ƌĞƐƵůƚ ŝŶ ΨϮ ďŝůůŝŽŶ ĂŶŶƵĂů ƐĂǀŝŶŐƐ ƚŽ ƚŚĞ ĞĐŽŶŽŵLJ͘ϱϱ ƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚĞ ĚŝŐŝƚŝnjĂƚŝŽŶ ŽĨ ƵƚŝůŝƚLJ ƉƌŽĐĞƐƐĞƐͶĨƌŽŵ ƐŵĂƌƚ ŐƌŝĚ͕ ƚŽ ǁŽƌŬĨŽƌĐĞ ƚŽŽůƐ͕ ƚŽ ĂƵƚŽŵĂƚŝŽŶ ŽĨ ďƵƐŝŶĞƐƐ ŵĂŶĂŐĞŵĞŶƚ ƉƌŽĐĞƐƐĞƐͶĐĂŶ Ɛƚ ƉƌŽĨŝƚĂďŝůŝƚLJ ϮϬʹϯϬ ƉĞƌĐĞŶƚ͘ϱϲ hƚŝůŝƚLJ ĂŶĂůLJƚŝĐƐ ŝƐ ĂŶ ĞŵĞƌŐŝŶŐ ďƵƐŝŶĞƐƐ ŐƌŽǁƚŚ ĂƌĞĂ ĞƐƚŝŵĂƚĞĚ ƚŽ ŐƌŽǁ Ăƚ Ă ƌĂƚĞ ŽĨ ϭϯ͘ϱ ƉĞƌĐĞŶƚ ƉĞƌ LJĞĂƌ ;ĨƌŽŵ Ψϭ͘ϴ ďŝůůŝŽŶ ŝŶ ϮϬϭϲ ƚŽ Ψϯ͘ϰ ďŝůůŝŽŶ ŝŶ ϮϬϮϭͿ͕ ǁŝƚŚ ŵŽƐƚ ŐƌŽǁƚŚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϱϳ ŝŐŝƚŝnjĂƚŝŽŶ ĂůƐŽ ĐƌĞĂƚĞƐ ŶĞǁ ďƵƐŝŶĞƐƐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ͕ ƐƵĐŚ ĂƐ ƌĞŵŽƚĞ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐĞƌǀŝĐĞƐ͘ 'ƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ǁŝůů ďĞ ĞŶŚĂŶĐĞĚ ďLJ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ŽƉĞƌĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐLJ ;Kd ƐLJƐƚĞŵƐ ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ ; dͿ ƐLJƐƚĞŵƐ͕ ƚŚĂƚ ĐƵƌƌĞŶƚůLJ ƚĞŶĚ ƚŽ ƐĞƌǀĞ ŝŵƉŽƌƚĂŶƚ ďƵƚ ĚŝƐƚŝŶĐƚ ƵƚŝůŝƚLJ ĨƵŶĐƚŝŽŶƐ͘ Kd ƉƌŽǀŝĚĞƐ ƚŚĞ ĐŽŶƚƌŽů ƐLJƐƚĞŵ ƚŚĂƚ ĞdžĞĐƵƚĞƐ ĂŶĚ ŵŽŶŝƚŽƌƐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ĂŝŵŝŶŐ ƚŽ ƉƌŽƚĞĐƚ ƚŚĞ ŶĞƚǁŽƌŬ͕ ƉƌĞǀĞŶƚ ĞůĞĐƚƌŝĐ ŽƵƚĂŐĞƐ Žƌ ďůĂĐŬŽƵƚƐ͕ ĂŶĚ ƌĞĚƵĐĞ ƚŚĞ ĐŽƐƚ ŽĨ ŽƉĞƌĂƚŝŽŶƐ͘ Kd ƉƌŽǀŝĚĞƐ ŽǀĞƌƐŝŐŚƚ ĂŶĚ ĐŽŶƚƌŽů ŽĨ ƚŚĞ ƉŚLJƐŝĐĂů ĂƐƐĞƚƐ ƚŚĂƚ ĐƌĞĂƚĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝŶ ƌĞĂů ƚŝŵĞͶĨƌŽŵ ŐĞŶĞƌĂƚŽƌƐ͕ ƐƵďƐƚĂƚŝŽŶƐ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ŶĞƚǁŽƌŬƐ ƚŽ ŵĞƚĞƌƐ Ăƚ ƚŚĞ ƉŽŝŶƚ ŽĨ ƵƐĞ͘ LJƐƚĞŵƐ ƚŚĂƚ ĂƌĞ ŝŶ ƚŚĞ ƌĞĂůŵ ŽĨ Kd ĂƉƉůŝĐĂƚŝŽŶƐ ŝŶĐůƵĚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŵĂŶĂŐĞŵĞŶƚ ƐLJƐƚĞŵƐ͕ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƐLJƐƚĞŵƐ͕ ŐĞŽŐƌĂƉŚŝĐĂů ŝŶĨŽƌŵĂƚŝŽŶ ƐLJƐƚĞŵƐ͕ ĂŶĚ ƐLJƐƚĞŵƐ͘ d͕ ŽŶ 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ĚŝƐƚƌŝďƵƚŝŽŶ ĨĞĞĚĞƌƐ͘ dŚĞ ƉƌĂĐƚŝĐĂů ĂƉƉůŝĐĂƚŝŽŶ ŽĨ ƚŝŵĞͲǀĂƌLJŝŶŐ ƌĂƚĞƐ ŝƐ ĂůƐŽ ŵĂĚĞ ƉŽƐƐŝďůĞ ďLJ D ͕ ǁŝƚŚ ƌĞƐƵůƚƐ ƐŚŽǁŝŶŐ ƵƉ ƚŽ ϯϬ ƉĞƌĐĞŶƚ ŽĨ ƉĞĂŬ ĚĞŵĂŶĚ ƌĞĚƵĐƚŝŽŶ ĂŵŽŶŐ ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌƐ ;ŽďƐĞƌǀĞĚ ŝŶ ƚŚĞ ŵĞƌŝĐĂŶ ZĞĐŽǀĞƌLJ ĂŶĚ ZĞŝŶǀĞƐƚŵĞŶƚ Đƚ ŽĨ ϮϬϬϵ ΀ ZZ ΁ ƉƌŽũĞĐƚƐͿ͘ϲϱ Ě ŵĂƌƚ ŵĞƚĞƌƐ ĂƌĞ ĚĞĨŝŶĞĚ ŚĞƌĞ ĂƐ ĂĚǀĂŶĐĞĚ ŵĞƚĞƌŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ Žƌ D ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5  ĂƵůƚ ůŽĐĂƚŝŽŶ͕ ŝƐŽůĂƚŝŽŶ͕ ĂŶĚ ƐĞƌǀŝĐĞ ƌĞƐƚŽƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ ĞŶĂďůĞƐ ƚŚĞ ŶĞĂƌͲŝŶƐƚĂŶƚĂŶĞŽƵƐ ƌĞĐŽŶĨŝŐƵƌĂƚŝŽŶ ŽĨ ĚŝƐƚƌŝďƵƚŝŽŶ ĐŝƌĐƵŝƚƐ ƚŚƌŽƵŐŚ ƐǁŝƚĐŚĞƐ ĂŶĚ ƌĞĐůŽƐĞƌƐ ĂŶĚ ŐƌĞĂƚůLJ ƌĞĚƵĐĞƐ ŽƵƚĂŐĞ ƚŝŵĞ ĞdžƉĞƌŝĞŶĐĞĚ ďLJ ƵƚŝůŝƚLJ ĐƵƐƚŽŵĞƌƐ͘ϲϲ  sŽůƚĂŐĞ ŽƉƚŝŵŝnjĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ ƉĞƌŵŝƚƐ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ ƚŽ ĂĐƚŝǀĞůLJ ĂĚũƵƐƚ ǀŽůƚĂŐĞ ůĞǀĞůƐ ĂůŽŶŐ ĚŝƐƚƌŝďƵƚŝŽŶ ĨĞĞĚĞƌƐ ƚŽ ĞŶƐƵƌĞ ƉƌŽƉĞƌ ůĞǀĞůƐ͘ tŚĞŶ ŽƉĞƌĂƚĞĚ ƚŽ ŬĞĞƉ ǀŽůƚĂŐĞ ůĞǀĞůƐ ůŽǁ͕ ďƵƚ ǁŝƚŚŝŶ ƌĞƋƵŝƌĞĚ ƌĂŶŐĞƐ͕ ůĞƐƐ ƉŽǁĞƌ ŝƐ ƌĞƋƵŝƌĞĚ ƚŽ ŵĞĞƚ ůŽĂĚ ƌĞƋƵŝƌĞŵĞŶƚƐ ĂŶĚ ĐƵƐƚŽŵĞƌƐ ƐĂǀĞ ĞŶĞƌŐLJ ;ƵƉ ƚŽ ϯ ƉĞƌĐĞŶƚ Žƌ ŵŽƌĞ ŽĨ ƚŚĞŝƌ ƚŽƚĂů ůŽĂĚͿ͘ϲϳ  ƋƵŝƉŵĞŶƚ ŚĞĂůƚŚ ŵŽŶŝƚŽƌƐ ŵĞĂƐƵƌĞ ƚĞŵƉĞƌĂƚƵƌĞ͕ ǀŽůƚĂŐĞ͕ ĂŶĚ ƚŚĞ ůĞǀĞůƐ ŽĨ ŽƚŚĞƌ ƉĂƌĂŵĞƚĞƌƐ ŝŶ ƚƌĂŶƐĨŽƌŵĞƌƐ ĂŶĚ ŽƚŚĞƌ ĚĞǀŝĐĞƐ͕ ƉĞƌŵŝƚƚŝŶŐ Ă ƵƚŝůŝƚLJ ƚŽ ŽďƐĞƌǀĞ ĚĞƚĞƌŝŽƌĂƚŝŽŶ ĂŶĚ ŽƉĞƌĂƚĞ ĚĞǀŝĐĞƐ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚůLJ͘ϲϴ  LJŶĐŚƌŽƉŚĂƐŽƌ ƐLJƐƚĞŵƐͶĐŽŶƐŝƐƚŝŶŐ ŽĨ ƉŚĂƐŽƌ ŵĞĂƐƵƌĞŵĞŶƚ ƵŶŝƚƐ͕ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŶĞƚǁŽƌŬƐ͕ ĂŶĚ ĚĂƚĂ ǀŝƐƵĂůŝnjĂƚŝŽŶ ƐLJƐƚĞŵƐͶƐĞŶĚ ƚŝŵĞͲƐLJŶĐŚƌŽŶŝnjĞĚ ĚĂƚĂ ŽŶ ǀŽůƚĂŐĞ͕ ĐƵƌƌĞŶƚ͕ ĂŶĚ ĨƌĞƋƵĞŶĐLJ ĐŽŶĚŝƚŝŽŶƐ ϯϬ ƚŝŵĞƐ ƉĞƌ ƐĞĐŽŶĚ ;Žƌ ŐƌĞĂƚĞƌͿ ƚŽ ƚƌĂŶƐŵŝƐƐŝŽŶ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ͕ ĂůůŽǁŝŶŐ ƚŚĞŵ ƚŽ ĚĞƚĞĐƚ ĂŶĚ ĚŝĂŐŶŽƐĞ ƉƌŽďůĞŵƐ ƚŚĂƚ ĐŽŶǀĞŶƚŝŽŶĂů ƚĞĐŚŶŽůŽŐLJ ĐĂŶŶŽƚ ŽďƐĞƌǀĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ƐLJŶĐŚƌŽƉŚĂƐŽƌ ƚĞĐŚŶŽůŽŐLJ ĐĂŶ ƐĞĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ŐƌŝĚ ŽƐĐŝůůĂƚŝŽŶƐ ƚŚĂƚ ĐĂŶ ƌĞƐƵůƚ ĨƌŽŵ ŝŵƉƌŽƉĞƌůLJ ƐĞƚ ĐŽŶƚƌŽůƐ͕ ŝŶĂĚĞƋƵĂƚĞ ŵŽĚĞůƐ͕ Žƌ ŵĂůĨƵŶĐƚŝŽŶŝŶŐ ĞƋƵŝƉŵĞŶƚͶƉĞƌŵŝƚƚŝŶŐ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ ƚŽ ƋƵŝĐŬůLJ ĂĚũƵƐƚ ĂŶĚ ĐŽƌƌĞĐƚ ƚŚĞ ƐLJƐƚĞŵ͘ϲϵ Ŷ ϮϬϬϵ͕ K ƌĞĐĞŝǀĞĚ Ψϰ͘ϯ ďŝůůŝŽŶ ŝŶ ZZ Ğ ĨƵŶĚƐ ƚŽ ƐƵƉƉŽƌƚ ƚŚĞ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ĂŶĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ƚŚĞƐĞ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ĂĐƌŽƐƐ ƚŚĞ EĂƚŝŽŶ͘ LJ ĂĚĚŝŶŐ ƚŽ ĞĨĨŽƌƚƐ ǁĞůů ƵŶĚĞƌǁĂLJ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŝŶĚƵƐƚƌLJ͕ ZZ ŚĞůƉĞĚ ĐĂƚĂůLJnjĞ ƚŚĞ ĂĚǀĂŶĐĞŵĞŶƚ ŽĨ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ŝŶĐůƵĚŝŶŐ ƐŵĂƌƚ ŵĞƚĞƌƐ͕ ƉƌŽŐƌĂŵŵĂďůĞ ĐŽŵŵƵŶŝĐĂƚŝŶŐ ƚŚĞƌŵŽƐƚĂƚƐ͕ ĂƵƚŽŵĂƚĞĚ ĨĞĞĚĞƌ ƐǁŝƚĐŚĞƐ ĂŶĚ ĐĂƉĂĐŝƚŽƌƐ͕ ĞƋƵŝƉŵĞŶƚ ŚĞĂůƚŚ ƐĞŶƐŽƌƐ͕ ĂŶĚ ƉŚĂƐŽƌ ŵĞĂƐƵƌĞŵĞŶƚ ƵŶŝƚƐ ƉůƵƐ ƌĞƋƵŝƐŝƚĞ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ŵĂŶĂŐĞŵĞŶƚ ƐLJƐƚĞŵƐ͘ Ŷ ƐŽŵĞ ĐĂƐĞƐ͕ ƵƚŝůŝƚŝĞƐ ǁĞƌĞ ĂďůĞ ƚŽ ĂĐĐĞůĞƌĂƚĞ ƚŚĞŝƌ ƐŵĂƌƚ ŐƌŝĚ ĚĞƉůŽLJŵĞŶƚ ƉůĂŶƐ ďLJ ƵƉ ƚŽ ϱ LJĞĂƌƐ͕ ǁŚŝůĞ ŽƚŚĞƌƐ ůĞƐƐ ĨĂŵŝůŝĂƌ ǁŝƚŚ ƚŚĞ ƚĞĐŚŶŽůŽŐLJ ǁĞƌĞ ĂďůĞ ƚŽ ƐƚĂƌƚ ƚŚĞŝƌ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ĞĨĨŽƌƚƐ ǁŝƚŚ ZZ ƐƵƉƉŽƌƚ͘ϳϬ Ŷ ŝŵƉŽƌƚĂŶƚ ƵƐĞ ŽĨ ZZ ƐŵĂƌƚ ŐƌŝĚ ĨƵŶĚŝŶŐ ǁĂƐ ƚŽ ƉƌŽǀŝĚĞ ƚŚĞ ŝŶŝƚŝĂů ƐƵƉƉŽƌƚ ĨŽƌ K ͛Ɛ ŽŶŐŽŝŶŐ 'D ͕ ǁŚŝĐŚ ŝƐ ĚĞƐĐƌŝďĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ƚŚĞ ďŽdž ďĞůŽǁ͘ Ğ ZZ ǁĂƐ Ă ƐƚŝŵƵůƵƐ ƉĂĐŬĂŐĞ ĞŶĂĐƚĞĚ ďLJ ƚŚĞ ϭϭϭƚŚ hŶŝƚĞĚ ƚĂƚĞƐ ŽŶŐƌĞƐƐ ŝŶ ĞďƌƵĂƌLJ ϮϬϬϵ ĂŶĚ ƐŝŐŶĞĚ ŝŶƚŽ ůĂǁ ŽŶ ĞďƌƵĂƌLJ ϭϳ͕ ϮϬϬϵ͕ ďLJ WƌĞƐŝĚĞŶƚ ĂƌĂĐŬ KďĂŵĂ͘ ZZ ƐƵƉƉŽƌƚĞĚ ŵĂŶLJ ŽĨ ƚŚĞ ŝŶŝƚŝĂƚŝǀĞƐ ƉƌĞƐĞŶƚĞĚ ǁŝƚŚŝŶ dŝƚůĞ y ; ŵĂƌƚ 'ƌŝĚͿ ŽĨ ƚŚĞ ŶĞƌŐLJ ŶĚĞƉĞŶĚĞŶĐĞ ĂŶĚ ĞĐƵƌŝƚLJ Đƚ ŽĨ ϮϬϬϳ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Department of Energy Grid Modernization Initiative 7KH ULG 0RGHUQL DWLRQ QLWLDWLYH 0 LV D FURVVFXWWLQJ 'HSDUWPHQW RI QHUJ '2 HIIRUW WKURXJK ZKLFK WKH 'HSDUWPHQW ZRUNV ZLWK SXEOLF DQG SULYDWH SDUWQHUV WR GHYHORS FRQFHSWV WRROV DQG WHFKQRORJLHV QHHGHG WR PRGHUQL H WKH 1DWLRQ¶V JULG LQIUDVWUXFWXUH 7KLV ZRUN OHYHUDJHV '2 ¶V FRUH FDSDELOLWLHV LQ PRGHOLQJ FRPSXWDWLRQ V VWHPV LQWHJUDWLRQ F EHUVHFXULW DQG HQHUJ VWRUDJH WR KHOS LPSURYH V VWHP UHOLDELOLW LQWHJUDWH GLYHUVH VRXUFHV RI HOHFWULFLW DGYDQFH HQHUJ WHFKQRORJLHV DQG SURYLGH D FULWLFDO SODWIRUP IRU 8 6 FRPSHWLWLYHQHVV DQG LQQRYDWLRQ LQ WKH JOREDO HFRQRP Q -DQXDU WKH ULG 0RGHUQL DWLRQ DERUDWRU RQVRUWLXP 0 VWDUWHG UHJLRQDO SURMHFWV WKDW IRVWHU ORFDO DSSURDFKHV WR JULG PRGHUQL DWLRQ ZKLOH FRQWULEXWLQJ WR D GLYHUVH DQG EDODQFHG QDWLRQDO JULG Figure 1-5 Grid Modernization Laboratory Consortium Locations and Regional Projects 71 7KLUWHHQ '2 1DWLRQDO DERUDWRULHV FROODERUDWH ZLWK UHJLRQDO SDUWQHUV RQ QDWLRQDO JULG PRGHUQL DWLRQ JRDOV WKURXJKRXW WKH 8 6 3URMHFWV YDU ZLGHO ZLWK VRPH RI WKHVH SURMHFWV GLVSOD HG LQ WKH ILJXUH DERYH DQG GHWDLOHG IXUWKHU LQ 7DEOH EHORZ Table 1-2 Sample Grid Modernization Initiative Projects72 Project Summary Partners Kentucky Industrial ŶǀĞƐƚŝŐĂƚŝŽŶ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĂŶĂůLJƐŝƐ ŽĨ ƚŚĞ ƌŝƐŬƐ͕ hŶŝƚĞĚ WĂƌĐĞů ĞƌǀŝĐĞ͕ tĂƐƚĞ DĂŶĂŐĞŵĞŶƚ͕ Microgrid Analysis ĐŽƐƚƐ͕ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ Ă ŵŝĐƌŽŐƌŝĚ ƵƚŝůŝnjŝŶŐ ƌĞŶĞǁĂďůĞ ƵƌŶƐ Θ DĐ ŽŶŶĞůů͕ ĂƌƐŚĂǁ dƌĂŶĞ͕ ŽƵŝƐǀŝůůĞ ĞŶĞƌŐLJ ƐLJƐƚĞŵƐ Ăƚ ƚŚĞ hW tŽƌůĚWŽƌƚ ĂŶĚ ĞŶƚĞŶŶŝĂů 'ĂƐ ĂŶĚ ůĞĐƚƌŝĐ͕ ƚĂƚĞ ŽĨ ĞŶƚƵĐŬLJ and Design for Energy Security and Ƶď ĨĂĐŝůŝƚŝĞƐ͘ ĞǀĞůŽƉ ƌŽĂĚŵĂƉ ƚŽ ŚĞůƉ ŝŶĚƵƐƚƌŝĞƐ ĞǀĂůƵĂƚĞ ŵŝĐƌŽŐƌŝĚ ĂĚŽƉƚŝŽŶ ďLJ ĚĞĨŝŶŝŶŐ ŝŶƐƚŝƚƵƚŝŽŶĂů Resiliency ĂŶĚ ƌĞŐƵůĂƚŽƌLJ ĐŚĂůůĞŶŐĞƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ Oak Ridge National ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ŝŶĚƵƐƚƌŝĂůͲďĂƐĞĚ ƌĞƐŝůŝĞŶƚ ƐLJƐƚĞŵƐ͘ Laboratories Sandia National Laboratories 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Project Summary Partners ŽŶǀĞŶĞ ŝŶĚƵƐƚƌLJ ĂŶĚ ĂĐĂĚĞŵŝĐ ĞdžƉĞƌƚƐ ŝŶ ƉŽǁĞƌ ŽƵƚŚǁĞƐƚ WŽǁĞƌ WŽŽů͕ DŝĚĐŽŶƚŝŶĞŶƚ Midwest ƐLJƐƚĞŵƐ ƚŽ ĞǀĂůƵĂƚĞ ƚŚĞ ŚŝŐŚͲǀŽůƚĂŐĞ͕ ĚŝƌĞĐƚ ĐƵƌƌĞŶƚ ŶĚĞƉĞŶĚĞŶƚ LJƐƚĞŵ KƉĞƌĂƚŽƌ͕ tĞƐƚĞƌŶ ƌĞĂ Interconnection ĂŶĚ ĂůƚĞƌŶĂƚŝŶŐ ĐƵƌƌĞŶƚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐĞĂŵƐ ďĞƚǁĞĞŶ WŽǁĞƌ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ŽůĂƌ ŶĞƌŐLJ ŶĚƵƐƚƌŝĞƐ Seams Study National Renewable ƚŚĞ h͘ ͘ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶƐ ĂŶĚ ƉƌŽƉŽƐĞ ƵƉŐƌĂĚĞƐ ƚŽ ƐƐŽĐŝĂƚŝŽŶ͕ DŝŶŶĞƐŽƚĂ WŽǁĞƌ͕ yĐĞů ŶĞƌŐLJ͕ ĞdžŝƐƚŝŶŐ ĨĂĐŝůŝƚŝĞƐ ƚŚĂƚ ƌĞĚƵĐĞ ƚŚĞ ĐŽƐƚ ŽĨ ŵŽĚĞƌŶŝnjŝŶŐ dĞƚƌĂ dĞĐŚ͕ dƌĂŶƐŐƌŝĚ ŽůƵƚŝŽŶƐ͕ hƚŝůŝƚLJ Energy Laboratory ƚŚĞ EĂƚŝŽŶ͛Ɛ ƉŽǁĞƌ ƐLJƐƚĞŵ͘ sĂƌŝĂďůĞ'ĞŶĞƌĂƚŝŽŶ ŶƚĞŐƌĂƚŝŽŶ 'ƌŽƵƉ͕ ƌLJŶĚĂŶ Pacific Northwest ƐƐŽĐŝĂƚĞƐ National Laboratory Argonne National Laboratory Oak Ridge National Laboratory ŽŶĚƵĐƚ ƚĞĐŚŶŝĐĂů ĞǀĂůƵĂƚŝŽŶƐ ƚŽ ĂƐƐĞƐƐ ĞŶĞƌŐLJ ĂŶĚ ŝƚLJ ŽĨ EĞǁ KƌůĞĂŶƐ͕ ZŽĐŬĞĨĞůůĞƌ ŶƐƚŝƚƵƚĞ͕ Grid Analysis and Design for Resiliency ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ ĂŶĚ ƚŽ ŝĚĞŶƚŝĨLJ ŶƚĞƌŐLJ͕ h͘ ͘ ƌŵLJ ŽƌƉƐ ŽĨ ŶŐŝŶĞĞƌƐ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ŽƉƚŝŽŶƐ ƚŽ ŝŵƉƌŽǀĞ ƚŚĞ ƌĞƐŝůŝĞŶĐLJ ŽĨ ďŽƚŚ in New Orleans ƚŚĞ ĞůĞĐƚƌŝĐĂů ŐƌŝĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ƚŚĞ ĐŽŵŵƵŶŝƚLJ͘ Sandia National Laboratories Los Alamos National Laboratories ULG PRGHUQL DWLRQ SURMHFWV YDU ZLGHO LQ VFRSH DQG UHJLRQ 7KUHH RI WKHVH SURMHFWV DUH VXPPDUL HG DERYH dŚĞƌĞ ŝƐ Ă ŶĞǁ ƐĞƚ ŽĨ ĚĞŵĂŶĚƐ ŽŶ ŐƌŝĚ ĨƵŶĐƚŝŽŶ ĂŶĚ ƐƚƌƵĐƚƵƌĞ ƚŚĂƚ ǁĂƐ ŶŽƚ ĨƵůůLJ ĂƉƉƌĞĐŝĂƚĞĚ ϳ LJĞĂƌƐ ĂŐŽ ǁŚĞŶ ZZ ĨƵŶĚƐ ǁĞƌĞ ŵĂĚĞ ĂǀĂŝůĂďůĞ͘ Ɛ ƚŚĞ ŶƵŵďĞƌ ŽĨ ŝŶƚĞŐƌĂƚĞĚ͕ ŝŶƚĞůůŝŐĞŶƚ ĂƐƐĞƚƐ ŝŶĐƌĞĂƐĞƐ͕ ƚŚĞ ƐƉĞĞĚ ŽĨ ĐŽŵŵƵŶŝĐĂƚŝŽŶ͕ ĐŽŽƌĚŝŶĂƚŝŽŶ͕ ĂŶĚ ĐŽŶƚƌŽů ǁŝůů ƌĞƋƵŝƌĞ ŵŽƌĞ ĚŝƐƚƌŝďƵƚĞĚ͕ ĂƵƚŽŵĂƚĞĚ ;ŵĂĐŚŝŶĞ ƚŽ ŵĂĐŚŝŶĞͿ ŝŶƚĞůůŝŐĞŶĐĞ ĚĞĂůŝŶŐ ǁŝƚŚ ƐƵďͲƐĞĐŽŶĚ ĚĞĐŝƐŝŽŶƐ ƚŚĂƚ ĐĂŶŶŽƚ ďĞ ŵĂŶĂŐĞĚ ďLJ ŚƵŵĂŶ ŽƉĞƌĂƚŽƌƐ ŝŶ ƌĞĂů ƚŝŵĞ͘ dŚĞ ƐĐŽƉĞ ŽĨ ͞ƐŵĂƌƚ͟ ŵƵƐƚ ĞǀŽůǀĞ ƚŽ ŝŶĐůƵĚĞ ŵĂĐŚŝŶĞ ůĞĂƌŶŝŶŐ ƚŽ ŵĂŶĂŐĞ ƚŚĞ ĐŽͲŽƉƚŝŵŝnjĂƚŝŽŶ ŽĨ ƐLJƐƚĞŵƐ ĂŶĚ ƐƵďƐLJƐƚĞŵƐ ǁŚŝůĞ ŵĂŝŶƚĂŝŶŝŶŐ ƐLJƐƚĞŵ ƌĞůŝĂďŝůŝƚLJ ĂƐ ŵŽƌĞ Z ĂƌĞ ŝŶƚĞŐƌĂƚĞĚ ŝŶƚŽ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ͘ dŚĞ ŬĞLJ ŝŶŐƌĞĚŝĞŶƚ ƚŽ ĞŶĂďůŝŶŐ ƚŚŝƐ ĐĂƉĂďŝůŝƚLJ ĂƌĞ d ŶĞƚǁŽƌŬƐ ƚŚĂƚ ŶŽƚ ŽŶůLJ ƐƵƉƉŽƌƚ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ͕ ďƵƚ ĂůƐŽ ƉĞƌŵŝƚ͕ ǁŚĞƌĞ ĂƉƉƌŽƉƌŝĂƚĞ͕ ŝƚƐ ĐŽŶǀĞƌŐĞŶĐĞ ǁŝƚŚ ŽƚŚĞƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ͕ ŝŶĐůƵĚŝŶŐ ďƵŝůĚŝŶŐƐ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ǁĂƚĞƌ͕ ĂŶĚ ŶĂƚƵƌĂů ŐĂƐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ͘ ƚ ŝƐ ĞŶǀŝƐŝŽŶĞĚ ƚŚĂƚ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ŝŶƚĞůůŝŐĞŶƚ ĂƐƐĞƚƐ ĂĐƌŽƐƐ ƚŚĞƐĞ ƐLJƐƚĞŵƐ ǁŝůů ƉƌŽǀŝĚĞ ĞŶŚĂŶĐĞĚ ůĞǀĞůƐ ŽĨ ĞĨĨŝĐŝĞŶĐLJ͕ ĂƐƐĞƚ ƵƚŝůŝnjĂƚŝŽŶ͕ ĂŶĚ ŝŶŶŽǀĂƚŝŽŶ͘ ƉĞĞĚ ĂŶĚ ƉƌĞĐŝƐŝŽŶ ǁŝůů ďĞ ĞƐƐĞŶƚŝĂů ĞůĞŵĞŶƚƐ ĨŽƌ ĞŶƐƵƌŝŶŐ Ă ŚŝŐŚůLJ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ tĞůůͲ ĚĞƐŝŐŶĞĚ ƐŵĂƌƚ ŐƌŝĚƐ ĂƌĞ ƐƚƌƵĐƚƵƌĞĚ ƚŽ ĞŶĂďůĞ ĂĚĂƉƚĂƚŝŽŶ ƚŽ ĞǀĞƌͲĐŚĂŶŐŝŶŐ ĚĞǀŝĐĞ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ĂŶĚ ƌĞƋƵŝƌĞŵĞŶƚƐ͘ ƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ͕ ŶĞǁ ĚĞǀŝĐĞƐ ƚŚĂƚ ŝŵƉĂĐƚ ƚŚĞ ŐƌŝĚ ĂŶĚ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĨŝŶĚŝŶŐ ƚŚĂƚ ǀĞŶĚŽƌƐ ĂƌĞ ƌĞƚŝƌŝŶŐ ƚŚĞ ŵĂŶƵĨĂĐƚƵƌĞ ŽĨ ĂŶĂůŽŐ ŵĞƚĞƌƐ͕ ǁŚŝĐŚ ŵĞĂŶƐ ƚŚĂƚ ǁŚĞŶ ŵĞƚĞƌ ƌĞƉůĂĐĞŵĞŶƚ ŝƐ ƌĞƋƵŝƌĞĚ͕ ŝƚ ǁŝůů ůĞĂĚ ƚŽ ƚŚĞ ŶĞĞĚ ĨŽƌ ďƵŝůĚŝŶŐ ĂƵƚŽŵĂƚĞĚ ŵĞƚĞƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ Electricity Systems and Grid Management Are Facing New Challenges tŚŝůĞ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ĂŶĚ ĚŝŐŝƚŝnjĂƚŝŽŶ ŚĂǀĞ ĐƌĞĂƚĞĚ ŶĞǁ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ ƚŽ ŝŵƉƌŽǀĞ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƌĞĚƵĐĞ ĐŽƐƚƐ͕ ŽƚŚĞƌ ƚƌĞŶĚƐ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĂǀĞ ĐƌĞĂƚĞĚ ŶĞǁ ĐŚĂůůĞŶŐĞƐ ĨŽƌ ŐƌŝĚ ŵĂŶĂŐĞŵĞŶƚ͘ ŶĐƌĞĂƐŝŶŐ ĚĞƉůŽLJŵĞŶƚ ŽĨ ǀĂƌŝĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ;s ZƐͿ ƐƵĐŚ ĂƐ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ƉŽǁĞƌ͕ ƚŚĞ ŝŶƚĞƌĂĐƚŝŽŶ ŽĨ Z ǁŝƚŚ ďĂƐĞůŽĂĚ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ƚŚĞ ĐŚĂŶŐŝŶŐ ƌŽůĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌƐ ŚĂǀĞ ŝŶĐƌĞĂƐĞĚ ƚŚĞ ĐŽŵƉůĞdžŝƚLJ ŽĨ ŵĂƚĐŚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ ǁŝƚŚ ĚĞŵĂŶĚ Ăƚ Ăůů ƚŝŵĞƐ͘ ƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ ƚŚĞLJ ƉŽƐĞ ĐŚĂůůĞŶŐĞƐ͕ ĞĂĐŚ ŽĨ ƚŚĞƐĞ ƚƌĞŶĚƐ ŚĂƐ ĚŝƐƚŝŶĐƚ ĂĚǀĂŶƚĂŐĞƐ͕ ƐƵĐŚ ĂƐ ŚĞůƉŝŶŐ ƚŽ ĞŶĂďůĞ ƚŚĞ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ŝŶĐƌĞĂƐŝŶŐ ĐŽŶƐƵŵĞƌ ŽƉƚŝŽŶƐ ĂŶĚ ƐĞƌǀŝĐĞƐ͕ ĂŶĚ ĂĚǀĂŶĐŝŶŐ ŐƌŝĚ ŵĂŶĂŐĞŵĞŶƚ ƐŽůƵƚŝŽŶƐ͕ ƐƵĐŚ ĂƐ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĨůĞdžŝďŝůŝƚLJ ĂŶĚ ŐƌŝĚͲƐĐĂůĞ ƐƚŽƌĂŐĞ͘ DĂŶLJ ŽĨ ƚŚĞƐĞ ƚƌĞŶĚƐ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s͕ Ensuring Electricity System Reliability 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ĂƌĞ ǁŽƌŬŝŶŐ ƚŽ ĂĚĚƌĞƐƐ ƚŚĞƐĞ ŝƐƐƵĞƐ͘ dŚĞ ĂůŝĨŽƌŶŝĂ ŽůĂƌ ŶŝƚŝĂƚŝǀĞ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ŝƐ ƉĂƌƚ ŽĨ Ă ĂůŝĨŽƌŶŝĂ WƵďůŝĐ hƚŝůŝƚŝĞƐ ŽŵŵŝƐƐŝŽŶ ŵĂŶĚĂƚĞ ƚŽ ďƵŝůĚ ĂŶĚ ŵĂŝŶƚĂŝŶ Ă ƉƵďůŝĐůLJ ĂĐĐĞƐƐŝďůĞ ĚĂƚĂ ƐĞƚ ŽĨ ĐĂƉĂĐŝƚLJ ĂŶĚ ƚĞĐŚŶŝĐĂů ƐƉĞĐŝĨŝĐĂƚŝŽŶƐ ŽĨ ' ƐLJƐƚĞŵƐ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ƐƚĂƚĞ͘ϳϴ Ŷ ĂǁĂŝŝ͕ Ă ĐŽůůĂďŽƌĂƚŝŽŶ ďĞƚǁĞĞŶ K ĂŶĚ ƚŚĞ ĂǁĂŝŝĂŶ ůĞĐƚƌŝĐ ŽŵƉĂŶLJ ŝƐ ĚĞƐŝŐŶŝŶŐ ŶĞǁ ĐĂƉĂďŝůŝƚŝĞƐ ĨŽƌ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƐLJƐƚĞŵƐ͕ϳϵ ŝŶƚƌŽĚƵĐŝŶŐ ŐƌĞĂƚĞƌ ǀŝƐŝďŝůŝƚLJ ŽĨ ' ďLJ ĨĂĐƚŽƌŝŶŐ ĂĚǀĂŶĐĞĚ ϭϱͲŵŝŶƵƚĞ͕ ƐŚŽƌƚͲƚĞƌŵ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ĨŽƌĞĐĂƐƚŝŶŐ ŝŶƚŽ ŝƚƐ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƐLJƐƚĞŵƐ ĚĞĐŝƐŝŽŶͲŵĂŬŝŶŐ ƉƌŽĐĞƐƐ͘ Role of Baseload Generation ůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŚĂƐ ĂůǁĂLJƐ ďĞĞŶ ǀĂƌŝĂďůĞ͘ dŽ ŵĂŶĂŐĞ ƚŚŝƐ ǀĂƌŝĂďŝůŝƚLJ͕ ƐLJƐƚĞŵ ŽƉĞƌĂƚŽƌƐ ŚĂǀĞ ƚƌĂĚŝƚŝŽŶĂůůLJ ƌĞůŝĞĚ ŽŶ Ă ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ƚŚĂƚ ĨĂůůƐ ŝŶƚŽ ƚŚƌĞĞ ŐĞŶĞƌĂů ĐĂƚĞŐŽƌŝĞƐ͗ ďĂƐĞůŽĂĚ͕ ŝŶƚĞƌŵĞĚŝĂƚĞ ĂŶĚ ƉĞĂŬŝŶŐ ƉůĂŶƚƐ͕ ĂŶĚ ƐŽŵĞ ĚĞŵĂŶĚͲƐŝĚĞ ƌĞƐŽƵƌĐĞƐ ƐƵĐŚ ĂƐ Z͘ ĞĐĂƵƐĞ ďĂƐĞůŽĂĚ ƵŶŝƚƐ ĂƌĞ ƵƐƵĂůůLJ ĐĂƉŝƚĂůͲŝŶƚĞŶƐŝǀĞ ŐĞŶĞƌĂƚŽƌƐ ǁŝƚŚ ůŽǁ ŽƉĞƌĂƚŝŶŐ ĐŽƐƚƐ͕ ƚŚĞLJ ĂƌĞ ŽƉĞƌĂƚĞĚ Ăƚ ŚŝŐŚ ŽƵƚƉƵƚ͕ 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OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-10 Traditional One-Way Flow Electricity Supply Chain91 7KH SRZHU JULG ZDV WUDGLWLRQDOO GHVLJQHG WR PRYH HOHFWULFLW IURP ODUJH JHQHUDWRUV WR HQG XVHUV $UURZV UHSUHVHQW SRZHU IORZV dŚĞ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶƐ ĚĞƐĐƌŝďĞĚ ĞĂƌůŝĞƌ ĐĂŶ ƌĞĚƵĐĞ ŐƌŝĚ ĐŽƐƚƐ ĂŶĚ ŝŵƉƌŽǀĞ ĞĨĨŝĐŝĞŶĐLJ͕ ĂƐ ǁĞůů ĂƐ ƐĂǀĞ ƚŝŵĞ ĂŶĚ ĞĨĨŽƌƚ͖ ďƵƚ ƵŶƚŝů ƌĞĐĞŶƚůLJ͕ ĐŽŵƉƵƚĞƌ ƉƌŽĐĞƐƐŝŶŐ ƐƉĞĞĚƐ ĂŶĚ ůŽǁͲĐŽƐƚ ĚŝŐŝƚĂů ŵĞĂƐƵƌĞŵĞŶƚ ĂŶĚ ƐĞŶƐŽƌ ƚĞĐŚŶŽůŽŐLJ ůŝŵŝƚĞĚ ƚŚĞ ĂďŝůŝƚLJ ŽĨ ŐƌŝĚƐ ĂŶĚ ĐŽŶƐƵŵĞƌƐ ƚŽ ŵĂŶĂŐĞ ĞŶĚͲƵƐĞ ďĞŚĂǀŝŽƌ ŝŶ ŚŝŐŚůLJ ŐƌĂŶƵůĂƌ ǁĂLJƐ͘ dŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŽ ŵĂŶĂŐĞ ƚŚĞƐĞ ĞŶĚ ƵƐĞƐ ŚĂƐ ĂůƐŽ ĞŶĂďůĞĚ ƚǁŽͲǁĂLJ ĨůŽǁƐ ŽŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ ŝŐƵƌĞ ϭͲϭϭ ƐƵŵŵĂƌŝnjĞƐ ŬĞLJ ĐŚĂŶŐĞƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ǁŚĞƌĞ ƐƵĐŚ ƚǁŽͲǁĂLJ ĨůŽǁƐ ĂƌĞ ƉŽƐƐŝďůĞ ĂŶĚ ŵŽƌĞ ĐŽŵŵŽŶ͕ ĂŶĚ ǁŚĞƌĞ ĚŝŐŝƚŝnjĂƚŝŽŶ ŝƐ Ă ŬĞLJ ĞŶĂďůĞƌ ŽĨ Ă ŶĞǁ ƌĂŶŐĞ ŽĨ ƐĞƌǀŝĐĞƐ͕ ŝŶĐůƵĚŝŶŐ ŝŶĐƌĞĂƐĞĚ ĨůĞdžŝďŝůŝƚLJ͕ ŚŝŐŚĞƌ ƐLJƐƚĞŵ ĞĨĨŝĐŝĞŶĐLJ͕ ƌĞĚƵĐĞĚ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ͕ ĂŶĚ ŝŶĐƌĞĂƐĞĚ ĐŽŶƐƵŵĞƌ ŽƉƚŝŽŶƐ ĂŶĚ ǀĂůƵĞ͘ Figure 1-11 Emerging 21st Century Electricity Two-Way Flow Supply Chain92 7KH HPHUJLQJ VW FHQWXU SRZHU JULG ZLOO LQFRUSRUDWH UHVSRQVLYH UHVRXUFHV VWRUDJH PLFURJULGV DQG RWKHU WHFKQRORJLHV WKDW HQDEOH LQFUHDVHG IOH LELOLW KLJKHU V VWHP HIILFLHQF UHGXFHG HQHUJ FRQVXPSWLRQ DQG LQFUHDVHG FRQVXPHU RSWLRQV DQG YDOXH DV GLVFXVVHG LQ KDSWHU The Electricity Sector Maximizing Economic Value and Consumer Equity $UURZV UHSUHVHQW SRZHU IORZV LJXUH DOVR GHSLFWV NH IDFWRUV WKDW DUH GLVUXSWLQJ WUDGLWLRQDO PRGHV RI JULG PDQDJHPHQW DQG RSHUDWLRQV GLVFXVVHG LQ JUHDWHU GHWDLO LQ KDSWHU 9 Ensuring Electricity System Reliability Security and Resilience EĞǁ ĐŽŶƚƌŽů ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ĂŶ ĞǀŽůƵƚŝŽŶ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ ĚĞƐŝŐŶ ǁŝůů ĨĂĐŝůŝƚĂƚĞ ƚŚĞ ƌĞůŝĂďůĞ ĂŶĚ ĞĐŽŶŽŵŝĐ ŽƉĞƌĂƚŝŽŶ ŽĨ ƚŚĞ ŶĞǁ ĐĂƉĂďŝůŝƚŝĞƐ ŝŶ Ă ϮϭƐƚ ĐĞŶƚƵƌLJ ŐƌŝĚ͘ d ŚĂƐ ĂůƌĞĂĚLJ ŝŵƉƌŽǀĞĚ ƚŚĞ ŽƉĞƌĂƚŝŽŶƐ ŽĨ ƚŚĞ ŐƌŝĚ ǁŝƚŚŝŶ ĂŶĚ ĂĐƌŽƐƐ ƌĞŐŝŽŶƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ĂĚǀĂŶĐĞĚ ŝŶǀĞƌƚĞƌƐ ŽŶ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ ĐĂŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ƉƌŽǀŝĚĞ Ă ǀĂƌŝĞƚLJ ŽĨ ůŽĐĂůŝnjĞĚ ŐƌŝĚ ƐƵƉƉŽƌƚ ĨƵŶĐƚŝŽŶƐ͕ ŝŶĐůƵĚŝŶŐ ǀŽůƚĂŐĞ ƌĞŐƵůĂƚŝŽŶ ĂŶĚ ĨƌĞƋƵĞŶĐLJ ƌŝĚĞ ƚŚƌŽƵŐŚ͘Ő ϵϯ EĞĂƌůLJ Ăůů ŵĂƌŬĞƚ ƌĞŐŝŽŶƐ ŚĂǀĞ ŝŶĐŽƌƉŽƌĂƚĞĚ ĂĐƚŝǀĞ ƉŽǁĞƌ ĐŽŶƚƌŽů ŽĨ ǁŝŶĚ ƚƵƌďŝŶĞƐ ŝŶƚŽ ƚŚĞŝƌ ĚŝƐƉĂƚĐŚ ƉƌŽĐĞĚƵƌĞƐ ƚŽ ŵĂŶĂŐĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ĐŽŶŐĞƐƚŝŽŶ͘ϵϰ ůƐŽ͕ ƐĞǀĞƌĂů ŵĂƌŬĞƚ ƌĞŐŝŽŶƐ ŚĂǀĞ ĐŚĂŶŐĞĚ ŵĂƌŬĞƚ ƌƵůĞƐ ƚŽ ƌĞĨůĞĐƚ ƚŚĞ ĨĂƐƚ ƌĞĂĐƚŝŽŶ ŽĨ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞ ƚŽ ĨƌĞƋƵĞŶĐLJ ƌĞŐƵůĂƚŝŽŶ ŽƉĞƌĂƚŝŶŐ ƐŝŐŶĂůƐ͘ϵϱ Customer Engagement New Business Models and the Emerging Role of Aggregators dŚĞ ƌŽůĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌ ŚĂƐ ďĞĞŶ ĐŚĂŶŐŝŶŐ ƐŝŶĐĞ dŚŽŵĂƐ ĚŝƐŽŶ ĨŝƌƐƚ ůĂƵŶĐŚĞĚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ͘ dŚƌŽƵŐŚŽƵƚ ƚŚĞ ŝŶĚƵƐƚƌLJ͛Ɛ ĚĞǀĞůŽƉŵĞŶƚ͕ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌ ǁĂƐ ǀŝĞǁĞĚ ĂƐ ͞ůŽĂĚ͟ͶƚŚĞ ĂŐŐƌĞŐĂƚĞ ĂĐĐƵŵƵůĂƚŝŽŶ ŽĨ ĚĞŵĂŶĚ ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ƐĞƌǀĞĚ͕ ƐƵƉƉŽƌƚĞĚ ďLJ Ă ͞ƌĂƚĞƉĂLJĞƌ͘͟ dŚŝƐ ǀŝĞǁ ŽĨ ĐƵƐƚŽŵĞƌƐ ĂƐ ůŽĂĚ ĂŶĚ ƌĂƚĞƉĂLJĞƌ͕ ůĂƌŐĞůLJ ƉĂƐƐŝǀĞ ďĞĐĂƵƐĞ ƚŚĞƌĞ ǁĞƌĞ ŶŽ ƌĞĂů ĂůƚĞƌŶĂƚŝǀĞ ŽƉƚŝŽŶƐ ƚŽ ƵƚŝůŝƚLJ ƐĞƌǀŝĐĞ͕ ǁĂƐ ŽƉĞƌĂƚŝǀĞ ƚŚƌŽƵŐŚ ƚŚĞ ĞĂƌůLJ ϭϵϴϬƐ͘ ŚĂŶŐĞƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ƐƚĂƌƚŝŶŐ ŝŶ ƚŚĞ ŵŝĚͲϭϵϴϬƐ͕ ŚŽǁĞǀĞƌ͕ ŚĂǀĞ ƉƌŽŵƉƚĞĚ ƵƚŝůŝƚŝĞƐ ĂŶĚ ĞŵĞƌŐŝŶŐ ĐŽŵƉĞƚŝƚŽƌƐ ƚŽ ƐůŽǁůLJ ƐŚŝĨƚ ƚŚĞŝƌ ͞ĐƵƐƚŽŵĞƌ ĂƐ ůŽĂĚ͟ ǀŝĞǁƐ ƚŽ Ă ƉŽŝŶƚ ŽĨ ǀŝĞǁ ƚŚĂƚ ŝƐ ŵƵĐŚ ŵŽƌĞ͕ ĂŶĚ ŵŽƌĞ ƐŝŵƉůLJ͕ ĐƵƐƚŽŵĞƌͲĐĞŶƚƌŝĐ͘ ƚĂƚĞƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĞdžƉůŽƌŝŶŐ ŶĞǁ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ǁŚŝůĞ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ ŝƐ ƉƌŽǀŝĚŝŶŐ ŶĞǁ ƉƌŽĚƵĐƚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ƚŽ ĐŽŶƐƵŵĞƌƐ͘ Ŷ ƚŚĞ ƉĂƐƚ ĚĞĐĂĚĞ͕ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ ŚĂƐ ƐĞĞŶ Ă ůĂƌŐĞ ŝŶĐƌĞĂƐĞ ŝŶ ƚŚĞ ŶƵŵďĞƌ ŽĨ ďƵƐŝŶĞƐƐĞƐ ĨŽĐƵƐĞĚ ŽŶ ƉƌŽǀŝĚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ƉƌŽĚƵĐƚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ŽƵƚƐŝĚĞ ŽĨ ƚƌĂĚŝƚŝŽŶĂů ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͘ϵϲ dŚĞƐĞ ďƵƐŝŶĞƐƐĞƐ ŚĂǀĞ ĨŽƵŶĚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ƉƌŽǀŝĚĞ ǀĂůƵĞ ƚŽ ĐƵƐƚŽŵĞƌƐ ƚŚƌŽƵŐŚ ŝŶŶŽǀĂƚŝǀĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ŶŽǀĞů ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͕ ĂŶĚ ƐƵƉƉŽƌƚŝǀĞ ƚĂƚĞ ĂŶĚ ĞĚĞƌĂů ƉŽůŝĐLJ ĚĞĐŝƐŝŽŶƐͶƚŚĞLJ ĂƌĞ ĂůƐŽ ĐŚĂŶŐŝŶŐ ƚŚĞ ƌŽůĞ ŽĨ ƐŽŵĞ ƌĂƚĞƉĂLJĞƌƐ ĨƌŽŵ ƉĂƐƐŝǀĞ ĐŽŶƐƵŵĞƌƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ŝŶĨŽƌŵĞĚ ƐŚŽƉƉĞƌƐ ĂŶĚ ƉƌŽĚƵĐĞƌƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ƌĞůĂƚĞĚ ĞŶĚͲƵƐĞ ƐĞƌǀŝĐĞƐ͘ϵϳ DĂŶLJ ŽĨ ƚŚĞƐĞ ƐĞƌǀŝĐĞƐ ĂƌĞ ĞŶĂďůĞĚ ďLJ ƚŚĞ ƌĞĐĞŶƚ ǁŝĚĞƐƉƌĞĂĚ ĂĚŽƉƚŝŽŶ ŽĨ ĂĚǀĂŶĐĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŵĞƚĞƌŝŶŐ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶ ƐLJƐƚĞŵƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ƌĂƚĞƉĂLJĞƌƐ ǁŝƚŚ ƵŶƉƌĞĐĞĚĞŶƚĞĚ ůĞǀĞůƐ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ ƌĞŐĂƌĚŝŶŐ ƚŚĞŝƌ ŽǁŶ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ƉĂƚƚĞƌŶƐ͘ϵϴ dŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞů ŝƐ ĚŝƐĐƵƐƐĞĚ ĨƵƌƚŚĞƌ ŝŶ ŚĂƉƚĞƌ ͕ The Electricity Sector Maximizing Economic Value and Consumer Equity DĂŶLJ ďƵƐŝŶĞƐƐĞƐ ĂƌĞ ŶŽǁ ƉƌŽǀŝĚŝŶŐ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ͕ ĞŶĚͲƵƐĞ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞƐ͕ ĂŶĚ ĂŐŐƌĞŐĂƚĞĚ ĚĞŵĂŶĚ ƐĞƌǀŝĐĞƐ͘ dŚĞƐĞ ͞ĂŐŐƌĞŐĂƚŽƌƐ͟ ĂƌĞ ƉůĂLJŝŶŐ Ă ŐƌŽǁŝŶŐ ƌŽůĞ ŝŶ ƚŚŝƐ ĐƵƐƚŽŵĞƌͲĐĞŶƚƌŝĐ ǀŝĞǁ ŽĨ ůŽĂĚ͘ ŐŐƌĞŐĂƚŝŽŶ ŝŶǀŽůǀĞƐ ŐƌŽƵƉŝŶŐ ĚŝƐƚŝŶĐƚ ĞŶĚ ƵƐĞƌƐ ŝŶ ĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝŶĐůƵĚŝŶŐ ƚƌĂĚŝƚŝŽŶĂů ĐŽŶƐƵŵĞƌƐ͖ ĐŽŶƐƵŵĞƌƐ ƚŚĂƚ ƉƌŽĚƵĐĞ ƉŽǁĞƌ ĨŽƌ ŐƌŝĚ ƵƐĞ͖ ƚŚŝƌĚͲƉĂƌƚLJ ŽŶƐŝƚĞ ƉƌŽĚƵĐĞƌƐ͕ ƐƵĐŚ ĂƐ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞ ĐŽŵƉĂŶŝĞƐ͖ ĐŽŵƉĞƚŝƚŝǀĞ ƌĞƚĂŝůĞƌƐ͖ ĂŶĚ ĨĂĐŝůŝƚŝĞƐ ŵĂŶĂŐĞŵĞŶƚ ƐĞƌǀŝĐĞ ĞŶƚŝƚŝĞƐ͘ dŚŝƐ ĂŐŐƌĞŐĂƚŝŽŶ ŽĨ ĐŽŶƐƵŵĞƌƐ ĞŶĂďůĞƐ ƚŚĞŵ ƚŽ ĂĐƚ ĂƐ Ă ƐŝŶŐůĞ ĞŶƚŝƚLJ͕ ƉƌŽǀŝĚŝŶŐ Ă ƐĞƌǀŝĐĞ ƚŽ ƵƚŝůŝƚŝĞƐ ƵŶĚĞƌ Ă ĐŽŶƚƌĂĐƚ͕ Žƌ ƚŽ ĐĞŶƚƌĂůůLJͲŽƌŐĂŶŝnjĞĚ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚƐ ŽƉĞƌĂƚĞĚ ďLJ KƐͬZdKƐ ƚŚƌŽƵŐŚ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŝŶ ƌĞƐŽƵƌĐĞ ĂƵĐƚŝŽŶƐ͘ Ŷ ƐŚŽƌƚ͕ ĂŐŐƌĞŐĂƚŽƌƐ ĂƌĞ ĞŶƚĞƌƉƌŝƐĞƐ ƚŚĂƚ ŽƌĐŚĞƐƚƌĂƚĞ ĂŶĚ ŵĂŶĂŐĞ ĂŐŐƌĞŐĂƚĞĚ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ƐĞƌǀŝĐĞƐ ĞŶĂďůĞĚ ďLJ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƚŚĞ ƐŵĂƌƚ ŐƌŝĚ͘ sĂůƵĞ ƌĞĂůŝnjĞĚ ƚŚƌŽƵŐŚ ĂŐŐƌĞŐĂƚŝŽŶ ƚƌĂŶƐĂĐƚŝŽŶƐ ŝƐ ƚLJƉŝĐĂůůLJ ƐŚĂƌĞĚ ďĞƚǁĞĞŶ ĂŐŐƌĞŐĂƚŽƌƐ ĂŶĚ ƚŚĞŝƌ ĐůŝĞŶƚƐ͘ dŚĞ ĐŽƌĞ ǁŽƌŬĨůŽǁƐ ŽĨ ĂŐŐƌĞŐĂƚŽƌƐ ŝŶǀŽůǀĞ ĂƉƉůLJŝŶŐ ƚĞĐŚŶŝĐĂů ƐĞƌǀŝĐĞƐ ƐƵĐŚ ĂƐ ĞŶŐŝŶĞĞƌŝŶŐ ĂŶĂůLJƚŝĐƐ͕ ƉƌŽĐĞƐƐ ƐLJƐƚĞŵ ĚĞƐŝŐŶ͕ ĂƐƐĞƚ ĂĐƋƵŝƐŝƚŝŽŶ ĂŶĚ ŝŶƐƚĂůůĂƚŝŽŶ͕ ĂŶĚ ŽŶŐŽŝŶŐ ŽƉĞƌĂƚŝŽŶƐ ĂŶĚ ŵĂŝŶƚĞŶĂŶĐĞ͕ ĂƐ ǁĞůů ĂƐ ĞĐŽŶŽŵŝĐ ƐĞƌǀŝĐĞƐ ƐƵĐŚ ĂƐ ůĞĂƐŝŶŐ ƚŽ ƐƵƉƉŽƌƚ ĂĚŽƉƚŝŽŶ ŽĨ ƐĞƌǀŝĐĞƐ͕ ƐŚĂƌĞĚ ƐĂǀŝŶŐƐͲďĂƐĞĚ ƚƌĂŶƐĂĐƚŝŽŶƐ ƚŚĂƚ ƌĞĚƵĐĞ ĐůŝĞŶƚ ĐŽƐƚƐ͕ ĂŶĚ ŽǁŶĞƌƐŚŝƉ ŽĨ ƐLJƐƚĞŵƐ ĨŽƌ ǁŚŝĐŚ Ă ŵŽŶƚŚůLJ ĨĞĞ ŝƐ ĐŚĂƌŐĞĚ ƚŽ ĐůŝĞŶƚƐ͘ tŚŝůĞ ƚŚĞƌĞ ĂƌĞ ŵĂŶLJ ǀĂƌŝĂƚŝŽŶƐ ŽĨ ƚŚĞƐĞ ŐĞŶĞƌĂů ĞŶƚĞƌƉƌŝƐĞ ĂĐƚŝǀŝƚŝĞƐ͕ ŝŐƵƌĞ ϭͲϭϮ ƉƌŽǀŝĚĞƐ 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ŽƉĞƌĂƚŝŽŶƐ ƚŽŽůƐ͕ ĂŶĚ ŝŶĚƵƐƚƌLJ ƐƚƌƵĐƚƵƌĞ ǁŝůů ƌĞƋƵŝƌĞ ĂŶ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ ǁŽƌŬĨŽƌĐĞ ĐĂƉĂďůĞ ŽĨ ĂĚĂƉƚŝŶŐ ĂŶĚ ĞǀŽůǀŝŶŐ ƚŽ ŵĞĞƚ ƚŚĞ ŶĞĞĚƐ ŽĨ ƚŚĞ ϮϭƐƚ ĐĞŶƚƵƌLJ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ ƐŬŝůůĞĚ ǁŽƌŬĨŽƌĐĞ ƚŚĂƚ ĐĂŶ ďƵŝůĚ͕ ŽƉĞƌĂƚĞ͕ ĂŶĚ ŵĂŶĂŐĞ Ă ŵŽĚĞƌŶŝnjĞĚ ŐƌŝĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ĂŶ ĞƐƐĞŶƚŝĂů ĐŽŵƉŽŶĞŶƚ ĨŽƌ ƌĞĂůŝnjŝŶŐ ƚŚĞ ĨƵůů ǀĂůƵĞ ŽĨ Ă ŵŽĚĞƌŶŝnjĞĚ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ĂůƐŽ ďĞĞŶ ĞdžƉĞƌŝĞŶĐŝŶŐ Ă ůŽŶŐͲƚĞƌŵ ƉŽƉƵůĂƚŝŽŶ ƐŚŝĨƚ ĨƌŽŵ ƌƵƌĂů ƚŽ ƵƌďĂŶ ĂƌĞĂƐ ƐŝŶĐĞ ƚŚĞ ƐƚĂƌƚ ŽĨ ƚŚĞ ůĂƐƚ ĐĞŶƚƵƌLJ͘ ĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ h͘ ͘ ĞŶƐƵƐ ƵƌĞĂƵ͕ ĂƌŽƵŶĚ ϮϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ h͘ ͘ ƉŽƉƵůĂƚŝŽŶ ůŝǀĞĚ ŝŶ ƌƵƌĂů ĂƌĞĂƐ ŝŶ ϮϬϭϬ͕ ǁŚŝůĞ ŵŽƌĞ ƚŚĂŶ ϳϬ ƉĞƌĐĞŶƚ ůŝǀĞĚ ŝŶ ƵƌďĂŶ ĂƌĞĂƐ͘ϵϵ dŚŝƐ ŵĂŬĞƐ ŝƚ ĞƐƉĞĐŝĂůůLJ ĐŚĂůůĞŶŐŝŶŐ ĨŽƌ ƵƚŝůŝƚLJ ĐŽŵƉĂŶŝĞƐ ůŽĐĂƚĞĚ ŝŶ ƌƵƌĂů ĂƌĞĂƐ ƚŽ ƌĞƚĂŝŶ ĂŶĚ ĂƚƚƌĂĐƚ Ă ŚŝŐŚͲƐŬŝůůĞĚ ǁŽƌŬĨŽƌĐĞ͘ ůƐŽ͕ ƐŝŶĐĞ ƚŚĞ ĞĂƌůLJ ϮϬϬϬƐ͕ ďĂďLJ ŵĞƌƐ ĂƌĞ ƌĞƚŝƌŝŶŐ ŝŶ ŝŶĐƌĞĂƐŝŶŐ ŶƵŵďĞƌƐ͘ϭϬϬ ŶĚƵƐƚƌLJ ƐƵƌǀĞLJƐ ŝŶĚŝĐĂƚĞ ƚŚĂƚ ƌŽƵŐŚůLJ Ϯϱ ƉĞƌĐĞŶƚ ŽĨ ĞŵƉůŽLJĞĞƐ ǁŝůů ďĞ ƌĞĂĚLJ ƚŽ ƌĞƚŝƌĞ ǁŝƚŚŝŶ ƚŚĞ ŶĞdžƚ ϱ LJĞĂƌƐ͘ϭϬϭ ϭϬϮ ŝĨƚĞĞŶ ƉĞƌĐĞŶƚ ŽĨ ůŝŶĞǁŽƌŬĞƌƐ ĂƌĞ ĨŽƌĞĐĂƐƚĞĚ ƚŽ ƌĞƚŝƌĞ ďĞƚǁĞĞŶ ϮϬϭϲ ĂŶĚ ϮϬϮϬ͕ ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ ϭϵ ƉĞƌĐĞŶƚ ŽĨ ƚĞĐŚŶŝĐŝĂŶƐ͕ ϭϳ ƉĞƌĐĞŶƚ ŽĨ ŶŽŶͲŶƵĐůĞĂƌ ƉůĂŶƚ ŽƉĞƌĂƚŽƌƐ͕ ĂŶĚ ϭϱ ƉĞƌĐĞŶƚ ŽĨ ĞŶŐŝŶĞĞƌƐ͘ϭϬϯ KŶĞ ƌĞĐĞŶƚ ƐƵƌǀĞLJ ƐƵŐŐĞƐƚĞĚ ƚŚĂƚ ϰϯ ƉĞƌĐĞŶƚ ŽĨ ƵƚŝůŝƚŝĞƐ ǀŝĞǁ ƌĞƚŝƌĞŵĞŶƚƐ ĂŶĚ ĂŶ ĂŐŝŶŐ ǁŽƌŬĨŽƌĐĞ ĂƐ ŽŶĞ ŽĨ ƚŚĞŝƌ ŵŽƐƚ ƉƌĞƐƐŝŶŐ ĐŚĂůůĞŶŐĞƐ͘ϭϬϰ dŚĞƐĞ ǁŽƌŬĞƌƐ ƌĞƚŝƌŝŶŐ ŚĂǀĞ ĞdžƉĞƌŝĞŶĐĞ ĂŶĚ ƐŬŝůůƐĞƚƐ ƚŚĂƚ ĂƌĞ ĚŝĨĨŝĐƵůƚ ƚŽ ƌĞƉůĂĐĞ͘ ŽďƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĚƵƐƚƌLJ ƌĞƋƵŝƌĞ Ă ǀĂƌŝĞĚ ƌĂŶŐĞ ŽĨ ŶĞǁ ƐŬŝůůƐ͘ dƌĂĚŝƚŝŽŶĂů ƵƚŝůŝƚLJ ũŽďƐ ŝŶĐůƵĚĞ ůŝŶĞǁŽƌŬĞƌƐ͕ ƉŽǁĞƌ ƉůĂŶƚ ŽƉĞƌĂƚŽƌƐ͕ ƚĞĐŚŶŝĐŝĂŶƐ͕ ƉŝƉĞĨŝƚƚĞƌƐ ĂŶĚ ƉŝƉĞ ůĂLJĞƌƐ͕ ĂŶĚ ĞŶŐŝŶĞĞƌƐ͘ ĚĚŝƚŝŽŶĂů ĨŝĞůĚ ƐƵƉƉŽƌƚ ŝŶĐůƵĚĞƐ ƚƌƵĐŬ ĚƌŝǀĞƌƐ͕ ŝŶƐƉĞĐƚŽƌƐ͕ ŵĞĐŚĂŶŝĐƐ͕ ĂŶĚ ĞůĞĐƚƌŝĐŝĂŶƐ͘ϭϬϱ tŚŝůĞ ƚƌĂĚŝƚŝŽŶĂů ũŽďƐ ƐƵĐŚ ĂƐ ůŝŶĞǁŽƌŬĞƌƐ ǁŝůů ĐŽŶƚŝŶƵĞ ƚŽ ďĞ ŶĞĞĚĞĚ͕ ŝŶĐƌĞĂƐĞƐ ŝŶ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ d ǁŝůů ĐŚĂŶŐĞ ƚŚĞ ƐŬŝůůƐĞƚƐ ƌĞƋƵŝƌĞĚ ĨŽƌ ƐŽŵĞ ũŽďƐ ĂŶĚ ƚŚĞ ƌĞůĂƚŝǀĞ ŶĞĞĚ ĨŽƌ ĞŵƉůŽLJĞĞƐ ŝŶ ĚŝĨĨĞƌĞŶƚ ƌŽůĞƐ͘ The Electricity Sector Is Enabling a More Productive Economy and Reducing Carbon Emissions tŚŝůĞ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ƚŚĞ ǁŽƌŬŚŽƌƐĞ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ͕ ŝƚ ŝƐ ĂůƐŽ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ϯϬ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ' ' ĞŵŝƐƐŝŽŶƐ͘ϭϬϲ h͘ ͘ ƉŽǁĞƌ ƐĞĐƚŽƌ ĞŵŝƐƐŝŽŶƐ ĚĞĐůŝŶĞĚ ďLJ ϮϬ ƉĞƌĐĞŶƚ ƐŝŶĐĞ ϮϬϬϱ͕ ůĂƌŐĞůLJ ĚƵĞ ƚŽ Ă ƐůŽǁŝŶŐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŐƌŽǁƚŚ ĂŶĚ ƚŚĞ ĂĐĐĞůĞƌĂƚĞĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ůŽǁĞƌͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͘ϭϬϳ͕ ϭϬϴ ŝŶĐĞ ƚŚĞ ϭϵϱϬƐ͕ ŐƌŽǁƚŚ ŝŶ h͘ ͘ ĞůĞĐƚƌŝĐ ĐŽŶƐƵŵƉƚŝŽŶ ŚĂƐ ŐƌĂĚƵĂůůLJ ƐůŽǁĞĚ ĞĂĐŚ ĚĞĐĂĚĞ ;ƐĞĞ ŝŐƵƌĞ ϭͲϭϯͿ͘ ŶƵŵďĞƌ ŽĨ ĨĂĐƚŽƌƐ ŚĂǀĞ ůĞĚ ƚŽ ƚŚŝƐ ŐƌĂĚƵĂů ƐůŽǁŝŶŐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŐƌŽǁƚŚ ƌĂƚĞ͕ ŝŶĐůƵĚŝŶŐ ŵŽĚĞƌĂƚŝŶŐ ƉŽƉƵůĂƚŝŽŶ ŐƌŽǁƚŚ͕ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ƚŚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ďƵŝůĚŝŶŐƐ ĂŶĚ ŝŶĚƵƐƚƌLJ͕ ŵĂƌŬĞƚ ƐĂƚƵƌĂƚŝŽŶ ŽĨ ĐĞƌƚĂŝŶ ŵĂũŽƌ ĂƉƉůŝĂŶĐĞƐ͕ ĂŶĚ Ă ƐŚŝĨƚ ŝŶ ƚŚĞ ďƌŽĂĚĞƌ ĞĐŽŶŽŵLJ ƚŽ ůĞƐƐ ĞŶĞƌŐLJͲŝŶƚĞŶƐŝǀĞ ŝŶĚƵƐƚƌŝĞƐ͘ϭϬϵ͕ ϭϭϬ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-13 U S GDP and Electricity Demand Growth Rates 1950–2040111 8 6 HOHFWULFLW GHPDQG JURZWK KDV VORZHG VLQFH WKH V DQG LV SURMHFWHG WR UHPDLQ IODW WKURXJK EDVHG XSRQ EXVLQHVV DV XVXDO DVVXPSWLRQV 7KRXJK QDWLRQDO '3 KDV VORZHG RYHU WKH VDPH WLPH SHULRG HOHFWULFLW JURZWK KDV VORZHG VLJQLILFDQWO PRUH WKDQ '3 WĂƐƚ ĂŶĚ ĨƵƚƵƌĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŐƌŽǁƚŚ ƌĂƚĞƐ ĂƌĞ ĚƌŝǀĞŶ ďLJ ƐĞǀĞƌĂů ƐĞĐƚŽƌͲƐƉĞĐŝĨŝĐ ƚƌĞŶĚƐ ƚŚĂƚ ƌĞĨůĞĐƚ ďƌŽĂĚĞƌ ĞĐŽŶŽŵŝĐ ĐŚĂŶŐĞƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ǁŚŝůĞ ŝŶĚƵƐƚƌŝĂů ĚĞŵĂŶĚ ŐƌŽǁƚŚ ŝƐ ǀŝƌƚƵĂůůLJ ĨůĂƚ͕ ƉƌŽĚƵĐƚŝǀŝƚLJ ;ĂƐ ŵĞĂƐƵƌĞĚ ďLJ ƵŶŝƚƐ ŽĨ ' W ƉƌŽĚƵĐĞĚ ƉĞƌ ƵŶŝƚ ŽĨ ĞŶĞƌŐLJ ĐŽŶƐƵŵĞĚͿ ŝƐ ŐƌŽǁŝŶŐ͘ dŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ ŶĞĂƌůLJ ĚŽƵďůĞĚ ďĞƚǁĞĞŶ ϭϵϵϬ ĂŶĚ ϮϬϭϰ͘ WƌŽũĞĐƚŝŽŶƐ ƐƵŐŐĞƐƚ ƚŚĂƚ ŐƌŝĚͲƉƵƌĐŚĂƐĞĚ ĞůĞĐƚƌŝĐŝƚLJ ǁŝůů ƌĂƉŝĚůLJ ŝŶĐƌĞĂƐĞ ŝŶ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ĨƌŽŵ ϮϬϭϬ ƵŶƚŝů ϮϬϮϱ͕ ĂĨƚĞƌ ǁŚŝĐŚ ŐƌŽǁƚŚ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ƐůŽǁ ƚŽ ϮϬϰϬ ǁŚĞŶ ŝƚ ƌĞĂĐŚĞƐ ϭ͕Ϯϭϴ ƚĞƌĂǁĂƚƚͲŚŽƵƌƐ ;Ϯϱ ƉĞƌĐĞŶƚ ĂďŽǀĞ ƚŚĞ ϮϬϭϬ ůĞǀĞůͿ͘ ϭϭϮ Decarbonizing the Electricity System h͘ ͘ ƉŽǁĞƌ ƐĞĐƚŽƌ ĞŵŝƐƐŝŽŶƐ ĚĞĐůŝŶĞĚ ďLJ ϮϬ ƉĞƌĐĞŶƚ ƐŝŶĐĞ ϮϬϬϱ͕ ůĂƌŐĞůLJ ĚƵĞ ƚŽ Ă ƐůŽǁŝŶŐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŐƌŽǁƚŚ ĂŶĚ ƚŚĞ ĂĐĐĞůĞƌĂƚĞĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ůŽǁĞƌͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͘ϭϭϯ Žǁ ŶĂƚƵƌĂů ŐĂƐ ƉƌŝĐĞƐ ŚĂǀĞ ůĞĚ ƚŽ ƐƵďƐƚĂŶƚŝĂů ƐƵďƐƚŝƚƵƚŝŽŶƐ ŽĨ ůŽǁĞƌͲĞŵŝƚƚŝŶŐ ŐĂƐ ĨŽƌ ŚŝŐŚͲĞŵŝƚƚŝŶŐ ĐŽĂů͘ dŚŝƐ ŝƐ ŝŶ ƉĂƌƚ ďĞĐĂƵƐĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŚĂƐ ƚŚĞ ďƌŽĂĚĞƐƚ ĂŶĚ ŵŽƐƚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĂďĂƚĞŵĞŶƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ŽĨ ĂŶLJ ƐĞĐƚŽƌ͕ ŝŶĐůƵĚŝŶŐ ŵƵůƚŝƉůĞ njĞƌŽͲĐĂƌďŽŶ ĂŶĚ ůŽǁͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ŽƉƚŝŽŶƐͶƐƵĐŚ ĂƐ ŶƵĐůĞĂƌ͕ ŚLJĚƌŽƉŽǁĞƌ͕ ƐŽůĂƌ͕ ǁŝŶĚ͕ ŐĞŽƚŚĞƌŵĂů͕ ďŝŽŵĂƐƐ͕ ĂŶĚ ĨŽƐƐŝů ŐĞŶĞƌĂƚŝŽŶ ǁŝƚŚ ĐĂƌďŽŶ ĐĂƉƚƵƌĞ ĂŶĚ ƐƚŽƌĂŐĞͶĂƐ ǁĞůů ĂƐ ŵĂŶLJ ŽƉĞƌĂƚŝŽŶĂů ĂŶĚ ĞŶĚͲƵƐĞ ĞĨĨŝĐŝĞŶĐLJ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͘ dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŚĂƐ ďĞĞŶ ĂŶĚͶĚĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ŝŶƚĞƌƉůĂLJ ŽĨ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ŵĂƌŬĞƚ ĨŽƌĐĞƐ͕ ĂŶĚ ƉŽůŝĐLJͶŝƐ ůŝŬĞůLJ ƚŽ ĐŽŶƚŝŶƵĞ ƚŽ ďĞ ƚŚĞ ĨŝƌƐƚ ŵŽǀĞƌ ŝŶ ĞĐŽŶŽŵLJͲǁŝĚĞ ' ' ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ͘ ƚ ǁŝůů ĂůƐŽ ƉůĂLJ Ă ŵĂũŽƌ ƌŽůĞ ŝŶ ƚŚĞ ůĞǀĞůƐ ŽĨ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŶĞĞĚĞĚ ĨƌŽŵ ŽƚŚĞƌ ƐĞĐƚŽƌƐ ƐƵĐŚ ĂƐ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͘ DĂŶLJ ŽĨ ƚŚĞƐĞ ƚƌĞŶĚƐ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s ;Building a Clean Electricity FutureͿ͘ dŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ĂƌŐƵĞƐ ĨŽƌ ĞŶƐƵƌŝŶŐ ƚŚĂƚ ĞĚĞƌĂů ĂŶĚ ƚĂƚĞ ƉŽůŝĐŝĞƐ ƉƌŽǀŝĚĞ ĐŽŵƉĞůůŝŶŐ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƚƌĂŶƐŝƚŝŽŶŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ĂƐ ƉĂƌƚ ŽĨ ĂĐŚŝĞǀŝŶŐ ŶĂƚŝŽŶĂů ŐŽĂůƐ͘ KƉƚŝŽŶƐ ĨŽƌ ĚĞĐĂƌďŽŶŝnjŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŵƵƐƚ ĂĚĚƌĞƐƐ ƐŝŐŶŝĨŝĐĂŶƚ ďĂƌƌŝĞƌƐ ŝŶ ƚŚƌĞĞ ďƌŽĂĚ ĐĂƚĞŐŽƌŝĞƐ͗ ƚĞĐŚŶŝĐĂů ;Ğ͘Ő͕͘ ůŽŶŐ ƚŝŵĞ ĨƌĂŵĞƐ ĨŽƌ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĚĞŵŽŶƐƚƌĂƚŝŽŶ͕ ĂŶĚ ĚĞƉůŽLJŵĞŶƚ ΀Z Θ ΁ ŐĞƐƚĂƚŝŽŶͿ͖ ƐƚƌƵĐƚƵƌĂů ;Ğ͘Ő͕͘ ůŽŶŐ ƚŝŵĞ ĨƌĂŵĞƐ ĨŽƌ ĐĂƉŝƚĂů ƐƚŽĐŬ ƚƵƌŶŽǀĞƌͿ͖ ĂŶĚ ƉŽůŝĐLJ ;Ğ͘Ő͕͘ ĚŝĨĨŝĐƵůƚŝĞƐ ŝŶ ŵŽďŝůŝnjŝŶŐ ŶĞĞĚĞĚ ŝŶǀĞƐƚŵĞŶƚͿ͘ ŶǀĞƐƚŵĞŶƚ ŝŶ ŝŶŶŽǀĂƚŝŽŶ ŝƐ ŶĞĞĚĞĚ͕ ŝŶĐůƵĚŝŶŐ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĂĚǀĂŶĐĞŵĞŶƚƐ ŽĨ ŬŶŽǁŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĂƐ ǁĞůů ĂƐ ŝŶ ĨƵŶĚĂŵĞŶƚĂů ďƌĞĂŬƚŚƌŽƵŐŚƐ͘ dŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ƚŽ ŝŶĐƌĞĂƐĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĞdžŝƐƚŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƵŶůŽĐŬ ĨƵƚƵƌĞ ƚĞĐŚŶŽůŽŐŝĞƐ ŝƐ ƐŝŐŶŝĨŝĐĂŶƚ͕ ĂŶĚ ůŽŶŐͲƌĂŶŐĞ ƉůĂŶŶŝŶŐ ŵƵƐƚ ƚĂŬĞ ƚĞĐŚŶŽůŽŐLJ ƚŝŵĞ ƐĐĂůĞƐ ĂŶĚ ĚĞƉůŽLJŵĞŶƚ ƚŝŵĞůŝŶĞƐ ŝŶƚŽ ĂĐĐŽƵŶƚ͘ dŚĞ ŝŶŶŽǀĂƚŝŽŶ ƉƌŽĐĞƐƐ ŝƐ ŝƚĞƌĂƚŝǀĞ͕ ƌĞƋƵŝƌŝŶŐ ĞĂƌůLJ ĚĞƉůŽLJŵĞŶƚ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ůĞĂƌŶŝŶŐ ŽǀĞƌ ƚŝŵĞ͘ ůƐŽ͕ ďĞLJŽŶĚ ĞŶĂďůŝŶŐ ĚŽŵĞƐƚŝĐ ' ' ƌĞĚƵĐƚŝŽŶ ĂŶĚ ŝŵƉƌŽǀŝŶŐ ĞĐŽŶŽŵŝĐ ǁĞůůͲďĞŝŶŐ͕ ŝŶŶŽǀĂƚŝŽŶ ĐĂŶ ƐŝŐŶŝĨŝĐĂŶƚůLJ ĂĐĐĞůĞƌĂƚĞ ĂŶĚ ĞĂƐĞ ƚŚĞ ƉĂƚŚ ƚŽ ŐůŽďĂů ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ͕ ďŽƚŚ ŽĨ ǁŚŝĐŚ ĂƌĞ ĐƌŝƚŝĐĂů ƚŽ ƌĞĚƵĐŝŶŐ ĂĚǀĞƌƐĞ ĐůŝŵĂƚĞ ŝŵƉĂĐƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚƌĂŶƐŝƚŝŽŶŝŶŐ ƚŽ Ă ůŽǁͲĐĂƌďŽŶ ĞůĞĐƚƌŝĐŝƚLJ ĨƵƚƵƌĞ ƌĞƋƵŝƌĞƐ ƉŽůŝĐŝĞƐ ƚŚĂƚ ĂĐĐĞůĞƌĂƚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ůŽǁͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͘ϭϭϰ dŚĞ ůŽŶŐ ƚŝŵĞ ĨƌĂŵĞƐ ĨŽƌ ĐĂƉŝƚĂů ƐƚŽĐŬ ƚƵƌŶŽǀĞƌ ĂůƐŽ ŵŽƚŝǀĂƚĞ ĞĂƌůLJ ĂĐƚŝŽŶ͘ dŚĞƌĞ ĂƌĞ ĞĚĞƌĂů ƚĂdž ĐƌĞĚŝƚƐ ĂŶĚ ƚĂƚĞ ƉŽůŝĐŝĞƐ͕ ƐƵĐŚ ĂƐ ƌĞŶĞǁĂďůĞ ƉŽƌƚĨŽůŝŽ ƐƚĂŶĚĂƌĚƐ͕ ƚŚĂƚ ĂƌĞ ĚƌŝǀŝŶŐ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ƌĞŶĞǁĂďůĞ ƉŽǁĞƌ͕ ďƵƚ ĂĚĚŝƚŝŽŶĂů ƉŽůŝĐŝĞƐ ŵĂLJ ďĞ ŶĞĞĚĞĚ ĨŽƌ ƚŚĞ ĂĐĐĞůĞƌĂƚĞĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ƚŚĞƐĞ ĂŶĚ ŽƚŚĞƌ ĐƌŝƚŝĐĂů ŐƌŝĚͲƌĞůĂƚĞĚ ƚĞĐŚŶŽůŽŐŝĞƐ͘ tĞůůͲĚĞƐŝŐŶĞĚ ƉŽůŝĐŝĞƐ ĐĂŶ ŚĞůƉ ĨĂĐŝůŝƚĂƚĞ ĂŶĚ ĞŶĂďůĞ ŵĂƌŬĞƚ ŵĞĐŚĂŶŝƐŵƐ ƚŚĂƚ ĚƌŝǀĞ ůĞĂƐƚͲĐŽƐƚ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ŵŽďŝůŝnjŝŶŐ ĂŶĚ ůĞǀĞƌĂŐŝŶŐ ƉƵďůŝĐ ĂŶĚ ƉƌŝǀĂƚĞ ŝŶǀĞƐƚŵĞŶƚ͕ ŵŝŶŝŵŝnjŝŶŐ ƚŚĞ ƌŝƐŬ ŽĨ ƐƚƌĂŶĚĞĚ ĂƐƐĞƚƐ ĂŶĚ ƌĞĚƵĐŝŶŐ ĞŵŝƐƐŝŽŶƐ͘ ŽŶǀĞƌƐĞůLJ͕ ƉŽůŝĐŝĞƐ ƚŚĂƚ ƌĞƉůĂĐĞ Žƌ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŝŶƚĞƌĨĞƌĞ ǁŝƚŚ ŵĂƌŬĞƚ ŵĞĐŚĂŶŝƐŵƐ ĐĂŶ ŚĂǀĞ ƵŶŝŶƚĞŶĚĞĚ ĂŶĚ ůŽŶŐͲƚĞƌŵ ŝŵƉĂĐƚƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ĂƐ ŝŐƵƌĞ ϭͲϭϰ ĚĞŵŽŶƐƚƌĂƚĞƐ͕ ƚŚĞ ƉĂƐƐĂŐĞ ŽĨ ƚŚĞ WŽǁĞƌƉůĂŶƚ ĂŶĚ ŶĚƵƐƚƌŝĂů ƵĞů hƐĞ Đƚ ; h Ϳ ŝŶ ϭϵϳϴ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ƚŚĞ ƌĂď Žŝů ĞŵďĂƌŐŽ ŽĨ ϭϵϳϯ ĂŶĚ ƉĞƌĐĞŝǀĞĚ ƐŚŽƌƚĂŐĞƐ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ĨƵŶĚĂŵĞŶƚĂůůLJ ŽƵƚůĂǁĞĚ ƚŚĞ ƵƐĞ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ŝŶ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͘ ĨƚĞƌ ƚŚĞ ƉĂƐƐĂŐĞ ŽĨ ƚŚĞ h ͕ ƚŚĞƌĞ ǁĂƐ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĚƌŽƉ ŝŶ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ĂĚĚŝƚŝŽŶƐ͘ 'ĂƐ ĐĂƉĂĐŝƚLJ ŽŶůLJ ďĞŐĂŶ ƚŽ ŐƌŽǁ ĂŐĂŝŶ ĂĨƚĞƌ ƚŚĞ ƌĞƉĞĂů ŽĨ ƚŚĞ h ŝŶ ϭϵϴϳ ĂŶĚ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ĐŽŵďŝŶĞĚͲĐLJĐůĞ ƚƵƌďŝŶĞƐ͘ Ŷ ƚŚĞ ŝŶƚĞƌŝŵ LJĞĂƌƐ ǁŚĞŶ ƚŚĞ ůĂǁ ǁĂƐ ŝŶ ĞĨĨĞĐƚ͕ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽĂů ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ǁĂƐ ĂĚĚĞĚ ƚŽ ƚŚĞ h͘ ͘ ŐĞŶĞƌĂƚŝŽŶ ĨůĞĞƚ͕ ǁŝƚŚ ůŽŶŐͲƚĞƌŵ ŝŵƉĂĐƚƐ ŽŶ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ĂŶĚ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ͘ ŝŐƵƌĞ ϭͲϭϰ ƐŚŽǁƐ ƐĞǀĞƌĂů ĂĚĚŝƚŝŽŶĂů ĞdžĂŵƉůĞƐ ŽĨ ƉŽůŝĐĞƐ ĚƌŝǀŝŶŐ ĐŚĂŶŐĞƐ ŝŶ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž͘ ƵƌƚŚĞƌ ĚĞƚĂŝůƐ ŽŶ ƚŚĞƐĞ ƉŽůŝĐŝĞƐ ĐĂŶ ďĞ ĨŽƵŶĚ ŝŶ ƚŚĞ ƉƉĞŶĚŝdž ; ůĞĐƚƌŝĐŝƚLJ LJƐƚĞŵ KǀĞƌǀŝĞǁͿ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 Figure 1-14 Net Generation Capacity Additions 1950–2015115 DSDFLW DGGLWLRQV RI GLIIHUHQW JHQHUDWLRQ WHFKQRORJLHV FDPH LQ ZDYHV WKDW ZHUH ODUJHO LQIOXHQFHG E SROLF IXHO FRVWV DQG WHFKQRORJ GHYHORSPHQW 7KH V DQG V IRVWHUHG WKH GHYHORSPHQW RI K GURSRZHU QXFOHDU SRZHU ZDV ZLGHO GHSOR HG LQ WKH V DIWHU QXFOHDU UHVHDUFK IRU SHDFHIXO XVHV ZDV DOORZHG QDWXUDO JDV DGGLWLRQV SHDNHG LQ WKH V DQG QRQ K GUR UHQHZDEOHV DUH TXLFNO JURZLQJ LQ WKH VW FHQWXU 1RWH WKDW WKH GHSOR PHQW RI WKHVH JHQHUDWLRQ WHFKQRORJLHV IROORZHG HQDEOLQJ HGHUDO SROLFLHV DQG WHFKQRORJ GHYHORSPHQW²H J QXFOHDU SRZHU UHDFWRUV DQG QDWXUDO JDV FRPELQHG F FOH WXUELQHV²E VHYHUDO GHFDGHV DĂŶLJ ŐĞŶĞƌĂƚŝŽŶ ŽǁŶĞƌƐ ĂŶĚ ŵŽƐƚ ĞĐŽŶŽŵŝƐƚƐ ŵĂŝŶƚĂŝŶ ƚŚĂƚ Ă ƉƌŝĐĞ ŽŶ ĐĂƌďŽŶ ŝƐ ƚŚĞ ŵŽƐƚ ĞĨĨŝĐŝĞŶƚ ŵĞĂŶƐ ŽĨ ĂĐŚŝĞǀŝŶŐ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ͘ DĂŶLJ ŝŶǀĞƐƚŽƌƐ ĂůƌĞĂĚLJ ĂƐƐƵŵĞ Ă ƐŚĂĚŽǁ ƉƌŝĐĞ ŽŶ ĐĂƌďŽŶ ǁŚĞŶ ŵĂŬŝŶŐ ŝŶǀĞƐƚŵĞŶƚ ĚĞĐŝƐŝŽŶƐ͘ ƚĂƚĞƐ ŚĂǀĞ ĂůƐŽ ƚĂŬĞŶ Ă ŶƵŵďĞƌ ŽĨ ĂĐƚŝŽŶƐ ƚŽ ƌĞĚƵĐĞ ĐŽŶǀĞŶƚŝŽŶĂů ƉŽůůƵƚŝŽŶ ĂŶĚ͕ ŵŽƌĞ ƌĞĐĞŶƚůLJ͕ ' ' ĞŵŝƐƐŝŽŶƐ ďĞLJŽŶĚ ǁŚĂƚ ŝƐ ƌĞƋƵŝƌĞĚ ƵŶĚĞƌ ŶĂƚŝŽŶĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ƐƚĂƚƵƚĞƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ŵĂŶLJ ĐŝƚŝĞƐ ŚĂǀĞ ƐĞƚ ĞdžƉůŝĐŝƚ ŐŽĂůƐ ƚŽ ƌĞĚƵĐĞ ' ' ĞŵŝƐƐŝŽŶƐ ĂŶĚ ŚĂǀĞ ĞŶĂĐƚĞĚ ƉŽůŝĐŝĞƐ ƚŽ ŚĞůƉ ŵĞĞƚ ƚŚŽƐĞ ŐŽĂůƐ͘ ŝŶĂůůLJ͕ ƐĞǀĞƌĂů ZdKƐͬ KƐ ŚĂǀĞ ŝƐƐƵĞĚ ƐƚƵĚŝĞƐ ŽŶ ƚŚĞ ĞĨĨĞĐƚƐ ŽĨ ĂĚĚŝŶŐ Ă ĐĂƌďŽŶ ĐŚĂƌŐĞ ƚŽ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚƐ͘ K EĞǁ ŶŐůĂŶĚ ƐƚĂŬĞŚŽůĚĞƌƐ ĂƌĞ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ĚŝƐĐƵƐƐŝŶŐ ĐŚĂŶŐĞƐ ƚŽ ƚŚĞŝƌ K ŵĂƌŬĞƚ ĚĞƐŝŐŶ ƚŚĂƚ ŝŶĐůƵĚĞƐ Ă ĐĂƌďŽŶ ƉƌŝĐĞ͘ϭϭϲ ƚĂƚĞƐ ĂƌĞ ĂůƐŽ ƉƵƌƐƵŝŶŐ Ă ƌĂŶŐĞ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉŽůŝĐŝĞƐ ǁŝƚŚ ĐůŝŵĂƚĞ ĐŽͲďĞŶĞĨŝƚƐ͘ dŚĞƐĞ ĞĨĨŽƌƚƐ ĂƌĞ ŝŵƉŽƌƚĂŶƚ ĂŶĚ ĞĨĨĞĐƚŝǀĞ͕ ďƵƚ ƚŚĞLJ ƚĞŶĚ ƚŽ ƵŶĚĞƌĞƐƚŝŵĂƚĞ ƚŚĞ ǀĂůƵĞ ŽĨ ŽƚŚĞƌ njĞƌŽͲ ĂŶĚ ůŽǁͲĐĂƌďŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ŶƵĐůĞĂƌ ƉŽǁĞƌ ĂŶĚ ĐĂƌďŽŶ ĐĂƉƚƵƌĞ ĂŶĚ ƐƚŽƌĂŐĞ ĨŽƌ ďŽƚŚ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ ĐŽĂů 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŐĞŶĞƌĂƚŝŽŶ͘ dŚĞ ' ' ŵŝƚŝŐĂƚŝŽŶ ďĞŶĞĨŝƚƐ ŽĨ ƚŚĞ ĞdžŝƐƚŝŶŐ ĨůĞĞƚ ŽĨ ŶƵĐůĞĂƌ ƉŽǁĞƌ ƉůĂŶƚƐ͕ ǁŚŝĐŚ ƉƌŽǀŝĚĞ ϲϬ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͕ ŵĞƌŝƚ ĐŽŶƐŝĚĞƌĂƚŝŽŶ ĂƐ ǀĂůƵĂďůĞ͕ ƐƵƐƚĂŝŶĂďůĞ ƌĞƐŽƵƌĐĞƐ͕ ǁŚĞƌĞ ĐƵƌƌĞŶƚ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚ ĚĞƐŝŐŶƐ ĂŶĚ ƌĞŐƵůĂƚŽƌLJͲďĂƐĞĚ ĐŽƐƚͲŽĨͲƐĞƌǀŝĐĞ ǀĂůƵĂƚŝŽŶƐ ƚĞŶĚ ƚŽ ŶŽƚ ͞ƉƌŝĐĞ ŝŶ͟ ƚŚĞƐĞ ǀĂůƵĞƐ͘ LJĚƌŽƉŽǁĞƌ ŝƐ ĂůƐŽ ĐĂƌďŽŶͲĨƌĞĞ ĂŶĚ Ă ŵĂũŽƌ ƐŽƵƌĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƐƚŽƌĂŐĞ ĂƐ ǁĞůů͘ ŝŶĂůůLJ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ĂůƌĞĂĚLJ ŵĂĚĞ ƐŝŐŶŝĨŝĐĂŶƚ ƉƌŽŐƌĞƐƐ ƚŽǁĂƌĚ Ă ŚŝŐŚĞƌͲĞĨĨŝĐŝĞŶĐLJ͕ ůŽǁĞƌͲĐĂƌďŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ĂŶĚ ŵŽƌĞ ƉƌŽŐƌĞƐƐ ŝƐ ĞdžƉĞĐƚĞĚ ŐŽŝŶŐ ĨŽƌǁĂƌĚ͘ dŽ ĨƵůůLJ ƌĞĂůŝnjĞ ƚŚĞ ĐĂƌďŽŶ ƌĞĚƵĐƚŝŽŶƐ ƉŽƚĞŶƚŝĂů ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ĞŶĚ ƵƐĞ͕ ĚŝŐŝƚŝnjĂƚŝŽŶ ƚŽ ĐƌĞĂƚĞ Ă ŵŽƌĞ ĐŽŶŶĞĐƚĞĚ͕ ŝŶƚĞƌĂĐƚŝǀĞ͕ ĂŶĚ ŝŶƚĞŐƌĂƚĞĚ ƐLJƐƚĞŵ ǁŝůů ďĞ ĞƐƐĞŶƚŝĂů͘ ĞĐĂƌďŽŶŝnjŝŶŐ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ǁŝůů ĂůƐŽ ƌĞƋƵŝƌĞ ŝŶĐƌĞĂƐĞĚ ĐĂƌďŽŶͲĨƌĞĞ ĞŶĞƌŐLJ͖ ŝŵƉƌŽǀĞĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͖ ĂĐƚŝǀĞ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ŽĨ ĞŶĚͲƵƐĞ ĨĂĐŝůŝƚŝĞƐ͖ ĂŶĚ ŝŵƉƌŽǀĞĚ ŐƌŝĚ ĐŽŶƚƌŽůƐ͕ ŝŶĐůƵĚŝŶŐ ŵŽƌĞ ƌĞƐƉŽŶƐŝǀĞ ĐĞŶƚƌĂůŝnjĞĚ ŐĞŶĞƌĂƚŝŽŶͶĂůů ŽĨ ǁŚŝĐŚ ĐĂŶ ďĞ ŽƉƚŝŵŝnjĞĚ ďLJ ĚĂƚĂ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƐLJƐƚĞŵƐ͘ϭϭϳ Electricity Dependency Is a National Security Vulnerability tŝƚŚŽƵƚ ĂĐĐĞƐƐ ƚŽ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ͕ ŵƵĐŚ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ ĂŶĚ Ăůů ĞůĞĐƚƌŝĐŝƚLJͲĞŶĂďůĞĚ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂƌĞ Ăƚ ƌŝƐŬ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ŽƵƌ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ĂŶĚ ŚŽŵĞůĂŶĚ ĚĞĨĞŶƐĞ ŶĞƚǁŽƌŬƐ͕ ǁŚŝĐŚ ĚĞƉĞŶĚ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ĐĂƌƌLJ ŽƵƚ ƚŚĞŝƌ ŵŝƐƐŝŽŶƐ ƚŽ ĞŶƐƵƌĞ ƚŚĞ ƐĂĨĞƚLJ ĂŶĚ ƉƌŽƐƉĞƌŝƚLJ ŽĨ ƚŚĞ ŵĞƌŝĐĂŶ ƉĞŽƉůĞ͘ dŚĞ ĞŶƚĞƌ ĨŽƌ EĂǀĂů ŶĂůLJƐĞƐ ŝŶ Ă EŽǀĞŵďĞƌ ϮϬϭϱ ƌĞƉŽƌƚ ŽŶ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ĂŶĚ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ŶŽƚĞĚ ƚŚĂƚ ͞ ƐƐƵƌŝŶŐ ƚŚĂƚ ǁĞ ŚĂǀĞ ƌĞůŝĂďůĞ͕ ĂĐĐĞƐƐŝďůĞ͕ ƐƵƐƚĂŝŶĂďůĞ͕ ĂŶĚ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŝƐ Ă ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ŝŵƉĞƌĂƚŝǀĞ͘ KƵƌ ŝŶĐƌĞĂƐĞĚ ƌĞůŝĂŶĐĞ ŽŶ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŝŶ ĞǀĞƌLJ ƐĞĐƚŽƌ ŽĨ ŽƵƌ ůŝǀĞƐ͕ ŝŶĐůƵĚŝŶŐ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͕ ĐŽŵŵĞƌĐĞ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ŚĞĂůƚŚ ĂŶĚ ĞŵĞƌŐĞŶĐLJ ƐĞƌǀŝĐĞƐ͕ ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ ŚŽŵĞůĂŶĚ ĂŶĚ ŶĂƚŝŽŶĂů ĚĞĨĞŶƐĞ͕ ŵĞĂŶƐ ƚŚĂƚ ůĂƌŐĞͲ ƐĐĂůĞ ĚŝƐƌƵƉƚŝŽŶƐ ŽĨ ĞůĞĐƚƌŝĐĂů ƉŽǁĞƌ ǁŝůů ŚĂǀĞ ŝŵŵĞĚŝĂƚĞ ĐŽƐƚƐ ƚŽ ŽƵƌ ĞĐŽŶŽŵLJ ĂŶĚ ĐĂŶ ƉůĂĐĞ ŽƵƌ ƐĞĐƵƌŝƚLJ Ăƚ ƌŝƐŬ͘ tŚĞƚŚĞƌ ŝƚ ŝƐ ƚŚĞ ĂďŝůŝƚLJ ŽĨ ĨŝƌƐƚ ƌĞƐƉŽŶĚĞƌƐ ƚŽ ĂŶƐǁĞƌ ƚŚĞ ĐĂůů ƚŽ ĞŵĞƌŐĞŶĐŝĞƐ ŚĞƌĞ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ Žƌ ƚŚĞ ƌĞĂĚŝŶĞƐƐ ĂŶĚ ĐĂƉĂďŝůŝƚLJ ŽĨ ŽƵƌ ŵŝůŝƚĂƌLJ ƐĞƌǀŝĐĞ ŵĞŵďĞƌƐ ƚŽ ŽƉĞƌĂƚĞ ĞĨĨĞĐƚŝǀĞůLJ ŝŶ ƚŚĞ h͘ ͘ Žƌ ĚĞƉůŽLJĞĚ ŝŶ ƚŚĞĂƚĞƌ͕ ƚŚĞƐĞ ŵŝƐƐŝŽŶƐ ĂƌĞ ĚŝƌĞĐƚůLJ ůŝŶŬĞĚ ƚŽ ĂƐƐƵƌĞĚ ĚŽŵĞƐƚŝĐ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ͘͟ϭϭϴ Ɛ ǁĞ ĐŽŶƐŝĚĞƌ ƚŚĞ ĐĞŶƚƌĂů ƌŽůĞ ĞůĞĐƚƌŝĐŝƚLJ ƉůĂLJƐ ŝŶ ƚŚĞ ϮϭƐƚ ĐĞŶƚƵƌLJ ĞĐŽŶŽŵLJ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ͛Ɛ ďƌŽĂĚĞƌ ƌŽůĞ ŝŶ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ͕ ŝƚ ŝƐ ŝŶƐƚƌƵĐƚŝǀĞ ƚŽ ďƌŝĞĨůLJ ƌĞǀŝĞǁ ƚŚĞ h͘ ͘ ƉŽůŝĐLJ ƌĞƐƉŽŶƐĞ ƚŽ Žŝů ĚĞƉĞŶĚĞŶĐĞ͘ ƐŝŶŐůĞ ĂĐƚŝŽŶͶƚŚĞ ϭϵϳϯ KƌŐĂŶŝnjĂƚŝŽŶ ŽĨ WĞƚƌŽůĞƵŵ džƉŽƌƚŝŶŐ ŽƵŶƚƌŝĞƐ Žŝů ĞŵďĂƌŐŽͶĞdžƉŽƐĞĚ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ͛Ɛ ĚĞƉĞŶĚĞŶĐĞ ŽŶ Ă ƐŝŶŐůĞ ĐŽŵŵŽĚŝƚLJ͘ ŝŶĐĞ ƚŚĞ ĞŵďĂƌŐŽ͕ ƌĞĚƵĐŝŶŐ ƚŚĞ ĐŽƵŶƚƌLJ͛Ɛ ŽǀĞƌĂůů ĚĞƉĞŶĚĞŶĐĞ ŽŶ Žŝů͕ ĂƐ ǁĞůů ĂƐ ŝŵƉŽƌƚĞĚ Žŝů͕ ŚĂƐ ďĞĞŶ Ă ĨƵŶĚĂŵĞŶƚĂů ĐŽŵƉŽŶĞŶƚ ŽĨ h͘ ͘ ŶĂƚŝŽŶĂů ĂŶĚ ĞŶĞƌŐLJ ƐĞĐƵƌŝƚLJ͘ ƐƵƐƚĂŝŶĞĚ͕ ϰϬͲLJĞĂƌ ĞĚĞƌĂů ƉŽůŝĐLJ ĐŽŵŵŝƚŵĞŶƚ ŚĂƐ ĞŶĂďůĞĚ Ă ƌŽďƵƐƚ͕ ŐůŽďĂů Žŝů ŵĂƌŬĞƚ͖ Ă ĚŝǀĞƌƐŝƚLJ ŽĨ ƉĞƚƌŽůĞƵŵ ƐƵƉƉůŝĞƌƐ͖ ƚŚĞ ǁŽƌůĚ͛Ɛ ůĂƌŐĞƐƚ ƐƚƌĂƚĞŐŝĐ Žŝů ƌĞƐĞƌǀĞ͖ ŝŶƚĞƌŶĂƚŝŽŶĂů ŵĞĐŚĂŶŝƐŵƐ ĨŽƌ ĐŽŶĐĞƌƚĞĚ ĂĐƚŝŽŶ ŝŶ ƚŚĞ ĞǀĞŶƚ ŽĨ ĚŝƐƌƵƉƚŝŽŶƐ͖ ŝŶĐƌĞĂƐĞĚ ĚŽŵĞƐƚŝĐ Žŝů ƉƌŽĚƵĐƚŝŽŶ͖ Ă ƐŚŝĨƚ ĂǁĂLJ ĨƌŽŵ ŽŝůͲ ĨŝƌĞĚ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͖ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ǀĞŚŝĐůĞƐ͖ ĂŶĚ Ă ŚŽƐƚ ŽĨ ŽƚŚĞƌ ďĞŶĞĨŝƚƐ͘ dŚĞ h͘ ͘ ŐŽǀĞƌŶŵĞŶƚ ŝƐ ĂůƐŽ ŵŽĚĞƌŶŝnjŝŶŐ ŝƚƐ ƚƌĂƚĞŐŝĐ WĞƚƌŽůĞƵŵ ZĞƐĞƌǀĞ ƚŽ ŵŽƌĞ ĂƉƉƌŽƉƌŝĂƚĞůLJ ŵĂŶĂŐĞ ŝƚƐ ǀĂůƵĞ ĂƐ ĂƌƚŝĐƵůĂƚĞĚ ŝŶ ƐƚĂƚƵƚĞͶƌĞĚƵĐŝŶŐ ƚŚĞ ŚĂƌŵ ƚŽ ƚŚĞ h͘ ͘ ĞĐŽŶŽŵLJ ĨƌŽŵ Žŝů ƉƌŝĐĞ ƐŚŽĐŬƐ ĂŶĚ ŐůŽďĂů ƐƵƉƉůLJ ĚŝƐƌƵƉƚŝŽŶƐ͘ dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŶŽǁ ŶĞĞĚƐ ĂŶ ĂŶĂůŽŐŽƵƐ ĂƉƉƌŽĂĐŚ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ͘ hŶůŝŬĞ ƚŚĞ ƐƵƉƉůLJ ŽĨ Žŝů ŝŶ ƚŚĞ ϭϵϳϬƐ͕ ŵŽƐƚ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞĚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ŐĞŶĞƌĂƚĞĚ ĚŽŵĞƐƚŝĐĂůůLJ ;ƚŚŽƵŐŚ ĐƵƌƌĞŶƚ ĐƌŽƐƐͲ ďŽƌĚĞƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ďĞƚǁĞĞŶ ĂŶĂĚĂ ĂŶĚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐͶĂŶĚ ůŝŬĞůLJ DĞdžŝĐŽ ŝŶ ƚŚĞ ĨƵƚƵƌĞͶĐĂŶ ŵĂŬĞ ŝŶĐƌĞĂƐŝŶŐůLJ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽŶƚƌŝďƵƚŝŽŶƐ ƚŽ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ŝŶ ƚŚĞ ĨƵƚƵƌĞͿ͘ Ɛ ŝŶ ƚŚĞ ϭϵϳϯ KƌŐĂŶŝnjĂƚŝŽŶ ŽĨ WĞƚƌŽůĞƵŵ džƉŽƌƚŝŶŐ ŽƵŶƚƌŝĞƐ ĞŵďĂƌŐŽ͕ ĚŝƐƌƵƉƚŝŽŶƐ ŝŶ ƚŚĞ ĨůŽǁ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ǁŽƵůĚ ŚĂǀĞ ƉƌŽĨŽƵŶĚ ĞĨĨĞĐƚƐ ŽŶ ƚŚĞ ĞĐŽŶŽŵLJ ĂŶĚ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ͘ hŶůŝŬĞ Žŝů͕ ŚŽǁĞǀĞƌ͕ ĞůĞĐƚƌŝĐŝƚLJ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ĐĂŶŶŽƚ ĐƵƌƌĞŶƚůLJ ďĞ ƐƚŽƌĞĚ Ăƚ ƐĐĂůĞ͘ Ɛ h͘ ͘ ƉŽůŝĐŝĞƐ ĞƐƚĂďůŝƐŚ ŶĞǁ ƉĂƚŚǁĂLJƐ ƚŽ ĞŶŚĂŶĐĞ ĞĐŽŶŽŵŝĐ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŽďũĞĐƚŝǀĞƐ͕ ŝƚ ŝƐ ĂůƐŽ ĞƐƐĞŶƚŝĂů ƚŚĂƚ ƚŚĞƐĞ ƉŽůŝĐŝĞƐ ǁŽƌŬ ŝŶ ĐŽŶĐĞƌƚ ǁŝƚŚ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ŽďũĞĐƚŝǀĞƐ͘ ŽŝŶŐ ƐŽ ŝƐ ĐŚĂůůĞŶŐŝŶŐ ďƵƚ ĂĐŚŝĞǀĂďůĞ͘ The Threat Environment Is Changing dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĨĂĐĞƐ Ă ƌĂŶŐĞ ŽĨ ŐƌŽǁŝŶŐ ƚŚƌĞĂƚƐ ƚŽ ŝƚƐ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƐĞĐƵƌŝƚLJ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ĐLJďĞƌ ĂŶĚ ƉŚLJƐŝĐĂů ƚŚƌĞĂƚƐ͕ ŶĂƚƵƌĂů ĚŝƐĂƐƚĞƌƐ ĂŶĚ ŝŶĐƌĞĂƐĞĚ ĞdžƚƌĞŵĞ ǁĞĂƚŚĞƌ ĞǀĞŶƚƐ ĚƵĞ ƚŽ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͕ ĂŐŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚŶĞƐƐ ŽĨ ĂŶ ŝŶĐƌĞĂƐŝŶŐůLJ ĚĂƚĂͲĚƌŝǀĞŶ ĞĐŽŶŽŵLJ͕ ĂŶĚ Ă ĐŚĂŶŐŝŶŐ ƚĞĐŚŶŝĐĂů ĂŶĚ ŽƉĞƌĂƚŝŽŶĂů ĞŶǀŝƌŽŶŵĞŶƚ͘ DĂŶLJ ŽĨ ƚŚĞƐĞ ŝƐƐƵĞƐ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s͕ Ensuring Electricity System Reliability Security and Resilience LJďĞƌƐĞĐƵƌŝƚLJ ŝƐ Ă ƉĂƌƚŝĐƵůĂƌ ĐŽŶĐĞƌŶ ĨŽƌ ŶĂƚŝŽŶĂů ĂŶĚ ŚŽŵĞůĂŶĚ ƐĞĐƵƌŝƚLJ͘ LJďĞƌ ĂƚƚĂĐŬƐ ŝŶĐƌĞĂƐŝŶŐůLJ ŵĂLJ ƌĞƐĞŵďůĞ ĐŽŶǀĞŶƚŝŽŶĂů ĂƚƚĂĐŬƐ ƚŚĂƚ ĂƌĞ ĚĞƐŝŐŶĞĚ ƚŽ ĚŝƐƌƵƉƚ ƉŚLJƐŝĐĂů ƐLJƐƚĞŵƐ͘ DĂůŝĐŝŽƵƐ ĐLJďĞƌ ĂĐƚŝǀŝƚLJ ĂŐĂŝŶƐƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂŶĚ ŝƚƐ ƐƵƉƉůŝĞƌƐ ĂƌĞ ŐƌŽǁŝŶŐ ŝŶ ƐŽƉŚŝƐƚŝĐĂƚŝŽŶ͘ dŚĞ ĐLJďĞƌ ĂƚƚĂĐŬ ŽŶ hŬƌĂŝŶĞ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ŝŶ ĞĐĞŵďĞƌ ϮϬϭϱ ƐĞƌǀĞƐ ĂƐ Ă ǁĂƌŶŝŶŐ͘ dŚƌĞĞ ŽĨ hŬƌĂŝŶĞ͛Ɛ ƌĞŐŝŽŶĂů ĞůĞĐƚƌŝĐŝƚLJ ĚŝƐƚƌŝďƵƚŝŽŶ ĐŽŵƉĂŶŝĞƐ ĞdžƉĞƌŝĞŶĐĞĚ ƐŝŵƵůƚĂŶĞŽƵƐ ĐLJďĞƌ ĂƚƚĂĐŬƐ ŽŶ ƚŚĞŝƌ ĐŽŵƉƵƚĞƌ ĂŶĚ ĐŽŶƚƌŽů ƐLJƐƚĞŵƐ͕ ƉƌĞĐŝƉŝƚĂƚŝŶŐ ƚŚĞ ĚŝƐĐŽŶŶĞĐƚŝŽŶ ŽĨ ŵƵůƚŝƉůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵďƐƚĂƚŝŽŶƐ͘ dŚĞ ƌĞƐƵůƚ ǁĂƐ ƐĞǀĞƌĂů ŽƵƚĂŐĞƐ ƚŚĂƚ ĐĂƵƐĞĚ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϮϮϱ͕ϬϬϬ ĐƵƐƚŽŵĞƌƐ ŝŶ ƚŚƌĞĞ ĚŝĨĨĞƌĞŶƚ ĚŝƐƚƌŝďƵƚŝŽŶͲůĞǀĞů ƐĞƌǀŝĐĞ ƚĞƌƌŝƚŽƌŝĞƐ ƚŽ ůŽƐĞ ƉŽǁĞƌ ĨŽƌ ŚŽƵƌƐ͘ϭϭϵ KŶĞ ŽĨ ƚŚĞ ŚĂĐŬĞƌƐ͛ ƐƚƌŽŶŐĞƐƚ ĐĂƉĂďŝůŝƚŝĞƐ ǁĂƐ ƚŚĞŝƌ ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ƚŚĞ ůŽŶŐͲƚĞƌŵ ƌĞĐŽŶŶĂŝƐƐĂŶĐĞ ŽƉĞƌĂƚŝŽŶƐ ƌĞƋƵŝƌĞĚ ƚŽ ůĞĂƌŶ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ ĂŶĚ ĞdžĞĐƵƚĞ Ă ŚŝŐŚůLJ ƐLJŶĐŚƌŽŶŝnjĞĚ͕ ŵƵůƚŝͲƐƚĂŐĞ͕ ŵƵůƚŝͲƐŝƚĞ ĂƚƚĂĐŬ͘ dŚĞƐĞ ŚŝŐŚůLJ ƚĂƌŐĞƚĞĚ͕ ůŽŶŐͲƚĞƌŵ ĐĂŵƉĂŝŐŶƐ͕ ĐĂůůĞĚ advanced persistent threats͕ ĂƌĞ ŐĞŶĞƌĂůůLJ ĚĞƐŝŐŶĞĚ ƚŽ ƐĂƚŝƐĨLJ ƚŚĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ŽĨ ŝŶƚĞƌŶĂƚŝŽŶĂů ĞƐƉŝŽŶĂŐĞ ĂŶĚͬŽƌ ƐĂďŽƚĂŐĞ͘ϭϮϬ dŚŝƐ ƚLJƉĞ ŽĨ ǁĞůů Ͳ ĨƵŶĚĞĚ ĂŶĚ ƐƚĂĨĨĞĚ ĂƚƚĂĐŬ ŚĂƐ ůŽŶŐ ǁŽƌƌŝĞĚ h͘ ͘ ƐĞĐƵƌŝƚLJ ŽĨĨŝĐŝĂůƐ͘ DŝĐŚĂĞů ͘ ZŽŐĞƌƐ͕ ŽŵŵĂŶĚĞƌ͕ h͘ ͘ LJďĞƌ ŽŵŵĂŶĚ ĂŶĚ ŝƌĞĐƚŽƌ͕ EĂƚŝŽŶĂů ĞĐƵƌŝƚLJ ŐĞŶĐLJ͕ ŝŶ ƚĞƐƚŝŵŽŶLJ ďĞĨŽƌĞ ƚŚĞ ŽƵƐĞ ĞůĞĐƚ ŽŵŵŝƚƚĞĞ ŽŶ ŶƚĞůůŝŐĞŶĐĞ ŝŶ KĐƚŽďĞƌ ϮϬϭϰ͕ ŶŽƚĞĚ ƚŚĂƚ͕ ͞dŚĞƌĞ ƐŚŽƵůĚŶ͛ƚ ďĞ ĂŶLJ ĚŽƵďƚ ŝŶ ŽƵƌ ŵŝŶĚƐ ƚŚĂƚ ƚŚĞƌĞ ĂƌĞ ŶĂƚŝŽŶͲƐƚĂƚĞƐ ĂŶĚ ŐƌŽƵƉƐ ƚŚĂƚ ŚĂǀĞ ƚŚĞ ĐĂƉĂďŝůŝƚLJ ΀ƚŽ ĚŽ ƚŚĂƚ͕΁ ƚŽ ĞŶƚĞƌ ŽƵƌ ƐLJƐƚĞŵƐ͘͘͘ĂŶĚ ƚŽ ƐŚƵƚ ĚŽǁŶ͘͘͘ŽƵƌ ĂďŝůŝƚLJ ƚŽ ŽƉĞƌĂƚĞ ŽƵƌ ďĂƐŝĐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ǁŚĞƚŚĞƌ ŝƚ͛Ɛ ŐĞŶĞƌĂƚŝŶŐ ƉŽǁĞƌ͙ŵŽǀŝŶŐ ǁĂƚĞƌ ĂŶĚ ĨƵĞů͙͟ϭϮϭ ŶŽƚŚĞƌ ĞĨĨĞĐƚŝǀĞ ĨŽƌŵ ŽĨ ĐŽŽƌĚŝŶĂƚĞĚ ĐLJďĞƌ ĂƚƚĂĐŬ ŝƐ ƚŚƌŽƵŐŚ ƚŚĞ ƵƐĞ ŽĨ Ă ďŽƚŶĞƚ͘ dŚĞ DŝƌĂŝ ďŽƚŶĞƚ͕ ǁŚŝĐŚ ŝŶǀŽůǀĞƐ Ă ŐůŽďĂů ŶĞƚǁŽƌŬ ŽĨ ŝŶĨĞĐƚĞĚ Žd ĚĞǀŝĐĞƐ͕ ǁĂƐ ƵƐĞĚ ƚŽ ĂƚƚĂĐŬ ŵƵůƚŝƉůĞ ƚĂƌŐĞƚƐ ŽŶ KĐƚŽďĞƌ Ϯϭ͕ ϮϬϭϲ͘ϭϮϮ dŚŝƐ ǁĂƐ ƚŚĞ ůĂƌŐĞƐƚ ƌĞĐŽƌĚĞĚ ĚŝƐƚƌŝďƵƚĞĚ ĚĞŶŝĂů ŽĨ ƐĞƌǀŝĐĞ ĂƚƚĂĐŬ ŝŶ ŚŝƐƚŽƌLJ͘ ƚƚĂĐŬƐ ĂŐĂŝŶƐƚ ŶƚĞƌŶĞƚ ƐLJƐƚĞŵƐ ƚŚĂƚ ƐƵƉƉŽƌƚ ƚŚĞ h͘ ͘ ƉŽǁĞƌ ŐƌŝĚ͕ ůŝŬĞ ƚŚĞ DŝƌĂŝ ďŽƚŶĞƚ ĂƚƚĂĐŬ͕ ĂƌĞ ŽĨ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽŶĐĞƌŶ͘ Ŷ ŵŽƐƚ ĐĂƐĞƐ͕ Žd ĚĞǀŝĐĞƐ ĂƌĞ ĞĂƐŝĞƌ ƚŽ ŝŶĨĞĐƚ ƚŚĂŶ ƚƌĂĚŝƚŝŽŶĂů ĐŽŵƉƵƚĞƌ ƐLJƐƚĞŵƐ ĚƵĞ ƚŽ ƚŚĞ ůĂĐŬ ŽĨ ĞŵďĞĚĚĞĚ ƐĞĐƵƌŝƚLJ ĂŶĚ ƚŚĞ ůŝŵŝƚĞĚ ĂďŝůŝƚLJ ƚŽ ƉĂƚĐŚ ŬŶŽǁŶ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ͘ tŝƚŚ ƚŚĞ ƌĂƉŝĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ Žd ĚĞǀŝĐĞƐ ǁŽƌůĚǁŝĚĞ͕ ŝŶĐůƵĚŝŶŐ ƐŵĂƌƚ ƉƌŝŶƚĞƌƐ͕ ŚŽŵĞ ƌŽƵƚĞƌƐ͕ ŵŽŶŝƚŽƌƐ ĂŶĚ ĐĂŵĞƌĂƐ͕ ĂŶĚ ƚŚŽƵƐĂŶĚƐ ŽĨ ŽƚŚĞƌƐ͕ ƚŚĞ ŽƉƉŽƌƚƵŶŝƚLJ ĨŽƌ ŚĂĐŬĞƌƐ ƚŽ ĚŝƐƌƵƉƚ ƚŚĞ ĨůŽǁƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ŐƌŽǁŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚůLJ͘ dŚĞ ƌĞůŝĂŶĐĞ ŽĨ ŽƵƌ ĐƌŝƚŝĐĂů ĞŶĞƌŐLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƉůĂĐĞƐ Ă ǀĞƌLJ ŚŝŐŚ ƉƌĞŵŝƵŵ ŽŶ Ă ƌĞůŝĂďůĞ͕ ŵŽĚĞƌŶ͕ ĂŶĚ ŚĂƌĚĞŶĞĚ ĞůĞĐƚƌŝĐ ŐƌŝĚ͕ ĂƐ ǁĞůů ĂƐ ŽƵƌ ĞĨĨŽƌƚƐ ƚŽ ƵŶĚĞƌƐƚĂŶĚ͕ ĚĞǀĞůŽƉ͕ ĂŶĚ ĞǀŽůǀĞ ŽƵƌ ĞŵĞƌŐĞŶĐLJ ƌĞƐƉŽŶƐĞ ĐĂƉĂďŝůŝƚLJ ƚŽ ĂĚĚƌĞƐƐ ĞǀĞƌͲĐŚĂŶŐŝŶŐ ĂŶĚ ĞǀŽůǀŝŶŐ ĐLJďĞƌ ƚŚƌĞĂƚƐ͘ Ɛ Ă ƌĞƐƵůƚ͕ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ ĨĂĐĞ ƐŝŐŶŝĨŝĐĂŶƚ ĐŚĂůůĞŶŐĞƐ ŝŶ ƐĞĐƵƌŝŶŐ ƚŚĞŝƌ d ĂŶĚ Kd ŶĞƚǁŽƌŬƐ ĂŶĚ ƐLJƐƚĞŵƐ ĨƌŽŵ ŵĂŶLJ ĐLJďĞƌ ĂƚƚĂĐŬ ǀĞĐƚŽƌƐ ;ƐĞĞ ŝŐƵƌĞ ϭͲϭϱͿ͘ hƚŝůŝƚŝĞƐ ĂůƐŽ ĚĞƉĞŶĚ ŽŶ ĞĂĐŚ ŽƚŚĞƌ͖ ůĂƌŐĞ ĂŶĚ ƐŵĂůů ƉƵďůŝĐ ĂŶĚ ƉƌŝǀĂƚĞ ƵƚŝůŝƚŝĞƐ ŶĞĞĚ ƐƚƌŽŶŐ ĐLJďĞƌƐĞĐƵƌŝƚLJ ƚĞĐŚŶŝƋƵĞƐ ĂŶĚ ƉƌŽĐĞƐƐĞƐ͘ 'ŝǀĞŶ ƚŚĂƚ ͞ƐLJƐƚĞŵƐ ĂƌĞ ŽŶůLJ ĂƐ ƐƚƌŽŶŐ ĂƐ ƚŚĞŝƌ ǁĞĂŬĞƐƚ ůŝŶŬƐ͕͟ϭϮϯ ƐĞĐƚŽƌͲǁŝĚĞ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ŐƌŝĚ ƐĞĐƵƌŝƚLJ ǁŝůů ďĞ ĞƐƐĞŶƚŝĂů ĂŶĚ ƌĞƋƵŝƌĞ ĐŽůůĞĐƚŝǀĞ ĂĐƚŝŽŶ ďŽƚŚ ǁŝƚŚŝŶ ƚŚĞ ŝŶĚƵƐƚƌLJ ŝƚƐĞůĨ ĂŶĚ ǁŝƚŚ ŐŽǀĞƌŶŵĞŶƚ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 1-15 Example Cyberattack Vectors for an Electric Utility 124 7KHUH DUH PDQ ZD V WR FRPPXQLFDWH ZLWK D FRQWURO V VWHP QHWZRUN DQG FRPSRQHQWV XVLQJ D YDULHW RI FRPSXWLQJ DQG FRPPXQLFDWLRQV HTXLSPHQW H YXOQHUDELOLWLHV LQFOXGH XQSDWFKHG QHWZRUNV XQYHWWHG YHQGRU DFFHVV DFFHVV WR WKH SXEOLF QWHUQHW DQG LQVLGHU WKUHDWV Homeland Security Requires a Resilient Power Grid ůŝƐƚƐ ĨŝǀĞ ďĂƐŝĐ ŵŝƐƐŝŽŶƐ ŝŶ ŝƚƐ ͞ϮϬϭϰ YƵĂĚƌĞŶŶŝĂů ŽŵĞůĂŶĚ ĞĐƵƌŝƚLJ ZĞǀŝĞǁ͕͟ ƚŚƌĞĞ ŽĨ ǁŚŝĐŚ ĚŝƌĞĐƚůLJ ƌĞůĂƚĞ ƚŽ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂŶĚ ƚŚĞ ŽƚŚĞƌ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƐĞĐƚŽƌƐ ƚŚĂƚ ĚĞƉĞŶĚ ŽŶ ŝƚ͗ ƉƌĞǀĞŶƚŝŶŐ ƚĞƌƌŽƌŝƐŵ ĂŶĚ ĞŶŚĂŶĐŝŶŐ ƐĞĐƵƌŝƚLJ͕ ƐĂĨĞŐƵĂƌĚŝŶŐ ĂŶĚ ƐĞĐƵƌŝŶŐ ĐLJďĞƌƐƉĂĐĞ͕ ĂŶĚ ƐƚƌĞŶŐƚŚĞŶŝŶŐ ŶĂƚŝŽŶĂů ƉƌĞƉĂƌĞĚŶĞƐƐ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ͘ dŚĞ ŽƉĞƌĂƚŝŽŶĂů ĐŽŵƉŽŶĞŶƚƐ ŽĨ ĞĚĞƌĂů ĂŶĚ ƚĂƚĞ ŚŽŵĞůĂŶĚ ƐĞĐƵƌŝƚLJ ĂŐĞŶĐŝĞƐ ĂƌĞ ŚĞĂǀŝůLJ ĚĞƉĞŶĚĞŶƚ ŽŶ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƚŽ ĨƵŶĐƚŝŽŶ͘ dŚĞ ƵƐƚŽŵƐ ĂŶĚ ŽƌĚĞƌ WƌŽƚĞĐƚŝŽŶ ; WͿ ĂŐĞŶĐLJ ǁŝƚŚŝŶ ŽĨĨĞƌƐ Ă ĐĂƐĞ ŝŶ ƉŽŝŶƚ͘ dŽ ƐĞĐƵƌĞ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂĐƌŽƐƐ ƌŽƵŐŚůLJ ϴ͕ϬϬϬ ŵŝůĞƐ ŽĨ ůĂŶĚ ĂŶĚ ĐŽĂƐƚĂů ďŽƌĚĞƌƐͶǁŚŝůĞ ƐŝŵƵůƚĂŶĞŽƵƐůLJ ĞŶƐƵƌŝŶŐ Ă ƐŵŽŽƚŚ ĨůŽǁ ŽĨ ůĞŐĂů ƚƌĂĚĞ ĂŶĚ ƚƌĂǀĞů ĨƌŽŵ ƚŚĞ ďŽƌĚĞƌƐ ƚŚƌŽƵŐŚ ƚŚĞ ĐŽƵŶƚƌLJ͛Ɛ ŝŶƚĞƌŝŽƌͶ W ƵƚŝůŝnjĞƐ Ă ǀĂƐƚ ŶĞƚǁŽƌŬ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲĚĞƉĞŶĚĞŶƚ ĨĂĐŝůŝƚŝĞƐ͕ ƐĞŶƐŽƌƐ͕ ĂŶĚ ŽƚŚĞƌ ŽƉĞƌĂƚŝŽŶĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ ZĂĚŝĂƚŝŽŶ ƉŽƌƚĂů ŵŽŶŝƚŽƌƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ĂƌĞ ĚĞƉůŽLJĞĚ ďLJ W ŶĂƚŝŽŶǁŝĚĞ ;Ăƚ ƐĞĂƉŽƌƚƐ͕ ůĂŶĚ ďŽƌĚĞƌ ƉŽƌƚƐ ŽĨ ĞŶƚƌLJ͕ ĂŶĚ ŽƚŚĞƌ ůŽĐĂƚŝŽŶƐͿ ƚŽ ƐĂĨĞŐƵĂƌĚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĨƌŽŵ ŶƵĐůĞĂƌ ĚĞǀŝĐĞƐ ĂŶĚ ĚŝƌƚLJ ďŽŵďƐ͘ϭϮϱ dŚĞ ŵŽŶŝƚŽƌƐ ĂŶĚ ŶĞƚǁŽƌŬƐ ƚŽ ǁŚŝĐŚ ƚŚĞLJ ĂƌĞ ůŝŶŬĞĚ ƌĞůLJ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ĨƵŶĐƚŝŽŶ͘ KƚŚĞƌ ĐŽŵƉŽŶĞŶƚƐ ŽĨ ƚŚĞ ŶĞƚǁŽƌŬ͕ ĞƐƉĞĐŝĂůůLJ ƚŚĞ dƌĂŶƐƉŽƌƚĂƚŝŽŶ ĞĐƵƌŝƚLJ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ĂƌĞ ĞƋƵĂůůLJ ƌĞůŝĂŶƚ ŽŶ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƚŽ ĐŽŶĚƵĐƚ ƚŚĞŝƌ ŽƉĞƌĂƚŝŽŶƐ͘ dŚŝƐ ŝƐ ĂůƐŽ ƚŚĞ ĐĂƐĞ ĨŽƌ ŚŽŵĞůĂŶĚ ƐĞĐƵƌŝƚLJ ĂŐĞŶĐŝĞƐ ĂŶĚ ĞŵĞƌŐĞŶĐLJ ŽƉĞƌĂƚŝŽŶƐ ĐĞŶƚĞƌƐ ĨŽƌ ƚĂƚĞ͕ ůŽĐĂů͕ ƚƌŝďĂů͕ ĂŶĚ ƚĞƌƌŝƚŽƌŝĂů ŐŽǀĞƌŶŵĞŶƚƐ͕ ǁŚŝĐŚ ƚLJƉŝĐĂůůLJ ŚĂǀĞ ĞŵĞƌŐĞŶĐLJ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂďŝůŝƚŝĞƐ ƚŚĂƚ ǁŝůů ďĞ Ăƚ ŝŶĐƌĞĂƐŝŶŐ ƌŝƐŬ ;ŝŶ ƚĞƌŵƐ ŽĨ ŐĞŶĞƌĂƚŽƌ ďƵƌŶŽƵƚ ĂŶĚ ĨƵĞů ƌĞƐƵƉƉůLJͿ ŝĨ ůŽŶŐͲĚƵƌĂƚŝŽŶ͕ ǁŝĚĞͲĂƌĞĂ ƉŽǁĞƌ ŽƵƚĂŐĞƐ ŽĐĐƵƌ͘ ĂƚĂƐƚƌŽƉŚĞƐ ĐĂƵƐĞĚ ďLJ ŚƵŵĂŶ Žƌ ŶĂƚƵƌĂů ŚĂnjĂƌĚƐ ĞŶƚĂŝů ƚǁŝŶ ĐŚĂůůĞŶŐĞƐ ĨŽƌ ŚŽŵĞůĂŶĚ ƐĞĐƵƌŝƚLJ͕ ďŽƚŚ ŽĨ ǁŚŝĐŚ ǁŝůů ƉůĂĐĞ Ă ƉƌĞŵŝƵŵ ŽŶ ŐƌŝĚ ƌĞƐŝůŝĞŶĐĞ͘ ŝƌƐƚ͕ ĂƐ ƌĞǀĞĂůĞĚ ŝŶ ƚŚĞ ůĞĂƌ WĂƚŚͲ s ĂŶĚ ĂƐĐĂĚŝĂ ZŝƐŝŶŐ ĞdžĞƌĐŝƐĞƐ ŝŶ ϮϬϭϲ͕ ƐĞǀĞƌĞ ĞĂƌƚŚƋƵĂŬĞƐ ĂŶĚ ŽƚŚĞƌ ĐĂƚĂƐƚƌŽƉŚŝĐ ĞǀĞŶƚƐ ǁŝůů ƉŽƐĞ ŝŵŵĞĚŝĂƚĞ ƚŚƌĞĂƚƐ ƚŽ ƉƵďůŝĐ ŚĞĂůƚŚ ĂŶĚ ƐĂĨĞƚLJ ĂƐ ǁĂƚĞƌ ĂŶĚ ǁĂƐƚĞǁĂƚĞƌ ƐLJƐƚĞŵƐ͕ ŚŽƐƉŝƚĂůƐ͕ ĂŶĚ ŽƚŚĞƌ ĐƌŝƚŝĐĂů ĂƐƐĞƚƐ ĂƌĞ ĚĂŵĂŐĞĚ ĂŶĚ ůŽƐĞ ƉŽǁĞƌ͘ ĞĐŽŶĚ͕ ƌĞƐƉŽŶƐĞ ĂŶĚ ƌĞĐŽǀĞƌLJ ŽƉĞƌĂƚŝŽŶƐ ǁŝůů ďĞ ĚŝƐƌƵƉƚĞĚ ƵŶůĞƐƐ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ĂǀĂŝůĂďůĞ ƚŽ ŚĞůƉ ƐƵƉƉŽƌƚ ƚŚĞ ůĂƌŐĞͲƐĐĂůĞ ůŽŐŝƐƚŝĐƐ ĂŶĚ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ŽƉĞƌĂƚŝŽŶƐ ;ŝŶĐůƵĚŝŶŐ ĨŽƌ ŵĂƐƐ ĞǀĂĐƵĂƚŝŽŶͿ ƚŚĂƚ ƐƵĐŚ ĞǀĞŶƚƐ ǁŝůů ƌĞƋƵŝƌĞ͘ DŽƐƚ ĐƌŝƚŝĐĂů ĨĂĐŝůŝƚŝĞƐ ŚĂǀĞ ďĂĐŬͲƵƉ ƉŽǁĞƌ͘ ŽǁĞǀĞƌ͕ ƉƌŽǀŝĚŝŶŐ ĨŽƌ ƐƵƐƚĂŝŶĞĚ ƌĞƐƵƉƉůLJ ŽĨ ĨƵĞů ĨŽƌ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŽƌƐ ǁŝůů ďĞĐŽŵĞ ŝŶĐƌĞĂƐŝŶŐůLJ ĚŝĨĨŝĐƵůƚ ŝŶ ůŽŶŐͲĚƵƌĂƚŝŽŶ ŽƵƚĂŐĞƐ͕ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ĞƐƉĞĐŝĂůůLJ ŝŶ ĞĂƌƚŚƋƵĂŬĞƐ Žƌ ŽƚŚĞƌ ĞǀĞŶƚƐ ƚŚĂƚ ƐĞǀĞƌĞůLJ ĚŝƐƌƵƉƚ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ĨƵĞů ƐƵƉƉůLJ ĐŚĂŝŶƐ͕ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͘ dƌĂĚŝƚŝŽŶĂůůLJ͕ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ ŚĂƐ ŵĂŝŶůLJ ĨŽĐƵƐĞĚ ŽŶ ƚŚĞ ƉŚLJƐŝĐĂů ĂƐƉĞĐƚƐ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ 'ƌŽǁŝŶŐ ĚŝŐŝƚŝnjĂƚŝŽŶ ĂŶĚ ƌĞůŝĂŶĐĞ ŽŶ ĚĂƚĂ ŝƐ ŵĂŬŝŶŐ ŝŶĨŽƌŵĂƚŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝŶĐƌĞĂƐŝŶŐůLJ ŝŵƉŽƌƚĂŶƚ ƚŽ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ ĂƐ ǁĞůů͘ WŚLJƐŝĐĂů ƐLJƐƚĞŵƐ ĂƌĞ ŝŵƉĂĐƚĞĚ ďLJ ŝŶƚĞŶƚŝŽŶĂů ĂĐƚƐ ŽĨ ǀĂŶĚĂůŝƐŵ Žƌ ĂƚƚĞŵƉƚƐ ƚŽ ĐƌŝƉƉůĞ ĞƋƵŝƉŵĞŶƚ ƚŚĂƚ ŝƐ ĐƌŝƚŝĐĂů ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ ĚĞůŝǀĞƌLJ͘ ŶĨŽƌŵĂƚŝŽŶ͕ Žƌ ĐLJďĞƌ ƐLJƐƚĞŵƐ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŵŽƌĞ ĐŽŵƉůĞdž ĨƌŽŵ Ă ƚŚƌĞĂƚ ŵŝƚŝŐĂƚŝŽŶ ƉĞƌƐƉĞĐƚŝǀĞ͖ ƚŚĞ ŝŶĐƵƌƐŝŽŶ ƉĂƚŚǁĂLJƐ ĂƌĞ ŵŽƌĞ ĚŝǀĞƌƐĞ ĂŶĚ ĞǀŽůǀĞ ƌĂƉŝĚůLJ͕ ĂƐ ĚŽ ĂƚƚĂĐŬ ŽďũĞĐƚŝǀĞƐ ƚŚĂƚ ĐĂŶ ƌĂŶŐĞ ĨƌŽŵ ŝŶƚĞůůŝŐĞŶĐĞ ŐĂƚŚĞƌŝŶŐ ƚŽ ŝŶƚĞŶƚŝŽŶĂů ĚĞƐƚƌƵĐƚŝŽŶ ŽĨ ŐƌŝĚ ŝŶƚĞŐƌŝƚLJ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ ĐĂƉĂďŝůŝƚLJ͘ ŝŐƵƌĞ ϭͲϭϲ ďĞůŽǁ ƐƵŵŵĂƌŝnjĞƐ ƚŚĞƐĞ ŵŽƌĞ ĐŽŵƉůĞdž ĐLJďĞƌ ĐŚĂůůĞŶŐĞƐ ƚŽ ƚŚĞ ƌĞůŝĂďŝůŝƚLJ ŽĨ ƚŚĞ ŐƌŝĚ͘ Figure 1-16 Summary of the Cybersecurity Characteristics and Risks Confronting Smart Grid Deployment EHU WKUHDWV KDYH GLIIHUHQW REMHFWLYHV W SLFDOO LQFXUVLRQV E VRYHUHLJQ DWWDFNHUV DUH ZDUIDUH RULHQWHG ZKHUHDV LQFXUVLRQV E JURXSV DQG LQGLYLGXDOV DUH GULYHQ E SHFXQLDU LQWHUHVWV VXFK DV FRUSRUDWH HVSLRQDJH FUHGLW FDUG IUDXG DQG UDQVRP 6RYHUHLJQ DQG QRQ VRYHUHLJQ KDFNLQJ H KLELW VLPLODU FKDUDFWHULVWLFV DQG SDWWHUQV ZKLFK LQIRUP HIIRUWV WR GHIHQG DJDLQVW DWWDFNV Note Intended to be illustrative not comprehensive 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Electricity Has Significant Value for the National Defense dŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞ ; K Ϳ ŝƐ ƚŚĞ ůĂƌŐĞƐƚ ĐƵƐƚŽŵĞƌ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ Ă ƐLJƐƚĞŵ ǁŚŝĐŚ ŝƐ ůĂƌŐĞůLJ ŽǁŶĞĚ ĂŶĚ ŽƉĞƌĂƚĞĚ ďLJ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ͘ ƚ ƵƐĞƐ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ĞdžĞĐƵƚĞ ƚŚĞ ƌŵĞĚ ĞƌǀŝĐĞƐ͛ ŵŝƐƐŝŽŶ ĞƐƐĞŶƚŝĂů ĨƵŶĐƚŝŽŶƐ ďLJ ĞŶĞƌŐŝnjŝŶŐ ƚŚĞ ƐLJƐƚĞŵƐ ƚŚĂƚ ĨƵĞů ƚƌƵĐŬƐ͕ ƚĂŶŬƐ͕ ĂŶĚ ƐŚŝƉƐ͖ ƉŽǁĞƌŝŶŐ ƚŚĞ ŚĞĂƚŝŶŐ͕ ǀĞŶƚŝůĂƚŝŽŶ͕ ĂŶĚ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ ƐLJƐƚĞŵƐ ĂŶĚ ŽƚŚĞƌ ŝŶƐƚĂůůĂƚŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŶĞĐĞƐƐĂƌLJ ĨŽƌ ŵŝůŝƚĂƌLJ ďĂƐĞƐ ƚŽ ĨƵŶĐƚŝŽŶ͖ ĂŶĚ ƐƵƉƉŽƌƚŝŶŐ Ă ǁŝĚĞ ƌĂŶŐĞ ŽĨ ŽƚŚĞƌ ĚĞĨĞŶƐĞ ŽƉĞƌĂƚŝŽŶƐ ĂŶĚ ĂƐƐĞƚƐ ĞƐƐĞŶƚŝĂů ĨŽƌ ŵŝƐƐŝŽŶ ĂƐƐƵƌĂŶĐĞ͘ dŚĞ ĚĞŐƌĞĞ ƚŽ ǁŚŝĐŚ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ŵŝƐƐŝŽŶ ĐƌŝƚŝĐĂů ĨŽƌ K ĞůĞǀĂƚĞƐ ƚŚĞ ůĞǀĞů ŽĨ ƌĞƐŝůŝĞŶĐĞ ďĞLJŽŶĚ ǁŚĂƚ ŵĂLJ ďĞ ĚĞĞŵĞĚ ƐƵĨĨŝĐŝĞŶƚ ĨŽƌ ŵĂƌŬĞƚ ƉƵƌƉŽƐĞƐ͘ dŚĞ ŐƌŽǁŝŶŐ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ŝŵƉůŝĐĂƚŝŽŶƐ ŽĨ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ŐƌŝĚ ŚĂǀĞ ŝŶƐƉŝƌĞĚ ŶĞǁ ůĂǁƐ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ ƚŽ ĂĚĂƉƚ ƚŽ ƚŚŝƐ ŝŵƉĞƌĂƚŝǀĞ ĂŶĚ ĞǀŽůǀŝŶŐ ƚŚƌĞĂƚ ůĂŶĚƐĐĂƉĞ͘ WƌĞƐŝĚĞŶƚŝĂů WŽůŝĐLJ ŝƌĞĐƚŝǀĞ ;WW ͿͲ Ϯϭ ĂĚǀĂŶĐĞƐ Ă ƵŶŝƚLJ ŽĨ ĞĨĨŽƌƚ ƚŽ ƐƚƌĞŶŐƚŚĞŶ ĂŶĚ ŵĂŝŶƚĂŝŶ ƐĞĐƵƌĞ͕ ĨƵŶĐƚŝŽŶŝŶŐ͕ ĂŶĚ ƌĞƐŝůŝĞŶƚ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĨŽĐƵƐŝŶŐ ŽŶ Ăůů ŚĂnjĂƌĚƐ ŽŶ ďŽƚŚ ƉŚLJƐŝĐĂů ĂŶĚ ĐLJďĞƌ ƐLJƐƚĞŵƐ͘ dŚĞ ĐƌŝƚŝĐĂů ƌŽůĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĚĞĨĞŶƐĞ ǁĂƐ ĂůƐŽ ƌĞĐŽŐŶŝnjĞĚ ŝŶ ƚŚĞ ŝdžŝŶŐ ŵĞƌŝĐĂ͛Ɛ ƵƌĨĂĐĞ dƌĂŶƐƉŽƌƚĂƚŝŽŶ Đƚ ŽĨ ϮϬϭϱ ;ĐŽŵŵŽŶůLJ ŬŶŽǁŶ ĂƐ ƚŚĞ d ĐƚͿ͘ ĞĐƚŝŽŶ ϲϭϬϬϯ ŽĨ ƚŚĞ Đƚ ƌĞƋƵŝƌĞƐ ƚŚĞ ĞĐƌĞƚĂƌLJ ŽĨ ŶĞƌŐLJ͕ ŝŶ ĐŽŶƐƵůƚĂƚŝŽŶ ǁŝƚŚ ŽƚŚĞƌ ĂƉƉƌŽƉƌŝĂƚĞ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ͕ ƚŽ ŝĚĞŶƚŝĨLJ ĨĂĐŝůŝƚŝĞƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ƚŚĂƚ ĂƌĞ͗ ;ϭͿ ͞ĐƌŝƚŝĐĂů ƚŽ ƚŚĞ ĚĞĨĞŶƐĞ ŽĨ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕͟ ĂŶĚ ;ϮͿ ͞ǀƵůŶĞƌĂďůĞ ƚŽ Ă ĚŝƐƌƵƉƚŝŽŶ ŽĨ ƚŚĞ ƐƵƉƉůLJ ŽĨ ĞůĞĐƚƌŝĐ ĞŶĞƌŐLJ ƉƌŽǀŝĚĞĚ ƚŽ ƐƵĐŚ Ă ĨĂĐŝůŝƚLJ ďLJ ĂŶ ĞdžƚĞƌŶĂů ƉƌŽǀŝĚĞƌ͘͟ϭϮϲ ůĞĐƚƌŝĐŝƚLJ ŝƐ ĞƐƉĞĐŝĂůůLJ ǀŝƚĂů ĨŽƌ ƉŽǁĞƌŝŶŐ ĚĞĨĞŶƐĞ ŶĞƚǁŽƌŬƐ ĂŶĚ ĞŶĂďůŝŶŐ ďƌŽĂĚĞƌ ĐŽŵŵĂŶĚ͕ ĐŽŶƚƌŽů͕ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ĨƵŶĐƚŝŽŶƐ͘ K ͛Ɛ ϮϬϭϱ ͞ LJďĞƌ ƚƌĂƚĞŐLJ͟ ŚŝŐŚůŝŐŚƚƐ ƚŚĞ ƌŽůĞ ŽĨ Ă ͞ǁŝƌĞĚ͟ ǁŽƌůĚ͕ ƚŚĞ ĞƐƐĞŶƚŝĂů ƌŽůĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂƐ ĂŶ ĞŶĂďůĞƌ ŽĨ ƚŚĞƐĞ ĐŽŶŶĞĐƚŝŽŶƐ͕ ĂŶĚ ƚŚĞ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ ƚŚŝƐ ĚĞƉĞŶĚĞŶĐĞ ĐƌĞĂƚĞƐ͘ dŚĞ ƐƚƌĂƚĞŐLJ ŶŽƚĞƐ ƚŚĂƚ͕ ͞ K ͛Ɛ ŽǁŶ ŶĞƚǁŽƌŬƐ ĂƌĞ Ă ƉĂƚĐŚǁŽƌŬ ŽĨ ƚŚŽƵƐĂŶĚƐ ŽĨ ŶĞƚǁŽƌŬƐ ĂĐƌŽƐƐ ƚŚĞ ŐůŽďĞ͕ ĂŶĚ K ůĂĐŬƐ ƚŚĞ ǀŝƐŝďŝůŝƚLJ ĂŶĚ ŽƌŐĂŶŝnjĂƚŝŽŶĂů ƐƚƌƵĐƚƵƌĞ ƌĞƋƵŝƌĞĚ ƚŽ ĚĞĨĞŶĚ ŝƚƐ ĚŝĨĨƵƐĞ ŶĞƚǁŽƌŬƐ ĞĨĨĞĐƚŝǀĞůLJ͙ K ƌĞůŝĞƐ ŽŶ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂĐƌŽƐƐ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂŶĚ ŽǀĞƌƐĞĂƐ ĨŽƌ ŝƚƐ ŽƉĞƌĂƚŝŽŶƐ͕ LJĞƚ ƚŚĞ ĐLJďĞƌƐĞĐƵƌŝƚLJ ŽĨ ƐƵĐŚ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝƐ ƵŶĐĞƌƚĂŝŶ͘͟ϭϮϳ dŚĞ ĞĨĞŶƐĞ ĐŝĞŶĐĞ ŽĂƌĚ ŝŶ ϮϬϬϴ ŶŽƚĞĚ ƚŚĂƚ͕ ͞ K ͛Ɛ ŬĞLJ ƉƌŽďůĞŵ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ƚŚĂƚ ĐƌŝƚŝĐĂů ŵŝƐƐŝŽŶƐ͕ ƐƵĐŚ ĂƐ ŶĂƚŝŽŶĂů ƐƚƌĂƚĞŐŝĐ ĂǁĂƌĞŶĞƐƐ ĂŶĚ ŶĂƚŝŽŶĂů ĐŽŵŵĂŶĚ ĂƵƚŚŽƌŝƚŝĞƐ͕ ĂƌĞ ĂůŵŽƐƚ ĞŶƚŝƌĞůLJ ĚĞƉĞŶĚĞŶƚ ŽŶ ƚŚĞ ŶĂƚŝŽŶĂů ƚƌĂŶƐŵŝƐƐŝŽŶ ŐƌŝĚ͘͟ϭϮϴ dŚŝƐ ĚĞƉĞŶĚĞŶĐĞ ŽŶ ƚŚĞ ŐƌŝĚͶǁŚŝĐŚ ĐŽŶƚŝŶƵĞƐ ƚŽĚĂLJͶŵĞĂŶƐ ƚŚĂƚ K ĨĂĐĞƐ ŵĂŶLJ ŽĨ ƚŚĞ ƐĂŵĞ ĐŚĂůůĞŶŐĞƐ ĨĂĐĞĚ ďLJ Ăůů ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌƐ͘ Ŷ ϮϬϭϱ͕ K ĨĂĐŝůŝƚŝĞƐ ĞdžƉĞƌŝĞŶĐĞĚ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϭϮϳ ƵƚŝůŝƚLJ ŽƵƚĂŐĞƐ ƚŚĂƚ ůĂƐƚĞĚ ϴ ŚŽƵƌƐ Žƌ ůŽŶŐĞƌ͕ ĂŶ ŝŶĐƌĞĂƐĞ ĨƌŽŵ ϭϭϰ ĞǀĞŶƚƐ ŝŶ ϮϬϭϰ͘ϭϮϵ EĞĂƌůLJ ŚĂůĨ ŽĨ ƚŚĞ ŽƵƚĂŐĞƐ ǁĞƌĞ ĐĂƵƐĞĚ ďLJ ǁĞĂƚŚĞƌ͕ ǁŚŝůĞ ƚŚĞ ŽƚŚĞƌ ŚĂůĨ ǁĞƌĞ ĐĂƵƐĞĚ ďLJ ĞƋƵŝƉŵĞŶƚ ĨĂŝůƵƌĞ͘ K ͛Ɛ ϮϬϭϱ ͞ ŶŶƵĂů ŶĞƌŐLJ DĂŶĂŐĞŵĞŶƚ ZĞƉŽƌƚ͕͟ ŝŶ ĚŝƐĐƵƐƐŝŶŐ ƌĞůŝĂŶĐĞ ŽŶ ĐŽŵŵĞƌĐŝĂů ƉŽǁĞƌ ƐƵƉƉůŝĞƐ͕ ŶŽƚĞĚ ƚŚĂƚ͕ ͞ K ƌĞĐŽŐŶŝnjĞƐ ƚŚĂƚ ƐƵĐŚ ĞǀĞŶƚƐ ĐŽƵůĚ ƌĞƐƵůƚ ŝŶ ƉŽǁĞƌ ŽƵƚĂŐĞƐ ĂĨĨĞĐƚŝŶŐ ĐƌŝƚŝĐĂů K ŵŝƐƐŝŽŶƐ ŝŶǀŽůǀŝŶŐ ƉŽǁĞƌ ƉƌŽũĞĐƚŝŽŶ͕ ĚĞĨĞŶƐĞ ŽĨ ƚŚĞ ŚŽŵĞůĂŶĚ͕ Žƌ ŽƉĞƌĂƚŝŽŶƐ ĐŽŶĚƵĐƚĞĚ Ăƚ ŝŶƐƚĂůůĂƚŝŽŶƐ ŝŶ ƚŚĞ h͘ ͘ ĚŝƌĞĐƚůLJ ƐƵƉƉŽƌƚŝŶŐ ǁĂƌĨŝŐŚƚŝŶŐ ŵŝƐƐŝŽŶƐ ŽǀĞƌƐĞĂƐ͘͟ϭϯϬ ŝŶĐĞ ƚŚĞ ĞĨĞŶƐĞ ĐŝĞŶĐĞ ŽĂƌĚ͛Ɛ ϮϬϬϴ ƐƚƵĚLJ͕ ŵŝůŝƚĂƌLJ ďĂƐĞƐ ĂŶĚ ĚĞĨĞŶƐĞ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŶĞƚǁŽƌŬƐ ŚĂǀĞ ƚĂŬĞŶ ĂŐŐƌĞƐƐŝǀĞ ĂĐƚŝŽŶƐ ƚŚƌŽƵŐŚ Ă ďƌŽĂĚ ƌĂŶŐĞ ŽĨ ŝŶŝƚŝĂƚŝǀĞƐ ƚŽ ƐƚƌĞŶŐƚŚĞŶ ƚŚĞŝƌ ĂďŝůŝƚLJ ƚŽ ŽƉĞƌĂƚĞ ŽŶ ĞŵĞƌŐĞŶĐLJ ƉŽǁĞƌ ŝĨ ďůĂĐŬŽƵƚƐ ŽĐĐƵƌ͕ ŝŶĐůƵĚŝŶŐ ƉƌŽǀŝĚŝŶŐ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ Ăƚ ĐƌŝƚŝĐĂů ĨĂĐŝůŝƚŝĞƐ͖ ĚĞǀĞůŽƉŝŶŐ ƉƌŝŽƌŝƚLJ ƌĞůĂƚŝŽŶƐŚŝƉƐ ǁŝƚŚ ƵƚŝůŝƚŝĞƐ͖ ĂŶĚ ďƵŝůĚŝŶŐ ĂůƚĞƌŶĂƚŝǀĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ ĐŽŶĨŝŐƵƌĂƚŝŽŶƐ͕ ƐƵĐŚ ĂƐ ŵŝĐƌŽŐƌŝĚƐ͘ ŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ŐƌŝĚ ƌĞƐŝůŝĞŶĐĞ ĐĂŶ ŐƌĞĂƚůLJ ĞŶŚĂŶĐĞ ƚŚĞ ŵŝůŝƚĂƌLJ͛Ɛ ĂďŝůŝƚLJ ƚŽ ĐĂƌƌLJ ŽƵƚ ŝƚƐ ŵŝƐƐŝŽŶƐ͕ ĞƐƉĞĐŝĂůůLJ ŝĨ ƌĞƐŝůŝĞŶĐĞ ŝŶŝƚŝĂƚŝǀĞƐ ĂƌĞ ĨŽĐƵƐĞĚ ŽŶ ƐƵƉƉŽƌƚŝŶŐ ĞƐƉĞĐŝĂůůLJ ĐƌŝƚŝĐĂů ĚĞĨĞŶƐĞ ĨĂĐŝůŝƚŝĞƐ ĂŶĚ ĨƵŶĐƚŝŽŶƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 KŶƐŝƚĞ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ ŝƐ K ͛Ɛ ƉƌŝŵĂƌLJ ŵĞƚŚŽĚ ĨŽƌ ƐƵƐƚĂŝŶŝŶŐ ŽƉĞƌĂƚŝŽŶƐ ĚƵƌŝŶŐ ŐƌŝĚ ŽƵƚĂŐĞƐ͘ ĐĐŽƌĚŝŶŐ ƚŽ K ŝŶ ϮϬϭϭ͕ ŵŽƐƚ ĨĂĐŝůŝƚŝĞƐ ƵƐĞ ĚŝĞƐĞů ŐĞŶĞƌĂƚŽƌƐ ƚŽ ƐƵƉƉŽƌƚ ŽƉĞƌĂƚŝŽŶƐ ĂŶĚ ĐƌŝƚŝĐĂů ŵŝƐƐŝŽŶƐ͕ ǁŝƚŚ ĞŶŽƵŐŚ ĨƵĞů ƚŽ ƐƵƐƚĂŝŶ ďĂƐŝĐ ĨƵŶĐƚŝŽŶƐ ĨŽƌ ϯʹϳ ĚĂLJƐ Žƌ ŵŽƌĞ Ăƚ ŵĂŶLJ ŝŶƐƚĂůůĂƚŝŽŶƐ͘ϭϯϭ ŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ŐƌŝĚ ƌĞƐŝůŝĞŶĐĞ ĐĂŶ ŐƌĞĂƚůLJ ĞŶŚĂŶĐĞ ƚŚĞ ŵŝůŝƚĂƌLJ͛Ɛ ĂďŝůŝƚLJ ƚŽ ĐĂƌƌLJ ŽƵƚ ŝƚƐ ŵŝƐƐŝŽŶƐ͘ Žƌ ůŽŶŐĞƌͲĚƵƌĂƚŝŽŶ ŽƵƚĂŐĞƐ͕ ŚŽǁĞǀĞƌ͕ ďƌŽĂĚĞƌ ŐƌŝĚ ƌĞƐŝůŝĞŶĐĞ ŝŶŝƚŝĂƚŝǀĞƐ ǁŝůů ďĞ ĞƐƐĞŶƚŝĂů ƚŽ ŝŵƉƌŽǀĞ ŵŝƐƐŝŽŶ ĂƐƐƵƌĂŶĐĞ͘ dŚĞ ůŽŶŐĞƌ ĂŶ ŽƵƚĂŐĞ͕ ƚŚĞ ŵŽƌĞ ĐĂƐĐĂĚŝŶŐ ƚŚĞ ĞĨĨĞĐƚ͕ ǁŝƚŚ ŝŶƚĞƌĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵƐ ŝŶĐƌĞĂƐŝŶŐůLJ ŝŵƉůŝĐĂƚĞĚ͘ ĨƚĞƌ ϳ ĚĂLJƐ ǁŝƚŚŽƵƚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚŚĞ ďƌŽĂĚĞƌ ŝŵƉĂĐƚ ŽĨ ĚĞĨĞŶƐĞ ƐLJƐƚĞŵƐ ĚĞƉĞŶĚĞŶƚ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ďĞĐŽŵĞƐ Ă ĐŽŶĐĞƌŶ͕ ŝŶĐůƵĚŝŶŐ ǁĂƚĞƌ͕ ĨƵĞů͕ ĂŶĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶ ƐLJƐƚĞŵƐ͘ K ǁŽƌŬƐ ǁŝƚŚ Back-Up Power for Security K ƚŽ ĚĞǀĞůŽƉ ďĂĐŬͲƵƉ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ƚŽ Q WKH 'HSDUWPHQW RI QHUJ DQG WKH ƐƵƉƉŽƌƚ ƚŚĞ ŝŶƚĞƌĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵƐ ƚŚĂƚ ƌĞůLJ ŽŶ 'HSDUWPHQW RI 'HIHQVH DQQRXQFHG ĞůĞĐƚƌŝĐŝƚLJ͘ K ŝƐ ƐƵƉƉŽƌƚŝŶŐ K ŝŶ ĚĞǀĞůŽƉŝŶŐ FROODERUDWLRQ RQ IXHO FHOO EDFN XS SRZHU ǁĂLJƐ ƚŽ ĞŶƐƵƌĞ ƚŚĞ ƌĞƐŝůŝĞŶĐĞ ŽĨ ƉŽǁĞƌ ƚƌĂŶƐĨŽƌŵĞƌƐ JHQHUDWLRQ SURMHFWV DW HLJKW 8 6 GHIHQVH ĂŶĚ ŽƚŚĞƌ ĐƌŝƚŝĐĂů ĞƋƵŝƉŵĞŶƚ͘ K ŝƐ ĂůƐŽ LQVWDOODWLRQV RPSDUHG ZLWK GLHVHO JHQHUDWRUV ƐƚƌĞŶŐƚŚĞŶŝŶŐ ĐŽůůĂďŽƌĂƚŝŽŶ ǁŝƚŚ ƵƚŝůŝƚLJ ƉƌŽǀŝĚĞƌƐ͕ ZKLFK DUH RIWHQ XVHG IRU EDFN XS SRZHU IXHO FHOOV XVH QR SHWUROHXP DUH TXLHWHU UHTXLUH ĂŶĚ ƚĂƚĞ ĂŶĚ ůŽĐĂů ĞŵĞƌŐĞŶĐLJ ŵĂŶĂŐĞŵĞŶƚ OHVV PDLQWHQDQFH WKDQ HLWKHU JHQHUDWRUV RU ĂŐĞŶĐŝĞƐ ƌĞŵĂŝŶ Ă ĐĞŶƚƌĂů ĨŽĐƵƐ ƚŽ ĞŶŚĂŶĐĞ ƚŚĞ EDWWHULHV DQG FDQ HDVLO EH PRQLWRUHG UHPRWHO ƌĞƐŝůŝĞŶĐĞ ĂŶĚ ƌĂƉŝĚ ƌĞƐƚŽƌĂƚŝŽŶ ŽĨ ĐŽŵŵĞƌĐŝĂů ŐƌŝĚ WR UHGXFH PDLQWHQDQFH WLPH 7KHVH SURMHFWV ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƚŚĂƚ ƐƵƉƉŽƌƚƐ ŵŝƐƐŝŽŶ ĐƌŝƚŝĐĂů DGGUHVV LQWHUGHSHQGHQFLHV WKDW DUH DW ULVN WKH ŝŶƐƚĂůůĂƚŝŽŶƐ ĂŶĚ ĨĂĐŝůŝƚŝĞƐ͘ϭϯϮ ORQJHU WKH GXUDWLRQ RXWDJH EXW SURYLGH EDFN XS SRZHU WR FRPSXWLQJ WHOHSKRQH DQG OLJKWLQJ IXQFWLRQV RI WKH PLOLWDU LQVWDOODWLRQV WKH VHUYH ƚƌĞŶŐƚŚĞŶŝŶŐ ƚŚĞ ƌĞƐŝůŝĞŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŶŽƚ ŽŶůLJ ůŝŵŝƚƐ ƚŚĞ ĚŝƐƌƵƉƚŝǀĞ ĞĨĨĞĐƚƐ ŽĨ ĂĚǀĞƌƐĂƌLJ ĂƚƚĂĐŬƐ ŽŶ K ŵŝƐƐŝŽŶ ĂƐƐƵƌĂŶĐĞ͕ ŝƚ ĐĂŶ ĂůƐŽ ƌĞĚƵĐĞ ƚŚĞ ƌŝƐŬ ŽĨ ĐĞƌƚĂŝŶ ƚLJƉĞƐ ŽĨ ĂƚƚĂĐŬƐ ŽĐĐƵƌƌŝŶŐ ŝŶ ƚŚĞ ĨŝƌƐƚ ƉůĂĐĞ͘ ZĞƐŝůŝĞŶĐĞ ŝŶŝƚŝĂƚŝǀĞƐ ĐĂŶ ŚĞůƉ ƐƚƌĞŶŐƚŚĞŶ ͞ĚĞƚĞƌƌĞŶĐĞ ďLJ ĚĞŶŝĂů͘͟ LJ ŝŵƉƌŽǀŝŶŐ ƚŚĞ ĂďŝůŝƚLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ƚŽ ƐƵƌǀŝǀĞ ĐLJďĞƌ ĂŶĚ ŬŝŶĞƚŝĐ ĂƚƚĂĐŬƐ͕ ĂŶĚ ĂĐĐĞůĞƌĂƚŝŶŐ ƉŽǁĞƌ ƌĞƐƚŽƌĂƚŝŽŶ ǁŚĞŶ ďůĂĐŬŽƵƚƐ ĚŽ ŽĐĐƵƌ͕ ƌĞƐŝůŝĞŶĐĞ ƉƌŽũĞĐƚƐ ĐĂŶ ƌĂŝƐĞ ĂŶ ĂĚǀĞƌƐĂƌLJ͛Ɛ ƵŶĐĞƌƚĂŝŶƚLJ ĂƐ ƚŽ ǁŚĞƚŚĞƌ ĂŶ ĂƚƚĂĐŬ ǁŝůů ĂĐŚŝĞǀĞ ƚŚĞ ŝŶƚĞŶĚĞĚ ĐŽŶƐĞƋƵĞŶĐĞƐ͘ dŚĂƚ ŝŶĐƌĞĂƐĞĚ ƵŶĐĞƌƚĂŝŶƚLJ ĐĂŶ ŚĞůƉ ƌĞĚƵĐĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ĂƚƚƌĂĐƚŝǀĞŶĞƐƐ ŽĨ ƐƵĐŚ ĂŶ ĂƚƚĂĐŬͶĞƐƉĞĐŝĂůůLJ ŝĨ ƚŚĞ ĂĚǀĞƌƐĂƌLJ ďĞůŝĞǀĞƐ ƚŚĂƚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĐĂŶ ĞĨĨĞĐƚŝǀĞůLJ ƌĞƐƉŽŶĚ ŝĨ ĂŶ ĂƚƚĂĐŬ ŽĐĐƵƌƐ͘ Ŷ ŶŽƚŝŶŐ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ďŽůƐƚĞƌŝŶŐ ĚĞƚĞƌƌĞŶĐĞ ďLJ ĚĞŶŝĂů͕ ƚŚĞ KďĂŵĂ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͛Ɛ ͞ZĞƉŽƌƚ ŽŶ LJďĞƌ ĞƚĞƌƌĞŶĐĞ WŽůŝĐLJ͟ ĐĂůůƐ ĨŽƌ ͞ďƵŝůĚŝŶŐ ƐƚƌŽŶŐ ƉĂƌƚŶĞƌƐŚŝƉƐ ǁŝƚŚ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ ƚŽ ƉƌŽŵŽƚĞ ĐLJďĞƌƐĞĐƵƌŝƚLJ ďĞƐƚ ƉƌĂĐƚŝĐĞƐ͘͟ dŚĞ ƌĞƉŽƌƚ ĂůƐŽ ƌĞĐŽŵŵĞŶĚƐ ŵĞĂƐƵƌĞƐ ƚŽ ͞ĂƌĐŚŝƚĞĐƚ ƌĞƐŝůŝĞŶƚ ƐLJƐƚĞŵƐ ƚŚĂƚ ƌĞĐŽǀĞƌ ƋƵŝĐŬůLJ ĨƌŽŵ ĂƚƚĂĐŬƐ͕͟ ĂŶĚ ͞ůĞŶĚ ĐƌĞĚŝďŝůŝƚLJ ƚŽ ŶĂƚŝŽŶĂů ĞĨĨŽƌƚƐ ƚŽ ŝŶĐƌĞĂƐĞ ŶĞƚǁŽƌŬ ƌĞƐŝůŝĞŶĐLJ͘͟ϭϯϯ DOE’s Growing Role in Protecting the Electricity System as a Critical National Security Asset K ͛Ɛ ƌŽůĞ ŝŶ ĂĚĚƌĞƐƐŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂƐ Ă ĐƌŝƚŝĐĂů ĐŽŵƉŽŶĞŶƚ ŽĨ ŶĂƚŝŽŶĂů ƐĞĐƵƌŝƚLJ ŝƐ ŐƌŽǁŝŶŐ ĂƐ ƚŚĞ ƚŚƌĞĂƚ ůĂŶĚƐĐĂƉĞ ŚĂƐ ĞǀŽůǀĞĚ͘ WW Ϯϭ ĞƐƚĂďůŝƐŚĞƐ Ă ƉŽůŝĐLJ ĨƌĂŵĞǁŽƌŬ ĂŶĚ ƵŶŝƚLJ ŽĨ ĞĨĨŽƌƚ ƚŽ ƐƚƌĞŶŐƚŚĞŶ ĂŶĚ ŵĂŝŶƚĂŝŶ ƐĞĐƵƌĞ͕ ĨƵŶĐƚŝŽŶŝŶŐ͕ ĂŶĚ ƌĞƐŝůŝĞŶƚ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĨŽĐƵƐĞĚ ŽŶ Ăůů ŚĂnjĂƌĚƐ͘ hŶĚĞƌ WW Ϯϭ͕ K ŝƐ ŝĚĞŶƚŝĨŝĞĚ ĂƐ ƚŚĞ ĞĐƚŽƌͲ ƉĞĐŝĨŝĐ ŐĞŶĐLJ ĨŽƌ ŶĞƌŐLJ͕ ŵĂŬŝŶŐ K ƚŚĞ ůĞĂĚ ĞĚĞƌĂů ŝŶƚĞƌĨĂĐĞ ǁŝƚŚ ĞŶĞƌŐLJ ƐĞĐƚŽƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŽǁŶĞƌƐ ĂŶĚ ŽƉĞƌĂƚŽƌƐ͘ ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐ ĂůƐŽ ŝŶĐůƵĚĞ ƐƵƉƉŽƌƚŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƉƌŽƚĞĐƚŝŽŶ ĞĨĨŽƌƚƐ ǁŝƚŚŝŶ ƚŚĞ ƐĞĐƚŽƌ ĂŶĚ ŝŶĐŝĚĞŶƚ ŵĂŶĂŐĞŵĞŶƚ͘ Ɛ ƐƵĐŚ͕ K ůĞĂĚƐ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͛Ɛ ŵĞƌŐĞŶĐLJ ƵƉƉŽƌƚ ƵŶĐƚŝŽŶ ηϭϮ͕ ǁŚŝĐŚ ŝƐ ĚĞƐŝŐŶĞĚ ƚŽ ĨĂĐŝůŝƚĂƚĞ ƚŚĞ ƌĞĞƐƚĂďůŝƐŚŵĞŶƚ ŽĨ ĚĂŵĂŐĞĚ ĞŶĞƌŐLJ ƐLJƐƚĞŵƐ ĂŶĚ ĐŽŵƉŽŶĞŶƚƐ͘ ŝŶĂůůLJ͕ ŽŶŐƌĞƐƐ ƉĂƐƐĞĚ ƚŚĞ d Đƚ ŝŶ ϮϬϭϱ ;ĚŝƐĐƵƐƐĞĚ ŝŶ ŐƌĞĂƚĞƌ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s ͕ A 21st Century Electricity Sector Conclusions and RecommendationsͿ͘ dŚĞ d Đƚ ŝŶĐůƵĚĞƐ ĂĐƚŝŽŶƐ ƚŽ ŝŵƉƌŽǀĞ ƚŚĞ ƐĞĐƵƌŝƚLJ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ KŶĞ ŽĨ ƚŚĞ ŵŽƐƚ ŝŵƉŽƌƚĂŶƚ ŵĞĂƐƵƌĞƐ ƉƌŽǀŝĚĞƐ ƚŚĞ ĞĐƌĞƚĂƌLJ ŽĨ ŶĞƌŐLJ ǁŝƚŚ ďƌŽĂĚ ŶĞǁ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĂƵƚŚŽƌŝƚLJ ƚŽ ĂĚĚƌĞƐƐ ŐƌŝĚ ƐĞĐƵƌŝƚLJ ĞŵĞƌŐĞŶĐŝĞƐ͘ ͞'ƌŝĚ ƐĞĐƵƌŝƚLJ ĞŵĞƌŐĞŶĐLJ͟ ŝƐ ĚĞĨŝŶĞĚ ƚŽ ŝŶĐůƵĚĞ Ă ƉŚLJƐŝĐĂů ĂƚƚĂĐŬ͕ ͞Ă ŵĂůŝĐŝŽƵƐ ĂĐƚ ƵƐŝŶŐ ĞůĞĐƚƌŽŶŝĐ ĐŽŵŵƵŶŝĐĂƚŝŽŶ Žƌ ĂŶ ĞůĞĐƚƌŽŵĂŐŶĞƚŝĐ ƉƵůƐĞ͕ Žƌ Ă ŐĞŽŵĂŐŶĞƚŝĐ ƐƚŽƌŵ ĞǀĞŶƚ͘͟ϭϯϰ Ŷ ƚŚĞ d Đƚ͕ K ŝƐ ƚŚĞ ƐƚĂƚƵƚŽƌŝůLJ ĚĞƐŝŐŶĂƚĞĚ ƐĞĐƚŽƌͲƐƉĞĐŝĨŝĐ ĂŐĞŶĐLJ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ĐLJďĞƌƐĞĐƵƌŝƚLJ͘ dŚĞ d Đƚ ĂůƐŽ ŐŝǀĞƐ ŶĞǁ ĂƵƚŚŽƌŝƚŝĞƐ ƚŽ ƚŚĞ ĞĐƌĞƚĂƌLJ ŽĨ ŶĞƌŐLJ ƚŽ ƉƌŽƚĞĐƚ ĂŶĚ ƌĞƐƚŽƌĞ ƚŚĞ ƌĞůŝĂďŝůŝƚLJ ŽĨ ĐƌŝƚŝĐĂů ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ Žƌ ĚĞĨĞŶƐĞ ĐƌŝƚŝĐĂů ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĚƵƌŝŶŐ Ă ĐLJďĞƌ͕ ƉŚLJƐŝĐĂů͕ ĞůĞĐƚƌŽŵĂŐŶĞƚŝĐ ƉƵůƐĞ͕ Žƌ ŐĞŽŵĂŐŶĞƚŝĐ ĚŝƐƚƵƌďĂŶĐĞ ĞŵĞƌŐĞŶĐLJ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞ Đƚ ŐŝǀĞƐ ƚŚĞ WƌĞƐŝĚĞŶƚ ĂƵƚŚŽƌŝƚLJ ƚŽ ĂĐƚ ŝĨ ƚŚĞƌĞ ŝƐ ͞ŝŵŵŝŶĞŶƚ ĚĂŶŐĞƌ͟ ŽĨ ƐƵĐŚ ĂŶ ĂƚƚĂĐŬ͘ dŚŝƐ ƌĞƋƵŝƌĞƐ ĐŽŶƐƚĂŶƚ ŵŽŶŝƚŽƌŝŶŐ ĂŶĚ ƵƉĚĂƚŝŶŐ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ͕ ĂƐ ĐLJďĞƌ ƚŚƌĞĂƚƐ ĂƌĞ ĞǀŽůǀŝŶŐ͘ K ͕ ĂƐ ƚŚĞ ůĞĂĚ ĂŐĞŶĐLJ ŽŶ ĐLJďĞƌƐĞĐƵƌŝƚLJ ĨŽƌ ĐƌŝƚŝĐĂů ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ͕ ŵƵƐƚ ŵĂŝŶƚĂŝŶ ŽŶŐŽŝŶŐ ĐĂƉĂďŝůŝƚŝĞƐ ƚŽ ĨƵůĨŝůů Ă ĐƌŝƚŝĐĂů ĂĚǀŝƐŽƌLJ ƌŽůĞ ĨŽƌ ƚŚĞ WƌĞƐŝĚĞŶƚ ĂďŽƵƚ ŝŵŵŝŶĞŶƚ ĚĂŶŐĞƌƐ͕ ĂƐ ǁĞůů ĂƐ ƚŽ ƌĞƐƉŽŶĚ ƚŽ ĂĐƚƵĂů ĞŵĞƌŐĞŶĐŝĞƐ ƵŶĚĞƌ ƚŚĞ ŶĞǁ ĂƵƚŚŽƌŝƚŝĞƐ ŝŶ ƚŚĞ d Đƚ͘ ŝŶĂůůLJ͕ ƚŚĞ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ďĞƚǁĞĞŶ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ŶĂƚƵƌĂů ŐĂƐ ŝƐ Ă ŐƌŽǁŝŶŐ ŶĂƚŝŽŶĂů 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ƚƌĂŶƐŝƚŝŽŶ͘ ĐŚŝĞǀŝŶŐ Ă ĐůĞĂŶ͕ ĨůĞdžŝďůĞ͕ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ǁŝůů ƌĞƋƵŝƌĞ ĐŽŶƐƚĂŶƚůLJ ŝŵƉƌŽǀŝŶŐ ƚŚĞ ĐŽƐƚ ĂŶĚ ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ŽƵƌ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ZΘ ͕ ĐŽƵƉůĞĚ ǁŝƚŚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ĂŶĚ ĚĞƉůŽLJŵĞŶƚ ;ŝ͘Ğ͕͘ Z Θ Ϳ͕ ĐƌĞĂƚĞƐ Ă ͚ƚĞĐŚŶŽůŽŐLJ ƉƵƐŚ͛ ƚŚĂƚ ƌĞĚƵĐĞƐ ƚŚĞ ĐŽƐƚ ŽĨ ƚŚĞ ͚ƉŽůŝĐLJ ƉƵůů͛ ŐĞŶĞƌĂƚĞĚ ƚŚƌŽƵŐŚ ƌĞŐƵůĂƚŽƌLJ͕ ƚĂdž͕ ĞŶǀŝƌŽŶŵĞŶƚĂů͕ ĂŶĚ ŽƚŚĞƌ ƉŽůŝĐŝĞƐ͘ ƵƌƌĞŶƚ ůĞǀĞůƐ ŽĨ ĞĚĞƌĂů ƐƵƉƉŽƌƚ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ŽƚŚĞƌ ĞŶĞƌŐLJͲ ĨŽĐƵƐĞĚ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ŶĞĞĚ ƚŽ ďĞ ƐƵďƐƚĂŶƚŝĂůůLJ ŝŶĐƌĞĂƐĞĚ͘ ZĞŐŝŽŶĂů ǀĂƌŝĂƚŝŽŶ ŝŶ ŝŶŶŽǀĂƚŝŽŶ ĐĂƉĂďŝůŝƚŝĞƐ͕ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŵĂƌŬĞƚƐ͕ ƉŽůŝĐŝĞƐ͕ ĂŶĚ ƌĞƐŽƵƌĐĞƐ ĂůƐŽ ƉŽŝŶƚ ƚŽ Ă ŶĞĞĚ ƚŽ ĂĚĚƌĞƐƐ ĞůĞĐƚƌŝĐ ƐĞĐƚŽƌ ŝŶŶŽǀĂƚŝŽŶ ƚŚƌŽƵŐŚ ƌĞŐŝŽŶĂů ĂƉƉƌŽĂĐŚĞƐ͘ϭϯϲ ŵƉĂĐƚƐ ŽĨ ĞĚĞƌĂů Z Θ ĂƌĞ ĚĞƐĐƌŝďĞĚ ŝŶ ĨƵƌƚŚĞƌ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ ͕ Building a Clean Electricity Future͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU dǁŽ ŬĞLJ ĞdžĂŵƉůĞƐ ŽĨ ĞdžƉĂŶĚŝŶŐ ĞĚĞƌĂů Z Θ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ĂƌĞ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ĂŶĚ K ͛Ɛ 'D ;ĚŝƐĐƵƐƐĞĚ ĞĂƌůŝĞƌͿ͘ K ͛Ɛ 'D ŝƐ Ă ĐƌŽƐƐĐƵƚƚŝŶŐ Z Θ ĞĨĨŽƌƚ ƚŽ ŐĞŶĞƌĂƚĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ŵĞĂƐƵƌĞ͕ ĂŶĂůLJnjĞ͕ ƉƌĞĚŝĐƚ͕ ƉƌŽƚĞĐƚ͕ ĂŶĚ ĐŽŶƚƌŽů ƚŚĞ ŐƌŝĚ ŽĨ ƚŚĞ ĨƵƚƵƌĞ͘ dŚĞƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ŶĞĞĚĞĚ ƚŽ ŝŶƚĞŐƌĂƚĞ ĐŽŶǀĞŶƚŝŽŶĂů ŐĞŶĞƌĂƚŝŽŶ͕ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞ͖ ĞŶĂďůĞ ƐŵĂƌƚ ďƵŝůĚŝŶŐƐ ĂŶĚ ĞŶĚͲƵƐĞ ĚĞǀŝĐĞƐ͖ ĂŶĚ ĞŶƐƵƌĞ ƚŚĂƚ ƚŚĞ ŐƌŝĚ ŝƐ ƌĞƐŝůŝĞŶƚ ƚŽ ŐƌŽǁŝŶŐ ƉŚLJƐŝĐĂů͕ ĐLJďĞƌ͕ ĂŶĚ ĞdžƚƌĞŵĞ ǁĞĂƚŚĞƌ ƚŚƌĞĂƚƐ͘ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ŝƐ ĂŶ ĞĨĨŽƌƚ ďLJ ϮϮ ĐŽƵŶƚƌŝĞƐ ĂŶĚ ƚŚĞ ƵƌŽƉĞĂŶ hŶŝŽŶͶƐƉĞĂƌŚĞĂĚĞĚ ďLJ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂŶĚ ĂŶŶŽƵŶĐĞĚ Ăƚ ƚŚĞ WĂƌŝƐ ůŝŵĂƚĞ Ƶŵŵŝƚ ŝŶ ϮϬϭϱͶƚŽ ĚƌĂŵĂƚŝĐĂůůLJ ĂĐĐĞůĞƌĂƚĞ ƉƵďůŝĐ ĂŶĚ ƉƌŝǀĂƚĞ ŐůŽďĂů ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ŝŶĐůƵĚŝŶŐ ĚŽƵďůŝŶŐ ƚŚĞ ƉƵďůŝĐ ƐĞĐƚŽƌ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĐůĞĂŶ ĞŶĞƌŐLJ Z Θ ŽǀĞƌ ϱ LJĞĂƌƐ͘ Jurisdictional Relationships and Limitations ZĞƐƉŽŶƐŝďŝůŝƚLJ ĨŽƌ ƌĞŐƵůĂƚŝŶŐ ĂŶĚ ŽǀĞƌƐĞĞŝŶŐ ƚŚĞ ŶƵŵĞƌŽƵƐ ĂĐƚŽƌƐ ƚŚĂƚ ĐŽŵƉƌŝƐĞ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŝŶĚƵƐƚƌLJ ŝƐ ǀĞƐƚĞĚ ŝŶ ŵƵůƚŝƉůĞ ŐŽǀĞƌŶŵĞŶƚ ůĞǀĞůƐ ĂŶĚ ĂŐĞŶĐŝĞƐ͕ ĂŶĚ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ƉƵƚƚŝŶŐ ƉƌĞƐƐƵƌĞ ŽŶ ƚƌĂĚŝƚŝŽŶĂů ũƵƌŝƐĚŝĐƚŝŽŶĂů ďŽƵŶĚĂƌŝĞƐ͘ ZĞŐƵůĂƚŽƌLJ ĂƵƚŚŽƌŝƚŝĞƐ ƐƉĂŶ ĞĚĞƌĂů͕ ƚĂƚĞ͕ ůŽĐĂů͕ ĂŶĚ ƚƌŝďĂů ůĞǀĞůƐ͘ ƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů͕ Z ŝƐ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ƌĞŐƵůĂƚŝŽŶ ŽĨ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ǁŚŽůĞƐĂůĞ ƐĂůĞƐ ŝŶ ŝŶƚĞƌƐƚĂƚĞ ĐŽŵŵĞƌĐĞ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ŽƚŚĞƌ ĞĚĞƌĂů ĂƵƚŚŽƌŝƚŝĞƐ ĂƌĞ ŝŶǀŽůǀĞĚ ǁŝƚŚ ǀĂƌŝŽƵƐ ĂƐƉĞĐƚƐ ŽĨ ƌĞŐƵůĂƚŝŽŶ Žƌ ŽǀĞƌƐŝŐŚƚ͕ ŝŶĐůƵĚŝŶŐ K ͕ ƚŚĞ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ƵƐƚŝĐĞ͕ ĞĐƵƌŝƚŝĞƐ ĂŶĚ džĐŚĂŶŐĞ ŽŵŵŝƐƐŝŽŶ͕ ŽŵŵŽĚŝƚLJ ƵƚƵƌĞƐ dƌĂĚŝŶŐ ŽŵŵŝƐƐŝŽŶ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ƚŚĞ ŶƚĞƌŝŽƌ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ŐƌŝĐƵůƚƵƌĞ͕ ƵƚŽŵĂƚĞĚ ŽŵŵĞƌĐŝĂů ŶǀŝƌŽŶŵĞŶƚ͕ ĂŶĚ EƵĐůĞĂƌ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ͕ ĂŵŽŶŐ ŽƚŚĞƌƐ͘ ŽůůĞĐƚŝǀĞůLJ͕ ƚŚĞLJ ŽǀĞƌƐĞĞ ŵĂŶLJ ŝŶĚƵƐƚƌLJ ĂĐƚŽƌƐ͘ ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐ ĂƌĞ ǁŝĚĞͲƌĂŶŐŝŶŐ ĂŶĚ ƌĞůĂƚĞ ƚŽ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉƌŽƚĞĐƚŝŽŶ͕ ůĂŶĚ ƵƐĞ͕ ĂŶƚŝͲƚƌƵƐƚ ƉƌŽƚĞĐƚŝŽŶ͕ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐŝƚŝŶŐ͘ ŽŶŐƌĞƐƐ ƉĂƐƐĞĚ ůĞŐŝƐůĂƚŝŽŶ ŝŶ ϮϬϬϱ ŐŝǀŝŶŐ Z ŽǀĞƌƐŝŐŚƚ ƌĞƐƉŽŶƐŝďŝůŝƚLJ ĨŽƌ ŵĂŶĚĂƚŽƌLJ ƌĞůŝĂďŝůŝƚLJ ƐƚĂŶĚĂƌĚƐ ĂŶĚ ĂƵƚŚŽƌŝnjĞĚ ƚŚĞ ĂŐĞŶĐLJ ƚŽ ƉĂƌƚŝĂůůLJ ĐĞƌƚŝĨLJ ĂŶ ĞůĞĐƚƌŝĐ ƌĞůŝĂďŝůŝƚLJ ŽƌŐĂŶŝnjĂƚŝŽŶ ƚŽ ĚĞǀĞůŽƉ ĂŶĚ ĞŶĨŽƌĐĞ ƚŚŽƐĞ ƐƚĂŶĚĂƌĚƐ͘ϭϯϳ Z ŵƵƐƚ ĂƉƉƌŽǀĞ Ă ƌĞůŝĂďŝůŝƚLJ ƐƚĂŶĚĂƌĚ ďĞĨŽƌĞ ŝƚ ŝƐ ĞŶĨŽƌĐĞĂďůĞ͘ Z ĐĞƌƚŝĨŝĞĚ ƚŚĞ EŽƌƚŚ ŵĞƌŝĐĂŶ ůĞĐƚƌŝĐ ZĞůŝĂďŝůŝƚLJ ŽƌƉŽƌĂƚŝŽŶ͕ Ă ŶŽŶƉƌŽĨŝƚ ĐŽƌƉŽƌĂƚŝŽŶ͕ ĂƐ ƚŚĞ ĞůĞĐƚƌŝĐ ƌĞůŝĂďŝůŝƚLJ ŽƌŐĂŶŝnjĂƚŝŽŶ͘ Ŷ ĞĂĐŚ ƐƚĂƚĞ͕ ƌĞŐƵůĂƚŽƌLJ ƉŽǁĞƌ ŝƐ ǀĞƐƚĞĚ ǁŝƚŚ ƚŚĞ ƐƚĂƚĞ ƉƵďůŝĐ ƵƚŝůŝƚLJ ĐŽŵŵŝƐƐŝŽŶ ĨŽƌ ƌĞŐƵůĂƚŝŽŶ ŽĨ ƚŚĞ ŝŶǀĞƐƚŽƌͲŽǁŶĞĚ ƵƚŝůŝƚŝĞƐ ǁŝƚŚŝŶ ŝƚƐ ƐƚĂƚĞ ďŽƵŶĚĂƌŝĞƐ ;ĂŶĚ ĐĞƌƚĂŝŶ ƉƵďůŝĐ ƉŽǁĞƌ ĂŶĚ ĐŽŽƉĞƌĂƚŝǀĞ ƵƚŝůŝƚLJ ĂĐƚŝǀŝƚŝĞƐ ŝŶ ƐŽŵĞ ƐƚĂƚĞƐͿ͘ ĚĚŝƚŝŽŶĂůůLJ͕ ƚĂƚĞ ƉŽůŝĐLJŵĂŬĞƌƐ ;ŐŽǀĞƌŶŽƌƐ ĂŶĚ ůĞŐŝƐůĂƚƵƌĞƐͿ ĞƐƚĂďůŝƐŚ ůĂǁƐ ƚŚĂƚ ŝŶĚƵƐƚƌLJ ĂĐƚŽƌƐ ŵƵƐƚ ĂďŝĚĞ ďLJ ĂŶĚ ƚŚĂƚ ƚŚĞ ƉƵďůŝĐ ƵƚŝůŝƚLJ ĐŽŵŵŝƐƐŝŽŶƐ ĐĂƌƌLJ ŽƵƚ͘ ƚĂƚĞ ĞŶǀŝƌŽŶŵĞŶƚĂůͬĞŶĞƌŐLJ ĂƵƚŚŽƌŝƚŝĞƐ ĐĂƌƌLJ ŽƵƚ ƌĞůĞǀĂŶƚ ĞĚĞƌĂů ĂŶĚ ƚĂƚĞ ůĞŐŝƐůĂƚŝŽŶ ĂŶĚ ƌĞǀŝĞǁ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚ ŽĨ ĐĞƌƚĂŝŶ ŝŶĚƵƐƚƌLJ ĂĐƚŝǀŝƚŝĞƐ ǁŝƚŚŝŶ ƚŚĞ ƐƚĂƚĞ͘ dŚĞLJ ĂůƐŽ ĐŽŶƚƌŽů ŝŶͲƐƚĂƚĞ ƐŝƚŝŶŐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂůƚŚŽƵŐŚ ƚŚĞ ŶĞƌŐLJ WŽůŝĐLJ Đƚ ŽĨ ϮϬϬϱ ĞƐƚĂďůŝƐŚĞƐ Ă ƐŝŐŶŝĨŝĐĂŶƚ ƌŽůĞ ĨŽƌ K ŝŶ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐŝƚŝŶŐ͘ ŽĐĂů ĂƵƚŚŽƌŝƚŝĞƐ ƚLJƉŝĐĂůůLJ ŝŶĐůƵĚĞ ƚŚĞ ůŽĐĂů ŐŽǀĞƌŶŝŶŐ ďŽĚLJ ŽĨ Ă ĐŝƚLJ͕ ƚŽǁŶ͕ Žƌ ĐŽƵŶƚLJ͕ Žƌ ƚŚĞ ĞůĞĐƚĞĚ Žƌ ĂƉƉŽŝŶƚĞĚ ďŽĂƌĚƐ ƚŚĂƚ ŽǀĞƌƐĞĞ ƉƵďůŝĐ ƉŽǁĞƌ Žƌ ĐŽŽƉĞƌĂƚŝǀĞ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ͘ dƌŝďĂů ŐŽǀĞƌŶŝŶŐ ďŽĚŝĞƐ ĂƌĞ ĞŶƚŝƚŝĞƐ ƚŚĂƚ ŽǀĞƌƐĞĞ Ă ƌĂŶŐĞ ŽĨ ĞůĞĐƚƌŝĐ ŝŶĚƵƐƚƌLJ ĂĐƚŝǀŝƚŝĞƐ ƚŚĂƚ ŽĐĐƵƌ ŽŶ ƚƌŝďĂů ůĂŶĚƐ͘ dŚĞ ĐƵƌƌĞŶƚ ũƵƌŝƐĚŝĐƚŝŽŶĂů ĚŝǀŝĚĞ ŽĨ ƌĞŐƵůĂƚŽƌLJ ĂƵƚŚŽƌŝƚLJ ďĞƚǁĞĞŶ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĂŶĚ ƚŚĞ ƐƚĂƚĞƐ͕ ĞƐƚĂďůŝƐŚĞĚ ŝŶ ƚŚĞ ĞĚĞƌĂů WŽǁĞƌ Đƚ ĂŶĚ ĐůĂƌŝĨŝĞĚ ďLJ ƐƵďƐĞƋƵĞŶƚ ƵƉƌĞŵĞ ŽƵƌƚ ĂŶĚ ůŽǁĞƌ ĐŽƵƌƚ ĚĞĐŝƐŝŽŶƐ͕ ŝƐ ƚŚĞ ƌĞƐƵůƚ ŽĨ ƚŚĞ ĞǀŽůƵƚŝŽŶ ŽĨ Ă ƌĞŐƵůĂƚŽƌLJ ƐƚƌƵĐƚƵƌĞ͖ ŝŶ ŐĞŶĞƌĂů͕ ĞĚĞƌĂů ƌĞŐƵůĂƚŽƌƐ ŚĂǀĞ ĂƵƚŚŽƌŝƚLJ ŽǀĞƌ ƚŚĞ ďƵůŬ ƉŽǁĞƌ ƐLJƐƚĞŵ ĂŶĚ ǁŚŽůĞƐĂůĞ ĞůĞĐƚƌŝĐ ƐĂůĞƐ ŝŶ ŝŶƚĞƌƐƚĂƚĞ ĐŽŵŵĞƌĐĞ ǁŚŝůĞ ƚĂƚĞ ĂŶĚ ůŽĐĂů ƌĞŐƵůĂƚŽƌƐ ŚĂǀĞ ŽǀĞƌƐŝŐŚƚ ŽĨ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ ĂŶĚ ƌĞƚĂŝů ƐĂůĞƐ͘ dŚŝƐ ĚŝǀŝƐŝŽŶ ŽĨ ĂƵƚŚŽƌŝƚŝĞƐ ďĞƚǁĞĞŶ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĂŶĚ ƐƚĂƚĞƐ͕ ĂƐ ǁƌŝƚƚĞŶ ŝŶ ƚŚĞ ĞĚĞƌĂů WŽǁĞƌ Đƚ͕ ŚĂƐ ďĞĞŶ ĚĞƐĐƌŝďĞĚ ĂƐ Ă ͞ďƌŝŐŚƚ ůŝŶĞ͖͟ ƚŚŝƐ ďƌŝŐŚƚ ůŝŶĞ ŝƐ͕ ŚŽǁĞǀĞƌ͕ ďĞĐŽŵŝŶŐ ŝŶĐƌĞĂƐŝŶŐůLJ ŚĂnjLJ ĂƐ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƐĞƌǀŝĐĞƐ 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;ĂŶĚ ŝŶĐƌĞĂƐĞƐ Žƌ ĚĞĐƌĞĂƐĞƐ ŝŶ ǀŽůƚĂŐĞͿ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ƚŚƌŽƵŐŚ ĚĞůŝǀĞƌLJ ƚŽ ƵůƚŝŵĂƚĞ ĐŽŶƐƵŵƉƚŝŽŶ͘ ŶƐƚĞĂĚ͕ ŶĞǁ Z ;ŝŶĐůƵĚŝŶŐ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞͿ ĐĂŶ ďĞ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ ƚŽ ĞŝƚŚĞƌ ƚŚĞ Z ũƵƌŝƐĚŝĐƚŝŽŶĂů ŚŝŐŚͲǀŽůƚĂŐĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ŐƌŝĚ Žƌ ƚŚĞ ƚĂƚĞ ũƵƌŝƐĚŝĐƚŝŽŶĂů ůŽǁͲǀŽůƚĂŐĞ ůŽĐĂů ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ ;Žƌ ďĞŚŝŶĚ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ŵĞƚĞƌͿ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞƐĞ ƌĞƐŽƵƌĐĞƐ͕ ĂůŽŶŐ ǁŝƚŚ ƚŚĞ ŽƚŚĞƌ ŶĞǁ ĂŶĚ ĂĚǀĂŶĐĞĚ ƚĞĐŚŶŽůŽŐŝĞƐ ŶŽƚĞĚ ĂďŽǀĞ͕ ĐĂŶ ƉƌŽǀŝĚĞ ;Žƌ ĞŶĂďůĞ Z ƚŚĂƚ ĐĂŶ ƉƌŽǀŝĚĞͿ ƐĞǀĞƌĂů ŬŝŶĚƐ ŽĨ ďŽƚŚ ǁŚŽůĞƐĂůĞ ĂŶĚ ƌĞƚĂŝů ŐƌŝĚ ƐĞƌǀŝĐĞƐ͕ ǁŝƚŚ ďĞŶĞĨŝƚƐ ƚŚĂƚ ĞdžƚĞŶĚ ĂĐƌŽƐƐ ƚŚĞ ƚƌĂĚŝƚŝŽŶĂů ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĐůĂƐƐŝĨŝĐĂƚŝŽŶƐ͘ϭϯϴ dŚĞ ƐĐĂůĞ ĂŶĚ ƐĐŽƉĞ ŽĨ ƚŚĞ ƚƌĂŶƐŝƚŝŽŶ ĂůƌĞĂĚLJ ƵŶĚĞƌǁĂLJ ĂůƐŽ ƌĞƋƵŝƌĞƐ ƚŚĞ ĐŽͲĞǀŽůƵƚŝŽŶ ŽĨ ƚŚĞ ĞĚĞƌĂů ƌŽůĞ͖ ƚŚŝƐ ŝŶƐƚĂůůŵĞŶƚ ŽĨ ƚŚĞ Y Z ;ŝ͘Ğ͕͘ Y Z ϭ͘ϮͿ ǁŝůů ƚŚĞƌĞĨŽƌĞ ĐŽŶƐŝĚĞƌ ƚŚĞ ĞĚĞƌĂů ƌŽůĞ ŝŶ ƚŚŝƐ ƚƌĂŶƐŝƚŝŽŶ͘ dŚĞ ĞĚĞƌĂů ƌŽůĞ ŵĞƌŝƚƐ ĞǀĂůƵĂƚŝŽŶ ŝŶ ƚĞƌŵƐ ŽĨ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ŵĂƌŬĞƚƐ ĂŶĚ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ ŝŶ ŝŶĐĞŶƚŝŶŐ ĐůĞĂŶ͕ ƌĞůŝĂďůĞ͕ ĂŶĚ ĂĨĨŽƌĚĂďůĞ ƉŽǁĞƌ͖ ĞŵĞƌŐŝŶŐ 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Recommendations 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Endnotes ϭ KƌŝƐŽŶ ǁĞƚƚ DĂƌĚĞŶ͕ Little Visits with Great Americans Or Success Ideals and How to Attain Them ; ƵĐĐĞƐƐ ŽŵƉĂŶLJ ĂƌǀĂƌĚ hŶŝǀĞƌƐŝƚLJ͕ ϭϵϬϯͿ͕ ϯϬ͘ ŝŐŝƚŝnjĞĚ ĞĐĞŵďĞƌ ϵ͕ ϮϬϬϴ͕ ŚƚƚƉƐ͗ͬͬŬƐ͘ŐŽŽŐůĞ͘ĐŽŵͬŬƐ͍ŝĚсϳĚŽϴ z ΘĚƋсƚŚŽŵĂƐнĞĚŝƐŽŶнйϮϮƌĞŽƌŐĂŶŝnjĞнƚŚĞнůŝĨĞнŽĨнƚŚĞнǁŽƌůĚйϮϮΘƐŽƵƌĐĞ сŐďƐͺŶĂǀůŝŶŬƐͺƐ Ϯ ͞ ƌĞƋƵĞŶƚůLJ ƐŬĞĚ YƵĞƐƚŝŽŶƐ͗ Žǁ ŵĂŶLJ ƉŽǁĞƌ ƉůĂŶƚƐ ĂƌĞ ƚŚĞƌĞ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͍͟ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ĂĐĐĞƐƐĞĚ KĐƚŽďĞƌ ϭϵ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬƚŽŽůƐͬĨĂƋƐͬĨĂƋ͘ĐĨŵ͍ŝĚсϲϱΘƚсϮ͘ ϯ WůĂƚƚƐ͕ 2015 UDI Directory of Electric Power Producers and Distributors 123rd Edition of the Electrical World Directory ;EĞǁ zŽƌŬ͕ Ez͗ WůĂƚƚƐ͕ ϮϬϭϰͿ͕ ǀŝʹǀŝŝ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƉůĂƚƚƐ͘ĐŽŵͬŝŵ͘ƉůĂƚƚƐ͘ĐŽŶƚĞŶƚͬĚŽǁŶůŽĂĚƐͬƵĚŝͬĞƉƉĚͬĞƉƉĚĚŝƌ͘ƉĚĨ͘ ϰ ƵůŝĂ WLJƉĞƌ͕ ͞dŚĞ h ŽůĂƌ DĂƌŬĞƚ Ɛ EŽǁ ϭ DŝůůŝŽŶ ŶƐƚĂůůĂƚŝŽŶƐ ƚƌŽŶŐ͕͟ Greentech Media͕ Ɖƌŝů Ϯϭ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŐƌĞĞŶƚĞĐŚŵĞĚŝĂ͘ĐŽŵͬĂƌƚŝĐůĞƐͬƌĞĂĚͬdŚĞͲh͘ ͘Ͳ ŽůĂƌͲDĂƌŬĞƚͲEŽǁͲKŶĞͲDŝůůŝŽŶͲ ŶƐƚĂůůĂƚŝŽŶƐͲ ƚƌŽŶŐ͘ ϱ ͞ ůĞĐƚƌŝĐ ƵďƐƚĂƚŝŽŶƐ͕͟ WůĂƚƚƐ͕ ŐĞŶĞƌĂƚĞĚ DĂƌĐŚ ϲ͕ ϮϬϬϵ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ƉůĂƚƚƐ͘ĐŽŵͬ D͘WůĂƚƚƐ͘ ŽŶƚĞŶƚͬWƌŽĚƵĐƚƐ ĞƌǀŝĐĞƐͬWƌŽĚƵĐƚƐͬŐŝƐŵĞƚĂĚĂƚĂͬƐƵďƐƚĂƚŶ͘ƉĚĨ͘ ϲ WůĂƚƚƐ͕ 2015 UDI Directory of Electric Power Producers and Distributors 123rd Edition of the Electrical World Directory ;EĞǁ zŽƌŬ͕ Ez͗ WůĂƚƚƐ͕ ϮϬϭϰͿ͕ ǀŝʹǀŝŝ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƉůĂƚƚƐ͘ĐŽŵͬŝŵ͘ƉůĂƚƚƐ͘ĐŽŶƚĞŶƚͬĚŽǁŶůŽĂĚƐͬƵĚŝͬĞƉƉĚͬĞƉƉĚĚŝƌ͘ƉĚĨ͘ ϳ WůĂƚƚƐ͕ 2015 UDI Directory of Electric Power Producers and Distributors 123rd Edition of the Electrical World Directory ;EĞǁ zŽƌŬ͕ Ez͗ WůĂƚƚƐ͕ ϮϬϭϰͿ͕ ǀŝ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƉůĂƚƚƐ͘ĐŽŵͬŝŵ͘ƉůĂƚƚƐ͘ĐŽŶƚĞŶƚͬĚŽǁŶůŽĂĚƐͬƵĚŝͬĞƉƉĚͬĞƉƉĚĚŝƌ͘ƉĚĨ͘ ϴ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ͞dĂďůĞ Ϯ͘ϭ͘ EƵŵďĞƌ ŽĨ hůƚŝŵĂƚĞ ƵƐƚŽŵĞƌƐ ĞƌǀĞĚ ďLJ ĞĐƚŽƌ͕ ďLJ WƌŽǀŝĚĞƌ͕ ϮϬϬϱ ƚŚƌŽƵŐŚ ϮϬϭϱ͕͟ Electric Power Annual 2014 ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ĂĐĐĞƐƐĞĚ KĐƚŽďĞƌ ϮϬ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĂŶŶƵĂůͬŚƚŵůͬĞƉĂͺϬϮͺϬϭ͘Śƚŵů͘ ϵ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ͞ ůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĂůĞƐ͕ ƌĞǀĞŶƵĞ͕ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Žƌŵ Ͳϴϲϭ ĚĞƚĂŝůĞĚ ĚĂƚĂ ĨŝůĞƐ͕͟ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ KĐƚŽďĞƌ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĚĂƚĂͬĞŝĂϴϲϭͬ͘ ϭϬ ŶƚĞƌŶĂƚŝŽŶĂů DŽŶĞƚĂƌLJ ƵŶĚ͕ World Economic Outlook database Entire Dataset By Country Groups GDP Current Prices Ɖƌŝů ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŝŵĨ͘ŽƌŐͬĞdžƚĞƌŶĂůͬƉƵďƐͬĨƚͬǁĞŽͬϮϬϭϲͬϬϭͬǁĞŽĚĂƚĂͬĚŽǁŶůŽĂĚ͘ĂƐƉdž͘ ϭϭ sŝƉŝŶ ƌŽƌĂ ĂŶĚ ŽnjĞĨ ŝĞƐŬŽǀƐŬLJ͕ Electricity Use as an Indicator of U S Economic Activity ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ϮϬϭϰͿ͕ ǁŽƌŬŝŶŐ ƉĂƉĞƌ ƐĞƌŝĞƐ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬǁŽƌŬŝŶŐƉĂƉĞƌƐͬƉĚĨͬĞůĞĐƚƌŝĐŝƚLJͺŝŶĚŝĐĂƚŽƌ͘ƉĚĨ͘ ϭϮ sŝƉŝŶ ƌŽƌĂ ĂŶĚ ŽnjĞĨ ŝĞƐŬŽǀƐŬLJ͕ Electricity Use as an Indicator of U S Economic Activity ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ϮϬϭϰͿ͕ ǁŽƌŬŝŶŐ ƉĂƉĞƌ ƐĞƌŝĞƐ͕ Ϯ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬǁŽƌŬŝŶŐƉĂƉĞƌƐͬƉĚĨͬĞůĞĐƚƌŝĐŝƚLJͺŝŶĚŝĐĂƚŽƌ͘ƉĚĨ͘ ϭϯ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Energy Sector-Specific Plan 2015 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ĂŶĚ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽŵĞůĂŶĚ ĞĐƵƌŝƚLJ͕ ϮϬϭϱͿ͕ ŝǀ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĚŚƐ͘ŐŽǀͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬƉƵďůŝĐĂƚŝŽŶƐͬŶŝƉƉͲƐƐƉͲĞŶĞƌŐLJͲϮϬϭϱͲϱϬϴ͘ƉĚĨ͘ ϭϰ Ƶ ŶŶ ĂŚůŵĂŶ͕ ͞ ůŝŵĂƚĞ ŚĂŶŐĞ͗ 'ůŽďĂů dĞŵƉĞƌĂƚƵƌĞ͕͟ EĂƚŝŽŶĂů KĐĞĂŶŝĐ ĂŶĚ ƚŵŽƐƉŚĞƌŝĐ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ĂŶƵĂƌLJ ϭ͕ ϮϬϭϱ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐůŝŵĂƚĞ͘ŐŽǀͬŶĞǁƐͲĨĞĂƚƵƌĞƐͬƵŶĚĞƌƐƚĂŶĚŝŶŐͲĐůŝŵĂƚĞͬĐůŝŵĂƚĞͲĐŚĂŶŐĞͲŐůŽďĂůͲƚĞŵƉĞƌĂƚƵƌĞ͘ ϭϱ Ƶ ŶŶ ĂŚůŵĂŶ͕ ͞ ůŝŵĂƚĞ ŚĂŶŐĞ͗ 'ůŽďĂů dĞŵƉĞƌĂƚƵƌĞ͕͟ EĂƚŝŽŶĂů KĐĞĂŶŝĐ ĂŶĚ ƚŵŽƐƉŚĞƌŝĐ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ĂŶƵĂƌLJ ϭ͕ ϮϬϭϱ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐůŝŵĂƚĞ͘ŐŽǀͬŶĞǁƐͲĨĞĂƚƵƌĞƐͬƵŶĚĞƌƐƚĂŶĚŝŶŐͲĐůŝŵĂƚĞͬĐůŝŵĂƚĞͲĐŚĂŶŐĞͲŐůŽďĂůͲƚĞŵƉĞƌĂƚƵƌĞ͘ ϭϲ WĂƚƌŝĐŬ LJŶĐŚ͕ ͞ϮϬϭϲ ůŝŵĂƚĞ dƌĞŶĚƐ ŽŶƚŝŶƵĞ ƚŽ ƌĞĂŬ ZĞĐŽƌĚƐ͕͟ EĂƚŝŽŶĂů ĞƌŽŶĂƵƚŝĐƐ ĂŶĚ ƉĂĐĞ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ƵůLJ ϭϵ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶĂƐĂ͘ŐŽǀͬĨĞĂƚƵƌĞͬŐŽĚĚĂƌĚͬϮϬϭϲͬĐůŝŵĂƚĞͲƚƌĞŶĚƐͲĐŽŶƚŝŶƵĞͲƚŽͲďƌĞĂŬͲƌĞĐŽƌĚƐ͘ ϭϳ ͘ KǀĞƌůĂŶĚ͕ ͘ ĂŶŶĂ͕ ͘ ĂŶƐƐĞŶͲ ĂƵĞƌ͕ ͘Ͳ ͘ ŝŵ͕ ͘ ͘ tĂůƐŚ͕ D͘ tĂŶŐ͕ h͘ ͘ ŚĂƚƚ͕ ĂŶĚ Z͘ ͘ dŚŽŵĂŶ͕ ͞ ƌĐƚŝĐ ZĞƉŽƌƚ ĂƌĚ͗ hƉĚĂƚĞ ĨŽƌ ϮϬϭϲ͕ WĞƌƐŝƐƚĞŶƚ ǁĂƌŵŝŶŐ ƚƌĞŶĚ ĂŶĚ ůŽƐƐ ŽĨ ƐĞĂ ŝĐĞ ĂƌĞ ƚƌŝŐŐĞƌŝŶŐ ĞdžƚĞŶƐŝǀĞ ƌĐƚŝĐ ĐŚĂŶŐĞƐ͕͟ ĂĐĐĞƐƐĞĚ ĞĐĞŵďĞƌ Ϯϴ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĂƌĐƚŝĐ͘ŶŽĂĂ͘ŐŽǀͬZĞƉŽƌƚͲ ĂƌĚͬZĞƉŽƌƚͲ ĂƌĚͲϮϬϭϲͬ ƌƚD ͬϱϬϮϮͬ ƌƚŝĐůĞ ͬϮϳϭͬ ƵƌĨĂĐĞͲ ŝƌͲdĞŵƉĞƌĂƚƵƌĞ͘ ϭϴ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Energy Demands on Water Resources Report to Congress on the Interdependency of Energy and Water ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞĐĞŵďĞƌ ϮϬϬϲͿ͕ Ϯϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĐŝƌĐůĞŽĨďůƵĞ͘ŽƌŐͬǁƉͲĐŽŶƚĞŶƚͬƵƉůŽĂĚƐͬϮϬϭϬͬϬϵͬϭϮϭͲ ZƉƚdŽ ŽŶŐƌĞƐƐͲ tǁ ĐŽŵŵĞŶƚƐͲ E Ϯ͘ƉĚĨ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ϭϵ ĂůŝĨŽƌŶŝĂ ĞƉĂƌƚŵĞŶƚ ŽĨ tĂƚĞƌ ZĞƐŽƵƌĐĞƐ͕ Managing an Uncertain Future Climate Change Adaptation Strategies for California's Water ; ĂĐƌĂŵĞŶƚŽ͕ ͗ ĂůŝĨŽƌŶŝĂ ĞƉĂƌƚŵĞŶƚ ŽĨ tĂƚĞƌ ZĞƐŽƵƌĐĞƐ͕ KĐƚŽďĞƌ ϮϬϬϴͿ͕ ϴ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ǁĂƚĞƌ͘ĐĂ͘ŐŽǀͬĐůŝŵĂƚĞĐŚĂŶŐĞͬĚŽĐƐͬ ůŝŵĂƚĞ ŚĂŶŐĞtŚŝƚĞWĂƉĞƌ͘ƉĚĨ͘ ϮϬ ŝĂŶĂ ĂƵĞƌ͕ DĂƌŬ WŚŝůďƌŝĐŬ͕ Žď sĂůůĂƌŝŽ͕ ŽLJƚ ĂƚƚĞLJ͕ ĂĐŚĂƌLJ ůĞŵĞŶƚ͕ ůĞƚĐŚĞƌ ŝĞůĚƐ͕ ĞŶŶŝĨĞƌ ŝ͕ Ğƚ Ăů͕͘ The Water-Energy Nexus Challenges and Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ƵŶĞ ϮϬϭϰͿ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϰͬϬϳͬĨϭϳͬtĂƚĞƌйϮϬ ŶĞƌŐLJйϮϬEĞdžƵƐйϮϬ ƵůůйϮϬZĞƉŽƌƚйϮϬ ƵůLJйϮϬϮϬϭϰ͘ƉĚĨ͘ Ϯϭ D͘ ŝŶƐƚĞƌ͕ ͘ WŚŝůůŝƉƐ͕ ĂŶĚ ͘ WŝůůŽŶ͕ State Energy Resilience Framework ; ĞŵŽŶƚ͕ ͗ ƌŐŽŶŶĞ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ƵůLJ ϮϬϭϲͿ͘ ϮϮ ͞ ŶƚĞƌĚĞƉĞŶĚĞŶĐĞ͕͟ ĞĚĞƌĂů ŽŵŵƵŶŝĐĂƚŝŽŶƐ ŽŵŵŝƐƐŝŽŶ͕ ĂĐĐĞƐƐĞĚ ĞĐĞŵďĞƌ ϳ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨĐĐ͘ŐŽǀͬŐĞŶĞƌĂůͬŝŶƚĞƌĚĞƉĞŶĚĞŶĐĞ͘ Ϯϯ ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŽŵĞůĂŶĚ ĞĐƵƌŝƚLJͿ͕ Financial Services Sector-Specific Plan 2015 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ ϮϬϭϱͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĚŚƐ͘ŐŽǀͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬƉƵďůŝĐĂƚŝŽŶƐͬŶŝƉƉͲƐƐƉͲĨŝŶĂŶĐŝĂůͲƐĞƌǀŝĐĞƐͲϮϬϭϱͲϱϬϴ͘ƉĚĨ͘ Ϯϰ Z ; ĞĚĞƌĂů ŶĞƌŐLJ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶͿ ĂŶĚ E Z ;EŽƌƚŚ ŵĞƌŝĐĂŶ ůĞĐƚƌŝĐ ZĞůŝĂďŝůŝƚLJ ŽƌƉŽƌĂƚŝŽŶͿ͕ Report on Outages and Curtailments During the Southwest Cold Weather Event of February 1–5 2011 Causes and Recommendations͕ ;tĂƐŚŝŶŐƚŽŶ͕ ͗ Z ĂŶĚ E Z ͕ ϮϬϭϭͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨĞƌĐ͘ŐŽǀͬůĞŐĂůͬƐƚĂĨĨͲƌĞƉŽƌƚƐͬϬϴͲϭϲͲϭϭͲƌĞƉŽƌƚ͘ƉĚĨ͘ Ϯϱ WĞƚĞƌ ĞůůLJͲ ĞƚǁŝůĞƌ͕ Mind the Gap Energy Availability and the Disconnect with Data͕ ; ŽƵƐƚŽŶ͕ dy͗ EŽƌƚŚďƌŝĚŐĞ 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ŚƚƚƉ͗ͬͬǁǁǁ͘ŵĐŬŝŶƐĞLJ͘ĐŽŵͬŝŶĚƵƐƚƌŝĞƐͬŚŝŐŚͲƚĞĐŚͬŽƵƌͲŝŶƐŝŐŚƚƐͬĚŝŐŝƚĂůͲĂŵĞƌŝĐĂͲĂͲƚĂůĞͲŽĨͲƚŚĞͲŚĂǀĞƐͲĂŶĚͲŚĂǀĞͲŵŽƌĞƐ͘ ϯϰ ĂǀŝĚ ĐŚƌĂŶŬ͕ ŝůů ŝƐĞůĞ͕ dŝŵ ŽŵĂdž͕ ĂŶĚ ŝŵ ĂŬ͕ 2015 Urban Mobility Scorecard ; ŽůůĞŐĞ ƚĂƚŝŽŶ͕ dy͗ dĞdžĂƐ ΘD dƌĂŶƐƉŽƌƚĂƚŝŽŶ ŶƐƚŝƚƵƚĞ ĂŶĚ EZ y͕ ŶĐ͕͘ ϮϬϭϱͿ͕ ŚƚƚƉ͗ͬͬĚϮĚƚůϱŶŶůƉĨƌϬƌ͘ĐůŽƵĚĨƌŽŶƚ͘ŶĞƚͬƚƚŝ͘ƚĂŵƵ͘ĞĚƵͬĚŽĐƵŵĞŶƚƐͬŵŽďŝůŝƚLJͲ ƐĐŽƌĞĐĂƌĚͲϮϬϭϱ͘ƉĚĨ͘ ϯϱ ĂŵĞƐ DĂŶLJŝŬĂ͕ DŝĐŚĂĞů ŚƵŝ͕ WĞƚĞƌ ŝƐƐŽŶ͕ ŽŶĂƚŚĂŶ tŽĞƚnjĞů͕ ZŝĐŚĂƌĚ ŽďďƐ͕ ĂĐƋƵĞƐ ƵŐŚŝŶ͕ ĂŶĚ ĂŶ ŚĂƌŽŶ͕ Unlocking the potential of the Internet of Things ;DĐ ŝŶƐĞLJ 'ůŽďĂů ŶƐƚŝƚƵƚĞ͕ ϮϬϭϱͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŵĐŬŝŶƐĞLJ͘ĐŽŵͬďƵƐŝŶĞƐƐͲ ĨƵŶĐƚŝŽŶƐͬďƵƐŝŶĞƐƐͲƚĞĐŚŶŽůŽŐLJͬŽƵƌͲŝŶƐŝŐŚƚƐͬƚŚĞͲŝŶƚĞƌŶĞƚͲŽĨͲƚŚŝŶŐƐͲƚŚĞͲǀĂůƵĞͲŽĨͲĚŝŐŝƚŝnjŝŶŐͲƚŚĞͲƉŚLJƐŝĐĂůͲǁŽƌůĚ͘ ϯϲ EZ ;EĂƚƵƌĂů ZĞƐŽƵƌĐĞƐ ĞĨĞŶƐĞ ŽƵŶĐŝůͿ͕ America’s Data Centers Are Wasting Huge Amounts of Energy Critical Action Needed to Save Billions of Dollars and Kilowatts ;tĂƐŚŝŶŐƚŽŶ͕ ͗ EZ ͕ ϮϬϭϱͿ͕ ŝƐƐƵĞ ďƌŝĞĨ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŶƌĚĐ͘ŽƌŐͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬĚĂƚĂͲĐĞŶƚĞƌͲĞĨĨŝĐŝĞŶĐLJͲĂƐƐĞƐƐŵĞŶƚͲ ͘ƉĚĨ͘ ϯϳ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͞ϭϬ ĂĐƚƐ ƚŽ ŶŽǁ ďŽƵƚ ĂƚĂ ĞŶƚĞƌƐ͕͟ EŽǀĞŵďĞƌ ϭϳ͕ ϮϬϭϰ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬĞĞƌĞͬĂƌƚŝĐůĞƐͬϭϬͲ ĨĂĐƚƐͲŬŶŽǁͲĂďŽƵƚͲĚĂƚĂͲĐĞŶƚĞƌƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ϯϴ ƌŵĂŶ ŚĞŚĂďŝ͕ ĂƌĂŚ ŽƐĞƉŚŝŶĞ ŵŝƚŚ͕ ĂůĞ ͘ ĂƌƚŽƌ͕ ZŝĐŚĂƌĚ ͘ ƌŽǁŶ͕ DĂŐŶƵƐ ĞƌƌůŝŶ͕ ŽŶĂƚŚĂŶ '͘ ŽŽŵĞLJ͕ ƌŝĐ Z͘ DĂƐĂŶĞƚ͕ Ğƚ Ăů͕͘ United States Data Center Energy Usage Report ; ĞƌŬĞůĞLJ͕ ͗ ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ƵŶĞ ϮϬϭϲͿ͕ ŚƚƚƉƐ͗ͬͬĞƚĂ͘ůďů͘ŐŽǀͬƐŝƚĞƐͬĂůůͬĨŝůĞƐͬƉƵďůŝĐĂƚŝŽŶƐͬůďŶůͲϭϬϬϱϳϳϱͺǀϮ͘ƉĚĨ ϯϵ ŽƐŚ tŚŝƚŶĞLJ ĂŶĚ WŝĞƌƌĞ ĞůĨŽƌŐĞ͕ Data Center Efficiency Assessment Scaling Up Energy Efficiency Across the Data Center Industry Evaluating Key Drivers and Barriers ;tĂƐŚŝŶŐƚŽŶ͕ ͗ EĂƚƵƌĂů ZĞƐŽƵƌĐĞƐ ĞĨĞŶƐĞ ŽƵŶĐŝů͕ ƵŐƵƐƚ ϮϬϭϰͿ͕ ŝƐƐƵĞ ƉĂƉĞƌ͕ ϱ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŶƌĚĐ͘ŽƌŐͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬĚĂƚĂͲĐĞŶƚĞƌͲĞĨĨŝĐŝĞŶĐLJͲĂƐƐĞƐƐŵĞŶƚͲ W͘ƉĚĨ͘ ϰϬ ƌŵĂŶ ŚĞŚĂďŝ͕ ĂƌĂŚ ŽƐĞƉŚŝŶĞ ŵŝƚŚ͕ ĂůĞ ͘ ĂƌƚŽƌ͕ ZŝĐŚĂƌĚ ͘ ƌŽǁŶ͕ DĂŐŶƵƐ ĞƌƌůŝŶ͕ ŽŶĂƚŚĂŶ '͘ ŽŽŵĞLJ͕ ƌŝĐ Z͘ DĂƐĂŶĞƚ͕ Ğƚ Ăů͕͘ United States Data Center Energy Usage Report ; ĞƌŬĞůĞLJ͕ ͗ ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ƵŶĞ ϮϬϭϲͿ͕ ŚƚƚƉƐ͗ͬͬĞƚĂ͘ůďů͘ŐŽǀͬƐŝƚĞƐͬĂůůͬĨŝůĞƐͬƉƵďůŝĐĂƚŝŽŶƐͬůďŶůͲϭϬϬϱϳϳϱͺǀϮ͘ƉĚĨ͘ ϰϭ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ͞ ůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĂůĞƐ͕ ƌĞǀĞŶƵĞ͕ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Žƌŵ Ͳϴϲϭ ĚĞƚĂŝůĞĚ ĚĂƚĂ ĨŝůĞƐ͕͟ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ KĐƚŽďĞƌ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĚĂƚĂͬĞŝĂϴϲϭͬ͘ ϰϮ ŝůů ŽǀĞůĞƐƐ͕ ͞ ŶƚĞƌŶĞƚ ŽĨ dŚŝŶŐƐ ƉƵƚƐ ĞŶĞƌŐLJ ŐƌŝĚ ƚŽ ƚĞƐƚ͕͟ USA Today͕ ĞĐĞŵďĞƌ ϮϬ͕ ϮϬϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ƵƐĂƚŽĚĂLJ͘ĐŽŵͬƐƚŽƌLJͬŵŽŶĞLJͬĐŽůƵŵŶŝƐƚͬϮϬϭϱͬϭϮͬϮϬͬůŽǀĞůĞƐƐͲŝŶƚĞƌŶĞƚͲŽĨͲƚŚŝŶŐƐͲĞŶĞƌŐLJͲŐƌŝĚͬϳϳϱϭϱϲϴϴͬ͘ ϰϯ ŝŵĞŶƐŝŽŶĂů ZĞƐĞĂƌĐŚ͕ Business Impact of IT Incident Communications A Global Survey of IT Professionals ; ĂŶ ŽƐĞ͕ ͗ ŝŵĞŶƐŝŽŶĂů ZĞƐĞĂƌĐŚ ĂŶĚ džDĂƚƚĞƌƐ͕ DĂƌĐŚ ϮϬϭϱͿ͕ ŚƚƚƉ͗ͬͬŝŶĨŽ͘džŵĂƚƚĞƌƐ͘ĐŽŵͬƌƐͬĂůĂƌŵƉŽŝŶƚͬŝŵĂŐĞƐͬdžDĂƚƚĞƌƐͲϮϬϭϱͲ ƵƌǀĞLJͲ ZĞƉŽƌƚ͘ƉĚĨ͘ ϰϰ ŝŵĞŶƐŝŽŶĂů ZĞƐĞĂƌĐŚ͕ Business Impact of IT Incident Communications A Global Survey of IT Professionals ; ĂŶ ŽƐĞ͕ ͗ ŝŵĞŶƐŝŽŶĂů ZĞƐĞĂƌĐŚ ĂŶĚ džDĂƚƚĞƌƐ͕ DĂƌĐŚ ϮϬϭϱͿ͕ ϯ͕ ŚƚƚƉ͗ͬͬŝŶĨŽ͘džŵĂƚƚĞƌƐ͘ĐŽŵͬƌƐͬĂůĂƌŵƉŽŝŶƚͬŝŵĂŐĞƐͬdžDĂƚƚĞƌƐͲϮϬϭϱͲ ƵƌǀĞLJͲ ZĞƉŽƌƚ͘ƉĚĨ͘ ϰϱ ƚĞǀĞŶ ŚĂƉŝƌŽ͕ Η KD Ϯ͘ϯ͗ ĞƐƚ WƌĂĐƚŝĐĞƐ ĨŽƌ KƉĞƌĂƚŝŶŐ Ă ĂƚĂ ĞŶƚĞƌΗ ;ƉƌĞƐĞŶƚĂƚŝŽŶ ŐŝǀĞŶ Ăƚ ƚŚĞ ĂƚĂ ĞŶƚĞƌ tŽƌůĚ ŽŶĨĞƌĞŶĐĞ͕ EĞǁ KƌůĞĂŶƐ͕ ͕ ĞƉƚĞŵďĞƌ ϭϮʹϭϱ͕ ϮϬϭϲͿ͕ ŚƚƚƉ͗ͬͬĨĂůů͘ĚĂƚĂĐĞŶƚĞƌǁŽƌůĚ͘ĐŽŵͬĚĐĨϭϲͬ ƵƐƚŽŵͬ ĂŶĚŽƵƚͬ ƉĞĂŬĞƌϬͺ ĞƐƐŝŽŶϭϬϭϲϬϱϰͺϭ͘ƉĚĨ͘ ϰϲ ͞ ĂƚĂ ĞŶƚĞƌ ƚĂŶĚĂƌĚƐ ;dŝĞƌƐ Ͳ sͿ͕͟ ŽůŽĐĂƚŝŽŶ ŵĞƌŝĐĂ ŽǀĞƌǀŝĞǁ͘Śƚŵ͘ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐŽůŽĐĂƚŝŽŶĂŵĞƌŝĐĂ͘ĐŽŵͬĚĂƚĂͲĐĞŶƚĞƌͬƚŝĞƌͲƐƚĂŶĚĂƌĚƐͲ ϰϳ ƌŽƐƚ Θ ƵůůŝǀĂŶ͕ Analysis of the US Power Quality Equipment Market ; ĞƌŬĞůĞLJ͕ ͗ ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ƵŐƵƐƚ ϮϬϭϱͿ͕ E ͲϭϬϬϯϵϵϬ͕ ϯϮ͕ ŚƚƚƉƐ͗ͬͬĞŵƉ͘ůďů͘ŐŽǀͬƐŝƚĞƐͬĂůůͬĨŝůĞƐͬůďŶůͲϭϬϬϯϵϵϬ͘ƉĚĨ͘ ϰϴ ƌŽƐƚ Θ ƵůůŝǀĂŶ͕ Analysis of the US Power Quality Equipment Market ; ĞƌŬĞůĞLJ͕ ͗ ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ƵŐƵƐƚ ϮϬϭϱͿ͕ E ͲϭϬϬϯϵϵϬ͕ ŚƚƚƉƐ͗ͬͬĞŵƉ͘ůďů͘ŐŽǀͬƐŝƚĞƐͬĂůůͬĨŝůĞƐͬůďŶůͲϭϬϬϯϵϵϬ͘ƉĚĨ͘ ϰϵ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ The Potential Benefits of Distributed Generation and Rate-Related Issues that May Impede Their Expansion A Study Pursuant to Section 1817 of the Energy Policy Act of 2005 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞďƌƵĂƌLJ ϮϬϬϳͿ͕ ŝŝ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨĞƌĐ͘ŐŽǀͬůĞŐĂůͬĨĞĚͲƐƚĂͬĞdžƉͲƐƚƵĚLJ͘ƉĚĨ͘ ϱϬ 'ƌĞŐ ŝŶŐůĞƚŽŶ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ŽďƐĞƌǀĞƌ ĂŶĚ ĂƚƚĞŶĚĞĞ ŽĨ ůĞĂƌ WĂƚŚ s ĞdžĞƌĐŝƐĞ͕ ƉĞƌƐŽŶĂů ŶŽƚĞƐ͕ Ɖƌŝů ϭϵʹϮϬ͕ ϮϬϭϲ͘ ϱϭ ĂƚŚĞƌŝŶĞ tŽůĨƌĂŵ͕ ͞ Ɛ ƚŚĞ h͘ ͘ ŶǀĞƐƚŝŶŐ ŶŽƵŐŚ ŝŶ ůĞĐƚƌŝĐŝƚLJ 'ƌŝĚ ZĞůŝĂďŝůŝƚLJ͍͟ Energy Institute at Haas͕ ƵŶĞ ϭϱ͕ ϮϬϭϱ͕ ŚƚƚƉƐ͗ͬͬĞŶĞƌŐLJĂƚŚĂĂƐ͘ǁŽƌĚƉƌĞƐƐ͘ĐŽŵͬϮϬϭϱͬϬϲͬϭϱͬŝƐͲƚŚĞͲƵͲƐͲŝŶǀĞƐƚŝŶŐͲĞŶŽƵŐŚͲŝŶͲĞůĞĐƚƌŝĐŝƚLJͲŐƌŝĚͲƌĞůŝĂďŝůŝƚLJͬ͘ ϱϮ 'ƌŽƵƉ͕ ͞dŚĞ ǀŽůƵƚŝŽŶ ŽĨ ͬ D ͬ'D ͗ DĂŶĂŐŝŶŐ ƚŚĞ tŽƌůĚ͛Ɛ WŽǁĞƌ EĞƚǁŽƌŬƐ͕͟ 'ƌŽƵƉ͕ ĂĐĐĞƐƐĞĚ ĞƉƚĞŵďĞƌ Ϯϵ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘Ăďď͘ƵƐͬĐĂǁƉͬĚďϬϬϬϯĚďϬϬϮϲϵϴͬďϯϳϮĨϭϯϭĐϭĂϱϰĞϱĨĐϭϮϱϳϮĞĐϬϬϬϱĚĐďϰ͘ĂƐƉdž͘ ϱϯ ͘ ĞĞ ŵŝƚŚ͕ ͞ ƌŝĞĨ ŝƐƚŽƌLJ ŽĨ ƚŚĞ ůĞĐƚƌŝĐ hƚŝůŝƚLJ ƵƚŽŵĂƚŝŽŶ LJƐƚĞŵƐ ” Electric Energy T D Magazine Ɖƌŝů ϮϬϭϬ͕ ϯϵʹϰϰ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞůĞĐƚƌŝĐĞŶĞƌŐLJŽŶůŝŶĞ͘ĐŽŵͬƐŚŽǁͺĂƌƚŝĐůĞ͘ƉŚƉ͍ŵĂŐсϲϯΘĂƌƚŝĐůĞсϰϵϭ͘ ϱϰ ͘ ĞĞ ŵŝƚŚ͕ ͞ ƌŝĞĨ ŝƐƚŽƌLJ ŽĨ ůĞĐƚƌŝĐ hƚŝůŝƚLJ ƵƚŽŵĂƚŝŽŶ LJƐƚĞŵƐ͕͟ ” Electric Energy T D Magazine Ɖƌŝů ϮϬϭϬ͕ ϯϵʹϰϰ͘ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞůĞĐƚƌŝĐĞŶĞƌŐLJŽŶůŝŶĞ͘ĐŽŵͬƐŚŽǁͺĂƌƚŝĐůĞ͘ƉŚƉ͍ŵĂŐсϲϯΘĂƌƚŝĐůĞсϰϵϭ͘ ϱϱ tŝůůŝĂŵ WĂƌŬƐ͕ ĞǀŝŶ LJŶŶ͕ Ăƌů ŵŚŽĨĨ͕ ƌLJĂŶ ĂŶŶĞŐĂŶ͕ ŚĂƌůĞƐ 'ŽůĚŵĂŶ͕ ĞĨĨĞƌLJ ĂŐůĞ͕ ŽŚŶ 'ƌŽƐŚ͕ Ğƚ Ăů͕͘ Grid Modernization Multi-Year Program Plan ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ϮϬϭϱͿ͕ ŚƚƚƉƐ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϲͬϬϭͬĨϮϴͬ'ƌŝĚйϮϬDŽĚĞƌŶŝnjĂƚŝŽŶйϮϬDƵůƚŝͲzĞĂƌйϮϬWƌŽŐƌĂŵйϮϬWůĂŶ͘ƉĚĨ͘ ϱϲ ĚƌŝĂŶ ŽŽƚŚ͕ EŝŬŽ DŽŚƌ͕ ĂŶĚ WĞƚĞƌ WĞƚĞƌƐ͕ ͞dŚĞ ŝŐŝƚĂů hƚŝůŝƚLJ͗ EĞǁ KƉƉŽƌƚƵŶŝƚŝĞƐ ĂŶĚ ŚĂůůĞŶŐĞƐ͕͟ DĐ ŝŶƐĞLJ Θ ŽŵƉĂŶLJ͕ DĂLJ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŵĐŬŝŶƐĞLJ͘ĐŽŵͬŝŶĚƵƐƚƌŝĞƐͬĞůĞĐƚƌŝĐͲƉŽǁĞƌͲĂŶĚͲŶĂƚƵƌĂůͲŐĂƐͬŽƵƌͲŝŶƐŝŐŚƚƐͬƚŚĞͲĚŝŐŝƚĂůͲƵƚŝůŝƚLJͲŶĞǁͲ ŽƉƉŽƌƚƵŶŝƚŝĞƐͲĂŶĚͲĐŚĂůůĞŶŐĞƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ϱϳ DĂƌŬĞƚƐ ĂŶĚ DĂƌŬĞƚƐ͕ Energy and Utility Analytics Market by Type Application Vertical Deployment - Global Forecast to 2021 ;DĂƌŬĞƚƐ ĂŶĚ DĂƌŬĞƚƐ͕ ĞƉƚĞŵďĞƌ ϮϬϭϲͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŵĂƌŬĞƚǁĂƚĐŚ͘ĐŽŵͬƐƚŽƌLJͬĞŶĞƌŐLJͲĂŶĚͲƵƚŝůŝƚLJͲĂŶĂůLJƚŝĐƐͲŵĂƌŬĞƚͲ ǁŽƌƚŚͲϯϰϭͲďŝůůŝŽŶͲƵƐĚͲďLJͲϮϬϮϭͲϮϬϭϲͲϬϵͲϭϮͲϭϯϮϬϯϭϭ͘ ϱϴ 'ƌŽƵƉ͕ Convergence of Information and Operation Technologies IT OT to Build a Successful Smart Grid ; ƺƌŝĐŚ͗ ͕ ϮϬϭϱͿ͕ ŚƚƚƉ͗ͬͬŶĞǁ͘Ăďď͘ĐŽŵͬĚŽĐƐͬůŝďƌĂƌŝĞƐƉƌŽǀŝĚĞƌϭϯϵͬĚĞĨĂƵůƚͲĚŽĐƵŵĞŶƚͲůŝďƌĂƌLJͬǁƉͲϭϮͺĐŽŶǀĞƌŐĞŶĐĞͲŝƚͲŽƚͲƐŵĂƌƚͲ ŐƌŝĚ͘ƉĚĨ͍ƐĨǀƌƐŶсϮ͘ ϱϵ ZĂǀŝ ĂƌŶĂĚ ĂŶĚ DƵƌĂůŝ ŚĂŶĚƌĂŚĂƐĂŶ͕ ͞ ƵŝůĚŝŶŐ ƚŚĞ ƵƚƵƌĞ ŵĂƌƚ hƚŝůŝƚLJ ƚŚƌŽƵŐŚ d Kd ŶƚĞŐƌĂƚŝŽŶ ʹ ĞǀĞƌĂŐŝŶŐ ĂŶ ƐƐĞƚ ŶĨŽƌŵĂƚŝŽŶ DĂŶĂŐĞŵĞŶƚ ƌĂŵĞǁŽƌŬ͕͟ dĂƚĂ ŽŶƐƵůƚĂŶĐLJ ĞƌǀŝĐĞƐ͕ ϮϬϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ƚĐƐ͘ĐŽŵͬĞŶŐŝŶĞĞƌŝŶŐͲƐĞƌǀŝĐĞƐͬƌĞůĂƚĞĚͲ ŝŶƐŝŐŚƚƐͬWĂŐĞƐͬ ƵŝůĚŝŶŐͲ ƵƚƵƌĞͲ ŵĂƌƚͲhƚŝůŝƚLJͲ dͲKdͲ ŶƚĞŐƌĂƚŝŽŶ͘ĂƐƉdž͘ ϲϬ dŚĞ ĚŝƐŽŶ ŽƵŶĚĂƚŝŽŶ ŶƐƚŝƚƵƚĞ ĨŽƌ ůĞĐƚƌŝĐ ŶŶŽǀĂƚŝŽŶ ; Ϳ͕ Utility-Scale Smart Meter Deployments Building Block of the Evolving Power Grid ;tĂƐŚŝŶŐƚŽŶ ͗ ͕ ϮϬϭϰͿ͕ ϭ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞĚŝƐŽŶĨŽƵŶĚĂƚŝŽŶ͘ŶĞƚͬŝĞŝͬƉƵďůŝĐĂƚŝŽŶƐͬ ŽĐƵŵĞŶƚƐͬ ͺ ŵĂƌƚDĞƚĞƌhƉĚĂƚĞͺϬϵϭϰ͘ƉĚĨ͘ ϲϭ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ͞ Žƌŵ ͲϴϲϬ ĚĞƚĂŝůĞĚ ĚĂƚĂ ͟ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ KĐƚŽďĞƌ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĚĂƚĂͬĞŝĂϴϲϬ͘ ϲϮ ŝƐĂ ĐŚǁĂƌƚnj͕ DĂdž tĞŝ͕ tŝůůŝĂŵ DŽƌƌŽǁ͕ ĞĨĨ ĞĂƐŽŶ͕ ƚĞǀĞŶ Z͘ ĐŚŝůůĞƌ͕ 'ƌĞŐ ĞǀĞŶƚŝƐ͕ ĂƌĂŚ ŵŝƚŚ͕ Ğƚ Ăů͕͘ Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ϮϬϭϲͿ͕ Ͳ ϬϮͲ Ϭϱ ϭϭϮϯϭ͕ ϭϱ͘ ϲϯ ΗEz WƌŝnjĞ͕Η EĞǁ zŽƌŬ ƚĂƚĞ ŶĞƌŐLJ ZĞƐĞĂƌĐŚ ĂŶĚ ĞǀĞůŽƉŵĞŶƚ ƵƚŚŽƌŝƚLJ͕ ůĂƐƚ ƵƉĚĂƚĞĚ KĐƚŽďĞƌ ϭϮ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŶLJƐĞƌĚĂ͘ŶLJ͘ŐŽǀͬ ůůͲWƌŽŐƌĂŵƐͬWƌŽŐƌĂŵƐͬEzͲWƌŝnjĞ͘ ϲϰ ͞DŝĐƌŽŐƌŝĚ WƌŽŐƌĂŵ͕͟ ƚĂƚĞ ŽĨ ŽŶŶĞĐƚŝĐƵƚ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ Θ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ ƵŐƵƐƚ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘Đƚ͘ŐŽǀͬĚĞĞƉͬĐǁƉͬǀŝĞǁ͘ĂƐƉ͍ĂсϰϭϮϬΘYсϱϬϴϳϴϬ͘ ϲϱ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Technology Review An Assessment of Energy Technologies and Research Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϲϳ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϵͬĨϮϲͬYƵĂĚƌĞŶŶŝĂůͲ dĞĐŚŶŽůŽŐLJͲZĞǀŝĞǁͲϮϬϭϱͺϬ͘ƉĚĨ͘ ϲϲ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Fault Location Isolation and Service Restoration Technologies Reduce Outage Impact and Duration ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞĐĞŵďĞƌ ϮϬϭϰͿ͕ ŝŝŝʹǀ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƐŵĂƌƚŐƌŝĚ͘ŐŽǀͬĨŝůĞƐͬ ϱͺĚƌĂĨƚͺƌĞƉŽƌƚͲϭϮͲϭϴͲϮϬϭϰ͘ƉĚĨ͘ ϲϳ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Voltage and Power Optimization Saves Energy and Reduces Peak Power ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϰ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƐŵĂƌƚŐƌŝĚ͘ŐŽǀͬĚŽĐƵŵĞŶƚͬsŽůƚĂŐĞͲWŽǁĞƌͲKƉƚŝŵŝnjĂƚŝŽŶͲ ĂǀĞƐͲ ŶĞƌŐLJͲZĞĚƵĐĞƐͲWĞĂŬͲ WŽǁĞƌ͘Śƚŵů͘ ϲϴ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Synchrophasor Technologies and their Deployment in the Recovery Act Smart Grid Programs ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ƵŐƵƐƚ ϮϬϭϯͿ͕ ϭʹϱ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƐŵĂƌƚŐƌŝĚ͘ŐŽǀͬĨŝůĞƐͬ LJŶĐŚƌŽƉŚĂƐŽƌͺZĞƉŽƌƚͺϬϴͺϬϵͺϮϬϭϯͺ K ͺϮͺǀĞƌƐŝŽŶͺϬ͘ƉĚĨ͘ ϲϵ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ The American Recovery and Reinvestment Act Smart Grid Highlights ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ KĐƚŽďĞƌ ϮϬϭϰͿ͕ ϲϱʹϲϳ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϰͬϭϮͬĨϭϵͬ ' 'Ͳ ' WͲ ŝŐŚůŝŐŚƚƐͲKĐƚŽďĞƌϮϬϭϰ͘ƉĚĨ͘ ϳϬ ŽƐĞƉŚ WĂůĂĚŝŶŽ͕ ΗdŽ Ă ŝŐŝƚĂů͕ ŶƚĞŐƌĂƚĞĚ 'ƌŝĚ͕Η T D World Magazine͕ ĞďƌƵĂƌLJ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬƚĚǁŽƌůĚ͘ĐŽŵͬŐƌŝĚͲŽƉƚͲƐŵĂƌƚͲ ŐƌŝĚͬĚŝŐŝƚĂůͲŝŶƚĞŐƌĂƚĞĚͲŐƌŝĚ͘ ϳϭ ; K Ϳ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͘ ϮϬϭϲ WƌŽũĞĐƚ WŽƌƚĨŽůŝŽ͕ ;'ƌŝĚ DŽĚĞƌŶŝnjĂƚŝŽŶ ĂďŽƌĂƚŽƌLJ ŽŶƐŽƌƚŝƵŵ͗ ϮϬϭϲͿ ŚƚƚƉƐ͗ͬͬŐƌŝĚŵŽĚ͘ůĂďǁŽƌŬƐ͘ŽƌŐͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬĚŽĐƵŵĞŶƚƐͬ'D ͺWŽƌƚĨŽůŝŽͺ ƌŽĐŚƵƌĞͲE tϭ͘ƉĚĨ ϳϮ ; K Ϳ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͘ ϮϬϭϲ WƌŽũĞĐƚ WŽƌƚĨŽůŝŽ͕ ;'ƌŝĚ DŽĚĞƌŶŝnjĂƚŝŽŶ ĂďŽƌĂƚŽƌLJ ŽŶƐŽƌƚŝƵŵ͗ ϮϬϭϲͿ ŚƚƚƉƐ͗ͬͬŐƌŝĚŵŽĚ͘ůĂďǁŽƌŬƐ͘ŽƌŐͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬĚŽĐƵŵĞŶƚƐͬ'D ͺWŽƌƚĨŽůŝŽͺ ƌŽĐŚƵƌĞͲE tϭ͘ƉĚĨ ϳϯ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Energy Review Energy Transmission Storage and Distribution Infrastructure ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ Ɖƌŝů ϮϬϭϱͿ͕ ϯͲϯ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϴͬĨϮϱͬY ZйϮϬ ŚĂƉƚĞƌйϮϬ йϮϬ ůĞĐƚƌŝĐŝƚLJйϮϬ ƉƌŝůйϮϬϮϬϭϱ͘ƉĚĨ͘ ϳϰ ĞĨĨƌĞLJ ŽŐĂŶ͕ ĞŶŶĞƚŚ ͘ DĞĚůŽĐŬ ͕ ĂŶĚ tŝůůŝĂŵ ͘ ŽLJĚ͕ A Review of Sector and Regional Trends in U S Electricity Markets Focus on Natural Gas ;'ŽůĚĞŶ͕ K͗ EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJ͕ KĐƚŽďĞƌ ϮϬϭϱͿ͕ EZ ͬdWͲϲ ϱϬͲϲϰϲϱϮ͕ ϯϴ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶƌĞů͘ŐŽǀͬĚŽĐƐͬĨLJϭϲŽƐƚŝͬϲϰϲϱϮ͘ƉĚĨ͘ ϳϱ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2016 With Projections to 2040 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ϮϬϭϲͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϲͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϲͿ͘ƉĚĨ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ϳϲ WĂƵů ǀŽƌĂŬ͕ Η K ŽĨ ĂůŝĨŽƌŶŝĂ K ƐĞĞƐ ϱϬй ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉĞŶĞƚƌĂƚŝŽŶ ĂŶĚ ŵŽƌĞ͕Η Windpower Engineering Development͕ ƵŶĞ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ǁŝŶĚƉŽǁĞƌĞŶŐŝŶĞĞƌŝŶŐ͘ĐŽŵͬĨĞĂƚƵƌĞĚͬďƵƐŝŶĞƐƐͲŶĞǁƐͲƉƌŽũĞĐƚƐͬĐĞŽͲĐĂůŝĨŽƌŶŝĂͲŝƐŽͲ ƐĞĞƐͲϱϬͲƌĞŶĞǁĂďůĞͲĞŶĞƌŐLJͲƉĞŶĞƚƌĂƚŝŽŶ͘ ϳϳ ZW Ͳ ; ĚǀĂŶĐĞĚ ZĞƐĞĂƌĐŚ WƌŽũĞĐƚƐ ŐĞŶĐLJͲ ŶĞƌŐLJͿ͕ NODES Program Overview ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ZW Ͳ Ϳ͕ ϱ͕ ĂĐĐĞƐƐĞĚ ĞĐĞŵďĞƌ ϭϮ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬĂƌƉĂͲ Ğ͘ĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬĚĞĨĂƵůƚͬĨŝůĞƐͬĚŽĐƵŵĞŶƚƐͬĨŝůĞƐͬEK ͺWƌŽŐƌĂŵKǀĞƌǀŝĞǁ͘ƉĚĨ͘ ϳϴ Order Instituting Rulemaking Regarding Policies Procedures and Rules for the California Solar Initiative the Self Generation Incentive Program and Other Distributed Generation Issues͕ ZƵůĞŵĂŬŝŶŐ ϭϮͲϭϭͲϬϬϱ͕ WƵďůŝĐ hƚŝůŝƚŝĞƐ ŽŵŵŝƐƐŝŽŶ ŽĨ ƚŚĞ ƚĂƚĞ ŽĨ ĂůŝĨŽƌŶŝĂ ;EŽǀĞŵďĞƌ ϲ͕ ϮϬϭϰͿ͕ ŚƚƚƉ͗ͬͬĚŽĐƐ͘ĐƉƵĐ͘ĐĂ͘ŐŽǀͬWƵďůŝƐŚĞĚ ŽĐƐͬWƵďůŝƐŚĞĚͬ'ϬϬϬͬDϭϰϭͬ ϭϭϱͬϭϰϭϭϭϱϬϳϰ͘W ͘ ϳϵ ͞ ŝƐƚƌŝďƵƚĞĚ ZĞƐŽƵƌĐĞ ŶĞƌŐLJ ŶĂůLJƐŝƐ ĂŶĚ DĂŶĂŐĞŵĞŶƚ LJƐƚĞŵ ; Z D Ϳ ĞǀĞůŽƉŵĞŶƚ ĨŽƌ ZĞĂůͲdŝŵĞ 'ƌŝĚ KƉĞƌĂƚŝŽŶƐ͕͟ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ KĨĨŝĐĞ ŽĨ ŶĞƌŐLJ ĨĨŝĐŝĞŶĐLJ ĂŶĚ ZĞŶĞǁĂďůĞ ŶĞƌŐLJ͕ ƵŶ ŚŽƚ ŶŝƚŝĂƚŝǀĞ͕ ĂĐĐĞƐƐĞĚ KĐƚŽďĞƌ ϯϭ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬĞĞƌĞͬƐƵŶƐŚŽƚͬĚŝƐƚƌŝďƵƚĞĚͲƌĞƐŽƵƌĐĞͲĞŶĞƌŐLJͲĂŶĂůLJƐŝƐͲĂŶĚͲŵĂŶĂŐĞŵĞŶƚͲƐLJƐƚĞŵͲĚƌĞĂŵƐͲĚĞǀĞůŽƉŵĞŶƚͲƌĞĂůͲ ƚŝŵĞ͘ ϴϬ ;h͘ ͘ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Average utilization for natural gas combined-cycle plants exceeded coal plants in 2015 ;dŽĚĂLJ ŝŶ ŶĞƌŐLJ͗ tĂƐŚŝŶŐƚŽŶ͕ ͘ ͘Ϳ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬƚŽĚĂLJŝŶĞŶĞƌŐLJͬĚĞƚĂŝů͘ƉŚƉ͍ŝĚсϮϱϲϱϮ ϴϭ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2016 With Projections to 2040 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ƵŐƵƐƚ ϮϬϭϲͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϲͿ͕ DdͲϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϲͿ͘ƉĚĨ͘ ϴϮ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2016 With Projections to 2040 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ƵŐƵƐƚ ϮϬϭϲͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϲͿ͕ DdͲϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϲͿ͘ƉĚĨ͘ ϴϯ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Technology Review An Assessment of Energy Technologies and Research Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϴϮ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϵͬĨϮϲͬYƵĂĚƌĞŶŶŝĂůͲ dĞĐŚŶŽůŽŐLJͲZĞǀŝĞǁͲϮϬϭϱͺϬ͘ƉĚĨ͘ ϴϰ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2016 With Projections to 2040 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ƵŐƵƐƚ ϮϬϭϲͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϲͿ͕ DdͲϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϲͿ͘ƉĚĨ͘ ϴϱ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Technology Review An Assessment of Energy Technologies and Research Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϱϲ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϵͬĨϮϲͬYƵĂĚƌĞŶŶŝĂůͲ dĞĐŚŶŽůŽŐLJͲZĞǀŝĞǁͲϮϬϭϱͺϬ͘ƉĚĨ͘ ϴϲ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Technology Review An Assessment of Energy Technologies and Research Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϱϵ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϵͬĨϮϲͬYƵĂĚƌĞŶŶŝĂůͲ dĞĐŚŶŽůŽŐLJͲZĞǀŝĞǁͲϮϬϭϱͺϬ͘ƉĚĨ͘ ϴϳ ZŽĚĞƌŝĐŬ ĂĐŬƐŽŶ͕ KŵĞƌ ͘ KŶĂƌ͕ ĂƌŽůĚ ƌŝŬŚĂŵ͕ ŵŝůLJ ŝƐŚĞƌ͕ ůĂĞŚŶ ƵƌŬĞƐ͕ DŝĐŚĂĞů ƚĂƌŬĞ͕ KůĂŵĂ DŽŚĂŵŵĞĚ͕ Ğƚ Ăů͕͘ Opportunities for Energy Efficiency Improvements in the U S Electricity Transmission and Distribution System ;KĂŬ ZŝĚŐĞ͕ dE͗ KĂŬ ZŝĚŐĞ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ϮϬϭϱͿ͕ KZE ͬdDͲϮϬϭϱͬϱ͕ ϯʹϳ͕ ŚƚƚƉƐ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϰͬĨϮϮͬY ZйϮϬ ŶĂůLJƐŝƐйϮϬͲ йϮϬKƉƉŽƌƚƵŶŝƚŝĞƐйϮϬĨŽƌйϮϬ ŶĞƌŐLJйϮϬ ĨĨŝĐŝĞŶĐLJйϮϬ ŵƉƌŽǀĞŵĞŶƚƐйϮϬŝŶйϮϬƚŚĞйϮϬh йϮϬ ůĞĐƚƌŝĐŝƚLJйϮϬdƌĂŶƐŵŝƐƐŝŽŶйϮϬ ĂŶĚйϮϬ ŝƐƚƌŝďƵƚŝŽŶйϮϬ LJƐƚĞŵͺϬ͘ƉĚĨ͘ ϴϴ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Technology Review An Assessment of Energy Technologies and Research Opportunities ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ĞƉƚĞŵďĞƌ ϮϬϭϱͿ͕ ϱϯʹϱϲ͘ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϵͬĨϮϲͬYƵĂĚƌĞŶŶŝĂůͲ dĞĐŚŶŽůŽŐLJͲZĞǀŝĞǁͲϮϬϭϱͺϬ͘ƉĚĨ͘ ϴϵ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ͞ ůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĂůĞƐ͕ ƌĞǀĞŶƵĞ͕ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Žƌŵ Ͳϴϲϭ ĚĞƚĂŝůĞĚ ĚĂƚĂ ĨŝůĞƐ͕͟ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ KĐƚŽďĞƌ ϲ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĚĂƚĂͬĞŝĂϴϲϭͬ͘ ϵϬ ůŽŽŵďĞƌŐ ͘W͕͘ ͞ ŶŶƵĂů ĐĂƉŝƚĂů ĞdžƉĞŶĚŝƚƵƌĞƐ͕ ĚĞƉƌĞĐŝĂƚŝŽŶ͕ ĂŶĚ ŶĞƚ ĐĂƉŝƚĂů ĂĚĚŝƚŝŽŶƐ ĨŽƌ ϵϴ ůĂƌŐĞ ƵƚŝůŝƚLJ ŽƉĞƌĂƚŝŶŐ ĐŽŵƉĂŶŝĞƐ͕ ϮϬϬϰ Ͳ ϮϬϭϱ͕͟ ĂĐĐĞƐƐĞĚ EŽǀĞŵďĞƌ ϯ͕ ϮϬϭϲ͘ ϵϭ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ KĨĨŝĐĞ ŽĨ ŶĞƌŐLJ WŽůŝĐLJ ĂŶĚ LJƐƚĞŵƐ ŶĂůLJƐŝƐ͕ ϮϬϭϲ͘ ϵϮ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ KĨĨŝĐĞ ŽĨ ŶĞƌŐLJ WŽůŝĐLJ ĂŶĚ LJƐƚĞŵƐ ŶĂůLJƐŝƐ͕ ϮϬϭϲ͘ ϵϯ EZ ;EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJͿ͕ Advanced Inverter Functions to Support High Levels of Distributed Solar Policy and Regulatory Considerations ;'ŽůĚĞŶ͕ K͗ EZ ͕ ϮϬϭϰͿ͕ ϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶƌĞů͘ŐŽǀͬĚŽĐƐͬĨLJϭϱŽƐƚŝͬϲϮϲϭϮ͘ƉĚĨ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ϵϰ ͘ ůĂ͕ s͘ 'ĞǀŽƌŐŝĂŶ͕ W͘ ůĞŵŝŶŐ͕ z͘ ͘ ŚĂŶŐ͕ D͘ ŝŶŐŚ͕ ͘ DƵůũĂĚŝ͕ ͘ ĐŚŽůďƌŽŽŬ͕ Ğƚ Ăů͕͘ Active Power Controls from Wind Power Bridging the Gaps ;'ŽůĚĞŶ͕ K͗ EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJ͕ ϮϬϭϰͿ͕ EZ ͬdWͲ ϱϬϬͲϲϬϱϳϰ͕ ǀŝŝ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶƌĞů͘ŐŽǀͬĚŽĐƐͬĨLJϭϰŽƐƚŝͬϲϬϱϳϰ͘ƉĚĨ͘ ϵϱ ŽůƵŶ yƵ͕ zƵƌLJ ǀŽƌŬŝŶ͕ ĂŶŝĞů ͘ ŝƌƐĐŚĞŶ͕ ͘ ͘ ŝůǀĂϬDŽŶƌŽLJ͕ ĂŶĚ ĞĂŶͲWĂƵů tĂƚƐŽŶ͕ ͞ ŽŵƉĂƌŝƐŽŶ ŽĨ WŽůŝĐŝĞƐ ŽŶ ƚŚĞ WĂƌƚŝĐŝƉĂƚŝŽŶ ŽĨ ƚŽƌĂŐĞ ŝŶ h͘ ͘ ƌĞƋƵĞŶĐLJ ZĞŐƵůĂƚŝŽŶ DĂƌŬĞƚƐ͕͟ WŽǁĞƌ ůĞĐƚƌŽŶŝĐƐ ŽĐŝĞƚLJ 'ĞŶĞƌĂů DĞĞƚŝŶŐ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬĂƌdžŝǀ͘ŽƌŐͬƉĚĨͬϭϲϬϮ͘ϬϰϰϮϬ͘ƉĚĨ͘ ϵϲ ĐŽƚƚ W͘ ƵƌŐĞƌ ĂŶĚ DĂdž ƵŬĞ͕ Business Models for Distributed Energy Resources A Review and Empirical Analysis An MIT Energy Initiative Working Paper ; ĂŵďƌŝĚŐĞ͕ D ͗ D d͕ Ɖƌŝů ϮϬϭϲͿ͕ ϱ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŵŝƚ͘ĞĚƵͬǁƉͲ ĐŽŶƚĞŶƚͬƵƉůŽĂĚƐͬϮϬϭϲͬϬϰͬD d ͲtWͲϮϬϭϲͲϬϮ͘ƉĚĨ͘ ϵϳ ĞŶ ŽƐƚĞůůŽ͕ ΗdŚĞ ŚĂůůĞŶŐĞƐ ŽĨ EĞǁ ůĞĐƚƌŝĐŝƚLJ ƵƐƚŽŵĞƌ ŶŐĂŐĞŵĞŶƚ ĨŽƌ hƚŝůŝƚŝĞƐ ĂŶĚ ƚĂƚĞ ZĞŐƵůĂƚŽƌƐΗ ;ƉƌĞƐĞŶƚĞĚ Ăƚ EZZ tĞďŝŶĂƌ͕ KĐƚŽďĞƌ Ϯϲ͕ ϮϬϭϲͿ͕ ŚƚƚƉ͗ͬͬŶƌƌŝ͘ŽƌŐͬǁƉͲĐŽŶƚĞŶƚͬƵƉůŽĂĚƐͬϮϬϭϲͬϭϬͬEZZ ͲtĞďŝŶĂƌͲKĐƚŽďĞƌͲϮϲͲϮϬϭϲͲ ŽƐƚĞůůŽ͘ƉĚĨ͘ ϵϴ W ŽŶƐƵůƚŝŶŐ͕ Delivering the Next Generation Utility Customer Experience ;EĞǁ zŽƌŬ͗ W ŽŶƐƵůƚŝŶŐ͕ ϮϬϭϲͿ͕ ϰͲϲ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ƉĂĐŽŶƐƵůƚŝŶŐ͘ĐŽŵͬŽƵƌͲƚŚŝŶŬŝŶŐͬŶĞdžƚͲŐĞŶĞƌĂƚŝŽŶͲƵƚŝůŝƚLJ͘ ϵϵ ůĂŶ 'ƌĞĞŶďůĂƚƚ͕ ͞ZƵƌĂů ƌĞĂƐ ŽƐĞ WĞŽƉůĞ Ƶƚ EŽƚ WŽǁĞƌ͕͟ Governing the States and Localities͕ Ɖƌŝů ϮϬϭϰ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŐŽǀĞƌŶŝŶŐ͘ĐŽŵͬƚŽƉŝĐƐͬƉŽůŝƚŝĐƐͬŐŽǀͲƌƵƌĂůͲĂƌĞĂƐͲůŽƐĞͲƉĞŽƉůĞͲŶŽƚͲƉŽǁĞƌ͘Śƚŵů͘ ϭϬϬ ůŝĐŝĂ ͘ DƵŶŶĞůů͕ ͞dŚĞ ŵƉĂĐƚ ŽĨ ŐŝŶŐ ĂďLJ ŽŽŵĞƌƐ ŽŶ ĂďŽƌ ŽƌĐĞ WĂƌƚŝĐŝƉĂƚŝŽŶ͕͟ Center for Retirement Research at Boston College͕ ŶŽ͘ ϭϰͲϰ ;ϮϬϭϰͿ͗ ϰ͕ ŚƚƚƉ͗ͬͬĐƌƌ͘ďĐ͘ĞĚƵͬǁƉͲĐŽŶƚĞŶƚͬƵƉůŽĂĚƐͬϮϬϭϰͬϬϮͬ ͺϭϰͲϰ͘ƉĚĨ͘ ϭϬϭ t ; ĞŶƚĞƌ ĨŽƌ ŶĞƌŐLJ tŽƌŬĨŽƌĐĞ ĞǀĞůŽƉŵĞŶƚͿ͕ Gaps in the Energy Workforce Pipeline 2015 CEWD Survey Results ;tĂƐŚŝŶŐƚŽŶ͕ ͗ t ͕ ϮϬϭϱͿ͕ ϯ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĐĞǁĚ͘ŽƌŐͬƐƵƌǀĞLJƌĞƉŽƌƚͬ t ϮϬϭϱ ƵƌǀĞLJ ƵŵŵĂƌLJ͘ƉĚĨ͘ ϭϬϮ W ŽŶƐƵůƚŝŶŐ͕ The Nimble Utility Creating the Next Generation Workforce ;W ŽŶƐƵůƚŝŶŐ͕ ϮϬϭϲͿ͕ ϮϬ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ƉĂĐŽŶƐƵůƚŝŶŐ͘ĐŽŵͬŽƵƌͲƚŚŝŶŬŝŶŐͬŶĞdžƚͲŐĞŶĞƌĂƚŝŽŶͲƵƚŝůŝƚLJͬηŚĞƌĞ͘ ϭϬϯ ĞŶŶŝƐ ZĂLJ͕ ͞ZĞƐƉŽŶĚŝŶŐ ƚŽ ŚĂŶŐŝŶŐ tŽƌŬĨŽƌĐĞ EĞĞĚƐ ĂŶĚ ŚĂůůĞŶŐĞƐΗ ;ƉƌĞƐĞŶƚĂƚŝŽŶ ŐŝǀĞŶ Ăƚ ƚŚĞ ŐŝŶŐ hƚŝůŝƚLJ tŽƌŬĨŽƌĐĞ ŽŶĨĞƌĞŶĐĞ͕ EĂƐŚǀŝůůĞ͕ dĞŶŶĞƐƐĞĞ͕ EŽǀĞŵďĞƌ ϭϴʹϭϵ͕ ϮϬϭϯͿ͕ ŚƚƚƉ͗ͬͬƉƐĞƌĐ͘ǁŝƐĐ͘ĞĚƵͬĚŽĐƵŵĞŶƚƐͬƉƵďůŝĐĂƚŝŽŶƐͬƐƉĞĐŝĂůͺŝŶƚĞƌĞƐƚͺƉƵďůŝĐĂƚŝŽŶƐͬǁŽƌŬĨŽƌĐĞͬĚƌĂLJͺĂŐŝŶŐͺƵƚŝůŝƚLJͺǁŽƌŬĨŽƌĐĞͺŶŽǀͺϮ Ϭϭϯ͘ƉĚĨ͘ ϭϬϰ hƚŝůŝƚLJ ŝǀĞ͕ 2016 State of the Electric Utility Survey ;hƚŝůŝƚLJ ŝǀĞ͕ ϮϬϭϲͿ͕ ϵ͕ ŚƚƚƉƐ͗ͬͬƐϯ͘ĂŵĂnjŽŶĂǁƐ͘ĐŽŵͬĚŝǀĞͺĂƐƐĞƚƐͬƌůƉƐLJƐͬƐƚĂƚĞͺŽĨͺĞůĞĐƚƌŝĐͺƵƚŝůŝƚLJͺϮϬϭϲ͘ƉĚĨ͘ ϭϬϱ DĂƌŬ ƌŝĚŐĞƌƐ͕ ͞tŚŽ tŝůů Ž ƚŚĞ tŽƌŬ͍͗ EŽƌƚŚ ŵĞƌŝĐĂŶ hƚŝůŝƚLJ tŽƌŬĨŽƌĐĞ ƵƉƉůLJ ǀƐ͘ ĞŵĂŶĚ͟ ;ƉƌĞƐĞŶƚĂƚŝŽŶ ŐŝǀĞŶ Ăƚ ƚŚĞ EĂƚŝŽŶĂů ƐƐŽĐŝĂƚŝŽŶ ŽĨ ZĞŐƵůĂƚŽƌLJ hƚŝůŝƚLJ ŽŵŵŝƐƐŝŽŶĞƌƐ͕ ƵŵŵĞƌ ŽŵŵŝƚƚĞĞ DĞĞƚŝŶŐƐ͕ EĂƐŚǀŝůůĞ͕ dĞŶŶĞƐƐĞĞ͕ ƵůLJ Ϯϲ͕ ϮϬϭϲͿ͕ ŚƚƚƉ͗ͬͬƉƵďƐ͘ŶĂƌƵĐ͘ŽƌŐͬƉƵďͬϯϬ ϵϲϱͲ ϬϭϯͲ Ϯ ϳͲ ϰ Ͳ ϳ ϲ ϭϵ ϯϮ͘ ϭϬϲ W ; ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJͿ͕ Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ W ͕ Ɖƌŝů ϮϬϭϲͿ͕ W ϰϯϬͲZͲϭϲͲϬϬϮ͕ ͲϮϯ͕ ŚƚƚƉƐ͗ͬͬǁǁǁϯ͘ĞƉĂ͘ŐŽǀͬĐůŝŵĂƚĞĐŚĂŶŐĞͬ ŽǁŶůŽĂĚƐͬŐŚŐĞŵŝƐƐŝŽŶƐͬh Ͳ' 'Ͳ ŶǀĞŶƚŽƌLJͲϮϬϭϲͲDĂŝŶͲdĞdžƚ͘ƉĚĨ͘ ϭϬϳ W ; ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJͿ͕ Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ W ͕ Ɖƌŝů ϮϬϭϲͿ͕ W ϰϯϬͲZͲϭϲͲϬϬϮ͕ ϮͲϭϭ͕ ŚƚƚƉƐ͗ͬͬǁǁǁϯ͘ĞƉĂ͘ŐŽǀͬĐůŝŵĂƚĞĐŚĂŶŐĞͬ ŽǁŶůŽĂĚƐͬŐŚŐĞŵŝƐƐŝŽŶƐͬh Ͳ' 'Ͳ ŶǀĞŶƚŽƌLJͲϮϬϭϲͲDĂŝŶͲdĞdžƚ͘ƉĚĨ͘ ϭϬϴ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ U S Energy-Related Carbon Dioxide Emissions 2014 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ EŽǀĞŵďĞƌ ϮϬϭϱͿ͕ ϭϮ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞŶǀŝƌŽŶŵĞŶƚͬĞŵŝƐƐŝŽŶƐͬĐĂƌďŽŶͬƉĚĨͬϮϬϭϰͺĐŽϮĂŶĂůLJƐŝƐ͘ƉĚĨ͘ ϭϬϵ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2015 With Projections to 2040 ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ϮϬϭϱͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϱͿ͕ ϴ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϱͿ͘ƉĚĨ͘ ϭϭϬ ŝƐĂ ĐŚǁĂƌƚnj͕ DĂdž tĞŝ͕ tŝůůŝĂŵ DŽƌƌŽǁ͕ ĞĨĨ ĞĂƐŽŶ͕ ƚĞǀĞŶ Z͘ ĐŚŝůůĞƌ͕ 'ƌĞŐ ĞǀĞŶƚŝƐ͕ ĂƌĂŚ ŵŝƚŚ͕ tŽĞŝ ŝŶŐ ĞŽǁ͕ dŽĚĚ ĞǀŝŶ͕ ƚĞǀĞ WůŽƚŬŝŶ͕ ĂŶĚ zĂŶ ŚŽƵ͕ Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ;tĂƐŚŝŶŐƚŽŶ͕ ͘ ͗͘ h͘ ͘ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ϮϬϭϲͿ͕ ϭ͕ Ͳ ϬϮͲϬϱ ϭϭϮϯϭ͘ ϭϭϭ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Annual Energy Outlook 2016 With Projections to 2040 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ͕ ϮϬϭϲͿ͕ K ͬ ͲϬϯϴϯ;ϮϬϭϲͿ͕ ŝŐƵƌĞ DdͲϮϳ͕ DdͲϭϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬϬϯϴϯ;ϮϬϭϲͿ͘ƉĚĨ͘ ϭϭϮ ŝƐĂ ĐŚǁĂƌƚnj͕ DĂdž tĞŝ͕ tŝůůŝĂŵ DŽƌƌŽǁ͕ ĞĨĨ ĞĂƐŽŶ͕ ƚĞǀĞŶ Z͘ ĐŚŝůůĞƌ͕ 'ƌĞŐ ĞǀĞŶƚŝƐ͕ ĂƌĂŚ ŵŝƚŚ͕ ĂŶĚ tŽĞŝ ŝŶŐ ĞŽǁ͕ ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ ĂŶĚ dŽĚĚ ĞǀŝŶ͕ ƚĞǀĞ WůŽƚŬŝŶ͕ ĂŶĚ zĂŶ ŚŽƵ͕ ƌŐŽŶŶĞ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͘ ůĞĐƚƌŝĐŝƚLJ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŶĚ hƐĞƐ͕ ŶĞƌŐLJ ĨĨŝĐŝĞŶĐLJ͕ ĂŶĚ ŝƐƚƌŝďƵƚĞĚ ŶĞƌŐLJ ZĞƐŽƵƌĐĞƐ ĂƐĞůŝŶĞ ;tĂƐŚŝŶŐƚŽŶ͕ ͗ h͘ ͘ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ͕ ϮϬϭϲͿ͕ ϭϲϯ͕ Ͳ ϬϮͲϬϱ ϭϭϮϯϭ͘ ϭϭϯ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Monthly Energy Review ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ ƵŐƵƐƚ ϮϬϭϲͿ͕ K ͬ Ͳ ϬϬϯϱ;ϮϬϭϲͬϴͿ͕ ϭϴϱ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬƚŽƚĂůĞŶĞƌŐLJͬĚĂƚĂͬŵŽŶƚŚůLJͬĂƌĐŚŝǀĞͬϬϬϯϱϭϲϬϴ͘ƉĚĨ͘ ϭϭϰ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Low Carbon Workshop Report ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ϮϬϭϲͿ͘ ϭϭϱ ; ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶͿ͕ Electric ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĞůĞĐƚƌŝĐŝƚLJͬĂŶŶƵĂůͬ͘ Power Annual ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ ϮϬϭϱͿ͕ ϭϭϲ tŝůůŝĂŵ KƉĂůŬĂ͕ ͞E͘ ͘ ZŽƵŶĚƚĂďůĞ ŽŶƐŝĚĞƌƐ ĂƌďŽŶ WƌŝĐŝŶŐ͕ ƚĂƚĞ WW Ɛ͕͟ RTO Insider͕ KĐƚŽďĞƌ ϯ͕ ϮϬϭϲ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƌƚŽŝŶƐŝĚĞƌ͘ĐŽŵͬŶĞǁͲĞŶŐůĂŶĚͲƌĞƐƚƌƵĐƚƵƌŝŶŐͲƌŽƵŶĚƚĂďůĞͲĐĂƌďŽŶͲƉƌŝĐŝŶŐͲϯϮϮϳϭͬ͘ ϭϭϳ tĞƐ ƌLJĞ͕ Smart Grid Transforming the Electricity System to Meet Future Demand and Reduce Greenhouse Gas Emissions ; ĂŶ ŽƐĞ͕ ͗ ŝƐĐŽ LJƐƚĞŵƐ͕ EŽǀĞŵďĞƌ ϮϬϬϴͿ͕ Ϯʹϳ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĐŝƐĐŽ͘ĐŽŵͬĐͬĚĂŵͬŐůŽďĂůͬĚĞͺĚĞͬĂƐƐĞƚƐͬĐŝƐĐŽŶŶĞĐƚͬϮϬϬϵͲ ϭϬͬŝŵĂŐĞƐͬ ŵĂƌƚͺ'ƌŝĚͺtŚŝƚĞͺWĂƉĞƌͺϮ͘ƉĚĨ͘ ϭϭϴ E DŝůŝƚĂƌLJ ĚǀŝƐŽƌLJ ŽĂƌĚ͕ National Security and Assured U S Electrical Power ; E ŶĂůLJƐŝƐ Θ ŽůƵƚŝŽŶƐ͕ ϮϬϭϱͿ͕ ϭ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐŶĂ͘ŽƌŐͬ E ͺĨŝůĞƐͬW ͬEĂƚŝŽŶĂůͲ ĞĐƵƌŝƚLJͲ ƐƐƵƌĞĚͲ ůĞĐƚƌŝĐĂůͲWŽǁĞƌ͘ƉĚĨ͘ ϭϭϵ ZŽďĞƌƚ D͘ ĞĞ͕ DŝĐŚĂĞů ͘ ƐƐĂŶƚĞ͕ ĂŶĚ dŝŵ ŽŶǁĂLJ͕ Analysis of the Cyber Attack on the Ukrainian Power Grid Defense Use Case ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ůĞĐƚƌŝĐŝƚLJ ŶĨŽƌŵĂƚŝŽŶ ŚĂƌŝŶŐ ĂŶĚ ŶĂůLJƐŝƐ ĞŶƚĞƌ͕ DĂƌĐŚ ϮϬϭϲͿ͕ ŝǀ͕ ŚƚƚƉƐ͗ͬͬŝĐƐ͘ƐĂŶƐ͘ŽƌŐͬŵĞĚŝĂͬ Ͳ ͺ E ͺhŬƌĂŝŶĞͺ h ͺϱ͘ƉĚĨ͘ ϭϮϬ LJŵĂŶƚĞĐ͕ Advanced Persistent Threats A Symantec Perspective Preparing the Right Defense for the New Threat Landscape ;DŽƵŶƚĂŝŶ sŝĞǁ͕ ͗ LJŵĂŶƚĞĐ͕ ϮϬϭϭͿ͕ ϭ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ƐLJŵĂŶƚĞĐ͘ĐŽŵͬĐŽŶƚĞŶƚͬĞŶͬƵƐͬĞŶƚĞƌƉƌŝƐĞͬǁŚŝƚĞͺƉĂƉĞƌƐͬďͲ ĂĚǀĂŶĐĞĚͺƉĞƌƐŝƐƚĞŶƚͺƚŚƌĞĂƚƐͺtWͺϮϭϮϭϱϵϱϳ͘ĞŶͲƵƐ͘ƉĚĨ͘ ϭϮϭ Hearing of the House Select Intelligence Committee on “Cybersecurity Threats The Way Forward ” ;EŽǀĞŵďĞƌ ϮϬ͕ ϮϬϭϰͿ ;ƚĞƐƚŝŵŽŶLJ ďLJ ĚŵŝƌĂů DŝĐŚĂĞů ZŽŐĞƌƐ͕ ŽŵŵĂŶĚĞƌ͕ h͘ ͘ LJďĞƌ ŽŵŵĂŶĚ ĂŶĚ ŝƌĞĐƚŽƌ͕ EĂƚŝŽŶĂů ĞĐƵƌŝƚLJ ŐĞŶĐLJͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŶƐĂ͘ŐŽǀͬŶĞǁƐͲĨĞĂƚƵƌĞƐͬƐƉĞĞĐŚĞƐͲƚĞƐƚŝŵŽŶŝĞƐͬƚĞƐƚŝŵŽŶŝĞƐͬĂĚŵͲƌŽŐĞƌƐͲƚĞƐƚŝŵŽŶLJͲϮϬŶŽǀϮϬϭϰ͘ƐŚƚŵů͘ ϭϮϮ ĐŽƚƚ ŝůƚŽŶ͕ ͞ LJŶ ŶĂůLJƐŝƐ ƵŵŵĂƌLJ ŽĨ ƌŝĚĂLJ KĐƚŽďĞƌ Ϯϭ ƚƚĂĐŬ͕͟ Dyn͕ KĐƚŽďĞƌ Ϯϲ͕ ϮϬϭϲ͕ ŚƚƚƉ͗ͬͬĚLJŶ͘ĐŽŵͬďůŽŐͬĚLJŶͲ ĂŶĂůLJƐŝƐͲƐƵŵŵĂƌLJͲŽĨͲĨƌŝĚĂLJͲŽĐƚŽďĞƌͲϮϭͲĂƚƚĂĐŬͬ͘ ϭϮϯ DĂƌƚLJ ŽƐƚ ĂŶĚ DŝĐŚĂĞů Žďď͕ IIS Security ;EĞǁ zŽƌŬ͕ Ez͗ DĐ'ƌĂǁͲ ŝůůͬKƐďŽƌŶĞ͕ ϮϬϬϮͿ͕ ϵ͘ ϭϮϰ ŶĚƵƐƚƌŝĂů ŽŶƚƌŽů LJƐƚĞŵƐ LJďĞƌ ŵĞƌŐĞŶĐLJ ZĞƐƉŽŶƐĞ dĞĂŵ ; Ͳ ZdͿ͕ Overview ĐĞƌƚ͘ƵƐͲĐĞƌƚ͘ŐŽǀͬĐŽŶƚĞŶƚͬŽǀĞƌǀŝĞǁͲĐLJďĞƌͲǀƵůŶĞƌĂďŝůŝƚŝĞƐηƵŶĚĞƌ of Cyber Vulnerabilities ŚƚƚƉƐ͗ͬͬŝĐƐͲ ϭϮϱ ͞ZĂĚŝĂƚŝŽŶ WŽƌƚĂů DŽŶŝƚŽƌƐ ĂĨĞŐƵĂƌĚ ŵĞƌŝĐĂ ĨƌŽŵ EƵĐůĞĂƌ ĞǀŝĐĞƐ ĂŶĚ ZĂĚŝŽůŽŐŝĐĂů DĂƚĞƌŝĂůƐ͕͟ ƵƐƚŽŵƐ ĂŶĚ ŽƌĚĞƌ WƌŽƚĞĐƚŝŽŶ͕ ůĂƐƚ ƵƉĚĂƚĞĚ EŽǀĞŵďĞƌ ϭϮ͕ ϮϬϭϯ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐďƉ͘ŐŽǀͬďŽƌĚĞƌͲƐĞĐƵƌŝƚLJͬƉŽƌƚͲĞŶƚƌLJͬĐĂƌŐŽͲƐĞĐƵƌŝƚLJͬĐĂƌŐŽͲ ĞdžĂŵͬƌĂĚͲƉŽƌƚĂůϭ͘ ϭϮϲ ŝdžŝŶŐ ŵĞƌŝĐĂ͛Ɛ ƵƌĨĂĐĞ dƌĂŶƐƉŽƌƚĂƚŝŽŶ Đƚ͕ WƵď͘ ͘ EŽ͘ ϭϭϰͲϵϰ ;ϮϬϭϱͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐŽŶŐƌĞƐƐ͘ŐŽǀͬϭϭϰͬďŝůůƐͬŚƌϮϮͬ Ͳ ϭϭϰŚƌϮϮĞŶƌ͘ƉĚĨ͘ ϭϮϳ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞͿ͕ The DOD Cyber Strategy ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ ϮϬϭϱͿ͕ ϳ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĚĞĨĞŶƐĞ͘ŐŽǀͬWŽƌƚĂůƐͬϭͬĨĞĂƚƵƌĞƐͬϮϬϭϱͬϬϰϭϱͺĐLJďĞƌͲƐƚƌĂƚĞŐLJͬ ŝŶĂůͺϮϬϭϱͺ Ž ͺ z Zͺ dZ d 'zͺĨŽƌͺǁĞď͘ƉĚĨ͘ ϭϮϴ ; ĞĨĞŶƐĞ ĐŝĞŶĐĞ ŽĂƌĚͿ͕ Report of the Defense Science Board on DoD Energy Strategy “More Fight – Less Fuel” ;tĂƐŚŝŶŐƚŽŶ͕ ͗ KĨĨŝĐĞ ŽĨ ƚŚĞ hŶĚĞƌ ĞĐƌĞƚĂƌLJ ŽĨ ĞĨĞŶƐĞ ĨŽƌ ĐƋƵŝƐŝƚŝŽŶ͕ dĞĐŚŶŽůŽŐLJ͕ ĂŶĚ ŽŐŝƐƚŝĐƐ ĂŶĚ ͕ ϮϬϬϴͿ͕ ϭϴ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĂĐƋ͘ŽƐĚ͘ŵŝůͬĚƐďͬƌĞƉŽƌƚƐͬ ϰϳϳϲϭϵ͘ƉĚĨ͘ ϭϮϵ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞͿ͕ Department of Defense Annual Energy Management Report Fiscal Year 2015 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ KĨĨŝĐĞ ŽĨ ƚŚĞ ƐƐŝƐƚĂŶƚ ĞĐƌĞƚĂƌLJ ŽĨ ĞĨĞŶƐĞ͕ ƵŶĞ ϮϬϭϲͿ͕ ϰϵ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĂĐƋ͘ŽƐĚ͘ŵŝůͬĞŝĞͬ ŽǁŶůŽĂĚƐͬ ͬ zйϮϬϮϬϭϱйϮϬ DZ͘ƉĚĨ͘ ϭϯϬ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞͿ͕ Department of Defense Annual Energy Management Report Fiscal Year 2015 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ KĨĨŝĐĞ ŽĨ ƚŚĞ ƐƐŝƐƚĂŶƚ ĞĐƌĞƚĂƌLJ ŽĨ ĞĨĞŶƐĞ͕ ƵŶĞ ϮϬϭϲͿ͕ ϰϵ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĂĐƋ͘ŽƐĚ͘ŵŝůͬĞŝĞͬ ŽǁŶůŽĂĚƐͬ ͬ zйϮϬϮϬϭϱйϮϬ DZ͘ƉĚĨ͘ ϭϯϭ Hearing before the Committee on Energy and Commerce Subcommittee on Energy and Power ;DĂLJ ϯϭ͕ ϮϬϭϭͿ ;ƌĞŵĂƌŬƐ ďLJ ƚŚĞ ŽŶŽƌĂďůĞ WĂƵů ƚŽĐŬƚŽŶ͕ ƐƐŝƐƚĂŶƚ ĞĐƌĞƚĂƌLJ ŽĨ ĞĨĞŶƐĞ͕ ŽŵĞůĂŶĚ ĞĨĞŶƐĞ ĂŶĚ ŵĞƌŝĐĂƐ͛ ĞĐƵƌŝƚLJ ĨĨĂŝƌƐ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĚŽĚ͘ŵŝůͬĚŽĚŐĐͬŽůĐͬĚŽĐƐͬƚĞƐƚ ƚŽĐŬƚŽŶϬϱϯϭϮϬϭϭ͘ƉĚĨ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6 VWHP 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 ϭϯϮ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞͿ͕ Department of Defense Annual Energy Management Report Fiscal Year 2015 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ KĨĨŝĐĞ ŽĨ ƚŚĞ ƐƐŝƐƚĂŶƚ ĞĐƌĞƚĂƌLJ ŽĨ ĞĨĞŶƐĞ͕ ƵŶĞ ϮϬϭϲͿ͕ ϰϵ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĂĐƋ͘ŽƐĚ͘ŵŝůͬĞŝĞͬ ŽǁŶůŽĂĚƐͬ ͬ zйϮϬϮϬϭϱйϮϬ DZ͘ƉĚĨ͘ ϭϯϯ džĞĐƵƚŝǀĞ KĨĨŝĐĞ ŽĨ ƚŚĞ WƌĞƐŝĚĞŶƚ͕ Report on Cyber Deterrence Policy ;tĂƐŚŝŶŐƚŽŶ͕ ͗ tŚŝƚĞ ŽƵƐĞ͕ džĞĐƵƚŝǀĞ KĨĨŝĐĞ ŽĨ ƚŚĞ WƌĞƐŝĚĞŶƚ͕ ϮϬϭϱͿ͕ ϱʹϲ͕ ŚƚƚƉ͗ͬͬĨĞĚĞƌĂůŶĞǁƐƌĂĚŝŽ͘ĐŽŵͬǁƉͲĐŽŶƚĞŶƚͬƵƉůŽĂĚƐͬϮϬϭϱͬϭϮͬZĞƉŽƌƚͲŽŶͲ LJďĞƌͲ ĞƚĞƌƌĞŶĐĞͲWŽůŝĐLJͲ ŝŶĂů͘ƉĚĨ͘ ϭϯϰ WƵďůŝĐ Ăǁ ϭϭϰͲϵϰ͕ ŝdžŝŶŐ ŵĞƌŝĐĂΖƐ ƵƌĨĂĐĞ dƌĂŶƐƉŽƌƚĂƚŝŽŶ Đƚ͕ ϮϬϭϱ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĐŽŶŐƌĞƐƐ͘ŐŽǀͬϭϭϰͬďŝůůƐͬŚƌϮϮͬ Ͳ ϭϭϰŚƌϮϮĞŶƌ͘ƉĚĨ͘ ϭϯϱ ĞƚŚĂ dĂǁŶĞLJ͕ ƌĂŶĐŝƐĐŽ ůŵĞŶĚƌĂ͕ WĂďůŽ dŽƌƌĞƐ͕ ĂŶĚ Ƶƚnj tĞŝƐĐŚĞƌ͕ Two Degrees of Innovation—How to seize the opportunities in low-carbon power ;tĂƐŚŝŶŐƚŽŶ͕ ͗ tŽƌůĚ ZĞƐŽƵƌĐĞƐ ŶƐƚŝƚƵƚĞ͕ ϮϬϭϭͿ͕ ǁŽƌŬŝŶŐ ƉĂƉĞƌ͕ ϯ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ǁƌŝ͘ŽƌŐͬƉƵďůŝĐĂƚŝŽŶͬƚǁŽͲĚĞŐƌĞĞƐͲŝŶŶŽǀĂƚŝŽŶ͘ ϭϯϲ E ;EĂƚŝŽŶĂů ĐĂĚĞŵLJ ŽĨ ĐŝĞŶĐĞƐͿ͕ The Power of Change Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies ;tĂƐŚŝŶŐƚŽŶ͕ ͗ E ͕ ϮϬϭϲͿ͕ ϱ ĂŶĚ ϭϬʹϭϭ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŶĂƉ͘ĞĚƵͬĐĂƚĂůŽŐͬϮϭϳϭϮͬƚŚĞͲ ƉŽǁĞƌͲŽĨͲĐŚĂŶŐĞͲŝŶŶŽǀĂƚŝŽŶͲĨŽƌͲĚĞǀĞůŽƉŵĞŶƚͲĂŶĚͲĚĞƉůŽLJŵĞŶƚͲŽĨ͘ ϭϯϳ FERC's Role in Electric Security ;ƌĞŵĂƌŬƐ ďLJ DŝĐŚĂĞů ĂƌĚĞĞ͕ ŝƌĞĐƚŽƌ͕ KĨĨŝĐĞ ŽĨ ůĞĐƚƌŝĐ ZĞůŝĂďŝůŝƚLJ͕ h͘ ͘ ĞĚĞƌĂů ŶĞƌŐLJ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ͕ Ăƚ ƚŚĞ ŶƚĞƌŶĂƚŝŽŶĂů ŶĞƌŐLJ ŐĞŶĐLJ tŽƌŬƐŚŽƉ͗ ůĞĐƚƌŝĐŝƚLJ ĞĐƵƌŝƚLJ ĐƌŽƐƐ ŽƌĚĞƌƐ͕ WĂƌŝƐ͕ ƌĂŶĐĞ͕ Ɖƌŝů Ϯϴ͕ ϮϬϭϲͿ͕ ϭ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ŝĞĂ͘ŽƌŐͬŵĞĚŝĂͬǁŽƌŬƐŚŽƉƐͬϮϬϭϲͬĞƐĂƉǁŽƌŬƐŚŽƉǀŝŝͬ ĂƌĚĞĞ͘ƉĚĨ͘ ϭϯϴ K ; ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJͿ͕ Quadrennial Energy Review Energy Transmission Storage and Distribution Infrastructure ;tĂƐŚŝŶŐƚŽŶ͕ ͗ K ͕ Ɖƌŝů ϮϬϭϱͿ͕ ϯͲϭϯ͕ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϱͬϬϴͬĨϮϱͬY ZйϮϬ ŚĂƉƚĞƌйϮϬ йϮϬ ůĞĐƚƌŝĐŝƚLJйϮϬ ƉƌŝůйϮϬϮϬϭϱ͘ƉĚĨ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU This page intentionally left blank Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 1-49 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW dĞĐŚŶŽůŽŐLJͲĞŶĂďůĞĚ ĐŚĂŶŐĞƐ ŽŶ ďŽƚŚ ƚŚĞ ĐŽŶƐƵŵĞƌ ĂŶĚ ƵƚŝůŝƚLJ ƐŝĚĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŵĞƚĞƌ ĂƌĞ ĐƌĞĂƚŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚ ĞĐŽŶŽŵŝĐ ǀĂůƵĞ ĨŽƌ ƚŚĞ EĂƚŝŽŶ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞƌƐ͕ ĂƐ ǁĞůů ĂƐ ĐŚĂŶŐŝŶŐ ƚŚĞ ƌŽůĞ ŽĨ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ƚŚĞŝƌ ƌĞůĂƚŝŽŶƐŚŝƉ ǁŝƚŚ ƚŚĞŝƌ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƌĞůĂƚĞĚ 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ĞůĞĐƚƌŝĐŝƚLJ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ƉƌŽŐƌĂŵƐ͘ Ŷ ƐŽŵĞ ƐŝƚƵĂƚŝŽŶƐ͕ ĐŽŶƐƵŵĞƌƐ ŵĂŬĞ Ă ŽŶĞͲƚŝŵĞ ĚĞĐŝƐŝŽŶ ƚŽ ĂĚŽƉƚ Ă ƚĞĐŚŶŽůŽŐLJ Žƌ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞ͕ ĞůŝŵŝŶĂƚŝŶŐ ƚŚĞ ŶĞĞĚ ĨŽƌ ĐŽŶƚŝŶƵŽƵƐ ĚĞĐŝƐŝŽŶ ŵĂŬŝŶŐ͘ ŶĐƌĞĂƐŝŶŐůLJ͕ ƚŚĞ ĐŽŶǀĞƌŐĞŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ǁŝƚŚ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐLJ ; dͿ ŝƐ ĐƌĞĂƚŝŶŐ Ă ƉůĂƚĨŽƌŵ ĨŽƌ ǀĂůƵĞ ĐƌĞĂƚŝŽŶ ĂŶĚ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ŽĨ ŶĞǁ ƐĞƌǀŝĐĞƐ ďĞLJŽŶĚ ĞůĞĐƚƌŝĐŝLJ͕ ƚŚĂƚ ŵĂLJ Žƌ ŵĂLJ ŶŽƚ ƌĞƋƵŝƌĞ ŵŽƌĞ ĐŽŶƐƵŵĞƌ ĞŶŐĂŐĞŵĞŶƚ͘ Ŷ ƚŚĞ ůĂƐƚ ƐĞǀĞƌĂů LJĞĂƌƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ŵĂũŽƌ ĐŽŵƉĂŶŝĞƐ ŚĂǀĞ ŝŶǀĞƐƚĞĚ ŝŶ ŝŶƚĞůůŝŐĞŶƚ ƚŚĞƌŵŽƐƚĂƚ ƐŽĨƚǁĂƌĞ ĂŶĚ ŚĂƌĚǁĂƌĞ ƉƌŽĚƵĐƚƐ͕ ƚŽ ďŽƚŚ ŵĂŶĂŐĞ ďƵŝůĚŝŶŐ ƚĞŵƉĞƌĂƚƵƌĞƐ ĂŶĚ ƐĞƌǀĞ ĂƐĐŽŶƚƌŽů ĐĞŶƚĞƌƐ ĨŽƌ ƐŵĂƌƚ ŚŽŵĞ ƉůĂƚĨŽƌŵƐ͘ϭ dŚĞ ŵLJƌŝĂĚ ĐŚĂŶŐĞƐ ƚĂŬŝŶŐ ƉůĂĐĞ Ăƚ ƚŚĞ ĐŽŶƐƵŵĞƌ ůĞǀĞů ĂƌĞ ĐŚĂůůĞŶŐŝŶŐ ƐŽŵĞ ĞůĞĐƚƌŝĐͲƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ĂŶĚ ĨŽƌĐŝŶŐ ƚŚĞŵ ƚŽ ŵŽĚĞƌŶŝnjĞ ƉŚLJƐŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƚŽ ŵĂŝŶƚĂŝŶ ŚŝŐŚͲƋƵĂůŝƚLJ ƐĞƌǀŝĐĞ͘ ŶŶŽǀĂƚŝǀĞ ĂŶĚ ƉŽƚĞŶƚŝĂůůLJ ĚŝƐƌƵƉƚŝǀĞ ĐŚĂŶŐĞƐ ĨŽƌ ĚŝĨĨĞƌĞŶƚ ĐŽŶƐƵŵĞƌ ĐůĂƐƐĞƐ ĂƌĞ ƚĂŬŝŶŐ ƉůĂĐĞ ƚŚĂƚ ƉŽůŝĐLJ ŵĂŬĞƌƐ͕ ƵƚŝůŝƚŝĞƐ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂŬĞŚŽůĚĞƌƐ ŵƵƐƚ ĐŽŶƐŝĚĞƌ ŝŶ ŽƌĚĞƌ ƚŽ ĞŶƐƵƌĞ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ƐĞĐƵƌŝƚLJ͕ ĂĨĨŽƌĚĂďŝůŝƚLJ͕ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ ŵĞƌŐŝŶŐ ƉĂƚƚĞƌŶƐ ŽĨ ĂƐƐĞƚ ŽǁŶĞƌƐŚŝƉ ĂŶĚ ĐŽŶƐƵŵĞƌ ďĞŚĂǀŝŽƌ ĂƌĞ ĐŚĂůůĞŶŐŝŶŐ ĞdžŝƐƚŝŶŐ ƌĞŐƵůĂƚŽƌLJ ƐƚƌƵĐƚƵƌĞƐ͕ ŝŶƐƚŝƚƵƚŝŽŶƐ͕ ĂŶĚ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͕ ĂƐ ǁĞůů ĂƐ ĐƌĞĂƚŝŶŐ ŶĞǁ ďƵƐŝŶĞƐƐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͘ dŚŝƐ͕ ŝŶ ƚƵƌŶ͕ ĞƐƚĂďůŝƐŚĞĚ ƚŚĞ ŶĞĞĚ ĨŽƌ ŶĞǁ ĚĞƐŝŐŶƐ ĨŽƌ ŝŶƚĞŐƌĂƚŝŶŐ ŝŶĨŽƌŵĂƚŝŽŶ ŶĞƚǁŽƌŬƐ ǁŝƚŚ ƚŚĞ ƉŚLJƐŝĐĂů ŐƌŝĚ͖ ƚŚĞƐĞ ĚĞƐŝŐŶƐ ŵƵƐƚ ƐĞĐƵƌĞůLJ ĂŶĚ ƌĞůŝĂďůLJ ŵĂŶĂŐĞ ĚŝƐƚƌŝďƵƚĞĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͕ ĐŽŶƚƌŽů͕ ĂŶĚ ĐŽŽƌĚŝŶĂƚŝŽŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ĂŵŽŶŐ ƚŚĞ ǀĂƌŝŽƵƐ ƉĂƌƚŝĐŝƉĂŶƚƐ ĂŶĚ ŝŶƚĞůůŝŐĞŶƚ ŐƌŝĚ ĂƐƐĞƚƐ͘ WŽůŝĐŝĞƐ͕ ƌĞŐƵůĂƚŝŽŶƐ͕ ĂŶĚ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ĐŽƵůĚ ĂŶĚ ƐŚŽƵůĚ ƐƵƉƉŽƌƚ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ ƉůĂƚĨŽƌŵƐ ƚŚĂƚ Ăŝŵ ƚŽ ŵĂdžŝŵŝnjĞ ƚŚĞ ĨƵůů ďĞŶĞĨŝƚ ŽĨ ĐŽŶƐƵŵĞƌ ĂƐƐĞƚƐ͕ ǁŚŝůĞ ĐŽŵƉĞŶƐĂƚŝŶŐ ƵƚŝůŝƚŝĞƐ ĂŶĚ ŽƚŚĞƌ ƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞƌ͕ ĨŽƌ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ƐƚŽƌĂŐĞ͕ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ĂŶĚ ĞŶĚͲƵƐĞ ƐĞƌǀŝĐĞƐ͘ dŚŽƵŐŚƚĨƵů ƌĞŐƵůĂƚŝŽŶ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ƉƌĞƐĞŶƚƐ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ŝŵƉƌŽǀĞ ƐĞƌǀŝĐĞ͕ ƐƵƉƉŽƌƚ ƚĞĐŚŶŽůŽŐLJ ŐƌŽǁƚŚ͕ ŝŶĐƌĞĂƐĞ ĐŽŶƐƵŵĞƌ ĞƋƵŝƚLJ͕ ĂŶĚ ŵĂdžŝŵŝnjĞ ƚŚĞ ŐƌŝĚ͛Ɛ ǀĂůƵĞ͘ dŽ ĞŶƐƵƌĞ ƚŚĞ ĐŽŶƚŝŶƵŽƵƐ ĂĨĨŽƌĚĂďŝůŝƚLJ͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ƉŽůŝĐLJ ŵĂŬĞƌƐ͕ ƵƚŝůŝƚŝĞƐ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂŬĞŚŽůĚĞƌƐ ŵƵƐƚ ĐŽŶƐŝĚĞƌ ƚŚĞ ŬĞLJ ŶĞĞĚƐ ĂŶĚ ƉŽƚĞŶƚŝĂů ĚŝƐƌƵƉƚŝǀĞ ĐŚĂŶŐĞƐ ƚĂŬŝŶŐ ƉůĂĐĞ ĂĐƌŽƐƐ ƚŚĞ ƌĂŶŐĞ ŽĨ ĐƵƐƚŽŵĞƌ ĐůĂƐƐĞƐ͘ 2 2 The 21st-Century Energy Consumer WŽůŝĐLJ͕ ƚĞĐŚŶŽůŽŐLJ͕ ŵĂƌŬĞƚƐ͕ ĂŶĚ ĐŽŶƐƵŵĞƌ ƉƌĞĨĞƌĞŶĐĞƐ ĂƌĞ ĐŽŵƉůĞdž͕ ŝŶƚĞƌƌĞůĂƚĞĚ ĚƌŝǀĞƌƐ ŽĨ ĐŚĂŶŐĞ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ EĞǁ ƉŽůŝĐŝĞƐ ĐĂŶ ŝŶĨůƵĞŶĐĞ ĐŚĂŶŐĞƐ ŝŶ ĐŽŶƐƵŵĞƌ ďĞŚĂǀŝŽƌ͕ ůŝŬĞ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Žƌ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ͖ Žƌ ƐƚŝĨůĞ ĐŽŶƐƵŵĞƌ ĐŚŽŝĐĞ ďLJ ůŝŵŝƚŝŶŐ ĐŽŵƉĞƚŝƚŝŽŶ Žƌ ƌĂŝƐŝŶŐ ĐŽƐƚƐ ƚŚƌŽƵŐŚ ĨĞĞƐ͘ ŽŶǀĞƌƐĞůLJ͕ ĐŽŶƐƵŵĞƌ ƉƌĞĨĞƌĞŶĐĞƐ ĐĂŶ ĚƌŝǀĞ ĂĚŽƉƚŝŽŶ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ Žƌ ƉŽůŝĐŝĞƐ͘ ƚ ŝƐ ŚĂƌĚ ƚŽ ƐĞƉĂƌĂƚĞ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ƚŚĞ ŝŶĨůƵĞŶĐĞƐ ŽĨ ƌĂƉŝĚůLJ ĚĞĐůŝŶŝŶŐ ĐŽƐƚƐ ĨŽƌ ƌĞŶĞǁĂďůĞ ƚĞĐŚŶŽůŽŐLJ ĨƌŽŵ ƚŚĞ ĐŽŶƐƵŵĞƌ ĚĞŵĂŶĚƐ ƚŚĂƚ ůĞĚ ƐƚĂƚĞ ůĞŐŝƐůĂƚƵƌĞƐ ĂĐƌŽƐƐ ƚŚĞ ĐŽƵŶƚƌLJ ƚŽ ĂĚŽƉƚ ZĞŶĞǁĂďůĞ WŽƌƚĨŽůŝŽ ƚĂŶĚĂƌĚ ;ZW Ϳ ƉŽůŝĐŝĞƐ͘ ZĞŐĂƌĚůĞƐƐ ŽĨ ŝƚƐ ŐĞŶĞƐŝƐ͕ ƚŚĞ ĐŚĂŶŐŝŶŐ ŶĂƚƵƌĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞƌ ŝƐ Ă ƉŽǁĞƌĨƵů ĨŽƌĐĞ ƚŚĂƚ ŝƐ ƐŚĂƉŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ͘ ůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝƐ ĂŶ ŝŵƉŽƌƚĂŶƚ ƉĂƌƚ ŽĨ ƚŚŝƐ ĐŚĂŶŐĞ ; ŝŐƵƌĞ ϮͲϭͿ͘ dŚĞ ŚŝŐŚĞƐƚ ŐƌŽǁƚŚ ŝƐ ƉƌŽũĞĐƚĞĚ ĨŽƌ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌͶĂŶ ŝŶĐƌĞĂƐĞ ŽĨ ϭϯϰ ƉĞƌĐĞŶƚ͕ ĂůƚŚŽƵŐŚ ŝƚ ǁŝůů Ɛƚŝůů ŵĂŬĞ ƵƉ ůĞƐƐ ƚŚĂŶ ŽŶĞ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĐŽŶƐƵŵƉƚŝŽŶ͘ ůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝŶ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ŐƌŽǁ ŵŽƐƚ ƐůŽǁůLJ͕ ďLJ ŶŝŶĞ ƉĞƌĐĞŶƚ͘Ϯ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-1 U S Electricity Consumption Projections to 20403 Q WKH UHVLGHQWLDO VHFWRU FRQVXPHG WKH PRVW HOHFWULFLW RI DQ VHFWRU WHUDZDWW KRXUV 7 K@ SHUFHQW RI WRWDO FRQVXPSWLRQ 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ŚŝŐŚ ǀĂůƵĞ ŽŶ ĂĨĨŽƌĚĂďŝůŝƚLJ ĂƐ ĞůĞĐƚƌŝĐŝƚLJ ĐŽƐƚƐ ŝŵƉĂĐƚ ƚŚĞŝƌ ďŽƚƚŽŵ ůŝŶĞ͘ dŚĞƐĞ ĐƵƐƚŽŵĞƌƐ ƚLJƉŝĐĂůůLJ ƉĂLJ ůĞƐƐ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ͘ ĚĂƚĂ ƐŚŽǁ Ă ŶĂƚŝŽŶĂů ϭϮͲŵŽŶƚŚ ƌŽůůŝŶŐ ĂǀĞƌĂŐĞ ƉƌŝĐĞ ĨŽƌ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌƐ ŽĨ ϲ͘ϳϰ ĐĞŶƚƐ ƉĞƌ ŬŝůŽǁĂƚƚͲŚŽƵƌ ;ŬtŚͿ ǀĞƌƐƵƐ ϭϮ͘ϱϳ ĐĞŶƚƐͬŬtŚ ĨŽƌ ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌƐ ĂŶĚ ϭϬ͘ϰϬ ĐĞŶƚƐͬŬtŚ ĨŽƌ ĐŽŵŵĞƌĐŝĂů ĐƵƐƚŽŵĞƌƐ ĂƐ ŽĨ ĞƉƚĞŵďĞƌ ϮϬϭϲ͘ϳ Ĩ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌƐ͛ ĞůĞĐƚƌŝĐŝƚLJ ŶĞĞĚƐ ĂƌĞ ůĂƌŐĞ ĞŶŽƵŐŚ͕ ƚŚĞ ĨŽĐƵƐ ŽŶ ƉƌŝĐĞ ĐĂŶ ůĞĂĚ ƚŚĞŵ ƚŽ ƉƵƌĐŚĂƐĞ ĞůĞĐƚƌŝĐŝƚLJ ĚŝƌĞĐƚůLJ ŝŶ ƌĞŐŝŽŶĂů ƉŽǁĞƌ ŵĂƌŬĞƚƐ ƌĂƚŚĞƌ ƚŚĂŶ ƚŚƌŽƵŐŚ ƚŚĞ ůŽĐĂů ŝŶĐƵŵďĞŶƚ ƵƚŝůŝƚLJ͕ ǁŚĞƌĞ ƚŚĞ ƐƚĂƚĞ ĂůůŽǁƐ͘ ĂƌŐĞ ŝŶĚƵƐƚƌŝĂů ĐŽŶƐƵŵĞƌƐ ŵĂLJ ĞǀĞŶ ďĞ ŵĞŵďĞƌƐ ŽĨ Ă ƌĞŐŝŽŶĂů ƚƌĂŶƐŵŝƐƐŝŽŶ ŽƌŐĂŶŝnjĂƚŝŽŶ ;ZdKͿ Žƌ ŝŶĚĞƉĞŶĚĞŶƚ ƐLJƐƚĞŵ ŽƉĞƌĂƚŽƌ ; KͿ ƚŽ ĂůůŽǁ ƚŚĞŵ ƚŽ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ ŝŶ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ;ŵĞĂƐƵƌĞĚ ŝŶ ŬtŚ ƉĞƌ ĚŽůůĂƌ ŽĨ ŽƵƚƉƵƚ ƉƌŽĚƵĐĞĚͿ ŚĂƐ ŝŵƉƌŽǀĞĚ ƌĂƉŝĚůLJ ŽǀĞƌ ƚŚĞ ůĂƐƚ ϭϱ LJĞĂƌƐĂ ĂŶĚ ĐŽŶƚŝŶƵĞĚ ŝŵƉƌŽǀĞŵĞŶƚ ǁŝůů ĚĞƉĞŶĚ ŽŶ ƉĞƌƐŝƐƚĞŶƚ ĂƚƚĞŶƚŝŽŶ ƚŽ ĞĨĨŝĐŝĞŶĐLJ͘ ŶĞƌŐLJͲŝŶƚĞŶƐŝǀĞ ƐƵďͲƐĞĐƚŽƌƐ ;Ğ͘Ő͕͘ ŵĞƚĂůƐ ĂŶĚ ĐŚĞŵŝĐĂůƐ ŵĂŶƵĨĂĐƚƵƌŝŶŐͿ ƌĞƉƌĞƐĞŶƚ ƚŚĞ ŐƌĞĂƚĞƐƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƚĂƌŐĞƚĞĚ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ͘ Ŷ ƚŚĞ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ƐƵďͲƐĞĐƚŽƌ͕ ǁŚŝĐŚ ĂĐĐŽƵŶƚƐ ĨŽƌ ŽǀĞƌ ϴϬй ŽĨ ƚŽƚĂů ŝŶĚƵƐƚƌŝĂů ŐƌŝĚͲĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ; ŝŐƵƌĞ ϮͲϮͿ͕ ŵĂĐŚŝŶĞ ĚƌŝǀĞƐď ŵĂŬĞ ƵƉ ŚĂůĨ ŽĨ ŝŶĚƵƐƚƌŝĂů ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ͘ dŚĞ ŶĞdžƚ ďŝŐŐĞƐƚ ĞŶĚ ƵƐĞ͕ ƉƌŽĐĞƐƐ ŚĞĂƚŝŶŐ ĂŶĚ ĐŽŽůŝŶŐ͕ ŵĂŬĞƐ ƵƉ ũƵƐƚ ŽǀĞƌ ŽŶĞͲƚĞŶƚŚ ŽĨ ƚŽƚĂů ŝŶĚƵƐƚƌŝĂů ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ͘ dŚĞ ĨŽĐƵƐ ŽŶ ƉƌŝĐĞ ĂůƐŽ ƉƌŽǀŝĚĞƐ Ă ŶĂƚƵƌĂů ŝŶĐĞŶƚŝǀĞ ĨŽƌ ĂŶ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌ ƚŽ ƐĞůĨͲĨŝŶĂŶĐĞ ĞĐŽŶŽŵŝĐ ĞŶĞƌŐLJͲĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ŝŶ ŽƌĚĞƌ ƚŽ ƚĂŬĞ ĂĚǀĂŶƚĂŐĞ ŽĨ ƌĞĚƵĐĞĚ ĐŽƐƚƐ ĂŶĚ ŐƌĞĂƚĞƌ ƉƌŽĚƵĐƚŝǀŝƚLJ͘ KƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ŵŽƌĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Ɛƚŝůů ĞdžŝƐƚ͘ Ŷ ƚŚĞ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ƐƵďƐĞĐƚŽƌ͕ ǁŚŝĐŚ ĂĐĐŽƵŶƚƐ ĨŽƌ ŽǀĞƌ ϴϬ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŝŶĚƵƐƚƌŝĂů ŐƌŝĚͲĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͕ ŵĂĐŚŝŶĞ ĚƌŝǀĞƐ ŵĂŬĞ ƵƉ ŚĂůĨ ŽĨ ŝŶĚƵƐƚƌŝĂů ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ĂŶĚ ĐŽƵůĚ ďĞ Ă ƚĂƌŐĞƚ ĨŽƌ ĨƵƌƚŚĞƌ ŝŶŶŽǀĂƚŝŽŶ͘ Z ;ƐŚŝĨƚŝŶŐ Žƌ ĚĞĐƌĞĂƐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ƚŝŵĞͲďĂƐĞĚ ƌĂƚĞƐ Žƌ ŽƚŚĞƌ ĨŽƌŵƐ ŽĨ ĨŝŶĂŶĐŝĂů ŝŶĐĞŶƚŝǀĞƐͿ ŚĞůƉƐ ŵĂŬĞ h͘ ͘ ŵĂŶƵĨĂĐƚƵƌĞƌƐ ŵŽƌĞ ĐŽŵƉĞƚŝƚŝǀĞ͘ Ŷ ƚŚĞ W D ƌĞŐŝŽŶ͕ ůĂƌŐĞ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌƐ ŽĨƚĞŶ ďŝĚ Z ŝŶƚŽ ƚŚĞ ŵĂƌŬĞƚ ĂƐ Ă ƌĞƐŽƵƌĐĞ͘ ƌĞĐĞŶƚ ĐŚĂŶŐĞ ĂŵŽŶŐ ƐŽŵĞ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌƐ͕ ĞƐƉĞĐŝĂůůLJ ĂŵŽŶŐ ƚŚŽƐĞ ǁŝƚŚ ƌĞƚĂŝů ĐƵƐƚŽŵĞƌƐ͕ ŝƐ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ĐŽƌƉŽƌĂƚĞ ƐƵƐƚĂŝŶĂďŝůŝƚLJ ŐŽĂůƐ͘ ĐŚŝĞǀŝŶŐ ƚŚĞƐĞ ŐŽĂůƐ ŵĂLJ ŝŶǀŽůǀĞ ƐĞůĨͲŐĞŶĞƌĂƚŝŽŶ͕ ƉƵƌĐŚĂƐĞ ŽĨ ĐƌĞĚŝƚƐ͕ Žƌ ǁŚŽůĞƐĂůĞ ƉŽǁĞƌ ƉƵƌĐŚĂƐĞƐ ŝŶǀŽůǀŝŶŐ ůŽǁͲ Žƌ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͕ ƐƵĐŚ ĂƐ ĨƌŽŵ ƌĞŶĞǁĂďůĞƐ ; ŝŐƵƌĞ ϮͲϮͿ͘ Žƌ ĞdžĂŵƉůĞ͕ 'ĞŶĞƌĂů DŽƚŽƌƐ͕ Ă ǀĞƌLJ ůĂƌŐĞ ĐŽŶƐƵŵĞƌ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ͕ ŝƐ ĐƵƌƌĞŶƚůLJ ƚŚĞ ůĂƌŐĞƐƚ ĂƵƚŽŵŽƚŝǀĞ ƵƐĞƌ ŽĨ ƐŽůĂƌ ƉŽǁĞƌ ĂŶĚ ŝƐ ĂŵŽŶŐ ƚŚĞ ƚŽƉ Ϯϱ ƐŽůĂƌͲƉŽǁĞƌĞĚ h͘ ͘ ĐŽŵƉĂŶŝĞƐ͘ϴ Ă ůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ŵĞĂƐƵƌĞĚ ĂƐ ĚŽůůĂƌƐ ŽĨ ŐƌŽƐƐ ĚŽŵĞƐƚŝĐ ƉƌŽĚƵĐƚ ;' WͿ ƉƌŽĚƵĐĞĚ ƉĞƌ ŬŝůŽǁĂƚƚͲŚŽƵƌ ;ŬtŚͿ͕ ŶĞĂƌůLJ ĚŽƵďůĞĚ ďĞƚǁĞĞŶ ϭϵϵϬ ĂŶĚ ϮϬϭϰ͕ ǁŚŝůĞ ŝŶĚƵƐƚƌŝĂů ĞůĞĐƚƌŝĐŝƚLJ ƐĂůĞƐ ǁĞƌĞ ĨůĂƚ͘ ď DĂĐŚŝŶĞ ĚƌŝǀĞƐ ĐŽŶǀĞƌƚ ĞůĞĐƚƌŝĐ ĞŶĞƌŐLJ ŝŶƚŽ ŵĞĐŚĂŶŝĐĂů ĞŶĞƌŐLJ ĂŶĚ ĂƌĞ ĨŽƵŶĚ ŝŶ ĂůŵŽƐƚ ĞǀĞƌLJ ƉƌŽĐĞƐƐ ŝŶ ŵĂŶƵĨĂĐƚƵƌŝŶŐ͖ ƚŚĞLJ ĐŽŵƉƌŝƐĞ ŵŽƚŽƌƐ ĂŶĚ ƚŚĞ ƉƌŽĐĞƐƐ ƐLJƐƚĞŵƐ ƚŚĞLJ ĚƌŝǀĞ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-2 U S Industrial Electricity Consumption in 2014 Million Kilowatt Hours 9 7KH OHIW FKDUW VKRZV WKH LQGXVWULDO VHFWRU¶V SXUFKDVHG HOHFWULFLW FRQVXPSWLRQ FRPELQHG KHDW DQG SRZHU VHOI JHQHUDWLRQ E VRXUFH DQG WKH ULJKW FKDUW VKRZV SXUFKDVHG HOHFWULFLW E LQGXVWULDO VXEVHFWRU Žƌ ŵĂŶLJ ŝŶĚƵƐƚƌŝĂů ĨĂĐŝůŝƚŝĞƐ͕ ĞŶĞƌŐLJ ŝƐ ŶŽƚ ĂĐƚŝǀĞůLJ ŵĂŶĂŐĞĚ͘ tŚŝůĞ ƐŽŵĞ ĨĂĐŝůŝƚŝĞƐ ŝŵƉůĞŵĞŶƚ ƐƚĂŶĚͲĂůŽŶĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽũĞĐƚƐ ƚŚĂƚ ƐĂǀĞ ĞŶĞƌŐLJ͕ ŵĂŶLJ ĚŽ ŶŽƚ ŝŵƉůĞŵĞŶƚ ƚŚĞƐĞ ƉƌŽũĞĐƚƐ ĂƐ ƉĂƌƚ ŽĨ Ă ĐŽŵƉƌĞŚĞŶƐŝǀĞ ƐƚƌĂƚĞŐLJ ƚŽ ĐŽŶƚŝŶƵĂůůLJ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ƉĞƌĨŽƌŵĂŶĐĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ǁŚŝůĞ ŶĞĂƌůLJ ϯϬй ŽĨ h͘ ͘ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ĨĂĐŝůŝƚŝĞƐ ƌĞƉŽƌƚ ƐĞƚƚŝŶŐ ŐŽĂůƐ ĨŽƌ ŝŵƉƌŽǀŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ϭϬ ŽŶůLJ ĂďŽƵƚ ϳй ŽĨ ĨĂĐŝůŝƚŝĞƐ ƌĞƉŽƌƚ ĞŵƉůŽLJŝŶŐ Ă ĨƵůůͲƚŝŵĞ ĞŶĞƌŐLJ ŵĂŶĂŐĞƌ͘ ƚƌĂƚĞŐŝĐ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ĂƉƉƌŽĂĐŚĞƐ͕ ƐƵĐŚ ĂƐ E Z'z d Z ĨŽƌ ŝŶĚƵƐƚƌŝĂů ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ͕ K ϱϬϬϬϭ ĂŶĚ ƵƉĞƌŝŽƌ ŶĞƌŐLJ WĞƌĨŽƌŵĂŶĐĞ ŚĞůƉ ŝŶĚŝǀŝĚƵĂů ďƵƐŝŶĞƐƐĞƐ ŝĚĞŶƚŝĨLJ ŽƉĞƌĂƚŝŽŶĂů ĞĨĨŝĐŝĞŶĐLJ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͘Đ ŽƐƚͲďĞŶĞĨŝƚ ĂƐƐĞƐƐŵĞŶƚƐ ĨŽƌ ƵƉĞƌŝŽƌ ŶĞƌŐLJ WĞƌĨŽƌŵĂŶĐĞ ĨŝŶĚ ĂŶŶƵĂů ƐĂǀŝŶŐƐ ďĞƚǁĞĞŶ Ψϯϲ͕ϬϬϬ ĂŶĚ Ψϵϯϴ͕ϬϬϬ͕ ǁŝƚŚ ƉĂLJďĂĐŬƐ ŽĨ ůĞƐƐ ƚŚĂŶ ϭ͘ϱ LJĞĂƌƐ ĨŽƌ ůĂƌŐĞ ĞŶĞƌŐLJ ĐŽŶƐƵŵŝŶŐ ĨĂĐŝůŝƚŝĞƐ ;ƚŚŽƐĞ ǁŝƚŚ ĂŶŶƵĂů ĞŶĞƌŐLJ ĐŽƐƚƐ ŽĨ ŵŽƌĞ ΨϮ ŵŝůůŝŽŶ͘Ϳϭϭ LJ ƉƌŽĚƵĐŝŶŐ ŶĞƌŐLJ ĂŶĚǁŝĚƚŚ ƚƵĚŝĞƐ͕ ƚŚĞ h͘ ͘ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ ŚĂƐ ĂůƐŽ ŝĚĞŶƚŝĨŝĞĚ ƉŽƚĞŶƚŝĂů ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ĨŽƌ ƐĞůĞĐƚĞĚ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌƐ ďLJ ĐĂůĐƵůĂƚŝŶŐ ĚŝĨĨĞƌĞŶĐĞƐ ďĞƚǁĞĞŶ ƚLJƉŝĐĂů ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ůĞǀĞůƐ ĨŽƌ ƐƉĞĐŝĨŝĐ ƉƌŽĐĞƐƐĞƐ ĂŶĚ ůŽǁĞƌ ĐŽŶƐƵŵƉƚŝŽŶ ůĞǀĞůƐ ƌĞƋƵŝƌĞĚ ďLJ ƐƚĂƚĞ ŽĨ ƚŚĞ Ăƌƚ ƚĞĐŚŶŽůŽŐLJ͕ ĂƐ ǁĞůů ĂƐ ƚĞĐŚŶŽůŽŐLJ ĐƵƌƌĞŶƚůLJ ƵŶĚĞƌ ƌĞƐĞĂƌĐŚ ĂŶĚ ĚĞǀĞůŽƉŵĞŶƚ͘ϭϮ Đ K ϱϬϬϬϭ ŝƐ ĂŶ ŝŶƚĞƌŶĂƚŝŽŶĂů ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƐƚĂŶĚĂƌĚ ĂŶĚ ƵƉĞƌŝŽƌ ŶĞƌŐLJ WĞƌĨŽƌŵĂŶĐĞ ŝƐ Ă ƉƌŽŐƌĂŵ ƚŚĂƚ ŚĞůƉƐ ĐŽŵƉĂŶŝĞƐ ƚŽ ŝŶĐŽƌƉŽƌĂƚĞ K ϱϬϬϬϭ ŝŶƚŽ ƚŚĞŝƌ ƉƌŽĚƵĐƚŝŽŶ ŵĂŶĂŐĞŵĞŶƚ ƉƌĂĐƚŝĐĞƐ ĂŶĚ ŵŽƚŝǀĂƚĞƐ ƚŚĞŵ ƚŽ ƐĞƚ ĂŶĚ ƌĞĂĐŚ ƐĂǀŝŶŐƐ ŐŽĂůƐ͘ DŽƌĞ ŝŶĨŽƌŵĂƚŝŽŶ ŽŶ ŶĚƵƐƚƌŝĂů ŶĞƌŐLJ DĂŶĂŐĞŵĞŶƚ ƚŚƌŽƵŐŚ E Z'z d Z ĨŽƌ ŝƐ ĂǀĂŝůĂďůĞ Ăƚ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŶĞƌŐLJƐƚĂƌ͘ŐŽǀͬďƵŝůĚŝŶŐƐͬĨĂĐŝůŝƚLJͲŽǁŶĞƌƐͲĂŶĚͲŵĂŶĂŐĞƌƐͬŝŶĚƵƐƚƌŝĂůͲƉůĂŶƚƐ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW Ŷ ĂĚĚŝƚŝŽŶ͕ ŝŶĚƵƐƚƌŝĂů W ƌĞƉƌĞƐĞŶƚƐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ŶĞĂƌͲƚĞƌŵ ƐŽůƵƚŝŽŶƐ ƚŽ ƌĞĚƵĐĞ ĞŶĞƌŐLJ ŝŶƚĞŶƐŝƚLJ͘Ě W ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ ŝƐ ĞƋƵŝǀĂůĞŶƚ ƚŽ ĂďŽƵƚ ϴ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ ĨƌŽŵ ƵƚŝůŝƚLJͲƐĐĂůĞ ƉŽǁĞƌ ƉůĂŶƚƐ ŝŶ ϮϬϭϱ͘Ğ ϭϯ LJ ĐŽŶĐƵƌƌĞŶƚůLJ ƉƌŽĚƵĐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ŚĞĂƚ Ăƚ ƚŚĞ ƐŝƚĞ ŽĨ ƵƐĞ͕ W ƐLJƐƚĞŵƐ ƵƐĞ Ϯϱ ƉĞƌĐĞŶƚ ƚŽ ϯϱ ƉĞƌĐĞŶƚ ůĞƐƐ ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ƚŚĂŶ ŐƌŝĚ ĞůĞĐƚƌŝĐŝƚLJ ƉůƵƐ ĐŽŶǀĞŶƚŝŽŶĂů ŚĞĂƚŝŶŐ ĞŶĚͲƵƐĞƐ ;Ğ͘Ő͕͘ ǁĂƚĞƌ ŚĞĂƚĞƌƐ͕ ďŽŝůĞƌƐͿ͕ ǁŝƚŚ Ă ƚLJƉŝĐĂů ϳϱ ƉĞƌĐĞŶƚ ŽǀĞƌĂůů ĞĨĨŝĐŝĞŶĐLJ ǀĞƌƐƵƐ ϱϬ ƉĞƌĐĞŶƚ ǁŝƚŚ ĐŽŶǀĞŶƚŝŽŶĂů ŐĞŶĞƌĂƚŝŽŶ ; ĞĐƚŝŽŶ ϲ͘Ϯ͘ϭ͘ϱͿ͘ Ŷ ƌĞŐŝŽŶƐ ǁŚĞƌĞ ƚŚĞ ĞŵŝƐƐŝŽŶ ŝŶƚĞŶƐŝƚLJ ŽĨ ĐĞŶƚƌĂů ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ŚŝŐŚ͕ ƐǁŝƚĐŚŝŶŐ ƚŽ W ǁŝůů ŚĂǀĞ ƚŚĞ ďŝŐŐĞƐƚ ĞŵŝƐƐŝŽŶƐ ŝŵƉĂĐƚ͘ K ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƚŚĞƌĞ ŝƐ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ĨŽƌ ƌŽƵŐŚůLJ Ϯϰϭ 't ŽĨ W ĐĂƉĂĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŝŶĐůƵĚŝŶŐ ŝŶĚƵƐƚƌŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů W ĂƐ ǁĞůů ĂƐ ǁĂƐƚĞ ŚĞĂƚ ƚŽ ƉŽǁĞƌ͘ϭϰ KǀĞƌĂůů ŐƌŽǁƚŚ ŝŶ W ĐĂƉĂĐŝƚLJ ŚĂƐ ƐƚĂůůĞĚ ƐŝŶĐĞ ƚŚĞ ĞĂƌůLJ ϮϬϬϬƐ ĚƵĞ ƚŽ ƵƉĨƌŽŶƚ ĞƋƵŝƉŵĞŶƚ ĐŽƐƚƐ͕ ƚĞĐŚŶŝĐĂů ĐŽŵƉůĞdžŝƚLJ͕ ĂŶĚ ƉŽůŝĐLJ ĐŚĂŶŐĞƐ͘ dŚĞƌĞ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚ ŽŶŐŽŝŶŐ ĚĞƉůŽLJŵĞŶƚ ĞĨĨŽƌƚƐ ƚŽ ƉƌŽŵŽƚĞ ƚŚŝƐ ƚĞĐŚŶŽůŽŐLJ͕ ŝŶĐůƵĚŝŶŐ K ͛Ɛ dĞĐŚŶŝĐĂů ƐƐŝƐƚĂŶĐĞ WĂƌƚŶĞƌƐŚŝƉƐ͕ϭϱ ĂƐ ǁĞůů ĂƐ ƐĞǀĞƌĂů ĂĐƚŝǀĞ ƐƚĂƚĞ ŝŶĐĞŶƚŝǀĞƐ͕ ƐƵĐŚ ĂƐ ŝŶĐůƵĚŝŶŐ W ŐĞŶĞƌĂƚŝŽŶ ŝŶ ZW ͕ ĂŶĚ ƵƚŝůŝƚLJ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ W ƐLJƐƚĞŵƐ͘ϭϲ dŚĞ ŚŝŐŚĞƐƚ ŶƵŵďĞƌ ŽĨ W ŝŶƐƚĂůůĂƚŝŽŶƐ ŝŶ ϮϬϭϯ ĂŶĚ ϮϬϭϰ ŽĐĐƵƌƌĞĚ ŝŶ ƐƚĂƚĞƐ ǁŝƚŚ ŵƵůƚŝLJĞĂƌ WͲŝŶĐĞŶƚŝǀĞ ƉƌŽŐƌĂŵƐ ;EĞǁ zŽƌŬ ĂŶĚ ĂůŝĨŽƌŶŝĂ͕ ĞĐƚŝŽŶ ϲ͘ϱ͘ϭ͘ϯͿ͘ 2 2 2 Commercial Consumers Optimizing Building Design Lighting and Space Conditioning dŚĞƌĞ ŝƐ ĂďŽƵƚ ϴϳ ďŝůůŝŽŶ ƐƋƵĂƌĞ ĨĞĞƚ ŽĨ ĐŽŵŵĞƌĐŝĂů ƐƉĂĐĞ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƐƉƌĞĂĚ ĂĐƌŽƐƐ ŵŽƌĞ ƚŚĂŶ ϱ ŵŝůůŝŽŶ ĐŽŵŵĞƌĐŝĂů ĂŶĚ ŝŶƐƚŝƚƵƚŝŽŶĂů ďƵŝůĚŝŶŐƐ͘ϭϳ ŽŵŵĞƌĐŝĂů ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ĂĐĐŽƵŶƚƐ ĨŽƌ ĂďŽƵƚ ϯϲ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ dŚŝƐ ƐĞĐƚŽƌ ŝƐ ǀĞƌLJ ĚŝǀĞƌƐĞ ĂŶĚ ŝŶĐůƵĚĞƐ ŽĨĨŝĐĞ͕ ƌĞƚĂŝů͕ ŚĞĂůƚŚ ĐĂƌĞ͕ ĞĚƵĐĂƚŝŽŶ͕ ǁĂƌĞŚŽƵƐĞ͕ ĂŶĚ ƐĞǀĞƌĂů ŽƚŚĞƌ ďƵŝůĚŝŶŐ ƚLJƉĞƐ͕ ƌĂŶŐŝŶŐ ŝŶ ƐŝnjĞ ĨƌŽŵ Ă ĨĞǁ ƚŚŽƵƐĂŶĚ ƚŽ ŵŝůůŝŽŶƐ ŽĨ ƐƋƵĂƌĞ ĨĞĞƚ ƉĞƌ ďƵŝůĚŝŶŐ͘ ŽƵƌ ƚLJƉĞƐ ŽĨ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ĂĐĐŽƵŶƚ ĨŽƌ ŵŽƌĞ ƚŚĂŶ ϱϬ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĚĞůŝǀĞƌĞĚ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶͶŽĨĨŝĐĞ͕ ƌĞƚĂŝů͕ ĞĚƵĐĂƚŝŽŶ͕ ĂŶĚ ŚĞĂůƚŚ ĐĂƌĞ͘Ĩ͕ ϭϴ ZĞĐĞŶƚ ĂŶĂůLJƐŝƐ ƐŚŽǁƐ ƚŚĂƚ ŝŶ ƐƚĂƚĞƐ ĐŽŶƐŝƐƚĞŶƚůLJ ĂĚŽƉƚŝŶŐ ƚŚĞ ŵŽƐƚ ƌĞĐĞŶƚ ǀĞƌƐŝŽŶƐ ŽĨ ƚŚĞ ŵŽĚĞů ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ŚŽŵĞŽǁŶĞƌƐ͕ ďƵŝůĚŝŶŐ ŽǁŶĞƌƐ͕ ĂŶĚ ƚĞŶĂŶƚƐ ĐŽƵůĚ ƐĂǀĞ ΨϭϮϲ ďŝůůŝŽŶ ŽŶ ĞŶĞƌŐLJ ďŝůůƐ͘ DĂŶLJ ŽĨ ƚŚĞ ŚŝŐŚ ĞĨĨŝĐŝĞŶĐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ďƵŝůĚŝŶŐ ĞŶǀĞůŽƉĞ ĚĞƐŝŐŶƐ͕ ĂŶĚ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƉƌĂĐƚŝĐĞƐ ƚŚĂƚ ĞŶĂďůĞ ƐŝŐŶŝĨŝĐĂŶƚ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ĂŶĚ ' ' ƌĞĚƵĐƚŝŽŶƐ ďĞLJŽŶĚ ƚŽĚĂLJ͛Ɛ ďƵŝůĚŝŶŐ ĐŽĚĞƐ ŚĂǀĞ ďĞĞŶ ĚĞŵŽŶƐƚƌĂƚĞĚ ĂŶĚ ĂƌĞ ĐŽŵŵĞƌĐŝĂůůLJ ĂǀĂŝůĂďůĞ͘ ŽŵŵĞƌĐŝĂůͲƐĞĐƚŽƌ ƐƋƵĂƌĞ ĨŽŽƚĂŐĞ ĂŶĚ ĞŶĞƌŐLJ ƵƐĞ ŚĂƐ ŐƌŽǁŶ ƐƚĞĂĚŝůLJ͕ ĂůƚŚŽƵŐŚ ĞůĞĐƚƌŝĐŝƚLJ ŝŶƚĞŶƐŝƚLJ ;ŬtŚͬƐƋƵĂƌĞ ĨŽŽƚͿ ŝƐ ŝŵƉƌŽǀŝŶŐ͕ ůĂƌŐĞůLJ ĚƌŝǀĞŶ ďLJ ŝŶĐƌĞĂƐĞƐ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂĐƌŽƐƐ ĞŶĚ ƵƐĞƐ͘ ZĞĐĞŶƚ ĂŶĂůLJƐŝƐ ŝŶĚŝĐĂƚĞƐ ƚŚĂƚ ƚŚĞ ŵĂũŽƌ ĐŽŶƚƌŝďƵƚŝŶŐ ĨĂĐƚŽƌƐ ƚŽ ƚŚĞ ĐŚĂŶŐĞ ŝŶ ĐŽŵŵĞƌĐŝĂů ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ĨƌŽŵ ϮϬϬϴ ƚŽ ϮϬϭϮ ǁĞƌĞ ƐĂǀŝŶŐƐ ĨƌŽŵ ĂƉƉůŝĂŶĐĞ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ƐƚĂŶĚĂƌĚƐ ĂŶĚ ƵƚŝůŝƚLJ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͘ϭϵ DŽǀŝŶŐ ĨŽƌǁĂƌĚ͕ ƚŚĞƐĞ ĞĨĨŝĐŝĞŶĐLJ ƚƌĞŶĚƐ ǁŝůů ĐŽŶƚŝŶƵĞ ƚŽ ŵĂŬĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚ͘ Ŷ ĨĂĐƚ͕ ĨƌŽŵ ϮϬϭϯ ƚŽ ϮϬϰϬ͕ ĐŽŵŵĞƌĐŝĂů ĞŶĚͲƵƐĞ ŝŶƚĞŶƐŝƚLJ͕ ŵĞĂƐƵƌĞĚ ŝŶ ŬtŚͬƐƋƵĂƌĞ ĨŽŽƚ͕ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ĚĞĐƌĞĂƐĞ ďLJ ĂďŽƵƚ ϴ ƉĞƌĐĞŶƚ͘ϮϬ dŚŝƐ ĚĞĐƌĞĂƐĞ ŝƐ ůĞĚ ďLJ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĚĞĐůŝŶĞ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶƚĞŶƐŝƚLJ ŽĨ ůŝŐŚƚŝŶŐ͕Ϯϭ ďƵƚ ŝƚ ŝƐ ĂůƐŽ ŽĨĨƐĞƚ ďLJ Ă ƐŝŐŶŝĨŝĐĂŶƚ ŝŶĐƌĞĂƐĞ ŝŶ ŵŝƐĐĞůůĂŶĞŽƵƐ ĞůĞĐƚƌŝĐ ůŽĂĚƐ ;D ƐͿ͘Ő Ě tŝƚŚŝŶ ƚŚĞ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ƐƵďͲƐĞĐƚŽƌ͕ dŚĞ DĂŶƵĨĂĐƚƵƌŝŶŐ ŶĞƌŐLJ ĂŶĚ ĂƌďŽŶ ŽŽƚƉƌŝŶƚƐ ĂŶĂůLJƐŝƐ ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ϳ͕ϮϮϴ ƚƌŝůůŝŽŶ ƚƵ͕ Žƌ ϱϭ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ϭϰ͕Ϭϲϰ ƚƌŝůůŝŽŶ ƚƵ ŽĨ ƚŽƚĂů ĚĞůŝǀĞƌĞĚ ĞŶĞƌŐLJ ƚŽ ƚŚĞ h͘ ͘ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ƐĞĐƚŽƌ͕ ǁĂƐ ǁĂƐƚĞĚ ĂƐ ĞĨĨŝĐŝĞŶĐLJ ůŽƐƐĞƐ ŝŶ ϮϬϭϬ͘ Ğ W ŝƐ ŽĨƚĞŶ ĐŽŶƐŝĚĞƌĞĚ Ă ĨŽƌŵ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ďƵƚ ŝƐ ĐĂŶ ĂůƐŽ ďĞ ĐŽŶƐŝĚĞƌĞĚ Ă ĨŽƌŵ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ͘ Ĩ ƚŽƚĂů ŽĨ ϱϲ͘ϰ ƉĞƌĐĞŶƚ͗ ŽĨĨŝĐĞƐ ĂĐĐŽƵŶƚ ĨŽƌ ϮϬ͘ϰ ƉĞƌĐĞŶƚ͕ ŵĞƌĐĂŶƚŝůĞ ;ŵĂůůƐ ĂŶĚ ŶŽŶͲŵĂůů ƌĞƚĂŝůͿ ĂĐĐŽƵŶƚƐ ĨŽƌ ϭϲ͘ϲ ƉĞƌĐĞŶƚ͕ ĞĚƵĐĂƚŝŽŶ ĂĐĐŽƵŶƚƐ ĨŽƌ ϭϬ͘ϴ ƉĞƌĐĞŶƚ͕ ĂŶĚ ŚĞĂůƚŚ ĐĂƌĞ ĂĐĐŽƵŶƚƐ ĨŽƌ ϴ͘ϲ ƉĞƌĐĞŶƚ͘ Ő D Ɛ ƌĞƉƌĞƐĞŶƚ Ă ƌĂŶŐĞ ŽĨ ĞůĞĐƚƌŝĐ ůŽĂĚƐ ŽƵƚƐŝĚĞ ŽĨ Ă ďƵŝůĚŝŶŐ͛Ɛ ĐŽƌĞ ĞŶĚ ƵƐĞƐ ŽĨ ŚĞĂƚŝŶŐ͕ ǀĞŶƚŝůĂƚŝŽŶ͕ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ͕ ůŝŐŚƚŝŶŐ͕ ǁĂƚĞƌ ŚĞĂƚŝŶŐ͕ ĂŶĚ ƌĞĨƌŝŐĞƌĂƚŝŽŶ͘ ĂŵƉůĞ D Ɛ ŝŶĐůƵĚĞ ƚĞůĞǀŝƐŝŽŶƐ͕ ƉŽŽů ŚĞĂƚĞƌƐ ĂŶĚ ƉƵŵƉƐ͕ ƐĞƚͲƚŽƉ ďŽdžĞƐ͕ ĂŶĚ ĐĞŝůŝŶŐ ĨĂŶƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU dŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ŵŽƐƚ ĐŽŵŵĞƌĐŝĂů ĞŶĚ ƵƐĞƐ ŝƐ ŝŶĐƌĞĂƐŝŶŐ ǁŝƚŚ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĂĚǀĂŶĐĞĚ ůŝŐŚƚŝŶŐ͕ ƐƉĂĐĞ ĐŽŶĚŝƚŝŽŶŝŶŐ͕ ĞůĞĐƚƌŽŶŝĐƐ ĂŶĚ ďƵŝůĚŝŶŐ ĚĞƐŝŐŶƐ͘ dŚĞ ƌĞƚƌŽĨŝƚ ŽĨ ĞdžŝƐƚŝŶŐ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ĂŶĚ ƚŚĞ ĂĚŽƉƚŝŽŶ ŽĨ ŶĞǁ ĞŶĞƌŐLJͲŵĂŶĂŐĞŵĞŶƚ ƚŽŽůƐ ĂƌĞ ĂůƐŽ ŵĂŬŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽŶƚƌŝďƵƚŝŽŶƐ ƚŽ ŵĞĞƚŝŶŐ ďŽƚŚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŐŽĂůƐ ĂŶĚ ƌĞĚƵĐŝŶŐ ĐŽŶƐƵŵĞƌ ĞůĞĐƚƌŝĐŝƚLJ ĐŽƐƚƐ͘ dŚĞ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ĂŶĚ ĞĚĞƌĂů͕ ƐƚĂƚĞ͕ ĂŶĚ ůŽĐĂů ĂŐĞŶĐŝĞƐ ĂƌĞ ŶŽǁ ŝŵƉůĞŵĞŶƚŝŶŐ ŚĂǀĞ ĞŶĂďůĞĚ ƚŚĞƐĞ ƚƌĞŶĚƐ͘ϮϮ Figure 2-3 Comparison of Commercial End-Use Electricity Consumption between 2003 and 2012 23 24 RQVXPSWLRQ DFURVV PRVW HQG XVHV LV LQFUHDVLQJ LQFOXGLQJ 0 V UHIULJHUDWLRQ FRPSXWLQJ DQG FRROLQJ LJKWLQJ DQG VSDFH KHDWLQJ FRQVXPSWLRQ KDYH HDFK GHFUHDVHG E DERXW SHUFHQW EHWZHHQ DQG 2 2 2 1 “Dispatchable” Smart Green Buildings Ŷ ŝŵƉŽƌƚĂŶƚ ƚƌĞŶĚ ǁŝƚŚ ŝŵƉůŝĐĂƚŝŽŶƐ ĨŽƌ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝƐ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐ ĚŝŐŝƚŝnjĂƚŝŽŶ ŽĨ ĐŽŵŵĞƌĐŝĂů ŽĨĨŝĐĞ ƐƉĂĐĞ ĂŶĚ ƚŚĞ ƌĞƐƵůƚŝŶŐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ƵƐĞ ďƵŝůĚŝŶŐƐ ƚŚĞŵƐĞůǀĞƐ ĂƐ ƉĂƌƚ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ƐLJƐƚĞŵ͘ ƵŝůĚŝŶŐ ůŽĂĚƐ ĂƌĞ ďĞĐŽŵŝŶŐ ͞ĚŝƐƉĂƚĐŚĂďůĞ͟ ďLJ ƵƚŝůŝnjŝŶŐ Z ƚĞĐŚŶŽůŽŐŝĞƐ͕ ŵĂƌŬĞƚƐ͕ 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ŵĂƌŬĞƚ͖ ĂŶĚ ƉƌĞǀĞŶƚƐ ƚŚĞ ĐŽƐƚƐ ŽĨ t ͛ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŝŶǀĞƐƚŵĞŶƚ ĨƌŽŵ ƐŚŝĨƚŝŶŐ ƚŽ ŽƚŚĞƌ ĐŽŶƐƵŵĞƌƐ͘ϯϰ dŚĞƌĞ ĂƌĞ ƐĞǀĞƌĂů ǁĂLJƐ ŝŶ ǁŚŝĐŚ ĐŽƌƉŽƌĂƚŝŽŶƐ ĐĂŶ ǀŽůƵŶƚĂƌŝůLJ ƉƌŽĐƵƌĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ͕ ŝŶĐůƵĚŝŶŐ WŽǁĞƌ WƵƌĐŚĂƐĞ ŐƌĞĞŵĞŶƚƐ ;WW ͛ƐͿ͘ Ŷ ĂƌĞĂƐ ǁŚĞƌĞ ŵĂƌŬĞƚ ƐƚƌƵĐƚƵƌĞƐ ƉƌĞĐůƵĚĞ WW Ɛ ĨŽƌ ĚŝƌĞĐƚ ĐŽƌƉŽƌĂƚĞ ƉƌŽĐƵƌĞŵĞŶƚ͕ ƐŽŵĞ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƌĞƚĂŝů ĞůĞĐƚƌŝĐŝƚLJͲƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ ŽĨĨĞƌ ŐƌĞĞŶ ĐŚŽŝĐĞ Žƌ ŐƌĞĞŶ ƚĂƌŝĨĨ ƉƌŽŐƌĂŵƐ͖ ĨŽƌ ĞdžĂŵƉůĞ͕ ƐŽŵĞ ĞŶĞƌŐLJ ƉƌŽǀŝĚĞƌƐ ŝŶ dĞdžĂƐ ŽĨĨĞƌ ϭϬϬ ƉĞƌĐĞŶƚ ǁŝŶĚ ƉůĂŶƐ ƚŽ ĐƵƐƚŽŵĞƌƐ͘ 2 2 3 Federal Agencies tŝƚŚ ŵŽƌĞ ƚŚĂŶ ϯϱϬ͕ϬϬϬ ďƵŝůĚŝŶŐƐ ŝŶ ƵƐĞ͕ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŝƐ ƚŚĞ EĂƚŝŽŶ͛Ɛ ůĂƌŐĞƐƚ ĞŶĞƌŐLJ ƵƐĞƌ͘ϯϱ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ƵƐĞĚ ϵϰϳ ƚƌŝůůŝŽŶ ƌŝƚŝƐŚ ƚŚĞƌŵĂů ƵŶŝƚƐ ŝŶ ϮϬϭϱ͘ϯϲ ůĞĐƚƌŝĐŝƚLJ ŵĂĚĞ ƵƉ ϭϵ͘ϵ ƉĞƌĐĞŶƚ ŽĨ ĞĚĞƌĂů ĞŶĞƌŐLJ ƵƐĞ͕ ďĞŚŝŶĚ ŽŶůLJ ũĞƚ ĨƵĞů Ăƚ ϰϰ͘Ϯ ƉĞƌĐĞŶƚ͘ϯϳ DŽƐƚ ĞĚĞƌĂů ďƵŝůĚŝŶŐƐ ŚĂǀĞ ŐƌĞĞŶŚŽƵƐĞ ŐĂƐ ;' 'ͿͲƌĞĚƵĐƚŝŽŶ ŐŽĂůƐ͕ ĂŶĚ ĞĚĞƌĂů ůĂǁ ĞŶĐŽƵƌĂŐĞƐ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ƚŽ ŝŵƉůĞŵĞŶƚ Ăůů ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ͘ ĞĚĞƌĂů ůĂǁ ĂůƐŽ ƌĞƋƵŝƌĞƐ ĂŐĞŶĐŝĞƐ ƚŽ ƵƐĞ ůŝĨĞͲĐLJĐůĞ ĐŽƐƚ ĂŶĂůLJƐĞƐ ǁŚĞŶ ĐŽŶƐŝĚĞƌŝŶŐ ďƵŝůĚŝŶŐ ƐLJƐƚĞŵƐ͘ϯϴ hŶĚĞƌ džĞĐƵƚŝǀĞ KƌĚĞƌ ϭϯϱϭϰ ƌĞƋƵŝƌĞƐ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ƚŽ ƌĞĚƵĐĞ ' ' ĞŵŝƐƐŝŽŶƐ ďLJ ϰϬ ƉĞƌĐĞŶƚ ĐŽŵƉĂƌĞĚ ƚŽ Ă ϮϬϬϴ ďĂƐĞůŝŶĞ ďLJ ϮϬϮϱ͘ ƚ ĂůƐŽ ƌĞƋƵŝƌĞƐ ĞĚĞƌĂů ĨĂĐŝůŝƚŝĞƐ ƚŽ ŵĞĞƚ Ă ϯϬ ƉĞƌĐĞŶƚ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐƚĂŶĚĂƌĚ ďLJ ϮϬϮϱ͕ϯϵ ĂŶĚ ĨĂĐŝůŝƚŝĞƐ ĐĂŶ ŵĞĞƚ ƚŚĞ ƐƚĂŶĚĂƌĚ ŝŶ ŽŶĞ ŽĨ ĨŽƵƌ ǁĂLJƐ ;ůŝƐƚĞĚ ŝŶ ƉƌŝŽƌŝƚLJ ŽƌĚĞƌͿ ϭͿ ŝŶƐƚĂůůŝŶŐ ĂŐĞŶĐLJͲĨƵŶĚĞĚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŽŶƐŝƚĞ Ăƚ ĞĚĞƌĂů ĨĂĐŝůŝƚŝĞƐ͖ ;ϮͿ ĐŽŶƚƌĂĐƚŝŶŐ ƚŚĞ ƉƵƌĐŚĂƐĞ ŽĨ ĞŶĞƌŐLJ͕ ǁŚŝĐŚ ŝŶĐůƵĚĞƐ ƚŚĞ ŝŶƐƚĂůůĂƚŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŽŶƐŝƚĞ ĂŶĚ ŽĨĨƐŝƚĞ Ăƚ Ă ĞĚĞƌĂů ĨĂĐŝůŝƚLJ͖ ;ϯͿ ƉƵƌĐŚĂƐŝŶŐ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ͕ ĂŶĚ ;ϰͿ ƉƵƌĐŚĂƐŝŶŐ ZĞŶĞǁĂďůĞ ůĞĐƚƌŝĐŝƚLJ ƌĞĚŝƚƐ͘ϰϬ ŝĨƚĞĞŶ ƉĞƌĐĞŶƚ ŽĨ ĞdžŝƐƚŝŶŐ ĂŐĞŶĐLJ ďƵŝůĚŝŶŐƐ ŵƵƐƚ ďĞ ŐƌĞĞŶ ďƵŝůĚŝŶŐƐ͕ ĞŝƚŚĞƌ ďLJ ŶƵŵďĞƌ Žƌ ƐƋƵĂƌĞ ĨŽŽƚĂŐĞ͘ϰϭ 2 2 3 1 Department of Defense is Single Largest Consumer of Electricity dŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ĞĨĞŶƐĞ ; K Ϳ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ůĂƌŐĞƐƚ ĞŶĞƌŐLJ ĐŽŶƐƵŵĞƌƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŝƐ ƚŚĞ ůĂƌŐĞƐƚ ĐƵƐƚŽŵĞƌ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ͕ϰϮ ĂŶĚ ƵƐĞƐ ŵŽƌĞ ƚŚĂŶ Ăůů ŽƚŚĞƌ ĂŐĞŶĐŝĞƐ ĐŽŵďŝŶĞĚ ; ŝŐƵƌĞ ϮͲϱͿ͘ K ƌĞƋƵŝƌĞƐ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ƐƵƉƉŽƌƚ ŝƚƐ ŵŝƐƐŝŽŶƐ ďŽƚŚ ĚŝƌĞĐƚůLJ ďLJ ĞŶĞƌŐŝnjŝŶŐ ƚŚĞ ĨĂĐŝůŝƚŝĞƐ ĂŶĚ ƐLJƐƚĞŵƐ ƚŚĂƚ ĨƵĞů ĨůĞĞƚƐ ŽĨ ƚƌƵĐŬƐ͕ ƚĂŶŬƐ͕ ĂŶĚ ƐŚŝƉƐ͕ ĂŶĚ ŝŶĚŝƌĞĐƚůLJ ďLJ ĞŶĞƌŐŝnjŝŶŐ ŽƚŚĞƌ ƐƵƉƉŽƌƚŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ƐƵĐŚ ĂƐ ƚŚĞ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƐLJƐƚĞŵƐ ƚŚĂƚ ĚĞůŝǀĞƌ ŝŶĨŽƌŵĂƚŝŽŶ ĂĐƌŽƐƐ ƚŚĞ ŐůŽďĞ͘ dŽ ĞŶƐƵƌĞ ŝƚ ĐĂŶ ƉĞƌĨŽƌŵ ŝƚƐ ŵŝƐƐŝŽŶ͕ K ŝŶǀĞƐƚƐ ŝŶ ŶƵŵĞƌŽƵƐ ĂĚǀĂŶĐĞĚ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ŝŶĐƌĞĂƐĞ ĞŶĞƌŐLJ ƐƵƉƉůLJ ƌĞƐŝůŝĞŶĐĞ ĂŶĚ ĨĂĐĞƐ ŵĂŶLJ ŽĨ ƚŚĞ ƐĂŵĞ ĐŚĂůůĞŶŐĞƐ ĂƐ ŽƚŚĞƌ ƉƵďůŝĐ ŝŶƐƚŝƚƵƚŝŽŶƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-5 Electricity Use by the U S Government and Department of Defense 1975201543 '2' XVHV PRUH HOHFWULFLW WKDQ WKH UHVW RI WKH 8 6 RYHUQPHQW FRPELQHG 7KLV UHODWLRQVKLS KDV UHPDLQHG UHODWLYHO VWHDG IRU WKH SDVW HDUV K ŚĂƐ ďĞĞŶ ĂŶ ĞĂƌůLJ ĂŶĚ ĂĐƚŝǀĞ ƵƐĞƌ ŽĨ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ƉĞƌĨŽƌŵĂŶĐĞ ĐŽŶƚƌĂĐƚƐ ƚŽ ŝŵƉůĞŵĞŶƚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽũĞĐƚƐ ƚŚĂƚ ƐĂǀĞ ŵŽŶĞLJ ĂŶĚ ƌĞĚƵĐĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ K ĂůƐŽ ƉƵƌƐƵĞƐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƚŽ ĂĚǀĂŶĐĞ ŝƚƐ ĞŶĞƌŐLJ ƌĞƐŝůŝĞŶĐĞ͘ ZŽƵŐŚůLJ Ϯ ƉĞƌĐĞŶƚ ŽĨ K ͛Ɛ ƚŽƚĂů ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ĐĂŵĞ ĨƌŽŵ ƌĞŶĞǁĂďůĞ ƐŽƵƌĐĞƐ ŝŶ ĨŝƐĐĂů LJĞĂƌ ϮϬϭϱ͘ KŶƐŝƚĞ ŽƉĞƌĂƚŝŽŶĂů ƉƌŽũĞĐƚƐ ;ŵŽƐƚůLJ ŐĞŽƚŚĞƌŵĂů͕ ďŝŽŵĂƐƐ͕ ĂŶĚ ŵƵŶŝĐŝƉĂů ƐŽůŝĚ ǁĂƐƚĞͿ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϴϮ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĞƉĂƌƚŵĞŶƚ͛Ɛ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐƵƉƉůLJ͕ ǁŚŝůĞ ƉƵƌĐŚĂƐĞĚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĐƌĞĚŝƚƐ ƌĞƉƌĞƐĞŶƚĞĚ ƚŚĞ ŽƚŚĞƌ ϭϴ ƉĞƌĐĞŶƚ͘ Ŷ ϮϬϭϱ͕ K ŚĂĚ ŽǀĞƌ ϭ͕ϯϵϬ ŽƉĞƌĂƚŝŽŶĂů ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ͕ ĐŽŵƉĂƌĞĚ ƚŽ ϭ͕ϭϯϬ ŝŶ ϮϬϭϰ͘ϰϰ 'ĞŽƚŚĞƌŵĂů ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŝƐ ďLJ ĨĂƌ ƚŚĞ ŵŽƐƚ ƐŝŐŶŝĨŝĐĂŶƚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐŽƵƌĐĞ ŝŶ K ͕ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ŽǀĞƌ ϰϭ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĞƉĂƌƚŵĞŶƚ͛Ɛ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŐĞŶĞƌĂƚŝŽŶ ƉŽƌƚĨŽůŝŽ͘ ŝŽŵĂƐƐ ŵĂŬĞƐ ƵƉ ĂďŽƵƚ ϭϵ ƉĞƌĐĞŶƚ͕ ǁŚŝůĞ ŵƵŶŝĐŝƉĂů ƐŽůŝĚ ǁĂƐƚĞ͕ ǁŚŝĐŚ ŝƐ ƵƐĞĚ ĨŽƌ ďŽƚŚ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ƐƚĞĂŵ ƉƌŽĚƵĐƚŝŽŶ͕ ĂĐĐŽƵŶƚƐ ĨŽƌ ϭϱ ƉĞƌĐĞŶƚ͘ dŚĞƌĞ ĂƌĞ ϴϭϬ ƐŽůĂƌ ƉŚŽƚŽǀŽůƚĂŝĐ ;WsͿ ƐLJƐƚĞŵƐ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ K ƐLJƐƚĞŵ ƚŚĂƚ ĐŽŶƚƌŝďƵƚĞ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϭϯ ƉĞƌĐĞŶƚ͘ Ŷ KĐƚŽďĞƌ ϮϬϭϲ͕ ƚŚĞ h͘ ͘ EĂǀLJ ĂŶĚ ĞŵƉƌĂ ŶĞƌŐLJ ŽƉĞŶĞĚ ƚŚĞ ϭϱϬͲDt DĞƐƋƵŝƚĞ ŽůĂƌ ϯ ƉƌŽũĞĐƚ ƚŽ ƐƵƉƉůLJ ĂƉƉƌŽdžŝŵĂƚĞůLJ ŽŶĞͲƚŚŝƌĚ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƌĞƋƵŝƌĞĚ ďLJ ϭϰ EĂǀLJ ĂŶĚ DĂƌŝŶĞ ŝŶƐƚĂůůĂƚŝŽŶƐͶƚŚĞ ůĂƌŐĞƐƚ ĞĚĞƌĂů ƉƵƌĐŚĂƐĞ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶ ŚŝƐƚŽƌLJ͘ϰϱ͕ ϰϲ K ŝƐ ĂůƐŽ ĞdžƉůŽƌŝŶŐ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ǁĂLJƐ ƚŽ ŝŶĐŽƌƉŽƌĂƚĞ ŵŝĐƌŽŐƌŝĚ ĂƉƉůŝĐĂƚŝŽŶƐ ƚŽ ƌĞĚƵĐĞ ĞŶĞƌŐLJ ĚĞŵĂŶĚ͕ ŝŶĐƌĞĂƐĞ ĞŶĞƌŐLJ ƐƵƌĞƚLJ͕ ĂŶĚ ƉƌŽǀŝĚĞ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ; 'Ϳ ĂŶĚ ƐƚŽƌĂŐĞ͘ ŵĂƌƚ WŽǁĞƌ ŶĨƌĂƐƚƌƵĐƚƵƌĞ ĞŵŽŶƐƚƌĂƚŝŽŶ ĨŽƌ ŶĞƌŐLJ ZĞůŝĂďŝůŝƚLJ ĂŶĚ ĞĐƵƌŝƚLJ ; W Z Ϳ ŽŝŶƚ ĂƉĂďŝůŝƚLJ dĞĐŚŶŽůŽŐLJ ĞŵŽŶƐƚƌĂƚŝŽŶ ; d Ϳ ŝƐ Ă ŐƌŽƵŶĚďƌĞĂŬŝŶŐ ƉƌŽŐƌĂŵ ĚĞƐŝŐŶĞĚ ƚŽ ďŽůƐƚĞƌ ƚŚĞ ĐLJďĞƌƐĞĐƵƌŝƚLJ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŽĨ h͘ ͘ ŵŝůŝƚĂƌLJ ŝŶƐƚĂůůĂƚŝŽŶƐ ĂŶĚ ƚƌĂŶƐĨĞƌ ƚŚĞ ŬŶŽǁŚŽǁ ƚŽ ŶŽŶͲŵŝůŝƚĂƌLJ ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ϰϳ K ůĂƵŶĐŚĞĚ ƚŚĞ W Z d ƉƌŽŐƌĂŵ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ŐƌŽǁŝŶŐ ĐŽŶĐĞƌŶ ĂďŽƵƚ ƚŚĞ ŵŝůŝƚĂƌLJ͛Ɛ ĞŶĞƌŐLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͛Ɛ ǀƵůŶĞƌĂďŝůŝƚLJ ƚŽ ŶĂƚƵƌĂů ĚŝƐĂƐƚĞƌƐ ĂŶĚ ĐŽŵƉƵƚĞƌͲďŽƌŶĞ ĐLJďĞƌ ĂƚƚĂĐŬƐ͕ ǁŚŝĐŚ ĐŽƵůĚ ŝŵƉĂĐƚ ƚŚĞ ŐƌŝĚ͘ 2 2 4 Municipalities Universities Schools and Hospitals WƵďůŝĐ ĂŶĚ ŝŶƐƚŝƚƵƚŝŽŶĂů ĐŽŶƐƵŵĞƌƐ͕ ƐƵĐŚ ĂƐ ŵƵŶŝĐŝƉĂůŝƚŝĞƐ͕ ƵŶŝǀĞƌƐŝƚŝĞƐ͕ ƐĐŚŽŽůƐ͕ ĂŶĚ ŚŽƐƉŝƚĂůƐ͕ ŽĨƚĞŶ ĐĂůůĞĚ ƚŚĞ Dh ŵĂƌŬĞƚ͕ ĂƌĞ ĂŶŽƚŚĞƌ ŐƌŽǁŝŶŐ ĐĂƚĞŐŽƌLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐƵƐƚŽŵĞƌƐ͘ dŚĞƐĞ ĐƵƐƚŽŵĞƌƐ͕ ĞƐƉĞĐŝĂůůLJ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ĐŝƚŝĞƐ͕ ĂƌĞ ĐŽŶƐŝĚĞƌĞĚ ƚŽ ďĞ ĞŶŐŝŶĞƐ ŽĨ ĞĐŽŶŽŵŝĐ ŐƌŽǁƚŚ ĂƐ ƚŚĞLJ ƐƵƉƉŽƌƚ ůĂƌŐĞ͕ ĐŽŶĐĞŶƚƌĂƚĞĚ ƉŽƉƵůĂƚŝŽŶƐ ǁŝƚŚ ĐŽŵƉůĞdž ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ƐƉĞĐŝĨŝĐ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŶĞĞĚƐ͘ϰϴ tŚŝůĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŶĞĞĚƐ ŽĨ ƚŚĞƐĞ ĐŽŶƐƵŵĞƌƐ ĂƌĞ ǀŝƚĂů ƚŽ ĞĐŽŶŽŵŝĐ ƉƌŽƐƉĞƌŝƚLJ ĂŶĚ ƐĞĐƵƌŝƚLJ͕ ƚŚĞ Dh ŵĂƌŬĞƚ ŽĨƚĞŶ ĨĂĐĞƐ ĐŽŶƐƚƌĂŝŶĞĚ ŵĂŝŶƚĞŶĂŶĐĞ ďƵĚŐĞƚƐ ĂŶĚ ůŝŵŝƚĞĚ ĂĐĐĞƐƐ ƚŽ ĐĂƉŝƚĂů͖ ƉƵďůŝĐ ĞŶƚŝƚŝĞƐ ĂƌĞ ĂůƐŽ ŶŽƚ ĞůŝŐŝďůĞ ĨŽƌ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĂdž ĐƌĞĚŝƚƐ ƚŚĂƚ ĞŶƚŝƚŝĞƐ ǁŝƚŚ ƚĂdž ůŝĂďŝůŝƚLJ ĐĂŶ ƵƐĞ ƚŽ ĂƉƉůLJ ƚŽǁĂƌĚ ĐĞƌƚĂŝŶ ƉƌŽũĞĐƚƐ͘ Ɛ Ă ƌĞƐƵůƚ͕ ƚŚĞƐĞ ĐƵƐƚŽŵĞƌƐ ƚĂŬĞ ĐƌĞĂƚŝǀĞ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ŵĞĞƚ Ăůů ƚŚĞŝƌ ŶĞĞĚƐ͕ ǁŚŝůĞ ĂĐƚŝŶŐ ĂƐ ƚŚĞ ůŽĐƵƐ ŽĨ ŝŶŶŽǀĂƚŝŽŶ ŝŶ ĂŶ ĂƌƌĂLJ ŽĨ ƐĞĐƚŽƌƐ ƚŚĂƚ ĚƌŝǀĞ ƚĞĐŚŶŽůŽŐŝĐĂů ĐŚĂŶŐĞ͕ ŝŶĐůƵĚŝŶŐ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ĚĞĨĞŶƐĞ͕ ĂŶĚ ƉƵďůŝĐ ŚĞĂůƚŚ͘ dŚĞ ĞůĞĐƚƌŝĐŝƚLJ ďŝůů ĨŽƌ Ă ŵƵŶŝĐŝƉĂů ŐŽǀĞƌŶŵĞŶƚ ĐŽǀĞƌƐ ĞůĞĐƚƌŝĐŝƚLJ ĨŽƌ ŽƉĞƌĂƚŝŶŐ ŵƵŶŝĐŝƉĂů ďƵŝůĚŝŶŐƐ͕ ĂŶĚ ƉƌŽǀŝĚŝŶŐ ƉƵďůŝĐ ƐĞƌǀŝĐĞƐ ůŝŬĞ ǁĂƚĞƌ ƚƌĞĂƚŵĞŶƚ͕ ƐƚƌĞĞƚ ůŝŐŚƚƐ͕ ĂŶĚ ƚƌĂĨĨŝĐ ƐŝŐŶĂůƐ͘ϰϵ EĞǁ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ĐĂŶ ƐĂǀĞ ĞŶĞƌŐLJ ĂŶĚ ƌĞĚƵĐĞ ĐĂƌďŽŶ ƉŽůůƵƚŝŽŶ͕ ĂŶĚ ƌĞƚƌŽĨŝƚƚĞĚ ďƵŝůĚŝŶŐƐ ƉƌŽǀŝĚĞ ŚĞĂůƚŚŝĞƌ ĂŶĚ ŵŽƌĞ ƉƌŽĚƵĐƚŝǀĞ ǁŽƌŬƉůĂĐĞƐ͘ϱϬ dŽ ƌĞĚƵĐĞ ƉŽůůƵƚŝŽŶ ĂŶĚ ƐĂǀĞ ƚĂdž ĚŽůůĂƌƐ͕ ŵƵŶŝĐŝƉĂů ĂŶĚ ƚƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ ŚĂǀĞ ĂĚŽƉƚĞĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ͕ ĞŶƚĞƌĞĚ ŝŶƚŽ ĂŐƌĞĞŵĞŶƚƐ ƚŽ ƉƵƌĐŚĂƐĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ͕ ĂŶĚ ŝŶƐƚĂůůĞĚ ƚŚĞŝƌ ŽǁŶ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐŽƵƌĐĞƐ͘ dŚĞ ϯϬ ƚŽƉ ŵƵŶŝĐŝƉĂů ĂŶĚ ƚƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ ŝŶ ƚŚĞ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJ͛Ɛ ; W ͛ƐͿ 'ƌĞĞŶ WŽǁĞƌ WĂƌƚŶĞƌƐŚŝƉ ;Ă ǀŽůƵŶƚĂƌLJ ƉƌŽŐƌĂŵ ƚŚĂƚ ĞŶĐŽƵƌĂŐĞƐ ŽƌŐĂŶŝnjĂƚŝŽŶƐ ƚŽ ƵƐĞ ĐůĞĂŶ ĞŶĞƌŐLJͿ ƵƐĞĚ ϯ͘ϵ ďŝůůŝŽŶ ŬtŚ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ ĂŶŶƵĂůůLJ͕ ƌŽƵŐŚůLJ ĞƋƵŝǀĂůĞŶƚ ƚŽ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŽĨ ϯϲϬ͕ϬϬϬ ĂǀĞƌĂŐĞ ŵĞƌŝĐĂŶ ŚŽŵĞƐ͘ϱϭ dŚĞ ŝƚLJ ŽĨ ŽƵƐƚŽŶ͕ dĞdžĂƐ͕ ǁĂƐ ŶƵŵďĞƌ ŽŶĞ ŽŶ ƚŚĞ ůŝƐƚ͕ ǁŝƚŚ ϵϱϭ͕ϳϵϵ͕ϯϳϱ ŬtŚ ŝŶ ƐŽůĂƌ ĂŶĚ ǁŝŶĚ ĞŶĞƌŐLJ ƉƵƌĐŚĂƐĞĚ ĨƌŽŵ ZĞůŝĂŶƚ ŶĞƌŐLJ ĂŶĚ ŐĞŶĞƌĂƚĞĚ ŽŶƐŝƚĞ͕ ĞƋƵŝǀĂůĞŶƚ ƚŽ ϴϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĐŝƚLJ ŐŽǀĞƌŶŵĞŶƚ͛Ɛ ƚŽƚĂů ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ͘ϱϮ dŚĞ ŝƚLJ ŽĨ ĞƚƌŽŝƚ ŝƐ ƌĞƉůĂĐŝŶŐ ǁĂƐƚĞĨƵů͕ ŚŝŐŚͲƉƌĞƐƐƵƌĞ ƐŽĚŝƵŵ ƐƚƌĞĞƚůŝŐŚƚƐ͕ ĂďŽƵƚ ŚĂůĨ ŽĨ ǁŚŝĐŚ ĂƌĞ ŶŽ ůŽŶŐĞƌ ǁŽƌŬŝŶŐ͕ ǁŝƚŚ ŵŽĚĞƌŶ ůŝŐŚƚͲĞŵŝƚƚŝŶŐ ĚŝŽĚĞ ; Ϳ ƐƚƌĞĞƚ ůŝŐŚƚŝŶŐ ƚŚĂƚ ǁŝůů ƐĂǀĞ ĞŶĞƌŐLJ ĐŽƐƚƐ ĂŶĚ ŝŵƉƌŽǀĞ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƐĞĐƵƌŝƚLJ͘ϱϯ͕ ϱϰ KƚŚĞƌ ĐŝƚŝĞƐ ŚĂǀĞ ĚĞǀĞůŽƉĞĚ ǁĂƐƚĞͲƚŽͲĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ ƚŽ ĚŝƐƉŽƐĞ ŽĨ ŵƵŶŝĐŝƉĂů ǁĂƐƚĞ ǁŚŝůĞ ĂůƐŽ ƉƌŽĚƵĐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ Žƌ ƐƚĞĂŵ ĨŽƌ ŚĞĂƚŝŶŐ ďƵŝůĚŝŶŐƐ͘ Ɛ ŽĨ ϮϬϭϯ͕ ƚŚĞƌĞ ǁĞƌĞ ϴϬ ǁĂƐƚĞͲƚŽͲĞŶĞƌŐLJ ƉůĂŶƚƐ ƚŚĂƚ ĚŝƐƉŽƐĞĚ ŽĨ ϭϮ͘ϵ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ EĂƚŝŽŶ͛Ɛ ŵƵŶŝĐŝƉĂů ǁĂƐƚĞ ǁŚŝůĞ ƉƌŽĚƵĐŝŶŐ ϭϰ ďŝůůŝŽŶ ŬtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ͕ ƌŽƵŐŚůLJ ƚŚĞ ƐĂŵĞ ĂŵŽƵŶƚ ƵƐĞĚ ďLJ ϭ͘ϯ ŵŝůůŝŽŶ h͘ ͘ ŚŽƵƐĞŚŽůĚƐ͘ϱϱ hƉĚĂƚĞĚ͕ ŶĞƚǁŽƌŬĞĚ ƐƚƌĞĞƚůŝŐŚƚƐ ĐĂŶ ĂůƐŽ ƉƌŽǀŝĚĞ ŽƚŚĞƌ ďĞŶĞĨŝƚƐ ƚŽ ĐŝƚLJ ŐŽǀĞƌŶŵĞŶƚƐ͕ ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ͘ EĞƚǁŽƌŬĞĚ ƐLJƐƚĞŵƐ ǁŝƚŚ ǁŝƌĞůĞƐƐ ŝŶƚĞƌŶĞƚ ĂŶĚ ƐĞŶƐŽƌƐ ĐĂŶ ĂůĞƌƚ ŵĂŶĂŐĞŵĞŶƚ ǁŚĞŶ ĂŶ ŽƵƚĂŐĞ ŽĐĐƵƌƐ͕ ŵŽŶŝƚŽƌ ƚƌĂĨĨŝĐ Žƌ Ăŝƌ ƋƵĂůŝƚLJ͕ ĂŶĚ ƉƵďůŝĐŝnjĞ ƚŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ƉĂƌŬŝŶŐ ƐƉĂĐĞƐ͘ϱϲ ' ͛Ɛ ŶĞǁ ƐŵĂƌƚ ƐƚƌĞĞƚůŝŐŚƚƐ ǁŝůů ĐŽŵďŝŶĞ ůŝŐŚƚŝŶŐ ǁŝƚŚ ĂĐŽƵƐƚŝĐ ƐĞŶƐŽƌƐ ƚŽ ĚĞƚĞĐƚ ĂŶĚ ůŽĐĂƚĞ ŐƵŶĨŝƌĞ ĂŶĚ ĂƵƚŽŵĂƚŝĐĂůůLJ ŶŽƚŝĨLJ ƉŽůŝĐĞ͘ϱϳ ĚǀĂŶĐĞŵĞŶƚƐ ŝŶ d ĂƌĞ ĞŶĂďůŝŶŐ ŝŵƉƌŽǀĞŵĞŶƚƐ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ŝŶĐůƵĚŝŶŐ ŚŽǁ ĐŝƚLJ ŐŽǀĞƌŶŵĞŶƚƐ ƵƐĞ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ƉƌŽǀŝĚĞ ƉƵďůŝĐ ƐĞƌǀŝĐĞƐ͘ dŚĞ ŵĂƌƚ ŝƚŝĞƐ ŶŝƚŝĂƚŝǀĞ͕ Ă ΨϭϲϬ ŵŝůůŝŽŶ ƉƌŽŐƌĂŵ ĨŽƌ ƚĞĐŚŶŽůŽŐLJ Ăƚ ƚŚĞ ůŽĐĂů ůĞǀĞů͕ ŚĂƐ ŝŵƉƌŽǀĞĚ ƚŚĞ ĐŽůůĞĐƚŝŽŶ͕ ĂŐŐƌĞŐĂƚŝŽŶ͕ ĂŶĚ ƵƐĞ ŽĨ ĚĂƚĂ͕ ĂůůŽǁŝŶŐ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ƚŽ ďĞƚƚĞƌ ĚĞůŝǀĞƌ ƉƵďůŝĐ ƐĞƌǀŝĐĞƐ͘ϱϴ dŚƌŽƵŐŚ ƚŚĞ ŝŶŝƚŝĂƚŝǀĞ͕ ŵŽƌĞ ƚŚĂŶ ϮϬ ĐŝƚŝĞƐ ĂƌĞ ƉĂƌƚŶĞƌŝŶŐ ǁŝƚŚ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ͕ ƵŶŝǀĞƌƐŝƚŝĞƐ͕ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ĐŽŵƉĂŶŝĞƐ ŝŶ ƌĞƐĞĂƌĐŚ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ƉƌŽũĞĐƚƐ ŝŶǀŽůǀŝŶŐ ƐŵĂƌƚ ĞŶĞƌŐLJ ĚĞǀŝĐĞƐ͕ ƚŚĞ ŶƚĞƌŶĞƚ ŽĨ dŚŝŶŐƐ ; ŽdͿ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐŽůƵƚŝŽŶƐ͕ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͘ϱϵ Žƌ ĞdžĂŵƉůĞ͕ ŽŶĞ ƌĞƐĞĂƌĐŚ ĂǁĂƌĚ ǁŝůů ƐƵƉƉŽƌƚ ƌĞƐĞĂƌĐŚ ŝŶƚŽ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ƐĞůĨͲ ĚƌŝǀŝŶŐ ĐĂƌƐ ĂŶĚ ƐŵĂƌƚ ďƵŝůĚŝŶŐƐ͕ ǁŚŝůĞ ĂŶŽƚŚĞƌ ǁŝůů ŝŶǀĞƐƚŝŐĂƚĞ ŶŽǀĞů ĂƉƉƌŽĂĐŚĞƐ ƚŽ ŝŶƚĞŐƌĂƚŝŶŐ ĚŝƐƚƌŝďƵƚĞĚ ƉŽǁĞƌ ƐŽƵƌĐĞƐ ĂŶĚ ďĂƚƚĞƌLJ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞ͘ϲϬ 2 2 4 1 Municipal Water Efficiency Opportunities ŽŶǀĞLJĂŶĐĞ͕ ŝŶŝƚŝĂů ƚƌĞĂƚŵĞŶƚ͕ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ĂŶĚ ǁĂƐƚĞǁĂƚĞƌ ƚƌĞĂƚŵĞŶƚ Ăůů ƌĞƋƵŝƌĞ ĞŶĞƌŐLJ ŝŶƉƵƚ͕ ĂŶĚ ƐŽŵĞ ŚĂǀĞ ƉŽƚĞŶƚŝĂů ĞŶĞƌŐLJ ŽƵƚƉƵƚƐ ;ƐƵĐŚ ĂƐ ĞŶĞƌŐLJ ĨƌŽŵ ǁĂƐƚĞǁĂƚĞƌ ďŝŽͲƐŽůŝĚƐͿ͘ϲϭ dŚĞ ŶĂƚŝŽŶĂů ĞŶĞƌŐLJ ĚĞŵĂŶĚ ĨŽƌ ĚƌŝŶŬŝŶŐ ǁĂƚĞƌ ĂŶĚ ǁĂƐƚĞǁĂƚĞƌ ƚƌĞĂƚŵĞŶƚ ŝŶĐƌĞĂƐĞĚ ďLJ ŵŽƌĞ ƚŚĂŶ ϯϬ ƉĞƌĐĞŶƚ ďĞƚǁĞĞŶ ϭϵϵϲ ĂŶĚ ϮϬϭϯ͘ϲϮ dŚŝƐ ŝŶĐƌĞĂƐĞ ŝƐ ƉƌŝŵĂƌŝůLJ ĚƵĞ ƚŽ ƉŽƉƵůĂƚŝŽŶ ŐƌŽǁƚŚ ;ĂďŽƵƚ ϭϳ ƉĞƌĐĞŶƚͿ ĂŶĚ ŵŽƌĞ ƐƚƌŝŶŐĞŶƚ ǁĂƚĞƌ ƋƵĂůŝƚLJ ƌĞŐƵůĂƚŝŽŶƐ͕ ƐƵĐŚ ĂƐ ƚŚĞ ĂĨĞ ƌŝŶŬŝŶŐ tĂƚĞƌ Đƚ͘ϲϯ͕ ϲϰ͕ ϲϱ͕ ϲϲ Žƌ Ă ƚLJƉŝĐĂů ǁĂƚĞƌ ƌĞƐŽƵƌĐĞͲƌĞĐŽǀĞƌLJ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĨĂĐŝůŝƚLJ͕ ĞůĞĐƚƌŝĐŝƚLJ ĂĐĐŽƵŶƚƐ ĨŽƌ ŶĞĂƌůLJ Ϯϯ ƉĞƌĐĞŶƚ ŽĨ ŝƚƐ ŽƉĞƌĂƚŝŶŐ ĐŽƐƚƐ͘ϲϳ dƌĞĂƚŵĞŶƚ ĨĂĐŝůŝƚŝĞƐ͕ ŚŽǁĞǀĞƌ͕ ŚĂǀĞ ŶƵŵĞƌŽƵƐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ďĞĐŽŵĞ ŶĞƚ ƉƌŽĚƵĐĞƌƐ ŽĨ ĞŶĞƌŐLJ͘ϲϴ DƵŶŝĐŝƉĂů ǁĂƐƚĞǁĂƚĞƌ ĐŽŶƚĂŝŶƐ ĨŝǀĞ ƚŽ ƚĞŶ ƚŝŵĞƐ ĂƐ ŵƵĐŚ ĐŚĞŵŝĐĂů ĂŶĚ ƚŚĞƌŵĂů ĞŶĞƌŐLJ ĂƐ ƚŚĞ ůĂǁ ĐƵƌƌĞŶƚůLJ ƌĞƋƵŝƌĞƐ ĨŽƌ ǁĂƚĞƌ ƚƌĞĂƚŵĞŶƚ ƚŽ ŵĞĞƚ ĚŝƐĐŚĂƌŐĞ ƐƚĂŶĚĂƌĚƐ͘ϲϵ͕ ϳϬ͕ ϳϭ dŚĞƌĞ ĂƌĞ Ă ŶƵŵďĞƌ ŽĨ ǁĂLJƐ ƚŽ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŝŵƉƌŽǀĞ ƚŚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ĞůĞĐƚƌŝĐ ǁĂƚĞƌ ƉƵŵƉƐ ƵƐĞĚ ŝŶ ŵƵŶŝĐŝƉĂů ƐLJƐƚĞŵƐ ƚŚƌŽƵŐŚ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ͘ dŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ ; K Ϳ ŚĂƐ ƌĞŐƵůĂƚŽƌLJ ĂƵƚŚŽƌŝƚLJ ŽǀĞƌ ƉƵŵƉƐ͕ ŝŶĐůƵĚŝŶŐ ǁĂƚĞƌ ƉƵŵƉƐ͘ ŶĚ ŝŶ ϮϬϭϲ͕ K ƐĞƚ ŵŝŶŝŵƵŵ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ĐĞƌƚĂŝŶ ĐĂƚĞŐŽƌŝĞƐ ŽĨ ǁĂƚĞƌ ƉƵŵƉƐ ĂŶĚ ƚŚĞ ĂĚŽƉƚŝŽŶ ŽĨ ǀĂƌŝĂďůĞ ƐƉĞĞĚ ĚƌŝǀĞƐ͖ K ƌĞƋƵŝƌĞĚ ĐŽŵƉůŝĂŶĐĞ ƐƚĂƌƚŝŶŐ ŝŶ ϮϬϮϬ͘Ś DŽƌĞŽǀĞƌ͕ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ĐŽŵƉůŝĂŶĐĞ ǁŝƚŚ ƚŚĞƐĞ ƐƚĂŶĚĂƌĚƐ ĐŽƵůĚ ŚĂǀĞ ƚŚĞ ĂŶĐŝůůĂƌLJ ďĞŶĞĨŝƚ ŽĨ ĞŶŚĂŶĐĞĚ ĚĂƚĂ ĐŽůůĞĐƚŝŽŶ ŽŶ ĞŶĞƌŐLJ ƵƐĞ ďLJ ƉƵŵƉƐ͘ϳϮ KƚŚĞƌ ŵĂŶĂŐĞŵĞŶƚ ƚĞĐŚŶŝƋƵĞƐ ƚŽ ƌĞĚƵĐĞ ƉƵŵƉƐ͛ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ĂƌĞ ĂůƐŽ ŽŶ ƚŚĞ ƌŝƐĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ďĞĐĂƵƐĞ ǁĂƚĞƌ ƉƵŵƉƐ ƵƐĞĚ ĨŽƌ ŝƌƌŝŐĂƚŝŽŶ ĂŶĚ ŵƵŶŝĐŝƉĂů ǁĂƚĞƌ ƐLJƐƚĞŵƐ ĐĂŶ ďĞ ƚĞŵƉŽƌĂƌŝůLJ ƚƵƌŶĞĚ ŽĨĨ ƚŽ ƌĞĚƵĐĞ ůŽĂĚ ĚƵƌŝŶŐ ƉĞƌŝŽĚƐ ŽĨ ƉĞĂŬ ĚĞŵĂŶĚ͕ Ă ŶƵŵďĞƌ ŽĨ ƵƚŝůŝƚŝĞƐ ĂůƌĞĂĚLJ ŽĨĨĞƌ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ŽƉĞƌĂƚŽƌƐ ƚŽ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ Z ƉƌŽŐƌĂŵƐ͘ 2 2 5 Residential Consumers dŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ ĂĐĐŽƵŶƚƐ ĨŽƌ ĂďŽƵƚ ϯϴ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ ŝŶŐůĞͲĨĂŵŝůLJ ĚĞƚĂĐŚĞĚ ŚŽŵĞƐ ĐŽŶƐƵŵĞ ƚŚĞ ŵĂũŽƌŝƚLJͶϳϰ ƉĞƌĐĞŶƚͶŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂĐƌŽƐƐ ƚŚĞ EĂƚŝŽŶ͛Ɛ ƚŽƚĂů ƐƚŽĐŬ ŽĨ ϭϭϯ͘ϲ ŵŝůůŝŽŶ ƌĞƐŝĚĞŶĐĞƐ͘ tŚŝůĞ ƌĞƐŝĚĞŶƚŝĂů ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶĐƌĞĂƐĞĚ ďĞƚǁĞĞŶ ϭϵϵϬ ĂŶĚ ϮϬϬϲ͕ ŝŶ ŵŽƌĞ ƌĞĐĞŶƚ LJĞĂƌƐ͕ ƚŚĞƌĞ ŚĂƐ ďĞĞŶ ůŝƚƚůĞ͕ Žƌ ĞǀĞŶ ŶĞŐĂƚŝǀĞ͕ ĂŶŶƵĂů ĞůĞĐƚƌŝĐŝƚLJͲĐŽŶƐƵŵƉƚŝŽŶ ŐƌŽǁƚŚ ŝŶ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ͘ ŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶƚĞŶƐŝƚLJ ;ŵĞŐĂǁĂƚƚ ŚŽƵƌƐ ΀DtŚ΁ͬŚŽƵƐĞŚŽůĚͿ ŽĨ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ͕ ůĂƌŐĞůLJ ĂƚƚƌŝďƵƚĞĚ ƚŽ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ŵŽƐƚ ĞŶĚ ƵƐĞƐ͕ ŚĂǀĞ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƚŚŝƐ ƌĞĐĞŶƚ ůŽǁ ŐƌŽǁƚŚ͘ dŚĞ ŶƵŵďĞƌ ŽĨ h͘ ͘ ŚŽƵƐĞŚŽůĚƐ ŚĂƐ ďĞĞŶ ŝŶĐƌĞĂƐŝŶŐ͕ ĂŶĚ ƚŚŝƐ ŐƌŽǁƚŚ ŝŶ ŶƵŵďĞƌ ŽĨ ŚŽƵƐĞŚŽůĚƐ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ĐŽŶƚŝŶƵĞ͘ WĞƌ ŚŽƵƐĞŚŽůĚ͕ ŚŽǁĞǀĞƌ͕ ϮϬϰϬ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĂŐĞ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ďĞ ůŽǁĞƌ ƚŚĂŶ ϮϬϭϯͶϭϬ ƉĞƌĐĞŶƚ ůŽǁĞƌ ƉĞƌ ŚŽƵƐĞŚŽůĚ͕ ϴ ƉĞƌĐĞŶƚ ůŽǁĞƌ ƉĞƌ ĐĂƉŝƚĂ͕ ĂŶĚ ϭϴ ƉĞƌĐĞŶƚ ůŽǁĞƌ ƉĞƌ ƐƋƵĂƌĞ ĨŽŽƚ͘ ŽŶƚŝŶƵĞĚ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ŽƚŚĞƌ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ůŝŬĞ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƐƚŽƌĂŐĞ͕ ĂƌĞ ůŝŬĞůLJ ƚŽ ĂĐĐĞůĞƌĂƚĞ ŝŶ ŶĞǁ ĂŶĚ ĞdžŝƐƚŝŶŐ ŚŽŵĞƐ ĂŶĚ ĂĐƌŽƐƐ ĂƉƉůŝĂŶĐĞƐ͕ ůŝŐŚƚŝŶŐ͕ ǁĂƚĞƌ ŚĞĂƚŝŶŐ͕ ŚĞĂƚŝŶŐ ĂŶĚ ĐŽŽůŝŶŐ ĞƋƵŝƉŵĞŶƚ͕ ĂŶĚ ĞůĞĐƚƌŽŶŝĐƐ͕ ƉƵƚƚŝŶŐ ĚŽǁŶǁĂƌĚ ƉƌĞƐƐƵƌĞ ŽŶ ůŽĂĚ ŐƌŽǁƚŚ͘ Z Ğ Ŷ Ğ ǁ Ă ď ů Ğ Ğ Ŷ Ğ ƌ Ő LJ Ă Ŷ Ě ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ŝŵƉůĞŵĞŶƚĞĚ ďLJ ƵƚŝůŝƚŝĞƐ ĂŶĚ ĞĚĞƌĂů͕ ƐƚĂƚĞ͕ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ŚĂǀĞ ƉůĂLJĞĚ ĂŶ ŝŵƉŽƌƚĂŶƚ ƌŽůĞ ŝŶ ĞŶĂďůŝŶŐ ƚŚĞƐĞ ƚƌĞŶĚƐ͘ 2 2 5 1 Energy Management through DR Automation and Smart Homes ŝŶĐĞ ƚŚĞ ϭϵϴϬƐ͕ Ă ŶƵŵďĞƌ ŽĨ ƵƚŝůŝƚŝĞƐ ŚĂǀĞ ŽƉĞƌĂƚĞĚ ƌĞƚĂŝů Z ƉƌŽŐƌĂŵƐ ƵƐŝŶŐ ƌĂĚŝŽ͕ ƉŽǁĞƌůŝŶĞ ĐĂƌƌŝĞƌ͕ ĂŶĚ ŶŽǁ ĂůƐŽ ƚŚƌŽƵŐŚ ƐŵĂƌƚ ŵĞƚĞƌͲĞŶĂďůĞĚ͕ ƵƚŝůŝƚLJͲƐƵƉƉůŝĞĚ͕ ĐĞŶƚƌĂů ĂŝƌͲĐŽŶĚŝƚŝŽŶĞƌ ĂŶĚ ĞůĞĐƚƌŝĐ ǁĂƚĞƌͲ ŚĞĂƚĞƌ ƐǁŝƚĐŚĞƐ͘ ŽƚŚ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƉƌŝǀĂƚĞ ĐŽŵƉĂŶŝĞƐ ŶŽǁ ĂŐŐƌĞŐĂƚĞ ƌĞƐŝĚĞŶƚŝĂů ůŽĂĚƐ ŝŶ ƌĞƚĂŝů ĂŶĚ ǁŚŽůĞƐĂůĞ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚƐ͘ tŚŝůĞ ŐƌŽǁŝŶŐ͕ ƚŚĞ ǁŝĚĞƐƉƌĞĂĚ ĂŶĚ ĚĞĞƉ ƵƐĞ ŽĨ ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌ ůŽĂĚƐ ĂƐ ƉĂƌƚ ŽĨ ĞůĞĐƚƌŝĐ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ ŝƐ Ɛƚŝůů ƌĞůĂƚŝǀĞůLJ ŶĂƐĐĞŶƚ ŝŶ ƌĞůĂƚŝŽŶ ƚŽ ŝƚƐ ƉŽƚĞŶƚŝĂů͘ ƵƌƌĞŶƚůLJ͕ ŵŽƐƚ ƌĞƐŝĚĞŶƚŝĂů ďƵŝůĚŝŶŐƐ ĂƌĞ ĞƋƵŝƉƉĞĚ ƚŽ ĂƵƚŽŵĂƚĞ ŽŶůLJ Ă ƐŵĂůů ŶƵŵďĞƌ ŽĨ ƚĂƐŬƐ ƐŝŶĐĞ ĂĨĨŽƌĚĂďůĞ ĂƵƚŽŵĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ͕ ǁŝƚŚ ƐŽŵĞ ĞdžĐĞƉƚŝŽŶƐ͕ ŝƐ ŶŽƚ ĐŽŵŵĞƌĐŝĂůůLJ ĂǀĂŝůĂďůĞ Žƌ ǁŝĚĞůLJ ƵƐĞĚ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƐŵĂƌƚ ŵĞƚĞƌƐ͕ Ă ŬĞLJ ĞŶĂďůĞƌ ŽĨ ƐƵĐŚ ĂĐƚŝǀŝƚŝĞƐ͕ ŚĂǀĞ ďĞĞŶ ƌĞĐĞŶƚůLJ ǁŝĚĞůLJ ĚĞƉůŽLJĞĚ ĂŶĚ ĂƌĞ ŽŶůLJ Ăƚ ĂŶ ĞĂƌůLJ ƐƚĂŐĞ ŽĨ ĚĞǀĞůŽƉŵĞŶƚ ĨŽƌ ĐŽŶƐƵŵĞƌ ĂŶĚ ŶŽƚ ŽŶůLJ ƵƚŝůŝƚLJ ƵƐĞƐ͘ Ś ϭϬ ͘ ͘Z͘ ϰϮϵ͕ ϭϬ ͘ ͘Z͘ ϰϯϭ͘ dŚĞ ŶĞƌŐLJ WŽůŝĐLJ ĂŶĚ ŽŶƐĞƌǀĂƚŝŽŶ Đƚ ŽĨ ϭϵϳϱ͕ ĂƐ ĂŵĞŶĚĞĚ͕ ƐĞƚƐ ĨŽƌƚŚ Ă ǀĂƌŝĞƚLJ ŽĨ ƉƌŽǀŝƐŝŽŶƐ ĚĞƐŝŐŶĞĚ ƚŽ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ WĂƌƚ ŽĨ dŝƚůĞ ĞƐƚĂďůŝƐŚĞƐ ƚŚĞ ͞ ŶĞƌŐLJ ŽŶƐĞƌǀĂƚŝŽŶ WƌŽŐƌĂŵ ĨŽƌ ĞƌƚĂŝŶ 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ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ƚŚĂƚ ƌĞĚƵĐĞ ŽǀĞƌĂůů ĐŽŶƐƵŵƉƚŝŽŶ ŵĂLJ ƐŝŵŝůĂƌůLJ ƌĞĚƵĐĞ ĨƵŶĚŝŶŐ ĨŽƌ ĂƐƐŝƐƚĂŶĐĞ ƉƌŽŐƌĂŵƐ͘ ZĞǀĞŶƵĞ ĚĞĐŽƵƉůŝŶŐ ĐĂŶ ƉƌĞǀĞŶƚ ƚŚĞ ƵŶĚĞƌĨƵŶĚŝŶŐ ŽĨ ƚŚĞƐĞ ƉƌŽŐƌĂŵƐ͕ ďƵƚ ŶŽƚ ƚŚĞ ƐŚŝĨƚ ŽĨ ƚŚĞŝƌ ĐŽƐƚƐ ĂŵŽŶŐ ĐŽŶƐƵŵĞƌƐ͘ 2 2 5 6 Access to Distributed Energy Resources and New Energy Services for All Consumers ŽǁͲŝŶĐŽŵĞ ĐŽŵŵƵŶŝƚŝĞƐ ŽĨƚĞŶ ƐƚĂŶĚ ƚŽ ďĞŶĞĨŝƚ ĨƌŽŵ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ŵŽƌĞ ƚŚĂŶ ŽƚŚĞƌ ĐŽŵŵƵŶŝƚŝĞƐ ďĞĐĂƵƐĞ ƚŚĞƐĞ ƌĞƐŝĚĞŶƚƐ ŚĂǀĞ ŚŝŐŚĞƌ ĞŶĞƌŐLJ ďƵƌĚĞŶƐ ĂŶĚ ŽĨƚĞŶ ďĞĂƌ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞ ŝŵƉĂĐƚƐ ŽĨ ƉŽůůƵƚŝŽŶϭϬϳ ĂŶĚ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ϭϬϴ ƵƌƌĞŶƚ ŵŽĚĞƐ ŽĨ ƉƌŽŵŽƚŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ͕ ŚŽǁĞǀĞƌ͕ ĂƌĞ ŶŽƚ ĂůǁĂLJƐ ĚĞƐŝŐŶĞĚ ƚŽ ďĞŶĞĨŝƚ ůŽǁͲŝŶĐŽŵĞ ĐŽŵŵƵŶŝƚŝĞƐ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ŚĂǀŝŶŐ ůĞƐƐ ĞŶĞƌŐLJͲĞĨĨŝĐŝĞŶƚ ŚŽŵĞƐ ŽŶ ĂǀĞƌĂŐĞ͕ ŝƚ ŝƐ ŵƵĐŚ ŵŽƌĞ ĞdžƉĞŶƐŝǀĞ ĨŽƌ ƵƚŝůŝƚŝĞƐ ƚŽ ƉƌŽǀŝĚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ƚŽ ƚŚŽƐĞ ĐŽŶƐƵŵĞƌƐ ƚŚĂŶ ƚŽ ĂǀĞƌĂŐĞͲŝŶĐŽŵĞ ƌĞƐŝĚĞŶƚŝĂů Žƌ ĐŽŵŵĞƌĐŝĂů ĐŽŶƐƵŵĞƌƐ͘ϭϬϵ ŽǁͲŝŶĐŽŵĞ ŚŽƵƐĞŚŽůĚƐ ĂƌĞ ŽĨƚĞŶ ƌĞŶƚĞƌƐ͕ ĐƌĞĂƚŝŶŐ Ă ƐƉůŝƚͲŝŶĐĞŶƚŝǀĞ ƉƌŽďůĞŵ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ͖ ƚŚĞ ůĂŶĚůŽƌĚ ƐĞĞƐ ŶŽ ŝŶĐĞŶƚŝǀĞ ƚŽ ŵĂŬĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ƐŝŶĐĞ ƚŚĞ ďĞŶĞĨŝƚ ŐŽĞƐ ƚŽ ƚŚĞ ƚĞŶĂŶƚ ǁŚŽ ƉĂLJƐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ďŝůů͘ dŚĞ ƚĞŶĂŶƚ͕ ŽŶ ƚŚĞ ŽƚŚĞƌ ŚĂŶĚ͕ ƐĞĞƐ ůŝƚƚůĞ ŝŶĐĞŶƚŝǀĞ ƚŽ ŵĂŬĞ ĞdžƉĞŶƐŝǀĞ͕ ůŽŶŐͲƚĞƌŵ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ƐŝŶĐĞ ĨƵƚƵƌĞ ďĞŶĞĨŝƚƐ ǁŝůů ĂĐĐƌƵĞ ƚŽ ĨƵƚƵƌĞ ƚĞŶĂŶƚƐ͘ dŚĞ ƐƉůŝƚ ŝŶĐĞŶƚŝǀĞ ƉƌŽďůĞŵ ůĞĂĚƐ ƚŽ ĚĞĐůŝŶŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŽǀĞƌ ƚŝŵĞ ǁŚĞŶ ĐŽŵƉĂƌĞĚ ƚŽ ŽǁŶĞƌͲ ŽĐĐƵƉŝĞĚ ŚŽƵƐŝŶŐ͕ ĐŽŵƉŽƵŶĚĞĚ ďLJ ƚŚĞ ƚĞŶĚĞŶĐLJ ĨŽƌ ůŽǁͲŝŶĐŽŵĞ ŵĞƌŝĐĂŶƐ ƚŽ ŽĐĐƵƉLJ ŽůĚĞƌ ďƵŝůĚŝŶŐƐ͘ ϭϭϬ ŝŶĂůůLJ͕ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ŽĨƚĞŶ ůĂĐŬ ĂĐĐĞƐƐ ƚŽ ĐĂƉŝƚĂů ĨŽƌ ŚŽŵĞ ĞŶĞƌŐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ĂŶĚ ŚĂǀĞ ůŝŵŝƚĞĚ ĂĐĐĞƐƐ ƚŽ ƚŚĞ ŵŽƐƚ ŵŽĚĞƌŶ ĂŶĚ ĞĨĨŝĐŝĞŶƚ ĂƉƉůŝĂŶĐĞƐ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ͘ K ͛Ɛ tĞĂƚŚĞƌŝnjĂƚŝŽŶ ƐƐŝƐƚĂŶĐĞ WƌŽŐƌĂŵ ;t WͿ ĨƵŶĚƐ ůŽǁͲŝŶĐŽŵĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƵƉŐƌĂĚĞƐ͕ ďƵƚ ƵŶĨŽƌƚƵŶĂƚĞůLJ͕ ƚŚĞ ŶĞĞĚƐ ĚƌĂŵĂƚŝĐĂůůLJ ĞdžĐĞĞĚ t W ĨƵŶĚŝŶŐ͘ dŚĞ ĂůŝĨŽƌŶŝĂ WƵďůŝĐ hƚŝůŝƚŝĞƐ ŽŵŵŝƐƐŝŽŶ ; Wh Ϳ ƌĞĐĞŶƚůLJ ĨŽƵŶĚ ƚŚĂƚ͕ ƐŝŶĐĞ ϭϵϵϵ͕ ƌŽŽĨƚŽƉ ƐŽůĂƌ ĐƵƐƚŽŵĞƌƐ ŚĂĚ Ă ŵĞĚŝĂŶ ŚŽƵƐĞŚŽůĚ ŝŶĐŽŵĞ ŽĨ Ψϵϭ͕ϬϬϬ͕ ǁŚŝůĞ ƚŚĞ ŵĞĚŝĂŶ ŝŶĐŽŵĞ ŝŶ ĂůŝĨŽƌŶŝĂ ǁĂƐ Ψϱϰ͕ϬϬϬ ĂŶĚ ƚŚĂƚ ŽĨ ƚŚĞ ŝŶǀĞƐƚŽƌͲŽǁŶĞĚ ƵƚŝůŝƚLJ ; KhͿ ĐƵƐƚŽŵĞƌƐ ǁĂƐ Ψϲϴ͕ϬϬϬ͘ϭϭϭ ƐƵƌǀĞLJ ĐŽŶĚƵĐƚĞĚ ďLJ ƚŚĞ EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJ ĨŽƵŶĚ ƚŚĂƚ ƐŽůĂƌ ĂĚŽƉƚĞƌƐ ŝŶ ĂŶ ŝĞŐŽ ŽƵŶƚLJ ŚĂĚ ĂŶ ĂǀĞƌĂŐĞ ŚŽƵƐĞŚŽůĚ ŝŶĐŽŵĞ ŽĨ Ψϭϲϱ͕ϬϬϬ͕ ĐŽŵƉĂƌĞĚ ƚŽ Ψϭϭϱ͕ϬϬϬ ĨŽƌ ŶŽŶͲĂĚŽƉƚĞƌƐ͘ϭϭϮ Ŷ ƉƌŝŶĐŝƉůĞ͕ ůŽǁĞƌͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ĐŽƵůĚ ďĞŶĞĨŝƚ ĨƌŽŵ ŝŶƐƚĂůůŝŶŐ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ ĂŶĚ ŽƚŚĞƌ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ŝŶ ƚŚĞŝƌ ŚŽŵĞƐ ŝŶ ƚŚĞ ƐĂŵĞ ǁĂLJ ƚŚĂƚ ŚŝŐŚĞƌͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ĚŽ͕ ďƵƚ ŵĂŶLJ ďĂƌƌŝĞƌƐ ŚĂǀĞ ƉƌĞǀĞŶƚĞĚ ƚŚŝƐ͕ ŝŶĐůƵĚŝŶŐ ůĂĐŬ ŽĨ ĨƵŶĚŝŶŐ Žƌ ĨŝŶĂŶĐŝŶŐ ĂŶĚ ůĂĐŬ ŽĨ ĂŶ ĂĚĂƋƵĂƚĞ ƌŽŽĨ͘ϭϭϯ Ŷ ĂĚĚŝƚŝŽŶ͕ ŵĂŶLJ ůŽǁͲŝŶĐŽŵĞ ŵĞƌŝĐĂŶƐ ĂŶĚ ďƵƐŝŶĞƐƐĞƐ ŝŶ ůŽǁͲŝŶĐŽŵĞ ĐŽŵŵƵŶŝƚŝĞƐ ƌĞŶƚ ƚŚĞŝƌ ŚŽŵĞƐ ĂŶĚ ŽĨĨŝĐĞƐ͕ ŵĂŬŝŶŐ ƵƉŐƌĂĚĞƐ ŚĂƌĚĞƌ ƚŽ ĂƌƌĂŶŐĞ ĂŶĚ ƉĂLJ ďĂĐŬ ƚŚƌŽƵŐŚ ĞŶĞƌŐLJ Žƌ ďŝůů ƐĂǀŝŶŐƐ͘ hƚŝůŝƚŝĞƐ ĂŶĚ ŽƚŚĞƌ ĞŶĞƌŐLJͲƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ ĐĂŶ ŵĂŬĞ ƐŽůĂƌ WsͲŵĂƌŬĞƚ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ĂǀĂŝůĂďůĞ ƚŽ ůŽǁͲ ŝŶĐŽŵĞ ĐƵƐƚŽŵĞƌƐ ƚŚƌŽƵŐŚ ĂƌƌĂŶŐĞŵĞŶƚƐ ůŝŬĞ ĐŽŵŵƵŶŝƚLJ ƐŽůĂƌ͕ ǁŚŝĐŚ ŵĂLJ ƉƌŽǀŝĚĞ ĐĂƐŚͲĨůŽǁͲƉŽƐŝƚŝǀĞ ƐŽůƵƚŝŽŶƐ ƚŽ ĂĚĚƌĞƐƐ ƚŚĞ ŶĞĞĚƐ ŽĨ Ă ůĂƌŐĞ ĚŽǁŶ ƉĂLJŵĞŶƚ͕ ĨĂǀŽƌĂďůĞ ĐƌĞĚŝƚ ƌĂƚŝŶŐ͕ Žƌ ŽǁŶĞƌͲŽĐĐƵƉŝĞĚ ƐŝŶŐůĞͲ ĨĂŵŝůLJ ŚŽŵĞ͘ KŶĞ ĐŽŵŵŽŶ ŵŽĚĞů ŝƐ ĨŽƌ ĐŽŵŵƵŶŝƚLJ ƐŽůĂƌ ƉƌŽũĞĐƚ ĚĞǀĞůŽƉĞƌƐ ƚŽ ĨŽƌŵ WW Ɛ ǁŝƚŚ ƚŚĞ ƵƚŝůŝƚLJ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĨŽƌ Ă ƐŽůĂƌ ĚĞǀĞůŽƉŵĞŶƚ ůŽĐĂƚĞĚ ŝŶ Ă ĐŽŵŵƵŶŝƚLJ Žƌ ŽĨĨƐŝƚĞ͘ ƐƉĞĐŝĨŝĞĚ ŶƵŵďĞƌ ŽĨ ĐƵƐƚŽŵĞƌƐ ĐĂŶ ƚŚĞŶ ƐƵďƐĐƌŝďĞ ƚŽ ƚŚĞ ƉƌŽŐƌĂŵ ĨŽƌ Ă ŵŽŶƚŚůLJ ĨĞĞ ĂŶĚ ƌĞĐĞŝǀĞ Ă ǀŝƌƚƵĂů ŶĞƚ ŵĞƚĞƌŝŶŐ ďŝůů ĐƌĞĚŝƚ ĨŽƌ Ă ƉŽƌƚŝŽŶ ŽĨ ĞŶĞƌŐLJ ƉƌŽĚƵĐĞĚ͘ Ŷ ƐŽŵĞ ĐĂƐĞƐ͕ ŽŶƐŝƚĞ͕ ĐŽŵŵƵŶŝƚLJ͕ ĂŶĚ ƐŚĂƌĞĚ ƐŽůĂƌ ƉƌŽŐƌĂŵƐ ĐĂŶ ƵƐĞ ĞĚĞƌĂů ůŽǁͲ ŝŶĐŽŵĞ ĞŶĞƌŐLJ ĂƐƐŝƐƚĂŶĐĞ ƚŚƌŽƵŐŚ ƉƌŽŐƌĂŵƐ ůŝŬĞ W͕ t W͕ ĂŶĚ ŽǁͲŝŶĐŽŵĞ ŽƵƐŝŶŐ dĂdž ƌĞĚŝƚƐ ƚŽ ďĞŶĞĨŝƚ ĐŽŶƐƵŵĞƌƐ ǁŚŽ ǁŽƵůĚ ŽƚŚĞƌǁŝƐĞ ďĞ ĚĞĞŵĞĚ ŝŶĞůŝŐŝďůĞ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƵƉŐƌĂĚĞƐ͘ dŚĞ ůĞĂŶ ŶĞƌŐLJ ĂǀŝŶŐƐ ĨŽƌ ůů ŵĞƌŝĐĂŶƐ ŶŝƚŝĂƚŝǀĞ ŝƐ Ă ĐƌŽƐƐͲĂŐĞŶĐLJ ŝŶŝƚŝĂƚŝǀĞ ǁŝƚŚ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ĨƌŽŵ K ͕ W ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ŽƵƐŝŶŐ ĂŶĚ hƌďĂŶ ĞǀĞůŽƉŵĞŶƚ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ŐƌŝĐƵůƚƵƌĞ ;h Ϳ͕ ĞƉĂƌƚŵĞŶƚ ŽĨ ĂďŽƌ͕ ŽƌƉŽƌĂƚŝŽŶ ĨŽƌ EĂƚŝŽŶĂů ĂŶĚ ŽŵŵƵŶŝƚLJ ĐŝĞŶĐĞ͕ ĂŶĚ dƌĞĂƐƵƌLJ͘ dŚĞ ŝŶŝƚŝĂƚŝǀĞ ĨŽĐƵƐĞƐ ŽŶ ĞŶƐƵƌŝŶŐ ƚŚĂƚ ůŽǁͲŝŶĐŽŵĞ ŚŽƵƐĞŚŽůĚƐ ŚĂǀĞ ĂĐĐĞƐƐ ƚŽ ƐŽůĂƌ ŽƉƚŝŽŶƐ ƚŚƌŽƵŐŚ Ă ǀĂƌŝĞƚLJ ŽĨ ƚŚĞƐĞ ŵĞĐŚĂŶŝƐŵƐ͘ 2 2 6 Electricity Issues in Small Rural and Islanded Communities ZƵƌĂů ĂŶĚ ŝƐůĂŶĚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ĂƌĞ ŵŝĐƌŽĐŽƐŵƐ ŽĨ ƚŚĞ ůĂƌŐĞƌ ĞůĞĐƚƌŝĐŝƚLJ ŐƌŝĚ͕ ďƵƚ ƚŚĞLJ ĂůƐŽ ĨĂĐĞ ƵŶŝƋƵĞ ĐŚĂůůĞŶŐĞƐ ƌĞůĂƚĞĚ ƚŽ ďĞŝŶŐ ŝƐŽůĂƚĞĚ ĨƌŽŵ ƚŚĞ ŐƌŝĚ Žƌ ďĞŝŶŐ ůŽĐĂƚĞĚ ŝŶ ůŽǁͲƉŽƉƵůĂƚŝŽŶ ĂƌĞĂƐ͘ ZƵƌĂů ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ŚĂǀĞ Ă ƐŵĂůůĞƌ ĐƵƐƚŽŵĞƌ ďĂƐĞ ďƵƚ ŵŽƌĞ ŵŝůĞƐ ŽĨ ĚŝƐƚƌŝďƵƚŝŽŶ ůŝŶĞ ƚŽ ŵĂŝŶƚĂŝŶ ƚŚĂŶ ƵƚŝůŝƚŝĞƐ ƐĞƌǀŝŶŐ ƵƌďĂŶ ĂƌĞĂƐ͘ ZƵƌĂů ĞůĞĐƚƌŝĐ ĐŽŽƉĞƌĂƚŝǀĞƐ ;ĐŽͲŽƉƐͿ ĐŽǀĞƌ ƚŚƌĞĞ ƋƵĂƌƚĞƌƐ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͛Ɛ ůĂŶĚ ŵĂƐƐ͕ ǁŝƚŚ Ă ƚŽƚĂů ŵĞŵďĞƌƐŚŝƉ ŽĨ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϰϮ ŵŝůůŝŽŶ ƉĞŽƉůĞ͘ϭϭϰ WĞƌ ŵŝůĞ ŽĨ ĚŝƐƚƌŝďƵƚŝŽŶ ůŝŶĞ͕ ĐŽͲŽƉƐ ƐĞƌǀĞ ĂŶ ĂǀĞƌĂŐĞ ŽĨ ϳ͘ϰ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ĐŽůůĞĐƚ ĂŶŶƵĂů ƌĞǀĞŶƵĞ ŽĨ ĂďŽƵƚ Ψϭϱ͕ϬϬϬ͕ ǁŚŝůĞ KhƐ ƐĞƌǀĞ ĂŶ ĂǀĞƌĂŐĞ ŽĨ ϯϰ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ĐŽůůĞĐƚ Ψϳϱ͕ϱϬϬ͘ dŚŝƐ ĚŝƐƉĂƌŝƚLJ ŝŶ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ƌĞǀĞŶƵĞ ƉĞƌ ůŝŶĞͲŵŝůĞ ƉŽƐĞƐ Ă ĐŚĂůůĞŶŐĞ ĨŽƌ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ƌƵƌĂů ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ϭϭϱ ƐůĂŶĚĞĚ ƐLJƐƚĞŵƐ ĐĂŶ ďĞ ĂĐƚƵĂů ŝƐůĂŶĚƐ Žƌ ͞ŝƐůĂŶĚĞĚ͟ ďLJ ďĞŝŶŐ ŝƐŽůĂƚĞĚ ĨƌŽŵ ƚŚĞ ůĂƌŐĞƌ ĞůĞĐƚƌŝĐŝƚLJ ŐƌŝĚ ;Ğ͘Ő͕͘ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ƐĞƌǀŝŶŐ ƐŵĂůů ǀŝůůĂŐĞƐ ŝŶ ƌƵƌĂů ůĂƐŬĂͿ͘ ƐůĂŶĚĞĚ ƐLJƐƚĞŵƐ ĂůƐŽ ŚĂǀĞ ƐŵĂůů ĐƵƐƚŽŵĞƌ ďĂƐĞƐ͕ ǁŝƚŚ ŚŝŐŚ ĐĂƉŝƚĂů ĐŽƐƚƐ ĂŶĚ ŚŝŐŚ ƐŚŝƉƉŝŶŐ ĐŽƐƚƐ ĨŽƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ĨƵĞů ƐƵƉƉůŝĞƐ͘ dŚĞLJ ŵĂLJ ĂůƐŽ ŶĞĞĚ Ă ŚŝŐŚ ůĞǀĞů ŽĨ ƌĞĚƵŶĚĂŶĐLJ ĚƵĞ ƚŽ ĞdžƚƌĞŵĞ ǁĞĂƚŚĞƌ ĐŽŶĚŝƚŝŽŶƐ ĂŶĚ ŐĞŶĞƌĂů ŝƐŽůĂƚŝŽŶ͘ϭϭϲ 'ƌŝĚ ŽƉĞƌĂƚŽƌƐ ĨĂĐĞ ƚŚĞ ĐŚĂůůĞŶŐĞ ŽĨ ĚĞůŝǀĞƌŝŶŐ ƌĞůŝĂďůĞ͕ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƌĞŵŽƚĞ ĂƌĞĂƐ ǁŚŝůĞ ĂĚĚŝŶŐ ŝŶƚĞƌŵŝƚƚĞŶƚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĂŶĚ ŽƚŚĞƌ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĐĂŶ ƉƌŽǀŝĚĞ ŵŽƌĞ ƌĞƐŝůŝĞŶƚ ĂŶĚ ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ͘ ƐƐŝƐƚĂŶĐĞ ǁŝƚŚ ĨŝŶĂŶĐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ŝŵƉƌŽǀĞĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ĐŽƵůĚ ŚĞůƉ ƉƌŽǀŝĚĞ ŵŽƌĞ ĂĨĨŽƌĚĂďůĞ͕ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƌƵƌĂů ĂŶĚ ŝƐůĂŶĚĞĚ ĐŽŵŵƵŶŝƚŝĞƐ͘ ŵƉƌŽǀĞĚ ĂĐĐĞƐƐ ƚŽ ďƌŽĂĚďĂŶĚ ŝŶ ƌƵƌĂů ĐŽŵŵƵŶŝƚŝĞƐ ǁŽƵůĚ ŚĞůƉ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ Z͕ ƐƚŽƌĂŐĞ͕ '͕ ĂŶĚ ŽƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ƌĞůLJ ŽŶ ďƌŽĂĚďĂŶĚ͘ ĚĚŝƚŝŽŶĂůůLJ͕ ĞĚƵĐĂƚŝŽŶ ĂŶĚ ƚƌĂŝŶŝŶŐ ŵĂLJ ĂůƐŽ ďĞ ƌĞƋƵŝƌĞĚ ƚŽ ĞŶĂďůĞ ƌĞƐŝĚĞŶƚƐ ŽĨ ƐŵĂůů͕ ƌĞŵŽƚĞ ĐŽŵŵƵŶŝƚŝĞƐ ƚŽ ŽƉĞƌĂƚĞ ĂŶĚ ŵĂŝŶƚĂŝŶ ƚŚĞŝƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ǁŚĞŶ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ĚĞƉůŽLJĞĚ͘ ŽͲŽƉƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ƉƌŽǀŝĚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƌƵƌĂů ĂŶĚ ŝƐůĂŶĚĞĚ ĐŽŵŵƵŶŝƚŝĞƐ ŚĂǀĞ ĚĞǀĞůŽƉĞĚ ĞdžƉĞƌƚŝƐĞ ŝŶ ĚĞĂůŝŶŐ ǁŝƚŚ ƚŚĞƐĞ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ĐĂŶ ƉƌŽǀŝĚĞ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ƚŽ ŝƐůĂŶĚĞĚ ĐŽŵŵƵŶŝƚŝĞƐ ŝŶ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ͕ ĂĚĚŝŶŐ ƐƚŽƌĂŐĞ͕ Žƌ ŵĂŬŝŶŐ ŽƚŚĞƌ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ĚĞůŝǀĞƌLJ͘ Žƌ ĞdžĂŵƉůĞ͕ ĂǁĂŝŝ ŝƐ ƚŚĞ ĨŝƌƐƚ ƐƚĂƚĞ ƚŽ ůĞŐŝƐůĂƚĞ Ă ϭϬϬ ƉĞƌĐĞŶƚ ;ďLJ ϮϬϰϱͿ ZW ͘ ĂǁĂŝŝ ŝƐ ĂůƌĞĂĚLJ ĨĂĐŝŶŐ ĐŚĂůůĞŶŐĞƐ ŝŶ ƉůĂŶŶŝŶŐ͕ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ͕ ĂŶĚ ƐŝƚŝŶŐ ŝƐƐƵĞƐ ƚŚĂƚ ŽƚŚĞƌ ƐƚĂƚĞƐ ǁŝƚŚ ŚŝŐŚ ZW ǁŝůů ďĞ ĨĂĐŝŶŐ ƐŽŽŶ͘ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŚĂƐ Ă ƌŽůĞ ŝŶ ĞŶĐŽƵƌĂŐŝŶŐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĂŶĚ ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ ŝŶ ƌƵƌĂů ĂƌĞĂƐ͘ K ĂŶĚ ŽƚŚĞƌ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ŚĂǀĞ ƐĞǀĞƌĂů ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ƌĞŶĞǁĂďůĞ ƉƌŽŐƌĂŵƐ ĂǀĂŝůĂďůĞ ƚŽ ƌĞƐŝĚĞŶƚƐ ŝŶ ƌƵƌĂů ĂƌĞĂƐ͕ ĞǀĞŶ ŝĨ ƚŚĞLJ ĂƌĞ ŶŽƚ ƐƉĞĐŝĨŝĐĂůůLJ ĚĞƐŝŐŶĞĚ ĨŽƌ ƌƵƌĂů ĐŽŵŵƵŶŝƚŝĞƐ͖ ƚŚĞƐĞ ŝŶĐůƵĚĞƚŚĞ EĂƚŝŽŶĂů ŽŵŵƵŶŝƚLJ ŽůĂƌ WĂƌƚŶĞƌƐŚŝƉ͕ t W͕ ƚŚĞ ĞƚƚĞƌ ƵŝůĚŝŶŐƐ ŚĂůůĞŶŐĞ͕ ĂŶĚ ŽƚŚĞƌƐ͘ϭϭϳ͕ ϭϭϴ͕ ϭϭϵ h ͛Ɛ ZƵƌĂů hƚŝůŝƚŝĞƐ ĞƌǀŝĐĞ ;Zh Ϳ ƉƌŽǀŝĚĞƐ ĨŝŶĂŶĐŝŶŐ ĨŽƌ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ ;ǁŚŽůĞƐĂůĞ ĂŶĚ ƌĞƚĂŝů ƉƌŽǀŝĚĞƌƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͿ ƚŚĂƚ ƐĞƌǀĞ ĐƵƐƚŽŵĞƌƐ ŝŶ ƌƵƌĂů ĂƌĞĂƐ͘ϭϮϬ Zh ůŽĂŶƐ ŝŶĐůƵĚĞ ĨŝŶĂŶĐŝŶŐ ĨŽƌ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ŵŽĚĞƌŶŝnjĂƚŝŽŶ͘ Ŷ ƌĞĐĞŶƚ LJĞĂƌƐ͕ ŚŽǁĞǀĞƌ͕ ƚŚĞ Zh ůŽĂŶ ƉƌŽŐƌĂŵ ŚĂƐ ďĞĞŶ ƵŶĚĞƌƐƵďƐĐƌŝďĞĚ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW 2 2 6 1 Powering Isolated Communities in Alaska ZƵƌĂů ůĂƐŬĂ ĐŽŵŵƵŶŝƚŝĞƐ ŚĂǀĞ ŚŝŐŚ ƐĞĂƐŽŶĂů ůŽĂĚ ƉĞĂŬƐ͕ ǁŝƚŚ ŚŝŐŚ ĚĞŵĂŶĚ ŝŶ ƚŚĞ ǁŝŶƚĞƌ ĨŽƌ ŚĞĂƚŝŶŐ ĂŶĚ ůŝŐŚƚŝŶŐ͘ DĂŶLJ ƐŵĂůůĞƌ ůĂƐŬĂ ĐŽŵŵƵŶŝƚŝĞƐ ƌĞůLJ ŽŶ ĚŝĞƐĞů ĨƵĞů ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ƉĂLJ ΨϬ͘ϱϬ ƚŽ ΨϬ͘ϴϬ ƉĞƌ ŬtŚ ďĞĐĂƵƐĞ ŽĨ ƚŚĞ ŚŝŐŚ ĐŽƐƚ ŽĨ ĨƵĞů ĂŶĚ ƐŚŝƉƉŝŶŐ͕ ŚŝŐŚĞƌ ĐĂƉŝƚĂů ĐŽƐƚƐ ĚƵĞ ƚŽ ƚŚĞ ƐŵĂůů ƐĐĂůĞ ŽĨ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ƚŚĞ ŐƌĞĂƚĞƌ ŶĞĞĚ ĨŽƌ ƌĞĚƵŶĚĂŶĐLJ ŝŶ ŐĞŶĞƌĂƚŝŽŶ ;ƐĞĞ ŝŐƵƌĞ ϮͲϴͿ͘ϭϮϭ ĂƚƚĞƌLJ ƐƚŽƌĂŐĞ ŚĂƐ ŝŵƉƌŽǀĞĚ ƌĞůŝĂďŝůŝƚLJ ŝŶ ůĂƐŬĂ ĐŽŵŵƵŶŝƚŝĞƐ ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚĞ ůĂƌŐĞƌ ŐƌŝĚ ŝŶ ƚŚĞ ĐĞŶƚƌĂů ƉĂƌƚ ŽĨ ƚŚĞ ƐƚĂƚĞ͘ϭϮϮ dŚĞ ďĂƚƚĞƌŝĞƐ ŚĂǀĞ ďĞĞŶ ŝŶƐƚĂůůĞĚ ƉƌŝŵĂƌŝůLJ ĨŽƌ ĨƌĞƋƵĞŶĐLJ ĂŶĚ ǀŽůƚĂŐĞ ƌĞŐƵůĂƚŝŽŶ͕ ŶŽƚ ƚŽ ƐƚŽƌĞ ŝŶƚĞƌŵŝƚƚĞŶƚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ͘ϭϮϯ ůĂƐŬĂŶƐ ŚĂǀĞ ĞdžƉĞƌŝĞŶĐĞĚ ĨĞǁĞƌ ŽƵƚĂŐĞƐ͕ ĂŶĚ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ ƵƐĞ ůĞƐƐ ƐƉŝŶŶŝŶŐ ƌĞƐĞƌǀĞ ĐĂƉĂĐŝƚLJ ǁŝƚŚ ƚŚĞ ĂĚĚŝƚŝŽŶ ŽĨ ůĂƌŐĞͲƐĐĂůĞ ďĂƚƚĞƌLJ ƐƚŽƌĂŐĞ͘ϭϮϰ Figure 2-8 Electricity Costs in Rural Alaska125 7KH $ODVND 9LOODJH OHFWULF RRSHUDWLYH VHUYHV PRUH WKDQ VPDOO FRPPXQLWLHV GLVSHUVHG DFURVV ODUJH GLVWDQFHV DQG LQ UHPRWH UHJLRQV ZLWK KDUVK FOLPDWLF FRQGLWLRQV 7KHVH IDFWRUV FRQWULEXWH WR DYHUDJH HOHFWULFLW SULFHV EHLQJ DSSUR LPDWHO ILYH WLPHV WKH 8 6 QDWLRQDO DYHUDJH ůĂƐŬĂŶ ĐŽͲŽƉƐ ĂƌĞ ŝŶƐƚĂůůŝŶŐ ŵŽƌĞ ǁŝŶĚ ĞŶĞƌŐLJ ĂŶĚ ŝŵƉƌŽǀŝŶŐ ƉŽǁĞƌͲĐŽŶƚƌŽů ƚĞĐŚŶŽůŽŐLJ ŝŶ ƌƵƌĂů ĂƌĞĂƐ ƚŽ ďĞƚƚĞƌ ŵĂŶĂŐĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ƚŚĂƚ ƉƌŝŵĂƌŝůLJ ƌƵŶ ŽŶ ĚŝĞƐĞů ĨƵĞů͘ϭϮϲ dŚĞ ůĂƐŬĂ ĞŶƚĞƌ ĨŽƌ ŶĞƌŐLJ ĂŶĚ WŽǁĞƌ ŚĂƐ ƐƚƵĚŝĞĚ ǁĂLJƐ ƚŽ ƌĞĚƵĐĞ ƌĞůŝĂŶĐĞ ŽŶ ĚŝĞƐĞů ŐĞŶĞƌĂƚŝŽŶ͕ ǁŚŝůĞ ƌĞĐŽŐŶŝnjŝŶŐ ƚŚĞ ĚŝĨĨŝĐƵůƚLJ ŝŶ ĞůŝŵŝŶĂƚŝŶŐ ĚŝĞƐĞů ŐĞŶĞƌĂƚŽƌƐ ďĞĐĂƵƐĞ ƚŚĞLJ ƉƌŽǀŝĚĞ ŝŵƉŽƌƚĂŶƚ ƐĞƌǀŝĐĞƐ ďĞLJŽŶĚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶϭϮϳ ŝŶĐůƵĚŝŶŐ ǁĂƐƚĞ ŚĞĂƚ ĂŶĚ ŝŶĞƌƚŝĂ ĨŽƌ ůŽĐĂů ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ͘ϭϮϴ LJƐƚĞŵƐ ƚŚĂƚ ƵƐĞ ďŽƚŚ ĚŝĞƐĞů ĂŶĚ ǁŝŶĚ ĞŶĞƌŐLJ ŚĂǀĞ ƌĞĚƵĐĞĚ ĨƵĞů ĐŽƐƚƐ ĂŶĚ ĞŵŝƐƐŝŽŶƐ ďƵƚ ĂƌĞ ŵŽƌĞ ĐŽŵƉůĞdž ĂŶĚ ƌĞƋƵŝƌĞ ŵŽƌĞ ƚƌĂŝŶŝŶŐ ĨŽƌ ŽƉĞƌĂƚŽƌƐ͘ϭϮϵ ůƐŽ͕ ŝŵƉƌŽǀĞĚ ďƌŽĂĚďĂŶĚ ĂĐĐĞƐƐ ƚŽ ƚŚĞ ůĂƌŐĞ ĚĂƚĂ ƐƚƌĞĂŵƐ ŶĞĐĞƐƐĂƌLJ ĨŽƌ ŵĂŶĂŐŝŶŐ ƚŚĞƐĞ ĐŽŵƉůĞdž ƐLJƐƚĞŵƐ ǁŽƵůĚ ŵĂŬĞ ŝƚ ĞĂƐŝĞƌ ƚŽ ƌƵŶ ƚŚĞŵ ŝŶ ƌĞŵŽƚĞ ĂƌĞĂƐ ĂŶĚ ŽŶ ŝƐůĂŶĚƐ͘ϭϯϬ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU 2 2 6 2 Innovative Rural Electric Co-Op Programs tŚŝůĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝƐ ŵŽƌĞ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ƚŚĂŶ ďƵŝůĚŝŶŐ ŶĞǁ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ƌƵƌĂů ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĨĂĐĞ Ă ƵŶŝƋƵĞ ĐŚĂůůĞŶŐĞ͘ ZƵƌĂů ĐŽŵŵƵŶŝƚŝĞƐ ŚĂǀĞ Ă ŐƌĞĂƚĞƌ ƉƌŽƉŽƌƚŝŽŶ ŽĨ ůŽǁͲƚŽͲŵŽĚĞƌĂƚĞͲ ŝŶĐŽŵĞ ĨĂŵŝůŝĞƐ ǁŚŽ ŵĂLJ ŚĂǀĞ ƉƌŽďůĞŵƐ ĨŝŶĂŶĐŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ͘ ůƐŽ͕ ƐĞĂƐŽŶĂů ĚĞŵĂŶĚ ƉĞĂŬƐ ƌĞůĂƚĞĚ ƚŽ ĂŐƌŝĐƵůƚƵƌĞ ĐĂŶ ŵĂŬĞ ƚŚĞ ƉĂLJďĂĐŬ ƚŝŵĞ ůŽŶŐĞƌ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ĂŶĚ ĐŽͲ ŽƉƐ ƐĞƌǀŝŶŐ ƌƵƌĂů ĐŽŵŵƵŶŝƚŝĞƐ ŵĂLJ ŚĂǀĞ ůĞƐƐ ĂĐĐĞƐƐ ƚŽ ĐĂƉŝƚĂů ĂŶĚ ƚĞĐŚŶŝĐĂů ĞdžƉĞƌƚŝƐĞ ƚŚĂŶ KhƐ͘ϭϯϭ Ŷ ƐƉŝƚĞ ŽĨ ƚŚĞ ĐŚĂůůĞŶŐĞƐ ŽĨ ŽƉĞƌĂƚŝŶŐ ŝŶ ŝƐŽůĂƚĞĚ ĂƌĞĂƐ͕ ĐŽͲŽƉ ƐĂůĞƐ ŐƌĞǁ ϯ͘ϯ ƉĞƌĐĞŶƚ ŝŶ ϮϬϭϰ ĐŽŵƉĂƌĞĚ ƚŽ ϭ͘ϭ ƉĞƌĐĞŶƚ ŐƌŽǁƚŚ ĂĐƌŽƐƐ ƚŚĞ ĞŶƚŝƌĞ ƌĞƚĂŝů ĞůĞĐƚƌŝĐŝƚLJ ƐĂůĞƐ ŝŶĚƵƐƚƌLJ͘ϭϯϮ ŽͲŽƉƐ ŚĂǀĞ ŝŶƐƚĂůůĞĚ ƚŚĞ ŐƌĞĂƚĞƐƚ ƉĞƌĐĞŶƚĂŐĞ ŽĨ ĂĚǀĂŶĐĞĚ ŵĞƚĞƌŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ; D Ϳ͕ ǁŝƚŚ ϱϭ ƉĞƌĐĞŶƚ ƉĞŶĞƚƌĂƚŝŽŶ͕ ĐŽŵƉĂƌĞĚ ƚŽ ϰϭ ƉĞƌĐĞŶƚ ĨŽƌ KhƐ ĂŶĚ Ϯϲ ƉĞƌĐĞŶƚ ŽĨ ƉƵďůŝĐůLJ ŽǁŶĞĚ ƵƚŝůŝƚŝĞƐ͘ϭϯϯ ZƵƌĂů ĞůĞĐƚƌŝĐ ĐŽͲŽƉƐ ŚĂǀĞ ƚŚĞ ĂĚǀĂŶƚĂŐĞ ŽĨ ďĞŝŶŐ ƐŵĂůůĞƌ ĂŶĚ ŵŽƌĞ ŶŝŵďůĞ ƚŚĂŶ ůĂƌŐĞ KhƐ ƌĞŐƵůĂƚĞĚ ďLJ Wh Ɛ͕ ĂŶĚ ƚŚĞLJ ĐĂŶ ŵŽƌĞ ĞĂƐŝůLJ ĂĚŽƉƚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ Žƌ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉƌŽŐƌĂŵƐ ƚĂŝůŽƌĞĚ ƚŽ ƚŚĞŝƌ ŵĞŵďĞƌƐ͘ ŽŵĞ ƌƵƌĂů ĐŽͲŽƉƐ ĂƌĞ ĂĚĚŝŶŐ ďŝŽĚŝŐĞƐƚĞƌƐ ƚŽ ĐŽŶǀĞƌƚ ƐŽůŝĚ ǁĂƐƚĞ ĨƌŽŵ ĚĂŝƌLJ ĐŽǁƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ͕ ƐŵĂƌƚ ĞůĞĐƚƌŝĐ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ƚŽ ƐƚŽƌĞ ǁŝŶĚ ĞŶĞƌŐLJ͕ ŝŵƉƌŽǀĞĚ ĨŽƌĞĐĂƐƚŝŶŐ ĨŽƌ ƐŽůĂƌ ĂŶĚ ǁŝŶĚ ĞŶĞƌŐLJ͕ ĂŶĚ ŽƚŚĞƌ Z ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ƚĂŬĞ ĂĚǀĂŶƚĂŐĞ ŽĨ ƌĞƐŽƵƌĐĞƐ ŝŶ ƌƵƌĂů ĂƌĞĂƐ͘ DĂŶLJ ŽĨ ƚŚĞƐĞ Z ĂŶĚ ƐƚŽƌĂŐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽƵůĚ ďĞ ĞdžƉĂŶĚĞĚ ǁŝƚŚ ŝŵƉƌŽǀĞĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ĂĐĐĞƐƐ͘ϭϯϰ dŚĞ Zh ƉĂƌƚŶĞƌƐ ǁŝƚŚ ĐŽŽƉĞƌĂƚŝǀĞƐ ƚŽ ĨŝŶĂŶĐĞ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ƌƵƌĂů ĐŽŵŵƵŶŝƚŝĞƐ͕ ŵĂŶLJ ŽĨ ǁŚŝĐŚ ĂƌĞ ůŽǁ ŝŶĐŽŵĞ͘ϭϯϱ ZŽĂŶŽŬĞ ůĞĐƚƌŝĐ ŽŽƉĞƌĂƚŝǀĞ ŝŵƉůĞŵĞŶƚĞĚ Ă ƉƌŽŐƌĂŵ ƚŽ ŵĂŬĞ ŝŶǀĞƐƚŵĞŶƚƐ ƚŝĞĚ ƚŽ ĞĂĐŚ ŵĞƚĞƌ ĂŶĚ ĨƵŶĚĞĚ ďLJ ĂŶ Zh ůŽĂŶ͘ϭϯϲ dŚĞ ĐŽͲŽƉ ƉĂŝĚ ĨŽƌ ŝŶƐƚĂůůĂƚŝŽŶ ŽĨ ŝŵƉƌŽǀĞĚ ŝŶƐƵůĂƚŝŽŶ͕ ĚƵĐƚ ĂŶĚ Ăŝƌ ƐĞĂůŝŶŐ͕ ŚĞĂƚ ĂŶĚ ǁĂƚĞƌ ƉƵŵƉ ƵƉŐƌĂĚĞƐ͕ ĂŶĚ ĞĨĨŝĐŝĞŶƚ ůŝŐŚƚŝŶŐ͘ϭϯϳ dŚĞ ĐŽͲŽƉ ƌĞĐŽǀĞƌƐ ŝƚƐ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚ ƚŚƌŽƵŐŚ Ă ƚĂƌŝĨĨ ŽŶ ƚŚĞ ďŝůů ĨƌŽŵ ĐŽͲŽƉ ŵĞŵďĞƌƐ͕ ǁŚŽ Ɛƚŝůů ƐĞĞ ƐĂǀŝŶŐƐ ŽŶ ƚŚĞŝƌ ďŝůů ĨƌŽŵ ƚŚĞ ƌĞĚƵĐĞĚ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ͘ϭϯϴ ĨƚĞƌ ĞĨĨŝĐŝĞŶĐLJ ƵƉŐƌĂĚĞƐ͕ ƚŚĞ ĂǀĞƌĂŐĞ ƐĂǀŝŶŐƐ ǁĂƐ ΨϭϮϬ͕ ǁŚŝĐŚ ƚŚĞ ŵĞŵďĞƌ ĂŶĚ ƚŚĞ ĐŽͲŽƉ ǁŽƵůĚ ƐƉůŝƚ͖ ĂŶ ĂǀĞƌĂŐĞ ŵĞŵďĞƌ ǁŽƵůĚ ƐĂǀĞ ΨϲϬ ƉĞƌ ŵŽŶƚŚ ŽŶ ŚŝƐ Žƌ ŚĞƌ ďŝůů͕ ĂŶĚ ƚŚĞ ĐŽͲ ŽƉ ǁŽƵůĚ ƉĂLJ ŽĨĨ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ƵƉŐƌĂĚĞ ŝŶ ϭϬ LJĞĂƌƐ͘ϭϯϵ ŵƉƌŽǀĞŵĞŶƚƐ ƚŽ Zh ůŽĂŶ ƉƌŽŐƌĂŵƐ͕ ŵĂŶLJ ŽĨ ǁŚŝĐŚ ĂƌĞ ƵŶĚĞƌƐƵďƐĐƌŝďĞĚ ďĞĐĂƵƐĞ ŽĨ ƚŚĞ ƉƌŽŐƌĂŵƐ͛ ĐŽŵƉůĞdžŝƚLJ Žƌ ƚŚĞ ŝŶĂďŝůŝƚLJ ƚŽ ƌĞĨŝŶĂŶĐĞ ƚŽ ůŽǁĞƌ ŝŶƚĞƌĞƐƚ ƌĂƚĞƐ͕ ĐŽƵůĚ ĂĐĐĞůĞƌĂƚĞ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽũĞĐƚƐ ŝŶ ƌƵƌĂů ĂƌĞĂƐ͘ 2 2 7 Electricity as a Driver of Economic Growth in Tribal Communities ůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ĂŵŽŶŐ ƚŚĞ ŚŝŐŚĞƐƚ ŝŶ ƚŚĞ ǁŽƌůĚ͕ ďƵƚ ĂĐĐĞƐƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ŽŶ ŶĚŝĂŶ ƌĞƐĞƌǀĂƚŝŽŶƐ ƉƌĞƐĞŶƚƐ Ă ƐƚƌŝŬŝŶŐůLJ ĚŝĨĨĞƌĞŶƚ ƌĞĂůŝƚLJ͘ dŚĞ ŝŶƚĞƌĚĞƉĞŶĚĞŶĐŝĞƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂĐĐĞƐƐ͕ ĞĐŽŶŽŵŝĐ ǁĞůůͲďĞŝŶŐ͕ ĂŶĚ ƋƵĂůŝƚLJ ŽĨ ůŝĨĞ ƵŶĚĞƌƐĐŽƌĞ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ĞůĞĐƚƌŝĨLJŝŶŐ ƚƌŝďĂů ůĂŶĚƐ͘ Ŷ ϮϬϭϬ͕ ϭ͘ϭ ŵŝůůŝŽŶ ŵĞƌŝĐĂŶ ŶĚŝĂŶ Žƌ ůĂƐŬĂ EĂƚŝǀĞ ƉĞŽƉůĞ ůŝǀĞĚ ŽŶ ƌĞƐĞƌǀĂƚŝŽŶƐ ĂŶĚ ůĂƐŬĂ EĂƚŝǀĞ sŝůůĂŐĞ ƌĞĂƐ͘ dŚĞ EĂǀĂũŽ EĂƚŝŽŶ ƌĞƐŝĚĞƐ ŽŶ ƚŚĞ ůĂƌŐĞƐƚ ƌĞƐĞƌǀĂƚŝŽŶ͕ ƐƉĂŶŶŝŶŐ EĞǁ DĞdžŝĐŽ͕ ƌŝnjŽŶĂ͕ ĂŶĚ hƚĂŚ͘ KĨ EĂǀĂũŽ ŚŽƵƐĞŚŽůĚƐ͕ ϯϳ ƉĞƌĐĞŶƚ ĂƌĞ ǁŝƚŚŽƵƚ ĂĐĐĞƐƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ϰϯ ƉĞƌĐĞŶƚ ůŝǀĞ ďĞůŽǁ ƚŚĞ ƉŽǀĞƌƚLJ ůŝŶĞ͘ϭϰϬ Ŷ ƐƚƵĚLJ ŝŶ ϮϬϬϬ ĨŽƵŶĚ ƚŚĂƚ ĂĐƌŽƐƐ Ăůů ƚƌŝďĞƐ͕ ŽŶĞ ŝŶ ƐĞǀĞŶ ŶĚŝĂŶ ŚŽƵƐĞŚŽůĚƐ ůŝǀŝŶŐ ŽŶ ƌĞƐĞƌǀĂƚŝŽŶƐ ǁĂƐ ǁŝƚŚŽƵƚ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ͘ϭϰϭ džƚƌĂƉŽůĂƚŝŶŐ ĨƌŽŵ ͛Ɛ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ƌĂƚĞƐ͕Ƌ ƚŽĚĂLJ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϭϲϬ͕ϬϬϬ ƉĞŽƉůĞ ĂƌĞ ǁŝƚŚŽƵƚ ĞůĞĐƚƌŝĐŝƚLJ͘ ĂƚĂ ĨƌŽŵ ƚŚĞ ϮϬϬϳʹϮϬϭϭ h͘ ͘ ĞŶƐƵƐ ŵĞƌŝĐĂŶ ŽŵŵƵŶŝƚLJ ƵƌǀĞLJ ĂůƐŽ ĐŽŶĐůƵĚĞƐ ƚŚĂƚ ŽŶ ƚƌŝďĂů ůĂŶĚƐ͕ ƚŚŽƵƐĂŶĚƐ ŽĨ EĂƚŝǀĞ ŵĞƌŝĐĂŶƐ ĂƌĞ Ɛƚŝůů ůŝǀŝŶŐ ǁŝƚŚŽƵƚ ďĂƐŝĐ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞƐ͘ Ƌ dŚĞ ϮϬϬϬ ƐƚƵĚLJ ŝƐ ƚŚĞ ŵŽƐƚ ĐƵƌƌĞŶƚ ƐƚƵĚLJ ŽŶ ƚŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŽŶ ƌĞƐĞƌǀĂƚŝŽŶƐ͘ ƐƚƵĚLJ ĨƌŽŵ K ͛Ɛ KĨĨŝĐĞ ŽĨ ŶĚŝĂŶ ŶĞƌŐLJ WŽůŝĐLJ ĂŶĚ WƌŽŐƌĂŵƐ ŝƐ ĨŽƌƚŚĐŽŵŝŶŐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ĨĨŽƌƚƐ ƚŽ ĂĚĚƌĞƐƐ ĂĐĐĞƐƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ŽŶ ŶĚŝĂŶ ůĂŶĚƐ ĨĂĐĞ ƐŝŐŶŝĨŝĐĂŶƚ ĐŚĂůůĞŶŐĞƐ͘ dŚĞƐĞ ĐŚĂůůĞŶŐĞƐ ŝŶĐůƵĚĞ ƌĞŵŽƚĞ ůŽĐĂƚŝŽŶƐ͕ ǁŝĚĞůLJ ĚŝƐƉĞƌƐĞĚ ŚŽŵĞƐ͕ ĂŶĚ ƚŚĞ ƉƌŽŚŝďŝƚŝǀĞ ĐŽƐƚ ŽĨ ƵƚŝůŝƚLJ ĚŝƐƚƌŝďƵƚŝŽŶ ůŝŶĞƐ͘ ĞƐƉŝƚĞ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ĐŽƐƚƐ͕ ŵĂŶLJ ƚƌŝďĞƐ ŚĂǀĞ ŶŽƚ ďĞĞŶ ĂďůĞ ƚŽ ƚĂŬĞ ĂĚǀĂŶƚĂŐĞ ŽĨ ƚŚĞŝƌ ǁŝŶĚ Žƌ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ͘ϭϰϮ dƌŝďĞƐ ŚĂǀĞ ůŝŵŝƚĞĚ ĂĐĐĞƐƐ ƚŽ ƉƌŝǀĂƚĞ ĐĂƉŝƚĂů ĨŽƌ ƉƌŽũĞĐƚƐ ŝŶ ŶĚŝĂŶ ŽƵŶƚƌLJ͘ K ͛Ɛ KĨĨŝĐĞ ŽĨ ŶĚŝĂŶ ŶĞƌŐLJ WŽůŝĐLJ ĂŶĚ WƌŽŐƌĂŵƐ ƌĞĐĞŶƚůLJ ŵŽĚĞƌŶŝnjĞĚ ŝƚƐ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ƐƚƌĂƚĞŐLJ ƚŽ ďĞƚƚĞƌ ĂƐƐŝƐƚ ƚƌŝďĞƐ ŝŶ ŝŵƉƌŽǀŝŶŐ ĞŶĞƌŐLJ ĂĐĐĞƐƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ďLJ ƌĞĐŽŐŶŝnjŝŶŐ ƚŚĂƚ ƚŚĞ ƋƵĞƐƚŝŽŶƐ ŽĨ ƚŽĚĂLJ͛Ɛ ŐƌŝĚ ĂƌĞ ŵŽƌĞ ĐŽŵƉůĞdž ĂŶĚ ƐŽŵĞƚŝŵĞƐ ƌĞƋƵŝƌĞ ůŽŶŐĞƌͲƚĞƌŵ ƉĂƌƚŶĞƌƐŚŝƉƐ͘ dŚĞ ƵƌĞĂƵ ŽĨ ŶĚŝĂŶ ĨĨĂŝƌƐ Ăƚ ƚŚĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ƚŚĞ ŶƚĞƌŝŽƌ ŚĂƐ ƐĞǀĞƌĂů ƉƌŽŐƌĂŵƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ƚŽ ŵĞƌŝĐĂŶ ŶĚŝĂŶ ƚƌŝďĞƐ ĨŽƌ ĞŶĞƌŐLJ ĚĞǀĞůŽƉŵĞŶƚ͘ h ͛Ɛ Zh ŽĨĨĞƌƐ ůŽǁͲĐŽƐƚ ůŽĂŶƐ ƚŽ ƌƵƌĂů ƵƚŝůŝƚŝĞƐ͕ ŝŶĐůƵĚŝŶŐ ƚƌŝďĂů ŝŶŝƚŝĂƚŝǀĞƐ ĨŽƌ ŝŶĐƌĞĂƐŝŶŐ ŐƌŝĚ ĂĐĐĞƐƐ͕ ĂŶĚ ƐƚĂƚĞ ƉƌŽŐƌĂŵƐ ĂůƐŽ ĞdžŝƐƚ͘ Žƌ ĞdžĂŵƉůĞ͕ ŝŶ EĞǁ DĞdžŝĐŽ͕ ƚŚĞ dƌŝďĂů ŶĨƌĂƐƚƌƵĐƚƵƌĞ ƵŶĚ͕ ĐƌĞĂƚĞĚ ďLJ ƚŚĞ dƌŝďĂů ŶĨƌĂƐƚƌƵĐƚƵƌĞ Đƚ ŝŶ ϮϬϬϱ͕ ƌĞĐŽŐŶŝnjĞƐ ƚŚĂƚ ŵĂŶLJ ŽĨ EĞǁ DĞdžŝĐŽ͛Ɛ ƚƌŝďĂů ĐŽŵŵƵŶŝƚŝĞƐ ůĂĐŬ ďĂƐŝĐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝŶĐůƵĚŝŶŐ͕ ďƵƚ ŶŽƚ ůŝŵŝƚĞĚ ƚŽ͕ ǁĂƚĞƌ ĂŶĚ ǁĂƐƚĞǁĂƚĞƌ ƐLJƐƚĞŵƐ͕ ƌŽĂĚƐ͕ ĂŶĚ ĞůĞĐƚƌŝĐĂů ƉŽǁĞƌ ůŝŶĞƐ͘ dŚƌŽƵŐŚ ƚŚŝƐ ĐŽŵƉĞƚŝƚŝǀĞ ĨƵŶĚŝŶŐ͕ Ăůů ĞĚĞƌĂůůLJ ƌĞĐŽŐŶŝnjĞĚ ƚƌŝďĞƐ͕ ŶĂƚŝŽŶƐ͕ ĂŶĚ ƉƵĞďůŽƐ ǁŝƚŚŝŶ EĞǁ DĞdžŝĐŽ ŚĂǀĞ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ƐƵďŵŝƚ Ă ƌŽďƵƐƚ ƉƌŽũĞĐƚ ƉƌŽƉŽƐĂů ĨŽƌ ƚŚĞŝƌ ĐŽŵŵƵŶŝƚŝĞƐ͘ ƚ ĞĂĐŚ ĨƵŶĚŝŶŐ ĐLJĐůĞ͕ ƚŚĞ ƉƌŽũĞĐƚ ƉƌŽƉŽƐĂů ŝƐ ĞǀĂůƵĂƚĞĚ ĂŶĚ͕ ďĂƐĞĚ ŽŶ ƐĐŽƌŝŶŐ͕ ŝƐ ĂǁĂƌĚĞĚ ĨƵŶĚƐ ƚŚƌŽƵŐŚ ƚŚĞ ϭϯͲƉĞƌƐŽŶ dƌŝďĂů ŶĨƌĂƐƚƌƵĐƚƵƌĞ ŽĂƌĚ͕ ǁŚŝĐŚ ŝƐ ĂĚŵŝŶŝƐƚƌĂƚŝǀĞůLJ ĂƚƚĂĐŚĞĚ ƚŽ ƚŚĞ EĞǁ DĞdžŝĐŽ ŶĚŝĂŶ ĨĨĂŝƌƐ ĞƉĂƌƚŵĞŶƚ͘ ŽǁĞǀĞƌ͕ ƚŚĞƐĞ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƌĞƐŽƵƌĐĞƐ ĐĂŶ ďĞ ŝŶƐƵĨĨŝĐŝĞŶƚ ǁŚĞŶ ŵĞĂƐƵƌĞĚ ĂŐĂŝŶƐƚ ƚŚĞ ŶĞĞĚ ĨŽƌ ƚŚĞŵ͘ dŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ŶĞǁ ƚŽŽůƐ ĂŶĚ d ĚŽĞƐ ŶŽƚ ĐŚĂŶŐĞ ƚŚĞ ƌĞĂůŝƚLJ ƚŚĂƚ ƉƌŽǀŝĚŝŶŐ ĂĐĐĞƐƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ǀĞƌLJ ĞdžƉĞŶƐŝǀĞ ĨŽƌ ƚƌŝďĂů ƵƚŝůŝƚŝĞƐ͘ ŶĚĞĞĚ͕ ƚŚĞ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ƌƵƌĂů ŵĞƌŝĐĂ ŝŶ ƚŚĞ ϭϵϯϬƐ ǁĂƐ ĂĐŚŝĞǀĞĚ ƚŚƌŽƵŐŚ ĞĐŽŶŽŵŝĐ ƚƌĂŶƐĨĞƌƐ ĨƌŽŵ ƵƌďĂŶ ĐƵƐƚŽŵĞƌƐ ƚŽ ƌƵƌĂů ĐƵƐƚŽŵĞƌƐ͕ Ğ͘Ő͕͘ ƚŚƌŽƵŐŚ ŚŝŐŚ ůĞǀĞůƐ ŽĨ ŝŶƚĞƌĞƐƚͲĨƌĞĞ ůŽĂŶƐ ĂŶĚ ŐƌĂŶƚƐ ĨƌŽŵ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͘ WƌŝŽƌŝƚŝnjŝŶŐ ƵŶŝǀĞƌƐĂů ĞůĞĐƚƌŝĐŝƚLJ ĂĐĐĞƐƐ ĨŽƌ ƚĞŶƐ ŽĨ ƚŚŽƵƐĂŶĚƐ ŽĨ ŵĞƌŝĐĂŶƐ ǁŝƚŚŽƵƚ ĞůĞĐƚƌŝĐŝƚLJ ŵĂLJ ĂŐĂŝŶ ƌĞƋƵŝƌĞ ƐŝŐŶŝĨŝĐĂŶƚ ĞĚĞƌĂů ŝŶƚĞƌǀĞŶƚŝŽŶ͘ dƌŝďĞƐ ĂůƐŽ ĨĂĐĞ ƌĞŐƵůĂƚŽƌLJ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ůŝŵŝƚĂƚŝŽŶƐ͘ dŚĞ ƚĂdžͲĞdžĞŵƉƚ͕ ŶŽŶͲƉƌŽĨŝƚ ƐƚĂƚƵƐ ŽĨ ĞĚĞƌĂůůLJ ƌĞĐŽŐŶŝnjĞĚ ƚƌŝďĞƐ ƉƌĞĐůƵĚĞƐ ƚŚĞŵ ĨƌŽŵ ƚĂŬŝŶŐ ĂĚǀĂŶƚĂŐĞ ŽĨ ƚŚĞ ĞĚĞƌĂů WƌŽĚƵĐƚŝŽŶ dĂdž ƌĞĚŝƚ Žƌ ŶǀĞƐƚŵĞŶƚ dĂdž ƌĞĚŝƚ ǁŝƚŚŽƵƚ ĐŽƐƚůLJ ĂŶĚ ĐŽŵƉůŝĐĂƚĞĚ ĐŽƌƉŽƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ͘ϭϰϯ dŚĞƐĞ ƚĂdž ĐƌĞĚŝƚƐ ŚĂǀĞ ƐƵƉƉŽƌƚĞĚ Ă ĚƌĂŵĂƚŝĐ ĞdžƉĂŶƐŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉƌŽĚƵĐƚŝŽŶ ŽŶ ŶŽŶͲƚƌŝďĂů ůĂŶĚƐ͘ ĞŶŐƚŚLJ ƌĞŐƵůĂƚŽƌLJ ƉƌŽĐĞƐƐĞƐ ĂůƐŽ ŵĂŬĞ ŝƚ ŵŽƌĞ ĚŝĨĨŝĐƵůƚ ƚŽ ĚĞǀĞůŽƉ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉƌŽũĞĐƚƐ͘ϭϰϰ ŝƚŝŶŐ ĂŶĚ ƉĞƌŵŝƚƚŝŶŐ ƌƵůĞƐ ĨŽƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ƌŝŐŚƚƐͲŽĨͲǁĂLJ ŽŶ ƚƌŝďĂů ůĂŶĚƐ ǁĞƌĞ ƐŝŵƉůŝĨŝĞĚ ĂŶĚ ĐůĂƌŝĨŝĞĚ ŝŶ ϮϬϭϱ͕ ǁŚŝĐŚ ŵĂLJ ŽĨĨĞƌ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƚƌŝďĞƐ ƚŽ ďƵŝůĚ ŽƵƚ ŐƌŝĚ ĂĐĐĞƐƐ ƚŽ ƵŶĐŽŶŶĞĐƚĞĚ ƌƵƌĂů ĂƌĞĂƐ ĂŶĚ ŝŶĐƌĞĂƐĞ ĐŽŶŶĞĐƚŝŽŶƐ ƚŽ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ͘ ŶĚŝĂŶ ĂŶĚƐ ŚĂǀĞ ŽǀĞƌ ϵ ŵŝůůŝŽŶ Dt ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƉŽƚĞŶƚŝĂů͕ϭϰϱ ďƵƚ ŽŶůLJ ϭϮϱʹϭϯϬ Dt ŚĂƐ ďĞĞŶ ŝŶƐƚĂůůĞĚ ŽŶ ƚƌŝďĂů ůĂŶĚƐ͕ ĚƵĞ ƚŽ ƚŚĞ ůĂĐŬ ŽĨ ĐĂƉŝƚĂů͘ϭϰϲ DĂŬŝŶŐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƚĂdž ĐƌĞĚŝƚƐ ƌĞĨƵŶĚĂďůĞ ĂŶĚ ƉƌŽǀŝĚŝŶŐ ůŽĂŶ ŐƵĂƌĂŶƚĞĞƐ ǁŽƵůĚ ŚĞůƉ ƚƌŝďĞƐ ĚĞǀĞůŽƉ ƚŚĞŝƌ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ͘ ŽŵĞ ƚƌŝďĞƐ ŚĂǀĞ ĂůƐŽ ĞdžƉƌĞƐƐĞĚ ŝŶƚĞƌĞƐƚ ŝŶ ŝŵƉƌŽǀŝŶŐ ƚŚĞŝƌ ĐĂƉĂĐŝƚLJ ƚŽ ƌƵŶ ĞŶĞƌŐLJ ƉƌŽŐƌĂŵƐ ďLJ ĚĞǀĞůŽƉŝŶŐ ƚƌŝďĂů ĞŶĞƌŐLJ ŽĨĨŝĐĞƐ͕ ĐŽŵƉĂƌĂďůĞ ƚŽ ƐƚĂƚĞ ĞŶĞƌŐLJ ŽĨĨŝĐĞƐ ƚŚĂƚ ƌƵŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ĞŶĞƌŐLJ ƐĞĐƵƌŝƚLJ ƉƌŽŐƌĂŵƐ͘ϭϰϳ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŚĂƐ Ă ƚƌƵƐƚ ƌĞƐƉŽŶƐŝďŝůŝƚLJ ƚŽ ƉƌŽƚĞĐƚ ƚƌŝďĂů ƚƌĞĂƚLJ ƌŝŐŚƚƐ͕ ůĂŶĚ͕ ĂŶĚ ƌĞƐŽƵƌĐĞƐ͕ ĂŶĚ ŝƚ ŚĂƐ Ă ůŽŶŐƐƚĂŶĚŝŶŐ ƉŽůŝĐLJ ŽĨ ĞŶĐŽƵƌĂŐŝŶŐ ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ ŝŶ ŶĚŝĂŶ ŽƵŶƚƌLJ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƐƵƉƉŽƌƚŝŶŐ ŝŵƉƌŽǀĞĚ ĂĐĐĞƐƐ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĚĞǀĞůŽƉŵĞŶƚ͕ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ƐŚŽƵůĚ ŝŵƉƌŽǀĞ ĐŽŶƐƵůƚĂƚŝŽŶ ǁŝƚŚ ƚƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ ŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƉƌŽũĞĐƚƐ͘ ƌĞƋƵĞŶƚůLJ͕ ƚƌŝďĂů ĐŽŶƐƵůƚĂƚŝŽŶ ƚĂŬĞƐ ƉůĂĐĞ ŶĞĂƌ ƚŚĞ ĞŶĚ ŽĨ ƚŚĞ ƐŝƚŝŶŐ ĂŶĚ ƉĞƌŵŝƚƚŝŶŐ ƉƌŽĐĞƐƐ͕ ƚŽŽ ůĂƚĞ ƚŽ ĂůůŽǁ ĨŽƌ ŵĞĂŶŝŶŐĨƵů ŝŶƉƵƚ ĨƌŽŵ ƚƌŝďĞƐ͘ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ŚĂǀĞ ĚŝĨĨĞƌĞŶƚ ƉƌŽĐĞĚƵƌĞƐ ĂŶĚ ĚĞĨŝŶŝƚŝŽŶƐ ĨŽƌ ĐŽŶƐƵůƚĂƚŝŽŶ͕ ĂŶĚ ƐŽŵĞ ƚƌŝďĞƐ ůĂĐŬ ƚŚĞ ƐƚĂĨĨ Žƌ ƚĞĐŚŶŝĐĂů ĞdžƉĞƌƚŝƐĞ ƚŽ ƌĞǀŝĞǁ ƉĞƌŵŝƚƚŝŶŐ ĚŽĐƵŵĞŶƚƐ͘ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ƐŚŽƵůĚ ŝŵƉůĞŵĞŶƚ ƉƌŽĐĞĚƵƌĞƐ ƚŚĂƚ ĞŶƐƵƌĞ ĞĂƌůLJ ĂŶĚ ŵĞĂŶŝŶŐĨƵů ĐŽŶƐƵůƚĂƚŝŽŶ ǁŝƚŚ ƚƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ͕ ĂŶĚ ĞĚĞƌĂů ƐƚĂĨĨ ƐŚŽƵůĚ ƌĞĐĞŝǀĞ ƚƌĂŝŶŝŶŐ ĂďŽƵƚ ŚŽǁ ƚŽ ƉƌŽǀŝĚĞ ŵĞĂŶŝŶŐĨƵů ĐŽŶƐƵůƚĂƚŝŽŶ ƚŽ ƚƌŝďĞƐ ƚŽ ŝĚĞŶƚŝĨLJ ĂŶĚ ĂĚĚƌĞƐƐĞƐ ĐŽŶĐĞƌŶƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU 2 3 Maximizing the Value of Energy Efficiency ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ŽĨƚĞŶ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ ƚŚĞ ͞ĨŝƌƐƚ ĨƵĞů͕͟ ƉƌŽǀŝĚĞƐ ďĞŶĞĨŝƚƐ ĨŽƌ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ŝŶĐůƵĚŝŶŐ ĂǀŽŝĚĞĚ ĐŽƐƚƐ ĨŽƌ ĞŶĞƌŐLJ͕ ĂƐ ǁĞůů ĂƐ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĐĂƉĂĐŝƚLJ͖ ůĞƐƐ ǀŽůĂƚŝůĞ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ ƉƌŝĐĞƐ͖ ƌĞĚƵĐĞĚ ƐĞƌǀŝĐĞ ĚŝƐĐŽŶŶĞĐƚŝŽŶƐ ĚƵĞ ƚŽ ĂƌƌĞĂƌĂŐĞƐ ŽŶ ďŝůů ƉĂLJŵĞŶƚƐ͖ ĂŶĚ ŝŵƉƌŽǀĞĚ ƐLJƐƚĞŵ ƌĞůŝĂďŝůŝƚLJ ; ŝŐƵƌĞ ϮͲϵͿ͘ tŚŝůĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƌĞĚƵĐĞƐ ĞůĞĐƚƌŝĐŝƚLJ͕ ŶĂƚƵƌĂů ŐĂƐ͕ ĂŶĚ ŽƚŚĞƌ ŚŽŵĞͲŚĞĂƚŝŶŐ ĨƵĞů ĐŽŶƐƵŵƉƚŝŽŶ͕ ŝƚ ĞƋƵĂůůLJ ƐƵƉƉŽƌƚƐ Ă ŚŽƐƚ ŽĨ ŶŽŶͲĞŶĞƌŐLJ ďĞŶĞĨŝƚƐ ĨŽƌ ŝŶĚŝǀŝĚƵĂů ƉĂƌƚŝĐŝƉĂŶƚƐ ĂŶĚ ƐŽĐŝĞƚLJ ĂƐ Ă ǁŚŽůĞ͘ϭϰϴ͕ ϭϰϵ Žƌ ƉĂƌƚŝĐŝƉĂŶƚƐ͕ ƚŚĞƐĞ ŝŶĐůƵĚĞ ƐƵĐŚ ďĞŶĞĨŝƚƐ ĂƐ ƌĞĚƵĐĞĚ ĞŶĞƌŐLJ ďŝůůƐ ĂŶĚ ŵŽƌĞ ĚŝƐƉŽƐĂďůĞ ŝŶĐŽŵĞ͕ ŝŶĐƌĞĂƐĞĚ ƉƌŽƉĞƌƚLJ ǀĂůƵĞƐ͕ ŝŵƉƌŽǀĞĚ ĐŽŵĨŽƌƚ͕ ůŽǁĞƌ ŵĂŝŶƚĞŶĂŶĐĞ ĐŽƐƚƐ͕ ŚŝŐŚĞƌ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ĂŶĚ ƉŽƐŝƚŝǀĞ ŚĞĂůƚŚ ŝŵƉĂĐƚƐ͘ƌ Žƌ ƐŽĐŝĞƚLJ ĂƐ Ă ǁŚŽůĞ͕ ŶŽŶͲĞŶĞƌŐLJ ďĞŶĞĨŝƚƐ ŝŶĐůƵĚĞ ŝŵƉƌŽǀĞĚ ĞŶĞƌŐLJ ƐĞĐƵƌŝƚLJ ĂŶĚ ŝŶĚĞƉĞŶĚĞŶĐĞ͖ ƌĞĚƵĐĞĚ Ăŝƌ ĞŵŝƐƐŝŽŶƐ͕ ǁĂƚĞƌ ƐĂǀŝŶŐƐ͕ ĂŶĚ ŽƚŚĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͖ ƌĞĚƵĐĞĚ ĐŽƐƚƐ ƚŽ ŽƉĞƌĂƚĞ ƉƵďůŝĐ ĨĂĐŝůŝƚŝĞƐ͖ ũŽďƐ ĐƌĞĂƚĞĚ ĂŶĚ ůŽĐĂů ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ͖ ĂŶĚ ďƌŽĂĚ ŚĞĂůƚŚ ďĞŶĞĨŝƚƐ͕ ƐƵĐŚ ĂƐ ƌĞĚƵĐĞĚ ĂƐƚŚŵĂ ĐĂƐĞƐ ĨƌŽŵ ĐůĞĂŶĞƌ Ăŝƌ͘ ZĞŐƵůĂƚŽƌLJ ĂƉƉƌŽĂĐŚĞƐ ƐƵĐŚ ĂƐ ĚĞĐŽƵƉůŝŶŐ͕ ŝŶĐĞŶƚŝǀĞƐ͕ Žƌ ůŽƐƚ ƌĞǀĞŶƵĞ ĂĚũƵƐƚŵĞŶƚƐ ĐĂŶ ďĞ ƵƐĞĚ ƚŽ ƉƌŽŵŽƚĞ ƵƚŝůŝƚLJ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ ƵŝůĚŝŶŐ ŽǁŶĞƌƐ ĐĂŶ ĂůƐŽ ƵƐĞ Ă ǀĂƌŝĞƚLJ ŽĨ ĨŝŶĂŶĐŝŶŐ ŵĞĐŚĂŶŝƐŵƐ ƚŽ ŝŵƉůĞŵĞŶƚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ͕ ŝŶĐůƵĚŝŶŐ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ƉĞƌĨŽƌŵĂŶĐĞ ĐŽŶƚƌĂĐƚƐ͕ ƉƌŽƉĞƌƚLJͲ ĂƐƐĞƐƐĞĚ ĐůĞĂŶ ĞŶĞƌŐLJ ůŽĂŶƐ͕ Žƌ ĞŶĞƌŐLJͲĨŽĐƵƐĞĚ ůŽĂŶƐ ĨƌŽŵ ŶĂƚŝŽŶĂů ůĞŶĚĞƌƐ͘ Figure 2-9 Multiple Benefits of Energy Efficiency Improvements 150 QHUJ HIILFLHQF LPSURYHPHQWV LQFOXGH HQHUJ DQG QRQ HQHUJ EHQHILWV IRU LQGLYLGXDO SDUWLFLSDQWV WKH HOHFWULFLW V VWHP DQG VRFLHW DV D ZKROH ƌ Žƌ ŝŶĨŽƌŵĂƚŝŽŶ ŽŶ ŚŽǁ ƚŽ ƋƵĂŶƚŝĨLJ ƚŚĞ ŵƵůƚŝƉůĞ ďĞŶĞĨŝƚƐ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ƐĞĞ W ͛Ɛ Assessing the Multiple Benefits of Clean Energy A Resource for States ;ϮϬϭϭͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞƉĂ͘ŐŽǀͬƐƚĂƚĞůŽĐĂůĐůŝŵĂƚĞͬĂƐƐĞƐƐŝŶŐͲŵƵůƚŝƉůĞͲďĞŶĞĨŝƚƐͲĐůĞĂŶͲĞŶĞƌŐLJͲ ƌĞƐŽƵƌĐĞͲƐƚĂƚĞƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉŽůŝĐŝĞƐͶƐƵĐŚ ĂƐ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ĂƉƉůŝĂŶĐĞ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ƐƚĂŶĚĂƌĚƐ ĂŶĚ ůĂďĞůŝŶŐ͕ ĂŶĚ ƚĂƌŐĞƚĞĚ ŝŶĐĞŶƚŝǀĞƐͶŚĂǀĞ ƉůĂLJĞĚ Ă ƐŝŐŶŝĨŝĐĂŶƚ ƌŽůĞ ŝŶ ƐůŽǁŝŶŐ ƚŚĞ ŐƌŽǁƚŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͘Ɛ ŶĐƌĞŵĞŶƚĂů ĂŶŶƵĂů ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ĨƌŽŵ ƵƚŝůŝƚLJ ĐƵƐƚŽŵĞƌͲĨƵŶĚĞĚ ĞůĞĐƚƌŝĐ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ŝŶ ƚŚĞ ƵƚŝůŝƚLJ ƐĞĐƚŽƌ ĂƌĞ ĞdžƉĞĐƚĞĚ ƚŽ ƌĞĂĐŚ ĂďŽƵƚ Ϭ͘ϴ ƉĞƌĐĞŶƚ ƉĞƌ LJĞĂƌ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ďLJ ϮϬϮϱ͕ ĚƌŝǀĞŶ ƉƌŝŵĂƌŝůLJ ďLJ ĐŽŵƉůŝĂŶĐĞ ǁŝƚŚ ƐƚĂƚĞǁŝĚĞ ƐĂǀŝŶŐƐ Žƌ ƐƉĞŶĚŝŶŐ ƚĂƌŐĞƚƐ ƚLJƉŝĐĂůůLJ ĨŽĐƵƐĞĚ ŽŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͘ϭϱϭ ĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĨƵŶĚĞĚ ďLJ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚLJ ĐƵƐƚŽŵĞƌƐ͕ ĂƐ ǁĞůů ĂƐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ĂƉƉůŝĂŶĐĞƐ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ĂƌĞ ůŝŬĞůLJ ƚŽ ĐŽŶƚŝŶƵĞ ƚŽ ŽĨĨƐĞƚ ƚŚĞ ŵĂũŽƌŝƚLJ ŽĨ ĞůĞĐƚƌŝĐ ůŽĂĚ ŐƌŽǁƚŚ͘ ĚǀĂŶĐĞƐ ŝŶ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ŐƌŽǁƚŚ ŽĨ ƚŚĞ ďƌŽĂĚĞƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ŝŶĚƵƐƚƌLJ ŚĂǀĞ ĂůƐŽ ƉůĂLJĞĚ ŝŵƉŽƌƚĂŶƚ ƌŽůĞƐ ŝŶ ĂĐŚŝĞǀŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚ ůĞǀĞůƐ ŽĨ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ͘ ďƌŽĂĚ ƌĂŶŐĞ ŽĨ ƉŽůŝĐŝĞƐ ĂŶĚ ƉƌŽŐƌĂŵƐ ĐĂŶ ŚĞůƉ ƚŚĞ ŵĞƌŝĐĂŶ ĞĐŽŶŽŵLJ ĐĂƉƚƵƌĞ ǀĂůƵĞ ĨƌŽŵ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƉƌĂĐƚŝĐĞƐ͘ ƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů͕ K ƐƵƉƉŽƌƚƐ ĐŽƐƚͲƐŚĂƌĞĚ ZΘ ŽĨ ŶĞǁ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƉƌĂĐƚŝĐĞƐ ĂƉƉůŝĐĂďůĞ ƚŽ Ăůů ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ ŝŶĐůƵĚŝŶŐ ůŝŐŚƚŝŶŐ͖ ƌĞĨƌŝŐĞƌĂƚŝŽŶ͕ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ͕ ĂŶĚ ŚĞĂƚ ƉƵŵƉ ƚĞĐŚŶŽůŽŐŝĞƐ͖ ŶĞǁ ďƵŝůĚŝŶŐ ĚĞƐŝŐŶ ĂŶĚ ĐŽŶƐƚƌƵĐƚŝŽŶ ƚŽŽůƐ ĂŶĚ ŵĂƚĞƌŝĂůƐ͖ ƐĞŶƐŽƌ ĂŶĚ ĐŽŶƚƌŽůƐ͖ ŝŶĚƵƐƚƌŝĂů ƉƌŽĐĞƐƐĞƐ ĂŶĚ ŵĂƚĞƌŝĂůƐ͖ sƐ͖ ĚŝƐƚƌŝďƵƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƐƚŽƌĂŐĞ ƚĞĐŚŶŽůŽŐŝĞƐ͖ ĂŶĚ ŽƚŚĞƌƐ͘ dĞĐŚŶŽůŽŐLJ ĚĞǀĞůŽƉŵĞŶƚ ĞĨĨŽƌƚƐ ĂƌĞ ƵƐƵĂůůLJ ĂĐĐŽŵƉĂŶŝĞĚ Žƌ ĨŽůůŽǁĞĚ ďLJ ƚĞĐŚŶŽůŽŐLJ ĚĞŵŽŶƐƚƌĂƚŝŽŶƐ ĂŶĚ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ƚĞƐƚ ŵĞƚŚŽĚƐ ƚŽ ĨĂĐŝůŝƚĂƚĞ ŵĂƌŬĞƚ ĂĐĐĞƉƚĂŶĐĞ͘ ĂďĞůŝŶŐ ĂŶĚ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ;ĨŽƌ ĞdžĂŵƉůĞ͕ ƚŚƌŽƵŐŚ W ͛Ɛ ĂŶĚ K ͛Ɛ E Z'z d Z ĂŶĚ K ͛Ɛ ĞƚƚĞƌ ƵŝůĚŝŶŐƐ ƉƌŽŐƌĂŵƐͿ͕ ƉƌŽǀŝĚĞ ƚŚĞ ŝŶĨŽƌŵĂƚŝŽŶ ŶĞĐĞƐƐĂƌLJ ĨŽƌ ĐŽŶƐƵŵĞƌƐ ƚŽ ŝĚĞŶƚŝĨLJ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƌĞĚƵĐŝŶŐ ƚŚĞ ĐŽƐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŚƌŽƵŐŚ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ŶĞǁ͕ ŵŽƌĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ƉƌŽĚƵĐƚƐ͕ Žƌ ŝŵƉƌŽǀĞŵĞŶƚƐ ƚŽ ƚŚĞ ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ĞdžŝƐƚŝŶŐ ďƵŝůĚŝŶŐƐ ĂŶĚ ƉƌŽĐĞƐƐĞƐ͘ 'ƌĞĞŶ ďƵŝůĚŝŶŐ ĐĞƌƚŝĨŝĐĂƚŝŽŶ ƉƌŽŐƌĂŵƐ ƉƌŽŵŽƚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ďƵŝůĚŝŶŐƐ͘ ŶĐĞŶƚŝǀĞƐ͕ ĨŝŶĂŶĐŝŶŐ͕ ĂŶĚ ƚĂƌŐĞƚĞĚ ƉƌŽĐƵƌĞŵĞŶƚ ƉƌŽŐƌĂŵƐ ŝŵƉůĞŵĞŶƚĞĚ ďLJ ŐŽǀĞƌŶŵĞŶƚƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ŚĞůƉ ĞŶĂďůĞ Žƌ ŵŽƚŝǀĂƚĞ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ŚŝŐŚĞƌͲĞĨĨŝĐŝĞŶĐLJ ƉƌŽĚƵĐƚƐ ĂŶĚ ĂĐĐĞůĞƌĂƚĞ ƚŚĞ ŵĂƌŬĞƚ ƉĞŶĞƚƌĂƚŝŽŶ ŽĨ ŶĞǁ͕ ŵŽƌĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŝŶĂůůLJ͕ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ďƵŝůĚŝŶŐ ĐŽĚĞƐ ĂŶĚ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ĂƉƉůŝĂŶĐĞƐ ĞŶƐƵƌĞ ĐŽŶƐŝƐƚĞŶƚ ŵĂƌŬĞƚ ĂĚŽƉƚŝŽŶ ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞĨĨŝĐŝĞŶĐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dŚĞ ƉƌŝŵĂƌLJ ŽďũĞĐƚŝǀĞ ŽĨ ƚŚĞƐĞ ĞĨĨŽƌƚƐ ŝƐ ƚŽ ĞŶĂďůĞ ĐŽŶƐƵŵĞƌƐ ƚŽ ŽďƚĂŝŶ ƚŚĞ ƐĂŵĞ Žƌ ŝŵƉƌŽǀĞĚ ĞŶĚͲƵƐĞ ƐĞƌǀŝĐĞƐ Ăƚ ůŽǁĞƌ ƚŽƚĂů ĐŽƐƚ͕ ǁŚŝůĞ ĂůƐŽ LJŝĞůĚŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ĞĐŽŶŽŵŝĐ ďĞŶĞĨŝƚƐ͘ dŽĚĂLJ͕ ƐƵĐŚ ƉƌŽŐƌĂŵƐ ĂƌĞ ĞĨĨĞĐƚŝǀĞůLJ ƐƚŝŵƵůĂƚŝŶŐ ĞĨĨŝĐŝĞŶĐLJ ŐĂŝŶƐ ŝŶ Ăůů ŶĞǁ ďƵŝůĚŝŶŐƐ ĂŶĚ ǀĞŚŝĐůĞƐ͕ ĂŶĚ ŵŽƐƚ ĂƉƉůŝĂŶĐĞƐ ĂŶĚ ĞƋƵŝƉŵĞŶƚ͘ ƵƌƚŚĞƌŵŽƌĞ͕ ƐƵďƐƚĂŶƚŝĂů ĞůĞĐƚƌŝĐ ĞĨĨŝĐŝĞŶĐLJ ŐĂŝŶƐ ĂƌĞ ƉŽƐƐŝďůĞ ŝŶ Ăůů ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ͘ dŚĞ EĂƚŝŽŶĂů ĐĂĚĞŵŝĞƐ ĨŽƵŶĚ ƚŚĂƚ ĨƵůů ĚĞƉůŽLJŵĞŶƚ ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ ŝŶ ďƵŝůĚŝŶŐƐ ĐŽƵůĚ ĞůŝŵŝŶĂƚĞ ƚŚĞ ŶĞĞĚ ƚŽ ďƵŝůĚ ŶĞǁ ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ƚŚƌŽƵŐŚ ϮϬϯϬ͘ϭϱϮ Ĩ ďƵŝůĚŝŶŐƐ ǁĞƌĞ ƚŽ ĂĚŽƉƚ ƚŽĚĂLJ͛Ɛ ďĞƐƚ ĂǀĂŝůĂďůĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĞŶĞƌŐLJ ƵƐĞ ŝŶƚĞŶƐŝƚLJ ;ƚŚŽƵƐĂŶĚ ƌŝƚŝƐŚ ƚŚĞƌŵĂů ƵŶŝƚƐ ƉĞƌ ƐƋƵĂƌĞ ĨŽŽƚͿ ĐŽƵůĚ ĚĞĐƌĞĂƐĞ ďLJ Ăƚ ůĞĂƐƚ ϱϬ ƉĞƌĐĞŶƚ ĨŽƌ ƐŝŶŐůĞͲĨĂŵŝůLJ ŚŽŵĞƐ ĂŶĚ ďLJ ϰϮ ƉĞƌĐĞŶƚ ĨŽƌ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ͘ϭϱϯ EĞǁ ĞůĞĐƚƌŝĐŝƚLJ ƐĂǀŝŶŐƐ ĂŶĚ Z ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĂƌĞ ďĞŝŶŐ ƵŶůŽĐŬĞĚ ďLJ ƚŚĞ ĚŝŐŝƚŝnjĂƚŝŽŶ ŽĨ ĞŶĚͲƵƐĞ ĚĞǀŝĐĞƐ ĂŶĚ ƚŚĞ ďƵŝůĚͲŽƵƚ ŽĨ ůĂLJĞƌƐ ŽĨ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƚŽ ĂůůŽǁ ƚŚĞŵ ƚŽ ďŽƚŚ ĐŽŵŵƵŶŝĐĂƚĞ ƚŚĞŝƌ ƐƚĂƚĞ ĂŶĚ ďĞ ĐŽŶƚƌŽůůĞĚ͕ ĨƵƌƚŚĞƌ ĞŶĂďůŝŶŐ ŐƌŝĚͲƐLJƐƚĞŵͲǁŝĚĞ ĞĨĨŝĐŝĞŶĐŝĞƐ ĂŶĚ ĨƵŶĐƚŝŽŶĂůŝƚŝĞƐ͘ ĞǀĞůŽƉŝŶŐ ĞĨĨĞĐƚŝǀĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƐƚƌĂƚĞŐŝĞƐ ĨŽƌ ƌĞĂůŝnjŝŶŐ ƚŚĞƐĞ ǀĂůƵĞͲĐƌĞĂƚŝŽŶ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ǁŝůů ƌĞƋƵŝƌĞ ŝŵƉƌŽǀĞĚ ĚĂƚĂ ŽŶ ƚŚĞ ĂĐƚƵĂů ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ŵŽƌĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ĂƉƉůŝĂŶĐĞƐ͕ ĞƋƵŝƉŵĞŶƚ͕ ĂŶĚ ďƵŝůĚŝŶŐƐ͖ ǀĂƌŝĂƚŝŽŶ ĂŵŽŶŐ ĚŝĨĨĞƌĞŶƚ ĐĂƚĞŐŽƌŝĞƐ ŽĨ ĐŽŶƐƵŵĞƌƐ͖ ĂŶĚ ƚŚĞ ĐŽŶƐƚĞůůĂƚŝŽŶ ŽĨ ƉƌŽĚƵĐƚ ĂŶĚ ƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ ƚŚĂƚ ƐĞƌǀĞ ĂŶĚ ŝŶĨůƵĞŶĐĞ ƚŚĞ ĚĞĐŝƐŝŽŶƐ ŽĨ ĐŽŶƐƵŵĞƌƐ͘ Ɛ Žƌ ĂĚĚŝƚŝŽŶĂů ŝŶĨŽƌŵĂƚŝŽŶ ŽŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƚŽƉŝĐƐ͕ ƐƵĐŚ ĂƐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĐŽĚĞƐ ĂŶĚ ƐƚĂŶĚĂƌĚƐ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ƉĞƌĨŽƌŵĂŶĐĞ ĐŽŶƚƌĂĐƚƐ ĂŶĚ ůŝĨĞͲĐLJĐůĞ ĐŽƐƚŝŶŐ ŝŶ ƚŚĞ ĨĞĚĞƌĂů ƐĞĐƚŽƌ͕ ŵŝƐĐĞůůĂŶĞŽƵƐ ĞůĞĐƚƌŝĐ ůŽĂĚƐ͕ ƐƚĂƚĞ ĂŶĚ ůŽĐĂů ƉŽůŝĐŝĞƐ Θ ƉƌŽŐƌĂŵƐ͕ ƐĞĞ ŚĂƉƚĞƌ ;Building a Clean Electricity FutureͿ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU 2 3 1 Miscellaneous Electric Loads Will Be Growing Share of Electricity Demand in Future dŚĞ ƐŚĂƌĞƐ ŽĨ ĞŶĚͲƵƐĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ŝŶ ϮϬϭϰ ĂƌĞ ƐĞĞŶ ŝŶ ŝŐƵƌĞ ϮͲϭϬ͘ DŽƐƚ ďƵŝůĚŝŶŐͲƐĞĐƚŽƌ ĞŶĚ ƵƐĞƐ ĂƌĞ ĞdžƉĞĐƚĞĚ ƚŽ ƌĞƉƌĞƐĞŶƚ ĚĞĐůŝŶŝŶŐ ƐŚĂƌĞƐ ŽĨ ĨƵƚƵƌĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͕ ǁŝƚŚ ŽŶůLJ D Ɛ͕ƚ ƌĞƐŝĚĞŶƚŝĂů ĂŝƌͲĐŽŶĚŝƚŝŽŶŝŶŐ͕ ĂŶĚ ĐŽŵŵĞƌĐŝĂů ŽĨĨŝĐĞ ĞƋƵŝƉŵĞŶƚ ĞdžƉĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ƚŚĞŝƌ ƐŚĂƌĞƐ͘ dŚĞ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ŽĨ D Ɛ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ĨƌŽŵ ϮϬϭϰ ƚŽ ϮϬϰϬ͕ ĨƌŽŵ ϰϮ ƚŽ ϰϴ ƉĞƌĐĞŶƚ ŝŶ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ ĂŶĚ ĨƌŽŵ ϰϲ ƚŽ ϱϴ ƉĞƌĐĞŶƚ ŝŶ ƚŚĞ ĐŽŵŵĞƌĐŝĂů ƐĞĐƚŽƌ͘ϭϱϰ dŚĞ ŝŶĐƌĞĂƐĞĚ ƐŚĂƌĞ ŽĨ ĞŶĞƌŐLJ ƵƐĞĚ ďLJ D Ɛ ĨŽůůŽǁƐ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ĞŵĞƌŐĞŶĐĞ ŽĨ ŶĞǁ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞƐ ĂŶĚ ƚŚĞ ůĞƐƐ ĞĨĨĞĐƚŝǀĞ ĐŽǀĞƌĂŐĞ ŽĨ ŵĂũŽƌ ůŽĂĚƐ ďLJ ĞdžŝƐƚŝŶŐ ƉŽůŝĐŝĞƐ ĚĞƐŝŐŶĞĚ ƚŽ ĂĐĐĞůĞƌĂƚĞ ĞĨĨŝĐŝĞŶĐLJ ŐĂŝŶƐ͘ ĚĚŝƚŝŽŶĂů ĂĐƚŝŽŶ ŝƐ ŶĞĞĚĞĚ ƚŽ ŝŵƉƌŽǀĞ ĚĂƚĂ ĐŽůůĞĐƚŝŽŶ ĂŶĚ ƚŽ ĨƵƌƚŚĞƌ ĞdžƉĂŶĚ ƚĞĐŚŶŽůŽŐLJ ĚĞǀĞůŽƉŵĞŶƚ͕ ƉƌŽĚƵĐƚ ƚĞƐƚŝŶŐ͕ ůĂďĞůŝŶŐ͕ ĂŶĚ ŵŝŶŝŵƵŵ ƐƚĂŶĚĂƌĚƐ ƉƌŽŐƌĂŵƐ ƚŽ ďĞƚƚĞƌ ĐŽǀĞƌ D Ɛ͘ Figure 2-10 Share of Miscellaneous Electric Loads Compared to All Other Building Electric Loads Residential and Commercial Sectors 2014 and 2040 155 RPSDUHG WR RWKHU ORDGV 0 V DUH SURMHFWHG WR LQFUHDVH VLJQLILFDQWO LQ WKHLU VKDUH RI WRWDO GHOLYHUHG HOHFWULFLW LQ UHVLGHQWLDO DQG FRPPHUFLDO EXLOGLQJV 0 V UHSUHVHQW D EURDG UDQJH RI HOHFWULF ORDGV RXWVLGH RI D EXLOGLQJ¶V FRUH HQG XVHV RI KHDWLQJ YHQWLODWLRQ DLU FRQGLWLRQLQJ OLJKWLQJ ZDWHU KHDWLQJ DQG UHIULJHUDWLRQ 3URMHFWLRQV DUH EDVHG XSRQ WKH EXVLQHVV DV XVXDO DVVXPSWLRQV LQ WKH 36$ %DVH DVH ƚ Žƌ Ă ŵŽƌĞ ĚĞƚĂŝůĞĚ ĚŝƐĐƵƐƐŝŽŶ ŽĨ D Ɛ͕ ƐĞĞ͗ ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬĞĞƌĞͬďƵŝůĚŝŶŐƐͬĚŽǁŶůŽĂĚƐͬďƚŽͲŝŶǀĞƐƚŝŐĂƚĞƐͲŵŝƐĐĞůůĂŶĞŽƵƐͲ ĞůĞĐƚƌŝĐͲůŽĂĚƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW 2 3 2 Energy Efficiency Codes and Standards Help Reduce Consumption and Save Money ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉŽůŝĐŝĞƐͶƐƵĐŚ ĂƐ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ĞƋƵŝƉŵĞŶƚ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ͕ ŵĂŶĚĂƚŽƌLJ ĂƐ ǁĞůů ĂƐ ǀŽůƵŶƚĂƌLJ ůĂďĞůŝŶŐ ůŝŬĞ E Z'z d Z͕ ĂŶĚ ƚĂƌŐĞƚĞĚ ŝŶĐĞŶƚŝǀĞƐͶŚĂǀĞ ƉůĂLJĞĚ Ă ƐŝŐŶŝĨŝĐĂŶƚ ƌŽůĞ ŝŶ ƐůŽǁŝŶŐ ƚŚĞ ŐƌŽǁƚŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ ĞĐĂƵƐĞ ďƵŝůĚŝŶŐƐ ŽĨƚĞŶ ŚĂǀĞ ůŝĨĞƚŝŵĞƐ ŽĨ ϳϱʹϭϬϬ LJĞĂƌƐ͕ ƉŽůŝĐŝĞƐ ĂŶĚ ŵĂƌŬĞƚ ĨŽƌĐĞƐ ƚŚĂƚ ŝŵƉƌŽǀĞ ĞĨĨŝĐŝĞŶĐLJ ŝŶ ďĂƐĞ ďƵŝůĚŝŶŐ ƐLJƐƚĞŵƐ ĐĂŶ ŚĂǀĞ ůĂƐƚŝŶŐ ďĞŶĞĨŝƚƐ͘ ĚǀĂŶĐĞƐ ŝŶ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ŐƌŽǁƚŚ ŽĨ ƚŚĞ ďƌŽĂĚĞƌ ĞŶĞƌŐLJͲŵĂŶĂŐĞŵĞŶƚ ŝŶĚƵƐƚƌLJ ŚĂǀĞ ĂůƐŽ ƉůĂLJĞĚ ƌŽůĞƐ ŝŶ ĐƌĞĂƚŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚ ǀĂůƵĞ ƚŚƌŽƵŐŚ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ͘ ƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ĞŶĞƌŐLJ ĐŽŶƐĞƌǀĂƚŝŽŶ ƐƚĂŶĚĂƌĚƐ͕ ĂŶĚ ƚŚĞ ǀŽůƵŶƚĂƌLJ E Z'z d Z ƉƌŽŐƌĂŵ ĨŽƌ ĂƉƉůŝĂŶĐĞƐ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ƐĞƚ Ă ŵŝŶŝŵƵŵ ůĞǀĞů ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉĞƌĨŽƌŵĂŶĐĞ ĂƐ ǁĞůů ĂƐ ůĞĂĚĞƌƐŚŝƉ ĞĨĨŝĐŝĞŶĐLJ ůĞǀĞůƐ͘ ŽĚĞƐ ĂŶĚ ƐƚĂŶĚĂƌĚƐ ĂĚĚƌĞƐƐ ŵĂƌŬĞƚ ďĂƌƌŝĞƌƐ ƌĞůĂƚĞĚ ƚŽ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ƚƌĂŶƐƉĂƌĞŶĐLJ͕ ŵĂƚĞƌŝĂůŝƚLJ͕ ĂŶĚ ƐƉůŝƚ ŝŶĐĞŶƚŝǀĞƐ͘Ƶ dŚĞƐĞ ƉŽůŝĐŝĞƐ ŚĂǀĞ ƚŚĞ ŐŽĂů ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞůLJ ƌĞĚƵĐŝŶŐ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ƚŽ ƉƌŽǀŝĚĞ ǀĂůƵĞ ƚŽ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ŵĞĞƚ ůŽŶŐͲƚĞƌŵ ĞŶĞƌŐLJ ŐŽĂůƐ͘ Ɛ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ ĐŽŶƚŝŶƵĞ ƚŽ ĂĚǀĂŶĐĞ͕ ƐƚĂƚĞƐ ĂŶĚ ĚĞǀĞůŽƉĞƌƐ ŽĨ ŵŽĚĞů ĐŽĚĞƐ ŚĂǀĞ ƚǁŽ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ŝŶĐƌĞĂƐĞ ƚŚĞŝƌ ŝŵƉĂĐƚ͘ dŚĞ ĨŝƌƐƚ ŝƐ ƚŚĞ ůŽŶŐͲƐƚĂŶĚŝŶŐ ŝŶƚĞƌĂĐƚŝŽŶ ďĞƚǁĞĞŶ ĞŶĞƌŐLJ ĐŽĚĞƐ ĂŶĚ ƌĂƚĞƉĂLJĞƌͲĨƵŶĚĞĚ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͘ tŚŝůĞ ƚŚĞLJ ŽĨƚĞŶ ƐŚĂƌĞ ƐŝŵŝůĂƌ ƉŽůŝĐLJ ŐŽĂůƐ͕ ŝŶĐƌĞĂƐŝŶŐůLJ ƐƚƌŝŶŐĞŶƚ ĞŶĞƌŐLJ ĐŽĚĞƐ ĐĂŶ ĐƌĞĂƚĞ ĐŚĂůůĞŶŐĞƐ ĨŽƌ ƉƌŽŐƌĂŵƐ ƚŚĂƚ ĐĂŶ ŽŶůLJ ĐůĂŝŵ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ďĞLJŽŶĚ ƚŚĞ ĞŶĞƌŐLJ ƐĂǀĞĚ ďLJ ĐŽĚĞƐ͘ DĂdžŝŵŝnjŝŶŐ ǀĂůƵĞ ƚŽ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ŽƚŚĞƌ ƉĂƌƚŝĞƐ ƌĞƋƵŝƌĞƐ ƐƚĂƚĞ ƉŽůŝĐLJŵĂŬĞƌƐ ƚŽ ĂůŝŐŶ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ Ăůů ƉĂƌƚŝĞƐ͕ ƚŽ ĞŶƐƵƌĞ ƚŚĂƚ ŵŽĚĞƌŶ ĞŶĞƌŐLJ ĐŽĚĞƐ ĂŶĚ ǀŽůƵŶƚĂƌLJ ƉƌŽŐƌĂŵƐ ĐŽŵƉůĞŵĞŶƚ ĞĂĐŚ ŽƚŚĞƌ ŝŶ ĂĐŚŝĞǀŝŶŐ Ăůů ĐŽƐƚͲ ĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ dŚĞ ƐĞĐŽŶĚ ŽƉƉŽƌƚƵŶŝƚLJ ůŝĞƐ ŝŶ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐ ĐŽŶŶĞĐƚŝǀŝƚLJ ĂŶĚ ĐŽŶƚƌŽůůĂďŝůŝƚLJ ŽĨ ĐŽŶƐƵŵĞƌ ĚĞǀŝĐĞƐ͘ džƉĂŶĚŝŶŐ ĐŽŶŶĞĐƚŝǀŝƚLJ ŵĂLJ ŝŶĐƌĞĂƐĞ ƚŚĞ ĞŶĞƌŐLJ ƵƐĞĚ ďLJ ĐŽŶƐƵŵĞƌ ĚĞǀŝĐĞƐ͕ ǁŚŝůĞ ĂůƐŽ ŽĨĨĞƌŝŶŐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ƉƌŽǀŝĚĞ ǀĂůƵĞ ƚŚƌŽƵŐŚ ŝŵƉƌŽǀĞĚ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ĂŶĚ ŝŶĐƌĞĂƐĞĚ ĨůĞdžŝďŝůŝƚLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ ŶĐŽƵƌĂŐŝŶŐ ƚŚĞ ƵƐĞ ŽĨ ĐŽŶŶĞĐƚĞĚ ĚŝŐŝƚĂů ĚĞǀŝĐĞƐ ŝŶ ǁĂLJƐ ƚŚĂƚ ƐĂǀĞ ĞŶĞƌŐLJ ĂŶĚ ƉƌŽǀŝĚĞ ĨůĞdžŝďŝůŝƚLJ ƚŽ ƚŚĞ ŐƌŝĚ ŚĂƐ ŶŽƚ ŚŝƐƚŽƌŝĐĂůůLJ ďĞĞŶ Ă ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŝŶ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͘ ŽĚĞƐ ƚŚĂƚ ĞŶĐŽƵƌĂŐĞ ĞĨĨĞĐƚŝǀĞ ƵƐĞ ŽĨ ďƵŝůĚŝŶŐ ĂŶĚ ĚĞǀŝĐĞ ĐŽŶŶĞĐƚŝǀŝƚLJ ĂŶĚ ĐŽŶƚƌŽůƐ ĐĂŶ ĚŝƌĞĐƚůLJ ƉƌŽǀŝĚĞ ǀĂůƵĞ ƚŽ ďƵŝůĚŝŶŐ ŽĐĐƵƉĂŶƚƐ͕ ĂƐ ǁĞůů ĂƐ ŝŶĐƌĞĂƐĞ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚĞ ďƵŝůĚŝŶŐ ĂƐ Ă ŐƌŝĚ ĂƐƐĞƚ͘ 2 3 3 State and Local Energy Policies and Programs Deliver Efficiency ZĞĐĞŶƚ ƌĞƐĞĂƌĐŚ ŝŶĚŝĐĂƚĞƐ ƚŚĂƚ ŝŶĞĨĨŝĐŝĞŶƚ ďƵŝůĚŝŶŐƐ ƚŚĂƚ ƵƐĞ ŵŽƌĞ ĞŶĞƌŐLJ ƚŚĂŶ ƐŝŵŝůĂƌ ďƵŝůĚŝŶŐƐ ŵĂLJ LJŝĞůĚ Ă ƌĞĚƵĐĞĚ ŵŽƌƚŐĂŐĞ ǀĂůƵĞ ĚƵĞ ƚŽ ĞŶĞƌŐLJ ƉƌŝĐĞ ƌŝƐŬ͘ϭϱϲ ŵƉƌŽǀŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĐĂŶ ŚĞůƉ ƉƌŽƚĞĐƚ ĂŐĂŝŶƐƚ ƚŚŝƐ ƉŽƚĞŶƚŝĂů ůŽƐƐ ŽĨ ĨŝŶĂŶĐŝĂů ǀĂůƵĞ͘ DĂŶLJ h͘ ͘ ũƵƌŝƐĚŝĐƚŝŽŶƐ ƚŚĂƚ ƌĞƋƵŝƌĞ ƌĞƉŽƌƚŝŶŐ ŽĨ ďƵŝůĚŝŶŐƐ͛ ĞŶĞƌŐLJ ƉĞƌĨŽƌŵĂŶĐĞ ŚĂǀĞ ŝŵƉůĞŵĞŶƚĞĚ ĞŶĞƌŐLJ ďĞŶĐŚŵĂƌŬŝŶŐ ĂŶĚ ƚƌĂŶƐƉĂƌĞŶĐLJ ƉŽůŝĐŝĞƐ ĨŽƌ ďƵŝůĚŝŶŐƐ͘ dŚŝƐ ƌĞƉŽƌƚŝŶŐ ŝŶĐƌĞĂƐĞƐ ďƵŝůĚŝŶŐ ŽǁŶĞƌƐ͛ ŬŶŽǁůĞĚŐĞ ŽĨ ƉƌŽƉĞƌƚŝĞƐ͛ ĞŶĞƌŐLJ ƵƐĂŐĞ͖ ƉƌŽǀŝĚĞƐ ŐƌĞĂƚĞƌ ƚƌĂŶƐƉĂƌĞŶĐLJ ĨŽƌ ĐƵƌƌĞŶƚ ĂŶĚ ƉƌŽƐƉĞĐƚŝǀĞ ƚĞŶĂŶƚƐ͖ ŚŝŐŚůŝŐŚƚƐ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ͕ ĞŶĞƌŐLJͲƐĂǀŝŶŐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͖ ĂŶĚ ƉƌŽǀŝĚĞƐ ŵĂƌŬĞƚ ĚĂƚĂ ƚŽ ĞŶŚĂŶĐĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĞĨĨŝĐŝĞŶĐLJ ĞĨĨŽƌƚƐ ŽŶ ďĞŚĂůĨ ŽĨ ƌĞůĞǀĂŶƚ ĂŐĞŶĐŝĞƐ͘ϭϱϳ ƵŝůĚŝŶŐ ďĞŶĐŚŵĂƌŬŝŶŐ ĂŶĚ ĂƵĚŝƚŝŶŐ ĚĂƚĂ ƉƌŽǀŝĚĞ Ă ĚĂƚĂďĂƐĞ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ ƚŚĂƚ ƐƵƉƉŽƌƚƐ ďĞƚƚĞƌ ǀĂůƵĂƚŝŽŶ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ŝŶ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ĨŽƌ ĨƵƚƵƌĞ ŽǁŶĞƌƐ ĂŶĚ ŝŶǀĞƐƚŽƌƐ͘ ZĞŐƵůĂƚŝŽŶƐ ƚŚĂƚ ƌĞƋƵŝƌĞ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ďĞŶĐŚŵĂƌŬŝŶŐ͕ ƉĞƌŝŽĚŝĐ ĞŶĞƌŐLJ ĂƵĚŝƚƐ͕ ĐŽƌƌĞĐƚŝǀĞ ĂĐƚŝŽŶƐ ;Ğ͘Ő͕͘ ƌĞƚƌŽĐŽŵŵŝƐƐŝŽŶŝŶŐͿ͕ Žƌ ƉŽŝŶƚͲŽĨͲƐĂůĞ ĚŝƐĐůŽƐƵƌĞ Žƌ ƵƉŐƌĂĚĞƐ ;Žƌ ďŽƚŚͿ ĨŽƌ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ŚĂǀĞ ďĞĞŶ ĂĚŽƉƚĞĚ ďLJ ϴ ƐƚĂƚĞƐ ĂŶĚ ϭϰ ĐŝƚŝĞƐ ; ŝŐƵƌĞ ϮͲϭϭͿ͘ Ƶ ŚĂƉƚĞƌ ;Building a Clean Electricity FutureͿ ĚŝƐĐƵƐƐĞƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ ĂŶĚ ĂƉƉůŝĂŶĐĞ ƐƚĂŶĚĂƌĚƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-11 U S Building Benchmarking and Disclosure Policies158 $ JURZLQJ QXPEHU RI VWDWHV DQG FRPPXQLWLHV DUH DGRSWLQJ EXLOGLQJ LQIRUPDWLRQ WUDQVSDUHQF SROLFLHV 7KHVH LQFOXGH EXLOGLQJ HQHUJ EHQFKPDUNLQJ SHULRGLF HQHUJ DXGLWV FRUUHFWLYH DFWLRQV H J UHWURFRPPLVVLRQLQJ DQG SRLQW RI VDOH GLVFORVXUH RU XSJUDGHV RU ERWK EĞĂƌůLJ Ă ƚŚŝƌĚ ŽĨ ƐƚĂƚĞƐ ĂƌĞ ƐĂǀŝŶŐ Ăƚ ůĞĂƐƚ ϭ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ĞĂĐŚ LJĞĂƌ ƚŚƌŽƵŐŚ ƉƌŽŐƌĂŵƐ ĨƵŶĚĞĚ ďLJ ƵƚŝůŝƚLJ ĐƵƐƚŽŵĞƌƐ͘ ZŽƵŐŚůLJ ĂŶŽƚŚĞƌ ƚŚŝƌĚ ŽĨ ƐƚĂƚĞƐͶŵŽƐƚ ƌĞůĂƚŝǀĞůLJ ŶĞǁ ƚŽ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJͶ ĂƌĞ ƐĂǀŝŶŐ ďĞƚǁĞĞŶ Ϭ͘Ϯϱ ƉĞƌĐĞŶƚ ĂŶĚ Ϭ͘ϳϱ ƉĞƌĐĞŶƚ ; LJXUH Ϳ͘ϭϱϵ DĂŶLJ ƐƚĂƚĞƐ ĂƌĞ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞŝƌ ĞĨĨŝĐŝĞŶĐLJ ƚĂƌŐĞƚƐ ĂƐ ƚŚĞLJ ŵĞĞƚ ŝŶŝƚŝĂů ŐŽĂůƐ ĂŶĚ ĂƌĞ ŽŶ ƚƌĂĐŬ ƚŽ ĂĐŚŝĞǀĞ ĞǀĞŶ ŚŝŐŚĞƌ ƐĂǀŝŶŐƐ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĨƵŶĚĞĚ ďLJ ƵƚŝůŝƚLJ ĐƵƐƚŽŵĞƌƐ ƐƉĞŶƚ Ψϲ ďŝůůŝŽŶ ŝŶ ϮϬϭϯ͘ϭϲϬ ƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚĞ ĂǀĞƌĂŐĞ ƚŽƚĂů ĐŽƐƚ ŽĨ ƐĂǀŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ĂŵŽŶŐ h͘ ͘ ƵƚŝůŝƚLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĂĐƌŽƐƐ Ăůů ŵĂƌŬĞƚ ƐĞĐƚŽƌƐ ĨŽƌ ƚŚĞ ƉĞƌŝŽĚ ϮϬϬϵ ƚŽ ϮϬϭϯ ŝƐ ϰ͘ϲ ĐĞŶƚƐ ƉĞƌ ŬtŚ ƐĂǀĞĚ͕ ƐƉůŝƚ ƌŽƵŐŚůLJ ŝŶ ŚĂůĨ ďĞƚǁĞĞŶ ƚŚĞ ƵƚŝůŝƚLJ ;Žƌ ŽƚŚĞƌ ƉƌŽŐƌĂŵ ĂĚŵŝŶŝƐƚƌĂƚŽƌͿ ĂŶĚ ƉƌŽŐƌĂŵ ƉĂƌƚŝĐŝƉĂŶƚƐ͘ϭϲϭ͕ ϭϲϮ dŚŝƐ ŝƐ ŵƵĐŚ ůŽǁĞƌ ƚŚĂŶ ƚŚĞ ĂǀĞƌĂŐĞ ƉƌŝĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƚŚĞ h͘ ͘ ŝŶ ϮϬϭϰ͕ ǁŚŝĐŚ ǁĂƐ ϭϬ͘ϰϰ ĐĞŶƚƐ ƉĞƌ ŬtŚ͘ϭϲϯ ŶŽƚŚĞƌ ǁĂLJ ƚŽ ǀŝĞǁ ƚŚĞ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞŶĞƐƐ ŽĨ ĞĨĨŝĐŝĞŶĐLJ ŝƐ ƚŽ ĐŽŵƉĂƌĞ ƚŚĞ ĐŽƐƚ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ƚŚĞ ĐŽƐƚ ŽĨ Ă ŶĞǁ ƉŽǁĞƌ ƉůĂŶƚ͘ dŚĞ ĂǀĞƌĂŐĞ ůĞǀĞůŝnjĞĚ ĐŽƐƚ ŽĨ ƐĂǀĞĚ ĞŶĞƌŐLJ ĨƌŽŵ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ĞƐƚŝŵĂƚĞĚ Ăƚ ΨϰϲͬDtŚ͕ ǀĞƌƐƵƐ ƚŚĞ ůĞǀĞůŝnjĞĚ ĐŽƐƚ ŽĨ ĞŶĞƌŐLJ ĨŽƌ ŶĂƚƵƌĂů ŐĂƐ ĐŽŵďŝŶĞĚͲĐLJĐůĞ ŐĞŶĞƌĂƚŝŽŶ͕ ǁŝƚŚ ŝƚƐ ƐĞŶƐŝƚŝǀŝƚLJ ƚŽ ĨƵĞů ƉƌŝĐĞƐ͕ Ăƚ ΨϱϮ ƚŽ ΨϳϴͬDtŚ͘ ǀ ϭϲϰ ǀ dŚŝƐ ĐŽŵƉĂƌŝƐŽŶ ŚĂƐ ƐŽŵĞ ůŝŵŝƚĂƚŝŽŶƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ƚŚĞ ĐŽƐƚ ŽĨ ƐĂǀĞĚ ĞŶĞƌŐLJ ƵƐƵĂůůLJ ŝƐ ĐĂůĐƵůĂƚĞĚ Ăƚ ƚŚĞ ŵĞƚĞƌ ŽĨ ƚŚĞ ĞŶĚͲƵƐĞ ĐƵƐƚŽŵĞƌ͕ ǁŚŝůĞ ƚŚĞ ůĞǀĞůŝnjĞĚ ĐŽƐƚ ŽĨ ĞŶĞƌŐLJ ƐƵƉƉůLJ ŝƐ ĐĂůĐƵůĂƚĞĚ Ăƚ ƚŚĞ ďƵƐďĂƌ ŽĨ ƚŚĞ ƉŽǁĞƌ ƉůĂŶƚ͕ ǁŚŝĐŚ ƚLJƉŝĐĂůůLJ ĚŽĞƐ ŶŽƚ ƌĞĨůĞĐƚ ĞŶĞƌŐLJ ůŽƐƚ ŝŶ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ;ŝ͘Ğ͕͘ ůŝŶĞ ůŽƐƐĞƐͿ ďĞƚǁĞĞŶ ƚŚĞ ŐĞŶĞƌĂƚŽƌ ĂŶĚ ĞŶĚͲƵƐĞ ĐƵƐƚŽŵĞƌ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW Figure 2-12 Percent Electricity Savings in 2014 from Energy Efficiency Programs Funded by Utility Customers 1HDUO D WKLUG RI VWDWHV DUH DFKLHYLQJ VDYLQJV RI DW OHDVW SHUFHQW SHU HDU DQG DQRWKHU WKLUG RI VWDWHV DUH VDYLQJ EHWZHHQ SHUFHQW DQG SHUFHQW RI UHWDLO VDOHV 2Q DYHUDJH QDWLRQDO VDYLQJV UHSRUWHG LQ IURP XWLOLW DQG SXEOLF EHQHILWV HOHFWULFLW SURJUDPV ZHUH HTXDO WR SHUFHQW RI VDOHV DĂŶLJ ƐƚĂƚĞƐ ĂŶĚ ůŽĐĂůŝƚŝĞƐ ŚĂǀĞ ƉŽůŝĐŝĞƐ ŝŶ ƉůĂĐĞ ƚŽ ůŽǁĞƌ ďĂƌƌŝĞƌƐ ƚŽ ĨŝŶĂŶĐŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽũĞĐƚƐ͘ džĂŵƉůĞƐ ŽĨ ĨŝŶĂŶĐŝŶŐ ŝŶŝƚŝĂƚŝǀĞƐ ŝŶĐůƵĚĞ ŽŶͲďŝůů ĨŝŶĂŶĐŝŶŐ͕ ƐƚĂƚĞ ƌĞǀŽůǀŝŶŐ ůŽĂŶ ĨƵŶĚƐ ĨŽƌ ĐůĞĂŶ ĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ ;ŝŶĐůƵĚŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJͿ͕ ŽƚŚĞƌ ƚĂƚĞ ŶĞƌŐLJ KĨĨŝĐĞ ƉƌŽŐƌĂŵƐ͕ϭϲϲ ƵƚŝůŝƚLJ ĨŝŶĂŶĐŝŶŐ ƉƌŽŐƌĂŵƐ͕ ĂŶĚ ůŽĐĂů WƌŽƉĞƌƚLJ ƐƐĞƐƐĞĚ ůĞĂŶ ŶĞƌŐLJ ƉƌŽŐƌĂŵƐϭϲϳ ĨŽƌ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ͘ tŚŝůĞ Ă ŵĂũŽƌŝƚLJ ŽĨ ƐƚĂƚĞƐ ŚĂǀĞ Ăƚ ůĞĂƐƚ ŽŶĞ ƚLJƉĞ ŽĨ ĨŝŶĂŶĐŝŶŐ ƉƌŽŐƌĂŵ͕ ƚŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ŵƵůƚŝƉůĞ ƉƌŽŐƌĂŵƐ ĂŶĚ ƚŚĞ ƉĞƌĐĞŶƚĂŐĞ ŽĨ ƚŚĞ ƐƚĂƚĞ ƉŽƉƵůĂƚŝŽŶ ǁŝƚŚ ĂĐĐĞƐƐ ƚŽ ƚŚĞƐĞ ƉƌŽŐƌĂŵƐ ǀĂƌLJ ƐŝŐŶŝĨŝĐĂŶƚůLJ͘ϭϲϴ ƚ ůĞĂƐƚ Ϯϯ ƐƚĂƚĞƐ ŚĂǀĞ ĂŶ ŽŶͲďŝůů ĨŝŶĂŶĐĞ ƉƌŽŐƌĂŵ͕ ǁŚŝĐŚ ŝƐ ŝŶƚĞŶĚĞĚ ƚŽ ĚĞĐƌĞĂƐĞ ƚŚĞ ĨŝŶĂŶĐŝĂů ŚƵƌĚůĞ ĨŽƌ ŵĂŬŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ďLJ ĂůůŽǁŝŶŐ ƚŚĞ ĐƵƐƚŽŵĞƌ ƚŽ ƉĂLJ ĨŽƌ ƚŚĞ ƵƉŐƌĂĚĞƐ ƚŚƌŽƵŐŚ ƚŚĞŝƌ ŵŽŶƚŚůLJ ƵƚŝůŝƚLJ ďŝůů͘ϭϲϵ tŚŝůĞ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĂƌĞ ůĂƌŐĞ ŝŶ Ăůů ƐƚĂƚĞƐ͕ ƚŚĞ ŵŽƐƚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ŵĞĂƐƵƌĞƐ ǀĂƌLJ ƌĞŐŝŽŶĂůůLJ ďĂƐĞĚ ŽŶ ĨĂĐƚŽƌƐ ƐƵĐŚ ĂƐ ĐůŝŵĂƚĞ͕ ĞŶĞƌŐLJ ƉƌŝĐĞƐ͕ ĂŶĚ ďƵŝůĚŝŶŐ ƉƌĂĐƚŝĐĞƐ͘ KŶĞ ĞdžĂŵƉůĞ ĐŽŵĞƐ ĨƌŽŵ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ͕ ǁŚĞƌĞ K ĂŶĂůLJƐŝƐ ŝĚĞŶƚŝĨŝĞĚ Ă ƐƵŝƚĞ ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ 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ƚĞĐŚŶŝĐĂů ƐƵƉƉŽƌƚ ƚŽ ĐĂƉƚƵƌĞ ǀĂůƵĞ ƚŚƌŽƵŐŚ ŝŶĐƌĞĂƐŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ďLJ ĐŽŶƐƵŵĞƌƐ͘ ZĂƚĞƉĂLJĞƌͲĨƵŶĚĞĚ ƉƌŽŐƌĂŵƐ ĚŝƌĞĐƚĞĚ Ăƚ ŝŵƉƌŽǀŝŶŐ ĞŶĚͲƵƐĞ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ŵĂŶĂŐĞŵĞŶƚ ĂƌĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŶŽǁ ĨƵŶĚĞĚ Ăƚ Ψϲʹϳ ďŝůůŝŽŶ ƉĞƌ LJĞĂƌ͘ϭϳϭ dǁĞŶƚLJͲƐŝdž ƐƚĂƚĞƐ ŚĂǀĞ ĞŶĂĐƚĞĚ ĂŶ ŶĞƌŐLJ ĨĨŝĐŝĞŶĐLJ ZĞƐŽƵƌĐĞ ƚĂŶĚĂƌĚ ; Z Ϳ͕ ǁŚŝĐŚ ƌĞƋƵŝƌĞƐ ƵƚŝůŝƚŝĞƐ ƚŽ ƌĞĚƵĐĞ ƚŚĞŝƌ ĐƵƐƚŽŵĞƌƐ͛ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ďLJ Ă ĐĞƌƚĂŝŶ ƉĞƌĐĞŶƚĂŐĞ ŽĨ ĂŶŶƵĂů ƐĂůĞƐ͘ ĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ ŵĞƌŝĐĂŶ ŽƵŶĐŝů ĨŽƌ ĂŶ ŶĞƌŐLJ ĨĨŝĐŝĞŶƚ ĐŽŶŽŵLJ͕ ͞ŝŶ ϮϬϭϰ͕ ƐƚĂƚĞƐ ǁŝƚŚ ĂŶ Z ĂĐŚŝĞǀĞĚ ŝŶĐƌĞŵĞŶƚĂů ĞůĞĐƚƌŝĐŝƚLJ ƐĂǀŝŶŐƐ ŽĨ ϭ͘Ϯ ƉĞƌĐĞŶƚ ŽĨ ƌĞƚĂŝů ƐĂůĞƐ ŽŶ ĂǀĞƌĂŐĞ͕ ĐŽŵƉĂƌĞĚ ƚŽ ĂǀĞƌĂŐĞ ƐĂǀŝŶŐƐ ŽĨ Ϭ͘ϯ ƉĞƌĐĞŶƚ ŝŶ ƐƚĂƚĞƐ ǁŝƚŚŽƵƚ ĂŶ Z ͘͟ϭϳϮ Z ƉŽůŝĐŝĞƐ͕ Žƌ ƐŝŵŝůĂƌ ƌĞƋƵŝƌĞŵĞŶƚƐ͕ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ďĞ Ă ŬĞLJ ĚƌŝǀĞƌ ŽĨ ĨƵƚƵƌĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͕ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ŶĞĂƌůLJ ƚŚƌĞĞ ƋƵĂƌƚĞƌƐ ŽĨ Ăůů ŝŶǀĞƐƚŵĞŶƚ͘ϭϳϯ ĚĚŝƚŝŽŶĂůůLJ͕ ďLJ ϮϬϮϬ ƚŚĞƐĞ ƐƚĂƚĞ Z Ɛ ĂƌĞ ĞƐƚŝŵĂƚĞĚ ƚŽ ƌĞĚƵĐĞ ĞůĞĐƚƌŝĐŝƚLJ 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ŐƌŝĚ ƚŚƌŽƵŐŚ ƚŚĞ Žd ŝƐ ŐĞŶĞƌĂƚŝŶŐ ĚƌĂŵĂƚŝĐĂůůLJ ŝŶĐƌĞĂƐĞĚ ǀŽůƵŵĞƐ ŽĨ ĚĂƚĂ͘ zĞƚ͕ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ ĂŶĚ ƉŽǁĞƌ ĚŝƐƉĂƚĐŚĞƌƐ ŶĞĞĚ ďĞƚƚĞƌ ǀŝƐƵĂůŝnjĂƚŝŽŶ ŽĨ ďĞŚŝŶĚͲƚŚĞͲŵĞƚĞƌ ƌĞƐŽƵƌĐĞƐ ĨŽƌ ĐĂƉĂĐŝƚLJ ƉůĂŶŶŝŶŐ ĂŶĚ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ ŶĞĞĚ ƚŽ ƵŶĚĞƌƐƚĂŶĚ ƚŚĞ ĚĞŐƌĞĞ ƚŽ ǁŚŝĐŚ ƚŚĞLJ ĐĂŶ ƌĞůLJ ŽŶ ĐƵƐƚŽŵĞƌͲƐŝƚĞĚ ĂƐƐĞƚƐ͛ ƉŽǁĞƌ ƉƌŽĚƵĐƚŝŽŶ ƚŽ ŽĨĨƐĞƚ ĐĂƉĂĐŝƚLJ ƌĞƋƵŝƌĞŵĞŶƚƐ͘ dŚŝƐ ŝƐ ĞƐƉĞĐŝĂůůLJ ƚƌƵĞ ŝĨ ƌĞŐƵůĂƚŽƌƐ ĐŽŶƚŝŶƵĞ ƚŽ ƌĞƋƵŝƌĞ ƚŚĂƚ ƚŚĞLJ ŵĂŝŶƚĂŝŶ ƚŚĞ ŶĞĐĞƐƐĂƌLJ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĐĂƉĂďŝůŝƚŝĞƐ ƚŽ ĞŶƐƵƌĞ ƐLJƐƚĞŵ ŚĞĂůƚŚ ĂŶĚ ƉƌŽĚƵĐƚ ƋƵĂůŝƚLJ͘ϭϳϵ KŶĞ ŵĞƚĂͲĂŶĂůLJƐŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚĞ ĞĨĨĞĐƚŝǀĞ ƵƐĞ ŽĨ d ŚĂƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ƌĞĚƵĐĞ ƚŽƚĂů h͘ ͘ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ďLJ ϭϮ ƉĞƌĐĞŶƚ ƚŽ ϮϮ ƉĞƌĐĞŶƚ ďLJ ϮϬϮϬ͘ϭϴϬ tŚŝůĞ d ĚĞǀŝĐĞƐ ĐŽŶƐƵŵĞ ĞůĞĐƚƌŝĐŝƚLJ͕ ƚŚĞLJ ĂůƐŽ ŝŶĐƌĞĂƐĞ ĞĐŽŶŽŵŝĐ ƉƌŽĚƵĐƚŝǀŝƚLJ ĂŶĚ ĐĂŶ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ Žƌ ĞǀĞƌLJ ŬtŚ ĐŽŶƐƵŵĞĚ ďLJ d ƐLJƐƚĞŵƐ͕ ŝƚ ŚĂƐ ďĞĞŶ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ϭϬ ŬtŚ ĂƌĞ ƐĂǀĞĚ ĞůƐĞǁŚĞƌĞ ŝŶ ƚŚĞ ĞĐŽŶŽŵLJ͘ϭϴϭ ŽǁĞǀĞƌ͕ ĚĞƉůŽLJŵĞŶƚ ŽĨ d͕ D ͕ ĂŶĚ ŐƌŝĚ 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ŵĞƌŝĐĂŶ ZĞĐŽǀĞƌLJ ĂŶĚ ZĞŝŶǀĞƐƚŵĞŶƚ Đƚ͕ ƚŽ ŝŶƐƚĂůů ϭϳϬ͕ϬϬϬ ƐŵĂƌƚ ŵĞƚĞƌƐ ĂŶĚ ŐƌŝĚͲĂƵƚŽŵĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŽ ŝŵƉƌŽǀĞ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƌĞĚƵĐĞ ĐŽŶƐƵŵĞƌ ĞůĞĐƚƌŝĐŝƚLJ ďŝůůƐ ƚŚƌŽƵŐŚ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ͘ϭϴϰ dŚĞ ƵƉŐƌĂĚĞĚ ƐLJƐƚĞŵ ŚĂƐ ĂůƌĞĂĚLJ ĂůůŽǁĞĚ W ƚŽ ƋƵŝĐŬůLJ ƌĞƐƚŽƌĞ ƉŽǁĞƌ ĂĨƚĞƌ ƚǁŽ ŵĂũŽƌ ǁĞĂƚŚĞƌͲƌĞůĂƚĞĚ ŽƵƚĂŐĞƐ͕ ƐĂǀŝŶŐ ŵŝůůŝŽŶƐ ŽĨ ĚŽůůĂƌƐ ĨŽƌ W ĂŶĚ ƚŚĞ ĐŽŵŵƵŶŝƚLJ͘ϭϴϱ Ŷ ϮϬϭϬ͕ W ĂŶŶŽƵŶĐĞĚ ŝƚ ǁŽƵůĚ ŽĨĨĞƌ ƚŚĞ ĨŝƌƐƚ ϭͲŐŝŐĂďŝƚͲƉĞƌͲƐĞĐŽŶĚ ;'ďƉƐͿ ƐĞƌǀŝĐĞ ŝŶ ƚŚĞ ĐŽƵŶƚƌLJ͕ ǁŚŝĐŚ ŝƐ ϭϬ ƚŽ ϮϬ ƚŝŵĞƐ ĨĂƐƚĞƌ ƚŚĂŶ ƚŚĞ ďƌŽĂĚďĂŶĚ W ŚĂĚ ďĞĞŶ ŽĨĨĞƌŝŶŐ͘ϭϴϲ dŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ϭͲ'ďƉƐ ŝŶƚĞƌŶĞƚ ƐĞƌǀŝĐĞ ŚĂƐ ŚĞůƉĞĚ ŐƌŽǁ ŚĂƚƚĂŶŽŽŐĂ͛Ɛ ĞĐŽŶŽŵLJ ĂŶĚ ĞŶĐŽƵƌĂŐĞĚ ďƵƐŝŶĞƐƐĞƐ ƚŽ ŝŶǀĞƐƚ ŝŶ ƚŚĞ ĐŝƚLJ͘ϭϴϳ dŚĞ ĞĚĞƌĂů ŽŵŵƵŶŝĐĂƚŝŽŶƐ ŽŵŵŝƐƐŝŽŶ ; Ϳ ŚĂƐ ĂƚƚĞŵƉƚĞĚ ƚŽ ƌĞŵŽǀĞ ďĂƌƌŝĞƌƐ ƚŽ ďƌŽĂĚďĂŶĚ ĞdžƉĂŶƐŝŽŶ ĂŶĚ ƉƌŽŵŽƚĞ ĐŽŵƉĞƚŝƚŝŽŶ ŝŶ dĞŶŶĞƐƐĞĞ ďLJ ĂůůŽǁŝŶŐ W ƚŽ ĞdžƉĂŶĚ ŽƵƚƐŝĚĞ ŝƚƐ ƐĞƌǀŝĐĞ ĂƌĞĂ͕ ďƵƚ Ă ĞĚĞƌĂů ĂƉƉĞĂůƐ ĐŽƵƌƚ ƌĞĐĞŶƚůLJ ŚĞůĚ ƚŚĂƚ ƚŚĞ ĚŝĚ ŶŽƚ ŚĂǀĞ ĂƵƚŚŽƌŝƚLJ ƚŽ ĚŽ ƐŽ͘ϭϴϴ ĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ ͕ ϭϬ ƉĞƌĐĞŶƚ ŽĨ ŵĞƌŝĐĂŶƐ ĂŶĚ ϯϵ ƉĞƌĐĞŶƚ ŽĨ ƌƵƌĂů ŵĞƌŝĐĂŶƐ ůĂĐŬ ĂĐĐĞƐƐ ƚŽ ĂĚǀĂŶĐĞĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͘ϭϴϵ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͕ ƚŚƌŽƵŐŚ ƚŚĞ ZƵƌĂů ůĞĐƚƌŝĨŝĐĂƚŝŽŶ Đƚ͕ ŚĂƐ Ă ůŽŶŐ ŚŝƐƚŽƌLJ ŽĨ ƐƵƉƉŽƌƚŝŶŐ ĞdžƉĂŶƐŝŽŶ ŽĨ ĂĐĐĞƐƐ ƚŽ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƐĞƌǀŝĐĞƐ ŝŶ ƌƵƌĂů ŵĞƌŝĐĂ͕ ǁŝƚŚ ŵĂũŽƌ ŝŶŝƚŝĂƚŝǀĞƐ ĐŽŶƚŝŶƵŝŶŐ ƚŽĚĂLJ ĨŽƌ ŝŵƉůĞŵĞŶƚŝŶŐ ĚĞŵĂŶĚ ƐŝĚĞ ŵĂŶĂŐĞŵĞŶƚ͕ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͕ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐLJƐƚĞŵƐ͕ ĂŶĚ ŽƚŚĞƌ ŝŶŝƚŝĂƚŝǀĞƐ͘ϭϵϬ ŽŶŐƌĞƐƐ ŚĂƐ ĚĞƚĞƌŵŝŶĞĚ ƚŚĂƚ ŝƚ ŝƐ ĞĚĞƌĂů ƉŽůŝĐLJ ƚŽ ƉƌŽǀŝĚĞ ůŽĂŶƐ ƚŽ ƌƵƌĂů ĞůĞĐƚƌŝĐ ĐŽͲŽƉƐ Ăƚ ŝŶƚĞƌĞƐƚ ƌĂƚĞƐ ƚŚĂƚ ĂůůŽǁ ƚŚĞŵ ƚŽ ĂĐŚŝĞǀĞ ƚŚĞ ŐŽĂůƐ ŽĨ ƚŚĞ ZƵƌĂů ůĞĐƚƌŝĨŝĐĂƚŝŽŶ Đƚ͕ ŝŶĐůƵĚŝŶŐ ŝŵƉƌŽǀŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĨĂĐŝůŝƚŝĞƐ ŝŶ ĂƌĞĂƐ ǁŝƚŚ ŚŝŐŚ ĞůĞĐƚƌŝĐŝƚLJ ĐŽƐƚƐ͘ϭϵϭ ϭϵϮ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ĨŝŶĂŶĐŝĂů ƐƵƉƉŽƌƚ͕ h ƉƌŽǀŝĚĞƐ ƚĞĐŚŶŝĐĂů ƐƵƉƉŽƌƚ ĂŶĚ ĐƌĞĂƚĞƐ ƉŝůŽƚ ƉƌŽũĞĐƚƐ ĨŽƌ ŝŵƉƌŽǀŝŶŐ ƌƵƌĂů ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ĂŶĚ ƉƌŽŵŽƚŝŶŐ ƌƵƌĂů ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ͘ϭϵϯ 2 4 2 Customer Engagement Ɛ ĚŝƐĐƵƐƐĞĚ ŝŶ ŚĂƉƚĞƌ ;Transforming the Nation’s Electricity System The Second Installment of the QERͿ͕ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝƐ ďĞĐŽŵŝŶŐ ŵŽƌĞ ĚŝŐŝƚĂů͕ ĐŽŶŶĞĐƚĞĚ͕ ĂŶĚ ŝŶƚĞŐƌĂƚĞĚ͘ dŚĞƐĞ ƚƌĞŶĚƐ͕ ĂŶĚ ƚŚĞ ŶĞǁ ƐĞƌǀŝĐĞƐ ĂŶĚ ĂƐƐĞƚƐ ŽŶ ƚŚĞ ƐLJƐƚĞŵ ŝŶĐůƵĚŝŶŐ ĚŝƐƚƌŝďƵƚĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ; ZͿ͕ ŚŽŵĞ ĂƵƚŽŵĂƚŝŽŶ͕ ĂŶĚ Z͕ ĂƌĞ ĐŚĂŶŐŝŶŐ ƚŚĞ ƉŚLJƐŝĐĂů ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ǁŚŝůĞ ĂůƐŽ ĂůƚĞƌŝŶŐ ĐƵƐƚŽŵĞƌƐ͛ ŝŶƚĞƌĞƐƚ ĂŶĚ ĞŶŐĂŐĞŵĞŶƚ ǁŝƚŚ ƚŚĞŝƌ ĞŶĞƌŐLJ ƵƐĞ͘ KŶĞ ƐƚƵĚLJ ŽĨ ŐƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ĨŽƵŶĚ ƚŚĂƚ ĐŽŶƐƵŵĞƌƐ ǁŝƚŚ Ă ƐŵĂƌƚ ŵĞƚĞƌ ŝŶ ƚŚĞŝƌ ŚŽŵĞ ĞdžƉĞĐƚ ŵŽƌĞ ĨƌŽŵ ƚŚĞŝƌ ƵƚŝůŝƚLJ ŝŶ ƚĞƌŵƐ ŽĨ ŶŽƚŝĨŝĐĂƚŝŽŶƐ ŽŶ ƉŽƚĞŶƚŝĂů ďŝůů ƐĂǀŝŶŐƐ Žƌ ĞdžĐĞƐƐĞƐ͘ϭϵϰ tŚŝůĞ ŵĂŶLJ ĐƵƐƚŽŵĞƌƐ ǁŝůů ĐŽŶƚŝŶƵĞ ƚŽ ĚĞƐŝƌĞ ͞ƉůĂŝŶ ǀĂŶŝůůĂ͟ϭϵϱ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ͕ ŝŶĐƌĞĂƐŝŶŐůLJ͕ ƵƚŝůŝƚŝĞƐ ĂƌĞ ǁŽƌŬŝŶŐ ƚŽ ďĞƚƚĞƌ ĞŶŐĂŐĞ ĂŶĚ ŝŶĨŽƌŵ ƚŚĞŝƌ ŵŽƌĞ ĞŶĞƌŐLJͲŝŶǀŽůǀĞĚ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ĂƌĞ ŵŽǀŝŶŐ ƚŽǁĂƌĚ ŵŽƌĞ ĐƵƐƚŽŵĞƌͲĐĞŶƚƌŝĐ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ͘ ŶŐĂŐŝŶŐ ĐƵƐƚŽŵĞƌƐ ŚĂƐ ĚŝƐƚŝŶĐƚ ďĞŶĞĨŝƚƐ ĨŽƌ ƵƚŝůŝƚŝĞƐͶĞŶŐĂŐĞĚ ŚŽƵƐĞŚŽůĚƐ ĂĚĚ ΨϰϬʹΨϵϬ ĂŶŶƵĂůůLJ ƚŽ Ă ƌĞŐƵůĂƚĞĚ ƵƚŝůŝƚLJ͛Ɛ ďŽƚƚŽŵ ůŝŶĞ ;ƐĞĞ dĂďůĞ ϮͲϭ ĨŽƌ Ă ďƌĞĂŬĚŽǁŶ ŽĨ ƐĂǀŝŶŐƐͿ͕ ĂŶĚ ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌƐ ƌĞƉŽƌƚ ƵƉ ƚŽ Ă ϵ ƉĞƌĐĞŶƚ ŝŶĐƌĞĂƐĞ ŝŶ ƐĂƚŝƐĨĂĐƚŝŽŶ ǁŝƚŚ ƚŚĞŝƌ ƵƚŝůŝƚLJ͘ϭϵϲ hƚŝůŝƚŝĞƐ ĨƵƌƚŚĞƌ ďĞŶĞĨŝƚ ĨƌŽŵ ƌŽďƵƐƚ ĐƵƐƚŽŵĞƌͲĞŶŐĂŐĞŵĞŶƚ ŝŶŝƚŝĂƚŝǀĞƐ ĂƐ ƚŚĞ ŐƌŝĚ ĂŶĚ ƚŚĞ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞů ĐŽŶƚŝŶƵĂůůLJ ĞǀŽůǀĞ ĂŶĚ ŵŽĚĞƌŶŝnjĞ ƚŽ ŵĞĞƚ ŶĞǁ ƚĞĐŚŶŽůŽŐLJ ĚĞŵĂŶĚƐ͕ ƐLJƐƚĞŵ ĐŚĂŶŐĞƐ͕ ĂŶĚ ƉŽůŝĐLJ ŐŽĂůƐ͘ hƚŝůŝƚŝĞƐ ǁŝƚŚ ŵŽƌĞ ƐĂƚŝƐĨŝĞĚ ĐƵƐƚŽŵĞƌƐ ĂƌĞ ŵŽƌĞ ůŝŬĞůLJ ƚŽ ďĞ ĂƉƉƌŽǀĞĚ ĨŽƌ ƌĂƚĞ ŝŶĐƌĞĂƐĞƐ ĨŽƌ ŶĞǁ ŝŶǀĞƐƚŵĞŶƚƐ ƚŚĂŶ ƚŚŽƐĞ ǁŝƚŚ ůŽǁĞƌ ĐƵƐƚŽŵĞƌͲƐĂƚŝƐĨĂĐƚŝŽŶ ƌĂƚŝŶŐƐ͘ϭϵϳ ĐĐŽƌĚŝŶŐ ƚŽ Ă ƐƵƌǀĞLJ ŽĨ ϭϰϰ ƉŽǁĞƌͲƐĞĐƚŽƌ ĞdžĞĐƵƚŝǀĞƐ͕ ŽŶůLJ Ϯ ƉĞƌĐĞŶƚ ƚŚŝŶŬ ƚŚĞŝƌ ƵƚŝůŝƚLJ ŚĂƐ ŐŽŽĚ ĐƵƐƚŽŵĞƌ ŽƵƚƌĞĂĐŚ ƉƌŽŐƌĂŵƐ͕ϭϵϴ ďƵƚ ŵŽƌĞ ƵƚŝůŝƚŝĞƐ ĂƌĞ ŝŶǀĞƐƚŝŶŐ ŝŶ ŶĞǁ ŵĂƌŬĞƚ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƉƌŽŐƌĂŵƐ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŶĐƌĞĂƐŝŶŐůLJ͕ ůŽǁͲƚŽƵĐŚ ŝŶƚĞƌĂĐƚŝŽŶ͕ ƐĞůĨͲƐĞƌǀŝĐĞ͕ ĂŶĚ ƐŽĐŝĂů ŵĞĚŝĂ ĞŶŐĂŐĞŵĞŶƚƐ ĂƌĞ ƚŚƌĞĞ ĐŽŵŵŽŶ ĐƵƐƚŽŵĞƌ ƉƌĞĨĞƌĞŶĐĞƐ ĨŽƌ ŝŶƚĞƌĂĐƚŝŶŐ ǁŝƚŚ ƚŚĞŝƌ ƵƚŝůŝƚLJ͘ϭϵϵ dŚĞƐĞ ĞŶŐĂŐĞŵĞŶƚƐ ĐĂŶ ŝŶĐůƵĚĞ ƐŵĂƌƚ ƉŚŽŶĞ ĂƉƉůŝĐĂƚŝŽŶƐ ĨŽƌ ƌĞĂůͲƚŝŵĞ ŵŽŶŝƚŽƌŝŶŐ ŽĨ ŚŽŵĞ ĞŶĞƌŐLJ ƵƐĞ ĂŶĚ ĞͲďŝůůŝŶŐ ĨŽƌ ŵŽŶƚŚůLJ ĞůĞĐƚƌŝĐŝƚLJ ďŝůůƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Table 2-1 Potential Annual Cost Savings from Customer Engagement Solutions200 XVWRPHU HQJDJHPHQW FDQ SURYLGH FRVW VDYLQJV WR XWLOLWLHV DFURVV VHYHUDO IXQFWLRQV SURJUDP PDUNHWLQJ FXVWRPHU FDUH HQHUJ HIILFLHQF DQG GHPDQG UHVSRQVH 2 4 3 Privacy Concerns Could Limit Utilization of Consumer Data WŽůŝĐLJŵĂŬĞƌƐ͕ ƵƚŝůŝƚŝĞƐ͕ ĂŶĚ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ ĂƌĞ ŝŶĐƌĞĂƐŝŶŐůLJ ŐƌĂƉƉůŝŶŐ ǁŝƚŚ ƉƌŝǀĂĐLJ ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ĂƐ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ĚĂƚĂ ŐĞŶĞƌĂƚĞĚ ĂďŽƵƚ ĐŽŶƐƵŵĞƌƐ͛ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĂŐĞ ŐƌŽǁƐ ĞdžƉŽŶĞŶƚŝĂůůLJ͘ Žƌ ƌĞƐŝĚĞŶƚŝĂů ĐŽŶƐƵŵĞƌƐ͕ ĐŽŶĐĞƌŶƐ ƌĞǀŽůǀĞ ĂƌŽƵŶĚ ĐŽŶƚƌŽů ŽĨ ǁŚĞŶ͕ ǁŚĞƌĞ͕ ŚŽǁ͕ ĂŶĚ ǁŝƚŚ ǁŚŽŵ ĂŶ ŝŶĚŝǀŝĚƵĂů ƐŚĂƌĞƐ ŚŝƐ Žƌ ŚĞƌ ŽǁŶ ƉĞƌƐŽŶĂů ŝŶĨŽƌŵĂƚŝŽŶ͕ ĂƐ ǁĞůů ĂƐ ƚŚĞ ƌŝŐŚƚ ƚŽ ĂĐĐĞƐƐ ƉĞƌƐŽŶĂů ŝŶĨŽƌŵĂƚŝŽŶ ŐŝǀĞŶ ƚŽ ŽƚŚĞƌƐ͕ ƚŽ ĐŽƌƌĞĐƚ ŝƚ͕ ĂŶĚ ƚŽ ĞŶƐƵƌĞ ŝƚ ŝƐ ƐĂĨĞŐƵĂƌĚĞĚ ĂŶĚ ĚŝƐƉŽƐĞĚ ŽĨ ĂƉƉƌŽƉƌŝĂƚĞůLJ͘ϮϬϭ KƚŚĞƌ ĂƐƉĞĐƚƐ ŽĨ ƉƌŝǀĂĐLJ ŝŶĐůƵĚĞ ƉƌŝǀĂĐLJ ŽĨ ƚŚĞ ƉĞƌƐŽŶ͕ ƉƌŝǀĂĐLJ ŽĨ ƉĞƌƐŽŶĂů ďĞŚĂǀŝŽƌ͕ ĂŶĚ ƉƌŝǀĂĐLJ ŽĨ ƉĞƌƐŽŶĂů ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͘ ϮϬϮ ŽŵĞ ĐŽŶƐƵŵĞƌƐ ĂƌĞ ƌĞƐŝƐƚĂŶƚ ƚŽ D ĚƵĞ ƚŽ ƚŚĞ ƐƉĞĐŝĨŝĐŝƚLJ ŽĨ ĚĂƚĂ ĐŽůůĞĐƚĞĚ ŽŶ ĞŶĞƌŐLJͲƵƐĞ ĚĂƚĂ ŝŶ ƐŵĂůůĞƌ ĂŶĚ ƐŚŽƌƚĞƌ ƚŝŵĞ ŝŶĐƌĞŵĞŶƚƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ĂĐƚƵĂů ĂƉƉůŝĂŶĐĞƐ ĐĂŶ ďĞ ŝĚĞŶƚŝĨŝĞĚ ďLJ ƚŚĞŝƌ ůŽĂĚ ƉƌŽĨŝůĞ ;ƌĞĨƌŝŐĞƌĂƚŽƌ͕ ƚŽĂƐƚĞƌ͕ ǁĂƐŚŝŶŐ ŵĂĐŚŝŶĞ͕ ŬĞƚƚůĞ͕ ƉůĂƐŵĂ ds͕ ŽǀĞŶ͕ ĞƚĐ͘Ϳ ĂŶĚ ƚŝŵĞƐ ŽĨ ƵƐĂŐĞ͘ dŚĞƐĞ ĚĂƚĂ ĐĂŶ ƌĞǀĞĂů ďƵŝůĚŝŶŐ ŽĐĐƵƉĂŶĐLJ͕ ďĞŚĂǀŝŽƌĂů ƉĂƚƚĞƌŶƐ͕ ĂŶĚ ŝŶĚŝǀŝĚƵĂů ƉƌĞĨĞƌĞŶĐĞƐ͘ tŚŝůĞ ƐŽŵĞ ĐŽŶƐƵŵĞƌƐ ƐĞĞŵ ƚŽ ƉƌĞĨĞƌ ƚŚĞ ĐĂƉĂďŝůŝƚLJ ƚŽ ŚĂǀĞ ƐƵĐŚ ƐŵĂƌƚ ĂƉƉůŝĂŶĐĞƐ ĂŶĚ ĞǀĞŶ ƚŽ ďĞ ĂďůĞ ƚŽ ĐŽŶƚƌŽů ƚŚĞŵ ƌĞŵŽƚĞůLJ͕ ŽƚŚĞƌ ĐŽŶƐƵŵĞƌƐ ĚŽ ŶŽƚ͘ WƌŝǀĂĐLJ ĐŽŶĐĞƌŶƐ ĂƌĞ ŶŽƚ ůŝŵŝƚĞĚ ƚŽ ƌĞƐŝĚĞŶƚŝĂů ĐŽŶƐƵŵĞƌƐ͘ ŵĂƌƚ ďƵŝůĚŝŶŐƐ ŵĂLJ ĂĚũƵƐƚ ďƵŝůĚŝŶŐ ĐŽŶƚƌŽůƐ͕ ŝŶĐůƵĚŝŶŐ s ͕ ůŝŐŚƚŝŶŐ͕ ĂŶĚ ƐĞĐƵƌŝƚLJ ƐLJƐƚĞŵƐ ďĂƐĞĚ ƵƉŽŶ ŽĐĐƵƉĂŶĐLJ ůĞǀĞůƐ ĂŶĚ ŽĐĐƵƉĂŶĐLJ ŵŝŐƌĂƚŝŽŶ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ďƵŝůĚŝŶŐ͘ ĂƌŐĞƌ ĐŽŵŵĞƌĐŝĂů ĂŶĚ ŝŶĚƵƐƚƌŝĂů ĐƵƐƚŽŵĞƌƐ ŵĂLJ ŚĂǀĞ ůĞŐŝƚŝŵĂƚĞ ĐŽŶĐĞƌŶƐ ĂďŽƵƚ ƐŝŵŝůĂƌ ƵƐĂŐĞ ĚĂƚĂ͕ ƐƵĐŚ ĂƐ ŬŶŽǁŝŶŐ ŚŽǁ ŵƵĐŚ ĂŶĚ ǁŚĞŶ Ă ƐƉĞĐŝĨŝĐ ƚLJƉĞ ŽĨ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ĞƋƵŝƉŵĞŶƚ ŝƐ ŽƉĞƌĂƚŝŽŶĂů͕ ďĞŝŶŐ ŝŶƚĞƌĐĞƉƚĞĚ͕ Žƌ ĂǀĂŝůĂďůĞ ƚŽ ƚŚĞŝƌ ĐŽŵƉĞƚŝƚŽƌƐ͘ ŽŵƉĞƚŝƚŽƌƐ͕ ƉŽƚĞŶƚŝĂů ƐƵŝƚŽƌƐ͕ ĂŶĚ ĞǀĞŶ ĂƐƚƵƚĞ ŝŶǀĞƐƚŽƌƐ ĐŽƵůĚ ďĞ ŬĞĞŶ ƚŽ ůĞĂƌŶ ĨĂĐŝůŝƚLJ ƵƚŝůŝnjĂƚŝŽŶ͕ ƉƌŽĚƵĐƚŝŽŶ ƌĂƚĞƐ͕ ĂŶĚ ŽƚŚĞƌ ƐĂůŝĞŶƚ ŽƉĞƌĂƚŝŽŶĂů ĚĞƚĂŝůƐ ďĞĨŽƌĞ ƐƵĐŚ ŝŶĨŽƌŵĂƚŝŽŶ ďĞĐŽŵĞƐ ƉƵďůŝĐ ĂĨƚĞƌ ƉƌŽĚƵĐƚ ƐĂůĞƐ ǀŽůƵŵĞƐ ĂƌĞ ĂŶŶŽƵŶĐĞĚ Žƌ ĚŝƐĐůŽƐĞĚ͘ ŝŵŝůĂƌůLJ͕ ŐŽǀĞƌŶŵĞŶƚĂů ĐƵƐƚŽŵĞƌƐ͕ ŝŶĐůƵĚŝŶŐ ĂŶĚ ĞƐƉĞĐŝĂůůLJ ŶĂƚŝŽŶĂů ĚĞĨĞŶƐĞ ĂŐĞŶĐŝĞƐ Žƌ ƚŚĞŝƌ ĐŽŶƚƌĂĐƚŽƌƐ͕ ŵĂLJ ŚĂǀĞ ĐŽŶĐĞƌŶƐ ĂďŽƵƚ ƵŶĨƌŝĞŶĚůLJ ƉĂƌƚŝĞƐ Žƌ ĨŽƌĞŝŐŶ ŐŽǀĞƌŶŵĞŶƚƐ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ĂŶ ĂŐĞŶĐLJ͛Ɛ Žƌ ĐŽŶƚƌĂĐƚŽƌ͛Ɛ ŐƌŝĚ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ ĂŶĚ ƌĞƋƵŝƌĞŵĞŶƚƐ͕ ƵƐĂŐĞ͕ ĂŶĚ ƉĂƚƚĞƌŶƐ͘ ĂƵŶĐŚĞĚ ŝŶ ϮϬϭϮ ďLJ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͕ ƚŚĞ 'ƌĞĞŶ ƵƚƚŽŶ ŶŝƚŝĂƚŝǀĞϮϬϯ ŝƐ Ă ƉĂƌƚŶĞƌƐŚŝƉ ǁŝƚŚ ƚŚĞ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚLJ ŝŶĚƵƐƚƌLJ ƚŽ ƉƌŽǀŝĚĞ ĐŽŶƐƵŵĞƌƐ ǁŝƚŚ ĞĂƐLJ͕ ƐĞĐƵƌĞ ĂĐĐĞƐƐ ƚŽ ƚŚĞŝƌ ŽǁŶ ĞŶĞƌŐLJ ƵƐĂŐĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ŝŶĨŽƌŵĂƚŝŽŶ ŝŶ Ă ĐŽŶƐƵŵĞƌͲĨƌŝĞŶĚůLJ ĂŶĚ ĐŽŵƉƵƚĞƌͲĨƌŝĞŶĚůLJ ĨŽƌŵĂƚ͘ϮϬϰ DŽƌĞ ƚŚĂŶ ϲϬ ŵŝůůŝŽŶ ŚŽƵƐĞŚŽůĚƐ ĂŶĚ ďƵƐŝŶĞƐƐĞƐ ĐĂŶ ƵƚŝůŝnjĞ 'ƌĞĞŶ ƵƚƚŽŶ ƚŽ ĂĐĐĞƐƐ ĞŶĞƌŐLJͲƵƐĂŐĞ ĚĂƚĂ ĨƌŽŵ ƚŚĞŝƌ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚLJ͘ tŚŝůĞ ƚŚŝƐ ƉƌŽŐƌĂŵ ƉƌŽǀŝĚĞƐ ŝŶĚŝǀŝĚƵĂůƐ ǁŝƚŚ ƚŚĞŝƌ ŽǁŶ ĞŶĞƌŐLJ ƵƐĞ ĚĂƚĂ͕ ƐƚƌĞĂŵůŝŶĞĚ ƐŚĂƌŝŶŐ ŽĨ ĚĂƚĂ ǁŝƚŚ ƚŚŝƌĚ ƉĂƌƚŝĞƐ͕ ĂƐ ĞdžŝƐƚƐ ǁŝƚŚ ŐůŽďĂů ƉŽƐŝƚŝŽŶŝŶŐ ƐLJƐƚĞŵ ;'W Ϳ ĚĂƚĂ͕ ŝƐ Ɛƚŝůů ŶŽƚ ĂǀĂŝůĂďůĞ͘ dŚĞ ϮϬϭϲ KƌĂŶŐĞ ƵƚƚŽŶ ƉƌŽŐƌĂŵ ďƵŝůĚƐ ŽŶ 'ƌĞĞŶ ƵƚƚŽŶ ĂŶĚ ĞƐƚĂďůŝƐŚĞƐ ƐŽůĂƌ ĚĂƚĂ͘ K ŚĂƐ ƉƵďůŝƐŚĞĚ Ă ǀŽůƵŶƚĂƌLJ ĐŽĚĞ ŽĨ ĐŽŶĚƵĐƚ ĨŽƌ ĚĂƚĂ ƉƌŝǀĂĐLJ ƌĞůĂƚĞĚ ƚŽ ĞŶĚͲƵƐĞƌ ĞŶĞƌŐLJͲĐŽŶƐƵŵƉƚŝŽŶ ĚĂƚĂ͘ hƚŝůŝƚŝĞƐ ĐĂŶ ĚĞŵŽŶƐƚƌĂƚĞ ƚŚĞŝƌ ĐŽŵŵŝƚŵĞŶƚ ƚŽ ĐƵƐƚŽŵĞƌƐ͛ ĚĂƚĂ ƉƌŝǀĂĐLJ ƚŚƌŽƵŐŚ ǀŽůƵŶƚĂƌLJ ĂĚŚĞƌĞŶĐĞ ƚŽ ƚŚĞ ĂƚĂ'ƵĂƌĚ ŶĞƌŐLJ ĂƚĂ WƌŝǀĂĐLJ WƌŽŐƌĂŵ͛Ɛ ƐƚĂŶĚĂƌĚƐ͘ dŚĞƐĞ ƐƚĂŶĚĂƌĚƐ ĞŶƐƵƌĞ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ƌĞŐƵůĂƚŽƌƐ ƚŚĂƚ ƵƐĞƌƐ ŽĨ ĐƵƐƚŽŵĞƌ ĚĂƚĂ ĂĚŚĞƌĞ ƚŽ Ă ŵŝŶŝŵƵŵ ĂŶĚ ǁĞůůͲĂƌƚŝĐƵůĂƚĞĚ ůĞǀĞů ŽĨ ĚĂƚĂ ƉƌŝǀĂĐLJ͘ ĐŽŵƉĂŶLJ͛Ɛ ĐůĂŝŵ ŽĨ ĂĚŚĞƌĞŶĐĞ ƚŽ ƚŚĞ ĂƚĂ'ƵĂƌĚ ƉƌŝŶĐŝƉůĞƐ ŝƐ ĞŶĨŽƌĐĞĂďůĞ ďLJ ƚŚĞ ĞĚĞƌĂů dƌĂĚĞ ŽŵŵŝƐƐŝŽŶ ĂŶĚ ƐƚĂƚĞ ĐŽŶƐƵŵĞƌͲƉƌŽƚĞĐƚŝŽŶ ĂŐĞŶĐŝĞƐ͘ 2 4 4 Demand-Side Options Can Be Used to Avoid Costs of New Infrastructure DĂŶLJ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĨĂĐŝŶŐ ƚŚĞ ƉƌŽƐƉĞĐƚƐ ŽĨ ůĂƌŐĞ ĐĂƉŝƚĂů ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ͕ ĞƐƉĞĐŝĂůůLJ͕ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ ƵƉŐƌĂĚĞƐ͘ dŚĞ ĚŝƐŽŶ ŽƵŶĚĂƚŝŽŶ ƉƌŽũĞĐƚƐ ƚŚĂƚ ƚŽƚĂů h͘ ͘ ĚŝƐƚƌŝďƵƚŝŽŶ ĐĂƉŝƚĂů ŝŶǀĞƐƚŵĞŶƚƐ ĨŽƌ ƚŚĞ ƉĞƌŝŽĚ ϮϬϭϬ ƚŽ ϮϬϯϬ ǁŝůů ďĞ ΨϱϴϮ ďŝůůŝŽŶ ŝŶ ŶŽŵŝŶĂů ƚĞƌŵƐ͘ϮϬϱ 'ĞŽŐƌĂƉŚŝĐĂůůLJ ƚĂƌŐĞƚĞĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ Z ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞůLJ ĚĞĨĞƌ͕ ƌĞĚƵĐĞ͕ Žƌ ƌĞƉůĂĐĞ ĐĂƉĂĐŝƚLJ ƵƉŐƌĂĚĞƐ ĨŽƌ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐLJƐƚĞŵƐ ďLJ ƌĞůŝĂďůLJ ƌĞĚƵĐŝŶŐ ŵĂdžŝŵƵŵ ĚĞŵĂŶĚ ŝŶ ƐƉĞĐŝĨŝĐ ŐƌŝĚ ĂƌĞĂƐ ĂŶĚ ŝŶĐƌĞĂƐŝŶŐ ƵƚŝůŝnjĂƚŝŽŶ ŽĨ ĞdžŝƐƚŝŶŐ ĂƐƐĞƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ĐŽƐƚ ƐĂǀŝŶŐƐ͕ ƉŽƚĞŶƚŝĂů ďĞŶĞĨŝƚƐ ŽĨ ŶŽŶͲ ǁŝƌĞ ĂůƚĞƌŶĂƚŝǀĞƐ ŝŶĐůƵĚĞ ŵŝƚŝŐĂƚŝŶŐ ƐŝƚŝŶŐ ĐŽŶĐĞƌŶƐ ƌĞůĂƚĞĚ ƚŽ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ͖ ĞŶŐĂŐŝŶŐ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ƚŚĞŝƌ ĂŐĞŶƚƐ ;Ğ͘Ő͕͘ ĂŐŐƌĞŐĂƚŽƌƐͿ ŝŶ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐŽůƵƚŝŽŶƐ͖ ĞŶĂďůŝŶŐ ŐƌĂĚƵĂů ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ;ƌĞĚƵĐŝŶŐ ƚŚĞ ŝŵƉĂĐƚ ŽĨ ŝŶĐŽƌƌĞĐƚ ůŽĂĚ ƉƌŽũĞĐƚŝŽŶƐͿ͖ ŝŵƉƌŽǀŝŶŐ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ƚŚƌŽƵŐŚ Ă ĚŝǀĞƌƐŝƚLJ ŽĨ ŵĞĂƐƵƌĞƐ͖ ĂŶĚ ĂĐĐĞůĞƌĂƚŝŶŐ ĚĞǀĞůŽƉŵĞŶƚ ƚŝŵĞ ĨƌĂŵĞƐ͘ dŚĞƐĞ ĂůƚĞƌŶĂƚŝǀĞƐ ĐĂŶ ďĞ ŝĚĞŶƚŝĨŝĞĚ ƚŚƌŽƵŐŚ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉůĂŶŶŝŶŐ ĨŽƌ ƐƉĞĐŝĨŝĐ ŐĞŽŐƌĂƉŚŝĐ ĂƌĞĂƐ͘ KƌĚĞƌƐ ϴϵϬ ĂŶĚ ϭϬϬϬ ďLJ Z ;ĚŝƐĐƵƐƐĞĚ ŝŶ ŐƌĞĂƚĞƌ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ ͕ Building a Clean Electricity FutureͿ ƌĞƋƵŝƌĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉƌŽǀŝĚĞƌƐ ƚŽ ĐŽŵƉĂƌĂďůLJ ƚƌĞĂƚ Ăůů ƌĞƐŽƵƌĐĞƐ ŝŶ Ă ƚƌĂŶƐŵŝƐƐŝŽŶ ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐ͕ ǁŚŝĐŚ ŵĂLJ ŝŶĐůƵĚĞ ŝĚĞŶƚŝĨLJŝŶŐ ŚŽǁ ƚŚĞLJ ǁŝůů ƚƌĞĂƚ ĚĞŵĂŶĚ ƌĞƐŽƵƌĐĞƐ ŽŶ Ă ĐŽŵƉĂƌĂďůĞ ďĂƐŝƐ ǁŝƚŚ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ŐĞŶĞƌĂƚŝŽŶ ƐŽůƵƚŝŽŶƐ ĨŽƌ ƉƵƌƉŽƐĞƐ ŽĨ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉůĂŶŶŝŶŐ͘ϮϬϲ͕ϮϬϳ͕ ϮϬϴ dŚĞ ŽŶŶĞǀŝůůĞ WŽǁĞƌ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ĂŶĚ ƐŽŵĞ ƐƚĂƚĞƐ ;Ğ͘Ő͕͘ DĂŝŶĞ ĂŶĚ sĞƌŵŽŶƚͿ ĂŶĚ ƵƚŝůŝƚŝĞƐ ŚĂǀĞ ďĞĞŶ ĞĂƌůLJ Z ĂĚŽƉƚĞƌƐ͘ dŚĞ ƌŽŽŬůLJŶ YƵĞĞŶƐ ĞŵĂŶĚ DĂŶĂŐĞŵĞŶƚ ƉƌŽũĞĐƚ ŝƐ ĂŶ ĞdžĂŵƉůĞ ŽĨ Ă ƵƚŝůŝƚLJ ƉůĂŶ ĨŽƌ ƵƐŝŶŐ ĚĞŵĂŶĚͲƐŝĚĞ ŽƉƚŝŽŶƐ͕ ĂůŽŶŐ ǁŝƚŚ ƵƚŝůŝƚLJ ƌĞƐŽƵƌĐĞƐ͕ ƚŽ ĂǀŽŝĚ ƐƉĞŶĚŝŶŐ Ψϭ͘Ϯ ďŝůůŝŽŶ ĨŽƌ ŶĞǁ ƐƵďƐƚĂƚŝŽŶƐ͕ ĨĞĞĚĞƌƐ͕ ĂŶĚ ƐǁŝƚĐŚŝŶŐ ƐƚĂƚŝŽŶƐ ƚŽ ŵĞĞƚ Ă ϲϵͲDt ƐŚŽƌƚĨĂůů ŝŶ ƚŚĞ ŐƌŽǁŝŶŐ ƌŽŽŬůLJŶ ĂŶĚ YƵĞĞŶƐ ďŽƌŽƵŐŚƐ ŽĨ EĞǁ zŽƌŬ ŝƚLJ͘ ŽŶƐŽůŝĚĂƚĞĚ ĚŝƐŽŶ͛Ɛ ; ŽŶ Ě͛ƐͿ ƌŽŽŬůLJŶ YƵĞĞŶƐ ĞŵĂŶĚ DĂŶĂŐĞŵĞŶƚ ƉƌŽũĞĐƚ ǁŝůů ĐŽƐƚ ĂŶ ĞƐƚŝŵĂƚĞĚ ΨϮϬϬ ŵŝůůŝŽŶ͕ ǁŚŝĐŚ ŝŶĐůƵĚĞƐ ϭϳ Dt ŽĨ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝŶǀĞƐƚŵĞŶƚ ĂŶĚ ϱϮ Dt ŽĨ ĚĞŵĂŶĚͲƐŝĚĞ ƐŽůƵƚŝŽŶƐ ŽŶ ďŽƚŚ ƚŚĞ ƵƚŝůŝƚLJ ĂŶĚ ĐƵƐƚŽŵĞƌ ƐŝĚĞƐ ŽĨ ƚŚĞ ŵĞƚĞƌ͘ ĞŵĂŶĚͲƐŝĚĞ ŽƉƚŝŽŶƐ ŝŶĐůƵĚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ǁŝƚŚ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ĐƵƐƚŽŵĞƌƐ͕ Z ĂƵĐƚŝŽŶƐ͕ ĂŶĚ Ă WͲĂĐĐĞůĞƌĂƚŝŽŶ ƉƌŽŐƌĂŵ͘ ŽŶ Ě ŚĞůĚ ŝƚƐ ĨŝƌƐƚ Z ĂƵĐƚŝŽŶ ŝŶ ĞĂƌůLJ ƵŐƵƐƚ ϮϬϭϲ ĂŶĚ ĂǁĂƌĚĞĚ ϭϬ ĐŽŶƚƌĂĐƚƐ ƚŚĂƚ ǁŽƵůĚ ƌĞƐƵůƚ ŝŶ ϮϮ Dt ŽĨ ƉĞĂŬ ĚĞŵĂŶĚ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ϮϬϭϴ ǁŝƚŚ ƉĂLJŵĞŶƚƐ ƚŽ ƉƌŽǀŝĚĞƌƐ ƌĂŶŐŝŶŐ ĨƌŽŵ ΨϮϭϱʹ ΨϵϴϴͬŬtͬLJĞĂƌ ĚĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ƉŽǁĞƌ ƌĞĚƵĐƚŝŽŶ ĂŶĚ ĚĞŵĂŶĚ ŵĂŶĂŐĞŵĞŶƚ ƚĞĐŚŶŽůŽŐLJ ƵƐĞĚ͘ dŚĞ ĂǁĂƌĚĞĚ ĐŽŵƉĂŶŝĞƐ ĂƌĞ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ƐŝŐŶŝŶŐ ƵƉ ŽŶ Ě ĐƵƐƚŽŵĞƌƐ ǁŝůůŝŶŐ ƚŽ ƌĞĚƵĐĞ ƚŚĞŝƌ ƵƐĂŐĞ ĚƵƌŝŶŐ ƉĞĂŬ ŚŽƵƌƐ Žƌ ĚĞƉůŽLJ ƚĞĐŚŶŽůŽŐŝĞƐ ůŝŬĞ ƐŽůĂƌ Žƌ ƐƚŽƌĂŐĞ ƚŽ ĐƵƚ ƚŚĞŝƌ ĐŽŶƐƵŵƉƚŝŽŶ͘ dŚĞ ƵƚŝůŝƚLJ ǁŝůů ĂůƐŽ ďĞ ĚĞƉůŽLJŝŶŐ ƐĞǀĞƌĂů Z͕ ŝŶĐůƵĚŝŶŐ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ͕ ĨƵĞů ĐĞůůƐ͕ ďĂƚƚĞƌLJ ƐƚŽƌĂŐĞ͕ ĂŶĚ ǀŽůƚĂŐĞͲ ŽƉƚŝŵŝnjĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ͕ ƚŽ ƌĞĚƵĐĞ ƉĞĂŬ ĚĞŵĂŶĚ ĂŶĚ ƐĂǀĞ ĞŶĞƌŐLJ͘ DŽƌĞ ƚŚĂŶ ϮϱϬ ĞůĞĐƚƌŝĐ ĐŽŽƉĞƌĂƚŝǀĞƐ ŝŶ ϯϱ h͘ ͘ ƚĂƚĞƐ ƵƐĞ ůĂƌŐĞͲĐĂƉĂĐŝƚLJ ĞůĞĐƚƌŝĐͲƌĞƐŝƐƚĂŶĐĞ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ƚŽ ƐŚŝĨƚ ĚĞŵĂŶĚ ĂǁĂLJ ĨƌŽŵ ƉĞĂŬ ŚŽƵƌƐ͘ϮϬϵ dŚĞƐĞ ůĂƌŐĞ͕ ŝŶƐƵůĂƚĞĚ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ƐƚŽƌĞ ǁĂƚĞƌ ŚĞĂƚĞĚ ǁŝƚŚ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ůŽǁͲĐŽƐƚ ƉŽǁĞƌ ĚƵƌŝŶŐ ƚŝŵĞƐ ŽĨ ŽĨĨͲƉĞĂŬ ĚĞŵĂŶĚ ĨŽƌ ƵƐĞ ĚƵƌŝŶŐ ƚŝŵĞƐ ŽĨ ŚŝŐŚͲĐŽƐƚ ƉĞĂŬ ĞŶĞƌŐLJ ĚĞŵĂŶĚ͕ ĞŶĂďůŝŶŐ ĐŽͲŽƉƐ ƚŽ ŽƉƚŝŵŝnjĞ ŽƉĞƌĂƚŝŽŶ ŽĨ ƚŚĞ ŐƌŝĚ͘ ĂƌŐĞ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ĂůƐŽ ĐŽŶƚƌŝďƵƚĞ ƐŝŐŶŝĨŝĐĂŶƚ ĂŶĚ ĐŽŶƐŝƐƚĞŶƚ ĂŵŽƵŶƚƐ ŽĨ ůŽĂĚ͕ ŵĂŬŝŶŐ ƚŚĞŵ ŝĚĞĂů ĐĂŶĚŝĚĂƚĞƐ ĨŽƌ ƵƚŝůŝƚLJ Z ƉƌŽŐƌĂŵƐ͘ϮϭϬ ĂƐŝŶ ůĞĐƚƌŝĐ ŽͲKƉ͕ ǁŚŝĐŚ ƌĞůŝĞƐ ŽŶ ƚŚĞƐĞ ůĂƌŐĞƌ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ĨŽƌ ŵĂŶLJ Z ƉƌŽŐƌĂŵƐ͕ ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƚŚĞƐĞ ŐƌŝĚͲƚŝĞĚ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ŚĞůƉ ƌĞĚƵĐĞ ϱϬϬ Dt ŽĨ ĂŶŶƵĂů ƉĞĂŬ ĚĞŵĂŶĚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘Ϯϭϭ dŚĞ ĂƉƉůŝĐĂƚŝŽŶ ŽĨ Z ƚŽ ŽĨĨƐĞƚ ƚƌĂĚŝƚŝŽŶĂů ƐLJƐƚĞŵ ƵƉŐƌĂĚĞƐ ƉƌĞƐĞŶƚƐ Ă ŶĞǁ ǀĂůƵĞ ƉƌŽƉŽƐŝƚŝŽŶ ĂŶĚ ĐŚĂůůĞŶŐĞƐ ŚŽǁ ƵƚŝůŝƚŝĞƐ ĂƌĞ ƚLJƉŝĐĂůůLJ ĐŽŵƉĞŶƐĂƚĞĚ͘ ĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ EĞǁ zŽƌŬ ZĞĨŽƌŵŝŶŐ ƚŚĞ ŶĞƌŐLJ sŝƐŝŽŶ ŽƌĚĞƌ ŽŶ ƌĂƚĞŵĂŬŝŶŐ ĂŶĚ ƚŚĞ ƵƚŝůŝƚLJ ƌĞǀĞŶƵĞͲŵŽĚĞů ĨƌĂŵĞǁŽƌŬ͕ϮϭϮ ƚŚĞ EĞǁ zŽƌŬ WƵďůŝĐ ĞƌǀŝĐĞ ŽŵŵŝƐƐŝŽŶ ĞdžƉĞĐƚƐ ƚŚĂƚ ŶĞǁ ĞĂƌŶŝŶŐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ ŝŶ ƚŚĞ ŶĞĂƌ ƚĞƌŵ ǁŝůů ďĞ Ă ĐŽŵďŝŶĂƚŝŽŶ ŽĨ ŽƵƚĐŽŵĞͲďĂƐĞĚ ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ ƌĞǀĞŶƵĞƐ ĞĂƌŶĞĚ ĚŝƌĞĐƚůLJ ĨƌŽŵ ƚŚĞ ĨĂĐŝůŝƚĂƚŝŽŶ ŽĨ ĐŽŶƐƵŵĞƌͲĚƌŝǀĞŶ ŵĂƌŬĞƚƐ͘ 2 4 5 Aggregation of Individual Consumer Transactions Can Create Economies of Scale and New Business Models ŐŐƌĞŐĂƚŝŽŶ ĐĂŶ ďĞ ŽĨ ĞŝƚŚĞƌ ůŽĂĚ ;ŝ͘Ğ͕͘ ĐŽŶƐƵŵĞƌƐ ũŽŝŶŝŶŐ ƚŽŐĞƚŚĞƌ ƚŽ ĂŐŐƌĞŐĂƚĞ ƉƵƌĐŚĂƐĞƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͿ Žƌ ŽĨ ƐŽŵĞ ĐŽŵďŝŶĂƚŝŽŶ ŽĨ ƐƵƉƉůLJͲ ĂŶĚ ĚĞŵĂŶĚͲƐŝĚĞ ƌĞƐŽƵƌĐĞƐ͘ ŚĂŶŐĞƐ ŝŶ ƚĞĐŚŶŽůŽŐLJ ĂƐ ǁĞůů ĂƐ ƐƚĂƚĞ ƉŽůŝĐLJ ŚĂǀĞ ůĞĚ ƚŽ ƚŚĞ ĞǀŽůƵƚŝŽŶ ŽĨ ƚǁŽ ŶĞǁĞƌ ĨŽƌŵƐ ŽĨ ĂŐŐƌĞŐĂƚŝŽŶ͕ ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ Z͗ ǀŝƌƚƵĂů ƉŽǁĞƌ ƉůĂŶƚ ;sWWͿ ĂŐŐƌĞŐĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝƚLJ ĐŚŽŝĐĞ ĂŐŐƌĞŐĂƚŝŽŶ ; Ϳ͘ DR aggregation ŝƐ ďĞŝŶŐ ƉƵƌƐƵĞĚ ďLJ ďŽƚŚ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ ĂŶĚ ĐŽŵƉĂŶŝĞƐ ǁŚŽ ƚŚĞŶ ƚĂŬĞ ƚŚĞ ĂŐŐƌĞŐĂƚĞĚ Z ĂŶĚ ďŝĚ ŝƚ ŝŶ ZdKͬ K ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚƐ͕ ƐƵĐŚ ĂƐ W D͕ KͲEĞǁ ŶŐůĂŶĚ͕ D K͕ ĂůŝĨŽƌŶŝĂ K͕ ĂŶĚ EĞǁ zŽƌŬ K͕ Žƌ ĚĞůŝǀĞƌ ŝƚ ƚŽ ĐŽŶƚƌĂĐƚĞĚ ƵƚŝůŝƚŝĞƐ͘dž Z ŝŶ ƚŚĞƐĞ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚƐ ŚĞůƉƐ ůŽǁĞƌ ǁŚŽůĞƐĂůĞ ƉƌŝĐĞƐ͖ ĂĚĚƐ ƚŽ ƌĞƐŽƵƌĐĞ ĚŝǀĞƌƐŝƚLJ͕ ǁŚŝĐŚ ĐĂŶ ŚĞůƉ ƌĞůŝĂďŝůŝƚLJ͖ ĂŶĚ ĐĂŶ ĂůƐŽ ŚĞůƉ ŝŶƚĞŐƌĂƚĞ ŽƚŚĞƌ ƌĞƐŽƵƌĐĞƐ ƐƵĐŚ ĂƐ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ͘ KŶĞ ĞƐƚŝŵĂƚĞ ŝƐ ƚŚĂƚ ϯϮ 't ŽĨ Z ƌĞƐŽƵƌĐĞƐ ĂƌĞ ŶŽǁ ĂǀĂŝůĂďůĞ͕ Ăůů ŽĨ ǁŚŝĐŚ ĂƌĞ ďƌŝŶŐŝŶŐ ƚŚĞ ĐƵƐƚŽŵĞƌ ĚŝƌĞĐƚůLJ ŝŶƚŽ ǁŚŽůĞƐĂůĞ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚƐ͘Ϯϭϯ dŚĞ ƵƐĞ ŽĨ ĂŐŐƌĞŐĂƚĞĚ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ŝŶ ZdKͬ K ŵĂƌŬĞƚƐ ǁĂƐ ŐƌĞĂƚůLJ ĂŝĚĞĚ ďLJ Z ͛Ɛ ŝƐƐƵĂŶĐĞ ŽĨ KƌĚĞƌ EŽ͘ ϳϰϱ͕ ǁŚŝĐŚ ƐĂŝĚ ƚŚĂƚ Ă ͞ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ƌĞƐŽƵƌĐĞ must be compensated ĨŽƌ ƚŚĞ ƐĞƌǀŝĐĞ ŝƚ ƉƌŽǀŝĚĞƐ ƚŽ ƚŚĞ ĞŶĞƌŐLJ ŵĂƌŬĞƚ Ăƚ ƚŚĞ ŵĂƌŬĞƚ ƉƌŝĐĞ ĨŽƌ ĞŶĞƌŐLJ͕ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ ƚŚĞ ůŽĐĂƚŝŽŶĂů ŵĂƌŐŝŶĂů ƉƌŝĐĞ͘͟Ϯϭϰ ŝŶĐĞ ƚŚĞƌĞ ŝƐ Ă ŵŝdžŝŶŐ ŽĨ ƌĞƚĂŝůͲůĞǀĞů ƐĞƌǀŝĐĞƐ ǁŝƚŚ ǁŚŽůĞƐĂůĞͲůĞǀĞů ƐĞƌǀŝĐĞƐ͕ Z ͛Ɛ KƌĚĞƌ EŽ͘ ϳϰϱ ƌĂŝƐĞĚ Ă ŶƵŵďĞƌ ŽĨ ƐƚĂƚĞ ĂŶĚ ĞĚĞƌĂů ũƵƌŝƐĚŝĐƚŝŽŶĂů ŝƐƐƵĞƐ͕ ǁŚŝĐŚ ƚŚĞ h͘ ͘ ƵƉƌĞŵĞ ŽƵƌƚ ĂĚĚƌĞƐƐĞĚ͘Ϯϭϱ Virtual power plants VPPs pioneered in the 1980s in Austin Texas are systems that integrate a wide variety of power resources such as smaller local renewable or gas-fired generation energy storage and energy efficiency DR programs They do this by aggregating many diverse customers from different customer classes “under one type of pricing demand response or distributed energy resource program ”216 Customers are not necessarily grouped by program or type but they can also be aggregated by another defining characteristic for example location ŝŐƵƌĞ ϮͲϭϰͿ͘ LJ ƌĞŵŽƚĞůLJ ĐŽŶƚƌŽůůŝŶŐ ƚŚĞƐĞ sWWƐ ĂŶĚ ĂŐŐƌĞŐĂƚŝŶŐ ĚŝĨĨĞƌĞŶƚ ƚLJƉĞƐ ŽĨ ƉƌŽĚƵĐƚƐ͕ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĂďůĞ ƚŽ ďĞƚƚĞƌ ĨŽƌĞĐĂƐƚ ĞŶĞƌŐLJ ƐƵƉƉůLJ ĂŶĚ ĚĞŵĂŶĚ ĂŶĚ ŝŶĐƌĞĂƐĞ ƚŚĞ ĨůĞdžŝďŝůŝƚLJ ĂŶĚ ƌĞůŝĂďŝůŝƚLJ ŽĨ ƚŚĞ ƐLJƐƚĞŵ͘ ĚĚŝƚŝŽŶĂůůLJ͕ ĂŐŐƌĞŐĂƚŝŽŶ ŽĨ Z ƉƌŽŐƌĂŵƐ ĂůůŽǁƐ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŝŶ Ă ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚ͘ hƚŝůŝƚŝĞƐ ŝŶ ƐĞǀĞƌĂů ƐƚĂƚĞƐ ĂƌĞ ďĞŐŝŶŶŝŶŐ ƚŽ ĨŽĐƵƐ ŽŶ ƚŽĚĂLJ͛Ɛ ŶĞǁĞƌ ǀĞƌƐŝŽŶ ŽĨ sWWƐ͘ Ŷ ĞŶƚƵĐŬLJ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ƚŚĞ 'ůĂƐŐŽǁ ůĞĐƚƌŝĐ WůĂŶƚ ŽĂƌĚ ŝƐ ŝŶƐƚĂůůŝŶŐ Ă ƐLJƐƚĞŵ ŽĨ ďĂƚƚĞƌŝĞƐ ƚŚĂƚ ĐĂŶ ƌĞůĞĂƐĞ ƉŽǁĞƌ ĚƵƌŝŶŐ ƉĞĂŬ ĚĞŵĂŶĚ ƚŝŵĞƐ͘Ϯϭϳ ŝŵŝůĂƌ ƉƌŽŐƌĂŵƐ ĂƌĞ ďĞŝŶŐ ƉŝůŽƚĞĚ ŝŶ EĞǁ zŽƌŬ ĂŶĚ sĞƌŵŽŶƚ͘Ϯϭϴ dŽĚĂLJ͕ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ d ĂƌĞ ĂůůŽǁŝŶŐ ĨŽƌ ƚŚĞ ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŽĨ ŵŽƌĞ ĞůĂďŽƌĂƚĞ ĨŽƌŵƐ ŽĨ sWWƐ͘ dž ŚĂƉƚĞƌ ;Building a Clean Electricity FutureͿ ĚŝƐĐƵƐƐĞƐ ƐƚĂƚĞƐ ƌĞŐƵůĂƚŽƌLJ ĂĐƚŝŽŶƐ ƚŚĂƚ ŝŵƉĂĐƚĞĚ Z͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW Figure 2-14 Aggregations of Demand Response and Distributed Generation219 $JJUHJDWRUV DFWLQJ DV 933V FROOHFW SRZHU DQG VHUYLFHV IURP GLVWULEXWHG UHVRXUFHV LQFOXGLQJ FRPPXQLW VRODU URRIWRS VRODU 9V GLVWULEXWHG VWRUDJH DQG JULG FRQWUROOHG DQG SULFH UHDFWLYH KRXVHKROG GHYLFHV $JJUHJDWRUV DUH WKHQ DEOH WR ELG WKHVH VHUYLFHV FROOHFWLYHO LQWR ZKROHVDOH HOHFWULFLW PDUNHWV WR PHHW V VWHP RSHUDWLRQ QHHGV Community choice aggregation ĞŶĂďůĞƐ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ƚŽ ĂŐŐƌĞŐĂƚĞ ƚŚĞ ďƵLJŝŶŐ ƉŽǁĞƌ ŽĨ ŝŶĚŝǀŝĚƵĂů ĐƵƐƚŽŵĞƌƐ ŝŶ ŽƌĚĞƌ ƚŽ ƐĞĐƵƌĞ ĂůƚĞƌŶĂƚŝǀĞ ĞŶĞƌŐLJ ƐƵƉƉůLJ ĐŽŶƚƌĂĐƚƐ ŽŶ Ă ĐŽŵŵƵŶŝƚLJǁŝĚĞ ďĂƐŝƐ͕ ǁŚŝůĞ ŵĂŝŶƚĂŝŶŝŶŐ ƚŚĞ ĞdžŝƐƚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽǀŝĚĞƌ ĨŽƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ƐĞƌǀŝĐĞƐ͘ϮϮϬ ĞǀĞŶ ƐƚĂƚĞƐͶ DĂƐƐĂĐŚƵƐĞƚƚƐ͕ EĞǁ zŽƌŬ͕ KŚŝŽ͕ ĂůŝĨŽƌŶŝĂ͕ EĞǁ ĞƌƐĞLJ͕ ZŚŽĚĞ ƐůĂŶĚ͕ ĂŶĚ ůůŝŶŽŝƐͶƉĂƐƐĞĚ ůĂǁƐ ĂƐ ƉĂƌƚ ŽĨ ĞůĞĐƚƌŝĐͲƌĞƐƚƌƵĐƚƵƌŝŶŐ ůĞŐŝƐůĂƚŝŽŶ ŝŶ ƚŚĞ ůĂƚĞ ϭϵϵϬƐ ĂŶĚ ĞĂƌůLJ ϮϬϬϬƐ͘ Ŷ ϮϬϭϯ͕ Ɛ ǁĞƌĞ ĂďůĞ ƚŽ ƐĞĐƵƌĞ ŵŽƌĞ ƚŚĂŶ ϵ ŵŝůůŝŽŶ DtŚ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĨŽƌ ĂƉƉƌŽdžŝŵĂƚĞůLJ Ϯ͘ϰ ŵŝůůŝŽŶ ĐƵƐƚŽŵĞƌƐ͘ DŽƐƚ Ɛ ĂƌĞ ΗŽƉƚͲŽƵƚΗ ĞŶƚŝƚŝĞƐ͕ ŵĞĂŶŝŶŐ ƚŚĂƚ ƚŚĞ ĐƵƐƚŽŵĞƌ ŝƐ ďLJ ĚĞĨĂƵůƚ ƉĂƌƚ ŽĨ ƚŚĞ ĂŐŐƌĞŐĂƚŝŽŶ ƵŶůĞƐƐ ƚŚĞ ĐƵƐƚŽŵĞƌ ŽƉƚƐ ŽƵƚ͘ dŚĞ community solar model ŝƐ ĂŶ ĂĚĚŝƚŝŽŶĂů ŵĞƚŚŽĚ ŽĨ ŽƌŐĂŶŝnjŝŶŐ ƚŚĞ ŝŶƐƚĂůůĂƚŝŽŶ ŽĨ ƐŽůĂƌ ĨĂĐŝůŝƚŝĞƐ͘ Ŷ ƚŚŝƐ ƐƚƌƵĐƚƵƌĞ͕ ƐŽůĂƌ ĨĂĐŝůŝƚŝĞƐ ƐƵƉƉůLJ ƉŽǁĞƌ ƚŽ ŵƵůƚŝƉůĞ ĐƵƐƚŽŵĞƌƐ͕ ĞŶĂďůŝŶŐ ƚŚĞ ƉůĂĐĞŵĞŶƚ ĂŶĚ ƐŚĂƌŝŶŐ ŽĨ ƐŽůĂƌ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŝŶƐƚĂůůĂƚŝŽŶƐ ďLJ Ă ĚŝǀĞƌƐĞ ŐƌŽƵƉ ŽĨ ĐƵƐƚŽŵĞƌƐ͘ dŚŝƐ ŵŽĚĞů ŝƐ ŵĞŶƚŝŽŶĞĚ ƐĞƉĂƌĂƚĞůLJ ďĞĐĂƵƐĞ ŝƚ ĐĂŶ ďĞ ĚĞǀĞůŽƉĞĚ ǀŝĂ ŵƵůƚŝƉůĞ ŽǁŶĞƌƐŚŝƉ ĨŽƌŵƐ͕ ŝŶĐůƵĚŝŶŐ ũŽŝŶƚ͕ ŵƵŶŝĐŝƉĂů͕ ĂŶĚ ƵƚŝůŝƚLJ͘ 2 4 6 Interconnection and Interoperability Standards ŶƚĞƌĐŽŶŶĞĐƚŝŽŶ ƐƚĂŶĚĂƌĚƐͶƚŚĞ ƐĞƚƐ ŽĨ ƌƵůĞƐ ƚŚĂƚ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ' Žƌ ƐƚŽƌĂŐĞ ƚŽ ĐŽŶŶĞĐƚ ƚŽ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŐƌŝĚͶƉƌĞƐĐƌŝďĞ ƚŚĞ ĐĂƉĂďŝůŝƚŝĞƐ ƚŚĂƚ ƚĞĐŚŶŽůŽŐŝĞƐ ŵƵƐƚ ƉŽƐƐĞƐƐ ŝŶ ŽƌĚĞƌ ƚŽ ďĞ ĂůůŽǁĞĚ ƚŽ ŝŶƚĞƌĂĐƚ ǁŝƚŚ ƚŚĞ ŐƌŝĚ͘ dŚĞƐĞ ƐƚĂŶĚĂƌĚƐ ĂƌĞ ǀŽůƵŶƚĂƌLJ͕ ďƵƚ ŵĂŶLJ ƐƚĂƚĞ Wh Ɛ ƌĞƋƵŝƌĞ ƚŚĞŝƌ ũƵƌŝƐĚŝĐƚŝŽŶĂů ƵƚŝůŝƚŝĞƐ ƚŽ ĂĚŽƉƚ ƚŚĞŵ ĂŶĚ ƚŚƵƐ ŚĂǀĞ ďĞĐŽŵĞ ĚĞͲĨĂĐƚŽ ŝŶĚƵƐƚƌLJ ƐƚĂŶĚĂƌĚƐ͘ Ŷ ϮϬϭϯ͕ ƚŚĞ ŶƐƚŝƚƵƚĞ ŽĨ ůĞĐƚƌŝĐĂů ĂŶĚ ůĞĐƚƌŽŶŝĐƐ ŶŐŝŶĞĞƌƐ ; Ϳ͕ ǁŚŝĐŚ ĂƵƚŚŽƌƐ ƚŚĞ ƐƚĂŶĚĂƌĚƐ͕ ůĂƵŶĐŚĞĚ Ă ĨƵůů ƌĞǀŝƐŝŽŶ ŽĨ ŝƚƐ ƚĂŶĚĂƌĚ ϭϱϰϳ ͞ ƚĂŶĚĂƌĚ ĨŽƌ ŶƚĞƌĐŽŶŶĞĐƚŝŶŐ ŝƐƚƌŝďƵƚĞĚ ZĞƐŽƵƌĐĞƐ ǁŝƚŚ ůĞĐƚƌŝĐ WŽǁĞƌ LJƐƚĞŵƐ͕͟ ǁŝƚŚ ĞdžƉĞƌƚƐ Ăƚ EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJ ĂŶĚ ĂŶĚŝĂ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌŝĞƐ ůĞĂĚŝŶŐ ƚŚĞ ƚĂŶĚĂƌĚ dĞĐŚŶŝĐĂů WĂŶĞů͘ϮϮϭ dŚĞ ƌĞǀŝƐŝŽŶ͕ ǁŚŝĐŚ ŝƐ ĐƵƌƌĞŶƚůLJ ƵŶĚĞƌǁĂLJ͕ ƐŚŽƵůĚ ĐůĂƌŝĨLJ ĨƵŶĐƚŝŽŶƐ ĨŽƌ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ Z͕ ŝŶƚĞƌŽƉĞƌĂďůĞ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚĞĚ Ws ƌĞůĂƚĞĚ ƚŽ ĂĚǀĂŶĐĞĚ ŝŶǀĞƌƚĞƌ ĨƵŶĐƚŝŽŶĂůŝƚLJ͕ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ĐĂƉĂďŝůŝƚŝĞƐ͕ ĐŽŶƚƌŽůƐ͕ ĂŶĚ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ͕ ĂŵŽŶŐ ŽƚŚĞƌ ƚŽƉŝĐƐ͘ dŚĞƐĞ ĐĂƉĂďŝůŝƚŝĞƐ ĂƌĞ ĨŽƵŶĚĂƚŝŽŶĂů ĨŽƌ ƵƐŝŶŐ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ ďĂĐŬͲƵƉ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ Ws ŐĞŶĞƌĂƚŽƌƐ ƚŽ ƐƵƉƉŽƌƚ ƚŚĞ ĨƵŶĐƚŝŽŶŝŶŐ ŽĨ ƚŚĞ ŐƌŝĚ ŝŶ ƚŚĞ ůŽŶŐ ƚĞƌŵ͘ Ŷ ƚŚĞ ƐŚŽƌƚ ƚĞƌŵ͕ ƚŚĞLJ ǁŝůů ĞŶĂďůĞ ŐƌĞĂƚĞƌ ŚŽƐƚŝŶŐ ĐĂƉĂĐŝƚLJ ĂŶĚ ŵŝƚŝŐĂƚĞ ƐŽŵĞ ŝŶƚĞŐƌĂƚŝŽŶ ĐŚĂůůĞŶŐĞƐ͘ ƉůĂŶƐ ƌĞŐƵůĂƌ ŵĞĞƚŝŶŐƐ ĂŶĚ ĐŽŶŶĞĐƚƐ ƐƵďũĞĐƚ ŵĂƚƚĞƌ ĞdžƉĞƌƚƐ ŝŶ ŐŽǀĞƌŶŵĞŶƚ ĂŶĚ ŝŶĚƵƐƚƌLJ ƚŽ ĐŽůůĂďŽƌĂƚĞ ŽŶ ĂŵĞŶĚŝŶŐ ƐƚĂŶĚĂƌĚƐ ďĂƐĞĚ ŽŶ ƚŚĞŝƌ ůĂƚĞƐƚ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ŽĨ ĞǀŽůǀŝŶŐ ƚĞĐŚŶŽůŽŐLJ͘ dŚĞ ƉƌŝŵĂƌLJ ĐŚĂůůĞŶŐĞ ƚŽ ĐŽŵƉůĞƚŝŶŐ ƚŚĞ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶ ƐƚĂŶĚĂƌĚ͕ ŬŶŽǁŶ ĂƐ ƚĂŶĚĂƌĚ ϭϱϰϳ ƌĞǀŝƐŝŽŶ͕ ŝƐ ĐŝƌĐƵůĂƚŝŶŐ ƚŚĞ ƉƌŽƉŽƐĞĚ ƌĞǀŝƐĞĚ ƐƚĂŶĚĂƌĚ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ŝŶĚƵƐƚƌLJ ĂŶĚ ĂƌďŝƚƌĂƚŝŶŐ ĐŽŵŵĞŶƚƐ ƚŚƌŽƵŐŚ ƚŚĞ ďĂůůŽƚ ƉƌŽĐĞƐƐ͘ ĞdžƉĞĐƚƐ ŽǀĞƌ ϭ͕ϬϬϬ ĐŽŵŵĞŶƚƐ ŽŶ ƚŚĞ ĨŽƌƚŚĐŽŵŝŶŐ ƌĞǀŝƐŝŽŶ͕ ĞĂĐŚ ŽĨ ǁŚŝĐŚ Ă ŵĞŵďĞƌ ŽĨ ƚŚĞ ǁŽƌŬŝŶŐ ŐƌŽƵƉ ŵƵƐƚ ĂĚĚƌĞƐƐ͘ dŚĞ ǁŽƌŬŝŶŐ ŐƌŽƵƉ ĞdžƉĞĐƚƐ ƚŽ ĞŶƚĞƌ ƚŚĞ ŝŶŝƚŝĂů ďĂůůŽƚŝŶŐ ƉƌŽĐĞƐƐ ŝŶ ĞĂƌůLJ ϮϬϭϳ͘ Ĩ ƚŚĞ ĂǀĞƌĂŐĞ ŵŽŶƚŚůLJ ƌĂƚĞ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ Ws ĂĚŽƉƚŝŽŶ ĨƌŽŵ Ɖƌŝů ϮϬϭϱ ƚŽ Ɖƌŝů ϮϬϭϲ ƌĞŵĂŝŶƐ ƚŚĞ ƐĂŵĞ͕ ĂŶ ĂĚĚŝƚŝŽŶĂů ϭϬ 't ǁŝůů ďĞ ĂĚĚĞĚ ƚŽ ƚŚĞ ŐƌŝĚ ďLJ ƚŚĞ ĞŶĚ ŽĨ ϮϬϭϴ͕ ŵŽƌĞ ƚŚĂŶ ĚŽƵďůŝŶŐ ƚŚĞ ĐƵƌƌĞŶƚ ĐĂƉĂĐŝƚLJ͘ϮϮϮ ŽǁĞǀĞƌ͕ ĞǀĞŶ ĂĨƚĞƌ ĂĚŽƉƚƐ ƚŚĞ ƌĞǀŝƐĞĚ ƐƚĂŶĚĂƌĚƐ͕ Wh Ɛ ĂŶĚ ƵƚŝůŝƚŝĞƐ ǁŝůů ŶĞĞĚ ƚŽ ĐŽŶƐŝĚĞƌ ĂŶĚ ĂĚŽƉƚ ƚŚĞŵ ŝŶ ŽƌĚĞƌ ƚŽ ĨĂĐŝůŝƚĂƚĞ ĂĚǀĂŶĐĞĚ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ ĂŶĚ ŝŶƚĞƌŽƉĞƌĂďůĞ ŽƉĞƌĂƚŝŽŶ ŽĨ ŐƌŝĚͲĐŽŶŶĞĐƚĞĚ ĚĞǀŝĐĞƐ͘ EŽƚĂďůLJ ƚŚĞ ĐƵƌƌĞŶƚ ƉƵďůŝƐŚĞĚ ƐƚĂŶĚĂƌĚ ;ϭϱϰϳ͘ĂͿ ĞŶĐŽŵƉĂƐƐĞƐ ĂƐƉĞĐƚƐ ŽĨ ĞdžƚĞŶĚĞĚ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ĐĂƉĂďŝůŝƚŝĞƐ͕ϮϮϯ ďƵƚ ŝƚ ŚĂƐ ŶŽƚ ďĞĞŶ ǁŝĚĞůLJ ĂĚŽƉƚĞĚ͘ džƉĞĚŝƚŝŶŐ ƚŚĞ ĐŽŵƉůĞƚŝŽŶ ĂŶĚ ĂĚŽƉƚŝŽŶ ŽĨ ƚŚĞ ϭϱϰϳ ƚĂŶĚĂƌĚ ƌĞǀŝƐŝŽŶ ǁŝůů ŝŵƉƌŽǀĞ ƐŽŵĞ ŽƉĞƌĂƚŝŽŶĂů ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ŽĨ ƉƌĞͲĞdžŝƐƚŝŶŐ ƐLJƐƚĞŵƐ͘ ƚ ǁŝůů ĂůƐŽ ĂůůŽǁ Ă ŐƌĞĂƚĞƌ ƉĞƌĐĞŶƚĂŐĞ ŽĨ ŶĞĂƌͲƚĞƌŵ ĐĂƉĂĐŝƚLJ ĂĚĚŝƚŝŽŶƐ ƚŽ ŝŶĐŽƌƉŽƌĂƚĞ ŵĂŶLJ ŝŵƉŽƌƚĂŶƚ ŐƌŝĚ ĨƵŶĐƚŝŽŶƐ ĂŶĚ ĐĂƉĂďŝůŝƚŝĞƐ ƚŚĂƚ ĐƵƌƌĞŶƚ ƐƚĂŶĚĂƌĚƐ ĚŽ ŶŽƚ ĂĚĚƌĞƐƐ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƐƚĂŶĚĂƌĚƐ͕ EĂƚŝŽŶĂů ůĞĐƚƌŝĐĂů ŽĚĞ ƐƚĂŶĚĂƌĚƐ ŚĂǀĞ ĐŚĂŶŐĞĚ ƐŝŐŶŝĨŝĐĂŶƚůLJ ǁŝƚŚ ĞĂĐŚ ƌĞǀŝƐŝŽŶ ŝŶ ƌĞĐĞŶƚ LJĞĂƌƐ͘ dŚŝƐ ĐŚĂŶŐĞ ŚĂƐ ďĞĞŶ ŝŶ ƌĞƐƉŽŶƐĞ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ĞǀŽůƵƚŝŽŶ ŽĨ ƐŽůĂƌ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ƚŚĞ ŶĞĞĚ ĨŽƌ Ă ƐƚĂďůĞ ŵĂƌŬĞƚ ĞŶǀŝƌŽŶŵĞŶƚ ƚŽ ĞŶƐƵƌĞ ƚŚĞ ƉƌŽůŝĨĞƌĂƚŝŽŶ ŽĨ ƐĂĨĞ͕ ƌĞůŝĂďůĞ͕ ĂŶĚ ĐŽƐƚͲ ĞĨĨĞĐƚŝǀĞ ƐŽůĂƌ Ws͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶ͕ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ŝƐ Ă ĐƌŝƚŝĐĂů ƌĞƋƵŝƌĞŵĞŶƚ ĨŽƌ ƐĞĂŵůĞƐƐ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ŐƌŝĚͲ ĐŽŶŶĞĐƚĞĚ ĚĞǀŝĐĞƐ͘ϮϮϰ dŚĞ EĂƚŝŽŶĂů ŶƐƚŝƚƵƚĞ ŽĨ ƚĂŶĚĂƌĚƐ ĂŶĚ dĞĐŚŶŽůŽŐLJ ;E dͿ ĚĞĨŝŶĞƐ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ĂƐ ͙͞ƚŚĞ ĐĂƉĂďŝůŝƚLJ ŽĨ ƚǁŽ Žƌ ŵŽƌĞ ŶĞƚǁŽƌŬƐ͕ ƐLJƐƚĞŵƐ͕ ĚĞǀŝĐĞƐ͕ ĂƉƉůŝĐĂƚŝŽŶƐ͕ Žƌ ĐŽŵƉŽŶĞŶƚƐ ƚŽ ĞdžĐŚĂŶŐĞ ĂŶĚ ƌĞĂĚŝůLJ ƵƐĞ ŝŶĨŽƌŵĂƚŝŽŶͶƐĞĐƵƌĞůLJ͕ ĞĨĨĞĐƚŝǀĞůLJ͕ ĂŶĚ ǁŝƚŚ ůŝƚƚůĞ Žƌ ŶŽ ŝŶĐŽŶǀĞŶŝĞŶĐĞ ƚŽ ƚŚĞ ƵƐĞƌ͘͟ϮϮϱ ŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ƐƚĂŶĚĂƌĚƐ ŝŶĐƌĞĂƐĞ ƚŚĞ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞŶĞƐƐ ŽĨ ŐƌŝĚͲŵŽĚĞƌŶŝnjĂƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ ďLJ ŵŝƚŝŐĂƚŝŶŐ ƚŚĞ ƌŝƐŬ ŽĨ ĚŝǀĞƌƐĞ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ďĞĐŽŵŝŶŐ ƉƌĞŵĂƚƵƌĞůLJ ŽďƐŽůĞƚĞ͖ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ďĂĐŬǁĂƌĚ ĐŽŵƉĂƚŝďŝůŝƚLJ ǁŝƚŚ ĂůƌĞĂĚLJͲĚĞƉůŽLJĞĚ ƚĞĐŚŶŽůŽŐŝĞƐ͖ ĞŶĂďůŝŶŐ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶƐ ĨŽƌ ƚŚĞ ŚĂƌĚǁĂƌĞ ĂŶĚ ƐŽĨƚǁĂƌĞ ŽĨ ŐƌŝĚͲĐŽŶŶĞĐƚĞĚ ĚĞǀŝĐĞƐ͖ ĂŶĚ ĞŶƐƵƌŝŶŐ ƚŚĞ ƐĞĐƵƌŝƚLJ ŽĨ ĚĞǀŝĐĞƐ ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚĞ ŐƌŝĚ͘ϮϮϲ dŚĞ ŶĞƌŐLJ ŶĚĞƉĞŶĚĞŶĐĞ ĂŶĚ ĞĐƵƌŝƚLJ Đƚ ŽĨ ϮϬϬϳ ŵĂŶĚĂƚĞĚ ƚŚĂƚ E d ĚĞǀĞůŽƉ Ă ĨƌĂŵĞǁŽƌŬ ĂŶĚ ƉƌŽƚŽĐŽůƐ ĨŽƌ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ƐƚĂŶĚĂƌĚƐ ŽĨ ƐŵĂƌƚ ŐƌŝĚ ĚĞǀŝĐĞƐ͘ E d͕ ŝŶ ĐŽŽƉĞƌĂƚŝŽŶ ǁŝƚŚ ƚŚĞ ŝŶĚƵƐƚƌLJͲůĞĚ ŵĂƌƚ 'ƌŝĚ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ŶƚĞƌŽƉĞƌĂďŝůŝƚLJ WĂŶĞů͕ ĚĞǀĞůŽƉĞĚ ŝŶŝƚŝĂů ƐƚĂŶĚĂƌĚƐ ĂŶĚ ĐŽŶƚŝŶƵĞƐ ƚŽ ĚĞǀĞůŽƉ ƚŚĞ ƐƚĂŶĚĂƌĚƐ ǁŝƚŚ ƚŚĞ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŽĨ K ĂŶĚ ŝŶĚƵƐƚƌLJ ŐƌŽƵƉƐ͘ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĚŽĞƐ ŶŽƚ ŵĂŶĚĂƚĞ ƚŚĞ ƵƉƚĂŬĞ ŽĨ ŝŶƚĞƌŽƉĞƌĂďŝůŝƚLJ ĂŶĚ ŝŶƚĞƌĐŽŶŶĞĐƚŝŽŶ ƐƚĂŶĚĂƌĚƐ͕ ďƵƚ ŝƚ ƐƵƉƉŽƌƚƐ ĂŶĚ ĐĂŶ ƐƉĞĞĚ ƵƉ ƚŚĞ ƐƚĂŶĚĂƌĚƐͲĚĞǀĞůŽƉŵĞŶƚ ƉƌŽĐĞƐƐĞƐ ŝŶ ŽƌĚĞƌ ƚŽ ĂŶŝŵĂƚĞ ŶĂƚŝŽŶĂů ŵĂƌŬĞƚƐ ĨŽƌ ŐƌŝĚͲĐŽŶŶĞĐƚĞĚ ĚĞǀŝĐĞƐ͘ DĂŶLJ ĐŽŶƐƵŵĞƌͲůĞǀĞů ĂŶĚ ŐƌŝĚͲůĞǀĞů ĚĞǀŝĐĞƐ ĂƌĞ ĞŝƚŚĞƌ ŽŶ ƚŚĞ ŵĂƌŬĞƚ Žƌ ƵŶĚĞƌ ĚĞǀĞůŽƉŵĞŶƚ͘ tŚĞŶ ĐŽŶŶĞĐƚĞĚ ƚŚƌŽƵŐŚ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚŝĞƐ͛ ĚŝƐƚƌŝďƵƚŝŽŶ ŐƌŝĚƐ͕ ƚŚĞƐĞ ĚĞǀŝĐĞƐ ĐĂŶ ŽĨĨĞƌ ďĞŶĞĨŝƚƐ ƚŽ ƚŚĞ ĐƵƐƚŽŵĞƌƐ ǁŚŽ ƵƐĞ ƚŚĞŵ ĂŶĚ ĐĂŶ ƐƵƉƉŽƌƚ ƚŚĞ ƐƚĂďŝůŝƚLJ ŽĨ ƚŚĞ ďƌŽĂĚĞƌ ŐƌŝĚ ƐLJƐƚĞŵ͘ ŽǁĞǀĞƌ͕ ŝŶ ŽƌĚĞƌ ƚŽ ƌĞĂůŝnjĞ ďĞŶĞĨŝƚƐ͕ ĚĞǀŝĐĞƐ ŵƵƐƚ ďĞ ĂďůĞ ƚŽ ĐŽŽƌĚŝŶĂƚĞ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚĞ ƚŚĞŝƌ ŽƉĞƌĂƚŝŽŶƐ ǁŝƚŚ ƚŚĞ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ͛ ĐŽŶƚƌŽů ƐLJƐƚĞŵƐ ĂŶĚ ŽƚŚĞƌ ĚĞǀŝĐĞƐ͘ 2 5 The Changing Preferences of Electricity Consumers Impacts on Policies and Regulations dŚĞ ŶĞǁ ŐƌŝĚ ĂŶĚ ĞŶĚͲƵƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĚĞƐĐƌŝďĞĚ ŝŶ ƚŚŝƐ ŝŶƐƚĂůůŵĞŶƚ ŽĨ ƚŚĞ YƵĂĚƌĞŶŶŝĂů ŶĞƌŐLJ ZĞǀŝĞǁ ŚĂǀĞ ĚŝĨĨĞƌĞŶƚ ŽƉĞƌĂƚŝŽŶĂů ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ĂŶĚ ĐĂŶ ƉƌŽǀŝĚĞ ŶĞǁ ĂŶĚ ĚŝĨĨĞƌĞŶƚ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ƚŚĂŶ ŵĂŶLJ ŽĨ ƚŚĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĨŽƌŵĞĚ ƚŚĞ ďĂĐŬďŽŶĞ ŽĨ ƚŚĞ ϮϬƚŚͲĐĞŶƚƵƌLJ ŐƌŝĚ͘ Ŷ ŵĂŶLJ ŝŶƐƚĂŶĐĞƐ͕ ƚŚĞ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ƉƌŽǀŝĚĞ ŶĞǁ ďĞŶĞĨŝƚƐ ƚŽ ƐLJƐƚĞŵ ƉĂƌƚŝĐŝƉĂŶƚƐ ďƵƚ ĚŽ ŶŽƚ ŶĞĐĞƐƐĂƌŝůLJ ƉƌŽǀŝĚĞ Ăůů ƐĞƌǀŝĐĞƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ŵĂŝŶƚĂŝŶ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ ƵŶĚĞƌ ĐƵƌƌĞŶƚ ŽƉĞƌĂƚŝŶŐ ƉƌŽƚŽĐŽůƐ͘ Ŷ ƚŚĞ ƵŶƌĞƐƚƌƵĐƚƵƌĞĚ ŐƌŝĚ͕ ǁŚŝĐŚ Ɛƚŝůů ƐĞƌǀĞƐ ůĂƌŐĞ ƉŽƌƚŝŽŶƐ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͕ Ă ǀĞƌƚŝĐĂůůLJ ŝŶƚĞŐƌĂƚĞĚ ƵƚŝůŝƚLJ ƉƌŽǀŝĚĞƐ ŵŽƐƚ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ;ĞŶĞƌŐLJ͕ ĂŶĐŝůůĂƌLJ ƐĞƌǀŝĐĞƐ͕ ĞƚĐ͘Ϳ ƚŚƌŽƵŐŚ ĐĞŶƚƌĂůŝnjĞĚ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƵƚŝůŝƚLJͲŽǁŶĞĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĞƋƵŝƉŵĞŶƚ͘ ƚ ƚŚĞŶ ĐŚĂƌŐĞƐ ĐŽŶƐƵŵĞƌƐ ĨŽƌ ƚŚĞ ĐŽƐƚ ŽĨ ƚŚĞ ĞŶĞƌŐLJ ƚŚĞLJ ĐŽŶƐƵŵĞ͕ ƚŚĞ ƐĞƌǀŝĐĞƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ƉƌŽǀŝĚĞ ƚŚĂƚ ĞŶĞƌŐLJ͕ ĂŶĚ ƚŚĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƚŚĂƚ ŐĞŶĞƌĂƚĞƐ ĂŶĚ ƚƌĂŶƐŵŝƚƐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ͘ tŝƚŚ ƚŚĞ ĂĚǀĞŶƚ ŽĨ ĐŽŵƉĞƚŝƚŝǀĞ ŵĂƌŬĞƚƐ͕ ĞŶĞƌŐLJ ĂŶĚ ŽƚŚĞƌ ƐĞƌǀŝĐĞƐ ĐĂŶ ŶŽǁ ďĞ ĂĐƋƵŝƌĞĚ ĨƌŽŵ ŽƚŚĞƌ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ͘ ƌĂŶŐĞ ŽĨ ĂĐƚŽƌƐ ĞŶŐĂŐĞĚ ŝŶ ƚŚĞ ƐLJƐƚĞŵ͕ ǁŚŽƐĞ ŶƵŵďĞƌƐ ĂƌĞ ŐƌŽǁŝŶŐ ĚĂŝůLJ͕ ĐĂŶ ƚĞĐŚŶŽůŽŐŝĐĂůůLJ ƉƌŽǀŝĚĞ ƚŚĞ ƐĞƌǀŝĐĞƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ŵĂŝŶƚĂŝŶ ƐLJƐƚĞŵ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ƐƵƉƉŽƌƚ͘ ĞƐƉŝƚĞ ŝŶĐƌĞĂƐŝŶŐ ĐƵƐƚŽŵĞƌ ƉĂƌƚŝĐŝƉĂƚŝŽŶ͕ ƚŚĞ ƌĞƐƉŽŶƐŝďŝůŝƚLJ ŽĨ ĞŶƐƵƌŝŶŐ ƌĞůŝĂďŝůŝƚLJ ŽŶ ĂŶ ŝŶĐƌĞĂƐŝŶŐůLJ ĐŽŵƉůŝĐĂƚĞĚ ƐLJƐƚĞŵ ůĂƌŐĞůLJ ĨĂůůƐ ƚŽ ƚŚĞ ŐƌŝĚ ŽƉĞƌĂƚŽƌ͘ dŚĞ ƉƌŽůŝĨĞƌĂƚŝŽŶ ŽĨ ĚLJŶĂŵŝĐ͕ ĐŽŶƐƵŵĞƌͲŽǁŶĞĚ ĂƐƐĞƚƐ ƚŚĂƚ ŐĞŶĞƌĂƚĞ ƉŽǁĞƌ ĂŶĚ ƉƌŽǀŝĚĞ Z ƐĞƌǀŝĐĞƐ ĐŚĂůůĞŶŐĞƐ ƚŚĞ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƌĞŐƵůĂƚŽƌLJ ƐƚƌƵĐƚƵƌĞƐ͘ dŚĞƐĞ ƌĞŐƵůĂƚŝŶŐ ƐƚƌƵĐƚƵƌĞƐ ŐŽǀĞƌŶ ĐŽŵƉĞŶƐĂƚŝŽŶ ĨŽƌ ĞŶĞƌŐLJ͕ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ĂŶĚ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ĂŶĚ ŚĂǀĞ ũƵƌŝƐĚŝĐƚŝŽŶĂů ƌĞƐƉŽŶƐŝďŝůŝƚLJ ĨŽƌ ŽǀĞƌƐĞĞŝŶŐ ƚŚĞ ƐLJƐƚĞŵ͕ ǁŚŝĐŚ ŚĂƐ ĞǀŽůǀĞĚ ƐůŽǁůLJ ƐŝŶĐĞ ƚŚĞ ϭϵϯϬƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƐƚĂƚĞ ĂŶĚ ůŽĐĂů ĞůĞĐƚƌŝĐŝƚLJ ƌĞŐƵůĂƚŽƌƐ ĂŶĚ ƉŽůŝĐLJŵĂŬĞƌƐ ĂƌĞ ǁŽƌŬŝŶŐ ǁŝƚŚŝŶ ƚŽ ƚƌĂŶƐĨŽƌŵ ĂŶ ŝŶĚƵƐƚƌLJ ƚŚĂƚ ŝƐ ĞdžƉĞƌŝĞŶĐŝŶŐ Ă ǁĂǀĞ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĐŽŶƐƵŵĞƌ ĚĞŵĂŶĚƐ͕ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ͘ WƵďůŝĐ ŽĨĨŝĐŝĂůƐ ĂŶĚ ƐŵĂůů ƵƚŝůŝƚLJ ŵĂŶĂŐĞƌƐ ĂƌĞ ƚƌLJŝŶŐ ƚŽ ĞǀĂůƵĂƚĞ ƚŚĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ ĞŵĞƌŐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dŚŝƐ ƉƌŽĐĞƐƐ ŝƐ ŽĨƚĞŶ ŚŝŐŚůLJ ƚĞĐŚŶŝĐĂů ĂŶĚ ĚĞŵĂŶĚƐ Ă ŶĞǁ ŬŶŽǁůĞĚŐĞ ďĂƐĞ ĂŶĚ ƐŬŝůů ƐĞƚ ƚŚĂŶ ƚŚŽƐĞ ƉƌĞǀŝŽƵƐůLJ ƌĞƋƵŝƌĞĚ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ͘ Žƌ ĞdžĂŵƉůĞ͕ EĞǁ zŽƌŬ ƚĂƚĞ͛Ɛ͕ ZĞĨŽƌŵŝŶŐ ƚŚĞ ŶĞƌŐLJ sŝƐŝŽŶ ŝƐ Ă ĐŽŵƉƌĞŚĞŶƐŝǀĞ ĞĨĨŽƌƚ ƚŽ ͞ŚĞůƉ ĐŽŶƐƵŵĞƌƐ ŵĂŬĞ ŵŽƌĞ ŝŶĨŽƌŵĞĚ ĞŶĞƌŐLJ ĐŚŽŝĐĞƐ͕ ĚĞǀĞůŽƉ ŶĞǁ ĞŶĞƌŐLJ ƉƌŽĚƵĐƚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ͕ ĂŶĚ ƉƌŽƚĞĐƚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ ǁŚŝůĞ ĐƌĞĂƚŝŶŐ ŶĞǁ ũŽďƐ ĂŶĚ ĞĐŽŶŽŵŝĐ ŽƉƉŽƌƚƵŶŝƚLJ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ƐƚĂƚĞ͘ΗϮϮϳ EĞǁ ĐŽŵƉĞŶƐĂƚŽƌLJ ŵŽĚĞůƐ ƚŽ ŝŶĐĞŶƚ ƚŚĞ ĂƉƉƌŽƉƌŝĂƚĞ ŵŝdž ŽĨ ƌĞƐŽƵƌĐĞƐ ŽŶ ƚŚĞ ŐƌŝĚ ĂŶĚ ŶĞǁ ƚŽŽůƐ ĨŽƌ ĐŽŽƌĚŝŶĂƚŝŶŐ ĂĐƌŽƐƐ ũƵƌŝƐĚŝĐƚŝŽŶƐ ǁŝůů ďĞ ƌĞƋƵŝƌĞĚ ƚŽ ĂůŝŐŶ ƚŚĞ ƉŽůŝĐLJ ĂŶĚ ƌĞŐƵůĂƚŽƌLJ ĨƌĂŵĞǁŽƌŬƐ ƚŚĂƚ ĞŶƐƵƌĞ ƐĞĐƵƌĞ͕ ƌĞůŝĂďůĞ͕ ĂŶĚ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU 2 5 1 Compensating Providers of Grid Services dŚĞ ĂĐĐƵƌĂƚĞ ĐŚĂƌĂĐƚĞƌŝnjĂƚŝŽŶ ĂŶĚ ǀĂůƵĂƚŝŽŶ ŽĨ ƐĞƌǀŝĐĞƐ ƚŚĂƚ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ƉƌŽǀŝĚĞ ƚŽ ƚŚĞ ŐƌŝĚ ĐĂŶ ĐŽŶƚƌŝďƵƚĞ ƚŽ ĐůĞĂƌĞƌ ƉƌŝĐĞ ƐŝŐŶĂůƐ ƚŽ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŽǁŶĞƌƐ͘ dŚŝƐ ĐůĂƌŝƚLJ ĞŶƐƵƌĞƐ ƚŚĂƚ ƚƌĂĚĞŽĨĨƐ ĂŵŽŶŐ ƐLJƐƚĞŵ ĂƚƚƌŝďƵƚĞƐ ůŝŬĞ ĂĨĨŽƌĚĂďŝůŝƚLJ͕ ƐƵƐƚĂŝŶĂďŝůŝƚLJ͕ ĂŶĚ ƌĞůŝĂďŝůŝƚLJ ĂƌĞ ƐLJƐƚĞŵĂƚŝĐĂůůLJ ĐŽŶƐŝĚĞƌĞĚ͕ ĂŶĚ ƚŚĂƚ ĚĞƐŝƌĂďůĞ ƉƌŽƉĞƌƚŝĞƐ ĂƌĞ ĐŽŵƉĞŶƐĂƚĞĚ ĂƉƉƌŽƉƌŝĂƚĞůLJ ŝŶ Ă ƌĂƉŝĚůLJ ĞǀŽůǀŝŶŐ ƐLJƐƚĞŵ͘ hƚŝůŝƚŝĞƐ ĂƌĞ ŝŶĐƌĞĂƐŝŶŐůLJ ĂƚƚĞŵƉƚŝŶŐ ƚŽ ƋƵĂŶƚŝĨLJ ƚŚĞ ƌĞůĂƚŝǀĞ ĐŽƐƚ ŽĨ ĚĞŵĂŶĚͲƐŝĚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ůŽĂĚͲŵĂŶĂŐĞŵĞŶƚ ŝŶǀĞƐƚŵĞŶƚƐ ĐŽŵƉĂƌĞĚ ƚŽ ƐƵƉƉůLJͲƐŝĚĞ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ Žƌ ĚŝƐƚƌŝďƵƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ƵƚŝůŝƚLJ ĂŶĚ ƌĞŐŝŽŶĂů ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐĞƐ͕ ĂƐ ǁĞůů ĂƐ ŝŶƚĞƌĐŽŶŶĞĐƚͲǁŝĚĞ ĂŶĚ ŶĂƚŝŽŶĂů ƉŽůŝĐLJ ŵĂŬŝŶŐ͘ϮϮϴ͕ ϮϮϵ͕ ϮϯϬ͕ Ϯϯϭ KĨƚĞŶ͕ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ĚĞŵĂŶĚͲƐŝĚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƚŽ ďĂůĂŶĐĞ ƐƵƉƉůLJ ĂŶĚ ĚĞŵĂŶĚ ŽŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ĂƌĞ ůĞƐƐ ĞdžƉĞŶƐŝǀĞ ƚŚĂŶ ĂĚĚŝƚŝŽŶĂů ƐƵƉƉůLJ ĂŶĚ ƉƌŽǀŝĚĞ Ă ƌĂŶŐĞ ŽĨ ƋƵĂŶƚŝĨŝĂďůĞ ďĞŶĞĨŝƚƐ͘ϮϯϮ͕ Ϯϯϯ ŽǁĞǀĞƌ͕ ĐƵƌƌĞŶƚ ŵĞƚŚŽĚƐ ĨŽƌ ĐŽŶƐŝĚĞƌŝŶŐ ďĞŶĞĨŝƚƐ ŽĨ ĂŶĚ ƉƌŽĐƵƌŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĚŝĨĨĞƌƐ ĨƌŽŵ ƐƵƉƉůLJͲ ƐŝĚĞ ŝŶǀĞƐƚŵĞŶƚ ĚĞĐŝƐŝŽŶƐ͕ ŝŶĐůƵĚŝŶŐ ŚŽǁ ƉĂƌƚŝĐŝƉĂŶƚ ĐŽƐƚƐ ĂƌĞ ĐŽŶƐŝĚĞƌĞĚ ĂŶĚ ƚŚĞ ĂďŝůŝƚLJ ŽĨ Ă ƵƚŝůŝƚLJ ƚŽ ĂĐƋƵŝƌĞ ƌĞƐŽƵƌĐĞƐ ŽƵƚƐŝĚĞ ŝƚƐ ƐĞƌǀŝĐĞ ƚĞƌƌŝƚŽƌLJ ƚŽ ŵĞĞƚ ĚĞŵĂŶĚ͘Ϯϯϰ 2 5 2 Valuation of Grid Services ďƌŽĂĚ ĞdžĂŵŝŶĂƚŝŽŶ ŽĨ ǀĂůƵĂƚŝŽŶ ƌĞǀĞĂůƐ ŐĂƉƐ ŝŶ ŚŽǁ ŵĂƌŬĞƚƐ͕ ŝŶĐĞŶƚŝǀĞƐ͕ ƌĞŐƵůĂƚŝŽŶƐ͕ ĂŶĚ ƌĂƚĞƐ ĐŽŵƉĞŶƐĂƚĞ ĂŶĚ ǀĂůƵĞ ƐĞƌǀŝĐĞƐ ƉƌŽǀŝĚĞĚ ďLJ ĞŵĞƌŐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƐLJƐƚĞŵ ƚŽƉŽůŽŐŝĞƐ͘ Ɛ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĚƌŝǀĞ ĐŚĂŶŐĞƐ ŝŶ ŐƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ͕ ƵŶĂŶƚŝĐŝƉĂƚĞĚ ŐĂƉƐ ŝŶ ǀĂůƵĂƚŝŽŶ͕ ǁŚŝĐŚ ŝŶĂĚǀĞƌƚĞŶƚůLJ ĞdžĐůƵĚĞ ĞdžŝƐƚŝŶŐ Žƌ ĞŵĞƌŐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ Žƌ ƐĞƌǀŝĐĞƐ͕ ǁŝůů ůŝŬĞůLJ ĞŵĞƌŐĞ͘ ƵƚƵƌĞ ƉŽůŝĐLJ ŽďũĞĐƚŝǀĞƐ ĂŶĚ ĐŚĂůůĞŶŐĞƐ ŵĂLJ ĐƌĞĂƚĞ ŶĞǁ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ǀĂůƵŝŶŐ ƐĞƌǀŝĐĞƐ͕ ĂŶĚ ĐŽŵƉƌĞŚĞŶƐŝǀĞ ǀĂůƵĂƚŝŽŶ ŵĞƚŚŽĚŽůŽŐŝĞƐ ĐĂŶ ŚĞůƉ ŝĚĞŶƚŝĨLJ ĂŶĚ ŵŝƚŝŐĂƚĞ ŐĂƉƐ͘ ŽǁĞǀĞƌ͕ ĐůŽƐŝŶŐ ƚŚĞƐĞ ŐĂƉƐ ŽĨƚĞŶ ƌĞƋƵŝƌĞƐ ƐƉĞĐŝĨŝĐ ĞĨĨŽƌƚƐ ƚŽ ĂĚĚƌĞƐƐ ĨŝŶĂŶĐĞ͕ ŵĂƌŬĞƚ ƌƵůĞƐ͕ ŝŶĐĞŶƚŝǀĞƐ͕ ĂŶĚ ƉŽůŝĐŝĞƐ͘ tŚŝůĞ ǀĂůƵĂƚŝŽŶ ƌĞŵĂŝŶƐ Ă ŚŝŐŚͲůĞǀĞů ĚŝƐĐƵƐƐŝŽŶ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ͕ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĞdžŝƐƚ ƚŽ Ĩŝůů ĐƵƌƌĞŶƚ͕ ĐůĞĂƌůLJ ĚĞĨŝŶĞĚ ŐĂƉƐ ƌĞůĂƚĞĚ ƚŽ ĞŶǀŝƌŽŶŵĞŶƚĂů͕ ƌĞůŝĂďŝůŝƚLJ͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ďĞŶĞĨŝƚƐ ŽĨ ŶĞǁ ƐĞƌǀŝĐĞƐ͘ dŚĞ ǀĂůƵĞ ƚŚĂƚ ŶĞǁ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ƉƌŽǀŝĚĞ͕ ďŽƚŚ ŝŶĚŝǀŝĚƵĂůůLJ ĂŶĚ ŝŶ ĂŐŐƌĞŐĂƚĞ͕ ĚĞƉĞŶĚƐ ŽŶ ƚŚĞ ĨŽůůŽǁŝŶŐ͗  Type of resource ŝĨĨĞƌĞŶƚ ƌĞƐŽƵƌĐĞƐ ǁŝůů ďĞ ĂďůĞ ƚŽ ƉƌŽǀŝĚĞ ĚŝĨĨĞƌĞŶƚ ǀĂůƵĞƐ ŝŶ ĚŝĨĨĞƌĞŶƚ ƐŝƚƵĂƚŝŽŶƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ǁŚŝůĞ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞ ĂŶĚ Ws ǁŝůů ďĞ ĂďůĞ ƚŽ ƉƌŽǀŝĚĞ ƌĞĂĐƚŝǀĞ ƉŽǁĞƌ ƚŽ ƚŚĞ ŐƌŝĚ͕ ŽƚŚĞƌ ĚĞǀŝĐĞƐ ;Ğ͘Ő͕͘ ĞĨĨŝĐŝĞŶƚ ǁŝŶĚŽǁƐͿ ǁŝůů ŶŽƚ͘  Location dŚĞ ǀĂůƵĞ ƚŚĂƚ Ă ƌĞƐŽƵƌĐĞ ĐĂŶ ƉƌŽǀŝĚĞ ĚĞƉĞŶĚƐ ŽŶ ŝƚƐ ůŽĐĂƚŝŽŶ ŽŶ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ Žƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐLJƐƚĞŵ͘ Žƌ ĞdžĂŵƉůĞ͕ ƉůĂĐŝŶŐ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ŽŶ Ws ŶĞĂƌ ƉŽŝŶƚƐ ŽĨ ĐŽŶŐĞƐƚŝŽŶ ŵĂLJ ŚĂǀĞ ŵƵĐŚ ŵŽƌĞ ǀĂůƵĞ ƚŽ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ƚŚĂŶ ƉůĂĐĞƐ ǁŝƚŚ ŶŽ ĐŽŶŐĞƐƚŝŽŶ͘  Time tŚĞŶ ƚŚĞ ƌĞƐŽƵƌĐĞ ƉƌŽǀŝĚĞƐ ƚŚĞ ƐĞƌǀŝĐĞ ŝƐ ŝŵƉŽƌƚĂŶƚ͘ Žƌ ĞdžĂŵƉůĞ͕ ŝĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ƌĞĚƵĐĞ ƉĞƌŝŽĚƐ ŽĨ ƉĞĂŬ ůŽĂĚ͕ ƚŚŽƐĞ ŵĞĂƐƵƌĞƐ ŵĂLJ ďĞ ĂďůĞ ƚŽ ĚĞĨĞƌ ďƵŝůĚŝŶŐ ŶĞǁ ŐĞŶĞƌĂƚŝŽŶ Žƌ ĚŝƐƚƌŝďƵƚŝŽŶͬƚƌĂŶƐŵŝƐƐŝŽŶ ƵƉŐƌĂĚĞƐ͘ ƵƌƌĞŶƚůLJ͕ ŵĂŶLJ ǀĂůƵĂƚŝŽŶ ĞĨĨŽƌƚƐ ĨŽĐƵƐ ŽŶ ƚŚĞ ĐŽŶƚƌŝďƵƚŝŽŶƐ ŽĨ ƐƉĞĐŝĨŝĐ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ďƵƚ ƚŽ ďĞ ĨƵůůLJ ĞĨĨĞĐƚŝǀĞ͕ ǀĂůƵĂƚŝŽŶ ŵƵƐƚ ďĞ ĚŽŶĞ ŝŶ Ă ƐLJƐƚĞŵ ĐŽŶƚĞdžƚ͕ ĂŶĚ ĞƐƚŝŵĂƚŝŶŐ ƚŚĞ ǀĂůƵĞ ŽĨ ĂŶ ŝŶĚŝǀŝĚƵĂů ƚĞĐŚŶŽůŽŐLJ ŽƵƚƐŝĚĞ ƚŚĞ ƐLJƐƚĞŵ ĐŽŶƚĞdžƚ ŝƐ ƐƵďŽƉƚŝŵĂů͘Ϯϯϱ ŚĂŶŐĞƐ ƚŽ ƚŚĞ ƐLJƐƚĞŵ͕ ǁŚĞƚŚĞƌ ƌĞŐƵůĂƚŽƌLJ ĐŚĂŶŐĞƐ Žƌ ƚĞĐŚŶŽůŽŐLJ ĐŚĂŶŐĞƐ͕ ĐĂŶ ŚĂǀĞ ďŽƚŚ ůŽĐĂƚŝŽŶĂů ĂŶĚ ƚĞŵƉŽƌĂů ƐLJƐƚĞŵ ŝŵƉĂĐƚƐ͘ YƵĂŶƚŝĨLJŝŶŐ ƚŚĞ ǀĂůƵĞ ŽĨ ĂŶ ŝŶĚŝǀŝĚƵĂů ƚĞĐŚŶŽůŽŐLJ ƐŚŽƵůĚ ŝŶǀŽůǀĞ ĐŽŵƉĂƌŝŶŐ ƚŚĞ ƐƚĂƚĞƐ ŽĨ ƚŚĞ ƐLJƐƚĞŵ ďĞĨŽƌĞ ĂŶĚ ĂĨƚĞƌ ƚŚĞ ƚĞĐŚŶŽůŽŐLJ ǁĂƐ ŝŶƐƚĂůůĞĚ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW 2 5 3 Rate Designs for Valuing New Services ůĞĐƚƌŝĐŝƚLJ ƌĂƚĞƐ ĂƌĞ ƚŚĞ ƐĐŚĞĚƵůĞ ŽĨ ƉƌŝĐĞƐ ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ĐŚĂƌŐĞ ĞŶĚ ƵƐĞƌƐ ĨŽƌ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ŽĨ ƐĞƌǀŝĐĞ͘ ZĂƚĞŵĂŬŝŶŐ͕ ƚŚĞ ƉƌŽĐĞƐƐ ŽĨ ĞƐƚĂďůŝƐŚŝŶŐ ƌĂƚĞƐ͕ ŝƐ ĂŶ ĂĚŵŝŶŝƐƚƌĂƚŝǀĞ ƉƌŽĐĞƐƐ ĚĞƐŝŐŶĞĚ ƚŽ ƌĞĐŽǀĞƌ ĞdžƉĞĐƚĞĚ ĐŽƐƚƐ ĂŶĚ ƉƌŽǀŝĚĞ ƚŚĞ ƵƚŝůŝƚLJ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ĞĂƌŶ ĂŶ ĂůůŽǁĞĚ ƌĂƚĞ ŽĨ ƌĞƚƵƌŶ͘ dŚƌŽƵŐŚ ĐŽƐƚͲŽĨͲƐĞƌǀŝĐĞ ƌĂƚĞƐ͕ ƵƚŝůŝƚŝĞƐ ĞĂƌŶ Ă ĨĂŝƌ ƌĞƚƵƌŶ ŽŶ ŝŶǀĞƐƚĞĚ ĐĂƉŝƚĂů ĂŶĚ ƌĞĐŽǀĞƌ ƚŚĞ ĐŽƐƚ ŽĨ ĚĞƉƌĞĐŝĂƚŝŽŶ͕ ŽƉĞƌĂƚŝŶŐ ĞdžƉĞŶƐĞƐ͕ ĂŶĚ ƚĂdžĞƐ͘ ĚĚŝƚŝŽŶĂůůLJ͕ ƚŚĞ ƌĞĐŽǀĞƌLJ ŽĨ ĐŽƐƚƐ ŝŶ ƌĂƚĞŵĂŬŝŶŐ ŝŶƚƌŽĚƵĐĞƐ ďĞŚĂǀŝŽƌĂů ŝŶĐĞŶƚŝǀĞƐ ƚŽ ƵƚŝůŝƚŝĞƐ͘ dŚĞ ƐƚƌƵĐƚƵƌĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƌĂƚĞƐ ĚĞƚĞƌŵŝŶĞƐ ƚŚĞ ŶĂƚƵƌĞ ŽĨ ƉƌŝĐĞ ƐŝŐŶĂůƐ ƚŽ ĐŽŶƐƵŵĞƌƐ͘ ZĂƚĞƐ ĂƌĞ ƚŚĞ ƉƌŝŵĂƌLJ ŵĞĐŚĂŶŝƐŵ ďLJ ǁŚŝĐŚ ƵƚŝůŝƚŝĞƐ ƉƌŽǀŝĚĞ ŝŶĨŽƌŵĂƚŝŽŶ ƚŽ ĐƵƐƚŽŵĞƌƐ ƚŽ ŝŶĨŽƌŵ ƚŚĞŝƌ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ŝŶǀĞƐƚŵĞŶƚ ďĞŚĂǀŝŽƌ͘ h͘ ͘ ƵƉƌĞŵĞ ŽƵƌƚ ƉƌĞĐĞĚĞŶƚƐ ƚŚĂƚ ĨƌĂŵĞ ƚŚĞ ůĞŐĂů ƌĞƋƵŝƌĞŵĞŶƚƐ ŽĨ ƌĞŐƵůĂƚŝŽŶ ŚĞůƉ ƐŚĂƉĞ ƌĂƚĞŵĂŬŝŶŐ͘LJ dŚĞ ƌĂƚĞŵĂŬŝŶŐ ƉƌŽĐĞƐƐ ďĞŐŝŶƐ ĨŝƌƐƚ ǁŝƚŚ ƚŚĞ ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŽĨ ƚŚĞ ƵƚŝůŝƚLJ ƌĞǀĞŶƵĞ ƌĞƋƵŝƌĞŵĞŶƚ ĂŶĚ ĨŽůůŽǁƐ ǁŝƚŚ ƚŚĞ ĚĞƐŝŐŶ ŽĨ ƌĂƚĞƐ͘ dŚĞ ƌĞǀĞŶƵĞ ƌĞƋƵŝƌĞŵĞŶƚ ŝƐ Ă ĨŽƌĞĐĂƐƚ ŽĨ ƚŚĞ ďƵĚŐĞƚ ƚŚĂƚ ƚŚĞ ƵƚŝůŝƚLJ ǁŝůů ƌĞƋƵŝƌĞ ƚŽ ŵĞĞƚ ĞdžƉĞĐƚĞĚ ĐƵƐƚŽŵĞƌƐ͛ ĞůĞĐƚƌŝĐŝƚLJ ŶĞĞĚƐ ĚƵƌŝŶŐ Ă ƉĂƐƚ Žƌ ĨƵƚƵƌĞ ƚĞƐƚ LJĞĂƌ͘ dŚĞ ďĂƐŝĐ ĨŽƌŵƵůĂ ĨŽƌ ĚĞƚĞƌŵŝŶŝŶŐ ƚŚĞ ƵƚŝůŝƚLJ ƌĞǀĞŶƵĞ ƌĞƋƵŝƌĞŵĞŶƚ ŝƐ͗ Revenue Requirement Rate of Return x Depreciated Rate Base Depreciation Operations and Maintenance including Fuel Taxes dŚĞ ƌĂƚĞͲĚĞƐŝŐŶ ƉƌŽĐĞƐƐ ďĂůĂŶĐĞƐ ƚŚĞ ƉƌŝĐĞƐ ĐƵƐƚŽŵĞƌƐ ƐĞĞ ǁŝƚŚ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ĂďŝůŝƚLJ ƚŽ ƌĞĐŽǀĞƌ ŝƚƐ ƌĞǀĞŶƵĞ ƌĞƋƵŝƌĞŵĞŶƚ͘ dŚĞ ƉƌŽĐĞƐƐ ƌĞƋƵŝƌĞƐ ĂůůŽĐĂƚŝŶŐ ƵƚŝůŝƚLJ ĐŽƐƚƐ ƚŽ ĚŝĨĨĞƌĞŶƚ ĐƵƐƚŽŵĞƌ ĐůĂƐƐĞƐ ;Ğ͘Ő͕͘ ƌĞƐŝĚĞŶƚŝĂů͕ ĐŽŵŵĞƌĐŝĂů͕ ŝŶĚƵƐƚƌŝĂůͿ ĂŶĚ ƚŽ ĚŝĨĨĞƌĞŶƚ ƌĂƚĞ ĐĂƚĞŐŽƌŝĞƐ ;Ğ͘Ő͕͘ ĞŶĞƌŐLJ ĐŚĂƌŐĞƐ͕ ĚĞŵĂŶĚ ĐŚĂƌŐĞƐͿ͘ ŬĞLJ ƐƚĞƉ ŝŶ ƚŚĞ ƌĂƚĞͲĚĞƐŝŐŶ ƉƌŽĐĞƐƐ ŝƐ ƚŚĞ ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŽĨ ĐŽƐƚ ĐĂƵƐĂƚŝŽŶ ;ƚŚĞ ƵŶĚĞƌůLJŝŶŐ ƌĂƚŝŽŶĂůĞ ĨŽƌ ŝŶĐƵƌƌŝŶŐ ƚŚĂƚ ĐŽƐƚͿ͕ ǁŚŝĐŚ ŚĞůƉƐ ĚĞǀĞůŽƉ ƌĂƚĞƐ ǁŚĞƌĞďLJ ĚŝĨĨĞƌĞŶƚ ĐƵƐƚŽŵĞƌƐ ƉĂLJ ƚŚĞ ĐŽƐƚ ŽĨ ƉƌŽǀŝĚŝŶŐ ƚŚĞ ƐĞƌǀŝĐĞ ƚŚĞLJ ƵƐĞ͘ sĂƌŝŽƵƐ ĞůĞŵĞŶƚƐ ŽĨ ĐŽƐƚƐ ;Ğ͘Ő͕͘ ĚŝƐƚƌŝďƵƚŝŽŶ ĐŽƐƚƐ͕ ŵĞƚĞƌŝŶŐ͕ ƚƌĂŶƐŵŝƐƐŝŽŶͿ ĂƌĞ ƚŚƵƐ ĂůůŽĐĂƚĞĚ ƚŽ ĞĂĐŚ ĐƵƐƚŽŵĞƌ ĐůĂƐƐ͘ ĚĞĂůůLJ͕ ĞĂĐŚ ĐƵƐƚŽŵĞƌ ǁŽƵůĚ ƉĂLJ ŽŶůLJ ƚŚĞ ĐŽƐƚ ŽĨ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞƐ ƚŚĂƚ ƚŚĞ ĐƵƐƚŽŵĞƌ ƵƐĞƐ͘ Ɛ ĚŝƐĐƵƐƐĞĚ͕ ƚŚŝƐ ŝƐ ĂŶ ĂƐƉŝƌĂƚŝŽŶĂů ŐŽĂů ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ŽĨƚĞŶ ĚŽ ŶŽƚ ĂĐŚŝĞǀĞ ŝŶ ƉƌĂĐƚŝĐĞ͘ ŽŵĞ ũƵƌŝƐĚŝĐƚŝŽŶƐ ŵĂLJ ŚĂǀĞ ƌĂƚĞƐ ŝŶ ĞĨĨĞĐƚ ĨŽƌ Ă ƐƉĞĐŝĨŝĐ ƚŝŵĞ ƉĞƌŝŽĚ͕ ƐƵĐŚ ĂƐ ϯ LJĞĂƌƐ͕ ǁŚŝůĞ ŽƚŚĞƌ ũƵƌŝƐĚŝĐƚŝŽŶƐ ŵĂLJ ĂůůŽǁ ƌĂƚĞƐ ƚŽ ƌĞŵĂŝŶ͕ ŝŶ ĞĨĨĞĐƚ͕ ŝŶĚĞĨŝŶŝƚĞůLJ͕ ƵŶůĞƐƐ ƚŚĞ ƵƚŝůŝƚLJ͕ ƚŚĞ Wh ͕ Žƌ Ă ƚŚŝƌĚ ƉĂƌƚLJ ǁŝƚŚ ƐƚĂŶĚŝŶŐ ƐĞĞŬ Ă ƌĂƚĞ ĂĚũƵƐƚŵĞŶƚ ǀŝĂ Ă ĐŽŵƉůĂŝŶƚ͘ ŽŶƐŝĚĞƌĂƚŝŽŶƐ ŝŶĐůƵĚĞ ƚŚĞ ŶĞĞĚƐ ŽĨ ĐƵƌƌĞŶƚ ǀĞƌƐƵƐ ĨƵƚƵƌĞ ƌĂƚĞƉĂLJĞƌƐ͖ ƚŚĞ ŐĞŽŐƌĂƉŚŝĐ Žƌ ĚĞŵŽŐƌĂƉŚŝĐ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ŽĨ ƌĂƚĞƉĂLJĞƌƐ͖ ĨƵŶĚŝŶŐ ĨŽƌ ĂŶLJ ƉƵďůŝĐ ďĞŶĞĨŝƚ ƉƌŽŐƌĂŵƐ͕ ůŝŬĞ ĞĨĨŝĐŝĞŶĐLJ͕ ZΘ ͕ Žƌ ůŽǁͲŝŶĐŽŵĞ ĂƐƐŝƐƚĂŶĐĞ ƉƌŽŐƌĂŵƐ͖ ĞǀŽůǀŝŶŐ ƚĞĐŚŶŽůŽŐLJ͖ ĂŶĚ ƐŽĐŝĂů ŐŽĂůƐ ůŝŬĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ͘ ŝŐƵƌĞ ϮͲϭϱ ďĞůŽǁ ŝůůƵƐƚƌĂƚĞƐ ƚŚĞ ŽƌĚĞƌ ĂŶĚ ƚŝŵĞůŝŶĞ ŽĨ Ă ƚLJƉŝĐĂů ƐƚĂƚĞ ƌĂƚĞͲĐĂƐĞ ƉƌŽĐĞĞĚŝŶŐ͘ LJ Žƌ ĞdžĂŵƉůĞ͕ ŝŶ Knoxville v Knoxville Water Company 212 U S 1 1909 ͕ ƚŚĞ h͘ ͘ ƵƉƌĞŵĞ ŽƵƌƚ ƌĞĐŽŐŶŝnjĞĚ ƚŚĞ ƌŝŐŚƚ ŽĨ Ă ƵƚŝůŝƚLJ ƚŽ ƌĞĐŽǀĞƌ ƚŚĞ ŝŶŝƚŝĂů ĐŽƐƚ ŽĨ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŝŶǀĞƐƚŵĞŶƚ ƚŚƌŽƵŐŚ ĚĞƉƌĞĐŝĂƚŝŽŶ ĐŚĂƌŐĞƐ͘ Ŷ Bluefield Water Works Improvement Company v Public Service Commission 62 U S 679 1923 ƚŚĞ h͘ ͘ ƵƉƌĞŵĞ ŽƵƌƚ ĞƐƚĂďůŝƐŚĞĚ ƚŚĞ ƉƌŝŶĐŝƉůĞ ƚŚĂƚ ͞ƚŚĞ ƌĞƚƵƌŶ ƐŚŽƵůĚ ďĞ ƌĞĂƐŽŶĂďůLJ ƐƵĨĨŝĐŝĞŶƚ ƚŽ ĂƐƐƵƌĞ ĐŽŶĨŝĚĞŶĐĞ ŝŶ ƚŚĞ ĨŝŶĂŶĐŝĂů ƐŽƵŶĚŶĞƐƐ ŽĨ ƚŚĞ ƵƚŝůŝƚLJ ĂŶĚ ƐŚŽƵůĚ ďĞ ĂĚĞƋƵĂƚĞ͙ƚŽ ŵĂŝŶƚĂŝŶ ĂŶĚ ƐƵƉƉŽƌƚ ĐƌĞĚŝƚ͙͟ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-15 Timeline of a Typical Rate Case Proceeding236 5DWH FDVHV DUH OHQJWK DQG FRPSOH RIWHQ ODVWLQJ D HDU RU PRUH 'HSHQGLQJ RQ KRZ XWLOLWLHV FDOFXODWH WKHLU FRVWV WKLV RIWHQ OHDGV WR ³UHJXODWRU ODJ ´ ZKHUHLQ UDWHV FRPH LQWR HIIHFW ORQJ DIWHU XWLOLWLHV KDYH PDGH LQYHVWPHQWV 7KXV XWLOLWLHV DUH W SLFDOO UHFRYHULQJ SDVW QRW FXUUHQW FRVWV dLJƉŝĐĂůůLJ͕ ƚŚĞ ƌĂƚĞͲĚĞƐŝŐŶ ƉƌŽĐĞƐƐ ďĞŐŝŶƐ ǁŝƚŚ Ă ĐŽƐƚ ƐƚƵĚLJ ƚŚĂƚ ĐŚĂƌĂĐƚĞƌŝnjĞƐ ƚŚĞ ĞůĞŵĞŶƚƐ ŽĨ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ĐŽƐƚ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞ ƚŽ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ĚĞƚĞƌŵŝŶĞƐ ĐŽƐƚ ĐĂƵƐĂƚŝŽŶ͘ EŽƚĞ ƚŚĂƚ ƚŚĞ costs ŽĨ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞ ĂƌĞ ƚŚĞ ƋƵĂŶƚŝĨŝĂďůĞ ǀĂůƵĞƐ ŽĨ ĂƐƐĞƚƐ ĂŶĚ ƉŽůŝĐŝĞƐ ƚŚĂƚ ĂĐĐƌƵĞ ƚŽ ƚŚĞ ƵƚŝůŝƚLJ͖ ƚŚĞ price or charge ŝƐ ƚŚĞ ĐĂƐŚ ǀĂůƵĞ ŽĨ ƚŚĞ ƐĞƌǀŝĐĞ ĚĞƚĞƌŵŝŶĞĚ ďLJ ƌĂƚĞ ƌĞŐƵůĂƚŝŽŶ͕ ŝŶĐůƵĚŝŶŐ ƐƵďƐŝĚŝĞƐƚŚĞ ƵƚŝůŝƚLJ ƌĞĐŽǀĞƌƐ costs͕ ǁŚŝůĞ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐĞĞƐ prices and charges͘ ůĞŵĞŶƚƐ ŽĨ ĐŽƐƚ ĨĂůů ŝŶƚŽ ƚŚƌĞĞ ďĂƐŝĐ ĐĂƚĞŐŽƌŝĞƐ͗ ϭ͘ Fixed costs ĂƌĞ ƚŚĞ ďĂƐŝĐ ĐŽƐƚƐ ŽĨ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞ ƚŚĂƚ ĚŽ ŶŽƚ ǀĂƌLJ ǁŝƚŚ ƚŚĞ ůĞǀĞů ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ Ŷ ĞdžĂŵƉůĞ ŽĨ Ă ĨŝdžĞĚ ĐŽƐƚ ŝƐ ƚŚĞ ĐŽƐƚ ŽĨ Ă ŵĞƚĞƌ͕ Ă ŶĞĐĞƐƐĂƌLJ ĞůĞŵĞŶƚ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞ ƚŚĂƚ ŝƐ ĨƵŶĐƚŝŽŶĂů ǁŚĞƚŚĞƌ ƚŚĞ ĐƵƐƚŽŵĞƌ ƵƐĞƐ ǀĞƌLJ ůŝƚƚůĞ Žƌ Ă ŐƌĞĂƚ ĚĞĂů ŽĨ ĞŶĞƌŐLJ͘ Ϯ͘ Capacity costs ŵĞĂƐƵƌĞ ƚŚĞ ŝŵƉĂĐƚ ŽĨ ƵƐĂŐĞ ŽŶ ƐLJƐƚĞŵ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ǁŚĞƌĞ ŝŶĐƌĞĂƐĞƐ ŝŶ ĐƵƐƚŽŵĞƌ ĐŽŶƐƵŵƉƚŝŽŶ ĐĂŶ ƚƌŝŐŐĞƌ ƚŚĞ ŶĞĞĚ ĨŽƌ ĂĚĚŝƚŝŽŶĂů ŝŶǀĞƐƚŵĞŶƚ͘ Žƌ ĞdžĂŵƉůĞ͕ ŝŶĐƌĞĂƐĞƐ ŝŶ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ ƵƐĞ ĐĂŶ ŶĞĐĞƐƐŝƚĂƚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚ͕ ǁŚĞƌĞ ƚŚĞ ƐŝnjĞ ŽĨ Ă ƐƵďƐƚĂƚŝŽŶ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ƐƵƉƉŽƌƚŝŶŐ Ă ƌĞƐŝĚĞŶƚŝĂů ĚŝƐƚƌŝďƵƚŝŽŶ ůĂƚĞƌĂů ƉŽǁĞƌ ůŝŶĞ ŝƐ ĚƌŝǀĞŶ ďLJ ƚŚĞ ŶĞĞĚ ƚŽ ƌĞůŝĂďůLJ ƐĞƌǀĞ ƚŚĞ ƉĞĂŬ ƵƐĂŐĞ͕ ƚLJƉŝĐĂůůLJ ĚƌŝǀĞŶ ďLJ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ ŽŶ ƚŚĞ ŚŽƚƚĞƐƚ ĚĂLJ ŽĨ ƚŚĞ LJĞĂƌ͘ ĂƉĂĐŝƚLJ ;ĚĞŵĂŶĚͿ ĐŚĂƌŐĞƐ ĐĂŶ ďĞ ĚĞƐŝŐŶĞĚ ƚŽ ƐŝŐŶĂů ĐƵƐƚŽŵĞƌƐ͛ ĞdžƉĞĐƚĞĚ ĐŽŶƚƌŝďƵƚŝŽŶ ƚŽ ŶĞǁ ŝŶǀĞƐƚŵĞŶƚ ĂŶĚ ƉƌŽǀŝĚĞ Ă ŵĞĐŚĂŶŝƐŵ ĨŽƌ ƌĞĐŽǀĞƌŝŶŐ ƚŚŽƐĞ ĐŽƐƚƐ͕ ŽŶĐĞ ŝŶĐƵƌƌĞĚ͘ ϯ͘ Variable costs ĂƌĞ ƉƌŝŵĂƌŝůLJ ƚŚĞ ĞŶĞƌŐLJ ĐŽƐƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ƉƌŽǀŝĚŝŶŐ ƐĞƌǀŝĐĞ͕ ƐƵĐŚ ĂƐ ĨƵĞů͘ sĂƌŝĂďůĞ ĐŽƐƚƐ ĐŚĂŶŐĞ ďĂƐĞĚ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ĂŶĚ ƚŚĞ ƚLJƉĞƐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ĂǀĂŝůĂďůĞ ŝŶ ƚŚĞ ƐLJƐƚĞŵ͘ Ŷ ĂŶ ŝĚĞĂů ƌĂƚĞŵĂŬŝŶŐ ƐĐŚĞŵĞ͕ ƚŚĞ ĞůĞŵĞŶƚƐ ŽĨ ĐŽƐƚ ǁŽƵůĚ Ĩŝƚ ŶĂƚƵƌĂůůLJ ŝŶƚŽ ƚŚĞ ƚŚƌĞĞ ĐŽŵƉŽŶĞŶƚƐ ŽĨ ƌĂƚĞƐ͗ ;ϭͿ ĨŝdžĞĚ ;ĐƵƐƚŽŵĞƌͿ ĐŚĂƌŐĞƐ͕ ;ϮͿ ĐĂƉĂĐŝƚLJ ;ĚĞŵĂŶĚͿ ĐŚĂƌŐĞƐ͕ ĂŶĚ ;ϯͿ ĞŶĞƌŐLJ ;ǀĂƌŝĂďůĞͿ ĐŚĂƌŐĞƐ͘ dŚĞ ĨŝdžĞĚ ĐƵƐƚŽŵĞƌ ĐŚĂƌŐĞ ǁŽƵůĚ ƌĞĨůĞĐƚ ƚŚĞ ĨŝdžĞĚ ĐŽƐƚƐ ŽĨ ƉƌŽǀŝĚŝŶŐ Ă ƐĞƌǀŝĐĞ͘ dŚĞ ǀĂƌŝĂďůĞ ĞŶĞƌŐLJ ĐŚĂƌŐĞ ǁŽƵůĚ ƌĞƉƌĞƐĞŶƚ ƚŚĞ ĐŽƐƚ ŽĨ ĞŶĞƌŐLJ͕ ĚĞƚĞƌŵŝŶĞĚ ĞŝƚŚĞƌ ƚŚƌŽƵŐŚ ĂŶ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ Žƌ ďLJ ƚŚĞ ĨƵĞů ĂŶĚ ŽƚŚĞƌ ǀĂƌŝĂďůĞ ĐŽƐƚƐ ƌĞƋƵŝƌĞĚ ƚŽ ŽƉĞƌĂƚĞ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ŽǁŶ ŐĞŶĞƌĂƚŝŽŶ͘ ĂƉĂĐŝƚLJ ĐŽƐƚƐ ǀĂƌLJ ďLJ ĚĞŵĂŶĚ ĂŶĚ ĂƌĞ ĚƌŝǀĞŶ ďLJ ƚŚĞ ŵĂdžŝŵƵŵ ƐLJƐƚĞŵ ƵƐĂŐĞ ďĞĐĂƵƐĞ ĞůĞĐƚƌŝĐĂů ƐLJƐƚĞŵƐ ĂƌĞ ĚĞƐŝŐŶĞĚ ƚŽ ŵĞĞƚ ƉĞĂŬ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ dŚĞ ĚĞŵĂŶĚ ĐŚĂƌŐĞ ŝƐ Ă ŵĞĐŚĂŶŝƐŵ ĨŽƌ ďŽƚŚ ƌĞĐŽǀĞƌŝŶŐ ĐĂƉĂĐŝƚLJ ĐŽƐƚƐ ĂŶĚ ƉƌŽǀŝĚŝŶŐ Ă ƉƌŝĐĞ ƐŝŐŶĂů ƚŽ ĐƵƐƚŽŵĞƌƐ ĂďŽƵƚ ƚŚĞŝƌ ĐŽŶƚƌŝďƵƚŝŽŶ ƚŽ ĐŽƐƚƐ Ăƚ ƚŚĞ ƉĞĂŬ͘ dLJƉŝĐĂůůLJ͕ ƚŚĞ ĚĞŵĂŶĚ ĐŚĂƌŐĞ ŝƐ ƐĞƚ ĂŶŶƵĂůůLJ͕ ƐĞƌǀŝŶŐ ĂƐ Ă ƌĂƚĐŚĞƚ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌƐ͛ ďŝůůƐ͘nj dƌĂĚŝƚŝŽŶĂůůLJ͕ ƵƚŝůŝƚŝĞƐ ƌĞĐŽƵƉĞĚ ƚŚĞŝƌ ĐŽƐƚƐ ĨƌŽŵ ĐƵƐƚŽŵĞƌƐ ďLJ ĐŚĂƌŐŝŶŐ Ă ƚǁŽͲƉĂƌƚ ƌĂƚĞ ƚŚĂƚ ĐŽŶƐŝƐƚĞĚ ŽĨ Ă ǀŽůƵŵĞƚƌŝĐ ĐŚĂƌŐĞ ĐŽŵƉŽŶĞŶƚ ĂŶĚ Ă ĨŝdžĞĚ ĐŚĂƌŐĞ ĐŽŵƉŽŶĞŶƚ͘ sŽůƵŵĞƚƌŝĐ ĐŚĂƌŐĞƐ ĂƌĞ ďĂƐĞĚ ŽŶ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ Ă ĐƵƐƚŽŵĞƌ ĂĐƚƵĂůůLJ ƵƐĞƐ ĂŶĚ ŐĞŶĞƌĂůůLJ ĂƌĞ ĂƐƐĞƐƐĞĚ ƉĞƌ ŬtŚ͘ ƵƐƚŽŵĞƌƐ ƉĂLJ ƚŚĞ ĨŝdžĞĚ ĐŚĂƌŐĞ ƌĞŐĂƌĚůĞƐƐ ŽĨ ŚŽǁ ŵƵĐŚ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĞLJ ĐŽŶƐƵŵĞ͘ĂĂ ŶĂůLJƐƚƐ ŚĂǀĞ ŐĞŶĞƌĂůůLJ ďƌŽŬĞŶ ĚŽǁŶ ƚŚĞ ĨŝdžĞĚ ĐŽƐƚƐ ƚŚĂƚ ƚŚĞ ƵƚŝůŝƚLJ ŝŶĐƵƌƐ ŝŶƚŽ ƚǁŽ ĐĂƚĞŐŽƌŝĞƐ͗ ƐLJƐƚĞŵͲǁŝĚĞ ĨŝdžĞĚ ĐŽƐƚƐ ĂŶĚ ĐƵƐƚŽŵĞƌͲƐƉĞĐŝĨŝĐ ĨŝdžĞĚ ĐŽƐƚƐ͘ ĐƵƐƚŽŵĞƌͲƐƉĞĐŝĨŝĐ ĨŝdžĞĚ ĐŽƐƚ ŝƐ ƚŚĞ ĐŽƐƚ ƚŚĞ ƵƚŝůŝƚLJ ŝŶĐƵƌƐ ǁŚĞŶ ŝƚ ŝƐ ƐĞƌǀŝĐŝŶŐ ƚŚĞ ĐƵƐƚŽŵĞƌͶĨŽƌ ĞdžĂŵƉůĞ͕ ƚŚĞ ĐŽƐƚƐ ƚŽ ŵĞƚĞƌ ƚŚĞ ĐƵƐƚŽŵĞƌ ĂŶĚ ŝƐƐƵĞ Ă ďŝůů͘ dŚŝƐ ĐŽƐƚ ŝƐ ŝŶĚĞƉĞŶĚĞŶƚ ŽĨ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ƵƐĂŐĞ͘ ƐLJƐƚĞŵͲǁŝĚĞ ĨŝdžĞĚ ĐŽƐƚ ŝƐ ƚŚĞ ĐŽƐƚ ŽĨ ŚĂǀŝŶŐ͕ ƌƵŶŶŝŶŐ͕ ĂŶĚ ŵĂŝŶƚĂŝŶŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŐƌŝĚͶ ƌĞŐĂƌĚůĞƐƐ ŽĨ ŚŽǁ ŵĂŶLJ ĐƵƐƚŽŵĞƌƐ ŝƚ ŝƐ ƐĞƌǀŝŶŐ͘Ϯϯϳ ŝƐƚŽƌŝĐĂůůLJ͕ ĐŽŶƐƵŵĞƌ ĚĞŵĂŶĚ ĂůůŽǁĞĚ ƵƚŝůŝƚŝĞƐ ƚŽ ƐĞĐƵƌĞůLJ ƌĞĐŽƵƉ ŵŽƐƚ ŽĨ ƚŚĞŝƌ ĨŝdžĞĚ ĐŽƐƚƐ ƚŚƌŽƵŐŚ ƚŚĞ ǀŽůƵŵĞƚƌŝĐ ƌĂƚĞ͘ hƚŝůŝƚŝĞƐ ǁĞƌĞ ĂďůĞ ƚŽ ĂƐƐĞƐƐ ŽŶůLJ Ă ůŝŵŝƚĞĚ ĨŝdžĞĚ ĐŚĂƌŐĞ ƚŽ ĞĂĐŚ ĐƵƐƚŽŵĞƌ͕ ǁŚŝĐŚ ŐĞŶĞƌĂůůLJ ĚŝĚ ŶŽƚ ĂĐĐƵƌĂƚĞůLJ ƌĞĨůĞĐƚ ƚŚĞ ƚƌƵĞ ĨŝdžĞĚ ĐŽƐƚƐ Ă ƵƚŝůŝƚLJ ǁĂƐ ŝŶĐƵƌƌŝŶŐ͘ Žƌ ƚLJƉŝĐĂů ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌƐ͕ ĨŝdžĞĚ ĐŽƐƚƐ ŵĂŬĞ ƵƉ Ă ŵƵĐŚ ůĂƌŐĞƌ ƉƌŽƉŽƌƚŝŽŶ ŽĨ ƚŽƚĂů ĐŽƐƚƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ ƚŚĂŶ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ĞůĞĐƚƌŝĐŝƚLJ ďŝůůƐ ƌĞĨůĞĐƚ͘ďď ͕Ϯϯϴ tŚŝůĞ ĐŽŶƐƵŵĞƌƐ ŽŶůLJ ƐĞĞ Ă ƐŵĂůů ĨŝdžĞĚ ĐŚĂƌŐĞ ŽŶ ƚŚĞŝƌ ĞůĞĐƚƌŝĐŝƚLJ ďŝůů ĂŶĚ ŵŽƐƚ ŽĨ ƚŚĞŝƌ ďŝůů ĐŽŵƉƌŝƐĞƐ ƚŚĞ ǀĂƌŝĂďůĞ ĐŚĂƌŐĞ ďĂƐĞĚ ŽŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞĚ͕ ƵƚŝůŝƚŝĞƐ͛ ĐŽƐƚƐ ĚŽ ŶŽƚ ƌĞĨůĞĐƚ ƚŚŝƐ ďƌĞĂŬĚŽǁŶ͘ hƚŝůŝƚŝĞƐ͛ ĐŽƐƚƐ ĨŽƌ Ă ƚLJƉŝĐĂů ďŝůů ĂƌĞ ĚŝǀŝĚĞĚ ŝŶƚŽ ǀĂƌŝĂďůĞ ĂŶĚ ĨŝdžĞĚ ĐŽƐƚƐ͘ tŚŝůĞ͕ ŚŝƐƚŽƌŝĐĂůůLJ͕ ĐƵƐƚŽŵĞƌ ĚĞŵĂŶĚ ĂůůŽǁĞĚ ƵƚŝůŝƚŝĞƐ ƚŽ ƐĞĐƵƌĞůLJ ƌĞĐŽƵƉ ŵŽƐƚ ŽĨ ƚŚĞŝƌ ĨŝdžĞĚ ĐŽƐƚƐ ƚŚƌŽƵŐŚ ƚŚĞ ǀŽůƵŵĞƚƌŝĐ ƌĂƚĞ͕ ƚŚĞ ĐƵƌƌĞŶƚ ƐƚĂŐŶĂŶƚ Žƌ ĚĞĐůŝŶŝŶŐ ĚĞŵĂŶĚ ŝƐ ĐĂƵƐŝŶŐ ƵƚŝůŝƚŝĞƐ ƚŽ ƵŶĚĞƌĐŽǀĞƌ ĨŝdžĞĚ ĐŽƐƚƐ͘ nj ƌĂƚĐŚĞƚ ŝƐ Ă ĐŝƌĐƵŵƐƚĂŶĐĞ ŝŶ ǁŚŝĐŚ ƚŚĞ ƌĂƚĞ ǁŝůů ŶŽƚ ĚĞĐůŝŶĞ ƵŶƚŝů ĂŶ ĂƉƉƌŽƉƌŝĂƚĞ ƉĞƌŝŽĚ ĞůĂƉƐĞƐ ;ŽĨƚĞŶ͕ ϭ LJĞĂƌͿ͘ dŚƵƐ͕ Ă ĚĞŵĂŶĚ ĐŚĂƌŐĞ͕ ďĂƐĞĚ ŽŶ Ă ĚĞŵĂŶĚ ŽĨ ϯ ŬŝůŽǁĂƚƚƐ ƐĞƚ ŝŶ ŵŽŶƚŚ ŽŶĞ ;ƐĂLJ͕ ĂŶƵĂƌLJͿ͕ ŵŝŐŚƚ ŝŶĐƌĞĂƐĞ ŝĨ Ă ŚŝŐŚĞƌ ĚĞŵĂŶĚ͕ ϱ ŬŝůŽǁĂƚƚƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ŝƐ ƐĞƚ ŝŶ ŵŽŶƚŚ ƚǁŽ ; ĞďƌƵĂƌLJͿ͖ ďƵƚ ůŽǁĞƌ ĚĞŵĂŶĚ ŝŶ ƐƵďƐĞƋƵĞŶƚ ŵŽŶƚŚƐ ǁŝůů ŶŽƚ ƌĞĚƵĐĞ ƚŚĞ ĚĞŵĂŶĚ ĐŚĂƌŐĞ ƵŶƚŝů ƚŚĞ ƉĞƌŝŽĚ ŚĂƐ ĞdžƉŝƌĞĚ͘ ĂĂ ŝdžĞĚ ĐŚĂƌŐĞƐ ŵĂLJ ǀĂƌLJ ďLJ ĐůĂƐƐ ŽĨ ĐŽŶƐƵŵĞƌͶŝŶĚƵƐƚƌŝĂů͕ ĐŽŵŵĞƌĐŝĂů͕ Žƌ ƌĞƐŝĚĞŶƚŝĂůͶďƵƚ ƚŚĞ ǀŽůƵŵĞ ŽĨ ƵƐĂŐĞ ƉĞƌ ďŝůůŝŶŐ ƉĞƌŝŽĚ ŵĂLJ ŶŽƚ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ĐůĂƐƐĞƐ͘ ďď ͞ ƚLJƉŝĐĂů ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌ ƵƐĞƐ ϵϴϮ ŬtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƉĞƌ ŵŽŶƚŚ͕ ǁŝƚŚ Ă ďŝůů ĂǀĞƌĂŐŝŶŐ ΨϭϭϬ͘ dŚĞ ďŝůů ŝƐ ŵĂĚĞ ƵƉ ŽĨ ƚŚƌĞĞ ĐŽƐƚ ĐŽŵƉŽŶĞŶƚƐ͗ ΨϳϬ ĐĂŶ ďĞ ĂůůŽĐĂƚĞĚ ƚŽ ŐĞŶĞƌĂƚŝŽŶ͕ ΨϯϬ ƚŽ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ĂŶĚ ΨϭϬ ƚŽ ƚƌĂŶƐŵŝƐƐŝŽŶ͘ EĞĂƌůLJ Ăůů ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ĐŽƐƚƐ ĂƌĞ ĨŝdžĞĚ ;Žƌ ĐĂƉĂĐŝƚLJͲƚLJƉĞͿ ĐŽƐƚƐ ƚŚĂƚ ĚŽ ŶŽƚ ǀĂƌLJ ďĂƐĞĚ ŽŶ ŚŽƵƌůLJ ĐƵƐƚŽŵĞƌ ůŽĂĚƐ͕ ǁŚŝůĞ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϴϬ ƉĞƌĐĞŶƚ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĐŽƐƚƐ ĂƌĞ ǀĂƌŝĂďůĞ͘ dŚŝƐ ŵĞĂŶƐ ƚŚĂƚ Ψϱϰ ŽĨ ƚŚĞ ƚLJƉŝĐĂů ďŝůů ŝƐ ƌĞůĂƚĞĚ ƚŽ ĐĂƉĂĐŝƚLJ Žƌ ĨŝdžĞĚ ĐŽƐƚƐ͕ ĂŶĚ Ψϱϲ ĐĂŶ ďĞ ĂƚƚƌŝďƵƚĞĚ ƚŽ ĞŶĞƌŐLJͲƌĞůĂƚĞĚ Žƌ ǀĂƌŝĂďůĞ ĐŽƐƚƐ͘ zĞƚ͕ Ă ƚLJƉŝĐĂů ƌĞƐŝĚĞŶƚŝĂů ĨŝdžĞĚ ĐŚĂƌŐĞ ŝƐ ĂƌŽƵŶĚ ΨϭϬ ƉĞƌ ŵŽŶƚŚ͘͟ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ŽǁĞǀĞƌ͕ ƚŚĞ ĐƵƌƌĞŶƚ ƚƌĞŶĚ ŽĨ ƐƚĂŐŶĂŶƚ Žƌ ĚĞĐůŝŶŝŶŐ ĚĞŵĂŶĚ ĂŶĚ ƚŚĞ ƌĞƐƵůƚŝŶŐ ĚƌŽƉ ŝŶ ƌĞǀĞŶƵĞ ĨƌŽŵ ǀŽůƵŵĞƚƌŝĐ ĐŚĂƌŐĞƐ ŚĂƐ ƌĞŶĚĞƌĞĚ ƚŚŝƐ ƐƚƌĂƚĞŐLJ ŝŶĞĨĨĞĐƚŝǀĞ͕ ůĞĂǀŝŶŐ ƵƚŝůŝƚŝĞƐ ƚŽ ĨŝŶĚ ŶĞǁ ŵĞƚŚŽĚƐ ƚŽ ƌĞĐŽǀĞƌ ƚŚĞŝƌ ĨŝdžĞĚ ĐŽƐƚƐ͘ ŽŵĞ ƵƚŝůŝƚŝĞƐ ŚĂǀĞ ƉƌŽƉŽƐĞĚ ĐŽŶǀĞƌƚŝŶŐ ƐLJƐƚĞŵͲǁŝĚĞ ĨŝdžĞĚ ĐŽƐƚƐ ŝŶƚŽ ĨŝdžĞĚ ĐŚĂƌŐĞƐ ƚŽ ĐŽŶƐƵŵĞƌƐ͕ ďƵƚ ƚŚŝƐ ŝƐ ŶŽƚ ǁŝƚŚŽƵƚ ĐŽŶƚƌŽǀĞƌƐLJ͘ Ɛ ƚŚĞ ZŽĐŬLJ DŽƵŶƚĂŝŶ ŶƐƚŝƚƵƚĞ ĐŽŶĐůƵĚĞĚ͗ ͞ Ĩ ŝŶĐƌĞĂƐŝŶŐ ƉŽƌƚŝŽŶƐ ŽĨ ĐƵƐƚŽŵĞƌ ďŝůůƐ ĂƌĞ ĐŽůůĞĐƚĞĚ ŝŶ ƚŚĞ ĨŽƌŵ ŽĨ ĨŝdžĞĚ ŵŽŶƚŚůLJ ĐŚĂƌŐĞƐͶĂŶĚ ůĞƐƐ ŝŶ ƚŚĞ ĨŽƌŵ ŽĨ ǀŽůƵŵĞƚƌŝĐ ĐŚĂƌŐĞƐ Žƌ ŽƚŚĞƌ ƚLJƉĞƐ ŽĨ ĐŚĂƌŐĞƐ ƚŚĂƚ ƚŚĞ ĐƵƐƚŽŵĞƌ ŚĂƐ ƚŚĞ ĂďŝůŝƚLJ ƚŽ ŝŶĨůƵĞŶĐĞͶƚŚĞ ŝŶĐĞŶƚŝǀĞ ƚŽ ĐŽŶƐĞƌǀĞ ĐŽƵůĚ ďĞ ĚŝŵŝŶŝƐŚĞĚ͘͟Ϯϯϵ ŽǁĞǀĞƌ͕ ƌĂŝƐŝŶŐ ĨŝdžĞĚ ĐŽƐƚƐ ĨŽƌ Ăůů ĐƵƐƚŽŵĞƌƐ ĐĂŶ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞůLJ ŝŵƉĂĐƚ ůŽǁͲƵƐĂŐĞ ĐƵƐƚŽŵĞƌƐ ĨŽƌ ǁŚŽŵ ŚŝŐŚ ĨŝdžĞĚ ĐŽƐƚƐ ǁŽƵůĚ ĐŽŵƉƌŝƐĞ Ă ƌĞůĂƚŝǀĞůLJ ůĂƌŐĞƌ ƉŽƌƚŝŽŶ ŽĨ ƚŚĞ ďŝůů͘ ŝŐŚ ĨŝdžĞĚ ĐŽƐƚƐ ƐŝŵŝůĂƌůLJ ŝŵƉĂĐƚ ůŽǁͲŝŶĐŽŵĞ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ŽƚŚĞƌ ǀƵůŶĞƌĂďůĞ ƉŽƉƵůĂƚŝŽŶƐ͘ϮϰϬ 2 5 3 1 Time-Varying Rates Can Shift Demand ŝƐƚŽƌŝĐĂůůLJ͕ ǀŽůƵŵĞƚƌŝĐ ĐŚĂƌŐĞƐ ƚŽ ĞŶĚ ƵƐĞƌƐ ŚĂǀĞ ďĞĞŶ ƵŶŝĨŽƌŵ ŝŶ ƚŝŵĞ͕ ďƵƚ ƐLJƐƚĞŵ ĐŽƐƚƐ ǀĂƌLJ ďLJ ƐĞĂƐŽŶ ĂŶĚ ďLJ ŚŽƵƌ ŽĨ ĚĂLJ͕ ƌĞĨůĞĐƚŝŶŐ ƚŚĞ ŵĂƌŐŝŶĂů ĐŽƐƚ ŽĨ ŐĞŶĞƌĂƚŝŽŶ͕ ƚŚĞ ĐŽƐƚ ŽĨ ŵĂŝŶƚĂŝŶŝŶŐ ĐĂƉĂĐŝƚLJ͕ ĂŶĚ ŝŵƉĂĐƚƐ ŽŶ ĐŽŶŐĞƐƚŝŽŶ ŽŶ ƉŚLJƐŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ dŝŵĞͲǀĂƌLJŝŶŐ ƉƌŝĐŝŶŐ ŝƐ ŽŶĞ ǁĂLJ ƚŽ ŝŶĚƵĐĞ ĐŽŶƐƵŵĞƌƐ ƚŽ ƐŚŝĨƚ ƚŚĞŝƌ ĚĞŵĂŶĚ ƚŽ ůĞƐƐͲĞdžƉĞŶƐŝǀĞ ƚŝŵĞƐ͕ ĂŶĚ ŝƚ ŚĂƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ƐŚŝĨƚ ǀĂůƵĞ ĨƌŽŵ ŽǁŶĞƌƐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĂƐƐĞƚƐ ƚŽ ĐŽŶƐƵŵĞƌƐ͘Ϯϰϭ͕ ϮϰϮ sĂƌŝĂƚŝŽŶƐ ŝŶ ĐŽŶƐƵŵĞƌ ƉƌŝĐĞƐ ĐĂŶ ďĞ ƐĐŚĞĚƵůĞĚ ŝŶ ĂĚǀĂŶĐĞ Žƌ ĐĂŶ ƌĞĨůĞĐƚ ƌĞĂůͲƚŝŵĞ ǁŚŽůĞƐĂůĞ ĞŶĞƌŐLJ ƉƌŝĐĞƐ͘ dŚĞ ŵŽƐƚ ĐŽŵŵŽŶ ƚŝŵĞͲǀĂƌLJŝŶŐ ƌĂƚĞ ŝƐ ƚŝŵĞͲŽĨ ƵƐĞ ;dKhͿ ƉƌŝĐŝŶŐ͕ ǁŚŝĐŚ ƵƐĞƐ Ă ƉƌĞĚĞƚĞƌŵŝŶĞĚ ƐĐŚĞĚƵůĞ ŽĨ ƐĞĂƐŽŶĂů ĂŶĚ ĚĂŝůLJ ƉƌŝĐĞ ǀĂƌŝĂƚŝŽŶƐ͘ ŽŵĞ ƵƚŝůŝƚŝĞƐ ĂƌĞ ŵŽǀŝŶŐ ƚŽǁĂƌĚ ŝŵƉůĞŵĞŶƚŝŶŐ dKh ĂƐ ƚŚĞ ĚĞĨĂƵůƚ ƌĂƚĞ͘ dKh ƉƌŝĐŝŶŐ ƵƐƵĂůůLJ ĚŽĞƐ ŶŽƚ ƌĞĨůĞĐƚ ƚŚĞ ƐŵĂůů ŶƵŵďĞƌ ŽĨ ŚŽƵƌƐ ƚŚĂƚ ŚĂǀĞ ƚŚĞ ǀĞƌLJ ŚŝŐŚĞƐƚ ǁŚŽůĞƐĂůĞ ƉƌŝĐĞƐ ĂŶĚ ĐŽŶŐĞƐƚŝŽŶ ƉƌŽďůĞŵƐ͘ dǁŽ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ ƚŚĂƚ ĚŽ ĂƌĞ ƌĞĂůͲƚŝŵĞ ƉƌŝĐŝŶŐ ;ZdWͿ͕ ƚŚƌŽƵŐŚ ǁŚŝĐŚ ĐŽŶƐƵŵĞƌƐ ĞdžƉĞƌŝĞŶĐĞ ǁŚŽůĞƐĂůĞ ƉƌŝĐĞƐ ĚŝƌĞĐƚůLJ͕ ĂŶĚ ĐƌŝƚŝĐĂů ƉĞĂŬ ƉƌŝĐŝŶŐ͕ ǁŚŝĐŚ ŐŝǀĞƐ ĐŽŶƐƵŵĞƌƐ ŽĐĐĂƐŝŽŶĂů ůĂƌŐĞ ƌĂƚĞ ũƵŵƉƐ Ăƚ ƐŚŽƌƚ ŶŽƚŝĐĞ ǁŚĞŶ ƐLJƐƚĞŵ ĐŽƐƚƐ ĂƌĞ ƉĂƌƚŝĐƵůĂƌůLJ ŚŝŐŚ͘ ZdW ƉƌŽǀŝĚĞƐ ƚŚĞ ŵŽƐƚ ĞĐŽŶŽŵŝĐĂůůLJ ĞĨĨŝĐŝĞŶƚ ŝŶĐĞŶƚŝǀĞƐ͕ ĂŶĚ ŝƚ ĐŽƵůĚ ŝŶĐƌĞĂƐĞ ƚŚĞ ĞĐŽŶŽŵŝĐ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ƚŚĞ ƐLJƐƚĞŵ ƐƵďƐƚĂŶƚŝĂůůLJ͘ KŶĞ ĞƐƚŝŵĂƚĞ ĨŽƵŶĚ ƚŚĂƚ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞ ŶƵŵďĞƌ ŽĨ W D ĐƵƐƚŽŵĞƌƐ ŽŶ ZdW ĨƌŽŵ ϭϬ ƚŽ ϮϬ ƉĞƌĐĞŶƚ ĐŽƵůĚ ŝŵƉƌŽǀĞ ĞĐŽŶŽŵŝĐ ĞĨĨŝĐŝĞŶĐLJ ďLJ ΨϭϮϬ ŵŝůůŝŽŶ ƉĞƌ LJĞĂƌ͘ĐĐ͕ Ϯϰϯ ŽǁĞǀĞƌ͕ ZdW ĂŶĚ ĐƌŝƚŝĐĂů ƉĞĂŬ ƉƌŝĐŝŶŐ ŝŶƚƌŽĚƵĐĞ ƚŚĞ ƌŝƐŬ ŽĨ ǀŽůĂƚŝůĞ ǁŚŽůĞƐĂůĞ ƉƌŝĐĞƐ ƚŽ ƚŚĞ ĐŽŶƐƵŵĞƌ͕ ƚŚŽƵŐŚ ĨŝŶĂŶĐŝĂů ŝŶƐƚƌƵŵĞŶƚƐ ĐĂŶ ŵŝƚŝŐĂƚĞ ƌŝƐŬƐ͘ ŽŶƐƵŵĞƌ ĂĚǀŽĐĂƚĞƐ ŚĂǀĞ ŽƉƉŽƐĞĚ ƚŝŵĞͲǀĂƌLJŝŶŐ ƉƌŝĐŝŶŐ ŽŶ ƚŚĞ ŐƌŽƵŶĚƐ ƚŚĂƚ ŝƚ ĚŝƐĂĚǀĂŶƚĂŐĞƐ ůŽǁͲŝŶĐŽŵĞ ƌĞƐŝĚĞŶƚŝĂů ĐŽŶƐƵŵĞƌƐ͕ ďƵƚ ƚŚĞƌĞ ŝƐ ŶŽƚ ĐůĞĂƌ ĞǀŝĚĞŶĐĞ ƚŽ ƐƵƉƉŽƌƚ ƚŚĂƚ ĐůĂŝŵ͘ ƐƵƌǀĞLJ ŽĨ ŵƵůƚŝƉůĞ dKh ƉƌŽŐƌĂŵƐ ĨŽƵŶĚ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ƚŽ ŚĂǀĞ ďŽƚŚ ĨůĂƚƚĞƌ ĚĞŵĂŶĚ ƉƌŽĨŝůĞƐ ĂŶĚ ůĞƐƐ ĂďŝůŝƚLJ ŽŶ ĂǀĞƌĂŐĞ ƚŽ ƐŚŝĨƚ ƚŚĞŝƌ ĚĞŵĂŶĚ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ƉƌŝĐĞ͘Ϯϰϰ dŚŝƐ ŵĞĂŶƚ ƚŚĂƚ͕ ŽŶ ĂǀĞƌĂŐĞ͕ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ďĞŶĞĨŝƚƚĞĚ ĨƌŽŵ dKh ǁŝƚŚŽƵƚ ĂŶLJ ĐŚĂŶŐĞ ŝŶ ƚŚĞŝƌ ďĞŚĂǀŝŽƌ͘ ŽǁĞǀĞƌ͕ ƚŚĞLJ ǁĞƌĞ ůĞƐƐ ĂďůĞ ƚŚĂŶ ŽƚŚĞƌ ĐŽŶƐƵŵĞƌƐ ƚŽ ƌĞĐŽƵƉ ĂĚĚŝƚŝŽŶĂů ďĞŶĞĨŝƚƐ ďLJ ĐŚĂŶŐŝŶŐ ďĞŚĂǀŝŽƌ͘ ĐƌŽƐƐ ƚŚĞ ĨŝǀĞ dKh ƉƌŽŐƌĂŵƐ ƐƚƵĚŝĞĚ͕ ƚŚĞ ŶĞƚ ĞĨĨĞĐƚƐ ŽŶ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐ ĐŽƵůĚ ďĞ ƉŽƐŝƚŝǀĞ Žƌ ŶĞŐĂƚŝǀĞ͘Ϯϰϱ 2 5 3 2 Locational Pricing Difficult to Implement dƌĂĚŝƚŝŽŶĂůůLJ͕ ůŽĐĂƚŝŽŶĂů ŝŵƉĂĐƚƐ ŽŶ ĞůĞĐƚƌŝĐŝƚLJ ĐŽƐƚ ĚŽ ŶŽƚ ŝŶĨŽƌŵ ƌĞƚĂŝů ƌĂƚĞƐ͕ ǁŚŝĐŚ ŝƐ ĂŶĂůŽŐŽƵƐ ƚŽ ƵŶŝĨŽƌŵ ĐŚĂƌŐĞƐ Ăƚ ƚŚĞ ƉŽƐƚ ŽĨĨŝĐĞ ĨŽƌ ŵĂŝůŝŶŐ Ă ůĞƚƚĞƌ ƚŽ ĂŶ ƵƌďĂŶ Žƌ Ă ƌƵƌĂů ŚŽŵĞ͘ tŚĞƚŚĞƌ ůŝǀŝŶŐ ŝŶ Ă ĚĞŶƐĞ ƵƌďĂŶ ŶĞŝŐŚďŽƌŚŽŽĚ Žƌ ŝŶ ƚŚĞ ŽŶůLJ ŚŽƵƐĞ Ăƚ ƚŚĞ ĞŶĚ ŽĨ Ă ĐŽƵŶƚƌLJ ƌŽĂĚ͕ Ăůů ĐŽŶƐƵŵĞƌƐ ŝŶ Ă ƐĞƌǀŝĐĞ ƚĞƌƌŝƚŽƌLJ ƉĂLJ ƚŚĞ ƐĂŵĞ ĐŚĂƌŐĞƐ ĨŽƌ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ͘ ŽǁĞǀĞƌ͕ ƐLJƐƚĞŵ ƉůĂŶŶŝŶŐ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ ĂƌĞ ŶŽǁ ƌĞĂĐŚŝŶŐ Ă ůĞǀĞů ŽĨ ƐŽƉŚŝƐƚŝĐĂƚŝŽŶ ƚŚĂƚ ĂůůŽǁƐ ĞŶŐŝŶĞĞƌƐ ƚŽ ĞƐƚŝŵĂƚĞ ƚŚĞ ůŽĐĂƚŝŽŶĂů ĂŶĚ ƚĞŵƉŽƌĂů ĐŽƐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĂƚ ĚĞƉĞŶĚ ŽŶ ůŽĐĂůŝnjĞĚ ƚĞĐŚŶŝĐĂů ĂƚƚƌŝďƵƚĞƐ ŽĨ ƚŚĞ ƉŚLJƐŝĐĂů ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ ůŝŬĞ ĨĞĞĚĞƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ůŝŶĞ ĐŽŶƐƚƌĂŝŶƚƐ͕ ĂŶĚ ůŽĐĂů ĚĞŵĂŶĚ͘ ĐĐ Žƌ ĐŽŵƉĂƌŝƐŽŶ͕ ƚŚĞ ƚŽƚĂů ƌĞƚĂŝů ƉƌŝĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚƌĂŶƐĂĐƚĞĚ ƚŚƌŽƵŐŚ W D ŝŶ Ă LJĞĂƌ ŝƐ ĂďŽƵƚ ΨϲϬϳϬ ďŝůůŝŽŶ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ZĞĐĞŶƚ ƉŽůŝĐŝĞƐ ĨƌŽŵ ƐĞǀĞƌĂů ƐƚĂƚĞ Wh Ɛ ŚĂǀĞ ƐƵŐŐĞƐƚĞĚ ƌĞŐƵůĂƚŽƌLJ ŝŶƚĞƌĞƐƚ ŝŶ ůŽĐĂƚŝŽŶͲďĂƐĞĚ ƉƌŝĐŝŶŐ ĨŽƌ ƌĂƚĞƉĂLJĞƌƐ ĚŽǁŶ ƚŽ ƚŚĞ ĨĞĞĚĞƌ ůĞǀĞů͘ ZĞŐƵůĂƚŽƌƐ ŝŶ DŝŶŶĞƐŽƚĂ ĐƵƌƌĞŶƚůLJ ĂůůŽǁ ƵƚŝůŝƚŝĞƐ ƚŽ ŝŶĐŽƌƉŽƌĂƚĞ ƚŚĞ ůŽĐĂƚŝŽŶͲƐƉĞĐŝĨŝĐ ŶĞƚ ďĞŶĞĨŝƚƐ ŽĨ ' ŝŶƚŽ ƉƌŝĐĞƐ ĐŚĂƌŐĞĚ ĨŽƌ ƉĂƌƚŝĐƵůĂƌ ƌĂƚĞƉĂLJĞƌƐ͘ĚĚ͕ Ϯϰϲ ZĞŐƵůĂƚŽƌƐ ŝŶ EĞǁ zŽƌŬ͕ ĂǁĂŝŝ͕ ĂŶĚ ĂůŝĨŽƌŶŝĂ ŚĂǀĞ ƌĞĐĞŶƚůLJ ĞdžƉƌĞƐƐĞĚ ŝŶƚĞƌĞƐƚ ŝŶ ůŽĐĂƚŝŽŶͲďĂƐĞĚ ƌĂƚĞƐ͘Ϯϰϳ͕ Ϯϰϴ ŽǁĞǀĞƌ͕ ŵŽƐƚ ĚĞƚĞƌŵŝŶĂŶƚƐ ŽĨ ůŽĐĂƚŝŽŶĂů ǀĂůƵĞ ĂƌĞ ŶŽƚ ǁŝƚŚŝŶ ĐƵƐƚŽŵĞƌƐ͛ ĐŽŶƚƌŽů͕ Žƌ ĞǀĞŶ ǁŝƚŚŝŶ ƚŚĞ ĐŽŶƐƵŵĞƌ͛Ɛ ŬŶŽǁůĞĚŐĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ŝĨ Ă ƐĞĐŽŶĚĂƌLJ ƚƌĂŶƐĨŽƌŵĞƌ ŝƐ ĐůŽƐĞ ƚŽ ŝƚƐ ƌĞƐĞƌǀĞ ŵĂƌŐŝŶ ĂŶĚ ƐŽŵĞŽŶĞ ǁŚŽ ůŝǀĞƐ ŶĞĂƌďLJ ďƵLJƐ ĂŶ s͕ ƚŚĞ ƵƚŝůŝƚLJ ŵĂLJ ŚĂǀĞ ƚŽ ƵƉŐƌĂĚĞ ƚŚĞ ƚƌĂŶƐĨŽƌŵĞƌ͕ ŝŶĐƵƌƌŝŶŐ Ă ǀĞƌLJ ƐƵďƐƚĂŶƚŝĂů ůŽĐĂů ĐŽƐƚ͘ Ĩ ƚŚĂƚ ƵƚŝůŝƚLJ ŝƐ ĂƉƉůLJŝŶŐ ůŽĐĂƚŝŽŶĂů ƉƌŝĐĞƐ͕ Ăůů ŽĨ ƚŚĞ ĐƵƐƚŽŵĞƌƐ ŽŶ ƚŚĂƚ ĨĞĞĚĞƌ ǁŽƵůĚ ƐĞĞ ƚŚĞŝƌ ƉƌŝĐĞƐ ŐŽ ƵƉ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ŽŶĞ ŶĞŝŐŚďŽƌ͛Ɛ ĚĞĐŝƐŝŽŶ͘ ŽĐĂƚŝŽŶĂů ĐŽƐƚƐ ŵĂLJ ƌĞĨůĞĐƚ ƉŚLJƐŝĐĂů ŐĞŽŐƌĂƉŚLJ͕ ůŽĐĂů ĞĐŽŶŽŵŝĐ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ͕ ĂŶĚ ůĞŐĂĐLJ ƉůĂŶŶŝŶŐ ĚĞĐŝƐŝŽŶƐ ŵĂĚĞ ďLJ ƵƚŝůŝƚŝĞƐ͕ ĂŶĚ ƚŚĞƐĞ ĐŽŵƉůĞdžŝƚŝĞƐ ŝŶƚƌŽĚƵĐĞ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ŝŶĞƋƵŝƚŝĞƐ ƚŽ ĐŽŶƐƵŵĞƌƐ͘ ĨĞĞĚĞƌͲďLJͲĨĞĞĚĞƌ ĞĐŽŶŽŵŝĐ ĂŶĚ ĞŶŐŝŶĞĞƌŝŶŐ ĂŶĂůLJƐŝƐ ŽĨ ƚŚĞ ǀĂůƵĞ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ Ws ŝŶ WĂĐŝĨŝĐ 'ĂƐ Θ ůĞĐƚƌŝĐ ŽŵƉĂŶLJ͛Ɛ ƐĞƌǀŝĐĞ ƚĞƌƌŝƚŽƌLJ ĨŽƵŶĚ ƚŚĂƚ ϵϬ ƉĞƌĐĞŶƚ ŽĨ ĨĞĞĚĞƌƐ ŚĂĚ ŶĞŝƚŚĞƌ ĐŽƐƚƐ ŶŽƌ ďĞŶĞĨŝƚƐ ĨƌŽŵ ĚŝƐƚƌŝďƵƚĞĚ Ws͕ ĂŶĚ ƚŚĞ ŚŝŐŚĞƐƚ ůŽĐĂƚŝŽŶĂů ǀĂůƵĞ ŽŶ ĂŶLJ ĨĞĞĚĞƌ ǁĂƐ ŽŶůLJ ĂďŽƵƚ ΨϲϬ ƉĞƌ Ŭt ƉĞƌ LJĞĂƌ͕ ƐƵŐŐĞƐƚŝŶŐ ƚŚĂƚ ƚŚĞƌĞ ŵĂLJ ďĞ ůŝŵŝƚĞĚ ďĞŶĞĨŝƚ ƚŽ ŝŶƐƚŝƚƵƚŝŶŐ ůŽĐĂƚŝŽŶĂů ƉƌŝĐĞƐ͘Ϯϰϵ 2 5 4 Net Metering for Distributed Generation EĞƚ ŵĞƚĞƌŝŶŐ ŝƐ Ă ƌĂƚĞ ŵĞĐŚĂŶŝƐŵ ǁŚĞƌĞŝŶ ĐƵƐƚŽŵĞƌƐ ǁŝƚŚ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ ůŝŬĞ ƌŽŽĨƚŽƉ ƐŽůĂƌ ĂƌĞ ĐŚĂƌŐĞĚ ĨŽƌ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚĞŝƌ ŶĞƚ ĐŽŶƐƵŵƉƚŝŽŶ ;ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞĚ ůĞƐƐ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐĞĚ ďLJ ƐŽůĂƌͿ͕ ĐƌĞĚŝƚŝŶŐ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ Ăƚ ƚŚĞ ĨƵůů ƌĞƚĂŝů ƌĂƚĞ͘ ƉƌŽǀŝƐŝŽŶ ŝŶ ƚŚĞ ŶĞƌŐLJ WŽůŝĐLJ Đƚ ŽĨ ϮϬϬϱ ƌĞƋƵŝƌĞĚ ƐƚĂƚĞƐ ƚŽ ĐŽŶƐŝĚĞƌ ŶĞƚ ŵĞƚĞƌŝŶŐ ĂƐ ĂŶ ŽƉƚŝŽŶ ĨŽƌ ĐŽŵƉĞŶƐĂƚŝŶŐ ŽǁŶĞƌƐ ŽĨ '͘ ƵƌƌĞŶƚůLJ͕ ϰϭ ƐƚĂƚĞƐ ĂŶĚ ƚŚĞ ŝƐƚƌŝĐƚ ŽĨ ŽůƵŵďŝĂ ŚĂǀĞ Ă ƐƚĂƚĞǁŝĚĞ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉŽůŝĐLJ͕ ĂŶĚ ϲ ƐƚĂƚĞƐ ŚĂǀĞ ĂůƚĞƌŶĂƚŝǀĞ ĐŽŵƉĞŶƐĂƚŝŽŶ ŵĞĐŚĂŶŝƐŵƐ ĨŽƌ ' ;ƐĞĞ ŝŐƵƌĞ ϮͲϭϲͿ͘ ƚĂƚĞƐ ĂĚŽƉƚĞĚ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉŽůŝĐŝĞƐ ŵŽƚŝǀĂƚĞĚ ďLJ Ă ĚĞƐŝƌĞ ƚŽ ŐĞŶĞƌĂƚĞ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ njĞƌŽͲ Žƌ ůŽǁͲĞŵŝƚƚŝŶŐ ƐŽƵƌĐĞƐ͕ ƚŽ ƐƵƉƉŽƌƚ ĚĞƉůŽLJŵĞŶƚ ŽĨ Ă ŶĞǁ ƚĞĐŚŶŽůŽŐLJ͕ ĂŶĚ ƚŽ ŐŝǀĞ ĐŽŶƐƵŵĞƌƐ ƚŚĞ ŽƉƚŝŽŶ ŽĨ ŐĞŶĞƌĂƚŝŶŐ ƚŚĞŝƌ ŽǁŶ ƉŽǁĞƌ͘ϮϱϬ dŚĞ ƉŽůŝĐLJ ŚĂƐ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ϭϮ͕ϯϬϬ Dt ŽĨ ŝŶƐƚĂůůĞĚ ĚŝƐƚƌŝďƵƚĞĚ Ws ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂƐ ŽĨ ĞƉƚĞŵďĞƌ ϮϬϭϲ͘Ϯϱϭ ŽŶƐƵŵĞƌƐ ǁŝƚŚ ' ĂƌĞ Ɛƚŝůů ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚĞ ŵĂŝŶ ŐƌŝĚ͕ ĂůůŽǁŝŶŐ ƚŚĞŵ ƚŽ ďĞŶĞĨŝƚ ĨƌŽŵ ƚŚĞ ƉŚLJƐŝĐĂů ĐŽŶŶĞĐƚŝŽŶ ƚŽ ƚŚĞ ŐƌŝĚ ƚŚĂƚ ƉƌŽǀŝĚĞƐ ďĂůĂŶĐŝŶŐ ƐĞƌǀŝĐĞƐ͕ ƌĞůŝĂďŝůŝƚLJ͕ ĂŶĚ ďĂƐĞ ůŽĂĚ ĂŶĚ ƉĞĂŬŝŶŐ ŐĞŶĞƌĂƚŝŽŶ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ǁŚĞŶ ƚŚĞ ' ƐŽƵƌĐĞ ŝƐ ŶŽƚ ƉƌŽĚƵĐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ŽŶƐŝƚĞ Ws ŚŽƐƚƐ͕ ŵĂŶLJ ƵƚŝůŝƚŝĞƐ ŚĂǀĞ ĞdžƉĂŶĚĞĚ ŶĞƚ ŵĞƚĞƌŝŶŐ ƚŽ ĐƵƐƚŽŵĞƌƐ ǁŚŽ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ŽĨĨƐŝƚĞ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ͕ ƐƵĐŚ ĂƐ ĐŽŵŵƵŶŝƚLJ ƐŽůĂƌ͕ ƚŚƌŽƵŐŚ ǀŝƌƚƵĂů ŶĞƚ ŵĞƚĞƌŝŶŐ͘ĞĞ ƵĐŚ ƉƌŽŐƌĂŵƐ ĞdžƚĞŶĚ ƚŚĞ ďŝůů ƐĂǀŝŶŐƐ ƚŽ ĐŽŶƐƵŵĞƌƐ ǁŚŽ ĚŽ ŶŽƚ ŚĂǀĞ ĂƉƉƌŽƉƌŝĂƚĞ ƐƉĂĐĞ ĨŽƌ ƐŽůĂƌ ŽŶ ƚŚĞŝƌ ŽǁŶ ƉƌĞŵŝƐĞƐ Žƌ ǁŚŽ ĂƌĞ ƵŶĂďůĞ ƚŽ ĨŝŶĂŶĐĞ ƐŽůĂƌ ŽŶ ƚŚĞŝƌ ŽǁŶ ;Ğ͘Ő͕͘ ůŽǁͲŝŶĐŽŵĞ ĐŽŶƐƵŵĞƌƐͿ͘ ĚĚ dŚĞ DŝŶŶĞƐŽƚĂ sĂůƵĞ ŽĨ ŽůĂƌ DĞƚŚŽĚŽůŽŐLJ ĂůůŽǁƐ ĨŽƌ ŝŶĐŽƌƉŽƌĂƚŝŶŐ ƚŚĞ ůŽĐĂƚŝŽŶ ŽĨ ƚŚĞ Z ŝŶ ĚĞƚĞƌŵŝŶŝŶŐ ŝƚƐ ǀĂůƵĞ ƚŽ ƚŚĞ ŐƌŝĚ͕ ďƵƚ ŝƚ ŝƐ ŶŽƚ ĐůĞĂƌ ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ŚĂǀĞ ĂĐƚƵĂůůLJ ĞdžĞƌĐŝƐĞĚ ƚŚĂƚ ĚŝƐĐƌĞƚŝŽŶ͘ ĞĞ sŝƌƚƵĂů ŶĞƚ ŵĞƚĞƌŝŶŐ ĐĂůĐƵůĂƚĞƐ Ă ƐŚĂƌĞ ŽĨ ŶĞƚ ŵĞƚĞƌŝŶŐ ĨŽƌ Ăůů ƉĂƌƚŝĐŝƉĂŶƚƐ ŝŶ Ă ŐƌŽƵƉ͖ ŝƚ ŝƐ ƵƐƵĂůůLJ ĂĚŵŝŶŝƐƚĞƌĞĚ ƚŚƌŽƵŐŚ Ă ƐƵďƐĐƌŝƉƚŝŽŶ ƉƌŽŐƌĂŵ͕ ǁŚĞƌĞ ĐŽŶƐƵŵĞƌƐ ĐĂŶ ĞĂƐŝůLJ ǁŝƚŚĚƌĂǁ ĨƌŽŵ ƚŚĞ ƉƌŽŐƌĂŵ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Figure 2-16 Current Net Metering and Distributed Generation Compensation Policies 252 HRUJLD DZDLL 0LVVLVVLSSL DQG 1HYDGD RIIHU DOWHUQDWLYH FRPSHQVDWLRQ PHFKDQLVPV IRU ' VXFK DV QHW ELOOLQJ ZKLFK W SLFDOO SURYLGHV D UDWH RI FRPSHQVDWLRQ IRU JULG H SRUWV EHORZ WKH UHWDLO UDWH dŚĞƌĞ ĂƌĞ Ă ǁŝĚĞ ǀĂƌŝĞƚLJ ŽĨ ŵĞƚŚŽĚƐ ĨŽƌ ǀĂůƵŝŶŐ '͘ EĞƚ ŵĞƚĞƌŝŶŐ ǀĂůƵĞƐ ' Ăƚ ƚŚĞ ƌĞƚĂŝů ƌĂƚĞ͘ ƚ ůŽǁ ƉĞŶĞƚƌĂƚŝŽŶ ůĞǀĞůƐ ĂŶĚ ǁŝƚŚ ĨĞǁ ŽƉƚŝŽŶƐ ĨŽƌ ĂůƚĞƌŶĂƚŝǀĞ ŵĞƚĞƌŝŶŐ͕ ŶĞƚ ŵĞƚĞƌŝŶŐ ŝƐ Ă ƌĞĂƐŽŶĂďůĞ ĂƉƉƌŽĂĐŚ ƚŽ ƉƌŽǀŝĚŝŶŐ ǀĂůƵĞ ƚŽ ƚŚĞ ĐƵƐƚŽŵĞƌ ĂŶĚ ƚŚĞ ƵƚŝůŝƚLJ͘ Ɛ ' ƉĞŶĞƚƌĂƚŝŽŶ ŝŶĐƌĞĂƐĞƐ͕ ƚŚŝƐ ĂƐƐƵŵƉƚŝŽŶ ďĞĐŽŵĞƐ ůĞƐƐ ǀĂůŝĚ͘ dŚĞƌĞ ĂƌĞ ĞdžƚĞƌŶĂů ďĞŶĞĨŝƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ '͘ ŽůĂƌ Ws ĚŝƐƉůĂĐĞƐ ĐĂƌďŽŶͲ ĞŵŝƚƚŝŶŐ ƐŽƵƌĐĞƐ͘ ƚ ĐĂŶ ĂůƐŽ ƌĞĚƵĐĞ ĐŽŶŐĞƐƚŝŽŶ ŽŶ ĚŝƐƚƌŝďƵƚŝŽŶ ůŝŶĞƐ͕ ĂůƚŚŽƵŐŚ ŝƚ ĐĂŶ ĂůƐŽ ŝŶĐƌĞĂƐĞ ĐŽŶŐĞƐƚŝŽŶƚŚĞ ŶĞƚ ĞĨĨĞĐƚ ďĞŝŶŐ ůŽĐĂƚŝŽŶͲ ĂŶĚ ĐŽŶĨŝŐƵƌĂƚŝŽŶͲƐƉĞĐŝĨŝĐ͘ Ɛ ' ŚŽƐƚƐ ƌĞĐĞŝǀĞ ƚŚĞ ƌĞƚĂŝů ƌĂƚĞ ĨŽƌ ĞdžƉŽƌƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ͕ ƐŽŵĞ ŚĂǀĞ ĐůĂŝŵĞĚ ƚŚĂƚ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ĂǀŽŝĚ ƉĂLJŝŶŐ ƚŚĞ ĨƵůů ŽŶŐŽŝŶŐ ĐŽƐƚƐ ŽĨ ƉƌŽǀŝĚŝŶŐ ĂŶĚ ŵĂŝŶƚĂŝŶŝŶŐ ĚŝƐƚƌŝďƵƚŝŽŶͲƐLJƐƚĞŵ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂŶĚ ƚŚĞ ĐŽƐƚƐ ŽĨ ƉƌŽǀŝĚŝŶŐ ƉŽǁĞƌ ǁŚĞŶ ƚŚĞ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŽƌƐ ĂƌĞ ŶŽƚ ŐĞŶĞƌĂƚŝŶŐ ;ĂƐ Ăƚ ŶŝŐŚƚ ǁŝƚŚ ƐŽůĂƌͿ͘Ϯϱϯ DŽƌĞŽǀĞƌ͕ ďĞĐĂƵƐĞ ǀŽůƵŵĞƚƌŝĐ rates ĂƐ ĚĞƐŝŐŶĞĚ ĂƌĞ ŐĞŶĞƌĂůůLJ ŶŽƚ Ă ƚƌƵĞ ƌĞƉƌĞƐĞŶƚĂƚŝŽŶ ŽĨ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ǀĂƌŝĂďůĞ costs ;ƚŚĞLJ ƚLJƉŝĐĂůůLJ ŝŶĐůƵĚĞ Ă ƐƵďƐƚĂŶƚŝĂů ƉŽƌƚŝŽŶ ŽĨ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ĨŝdžĞĚ ĐŽƐƚƐ͕ ĂƐ ǁĞůůͿ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ǁŚŽ ƌĞĚƵĐĞ ƚŚĞ ǀŽůƵŵĞƚƌŝĐ ƉŽƌƚŝŽŶ ŽĨ ƚŚĞŝƌ ďŝůů ǁŝůů ůŝŬĞůLJ ƉĂLJ Ă ůŽǁĞƌ ĂŵŽƵŶƚ ƚŽǁĂƌĚ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ĨŝdžĞĚ ĐŽƐƚƐ͘ ĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ĐĂŶ ŚĂǀĞ ƐŝŵŝůĂƌ ĞĨĨĞĐƚƐ͘ dŚŝƐ ĐĂŶ ůĞĂĚ ƚŽ ƌĞǀĞŶƵĞ ƐŚŝĨƚƐ ĨƌŽŵ ůŽǁͲ ĚĞŵĂŶĚ ĂŶĚ ŶĞƚ ŵĞƚĞƌĞĚ ĐŽŶƐƵŵĞƌƐ ƚŽ ŽƚŚĞƌƐ ĚĞƉĞŶĚŝŶŐ ŽŶ ůŽĐĂƚŝŽŶ ĂŶĚ ĐŽŶĨŝŐƵƌĂƚŝŽŶ͘Ϯϱϰ ŽŶƚĞŶƚŝŽƵƐ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ĚŝƐĐƵƐƐŝŽŶƐ ĂƌŽƵŶĚ ƚŚĞ ƌĞƐƵůƚƐ ŽĨ ŶĞƚ ŵĞƚĞƌŝŶŐ ŝŶĐůƵĚĞ ǁŚĞƚŚĞƌ ƌĂƚĞƐ ƐƚƌƵĐƚƵƌĞĚ ŝŶ ƚŚŝƐ ŵĂŶŶĞƌ ĐĂŶ ĐŽŶƚƌŝďƵƚĞ ƚŽ ŝŵƉƌŽƉĞƌ ǀĂůƵĂƚŝŽŶ ŽĨ ŐƌŝĚ ƐĞƌǀŝĐĞƐ͕ ƌĞǀĞŶƵĞ ƐŚŝĨƚƐ͕ ĂŶĚ ĐŽƐƚ ƐŚŝĨƚƐ ĨŽƌ ŵĂŝŶƚĂŝŶŝŶŐ ƚŚĞ ŐƌŝĚ ĨƌŽŵ ' ƉĂƌƚŝĐŝƉĂŶƚƐ ƚŽ Žƌ ĨƌŽŵ ŶŽŶͲƉĂƌƚŝĐŝƉĂŶƚƐ͘ dŚĞƐĞ ƐŚŝĨƚƐ ĐĂŶ ďĞ ƐŝŐŶŝĨŝĐĂŶƚ͕ ǁŝƚŚ Ă ƌĞĐĞŶƚ ƐƚƵĚLJ ƉĞƌĨŽƌŵĞĚ ĨŽƌ ƚŚĞ Wh ĨŽƌĞĐĂƐƚŝŶŐ ƚŚĂƚ ƚŚĞ ĐŽƐƚ ƐŚŝĨƚ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŶĞƚ ŵĞƚĞƌŝŶŐ ǁŽƵůĚ ďĞ Ψϭ͘ϭ ďŝůůŝŽŶ ƉĞƌ LJĞĂƌ ďLJ ϮϬϮϬ͘Ϯϱϱ ŽŵĞ ƐƚƵĚŝĞƐ ŚĂǀĞ ĚĞŵŽŶƐƚƌĂƚĞĚ ƚŚĂƚ ƚŚĞ ƉƌĞƐĞŶĐĞ ŽĨ ƌĞǀĞŶƵĞ ƐŚŝĨƚƐ ĚŽĞƐ ŶŽƚ ŶĞĐĞƐƐĂƌŝůLJ ŝŵƉůLJ ƚŚĂƚ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ĂƌĞ ŶŽƚ ĐŽǀĞƌŝŶŐ ƚŚĞŝƌ ĐŽƐƚ ŽĨ ƐĞƌǀŝĐĞ͘ ƚƵĚŝĞƐ ŽĨ ŶĞƚ ŵĞƚĞƌŝŶŐ ŝŶ EĞǀĂĚĂ ĂŶĚ ĂůŝĨŽƌŶŝĂ ƐƵŐŐĞƐƚĞĚ ƚŚĂƚ͕ ƌĞŐĂƌĚůĞƐƐ ŽĨ ůŽƐƚ ĐŽŶƚƌŝďƵƚŝŽŶ ƚŽ ĨŝdžĞĚ ĐŽƐƚƐ͕ Ă ŶƵŵďĞƌ ŽĨ ĐůĂƐƐĞƐ ŽĨ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ŚĂǀĞ ďĞĞŶ ƉĂLJŝŶŐ ŵŽƌĞ ƚŚĂŶ ŝƚ ĐŽƐƚƐ ƚŽ ƐĞƌǀĞ ƚŚĞŵ͘ĨĨ͕ Ϯϱϲ͕ Ϯϱϳ Ŷ ĐŽŶƚƌĂƐƚ͕ Ă ƐƚƵĚLJ ƉĞƌĨŽƌŵĞĚ ĨŽƌ ƚŚĞ ŽƵŝƐŝĂŶĂ WƵďůŝĐ ĞƌǀŝĐĞ ŽŵŵŝƐƐŝŽŶ ĐŽŶĐůƵĚĞĚ ƚŚĂƚ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ĚŽ ŶŽƚ ĐŽǀĞƌ ƚŚĞŝƌ ĐŽƐƚ ŽĨ ƐĞƌǀŝĐĞ͘Ϯϱϴ Ĩ͕ ĂƐ ƚŚĞ ĞǀŝĚĞŶĐĞ ƐƵŐŐĞƐƚƐ͕ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ĂƌĞ ŝŶ ƐŽŵĞ ĐĂƐĞƐ ĐŽǀĞƌŝŶŐ ƚŚĞŝƌ ĐŽƐƚƐ ǁŚŝůĞ ĐƌĞĂƚŝŶŐ Ă ƌĞǀĞŶƵĞ ƐŚŝĨƚ ƚŽ ŽƚŚĞƌ ĐƵƐƚŽŵĞƌƐ͕ ƌĂƚĞƐ ŵĂLJ ŶĞĞĚ ƚŽ ďĞ ďĞƚƚĞƌ ĂůŝŐŶĞĚ ǁŝƚŚ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ĂĐƌŽƐƐ ƚŚĞ ƐLJƐƚĞŵ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ŝŶ ƐŽŵĞ ŝŶƐƚĂŶĐĞƐ͕ ƚŚĞ ďĞŶĞĨŝƚƐ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ ŵĂLJ ĞdžĐĞĞĚ ƚŚĞ ƌĞƚĂŝů ƌĂƚĞ ĨƌŽŵ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉƌŽŐƌĂŵƐ ĂŶĚ ƌĞƐƵůƚ ŝŶ Ă ƐŚŝĨƚ ŽĨ ďĞŶĞĨŝƚƐ ĨƌŽŵ ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ƚŽ ŽƚŚĞƌ ŚŽƵƐĞŚŽůĚƐ͘Ϯϱϵ DĂŶLJ ƐƚƵĚŝĞƐ ŚĂǀĞ ĂƚƚĞŵƉƚĞĚ ƚŽ ƋƵĂŶƚŝĨLJ ŶŽƚ ũƵƐƚ ŚŽǁ ' ĂĚĚƐ ĐŽƐƚƐ ƚŽ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ďƵƚ ŚŽǁ ĚŝƐƚƌŝďƵƚĞĚ Ws ŝŶĐƌĞĂƐĞƐ ƐŽĐŝĂů ďĞŶĞĨŝƚƐ ďLJ ƌĞĚƵĐŝŶŐ ' ' ĞŵŝƐƐŝŽŶƐ͕ Ăŝƌ ƉŽůůƵƚŝŽŶ͕ ĞdžƉŽƐƵƌĞ ƚŽ ĨƵĞů ƉƌŝĐĞ ǀŽůĂƚŝůŝƚLJ͕ ĂŶĚ ƚŚĞ ŶĞĞĚ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ Ăƚ ƚŝŵĞƐ ŽĨ ƉĞĂŬ ůŽĂĚ͘ŐŐ͕ ϮϲϬ ĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ŵĞƚŚŽĚ ƵƐĞĚ ĂŶĚ ƚŚĞ ĐƵƌƌĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽŶƐŝĚĞƌĞĚ͕ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ ŚĂǀĞ ďĞĞŶ ĞƐƚŝŵĂƚĞĚ Ăƚ ŵŽƌĞ ƚŚĂŶ ϭϬ ĐĞŶƚƐ ƉĞƌ ŬtŚ ĂŶĚ ƚŚĞ ĨƵĞů ƉƌŝĐĞ ƌŝƐŬ ƌĞĚƵĐƚŝŽŶ Ăƚ Ă ƐŝŵŝůĂƌ ǀĂůƵĞ͘Ϯϲϭ LJ ŝŶĐůƵĚŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͕ ƐĞǀĞƌĂů ƐƚĂƚĞƐ ŚĂǀĞ ĨŽƵŶĚ ƚŚĂƚ ƚŚĞ ƚŽƚĂů ǀĂůƵĞ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ Ws ĞdžĐĞĞĚƐ ƚŚĞ ƌĞƚĂŝů ƌĂƚĞ͘ ϮϲϮ DĂŶLJ ŽĨ ƚŚĞƐĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ĂƌĞ ͞ĞdžƚĞƌŶĂůŝƚŝĞƐ͟ ƚŚĂƚ ĂƌĞ ŶŽǁ ŶŽƚ ƚLJƉŝĐĂůůLJ ƉĂƌƚ ŽĨ ƵƚŝůŝƚLJ ĐŽŶƐŝĚĞƌĂƚŝŽŶ͘ ŽǁĞǀĞƌ͕ ŝƚ ƐŚŽƵůĚ ďĞ ŶŽƚĞĚ ƚŚĞƐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ƐLJƐƚĞŵ ďĞŶĞĨŝƚƐ ĂĐĐƌƵĞ ĞƋƵĂůůLJ ĨƌŽŵ ďŽƚŚ ĚŝƐƚƌŝďƵƚĞĚ Ws ĂŶĚ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ͖ ďƵƚ͕ ŝŶ ŐĞŶĞƌĂů͕ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ŶŽƚ ĞůŝŐŝďůĞ ĨŽƌ ŶĞƚͲŵĞƚĞƌŝŶŐͲůŝŬĞ ĐŽŵƉĞŶƐĂƚŝŽŶ ƐƚƌƵĐƚƵƌĞƐ͘ŚŚ ŽŶƐŝĚĞƌŝŶŐ ƚŚĞ ĐŽŵƉůĞdžŝƚLJ ŽĨ ĞǀĂůƵĂƚŝŶŐ ĚŝƐƚƌŝďƵƚĞĚ ĞŶĞƌŐLJ ŝŶǀĞƐƚŵĞŶƚƐ͕ ƐŽŵĞ ƐƚĂƚĞ ƌĞŐƵůĂƚŽƌƐ ĂƌĞ ƌĞĞǀĂůƵĂƚŝŶŐ ĐŽŵƉĞŶƐĂƚŝŽŶ ŵŽĚĞůƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ ĂŶĚ ĞdžƉůŽƌŝŶŐ ŝŶŶŽǀĂƚŝǀĞ ǁĂLJƐ ƚŽ ǀĂůƵĞ ƚŚĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ Z ƚŽ ƚŚĞ ŐƌŝĚ ĂŶĚ ŝŵƉƌŽǀĞ ŵĂƌŬĞƚ ŵĞĐŚĂŶŝƐŵƐ ƚŚĂƚ ĂůŝŐŶ ŝŶǀĞƐƚŵĞŶƚƐ͕ ďĞŚĂǀŝŽƌ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ͘ EĞƚ ŵĞƚĞƌŝŶŐ ŽŶůLJ ĐŽŵƉĞŶƐĂƚĞƐ ĨŽƌ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞƐ ǁŝƚŚŽƵƚ ƉƌŽǀŝƐŝŽŶƐ ĨŽƌ ƉĂLJŵĞŶƚƐ ĨŽƌ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ƐƵĐŚ ĂƐ ǀŽůƚͬǀĂƌ ;ǀŽůƚͲĂŵƉĞƌĞ ƌĞĂĐƚŝǀĞͿ ƐƵƉƉŽƌƚ ĂŶĚ ŽƚŚĞƌ ĂŶĐŝůůĂƌLJ ƐĞƌǀŝĐĞƐ͘ EĞǁ ĐŽŵƉĞŶƐĂƚŝŽŶ ĂƌƌĂŶŐĞŵĞŶƚƐ ĐŽƵůĚ ŝŶĐĞŶƚ ĐƵƐƚŽŵĞƌƐ ƚŽ ƉƌŽǀŝĚĞ ƚŚĞƐĞ ƐĞƌǀŝĐĞƐ͕ ďƵƚ ǁŝƚŚŽƵƚ ŶĞǁ ƉĂLJŵĞŶƚ ĂƌƌĂŶŐĞŵĞŶƚƐ͕ ĐƵƐƚŽŵĞƌƐ ĂƌĞ ĚŝƐŝŶĐĞŶƚŝǀŝnjĞĚ ƚŽ ƉƌŽǀŝĚĞ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ƚŚĂƚ ŵĂLJ ƌĞĚƵĐĞ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ĞŶĞƌŐLJ ĞdžƉŽƌƚĞĚ ƚŽ ƚŚĞ ŐƌŝĚ͘ Ɛ ŽĨ KĐƚŽďĞƌ ϮϬϭϱ͕ Ϯϱ ƐƚĂƚĞƐ ĂƌĞ ƌĞǀŝĞǁŝŶŐ ŶĞƚ ŵĞƚĞƌŝŶŐ͘Ϯϲϯ dĂďůĞ ϮͲϮ ůŝƐƚƐ ƐŽŵĞ ĂůƚĞƌŶĂƚŝǀĞƐ ƚŽ ŶĞƚ ŵĞƚĞƌŝŶŐ ƵŶĚĞƌ ĐŽŶƐŝĚĞƌĂƚŝŽŶ͘ ĂƌůLJ ŵŽǀĞƌƐ ǁŝůů ƐĞƌǀĞ ĂƐ ƚĞƐƚ ďĞĚƐ ƚŽ ŐƵŝĚĞ ŽƚŚĞƌ ƐƚĂƚĞƐ ĐŽŶƐŝĚĞƌŝŶŐ ĂůƚĞƌŶĂƚŝǀĞƐ͘ Ɛ ƚŚŝƐ ŚĂƉƉĞŶƐ͕ ŚŽǁĞǀĞƌ͕ ĐŽŶƐƵŵĞƌƐ ǁŚŽ ŚĂǀĞ ĂůƌĞĂĚLJ ŝŶǀĞƐƚĞĚ ŝŶ ĚŝƐƚƌŝďƵƚĞĚ Ws ŵĂLJ ĨĂĐĞ ƐƵďƐƚĂŶƚŝĂů ĞĐŽŶŽŵŝĐ ůŽƐƐ ŝĨ ƚŚĞLJ ĂƌĞ ŶŽƚ ŐƌĂŶĚĨĂƚŚĞƌĞĚ ĂŶĚ ǁŝůů ďĞŐŝŶ ƚŽ ƌĞĐĞŝǀĞ ƐƵďƐƚĂŶƚŝĂůůLJ ƌĞĚƵĐĞĚ ƌĂƚĞƐ ĨŽƌ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĞLJ ƉƌŽǀŝĚĞ ƚŽ ƚŚĞ ŐƌŝĚ͘ ZĞŐƵůĂƚŽƌLJ ƵŶĐĞƌƚĂŝŶƚLJ ĐĂŶ ĂůƐŽ ŵĂŬĞ ŝƚ ŵŽƌĞ ĚŝĨĨŝĐƵůƚ ƚŽ ƐĞĐƵƌĞ ĨŝŶĂŶĐŝŶŐ ĂŶĚ ĐĂŶ ĚƌŝǀĞ ƵƉ ƚŚĞ ĐŽƐƚ ŽĨ ĐĂƉŝƚĂů ĨŽƌ '͘ ĚƵĐĂƚŝŶŐ ĂŶĚ ŝŶĨŽƌŵŝŶŐ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ƐŵĂůů ĐŽŵŵĞƌĐŝĂů ĐŽŶƐƵŵĞƌƐ ĂďŽƵƚ ƉŽƚĞŶƚŝĂů ƌĞŐƵůĂƚŽƌLJ ƌŝƐŬƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ Z ŝŶǀĞƐƚŵĞŶƚƐ ƐŚŽƵůĚ ďĞ Ă ĨĨ dŚĞ Wh ƐƚƵĚLJ ĨŽƵŶĚ ƚŚĂƚ ŝŶ ϮϬϭϭ ŶŽŶͲƌĞƐŝĚĞŶƚŝĂů ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ;ϱϲ ƉĞƌĐĞŶƚ ŽĨ ŶĞƚ ŵĞƚĞƌĞĚ ƐLJƐƚĞŵƐͿ ƉĂŝĚ ϭϭϮ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĐŽƐƚ ƚŽ ƐĞƌǀĞ ƚŚĞŵ͕ ǁŚŝůĞ ƌĞƐŝĚĞŶƚŝĂů ŶĞƚ ŵĞƚĞƌĞĚ ĐƵƐƚŽŵĞƌƐ ƉĂŝĚ ϴϭ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĐŽƐƚ ƚŽ ƐĞƌǀĞ ƚŚĞŵ͘ ŐŐ 'ĞŶĞƌĂƚŝŽŶ Ăƚ ƚŝŵĞƐ ŽĨ ƉĞĂŬ ůŽĂĚ ŝƐ ƉĂƌƚŝĐƵůĂƌůLJ ǀĂůƵĂďůĞ ǁŚĞŶ ƚŚĞƌĞ ŝƐ ůŝƚƚůĞ ƐŽůĂƌ ŝŶƐƚĂůůĞĚ͖ ƚŚŝƐ ǀĂůƵĞ ĚĞĐůŝŶĞƐ ĨŽƌ ƐƵďƐĞƋƵĞŶƚ ŝŶƐƚĂůůĂƚŝŽŶƐ͘ ŚŚ ĚĚŝƚŝŽŶĂůůLJ͕ ƚŽƚĂů ƐLJƐƚĞŵ ĐŽƐƚƐ ĨŽƌ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ ůŽǁĞƌ ƚŚĂŶ ĨŽƌ ĂŶ ĞƋƵŝǀĂůĞŶƚ ĐĂƉĂĐŝƚLJ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ Ws ĚƵĞ ƚŽ ĞĐŽŶŽŵŝĞƐ ŽĨ ƐĐĂůĞ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ƉƌŝŽƌŝƚLJ͘ Ɛ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ŵĂƌŬĞƚƐ ĞǀŽůǀĞ͕ ƐƚĂƚĞƐ ĐĂŶ ďƵŝůĚ ƚŚĞŝƌ ĐĂƉĂĐŝƚLJ ƚŽ ǀĂůƵĞ '͕ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ Z͕ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ĂŶĚ ƚŽ ĞĨĨĞĐƚŝǀĞůLJ ŝŶĐůƵĚĞ ƚŚĞŵ ŝŶ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ͘ EĞƚ ŵĞƚĞƌŝŶŐ ŝƐ Ă ĨŝƌƐƚ ƐƚĞƉ ŝŶ ĚĞǀĞůŽƉŝŶŐ ŵĞƚŚŽĚƐ ƚŽ ĐŽŵƉĞŶƐĂƚĞ ĐƵƐƚŽŵĞƌƐ ĨŽƌ ƚŚĞ ƐĞƌǀŝĐĞƐ ĂŶĚ ŐĞŶĞƌĂƚŝŽŶ ƚŚĞLJ ƉƌŽǀŝĚĞ ƚŽ ƚŚĞ ŐƌŝĚ͘ ŽŵĞ ŽĨ ƚŚĞ ůŝŵŝƚĂƚŝŽŶƐ ŽĨ ŶĞƚ ŵĞƚĞƌŝŶŐ ŵĂLJ ďĞ ĂĚĚƌĞƐƐĞĚ ďLJ ĐƌĞĂƚŝŶŐ ƐĞƉĂƌĂƚĞ ƌĂƚĞ ĐůĂƐƐĞƐ ĨŽƌ ' ƉĂƌƚŝĐŝƉĂŶƚƐ ĂŶĚ ŝŶĐŽƌƉŽƌĂƚŝŶŐ ĞůĞŵĞŶƚƐ ŽĨ ŶĞƚ ŵĞƚĞƌŝŶŐ ŝŶƚŽ ŵŽƌĞ ƐŽƉŚŝƐƚŝĐĂƚĞĚ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ ĨŽƌ ƚŚĂƚ ĐƵƐƚŽŵĞƌ ĐůĂƐƐ͘ DŽǀŝŶŐ ĨŽƌǁĂƌĚ͕ ƐƚĂƚĞƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ǁŝůů ůŝŬĞůLJ ůŽŽŬ ƚŽ ƵƐĞ ŵŽƌĞ ƌŽďƵƐƚ ǀĂůƵĂƚŝŽŶ ŵĞƚŚŽĚƐ͘ ĐĐŽƌĚŝŶŐůLJ͕ ŶĞǁ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ĐŽŶƐƵŵĞƌ ĐŽŵƉĞŶƐĂƚŝŽŶ ƉŽůŝĐŝĞƐ ĨŽƌ ƐŽŵĞ ĐŽŶƐƵŵĞƌƐŵŽƌĞ ƉƌĞĐŝƐĞ ƚŽŽůƐ ƚŚĂŶ ĐƵƌƌĞŶƚ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉŽůŝĐŝĞƐǁŝůů ĞŶĂďůĞ ĞĨĨŝĐŝĞŶƚ ĐŽŵƉĞŶƐĂƚŝŽŶ ĨŽƌ Ă ǁŝĚĞƌ ĂƌƌĂLJ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ ƌĞƐŽƵƌĐĞƐ͘ dŚĞ ŐƌŽƵƉ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ ĞůŝŐŝďůĞ ĨŽƌ ĐŽŵƉĞŶƐĂƚŝŽŶ ŵĂLJ ůŝŬĞůLJ ŐƌŽǁ ƚŽ ŝŶĐůƵĚĞ ŵŽƌĞ ĨůĞdžŝďůĞ ĐŽŶǀĞƌƚŽƌƐ͕ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ ůŽĂĚͲĐŽŶƚƌŽůůĞĚ ŚŽƚ ǁĂƚĞƌ ŚĞĂƚĞƌƐ͕ ĂŶĚ ŽƚŚĞƌ ƐŵĂƌƚ ŐƌŝĚͲĐŽŶƚƌŽůůĞĚ ĚĞǀŝĐĞƐ ƚŚĂƚ ĐŽƵůĚ ƉƌŽǀŝĚĞ ĂŶĐŝůůĂƌLJ ĂŶĚ ůŽĂĚͲƐŚŝĨƚŝŶŐ ƐĞƌǀŝĐĞƐ͘ tŚĞŶ ƌĞĚĞƐŝŐŶŝŶŐ ƌĂƚĞƐ ƚŚĂƚ ĞŶĂďůĞ ĐƵƐƚŽŵĞƌƐ ƚŽ ƉƵƌƐƵĞ ŽƉƚŝŽŶƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ƚŚĞŵ ĂŶĚ ƚŚĞ ƵƚŝůŝƚLJ ǀĂůƵĞͲďĂƐĞĚ ŽƉƚŝŽŶƐ͕ ƌĞĐŽǀĞƌŝŶŐ ƚŚĞ ĐŽƐƚ ŽĨ ƉƌŽǀŝĚŝŶŐ ĚŝƐƚƌŝďƵƚŝŽŶ ƐĞƌǀŝĐĞƐ ŝƐ ŽĨ ĐƌŝƚŝĐĂů ŝŵƉŽƌƚĂŶĐĞ͘ Ɛ ƐƵĐŚ͕ ĂŶ ŝƐƐƵĞ ŝƐ ƚŚĞ ƉƌŽƉĞƌ ŝĚĞŶƚŝĨŝĐĂƚŝŽŶ ĂŶĚ ǀĂůƵĂƚŝŽŶ ŽĨ ƚŚĞ ĐŽƐƚƐ ĂŶĚ ƚŚĞ ďĞŶĞĨŝƚƐ ƉƌŽǀŝĚĞĚ ďLJ ƚŚĞ ŐƌŽǁŝŶŐ ĂƌƌĂLJ ŽĨ ĐƵƐƚŽŵĞƌ ŽƉƚŝŽŶƐ͘ ŽŶƐƵŵĞƌƐ ǁŚŽ ǁĂŶƚ ƚŽ ŵĂŝŶƚĂŝŶ ƚŚĞŝƌ ĞdžŝƐƚŝŶŐ ƐĞƌǀŝĐĞ ŽƉƚŝŽŶƐ ƐŽŵĞƚŝŵĞƐ ŐĞƚ ůŽƐƚ ŝŶ ƚŚĞ ƉƌŽĐĞƐƐ͘ dŚĞƐĞ ĐŽŶƐƵŵĞƌƐ ƉŽƐĞ ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ĨŽƌ ƌĞůĞǀĂŶƚ ƌĞŐƵůĂƚŽƌƐ ĂŶĚ ŵĂƌŬĞƚƉůĂĐĞ ŽƉĞƌĂƚŽƌƐ͘ dŚĞ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ƉƌĞƐĞŶƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ĞŶŚĂŶĐĞĚ ĨůĞdžŝďŝůŝƚLJ ƚŽ ŚĞůƉ ŵĞĞƚ ĐŽŶƐƵŵĞƌ ĞdžƉĞĐƚĂƚŝŽŶƐ͘ ŽǁĞǀĞƌ͕ ŝŶ ĂĐŚŝĞǀŝŶŐ ƚŚŝƐ ŝŶĐƌĞĂƐĞĚ ĨůĞdžŝďŝůŝƚLJ͕ ƌĞŐƵůĂƚŽƌƐ ĂŶĚ ŵĂƌŬĞƚ ŽƉĞƌĂƚŽƌƐ ƐŚŽƵůĚ ĂĐƚŝǀĞůLJ ŵŝŶŝŵŝnjĞ ŶĞŐĂƚŝǀĞ ŝŵƉĂĐƚƐ ŽŶ ŶŽŶͲƉĂƌƚŝĐŝƉĂƚŝŶŐ ĐŽŶƐƵŵĞƌƐ͕ ƚŚŽƵŐŚ ƉƵďůŝĐ ƉŽůŝĐLJ ŽďũĞĐƚŝǀĞƐ ŵĂLJ ĞdžƉĂŶĚ ƚŚĞ ƐĐŽƉĞ ŽĨ ŝŵƉĂĐƚƐ ĐŽŶƐŝĚĞƌĞĚ͘ EĞƚ ŵĞƚĞƌŝŶŐ ŝƐ ƚŚĞ ŵŽƐƚ ĐŽŵŵŽŶ ƌĂƚĞ ĨŽƌ ĚŝƐƚƌŝďƵƚĞĚ Ws͕ ďƵƚ ŵĂŶLJ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĞdžƉůŽƌŝŶŐ ĂůƚĞƌŶĂƚŝǀĞ ƐƚƌƵĐƚƵƌĞƐ͘ Table 2-2 Alternative Rate Options for Distributed Solar 7KH LQFUHDVLQJ SHQHWUDWLRQ RI URRIWRS VRODU DQG DGYDQFHG PHWHULQJ LV GULYLQJ DQG HQDEOLQJ UHJXODWRU FKDQJHV 5HJXODWRUV DQG XWLOLWLHV DUH FRQVLGHULQJ DOWHUQDWLYH UDWH RSWLRQV IRU FRPSHQVDWLQJ FXVWRPHUV IRU JULG VHUYLFHV ZKLOH FRQWLQXLQJ WR VXSSRUW QHZ WHFKQRORJ PDLQWDLQ LQIUDVWUXFWXUH DQG HQVXUH DIIRUGDELOLW IRU DOO FXVWRPHUV 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW 2 5 4 1 Providing Incentives through Ratemaking ŽƐƚͲŽĨͲƐĞƌǀŝĐĞ ƌĂƚĞŵĂŬŝŶŐ ĐƌĞĂƚĞƐ ƵŶŝƋƵĞ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƚŚĞ ƵƚŝůŝƚLJ ƚŚĂƚ ĚŝĨĨĞƌ ĨƌŽŵ ƚŚŽƐĞ ĞdžƉĞƌŝĞŶĐĞĚ ďLJ ĨŝƌŵƐ ŝŶ ĐŽŵƉĞƚŝƚŝǀĞ ŵĂƌŬĞƚƐ ĂƌĞ ĐŽŶĐĞƌŶĞĚ ǁŝƚŚ ŵŝŶŝŵŝnjŝŶŐ ƚŚĞ ƚŽƚĂů ĐŽƐƚ ŽĨ ƉƌŽĚƵĐƚŝŽŶ͘ ZĞŐƵůĂƚŝŽŶ ĐĂŶ ďĞ Ă ƐƵďƐƚŝƚƵƚĞ ĨŽƌ ĐŽŵƉĞƚŝƚŝǀĞ ŵĂƌŬĞƚ ƉƌĞƐƐƵƌĞƐ͖ ŝƚ ĐƌĞĂƚĞƐ Ă ǀĂƌŝĞƚLJ ŽĨ ŝŶĐĞŶƚŝǀĞƐ͕ ĚƌŝǀĞŶ ďLJ ƚŚĞ ƵŶŝƋƵĞ ƚƌĞĂƚŵĞŶƚ ŽĨ ĚŝĨĨĞƌĞŶƚ ĐŽƐƚ ĞůĞŵĞŶƚƐ͕ ďŽƚŚ ŝŶ ƚŚĞ ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŽĨ ƌĂƚĞƐ ĂŶĚ ĚƵƌŝŶŐ ƚŚĞ ƉĞƌŝŽĚ ďĞƚǁĞĞŶ ƌĂƚĞ ĐĂƐĞƐ͘ Ɛ ĞdžƉůĂŝŶĞĚ ŝŶ ƚŚĞ ƉƌĞǀŝŽƵƐ ƐĞĐƚŝŽŶ͕ ƚŚĞ ƌĂƚĞͲŵĂŬŝŶŐ ƉƌŽĐĞƐƐ ĚĞƚĞƌŵŝŶĞƐ ŚŽǁ ŵƵĐŚ Ă ƵƚŝůŝƚLJ ĐĂŶ ĞĂƌŶ͕ ďĂƐĞĚ ŽŶ ƚŚĞ ƚǁŽ ƉƌŝŵĂƌLJ ĨĂĐƚŽƌƐ͗ ;ϭͿ ƚŚĞ ĂůůŽǁĞĚ ƌĞƚƵƌŶ ŽŶ ĐĂƉŝƚĂů͕ ĂŶĚ ;ϮͿ ƚŚĞ ƵƚŝůŝƚLJ ƌĂƚĞ ďĂƐĞ͘ hƚŝůŝƚŝĞƐ ĞĂƌŶ ƉƌŽĨŝƚ ĨƌŽŵ Ă ƌĞƚƵƌŶ ŽŶ ĐĂƉŝƚĂů͘ dŚƵƐ͕ ŝĨ ŝƚ ĐŽƐƚƐ Ă ƵƚŝůŝƚLJ ůĞƐƐ ƚŽ ƌĂŝƐĞ ŵŽŶĞLJ ƚŚĂŶ ŝƚ ĞĂƌŶƐ ŽŶ ŝƚƐ ŝŶǀĞƐƚŵĞŶƚ ŝƚ ǁŝůů ŚĂǀĞ ĂŶ ŝŶĐĞŶƚŝǀĞ ƚŽ ŽǀĞƌͲŝŶǀĞƐƚ͘ ƌĞǀĞƌƐĞ ďŝĂƐ ŝƐ ĐƌĞĂƚĞĚ ŝĨ ƚŚĞ ĐŽƐƚ ŽĨ ĐĂƉŝƚĂů ŝƐ ƐĞƚ ƚŽŽ ůŽǁ Žƌ ƌĞŐƵůĂƚŝŽŶ ĐƌĞĂƚĞƐ ŽďƐƚĂĐůĞƐ ƚŽ ĨƵůůLJ ƌĞĐŽǀĞƌŝŶŐ ĐĂƉŝƚĂů͖ ĨŽƌ ĞdžĂŵƉůĞ͕ ƉƌŽŵŽƚŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ǁŝƚŚŽƵƚ ĨŝdžĞĚͲĐŽƐƚ ƌĞĐŽǀĞƌLJ ƚƌƵĞͲƵƉƐ͕ ŝŶ ǁŚŝĐŚ ŽǀĞƌͲƌĞĐŽǀĞƌLJ ĂŶĚ ƵŶĚĞƌͲƌĞĐŽǀĞƌLJ ŽĨ ƌĞǀĞŶƵĞƐ ĂƌĞ ĞǀĂůƵĂƚĞĚ ĂŶĚ ĂƌĞ ĞŝƚŚĞƌ ƌĞƚƵƌŶĞĚ Žƌ ĐŚĂƌŐĞĚ ƚŽ ĐƵƐƚŽŵĞƌƐ͘ ZĞŐƵůĂƚŽƌLJ ŝŶĐĞŶƚŝǀĞƐ ǁŝůů ƉůĂLJ ĂŶ ŝŵƉŽƌƚĂŶƚ ƌŽůĞ ŝŶ ƚŚĞ ĞŶƚŚƵƐŝĂƐŵ ǁŝƚŚ ǁŚŝĐŚ ƵƚŝůŝƚŝĞƐ ƉƵƌƐƵĞ ĚŝĨĨĞƌĞŶƚ ĂĐƚŝǀŝƚŝĞƐ ĂŶĚ ƚŚĞ ƌĞůĂƚŝŽŶƐŚŝƉ ǁŝƚŚ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ ƚŚĞLJ ĂƌĞ ǁŝůůŝŶŐ ƚŽ ƉƵƌƐƵĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ƚŽ ĞŶĐŽƵƌĂŐĞ ƵƚŝůŝƚLJ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͕ ƌĞŐƵůĂƚŽƌLJ ĐŽŵŵŝƐƐŝŽŶƐ ŚĂǀĞ ƵƐĞĚ ƚŚƌĞĞ ĂƉƉƌŽĂĐŚĞƐ͗ ϭ͘ ŽƐƚ ƌĞĐŽǀĞƌLJ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĞdžƉĞŶƐĞƐ Ϯ͘ ŽŵƉĞŶƐĂƚŝŽŶ ĨŽƌ ůŽƐƚ ŵĂƌŐŝŶ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ůŽǁĞƌ ĞŶĞƌŐLJ ƐĂůĞƐ ϯ͘ ŶĐĞŶƚŝǀĞƐ͕ ƐƵĐŚ ĂƐ ƐŚĂƌĞ ƚŚĞ ƐĂǀŝŶŐƐ ĂƉƉƌŽĂĐŚĞƐ͕ ƚŽ ŵŽƚŝǀĂƚĞ ƵƚŝůŝƚŝĞƐ ƚŽ ƉƵƌƐƵĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ dŚĞ ŝŶĚƵƐƚƌLJ ŝƐ ŶŽǁ ĨĂĐŝŶŐ ĂŶ ĂŶĂůŽŐŽƵƐ ƐŝƚƵĂƚŝŽŶ ǁŝƚŚ Z͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ǁŚĞƌĞ ŶĞƚ ŵĞƚĞƌŝŶŐ ŝƐ ǀŝĞǁĞĚ ĂƐ Ă ŵĞĐŚĂŶŝƐŵ ďLJ ǁŚŝĐŚ ƵƚŝůŝƚŝĞƐ ǁŽƵůĚ ůŽƐĞ ƌĞǀĞŶƵĞƐ͘ ƚ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ĨĂĐƚŽƌƐ ƚŚĂƚ ĐŽŵƉůŝĐĂƚĞƐ ƚŚĞ ĂďŝůŝƚLJ ŽĨ ƵƚŝůŝƚŝĞƐ ƚŽ ƉƌŽǀŝĚĞ ĐƵƐƚŽŵĞƌƐ ƚŚĞ ƐĞƌǀŝĐĞƐ ƚŚĂƚ ƵŶƌĞŐƵůĂƚĞĚ ĐŽŵƉĞƚŝƚŽƌƐ ĐĂŶ ĂůƐŽ ƉƌŽǀŝĚĞ͘ dŚĞ ƐƚƌƵĐƚƵƌĞ ŽĨ ŶĞǁ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ǁŝůů ĐƌĞĂƚĞ ŝŶĐĞŶƚŝǀĞƐ ƚŚĂƚ ŐƵŝĚĞ ƵƚŝůŝƚLJ ŽƉĞƌĂƚŝŽŶ ĂŶĚ ŝŶǀĞƐƚŵĞŶƚ ĚĞĐŝƐŝŽŶƐ ŝŶ ƚŚĞ ĨƵƚƵƌĞ͘ Ŷ ƚŚĞ ƉƌŽĐĞƐƐ ŽĨ ĚĞǀĞůŽƉŝŶŐ ƚŚŝƐ ŶĞǁ ƌĞŐŝŵĞ͕ ŝƚ ŝƐ ŝŵƉŽƌƚĂŶƚ ƚŽ ƉƌŽǀŝĚĞ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƵƚŝůŝƚŝĞƐ ƚŽ ďŽƚŚ ƉƵƌƐƵĞ ĂŶĚ ĞŶĂďůĞ ŶŽŶͲƵƚŝůŝƚLJ ƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ ƚŽ ŵĞĞƚ͕ ŶĂƚŝŽŶĂů ŐŽĂůƐ ŽĨ Ă ƐĞĐƵƌĞ͕ ƌĞůŝĂďůĞ͕ ĂŶĚ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ 2 5 4 2 Providing Resources to Inform Rate Design ZĞŐƵůĂƚŽƌƐ ŵƵƐƚ ĚĞƐŝŐŶ ƌĂƚĞ ƐƚƌƵĐƚƵƌĞƐ ƚŚĂƚ ƐƵƉƉŽƌƚ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ ƚŽ ĐƵƐƚŽŵĞƌƐ͕ ŝŶĐĞŶƚ ĚĞƐŝƌĞĚ ƉŽůŝĐLJ ŽƵƚĐŽŵĞƐ͕ ĂůůŽǁ ĨŽƌ Ă ĨĂŝƌ ƌĞƚƵƌŶ ŽŶ ŝŶǀĞƐƚŵĞŶƚ͕ ĂŶĚ ŵĂŝŶƚĂŝŶ ĂĨĨŽƌĚĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ĨŽƌ ƚŚĞ ĐŽŶƐƵŵĞƌ͘ ZĞŐƵůĂƚŽƌƐ ĨŝŶĚ ƚŚĞŵƐĞůǀĞƐ ŝŶ Ă ŶĞǁ ĞŶǀŝƌŽŶŵĞŶƚ ĐŚĂƌĂĐƚĞƌŝnjĞĚ ďLJ ƌĂƉŝĚůLJ ĐŚĂŶŐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ǀĂƐƚ ĂŵŽƵŶƚƐ ŽĨ ĚĂƚĂ ďĞŝŶŐ ƉƌŽĚƵĐĞĚ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ƐLJƐƚĞŵ͕ ĂŶĚ Ă ƐƵŝƚĞ ŽĨ ŶĞǁ ƐƚĂŬĞŚŽůĚĞƌƐ ƉĂƌƚŝĐŝƉĂƚŝŶŐ ŝŶ ƌĂƚĞ ĐĂƐĞƐ͘ Ŷ ŝŵƉŽƌƚĂŶƚ ĞĚĞƌĂů ƌŽůĞ ŵĂLJ ďĞ ƚŽ ĨĂĐŝůŝƚĂƚĞ ďĞƐƚ ĂŶĂůLJƚŝĐ ƉƌĂĐƚŝĐĞƐ ƌĞůĂƚĞĚ ƚŽ ƌĂƚĞŵĂŬŝŶŐ ĂŶĚ ƚŽ ĞŶƐƵƌĞ ĨƵůů ƚƌĂŶƐƉĂƌĞŶĐLJ ƚŽ ĐŽƐƚŝŶŐ ĞdžĞƌĐŝƐĞƐ ŝŶ ďŽƚŚ KhͲƌĞŐƵůĂƚŝŽŶ ĨŽƌƵŵƐ ĂŶĚ ƉƵďůŝĐ ĞŶƚŝƚLJ ĨŽƌƵŵƐ͘ ŶĨŽƌŵĂƚŝŽŶ ŝƐ Ă ŐƌŽǁŝŶŐ ŬĞLJ ĨĂĐƚŽƌ ŝŶ Ăůů ĂƐƉĞĐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƐĞƌǀŝĐĞ͕ ĨƌŽŵ ƉŽǁĞƌ ƉůĂŶƚ ŵĂŶĂŐĞŵĞŶƚ ƚŽ ĐƵƐƚŽŵĞƌ ŝŶƚĞƌĨĂĐĞƐ͕ ĂŶĚ ĐƵƐƚŽŵĞƌͲƐŝĚĞͲŽĨͲƚŚĞͲŵĞƚĞƌ ĚĞǀŝĐĞƐ ĂŶĚ ĂƉƉůŝĐĂƚŝŽŶƐ͘ dŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ ŵĂŬĞƐ ŝƚ Ă ŬĞLJ ǀĂůƵĂƚŝŽŶ ĨĂĐƚŽƌ͕ ĂƐ ǁĞůů͘ dŚĞ ƌŝŐŚƚ ŝŶĨŽƌŵĂƚŝŽŶ ĂƉƉůŝĞĚ ŝŶ ƚŚĞ ƌŝŐŚƚ ǁĂLJ ĐĂŶ ŚĂǀĞ ƐŝŐŶŝĨŝĐĂŶƚ ǀĂůƵĞͲĞŶŚĂŶĐŝŶŐ ĞĨĨĞĐƚƐ͘ Žƌ ŝŶƐƚĂŶĐĞ͕ ŝŶĨŽƌŵĂƚŝŽŶ ĞƐƐĞŶƚŝĂůůLJ ĐƌĞĂƚĞƐ ǀĂůƵĞ ŝŶ ƚŚĞ ĨŽůůŽǁŝŶŐ ǁĂLJƐ͗  ŶĐƌĞĂƐŝŶŐ ƚƌĂŶƐƉĂƌĞŶĐLJ ĂŶĚ ŝĚĞŶƚŝĨLJŝŶŐ ŶĞǁ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ǁŝƚŚ ŚŝŐŚ ƉŽƚĞŶƚŝĂů ƌĞǁĂƌĚƐ ŝŵƉƌŽǀĞƐ ĞĐŽŶŽŵŝĐ ƉƌŽĨŝƚĂďŝůŝƚLJ ďLJ ŝĚĞŶƚŝĨLJŝŶŐ ƌŝƐŬƐ ĂŶĚ ƚŚĞƌĞďLJ ƌĞĚƵĐŝŶŐ ƚŚĞ ĐŽƐƚ ŽĨ ĐĂƉŝƚĂů͘  ZĞĚƵĐŝŶŐ ƵŶĐĞƌƚĂŝŶƚLJ͕ ƐƵĐŚ ĂƐ ůŽǁĞƌŝŶŐ ŝŶŝƚŝĂů ĐŽƐƚƐ͕ ŵĂŝŶƚĂŝŶŝŶŐ Ă ůŽǁĞƌ ůŝĨĞͲĐLJĐůĞ ĐŽƐƚ͕ ƌĞĚƵĐŝŶŐ ƚŚĞ ƉĞƌĐĞƉƚŝŽŶ ŽĨ ƌŝƐŬƐ ďLJ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞ ĐŽŶƚƌŽů ŽĨ ƌŝƐŬƐ͕ Žƌ ƌĞĚƵĐŝŶŐ ĐŽŶƐƚƌĂŝŶƚƐ ďĂƌƌŝĞƌƐ ƚŚĂƚ ůŝŵŝƚ ŐƌŽǁƚŚ͕ ŝŶŶŽǀĂƚŝŽŶ͕ ĂŶĚ ŝŵƉƌŽǀĞĚ ƉĞƌĨŽƌŵĂŶĐĞ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU  džƉůŽŝƚŝŶŐ ƚŚĞ ƌĞůĂƚŝǀĞ ĂĚǀĂŶƚĂŐĞ ŽĨ ŚĂǀŝŶŐ ƐƵƉĞƌŝŽƌ ŝŶĨŽƌŵĂƚŝŽŶ͕ ƐƵĐŚ ĂƐ ƐĂǀŝŶŐ ƚŝŵĞ ĂŶĚ ĞĨĨŽƌƚ͕ Žƌ ƌĞĚƵĐŝŶŐ ůĂŐ ƚŝŵĞƐ͕ Žƌ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞ ƐĐĂůĞ ĂŶĚ ŝŵŵĞĚŝĂĐLJ ŽĨ ƌĞǁĂƌĚƐ͘ K ŚĂƐ ďĞŐƵŶ Ă ƉƌŽĐĞƐƐ ŽĨ ĞǀĂůƵĂƚŝŶŐ ƚŚĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ Z͕ ƉƌŽǀŝĚŝŶŐ Ă ƚĂdžŽŶŽŵLJ ŽĨ ĐŽƐƚƐ͕ ĂŶĚ ĨƌĂŵŝŶŐ ƚŚĞ ĚŝƐƉƵƚĞƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ǀĂůƵĂƚŝŽŶ ŽĨ ĞĂĐŚ ĐŽƐƚ ĞůĞŵĞŶƚ͘Ϯϲϰ dŚĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ ŵĂŶLJ ƐŵĂƌƚ ŐƌŝĚ ĂƉƉůŝĐĂƚŝŽŶƐ ǁĞƌĞ ĂůƐŽ ĐĂƉƚƵƌĞĚ ƚŚƌŽƵŐŚ ƚŚĞ ŵĂƌƚ 'ƌŝĚ ŶǀĞƐƚŵĞŶƚ 'ƌĂŶƚ WƌŽŐƌĂŵ ĂŶĚ ŵĂƌƚ 'ƌŝĚ ĞŵŽŶƐƚƌĂƚŝŽŶ WƌŽŐƌĂŵ ŽĨ ƚŚĞ ZĞĐŽǀĞƌLJ Đƚ͘Ϯϲϱ Ŷ ĂĚĚŝƚŝŽŶ͕ Ă ĐŽŶƐŽƌƚŝƵŵ ŽĨ EĂƚŝŽŶĂů ĂďƐ͕ ƚŚĞ dĞŶŶĞƐƐĞĞ sĂůůĞLJ ƵƚŚŽƌŝƚLJ͕ ƚŚĞ EĂƚŝŽŶĂů ƐƐŽĐŝĂƚŝŽŶ ŽĨ ZĞŐƵůĂƚŽƌLJ hƚŝůŝƚLJ ŽŵŵŝƐƐŝŽŶĞƌƐ͕ ĂŶĚ ƉůĂŶŶŝŶŐ ĐŽůůĂďŽƌĂƚŝǀĞƐ ŝŶ ƚŚĞ ĂƐƚĞƌŶ ŶƚĞƌĐŽŶŶĞĐƚ ĂƌĞ ĚĞǀĞůŽƉŝŶŐ Ă ŐƌŝĚͲƐĞƌǀŝĐĞƐ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐͲǀĂůƵĂƚŝŽŶ ĨƌĂŵĞǁŽƌŬ ƵŶĚĞƌ ƚŚĞ K 'ƌŝĚ DŽĚĞƌŶŝnjĂƚŝŽŶ Ăď ŽŶƐŽƌƚŝƵŵ͘Ϯϲϲ Ɛ ƉĂƌƚ ŽĨ ŝƚƐ ŝŶƚĞŐƌĂƚĞĚ ŐƌŝĚ ĞĨĨŽƌƚ͕ ůĞĐƚƌŝĐ WŽǁĞƌ ZĞƐĞĂƌĐŚ ŶƐƚŝƚƵƚĞ ŝƐ ĚĞǀĞůŽƉŝŶŐ Ă ďĞŶĞĨŝƚͲĐŽƐƚ ĨƌĂŵĞǁŽƌŬ ĨŽƌ ƋƵĂŶƚŝĨLJŝŶŐ ƚŚĞ ŝŵƉĂĐƚ ŽĨ Z ŽŶ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ďƵůŬ ƉŽǁĞƌ ƐLJƐƚĞŵƐ͘ ŵƉŽƌƚĂŶƚůLJ͕ ƐŚĂƌŝŶŐ ŝŶĨŽƌŵĂƚŝŽŶ ŶĂƚŝŽŶĂůůLJ ŽŶ ǀĂůƵĂƚŝŽŶ ŽĨ ĐŽƐƚƐ ĂŶĚ ŵĞƚŚŽĚƐ ŽĨ ĚĞǀĞůŽƉŝŶŐ ƌĂƚĞƐ ĚŽĞƐ ŶŽƚ ŝŵƉůLJ Ă ŶĂƚŝŽŶĂůůLJ ƉƌĞƐĐƌŝďĞĚ ŵĞƚŚŽĚ ŽĨ ĚĞƚĞƌŵŝŶŝŶŐ ĐŽƐƚƐ ĂŶĚ ƌĂƚĞƐ͖ ƐƵĐŚ ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŝƐ Ă ƐƚĂƚĞ ƌĞƐƉŽŶƐŝďŝůŝƚLJ͘ dŚĞƌĞ ŚĂƐ ďĞĞŶ Ă ŐƌĞĂƚ ĚĞĂů ŽĨ ŝŶŶŽǀĂƚŝŽŶ ŝŶ ƚŚĞ ƌŽůĞ ŽĨ ƚŚĞ ĐƵƐƚŽŵĞƌ͕ ƌĂƚĞ ĚĞƐŝŐŶ͕ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐ ƵƐĞĚ ƚŽ ƉƌŽǀŝĚĞ ƐĞƌǀŝĐĞ ƚŽ ĐƵƐƚŽŵĞƌƐ͘ ŽƐƚƐ ĚƌŝǀĞƌƐ ĂƌĞ ƐŚŝĨƚŝŶŐ͕ ŶĞǁ ĐŽƐƚƐ ĂƌĞ ďĞŝŶŐ ĐŽŶƐŝĚĞƌĞĚ͕ ĂŶĚ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ƌĂƚĞ ĚĞƐŝŐŶ ŚĂƐ ŝŶĐƌĞĂƐĞĚͶďŽƚŚ ĨŽƌ ĞŶŐĞŶĚĞƌŝŶŐ ĐƵƐƚŽŵĞƌ ƌĞƐƉŽŶƐĞ ĂŶĚ ĂƐ Ă ŵĞƚŚŽĚ ŽĨ ĞŶĐŽƵƌĂŐŝŶŐ ĐŽŵƉŽŶĞŶƚ ĂŶĚ ƐLJƐƚĞŵ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ Z͘ dŚĞ EĂƚŝŽŶĂů ƐƐŽĐŝĂƚŝŽŶ ŽĨ ZĞŐƵůĂƚŽƌLJ hƚŝůŝƚLJ ŽŵŵŝƐƐŝŽŶĞƌƐ ŚĂƐ ĨƌĂŵĞĚ ŵĂŶLJ ŽĨ ƚŚĞ ŝƐƐƵĞƐ ƚŚĂƚ ŶĞĞĚ ĨƵƌƚŚĞƌ ĞdžƉůŽƌĂƚŝŽŶ ŝŶ ŝƚƐ ƌĞĐĞŶƚůLJ ƌĞůĞĂƐĞĚ ƌĂƚĞͲ ĚĞƐŝŐŶ ŵĂŶƵĂů͘Ϯϲϳ 'ŝǀĞŶ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ƌĂƚĞƐŶŽƚ ŽŶůLJ ĨŽƌ ĐŽŵƉĞŶƐĂƚŝŶŐ ƵƚŝůŝƚŝĞƐ͕ ďƵƚ͕ ŝŶĐƌĞĂƐŝŶŐůLJ͕ ĂƐ Ă ǀĞŚŝĐůĞ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ƉƌŝĐĞ ƐŝŐŶĂůƐ ƚŽ ĐƵƐƚŽŵĞƌƐ ǁŚŽ ƉƌŽǀŝĚĞ ƚƌĂŶƐĂĐƚŝǀĞ ůŽĂĚ ĂŶĚ Zŝƚ ǁŽƵůĚ ďĞ ǀĞƌLJ ǀĂůƵĂďůĞ ĨŽƌ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ƚŽ ĨĂĐŝůŝƚĂƚĞ Ă ŶĂƚŝŽŶĂů ƌĞǀŝĞǁ ŽĨ ƌĞƚĂŝů ƌĂƚĞƐ ĂŶĚ ƚŚĞ ĐƌĞĂƚŝŽŶ ŽĨ Ă ŶĂƚŝŽŶĂů ƌĞƉŽƐŝƚŽƌLJ ŽĨ ƌĂƚĞ ŝŶĨŽƌŵĂƚŝŽŶ͘ 2 5 5 Adapting the Distribution Utility Business Model dŚĞ ĞůĞĐƚƌŝĐ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ ŶŽǁ ĨĂĐĞƐ Ă ĨƵŶĚĂŵĞŶƚĂů ƚƌĂŶƐĨŽƌŵĂƚŝŽŶ͘ dŚĞ ĞŵĞƌŐĞŶƚ ƌŽůĞ ŽĨ ƚŚĞ ĐŽŶƐƵŵĞƌ ĂƐ ƉƌŽƐƵŵĞƌ ĂŶĚ ŶĞǁ ŝŵƉĞƌĂƚŝǀĞƐ͕ ƐƵĐŚ ĂƐ ƌĞƐŝůŝĞŶĐĞ͕ Ă ĐůĞĂŶĞƌ ĞŶĞƌŐLJ ĨƵƚƵƌĞ͕ ĂŶĚ ŐƌŝĚ ƐĞĐƵƌŝƚLJ͕ ĂƌĞ ĚƌŝǀŝŶŐ ƚŚĞ ĐƵƌƌĞŶƚ ĞǀŽůƵƚŝŽŶ͘ ĚĚŝƚŝŽŶĂů ŝŶǀĞƐƚŵĞŶƚƐ ƚŽ ƐƵƉƉŽƌƚ ĞŶŚĂŶĐĞĚ ƐĞƌǀŝĐĞƐ ĂƌĞ ƌĞƋƵŝƌĞĚ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ŶĞǁ ƚƌĂŶƐĂĐƚŝǀĞ ƌŽůĞ ĨŽƌ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ƚŚĞ ŚŝŐŚĞƌ ůĞǀĞůƐ ŽĨ ĨůĞdžŝďŝůŝƚLJ ĂŶĚ ƌĞůŝĂďŝůŝƚLJ ƚŚĂƚ ǁŝůů ƐƵƉƉŽƌƚ ƚŚĞ ĚŝŐŝƚĂů ĞĐŽŶŽŵLJ͘ ƚ ŝƐ ĐƌŝƚŝĐĂůůLJ ŝŵƉŽƌƚĂŶƚ ƚŽ ƵŶĚĞƌƐƚĂŶĚ ƚŚĂƚ ĂůƚĞƌŶĂƚŝǀĞ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ĂŶĚ ƌĞŐƵůĂƚŽƌLJ ƉƌĂĐƚŝĐĞƐ ĂƌĞ ŝŶĞdžƚƌŝĐĂďůLJ ůŝŶŬĞĚ͘ DŽĚŝĨŝĐĂƚŝŽŶ ŽĨ ƚŚĞ ƚƌĂĚŝƚŝŽŶĂů ƌĂƚĞŵĂŬŝŶŐͲďĂƐĞĚ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞů ŵƵƐƚ ďĞ͗ ĂĐĐĞƉƚĂďůĞ ƚŽ ƐƚĂƚĞ ƌĞŐƵůĂƚŽƌƐ͕ ƌĞƐƉŽŶƐŝǀĞ ƚŽ ĐƵƐƚŽŵĞƌƐ͕ ĨŝŶĂŶĐŝĂůůLJ ƚĞŶĂďůĞ ƚŽ ƵƚŝůŝƚLJ ƐŚĂƌĞŚŽůĚĞƌƐ͕ Ăůů ǁŚŝůĞ ƐƵƉƉŽƌƚŝŶŐ ŝŶŶŽǀĂƚŝŽŶ ;ǁŚĞƚŚĞƌ ďLJ ƚŚĞ ƵƚŝůŝƚLJ Žƌ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐͿ͘ dŚĞ ďƵƐŝŶĞƐƐ ŵŽĚĞů ŝƐ ƉĂƌƚ ŽĨ Ă ƚƌŝĂĚ ŽĨ ŝŶƚĞƌƌĞůĂƚĞĚ ĞůĞŵĞŶƚƐ͕ ǁŚŝĐŚ ŝŶĐůƵĚĞƐ ƚŚĞ ƌĞŐƵůĂƚŽƌLJ ƐƚƌƵĐƚƵƌĞ ĂŶĚ ĞĐŽŶŽŵŝĐͬŵĂƌŬĞƚ ƐƚƌƵĐƚƵƌĞ ƚŚĂƚ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ŶĂƚƵƌĞ ŽĨ ĐƵƐƚŽŵĞƌ ƐĞƌǀŝĐĞ͘Ϯϲϴ DĂŶLJ ƉĞŽƉůĞ ŚĂǀĞ ƉƌŽƉŽƐĞĚ ŵŽĚĞůƐ ƚŚĂƚ ƌĞƉƌĞƐĞŶƚ ƉŽƚĞŶƚŝĂů ĨƵƚƵƌĞ ĞǀŽůƵƚŝŽŶƐ ŽĨ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ͘ KŶĞ ĂƵƚŚŽƌ ƌĞƉƌĞƐĞŶƚƐ ƵƚŝůŝƚLJ ĞǀŽůƵƚŝŽŶ ĞŶĚƉŽŝŶƚƐ ŽŶ Ă ƐƉĞĐƚƌƵŵ ďĞƚǁĞĞŶ ƚǁŽ ŵŽĚĞůƐ͗ ƚŚĞ ŵĂƌƚ ŶƚĞŐƌĂƚŽƌ ĂŶĚ ƚŚĞ ŶĞƌŐLJ ĞƌǀŝĐĞƐ hƚŝůŝƚLJ͘Ϯϲϵ dŚĞ ŵĂƌƚ ŶƚĞŐƌĂƚŽƌ ŝƐ ĚĞƐĐƌŝďĞĚ ĂƐ ĂŶ ŽƉĞƌĂƚŽƌ ŽĨ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŐƌŝĚ ŝŶ ŵƵĐŚ ƚŚĞ ƐĂŵĞ ǁĂLJ ƚŚĂƚ ĂŶ K ŽƉĞƌĂƚĞƐ ƚŚĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ŐƌŝĚ ĂŶĚ ǁŚŽůĞƐĂůĞ ƉŽǁĞƌ ŵĂƌŬĞƚƐ͘ ƚ ŝƐ Ă ƉůĂƚĨŽƌŵ ĨŽƌ ƚƌĂŶƐĂĐƚŝŽŶƐ͕ ďƵƚ ŝƚ ĚŽĞƐ ŶŽƚ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ĞŶĞƌŐLJ ƚƌĂŶƐĂĐƚŝŽŶƐ͘ dŚĞ ŶĞƌŐLJ ĞƌǀŝĐĞƐ hƚŝůŝƚLJ ƐŚĂƌĞƐ ƚŚĞ ďĂƐŝĐ ĨƵŶĐƚŝŽŶƐ ŽĨ ƚŚĞ ŵĂƌƚ ŶƚĞŐƌĂƚŽƌ͕ ďƵƚ ŝƐ ĂůƐŽ Ă ƉƌŽǀŝĚĞƌ ŽĨ ƐĞƌǀŝĐĞƐ͘ ƚ ŝƐ ĂŶ ĞdžƚĞŶƐŝŽŶ ŽĨ ƚŚĞ ǀĞƌƚŝĐĂůůLJ ŝŶƚĞŐƌĂƚĞĚ ƵƚŝůŝƚLJ͘ dǁŽ ƋƵĞƐƚŝŽŶƐ ǁŝůů ĚĞƚĞƌŵŝŶĞ ŚŽǁ ƚŚĞ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞů ĞǀŽůǀĞƐ͗ ϭ͘ tŚĂƚ ƐĞƌǀŝĐĞƐ ĐĂŶ ;ĂŶĚ ƐŚŽƵůĚͿ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚŝĞƐ ƉƌŽǀŝĚĞ ŶŽǁ ĂŶĚ ŝŶ ƚŚĞ ĨƵƚƵƌĞ͍ Ϯ͘ Žǁ ƐŚŽƵůĚ ƵƚŝůŝƚLJ ƌĂƚĞƐ ďĞ ĚĞƐŝŐŶĞĚ ƚŽ ƉƌŽǀŝĚĞ ƉƌŝĐĞ ƐŝŐŶĂůƐ ƚŽ ĐƵƐƚŽŵĞƌƐ ĂŶĚ ƚŽ ĐŽŵƉĞŶƐĂƚĞ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ƵƚŝůŝƚŝĞƐ ĨŽƌ ƚŚĞ ƐĞƌǀŝĐĞƐ ƚŚĞLJ ƌĞŶĚĞƌ͕ ŝŶĐůƵĚŝŶŐ ŝŶĐĞŶƚŝǀĞƐ ƚŽ ƉƌŽǀŝĚĞ ďŽƚŚ ƚƌĂĚŝƚŝŽŶĂů ĂŶĚ ŶŽŶƚƌĂĚŝƚŝŽŶĂů ƐĞƌǀŝĐĞƐ͍ ƚ ŝƐƐƵĞ ŝƐ ƚŚĞ ŶĂƚƵƌĞ ŽĨ ƚŚĞ ĞŶƚŝƚŝĞƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ƐĞƌǀŝĐĞƐ Ăƚ ƚŚĞ ĐƵƐƚŽŵĞƌƐ͛ ƉƌĞŵŝƐĞƐ͕ ƚŚĞ ƚĞƌŵƐ ŽĨ ĐŽŵƉĞŶƐĂƚŝŽŶ͕ ĂŶĚ ƚŚĞ ĞĨĨĞĐƚ ŽŶ ƚŚĞ ĂďŝůŝƚLJ ŽĨ ƵƚŝůŝƚŝĞƐ ƚŽ ƌĞĐŽǀĞƌ ƚŚĞ ĐŽƐƚ ŽĨ ĂĐƚŝŶŐ ĂƐ ƚŚĞ ĐŽŶĚƵŝƚ ƚŽ ƚŚĞ ŐƌŝĚ͘ 2 5 5 1 Models for Provision of Demand-Side Services dŚĞƌĞ ĂƌĞ ĂůƚĞƌŶĂƚŝǀĞ ǀĞŚŝĐůĞƐ ĨŽƌ ĚĞůŝǀĞƌŝŶŐ ƐĞƌǀŝĐĞƐ ƚŽ ĐƵƐƚŽŵĞƌƐ͘ Ŷ ĞƐƐĞŶƚŝĂů ƋƵĞƐƚŝŽŶ ŝŶ ĚƌĂǁŝŶŐ ƚŚĞ ĨƵƚƵƌĞ ƐĐŽƉĞ ŽĨ ƚŚĞ ƵƚŝůŝƚŝĞƐ ŝƐ ǁŚĞƚŚĞƌ ƚŚĞLJ ǁŝůů ƉƌŽǀŝĚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐĞƌǀŝĐĞƐ ĂŶĚ ƵŶĚĞƌ ǁŚĂƚ ƚĞƌŵƐ͘ dŚĞ ĂŶƐǁĞƌ ǁŝůů ĂůƐŽ ƉůĂLJ Ă ůĂƌŐĞ ƌŽůĞ ŝŶ ĚĞƚĞƌŵŝŶŝŶŐ ƚŚĞ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ŽĨ ĐŽŵƉĞƚŝƚŝǀĞ ƉƌŽǀŝĚĞƌƐ͘ dŚĞƌĞ ĂƌĞ ĨŽƵƌ ďĂƐŝĐ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͗ŝŝ ϭ͘ WƌŽŐƌĂŵƐ ĚĞƌŝǀĞĚ ĨƌŽŵ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐ ;Ğ͘Ő͕͘ ŝŶƚĞŐƌĂƚĞĚ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ ƚŽ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ůĞǀĞů ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJͿ ĂŶĚ ĂĚŵŝŶŝƐƚĞƌĞĚ ďLJ ƚŚĞ ƵƚŝůŝƚLJ Ϯ͘ WƌŽŐƌĂŵƐ ĚĞƌŝǀĞĚ ĨƌŽŵ ƚŚĞ ƵƚŝůŝƚLJ͛Ɛ ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐ ;Ğ͘Ő͕͘ ŝŶƚĞŐƌĂƚĞĚ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ ƚŽ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ůĞǀĞů ŽĨ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJͿ ĂŶĚ ĂĚŵŝŶŝƐƚĞƌĞĚ ďLJ Ă ƚŚŝƌĚ ƉĂƌƚLJ ŽƉĞƌĂƚŝŶŐ ƵŶĚĞƌ Ă ƐƚĂƚĞ Žƌ ƵƚŝůŝƚLJ ƉƌŽŐƌĂŵ ϯ͘ ŵĂƌŬĞƚͲďĂƐĞĚ ĂƉƉƌŽĂĐŚ͕ ŝŶ ǁŚŝĐŚ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ ƐĞĞŬ ƉƌŽĨŝƚ ďLJ ƐĞůůŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐĞƌǀŝĐĞƐ ƚŽ ĐƵƐƚŽŵĞƌƐ ϰ͘ ŵĂƌŬĞƚͲďĂƐĞĚ ĂƉƉƌŽĂĐŚ͕ ŝŶ ǁŚŝĐŚ ŝŶĚŝǀŝĚƵĂů ĐƵƐƚŽŵĞƌƐ ĂĐƚ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŝĐĞ ƐŝŐŶĂůƐ͘ Ŷ ƚŚĞ ĨŝƌƐƚ ƚǁŽ ĂƉƉƌŽĂĐŚĞƐ͕ ĨƵŶĚƐ ĨŽƌ ƉƌŽŐƌĂŵƐ ĂƌĞ ĐŽůůĞĐƚĞĚ ďLJ ƚŚĞ ƵƚŝůŝƚLJ ƚŚƌŽƵŐŚ ĐƵƐƚŽŵĞƌƐ͛ ďŝůůƐ͘ ƵƐƚŽŵĞƌƐ ĚŝƌĞĐƚůLJ ĨŝŶĂŶĐĞ ƚŚĞ ůĂƐƚ ƚǁŽ ĂƉƉƌŽĂĐŚĞƐ͘ ŶƚĞƌĂĐƚŝŶŐ ǁŝƚŚ ƚŚĞ ĨŽƵƌ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ůŝƐƚĞĚ ĂďŽǀĞ͕ ƐĞǀĞƌĂů ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ĂƌĞ ƉŽƐƐŝďůĞ ĚĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ƉĂƌƚŝĐƵůĂƌ ĂƉƉƌŽĂĐŚ ƚŚĂƚ Ă ƵƚŝůŝƚLJ ĂŶĚ ŝƚƐ ƌĞŐƵůĂƚŽƌ ƚĂŬĞ ;dĂďůĞ ϮͲϯͿ͘ ŝŝ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ ŚĂǀĞ ƉůĂLJĞĚ Ă ǀŝƚĂů ƌŽůĞ ŝŶ ƚƌĂŶƐĨŽƌŵŝŶŐ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ĂǀĂŝůĂďůĞ ƉƌŽĚƵĐƚƐ͘ dŚŝƐ ƐĞĐƚŝŽŶ ŝƐ ĐŽŶĐĞƌŶĞĚ ǁŝƚŚ ƚŚĞ ĐŚŽŝĐĞ ĂŶĚ ĂĐƋƵŝƐŝƚŝŽŶ ŽĨ ƚŚŽƐĞ ƉƌŽĚƵĐƚƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Table 2-3 Energy Efficiency Business Models270 271 $Q DUUD RI DFWRUV LQ WKH HOHFWULFLW VHFWRU LQFOXGLQJ XWLOLWLHV SULYDWH VHFWRU FRPSDQLHV DQG VWDWH DJHQFLHV RIIHU HQHUJ HIILFLHQF SURJUDPV QHUJ HIILFLHQF SURJUDPV DUH DYDLODEOH ERWK LQ ZKROHVDOH HOHFWULFLW PDUNHW DUHDV DQG ZLWKLQ UHJXODWHG YHUWLFDOO LQWHJUDWHG XWLOLW DUHDV 2 5 5 2 Models for Integrating Distributed Generation ŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ĚĞůŝǀĞƌƐ ƉŽǁĞƌ ŝŶƚŽ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŐƌŝĚ ŶĞĂƌ ƚŚĞ ůŽĂĚ ĐĞŶƚĞƌ͘ dLJƉŝĐĂůůLJ͕ ' ŝƐ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐŝĚĞ ŽĨ ƚŚĞ ŵĞƚĞƌ͗ ƚŚĞ ĐƵƐƚŽŵĞƌ ŝŶƐƚĂůůƐ ŐĞŶĞƌĂƚŝŽŶ͕ ƐƚŽƌĂŐĞ͕ Žƌ Ă ĐŽŶƚƌŽůůĂďůĞ ůŽĂĚ ĂŶĚ ƚŝĞƐ ŝŶƚŽ ƚŚĞ ŐƌŝĚ ǀŝĂ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ͘ hƚŝůŝƚŝĞƐ ĐĂŶ ŝŶƚĞŐƌĂƚĞ ' ƵƐŝŶŐ Ă ǀĂƌŝĞƚLJ ŽĨ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ;dĂďůĞ ϮͲϰͿ͘ dŚĞƐĞ ŵŽĚĞůƐ ĐŽƵůĚ ďĞ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐŝĚĞ͕ ǁŚĞƌĞ ƵƚŝůŝƚŝĞƐ ƐĞůů ' ƉƌŽĚƵĐƚƐ ĚŝƌĞĐƚůLJ ƚŽ ƚŚĞ ĐŽŶƐƵŵĞƌ Žƌ ŽŶ ƚŚĞ ƵƚŝůŝƚLJͲƐŝĚĞ͕ ǁŚĞƌĞ ' ƉƌŽǀŝĚĞƌƐ ƐĞůů ĞŶĞƌŐLJ ĚŝƌĞĐƚůLJ ƚŽ ƚŚĞ ƵƚŝůŝƚLJ͘ ůƚŚŽƵŐŚ ĂƐ ' ƉƌŽǀŝĚĞ ŵŽƌĞ ĞůĞĐƚƌŝĐŝƚLJ͕ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ŵĂŶĂŐĞŵĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŵĂLJ ďĞĐŽŵĞ Ă ƐŚĂƌĞĚ ƌĞƐƉŽŶƐŝďŝůŝƚLJ ĂŵŽŶŐ ƵƚŝůŝƚŝĞƐ͕ ĐƵƐƚŽŵĞƌͲŽǁŶĞĚ '͕ ĂŶĚ ŽƚŚĞƌ 'ͲƐĞƌǀŝĐĞ ƉƌŽǀŝĚĞƌƐ͘ dŽĚĂLJ͕ ŵŽƐƚ ' ŝŶƐƚĂůůĂƚŝŽŶƐ ŽĐĐƵƌ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐŝĚĞ ŽĨ ƚŚĞ ŵĞƚĞƌ͘ϮϳϮ džĐĞƉƚ ŝŶ ƌĂƌĞ ĐĂƐĞƐ͕ ƚŚĞ ĐƵƐƚŽŵĞƌ ƌĞŵĂŝŶƐ ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ŐƌŝĚ͕ ǁŚŝĐŚ ƐĞƌǀĞƐ ĂŶLJ ůŽĂĚ ƵŶŵĞƚ ďLJ ƚŚĞ '͘ tŚĞŶ ƚŚĞ ' ƐLJƐƚĞŵ ƉƌŽĚƵĐĞƐ ƉŽǁĞƌ ŝŶ ĞdžĐĞƐƐ ŽĨ ĐƵƐƚŽŵĞƌ ŶĞĞĚƐ͕ ƚŚĂƚ ƉŽǁĞƌ ŵĂLJ ďĞ ƐŽůĚ ŝŶƚŽ ƚŚĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ͘ dŚĞ ŵĂũŽƌŝƚLJ ŽĨ ƚŚŝƐ ' ŝƐ ŽŶ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐŝĚĞ͕ ǁŝƚŚ ǀĞƌLJ ĨĞǁ ĐƵƐƚŽŵĞƌƐ ƐĞůůŝŶŐ ƉŽǁĞƌ ďĂĐŬ ƚŽ ƚŚĞ ŐƌŝĚ͘ ĂůĞƐ ƚŽ ƚŚĞ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ ƵƚŝůŝƚLJ ĐŽƵůĚ ŽĐĐƵƌ ƵŶĚĞƌ Ă ŶĞƚ ŵĞƚĞƌŝŶŐ ĂƌƌĂŶŐĞŵĞŶƚ͕ Ă ǀĂůƵĞ ŽĨ ƐŽůĂƌ ƚĂƌŝĨĨ͕ Ă ĨĞĞĚͲŝŶ ƚĂƌŝĨĨ͕ũũ Ă WƵďůŝĐ hƚŝůŝƚLJ ZĞŐƵůĂƚŽƌLJ WŽůŝĐŝĞƐ Đƚ ĐŽŶƚƌĂĐƚ͕ Žƌ ĂƐ Ă ŶĞŐŽƚŝĂƚĞĚ ǁŚŽůĞƐĂůĞ ƐĂůĞ͘ ũũ ĞĞĚͲŝŶ ƚĂƌŝĨĨƐ ĂƌĞ ƐĞƚ ƉƌŝĐĞƐ ƉĂŝĚ ďLJ ƵƚŝůŝƚŝĞƐ ƚŽ ĐƵƐƚŽŵĞƌƐ ĨŽƌ ƉƌŽĚƵĐƚŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW Table 2-4 Business Models for Distributed Generation 8WLOLWLHV FDQ LQWHJUDWH ' XVLQJ D YDULHW RI EXVLQHVV PRGHOV WR DFFRPPRGDWH YDU LQJ ORFDO DQG UHJLRQDO FLUFXPVWDQFHV PDUNHW DQG LQIUDVWUXFWXUH WRSRORJLHV DQG FRQVXPHU SUHIHUHQFHV 2 5 5 3 Limitations on the Scope of Utility Activities dŚĞ ƐĐŽƉĞ ŽĨ ƵƚŝůŝƚLJ ƐĞƌǀŝĐĞƐ ĚĞĨŝŶĞƐ ƚŚĞ ůŝŶĞƐ ŽĨ ďƵƐŝŶĞƐƐ ƚŚĂƚ ŝƚ ĐĂŶ ƉƵƌƐƵĞ͘ dŚĞƌĞ ĂƌĞ ƚǁŽ ĨƵŶĚĂŵĞŶƚĂů ƌĞĂƐŽŶƐ ĨŽƌ ůŝŵŝƚŝŶŐ ƐĐŽƉĞ͘ dŚĞ ĨŝƌƐƚ ŝƐ ƚŽ ĞĨĨĞĐƚŝǀĞůLJ ƉƌĞǀĞŶƚ ĐƌŽƐƐͲƐƵďƐŝĚŝnjĂƚŝŽŶ ŽĨ ƵƚŝůŝƚLJ ĂĨĨŝůŝĂƚĞ ĂĐƚŝǀŝƚŝĞƐ͕ ŝŶ ǁŚŝĐŚ ƌĂƚĞƉĂLJĞƌƐ ƐƵďƐŝĚŝnjĞ ŶŽŶͲĐŽƌĞ ƵƚŝůŝƚLJ ĂĐƚŝǀŝƚŝĞƐ͘ Z ĂŶĚ ƐƚĂƚĞ Wh Ɛ ůĂƌŐĞůLJ ĨŽƌŵĂůŝnjĞĚ ƌĞŐƵůĂƚŽƌLJ ĂƵƚŚŽƌŝƚŝĞƐ ƚŽ ƉƌĞǀĞŶƚ ĐƌŽƐƐͲƐƵďƐŝĚŝnjĂƚŝŽŶƐ͘ dŚĞ ƐĞĐŽŶĚ ƌĞĂƐŽŶ ƚŽ ůŝŵŝƚ ƵƚŝůŝƚLJ ĂĐƚŝǀŝƚLJ͕ ĂŶĚ ƚŚĞ ŽŶĞ ƚŚĂƚ ŝƐ ŵŽƐƚ ŝŵƉŽƌƚĂŶƚ ŝŶ ĨƌĂŵŝŶŐ ƚŚĞ ĨƵƚƵƌĞ ĚŝƐƚƌŝďƵƚŝŽŶ ƵƚŝůŝƚLJ ŵŽĚĞů͕ ŝƐ ƚŽ ƉƌĞƐĞƌǀĞ ĐŽŶƐƵŵĞƌ ďĞŶĞĨŝƚƐ ŽĨ ĐŽŵƉĞƚŝƚŝŽŶ ďLJ ĞŶĂďůŝŶŐ ĐŽŵƉĞƚŝƚŝǀĞ ƉƌŽǀŝĚĞƌƐ ŽĨ ƉŽǁĞƌ ĂŶĚ ƐĞƌǀŝĐĞƐ ƚŽ ĞĨĨĞĐƚŝǀĞůLJ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ƚŚĞ ŵĂƌŬĞƚ͘ dŚĞ ůĂƚƚĞƌ ƌĂƚŝŽŶĂůĞ ŝƐ ŝŵƉŽƌƚĂŶƚ ĨŽƌ ĚĞƚĞƌŵŝŶŝŶŐ ĂĐƚŝǀŝƚŝĞƐ ƚŚĂƚ ƵƚŝůŝƚŝĞƐ ĂƌĞ ĂůůŽǁĞĚ ƚŽ ƉƵƌƐƵĞ͘ hƚŝůŝƚLJ ƌĞƐƚƌƵĐƚƵƌŝŶŐ ŐƌĞĂƚůLJ ĂůƚĞƌĞĚ ƚŚĞ ĞůĞĐƚƌŝĐ ƵƚŝůŝƚLJ ďƵƐŝŶĞƐƐ ŵŽĚĞů ŝŶ ƐŽŵĞ ƐƚĂƚĞƐ ďLJ ďƌĞĂŬŝŶŐ ƵƉ ǀĞƌƚŝĐĂůůLJ ŝŶƚĞŐƌĂƚĞĚ ƵƚŝůŝƚŝĞƐ ĂŶĚ ŝŶƚƌŽĚƵĐŝŶŐ ĐŽŵƉĞƚŝƚŝŽŶ ĂŶĚ ĐƵƐƚŽŵĞƌ ĐŚŽŝĐĞ͘Ϯϳϯ hƚŝůŝƚŝĞƐ͛ ĚŝǀĞƐƚŝƚƵƌĞ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĂůůĂLJĞĚ ĐŽŶĐĞƌŶƐ ĂďŽƵƚ ĂŶƚŝͲĐŽŵƉĞƚŝƚŝǀĞ ďĞŚĂǀŝŽƌ͕ ƐƵĐŚ ĂƐ ĐƌŽƐƐͲƐƵďƐŝĚŝĞƐ ďĞƚǁĞĞŶ ĂĨĨŝůŝĂƚĞƐ ĂŶĚ ĨĂǀŽƌĞĚ ƚƌĞĂƚŵĞŶƚ ŽĨ ĂĨĨŝůŝĂƚĞƐ ŝŶ ƚŚĞ ŶĞǁ ŵĂƌŬĞƚ͘ Wh Ɛ ŝŶ ƌĞƐƚƌƵĐƚƵƌĞĚ ƐƚĂƚĞƐ ĨƌĞƋƵĞŶƚůLJ ĞŶĐŽƵƌĂŐĞĚ Žƌ ƌĞƋƵŝƌĞĚ ĚŝǀĞƐƚŝƚƵƌĞ ŽĨ ŐĞŶĞƌĂƚŝŶŐ ĂƐƐĞƚƐ ƐŽ ƚŚĂƚ ƚŚĞ ƵƚŝůŝƚŝĞƐ ŶŽ ůŽŶŐĞƌ ĐŽŶƚƌŽůůĞĚ ƚŚĞŝƌ ŽǁŶ ŐĞŶĞƌĂƚŝŽŶ͘ Ɛ ǁĂƐ ƚŚĞ ĐĂƐĞ ŝŶ EĞǁ zŽƌŬ͕ ƚŚĞ ƉƌŝŵĂƌLJ ƌĂƚŝŽŶĂůĞ ĨŽƌ ĚŝǀĞƐƚŝƚƵƌĞ ǁĂƐ ƚŽ ďƌĞĂŬ ƚŚĞ ĞĐŽŶŽŵŝĐ ƚŝĞ ďĞƚǁĞĞŶ ĞůĞĐƚƌŝĐŝƚLJ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ŐĞŶĞƌĂƚŝŽŶ ƐĞƌǀŝĐĞƐ ƚŽ ĐƌĞĂƚĞ Ă ĐŽŵƉĞƚŝƚŝǀĞ ǁŚŽůĞƐĂůĞ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ͘ ĞƚǁĞĞŶ ϭϵϵϴ ĂŶĚ ϮϬϬϭ͕ ƵƚŝůŝƚŝĞƐ ĚŝǀĞƐƚĞĚ ŵŽƌĞ ƚŚĂŶ ϯϬϬ ĞůĞĐƚƌŝĐͲŐĞŶĞƌĂƚŝŶŐ ƉůĂŶƚƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŶĞĂƌůLJ ϮϬ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ͘Ϯϳϰ Ŷ ϭϵϵϳ͕ ŽŶůLJ ϭ͘ϲ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ǁĂƐ ƉƌŽĚƵĐĞĚ ďLJ ŶŽŶͲƵƚŝůŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƌŝƐŝŶŐ ƚŽ Ϯϱ ƉĞƌĐĞŶƚ ďLJ ϮϬϬϮ ĂŶĚ ŶĞĂƌůLJ ϯϱ ƉĞƌĐĞŶƚ ŝŶ ϮϬϭϮ͘Ϯϳϱ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU hůƚŝŵĂƚĞůLJ͕ ƚŚĞ ƋƵĞƐƚŝŽŶ ŝƐ ŶŽƚ ǁŚĂƚ ƚŚĞ ƵƚŝůŝƚLJ ĂĨĨŝůŝĂƚĞ ŝƐ ƉĞƌŵŝƚƚĞĚ ƚŽ ĚŽ͕ ďƵƚ ǁŚŝĐŚ ĨƵŶĐƚŝŽŶƐ ƚŚĞ ƵƚŝůŝƚLJ ŝƚƐĞůĨ ŝƐ ĂůůŽǁĞĚ ƚŽ ƉĞƌĨŽƌŵ͘ ŽŵĞ ďĂƐŝĐ ƋƵĞƐƚŝŽŶƐ ƐŚŽƵůĚ ďĞ ĂĚĚƌĞƐƐĞĚ ŝŶ ƚŚĞ ƉƌŽĐĞƐƐ ŽĨ ĚĞƚĞƌŵŝŶŝŶŐ ƚŚĞ ƐĐŽƉĞ ŽĨ ƵƚŝůŝƚLJ ĂĐƚŝǀŝƚŝĞƐ͗  ŽĞƐ ƉƌŽŚŝďŝƚŝŶŐ ƵƚŝůŝƚLJ ĂĐƚŝǀŝƚLJ ŵĞĂŶ ŐŝǀŝŶŐ ƵƉ ĞĐŽŶŽŵŝĞƐ ŽĨ ƐĐĂůĞ ĂŶĚ ƐĐŽƉĞ͍  tŚŝĐŚ ŽƉƚŝŽŶ ƉƌŽǀŝĚĞƐ ĐƵƐƚŽŵĞƌƐ ǁŝƚŚ ƚŚĞ ůŽǁĞƐƚ ĐŽƐƚ ŽĨ ƐĞƌǀŝĐĞ͍  Žǁ ĐĂŶ ƚŚĞ ƵƚŝůŝƚLJ ĞdžƉĂŶĚ ĐŽŶƐƵŵĞƌ ĐŚŽŝĐĞ͍ ĂůŝĨŽƌŶŝĂ͛Ɛ ƉŽůŝĐLJ ŝƐ Ă ŚLJďƌŝĚ ĂƉƉƌŽĂĐŚ͕ ĂůůŽǁŝŶŐ ŶĞƚ ŵĞƚĞƌŝŶŐ ǁŝƚŚ ƚŚŝƌĚͲƉĂƌƚLJ ĚĞǀĞůŽƉŵĞŶƚ ƚŚƌŽƵŐŚ WW Ɛ ĂŶĚ ƵƚŝůŝƚLJ ŝŶǀĞƐƚŵĞŶƚ ŝŶ Ws͘ ƚĂƚĞ KhƐ ĂƌĞ ĂůůŽǁĞĚ ƚŽ ŽǁŶ ĂŶĚ ŽƉĞƌĂƚĞ ƐŽůĂƌ Ws ĨĂĐŝůŝƚŝĞƐ ĂŶĚ ĞdžĞĐƵƚĞ ƐŽůĂƌ Ws WW Ɛ ǁŝƚŚ ŝŶĚĞƉĞŶĚĞŶƚ ƉŽǁĞƌ ƉƌŽĚƵĐĞƌƐ ƚŚƌŽƵŐŚ Ă ĐŽŵƉĞƚŝƚŝǀĞ ƐŽůŝĐŝƚĂƚŝŽŶ ƉƌŽĐĞƐƐ͘Ϯϳϲ ĂůŝĨŽƌŶŝĂ ŚĂƐ ĂůƐŽ ƉƵƌƐƵĞĚ Ă ŚLJďƌŝĚ ĂƉƉƌŽĂĐŚ ƚŽ ƵƚŝůŝƚLJͬŵĂƌŬĞƚ ƉƌŽǀŝƐŝŽŶ ƚŚĂƚ ƉƌŽŵŽƚĞƐ ƐƚŽƌĂŐĞ ƚĞĐŚŶŽůŽŐLJ ƚŚĂƚ ĞŶŚĂŶĐĞƐ ŐƌŝĚ ŽƉƚŝŵŝnjĂƚŝŽŶ͕ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ͕ ĂŶĚ ƚŚĞ ƌĞĚƵĐƚŝŽŶ ŽĨ ' ' ĞŵŝƐƐŝŽŶƐ͕ ĂŶĚ ĞdžƉůŝĐŝƚůLJ ƉƌŽǀŝĚĞƐ Ă ƌŽůĞ ĨŽƌ ƚŚĞ ƵƚŝůŝƚLJ͘ hŶĚĞƌ ĂůŝĨŽƌŶŝĂ ƚĂƚĞ Ăǁ ƐƐĞŵďůLJ ŝůů Ϯϱϭϰ͕ ƚŚĞ Wh ŝƐ ƌĞƋƵŝƌĞĚ ƚŽ ĞƐƚĂďůŝƐŚ ƉƌŽĐƵƌĞŵĞŶƚ ƚĂƌŐĞƚƐ ĨŽƌ ƚŚĞ ƐƚĂƚĞ͛Ɛ ƚŚƌĞĞ KhƐ ƚŽ ĂĐƋƵŝƌĞ ǀŝĂďůĞ ĂŶĚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ƐƚŽƌĂŐĞ͘ Ŷ KĐƚŽďĞƌ ϮϬϭϯ͕ ƚŚĞ Wh ĞƐƚĂďůŝƐŚĞĚ ƉƌŽĐƵƌĞŵĞŶƚ ƚĂƌŐĞƚƐ ƚŚĂƚ ƌĞƋƵŝƌĞĚ ƚŚĞ ƚŚƌĞĞ KhƐ ƚŽ ƉƌŽĐƵƌĞ ϭ͕ϯϮϱ Dt ŽĨ ƐƚŽƌĂŐĞ ďLJ ϮϬϮϬ͕ ǁŝƚŚ ƚĂƌŐĞƚƐ ĚŝǀŝĚĞĚ ĂŵŽŶŐ ƚŚƌĞĞ ŝŶĚƵƐƚƌLJ ƐĞŐŵĞŶƚƐ͗ ƚƌĂŶƐŵŝƐƐŝŽŶͲ ĐŽŶŶĞĐƚĞĚ͕ ĚŝƐƚƌŝďƵƚŝŽŶͲůĞǀĞů͕ ĂŶĚ ĐƵƐƚŽŵĞƌͲƐŝĚĞͲŽĨʹƚŚĞͲŵĞƚĞƌ ĂƉƉůŝĐĂƚŝŽŶƐ͘ Ŷ ĐŽŶƚƌĂƐƚ ǁŝƚŚ ƚŚĞ ƐƚĂƚĞ͛Ɛ ƉŽůŝĐLJ ŽŶ ƌŽŽĨƚŽƉ ƐŽůĂƌ ŝŶƐƚĂůůĂƚŝŽŶƐ͕ 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ĐĂŶ ĂĐƋƵŝƌĞ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ ŽŶͲƉƌĞŵŝƐĞ '͕ ĞŝƚŚĞƌ ƚŚƌŽƵŐŚ ĚŝƌĞĐƚ ƉƵƌĐŚĂƐĞ Žƌ ůŽŶŐͲƚĞƌŵ ƚƌĂŶƐĂĐƚŝŽŶƐ ǁŝƚŚ ƚŚŝƌĚͲƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ ǁŚĞƌĞ ƉĞƌŵŝƚƚĞĚ͘ EŽŶͲƵƚŝůŝƚLJ ĞŶƚŝƚŝĞƐ ĐĂŶ ĂůƐŽ ƉƌŽǀŝĚĞ ŽƚŚĞƌ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞƐ͕ ůŝŬĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƌĞƚƌŽĨŝƚƐ͘ dŚĞƐĞ ƚŚŝƌĚͲ ƉĂƌƚLJ ƉƌŽǀŝĚĞƌƐ ĐƌĞĂƚĞ ŶĞǁ ƌĞůĂƚŝŽŶƐŚŝƉƐ ǁŝƚŚ ƚŚĞ ĐŽŶƐƵŵĞƌ ƚŚĂƚ ƚŚĞ ƌĞŐƵůĂƚŽƌLJ ĐŽŵƉĂĐƚ ĚŝĚ ŶŽƚ ĞŶǀŝƐŝŽŶ͘ dŚĞ ƌĞůĂƚŝŽŶƐŚŝƉ ďĞƚǁĞĞŶ ƚŚĞ ĐŽŶƐƵŵĞƌ ĂŶĚ ƚŚĞƐĞ ŶŽŶͲƵƚŝůŝƚLJ ĞŶƚŝƚŝĞƐ ĂƌĞ ƵƐƵĂůůLJ ŐŽǀĞƌŶĞĚ ďLJ ĐŽŶƚƌĂĐƚ ůĂǁ͘ Ŷ ĐĂƐĞƐ ǁŚĞƌĞ ƐƵĐŚ ĐŽŶƚƌĂĐƚƵĂů ƌĞůĂƚŝŽŶƐŚŝƉƐ ŝŶĐůƵĚĞ ĨƌĂƵĚƵůĞŶƚ ĐŽŶĚƵĐƚ͕ ƚŚĞ ĞĚĞƌĂů dƌĂĚĞ ŽŵŵŝƐƐŝŽŶ ĂŶĚ ƐƚĂƚĞ ĂƚƚŽƌŶĞLJƐ ŐĞŶĞƌĂůͶŶŽƚ Wh ƐͶŚĂǀĞ ŽǀĞƌƐŝŐŚƚ ĂƵƚŚŽƌŝƚLJ͘ tŚĞŶ ĐƵƐƚŽŵĞƌƐ ĚĞĐŝĚĞ ƚŽ ĚĞǀĞůŽƉ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ ŽŶ ƚŚĞŝƌ ƉƌĞŵŝƐĞƐ͕ ƚŚĞLJ ŵƵƐƚ ŵĂŬĞ ƚǁŽ ŝŵƉŽƌƚĂŶƚ ĚĞĐŝƐŝŽŶƐ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ;ϭͿ ǁŚĞƚŚĞƌ ƚŽ ďƵLJ͕ ůĞĂƐĞ͕ Žƌ ĞŶƚĞƌ ŝŶƚŽ Ă WW ĂŶĚ ;ϮͿ ƚŚĞ ƐŝnjĞ ŽĨ ƚŚĞ ƐŽůĂƌ ĨĂĐŝůŝƚLJ͘ dLJƉŝĐĂů ĐƵƐƚŽŵĞƌƐ ƚŝĞ ƚŚĞƐĞ ĚĞĐŝƐŝŽŶƐ ƚŽ ƚŚĞ ƉƌŽƉĞƌƚLJ ƚŚĞLJ ŽĐĐƵƉLJ͕ ĂŶĚ ƚŚĞLJ ŵĂLJ ŶŽƚ ŚĂǀĞ ĂĚĞƋƵĂƚĞ ŝŶĨŽƌŵĂƚŝŽŶ ĂďŽƵƚ ƌŝƐŬƐ ĂŶĚ ŝŵƉĂĐƚƐ͘ dŚĞ ƉƌŝŶĐŝƉĂů ƐŽƵƌĐĞ ŽĨ ŝŶĨŽƌŵĂƚŝŽŶ ĐŽŵĞƐ ĨƌŽŵ ƚŚĞ ǀĞŶĚŽƌƐ ƚŚĂƚ ǁĂŶƚ ƚŽ ĞŝƚŚĞƌ ƐĞůů Žƌ ĞŶƚĞƌ ŝŶƚŽ ůŽŶŐͲƚĞƌŵ ĐŽŶƚƌĂĐƚƐ͘Ϯϳϴ͕ Ϯϳϵ dŚĞƌĞ ĂƌĞ ƚǁŽ ƚLJƉĞƐ ŽĨ ůŽŶŐͲƚĞƌŵ ĐŽŶƚƌĂĐƚƐ͗ ;ϭͿ Ă ĐƵƐƚŽŵĞƌ ƐŝŐŶƐ Ă ƚƌĂĚŝƚŝŽŶĂů ůĞĂƐĞ ĂŶĚ ƉĂLJƐ ƚŽ ƵƐĞ Ă ƐŽůĂƌ ƐLJƐƚĞŵ͕ Žƌ ;ϮͿ Ă ĐƵƐƚŽŵĞƌ ƐŝŐŶƐ Ă WW ĂŶĚ ƉĂLJƐ Ă ƐĞƚ ŵŽŶƚŚůLJ ƌĂƚĞ ĨŽƌ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĂƚ ŝƐ ŐĞŶĞƌĂƚĞĚ͘ dŚĞ ůĞŶŐƚŚƐ ŽĨ ƚŚĞ ĐŽŶƚƌĂĐƚƐ ĂƌĞ ƚLJƉŝĐĂůůLJ ϮϬʹϯϬ LJĞĂƌƐ ;ĂůƚŚŽƵŐŚ ƐŽŵĞ ĂƌĞ ƐŚŽƌƚĞƌͿ ĂŶĚ ĐŽŶƚĂŝŶ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ƚŚĂƚ ĂŶLJ ĞdžĐĞƐƐ ƉŽǁĞƌ ƉƌŽĚƵĐĞĚ ǁŝůů ďĞ ƐŽůĚ ƚŽ ƚŚĞ ŐƌŝĚ Ăƚ ƚŚĞ ƌĞƚĂŝů ƌĂƚĞ ;ŶĞƚ ŵĞƚĞƌŝŶŐͿ͘ LJ ϮϬϭϰ͕ ϳϮ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐŽůĂƌ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ǁĂƐ ƐŽůĚ ƵŶĚĞƌ ƐŽůĂƌ ůĞĂƐĞƐ ĂŶĚ WW Ɛ͘ ϮϴϬ͕ Ϯϴϭ ŝĨĨĞƌĞŶƚ ƐƚĂƚĞƐ ŚĂǀĞ ĚŝĨĨĞƌĞŶƚ ƉŽůŝĐŝĞƐ ŽŶ ƚŚŝƌĚͲƉĂƌƚLJ ĨŝŶĂŶĐŝŶŐ͘ Ɛ ŽĨ DĂƌĐŚ ϮϬϭϲ͕ Ϯϱ ƐƚĂƚĞ͕ ƉůƵƐ ƚŚĞ ŝƐƚƌŝĐƚ ŽĨ ŽůƵŵďŝĂ ĂŶĚ WƵĞƌƚŽ ZŝĐŽ ĂůůŽǁĞĚ ƚŚŝƌĚͲƉĂƌƚLJ ƐŽůĂƌ WW Ɛ͖ ϴ ƐƚĂƚĞƐ ƉƌŽŚŝďŝƚĞĚ ƚŚŝƌĚͲƉĂƌƚLJ ƐŽůĂƌ WW Ɛ͖ ĂŶĚ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU KDSWHU 7KH OHFWULFLW 6HFWRU 0D LPL LQJ FRQRPLF 9DOXH DQG RQVXPHU TXLW ƚŚĞ ůĞŐĂů ƐƚĂƚƵƐ ǁĂƐ ƵŶĐůĞĂƌ ŝŶ ϭϲ ƐƚĂƚĞƐ͘ϮϴϮ dŚĞ ŽůĂƌ ŶĞƌŐLJ ŶĚƵƐƚƌŝĞƐ ƐƐŽĐŝĂƚŝŽŶ ƉƵďůŝƐŚĞĚ ŝŶ ϮϬϭϱ ƚŚĞ ŽůĂƌ ƵƐŝŶĞƐƐ ŽĚĞ ĂŶĚ ďĞƐƚ ƉƌĂĐƚŝĐĞƐ ĨŽƌ ĐŽŶƐƵŵĞƌ ƉƌŽƚĞĐƚŝŽŶ͕ ďLJ ǁŚŝĐŚ ŵĞŵďĞƌ ĐŽŵƉĂŶŝĞƐ ŵƵƐƚ ĂďŝĚĞ͘Ϯϴϯ ZĞƚĂŝů ŽƉĞŶ ĂĐĐĞƐƐ ĂůůŽǁƐ ĐƵƐƚŽŵĞƌƐ ƚŽ ƐŚŽƉ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ ĐŽŵƉĞƚŝƚŝǀĞ͕ ĂůƚĞƌŶĂƚŝǀĞ ƉƌŽǀŝĚĞƌƐ͘ ůĞĐƚƌŝĐŝƚLJ ŝƐ ŶŽƚ Ă ƚLJƉŝĐĂů ŐŽŽĚ ƚŚĂƚ ůĞŶĚƐ ŝƚƐĞůĨ ƚŽ ĐŽŵƉĂƌŝƐŽŶ ƐŚŽƉƉŝŶŐ͕ ŐŝǀĞŶ ƚŚĂƚ ƚŚĞƌĞ ĂƌĞ ĚŝĨĨĞƌĞŶƚ ƚĞƌŵƐ ƚŚĂƚ ĂĨĨĞĐƚ ƚŚĞ ƵůƚŝŵĂƚĞ ĚĞůŝǀĞƌĞĚ ƉƌŝĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ͘ Ɛ Ă ĐŽŶƐĞƋƵĞŶĐĞ͕ ůŽǁͲŝŶĐŽŵĞ ĂŶĚ ǀƵůŶĞƌĂďůĞ ƉŽƉƵůĂƚŝŽŶƐ ĂƌĞ ƉĂƌƚŝĐƵůĂƌůLJ ƐƵƐĐĞƉƚŝďůĞ ƚŽ ƵŶƐĐƌƵƉƵůŽƵƐ ďĞŚĂǀŝŽƌ͘ dŚĞ ƐƚĂĨĨ ŽĨ ƚŚĞ EĞǁ zŽƌŬ WƵďůŝĐ ĞƌǀŝĐĞ ŽŵŵŝƐƐŝŽŶ ƌĞĐĞŶƚůLJ ĨŽƵŶĚ ƚŚĂƚ ƐŝŶĐĞ ϮϬϭϰ ƌĞƐŝĚĞŶƚŝĂů ĐƵƐƚŽŵĞƌƐ ƉĂŝĚ ĂůƚĞƌŶĂƚŝǀĞ ĞŶĞƌŐLJ ƐƵƉƉůŝĞƌƐ Ψϴϭϳ ŵŝůůŝŽŶ ŵŽƌĞ ƚŚĂŶ ŝĨ ƚŚĞLJ ŚĂĚ ƌĞŵĂŝŶĞĚ ǁŝƚŚ ƚŚĞŝƌ ƵƚŝůŝƚLJ ĨŽƌ ŐĂƐ ĂŶĚ ĞůĞĐƚƌŝĐ ƐƵƉƉůLJ͘Ϯϴϰ͕ Ϯϴϱ͕ Ϯϴϲ dŚĞ EĞǁ zŽƌŬ WƵďůŝĐ ĞƌǀŝĐĞ ŽŵŵŝƐƐŝŽŶ ŝƐ ŶŽǁ ƌĞͲĞdžƉůŽƌŝŶŐ ŝƚƐ ƌŽůĞ ŝŶ ŵŽŶŝƚŽƌŝŶŐ ĂŶĚ ƉƌŽƚĞĐƚŝŶŐ ĐŽŶƐƵŵĞƌƐ ǁŚŽ ƉƵƌĐŚĂƐĞ ƉŽǁĞƌ ĨƌŽŵ ĂůƚĞƌŶĂƚŝǀĞ ƉƌŽǀŝĚĞƌƐ͘ dŚĞ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŵĂƌŬĞƚƐ ŚĂƐ ĨŽĐƵƐĞĚ ŽŶ ĐŽŵƉĞƚŝƚŝŽŶ ĂŶĚ ƚŚĞ ŽĨĨĞƌŝŶŐ ŽĨ ŶĞǁ ƐĞƌǀŝĐĞ ŽƉƚŝŽŶƐ ƚŽ ĐƵƐƚŽŵĞƌƐͶůĂƌŐĞůLJ ďLJ ŶŽŶͲƵƚŝůŝƚLJ ƉƌŽǀŝĚĞƌƐ͘ ŽŝŶŐ ƐŽ ŚĂƐ ŝŶĐƌĞĂƐĞĚ ŝŶŶŽǀĂƚŝŽŶ͕ ďƵƚ ŝƚ ŚĂƐ ĂůƐŽ ŵĂĚĞ ƚŚĞ ƌŽůĞ ŽĨ ĐƵƐƚŽŵĞƌ ƉƌŽƚĞĐƚŝŽŶ ŵŽƌĞ ĂŵďŝŐƵŽƵƐ͕ ĐƌĞĂƚŝŶŐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ĚĞǀĞůŽƉ ŵĞĐŚĂŶŝƐŵƐ ƚŽ ŝŶĐƌĞĂƐĞ ƚƌĂŶƐƉĂƌĞŶĐLJ͘ WĂƌƚ ŽĨ ƚŚĞ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶ ƌĞƋƵŝƌĞƐ ŶĞǁ ƚŽŽůƐ ĨŽƌ ŵŽŶŝƚŽƌŝŶŐ ƚŚŝƌĚͲƉĂƌƚLJ ŝŶƚĞƌĂĐƚŝŽŶƐ ǁŝƚŚ ĐƵƐƚŽŵĞƌƐͶĨƌŽŵ ĨƌĂƵĚƵůĞŶƚ ĐůĂŝŵƐ ƚŽ ĨĂŝůƵƌĞ ƚŽ ŵĞĞƚ ĐŽŶƚƌĂĐƚƵĂů ŽďůŝŐĂƚŝŽŶƐ͘ ƚĂƚĞ Wh Ɛ ŵĂLJ ƌĞƋƵŝƌĞ ŶĞǁ ƉŽǁĞƌƐ ƚŽ ĨƵůĨŝůů ƚŚĞŝƌ ŚŝƐƚŽƌŝĐ ƌŽůĞ ŽĨ ƉƌŽƚĞĐƚŝŶŐ ĐƵƐƚŽŵĞƌƐ͘ 2 6 Federal and State Jurisdictional Issues dŚĞ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ƌĂŝƐĞ ƋƵĞƐƚŝŽŶƐ ĂďŽƵƚ ǁŚŽ ƐŚŽƵůĚ ƌĞŐƵůĂƚĞ ŶĞǁ ƐĞƌǀŝĐĞƐ ĂŶĚ ŵĂƌŬĞƚ ĞŶƚƌĂŶƚƐ ĂŶĚ ƚŚĞ ŐƌŽǁƚŚ ŽĨ ůŽŶŐͲĚŝƐƚĂŶĐĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂĐƌŽƐƐ ƐƚĂƚĞ ĂŶĚ ZdK ďŽƵŶĚĂƌŝĞƐ͘ dŚĞƌĞ ŝƐ ŝŶĐƌĞĂƐĞĚ ƉŽƚĞŶƚŝĂů ĨŽƌ ƚĞŶƐŝŽŶƐ ďĞƚǁĞĞŶ ĞdžŝƐƚŝŶŐ ƌĞŐƵůĂƚŽƌLJ ďŽĚŝĞƐ Ăƚ ƚŚĞ ƐƚĂƚĞ ĂŶĚ ĞĚĞƌĂů ůĞǀĞůƐ͕ ĂŶĚ ƚŚĞ ĞĚĞƌĂů WŽǁĞƌ Đƚ͛Ɛ ; W ͛ƐͿ ďƌŝŐŚƚ ůŝŶĞ ĚĞůŝŶĞĂƚŝŶŐ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ũƵƌŝƐĚŝĐƚŝŽŶ ĂƵƚŚŽƌŝƚŝĞƐ ŝƐ ŝŶĐƌĞĂƐŝŶŐůLJ ďůƵƌƌĞĚ͘ ĞƌƚĂŝŶ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ƐƵĐŚ ĂƐ '͕ ƐŽƉŚŝƐƚŝĐĂƚĞĚ ůŽĂĚ ĐŽŶƚƌŽůƐ ƚŚĂƚ ĨĂĐŝůŝƚĂƚĞ ĚĞŵĂŶĚ ŵĂŶĂŐĞŵĞŶƚ͕ ŵŝĐƌŽŐƌŝĚƐ͕ ĂŶĚ ƐƚŽƌĂŐĞ ĂƌĞ ŶŽƚ ĂƐ ĐůĞĂƌůLJ ĚĞůŝŶĞĂƚĞĚ ĂƐ ďĞŝŶŐ ƐŽůĞůLJ ǁŝƚŚŝŶ ƚŚĞ ƌĞĂůŵ ŽĨ ǁŚŽůĞƐĂůĞ Žƌ ƌĞƚĂŝů ũƵƌŝƐĚŝĐƚŝŽŶ͘ dŚĞƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂǀĞ ĚŝĨĨĞƌĞŶƚ ĂƚƚƌŝďƵƚĞƐ ƚŚĂŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĞdžŝƐƚĞĚ ǁŚĞŶ ƚŚĞ W ǁĂƐ ĞŶĂĐƚĞĚ͕ ĂŶĚ ƚŚĞLJ ĂƌĞ ĐĂƉĂďůĞ ŽĨ ƉƌŽǀŝĚŝŶŐ ŵƵůƚŝƉůĞ ƐĞƌǀŝĐĞƐ ĂĐƌŽƐƐ ƚŚĞ ƚƌĂĚŝƚŝŽŶĂů ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ďŽƵŶĚĂƌŝĞƐ͘ 2 6 1 Distributed Generation KǀĞƌ ƚŚĞ ƉĂƐƚ ϭϱ LJĞĂƌƐ͕ Z ŚĂƐ ŝƐƐƵĞĚ Ă ƐĞƌŝĞƐ ŽĨ ŽƌĚĞƌƐ ůĂƌŐĞůLJ ĚŝƐĐůĂŝŵŝŶŐ ũƵƌŝƐĚŝĐƚŝŽŶ ĨƌŽŵ ƌĞƐŽƵƌĐĞƐ ƉĂƌƚŝĐŝƉĂƚŝŶŐ ŝŶ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉƌŽŐƌĂŵƐ͘ Z ͛Ɛ ŝŶƚĞƌƉƌĞƚĂƚŝŽŶƐ ŽĨ ŝƚƐ ũƵƌŝƐĚŝĐƚŝŽŶ ĞƐƐĞŶƚŝĂůůLJ ĂůůŽǁ ƐƚĂƚĞ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉƌŽŐƌĂŵƐ ƚŽ ĐŽŶƚŝŶƵĞ ǁŝƚŚŽƵƚ ƚƌŝŐŐĞƌŝŶŐ ĞĚĞƌĂů ƌĞŐƵůĂƚŽƌLJ ĂƉƉůŝĐĂďŝůŝƚLJ ƚŚĂƚ ĐŽƵůĚ ƐƚLJŵŝĞ ƐƚĂƚĞ ŝŶŝƚŝĂƚŝǀĞƐ͘ dŚĞƐĞ ĚĞĐŝƐŝŽŶƐ ƌĞƐƚ ŽŶ Ă ƌĞŐƵůĂƚŽƌLJ ĐŽŶƐƚƌƵĐƚ ƚŚĂƚ ĐŽŶƐƵŵĞƌƐ ǁŝƚŚ ŽŶƐŝƚĞ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ ͞ŽĨĨƐĞƚƚŝŶŐ͟ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ƚŚƵƐ ŶŽƚ ĞŶŐĂŐĞĚ ŝŶ ŵĂŬŝŶŐ ǁŚŽůĞƐĂůĞ ƐĂůĞƐ ƌĞŐƵůĂƚĞĚ ƵŶĚĞƌ ƚŚĞ W ͘ dŚĞ ŽǀĞƌĂůů ƐLJƐƚĞŵ ŝŵƉĂĐƚ ŽĨ ' ŝƐ ĂůƐŽ ŝŶĐƌĞĂƐŝŶŐ ĂƐ ŝƚƐ ĚĞƉůŽLJŵĞŶƚ ĞdžƉĂŶĚƐ͘ DŽƌĞ ŽĨƚĞŶ͕ ' ŝƐ ďĞŝŶŐ ĐŽŵďŝŶĞĚ ǁŝƚŚ ŽƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ ƐƵĐŚ ĂƐ ŽŶƐŝƚĞ ƐƚŽƌĂŐĞ͕ Z͕ ĂŶĚ ĞŶŚĂŶĐĞĚ ƚĞĐŚŶŝĐĂů ĐŽŶƚƌŽůƐ͕ ĂŶĚ ŝƚ ŝƐ ďĞŝŶŐ ƵƐĞĚ ƚŽ ƐĞƌǀĞ ǁŚŽůĞƐĂůĞ ĐĂƉĂĐŝƚLJ͕ ĞŶĞƌŐLJ͕ ĂŶĚ ĂŶĐŝůůĂƌLJ ƐĞƌǀŝĐĞƐ ŵĂƌŬĞƚƐ ƚŚƌŽƵŐŚ ĂŐŐƌĞŐĂƚŝŽŶ͘ Ĩ ƚŚĞ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŽƌƐ ƉƌŽǀŝĚŝŶŐ ƚŚĞƐĞ ƌĞƐŽƵƌĐĞƐ ĂƌĞ Ɛƚŝůů ĐŽŶŶĞĐƚĞĚ ĐůŽƐĞ ƚŽ ůŽĂĚ ĂŶĚ ǁŝƚŚŝŶ ƚŚĞ ƐƚĂƚĞͲ ƌĞŐƵůĂƚĞĚ ĚŝƐƚƌŝďƵƚŝŽŶ ƐLJƐƚĞŵ͕ ƚŚĞŶ ĐŽŽƌĚŝŶĂƚŝŽŶ ďĞƚǁĞĞŶ ƚŚĞ ǁŚŽůĞƐĂůĞ ĂŶĚ ƌĞƚĂŝů ŵĂƌŬĞƚƐ ĂŶĚ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƌĞŐƵůĂƚŽƌƐ ǁŝůů ďĞ ŶĞĐĞƐƐĂƌLJ ƚŽ ĂǀŽŝĚ ĂŶĚ ƌĞƐŽůǀĞ ĐŽŶĨůŝĐƚƐ͘ KŶĞ ĂƉƉůŝĐĂƚŝŽŶ ŽĨ ' ŝƐ ĨŽƌ ŵŝĐƌŽŐƌŝĚƐ͕ ǁŚŝĐŚ ƌĂŝƐĞƐ ŶĞǁ ũƵƌŝƐĚŝĐƚŝŽŶĂů ŝƐƐƵĞƐ͘ Žƌ ŝŶƐƚĂŶĐĞ͕ ŝŶ ĂƌĞĂƐ ǁŚĞƌĞ Ă ƐŝŶŐůĞ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽǀŝĚĞƌ ŝƐ ŐƌĂŶƚĞĚ Ă ŵŽŶŽƉŽůLJ ĨƌĂŶĐŚŝƐĞ͕ ƌĞŐƵůĂƚŝŽŶƐ ŵĂLJ ƉƌŽŚŝďŝƚ ĂŶLJ ŽƚŚĞƌ ĞŶƚŝƚLJ ĨƌŽŵ ĐŽŶƐƚƌƵĐƚŝŶŐ ŶĞǁ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ Žƌ ƉƌŽǀŝĚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ĞŶĚ ƵƐĞƌƐ͘Ϯϴϳ͕ Ϯϴϴ KƚŚĞƌ ƌĞŐƵůĂƚŽƌLJ ŝƐƐƵĞƐ ŵĂLJ ĂƌŝƐĞ ŝŶ ƚŚĞ ĐĂƐĞ ǁŚĞƌĞ Ă ŵŝĐƌŽŐƌŝĚ ŽƉĞƌĂƚŽƌ ƉƵƌĐŚĂƐĞƐ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ ŽǁŶĞƌƐ ŽĨ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU ĚŝƐƚƌŝďƵƚĞĚ ƌĞƐŽƵƌĐĞƐ ŝŶ ƚŚĞŝƌ ƐLJƐƚĞŵ ĂŶĚ ƌĞƐĞůůƐ ƚŚĂƚ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ŽƚŚĞƌ ƵƐĞƌƐ ǁŝƚŚŝŶ ƚŚĞ ŵŝĐƌŽŐƌŝĚ͘ dŚĞ W ĐŽƵůĚ ĐŽŶƐŝĚĞƌ ƐƵĐŚ Ă ƚƌĂŶƐĂĐƚŝŽŶ ĂƐ Ă ƐĂůĞ ĨŽƌ ƌĞƐĂůĞ͕ ǁŚŝĐŚ ĞĚĞƌĂů ůĂǁ ƉƌŽŚŝďŝƚƐ͘Ϯϴϵ ĞƐƉŝƚĞ ůŝŶŐĞƌŝŶŐ ƌĞŐƵůĂƚŽƌLJ ĂŶĚ ũƵƌŝƐĚŝĐƚŝŽŶĂů ƵŶĐĞƌƚĂŝŶƚŝĞƐ͕ ƚŚĞ ŶƵŵďĞƌ ĂŶĚ ĚŝǀĞƌƐŝƚLJ ŽĨ ŵŝĐƌŽŐƌŝĚƐ ĐŽŶƚŝŶƵĞƐ ƚŽ ŐƌŽǁ͘ϮϵϬ 2 6 2 Demand Response Ŷ ϮϬϬϴ͕Ϯϵϭ Z ŝƐƐƵĞĚ KƌĚĞƌ EŽ͘ ϳϭϵ ƚŽ͕ ĂŵŽŶŐ ŽƚŚĞƌ ŽďũĞĐƚŝǀĞƐ͕ ĞŶƐƵƌĞ ƚŚĞ ĐŽŵƉĂƌĂďůĞ ƚƌĞĂƚŵĞŶƚ ŽĨ Z ŝƐ ƚŽ ŽƚŚĞƌ ƌĞƐŽƵƌĐĞƐ ŝŶ ŽƌŐĂŶŝnjĞĚ ŵĂƌŬĞƚƐ ĂŶĚ ƚŽ ƉĞƌŵŝƚ Z ĂŐŐƌĞŐĂƚŽƌƐ ƚŽ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ŵĂƌŬĞƚƐ ŽŶ ďĞŚĂůĨ ŽĨ ƌĞƚĂŝů ĐƵƐƚŽŵĞƌƐ͘ϮϵϮ ŽǁĞǀĞƌ͕ ƐƚĂƚĞƐ ĐĂŶ ŽƉƚ ŽƵƚ ŽĨ Z ͛Ɛ Z ƉŽůŝĐLJ ĂŶĚ ĨŽƌĞĐůŽƐĞ Z ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŝŶ ŵĂƌŬĞƚƐ͘ Z ŝƐƐƵĞĚ Z KƌĚĞƌ EŽ͘ ϳϰϱ ŝŶ ϮϬϭϭ͕ ƌĞƋƵŝƌŝŶŐ ƚŚĂƚ Z ƌĞƐŽƵƌĐĞƐ ƌĞĐĞŝǀĞ ĐŽŵƉĞŶƐĂƚŝŽŶ ĨŽƌ ƚŚĞ ƐĞƌǀŝĐĞƐ ƚŚĞLJ ƉƌŽǀŝĚĞ ƚŽ ƚŚĞ ĞŶĞƌŐLJ ŵĂƌŬĞƚ Ăƚ ƚŚĞ ůŽĐĂƚŝŽŶĂů ŵĂƌŬĞƚ ƉƌŝĐĞ ĨŽƌ ĞŶĞƌŐLJ͘Ϯϵϯ Z ĞdžƉĞƌŝĞŶĐĞĚ ƉƵƐŚďĂĐŬ ĨƌŽŵ ƵƚŝůŝƚLJ ĂŶĚ ŐĞŶĞƌĂƚŽƌ ĐŽŵƉĞƚŝƚŽƌƐ ƚŽ Z͕ ďƵƚ ƚŚĞ ƵƉƌĞŵĞ ŽƵƌƚ ƵůƚŝŵĂƚĞůLJ ƵƉŚĞůĚ ƚŚĞ ŽƌĚĞƌ ŝŶ Elec Power Supply Ass’n v FERC͘ dŚĞ ŽƵƌƚ ĨŽƵŶĚ ƚŚĂƚ KƌĚĞƌ EŽ͘ ϳϰϱ ĚŝĚ ŶŽƚ ĚŝƌĞĐƚůLJ ƌĞŐƵůĂƚĞ ƌĞƚĂŝů ĞůĞĐƚƌŝĐŝƚLJ ƐĂůĞƐ ĂŶĚ ƚŚƵƐ ǁĂƐ ǁŝƚŚŝŶ Z ͛Ɛ ũƵƌŝƐĚŝĐƚŝŽŶ͘ dŚĞ ĂďŝůŝƚLJ ŽĨ ĞŶĚͲƵƐĞ ĐƵƐƚŽŵĞƌƐ ƚŽ ŽĨĨĞƌ Z ĐŽŵŵŝƚŵĞŶƚƐ ŝŶ ƚŚĞ ǁŚŽůĞƐĂůĞ ŵĂƌŬĞƚ͕ ĂŶĚ ƚŽ ďĞ ĐŽŵƉĞŶƐĂƚĞĚ ĨŽƌ ƚŚŽƐĞ ĐŽŵŵŝƚŵĞŶƚƐ͕ ŝƐ ŵĂĚĞ ƉŽƐƐŝďůĞ ďLJ ƚĞĐŚŶŽůŽŐLJ ĐŚĂŶŐĞƐ ƚŚĂƚ ĂůůŽǁ ƚŚŽƐĞ ĐƵƐƚŽŵĞƌƐ ƚŽ ďĞ ĂŐŐƌĞŐĂƚĞĚ͕ ŵŽŶŝƚŽƌĞĚ͕ ĂŶĚ ŵĞƚĞƌĞĚ͘ dŚƵƐ͕ ĞŶĚ ƵƐĞƌƐ ;ƚŽ ǁŚŽŵ ƐĂůĞƐ ĂƌĞ ĐůĞĂƌůLJ ǁŝƚŚŝŶ ƐƚĂƚĞ ũƵƌŝƐĚŝĐƚŝŽŶͿ ǁĞƌĞ ƉĂƌƚŝĐŝƉĂƚŝŶŐ ŝŶ ǁŚŽůĞƐĂůĞ ĞŶĞƌŐLJ ŵĂƌŬĞƚƐ͕ ƐƵďũĞĐƚ ƚŽ Z ŽǀĞƌƐŝŐŚƚ͕ ƉƌĞƐĞŶƚŝŶŐ Ă ƌĂƚŝŽŶĂůĞ ĨŽƌ ƌĞŐƵůĂƚŝŽŶ ƵŶĚĞƌ ƚŚĞ W ũƵƌŝƐĚŝĐƚŝŽŶĂů ƉƌŽǀŝƐŝŽŶƐ͘ 2 6 3 Energy Storage ŶĞƌŐLJ ƐƚŽƌĂŐĞ ĐĂƉĂďŝůŝƚŝĞƐ ŝŶĐůƵĚĞ ĂŶLJ ĨĂĐŝůŝƚLJ ƚŚĂƚ ĐĂŶ ƌĞĐĞŝǀĞ ĞůĞĐƚƌŝĐ ĞŶĞƌŐLJ ĨƌŽŵ ƚŚĞ ŐƌŝĚ ĂŶĚ ƐƚŽƌĞ ŝƚ ĨŽƌ ůĂƚĞƌ 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ŵĞĂŶƐ ƚŽ ŵĂŶĂŐĞ ĐƵƐƚŽŵĞƌ ĚĞŵĂŶĚ ĐŚĂƌŐĞƐ ĂƐ ƐLJƐƚĞŵ ƉƌŝĐĞƐ ĚƌŽƉ ĂŶĚ ƚŚĞ ǀĂůƵĞ ŽĨ ĨůĞdžŝďŝůŝƚLJ ŝŶĐƌĞĂƐĞƐ ǁŝƚŚ Ă ĐŚĂŶŐŝŶŐ ƌĞƐŽƵƌĐĞ ŵŝdž͘Ϯϵϱ ŽǁĞǀĞƌ͕ ĚĞƉůŽLJŝŶŐ ƐƚŽƌĂŐĞ ƌĞƐŽƵƌĐĞƐ ƐŽůĞůLJ ƵƐŝŶŐ ƚŚĞ ĞdžŝƐƚŝŶŐ ƌĞŐƵůĂƚŽƌLJ ĐůĂƐƐŝĨŝĐĂƚŝŽŶƐ ;ǁŚŽůĞƐĂůĞ ĞŶĞƌŐLJ ĂŶĚ ĂŶĐŝůůĂƌLJ ƐĞƌǀŝĐĞƐ ŵĂƌŬĞƚƐ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶͿ ĐĂŶ ůŝŵŝƚ ƚŚĞ ĂǀĂŝůĂďůĞ ͞ƵƐĞ ĐĂƐĞƐ͘͟ ƚ ĐĂŶ ĂůƐŽ ĐŽŶƐƚƌĂŝŶ ƚŚĞ ƐĞƌǀŝĐĞƐ ƚŚĂƚ Ă ƉĂƌƚŝĐƵůĂƌ ƐƚŽƌĂŐĞ ƌĞƐŽƵƌĐĞ ĐĂŶ ƉƌŽǀŝĚĞ ĂŶĚ ƚŚĞ ƌĞǀĞŶƵĞ ƐŽƵƌĐĞƐ ƚŚĂƚ ŽǁŶĞƌƐ Žƌ ŽƉĞƌĂƚŽƌƐ ĐĂŶ ŽďƚĂŝŶ͘ KŶĞ ƉĂƌƚŝĐƵůĂƌ ƌĞŐƵůĂƚŽƌLJ ĐŽŵƉůŝĐĂƚŝŽŶ ŝƐ ƚŚĂƚ ƐƚŽƌĂŐĞ ŵĂLJ ďĞ ƐĞůůŝŶŐ ŵƵůƚŝƉůĞ ƐĞƌǀŝĐĞƐ͕ ƐŽŵĞ ŽĨ ǁŚŝĐŚ ĂƌĞ ƐƵďũĞĐƚ ƚŽ ŵĂƌŬĞƚͲďĂƐĞĚ ƉƌŝĐĞƐ ĂŶĚ ŽƚŚĞƌƐ ƚŚĂƚ ĂƌĞ ƐŽůĚ Ăƚ ĐŽƐƚͲďĂƐĞĚ ƌĂƚĞƐ͘ dŚĞ ĂďŝůŝƚLJ ƚŽ ͞ƐƚĂĐŬ͟ ƚŚĞƐĞ ƐĞƌǀŝĐĞƐ ƚŽ ĂĐŚŝĞǀĞ ƐƵĨĨŝĐŝĞŶƚ ƌĞǀĞŶƵĞƐ ŵĂLJ ƌĞƋƵŝƌĞ ĂĐƚŝŽŶ ĨƌŽŵ ďŽƚŚ Z ĂŶĚ ƐƚĂƚĞ ƌĞŐƵůĂƚŽƌƐ͘Ϯϵϲ ƚĂƚĞ ƌĞŐƵůĂƚŽƌƐ ĂŶĚ Z ƌĞĐŽŐŶŝnjĞ ƚŚĞƐĞ ƌĞŐƵůĂƚŽƌLJ ĐŽŶƐƚƌƵĐƚƐ͕ ĂŶĚ Z ŝƐ ĐƵƌƌĞŶƚůLJ ĞdžƉůŽƌŝŶŐ ƚŚĞ ďĂƌƌŝĞƌƐ ƚŽ ĨƵůů ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŽĨ ƐƚŽƌĂŐĞ ŝŶ ŽƌŐĂŶŝnjĞĚ ŵĂƌŬĞƚƐ͘ Z ƌĞĐĞŶƚůLJ ŝƐƐƵĞĚ Ă ŶŽƚŝĐĞ ŽĨ ƉƌŽƉŽƐĞĚ ƌƵůĞŵĂŬŝŶŐ ƚŽ ĂĚĚƌĞƐƐ ĞůĞĐƚƌŝĐŝƚLJͲƐƚŽƌĂŐĞ ƉĂƌƚŝĐŝƉĂƚŝŽŶ ŝŶ ŵĂƌŬĞƚƐ ŽƉĞƌĂƚĞĚ ďLJ ZdKƐ ĂŶĚ KƐ͘Ϯϵϳ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU Chapter II The Electricity Sector Maximizing Economic Value and Consumer Equity 2 6 4 Potential Tools to Coordinate across Jurisdictions and Align Regulatory Approaches to Emerging Energy Technologies In many policy areas FERC has tread softly where it might have a claim of jurisdiction but did not want to preempt state regulation in these instances it has chosen to exercise its jurisdiction in line with state policy goals Several tools are at FERC’s disposal to deal with future potential jurisdiction challenges impacting new and emerging technologies and the integration of markets for those technologies One way forward is through new frameworks that for example could establish rate-setting models that consider revenues from both state and Federal jurisdictions simultaneously These models would allow resource owners to “stack” revenues from services they provide across state and Federal jurisdictions It would also guard against the potential for over-recovery and unjust and unreasonable rates In addition FERC could explore including costs of additional technologies in rate design While rarely used FERC has authority to establish joint hearings that would permit FERC and the states to hear cases together but without a joint decisional procedure 298 FERC can also delegate certain roles to “joint boards” made up of state commissioners with no Federal representation 299 More generally FERC and state commissions can collaborate on policy matters of common interest Another possible approach is to redraw the line between Federal and state jurisdictions to better accommodate today’s regulatory needs In particular this redraw should reflect the broader regional nature of electricity markets and the ability of new and emerging technologies to provide service across both Federal and state jurisdictional lines kk Another option would be to authorize jurisdictional agreements which would permit a consensual resolution of potential conflicts between state agencies and FERC Under this option an amendment to the FPA would include provisions similar to those in several other Federal statutesll that would authorize FERC and state commissions to enter into agreements that rationalize their respective state and Federal regulatory jurisdiction The recommendations based on the analysis in this chapter are covered in Chapter VII A 21st-Century Electricity Sector Conclusions and Recommendations kk Note that amendments to the Federal Power Act intended to resolve jurisdictional uncertainty with respect to new technologies or circumstances will themselves be subject to interpretation over time and will have to be applied to everchanging fact patterns ll See e g National Labor Relations Act of 1935 Pub L No 74-198 §§ 10 a 14 c 49 Stat 449 453 457 codified as amended at 29 U S C §§160 a 164 c Atomic Energy Act of 1954 Pub L No 83-703 § 244 68 Stat 919 958-59 codified as amended at 42 U S C § 2021 2005 Clean Air Act § 111 c Pub L No 91-604 § 111 c 84 Stat 1676 1684 1970 codified as amended at 42 U S C § 7411 c 1977 2-60 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 2 7 Endnotes 1 Aaron Tilley “Thermostat Wars With Help From Apple HomeKit Ecobee Takes Number Two Place Behind Nest ” Forbes September 28 2015 http www forbes com sites aarontilley 2015 09 28 thermostat-wars-with-help-from-apple-ecobeetakes-number-two-place-behind-nest #35d8a2651940 2 EPSA Analysis EPSA Base Case 3 Projections data from EPSA Analysis EPSA Base Case Historical data from U S Energy Information Administration Sales to Ultimate Customers Megawatt-hours by State by Sector by Provider 1990–2014 www eia gov electricity data state sales_annual xls Accessed October 21 2015 4 EPSA Analysis Lawrence Berkeley National Laboratory “Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ” January 2017 Pg 28 5 U S Energy Information Administration EIA “Sales to Ultimate Customers Megawatthours by State by Sector by Provider 1990-2015 ” http www eia gov electricity data cfm#sales 6 U S Energy Information Administration EIA Annual Energy Outlook 2014 with projections to 2040 Washington DC EIA 2015 DOE EIA-0383 2014 http www eia gov outlooks aeo pdf 0383 2014 pdf page MT-16 7 Energy Information Administration EIA Annual Energy Outlook 2015 With Projections to 2040 Washington DC EIA April 2015 DOE EIA-0383 2015 8 http www eia gov forecasts archive aeo15 8 General Motors GM 2015 Sustainability Report General Motors accessed November 8 2016 http www gmsustainability com home html 9 EPSA Analysis Lawrence Berkeley National Laboratory “Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ” January 2017 Pg 28 10 Energy Information Administration “Manufacturing Energy Consumption Survey Table 8 4 Number of Establishments by Participation in Specific Energy-Management Activities 2010 ” Accessed December 16 2016 from https www eia gov consumption manufacturing data 2010 pdf Table8_4 pdf 11 U S Department of Energy “Superior Energy Performance ” Accessed December 16 2016from https energy gov eere amo superior-energy-performance 12 U S Department of Energy Office of Energy Efficiency and Renewable Energy “Energy Analysis by Sector ” Accessed December 16 2016 from https energy gov eere amo energy-analysis-sector#5 13 Schwartz L et al Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline Berkley CA Lawrence Berkeley National Lab 2016 P 216-220 14 Combined Heat and Power CHP Technical Potential in the United States Washington DC U S Department of Energy 2016 iii DOE EE-1328 http www energy gov sites prod files 2016 04 f30 CHP%20Technical%20Potential%20Study%20331-2016%20Final pdf 15 “CHP Technical Assistance Partnerships ” U S Department of Energy Accessed October 25 2016 from http energy gov eere amo chp-technical-assistance-partnerships-chp-taps 16 “List of CHP Cogeneration Incentives ” OpenEI accessed October 25 2016 from http en openei org wiki List_of_CHP Cogeneration_Incentives 17 Energy Information Administration EIA “Table B1 Summary table total and means of floorspace number of workers and hours of operation 2012 ” Commercial Buildings Energy Consumption Survey EIA 2016 http www eia gov consumption commercial data 2012 bc pdf b1 pdf 18 Energy Information Administration EIA Commercial Buildings Energy Consumption Survey EIA 2012 Table C13 Total electricity consumption and expenditures http www eia gov consumption commercial data 2012 index php view consumption#c13-c22 19 Steven Nadel “Electricity Distribution End Use Challenges Opportunities” American Council for an Energy-Efficient Economy 2016 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 2-61 Chapter II The Electricity 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pdf 296 Garrett Fitzgerald James Mandel Jesse Morris and Hervé Touati The Economics of Battery Energy Storage How Multi-Use Customer-Sited Batteries Deliver the Most Services and Value to Customers and the Grid Boulder CO Rocky Mountain Institute 2015 http www rmi org Content Files RMI-TheEconomicsOfBatteryEnergyStorage-FullReport-FINAL pdf 297 Federal Energy Regulatory Commission FERC “Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators” FERC November 17 2016 https www ferc gov whats-new commmeet 2016 111716 E-1 pdf 298 Federal Power Act of 1920 § 209 b 16 U S C § 824h b 299 Federal Power Act of 1920 § 209 a 16 U S C § 824h a 2-76 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 This page intentionally left blank Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 2-77 %XLOGLQJ D OHDQ OHFWULFLW XWXUH dŚŝƐ ĐŚĂƉƚĞƌ ĞdžƉůŽƌĞƐ ƚŚĞ ĞƐƐĞŶƚŝĂů ĞůĞŵĞŶƚƐ ŽĨ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ĂŶĚ ŝĚĞŶƚŝĨŝĞƐ ƚŚĞ ƉŽůŝĐLJ͕ ŵĂƌŬĞƚ͕ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶƐ ŶĞĞĚĞĚ ƚŽ ŝŵƉƌŽǀĞ ŝƚƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ͘ Ŷ ƐŚŽƌƚ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ŵĂĚĞ ƐƵďƐƚĂŶƚŝĂů ƉƌŽŐƌĞƐƐ ŝŶ ƌĞĚƵĐŝŶŐ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ďƵƚ ŵƵĐŚ ǁŽƌŬ ƌĞŵĂŝŶƐ͘ dŚĞ ĐŚĂƉƚĞƌ ĨŝƌƐƚ ĞdžƉůŽƌĞƐ ƚŚĞ ' ' ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ĂŶĚ ƚŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ůŽǁͲ ĂŶĚ njĞƌŽͲĐĂƌďŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƐŽƵƌĐĞƐ͕ ŝŶĐůƵĚŝŶŐ ŶƵĐůĞĂƌ͕ ŶĂƚƵƌĂů ŐĂƐ͕ ƐŽůĂƌ͕ ǁŝŶĚ͕ ŚLJĚƌŽƉŽǁĞƌ͕ ďŝŽŵĂƐƐ͕ ĂŶĚ ŐĞŽƚŚĞƌŵĂů ƐŽƵƌĐĞƐ͘ dŚĞ ŶĞdžƚ ƐĞĐƚŝŽŶƐ ĚĞƚĂŝů ƚŚĞ ŝŶƚĞƌĂĐƚŝŽŶ ďĞƚǁĞĞŶ ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ĂŶĚ ŬĞLJ ŽƉƚŝŽŶƐ ĂŶĚ ĨĞĂƚƵƌĞƐ͕ ƐƵĐŚ ĂƐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ͕ ŐƌŝĚ ĨůĞdžŝďŝůŝƚLJ͕ ĂŶĚ ƐƚŽƌĂŐĞ͘ dŚĞ ĐŚĂƉƚĞƌ ŝŶĐůƵĚĞƐ Ă ĚŝƐĐƵƐƐŝŽŶ ŽĨ ŚŽǁ ƚŚĞ ŝŶƚĞƌƉůĂLJ ŽĨ ƚĞĐŚŶŽůŽŐLJ͕ ŵĂƌŬĞƚƐ͕ ĂŶĚ ƉŽůŝĐLJ ĐĂŶ ůĞĂĚ ƚŽ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐ ƐLJƐƚĞŵ͕ ĂŶĚ ŚŽǁ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐ ƐLJƐƚĞŵ ĐĂŶ ƐƵƉƉŽƌƚ ĞĐŽŶŽŵLJͲǁŝĚĞ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ƚŚƌŽƵŐŚ ƚŚĞ ĨƵƌƚŚĞƌ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ŽƚŚĞƌ ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ͘ 7UDQVIRUPLQJ WKH 1DWLRQ¶V OHFWULFLW 6HFWRU 7KH 6HFRQG QVWDOOPHQW RI WKH 4 5 _ -DQXDU 3-1 Chapter III Building a Clean Electricity Future Key Findings for Building a Clean Electricity Future  Deep decarbonization of the electricity system is essential for meeting climate goals this has multiple economic benefits beyond those of environmental responsibility  The United States is the largest producer and consumer of environmental technologies In 2015 the U S environmental technology and services industry employed 1 6 million people had revenues of $320 billion and exported $51 billion worth of goods and services  Though the U S population and economy have grown between 1970 and 2014 aggregate emissions of common air pollutants from the electric power sector dropped 74 percent even as electricity generation grew by 167 percent  U S carbon dioxide CO2 emissions from the power sector have substantially declined Between 2006 and 2014 61 percent of the reductions in CO2 intensity were attributed to switching from coal- to gasfired power generation and 39 percent were attributed to increases in zero-emissions generation  The increasing penetration of zero-carbon variable energy resources VERs and deployment of clean distributed energy resources DERs including energy efficiency are critical components of a U S decarbonization strategy  It is beneficial to a clean electricity system to have many options available as many of the characteristics of clean electricity technologies complement each other  Currently 29 states and Washington D C have a Renewable Portfolio Standard RPS and 23 states have active and binding Energy Efficiency Resource Standards EERSs for electricity States that have actively created and implemented such electricity resource standards and other supporting regulatory policies have seen the greatest growth in renewables and efficiency  The integration of variable renewables increases the need for system flexibility as the grid transitions from controllable generation and variable load to more variable generation and the need and potential for controllable load There are a number of flexibility options such as demand response DR fast ramping natural gas generation and storage  Energy efficiency is a cost-effective component of a clean electricity sector The average levelized cost of saved electricity from energy efficiency programs in the United States is estimated at $46 per megawatt-hour MWh versus the levelized cost of electricity LCOE for natural gas combined-cycle NGCC generation with its sensitivity to fuel prices at $52 to $78 MWh 1  Electricity will likely play a significant role in the decarbonization of other sectors of the U S economy as electrification of transportation heating cooling and industrial applications continues In the context of the Quadrennial Energy Review QER electrification includes both direct use of electricity in end use applications as well as indirect use whereby electricity is used to make intermediate fuels such as hydrogen  Realizing greenhouse gas GHG emissions reductions and other environmental improvements from the electricity system to achieve national goals will require additional policies combined with accelerating technology innovation  Improving understanding of the electricity system and its dynamics through enhancements in data modeling and analysis is needed to provide information to help meet clean objectives most costeffectively  Decades of Federal state and industry innovation investments have significantly contributed to recent cost reductions in renewable energy and energy efficiency technologies  Innovation in generation distribution efficiency and demand response technologies is essential to a low-carbon future Innovation combined with supportive policies can provide the signal needed to accelerate deployment of clean energy technologies providing a policy pull to complement technology push 3-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017  Nuclear power currently provides 60 percent of U S zero-carbon electricity but existing nuclear merchant plants are having difficulty competing in restructured electricity markets due to low natural gas prices and flat or declining electricity demand Since 2013 six nuclear power reactors have shut down earlier than their licensed lifetime and eleven a others have announced plans to close in the next decade In 2016 two states Illinois and New York put policies in place to incentivize the continued operation of existing nuclear plants  Enhanced oil recovery EOR operations in the United States are commercially demonstrated geologic storage and could provide a market pull for the deployment of carbon capture utilization and storage CCUS  Federal laws currently limit the ability of regulated utilities to utilize Federal tax credits in the same manner as private and unregulated developers Publicly owned clean energy projects cannot benefit from the clean energy tax credits because tax equity investors cannot partner directly with tax-exempt entities to monetize tax credits  Low-income and minority communities are disproportionately exposed to air quality and water quality issues associated with electric power generation Compared to the U S population overall there is a greater concentration of minorities living within a three-mile radius of coal- and oil-fired power plants In these same areas the percentage of the population below the poverty line is also higher than the national average  Some energy technologies that reduce GHG emissions such as carbon capture utilization and storage CCUS concentrated solar power CSP and geothermal generation have the potential to increase energy’s water intensity others such as wind and photovoltaic PV solar power can lower it Dry cooling can reduce water intensity but may increase overall GHG emissions by decreasing generation efficiency Though there can be a strong link between energy and water efficiency in energy technologies many research development demonstration and deployment RDD D funding criteria do not incorporate water use or water performance metrics Designing technologies and optimizing operations for improved water performance can have both energy and water benefits  There is currently no centralized permanent-disposal facility for used nuclear fuel in the United States so this radioactive material is stored at reactor sites in 35 states awaiting development of consolidated storage facilities and or geologic repositories  Coal combustion residuals CCRs such as coal ash and scrubber slurry are the second most abundant waste materials in the United States after household waste  There is a range of decommissioning needs for different types of power generation facilities 3 1 Building a Clean Electricity Future tŚŝůĞ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ƚŚĞ ǁŽƌŬŚŽƌƐĞ ŽĨ ŽƵƌ ŵŽĚĞƌŶ ĞĐŽŶŽŵLJ͕ ŝƚ ŝƐ ĂůƐŽ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ŵŽƌĞ ƚŚĂŶ ϯϬ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ŐƌĞĞŶŚŽƵƐĞ ŐĂƐ ;' 'Ϳ ĞŵŝƐƐŝŽŶƐ͘Ϯ ZĞĚƵĐŝŶŐ ' ' ĞŵŝƐƐŝŽŶƐ ŝƐ Ă ŬĞLJ ŝŵƉĞƌĂƚŝǀĞ ĨŽƌ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ͘ tŚĞŶ ĐŽŶƐŝĚĞƌŝŶŐ ƚŚĞ ƐĐĂůĞ ŽĨ ƚŚŝƐ ĐŚĂůůĞŶŐĞ͕ ŝƚ ŝƐ ŝŵƉŽƌƚĂŶƚ ƚŽ ƌĞĐŽŐŶŝnjĞ ƚŚĂƚ ƚŚĞ ƌĞĚƵĐƚŝŽŶ ŽĨ ĂĚǀĞƌƐĞ ƉƵďůŝĐ ŚĞĂůƚŚ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ĨƌŽŵ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĂƐ ďĞĞŶ ŽŶĞ ŽĨ ƚŚĞ ŵĂũŽƌ h͘ ͘ ĞŶǀŝƌŽŶŵĞŶƚĂů ƐƵĐĐĞƐƐ ƐƚŽƌŝĞƐ ŽĨ ƚŚĞ ϮϬƚŚ ĐĞŶƚƵƌLJ͘ ŝŶĐĞ ϭϵϳϬ͕ ĞŵŝƐƐŝŽŶƐ ŽĨ ĐŽŵŵŽŶ Ăŝƌ ƉŽůůƵƚĂŶƚƐ ĨƌŽŵ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ ŚĂǀĞ ĚĞĐƌĞĂƐĞĚ ďLJ ŵŽƌĞ ƚŚĂŶ ŚĂůĨ͘ϯ Ŷ ƚŚĞ ŶĞĂƌ ƚĞƌŵ͕ ĐĂƌďŽŶ ĚŝŽdžŝĚĞ ; KϮͿ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ ĞŶĞƌŐLJ ƐĞĐƚŽƌ ĨĞůů ďLJ ϭϬ ƉĞƌĐĞŶƚ ĨƌŽŵ ϮϬϬϴ ƚŽ ϮϬϭϱ͕ ǁŚŝůĞ ƚŚĞ ĞĐŽŶŽŵLJ ŐƌĞǁ ďLJ ŵŽƌĞ ƚŚĂŶ ϭϬ ƉĞƌĐĞŶƚ ŽǀĞƌ ƚŚŝƐ ƐĂŵĞ ƉĞƌŝŽĚ͘ϰ dŚŝƐ ƐƵĐĐĞƐƐ ŝƐ ĞǀĞŶ ŵŽƌĞ ŶŽƚĂďůĞ ďĞĐĂƵƐĞ ŝƚ ŽĐĐƵƌƌĞĚ ŝŶ ĐŽŶũƵŶĐƚŝŽŶ ǁŝƚŚ ŝŶĐƌĞĂƐĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƐŝŐŶŝĨŝĐĂŶƚ͕ ƐƵƐƚĂŝŶĞĚ ĞĐŽŶŽŵŝĐ ŐƌŽǁƚŚ͘ ƌĞĐĞŶƚ ƉŽůů ŶŽƚĞĚ ƚŚĂƚ “73% of voters support a national energy policy that ensures a secure supply of abundant affordable and available energy for the American people in an environmentally responsible manner ”ϱ Ă EŽƚĞ ƚŚĂƚ Ɛŝdž ŽĨ ƚŚĞƐĞ ƌĞĂĐƚŽƌƐ ;ƚŚĞ EĞǁ zŽƌŬ ĂŶĚ ůůŝŶŽŝƐ ƌĞĂĐƚŽƌƐͿ ĂƌĞ ĞdžƉĞĐƚĞĚ ƚŽ ƌĞŵĂŝŶ ŽƉĞŶ ǁŝƚŚ ƚŚĞ ƉĂƐƐĂŐĞ ŽĨ ůĞĂŶ ŶĞƌŐLJ ƚĂŶĚĂƌĚƐ ; ƐͿ ŝŶ ƚŚŽƐĞ ƐƚĂƚĞƐ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-3 Chapter III Building a Clean Electricity Future dŚĞ ǀŝĞǁƐ ŽĨ ƚŚĞ ƌĞƐƉŽŶĚĞŶƚƐ ŝŶ ƚŚŝƐ ƉŽůů ƐƵŐŐĞƐƚ ƚŚĂƚ ƚŚĞ ŵĞƌŝĐĂŶ ƉĞŽƉůĞ ĚŽ ŶŽƚ ǀŝĞǁ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ŽƚŚĞƌ ŐŽĂůƐ ƚŽ ďĞ ŝŶ ĐŽŶĨůŝĐƚ͖ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ĐŽŶƐŝƐƚĞŶƚůLJ ďĞĞŶ ĂďůĞ ƚŽ ŵĂŶĂŐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉŽůůƵƚŝŽŶ ǁŚŝůĞ ĂůƐŽ ŵĂŝŶƚĂŝŶŝŶŐ ĞůĞĐƚƌŝĐ ƌĞůŝĂďŝůŝƚLJ͕ ŐƌŽǁŝŶŐ ƚŚĞ ĞĐŽŶŽŵLJ͕ ĂŶĚ ƐƵƉƉŽƌƚŝŶŐ ŵŝůůŝŽŶƐ ŽĨ ũŽďƐ͘ ŶĂďůŝŶŐ Ă ĐůĞĂŶ͕ ĨůĞdžŝďůĞ͕ ƌĞůŝĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ǁŝůů ƌĞƋƵŝƌĞ ĐŽŶƚŝŶƵŽƵƐ ĐŽƐƚ ƌĞĚƵĐƚŝŽŶƐ ĂŶĚ ŝŵƉƌŽǀĞĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dŚĞƌĞ ĂƌĞ ŵƵůƚŝƉůĞ ĂǀĞŶƵĞƐ ĨŽƌ ŝŵƉƌŽǀŝŶŐ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ďLJ ďƵŝůĚŝŶŐ ŽŶ ƉĂƐƚ ƐƵĐĐĞƐƐĞƐ͘ ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ƐLJƐƚĞŵ ĐĂŶ ďĞ ĂĐŚŝĞǀĞĚ ƚŚƌŽƵŐŚ Ă ĐŽŵďŝŶĂƚŝŽŶ ŽĨ ƚĞĐŚŶŽůŽŐŝĐĂů ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ͕ ŶĂƚŝŽŶĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ƉŽůŝĐLJ͕ ŝŶŶŽǀĂƚŝǀĞ ƐƚĂƚĞ ƉŽůŝĐLJ͕ ĂŶĚ ĨŝŶĂŶĐŝĂů ŵĞĐŚĂŶŝƐŵƐ͘ dŚĞƐĞ ĨŝŶĚŝŶŐƐ ĂƌĞ ƐƵƉƉŽƌƚĞĚ ďLJ ĚĞƚĂŝůĞĚ ŵŽĚĞůŝŶŐ ŽĨ ƐĐĞŶĂƌŝŽƐ ĨŽƌ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ǁŚŝĐŚ ĚĞŵŽŶƐƚƌĂƚĞƐ ƚŚĞ ƌŽůĞ ŽĨ ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ĞĨĨĞĐƚŝǀĞ ƉŽůŝĐLJ ŝŶ ŝŵƉƌŽǀŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ŽƵƚĐŽŵĞƐ͘ dŚĞ ĐŚĂƉƚĞƌ ĂůƐŽ ĞdžĂŵŝŶĞƐ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ĨƵƌƚŚĞƌ ƌĞĚƵĐŝŶŐ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŽŶ Ăŝƌ ĂŶĚ ǁĂƚĞƌ͕ ĂƐ ǁĞůů ĂƐ ŵŝƚŝŐĂƚŝŶŐ ƌĞůĞǀĂŶƚ ůĂŶĚ ƵƐĞ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ũƵƐƚŝĐĞ ŝƐƐƵĞƐ ĂĨĨĞĐƚŝŶŐ ůŽĐĂů ĐŽŵŵƵŶŝƚŝĞƐ͘ dŚĞƌĞ ĂƌĞ͕ ŚŽǁĞǀĞƌ͕ ŽŶŐŽŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ƚŚĂƚ ŵĞƌŝƚ ƐƵƐƚĂŝŶĞĚ ƉŽůŝĐLJ ĂŶĚ ƌĞŐƵůĂƚŽƌLJ ĨŽĐƵƐ ĂŶĚ ƐƵƉƉŽƌƚ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͖ ǁĂƚĞƌ ƵƐĞ ĨŽƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͖ ůĂŶĚ ƵƐĞ ŝŵƉĂĐƚƐ ŽĨ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͖ ĞŶǀŝƌŽŶŵĞŶƚĂů ũƵƐƚŝĐĞ ŝƐƐƵĞƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ͖ ĂŶĚ ĚĞĐŽŵŵŝƐƐŝŽŶŝŶŐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĂƐƐĞƚƐ͘ dŽĚĂLJ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ďƵŝůĚ ŽŶ ŝƚƐ ƐƵďƐƚĂŶƚŝĂů ĞdžƉĞƌŝĞŶĐĞ ŽĨ ũŽŝŶƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ĞĐŽŶŽŵŝĐ ƐƵĐĐĞƐƐ ƚŽ ĂĚĚƌĞƐƐ ƚŚĞ ĐĞŶƚƌĂů ĐŚĂůůĞŶŐĞ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŵŝƚŝŐĂƚŝŽŶ͕ ĂůŽŶŐ ǁŝƚŚ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŚĂůůĞŶŐĞƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ĚŝƐƚƌŝďƵƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĐŽŶƐƵŵƉƚŝŽŶ͘ 3 2 CO2 Emissions and the Electricity System dŚĞ ŐƌŽǁƚŚ ŝŶ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ŚĂƐ ŐƌĂĚƵĂůůLJ ƐůŽǁĞĚ ĨƌŽŵ ϵ͘ϴ ƉĞƌĐĞŶƚ ƉĞƌ LJĞĂƌ ŝŶ ƚŚĞ ϭϵϱϬƐ ƚŽ Ϭ͘ϱ ƉĞƌĐĞŶƚ ƉĞƌ year over the past decade due in part to “slowing population growth market saturation ŽĨ ŵĂũŽƌ ĞůĞĐƚƌŝĐŝƚLJͲƵƐŝŶŐ ĂƉƉůŝĂŶĐĞƐ͕ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ĂƉƉůŝĂŶĐĞƐ͕ ĂŶĚ Ă ƐŚŝĨƚ ŝŶ ƚŚĞ ĞĐŽŶŽŵLJ ƚŽǁĂƌĚ Ă ůĂƌŐĞƌ ƐŚĂƌĞ ŽĨ ĐŽŶƐƵŵƉƚŝŽŶ ŝŶ ůĞƐƐ ĞŶĞƌŐLJͲŝŶƚĞŶƐŝǀĞ industries ”ϲ͕ ϳ Ŷ ϮϬϭϰ͕ ĞůĞĐƚƌŝĐŝƚLJ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϯϵ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ď dŚĞ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ƐĞĐƚŽƌƐ ĞĂĐŚ ĐŽŶƐƵŵĞĚ ĂďŽƵƚ ƚŚĞ ƐĂŵĞ ƐŚĂƌĞ ŽĨ ƚŽƚĂů ĞůĞĐƚƌŝĐŝƚLJ—ϯϳ ƉĞƌĐĞŶƚ ĂŶĚ ϯϲ ƉĞƌĐĞŶƚ͕ ƌĞƐƉĞĐƚŝǀĞůLJ—ǁŝƚŚ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ Ϯϲ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ͘ ůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŝŶ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ ǁĂƐ ŵŝŶŝŵĂů͕ ĐŽŶƐƚŝƚƵƚŝŶŐ ůĞƐƐ ƚŚĂŶ ϭ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ϴ ůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŐƌŽǁ ƐůŽǁůLJ͕ ĂŶĚ ŝƚƐ ƐŚĂƌĞ ŽĨ ƚŽƚĂů ĚĞůŝǀĞƌĞĚ h͘ ͘ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ŽŶůLJ ƐůŝŐŚƚůLJ ďLJ ϮϬϰϬ͘Đ͕ Ě͕ ϵ ůĞĐƚƌŝĐ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ůĂƌŐĞƐƚ ƐŽƵƌĐĞƐ ŽĨ KϮ ĞŵŝƐƐŝŽŶƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϭϬ KǀĞƌ ϵϵ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ' ' ĞŵŝƐƐŝŽŶƐ ĂƚƚƌŝďƵƚĞĚ ƚŽ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ĂƌĞ ƚŚĞ ƌĞƐƵůƚ ŽĨ ƚŚĞ ĐŽŵďƵƐƚŝŽŶ ŽĨ ĨŽƐƐŝů ĨƵĞůƐ ĨŽƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͘ Ŷ ϮϬϭϰ͕ KϮ ĨƌŽŵ ĐŽĂů ĐŽŵďƵƐƚŝŽŶ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ŽǀĞƌ ƚŚƌĞĞͲƋƵĂƌƚĞƌƐ ŽĨ h͘ ͘ ƉŽǁĞƌͲƐĞĐƚŽƌ ' ' ĞŵŝƐƐŝŽŶƐ͕ ǁŚŝůĞ KϮ ĨƌŽŵ ƚŚĞ ĐŽŵďƵƐƚŝŽŶ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ĐŽŶƚƌŝďƵƚĞĚ ĂƉƉƌŽdžŝŵĂƚĞůLJ Ϯϭ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ƉŽǁĞƌͲƐĞĐƚŽƌ ' ' ĞŵŝƐƐŝŽŶƐ͘ϭϭ͕ ϭϮ dŚĞ ĞŵŝƐƐŝŽŶ rate—ƚŚĞ ĂŵŽƵŶƚ ŽĨ KϮ ĞŵŝƚƚĞĚ ƉĞƌ ƵŶŝƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚĞĚ—ŝƐ Ă ŬĞLJ ŝŶĚŝĐĂƚŽƌ ŽĨ ƚŚĞ ĐůŝŵĂƚĞ ŝŵƉĂĐƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ǀĂƌŝĞƐ ƐŝŐŶŝĨŝĐĂŶƚůLJ ďLJ ĨƵĞů ĂŶĚ ƚĞĐŚŶŽůŽŐLJ͘ dŚĞ ĐƵƌƌĞŶƚ͕ ĂǀĞƌĂŐĞ ĞŵŝƐƐŝŽŶ ƌĂƚĞ ŽĨ E' ƉůĂŶƚƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ď ϯϴ͘ϰ ƋƵĂĚƐ ǁĞƌĞ ƵƐĞĚ ƚŽ ŐĞŶĞƌĂƚĞ ϯ͕ϵϬϬ ƚĞƌĂǁĂƚƚŚŽƵƌƐ ;dtŚͿ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ͘ dŽƚĂů ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝŶ ϮϬϭϰ ǁĂƐ ϵϴ͘ϯ ƋƵĂĚƐ͘ Đ ĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ W ĂƐĞ ĂƐĞ͕ ǁŚŝĐŚ ŝŶĐŽƌƉŽƌĂƚĞƐ Ăůů ĞdžŝƐƚŝŶŐ h͘ ͘ ƉŽůŝĐŝĞƐ ďƵƚ ĂƐƐƵŵĞƐ ŶŽ ŶĞǁ ƉŽůŝĐŝĞƐ͕ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŐƌŽǁ Ăƚ ĂŶ ĂŶŶƵĂů ƌĂƚĞ ŽĨ Ϭ͘ϲϱ ƉĞƌĐĞŶƚ ďĞƚǁĞĞŶ ϮϬϭϰ ĂŶĚ ϮϬϰϬ͘ Ŷ ƚĞƌŵƐ ŽĨ ĚĞůŝǀĞƌĞĚ ĞŶĞƌŐLJ͕ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚor’s ƐŚĂƌĞ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ĨƌŽŵ ϭϴ ƉĞƌĐĞŶƚ ŝŶ ϮϬϭϰ ƚŽ ϭϵ ƉĞƌĐĞŶƚ ŝŶ ϮϬϰϬ͕ ĂŶĚ ŽǀĞƌĂůů ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ĨƌŽŵ ϭϮ͘ϳϲ ƚŽ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϭϱ ƋƵĂĚƌŝůůŝŽŶ ƌŝƚŝƐŚ ƚŚĞƌŵĂů ƵŶŝƚƐ ;ƋƵĂĚƐͿ͘ Ě Ŷ ƚĞƌŵƐ ŽĨ ƚŽƚĂů ƉƌŝŵĂƌLJ ;Žƌ ƐŽƵƌĐĞͿ ĞŶĞƌŐLJ͕ ƚŚĞ ĞůĞĐƚƌŝĐ ƐĞĐƚŽr’s share is projected to increase from 13 percent in 2014 to 14 ƉĞƌĐĞŶƚ ŝŶ ϮϬϰϬ͕ ĂĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ W ĂƐĞ ĂƐĞ͕ ǁŚŝĐŚ ŝŶĐŽƌƉŽƌĂƚĞƐ Ăůů ĞdžŝƐƚŝŶŐ h͘ ͘ ƉŽůŝĐŝĞƐ ďƵƚ ĂƐƐƵŵĞƐ ŶŽ ŶĞǁ ƉŽůŝĐŝĞƐ͘ 3-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƚĂƚĞƐ ŝƐ ϲϬ ƉĞƌĐĞŶƚ ůĞƐƐ ƚŚĂŶ ƚŚĂƚ ŽĨ ĂǀĞƌĂŐĞ ĐŽĂůͲĨŝƌĞĚ ƉůĂŶƚƐ͘ϭϯ͕ϭϰ EƵĐůĞĂƌ ƉŽǁĞƌ ĂŶĚ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĂǀĞ ŶŽ ĚŝƌĞĐƚ ĞŵŝƐƐŝŽŶƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ ůĞĐƚƌŝĐ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ƉƌŽǀŝĚĞƐ ƐĞƌǀŝĐĞ ƚŽ ĞŶĚͲƵƐĞ ĞĐŽŶŽŵŝĐ ƐĞĐƚŽƌƐ͘ tŚĞŶ ĂƚƚƌŝďƵƚŝŶŐ ĐƵƌƌĞŶƚ h͘ ͘ ƉŽǁĞƌͲƐĞĐƚŽƌ ' ' ĞŵŝƐƐŝŽŶƐ ƚŽ ĞŶĚͲƵƐĞ ĞĐŽŶŽŵŝĐ ƐĞĐƚŽƌƐ͕ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ŝƐ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ĂƉƉƌŽdžŝŵĂƚĞůLJ Ϯϲ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ĞŵŝƐƐŝŽŶƐ͕ ĂŶĚ ƚŚĞ ƌĞŵĂŝŶĚĞƌ ŝƐ ƐƉůŝƚ ĞǀĞŶůLJ ďĞƚǁĞĞŶ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ƐĞĐƚŽƌƐ͕ Ăƚ ϯϲ ƉĞƌĐĞŶƚ ĂŶĚ ϯϱ ƉĞƌĐĞŶƚ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͘Ğ͕ ϭϱ dŚŝƐ ƐĞĐƚŽƌĂů ĂƚƚƌŝďƵƚŝŽŶ ŚŝŐŚůŝŐŚƚƐ Ă ĚƵĂů ƉĂƚŚǁĂLJ ĨŽƌ ƌĞĚƵĐŝŶŐ ƚŽƚĂů ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ͗ ;ϭͿ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŝƚƐĞůĨ͕ ĂŶĚ ;ϮͿ ĞůĞĐƚƌŝĐŝƚLJ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ǁŝƚŚŝŶ ƚŚĞ ĞŶĚͲƵƐĞ ĞĐŽŶŽŵŝĐ ƐĞĐƚŽƌƐ͘ 3 2 1 Decarbonization of the Electricity System ĨƚĞƌ Ă ŐƌĂĚƵĂů ĚĞĐůŝŶĞ ĨƌŽŵ ϭϵϳϬ ƚŽ ϮϬϬϱ͕ ƚŚĞ KϮ ĞŵŝƐƐŝŽŶ ƌĂƚĞ ;ŬŝůŽŐƌĂŵƐ ŽĨ KϮͬDtŚͿ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĨĞůů ƚŽ ϮϬ͘ϵ ƉĞƌĐĞŶƚ ďĞůŽǁ ϮϬϬϱ ůĞǀĞůƐ ŝŶ ϮϬϭϱ͘ϭϲ Figure 3-1 Trend Lines in Emissions Drivers 2005–201517 18 19 The population growth per capita gross domestic product GDP and electricity intensity of the economy all factor into total U S electricity demand While growth in population and per capita GDP has placed upward pressure on power-sector demand this growth has been partially offset by a decline in the electricity intensity of the economy ůŽǁ ŐƌŽǁƚŚ ŝŶ ƉĞƌ ĐĂƉŝƚĂ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ͕ ŐƌĞĂƚĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ ;ŵĞĂƐƵƌĞĚ ŝŶ ĚŽůůĂƌƐ ŽĨ ŐƌŽƐƐ ĚŽŵĞƐƚŝĐ ƉƌŽĚƵĐƚ ΀' W΁ ƉĞƌ ŬŝůŽǁĂƚƚͲŚŽƵƌ ΀ŬtŚ΁ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͿ͕ ĂŶĚ Ă ĚĞĐůŝŶĞ ŝŶ ƚŚĞ KϮ ĞŵŝƐƐŝŽŶ Ğ dŚĞ ƌĞŵĂŝŶŝŶŐ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ĞŵŝƐƐŝŽŶƐ ĂƌĞ ĨƌŽŵ ŽƚŚĞƌ ƐĞĐƚŽƌƐ ƚŚĂƚ ĂĐĐŽƵŶƚ ĨŽƌ ŵŝŶŽƌ ĂŵŽƵŶƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ĞŵŝƐƐŝŽŶƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŝŶĐůƵĚŝŶŐ ĂŐƌŝĐƵůƚƵƌĞ ;ϯ ƉĞƌĐĞŶƚͿ ĂŶĚ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ;Ϭ͘Ϯ ƉĞƌĐĞŶƚͿ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-5 Chapter III Building a Clean Electricity Future ƌĂƚĞ ĨƌŽŵ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĂǀĞ ĂůƌĞĂĚLJ ŚĞůƉĞĚ ĚĞĐŽƵƉůĞ ĞĐŽŶŽŵŝĐ ŐƌŽǁƚŚ ĨƌŽŵ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ;ĂŶĚ͕ ĐŽŶƐĞƋƵĞŶƚůLJ͕ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ–ƌĞůĂƚĞĚ KϮ ĞŵŝƐƐŝŽŶƐͿ͘ϮϬ h͘ ͘ ƉŽǁĞƌͲƐĞĐƚŽƌ KϮ ĞŵŝƐƐŝŽŶƐ ŚĂǀĞ ĚĞĐůŝŶĞĚ ĞǀĞŶ ǁŚŝůĞ ƚŚĞ ƉŽƉƵůĂƚŝŽŶ ĂŶĚ ƚŚĞ ĞĐŽŶŽŵLJ ŚĂǀĞ ŐƌŽǁŶ͘ Ɛ ƐŚŽǁŶ ŝŶ ŝŐƵƌĞ ϯͲ ϭ͕ ďĞƚǁĞĞŶ ϮϬϬϱ ĂŶĚ ϮϬϭϱ͕ ƚŚĞ h͘ ͘ ' W ŐƌĞǁ ďLJ ϭϰ͘ϴ ƉĞƌĐĞŶƚ͕ ĂŶĚ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞĚ ƉĞƌ ĚŽůůĂƌ ŽĨ ' W ĚĞĐůŝŶĞĚ ďLJ ϭϮ ƉĞƌĐĞŶƚ ĚƵĞ ƚŽ ŐƌĞĂƚĞƌ ĞĐŽŶŽŵŝĐ ƉƌŽĚƵĐƚŝǀŝƚLJ ƉĞƌ ŬtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞĚ͘ Ɛ ƐŚŽǁŶ ŝŶ ŝŐƵƌĞ ϯͲϮ͕ ĞŶĞƌŐLJͲƌĞůĂƚĞĚ KϮ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ƌĞĐĞŶƚ ŚŝƐƚŽƌLJ ŚĂǀĞ ŽĐĐƵƌƌĞĚ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ ůĂƌŐĞůLJ ďĞĐĂƵƐĞ ŽĨ ƚŚĞ ĚĞĐƌĞĂƐĞĚ ƵƐĞ ŽĨ ĐŽĂů ĂŶĚ ƚŚĞ ŝŶĐƌĞĂƐĞĚ ƵƐĞ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ 3-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-2 U S Energy-Related CO2 Emissions 2005–2015 top and Change in U S EnergyRelated CO2 Emissions by Sector 2005–2015 bottom 21 22 After increasing in 2013 and in 2014 energy-related CO2 emissions fell in 2015 In 2015 U S energyrelated CO2 emissions were 12 percent below the 2005 levels mostly because of changes in the electric power sector Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƚŚĞƐĞ ŵĂƌŬĞƚ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ƚƌĞŶĚƐ͕ Ă ǁŝĚĞ ĂƌƌĂLJ ŽĨ ƉŽůŝĐŝĞƐ ĂŶĚ ŵĞĂƐƵƌĞƐ ĚĞǀĞůŽƉĞĚ ĂŶĚ ŝŵƉůĞŵĞŶƚĞĚ Ăƚ ƚŚĞ ĞĚĞƌĂů͕ ƐƚĂƚĞ͕ ĂŶĚ ůŽĐĂů ůĞǀĞůƐ ŚĂǀĞ ŚĞůƉĞĚ ƚŽ ŵŝƚŝŐĂƚĞ ' ' ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ h͘ ͘ ƉŽǁĞƌ ƐĞĐƚŽƌ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ƉĞƌĨŽƌŵĂŶĐĞͲďĂƐĞĚ ƌĞŐƵůĂƚŝŽŶƐ ĂŶĚ ƐƚĂŶĚĂƌĚƐ͕ ĞĐŽŶŽŵŝĐ ŝŶƐƚƌƵŵĞŶƚƐ͕ ŝŶĨŽƌŵĂƚŝŽŶ ƉƌŽŐƌĂŵƐ͕ ĂŶĚ ĚŝĨĨƵƐŝŽŶ ŽĨ ŬĞLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĨƌŽŵ ƌŽďƵƐƚ Z Θ ŝŶǀĞƐƚŵĞŶƚƐ͘ DĂŶLJ ƉŽůŝĐLJ ĂƉƉƌŽĂĐŚĞƐ ĐƌŽƐƐ ƚŚĞƐĞ ĐĂƚĞŐŽƌŝĞƐ͘ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ĞŵŝƐƐŝŽŶƐ ƚƌĂĚŝŶŐ ƉƌŽŐƌĂŵƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ĐŽŵďŝŶĞ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-7 Chapter III Building a Clean Electricity Future ƉĞƌĨŽƌŵĂŶĐĞͲďĂƐĞĚ ƌĞŐƵůĂƚŝŽŶ ǁŝƚŚ ƚƌĂĚŝŶŐ ŽĨ ŵĂƌŬĞƚĂďůĞ ĐƌĞĚŝƚƐ Žƌ ĂůůŽǁĂŶĐĞƐ͕ ƚŚĞ ůĂƚƚĞƌ ŽĨ ǁŚŝĐŚ ĂƌĞ ĞĐŽŶŽŵŝĐ ŝŶƐƚƌƵŵĞŶƚƐ͘ hƉŐƌĂĚŝŶŐ ĂŶĚ ŝŶǀĞƐƚŝŶŐ ŝŶ ƚŚĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐLJƐƚĞŵ ŝƐ ŽŶĞ ĐƌŝƚŝĐĂů ŵĞĂƐƵƌĞ ƚŚĂƚ ĐŽƵůĚ ŚĂǀĞ ĨĂƌͲƌĞĂĐŚŝŶŐ ŝŵƉĂĐƚƐ ĨŽƌ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ͕ ĐŽƵůĚ ŝŶĐƌĞĂƐĞ ƐLJƐƚĞŵ ĨůĞdžŝďŝůŝƚLJ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ͕ ĂŶĚ ƐĂǀĞ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵĞƌƐ ĂƐ ŵƵĐŚ ĂƐ Ψϰϳ ďŝůůŝŽŶ ĂŶŶƵĂůůLJ͘Ϯϯ ŵŽĚĞƌŶŝnjĞĚ ĂŶĚ ĞdžƉĂŶĚĞĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐLJƐƚĞŵ ŚĂƐ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ŝŶƚĞƌĐŽŶŶĞĐƚ ĐůĞĂŶ ŐĞŶĞƌĂƚŝŽŶ ;ĨŽƌ ďŽƚŚ ƐŚŽƌƚ ĚŝƐƚĂŶĐĞƐ ĂƐ ǁĞůů ĂƐ ĐŽŶŶĞĐƚŝŶŐ ƌĞŵŽƚĞ ĐůĞĂŶ ŐĞŶĞƌĂƚŝŽŶ ƐŽƵƌĐĞƐ ƚŽ ƉŽƉƵůĂƚŝŽŶ ĐĞŶƚĞƌƐ͕ ǁŚŝůĞ ĂůƐŽ ĞŶŚĂŶĐŝŶŐ Ă ŶĂƚŝŽŶĂů ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚ ŝŶ ǁŚŝĐŚ Ăůů ĞŶĞƌŐLJ ĂƐƐĞƚƐ ĐĂŶ ĨĂŝƌůLJ ĐŽŵƉĞƚĞ͘ ƚĂƚĞ ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ŐŽĂůƐ ĂƌĞ ĂůƐŽ ĨĂĐŝůŝƚĂƚĞĚ ƚŚƌŽƵŐŚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƵƉŐƌĂĚĞƐ͕ ĂŶ ĞdžĂŵƉůĞ ďĞŝŶŐ ƚŚĞ EĞǁ zŽƌŬ ŶĚĞƉĞŶĚĞŶƚ LJƐƚĞŵ KƉĞƌĂƚŽƌ ; KͿ͕ ǁŚŝĐŚ ŝƐ ůŽŽŬŝŶŐ ƚŽ ŵĂŬĞ ŵŽƌĞ ĞĨĨĞĐƚŝǀĞ ƵƐĞ ŽĨ ƌƵƌĂůůLJ ůŽĐĂƚĞĚ ǁŝŶĚ ĂŶĚ ŚLJĚƌŽƉŽǁĞƌ ƌĞƐŽƵƌĐĞƐ ďLJ ĐŽŶŶĞĐƚŝŶŐ ƚŚĞŵ ǁŝƚŚ ŚŝŐŚ ĞůĞĐƚƌŝĐŝƚLJͲĚĞŵĂŶĚ ĐĞŶƚĞƌƐ ůŝŬĞ EĞǁ zŽƌŬ ŝƚLJ͘Ϯϰ ƚ ĐĂŶ ďĞ ĐŚĂůůĞŶŐŝŶŐ ƚŽ ĞǀĂůƵĂƚĞ ǁŚĞƚŚĞƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉŽůŝĐŝĞƐ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ ĂƌĞ ƐŝŵƵůƚĂŶĞŽƵƐůLJ ĂĐŚŝĞǀŝŶŐ ƚŚĞŝƌ ŝŶƚĞŶĚĞĚ ƌĞůŝĂďŝůŝƚLJ ďĞŶĞĨŝƚƐ ŝŶ ƚŚĞ ĨĂĐĞ ŽĨ ƵŶƉƌĞĐĞĚĞŶƚĞĚ ƉŚLJƐŝĐĂů ĐŚĂŶŐĞ͕ ĂŶĚ ĂƌĞ ƉƌŽǀŝĚŝŶŐ ĂĚĞƋƵĂƚĞ ĐĂƉĂĐŝƚLJ ƚŽ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞůLJ ĂĚĚƌĞƐƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƋƵŝƌĞŵĞŶƚƐ͘ ƵĐŚ ĞǀĂůƵĂƚŝŽŶ ƌĞƋƵŝƌĞƐ ŶĞǁ ĂŶĂůLJƐĞƐ͕ ďƵƚ ĨŽƌ ƚŚŽƐĞ ĂŶĂůLJƐĞƐ ƚŽ ďĞ ǀĂůŝĚ͕ ĚĂƚĂ ǁŝƚŚ ŐƌĞĂƚĞƌ ƐĐŽƉĞ͕ ĨƌĞƋƵĞŶĐLJ͕ ĂŶĚ ƌĞƐŽůƵƚŝŽŶ ŵƵƐƚ ďĞ ŵĂĚĞ ĂǀĂŝůĂďůĞ͘ džƉĂŶĚĞĚ ƚƌĂŶƐŵŝƐƐŝŽŶ ĚĂƚĂ ƌĞƐŽƵƌĐĞƐ ǁŝůů ĨĂĐŝůŝƚĂƚĞ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ĞĨĨĞĐƚŝǀĞ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐŝĞƐ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ ƚŚĂƚ ǁŝůů ĂĨĨĞĐƚ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŐŽĂůƐ͕ ŐŝǀĞ ƚŚŽƐĞ ƚŚĂƚ ŝŶǀĞƐƚ ŝŶ ƚŚĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ƐLJƐƚĞŵ ŝŶƐŝŐŚƚƐ ŝŶƚŽ ƉŽƚĞŶƚŝĂů ďƵƐŝŶĞƐƐ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͕ ĂŶĚ ƉƌŽǀŝĚĞ Ă ďƌŽĂĚ ƌĂŶŐĞ ŽĨ ƐƚĂŬĞŚŽůĚĞƌƐ ǁŝƚŚ Ă ŐƌĞĂƚĞƌ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ŽĨ ƚŚĞ ĨĂŝƌŶĞƐƐ ŽĨ ŽƉĞƌĂƚŝŽŶƐ ŝŶ ƉƌŽǀŝĚŝŶŐ ŶŽŶͲĚŝƐĐƌŝŵŝŶĂƚŽƌLJ ĂĐĐĞƐƐ͘ dŚĞ ĞĚĞƌĂů ŶĞƌŐLJ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ ; Z Ϳ ŚĂƐ ƌĞĐŽŐŶŝnjĞĚ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚƌĂŶƐŵŝƐƐŝŽŶ ŝŶ Ă ĐůĞĂŶ ĨƵƚƵƌĞ ĂŶĚ ǁŽƌŬĞĚ ƚŽ ĞdžƉĞĚŝƚĞ ƚŚĞ ĐŽŶƚƌŝďƵƚŝŽŶ ŽĨ ƚƌĂŶƐŵŝƐƐŝŽŶ ƚŚƌŽƵŐŚ Z KƌĚĞƌ EŽƐ͘ ϴϵϬ ĂŶĚ ϭϬϬϬ͘ KƌĚĞƌ EŽ͘ ϴϵϬ ;ϮϬϬϳͿ ƌĞƋƵŝƌĞĚ ƚŚĂƚ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉůĂŶŶŝŶŐ ďĞ ŽƉĞŶ ƚŽ ƐƚĂŬĞŚŽůĚĞƌƐ͘ KƌĚĞƌ EŽ͘ ϭϬϬϬ ;ϮϬϭϭͿ ĂĚĚĞĚ ŝŶƚĞƌƌĞŐŝŽŶĂů ĐŽŽƌĚŝŶĂƚŝŽŶ͕ ĐŽŵƉĞƚŝƚŝŽŶ ĂŵŽŶŐ ƚƌĂŶƐŵŝƐƐŝŽŶ ŽǁŶĞƌƐ͕ ĂŶĚ ĐŽƐƚ ĂůůŽĐĂƚŝŽŶ ƌĞĨŽƌŵ͘ KƌĚĞƌ EŽ͘ ϭϬϬϬ ĂůƐŽ ĞŶĂďůĞƐ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉƌŽũĞĐƚƐ ƚŚĂƚ ƐƵƉƉŽƌƚ ƉƵďůŝĐ ƉŽůŝĐLJ ŐŽĂůƐ͕ ƐƵĐŚ ĂƐ ŵŽǀŝŶŐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĨƌŽŵ ĚŝƐƚĂŶƚ ƐŽƵƌĐĞƐ ƚŽ ůŽĂĚ ĐĞŶƚĞƌƐ͕ ƚŽ ďĞ ĨĂĐŝůŝƚŝĞƐ ǁŝƚŚ ŝŶĐŽŵĞ ƚŚĂƚ ŝƐ ƐƵďũĞĐƚ ƚŽ Z ƌĞŐƵůĂƚŽƌLJ ĂƵƚŚŽƌŝƚLJ͘ ƋƵŝƚĂďůĞ ĐŽƐƚ ĂůůŽĐĂƚŝŽŶ ĂŵŽŶŐ ĐƵƐƚŽŵĞƌ ďĞŶĞĨŝĐŝĂƌŝĞƐ͕ ĞƐƉĞĐŝĂůůLJ ĨŽƌ ůĂƌŐĞƌ ĂŶĚ ŝŶƚĞƌƌĞŐŝŽŶĂů ƚƌĂŶƐŵŝƐƐŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ͕ ŝƐ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĐŚĂůůĞŶŐĞ ŝŶ ƚŚĞ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ ƚŚĞ Z KƌĚĞƌ EŽ͘ ϭϬϬϬ ƌĞŐŝŽŶĂů ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐ͘ ŝĨĨĞƌŝŶŐ ƌĞŐŝŽŶĂů ĂƉƉƌŽĂĐŚĞƐ ƚŽ ŵĞĞƚŝŶŐ Z KƌĚĞƌ EŽ͘ ϭϬϬϬ ƉƌŝŶĐŝƉůĞƐ ĨŽƌ ϰĐŽƐƚ ĂůůŽĐĂƚŝŽŶ—particularly the definition of “beneficiary”—ŚĂǀĞ ŵĂĚĞ ƚŚĞ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ KƌĚĞƌ EŽ͘ ϭϬϬϬ ĐŽŵƉůĞdž͘ dŚĞ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ Z KƌĚĞƌ EŽ͘ ϭϬϬϬ ƌĞŐŝŽŶĂů ĐŽƐƚ ĂůůŽĐĂƚŝŽŶ ƉƌŝŶĐŝƉůĞƐ ŝƐ ƌĞůĂƚŝǀĞůLJ ŶĞǁ͕ ƐŽ ŝƚ ŝƐ ŚĂƌĚ ƚŽ ĂƐƐĞƐƐ ƚŚĞ ĞĨĨĞĐƚŝǀĞŶĞƐƐ ŽĨ ƚŚĞ ƉƌŽĐĞƐƐ ƚŽ ĚĂƚĞ ŝŶ ĂĐŚŝĞǀŝŶŐ ƉƵďůŝĐ ƉŽůŝĐLJ ŐŽĂůƐ͘ 'ŽŝŶŐ ĨŽƌǁĂƌĚ͕ ŵŽƌĞ ƐLJƐƚĞŵĂƚŝĐ ŵŽŶŝƚŽƌŝŶŐ ŽĨ ĂĐƚŝǀŝƚŝĞƐ ĂŶĚ ƐLJƐƚĞŵĂƚŝĐ ĚĂƚĂ ĐŽůůĞĐƚŝŽŶ ǁŝůů ďĞ ŶĞĞĚĞĚ ƚŽ ĂƐƐĞƐƐ ǁŚĞƚŚĞƌ KƌĚĞƌ EŽƐ͘ ϴϵϬ ĂŶĚ ϭϬϬϬ ĂƌĞ ĂĐŚŝĞǀŝŶŐ ƚŚĞŝƌ ŐŽĂůƐ͘ 3 2 2 Low and Zero-Carbon Power Generation ĐŽŶƐŝƐƚĞŶƚ ƚŚĞŵĞ ĨƌŽŵ Ă ǀĂƐƚ ďŽĚLJ ŽĨ ĐůŝŵĂƚĞ ƐĐŝĞŶĐĞ ƌĞƐĞĂƌĐŚ ƐƵŐŐĞƐƚƐ ƚŚĂƚ ĚĞĞƉĞƌ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŝƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ƌĞĚƵĐĞ ĞŵŝƐƐŝŽŶƐ ƐƵĨĨŝĐŝĞŶƚůLJ ƚŽ ŵŝŶŝŵŝnjĞ ƚŚĞ ŵŽƐƚ ƐĞƌŝŽƵƐ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘Ϯϱ dŚŝƐ ǁŝůů ƌĞƋƵŝƌĞ͕ ŝŶ ƉĂƌƚ͕ ĂŶ ĞŶŚĂŶĐĞĚ ƉŽƌƚĨŽůŝŽ ŽĨ ůŽǁĞƌͲ ĂŶĚ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ƌĞŶĞǁĂďůĞƐ͕ ŶƵĐůĞĂƌ ƉŽǁĞƌ͕ ĂŶĚ ĨŽƐƐŝů ŐĞŶĞƌĂƚŝŽŶ ǁŝƚŚ ĐĂƌďŽŶ ĐĂƉƚƵƌĞ͕ ƵƚŝůŝnjĂƚŝŽŶ ĂŶĚ ƐƚŽƌĂŐĞ ; h Ϳ͘ dŚĞ ŶĂƚŝŽŶĂů ĂŶĚ ƌĞŐŝŽŶĂů ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ŚĂƐ ĐŚĂŶŐĞĚ ŽǀĞƌ ƚŚĞ ƉĂƐƚ ĨĞǁ ĚĞĐĂĚĞƐ ;dĂďůĞ ϯͲϭͿ͕ ĂŶĚ ĂĚĚŝƚŝŽŶĂů ĐŚĂŶŐĞƐ ĂƌĞ ƉƌŽũĞĐƚĞĚ ĨŽƌ ϮϬϰϬ͘ Ŷ ϮϬϬϱ͕ ƚŚĞ ƚŽƉ Ɛŝdž ŐĞŶĞƌĂƚŝŽŶ ƐŽƵƌĐĞƐ ŝŶ ĚĞƐĐĞŶĚŝŶŐ ŽƌĚĞƌ ǁĞƌĞ ĐŽĂů͕ ŶƵĐůĞĂƌ͕ ŐĂƐ͕ ŚLJĚƌŽ͕ ƉĞƚƌŽůĞƵŵ͕ ĂŶĚ ŶŽŶͲŚLJĚƌŽ ƌĞŶĞǁĂďůĞƐ͘ EĂƚƵƌĂů ŐĂƐ ĂŶĚ ŶŽŶͲŚLJĚƌŽ ƌĞŶĞǁĂďůĞƐ͕ ĞƐƉĞĐŝĂůůLJ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ͕ ŚĂǀĞ ďĞĐŽŵĞ ŵƵĐŚ ŵŽƌĞ ƉƌŽŵŝŶĞŶƚ ŝŶ ƚŚĞ ĨƵĞů ŵŝdž͕ ůĂƌŐĞůLJ ĚƵĞ ƚŽ ůŽǁͲĐŽƐƚ͕ ĂďƵŶĚĂŶƚ ŶĂƚƵƌĂů ŐĂƐ ƐƵƉƉůŝĞƐ͕ ůŽǁĞƌ ĐŽƐƚ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĂŶĚ Ă ƌĂŶŐĞ 3-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ŽĨ ĨĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐŝĞƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ Ă ƌĂŶŐĞ ŽĨ ĐůĞĂŶ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŽŵƉĂƌŝŶŐ ƚŚĞ ĐŽƐƚƐ ŽĨ ĚŝĨĨĞƌĞŶƚ ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ŝƐ ĐŚĂůůĞŶŐŝŶŐ͕ ƉĂƌƚŝĐƵůĂƌůLJ ĂƐ ƚŚĞ ĐŽƐƚƐ ŽĨ ŵĂŶLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ĨƵĞůƐ ǀĂƌLJ ĚƵĞ ƚŽ ƚŚĞ ŝŶƚĞƌƉůĂLJ ŽĨ ŝŶŶŽǀĂƚŝŽŶ͕ ƉŽůŝĐLJ͕ ŵĂƌŬĞƚƐ͕ ĂŶĚ ĨƵƚƵƌĞ ƵŶĐĞƌƚĂŝŶƚLJ͘ KŶĞ ĐŽŵŵŽŶ ĂƉƉƌŽĂĐŚ ŝƐ ƚŽ ĐŽŵƉĂƌĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƵƐŝŶŐ ƚŚĞ K ͘Ϯϲ dŚĞƌĞ ĂƌĞ ůŝŵŝƚĂƚŝŽŶƐ ŽĨ ƵƐŝŶŐ K ͕ ƉĂƌƚŝĐƵůĂƌůLJ ĨŽƌ ĐĂƉŝƚĂůͲŝŶƚĞŶƐŝǀĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĂƐ ƚŚŝƐ ŵĞƚƌŝĐ ŝƐ ƐĞŶƐŝƚŝǀĞ ƚŽ ĂƐƐƵŵƉƚŝŽŶƐ ĂďŽƵƚ ƚŚĞ ĐŽƐƚ ŽĨ ĐĂƉŝƚĂů͕ ĂŵŽŶŐ ŽƚŚĞƌ ĨĂĐƚŽƌƐ͘Ĩ Table 3-1 Change in Generation from Major Fuel Type 2009–201427 Coal Natural Gas Absolute Change TWh Percent U S Absolute Change Change TWh -171 3 -10 WECC -13 8 SERC Percent Non-Hydro Renewable Nuclear Absolute Change Change TWh 204 6 22 -6 -4 3 -53 9 -11 RFC -83 0 NPCC Percent Absolute Change Change TWh -1 7 0 -2 -10 3 94 8 51 -15 65 1 -17 4 -62 SPP -0 8 MRO Percent Total Absolute Percent Change Change TWh Change 130 8 85 132 0 3 -15 43 4 92 11 9 2 3 8 1 12 7 52 49 8 5 85 12 1 5 17 5 102 13 5 1 11 8 12 0 2 0 14 5 148 -6 4 -2 -1 -5 7 -10 -0 2 -2 4 0 29 3 4 2 -9 6 -6 2 7 31 -3 9 -11 19 2 105 12 2 6 FRCC -4 1 -7 30 6 29 -1 2 -4 0 0 -1 9 7 4 TRE 11 4 10 9 7 6 -2 2 -5 19 4 105 37 8 12 Alaska -0 1 -11 -0 3 -8 0 0 0 0 2 1 484 -0 7 -10 Hawaii 0 0 1 0 0 0 0 0 0 0 5 74 -1 3 -12 In recent years the electricity generation mix in the western United States has shifted from fossil fuels and nuclear power to non-hydro renewables In the eastern part of the United States generation has shifted primarily from coal to natural gas Texas has seen a growth in generation from both coal and non-hydro renewables Acronyms terawatt-hours TWh Western Electricity Coordinating Council WECC SERC Reliability Corporation SERC Reliability First Corporation RFC Northeast Power Coordinating Council NPCC Southwest Power Pool SPP Midwest Reliability Organization MRO Florida Reliability Coordinating Council FRCC Texas Reliability Entity TRE Ŷ ƚŚĞ ƉĂƐƚ ϭϬ LJĞĂƌƐ͕ ƚŚĞ ƐŚĂƌĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ůŽǁͲ ĂŶĚ njĞƌŽͲĐĂƌďŽŶͲĞŵŝƚƚŝŶŐ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂƐ ďĞĞŶ ŐƌŽǁŝŶŐ͘ ĞƌŽͲĞŵŝƚƚŝŶŐ ƐŽƵƌĐĞƐ ĂĐĐŽƵŶƚ ĨŽƌ ϯϯ͘ϰ ƉĞƌĐĞŶƚ ŽĨ ƉŽǁĞƌͲƐĞĐƚŽƌ ŐĞŶĞƌĂƚŝŽŶ͘ Ŷ ϮϬϭϱ͕ ŶƵĐůĞĂƌ ƉŽǁĞƌ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ĂďŽƵƚ ϮϬ ƉĞƌĐĞŶƚ ŽĨ ƉŽǁĞƌͲƐĞĐƚŽƌ ĞůĞĐƚƌŝĐŝƚLJ͕ ĨŽůůŽǁĞĚ ďLJ ĐŽŶǀĞŶƚŝŽŶĂů ŚLJĚƌŽƉŽǁĞƌ Ăƚ ϲ ƉĞƌĐĞŶƚ͕ ĂŶĚ ŽƚŚĞƌ ƌĞŶĞǁĂďůĞ ĨŽƌŵƐ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ĐŽŵďŝŶĞĚ—ŝŶĐůƵĚŝŶŐ ǁŝŶĚ͕ ƐŽůĂƌ͕ ŐĞŽƚŚĞƌŵĂů͕ ĂŶĚ ďŝŽŵĂƐƐ—Ăƚ ĂƌŽƵŶĚ ϳ ƉĞƌĐĞŶƚ͘Ϯϴ ŽǁĞǀĞƌ͕ ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ŶƵĐůĞĂƌ ĂŶĚ ŚLJĚƌŽƉŽǁĞƌ ŚĂƐ ďĞĞŶ ƌĞůĂƚŝǀĞůLJ ĨůĂƚ͘ DŽƐƚ ŽĨ ƚŚĞ ŐƌŽǁƚŚ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ njĞƌŽͲĞŵŝƚƚŝŶŐ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ƐŝŶĐĞ ϮϬϬϱ ŝƐ ĨƌŽŵ ƌĞŶĞǁĂďůĞ ƐŽƵƌĐĞƐ͕ ƐƵĐŚ ĂƐ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ƉŽǁĞƌ͘Ϯϵ h ŝƐ Ă ƉŽƚĞŶƚŝĂůůLJ ƐŝŐŶŝĨŝĐĂŶƚ ƚĞĐŚŶŽůŽŐLJ ŽƉƚŝŽŶ ƚŽ ĞŶĂďůĞ ǀĞƌLJͲůŽǁͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ĨŽƐƐŝů ĨƵĞůƐ ĂŶĚ ďŝŽŵĂƐƐ͘ Ĩ Žƌ Ă ĚŝƐĐƵƐƐŝŽŶ ŽĨ ƚŚĞ ůŝŵŝƚĂƚŝŽŶƐ ŽĨ K ͕ ƐĞĞ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ; Ϳ͕ Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2016 ;tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ ϮϬϭϲͿ͕ ϭ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬŽƵƚůŽŽŬƐͬĂĞŽͬƉĚĨͬĞůĞĐƚƌŝĐŝƚLJͺŐĞŶĞƌĂƚŝŽŶ͘ƉĚĨ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-9 Chapter III Building a Clean Electricity Future 3 2 2 1 Wind and Solar Zero-Carbon Variable Energy Resources ƵŵƵůĂƚŝǀĞ ǁŝŶĚ ĐĂƉĂĐŝƚLJ ŚĂƐ ŐƌŽǁŶ ĨƌŽŵ Ϯϱ ŐŝŐĂǁĂƚƚƐ ;'tͿ ŝŶ ϮϬϬϴ ƚŽ ϳϰ͘ϰ 't ŝŶ ϮϬϭϱ͘ϯϬ Ŷ ϮϬϭϱ͕ ǁŝŶĚ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϰϭ ƉĞƌĐĞŶƚ ŽĨ ŶĞǁ ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂŶĚ ƉƌŽǀŝĚĞĚ ϰ͘ϳ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ϯϭ͕ ϯϮ͕ ϯϯ ŝŵŝůĂƌůLJ͕ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ŚĂƐ ŐƌŽǁŶ ĨƌŽŵ ůĞƐƐ ƚŚĂŶ Ϭ͘ϭ 't ŝŶ ϮϬϬϴ ƚŽ ϭϭ͘ϵ 't ŝŶ ϮϬϭϱ͕ Ă ĨĂĐƚŽƌ ŽĨ ŽǀĞƌ ϭϲϴ͘ϯϰ dŚĞƌĞ ĂƌĞ ŶŽǁ ŽǀĞƌ ϭ ŵŝůůŝŽŶ ŝŶƐƚĂůůĞĚ Ws ƐLJƐƚĞŵƐ ĂĐƌŽƐƐ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϯϱ͕ ϯϲ ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƚŽƚĂů h͘ ͘ ƐŽůĂƌ ŶĞƚ ŐĞŶĞƌĂƚŝŽŶ ;Ws ĂŶĚ ƚŚĞƌŵĂůͿ ǁĂƐ ϰ͘ϳ ŵŝůůŝŽŶ ŵĞŐĂǁĂƚƚŚŽƵƌƐ ŝŶ KĐƚŽďĞƌ ϮϬϭϲ͕ ǁŝƚŚ ϯϯ͘ϵϰй ŽĨ ƚŚĂƚ ƚŽƚĂů ĐŽŵŝŶŐ ĨƌŽŵ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ Ws͘ϯϳ Figure 3-3 Utility-Scale PV Installed Capacity Top 10 States as of August 2016 in MWAC 38 Utility-scale PV installed capacity is distributed unevenly across the United States California comprises almost half of the installed utility-scale PV capacity in the country followed by North Carolina and the Southwest of the United States with Arizona Nevada and Utah MW AC denotes alternating-current megawatts dŚĞ ƉƌŝĐĞ ŽĨ ŝŶƐƚĂůůĞĚ ƌĞƐŝĚĞŶƚŝĂůͲ ĂŶĚ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ Ws ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ĨĂůů ďĞůŽǁ ΨϮ ƉĞƌ t ;ĚŝƌĞĐƚ ĐƵƌƌĞŶƚ ǁĂƚƚĂŐĞͿ ĂŶĚ Ψϭ͘ϭϱͬt ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͕ ŝŶ ƚŚĞ ŶĞdžƚ ϭϬ LJĞĂƌƐ͘ ŽůĂƌ Ws ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ŐƌŽǁ ďLJ Ă ĨĂĐƚŽƌ ŽĨ ϭϳ ĨƌŽŵ ϮϬϭϱ ƚŽ ϮϬϰϬ ĂŶĚ ƌĞĂĐŚ ĂŶ ŝŶƐƚĂůůĞĚ ĐĂƉĂĐŝƚLJ ŽĨ ŽǀĞƌ ϭϬϬ 't͘ϯϵ The Department of Energy’s DOE’sͿ ƵŶ ŚŽƚ ƉƌŽŐƌĂŵ ŚĂƐ Ă ŐŽĂů ŽĨ ĂĐŚŝĞǀŝŶŐ ĂŶ K ŽĨ ϲ ĐĞŶƚƐͬŬtŚͿ ĨŽƌ ƵƚŝůŝƚLJͲƐĐĂůĞ Ws ŝŶ ϮϬϮϬ ĂŶĚ ϯ ĐĞŶƚƐͬŬtŚ ďLJ ϮϬϯϬ͘ϰϬ ĞƐƉŝƚĞ ƚŚĞ ƌĂƉŝĚ ŐƌŽǁƚŚ ŽĨ ĚŝƐƚƌŝďƵƚĞĚͲ ĂŶĚ ƵƚŝůŝƚLJͲ ƐĐĂůĞ Ws͕ ƚŚĞƐĞ ƌĞƐŽƵƌĐĞƐ ĐŽŶƚƌŝďƵƚĞ ŐĞŶĞƌĂƚŝŽŶ ĞƋƵŝǀĂůĞŶƚ ƚŽ ĂďŽƵƚ Ϭ͘ϰ ƉĞƌĐĞŶƚ ĂŶĚ Ϭ͘ϲ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ĚĞŵĂŶĚ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͘ϰϭ͕ ϰϮ Ŷ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ĂůŝĨŽƌŶŝĂ ĚŽŵŝŶĂƚĞƐ ƐŽůĂƌ Ws ǁŝƚŚ ĂďŽƵƚ ϱϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ Eation’s installed capacity ; ŝŐƵƌĞ ϯͲϯͿ͕ ĚƵĞ ŝŶ ůĂƌŐĞ ƉĂƌƚ ƚŽ ůĞŐĂĐLJ ƐƚĂƚĞǁŝĚĞ ŝŶĐĞŶƚŝǀĞ ƉƌŽŐƌĂŵƐ͕ ƐƵĐŚ ĂƐ ƚŚĞ ĂůŝĨŽƌŶŝĂ ŽůĂƌ ŶŝƚŝĂƚŝǀĞ͕ ĂƐ ǁĞůů ĂƐ the state’s ŚŝŐŚ ƌĞƚĂŝů ĞůĞĐƚƌŝĐŝƚLJ ƌĂƚĞƐ ĂŶĚ ƐŽůĂƌ ƌĞƐŽƵƌĐĞ ƉŽƚĞŶƚŝĂů͘ 3-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-4 Relationship between the Production Tax Credit PTC and Annual Wind Capacity Additions43 The Production Tax Credit PTC has accelerated wind project deployment significantly—between 2000 and 2013 cumulative wind capacity grew from under 5 GW to over 60 GW—though capacity additions noticeably track the PTC expiration and extension schedule dĞĐŚŶŽůŽŐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ǁŝŶĚ ƚƵƌďŝŶĞƐ—ŝŶĐůƵĚŝŶŐ ƚĂůůĞƌ ƚƵƌďŝŶĞƐ͕ ůŽŶŐĞƌ ďůĂĚĞƐ͕ ĂŶĚ ĂĚǀĂŶĐĞĚ ƚƵƌďŝŶĞ ĚĞƐŝŐŶƐ—ŚĂǀĞ ĞŶĂďůĞĚ ƐƵďƐƚĂŶƚŝĂů ĐŽƐƚ ƌĞĚƵĐƚŝŽŶƐ ĨŽƌ ǁŝŶĚ ƉŽǁĞƌ͘ WŽǁĞƌ ƉƵƌĐŚĂƐĞ ĂŐƌĞĞŵĞŶƚƐ ĨŽƌ ǁŝŶĚ ŚĂǀĞ ĨĂůůĞŶ ĨƌŽŵ ƌĂƚĞƐ ĂƐ ŚŝŐŚ ĂƐ ϳ ĐĞŶƚƐͬŬtŚ ŝŶ ϮϬϬϵ ƚŽ ĂƌŽƵŶĚ Ϯ ĐĞŶƚƐͬŬtŚ ŝŶĐůƵƐŝǀĞ ŽĨ ƚŚĞ WƌŽĚƵĐƚŝŽŶ dĂdž ƌĞĚŝƚ ;Wd Ϳ ŝŶ ϮϬϭϱ͕ ĚƌŝǀĞŶ ďLJ ǁŝŶĚ ĚĞƉůŽLJŵĞŶƚ ŝŶ ĞdžĐĞůůĞŶƚ ƌĞƐŽƵƌĐĞ ůŽĐĂƚŝŽŶƐ ŝŶ ƚŚĞ ŝŶƚĞƌŝŽƌ ƌĞŐŝŽŶƐ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͘ϰϰ ƚ ŝƐ ĂůƐŽ ƉƌŽũĞĐƚĞĚ ƚŚĂƚ ƚŚĞƐĞ ƚĞĐŚŶŽůŽŐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ǁŝůů ĞŶĂďůĞ ĂŶ expansion of the geographic distribution of wind power’s technical potential to new regions of the United ƚĂƚĞƐ͘ϰϱ ĞĐůŝŶŝŶŐ ĐŽƐƚƐ ĨŽƌ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ŚĂǀĞ ďĞĞŶ ƐƉƵƌƌĞĚ ďLJ ŝŶĚƵƐƚƌLJ ŝŶŶŽǀĂƚŝŽŶ ĂƐ ǁĞůů ĂƐ Ă ǀĂƌŝĞƚLJ ŽĨ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐŝĞƐ ƚŚĂƚ ĂĐĐĞůĞƌĂƚĞ ĚĞƉůŽLJŵĞŶƚ͘ DĂũŽƌ ƉŽůŝĐŝĞƐ ŝŶĐůƵĚĞ ƚŚĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƚĂdž ĐƌĞĚŝƚƐ Ăƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů ĂŶĚ ƚŚĞ ZW Ɛ Ăƚ ƚŚĞ ƐƚĂƚĞ ůĞǀĞů͘ ƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů͕ ƚŚĞ ŶǀĞƐƚŵĞŶƚ dĂdž ƌĞĚŝƚ ; d Ϳ ĂŶĚ Wd ĞƐƚĂďůŝƐŚĞĚ ƵŶĚĞƌ ƚŚĞ ŶĞƌŐLJ WŽůŝĐLJ Đƚ ŽĨ ϭϵϵϮ ĂƌĞ ƚǁŽ ŬĞLJ ĞĚĞƌĂů ƚĂdž ŝŶĐĞŶƚŝǀĞƐ ƚŚĂƚ ŚĂǀĞ ďĞĞŶ ŝŶƐƚƌƵŵĞŶƚĂů ŝŶ ĂĐĐĞůĞƌĂƚŝŶŐ ƚŚĞ ĐŽŶƐƚƌƵĐƚŝŽŶ ŽĨ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽũĞĐƚƐ͘ ŽƚŚ ŽĨ ƚŚĞƐĞ ŝŶĐĞŶƚŝǀĞƐ ĂƌĞ ĚĞƐŝŐŶĞĚ ĨŽƌ ƵƐĞ ďLJ ĞŶƚŝƚŝĞƐ ƚŚĂƚ ƉĂLJ ĞĚĞƌĂů ƚĂdžĞƐ ĂŶĚ ĂƌĞ ƐƵďũĞĐƚ ƚŽ ƐƚƌŝĐƚ ƚƌĞĂƚŵĞŶƚ ƵŶĚĞƌ ďŽƚŚ ƚŚĞ ŶƚĞƌŶĂů ZĞǀĞŶƵĞ ŽĚĞ ĂŶĚ 'ĞŶĞƌĂůůLJ ĐĐĞƉƚĞĚ ĐĐŽƵŶƚŝŶŐ WƌŝŶĐŝƉůĞƐ͘ dŚĞƐĞ ĂƚƚƌŝďƵƚĞƐ ŚĂǀĞ ŵĂũŽƌ ŝŵƉůŝĐĂƚŝŽŶƐ ĨŽƌ ǁŚŽ ƵƚŝůŝnjĞƐ ƚŚĞ ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ ŚŽǁ ƉƌŽũĞĐƚƐ ĂƌĞ ĚĞǀĞůŽƉĞĚ͘ ĞĐĂƵƐĞ ƚŚĞLJ ĚŽ ŶŽƚ ƉĂLJ ĞĚĞƌĂů ŝŶĐŽŵĞ ƚĂdžĞƐ͕ ĞŶƚŝƚŝĞƐ ůŝŬĞ ŵƵŶŝĐŝƉĂů ƵƚŝůŝƚŝĞƐ ĂŶĚ ĐŽŽƉĞƌĂƚŝǀĞ ƵƚŝůŝƚŝĞƐ ĐĂŶŶŽƚ ĐƵƌƌĞŶƚůLJ ŵŽŶĞƚŝnjĞ ƚŚĞƐĞ ƚĂdž ĐƌĞĚŝƚƐ͘ Žƌ ƌĞŐƵůĂƚĞĚ ƵƚŝůŝƚŝĞƐ͕ ƚŚĞ ŶƚĞƌŶĂů ZĞǀĞŶƵĞ ĞƌǀŝĐĞ ƌĞƋƵŝƌĞƐ ƚŚĂƚ ĂŶLJ d ďĞŶĞĨŝƚƐ ďĞ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-11 Chapter III Building a Clean Electricity Future ŶŽƌŵĂůŝnjĞĚŐ ĨŽƌ ƌĂƚĞŵĂŬŝŶŐ ƉƵƌƉŽƐĞƐ͘ dŚĞ ŶĞƚ ƌĞƐƵůƚ ŽĨ ƚŚĞƐĞ ŶƵĂŶĐĞƐ ŝƐ ƚŚĂƚ ŝŶĚĞƉĞŶĚĞŶƚ ĚĞǀĞůŽƉĞƌƐ ŚĂǀĞ ƉůĂLJĞĚ ĂŶ ŽƵƚƐŝnjĞĚ ƌŽůĞ ŝŶ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ƌĞůĂƚŝǀĞ ƚŽ ƉƌĞǀŝŽƵƐ ƚĞĐŚŶŽůŽŐŝĞƐ͘ Ŷ ĞĐĞŵďĞƌ ϮϬϭϱ͕ ƚŚĞ d ĂŶĚ Wd ǁĞƌĞ ďŽƚŚ ĞdžƚĞŶĚĞĚ ďLJ ϱ LJĞĂƌƐ ƚŚƌŽƵŐŚ ϮϬϮϭ ĂŶĚ ϮϬϭϵ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͕ ǁŝƚŚ ĞĂĐŚ ƚĂdž ĐƌĞĚŝƚ ŽŶ Ă ĚŝĨĨĞƌĞŶƚ ĚĞĐůŝŶŝŶŐ ƐĐŚĞĚƵůĞ͘ ŽůĂƌ ƐLJƐƚĞŵ ŽǁŶĞƌƐ ŚĂǀĞ ƉƌŝŵĂƌŝůLJ ĐůĂŝŵĞĚ ƚŚĞ d ͕ ǁŚŝůĞ ǁŝŶĚ ƉŽǁĞƌ͕ ǁŚŝĐŚ ŚĂƐ ŚŝŐŚĞƌ ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ ĂŶĚ ůŽǁĞƌ ĐĂƉŝƚĂů ĐŽƐƚƐ͕ ŚĂƐ ďĞŶĞĨŝƚƚĞĚ ĨƌŽŵ ƚŚĞ Wd ; ŝŐƵƌĞ ϯͲϰͿ͘ ƌĞĐĞŶƚ EĂƚŝŽŶĂů ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĂďŽƌĂƚŽƌLJ ;EZ Ϳ ƐƚƵĚLJ ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƚŚĞ ĞĐĞŵďĞƌ ϮϬϭϱ ĞdžƚĞŶƐŝŽŶ ŽĨ ƚŚĞ d ĂŶĚ Wd ĐŽƵůĚ ƌĞƐƵůƚ ŝŶ ĂŶ ĂĚĚŝƚŝŽŶĂů ϱϯ 't ŽĨ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ĐĂƉĂĐŝƚLJ ďLJ ϮϬϮϬ ĂƐ ĐŽŵƉĂƌĞĚ ƚŽ Ă ĐĂƐĞ ǁŝƚŚ ŶŽ ƚĂdž ĐƌĞĚŝƚ ĞdžƚĞŶƐŝŽŶƐ͕ ĐŽƌƌĞƐƉŽŶĚŝŶŐ ƚŽ ϱϰϬ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ŽĨ ĂǀŽŝĚĞĚ KϮ ĐƵŵƵůĂƚŝǀĞůLJ ďLJ ϮϬϯϬ͕ ĂŐĂŝŶ ĐŽŵƉĂƌĞĚ ƚŽ ƚŚĞ ŶŽ ĞdžƚĞŶƐŝŽŶ ĐĂƐĞ͘ϰϲ ƚĂƚĞ ZW ƉŽůŝĐŝĞƐ ĂƌĞ ĂůƐŽ ŬĞLJ ĚƌŝǀĞƌƐ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŐƌŽǁƚŚ͘ dǁĞŶƚLJͲŶŝŶĞ ƐƚĂƚĞƐ ŚĂǀĞ ƌĞŶĞǁĂďůĞ Žƌ ĂůƚĞƌŶĂƚŝǀĞ ĞŶĞƌŐLJ ƉŽƌƚĨŽůŝŽ ƐƚĂŶĚĂƌĚƐ ƚŚĂƚ ƌĞƋƵŝƌĞ ƵƚŝůŝƚŝĞƐ Žƌ ŽƚŚĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽǀŝĚĞƌƐ ƚŽ ŵĞĞƚ Ă ŵŝŶŝŵƵŵ ƉŽƌƚŝŽŶ ŽĨ ůŽĂĚ ǁŝƚŚ ƋƵĂůŝĨLJŝŶŐ ĨŽƌŵƐ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJError Reference source not found ͘ϰϳ KĨ ƚŚĞ ϮϯϬ ƚĞƌĂǁĂƚƚͲŚŽƵƌƐ ;dtŚͿ ŽĨ ƚŽƚĂů ŶŽŶͲŚLJĚƌŽ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŐƌŽǁƚŚ ƐŝŶĐĞ ϮϬϬϬ͕ ŽǀĞƌ ŚĂůĨ ;Žƌ ϭϯϬ dtŚͿ ǁĂƐ ƚŽ ŵĞĞƚ ZW ŵĂŶĚĂƚĞƐ͘ϰϴ Ő EŽƌŵĂůŝnjĂƚŝŽŶ ƌĞƋƵŝƌĞƐ ƚŚĂƚ Ă ƚĂdž ĐƌĞĚŝƚ ďĞ ƌĞĂůŝnjĞĚ ĂĐƌŽƐƐ ƚŚĞ ůŝĨĞ ŽĨ ĂŶ ĂƐƐĞƚ͕ ŝŶƐƚĞĂĚ ŽĨ ŝŵŵĞĚŝĂƚĞůLJ͘ 3-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-5 State RPS Policies August 201649 Twenty-nine states and the District of Columbia have an RPS and an additional eight states have a renewable portfolio goal some include extra credit for solar or customer-sited renewables or include nonrenewable alternative resources The RPSs or renewable portfolio goals are key drivers of renewable energy growth ZW ƌƵůĞƐ ǀĂƌLJ ĨƌŽŵ ƐƚĂƚĞ ƚŽ ƐƚĂƚĞ͕ ĞĂĐŚ ǁŝƚŚ ĚŝĨĨĞƌĞŶƚ ƚĂƌŐĞƚƐ͕ ƚŝŵĞĨƌĂŵĞƐ͕ ĂŶĚ ƐŽŵĞƚŝŵĞƐ ƐƉĞĐŝĨŝĐ ĐĂƌǀĞ ŽƵƚƐ ĨŽƌ ƐŽůĂƌ Žƌ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ; 'Ϳ͘ ůŵŽƐƚ ŚĂůĨ ŽĨ ƚŚĞ ŵĂŶĚĂƚĞĚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĐĂƉĂĐŝƚLJ ŝƐ located in California “reflecting the rapid and recent buildͲŽƵƚ ŽĨ ƌĞŶĞǁĂďůĞ ĐĂƉĂĐŝƚLJ ƚŽ ŵĞĞƚ ϮϬϮϬ ZW ƚĂƌŐĞƚƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĐŽŵƉůĞƚŝŽŶ ŽĨ Ă ŶƵŵďĞƌ ŽĨ ůĂƌŐĞ ƵƚŝůŝƚLJͲscale PV projects ”ϱϬ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƐƚĂƚĞͲůĞǀĞů ZW Ɛ͕ ƐŽŵĞ ƐƚĂƚĞƐ ŚĂǀĞ ŝŶƐƚŝƚƵƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ƌĞƐŽƵƌĐĞ ƐƚĂŶĚĂƌĚƐ ƚŚĂƚ ƐĞƚ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ΗĐůĞĂŶΗ Žƌ ΗĂůƚĞƌŶĂƚŝǀĞΗ ĞŶĞƌŐLJ͕ ǁŚŝĐŚ ŝŶĐůƵĚĞ ŶŽƚ ŽŶůLJ ƌĞŶĞǁĂďůĞƐ͕ ďƵƚ ĂůƐŽ ĐĞƌƚĂŝŶ ŶŽŶͲ ƌĞŶĞǁĂďůĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ŶƵĐůĞĂƌ ƉŽǁĞƌ ĂŶĚ ĐŽĂů ǁŝƚŚ h ͘ dŚĞƐĞ ĂƌĞ ƐŽŵĞƚŝŵĞƐ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ ůĞĂŶ ŶĞƌŐLJ ƚĂŶĚĂƌĚƐ ; ƐͿ͘ ƚĂƚĞƐ ƚŚĂƚ ŚĂǀĞ ŝŵƉůĞŵĞŶƚĞĚ ƚŚĞƐĞ ŝŶĐůƵĚĞ ŽůŽƌĂĚŽ͕ DŝĐŚŝŐĂŶ͕ ůůŝŶŽŝƐ͕ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-13 Chapter III Building a Clean Electricity Future EĞǁ zŽƌŬ͕ KŚŝŽ͕ WĞŶŶƐLJůǀĂŶŝĂ͕ ĂŶĚ hƚĂŚ͘Ś dŚĞƌĞ ŚĂǀĞ ďĞĞŶ ƉƌŽƉŽƐĂůƐ ĨŽƌ Ă ĞĚĞƌĂů ŝŶƚƌŽĚƵĐĞĚ ŝŶ ƉƌĞǀŝŽƵƐ ŽŶŐƌĞƐƐĞƐ͘ ZĞŶĞǁĂďůĞ ŶĞƌŐLJ ĞƌƚŝĨŝĐĂƚĞƐ ;Z ƐͿ ĂƌĞ ƚƌĂĚĞĂďůĞ ĐĞƌƚŝĨŝĐĂƚĞƐ ƵƐĞĚ ƚŽ ĚĞŵŽŶƐƚƌĂƚĞ ĂŶĚ ǀĞƌŝĨLJ ƚŚĞ ƵƐĞ ŽĨ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƵƐƵĂůůLJ ƚŽ ŵĞĞƚ ƐƚĂƚĞ ZW Ɛ ĂŶĚ ƐŽŵĞƚŝŵĞƐ ƚŽ ŵĞĞƚ ǀŽůƵŶƚĂƌLJ ƌĞŶĞǁĂďůĞ ŐŽĂůƐ͘ tŚŝůĞ ŐĞŶĞƌĂƚĞĚ ĐŽŶĐƵƌƌĞŶƚůLJ ǁŝƚŚ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ͕ Z Ɛ ĐĂŶ ďĞ ƚƌĂĚĞĚ ƐĞƉĂƌĂƚĞůLJ ĨƌŽŵ ƚŚĞ ƵŶĚĞƌůLJŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ͘ tŚŝůĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ĞůŝŐŝďůĞ ƌĞƐŽƵƌĐĞƐ ǀĂƌLJ ĨƌŽŵ ƐƚĂƚĞ ƚŽ ƐƚĂƚĞ͕ ŽŶĞ Z ŝƐ ŝƐƐƵĞĚ ĨŽƌ ĞĂĐŚ DtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚĞĚ ĨƌŽŵ ĂŶ ĞůŝŐŝďůĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞ͘ LJ ŽďƚĂŝŶŝŶŐ ĂŶĚ ƌĞƚŝƌŝŶŐ ;ŝ͘Ğ͕͘ ƉƌĞǀĞŶƚŝŶŐ ĨƵƌƚŚĞƌ ƚƌĂĚŝŶŐ ŽĨͿ Ă Z ͕ Ă ƵƚŝůŝƚLJ Žƌ ĐƵƐƚŽŵĞƌ ĐĂŶ ĐůĂŝŵ ŝƚ ĨŽƌ ĐŽŵƉůŝĂŶĐĞ ǁŝƚŚ ĂŶ ZW Žƌ ĨŽƌ ǀŽůƵŶƚĂƌLJ ƉƵƌƉŽƐĞƐ͘ Z ƚƌĂĐŬŝŶŐ ƐLJƐƚĞŵƐ͕ ĂǀĂŝůĂďůĞ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ĐŽƵŶƚƌLJ͕ ĞŶƐƵƌĞ ƚŚĂƚ ŶŽ ĐůĂŝŵƐ ŽŶ ƚŚŝƐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĂƌĞ ĚŽƵďůĞ ĐŽƵŶƚĞĚ͘ Ŷ ϮϬϭϱ͕ ŽǀĞƌ ϮϭϬ ŵŝůůŝŽŶ Z Ɛ ǁĞƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ďĞ ŐĞŶĞƌĂƚĞĚ ƚŽ ŵĞĞƚ ƐƚĂƚĞ ZW ƌĞƋƵŝƌĞŵĞŶƚƐ͘ϱϭ Ŷ ĂĚĚŝƚŝŽŶĂů ϳϴ ŵŝůůŝŽŶ ǀŽůƵŶƚĂƌLJ Z Ɛ ǁĞƌĞ ŐĞŶĞƌĂƚĞĚ ĂŶĚ ƌĞƚŝƌĞĚ ĨŽƌ ǀŽůƵŶƚĂƌLJ ƉƵƌƉŽƐĞƐ ďLJ ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ĐƵƐƚŽŵĞƌƐ͘ϱϮ ŶĂůLJƐŝƐ ŝŶĚŝĐĂƚĞƐ ƚŚĂƚ ŶĞǁ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƌĞƐŽƵƌĐĞƐ ƚŚĂƚ ǁĞƌĞ ƵƐĞĚ ƚŽ ŵĞĞƚ Ăůů ƐƚĂƚĞ ZW ŽďůŝŐĂƚŝŽŶƐ ƚŽƚĂůĞĚ ϱ͕ϲϬϬ Dt ŽĨ ĐĂƉĂĐŝƚLJ ĂĚĚŝƚŝŽŶƐ͕ ĂƐ ǁĞůů ĂƐ ϵϴ dtŚ ŽĨ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ϮϬϭϯ͘ϱϯ KŶĞ ůŝĨĞͲ ĐLJĐůĞ ' ' ĞŵŝƐƐŝŽŶƐ ĂŶĂůLJƐŝƐ ŝŶĚŝĐĂƚĞƐ ƚŚĂƚ ƚŚŝƐ ŶĞǁ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĞůƉĞĚ ƚŽ ĂǀŽŝĚ ϱϵ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ŽĨ KϮ ĞƋƵŝǀĂůĞŶƚ ŝŶ ϮϬϭϯ͘ϱϰ dŚĞƐĞ ƉŽůŝĐŝĞƐ ĂƌĞ ĐŽŵŵŽŶůLJ ŚŝŐŚůŝŐŚƚĞĚ ďLJ ƐƚĂƚĞƐ ĂƐ ŚĂǀŝŶŐ ƐƚƌŽŶŐ ƉŽƚĞŶƚŝĂů ƚŽ ĐƌĞĂƚĞ ũŽďƐ͘ϱϱ ϮϬϭϲ ƐƚƵĚLJ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ZW Ɛ ĐƌĞĂƚĞĚ ϮϬϬ͕ϬϬϬ ŐƌŽƐƐ ĚŽŵĞƐƚŝĐ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ũŽďƐ ŝŶ ϮϬϭϯ͘ϱϲ Ŷ ŽƌĚĞƌ ƚŽ ĨƵůůLJ ƌĞĂůŝnjĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ĞŵŝƐƐŝŽŶ ƌĞĚƵĐƚŝŽŶ ďĞŶĞĨŝƚƐ ŽĨ ŚŝŐŚ ůĞǀĞůƐ ŽĨ njĞƌŽͲĐĂƌďŽŶ ǀĂƌŝĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ͕ ƚŚĞLJ ŵƵƐƚ ďĞ ŝŶƚĞŐƌĂƚĞĚ ŝŶƚŽ ƚŚĞ ŐƌŝĚ ĂŶĚ ƉƌŽǀŝĚĞ ŐƌŝĚ ƐĞƌǀŝĐĞƐ͘ tŝŶĚ ĂŶĚ ƐŽůĂƌ ƉůĂŶƚƐ ĂƌĞ ŽŶůLJ ĐƵƌƌĞŶƚůLJ ƌĞƋƵŝƌĞĚ ƚŽ ƉƌŽǀŝĚĞ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ŝŶ ĐĞƌƚĂŝŶ ƌĞŐŝŽŶƐ͘ŝ ŵĂƌƚ ƉŽǁĞƌ ĐŽŶǀĞƌƚĞƌƐ ĨŽƌ ǁŝŶĚ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ƐŵĂƌƚ ŝŶǀĞƌƚĞƌƐ ĨŽƌ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ ĐŽƵůĚ ƉƌŽǀŝĚĞ ƐĞǀĞƌĂů ƐĞƌǀŝĐĞƐ ƚŽ ĂƐƐŝƐƚ ŝŶ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ͘ϱϳ͕ ϱϴ͕ ϱϵ͕ ϲϬ͕ ϲϭ͕ ϲϮ͕ ϲϯ K͕ D K͕ W D͕ KͲEĞǁ ŶŐůĂŶĚ͕ ĂŶĚ EĞǁ zŽƌŬ K ĂƌĞ Ăůů ŵĂŬŝŶŐ ĞĨĨŽƌƚƐ ƚŽ ŝŶƚĞŐƌĂƚĞ njĞƌŽͲĐĂƌďŽŶ ǀĂƌŝĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ďLJ ĚĞǀĞůŽƉŝŶŐ Žƌ ŝŵƉƌŽǀŝŶŐ ŵĞĐŚĂŶŝƐŵƐ ƚŽ ƉƌŽǀŝĚĞ ĂŶĚ ƐƵƉƉŽƌƚ ĨůĞdžŝďůĞ ƌĂŵƉŝŶŐ͕ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ĨůĞdžŝďůĞ ƌĂŵƉŝŶŐ ƉƌŽĚƵĐƚƐ ŝŶƚŽ ƚŚĞŝƌ ŵĂƌŬĞƚƐ Žƌ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ƌĞůŝĂďůĞ ĐĂƉĂĐŝƚLJ͘ϲϰ 3 2 2 2 Natural Gas Generation Lower-Carbon Flexible Baseload EĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ďĞĐŽŵĞ ƚŚĞ ůĂƌŐĞƐƚ ƐŽƵƌĐĞ ŽĨ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ϮϬϭϲ͕ ŽǀĞƌƚĂŬŝŶŐ ĐŽĂů ĨŽƌ ƚŚĞ ĨŝƌƐƚ ƚŝŵĞ ŽŶ ĂŶ ĂŶŶƵĂů ďĂƐŝƐ͘ϲϱ Ŷ ϮϬϭϱ͕ ŶĂƚƵƌĂů ŐĂƐ–ĨŝƌĞĚ ŐĞŶĞƌĂƚŝŽŶ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϯϯ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ŐĞŶĞƌĂƚŝŽŶ ;ƐĞĞ ŝŐƵƌĞ ϯͲϲ ĨŽƌ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĨƌŽŵ ϭϵϱϬ ƚŽ ϮϬϭϱͿ͘ϲϲ dŚĞ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ůŽǁͲĐŽƐƚ͕ ĚŽŵĞƐƚŝĐ ĨƵĞů͖ ůŽǁ ĐĂƉŝƚĂů ĐŽƐƚƐ͖ ĞdžŝƐƚŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͖ ĂŶĚ ƌĞůĂƚŝǀĞ ŐĞŶĞƌĂƚŝŽŶ ĨůĞdžŝďŝůŝƚLJ ŚĂǀĞ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƚŚŝƐ ŝŶĐƌĞĂƐĞ͘ dŚĞ ƐŚŝĨƚ ƚŽǁĂƌĚƐ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ƌĞƐƵůƚĞĚ ŝŶ ϭ͕Ϯϱϰ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ŽĨ ĂǀŽŝĚĞĚ KϮ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ϮϬϬϱ ƚŽ ϮϬϭϰ͕ Ś Ŷ ϮϬϭϲ͕ ƚǁŽ ƐƚĂƚĞƐ͕ ůůŝŶŽŝƐ ĂŶĚ EĞǁ zŽƌŬ͕ ƉƵƚ ƉŽůŝĐŝĞƐ ŝŶ ƉůĂĐĞ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ŽƉĞƌĂƚŝŽŶ ŽĨ ĞdžŝƐƚŝŶŐ ŶƵĐůĞĂƌ ƉůĂŶƚƐ͘ ŝ Ŷ EŽǀĞŵďĞƌ ϮϬϭϱ͕ ƚŚĞ EŽƌƚŚ ŵĞƌŝĐĂŶ ůĞĐƚƌŝĐ ZĞůŝĂďŝůŝƚLJ ŽƌƉŽƌĂƚŝŽŶ ;E Z Ϳ ŝƐƐƵĞĚ ĨŝǀĞ ŐĞŶĞƌĂů ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ĂƐ ƉĂƌƚ ŽĨ ŝƚƐ ƐƐĞŶƚŝĂů ZĞůŝĂďŝůŝƚLJ ĞƌǀŝĐĞƐ dĂƐŬ ŽƌĐĞ DĞĂƐƵƌĞƐ ƌĂŵĞǁŽƌŬ ZĞƉŽƌƚ ǁŚŝĐŚ ƚŚĂƚ ĨŽĐƵƐ ŽŶ ƚŚĞ ŝŶĐŽƌƉŽƌĂƚŝŽŶ ŽĨ ƚŚĞƐĞ ƐĞƌǀŝĐĞƐ ŝŶƚŽ ƚŚĞ ĚĞƐŝŐŶ ŽĨ ǀĂƌŝĂďůĞ ŐĞŶĞƌĂƚŝŶŐ ƌĞƐŽƵƌĐĞƐ ŝŶ ƚŚĞ ĨƵƚƵƌĞ͘ ŚŽƌƚůLJ ƚŚĞƌĞĂĨƚĞƌ͕ ŽŶ ĞďƌƵĂƌLJ ϭϴ͕ ϮϬϭϲ͕ Z ŝƐƐƵĞĚ Ă EŽƚŝĐĞ ŽĨ ŶƋƵŝƌLJ͕ ŽĐŬĞƚ ZDϭϲͲϲͲϬϬϬ͕ ƐĞĞŬŝŶŐ ĐŽŵŵĞŶƚ ŽŶ ƚŚĞ ŶĞĞĚ ƚŽ ƌĞĨŽƌŵ ŝƚƐ ƌĞŐƵůĂƚŝŽŶƐ ĨŽƌ ƚŚĞ ƉƌŽǀŝƐŝŽŶ ĂŶĚ ĐŽŵƉĞŶƐĂƚŝŽŶ ŽĨ ƉƌŝŵĂƌLJ ĨƌĞƋƵĞŶĐLJ ƌĞƐƉŽŶƐĞ͘ ŽƵƌĐĞ͗ EŽƌƚŚ ŵĞƌŝĐĂŶ ůĞĐƚƌŝĐ ZĞůŝĂďŝůŝƚLJ ŽƌƉŽƌĂƚŝŽŶ ;E Z Ϳ͕ Essential Reliability Services Task Force Measures Framework Report ; ƚůĂŶƚĂ͕ ' ͗ E Z ͕ EŽǀĞŵďĞƌ ϮϬϭϱͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶĞƌĐ͘ĐŽŵͬĐŽŵŵͬKƚŚĞƌͬĞƐƐŶƚůƌůďůƚLJƐƌǀĐƐƚƐŬĨƌĐ ͬ Z d йϮϬ ƌĂŵĞǁŽƌŬйϮϬZĞƉŽƌƚйϮϬͲйϮϬ ŝŶĂů͘ƉĚĨ ͖ ĞĚĞƌĂů ŶĞƌŐLJ ZĞŐƵůĂƚŽƌLJ ŽŵŵŝƐƐŝŽŶ ; Z Ϳ͕ Docket No RM16-6-000 Essential Reliability Services and the Evolving Bulk-Power System-Primary Frequency Response ;tĂƐŚŝŶŐƚŽŶ͕ ͗ Z ͕ ͕ ĞďƌƵĂƌLJ ϭϲ͕ ϮϬϭϲͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨĞƌĐ͘ŐŽǀͬǁŚĂƚƐͲŶĞǁͬĐŽŵŵͲ ŵĞĞƚͬϮϬϭϲͬϬϮϭϴϭϲͬ ͲϮ͘ƉĚĨ͘ 3-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Žƌ ĂďŽƵƚ ϲϭ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĂǀŽŝĚĞĚ ĞŵŝƐƐŝŽŶƐ ŽǀĞƌ ƚŚĂƚ ƚŝŵĞ ƉĞƌŝŽĚ͘ϲϳ KŶ Ă ůŝĨĞͲĐLJĐůĞ ďĂƐŝƐ͕ Ă ŶĞǁ E' ƉůĂŶƚ ĞŵŝƚƐ ƌŽƵŐŚůLJ ϱϬ ƚŽ ϲϬ ƉĞƌĐĞŶƚ ůĞƐƐ KϮ ƚŚĂŶ Ă ƚLJƉŝĐĂů ĞdžŝƐƚŝŶŐ ĐŽĂůͲĨŝƌĞĚ ƉŽǁĞƌ ƉůĂŶƚ͘ũ͕ ϲϴ Figure 3-6 U S Natural Gas Generation 1950–2015 in TWh 69 Natural gas–fired generation has grown nearly continuously since the late 1980s EĂƚƵƌĂů ŐĂƐ ĐŽŵďŝŶĞĚ ĐLJĐůĞ ;E' Ϳ ŐĞŶĞƌĂƚŽƌƐ ĂƌĞ ǀĞƌLJ ĞĨĨŝĐŝĞŶƚ͕ ŚĂǀĞ ƵŶƵƐĞĚ ĐĂƉĂĐŝƚLJ͕ ĂŶĚ ŚĂǀĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŚŝŐŚĞƌ ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ ƚŚĂŶ ŶĂƚƵƌĂů ŐĂƐ ĐŽŵďƵƐƚŝŽŶ ƚƵƌďŝŶĞƐ ; dͿ ƚŚĂƚ ĐŽŶƚƌŝďƵƚĞ ƉƌŝŵĂƌŝůLJ ƚŽ ƉĞĂŬ ůŽĂĚ ĂŶĚ ŵĂLJ ŽŶůLJ ŽƉĞƌĂƚĞ ĨŽƌ Ă ĨĞǁ ŚŽƵƌƐ Ă LJĞĂƌ ;ƐĞĞ ŝŐƵƌĞ ϯͲϳͿ͘ hŶƚŝů ƌĞĐĞŶƚůLJ͕ ŵŽƐƚ E' ƵŶŝƚƐ ǁĞƌĞ ƵƚŝůŝnjĞĚ ĨŽƌ ŝŶƚĞƌŵĞĚŝĂƚĞ ĂŶĚ ƉĞĂŬ ůŽĂĚƐ͕ ƌĂƚŚĞƌ ƚŚĂŶ ďĂƐĞůŽĂĚ͘ ĞĐĂƵƐĞ ŶĂƚƵƌĂů ŐĂƐ ƉƌŝĐĞƐ ŚĂǀĞ ďĞĞŶ ůŽǁ ĨŽƌ Ă ƐƵƐƚĂŝŶĞĚ ƉĞƌŝŽĚ͕ ĂŶĚ ďĞĐĂƵƐĞ E' ƉůĂŶƚƐ ƌĞƚĂŝŶ ƐŽŵĞ ŽĨ ƚŚĞ ĨůĞdžŝďůĞ ĐŚĂƌĂĐƚĞƌŝƐƚŝĐƐ ŽĨ dƐ͕ ĂŶĚ ŽƉĞƌĂƚĞ Ăƚ Ă ŚŝŐŚĞƌ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ůŽǁĞƌ ĐŽƐƚ͖ ƚŚĞƐĞ ƵŶŝƚƐ ĂƌĞ ŶŽǁ ŽĨƚĞŶ ƵƐĞĚ ĨŽƌ ďĂƐĞůŽĂĚ ƉŽǁĞƌ͘ d’Ɛ ƐŚŽƌƚ ƐƚĂƌƚƵƉ ƚŝŵĞƐ ĂŶĚ ĨĂƐƚ ƌĂŵƉ ƌĂƚĞƐ ŵĂŬĞƐ ŝƚ ĞƐƐĞŶƚŝĂů ĨŽƌ ŵĂŝŶƚĂŝŶŝŶŐ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ͕ ĂďƐĞŶƚ ĂĨĨŽƌĚĂďůĞ ŐƌŝĚͲƐĐĂůĞ ƐƚŽƌĂŐĞ͘ ĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ ĨŽƌ dƐ ĂƌĞ ƋƵŝƚĞ ůŽǁ ;ŐĞŶĞƌĂůůLJ ďĞůŽǁ ϭϬйͿ ďƵƚ ǁŚĞŶ ŽƉĞƌĂƚŝŶŐ͕ ƚŚĞLJ ĐĂŶ ďĞ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽŶƚƌŝďƵƚŽƌƐ ƚŽ ĐŽŶǀĞŶƚŝŽŶĂů Ăŝƌ ƉŽůůƵƚĂŶƚƐ͘ϳϬ ŝŶŐůĞ ĐLJĐůĞ ŐĂƐ ƚƵƌďŝŶĞƐ ĐĂŶ ŐŽ ĨƌŽŵ ĐŽůĚ ƐƚĂƌƚƵƉ ƚŽ ϭϬϬ ƉĞƌĐĞŶƚ ŽƵƚƉƵƚ ŝŶ ϳͲϭϭ ŵŝŶƵƚĞƐ͖ ŝŶ ĐŽŶƚƌĂƐƚ͕ ĐŽĂůͲĨŝƌĞĚ ƵŶŝƚƐ ƌĂŵƉ ŽŶ ƚŚĞ ŽƌĚĞƌ ŽĨ ŚŽƵƌƐ͕ ĂŶĚ ĚŽŝŶŐ ƐŽ ŝŶĐƵƌƐ ŝŶĐƌĞĂƐĞĚ KΘD ĐŽƐƚƐ͘ϳϭ E' ƌĂŵƉ ƌĂƚĞƐ ĨĂůů ƐŽŵĞǁŚĞƌĞ ŝŶ ďĞƚǁĞĞŶ͕ ĂŶĚ ƐŽŵĞ E' ƵŶŝƚƐ ĐĂŶ ƌĂŵƉ ƚŽ ĨƵůů ƌĂƚĞĚ ƉŽǁĞƌ ŝŶ ůĞƐƐ ƚŚĂŶ ϯϬ ŵŝŶƵƚĞƐ͘ϳϮ dŚŝƐ ĨůĞdžŝďŝůŝƚLJ ŵĂŬĞƐ dƐ ƵƐĞĨƵů ŝŶ ĐŽŵƉůĞŵĞŶƚŝŶŐ ǀĂƌŝĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͕ ĞƐƉĞĐŝĂůůLJ ĨŽƌ ƐŽůĂƌ͕ ďĞĐĂƵƐĞ ŝƚ ĐŽŵƉůĞŵĞŶƚƐ ƚŚĞ ŚŝŐŚ ƉĞĂŬƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ƐŽůĂƌ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ĂůůŽǁƐ ĨŽƌ ůŽĂĚ ĨŽůůŽǁŝŶŐ͘ ŽŵĞ ƐƚĂƚĞƐ ƌĞůLJ ŽŶ dƐ ŵŽƌĞ ƌĞŐƵůĂƌůLJ ũ ŝĨĞͲĐLJĐůĞ ' ' ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ŶĂƚƵƌĂů ŐĂƐ–ĨŝƌĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ůŽǁĞƌ ƚŚĂŶ ĨƌŽŵ ĐŽĂůͲĨŝƌĞĚ ƵŶŝƚƐ͘ dŚŝƐ ŝƐ ƚƌƵĞ ĞǀĞŶ ǁŚĞŶ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ŵĞƚŚĂŶĞ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ ĐŽĂů͕ Ă ǁŝĚĞ ƌĂŶŐĞ ŽĨ ǀĂƌŝĂďŝůŝƚLJ ŝŶ ƚŚĞ ƉĞƌĨŽƌŵĂŶĐĞ ŽĨ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ͕ ĂŶĚ ƚŚĞ ƚŝŵŝŶŐ ŽĨ ŝŵƉĂĐƚ ƚŽ ƌĂĚŝĂƚŝǀĞ ĨŽƌĐŝŶŐ ŝŶ ƚŚĞ ĂƚŵŽƐƉŚĞƌĞ͘ ƵƌƚŚĞƌŵŽƌĞ͕ ƚŚĞƌĞ ĂƌĞ Ă ŶƵŵďĞƌ ŽĨ ŽŶŐŽŝŶŐ ƉŽůŝĐLJ ĞĨĨŽƌƚƐ—ŝŶĐůƵĚŝŶŐ ƚŚŽƐĞ ŽƵƚůŝŶĞĚ ŝŶ ŚĂƉƚĞƌ s ŽĨ Y Z ϭ͘ϭ ;Addressing Environmental Aspects of TS D InfrastructureͿ—ƚŚĂƚ ĂƌĞ ĐŽŶƚƌŝďƵƚŝŶŐ ƚŽ ĨƵƌƚŚĞƌ ƌĞĚƵĐŝŶŐ ŵĞƚŚĂŶĞ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ŶĂƚƵƌĂů ŐĂƐ͕ ŵĂŬŝŶŐ ŶĂƚƵƌĂů ŐĂƐΖƐ ƌĞůĂƚŝǀĞ ĂĚǀĂŶƚĂŐĞ ĞǀĞŶ ŐƌĞĂƚĞƌ͘ dŚĞƐĞ ŝŶĐůƵĚĞ ƌĞĐĞŶƚůLJ ĨŝŶĂůŝnjĞĚ ƌĞŐƵůĂƚŝŽŶƐ ďLJ ƚŚĞ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJ ; W Ϳ ĂŶĚ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶƚĞƌŝŽƌ the EPA’s voluntary Methane Challenge Program and several new programs at K ƚŽ ŚĞůƉ ŝŵƉƌŽǀĞ ƋƵĂŶƚŝĨŝĐĂƚŝŽŶ ŽĨ ŵĞƚŚĂŶĞ ĞŵŝƐƐŝŽŶƐ ĂŶĚ ĞdžƉĂŶĚ ƌĞůĂƚĞĚ ZΘ ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-15 Chapter III Building a Clean Electricity Future ƚŚĂŶ ŽƚŚĞƌ ůŽĐĂƚŝŽŶƐ͕ ŵŽƐƚ ŶŽƚĂďůLJ dĞdžĂƐ͕ ŽƵŝƐŝĂŶĂ͕ tLJŽŵŝŶŐ͕ EĞǁ ĂŵƉƐŚŝƌĞ͕ DĂŝŶĞ͕ ĂŶĚ ZŚŽĚĞ ƐůĂŶĚ Ăůů ŚĂǀĞ d ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ ŐƌĞĂƚĞƌ ƚŚĂŶ ϮϬ ƉĞƌĐĞŶƚ͘ϳϯ Figure 3-7 NGCC Capacity Factors by State 201474 75 Capacity factors of NGCC plants all generally increased across the United States between 2010 and 2014 and many states have constructed or are planning to construct new NGCC plants after 2014 Significant potential exists to further increase generation from NGCCs in most states In the figure “0%” represents states with no NGCC capacity A recent study of the value of fast ramping gas for supporting variable renewables noted that “…to date Z ΀ĨĂƐƚ ƌĂŵƉŝŶŐ ĨŽƐƐŝů΁ ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂǀĞ ĞŶĂďůĞĚ Z ΀ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ΁ ĚŝĨĨƵƐŝŽŶ ďLJ ƉƌŽǀŝĚŝŶŐ ƌĞůŝĂďůĞ ĂŶĚ ĚŝƐƉĂƚĐŚĂďůĞ ďĂĐŬͲƵƉ ĐĂƉĂĐŝƚLJ ƚŽ ŚĞĚŐĞ ĂŐĂŝŶƐƚ ǀĂƌŝĂďŝůŝƚLJ ŽĨ ƐƵƉƉůLJ͘͘͘ƌĞŶĞǁĂďůĞƐ ĂŶĚ ĨĂƐƚͲƌĞĂĐƚŝŶŐ fossil technologies appear as highly complementary and…should be jointly installed to meet the goals of ĐƵƚƚŝŶg emissions and ensuring a stable supply ”ϳϲ ƚ ŝƐ ĂůƐŽ ŝŵƉŽƌƚĂŶƚ ƚŽ ŶŽƚĞ ƚŚĂƚ ƚŚĞ ĐŚĂŶŐŝŶŐ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ĂŶĚ ŐƌŽǁŝŶŐ ƌĞůŝĂŶĐĞ ŽŶ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ĂůƐŽ ŝŶĐƌĞĂƐŝŶŐ ƚŚĞ ŶĞĞĚ ĨŽƌ ĂŶĚ ǀĂůƵĞ ŽĨ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ͘ K EĞǁ ŶŐůĂŶĚ ŚĂƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ĚĞǀĞůŽƉĞĚ Ă tŝŶƚĞƌ ZĞůŝĂďŝůŝƚLJ WƌŽŐƌĂŵ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ͕ ĂŵŽŶŐ ŽƚŚĞƌ ƚŚŝŶŐƐ͕ ƚŽ ƉƌŽƚĞĐƚ ŶĂƚƵƌĂů ŐĂƐ ĐƵƐƚŽŵĞƌƐ ĚƵƌŝŶŐ ĞdžƚƌĞŵĞ ĐŽůĚ ǁĞĂƚŚĞƌ ĞǀĞŶƚƐ͘ ŶŽƚŚĞƌ ĞdžĂŵƉůĞ͗ EĞǁ zŽƌŬ K ĐĂŶ ĂĐƚŝǀĂƚĞ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ƉƌŽŐƌĂŵƐ ŝŶ ƚŚĞ ǁŝŶƚĞƌ ƚŽ ŝŶĐƌĞĂƐĞ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ĚĞĐƌĞĂƐĞ ǁŝŶƚĞƌ ĚĞŵĂŶĚ͘ϳϳ 3-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ŝƐ ĚŝƐĐƵƐƐĞĚ ŝŶ ŐƌĞĂƚĞƌ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s ;Ensuring Electricity System Reliability Security and Resilience 3 2 2 3 Coal Natural Gas and Biomass Generation with Carbon Capture Utilization and Storage Low-Carbon Baseload dŚŽƵŐŚ ƚŚĞƌĞ ŝƐ ŝŶƚĞƌŶĂƚŝŽŶĂů ĐŽŶƐĞŶƐƵƐ ƚŚĂƚ h ǁŝůů ůŝŬĞůLJ ďĞ ƌĞƋƵŝƌĞĚ ƚŽ ƌĞĂůŝnjĞ ƚŚĞ ĞŵŝƐƐŝŽŶ ĐƵƚƐ ŶĞĞĚĞĚ ƚŽ ůŝŵŝƚ ŐůŽďĂů ǁĂƌŵŝŶŐ͕ϳϴ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĂŶĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ h ƚĞĐŚŶŽůŽŐLJ ůĂŐƐ ďĞŚŝŶĚ ŽƚŚĞƌ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ƉƌŝŵĂƌŝůLJ ĚƵĞ ƚŽ ĐŽƐƚ͘ϳϵ dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ Ă ŐůŽďĂů ůĞĂĚĞƌ ŝŶ ĞŶŚĂŶĐĞĚ Žŝů ƌĞĐŽǀĞƌLJ ; KZͿ͕ ǁŝƚŚ ƚŚĞ ůĂƌŐĞƐƚ KϮ ƉŝƉĞůŝŶĞ ŶĞƚǁŽƌŬ ŝŶ ƚŚĞ ǁŽƌůĚ͘ KϮ ƵƐĞĚ ĨŽƌ KZ ŚĂƐ ƉƌŽǀŝĚĞĚ ŝŵƉŽƌƚĂŶƚ ƌĞǀĞŶƵĞ ƐƚƌĞĂŵƐ ĨŽƌ h ƉƌŽũĞĐƚƐ ďƵƚ ŚĂƐ ďĞĞŶ ŝŶƐƵĨĨŝĐŝĞŶƚ ƚŽ ƐƵƉƉŽƌƚ ƐƵďƐƚĂŶƚŝĂů ĚĞƉůŽLJŵĞŶƚ͘ ƚƌŽŶŐĞƌ h ĚĞƉůŽLJŵĞŶƚ ƉŽůŝĐŝĞƐ ǁŽƵůĚ ŚĞůƉ ƚŽ ƉƌŽǀŝĚĞ ƚŚĞ ŵĂƌŬĞƚ ĐĞƌƚĂŝŶƚLJ ĂŶĚ ĨŝŶĂŶĐŝŶŐ ŶĞĞĚĞĚ ĨŽƌ ĚĞƉůŽLJŵĞŶƚ ĂŶĚ ƚŽ ĚĞǀĞůŽƉ ƐƵƉƉůLJ ĐŚĂŝŶƐ͕ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ĂŶĚ ƵůƚŝŵĂƚĞůLJ͕ ĞdžƉĂŶĚĞĚ ƉƌŝǀĂƚĞͲƐĞĐƚŽƌ ŝŶǀĞƐƚŵĞŶƚ ŝŶ h ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŽŶƚŝŶƵĞĚ ƌĞƐĞĂƌĐŚ͕ ĚĞǀĞůŽƉŵĞŶƚ͕ ĂŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶ ;Z Θ Ϳ ŝƐ ĂůƐŽ ĐƌŝƚŝĐĂů ƚŽ ŝŵƉƌŽǀŝŶŐ ƉĞƌĨŽƌŵĂŶĐĞ ĂŶĚ ĚƌŝǀŝŶŐ ĚŽǁŶ ƚŚĞ ĐŽƐƚƐ ŽĨ h ƚĞĐŚŶŽůŽŐŝĞƐ͘ 3 2 2 4 Hydropower Zero-Carbon Baseload and Flexibility Resourcek Ŷ ϮϬϭϰ͕ ƚŚĞƌĞ ǁĂƐ ϳϵ͘ϲ 't ŽĨ ŝŶƐƚĂůůĞĚ ŚLJĚƌŽƉŽǁĞƌ ĐĂƉĂĐŝƚLJ ĨƌŽŵ ĐŽŶǀĞŶƚŝŽŶĂů ĨĂĐŝůŝƚŝĞƐ ĂŶĚ Ϯϭ͘ϲ 't ĨƌŽŵ ƉƵŵƉĞĚ ƐƚŽƌĂŐĞ ŚLJĚƌŽƉŽǁĞƌ͘ϴϬ dŚĞ ĂǀĞƌĂŐĞ ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌ ŽĨ ĐŽŶǀĞŶƚŝŽŶĂů ŚLJĚƌŽĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŽƌƐ ǁĂƐ ϰϬ ƉĞƌĐĞŶƚ͘ dŚĞ ƚĞĐŚŶŝĐĂů ƌĞƐŽƵƌĐĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ŶĞǁ ŚLJĚƌŽƉŽǁĞƌ ĚĞǀĞůŽƉŵĞŶƚƐ ŝƐ ϲϱ͘ϱ 't͕ ĨŽĐƵƐĞĚ ůĂƌŐĞůLJ ŝŶ ƚŚĞ WĂĐŝĨŝĐ EŽƌƚŚǁĞƐƚ ĂŶĚ ZŽĐŬLJ DŽƵŶƚĂŝŶ tĞƐƚ ; ŝŐƵƌĞ ϯͲϴͿ͘ϴϭ dŚĞ ƚĞĐŚŶŝĐĂů ƌĞƐŽƵƌĐĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ƉŽǁĞƌŝŶŐ ĐƵƌƌĞŶƚůLJ ŶŽŶƉŽǁĞƌĞĚ ĚĂŵƐ ŝƐ ϭϮ 't͕ ĂŶ ŝŶĐƌĞĂƐĞ ŽĨ ϭϱ ƉĞƌĐĞŶƚ ŽǀĞƌ ƚŚĞ ĞdžŝƐƚŝŶŐ ĨůĞĞƚ͘ dŚŝƐ ƉŽƚĞŶƚŝĂů ŝƐ ĨŽĐƵƐĞĚ ŵĂŝŶůLJ ŽŶ ƚŚĞ DŝƐƐŝƐƐŝƉƉŝ ZŝǀĞƌ ĂŶĚ ŝƚƐ ŵĂũŽƌ ƚƌŝďƵƚĂƌŝĞƐ͕ ƐƵĐŚ ĂƐ ƚŚĞ KŚŝŽ ĂŶĚ ZĞĚ ZŝǀĞƌƐ͘ϴϮ hƉŐƌĂĚĞƐ ĂŶĚ ŽƉƚŝŵŝnjĂƚŝŽŶ ĨŽƌ ĞdžŝƐƚŝŶŐ ŚLJĚƌŽƉŽǁĞƌ ĨĂĐŝůŝƚŝĞƐ ĐŽƵůĚ ƉƌŽǀŝĚĞ ĂŶ ĂĚĚŝƚŝŽŶĂů ϱ͘ϲ 't͕ Žƌ ĂŶ ϴ ƚŽ ϭϬ ƉĞƌĐĞŶƚ ŝŶĐƌĞĂƐĞ͕ ŽĨ ŝŶĐƌĞĂƐĞĚ ŐĞŶĞƌĂƚŝŽŶ ĐĂƉĂĐŝƚLJ ƚŚƌŽƵŐŚ ƚƵƌďŝŶĞ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ĂŶĚ ĨĂĐŝůŝƚLJ ŽƉƚŝŵŝnjĂƚŝŽŶ͘ϴϯ LJĚƌŽƉŽǁĞƌ ĐŽŵƉƌŝƐĞƐ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϮϬ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͘ϴϰ Ŭ ZĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐŽƵƌĐĞƐ ƚŚĂƚ ŚĂǀĞ njĞƌŽ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ĐĂŶ ƌĞƐƵůƚ ŝŶ ŵĂƌŐŝŶĂů ĞŵŝƐƐŝŽŶƐ ǁŚĞŶ ĞǀĂůƵĂƚĞĚ ƚŚƌŽƵŐŚ ĂŶ ůŝĨĞͲĐLJĐůĞ ĂŶĂůLJƐŝƐ͖ ĨŽƌ ĞdžĂŵƉůĞ͕ ƐĞĞ ĞƉĂƌƚŵĞŶƚ ŽĨ ŶĞƌŐLJ ; K Ϳ͕ Hydropower Vision A New Chapter for America’s First Renewable Electricity Source ;KĂŬ ZŝĚŐĞ͕ dE͗ K ͕ ϮϬϭϲͿ͕ ŚƚƚƉƐ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬƐŝƚĞƐͬƉƌŽĚͬĨŝůĞƐͬϮϬϭϲͬϭϬͬĨϯϯͬ LJĚƌŽƉŽǁĞƌͲsŝƐŝŽŶͲ ϭϬϮϲϮϬϭϲͺϬ͘ƉĚĨ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-17 Chapter III Building a Clean Electricity Future Figure 3-8 U S New Stream-Reach Development Potential by Subbasin for the United States85 The technical resource potential for new hydropower developments is 65 5 GW focused largely in the Pacific Northwest and Rocky Mountain West ďŽƵƚ ŚĂůĨ ƚŚĞ h͘ ͘ ŚLJĚƌŽĞůĞĐƚƌŝĐ ĨůĞĞƚ ŝƐ ŽǀĞƌ ϱϬ LJĞĂƌƐ ŽůĚ ƐŝŶĐĞ ŵĂŶLJ ůĂƌŐĞ ĚĂŵƐ ǁĞƌĞ ďƵŝůƚ ďĞƚǁĞĞŶ ƚŚĞ ϭϵϰϬƐ ĂŶĚ ϭϵϲϬƐ ; ŝŐƵƌĞ ϯͲϵͿ͘ϴϲ ŽǁĞǀĞƌ͕ ǁŝƚŚ ƌŽƵƚŝŶĞ ŵĂŝŶƚĞŶĂŶĐĞ ĂŶĚ ƌĞĨƵƌďŝƐŚŵĞŶƚ ŽĨ ƚƵƌďŝŶĞƐ ĂŶĚ ĞůĞĐƚƌŝĐĂů ĞƋƵŝƉŵĞŶƚ͕ ƚŚĞ ĞdžƉĞĐƚĞĚ ůŝĨĞ ŽĨ Ă ŚLJĚƌŽƉŽǁĞƌ ĨĂĐŝůŝƚLJ ŝƐ ůŝŬĞůLJ ƚŽ ďĞ ϭϬϬ LJĞĂƌƐ Žƌ ŵŽƌĞ͘ 3-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-9 Age Profile of U S Hydropower Generation Fleet 201487 About half the U S hydroelectric fleet is over 50 years old Many large dams were built between the 1940s and 1960s dŚĞƌĞ ŚĂƐ ďĞĞŶ Ă ƌĞŶĞǁĞĚ ŝŶƚĞƌĞƐƚ ŝŶ ƚŚĞ ĨůĞdžŝďŝůŝƚLJ ďĞŶĞĨŝƚƐ ƚŚĂƚ ŵĂŶLJ ŚLJĚƌŽƉŽǁĞƌ ƉƌŽũĞĐƚƐ ĐĂŶ ŽĨĨĞƌ ƚŚĞ ŐƌŝĚ͕ ŐŝǀĞŶ ƚŚĞ ŐƌŽǁƚŚ ŝŶ ǀĂƌŝĂďůĞ ƌĞŶĞǁĂďůĞ ƐŽƵƌĐĞƐ͕ ĞƐƉĞĐŝĂůůLJ ǁŝŶĚ͘ ƌĞĐĞŶƚ ƌĞƉŽƌƚ ŶŽƚĞƐ ƚŚĂƚ ĂďŽƵƚ ŚĂůĨ ŽĨ Ăůů ŝŶƐƚĂůůĞĚ ŚLJĚƌŽƉŽǁĞƌ ĐĂƉĂĐŝƚLJ ;ϯϵ 'tͿ ŚĂƐ ŚŝŐŚ ĨůĞdžŝďŝůŝƚLJ ƉŽƚĞŶƚŝĂů ĂŶĚ ĐŽƵůĚ ƉůĂLJ ĂŶ ŝŵƉŽƌƚĂŶƚ ƌŽůĞ ŝŶ ůŽǁͲĐŽƐƚ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ǀĂƌŝĂďůĞ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŽƌƐ͘ϴϴ WƵŵƉĞĚ ŚLJĚƌŽƉŽǁĞƌ ƐƚŽƌĂŐĞ ĐĂŶ ďĞ ƵƐĞĚ ŝŶ ƉĞĂŬŝŶŐ ĂŶĚ ďĂůĂŶĐŝŶŐ ĂƉƉůŝĐĂƚŝŽŶƐ ƚŽ ŵĂŝŶƚĂŝŶ ŐƌŝĚ ƌĞůŝĂďŝůŝƚLJ ĂŶĚ ĐĂŶ ƉůĂLJ Ă ďĂůĂŶĐŝŶŐ ƌŽůĞ ŝŶ ĂƌĞĂƐ ǁŝƚŚ ŚŝŐŚ ƉĞŶĞƚƌĂƚŝŽŶƐ ŽĨ s ZƐ͘ ĂƌŐĞͲƐĐĂůĞ ŚLJĚƌŽƉŽǁĞƌ ƉƌŽũĞĐƚƐ ĂƌĞ ŽĨƚĞŶ ĚŝĨĨŝĐƵůƚ ƚŽ ĨŝŶĂŶĐĞ ĚƵĞ ƚŽ ŚŝŐŚ ĐĂƉŝƚĂů ĐŽƐƚƐ͕ ůĞŶŐƚŚLJ ƉĞƌŵŝƚƚŝŶŐ ƉĞƌŝŽĚƐ͕ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶĐĞƌŶƐ͘ tŚŝůĞ ƚŚĞ ƉƌŽƐƉĞĐƚƐ ĨŽƌ ďƵŝůĚŝŶŐ ǀĞƌLJ ůĂƌŐĞ͕ ŶĞǁ ĚĂŵƐ ĂƌĞ ůŽǁ͕ ƚŚĞƌĞ ĂƌĞ ŽƚŚĞƌ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ŚLJĚƌŽƉŽǁĞƌ ƚŽ ĞdžƉĂŶĚ ŝŶ ƚŚĞ h͘ ͘ ŐĞŶĞƌĂƚŝŽŶ ƉŽƌƚĨŽůŝŽ͘ hƉŐƌĂĚŝŶŐ ĞƋƵŝƉŵĞŶƚ Ăƚ ĞdžŝƐƚŝŶŐ ƐŝƚĞƐ ƚŽ ĞdžƉĂŶĚ ĐĂƉĂĐŝƚLJ ŝƐ ůŝŬĞůLJ ƚŽ ĐŽŶƚŝŶƵĞ͕ ĂŶĚ ƉƌŽũĞĐƚƐ Ăƚ ĐƵƌƌĞŶƚůLJ ŶŽŶƉŽǁĞƌĞĚ ĚĂŵ ƐŝƚĞƐ ĐŽƵůĚ ĐŽŶƚŝŶƵĞ ƚŽ ĂĚǀĂŶĐĞ͘ DŽĚĞƌŶ ůŽǁͲŝŵƉĂĐƚ͕ ĞŶǀŝƌŽŶŵĞŶƚĂůůLJ ƐƵƐƚĂŝŶĂďůĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ǁĂƚĞƌͲĞĨĨŝĐŝĞŶƚ ĂŶĚ “ĨŝƐŚͲĨƌŝĞŶĚůLJ” ƚƵƌďŝŶĞƐ͕ Žƌ ƌƵŶͲŽĨͲƌŝǀĞƌ ĂƉƉƌŽĂĐŚĞƐ ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ŝŶĐƌĞĂƐĞ ŚLJĚƌŽƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͘ ƵĐŚ ƵƉŐƌĂĚĞƐ ĂŶĚ ŽƉƚŝŵŝnjĂƚŝŽŶ ĨŽƌ ĞdžŝƐƚŝŶŐ ŚLJĚƌŽƉŽǁĞƌ ĨĂĐŝůŝƚŝĞƐ ĐŽƵůĚ ƉƌŽǀŝĚĞ ĂŶ ĂĚĚŝƚŝŽŶĂů ϱ͘ϲ 't ŶĂƚŝŽŶĂůůLJ͕ ĂůƚŚŽƵŐŚ ŝŶĚŝǀŝĚƵĂů ĨĂĐŝůŝƚŝĞƐ ŚĂǀĞ ƐĞĞŶ ŐĞŶĞƌĂƚŝŽŶ ŝŶĐƌĞĂƐĞƐ ŽĨ ϯϱ ƉĞƌĐĞŶƚ ǁŝƚŚ ŝŶǀĞƐƚŵĞŶƚ ƉĂLJďĂĐŬ ƉĞƌŝŽĚƐ ƵŶĚĞƌ Ϯ LJĞĂƌƐ͘ϴϵ ƚŝůů͕ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ŶĞǁ ŚLJĚƌŽƉŽǁĞƌ ĐĂƉĂĐŝƚLJ ƚŚĂƚ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ĐŽŵĞ ŽŶůŝŶĞ ŽǀĞƌ ƚŚĞ ŶĞĂƌ ƚŽ ŵŝĚͲƚĞƌŵ ŝƐ ƌĞůĂƚŝǀĞůLJ ŵŽĚĞƐƚ ǁŚĞŶ ĐŽŵƉĂƌĞĚ ƚŽ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ͘ KǀĞƌ ƚŚĞ ŶĞdžƚ ϭϬ LJĞĂƌƐ͕ ĞdžŝƐƚŝŶŐ Z ůŝĐĞŶƐĞƐ ǁŝůů ĞdžƉŝƌĞ ĨŽƌ ŶĞĂƌůLJ ϮϱϬ ŚLJĚƌŽƉŽǁĞƌ ƉƌŽũĞĐƚƐ͘ dŚĞƐĞ ĞdžƉŝƌŝŶŐ ĨĂĐŝůŝƚŝĞƐ ƚŽƚĂů ŵŽƌĞ ƚŚĂŶ ϭϲ͕ϬϬϬ Dt͕ Žƌ ŶĞĂƌůLJ ϮϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĞdžŝƐƚŝŶŐ ŝŶƐƚĂůůĞĚ ĐĂƉĂĐŝƚLJ͘ ƚ ƚĂŬĞƐ ĂŶ ĂǀĞƌĂŐĞ ŽĨ ϱ ƚŽ ϴ LJĞĂƌƐ ƚŽ ƌĞůŝĐĞŶƐĞ ĂŶ ĞdžŝƐƚŝŶŐ ŚLJĚƌŽ ƉƌŽũĞĐƚ͕ ǁŝƚŚ Ăƚ ůĞĂƐƚ ϯ LJĞĂƌƐ ŽĨ ƉƌĞͲĨŝůŝŶŐ ĂĐƚŝǀŝƚLJ ĂŶĚ ƚŚĞŶ Ăƚ ůĞĂƐƚ ĂŶŽƚŚĞƌ Ϯ LJĞĂƌƐ ĂĨƚĞƌ ƚŚĞ ĂƉƉůŝĐĂƚŝŽŶ ŝƐ ĨŝůĞĚ͘ KŶůLJ Ϯ͕ϭϵϴ ĚĂŵƐ ĂƌĞ ĐƵƌƌĞŶƚůLJ ƵƐĞĚ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-19 Chapter III Building a Clean Electricity Future ĨŽƌ ŚLJĚƌŽĞůĞĐƚƌŝĐŝƚLJ—ϯ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ Eation’s total dams Other uses for dams include navigation flood ĐŽŶƚƌŽů͕ ŝƌƌŝŐĂƚŝŽŶ͕ ĂŶĚ ƌĞĐƌĞĂƚŝŽŶ͘Ϳ ĚĚŝŶŐ ŚLJĚƌŽĞůĞĐƚƌŝĐŝƚLJ ƚŽ ƚŚĞƐĞ ƉƌĞĞdžŝƐƚŝŶŐ ĚĂŵƐ ǁŽƵůĚ ŝŶĐƌĞĂƐĞ ŚLJĚƌŽ ŐĞŶĞƌĂƚŝŽŶ ďLJ ϭϱ ƉĞƌĐĞŶƚ͕ ĂŶĚ ƚŚĞƐĞ ƉƌĞĞdžŝƐƚŝŶŐ ĚĂŵƐ ŵĂLJ ŶŽƚ ĨĂĐĞ ĂƐ ŵĂŶLJ ƐŝƚŝŶŐ ĐŽŶƐƚƌĂŝŶƚƐ ďĞĐĂƵƐĞ ƐŽŵĞ ŽĨ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ĨƌŽŵ ĚĂŵ ĐŽŶƐƚƌƵĐƚŝŽŶ ŚĂǀĞ ĂůƌĞĂĚLJ ďĞĞŶ ŝŶĐƵƌƌĞĚ͘ ƵĐŚ ĂĚĚŝƚŝŽŶƐ͕ ĐŽŵďŝŶĞĚ ǁŝƚŚ ƚŚĞ ĂďŝůŝƚLJ ƚŽ ůĞǀĞƌĂŐĞ ĂŶĚ ƵƉŐƌĂĚĞ ĞdžŝƐƚŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ Ăƚ ŶŽŶͲƉŽǁĞƌĞĚ ĚĂŵƐ͕ ǁŚŝĐŚ ǁŽƵůĚ ŝŶĐƌĞĂƐĞ ŚLJĚƌŽ ŐĞŶĞƌĂƚŝŽŶ ďLJ ϴ ƚŽ ϭϬ ƉĞƌĐĞŶƚ͕ ƉƌŽǀŝĚĞ ƐŝŐŶŝĨŝĐĂŶƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ŝŶĐƌĞĂƐĞ ŚLJĚƌŽƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ǁŚŝůĞ ƌĞĚƵĐŝŶŐ ĐŽƐƚƐ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ϵϬ 3 2 2 5 Biomass Net-Zero Carbon Renewable Baseload and Flexibility Resource ŝŽŵĂƐƐ ĨƵĞůƐ ŝŶĐůƵĚĞ Ă ďƌŽĂĚ ƌĂŶŐĞ ŽĨ ƐŽƵƌĐĞƐ͕ ŝŶĐůƵĚŝŶŐ ǁŽŽĚ ĂŶĚ ǁŽŽĚͲĚĞƌŝǀĞĚ ĨƵĞůƐ͕ ďůĂĐŬ ůŝƋƵŽƌ ;ƉƌŝŵĂƌŝůLJ ƉƵůƉ ƌĞƐŝĚƵĂůƐ ŝŶ ƚŚĞ ƉĂƉĞƌ ƉƌŽĚƵĐƚŝŽŶ ƉƌŽĐĞƐƐͿ͕ ŵƵŶŝĐŝƉĂů ƐŽůŝĚ ǁĂƐƚĞƐ͕ ůĂŶĚĨŝůů ŐĂƐ͕ ĂŶĚ ŽƚŚĞƌƐ͘ Ĩ ƚŚĞ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ĐŽŵďƵƐƚŝŶŐ ďŝŽŵĂƐƐ ĂƌĞ ĨƵůůLJ ŽĨĨƐĞƚ ďLJ ƚŚĞ ƐĞƋƵĞƐƚƌĂƚŝŽŶ ŽĨ KϮ ĂƐ ƚŚĞ ďŝŽŵĂƐƐ ŝƐ ŐƌŽǁŶ ǁŚĞŶ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ƚŚĞ ĐĂƌďŽŶ ĨůŽǁƐ ŝŶ ƉƌŽĚƵĐƚŝŽŶ ĂŶĚ ƉƌŽĐĞƐƐŝŶŐ ŽĨ ƚŚĞ ďŝŽŵĂƐƐ͕ ďŝŽŵĂƐƐ ĞůĞĐƚƌŝĐŝƚLJ ĐĂŶ ďĞ Ă ůŽǁͲĐĂƌďŽŶ ƌĞƐŽƵƌĐĞ͘ ŝŽƉŽǁĞƌ ƉůĂŶƚƐ ĂƌĞ ƚLJƉŝĐĂůůLJ ĨƵůůLJ ĚŝƐƉĂƚĐŚĂďůĞ ĂŶĚ ĂƌĞ ŐĞŶĞƌĂůůLJ ĚŝƐƉĂƚĐŚĞĚ ĂƐ ďĂƐĞůŽĂĚ ŐĞŶĞƌĂƚŝŽŶ ŝĨ ǀĂƌŝĂďůĞ ĂŶĚ ĨƵĞů ĐŽƐƚƐ ĂƌĞ ůŽǁ ĞŶŽƵŐŚ͘ ŝŽŵĂƐƐ ƐŽƵƌĐĞƐ ĐĂŶ ĞŝƚŚĞƌ ďĞ ĚŝƌĞĐƚůLJ ĐŽŵďƵƐƚĞĚ͕ ŐĂƐŝĨŝĞĚ ƚŽ ƉƌŽĚƵĐĞ Ă ƐLJŶƚŚĞƚŝĐ ĨƵĞů͕ Žƌ ĐŽͲĨŝƌĞĚ Ăƚ Ă ƐŵĂůů ĂŵŽƵŶƚ ;ƚLJƉŝĐĂůůLJ ƵƉ ƚŽ ϭϬ ƉĞƌĐĞŶƚ ŚĞĂƚ ĐŽŶƚĞŶƚͿ ǁŝƚŚ Ă ĐŽŶǀĞŶƚŝŽŶĂů ĨƵĞů ƐƵĐŚ ĂƐ ĐŽĂů͘ϵϭ Ŷ ϮϬϭϱ͕ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ďŝŽŵĂƐƐ ĂĐƌŽƐƐ Ăůů ƐĞĐƚŽƌƐ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϭϭ͘ϯ ƉĞƌĐĞŶƚ ŽĨ ƌĞŶĞǁĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ϭ͘ϲ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ ƐŝŐŶŝĨŝĐĂŶƚ ŶƵŵďĞƌ ŽĨ ďŝŽŵĂƐƐ ĨĂĐŝůŝƚŝĞƐ ĂƌĞ ƐŵĂůů ĞŶŽƵŐŚ ƚŚĂƚ ƚŚĞLJ ĐĂŶ ďĞ ůŽĐĂƚĞĚ ŶĞĂƌ ƚŚĞŝƌ ĨƵĞů ƐŽƵƌĐĞƐ͘ Ɛ ƐƵĐŚ͕ ŶĞĂƌůLJ ŚĂůĨ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚĞĚ ĨƌŽŵ ďŝŽŵĂƐƐ ŝŶ ϮϬϭϱ ǁĂƐ Ăƚ ŝŶĚƵƐƚƌŝĂů ĨĂĐŝůŝƚŝĞƐ ŽƵƚƐŝĚĞ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ͕ ƐƵĐŚ ĂƐ ƉƵůƉ ĂŶĚ ƉĂƉĞƌ ŵŝůůƐ͘ 'ĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ďŝŽŵĂƐƐ ĂĐƌŽƐƐ Ăůů ƐĞĐƚŽƌƐ ŐƌĞǁ ĨƌŽŵ ϱϲ dtŚ ŝŶ ϮϬϭϬ ƚŽ ϲϰ dtŚ ŝŶ ϮϬϭϱ͕ ĚƌŝǀĞŶ ƉƌŝŵĂƌŝůLJ ĨƌŽŵ ŶĞǁ ĐĂƉĂĐŝƚLJ ŝŶ ƐŽƵƚŚĞƌŶ ƐƚĂƚĞƐ͕ ƐƵĐŚ ĂƐ sŝƌŐŝŶŝĂ͕ ůŽƌŝĚĂ͕ ĂŶĚ 'ĞŽƌŐŝĂ͘ϵϮ 3 2 2 6 Geothermal Generation Zero-Carbon Baseload and Flexibility Resource 'ĞŽƚŚĞƌŵĂů ŐĞŶĞƌĂƚŽƌƐ ĂƌĞ ďĂƐĞůŽĂĚ ƉůĂŶƚƐ ĐĂƉĂďůĞ ŽĨ ƉƌŽǀŝĚŝŶŐ ǀĂůƵĂďůĞ ƐĞƌǀŝĐĞƐ ƚŽ ƚŚĞ ŐƌŝĚ͕ ƐƵĐŚ ĂƐ ŐĞŶĞƌĂƚŝŽŶ ĨůĞdžŝďŝůŝƚLJ͘ WƌŝŽƌ ƚŽ ϭϵϴϬ͕ ŐĞŽƚŚĞƌŵĂů ŐĞŶĞƌĂƚŝŽŶ ƌĞŵĂŝŶĞĚ ďĞůŽǁ ϱ dtŚ ĂŶŶƵĂůůLJ͘ ĞƚǁĞĞŶ ϭϵϴϬ ĂŶĚ ϭϵϴϵ͕ ŐĞŶĞƌĂƚŝŽŶ ƚƌŝƉůĞĚ ƚŽ ϭϱ dtŚ ĂƐ ŶĞǁ ĨĂĐŝůŝƚŝĞƐ ĐĂŵĞ ŽŶůŝŶĞ͘ DƵĐŚ ŽĨ ƚŚĞ ĞĂƌůLJ ŐƌŽǁƚŚ ŝŶ ŐĞŽƚŚĞƌŵĂů ƉŽǁĞƌ ǁĂƐ ĚƌŝǀĞŶ ďLJ WƵďůŝĐ hƚŝůŝƚLJ ZĞŐƵůĂƚŽƌLJ WŽůŝĐŝĞƐ Đƚ ŝŶĐĞŶƚŝǀĞƐ͕ ĂůƚŚŽƵŐŚ ƚŚŝƐ ĚƌŝǀĞƌ ŚĂƐ ĚĞĐůŝŶĞĚ ŽǀĞƌ ƚŝŵĞ ĂƐ ƚŚĞ ĂǀŽŝĚĞĚ ĐŽƐƚƐ ŽĨ ƵƚŝůŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŚĂǀĞ ĨĂůůĞŶ͘ Ɛ ŽĨ ϮϬϭϱ͕ ŐĞŽƚŚĞƌŵĂů ƉŽǁĞƌ ĐŽŶƚŝŶƵĞƐ ƚŽ ŐĞŶĞƌĂƚĞ ƌŽƵŐŚůLJ ϭϱ dtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂŶŶƵĂůůLJ͕ Žƌ ƌŽƵŐŚůLJ Ϭ͘ϰ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ϵϯ͕ ϵϰ ŚĂůůĞŶŐĞƐ ŝŶ ĞdžƉůŽƌŝŶŐ ŶĞǁ “ďůŝŶĚ” ŚLJĚƌŽƚŚĞƌŵĂů ƌĞƐŽƵƌĐĞƐ ĂŶĚ ůŽŶŐ ĚƌŝůůŝŶŐ ƚŝŵĞƐ ĨŽƌ ƉƌŽĚƵĐƚŝŽŶ ǁĞůůƐ ŚĂǀĞ ůĞĚ ƚŽ ŝŶĐƌĞĂƐĞĚ ƵŶĐĞƌƚĂŝŶƚLJ ĨŽƌ ŝŶǀĞƐƚŽƌƐ ŝŶ ůĂƌŐĞ ŐĞŽƚŚĞƌŵĂů ƉƌŽũĞĐƚƐ͘ ĚĚŝƚŝŽŶĂůůLJ͕ ƚĂdž ĐƌĞĚŝƚƐ ƚŚĂƚ ĂƌĞ ŽŶůLJ ĞdžƚĞŶĚĞĚ ĨŽƌ ƐŚŽƌƚ ƉĞƌŝŽĚƐ ŽĨ ƚŝŵĞ ĚŽ ŶŽƚ ƚĂŬĞ ŝŶƚŽ ĂĐĐŽƵŶƚ ƚŚĞ ůŽŶŐ ůĞĂĚ ƚŝŵĞ ŽĨ ŐĞŽƚŚĞƌŵĂů ƉƌŽũĞĐƚ ĚĞǀĞůŽƉŵĞŶƚ͕ ƐĐĂƌĐŝƚLJ ŽĨ ƉŽǁĞƌ ƉƵƌĐŚĂƐĞ ĂŐƌĞĞŵĞŶƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͕ Žƌ ŶĞĞĚ ĨŽƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ ƵƌƌĞŶƚ ĂŶĐŝůůĂƌLJ ƐĞƌǀŝĐĞ ĐŽŵƉĞŶƐĂƚŝŽŶ ŵŽĚĞůƐ ŝŶ ĂƌĞĂƐ ǁŝƚŚ ŵŽƐƚ ŐĞŽƚŚĞƌŵĂů ĚĞǀĞůŽƉŵĞŶƚ ĚŽ ŶŽƚ ƉƌŽǀŝĚĞ ƐƵĨĨŝĐŝĞŶƚ ƌĞǀĞŶƵĞ ƚŽ ǁĂƌƌĂŶƚ ƚŚĞ ŝŶĐƌĞĂƐĞĚ ŽƉĞƌĂƚŝŽŶĂů ĂŶĚ ĐŽŶƚƌŽů ƌĞƚƌŽĨŝƚƚŝŶŐ ĞdžƉĞŶƐĞƐ͘ Ĩ ĂƉƉƌŽƉƌŝĂƚĞůLJ ǀĂůƵĞĚ͕ ƚŚĞ ƐĞƌǀŝĐĞƐ Ă ŐĞŽƚŚĞƌŵĂů ƉůĂŶƚ ĐĂŶ ƉƌŽǀŝĚĞ ŝŶĐůƵĚĞ ƌĞŐƵůĂƚŝŽŶ͕ ůŽĂĚ ĨŽůůŽǁŝŶŐ͕ ƐƉŝŶŶŝŶŐ ƌĞƐĞƌǀĞƐ͕ ŶŽŶƐƉŝŶŶŝŶŐ ƌĞƐĞƌǀĞ͕ ĂŶĚ ƌĞƉůĂĐĞŵĞŶƚ Žƌ ƐƵƉƉůĞŵĞŶƚĂů ƌĞƐĞƌǀĞ͘ϵϱ 3 2 2 7 Nuclear Generation Zero-Carbon Baseload EƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ĐŽŵƉƌŝƐĞƐ ϲϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ Nation’s ĐƵƌƌĞŶƚ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ͘ϵϲ dŚĞ ĐƵƌƌĞŶƚ ŽƉĞƌĂƚŝŶŐ ŶƵĐůĞĂƌ ƉŽǁĞƌ ĨůĞĞƚ ;ϵϵ ƌĞĂĐƚŽƌƐͿ ĐŽŶƐŝƐƚƐ ŽĨ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϱϰ 't ŽĨ ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ ŝŶ ƌĞŐƵůĂƚĞĚ ŵĂƌŬĞƚƐ ĂŶĚ ϰϱ 't ŝŶ ƌĞƐƚƌƵĐƚƵƌĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚƐ͘ϵϳ KĨ ƚŚĞ ϵϵ ŽƉĞƌĂƚŝŶŐ ŶƵĐůĞĂƌ ƌĞĂĐƚŽƌƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƐŽ ĨĂƌ͕ ϴϬ ŚĂǀĞ ďĞĞŶ ĂƉƉƌŽǀĞĚ ƚŽ ;ĂŶĚ ƉůĂŶ ƚŽͿ ŽƉĞƌĂƚĞ ĨŽƌ ϲϬ LJĞĂƌƐ͕ ǁŚŝůĞ ĂŶŽƚŚĞƌ ϵ 3-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĐƵƌƌĞŶƚůLJ ŚĂǀĞ ĂƉƉůŝĐĂƚŝŽŶƐ ƵŶĚĞƌ ƌĞǀŝĞǁ͘ϵϴů dŚĞ ƚŝŵĞůŝŶĞ ĨŽƌ ƚŚĞƐĞ ƵŶŝƚƐ ƚŽ ƌĞĂĐŚ ƚŚĞ ĞŶĚ ŽĨ ƚŚĞŝƌ ϲϬͲLJĞĂƌ ůŝĐĞŶƐĞ ŝƐ ĂƐ ĨŽůůŽǁƐ͗ ϲ ƵŶŝƚƐ ďĞƚǁĞĞŶ ϮϬϮϵ–ϮϬϯϬ͖ Ϯϳ ƵŶŝƚƐ ďĞƚǁĞĞŶ ϮϬϯϭ–ϮϬϯϱ͖ ϭϱ ƵŶŝƚƐ ďĞƚǁĞĞŶ ϮϬϯϲ– ϮϬϰϬ͖ ϮϬ ƵŶŝƚƐ ďĞƚǁĞĞŶ ϮϬϰϭ–ϮϬϰϱ͖ ĂŶĚ ϭϮ ƵŶŝƚƐ ďĞƚǁĞĞŶ ϮϬϰϲ–ϮϬϱϬ͘ϵϵ ŽƌƚLJͲĞŝŐŚƚ ƵŶŝƚƐ ǁŝůů ƌĞĂĐŚ ƚŚĞ ĞŶĚ ŽĨ ƚŚĞŝƌ ůŝĐĞŶƐĞĚ ůŝĨĞƚŝŵĞ ďLJ ϮϬϰϬ͕ ƚŚĞ ƚŝŵĞĨƌĂŵĞ ĐŽǀĞƌĞĚ ďLJ Y Z ϭ͘Ϯ͘ ; ŝŐƵƌĞ ϯͲϭϬͿŵ͕ ϭϬϬ tŝƚŚŽƵƚ ƌĞŶĞǁĂůƐ ƚŽ ϴϬ LJĞĂƌƐ͕ ƚŚĞƌĞ ǁŝůů ďĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ůŽƐƐ ŽĨ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ƐƚĂƌƚŝŶŐ ŝŶ ƚŚĞ ϮϬϯϬƐ͘ ůƐŽ͕ ŝĨ ƚŚĞƐĞ ƉůĂŶƚƐ ǁĞƌĞ ƚŽ Ăůů ƌĞƋƵĞƐƚ Ă ůŝĐĞŶƐĞ ƌĞŶĞǁĂů ƚŽ ϴϬ LJĞĂƌƐ͕ ŝƚ ǁŽƵůĚ ƌĞƉƌĞƐĞŶƚ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĂĚĚŝƚŝŽŶĂů ǁŽƌŬůŽĂĚ ĨŽƌ EZ ƐƚĂĨĨ ĂŶĚ ĐŽŵŵŝƐƐŝŽŶĞƌƐ͘ dǁŽ ƉůĂŶƚƐ͕ ƵƌƌLJ WŽǁĞƌ ƚĂƚŝŽŶ ĂŶĚ WĞĂĐŚ ŽƚƚŽŵ EƵĐůĞĂƌ 'ĞŶĞƌĂƚŝŶŐ ƚĂƚŝŽŶ͕ ŚĂǀĞ ĂŶŶŽƵŶĐĞĚ ŝŶƚĞŶƚŝŽŶƐ ƚŽ ƐĞĞŬ ƐƵďƐĞƋƵĞŶƚ ůŝĐĞŶƐĞ ƌĞŶĞǁĂůƐ͕ ĂŶĚ ŽƚŚĞƌƐ ĂƌĞ ĂůƐŽ ĞdžƉĞĐƚĞĚ ƚŽ ĚŽ ƐŽ͘ ů ŝĂďůŽ ĂŶLJŽŶ ϭ ĂŶĚ Ϯ ĂƌĞ ƵŶĚĞƌ ƌĞǀŝĞǁ͕ ďƵƚ W'Θ ŚĂƐ ĂŶŶŽƵŶĐĞĚ ŝƚ ǁŝůů ǁŝƚŚĚƌĂǁ ƚŚĞ ĂƉƉůŝĐĂƚŝŽŶ ŵ dŚĞƐĞ ĂƌĞ ƚŚĞ ĞŶĚ ĚĂƚĞƐ ǁŝƚŚ ĨŝƌƐƚ ůŝĐĞŶƐĞ ƌĞŶĞǁĂů͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-21 Chapter III Building a Clean Electricity Future Figure 3-10 Current and Projected Nuclear Capacity Assuming No Subsequent License Renewals101 102 The top map in the figure shows U S nuclear power capacity in MW by state in 2016 as of December 15 2016 The bottom map shows what the U S nuclear power capacity by state would be in 2040 December 31 2040 assuming that all reactors except those that have already specified closure dates shut down at the expiration of their currently approved licenses 3-22 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 tŚŝůĞ ĞƐƚŝŵĂƚĞƐ ŽĨ ƚŚĞ ƚŽƚĂů ĂŵŽƵŶƚ ŽĨ ĂƚͲƌŝƐŬ ĐĂƉĂĐŝƚLJ ǀĂƌLJ͕ ŽŶĞ ƌĞĐĞŶƚ ĂŶĂůLJƐŝƐ ƐƵŐŐĞƐƚƐ ƚŚĂƚ ƚŚĞ ĐĂƉĂĐŝƚLJ ŽĨ ƌĞƚŝƌĞĚ Žƌ ĂƚͲƌŝƐŬ ŶƵĐůĞĂƌ ƉŽǁĞƌ ƉůĂŶƚƐ ďLJ ϮϬϯϬ ŝƐ ĂďŽƵƚ Ϯϴ 't͕ Ă ůŝƚƚůĞ ŽǀĞƌ ŽŶĞͲƋƵĂƌƚĞƌ ŽĨ h͘ ŶƵĐůĞĂƌ ƉůĂŶƚ ĐĂƉĂĐŝƚLJ͖ ĂƚͲƌŝƐŬ ƉůĂŶƚ ĐĂƉĂĐŝƚLJ ǀĂƌŝĞƐ ďLJ ƌĞŐŝŽŶ͕ ǁŝƚŚ ƚŚĞ ĂƐƚ EŽƌƚŚ ĞŶƚƌĂů ŵŽƐƚ ĂĨĨĞĐƚĞĚ ; ŝŐƵƌĞ ϯͲ ϭϭͿ͘ϭϬϯ ĞǀĞƌĂů ŶƵĐůĞĂƌ ƉŽǁĞƌ ƉůĂŶƚƐ͕ ƉĂƌƚŝĐƵůĂƌůLJ ƚŚŽƐĞ ǁŝƚŚ ƐŝŶŐůĞ ƵŶŝƚƐ͕ ĨĂĐĞ ůĂƌŐĞ ƌĞĐƵƌƌŝŶŐ ĨŝdžĞĚ ĐŽƐƚƐ͘ ŽŵĞ ŽĨ ƚŚĞƐĞ ĐŽƐƚƐ ĂƌĞ ĚƵĞ ƚŽ ƉŽƐƚͲ ƵŬƵƐŚŝŵĂ ƌĞƋƵŝƌĞŵĞŶƚƐ͕ ďƵƚ ŵĂŶLJ ĂƌĞ ƐŝŵƉůLJ ƚŚĞ ĐŽƐƚƐ ŽĨ ŽƉĞƌĂƚŝŽŶ͕ ƐƵĐŚ ĂƐ ƐĞĐƵƌŝƚLJ͕ ƐĂůĂƌŝĞƐ͕ ĞƚĐ͘ ĞǀĞƌĂů ƉůĂŶƚƐ ŚĂǀĞ ĂůƐŽ ŶĞĞĚĞĚ ůĂƌŐĞ ĐĂƉŝƚĂů ĞdžƉĞŶĚŝƚƵƌĞƐ͖ ĨĂĐĞĚ ǁŝƚŚ ƚŚĞƐĞ ƐŝŐŶŝĨŝĐĂŶƚ ĐŽƐƚƐ͕ ƉůĂŶƚ ŽƉĞƌĂƚŽƌƐͬŽǁŶĞƌƐ ŚĂǀĞ ĐŚŽƐĞŶ ƚŽ ƐŚƵƚ ƚŚĞŵ ĚŽǁŶ͘ ŝŶĐĞ ϮϬϭϮ͕ ǁŚĞŶ ϭϬϰ ƌĞĂĐƚŽƌƐ ǁĞƌĞ ŽƉĞƌĂƚŝŶŐ͕ Ɛŝdž ƵŶŝƚƐ ƚŽƚĂůŝŶŐ ϰ͘ϳ 't ŚĂǀĞ ƐŚƵƚ ĚŽǁŶ ĞĂƌůŝĞƌ ƚŚĂŶ ƚŚĞŝƌ ůŝĐĞŶƐĞĚ ůŝĨĞƚŝŵĞ͘ dǁŽ ƌĞƚŝƌĞŵĞŶƚƐ͕ ĂŶ KŶŽĨƌĞ ĂŶĚ ƌLJƐƚĂů ZŝǀĞƌ͕ ŚĂǀĞ ďĞĞŶ ĚƌŝǀĞŶ ďLJ ŵĞĐŚĂŶŝĐĂů ĨĂŝůƵƌĞƐ ƚŚĂƚ ǁĞƌĞ ĚĞĞŵĞĚ ƚŽŽ ĐŽƐƚůLJ ƚŽ ƌĞƉĂŝƌ͖ ƚŚĞ ŽƚŚĞƌƐ ǁĞƌĞ ŵĂƌŬĞƚ ĚĞĐŝƐŝŽŶƐ͘ Ɛ ŽĨ ĞĐĞŵďĞƌ ϮϬϭϲ͕ ƚĞŶ ŽƚŚĞƌ ƵŶŝƚƐ ƚŽƚĂůŝŶŐ ϴ͘ϲ 't ŽĨ ĐĂƉĂĐŝƚLJ ŚĂǀĞ ĂŶŶŽƵŶĐĞĚ ƉůĂŶƐ ƚŽ ĐůŽƐĞ ŝŶ ƚŚĞ ŶĞdžƚ ĚĞĐĂĚĞ ;ƚŚŽƵŐŚ Ɛŝdž ŽĨ ƚŚĞƐĞ ƵŶŝƚƐ ŵĂLJ ŶŽƚ ĐůŽƐĞ ďĞĐĂƵƐĞ ŽĨ ƌĞĐĞŶƚ ƐƚĂƚĞ ĂĐƚŝŽŶƐͿ͖ ĞŝŐŚƚ ŽĨ ƚŚŽƐĞ ĐůŽƐƵƌĞƐ͕ ǁŝƚŚ ƚŚĞ ĞdžĐĞƉƚŝŽŶ ŽĨ ƚǁŽ ƵŶŝƚƐ Ăƚ ŝĂďůŽ ĂŶLJŽŶ͕ would occur prior to the expiration of the unit’s existing licenses ĞǀĞŶ ŽĨ ƚŚĞ ĂŶŶŽƵŶĐĞĚ ƌĞƚŝƌĞŵĞŶƚƐ͕ Ăůů ƚŚŽƐĞ ĞdžĐĞƉƚ KLJƐƚĞƌ ƌĞĞŬ ĂŶĚ ŝĂďůŽ ĂŶLJŽŶ͕ ǁĞƌĞ ĂƚƚƌŝďƵƚĞĚ ƚŽ ŵĂƌŬĞƚ ĐŽŶĚŝƚŝŽŶƐ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƉůĂŶƚƐ ǁŝƚŚ ŚŝŐŚ ƌĞĐƵƌƌŝŶŐ ĨŝdžĞĚ ĐŽƐƚƐ͕ ƉŽƐƚͲ ƵŬƵƐŚŝŵĂ͕ ŵĂƌŬĞƚ ƐƚƌƵĐƚƵƌĞƐ ŚĂǀĞ ŚĂĚ ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚƐ ŽŶ ƚŚĞ ĞĐŽŶŽŵŝĐƐ ŽĨ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ͘ Ŷ ƐƚĂƚĞƐ ǁŝƚŚ ƌĞƐƚƌƵĐƚƵƌĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŵĂƌŬĞƚƐ͕ ŶƵĐůĞĂƌ ŽƉĞƌĂƚŽrs have found it to be increasingly difficult to compete under today’s market conditions ǁŚĞƌĞ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝƐ ĨůĂƚ Žƌ ĚĞĐůŝŶŝŶŐ͕ ŶĂƚƵƌĂů ŐĂƐ ƉƌŝĐĞƐ ĂŶĚ ĐĂƉŝƚĂů ĐŽƐƚƐ ĨŽƌ ŶĞǁ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ ůŽǁ͕ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ĐŽƐƚƐ ĂƌĞ ĚĞĐůŝŶŝŶŐ ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐŝĞƐ ĨĂǀŽƌ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͘ dŚĞƌĞ ĂƌĞ ŚŽǁĞǀĞƌ͕ ŶĞǁ ŶƵĐůĞĂƌ ƌĞĂĐƚŽƌƐ ƵŶĚĞƌ ĐŽŶƐƚƌƵĐƚŝŽŶ ŝŶ ǀĞƌƚŝĐĂůůLJ ŝŶƚĞŐƌĂƚĞĚ ŵĂƌŬĞƚƐ͘ tĂƚƚƐ Ăƌ Ϯ ĞŶƚĞƌĞĚ ƐĞƌǀŝĐĞ ŝŶ dĞŶŶĞƐƐĞĞ ŝŶ ϮϬϭϲ͕ ĂŶĚ ĨŽƵƌ ĂĚĚŝƚŝŽŶĂů ƌĞĂĐƚŽƌƐ ĂƌĞ ƵŶĚĞƌ ĐŽŶƐƚƌƵĐƚŝŽŶ ŝŶ 'ĞŽƌŐŝĂ ĂŶĚ ŽƵƚŚ ĂƌŽůŝŶĂ ƚŚĂƚ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ĞŶƚĞƌ ĐŽŵŵĞƌĐŝĂů ŽƉĞƌĂƚŝŽŶ ŝŶ ƚŚĞ ϮϬϭϵ–ϮϬϮϬ ƚŝŵĞĨƌĂŵĞ͘ Ŷ ϮϬϭϲ͕ ƚǁŽ ƐƚĂƚĞƐ͕ ůůŝŶŽŝƐ ĂŶĚ EĞǁ zŽƌŬ ƉƵƚ ƉŽůŝĐŝĞƐ ŝŶ ƉůĂĐĞ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ƚŚĞ ĐŽŶƚŝŶƵĞĚ ŽƉĞƌĂƚŝŽŶ ŽĨ ŶƵĐůĞĂƌ ƉůĂŶƚƐ͘ dŚĞ EĞǁ zŽƌŬ WƵďůŝĐ ĞƌǀŝĐĞ ŽŵŵŝƐƐŝŽŶ ĨŝŶĂůŝnjĞĚ ŝƚƐ ůĞĂŶ ŶĞƌŐLJ ƚĂŶĚĂƌĚ ; Ϳ ŽŶ ƵŐƵƐƚ ϭ͕ ϮϬϭϲ͕ ǁŚŝĐŚ ĐŽŶƚĂŝŶƐ Ă ϱϬ ƉĞƌĐĞŶƚ ƌĞŶĞǁĂďůĞ ƚĂƌŐĞƚ ďLJ ϮϬϯϬ͕ ĂůŽŶŐ ǁŝƚŚ njĞƌŽͲĞŵŝƐƐŝŽŶ ĐƌĞĚŝƚƐ ; ƐͿ ĨŽƌ ŶƵĐůĞĂƌ ƉůĂŶƚƐ͘ dŚĞ ŐŽĂů ŽĨ ƚŚĞ ƉŽůŝĐLJ ŝƐ ƚŽ ƉƌŽǀŝĚĞ ƌĞǀĞŶƵĞ ƐƵƉƉŽƌƚ ĨŽƌ ƚŚƌĞĞ ƉůĂŶƚƐ ƚŚĂƚ ŚĂĚ ďĞĞŶ Ăƚ ƌŝƐŬ ĨŽƌ ƉƌĞŵĂƚƵƌĞ ƌĞƚŝƌĞŵĞŶƚ͗ 'ŝŶŶĂ͕ EŝŶĞ DŝůĞ͕ ĂŶĚ ŝƚnjWĂƚƌŝĐŬ͘ ĐĐŽƌĚŝŶŐ ƚŽ ĂŶĂůLJƐŝƐ ĨƌŽŵ h ͕ ƚŚĞ ƉŽůŝĐLJ ǁŽƵůĚ ĞƐƐĞŶƚŝĂůůLJ ŐƵĂƌĂŶƚĞĞ ƌĞǀĞŶƵĞͲƉŽƐŝƚŝǀĞ ŽƉĞƌĂƚŝŽŶƐ ĨŽƌ ƚŚĞ ƚŚƌĞĞ ƉůĂŶƚƐ ƚŚƌŽƵŐŚ Ă ƐƚĂďůĞ ůĞǀĞů ŽĨ ĐŽŵƉĞŶƐĂƚŝŽŶ͘ϭϬϰ ůůŝŶŽŝƐ ĞŶĂĐƚĞĚ Ă ƐŝŵŝůĂƌ ƉŽůŝĐLJ ĂƐ ƉĂƌƚ ŽĨ ĐŽŵƉƌĞŚĞŶƐŝǀĞ ĞŶĞƌŐLJ ůĞŐŝƐůĂƚŝŽŶ ŝŶ ĞĐĞŵďĞƌ ϮϬϭϲ͘ ůƐŽ͕ ƚŚĞ ĞĐƌĞƚĂƌLJ ŽĨ ŶĞƌŐLJ’s ĚǀŝƐŽƌLJ ŽĂƌĚ dĂƐŬ ŽƌĐĞ ŽŶ EƵĐůĞĂƌ ŶĞƌŐLJ ŝƐƐƵĞĚ Ă ƌĞƉŽƌƚ ĚĞƐĐƌŝďŝŶŐ ŝŶŝƚŝĂƚŝǀĞƐ ƚŚĂƚ ǁŽƵůĚ ůĞĂĚ ƚŽ Ă ƐŝŐŶŝĨŝĐĂŶƚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ŶƵĐůĞĂƌ ƉŽǁĞƌ ŝŶ ϮϬϯϬ– ϮϬϱϬ ƚŝŵĞĨƌĂŵĞ͘ ƚ ŽƵƚůŝŶĞƐ ƉƌŽŐƌĂŵƐ ĂŶĚ ĞĨĨŽƌƚƐ ĨŽƌ ďŽƚŚ ŶĞǁ ĂŶĚ ĞdžŝƐƚŝŶŐ ŶƵĐůĞĂƌ ƉŽǁĞƌ ĂŶĚ ĂůƐŽ ĂĚǀĂŶĐĞĚ ƌĞĂĐƚŽƌ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĂƌĞ ŶŽƚ ďĂƐĞĚ ŽŶ ƚƌĂĚŝƚŝŽŶĂů ůŝŐŚƚͲǁĂƚĞƌ ƌĞĂĐƚŽƌ ĚĞƐŝŐŶƐ͘ϭϬϱ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-23 Chapter III Building a Clean Electricity Future Figure 3-11 Nuclear Units at Risk or Recently Retired by Census Region106 Across the country over 28 GW of nuclear generating capacity is at risk or recently retired most of which is in the East North Central region Ɛ ŶŽƚĞĚ͕ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ϲϬй ŽĨ njĞƌŽͲĐĂƌďŽŶ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ h͘ ͘ ƚ ŝƐ ŝŵƉŽƌƚĂŶƚ ƚŽ ǁĞŝŐŚ ƚŚĞ ĐŽƐƚƐ ŽĨ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ĐŽŵƉĂƌĞĚ ƚŽ ŽƚŚĞƌ njĞƌŽ ĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƚŽ ůŽǁͲĐĂƌďŽŶ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ƌĞůĂƚŝǀĞ ǀĂůƵĞ ŽĨ ĂƚͲƌŝƐŬ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ƵŶŝƚƐ͘ ƌĞĐĞŶƚ ĂŶĂůLJƐŝƐ ĞƐƚŝŵĂƚĞĚ ƚŚĞ “ƌĞǀĞŶƵĞ ŐĂƉ” – ƚŚĞ ĐŽƐƚ ŽĨ ŝŶĐĞŶƚŝǀĞƐ ĨŽƌ ŬĞĞƉŝŶŐ ĐĞƌƚĂŝŶ ŶƵĐůĞĂƌ ƵŶŝƚƐ ƌƵŶŶŝŶŐ – ĨŽƌ Ă ĚŝƐĐƌĞƚĞ ďƵƚ ƌĞƉƌĞƐĞŶƚĂƚŝǀĞ ƐĞƚ ŽĨ ŶƵĐůĞĂƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŶŐ ƵŶŝƚƐ͘ϭϬϳ K ƚŚĞŶ ĂŶĂůLJnjĞĚ ƚŚĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ďĞŶĞĨŝƚƐ ŽĨ ŬĞĞƉŝŶŐ ƚŚŝƐ ƐĞƚ ŽĨ ƉůĂŶƚƐ ŽƉĞŶ ďLJ ƵƐŝŶŐ Ă ƐŽĐŝĂů ĐŽƐƚ ŽĨ ĐĂƌďŽŶ ŽĨ ΨϰϭͬŵĞƚƌŝĐ ƚŽŶ͘ ƐƐƵŵŝŶŐ ƚŚĂƚ Ăůů ŐĞŶĞƌĂƚŝŽŶ ĨƌŽŵ ƌĞƚŝƌŝŶŐ ŶƵĐůĞĂƌ ƉůĂŶƚƐ ŝŶ ƚŚŝƐ ĚŝƐĐƌĞƚĞ ƐĞƚ ǁŽƵůĚ ŽƚŚĞƌǁŝƐĞ ďĞ ƌĞƉůĂĐĞĚ ǁŝƚŚ ŐĂƐ ŐĞŶĞƌĂƚŝŽŶ͕ ŬĞĞƉŝŶŐ Ăůů ďƵƚ ŽŶĞ ŽĨ ƚŚĞ ŶƵĐůĞĂƌ ƵŶŝƚƐ ŽƉĞŶ ǁŽƵůĚ ŚĂǀĞ ŚŝŐŚĞƌ ďĞŶĞĨŝƚƐ ƚŚĂŶ ĐŽƐƚƐ͘ DOE’s ĂŶĂůLJƐŝƐ ŽŶůLJ ůŽŽŬĞĚ Ăƚ ƚŚĞ ĐĂƌďŽŶ ďĞŶĞĨŝƚƐ ŽĨ ĂƚͲƌŝƐŬ ŐĞŶĞƌĂƚŽƌƐ͖ ƚŚĞƌĞ ĂƌĞ ŽƚŚĞƌ͕ ŶŽŶͲĐĂƌďŽŶ ďĞŶĞĨŝƚƐ ŽĨ 3-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƌĞƚĂŝŶŝŶŐ ĞdžŝƐƚŝŶŐ ŶƵĐůĞĂƌ ƉŽǁĞƌ͕ ŝŶĐůƵĚŝŶŐ ũŽďƐ͕ ƌĞůŝĂďŝůŝƚLJ͕ ĂŶĚ ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ ďĞŶĞĨŝƚƐ ĂƐ ǁĞůů͘ EƵĐůĞĂƌ ƉůĂŶƚƐ ŐĞŶĞƌĂůůLJ ŽŶůLJ ƐŚƵƚ ĚŽǁŶ ĨŽƌ ŵĂŝŶƚĞŶĂŶĐĞ ĂĐƚŝǀŝƚŝĞƐ͕ ĂŶĚ ĨŽƌĐĞĚ ŽƵƚĂŐĞƐ ĂƌĞ ǀĞƌLJ ƌĂƌĞ͕ dŚĞ ĐĂƌďŽŶ ŝŶƚĞŶƐŝƚLJ ŽĨ ƚŚĞ ƌĞƉůĂĐĞŵĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ĨŽƌ ƌĞƚŝƌŝŶŐ ŶƵĐůĞĂƌ ƉůĂŶƚƐ ŝƐ Ă ŬĞLJ ƵŶŬŶŽǁŶ͘ Ĩ ƚŚĞ ƌĞƉůĂĐĞŵĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ůĞƐƐ ĐĂƌďŽŶ ŝŶƚĞŶƐŝǀĞ ƚŚĂŶ ŶĂƚƵƌĂů ŐĂƐ͕ ĨĞǁĞƌ ƉůĂŶƚƐ ǁŽƵůĚ ƉĂƐƐ ƚŚŝƐ ĐŽƐƚͲďĞŶĞĨŝƚ ƚĞƐƚ͘ Ĩ ƚŚĞ ƌĞƉůĂĐĞŵĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ŵŽƌĞ ĐĂƌďŽŶ ŝŶƚĞŶƐŝǀĞ͕ ŵŽƌĞ ƉůĂŶƚƐ ǁŽƵůĚ ƉĂƐƐ ƚŚŝƐ ĐŽƐƚͲďĞŶĞĨŝƚ ƚĞƐƚ͘ ƚ ŝƐ ƉŽƐƐŝďůĞ ƚŚĂƚ ƐŽŵĞ ĐŽĂů ŵĂLJ ƌĞƉůĂĐĞ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƐƉĞĐŝĨŝĐ ƌĞŐŝŽŶƐ͘ tŚĞŶ ĂŶĂůLJnjŝŶŐ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ƉƌĞŵĂƚƵƌĞ ŶƵĐůĞĂƌ ƌĞƚŝƌĞŵĞŶƚƐ ŽŶ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ ƐƚĂƚĞ͕ Ă ƐƚĂƚĞ ŽĨ ůůŝŶŽŝƐ ƌĞƉŽƌƚ ĐŽŶƐŝĚĞƌĞĚ Ă ƐĐĞŶĂƌŝŽ ŝŶ ǁŚŝĐŚ ϴϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ƌĞƉůĂĐĞŵĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ǁĂƐ ĐŽĂů͘ϭϬϴ KƚŚĞƌ ĂŶĂůLJƐŝƐ ĐŽŶĐůƵĚĞƐ ƚŚĂƚ ƌŽƵŐŚůLJ ϳϱ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ĂƚͲƌŝƐŬ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ ŶĂƚŝŽŶǁŝĚĞ ǁŽƵůĚ ďĞ ƌĞƉůĂĐĞĚ ǁŝƚŚ ĨŽƐƐŝů ŐĞŶĞƌĂƚŝŽŶ͕ ůĂƌŐĞůLJ ƉŽǁĞƌĞĚ ǁŝƚŚ ŶĂƚƵƌĂů ŐĂƐ͘ϭϬϵ ƵĨĨŝĐŝĞŶƚůLJ ĨĂǀŽƌĂďůĞ ƌĞǀĞŶƵĞ͕ ƚĞĐŚŶŽůŽŐLJ ƉĞƌĨŽƌŵĂŶĐĞ͕ ƉŽůŝĐLJ͕ ĂŶĚ ŵĂƌŬĞƚ ĐŽŶĚŝƚŝŽŶƐ ĞŶĂďůĞ ĨŝŶĂŶĐŝŶŐ ĨŽƌ ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ͘ dŽ ĂĐĐĞůĞƌĂƚĞ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĐůĞĂŶ ƐLJƐƚĞŵƐ͕ ĨĞĚĞƌĂů ƉŽůŝĐŝĞƐ ĐĂŶ ĂĚĚƌĞƐƐ ƚŚĞ ďĂƌƌŝĞƌƐ ĚŝƐĐƵƐƐĞĚ ŝŶ ƚŚŝƐ ƐĞĐƚŝŽŶ ĂŶĚ ŵĂLJ ĐƌĞĂƚĞ ƚŚĞ ĐŽŶĚŝƚŝŽŶƐ ƵŶĚĞƌ ǁŚŝĐŚ ŵŽƌĞ ĐůĞĂŶ ƌĞƐŽƵƌĐĞƐ ĐĂŶ ŽďƚĂŝŶ ĨŝŶĂŶĐŝŶŐ͘ dŚĞƐĞ ƉŽůŝĐŝĞƐ ŝŶĐůƵĚĞ ŵĞĐŚĂŶŝƐŵƐ ƚŚĂƚ ŝŶĐƌĞĂƐĞ ƚŚĞ ĨŝŶĂŶĐŝĂů ƌĞƚƵƌŶ ŽŶ ĐůĞĂŶ ĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ͕ ŝŵƉƌŽǀĞ ƚŚĞ ĨŝŶĂŶĐŝĂů ƉƌŽĨŝůĞ ŽĨ ĞŶƚŝƚŝĞƐ ƚŚĂƚ ƉĂƌƚŝĐŝƉĂƚĞ ŝŶ ĐůĞĂŶ ĞŶĞƌŐLJ͕ Žƌ ĂůůŽǁ ŐƌĞĂƚĞƌ ĂĐĐĞƐƐ ƚŽ ĐĂƉŝƚĂů͘ 3 2 3 Decarbonization via Distributed Energy Resources ZƐ ƌĞƉƌĞƐĞŶƚ Ă ǁŝĚĞ ƌĂŶŐĞ ŽĨ ŐĞŶĞƌĂƚŝŶŐ Žƌ ůŽĂĚͲƌĞĚƵĐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƉƌŽŐƌĂŵƐ ƚŚĂƚ ƌĞƐŝĚĞ ŽŶ Ă utility’s distribution system or on the premises of an endͲƵƐĞ ĐŽŶƐƵŵĞƌ͘ ZƐ ĐĂŶ ŚĞůƉ ƌĞĚƵĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ďLJ ƉƌŽǀŝĚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ ůŽǁͲ Žƌ njĞƌŽͲĐĂƌďŽŶ ĞŵŝƚƚŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ďLJ ƌĞĚƵĐŝŶŐ ĚĞŵĂŶĚ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ZƐ ĐĂŶ ĂůƐŽ ŝŵƉĂĐƚ ŚŽǁ ŵƵĐŚ͕ ĂŶĚ ǁŚĞŶ͕ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ĚĞŵĂŶĚĞĚ ĨƌŽŵ ƚŚĞ ŐƌŝĚ͕ ƚŚĞƌĞďLJ ƐƵƉƉŽƌƚŝŶŐ ŝŵƉƌŽǀĞĚ ŐƌŝĚ ĨůĞdžŝďŝůŝƚLJ ĂŶĚ ůŽĂĚ ďĂůĂŶĐŝŶŐ͘ ZƐ ƉƌŽǀŝĚĞ ƐLJƐƚĞŵ ƌĞůŝĂďŝůŝƚLJ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŚĂƚ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s ;Ensuring Electricity System Reliability Security and Resilience ZƐ ĂůƐŽ ƉƌŽǀŝĚĞ ďƵƐŝŶĞƐƐ ĂŶĚ ĐŽŶƐƵŵĞƌ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŚĂƚ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer Equity ͘ dĞĐŚŶŝĐĂů ĚĞĨŝŶŝƚŝŽŶƐ ŽĨ ZƐ ǀĂƌLJ͕ ďƵƚ ĨŽƌ ƉƵƌƉŽƐĞƐ ŽĨ Y Z ϭ͘Ϯ͕ ZƐ ĂƌĞ ĚĞĨŝŶĞĚ ĂƐ '͕ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ ĂŶĚ ĚĞŵĂŶĚͲƐŝĚĞ ŵĂŶĂŐĞŵĞŶƚ͕ ŝŶĐůƵĚŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ Z͘ ůů ZƐ ĐĂŶ ƌĞĚƵĐĞ ĐĂƌďŽŶ ĂŶĚ ŽƚŚĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ďƵƚ ƚŚĞLJ ĚŽ ƐŽ ŝŶ ĚŝĨĨĞƌĞŶƚ ǁĂLJƐ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽǀŝĚĞƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ ďLJ ĂǀŽŝĚŝŶŐ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ĂŶĚ ƚŚĞŝƌ ĂƐƐŽĐŝĂƚĞĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ ůĞĂŶ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ƉƌŽǀŝĚĞƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ ďLJ ĚŝƐƉůĂĐŝŶŐ ŚŝŐŚĞƌͲĞŵŝƚƚŝŶŐ ŐĞŶĞƌĂƚŝŽŶ͘ ĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ĂŶĚ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ ĞŶĂďůĞ Ă ĐůĞĂŶĞƌ ŐƌŝĚ ďLJ ƉƌŽǀŝĚŝŶŐ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ǁŝƚŚ ůŽǁĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ƚŚĂŶ ŽƚŚĞƌ ŽƉƚŝŽŶƐ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ƐƵĐŚ ƐĞƌǀŝĐĞƐ͘ dŚĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŶĞĞĚĞĚ ƚŽ ĞŶĂďůĞ ZƐ ŝŶĐůƵĚĞƐ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĞŶĂďůĞ Z ĂŶĚ ŝŵƉƌŽǀĞĚ ĚĞŵĂŶĚ ĐŽŶƚƌŽů ;Ğ͘Ő͕͘ ƐŵĂƌƚ ŵĞƚĞƌƐ͕ ďƵŝůĚŝŶŐ ĂƵƚŽŵĂƚŝŽŶ ƐLJƐƚĞŵƐ͕ ƐŵĂƌƚ ĂƉƉůŝĂŶĐĞƐ͕ ĂŶĚ ĚŝƌĞĐƚ ůŽĂĚ ĐŽŶƚƌŽů ƚĞĐŚŶŽůŽŐŝĞƐͿ͖ ŚŝŐŚůLJ ĞĨĨŝĐŝĞŶƚ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ĞŶǀĞůŽƉĞƐ͖ ' ƐLJƐƚĞŵƐ ;Ğ͘Ő͕͘ ŶĂƚƵƌĂů ŐĂƐ– ĂŶĚ ďŝŽŵĂƐƐͲĨŝƌĞĚ ĐŽŵďŝŶĞĚ ŚĞĂƚ ĂŶĚ ƉŽǁĞƌ ΀ W΁͕ ǁĂƐƚĞ ŚĞĂƚ ƌĞĐŽǀĞƌLJ͕ ďĂĐŬƵƉ ŐĞŶĞƌĂƚŝŽŶ͕ ƌŽŽĨƚŽƉ ƐŽůĂƌ Ws͕ ƐŵĂůůͲƐĐĂůĞ ǁŝŶĚ ƉŽǁĞƌ͕ ŐĞŽƚŚĞƌŵĂůͿ͖ ĂŶĚ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ ƐLJƐƚĞŵƐ ;Ğ͘Ő͕͘ ǀĞŚŝĐůĞ ƚŽ ŐƌŝĚ͕Ŷ ďĂƚƚĞƌŝĞƐ͕ ƚŚĞƌŵĂů͕ ĨůLJǁŚĞĞůƐͿ͘ Ž Ŷ sĞŚŝĐůĞͲƚŽͲŐƌŝĚ ĐŽŶĨŝŐƵƌĂƚŝŽŶƐ ĞŶĂďůĞ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ĨůŽǁ ĨƌŽŵ ƚŚĞ ďĂƚƚĞƌLJ ŽĨ Ă ƉůƵŐͲŝŶ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞ ;W sͿ ƚŽ ƚŚĞ ŐƌŝĚ ĂŶĚ ďĂĐŬ ƚŽ ƚŚĞ ǀĞŚŝĐůĞ͘ Ž EŽƚ Ăůů ZƐ ĂƌĞ ĐŽŶŶĞĐƚĞĚ ƚŽ Ă ƵƚŝůŝƚLJ ĞůĞĐƚƌŝĐ ŐƌŝĚ Žƌ ĐĂŶ ďĞ ĐŽŶƚƌŽůůĞĚ ďLJ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ƌĞƐŽƵƌĐĞƐ ĚĞƉůŽLJĞĚ ŽŶ ƐŽŵĞ ŵŝĐƌŽŐƌŝĚƐ ĂŶĚ W ƐLJƐƚĞŵƐ ĂƌĞ Ɛƚŝůů ZƐ͕ ĚĞƐƉŝƚĞ ůĂĐŬŝŶŐ Ă ŐƌŝĚ ĐŽŶŶĞĐƚŝŽŶ͘ EŽƚĞ ƚŚĂƚ ƚŚĞ ŶĞƌŐLJ ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ĐŽŶƐŝĚĞƌƐ ZƐ ƚŚĂƚ ĂƌĞ not ĐŽŶŶĞĐƚĞĚ ƚŽ ƚŚe grid as “dispersed generation” rather than “distributed generation ” See Energy Information Administration EIA Modeling Distributed Generation in the Buildings Sectors tĂƐŚŝŶŐƚŽŶ͕ ͗ ͕ ƵŐƵƐƚ ϮϬϭϯϬͿ͕ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĞŝĂ͘ŐŽǀͬĨŽƌĞĐĂƐƚƐͬĂĞŽͬŶĞŵƐͬϮϬϭϯͬďƵŝůĚŝŶŐƐͬ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-25 Chapter III Building a Clean Electricity Future ŽŵĞ ZƐ͕ ƐƵĐŚ ĂƐ ĚŝƐƚƌŝďƵƚĞĚ ƐŽůĂƌ Ws ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ĞƋƵŝƉŵĞŶƚ͕ ĐĂŶ ŚĂǀĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚ ŽŶ ƐLJƐƚĞŵ ůŽĂĚ͕ ďƵƚ ŵĂLJ ŶŽƚ ďĞ ƵŶĚĞƌ ƚŚĞ ĚŝƌĞĐƚ ĐŽŶƚƌŽů ŽĨ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ͘ KƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ƌĞƐŝĚĞŶƚŝĂů ŚŽƚ ǁĂƚĞƌ ŚĞĂƚĞƌƐ͕ ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ƐĞƌǀĞ ĂƐ ZƐ ĂƐ Z ŵĞĂƐƵƌĞƐ͕ ďƵƚ ƚĞĐŚŶŽůŽŐŝĞƐ ĞŶĂďůŝŶŐ ƚŚŝƐ ƌĞƐŽƵƌĐĞ ŚĂǀĞ ůŽǁ ƉĞŶĞƚƌĂƚŝŽŶ Žƌ ĂƌĞ Ɛƚŝůů ŶĂƐĐĞŶƚ͘ ůƐŽ͕ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ƵƐĂŐĞ ŽĨ ZƐ ǀĂƌLJ ďLJ ĐůŝŵĂƚĞ ĂŶĚ ŚŽƵƐĞŚŽůĚ ĚĞŵŽŐƌĂƉŚŝĐƐ͕ ƐŽ ƚĂŝůŽƌŝŶŐ ƉƌŽŐƌĂŵƐ ƚŽ ůŽĐĂů ŶĞĞĚƐ ŝƐ ŝŵƉŽƌƚĂŶƚ͘ dŚĞ tĞƐƚ ĂŶĚ ŽƵƚŚ ĐĞŶƐƵƐ ƌĞŐŝŽŶƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ǁŚĞƌĞ ĂǀĞƌĂŐĞ ŚŽƵƐĞŚŽůĚ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝƐ ŚŝŐŚĞƌ ƚŚĂŶ ŽƚŚĞƌ ƌĞŐŝŽŶƐ͕Ɖ ĂƌĞ ďŽƚŚ ĞdžƉĞƌŝĞŶĐŝŶŐ ŚŝŐŚ ƉŽƉƵůĂƚŝŽŶ ŐƌŽǁƚŚ ƌĂƚĞƐ͘ ĞǀĞůŽƉŵĞŶƚƐ ŝŶ Z ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐŝĞƐ ; dͿ ĐĂŶ ƐƵƉƉŽƌƚ ĂŶ ĞůĞĐƚƌŝĐ ŐƌŝĚ ĐĂƉĂďůĞ ŽĨ ŵƵĐŚ ŐƌĞĂƚĞƌ ĨůĞdžŝďŝůŝƚLJ ŝŶ ŵĂŶĂŐŝŶŐ ďŽƚŚ ƐƵƉƉůLJ ĂŶĚ ĚĞŵĂŶĚ͘ dŚŝƐ ĐĂŶ ŽĨĨĞƌ ŵƵůƚŝƉůĞ ǀĂůƵĞ ƐƚƌĞĂŵƐ ;Ğ͘Ő͕͘ ĞŶĞƌŐLJ͕ ĐĂƉĂĐŝƚLJ͕ ƌĞĂĐƚŝǀĞ ƉŽǁĞƌ͕ ĨƌĞƋƵĞŶĐLJ ƐƵƉƉŽƌƚ͕ ĚĞĨĞƌƌĞĚ ƵƚŝůŝƚLJ ĐĂƉŝƚĂů ĞdžƉĞŶĚŝƚƵƌĞƐ͕ ĞŶĞƌŐLJ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ĂǀŽŝĚĞĚ ĞŵŝƐƐŝŽŶƐͿ͘ ŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ĂůƐŽ ĞŶĂďůĞ ŝŵƉƌŽǀĞĚ ĚĞŵĂŶĚͲƐŝĚĞ ŵĂŶĂŐĞŵĞŶƚ ĂŶĚ ƌĞĚƵĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ͘ ŶĂůLJƐŝƐ ƚŚĂƚ ƐŽƵŐŚƚ ƚŽ ƋƵĂŶƚŝĨLJ ƚŚĞ KϮ ďĞŶĞĨŝƚƐ ŽĨ ϭϬϬ ƉĞƌĐĞŶƚ ƉĞŶĞƚƌĂƚŝŽŶ ŽĨ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ďLJ ϮϬϯϬ ƵƐŝŶŐ ŶŝŶĞ ĚŝĨĨĞƌĞŶƚ ŵĞĐŚĂŶŝƐŵƐ ƐƵŐŐĞƐƚƐ Ă ƉŽƐƐŝďůĞ ϭϮ ƉĞƌĐĞŶƚ ĚŝƌĞĐƚ ƌĞĚƵĐƚŝŽŶ ŝŶ ĞŵŝƐƐŝŽŶƐ ;ƚŚƌŽƵŐŚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ ƚŚĞ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĚŝƌĞĐƚůLJ ĂĨĨĞĐƚ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ KϮ ĞŵŝƐƐŝŽŶƐͿ ĂŶĚ Ă ϲ ƉĞƌĐĞŶƚ ŝŶĚŝƌĞĐƚ ƌĞĚƵĐƚŝŽŶ ŝŶ ĞŵŝƐƐŝŽŶƐ ;ƚƌĂŶƐůĂƚŝŶŐ ƚŚĞ ĞƐƚŝŵĂƚĞĚ ĐŽƐƚ ƐĂǀŝŶŐƐ ŝŶ ĞŶĞƌŐLJ ĂŶĚͬŽƌ ĐĂƉĂĐŝƚLJ ŝŶƚŽ ƚŚĞŝƌ ĞŶĞƌŐLJ ĂŶĚ ĐĂƌďŽŶ ĞƋƵŝǀĂůĞŶƚƐ ƚŚƌŽƵŐŚ ƉƵƌĐŚĂƐĞ ŽĨ ĂĚĚŝƚŝŽŶĂů ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJͿ͘ϭϭϬ dƌĂŶƐĂĐƚŝǀĞ ĞŶĞƌŐLJ ĐŽŶƚƌŽůƐ͕ ƐŵĂƌƚ ĐŚĂƌŐŝŶŐ ŽĨ ƉůƵŐͲŝŶ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞƐ ;W sƐͿ͕ ĂŶĚ ŽƚŚĞƌ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ĐŽŶƚƌŽůůŝŶŐ ůŽĂĚ ŝŶ ƌĞƐƉŽŶƐĞ ƚŽ ŐƌŝĚ ĐŽŶĚŝƚŝŽŶƐ ĐĂŶ ĐŽŶƚƌŝďƵƚĞ ƚŽ ďŽƚŚ ĚŝƌĞĐƚ ĂŶĚ ŝŶĚŝƌĞĐƚ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ĞŵŝƐƐŝŽŶƐ͘ dĂďůĞ ϯͲϮ ƐŚŽǁƐ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚĞ ǀĂƌŝŽƵƐ ŵĞĐŚĂŶŝƐŵƐ ĂŶĂůLJnjĞĚ͘ Table 3-2 Potential Reductions in Electricity-Sector Energy and CO2 Emissions in 2030 Attributable to Smart Grid Technologies111 Reductions in Electricity-Sector Energy and CO2 Emissionsa Mechanism Direct % Indirect % Conservation effect of consumer information and feedback systems 3 - Joint marketing of energy efficiency and DR programs - 0 Deployment of diagnostics in residential and small medium commercial buildings 3 - Measurement and verification for energy efficiency programs 1 0 5 0 1 - Support additional electric vehicles and plug-in hybrid electric vehicles 3 - Conservation voltage reduction and advanced voltage control 2 - Support penetration of renewable wind and solar generation 25 percent RPS 0 1 5 12 6 Shifting load to more efficient generation Total reduction The combined impact of nine smart grid mechanisms assuming 100 percent penetration of smart grid technologies by 2030 is a 12 percent reduction in annual U S electricity-related CO2 emissions from direct Ɖ ůĞĐƚƌŝĐŝƚLJ ƵƐĞ ĨŽƌ ƐƉĂĐĞ ŚĞĂƚŝŶŐ ŝƐ ƉĂƌƚŝĐƵůĂƌůLJ ŚŝŐŚ ŝŶ ƚŚĞ ŽƵƚŚ ĐĞŶƐƵƐ ƌĞŐŝŽŶ͘ dŚĞ ŽƵƚŚ͕ ĂŶĚ ƚŽ Ă ůĞƐƐĞƌ ĞdžƚĞŶƚ ƚŚĞ tĞƐƚ͕ ĐĞŶƐƵƐ ƌĞŐŝŽŶƐ ĂůƐŽ ŚĂǀĞ ŚŝŐŚ ĐŽŽůŝŶŐ ůŽĂĚƐ͘ 3-26 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 effects and a 6 percent reduction from indirect effects q Assumes 100 percent penetration of the smart grid technologies͘ d ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ĞŶĂďůŝŶŐ ŐƌĞĂƚĞƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ǁŝƚŚ ŝƚƐ ĐŽŶĐŽŵŝƚĂŶƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͕ ŝŶ ƚǁŽ ŝŵƉŽƌƚĂŶƚ ǁĂLJƐ͘ ŝƌƐƚ͕ ƚŚĞLJ ĂƵƚŽŵĂƚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͗ ĨŽƌ ĞdžĂŵƉůĞ ďLJ ƐŚƵƚƚŝŶŐ ŽĨĨ ůŝŐŚƚƐ͕ ĚĞǀŝĐĞƐ͕ ĂŶĚ ĂƉƉůŝĂŶĐĞƐ ǁŚĞŶ ƚŚĞLJ ĂƌĞ ŶŽƚ ŶĞĞĚĞĚ͖ Žƌ ĂĚũƵƐƚŝŶŐ s ĚĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ƚŝŵĞ ŽĨ ĚĂLJ͘ ĞĐŽŶĚ͕ ƚŚĞLJ ĞŶĂďůĞ ŵŽƌĞ ĂĚǀĂŶĐĞĚ ĞǀĂůƵĂƚŝŽŶ͕ ŵĞĂƐƵƌĞŵĞŶƚ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ ; DΘs͕ ƐŽŵĞƚŝŵĞƐ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ DΘs Ϯ͘ϬͿ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ͕ ŝŵƉƌŽǀŝŶŐ ƚŚĞŝƌ ĞĨĨĞĐƚŝǀĞŶĞƐƐ ĂŶĚ ƋƵĂŶƚŝĨŝĐĂƚŝŽŶ͕ ĂŶĚ ĞŶĂďůŝŶŐ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽǀŝĚĞƌƐ ƚŽ ďĞ ĂĐĐƵƌĂƚĞůLJ ĐŽŵƉĞŶƐĂƚĞĚ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ďĞŶĞĨŝƚƐ͕ ŝŶĐůƵĚŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͘ d ƚĞĐŚŶŽůŽŐŝĞƐ ĞŶĂďůĞ ŶĞƚǁŽƌŬƐ ƚŚĂƚ ĐŽŶŶĞĐƚ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ĨƌŽŵ ĞŶĚ ƚŽ ĞŶĚ͕ ĨĂĐŝůŝƚĂƚŝŶŐ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚŚƌŽƵŐŚŽƵƚ ƚŚĞ ƐLJƐƚĞŵ͘ džĂŵƉůĞ ĂƉƉůŝĐĂƚŝŽŶƐ ŝŶĐůƵĚĞ ĂĚǀĂŶĐĞĚ ƐĞŶƐŽƌƐ ĂŶĚ ĐŽŶƚƌŽůƐ ŝŶ ďƵŝůĚŝŶŐƐ ƚŽ ĚĞƚĞĐƚ ĂŶĚ ĞůŝŵŝŶĂƚĞ ĞŶĞƌŐLJ ǁĂƐƚĞ ĂŶĚ ĂĚǀĂŶĐĞĚ ŵĞƚĞƌŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ; D Ϳ ƚŚĂƚ ĞŶĂďůĞƐ ĂƵƚŽŵĂƚĞĚ ƌĞƐƉŽŶƐĞ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŝĐĞƐ ǀŝĂ ƐĞƚƚŝŶŐƐ ;Ğ͘Ő͕͘ ĨŽƌ ƚŚĞƌŵŽƐƚĂƚƐͿ ďLJ ĐŽŶƐƵŵĞƌƐ͘ dŚĞƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ŝŵƉƌŽǀĞ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌĨŽƌŵĂŶĐĞ͕ ƌĞůŝĂďŝůŝƚLJ͕ ƌĞƐŝůŝĞŶĐĞ͕ ĨůĞdžŝďŝůŝƚLJ͕ ĂŶĚ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƚŚƌŽƵŐŚ ƌĞĂůͲƚŝŵĞ ŵŽŶŝƚŽƌŝŶŐ ĂŶĚ ĐŽŶƚƌŽů ŽĨ ŐƌŝĚ ƐLJƐƚĞŵƐ͘ 3 2 3 1 Energy Efficiency Environmental Benefits and Consumer Savings ŶĚ ƵƐĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝƐ Ă ƌĂŶŐĞ ŽĨ ŵĞĂƐƵƌĞƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ĞŶĚ ƵƐĞƌƐ ƚŚĞ ƐĂŵĞ ƐĞƌǀŝĐĞƐ ;ƐƵĐŚ ĂƐ ůŝŐŚƚ ĂŶĚ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐͿ ǁŝƚŚ ůĞƐƐ ĞŶĞƌŐLJ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŚĂƐ ŵƵůƚŝƉůĞ ďĞŶĞĨŝƚƐ͘ ůů ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ŚĂƐ ƐŽŵĞ ŝŵƉĂĐƚ ŽŶ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂǀŽŝĚƐ Ăůů ŽĨ ƚŚĞƐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ ƚ ĞŵŝƚƐ ŶŽ ' 'Ɛ͕ Ăŝƌ Žƌ ǁĂƚĞƌ ƉŽůůƵƚŝŽŶ͘ ƚ ŚĂƐ ŶŽ ŝŵƉĂĐƚ ŽŶ ůĂŶĚ ƵƐĞ͘ ƚ ƌĞƋƵŝƌĞƐ ŶŽ ƐŝƚŝŶŐ͕ ƉĞƌŵŝƚƚŝŶŐ Žƌ ĚĞĐŽŵŵŝƐƐŝŽŶŝŶŐ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂůƐŽ ƐĂǀĞƐ ĐŽŶƐƵŵĞƌƐ ŵŽŶĞLJ͕ ŵĂŬŝŶŐ ŝƚ ƚŚĞ ŵŽƐƚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŽƉƚŝŽŶ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ ĂŶĚ ƐĂǀŝŶŐƐ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ĨƵƌƚŚĞƌ ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer Equity ͘ DOE’s Appliance and ƋƵŝƉŵĞŶƚ ƚĂŶĚĂƌĚƐ WƌŽŐƌĂŵϭϭϮ ŚĂƐ ƐĞƌǀĞĚ ĂƐ ŽŶĞ ŽĨ ƚŚĞ Eation’s most effective ƉŽůŝĐŝĞƐ ĨŽƌ ŝŵƉƌŽǀŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ dŚĞ ƉƌŽŐƌĂŵ ŝŵƉůĞŵĞŶƚƐ ŵŝŶŝŵƵŵ ĞŶĞƌŐLJ ĐŽŶƐĞƌǀĂƚŝŽŶ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ŵŽƌĞ ƚŚĂŶ ϲϬ ƉƌŽĚƵĐƚƐ ƚŚĂƚ ĐŽŶƐƵŵĞ ĂďŽƵƚ ϵϬ ƉĞƌĐĞŶƚ ŽĨ ŚŽŵĞ ĞŶĞƌŐLJ ƵƐĞ͕ ϲϬ ƉĞƌĐĞŶƚ ŽĨ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ƵƐĞ͕ ĂŶĚ ϯϬ ƉĞƌĐĞŶƚ ŽĨ ŝŶĚƵƐƚƌŝĂů ĞŶĞƌŐLJ ƵƐĞ͘ϭϭϯ ŝŶĐĞ ϮϬϬϵ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ŝƐƐƵĞĚ ϰϬ ŶĞǁ Žƌ ƵƉĚĂƚĞĚ ƐƚĂŶĚĂƌĚƐ ƚŽ ŵĂŬĞ ĂƉƉůŝĂŶĐĞƐ͕ ďƵŝůĚŝŶŐƐ͕ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ͘ dŚĞƐĞ ƐƚĂŶĚĂƌĚƐ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ƌĞĚƵĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ďĞƚǁĞĞŶ ϮϬϬϵ ĂŶĚ ϮϬϯϬ ďLJ ŽǀĞƌ Ϯ͘ϱ ďŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ͕ ƐĂǀĞ ĐŽŶƐƵŵĞƌƐ Ψϱϱϳ ďŝůůŝŽŶ ŽŶ ƵƚŝůŝƚLJ ďŝůůƐ͕ ĂŶĚ ƌĞĚƵĐĞ ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ďLJ ϰϮ ƋƵĂĚƌŝůůŝŽŶ ƌŝƚŝƐŚ ƚŚĞƌŵĂů ƵŶŝƚƐ ; dhͿ͘ƌ͕ ϭϭϰ dŚŝƐ ŶƵŵďĞƌ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ŐƌŽǁ ƚŽ ϯ ďŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ǁŝƚŚ ƐƚĂŶĚĂƌĚƐ ƉƵďůŝƐŚĞĚ ƚŚƌŽƵŐŚ ĂŶƵĂƌLJ ϮϬϭϳ͘ϭϭϱ Žƌ ĞdžĂŵƉůĞ͕ ŝŶ ĂŶƵĂƌLJ ϮϬϭϲ K ĨŝŶĂůŝnjĞĚ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ĐŽŵŵĞƌĐŝĂů Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ ĂŶĚ ŚĞĂƚŝŶŐ ĞƋƵŝƉŵĞŶƚ͕ ǁŚŝĐŚ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ĂǀŽŝĚ ϳϳ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ KϮ ďLJ ϮϬϯϬ͘ϭϭϲ dŽĚĂLJ͕ Ă ƚLJƉŝĐĂů ŚŽƵƐĞŚŽůĚ ƐĂǀĞƐ ĂďŽƵƚ Ψϯϭϵ ƉĞƌ LJĞĂƌ ŽĨĨ ƚŚĞŝƌ ĞŶĞƌŐLJ ďŝůůƐ ĂƐ Ă ƌĞƐƵůƚ ŽĨ ƚŚĞƐĞ ƐƚĂŶĚĂƌĚƐ͕ ĂŶĚ ĂƐ ƉĞŽƉůĞ ƌĞƉůĂĐĞ ƚŚĞŝƌ ĂƉƉůŝĂŶĐĞƐ ǁŝƚŚ ŶĞǁĞƌ ŵŽĚĞůƐ͕ ƚŚĞLJ ĐĂŶ ĞdžƉĞĐƚ ƚŽ ƐĂǀĞ ŽǀĞƌ ΨϰϲϬ ĂŶŶƵĂůůLJ ďLJ ϮϬϯϬ͘ϭϭϳ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ŵŝŶŝŵƵŵ ĞĨĨŝĐŝĞŶĐLJ ƐƚĂŶĚĂƌĚƐ ĨŽƌ ĂƉƉůŝĂŶĐĞƐ͕ ƚŚĞ ŶǀŝƌŽŶŵĞŶƚĂů WƌŽƚĞĐƚŝŽŶ ŐĞŶĐLJ ; W Ϳ ůĞĂĚƐ E Z'z d Z͕ Ă ǀŽůƵŶƚĂƌLJ ůĂďĞůŝŶŐ ƉƌŽŐƌĂŵ ĚĞƐŝŐŶĞĚ ƚŽ ŚĞůƉ ďƵƐŝŶĞƐƐĞƐ ĂŶĚ ŝŶĚŝǀŝĚƵĂůƐ ƐĂǀĞ ŵŽŶĞLJ ĂŶĚ ĂǀŽŝĚ ƉŽůůƵƚŝŽŶ ǁŝƚŚ ĞŶĞƌŐLJͲĞĨĨŝĐŝĞŶƚ ƉƌŽĚƵĐƚƐ͘ E Z'z ƋdŚĞ ĚŝƌĞĐƚ ƌĞĚƵĐƚŝŽŶƐ ǁĞƌĞ ĐĂůĐƵůĂƚĞĚ ĨŽƌ ƚŚĞ ŵĞĐŚĂŶŝƐŵƐ ƚŚĂƚ ĂĨĨĞĐƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ KϮ ĞŵŝƐƐŝŽŶƐ ĚŝƌĞĐƚůLJ ƚŚƌŽƵŐŚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ ƚŚĞ ƐŵĂƌƚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŶĚŝƌĞĐƚ ƌĞĚƵĐƚŝŽŶƐ ĂƌĞ ĚĞƌŝǀĞĚ ďLJ ƚƌĂŶƐůĂƚŝŶŐ ƚŚĞ ĞƐƚŝŵĂƚĞĚ ĐŽƐƚ ƐĂǀŝŶŐƐ ŝŶ ĞŶĞƌŐLJ ĂŶĚͬŽƌ ĐĂƉĂĐŝƚLJ ŝŶƚŽ ƚŚĞŝƌ ĞŶĞƌŐLJ ĂŶĚ ĐĂƌďŽŶ ĞƋƵŝǀĂůĞŶƚƐ ƚŚƌŽƵŐŚ ƉƵƌĐŚĂƐĞ ŽĨ ĂĚĚŝƚŝŽŶĂů ĐŽƐƚͲ ĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ dŚŝƐ ĐĂŶ ƌĞƉƌĞƐĞŶƚ Ă ƉŽůŝĐLJ ĚĞĐŝƐŝŽŶ ƚŽ ƌĞŝŶǀĞƐƚ ƚŚĞ ƐĂǀŝŶŐƐ ƚŽ ƉƵƌĐŚĂƐĞ ĂĚĚŝƚŝŽŶĂů ŵŽƌĞ ĐŽƐƚ ĞĨĨĞĐƚŝǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ƌĞŶĞǁĂďůĞ ƌĞƐŽƵƌĐĞƐ͘ ƌ dŚĞƐĞ ƐĂǀŝŶŐƐ ŶƵŵďĞƌƐ ĂƌĞ ĂƐ ŽĨ ĞĐĞŵďĞƌ ϮϬϭϲ͘ ƉƉůŝĂŶĐĞ ĂŶĚ ĞƋƵŝƉŵĞŶƚ ƐƚĂŶĚĂƌĚƐ ĐŽŶƚŝŶƵĞ ƚŽ ďĞ ŝƐƐƵĞĚ ĂŶĚ ƵƉĚĂƚĞĚ͘ ZĞĨĞƌ ƚŽ ƚŚĞ ƉƉůŝĂŶĐĞ ĂŶĚ ƋƵŝƉŵĞŶƚ ƚĂŶĚĂƌĚ WƌŽŐƌĂŵ ǁĞďƐŝƚĞ ĨŽƌ ƵƉĚĂƚĞĚ ŝŶĨŽƌŵĂƚŝŽŶ ;ŚƚƚƉ͗ͬͬĞŶĞƌŐLJ͘ŐŽǀͬĞĞƌĞͬďƵŝůĚŝŶŐƐͬĂƉƉůŝĂŶĐĞͲĂŶĚͲĞƋƵŝƉŵĞŶƚͲƐƚĂŶĚĂƌĚƐͲƉƌŽŐƌĂŵͿ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-27 Chapter III Building a Clean Electricity Future d Z ůĂďĞůƐ ĂƉƉĞĂƌ ŽŶ ŵĂũŽƌ ĂƉƉůŝĂŶĐĞƐ͕ ŽĨĨŝĐĞ ĞƋƵŝƉŵĞŶƚ͕ ůŝŐŚƚŝŶŐ͕ ŚŽŵĞ ĞůĞĐƚƌŽŶŝĐƐ͕ ŶĞǁ ŚŽŵĞƐ͕ ĂŶĚ ĐŽŵŵĞƌĐŝĂů ĂŶĚ ŝŶĚƵƐƚƌŝĂů ďƵŝůĚŝŶŐƐ ĂŶĚ ƉůĂŶƚƐ͘ dŚĞ E Z'z d Z ƉƌŽŐƌĂŵ ƐĂǀĞĚ ŵĞƌŝĐĂŶ ĐŽŶƐƵŵĞƌƐ ĂŶ ĞƐƚŝŵĂƚĞĚ ΨϮϰ ďŝůůŝŽŶ ŝŶ ĞŶĞƌŐLJ ĐŽƐƚƐ ŝŶ ϮϬϭϮ ĂůŽŶĞ͘ϭϭϴ ƵŝůĚŝŶŐƐ͕ ǁŚŝĐŚ ůĂƐƚ ĨŽƌ ĚĞĐĂĚĞƐ͕ ĂĐĐŽƵŶƚ ĨŽƌ ϳϲ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ϰϬ ƉĞƌĐĞŶƚ ŽĨ ' ' ĞŵŝƐƐŝŽŶƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϭϭϵ ZĞĐĞŶƚ ĂŶĂůLJƐŝƐ ƐŚŽǁƐ ƚŚĂƚ ŝŶ ƐƚĂƚĞƐ ĐŽŶƐŝƐƚĞŶƚůLJ ĂĚŽƉƚŝŶŐ ƚŚĞ ŵŽƐƚ ƌĞĐĞŶƚ ǀĞƌƐŝŽŶƐ ŽĨ ƚŚĞ ŵŽĚĞů ďƵŝůĚŝŶŐ ĞŶĞƌŐLJ ĐŽĚĞƐ͕ ŚŽŵĞŽǁŶĞƌƐ͕ ďƵŝůĚŝŶŐ ŽǁŶĞƌƐ͕ ĂŶĚ ƚĞŶĂŶƚƐ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ƐĂǀĞ ΨϭϮϲ ďŝůůŝŽŶ ŽŶ ĞŶĞƌŐLJ ďŝůůƐ ĂŶĚ ƌĞĚƵĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ďLJ ŽǀĞƌ ϴϰϭ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ĐƵŵƵůĂƚŝǀĞůLJ ďĞƚǁĞĞŶ ϮϬϭϬ ĂŶĚ ϮϬϰϬ ŝĨ ĞŶĞƌŐLJ ĐŽĚĞƐ ĐŽŶƚŝŶƵĞ ƚŽ ďĞ ƐƚƌĞŶŐƚŚĞŶĞĚ͘ϭϮϬ DĂŶLJ ŽĨ ƚŚĞ ŚŝŐŚͲ ĞĨĨŝĐŝĞŶĐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ďƵŝůĚŝŶŐ ĞŶǀĞůŽƉĞ ĚĞƐŝŐŶƐ͕ ĂŶĚ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ ƉƌĂĐƚŝĐĞƐ ƚŚĂƚ ĞŶĂďůĞ significant energy savings and GHG reductions beyond today’s building codes have been demonstrated ĂŶĚ ĂƌĞ ĐŽŵŵĞƌĐŝĂůůLJ ĂǀĂŝůĂďůĞ͘ tŚŝůĞ ĐŽŶƚŝŶƵĞĚ ĚĞǀĞůŽƉŵĞŶƚƐ ŝŶ ďƵŝůĚŝŶŐ ĚĞƐŝŐŶ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ŬĞLJ ďƵŝůĚŝŶŐ ĐŽŵƉŽŶĞŶƚƐ ĂŶĚ ƐLJƐƚĞŵƐ ŚĂǀĞ ůĞĚ ƚŽ ůĂƌŐĞ ĞĨĨŝĐŝĞŶĐLJ ŐĂŝŶƐ͕ ƚŚĞƌĞ ƌĞŵĂŝŶƐ Ă ůĂƌŐĞ ŐĂƉ ďĞƚǁĞĞŶ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ƚŚĞ ĞdžŝƐƚŝŶŐ ďƵŝůĚŝŶŐ ƐƚŽĐŬ ĂŶĚ ǁŚĂƚ ŝƐ ƉŽƐƐŝďůĞ ƵƐŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂǀĂŝůĂďůĞ ƚŽĚĂLJ͘ϭϮϭ WŽůŝĐŝĞƐ Žƌ ƉƌŽŐƌĂŵƐ ĐŽƵůĚ ŚĞůƉ ŽǀĞƌĐŽŵĞ ŵĂƌŬĞƚ ĂŶĚ ďĞŚĂǀŝŽƌĂů ďĂƌƌŝĞƌƐ ƚŚĂƚ ĂƌĞ ůŝŵŝƚŝŶŐ ĚĞƉůŽLJŵĞŶƚ͘ hƐŝŶŐ ĞdžŝƐƚŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ďƵŝůĚŝŶŐ ĚĞƐŝŐŶ ĂŶĚ ĐŽŶƐƚƌƵĐƚŝŽŶ ƉƌĂĐƚŝĐĞƐ͕ ďƵŝůĚĞƌƐ ĂƌĞ ĂďůĞ ƚŽ ĚĞƐŝŐŶ ŚŽŵĞƐ ƚŚĂƚ ĂƌĞ ƵƉ ƚŽ ϱϬ ƉĞƌĐĞŶƚ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ƚŚĂŶ ƚLJƉŝĐĂů ŶĞǁ ŚŽŵĞƐ͕ϭϮϮ͕ ϭϮϯ ĂŶĚ ƚŚĞƐĞ ĐĂŶ ƉƌŽǀŝĚĞ ĐŽŶƐƵŵĞƌƐ ǁŝƚŚ ŵŽŶƚŚůLJ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ƵƉ ƚŽ ΨϭϬϬ͘Ɛ͕ ϭϮϰ͕ ϭϮϱ dŚĞ EĂƚŝŽŶĂů ŶƐƚŝƚƵƚĞ ĨŽƌ ƚĂŶĚĂƌĚƐ ĂŶĚ dĞĐŚŶŽůŽŐLJ ŚĂƐ ĐŽŵƉůĞƚĞĚ Ă ĚĞŵŽŶƐƚƌĂƚŝŽŶ Ăƚ ŝƚƐ EĞƚ ĞƌŽ ŶĞƌŐLJ ZĞƐŝĚĞŶƚŝĂů dĞƐƚ ĂĐŝůŝƚLJ͖ ƚŽƚĂů ƉƌĞƐĞŶƚ ǀĂůƵĞ ĞŶĞƌŐLJ ĐŽƐƚƐ ĨŽƌ Ă ŶĞƚͲnjĞƌŽ ĞŶĞƌŐLJ ŚŽŵĞ ǁĞƌĞ ŵŽƌĞ ƚŚĂŶ ΨϰϬ͕ϬϬϬ ůŽǁĞƌ ƚŚĂŶ Ă ŶĞǁ ŚŽŵĞ ďƵŝůƚ ƚŽ ƚŚĞ ĐŽŵƉĂƌĂďůĞ ŵŝŶŝŵƵŵ ĐŽĚĞ͘ϭϮϲ ZĞĐĞŶƚ ƐƚƵĚŝĞƐ ĚĞŵŽŶƐƚƌĂƚĞ ƚŚĂƚ ĐŽŶƐƚƌƵĐƚŝŽŶ ĐŽƐƚƐ ĨŽƌ ŶĞƚͲnjĞƌŽ ĞŶĞƌŐLJ ďƵŝůĚŝŶŐƐ ŝŶ ƚŚĞ ĐŽŵŵĞƌĐŝĂů ƐĞĐƚŽƌ ĂƌĞ ĐĂƉĂďůĞ ŽĨ ĨĂůůŝŶŐ ǁŝƚŚŝŶ ƚŚĞ ƐĂŵĞ ƌĂŶŐĞ ĂƐ ĐŽŶǀĞŶƚŝŽŶĂů ŶĞǁ ĐŽŶƐƚƌƵĐƚŝŽŶ ƉƌŽũĞĐƚƐ͘ϭϮϳ͕ ϭϮϴ ƚ ŝƐ ǁŽƌƚŚ ŶŽƚŝŶŐ ƚŚĂƚ͕ ǁŚĞŶ ĂƚƚĞŵƉƚŝŶŐ ƚŽ ĐĂůĐƵůĂƚĞ ƚŚĞ ŝŶĐƌĞŵĞŶƚĂů ĐŽŶƐƚƌƵĐƚŝŽŶ ĐŽƐƚ ŽĨ Ă ŶĞƚͲnjĞƌŽ ĞŶĞƌŐLJ ďƵŝůĚŝŶŐƚ ĐŽŵƉĂƌĞĚ ƚŽ Ă ĐŽŶǀĞŶƚŝŽŶĂů ďƵŝůĚŝŶŐ͕ ĂĚĚŝƚŝŽŶĂů ĨĂĐƚŽƌƐ͕ ƐƵĐŚ ĂƐ ĐŽŶƚŝŶƵĞĚ ŽƉĞƌĂƚŝŽŶĂů ƐĂǀŝŶŐƐ͕ ŝŶĐƌĞĂƐĞĚ ŽĐĐƵƉĂŶƚ ĐŽŵĨŽƌƚ͕ ĂŶĚ ŝŶĐƌĞĂƐĞĚ ďƵŝůĚŝŶŐ ǀĂůƵĞ͕ ƐŚŽƵůĚ ĂůƐŽ ďĞ ĐŽŶƐŝĚĞƌĞĚ͘ dŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ŝƐ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ĂƉƉƌŽdžŝŵĂƚĞůLJ Ϯϲ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ KϮ ĞŵŝƐƐŝŽŶƐ͘ϭϮϵ ůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ ŝŶ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ;ŵĞĂƐƵƌĞĚ ŝŶ ŬtŚ ƉĞƌ ĚŽůůĂƌ ŽĨ ŽƵƚƉƵƚ ƉƌŽĚƵĐĞĚͿ ŚĂƐ ŝŵƉƌŽǀĞĚ ƌĂƉŝĚůLJ ŽǀĞƌ ƚŚĞ ůĂƐƚ ϭϱ LJĞĂƌƐ͕Ƶ ĂŶĚ ĐŽŶƚŝŶƵĞĚ ŝŵƉƌŽǀĞŵĞŶƚ ǁŝůů ĚĞƉĞŶĚ ŽŶ ƉĞƌƐŝƐƚĞŶƚ ĂƚƚĞŶƚŝŽŶ ƚŽ ĞĨĨŝĐŝĞŶĐLJ͘ Ŷ ƌĞŐŝŽŶƐ ǁŚĞƌĞ ƚŚĞ ĞŵŝƐƐŝŽŶƐ ŝŶƚĞŶƐŝƚLJ ŽĨ ĐĞŶƚƌĂů ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ŝƐ ŚŝŐŚ͕ ƐǁŝƚĐŚŝŶŐ ƚŽ W ǁŝůů ŚĂǀĞ ƚŚĞ ďŝŐŐĞƐƚ ĞŵŝƐƐŝŽŶƐ ŝŵƉĂĐƚ͘ K ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƚŚĞƌĞ ŝƐ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ĨŽƌ ƌŽƵŐŚůLJ Ϯϰϭ 't ŽĨ W ĐĂƉĂĐŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŝŶĐůƵĚŝŶŐ ŝŶĚƵƐƚƌŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů W ĂƐ ǁĞůů ĂƐ ǁĂƐƚĞ ŚĞĂƚ ƚŽ ƉŽǁĞƌ͘ϭϯϬ ŝŶĐĞ ŵŽƐƚ ŽĨ ŝŶĚƵƐƚƌŝĂů W ŝƐ ĨƵĞůĞĚ ďLJ ŶĂƚƵƌĂů ŐĂƐ͕ϭϯϭ ŚŽǁĞǀĞƌ͕ ĞŝƚŚĞƌ ĨƵĞůͲƐǁŝƚĐŚŝŶŐ ƚŽ ĚĞĐĂƌďŽŶŝnjĞĚ ĨƵĞůƐ Žƌ Ă ƚƌĂŶƐŝƚŝŽŶ ĂǁĂLJ ĨƌŽŵ W ǁŽƵůĚ ďĞ ŶĞĞĚĞĚ ŝŶ ƚŚĞ ůŽŶŐ ƚĞƌŵ ƚŽ ŵŽƌĞ ĨƵůůLJ ĚĞĐĂƌďŽŶŝnjĞ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ͘ 3 2 3 2 Distributed Generation Distributed Storage and Demand Response Ŷ ƌĞĐĞŶƚ LJĞĂƌƐ͕ ƚŚĞƌĞ ŚĂƐ ďĞĞŶ ƐŝŐŶŝĨŝĐĂŶƚ ŐƌŽǁƚŚ ŝŶ '͕ ƉĂƌƚŝĐƵůĂƌůLJ ƌŽŽĨƚŽƉ ƐŽůĂƌ Ws͕ ǁŚŝĐŚ ŚĂƐ ďĞĞŶ ĨŽƐƚĞƌĞĚ ďLJ ůŽǁĞƌ ŝŶƐƚĂůůĂƚŝŽŶ ĂŶĚ ŚĂƌĚǁĂƌĞ ĐŽƐƚƐ ĂŶĚ ƐƵƉƉŽƌƚŝǀĞ ƉŽůŝĐŝĞƐ͕ ƐƵĐŚ ĂƐ ŶĞƚ ŵĞƚĞƌŝŶŐ ĂŶĚ ƐĞůĨͲ ŐĞŶĞƌĂƚŝŽŶ ƚĂƌŝĨĨƐ ĂŶĚ ZW Ɛ ǁŝƚŚ ƐĞƚͲĂƐŝĚĞƐ Žƌ ŵƵůƚŝƉůŝĞƌƐ ĨŽƌ '͘ ŽǁĞǀĞƌ͕ ƐŽŵĞ ƐƚĂƚĞƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ĂƌĞ Ɛ EPA’s ENERGY STAR Certified Homes are typically 15 percent to 30 percent more efficient than the average new home yet ƚŚĞLJ ĐĂŶ ƉƌŽǀŝĚĞ ŵŽŶƚŚůLJ ĞŶĞƌŐLJ ĐŽƐƚ ƐĂǀŝŶŐƐ ŽĨ ĂďŽƵƚ ΨϮϳ–$93 to consumers DOE’s Zero Energy Ready Homes are at least 40 ƉĞƌĐĞŶƚ ƚŽ ϱϬ ƉĞƌĐĞŶƚ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ƚŚĂŶ ƚLJƉŝĐĂů ŶĞǁ ŚŽŵĞƐ͕ LJĞƚ ƚŚĞLJ ĐĂŶ ƉƌŽǀŝĚĞ ĐŽŶƐƵŵĞƌƐ ǁŝƚŚ ŵŽŶƚŚůLJ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ŽĨ ĂďŽƵƚ ΨϯϬ–ΨϭϬϬ͘ ĞĞ ĐŝƚĂƚŝŽŶƐ ŝŶ ƚŚĞ ŵĂŝŶ ƚĞdžƚ ĨŽƌ ĚĞƚĂŝůƐ ƌĞŐĂƌĚŝŶŐ ƚŚĞƐĞ ĞƐƚŝŵĂƚĞƐ ;ĞŶĚŶŽƚĞƐ ϭϰϵ–ϭϱϮͿ͘ ƚ ĞƌŽͲĞŶĞƌŐLJ ďƵŝůĚŝŶŐƐ ĂƌĞ ŚŝŐŚͲƉĞƌĨŽƌŵĂŶĐĞ ĐŽŵŵĞƌĐŝĂů ĂŶĚ ƌĞƐŝĚĞŶƚŝĂů ďƵŝůĚŝŶŐƐ ƚŚĂƚ ĂƌĞ ƐŽ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ͕ Ă ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐLJƐƚĞŵ ĐĂŶ ŽĨĨƐĞƚ ŵŽƐƚ Žƌ Ăůů ŝƚƐ ĂŶŶƵĂů ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ Ƶ ůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ŵĞĂƐƵƌĞĚ ĂƐ ĚŽůůĂƌƐ ŽĨ ' W ƉƌŽĚƵĐĞĚ ƉĞƌ ŬtŚ͕ ŶĞĂƌůLJ ĚŽƵďůĞĚ ďĞƚǁĞĞŶ ϭϵϵϬ ĂŶĚ ϮϬϭϰ͕ ǁŚŝůĞ ŝŶĚƵƐƚƌŝĂů ĞůĞĐƚƌŝĐŝƚLJ ƐĂůĞƐ ǁĞƌĞ ĨůĂƚ͘ 3-28 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĂĚũƵƐƚŝŶŐ ƚŚĞŝƌ ŶĞƚ ŵĞƚĞƌŝŶŐ ƉŽůŝĐŝĞƐ ĂƐ ƚŚĞ ĚŝƐƚƌŝďƵƚĞĚ Ws ŵĂƌŬĞƚ ŐƌŽǁƐ͘ EĞƚ ŵĞƚĞƌŝŶŐ ŝƐ Ă ƌĞůĂƚŝǀĞůLJ ƐŝŵƉůĞ ƉŽůŝĐLJ͕ ĂŶĚ ĂƐ ƚŚĞ ĚŝƐƚƌŝďƵƚĞĚ Ws ŵĂƌŬĞƚ ŚĂƐ ŐƌŽǁŶ ĚƌĂŵĂƚŝĐĂůůLJ͕ ŵĂŶLJ ƐƚĂƚĞƐ ĂƌĞ ƵƉĚĂƚŝŶŐ ƚŚĞŝƌ ŝŶĐĞŶƚŝǀĞ ƐƚƌƵĐƚƵƌĞƐ ĨŽƌ ĚŝƐƚƌŝďƵƚĞĚ Ws ƚŽ ŵŽƌĞ ĐĂƌĞĨƵůůLJ ĂĐĐŽƵŶƚ ĨŽƌ ĐŚĂŶŐŝŶŐ ĞůĞĐƚƌŝĐ ƐLJƐƚĞŵ ŶĞĞĚƐ͕ ƚƌĂŶƐĨĞƌƐ ďĞƚǁĞĞŶ ƌĂƚĞƉĂLJĞƌ ĐůĂƐƐĞƐ͕ ĂŶĚ ǀĂƌŝŽƵƐ ďĞŶĞĨŝƚ ĂŶĚ ĐŽƐƚ ƐƚƌĞĂŵƐ͘ dŚŝƐ ŝƐ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƉƚŚ ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer Equity ͘ ŵĂůůͲƐĐĂůĞ ĚŝƐƚƌŝďƵƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ƐƚŽƌĂŐĞ ŝƐ ďĞĐŽŵŝŶŐ ŵŽƌĞ ǁŝĚĞůLJ ĂǀĂŝůĂďůĞ ĂŶĚ ĐĂŶ ĐŽŶƚƌŝďƵƚĞ ƚŽ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ďLJ ĨĂĐŝůŝƚĂƚŝŶŐ ŝŶĐƌĞĂƐĞĚ ƉĞŶĞƚƌĂƚŝŽŶ ŽĨ ǀĂƌŝĂďůĞ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ͘ ƚ ĐĂŶ ĂůƐŽ ƌĞĚƵĐĞ ƉĞĂŬ ůŽĂĚ͕ ŝŵƉƌŽǀĞ ĞůĞĐƚƌŝĐĂů ƐƚĂďŝůŝƚLJ͕ ĂŶĚ ƌĞĚƵĐĞ ƉŽǁĞƌ ƋƵĂůŝƚLJ ĚŝƐƚƵƌďĂŶĐĞƐ͘ ŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ ŝƐ ĐŽǀĞƌĞĚ ŝŶ ŐƌĞĂƚĞƌ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer Equity ŝŬĞ ĚŝƐƚƌŝďƵƚĞĚ ƐƚŽƌĂŐĞ͕ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ; ZͿ ĞŶĂďůĞƐ Ă ĐůĞĂŶĞƌ ŐƌŝĚ ďLJ ƉƌŽǀŝĚŝŶŐ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ǁŝƚŚ ůŽǁĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ƚŚĂŶ ŽƚŚĞƌ ŽƉƚŝŽŶƐ ĨŽƌ ƉƌŽǀŝĚŝŶŐ ƐƵĐŚ ƐĞƌǀŝĐĞƐ͘ Ĩ ĂƉƉƌŽƉƌŝĂƚĞůLJ ĚĞƐŝŐŶĞĚ ĂŶĚ ƌĞƐŽƵƌĐĞĚ͕ Z ĞŶĂďůĞƐ ƵƚŝůŝƚŝĞƐ͕ ŐƌŝĚ ŽƉĞƌĂƚŽƌƐ͕ Žƌ ŽƚŚĞƌ ŝŶƚĞƌŵĞĚŝĂƌŝĞƐ ƚŽ ĐĂůů ĨŽƌ ƐƉĞĐŝĨŝĐ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ĚĞŵĂŶĚ ǁŚĞŶ ŶĞĞĚĞĚ͖ ƚŚŝƐ ĐŽƵůĚ ƉƌŽǀŝĚĞ ďĞŶĞĨŝƚƐ ŝŶ ƌĞĚƵĐŝŶŐ ƉĞĂŬ ůŽĂĚ ĂŶĚ ƐƵƉƉůLJŝŶŐ ĞƐƐĞŶƚŝĂů ƌĞůŝĂďŝůŝƚLJ ƐĞƌǀŝĐĞƐ ǁŚĞŶ ŝŶĐƌĞĂƐĞĚ ǀĂƌŝĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ĂƌĞ ŽŶ ƚŚĞ ŐƌŝĚ͘ ƚ ŚŝŐŚĞƌ ƉĞŶĞƚƌĂƚŝŽŶ ůĞǀĞůƐ ŽĨ ǁŝŶĚ ĂŶĚ ƐŽůĂƌ ;ǀĂƌŝĂďůĞͿ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ͕ ƉŽůŝĐŝĞƐ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ ƚŚĂƚ ĞŶĂďůĞ ŐƌĞĂƚĞƌ ƉĞŶĞƚƌĂƚŝŽŶ ŽĨ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ŝŶ ŐƌŝĚ ƐĞƌǀŝĐĞƐ ŵĂƌŬĞƚƐ ĂƌĞ ůŝŬĞůLJ ƚŽ ďĞĐŽŵĞ ŝŶĐƌĞĂƐŝŶŐůLJ ŝŵƉŽƌƚĂŶƚ ƚŽ ĞŶĂďůĞ Ă ĐůĞĂŶĞƌ ŐƌŝĚ͘ϭϯϮ D ĞŶĂďůĞƐ ƚŝŵĞͲďĂƐĞĚ ƌĂƚĞƐ ĂŶĚ ĨĂĐŝůŝƚĂƚĞƐ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ĚŝƐƚƌŝďƵƚĞĚ ŐĞŶĞƌĂƚŝŽŶ ƐLJƐƚĞŵƐ ;Ğ͘Ő͕͘ ƐŽůĂƌͿ͕ ĂŵŽŶŐ ŽƚŚĞƌ ĐĂƉĂďŝůŝƚŝĞƐ͘ DŽƌĞ ĂƵƚŽŵĂƚĞĚ ĚĞŵĂŶĚ ƌĞƐƉŽŶƐĞ ĐĂƉĂďŝůŝƚŝĞƐ ǁŝůů ĞŶĂďůĞ ŐƌĞĂƚĞƌ ĨůĞdžŝďŝůŝƚLJ ŽĨ ĚĞŵĂŶĚͲƐŝĚĞ ƌĞƐŽƵƌĐĞƐ͕ ŝŵƉƌŽǀĞĚ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ǀĂƌŝĂďůĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ĞĂƐŝĞƌ ǀĂůƵĂƚŝŽŶ ŽĨ ƚŚĞŝƌ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ďĞŶĞĨŝƚƐ͕ ĂŶĚ ĞŶŚĂŶĐĞ ƐLJƐƚĞŵ ŝŶƚĞŐƌŝƚLJ ƚŚƌŽƵŐŚ ŐƌĞĂƚĞƌ ĂƌĞĂͲ ǁŝĚĞ ŬŶŽǁůĞĚŐĞ͘ dŚĞ ŵŽƐƚ ǀŝĂďůĞ Z ĞŶĚͲƵƐĞƐ ĨŽƌ s Z ŝŶƚĞŐƌĂƚŝŽŶ ĂƌĞ ĞůĞĐƚƌŝĐ ǁĂƚĞƌ ŚĞĂƚĞƌƐ ĂŶĚ ĨƵƌŶĂĐĞƐ͕ Ăŝƌ ĐŽŶĚŝƚŝŽŶĞƌƐ ĂŶĚ ůŝŐŚƚŝŶŐ ǁŝƚŚ ĂĚǀĂŶĐĞĚ ĐŽŶƚƌŽůƐ͕ ĂŐƌŝĐƵůƚƵƌĂů ŝƌƌŝŐĂƚŝŽŶ͕ ĂŶĚ ŵŽƚŽƌͬĐŽŵƉƌĞƐƐŽƌ ĚƌŝǀĞƐ ǁŝƚŚ ǀĂƌŝĂďůĞ ĨƌĞƋƵĞŶĐŝĞƐ͘ϭϯϯ 3 2 4 Increased Electrification Is Essential for Decarbonization ŶĂůLJƐĞƐ ƚŚĂƚ ĞdžƉůŽƌĞ ŚŝŐŚ ůĞǀĞůƐ ŽĨ ůŽŶŐͲƚĞƌŵ ' ' ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ƐƵŐŐĞƐƚ ƚŚĂƚ ƚŚĞ ŝŶĐƌĞĂƐĞĚ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶǀ ŽĨ ŬĞLJ ĞŶĚ ƵƐĞƐ ŝŶ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ďƵŝůĚŝŶŐƐ͕ ĂŶĚ ŝŶĚƵƐƚƌLJ ŝƐ ŽŶĞ ŽĨ ƚŚƌĞĞ ĨƵŶĚĂŵĞŶƚĂů ĂƌĞĂƐ ;ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ ĚĞĐĂƌďŽŶŝnjŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ĂĚŽƉƚŝŶŐ ŚŝŐŚůLJͲĞĨĨŝĐŝĞŶƚ ĞŶĚ ƵƐĞƐͿ ŶĞĞĚĞĚ ƚŽ ĂĐŚŝĞǀĞ ĚĞĞƉ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ͘ϭϯϰ͕ ϭϯϱ DƵůƚŝƉůĞ ƐĞĐƚŽƌƐ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ ŚĂǀĞ ĂůƌĞĂĚLJ ďĞŐƵŶ ƚŽ ĞdžŚŝďŝƚ ƚƌĞŶĚƐ ƚŽǁĂƌĚƐ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ͘ ĐŽŶƚŝŶƵŝŶŐ ƐŚŝĨƚ ƚŽǁĂƌĚ ďŽƚŚ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐLJƐƚĞŵ ĂŶĚ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ĞŶĚ ƵƐĞƐ ǁŽƵůĚ ŚĞůƉ ƌĞĚƵĐĞ ' ' ĞŵŝƐƐŝŽŶƐ ĞĐŽŶŽŵLJͲǁŝĚĞ ĂŶĚ ƉƌŽǀŝĚĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ĂǀŽŝĚ ƚŚĞ ' ' ĞŵŝƐƐŝŽŶƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ƚŚĞ ĚŝƌĞĐƚ ƵƐĞ ŽĨ ĨŽƐƐŝů ĨƵĞůƐ ǁŝƚŚŽƵƚ h ͘ϭϯϲ dŚĞ ůĞǀĞů ŽĨ ' ' ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ƚŚĂƚ ĐĂŶ ďĞ ĂĐŚŝĞǀĞĚ ǀŝĂ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ĚĞƉĞŶĚƐ ŽŶ Ă ǀĂƌŝĞƚLJ ŽĨ ĨĂĐƚŽƌƐ͕ ƐƵĐŚ ĂƐ ƚŚĞ ĐĂƌďŽŶ ŝŶƚĞŶƐŝƚLJ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͖ ƚŚĞ ĞĨĨŝĐŝĞŶĐLJ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͖ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ͖ ĂŶĚ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ĨƵĞů ƐǁŝƚĐŚŝŶŐ͕ ǁŚŝĐŚ ĐŽƵůĚ ŝŶĐůƵĚĞ ƚŚĞ ƵƐĞ ŽĨ ŚLJĚƌŽŐĞŶ ƉƌŽĚƵĐĞĚ ǀŝĂ ĞůĞĐƚƌŽůLJƐŝƐ͘ WŽůŝĐŝĞƐ ĂƌĞ ŶĞĞĚĞĚ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ĞĂƌůLJ ƚĞĐŚŶŽůŽŐLJ ĂĚŽƉƚŝŽŶ ĂŶĚ ƚŽ ŝŶĐƌĞĂƐĞ ƉĞŶĞƚƌĂƚŝŽŶ ŽĨ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŝŶ ƐƉĞĐŝĨŝĐ ƐĞĐƚŽƌƐ͕ ĂƉƉůŝĐĂƚŝŽŶƐ͕ ĂŶĚ ƌĞŐŝŽŶƐ͘ 3 2 4 1 Electrification of Buildings ŶĂůLJƐŝƐ ĚĞŵŽŶƐƚƌĂƚĞƐ ƚŚĂƚ ŝŶĐƌĞĂƐŝŶŐ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ďƵŝůĚŝŶŐ ĞŶĚ ƵƐĞƐ ĐŽƵůĚ ŚĞůƉ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ƌĞĂĐŚ ĚĞĞƉ ĞĐŽŶŽŵLJͲǁŝĚĞ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ͘ϭϯϳ͕ ϭϯϴ͕ ϭϯϵ͕ ϭϰϬ͕ ϭϰϭ dŚĞ ůĂƌŐĞƐƚ ŶŽŶͲĞůĞĐƚƌŝĐ ĞŶĚ ƵƐĞƐ ĨŽƌ ǀ Ŷ ƚŚĞ ĐŽŶƚĞdžƚ ŽĨ ƚŚĞ Y Z͕ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŝŶĐůƵĚĞƐ ďŽƚŚ ƵƐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŝƚƐĞůĨ ƚŽ ƉŽǁĞƌ ĞŶĚͲƵƐĞ ĂƉƉůŝĐĂƚŝŽŶƐ ĂƐ ǁĞůů ĂƐ ƵƐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ŵĂŬĞ ŝŶƚĞƌŵĞĚŝĂƚĞ ĨƵĞůƐ ƐƵĐŚ ĂƐ ŚLJĚƌŽŐĞŶ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-29 Chapter III Building a Clean Electricity Future ƌĞƐŝĚĞŶƚŝĂů ĂŶĚ ĐŽŵŵĞƌĐŝĂů ďƵŝůĚŝŶŐƐ ĂƌĞ ƐƉĂĐĞ ŚĞĂƚŝŶŐ ĂŶĚ ǁĂƚĞƌ ŚĞĂƚŝŶŐ͘ ůĞĐƚƌŝĐŝƚLJ ƵƐĂŐĞ ĨŽƌ ƐƉĂĐĞ ŚĞĂƚŝŶŐ ŝƐ ĐƵƌƌĞŶƚůLJ ŝŶĐƌĞĂƐŝŶŐ͕ ĂŶĚ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ ŽƚŚĞƌ ĚŝƌĞĐƚ ĨƵĞů ƵƐĂŐĞ ĂƌĞ ƚƌĞŶĚŝŶŐ ĚŽǁŶǁĂƌĚ͘ϭϰϮ ĚǀĂŶĐĞƐ ŝŶ ŚĞĂƚ ƉƵŵƉ ƚĞĐŚŶŽůŽŐLJ ĨŽƌ ďŽƚŚ ƐƉĂĐĞ ŚĞĂƚŝŶŐ ĂŶĚ ǁĂƚĞƌ ŚĞĂƚŝŶŐ ŚĂǀĞ ŵĂĚĞ ŚĞĂƚ ƉƵŵƉƐ ĂŶ ĞĐŽŶŽŵŝĐĂů ĂŶĚ ĞĨĨŝĐŝĞŶƚ ĐŚŽŝĐĞ͘ ĞĂƚ ƉƵŵƉƐ ĐĂŶ ďĞ ƚǁŝĐĞ ĂƐ ĞĨĨŝĐŝĞŶƚ ĂƐ ĞůĞĐƚƌŝĐ ƌĞƐŝƐƚĂŶĐĞ ƐƉĂĐĞ ŚĞĂƚŝŶŐ͘ ƵƌƌĞŶƚůLJ͕ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ƐŽŵĞ ĞŶĚ ƵƐĞƐ ƐĂǀĞƐ ĐŽŶƐƵŵĞƌƐ ŵŽŶĞLJ ĂŶĚͬŽƌ ƐĂǀĞƐ ĞŶĞƌŐLJ ŝŶ ŵĂŶLJ ƉĂƌƚƐ ŽĨ ƚŚĞ ĐŽƵŶƚƌLJ͘ϭϰϯ͕ ϭϰϰ ŵƉƌŽǀŝŶŐ ƐŝŶŐůĞͲĨĂŵŝůLJ ĚĞƚĂĐŚĞĚ ŚŽŵĞƐ ǁŝƚŚ Ă ƉĂĐŬĂŐĞ ŽĨ ĨƵĞůͲƐǁŝƚĐŚŝŶŐ ĞĨĨŝĐŝĞŶĐLJ ƵƉŐƌĂĚĞƐǁ ŚĂƐ ƚŚĞ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ƚŽ ƐĂǀĞ ϰϱϬ ƚƌŝůůŝŽŶ ƚƵ ƉĞƌ LJĞĂƌ ŽĨ ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ŶĂƚŝŽŶĂůůLJ͕ Žƌ ĂďŽƵƚ ϯ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ƵƐĞĚ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ŝŶ ƚŚĞ ƌĞƐŝĚĞŶƚŝĂů ƐĞĐƚŽƌ ŝŶ ϮϬϭϱ͘dž͕ LJ͕ ϭϰϱ dŚŝƐ ĞŶĞƌŐLJ ƐĂǀŝŶŐƐ ĂŶĚ ƚŚĞ ĐŽƌƌĞƐƉŽŶĚŝŶŐ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶ ƉŽƚĞŶƚŝĂů ǀĂƌŝĞƐ ǁŝĚĞůLJ ďLJ ƐƚĂƚĞ ĂŶĚ ƌĞŐŝŽŶ ĂƐ Ă ƌĞƐƵůƚ ŽĨ ĨƵĞů ĐŚŽŝĐĞ͕ ƚĞĐŚŶŽůŽŐLJ͕ ĂŶĚ ĐůŝŵĂƚĞ ĚŝĨĨĞƌĞŶĐĞƐ͘ tŝƚŚ ĐƵƌƌĞŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ĂƐƐƵŵŝŶŐ Ă ϱϬ ƉĞƌĐĞŶƚ ĂŶĚ Ă ϵϬ ƉĞƌĐĞŶƚ ĐůĞĂŶĞƌ ŐƌŝĚ ƚŚĂŶ ƚŽĚĂLJ͕ϭϰϲ ƚŚĞ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ŽĨ ƚŚĞ ƐĂŵĞ ƐĞƚ ŽĨ ƵƉŐƌĂĚĞƐ ĨŽƌ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶ ƌĞĚƵĐƚŝŽŶƐ ŝƐ ϴϬ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ĂŶĚ ϭϮϬ ŵŝůůŝŽŶ ŵĞƚƌŝĐ ƚŽŶƐ ŽĨ KϮ ƉĞƌ LJĞĂƌ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͘ϭϰϳ dŚĞ ĞŵŝƐƐŝŽŶƐ ƐĂǀŝŶŐƐ ǁŽƵůĚ ŶŽƚ ďĞ ĂƐ ƐŝŐŶŝĨŝĐĂŶƚ ǁŝƚŚ ƚŚĞ ĐƵƌƌĞŶƚ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ŽĨ ƚŚĞ h͘ ͘ ƉŽǁĞƌ ƐĞĐƚŽƌ͘ Ɛ ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽŶƚŝŶƵĞ ƚŽ ŝŵƉƌŽǀĞ ĂŶĚ ƚŽ ĐŽŵĞ ĚŽǁŶ ŝŶ ƉƌŝĐĞ͕ ďŽƚŚ ƚŚĞ ĞĐŽŶŽŵŝĐ ĂŶĚ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ǁŝůů ŝŶĐƌĞĂƐĞ͘ 3 2 4 2 Electrification of Industry dŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ͕ ƉĞƌŚĂƉƐ ŵŽƌĞ ƚŚĂŶ ĂŶLJ ŽƚŚĞƌ͕ ŝƐ Ă ƐĞĐƚŽƌ ŝŶ ǁŚŝĐŚ ƚĞĐŚŶŽůŽŐŝĐĂů ŝŶŶŽǀĂƚŝŽŶ ŝƐ ŶĞĞĚĞĚ ĨŽƌ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ͖ ŝŶ ĂĚĚŝƚŝŽŶ͕ ƐLJƐƚĞŵĂƚŝĐ ĞĐŽŶŽŵŝĐ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ĨŽƌ ƐŚŝĨƚŝŶŐ ĨƌŽŵ ĚŝƌĞĐƚ ĨƵĞů ƵƐĞ ŝƐ ƚĞĐŚŶŝĐĂůůLJ ŵŽƌĞ ĚŝĨĨŝĐƵůƚ ĂŶĚ ĞdžƉĞŶƐŝǀĞ ĨŽƌ ŝŶĚƵƐƚƌLJ͘ ůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŝƐ ůŝŬĞůLJ ƚŽ ďĞ ŽŶůLJ ƉĂƌƚŝĂůůLJ ǀŝĂďůĞ ĨŽƌ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ ĚƵĞ ƚŽ ƉŚLJƐŝĐĂů ĂŶĚ ĞĐŽŶŽŵŝĐ ƌĞĂƐŽŶƐ͖ϭϰϴ ƚŚŝƐ ǁŽƵůĚ ůŝŬĞůLJ ŵĂŬĞ ƚŚĞ ƐĞĐƚŽƌ Ă ŚŝŐŚͲ ǀĂůƵĞ ĂƌĞĂ ĨŽƌ h ͕nj ŚLJĚƌŽŐĞŶ͕ ĂŶĚ ďŝŽĨƵĞůƐ ƚŽ ƌĞĚƵĐĞ ĐĂƌďŽŶ ŝŶƚĞŶƐŝƚLJ͘ĂĂ ŽŶǀĞŶƚŝŽŶĂů ďŽŝůĞƌ ƵƐĞ ĂŶĚ ƉƌŽĐĞƐƐ ŚĞĂƚŝŶŐ ĂƌĞ ƚǁŽ ŝŶĚƵƐƚƌŝĂů ĞŶĚ ƵƐĞƐ ǁŝƚŚ ŵĞĂŶŝŶŐĨƵů ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ĨŽƌ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ͘ ƵĞůͲ ĨŝƌĞĚ ďŽŝůĞƌƐ ĐĂŶ ďĞ ƌĞƉůĂĐĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐ ďŽŝůĞƌƐ ĂŶĚ͕ ĚĞƉĞŶĚŝŶŐ ŽŶ ƚŚĞ ŝŶĚƵƐƚƌLJ͕ ĚŝĨĨĞƌĞŶƚ ĞůĞĐƚƌŽͲ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ďĞƐƚ ƐƵŝƚĞĚ ƚŽ ƉƌŽǀŝĚĞ ƉƌŽĐĞƐƐ ŚĞĂƚ͘ Žƌ ĞdžĂŵƉůĞ͕ ĞůĞĐƚƌŽůLJƚŝĐ ƌĞĚƵĐƚŝŽŶ͕ ŝŶĚƵĐƚŝŽŶ ŚĞĂƚŝŶŐ͕ ƌĞƐŝƐƚĂŶĐĞ ŚĞĂƚŝŶŐ ĂŶĚ ŵĞůƚŝŶŐ͕ ĚŝƌĞĐƚ ĂƌĐ ŵĞůƚŝŶŐ͕ ĂŶĚ ŝŶĚƵƐƚƌŝĂů ƉƌŽĐĞƐƐ ŚĞĂƚ ƉƵŵƉƐ ĐĂŶ ďĞ ƵƐĞĚ ĨŽƌ ƉƌŽĐĞƐƐ ŚĞĂƚŝŶŐ ŝŶ ƚŚĞ ŶŽŶĨĞƌƌŽƵƐ ŵĞƚĂůƐ ;ŶŽŶͲĂůƵŵŝŶƵŵͿ͕ϭϰϵ ŵĞƚĂů ĨĂďƌŝĐĂƚŝŽŶ͕ϭϱϬ ŐůĂƐƐ͕ϭϱϭ ŝƌŽŶ ĂŶĚ ƐƚĞĞů͕ϭϱϮ ĨŽŽĚ͕ϭϱϯ ĐŚĞŵŝĐĂů͕ϭϱϰ ĂŶĚ ƉƵůƉ ĂŶĚ ƉĂƉĞƌϭϱϱ ŝŶĚƵƐƚƌŝĞƐ͕ ƌĞƐƉĞĐƚŝǀĞůLJ͘ 3 2 4 3 Electrification of Transportation DĂŶLJ ƐƚƵĚŝĞƐ ĐŽŶĐůƵĚĞ ƚŚĂƚ ƐŝŐŶŝĨŝĐĂŶƚ KϮ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ĂƌĞ ŶĞĞĚĞĚ ĨƌŽŵ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ͖ ƚŚŝƐ ǁŝůů ƌĞƋƵŝƌĞ ǁŝĚĞƐƉƌĞĂĚ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ͕ Žƌ ƵƐĞ ŽĨ ĂŶŽƚŚĞƌ ŶŽŶͲĞŵŝƚƚŝŶŐ ĨƵĞů ďLJ͕ ƚŚĞ h͘ ͘ ǀĞŚŝĐůĞ ĨůĞĞƚ͘ϭϱϲ͕ ϭϱϳ͕ ϭϱϴ Ŷ ƌĞĐĞŶƚ LJĞĂƌƐ͕ ƚŚĞƌĞ ŚĂƐ ďĞĞŶ Ă ƐŚĂƌƉ ŝŶĐƌĞĂƐĞ ŝŶ ĞůĞĐƚƌŝĐ ůŝŐŚƚͲĚƵƚLJ ǀĞŚŝĐůĞ ƐĂůĞƐ ǁ ŝƐƚ ŽĨ ƵƉŐƌĂĚĞƐ ĐŽŶƐŝĚĞƌĞĚ ŝŶ ƚŚŝƐ ƉĂĐŬĂŐĞ ŝŶĐůƵĚĞ ;ϭͿ ĚƵĐƚůĞƐƐ ŚĞĂƚ ƉƵŵƉ ; WͿ ƌĞƉůĂĐĞƐ ŐĂƐ ďŽŝůĞƌ ;ϭϬϬй ĚŝƐƉůĂĐĞŵĞŶƚͿ͖ ;ϮͿ W ƌĞƉůĂĐĞƐ Žŝů ďŽŝůĞƌ ;ϭϬϬй ĚŝƐƉůĂĐĞŵĞŶƚͿ͖ ;ϯͿ W ƌĞƉůĂĐĞƐ ƉƌŽƉĂŶĞ ďŽŝůĞƌ ;ϭϬϬй ĚŝƐƉůĂĐĞŵĞŶƚͿ͖ ;ϰͿ ǀĂƌŝĂďůĞ ƐƉĞĞĚ ŚĞĂƚ ƉƵŵƉ ;s WͿ ƌĞƉůĂĐĞƐ Ăŝƌ ĐŽŶĚŝƚŝŽŶĞƌ ĂŶĚ ŐĂƐ ĨƵƌŶĂĐĞ͖ ;ϱͿ s W ƌĞƉůĂĐĞƐ Ăŝƌ ĐŽŶĚŝƚŝŽŶĞƌ ĂŶĚ Žŝů ĨƵƌŶĂĐĞ͖ ;ϲͿ s W ƌĞƉůĂĐĞƐ Ăŝƌ ĐŽŶĚŝƚŝŽŶĞƌ ĂŶĚ ƉƌŽƉĂŶĞ ĨƵƌŶĂĐĞ͖ ;ϳͿ ŚĞĂƚ ƉƵŵƉ ǁĂƚĞƌ ŚĞĂƚĞƌ ; Wt Ϳ ϴϬ ŐĂůůŽŶ ƌĞƉůĂĐĞƐ Žŝů ǁĂƚĞƌ ŚĞĂƚĞƌ ;t Ϳ͖ ϴͿ Wt ϴϬ ŐĂůůŽŶ ƌĞƉůĂĐĞƐ ƉƌŽƉĂŶĞ t ͘ dž dŚĞ ĐƵƌƌĞŶƚ ĞĐŽŶŽŵŝĐ ƉŽƚĞŶƚŝĂů ;EWsхϬͿ ƚŽ ƐĂǀĞ ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ǁŝƚŚ ƚŚŝƐ ƉĂĐŬĂŐĞ ŽĨ ŵĞĂƐƵƌĞƐ ŝƐ ůŽǁĞƌ͕ ďƵƚ Ɛƚŝůů ƐŝŐŶŝĨŝĐĂŶƚ Ăƚ ϮϱϮ ƚƌŝůůŝŽŶ ƚƵ ƉĞƌ LJĞĂƌ͘ LJ dŚŝƐ ĂĐĐŽƵŶƚƐ ĨŽƌ ƚŚĞ ĐŽŶǀĞƌƐŝŽŶ ůŽƐƐĞƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ƚŚĞ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ;dΘ Ϳ ůŝŶĞ ůŽƐƐĞƐ ĐŽŵƉĂƌĞĚ ƚŽ ĚŝƌĞĐƚ ĨƵĞů ƵƐĂŐĞ ;Ğ͘Ő͕͘ ŶĂƚƵƌĂů ŐĂƐ͕ Žŝů͕ ĂŶĚ ƉƌŽƉĂŶĞͿ͘ nj DĂŶLJ ŝŶĚƵƐƚƌŝĂů ƉƌŽĐĞƐƐĞƐ ƉƌŽĚƵĐĞ ƌĞůĂƚŝǀĞůLJ ƉƵƌĞ ƐƚƌĞĂŵƐ ŽĨ K ͕ ŵĂŬŝŶŐ h ĂŶ ĂƚƚƌĂĐƚŝǀĞ ŵĞƚŚŽĚ ĨŽƌ ĚĞĐĂƌďŽŶŝnjŝŶŐ Ϯ ƉŽƌƚŝŽŶƐ ŽĨ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ƐĞĐƚŽƌ͘ ŶĚƵƐƚƌŝĂů ĨĂĐŝůŝƚŝĞƐ ƌĞƉƌĞƐĞŶƚ Ă ůŽǁͲĐŽƐƚ ƉĂƚŚǁĂLJ ĨŽƌ ƐƚŝŵƵůĂƚŝŶŐ h ĚĞƉůŽLJŵĞŶƚ͕ ĂƐ ĐĂƉƚƵƌĞ ĨƌŽŵ ŚŝŐŚͲƉƵƌŝƚLJ ƐŽƵƌĐĞƐ ƉƌŽǀŝĚĞƐ ǀĂůƵĂďůĞ ĞĂƌůLJ ƉĞƌŵŝƚƚŝŶŐ͕ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĚĞƉůŽLJŵĞŶƚ͕ ĂŶĚ ŵĂƌŬĞƚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͖ ƚŚŝƐ͕ ŝŶ ƚƵƌŶ͕ ǁŝůů ůŽǁĞƌ ƚŚĞ ĐŽƐƚ ŽĨ ĐĂƉƚƵƌŝŶŐ KϮ ĨƌŽŵ ĨƵƚƵƌĞ ŝŶĚƵƐƚƌŝĂůͲ ĂŶĚ ƉŽǁĞƌͲƐĞĐƚŽƌ ƉƌŽũĞĐƚƐ͘ ĂĂ ƐŝŐŶŝĨŝĐĂŶƚ ĨƌĂĐƚŝŽŶ ŽĨ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ŝŶ ŝŶĚƵƐƚƌLJ ŐŽĞƐ ƚŽ ĨĞĞĚƐƚŽĐŬ ƵƐĞ ĂŶĚ ĐĂŶŶŽƚ ďĞ ĚĞĐĂƌďŽŶŝnjĞĚ ƚŚƌŽƵŐŚ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ͘ ĞǀĞƌĂů ŝŶĚƵƐƚƌŝĂů ƉƌŽĐĞƐƐĞƐ ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ƐƵďƐƚŝƚƵƚĞ ŵĂƚĞƌŝĂůƐ ĨŽƌ ůŽǁĞƌ ' ' ŽƉƚŝŽŶƐ͘ 3-30 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĂŶĚ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞ ŵŝůĞƐ ƚƌĂǀĞůĞĚ͕ ďƵƚ ƚŽƚĂů W s ƐĂůĞƐ ĂĐĐŽƵŶƚ ĨŽƌ ůĞƐƐ ƚŚĂŶ ϭ ƉĞƌĐĞŶƚ ŽĨ Ăůů ůŝŐŚƚͲĚƵƚLJ ǀĞŚŝĐůĞ ƐĂůĞƐ͘ϭϱϵ WƌŽũĞĐƚŝŽŶƐ ĨŽƌ ĨƵƚƵƌĞ ĂĚŽƉƚŝŽŶ ŽĨ ƚŚĞƐĞ ǀĞŚŝĐůĞƐ ǀĂƌLJ ĂŶĚ ŵĂLJ ďĞ ŝŶĨůƵĞŶĐĞĚ ƉŽƐŝƚŝǀĞůLJ ďLJ ƐŵĂƌƚ ŵŽďŝůŝƚLJ ƚƌĞŶĚƐ͕ ƐƵĐŚ ĂƐ ĐŽŶŶĞĐƚĞĚ ĂŶĚ ĂƵƚŽŵĂƚĞĚ ǀĞŚŝĐůĞƐ ĂŶĚ ƌŝĚĞ ƐŚĂƌŝŶŐ͘ ůĞĐƚƌŝĨŝĐĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ĂůƐŽ ďĞŝŶŐ ŝŶƚƌŽĚƵĐĞĚ ŝŶƚŽ ŽƚŚĞƌ ƐĞŐŵĞŶƚƐ ŽĨ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ͕ ƐƵĐŚ ĂƐ ůĂƌŐĞƌ ǀĞŚŝĐůĞ ĐůĂƐƐĞƐ ĂŶĚ ŐƌŽƵŶĚ ŽƉĞƌĂƚŝŽŶƐ Ăƚ ƉŽƌƚƐ ĂŶĚ ĂŝƌƉŽƌƚƐ͘ Figure 3-12 PEV Registrations per 1 000 People by State in 2015160 The concentration of PEV registrations varies by state with the highest concentrations in California Washington Georgia and Oregon tŚĞŶ ďƵLJŝŶŐ Ă ŶĞǁ ǀĞŚŝĐůĞ͕ ŚŽǁĞǀĞƌ͕ ŽŶĞ ŽĨ ƚŚĞ ŵŽƐƚ ŝŵƉŽƌƚĂŶƚ ĐƌŝƚĞƌŝĂ ĨŽƌ ƉƵƌĐŚĂƐĞƌƐ ŝƐ ƚŚĞ ƵƉĨƌŽŶƚ ǀĞŚŝĐůĞ ƉƌŝĐĞ͖ϭϲϭ ĨƵƚƵƌĞ ĨƵĞů ƐĂǀŝŶŐƐ ƚĞŶĚ ƚŽ ďĞ ƵŶĚĞƌͲǀĂůƵĞĚ͘ϭϲϮ͕ ϭϲϯ ƵƌƌĞŶƚůLJ͕ ƚŚĞ ĂǀĞƌĂŐĞ ƉƌŝĐĞ ŽĨ ŶĞǁ ŐĂƐŽůŝŶĞͲƉŽǁĞƌĞĚ ĐĂƌƐ ŝƐ ƐŝŵŝůĂƌ ƚŽ ƚŚĂƚ ŽĨ ĐŽŵƉĂƌĂďůĞ ŶĞǁ W sƐ ǁŝƚŚ ŝŶĐĞŶƚŝǀĞƐ͘ϭϲϰ Ŷ ĨĂĐƚ͕ ǁŝƚŚ ŝŶĐĞŶƚŝǀĞƐ͕ ĨŽƌ ƐŽŵĞ ƉƵƌĐŚĂƐĞƌƐ͕ ƚŚĞ ƚŽƚĂů ĐŽƐƚ ŽĨ ŽǁŶĞƌƐŚŝƉ ŽǀĞƌ ƚŚĞ ůŝĨĞƚŝŵĞ ŽĨ Ă ǀĞŚŝĐůĞ ĐĂŶ ĂĐƚƵĂůůLJ ďĞ ůŽǁĞƌ ĨŽƌ W sƐ͘ϭϲϱ͕ ϭϲϲ͕ ϭϲϳ ŶĐĞŶƚŝǀĞƐ ĂƌĞ Ɛƚŝůů͕ ŚŽǁĞǀĞƌ͕ ŝŵƉŽƌƚĂŶƚ ĨŽƌ ĚĞƉůŽLJŵĞŶƚ ŽĨ W sƐ͘ tŚŝůĞ ďĂƚƚĞƌLJ ĐŽƐƚƐ ŚĂǀĞ ĐŽŵĞ ĚŽǁŶ ĂŶĚ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ĐŽŶƚŝŶƵĞ ƚŽ ĚĞĐƌĞĂƐĞ ǁŝƚŚ ĐŽŶƚŝŶƵĞĚ Z Θ ͕ϭϲϴ ƐĐĂůŝŶŐ ƵƉ ƉƌŽĚƵĐƚŝŽŶ ĂůŽŶĞ ǁŝůů ŶŽƚ ďĞ ƐƵĨĨŝĐŝĞŶƚ ƚŽ ůŽǁĞƌ ƚŚĞ ĐŽƐƚ ŽĨ W sƐ ƚŽ ŵĂŬĞ ƚŚĞŵ ĐŽŵƉĂƌĂďůĞ ƚŽ ŝŶƚĞƌŶĂů ĐŽŵďƵƐƚŝŽŶ ĞŶŐŝŶĞƐ ǁŝƚŚŽƵƚ ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ ĨƵƌƚŚĞƌ ƚĞĐŚŶŽůŽŐLJ ĐŽƐƚ ƌĞĚƵĐƚŝŽŶƐ͘ϭϲϵ ƌĞůĂƚĞĚ ŝƐƐƵĞ͗ ƌĞĐĞŶƚ ƐƚƵĚLJ ĨŽƵŶĚ ƚŚĂƚ ƚŚĞ ĐƵƌƌĞŶƚ ĞĚĞƌĂů ƚĂdž ĐƌĞĚŝƚƐ ĨŽƌ ƉůƵŐͲŝŶ ĂŶĚ ĂůƚĞƌŶĂƚŝǀĞ ŵŽƚŽƌ ǀĞŚŝĐůĞƐ ĂƌĞ ďĞŝŶŐ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞůLJ ƵƚŝůŝnjĞĚ ďLJ ǀĞŚŝĐůĞ ŽǁŶĞƌƐ ŝŶ ŚŝŐŚĞƌ ŝŶĐŽŵĞ ďƌĂĐŬĞƚƐ͕ ĂƐ ϵϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ƋƵĂůŝĨŝĞĚ ƉůƵŐͲŝŶ ĞůĞĐƚƌŝĐ ĚƌŝǀĞ ŵŽƚŽƌ ǀĞŚŝĐůĞ ĐƌĞĚŝƚƐ ǁĞŶƚ ƚŽ ďƵLJĞƌƐ ŝŶ ƚŚĞ ƚŽƉ ŝŶĐŽŵĞ ƋƵŝŶƚŝůĞ ; ŝŐƵƌĞ ϯͲϭϯͿ͘ϭϳϬ The state of California recently decided to increase the amount of the state’s clean vehicle Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-31 Chapter III Building a Clean Electricity Future ƌĞďĂƚĞ ĨŽƌ ůŽǁĞƌ ŝŶĐŽŵĞ ƉƵƌĐŚĂƐĞƌƐ ĂŶĚ Ăƚ ƚŚĞ ƐĂŵĞ ƚŝŵĞ ŝŵƉůĞŵĞŶƚ ĂŶ ƵƉƉĞƌ ŝŶĐŽŵĞ ĐĂƉ ŽŶ ĞůŝŐŝďŝůŝƚLJ͘ϭϳϭ ŶĂůLJƐŝƐ ŽĨ ƚŚĞ ĂůŝĨŽƌŶŝĂ ƌĞďĂƚĞ͕ ƉƌŝŽƌ ƚŽ ƚŚĞ ƌĞĐĞŶƚ ĐŚĂŶŐĞ͕ ĨŽƵŶĚ ƚŚĂƚ Ă ƉƌŽŐƌĞƐƐŝǀĞ ƌĞďĂƚĞ ƐLJƐƚĞŵ ǁŝƚŚ ĂŶ ŝŶĐŽŵĞ ĐĂƉ ǁŽƵůĚ ďĞ ůĞƐƐ ĞdžƉĞŶƐŝǀĞ ďƵƚ ƌĞƐƵůƚ ŝŶ ĂƉƉƌŽdžŝŵĂƚĞůLJ ƚŚĞ ƐĂŵĞ ŶƵŵďĞƌ ŽĨ W sƐ ƐŽůĚ͘ϭϳϮ Figure 3-13 Qualified Plug-In Electric Drive Motor Vehicle Credit 2009–2012173 The relationship between average credit per tax return per adjusted gross income category demonstrates that historically high earners are the group that derives the most financial benefits from the Qualified PlugIn Electric Drive Motor Vehicle Credit Ŷ ƚŚĞ ŵĞĚŝƵŵͲ ĂŶĚ ŚĞĂǀLJͲĚƵƚLJ ǀĞŚŝĐůĞ ŵĂƌŬĞƚ͕ ƚŚĞƌĞ ĂƌĞ ƐŽŵĞ ĐŽŵŵĞƌĐŝĂůůLJ ĂǀĂŝůĂďůĞ W sƐ͕ ŝŶĐůƵĚŝŶŐ ďĂƚƚĞƌLJ ĞůĞĐƚƌŝĐ ƚƌĂŶƐŝƚ͕ ƐĐŚŽŽů͕ ĂŶĚ ƐŚƵƚƚůĞ ďƵƐĞƐ͕ ĂƐ ǁĞůů ĂƐ ŽƚŚĞƌ ŵĞĚŝƵŵͲĚƵƚLJ ǀĞŚŝĐůĞƐ͕ ƉƌŝŵĂƌŝůLJ ĚĞůŝǀĞƌLJ ǀĞŚŝĐůĞƐ͘ϭϳϰ ůƚŚŽƵŐŚ ŵĞĚŝƵŵͲ ĂŶĚ ŚĞĂǀLJͲĚƵƚLJ W s ƉƵƌĐŚĂƐĞ ĐŽƐƚƐ ĂƌĞ ŚŝŐŚĞƌ ƚŚĂŶ ĐŽŶǀĞŶƚŝŽŶĂů ǀĞŚŝĐůĞƐ͕ ƚŚĞƐĞ W sƐ ŚĂǀĞ ƌĞĚƵĐĞĚ ŽƉĞƌĂƚŝŶŐ ĂŶĚ ŵĂŝŶƚĞŶĂŶĐĞ ĐŽƐƚƐ͕ϭϳϱ ǁŚŝĐŚ ŵĂLJ ŵĂŬĞ ƚŚĞŵ ĂƚƚƌĂĐƚŝǀĞ ƚŽ ĨůĞĞƚ ŽƉĞƌĂƚŽƌƐ ŝĨ ƚŚĞLJ ĐĂŶ ĨŝŶĂŶĐĞ ƚŚĞ ŝŶŝƚŝĂů ƉƵƌĐŚĂƐĞ ŽĨ ƚŚĞ ǀĞŚŝĐůĞ͘ dŚĞ ĂǀĂŝůĂďŝůŝƚLJ ĂŶĚ ƚLJƉĞ ŽĨ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞ ĐŚĂƌŐŝŶŐ ƐƚĂƚŝŽŶƐ ŝƐ ĂŶŽƚŚĞƌ ŝƐƐƵĞ͘ ŚĂƌŐĞƌƐ ǀĂƌLJ ĚƌĂŵĂƚŝĐĂůůLJ ŝŶ ƉƌŝĐĞ ĂŶĚ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ƚŝŵĞ ŝƚ ƚĂŬĞƐ ƚŽ ĐŚĂƌŐĞ ƚŚĞ ǀĞŚŝĐůĞ͘ďď͕ ϭϳϲ dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĐƵƌƌĞŶƚůLJ ŚĂƐ ŵŽƌĞ ƚŚĂŶ ϰϬ͕ϬϬϬ ƉƵďůŝĐĂůůLJ ĂĐĐĞƐƐŝďůĞ ŽƵƚůĞƚƐ Ăƚ ŵŽƌĞ ƚŚĂŶ ϭϰ͕ϬϬϬ ĐŚĂƌŐŝŶŐ ƐƚĂƚŝŽŶƐ ;ĞdžĐůƵĚŝŶŐ ƉƌŝǀĂƚĞ ƐƚĂƚŝŽŶƐͿ͕ϭϳϳ ďƵƚ ĐŽŶƚŝŶƵĞĚ ŝŶĐƌĞĂƐĞƐ ŝŶ ĐŚĂƌŐŝŶŐ ĂǀĂŝůĂďŝůŝƚLJ—ĞƐƉĞĐŝĂůůLJ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĂĚǀĂŶĐĞĚ ĨĂƐƚͲ ĐŚĂƌŐŝŶŐ ƐƚĂƚŝŽŶƐ—ǁŽƵůĚ ƐƵƉƉŽƌƚ ĂŶĚ ŝŶĐĞŶƚŝǀŝnjĞ ǁŝĚĞƐƉƌĞĂĚ W s ĂĚŽƉƚŝŽŶ͘ϭϳϴ ZĞƐĞĂƌĐŚ ƐŚŽǁƐ ƚŚĂƚ ĂǀĂŝůĂďůĞ ƉƵďůŝĐ ĨĂƐƚ ĐŚĂƌŐŝŶŐ ƌĞĚƵĐĞƐ ƌĂŶŐĞ ĂŶdžŝĞƚLJ ĂŶĚ ŝŶĐƌĞĂƐĞƐ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞ ŵŝůĞƐ ƚƌĂǀĞůĞĚ͘ϭϳϵ ĞǀĞůŽƉŝŶŐ Ă ŶĞƚǁŽƌŬ ŽĨ ĐŚĂƌŐĞƌƐ ĂůŽŶŐ ŚŝŐŚǁĂLJƐ ƚŽ ŝŶĐůƵĚĞ ĚŝƌĞĐƚ ĐƵƌƌĞŶƚ ; Ϳ ĨĂƐƚ ĐŚĂƌŐĞƌƐ͕ ĂŶĚ ƉĞƌŚĂƉƐ ĞǀĞŶ ϯϱϬͲŬt ĞdžƚƌĞŵĞ ĨĂƐƚ ĐŚĂƌŐŝŶŐ͕ ĐŽƵůĚ ĞŶĂďůĞ W s ŽǁŶĞƌƐ ƚŽ ƵƐĞ ƚŚĞƐĞ ǀĞŚŝĐůĞƐ ĨŽƌ ĚŝƐƚĂŶĐĞ ĚƌŝǀŝŶŐ͕ ĂƐ ƚŚĞLJ ŵŝŐŚƚ ŽƚŚĞƌǁŝƐĞ ƵƐĞ Ă ĐŽŶǀĞŶƚŝŽŶĂů ǀĞŚŝĐůĞ͘ϭϴϬ ůƐŽ͕ ǁŚĞŶ ǁŽƌŬƉůĂĐĞ ĐŚĂƌŐŝŶŐ ŝƐ ĂǀĂŝůĂďůĞ͕ ďď Žƌ ĞdžĂŵƉůĞ͕ ĞǀĞů ϭ ĐŚĂƌŐĞƌƐ Ăƚ ůĞĂƐƚ ϯϯ ŚŽƵƌƐ ƚŽ ĐŚĂƌŐĞ ϮϬϬ ŵŝůĞƐ ĂŶĚ ƚLJƉŝĐĂůůLJ ΨϯϬϬͲΨϭ͕ϱϬϬ ĚŽůůĂƌƐ ƚŽ ŝŶƐƚĂůů͘ ŝƌĞĐƚ ƵƌƌĞŶƚ ĂƐƚ ŚĂƌŐĞƌƐ ƚĂŬĞ ĂďŽƵƚ Ϯ ŚŽƵƌƐ ƚŽ ĐŚĂƌŐĞ ϮϬϬ ŵŝůĞƐ ĂŶĚ ĐŽƐƚ Ψϰϱ͕ϬϬϬ͕ ƉůƵƐ ΨϮϯ͕ϬϬϬ ŽŶ ĂǀĞƌĂŐĞ ĨŽƌ ŝŶƐƚĂůůĂƚŝŽŶ͘ 3-32 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĞŵƉůŽLJĞĞƐ ĂƌĞ Ɛŝdž ƚŝŵĞƐ ŵŽƌĞ ůŝŬĞůLJ ƚŽ ŽǁŶ Ă W s͕ ĂŶĚ ƚŚŽƐĞ ĞŵƉůŽLJĞĞƐ ĐŚĂƌŐĞ ƚŚĞŝƌ ǀĞŚŝĐůĞƐ Ăƚ ǁŽƌŬ͘ϭϴϭ͕ ϭϴϮ dŚĞƌĞ ŝƐ Ă ƌĂŶŐĞ ŽĨ ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ ƉƌŽŐƌĂŵƐ ƚŽ ĞdžƉĂŶĚ W s ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ DŽƌĞ ƚŚĂŶ ϮϬ ƐƚĂƚĞ ĂŶĚ ĞĚĞƌĂů ƉŽůŝĐŝĞƐ ĞdžŝƐƚ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ƚŚĞ ŝŶƐƚĂůůĂƚŝŽŶ ŽĨ W s ĐŚĂƌŐŝŶŐ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ;ƐĞĞ ŝŐƵƌĞ ϯͲϭϮ ĨŽƌ W s ƌĞŐŝƐƚƌĂƚŝŽŶƐ ďLJ ƐƚĂƚĞͿ͘ϭϴϯ ůƐŽ͕ ŝŶ EŽǀĞŵďĞƌ ϮϬϭϲ͕ ƚŚĞ ĞĚĞƌĂů ŝŐŚǁĂLJ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ĂŶŶŽƵŶĐĞĚ ϱϱ ƌŽƵƚĞƐ ƚŚĂƚ ǁŝůů ƐĞƌǀĞ ĂƐ Ă ďĂƐŝƐ ĨŽƌ Ă ŶĂƚŝŽŶĂů ŶĞƚǁŽƌŬ ŽĨ ĂůƚĞƌŶĂƚŝǀĞ ĨƵĞů ĂŶĚ ĞůĞĐƚƌŝĐ ĐŚĂƌŐŝŶŐ ĐŽƌƌŝĚŽƌƐ ƐƉĂŶŶŝŶŐ ϯϱ ƐƚĂƚĞƐ ĂŶĚ ŶĞĂƌůLJ ϴϱ͕ϬϬϬ ŵŝůĞƐ͘ϭϴϰ Those corridors are designated as “signͲready ” meaning ƚŚĂƚ ƌŽƵƚĞƐ ǁŚĞƌĞ ĂůƚĞƌŶĂƚŝǀĞ ĨƵĞů ĂŶĚ ĐŚĂƌŐŝŶŐ ƐƚĂƚŝŽŶƐ ĂƌĞ ĐƵƌƌĞŶƚůLJ ŝŶ ŽƉĞƌĂƚŝŽŶ ǁŝůů ďĞ ĞůŝŐŝďůĞ ƚŽ ĨĞĂƚƵƌĞ ŶĞǁ ƐŝŐŶƐ ĂůĞƌƚŝŶŐ ĚƌŝǀĞƌƐ ǁŚĞƌĞ ƚŚĞLJ ĐĂŶ ĨŝŶĚ ƚŚĞƐĞ ƐƚĂƚŝŽŶƐ͘ϭϴϱ Ŷ ĂĚĚŝƚŝŽŶ͕ ĂůŝĨŽƌŶŝĂ ŚĂƐ ƵŶŝƋƵĞ ĂƵƚŚŽƌŝƚLJ ƵŶĚĞƌ ƚŚĞ ůĞĂŶ ŝƌ Đƚ ; Ϳ ƚŽ ŝƐƐƵĞ ǀĞŚŝĐůĞ ĞŵŝƐƐŝŽŶ ƐƚĂŶĚĂƌĚƐ ƚŚĂƚ ĂƌĞ ƐƚƌŝĐƚĞƌ ƚŚĂŶ ƚŚŽƐĞ ŝƐƐƵĞĚ ďLJ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ͕ ĂŶĚ ŽƚŚĞƌ ƐƚĂƚĞƐ ĐĂŶ ĂĚŽƉƚ California’s standards in their entirety The California Air Resources Board adopted a zeroͲĞŵŝƐƐŝŽŶ ǀĞŚŝĐůĞ ZEV rule as part of the state’s 1990 Low Emission Vehicle Program Nine additional states have chosĞŶ to adopt California’s ZEV rule to date Connecticut Maine Maryland Massachusetts New Jersey New zŽƌŬ͕ KƌĞŐŽŶ͕ ZŚŽĚĞ ƐůĂŶĚ͕ ĂŶĚ sĞƌŵŽŶƚ͘ ƚ ŝƐ ĚŝĨĨŝĐƵůƚ ƚŽ ƉƌĞĚŝĐƚ ƚŚĞ ĨƵƚƵƌĞ s ŵĂƌŬĞƚ ƉĞŶĞƚƌĂƚŝŽŶ͕ ďƵƚ ĂďŽƵƚ ϭϱ͘ϰ ƉĞƌĐĞŶƚ ŽĨ ŶĞǁ ǀĞŚŝĐůĞƐ ƐŽůĚ ŝŶ ƉĂƌƚŝĐŝƉĂƚŝŶŐ ƐƚĂƚĞƐ ǁŝůů ďĞ ƌĞƋƵŝƌĞĚ ƚŽ ďĞ sƐ ďLJ ϮϬϮϱ͘ LJ ϮϬϮϱ͕ ĂůŝĨŽƌŶŝĂ ŶĞĞĚƐ ƚŽ ƌĞĂĐŚ ĂŶ ĞƐƚŝŵĂƚĞĚ Ϯϲϱ͕ϬϬϬ s ƐĂůĞƐ ƉĞƌ LJĞĂƌ—ĂŶ ŝŶĐƌĞĂƐĞ ŽĨ ϮϱϬ ƉĞƌĐĞŶƚ ŽǀĞƌ ƚŚĞ ŶĞdžƚ ĚĞĐĂĚĞ͘ϭϴϲ dƌĂŶƐŝƚ ŝŶĐĞŶƚŝǀĞƐ ĂƌĞ ĂůƐŽ ĂǀĂŝůĂďůĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ƚŚƌŽƵŐŚ ƚŚĞ Žǁ Žƌ EŽ ŵŝƐƐŝŽŶ sĞŚŝĐůĞ ĞƉůŽLJŵĞŶƚ WƌŽŐƌĂŵ͕ ƚŚĞ ĞĚĞƌĂů dƌĂŶƐŝƚ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ƉƌŽǀŝĚĞƐ ĨƵŶĚŝŶŐ ƚŽ ƐƚĂƚĞ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ĨŽƌ ƚŚĞ ƉƵƌĐŚĂƐĞ Žƌ ůĞĂƐĞ ŽĨ ƋƵĂůŝĨLJŝŶŐ ůŽǁͲ Žƌ ŶŽͲĞŵŝƐƐŝŽŶƐ ďƵƐĞƐ͕ ŝŶĐůƵĚŝŶŐ ĂůůͲĞůĞĐƚƌŝĐ ďƵƐĞƐ ĂŶĚ ƌĞůĂƚĞĚ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ƵƉŐƌĂĚĞƐ ƚŽ ĨĂĐŝůŝƚŝĞƐ ƚŽ ĂĐĐŽŵŵŽĚĂƚĞ ŶĞǁ ďƵƐĞƐ͘ϭϴϳ YƵĂůŝĨLJŝŶŐ ĂŝƌƉŽƌƚƐ ĐĂŶ ĂůƐŽ ƐĞĞŬ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ƐƵƉƉŽƌƚ ĨŽƌ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ǀĞŚŝĐůĞƐ͘ dŚĞ ĞĚĞƌĂů ǀŝĂƚŝŽŶ Administration’s Voluntary Airport Low Emissions and Zero Emission Vehicle Programs provide ĨŝŶĂŶĐŝĂů ƐƵƉƉŽƌƚ ĨŽƌ ƚŚĞ ƉƵƌĐŚĂƐĞ ŽĨ ĞůĞĐƚƌŝĐ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ǀĞŚŝĐůĞƐ͘ϭϴϴ͕ ϭϴϵ 3 2 5 Analytical Tools Converting Data to Information Is Key to a Cleaner Electricity System ZĞĂůͲƚŝŵĞ ĚĂƚĂ Ăƚ ĨŝŶĞ ŐƌĂŶƵůĂƌŝƚLJ ĂŶĚ Ă ƐƵŝƚĞ ŽĨ ĂŶĂůLJƚŝĐĂů ƚŽŽůƐ ĂŶĚ ŵŽĚĞůƐ ǁŝůů ĐŽŶƐƚŝƚƵƚĞ ƚŚĞ ďĂĐŬďŽŶĞ ŽĨ Ă ŵŽĚĞƌŶ͕ ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƚŚĂƚ ŝŶƚĞŐƌĂƚĞƐ ǀĂƌŝĂďůĞ ƌĞŶĞǁĂďůĞƐ ĂŶĚ ĞŶĞƌŐLJͲƐĂǀŝŶŐ ƚĞĐŚŶŽůŽŐLJ͘ KƚŚĞƌ ĚĂƚĂ ĂŶĚ ĂŶĂůLJƐŝƐ ƚŽŽůƐ ǁŝůů ĂůƐŽ ďĞ ŶĞĞĚĞĚ ƚŽ ŝŶĨŽƌŵ ĚĞĐŝƐŝŽŶ ŵĂŬŝŶŐ ĂƐ ŐŽǀĞƌŶŵĞŶƚƐ͕ ƵƚŝůŝƚŝĞƐ͕ ĂŶĚ ĐŽŶƐƵŵĞƌƐ ƐĞĂƌĐŚ ĨŽƌ ǁĂLJƐ ƚŽ ŵĂdžŝŵŝnjĞ ƚŚĞ ďĞŶĞĨŝƚƐ ŽĨ ŶĞǁ ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dŚĞƌĞ ĂƌĞ ƐĞǀĞƌĂů ĐŽŶĐĞƌŶƐ ƌĞůĂƚĞĚ ƚŽ ƚŚĞ ƉƌŽůŝĨĞƌĂƚŝŽŶ ŽĨ ƌĞĂůͲƚŝŵĞ ĂŶĚ ŽƚŚĞƌ ĚĂƚĂ͘ KĨ ƉĂƌĂŵŽƵŶƚ ŝŵƉŽƌƚĂŶĐĞ ĂƌĞ ĚĂƚĂ ƉƌŝǀĂĐLJ ĂŶĚ ƐĞĐƵƌŝƚLJ͘ ŶƐƵƌŝŶŐ ƚŚĞ ĐŽŵƉůĞƚĞŶĞƐƐ͕ ƋƵĂůŝƚLJ͕ ŚĂƌŵŽŶŝnjĂƚŝŽŶ͕ ĂŶĚ ĂĐĐĞƐƐŝďŝůŝƚLJ ŽĨ ĚĂƚĂ ƚŽ ĚĞĐŝƐŝŽŶ ŵĂŬĞƌƐ ŝƐ ĂůƐŽ ǀĞƌLJ ŝŵƉŽƌƚĂŶƚ͘ ĂƚĂ ŶĞĞĚƐ ĂŶĚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĂƌĞ ƉĂƌƚŝĐƵůĂƌůLJ ƐƚƌŽŶŐ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ĞŶĚͲƵƐĞ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͘ ŝƌƐƚ͕ ĞŶĚͲƵƐĞ ƐƵƌǀĞLJƐ ŚĂǀĞ ŐĂƉƐ͕ ƐƵĐŚ ĂƐ Ă ůĂĐŬ ŽĨ ǁĂƚĞƌͲƐĞĐƚŽƌ ĚĂƚĂ͕ ĂŶĚ ƚŚĞ ĞŶĚͲƵƐĞ ƐƵƌǀĞLJƐ ŚĂǀĞ ŶŽƚ ŬĞƉƚ ƵƉ ǁŝƚŚ ƐŚŝĨƚŝŶŐ ĚĞŵĂŶĚ ĐŽŵŝŶŐ ĨƌŽŵ ƚŚĞ ƉƌŽůŝĨĞƌĂƚŝŽŶ ŽĨ ŶĞǁ ĞůĞĐƚƌŽŶŝĐ ĂƉƉůŝĂŶĐĞƐ͘ ĞĐŽŶĚ͕ ƉůĂŶŶĞƌƐ ǁŝůů ŶĞĞĚ ŵŽƌĞ ŐƌĂŶƵůĂƌ ĚĂƚĂ ŽŶ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ ĂŶĚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƚŽ ĂĚĚƌĞƐƐ ŐƌŝĚ ŽƉĞƌĂƚŝŽŶ ŶĞĞĚƐ ĚƵĞ ƚŽ ŶĞǁ ǀĂƌŝĂďůĞ ƌĞƐŽƵƌĐĞƐ ĂŶĚ ŝŶĐƌĞĂƐŝŶŐ ĐŽŶƐƵŵĞƌ ĞŶĞƌŐLJ ŵĂŶĂŐĞŵĞŶƚ͘ dŚŝƌĚ͕ ƚŚĞ ŝŶĐƌĞĂƐĞĚ ĂďŝůŝƚLJ ƚŽ ŵĞĂƐƵƌĞ ĂŶĚ ŵŽŶŝƚŽƌ ĞŶĚͲƵƐĞ ĚĂƚĂ Ăƚ ĨŝŶĞƌ ƐĐĂůĞƐ ďƌŽƵŐŚƚ ďLJ D ĂŶĚ d ƉƌŽǀŝĚĞƐ ĂŶ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ƚĂƌŐĞƚ ƚŚĞ ƐƉĞĐŝĨŝĐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ŵŽƐƚ ĐĂƉĂďůĞ ŽĨ ƌĞĚƵĐŝŶŐ ƉĞĂŬ ĚĞŵĂŶĚ ĨŽƌ Ă ŐŝǀĞŶ ůŽĐĂƚŝŽŶ ĂŶĚ ƐĞĂƐŽŶ͘ hƉĚĂƚĞƐ ƚŽ ŵĞĂƐƵƌĞŵĞŶƚ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ ƉƌŽƚŽĐŽůƐ͕ ǁŚŝĐŚ ǀĂƌLJ ďLJ ƚĞĐŚŶŽůŽŐLJ͕ ĐĂŶ ŚĞůƉ ĚƌŝǀĞ ƚŚĞ ƚƌĂŶƐŝƚŝŽŶ ƚŽ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ dŚĞ ǁĞĂůƚŚ ŽĨ ĚĂƚĂ ďĞŝŶŐ ŐĞŶĞƌĂƚĞĚ ďLJ D ŝƐ ĞŶĂďůŝŶŐ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-33 Chapter III Building a Clean Electricity Future “ĞǀĂůƵĂƚŝŽŶ͕ ŵĞĂƐƵƌĞŵĞŶƚ͕ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ Ϯ͘Ϭ” ĂƐ ĚŝƐĐƵƐƐĞĚ ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer Equity ͘ĐĐ Ŷ ĂůŝĨŽƌŶŝĂ͕ ƐŽŵĞ ĐŽŶƐƵŵĞƌƐ ŶŽǁ ƌĞĐĞŝǀĞ ĚĂƚĂ ŽŶ ǁŚĂƚ ƚLJƉĞ ŽĨ ŐĞŶĞƌĂƚŽƌƐ ĂƌĞ ĐƵƌƌĞŶƚůLJ ƉƌŽǀŝĚŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ Ăƚ ƚŚĞŝƌ ŚŽŵĞ Žƌ ďƵƐŝŶĞƐƐ͘ ĂƐĞĚ ŽŶ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž͕ ƚŚĞ ĐŽŶƐƵŵĞƌ ĐĂŶ ĚĞĐŝĚĞ ŚŽǁ ŵƵĐŚ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ƵƐĞ ŝŶ ƌĞĂů ƚŝŵĞ ƵƐŝŶŐ Ă ƐŵĂƌƚ ĚĞǀŝĐĞ͘ ƐƚĂďůŝƐŚĞĚ ĨŽƌŵƐ ĨŽƌ Z͕ ƐƵĐŚ ĂƐ ĚŝƌĞĐƚ ůŽĂĚ ĐŽŶƚƌŽů͕ ŚĂǀĞ ǁĞůů ƵŶĚĞƌƐƚŽŽĚ ĂŶĚ ĂĐĐĞƉƚĞĚ ŵĞƚŚŽĚƐ ĨŽƌ ŵĞĂƐƵƌŝŶŐ ƚŚĞ ĂŵŽƵŶƚ ŽĨ Z ĂǀĂŝůĂďůĞ ĂŶĚ ĚĞƉůŽLJĞĚ ĂŶĚ ĨŽƌ ǀĞƌŝĨLJŝŶŐ ƚŚĂƚ ƚŚĞ ŝŶƚĞŶĚĞĚ ĂŶĚ ĂĐƚƵĂů ĂŵŽƵŶƚ ĚĞƉůŽLJĞĚ ĂƌĞ ƚŚĞ ƐĂŵĞ͘ĚĚ ŵĞƌŐŝŶŐ ĨŽƌŵƐ ŽĨ Z͕ ƐƵĐŚ ĂƐ ĂŐŐƌĞŐĂƚŝŶŐ ƌĞĚƵĐƚŝŽŶƐ ĨƌŽŵ ƌĞƐŝĚĞŶƚŝĂů ĐƌŝƚŝĐĂů ƉĞĂŬ ƉƌŝĐŝŶŐ ƉƌŽŐƌĂŵƐ͕ ĂƌĞ ĂƌĞĂƐ ǁŚĞƌĞ ĐŽŶƚŝŶƵĂůůLJ ŝŵƉƌŽǀŝŶŐ ŵĞĂƐƵƌĞŵĞŶƚ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ ǁŝůů ĂƐƐŝƐƚ ŝŶ ƚŚĞ ƚƌĂŶƐŝƚŝŽŶ ƚŽ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ ŵƉƌŽǀŝŶŐ ĚĂƚĂ ĂŶĚ ĂŶĂůLJƐŝƐ ƚŽŽůƐ ĐĂŶ ŚĞůƉ ĚĞĐŝƐŝŽŶ ŵĂŬĞƌƐ ƵƚŝůŝnjĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ĨŽƌ ŵŝŶŝŵŝnjŝŶŐ ĐŽƐƚƐ ĂŶĚ ĞŶƐƵƌŝŶŐ ƌĞůŝĂďŝůŝƚLJ͕ ŝŶĐůƵĚŝŶŐ ƉƌŽǀŝĚŝŶŐ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ŽŶ ƚŽŽůƐ ƚŚĂƚ ĞŶĂďůĞ ƚŚĞ ĨƵůů ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂƐ Ă ƌĞƐŽƵƌĐĞ͘ ŶĂůLJƐŝƐ ŝƐ ŶĞĞĚĞĚ Ăƚ ƚŚĞ ĂƉƉƌŽƉƌŝĂƚĞ ůĞǀĞů ŽĨ ŐƌĂŶƵůĂƌŝƚLJ ƚŽ ŝŶĨŽƌŵ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ŽĨ ƐLJƐƚĞŵ ĚLJŶĂŵŝĐƐ ĂŶĚ ďĞŚĂǀŝŽƌ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĞĨĨĞĐƚƐ ŽĨ ĐŚĂŶŐŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶĚŝƚŝŽŶƐ ĂŶĚ ƌĞƐŽƵƌĐĞ ĂǀĂŝůĂďŝůŝƚLJ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ĂŶĚ ŝŶƚĞƌĂĐƚŝŽŶƐ ďĞƚǁĞĞŶ ŵƵůƚŝƉůĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ͕ ƐƵĐŚ ĂƐ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ǁĂƚĞƌ͘ Žƌ ĞdžĂŵƉůĞ͕ ĨƵƌƚŚĞƌ ĂŶĂůLJƚŝĐĂů ƚŽŽůƐ ĂƌĞ ŶĞĞĚĞĚ Ăƚ ŵƵůƚŝƉůĞ ƐƉĂƚŝĂů ĂŶĚ ƚĞŵƉŽƌĂů ƐĐĂůĞƐ ƚŽ ďĞƚƚĞƌ ĨƌĂŵĞ ƐLJƐƚĞŵͲůĞǀĞů ƚƌĂĚĞŽĨĨƐ ƌĞůĂƚĞĚ ƚŽ ƌĞƐŝůŝĞŶĐĞ͕ ĞĐŽŶŽŵŝĐƐ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ĂŶĚ ŽƚŚĞƌ ĨĂĐƚŽƌƐ ƚŚĂƚ ĐĂŶ ŝŶĨŽƌŵ ĚĞƐŝŐŶ ĂŶĚ ƉŽůŝĐLJ ĚĞĐŝƐŝŽŶƐ͕ ƐƵĐŚ ĂƐ ƚŚŽƐĞ ƌĞůĂƚĞĚ ƚŽ ƚŚĞ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐ͘ Žƌ ďŽƚŚ ŶĂƚŝŽŶĂů ƉŽůŝĐLJ ĨŽƌŵƵůĂƚŝŽŶ ĂŶĚ ƐƚĂƚĞ ŝŶƚĞŐƌĂƚĞĚ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ͕ ƚŚĞƌĞ ŝƐ ŽĨƚĞŶ Ă ŶĞĞĚ ƚŽ ŵĂŬĞ Ă ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŽŶ ƚŚĞ ůĞǀĞů ŽĨ ƐĂǀŝŶŐƐ ƚŚĂƚ ŝƐ ĐŽƐƚ ĞĨĨĞĐƚŝǀĞ ĨƌŽŵ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ŽƚŚĞƌ ZƐ ;ŝ͘Ğ͕͘ Z ĂŶĚ 'Ϳ͘ ƵƌƌĞŶƚůLJ͕ ƚŚĞƌĞ ŝƐ ĂŶ ŝŶĐŽŵƉůĞƚĞ ƉĂƚĐŚǁŽƌŬ ŽĨ ĚŝĨĨĞƌĞŶƚ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉŽƚĞŶƚŝĂů ƐƚƵĚŝĞƐ ;ĂƐ ǁĞůů ĂƐ ƐƚƵĚŝĞƐ ƚŚĂƚ ĂŶĂůLJnjĞ ƚŚĞ ƉŽƐƐŝďůĞ ƐĂǀŝŶŐƐ ĨŽƌ ŽƚŚĞƌ ĚŝƐƚƌŝďƵƚĞĚ ƌĞƐŽƵƌĐĞƐͿ Ăƚ ƚŚĞ ƵƚŝůŝƚLJ Žƌ ƐƚĂƚĞ ůĞǀĞů ƚŚĂƚ ƵƐĞ Ă ǀĂƌŝĞƚLJ ŽĨ ĚŝĨĨĞƌĞŶƚ ŵĞƚŚŽĚŽůŽŐŝĞƐ͘ dŚĞƐĞ ƐƚƵĚŝĞƐ͕ ǁŚŝĐŚ ƚLJƉŝĐĂůůLJ ĐŽŶƐŝĚĞƌ ŽŶůLJ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ĚŽ ŶŽƚ ƚĂŬĞ ŝŶƚŽ ĂĐĐŽƵŶƚ ƚŚĞ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ŝŶƚĞŐƌĂƚĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ǁŝƚŚ ŽƚŚĞƌ ĐŽŶƐƵŵĞƌ ŽƉƚŝŽŶƐ͕ ƐƵĐŚ ĂƐ Z͕ '͕ ĂŶĚ ŽŶƐŝƚĞ ƐƚŽƌĂŐĞ—ƚĞĐŚŶŽůŽŐŝĞƐ ƚŽ ǁŚŝĐŚ ĐŽŶƐƵŵĞƌƐ ŚĂǀĞ ŐƌŽǁŝŶŐ ĂĐĐĞƐƐ͘ ŶĂƚŝŽŶĂů ĚĞŵĂŶĚͲƐŝĚĞ ƌĞƐŽƵƌĐĞƐ ƉŽƚĞŶƚŝĂů ĂƐƐĞƐƐŵĞŶƚ ǁŝƚŚ ƐƵĨĨŝĐŝĞŶƚ ŐĞŽŐƌĂƉŚŝĐĂů ƌĞƐŽůƵƚŝŽŶ ĐŽƵůĚ ďĞ ƵƐĞĚ ƚŽ ŵŽƌĞ ĞĨĨĞĐƚŝǀĞůLJ ŝŶƚĞŐƌĂƚĞ ZƐ ŝŶƚŽ ƐƚĂƚĞ ĂŶĚ ŶĂƚŝŽŶĂů ĞŶĞƌŐLJ ƉŽůŝĐLJ͘ ƵĞ ƚŽ ƚŚĞ ŝŶĐƌĞĂƐŝŶŐ ĂǀĂŝůĂďŝůŝƚLJ ŽĨ ŵƵůƚŝƉůĞ ĚĞŵĂŶĚͲƐŝĚĞ ƌĞƐŽƵƌĐĞƐ͕ ĂŶLJ ƉŽƚĞŶƚŝĂů ĂƐƐĞƐƐŵĞŶƚ ƚŚĂƚ ĐŽŶƐŝĚĞƌƐ ŽŶůLJ ŽŶĞ ŽĨ ƚŚĞƐĞ ƌĞƐŽƵƌĐĞƐ ǁŝůů ŽǀĞƌĞƐƚŝŵĂƚĞ ƚŚĞ ƐĂǀŝŶŐƐ ĨƌŽŵ ŽŶĞ ĂƉƉƌŽĂĐŚ ǁŚŝůĞ ƵŶĚĞƌĞƐƚŝŵĂƚŝŶŐ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ĂƉƉƌŽĂĐŚ͘ Žƌ ĞdžĂŵƉůĞ͕ Ă ĐƵƐƚŽŵĞƌ ĐŽŶƐŝĚĞƌŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŝŶǀĞƐƚŵĞŶƚƐ ǁŝůů ŚĂǀĞ Ă ĚŝĨĨĞƌĞŶƚ ďŝůů ƐĂǀŝŶŐƐ ŝĨ ƚŚĞLJ ĂƌĞ ĂůƌĞĂĚLJ ƉĂƌƚŝĐŝƉĂƚŝŶŐ ŝŶ Ă ƵƚŝůŝƚLJ Z ƉƌŽŐƌĂŵ ĨŽƌ Ă ŐŝǀĞŶ ĞŶĚ ƵƐĞ͕ ůŝŬĞ ǁĂƚĞƌ ŚĞĂƚŝŶŐ Žƌ Ăŝƌ ĐŽŶĚŝƚŝŽŶŝŶŐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ĞŶŚĂŶĐĞŵĞŶƚƐ ƚŽ ĞdžŝƐƚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ŵŽĚĞůƐ ǁŝůů ďĞ ƌĞƋƵŝƌĞĚ ĂƐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ĂŶĚ ŽƚŚĞƌ ĐŚĂůůĞŶŐĞƐ ĂĨĨĞĐƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ dŚĞ ŚŝƐƚŽƌLJ ŽĨ ĐŽŵƉƵƚĞƌ ŵŽĚĞůƐ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŝƐ ĞdžƚĞŶƐŝǀĞ͘ dŚĞ ƐĞĐƚŽƌ ŝƐ ŚŝŐŚůLJ ĚĞƉĞŶĚĞŶƚ ŽŶ ŵŽĚĞůŝŶŐ ĨŽƌ ƉůĂŶŶŝŶŐ͕ ŝŶǀĞƐƚŵĞŶƚ͕ ƌĞŐƵůĂƚŝŽŶ͕ ĂŶĚ ƐLJƐƚĞŵ ŽƉĞƌĂƚŝŽŶƐ͘ ŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƐƵƉƉůLJ ĐƵƌǀĞƐ ĂƌĞ ŶŽƚ ĐŽŵŵŽŶůLJ ƵƐĞĚ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŵŽĚĞůŝŶŐ ďĞĐĂƵƐĞ ƚŚĞƌĞ ĂƌĞ ŶŽƚ ƐƵĨĨŝĐŝĞŶƚůLJ ƌŽďƵƐƚ ĂŶĚ ŐƌĂŶƵůĂƌ ;ůŽĐĂƚŝŽŶͲ ĂŶĚ ƚĞĐŚŶŽůŽŐLJͲƐƉĞĐŝĨŝĐͿ ĚĂƚĂ ŽŶ ƚŚĞ ƉŽƚĞŶƚŝĂů ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ŵĞĂƐƵƌĞƐ ĨŽƌ ƚŚĞ ĞŶƚŝƌĞ EĂƚŝŽŶ—ƐŽŵĞƚŚŝŶŐ Ă ŶĂƚŝŽŶĂů ƉŽƚĞŶƚŝĂů ĂƐƐĞƐƐŵĞŶƚ ĐŽƵůĚ ƉƌŽǀŝĚĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ĐĂƉĂĐŝƚLJ ĞdžƉĂŶƐŝŽŶ ŵŽĚĞůƐ͕ ƐƵĐŚ ĂƐ ƚŚĞ EĂƚŝŽŶĂů ŶĞƌŐLJ DŽĚĞůŝŶŐ LJƐƚĞŵ ;E D Ϳ͕ ĐĐ hƉĚĂƚĞƐ ƚŽ ŵĞĂƐƵƌĞŵĞŶƚ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ ƉƌŽƚŽĐŽůƐ͕ ǁŚŝĐŚ ǀĂƌLJ ďLJ ƚĞĐŚŶŽůŽŐLJ͕ ĐĂŶ ŚĞůƉ ĚƌŝǀĞ ƚŚĞ ƚƌĂŶƐŝƚŝŽŶ ƚŽ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ dŚĞ ǁĞĂůƚŚ ŽĨ ĚĂƚĂ ďĞŝŶŐ ŐĞŶĞƌĂƚĞĚ ďLJ D ͕ ĂůŽŶŐ ǁŝƚŚ ŝŵƉƌŽǀĞĚ ĂŶĂůLJƚŝĐĂů ƚŽŽůƐ͕ ĂƌĞ ĞŶĂďůŝŶŐ ĂĚǀĂŶĐĞĚ ĞǀĂůƵĂƚŝŽŶ͕ ŵĞĂƐƵƌĞŵĞŶƚ͕ ĂŶĚ ǀĞƌŝĨŝĐĂƚŝŽŶ ŵĞƚŚŽĚƐ ĐŽŵŵŽŶůLJ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ Η DΘs Ϯ͘Ϭ͘Η ƐĞĞ ͘ ĐŚǁĂƌƚnj͕ Ğƚ Ăů͕͘ Electricity End Use Energy Efficiency and Distributed Energy Resources Baseline ; ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ ĂŶƵĂƌLJ ϮϬϭϳͿ͕ Ɖ ϮϱͲ ϲϬ͖ ϯϭϬͲϯϭϭ͖ ϯϮϬͲϯϮϵ͘ ĚĚ ƐĞƉĂƌĂƚĞ ŝƐƐƵĞ ŝƐ ǀĞƌŝĨLJŝŶŐ ƚŚĂƚ ƚŚĞ ĂŵŽƵŶƚ ŽĨ Z ƚŚĂƚ Ă ƵƚŝůŝƚLJ Žƌ ƚŚŝƌĚ ƉĂƌƚLJ ĐŽŵŵŝƚƐ ƚŽ ƉƌŽǀŝĚĞ ŝƐ ĂĐƚƵĂůůLJ ƉƌŽǀŝĚĞĚ ǁŚĞŶ ĐĂůůĞĚ ƵƉŽŶ͘ 3-34 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĂƌĞ ǁŝĚĞůLJ ƵƐĞĚ ĨŽƌ ƉŽůŝĐLJ ĨŽƌŵƵůĂƚŝŽŶ ĂŶĚ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ͘ E D ǁŽƵůĚ ƉĂƌƚŝĐƵůĂƌůLJ ďĞŶĞĨŝƚ ĨƌŽŵ ŝŵƉƌŽǀĞŵĞŶƚƐ ŝŶ ĐŚĂƌĂĐƚĞƌŝnjŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ĞŶĚ ƵƐĞ͕ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ '͕ ĂŶĚ ƐƚŽƌĂŐĞ͘ ŝŶĂůůLJ͕ ĞŶŚĂŶĐĞĚ ŵŽĚĞůƐ ĞdžĂŵŝŶŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ƌĞƐŽƵƌĐĞ ďĂƐĞ͕ ĂŶĚ ĐŽŵƉĞƚŝŶŐ ƵƐĞƐ ǁŽƵůĚ ďĞ ǀĂůƵĂďůĞ ŝŶ ŝŶĨŽƌŵŝŶŐ ƐŝƚŝŶŐ͕ ƉĞƌŵŝƚƚŝŶŐ͕ ĂŶĚ ŽƉĞƌĂƚŝŽŶĂů ƉƌĂĐƚŝĐĞƐ ĨŽƌ ŐĞŶĞƌĂƚŝŽŶ͘ ƚ ǁŽƵůĚ ďĞ ƵƐĞĨƵů ĨŽƌ ŚLJĚƌŽƉŽǁĞƌ ƉƌŽũĞĐƚ ŵŽĚĞůƐ ƚŽ ŝůůƵŵŝŶĂƚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ůĂŶĚͲƵƐĞ ŝŵƉĂĐƚƐ ĂŶĚ ĐŽͲďĞŶĞĨŝƚƐ͘ Žƌ ŐĞŽƚŚĞƌŵĂů ĞŶĞƌŐLJ͕ ŝƚ ǁŽƵůĚ ďĞ ǀĂůƵĂďůĞ ƚŽ ĐŚĂƌĂĐƚĞƌŝnjĞ Ă ƐƵďƐƚĂŶƚŝĂů ƉŽƌƚŝŽŶ ŽĨ ƚŚĞ ŐĞŽƚŚĞƌŵĂů ƌĞƐŽƵƌĐĞ ďĂƐĞ͕ ǁŚŝĐŚ ĐŽƵůĚ ŚĞůƉ ƚŽ ƌĞĚƵĐĞ ƐŝƚŝŶŐ ĂŶĚ ƉƌŽƐƉĞĐƚŝŶŐ ĐŽƐƚƐ͘ϭϵϬ Žƌ h ƉƌŽũĞĐƚƐ͕ ŵŽĚĞůƐ ĐĂŶ ŝŵƉƌŽǀĞ ƐƚĂŶĚĂƌĚŝnjĞĚ ƐŝƚĞ ĐŚĂƌĂĐƚĞƌŝnjĂƚŝŽŶ ƚŚĂƚ ŝŶĨŽƌŵƐ ƚŚĞ ĚĞƚĞƌŵŝŶĂƚŝŽŶ ŽĨ ĂƌĞĂƐ ǁŝƚŚ ƚŚĞ ĂƉƉƌŽƉƌŝĂƚĞ ƐƚŽƌĂŐĞ ŐĞŽůŽŐLJ͘ 3 2 6 Electricity-Sector Assets Operations and Planning dŚĞƌĞ ĂƌĞ ŵĂŶLJ ƚĞĐŚŶŝĐĂů͕ ŵĂƌŬĞƚ͕ ĂŶĚ ƉŽůŝĐLJ ĐŚĂůůĞŶŐĞƐ ƌĞůĂƚĞĚ ƚŽ ŚŽǁ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ŝŶǀĞƐƚŵĞŶƚ ĚĞĐŝƐŝŽŶƐ ĂŶĚ ŽƉĞƌĂƚŝŽŶƐ͕ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐLJ ĂŶĚ ƌĞŐƵůĂƚŝŽŶƐ͕ ĂŶĚ ƐLJƐƚĞŵ ĂŶĚ ƉŽůŝĐLJ ƉůĂŶŶŝŶŐ ŝŶƚĞƌĂĐƚ ǁŝƚŚ ĞĨĨŽƌƚƐ ƚŽ ƐŚŝĨƚ ƚŽ Ă ůŽǁͲĐĂƌďŽŶ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͘ dŽ ƌĞĂůŝnjĞ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ƐƚĂŬĞŚŽůĚĞƌƐ ǁŝůů ŶĞĞĚ ƚŽ ĐŽŶƐŝĚĞƌ Ăůů ĂƐƉĞĐƚƐ ĂŶĚ ŝŶƚĞŐƌĂƚŝŽŶ ŽĨ ĂŶ ĞŶĚͲƚŽͲĞŶĚ ƐƵƉƉůLJ ĐŚĂŝŶ͕ ĨƌŽŵ ŐĞŶĞƌĂƚŝŽŶ ƚŽ ĞŶĚ ƵƐĞ͘ Electricity infrastructure owners’ choices on resilience expansion and modernization will have implications for achieving the nation’s environmental goals and vice versa ŚĂƉƚĞƌ s ;Ensuring Electricity System Reliability Security and ResilienceͿ ĚŝƐĐƵƐƐĞƐ ƚŚĞ ŶĞĞĚ ĨŽƌ ĂŶĚ ŝŶƚĞƌĂĐƚŝŽŶ ďĞƚǁĞĞŶ ŝŵƉƌŽǀĞŵĞŶƚƐ in the electricity system’s clean resilient and flexible characteristics The same chapter adds that ƉƌŽďĂďŝůŝƐƚŝĐ ƉůĂŶŶŝŶŐ ŝƐ Ă ƌŽďƵƐƚ ŵĞƚŚŽĚ ŽĨ ĂƐƐĞƐƐŝŶŐ ǁŚĂƚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŝŶĐůƵĚŝŶŐ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͕ ƐŚŽƵůĚ ďĞ ďƵŝůƚ ĨŽƌ ƌĞůŝĂďŝůŝƚLJ ƉƵƌƉŽƐĞƐ͘ Integrating Energy and Capacity Markets with Clean Policies In the summer of 2016 the New England Power Pool NEPOOL began a stakeholder process designed to explore whether the various environmental policies across member states could be integrated into the regional energy and capacity markets operated by Independent System Operator New England Known as the Integrating Markets and Public Policy initiative it has the potential to set an important precedent for how clean policies can be integrated into existing regional markets “Our goal at NEPOOL and for the region is to create a competitive market signal to get the states what they need so they don’t have to act on their own If we’re successful the markets on their own will find the most cost-effective means in meeting those state objectives ” – NEPOOL Chairman Joel S Gordon191 Following the release of an initial problem statement and guidelines in May 2016 stakeholders were invited to propose ideas at the group’s first meeting in August Proposals offered a wide range of solutions from a carbon price adder to a separate “clean-only” auction process called a “Forward Clean Energy Market ” to strengthening the Regional Greenhouse Gas Initiative Some proposals recommended price adjustments in the energy markets while others offered modifications to the capacity markets 'ƌŝĚ ĂƌĐŚŝƚĞĐƚƵƌĞ ĂůƚĞƌŶĂƚŝǀĞƐ ĂƌĞ ĂůƐŽ ŝŵƉŽƌƚĂŶƚ ƚŽ ĐŽŶƐŝĚĞƌ ĨŽƌ ƌĞĂĐŚŝŶŐ Ă ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ĨƵƚƵƌĞ͘ ŚĂƉƚĞƌ s ;Ensuring Electricity System Reliability Security and ResilienceͿ ĚŝƐĐƵƐƐĞƐ ĂƌĐŚŝƚĞĐƚƵƌĂů ĂŶĚ ŽƉĞƌĂƚŝŽŶĂů ĂůƚĞƌŶĂƚŝǀĞƐ ƚŽ ŝŶĐƌĞĂƐĞ ƌĞƐŝůŝĞŶĐĞ͘ ůů ŽĨ ƚŚŽƐĞ ĂůƚĞƌŶĂƚŝǀĞƐ͕ ǁŚŝĐŚ ĚĞĐƌĞĂƐĞ ƐLJƐƚĞŵ ƌĞƐƉŽŶƐĞ ƚŝŵĞƐ ĂŶĚ ŝŶĐƌĞĂƐĞ ĨůĞdžŝďŝůŝƚLJ͕ ǁŽƵůĚ ŚĂǀĞ ŝŵƉŽƌƚĂŶƚ ĐŽͲďĞŶĞĨŝƚƐ ŝŶ ŝŶƚĞŐƌĂƚŝŶŐ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͘ ĨĨŽƌƚƐ ƚŽ ŝŵƉƌŽǀĞ ŶĞĂƌͲƚĞƌŵ ĨŽƌĞĐĂƐƚŝŶŐ ĂŶĚ ŐƌĂŶƵůĂƌ ŐƌŝĚ ǀŝƐƵĂůŝnjĂƚŝŽŶ ĂƌĞ ĂůƌĞĂĚLJ ƵŶĚĞƌǁĂLJ ĂŶĚ ŚĂǀĞ ĐůĞĂƌ ďĞŶĞĨŝƚƐ ĨŽƌ ĐůĞĂŶ ŐĞŶĞƌĂƚŝŽŶ ĂƐ ĂƌĞ ĞĨĨŽƌƚƐ ƚŽ ĞŶŚĂŶĐĞ ƐŝƚƵĂƚŝŽŶĂů ĂǁĂƌĞŶĞƐƐ͕ ĂŶĚ ŽƉĞƌĂƚŝŽŶĂů ǀŝƐŝďŝůŝƚLJ ĨŽƌ ƌĞůŝĂďŝůŝƚLJ͕ ƐĞĐƵƌŝƚLJ͕ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ ƌĞĂƐŽŶƐ͘ ůů ŽĨ ƚŚĞƐĞ ŵĞƚŚŽĚƐ ǁŽƵůĚ ĂůƐŽ ůŽǁĞƌ ƚŚĞ ĞĐŽŶŽŵŝĐ ĐŽƐƚ ŽĨ ƌĞŶĞǁĂďůĞ ŝŶƚĞŐƌĂƚŝŽŶ ĂŶĚ ĂƌĞ ĚŝƐĐƵƐƐĞĚ ŝŶ ĚĞƚĂŝů ŝŶ ŚĂƉƚĞƌ s ;Ensuring Electricity Reliability Security and ResilienceͿ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-35 Chapter III Building a Clean Electricity Future WŽǁĞƌ ŵĂƌŬĞƚ ĚLJŶĂŵŝĐƐ ĂůƐŽ ĂĨĨĞĐƚ ĐůĞĂŶ ƉŽǁĞƌ ŐŽĂůƐ͕ ĂŶĚ ǀŝĐĞ ǀĞƌƐĂ͘ ŽǁĞƌ ĞŶĞƌŐLJ ƉƌŝĐĞƐ͕ ǁŚŝĐŚ ĂƌĞ ƉĂƌƚůLJ ĚƵĞ ƚŽ ůŽǁͲĐŽƐƚ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ ŝŶĐĞŶƚŝǀŝnjĞĚ njĞƌŽͲŵĂƌŐŝŶĂůͲĐŽƐƚ ƌĞƐŽƵƌĐĞƐ͕ ĂƌĞ ƌĞĚƵĐŝŶŐ ƚŚĞ ĞĐŽŶŽŵŝĐ ǀŝĂďŝůŝƚLJ ŽĨ ŽƚŚĞƌ ĚĞƐŝƌĞĚ ĐůĞĂŶ ƌĞƐŽƵƌĐĞƐ͕ ŝŶĐůƵĚŝŶŐ ŶƵĐůĞĂƌ ĞŶĞƌŐLJ͘ DĂŶLJ ŽĨ ƚŚĞ ƉůĂŶŶŝŶŐͲƌĞůĂƚĞĚ ĐŚĂůůĞŶŐĞƐ ũƵƌŝƐĚŝĐƚŝŽŶĂů ĂƵƚŚŽƌŝƚŝĞƐ ĨĂĐĞ ĂƌŝƐĞ ĨƌŽŵ ƚŚĞ ƌĞĐĞŶƚ ƚƌĞŶĚ ŝŶ ƚĞĐŚŶŽůŽŐLJ ĂĚǀĂŶĐĞŵĞŶƚ—ĂŶĚ͕ ƐƉĞĐŝĨŝĐĂůůLJ͕ ƚŚĞ ŝŶĐƌĞĂƐĞ ŝŶ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ŵĞĐŚĂŶŝƐŵƐ ĨŽĐƵƐĞĚ Ăƚ ƚŚĞ ĞŶĚͲƵƐĞ ƐĞĐƚŽƌ—ďĞŚŝŶĚ ƚŚĞ ŵĞƚĞƌ͘ dŚŝƐ ƚƌĞŶĚ ŚĂƐ ĐĂƵƐĞĚ Ă ƐŚŝĨƚ ŝŶ ƚŚĞ ƵŶĚĞƌůLJŝŶŐ ĂƐƐƵŵƉƚŝŽŶƐ ƵƉŽŶ ǁŚŝĐŚ ŵŽƐƚ ƉůĂŶŶŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ ǁĞƌĞ ĞƐƚĂďůŝƐŚĞĚ͘ dŚĞƌĞ ĂƌĞ ŵĂŶLJ ĂƌĞĂƐ ǁŚĞƌĞ ĞĚĞƌĂů ƉŽůŝĐLJ ĐŽƵůĚ ĨĂĐŝůŝƚĂƚĞ ƚŚĞ ĨƵůů ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŽĨ ƚŚĞ ĐŽƐƚ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ŽƚŚĞƌ ĚĞŵĂŶĚͲƐŝĚĞ ŵĂŶĂŐĞŵĞŶƚ ƌĞƐŽƵƌĐĞƐ͕ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶ ƉůĂŶŶŝŶŐ ƉƌŽĐĞƐƐĞƐ͕ ŝŶĐůƵĚŝŶŐ ŝŵƉƌŽǀŝŶŐ ĚĂƚĂ͕ ĂĚǀĂŶĐŝŶŐ ƚŽŽůƐ ĂŶĚ ƌĞƉƌĞƐĞŶƚĂƚŝŽŶ ŝŶ ŵŽĚĞůƐ͕ ĂŶĚ ƉƌŽǀŝĚŝŶŐ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ŽŶ ƚŽŽůƐ ƚŚĂƚ ĞŶĂďůĞ ƚŚĞ ĨƵůů ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŽĨ ƚŚĞƐĞ ĐůĞĂŶ ƌĞƐŽƵƌĐĞƐ ŝŶ ƉůĂŶŶŝŶŐ͘ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŝƐ ƉƌŽǀŝĚŝŶŐ ĞdžƉĂŶĚĞĚ ƚĞĐŚŶŝĐĂů ĂƐƐŝƐƚĂŶĐĞ ŽŶ ŵĞƚŚŽĚƐ ŽĨ ĨƵůůLJ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͕ ŽƚŚĞƌ ĚĞŵĂŶĚͲƐŝĚĞ ŵĂŶĂŐĞŵĞŶƚ ƌĞƐŽƵƌĐĞƐ͕ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶ ƌĞƐŽƵƌĐĞ ƉůĂŶŶŝŶŐ ĐŽŶĚƵĐƚĞĚ ďLJ ŐŽǀĞƌŶŵĞŶƚƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ ƚŚĂƚ ĐŽƵůĚ ŚĞůƉ ďƌĞĂŬ ĚŽǁŶ ŝŶƐƚŝƚƵƚŝŽŶĂů ďĂƌƌŝĞƌƐ ƚŽ ĐŽŶƐŝĚĞƌŝŶŐ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂƐ Ă ƌĞƐŽƵƌĐĞ͘ KƚŚĞƌ ƉůĂŶŶŝŶŐ ĚƌŝǀĞƌƐ ĞdžŝƐƚ ĂƐ ǁĞůů͘ Žƌ ĞdžĂŵƉůĞ͕ ĞǀŽůǀŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ƌĞƋƵŝƌĞŵĞŶƚƐ Ăƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů ;Ğ͘Ő͕͘ ƚŚĞ ƌĞĐĞŶƚůLJ ƉƌŽŵƵůŐĂƚĞĚ “ ůĞĂŶ WŽǁĞƌ WůĂŶ” ΀ WW΁Ϳ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ŐŽĂůƐ Ăƚ ƚŚĞ ƐƚĂƚĞ ůĞǀĞů ;Ğ͘Ő͕͘ ZW Ϳ ĞŶĐŽƵƌĂŐĞ ũƵƌŝƐĚŝĐƚŝŽŶĂů ĂƵƚŚŽƌŝƚŝĞƐ Ăƚ ƚŚĞ ƐƚĂƚĞ ůĞǀĞů ĂŶĚ ĂĐƌŽƐƐ ƐƚĂƚĞƐ ƚŽ ĐŽŽƌĚŝŶĂƚĞ ƚŽ ĞŶƐƵƌĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĂƌĞ ŵĞƚ Ăƚ ůŽǁ ĐŽƐƚ͘ Ɛ ĚŝƐĐƵƐƐĞĚ ŝŶ ŚĂƉƚĞƌ ;The Electricity Sector Maximizing Economic Value and Consumer EquityͿ͕ ƌĂƚĞŵĂŬŝŶŐĞĞ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ƉƵďůŝĐ ƉŽůŝĐLJ ŝŶƐƚƌƵŵĞŶƚƐ ƚŚĂƚ ƐƚĂƚĞƐ ƵƐĞ ƚŽ ŝŶĐĞŶƚŝǀŝnjĞ ĂŶĚ ƌĞŐƵůĂƚĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ͘ ƚ ŝƐ ŝŵƉŽƌƚĂŶƚ ƚŚĂƚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ ŽĨ ĐůĞĂŶ ĞůĞĐƚƌŝĐŝƚLJ ĂƌĞ ĂƉƉƌŽƉƌŝĂƚĞůLJ ǀĂůƵĞĚ͘ dŽ ƌĞĂůŝnjĞ ƚŚĞ ĨƵůů ƉŽƚĞŶƚŝĂů ŽĨ ŝŶĐƌĞĂƐĞĚ ZƐ͕ ĐůĞĂŶ ĞŶĞƌŐLJ ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ ŵŽƌĞ ƐŽƉŚŝƐƚŝĐĂƚĞĚ ŐƌŝĚ ƚĞĐŚŶŽůŽŐŝĞƐ ;ƐƵĐŚ ĂƐ ƐŵĂƌƚ ŵĞƚĞƌƐ ĂŶĚ ƐƵƉĞƌǀŝƐŽƌLJ ĐŽŶƚƌŽů ĂŶĚ ĚĂƚĂ ĂĐƋƵŝƐŝƚŝŽŶ ƐLJƐƚĞŵƐͿ͕ ƌĞŐƵůĂƚŽƌƐ “will need to uƚŝůŝnjĞ ŵŽƌĞ ĂĚǀĂŶĐĞĚ ƌĂƚĞ ĚĞƐŝŐŶƐ ƚŚĂŶ they have in the past ”ϭϵϮ Ɛ ZƐ ďĞĐŽŵĞ ŵŽƌĞ ƉƌĞǀĂůĞŶƚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ĨŽƌ ĞdžĂŵƉůĞ͕ ƚŚĞ ƚƌĂĚŝƚŝŽŶĂů ƌĂƚĞŵĂŬŝŶŐ ŵŽĚĞůƐ ŵĂLJ ŶŽ ůŽŶŐĞƌ ƉƌŽǀŝĚĞ ƵƚŝůŝƚŝĞƐ ǁŝƚŚ ĂĚĞƋƵĂƚĞ ŵĞĂŶƐ ƚŽ ƉƌŽƉĞƌůLJ ƌĞĐŽǀĞƌ ƚŚĞ ƚƌƵĞ ĐŽƐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͘ϭϵϯ WƵďůŝĐ ƵƚŝůŝƚLJ ĐŽŵŵŝƐƐŝŽŶƐ ŚĂǀĞ ĂůƌĞĂĚLJ ďĞŐƵŶ ƚŽ ĂĚĚƌĞƐƐ ƚŚŝƐ ĐŚĂůůĞŶŐĞ ŝŶ Ă ǁŝĚĞ ǀĂƌŝĞƚLJ ŽĨ ǁĂLJƐ͕ ƌĞĨůĞĐƚŝŶŐ states’ different policy objectives and generation portfolios Many states have ŝŶƐƚŝƚƵƚĞĚ ĚĞĐŽƵƉůŝŶŐ Žƌ ůŽƐƚͲƌĞǀĞŶƵĞ ĂĚũƵƐƚŵĞŶƚ ŵĞĐŚĂŶŝƐŵƐ͕ ǁŚŝĐŚ ďƌĞĂŬ ƚŚĞ ůŝŶŬ ďĞƚǁĞĞŶ ƚŚĞ ĂŵŽƵŶƚ of energy a utility sells and the revenue that it collects increasing the utility’s acceptance of energy ĞĨĨŝĐŝĞŶĐLJ ƉƌŽŐƌĂŵƐ͘ DŽƌĞ ƌĞĐĞŶƚůLJ͕ ƐƚĂƚĞƐ ŚĂǀĞ ĂůƐŽ ďĞŐƵŶ ƚŽ ĞdžĂŵŝŶĞ ŚŽǁ ƚŽ ǀĂůƵĞ ƚŚĞ ĐŽƐƚƐ ĂŶĚ ďĞŶĞĨŝƚƐ ŽĨ ZƐ͘ salue of solar tariffs for example intend to “associate a quantifiable benefit with each kWh of distributed solar exported to the grid”ϭϵϰ ĂŶĚ ƚƌĂŶƐůĂƚĞ ƚŚŝƐ ďĞŶĞĨŝƚ ŝŶƚŽ Ă ĚŽůůĂƌ ƉĞƌ ŬtŚ ƌĂƚĞ͕ ŐŝǀŝŶŐ ƵƚŝůŝƚŝĞƐ ĂŶĚ ƌĞŐƵůĂƚŽƌƐ Ă ƉƌŝĐŝŶŐ ƚŽŽů ƚŚĂƚ ƌĞĨůĞĐƚƐ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚŝƐ ĞůĞĐƚƌŝĐŝƚLJ ďĞƚƚĞƌ ƚŚĂŶ ƌĞƚĂŝů Žƌ ǁŚŽůĞƐĂůĞ ƌĂƚĞƐ͘ Ɛ ƚŚĞ ƌŽůĞ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶ ƌĂƚĞŵĂŬŝŶŐ ĐŽŶƚŝŶƵĞƐ ƚŽ ĞǀŽůǀĞ͕ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĂŶĚ ƐƚĂƚĞƐ ĐĂŶ ĐŽŽƉĞƌĂƚĞ ƚŽ ĞƐƚŝŵĂƚĞ ƚŚĞ ǀĂůƵĞ ĂƚƚƌŝďƵƚĞĚ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŽĚƵĐƚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ͕ ĨĂĐŝůŝƚĂƚĞ ĚĂƚĂ ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ĞdžĐŚĂŶŐĞ ƚŽ ŐƵŝĚĞ ƌĂƚĞŵĂŬŝŶŐ ĂŶĚ ƌĂƚĞ ĚĞƐŝŐŶ͕ ĂŶĚ ƐŚĂƌĞ ůĞƐƐŽŶƐ ůĞĂƌŶĞĚ͘ 3 3 Multiple Paths Forward for CO2 Emissions Reductions from the Electricity Sector Ɛ ŶŽƚĞĚ͕ ƚŚĞ KϮ ŝŶƚĞŶƐŝƚLJ ŽĨ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ĐŽŶƚŝŶƵĞ ƚŽ ĚĞĐƌĞĂƐĞ ĚƵĞ ƚŽ ƐĞǀĞƌĂů ĨĂĐƚŽƌƐ͕ ŝŶĐůƵĚŝŶŐ ĨƵĞů ƐǁŝƚĐŚŝŶŐ͕ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ĂŶĚ ĐůĞĂŶ ĞŶĞƌŐLJ ƉŽůŝĐŝĞƐ͘ dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŚĂƐ ƐĞƚ ĞĐŽŶŽŵLJͲǁŝĚĞ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶ ƚĂƌŐĞƚƐ ŽĨ ϭϳ ƉĞƌĐĞŶƚ ďĞůŽǁ ƚŚĞ ϮϬϬϱ ůĞǀĞů ďLJ ϮϬϮϬ͕ ĂŶĚ Ϯϲ ƚŽ Ϯϴ ĞĞ Žƌ Ă ĚĞƐĐƌŝƉƚŝŽŶ ŽĨ ƚŚĞ ƌĂƚĞ ĚĞƐŝŐŶ ƉƌŽĐĞƐƐ͕ ƐĞĞ ƉƉĞŶĚŝdž ; ůĞĐƚƌŝĐŝƚLJ LJƐƚĞŵ KǀĞƌǀŝĞǁͿ͘ 3-36 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƉĞƌĐĞŶƚ ďĞůŽǁ ƚŚĞ ϮϬϬϱ ůĞǀĞů ďLJ ϮϬϮϱ͘ϭϵϱ dŚĞƐĞ ϮϬϮϬ ĂŶĚ ϮϬϮϱ ƚĂƌŐĞƚƐ ǁĞƌĞ ĨŽƌŵĂůůLJ ƐƵďŵŝƚƚĞĚ ƚŽ ƚŚĞ hŶŝƚĞĚ EĂƚŝŽŶƐ ƌĂŵĞǁŽƌŬ ŽŶǀĞŶƚŝŽŶ ŽŶ ůŝŵĂƚĞ ŚĂŶŐĞ ŝŶ ĂŶƵĂƌLJ ϮϬϭϬ ĂŶĚ DĂƌĐŚ ϮϬϭϱ ƌĞƐƉĞĐƚŝǀĞůLJ ĂŶĚ ƚŚĞLJ ĂƌĞ ĐŽŶƐŝƐƚĞŶƚ ǁŝƚŚ Ă ƐƚƌĂŝŐŚƚ ůŝŶĞ ĞŵŝƐƐŝŽŶ ƌĞĚƵĐƚŝŽŶ ƉĂƚŚǁĂLJ ĨƌŽŵ ϮϬϮϬ ƚŽ ĞĐŽŶŽŵLJͲǁŝĚĞ ĞŵŝƐƐŝŽŶ ƌĞĚƵĐƚŝŽŶƐ ŽĨ ϴϬ ƉĞƌĐĞŶƚ Žƌ ŵŽƌĞ ďLJ ϮϬϱϬ͘ϭϵϲ Ŷ ϴϬ ƉĞƌĐĞŶƚ ĞĐŽŶŽŵLJͲǁŝĚĞ ƌĞĚƵĐƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŐŝǀĞŶ ĐŽŵŵĞŶƐƵƌĂƚĞ ƌĞĚƵĐƚŝŽŶƐ ĞůƐĞǁŚĞƌĞ͕ ĐŽƵůĚ ŚĞůƉ ůŝŵŝƚ ƚŚĞ ŝŶĐƌĞĂƐĞ ŝŶ ŐůŽďĂů ŵĞĂŶ ƐƵƌĨĂĐĞ ƚĞŵƉĞƌĂƚƵƌĞ ƚŽ Ϯ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ ĂŶĚ ŵŝƚŝŐĂƚĞ ƚŚĞ ǁŽƌƐƚ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ϭϵϳ Ŷ ŽƌĚĞƌ ƚŽ ĂĐŚŝĞǀĞ ƐƵĐŚ ĚĞĞƉ ůĞǀĞůƐ ŽĨ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ͕ ŝƚ ŝƐ ůŝŬĞůLJ ƚŚĂƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ǁŝůů ŶĞĞĚ ƚŽ ƉƌŽǀŝĚĞ ŐƌĞĂƚĞƌ ĂŶĚ ŵŽƌĞ ŝŵŵĞĚŝĂƚĞ ' ' ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ƚŚĂŶ ŽƚŚĞƌ ƐĞĐƚŽƌƐ ďĞĐĂƵƐĞ ŝƚ ŝŶĐůƵĚĞƐ ƚŚĞ ŵŽƐƚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ŽƉƚŝŽŶƐ ĨŽƌ ƌĞĚƵĐŝŶŐ ' ' ĞŵŝƐƐŝŽŶƐ͘ The President’s “ ůŝŵĂƚĞ ĐƚŝŽŶ WůĂŶ͕”ϭϵϴ ƚŚĞ ĐƵƌƌĞŶƚ h͘ ͘ ƐƚƌĂƚĞŐLJ ĨŽƌ ĂĚĚƌĞƐƐŝŶŐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͕ ǁĂƐ ĨŽƌŵƵůĂƚĞĚ ƚŽ ŵŝƚŝŐĂƚĞ ŐůŽďĂů ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ĂŶĚ ƌĞĚƵĐĞ h͘ ͘ ' ' ĞŵŝƐƐŝŽŶƐ͘ Ŷ ĞdžĂŵƉůĞ ŽĨ Ă ƉŽůŝĐLJ ƚŚĂƚ͕ when implemented will further the goals of the President’s “Climate Action Plan” by contŝŶƵŝŶŐ ƚŚĞ ƚƌĞŶĚ ŽĨ ĚĞĐƌĞĂƐŝŶŐ KϮ ŝŶƚĞŶƐŝƚLJ ŝƐ ƚŚĞ WW͕ ǁŚŝĐŚ ǁĂƐ ĨŝŶĂůŝnjĞĚ ďLJ W ŝŶ ƵŐƵƐƚ ϮϬϭϱ͘ĨĨ hŶĚĞƌ ĞĐƚŝŽŶ ϭϭϭ;ĚͿ ŽĨ ƚŚĞ ͕ ƚŚĞ WW ƌĞŐƵůĂƚĞƐ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ĞdžŝƐƚŝŶŐ ƉŽǁĞƌ ƉůĂŶƚƐ ĂŶĚ ƌĞƋƵŝƌĞƐ ƐƚĂƚĞƐ ƚŽ ĂĚŽƉƚ ƉůĂŶƐ ƚŽ ůŝŵŝƚ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ĞdžŝƐƚŝŶŐ ĨŽƐƐŝů ĨƵĞůͲĨŝƌĞĚ ƉŽǁĞƌ ƉůĂŶƚƐ͘ W ƉƌŽũĞĐƚƐ ƚŚĂƚ͕ ďLJ ϮϬϯϬ͕ ƚŚĞ WW ǁŝůů ŚĞůƉ ĐƵƚ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ďLJ ϯϮ ƉĞƌĐĞŶƚ ĨƌŽŵ ϮϬϬϱ ůĞǀĞůƐ͘ϭϵϵ dĂdž ĐƌĞĚŝƚƐ ĨŽƌ ĐůĞĂŶ ĞŶĞƌŐLJ ŚĂǀĞ ĂůƐŽ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƌĞĚƵĐĞĚ KϮ ĞŵŝƐƐŝŽŶƐ ĂŶĚ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ĐŽŶƚŝŶƵĞ ƚŽ ŚĞůƉ ƌĞĚƵĐĞ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ĞŵŝƐƐŝŽŶƐ ŝŶ ƚŚĞ ĨƵƚƵƌĞ͘ϮϬϬ EZ ĂŶĂůLJƐŝƐ ƉƌŽũĞĐƚƐ Ă ϱϬ 't ŝŶĐƌĞĂƐĞ ŝŶ ĐƵŵƵůĂƚŝǀĞ ŝŶƐƚĂůůĞĚ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĐĂƉĂĐŝƚLJ ďLJ ϮϬϮϬ ĚƵĞ ƚŽ ƚŚĞ ĞĚĞƌĂů ƚĂdž ĐƌĞĚŝƚ ĞdžƚĞŶƐŝŽŶƐ͘ϮϬϭ 3 3 1 A Record of Environmental Policy Successes dŚĞ ƐƵĐĐĞƐƐĞƐ ŽĨ ĞdžŝƐƚŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉŽůŝĐLJ ĂƌĞ ŝŶƐƚƌƵĐƚŝǀĞ ĨŽƌ ŵĞĞƚŝŶŐ ĨƵƚƵƌĞ ŶĂƚŝŽŶĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ŐŽĂůƐ ĂŶĚ ŽďũĞĐƚŝǀĞƐ͘ dŚĞ ŵŽĚĞƌŶ ĨƌĂŵĞǁŽƌŬ ĨŽƌ ŝŵƉƌŽǀŝŶŐ Ăŝƌ ƋƵĂůŝƚLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ǁĂƐ ĞƐƚĂďůŝƐŚĞĚ ŝŶ ϭϵϳϬ͕ ǁŝƚŚ ƚŚĞ ĐƌĞĂƚŝŽŶ ŽĨ W ĂŶĚ ƚŚĞ ƉĂƐƐĂŐĞ ŽĨ ƚŚĞ ϭϵϳϬ ͕ ǁŚŝĐŚ ǁĂƐ ƐƵďƐĞƋƵĞŶƚůLJ ĂŵĞŶĚĞĚ ŝŶ ϭϵϳϳ ĂŶĚ ϭϵϵϬ͘ tŚŝůĞ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŚĂƐ ŚŝƐƚŽƌŝĐĂůůLJ ďĞĞŶ Ă ŵĂũŽƌ ƐŽƵƌĐĞ ŽĨ Ăŝƌ ƉŽůůƵƚŝŽŶ͕ ƐŝŶĐĞ ƚŚĞ ƉĂƐƐĂŐĞ ŽĨ ƚŚĞ ͕ ĞŵŝƐƐŝŽŶƐ ŽĨ Ăŝƌ ƉŽůůƵƚĂŶƚƐ ;ŝŶĐůƵĚŝŶŐ ƐƵůĨƵƌ ĚŝŽdžŝĚĞ ĂŶĚ ŶŝƚƌŽŐĞŶ ŽdžŝĚĞƐͿ ŚĂǀĞ ĨĂůůĞŶ ĚƌĂŵĂƚŝĐĂůůLJ ďĞůŽǁ ϭϵϳϬ ĞŵŝƐƐŝŽŶƐ ůĞǀĞůƐ͘ ĞƚǁĞĞŶ ϭϵϳϬ ĂŶĚ ϮϬϭϰ͕ ĂŐŐƌĞŐĂƚĞ ĞŵŝƐƐŝŽŶƐ ŽĨ ĐŽŵŵŽŶ Ăŝƌ ƉŽůůƵƚĂŶƚƐ ĨƌŽŵ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ ĚƌŽƉƉĞĚ ϳϰ ƉĞƌĐĞŶƚ͕ ĞǀĞŶ ĂƐ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŐƌĞǁ ďLJ ϭϲϳ ƉĞƌĐĞŶƚ ĂŶĚ ƚŚĞ h͘ ͘ ' W ŐƌĞǁ Ϯϯϴ ƉĞƌĐĞŶƚ͘ϮϬϮ͕ ϮϬϯ͕ ϮϬϰ dŚĞ ŚĞĂůƚŚ ďĞŶĞĨŝƚƐ ŽĨ ƌĞĚƵĐŝŶŐ ĞŵŝƐƐŝŽŶƐ ŽĨ Ăŝƌ ƉŽůůƵƚĂŶƚƐ ĨƌŽŵ ƉŽǁĞƌ ƉůĂŶƚƐ ĂŶĚ ŽƚŚĞƌ ƐŽƵƌĐĞƐ ŝŶĐůƵĚĞ ĂǀŽŝĚĞĚ ƉƌĞŵĂƚƵƌĞ ĚĞĂƚŚƐ͕ ĂǀŽŝĚĞĚ ŚĞĂƌƚ ĂƚƚĂĐŬƐ͕ ĨĞǁĞƌ ĐĂƐĞƐ ŽĨ ƌĞƐƉŝƌĂƚŽƌLJ ƉƌŽďůĞŵƐ ;ƐƵĐŚ ĂƐ ĂĐƵƚĞ ďƌŽŶĐŚŝƚŝƐ ĂŶĚ ĂƐƚŚŵĂ ĂƚƚĂĐŬƐͿ͕ ĂŶĚ ĂǀŽŝĚĞĚ ŚŽƐƉŝƚĂů ĂĚŵŝƐƐŝŽŶƐ͘ϮϬϱ͕ ϮϬϲ͕ ϮϬϳ ŝƌ ƋƵĂůŝƚLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ĨƌŽŵ ƚŚĞ ĐŝĚ ZĂŝŶ WƌŽŐƌĂŵ͕ ƉĂƌƚ ŽĨ ƚŚĞ ĂŵĞŶĚŵĞŶƚƐ ŽĨ ϭϵϵϬ͕ ǁĞƌĞ ĞƐƚŝŵĂƚĞĚ ƚŽ LJŝĞůĚ ŚĞĂůƚŚ ďĞŶĞĨŝƚƐ ŽĨ ĂƌŽƵŶĚ ΨϱϬ ďŝůůŝŽŶ ĂŶŶƵĂůůLJ ŝŶ ϮϬϭϬ͕ ĐŽŵƉĂƌĞĚ ƚŽ ĐŽŵƉůŝĂŶĐĞ ĐŽƐƚƐ ƚŚĂƚ ĂƌĞ ŽŶ ƚŚĞ ŽƌĚĞƌ ŽĨ ΨϬ͘ϱ ďŝůůŝŽŶ͘ϮϬϴ͕ ϮϬϵ͕ ϮϭϬ͕ Ϯϭϭ͕ ϮϭϮ DŽƌĞ ƌĞĐĞŶƚůLJ͕ ƚŚĞ ϮϬϭϮ DĞƌĐƵƌLJ ĂŶĚ ŝƌ dŽdžŝĐƐ ƚĂŶĚĂƌĚƐ͕ ǁŚŝĐŚ ĞƐƚĂďůŝƐŚĞĚ ĞŵŝƐƐŝŽŶƐ ůŝŵŝƚƐ ĨŽƌ ƉŽǁĞƌ ƉůĂŶƚƐ ĨŽƌ ŵĞƌĐƵƌLJ͕ ĂĐŝĚ ŐĂƐĞƐ͕ ĂŶĚ ŚĞĂǀLJ ŵĞƚĂůƐ͕ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ƉƌĞǀĞŶƚ ƵƉ ƚŽ ϭϭ͕ϬϬϬ ƉƌĞŵĂƚƵƌĞ ĚĞĂƚŚƐ͕ ϰ͕ϳϬϬ ŚĞĂƌƚ ĂƚƚĂĐŬƐ͕ ĂŶĚ ϭϯϬ͕ϬϬϬ ĂƐƚŚŵĂ ĂƚƚĂĐŬƐ ĞǀĞƌLJ LJĞĂƌ͘Ϯϭϯ dŚĞ ĞĐŽŶŽŵŝĐ ďĞŶĞĨŝƚƐ ŽĨ ĐůĞĂŶ Ăŝƌ ƉŽůŝĐŝĞƐ ĂƌĞ ĂůƐŽ ǁĞůůͲĚŽĐƵŵĞŶƚĞĚ͘ ƐƚƵĚLJ ůŽŽŬĞĚ Ăƚ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ƚŚĞ ĂŵĞŶĚŵĞŶƚƐ ŽĨ ϭϵϵϬ ĂŶĚ ƐŚŽǁĞĚ ƚŚĂƚ—ůŽŽŬŝŶŐ ĨŽƌǁĂƌĚ ƚŽ ϮϬϮϬ ŝŶ ĐƵŵƵůĂƚŝǀĞ͕ ŶĞƚͲƉƌĞƐĞŶƚͲ ǀĂůƵĞ ƚĞƌŵƐ—ƚŚĞƌĞ ǁŝůů ďĞ ΨϮ ƚƌŝůůŝŽŶ ŝŶ ďĞŶĞĨŝƚƐ ĐŽŵƉĂƌĞĚ ƚŽ Ψϲϱ ďŝůůŝŽŶ ŝŶ ĐŽƐƚƐ͕ Ă ďĞŶĞĨŝƚͲĐŽƐƚ ƌĂƚŝŽ ŽĨ ĨĨ On February 9 2016 the Supreme Court stayed implementation of the CPP pending judicial review The Court’s decision was ŶŽƚ ŽŶ ƚŚĞ ŵĞƌŝƚƐ ŽĨ ƚŚĞ ƌƵůĞ͘ W ĨŝƌŵůLJ ďĞůŝĞǀĞƐ ƚŚĞ WW ǁŝůů ďĞ ƵƉŚĞůĚ ǁŚĞŶ ƚŚĞ ŵĞƌŝƚƐ ĂƌĞ ĐŽŶƐŝĚĞƌĞĚ ďĞĐĂƵƐĞ ƚŚĞ ƌƵůĞ ƌĞƐƚƐ ŽŶ ƐƚƌŽŶŐ ƐĐŝĞŶƚŝĨŝĐ ĂŶĚ ůĞŐĂů ĨŽƵŶĚĂƚŝŽŶƐ͘ W ǁŝůů ĐŽŶƚŝŶƵĞ ƚŽ ƉƌŽǀŝĚĞ ƚŽŽůƐ ĂŶĚ ƐƵƉƉŽƌƚ ĨŽƌ ƚŚĞ ƐƚĂƚĞƐ ƚŚĂƚ ĐŚŽŽƐĞ ƚŽ ĐŽŶƚŝŶƵĞ to work to cut carbon pollution from power plants and seek the Agency’s guidance and assistance Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-37 Chapter III Building a Clean Electricity Future ŽǀĞƌ ϯϬ ƚŽ ϭ͘Ϯϭϰ In addition the United States is the world’s largest producer and consumer of ĞŶǀŝƌŽŶŵĞŶƚĂů ƚĞĐŚŶŽůŽŐŝĞƐ͘ŐŐ Ŷ ϮϬϭϱ͕ ƚŚĞ h͘ ͘ ĞŶǀŝƌŽŶŵĞŶƚĂů ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƐĞƌǀŝĐĞƐ ŝŶĚƵƐƚƌLJ ĞŵƉůŽLJĞĚ ϭ͘ϲ ŵŝůůŝŽŶ ƉĞŽƉůĞ͕ ŚĂĚ ƌĞǀĞŶƵĞƐ ŽĨ ΨϯϮϬ͘ϰ ďŝůůŝŽŶ͕ ĂŶĚ ĞdžƉŽƌƚĞĚ Ψϱϭ͘Ϯ ďŝůůŝŽŶ ǁŽƌƚŚ ŽĨ ŐŽŽĚƐ ĂŶĚ ƐĞƌǀŝĐĞƐ͘Ϯϭϱ͕ Ϯϭϲ h͘ ͘ ŝŶĚƵƐƚƌLJ ƌĞǀĞŶƵĞƐ ĨŽƌ Ăŝƌ ƉŽůůƵƚŝŽŶ ĐŽŶƚƌŽů ĂůŽŶĞ ƚŽƚĂůĞĚ Ψϭϵ͘ϲ ďŝůůŝŽŶ͕ ŝŶĐůƵĚŝŶŐ ĞƋƵŝƉŵĞŶƚ͕ ŝŶƐƚƌƵŵĞŶƚƐ͕ ĂŶĚ ĂƚƚĞŶĚĂŶƚ ƐĞƌǀŝĐĞƐ͕ ǁŚŝůĞ h͘ ͘ ƌĞǀĞŶƵĞƐ ĨŽƌ Ăŝƌ ƋƵĂůŝƚLJ ŵŽŶŝƚŽƌŝŶŐ ŝŶƐƚƌƵŵĞŶƚƐ ĂŶĚ ŝŶĨŽƌŵĂƚŝŽŶ ƐLJƐƚĞŵƐ ƚŽƚĂůĞĚ Ψϭ͘ϯ ďŝůůŝŽŶ͘Ϯϭϳ dŚŝƐ ĞdžƉĞƌŝĞŶĐĞ ƐŚŽǁƐ ƚŚĂƚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ĐŽŶƐŝƐƚĞŶƚůLJ ďĞĞŶ ĂďůĞ ƚŽ ŵĂŶĂŐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉŽůůƵƚŝŽŶ ǁŝƚŚ ďĞŶĞĨŝƚƐ ĨĂƌ ŽƵƚǁĞŝŐŚŝŶŐ ƚŚĞ ĐŽƐƚƐ͕ Ăůů ǁŚŝůĞ ĐŽŶƚŝŶƵŝŶŐ ƚŽ ŐƌŽǁ ƚŚĞ ĞĐŽŶŽŵLJ ĂŶĚ ƐƵƉƉŽƌƚ ŵŝůůŝŽŶƐ ŽĨ ũŽďƐ͘ 3 3 2 A Record of Clean Energy Technology Successes dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ŚŝƐƚŽƌŝĐĂůůLJ ďĞĞŶ Ă ŐůŽďĂů ŝŶŶŽǀĂƚŝŽŶ ůĞĂĚĞƌ͕ ĂŶĚ ƚŚĞ h͘ ͘ 'ŽǀĞƌŶŵĞŶƚ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ůĂƌŐĞƐƚ ĨƵŶĚĞƌƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽr RD D in the world The Federal Government’s long standing ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ Z Θ ŝŶǀĞƐƚŵĞŶƚƐ͕ ŝŶ ĐŽŶĐĞƌƚ ǁŝƚŚ ƐƵƉƉŽƌƚŝŶŐ ƉŽůŝĐŝĞƐ͕ ŚĂǀĞ ŵĂĚĞ ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚƐ on the Nation’s electric infrastructure for decades through the present day Shale Gas Research Development and Demonstration RD D and Time-Limited Tax Credit Early Federal shale gas RD D funding primarily for basin characterization and key drilling technologies combined with a public-private partnership and a time-limited Federal Production Tax Credit resulted in a sharp increase of shale gas in the mid-2000s Figure 3-14 Today shale gas is around 60 percent of total U S natural gas production The interplay of early Department of Energy funding industry-matched Gas Research Institute applied RD D and synergistic policy incentives enabled production from shales previously considered uneconomic The switch from coal and petroleum power generation to less-carbonintensive and more efficient combined-cycle natural gas generation resulted in over 1 2 billion metric tons of CO2 emissions reductions from 2005 to 2014 218 ŐŐ ŶǀŝƌŽŶŵĞŶƚĂů ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ĚĞǀŝĐĞƐ ƚŚĂƚ ƌĞĚƵĐĞ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚ ŽĨ ŶĂƚƵƌĂů ƌĞƐŽƵƌĐĞƐ͘ džĂŵƉůĞƐ ŽĨ ĞŶǀŝƌŽŶŵĞŶƚĂů ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ŚĂǀĞ ĐŽŶƚƌŝďƵƚĞĚ ƚŽ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ’ ƐƵĐĐĞƐƐ ŝŶ ƌĞĚƵĐŝŶŐ Ăŝƌ ƉŽůůƵƚŝŽŶ ŝŶĐůƵĚĞ ĂĐƚŝǀĂƚĞĚ ĐĂƌďŽŶ ŝŶũĞĐƚŝŽŶ͕ ĨůƵĞͲŐĂƐ ĚĞƐƵůĨƵƌŝnjĂƚŝŽŶ͕ ƐĞůĞĐƚŝǀĞ ĐĂƚĂůLJƚŝĐ ƌĞĚƵĐƚŝŽŶ͕ ĂŶĚ ĚƌLJͲƐŽƌďĞŶƚ ŝŶũĞĐƚŝŽŶ͘ 3-38 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-14 Steady RD D Funding and Time-Limited Tax Credit Led to Increase in U S Shale Gas Production 1976–2009 219 Federal funding time-limited tax credits and Gas Research Institute GRI funding led to a significant increase in gas production starting in the mid-2000s Light-Emitting Diodes LEDs Research Development and Demonstration RD D and Lighting Efficiency Standards Federal and private-sector RD D investments directly brought down LED costs improved efficiency and performance and fostered domestic manufacturing of LED lighting components and products 220 Since the Department of Energy DOE began funding solid-state lighting research projects in 2000 large and small businesses universities and National Laboratories that received DOE funds have applied for more than 260 patents and developed more than 220 commercially available products in this technology area including lighting products power supplies materials and manufacturing tools 221 222 In 2007 Federal legislation set minimum operating life and energy efficiency standards for a majority of light sources used by the public and relied heavily on technology innovation for manufacturers to meet those standards The same legislation also mandated an efficient lighting competition the “L Prize ” that provided cash prizes and Federal Government purchase contracts for winning products The combination of national lighting standards and lighting technology innovation investments and incentives has contributed to a rapid decline in LED product costs and a corresponding increase in LED sales Figure 3-15 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-39 Chapter III Building a Clean Electricity Future Figure 3-15 LED Costs and Installations 2008–2015223 LED bulbs now account for 6 percent of all installed A-type bulbs which are common in household applications This growth has been enabled by a 94 percent reduction in cost since 2008 In 1 year total installations of common home LED bulbs more than doubled from 77 million to 202 million—a particularly rapid growth considering there used to be fewer than 400 000 installations as recently as 2009 Across all LED product types LED installations prevented 13 8 million metric tons of CO 2 emissions and saved $2 8 billion in energy costs in 2015 alone ŽůĂƌ WsƐ ; ŝŐƵƌĞ ϯͲϭϲͿ͕ Ɛ͕ ĂŶĚ ƐŚĂůĞ ŐĂƐ ĚĞǀĞůŽƉŵĞŶƚ ĂƌĞ ĂŵŽŶŐ ŵĂŶLJ ŽƚŚĞƌ ĞůĞĐƚƌŝĐŝƚLJͲƌĞůĂƚĞĚ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĚĞŵŽŶƐƚƌĂƚĞ ƚŚĞ ŝŶƐƚƌƵŵĞŶƚĂů ƌŽůĞ ŽĨ ĞĚĞƌĂů ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĞĂƌůLJ ƐƚĂŐĞ ZΘ ͘ Ɛ ƚĞĐŚŶŽůŽŐŝĞƐ ŵĂƚƵƌĞ͕ ƚŚĞƐĞ ĐĂƐĞ ƐƚƵĚŝĞƐ ĂůƐŽ ƐŚŽǁ ƚŚĞ ŶĞĞĚ ĨŽƌ ďŽƚŚ ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ƉŽůŝĐLJ͕ ĂŶĚ ŝůůƵƐƚƌĂƚĞ ƚŚĞ ƐLJŶĞƌŐŝƐƚŝĐ ŝŶƚĞƌĂĐƚŝŽŶƐ ĂŵŽŶŐ ĐŽŵƉůĞŵĞŶƚĂƌLJ ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ƉŽůŝĐLJ ĞĨĨŽƌƚƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ŝŶŶŽǀĂƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ ƌĞĚƵĐĞ ƚŚĞ ĐŽƐƚ ŽĨ ƉŽůŝĐŝĞƐ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ ĂůůŽǁ ĚĞĐŝƐŝŽŶ ŵĂŬĞƌƐ ŝŶ ďŽƚŚ ŐŽǀĞƌŶŵĞŶƚ ĂŶĚ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ ƚŽ ĐŽŶƐŝĚĞƌ ŽƉƚŝŽŶƐ ƚŚĂƚ ǁŽƵůĚ ŽƚŚĞƌǁŝƐĞ ŶŽƚ ďĞ ĂǀĂŝůĂďůĞ͘ ŶĐƌĞĂƐĞĚ ĚĞƉůŽLJŵĞŶƚ ůĞǀĞůƐ ĚƵĞ ƚŽ ƉŽůŝĐŝĞƐ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ ĂůƐŽ ŝŶĐƌĞĂƐĞ ĞĐŽŶŽŵŝĞƐ ŽĨ ƐĐĂůĞ ĂŶĚ ĨƵƌƚŚĞƌ ƌĞĚƵĐĞ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ĐŽƐƚƐ ĂŶĚ ƚĞĐŚŶŝĐĂů ƌŝƐŬƐ͘ 3-40 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-16 Long-Term Solar PV Cost Decline and Global Deployment Growth 1976–2015224 225 226 227 228 This experience curve displays the relationship in logarithmic form between the average selling price ASP of a PV module and the cumulative global shipments of PV modules Average module prices have dropped by about a factor of 100 since 1976 to under $1 watt W while cumulative module shipments have increased from less than 1 MW to over 200 GW For every doubling of cumulative PV shipments there is on average a corresponding reduction of about 20 percent in PV module price Acronyms watt-peak Wp megawatt-peak MWp 3 3 3 Market-Based Carbon Policies ƚƌĂŶƐƉĂƌĞŶƚ͕ ŵĂƌŬĞƚͲďĂƐĞĚ ƉŽůŝĐLJ ƚŽ ƉƌŝĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ŚĂƐ ďĞĞŶ ĚŽĐƵŵĞŶƚĞĚ ĂƐ ƚŚĞ ŵŽƐƚ ĐŽƐƚͲ ĞĨĨĞĐƚŝǀĞ ǁĂLJ ƚŽ ƌĞĚƵĐĞ ' ' ĞŵŝƐƐŝŽŶƐ͘ϮϮϵ DĂƌŬĞƚͲďĂƐĞĚ ŝŶĐĞŶƚŝǀĞƐ ƐƵĐŚ ĂƐ Ă ĐĂƌďŽŶ ĐŚĂƌŐĞ Žƌ ƉƌŝĐĞ ĞŶĐŽƵƌĂŐĞ ĂĐƚŽƌƐ ŝŶ ƚŚĞ ĞĐŽŶŽŵLJ͕ ŝŶĐůƵĚŝŶŐ ĐŽŶƐƵŵĞƌƐ ĂŶĚ ƵƚŝůŝƚŝĞƐ͕ ƚŽ ŝŶƚĞƌŶĂůŝnjĞ ƚŚĞ ĐŽƐƚƐ ƚŽ ƐŽĐŝĞƚLJ ŽĨ ĞŵŝƚƚŝŶŐ ' 'Ɛ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ Ă ƚƌĂŶƐƉĂƌĞŶƚ͕ ŵĂƌŬĞƚͲďĂƐĞĚ ƉŽůŝĐLJ ƚŽ ƉƌŝĐĞ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ĚƌŝǀĞƐ ƚŚĞ ŵŽƐƚ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ĨŝƌƐƚ͕ ǁŚŝĐŚ ĂĐŚŝĞǀĞƐ ƚŚĞ ŐŽĂů ŽĨ ƌĞĚƵĐŝŶŐ KϮ ĞŵŝƐƐŝŽŶƐ Ăƚ ƚŚĞ ůŽǁĞƐƚ ĐŽƐƚ͘ ŽŶŐͲƚĞƌŵ ĐĂƌďŽŶ ƉƌŝĐŝŶŐ ƉŽůŝĐŝĞƐ ĂůƐŽ ƌĞĚƵĐĞ ƵŶĐĞƌƚĂŝŶƚLJ ĂŶĚ ƐĞŶĚ ĐůĞĂƌ ŵĂƌŬĞƚ ƐŝŐŶĂůƐ ƚŚĂƚ ĞŶĐŽƵƌĂŐĞ ŝŶŶŽǀĂƚŽƌƐ ƚŽ ĚĞǀĞůŽƉ ŶĞǁ ĂŶĚ ŝŵƉƌŽǀĞĚ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dĞŶ h͘ ͘ ƐƚĂƚĞƐ ĂƌĞ ĐƵƌƌĞŶƚůLJ ŝŵƉůĞŵĞŶƚŝŶŐ ŵĂƌŬĞƚͲďĂƐĞĚ ĐĂƌďŽŶ ƉƌŝĐŝŶŐ ƉŽůŝĐŝĞƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ŶŝŶĞ ƐƚĂƚĞƐ ŝŶ ƚŚĞ EŽƌƚŚĞĂƐƚ ĂŶĚ DŝĚͲ ƚůĂŶƚŝĐ ĂƌĞ ŝŵƉůĞŵĞŶƚŝŶŐ ƚŚĞ ZĞŐŝŽŶĂů 'ƌĞĞŶŚŽƵƐĞ 'ĂƐ ŶŝƚŝĂƚŝǀĞ͕ ǁŚŝĐŚ ŝƐ Ă ŵƵůƚŝͲƐƚĂƚĞ ' ' ĐĂƉͲĂŶĚͲƚƌĂĚĞ ƉƌŽŐƌĂŵ͘ϮϯϬ ŶǀĞƐƚŵĞŶƚƐ ƐƉƵƌƌĞĚ ďLJ ƚŚĞ ZĞŐŝŽŶĂů 'ƌĞĞŶŚŽƵƐĞ 'ĂƐ ŶŝƚŝĂƚŝǀĞ are estimated “to save 76 1 million Btu of fossil fuels and 20 6 million MWh of electricity” ŽǀĞƌ ƚŚĞ ůŝĨĞƚŝŵĞ ŽĨ ƚŚĞƐĞ ŝŶǀĞƐƚŵĞŶƚƐ͘Ϯϯϭ ĂůŝĨŽƌŶŝĂ ŝƐ ŝŵƉůĞŵĞŶƚŝŶŐ ƐƐĞŵďůLJ ŝůů ϯϮ͕ ƚŚĞ ĂůŝĨŽƌŶŝĂ 'ůŽďĂů tĂƌŵŝŶŐ ŽůƵƚŝŽŶƐ Đƚ͕ ǁŚŝĐŚ ǁĂƐ ĞŶĂĐƚĞĚ ŝŶ ϮϬϬϲ͘ ƐƐĞŵďůLJ ŝůů ϯϮ ƌĞƋƵŝƌĞƐ ƚŚĞ ƌĞĚƵĐƚŝŽŶ ŽĨ ƐƚĂƚĞǁŝĚĞ ' ' emissions to 1990 levels by 2020 One component of California’s program is a statewide GHG capͲ ĂŶĚͲƚƌĂĚĞ ƉƌŽŐƌĂŵ͘ϮϯϮ California’s program is linked to Quebec’s program͕ ĂůůŽǁŝŶŐ ĨŽƌ ĐƌŽƐƐͲďŽƌĚĞƌ ' ' ĞŵŝƐƐŝŽŶƐ ƚƌĂĚŝŶŐ͘ ĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ ĂƌĞ ĨĂůůŝŶŐ ĨĂƐƚĞƌ ƚŚĂŶ ĂŶƚŝĐŝƉĂƚĞĚ ĂŶĚ ƚŚĞ ĚĞŵĂŶĚ ĨŽƌ ĞŵŝƐƐŝŽŶ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-41 Chapter III Building a Clean Electricity Future ĂůůŽǁĂŶĐĞƐ ŚĂƐ ďĞĞŶ ĚĞĐƌĞĂƐŝŶŐ͘Ϯϯϯ͕ Ϯϯϰ ůƚŚŽƵŐŚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĚŽĞƐ ŚĂǀĞ Ă ĞĚĞƌĂů ĐĂƉͲĂŶĚͲƚƌĂĚĞ ƉƌŽŐƌĂŵ ĨŽƌ ƐƵůĨƵƌ ĚŝŽdžŝĚĞ ĞŵŝƐƐŝŽŶƐ͕ ƚŚĞƌĞ ŝƐ ŶŽ ŵĂƌŬĞƚͲďĂƐĞĚ ƉŽůŝĐLJ ĨŽƌ ' 'Ɛ Ăƚ ƚŚĞ ĞĚĞƌĂů ůĞǀĞů͘ŚŚ 3 3 4 Addressing Climate Change Growing the Economy through Innovation Climate change is one of the world’s major challenges The 17 warmest years on record have ŽĐĐƵƌƌĞĚ ŝŶ ƚŚĞ ůĂƐƚ ϭϴ LJĞĂƌƐ͘Ϯϯϱ ϮϬϭϱ ǁĂƐ ƚŚĞ ǁĂƌŵĞƐƚ LJĞĂƌ ŽŶ ƌĞĐŽƌĚ͕ ĂŶĚ ďĂƐĞĚ ŽŶ ƚŚĞ ůĂƚĞƐƚ ĚĂƚĂ͕ ϮϬϭϲ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ƐĞƚ Ă ŶĞǁ ƌĞĐŽƌĚ͘Ϯϯϲ͕ Ϯϯϳ 'ůŽďĂů ƚĞŵƉĞƌĂƚƵƌĞƐ ŚĂǀĞ ĂůƌĞĂĚLJ ǁĂƌŵĞĚ Ϭ͘ϴϱΣ ĨƌŽŵ ƉƌĞŝŶĚƵƐƚƌŝĂů ƚŝŵĞƐ͘Ϯϯϴ dŚĞ ƐƵĐĐĞƐƐĞƐ ŽĨ ƚŚĞ ŽĨĨĞƌ ůĞƐƐŽŶƐ ĂďŽƵƚ ŽƵƌ ĂďŝůŝƚLJ ƚŽ ƐŝŵƵůƚĂŶĞŽƵƐůLJ ĂĚĚƌĞƐƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶĐĞƌŶƐ ĂŶĚ ŐƌŽǁ ƚŚĞ ĞĐŽŶŽŵLJ͘ DŝƚŝŐĂƚŝŶŐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŝƐ͕ ŚŽǁĞǀĞƌ͕ ŝŶƚƌŝŶƐŝĐĂůůLJ ŵŽƌĞ ĐŽŵƉůŝĐĂƚĞĚ ďĞĐĂƵƐĞ ŝƚ ŝƐ Ă ŐůŽďĂů ƉƌŽďůĞŵ ƚŚĂƚ ĂĨĨĞĐƚƐ Ăůů ƐĞĐƚŽƌƐ ŽĨ ƚŚĞ ĞĐŽŶŽŵLJ͘ Figure 3-17 Global CO2 Emissions left and Probabilistic Temperature Outcomes right of United Nations Framework Convention on Climate Change’s 21st Session of the Conference of the Parties in Paris in December 2015 COP 21 1990–2100239 Implementing the 21st Conference of Parties pledges could significantly reduce the chances of a level of warming greater than 4 degrees Celsius by 2100 as seen under the Paris-Continued Ambition scenario However to decrease the likelihood of projected warming above 2 degrees Celsius additional actions are required as seen under the Paris-Increased Ambition scenario dŚĞ WĂƌŝƐ ŐƌĞĞŵĞŶƚ͕ ĂĚŽƉƚĞĚ ŝŶ ĞĐĞŵďĞƌ ϮϬϭϱ͕ ĞdžƉůŝĐŝƚůLJ ĂĐŬŶŽǁůĞĚŐĞĚ ƚŚĂƚ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ǁĂƌƌĂŶƚĞĚ Ă ŐůŽďĂů ƌĞƐƉŽŶƐĞ͕ ǁŝƚŚ ŵŽƌĞ ƚŚĂŶ ϭϵϬ ĐŽƵŶƚƌŝĞƐ ĂŐƌĞĞŝŶŐ ƚŽ ŵĂŬĞ ŶĂƚŝŽŶĂů ĐŽŵŵŝƚŵĞŶƚƐ ƚŽ ƐƵďƐƚĂŶƚŝĂůůLJ ƌĞĚƵĐĞ ƚŚĞŝƌ ' ' ĞŵŝƐƐŝŽŶƐ͘ϮϰϬ Ŷ ĂŶ ĞĨĨŽƌƚ ƚŽ ƌĞĚƵĐĞ ƚŚĞ ƌŝƐŬƐ ĂŶĚ ĞĨĨĞĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͕ ƚŚĞ WĂƌŝƐ ŐƌĞĞŵĞŶƚ ƐĞƚƐ Ă ŐŽĂů ƚŽ ŬĞĞƉ ŐůŽďĂů ĂǀĞƌĂŐĞ ƚĞŵƉĞƌĂƚƵƌĞ ƌŝƐĞ ƚŽ ŶŽ ŵŽƌĞ ƚŚĂŶ Ϯ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ ĂďŽǀĞ ƉƌĞŝŶĚƵƐƚƌŝĂů ůĞǀĞůƐ ĂŶĚ ƚŽ ƉƵƌƐƵĞ ĞĨĨŽƌƚƐ ƚŽ ůŝŵŝƚ ƚŚĞ ƚĞŵƉĞƌĂƚƵƌĞ ŝŶĐƌĞĂƐĞ ƚŽ ϭ͘ϱ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ͘Ϯϰϭ ŚŚ dŚĞ WW ƉƌŽǀŝĚĞƐ ƐƚĂƚĞƐ ǁŝƚŚ ĨůĞdžŝďŝůŝƚLJ ƚŽ ĐŚŽŽƐĞ ĚŝĨĨĞƌĞŶƚ ƉĂƚŚǁĂLJƐ ;ƐŽŵĞ ŽĨ ǁŚŝĐŚ ĂƌĞ ŵĂƌŬĞƚͲďĂƐĞĚͿ ƚŽ ĐŽŵƉůLJ͘ Ĩ Ăůů ƐƚĂƚĞƐ ĐŚŽŽƐĞ Ă ŵĂƌŬĞƚͲďĂƐĞĚ ƉŽůŝĐLJ ƵŶĚĞƌ ƚŚĞ WW Ă ĞĚĞƌĂů ŵĂƌŬĞƚ ŝƐ ŶŽƚ ŶĞĐĞƐƐĂƌŝůLJ ĐƌĞĂƚĞĚ͘ 3-42 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ZĞƉŽƌƚƐ ŝƐƐƵĞĚ ďLJ ƚŚĞ ŶƚĞƌŐŽǀĞƌŶŵĞŶƚĂů WĂŶĞů ŽŶ ůŝŵĂƚĞ ŚĂŶŐĞ ƐƵŐŐĞƐƚ ƚŚĂƚ ŝŶ ŽƌĚĞƌ ƚŽ ůŝŵŝƚ ǁĂƌŵŝŶŐ ƚŽ Ϯ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ ƚŽ ŵŝƚŝŐĂƚĞ ƚŚĞ ǁŽƌƐƚ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͕ ĚĞǀĞůŽƉĞĚ ĐŽƵŶƚƌŝĞƐ ŵƵƐƚ ĂĐŚŝĞǀĞ ĚĞĞƉ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ďLJ ƌĞĚƵĐŝŶŐ ƚŚĞŝƌ ĞŵŝƐƐŝŽŶƐ ďLJ ϴϬ ƚŽ ϵϱ ƉĞƌĐĞŶƚ ƌĞůĂƚŝǀĞ ƚŽ Ă ϭϵϵϬ ďĂƐĞůŝŶĞ͘ϮϰϮ͕ Ϯϰϯ WƵƌƐƵĂŶƚ ƚŽ ƚŚĞ WĂƌŝƐ ŐƌĞĞŵĞŶƚ͕ Ăůů ĐŽƵŶƚƌŝĞƐ ŵƵƐƚ ĐŽŵŵŝƚ ƚŽ ƐƵďŵŝƚƚŝŶŐ ƐƵĐĐĞƐƐŝǀĞ ŶĂƚŝŽŶĂůůLJ ĚĞƚĞƌŵŝŶĞĚ ĐŽŶƚƌŝďƵƚŝŽŶƐ ;E ƐͿ ĞǀĞƌLJ ϱ years that “represent a progression” beyond their current NDC ĂŶĚ ǁŚŝĐŚ ŽƵƚůŝŶĞ ǁŚĂƚ ĞĂĐŚ ĐŽƵŶƚƌLJ ƉůĂŶƐ ƚŽ ĚŽ ƚŽ ĂĚĚƌĞƐƐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘Ϯϰϰ dŚĞ ĞŵŝƐƐŝŽŶƐ ƵŶĚĞƌ ƚŚĞ ĐƵƌƌĞŶƚ E Ɛ ;ƚŚĞ ŽƌĂŶŐĞ ůŝŶĞ ŝŶ ŝŐƵƌĞ ϯͲϭϳͿ ĂƌĞ ƚŽŽ ŚŝŐŚ ƚŽ ůŝŵŝƚ ǁĂƌŵŝŶŐ ƚŽ Ϯ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ͘ ĚĚŝƚŝŽŶĂů ĂĐƚŝŽŶƐ ƚŽ ƌĞĚƵĐĞ ĞŵŝƐƐŝŽŶƐ ĂƌĞ ŶĞĞĚĞĚ͘ dŚĞ h͘ ͘ ĐŽŵŵŝƚŵĞŶƚ ŝŶ WĂƌŝƐ ĂĨĨŝƌŵĞĚ ƚŚĂƚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ƉƌĞƉĂƌĞĚ ƚŽ ƉƵƌƐƵĞ ĨƵƌƚŚĞƌ ƌĞĚƵĐƚŝŽŶƐ beyond the previously announced “economyͲǁŝĚĞ ƚĂƌŐĞƚ ŽĨ ƌĞĚƵĐŝŶŐ ŝƚƐ ' ' ĞŵŝƐƐŝŽŶƐ ďLJ Ϯϲ ƉĞƌĐĞŶƚ ƚŽ Ϯϴ ƉĞƌĐĞŶƚ ďĞůŽǁ ŝƚƐ ϮϬϬϱ ůĞǀĞů ŝŶ ϮϬϮϱ ĂŶĚ ƚŽ ŵĂŬĞ ďĞƐƚ ĞĨĨŽƌƚƐ ƚŽ ƌĞĚƵĐĞ ŝƚƐ ĞŵŝƐƐŝŽŶƐ ďLJ Ϯϴ ƉĞƌĐĞŶƚ ”Ϯϰϱ dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĨŽƌŵĂůůLJ ũŽŝŶĞĚ ƚŚĞ WĂƌŝƐ ŐƌĞĞŵĞŶƚ ŽŶ ĞƉƚĞŵďĞƌ ϯ͕ ϮϬϭϲ͕Ϯϰϲ ĂŶĚ ŝƐ ƐƚƌŽŶŐůLJ ĐŽŵŵŝƚƚĞĚ ƚŽ ƚĂŬŝŶŐ ĂĐƚŝŽŶ ĂŶĚ ŐůŽďĂů ůĞĂĚĞƌƐŚŝƉ ƚŽ ĂĚĚƌĞƐƐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘Ϯϰϳ WƌŽũĞĐƚŝŶŐ ŽƵƚ ƚŽ ƚŚĞ ŵŝĚͲĐĞŶƚƵƌLJ ĂŶĚ ďĞLJŽŶĚ͕ ƚŚĞ ůŝƚĞƌĂƚƵƌĞ ƐƵŐŐĞƐƚƐ ƚŚĂƚ ƚŚĞ ƌĂƚĞ ŽĨ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ǁŝůů ŶĞĞĚ ƚŽ ƐŝŐŶŝĨŝĐĂŶƚůLJ ƐƉĞĞĚ ƵƉ ƚŽ ƐƚĂLJ ŽŶ ƚƌĂĐŬ ƚŽ ŵĞĞƚ ƚŚĞ Ϯ ĚĞŐƌĞĞƐ ĞůƐŝƵƐ ǁĂƌŵŝŶŐ ƚĂƌŐĞƚ ĂŶĚ ƌĞĚƵĐĞ ƚŚĞ ƌŝƐŬ ŽĨ ƚŚĞ ŵŽƐƚ ƐĞǀĞƌĞ ƉƌŽũĞĐƚĞĚ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘Ϯϰϴ 3 3 5 Realizing Future GHG Reductions DOE Integrated Modeling Assessment ĚŝƐƉĂƌĂƚĞ ƐĞƚ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ƉŽůŝĐŝĞƐ ĂƌĞ ŝŶ ƉůĂĐĞ ƚŚĂƚ ŚĂǀĞ ƌĞĚƵĐĞĚ ĂŶĚ ĐĂŶ ĨƵƌƚŚĞƌ ƌĞĚƵĐĞ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ͘ Ŷ ŝŶƚĞŐƌĂƚĞĚ ĂƐƐĞƐƐŵĞŶƚ ŽĨ ƚŚĞ ƌŽůĞƐ ƚŚĞƐĞ ǀĂƌLJŝŶŐ ƐŽůƵƚŝŽŶƐ ŵŝŐŚƚ ƉůĂLJ ĂƐ ƚŚĞLJ ĐŽŵƉĞƚĞ ǁŝƚŚ ĂŶĚͬŽƌ ĐŽŵƉůĞŵĞŶƚ ŽŶĞ ĂŶŽƚŚĞƌ ĐĂŶ ĨƵƌƚŚĞƌ ŝŶĨŽƌŵ ďŽƚŚ ƉŽůŝĐLJ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ƉĂƚŚǁĂLJƐ ƚŽ ĂĐŚŝĞǀĞ ƚŚĞ ĚĞĞƉ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŶĞĞĚĞĚ ƚŽ ŵĞĞƚ ƚŚĞ ŐŽĂůƐ ĞƐƚĂďůŝƐŚĞĚ ďLJ ŵŽƌĞ ƚŚĂŶ ϭϵϬ ĐŽƵŶƚƌŝĞƐ ŝŶ WĂƌŝƐ͘ ŽŶƐƵŵĞƌƐ ŵĂŬĞ ƚŚĞŝƌ ŽǁŶ ĚĞĐŝƐŝŽŶƐ ĂďŽƵƚ ŚŽǁ ŵƵĐŚ ĞůĞĐƚƌŝĐŝƚLJ ƚŽ ƵƐĞ ďĂƐĞĚ ŽŶ ƚŚĞŝƌ ŶĞĞĚƐ ĂƐ ǁĞůů ĂƐ ĞůĞĐƚƌŝĐŝƚLJ ƉƌŝĐĞƐ͘ dŚĞ ƉƌŽũĞĐƚŝŽŶƐ ĚĞƐĐƌŝďĞĚ ďĞůŽǁ ǁŝůů ƉƌŽǀŝĚĞ ŝŶƐŝŐŚƚ ĂďŽƵƚ ǁŚĂƚ ĐŽƵůĚ ŚĂƉƉĞŶ ƚŽ ' ' ĞŵŝƐƐŝŽŶƐ ŝŶ ƚŚĞ ĨƵƚƵƌĞ ĂŶĚ ŚĞůƉ ŝŶĨŽƌŵ ƉŽǁĞƌ ĐŽŵƉĂŶŝĞƐ͕ ƌĞŐƵůĂƚŽƌƐ͕ ƉŽůŝĐLJŵĂŬĞƌƐ͕ ĂŶĚ ĐŽŶƐƵŵĞƌƐ ĂƐ ƚŚĞLJ ŵĂŬĞ ĚĞĐŝƐŝŽŶƐ ĂďŽƵƚ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ͕ ƚŚĞ ƉĞƌĨŽƌŵĂŶĐĞ ĂŶĚ ĐŽƐƚ ŽĨ ƚĞĐŚŶŽůŽŐLJ ŽƉƚŝŽŶƐ͕ ĂŶĚ ƚŚĞ ĂƉƉƌŽƉƌŝĂƚĞ ƌĞŐƵůĂƚŽƌLJ͕ ŵĂƌŬĞƚ͕ ŝŶǀĞƐƚŵĞŶƚ͕ ĂŶĚ ŝŶĐĞŶƚŝǀĞ ƐƚƌƵĐƚƵƌĞƐ͘ dŽ ĞdžƉůŽƌĞ ŚŽǁ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ ĐĂŶ ĐŽŶƚƌŝďƵƚĞ ƚŽ h͘ ͘ ĞĨĨŽƌƚƐ ƚŽ ĂĚĚƌĞƐƐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͕ K ĐŽŶƐƚƌƵĐƚĞĚ ƐĞǀĞƌĂů ŝůůƵƐƚƌĂƚŝǀĞ ƐĐĞŶĂƌŝŽƐ ĂƐ ƉĂƌƚ ŽĨ ƚŚĞ ĂŶĂůLJƐŝƐ ĐŽŶĚƵĐƚĞĚ ĨŽƌ ƚŚĞ Y Z͘ dŚĞ ƐĐĞŶĂƌŝŽƐ ƉƌĞƐĞŶƚĞĚ ŚĞƌĞ ĂƌĞ ŶŽƚ ŝŶƚĞŶĚĞĚ ƚŽ ďĞ ĨŽƌĞĐĂƐƚƐ͘ ZĂƚŚĞƌ͕ ƚŚĞLJ ƌĞǀĞĂů ƉŽƐƐŝďůĞ ŝŵƉůŝĐĂƚŝŽŶƐ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ƐƵƉƉůLJ͕ ĚĞŵĂŶĚ͕ ĂŶĚ ' ' ĞŵŝƐƐŝŽŶƐ ĨŽƌ Ă ƌĞĂƐŽŶĂďůĞ ƌĂŶŐĞ ŽĨ ĞĐŽŶŽŵŝĐ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ĂƐƐƵŵƉƚŝŽŶƐ͘ dŚŝƐ ĂŶĂůLJƐŝƐ ƵƐĞĚ W ͲE D ͕ŝŝ ĂŶ ŝŶƚĞŐƌĂƚĞĚ ĞŶĞƌŐLJ ƐLJƐƚĞŵ ŵŽĚĞů͕ ƚŽ ĞdžƉůŽƌĞ ŚŽǁ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŵĂLJ ĞǀŽůǀĞ ĂŶĚ ĂůƐŽ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨƵƚƵƌĞ ĐŽŵƉŽƐŝƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƐĞĐƚŽƌ͕ ďŽƚŚ ĨƌŽŵ ƚŚĞ ƉĞƌƐƉĞĐƚŝǀĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ŝŶƐƚĂůůĞĚ ĐĂƉĂĐŝƚLJ͘ ƐƵŵŵĂƌLJ ŽĨ ƚŚĞ ĂŶĂůLJƐŝƐ ĐĂƐĞƐ ŝƐ ĨŽƵŶĚ ŝŶ dĂďůĞ ϯͲϯ͘ ŝŝ dŚĞ ǀĞƌƐŝŽŶ ŽĨ E D ƵƐĞĚ ĨŽƌ ƚŚĞ W ĂƐĞ ĂƐĞ ŚĂƐ ďĞĞŶ ƌƵŶ ďLJ KŶ ŽĐĂƚŝŽŶ͕ ŶĐ͕͘ ǁŝƚŚ ŝŶƉƵƚ ĂƐƐƵŵƉƚŝŽŶƐ ĚĞƚĞƌŵŝŶĞĚ ďLJ DOE’s EPSA This analysis was commissioned by EPSA and uses a version of NEMS that differs from the one used by the Energy ŶĨŽƌŵĂƚŝŽŶ ĚŵŝŶŝƐƚƌĂƚŝŽŶ͘ dŚĞ ŵŽĚĞů ŝƐ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ W ͲE D ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-43 Chapter III Building a Clean Electricity Future Table 3-3 Summary of DOE QER Analysis Cases using EPSA-NEMS249 250 Case Description Base Case Based on the “Annual Energy Outlook 2015” High Oil and Gas Resource Case with 1 updated cost and performance estimates for CCUS solar and wind and 2 adjustments to incorporate all existing U S policies that were final at the time of this analysis the most recent of which were the CPP and the December 2015 extension of the Federal Renewable PTC and ITC jj CCUS Incentives Analysis A variation of the Base Case where the DOE RDD D program goals for CCUS technologies are achieved Two potential CCUS incentives are considered   CCUS incentives in the Administration’s fiscal year 2017 budget proposal including a refundable sequestration tax credit of $10 metric ton CO 2 for EOR storage and $50 metric ton CO2 for saline storage and a refundable 30 percent ITC for carbon capture and storage equipment and infrastructure A hypothetical revision of the Section 45Q sequestration tax creditskk to provide a credit of $35 metric ton CO2 for EOR storage and $50 metric ton CO2 for saline storage Advanced Technology Current DOE energy program goals including cost performance and deployment goals overlaid on top of the Base Case Stretch Technology More ambitious RDD D program goals including cost and performance goals overlaid on top of the Advanced Technology Case based on an assumption of additional RDD D such as what could be enabled by Mission Innovation which will be discussed in Section 3 3 7 Carbon Price CP 10 As a proxy for additional policy action an initial carbon price of $10 metric ton of CO2 starting in 2017 and rising at 5 percent per year in real dollars was overlaid on top of the Base Case Advanced Technology Case and Stretch Technology Case Side Cases The Base Advanced Technology and Carbon Price CP 10 Cases were also modeled using the “Annual Energy Outlook 2015” Reference case assumptions instead of the High Oil and Gas Resource assumptions—the “Annual Energy Outlook” Reference case has lower resources higher natural gas and oil prices All other inputs explained above stayed the same Table 3-3 summarizes the technology and policy assumptions underlying several illustrative analysis cases that DOE constructed to explore how the electric power sector can contribute to U S mitigation efforts for climate change dŚĞ ƌĞƐƵůƚŝŶŐ ƌĂŶŐĞ ŝŶ ƚŚĞ ƉƌŽũĞĐƚĞĚ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ĨŽƌ Ă ƐĞůĞĐƚĞĚ ƐĞƚ ŽĨ ĐĂƐĞƐ ŝƐ ƐŚŽǁŶ ŝŶ dĂďůĞ ϯͲϰ͘ dŚĞƐĞ ƉƌŽũĞĐƚŝŽŶƐ ƌĞĨůĞĐƚ ŽŶůLJ ŽŶĞ ƉŽƐƐŝďůĞ ĨƵƚƵƌĞ ĨŽƌ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž͘ dŚĞ ĨƵůů ƌĂŶŐĞ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĐŽƵůĚ ďĞ ĚĞƉůŽLJĞĚ ŝŶ Ă ĨƵƚƵƌĞ ŐĞŶĞƌĂƚŝŽŶ ƉŽƌƚĨŽůŝŽ ŝƐ Ɛƚŝůů ƵŶŬŶŽǁŶ͘ ŽǁĞǀĞƌ͕ ďŽƚŚ ƚŚĞ ĚǀĂŶĐĞĚ dĞĐŚŶŽůŽŐLJ ĂŶĚ ƚƌĞƚĐŚ dĞĐŚŶŽůŽŐLJ ĂƐĞƐ ƐĞĞ ĂŶ ŝŶĐƌĞĂƐĞ ŝŶ ƚŚĞ ŵĂƌŬĞƚ ƐŚĂƌĞ ŽĨ ŵĂŶLJ ůŽǁͲ ĂŶĚ njĞƌŽͲĐĂƌďŽŶ ŐĞŶĞƌĂƚŝŽŶ ƐŽƵƌĐĞƐ͕ ƉĂƌƚŝĐƵůĂƌůLJ ǁŚĞŶ ĂĚĚŝƚŝŽŶĂů ƉŽůŝĐŝĞƐ͕ ƐƵĐŚ ĂƐ Ă ĐĂƌďŽŶ ƉƌŝĐĞ͕ ĂƌĞ ĂƉƉůŝĞĚ ; ŝŐƵƌĞ ϯͲϭϴͿ͘ ũũ dŚĞ ŽŶƐŽůŝĚĂƚĞĚ ƉƉƌŽƉƌŝĂƚŝŽŶƐ Đƚ ŽĨ ϮϬϭϲ͕ ƐŝŐŶĞĚ ŝŶƚŽ ůĂǁ ŝŶ ĞĐĞŵďĞƌ ϮϬϭϱ͕ ĞdžƚĞŶĚĞĚ ƚŚĞ ĞĚĞƌĂů Wd ĨŽƌ ǁŝŶĚ ĨĂĐŝůŝƚŝĞƐ ƚŚĂƚ ĐŽŵŵĞŶĐĞ ĐŽŶƐƚƌƵĐƚŝŽŶ ďĞĨŽƌĞ ϮϬϮϬ͕ ĂůƚŚŽƵŐŚ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚĞ Wd ǁŝůů ďĞ ƉŚĂƐĞĚ ĚŽǁŶ ĨŽƌ ǁŝŶĚ ƉƌŽũĞĐƚƐ ĐŽŵŵĞŶĐŝŶŐ ĐŽŶƐƚƌƵĐƚŝŽŶ ĂĨƚĞƌ ĞĐĞŵďĞƌ ϯϭ͕ ϮϬϭϲ͘ dŚĞ Wd ĨŽƌ Ăůů ŽƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ ĞdžƉŝƌĞĚ Ăƚ ƚŚĞ ĞŶĚ ŽĨ ϮϬϭϲ͘ dŚĞ ŽŶƐŽůŝĚĂƚĞĚ ƉƉƌŽƉƌŝĂƚŝŽŶƐ Đƚ ŽĨ ϮϬϭϲ ĂůƐŽ ĞdžƚĞŶĚĞĚ ƚŚĞ ĨƵůů ĞĚĞƌĂů d ĨŽƌ ƐŽůĂƌ ĨĂĐŝůŝƚŝĞƐ ƚŚĂƚ ĐŽŵŵĞŶĐĞ ĐŽŶƐƚƌƵĐƚŝŽŶ ďĞĨŽƌĞ ϮϬϮϬ͕ ĂĨƚĞƌ ǁŚŝĐŚ ƚŚĞ ǀĂůƵĞ ŽĨ ƚŚĞ d ǁŝůů ďĞ ƉŚĂƐĞĚ ĚŽǁŶ ƚŽ ϭϬ ƉĞƌĐĞŶƚ ŝŶ ϮϬϮϮ ĂŶĚ Ăůů LJĞĂƌƐ ƚŚĞƌĞĂĨƚĞƌ͘ dŚĞ ĨƵůů d ǁĂƐ ĂůƐŽ ĂǀĂŝůĂďůĞ ĨŽƌ ůĂƌŐĞ ǁŝŶĚ ĨĂĐŝůŝƚŝĞƐ ƚŚƌŽƵŐŚ ϮϬϭϲ͕ ĂĨƚĞƌ ǁŚŝĐŚ ƚŚĞ ǀĂůƵĞ ǁĂƐ ƉŚĂƐĞĚ ĚŽǁŶ ĨŽƌ ƉƌŽũĞĐƚƐ ĐŽŵŵĞŶĐŝŶŐ ĐŽŶƐƚƌƵĐƚŝŽŶ ďĞĨŽƌĞ ĞĐĞŵďĞƌ ϯϭ͕ ϮϬϭϵ͘ dŚĞ d ĨŽƌ Ăůů ŽƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ ĞdžƉŝƌĞĚ Ăƚ ƚŚĞ ĞŶĚ ŽĨ ϮϬϭϲ͕ ǁŝƚŚ ƚŚĞ ĞdžĐĞƉƚŝŽŶ ŽĨ ŐĞŽƚŚĞƌŵĂů ĞůĞĐƚƌŝĐ ĨĂĐŝůŝƚŝĞƐ͕ ǁŚŝĐŚ ƌĞĐĞŝǀĞ Ă ϭϬ ƉĞƌĐĞŶƚ d ŝŶĚĞĨŝŶŝƚĞůLJ͘ ŬŬ Ϯϲ h͘ ͘ ͘ Α ϰϱY ƉƌŽǀŝĚĞƐ Ă ĐƌĞĚŝƚ ĨŽƌ K ƐĞƋƵĞƐƚƌĂƚŝŽŶ͘ Ϯ 3-44 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-18 U S Energy CO2 Emissions 2005–2040 top and U S Electricity-Sector CO2 Emissions 2005–2040 bottom 251 Top Projections of energy CO2 emissions are shown for several cases along with the corresponding percent decrease in CO2 emissions relative to a 2005 baseline These results indicate that successful clean energy RDD D can drive significant emissions reductions beyond those projected under the EPSA Base Case which incorporates all existing policies but assumes no new policies Current levels of RDD D investment in clean energy technologies Advanced Technology can double the projected emissions reductions by 2040 while more ambitious advancements in clean energy technologies Stretch Technology could triple the emissions reductions by 2040 These results also indicate that a combination Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-45 Chapter III Building a Clean Electricity Future of policy “pull” and technology “push” can achieve much greater reductions than policy or technology alone Additional technology and or policies beyond what was modeled are needed to obtain energy CO 2 emissions reductions that are consistent with goals of deep decarbonization Bottom Projections of CO2 emissions associated with electricity generation are shown for several cases The sharp reductions projected in the near future can be largely attributed to a cleaner electricity generation mix as more high-carbon generation is offset by a variety of low- and zero-carbon generation sources Reductions in electricity demand primarily from more efficient building shells and equipment and faster adoption at lower cost of more efficient building technologies also play a major role in driving down electricity-sector CO2 emissions throughout the analysis Altogether these analysis cases show that successful clean energy RDD D can drive emissions reductions beyond what is achieved with current policies measures and projections for technology advances In addition there are multiple pathways to achieving even greater reductions in CO2 emissions associated with electricity generation through additional technology and or policies K ƉĞƌĨŽƌŵĞĚ ĂŶ ĂŶĂůLJƐŝƐ ƚŽ ĞdžƉůŽƌĞ ƚŚĞ ŝŵƉĂĐƚ ŽĨ Z Θ ĂŶĚ ƚĂdž ŝŶĐĞŶƚŝǀĞƐ ŽŶ ƚŚĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ h ƚĞĐŚŶŽůŽŐŝĞƐ ;dĂďůĞ ϯͲϯͿ͘ϮϱϮ The analysis considered tax incentives proposed in the Administration’s ĨŝƐĐĂů LJĞĂƌ ϮϬϭϳ ďƵĚŐĞƚ͕ ĂƐ ǁĞůů ĂƐ Ă ŚLJƉŽƚŚĞƚŝĐĂů ƌĞǀŝƐŝŽŶ ŽĨ ƚŚĞ ĞĐƚŝŽŶ ϰϱY ƐĞƋƵĞƐƚƌĂƚŝŽŶ ƚĂdž ĐƌĞĚŝƚƐ͘ dŚĞ ĂŶĂůLJƐŝƐ ĨŽƵŶĚ ƚŚĂƚ ĞĚĞƌĂů Z Θ ĐŽŵďŝŶĞĚ ǁŝƚŚ ƚĂdž ŝŶĐĞŶƚŝǀĞƐ ĐĂŶ ŵĂŬĞ h Ă ǀŝĂďůĞ ŽƉƚŝŽŶ͕ ĂŶĚ ƚŚĂƚ h ĐĂŶ ƉůĂLJ ĂŶ ŝŵƉŽƌƚĂŶƚ ƌŽůĞ ŝŶ ŵĞĞƚŝŶŐ Ă ĐĂƌďŽŶ ƉŽůŝĐLJ͘ K ΖƐ ĂŶĂůLJƐŝƐ ĨŽƵŶĚ ƚŚĂƚ h ŝŶĐĞŶƚŝǀĞƐ ĂŶĚ Z Θ ĐŽƵůĚ ƌĞƐƵůƚ ŝŶ ƐŝŐŶŝĨŝĐĂŶƚ ĚĞƉůŽLJŵĞŶƚ ŽĨ h ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ͘ hŶĚĞƌ ƚŚĞ ƐĐĞŶĂƌŝŽ ĐŽŵďŝŶŝŶŐ ƚĂdž ŝŶĐĞŶƚŝǀĞƐ ǁŝƚŚ ƐƵĐĐĞƐƐĨƵů Z Θ “CCUS Incentives Analysis” ͕ ĐŽĂů ĂŶĚ ŶĂƚƵƌĂů ŐĂƐ ŐĞŶĞƌĂƚŝŶŐ ĐĂƉĂĐŝƚLJ ǁŝƚŚ h ĂĐĐŽƵŶƚĞĚ ĨŽƌ ĂŶ ŝŶĐƌĞŵĞŶƚĂů ϱ ƚŽ ϳ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŐĞŶĞƌĂƚŝŽŶ ŝŶ ϮϬϰϬ ;dĂďůĞ ϯͲϰͿ͘ Žƌ ĐŽŵƉĂƌŝƐŽŶ͕ ŝŶ ϮϬϭϱ͕ ŚLJĚƌŽƉŽǁĞƌ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϲ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŐĞŶĞƌĂƚŝŽŶ͕ ĂŶĚ Ăůů ŽƚŚĞƌ ƌĞŶĞǁĂďůĞƐ ƚŽƚĂůĞĚ ϳ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ŐĞŶĞƌĂƚŝŽŶ͘ Table 3-4 Percent of Utility-Scale Generation by Fuel Source 2015 and Projected to 2040 for Selected Cases253 254 2015 a 2040 Fuel Type Base Case Base Case Advanced Technology Carbon Price CP 10 CCUS Incentives Analysis Coal without CCUS 39% 18%–28% 23%–31% 4%–14% 19% Coal with CCUS 0% 1% 1% 1% 3%–4%a Natural Gas without CCUS 27% 21%–42% 11%–28% 13%–31% 37%–38% Natural Gas with CCUS 0% 0% 0% 1%–2% 2%–3%a Conventional Hydropower 7% 6%–7% 7% 7%–8% 6% Non-Hydro Renewables 7% 17%–25% 26%–30% 36%–38% 14% Nuclear Power 20% 17%–19% 15%–20% 21%–28% 17% Incremental to generation without CCUS The range in percentages shown in 2040 in the Base Case and Advanced Technology Case highlights the significant impact that future natural gas prices will have on the modeled U S electric power generation mix Similarly the incentives included in the CCUS Incentives Analysis illustrate the potential to increase penetration of CCUS technologies with additional incentives ƐŝŐŶŝĨŝĐĂŶƚ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĐůĞĂŶ ĞŶĞƌŐLJ Z Θ ͕ ĐŽƵƉůĞĚ ǁŝƚŚ ĂŶ ĞĐŽŶŽŵLJͲǁŝĚĞ ƉŽůŝĐLJ͕ ǁŽƵůĚ ĂĐĐĞůĞƌĂƚĞ ŝŶŶŽǀĂƚŝŽŶ ĂŶĚ ƚĞĐŚŶŽůŽŐLJ ĚĞƉůŽLJŵĞŶƚ ĂŶĚ ƌĞĚƵĐĞ KϮ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƚŚĞ ƉŽǁĞƌ ƐĞĐƚŽƌ ďLJ ϴϴ ƉĞƌĐĞŶƚ ŝŶ ϮϬϰϬ͕ ƌĞůĂƚŝǀĞ ƚŽ ϮϬϬϱ ůĞǀĞůƐ͘Ϯϱϱ dŚĞ ůĞǀĞů ŽĨ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ƚŚĞ ƚƌĞƚĐŚ dĞĐŚŶŽůŽŐLJ ƐĐĞŶĂƌŝŽ 3-46 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƌĞĨůĞĐƚƐ Ă ƉŽƌƚĨŽůŝŽ ĂƉƉƌŽĂĐŚ ƚŽ Z Θ ĂŶĚ ŝƐ ŽŶůLJ ŝůůƵƐƚƌĂƚŝǀĞ͕ ĂƐ ƚĞĐŚŶŽůŽŐLJ ƉĂƚŚǁĂLJƐ ĂƌĞ ŚŝŐŚůLJ ƵŶĐĞƌƚĂŝŶ͖ ƵŶĨŽƌĞƐĞĞŶ ƌĞƐĞĂƌĐŚ ďƌĞĂŬƚŚƌŽƵŐŚƐ ĂƌĞ ǀĞƌLJ ĚŝĨĨŝĐƵůƚ ƚŽ ĂŶƚŝĐŝƉĂƚĞ ŝŶ ŵŽĚĞůŝŶŐ ĂŶĂůLJƐŝƐ͖ ĂŶĚ ŐĞŶĞƌĂƚŝŽŶ ďƌĞĂŬŽƵƚƐ ĂƌĞ ƚŽŽ ƵŶĐĞƌƚĂŝŶ ƚŽ ƉƌĞƐĞŶƚ ŚĞƌĞ͘ dŚŝƐ ƵŶĐĞƌƚĂŝŶƚLJ͕ ĐŽƵƉůĞĚ ǁŝƚŚ ƚŚĞ ǀĂůƵĞ ŽĨ Z Θ ŝŶ ŵĞĞƚŝŶŐ ĚĞĞƉ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ͕ ƵŶĚĞƌƐĐŽƌĞƐ ƚŚĞ ŶĞĞĚ ĨŽƌ Ă ďƌŽĂĚ͕ ĚŝǀĞƌƐĞ͕ ĂŶĚ ƌŽďƵƐƚ ƌĞƐĞĂƌĐŚ ƉŽƌƚĨŽůŝŽ͘ ŶŽƚŚĞƌ ůĂƌŐĞ ƐŽƵƌĐĞ ŽĨ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ƚŚĞ K ĂŶĂůLJƐŝƐ ŝƐ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ƌĞĚƵĐƚŝŽŶƐ͕ ǁŚŝĐŚ ĐĂŶ ďĞ ĂĐŚŝĞǀĞĚ ďLJ ƚĞĐŚŶŽůŽŐLJ ĐŽƐƚ ĂŶĚ ƉĞƌĨŽƌŵĂŶĐĞ ŝŵƉƌŽǀĞŵĞŶƚƐ ƚŚĂƚ ŝŶĐƌĞĂƐĞ ĞůĞĐƚƌŝĐŝƚLJ ĞŶĚͲƵƐĞ ĞĨĨŝĐŝĞŶĐLJ͕ ĂŶĚ ƉĂŝƌŝŶŐ ƚŚĞƐĞ ŝŵƉƌŽǀĞŵĞŶƚƐ ǁŝƚŚ Ă ŵŽĚĞƐƚ ĐĂƌďŽŶ ƉƌŝĐĞ͘ dŚĞ ŵŽĚĞůŝŶŐ ĂŶĂůLJƐŝƐ ƐƵŐŐĞƐƚƐ ƚŚĂƚ͕ ǁŝƚŚ ƚŚĞƐĞ ŝŶǀĞƐƚŵĞŶƚƐ ĂŶĚ ƐƵƉƉŽƌƚŝǀĞ ƉŽůŝĐŝĞƐ͕ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ǁŽƵůĚ ŝŶĐƌĞĂƐĞ ďLJ ŽŶůLJ ϱ ƉĞƌĐĞŶƚ ŽǀĞƌ ƚŚĞ ŶĞdžƚ Ϯϱ LJĞĂƌƐ ĐŽŵƉĂƌĞĚ ƚŽ Ϯϭ ƉĞƌĐĞŶƚ ǁŝƚŚŽƵƚ ƚŚĞŵ͘ Figure 3-19 Total Direct and Indirect CO2 Emissions by End-Use Sector 2005–2040256 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-47 Chapter III Building a Clean Electricity Future This figure shows the projected impact of technology and policy assumptions on total CO2 emissions from the industrial top buildings middle and transportation bottom sectors including emissions associated with both 1 direct fuel use direct emissions and 2 electricity generation allocated to end-use sectors based on their electricity use indirect emissions Successful clean energy RDD D is projected to reduce end-use CO2 emissions by accelerating the transition towards a cleaner electricity generation mix and the adoption of cleaner and more efficient technologies Both efficiency improvements especially in energyintensive industries and additional policy can drive significant emissions reductions in industry and 3-48 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 buildings Technology advances can have a significant impact in the transportation sector but the modest carbon price proxy does not dramatically reduce transportation emissions Ŷ ƚŚĞ ƚƌĞƚĐŚ dĞĐŚŶŽůŽŐLJ ĂƐĞ͕ ĞǀĞŶ ŐƌĞĂƚĞƌ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ƐƵĐĐĞƐƐĨƵů ĐůĞĂŶ ĞŶĞƌŐLJ Z Θ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ƌĞƐƵůƚ ŝŶ ŵŽƌĞ ƐŝŐŶŝĨŝĐĂŶƚ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ͕ ĂŶĚ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝƐ ƉƌŽũĞĐƚĞĚ ƚŽ ĂĐƚƵĂůůLJ decrease ďLJ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϭ ƉĞƌĐĞŶƚ ŽǀĞƌ ƚŚĞ ŶĞdžƚ Ϯϱ LJĞĂƌƐ͘ Ŷ ďŽƚŚ ƚŚĞ ĚǀĂŶĐĞĚ dĞĐŚŶŽůŽŐLJ ĂŶĚ ƚƌĞƚĐŚ dĞĐŚŶŽůŽŐLJ ĂƐĞƐ͕ ƚŚĞƌĞ ŝƐ Ă ĚĞĐƌĞĂƐĞ ŝŶ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶ ďŽƚŚ ƚŚĞ ŝŶĚƵƐƚƌŝĂů ĂŶĚ ďƵŝůĚŝŶŐƐ ƐĞĐƚŽƌƐ͕ ƉƌŝŵĂƌŝůLJ ĚƵĞ ƚŽ ƚĞĐŚŶŽůŽŐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ƚŚĂƚ ƌĞƐƵůƚ ŝŶ ŝŶĐƌĞĂƐĞĚ ĞĨĨŝĐŝĞŶĐLJ ; ŝŐƵƌĞ ϯͲϭϵͿ͘ ŽŶǀĞƌƐĞůLJ͕ ŝŶ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ͕ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶĐƌĞĂƐĞƐ ĂƐ ƚŚĞ ŵĂƌŬĞƚ ƐƚĂƌƚƐ ƚŽ ĂĚŽƉƚ ŵŽƌĞ ďĂƚƚĞƌLJ ĞůĞĐƚƌŝĐ ǀĞŚŝĐůĞƐ͖ ŚŽǁĞǀĞƌ͕ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞ ŝŶ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ ŝƐ Ɛƚŝůů ǀĞƌLJ ƐŵĂůů ĐŽŵƉĂƌĞĚ ƚŽ ŽƚŚĞƌ ƐĞĐƚŽƌƐ͘ Ŷ ϮϬϰϬ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ŽŶůLJ ĂĐĐŽƵŶƚƐ ĨŽƌ Ϯ ƉĞƌĐĞŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶ ƚŚĞ ĚǀĂŶĐĞĚ dĞĐŚŶŽůŽŐLJ ĂƐĞ ĂŶĚ ϲ ƉĞƌĐĞŶƚ ŝŶ ƚŚĞ ƚƌĞƚĐŚ dĞĐŚŶŽůŽŐLJ ĂƐĞ ; ŝŐƵƌĞ ϯͲϮϬͿ͘ Figure 3-20 Electricity Demand by the Transportation Sector 2005–2040257 The DOE scenarios all project a small but growing shift towards electrification in the transportation sector In the Advanced Technology and Stretch Technology Cases advances in RDD D lead to increased market penetration of alternative vehicles including battery electric and fuel cell light-duty vehicles In 2040 battery electric vehicles and hydrogen fuel cell vehicles comprise 18 percent of new light-duty vehicle sales in the Advanced Technology Case and 40 percent of new light-duty vehicle sales in the Stretch Technology Case dŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ďLJ ƐƉĞĐŝĨŝĐ ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ ǁĂƐ ĂůƐŽ ĂŶĂůLJnjĞĚ͘ dŽƚĂů KϮ ĞŵŝƐƐŝŽŶƐ ĂĐĐŽƵŶƚ ĨŽƌ ďŽƚŚ ;ϭͿ ƚŚĞ KϮ ĞŵŝƐƐŝŽŶƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ each sector’s ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ;ϮͿ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-49 Chapter III Building a Clean Electricity Future ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ĚŝƌĞĐƚ ĨƵĞů ƵƐĞ ;Ğ͘Ő͕͘ ŝŶĚƵƐƚƌŝĂů ƉƌŽĐĞƐƐ ĞŵŝƐƐŝŽŶƐ ĂŶĚ ǀĞŚŝĐůĞ ƚĂŝůƉŝƉĞ ĞŵŝƐƐŝŽŶƐͿ͘ůů dĞĐŚŶŽůŽŐLJ ĂĚǀĂŶĐĞƐ ĂŶĚͬŽƌ ĂĚĚŝƚŝŽŶĂů ƉŽůŝĐLJ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ĚƌŝǀĞ ĚƌĂŵĂƚŝĐ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ĨƌŽŵ ƚŚĞ ďƵŝůĚŝŶŐƐ ƐĞĐƚŽƌ ĚƵĞ ƚŽ Ă ĐůĞĂŶĞƌ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ĂŶĚ ƌĞĚƵĐĞĚ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ƚŚƌŽƵŐŚ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ďƵŝůĚŝŶŐ ƐŚĞůůƐ ĂŶĚ ĞƋƵŝƉŵĞŶƚ͕ ĂƐ ǁĞůů ĂƐ ĨĂƐƚĞƌ ĂĚŽƉƚŝŽŶ Ăƚ ůŽǁĞƌ ĐŽƐƚ ŽĨ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŝŵŝůĂƌůLJ͕ ƐƵĐĐĞƐƐĨƵů ĐůĞĂŶ ĞŶĞƌŐLJ Z Θ ĂŶĚͬŽƌ ĂĚĚŝƚŝŽŶĂů ƉŽůŝĐLJ ĚƌŝǀĞ ƌĞĚƵĐƚŝŽŶƐ ŝŶ ŝŶĚƵƐƚƌŝĂůͲƐĞĐƚŽƌ KϮ ĞŵŝƐƐŝŽŶƐ ƚŚƌŽƵŐŚ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ;ĞƐƉĞĐŝĂůůLJ ŝŶ ĞŶĞƌŐLJͲŝŶƚĞŶƐŝǀĞ ŝŶĚƵƐƚƌŝĞƐͿ͖ ĂĚĚŝƚŝŽŶĂů ƉŽůŝĐLJ ŝƐ ĂůƐŽ ƉƌŽũĞĐƚĞĚ ƚŽ ŚĂǀĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚ͘ ŝŶĂůůLJ͕ ŝŶ ƚŚĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ƐĞĐƚŽƌ͕ ǁŚĞƌĞ ƵƐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝƐ ĐƵƌƌĞŶƚůLJ ǀĞƌLJ ůŝŵŝƚĞĚ͕ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĞdžŝƐƚ ĨŽƌ ƐŝŐŶŝĨŝĐĂŶƚ ĞŵŝƐƐŝŽŶƐ ƌĞĚƵĐƚŝŽŶƐ ƚŚƌŽƵŐŚ ĞĨĨŝĐŝĞŶĐLJ ŝŵƉƌŽǀĞŵĞŶƚƐ ĂŶĚ ƚŚĞ ƐƵĐĐĞƐƐĨƵů ĚĞƉůŽLJŵĞŶƚ ŽĨ ĞůĞĐƚƌŝĐ ĂŶĚ ŚLJĚƌŽŐĞŶ ĨƵĞů ĐĞůů ǀĞŚŝĐůĞƐ͕ ďƵƚ ƚŚĞ ĂƉƉůŝĐĂƚŝŽŶ ŽĨ Ă ŵŽĚĞƐƚ ĐĂƌďŽŶ ƉƌŝĐĞ ŚĂƐ ŽŶůLJ Ă ŵŝŶŽƌ ĂĚĚŝƚŝŽŶĂů ŝŵƉĂĐƚ ŽŶ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ ĞŵŝƐƐŝŽŶƐ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƐŚŽǁŝŶŐ ƚŚĞ ǀĂůƵĞ ŽĨ ƐLJŶĞƌŐŝƐƚŝĐ ƌĞƐĞĂƌĐŚ ŝŶǀĞƐƚŵĞŶƚƐ ĂŶĚ ƉŽůŝĐLJ͕ ƚŚĞ ĂŶĂůLJƐŝƐ ƐŚŽǁƐ ƚŚĂƚ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŝƐ ŵŽƐƚ ƐĞŶƐŝƚŝǀĞ ƚŽ Ă ĐĂƌďŽŶ ƉƌŝĐĞ ƉŽůŝĐLJ͕ ƉĂƌƚůLJ ďĞĐĂƵƐĞ ŝƚ ĂůƌĞĂĚLJ ŚĂƐ Ă ǀĂƌŝĞƚLJ ŽĨ ƌĞůĂƚŝǀĞůLJ ůŽǁͲĐŽƐƚ ƐƵďƐƚŝƚƵƚŝŽŶ ŽƉƚŝŽŶƐ ĂǀĂŝůĂďůĞ͘ ŝŶĂůůLJ͕ ƚŚŝƐ ĂŶĂůLJƐŝƐ ƐƵƉƉŽƌƚƐ ƚŚĞ ĨŝŶĚŝŶŐ ƚŚĂƚ ĂƐ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ ďĞĐŽŵĞƐ ŝŶĐƌĞĂƐŝŶŐůLJ ĚĞĐĂƌďŽŶŝnjĞĚ͕ ĞůĞĐƚƌŝĨŝĐĂƚŝŽŶ ŽĨ ĞŶĚ ƵƐĞƐ ĐĂŶ ƌĞƐƵůƚ ŝŶ ĨƵƌƚŚĞƌ ƌĞĚƵĐƚŝŽŶƐ ŽĨ ĞŶĞƌŐLJ KϮ ĞŵŝƐƐŝŽŶƐ͘ 3 3 6 Need for Accelerated Innovation in the Electricity-Sector ǀĞŶ ǁŝƚŚ ŶŽƚĂďůĞ ŝŶĐƌĞĂƐĞƐ ŝŶ ĐůĞĂŶ ƚĞĐŚŶŽůŽŐLJ ĚĞƉůŽLJŵĞŶƚ ŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŝŶ ƌĞĐĞŶƚ LJĞĂƌƐ͕ ƚŚĞ ƐĐĂůĞͲƵƉ ĂŶĚ ƐƉĞĞĚ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJmm ŝŶŶŽǀĂƚŝŽŶ ŶĞĞĚ ƚŽ ĂĐĐĞůĞƌĂƚĞ͘ Ɛ ŶŽƚĞĚ͕ ŝŶĐƌĞĂƐŝŶŐ Z Θ ŝŶ ĐŽŶũƵŶĐƚŝŽŶ ǁŝƚŚ ĂŶ ĞĐŽŶŽŵLJͲǁŝĚĞ ƉŽůŝĐLJ ĐĂŶ ŚĞůƉ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŵĞĞƚ ŝƚƐ E ͘ dŚĞƌĞ ĂƌĞ ĂůƐŽ ŵƵůƚŝƉůĞ ĚŝƌĞĐƚ ĂŶĚ ŝŶĚŝƌĞĐƚ ďĞŶĞĨŝƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ͘ ŶŶŽǀĂƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ ĚŝƌĞĐƚůLJ ĞdžƉĂŶĚ ƚŚĞ ƉŝƉĞůŝŶĞ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƌĞĚƵĐĞ ƚĞĐŚŶŽůŽŐLJ ĐŽƐƚƐ͕ ĂŶĚ ŵŝƚŝŐĂƚĞ ƚŚĞ ƌŝƐŬƐ ŽĨ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ Žƌ ƐLJƐƚĞŵƐ͘ dŚĞƐĞ ďĞŶĞĨŝƚƐ͕ ŝŶ ƚƵƌŶ͕ ƌĞĚƵĐĞ ƚŚĞ ĐŽƐƚ ŽĨ ƉŽůŝĐŝĞƐ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐϮϱϴ ĂŶĚ ĂůůŽǁ ĚĞĐŝƐŝŽŶ ŵĂŬĞƌƐ ŝŶ ďŽƚŚ ŐŽǀĞƌŶŵĞŶƚ ĂŶĚ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ ƚŽ ĐŽŶƐŝĚĞƌ ŽƉƚŝŽŶƐ ƚŚĂƚ ǁŽƵůĚ ŽƚŚĞƌǁŝƐĞ ŶŽƚ ďĞ ĂǀĂŝůĂďůĞ͘ ŶĐƌĞĂƐĞĚ ĚĞƉůŽLJŵĞŶƚ ůĞǀĞůƐ ĚƵĞ ƚŽ ƉŽůŝĐŝĞƐ ĂŶĚ ŝŶĐĞŶƚŝǀĞƐ ĂůƐŽ ŝŶĐƌĞĂƐĞ ĞĐŽŶŽŵŝĞƐ ŽĨ ƐĐĂůĞ ĂŶĚ ĨƵƌƚŚĞƌ ƌĞĚƵĐĞ ŵĂŶƵĨĂĐƚƵƌŝŶŐ ĐŽƐƚƐ ĂŶĚ ƚĞĐŚŶŝĐĂů ƌŝƐŬƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ŝŶŶŽǀĂƚŝŽŶ ŝŶǀĞƐƚŵĞŶƚƐ ĐĂŶ ƐĞƌǀĞ ƚŽ ƚƌĂŝŶ ƚŚĞ ŶĞdžƚ ŐĞŶĞƌĂƚŝŽŶ ŽĨ ƐĐŝĞŶƚŝƐƚƐ͕ ĞŶŐŝŶĞĞƌƐ͕ ĂŶĚ ĞŶƚƌĞƉƌĞŶĞƵƌƐ ĨŽƌ ǁŽƌŬ ŝŶ ƚŚĞ ƉƌŝǀĂƚĞ ƐĞĐƚŽƌ Žƌ Ăƚ ƵŶŝǀĞƌƐŝƚŝĞƐ Žƌ ŽƚŚĞƌ ƌĞƐĞĂƌĐŚ ŝŶƐƚŝƚƵƚŝŽŶƐ͘259 ŽǁĞǀĞƌ͕ ĐŽŵƉĂƌŝƐŽŶƐ ǁŝƚŚ ŽƚŚĞƌ ŝŶŶŽǀĂƚŝŽŶͲĚƌŝǀĞŶ ƐĞĐƚŽƌƐ ĂŶĚ ŽƚŚĞƌ ĐŽƵŶƚƌŝĞƐ͕ ĚĞĐůŝŶŝŶŐ ƉƌŝǀĂƚĞͲƐĞĐƚŽƌ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ĨƵŶĚŝŶŐ͕ ĂŶĚ ŝŶĐƌĞĂƐŝŶŐ ŶĞĞĚƐ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ŝŶŶŽǀĂƚŝŽŶ Ăůů ƉŽŝŶƚ ƚŽ ĂŶ ŝŶĂĚĞƋƵĂƚĞ ůĞǀĞů ŽĨ ĐƵƌƌĞŶƚ ƐƵƉƉŽƌƚ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϮϲϬ͕ Ϯϲϭ͕ ϮϲϮ͕ Ϯϲϯ͕ Ϯϲϰ͕ Ϯϲϱ͕ Ϯϲϲ Žƌ ĞdžĂŵƉůĞ͕ ĂŶŶƵĂů ŐůŽďĂů ĐŽƌƉŽƌĂƚĞ ĂŶĚ ǀĞŶƚƵƌĞ ĐĂƉŝƚĂů ŝŶǀĞƐƚŵĞŶƚ ŝŶ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ŐƌĞǁ ĨƌŽŵ Ψϯ͘ϲ ďŝůůŝŽŶ ŝŶ ϮϬϬϰ ƚŽ Ă ƉĞĂŬ ŽĨ Ψϳ͘ϲ ďŝůůŝŽŶ ŝŶ ϮϬϭϭ͕ ďƵƚ ƚŚŝƐ ŝŶǀĞƐƚŵĞŶƚ ŚĂƐ ƐŝŶĐĞ ĨĂůůĞŶ ƚŽ Ψϱ͘ϱ–Ψϲ͘Ϭ ďŝůůŝŽŶ ŝŶ ϮϬϭϰ–ϮϬϭϱ͘ ŶŶƵĂů ŐůŽďĂů ǀĞŶƚƵƌĞ ĐĂƉŝƚĂů ĂŶĚ ƉƌŝǀĂƚĞ ĞƋƵŝƚLJ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ĞĂƌůLJͲƐƚĂŐĞ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ĨŝƌŵƐ ŚĂǀĞ ĨĂůůĞŶ ĞǀĞŶ ŵŽƌĞ ĚƌĂƐƚŝĐĂůůLJ͕ ĨƌŽŵ Ă ƉĞĂŬ ŽĨ Ψϵ͘ϵ ďŝůůŝŽŶ ŝŶ ϮϬϬϴ ƚŽ ΨϮ͘ϭ–Ψϯ͘ϰ ďŝůůŝŽŶ ŝŶ ϮϬϭϯ–ϮϬϭϱ͘Ϯϲϳ Ŷ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƐŝŵŝůĂƌ ƚƌĞŶĚƐ ƐŚŽǁ ƚŚĂƚ ĂŶŶƵĂů ǀĞŶƚƵƌĞ ĐĂƉŝƚĂů ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĨĞůů ĨƌŽŵ Ă ϮϬϬϴ ƉĞĂŬ ŽĨ ŽǀĞƌ Ψϱ ďŝůůŝŽŶ ƚŽ ĂďŽƵƚ ΨϮ ďŝůůŝŽŶ ĞĂĐŚ LJĞĂƌ ƐŝŶĐĞ ϮϬϭϯ͘ ƌŽŵ ϮϬϬϲ ƚŽ ϮϬϭϭ͕ ŽŶůLJ ϱ ƉĞƌĐĞŶƚ ŽĨ ĞĂƌůLJͲƐƚĂŐĞ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ ĨŝƌŵƐ ƌĞƚƵƌŶĞĚ ƉƌŽĨŝƚƐ ƚŽ ƚŚĞŝƌ ŝŶǀĞƐƚŽƌƐ ƚŚƌŽƵŐŚ ĂĐƋƵŝƐŝƚŝŽŶ Žƌ ĂŶ ŝŶŝƚŝĂů ƉƵďůŝĐ ŽĨĨĞƌŝŶŐ͕ ĂƐ ŽƉƉŽƐĞĚ ƚŽ ϭϴ ƉĞƌĐĞŶƚ ŽĨ ĞĂƌůLJͲƐƚĂŐĞ ƐŽĨƚǁĂƌĞ ĨŝƌŵƐ ůů ŵŝƐƐŝŽŶƐ ĨƌŽŵ ĞŶĚͲƵƐĞ ƐĞĐƚŽƌƐ ĂƌĞ ƚLJƉŝĐĂůůLJ ƌĞĨĞƌƌĞĚ ƚŽ ĂƐ ŝŶĚŝƌĞĐƚ ĞŵŝƐƐŝŽŶƐ ;ĞŵŝƐƐŝŽŶƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƵƐĞĚ ďLJ ĞĂĐŚ ƐĞĐƚŽƌͿ ĂŶĚ ĚŝƌĞĐƚ ĞŵŝƐƐŝŽŶƐ ;ĚŝƌĞĐƚ ĨƵĞůͲƵƐĞ ĞŵŝƐƐŝŽŶƐͿ͘ ŵŵ ůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĂƌĞ ĚĞĨŝŶĞĚ ĂƐ ĞŶĞƌŐLJͲƌĞůĂƚĞĚ ŚĂƌĚǁĂƌĞ͕ ƐŽĨƚǁĂƌĞ͕ ĂŶĚ ƐLJƐƚĞŵƐ ƚŚĂƚ ĂǀŽŝĚ͕ ƌĞĚƵĐĞ͕ Žƌ ƐĞƋƵĞƐƚĞƌ ' ' ĞŵŝƐƐŝŽŶƐ Žƌ ŽƚŚĞƌ Ăŝƌ ƉŽůůƵƚĂŶƚƐ͕ ŝŶĐůƵĚŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĐŽŶǀĞƌƚ͕ ĐŽŶǀĞLJ͕ Žƌ ƐƚŽƌĞ ĞŶĞƌŐLJ ƌĞƐŽƵƌĐĞƐ͖ ŝŵƉƌŽǀĞ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ͖ Žƌ ƌĞĚƵĐĞ ĞŶĞƌŐLJ ĐŽŶƐƵŵƉƚŝŽŶ͘ 3-50 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƐƚĂƌƚĞĚ ĚƵƌŝŶŐ ƚŚĞ ƐĂŵĞ ƉĞƌŝŽĚ͘Ϯϲϴ WƌŝǀĂƚĞͲƐĞĐƚŽƌ ĞŶĞƌŐLJ ĨŝƌŵƐ ĂůƐŽ ƐƉĞŶĚ ƐŝŐŶŝĨŝĐĂŶƚůLJ ůĞƐƐ ŽŶ ZΘ ĂƐ Ă ƉĞƌĐĞŶƚĂŐĞ ŽĨ ƐĂůĞƐ ƚŚĂŶ ĨŝƌŵƐ ŝŶ ŽƚŚĞƌ ŵĂũŽƌ ƚĞĐŚŶŽůŽŐLJͲĚĞƉĞŶĚĞŶƚ ƐĞĐƚŽƌƐ͕ ƐƵĐŚ ĂƐ ƉŚĂƌŵĂĐĞƵƚŝĐĂůƐ͕ ĂĞƌŽƐƉĂĐĞ ĂŶĚ ĚĞĨĞŶƐĞ͕ ĂŶĚ ĐŽŵƉƵƚĞƌƐ ĂŶĚ ĞůĞĐƚƌŽŶŝĐƐ͘Ϯϲϵ WƌŝǀĂƚĞͲƐĞĐƚŽƌ ŝŶǀĞƐƚŵĞŶƚ͕ ǁŚŝůĞ ĐƌŝƚŝĐĂů͕ ǁŝůů ŶŽƚ ůŝŬĞůLJ ďĞ ŵĂĚĞ Ăƚ Ă ƉĂĐĞ ƐƵĨĨŝĐŝĞŶƚ ƚŽ ŵĞĞƚ ŶĂƚŝŽŶĂů ŽďũĞĐƚŝǀĞƐ͘ϮϳϬ͕ Ϯϳϭ͕ ϮϳϮ͕ Ϯϳϯ ůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ ŝƐ ƐƵďũĞĐƚ ƚŽ ŵĂŶLJ ďĂƌƌŝĞƌƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ƉƌŝĐĞƐ ĚŽ ŶŽƚ ƌĞĨůĞĐƚ ĞdžƚĞƌŶĂů ďĞŶĞĨŝƚƐŶŶ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ͖ ŝŶǀĞƐƚŵĞŶƚƐ ĂƌĞ ŵĂĚĞ ŝŶ Ă ŚŝŐŚůLJ ƌĞŐƵůĂƚĞĚ ĞŶǀŝƌŽŶŵĞŶƚ͖ ĂŶĚ ƚŚĞƌĞ ĂƌĞ ŚŝŐŚ ĐĂƉŝƚĂů ĐŽƐƚƐ ĂŶĚ ůŽŶŐͲƚŝŵĞ ŚŽƌŝnjŽŶƐ ĨŽƌ Z Θ ĂŶĚ ĐĂƉŝƚĂů ƐƚŽĐŬ ƚƵƌŶŽǀĞƌ ŝŶ ĐŽŵƉĂƌŝƐŽŶ ƚŽ ŽƚŚĞƌ ƐĞĐƚŽƌƐ͕ ƐƵĐŚ ĂƐ ŝŶĨŽƌŵĂƚŝŽŶ ƚĞĐŚŶŽůŽŐLJ͘ ƵƌƌĞŶƚ ůĞǀĞůƐ ŽĨ ĞĚĞƌĂů ƐƵƉƉŽƌƚ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ĂŶĚ ŽƚŚĞƌ ĞŶĞƌŐLJͲĨŽĐƵƐĞĚ Z Θ ŶĞĞĚ ƚŽ ďĞ ƐƵďƐƚĂŶƚŝĂůůLJ ŝŶĐƌĞĂƐĞĚ͘Ϯϳϰ͕ Ϯϳϱ͕ Ϯϳϲ͕ Ϯϳϳ͕ Ϯϳϴ͕ Ϯϳϵ͕ ϮϴϬ͕ Ϯϴϭ͕ ϮϴϮ͕ Ϯϴϯ ZĞŐŝŽŶĂů ǀĂƌŝĂƚŝŽŶ ŝŶ ŝŶŶŽǀĂƚŝŽŶ ĐĂƉĂďŝůŝƚŝĞƐ͕ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŵĂƌŬĞƚƐ͕ ƉŽůŝĐŝĞƐ͕ ĂŶĚ ƌĞƐŽƵƌĐĞƐ ĂůƐŽ ƉŽŝŶƚƐ ƚŽ Ă ŶĞĞĚ ƚŽ ĂĚĚƌĞƐƐ ĞůĞĐƚƌŝĐŝƚLJͲ ƐĞĐƚŽƌ ŝŶŶŽǀĂƚŝŽŶ ƚŚƌŽƵŐŚ ƌĞŐŝŽŶĂů ĂƉƉƌŽĂĐŚĞƐ͘Ϯϴϰ The Advanced Research Projects Agency–Energy ARPA-E Program and Electricity Innovation The Department of Energy’s ARPA-E funds technically innovative high-risk high-potential energy projects that are too early for private-sector investment but could significantly advance how the Nation generates stores distributes and uses energy 285 ARPA-E competitively supports innovative ideas with the specific purpose of advancing them from early-stage concept to application prototype One of the Mission Innovation goals that ARPA-E supports is to deliver more investment-ready innovative energy technologies for private-sector investors and industry to commercialize To date 45 ARPA-E projects have attracted more than $1 25 billion in private-sector follow-on funding to support commercial development There is significant opportunity for accelerating the development of more innovative project concepts based on the number of applications for ARPA-E projects On average ARPA-E is only able to fund 10 percent of the proposals for its focused solicitations and only 1 4 percent of the proposals that it receives in its open solicitations 286 Many of ARPA-E’s programs are directly or indirectly focused on breakthroughs for the electricity sector For example the Green Electricity Network Integration program has supported the development and demonstration of new grid optimization technologies such as power flow controllers 287 By redirecting power away from congested lines power flow controllers can increase transmission capacity without construction of new assets 288 dŚĞ ƐƉĞĐƚƌƵŵ ĨƌŽŵ ĞĂƌůLJͲ ƚŽ ůĂƚĞͲƐƚĂŐĞ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ƐƉĂŶƐ Ă ŚŝŐŚůLJ ŝŶƚĞƌĂĐƚŝǀĞ ƉƌŽĐĞƐƐ ƚŚĂƚ ŝŶĐůƵĚĞƐ ŝŶǀĞŶƚŝŽŶ͕ ƚƌĂŶƐůĂƚŝŽŶ͕ ĂĚŽƉƚŝŽŶ͕ ĂŶĚ ĚŝĨĨƵƐŝŽŶ͘ dŚĞƐĞ ĨŽƵƌ ƐƚĂŐĞƐ͕ ǁŚŝĐŚ ĐŽŶƚŝŶƵĂůůLJ ŝŶĨůƵĞŶĐĞ ĞĂĐŚ ŽƚŚĞƌ͕ ƌŽƵŐŚůLJ ĐŽƌƌĞůĂƚĞ ƚŽ ƚŚĞ ĐůĂƐƐŝĐ ůŝŶĞĂƌ ŝŶŶŽǀĂƚŝŽŶ ĐĂƚĞŐŽƌŝĞƐ Z Θ ͘Ϯϴϵ ŚĂůůĞŶŐĞƐ ƚŽ ĂĐĐĞůĞƌĂƚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ ǀĂƌLJ ǁŝĚĞůLJ ďĞƚǁĞĞŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ŝŶŶŽǀĂƚŝŽŶ ƐƚĂŐĞƐ͘ Žƌ ĞdžĂŵƉůĞ͕ ƐŽŵĞ ĞůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ŶƵĐůĞĂƌ͕ h ͕ ĂŶĚ ŽĨĨƐŚŽƌĞ ǁŝŶĚ͕ ŚĂǀĞ ĐĂƉŝƚĂů ĐŽƐƚƐ ƚŚĂƚ ĂƌĞ Ă ƌĞůĂƚŝǀĞůLJ ŚŝŐŚ ƐŚĂƌĞ ŽĨ ƚŽƚĂů ĐŽƐƚƐ ŝŶ ĐŽŵƉĂƌŝƐŽŶ ǁŝƚŚ ŽƚŚĞƌ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŝŐŚ ĐĂƉŝƚĂů ĐŽƐƚ ƉƌŽũĞĐƚƐ ƚLJƉŝĐĂůůLJ ƌĞƋƵŝƌĞ ĨŝƌƐƚͲŽĨͲĂͲŬŝŶĚ ĚĞŵŽŶƐƚƌĂƚŝŽŶƐ Ăƚ ĐŽŵŵĞƌĐŝĂů ƐĐĂůĞ ǁŚĞƌĞ ƐLJƐƚĞŵ ĞŶŐŝŶĞĞƌŝŶŐ ĐŚĂůůĞŶŐĞƐ ĂŶĚ ůĂƌŐĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĐŽƐƚƐ ƉƌĞĚŽŵŝŶĂƚĞ͘ ŽŵŵĞƌĐŝĂůͲƐĐĂůĞ ĚĞŵŽŶƐƚƌĂƚŝŽŶƐ ŽĨƚĞŶ ƚĂŬĞ ƚĞŶƐ Žƌ ŚƵŶĚƌĞĚƐ ŽĨ ŵŝůůŝŽŶƐ ŽĨ ĚŽůůĂƌƐ ƚŽ ĞdžĞĐƵƚĞ ĂŶĚ ŵĂLJ ĐĂƌƌLJ ŚŝŐŚ ƚĞĐŚŶŝĐĂů ĂŶĚ ŵĂƌŬĞƚ ƌŝƐŬ͘ϮϵϬ dŚĞƐĞ ĐŚĂůůĞŶŐĞƐ ĐĂŶ ƐŝŵƉůLJ ďĞ ƚŽŽ ůĂƌŐĞ ĨŽƌ Ă ƐŝŶŐůĞ Ĩŝƌŵ ƚŽ ƚĂŬĞ ŽŶ͕ ĂŶĚ ƚŚĞ ƚŝŵĞ ƚŽ ƉƌŽǀŝĚĞ Ă ƌĞƚƵƌŶ ĨŽƌ ƉƌŝǀĂƚĞ ŝŶǀĞƐƚŽƌƐ ŝƐ ŽĨƚĞŶ ůŽŶŐĞƌ ƚŚĂŶ ŝŶǀĞƐƚŽƌƐ ĐĂŶ ǁĂŝƚ͘Ϯϵϭ ŶŶ ZΘ ŝƐ Ă ĐůĂƐƐŝĐ ĞdžĂŵƉůĞ ŽĨ ĂŶ ĂĐƚŝǀŝƚLJ ƚŚĂƚ ŚĂƐ ƉŽƐŝƚŝǀĞ ĞdžƚĞƌŶĂůŝƚŝĞƐ ĨŽƌ ƐŽĐŝĞƚLJ͘ džƚĞƌŶĂůŝƚŝĞƐ ƌĞƉƌĞƐĞŶƚ Ă ĚŝĨĨĞƌĞŶĐĞ ďĞƚǁĞĞŶ ƉƌŝǀĂƚĞ ĂŶĚ ƐŽĐŝĂů ŐĂŝŶƐ͘ ZΘ ŚĂƐ ƉŽƐŝƚŝǀĞ ĞĨĨĞĐƚƐ ďĞLJŽŶĚ ƚŚŽƐĞ ĞŶũŽLJĞĚ ďLJ ƚŚĞ ƉƌŽĚƵĐĞƌ ƚŚĂƚ ƉĂŝĚ ĨŽƌ ƚŚĞ ZΘ ďĞĐĂƵƐĞ ZΘ ĞdžƉĂŶĚƐ ŐĞŶĞƌĂů ŬŶŽǁůĞĚŐĞ͕ ĂŶĚ ŝŶ ƚƵƌŶ͕ ĞŶĂďůĞƐ ŽƚŚĞƌ ĚŝƐĐŽǀĞƌŝĞƐ ĂŶĚ ĚĞǀĞůŽƉŵĞŶƚƐ͘ ƉƌŝǀĂƚĞ Ĩŝƌŵ ŽŶůLJ ƌĞĐĞŝǀĞƐ ďĞŶĞĨŝƚƐ ĨƌŽŵ ŝƚƐ ŽǁŶ ƉƌŽĚƵĐƚƐ͖ ŐĞŶĞƌĂůůLJ͕ ƚŚĞ ƉƌŝǀĂƚĞ ĂĐƚŽƌ ĚŽĞƐ ŶŽƚ ĐĂƉƚƵƌĞ ƚŚĞ ƉƌŽĨŝƚƐ ĨƌŽŵ ŽƚŚĞƌƐ ǁŚŽ ďĞŶĞĨŝƚĞĚ ŝŶĚŝƌĞĐƚůLJ͘ tŝƚŚ Ăůů ƉŽƐŝƚŝǀĞ ĞdžƚĞƌŶĂůŝƚŝĞƐ͕ ƉƌŝǀĂƚĞ ƌĞƚƵƌŶƐ ĂƌĞ ƐŵĂůůĞƌ ƚŚĂŶ ƐŽĐŝĂů ƌĞƚƵƌŶƐ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-51 Chapter III Building a Clean Electricity Future ůƚŚŽƵŐŚ ƚŚĞƌĞ ŝƐ ƐƵďƐƚĂŶƚŝĂů ƌĞƐĞĂƌĐŚ ŽŶ ƚŚĞ ǀĂůƵĞ ĂŶĚ ŝŵƉĂĐƚ ŽĨ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ƉĂƌƚŝĐƵůĂƌůLJ ĨŽƌ ŝŶĚŝǀŝĚƵĂů ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƚŚĞƌĞ ĂƌĞ ĨĞǁ ƌŽďƵƐƚ ŵĞĂƐƵƌĞƐ ĂŶĚ ƋƵĂŶƚŝƚĂƚŝǀĞ ĂƐƐĞƐƐŵĞŶƚƐ ŽĨ ƚŚĞ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ƐLJƐƚĞŵ͕ ƉĂƌƚŝĐƵůĂƌůLJ ŽĨ ƉƌŝǀĂƚĞͲƐĞĐƚŽƌ ŝŶƉƵƚƐ͕ ĂƐ ǁĞůů ĂƐ ŵĞĂŶŝŶŐĨƵů ŽƵƚƉƵƚƐ ĂŶĚ ŝŵƉĂĐƚ ŵĞĂƐƵƌĞƐ͘ ZĞĨŝŶĞĚ͕ ĚĂƚĂͲĚƌŝǀĞŶ ĨƌĂŵĞǁŽƌŬƐ ĂŶĚ ŵŽĚĞůƐ ŽŶ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ͕ ŝŶĐůƵĚŝŶŐ ƉŽůŝĐLJ ŝŶƚĞƌĂĐƚŝŽŶƐ͕ ĂƌĞ ŶĞĞĚĞĚ ƚŽ ƵŶĚĞƌƐƚĂŶĚ ďĞƚƚĞƌ ŚŽǁ ŝŶƉƵƚƐ ĂŶĚ ŽƵƚƉƵƚƐ ŽĨ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ ƐLJƐƚĞŵƐ ƌĞůĂƚĞ ƚŽ ĞĂĐŚ ŽƚŚĞƌ͘ϮϵϮ͕ Ϯϵϯ͕ Ϯϵϰ͕ Ϯϵϱ͕ Ϯϵϲ ůĞĐƚƌŝĐŝƚLJͲƐĞĐƚŽƌ ƚĞĐŚŶŽůŽŐLJ ĂƌĞĂƐ ƚŚĂƚ ƌĞĐĞŝǀĞĚ ƐƵďƐƚĂŶƚŝĂů ŝŶǀĞƐƚŵĞŶƚ ŝŶĐƌĞĂƐĞƐ ŝŶ ƚŚĞ ĨŝƐĐĂů LJĞĂƌ ϮϬϭϳ President’s ďƵĚŐĞƚ ŝŶĐůƵĚĞ ĞŶĞƌŐLJ ƐƚŽƌĂŐĞ͖ ŐƌŝĚ ŵŽĚĞƌŶŝnjĂƚŝŽŶ͖ ĞŶĞƌŐLJͲǁĂƚĞƌ ŶĞdžƵƐ͖ ƐƵďƐƵƌĨĂĐĞ ƐĐŝĞŶĐĞ͕ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ĞŶŐŝŶĞĞƌŝŶŐ͖ h ͖ ĂŶĚ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ƐƵĐŚ ĂƐ ƐŽůĂƌ͕ ǁŝŶĚ͕ ǁĂƚĞƌ͕ ĂŶĚ ŐĞŽƚŚĞƌŵĂů͘ WƌŽŵŝƐŝŶŐ ďƌĞĂŬƚŚƌŽƵŐŚ ƚĞĐŚŶŽůŽŐLJ ĂƌĞĂƐ ŝŶĐůƵĚĞ ŝŵƉƌŽǀŝŶŐ ĨůĞdžŝďůĞ ƉŽǁĞƌ ĚĞůŝǀĞƌLJ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͖ ĚĞǀĞůŽƉŝŶŐ ŶŽŶͲǀĂƉŽƌ ĐŽŵƉƌĞƐƐŝŽŶ ƐLJƐƚĞŵƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ŚŝŐŚůLJ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶƚ ƐƉĂĐĞ ĐŽŶĚŝƚŝŽŶŝŶŐ͕ ǁĂƚĞƌ ŚĞĂƚŝŶŐ͕ ĂŶĚ ƌĞĨƌŝŐĞƌĂƚŝŽŶ ƐĞƌǀŝĐĞƐ ŝŶ ďƵŝůĚŝŶŐƐ ǁŝƚŚŽƵƚ ƚŚĞ ƵƐĞ ŽĨ ƚƌĂĚŝƚŝŽŶĂů ƌĞĨƌŝŐĞƌĂŶƚƐ͖ ƉƌŽĚƵĐŝŶŐ ůŽǁͲĐŽƐƚ ŚLJĚƌŽŐĞŶ ĨƌŽŵ ƌĞŶĞǁĂďůĞ Žƌ ůŽǁͲĐĂƌďŽŶ ƐŽƵƌĐĞƐ͖ ƐĐĂůŝŶŐ ƵƉ ŶŽǀĞů KϮͲ ĐĂƉƚƵƌĞ ƚĞĐŚŶŽůŽŐŝĞƐ ĨƌŽŵ ƉŽǁĞƌ ƉůĂŶƚƐ ĂŶĚ ŝŶĚƵƐƚƌŝĂů ƐŽƵƌĐĞƐ͖ ĂŶĚ ƌĞĐLJĐůŝŶŐ KϮ ŝŶƚŽ ǀĂůƵĂďůĞ ƉƌŽĚƵĐƚƐ ĂƐ Ă ĨĞĞĚƐƚŽĐŬ͘ 3 3 7 Mission Innovation Accelerating Clean Electricity Technology RDD D Ŷ EŽǀĞŵďĞƌ ϮϬϭϱ͕ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂŶĚ ϭϵ ŽƚŚĞƌ ŶĂƚŝŽŶƐ ĐĂŵĞ ƚŽŐĞƚŚĞƌ ƚŽ ŵĂŬĞ Ă ůĂŶĚŵĂƌŬ ĐŽŵŵŝƚŵĞŶƚ—ĐĂůůĞĚ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ—ƚŽ ĚƌĂŵĂƚŝĐĂůůLJ ĂĐĐĞůĞƌĂƚĞ ŐůŽďĂů ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶŶŽǀĂƚŝŽŶ͘ dŚŝƐ ĐŚĂƌƚĞƌ ŐƌŽƵƉ ŽĨ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ĐŽƵŶƚƌŝĞƐ͕ ĂƐ ǁĞůů ĂƐ ŽƚŚĞƌƐ ƚŚĂƚ ŚĂǀĞ ũŽŝŶĞĚ ƐŝŶĐĞ͕ ĂƌĞ ƐĞĞŬŝŶŐ ƚŽ ĚŽƵďůĞ ƚŚĞŝƌ ƉƵďůŝĐ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ĐůĞĂŶ ĞŶĞƌŐLJ ZΘ ŽǀĞƌ ϱ LJĞĂƌƐ͘ ĐĐŽƌĚŝŶŐůLJ͕ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ǁŝůů ƌĞƐƵůƚ ŝŶ ŶĞĂƌůLJ ΨϯϬ ďŝůůŝŽŶ ŽĨ ƉƵďůŝĐ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ϮϬϮϭ͘ dŚĞ ŶĂďůŝŶŐ ƌĂŵĞǁŽƌŬ ĨŽƌ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ŽƵƚůŝŶĞƐ ĞdžĂŵƉůĞƐ ŽĨ ƉƌŽǀĞŶ ĂŶĚ ƉŽǁĞƌĨƵů ĂƉƉƌŽĂĐŚĞƐ ƚŽ Z Θ ƚŚĂƚ ǁŝůů ďĞ ĐƌŝƚŝĐĂů ĞůĞŵĞŶƚƐ ŽĨ ƚŚĞ h͘ ͘ ĚŽŵĞƐƚŝĐ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ͘Ϯϵϳ ZŽďƵƐƚ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŵƵƐƚ ŝŶĐŽƌƉŽƌĂƚĞ ŵƵůƚŝƉůĞ ůŝŶĞĂƌ ĂŶĚ ŶŽŶůŝŶĞĂƌ ĂƉƉƌŽĂĐŚĞƐ͕ ŶŽƚ ũƵƐƚ ŝŶ ƚĞƌŵƐ ŽĨ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ďƵƚ ĂůƐŽ ŝŶ ƚĞƌŵƐ ŽĨ ƚĞĐŚŶŽůŽŐLJ ƉĂƚŚǁĂLJƐ͘ dŚŝƐ ŵĞĂŶƐ ĨƵŶĚŝŶŐ ƉƌŽŐƌĂŵƐ ƚŚĂƚ ůĞǀĞƌĂŐĞ ĨŽƵŶĚĂƚŝŽŶĂů ŵĞĐŚĂŶŝƐŵƐ ƚŽ ŝŶĐƌĞĂƐĞ ďƌĞĂĚƚŚ ŽĨ ŬŶŽǁůĞĚŐĞ ǁŝƚŚŝŶ Ă ƐĐŝĞŶƚŝĨŝĐ ĚŝƐĐŝƉůŝŶĞ͖ ƚƌĂŶƐůĂƚŝŽŶĂů ŵĞĐŚĂŶŝƐŵƐ ƚŽ ƚĂƌŐĞƚ ŝŶĐƌĞŵĞŶƚĂů ŝŵƉƌŽǀĞŵĞŶƚƐ ĂůŽŶŐ ĚĞĨŝŶĞĚ ƚĞĐŚͲƌŽĂĚŵĂƉƐ͖ ĚŝƐƌƵƉƚŝǀĞ ŵĞĐŚĂŶŝƐŵƐ ƚŽ ǀĂůŝĚĂƚĞ ŚŝŐŚͲƌŝƐŬ͕ ŚŝŐŚͲƌĞǁĂƌĚ ŽĨĨͲƌŽĂĚŵĂƉ ŝĚĞĂƐ͖ ĂŶĚ ŝŶƚĞŐƌĂƚŝŽŶĂů ŵĞĐŚĂŶŝƐŵƐ ƚŽ ĨĂĐŝůŝƚĂƚĞ ĐŽůůĂďŽƌĂƚŝŽŶ ĂĐƌŽƐƐ ĚŝƐĐŝƉůŝŶĞƐ ĂŶĚ ƐƚĂŬĞŚŽůĚĞƌƐ͘ dŚĞ ƌĂŵĞǁŽƌŬ ƵƐĞƐ ĨŝǀĞ ƐƉĞĐŝĨŝĐ ĂƌĞĂƐ ŽĨ ĨŽĐƵƐ ƚŽ ŝůůƵŵŝŶĂƚĞ ƚŚĞƐĞ ŽƉƉŽƌƚƵŶŝƚŝĞƐ͕ Ăůů ŽĨ ǁŚŝĐŚ ĂƌĞ ĞŝƚŚĞƌ ƐƉĞĐŝĨŝĐĂůůLJ Žƌ ƉĂƌƚůLJ ƌĞůĂƚĞĚ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ͗ ŐĞŶĞƌĂƚŝŽŶ ;ŝ͘Ğ͕͘ ŚĂƌŶĞƐƐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ĨƌŽŵ ĐůĞĂŶ ƐŽƵƌĐĞƐͿ͖ ŵŽďŝůŝƚLJ ;ŝ͘Ğ͕͘ ŵŽǀŝŶŐ ƉĞŽƉůĞ ĂŶĚ ŐŽŽĚƐ ƵƐŝŶŐ ĐůĞĂŶ ĞŶĞƌŐLJͿ͖ ĐŽŶŶĞĐƚŝŽŶƐ ;ŝ͘Ğ͕͘ ĚĞůŝǀĞƌŝŶŐ ĐůĞĂŶ ĞŶĞƌŐLJ ĨƌŽŵ ƐƵƉƉůLJ ƚŽ ĚĞŵĂŶĚͿ͖ ƐƚƌƵĐƚƵƌĞƐ ;ŝ͘Ğ͕͘ ŝŶŶŽǀĂƚŝŶŐ ďĞƚƚĞƌ ďƵŝůĚŝŶŐƐͿ͖ ĂŶĚ ƉƌŽĐĞƐƐĞƐ ;ŝ͘Ğ͕͘ ƵƐŝŶŐ ĐůĞĂŶ ĞŶĞƌŐLJ ƚŽ ĐƌĞĂƚĞ ƉƌŽĚƵĐƚƐ ĂŶĚ ŐƌŽǁ ĨŽŽĚͿ͘ Ɛ ŽƵƚůŝŶĞĚ ŝŶ ƚŚĞ ŽŵĞƐƚŝĐ ŵƉůĞŵĞŶƚĂƚŝŽŶ ƌĂŵĞǁŽƌŬ͕Ϯϵϴ ƚŚĞ ĚŽŵĞƐƚŝĐ ŝŵƉůĞŵĞŶƚĂƚŝŽŶ ŽĨ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ĐŽƵůĚ    3-52 “Drive down energy costs ůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂǀĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ƚŽ ĚƌĂŵĂƚŝĐĂůůLJ ƌĞĚƵĐĞ ůŽŶŐͲƚĞƌŵ ĞŶĞƌŐLJ ĞdžƉĞŶĚŝƚƵƌĞƐ͘Ϯϵϵ dŚŝƐ ĐŽƵůĚ ŝŶĐƌĞĂƐĞ ƚŚĞ ĐŽŵƉĞƚŝƚŝǀĞŶĞƐƐ ŽĨ h͘ ͘ ďƵƐŝŶĞƐƐĞƐ ĂŶĚ ƉƵƚ ƚŚŽƵƐĂŶĚƐ ŽĨ ĚŽůůĂƌƐ ŝŶ ƚŚĞ ƉŽĐŬĞƚŬƐ ŽĨ ŵĞƌŝĐĂŶ ĨĂŵŝůŝĞƐ͘ Enhance system reliability ŶĞƌŐLJ ƐĞƌǀŝĐĞƐ ĂƌĞ ĚĞĞƉůLJ ĞŵďĞĚĚĞĚ ŝŶƚŽ Ăůů ĐƌŝƚŝĐĂů ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ƐĞƌǀŝĐĞƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ĂŶĚ ƚĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶƐ͘ ĚǀĂŶĐĞĚ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ ĐĂŶ ŝŵƉƌŽǀĞ ƐLJƐƚĞŵ ƌĞůŝĂďŝůŝƚLJ͘ Improve energy security hƐŝŶŐ ŵŽƌĞ ĚŝǀĞƌƐĞ ĞŶĞƌŐLJ ƐŽƵƌĐĞƐ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ŝŶĐƌĞĂƐĞ ƚŚĞ ƌĞƐŝůŝĞŶĐĞ ĂŶĚ ĨůĞdžŝďŝůŝƚLJ ŽĨ ƚŚĞ ĚŽŵĞƐƚŝĐ ĞŶĞƌŐLJ ƐƵƉƉůLJ ĐŚĂŝŶ͕ ŚĞůƉŝŶŐ ƚŽ ƉƌŽƚĞĐƚ ĞŶĞƌŐLJ ĐŽŶƐƵŵĞƌƐ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017    ĨƌŽŵ ŚŝŐŚͲĐŽƐƚ ŵĂƌŬĞƚ ĚŝƐƌƵƉƚŝŽŶƐ ĂŶĚ ƌĞĚƵĐŝŶŐ ĞdžƉŽƐƵƌĞ ƚŽ ŵĂƌŬĞƚƐ ǁŝƚŚ ŚŝŐŚ ƉƌŝĐĞ ǀŽůĂƚŝůŝƚLJ͕ ůŝŬĞ Žŝů͘ Curb adverse environmental and public health effects ŶĞƌŐLJͲƌĞůĂƚĞĚ ' ' ĞŵŝƐƐŝŽŶƐ ĂƌĞ ƚŚĞ ĚŽŵŝŶĂŶƚ ĐĂƵƐĞ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ ůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ ŝƐ ƚŚĞ ůĂƌŐĞƐƚ—ĂŶĚ ŵŽƐƚ ĞƐƐĞŶƚŝĂů— ĐŽŵƉŽŶĞŶƚ ŽĨ ŵŝƚŝŐĂƚŝŽŶ͘ dŚĞ ƐŚŝĨƚ ƚŽ ĐůĞĂŶ ĞŶĞƌŐLJ ǁŝůů ĂůƐŽ ƌĞĚƵĐĞ ƚŚĞ ŽƚŚĞƌ ŚĂƌŵĨƵů ƉŽůůƵƚĂŶƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞŶĞƌŐLJ ƵƐĞ͕ ŝŵƉƌŽǀŝŶŐ ŚĞĂůƚŚ ŽƵƚĐŽŵĞƐ͘ Build economic opportunities DĂŝŶƚĂŝŶŝŶŐ ŽƵƌ ƚĞĐŚŶŽůŽŐŝĐĂů ĞĚŐĞ ǁŝůů ĞŶĂďůĞ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ƚŽ ĞdžƉŽƌƚ ŽƵƌ ĐůĞĂŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƉƌŽĚƵĐƚƐ͕ ĂŶĚ ƐĞƌǀŝĐĞƐ ƚŽ ŽƚŚĞƌ ĐŽƵŶƚƌŝĞƐ͘ϯϬϬ ůĞĂŶ ĞŶĞƌŐLJ ĐĂŶ ďĞ Ă ŵĂũŽƌ ŽƉƉŽƌƚƵŶŝƚLJ ƚŽ ĐƌĞĂƚĞ ŶĞǁ ũŽďƐ͕ ĞŶĂďůĞ ĚŽŵĞƐƚŝĐ ŵĂŶƵĨĂĐƚƵƌŝŶŐ͕ ĂŶĚ ĐĂƚĂůLJnjĞ ŝŶĚƵƐƚƌŝĞƐ͘ϯϬϭ͕ ϯϬϮ Improve energy access and equity Ŷ ŵĂŶLJ ƌƵƌĂů ĂŶĚ ƌĞŵŽƚĞ ƉůĂĐĞƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ĐŽŵŵƵŶŝƚŝĞƐ ůĂĐŬ ĂĐĐĞƐƐ ƚŽ ƌĞůŝĂďůĞ ĂŶĚ ĂĨĨŽƌĚĂďůĞ ĞŶĞƌŐLJ ƐĞƌǀŝĐĞƐ͘ ĚǀĂŶĐĞĚ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ƐƵƉƉŽƌƚ ƵŶŝǀĞƌƐĂů ĞŶĞƌŐLJ ĂĐĐĞƐƐ͕ ŚĞůƉŝŶŐ ďŽŽƐƚ ƋƵĂůŝƚLJ ŽĨ ůŝĨĞ ĂŶĚ ĞĐŽŶŽŵŝĐ ĚĞǀĞůŽƉŵĞŶƚ͘”ϯϬϯ ZĞĐĞŶƚ ĂŶĂůLJƐŝƐ ƐƵŐŐĞƐƚƐ ƉƌŽŐƌĂŵƐ ĂŶĚ ŝŶǀĞƐƚŵĞŶƚƐ ŝŶ ƚĞĐŚŶŽůŽŐŝĞƐ ƐƵƉƉŽƌƚĞĚ ďLJ ŝŶŝƚŝĂƚŝǀĞƐ ůŝŬĞ DŝƐƐŝŽŶ ŶŶŽǀĂƚŝŽŶ ĐŽƵůĚ ŚĞůƉ ĐƌĞĂƚĞ ƐŝŐŶŝĨŝĐĂŶƚ ŐůŽďĂů ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ h͘ ͘ ďƵƐŝŶĞƐƐĞƐ ĂŶĚ ƚĞĐŚŶŽůŽŐŝĞƐ ŝŶ ƚŚĞ ĨŽůůŽǁŝŶŐ ƌĞŐŝŽŶƐ ŽĨ ƚŚĞ ǁŽƌůĚ͗       3 4 East Asia and the Pacific 'ƌĞĞŶ ďƵŝůĚŝŶŐƐ— ŚŝŶĂ͕ ŶĚŽŶĞƐŝĂ͕ ƚŚĞ WŚŝůŝƉƉŝŶĞƐ͕ ĂŶĚ sŝĞƚŶĂŵ ƐŚŽǁ Ă ůŽǁͲĐĂƌďŽŶ ŝŶǀĞƐƚŵĞŶƚ ƉŽƚĞŶƚŝĂů ŽĨ Ψϭϲ ƚƌŝůůŝŽŶ͘ Latin America and the Caribbean KĨĨĞƌƐ ƚŚĞ ŶĞdžƚ ůĂƌŐĞƐƚ ŽƉƉŽƌƚƵŶŝƚLJ—ƉĂƌƚŝĐƵůĂƌůLJ ŝŶ ƐƵƐƚĂŝŶĂďůĞ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ǁŚĞƌĞ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ŝŶǀĞƐƚŵĞŶƚ ŝŶ ƌŐĞŶƚŝŶĂ͕ ƌĂnjŝů͕ ŽůŽŵďŝĂ͕ ĂŶĚ DĞdžŝĐŽ ŝƐ ĂďŽƵƚ ΨϮ͘ϲ ƚƌŝůůŝŽŶ͘ South Asia KƉƉŽƌƚƵŶŝƚŝĞƐ ĂƌĞ ŵŽƐƚůLJ ƐĞĞŶ ŝŶ ĐůŝŵĂƚĞͲƌĞƐŝůŝĞŶƚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ǁŚĞƌĞ ΨϮ͘ϱ ƚƌŝůůŝŽŶ ŽĨ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĞdžŝƐƚ ŝŶ ŶĚŝĂ ĂŶĚ ĂŶŐůĂĚĞƐŚ͘ Sub-Saharan Africa ZĞƉƌĞƐĞŶƚƐ Ă Ψϳϴϯ ďŝůůŝŽŶ ŽƉƉŽƌƚƵŶŝƚLJ—ƉĂƌƚŝĐƵůĂƌůLJ ĨŽƌ ĐůĞĂŶ ĞŶĞƌŐLJ ŝŶ ŽƚĞ d’Ivoire Kenya Nigeria and South Africa Eastern Europe tŝƚŚ ŝƚƐ ďŝŐŐĞƐƚ ŵĂƌŬĞƚƐ—ZƵƐƐŝĂ͕ ĞƌďŝĂ͕ dƵƌŬĞLJ͕ ĂŶĚ hŬƌĂŝŶĞ—ƐŚŽǁƐ Ă ĐŽŵďŝŶĞĚ ŝŶǀĞƐƚŵĞŶƚ ƉŽƚĞŶƚŝĂů ŽĨ Ψϲϲϱ ďŝůůŝŽŶ͕ ŵŽƐƚůLJ ŝŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ĂŶĚ ŶĞǁ ŐƌĞĞŶ ďƵŝůĚŝŶŐƐ͘ Middle East and North Africa dŚĞ ƚŽƚĂů ĐůŝŵĂƚĞͲŝŶǀĞƐƚŵĞŶƚ ƉŽƚĞŶƚŝĂů ĨŽƌ ŐLJƉƚ͕ ŽƌĚĂŶ͕ ĂŶĚ DŽƌŽĐĐŽ ŝƐ ĞƐƚŝŵĂƚĞĚ Ăƚ ΨϮϲϱ ďŝůůŝŽŶ͕ “ŽǀĞƌ Ă ƚŚŝƌĚ ŽĨ ǁŚŝĐŚ ŝƐ ĨŽƌ ƌĞŶĞǁĂďůĞͲĞŶĞƌŐLJ ŐĞŶĞƌĂƚŝŽŶ͕ ǁŚŝůĞ ϱϱ ƉĞƌĐĞŶƚ ;Ψϭϰϲ ďŝůůŝŽŶͿ ŝƐ ĨŽƌ ĐůŝŵĂƚĞͲƐŵĂƌƚ ďƵŝůĚŝŶŐƐ͕ ƚƌĂŶƐƉŽƌƚĂƚŝŽŶ͕ ĂŶĚ ǁĂƐƚĞ ƐŽůƵƚŝŽŶ͘”ϯϬϰ Environmental Impacts of Electricity on Air Water Land Use and Local Communities ŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞůĞĐƚƌŝĐŝƚLJ ŽƉĞƌĂƚŝŽŶƐ ŚĂƐ Ă ƌĂŶŐĞ ŽĨ ĚŝƌĞĐƚ ŝŵƉĂĐƚƐ ƚŽ ĞĐŽƐLJƐƚĞŵƐ ĂŶĚ ŶĂƚƵƌĂů ƌĞƐŽƵƌĐĞƐ͘ dŚĞ ŵĂŐŶŝƚƵĚĞ ŽĨ ŝŵƉĂĐƚƐ ĚĞƉĞŶĚƐ ŽŶ ŚŽǁ ƚŚĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂĨĨĞĐƚƐ ĞŶĚĂŶŐĞƌĞĚ ƐƉĞĐŝĞƐ͕ ƐĞŶƐŝƚŝǀĞ ĞĐŽůŽŐŝĐĂů ĂƌĞĂƐ͕ Žƌ ĐƵůƚƵƌĂů Žƌ ŚŝƐƚŽƌŝĐ ƌĞƐŽƵƌĐĞƐ͖ ŐŝǀĞƐ ƌŝƐĞ ƚŽ ǀŝƐƵĂů Žƌ ĂĞƐƚŚĞƚŝĐ ĐŽŶĐĞƌŶƐ͖ Žƌ ŽƉĞŶƐ ŶĞǁ ĂƌĞĂƐ ƚŽ ĚĞǀĞůŽƉŵĞŶƚ͘ϯϬϱ ĐŚŝĞǀŝŶŐ ƚŚĞ ĚĞĞƉ ĚĞĐĂƌďŽŶŝnjĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐĞĐƚŽƌ ŶĞĐĞƐƐĂƌLJ ƚŽ ƌĞĂĐŚ ŶĂƚŝŽŶĂů ĐůŝŵĂƚĞ ƚĂƌŐĞƚƐ ǁŝůů ƌĞƋƵŝƌĞ Ă ƐŝŐŶŝĨŝĐĂŶƚ ƐĐĂůŝŶŐ ƵƉ ŽĨ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ͘ tŚŝůĞ ĞĚĞƌĂů͕ ƐƚĂƚĞ͕ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ŚĂǀĞ ŵĂĚĞ ƐƚƌŝĚĞƐ ŝŶ ĂƐƐĞƐƐŝŶŐ ƚŚĞ ĞĐŽůŽŐŝĐĂů ĂŶĚ ůĂŶĚͲƵƐĞ ŝŵƉĂĐƚƐ ŽĨ ĐƵƌƌĞŶƚ ƚĞĐŚŶŽůŽŐLJ—ĂƐ ǁĞůů ĂƐ ǁĂƚĞƌͲƵƐĞ ĂŶĚ ǁĂƚĞƌͲƋƵĂůŝƚLJ ŝŵƉĂĐƚƐ—ŵŽƌĞ ĂŶĂůLJƐŝƐ ǁŝůů ďĞ ŚĞůƉĨƵů ƚŽ ƐĐĂůĞ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĂĚĚŝƚŝŽŶĂů ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͘ ŽŶƐŝĚĞƌŝŶŐ ƚŚĞ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ĂŶĚ ŶĂƚƵƌĂů ƌĞƐŽƵƌĐĞ ŝŵƉůŝĐĂƚŝŽŶƐ ŽĨ ŶĞǁ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ŝŶ ƚŚĞ ZΘ ƉŚĂƐĞ ŵĂLJ ŚĞůƉ ĂǀŽŝĚ ƚŚĞ ĂĨŽƌĞŵĞŶƚŝŽŶĞĚ ŝŵƉĂĐƚƐ ĂŶĚ ƚŚĞ ŶĞĞĚ ƚŽ ŵŝƚŝŐĂƚĞ ƚŚĞŵ͘ ĞĐƌĞĂƐŝŶŐ ůĂŶĚͲƵƐĞ ĂŶĚ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-53 Chapter III Building a Clean Electricity Future ǁŝůů ĞdžƉĂŶĚ ƚŚĞ ƵŶŝǀĞƌƐĞ ŽĨ ŐĞŽŐƌĂƉŚŝĐĂůůLJ ƐƵŝƚĞĚ ĂƌĞĂƐ ĨŽƌ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐLJ͘ ƵƌƚŚĞƌ ƌĞĨŝŶĞŵĞŶƚ ŽĨ ŵŝƚŝŐĂƚŝŽŶ ƉŽůŝĐŝĞƐ ĨŽƌ ƚŚŽƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƌĞƋƵŝƌŝŶŐ ŵŝƚŝŐĂƚŝŽŶ ŝƐ ĂůƐŽ ŶĞĞĚĞĚ͘ 3 4 1 Air and Water Pollution dŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŚĂƐ ŵĂĚĞ ƌĞŵĂƌŬĂďůĞ ƉƌŽŐƌĞƐƐ ŝŵƉƌŽǀŝŶŐ Ăŝƌ ĂŶĚ ǁĂƚĞƌ ƋƵĂůŝƚLJ ƵŶĚĞƌ ƚŚĞ ͕ ƚŚĞ ůĞĂŶ tĂƚĞƌ Đƚ͕ ĂŶĚ ŽƚŚĞƌ ĞŶǀŝƌŽŶŵĞŶƚĂů ƐƚĂƚƵƚĞƐ͕ ďƵƚ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŵƵƐƚ ĐŽŶƚŝŶƵĞ ƚŽ ĂĚĚƌĞƐƐ ĞŵŝƐƐŝŽŶƐ͕ ŝŶĐůƵĚŝŶŐ ĨƌŽŵ ƚŚĞ ĞůĞĐƚƌŝĐ ƐĞĐƚŽƌ͘ Žƌ ĞdžĂŵƉůĞ͕ ƚŚĞ ŵŽƐƚͲƉŽůůƵƚŝŶŐ ƉŽǁĞƌ ƉůĂŶƚƐ Ɛƚŝůů ŚĂǀĞ ĐƌŝƚĞƌŝĂ Ăŝƌ ƉŽůůƵƚĂŶƚ ĞŵŝƐƐŝŽŶƐ ƉĞƌ ƵŶŝƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ƚŚĂƚ ĂƌĞ ŵĂŶLJ ƚŝŵĞƐ ůĂƌŐĞƌ ƚŚĂŶ ƚŚĞ ůĞĂƐƚͲƉŽůůƵƚŝŶŐ ƉŽǁĞƌ ƉůĂŶƚƐ͘ϯϬϲ ŝƌĞĐƚ Ăŝƌ ƉŽůůƵƚĂŶƚƐ ĨƌŽŵ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ŝŶĐůƵĚĞ ƐƵůĨƵƌ ĚŝŽdžŝĚĞ ; KϮͿ͕ ŽdžŝĚĞƐ ŽĨ ŶŝƚƌŽŐĞŶ ;EKdžͿ͕ ƐŽŵĞ ƉĂƌƚŝĐƵůĂƚĞ ŵĂƚƚĞƌ ;WDͿ͕ ĂŶĚ ŵĞƌĐƵƌLJ ĂŶĚ ŽƚŚĞƌ Ăŝƌ ƚŽdžŝĐ ƉŽůůƵƚĂŶƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞƐĞ ƉŽůůƵƚĂŶƚƐ ƌĞĂĐƚ ŝŶ ƚŚĞ ĂƚŵŽƐƉŚĞƌĞ ƚŽ ĨŽƌŵ ƐĞĐŽŶĚĂƌLJ ƉŽůůƵƚĂŶƚƐ—ŝŶĐůƵĚŝŶŐ ĂĐŝĚ ƌĂŝŶ͕ ŽƚŚĞƌ WD͕ ĂŶĚ ŐƌŽƵŶĚͲůĞǀĞů ŽnjŽŶĞ— ƚŚĂƚ ĂĚǀĞƌƐĞůLJ ŝŵƉĂĐƚ Ăŝƌ ƋƵĂůŝƚLJ͘ dŚĞƐĞ ƉŽůůƵƚĂŶƚƐ ŝŶĐƌĞĂƐĞ ŵŽƌďŝĚŝƚLJ ĂŶĚ ƚŚĞ ƌŝƐŬ ŽĨ ŵŽƌƚĂůŝƚLJ͕ ƌĞĚƵĐĞ ĂŐƌŝĐƵůƚƵƌĂů ĂŶĚ ƚŝŵďĞƌ ƉƌŽĚƵĐƚŝǀŝƚLJ͕ ĚĞƚĞƌŝŽƌĂƚĞ ŵĂƚĞƌŝĂůƐ͕ ƌĞĚƵĐĞ ǀŝƐŝďŝůŝƚLJ͕ ĂŶĚ ŚĂƌŵ ĞĐŽƐLJƐƚĞŵƐ͘ϯϬϳ͕ ϯϬϴ͕ ϯϬϵ͕ ϯϭϬ͕ ϯϭϭ Ŷ ϮϬϬϵ͕ W ĚĞƚĞƌŵŝŶĞĚ ƚŚĂƚ ' ' ƉŽůůƵƚŝŽŶ ƚŚƌĞĂƚĞŶƐ ŵĞƌŝĐĂŶƐΖ ŚĞĂůƚŚ ĂŶĚ ǁĞůĨĂƌĞ ďLJ ůĞĂĚŝŶŐ ƚŽ ůŽŶŐͲ ůĂƐƚŝŶŐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞƐ ƚŚĂƚ ĐĂŶ ŚĂǀĞ Ă ƌĂŶŐĞ ŽĨ ŶĞŐĂƚŝǀĞ ĞĨĨĞĐƚƐ ŽŶ ŚƵŵĂŶ ŚĞĂůƚŚ ĂŶĚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ ;dĂďůĞ ϯͲϱͿ͘ϯϭϮ ůŝŵĂƚĞ ĐŚĂŶŐĞ ĐĂŶ “affect ŚƵŵĂŶ ŚĞĂůƚŚ ŝŶ ƚǁŽ ŵĂŝŶ ǁĂLJƐ͗ ĨŝƌƐƚ͕ ďLJ ĐŚĂŶŐŝŶŐ ƚŚĞ ƐĞǀĞƌŝƚLJ Žƌ ĨƌĞƋƵĞŶĐLJ ŽĨ ŚĞĂůƚŚ ƉƌŽďůĞŵƐ ƚŚĂƚ ĂƌĞ ĂůƌĞĂĚLJ ĂĨĨĞĐƚĞĚ ďLJ ĐůŝŵĂƚĞ Žƌ ǁĞĂƚŚĞƌ ĨĂĐƚŽƌƐ͖ ĂŶĚ ƐĞĐŽŶĚ͕ ďLJ ĐƌĞĂƚŝŶŐ ƵŶƉƌĞĐĞĚĞŶƚĞĚ Žƌ ƵŶĂŶƚŝĐŝƉĂƚĞĚ ŚĞĂůƚŚ ƉƌŽďůĞŵƐ Žƌ ŚĞĂůƚŚ ƚŚƌĞĂƚƐ ŝŶ ƉůĂĐĞƐ ǁŚĞƌĞ ƚŚĞLJ ŚĂǀĞ ŶŽƚ ƉƌĞǀŝŽƵƐůLJ ŽĐĐƵƌƌĞĚ͘”ϯϭϯ h͘ ͘ 'ůŽďĂů ŚĂŶŐĞ ZĞƐĞĂƌĐŚ WƌŽŐƌĂŵ ƌĞƉŽƌƚ ŶŽƚĞƐ͗ “'ŝǀĞŶ ƚŚĂƚ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ŽǀĞƌ ƚŚĞ ŶĞdžƚ ĐĞŶƚƵƌLJ͕ ĐĞƌƚĂŝŶ ĞdžŝƐƚŝŶŐ ŚĞĂůƚŚ ƚŚƌĞĂƚƐ ǁŝůů ŝŶƚĞŶƐŝĨLJ ĂŶĚ ŶĞǁ ŚĞĂůƚŚ ƚŚƌĞĂƚƐ ŵĂLJ ĞŵĞƌŐĞ͘”ϯϭϰ Ŷ ƉĂƌƚŝĐƵůĂƌ͕ Ăŝƌ ƉŽůůƵƚŝŽŶ ĂŶĚ ĂŝƌďŽƌŶĞ ĂůůĞƌŐĞŶƐ ǁŝůů ůŝŬĞůLJ ŝŶĐƌĞĂƐĞ͕ ǁŽƌƐĞŶŝŶŐ ĂůůĞƌŐLJ ĂŶĚ ĂƐƚŚŵĂ ĐŽŶĚŝƚŝŽŶƐ ĚƵĞ ƚŽ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ ƵƚƵƌĞ ŽnjŽŶĞͲƌĞůĂƚĞĚ ŚƵŵĂŶ ŚĞĂůƚŚ ŝŵƉĂĐƚƐ ĂƚƚƌŝďƵƚĂďůĞ ƚŽ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ůĞĂĚ ƚŽ ŚƵŶĚƌĞĚƐ ƚŽ ƚŚŽƵƐĂŶĚƐ ŽĨ ƉƌĞŵĂƚƵƌĞ ĚĞĂƚŚƐ͕ ŚŽƐƉŝƚĂů ĂĚŵŝƐƐŝŽŶƐ͕ ĂŶĚ ĐĂƐĞƐ ŽĨ ĂĐƵƚĞ ƌĞƐƉŝƌĂƚŽƌLJ ŝůůŶĞƐƐĞƐ ĞĂĐŚ LJĞĂƌ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ďLJ ϮϬϯϬ͕ ŝŶĐůƵĚŝŶŐ ŝŶĐƌĞĂƐĞƐ ŝŶ ĂƐƚŚŵĂ ĞƉŝƐŽĚĞƐ ĂŶĚ ŽƚŚĞƌ ĂĚǀĞƌƐĞ ƌĞƐƉŝƌĂƚŽƌLJ ĞĨĨĞĐƚƐ ŝŶ ĐŚŝůĚƌĞŶ͘ϯϭϱ ZĂŐǁĞĞĚ ƉŽůůĞŶ ƐĞĂƐŽŶ ŝƐ ůŽŶŐĞƌ ŶŽǁ ŝŶ ĐĞŶƚƌĂů EŽƌƚŚ ŵĞƌŝĐĂ͕ ŚĂǀŝŶŐ ŝŶĐƌĞĂƐĞĚ ďLJ ĂƐ ŵĂŶLJ ĂƐ ϭϭ ƚŽ Ϯϳ ĚĂLJƐ ďĞƚǁĞĞŶ ϭϵϵϱ ĂŶĚ ϮϬϭϭ͕ ǁŚŝĐŚ ŝŵƉĂĐƚƐ ƐŽŵĞ ŽĨ ƚŚĞ ŶĞĂƌůLJ ϲ͘ϴ ŵŝůůŝŽŶ ĐŚŝůĚƌĞŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂĨĨĞĐƚĞĚ ďLJ ĂƐƚŚŵĂ ĂŶĚ ƐƵƐĐĞƉƚŝďůĞ ƚŽ ĂůůĞƌŐĞŶƐ ĚƵĞ ƚŽ ƚŚĞŝƌ ŝŵŵĂƚƵƌĞ ƌĞƐƉŝƌĂƚŽƌLJ ĂŶĚ ŝŵŵƵŶĞ ƐLJƐƚĞŵƐ͘ϯϭϲ 3-54 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table 3-5 Summary of Physical Impacts of the Most Common Air Pollutants317 318 319 320 Human Health NOx Crops and Timber Chronic obstructive pulmonary disease Materials Visibility Recreation Material deterioration Eutrophication Damages to forests Material depreciation Damages to forests Crop loss Timber loss Rubber deterioration Damages to forests and wilderness areas Ischemic heart diseaseIHD SO2 Asthma Cardiac O3 ozone Chronic asthma Acute-exposure mortality PM2 5 Respiratory problems Acute asthma attacks Premature death Loss of visibility Nonfatal heart attacks Hospital admissions Emergency Room visits for asthma acute bronchitis upper and lower respiratory symptoms PM10-2 5 Chronic bronchitis Major impacts of air pollution are delineated by sector and pollutant PM2 5 is particulate matter with a diameter of 2 5 micrometers or less PM10-2 5 is coarse particulate matter with diameter between 10 and 2 5 micrometers Ɛ ŽĨ ϮϬϭϰ͕ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ĂĐĐŽƵŶƚĞĚ ĨŽƌ ϲϰ ƉĞƌĐĞŶƚ ŽĨ ĞĐŽŶŽŵLJͲǁŝĚĞ KϮ ĞŵŝƐƐŝŽŶƐ ĂŶĚ ϭϰ ƉĞƌĐĞŶƚ ŽĨ EKdž ĞŵŝƐƐŝŽŶƐ͖ ƉŽǁĞƌ ƉůĂŶƚƐ ǁĞƌĞ ƚŚĞ ĚŽŵŝŶĂŶƚ ĞŵŝƚƚĞƌƐ ŽĨ ŵĞƌĐƵƌLJ ;ϱϬ ƉĞƌĐĞŶƚͿ ĂŶĚ ĂĐŝĚ ŐĂƐĞƐ ;ϳϱ ƉĞƌĐĞŶƚͿ͘ϯϮϭ͕ ϯϮϮ tŝƚŚŝŶ ƚŚĞ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ͕ ĐŽĂů ĐŽŵďƵƐƚŝŽŶ ĂĐĐŽƵŶƚƐ ĨŽƌ ƚŚĞ ǀĂƐƚ ŵĂũŽƌŝƚLJ ŽĨ ƉŽůůƵƚĂŶƚƐ͘ϯϮϯ tŚŝůĞ Ă ŵĂũŽƌŝƚLJ ŽĨ ƉŽǁĞƌ ƉůĂŶƚƐ ƵƐĞ ƐĐƌƵďďĞƌƐ ĂŶĚ ŽƚŚĞƌ ƉŽůůƵƚŝŽŶ ĐŽŶƚƌŽůƐ ƚŽ ƌĞĚƵĐĞ ĞŵŝƐƐŝŽŶƐ ŽĨ ŵƵůƚŝƉůĞ ƉŽůůƵƚĂŶƚƐ͕ ƐŽŵĞ ƉŽǁĞƌ ƉůĂŶƚƐ Ɛƚŝůů ĚŽ ŶŽƚ ĞŵƉůŽLJ ƚŚĞ ĨƵůů ƐƵŝƚĞ ŽĨ ĂǀĂŝůĂďůĞ ƉŽůůƵƚŝŽŶ ĐŽŶƚƌŽůƐ Žƌ ĚŽ ŶŽƚ ĐŽŶƚƌŽů ĨŽƌ Ăůů ƉŽůůƵƚĂŶƚƐ͘ϯϮϰ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-55 Chapter III Building a Clean Electricity Future ĚĚŝƚŝŽŶĂůůLJ͕ ƐƚĞĂŵ ĞůĞĐƚƌŝĐ ƉŽǁĞƌŽŽ ƉůĂŶƚƐ ŐĞŶĞƌĂƚĞ ǁĂƐƚĞǁĂƚĞƌ ƐƚƌĞĂŵƐ ĨƌŽŵ ƚŚĞŝƌ ǁĂƚĞƌ ƚƌĞĂƚŵĞŶƚ͕ ƉŽǁĞƌ ĐLJĐůĞ͕ ĂƐŚ ŚĂŶĚůŝŶŐ͕ Ăŝƌ ƉŽůůƵƚŝŽŶ ĐŽŶƚƌŽů ƐLJƐƚĞŵƐ͕ ĐŽĂů ƉŝůĞƐ͕ ĂŶĚ ŽƚŚĞƌ ŵŝƐĐĞůůĂŶĞŽƵƐ ǁĂƐƚĞƐ ƚŚĂƚ ĐĂŶ ŝŵƉĂĐƚ ŐƌŽƵŶĚ ǁĂƚĞƌ ĂŶĚ ƐƵƌĨĂĐĞ ǁĂƚĞƌ ƋƵĂůŝƚLJ͘ϯϮϱ ƵƌƌĞŶƚůLJ͕ ƐƚĞĂŵ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƉůĂŶƚƐ ĂĐĐŽƵŶƚ ĨŽƌ ĂďŽƵƚ ϯϬ ƉĞƌĐĞŶƚ ŽĨ Ăůů ƚŽdžŝĐ ƉŽůůƵƚĂŶƚƐ—ŝŶĐůƵĚŝŶŐ ŵĞƌĐƵƌLJ͕ ĂƌƐĞŶŝĐ͕ ƐĞůĞŶŝƵŵ͕ ĐĂĚŵŝƵŵ͕ ĂŶĚ ŽƚŚĞƌ ƚŽdžŝĐ ŵĞƚĂůƐ—ĚŝƐĐŚĂƌŐĞĚ ŝŶƚŽ ƐƵƌĨĂĐĞ ǁĂƚĞƌƐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͘ϯϮϲ dŚĞƐĞ ƉŽůůƵƚĂŶƚƐ ĐĂŶ ĐĂƵƐĞ ƐĞǀĞƌĞ ŚĞĂůƚŚ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉƌŽďůĞŵƐ ŝŶ ƚŚĞ ĨŽƌŵ ŽĨ ĐĂŶĐĞƌ ĂŶĚ ŶŽŶͲĐĂŶĐĞƌ ƌŝƐŬƐ ŝŶ ŚƵŵĂŶƐ͕ ůŽǁĞƌĞĚ Y ĂŵŽŶŐ ĐŚŝůĚƌĞŶ͕ ĂŶĚ ĚĞĨŽƌŵŝƚŝĞƐ ĂŶĚ ƌĞƉƌŽĚƵĐƚŝǀĞ ŚĂƌŵ ŝŶ ĨŝƐŚ ĂŶĚ ǁŝůĚůŝĨĞ͘ϯϮϳ Ŷ ϮϬϭϱ͕ W ĞƐƚĂďůŝƐŚĞĚ ŶĞǁ ůŝŵŝƚƐ ŽŶ ǁĂƐƚĞǁĂƚĞƌ ĚŝƐĐŚĂƌŐĞ ĨƌŽŵ ƉŽǁĞƌ ƉůĂŶƚƐ ƚŚĂƚ ĂƌĞ ƉƌŽũĞĐƚĞĚ ƚŽ ƌĞĚƵĐĞ ĚŝƐĐŚĂƌŐĞ ŽĨ ƚŚĞ ŵŽƐƚ ƚŽdžŝĐ ƉŽůůƵƚĂŶƚƐ ďLJ ŽǀĞƌ ϵϬ ƉĞƌĐĞŶƚ͘ϯϮϴ͕ ϯϮϵ ĞĚĞƌĂů ĂŶĚ ƐƚĂƚĞ ŐŽǀĞƌŶŵĞŶƚƐ ĂƌĞ ĐŽŶƚŝŶƵŝŶŐ ƚŚĞŝƌ ĞĨĨŽƌƚƐ ƚŽ ŝŶǀĞƐƚ ŝŶ ĂŶĚ ŝŶĐĞŶƚŝǀŝnjĞ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ͕ ůĞƐƐͲ ƉŽůůƵƚŝŶŐ ƉŽǁĞƌ ƉůĂŶƚ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƚŽ ƵƉĚĂƚĞ ƌĞŐƵůĂƚŝŽŶƐ ƐƵĐŚ ĂƐ ƚŚĞ ĨŝŶĂů ĞĚĞƌĂů ƌŽƐƐͲ ƚĂƚĞ ŝƌ WŽůůƵƚŝŽŶ hƉĚĂƚĞ ZƵůĞ͕ ĂŵŽŶŐ ŽƚŚĞƌ ĂĐƚŝŽŶƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƌĞŐƵůĂƚŝŽŶ ŽĨ KϮ ĞŵŝƐƐŝŽŶƐ ĨƌŽŵ ƉŽǁĞƌ ƉůĂŶƚƐ ŝƐ ĞdžƉĞĐƚĞĚ ƚŽ ƌĞĚƵĐĞ ĞŵŝƐƐŝŽŶƐ ŽĨ ŽƚŚĞƌ Ăŝƌ ƉŽůůƵƚĂŶƚƐ͕ ĐƌĞĂƚŝŶŐ ĂĚĚŝƚŝŽŶĂů ŚĞĂůƚŚ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ ŝŶ ĂĚĚŝƚŝŽŶ ƚŽ ƚŚĞ ĂǀŽŝĚĞĚ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŝŵƉĂĐƚƐ͘ϯϯϬ dŚĞ ƌĞŵĂŝŶŝŶŐ ƉŽůůƵƚŝŽŶ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞůLJ ĂĨĨĞĐƚƐ ĞŶǀŝƌŽŶŵĞŶƚĂů ũƵƐƚŝĐĞ ĐŽŵŵƵŶŝƚŝĞƐ ;ƐĞĞ ĞĐƚŝŽŶ ϯ͘ϰ͘ϳͿ͘ ŶǀŝƌŽŶŵĞŶƚĂů ũƵƐƚŝĐĞ ĐŽŵŵƵŶŝƚŝĞƐ ĂƌĞ ĂůƐŽ ĚŝƐƉƌŽƉŽƌƚŝŽŶĂƚĞůLJ ŝŵƉĂĐƚĞĚ ďLJ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ďĞĐĂƵƐĞ ƚŚĞLJ ŚĂǀĞ ůĞƐƐ ƌĞƐŝůŝĞŶĐĞ ĐĂƉĂĐŝƚLJ͘ 3 4 2 Role of Water in Thermoelectric Power Generation ůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐ ĂƌĞ ƐƚƌŽŶŐůLJ ŝŶƚĞƌĐŽŶŶĞĐƚĞĚ͘ tĂƚĞƌ ŝƐ Ă ĐƌŝƚŝĐĂů ƌĞƋƵŝƌĞŵĞŶƚ ĨŽƌ ŵĂŶLJ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dǁŽͲƚŚŝƌĚƐ ŽĨ ƚŽƚĂů h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ—ŝŶĐůƵĚŝŶŐ ŵĂŶLJ ĐŽĂů͕ ŶĂƚƵƌĂů ŐĂƐ͕ ŶƵĐůĞĂƌ͕ W͕ ĂŶĚ ŐĞŽƚŚĞƌŵĂů ƉůĂŶƚƐ—ƌĞƋƵŝƌĞƐ ǁĂƚĞƌ ĨŽƌ ĐŽŽůŝŶŐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ h ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂǀĞ ƐŝŐŶŝĨŝĐĂŶƚ ǁĂƚĞƌ ĚĞŵĂŶĚƐ͘ ƌŽŵ Ă ĨƵůůͲƐLJƐƚĞŵ ƉĞƌƐƉĞĐƚŝǀĞ͕ ƚŚĞ ũŽŝŶƚ ƌĞůŝĂŶĐĞ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐ ŽŶ ĞĂĐŚ ŽƚŚĞƌ ĐĂŶ ĐƌĞĂƚĞ ǀƵůŶĞƌĂďŝůŝƚŝĞƐ ;Ğ͘Ő͕͘ ĚƌŽƵŐŚƚ ŝŵƉĂĐƚƐ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ŚLJĚƌŽƉŽǁĞƌͿ͕ ďƵƚ ƚŚŝƐ ũŽŝŶƚ ƌĞůŝĂŶĐĞ ĐĂŶ ĂůƐŽ ĐƌĞĂƚĞ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĨŽƌ ĞĂĐŚ ƐLJƐƚĞŵ ƚŽ ďĞŶĞĨŝƚ ƚŚĞ ŽƚŚĞƌ ƚŚƌŽƵŐŚ ǁĞůůͲĚĞƐŝŐŶĞĚ ŝŶƚĞŐƌĂƚŝŽŶ ;ƐĞĞ ŝŐƵƌĞ ϯͲϮϭ ĨŽƌ ĐŽŶŶĞĐƚŝŽŶƐ ďĞƚǁĞĞŶ ĞŶĞƌŐLJ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐͿ͘ ŽŽ ƐƚĞĂŵ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƉůĂŶƚ ŝƐ Ă ƉŽǁĞƌ ƉůĂŶƚ ŝŶ ǁŚŝĐŚ ƐƚĞĂŵ ŝƐ ƵƐĞĚ ƚŽ ŐĞŶĞƌĂƚĞ ĞůĞĐƚƌŝĐŝƚLJ͘ Ŷ ƉĂƌƚŝĐƵůĂƌ͕ ǁĂƚĞƌ ŝƐ ďŽŝůĞĚ ƚŽ ŐĞŶĞƌĂƚĞ ƐƚĞĂŵ ǁŚŝĐŚ͕ ŝŶ ƚƵƌŶ͕ ƐƉŝŶƐ Ă ƐƚĞĂŵ ƚƵƌďŝŶĞ ƚŚĂƚ ĚƌŝǀĞƐ ĂŶ ĞůĞĐƚƌŝĐĂů ŐĞŶĞƌĂƚŽƌ͘ DŽƐƚ ĐŽĂů͕ ŐĞŽƚŚĞƌŵĂů͕ ƐŽůĂƌ ƚŚĞƌŵĂů͕ ŶƵĐůĞĂƌ͕ ĂŶĚ ǁĂƐƚĞ ŝŶĐŝŶĞƌĂƚŝŽŶ ƉůĂŶƚƐ ĂŶĚ ƐŽŵĞ ŶĂƚƵƌĂů ŐĂƐ ƉŽǁĞƌ ƉůĂŶƚƐ ĂƌĞ ƐƚĞĂŵ ĞůĞĐƚƌŝĐ ƉŽǁĞƌ ƉůĂŶƚƐ͘ 3-56 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-21 Hybrid Sankey Diagram of 2011 U S Interconnected Water and Energy Flows331 Significant fractions of surface freshwater withdrawals are for thermoelectric cooling and for agriculture but agriculture consumes more water than thermoelectric cooling consumes Most electricity is generated for residential commercial and industrial use but significant fractions are used for public water supply and wastewater treatment The Sankey diagram aids in visualizing these complex data streams and interconnections as a first step toward further analysis ĞǀĞƌĂů ƌĞĐĞŶƚ ƚƌĞŶĚƐ ĂƌĞ ƉĂƌƚŝĐƵůĂƌůLJ ŝŵƉŽƌƚĂŶƚ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵƐ͘ ŝƌƐƚ͕ ƚŚĞ ƌŝƐŝŶŐ ƐŚĂƌĞ ŽĨ ǁŝŶĚ ƚƵƌďŝŶĞ ĂŶĚ ƐŽůĂƌ Ws ŐĞŶĞƌĂƚŝŽŶ ƌĞƋƵŝƌĞƐ ŶĞŐůŝŐŝďůĞ ǁĂƚĞƌ ĨŽƌ ŽƉĞƌĂƚŝŽŶƐ͘ ĞĐŽŶĚ͕ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ǁĂƚĞƌ withdrawn ĨŽƌ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ĐŽŽůŝŶŐƉƉ ŚĂƐ ĚĞĐƌĞĂƐĞĚ ĂƐ ŽůĚĞƌ ƉůĂŶƚƐ ĂƌĞ ĚĞĐŽŵŵŝƐƐŝŽŶĞĚ ĂŶĚ ŵŽƌĞ ǁĂƚĞƌͲĞĨĨŝĐŝĞŶƚ Žƌ ĚƌLJͲĐŽŽůĞĚϯϯϮ ƐLJƐƚĞŵƐ ĂƌĞ ŝŶƐƚĂůůĞĚ͘ ŽǁĞǀĞƌ͕ ǁĂƚĞƌ consumption ŝŶ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ƉůĂŶƚƐ ŝƐ ƌŝƐŝŶŐ ĂƐ ĞǀĂƉŽƌĂƚŝǀĞ ĐŽŽůŝŶŐ ŚĂƐ ďĞĐŽŵĞ ƚŚĞ ƉƌĞĨĞƌƌĞĚ ĐŽŽůŝŶŐ ƚĞĐŚŶŽůŽŐLJ ĨŽƌ ŶĞǁ ƉůĂŶƚƐ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ ƚŚĞƌĞ ĂƌĞ ǁĂƚĞƌ ŝŵƉůŝĐĂƚŝŽŶƐ ŽĨ ƚŚĞ ƚĞĐŚŶŽůŽŐLJ ƉĂƚŚ ƉƵƌƐƵĞĚ ƚŽ ĂĚĚƌĞƐƐ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ͘ ; ĞĞ ŝŐƵƌĞ ϯͲϮϮ ĨŽƌ Ă ďƌĞĂŬĚŽǁŶ ŽĨ ŐĞŶĞƌĂƚŝŽŶ͕ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů͕ ĂŶĚ ǁĂƚĞƌ ĐŽŶƐƵŵƉƚŝŽŶ ďLJ ĐŽŽůŝŶŐ ƚLJƉĞ͘Ϳ dŚĞƌŵŽĞůĞĐƚƌŝĐ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ǁŝƚŚĚƌĂǁƐ ůĂƌŐĞ ƋƵĂŶƚŝƚŝĞƐ ŽĨ ǁĂƚĞƌ ĨŽƌ ĐŽŽůŝŶŐ ƉŽǁĞƌͲƉƌŽĚƵĐŝŶŐ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ĐŽŶĚĞŶƐŝŶŐ ƐƚĞĂŵ͘ ƚ ĂůƐŽ ĚŝƐƐŝƉĂƚĞƐ ůĂƌŐĞ ƋƵĂŶƚŝƚŝĞƐ ŽĨ ƉƌŝŵĂƌLJ ĞŶĞƌŐLJ ĚƵĞ ƚŽ ƚŚĞ ƉƌŽĐĞƐƐ ŽĨ ĐŽŶǀĞƌƚŝŶŐ ƚŚĞƌŵĂů ĞŶĞƌŐLJ ƚŽ ĞůĞĐƚƌŝĐŝƚLJ͘ Ŷ ϮϬϭϬ͕ƋƋ ϰϱ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů h͘ ͘ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂůƐ ǁĞƌĞ ĨŽƌ ƉƉ “Withdrawal” designates any water diverted from a surface or groundwater source “Consumed water” designates ǁŝƚŚĚƌĂǁŶ ǁĂƚĞƌ ƚŚĂƚ ŝƐ ŶŽƚ ƌĞƚƵƌŶĞĚ ƚŽ ŝƚƐ ƐŽƵƌĐĞ ;Ğ͘Ő͕͘ ďĞĐĂƵƐĞ ŝƚ ŚĂƐ ĞǀĂƉŽƌĂƚĞĚ͕ ďĞĞŶ ƚƌĂŶƐƉŝƌĞĚ ďLJ ƉůĂŶƚƐ͕ Žƌ ŝŶĐŽƌƉŽƌĂƚĞĚ ŝŶƚŽ ƉƌŽĚƵĐƚƐͿ͘ ƋƋ dŚĞ h͘ ͘ 'ĞŽůŽŐŝĐĂů ƵƌǀĞLJ ĐŽůůĞĐƚƐ ĚĂƚĂ ŽŶ ǁĂƚĞƌ ƵƐĂŐĞ ďLJ ǁĂƚĞƌ ƐŽƵƌĐĞ ĞǀĞƌLJ ĨŝǀĞ LJĞĂƌƐ ĂŶĚ ƉƵďůŝƐŚĞƐ ŝƚ ŶĞĂƌ ƚŚĞ ďĞŐŝŶŶŝŶŐ ŽĨ ƚŚĞ ŶĞdžƚ ĚĂƚĂ ĐŽůůĞĐƚŝŽŶ ĐLJĐůĞ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-57 Chapter III Building a Clean Electricity Future ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ĐŽŽůŝŶŐ ĂůŽŶĞ͕ ŵĂŬŝŶŐ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ƚŚĞ ůĂƌŐĞƐƚ ǁŝƚŚĚƌĂǁĞƌ ŽĨ ĐŽŵďŝŶĞĚ ĨƌĞƐŚ ĂŶĚ ƐĂůŝŶĞ ǁĂƚĞƌ ŶĂƚŝŽŶĂůůLJ͘ϯϯϯ ĞǀĞŶƚLJͲƚǁŽ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞƐĞ ǁŝƚŚĚƌĂǁĂůƐ ĨŽƌ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ĐŽŽůŝŶŐ ǁĞƌĞ ĨƌĞƐŚ ƐƵƌĨĂĐĞ ǁĂƚĞƌ͕ Ϭ͘ϰ ƉĞƌĐĞŶƚ ǁĞƌĞ ĨƌĞƐŚ ŐƌŽƵŶĚǁĂƚĞƌ͕ ĂŶĚ ƚŚĞ ƌĞŵĂŝŶŝŶŐ ǁĞƌĞ ĨƌŽŵ ƐĂůŝŶĞ ƐŽƵƌĐĞƐ͘ϯϯϰ dŚĞ ŝŶƚĞŶƐŝƚLJ ŽĨ ǁĂƚĞƌ ƵƐĞ ĂŶĚ ĞŶĞƌŐLJ ĚŝƐƐŝƉĂƚĞĚ ǀĂƌŝĞƐ ǁŝƚŚ ĐŽŽůŝŶŐ ƐLJƐƚĞŵ ƚĞĐŚŶŽůŽŐLJ ĂŶĚ ŐĞŶĞƌĂƚŝŽŶ ƚLJƉĞ͕ ĂƐ ǁĞůů ĂƐ ŽƉĞƌĂƚŝŽŶƐ͘ KŶĐĞͲƚŚƌŽƵŐŚ ĐŽŽůŝŶŐ ƚLJƉŝĐĂůůLJ ǁŝƚŚĚƌĂǁƐ ŵŽƌĞ ǁĂƚĞƌ ďƵƚ ĐŽŶƐƵŵĞƐ ůĞƐƐ ƚŚĂŶ Ă ǁĞƚͲƌĞĐŝƌĐƵůĂƚŝŶŐ ƐLJƐƚĞŵ͘ ƌLJ ĐŽŽůŝŶŐ ĂŶĚ ǁĞƚ ƚŽǁĞƌ ĐĂƉŝƚĂů ĂŶĚ ŽƉĞƌĂƚŝŶŐ ĐŽƐƚƐ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŚŝŐŚĞƌ ƚŚĂŶ ĨŽƌ ŽŶĐĞͲƚŚƌŽƵŐŚ͕ ǁŝƚŚ ĚƌLJ ĐŽŽůŝŶŐ ďĞŝŶŐ ƚŚĞ ŵŽƐƚ ĞdžƉĞŶƐŝǀĞ͘ ƌLJ ĐŽŽůŝŶŐ ƵŶŝƚƐ ĂůƐŽ ŝŶĚƵĐĞ ĞĨĨŝĐŝĞŶĐLJ ƉĞŶĂůƚŝĞƐ͕ ƌĂŝƐŝŶŐ ƚŚĞ ƉŽƐƐŝďŝůŝƚLJ ŽĨ ƉŽƚĞŶƚŝĂůůLJ ĐƌĞĂƚŝŶŐ ƚƌĂĚĞŽĨĨƐ ďĞƚǁĞĞŶ ĂĚĚƌĞƐƐŝŶŐ ǁĂƚĞƌ ĂŶĚ ĐůŝŵĂƚĞ ƌĞƐŝůŝĞŶĐĞ ǀĞƌƐƵƐ ĐůŝŵĂƚĞ ŵŝƚŝŐĂƚŝŽŶ͕ ǁŚŝĐŚ ĐŽƵůĚ ďĞ ŝŵƉƌŽǀĞĚ ǁŝƚŚ ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ͘ Figure 3-22 U S Power Generation Water Withdrawal and Water Consumption by Cooling Type 2015335 336 337 338 In 2015 nearly 21 percent of generation used once-through cooling and 52 percent of generation used wet-recirculating cooling About 21 percent of the electricity generated—including hydropower natural gas turbines and wind turbines—did not require cooling Water withdrawals for electricity generation totaled 167 billion gallons daily BGD the majority of which was withdrawn by once-through cooling Water consumption totaled 2 9 BGD with 84 percent of this amount consumed by wet-recirculating cooling 3-58 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-23 Water Withdrawal and Generation by Region 2015339 340 The largest water withdrawal regions are dominated by coal and or nuclear power generation The area of each pie chart corresponds to total power generation in that region “Other” includes petroleum other fossil fuels pumped storage non-biogenic municipal solid waste batteries and hydrogen The eight regions shown in the figure are notional based upon contiguous groupings of states and their generation mixes resources and market structures ZĞŐŝŽŶĂůůLJ͕ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů ĂŶĚ ĐŽŶƐƵŵƉƚŝŽŶ ǀĂƌLJ ƐŝŐŶŝĨŝĐĂŶƚůLJ ĂĐƌŽƐƐ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƉƌŝŵĂƌŝůLJ ĚƵĞ ƚŽ ƚŚĞ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ŵŝdž ĂŶĚ ĐŽŽůŝŶŐ ƐLJƐƚĞŵ ƚLJƉĞ͘ ŝŐƵƌĞ ϯͲϮϯ ƐŚŽǁƐ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů ĨŽƌ ĚŝĨĨĞƌĞŶƚ ƚLJƉĞƐ ŽĨ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ĞŝŐŚƚ ŶŽƚŝŽŶĂů ƌĞŐŝŽŶƐ ǁŝƚŚŝŶ ƚŚĞ ϰϴ ĐŽŶƚŝŐƵŽƵƐ ƐƚĂƚĞƐ͘ dŚĞ ŶŽƚŝŽŶĂů ƌĞŐŝŽŶƐ ĂƌĞ ďĂƐĞĚ ŽŶ ĐŽŶƚŝŐƵŽƵƐ ŐƌŽƵƉŝŶŐƐ ŽĨ ƐƚĂƚĞƐ ĂŶĚ ƚŚĞŝƌ ŐĞŶĞƌĂƚŝŽŶ ŵŝdžĞƐ͕ ƌĞƐŽƵƌĐĞƐ͕ ĂŶĚ ŵĂƌŬĞƚ ƐƚƌƵĐƚƵƌĞƐ͘ tŚŝůĞ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂůƐ ŝŶ Ăůů ĞŝŐŚƚ ƌĞŐŝŽŶƐ ĂƌĞ ĚŽŵŝŶĂƚĞĚ ďLJ ƐƵƌĨĂĐĞ ǁĂƚĞƌ͕ ƚŚĞ ŽƵƚŚĞĂƐƚ͕ ŽƵƚŚǁĞƐƚͬ ĞŶƚƌĂů͕ ĂŶĚ tĞƐƚ ƌĞŐŝŽŶƐ ĐŽŶƐƵŵĞ ŚŝŐŚĞƌ ůĞǀĞůƐ ŽĨ ŐƌŽƵŶĚǁĂƚĞƌ ĂŶĚ ƌĞĐůĂŝŵĞĚ ƉůĂŶƚ ĚŝƐĐŚĂƌŐĞ ǁĂƚĞƌ ƌĞůĂƚŝǀĞ ƚŽ ŽƚŚĞƌ ƌĞŐŝŽŶƐ͘ dŚĞ ƌĞŐŝŽŶƐ ǁŝƚŚ ƚŚĞ ůĂƌŐĞƐƚ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů ĂƌĞ ĚŽŵŝŶĂƚĞĚ ďLJ Ă ĐŽŵďŝŶĂƚŝŽŶ ŽĨ ĐŽĂů ĂŶĚ ŶƵĐůĞĂƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͘ ŝŶĐĞ ƚŚĞ ϭϵϱϬƐ͕ ƚŚĞ ĂŵŽƵŶƚ ŽĨ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁŶ ƉĞƌ ŬtŚ ŚĂƐ ƐƚĞĂĚŝůLJ ĚĞĐůŝŶĞĚ ĂƐ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ĂŶĚ ĐŽŽůŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ŚĂǀĞ ďĞĐŽŵĞ ŵŽƌĞ ĞĨĨŝĐŝĞŶƚ ŽǀĞƌ ƚŝŵĞ͘ dŚĞ ƚŽƚĂů ĂŵŽƵŶƚ ŽĨ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁŶ ĂĐƌŽƐƐ Ăůů ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ƉůĂŶƚƐ͕ ŚŽǁĞǀĞƌ͕ ŚĂƐ ƐƚĞĂĚŝůLJ ĂŶĚ ĚƌĂŵĂƚŝĐĂůůLJ ŝŶĐƌĞĂƐĞĚ ƌĞůĂƚŝǀĞ ƚŽ ŝƌƌŝŐĂƚŝŽŶ͕ ŝŶĚƵƐƚƌLJ͕ ĂŶĚ ƉƵďůŝĐ ƵƐĞ ;ƐĞĞ ŝŐƵƌĞ ϯͲϮϰͿ͘ DƵĐŚ ŽĨ ƚŚŝƐ ŝŶĐƌĞĂƐĞ ŝƐ ĚƵĞ ƚŽ ďƵŝůĚͲŽƵƚ ŽĨ ŽŶĐĞͲƚŚƌŽƵŐŚ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ĨŽƌ ƚŚĞ ĐŽĂů ĂŶĚ ŶƵĐůĞĂƌ ĨůĞĞƚƐ͘ LJ ƚŚĞ ϭϵϳϬƐ͕ ƚŚĞ ǁĞƚͲƌĞĐŝƌĐƵůĂƚŝŶŐ ƐLJƐƚĞŵ ďĞĐĂŵĞ ƚŚĞ ĚŽŵŝŶĂŶƚ ĐŽŽůŝŶŐ ƐLJƐƚĞŵ—ĂƐ ƚŚĞƐĞ ƐLJƐƚĞŵƐ ǁŝƚŚĚƌĂǁ ůĞƐƐ ǁĂƚĞƌ͕ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ǁŝƚŚĚƌĂǁĂůƐ ůĞǀĞůĞĚ ŽĨĨ͘ϯϰϭ͕ ϯϰϮ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-59 Chapter III Building a Clean Electricity Future ŽŵĞ ŽƉĞƌĂƚŝŽŶĂů ƉƌĂĐƚŝĐĞƐ ĂůƐŽ ĂĨĨĞĐƚ ǁĂƚĞƌ ƵƐĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ƐŽŵĞ ƉĞĂŬĞƌ ƉŽǁĞƌ ƉůĂŶƚƐ͕ ƐƵĐŚ ĂƐ ŶĂƚƵƌĂů ŐĂƐ ƐƚĞĂŵ ƚƵƌďŝŶĞƐ ǁŝƚŚ ůŽǁ ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ͕ ƌƵŶ ƚŚĞŝƌ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ĨŽƌ Ă ƐƵďƐƚĂŶƚŝĂů ĨƌĂĐƚŝŽŶ ŽĨ ƚŚĞ ƚŝŵĞ ǁŚĞŶ ƚŚĞLJ ĂƌĞ ŶŽƚ ŐĞŶĞƌĂƚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ;ĂƐ ƚŚĞ ĐŽŵƉĂƌŝƐŽŶ ďĞƚǁĞĞŶ ĐĂƉĂĐŝƚLJ ĨĂĐƚŽƌƐ ĨŽƌ ŐĞŶĞƌĂƚŝŽŶ ǀƐ͘ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ƐŚŽǁƐ ŝŶ ŝŐƵƌĞ ϯͲϮϱͿ͖ ƚŚĞLJ ĂůƐŽ ǁŝƚŚĚƌĂǁ Ă ƐŝŐŶŝĨŝĐĂŶƚůLJ ŚŝŐŚĞƌ ĂŵŽƵŶƚ ŽĨ ǁĂƚĞƌ ƚŚĂŶ E' ƉůĂŶƚƐ͘ dŚĞƌĞ ĂƌĞ ŵĂŶLJ ƉŽƚĞŶƚŝĂů ĞdžƉůĂŶĂƚŝŽŶƐ ĨŽƌ ƚŚŝƐ ďĞŚĂǀŝŽƌ͘ tŚĞŶ ƉůĂŶƚƐ ĂƌĞ ŶŽƚ ŐĞŶĞƌĂƚŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ͕ ƚŚĞLJ ŵĂLJ ĚĞĐŝĚĞ ƚŽ ŬĞĞƉ ƚŚĞŝƌ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ƌƵŶŶŝŶŐ ŝŶ ŽƌĚĞƌ ƚŽ ŵŝŶŝŵŝnjĞ ďŝŽĨŽƵůŝŶŐ ĂŶĚ ĐŽƌƌŽƐŝŽŶ͕ ĞƐƉĞĐŝĂůůLJ ŝŶ ŚŽƚ ĂŶĚ ŚƵŵŝĚ ĐůŝŵĂƚĞƐ͘ dŚĞLJ ŵĂLJ ĂůƐŽ ŽƉƚ ƚŽ ŬĞĞƉ ƚŚĞŝƌ ĐŽŽůŝŶŐ ƐLJƐƚĞŵ ƌƵŶŶŝŶŐ ƐŽ ƚŚĞLJ ĐĂŶ ďĞ ƌĞƐƉŽŶƐŝǀĞ ƚŽ ŝŶĐƌĞĂƐĞƐ ŝŶ ĚĞŵĂŶĚ ĨƌŽŵ ĞŶĚ ƵƐĞƌƐ Žƌ ĚĞĐƌĞĂƐĞƐ ŝŶ ƐƵƉƉůLJ ĨƌŽŵ ǀĂƌŝĂďůĞ ŐĞŶĞƌĂƚŝŽŶ͘ dŚĞƌĞ ŵĂLJ ďĞ ŽƉĞƌĂƚŝŽŶĂů ďĞƐƚ ƉƌĂĐƚŝĐĞƐ ƚŚĂƚ ďĞƚƚĞƌ ŽƉƚŝŵŝnjĞ ƚŚĞ ƚƌĂĚĞͲŽĨĨƐ ďĞƚǁĞĞŶ ůŽĂĚ ďĂůĂŶĐŝŶŐ͕ ĂǀŽŝĚŝŶŐ ďŝŽĨŽƵůŝŶŐ ĂŶĚ ĐŽƌƌŽƐŝŽŶ͕ ĂŶĚ ŵŝŶŝŵŝnjŝŶŐ ǁĂƚĞƌ ƵƐĞ͘ DŽƐƚ ƚLJƉĞƐ ŽĨ ǀĂƌŝĂďůĞ ŐĞŶĞƌĂƚŝŽŶ ĚŽ ŶŽƚ ƌĞƋƵŝƌĞ ǁĂƚĞƌ ĨŽƌ ĐŽŽůŝŶŐ ƉƵƌƉŽƐĞƐ͕ ďƵƚ ƚŚĞLJ ĐĂŶ ƉƵƚ ƉƌĞƐƐƵƌĞ ŽŶ ƚŚĞ ƐLJƐƚĞŵ ƚŽ ƉƌŽǀŝĚĞ ůŽĂĚ ďĂůĂŶĐŝŶŐ͕ ƵƐƵĂůůLJ ŝŶ ƚŚĞ ĨŽƌŵ ŽĨ ĚŝƐƉĂƚĐŚĂďůĞ ŐĞŶĞƌĂƚŝŽŶ ƚŚĂƚ ĚŽĞƐ ƌĞƋƵŝƌĞ ǁĂƚĞƌ ĨŽƌ ĐŽŽůŝŶŐ͘ dŚĞƐĞ ŝŶĚŝƌĞĐƚ ĞĨĨĞĐƚƐ ŝŶĐƌĞĂƐĞ ƚŚĞ ǀĂůƵĞ ƉƌŽƉŽƐŝƚŝŽŶ ĨŽƌ ŽƚŚĞƌ ĨŽƌŵƐ ŽĨ ůŽĂĚ ďĂůĂŶĐŝŶŐ͕ ƐƵĐŚ ĂƐ ŐƌŝĚ ƐƚŽƌĂŐĞ Žƌ Z͘ Figure 3-24 Water Withdrawals for Thermoelectric Generation and Other Sectors343 344 The water intensity of thermoelectric generation represented by bars has decreased over time The total amount of water withdrawn by thermoelectric generation represented by colored lines has increased significantly relative to other sectors but it is now declining 3-60 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 3-25 2015 Cooling System Capacity Factors vs Generation Capacity Factors345 Electricity generators run their cooling systems with varying capacity factors relative to their generating capacity factors Natural gas steam turbines Rankine cycle plants —many likely acting as peakers—run their cooling systems for a substantial amount of time when they are not generating as do a number of NGCC plants Plants on the dotted line run their cooling systems with the same capacity factor as their power generation capacity factor i e only when they are generating Plants that are dispatched primarily during times of peak electricity demand are considered peaking plants and will generally have lower power generation capacity factors Plants used for baseload electricity will generally have higher power generation capacity factors 3 4 3 Low-Carbon Generation and Water dŚĞ ŵŝdž ŽĨ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ƉŽƌƚĨŽůŝŽ ĚĞƉůŽLJĞĚ ƚŽ ƌĞĚƵĐĞ ' ' ĞŵŝƐƐŝŽŶƐ ǁŝůů ŚĂǀĞ ŝŵƉůŝĐĂƚŝŽŶƐ ĨŽƌ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů ĂŶĚ ĐŽŶƐƵŵƉƚŝŽŶ͘ EĞǁ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ ƚŚĂƚ ƌĞƋƵŝƌĞƐ ĐŽŽůŝŶŐ ǁŝůů ůŝŬĞůLJ ĞŵƉůŽLJ ƌĞĐŝƌĐƵůĂƚŝŶŐ ƐLJƐƚĞŵƐ͕ ǁŚŝĐŚ ŐĞŶĞƌĂůůLJ ŚĂǀĞ ůŽǁ ǁĂƚĞƌ ǁŝƚŚĚƌĂǁĂů ďƵƚ ŚŝŐŚ ǁĂƚĞƌ ĐŽŶƐƵŵƉƚŝŽŶ͘ ŝŐƵƌĞ ϯͲ Ϯϲ ƐŚŽǁƐ ƚŚĂƚ ƐŽŵĞ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĐĂŶ ŚĂǀĞ ďŽƚŚ ůŽǁ ǁĂƚĞƌ ƵƐĞ ĂŶĚ ĐĂƌďŽŶ ŝŶƚĞŶƐŝƚŝĞƐ͕ ƐƵĐŚ ĂƐ Ws ĂŶĚ ǁŝŶĚ͕ ǁŚŝůĞ ŽƚŚĞƌ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ƉƌĞƐĞŶƚ ƚƌĂĚĞŽĨĨƐ ďĞƚǁĞĞŶ ǁĂƚĞƌ ĂŶĚ ĐĂƌďŽŶ ĞŵŝƐƐŝŽŶƐ͘ ŽŵĞ ůŽǁͲĐĂƌďŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ŶƵĐůĞĂƌ ŐĞŶĞƌĂƚŝŽŶ͕ ŐĞŽƚŚĞƌŵĂů ŐĞŶĞƌĂƚŝŽŶ͕ W͕ ĂŶĚ h ͕ ƌĞƋƵŝƌĞ ƌĞůĂƚŝǀĞůLJ ůĂƌŐĞ ĂŵŽƵŶƚƐ ŽĨ ǁĂƚĞƌ͘ ŶĐŽƌƉŽƌĂƚŝŶŐ ǁĂƚĞƌ ƵƐĞ ĂŶĚ ƉĞƌĨŽƌŵĂŶĐĞ ŵĞƚƌŝĐƐ ŝŶƚŽ Z Θ ĨƵŶĚŝŶŐ ĐƌŝƚĞƌŝĂ ĨŽƌ ƚŚĞƐĞ ůŽǁͲĐĂƌďŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĐŽƵůĚ ŝŵƉƌŽǀĞ ƚŚĞ ŽƉƚŝŽŶƐ ĂǀĂŝůĂďůĞ ĨŽƌ ĐůŝŵĂƚĞ ŵŝƚŝŐĂƚŝŽŶ ĂŶĚ ƌĞƐŝůŝĞŶĐĞ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-61 Chapter III Building a Clean Electricity Future ŽŶǀĞƌƐĞůLJ͕ ĚƌLJ ĐŽŽůŝŶŐ͕ ǁŚŝĐŚ ŐƌĞĂƚůLJ ƌĞĚƵĐĞƐ ǁĂƚĞƌ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ĐŽŽůŝŶŐ͕ ŐĞŶĞƌĂůůLJ ŝŶĚƵĐĞƐ ĂŶ ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉĞŶĂůƚLJ͕ ƉĂƌƚŝĐƵůĂƌůLJ ƵŶĚĞƌ ŚŝŐŚͲƚĞŵƉĞƌĂƚƵƌĞ ĂŵďŝĞŶƚ ĐŽŶĚŝƚŝŽŶƐ͘ dŚŝƐ ŝŶĐƌĞĂƐĞƐ ƚŚĞ ĐĂƌďŽŶ ŝŶƚĞŶƐŝƚLJ ŽĨ ŐĞŶĞƌĂƚŝŽŶ͕ ĂƐ ǁĞůů ĂƐ ŽƚŚĞƌ ĂĚŽƉƚŝŽŶ ĐŚĂůůĞŶŐĞƐ͘ ŽǁĞǀĞƌ͕ ĚƌLJ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ŽĨĨĞƌ ƐŝŐŶŝĨŝĐĂŶƚ ƐŝƚŝŶŐ ĨůĞdžŝďŝůŝƚLJ ĂƐ ƚŚĞLJ ĚŽ ŶŽƚ ƌĞƋƵŝƌĞ ĂĐĐĞƐƐ ƚŽ ůĂƌŐĞ ǀŽůƵŵĞƐ ŽĨ ǁĂƚĞƌ͘ ƚ ƉƌĞƐĞŶƚ͕ ƚŚĞƌĞ ĂƌĞ ϳϰ ĚƌLJ Žƌ ŚLJďƌŝĚ ĐŽŽůŝŶŐ ƐLJƐƚĞŵƐ ƚŚĂƚ ƉƌŽǀŝĚĞ ϱϯ dtŚ ŽĨ ŶĞƚ ŐĞŶĞƌĂƚŝŽŶ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ŵŽƐƚ ŽĨ ǁŚŝĐŚ ŚĂǀĞ ďĞĞŶ ĚĞƉůŽLJĞĚ ŝŶ E' ƉůĂŶƚƐ ƐŝŶĐĞ ϮϬϬϬ͘ dŚĞ ĞŶĞƌŐLJ ƉĞŶĂůƚLJ ĨŽƌ ĐƵƌƌĞŶƚ ĚƌLJ ĐŽŽůŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ƌĞůĂƚŝǀĞ ƚŽ ŽŶĐĞͲƚŚƌŽƵŐŚ ĐŽŽůŝŶŐ ƌĂŶŐĞƐ ĨƌŽŵ ϰ͘Ϯ ƉĞƌĐĞŶƚ ƚŽ ϭϲ ƉĞƌĐĞŶƚ ĨŽƌ Ă ƌĞƉƌĞƐĞŶƚĂƚŝǀĞ ϰϬϬͲDt ĐŽĂůͲĨŝƌĞĚ ƉůĂŶƚ͕ ĚĞƉĞŶĚŝŶŐ ŽŶ ƉůĂŶƚ ƉĂƌĂŵĞƚĞƌƐ ĂŶĚ ĂŵďŝĞŶƚ ĐŽŶĚŝƚŝŽŶƐ͘ϯϰϲ Ŷ ĂĚĚŝƚŝŽŶ͕ ĞdžŝƐƚŝŶŐ ĚƌLJ ;ĂŝƌͲĐŽŽůĞĚͿ ŽƉƚŝŽŶƐ ŚĂǀĞ ŚŝŐŚĞƌ ĐĂƉŝƚĂů ĐŽƐƚƐ ĂŶĚ ƌĞƋƵŝƌĞ ĞdžƉĂŶĚĞĚ ƉŚLJƐŝĐĂů ĨŽŽƚƉƌŝŶƚƐ͘ϯϰϳ Figure 3-26 Carbon Emissions and Water Consumption Intensity Tradeoffs348 349 350 351 352 353 Some generation technologies e g solar PV and wind can have both low water and carbon intensities while other generation technologies present tradeoffs between water and carbon emissions For example low-carbon technologies such as nuclear geothermal and CSP generation along with carbon capture and storage CCS require large amounts of water Conversely dry cooling which greatly reduces water requirements for thermoelectric cooling often induces an efficiency penalty which increases the carbon intensity of generation Dotted lines represent ranges calculated from data and solid lines represent ranges from literature values dŚƌŽƵŐŚ ƚŚĞ ĚǀĂŶĐĞĚ ZĞƐĞĂƌĐŚ ŝŶ ƌLJ ŽŽůŝŶŐ ƉƌŽŐƌĂŵ͕ ƚŚĞ ĚǀĂŶĐĞĚ ZĞƐĞĂƌĐŚ WƌŽũĞĐƚƐ ŐĞŶĐLJ– ŶĞƌŐLJ ; ZW Ͳ Ϳ ŚĂƐ ŝŶǀĞƐƚĞĚ ĂďŽƵƚ ΨϯϬ ŵŝůůŝŽŶ ƚŽ ĂĚǀĂŶĐĞ ĚƌLJͲĐŽŽůŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ͘ dŚĞ ƉƌŽŐƌĂŵ ĂŝŵƐ ƚŽ ĚĞǀĞůŽƉ ĚƌLJͲĐŽŽůŝŶŐ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĚŽ ŶŽƚ ĐŽŶƐƵŵĞ ĂŶLJ ǁĂƚĞƌ͕ ĞůŝŵŝŶĂƚĞ ĞĨĨŝĐŝĞŶĐLJ ƉĞŶĂůƚŝĞƐ͕ ĂŶĚ ĚŽ ŶŽƚ ŝŶĐƌĞĂƐĞ ƚŚĞ K ďLJ ŵŽƌĞ ƚŚĂŶ ϱ ƉĞƌĐĞŶƚ͘ ZĞĂĐŚŝŶŐ ƚŚŝƐ ƚĂƌŐĞƚ ǁŽƵůĚ ĂůůŽǁ ĨŽƌ ƌĞĚƵĐĞĚ ǁĂƚĞƌ ƵƐĞ ĨŽƌ ĐŽŽůŝŶŐ ǁŝƚŚŽƵƚ ĂŶ ĂĚĚŝƚŝŽŶĂů ĞŶĞƌŐLJ ĞĨĨŝĐŝĞŶĐLJ ƉĞŶĂůƚLJ͘ Ŷ ĂĚĚŝƚŝŽŶ͕ K ŚĂƐ ƐƵƉƉŽƌƚĞĚ ĚĞƐŝŐŶƐ ĨŽƌ ĂĚǀĂŶĐĞĚ ŶƵĐůĞĂƌ ƌĞĂĐƚŽƌƐ ƚŚĂƚ ƵƐĞ ŵŽůƚĞŶ ƐĂůƚ ƌĂƚŚĞƌ ƚŚĂŶ ǁĂƚĞƌ ĂƐ Ă ĐŽŽůŝŶŐ ĨůƵŝĚ͘ DŽƌĞ ďƌŽĂĚůLJ͕ ƚŚĞƌĞ ĂƌĞ ďŽƚŚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĂŶĚ ƚƌĂĚĞŽĨĨƐ ŝŶ ĞŶĞƌŐLJ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐ ŝŶƚĞŐƌĂƚŝŽŶ ;Ğ͘Ő͕͘ ŝŶ ƵƐŝŶŐ ƚƌĞĂƚĞĚ ŵƵŶŝĐŝƉĂů ǁĂƐƚĞǁĂƚĞƌ ĨŽƌ ƚŚĞƌŵŽĞůĞĐƚƌŝĐ ĐŽŽůŝŶŐ͕ Žƌ ŝŶ ƌĞĐŽǀĞƌŝŶŐ ĞŶĞƌŐLJ ĨƌŽŵ ǁĂƐƚĞǁĂƚĞƌ ƐLJƐƚĞŵƐͿ͘ DĂŬŝŶŐ ĚĞƐŝŐŶ ĚĞĐŝƐŝŽŶƐ ĂďŽƵƚ ŚŽǁ ĂŶĚ ǁŚĞŶ ƚŽ ŝŶƚĞŐƌĂƚĞ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ǁĂƚĞƌ 3-62 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƐLJƐƚĞŵƐ Ăƚ ŵƵůƚŝƉůĞ ƐƉĂƚŝĂů ĂŶĚ ƚĞŵƉŽƌĂů ƐĐĂůĞƐ ŝƐ Ă ŵĂũŽƌ ĐŚĂůůĞŶŐĞ ƚŚĂƚ ŝŶǀŽůǀĞƐ Ă ŶƵŵďĞƌ ŽĨ ĂĐƚŽƌƐ͘ ĞƐŝŐŶ ŽĨ ŵŽƌĞ ŝŶƚĞŐƌĂƚĞĚ ƉŽůŝĐŝĞƐ ĂŶĚ ĚĞĐŝƐŝŽŶ ŵĂŬŝŶŐ ĨƌĂŵĞǁŽƌŬƐ ƚŚĂƚ ƚĂŬĞ ďŽƚŚ ŽƉƉŽƌƚƵŶŝƚŝĞƐ ĂŶĚ ƚƌĂĚĞŽĨĨƐ ŝŶƚŽ ĂĐĐŽƵŶƚ ĐŽƵůĚ ƵŶůŽĐŬ ĂĚĚŝƚŝŽŶĂů ǀĂůƵĞ ĨŽƌ ĞůĞĐƚƌŝĐŝƚLJ ĂŶĚ ǁĂƚĞƌ ƐLJƐƚĞŵƐ͘ 3 4 4 Land-Use and Ecological Impacts of the Electricity System dŚĞ ůĂŶĚͲƵƐĞ ĨŽŽƚƉƌŝŶƚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ĂƐƐŽĐŝĂƚĞĚ ŽƉĞƌĂƚŝŽŶƐ ŚĂƐ Ă ƌĂŶŐĞ ŽĨ ĚŝƌĞĐƚ ŝŵƉĂĐƚƐ ƚŽ ĞĐŽƐLJƐƚĞŵƐ ĂŶĚ ƚŽ ƐŽĐŝĞƚLJ ŵŽƌĞ ďƌŽĂĚůLJ͘ dŚĞ ŵĂŐŶŝƚƵĚĞ ŽĨ ƚŚĞƐĞ ŝŵƉĂĐƚƐ ĚĞƉĞŶĚƐ ŽŶ ŚŽǁ ƚŚĞ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĂĨĨĞĐƚƐ ĞŶĚĂŶŐĞƌĞĚ ƐƉĞĐŝĞƐ͕ ŝŶǀŽůǀĞƐ ƐĞŶƐŝƚŝǀĞ ĞĐŽůŽŐŝĐĂů ĂƌĞĂƐ͕ ŝŵƉĂĐƚƐ ĐƵůƚƵƌĂů Žƌ ŚŝƐƚŽƌŝĐ ƌĞƐŽƵƌĐĞƐ͕ ŐŝǀĞƐ ƌŝƐĞ ƚŽ ǀŝƐƵĂů Žƌ ĂĞƐƚŚĞƚŝĐ ĐŽŶĐĞƌŶƐ͕ Žƌ ŽƉĞŶƐ ŶĞǁ ĂƌĞĂƐ ƚŽ ĚĞǀĞůŽƉŵĞŶƚ͘ϯϱϰ tŚŝůĞ ĞdžƉĂŶĚŝŶŐ ƚƌĂŶƐŵŝƐƐŝŽŶ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ ;dΘ Ϳ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĐĂŶ ƉŽƐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŚĂůůĞŶŐĞƐ͕ ďƵŝůĚŝŶŐ ŶĞǁ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĐĂŶ ĂůƐŽ ŚĞůƉ ƚŽ ĞŶĂďůĞ ƐŝŐŶŝĨŝĐĂŶƚ ŶĞƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͘ dŚŝƐ ƐĞĐƚŝŽŶ ĚŝƐĐƵƐƐĞƐ ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ƚŚĂƚ ĂƌĞ ĐŽŵŵŽŶ ƚŽ ƚŚĞ ůĂŶĚͲƵƐĞ ĂŶĚ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŝŶĐůƵĚŝŶŐ ĚĞƐĐƌŝƉƚŝŽŶƐ ŽĨ ƚŚĞ ůĂŶĚͲƵƐĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĂŶĚ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ŽĨ ĚŝĨĨĞƌĞŶƚ ƚLJƉĞƐ ŽĨ ƉŽǁĞƌ ƉůĂŶƚƐ ĂŶĚ dΘ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͘ dŚŝƐ ƐĞĐƚŝŽŶ ŽŶůLJ ƚŽƵĐŚĞƐ ŽŶ Ă ĨĞǁ ŽĨ ƚŚĞ ŵŽƐƚ ƐŝŐŶŝĨŝĐĂŶƚ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ƚŚĂƚ ŽĐĐƵƌ ƵƉƐƚƌĞĂŵ ŽĨ ŐĞŶĞƌĂƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ĚŝƐƚƌŝďƵƚŝŽŶ͘ ŵŽƌĞ ĚĞƚĂŝůĞĚ ĞdžĂŵŝŶĂƚŝŽŶ ŽĨ ƚŚĞƐĞ ŝŵƉŽƌƚĂŶƚ ŝŵƉĂĐƚƐ ǁĂƐ ďĞLJŽŶĚ ƚŚĞ ƐĐŽƉĞ ŽĨ Y Z ϭ͘Ϯ͘ 3 4 4 1 Land-Use Impacts Žƌ Ăůů ƚĞĐŚŶŽůŽŐLJ ƚLJƉĞƐ͕ ƚŚĞ ƐŝƚŝŶŐ ŽĨ ƉŽǁĞƌ ƉůĂŶƚƐ ŝŶǀŽůǀĞƐ ƚŚĞ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶ ŽĨ ƚŚĞ ĞdžŝƐƚŝŶŐ ůĂŶĚƐĐĂƉĞ͕ ƚŚĞ ƌĞŵŽǀĂů ŽĨ ƐŽŝů ĂŶĚ ŐƌŽƵŶĚ ǀĞŐĞƚĂƚŝŽŶ͕ ĂŶĚ ƚŚĞ ƉŽƚĞŶƚŝĂů ĨŽƌ ĞƌŽƐŝŽŶ ĂŶĚ ƐĞĚŝŵĞŶƚĂƚŝŽŶ ůŽĂĚŝŶŐ ƚŽ ǁĂƚĞƌǁĂLJƐ ĚƵƌŝŶŐ ĐŽŶƐƚƌƵĐƚŝŽŶ͘ ŽǁĞǀĞƌ͕ ŽƚŚĞƌ ůĂŶĚͲƵƐĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ǀĂƌLJ ĂĐĐŽƌĚŝŶŐ ƚŽ ƚŚĞ ŐĞŶĞƌĂƚŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ƚŚĞŝƌ ĂƐƐŽĐŝĂƚĞĚ ŽƉĞƌĂƚŝŽŶĂů ƌĞƋƵŝƌĞŵĞŶƚƐ͘ ŝĨĞͲĐLJĐůĞ ůĂŶĚͲƵƐĞ ŝŵƉĂĐƚƐ ŽĨ ĨŽƐƐŝů ĂŶĚ ŶƵĐůĞĂƌ ƉůĂŶƚƐ͕ ǁŚĞŶ ĂĐĐŽƵŶƚŝŶŐ ĨŽƌ ĞdžƚƌĂĐƚŝŽŶ ĂŶĚ ǁĂƐƚĞ ĚŝƐƉŽƐĂů͕ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚ͖ ŚŽǁĞǀĞƌ͕ ƚŚĞ ƉŽǁĞƌ ƉůĂŶƚƐ ƚŚĞŵƐĞůǀĞƐ ĨĞĂƚƵƌĞ ƌĞůĂƚŝǀĞůLJ ƐŵĂůů ĨŽŽƚƉƌŝŶƚƐ͘ ŽŶǀĞƌƐĞůLJ͕ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ ůŝĨĞͲĐLJĐůĞ ůĂŶĚͲ ƵƐĞ ŝŵƉĂĐƚƐ ĂƌĞ ŵŝŶŽƌ͕ ǁŝƚŚ ŐĞŶĞƌĂƚŝŽŶ ĨĂĐŝůŝƚŝĞƐ ŚĂǀŝŶŐ ƐŝŐŶŝĨŝĐĂŶƚůLJ ůĂƌŐĞƌ ĨŽŽƚƉƌŝŶƚƐ͘ dŚĞƌĞ ŝƐ ůŝŵŝƚĞĚ ůŝƚĞƌĂƚƵƌĞ ĐŽŵƉĂƌŝŶŐ ůĂŶĚͲƵƐĞ ŝŵƉĂĐƚƐ ĂĐƌŽƐƐ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͘ϯϱϱ KŶĞ ϮϬϬϵ ƐƚƵĚLJ͕ ŚŽǁĞǀĞƌ͕ ƐŽƵŐŚƚ ƚŽ ŶŽƌŵĂůŝnjĞ ůŝĨĞͲĐLJĐůĞ ůĂŶĚ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ĐŽŶǀĞŶƚŝŽŶĂů ĂŶĚ ƌĞŶĞǁĂďůĞ ŐĞŶĞƌĂƚŝŽŶ ŽƉƚŝŽŶƐ͘ dŚŝƐ ƐƚƵĚLJ ĐŽŶĐůƵĚĞĚ ƚŚĂƚ ĂŵŽŶŐ ƌĞŶĞǁĂďůĞ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƚŚĞ Ws ůŝĨĞ ĐLJĐůĞ ƌĞƋƵŝƌĞĚ ƚŚĞ ƐŵĂůůĞƐƚ ĂŵŽƵŶƚ ŽĨ ůĂŶĚ͕ ĂŶĚ ďŝŽŵĂƐƐ ƚŚĞ ůĂƌŐĞƐƚ͘ϯϱϲ 'ƌŽƵŶĚͲŵŽƵŶƚĞĚ Ws ƐLJƐƚĞŵƐ ŝŶ ĂƌĞĂƐ ǁŝƚŚ ŚŝŐŚͲƋƵĂůŝƚLJ ƐŽůĂƌ ƌĞƐŽƵƌĐĞƐ ŚĂĚ ŶŽ ŐƌĞĂƚĞƌ ƌĞƋƵŝƌĞŵĞŶƚƐ ƚŚĂŶ ĐŽĂůͲďĂƐĞĚ ĨƵĞů ĐLJĐůĞƐ͕ ǁŚŝĐŚ ƌĞƋƵŝƌĞ ƌĞĐůĂŝŵŝŶŐ ŵŝŶĞ ůĂŶĚƐ ĂŶĚ ƐĞĐƵƌŝŶŐ ĂĚĚŝƚŝŽŶĂů ĂƌĞĂƐ ĨŽƌ ǁĂƐƚĞ ĚŝƐƉŽƐĂů͘ ϮϬϭϮ EZ ƌĞƉŽƌƚ ŽŶ ƌĞŶĞǁĂďůĞs’ ůĂŶĚ ƵƐĞ ĐĂůůĞĚ ĨŽƌ ŵŽƌĞ ĐŽŶƐŝƐƚĞŶƚ ŵĞƚŚŽĚŽůŽŐŝĞƐ ƚŽ ĚĞƚĞƌŵŝŶĞ ƚŚĞ ƌĞůĂƚŝǀĞ ŝŵƉĂĐƚ ĂŵŽŶŐ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͘ϯϱϳ dŚĞ ĚŝƌĞĐƚ ůĂŶĚ ƵƐĞ ĨŽƌ Ă ŶĂƚƵƌĂů ŐĂƐ ƉŽǁĞƌ ƉůĂŶƚ ŝƐ ƐŵĂůůĞƌ ƚŚĂŶ ƚŚĂƚ ƌĞƋƵŝƌĞĚ ĨŽƌ Ă ĐŽĂůͲĨŝƌĞĚ ƉůĂŶƚ ďĞĐĂƵƐĞ ůĂƌŐĞ ƐƚƌƵĐƚƵƌĞƐ ĂƌĞ ŶŽƚ ƌĞƋƵŝƌĞĚ ĨŽƌ ĨƵĞů ƐƚŽƌĂŐĞ Žƌ ĞŵŝƐƐŝŽŶͲĐŽŶƚƌŽů ĞƋƵŝƉŵĞŶƚ͘ϯϱϴ dŚĞ ůĂŶĚͲƵƐĞ ĨŽŽƚƉƌŝŶƚ ŽĨ Ă ƚLJƉŝĐĂů ϱϱϱͲDt E' ƉŽǁĞƌ ƉůĂŶƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ƚŽ ƵƐĞ ϮϬ ĂĐƌĞƐ͕ ǁŚŝůĞ Ă ƚLJƉŝĐĂů ϯϲϬͲDt ŐĂƐ ƚƵƌďŝŶĞ ƐŝŵƉůĞ ĐLJĐůĞ ƉůĂŶƚ ŝƐ ĞƐƚŝŵĂƚĞĚ ŽĐĐƵƉLJ ƌŽƵŐŚůLJ ŚĂůĨ ĂƐ ŵƵĐŚ ůĂŶĚ ĂƌĞĂ͘ tŚĞŶ ƚŚĞ ŶĂƚƵƌĂů ŐĂƐ ƉůĂŶƚƐ ŚĂǀĞ ĞƋƵŝƉŵĞŶƚ ĨŽƌ ĐĂƌďŽŶ ĐĂƉƚƵƌĞ ŽŶƐŝƚĞ͕ ƚŚĞŶ ƚŚĞ ůĂŶĚͲƵƐĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĂƌĞ ĞƐƚŝŵĂƚĞĚ ƚŽ ŝŶĐƌĞĂƐĞ ďLJ ϭϬ ƉĞƌĐĞŶƚ͘ϯϱϵ hƉƐƚƌĞĂŵ͕ ƚŚĞ ĚŝƌĞĐƚ ůĂŶĚͲƵƐĞ ƌĞƋƵŝƌĞŵĞŶƚƐ—ĂŶĚ ƉŽƚĞŶƚŝĂů ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ—ĨƌŽŵ ŶĂƚƵƌĂů ŐĂƐ ƉƌŽĚƵĐƚŝŽŶ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ͕ ĂŶĚ ƐƚŽƌĂŐĞ ĂƌĞ ŵŽƌĞ ƚŚĂŶ ĂŶ ŽƌĚĞƌ ŽĨ ŵĂŐŶŝƚƵĚĞ ŐƌĞĂƚĞƌ ƚŚĂŶ ƚŚĞ ĨŽŽƚƉƌŝŶƚ ŽĨ ŶĂƚƵƌĂů ŐĂƐ ƉŽǁĞƌ ƉůĂŶƚƐ͘ϯϲϬ Žƌ ĞdžĂŵƉůĞ͕ ƐŚĂůĞ ŐĂƐ ĚĞǀĞůŽƉŵĞŶƚ ŝŶǀŽůǀĞƐ ƌŝƐŬƐ ƚŽ ǁĂƚĞƌ ƋƵĂůŝƚLJ ĂŶĚ ƋƵĂŶƚŝƚLJ͕ ĂƐ ĐŚĞŵŝĐĂůƐ ŶĞĐĞƐƐĂƌLJ ĨŽƌ ĨƌĂĐŬŝŶŐ ŵŝŐŚƚ ďĞ ůĞĂŬĞĚ Žƌ ƐƉŝůůĞĚ͘ ŚŽƵůd leakage occur “ t he risks to local water resources will ĚĞƉĞŶĚ ŽŶ ƚŚĞ ƉƌŽdžŝŵŝƚLJ ƚŽ ǁĂƚĞƌ ďŽĚŝĞƐ͕ ƚŚĞ ůŽĐĂů ŐĞŽůŽŐLJ͕ ƋƵĂŶƚŝƚLJ ĂŶĚ ƚŽdžŝĐŝƚLJ ŽĨ ƚŚĞ ĐŚĞŵŝĐĂůƐ͕ ĂŶĚ how quickly and effectively cleanup operations occur ”ϯϲϭ ŶĚƵĐĞĚ ƐĞŝƐŵŝĐŝƚLJ ďLJ ǁĂƐƚĞǁĂƚĞƌ ĚŝƐƉŽƐĂů ĨŽƌ ŶĂƚƵƌĂů ŐĂƐ ƉƌŽĚƵĐĞĚ ƚŚƌŽƵŐŚ ŚLJĚƌĂƵůŝĐ ĨƌĂĐƚƵƌŝŶŐ ŝƐ ĂůƐŽ Ă ĐŽŶĐĞƌŶ͘ϯϲϮ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-63 Chapter III Building a Clean Electricity Future hƉƐƚƌĞĂŵ͕ ĐŽĂů ŵŝŶŝŶŐ ŝƐ ĐŽŶĚƵĐƚĞĚ ďŽƚŚ ŽŶ ƚŚĞ ƐƵƌĨĂĐĞ ĂŶĚ ƵŶĚĞƌŐƌŽƵŶĚ͕ ĂŶĚ ŽĨƚĞŶ ǁŝƚŚ ƐŝŐŶŝĨŝĐĂŶƚ ŝŵƉĂĐƚƐ ƚŽ ƚŚĞ ůĂŶĚƐĐĂƉĞ ĂŶĚ ƚŚĞ ĞĐŽƐLJƐƚĞŵ͘ DŽƵŶƚĂŝŶƚŽƉ ŵŝŶŝŶŐ ĂŶĚ ǀĂůůĞLJ ĨŝůůƐ͕ ĨŽƌ ŝŶƐƚĂŶĐĞ͕ ĐĂŶ ůĞĂĚ ƚŽ ůĂƌŐĞͲƐĐĂůĞ ůĂŶĚƐĐĂƉĞ ĐŚĂŶŐĞƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ůŽƐƐ ŽĨ ĨŽƌĞƐƚĞĚ ĂƌĞĂƐ ĂŶĚ ĚŝƐƉůĂĐĞŵĞŶƚ ĂŶĚ ůŽƐƐ ŽĨ ƐƉĞĐŝĞƐ͕ ĂƐ ǁĞůů ĂƐ ƐŝŐŶŝĨŝĐĂŶƚ ĂůƚĞƌĂƚŝŽŶƐ ŽĨ ƐƚƌĞĂŵ ĞĐŽƐLJƐƚĞŵƐ͘ϯϲϯ ŝŵŝůĂƌůLJ͕ ƚŚĞ ĚŝƌĞĐƚ ůĂŶĚ ƵƐĞ ĨŽƌ Ă ŶƵĐůĞĂƌ ƉŽǁĞƌ ƉůĂŶƚ ŝƐ ůŽǁ͕ ďƵƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ĚĂŵĂŐĞ ƌĞƐƵůƚŝŶŐ ĨƌŽŵ ƵƌĂŶŝƵŵ ŵŝŶŝŶŐ—ŝŶĐůƵĚŝŶŐ ĂĐŝĚ ŵŝŶĞ ĚƌĂŝŶĂŐĞ ĂŶĚ ƚŚĞ ĞdžƉŽƐƵƌĞ ŽĨ ƐƵƌƌŽƵŶĚŝŶŐ ĞĐŽƐLJƐƚĞŵƐ ƚŽ ŚĞĂǀLJ ŵĞƚĂůƐƌƌ—ŝƐ ƉŽƐƐŝďůĞ͘ƐƐ ůƚŚŽƵŐŚ ƚŚĞ ƵƉƐƚƌĞĂŵ ŵŝŶŝŶŐ ŝŵƉůŝĐĂƚŝŽŶƐ ŽĨ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐŽƵƌĐĞƐ ĂƌĞ ůĞƐƐ ƚŚĂŶ ƚŚŽƐĞ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŵĂŶLJ ŽƚŚĞƌ ŐĞŶĞƌĂƚŝŽŶ ƐŽƵƌĐĞƐ͕ ƌĞŶĞǁĂďůĞ ĞŶĞƌŐLJ ƐLJƐƚĞŵƐ ĂůƐŽ ƌĞƋƵŝƌĞ Ă ǀĂƌŝĞƚLJ ŽĨ ŵĂƚĞƌŝĂůƐ͕ ŝŶĐůƵĚŝŶŐ ĐŽŵŵŽĚŝƚŝĞƐ ůŝŬĞ ŝƌŽŶͬƐƚĞĞů͕ ƉŽůLJŵĞƌ ĐŽŵƉŽƐŝƚĞƐ͕ ĂůƵŵŝŶƵŵ͕ ĂŶĚ ƌĂƌĞ ĞĂƌƚŚ ŵŝŶĞƌĂůƐ͘ ŽƵƌĐŝŶŐ ŽĨ ƚŚĞƐĞ ŵĂƚĞƌŝĂůƐ ƌĞƋƵŝƌĞ ŵŝŶŝŶŐ ŽĨ ƌĂǁ ŵĂƚĞƌŝĂůƐ͕ ǁŝƚŚ ĂƐƐŽĐŝĂƚĞĚ ƌŝƐŬƐ ƌĞůĂƚĞĚ ƚŽ ƚŽdžŝĐŝƚLJ ŽĨ ĂƐƐŽĐŝĂƚĞĚ ŵŝŶĞ ƚĂŝůŝŶŐƐ ĂŶĚ ŶĞŐĂƚŝǀĞ ŝŵƉĂĐƚƐ ŽŶ ǁĂƚĞƌ ƵƐĞĚ ŝŶ ƌĞƐŽƵƌĐĞ ĞdžƚƌĂĐƚŝŽŶ͕ ƐĞƉĂƌĂƚŝŽŶ͕ ĂŶĚ ƉƌŽĐĞƐƐŝŶŐ͘ ŽŽŬŝŶŐ ƚŽǁĂƌĚƐ ƚŚĞ ĨƵƚƵƌĞ͕ K ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ƵŶĚĞƌ Ă ŚŝŐŚ ǁŝŶĚͲƉŽǁĞƌ ĚĞƉůŽLJŵĞŶƚ ƐĐĞŶĂƌŝŽ ďLJ ϮϬϱϬ͕ ƚŚĞ ƚŽƚĂů ůĂŶĚ ĂƌĞĂ ĂĨĨĞĐƚĞĚ ďLJ ǁŝŶĚͲƉŽǁĞƌ ŝŶƐƚĂůůĂƚŝŽŶƐ ǁŽƵůĚ ďĞ ůĞƐƐ ƚŚĂŶ ϭ͘ϱ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ ůĂŶĚ ĂƌĞĂ ŽĨ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ǁŝƚŚ ƚŚĞ ŵĂũŽƌŝƚLJ ;ϵϳ ƉĞƌĐĞŶƚͿ ŽĨ ƚŚĂƚ ůĂŶĚ ĂƌĞĂ ƌĞŵĂŝŶŝŶŐ ĂǀĂŝůĂďůĞ ĨŽƌ ŵƵůƚŝƉůĞ ƉƵƌƉŽƐĞƐ͘ϯϲϰ ϮϬϭϱ DĂƐƐĂĐŚƵƐĞƚƚƐ ŶƐƚŝƚƵƚĞ ŽĨ dĞĐŚŶŽůŽŐLJ ƌĞƉŽƌƚ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ Ăůů ƉƌŽũĞĐƚĞĚ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ĚĞŵĂŶĚ ŝŶ ϮϬϱϬ ĐŽƵůĚ ďĞ ŵĞƚ ďLJ Ws͕ ĂƐƐƵŵŝŶŐ ƐƚŽƌĂŐĞ ĂůůŽǁŝŶŐ ĨŽƌ Ăůů ŬtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚĞĚ ƚŽ ďĞ ƵƐĞĚ͖ ŝƚ ǁŽƵůĚ ƌĞƋƵŝƌĞ ƌŽƵŐŚůLJ ϯϯ͕ϬϬϬ ŬŵϮ Žƌ Ϭ͘ϰ ƉĞƌĐĞŶƚ ŽĨ h͘ ͘ ůĂŶĚ ĂƌĞĂ͘ϯϲϱ dŚŝƐ ŝƐ ƌŽƵŐŚůLJ ĞƋƵĂů ƚŽ ƚŚĞ ĂƌĞĂ ƵƐĞĚ ďLJ ƐƵƌĨĂĐĞ ŵŝŶŝŶŐ ŽĨ ĐŽĂů ĂŶĚ ŝƐ ůĞƐƐ ƚŚĂŶ ƚŚĞ ůĂŶĚ ĂƌĞĂ ŽĐĐƵƉŝĞĚ ďLJ ŵĂũŽƌ ƌŽĂĚƐ͘ ŝƚƚŝŶŐ ĐƵƌƌĞŶƚ ĞdžŝƐƚŝŶŐ h͘ ͘ ƌŽŽĨƚŽƉ ĂƌĞĂ ǁŝƚŚ Ws ĐŽƵůĚ ŵĞĞƚ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϲϬ ƉĞƌĐĞŶƚ ŽĨ ƚŚĞ Eation’s projected 2050 electricity needs ϯϲϲ ŝŵŝůĂƌůLJ͕ EZ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ƚŚĞ ƚĞĐŚŶŝĐĂů ƉŽƚĞŶƚŝĂů ĞdžŝƐƚƐ ĨŽƌ ƌŽŽĨƚŽƉ Ws ƚŽ ŐĞŶĞƌĂƚĞ ϭ͕ϰϯϮ dtŚ ŽĨ ĞůĞĐƚƌŝĐŝƚLJ͕ Žƌ ϯϵ ƉĞƌĐĞŶƚ ŽĨ ƚŽƚĂů ĂŶŶƵĂů ĞůĞĐƚƌŝĐŝƚLJ ƐĂůĞƐ͘ϯϲϳ 3 4 4 2 Wildlife Impacts WŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ĐĂŶ ŚĂǀĞ ĂĚǀĞƌƐĞ ŝŵƉĂĐƚƐ ŽŶ ǁŝůĚůŝĨĞ͘ dŚĞƌĞ ĂƌĞ Ă ǀĂƌŝĞƚLJ ŽĨ ŵŝƚŝŐĂƚŝŽŶ ƐƚƌĂƚĞŐŝĞƐ ĂǀĂŝůĂďůĞ ƚŽ ĂůůĞǀŝĂƚĞ ƐƵĐŚ ŝŵƉĂĐƚƐ ĂŶĚ͕ ĂƐ ĚŝƐĐƵƐƐĞĚ ďĞůŽǁ͕ ŵŽƌƚĂůŝƚŝĞƐ ĂƚƚƌŝďƵƚĞĚ ƚŽ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ĂƌĞ ƐŝŐŶŝĨŝĐĂŶƚůLJ ĨĞǁĞƌ ƚŚĂŶ ƚŚŽƐĞ ƚŚĂŶ ĐĂŶ ďĞ ĂƚƚƌŝďƵƚĞĚ ƚŽ ŶĂƚƵƌĂů ƉƌĞĚĂƚŽƌƐ ĂŶĚ ĐŽůůŝƐŝŽŶƐ ǁŝƚŚ ďƵŝůĚŝŶŐƐ͘ ǀĂŝůĂďůĞ ĚĂƚĂ ŽŶ ǁŝůĚůŝĨĞ ŝŵƉĂĐƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĐŽĂůͲĨŝƌĞĚ ƉŽǁĞƌ ƉůĂŶƚ ŽƉĞƌĂƚŝŽŶƐ ŝƐ ůŝŵŝƚĞĚ͕ ĂůƚŚŽƵŐŚ ŽŶĞ ƐƚƵĚLJϯϲϴ ĞƐƚŝŵĂƚĞƐ ƚŚĂƚ ĐŽĂůͲĨŝƌĞĚ ƉŽǁĞƌ ƉůĂŶƚƐ ĐĂƵƐĞ ƌŽƵŐŚůLJ ƚŚĞ ƐĂŵĞ Žƌ ŵŽƌĞ ĂǀŝĂŶ ŵŽƌƚĂůŝƚŝĞƐ ƉĞƌ 'tŚ ŐĞŶĞƌĂƚĞĚ ƚŚĂŶ ǁŝŶĚ ƚƵƌďŝŶĞƐ͘ ĂĐƚŽƌŝŶŐ ŝŶ ƉƌŽũĞĐƚĞĚ ĐůŝŵĂƚĞ ĐŚĂŶŐĞ ŝŵƉĂĐƚƐ͕ ĂǀŝĂŶ ŵŽƌƚĂůŝƚŝĞƐ ĂƚƚƌŝďƵƚĞĚ ƚŽ ĐŽĂůͲĨŝƌĞĚ ĞůĞĐƚƌŝĐŝƚLJ ǁĞƌĞ ĞƐƚŝŵĂƚĞĚ ƚŽ ďĞ ĨĂƌ ŐƌĞĂƚĞƌ ƚŚĂŶ ƚŚŽƐĞ ĂƚƚƌŝďƵƚĞĚ ƚŽ ŽƚŚĞƌ ĞůĞĐƚƌŝĐ ŐĞŶĞƌĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ͘ϯϲϵ EƵĐůĞĂƌ ƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ ƉŽƐĞƐ Ă ƌŝƐŬ ƚŽ ĂǀŝĂŶ ƉŽƉƵůĂƚŝŽŶƐ͕ ǁŚŝĐŚ ĐĂŶ ďĞ ĞdžƉŽƐĞĚ ƚŽ ƚŽdžŝĐ ǁĂƐƚĞ ƉŽŶĚƐ Ăƚ ƵƌĂŶŝƵŵ ŵŝŶŝŶŐ ĂŶĚ ŵŝůůŝŶŐ ĨĂĐŝůŝƚŝĞƐ ĂŶĚ ĐŽůůŝĚĞ ǁŝƚŚ ŶƵĐůĞĂƌ ĐŽŽůŝŶŐ ƚŽǁĞƌƐ͘ϯϳϬ hƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ĞŶĞƌŐLJ ĚĞǀĞůŽƉŵĞŶƚ ĐĂŶ ĂĨĨĞĐƚ ďŝƌĚƐ ĂŶĚ ĂǀŝĂŶ ĐŽŵŵƵŶŝƚŝĞƐ ĚŝƌĞĐƚůLJ ƚŚƌŽƵŐŚ ĨĂƚĂůŝƚLJ Žƌ ŝŶĚŝƌĞĐƚůLJ ƚŚƌŽƵŐŚ ĚĞŐƌĂĚĂƚŝŽŶ͕ ůŽƐƐ͕ Žƌ ĨƌĂŐŵĞŶƚĂƚŝŽŶ ŽĨ ŚĂďŝƚĂƚ͘ Ŷ ŐĞŶĞƌĂů͕ ĚŝƌĞĐƚ ĨĂƚĂůŝƚŝĞƐ ĂƌĞ ƌĞůĂƚĞĚ ƌƌ hƌĂŶŝƵŵ ŵŝŶŝŶŐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ƌĞŐƵůĂƚĞĚ ďLJ ƚŚĞ ƚŽŵŝĐ ŶĞƌŐLJ Đƚ ŽĨ ϭϵϱϰ͕ ĂƐ ĂŵĞŶĚĞĚ ;ϰϮ h͘ ͘ ͘ ΑΑ ϮϬϭϭͲϮϬϮϭ͕ ϮϬϮϮͲϮϮϴϲŝ͕ ϮϮϵϲĂͲϮϮϵϳŚͲϭϯͿ͘ dŚĞƐĞ ƌĞŐƵůĂƚŽƌLJ ĂĐƚŝŽŶƐ ƉƌŽƚĞĐƚ ƚŚĞ ŚĞĂůƚŚ ĂŶĚ ƐĂĨĞƚLJ ŽĨ ƚŚĞ ƉƵďůŝĐ ĂŶĚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ ĚƵƌŝŶŐ ƚŚĞ ĂĐƚŝǀĞ ůŝĨĞ ŽĨ Ă ƵƌĂŶŝƵŵ ƌĞĐŽǀĞƌLJ ŽƉĞƌĂƚŝŽŶ ĂŶĚ ĂĨƚĞƌ ƚŚĞ ĨĂĐŝůŝƚLJ ŚĂƐ ďĞĞŶ ĚĞĐŽŵŵŝƐƐŝŽŶĞĚ͘ ŝĐĞŶƐŝŶŐ ŵĂLJ ƌĞƋƵŝƌĞ ůŝĐĞŶƐĞĞƐ ƚŽ ƚĂŬĞ ƉƌĞǀĞŶƚĂƚŝǀĞ ŵĞĂƐƵƌĞƐ ƉƌŝŽƌ ƚŽ ƐƚĂƌƚŝŶŐ ŽƉĞƌĂƚŝŽŶƐ͕ ŝŶĐůƵĚŝŶŐ ǁĞůů ƚĞƐƚƐ͕ ŵŽŶŝƚŽƌŝŶŐ͕ ĂŶĚ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ƉƌŽĐĞĚƵƌĞƐ ƚŚĂƚ ŝŶĐůƵĚĞ ĞdžĐƵƌƐŝŽŶ ƌĞƐƉŽŶƐĞ ŵĞĂƐƵƌĞƐ ĂŶĚ ƌĞƉŽƌƚŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ͘ EZ issued a “Generic Environmental Impact Statement ĨŽƌ ŶͲ ŝƚƵ ĞĂĐŚ hƌĂŶŝƵŵ DŝŶŝŶŐ ĂĐŝůŝƚŝĞƐΗ ;EhZ ' ϭϵϭϬͿ ŝŶ DĂLJ ϮϬϬϵ͗ ŚƚƚƉ͗ͬͬǁǁǁ͘ŶƌĐ͘ŐŽǀͬŵĂƚĞƌŝĂůƐͬƵƌĂŶŝƵŵͲ ƌĞĐŽǀĞƌLJͬŐĞŝƐ͘Śƚŵů͘ ƐƐ dŚĞ ĂŵŽƵŶƚ ŽĨ ƵƌĂŶŝƵŵ ŵŝŶŝŶŐ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ŝƐ ĐƵƌƌĞŶƚůLJ ǀĞƌLJ ůŽǁ͘ 3-64 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ƚŽ ĐŽůůŝƐŝŽŶƐ Žƌ ƐŽůĂƌ ĨůƵdž͘ƚƚ͕ ϯϳϭ ŽůůŝƐŝŽŶƐ ŵĂLJ ŽĐĐƵƌ ǁŝƚŚ Ăůů ƚLJƉĞƐ ŽĨ ƐŽůĂƌ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ďƵƚ ƐŽůĂƌ ĨůƵdž ĞĨĨĞĐƚƐ ŽŶ ďŝƌĚƐ ŚĂǀĞ ďĞĞŶ ŽďƐĞƌǀĞĚ ŽŶůLJ Ăƚ ĨĂĐŝůŝƚŝĞƐ ǁŝƚŚ ƚŽǁĞƌƐ ĞƋƵŝƉƉĞĚ ƚŽ ĐŽŶĐĞŶƚƌĂƚĞ ƐŽůĂƌ ƉŽǁĞƌ͘ ƌĞĐĞŶƚ ƐƚƵĚLJ ĞƐƚŝŵĂƚĞĚ ƚŚĂƚ ĂƉƉƌŽdžŝŵĂƚĞůLJ ϲ͕ϬϬϬ ďŝƌĚƐ ĚŝĞĚ ĂĐƌŽƐƐ ƚŚĞ ĨŝǀĞ ƐƋƵĂƌĞ ŵŝůĞƐ ŽĨ California’s Ivanpah solar thermal facility last year͖ϯϳϮ ŶŽŶĞ ǁĞƌĞ ĞŶĚĂŶŐĞƌĞĚ͘ Žƌ ĐŽŵƉĂƌŝƐŽŶ͕ ĚŽŵĞƐƚŝĐ ĐĂƚƐ Ŭŝůů ϭ͘ϰ ƚŽ ϯ͘ϳ ďŝůůŝŽŶ ďŝƌĚƐ ƉĞƌ LJĞĂƌ͕ ĂŶĚ ďĞƚǁĞĞŶ ϯϲϱ ŵŝůůŝŽŶ ƚŽ ϵϴϴ ŵŝůůŝŽŶ ďŝƌĚƐ ĂƌĞ ĞƐƚŝŵĂƚĞĚ ƚŽ ĚŝĞ ĂŶŶƵĂůůLJ ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĨƌŽŵ ďƵŝůĚŝŶŐ ĐŽůůŝƐŝŽŶƐ͘ϯϳϯ K ĂŶĚ ƚŚĞ ƵƌĞĂƵ ŽĨ ĂŶĚ DĂŶĂŐĞŵĞŶƚ ; DͿ ŚĂǀĞ ũŽŝŶƚůLJ ĚĞǀĞůŽƉĞĚ ŐƵŝĚĂŶĐĞ ƚŽ ŵŝŶŝŵŝnjĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ—ŝŶĐůƵĚŝŶŐ ŝŵƉĂĐƚƐ ƚŽ ǁŝůĚůŝĨĞ—ĚƵƌŝŶŐ ƚŚĞ ƐŝƚŝŶŐ͕ ĐŽŶƐƚƌƵĐƚŝŽŶ͕ ĂŶĚ ŽƉĞƌĂƚŝŽŶ ŽĨ ƵƚŝůŝƚLJͲƐĐĂůĞ ƐŽůĂƌ ĨĂĐŝůŝƚŝĞƐ ŽŶ ƉƵďůŝĐ ůĂŶĚƐ͘ D ŝĚĞŶƚŝĨŝĞĚ ƐƉĞĐŝĨŝĐ ůŽĐĂƚŝŽŶƐ ǁĞůů ƐƵŝƚĞĚ ĨŽƌ ƵƚŝůŝƚLJͲƐĐĂůĞ ƉƌŽĚƵĐƚŝŽŶ ŽĨ ƐŽůĂƌ ĞŶĞƌŐLJ ƚŚĂƚ ŵŝŶŝŵŝnjĞ ǁŝůĚůŝĨĞ ŝŵƉĂĐƚƐ͘ ŝŵŝůĂƌůLJ͕ ƚŚĞ K ŐƵŝĚĂŶĐĞ ŝŶƚĞŐƌĂƚĞƐ ǁŝůĚůŝĨĞ ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ŝŶƚŽ ŝƚƐ ĂŶĂůLJƐŝƐ ĂŶĚ ƐĞůĞĐƚŝŽŶ ŽĨ ƉƌŽũĞĐƚƐ ƚŚĂƚ ŝƚ ǁŝůů ĨŝŶĂŶĐŝĂůůLJ ƐƵƉƉŽƌƚ͘ϯϳϰ dŚĞ ŝŵƉĂĐƚƐ ŽŶ ĂǀŝĂŶ ĂŶĚ ďĂƚ ƉŽƉƵůĂƚŝŽŶƐ ĂƌĞ ƚŚĞ ƉƌŝŶĐŝƉĂů ĞĐŽůŽŐŝĐĂů ĐŽŶĐĞƌŶƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ǁŝŶĚ ĚĞǀĞůŽƉŵĞŶƚ ĨŽƌ ůĂŶĚͲďĂƐĞĚ ǁŝŶĚ ƉƌŽũĞĐƚƐ͘ ĨĨĞĐƚƐ ŽŶ ŵĂƌŝŶĞ ůŝĨĞ ĂƌĞ ƚŚĞ ƉƌŝŶĐŝƉĂů ĐŽŶĐĞƌŶ ĨŽƌ ŽĨĨƐŚŽƌĞ ǁŝŶĚ͘ ŶǀĞƐƚŵĞŶƚƐ ƚŽ ĚĞǀĞůŽƉ ĐŽƐƚͲĞĨĨĞĐƚŝǀĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƚŚĂƚ ĐĂŶ ƌĞĚƵĐĞ ǁŝůĚůŝĨĞ ŝŵƉĂĐƚƐ ĂƌĞ ŽĨĨĞƌŝŶŐ ŶĞǁ ĂǀŝĂŶ ĚĞƚĞƌƌĞŶĐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ;Ğ͘Ő͕͘ ƚŽǁĞƌ ĐŽĂƚŝŶŐƐ ĂŶĚ ƵůƚƌĂƐŽŶŝĐ ƚƌĂŶƐŵŝƚƚĞƌƐͿ ĂŶĚ ŵŝƚŝŐĂƚŝŽŶ ƚĞĐŚŶŝƋƵĞƐ ƚŚĂƚ ǁŝůů ŚĞůƉ ŵŝŶŝŵŝnjĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ƚŽ ƐĞŶƐŝƚŝǀĞ ǁŝůĚůŝĨĞ ŝŶ ƚŚĞ ĨƵƚƵƌĞ͘ϯϳϱ dŚĞ K tŝŶĚ sŝƐŝŽŶ ƌĞƉŽƌƚϯϳϲ ĨŝŶĚƐ ƚŚĂƚ ĂŶŶƵĂů ďŝƌĚ ŵŽƌƚĂůŝƚŝĞƐ ĚƵĞ ƚŽ ǁŝŶĚ ƚƵƌďŝŶĞƐ ;Ϭ͘Ϯ ŵŝůůŝŽŶ ďŝƌĚƐͬLJĞĂƌͿ ĂƌĞ ŵƵĐŚ ůŽǁĞƌ ƚŚĂŶ ƚŚŽƐĞ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŽƚŚĞƌ ĞŶŐŝŶĞĞƌĞĚ ƐƚƌƵĐƚƵƌĞƐ ĂŶĚ ĨĂƌ ůŽǁĞƌ ƚŚĂŶ ƚŚŽƐĞ ŬŝůůĞĚ ďLJ ĚŽŵĞƐƚŝĐ ĐĂƚƐ͘ DŽƐƚ ƐƚƵĚŝĞƐ ĞƐƚŝŵĂƚĞ ƚŚĞ ďĂƚ ĨĂƚĂůŝƚLJ ƌĂƚĞƐ ĚƵĞ ƚŽ ǁŝŶĚ ƚƵƌďŝŶĞƐ ƚŽ ďĞ ůĞƐƐ ƚŚĂŶ ϭϬ ďĂƚƐͬDtͬƐƚƵĚLJ ƉĞƌŝŽĚ͘ϯϳϳ tŝƚŚ ƚŚĞ ŝŶĐƌĞĂƐĞ ŝŶ ǁŝŶĚͲƉŽǁĞƌ ŐĞŶĞƌĂƚŝŽŶ͕ ƚŚĞ ǁŝŶĚ ŝŶĚƵƐƚƌLJ ĂŶĚ ƌĞŐƵůĂƚŽƌLJ ĂŐĞŶĐŝĞƐ ŚĂǀĞ ǁŽƌŬĞĚ ƚŽ ŵŝŶŝŵŝnjĞ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ǁŝŶĚ ƉƌŽũĞĐƚƐ ŽŶ ŵŝŐƌĂƚŽƌLJ ďŝƌĚƐ ĂŶĚ ŽƚŚĞƌ ƐƉĞĐŝĞƐ ŽĨ ĐŽŶĐĞƌŶ ĂŶĚ ƚŚĞŝƌ ŚĂďŝƚĂƚƐ͘ƵƵ LJĚƌŽĞůĞĐƚƌŝĐ ƉŽǁĞƌ ĐĂŶ ĂůƐŽ ƐŝŐŶŝĨŝĐĂŶƚůLJ ŝŵƉĂĐƚ ĂƋƵĂƚŝĐ ĞĐŽƐLJƐƚĞŵƐ͕ ǁŝƚŚ ĨŝƐŚ ĂŶĚ ŽƚŚĞƌ ŽƌŐĂŶŝƐŵƐ ŝŶũƵƌĞĚ ĂŶĚ ŬŝůůĞĚ ďLJ ƚƵƌďŝŶĞ ƉĂƐƐĂŐĞ͘ DĞĐŚĂŶŝƐŵƐ ŽĨ ŵŽƌƚĂůŝƚLJ ĂŶĚ ŝŶũƵƌLJ ĂƌĞ ǀĂƌŝĞĚ ;Ğ͘Ő͕͘ ƐƚƌŝŬĞ͕ ƚƚ dŚĞƌĞ ŝƐ ŶŽƚ Ă ƚŚŽƌŽƵŐŚ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ŽĨ ƉŽƚĞŶƚŝĂů ŝŵƉĂĐƚƐ ŽĨ ƐŽůĂƌ ĨĂĐŝůŝƚŝĞƐ ŽŶ ĂǀŝĂŶ ƐƉĞĐŝĞƐ Žƌ ƚŚĞ ĞĨĨĞĐƚŝǀĞŶĞƐƐ ŽĨ ŵŝƚŝŐĂƚŝŽŶ ŵĞĂƐƵƌĞƐ Ăƚ ƚŚŝƐ ƚŝŵĞ͘ ŽŶƐŝƐƚĞŶĐLJ ĂŶĚ ƐƚĂŶĚĂƌĚŝnjĂƚŝŽŶ ŝŶ ĂǀŝĂŶ ŵŽŶŝƚŽƌŝŶŐ ĂŶĚ ƌĞƉŽƌƚŝŶŐ ƉƌŽƚŽĐŽůƐ ĐŽƵůĚ ďĞ ŝŵƉƌŽǀĞĚ͕ ĂŶĚ ĂĚĚŝƚŝŽŶĂů ƐLJƐƚĞŵĂƚŝĐ ĚĂƚĂ ŽŶ ĂǀŝĂŶ ĨĂƚĂůŝƚŝĞƐ ĂƌĞ ŶĞĞĚĞĚ ƚŽ ĚĞĐƌĞĂƐĞ ƵŶĐĞƌƚĂŝŶƚLJ ĂďŽƵƚ ƉŽƚĞŶƚŝĂů ŝŵƉĂĐƚƐ͘ dŚĞ ƉƌĞĞŵŝŶĞŶƚ ƌĞƉŽƌƚ ŽŶ ƚŚŝƐ ƚŽƉŝĐ͕ ƉƵďůŝƐŚĞĚ ŝŶ ϮϬϭϱ͕ ĐĂůůƐ ĨŽƌ ĐƌĞĂƚŝŶŐ Ă ƐŽůĂƌͲĂǀŝĂŶ ƐĐŝĞŶĐĞ ƉůĂŶ ƚŽ ŝŵƉƌŽǀĞ ƚŚĞ ƐĐŝĞŶƚŝĨŝĐ ǀĂůƵĞ ŽĨ ĂǀŝĂŶ ŵŽƌƚĂůŝƚLJ ĚĂƚĂ͕ ŝŶĨŽƌŵ ĚĞĐŝƐŝŽŶƐ ĂďŽƵƚ ƉƌŽũĞĐƚ ƐŝƚŝŶŐ ĂŶĚ ĚĞƐŝŐŶ͕ ĂŶĚ ĚĞǀĞůŽƉ ĂŶ ĂǀŝĂŶ ƌŝƐŬ ĂƐƐĞƐƐŵĞŶƚ ƚŽŽů ƚŽ ŝŵƉƌŽǀĞ ƵŶĚĞƌƐƚĂŶĚŝŶŐ ŽĨ ŝŵƉĂĐƚƐ ĂŶĚ ŝŶĨŽƌŵ ƉƌŽũĞĐƚͲƐƉĞĐŝĨŝĐ ŵŝƚŝŐĂƚŝŽŶ ĚĞĐŝƐŝŽŶƐ͘ ĞƌŽLJ ͘ tĂůƐƚŽŶ͕ ƌ͕͘ Ğƚ Ăů͕͘ A Review of Avian Monitoring and Mitigation Information at Existing Utility-Scale Solar Facilities ; ƌŐŽŶŶĞ͕ ͗ ƌŐŽŶŶĞ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ͕ Ɖƌŝů ϮϬϭϱͿ͕ E ͬ s ͲϭϱͬϮ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĞǀƐ͘ĂŶů͘ŐŽǀͬĚŽǁŶůŽĂĚƐͬ E Ͳ s ͺϭϱͲϮ͘ƉĚĨ͘ ƵƵ dŚĞ ŝƐŚ ĂŶĚ tŝůĚůŝĨĞ ĞƌǀŝĐĞ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ĂŐĞŶĐŝĞƐ ƌĞƐƉŽŶƐŝďůĞ ĨŽƌ ƚŚŝƐ ĂĐƚŝǀŝƚLJ͕ ĂŶĚ͕ ŝŶ ĐŽŶƐƵůƚĂƚŝŽŶ ǁŝƚŚ ŝŶĚƵƐƚƌLJ͕ ŝƚ ŚĂƐ ĂĐƚĞĚ ƚŽ ƐƵŐŐĞƐƚ ĚĞƐŝŐŶ ŵŽĚŝĨŝĐĂƚŝŽŶƐ ĨŽƌ ƚŽǁĞƌƐ ĂŶĚ ƚŽ ĞƐƚĂďůŝƐŚ ǀŽůƵŶƚĂƌLJ ŐƵŝĚĞůŝŶĞƐ ĂŶĚ ŐƵŝĚĂŶĐĞ ƚŽ ƉƌŽƚĞĐƚ ďĂůĚ ĂŶĚ ŐŽůĚĞŶ ĞĂŐůĞƐ͕ ĂƐ ǁĞůů ĂƐ ƚŚĞ ŶĚŝĂŶĂ ďĂƚ͘ ĞĞ ŝƐŚ ĂŶĚ tŝůĚůŝĨĞ ĞƌǀŝĐĞ͕ Indiana Bat Section 7 and Section 10 Guidance for Wind Energy Projects ; ŝƐŚ ĂŶĚ tŝůĚůŝĨĞ ĞƌǀŝĐĞ͕ ϮϬϭϭͿ͕ ŚƚƚƉ͗ͬͬǁǁǁ͘ĨǁƐ͘ŐŽǀͬŵŝĚǁĞƐƚͬĞŶĚĂŶŐĞƌĞĚͬŵĂŵŵĂůƐͬŝŶďĂͬtŝŶĚ ŶĞƌŐLJ'ƵŝĚĂŶĐĞ͘Śƚŵů͘ K ƌĞĐĞŶƚůLJ ŝƐƐƵĞĚ ƚǁŽ ĨƵŶĚŝŶŐ ŽƉƉŽƌƚƵŶŝƚLJ ĂŶŶŽƵŶĐĞŵĞŶƚƐ ƚŽ ĚĞǀĞůŽƉ ŵŝƚŝŐĂƚŝŽŶ ƚĞĐŚŶŽůŽŐŝĞƐ ĨŽƌ ĞĂŐůĞƐ ĂŶĚ ďĂƚƐ͘ Ŷ ĞĐĞŵďĞƌ ϮϬϭϲ͕ ƚŚĞ ŝƐŚ ĂŶĚ tŝůĚůŝĨĞ ĞƌǀŝĐĞ ĨŝŶĂůŝnjĞĚ Ă ƌƵůĞ ƚŚĂƚ ƌĞǀŝƐĞĚ ŝƚƐ ƉĞƌŵŝƚƚŝŶŐ ƉƌŽĐĞƐƐĞƐ ĂŶĚ ŵŽŶŝƚŽƌŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ ƚŽ ŝŵƉƌŽǀĞ ƚŚĞ ƉƌŽƚĞĐƚŝŽŶ ŽĨ ĞĂŐůĞ populations Changes to the rule “include revisions to permit issuance criteria compensatory ŵŝƚŝŐĂƚŝŽŶ ƐƚĂŶĚĂƌĚƐ͕ ĐƌŝƚĞƌŝĂ ĨŽƌ ĞĂŐůĞ ŶĞƐƚ ƌĞŵŽǀĂů ƉĞƌŵŝƚƐ͕ ƉĞƌŵŝƚ ĂƉƉůŝĐĂƚŝŽŶ ƌĞƋƵŝƌĞŵĞŶƚƐ͕ ĂŶĚ ĨĞĞƐ ” ĂƵƌLJ WĂƌƌĂŵŽƌĞ͕ “Service Announces Final Rule to ƵƌƚŚĞƌ ŽŶƐĞƌǀĞ͕ WƌŽƚĞĐƚ ĂŐůĞƐ ƚŚƌŽƵŐŚ ZĞǀŝƐĞĚ WĞƌŵŝƚƚŝŶŐ͕ DŽŶŝƚŽƌŝŶŐ ZĞƋƵŝƌĞŵĞŶƚƐ ” Fish and Wildife Service ĞĐĞŵďĞƌ ϭϰ͕ ϮϬϭϲ ŚƚƚƉƐ͗ͬͬǁǁǁ͘ĨǁƐ͘ŐŽǀͬŶĞǁƐͬ ŚŽǁEĞǁƐ͘ĐĨŵ͍ƌĞĨсƐĞƌǀŝĐĞͲĂŶŶŽƵŶĐĞƐͲĨŝŶĂůͲƌƵůĞͲƚŽͲĨƵƌƚŚĞƌͲĐŽŶƐĞƌǀĞͲƉƌŽƚĞĐƚͲĞĂŐůĞƐͲ ƚŚƌŽƵŐŚͲΘͺ сϯϱϵϭϮ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-65 Chapter III Building a Clean Electricity Future ďĂƌŽƚƌĂƵŵĂ͕ǀǀ ƐŚĞĂƌ͕ ƚƵƌďƵůĞŶĐĞͿ͘ ZĞƐĞƌǀŽŝƌ ǁĂƚĞƌ ŝƐ ƵƐƵĂůůLJ ŵŽƌĞ ƐƚĂŐŶĂŶƚ ƚŚĂŶ ŶŽƌŵĂů ƌŝǀĞƌ ǁĂƚĞƌ͕ ǁŚŝĐŚ ĐĂŶ ůĞĂĚ ƚŽ ĂůŐĂĞ ďůŽŽŵƐ ĂŶĚ ŽƚŚĞƌ ĂƋƵĂƚŝĐ ǁĞĞĚƐ ĐƌŽǁĚŝŶŐ ŽƵƚ ŶĂƚŝǀĞ ĂƋƵĂƚŝĐ ůŝĨĞ͘ K ŚĂƐ ƐƉŽŶƐŽƌĞĚ ƌĞƐĞĂƌĐŚ ƚŽ ŵŝƚŝŐĂƚĞ ǁŝůĚůŝĨĞ ŝŵƉĂĐƚƐ ŽĨ ĐŽŶǀĞŶƚŝŽŶĂů ŚLJĚƌŽƉŽǁĞƌ ;Ğ͘Ő͕͘ ZΘ ŽĨ ƚƵƌďŝŶĞ ĚĞƐŝŐŶƐ ƚŚĂƚ ŵŝŶŝŵŝnjĞ ĨŝƐŚ ĚĞĂƚŚƐ ĨŽƌ ĨŝƐŚ ƚŚĂƚ ƉĂƐƐ ƚŚƌŽƵŐŚ ƚŚĞ ƚƵƌďŝŶĞͿ͘ϯϳϴ DĂŶLJ ƐƉĞĐŝĞƐ ŽĨ ĨŝƐŚ͕ ƐƵĐŚ ĂƐ ƐĂůŵŽŶ͕ Ɛǁŝŵ ĨƌŽŵ ƚŚĞ ƐĞĂ ƵƉƐƚƌĞĂŵ ƚŽ ƐƉĂǁŶ͕ ĂŶĚ ĚĂŵƐ ĐĂŶ ďůŽĐŬ ƚŚĞŝƌ ǁĂLJ͘ ƉƉƌŽĂĐŚĞƐ ůŝŬĞ ƚŚĞ ĐŽŶƐƚƌƵĐƚŝŽŶ ŽĨ ĨŝƐŚ ůĂĚĚĞƌƐ ĂŶĚ ĞůĞǀĂƚŽƌƐ ŚĞůƉ ĨŝƐŚ ƚŽ ŵŽǀĞ ĂƌŽƵŶĚ ĚĂŵƐ ƚŽ ƵƉƐƚƌĞĂŵ ƐƉĂǁŶŝŶŐ ŐƌŽƵŶĚƐ͘ dŽ ĂĚĚƌĞƐƐ ƚŚĞƐĞ ĐŚĂůůĞŶŐĞƐ͕ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŝƐ ŝŶǀĞƐƚŝŶŐ ŝŶ ƚŽŽůƐ ĂŶĚ ŵĞƚŚŽĚƐ ƚŽ ĚĞǀĞůŽƉ͕ ĚĞŵŽŶƐƚƌĂƚĞ͕ ĂŶĚ ǀĂůŝĚĂƚĞ ĞŶǀŝƌŽŶŵĞŶƚĂůůLJ ĂŶĚ ĨŝƐŚͲĨƌŝĞŶĚůLJ ƚĞĐŚŶŽůŽŐŝĞƐ͕ ƐƵĐŚ ĂƐ ƚƵƌďŝŶĞƐ ƚŚĂƚ ďĞƚƚĞƌ ĂůůŽǁ ĨŽƌ ƚŚĞ ĚŽǁŶƐƚƌĞĂŵ ƉĂƐƐĂŐĞ ŽĨ ĨŝƐŚ ĂŶĚ ĂĞƌĂƚŝŶŐ ƚƵƌďŝŶĞƐ ƚŚĂƚ ǁŝůů ĞŶĂďůĞ ŽƉĞƌĂƚŽƌƐ ƚŽ ďĞƚƚĞƌ ŵĞĞƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ƐƚĂŶĚĂƌĚƐ ǁŚŝůĞ ŝŶĐƌĞĂƐŝŶŐ ĞůĞĐƚƌŝĐŝƚLJ ŐĞŶĞƌĂƚŝŽŶ͘ ŽŵƉƵƚĂƚŝŽŶĂů ƚŽŽůƐ ƚŚĂƚ ĞƐƚŝŵĂƚĞ ĨŝƐŚ ƉĂƐƐĂŐĞ ƌŝƐŬ ĂƌĞ ĂůƐŽ ŚĞůƉŝŶŐ ĞŶƐƵƌĞ ƚŚĂƚ ďŝŽůŽŐŝĐĂů ŝŵƉĂĐƚ ŝƐ ĐŽŶƐŝĚĞƌĞĚ ĚƵƌŝŶŐ ƚƵƌďŝŶĞ ĚĞƐŝŐŶ͘ϯϳϵ 3 4 4 3 Waste Impacts ŽĂů ĂŶĚ ŶƵĐůĞĂƌ ƉŽǁĞƌ ƉůĂŶƚƐ ƉƌŽĚƵĐĞ ƚŚĞ ůĂƌŐĞƐƚ ĂŵŽƵŶƚ ŽĨ ƐŽůŝĚ ǁĂƐƚĞ ĚƵƌŝŶŐ ŐĞŶĞƌĂƚŝŽŶ͘ ZƐ ĂƌĞ ƚŚĞ ƐĞĐŽŶĚ ŵŽƐƚ ĂďƵŶĚĂŶƚ ǁĂƐƚĞ ŵĂƚĞƌŝĂů ŝŶ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ ĂĨƚĞƌ ŚŽƵƐĞŚŽůĚ ǁĂƐƚĞ͘ϯϴϬ ZƐ ĂƌĞ ŐĞŶĞƌĂůůLJ ĚŝƐƉŽƐĞĚ ŽŶƐŝƚĞ Ăƚ ƚŚĞ ƉŽǁĞƌ ƉůĂŶƚ͕ ǁŚŝůĞ ƐŽŵĞ ĂƌĞ ƵƐĞĚ ĨŽƌ ďĞŶĞĨŝĐŝĂů ƉƵƌƉŽƐĞƐ͘ϯϴϭ Ŷ ϮϬϭϰ͕ h͘ ͘ ƉůĂŶƚƐ ƉƌŽĚƵĐĞĚ ϭϯϬ ŵŝůůŝŽŶ ƚŽŶƐ ŽĨ ĐŽĂů ĂƐŚ͕ϯϴϮ ǁŚŝĐŚ ŝƐ Ă ďLJƉƌŽĚƵĐƚ ŽĨ ĐŽŶǀĞŶƚŝŽŶĂů ĐŽĂůͲĨŝƌĞĚ ŐĞŶĞƌĂƚŝŽŶ͘ EĂƚƵƌĂůůLJ ŽĐĐƵƌƌŝŶŐ ƌĂĚŝŽĂĐƚŝǀĞ ĐŽŶƐƚŝƚƵĞŶƚƐ͕ ƐƵĐŚ ĂƐ ƵƌĂŶŝƵŵ͕ ĂƌĞ ĂůƐŽ ĨŽƵŶĚ ŝŶ ĐŽĂů ĂƐŚ͘ϯϴϯ͕ ϯϴϰ KŶƐŝƚĞ ĐŽĂů ĂƐŚ ŝŵƉŽƵŶĚŵĞŶƚ ƉŽŶĚƐ ĐĂŶ ďƌĞĂĐŚ͕ ŝŵƉĂĐƚŝŶŐ ƐƵƌƌŽƵŶĚŝŶŐ ĞĐŽƐLJƐƚĞŵƐ ĂŶĚ ǁĂƚĞƌƐŚĞĚƐ͕ ĂŶ ŝƐƐƵĞ ƚŚĂƚ W ĐŽŶƚŝŶƵĞƐ ƚŽ ĂĚĚƌĞƐƐ ƚŚƌŽƵŐŚ ŝƚƐ ƌƵůĞŵĂŬŝŶŐ ƉƌŽĐĞƐƐ͘ EƵĐůĞĂƌ ǁĂƐƚĞ ŝƐ ƐƚŽƌĞĚ Ăƚ ƚŚĞ ƌĞĂĐƚŽƌ ƐŝƚĞ ǁŚĞƌĞ ŝƚ ŝƐ ŐĞŶĞƌĂƚĞĚ͘ Ŷ ĐŽŶƚƌĂƐƚ͕ ŶĂƚƵƌĂů ŐĂƐ ĂŶĚ Žŝů ŐĞŶĞƌĂƚŝŽŶ ƉƌŽĚƵĐĞ ůŝŵŝƚĞĚ ĂŵŽƵŶƚƐ ŽĨ ĐŚĞŵŝĐĂů ĂŶĚ Ăŝƌ ƉŽůůƵƚŝŽŶ ĐŽŶƚƌŽů ǁĂƐƚĞ͕ ĂŶĚ ƌĞŶĞǁĂďůĞ ƚĞĐŚŶŽůŽŐŝĞƐ ƉƌŽĚƵĐĞ ĂůŵŽƐƚ ŶŽ ǁĂƐƚĞ ĚƵƌŝŶŐ ŐĞŶĞƌĂƚŝŽŶ͘ ĚĚŝƚŝŽŶĂů ŝŶĨŽƌŵĂƚŝŽŶ ŽŶ ǁĂƐƚĞ ĂƐ ŝƚ ƌĞůĂƚĞƐ ƚŽ ĚĞĐŽŵŵŝƐƐŝŽŶŝŶŐ ĐĂŶ ďĞ ĨŽƵŶĚ ůĂƚĞƌ ŝŶ ƚŚŝƐ ĐŚĂƉƚĞƌ ŝŶ ĞĐƚŝŽŶ ϯ͘ϰ͘ϴ͘ 3 4 4 4 Other Ecological Impacts ĚĚŝƚŝŽŶĂů ĞĐŽůŽŐŝĐĂů ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ ĨŽƌ ǁŝŶĚ ŝŶĐůƵĚĞ ŝŵƉĂĐƚƐ ĨƌŽŵ ĂƐƐŽĐŝĂƚĞĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ;Ğ͘Ő͕͘ ƌŽĂĚƐ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ͕ ƐƵďƐƚĂƚŝŽŶƐͿ͘ EŽŝƐĞ͕ ǀŝƐƵĂů ŝŵƉĂĐƚƐ ;ĨƌŽŵ ďůŝŶŬŝŶŐ ůŝŐŚƚƐ ĂŶĚ ĨƌŽŵ ǁŝŶĚ ƚƵƌďŝŶĞƐ ƚŚĞŵƐĞůǀĞƐͿ͕ ĂŶĚ ƉƌŽƉĞƌƚLJ ǀĂůƵĞƐ ĂƌĞ Ăůů ĐŽŶĐĞƌŶƐ ƌĂŝƐĞĚ ďLJ ĐŽŵŵƵŶŝƚŝĞƐ ǁŝƚŚ ǁŝŶĚ ĚĞǀĞůŽƉŵĞŶƚ͘ Žƌ ŽŶƐŚŽƌĞ ǁŝŶĚ͕ Ă ĂǁƌĞŶĐĞ ĞƌŬĞůĞLJ EĂƚŝŽŶĂů ĂďŽƌĂƚŽƌLJ ƐƚƵĚLJ ĨŽƵŶĚ ƚŚĂƚ ƚŚĞƌĞ ǁĂƐ ŶŽ ŝŵƉĂĐƚ ďLJ ǁŝŶĚ ƚƵƌďŝŶĞƐ ŽŶ ƌĞƐŝĚĞŶƚŝĂů ƉƌŽƉĞƌƚLJ ǀĂůƵĞ͘ϯϴϱ ĐŽƐLJƐƚĞŵ ŝŵƉĂĐƚƐ ĨƌŽŵ hydroelectric power plants depend on a river’s size and flow rate͖ ĐůŝŵĂƚĞ ĂŶĚ ŚĂďŝƚĂƚ ĐŽŶĚŝƚŝŽŶƐ͖ ƚŚĞ ƚLJƉĞ͕ ƐŝnjĞ͕ ĚĞƐŝŐŶ͕ ĂŶĚ ŽƉĞƌĂƚŝŽŶ ŽĨ ƚŚĞ ƉůĂŶƚ͖ ĂŶĚ ǁŚĞƚŚĞƌ ƚŚĞ ƉůĂŶƚ ŝƐ ůŽĐĂƚĞĚ ƵƉƐƚƌĞĂŵ Žƌ ĚŽǁŶƐƚƌĞĂŵ ŽĨ ŽƚŚĞƌ ƉƌŽũĞĐƚƐ ŽŶ ƚŚĞ ƐĂŵĞ ƌŝǀĞƌ͘ϯϴϲ DŽƐƚ ǁĂƚĞƌ ƋƵĂůŝƚLJ ĐŽŶĐĞƌŶƐ ŚĂǀĞ ƚŽ ĚŽ ǁŝƚŚ ŚŽǁ ƌĞƐĞƌǀŽŝƌƐ ĂĨĨĞĐƚ ŽdžLJŐĞŶ ůĞǀĞůƐ ĚŽǁŶƐƚƌĞĂŵ ;ƐŝŶĐĞ ƐŝŐŶŝĨŝĐĂŶƚ ĂĞƌĂƚŝŽŶ ŽĐĐƵƌƐ ŝŶ ƉƌŽĐĞƐƐͿ͘ dŚĞƌĞ ĂƌĞ ĂůƐŽ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŐĞŽƚŚĞƌŵĂů ŐĞŶĞƌĂƚŝŽŶ͘ tŚĞŶ ůĂƌŐĞ ĂŵŽƵŶƚƐ ŽĨ ŐĞŽƚŚĞƌŵĂů ĨůƵŝĚƐ ĂƌĞ ǁŝƚŚĚƌĂǁŶ ĂŶĚ ŝŶũĞĐƚĞĚ ďĞůŽǁ ƚŚĞ ĞĂƌƚŚΖƐ ƐƵƌĨĂĐĞ͕ ŝŶĚƵĐĞĚ ƐĞŝƐŵŝĐŝƚLJ ďĞĐŽŵĞƐ Ă ĐŽŶĐĞƌŶ͘ Ĩ ŝŶĚƵĐĞĚ ƐĞŝƐŵŝĐŝƚLJ ŽĐĐƵƌƐ͕ ŝƚ ŝƐ ƚLJƉŝĐĂůůLJ ůĞƐƐ ƚŚĂŶ ŵĂŐŶŝƚƵĚĞ Ϯ͘ϱ ŽŶ ƚŚĞ ZŝĐŚƚĞƌ ƐĐĂůĞ ;ĞĂƌƚŚƋƵĂŬĞƐ ƵƐƵĂůůLJ ĂƌĞ ŶŽƚ ĨĞůƚ ďĞůŽǁ ϯ͘ϱͿ͘ϯϴϳ ǀǀ Ɛ Ă ĨŝƐŚ ƉĂƐƐĞƐ ƚŚƌŽƵŐŚ Ă ĚĂŵ͕ ŝƚ ĐĂŶ ĞdžƉĞƌŝĞŶĐĞ ďĂƌŽƚƌĂƵŵĂ—ƐŝŐŶŝĨŝĐĂŶƚ ĐŚĂŶŐĞƐ ŝŶ ƉƌĞƐƐƵƌĞ ƚŚĂƚ ĐĂŶ ƌĞƐƵůƚ ŝŶ ŝŶƚĞƌŶĂů ŝŶũƵƌŝĞƐ Žƌ ĚĞĂƚŚ͘ ZŝĐŚĂƌĚ ͘ ƌŽǁŶ͕ ůŝƐŽŶ ͘ ŽůŽƚĞůŽ͕ ƌĞƚƚ ͘ WĨůƵŐƌĂƚŚ͕ ƌĂŝŐ ͘ ŽLJƐ͕ ĞĞ ͘ ĂƵŵŐĂƌƚŶĞƌ͕ ͘ ĂŶŝĞů ĞŶŐ͕ Ƶŝnj '͘ D͘ ŝůǀĂ͕ Ğƚ Ăů͕͘ “hŶĚĞƌƐƚĂŶĚŝŶŐ͕ ĂƌŽƚƌĂƵŵĂ ŝŶ ŝƐŚ WĂƐƐŝŶŐ LJĚƌŽ ƚƌƵĐƚƵƌĞƐ͗ 'ůŽďĂů ƚƌĂƚĞŐLJ ĨŽƌ ƵƐƚĂŝŶĂďůĞ ĞǀĞůŽƉŵĞŶƚ of Water Resources ” Fisheries ϯϵ͕ ŶŽ͘ ϯ ;ϮϬϭϰͿ͗ ϭϬϴ–ϭϮϮ͕ ŚƚƚƉ͗ͬͬĚdž͘ĚŽŝ͘ŽƌŐͬϭϬ͘ϭϬϴϬͬϬϯϲϯϮϰϭϱ͘ϮϬϭϰ͘ϴϴϯϱϳϬ͘ 3-66 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 dŽ ĂĚĚƌĞƐƐ ĐŽŶĐĞƌŶƐ ĂďŽƵƚ ŝŶĚƵĐĞĚ ƐĞŝƐŵŝĐŝƚLJ ƌĞůĂƚĞĚ ƚŽ ĞŶŚĂŶĐĞĚ ŐĞŽƚŚĞƌŵĂů ƐLJƐƚĞŵƐ͕ K ĐŽŵŵŝƐƐŝŽŶĞĚ ĞdžƉĞƌƚƐ ƚŽ ĂƵƚŚŽƌ ƚŚĞ ŶĚƵĐĞĚ ĞŝƐŵŝĐŝƚLJ WƌŽƚŽĐŽů͕ Ă ůŝǀŝŶŐ ŐƵŝĚĂŶĐĞ ĚŽĐƵŵĞŶƚ ĨŽƌ ŐĞŽƚŚĞƌŵĂů ĚĞǀĞůŽƉĞƌƐ͕ ƉƵďůŝĐ ŽĨĨŝĐŝĂůƐ͕ ƌĞŐƵůĂƚŽƌƐ͕ ĂŶĚ ƚŚĞ ŐĞŶĞƌĂů ƉƵďůŝĐ ƚŚĂƚ ĚĞƚĂŝůƐ ƵƐĞĨƵů ƐƚĞƉƐ ƚŽ ĞǀĂůƵĂƚĞ ĂŶĚ ŵĂŶĂŐĞ ƚŚĞ ĞĨĨĞĐƚƐ ŽĨ ŝŶĚƵĐĞĚ ƐĞŝƐŵŝĐŝƚLJ ƌĞůĂƚĞĚ ƚŽ ŐĞŽƚŚĞƌŵĂů ƉƌŽũĞĐƚƐ͘ϯϴϴ 3 4 4 5 Land-Use and Ecological Impacts of Electricity T D tŚŝůĞ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ŽĨ dΘ ƚĞŶĚ ƚŽ ďĞ ƐŵĂůůĞƌ ƚŚĂŶ ŐĞŶĞƌĂƚŝŽŶ ŝŵƉĂĐƚƐ͕ ƚŚĞLJ ĂƌĞ ŶŽƚ ŶĞŐůŝŐŝďůĞ͘ϯϴϵ Ɛ dΘ ĂƐƐĞƚƐ ĂƌĞ ŶŽƚ ůĂƌŐĞ ƉŽŝŶƚ ƐŽƵƌĐĞƐ ŽĨ ƉŽůůƵƚŝŽŶ ĂŶĚ ĂƌĞ ŐĞŽŐƌĂƉŚŝĐĂůůLJ ĞdžƉĂŶƐŝǀĞ͕ ƚŚĞŝƌ ŝŵƉĂĐƚƐ ĂůƐŽ ŵĂLJ ŶŽƚ ďĞ ǁĞůů ĐŚĂƌĂĐƚĞƌŝnjĞĚ͘ϯϵϬ dΘ ƐLJƐƚĞŵƐ ŚĂǀĞ ĂŶ ĂƌƌĂLJ ŽĨ ĚŝƌĞĐƚ ĂŶĚ ŝŶĚŝƌĞĐƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ǁŚŝĐŚ ĐĂŶ ďĞ ĚŝǀŝĚĞĚ ďĞƚǁĞĞŶ ƚŚĞ ŝŵƉĂĐƚƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĐŽŶƐƚƌƵĐƚŝŽŶ ĂŶĚ ƚŚŽƐĞ ƌĞůĂƚĞĚ ƚŽ ŽƉĞƌĂƚŝŽŶ ŽĨ ƚŚĞ ĞůĞĐƚƌŝĐ ŐƌŝĚ͘ dŚĞ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ŽĨ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ ĐĂŶ ďĞ ǁĞŝŐŚĞĚ against transmission lines’ benefits Žƌ ĞdžĂŵƉůĞ͕ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ ĐŽŶŶĞĐƚ ƌĞŵŽƚĞůLJ ůŽĐĂƚĞĚ͕ ůŽǁĞƌͲ ĞŵŝƚƚŝŶŐ ŐĞŶĞƌĂƚŝŽŶ ƐŽƵƌĐĞƐ ƚŽ ůŽĂĚ ĐĞŶƚĞƌƐ͕ ĂŶĚ ĐůĞĂƌŝŶŐƐ ĨŽƌ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ ĐƌĞĂƚĞ ĨŝƌĞďƌĞĂŬƐ͕ ƌĞĚƵĐŝŶŐ ƚŚĞ ŝŵƉĂĐƚƐ ŽĨ ǁŝůĚ ĨŝƌĞƐ ĂŶĚ ŝŵƉƌŽǀŝŶŐ ĞŵĞƌŐĞŶĐLJ ĂĐĐĞƐƐ͘ EĞǁ ƉŽǁĞƌ ůŝŶĞƐ͕ ĂĐĐĞƐƐ ƌŽĂĚƐ͕ ĂŶĚ ĂƐƐŽĐŝĂƚĞĚ ĞƋƵŝƉŵĞŶƚ ƉůĂĐĞĚ ŝŶ ƵŶĚĞǀĞůŽƉĞĚ ĂƌĞĂƐ ĐĂŶ ĐƌĞĂƚĞ ƐƵďƐƚĂŶƚŝĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͕ ŝŶĐůƵĚŝŶŐ ƚŚĞ ĚŝƐƚƵƌďĂŶĐĞ ŽĨ ĨŽƌĞƐƚƐ͕ ǁĞƚůĂŶĚƐ͕ ĂŶĚ ŽƚŚĞƌ ŶĂƚƵƌĂů ĂƌĞĂƐ͘ ĚũƵƐƚŝŶŐ ƉƌŽƉŽƐĞĚ ƌŽƵƚĞƐ ŽĨ ŽǀĞƌŚĞĂĚ ƉŽǁĞƌ ůŝŶĞƐ ĐĂŶ ƌĞĚƵĐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ϯϵϭ ŚŽŽƐŝŶŐ Ă ĚŝĨĨĞƌĞŶƚ ƚLJƉĞ ŽĨ ƉŽůĞ ƐƚƌƵĐƚƵƌĞ Žƌ ŵŽĚŝĨLJŝŶŐ ĐŽŶƐƚƌƵĐƚŝŽŶ ŵĞƚŚŽĚƐ ĐĂŶ ƌĞĚƵĐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ͘ ZŝŐŚƚͲŽĨͲǁĂLJ ŝƐƐƵĞƐ ĐĂŶ ďĞ ŵŝŶŝŵŝnjĞĚ ďLJ ƵƐŝŶŐ ĐŽƌƌŝĚŽƌͲƐŚĂƌŝŶŐ ƌŽƵƚĞƐ ĚƵƌŝŶŐ ƚŚĞ ĚĞƐŝŐŶ ƉŚĂƐĞ͘ WƵƚƚŝŶŐ ƉŽǁĞƌ ůŝŶĞƐ ƵŶĚĞƌŐƌŽƵŶĚ ĐĂŶ ůŝŵŝƚ ƚŚĞ ǀŝƐƵĂů ŝŵƉĂĐƚ ŽĨ ŽǀĞƌŚĞĂĚ ůŝŶĞƐ͘ ƵƌLJŝŶŐ ůŽǁͲǀŽůƚĂŐĞ ĚŝƐƚƌŝďƵƚŝŽŶ ůŝŶĞƐ ŝƐ ĐŽŵŵŽŶ ŝŶ ƌĞƐŝĚĞŶƚŝĂů ĂƌĞĂƐ͘ ƵƌLJŝŶŐ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ͕ ŚŽǁĞǀĞƌ͕ ŝƐ ƵŶĐŽŵŵŽŶ ďĞĐĂƵƐĞ ŝƚ ŝƐ Ϯ–ϭϬ ƚŝŵĞƐ ŵŽƌĞ ĞdžƉĞŶƐŝǀĞ ƚŚĂŶ ďƵŝůĚŝŶŐ ĂŶ ŽǀĞƌŚĞĂĚ ůŝŶĞ͘ϯϵϮ dΘ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ĨŽƌ ' ƐLJƐƚĞŵƐ ŚĂǀĞ ƐŵĂůůĞƌ ĨŽŽƚƉƌŝŶƚƐ͘ ' ƵŶŝƚƐ ĂƌĞ ĐůŽƐĞƌ ƚŽ ĞŶĚ ƵƐĞƌƐ͕ ƌĞĚƵĐŝŶŐ ƚŚĞ ŶĞĞĚ ĨŽƌ ŶĞǁ Žƌ ĞdžƉĂŶĚĞĚ ƚƌĂŶƐŵŝƐƐŝŽŶ͘ ' ƐLJƐƚĞŵƐ ĐĂŶ ƌĞƋƵŝƌĞ ĞdžƉĂŶĚĞĚ ƚƌĂŶƐĨŽƌŵĞƌ ĂŶĚ ƐƵďƐƚĂƚŝŽŶ ĐĂƉĂĐŝƚŝĞƐ ;ƚŚĞ ĂǀĞƌĂŐĞ ĐŽƐƚ ŽĨ ƵƉĚĂƚŝŶŐ Ă ƐƵďƐƚĂƚŝŽŶ ŝƐ ΨϰϬͬŬŝůŽǀŽůƚͲĂŵƉĞƌĞͿ͘ ǀŝĂŶ ŵŽƌƚĂůŝƚŝĞƐ ĨƌŽŵ ĐŽůůŝƐŝŽŶƐ ǁŝƚŚ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ ĂŶĚ ƌĞůĂƚĞĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞƐ ĂƌĞ ĂŶ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽƐƚ ŽĨ ƚŚĞ dΘ ƐLJƐƚĞŵ͘ Ŷ ĂĚĚŝƚŝŽŶ ƚŽ ƌĞĚƵĐŝŶŐ ďŝƌĚ ƉŽƉƵůĂƚŝŽŶƐ͕ ĐŽůůŝƐŝŽŶƐ ĂŶĚ ĞůĞĐƚƌŽĐƵƚŝŽŶƐ ĐĂŶ ƉƌŽĚƵĐĞ ŽƵƚĂŐĞƐ͘ ŝƌĚ ĐŽůůŝƐŝŽŶƐ ǀĂƌLJ ďLJ ŚĂďŝƚĂƚ ƚLJƉĞ͕ ƐƉĞĐŝĞƐ ƐŝnjĞ͕ ĂŶĚ ƐĐĂǀĞŶŐŝŶŐ ƌĂƚĞƐ͕ ĂŶĚ ƚŚĞLJ ĂƉƉĞĂƌ ƚŽ ďĞ ŚŝŐŚĞƌ ĚƵƌŝŶŐ ŵŝŐƌĂƚŝŽŶ͘ ĚǀĞƌƐĞ ĞĨĨĞĐƚƐ ŽŶ ĐĞƌƚĂŝŶ ďŝƌĚƐ ;Ğ͘Ő͕͘ ĞůĞĐƚƌŽĐƵƚŝŽŶ ŽĨ ĞĂŐůĞƐͿ ŵĂLJ ƌĞƐƵůƚ ŝŶ ƉĞŶĂůƚŝĞƐ͘ϯϵϯ KŶĞ ŝŶǀĞŶƚŽƌLJ ŽĨ ďŝƌĚ ŵŽƌƚĂůŝƚLJ ĨƌŽŵ ƚƌĂŶƐŵŝƐƐŝŽŶ ůŝŶĞƐ ĂĐƌŽƐƐ ĂŶĂĚĂ͕ ĂďŽƵƚ ŚĂůĨ ƚŚĞ ƐŝnjĞ ŽĨ ƚŚĞ h͘ ͘ ƐLJƐƚĞŵ͕ ƌĞƉŽƌƚĞĚ Ϯ͘ϱ ƚŽ Ϯϱ͘ϲ ŵŝůůŝŽŶ ďŝƌĚ ĚĞĂƚŚƐ ĂŶŶƵĂůůLJ͘ϯϵϰ Ŷ ƚŚĞ hŶŝƚĞĚ ƚĂƚĞƐ͕ ƌĞƐĞĂƌĐŚ ĐŽŶĚƵĐƚĞĚ ďLJ ƚŚĞ ŝƐŚ ĂŶĚ tŝůĚůŝĨĞ ĞƌǀŝĐĞ ĨŽƵŶĚ ƚŚĂƚ ƉŽǁĞƌ ůŝŶĞƐ ĂůŽŶĞ ŵŝŐŚƚ Ŭŝůů ƵƉ ƚŽ ϭϳϱ ŵŝůůŝŽŶ ďŝƌĚƐ ĂŶŶƵĂůůLJ͘ϯϵϱ WƌŽĂĐƚŝǀĞ ƉůĂŶŶŝŶŐ ĐĂŶ ŚĞůƉ ƌĞĚƵĐĞ ƚŚĞƐĞ ŝŵƉĂĐƚƐ ŽŶ ĂǀŝĂŶ ĂŶĚ ŽƚŚĞƌ ǁŝůĚůŝĨĞ ƉŽƉƵůĂƚŝŽŶƐ͘ 3 4 4 6 Mitigation of Environmental Impacts dŚĞƌĞ ĂƌĞ ƐĞǀĞƌĂů ĞdžŝƐƚŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ůĂǁƐ ĚĞƐŝŐŶĞĚ ƚŽ ŚĞůƉ ŵŝƚŝŐĂƚĞ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ĂŶĚ ĐŽŶĐĞƌŶƐ ŽƵƚůŝŶĞĚ ĂďŽǀĞ͘ Žƌ ĞdžĂŵƉůĞ͕ ĂƉƉůŝĐĂďůĞ ĞĚĞƌĂů ůĂǁƐ ŝŶĐůƵĚĞ ƚŚĞ ͕ϯϵϲ ƚŚĞ ůĞĂŶ tĂƚĞƌ Đƚϯϵϳ ĂŶĚ ƚŚĞ ŶĚĂŶŐĞƌĞĚ ƉĞĐŝĞƐ Đƚ͘ϯϵϴ ƵƌƚŚĞƌŵŽƌĞ͕ ĂŶLJ ĞĚĞƌĂů ĂĐƚŝŽŶ ŝŶǀŽůǀŝŶŐ ŶĞǁ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƌĞƋƵŝƌĞƐ ƚŚĞ ƌĞƐƉŽŶƐŝďůĞ ĞĚĞƌĂů ŽĨĨŝĐŝĂů ƚŽ ĐŽŶƐŝĚĞƌ ƚŚĞ ƉŽƚĞŶƚŝĂů ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ŽĨ ƚŚĞ ƉƌŽƉŽƐĞĚ ĂĐƚŝŽŶ ĂŶĚ ĂŶLJ ƌĞĂƐŽŶĂďůĞ ĂůƚĞƌŶĂƚŝǀĞƐ͘ϯϵϵ dŚŝƐ ƌĞƋƵŝƌĞŵĞŶƚ ŝƐ ƐƉĞĐŝĨŝĞĚ ŝŶ ƚŚĞ EĂƚŝŽŶĂů ŶǀŝƌŽŶŵĞŶƚĂů WŽůŝĐLJ Đƚ ;E W Ϳ ŽĨ ϭϵϲϵ ĂŶĚ ƚŚĞ ŽƵŶĐŝů ŽŶ ŶǀŝƌŽŶŵĞŶƚĂů YƵĂůŝƚLJ ZĞŐƵůĂƚŝŽŶƐ ĨŽƌ ŵƉůĞŵĞŶƚŝŶŐ ƚŚĞ WƌŽĐĞĚƵƌĂů WƌŽǀŝƐŝŽŶƐ ŽĨ E W ͘ϰϬϬ dŚĞ ĐŽŵƉůĞdžŝƚLJ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ŽďƚĂŝŶŝŶŐ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ƉĞƌŵŝƚƐ ŶĞĐĞƐƐĂƌLJ ƚŽ ďƵŝůĚ ŶĞǁ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ǁŝůů ĚŝĨĨĞƌ depending on the implications of the proposed facility’s proximity to ƐĞŶƐŝƚŝǀĞ Ăŝƌ͕ ǁĂƚĞƌ͕ ǁŝůĚůŝĨĞ͕ ĂŶĚ ĐƵůƚƵƌĂů ƌĞƐŽƵƌĐĞƐ͘ Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-67 Chapter III Building a Clean Electricity Future dŚĞ ĨŝƌƐƚ ŝŶƐƚĂůůŵĞŶƚ ŽĨ ƚŚĞ Y Z ;Y Z ϭ͘ϭͿ ĨŽƵŶĚ ƚŚĂƚ ǁŚŝůĞ ĞdžƉĂŶĚŝŶŐ dΘ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĐĂŶ ƉŽƐĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŚĂůůĞŶŐĞƐ͕ ďƵŝůĚŝŶŐ ŶĞǁ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ĐĂŶ ĂůƐŽ ůĞĂĚ ƚŽ ƐŝŐŶŝĨŝĐĂŶƚ ŶĞƚ ĞŶǀŝƌŽŶŵĞŶƚĂů ďĞŶĞĨŝƚƐ͘ Žƌ ƚŚŝƐ ƌĞĂƐŽŶ͕ ĂŐĞŶĐŝĞƐ ĂĐƌŽƐƐ ƚŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ĂƌĞ ĞŶŐĂŐĞĚ ŝŶ ƐĞǀĞƌĂů ŝŶŝƚŝĂƚŝǀĞƐ ƚŽ ŵŽĚĞƌŶŝnjĞ ƚŚĞ ĞĚĞƌĂů ƌŽůĞ ŝŶ ĞůĞĐƚƌŝĐ ƚƌĂŶƐŵŝƐƐŝŽŶ ƉĞƌŵŝƚƚŝŶŐ ĂŶĚ ƉƌŽũĞĐƚ ƌĞǀŝĞǁ͘ϰϬϭ Ŷ ƚŚĞŝƌ ĂŶĂůLJƐĞƐ͕ ƉĞƌŵŝƚƚŝŶŐ ĂŐĞŶĐŝĞƐ ƚLJƉŝĐĂůůLJǁǁ ĐŽŶƐŝĚĞƌ ŵŝƚŝŐĂƚŝŽŶ ƌĞƋƵŝƌĞŵĞŶƚƐ ƚŚĂƚ ŵĂLJ ďĞ ŝŵƉŽƐĞĚ ĂƐ ĐŽŶĚŝƚŝŽŶƐ ƚŽ ĂĚĚƌĞƐƐ ƵŶĂǀŽŝĚĂďůĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŚĂƌŵƐ͘ ĞĐĂĚĞƐ ŽĨ ĞdžƉĞƌŝĞŶĐĞ ǁŝƚŚ ƐŝƚŝŶŐ ĞŶĞƌŐLJ dΘ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ŚĂǀĞ ƉƌŽĚƵĐĞĚ ǀĂƌŝŽƵƐ ŵĞƚŚŽĚƐ ĨŽƌ ŽĨĨƐĞƚƚŝŶŐ ŝŵƉĂĐƚƐ ƚŽ ĂĨĨĞĐƚĞĚ ĐŽŵŵƵŶŝƚŝĞƐ ĂŶĚ ĞĐŽƐLJƐƚĞŵƐ͕ ŝŶĐůƵĚŝŶŐ ĂǀŽŝĚĂŶĐĞ͕ ŵŝŶŝŵŝnjĂƚŝŽŶ͕ ĂŶĚ ĐŽŵƉĞŶƐĂƚŝŽŶ͘ dŚĞƐĞ ŵĞƚŚŽĚƐ ĂƌĞ ƐƵŵŵĂƌŝnjĞĚ Y Z ϭ͘ϭ ĂŶĚ ĂƌĞ ƌĞƉƌŽĚƵĐĞĚ ŝŶ ƚŚĞ ďŽdž ďĞůŽǁ͘ Mitigating Environmental Impacts402  Mitigation is an important mechanism for agencies to use to avoid minimize rectify reduce or compensate the adverse environmental impacts associated with their activities 403 404 Federal agencies typically rely upon mitigation to reduce environmental impacts through modification of proposed actions and consideration and development of mitigation alternatives during the National Environmental Policy Act process xx  Mitigation is important to Federal agencies managing public lands which impose a responsibility to sustain an array of resources values and functions For example public lands contain important wildlife habitat and vegetative communities—in addition to recreational opportunities and ecosystem services cultural resources and special status species These lands are managed for the use and enjoyment of present and future generations The location construction and maintenance of energy infrastructure should avoid minimize and in some cases compensate for impacts to these public resources values and functions Mitigation is of critical importance to agencies responsible for protecting the Nation’s waters 405 Applying this mitigation hierarchy early in transmission and distribution infrastructure planning provides better outcomes for the impacted resources values and functions 406  Resource-specific mitigation measures can be applied to avoid or minimize impacts from a pipeline or an electric transmission project In order to identify and implement appropriate mitigation measures first the potential impacts of a project on a specific resource must be assessed Then project-specific and site-specific factors must be evaluated to determine whether the impact can be avoided or mitigated what action can be taken how effective the mitigation measure will be and the cost effectiveness of the measure 3 4 4 7 Mitigating Impacts through Siting and Permitting of Electricity Infrastructure DŽƐƚ ƐŝƚŝŶŐ ĂŶĚ ƉĞƌŵŝƚƚŝŶŐ ĚĞĐŝƐŝŽŶƐ ĂƌĞ ŵĂĚĞ Ăƚ ƚŚĞ ƐƚĂƚĞ ĂŶĚ ůŽĐĂů ůĞǀĞůƐ͕ ďƵƚ ƚŚĞ ƚƌĂŶƐĨŽƌŵĂƚŝŽŶ ŽĨ ƚŚĞ h͘ ͘ ĞůĞĐƚƌŝĐŝƚLJ ƐLJƐƚĞŵ ƌĞƋƵŝƌĞƐ ĞĨĨĞĐƚŝǀĞ ƐŝƚŝŶŐ ĂŶĚ ƉĞƌŵŝƚƚŝŶŐ ĐĂƉĂďŝůŝƚŝĞƐ Ăƚ Ăůů ůĞǀĞůƐ ŽĨ ŐŽǀĞƌŶŵĞŶƚ͘ WůĂŶŶŝŶŐ ĂŶĚ ƉĞƌŵŝƚƚŝŶŐ ŶĞǁ ƚƌĂŶƐŵŝƐƐŝŽŶ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ŝŶĐůƵĚŝŶŐ ŵĂŶĂŐŝŶŐ ĞĐŽůŽŐŝĐĂů ŝŵƉĂĐƚƐ ĂĐƌŽƐƐ ũƵƌŝƐĚŝĐƚŝŽŶƐ ĂŶĚ ǁŝƚŚ Ă ǁŝĚĞ ƌĂŶŐĞ ŽĨ ƐƚĂŬĞŚŽůĚĞƌƐ͕ ŝƐ ƵŶŝƋƵĞůLJ ĐŚĂůůĞŶŐŝŶŐ͘ ĞĚĞƌĂůŝƐŵ ĂŶĚ ƚŚĞ ŝŶƚĞƌƉůĂLJ ŽĨ ƐƚĂƚĞ ĂŶĚ ĞĚĞƌĂů ůĂǁ ĐƌĞĂƚĞ ŽǀĞƌůĂƉƉŝŶŐ ũƵƌŝƐĚŝĐƚŝŽŶĂů ůŝŶĞƐ͘ ƚĂƚĞ͕ ůŽĐĂů͕ ĂŶĚ ƚƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ͕ ĂƐƐŝƐƚĞĚ ďLJ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ͕ ŶĞĞĚ ƚŽ ďƵŝůĚ ĐĂƉĂĐŝƚLJ ƚŽ ŵŝŶŝŵŝnjĞ ƐĂĨĞƚLJ ĂŶĚ ƐĞĐƵƌŝƚLJ ĐŽŶƐĞƋƵĞŶĐĞƐ͕ ĂƐ ǁĞůů ĂƐ ƉƌŽƚĞĐƚ ƚŚĞ ĞŶǀŝƌŽŶŵĞŶƚ͕ ǁŚŝůĞ ůŝŵŝƚŝŶŐ ƉĞƌŵŝƚƚŝŶŐͲƌĞůĂƚĞĚ ĚĞůĂLJƐ͘ϰϬϳ͕ ϰϬϴ ŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ŵĂLJ ĂĚŽƉƚ njŽŶŝŶŐ ƌĞƋƵŝƌĞŵĞŶƚƐ ƚŚĂƚ ĚŝĨĨĞƌ ĨƌŽŵ ƐƚĂƚĞ ƌĞŐƵůĂƚŝŽŶƐ Žƌ ĞǀĞŶ ƚŚĞ ƌĞŐƵůĂƚŝŽŶƐ ŽĨ ŶĞŝŐŚďŽƌŝŶŐ ǁǁ ŐĞŶĐŝĞƐ ŵƵƐƚ ĐŽŶƐŝĚĞƌ ŵŝƚŝŐĂƚŝŽŶ ǁŚĞŶ ĐŽŵƉůĞƚŝŶŐ ĂŶ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚ ƐƚĂƚĞŵĞŶƚ͕ ĂŶĚ ŵŝƚŝŐĂƚŝŽŶ ŝƐ ŽĨƚĞŶ ĐŽŶƐŝĚĞƌĞĚ ǁŚĞŶ ĐŽŵƉůĞƚŝŶŐ ĂŶ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂƐƐĞƐƐŵĞŶƚ͘ dždž The Council on Environmental Quality’s NEPA regulations ƌĞƋƵŝƌĞ ĂŐĞŶĐŝĞƐ ƚŽ ŝĚĞŶƚŝĨLJ ŝŶ ƚŚĞŝƌ ZĞĐŽƌĚ ŽĨ ĞĐŝƐŝŽŶ ĂŶLJ ŵŝƚŝŐĂƚŝŽŶ ŵĞĂƐƵƌĞƐ ƚŚĂƚ ĂƌĞ ŶĞĐĞƐƐĂƌLJ ƚŽ ŵŝŶŝŵŝnjĞ ĞŶǀŝƌŽŶŵĞŶƚĂů ŚĂƌŵ ĨƌŽŵ ƚŚĞ ĂůƚĞƌŶĂƚŝǀĞ ƐĞůĞĐƚĞĚ ;ϰϬ ͘ ͘Z͘ Α ϭϱϬϱ͘Ϯ;ĐͿͿ͘ dŚĞ E W ĂŶĂůLJƐŝƐ ĐĂŶ ĂůƐŽ ĐŽŶƐŝĚĞƌ ŵŝƚŝŐĂƚŝŽŶ ĂƐ ĂŶ ŝŶƚĞŐƌĂů ĞůĞŵĞŶƚ ŝŶ ƚŚĞ ĚĞƐŝŐŶ ŽĨ ƚŚĞ ƉƌŽƉŽƐĞĚ ĂĐƚŝŽŶ͘ dŚĞ ƌĞŐƵůĂƚŝŽŶƐ ĨƵƌƚŚĞƌ ƐƚĂƚĞ ƚŚĂƚ Ă ŵŽŶŝƚŽƌŝŶŐ ĂŶĚ ĞŶĨŽƌĐĞŵĞŶƚ ƉƌŽŐƌĂŵ ƐŚĂůů ďĞ ĂĚŽƉƚĞĚ ǁŚĞƌĞ ĂƉƉůŝĐĂďůĞ ĨŽƌ ĂŶLJ ŵŝƚŝŐĂƚŝŽŶ ;ϰϬ ͘ ͘Z͘ Α ϭϱϬϱ͘Ϯ;ĐͿͿ͘ 3-68 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 ĐŽŵŵƵŶŝƚŝĞƐ͘ϰϬϵ dƌŝďĂů ŐŽǀĞƌŶŵĞŶƚƐ ďĞĐŽŵĞ ƉĂƌƚŝĐŝƉĂŶƚƐ ŝŶ ƉĞƌŵŝƚƚŝŶŐ ĚĞĐŝƐŝŽŶƐ ŝĨ Ă ƉƌŽũĞĐƚ ŵĂLJ ĚŝƐƌƵƉƚ ĐƵůƚƵƌĂů Žƌ ŚŝƐƚŽƌŝĐ ƉƌŽƉĞƌƚŝĞƐ Žƌ ƌĞƐŽƵƌĐĞƐ͘ϰϭϬ Žƌ ĂŶLJ ƉƌŽũĞĐƚ ƚŚĂƚ ŝŶǀŽůǀĞƐ Ă ĞĚĞƌĂů ĂĐƚŝŽŶ ;Ğ͘Ő͕͘ ŝĨ Ă ƉƌŽƉŽƐĞĚ ƉƌŽũĞĐƚ ǁŽƵůĚ ďĞ ƐŝƚĞĚ ŽŶ ĞĚĞƌĂů ůĂŶĚ Žƌ ƉĂƌƚŝĂůůLJ ĨŝŶĂŶĐĞĚ ǁŝƚŚ ĞĚĞƌĂů ĨƵŶĚƐͿ͕ ƚŚĞ ƌĞƐƉŽŶƐŝďůĞ ĞĚĞƌĂů ĂŐĞŶĐLJ ŝƐ ƌĞƋƵŝƌĞĚ ďLJ E W ƚŽ ĞǀĂůƵĂƚĞ ƉŽƚĞŶƚŝĂů ƐŽĐŝĂů ĂŶĚ ĞŶǀŝƌŽŶŵĞŶƚĂů ŝŵƉĂĐƚƐ ŽĨ ƚŚĞ ƉƌŽƉŽƐĞĚ ĂĐƚŝŽŶ ĂŶĚ ĐŽŶƐŝĚĞƌ ƌĞĂƐŽŶĂďůĞ ĂůƚĞƌŶĂƚŝǀĞƐ͘ϰϭϭ ŝŶĐĞ ŵƵůƚŝƉůĞ ĞĚĞƌĂů ĂŐĞŶĐŝĞƐ ĐĂŶ ďĞ ŝŶǀŽůǀĞĚ ǁŝƚŚ ƉĞƌŵŝƚƚŝŶŐ dΘ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ ƚŚĞ KďĂŵĂ ĚŵŝŶŝƐƚƌĂƚŝŽŶ ŚĂƐ ƚĂŬĞŶ ƐƚĞƉƐ ƚŽ ŵŽĚĞƌŶŝnjĞ ĞĚĞƌĂů ƉĞƌŵŝƚƚŝŶŐ ĂŶĚ ƌĞǀŝĞǁ ƉƌŽĐĞƐƐĞƐ͘ϰϭϮ ĐƚŝǀĞ ĐŽŽƌĚŝŶĂƚŝŽŶ ďĞƚǁĞĞŶ ĞĚĞƌĂů͕ ƐƚĂƚĞ͕ ĂŶĚ ůŽĐĂů ŐŽǀĞƌŶŵĞŶƚƐ ĞŶĂďůĞƐ ǁĞůůͲŝŶĨŽƌŵĞĚ ĚĞĐŝƐŝŽŶ ŵĂŬŝŶŐ͕ ƐƚƌŝŬŝŶŐ Ă ĨĂŝƌ ďĂůĂŶĐĞ ďĞƚǁĞĞŶ Ă ďƌŽĂĚ ƌĂŶŐĞ ŽĨ ƉƵďůŝĐ ĂŶĚ ƉƌŝǀĂƚĞ ŝŶƚĞƌĞƐƚƐ͘ 3 4 5 Federal and State Initiatives to Modernize Permitting and Review Processes dŚĞ ĞĚĞƌĂů 'ŽǀĞƌŶŵĞŶƚ ŝƐ ƵŶĚĞƌƚĂŬŝŶŐ ƐĞǀĞƌĂů ĂĐƚŝŽŶƐ ƚŽ ƌĞĚƵĐĞ ƚŚĞ ĂŐŐƌĞŐĂƚĞ ƉĞƌŵŝƚƚŝŶŐ ĂŶĚ ƌĞǀŝĞǁ ƚŝŵĞ ĨŽƌ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƉƌŽũĞĐƚƐ͕ ǁŚŝůĞ ŝŵƉƌŽǀŝŶŐ ĞŶǀŝƌŽŶŵĞŶƚĂů ĂŶĚ ĐŽŵŵƵŶŝƚLJ ŽƵƚĐŽŵĞƐ͘ dŚŝƐ ŝŶĐůƵĚĞƐ Ă ŶƵŵďĞƌ ŽĨ ĞĚĞƌĂů ĂŶĚ ƌĞŐŝŽŶĂů ŝŶŝƚŝĂƚŝǀĞƐ ;ŽƵƚůŝŶĞĚ ŝŶ dĂďůĞ ϯ͘ϲͿ ƚŚĂƚ ĂƌĞ ĚĞƐŝŐŶĞĚ ƚŽ ƐƵƉƉŽƌƚ ďĞƚƚĞƌ ĚĞĐŝƐŝŽŶ ŵĂŬŝŶŐ ŝŶ ƚŚĞ ĨŽůůŽǁŝŶŐ ǁĂLJƐ͗     ĂĐŝůŝƚĂƚĞ ďĞƚƚĞƌ ĐŽŽƌĚŝŶĂƚŝŽŶ ďĞƚǁĞĞŶ ƉĞƌŵŝƚƚŝŶŐ ĂƵƚŚŽƌŝƚŝĞƐ Ăƚ Ăůů ůĞǀĞůƐ ŽĨ ŐŽǀĞƌŶŵĞŶƚ ĞǀĞůŽƉ ĂŶĚ ƉƵďůŝƐŚ ƌĞůĞǀĂŶƚ ŝŶĨŽƌŵĂƚŝŽŶ͕ ĚĂƚĂ͕ ĂŶĚ ƚŽŽůƐ ƵƉƉŽƌƚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ ƉůĂŶŶŝŶŐ ĂŶĚ ĞƐƚĂďůŝƐŚ ƌŝŐŚƚƐ ŽĨ ǁĂLJ ĨŽƌ ĞŶĞƌŐLJ ƉƌŽũĞĐƚƐ ŽŶĚƵĐƚ ƚĞĐŚŶŽůŽŐLJ ZΘ ͘ Table 3-6 Federal and Sub-National Initiatives to Modernize Electric Infrastructure Permitting and Review Processes413 Initiative Title Description Scope and Specific Focus Areas Facilitate Better Coordination between Permitting Authorities Increase Transparency Establishing an Implementation Plan to Modernize Permitting National Federal plan includes four strategies 15 reforms and nearly 100 near-term and long-term milestones established by Presidential Memorandum Improving Performance of Federal Permitting and Review of Infrastructure Projects National Executive Order 13604 to improve the efficiency and transparency of permitting and review processes for infrastructure projects while producing measurably better outcomes for communities and the environment Transforming the Nation's Electric Grid through Improved Siting Permitting and Review National developing an integrated interagency preapplication process for significant onshore electric transmission projects requiring Federal approval identifying and designating energy corridor Creating a Permitting Dashboard National online database to track the status of Federal environmental reviews and authorizations for projects covered under Title 41 of the Fixing America’s Surface Transportation Act Establishing an Interagency Rapid Response Team for Transmission National improve Federal interagency coordination tribal consultation and conflict resolution for challenging transmission projects The Western Governors Association Regulatory and Permitting Information Desktop Toolkit Western United States includes wiki platform for stakeholder and agency collaboration Integrated Interagency Pre-application Process National DOE final rulemaking to improve project planning process Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-69 Chapter III Building a Clean Electricity Future Initiative Title Description Scope and Specific Focus Areas Fixing America’s Surface Transportation Act National Title 41 establishes the Federal Infrastructure Permitting Improvement Steering Council to inventory major infrastructure projects that are subject to NEPA and improve the review process Publish Information Data and Tools EPA’s NEPAssist National web-based mapping tool Fish and Wildlife Service’s Information Planning and Conservation Tool National help identify endangered and threatened species before beginning project design Army Corps’ Federal Support Toolbox National “one-stop shop” online water resources data portal Eastern Interconnection States Planning Council’s Energy Zones Mapping Tool Eastern United States includes 273 geographic information system data layers and links to key resources Energy Zones Mapping Tool for the Eastern Interconnection Planning Collaborative Eastern United States mapping clean energy resources and transmission Western Electricity Coordinating Council Environmental Data Viewer Western United States interactive transmission planning tool Support Infrastructure Planning Undertaking landscape- and watershed-level mitigation and conservation planning National environmental mitigation and resource protection at the landscape and watershed levels Speeding infrastructure development through more efficient and effective permitting and environmental review National Presidential Memorandum calling for expedited review of priority projects and improved accountability transparency and efficiency Memorandum of Understanding regarding transmission siting on Federal lands National aims at reducing approval time and reducing barriers to siting new transmission lines Designating corridors for pipelines electric transmission lines and related infrastructure Western United States Energy Policy Act of 2005 Section 386 establishes rights-of-way on Federal land to promote energy development resolve resource disputes and reduce congestion Desert Renewable Energy Conservation Plan California Federal and state collaboration on landscapelevel plan streamlining renewable development while conserving unique and valuable desert ecosystems Technology R D Promoting grid modernization DOE National Enhance security capabilities and stakeholder support A number of federal and regional initiatives are designed to improve the electric infrastructure permitting and review process Improved coordination not only reduces permitting and review time but also improves environmental and community outcomes These initiatives include the facilitation of coordination between authorities and increased transparency new tools to disseminate information effectively the support of infrastructure planning and technology R D 3 4 6 Addressing Impacts of Increased Deployment and New Clean Energy Technologies ŶĐƌĞĂƐĞĚ ĚĞƉůŽLJŵĞŶƚ ŽĨ ĞdžŝƐƚŝŶŐ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ĂŶĚ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ŶĞǁ ĐůĞĂŶ ĞŶĞƌŐLJ ƚĞĐŚŶŽůŽŐŝĞƐ ǁŝůů ƌĞƋƵŝƌĞ ƌĞĨŝŶĞŵĞŶƚ ŽĨ ĞdžŝƐƚŝŶŐ ŵŝƚŝŐĂƚŝŽŶ ƉŽůŝĐŝĞƐ͕ ǁŚŝĐŚ ǁĞƌĞ ĚĞǀĞůŽƉĞĚ ďĞĨŽƌĞ ƚŚĞƐĞ ƚĞĐŚŶŽůŽŐŝĞƐ ďĞĐĂŵĞ ĂǀĂŝůĂďůĞ͕ ĂƐ ǁĞůů ĂƐ ŶĞǁ ĂƉƉƌŽĂĐŚĞƐ ƚŽ ŵŝƚŝŐĂƚŝŽŶ͘ ŶĐůƵĚŝŶŐ ĂŶĂůLJƐĞƐ ŽĨ ůĂŶĚͲƵƐĞ 3-70 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 and ecological impacts in the R D process for new technologies could avoid most impacts and decrease the need for mitigation Improving environmental outcomes from infrastructure siting requires the joint efforts of agencies at all levels of government and the private sector Recent Transmission Line Approvals  Clean Line Plains Eastern Project 414 In March 2016 Secretary Moniz announced that the Department of Energy DOE would participate in the development of the Plains Eastern Clean Line Project Clean Line a major clean energy infrastructure project The Clean Line project taps abundant low-cost wind generation resources in the Oklahoma and Texas panhandle regions to deliver up to 4 000 megawatts MW of wind power via a 705-mile direct current transmission line— enough energy to power more than 1 5 million homes in the mid-South and Southeast United States The Clean Line project will include a 500-MW converter station in Arkansas that will allow the state to access the low-cost renewable energy supplied from the project Currently Arkansas has no utilityscale wind generation facilities and none under construction Furthermore as a condition of its participation DOE required that Clean Line make payments to localities for any otherwise-taxable land and assets that are owned by the Federal Government  Great Northern Transmission Line 415 In November 2016 DOE announced the issuance of a Record of Decision and Presidential Permit for the Great Northern Transmission Line The 224-mile overhead alternating current transmission line will bring up to 883 MW of hydropower from Manitoba Power in Canada to Grand Rapids Minnesota and will deliver wind power generated in North Dakota to Manitoba Power in Canada The project has the potential to provide enough reliable affordable and carbon-free electricity to serve approximately 600 000 residential customers in the Upper Midwest  New England Clean Power Link 416 In December 2016 DOE announced the issuance of a Record of Decision and Presidential Permit for the New England Clean Power Link Transmission Line The 154mile underground and underwater direct current transmission line will bring up to 1 000 MW of hydropower from Quebec Canada to southern Vermont The project has the potential to provide enough reliable affordable and carbon-free electricity to serve approximately 1 million residential customers in New England 3 4 6 1 Data and Analytical Needs In general it is important to have authoritative unbiased data in order to make informed Federal policy decisions but this is also important to empower other public- and private-sector entities at all levels to identify cost savings provide better services effectively plan for the future make research and scientific discoveries etc DOE has done well to provide relevant electricity data for many years most notably via the Energy Information Administration However attempts to address a host of emerging issues and pursue key policy objectives in the electricity sector have uncovered data issues that are inhibiting such efforts by actors at all levels of government Ecological and other environmental impacts specifically can be reduced by improving availability quality harmonization standardization and accessibility of relevant data to inform decision making Some data sets exist already including Tethys 417 a growing compendium of information and data exchanges on the environmental effects of wind and marine renewable energy technologies 418 and the Wind-Wildlife Impacts Literature Database a searchable document collection focusing on the impacts to wildlife from a variety of technologies 419 However relevant data if available can be plagued with quality issues and there are often spatial and temporal disparities between related data sets that make analysis difficult There is a need for additional data and analytical tools on updated life-cycle analysis using consistent methodologies as well as studies that attempt to monetize external costs420 associated with land-use requirements and ecological impacts More research and increased availability of data would improve the Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-71 Chapter III Building a Clean Electricity Future transparency of environmental impacts to developers regulators and the public and help inform more effective strategies for mitigating ecological impacts of electricity infrastructure and operations Including analysis of land and ecosystems in the R D process could decrease the need for mitigation New technologies with no adverse effects on ecosystems would unlock further areas where that technology could be deployed As the United States and other countries accelerate clean energy innovation through Mission Innovation including land-use and ecosystem impacts in Mission Innovation could provide a more holistic assessment of the environmental and ecological effects of new clean energy technologies 3 4 6 2 Multiple Uses for Rights of Way Repowering and Repurposing Degraded Lands or Brownfields Electricity infrastructure can be sited at less environmentally sensitive locations such as Superfund sites brownfields landfills abandoned mining land or existing transportation and transmission corridors Through its cataloging of Federal and state tracked contaminated lands landfills and mine sites EPA has identified thousands of potential sites that could potentially ameliorate incremental environmental impacts 421 Comprehensive land-use planning exercises have also identified areas appropriate for development such as the California Desert Renewable Energy Conservation Plan and the DOE-BLM Solar Programmatic Environmental Impact Statement States and Federal agencies could assess the amount of land suitable for multiple simultaneous uses including the installment of clean energy technologies Zoning laws could allow multiple land uses as a factor in permitting decisions for clean energy technologies 3 4 6 3 Programmatic Environmental Planning and Land-Scale Impact Assessments The trend has been to consider mitigation through programmatic environmental impact statements PEIS and landscape scale impact assessment replacing a more project-orientated focus A November 2013 Presidential Memorandum outlined further mitigation principles for Federal agencies including requiring agencies to set a “no net loss” or “net benefit” goal Subsequent Department of the Interior guidance on landscape-scale mitigation supported examining project impacts by considering the range of the resource in the context of the larger landscape where the project would be built Landscape-scale strategies consider impacts across ecosystems and administrative boundaries and give a more comprehensive picture than studies focused narrowly on impacts on a project-by-project basis This approach is being applied to a variety of major infrastructure development projects including transmission and other electricity projects The Fish and Wildlife Service uses landscape-scale analysis to protect the golden eagle among other species defining its “no net loss” policy to require every golden eagle killed at a wind plant to be offset by reducing eagle mortality from another source or by increasing eagle productivity 422 BLM also conducts PEIS for geothermal explorations or solar energy development in six southwestern states PEIS evaluate environmental impacts of a variety of individual projects over a long time frame and a large geographic area 423 Land-use and ecological impacts of energy technologies should be assessed on a larger scale and the necessary cooperation across jurisdictions should be expanded especially as impacts on wildlife could be felt far away from the original site of the deployed technology 3 4 7 Electricity and Environmental Justice Populations of concern—including low-income communities and some minority and tribal communities— are more vulnerable to the air- and water-quality impacts of the electricity system These communities are also disproportionately vulnerable and less resilient to the impacts of climate change These communities may have greater exposures due to their proximity to sources of pollution may be inherently 3-72 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 more sensitive to environmental impacts of pollution due to higher baseline risks such as poor overall health and typically have lower capacity to adapt to the impacts of pollution and extreme weather 424 For example a greater percentage of minorities and people living below the poverty level live within a 3-mile radius of coal- and oil-fired power plants compared to the U S population overall 425 Additionally existing health disparities and other inequities in these communities increase their vulnerability to the health effects of degraded air quality and climate change 426 Populations with the greatest sensitivity to the impacts of air pollution from power generation include children the elderly African Americans and women 427 Several factors make children more sensitive to air quality impacts including lung development that continues through adolescence the size of children’s airways their level of physical activity and body weight Ground-level ozone and PM are associated with increased asthma episodes and other adverse respiratory effects in children 428 Minority adults and children bear a disproportionate burden associated with asthma as measured by emergency hospital visits lost work and school days and overall poorer health status 429 Environmental justice concerns have been addressed in recent regulatory actions affecting power plant emissions wastewater discharges and onsite solid waste impoundment 430 431 432 In many cases these rulemakings have provided the opportunity to reduce existing disparities in health impacts For example the Mercury and Air Toxics Standard requires power plants to limit their emissions of toxic air pollutants like mercury arsenic and metals which disproportionately impact certain communities In addition Executive Order 12898 requires Federal agencies to consider environmental justice in regulatory permitting and enforcement activities Also in developing the CPP EPA took steps to ensure that vulnerable communities were not disproportionately impacted by the rule and that the rule’s benefits including climate benefits and air quality improvements were distributed fairly The Federal Interagency Working Group on Environmental Justice’s “Promising Practices for EJ Methodologies in NEPA Reviews”433 contains successful ideas across nine areas from which all Federal agencies can draw to develop their approaches to address environmental justice in the NEPA process          3 4 8 Meaningful engagement Scoping process Defining the affected environment Developing and selecting alternatives Identifying minority populations Identifying low-income populations Impacts Disproportionately high and adverse impacts Mitigation and monitoring Decommissioning of Generation Assets Infrastructure expansion can improve environmental performance by replacing higher-polluting with lower-polluting technologies 434 Because of their unique environmental concerns nuclear power plants have strict mandatory guidelines payment processes and monitoring for decommissioning activities while in general other generation assets do not There are multiple ways to improve and expedite endof-life-cycle processes while also improving environmental and societal outcomes Currently the changing electricity sector is causing the closure of many coal and nuclear plants in a shift from recent trends From 2000 through 2009 power plant retirements were dominated by natural gas steam turbines Over the past 6 years 2010–2015 power plant retirements were dominated by coal plants 37 GW which accounted for over 52 percent of recently retired power plant capacity 435 Over the Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-73 Chapter III Building a Clean Electricity Future next 5 years between 2016 and 2020 34 4 GW of summer capacity is planned to be retired and 79 percent of this planned retirement capacity are coal and natural gas plants 49 percent and 30 percent respectively The next largest set of planned retirements are nuclear plants 15 percent 436yy A much smaller percentage of planned retirements are diesel combustion and oil steam turbines These are less prominent in planned retirements in part because they now represent a much smaller percentage of the Nation’s electricity capacity than has historically been the case During decommissioning all plants have waste streams that need to be managed Coal and nuclear power plants produce the largest amount of solid waste during generation For coal plants the most expensive part of decommissioning in many cases will be environmental remediation of the CCR disposal sites 437 Nuclear waste is stored at the reactor site where it is generated The lack of a centralized permanent waste disposal facility for nuclear waste means that spent fuel storage facilities require continued management after a plant has been decommissioned Decommissioning needs will continue to evolve as new generators especially non-hydro renewables reach the end of their operating lives in the next 20– 30 years These plants have some unique waste streams including large volumes of glass and aluminum large fiberglass blades and in some cases rare earth metals however there is a high potential for recycling some of these materials and wind plants often have the opportunity for repowering by upgrading the turbine 3 4 8 1 Coal Increases in coal retirements imply a greater need for decommissioning these plants The coal ash byproduct of conventional coal-fired power plants is the largest quantity of solid waste produced from the generation of electricity 438 The composition and quantity of this solid waste depends on the type of coal burned the power conversion technology used and the addition of environmental controls Decommissioning needs include 1 data on waste and decommissioning costs 2 development of coal plant decommissioning procedures and 3 identification of barriers to waste recycling and options for overcoming these barriers 3 4 8 2 Nuclear Power NRC operating licenses for approximately 60 percent of the existing nuclear-power generating units in the United States will expire by 2040 Without further license extensions these expirations could result in retirements and decommissioning wastes in the coming decades 439 Nuclear plant owners must provide NRC with detailed decommissioning plans and periodic updates on the status of their decommissioning fund for the nuclear reactors they own 440 Three of the paramount considerations when developing a decommissioning plan are the radiological contamination condition and configuration of the plant Two decommissioning methods have been used in United States Safe Enclosure “SAFSTOR” and Immediate Dismantling “DECON” 441 In DECON the plant is immediately dismantled and the site is prepped for reuse by removing nuclear waste in casks for storage In SAFSTOR decommissioning plant dismantling is deferred for about 50 years There is currently no centralized permanent disposal facility for commercial used nuclear fuel in the United States so this radioactive material is stored at reactor sites in 35 states awaiting construction of a permanent handling facility 442 3 4 8 3 Oil and Gas Unlike coal plants and nuclear reactors gas- and oil-fired plants do not generate combustion ash or nuclear waste The unique solid waste concerns for gas- and oil-fired plants are the byproducts from yy These totals are based on announced retirements as of October 2016 Pending state action may prevent six nuclear reactors from retiring and another reactor has since announced it will retire during this timeframe 3-74 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 emission controls However the solid waste from electricity generation is small because of the low adoption rate of these emission controls for gas- and oil-fired plants These solid wastes are similar to the waste generated by environmental controls placed on the stacks of coal plants especially for most postcombustion removal technology There are three methods for decommissioning an oil or gas plant considering the conditions of the plants and the total budget cold closure selective demolition or total demolition 443 The decommissioning of gas and oil power plants creates construction and demolition waste general refuse and chemical waste 444 Chemical waste that is particular to oil and gas plants includes naturally occurring radioactive materials NORM During the oil and gas combustion process because NORM are not volatile burning away the carbon leads to higher levels of radioactive waste in scale sludge and scrapings of the generator tanks and pipelines 445 Radioactive material can also form a thin film on the interior surfaces of gas processing equipment and vessels Currently no Federal regulations exist that specifically address the handling and disposal of NORM wastes However several oil-producing states Texas Louisiana New Mexico North Dakota and Mississippi have enacted specific NORM regulations 446 3 4 8 4 Hydropower There are two options for decommissioning a hydropower plant A partial retirement involves retirement of only the hydroelectric facilities and retains portions of the dam and other structures Some rehabilitation of the structure for safety or maintenance may be required and can include reduction in height or breach of the dam In this case the dam is either reduced or eliminated while some of the ancillary facilities may remain intact A full retirement includes the removal of the project and all appurtenant structures including rehabilitation or restoration of the affected project area Decommissioning whether partial or full generally requires completion of an environmental impact statement and every dam removal process will have site-specific engineering environmental and community issues 3 4 8 5 Wind To date there have not been many wind decommissioning projects As a result details of decommissioning wind projects are very limited In some states developers are required to have decommissioning process and cost estimates ready with the decommissioning plan In general the decommissioning process of a wind plant consists of removing the turbine destroying the concrete pads restoring the surface and replanting and rebuilding the soil of disturbed land Communication towers are taken apart removed and then either disposed of recycled or reused 447 3 4 8 6 Solar PV Like wind there have not been many decommissioning projects for solar to date During decommissioning PV modules must be removed from racks and the racks must be dismantled These are stored temporarily onsite until they are transferred by trucks to appropriate facilities like recycling sites or back to the manufacturer Similarly inverters and associated components must be transported to an appropriate site per local state and Federal waste disposal regulations Finally re-vegetation of the site is done to minimize erosion and disruption of vegetation In the case of one solar farm decommissioning the recycling value of the raw material for the solar array is expected to exceed the removal costs and provide a net economic benefit 448 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-75 Chapter III Building a Clean Electricity Future While there is no industry-wide requirement for solar and wind developers to develop and fund decommissioning plans BLM does impose decommissioning requirements on Federal lands BLM requires developers seeking to site renewable generation projects on Federal lands to file a decommissioning plan and post a performance bond to help fund site remediation The performance bond is intended to cover costs associated with 1 removing hazardous materials including “herbicide use petroleum-based fluids and dust control or soil stabilization materials” 2 decommissioning removing and properly disposing of all “surface facilities ” such as panels and 3 “addressing reclamation revegetation restoration and soil stabilization ” such as regrading or vegetation as required under the Clean Water Act 449 Thus solar and wind facilities sited on Federal lands must have a decommissioning plan before they are granted right of way and must post a bond to fund decommissioning 3-76 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3 5 Endnotes 1 Ian M Hoffman Gregory Rybka Greg Leventis Charles A Goldman Lisa Schwartz Megan Billingsley and Steven Schiller The Total Cost of Saving Electricity through Utility Customer-Funded Energy Efficiency Programs Berkeley CA Lawrence Berkeley National Laboratory April 2015 2 https emp lbl gov sites all files total-cost-of-saved-energy pdf See also Lazard Lazard’s Levelized Cost of Energy Analysis—Version 9 0 Lazard November 2015 2 https www lazard com media 2390 lazards-levelized-cost-of-energy-analysis-90 pdf 2 Environmental Protection Agency EPA Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 Washington DC EPA April 2016 EPA 430-R-16-002 Table ES-6 http www3 epa gov climatechange ghgemissions usinventoryreport html 3 Environmental Protection Agency EPA “Air Pollutant Emissions Trends Data Average Annual Emissions ” accessed December 19 2016 https www epa gov sites production files 2015-07 national_tier1_caps xlsx 4 The White House Economic Report of the President Together with the Annual Report of the Council of Economic Advisors Washington DC The White House January 2017 https www whitehouse gov sites default files docs 2017_economic_report_of_president pdf 5 Jocelyn Rogers “New API Poll Voters Want Candidates Who Support America’s Energy Renaissance ” American Petroleum Institute June 21 2016 http www api org media Files Policy American-Energy WhatAmericaIsThinking-Polling pdf 6 Energy Information Administration EIA Annual Energy Outlook 2015 with Projections to 2040 Washington DC EIA 2015 DOE EIA-0383 2015 http www eia gov outlooks aeo pdf 0383 2015 pdf 7 Energy Information Administration EIA Annual Energy Outlook 2014 with Projections to 2040 Washington DC EIA 2015 DOE EIA-0383 2014 MT-16 http www eia gov outlooks aeo pdf 0383 2014 pdf 8 Energy Information Administration EIA Monthly Energy Review Washington DC EIA December 2016 accessed December 16 2016 Tables 2 1 2 2 2 3 2 4 and 2 5 http www eia gov totalenergy data monthly 9 EPSA Analysis Cara Marcy et al “Electricity Generation Baseline Report ” National Renewable Energy Laboratory 2017 10 Environmental Protection Agency EPA Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 Washington DC EPA April 2016 EPA 430-R-16-002 Table ES-6 http www3 epa gov climatechange ghgemissions usinventoryreport html 11 Environmental Protection Agency EPA Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 Washington DC EPA April 2016 EPA 430-R-16-002 Table A-95–A-98 http www3 epa gov climatechange ghgemissions usinventoryreport html 12 Environmental Protection Agency EPA Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 Washington DC EPA April 2016 EPA 430-R-16-002 Table 2-11 http www3 epa gov climatechange ghgemissions usinventoryreport html 13 Energy Information Administration EIA “Table 8 2 Average Tested Heat Rates by Prime Mover and Energy Source 2007– 2015 Btu per Kilowatthour ” in Electric Power Annual Washington DC EIA 2016 www eia gov electricity annual html epa_08_02 html 14 “Carbon Dioxide Emissions Coefficients ” Energy Information Administration February 2 2016 http www eia gov environment emissions co2_vol_mass cfm 15 Environmental Protection Agency EPA Inventory of U S Greenhouse Gas Emissions and Sinks 1990–2014 Washington DC EPA April 2016 EPA 430-R-16-002 Table 2-12 http www3 epa gov climatechange ghgemissions usinventoryreport html 16 Energy Information Administration EIA Monthly Energy Review Washington DC EIA December 2015 DOE EIA00035 2015 12 Table 12 6 http www eia gov totalenergy data monthly #electricity 17 Energy Information Administration EIA Monthly Energy Review Washington DC EIA 2016 accessed March 22 2016 Tables 7 1 and 12 6 http www eia gov totalenergy data monthly 18 “International Data Base ” U S Census Bureau last updated August 2016 accessed March 22 2016 http www census gov population international data idb informationGateway php 19 “Gross Domestic Product ” Department of Commerce Bureau of Economic Analysis accessed March 22 2016 http www bea gov national index htm#gdp Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-77 Chapter III Building a Clean Electricity Future 20 EPSA Analysis Caitlin Murphy and Colin Cunliff “QER 1 2 Environment Baseline Volume 1 Greenhouse Gas Emissions from the U S Power Sector ” Department of Energy 2017 Chapter 5 p 65 Finding #6 21 Energy Information Administration EIA Monthly Energy Review Washington DC EIA 2016 accessed November 17 2016 Table 12 1 http www eia gov totalenergy data monthly 22 Energy Information Administration EIA Monthly Energy Review Washington DC EIA 2016 accessed November 17 2016 Tables 12 2–12 6 http www eia gov totalenergy data monthly 23 Alexander E MacDonald Christopher T M Clack Anneliese Alexander Adam Dunbar James Wilczak and Yuanfu Xie “Future Cost-Competitive Electricity Systems and Their Impact on US CO2 Emissions ” Nature Climate Change 6 2016 526– 31 doi 10 1038 nclimate2921 24 New York Independent System Operator NYISO Power Trends 2016 The Changing Energy Landscape Rensselaer NY NYISO 2016 http www nyiso com public webdocs media_room publications_presentations Power_Trends Power_Trends 2016-powertrends-FINAL-070516 pdf 25 Intergovernmental Panel on Climate Change Climate Change 2014 Impacts Adaptation and Vulnerability Cambridge UK and New York Cambridge University Press 2014 http ipcc-wg2 gov AR5 report 26 Energy Information Administration EIA Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2016 Washington DC EIA 2016 6 http www eia gov outlooks aeo pdf electricity_generation pdf 27 “Form EIA-923 detailed data ” Energy Information Administration accessed December 30 2016 https www eia gov electricity data eia923 28 Energy Information Administration EIA “Table 7 2b Electric Power Sector ” in Monthly Energy Review Washington DC EIA March 2016 DOE EIA-0035 2016 3 110 http www eia gov totalenergy data monthly #electricity 29 EPSA Analysis Caitlin Murphy and Colin Cunliff “QER 1 2 Environment Baseline Volume 1 Greenhouse Gas Emissions from the U S Power Sector ” Department of Energy 2017 39 30 American Wind Energy Association AWEA U S Wind Industry Fourth Quarter 2015 Market Report AWEA 2016 4 http awea files cms-plus com FileDownloads pdfs 4Q2015%20AWEA%20Market%20Report%20Public%20Version pdf 31 Energy Information Administration EIA “Table 3 1 A Net Generation by Energy Source Total all sectors ” and “Table “3 1 B Net Generation from Renewable Sources Total all sectors ” in Electric Power Annual Washington DC EIA November 2016 https www eia gov electricity annual 32 Energy Information Administration EIA “Table 4 2 A Existing Net Summer Capacity by Energy Source and Producer Type” and “Table 4 2 B Existing Net Summer Capacity of Other Renewable Sources by Producer Type ” in Electric Power Annual Washington DC EIA November 2016 https www eia gov electricity annual 33 April Lee and David Darling “Wind Adds the Most Electric Generation Capacity in 2015 Followed by Natural Gas and Solar ” Energy Information Administration Today in Energy March 23 2016 http www eia gov todayinenergy detail php id 25492 34 Energy Information Administration EIA “Table 4 2 B Net Summer Capacity of Other Renewable Sources by Producer Type ” in Electric Power Annual Washington DC EIA November 2016 https www eia gov electricity annual 35 Julia Pyper “The US Solar Market Is Now 1 Million Installations Strong ” Greentech Media April 21 2016 https www greentechmedia com articles read The-U S -Solar-Market-Now-One-Million-Installations-Strong 36 Shayle Kann M J Shiao Cory Honeyman Jade Jones Austin Perea Colin Smith Benjamin Gallagher et al U S Solar Market Insight 2015 Q4 Year in Review GTM Research and Solar Energy Industries Association 2016 http www seia org sites default files gMOip8F78iSMI2015YIR pdf 37 Energy Information Administration EIA “Table 1 1A Renewable Sources Total – All Sectors October 2016 “Electric Power Monthly ” December 2016 http www eia gov electricity monthly 38 Energy Information Administration EIA “Table 6 2 B Net Summer Capacity Using Primarily Renewable Energy Sources and by State August 2016 and 2015 Megawatts ” Electric Power Monthly October 2016 http www eia gov electricity monthly 3-78 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 39 “Annual Technology Baseline and Standard Scenarios ” National Renewable Energy Laboratory last updated November 16 2016 http www nrel gov analysis data_tech_baseline html 40 “SunShot Initiative 2030 Goals Paper and Graphics ” Department of Energy accessed December 19 2016 https energy gov eere sunshot downloads sunshot-initiative-2030-goals-paper-and-graphics 41 Energy Information Administration EIA “Table 1 1 Net Generation by Energy Source Total All Sectors ” Electric Power Monthly March 2016 http www eia gov electricity monthly 42 Energy Information Administration EIA “Table 7 6 Electricity End Use ” Monthly Energy Review November 2016 https www eia gov totalenergy data monthly 43 Department of Energy DOE Wind Vision A New Era for Wind Power in the United States Oak Ridge TN DOE March 12 2015 https www energy gov sites prod files WindVision_Report_final pdf R Wiser M Bolinger Galen L Barbose Naïm R Darghouth Ben Hoen Andrew D Mills Joe Rand et al 2015 Wind Technologies Market Report Oak Ridge TN Department of Energy and Lawrence Berkeley National Laboratory August 2016 DOE GO-102016-4885 https energy gov sites prod files 2016 08 f33 2015-Wind-Technologies-Market-Report-08162016 pdf 44 R Wiser M Bolinger Galen L Barbose Naïm R Darghouth Ben Hoen Andrew D Mills Joe Rand et al 2015 Wind Technologies Market Report Oak Ridge TN Department of Energy and Lawrence Berkeley National Laboratory August 2016 DOE GO-102016-4885 https energy gov sites prod files 2016 08 f33 2015-Wind-Technologies-Market-Report08162016 pdf 45 Jose Zayas Michael Derby Patrick Gilman Shreyas Ananthan Eric Lantz Jason Cotrell Fredric Beck and Richard Tusing Enable Wind Power Nationwide edited by Elizabeth Hartman and Coryne Tasca Department of Energy Office of Energy Efficiency and Renewable Energy 2015 DOE EE-1218 http energy gov sites prod files 2015 05 f22 Enabling%20Wind%20Power%20Nationwide_18MAY2015_FINAL pdf 46 Trieu Mai Wesley Cole Eric Lantz Cara Marcy and Benjamin Sigrin Impacts of Federal Tax Credit Extensions on Renewable Deployment and Power Sector Emissions Golden CO National Renewable Energy Laboratory 2016 NREL TP-6A20-65571 18–21 Figure 6 http www nrel gov docs fy16osti 65571 pdf 47 Steve Capanna “New Study Renewable Energy for State Renewable Portfolio Standards Yield Sizable Benefits ” Department of Energy Office of Energy Efficiency and Renewable Energy January 7 2016 http energy gov eere articles new-studyrenewable-energy-state-renewable-portfolio-standards-yield-sizable-benefits 48 Galen Barbose U S Renewables Portfolio Standards 2016 Annual Status Report Lawrence Berkeley National Laboratory 2016 LBNL-1005057 https emp lbl gov sites all files lbnl-1005057 pdf 49 Database of State Incentives for Renewables Efficiency® DSIRE “Renewable Portfolio Standard Policies ” NC Clean Energy Technology Center August 2016 http ncsolarcen-prod s3 amazonaws com wp-content uploads 2014 11 RenewablePortfolio-Standards pdf 50 Ryan Wiser Trieu Mai Alberta Carpenter David Keyser and Andrew Mills A Retrospective Analysis of the Benefits and Impacts of U S Renewable Portfolio Standards Lawrence Berkley National Laboratory and National Renewable Energy Laboratory 2016 TP-6A20-65005 12 https emp lbl gov sites all files lbnl-1003961 pdf 51 Galen Barbose “RPS Compliance Summary Data ” Lawrence Berkley National Laboratory last updated February 1 2016 https emp lbl gov sites all files RPS%20Compliance%20Data_Feb%202016 xlsx 52 Eric O’Shaughnessy Chang Liu and Jenny Heeter Status and Trends in the U S Voluntary Green Power Market 2015 Data Golden CO National Renewable Energy Lab 2016 NREL TP-6A20-67147 http www nrel gov docs fy17osti 67147 pdf 53 Ryan Wiser Trieu Mai Alberta Carpenter David Keyser and Andrew Mills A Retrospective Analysis of the Benefits and Impacts of U S Renewable Portfolio Standards Lawrence Berkley National Laboratory and National Renewable Energy Laboratory 2016 TP-6A20-65005 http www nrel gov docs fy16osti 65005 pdf 54 Ryan Wiser Trieu Mai Alberta Carpenter David Keyser and Andrew Mills A Retrospective Analysis of the Benefits and Impacts of U S Renewable Portfolio Standards Lawrence Berkley National Laboratory and National Renewable Energy Laboratory 2016 TP-6A20-65005 http www nrel gov docs fy16osti 65005 pdf 55 Jonathan Glicoes “Renewable Portfolio Standards An Analysis of Net Job Impacts” master’s thesis Georgetown University 2013 https repository library georgetown edu handle 10822 559510 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-79 Chapter III Building a Clean Electricity Future 56 Ryan Wiser Trieu Mai Alberta Carpenter David Keyser and Andrew Mills A Retrospective Analysis of the Benefits and Impacts of U S Renewable Portfolio Standards Lawrence Berkley National Laboratory and National Renewable Energy Laboratory 2016 TP-6A20-65005 http www nrel gov docs fy16osti 65005 pdf 57 A Ellis Abraham R Nelson E Von Engeln R Walling J MacDowell L Casey E Seymour et al “Reactive Power Performance Requirements for Wind and Solar Plants ” in Power and Energy Society General Meeting Institute for Electrical and Electronics 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Verdolini Francesco Vona David Popp “Bridging the Gap Do Fast Reacting Fossil Technologies Facilitate Renewable Energy Diffusion ” Cambridge MA National Bureau of Economic Research July 2016 working paper 22454 http www nber org papers w22454 77 FERC Federal Energy Regulatory Commission FERC Open Access Podcast Transcript Winter Assessment Presented by FERC Staff October 27 2016 https www ferc gov media podcast 2016 10-27-transcript pdf accessed December 13 2016 78 United Nations Economic Commission for Europe From Source to Use The Role of Fossil Fuels in Delivering a Sustainable Energy Future Geneva Switzerland United Nations ECE 2014 ECE ENERGY 2014 5 Rev 1 3 http www unece org fileadmin DAM energy se pdfs comm23 ECE ENERGY 2014 5_e pdf 79 National Coal Council Leveling the Playing Field Policy Parity for Carbon Capture and Storage Technologies Washington DC National Coal Council 2015 2 http www nationalcoalcouncil org studies 2015 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Program 2016 249 http dx doi org 10 7930 J0VX0DFW 427 Pepco Energy Services “Benning Road Power Plant Decommissioning and Demolition Project presented at the MD-DC Utilities Association Conference Cambridge MD October 22 2014 6 http static1 squarespace com static 527154c0e4b09a993f80e460 t 545d17f6e4b042c56b56e272 1415387126360 McNult y_PPR_Demo_MD-DCUtilities_Presentation_Final pdf 428 J Balbus A Crimmins J L Gamble D R Easterling K E Kunkel S Saha and M C Sarofim “Climate Change and Human Health ” in The Impacts of Climate Change on Human Health in the United States A Scientific Assessment Washington DC U S Global Change Research Program 2016 256–257 http dx doi org 10 7930 J0VX0DFW 429 Hong Kong Environment Protection Department “Chapter 5 3 Water Quality” and “Chapter 5 4 Waste Management ” in Decommissioning of Two Open Cycle Gas Turbine Units and Associated Facilities at Tsing Yi Power Station” Island East Hong Kong Environmental Resource Management 2003 http www epd gov hk eia register profile latest dir090 pdf 430 Department of the Interior Geological Survey USGS Naturally Occurring Radioactive Materials NORM in Produced Water and Oil-Field Equipment—An Issue for the Energy Industry Denver CO USGS 1999 FS-142-99 3 http pubs usgs gov fs fs0142-99 fs-0142-99 pdf 431 Environmental Protection Agency EPA Regulatory Impact Analysis for EPA’s 2015 RCRA Final Rule Regulating Coal Combustion Residue CCR Landfills and Surface Impoundments at Coal-Fired Electric Utility Power Plants EPA 2015 EPA-HQOW-2009-081906375 DCN SE06111 8-8–8-11 432 Department of the Interior Geological Survey USGS Naturally Occurring Radioactive Materials NORM in Produced Water and Oil-Field Equipment—An Issue for the Energy Industry Denver CO USGS 1999 FS-142-99 3 http pubs usgs gov fs fs0142-99 fs-0142-99 pdf 433 Environmental Protection Agency EPA Environmental Justice EJ Interagency Workging Group IWG Promising Practices for EJ Methodologies in NEPA Reviews EPA March 2016 EPA Pub No 300-B-16-001 https www epa gov sites production files 2016-08 documents nepa_promising_practices_document_2016 pdf accessed December 13 2016 434 Department of Energy DOE Office of Energy Policy and Systems Analysis EPSA Quadrennial Energy Review First Installment Energy Transmission Storage and Distribution Infrastructure Washington DC DOE-EPSA 2015 7-3–7-6 http www energy gov epsa quadrennial-energy-review-first-installment 435 “Preliminary Monthly Electric Generator Inventory ” Energy Information Administration February 26 2016 accessed March 13 2016 http www eia gov electricity data eia860m 436 Energy Information Administration Electric Power Monthly https www eia gov electricity monthly 437 Richard Martin and Mackinnon Lawrence Coal Plant Decommissioning Navigant Research 2013 438 Stephen K Ritter A New Life for Coal Ash Chemical Engineering News 94 no 7 2016 10–4 439 Nancy Slater-Thompson “Nuclear Regulatory Commission Resumes License Renewals for Nuclear Power Plants ” Energy Information Administration Today in Energy October 29 2014 http www eia gov todayinenergy detail cfm id 18591 440 “Questions and Answers Decommissioning Planning Final Rule ” Nuclear Regulatory Commission April 10 2015 441 Nuclear Regulatory Commission NRC “Decommissioning Nuclear Power Plants ” Backgrounder Office of Public Affairs Fact Sheet NRC May 1 2015 http www nrc gov reading-rm doc-collections fact-sheets decommissioning html 442 “Disposal of High Level Nuclear Waste ” Government Accountability Office accessed June 9 2015 http www gao gov key_issues disposal_of_highlevel_nuclear_waste issue_summary 443Pepco Energy Services “Benning Road Power Plant Decommissioning and Demolition Project presented at the MD-DC Utilities Association Conference Cambridge MD October 22 2014 6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-99 Chapter III Building a Clean Electricity Future http static1 squarespace com static 527154c0e4b09a993f80e460 t 545d17f6e4b042c56b56e272 1415387126360 McNult y_PPR_Demo_MD-DCUtilities_Presentation_Final pdf 444 Hong Kong Environment Protection Department “Chapter 5 3 Water Quality” and “Chapter 5 4 Waste Management ” in Decommissioning of Two Open Cycle Gas Turbine Units and Associated Facilities at Tsing Yi Power Station” Island East Hong Kong Environmental Resource Management 2003 http www epd gov hk eia register profile latest dir090 pdf 445 Department of the Interior Geological Survey USGS Naturally Occurring Radioactive Materials NORM in Produced Water and Oil-Field Equipment—An Issue for the Energy Industry Denver CO USGS 1999 FS-142-99 http pubs usgs gov fs fs0142-99 fs-0142-99 pdf 446 Department of the Interior Geological Survey USGS Naturally Occurring Radioactive Materials NORM in Produced Water and Oil-Field Equipment—An Issue for the Energy Industry Denver CO USGS 1999 FS-142-99 3 http pubs usgs gov fs fs0142-99 fs-0142-99 pdf 447 Canadian Solar Aria Decommissioning Plan Report Guelph ON Aria Solar 2012 http ariasolarproject com Aria%20%20Nov%202013 Aria%20Tab%204%20-%20Decommissioning%20Plan%20Report pdf 448 Apple One Apple One Solar Farm Decommissioning Plan Charlotte NC Birdseye Manager LLC December 12 2014 http www catawbacountync gov Planning Projects Rezonings RZ2014-06Decommission pdf 449 Department of the Interior Bureau of Land Management “Instruction Memorandum No 2015-138 Change1 ” Washington DC December 2015 https www blm gov wo st en info regulations Instruction_Memos_and_Bulletins national_instruction 2015 im_2015138__change html 3-100 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 This page intentionally left blank Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 3-101 I IV Ensuring Electricity System Reliability Security and Resilience This chapter addresses a range of possible risks to the electricity system and the broader economy and it suggests options to mitigate and prepare for these risks The first section explores the changing nature of reliability—the ability of the system to withstand sudden disturbances such as electric short circuits or unanticipated loss of system components—in the future electricity system The next section examines existing and growing vulnerabilities for the electricity system and opportunities to address these vulnerabilities including cybersecurity risks interdependency of electricity with other critical infrastructures and increased risk due to worsening global climate change The final section focuses on enhancing the resilience of the system to minimize disruptions of service and return rapidly to normal operations following adverse events Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-1 Chapter IV Ensuring Electricity System Reliability Security and Resilience Ensuring Reliability Security and Resilience Summary of Key Findings  The reliability of the electric system underpins virtually every sector of the modern U S economy Reliability of the grid is a growing and essential component of national security Standard definitions of reliability have focused on the frequency duration and extent of power outages With the advent of more two-way flows of information and electricity—communication across the entire system from generation to end use controllable loads more variable generation and new technologies such as storage and advanced meters—reliability needs are changing and reliability definitions and metrics must evolve accordingly  The time scales of power balancing have shifted from daily to hourly minute or second-to-second to millisecond to millisecond at the distribution end of the supply chain with the potential to impact system frequency and inertia and or transmission congestion The demands of the modern electricity system have required and will increasingly require innovation in technologies e g inverters markets e g capacity markets and system operations e g balancing authorities  Electricity outages disproportionately stem from disruptions on the distribution system over 90 percent of electric power interruptions both in terms of the duration and frequency of outages which is largely due to weather-related events Damage to the transmission system while infrequent can result in more widespread major power outages that affect large numbers of customers with significant economic consequences  As transmission and distribution system design and operations become more data intensive complex and interconnected the demand for visibility across the continuum of electricity delivery has expanded across temporal variations price signals new technology costs and performance characteristics social-economic impacts and others However deployment and dissemination of innovative visibility technologies face multiple barriers that can differ by the technology and the role each plays in the electricity delivery system  Data analysis is an important aspect of today’s grid management but the granularity speed and sophistication of operator analytics will need to increase and distribution- and transmission-level planning will need to be integrated  The leading cause of power outages in the United States is extreme weather including heat waves blizzards thunderstorms and hurricanes Events with severe consequences are becoming more frequent and intense due to climate change and these events have been the principal contributors to an observed increase in the frequency and duration of power outages in the United States  Grid owners and operators are required to manage risks from a broad and growing range of threats These threats can impact almost any part of the grid e g physical attacks but some vary by geographic location and time of year Near-term and long-term risk management is increasingly critical to the ongoing reliability of the electricity system  The current cybersecurity landscape is characterized by rapidly evolving threats and vulnerabilities juxtaposed against the slower-moving deployment of defense measures Mitigation and response to cyber threats are hampered by inadequate information-sharing processes between government and industry the lack of security-specific technological and workforce resources and challenges associated with multi-jurisdictional threats and consequences System planning must evolve to meet the need for rapid response to system disturbances  Other risk factors stem from the increasing interdependency of electric and natural gas systems as natural gas-fired generation provides an increasing share of electricity However coordinated long-term planning across natural gas and electricity can be challenging because the two industries are organized and regulated differently  As distributed energy resources become more prevalent and sophisticated—from rooftop solar installations to applications for managing building electricity usage—planners system operators and regulators must adapt to the need for an order of magnitude increase in the quantity and frequency of data to ensure the continuous balance of generation and load 4-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017  Demand response and flexibility technologies – such as hydropower and storage – offer particularly flexible grid resources that are capable of improving system reliability reducing the need for capital investments to meet peak demand reducing electricity market prices and improving the integration of variable renewable energy resources These resources can be used for load reduction load shaping and consumption management to help grid operators mitigate the impact of variable and distributed generation on the transmission and distribution systems  Information and communications technologies are increasingly utilized throughout the electric system and behind the meter These technologies offer advantages in terms of efficient and resilient grid operations as well as opportunities for consumers to interact with the electricity system in new ways They also expand the grid’s vulnerability to cyber attacks by offering new vectors for intrusions and attacks—making cybersecurity a system-wide concern  There are no commonly used metrics for measuring grid resilience Several resilience metrics and measures have been proposed however there has been no coordinated industry or government initiative to develop a consensus on or implement standardized resilience metrics  Low-income and minority communities are disproportionately impacted by disaster-related damage to critical infrastructure These communities with fewer resources may not have the means to mitigate or adapt to natural disasters and they disproportionately rely on public services including community shelters during disasters  This chapter was developed in conjunction with the closely related and recently published “Joint United States-Canada Electric Grid Security and Resilience Strategy ” 1 Reliability Resilience and Security Grid Management and Transformation Traditional electricity system operations are evolving in ways that could enable a more dynamic and integrated grid The growing interconnectedness of the grid’s energy communications and data flow creates enormous opportunities at the same time it creates the potential for a new set of risks and vulnerabilities Also the emerging threat environment—particularly with respect to cybersecurity and increases in the severity of extreme weather events—poses challenges for the reliability security and resilience of the electricity sector as well as to its traditional governance and regulatory regimes The concepts of reliability security and resilience are interrelated and considered from different perspectives Meeting consumer expectations of reliability is a fundamental delivery requirement for electric utilities where reliability is formally defined through metrics describing power availability or outage duration frequency and extent The utility industry typically manages system reliability through redundancy and risk-management strategies to prevent disruptions from reasonably expected hazards Grid Reliability Security and Resilience For purposes of this discussion reliability is the ability of the system or its components to withstand instability uncontrolled events cascading failures or unanticipated loss of system components Resilience is the ability of a system or its components to adapt to changing conditions and withstand and rapidly recover from disruptions Security refers specifically to the ability of a system or its components to withstand attacks including physical and cyber incidents on its integrity and operations Delivery of electricity service has been consistently and highly reliable for most of the century-long development expansion and continuous operation of grids across all regions of the Nation The traditional definition of reliability—based on the frequency duration and extent of power outages—may be insufficient to ensure system integrity and available electric power in the face of climate change natural hazards physical attacks cyber threats and other intentional or accidental damage the security of the system particularly cybersecurity is a growing concern Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-3 Chapter IV Ensuring Electricity System Reliability Security and Resilience Resilience is the ability to prepare for and adapt to changing conditions as well as the ability to withstand and recover rapidly from disruptions whether deliberate accidental or naturally occurring 2 While resilience is related to aspects of both reliability and security it incorporates a dynamic response capability to reduce the magnitude and duration of energy service disruptions under stressful conditions 3 Infrastructure planning and investment strategies that account for resilience typically broaden the range of risk-reduction options and improve national flexibility through activities both pre- and post-disruption while also focusing on the electricity-delivery outcomes for the consumer U S policies markets and institutional arrangements must evolve to reflect new electricity system realities and trends—continuing to enable and enhance the reliability security and resilience of the electric grid The Department of Energy DOE the Federal Energy Regulatory Commission FERC the North American Electric Reliability Corporation NERC regional planning authorities utilities power system operators states and other organizations work together to ensure the reliability of the U S power system through the implementation of reliability standards timely planning and investment and effective system operations and coordination The Changing Nature of Reliability Electricity customers have high expectations of electricity reliability from their utility providers Virtually every sector of the modern U S economy depends on electricity—from food production to banking to health care Critical infrastructures like oil gas transportation and water all depend on electricity and the electric system depends on them This places a high premium on reliability Standard Measures of Reliability A brief review of how reliability is measured today will help define the playing field and the associated value at stake From the utility industry perspective reliability is formally defined through metrics describing power availability or outage duration frequency and extent Reliability within the utility industry is managed to ensure the system operates within limits and avoids instabilities or the growth of disturbances These practices are not static and utilities continue to improve their reliability practices and implementation methods to reflect increased consumer expectations Typical approaches to reliability include hardening investment and redundancy to prevent disruptions from reasonably expected hazards 4-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-1 System Average Interruption Duration Index SAIDI in 2015 by State 4 States experienced varying levels of reliability in 2015 A reliable bulk power system does not necessarily mean reliable end-user electricity service because outages often originate on local distribution systems as reflected in the SAIDI measurements in the above map Most state and Federal regulators have significant experience addressing system reliability and currently consider the issues of resilience and security through the lens of existing reliability tools approaches and metrics One metric applied with the goal of improving system performance with respect to reliability indicators is the System Average Interruption Duration Index SAIDI SAIDI measures the total duration of an interruption for the average customer given a defined time period Typically it is calculated on a monthly or yearly basis Another metric the Customer Average Interruption Duration Index CAIDI measures how long it takes to restore the system once an outage occurs And the System Average Interruption Frequency Index SAIFI measures the average number of times that a customer experiences an outage during the year SAIFI is calculated by dividing SAIDI by CAIDI As most outages occur on the distribution system rather than the bulk system these reliability indices are commonly used to measure distribution level reliability NERC uses a number of bulk power system reliability indices 5 Based on these reliability measures the average customer experiences 198 minutes of electric power unavailability per year a 6 although there is significant variability among states and utility providers The best-performing state had a SAIDI level of 85 minutes a year In contrast as shown in Figure 4-1 one state had a SAIDI statistic in 2015 of nearly 14 hours of outage for the year with an availability level of 99 84 percent Even this state level of aggregation masks some outliers in the data There were several utilities with a SAIDI index below 1 minute of outage for the year a Analysis is based on 2016 Energy Information Administration EIA data Information reported to EIA is estimated to cover approximately 90 percent of electricity customers Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-5 Chapter IV Ensuring Electricity System Reliability Security and Resilience There are however caveats to these findings First the variability of reliability performance is a function of a myriad of factors including regional differences varying regulatory standards costs system configuration customer density hazard exposure and other Also utilities have historically reported SAIDI SAIFI and CAIDI statistics in inconsistent ways for example some utilities include data associated with “major events” in their public reporting to public utilities commissions while others do not 7 Utilities also take inconsistent approaches to defining “major events ”8 The lack of uniform national data inhibits more sophisticated analysis of macro trends in distribution reliability—something that is important to remedy in an electricity sector that is increasingly data intensive Also although the predecessor to today's NERC was first formed in 1968 to address system reliability the Institute of Electrical and Electronics Engineers IEEE Standard 1366 only formally defined industry reliability metrics in 1998 9 The Energy Information Administration EIA began collecting distribution-level reliability data including SAIDI and SAIFI information in 2013—marking increased attention and effort on the reliability front Yet even today only 33% of utilities report these statistics covering 91% of the electricity sales in the nation which indicates that there is room for improving reliability reporting practices 10 There are other reliability measures and associated government reporting requirements as well NERC for example collects the additional data it needs to promulgate reliability and security standards but it does not make all of these data available to government agencies Beyond reliability a number of resilience metrics and measures have been proposed however there has not been a coordinated industry or government initiative to develop consensus or implement standardized resilience metrics though the Grid Modernization Laboratory Consortium is launching the Foundational Metrics Analysis project to develop some resilience metrics 11 Time Scales and Grid Reliability Throughout the 20th century the design of power systems and early metrics such as the loss of load expectation focused on periods of maximum consumer electricity use With more controllable loads more variable generation new technologies such as storage and the increasing importance of power system reliability reliability is becoming a more complex concept and reliability metrics and criteria must evolve accordingly Adequacy of generation resources is measured by a utility’s reserve margin and has traditionally meant the extent to which utilities have adequate infrastructure to generate electricity to meet customers’ needs Generation reliability criteria is focused on installed generation to meet customer demand the role of the customer as a system resource was not a consideration For vertically integrated systems grid operators manage the entire electricity supply chain from end generation to end delivery service When new market structures were created across many U S regions in the form of independent system operators ISOs or regional transmission organizations RTOs endto-end management was replaced with competing power generators In these markets variable generation may be the lowest cost generation generation from certain power stations may not be accepted to run because they are not cost competitive for a specific day’s operations However if a generator is deemed critical to system integrity power stations can get “reliability must run” payments These out-of-market payments in turn lower power market prices which has been especially problematic for certain types of generation such as nuclear which already faces challenges from low power prices due to the relatively low capital operations and fuel costs of natural gas-fired generators 4-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-2 System Reliability Depends on Managing Multiple Event Speeds12 Markets are used for traditional grid operations including hour-ahead day-ahead and capacity markets Long-term planning reaches byond typical market and financial signals Supply variabilityb is an important part of system operations where ISOs RTOs must ensure that risks of unexpected loss or variability of supplies are hedged by having some power plants immediately available spinning reserves and other plants able to supply power with short-term notifications of need nonspinning reserves These adjustments to power flow management occur within the general framework of grid operations This framework has historically been well understood by grid operators because the time dimensions of operations have not changed significantly even when ISOs RTOs were given responsibility for transmission system management These dimensions which operators have historically understood well are seen in b As used here variability refers to the difference between the expected and actual load or generation Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-7 Chapter IV Ensuring Electricity System Reliability Security and Resilience Figure 4-2 on the right side of the continuum where the time scales of capacity markets day-ahead and hour-ahead products are depicted For out-years beyond capacity contracts traditional transmission and distribution system planning methods work to map and price investment requirements to ensure longterm grid reliability Planning for decarbonization and climate resilience reaches beyond typical planning horizons for grid operators Changing Time Dimensions Grid Topology and Emerging Grid Management Challenges Variable energy resources VERs provide a range of benefits to utilities and their customers including avoided fuel costs greenhouse gas emissions and costs associated with environmental compliance 13 14 In some cases distributed VERs are also credited with providing electric reliability and resilience benefits particularly in the context of microgrids 15 However the widespread integration of VERs at both utility scale and distributed across all consumer segments significantly expands the time dimensions in which grid operators must function and it complicates operations It underscores the need “to coordinate time and space within the electric grid at greater resolution or with a higher degree of refinement than in the past ”16 A recent White House report noted “The distinctive characteristics of VERs will likely require a reimagining of electricity grid management ”17 Impacts on transmission and distribution systems and integration options vary by scale For instance utility-scale solar power flowing onto high-voltage transmission lines can be smoothed and firmed up at the point of production by using smart inverters and storage When onshore wind plants are integrated at a large geographic scale lower correlation factors can smooth out variability Assuming these aggregations are visible to grid operators to adequately assess both their costs and benefits many aggregated distributed solar installations can smooth out the random variations from individual installations The time dimensions in which grid operators must function to accommodate the unique characteristics of VERs and distributed energy resources DERs are identified in the hourly to minute to second intervals see 4-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-3 While grid operations are successfully managed today in some markets with relatively high levels of VER penetration 18 this can complicate grid management Consider a generic example of utilityscale generation portfolio management in a high VER supply system Power supplied from solar stations has two types of variability to manage minute-to-minute fluctuations and the dramatic drop in power supplied from solar as the sun goes down This drop can be precipitous and occur within an hour or less Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-9 Chapter IV Ensuring Electricity System Reliability Security and Resilience Figure 4-3 System Reliability Depends on Managing Multiple Event Speeds19 Markets are used for grid operations on the order of seconds to minutes such as frequency regulation and demand response Some essential reliability capabilities such as inertial response occur faster than typical market signals Grid dispatch actions that operators take to engage power suppliers to provide power to the grid occurs around load changes traditionally referred to as load-following activities In grids with wholesale markets economic dispatch occurs based on which generators win daily auctions and produce power for the grid ISOs RTOs also load follow for grid management and in regions with high VER production load following and load shaping may provide linked challenges By calling or not calling on generators to produce electricity grid dispatch determines the value that power producers obtain from their assets Grid dispatch ensures system reliability through management of operating generators as well as those waiting to be called if needed In a world of sub-second decision making dispatch effectiveness will require the integration of automated grid management with continuing human oversight The pace of change may dictate faster adaptation times for grid operators but grid reliability may dictate a more methodical consideration of operating protocol changes which are driven by changes in the types scale scope and location of power supplies Continuous engagement of grid dispatchers in planning for the 21st-century grid is essential VER fluctuations on the bulk power side of the equation can be mitigated by regulating power flows onto the grid—both up and down and from minute to minute Mitigating power flows can occur with resources and services such as regulation that respond in one to several seconds through process-flow techniques involving ramping up and throttling down generation plants via transmission system blending with flexible resources such as hydro and through demand response DR including advanced water infrastructure 20 which can be used to align demand with supply variations for grid services including frequency regulation Variability is managed through geographic diversity and aggregation FERC through NERC requires balancing authorities to constantly match supply and demand within their respective balancing areas c 21 Larger balancing areas could help manage variability by sharing generation resources to smooth out c A balancing authority “integrates resource plans ahead of time maintains Demand and resource balance within a Balancing Authority Area and supports Interconnection frequency in real time ” The Balancing Authority Area shortened here to Balancing Area is the “collection of generation transmission and loads within the metered boundaries of the Balancing Authority ” From North American Energy Regulatory Commission NERC “Glossary of Terms Used in NERC Reliability Standards ” NERC last updated November 28 2016 http www nerc com files glossary_of_terms pdf 4-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 supply A recent National Renewable Energy Laboratory analysis concluded that “consolidated operations of two or more balancing authorities fully captures the benefits of geographic diversity and provides more accurate response ”22 For example the integration of PacifiCorp into the California ISO Energy Imbalance Market reduced the amount of required flexibility reserves by about 280 megawatts MW or 36 percent 23 While there is ramping associated with all generation technologies because of their variability baseload generators must ramp more frequently to accommodate VERs Ramping to match supply and demand can reduce the efficiency of baseload generators possibly decrease their ability to recover capital costs and increase fossil unit emission rates Innovation to improve baseload generators’ ramping capability is an important need that will become more important at high levels of VERs Recent analysis suggests that “…High renewable energy penetrations could significantly change dispatch requirements and use of conventional generators ”24 Also price suppression is occurring in RTO ISO wholesale markets with noticeable amounts of wind and solar generation and low-cost gas generation While passing on savings to consumers is desirable in some regions these low prices have put pressure on baseload units particularly zero-carbon emissions nuclear generation Better forecasting has also reduced VER integration costs Most North American power markets dispatch wind plants along with conventional power plants based on current grid conditions and economics 25 Setting wind generator schedules as close as possible to the dispatch time minimizes forecast errors and using wind forecasting can greatly facilitate wind integration and reduce costs from carrying reserve capacity 26 Another complication as noted earlier is that system operators dispatch the least-cost mix of generation needed to meet load and the least-cost sources are often VER sources which are fueled by the sun or the wind and therefore have low or zero marginal cost of production In New England as additional variable resources have come online there has been “more frequent localized transmission congestion ”27 In the past congestion was reduced by the system operator “through manual curtailment instructions that were not reflected in Real-Time Prices ” causing a “mismatch” of signals when generators who would normally respond to high prices by increasing output were instead told to decrease output in order to maintain reliability 28 The system operator has undertaken several steps to address these challenges and in April 2016 wind and hydro resources were designated as automated dispatch 29 Going forward the system operator will require a series of actions to further integrate VER sources 30 Specifically on October 12 2016 ISO New England filed proposed revisions to its Transmission Markets and Services Tariff with FERC which in part were made to “more directly incorporate non-dispatchable intermittent power resources into market pricing ” and on December 12 2016 FERC issued an order accepting the proposal 31 32 Another example of the changes to grid management made in response to increasing penetrations of VERs is seen in the California market Under existing operations the California ISO found that “the fleet of resources committed…to provide energy often does not provide sufficient flexible ramping capability…to meet the actual changes in net load ”33 As a result the operator must “dispatch units out of economic sequence or dispatch units that are not in the market ” imposing “additional costs on the system” and creating “prices that do not reflect such marginal costs ”34 In California the ISO addressed this issue by amending its tariff to “enhance the CAISO ability to manage the ramping capacity necessary to meet changes in net load—both forecasted and unexpected ”35 Real-time wind penetration in the Southwest Power Pool SPP has at times approached 40% of generation 36 Between March 2016 and May 2016 wind accounted for 21 5% of all energy generated in SPP 37 In examining scenarios with significantly more VER SPP found that new procedures “would enable the SPP transmission system to reliably handle up to…60% wind penetration” 38 while lowering overall Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-11 Chapter IV Ensuring Electricity System Reliability Security and Resilience costs and reducing price volatility 39 These new procedures include increasing the dispatchability of renewable resources additional transmission capacity enhancements to ancillary services and new tools to manage inter-hour ramps 40 In the Pacific Northwest an increase in wind generation has meant that the operator must “dispatch units out of economic sequence or dispatch units that are not in the market ” imposing “additional costs on the system” and creating “prices that do not reflect such marginal costs ”41 Additionally an increase in wind generation has meant that “utilities must hold more resources in reserve to help balance demand minute-to-minute ” increasing “the need for system flexibility ”42 The Northwest Power and Conservation Council anticipates however “that the region will have sufficient generation and demand side capability on its existing system to meet balancing and flexibility reserve requirements over the next six years if the region’s energy efficiency and demand response development goals are achieved ”43 Hydropower provides a variety of essential reliability services that are beneficial to the electricity system One example is regulation and frequency response including inertia in which hydropower generators can quickly respond to sudden changes in system frequency making hydro a very suitable complement to wind generation Other essential reliability services include spinning and supplemental reserves enabled by high ramping capability reactive power and voltage support and black start capability Despite the technical ability of hydropower to provide essential reliability services these services provided by hydropower are not always explicitly compensated by existing market structures For example hydropower is one of the main providers of inertia and primary frequency response in the Western Electricity Coordinating Council but it is not explicitly compensated for either service 44 Some recent market advances have been made that allow greater ancillary service participation For example FERC now requires ISOs to better compensate generators for frequency regulation services based on their response speed and flexibility to respond to a range of situations 45 In addition in June 2016 FERC issued Order No 825 requiring all regional transmission organizations RTOs and ISOs to implement sub-hourly settlements allowing more accurate alignment of the services provided with the prices paid for them Market rules governing participation of flexible resources such as hydropower and pumped storage could be reviewed to determine if additional changes could allow these resources to participate more effectively and ensure just and reasonable compensation Part of the challenge facing hydropower lies in the difficulty of optimizing the limited generating ability of hydro resources due to non-market environmental and competing use constraints Determining the best use of hydro resources through manual dispatch or market-based bidding process can be difficult because the value of essential reliability services can change quickly due to a number of factors including location day time regulatory constraints and interaction with other generators Moreover in the long term the best use of hydro resources may evolve as the generation mix changes 46 Essential reliability services are however undervalued in some existing market structures On the consumer side of the utility meter consistent growth in DERs of which distributed VERs are a subset has also changed how grid operators sustain high system reliability at both the distribution and transmission levels of electricity delivery DERs represent a broad range of technologies that can significantly impact how much and when electricity is demanded from the grid and they include distributed generation DG and storage technologies as well as DR 47 Consumers with rooftop solar may influence their demand frequently and in diverse ways This can impact total load tending to reduce it but may not be directly controlled by grid operators Other DERs such as truly dispatchable DR can be directly managed and called by grid operators when needed Deployment of distributed VERs places additional design and operational requirements on distribution grid operators Currently distribution systems are predominantly radial networks feeders delivering 4-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 grid-supplied power to customer premises With significant penetration of distributed generation some distribution utilities are facing new demands to interconnect multiple feeders together to accept customer-generated power and to be able to balance generation and demand The new structure and roles of distribution systems will require development of advanced distribution circuits and substations to enable significant two-way power flows new protection schemes d and new control paradigms Grid Frequency Support from Distributed Inverter-Based Resources in Hawaii Hawaii leads the United States in the portion of its electricity that is produced from variable renewable sources and as an island state it cannot rely on neighbors to help balance generation and load Hence the Hawaiian Electric Companies are currently experiencing the bulk system frequency stability impacts that mainland U S power systems will experience in the coming years and decades 48 The Grid Modernization Laboratory Consortium will develop simulate validate and deploy practical solutions that enable distributed energy resources DERs to help mitigate bulk system frequency contingency events on the fastest time scale milliseconds to seconds 49 The project will examine the ability to leverage the fast response capability of power electronics to enable photovoltaic inverters and storage inverters to support grid frequency starting a few fractions of a second after the appearance of a frequency event The capabilities of currently available products to provide rapid frequency response will be characterized and new capabilities will be developed with a goal of maximizing DERs’ ability to support grid frequency stability California’s recent experience with its requirements for 20 000 MW of small renewable generation under 20 MW by 2020 is instructive for both valuation and grid management To make these volumes both visible to the ISO and valuable to consumers aggregators and grid operators market designers at the California ISO allowed bids of at least 0 5 MW into day-ahead energy and ancillary markets Similar efforts are underway in Texas and New York 50 The electricity system is also experiencing an increasing array of “sub-second” events that require response times that are far too short for humans to react One of the driving forces making smart grids necessary is the proliferation of smart devices each one is capable of microscopic frequency disruptions which cumulatively present an unprecedented new challenge for system operators Many consumer electronic devices such as mobile phones Wi-Fi-based home automation solutions and smart entertainment devices represent “endpoints” that can impact system operations In addition Internet of things IoT devices function at microsecond “clock speeds ” In the aggregate these devices represent a new source of variability at speeds far faster than what grids have traditionally managed The solution must take the form of protective relays and synchrophasors operating more-or-less autonomously in real time The upside implications going forward include the need for integrating machine learning into grid operations i e as positive solutions for mitigating unprecedented grid disruptive forces on the downside digitizing grid operations deep into sub-second operations raises new cyber vulnerabilities The kinds of anomalies affecting wholesale markets and grid operators noted above suggest the need for frequent adjustments to market designs to accommodate new technologies changing consumer preferences and security needs The Nation’s ISOs RTOs FERC and NERC are continuously engaged in analysis evaluation and design modification processes—working to ensure that the present scoping and pace of regulatory change is aligned with the scale and speed of change occurring as a result of continued VER deployment In September 2016 FERC approved new requirements for the quality of real-time monitoring and analysis capabilities for system operators 51 and NERC has made a number of improvements that have significantly reduced the time it takes to develop a standard This is an ongoing process both state and Federal regulators face complicated and evolving challenges that grid operators d Protection schemes identify coordinated corrective actions to detect and address abnormal system conditions e g faults Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-13 Chapter IV Ensuring Electricity System Reliability Security and Resilience must address in a timely fashion while simultaneously operating under existing performance standards and system requirements Grid Operation Impacts of the Internet of Things Grid control systems now handle sense and control endpoints numbered in the thousands Widespread DER DR penetration implies that future grid control systems may have to coordinate millions of end point control devices to support grid functions These devices vary in type from digital sensors and smart boards built into transformers to mobile devices used by field operators and grid control managers Current grid control systems are not structured for large-scale optimization of millions of devices and they are not equipped to handle increasingly large volumes and types of data End-users consumers as well as aggregators controlling multiple demand profiles may wish to perform optimal local controls to meet their desired requirements that may be in conflict with optimal system-wide control Grid control systems must evolve from being centralized to a hybrid of central and distributed control platforms The need for flexible grid operations is challenging basic assumptions about grid control which will require changes in standards and operating protocols Bulk power systems operations are the purview of both FERC and NERC but grid security and reliability assurance concerns mean that Federal authorities must be included in designing 21st-century grid control systems 4-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Overview of DHS Strategic Principles for Security of the Internet of Things IoT The Department of Homeland Security DHS developed strategic principles published on November 15 2016 52 to mitigate vulnerabilities introduced by the IoT through recognized security best practices These principles are intended to offer guidance to stakeholders as they seek to manage IoT security challenges Strategic Principles for Securing IoT 1 Incorporate security at the design phase—building in security at the design phase reduces potential disruptions and avoids the much more difficult and expensive endeavor of attempting to add security to products after they have been developed and deployed 2 Advance security updates and vulnerability management—vulnerabilities may be discovered in products after they have been deployed These flaws can be mitigated through patching security updates and vulnerability management strategies 3 Build on proven security practices—many tested practices used in traditional information technology and network security can be applied to the IoT helping to identify vulnerabilities detect irregularities respond to potential incidents and recover from damage or disruption to IoT devices 4 Prioritize security measures according to potential impact—risk models differ substantially across the IoT ecosystem and the consequences of a security failure across different customers will also vary significantly Focusing on the potential consequences of disruption breach or malicious activity across the consumer spectrum is therefore critical in determining where particular security efforts should be directed and who is best able to mitigate significant consequences 5 Promote transparency across the IoT—increased awareness could help manufacturers and industrial consumers identify where and how to apply security measures build in redundancies and be better equipped to appropriately mitigate threats and vulnerabilities as expeditiously as possible 6 Connect carefully and deliberately—IoT consumers can also help contain the potential threats posed by network connectivity connecting carefully and deliberately and by weighing the risks of a potential breach or failure of an IoT device against the costs of limiting connectivity to the Internet Utility-Scale and Distributed Storage Electricity remains unique among commodities in its limited capability available for storage There are few viable ways to store electrical energy e g batteries or pumped storage solutions and there are other more exotic possibilities like superconducting magnet rings Inventory options tend to narrow the amount and duration of ready access electricity The graphic depiction in Figure 4-4 summarizes the power and duration capabilities of various storage technologies Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-15 Chapter IV Ensuring Electricity System Reliability Security and Resilience Figure 4-4 The Storage Technology Development Map53 Most electricity storage is water that fuels turbines that produce electricity Currently the largest storage capacity is pumped hydro Electrochemical batteries have been the fastest growing new storage technology Batteries in the form of fuel cells can be used for continuous power production and the scaling capabilities of fuel cells make them attractive for fitting load shapes to specifically sized power supplies Other technologies for energy storage include compressed air flywheels and capacitors Utility-scale battery storage and distributed battery storage vary by scale and duration but perform consistently at any scale from a grid management perspective When distributed storage is aggregated it can offer to local grid operators greater flexibility for managing system reliability and power quality than utility-scale resources Aggregation can be scaled to fit specific local needs in distribution systems An example of grid reliability applications of energy storage is seen in California where the building of about 60 MW in new battery storage capacity is underway e 54 55 56 These installations are being built to e Upon commissioning the 20 MW 80 MW-hour SCE Mira Loma project will be the largest battery in operation The 37 5 MW 120 MW-hour San Diego Gas Electric Escondido project will then overtake Mira Loma as the largest battery when it is 4-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 resolve reliability issues caused by the Aliso Canyon leak57 for more information on Aliso Canyon see “Underground Storage Leak in California Driving Natural Gas Storage Safety and Reliability Improvements” text box in section 4 3 3 and the San Onofre Nuclear Generating Station outage 58 and they will help level out electricity supply in California by moving energy from the afternoon production of solar to the evening peak 59 While region-specific critical reliability requirements can drive storage deployment additional incentives can help accelerate these benefits ahead of a major disruption Public investment and policy have been key to electricity storage technology development the American Recovery and Reinvestment Act is the most commonly identified funding source for storage projects 60 By 2015 through a combination of regulatory reforms innovation and cost reductions lithium-ion batteries emerged as a dominant battery design for frequency regulation and renewables integration lithium-ion batteries made up 95% of deployed capacity in 2015 with 80% of this capacity located in the PJM Interconnection territory attracted by its pay-for-performance frequency regulation market The evolution of storage technology is likely to take the electricity sector into new realms “Hybridizing” storage solutions with solar and wind power sources may redefine what is meant by “power plant ” and alter how the grid is understood and used If hybrids can “self-power” even a portion of a significant load then tomorrow’s future electricity sector will be able to achieve national objectives for clean secure and affordable electricity supplies in a system that is imminently flexible and considerably resilient Demand Response Can Aid Grid Management DR empowers consumers to change their normal electricity consumption patterns it is a particularly flexible grid resource capable of improving system reliability reducing the need for capital investments to meet peak demand as well as electricity market prices DR can also be used for load reduction and load shaping as well as to help grids mitigate generation variability including from VERs A variety of DR programs exist some of which are offered directly by utilities while other programs are offered by the grid system operators retail competitors and aggregators DR challenges the view that a utility’s generation adequacy measured by its reserve margin is “steel in the ground” DR can offset “installed capacity” and currently provides nearly 30 gigawatts GW of peak reduction capability nationwide 61 this accounted for 3 9 percent of U S peak demand in 201662 and exceeded 10 percent in some regions f 63 64 Future DR growth—FERC scenarios show 82 GW to 188 GW in possible DR capacity by 201965—along with other DER could significantly shift customer demand from peak to off-peak periods A key driver of today’s DR programs has been the growth of advanced metering infrastructure AMI now deployed for nearly 65 million customers in the United States see Figure 4-5 66 AMIs typically include two-way communications networks that utilities can leverage to improve electric system operations enable new technological platforms and devices and facilitate consumer engagement More than half of deployed AMIs are in five states with California Florida and Texas accounting for over 40 percent of the total 67 AMI investments have been largely driven by state legislative and regulatory requirements and ARRA funding 68 commissioned In addition to their titles as largest yet in operation both projects were built quickly about six months from contract award to commissioning These projects show how new technologies many of which benefitted from early publicly supported demonstrations can provide rapid solutions for reliability resilience and security f For example in PJM Interconnection demand resources account for over 10 GW out of the 167 GW from all capacity resources in the 2019 2020 delivery year See references for more information Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-17 Chapter IV Ensuring Electricity System Reliability Security and Resilience Figure 4-5 Advanced Metering Infrastructure Growth Has Contributed to Expanded Role of DR Programs69 A key driver of today’s demand response programs has been the growth of advanced metering infrastructure in orange In 2015 approximately 65 million customers in the United States had advanced metering infrastructure installations State Regulatory Actions That Have Impacted DR70  The California Public Utilities Commission will require default time-of-use TOU rates for residential customers in 2019 and it is working with California Independent System Operator and the California Energy Commission to create a market for demand response DR and energy efficiency resources 71  In 2014 Massachusetts ordered its electricity distribution companies to file TOU rates with critical peak pricing as the default rate design for residential customers once utility grid modernization investments are in place 72  In 2015 the Michigan Public Service Commission directed DTE Electric to make TOU and dynamic peak pricing available on an opt-in basis to all customers with advanced metering infrastructure by January 1 2016 Similarly Consumers Energy must make TOU available on an opt-in basis by January 1 2017  Also in 2015 the New York Public Service Commission released a regulatory framework and implementation plan Reforming the Energy Vision to align electric utility practices and the state’s regulatory framework with technologies in information management power generation and distribution A related measure in 2014 approved a $200 million Brooklyn-Queens demand management program which includes 41 megawatts MW of customer-side measures including DR distributed generation distributed energy storage and energy efficiency to cost-effectively defer approximately $1 billion in transmission and distribution investment  In June 2015 the Pennsylvania Public Utility Commission set a total peak demand reduction of 425 MW for electric distribution companies by 2021 against a 2010 baseline  In Rhode Island DR is continuing to be tested in pilot programs by National Grid and will be incorporated in analysis for “non-wires alternatives” to traditional utility infrastructure planning 73 4-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 The legal and regulatory environment for DR is highly dynamic and evolving at both the national and state levels On January 25 2016 the U S Supreme Court upheld FERC’s authority to regulate DR programs in wholesale electricity markets FERC Order No 745 74 While this decision provides final policy clarity it was made almost 2 years after the Appeals Court issued the opposite decision in the intervening time the markets were operating under the lower court’s interpretation that FERC’s DR order was encroaching on each state’s exclusive right to regulate its utility markets As affirmed by the Supreme Court the FERC order ensures that DR providers are compensated at the same rates as generation owners This ruling is also expected to provide a more favorable environment for DR market growth by facilitating the participation of third parties in the aggregation of DR resources As noted total DR capacity varies widely by region reflecting the diversity in utility state and regional policies toward DR and other forms of demand-side management Regions where DR is installed directly in multiple electricity markets e g capacity and essential reliability services generally have greater total DR capacities and can reduce a larger proportion of their peak demand by using DR 75 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-19 Chapter IV Ensuring Electricity System Reliability Security and Resilience Table 4-1 Potential Peak Reduction from Retail DR Programs by Region and Customer Class 76 NERC Region Total DR Capacity megawatts Residential Commercial Industrial Transportation Alaska 27 19 0% 48 0% 33 0% 0 0% Florida Reliability Coordinating Council 1 924 42 0% 39 0% 19 0% 0 0% Hawaii 35 57 0% 43 0% 0 0% 0 0% Midwest Reliability Organization 4 264 44 0% 19 0% 37 0% 0 0% Northeast Power Coordinating Council 467 8 0% 55 0% 34 0% 3 0% Reliability First Corporation 5 362 29 0% 13 0% 58 0% 0 0% SERC Reliability Corporation 8 254 16 0% 10 0% 74 0% 0 0% Southwest Power Pool 1 594 13 0% 20 0% 66 0% 0 0% Texas Reliability Entity 459 19 0% 74 0% 7 0% 0 0% Western Electricity Coordinating Council 4 681 22 0% 24 0% 50 0% 3 0% Unspecified 28 100 0% 0 0% 0 0% 0 0% Totals 27 095 25 8% 18 9% 54 6% 0 6% Demand response DR resources tend to be drawn principally from industrial and commercial customers of utilities although three regions—Florida Reliability Coordinating Council Hawaii and Midwest Reliability Organization—exhibit high-residential DR capacity Variability among segments within and between regions is a function of DR program characteristics and requirements—whether penalties for non- or underperformance apply the frequency with which DR resources are called and the purpose for which DR is used such as peak mitigation or frequency regulation Capacity estimates must be adjusted for value and reliability of delivery based on operational outcomes as well DR when called may not sustain for a complete event period only a portion of what is called may show up resource availability may vary over an event period and sometimes the “snap back” at the end of an event can create “echo effects” of peak mitigation problems as well It is important to note that the potential peak reduction in Table 4-1 may not all be reduction in “real capacity ” There are significant challenges to making DR resources reliable predictable and sustainable so that they may function as “proxy generators ” Also the terms related to non-delivery or partial delivery of DR that is called into service by grid operators tend to have highly variable penalty clauses from region to region and from utility to utility’ grid operators generally favor more reliable and predictable resources over DR Until there are consistent standards across regions that ensure data accuracy and validity data on DR capacity will tend to be discounted by grid operators—an estimated 100-MW DR resource that can 4-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 be called does not mean that 100 MW will show up when called Real-time visibility of these resources is important to grid operators and essential for maximizing the value of DR 77 Topography and Geography are also Important to Grid Operators Topography and geography are additional and important aspects of core grid management challenges see Figure 4-6 Geography is the physical area covered by the grid topography is the type of geography e g flat hilly mountainous etc Figure 4-6 illustrates how physical distances can influence system structure and operational challenges An example of why these features are important is that information and communications technology ICT infrastructure and reliability for smart meters and smart grid assets are less effective when mountainous terrain and urban infrastructure disrupt reliable wireless signal strength Smart grid designers must and do build in redundancy to deal with certain topographic asymmetries by using multiple ICT channels As another example the concentration of distributed VERs in a specific urban geography can lead to stresses on local infrastructure including transformers and substations This can present more disruptive problems for local grid operators than non-clustered dispersion of VERs System operators must watch for grid impacts in more granular ways and grid design changes to mitigate clustering effects will become important new paths for adapting to consumer-side influences on grid operations Because consumer behavior can change quickly new grid design processes must be made to function faster from core architecture to actual deployment In turn regulators must become nimble in considering incremental system costs that are compelled by grid operators anticipating problems and acting to mitigate them before they lead to grid interruptions Figure 4-6 Network Geography and Topography Impact Real-Time Operations Management and Influence How System Planning Is Done for Grid Operations and Related Markets78 A variety of grid services are managed across different distance scales and markets can be used to integrate some necessary services The Growing Role of the Consumer in Grid Reliability Reliability is increasingly a two-way proposition between grid operators and consumers and grid reliability while remaining true to its longstanding commitment to ensure high system “uptime ” now abuts an emerging “consumer reliability ” Reliability has typically been synonymous with “grid reliability” or “system reliability ” Consumer reliability derives from a series of initiatives over several decades the continuous improvement in energy efficiency the value of DR to both the grid and consumer emerging new consumer value creation from IoT development and the shifting priority of consumers especially the commercial segment for uninterruptible power services The growing interdependence between grid operators and consumers—the two-way flow of information and power—means that grid reliability can be made more efficient and more robust if consumer integration into grid operations occurs Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-21 Chapter IV Ensuring Electricity System Reliability Security and Resilience Customer Engagement in Demand-Side Management Today many customer categories and segments are interacting with the grid in some way Customers now have the tools to alter their consumption patterns in response to price signals or requests from grid operators This significant change—from a customer that is a passive load to one that is more actively engaged in demand management—may trend toward greater customer participation in the future Within 10 to 15 years many of the new devices likely to become part of our electricity system—from power plants to rooftop solar systems from batteries to street lights from transformers to electric vehicles— will also be digitally communicating with the grid 79 Most of these new devices will be able to see others on the grid as well This kind of connectivity with customers may lead to more fully integrated customer participation in grid operations on either an active level—where customers respond to time-of-use or real-time price signals— or a passive level—with devices encoded to reflect customer preferences that are responsive to system prices and operating signals Visibility of this connectivity is however key to grid operations and management and essential for both customer and system reliability Consumption response to system signals can be more precise timely and predictable thanks to improved ICT enablers and better grid-side analytics focused on managing overall system reliability not just peak mitigation DOE through its laboratories for example has developed a platform that “enables mobile and stationary software agents to perform information gathering processing and control actions and independently manage a wide range of applications such as HVAC heating ventilation and air conditioning systems electric vehicles distributed energy or entire building loads leading to improved operational efficiency ” This platform provides the capabilities for real-time scalable distributed control and diagnostics that we need for security and reliability and “…the integration of today's new energy system ”80 Customer Engagement in Generation and System Reliability In addition to the potential for increased customer participation in demand side management there have been dramatic increases in distributed generation such as rooftop solar which enable customers to produce power that is sold back to the grid by the customer or aggregators acting on behalf of the customer The result is that both electricity and information can now flow in two directions across the distribution grid enabled by smart meters and or Internet platforms This two-way engagement has become more complex as distributed generation continues to penetrate industrial commercial and residential delivery service segments Most utilities are in the low distributed generation adoption phase with some states approaching moderate levels 81 The growth will be driven by regulatory characteristics within each state for example through rate design and utility regulation as set by a public utilities commission Figure 4-7 shows the conceptual growth of DG DER in three phases from low to high adoption Such conceptual forecasts are helpful in posing policy issues and assisting investors in seeing new opportunities However structural and systems outcomes depend as much on actual results of markets regulators and various jurisdictions co-evolving into the future 4-22 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-7 Major Technology Policy and Infrastructure Enablers of DER Adoption82 This figure shows a three-stage evolutionary framework based on an assumption that the distribution system will evolve in response to both top-down policy and bottom-up customer drivers Each level includes additional functionality to support greater amounts of distributed generation distributed energy resource DG DER adoption and complexity building upon the earlier level Most of the U S distribution system is at stage 1 the speed and nature of DG DER adoption will vary by region based on top-down and bottomup drivers Currently around 4 percent of U S generation is from DG although this varies widely by region 83 Low levels of DG penetration generally require modest though critical levels of planning and operational considerations Under high DG adoption rates grid operations and market structures will most likely require significant modification In a future grid where DG comprises a larger portion of the resource base disruptions of system dispatch and control signals that could result from higher levels of DG penetration will increase the risk of disturbing grid stability and reliability In its 2015 Long-Term Reliability Assessment NERC noted the complications DG DERs create for grid operations and how these issues might be resolved “Operators and planners face uncertainty with increased levels of distributed energy resources and new technologies Distributed energy resources DERs are contributing to changing characteristics and control strategies in grid operations DERs are not directly interconnected to the BPS bulk power system but to sub-transmission and distribution systems generally located behind customer metering facilities Visibility controllability and new forecasting methods of these resources are of paramount importance to plan and operate the BPS—particularly because the majority of DERs are intermittent in nature and outside the control of the System Operator As more DERs are integrated the supply of control to System Operators can decrease However distribution-centric operations can reliably support the BPS with adequate planning operating and forecasting analyses coordination and policies that are oriented to reliably interface with Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-23 Chapter IV Ensuring Electricity System Reliability Security and Resilience the BPS Coordinated and reliable integration of DERs into the BPS can also present opportunities to create a more robust and resilient system ”84 At high penetration levels distribution system changes to enhance DG DER value to grid reliability will require developing advanced distribution circuits and substations that allow for two-way power flows new protection schemes and new control paradigms There are digital solid-state technologies combined with ICT such as smart inverters power electronics and smart energy storage that can provide grid operators the flexibility needed to manage a mixed set of DERs and deal with inbound impacts from utilityscale VERs upstream as well The introduction of new grid control and optimization algorithms taking advantage of distributed generation and load flexibility in the United States could also contribute to grid reliability and related benefits such as reduction of renewables curtailment peak load mitigation and transmission and distribution T D congestion management Development of new technologies could enable DGs to provide voltage or reactiveg control resources Currently customer reliability investments and interests are not necessarily contributing to supporting and enhancing overall grid system reliability In cases where DGs are part of the equation particularly distributed VERs customer actions can increase reliability risk The electricity sector has a range of choices to adapt to these challenges and demands many of them coming from new generators and consumers The path that is chosen will shape future sector value-creation potential and the long-term relevance of utilities to electricity service delivery Technology innovation along with market forces are redefining “grid reality ” the management space where high system reliability is sustained under the aegis of critical national goals for a clean secure and competitive electricity sector Increased penetration of DGs and increased interconnectivity also bring increased vulnerabilities to malicious attacks on customer assets and on the grid Public networks carry with them risks of being conduits through which cyber attacks can be executed—where impacts can spread through grids as well as through customer assets that are part of the IoT There are policy gaps at the interface of electricity and information that require new policies that both promote value creation through connectivity and protect critical infrastructure against cyber attacks Valuation of DERs System Benefits and Costs The growth of DERs where significant will require additional valuation efforts in both planning and market design to capture the value of these new systems and services as well as to avoid uneconomic or unintended issues Valuation can be developed based on different cost perspectives such as private costs that affect the ratepayers’ cost of service or social costs that include the private cost of service and externalities Valuation efforts need to be performed for system as a whole as well as for planning and compensation structures e g rate design It is important to consider both the system cost and benefits when valuing DERs Factors that influence DER value include constraint reduction loss reduction voltage control investment deferral environmental benefits and reliability These factors can vary significantly based on the size and location of the DER Accurate valuations will depend on evaluations at a finer level or resolution than has been considered historically g NERC requires transmission operators to ensure that resources capable of providing “reactive power” or “voltage control” in addition to electricity are online or can be scheduled because these reactive power or voltage control services regulate voltage levels that maintain grid stability 4-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Flexibility and Management of DERs VERs and Two-Way or Multi-Directional Flows Resilience and flexibility might be considered complementary factors of grid modernization Grid modernization planning should take flexibility of resources as well as grid operations techniques into account architecting a flexible grid may require distinctive configurations of ICT and physical assets on the grid side as well as the customer side of the utility meter Flexibility is not only a generation matter it bears directly on the core reliability challenges of maintaining balance between generation and load Solar and wind which are not synchronously connected to the grid contribute to a net decrease in system inertia loss of frequency control System frequencyh must be managed tightly around 60 Hertz it measures how well the supply and demand of electricity are in balance which has significant implications for how resources are deployed literally minute-to-minute Conventional generation such as nuclear facilities or coal-fired power stations serve as baseload resources and as spinning reserves These resources are synchronously connected to the grid and provide system inertia i Deviations in frequency are corrected by the spinning mass and governor controls of conventional generators which automatically adjust electricity output within seconds to correct out-of-balance conditions In contrast conventional solar photovoltaic PV generators storage devices and non-frequency responsive loads do not have inertial value for grid operators As wind and solar power and other nonsynchronous DERs replace conventional synchronous generation total system inertia is reduced along with the number of units available to provide frequency response services In other words system flexibility could be compromised in the absence of intentional mitigating actions that preserve or boost frequency response capabilities Power electronics and advanced inverters that simulate inertia are available to add to wind and solar generators providing a version of frequency response but development and deployment of these technologies may be hindered without additional policies prioritizing or enabling frequency response service j 85 Steep ramping resources will become more important as more VERs come online and increase their share of power supply Ramping is used to follow load patterns to ensure that resources match the loads on the system VERs expand the role of ramping from being primarily load focused to more of a role in matching increasing supply variability For example in California in 2015 grid operators were required to bring on approximately 10 000 MW within a 3-hour period at the end of each workday to compensate for the reduction in PV output as the sun was setting Over time more ramping will be needed as variable resources continue to grow 86 There is not yet an established method for calculating the type of flexibility required to ensure reliability especially in circumstances with high penetration of variable or DG Distribution systems were designed to deliver power to customers rather than receive power from them When the same grid assets are tasked with handling power delivered to the grid as well as power delivered to customers the settings on many field devices such as capacitors feeder switches and relays need to be adjusted to handle multi-directional power flows Where deployment of PV on distribution feeders may significantly exceed real-time demand distribution system upgrades will be required However upgrades cannot be determined simply by evaluating grid requirements but must be configured h Frequency is the number of times per second that the electric charge reverses direction “Electric Systems Respond Quickly to the Sudden Loss of Supply or Demand ” Energy Information Administration Today in Energy November 21 2011 http www eia gov todayinenergy detail php id 3990 i NERC defines inertia as “the ability of a machine with rotating mass inertia to arrest frequency decline and stabilize the system ” See http www nerc com comm Other essntlrlbltysrvcstskfrcDL ERSTF_Draft_Concept_Paper_Sep_2014_Final pdf j FERC issued a Notice of Inquiry on February 18 2016 seeking comment on whether it should require all generators including wind and solar to provide frequency response service See https ferc gov whats-new comm-meet 2016 021816 E-2 pdf Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-25 Chapter IV Ensuring Electricity System Reliability Security and Resilience to deal with existing and potential increases in PV deployments Thus the concept of “hosting capacity ” much in the same way that Internet services calculate capacity requirements to serve Internet loads will become a key decision criterion for future grid upgrades Regulators will need to learn how hosting capacity is a relevant measure for grid planning and how cost justifications for rate purposes should be framed As noted consumers are adopting renewable technologies and devices that enable them to manage their electricity use e g through smart meters and energy management systems Proactive consumers reduce demand pattern predictability particularly when remote control of loads is involved This complicates very near-term system planning which in turn increases the need for redundancy to hedge the unexpected drops and surges in consumption that can happen Discussion of these circumstances and policy implications can be found in Chapter II The Electricity Sector Maximizing Economic Value and Consumer Equity Visibility Is Key to Addressing the Changing Nature of Reliability Flexibility in grid operations requires visibility into connected resources Visibility—knowledge of “which resources are interconnected as well as their locations and current capabilities”87—is a key attribute for managing the electricity system Visibility is a necessary condition for managing rapidly changing and complex grid conditions and for providing awareness of incursions as well as foresight for planning Advanced communication and information technologies facilitate visibility Visualization requires data collection analysis e g modeling business cases etc transparency i e sharing data and results modeling with both existing and new models and deploying various sensing technologies such as synchrophasors and smart meters Creating foresight for transformation requires increasing visibility across many dimensions          Temporal—real time to planning Geographic—such as seams between balancing areas in the bulk electric system Analytical—identification and specification of computer models needed to evaluate the path to the future grid such as finance tools transmission planning tools etc Price—the single most important mechanism for conveying information to customers and suppliers Societal impacts– associated risks taken on by the consumer may not be accounted for in price Business—business models and business-use cases for incumbent service providers and new technology providers Technological—including characteristics of new technologies and grid elements Regulatory—between different layers of jurisdiction and many different types of entities that must be synchronized to make the future grid work Vertical industry boundaries—between distribution and bulk system operations Integration of DER resources with ICT and other enabling technologies that provide visibility in the distribution system can give system operators the ability to react and respond to critical events with a level of efficiency and accuracy that is currently unavailable Policies that comprehensively assess and manage DERs could help reduce associated reliability challenges At some level of DER penetration these policies may merit extending to encompass the interstate bulk power system Data requirements and visibility of assets possibly including tracking production are important policy issues for state regulators 4-26 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 The deployment of innovative visibility technologies face multiple barriers that can differ by technology and the role each technology plays in T D systems For example synchrophasors are an important new technology that increase T D operator visibility but technology dissemination is being limited by utility concerns about vulnerabilities associated with sharing data and the fact that current regulations do not necessarily encourage investments in new technical solutions This suggests that there is a role for the Federal Government in working with stakeholders and state regulators to identify analyze and develop recommendations for removing barriers to the deployment of value enhancing advanced technologies Growing Vulnerabilities for the Electric Grid The electricity system requires management of risks from a wide variety of threats each with different characteristics not all of which are considered in a comprehensive way by decision makers Threats and hazards to the electricity system represent anything that can cause disruption and outages while vulnerabilities are points of weakness within a system that increase susceptibility to such threats The physical vulnerabilities and specific risks to the electric power system vary among infrastructure components and by geographic location Significant Cost of System Outages A National Research Council study of the 2003 blackout in the Midwest Northeast and Canada concluded that “the economic cost of the 2003 blackout came to approximately $5 per forgone kilowatt-hour a figure that is roughly 50 times greater than the average retail cost of a kilowatt-hour in the United States ” 88 Data suggest that electricity system outages attributable to weather-related events are increasing costing the U S economy an estimated $20 billion to $55 billion annually 89 Grid Reliability Risk Reliability risk is a complex mix of natural and human threats Risk mitigation includes developing future grid designs that maximize flexibility as well as making investments in structural process and technology solutions which increase grid resilience to reduce outage events Some strategies can help reduce risks with respect to a variety of threats while other strategies are more threat specific Specific measures fall into a few broad categories—such as hardening e g protection from wind and flooding modernization e g investment in sensors automated controls databases and tools general readiness e g equipment maintenance vegetation management stockpiling of critical equipment and analytics and security upgrades 90 91 92 Grid owners and operators are tasked with managing risks from a broad range of threats defined as anything that can disrupt or impact a system—natural environmental human or other Many threats to critical electricity infrastructure are universal e g physical attacks while others vary by geographic location and time of year e g natural disasters Threats also range in frequency of occurrence from highly likely e g weather-related events to less likely e g electromagnetic pulse Electric utilities have long prepared for specific hazards However hazards that evolve over time or combinations of hazards that occur simultaneously require enhanced or new measures for prevention or mitigation 93 Cyber attacks are emerging and rapidly evolving threats that may increase the vulnerability of utilities’ system operations Understanding the various established and emerging risks to the electricity system including characterization of historical trends and future projections as well as the predictability of different threats has important implications for threat mitigation and resilience 94 Figure 4-8 depicts the scope and severity of risks where probabilities of occurrence of each threat can change significantly “without notice ” This Figure illustrates the status of risk management with respect to current threats some of which are expected to worsen in the future suggesting a need for new risk management Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-27 Chapter IV Ensuring Electricity System Reliability Security and Resilience strategies Current risk management practices are well suited to address common threats for most system components however the picture is mixed particularly with respect to emerging threats where there is limited data and experience Figure 4-8 includes the current risks of system disruption color coding for electricity system segments columns across to various threats by rows The threats are further broken out by incidents of low and high intensity rows While the sector has well-established risk management practices for many current threats indicated with filled circles practices for other types of threats are nascent open circles 4-28 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-8 Integrated Assessment of Risks to Electricity Sector Resilience from Current Threats 95 Electricity system owners and operators must manage risks in a comprehensive manner for a broad range of threats This chart provides an integrated portrait of current risks to the electricity system and the maturity Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-29 Chapter IV Ensuring Electricity System Reliability Security and Resilience of current risk management practices The sector generally has well-established practices for managing familiar threats e g wildlife but much more work is needed to effectively manage risks from high-impact low-frequency events e g high-intensity hurricanes combined threats and unfamiliar threats for which information is lacking or unknowable e g cyber and physical attacks Additional attention is needed to reduce risks for above-ground distribution systems substations susceptible to large-scale geomagnetic disturbances This assessment does not reflect the status of risk management with respect to threats that are expected to worsen such as extreme weather and cyber attacks Grid Operator Reliability Risk Management Is Increasingly Important Delivery system reliability remains high and robust in today’s world but emerging threats create a higher risk profile that in turn creates challenges for ensuring sustained high delivery system reliability There are many electricity sector risks that are continuously managed such as investment risks regulatory risks and grid operational risks Operational risks encompass all variables that can produce outages or disrupt frequency and voltage—from new types of power generation to changing customer behavior to extreme weather Despite risk management practices the risk of system disruption remains particularly high to certain system segments e g above-ground distribution systems or threats e g large-scale earthquakes Further there remain evolving or dynamic threats for which the levels of risk are unknown and the risk management practices could be improved e g high-intensity physical attacks high-intensity cyber attacks or combined threats Key policy questions include how investments should be prioritized how cyber threats to ICT infrastructure should be managed how emerging climate threats should be mitigated and planned for and whether a highly dispersed power supply system contributes to a more resilient and secure electricity sector Finally longstanding high-voltage transmission and baseload power supply assets now must be analyzed as possible insurance assets for reliability Extreme Weather Is a Leading Threat to Grid Reliability Some types of extreme weather are becoming more frequent and intense due to climate change and these trends have been the principal contributors to an observed increase in the frequency and duration of power outages in the United States between 2000 and 2012 96 Figure 4-9 summarizes the main sources of contemporary outage events in 2015 excluding consideration of cyber-related effects 4-30 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-9 US Electric Outage Events by Cause and Magnitude 2015 97 There are regional variations in weather-related outage causes in the United States While the East and Gulf Coast regions are subject to hurricanes large weather-related outages in the West are more often caused by winter storms Major outages from weather events are more common than from cascading failures Superstorm Sandy demonstrated the severe impacts of a large storm and the interdependencies of electricity and other infrastructures The storm knocked out power to 8 66 million customers from North Carolina to Maine and as far west as Illinois and Wisconsin Electric utilities deployed over 70 000 workers to the affected areas the largest-ever dispatch of utilities workers 98 The nearly 1 000-mile-diameter storm caused flooding and power outages that shut down many other major infrastructure components illustrating the dependence of other critical infrastructures on electricity 99 Oil refineries were shut in as well as many East Coast product import terminals—which act as the primary back-up method for securing bulk product supplies during refinery outages—due to the loss of power A week after the storm product deliveries in New York Harbor had returned to only 61 percent of pre-storm levels and less than 20 percent of gas stations in New York City were open for business The Department of Defense provided 9 3 million gallons of fuel though fuel shortages still greatly hindered the ability of emergency response personnel to respond to the crisis 100 Weather-related events including lightning and storms have historically posed the greatest operation risk to the electricity system 101 Strong winds especially hurricane-force winds are the primary cause of damage to electric T D infrastructures Failures on the distribution system are typically responsible for more than 90 percent of electric power interruptions both in terms of the duration and frequency of outages 102 Damage to the transmission system while infrequent can result in more widespread major Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-31 Chapter IV Ensuring Electricity System Reliability Security and Resilience power outages that affect large numbers of customers and large total loads 103 Figure 4-10 summarizes major weather-induced reliability disruptions from 2002 to 2012 Figure 4-10 Major Weather-Related Outages Requiring a National Response 2002–2012104 There are regional variations in outage causes in the United States While the East and Gulf Coast regions are subject to hurricanes large weather-related outages in the West are more often caused by winter storms Major outages from weather events are more common than from cascading failures Further 2016 is on track to be the third consecutive year of record-breaking global temperatures 105 Cooling degree daysk have already increased in the United States by roughly 20 percent over the last few decades see Figure 4-11 and this trend is projected to continue in the future 106 These changes in temperature are expected to result in increased electricity use particularly during the mid- to lateafternoon peak hours primarily to meet rising demand for air conditioning 107 k The number of degrees that a day's average temperature is above 65o Fahrenheit indicating that consumers need to use air conditioning to cool their buildings and there is an increase in electricity demand 4-32 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-11 Heating and Cooling Degree Days in the Contiguous 48 States 1970–2015 Fahrenheit 108 As air temperature continue to rise since 1970 the number of cooling degree days has increased in the United States by roughly 20 percent while the number of heating degree days has declined The maps in Figure 4-12 show projected median changes in cooling degree days by 2040 under two global greenhouse gas emissions scenarios based on analysis of output from several global climate models l which were downscaled to the county level 109 This analysis found that while the average American has historically experienced around 2 weeks of days over 95°F each year this could rise to 3 to 6 weeks on average by 2040 110 l To account for uncertainty surrounding future emissions pathways the study cited here uses a plausible range of scenarios developed for the Fifth Assessment Report of the Intergovernmental Panel on Climate Change The highest emissions scenario corresponds to a world where fossil fuels continue to power global economic growth The lowest emissions scenario reflects a future in which global greenhouse gas emissions are reduced through a rapid transition to low-carbon energy sources Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-33 Chapter IV Ensuring Electricity System Reliability Security and Resilience Figure 4-12 Median Change in Cooling Degree Days from Historical 1981–2010 Average for Average Year between 2030 and 2049 under Two Emissions Scenarios111 The average number of cooling degree days are expected to increase significantly by 2040 particularly in southern parts of the country Projected changes for the higher emissions scenario right panel are much greater than under the lower emissions scenario left panel Power-sector system costs increase with higher temperatures particularly as additional capacity is built to meet higher peak demand Higher air temperatures also reduce the generation capacity and efficiency of thermal generation units Both of these factors were taken into consideration by modeling conducted for the QER Models showed the likely range of total power system costsm increasing by 2 percent to 7 percent with a median value of 4 5 percent under the lowest greenhouse gas emissions scenario rising to 4 percent to 11 percent under the highest emissions scenario 112 The scale of these modeled costs illustrates why electricity system planners should consider how best to incorporate possible weather changes into load forecasting and other considerations that affect investment planning for the electric power sector Increased earth observation and modeling of local-scale climate effects to improve forecasting would benefit electricity system planning and could reduce costs Extreme temperatures also increase the potential for electrical equipment to malfunction For example transformers do not last as long when overloaded to meet peak demand particularly when they are simultaneously exposed to high temperatures that exceed the heat ratings for which they were designed 113 When planning for future investments it may become important for utilities to proactively invest in transformers with higher heat ratings to reduce the potential for overloading under future warmer conditions A continuation of sea-level rise in conjunction with storm surges caused by tropical cyclones hurricanes and nor’easters will increase the depth and the inland penetration of coastal flooding thus increasing the frequency with which electricity assets are exposed to inundation during storm events 114 These challenges are exacerbated by the fact that some coastal areas may be experiencing load growth—rapid population growth and development in coastal areas—which is expected to continue in the coming decades 115 116 Another aspect of uneven impacts is that low-income and minority communities are disproportionately impacted by disaster-related damage to critical infrastructure 117 These communities often do not have m Calculated in net present value terms between 2016 and 2040 using a 5 percent discount rate 4-34 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 the means to mitigate or adapt to natural disasters and disproportionately rely on public services including community shelters during disasters As a result there may be a Federal role in providing technical and financial resources to help states and localities prioritize resilience investments in critical public infrastructure that would protect the most vulnerable communities Electricity and Natural Gas System Interdependencies A key interdependency and vulnerability for all economic sectors and critical infrastructures is reliance on electricity making its reliability a fundamental need and requirement across the entire economy Many of these interdependencies are growing such as the interdependency of electric and natural gas systems The reliability of the Nation’s electricity system is increasingly linked to the reliability of natural gas pipelines and associated infrastructure On May 24 2016 NERC released a special assessment of gaselectric interdependencies which included an investigation of the potential reliability risks to the Nation’s bulk power system due to increased reliance on natural gas NERC found that areas with growing reliance on natural gas-fired generation are increasingly vulnerable to gas supply disruptions These concerns were reinforced by NERC’s latest long-term reliability assessment which was released in December 2016 Unlike other fossil fuels natural gas is not typically stored onsite and must be delivered as it is consumed n In many regions sufficient gas infrastructure is a key requirement for electric reliability An interruption in natural gas deliveries could result from extreme weather or force majeure events as well as from lowprobability events that could unexpectedly remove infrastructure from service such as a well malfunction as seen in the underground storage leak in Aliso Canyon California Extreme weather events such as in the Southwest outages of 2011 can simultaneously increase energy demand for gas and electric heating while reducing supplies in the affected region 118 Operators may be able to respond to disruptive events by rerouting gas onto other pipelines as was the case during a 2016 disruption to the Texas Eastern Pipeline 119 Electric curtailments also have the potential to reduce gas available to gas-fired generators For example in 2011 power outages disabled electric-powered gas compressors on well gathering lines which reduced supplies of natural gas to New Mexico 120 In addition to physical natural gas disruptions’ impact on the electricity system the electricity sector’s increasing reliance on natural gas raises serious concerns regarding the need to secure natural gas pipelines against emerging cybersecurity threats Thus the adequacy of cybersecurity protections for natural gas pipelines directly impacts the reliability and security of the electric system The vulnerabilities due to natural gas and electric system interdependency are the subject of ongoing regulatory reforms physical upgrade efforts and industry collaboration Some ISOs have undertaken surveys of critical gas facilities to ensure that these facilities are exempt from potential load-shedding plans in the event of a system emergency and FERC has allowed communication of proprietary and other non-public operational information between the gas and electric industries to continue in order to facilitate further sharing of critical reliability issues 121 To date many stakeholders have performed extensive analysis to improve real-time and near-term operations and planning in order to address natural gas-electricity interdependencies One result has been FERC issuing a final ruling requiring interstate natural gas pipelines to change their pipeline nomination schedules to better conform to dispatch n Some natural gas power plants also have the ability to operate on alternatives to pipeline-delivered natural gas such as fuel oil and local stores of liquefied natural gas or liquefied petroleum gas In addition note that potential deliverability challenges for coal have also been documented For example see Energy Information Administration “Coal Stockpiles at Coal-Fired Power Plants Smaller than in Recent Years ” Today in Energy November 6 2014 http www eia gov todayinenergy detail cfm id 18711 See also Department of Energy DOE Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector Washington DC DOE 2015 v http energy gov epsa downloads report-natural-gas-infrastructure-implications-increased-demand-electric-power-sector Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-35 Chapter IV Ensuring Electricity System Reliability Security and Resilience scheduling in organized electricity markets 122 Most coordination efforts have been focused on short-term planning and operations Mid- and long-term planning coordination is also being explored to properly plan for long-term assets like electric transmission and natural gas pipelines However coordinated long-term planning across natural gas and electricity can be challenging as the two industries are organized and regulated differently Underground Storage Leak in California Driving Natural Gas Storage Safety and Reliability Improvements123 On October 23 2015 the largest methane leak from a natural gas storage facility in U S history was discovered by the Southern California Gas Company at well SS-25 in its Aliso Canyon Storage Field in Los Angeles County The leak continued for nearly four months until it was permanently sealed on February 17 2016 In the interim residents of nearby neighborhoods experienced health symptoms consistent with exposure to odorants added to the gas thousands of households were displaced and the Governor of California declared a state of emergency for the area Approximately 90 000 metric tons of methane were released from the well although estimates vary and the State of California is continuing its analysis The incident also created serious energy supply challenges for the region and prompted broader public concerns about the safety of natural gas storage facilities From an electric reliability perspective the continued shutdown of this facility has been significant because it is a key component of the Southern California gas system serving customers in the Los Angeles Basin and San Diego particularly many gas-fired power plants Curtailments of gas deliveries were expected to cause electric reliability problems in the summer of 2016 Such disruptions were avoided however due to the combined effects of comparatively mild summer weather intensified electric demand response efforts coordinated maintenance programs and extraordinary management of the region’s gas delivery system The possibility of gas and electric delivery problems remains a concern however for the winter of 2016– 2017 and additional preparation and coordination are required in order to avoid gas and electric curtailments In April 2016 the Obama Administration convened an Interagency Task Force on Natural Gas Storage Safety to support state and industry efforts to ensure safe storage of natural gas Congress codified the Task Force through the Protecting our Infrastructure of Pipelines and Enhancing Safety Act which was signed into law by President Obama in June 2016 The legislation created a task force established by the Secretary of Energy that consists of representatives from the Department of Transportation Environmental Protection Agency Federal Energy Regulatory Commission and the Department of the Interior The Protecting our Infrastructure of Pipelines and Enhancing Safety Act tasked the group with performing an analysis of the Aliso Canyon event making recommendations to reduce the occurrence of similar incidents in the future and required that Pipeline and Hazardous Materials Safety Administration promulgate minimum safety standards for underground gas storage that would take effect within 2 years In October 2016 the Task Force released a report called Ensuring Safe and Reliable Underground Natural Gas Storage and 44 recommendations These recommendations address concerns regarding the integrity of wells at underground natural gas storage facilities public health and environmental effects from leaks like the one at the Aliso Canyon facility and energy reliability concerns that could arise in the case of failures at such facilities in the future Combined Threats to the Grid The stochastic nature of certain events such as hurricanes and earthquakes makes the probability of two closely spaced co-located events very low However an intelligent attacker may plan to use the occurrence of one naturally occurring high-intensity and low-frequency event to amplify the impact of a physical cyber or electromagnetic pulse attack 124 While electric power systems are generally resilient and quick to recover from failures caused by most natural and accidental events the National Academy of Sciences concluded that an intelligent multi-site attack by knowledgeable attackers targeting specialized components like power transformers could result in widespread long-term power outages from which it could take several weeks to recover 125 Another combined threat is the simultaneous 4-36 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 occurrence of a severe heat wave during a prolonged drought which is expected to become increasingly likely in certain regions such as the U S Southwest 126 Physical Attacks on the Grid Incidents such as a series of as-yet unexplained attacks on exposed electricity substations—including the Metcalf incident in California and the attack on the Liberty substation in Arizona—have raised the public’s consciousness about the vulnerability of the U S electricity grid and the need for the United States to address these vulnerabilities With an increased focus on physical security NERC developed Critical Infrastructure Protection CIP Standards CIP-014 in 2014 to address the physical security risks and vulnerabilities of critical facilities on the bulk power system 127 The Reliability Standard requires transmission owners that meet specific voltage criteria to identify and then protect facilities that if rendered inoperable or damaged could result in instability or uncontrolled separation within an interconnection Transmission owners must also complete third-party verification of their analyses and mitigate the identified areas of concern Per NERC the initial risk assessments of critical facilities including transmission stations substations and control centers were completed by October 1 2015 while the third-party review of proposed changes to security plans and mitigation strategies was to be completed by November 24 2016 128 All entities subject to NERC CIP-014 Standards must retain data and or evidence of compliance as described by NERC guidance 129 Evolving Cyber Threats to the Grid The integration of cyber assets to electricity infrastructure presents unique and significant challenges for maintaining and planning for reliable and resilient grid operations The current cybersecurity landscape is characterized by rapidly evolving threats and vulnerabilities juxtaposed against the slower-moving prioritization and deployment of defense measures This gap is exacerbated by difficulties in addressing vulnerabilities in operational technologies that cannot easily be taken offline for upgrades and the presence of significant legacy systems as well as components that lack computing resources to incorporate new security fixes Also any operational changes must be implemented by the thousands of private companies that own and operate electricity infrastructure Sector transformation based on a two-way flow of energy and information between grids and consumers brings to the foreground the importance of Federal Government engagement in helping to manage and mitigate vulnerabilities inherent in 21st-century modernization Interoperability standards in particular have the potential to enhance cybersecurity Improved tools analytic methodologies and demonstrations would serve to clarify the circumstances where improved interoperability can improve grid cybersecurity by standardizing security solutions such that utilities can select ‘plug-and-play’ options to mitigate cybersecurity issues To this end there is a role for the Federal Government to facilitate state and utility adoption of interoperability standards that provide high societal net benefits through providing highquality and trusted information to decision makers 130 While cyber attacks on the U S grid and affiliated systems have had limited consequences to date attacks elsewhere in the world on energy systems should be seen as an indicator of what is possible Threats can emerge from a range of highly capable actors with sufficient resources including individuals groups or nation-states under the cloak of anonymity As noted the 2015 cyber attack on the Ukrainian electric grid was the most sophisticated cyber incident on a power system to date On December 23 2015 Ukraine experienced widespread power outages after malicious actors remotely manipulated circuit breakers across multiple facilities in a series of highly coordinated attacks 131 The event compromised six organizations including three electric distribution Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-37 Chapter IV Ensuring Electricity System Reliability Security and Resilience companies disconnected seven 110 kilovolts and 23 35-kilovolt substations which would straddle Federal and state jurisdiction in the United States rendered equipment inoperable overwhelmed the call center with a denial-of-serviceo event to prevent people from reporting outages and left 225 000 without power for 1 to 6 hours Grid Communication and Control Systems Deploying smart grid technologies can support increased grid systems’ observability and reliability by allowing more real-time awareness via sensors which enable self-healing systems like fault location and service restoration At the same time deployment of smart technologies and DERs can provide new vectors for cyber attacks While not yet a significant issue this is a growing and significant concern in a grid with two-way end-to-end flows of electricity While the likelihood that a malicious actor could bring down large regions of the electric grid by manipulating distributed energy and behind-the-meter equipment is currently low the risks may change as distributed energy and other advanced technologies increase in number are operated in aggregation and are used by the bulk power system to manage and shape load Smart meters track detailed power usage and allow for two-way communication between the utilities and end users via smart grid technology which can include remote customer connection and disconnection Hackers targeting this technology could cause erroneous signals and blocked information to cut-off communication cause physical damage or more and disconnect large numbers of customers to disrupt the grid Recently some utilities have been moving toward combining their physical security and cybersecurity business centers to create a “centralized operations center” organized under a chief information security officer responsible for cybersecurity 132 These centralized operations centers generally work toward meshing informational technologies with physical operational technologies Other utilities have their cybersecurity risk management program located in existing information technology IT security departments 133 However some utilities suffer from a lack of practical cyber expertise A recent survey showed that 37 percent of utilities surveyed make cybersecurity decisions at the executive level 47 percent at the management level and only 16 percent by professional staff 134 Reported cybersecurity incursions into industrial control systems ICS within the U S Canadian energy sector have decreased slightly from 111 reported incidents in 2013 135 to 79 incidents in 2014 136 and 46 in 2015 137 This is occurring despite an overall increase in the number of reported ICS incidents across the broader economy and so far these incursions have been unsuccessful at inhibiting or disrupting power system operations 138 Typical cybersecurity events impacting the grid have been mainly limited to gaining access to networks through phishing emails or infecting flash drives with the hope that they will be connected to a network Russian hacking of utility systems as seen in the Ukraine incident however underscores that such events should not be viewed simply as information theft for business purposes The more common cyber intrusions impacting the electricity subsector today could be preparatory activity for disruptive attacks in the future Mitigation of Threats to the Grid Detecting anomalies and sharing information across organizations are critical measures to enhance grid security this covers everything from prevention to mitigation and recovery from cyber attacks However it is difficult to identify cyber intrusions when no changes or disruptions to system operations are evident or detectible Furthermore utilities report a lack of intrusion detection systems 139 which allow security personnel to identify anomalies in cyber systems and to obtain forensic data 140 Organizations vary o Distributed denial of service refers to the prevention of authorized access to multiple system resources or the delaying of system operations and functions 4-38 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 monitoring systems and nearly every utility will require distinct intrusion detection system specifications due to utility-specific IT and operational technology system configurations 141 142 Even in optimized detection environments programs and institutions that wish to facilitate sharing within and across industry and government face challenges including human delays in sharing information procedural barriers related to classified information and liability and privacy concerns from industry that inhibit sharing For example Federal agencies maintain classified information related to cyber and physical security threats While some of this information is shared via existing mechanisms including the Electricity Information Sharing and Analysis Center and DOE’s Cybersecurity Risk Information Sharing Program p sector representatives routinely ask for more in-depth synthesized and timely security information When digital components of the grid have been compromised manual operationsq can be a temporary alternative Utilities may need to maintain mechanical controls to prevent degradation and loss of operability 143 Some subject matter experts suggest utilities are also leveraging decades of experience with mutual assistance agreements to set up cyber assistance in the event of a cyber attack but response and recovery from cyber attacks pose distinct challenges that are generally not covered by existing mutual assistance programs The Electricity Subsector Coordinating Council established the Cyber Mutual Assistance Task Force to convene industry experts and develop a cyber mutual assistance framework The Federal Government could play a convening role for the electricity sector and thereby accelerate efforts to design and employ cyber mutual response programs and ensure swift grid recovery after a cyber attack Grid Cybersecurity Workforce Gaps A shortage of skilled cybersecurity personnel across government and electricity industry presents challenges to meeting response and recovery needs in the aftermath of a large disruptive cyber event The power grid is a cyber-physical system requiring a cross-disciplinary workforce dedicated and trained to design manage and protect such complex systems 144 Companies face challenges in designating sufficient personnel for system security 145 In addition to the challenge of incorporating sufficient cyber and physical security expertise into their businesses recruiting and maintaining a workforce that is adequately trained is a growing challenge To address emerging cybersecurity risks the United States requires a workforce adept in a variety of skills such as risk assessment behavioral science and familiarity with cyber hygiene r Smart Grids and Related Risk Deployment of smart grid technologies—sensors and the ability to collect and analyze more data faster— supports increased observability of grid systems and thereby contributes to increasing grid reliability However in the absence of adequate cyber protections deployment of smart technologies and DERs could increase system vulnerabilities Because the deployment of these technologies is still in the p In partnership with industry the Department of Energy’s Office of Electricity Delivery and Energy Reliability has been supporting the Cybersecurity Risk Information Sharing Program CRISP which is a collaborative effort with private energy sector partners to facilitate the timely sharing of threat information and the deployment of situational awareness tools to enhance the sector’s ability to identify threats and coordinate the protection of critical infrastructure In August 2014 the North American Electric Reliability Corporation and the Electricity Subsector Coordinating Council agreed to manage CRISP for its sector q Use of mechanical switches and controls rather than computer-based controls r Cyber hygiene is a set of practices designed to maintain cyber security and keep out the “bugs” from a digital system Just as hand washing keeps germs from entering the body practices such as deleting data from cloud storage when it is no longer needed or prohibiting the download of non-essential applications which might contain viruses are intended to keep intrusions out of a computer system Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-39 Chapter IV Ensuring Electricity System Reliability Security and Resilience relatively early stage electricity regulatory bodies should ensure that cyber protection planning includes advanced cyber protection protocols when execution occurs Automated smart meters for example are increasingly relied on to track actual power usage and allow for two-way communication between the utilities and end users Hackers targeting this technology could cause disrupted power flows create erroneous signals block information including meter reads cut off communication and or cause physical damage Also some supervisory control and data acquisition SCADA systems rely on modern communication infrastructure or a blend of modern and conventional i e telephone lines communication channels to achieve the same ends which could make SCADA communications more accessible to hackers and more vulnerable to disruptions Hacking may come through access to hardcoded passwords s system backdoors t passwords in clear text u lack of strong authentication v and firmware vulnerabilities w 146 147 Development of Security Metrics A major impediment to common metrics is variation in how to measure benefits or conversely the cost of interruptions such as “freight cost per mile” or “value at risk ” After the attack on the Metcalf substation in April 2013 the California Public Utilities Commission analyzed methods of quantifying distribution system security 148 Metrics included copper theft successful or unsuccessful intrusion or attack and false or nuisance alarms the condition of all monitoring equipment and the performance of security personnel in training exercises and on tests results of substation inspections instances of vandalism or graffiti and problems with access control number of malfunctions of security equipment or camera coverage Comprehensive Vulnerabilities Assessments Reliability requirements in the face of human and natural threats require enterprises as well as state and Federal entities to seriously assess vulnerabilities and prioritize investments to ensure that highly reliable service continues These entities diligently work to identify and mitigate risks to grid reliability However given the scope and complexity of risks especially related to new vectors such as cyber attacks there may be a need to improve coordination not only around assessing event outcomes but also around maintaining contemporary assessments of vulnerabilities their associated risks and professional estimates of their likelihood Gaps in National Reliability Security and Resilience Authorities and Information The primary Federal entities with roles related to security and resilience of the electric grid under normal and emergency conditions are DOE the Department of Homeland Security DHS the Department of Commerce and FERC 149 These entities’ roles span research and development standards and guidance information-sharing mechanisms and the coordination of resource deployment during emergency events Existing authorities cover a wide breadth of Federal Government responsibilities yet certain gaps remain in implementing comprehensive reliability security and resilience measures For example the Fixing America's Surface Transportation FAST Act granted the President new authorities to protect critical infrastructure against electromagnetic pulse cyber geomagnetic disturbances and physical threats but not to take anticipatory action for natural disasters and extreme weather Nevertheless certain extreme s Passwords that cannot be changed by the user Alternative access to secure data or functions that bypass normal security procedures u Passwords stored without encryption v Not scrambling login information which enables a digital eavesdropper to capture passwords w Generic catch-all for hardware-based exploits rather than software-based t 4-40 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 weather events e g heat waves hurricanes can be easier to anticipate 150 and to date they have caused significantly more direct physical harm to the electric grid than have malicious acts Taking actions in advance of an impending threat can have significant positive effects in reducing power outages 151 so extending this authority for all hazards would be a great benefit for protecting the grid The lack of access to data represents another challenge to Federal agencies to enhance the security and resilience of the grid Given that the majority of electricity infrastructure is privately owned the Federal Government must rely on industry data collection activities to understand the vulnerability and security landscape of the electric grid Furthermore as noted earlier utilities report SAIDI SAIFI and CAIDI statistics in inconsistent ways 152 153 limiting the ability of governments to independently conduct robust risk assessments of the grid DOE and FERC in particular lack access to data on critical grid assets and their vulnerabilities In order to support the President in executing new anticipatory security authorities under the FAST Act addressing this information deficit is a priority NERC collects certain data in its role of performing grid reliability assessments and supporting the development of reliability and security standards but NERC does not make all of that data available to government agencies DOE has some limited visibility into critical electricity infrastructure through tools like EAGLE-Ix' additional system data to determine for example where there are critical vulnerabilities are needed to exercise the new emergency authorities granted to the President and the Secretary of Energy under the FAST Act One of the most prominent examples of this data gap is a lack of information on risk mitigation practices at the utility level including information regarding participation in risk mitigation programs a utility's specific risk mitigation practices and spare equipment specifications and numbers for critical infrastructure such as transformers Without with enhanced and appropriately protected data on utility practices component part reserves and an increase in awareness on a range of additional topics—such as transformer configuration the direct current resistance of various components and substation grounding resistance values—DOE’s ability to understand the extent to which infrastructure will be improved enabling DOE to better fulfill key statutory and executive responsibilities Markets and Their Impact on Reliability and Resilience Organized wholesale markets are recent innovations in the century-plus life of the electricity sector They were developed and implemented beginning in the 1990s on the heels of state legislative and regulatory direction but are considered Federally regulated structures that adhere to rules set by FERC and reliability standards set by NERC Organized markets operated by ISO RTO include time-delineated markets e g day-ahead hour-ahead and real-time as well as system support services such as spinning reserve and non-spinning reserve often referred to as Ancillary Services Commodity exchanges such as the Intercontinental Exchange ICE and the New York Mercantile Exchange offer future contracts for location-specific electricity trading referred to as hubs in U S markets These short-term markets are designed to provide price discovery on the marginal cost of power production and delivery Seven U S regions have operating ISOs RTOs that manage centrally organized wholesale markets for energy trades i e MW-hour only as compared to capacity trades that are for MW-only transactions Together these trades play an important role in operating and economically optimizing regional grids and x EAGLE-I which stands for Environment for Analysis of Geo-Located Energy Information is an interactive geographic information system GIS created and managed by DOE It allows participants to view and map the nation's energy infrastructure and obtain near real time informational updates concerning the electric petroleum and natural gas sectors within one visualization platform Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-41 Chapter IV Ensuring Electricity System Reliability Security and Resilience ultimately delivering fair-priced electricity to the Nation’s consumers Aspects of the bilateral model exist in the RTO ISO regions particularly in the SPP and Midcontinent ISO Also several RTO ISOs operate ancillary services markets and some run capacity markets designed to help ensure that total electricity resources will be sufficient to meet the immediate demand for electricity Wholesale electricity trade occurs through bilateral transactions as well These transactions vary in duration of contract as well as in volume daily timing and duration of delivery Trade differs regionally as a function of distinctive characteristics of regional grids Bilateral trade volumes tend to be much larger than daily trade in ISO RTO markets short-term markets There are many reasons that wholesale markets developed—from requirements for open-access transmission systems which enable development of competitive power generation to the need to value resources in more refined ways which help ensure that system reliability is maintained across a broad spectrum of possible disruptive situations For example peak mitigation requires generators to perform differently than a traditional baseload production model might specify and therefore it may be more valuable than day-ahead committed baseload generation Increasingly frequency regulation is as important as peak mitigation but frequency regulation methods may differ at the transmission level compared to the distribution level For example increasingly distribution frequency regulation occurs at much faster millisecond speeds compared to transmission frequency regulation As noted an array of new and evolving business models—aggregators consumer generators and an evolving generation mix—have emerged from the adoption and integration of new technologies and their associated economics These developments are raising jurisdictional and market questions For instance at the bulk power wholesale level short-run markets are deemed by regulators to be workably competitive but concerns have been raised about the ability of short-run markets to address longer-term issues such as ensuring that adequate capacity will be available when needed Also wholesale markets have successfully integrated independent generation into system operations and efforts have been underway for some time to make individual DER providers principally DR and aggregators of DERs also principally DR active market participants More visibility of and reliance on these potential resources is needed however to maximize their value At the local and utility level retail electricity choice markets that are intended to bring new services and lower prices to consumers have seen minor successes and consumer demand for these services is a significant driver of change Some states are exploring new structures that would open retail commodity trade to emulate wholesale markets These models are under consideration in the State of New York for instance and are often referred to under the rubric Distribution System Operator models Organized Wholesale Markets and Reliability Electricity production and delivery have traditionally been organized around large centralized power stations and high-voltage transmission lines Power is shipped over long distances before voltage is stepped down to flow through distribution systems for delivery to consumers This system often is referred to as the “bulk power system ” Organized wholesale markets are structured to provide price discovery of wholesale electricity costs in the bulk power system Costs relating to bulk power are more than half—and up to two-thirds—of most customers’ electricity bill The significance of costs to customers and the associated economic value of electricity to them is why the functioning of wholesale markets is so important to the overall operation of the electricity supply chain High-voltage transmission infrastructure tends to be much more networked than distribution systems Networked infrastructure increases system resilience by enabling grid operators to reroute power flows when a single line or multi-line pathway is compromised Transmission infrastructure already is 4-42 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 significantly automated through such tools as Automated Generator Control and advanced SCADA systems and information intensive New tools such as highly granular system visualization solutions synchrophasors smart relays and smart inverters increase network resilience While changing weather patterns and storm intensity are impactful the structure of most transmission networks is already hardened against such disruptive factors What remains to be addressed more comprehensively is how transmission grids can resist cyber incursions that could paralyze wide areas of a large-scale interconnect such as the Western or Eastern Interconnection These considerations were discussed in the preceding section Stakeholder input as part of the QER process FERC dockets National Association of Regulatory Utility Commissioner meetings and other venues have consistently raised the following issues as part of ongoing grid operations and planning efforts 154       The roles of mandatory capacity markets in PJM ISO-New England and parts of New York ISO The ability of bulk power markets especially in RTO ISO markets to incentivize new generations in addition to natural gas and state-Renewable Portfolio Standard mandated renewables thus helping with resource diversity resource adequacy and long-term decarbonization The incorporation of state policy and environmental goals in RTO ISO markets The ability to integrate increasing wind and solar generation at lower costs while allowing remaining traditional sources of generation to earn sufficient revenue to continue to provide needed generation and reliability services The ways to address the increasing changes occurring at the distribution level The continued evolution of transmission planning and seams issues between major bulk power market regions In addition to the issues noted above analysis of markets with high volumes of VERs notably California point to emerging impacts which eventually will affect other regions as their VERs increase as an overall share of the resource mix It is in these emerging issues that new resilience and flexibility considerations come into focus A 2014 study “Investigating a Higher Renewables Portfolio Standard in California ” which involved Los Angeles Department of Water and Power Pacific Gas Electric Sacramento Municipal Utilities District Southern California Edison Company and San Diego Gas Electric as sponsors The study identified emerging operations and planning issues under a 50% RPS standard note that CAISO already consistently handles up to 40% renewable resources on its system 155 Concerns in the study included over-generation as a critical management challenge that occurs when “must-run” generation—nondispatchable renewables combined-heat-and-power nuclear generation run-of-river hydro and thermal generation that is needed for grid stability—is greater than loads plus exports The principal mitigation for over-generation in many current systems is curtailing renewable resource contributions to the overall resource mix Future systems may increase the role of storage DR and flexibility to manage overgeneration Second renewable resources can change supply patterns suddenly and as the sun sets significant solar production disappears requiring a need for fast ramping generation to fill in for lost solar resources The study also found that a variety of integration solutions can reduce the cost of a high renewable scenario Improvements in regional coordination—which address jurisdictional challenges when state regulation cannot reach beyond state borders and Federal regulation cannot easily reach into distribution systems—could improve integration DR especially advanced practices that increase overall DR reliability can support higher levels of VER integration Energy storage is an important technology that must be developed and deployed as a key tool for VER impact mitigation Finally VER portfolio diversity is a key success factor as more VER volume impacts grids Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-43 Chapter IV Ensuring Electricity System Reliability Security and Resilience Resilience is an important transmission network matter but its traditional treatment has occurred as part of ongoing FERC-approved investments to meet NERC standards and to ensure reliable operations in regionally distinct conditions The emergence of VERs and their growing contribution to resource mixes in some U S regions bring with them a need to more robustly differentiate reliability investments from resilience investments As noted resilience in transmission networks with high VERs requires behavioral changes in system operations as noted above In bulk power systems with wholesale market overlays resolving valuation matters where curtailment of VERs is a valid resilience methodology is a serious matter To avoid complex issues of how to compensate curtailed VERs adjustments in market designs and new market developments are required For example in California one element in an overall VER management model is the Energy Imbalance Market created by CAISO which involves PacifiCorp a large multi-state utility based in the Pacific Northwest These initiatives tend not to be considered resilience efforts when in fact they are important contributors to both system reliability and longer-term resilience in high VER systems In short as resource mixes change with decarbonization efforts of grid operators and power producers the role of resilience grows more important as a distinct compliment to established reliability management investments and techniques The Role of Markets in Downstream Electricity Delivery Services Presently downstream electricity delivery services provided by investor-owned and public utilities— whether integrated with retail customer service or separated into wires operations and competitive retail services—do not function with organized “retail commodity markets” that emulate upstream wholesale markets But there are aspects of market mechanisms that impact grid operations and provide proxies for valuing various types of grid investments for reliability assurance system flexibility and network resilience For example some distribution systems allow net metering which involves the sale of power from consumers to grid operators Pricing of these services is based on state regulatory and ratemaking processes not auction platforms like those used by ISOs RTOs Energy Service providers retail competitors and aggregators compete through various sales channels for consumers interested in controlling and or reducing energy costs deploying onsite power generation and adopting microgrids that optimize sources and uses of electricity as an integrated onsite system Downstream electricity markets may not yet value commodity electricity in a manner that allows for effective pass-through of wholesale clearing prices in real-time to end-use consumers Wholesale and retail linkages may develop over time the New York Reforming the Energy Vision process and consideration of distribution system operator models may provide meaningful guidance for such evolution Whether realized or not under appropriate and necessary requirements for visibility of such generation downstream electricity delivery services achieve enhanced resilience by systematically promoting and integrating advanced DR and energy storage solutions into local grid operations Similar to wholesale markets and resilience considerations distribution system resilience measures can be enhanced by incorporating behavioral systems and processes into specific asset-based investments that harden systems against severe weather-related impacts physical threats and cyber-attacks Electricity Markets Reliability and Resilience Reliability investments are typically incorporated into ratemaking processes in both investor-owned and public utility institutions Supplementary investments for recovery from outage events also are handled through established ratemaking processes Resilience requirements tend to be valued as contributions to reliability and incorporated as part of ratemaking processes These processes are more easily executed in structures that are traditional end-to-end vertically integrated electricity delivery services other market 4-44 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 structures complicate reliability and resilience investment decision-making Short-run markets may not provide adequate price signals to ensure long-term investments in appropriately configured capacity Also resource valuations tend not to incorporate superordinate network and or social values such as enhancing resilience into resource or wires into investment decision making The increased importance of system resilience to overall grid reliability may require adjustments to market mechanisms that enable better valuation Grid Operations Planning and Resilience Resilience of the electricity system is increasingly important Recent weather extremes climate change impacts physical security and cybersecurity threats and a changing workforce have added to the challenges faced by electric utilities prompting industry to develop new multidisciplinary all-hazards approaches for managing these issues and making the grid more resilient Resilience Measures Expedited Restoration after Hurricane Matthew156 Hurricane Matthew began impacting the southeast United States on Thursday October 6 2016 and the flooding caused by the storm continues to affect North Carolina and South Carolina The initial effects of the storm were felt from Florida to Virginia with increased rain and wind causing damage to energy infrastructure Industry efforts to restore that damaged infrastructure are ongoing and have involved mutual assistance from utilities from across the country More than 99 percent of customers who lost power had their power restored within 8 days by 11 00 a m on October 14 2016 Florida Power and Light has invested $2 billion over the last 10 years leveraging $200 million in Federal investment through the American Recovery and Reinvestment Act of 2009 to advance smart grid functionalities with technologies such as advanced smart meters distribution automation and advanced monitoring equipment for the utility’s transmission system Early damage assessments suggest that investments in resilience measures expedited Florida Power and Light’s restoration timeline without these new technologies and functions it is estimated that restoration efforts would have taken 10–15 days Florida Power and Light reports that 98 percent of the 1 2 million customers who lost power had their power restored within 3 days Government industry and the various state energy offices helped coordinate the national effort to restore power following the storm Government responders helped industry crews access impacted areas facilitated waivers requested by utilities to use unmanned aerial systems for damage assessments and provided energy-sector situational awareness reports that informed decisions about where to place limited Federal and state resources Government responders remained in Georgia as well as North Carolina and South Carolina providing assistance until restoration was complete The response effort built on lessons learned from Hurricane Sandy of 2012 Resilience enhancement initiatives are generally focused on achieving at least one of three primary goals 1 preventing or minimizing damage to help avoid or reduce adverse events 2 expanding alternatives and enabling systems to continue operating despite damage and or 3 promoting a rapid return to normal operations when a disruption occurs i e speed the rate of recovery Resilience relates both to system improvements that prevent or reduce the impact of risks on reliability and to the ability of the system to recover more quickly Unlike reliability there are no commonly used metrics for the resilience of the electric grid and threats to system resilience are typically associated with disasters or high-intensity and low-frequency events An additional complication is that the responsibility for maintaining and improving grid resilience lies with multiple entities and jurisdictions including Federal and state agencies and regulatory bodies as well as multiple utilities For investments in electricity sector resilience approval is generally up to the discretion of state public utilities commissions or equivalent bodies which are balancing competing more near-term Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-45 Chapter IV Ensuring Electricity System Reliability Security and Resilience interests Furthermore from the societal perspective building resilience of critical infrastructure to future disasters involves decision making that also considers social cultural and environmental issues which have both qualitative and quantitative value from a risk assessment standpoint 157 Therefore building resilience to disasters depends upon close coordination among multiple entities which have varying approaches to measuring electricity system performance and outcomes for society Perhaps most relevant is the underlying barrier to prioritizing investments in reliability and resilience that utilities and regulators face 158 There is no established method for quantifying the benefits of investments which depend on the occurrence of some events with low probabilities One exception to this is an order recently released by the New York State Public Service Commission 159 however there is a clear need for a set of commonly used methods for estimating the costs and benefits of reliability and resilience investments Real-Time Electricity System Monitoring Enhances Situational Awareness Maintaining situational awareness is an important aspect of overall resilience management in service to maintaining high electricity system reliability Utilities rely on field personnel to assess and report grid system conditions through site inspections During emergency situations utilities’ abilities to assess and communicate system status after a large disruption tend to be significantly degraded Where there is a widespread disruption beyond electricity infrastructure damage personnel may be responding to a specific emergency situation which limits work scope Transportation challenges such as road blockages and traffic may also prevent the movement of utility personnel and equipment to assess electricity infrastructure throughout the affected area Furthermore wide communication system outages will also limit utilities’ ability to assess system conditions These initial assessment limitations then impede response and recovery planning 160 When distribution-level SCADA pairs with a distribution management system operations can be conducted remotely increasing the speed at which a utility can identify and locate faults on the distribution system and restore service as well as manage voltage and reactive power to reduce energy losses and integrate distributed generation and storage technologies 161 Analyses of the August 2003 Northeast blackout concluded that it was preventable and that the reliability of the U S and Canadian power systems needed an immediate and sustained focus on investments in technologies to promote “situational awareness” and adequate responses to major disturbances 162 New institutional structures and processes were developed to coordinate information among power pools for improved coordination across systems and across NERC regions for improved coordination of system resource adequacy requirements Grid Operations and Communications Redundancy With the increasing interdependence between communications and electricity redundancy in communications systems is essential to continuity of grid operations Some utilities have expanded satellite communications capabilities with mobile satellite trailers that can be deployed to field staging areas and include full capabilities for email Internet outage management systems voice-over Internet protocol telephones and portable and fixed satellite phones Others have redundant and diversely routed dedicated fiber-optic lines to enable continued operations 163 164 Dynamic Line Rating Systems for Transmission Systems Current transmission system operations rely on fixed ratings of transmission line capacity that are established to maintain reliability during worst-case conditions e g hot weather Line ratings may also 4-46 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 be reduced if ambient conditions are abnormally hot and still There are times when the conditions associated with establishing line ratings are not constraining and transmission lines could be operated at higher usage levels Dynamic line rating systems help operators identify available real-time capacity and increase line transmission capacity by 10 percent–15 percent Dynamic line rating systems can help facilitate the integration of wind generation into the transmission system 165 This real-time information about overhead conductors can help further enhance situational awareness while simultaneously providing economic benefits Incremental investments that increase the capacity of the existing transmission system can provide a low-cost hedge as well as enhanced real-time awareness However economic financial regulatory and institutional barriers limit incentives for regulated entities to deploy these low-capital cost technologies that could increase transmission capacity utilization 166 NERC has an important role to play in setting relevant standards which would drive increased operational focus on dynamic line ratings as part of overall response and recovery planning and execution Information Collection and Sharing Can Mitigate Threats to the Grid The Federal Government has established programs and launched pilots to analyze cyber and physical threat information share information with industry and provide technical assistance to state and utility decision makers in their mitigation efforts The electric sector utilizes resources and participates in these programs while also collaborating with one another through industry-led initiatives y While several Federal programs facilitate the sharing of threat information with industry challenges remain with respect to the Federal Government’s ability to provide data quickly enough to be useful Several factors limit timely and effective exchange of information including human delays in sharing information procedural barriers related to classified information and liability and privacy concerns from industry One particular challenge is that some government intelligence on threat indicators and vulnerabilities is classified preventing power sector owners and operators who lack the appropriate security clearances from accessing relevant information Many sector owners and operators and Federal employees often lack the security clearances to access this information Another important information gap is a national repository for all-hazard event and loss data which would help utility regulators planners and communities analyze and prioritize resilience investments In 2012 the National Academy of Sciences recommended the establishment of such a database167 to support efforts to develop more quantitative risk models and better understand structural and social vulnerability to disasters The Grid and Emergency Response As not all hazards to the grid can be prevented local authorities and stakeholders focus on failing elegantly and recovering quickly Response options can leverage existing capabilities tools and equipment to act immediately before during and after a disruptive event Emergency response resources can be provided by public and private sectors and can include mobile incident management and command centers mutual aid agreements and access to specialized materials 168 y For example in 2011 Edison Electric Institute in conjunction with private-sector experts and its member utilities initiated the Threat Scenario Project to identify threats and practices to mitigate these threats Identified threats included coordinated cyber attacks as well as blended physical and cyber attacks The project established common elements for each threat scenario including likely targets potential threat actors specific attack paths and the likely impacts of a successful attack Edison Electric Institute “EEI Business Continuity Conference Threat Scenario Project TSP ” presentation April 4 2012 1 http www eei org meetings Meeting_Documents 2012Apr-BusinessContinuity-Treat%20Scenario%20Project_Engels pdf Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-47 Chapter IV Ensuring Electricity System Reliability Security and Resilience A utility’s power restoration and business continuity planning includes year-round preparation for all types of emergencies including storms and other weather-related events fires earthquakes and other hazards as well as cyber and physical infrastructure attacks A speedy restoration process requires significant logistical expertise skilled trained certified workers and specialized equipment Utility restoration workers involved in mutual assistance typically travel many miles from different geographic areas to help the requesting utility to rebuild power lines replace poles and restore power to customers 169 Lessons Learned from Severe Outages170 171 172 After the immediate response to manage the adverse effects of an event recovery activities and programs take place to effectively and efficiently return operating conditions to an acceptable level This may entail restoring service to the same level as before the event or stabilizing service to a new normal Recovery measures usually consist of longer-term remediation measures and include access to critical equipment municipally owned utility activation and after-action reporting that would make the grid more resilient to future disruptions Hurricane Sandy and Katrina in 2005 caused significant damage to critical national energy infrastructure and stressed Federal capabilities to protect and restore critical infrastructure In the aftermath the White House and Federal Emergency Management Agency FEMA conducted detailed analyses of the Federal response to identify challenges and lessons learned and to make recommendations for future disaster preparedness and response efforts Several common themes emerged about response and recovery Ensure mutual aid in the utility sector In response to Hurricane Sandy electric utilities mobilized the largest-ever dispatch of mutual aid workers totaling approximately 70 000 primarily from the private sector but including some government workers Grant energy sector restoration crews the appropriate credentials to enter damaged work zones and have priority for fuel distribution In the storm response some energy sector repair crews were designated as first responders giving them priority access to fuel and expediting travel into affected areas However not all energy infrastructure repair crews had this status or access After Hurricane Sandy the Department of Energy’s DOE’s Office of Electricity Delivery and Energy Reliability recommended that electrical workers as well as refinery and terminal repair crews be given appropriate credentials to enter damaged work zones quickly Coordinate Emergency Support Function ESF 12 functions across Federal agencies ESF-12 under the National Response Framework is an integral part of the larger DOE responsibility of maintaining continuous and reliable energy supplies for the Nation through preventive measures and restoration and recovery actions in coordination with other Federal Government and industry partners In the “Hurricane Sandy FEMA After-Action Report ” FEMA noted that ESF-12—coordinated by DOE—struggled to fully engage supporting Federal departments and energy sector partners in addressing energy-restoration challenges A DOE report on the response to Sandy recommended that DOE permanently deploy DOE ESF-12 responders to the states and regions so they could provide on-the-ground situational awareness of energy disruptions establish relationships with State and local energy sector partners and gain first-hand system knowledge to better coordinate energy preparedness efforts with state and local public and private sector partners State governments play a major role in coordinating and directing response and recovery efforts to electricity disruptions These responsibilities received a boost through DOE grants to states and local governments to support a State Energy Assurance Planning Initiative Grants were awarded under this initiative in 2009 and 2010 to 47 states the District of Columbia 2 territories and 43 cities 173 The grants were used over a 3–4-year period to improve energy emergency preparedness plans and to enable quick recovery and restoration from any energy supply disruption States also used these funds to address energy supply disruption risks and vulnerabilities with the aim of mitigating the devastating impacts that such incidents can have on the economy and on public health and safety 174 4-48 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Each state under the Energy Assurance Planning Initiative was required to track energy emergencies to assess the restoration and recovery times of any supply disruptions to train appropriate personnel on energy infrastructure and supply systems and to participate in state and regional energy emergency exercises that were used to evaluate the effectiveness of their energy assurance plans States were also required to address cybersecurity concerns and to prepare for the challenges of integrating smart grid technologies and renewable energy sources into their plans Because of the initiative nearly all state and territory governments and select local governments have Energy Assurance Plans in place A review of the State Energy Assurance Plan was recommended to occur every 2 to 3 years and to date some states have undertaken update efforts 175 Back-Up Power and Spare Transformers for Emergency Response During outages and emergencies fast but safe system recovery is the mission of a utility Part of the effort to maintain service while power is being restored involves the use of back-up power along with speedy deployment of equipment spares that may have failed Back-up power sources can be used to bypass existing distribution service lines until they are restored and they are used by customers in lieu of utility service Critical facilities such as hospitals maintain robust back-up power systems Microgrids offer islanding solutions for large facilities and campuses by their integration of DG storage and demand side management solutions According to an Argonne National Laboratory report “One hundred percent of the following assessed facility groups have an alternate or back -up power in place Banking and Finance Critical Access Hospitals Private or Private Not-for-Profit General Medical and Surgical Hospitals State Local or Tribal General Medical and Surgical Hospitals ”176 More than 75 percent of other users including manufacturing wastewater hotels arenas retailers offices and law enforcement offices also maintain some form of alternate or back-up power source 177 Critical data centers and server centers also have robust back-up systems that enable islanding from the impacts of grid failures It is also important to ensure that key grid components are available in the event of emergencies Utilities have robust supply chains and inventory management systems that help ensure that spare transformers including the stocking of interchangeable spare transformers 178 the ordering of conventional spares in advance and the early retirement of conventional transformers for use as spares Conventional spares are typically used for planned replacements or individual unit failures but these transformer spares can also be used as emergency spares Under this approach the spares are identical to those transformers that are to be replaced and often stored at the substation next to existing transformers—which allows for quick energization without the transformer being moved The close proximity of such spares to the existing transformers can lead to potential high-intensity and low-frequency physical attacks or weather events Some utilities retain retired transformers to repurpose them as emergency spares 179 These are transformers that have retired but not failed which would allow their use as temporary spares until a new transformer is manufactured and transported 180 Utilities also use mobile transformers and substations to temporarily replace damaged assets much in the way that mobile power is used for resilience and repowering efforts Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-49 Chapter IV Ensuring Electricity System Reliability Security and Resilience Nuclear Regulatory Commission Requirements The Nuclear Regulatory Commission has issued several cyber and physical security regulations for nuclear power plants covering cybersecurity plans response and recovery strategies from aircraft crashes and training for security personnel among other measures For example 10 Code of Federal Regulations § 73 54 stipulates that licensees provide “…high assurance that digital computer and communication systems and networks are adequately protected against cyber-attacks…” Each nuclear power plant must submit a cybersecurity plan and implementation schedule which is then reviewed by the Nuclear Regulatory Commission 181 Additionally the Nuclear Regulatory Commission is also required to conduct “force-onforce” exercises at nuclear power plants at least once every three years These security exercises deploy a mock adversary force attempting to penetrate a plant’s critical locations and simulate damage to target safety components These exercises provide an evaluation of power plant security and identify deficiencies in security strategy plans or implementation When these deficiencies are identified additional security measures must be promptly implemented 182 These regulations have led to significant investments by nuclear power plant operators Some utilities retain retired transformers to repurpose them as emergency spares These are transformers that have retired but not failed which would allow them to be used as temporary spares until a new transformer is manufactured and transported 183 Utilities also use mobile transformers and substations to temporarily replace damaged assets “A mobile substation includes a trailer switchgear breakers emergency power supply and a transformer with enhanced cooling capability These units enable the temporary restoration of grid service while circumventing damaged substation equipment allowing time to repair grid components Mobile transformers are capable of restoring substation operations in some cases within 12–24 hours ”184 Finally utilities preparing for response after cyber disruptions are also taking measures to build redundancies for cyber infrastructure Some of these measures include building back-up control centers for full functionality and developing independent secured control mechanisms that would provide limited vital functions during an emergency 185 NERC CIP standards require utilities to maintain back-up energy management systems to manage bulk electric system generation and transmission assets 186 Equipment Constraints on Speedy Restoration Large Power Transformers The shortage of critical electrical equipment can cause significant delays for power restoration Specifically the loss of multiple large power transformers LPTs may overwhelm the system and cause widespread power outages possibly in more than one region increasing vulnerability and the potential for cascading failures Replacement of multiple failed LPTs is a challenge due to the cost and complex and lengthy process involving the procurement design manufacturing and transportation of this equipment These processes can take months depending on the size and specifications of the needed LPTs even under an accelerated schedule and normal transportation conditions Utilities mitigate the risk of losing LPTs through several strategies including adopting measures to prevent or minimize damage to equipment purchasing and maintaining spare transformers conventional spares identifying a less critical transformer on their system that could be used as a temporary replacement provisional replacement transformer and or setting up contracts to procure a transformer through a mutual assistance agreement or participation in an industry sharing program There are currently three key industry-led transformer-sharing programs in the United States—NERC’s Spare Equipment Database program Edison Electric Institute’s Spare Transformer Equipment Program and SpareConnect Another program Recovery Transformer developed a rapidly deployable prototype transformer designed to replace the most common high-voltage transformers which DHS successfully funded in partnership with Electric Power Research Institute and completed in 2014 187 As of December 4-50 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 2016 three additional programs—Grid Assurance Wattstock and Regional Equipment Sharing for Transmission Outage Restoration commonly referred to as RESTORE —are in development QER 1 1 recommendations noted that DOE should “analyze the policies technical specifications and logistical and program structures needed to mitigate the risks associated with the loss of transformers ”188 In December 2015 Congress directed DOE to develop a plan to establish a strategic transformer reserve in consultation with various industry stakeholders in the FAST Act To assess plan options DOE commissioned Oak Ridge National Laboratory to perform a technical analysis that would provide data necessary to evaluate the need for and feasibility of a strategic transformer reserve The objective of the study was to determine if after a severe event extensive damage to LPTs and lack of adequate replacement LPTs would render the grid dysfunctional for an extended period several months to years until replacement LPTs could be manufactured DOE's recommendations will be published in the report to Congress in early 2017 Grid Analytics and Resilience Both grid reliability and resilience increasingly depend on highly granular data about what is happening on grids in real time Data analysis is an important aspect of today’s grid management but the granularity speed and sophistication of operator analytics must increase as greater distribution system complexity occurs Regional differences may matter but the core analytic engines that must be developed and configured for grid operator use will be the same across regions and systems Figure 4-13 Information Drives Solution Sophistication which Drives New Benefit Realization for Grids189 Grid information systems are expected to evolve over time growing increasingly autonomous and selfmanaging Increased autonomy and self-management also involves increased system integration which amplifies the complexity systems and requires a degree of human-machine interdependence that is unprecedented for grid operations Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-51 Chapter IV Ensuring Electricity System Reliability Security and Resilience Smart Grid and System Resilience The installment and implementation of advanced meters and smart grid technology can make significant contributions to system resilience Advanced smart grid systems can be used to expedite information flow remotely monitor demand performance and quality of service enhance system efficiency and improve outage detection and restoration by identifying the location and description of damaged equipment Realtime system monitoring can support hourly pricing and reactive power and or DR programs which allow utilities to make same-day operational decisions near-term forecasts and scenario evaluations Historical data coupled with predictive modeling of extreme weather events and the related effects on electric infrastructure can also be used to inform management decisions identify areas of greatest risk ascertain system vulnerabilities allocate resources and help prioritize investments Still system managers need better real-time information about system trends and changes including the growth in VERs the rise of the “prosumer ” two-way electricity and information flows and real-time load management data—which means that demands on and expectations of SCADA systems are only increasing Grid modernization requires changes in operational systems and processes and in the way that system planners design for grid evolution Critical to smart grid realization is systems engineering to determine the requirements for ICT infrastructure which includes how latency factors communications delays and bandwidth requirements are embedded in operations to accommodate the proliferation of intelligent assets from relays to whole substations to automated customer DR controls that grid operators can access and use Fortunately as the complexity of the electricity system increases so do computer- and network-based capabilities The growing electricity-ICT interdependence is enabled in part by new technologies such as sensors and software that can provide greater situational awareness of grid conditions and operational efficiencies although much more work is needed 190 Large volumes of data are however unwieldy and developing additional ways to translate data into usable and timely information is essential Networks are evolving to include cloud computing and IoT technologies to help reduce costs increase efficiencies and increase system integration 191 192 Smart meters synchrophasors and other devices have also been deployed across the grid Even electromechanical devices like voltage regulators are adopting digital control interfaces On transmission networks SCADA systems traditionally have been used to monitor and control power systems by measuring grid conditions every 2 to 4 seconds Synchrophasor technology which addresses the lack of situational awareness provided by conventional instrumentation uses high-resolution phasor measurement units PMUs that provide time-synchronized data at a rate of more than 30 times per second to detect destabilizing network oscillations that would otherwise be undetectable Strategically located PMUs connected by high-speed communications networks provide grid operators with wide-area visibility to better detect system disturbances improve the grid’s efficiency and prevent or more quickly recover from outages In 2009 there were 166 PMUs in the United States—there are now over 1 700 PMUs located around the country see Figure 4-14 193 The impact of this deployment is that it now takes 16 milliseconds for PMUs in the Western Interconnect to send signals over a dedicated fiber-optic system to transmission operators in control centers throughout the system—a system that covers western North America from Mexico to western Canada from east of the Rockies to the Pacific Ocean 4-52 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 4-14 Phasor Measurement Units Technologies that Enable Superfast Network Management across Large Interconnected Systems Are Being Deployed to Improve Grid Operations194 Note the concentration of phasor measurement units PMUs in regions and interconnected systems where ISOs and RTOs dominate transmission service PMU deployment can be interpreted as a first mover in the development of smart grids and as evidence that upstream transmission systems are advancing more consistently and at a faster pace toward smart grid realization than local distribution systems although recent rate cases and public utility budgets for larger investor-owned utilities and public power indicate that smart grid investments are beginning to ramp up quickly However it should not be assumed that PMU deployment at the distribution level will mirror that at the transmission level because distribution smart grid deployment is much more complex in scale and scope Note that the Western Interconnect is in gray Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-53 Chapter IV Ensuring Electricity System Reliability Security and Resilience The electricity sector has also been relying on a variety of redundant communications networks for operations since its inception Internet Protocol-based communications networking systems—whether fiber-optic radio or other means for conveying data—can be owned by utilities or provided by telecommunication firms Utilities have invested heavily in these ICT networks over the last decade in part spurred by funding Congress provided through ARRA Roughly one-third of customers are connected to the distribution grid by the 60 million smart meters that serve as an essential building block to grid digitization 195 Smart meters send data to utility control systems every 15–60 minutes through communications networks and can provide information back to customers in real time often through the Internet These meters enable remote meter reading connections and disconnections and they allow for improved outage management and restoration During Superstorm Sandy smart meters reduced PECO Energy’s restoration time by 2–3 days Florida Power and Light has developed a tablet-based application for its field crews using AMI and geographic information systems data to improve emergency response this was recently used to increase the speed of power recovery after Hurricane Matthew Smart meters have an additional benefit—they give customers price information that enables them to respond to market conditions and reduce their electricity bills States and RTOs ISOs will continue in their traditional regulatory roles as the system evolves Given the increasing technical sophistication of grid operations state regulatory staff may need additional support from the Federal Government in evaluating technical proposals from utilities as they seek to modernize their grids Of concern are grid security standards across distribution delivery services Proactive planning should be considered as well as emergency response The impetus to invest in mitigation and preparedness may only occur following a catastrophe but proactive investments can prevent catastrophe and ultimately benefit ratepayers in the long term However distribution utilities face various challenges to implementing cybersecurity measures including outdated legacy equipment budgetary constraints workforce readiness and technology availability Recent electricity response exercises demonstrate the nascent status of coordinated industry and government efforts to jointly respond to potential cyber incidents The electricity industry has a long history of employing mutual assistance agreements to recover from most disruptions and the Nation would benefit from the development of appropriate mechanisms for addressing cybersecurity disruptions Underinvestment in Research Development Demonstration and Deployment and Implications for System Resilience This chapter has emphasized the importance of resilience to overall grid reliability From an investment perspective high grid reliability is a key factor in the treatment by investors of utilities both public and private as low risk investments with predictable returns Analysis suggests that in an increasingly complex grid management environment more focused investments are needed to ensure continued high system reliability and resilience Future investments must focus on innovations that help mitigate new sources of system disruption including VERs extreme weather and physical and cyber attacks these investment must occur in an environment that does not necessarily favor increased utility funds being used for research development demonstration and deployment RDD D Despite existing RDD D funding and activity in the electricity sector there is systemic underinvestment in RDD D of technologies as described in 3 Building a Clean Electricity Future Also private industry serving the electricity sector lacks incentives for investments in infrastructure resilience in part due to uncertainties in emerging risks 196 Utilities acquiring resilience assets and solutions face rate proceedings that have an inherently conservative perspective on new technologies and approaches which limits the ability to test new approaches in a timely manner and move to deploy successful efforts at an accelerated pace compared to traditional electricity sector norms The lack of incentives and preference for existing methods constrains the innovation options that are pursued and tested then enter the innovation 4-54 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 process supply chain These characteristics drive the need for additional Federal RDD D opportunities to improve the resilience of electricity systems as well as system security rapid response and recovery from disruptions Entities that operate distribution systems—the grid components most critical to reliability security and resilience—operate almost universally on the basis of cost-of-service The combination of stable revenues and low operational risk enables these entities—investor-owned utilities Munis Coops and other entities—to acquire capital at lower rates see Figure 4-15 Investors view these entities as relatively lowrisk investments compared with other electricity sector opportunities that face more competitive pressures As the operational characteristics of the industry evolve traditional utility returns may not be compelling for investors if sector transformations cause utilities to take on more or different types of risks New types of regulatory structures may be needed to provide appropriate incentives to plan for an increasingly uncertain and more complex risk environment as well as incorporate new approaches and technologies which enable the kind of resilience investments that may be needed but not otherwise funded Figure 4-15 Cost of Equity by Company Type and Size for Sampled Power Sector Companies 197 Regulated utilities with their predictable revenues and low risks tend to be viewed as safe investments exhibiting a low cost of equity compared to the rest of the sector As the industry addresses increasing risks and uncertainties existing regulatory structures may evolve to meet risk appetite Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-55 Chapter IV Ensuring Electricity System Reliability Security and Resilience Planning Is Essential for System Reliability and Resilience The responsibility for maintaining and improving grid reliability and resilience resides with a complex mix of entities with overlapping and sometimes inadequate jurisdictional responsibilities which include Federal and state agencies and regulatory bodies regional and national reliability organizations and multiple utilities with various business models There are many existing planning platforms for reliability planning that are well understood by utilities stakeholders and other responsible entities New value-added planning contributions can help grid operators make tradeoffs among multiple investment options strengthen the system and help ensure resilience and reliability which are needed for transforming a dramatically changing electricity system Rigorous tradeoff analysis implies and includes rigorous risk analysis Planning elements that should be added to existing platforms to accommodate system changes challenges threats and opportunities include the following    Regional integrated resource planning that includes both T D Integration of end-to-end options for optimal resource mix and operational integrity into existing planning Analyses with proposals for how to mitigate vulnerabilities In many parts of the country investor-owned utilities conduct integrated resource planning in accordance with state requirements that were established through legislation or regulatory actions While more than half of states in the Nation have integrated resource planning requirements other states have adopted Long-Term Procurement Planning or other similar processes 198 199 Only a small number of distribution utilities conduct planning200 in response to state policies 201 aiming to increase resilience to extreme weather events or stressful system conditions Also with few exceptions very few utilities take emerging threats from climate202 203 or cyber attacks into consideration when conducting integrated resource planning and distribution planning 204 In most cases cybersecurity efforts are often funded out of the overall rate base This means that funding for cybersecurity comes at the expense of profit or other investment needs which may have a disproportionate budgetary impact on smaller distribution utilities In rarer cases distribution utilities have a separate security recovery factor in their rate structure Integrated Planning Considerations The changing role of the consumer that drives the transformation of distribution also drives a need for new distribution planning approaches and tools to effectively integrate DERs into the grid and to understand the benefits and costs for developing forward-looking investment plans New solutions like smart inverters bring important issues to center stage like whether such solutions can be fully valued prior to deployment Because consumer preferences and needs are changing faster than the pace of grid planning there may be misalignment of operating circumstances Whatever investments are planned are likely to require revisions as actual events diverge from what is planned in advance Continued and rapid changes on the customer side of the meter may require adjustments in regulatory processes to assist grid owners and operators in keeping systems up to date Methods are under development in leading states e g California and New York to incorporate DERs and the growing role of “prosumers” -- consumers that produce power for the grid and third parties into the distribution system planning processes Important considerations for the development if such methods should include hosting capacity of distribution feeders for DERs and probabilistic DER growth scenarios as well as balance utility investments in system upgrades versus the services provided by DERs 4-56 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 e g in energy supply supply load balancing storage and support of both frequency and voltage regulation These planning processes will need sufficient transparency to permit all stakeholders including DER service providers to participate in supporting long-term capacity and energy requirements Contractual provisions between utilities and DER service providers will need to be established to ensure grid reliability and security which might benefit from the development of standard offer DER contracts As capacity and energy are increasingly being delivered at the distribution system level distribution- and transmission-level planning will need to be integrated Integrated Probabilistic Planning as an Emerging Tool Typically reliability decisions are based on a deterministic binary decision—a new facility is approved if it resolves a violation of a reliability standard In contrast economic decisions are based on a scenario framework where the expected value of a facility is evaluated across a range of likely scenarios The changing system topology uncertain regulatory frameworks decentralized market decisions and evolving vulnerabilities introduce economic and reliability uncertainties and risks that cannot be adequately assessed through a deterministic framework Probabilistic risk assessment PRA methodologies offer a framework to consider underlying uncertainties and risks PRA methods in transmission planning are still at a research stage and are not implemented widely Currently PRA is used to model topological changes such as variations in renewable generation levels variations in load level due to weather and DER output generation and transmission equipment performance variations in hydro-generation and physical threats like weather 205 However considerable barriers to implementation of PRA approaches in transmission planning include the following       Tradition of planning for worst-case scenarios using a deterministic approach Lack of industry-wide accepted approach for reliability indices in PRA framework Lack of standardization and availability of historic reliability data Lack of qualified workforce skillset and awareness of PRA approaches Lack of modeling tools for implementing PRA methodologies Lack of commercial tools for system security assessment under PRA framework 206 The Grid of the 21st Century The electricity sector’s long history is one of managing continuous albeit slow change while sustaining the same high reliability year in and year out The stock of the sector is incrementally refreshed as needed but changes highlighted in this chapter and other chapters of QER 1 2 call attention to several factors that place new emphasis on the sector’s effort to sustain high reliability security and resilience A transformed 21st-century grid is likely to be one that invests more in flexibility and resilience to achieve the same desired outcome that is the prime directive of grid operators—sustained high-service reliability How the grid is managed depends on the capabilities built into the stock of assets that make up the endto-end supply chain but managing real-time operational flows also requires specific systems and processes to continuously succeed The complexity of grid operations requires grid control tools that enable granular visibility and certain operational algorithms that help grid operators stay on top of second-to-second and millisecond-to-millisecond changes The era of enhanced grid operations through artificial intelligence is here Execution however must occur in a context that assiduously assures deflection of cyber attacks that could cripple grids it must also occur through market mechanisms to help value and ensure cost-effective outcomes State and Federal regulatory bodies and policymakers play key roles in helping ensure system integrity safety and the ongoing financing of the electricity sector Planning which is central to ensuring long-term Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-57 Chapter IV Ensuring Electricity System Reliability Security and Resilience stock and flow integrity must evolve as the sector itself evolves More robust modeling improved risk analysis and better optimization realization at the two-way interface of information and energy flows between consumers and grid operators are important improvements that are likely to be significant contributors to enabling a transformation that ensure today’s service reliability and quality can continue if not improve This is the state of sector grid management as the Nation continues its march deeper into the 21st century The scope of transformation required to adapt to new security concerns coupled with the organic evolution of a sector that is qualitatively changing as consumers have more direct and indirect influence on grid reliability are non-trivial costs that must be financed and paid for There are many ways to facilitate transformation and assist grid operators and other stakeholders in the sector in adapting to the sector’s changing physical and cyber “topography ” QER 1 2 turns now to addressing the “how to” question in the final chapter where recommendations designed to assist the Nation in maintaining a highly reliable electricity sector are mapped for consideration by policymakers and sector leaders alike 4-58 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Endnotes 1 Governments of the United States and Canada Joint United States-Canada Electric Grid Security and Resilience Strategy Washington DC Executive Office of the President of the United States of America and Government of Canada December 2016 https www whitehouse gov sites whitehouse gov files images Joint_US_Canada_Grid_Strategy_06Dec2016 pdf 2 The White House “Presidential Policy Directive -- Critical Infrastructure Security and Resilience ” White House Office of the Press Secretary February 12 2013 http www whitehouse gov the-press-office 2013 02 12 presidential-policy-directivecritical-infrastructure-security-and-resil 3 Alfred Berkeley and Mike Wallace A Framework for Establishing Critical Infrastructure Resilience Goals National Infrastructure Advisory Council October 2010 https www dhs gov xlibrary assets niac niac-a-framework-for-establishingcritical-infrastructure-resilience-goals-2010-10-19 pdf 4 Energy Information Administration “Electric power sales revenue and energy efficiency Form EIA-861 detailed data files 2015 ” Energy Information Administration released November 21 2016 https www eia gov electricity data eia861 5 “Reliability Indicators ” North American Electric Reliability Corporation accessed December 28 2016 http www nerc com pa RAPA Pages ReliabilityIndicators aspx 6 Energy Information Administration “Electric power sales revenue and energy efficiency Form EIA-861 detailed data files 2015 ” Energy Information Administration released November 21 2016 https www eia gov electricity data eia861 7 Joseph H Eto and Kristina Hamachi LaCommare Tracking the Reliability of the U S Electric Power System An Assessment of Publicly Available Information Reported to State Public Utility Commissions Berkeley CA Lawrence Berkeley National Laboratory October 2008 LBNL-1092E 16 http eetd lbl gov publications tracking-the-reliability-of-the-us-el 8 Joseph H Eto Kristina H LaCommare Michael D Sohn and Heidemarie C Caswell Evaluating the Performance of the IEEE Standard 1366 Method for Identifying Major Event Days IEEE Transactions on Power Systems PP no 99 2016 doi 10 1109 TPWRS 2016 2585978 9 Joseph H Eto Kristina H LaCommare and Michael D Sohn “Increasing Variability in SAIDI and Implications for Identifying Major Events Days” paper presented at the Institute of Electrical and Electronics Engineers Power Energy Society General Meeting 2014 National Harbor Maryland July 30 2014 http grouper ieee org groups td dist sd doc 201408%20Increasing%20Variability%20in%20SAIDI%20 Implications%20for%20Identifying%20MEDs-%20Joseph%20Eto pdf 10 Energy Information Administration “EIA data show average frequency and duration of electric power outages ” Today in Energy September 12 2016 http www eia gov todayinenergy detail php id 27892 11 “Foundational Metrics Analysis ” Grid Modernization Laboratory Consortium accessed December 28 2016 https gridmod labworks org projects foundational-metrics-analysis 12 Alexandra von Meier Challenges to the Integration of Renewable Resources at High System Penetration Berkeley CA California Institute for Energy and Environment May 2014 CEC‐500‐2014‐042 5 http uc-ciee org downloads CEC-5002014-042 pdf 13 EPSA Analysis Deloitte “Utility Risk Mitigation Strategies ” 27–28 forthcoming 14 IPCC Intergovernmental Panel on Climate Change Renewable Energy Sources and Climate Change Mitigation Summary for Policymakers and Technical Summary IPCC 2012 ISBN 978-92-9169-131-9 19 https www ipcc ch pdf specialreports srren SRREN_FD_SPM_final pdf 15 Richard Perez Benjamin L Norris and Thomas E Hoff The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania Napa CA Clean Power Research November 2012 http mseia net site wp-content uploads 2012 05 MSEIAFinal-Benefits-of-Solar-Report-2012-11-01 pdf 16 Alexandra von Meier Challenges to the Integration of Renewable Resources at High System Penetration Berkeley CA California Institute for Energy and Environment May 2014 CEC‐500‐2014‐042 1 http uc-ciee org downloads CEC-5002014-042 pdf Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-59 Chapter IV Ensuring Electricity System Reliability Security and Resilience 17 The White House Incorporating Renewables into the Electric Grid Expanding Opportunities for Smart Markets and Energy Storage Washington DC Executive Office of the President of the United States June 2016 https www whitehouse gov sites default files page files 20160616_cea_renewables_electricgrid pdf 18 L Bird M Milligan and D Lew Integrating Variable Renewable Energy Challenges and Solutions Golden CO National Renewable Energy Laboratory September 2013 NREL TP-6A20-60451 http www nrel gov docs fy13osti 60451 pdf 19 Alexandra von Meier Challenges to the Integration of Renewable Resources at High System Penetration Berkeley CA California Institute for Energy and Environment May 2014 CEC‐500‐2014‐042 5 http uc-ciee org downloads CEC-5002014-042 pdf 20 Michael A Berger Liesel Hans Kate Piscopo and Michael D Sohn Exploring the Energy Benefits of Advanced Water Metering Berkeley CA Lawrence Berkeley National Laboratory Energy Analysis and Environmental Impacts Division Energy Technologies Area August 2016 LBNL 1005988 https eetd lbl gov sites all files lbnl-1005988 pdf 21 NERC North American Electric Reliability Corporation Glossary of Terms Used in NERC Reliability Standards Atlanta GA NERC updated November 28 2016 http www nerc com files glossary_of_terms pdf 22 National Renewable Energy Laboratory “Big Fast and Flexible Grid Operation for Efficient Variable Renewable Integration” webinar presented on October 11 2016 https cleanenergysolutions org training flexible-grid-operations-variablerenewable-integration 23 California Independent System Operator CAISO Quantifying EIM Benefits 2016 Q2 Report Folsom CA CAISO July 28 2016 8 https www caiso com Documents ISO-EIMBenefitsReportQ2_2016 pdf 24 Jaquelin Cochran Paul Denholm Bethany Speer and Mackay Miller Grid Integration and the Carrying Capacity of the U S Grid to Incorporate Variable Renewable Energy Golden CO National Renewable Energy Laboratory 2015 NREL TP-6A2062607 https energy gov epsa downloads grid-integration-and-carrying-capacity-us-grid-incorporate-variable-renewableenergy 25 Kevin Porter Kevin Starr and Andrew Mills Variable Generation and Electricity Markets Reston VA Utility VariableGeneration Integration Group March 2015 http uvig org wp-content uploads 2015 05 VGinmarketstableApr2015 pdf 26 DOE Department of Energy Wind Vision A New Era of Wind Power in the United States Washington DC DOE 2015 85 http www energy gov sites prod files WindVision_Report_final pdf 27 Timothy Peet “Do Not Exceed DNE Dispatch Impacts for Intermittent Resources” PowerPoint presented as part of Independent System Operator New England WebEx broadcast May 3 2016 slide 11 https www iso-ne com staticassets documents 2016 05 20160503-webinar-dne-dispatch-impacts-for-ipr pdf 28 Jon Lowell “Resource Dispatchability Requirements Improving Price Formation and Efficient Dispatch” PowerPoint presented for Nepool Markets Committee October 8 2015 slide 5 https www iso-ne com staticassets documents 2015 10 a09_iso_presentation_10_08_15_1 pptx 29 Jon Lowell “Resource Dispatchability Requirements Improving Price Formation and Efficient Dispatch” PowerPoint presented for Nepool Markets Committee October 8 2015 slide 10 https www iso-ne com staticassets documents 2015 10 a09_iso_presentation_10_08_15_1 pptx 30 “Do Not Exceed Dispatch DNE Project ” Independent System Operator New England accessed December 21 2016 https www iso-ne com participate support customer-readiness-outlook do-not-exceed-dispatch 31 Independent System Operator ISO New England ISO New England Inc and New England Power Pool Market Rule 1 Revisions to Increase Resource Dispatchability Docket No ER17-68-000 ISO New England October 2016 2 https www isone com static-assets documents 2016 10 er17-68-000 pdf 32 Federal Energy Regulatory Commission “Order Accepting Proposed Tariff Revisions ” Docket Nos ER17-68-000 and ER17-68001 4 https www ferc gov CalendarFiles 20161209170835-ER17-68%20-000 pdf 33 California Independent System Operator CAISO “RE California Independent System Operator Corporation Docket No ER16___-000 Tariff Amendment to Implement Flexible Ramping Product Folsom CA CAISO June 2016 4 http www caiso com Documents Jun242016_TariffAmendment-FlexibleRampingProduct_ER16-2023 pdf 34 California Independent System Operator CAISO “RE California Independent System Operator Corporation Docket No ER16___-000 Tariff Amendment to Implement Flexible Ramping Product Folsom CA CAISO June 2016 4 http www caiso com Documents Jun242016_TariffAmendment-FlexibleRampingProduct_ER16-2023 pdf 4-60 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 35 California Independent System Operator CAISO “RE California Independent System Operator Corporation Docket No ER16___-000 Tariff Amendment to Implement Flexible Ramping Product Folsom CA CAISO June 2016 1 http www caiso com Documents Jun242016_TariffAmendment-FlexibleRampingProduct_ER16-2023 pdf 36 SPP Southwest Power Pool 2016 Wind Integration Study Little Rock AR SPP January 2016 17 https www spp org documents 34200 2016%20wind%20integration%20study%20 wis %20final pdf 37 Southwest Power Pool SPP Market Monitoring Unit State of the Market Report Sring 2016 Little Rock AR SPP Market Monitoring Unit June 2016 33 https www spp org Documents 39211 SPP_QSOM_2016Spring pdf 38 SPP Southwest Power Pool 2016 Wind Integration Study Little Rock AR SPP January 2016 6 https www spp org documents 34200 2016%20wind%20integration%20study%20 wis %20final pdf 39 SPP Southwest Power Pool 2016 Wind Integration Study Little Rock AR SPP January 2016 17 https www spp org documents 34200 2016%20wind%20integration%20study%20 wis %20final pdf 40 SPP Southwest Power Pool 2016 Wind Integration Study Little Rock AR SPP January 2016 38 https www spp org documents 34200 2016%20wind%20integration%20study%20 wis %20final pdf 41 Northwest Power and Conservation Council Seventh Northwest Conservation and Electric Power Plan Northwest Power and Conservation Council February 2016 2–4 https www nwcouncil org media 7149940 7thplanfinal_allchapters pdf 42 Northwest Power and Conservation Council Proposed Draft of Sixth Power Plan Mid-Term Assessment Report Portland OR Northwest Power and Conservation Council December 2012 20 https www nwcouncil org media 30112 2012_13 pdf 43 Northwest Power and Conservation Council Seventh Northwest Conservation and Electric Power Plan Portland OR Northwest Power and Conservation Council February 2016 2–4 https www nwcouncil org media 7149940 7thplanfinal_allchapters pdf 44 Department of Energy DOE Hydropower Vision A New Chapter for America’s First Renewable Electricity Source Oak Ridge TN DOE 2016 DOE GO-102016-4869 https energy gov sites prod files 2016 10 f33 Hydropower-Vision10262016_0 pdf 45 Department of Energy DOE Hydropower Vision A New Chapter for America’s First Renewable Electricity Source Oak Ridge TN DOE 2016 DOE GO-102016-4869 https energy gov sites prod files 2016 10 f33 Hydropower-Vision10262016_0 pdf 46 Department of Energy DOE Hydropower Vision A New Chapter for America’s First Renewable Electricity Source Oak Ridge TN DOE 2016 DOE GO-102016-4869 https energy gov sites prod files 2016 10 f33 Hydropower-Vision10262016_0 pdf 47 EPSA Analysis Lawrence Berkeley National Laboratory “Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ” forthcoming 48 William Parks Kevin Lynn Carl Imhoff Bryan Hannegan Charles Goldman Jeffery Dagle John Grosh et al Grid Modernization Multi-Year Program Plan Washington DC Department of Energy November 2015 2 https energy gov sites prod files 2016 01 f28 Grid%20Modernization%20Multi-Year%20Program%20Plan pdf 49 “Pioneer Regional Partnerships ” Grid Modernization Laboratory Consortium https gridmod labworks org pioneerregional-partnerships 50 Erdal Kara “Renewable integration and direction of the US electricity markets ” Energy Central December 23 2015 http www energycentral com c um renewable-integration-and-direction-us-electricity-markets 51 “All Reliability Standards ” North American Electric Reliability Corporation accessed December 28 2016 http www nerc com pa Stand Pages AllReliabilityStandards aspx jurisdiction United%20States 52 DHS Department of Homeland Security Strategic Principles for Securing the Internet of Things IoT Version 1 0 Washington DC DHS November 15 2016 https www dhs gov sites default files publications Strategic_Principles_for_Securing_the_Internet_of_Things-2016-1115FINAL pdf 53 Red Mountain Insights Utility Energy Storage Market Forecast to 2020 August 2014 ISBN 978-1-62484-002-9 http redmountaininsights com Utility-Energy-Storage-Market-Forecast-to-2020-I3550 54 Southern California Edison Company “2016 Aliso Canyon Energy Storage Request for Offers and Design Build and Transfer Request for Proposals ” Bidders Conference presentation given June 2 2016 19 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-61 Chapter IV Ensuring Electricity System Reliability Security and Resilience https scees accionpower com _scees_1601 doccheck asp doc_link _scees_1601 docs ES 2016 documents b Bidders Conference 20160602 ACES RFO-RFP Bidders Conference Presentation Upload Version pdf 55 “SDG E 2016 Preferred Resources Local Capacity Requirement Request for Offers ” San Diego Gas Electric accessed January 4 2017 http www sdge com procurement 2016PrefResourcesLCRRFO 56 Public Utilities Commission of the State of California Resolution E-4798 2016 3 http docs cpuc ca gov PublishedDocs Published G000 M165 K861 165861595 PDF 57 Public Utilities Commission of the State of California Resolution E-4798 2016 7 http docs cpuc ca gov PublishedDocs Published G000 M165 K861 165861595 PDF 58 Public Utilities Commission of the State of California Resolution E-4798 2016 5 http docs cpuc ca gov PublishedDocs Published G000 M165 K861 165861595 PDF 59 Gavin Bade “Inside construction of the world’s largest lithium ion battery storage facility ” Utility Drive December 6 2016 http www utilitydive com news inside-construction-of-the-worlds-largest-lithium-ion-battery-storage-faci 431765 60 D Hart and A Sarkissian Deployment of Grid-Scale Batteries in the United States Washington DC Department of Energy Office of Energy Policy and Systems Analysis 2016 3 61 FERC Federal Energy Regulatory Commission Assessment of Demand Response Advanced Metering Staff Report Washington DC FERC 2015 https www ferc gov legal staff-reports 2015 demand-response pdf 62 NERC North American Electric Reliability Corporation 2015 Long-Term Reliability Assessment Version 1 1 Atlanta GA NERC 2016 http www nerc com pa RAPA ra Reliability%20Assessments%20DL 2015LTRA%20-%20Final%20Report pdf 63 “2019 2020 RPM Base Residual Auction Results ” PJM accessed October 20 2016 http www pjm com media marketsops rpm rpm-auction-info 2019-2020-base-residual-auction-report ashx 64 EPSA Analysis L Schwartz M Wei W Morrow J Deason S Schiller G Leventis S Smith et al “Electricity End Uses Energy Efficiency and Distributed Energy Resources Baseline ” 268 forthcoming 65 FERC Federal Energy Regulatory Commission A National Assessment of Demand Response Potential Staff Report Washington DC FERC June 2009 xii https www ferc gov legal staff-reports 06-09-demand-response pdf 66 “Frequently Asked Questions How many smart meters are installed in the United States and who has them ” Energy Information Administration accessed December 13 2016 http www eia gov tools faqs faq cfm id 108 t 3 67 Energy Information Administration “Electric power sales revenue and energy efficiency Form EIA-861 detailed data files 2015 ” Energy Information Administration released November 21 2016 https www eia gov electricity data eia861 68 DOE Department of Energy 2014 Smart Grid System Report Report to Congress Washington DC DOE August 2014 http energy gov sites prod files 2014 08 f18 SmartGrid-SystemReport2014 pdf 69 Energy Information Administration “Electric power sales revenue and energy efficiency Form EIA-861 detailed data files 2013–2015 ” Energy Information Administration released November 21 2016 https www eia gov electricity data eia861 70 Federal Energy Regulatory Commission FERC Assessment of Demand Response Advanced Metering Staff Report FERC December 2015 https www ferc gov legal staff-reports 2015 demand-response pdf 71 California Public Service Commission CPUC California’s Distributed Energy Resources Action Plan Aligning Vision and Action Discussion Draft September 29 2016 CPUC 2016 http www cpuc ca gov uploadedFiles CPUC_Public_Website Content About_Us Organization Commissioners Michael_J _P icker 2016-09-26%20DER%20Action%20Plan%20FINAL3 pdf accessed December 13 2016 72 L Evers “Massachusetts DPU Says Time of Use Pricing Will Be the Default for All Customers ” Smart Grid Legal News June 26 2014 http www smartgridlegalnews com regulatory-concerns-1 massachusetts-dpu-says-time-of-use-pricing-will-be-thedefault-for-all-customers 73 “System Reliability Program ” State of Rhode Island Office of Energy Resources accessed December 13 2016 http www energy ri gov reliability 74 Gavin Bade “Updated Supreme Court Upholds FERC Order 745 Affirming Federal Role in Demand Response ” UtilityDIVE January 25 2016 http www utilitydive com news supreme-court-upholds-ferc-order-745-affirming-federal-role-indemand-resp 412668 4-62 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 75 A Chiu A Ipakchi A Chuang B Qiu B Hodges D Brooks E Koch et al Framework for Integrated Demand Response DR and Distributed Energy Resources DER Models v 1 3 Houston TX North American Energy Standards Board November 2009 www naesb org pdf4 smart_grid_ssd111709reqcom_pap9_a1 doc 76 FERC Federal Energy Regulatory Commission Assessment of Demand Response Advanced Metering Staff Report Washington DC FERC December 2015 https www ferc gov legal staff-reports 2015 demand-response pdf 77 California Independent System Operator “Expanding Metering Telemetry Options – Phase 2 June 10 2015 ” presented at stakeholder web conference June 17 2015 https www caiso com Documents AgendaPresentationDistributedEnergyResourceProvider-DraftFinalProposal pdf 78 Alexandra von Meier Challenges to the Integration of Renewable Resources at High System Penetration Berkeley CA California Institute for Energy and Environment May 2014 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Kristov Distribution Systems in a High Distributed Resources Future Planning Market Design Operation and Oversight Berkeley CA Lawrence Berkeley National Laboratory October 2015 https emp lbl gov sites all files FEUR_2%20distribution%20systems%2020151023 pdf 83 Energy Information Administration “Monthly Energy Review ” Table 7 2 Energy Information Administration accessed December 28 2016 https www eia gov totalenergy data monthly 84 NERC North American Electricity Reliability Corporation 2015 Long-Term Reliability Assessment version 1 1 Atlanta GA NERC 2016 1 http www nerc com pa RAPA ra Reliability%20Assessments%20DL 2015LTRA%20-%20Final%20Report pdf 85 FERC Federal Energy Regulatory Commission “Essential Reliability Services and the Evolving Bulk-Power System—Primary Frequency Response ” 18 C F R § 35 issued November 17 2016 https www ferc gov whats-new commmeet 2016 111716 E-3 pdf 86 “California Energy Commission – Tracking Progress ” California Energy Commission updated August 19 2015 accessed accessed December 28 2016 http www energy ca gov renewables tracking_progress documents resource_flexibility pdf 87 Edison Electric Institute QER Public Stakeholder Comments Pg 10 88 National Research Council Terrorism and the Electric Power Delivery System Washington DC The National Academies Press 2012 http www nap edu openbook php record_id 12050 89 Richard Campbell Weather-Related Power Outages and Electric System Resilience Congressional Research Service August 28 2012 R42696 http www fas org sgp crs misc R42696 pdf 90 EPSA Analysis M Finster J Phillips and K Wallace “Front-Line Resilience Perspectives The Electric Grid ” Argonne National Laboratory May 11 2016 91 EPSA Analysis Kristina LaCommare Peter Larsen and Joseph Eto Evaluating Proposed Investments in Power System Reliability and Resilience Preliminary Results from Interviews with Commission Staff Lawrence Berkeley National Laboratory 2016 92 Mindi Farber-DeAnda Matthew Cleaver Carleen Lewandowski and Kateri Young Hardening and Resilience U S Energy Industry Response to Recent Hurricane Seasons Washington DC Department of Energy Office of Electricity Delivery and Energy Reliability August 2010 http www oe netl doe gov docs HR-Report-final-081710 pdf 93 B L Preston S N Backhaus M Ewers J A Phillips J E Dagle C A Silva-Monroy A G Tarditi J Looney and T J King Jr Resilience of the U S Electricity System A Multi-Hazard Perspective Department of Energy forthcoming Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-63 Chapter IV Ensuring Electricity System Reliability Security and Resilience 94 B L Preston S N Backhaus M Ewers J A Phillips J E Dagle C A Silva-Monroy A G Tarditi J Looney and T J King Jr Resilience of the U S Electricity System A Multi-Hazard Perspective Department of Energy forthcoming 95 B L Preston S N Backhaus M Ewers J A Phillips J E Dagle C A Silva-Monroy A G Tarditi J Looney and T J King Jr Resilience of the U S Electricity System A Multi-Hazard Perspective Department of Energy forthcoming 96 Peter Larsen Kristina LaCommare Joseph Eto and James Sweeney Assessing Changes in the Reliability of the U S Electric Power System Berkeley CA Office of Electricity Delivery and Energy Reliability Lawrence Berkeley National Laboratory 2015 https emp lbl gov sites all files lbnl-188741_0 pdf 97 DOE Department of Energy Year-in-Review 2015 Energy Infrastructure Events and Expansions Washington DC DOE Office of Electricity Delivery and Energy Reliability 2016 http energy gov sites prod files 2016 06 f32 2015-YIR-05122016 pdf 98 Federal Emergency Management Agency FEMA Hurricane Sandy FEMA After-Action Report FEMA 2013 https www fema gov media-library-data 20130726-1923-25045-7442 sandy_fema_aar pdf 99 DOE Department of Energy Comparing the Impacts of Northeast Hurricanes on Energy Infrastructure Washington DC DOE Office of Electricity Delivery and Energy Reliability April 2013 http energy gov sites prod files 2013 04 f0 Northeast%20Storm%20Comparison_FINAL_041513b pdf 100 FEMA Federal Emergency Management Agency Hurricane Sandy FEMA After-Action Report FEMA 2013 6 https www fema gov media-library-data 20130726-1923-25045-7442 sandy_fema_aar pdf 101 DHS Department of Homeland Security Energy Sector-Specific Plan Washington DC DHS 2015 https www dhs gov sites default files publications nipp-ssp-energy-2015-508 pdf 102 Joseph Eto How Reliable Is Transmission Compared to Distribution and What Do Power Interruptions Really Cost Customers ” paper presented at National Association of Regulatory Utility Commissioners Winter Committee Meeting Washington DC February 14–17 2016 103 EPSA Analysis of DOE OE-417 DOE Electric Emergency Incident and Disturbance Report https www oe netl doe gov oe417 aspx 104 EPSA Analysis of DOE OE-417 DOE Electric Emergency Incident and Disturbance Report https www oe netl doe gov oe417 aspx and NOAA Historical Hurricane Tracks - GIS Map Viewer https www climate gov maps-data dataset historical-hurricane-tracks-gis-map-viewer 105 Deke Arndt and Brad Pugh “NOAA Climate Science Services Monthly Climate Update” National Oceanic and Atmospheric Administration Monthly Climate Webinar June 16 2016 https www ncdc noaa gov sotc briefings 201606 pdf 106 Kate M Larsen John W Larsen Michael Delgado Whitney Herndon and Shashank Mohan Assessing the Effect of Rising Temperatures The Cost of Climate Change to the US Power Sector New York NY Rhodium Group 2016 30 107 James Dirks Willy Gorrissen John Hathaway et al Impacts of Climate Change on Energy Consumption and Peak Demand in Buildings A Detailed Regional Approach accepted for publication in Energy doi 10 1016 j energy 2014 08 081 108 Climate at a Glance U S Time Series National Oceanic and Atmospheric Administration National Centers for Environmental Information accessed July 29 2016 http www ncdc noaa gov cag time-series us 109 Kate M Larsen John W Larsen Michael Delgado Whitney Herndon and Shashank Mohan Assessing 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forthcoming 125 National Research Council Terrorism and the Electric Power Delivery System Washington DC The National Academies Press 2012 https www nap edu read 12050 chapter 1 126 Jerry Melillo Terese T C Richmond and Gary Yohe Climate Change Impacts in the United States The Third National Climate Assessment U S Global Change Research Program 2014 http nca2014 globalchange gov 127 NERC North American Electric Reliability Corporation “Physical Security Reliability Standard Implementation” agenda excerpt from Member Representatives Committee Informational Session January 16 2015 http www nerc com pa CI PhysicalSecurityStandardImplementationDL CIP014%20Summary%20for%20January%2016%202015%20MRC%20Informational%20Session%20 Agenda%20Excerpt pdf 128 NERC North American Electric Reliability Corporation “Physical Security Reliability Standard Implementation” agenda excerpt from Member Representatives Committee Informational Session January 16 2015 http www nerc com pa CI 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142 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming 143 Paul Stockton Superstorm Sandy Implications for Designing a Post-Cyber Attack Power Restoration System Laurel MD Johns Hopkins Applied Physics Laboratory 2016 NSAD-R-15-075 17 http www jhuapl edu ourwork nsa papers PostCyberAttack pdf 144 President’s Council of Advisors on Science and Technology Report to the President and Congress Designing a Digital Future Federally Funded Research and Development In Networking and Information Technology Washington DC Executive Office of the President 2010 https www whitehouse gov sites default files microsites ostp pcast-nitrd-report-2010 pdf 145 Staff of Congressmen Edward J Markey and Henry Waxman Electric Grid Vulnerability Industry Responses Reveal Security Gaps Washington DC House of Representatives 2013 28 https portal mmowgli nps edu c document_library get_file uuid b2f47e65-330e-4d89-adeee2ed58908927 groupId 10156 146 B L Preston S N 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Preliminary Results from Interviews with Commission Staff Lawrence Berkeley National Laboratory 2016 159 State of New York Public Service Commission “CASE 14-M-0101 - Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision Order Establishing the Benefit Cost Analysis Framework ” January 21 2016 4 January 4 2017 http www3 dps ny gov W PSCWeb nsf All C12C0A18F55877E785257E6F005D533E OpenDocument 160 DOE Department of Energy Office of Electricity Delivery and Energy Reliability “Clearpath IV – After Action Review Draft ” Key Findings #2 May 2016 161 PNNL Pacific Northwest National Laboratory Electricity Distribution System Baseline Report 50 PNNL 2016 PNNL-25178 162 U S -Canada Power System Outage Task Force Final Report on the August 14 2003 Blackout in the United States and Canada Causes and Recommendations U S -Canada Power System Outage Task Force 2004 http energy gov sites prod files oeprod DocumentsandMedia BlackoutFinal-Web pdf 163 DOE Department of Energy Hardening and Resilience U S Energy Industry Response to Recent Hurricane Seasons Washington DC DOE Office of Electricity Delivery and Energy Reliability 2010 http www oe netl doe gov docs HRReport-final-081710 pdf 164 EPSA Analysis M Finster J Phillips and K Wallace “Front-Line Resilience Perspectives The Electric Grid ” Argonne National Laboratory May 11 2016 31 165 Warren Wang and Sarah Pinter Dynamic Line Rating Systems for Transmission Lines Topical Report Smart Grid Demonstration Program Washington DC Department of Energy 2014 https www smartgrid gov files SGDP_Transmission_DLR_Topical_Report_04-25-14_FINAL pdf 166 Warren Wang and Sarah Pinter Dynamic Line Rating Systems for Transmission Lines Topical Report Smart Grid Demonstration Program Washington DC Department of Energy 2014 50–51 https www smartgrid gov files SGDP_Transmission_DLR_Topical_Report_04-25-14_FINAL pdf 167 National Academy of Sciences Disaster Resilience A National Imperative Washington DC The National Academies Press 2012 87 http www nap edu catalog php record_id 13457 168 EPSA Analysis “60-15 State Energy Resilience Framework ” 169 EEI Edison Electric Institute Understanding the Electric Power Industry’s Response and Restoration Process Washington DC EEI 2016 3 http www eei org issuesandpolicy electricreliability mutualassistance documents ma_101final pdf 170 White House “The Federal Response to Hurricane Katrina Lessons Learned ” February 2006 accessed September 13 2016 135 https georgewbush-whitehouse archives gov reports katrina-lessons-learned Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-67 Chapter IV Ensuring Electricity System Reliability Security and Resilience 171 FEMA Federal Emergency Management Agency Hurricane Sandy FEMA After-Action Report FEMA 2013 10 https www fema gov media-library-data 20130726-1923-25045-7442 sandy_fema_aar pdf 172 DOE Department of Energy Overview of Response to Hurricane Sandy-Nor’Easter and Recommendations for Improvement Washington DC DOE 2013 12 accessed September 13 2016 http energy gov sites prod files 2013 05 f0 DOE_Overview_Response-Sandy-Noreaster_Final pdf 173 Alice Lippert “The American Recovery and Reinvestment Act ” The ARRA EAP Energy Assurance Planning Bulletin Volume 3 Number 4 2012 http energy gov sites prod files October%202012%20Energy%20Assurance%20Planning%20Bulletin%20Volume%203%20N o%204 pdf 174 EPSA Analysis M Finster J Phillips and J Pillon “State Energy Resilience Framework ” Argonne National Laboratory forthcoming 175 NASEO National Association of State Energy Officials State Energy Assurance Guidelines v 3 1 NASEO 2009 https www naseo org data sites 1 documents publications State_Energy_Assurance_Guidelines_Version_3 1 pdf 176 Julia Philips Kelly Wallace Terence Kudo and Joseph Eto Onsite and Electric Power Backup Capabilities at Critical Infrastructure Facilities in the United States Argonne IL Argonne National Laboratory 2016 ANL GSS-16 1 https emp lbl gov sites all files onsite-and-electric-power-backup pdf 177 Julia Philips Kelly Wallace Terence Kudo and Joseph Eto Onsite and Electric Power Backup Capabilities at Critical Infrastructure Facilities in the United States Argonne IL Argonne National Laboratory 2016 ANL GSS-16 1 https emp lbl gov sites all files onsite-and-electric-power-backup pdf 178 Electric Power Research Institute Considerations for a Power Transformer Emergency Spare Strategy for the Electric Utility Industry Washington DC Department of Homeland Security September 2014 9 https www dhs gov sites default files publications RecX%20-%20Emergency%20Spare%20Transformer%20Strategy508 pdf 179 ICF International “Assessment of Large Power Transformer Risk Mitigation Strategies ” September 9 2015 forthcoming 180 ICF International “Assessment of Large Power Transformer Risk Mitigation Strategies ” September 9 2015 forthcoming 181 Mark Holt Anthony Andrews Nuclear Power Plant Security and Vulnerabilities Washington DC Congressional Review Service 2014 11 https fas org sgp crs homesec RL34331 pdf 182 “Frequently Asked Questions About Force-on-Force Security Exercises at Nuclear Power Plants ” Nuclear Regulatory Commission accessed August 1 2016 http www nrc gov security faq-force-on-force html 183 ICF International “Assessment of Large Power Transformer Risk Mitigation Strategies ” September 9 2015 forthcoming 184 DOE Department of Energy Hardening and Resilience U S Energy Industry Response to Recent Hurricane Seasons Washington DC DOE Office of Electricity Delivery and Energy Reliability August 2010 http www oe netl doe gov docs HR-Report-final-081710 pdf 185 Paul Stockton Superstorm Sandy Implications for Designing a Post-Cyber Attack Power Restoration System Laurel MD Johns Hopkins Applied Physics Laboratory 2016 NSAD-R-15-075 17 http www jhuapl edu ourwork nsa papers PostCyberAttack pdf 186 Paul Stockton Superstorm Sandy Implications for Designing a Post-Cyber Attack Power Restoration System Laurel MD Johns Hopkins Applied Physics Laboratory 2016 NSAD-R-15-075 19 http www jhuapl edu ourwork nsa papers PostCyberAttack pdf 187 “Recovery Transformer RecX ” Department of Homeland Security accessed March 9 2016 https www dhs gov scienceand-technology rec-x 188 DOE Department of Energy Office of Energy Policy and Systems Analysis EPSA Quadrennial Energy Review Energy Transmission Storage and Distribution Infrastructure Washington DC DOE EPSA 2015 http energy gov sites prod files 2015 04 f22 QER-ALL%20FINAL_0 pdf 189 U S Department of Energy Office of Energy Policy and Systems Analysis staff Adapted from IBM Intel ABB Siemens EIA and State Utility Proceedings 4-68 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 190 PNNL Pacific Northwest National Laboratory The Emerging Interdependence of the Electric Power Grid Information and Communication Technology Washington DC Department of Energy 2015 PNNL-24643 http www pnnl gov main publications external technical_reports PNNL-24643 pdf 191 “The Evolution of SCADA EMS GMS ” ABB Group accessed September 29 2016 http www abb us cawp db0003db002698 b372f131c1a54e5fc12572ec0005dcb4 aspx 192 H Lee Smith “A Brief History of the Electric Utility Automation Systems ” Electric Energy Magazine April 2010 39–44 193 Jose R Gracia Marcus A Young II D Tom Rizy Lawrence C Markel and Julia Blackburn Advancement of Synchrophasor Technology in Projects Funded by the American Recovery and Reinvestment Act of 2009 Washington DC DOE Office of Electricity Delivery and Energy Reliability 2016 http www energy gov sites prod files 2016 03 f30 Advancement%20of%20Sychrophasor%20Technology%20Report%20M arch%202016 pdf 194 DOE Department of Energy Advancement of Synchrophasor Technology Washington DC DOE 2016 Figure ES 1 vi https www smartgrid gov files 20160320_Synchrophasor_Report pdf 195 “Frequently Asked Questions ” EIA Energy Information Administration accessed January 4 2017 http www eia gov tools faqs faq cfm id 108 t 3 DOE Department of Energy 2014 Smart Grid System Report Washington DC DOE 2014 http energy gov sites prod files 2014 08 f18 SmartGrid-SystemReport2014 pdf 196 DOE Department of Energy Quadrennial Technology Review Washington DC DOE 2015 37 https energy gov sites prod files 2015 09 f26 Quadrennial-Technology-Review-2015_0 pdf 197 EPSA analysis of Bloomberg Market Data 198 Wilkerson J P Larsen and G Barbose “Survey of Western U S Electric Utility Resource Plans ” Energy Policy 66 2014 90– 103 http dx doi org 10 1016 j enpol 2013 11 029 199 R Wilson and B Biewald Best Practices in Electric Utility Integrated Resource Planning Examples of State Regulations and Recent Utility Plans Cambridge MA Synapse Energy Economics and the Regulatory Assistance Project 2013 5 http www synapse-energy com project best-practices-electric-utility-integrated-resource-planning 200 EPSA Analysis M Kintner-Meyer J Homer P Balducci M Weimar I Shavel M Hagerty N Powers Y Yang and R Lueken Valuation of Electric Power System Services and Technologies Pacific Northwest National Laboratory and The Brattle Group August 2016 201 Safeguarding California California Natural Resources Agency http resources ca gov climate safeguarding 202 Crystal Raymond Seattle City Light Climate Change Vulnerability Assessment and Adaptation Plan Seattle WA Seattle City Light 2015 http www seattle gov light enviro docs Seattle_City_Light_Climate_Change_Vulnerability_Assessment_and_Adaptation_Pl an pdf 203 PG E Pacific Gas and Electric Company Climate Change Vulnerability Assessment Sacramento CA PG E 2016 http www pgecurrents com wp-content uploads 2016 02 PGE_climate_resilience pdf 204 EPSA Analysis M Kintner-Meyer J Homer P Balducci M Weimar I Shavel M Hagerty N Powers Y Yang and R Lueken Valuation of Electric Power System Services and Technologies Pacific Northwest National Laboratory and The Brattle Group August 2016 205 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming 206 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 4-69 V The Electricity Workforce Changing Needs New Opportunities This chapter provides an overview of current and projected employment in and related to the electricity sector and it discusses options to assist workers and develop a workforce that has the skills to build maintain and operate the electricity system of the future The chapter begins with an overview of the current workforce and key trends that have shaped employment in this sector It then discusses the demographics of the sector including the underrepresentation of women and minorities in employment and leadership Next the chapter identifies challenges to replacing retiring workers the incompatibility of available worker skills and electricity workforce needs and possible approaches to developing a skilled workforce for future sector demands Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-1 Chapter V The Electricity Workforce Changing Needs New Opportunities Key Findings The broader changes in the electricity industry have created both new opportunities and new challenges for the electricity industry workforce Opportunities include new workforce potential in the renewable energy industry and information and communications technologies challenges include the skills gap for deploying and operating new technologies the shift in the geographic location of jobs and the need to recruit and retain an inclusive workforce The electricity industry is the dominant consumer of coal natural gas and renewable energy technologies so changes in electricity industry demand for these resources can cause regional and sectoral dislocations in these industries Each industry has distinctive workforce skills requirements and geographic concentrations so employment gains in one industry do not always translate to opportunities for workers affected by employment loss in other industries that may be geographically distant and require different skills           Over 1 9 million people are employed in jobs related to electric power generation and fuels while 2 2 million people are working in industries directly or partially related to energy efficiency 1 Job growth in renewable energy is particularly strong Employment in the solar industry has grown over 20 percent annually from 2013 to 2015 From 2010 to 2015 the solar industry created 115 000 new jobs In 2016 approximately 374 000 individuals worked in whole or in part for solar firms with more than 260 000 of those employees spending most of their time on solar There were an additional 102 000 workers employed at wind firms across the Nation The solar workforce increased by 25 percent in 2016 while wind employment increased by 32 percent 2 The oil and natural gas industry experienced a large net increase in jobs over the last several years adding 80 000 jobs from 2004 to 2014 3 Unlike coal production natural gas production is projected to increase over the coming decades under a business-as-usual scenario sustaining natural gas industry employment 4 5 Employment in the natural gas industry is regionally and temporally volatile 28 000 jobs were lost between January 2015 and August 2016 6 Shifts in locations pose challenges for employees and the economies of the areas where they live and work 7 Between 1985 and 2001 coal production increased 28 percent as industry employment fell by 59 percent due to efficiencies gained by shifting production from Appalachia to the West 8 9 In 2015 annual coal production was at its lowest level since 1986 and it is forecast to continue declining over the coming decades 10 11 Aside from a minor employment increase from 2000 to 2011 141 500 domestic coal jobs were lost between 1985 and 2016 and the industry shrank by 60 percent As of November 2016 according to BLS data the coal mining industry employs about 53 000 people 12 a Despite ongoing economic challenges in the Appalachian region the non-highway appropriated budget for the Appalachian Regional Commission ARC a Federally funded regional economic development agency has fallen from roughly $600 million in the early 1970s to around $100 million in the 1980s and remained roughly constant until 2016 The ARC budget recently increased from $90 million in fiscal year 2015 to nearly $150 million in fiscal year 2016 13 The Abandoned Mine Lands Reclamation Fund’s AML Fund’s inability to fully support the reclamation of lands disrupted by the coal mining industry has the potential to leave communities in regions with declining local revenues with polluted and unsafe lands and few means to repair the damage The AML Fund’s increased ability to support coal mine reclamation would provide local employment opportunities and help coal communities transition to new industries The continued fiscal difficulties of coal miner pensions threaten the solvency of the Pension Benefit Guaranty Corporation a Federal agency that insures private-sector pension funds and is funded out of insurance premiums paid by member funds Proliferation of information and communications technology and new technologies like distributed generation smart home devices and electric battery storage have led to new businesses and employment opportunities which will require a wide array of new skills 14 a The 2017 U S Energy and Employment Report records 74 084 jobs for Coal Fuels employment in March 2016 The BLS data from November 2016 is relied upon here to illustrate both the recent trends and the historical record over many decades 5-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017       5 1 The electricity industry will need a cross-disciplinary power grid workforce that can comprehend design and mange cyber-physical systems the industry will increasingly require a workforce adept in risk assessment behavioral science and familiarity with cyber hygiene 15 16 A dip in the number of electricity industry workforce training programs in the 1980s contributed to a currently low number of workers in the electric utilities able to move into middle and upper management positions—creating a workforce gap as the large number of baby boomers retire 17 Workforce retirements are a pressing challenge Industry hiring managers often report that lack of candidate training experience or technical skills are major reasons why replacement personnel can be challenging to find—especially in electric power generation 18 19 Electricity and related industries employ fewer women and minorities than the national average but have a higher proportion of veterans 20 21 Only 5 percent of the boards of utilities in the United States in 2015 include women and approximately 13 percent of board members among the top 10 publicly owned utilities were African American or Latino 22 23 Underrepresentation in or lack of access to science technology engineering and mathematics educational opportunities and programs contribute to the underrepresentation of minorities and women within the electricity industry From 1995 to 2013 the number of injuries per 100 employee-years in the electricity utility industry decreased from 4 7 to 1 3 24 However line workers continue to experience hazardous working conditions In 2014 electrical power line installers and repairers suffered 25 fatal work injuries—a rate of 19 per 100 000 full-time equivalent workers which is over five times the national fatal work injury rate 25 While data on energy sector workforce are improving there are still major shortcomings in the data availability precision and categorization of energy sector jobs 26 A Modern Workforce for the 21st Century Electricity Industry The evolving demands on the electricity industry are causing a number of workforce challenges for the electricity industry which include large shifts in skills needed and in geographic location of jobs a skills gap for deploying and operating newer technologies changes occurring during a period when the industry is facing high levels of retirements and challenges recruiting and retaining a workforce that reflects the gender and racial diversity of the Nation At the same time the evolution of the industry is also creating a number of new workforce opportunities including jobs in renewable energy natural gas and information and communications technology ICT The electricity sector's full potential will only be realized if its workforce is able to appropriately adapt and evolve to meet the needs of the 21st-century electricity system A skilled workforce that can build operate and manage this modernized grid infrastructure is an essential component for the sector’s development Addressing the workforce challenges identified here will create well-paying jobs that contribute to the economic health of local communities support the increased use of efficiency technologies reduce injuries and improve worker safety enable employees in the electricity industry to support a modernized 21stcentury energy system and ensure a resilient electricity system This chapter provides an overview of the composition of the electricity industry workforce as well as the challenges the sector faces in maintaining an adequate and skilled workforce for the 21st-century electricity system This chapter further examines how qualities and characteristics of the electricity workforce are shifting in light of the ongoing transformation of the energy sector and it provides an overview of how industry and government action can respond to challenges facing the industry Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-3 Chapter V The Electricity Workforce Changing Needs New Opportunities 5 2 Overview of the Electricity Industry Workforce The electricity system depends on a workforce that fills a diverse set of jobs—from the coal miner extracting fuel from the ground for electricity generation to the utility worker repairing a distribution line and everything in between The following section provides an overview of the number and types of jobs related to the electricity industry 5 2 1 Workforce Size The Bureau of Labor Statistics BLS reports that nearly half a million people are employed in electric power generation transmission and distribution see Table 5-1 27 Of the 290 000 employees in the electric power transmission and distribution subsector over a quarter million are employed with distribution companies There are an additional 600 000 jobs in extraction and mining industries though only a portion of those jobs are directly attributable to the electricity industry 28 Table 5-1 Direct Employment and Income in Industries Related to Electric Power Supply as Tracked by BLS 201529 Industry Sector Subsector Jobs Electric power generation Electric power transmission and distribution Electric power total Coal miningb Oil and gas extractionc 192 000 290 000 Percent Related to Electricity Industry 100 percent 100 percent Average Annual Income $116 000 $99 000 482 000 71 000 540 000 100 percent $106 000 80 percent $82 817 10 percent to $113 022 20 percent Mining and extraction total 611 000 Unknown $110 000 More than 80 percent of the coal mined in the United States goes to power production 30 The oil and gas extraction sector is not subdivided and includes many non-power uses About 35 percent of the natural gas and roughly 1 percent of petroleum usage in the United States is for power production 31 In addition to the 482 000 jobs in the electric power generation transmission and distribution subsectors BLS reports that 169 000 people are employed in the Power and Communication Line and Related Structures Construction industry Some of these employees work constructing transmission lines substations and power plants 32 The electricity industry is a dynamic industry with changing sources of employment and job categories As a result the direct employment figures captured by the BLS job categories provided in Table 5-1 do not include all employment related to the electricity industry particularly those related to construction solar wind and energy efficiency workers 33 In 2015 the Department of Energy published the first edition of the U S Energy and Employment Report USEER which provided a broader depiction of electricity industry employment than the BLS data based on supplemental employment surveys A second edition of the USEER published in January 2017 finds that about 862 000 people are employed in jobs related to electric power generation Another 1 082 746 are also employed in jobs related to fuels extraction and mining although not all of these are directly attributable to the electric power sector see Table 5-2 b c Includes supporting North American Industry Classification System NAICS industry categories Includes supporting NAICS industry categories 5-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table 5-2 Electric Power Generation and Fuels Extraction and Mining Employment Estimates by Technology First Quarter 201634 Technology Electric Power Generation Employment Estimates Fuels Extraction and Mining Employment Estimates Hydroelectric 65 554 Coal 86 035 74 084 Natural Gas 88 242 309 993 Nuclear 68 176 8 592 Solar 373 807 Wind 101 738 Geothermal 5 768 Bioenergy 7 980 104 663 Oil 12 840 502 678 Combined Heat and Power 18 034 Other 32 695 82 736 860 869 Total 1 082 746 The U S Energy and Employment Report USEER provides a broader accounting than the BLS data presented above and finds that as of the first quarter of 2016 over 800 000 people were employed in the electric power generation industry most of which are related to the construction and buildout of new solar and wind generation capacity Another 1 082 746 are also employed in jobs related to fuels extraction and mining although not all of these are directly attributable to the electric power sector As noted above over 80 percent of coal 35 percent of the natural gas and merely 1 percent of petroleum usage in the United States is for power production 35 USEER finds that the BLS estimates are particularly low for jobs associated with solar wind geothermal and biomass electric power generation 36 These low estimates result from classifying many jobs in these industries as construction or business and professional services employment For instance most solar company installers are classified as electrical contractors 37 Though BLS does not estimate employment in energy efficiency jobs USEER found that 2 2 million people are working in industries directly or partially related to energy efficiency—more than 2 5 times the number employed by electric power generation Of those 2 2 million 1 4 million are in the construction industry 38 Energy efficiency employment includes both the production of energy-saving products and the provision of services that reduce end-use energy consumption However USEER estimates only include work with efficient technologies or building design and retrofits They do not capture employment related to energyefficient manufacturing processes If process efficiencies were included estimates for the energy efficiency workforce would be even larger 5 2 2 Skills and Training The electricity industry offers diverse jobs which require a variety of skills Table 5-3 includes job descriptions and educational requirements for selected job categories across the utility portion of the electricity industry Traditional jobs such as lineman will continue to be needed but the increase of renewable energy as well as an increased ICT component to the electricity industry will change the skillset required for many jobs in the electricity system of the 21st century Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-5 Chapter V The Electricity Workforce Changing Needs New Opportunities Table 5-3 Typical Electricity Workforce Roles and Required Education or Training39 Power Plant Operator Technicians Transmission and Distribution Technicians Generation Pipefitters and Pipelayers Generation Power Engineers Job Description Responsible for the installation and repair of overhead and underground distribution and transmission lines poles transformers and other equipment Responsible for the maintenance and operation of all primary and auxiliary equipment required to generate electricity or meet natural gas customers' demands Responsible for the repair of both electrical and mechanical equipment This includes inspecting and testing electrical equipment in generating stations and substations Doctorate Masters Bachelors Associates Apprenticeship Job Category Lineman Vocational High School Required Education Responsible for the construction assembly maintenance and repair of steam boilers and boiler house auxiliary equipment Responsible for the installation and maintenance of pipe systems and related equipment for steam hot water heating sprinkling and industrial production and processing systems Focus on electrical systems equipment and facilities rather than on mechanical systems and other non-electrical systems involved in electric and natural gas energy services It includes people involved in planning research design development construction installation and operation of equipment facilities and systems for the safe reliable and economic generation transmission distribution consumption and control of electricity All Other Engineers Focus on non-electrical systems processes equipment and facilities involved in electric energy services It includes people involved in the planning research design development construction installation and operation of equipment facilities and systems for the safe reliable and economic generation supply transmission distribution consumption and control of electricity The electricity workforce includes several job categories each with specific educational requirements shown in orange The striped orange boxes show where a specific level of education is sometimes required or infrequently required One ongoing challenge for maintaining the electric industry workforce is the amount of time required to train new workers For example training to become a journeyman line worker can take up to 7 years 40 if enrollment in apprenticeships and training programs increases during a period of worker shortage the new employees would not be prepared for the full range of line worker duties for several years 41 The electricity industry appears to have made progress on maintaining a pipeline of skilled labor the number of preapprenticeship training programs has more than tripled since the 1990s 42 43 Furthermore skilled workers 5-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 coming from related industries—such as construction electricians—may not require as much training and would be ready for duty in a shorter timeframe In addition to the electricity workforce job categories shown in Table 5-3 the electricity industry also employs thousands of corporate services employees engaged in jobs such as customer service finance management and human relations Skills required in these jobs are often more transferable between industries and require less specialized electricity industry training Training Programs in the Electricity Industry between the 1980s and Today The economic outlook of an industry often determines the availability of training programs During the 1980s and 1990s the electricity industry experienced much lower demand growth than the decade before A conservative outlook on demand growth coupled with an increased focus on productivity in anticipation of impending industry deregulation led utilities to scale back hiring and internal training programs 44 The 1980s and 1990s also coincided with a shift away from technical education as the primary tool to train the next generation toward a larger emphasis on four-year college programs This shift further decreased the interest in technical and vocational training previously a main pillar of education for the electricity industry workforce which led to the closure of many technical high schools shrinking the pool of available applicants for the electricity industry even further 45 The future workforce is now educated through a variety of means including community colleges apprenticeship programs and certificate programs This has led to a lack of uniformity of standards and curricula which is a challenge for electric companies as they often have to retest skills to ensure that applicants have the necessary education While the 2000s have seen a rebuilding of some of the training and apprenticeship programs the dip in training programs in the 1980s contributed to fewer workers in middle management in the electric utilities—creating a gap as the large number of baby boomers retire 46 5 2 3 Electricity Utility Worker Health and Safety The electricity industry has made progress in improving workplace safety From 1995 to 2013 the number of injuriesd per 100 employee-years in electricity utilities decreased from 4 7 to 1 3 47 In 2015 the workplace injury rate across electricity generation transmission and distribution companies was slightly more than half the national rate 48 However line workers continue to experience hazardous working conditions In 2014 electrical power line installers and repairers suffered 25 fatal work injuries—a rate of 19 per 100 000 full-time equivalent workers which is over five times the national fatal work injury rate 49 For electricity utility workers the injury rate is highest among the 21–30-year-old age group at 3 7 percent see Figure 5-1 This segment only makes up 10 7 percent of the sector workforce but has higher rates of injury due to “fewer years of experience and a higher proportion of young workers employed in higher risk occupations performing physically demanding or higher risk tasks ”50 d Injury rates reported here are for injuries resulting in a worker missing at least one full day of work after the injury date Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-7 Chapter V The Electricity Workforce Changing Needs New Opportunities Figure 5-1 Injury Rates and Employee Age Group Distribution for Electricity Utilities 1995–201351 Overall injury rates are highest among the 21–30-year-old group although employees between 41 and 50 years of age comprise the largest group of employees with 32 9 percent Injury rates for electricity utilities are not only unevenly distributed by age group they also differ regarding the nature of the job Welders line workers and meter readers accounted for the highest proportion of injuries among all electricity power sector occupations 52 The specific causes of worker injuries and fatalities can be generally grouped into four categories a misunderstanding or non-compliance with safety concepts poor communication absence of leadership and or lack of experience and qualified employees 53 As the electricity sector modernizes there may be opportunities to leverage technological advances to improve worker safety and reduce rates of injury New equipment processes and infrastructure design can complement innovations in training practices to improve workplace safety in the electricity industry through reducing electrical exposures instances where utilities deploy crews and trucks as well as instances where crews work at elevated heights 5 2 4 Electricity Industry Workforce Inclusion The electricity and related resource extraction industries employ fewer women and minorities than the national average see Figure 5-2 Women constitute 22 percent of the electric power generation transmission and distribution industry workforce compared to 47 percent of the entire workforce African Americans constitute just 8 percent of the electricity workforce but are 12 percent of the workforce as a whole Oil and gas extraction construction and coal mining industries employ even fewer women and African Americans Asian Americans are not statistically represented in the coal mining industry and again lag the national average for the other industries surveyed here Latino employment in the construction industry is the only minority demographic that is higher than the national average for the population groups and industries included here 54 5-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 5-2 Electricity and Related Industry Employment Demographic Indicators 201555 The electricity industry ranks far below the national average in employment of women African Americans Asian Americans and Latinos The oil and gas extraction and coal mining industries have similar demographic characteristics The construction industry where energy efficiency jobs are mostly located has a higher percentage of employment of Hispanic or Latino Americans The lack of diversity in the electricity industry extends to the executive level as well—only 5 percent of the boards of utilities in the United States in 2015 include any women and approximately 13 percent of board members among the top 10 publicly owned utilities were African American or Latino 56 57 Veterans make up a slightly higher proportion of electricity industry jobs than their representation in the national workforce A recent study found that veterans make up 8 percent of the current workforce and 10 percent of new hires across the electricity utility natural gas utility and nuclear energy industries 58 The solar industry employed an estimated 16 835 U S veterans in 2015 and the percentages of veterans working as solar manufacturers solar installers and solar project developers each exceeded the total percentage of veterans in the broader national workforce 59 Underrepresentation in or lack of access to science technology engineering and mathematics STEM educational opportunities and programs contribute to the underrepresentation of minorities and women within the electricity industry For instance African American and Latino students are critically underrepresented in STEM programs in high schools and colleges and STEM education is often necessary for entry into many positions in the electricity sector Two-thirds of public high schools with a majority of African American students do not offer calculus and more than half do not offer physics 60 These curriculum deficits result in lower STEM college graduation rates among underrepresented communities In the 2013– 2014 school year African Americans and Latinos received only 7 2 percent and 9 5 percent of all STEM bachelor’s degrees respectively 61 While the renewable portion of the electricity industry is seeing dynamic job growth workforce inclusion in renewable energy also tends to lag behind the national average Women represented 24 percent of the solar workforce which is well below the national average workforce participation levels However the number of women in the solar industry has been steadily trending upward from 19 percent in 2013 This trend is reversed for African Americans and Latinos who are trending downward with African Americans comprising 5 2 percent of the solar workforce in 2015 down from 5 9 percent in 2013 and Latinos Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-9 Chapter V The Electricity Workforce Changing Needs New Opportunities accounting for 11 percent of the workforce in 2015 down from 16 percent in 2013 The number of veterans in the solar workforce is also trending downward—9 2 percent in 2013 and 8 1 percent in 2015 but it is still above the national average 62 5 3 Electricity Industry Workforce Challenges The electricity industry is facing several changes that present challenges for maintaining a skilled workforce New technologies require new and evolving skillsets for industry employees as high levels of retirees take with them industry experience and regional mismatches are emerging between the needed and available workforce These changes could create skills gaps for the industry and workforce as well as recruitment challenges in attracting appropriately trained and qualified employees The time required to train new qualified workers in the sector serves to limit the industry’s ability to respond to rapid shifts in the workforce and limit the employment appeal to prospective employees faced with alternative career options Workforce challenges facing the industry are exacerbated by the lack of robust reliable data and by forecasts on industry needs and workforce supply—especially as business models evolve Meanwhile new technologies like distributed generation smart home devices and electric battery storage have led to the proliferation of many new business job types and employment opportunities These new business models are expanding the definition of electricity industry jobs and they present new workforce development challenges related to skills transferability and uniform safety and security practices and services The electricity system of the 21st century will require an adaptable and flexible workforce with additional areas of expertise and capabilities than the current workforce The integration of variable renewable sources storage systems smart grid and demand management will require new training and skillsets Sector engineers need to have well-developed expertise in traditional topics such as electrical engineering while also possessing knowledge of information technology communications and other relevant topics Maintaining existing training programs for the legacy systems while also focusing on the skillsets of tomorrow’s workers will be a unique challenge As an example of these new workforce needs the increased ICT component in the smart grid of the 21st century requires a wide array of new and different skills 63 With the issue of cybersecurity increasingly at the forefront of electricity industry concern the industry will require a workforce adept in risk assessment and behavioral science as well as familiar with cybersecurity risk factors 64 A 2010 report from the President’s Council of Advisors on Science and Technology Designing a Digital Future highlighted challenges stemming from the lack of a dedicated and trained cross-disciplinary power grid workforce that can comprehend design and manage cyber-physical systems CPS 65 In the future the electricity industry faces dual challenges of growing a workforce with new requirements and qualifications while also competing with other industries that are demanding CPS trained workers Training curriculum and education in CPS remains nascent The shortage of CPS-trained workers could place constraints on the evolution of the 21st-century electricity system Addressing those ICT and sectoral skills challenges requires a strategic approach to talent management focused on upgrading skills for existing employees and recruiting new employees with needed skills 5 3 1 Electricity Industry Capacity Gaps Much of the utility and electricity sector workforce is nearing retirement The aging workforce of the electricity sector is not unique in the U S economy yet its specific skills requirements and the importance of the industry to national security and economic prosperity elevate the importance of its workforce management Electricity utility natural gas utility and nuclear generation industry surveys indicate that roughly 25 percent of employees will be ready to retire in the next 5 years 66 Noting demographic trends within the industry in 2006 the North American Electric Reliability Council NERC raised concerns about 5-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 worker and skills gaps among electricity industry employees stating that “industry action is urgently needed to meet the expected 25 percent increase in demand for engineering professionals by 2015 ”67 Spurred by this and other reports the industry has pursued multiple initiatives and programs to address the looming increase in demand for skilled workforce Although the industry has made some progress on recruiting and developing the next generation workforce through hiring see Figure 5-3 the capacity gap remains stubbornly persistent due to a workforce that continues to age recruitment difficulties a rapidly changing industry and specific training and certification needs 68 A recent industry study forecasts the need for 105 000 new workers in the smart grid and electric utility industry by 2030 but expects that only 25 000 existing industry personnel are interested in filling those positions 69 The remaining 80 000 employees in this supply-demand mismatch will need to be filled through recruiting and training However the industry is not expected to meet the forecasted need with its current recruitment and training rates 70 In one recent survey 43 percent of utilities surveyed stated that they see the aging workforce and the increased rate of retirements as one of their top three most pressing challenges 71 Figure 5-3 Age Distribution in Electric and Natural Gas Utilities in 2006 and 201472 The age distribution in electric and natural gas utilities has shifted between 2006 and 2014 reflecting both the higher proportion of the workforce that is nearing retirement and industry efforts to address the aging workforce by hiring younger employees 5 3 2 Electricity Industry Employee Recruitment Challenges As workers retire the electricity sector is experiencing challenges in hiring replacement personnel Industry hiring managers often report that lack of candidate training experience or technical skills are major reasons why replacement personnel can be challenging to find—especially in electric power generation 73 This lack of experience can in part be attributed to hiring slow-downs in the 1990s and 2000s that have resulted in a current shortage of mid-career professionals with the experience to take on supervisory roles see “Training Programs in the Electricity Industry between 1980 and Today” textbox 74 According to survey responses over half of employers in the Mid-Atlantic region report very high difficulty with hiring in the electric power and fuels transmission wholesale trade and distribution and storage subsector while no more than 32 percent of employers in other regions reported hiring difficulty in this field see Figure 5-4 The Mid-Atlantic region home to more than 40 million people and Washington D C Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-11 Chapter V The Electricity Workforce Changing Needs New Opportunities also reports among the highest rates of difficulty hiring in the energy efficiency and electric power generation and fuels industries 75 76 Figure 5-4 Percentage of Employers Reporting Very High Hiring Difficulty by Census Region and Subsector Q4 2015 77 Over half of employers in the Mid-Atlantic region report very high difficulty hiring in the electric power and fuels transmission wholesale trade and distribution and storage subsector while no more than 32 percent of employers in other regions reported hiring difficulty in this field The Mid-Atlantic also reports among the highest rates of difficulty hiring in the energy efficiency and electric power generation and fuels industries The employment supply and demand imbalance is already evident in the electric power transmission industry One analysis finds that 10 states were experiencing a shortage of worker for electric power transmission in 2014 The same analysis projects that the number of states that will experience a shortage of worker supply will grow to at least 12 by 2018 78 5 3 3 Training Capacity and Timeline One of the challenges for maintaining the electric sector workforce is the amount of time required to train new workers in order to respond to changing industry needs Even if enrollment in apprenticeships and training programs increased today sector employees would not be ready to enter the job market until several years from now For example initial training to become a fully educated lineworker is between 4 5 and 7 years 79 And due to the closure of many training programs in the 1980s because of lower need see “Training Programs in the Electricity Industry between 1980 and Today” textbox there is also a dearth of mid-career employees within the electricity sector that might otherwise fill these roles see Figure 5-3 80 5-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5 4 Electricity Industry Sectoral and Regional Variations Training Opportunities The electricity industry is the dominant consumer of coal natural gas and renewable energy technologies so changes in electricity industry demand for these resources can cause separate regional and sectoral dislocations in these industries Each industry has distinctive workforce characteristics skills requirements and geographic concentrations which means that employment gains in one industry do not always translate to opportunities to workers affected by employment loss in other industries that may be geographically distant and require different skills In many cases changes in the electricity industry result in new businesses and sources of employment especially with the growth of natural gas production and the renewable energy industry In other parts of the country where employment is heavily dependent on a single industry like coal the economic consequences of the shifts in the electricity industry can be significant employment in the coal mining industry has fallen by nearly 70 percent over the last three decades largely in rural America 81 Even in sectors experiencing long-term growth employment can be volatile the oil and natural gas extraction industry has lost about 14 percent of its workforce since the beginning of 2015 through August 2016 82 These changes in employment not only impact the labor force but also the communities in which they live work and contribute to funding public infrastructure and services like roads and schools While the shift from jobs in coal to natural gas and renewables is a recent example of job dislocation this issue is not limited to coal or to the energy industry as a whole Job dislocation has been and will continue to be a critical issue across many industries as the Nation’s economy grows and changes 5 4 1 Falling Demand for Coal Has Reduced Coal-Related Employment In 2015 the electricity industry consumed over 80 percent of domestically produced coal 83 Recent shifts away from coal for electricity generation and toward natural gas and renewable energy technologies— largely driven by recent reductions in natural gas prices and renewable generation costs—have sharply reduced overall coal demand over the past several years Annual coal production in 2015 was at its lowest level since 1986 84 Because of the reduction in electricity industry demand and other shifts in the economy coal production is forecast to continue declining over the coming decades see Figure 5-5 Coal production in the Appalachian region began falling in 1990 even as total U S coal production increased through 2007 The primary reason for coal’s reduced market share in Appalachia is its higher relative price compared to coal in the western United States in 2015 the price of coal from West Virginia was four times as much per ton as coal from Wyoming 85 Differences in mining efficiency and ownership cause the higher cost for Appalachian coal Mines in the West tend to be larger and use surface mining techniques which result in lower production expenses compared to the mix of underground and surface mining used in Appalachia 86 While most mining in Appalachia occurs on private lands 80 percent of coal production in the western United States occurs on Federal lands where companies pay lower royalties and fees 87 Appalachian coal’s relative economic disadvantage is forecast to continue for the coming decades see Figure 5-5 88 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-13 Chapter V The Electricity Workforce Changing Needs New Opportunities Figure 5-5 Historic and Projected Coal Production 1985–204089 90 Coal production in the United States peaked in 2008 after a period of decreasing production in Appalachia and increasing production in the West Production is forecast to continue to fall in the business-as-usual scenario shown here Coal mining jobs in the United States have declined over the last several decades Between 1985 and 2000 employment in the coal industry shrank nearly 60 percent During this period 105 500 domestic coal jobs were lost While national coal mining employment experienced a minor increase from 2000–2011 36 000 coal mining jobs were lost between 2011 and September 2016 a reduction of 40 percent e Of these losses nearly 90 percent were in the Appalachian region As of November 2016 the BLS reported employment of about 53 000f people in the coal mining industry see Figure 5-6 91 e 2011 is used as the base year for this comparison because it was the peak year for domestic coal production this century Since then coal mining jobs have been declining while natural gas and oil extraction jobs have been on the rise overall f The 2017 U S Energy and Employment Report records higher Coal Fuels employment numbers in comparison to BLS due to differences in terms categorizations and survey methods reporting 74 084 Coal Fuels jobs in March 2016 as shown in Table 5-2 The BLS data is relied upon here to illustrate both the recent trends and the historical record over many decades 5-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 5-6 Coal Industry Employment and Production January 1985–September 201692 93 Employment in the coal industry fell from 1985 through 2003 while production increased due to mechanization and a shift to western coal that has much higher labor productivity than Appalachian mines Over 23 000 jobs were lost between 2011 and 2015 nearly 90 percent of those losses were in the Appalachian region Note Data from 2010 to 2016 are quarterly extrapolated to annual estimates This loss of coal jobs can be attributed to increased efficiencies in mining and later a reduction in coal demand over the last several decades Between 1985 and 2001 coal production increased 28 percent as industry employment fell by 59 percent due to the increased efficiencies in the industry and by the shifting of production and lower sulfur coal produced by shifting production from Appalachia to the Western U S especially within the Powder River Basin 94 95 From 2001 to 2015 annual mining productivity in Appalachia ranged from 5 100 tons per employee to 8 100 tons per employee in the West it ranged from 35 000 tons per employee to 45 000 tons per employee 96 Coal miners provide crucial economic support for communities in which they live which tend to be concentrated in rural areas In 2011 at the peak of coal mining employment in this century coal mining jobs accounted for over 5 percent of employment in 64 U S counties and over 20 percent in 12 counties not including indirect employment supporting the coal sector Fifty of the counties with over five percent coal mining employment experienced job losses between 2011 and 2015 97 98 The total net job loss in the 64 counties was over 20 000 jobs with 12 counties losing over 10 percent of their entire workforce 99 100 These counties that have been hit particularly hard by recent employment declines are located primarily in central and northern Appalachia see Figure 5-7 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-15 Chapter V The Electricity Workforce Changing Needs New Opportunities Figure 5-7 Change in Coal Mining Employment by County 2011–2015101 Nationally 161 counties experienced coal industry job losses between 2011 and 2015 when over 20 000 jobs were lost in total The most severe job losses are concentrated in central and northern Appalachia where some regions have a high proportion of their workforce in the coal industry Coal mining is a major economic driver within many rural communities Coal mining jobs pay well relative to other available occupations in those areas miners earn roughly 40 percent more than the average wage for all U S workers 102 The combination of relatively high income and employment concentration means that many local economies are very sensitive to changes in the industry 103 A reduction in jobs lowers municipal tax revenues severely impacting support for public schools local infrastructure and public services Less spending at local businesses depresses the local economy causing more unemployment and further reducing public revenue There are 1 8 million people living in Appalachian counties with ongoing coal-mining activity and classified as “economically distressed” or “economically at risk” by the Appalachian Regional Commission ARC based on a combined index of unemployment poverty and income levels g 104 These counties are heavily concentrated in West Virginia eastern Kentucky and southern Ohio largely overlapping with regions facing coal industry employment losses see Figure 5-8 g The Appalachian Regional Commission ranks all U S counties according to a combined index of unemployment poverty and income and considers counties in the bottom decile for the country to be ‘distressed’ and the bottom quartile to be ‘at risk ’ 5-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 5-8 Economic Wellbeing of Appalachian Counties 2016105 There are 1 8 million people living in Appalachian counties with ongoing coal-mining activity and classified as “economically distressed” or “economically at risk” by the Appalachian Regional Commission The Appalachian Regional Commission ranks all U S counties by a combined index of unemployment poverty and income It considers counties in the bottom decile for the country to be ‘distressed’ and the bottom quartile to be ‘at risk’ More than 45 percent of the mining workforce is over 45 years old 106 For these employees finding alternative employment—especially at a similar income level—can be more challenging than for younger workers with more time ahead of them in the labor force 107 Underfunded pension and retiree healthcare obligations put these older workers retired miners and their communities in a particularly vulnerable position Federal efforts to support economically vulnerable communities and workers are discussed in later sections of this chapter Coal-miner pension funds are in financial distress putting retirees and surviving dependents in jeopardy of losing their planned retirement and healthcare benefits As coal employment has declined mine-worker pensions have some of the highest ratios of retirees to current workers of any pension programs in the United States which can drain the principal balance of the fund faster than it can be replenished The largest coal-miner pension fund United Mine Workers of America’s 1974 Pension Plan has 90 000 beneficiaries with only 8 000 working members still contributing to the fund—a 9 percent ratio of contributing workers to active beneficiaries 108 On average 37 percent of pension participants in Federally guaranteed multiemployer pensions are still working and contributing to their pension funds 109 The financial crisis and the bankruptcy of three of the largest coal mining companies in the United States between 2014 and 2016 have further imperiled these pension and healthcare programs These bankruptcies have allowed several large coal companies including Patriot Coal and Alpha Natural Resource to default on some or all of their obligations to these pension and healthcare funds 110 111 The miners’ pension funds are insured by the Pension Benefit Guaranty Corporation PBGC a Federal corporation analogous to the Federal Deposit Insurance Corporation and funded out of insurance premiums paid by member pension Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-17 Chapter V The Electricity Workforce Changing Needs New Opportunities funds The 1974 Pension Plan is so large that its default could lead to the insolvency of the PBGC imperiling retirements across the economy 112 Retiree health insurance programs have no similar Federal guarantee 113 Typically a single employer providing retiree health insurance is not required to pre-fund such obligations and in bankruptcy may be relieved of the obligation to fulfill its commitments 114 Historically the Federal Government has intervened to support coal miner retiree benefits in times of crisis through legislative and administrative actions 115 President Obama’s fiscal year FY 2016 and FY 2017 budgets included the transfer of Federal funds to protect the health and pension benefits of retired coal miners and their families as did bipartisan legislation in the Senate and House However the 114th Congress adjourned at the end of 2016 without passing this legislation and instead only extended healthcare coverage to retired miners and their dependents through the term of the Continuing Resolution April 28 2017 Continued reductions in coal production in Appalachia are also frustrating efforts to protect community health and the environment against land and water degradation from pre-1977 mining activities Since 1977 the coal industry has taken responsibility for the remediation of the lands and waters affected by mining as required by the Surface Mining Control and Reclamation Act of 1977 SMCRA However prior mining activity has left an estimated $4 billion of high-priority health-related and safety-related issues with abandoned mine lands in the United States116 and up to $9 billion of abandoned coal mine sites needing restoration 117 SMCRA created the Abandoned Mine Lands Reclamation Fund AML Fund to reclaim land damaged before 1977 using funds collected through a small per-ton fee—currently less than 1 percent of retail value—on all coal mined in the United States 118 Declining coal production has reduced funding for abandoned mine reclamation AML Fund receipts have declined from a peak in 2007 of $305 million to $197 million in 2016 119 At this revenue level it would take 20 years to fully fund the high-priority health-related and safety-related coal mine reclamation in the United States—the majority located in Appalachia The current formula for distributing AML Fund resources poorly matches regional needs Until 2023 SMCRA requires that 50 percent of the fees collected for AML Fund restoration are spent in the state in which they are collected Most U S coal is produced in the western United States where little need for pre-1977 mine reclamation remains Meanwhile disbursements to Appalachia the historic heart of coal production where mine reclamation needs are most severe have fallen due to declining coal production in that region The President’s FY 2016 and FY 2017 budgets proposed to invest $1 billion over five years from the remaining unappropriated balance in the AML Fund The proposal would allow states and Native American tribes across the country to accelerate efforts to clean up abandoned mine lands and polluted waters then link those projects with economic development strategies to revitalize coal communities impacted by the downturn of the coal industry In February 2016 the Revitalizing the Economy of Coal Communities by Leveraging Local Activities and Investing More commonly known as RECLAIM Act H R 4456 a bill consistent with the President’s proposal sponsored by Congressman Hal Rogers was introduced in the House and gained a bipartisan group of 27 co-sponsors by the end of the 114th Congress 5-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Coal Power Plant Closures From 2011 to 2015 345 coal-fired generators were shut down and 20 were added resulting in a loss of 33 gigawatts or 10 percent of the 2011 coal-fired generating capacity 120 121 The number of power plants reporting coal as their primary fuel source dropped from 589 to 427 122 Not all of these numbers represent closures of entire plants—many plants have multiple generating units and some units have been switched to natural gas rather than shut down retaining much of their workforce Nevertheless fossil fuel electric power generation employment fell 5 percent from 2011–2015 123 The loss of power plant jobs in rural communities can have effects similar to those described above for coal mining job losses Several factors help mitigate though not eliminate the effects of coal-fired power plant job losses 124 125 For example in 2012 American Electric Power began planning for plant closures affecting 570 jobs that would occur by 2016 As closures occurred almost half of the employees moved to positions at other plants Some retraining occurred but many employees received similar jobs Other positions remained vacant after normal retirements and many employees were retirement eligible at the time of closure due to the advanced age of the workforce 126 These closures still affected workers and communities but the utility’s planning efforts lessened the effect 5 4 2 Natural Gas Employment Trends Reflect Shale Boom Beginning around 2009 the influx of new supply from unconventional sources reduced natural gas prices to pre-2000 low price levels see Figure 5-9 127 Low prices relative to coal increased demand for natural gas from the electric power system—now the largest consumer of natural gas in the United States From 2008 to 2015 electricity generation from natural gas rose 51 percent 128 Figure 5-9 Average Monthly Cost of Delivered Fossil Fuels in the U S Electricity Industry 19932015129 Natural gas prices fell back to pre-2000 prices around 2008 This price drop and increase in the price of coal has made natural gas more competitive than coal in many regions of the country The changing relative prices of natural gas and coal and the subsequent change in generation mix led to a large net increase in jobs over the last decade The natural gas and oil extraction industry added about 80 000 jobs from 2004 to 2014 130 When support activities pipeline construction and associated machinery Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-19 Chapter V The Electricity Workforce Changing Needs New Opportunities construction are included this number increases to about 400 000 131 Recently natural gas and oil extraction employment has declined by around 25 000 jobs between early 2015 through November of 2016 132 However unlike coal production natural gas production is projected to increase over the coming decades sustaining natural gas industry employment see Figure 5-10 133 134 Figure 5-10 Historic and Projected Annual Coal and Natural Gas Production 1985–2040135 136 137 Coal production is projected to decline in the coming years in the business-as-usual scenario shown here while natural gas production is forecast to increase substantially These changes imply the employment prospects within these two industries Though the oil and gas industry has lost a substantial number of jobs in 2015 and 2016 the industry is forecast to increase production in the long term Despite potential employment growth from the expected increase in natural gas production in the coming years jobs in the natural gas industry pose several workforce challenges As revealed by the recent shale boom jobs in the oil and natural gas production industry shift location regularly—posing challenges for employees and the economies of the areas where they live and work 138 Rapid influx of workers can strain local housing availability and subsequent outflows of workers can leave partially constructed housing in its wake 139 While average incomes in oil and gas extraction are high see Table 5-1 job security is low as the industry fluctuates in response to global markets and as extraction regions experience boom and bust cycles 140 These rapid transitions are characteristic of the oil and natural gas industry while changes in the coal industry have played out over longer periods 5 4 3 Sector Employment in Renewable Energy Continues to Grow In 2016 the traditional energy sector employed approximately 4 1 million workers Of these electric power generation and fuels technologies directly employed more than 1 9 million workers And job growth in the renewable energy industry remains strong Wind power constituted the largest portion of generation capacity additions in 2015 141 Employment in the solar industry has grown over 20 percent annually from 2013 to 2015 From 2010 to 2015 the solar industry created 115 000 new jobs In 2016 just under 375 000 individuals worked in whole or in part for solar firms with more than 260 000 of those employees spending most of their time on solar There were an additional 108 000 workers employed at wind firms across the Nation The solar workforce increased by 25% in 2016 while wind employment increased by 32% 142 Of the 375 000 individuals working in solar nearly half of these are in the solar installation industry requiring distinct skillsets compared to traditional generation technologies Solar industry jobs are relatively high 5-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 paying compared to all jobs nationally with a significant range of earnings across occupations within the industry Currently renewable energy jobs are geographically concentrated according to high-value wind and solar resources and state-specific renewable portfolio standards over half of all the solar jobs in the United States are found in only four states see Figure 5-11 143 Figure 5-11 Distribution of Solar Industry Jobs top and Wind Industry Jobs bottom by State 2015 144 145 Solar industry jobs are primarily located on the coasts while wind industry jobs are prevalent in the central United States Together wind and solar employment cover much of the United States Job locations are driven by resource availability and by state policies Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-21 Chapter V The Electricity Workforce Changing Needs New Opportunities 5 4 4 Coal Natural Gas and Renewable Energy Shifts Create a Mismatch in Electricity System Job Opportunities While there is potential for long-term job growth in renewable energy and natural gas extraction and further declines in coal mining these jobs are not substitutable Several factors prevent the employment opportunities in the renewables and natural gas industries from reaching those communities most affected by erosion of job opportunities  The geographic locations of electricity sector job losses and gains are currently not well correlated Job losses from the coal mining industry are largely concentrated in southern Appalachia while growth in natural gas extraction and the renewable energy industry is located elsewhere  Income discrepancies between industries is a challenge for reemployment The median wage for solar installers is higher than the median wage across all occupations It remains more than 20 percent less than the median wage for coal mining jobs 146 and solar manufacturing jobs in the United States pay 10 percent less than U S manufacturing jobs generally 147 While there is an income discrepancy between coal and solar jobs solar jobs are rapidly increasing Retraining and creating more localized solar jobs is important  The skills required for employment vary between industries experiencing growth and those experiencing decline Natural gas and coal jobs are largely extraction focused whereas wind and solar energy jobs are significantly manufacturing-based almost 50 percent for wind and 40 percent for solar and construction-based 20 percent for wind and almost 30 percent for solar 148 Significant retraining would be required to transition between these jobs Employment in the Nuclear Industry The U S Energy and Employment Report finds that 68 000 people are employed in the nuclear generation industry 149 Employment in the industry may fall as nuclear power plants retire Since 2013 six nuclear reactors have shut down prior to the end of their existing licenses Closure announcements have been made for another 10 reactors to cease operation over the next 10 years 8 will close before the end of their current operating licenses Recent state actions pending any legal challenges may enable four of those to continue operating However the net employment impact of plant closures may be mitigated through employee retirements and transfers to other power generation facilities 150 Construction of nuclear power plants requires thousands of skilled construction workers 151 To ensure an adequate supply of highly trained workers for the construction of nuclear reactor units at Plant Vogtle in Georgia North America’s Building Trades Unions and Georgia Power created an apprenticeship-readiness training program under the Helmets to Hardhats initiative The program focuses on increasing workforce inclusiveness and providing job opportunities to veterans 152 Employment in uranium production mining milling and processing has trended with production levels Though employment numbers are unknown prior to 1993 uranium production over the last two decades was a fraction of average annual production from 1960 to the early 1980s 153 The uranium production industry employed 625 people in 2015 down from a 21st-century peak of 1 563 in 2008 154 Employment trends in the uranium industry closely mirror resource prices these have fallen from a peak of over $100 per pound of triuranium octoxide U3O8 in 2007 to below $30 in 2015 Prices are anticipated to remain low due to growing inventories owned by nuclear power owners and operators Total inventories in 2015 were enough to fuel two years of nuclear power production at use-rate averages over the last decade 155 5-22 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5 4 5 Skills Training and Workforce Development Companies industry representatives and labor unions have pursued a variety of skills training and workforce development programs to overcome workforce skills deficiencies Many utilities operate their own line worker schools joint labor management apprenticeship programs and other training programs while others recruit from line worker training schools that offer introductory programs 156 Additional programs include a uniform nuclear curriculum program and a power plant technology program 157 In FY 2014 7 253 apprentices were enrolled in registered apprenticeship programs for line installer repairers line maintainers and line erectors 158 In 2006 the major industry trade associations and many leading companies formed the non-profit Center for Energy Workforce Development CEWD “CEWD was formed to help utilities work together to develop solutions to the coming workforce shortage in the utility industry It is the first partnership between utilities their associations contractors and unions to focus on the need to build a skilled workforce pipeline that will meet future industry needs ”159 Today CEWD includes the five major utility trade associations the industry’s two principal unions and more than 100 companies that employ over 90 percent of utility workers CEWD is organized through more than 30 state consortia that are focused on working with local educational institutions their union apprenticeship programs and other stakeholders to create a highquality diversified workforce Construction industry training programs are particularly important for energy efficiency Nationally North America’s Building Trades Unions operate over 1 600 Joint Apprenticeship Training Committees JATC with their construction employers These JATC’s train 74 percent of all construction apprentices in the United States at a cost of $1 3 billion annually 160 As the electricity industry relies increasingly on ICT components in creating a smart grid the labor intensity of the electricity grid of the 21st century may decrease Critically important industries that face similar challenges have already used redesigned work processes and innovative workforce practices to increase efficiency The increased use of technology—for example smart meters to reduce the need for meter readers smart grid components that isolate faults and reduce outages or aerial inspection technology to improve damage assessments—might also increase workforce efficiency Smart Grid Workforce Training and Development under the American Recovery and Reinvestment Act of 2009 In 2010 the Department of Energy awarded nearly $100 million of funding appropriated under the American Recovery and Reinvestment Act of 2009 to support 54 workforce training programs in the utility and electrical manufacturing industries Funding for these programs was cost-shared with community colleges universities utilities and manufacturers and it is estimated to have trained approximately 30 000 people 161 5 4 6 Electricity System Workforce Outreach and Inclusion Programs In addition to government programs private partnerships with non-profit organizations are also focused on increasing the inclusiveness of the energy sector workforce GRID Alternatives together with SunEdison created the Realizing an Inclusive Solar Economy Initiative which focuses on recruiting members of underrepresented communities for jobs in the solar industry—providing solar installation training working with the solar industry to identify needed skills for the trainings linking trained candidates with available employers and ensuring the retention of a diverse workforce in the industry 162 Additional targeted initiatives include the Utility Industry Workforce Initiative where CEWD joined with the Departments of Energy Labor Defense and Veterans Affairs the International Brotherhood of Electrical Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-23 Chapter V The Electricity Workforce Changing Needs New Opportunities Workers and the Utility Workers Union of America to increase hiring rates of veterans in the industry 163 Helmets to Hardhats run by the North American Building Trades Unions also trains veterans for the construction and utility industries 164 Department of Energy Workforce Inclusion Programs Several outreach programs have been established to build a more inclusive work environment in the energy sector The Department of Energy DOE launched the Minorities in Energy Initiative in 2013 to “strive to ensure that our energy workforce more fully reflects the diversity and strengths of the country ”165 The Department through the National Nuclear Security Agency also sponsors the Minority Serving Institutes Partnership Program and the Cybersecurity Consortium at Historically Black Colleges and Universities 166 In 2014 DOE also created the Solar Ready Vets® program through its SunShot Initiative 167 The program trains exiting service members to become solar installers and has developed a program that provides on-base training through the Department of Defense SkillBridge program during the last six months of service Other programs are more broadly focused on improving participation among women and minorities in science technology engineering and mathematics STEM fields and career pathways Specific DOE initiatives for STEM outreach include the Clean Energy Education Empowerment initiative and the Mickey Leland Energy Fellowship Program 168 169 5 4 7 Federal Workforce Data and Coordinated Programs In response to the lack of high-quality and discrete energy jobs data the Department of Energy launched the Jobs Strategy Council which commissioned USEER making significant strides in improving the availability of data and insights for the energy and electricity industry workforce 170 The second edition of the report will provide more precise job categorization—particularly for natural gas industry employment estimates—and will be published in January 2017 Title X of H R 6 the 2007 Energy Bill established the Energy Efficiency and Renewable Energy Worker Training program for the Department of Labor to administer 171 In addition to the training program H R 6 required the Secretary of Labor to collect and analyze labor market data to track energy-related workforce trends award competitive National Energy Training Partnerships Grants to implement training for economic self-sufficiency and develop an energy efficiency and renewable energy industries workforce Finally the Secretary of Labor was required to award competitive grants to states to administer labor market research information and labor exchange research programs as well as renewable energy and energy efficiency workforce development programs 172 To date this program remains unfunded by Congress 5 4 8 Support for Communities Experiencing Economic Dislocation The United States has a long history of providing adjustment and training programs to workers in industries undergoing transition The Trade Adjustment Assistance program for workers in trade-exposed industries with increased import competition was established in 1962 and the broader Job Training Partnership Act was passed in 1982 173 The Clean Air Employment Transition Assistance Program included in the Clean Air Act Amendments of 1990 and subsequently repealed provided training adjustment assistance employment services and needs-related payments to workers who lost jobs due to a business's compliance with the Clean Air Act 174 175 Current changes in the electricity sector are rapid and significant targeted assistance may aid in addressing this transition An alternative approach for older workers in regions with few economic opportunities could also provide a financial bridge to retirement in areas of rapid transition The Appalachian Regional Commission ARC is a regional economic development agency created in 1965 to help the Appalachian region reach socioeconomic parity with the rest of the Nation ARC funds business development workforce development infrastructure investment and community capacity building through Federal appropriations Despite ongoing economic challenges in the region ARC’s non-highway 5-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 appropriated budget has fallen from roughly $600 million in the early 1970s to below $100 million in the 1980s Its budget has averaged below $100 million per year until 2016 when it grew to $146 million 176 177 The continued fiscal difficulties of coal miner pensions threaten the solvency of PBGC Ensuring the continued fiscal health of PBGC would support retired workers and their spouses and provide sources of economic wealth in communities with decreasing sources of local government revenues While local governments experience losses in tax revenue it is essential to ensure that children have access to adequate education The Federal Government previously assisted in similar situations through the nowexpired Department of Agriculture Secure Rural Schools SRS program which provided grants to schools in communities that were suffering from the precipitous decline in logging on Federal land in the 1990s 178 In FY 2015 the SRS program paid $222 million to localities in 41 states and Puerto Rico to invest in school systems and road infrastructure 179 180 The amount of support required in coal communities is likely significantly less than in the SRS program which reached 9 million children 181 All of the central Appalachian states spend within 10 percent of the U S average of $10 600 per student per year and fewer than 100 000 students live in counties where at least 1 percent of the population works in coal mining 182 183 184 The AML Fund’s inability to fully support reclamation of lands disrupted by the coal mining industry has the potential to leave communities in regions with declining local revenues with polluted and unsafe lands and few means to repair the damage Ensuring funding and appropriate design for the AML Fund will help prevent mines that were once a source of prosperity for these communities from becoming sources of sustained financial and community health challenges The Partnership for Opportunity and Workforce Economic Revitalization POWER Initiative The POWER Initiative is a coordinated Federal effort designed to assist communities that are negatively impacted by changes in the coal and electricity industries by funding investments in economic revitalization and workforce training in coal communities across the United States The Appalachian Regional Commission and the Department of Commerce’s Economic Development Administration administer the program 185 Several first and second round grantees provide workforce development and training opportunities for workers displaced by the contraction of the coal industry in addition to economic development planning assistance 186 187 The recommendations based on the analysis in this chapter are covered in Chapter VII A 21st-Century Electricity Sector Conclusions and Recommendations Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-25 Chapter V The Electricity Workforce Changing Needs New Opportunities 5 5 Endnotes 1 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 2 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 3 Department of Labor Employment Hours and Earnings from the Current Employment Statistics Survey National All Employees Thousands Not Seasonally Adjusted Bureau of Labor Statistics accessed October 21 2016 https www bls gov oes current oessrci htm 4 Energy Information Administration Natural Gas Summary accessed October 31 2016 https www eia gov dnav ng NG_SUM_LSUM_A_EPG0_FPD_MMCF_A htm 5 Office of Energy Policy and Systems Analysis National Renewable Energy Laboratory Electricity Generation Baseline Report Department of Energy forthcoming 6 Department of Labor Employment Hours and Earnings from the Current Employment Statistics survey National All employees thousands not seasonally adjusted Bureau of Labor Statistics accessed October 21 2016 https www bls gov oes current oessrci htm 7 Environmental Law Institute and Washington Jefferson College Center for Energy Policy and Management Getting the Book Without the Bust Guiding Southwestern Pennsylvania through Shale Gas Development Washington DC and Pennsylvania Environmental Law Institute and Washington Jefferson College 2014 https www eli org sites default files elipubs getting-boom-final-paper-exec-summary-2014-07-28 pdf 13 Energy Information Administration EIA and the U S Mine Safety and Health Administration “Historical Coal Production Data 1985 2001 ” accessed December 13 2016 http www eia gov coal data php#production 9 Department of Labor Employment Hours and Earnings from the Current Employment Statistics survey National All Employees Thousands Coal Mining Not Seasonally Adjusted Bureau of Labor Statistics accessed October 21 2016 http www bls gov oes current naics4_212100 htm 10 Energy Information Administration Annual Coal Report 2015 Washington DC Department of Energy Energy Information Administration 2016 http www eia gov coal annual pdf acr pdf 11 EPSA Analysis National Renewable Energy Laboratory “Electricity Generation Baseline Report ” forthcoming 12 Department of Labor “Table B-1 Employees on nonfarm payrolls by industry sector and selected industry detail ” Bureau of Labor Statistics accessed November 04 2016 http www bls gov news release empsit t17 htm 13 Center for Regional Economic Competitiveness and West Virginia University Appalachia Then and Now Examining Changes to the Appalachian Region Since 1965 Washington DC Center for Regional Economic Competitiveness and West Virginia University for the Appalachian Regional Commission 2015 https www arc gov assets research_reports AppalachiaThenAndNowCompiledReports pdf 14 Illinois Institute of Technology and West Monroe Partners The Smart Grid Workforce of the Future Washington DC Department of Energy 2011 http www iitmicrogrid net education The%20Smart%20Grid%20Workforce%20of%20the%20Future pdf 15 Laura Saporito The Cybersecurity Workforce States’ Needs and Opportunities National Governors Association Center for Best Practices 2014 https www nga org files live sites NGA files pdf 2014 1410TheCybersecurityWorkforce pdf 16 PCAST Report to the President And Congress Designing A Digital Future Federally Funded Research And Development In Networking And Information Technology Washington DC White House 2010 https www whitehouse gov sites default files microsites ostp pcast-nitrd-report-2010 pdf 17 Sasha Mackler David Rosner and Marika Tatsutani National Commission on Energy Policy’s Task Force on America’s Future Energy Jobs Washington DC Bipartisan Policy Center 2009 http bipartisanpolicy org wpcontent uploads sites default files NCEP%20Task%20Force%20on%20America's%20Future%20Energy%20Jobs%20%20Final%20Report pdf 18 Utility Dive 2016 State of the Electric Utility Survey accessed September 15 2016 https s3 amazonaws com dive_assets rlpsys state_of_electric_utility_2016 pdf 5-26 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 19 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 20 Department of Labor Table 18 Employed persons by detailed industry sex race and Hispanic or Latino ethnicity Numbers in thousands Bureau of Labor Statistics Labor Force Statistics from the Current Population Survey accessed November 15 2016 http www bls gov cps cpsaat18 htm 21 Center for Energy Workforce Development “Gaps in the Energy Workforce Pipeline 2015 CEWD Survey Results ” Center for Energy Workforce Development 2015 5 http www cewd org surveyreport CEWD2015SurveySummary pdf 22 Susan Price “This industry has even fewer women than tech ” Fortune 2015 http fortune com 2015 08 04 women-energyindustry 23 Donald Cravins Jr 21st Century Innovations in Energy An Equity Framework National Urban League 2016 http nulwb iamempowered com sites nulwb iamempowered com files 21st%20Century%20Innovations%20in%20Energy%20An%20Equity%20Framework pdf 24 Electric Resource Power Institute EPRI EPRI Occupational Health and Safety Annual Report 2014 California EPRI 2015 http www epri com abstracts Pages ProductAbstract aspx productId 000000003002006342 25 Department of Labor “News Release National Census of Fatal Occupational Injuries in 2014 ” Bureau of Labor Statistics USDL15-1789 accessed November 17 2016 http www bls gov news release pdf cfoi pdf 26 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 27 Department of Labor “Quarterly Census of Employment and Wages ” Bureau of Labor Statistics accessed November 8 2016 http www bls gov cew 28 Department of Labor “Quarterly Census of Employment and Wages ” Bureau of Labor Statistics accessed November 8 2016 http www bls gov cew 29 Department of Labor “Quarterly Census of Employment and Wages ” Bureau of Labor Statistics accessed November 8 2016 http www bls gov cew 30 Energy Information Administration “U S Coal Flow 2015 ” accessed November 8 2016 http www eia gov totalenergy data monthly pdf flow coal pdf 31 Energy Information Administration Monthly Energy Review December 2016 Tables 3 7 4 3 and 6 7 Washington DC Department of Energy http www eia gov totalenergy data monthly 32 BW Research U S Energy and Employment Report Washington DC Department of Energy 2016 30 http energy gov sites prod files 2016 03 f30 U S %20Energy%20and%20Employment%20Report pdf 33 BW Research U S Energy and Employment Report Washington DC Department of Energy 2016 10 http energy gov sites prod files 2016 03 f30 U S %20Energy%20and%20Employment%20Report pdf 34 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 35 Energy Information Administration Monthly Energy Review December 2016 Tables 3 7 4 3 and 6 7 Washington DC Department of Energy http www eia gov totalenergy data monthly 36 BW Research U S Energy and Employment Report Washington DC Department of Energy 2016 http energy gov sites prod files 2016 03 f30 U S %20Energy%20and%20Employment%20Report pdf 37 BW Research U S Energy and Employment Report Washington DC Department of Energy 2016 10 http energy gov sites prod files 2016 03 f30 U S %20Energy%20and%20Employment%20Report pdf 38 BW Research U S Energy and Employment Report Washington DC Department of Energy January 2017 39 Southern Company “Energy Industry—Job Category Definitions ” accessed November 16 2016 http www southerncompany com about-us careers high-school hs-jobcategories cshtml 40 Department of Energy Workforce Trends in the Electric Utility Industry – A Report to the United States Congress Pursuant to Section 1101 of the Energy Policy Act of 2005 Washington DC Department of Energy 2006 7 http energy gov sites prod files oeprod DocumentsandMedia Workforce_Trends_Report_090706_FINAL pdf 41 Department of Energy Workforce Trends in the Electric Utility Industry – A Report to the United States Congress Pursuant to Section 1101 of the Energy Policy Act of 2005 Washington DC Department of Energy 2006 7 http energy gov sites prod files oeprod DocumentsandMedia Workforce_Trends_Report_090706_FINAL pdf Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-27 Chapter V The Electricity Workforce Changing Needs New Opportunities 42 Department of Energy Workforce Trends in the Electric Utility Industry – A Report to the United States Congress Pursuant to Section 1101 of the Energy Policy Act of 2005 Washington DC Department of Energy 2006 8 http energy gov sites prod files oeprod DocumentsandMedia Workforce_Trends_Report_090706_FINAL pdf 43 Employment and Training Administration Identifying and Addressing Workforce Challenges in America’s Energy Industry Washington DC Department of Labor 2007 11 https www doleta gov brg pdf Energy%20Report_final pdf 44 Marika Tatsutani National Commission on Energy Policy’s Task Force on America’s Future Energy Jobs Washington DC Bipartisan Policy Center 2009 14 http bipartisanpolicy org wpcontent uploads sites default files NCEP%20Task%20Force%20on%20America's%20Future%20Energy%20Jobs%20%20Final%20Report pdf 45 Marika Tatsutani National Commission on Energy Policy’s Task Force on America’s Future Energy Jobs Washington DC Bipartisan Policy Center 2009 45 http bipartisanpolicy org wpcontent uploads sites default files NCEP%20Task%20Force%20on%20America's%20Future%20Energy%20Jobs%20%20Final%20Report pdf 46 Marika Tatsutani National Commission on Energy Policy’s Task Force on America’s Future Energy Jobs Washington DC Bipartisan Policy Center 2009 http bipartisanpolicy org wpcontent uploads sites default files NCEP%20Task%20Force%20on%20America's%20Future%20Energy%20Jobs%20%20Final%20Report pdf 47 Electric Resource Power Institute EPRI EPRI Occupational Health and Safety Annual Report 2014 California EPRI 2015 http www epri com abstracts Pages ProductAbstract aspx productId 000000003002006342 48 Department of Labor “Incidence rates of nonfatal occupational injuries and 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News “Achieving zero injuries in the electrical utility industry ” accessed September 15 2015 http www ishn com articles 102284-achieving-zero-injuries-in-the-electrical-utility-industry 54 Department of Labor Table 18 Employed persons by detailed industry sex race and Hispanic or Latino ethnicity Numbers in thousands Bureau of Labor Statistics Labor Force Statistics from the Current Population Survey 2015 accessed November 15 2016 http www bls gov cps cpsaat18 htm 55 Department of Labor Table 18 Employed persons by detailed industry sex race and Hispanic or Latino ethnicity Numbers in thousands Bureau of Labor Statistics Labor Force Statistics from the Current Population Survey 2015 accessed November 15 2016 http www bls gov cps cpsaat18 htm 56 Susan Price “This Industry Has Even Fewer Women than Tech ” Fortune 2015 http fortune com 2015 08 04 women-energyindustry 57 Donald Cravins Jr 21st Century Innovations in Energy An Equity Framework National Urban League 2016 http nulwb iamempowered com sites nulwb iamempowered com files 21st%20Century%20Innovations%20in%20Energy%20An%20Equity%20Framework pdf 58 Center for Energy Workforce Development CEWD “Gaps in the Energy Workforce Pipeline 2015 CEWD Survey Results ” accessed December 13 2016 http www cewd org surveyreport CEWD2015SurveySummary pdf 59 The Solar Foundation “National Solar Jobs Census 2015 ” accessed December 28 2016 http www thesolarfoundation org wp-content uploads 2016 10 TSF-2015-National-Solar-Jobs-Census pdf 60 Department of Education “Persistent Disparities Found Through Comprehensive Civil Rights Survey Underscore Need for Continued Focus on Equity King Says ” accessed June 7 2016 http www ed gov news press-releases persistent-disparitiesfound-through-comprehensive-civil-rights-survey-underscore-need-continued-focus-equity-king-says 5-28 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 61 National Center for Education Statistics “Number and percentage distribution of science technology engineering and mathematics STEM degrees certificates conferred by postsecondary institutions by race ethnicity level of degree certificate and sex of student 2008–2009 through 2013–2014 ” accessed October 12 2016 https nces ed gov programs digest d15 tables dt15_318 45 asp 62 The Solar Foundation GW Solar Institute BW Research Partnership National Solar Jobs Census 2015 Washington DC The Solar Foundation January 2016 http www thesolarfoundation org 63 Illinois Institute of Technology and West Monroe Partners The Smart Grid Workforce of the Future Chicago Illinois Department of Energy National Energy Technology Laboratory 2011 http www iitmicrogrid net education The%20Smart%20Grid%20Workforce%20of%20the%20Future pdf 64 Laura Saporito The Cybersecurity Workforce States’ Needs and Opportunities Washington DC National Governors Association Center for Best Practices 2014 https www nga org files live sites NGA files pdf 2014 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Employment and Training Administration Identifying and Addressing Workforce Challenges in America’s Energy Industry Washington DC Department of Labor 2007 11 https www doleta gov brg pdf Energy%20Report_final pdf 81 Department of Labor “Employment Hours and Earnings from the Current Employment Statistics survey National All Employees Thousands Coal Mining Not Seasonally Adjusted Bureau of Labor Statistics accessed October 21 2016 http www bls gov oes current naics4_212100 htm Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-29 Chapter V The Electricity Workforce Changing Needs New Opportunities 82 Department of Labor Employment Hours and Earnings from the Current Employment Statistics survey National All Employees Thousands Seasonally Adjusted Bureau of Labor Statistics accessed October 21 2016 https www bls gov oes current oessrci htm 83 Energy Information Administration U S Coal Flow 2015 accessed November 14 2016 http www eia gov 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2016 funds-announcement pdf 186 Office of the Press Secretary Fact Sheet Administration Announces New Economic and Workforce Development Resources for Coal Communities through POWER Initiative The White House accessed August 24 2016 https www whitehouse gov the-press-office 2016 08 24 fact-sheet-administration-announces-new-economic-and-workforce 187 Office of the Press Secretary Fact Sheet Administration Announces Additional Economic and Workforce Development Resources for Coal Communities through POWER Initiative The White House accessed October 26 2016 5-34 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 https www whitehouse gov the-press-office 2016 10 26 fact-sheet-administration-announces-additional-economic-andworkforce Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 5-35 Chapter V Improving Shared Transport Infrastructures 5-38 QER Report Energy Transmission Storage and Distribution Infrastructure April 2015 VI Enhancing Electricity Integration in North America This chapter details the interconnectivity of the United States’ Canada’s and Mexico’sa electric systems and opportunities for enhancing integration First the chapter outlines the existing consensus between the nations to improve integration and the regional variation in transmission capacity that exists The next two sections explore the integration of the United States with Canada and Mexico respectively and provide in-depth discussions of relevant country-specific policies The chapter concludes with possible policy options to improve integration as well as ongoing and potential opportunities for collaboration a Due to the nature of electricity system interconnections and for simplicity of terminology the term “North America” will be used in this chapter to refer narrowly to the continental United States Canada and Mexico QER Report An Integrated Study of the U S Electricity System January 2017 6-1 Chapter VI Enhancing Electricity Integration in North America Key Findings Integration of the power systems of Canada Mexico and the United States historically occurred by gradual ad hoc and regional adjustments implemented by an array of regional public and private stakeholders reflecting the complex and fragmented jurisdictions in all countries Many opportunities for enhanced integration have included a collection of stakeholders and were pursued on a subregional basis 1 One model for power-sector collaboration across national borders is demonstrated by the reliability planning under the North American Electric Reliability Corporation however this engagement has been limited to Canada the United States and the Baja California region of Mexico 2 The Canadian Mexican and United States governments have all made significant climate commitments and have indicated a desire to shift toward greater renewable energy penetration 3 In June 2016 the United States Canada and Mexico announced a goal for North America to strive to achieve 50 percent clean power generation by 2025 Greater cross-border integration could be a tool to maximize gains from the deployment of clean energy generation and energy efficiency but the complexity and current asymmetry of national and subnational policy frameworks may impede implementation 4 The design of domestic U S clean energy policies both at the Federal and state level has implications for cross-border trade and continental emissions reductions Currently there are significant disparities between U S states’ policies for recognition or exclusion of international clean energy imports 5 Continued study of the context and levels of integration of each subregional cross-border interconnection will allow for a deeper understanding of policies that have shaped current levels of cross-border trade Table 1-1 Canada has additional hydropower resources that could be exported to the United States to provide a reliable source of firm low-carbon energy 6 There are concerns among stakeholders that increased imports of Canadian hydropower could reduce U S clean energy competitiveness however there are examples of arrangements where Canadian hydropower decreases curtailments of U S clean resources 7 Trade has been increasing across the North American bulk power system 8 but cross-border flows especially between Canada and the United States are now using the full capacity of existing transmission infrastructure 9 10 Under a low-carbon future scenario current modeling results show that transmission with Canada becomes increasingly important for sustaining emissions reductions and has a significant impact on the generation mix in border regions While many electricity system models exist for the United States and in some cases the United States and Canada detailed modeling tools to explore the economic social and or reliability impacts of electricity trade across all of North America are currently insufficient to inform opportunities for enhancing integration While extensive integration between the United States and Canada can inform the potential for increased future U S -Mexico integration these situations are fundamentally dissimilar in four main ways 1 the lack of a dominant exporting country on the U S -Mexican border 2 the different regional approaches to integration on the U S side 3 the nascent regulatory framework in Mexico and 4 the differing legal instruments for open-access transmission agreements and reliability coordination between the United States and Mexico 11 Mexico’s ongoing electric utility industry reforms could have significant impacts on the future of cross-border integration The reforms are focused on the overall goal of competitiveness with the twin objectives of reducing electricity costs and developing more clean energy 12 A transition in Mexico from oil to natural gas in electricity generation could have tremendous impacts in the manufacturing sector reducing electricity prices boosting manufacturing output and increasing overall gross domestic product for Mexico Mexico’s increasing importation of U S natural gas could be an economic and environmental opportunity for both sides by offsetting expensive and high greenhouse gas-emitting diesel generation in Mexico and creating economic opportunities for U S exporters The resulting reduction in electricity costs in Mexico could also boost overall North American competitiveness 6-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 The Electric Reliability Council of Texas could benefit from greater integration with Mexico through access to enhanced imports or as a business opportunity for power exporters California’s ambitious clean energy policy provides an opportunity for energy exporters in Mexico especially in the Baja California region to supply clean energy dispatchable power or essential reliability services 13 Cross-Border Electricity Integration Consensus to Enhance North American Electricity Integration The potential for electricity integration to provide economic benefits and support the development of more modern and resilient energy infrastructure has been a long-standing theme for North American diplomacy 14 15 Leaders in the United States Canada and Mexico have publicly and repeatedly affirmed support for the concept of increasing energy integration 16 and there is a general understanding across the continent that the benefits of cross-border electricity trade can be improved with deeper system integration Earlier this year at the North American Leaders’ Summit President Barack Obama President Enrique Peña Nieto and Prime Minister Justin Trudeau signed a statement agreeing to collaborate on cross-border transmission projects in order to achieve the mutual goal of advancing clean and secure power In particular the United States Canada and Mexico announced a goal for North America to strive to achieve 50 percent clean power generation by 2025 A number of additional recent developments make a discussion of cross-border electricity integrationb especially relevant       The completion of transformational energy reforms in Mexico in the oil gas and electricity sectors Canada’s framework on clean growth and climate change charting an accelerated path to achieve deep greenhouse gas GHG emissions reductions and green infrastructure development The shale gas boom in the United States which presents new opportunities for natural gas generation as well as raises questions about land use and emissions The Paris Agreement and the steps needed to implement nationally determined contributions globally All three countries’ sustained interest in stimulating strategic opportunities in clean energy development and energy efficiency 17 The acceleration of the deployment of renewable energy technologies which creates opportunities for grid management through integration The extensive electricity integration that already exists between the United States and Canada and the potential to increase existing integration between the United States and Mexico suggest that North America has much to gain from collaborative planning strategy and cooperation in the power sector Regional Variation in Integration across North America There is international consensus that electricity integration brings great value to Mexico Canada and the United States but the details of planning and implementing electricity integration require the b While the discussion of power sector integration has been of intense international interest moving from aspirational objectives to actionable policy steps requires a clear yet nuanced definition of “integration” or its close homologue “harmonization” While these terms are commonly discussed among a broad range of cross-border power sector stakeholders there is no single definition for their use For the purposes of this discussion we define integration to include basic information sharing in policy making and planning as well as the coordination of policies and decision making often with the result of enhancing flows of cross-border trade For the power sector this includes any level of coordination in planning system operations or regulation QER Report An Integrated Study of the U S Electricity System January 2017 6-3 Chapter VI Enhancing Electricity Integration in North America navigation of national regional and local interests through the engagement of a broad set of public and private stakeholders 18 The North American electricity system is heterogeneous operations and planning primarily take place through regional entities and every part of the system has evolved with different characteristics and structures 19 This leads to complex and asymmetrical jurisdictions and regulations as well as cases in which international cross-border coordination is sometimes greater than subregional coordination within a specific country U S -Canadian integration is often greater than between Canadian provinces 20 A subregional lens is necessary to understand the many varying contexts of integration between Canada and the U S Pacific Northwest Midwest and Northeast Regions as well Mexico and the southern border region with Arizona California New Mexico and Texas These contexts include different levels of integration that range from physical asynchronous interconnections geared towards emergency trade such as in the Electric Reliability Council of Texas ERCOT -Mexico cross-border interactions to extensive synchronous interconnections that enable Canadian cross-border participation in U S competitive electricity markets such as in the Manitoba Hydro-Midcontinent Independent System Operator ISO Because of this diversity there are additional opportunities for enhanced integration that should be examined in order to bring maximum benefit for the greatest number of stakeholders at a minimum cost For example additional cross-border transmission infrastructure with Canada has been projected to lead to lower overall system costs in U S border regions and it could enhance reliability backstop variable renewable energy development and enable lower overall emissions of U S power consumption 21 22 Greater cross-border planning of transmission and operations between the United States and Mexico could maximize efficiencies for commercial opportunities for U S generators to sell into a higher-priced market while lowering the electricity costs paid by industrial consumers in Mexico 23 24 Additional trading in electricity between Mexico and the United States could have further impacts including possibly on long-term price stability and other market factors which will need to be further analyzed Coordination of the United States’ and Mexico’s clean energy incentives and programs such as Clean Energy Certificates could lead to additional opportunities for clean energy research development and deployment as well as reductions in carbon emissions 25 The barriers to deepening integration are also regionally nuanced Increasing cross-border integration and especially increasing cross-border trade raises important questions regarding the economic impacts of enhanced integration on domestic power generators and jobs the reliability of power supply the environment costs for consumers and increased reliance on international sources of power In most border regions increasing electricity flows would require the construction of additional transmission infrastructure see Figure 6-1 since current lines between the United States and Canada are operating at or near capacity and the connections between the United States and Mexico tend to have low capacity Developers of new infrastructure will need to strategically align planning across borders in order to overcome opposition 6-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Figure 6-1 Transmission Capacity and Electricity Trade across Major Interconnections June 2015–May 2016 Blue lines show hourly export data from Canada and Mexico to the United States in negative megawatthours MWh red lines indicate maximum export capacity recorded hourly from June 9 2015 to May 19 2016 As the blue lines reach the red limit of maximum capacity transmission in that region is full and cannot be expanded on current lines The proximity of hourly export flows to the maximum export capacity suggests that transmission lines are often fully utilized especially in the U S Northeast Flat-lined regions in Hydro Quebec figures are attributed to maintenance outages U S -Canada Integration Historical Overview The United States and Canada serve as a global model of highly functional cross-border electricity coordination Cross-border electricity trade and coordination of operations policy and regulatory QER Report An Integrated Study of the U S Electricity System January 2017 6-5 Chapter VI Enhancing Electricity Integration in North America planning are extensive mature and efficient and they have led to economic and reliability benefits on both sides of the border 26 Significant levels of cross-border transmission interconnect both countries and electricity trade has been growing overall since 2005 increasingly dominated by flows from Canada to the United States 27 28 Total U S -Canada trade including flows in both directions in 2015 was 77 million megawatt-hours MWh accounting for a total of U S dollars USD $2 6 billion in revenues Canadian dollars $3 4 billion 29 With the notable exception of trade in the Pacific Northwest which continues to be bidirectional with the United States acting as a net exporter to Canada since 1999 in all other regions Canadian exports to the United States have significantly overtaken flows in the opposite direction Figure 6-2 30 These recent trends reinforce a longer historical trajectory Since the first electricity developments led to trade between the two countries in the early 1900s Canadian private hydropower generators have prioritized exports to the United States over pan-Canadian trade due to a number of factors 31 In accordance with Section 92A of the Canadian Constitutions Act of 1867 Canadian provinces have nearcomplete authority over their individual electricity systems Many hydropower-producing provinces such as British Columbia and Quebec have vertically integrated utilities with regulated pricing structures Markets with more diversified generation mixes such as Ontario and Alberta however have implemented varying levels of restructuring resulting in a system in which neighboring provinces often host asymmetrical market structures that aren’t conducive to trade 32 Transmission infrastructure development is determined by Canada’s spatial population distribution 75 percent of the Canadian population lives within 100 miles of the U S border and is clustered along the coasts 33 Canadian hydropower producers who have the greatest potential to increase capacity to serve other loads have focused on extending transmission the short distances from Canadian population centers to the U S border rather than on more costly east-west transmission to other provinces c 34 The high level of northsouth integration between Canada and the United States guided by jurisdictional population and geographic factors means that cross-border coordination often surpasses east-west coordination among provinces states or ISOs within either country 35 Primary interconnections link single Canadian provinces to markets in the United States The Pacific Northwest to British Columbia Manitoba to Midcontinent ISO Ontario and Quebec to New York ISO and Quebec to ISO New England High levels of integration between the United States and Canada exist across the border and are facilitated in a variety of ways For example since 1964 the Columbia River Treaty has contributed substantially to the economic progress and safety of both countries through coordinated flood-risk management and clean renewable hydropower within the Columbia River Basin in the Pacific Northwest Ongoing negotiations on a new formal treaty with Canada to extend this arrangement beyond 2024 are critically important to the economy of the Pacific Northwest region particularly for flood management and hydropower optimization The significant level of integration between the United States and Canada also has reliability implications Two large-scale cross-border blackouts the Great Northeast Blackout of 1965 and the Northeast Blackout of 2003 among other factors significantly shaped the current policies regarding reliability Those events played a role in spurring the subsequent establishment of the North American Electric Reliability Corporation NERC the Energy Policy Act of 1992 and the Federal Energy Regulatory Commission FERC c The Maritime Link Project which links New Foundland Labrador and Nova Scotia as well as discussions about exporting hydropower from British Columbia Hydro’s Site C Clean Energy Project to Alberta suggest this might be changing 6-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 orders to open transmission access 36 See the History and Trends Appendix for additional detail on these events Figure 6-2 Overall U S Electricity Trade with Canada in Four Regions37 The graphs show U S electricity trade with Canada 1997–2014 in the Northwest Midwest New York and New England While the Pacific Northwest has been steadily increasing electricity exports to Canada the Midwest New York and New England have been increasing imports over time Benefits and Barriers to Increasing Cross-Border Electricity Trade There is high potential to increase Canadian hydropower exports to the United States The Canadian Hydropower Association estimates that Canada has a technical hydropower-generation potential that could more than triple current levels up to 236 gigawatts 38 As a resource hydropower has several advantages it is flexible reliable and cost-competitive with other sources of power and it produces nearly zero carbon emissions 39 40 Hydro reservoirs can provide energy storage and hydropower generation can be adjusted relatively quickly making it a natural complement to intermittent resources such as solar and wind power 41 Some dams also serve additional functions such as managing flood control or storing potable water Already the climate and energy security benefits of Canadian-U S hydropower trade may be substantial By one estimate trade in hydropower between Quebec and its neighbors New England New York Ontario and New Brunswick can be credited with 20 6 megatonnes of avoided emissions from 2006–2008 42 Electricity imports can serve as a cost-effective supply for wholesale power markets in the United States The External Market Monitor of ISO New England concluded that importing electricity from Quebec and New Brunswick “reduces wholesale power costs for electricity consumers in New England ”43 Similarly a New England States Committee on Electricity study on incremental hydroelectric imports from Canada found average annual economic benefits associated with reduced electricity prices in New England to be in the range of USD $103 million to $471 million 44 Cross-border trade between the United States and Canada is mature and highly integrated but enhancing integration—especially with the objective of increasing cross-border trade—faces interrelated barriers First there are concerns from generators within the United States that increasing cross-border trade QER Report An Integrated Study of the U S Electricity System January 2017 6-7 Chapter VI Enhancing Electricity Integration in North America would have a negative impact on domestic markets and give Canadian suppliers market power 45 In the 2000s Canadian hydropower was viewed as one of the most cost-effective electricity sources which presented a double-edged sword it could lower prices for U S customers but it could also outcompete U S generators in the natural gas and renewable energy sectors In recent years low U S natural gas prices have shifted the business case for increasing cross-border trade by reducing the extent to which imports from Canada would lower costs for electricity users d 46 Continued thorough examination of the long-term implications of integration for consumers and generators will be needed in the future Second increasing electricity trade would require additional transmission capacity While several transmission projects have already been proposed to increase capacity in the Midwest and Northeast the complexity of these projects raises a variety of stakeholder concerns that lead to long development times and unexpected delays 47 Concerns range from the environmental impacts of transmission infrastructure to the potential implications of greater Canadian imports on local and regional economic development Siting and permitting decisions are made at the state and local level including for international transmission lines Continued integration and transformation of the North American electricity system requires effective siting and permitting capabilities at all levels of government Planning and permitting new cross-border transmission infrastructure including managing ecological impacts across jurisdictions and with a wide range of domestic and international stakeholders is uniquely challenging State provincial local and tribal governments assisted by federal agencies need to build capacity to minimize safety and security consequence and protect the environment while limiting permitting-related delays 48 49 Government efforts at the federal and local levels should ensure that project developers have a clear understanding of expectations best practices and priorities during the permitting of cross-border transmission projects The issuance of recent cross-border Presidential permits for the Great Northern Transmission Line50 in Minnesota and the New England Clean Power Link51 in Vermont are both examples of the application of collaborative principles of early engagement with stakeholders detailed in the new Integrated Interagency Pre-Application Process 52 Additional study of and updated information on crossborder regulation can assist with establishing a clear understanding of requirements at the federal and state levels for the permitting of cross-border transmission facilities Clean Energy Development in the Cross-Border Context Many states have established renewable portfolio standards RPSs not only to reduce GHG emissions but also to stimulate local development of clean energy Currently many U S clean energy policies are not designed to allow existing Canadian hydropower imports as a compliance option The additional concern about negative environmental impacts of large-scale hydropower have led a number of states to adopt RPSs that exclude large-scale hydropower leading to a “non-counting” of Canadian hydropower regardless of the positive impact such imports would have on the state’s emissions Currently Minnesota Vermont and Wisconsin are the only U S northern border states that have RPSs that allow for the accounting of some forms of large-scale hydropower including imports from Canada as a clean energy resource 53 Completed analysis of the economic and environmental impacts of increased levels of hydroelectric imports from Canada indicates that the potential for cumulative reductions in GHG emissions ranges from 58 million to 97 million megatonnes There are examples of Canadian hydropower supporting greater renewable energy development in the United States e A 2013 MISO Manitoba Hydro study explored the potential for Canadian hydropower to d According to the Energy Information Administration natural gas prices for electric power fell from USD $9 26 per thousand cubic feet in 2008 to USD $3 37 per thousand cubic feet in 2015 e This association is also suggested by the preliminary ReEDS projection shown for New York ISO in Figure 6-6 6-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 provide balancing for U S intermittent energy primarily wind and found that greater deployment of this arrangement provides economic and environmental benefits on both sides of the border with annual modified production cost savings ranging from $228 million to $455 million for 2027 and annual load cost savings ranging from $183 million to $1 302 million for 2027 54 Variations in planning and market design may require a different approach by region In addition lessons learned from examining the creation of economic and environmental benefits across international borders should be explored and disseminated when possible U S -Mexico Integration Mexico’s Energy Industry Reforms Due to a combination of historical geographic and resource factors there is significantly less electricity integration between the United States and Mexico Figure 6-3 According to the Energy Information Administration EIA in 2015 the United States and Mexico traded approximately 7 69 million MWh total compared to 77 2 million MWh traded between the United States and Canada with the United States exporting 0 39 million MWh and importing 7 3 million MWh f A number of factors explain the differences both countries’ border regions have experienced electricity shortages and lack reliable excess-generation resources55 to export to the other Mexico’s states along the U S border have some of the lowest population densities in the country 56 57 and the border regions include areas with low or insufficient levels of existing transmission capacity Two U S states Texas and California dominate the cross-border interactions with very different visions for integration ERCOT shares the longest border with Mexico of any U S state but all transmission connections between the Mexican grid and ERCOT are asynchronous and trades are primarily for emergency backup as illustrated in Figure 6-1 Baja California is not connected to the rest of the Mexican federal grid and therefore robust California-Baja California cross-border integration may not lead to more integration opportunities in the absence of more domestic long-distance transmission in Mexico f U S and Mexican estimates of U S -Mexico electricity trade vary significantly—a disparity that is being addressed by energy information institutions in both countries under the North American Energy Information Cooperation Mexico’s regulatory agency Comisión Reguladora de Energía and wholesale market operator El Centro Nacional de Control de Energía estimate total trade to be 4 million MWh in 2014 nearly double the EIA estimate QER Report An Integrated Study of the U S Electricity System January 2017 6-9 Chapter VI Enhancing Electricity Integration in North America Figure 6-3 Electricity Flows Between the United States and Mexico58 Monthly cross-border electricity trade between the United States and Mexico shows a number of differences with U S -Canada trade it occurs at lower volumes and is more sporadic seasonal and bidirectional Like U S -Canadian trade however it has been increasing overall since 2011 Mexico’s 2013 energy industry reforms which included transformational structural reforms across the oil gas and power sectors are highly relevant to cross-border electricity integration Figure 6-3 g Until 2013 the Mexican Federal Electricity Commission CFE the vertically integrated state-owned utility served as the sole producer provider and distributor of electricity in Mexico 59 and private participation in the sector was reserved for the state except in limited situations small power production cogeneration and independent power production The existing framework however faced significant stress in the 1990s and early 2000s caused by a mixture of external and structural factors including high energy prices low industrial competitiveness government subsidization of electricity lagging domestic fossil fuel production and under-investment in the power sector Projected growth of power demand over the next decade led the government to pass extensive energy reforms in 2013 followed by a series of implementing laws that unbundled CFE and established a new wholesale electricity market to foster competition with private-sector participation Figure 6-4 Under the new framework the private sector is now free to participate in all aspects of the generation and sale of electricity while CFE maintains physical control of transmission and distribution infrastructure and remains the sole provider to residential users with regulated tariffs and the National Energy Control Center is now the ISO in charge of the operational control and administration of the new wholesale electricity market 60 Many power g Unlike U S and Canadian power sector governance which defers a number of authorities to state and provincial governments Mexico’s federal government is more centralized and also has near-complete authority in the power sector 6-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 sector stakeholders have called the reforms groundbreaking and admirable including for reducing the strain of electricity consumption costs on industry in Mexico Figure 6-5 61 The reforms are focused on the overall goal of competitiveness with twin objectives of helping consumers pay less for electricity and have cleaner electricity 62 Currently the industrial sector in Mexico faces costs per MWh of electricity that are almost double electricity costs in the United States making production and goods more expensive for all of North America In seeking lower energy prices for its consumers Mexico is focusing on switching from fuel oil and diesel-fired generation in the power sector to natural gas in part through greater imports from the United States63 reducing transmission and distribution losses estimated at 16 percent of total generation in 2010 and increasing renewable energy deployment 64 The impacts for Mexico’s northern border region specifically could be significant as the region includes a number of industrial centers in Ciudad Juárez Matamoros Mexicali Nogales Nuevo Laredo Reynosa Tecate and Tijuana 65 One economic analysis estimates that transitioning from oil to natural gas for electricity production could have tremendous impacts in the manufacturing sector where it could reduce electricity prices by 13 percent boost manufacturing output by up to 3 9 percent and increase overall gross domestic product by up to 0 6 percent 66 67 As is natural for such a transformational change to the sector the full implementation of the reforms is still in development and uncertainties about the final form of the new framework exist Figure 6-4 Structural Changes Following Mexico’s Energy Industry Reforms A simplified schematic showing the adjustments in the Mexican power sector pre-reforms post-reforms and future aspirations Pre-reforms CFE was vertically integrated and responsible for the generation commercialization transmission and distribution of electricity to nearly all users with exceptions for some forms of self-generation The reforms created a wholesale competitive electricity market in which private generators can participate and divided users into “basic supply” users those who consume under a given threshold and continue to receive direct service from CFE and “qualified users” those who consume over that threshold and are serviced by the wholesale competitive market Over time the wholesale market is intended to supply the majority of consumers CFE continues to maintain control over transmission and distribution post-reforms QER Report An Integrated Study of the U S Electricity System January 2017 6-11 Chapter VI Enhancing Electricity Integration in North America Figure 6-5 Industrial and Residential Electricity Rates in the United States and Mexico 1993– 201368 Different policies regarding industrial electricity and residential tariffs in the United States and Mexico as well as different electricity generation sources over the given period Mexico used greater diesel heavy fuel oil-fired generation while the United States was more reliant on coal and natural gas have led to a significant differential between U S and Mexican electricity rates Of particular note industrial rates in Mexico were slightly less than double U S rates in 2013 which impacts Mexican industrial competitiveness Rates include government subsidies to Mexican residential consumers Mexico is already seeing reductions in electricity prices though the recent low oil and natural gas prices are likely a contributing factor this trend is also likely to be stimulated by the reforms From December 2014 to December 2015 electricity rates fell between 30 to 42 percent for industry The wholesale electricity market also began to operate in January of 2016 and renewable electricity-generation capacity increased by 8 5 percent from 2013–2014 alone 69 However a differential in prices still exists in the first six months of 2016 average wholesale prices in most locations of Mexico have ranged from $48 MWh to $60 MWh 70 while in Texas the ERCOT North 345-kilovolt peak wholesale prices over the same period were $22 MWh 71 Projected Actions and Potential Opportunities Mexico’s energy industry reforms may shift the cost-benefit analysis of enhanced integration in meaningful ways these reforms were intended to increase generation in Northern Mexico including a number of industrial centers stimulate private-sector investment in the power industry lower energy costs increase flows of natural gas from the United States and increase renewable energy and energy 6-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 efficiency deployment All of these objectives could have implications for the attractiveness of increasing cross-border coordination and electricity trade According to analysis done by EIA Mexico plans to build an additional 57 gigawatts of generation capacity from 2016 to 2030 and double natural gas imports from the United States from 2013 to 2018 72 which will lead to a decline in electricity subsidies The Program for Development of the National Electricity System an annual report known by its Spanish acronym “PRODESEN ” also demonstrates the intent to increase transmission capacity within Mexico with some developments that could have impacts on cross-border trade including connection of the Baja California Peninsula to the Mexican federal system by 2021 and construction of a new 150-MW asynchronous connection between Nogales Sonora and Arizona 73 74 The government of Mexico is also studying the possibility of a larger east-west transmission line along the U S border with the objective of enhancing transmission capacity in Northern Mexico and facilitating crossborder trade 75 Policy regulatory infrastructure and economic changes in Mexico may lead to a number of other new opportunities The smart grid is a key area of focus the PRODESEN report supports a smart grid program every three years to evaluate projects for the integration of new technologies into transmission new wide-area monitoring systems diagnostics and protections coordination using phasor measurements and automation and modernization of substations These investments will likely stimulate interest among U S generators to export electricity to Mexico increase potential for flows from Mexico to the United States to supply U S demand for clean energy and essential reliability services expand trade flows in both directions to enhance reliability and or improve cooperation to stimulate clean energy development and reduce GHG emissions Mexico’s increasing importation of U S natural gas has been and will remain an economic and environmental opportunity for both sides by offsetting expensive and high-GHG-emitting diesel generation in Mexico and creating economic opportunities for U S exporters The resulting reduction in electricity costs in Mexico could boost overall North American competitiveness and opportunities to integrate supply chains 76 As for clean energy development Mexico has established a program of clean energy certificates which bears a resemblance to California’s renewable energy credit system Mexico’s Transition Strategy has a significant focus on promoting clean technologies and fuels with goals of reaching 35 percent clean energy generation by 2024 77 A variety of tools such as the Clean Energy Zone Atlas will help Mexico plan for the development of clean energy power plants and the expansion of the grid similar to the Competitive Renewable Energy Zones in Texas Two long-term clean energy auctions in 2016 produced record-low prices for energy capacity and clean energy certificates and in the first auction contracts were awarded with an average certificate price of USD $47 76 these projects will start operations in 2018 In the second auction renewable projects including solar wind geothermal hydro and combined-cycle natural gas only for capacity produced three record-low prices for Latin America a wind price of $32 MWh and a solar price of $27 MWh These recent auction results indicate the opportunities in Mexico for renewable energy development There are even instances where projects in Mexico qualify for California’s RPS—the Energia Sierra Juarez project a wind farm constructed miles from the California border is one example of a Mexican project that has received certification to qualify The Mexican government is fully committed to capitalizing on these opportunities and its federal authority is sufficient to implement widespread changes Enhanced cross-border electricity integration with Mexico does present challenges Mexico’s sector continues to experience high levels of technical and non-technical losses 78 and it will need significant investments to improve system functionality to achieve greater efficiencies especially in a scenario that includes significant increases in power trading with the United States’ bulk power system Mexico has different protections for open access to transmission from the United States and Canada Though rules exist for access to government-owned transmission in Mexico these are dissimilar to FERC Order Nos QER Report An Integrated Study of the U S Electricity System January 2017 6-13 Chapter VI Enhancing Electricity Integration in North America 888 and 890 79 80 Additionally both sides of the border have experienced power shortages in the past decade suggesting that at this time neither border region has developed significant and reliable excess power to sell to the other on a firm basis The limitations of trade between Texas and the rest of the United States vis-à-vis the Federal Power Act do not apply to and therefore are not a limitation on ERCOT’s electricity trade with Mexico Though ERCOT has maintained a more isolated domestic trade strategy for electricity the same Federal Power Act issues that drive these policies should not impact ERCOT-Mexico trade in electricity But the combination of challenges to trade even though ERCOT shares the longest border with Mexico of any U S state suggests that it will take a very compelling business case to enhance cross-border flows Emerging Integration Opportunities across North America Carbon Trading and Pricing to Address Emissions in Mexico and Canada In recent months the federal governments of both Canada and Mexico have announced plans for new policies to address carbon dioxide emissions For several years provinces and the private sector have pursued various forms of carbon accounting charging and trading The electricity sector has and will play an important leading role in reducing economy-wide emissions of carbon dioxide Given the highly integrated nature of the U S -Canada electricity system and the increasingly integrated state of the U S Mexico electricity system it will be important to explore the effects of implementation of new federal carbon reduction policies across North America Subregional carbon markets are present all around the United States including in states that border Mexico and Canada The Regional Greenhouse Gas Initiative was the first mandatory carbon market in the United States and it includes a cap-and-trade program for carbon-dioxide emissions from power generators in the Northeast Delaware and Maryland see Chapter III Building a Clean Electricity Future for additional detail California and Quebec have had linked carbon markets since 2014 and Ontario will join those markets in 2018 Mexico and the province of Manitoba are also considering joining As these arrangements evolve the implications of these new markets for carbon trading should be examined further 6-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table 6-1 New Carbon Trading and Pricing Policies in Canada and Mexico Are a First for North American Federal Governments Canada Mexico Most of Canada’s provinces have implemented initiatives to reduce carbon-dioxide emissions from the power sector h and 80 percent of Canadians live in a province where there is pollution pricing 81 In September 2016 the federal government announced a “floor” carbon tax that will be introduced in 2018 at $10 ton of carbon Under the federal program the carbon price will rise $10 ton per year until 2022 when the price will freeze at $50 ton Provinces have considerable implementation flexibility The price can be in the form of a specific tax or levy or as a cap-and-trade program provided provinces set emissions caps that correspond to the expected reductions from the carbon price The carbon tax will be revenue-neutral for the federal government which will return funds to provinces from federally imposed carbon taxes Any province can also levy the carbon tax and collect revenue itself without involving the federal government to meet the carbon pricing requirement 82 83 A number of provinces including British Columbia i Alberta j Ottawa and Quebec k are already in compliance with a carbon price for 2018 though the rising federal price of carbon will necessitate additional action from all provinces by 2022 A carbon tax on the use of fossil fuels was introduced in Mexico in 2014 The initial price on carbon was set at USD $3 5 ton of carbon 84 In November 2016 Mexico launched its first federal initiative to deal with carbon a pilot project with voluntary participation for study purposes of Mexico’s new cap-and-trade program The information will inform implementation of the 2018 launch of Mexico’s new cap-and-trade program The program is being guided by the Secretariat of Environment the Mexican Stock Exchange and the Mexican Carbon Platform a private trading platform established in 2003 The platform involves voluntary participation of approximately 60 companies from various industries including steel cement and chemicals which combine to annually generate 70 million tons of carbon dioxide Historically the state of Baja California has been involved in California’s carbon trading and clean energy policies for several years To formally launch cap-and-trade in 2 years Mexico will need to establish a cap on GHG emissions and create a program for monitoring and verification 85 86 The electricity sector has and will continue to play an important leading role in reducing economy-wide emissions of carbon dioxide across North America Table 6-1 briefly describes recent announcements and actions by the federal governments of Canada and Mexico to address carbon dioxide emissions from the electricity system h Prince Edward Island has no current targets or initiatives in place the territory of Nunavut is implementing climate adaptation strategies that do not address power generation All other provinces and territories either have some form of emissions-reduction target and or carbon pricing in place including but not limited to mass-based targets cap-and-trading and RPS Two territories Northwest Territories and Yukon Territory have voluntary energy efficiency targets in place for households and businesses that will reduce emissions from the power sector i British Columbia currently has a carbon tax of $30 tonne j Alberta will levy a carbon tax on fuels at a rate of $20 tonne beginning in January 2017 One year later the levy will increase to $30 tonne k Carbon was trading at $17 Canadian tonne in May 2016 for the cap-and-trade market that includes Quebec and will include Ottawa according to the International Carbon Action Partnership QER Report An Integrated Study of the U S Electricity System January 2017 6-15 Chapter VI Enhancing Electricity Integration in North America Improving Grid Security and Reliability Protecting the grid against vulnerabilities is a shared responsibility across North America Most recently the United States and Canada have agreed upon goals to 1 protect today’s electricity grid and enhance preparedness 2 manage contingencies and enhance response and recovery efforts and 3 build a more secure and resilient future electric grid 87 The joint U S -Canada Grid Security Strategy promotes improvements to information sharing vulnerability assessment emergency response and continuity and management of new and evolving risks from grid technologies and design 88 The United States and Canada have developed respective national action plans to address and improve grid security Going forward there are key areas of mutual interest where joint cooperation can continue to grow between the United States and Canada These include the Department of Energy and Natural Resources Canada working in coordination with the Department of Homeland Security and Public Safety Canada to     Inform and support the private energy sector in response to a significant cyber incident Improve tools frameworks protocols and methods for information sharing risk assessment and situational awareness Coordinate with existing table-top exercise formats Develop standardized curricula and training materials for utilities to educate their workforces on protection against threats including cybersecurity Coordination of grid security efforts can lead to a more proactive approach to addressing emerging threats across North America As Mexico’s interconnections with the United States grow in number and capacity it will be important for ongoing discussions of grid security goals and objectives to be informed by Mexico’s experiences and perspective Mexico is working closely with NERC to achieve well-interconnected secure and stable electricity grids Currently an inter-ministerial body The Ministry of Energy the System Operator and the Regulatory Commission has been set to produce a first version of Mexico’s proposal of a Memorandum of Understanding with NERC Along with this proposal the group is working very closely with the staff of the Department of Energy FERC and the Western Electricity Coordinating Council to ensure consistency with other specific agreements As more interconnections are planned and built between the United States Canada and Mexico the North America bulk power system must not only remain secure but reliable High-level cooperation between all three countries on energy issues should maintain a focus on the shared goal of a reliable electricity system for the continent From coordination on high-level principles for reliability to modeling and analysis to inform operations of the future bulk power system cooperation across North America on reliability will complement efforts to improve security and ensure economic competitiveness Policy Options for North America There are a variety of policy options that all three countries and the United States individually can take to support targeted action to enhance integration 1 engagement—often high-level and internationally through bilateral and trilateral dialogues and other cooperation mechanisms 2 analysis—both cooperative and independent carried out through working groups and projects and 3 policy-level actions—primarily executed by domestic federal and state entities Specific recommendations are described more thoroughly in Chapter VII A 21st Century Electricity Sector Conclusions and Recommendations 6-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Key Existing Efforts to Analyze Cross-Border Electricity Policy While many detailed electricity sector modeling tools exist for the United States and in some cases the United States and Canada modeling tools capable of analyzing the economic environmental social or reliability impacts of electricity integration throughout North America are relatively coarse Improved models would lead to more informative and useful results to enable better stakeholder decisions While there is a diversity of power sector modeling tools to analyze U S grid or market operations at varying levels of detail and accuracy such tools do not yet exist at a robust level for the combined power system of Canada Mexico and the United States limiting the ability of modeling to estimate costs and benefits of increasing cross-border trade 89 One exception is the Regional Energy Deployment System ReEDS which does represent both the United States’ and Canada’s power systems 90 Sample preliminary analysis from this model is highlighted in Figure 6-6 The Department of Energy’s Office of Energy Efficiency and Renewable Energy is working with the National Renewable Energy Laboratory to expand this model to Mexico in cooperation with the Mexican Secretariat of Energy and the Mexican National Energy Control Center Final results will be used to understand the implications of a variety of U S -Mexican energy scenarios inform decision-making about renewable energy integration and crossborder energy markets and establish the analytical framework for long-term strategic thinking about a shared North American energy future The U S Department of Energy Natural Resources Canada and Mexico’s Secretariat for Energy are also supporting a 3-year effort through the North American Renewable Integration Study NARIS to share data and enable modeling and analysis of coordinated planning and operations across North America under high-market-penetration renewable energy scenarios The ReEDS United States Canada and Mexico models will be used to inform the NARIS study scenarios The NARIS study will be completed in 2018 QER Report An Integrated Study of the U S Electricity System January 2017 6-17 Chapter VI Enhancing Electricity Integration in North America Figure 6-6 Possible Long-Term Impacts of Cross-Border Transmission on Regional Generation Mix in the United States 2018–2040 in the Regional Energy Deployment System Model Under a low-carbon future scenario results from ReEDS show that transmission with Canada becomes increasingly important for sustaining emissions reductions and has a significant impact on the generation mix in border regions In ISO New England greater crossborder transmission capacity reduces domestic natural gas generation In New York ISO additional transmission capacity with Canada is associated with an increase in domestic renewable generation Though not scenario-based complementary qualitative analyses Table 0-2 can allow policymakers to understand the current status of integration and the relevance of specific factors to impact cross-border trade opportunities 6-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table 6-2 Analysis of Variables That Have Led to Current Levels of Cross-Border Trade in CrossBorder Trade Relationships Pacific Northwest Criteria Midwest NYISO Can ISO-NE Quebec CaliforniaBaja ERCOTMexico Integration enhances electric reliability Coordination in crossborder operations and planning Economic opportunities stimulate greater crossborder trade flows Regulatory certainty transmission access agreements Sufficient transmission capacity Clean Energy Climate incentives stimulate crossborder trade Color Legend Sufficient for needs in an expanded trade scenario Sufficient for current needs Moderately available expansion adjustment already in process Present but insufficient for current needs Not present N A The analysis done by the Office of Energy Policy and Systems Analysis demonstrates the variables that have contributed to differences in the level of cross-border integration observed in each cross-border interaction with robust cross-border integration between the United States and Canadian counterparts and less developed integration between the United States and Mexico Cross-border ties with Arizona and New Mexico were not included due to their small capacity Table 0-2 assesses the degree to which cross-border electricity trade in each region has met the criteria that must be present in order to increase international trade in electricity Cross-border trade in electricity must provide for customer demand across the border enhance reliability provide sufficient transmission capacity coordinate cross-border operations and planning and provide regulatory certainty Additionally incentives for clean energy can also influence cross-border trade and have been included in this table Looking at the assessment it is clear that some key factors required for enhanced integration are still emerging on the U S -Mexico border while supporting factors for cross-border trade in regions shared by the United States and Canada are already in place This table points also to areas for further work and cooperation among regional stakeholders and governments including for transmission capacity development Explanation of Policy Option Types 6 5 2 1 Engagement Engagement between Canada Mexico and the United States will serve to align national objectives For example trilateral and bilateral dialogues or mechanisms for cooperation including the North American Leaders’ Summit North America Energy Ministers’ Meetings and the Working Group on Climate Change and Energy trilateral and bilateral memoranda of understanding the U S -Canada Regulatory QER Report An Integrated Study of the U S Electricity System January 2017 6-19 Chapter VI Enhancing Electricity Integration in North America Cooperation Council and bilateral dialogues with Canada U S -Canada Clean Energy Dialogue U S Canada Energy Consultative Mechanism and Mexico U S -Mexico High Level Economic Dialogue U S Mexico Task Force on Clean Energy and Climate Policy U S -Mexico Bilateral Framework on Clean Energy and Climate Change provide a comprehensive set of diplomatic and working group opportunities for leaders to provide a high-level commitment to action establish national priorities establish working groups and task forces to explore specific topics in greater detail and coordinate developments internationally Additionally meetings of leaders at which commitments are made including the recent goal of 50 percent clean power generation by 2025 for North America can provide an important forum for engagement All of these efforts can help to align development and technical assistance efforts expand networks beyond governments to include key stakeholders from the private sector and other relevant power sector institutions or multilateral development institutions and stimulate new interest in analysis of other policy options Descriptions of recommended engagements to enhance North American electricity integration can be found in Chapter VII A 21st Century Electricity Sector Conclusions and Recommendations 6 5 2 2 Analysis The extraordinary complexity of the North America bulk power system means that policymakers and other stakeholders will require robust and extensive analysis to understand the implications of any specific action Three main elements comprise what is necessary for analysis    Access to consistent energy information and data from all three countries including information regarding generation transmission and distribution functions and expansion plans electricity flows and pricing Access to information on existing policy regulatory and operational features of the power system at the national state provincial ISO and local levels Rigorous power-sector modeling capabilities that can provide estimates of economic environmental social and operational benefits and costs at varying levels of detail Descriptions of analyses that will enhance North American electricity integration can be found in Chapter VII A 21st Century Electricity Sector Conclusions and Recommendations 6 5 2 3 Specific Policy-Level Actions Finally at the most granular level specific policies can be implemented strengthened or adjusted to support enhanced integration These policy actions range from domestic financial incentives that affect cross-border trade e g tax policy export tariffs clean energy incentives to regulatory frameworks that could be improved to ensure more coordinated yet robust functioning of existing governance e g permitting processes Descriptions of policy actions that will enhance North American electricity integration can be found in Chapter VII A 21st Century Electricity Sector Conclusions and Recommendations 6-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Endnotes 1 EPSA Analysis DOE Department of Energy “Brief Historical Background ” in Electricity in North America Washington DC DOE 2016 70–71 2 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 3 “INDCs as communicated by Parties ” United Nations’ Framework Convention on Climate Change accessed December 30 2016 http www4 unfccc int submissions indc Submission%20Pages submissions aspx “Canada’s INDC Submission to the UNFCCC ” United Nations’ Framework Convention on Climate Change accessed December 30 2016 http www4 unfccc int Submissions INDC Published%20Documents Canada 1 INDC%20-%20Canada%20-%20English pdf “Mexico Intended Nationally Determined Contribution ” United Nations’ Framework Convention on Climate Change accessed December 30 2016 http www4 unfccc int Submissions INDC Published%20Documents Mexico 1 MEXICO%20INDC%2003 30 2015 pdf “U S Cover Note of Intended Nationally Determined Contribution and Accompanying Information ” United Nations’ Framework Convention on Climate Change accessed December 30 2016 http www4 unfccc int Submissions INDC Published%20Documents United%20States%20of%20America 1 U S %20Cover% 20Note%20INDC%20and%20Accompanying%20Information pdf 4 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 5 “Database of State Incentives for Renewables Efficiency® – DSIRE ” North Carolina Clean Technology Center Department of Energy and North Carolina State University accessed December 29 2016 http www dsireusa org 6 “Canadian Hydropower Facts ” Canadian Hydropower Association accessed June 10 2016 https canadahydro ca facts 7 Jordan Bakke Zheng Zhou and Sumeet Mudgal Manitoba Hydro Wind Synergy Project Midcontinent Independent System Operator June 2013 https www misoenergy org _layouts MISO ECM Download aspx ID 160821 8 “2015 Electricity Exports and Imports Summary ” National Energy Board last modified December 1 2016 https www nebone gc ca nrg sttstc lctrct stt lctrctysmmr 2015 smmry2015-eng html#ntbt1 9 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 10 “Electric System Operating Data ” Energy information Administration Hourly Electricity Data from form 930 6 9 2015 to 5 19 2016 Maximum capacity data from OATI OASIS figures and Department of Energy Office of Electricity Transport Limits in Export Authorizations accessed May 2016 http www eia gov beta realtime_grid # summary demand end 20161229 start 20161129 11 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 12 “Energy Transition Law Ley de Transición Energética –LTE ” International Energy Agency last modified March 11 2016 http www iea org policiesandmeasures pams mexico name-153753-en php 13 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 14 Energy Information Administration “Memorandum of Understanding among the Department of Energy of the United States of America and the Department of Natural Resources of Canada and the Ministers of Energy of the United Mexican States Concerning Cooperation on Energy Information Washington DC Department of Energy December 2014 https www eia gov special trilat pdf DOE-NR_Canada-United_States_Mexican_MOU_Energy%20Information_12-152014 pdf QER Report An Integrated Study of the U S Electricity System January 2017 6-21 Chapter VI Enhancing Electricity Integration in North America 15 “Memorandum of Understanding among the Department of Energy of the United States of America and the Department of Natural Resources of Canada and the Ministers of Energy of the United Mexican States Concerning Climate Change and Energy Collaboration ” Natural Resources Canada last modified February 12 2016 https www nrcan gc ca energy international nacei 18102 16 “Memorandum of Understanding among the Department of Energy of the United States of America and the Department of Natural Resources of Canada and the Ministers of Energy of the United Mexican States Concerning Climate Change and Energy Collaboration ” Natural Resources Canada last modified February 12 2016 https www nrcan gc ca energy international nacei 18102 17 United Mexican States’ Energy Transition Law 2015 Article 3 XXIX “Goals ” accessed December 29 2016 http dof gob mx nota_detalle php codigo 5421295 fecha 24 12 2015 18 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 19 EPSA Analysis DOE Department of Energy “Section 3 Index of Current Status of North America Power Generation ” Electricity in North America Washington DC DOE 2016 21–66 20 EPSA Analysis DOE Department of Energy “Section 3 Index of Current Status of North America Power Generation ” Electricity in North America Washington DC DOE 2016 21–66 21 EPSA Analysis DOE Department of Energy “Case Study Minnesota Power and Manitoba Hydro Hydro Firming of U S Wind Power ” Electricity in North America Washington DC DOE 2016 80–2 22 Owen Zinaman Eduardo Ibanez Donna Heimiller Kelly Eurek and Trieu Mai “Findings from Scenario 2 3 4 ” Modeling the Value of Integrated Canadian and U S Power Sector Expansion” Golden CO National Renewable Energy Laboratory September 2016 http www nrel gov docs fy15osti 63797 pdf 23 EPSA Analysis DOE Department of Energy “The Economic Benefits of Reforms the Mexican Industrial Sector ” Electricity in North America Washington DC DOE 2016 100 24 EPSA Analysis DOE Department of Energy “Case Study Export Opportunities for ERCOT ” Electricity in North America Washington DC DOE 2016 102–7 25 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 26 “Canada’s Electricity Industry ” Canadian Electricity Association May 30 2015 http www electricity ca media Electricity101 Electricity101 pdf 27 “2014 Electricity Exports and Imports Summary ” National Energy Board Figure 2 Annual Canadian Electricity Imports Purchases 2005-2014 last modified December 1 2016 http www nebone gc ca nrg sttstc lctrct stt lctrctysmmr 2014 smmry2014-eng html 28 “2014 Electricity Exports and Imports Summary ” National Energy Board Figure 3 Annual Canadian Electricity Net Exports 2005-2014 last modified December 1 2016 http www neb-one gc ca nrg sttstc lctrct stt lctrctysmmr 2014 smmry2014eng html 29 “2015 Electricity Exports and Imports Summary ” National Energy Board last modified December 1 2016 https www nebone gc ca nrg sttstc lctrct stt lctrctysmmr 2015 smmry2015-eng html#ntbt1 30 Energy Information Administration “U S -Canada electricity trade increases ” Today in Energy Energy Information Administration July 9 2015 http www eia gov todayinenergy detail cfm id 21992 31 J T Miller Jr Foreign Trade in Gas and Electricity In North America A Legal and Historical Study New York Praeger Publishers 1970 32 Pierre-Olivier Pineau “Chapter 13 Fragmented Markets Canadian Electricity Sectors’ Underperformance ” in Evolution of Global Electricity Markets New Paradigms New Challenges New Approaches eds Fereidoon P Sioshansi Waltham MA Elsevier 2013 363–92 33 “Canada Facts ” National Geographic accessed July 15 2016 http travel nationalgeographic com travel countries canadafacts 6-22 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 34 M Ben Amor P Pineau C Gaudreault and R Samson “Electricity Trade and GHG Emissions Assessment of Quebec's Hydropower in the Northeastern American Market 2006–2008 ” Energy Policy 39 no 3 2011 1711–21 doi 10 1016 j enpol 2011 01 001 35 Alan J Krupnick Daniel Shawhan and Kristin Hayes Harmonizing the Electricity Sectors Across North America Recommendations and Action Items from Two RFF US Department of Energy Workshops Washington DC Resources for the Future 2016 http www rff org files document file RFF-DP-16-07 pdf 36 “Our History ” Independent Service Operator New England accessed July 16 2016 http www iso-ne com about what-wedo history 37 Energy Information Administration “U S -Canada electricity trade increases ” Today in Energy Energy Information Administration July 9 2015 http www eia gov todayinenergy detail cfm id 21992 38 Canadian Hydropower Facts Canadian Hydropower Association accessed June 10 2016 https canadahydro ca facts 39 K Aarons and D Vine Canadian Hydropower and the Clean Power Plan Arlington VA Center for Climate and Energy Solutions 2015 http www c2es org docUploads canadian-hydropower-04-2015 pdf 40 Jayant Sathaye Oswaldo Lucon Atiq Rahman John Christensen Fatima Denton Junichi Fujino Garvin Heath et al Renewable Energy in the Context of Sustainable Energy in IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation edited by Ottmar Edenhofer Ramón Pichs Madruga Youba Sokona Kristin Seyboth Patrick Eickemeier Patrick Matschoss Gerrit Hansen et al Cambridge MA Cambirdge University Press 2012 http www ipcc ch report srren 41 EPRI Electric Power Research Institute Quantifying the Value of Hydropower in the Electric Grid Final Report Washington DC EPRI February 2013 4-1 https www1 eere energy gov wind pdfs epri_value_hydropower_electric_grid pdf 42 M Ben Amor P Pineau C Gaudreault and R Samson “Electricity Trade and GHG Emissions Assessment of Quebec's Hydropower in the Northeastern American Market 2006–2008 ” Energy Policy 39 no 3 2011 1711–21 doi 10 1016 j enpol 2011 01 001 43 David B Patton Pallas Lee VanSchaick and Jie Chen 2013 Assessment of the ISO New England Electricity Market Potomac Economics 2014 https iso-ne com staticassets documents markets mktmonmit rpts ind_mkt_advsr isone_2013_emm_report_final_6_25_2014 pdf 44 Black Veatch Hydro Imports Analysis New England States Committee on Electricity 2013 1 http nescoe com uploads Hydro_Imports_Analysis_Report_01_Nov__2013_Final pdf 45 State House News Service “Power industry ads knock cost job impacts of Canadian hydropower ” New Boston Post April 12 2016 http newbostonpost com 2016 04 12 power-industry-ads-knock-cost-job-impacts-of-canadian-hydropower 46 “U S Natural Gas Electric Power Price ” Energy Information Administration accessed July 15 2016 http www eia gov dnav ng hist n3045us3a htm 47 EPSA Analysis DOE Department of Energy “Case Study The Champlain Hudson Power Express ” Electricity in North America Washington DC DOE 2016 83–5 48 EPSA Analysis DOE Department of Energy “Siting and Permitting of TS D Infrastructure ” in Quadrennial Energy Review Energy Transmission Storage and Distribution Infrastructure Washington DC DOE April 2015 http energy gov sites prod files 2015 08 f25 QER%20Chapter%20IX%20Siting%20and%20Permitting%20April%202015 pdf 49 GAO Government Accountability Office National Environmental Policy Act Little Information Exists on NEPA Analyses Washington DC GAO 2014 http www gao gov assets 670 662546 pdf 50 Patricia A Hoffman “Energy Department Announces Approval of Great Northern Transmission Line ” Department of Energy Office of Electricity Delivery and Energy Reliability November 16 2016 http energy gov oe articles energy-departmentannounces-approval-great-northern-transmission-line 51 Patricia A Hoffman “Energy Department Announces Approval of New England Power Link ” Department of Energy Office of Electricity Delivery and Energy Reliability December 5 2016 http energy gov oe articles energy-department-announcesapproval-new-england-clean-power-link 52 Joshunda Sanders “Improving the Transmission Permitting Process to Strengthen our Nation’s Grid ” Department of Energy September 21 2016 http energy gov articles improving-transmission-permitting-process-strengthen-our-nation-s-grid QER Report An Integrated Study of the U S Electricity System January 2017 6-23 Chapter VI Enhancing Electricity Integration in North America 53 EPSA Analysis DOE Department of Energy “Section 3 Index of Current Status of North America Power Generation ” Electricity in North America Washington DC DOE 2016 21–66 54 Jordan Bakke Zheng Zhou and Sumeet Mudgal Manitoba Hydro Wind Synergy Project Midcontinent Independent System Operator 2013 https www misoenergy org _layouts MISO ECM Download aspx ID 160821 55 Kassia Micek ERCOT Asks Lower Rio Grande Valley Residents to Limit Electric Usage S P Global Platts June 3 2015 http www platts com latest-news electric-power houston ercot-asks-lower-rio-grande-valley-residents-21550057 56 “Mexico Population Map ” Population Labs accessed June 21 2016 http www populationlabs com Mexico_Population asp 57 “Poblacion Hogares y Vivienda Cuardo Resumen ” Instituto Nacional de Estadistica y Geografia last updated November 24 2016 http www3 inegi org mx sistemas temas default aspx s est c 17484 58 “Cooperación de América del Norte en Información Energética Datos de Comercio al Exterior ” CRE-CENACE Comisión Reguladora de Energía–Centro Nacional de Control de Energía accessed June 21 2016 http base energia gob mx nacei comercio_exterior aspx 59 Clotilde Bonetto and Mark Storry “Power in Mexico A Brief History of Mexico's Power Sector ” Global Business Reports and POWER May 1 2010 http www powermag com power-in-mexico-a-brief-history-of-mexicos-power-sector 60 Raquel Bierzwinsky David Jimenez and Javier Felix Special Update A New Power Market in Mexico New York Chadbourne 2014 1 http www chadbourne com sites default files publications new_power_market_mexico_0914 pdf 61 Lisa Viscidi and Paul Shortell A Brighter Future for Mexico The Promise and Challenge of Electricity Reform Washington DC Inter-American Dialogue 2014 1 http archive thedialogue org uploads IAD9603_MexicanEnergyFINAL pdf 62 Commentary from SENER QER 1 2 Stakeholder Meeting February 25 2016 Mexico City Mexico 63 Bob Black “U S Natural Gas Exports to Mexico Taking Off ” Forbes August 3 2015 http www forbes com sites drillinginfo 2015 08 03 u-s-natural-gas-exports-to-mexico-taking-off #441508465cd9 64 Jorge Alvarez and Fabián Valencia Made in Mexico Energy Reform and Manufacturing Growth International Monetary Fund February 2015 4 https www imf org external pubs ft wp 2015 wp1545 pdf 65 Jorge Alvarez and Fabián Valencia Made in Mexico Energy Reform and Manufacturing Growth International Monetary Fund February 2015 4 https www imf org external pubs ft wp 2015 wp1545 pdf 66 Jorge Alvarez and Fabián Valencia Made in Mexico Energy Reform and Manufacturing Growth International Monetary Fund February 2015 4 https www imf org external pubs ft wp 2015 wp1545 pdf 67 Lisa Viscidi and Paul Shortell A Brighter Future for Mexico The Promise and Challenge of Electricity Reform Washington DC Inter-American Dialogue 2014 http archive thedialogue org uploads IAD9603_MexicanEnergyFINAL pdf 68 Provided by the Secretariat de Energia Mexico 69 Mexican Secretariat of Energy Programa de Desarrollo del Sistema Electrico Nacional PRODESEN 2016 https www gob mx sener acciones-y-programas programa-de-desarrollo-del-sistema-electrico-nacional-33462 idiom es 70 Energy Information Administration “Mexico electricity market reforms attempt to reduce costs and develop new capacity ” Today in Energy Energy Information Administration July 5 2016 http www eia gov todayinenergy detail cfm id 26932 71 Energy Information Administration “Wholesale Electricity and Natural Gas Market Data Current Year ” Energy Information Administration accessed July 15 2016 http www eia gov electricity wholesale 72 Mike Ford “Mexico's energy ministry projects rapid near-term growth of natural gas imports from U S ” Today in Energy Energy Information Administration May 29 2015 http www eia gov todayinenergy detail cfm id 16471 73 Mexican Secretariat of Energy Programa de Desarrollo del Sistema Electrico Nacional PRODESEN 2016 https www gob mx sener acciones-y-programas programa-de-desarrollo-del-sistema-electrico-nacional-33462 idiom es 74 Nicolas Borda and Evert Sanchez Alonso “Mexico Ministry of Energy Issues the PRODESEN 2016-2030 ” Haynesboone June 3 2016 http www haynesboone com news-and-events news alerts 2016 06 03 mexico-ministry-of-energy-issues-theprodesen-2016-2030 75 Presentation by Mexico’s Secretariat of Energy at North American Energy Minister’s Meeting Winnipeg Manitoba February 24 2016 6-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 76 Jorge Alvarez and Fabián Valencia Made in Mexico Energy Reform and Manufacturing Growth International Monetary Fund 2015 https www imf org external pubs ft wp 2015 wp1545 pdf 77 “Energy Transition Law Ley de Transición Energética –LTE ” International Energy Agency last modified March 11 2016 http www iea org policiesandmeasures pams mexico name-153753-en php 78 César Alejandro Hernández Alva Overview of Electricity Policy in Mexico presentation to the Mexican Secretariat of Energy April 2016 79 Federal Energy Regulatory Commission “Electric Power in the United States and Canada Opportunities for Regulatory and Planning Harmonization ” Resources for the Future Department of Energy Workshop October 2015 Albuquerque New Mexico 80 “Open Access Transmission Tariff OATT Reform ” Federal Energy Regulatory Commission last updated December 15 2016 http www ferc gov industries electric indus-act oatt-reform asp 81 “Government of Canada Announces Pan-Canadian Pricing on Carbon Pollution ” Government of Canada Ministry of Environment and Climate Change October 3 2016 http news gc ca web article-en do nid 1132149 82 The Canadian Press “5 things to know about Canada’s carbon pricing plans ” Toronto Star October 3 2016 https www thestar com news canada 2016 10 03 5-things-to-know-about-canadas-carbon-pricing-plans html 83 Bruce Campion-Smith “Justin Trudeau’s Liberals unveil plan to price carbon ” Toronto Star October 3 2016 https www thestar com news canada 2016 10 03 justin-trudeaus-liberals-unveil-plan-to-price-carbon html 84 Government of Mexico Tax on Fossil Fuels enacted in the Special Tax for Production and Services Law Congress of Mexico 2014 85 Michael Holder “Reports Mexico to launch carbon cap-and-trade market pilot ” Business Green August 16 2016 http www businessgreen com bg news 2468027 reports-mexico-to-launch-carbon-cap-and-trade-market-pilot 86 Natalie Schacher “Mexico announces launch of cap-and-trade pilot program ” Reuters August 15 2016 http www reuters com article us-mexico-environment-idUSKCN10R00B 87 The White House “Fact Sheet Release of the Joint United States-Canada Electric Grid Security and Resilience Strategy ” The White House Office of the Press Secretary December 12 2016 https www whitehouse gov the-pressoffice 2016 12 12 fact-sheet-release-joint-united-states-canada-electric-grid-security-and 88 The White House “Fact Sheet Release of the Joint United States-Canada Electric Grid Security and Resilience Strategy ” The White House Office of the Press Secretary December 12 2016 https www whitehouse gov the-pressoffice 2016 12 12 fact-sheet-release-joint-united-states-canada-electric-grid-security-and 89 EPSA Analysis Pacific Northwest National Laboratory “Model Compendium ” 2016 90 A Martinez K Eurek T Mai and A Perry Integrated Canada-U S Power Sector Modeling with the Regional Energy Deployment System ReEDS Golden CO National Renewable Energy Laboratory 2013 NREL TP-6A20-56724 http www nrel gov docs fy13osti 56724 pdf QER Report An Integrated Study of the U S Electricity System January 2017 6-25 VII A 21st-Century Electricity System Conclusions and Recommendations This chapter highlights many recommendations that are enablers of the modernization and transformation necessary The recommendations build on the analysis and findings in earlier QER 1 2 chapters Many of the recommendations will provide the incremental building blocks for longer-term planned changes and activities undertaken in conjunction with state and local governments policymakers industry and other stakeholders The policy research and investment choices made today will establish critical pathways for decades Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-1 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations A 21st-Century Electricity System The central finding in the second installment of the Quadrennial Energy Review QER 1 2 is as follows “As a critical and essential national asset it is a strategic imperative to protect and enhance the value of the electricity system through modernization and transformation ” Figure 7-1 Goals Objectives and Organization of QER 1 2 7 1 Key National Security and Reliability Priorities for a 21st-Century Electricity Sector The electricity sector is a complex system of overlapping interests investments and impacts that affect industry businesses consumers and communities served by electricity providers Accordingly migration from the present state to a desired outcome for the 21st-century electricity sector requires recognition of critical crosscutting factors that should be addressed as superordinate to the perspectives discussed in preceding chapters These high-level crosscutting issues and recommendations address national security reliability jurisdictional adjustments technology investments streamlined regulatory processes better gathering and use of data and analysis and realistic assistance solutions to enable key elements of a 21stcentury electricity system The Electricity System as a National Security Concern A set of actions and recommendations in the second installment of the Quadrennial Energy Review QER 1 2 address the fundamental role of the Federal Government promoting national security and ensuring the national defense To this end it is worth restating a key conclusion from Chapter I Transforming the 7-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Nation’s Electricity System The Second Installment of the QER to illustrate the essential and growing role electricity now plays in this fundamental function of the Federal Government The conclusion of a 2015 report from the Center for Naval Analyses notes “Assuring that we have reliable accessible sustainable and affordable electric power is a national security imperative Our increased reliance on electric power in every sector of our lives including communications commerce transportation health and emergency services in addition to homeland and national defense means that large-scale disruptions of electrical power will have immediate costs to our economy and can place our security at risk Whether it is the ability of first responders to answer the call to emergencies here in the United States or the readiness and capability of our military service members to operate effectively in the U S or deployed in theater these missions are directly linked to assured domestic electric power ”1 The analysis in QER 1 2 reaches a similar conclusion The reliability of the electric system underpins virtually every sector of the modern U S economy which depends on electricity—including sectors from food production to banking to health care Electricity is at the center of key infrastructure systems that support these activities—transportation oil and gas production water finance and information and communications technology Electricity-dependent critical infrastructures represent the core underlying lifeline framework that supports the American economy and society The range of goods and services that involve grid communications and two-way electricity flows including the Internet of Things IoT represents significant value creation and greatly supports and enhances our economy and global competitiveness At the same time these goods and services place new demands on the electric grid for high levels of reliability smarter components visibility analytics and system-wide planning These features and services also introduce new vulnerabilities to our electricity system e g accelerated time scales sufficient to require significant automation and cybersecurity that rise to the level of national security concerns These vulnerabilities are underscored by the October 21 2016 hacking incident of simple home devices Figure 7-2 shows the location of key data centers that support the Internet discussed in detail in Chapter I Transforming the Nation’s Electricity System The Second Installment of the QER as well as the global impacts of this event In this incident the Mirai botnet used the IoT devices including baby monitors to create the largest denial-of-service attack in history The impact of this event was amplified by the U S Domain Name System company called Dyn infecting 100 000 IoT devices deployed throughout the world Figure 7-3 2 The IoT devices in foreign countries worked together to attack a U S company This attack underscores the national security and economic vulnerabilities associated with the growing proliferation of unhardened consumer devices on the distribution network that have the potential to infect bulk power systems Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-3 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations Figure 7-2 Primary Data Centers for Major Service Providers3 Figure 7-3 October 21 2016 Hack Had Global Reach4 The global Internet is supported by a worldwide network of subsea cables and large-scale data centers operated by firms such as Amazon Google IBM and Microsoft Figure 7-2 This global reach and interconnectedness however also introduces vulnerabilities for U S assets and systems that can be affected by connected devices worldwide as was seen in the October 21 2016 “Mirai” botnet attack Figure 7-3 with blue depicting the global impacts of the attack The global exposure of the “internet of things” merits deliberate risk management activities as the electric power sector becomes increasingly interconnected with global communications networks As noted in Chapter I Transforming the Nation’s Electricity System The Second Installment of the QER and worth repeating here Congress has recognized the national security implications of the electricity system in the Fixing America’s Surface Transportation Act FAST Act passed in December 2015 To place the recommendations in QER 1 2 in context it is important to repeat key language in the Act The FAST Act gives the Secretary of Energy new emergency authorities for “critical electric infrastructure ” where upon a directive from the President the Secretary may “with or without notice hearing or report issue 7-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 such orders for emergency measures as are necessary…to protect or restore the reliability of critical electric infrastructure or of defense critical infrastructure during an emergency ” These authorities apply to “the occurrence or imminent danger of italics added …electronic communication or an electromagnetic pulse or a geomagnetic storm event that could disrupt the operation of those electronic devices or communications networks including hardware software and data that are essential to the reliability of critical electric infrastructure or of defense crucial electric infrastructure…the disruption of the operation of such devices or networks with significant adverse effects on the reliability of critical electric infrastructure or of defense critical electric infrastructure…a direct physical attack on critical electric infrastructure or on defense critical infrastructure and significant adverse effects on the reliability of critical electric infrastructure or of defense critical electric infrastructure as a result of such physical attack ”5 Four essential observations about these provisions should be noted First there are in effect anticipatory authorities in the law described in the FAST Act as events that present “imminent danger ” Second the provisions of the law are all tied to the reliability of critical electric infrastructure directly linking reliability to security the new security authorities of the President and Secretary of Energy cover security events that affect reliability to inform imminent threats they must also encompass cyber electromagnetic pulses EMPs or geomagnetic disturbance events that threaten security Third the increasing reliance of the electricity system on natural gas—it is now the number one primary fuel source for power generation for the first time in the Nation’s history—makes security information about related gas infrastructures a critical component for decision making under the FAST Act Finally cyber threats do not respect jurisdictional boundaries Figure 7-4 clearly illustrates the interconnectedness of the electricity system the national security responsibilities included in the FAST Act must be addressed without regard to jurisdictional boundaries Figure 7-4 Current Jurisdictional Boundaries and the Security of the Electricity System 6 The U S electricity sector regulatory authorities are generally split between the Federal Government for generation and transmission assets and states for distribution networks The recently passed FAST Act specifies federal authorities to address critical electric infrastructure emergencies Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-5 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations In addition the interconnectedness of our modern grid was underscored by the Supreme Court’s decision on Federal Energy Regulatory Commission FERC Order No 745 While the Court’s majority opinion on Order No 745 acknowledged that FERC in this order only addressed wholesale markets it also noted “It is a fact of economic life that the wholesale and retail markets in electricity as in every other known product are not hermetically sealed from each other…To the contrary transactions that occur on the wholesale market have natural consequences at the retail level And so too of necessity will FERC’s regulation of those wholesale matters…When FERC regulates what takes place on the wholesale market as part of carrying out its charge to improve how that market runs then no matter the effect on retail rates the Federal Power Act imposes no bar ”7 Recent FERC actions are designed to address and clarify key security issues as well as issues raised by two-way flows and a modern electricity system FERC has issued an order pursuant to the FAST Act to control the availability of sensitive critical energy infrastructure information on “production generation transmission and distribution of energy ” noting that a single critical energy infrastructure information process is “…the most efficient way to fulfill the statutory mandate of the FAST Act and to avoid any confusion that could result from different processes for different types of critical infrastructure information ”8 FERC has also taken steps to enable the aggregation of storage including at customer facilities examining the need to develop participation models consisting of market rules 9 Integrated Planning Needed to Address National Security Imperatives of the Electricity System National security investments regardless of scale are costs that should be born in part by the Federal Government acting on behalf of all Americans Sorting out how costs should be allocated will be a critical success factor in achieving and sustaining a secure grid throughout this century New authorities must come with appropriate budgets for Federal responsibilities and costs to be carried by ratepayers must be made explicit as well Managing investment requirements while keeping affordability in mind must be a key concern of the Federal Government While most analysts do not think that these costs will cause rate shocks having mechanisms for clearly articulating the associated Federal and ratepayer costs will be important for security and public acceptance QER 1 2 discusses the limits of existing reliability and resilience planning methodologies and processes in Chapter IV Ensuring Electricity System Reliability Security and Resilience There are many planning methods currently used by utilities ranging from integrated resource planning to more-focused procurement planning Despite the breadth and depth of current and emerging planning methods there are gaps in standards operational definitions and geographic scope There are also several levels of planning as well such as state-level regulatory planning state energy office planning independent system operator regional transmission organization regional planning North American Electric Reliability Corporation NERC region planning and FERC planning requirements which affect all entities regulated by FERC Still when aligned with a map of the Nation there are no adopted common demarcations that enable consistent and seamless planning related to grid security that can serve the need for a national security overlay 7 1 1 Key Crosscutting Recommendations to Support the Security and Reliability of the Electricity System Protect the Electricity System as a National Security Asset The Federal Power Act provides a statutory foundation for an electricity reliability organization to develop reliability standards for the bulk power system Pursuant to this authority FERC has certified NERC as the Electric Reliability Organization Under this arrangement NERC and FERC have put into place a 7-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 comprehensive set of binding reliability standards for the bulk power system over the past decade including standards on cybersecurity and physical security However the Federal oversight authority is limited FERC can approve or reject NERC-proposed reliability standards but it cannot author or modify reliability standards The nature of a national security threat however as articulated in the FAST Act stands in stark contrast to other major reliability events that have caused regional blackouts and reliability failures in the past In the current environment the U S grid faces imminent danger from cyber attacks Widespread disruption of electric service because of a transmission failure initiated by a cyber attack at various points of entry could undermine U S lifeline networks critical defense infrastructure and much of the economy it could also endanger the health and safety of millions of citizens Also natural gas plays an increasingly important role as fuel for the Nation’s electricity system a gas pipeline outage or malfunction due to a cyber attack could affect not only pipeline and related infrastructures but also the reliability of the Nation’s electricity system 1 Amend Federal Power Act authorities to reflect the national security importance of the Nation’s electric grid Grid security is a national security concern—the clear and exclusive purview of the Federal Government The Federal Power Act as amended by the FAST Act should be further amended by Congress to clarify and affirm the Department of Energy’s DOE’s authority to develop preparation and response capabilities that will ensure it is able to issue a grid-security emergency order to protect critical electric infrastructure from cyber attacks physical incidents EMPs or geomagnetic storms In this regard Federal authorities should include the ability to address two-way flows that create vulnerabilities across the entire system DOE should be supported in its development of exercises and its facilitation of the penetration testing necessary to fulfill FAST Act emergency authorities In the area of cybersecurity Congress should provide FERC with authority to modify NERC-proposed reliability standards—or to promulgate new standards directly—if it finds that expeditious action is needed to protect national security in the face of fast-developing new threats to the grid This narrow expansion of FERC’s authority would complement DOE’s national security authorities related to grid-security emergencies affecting critical electric infrastructure and defense-critical electricity infrastructure This approach would maintain the productive NERC-FERC structure for developing and enforcing reliability standards but would ensure that the Federal Government could act directly if necessary to address national security issues 2 Collect information on security events to inform the President about emergency actions as well as imminent dangers DOE should collect targeted data on critical cyber physical EMP and geomagnetic disturbance events and threats to the electric grid to inform decision making in the event of an emergency or to inform the anticipatory authorities in the FAST Act DOE should concurrently develop appropriate criteria processes and definitions for collecting these targeted data using a dedicated information protection program to safeguard utility data consistent with FERC rules Reporting will be done on a confidential basis Updating will be required to address evolving threats DOE will coordinate the development of analytical data-surveillance and dataprotection tools with the National Labs states universities industry Federal agencies and other organizations as appropriate 3 Adopt integrated electricity security planning and standards FERC should by rule adopt standards requiring integrated electricity security planning on a regional basis to the extent consistent with its statutory authority Such requirements would enhance DOE’s effectiveness in carrying out its responsibilities and authorities to address national security imperatives and new vulnerabilities created by 1 two-way flows of information and electricity and 2 the transactive Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-7 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations role of customers and key suppliers such as those providing stored fuel for strategic generators Important national security considerations warrant careful consideration of how generation transmission distribution and end-user assets are protected from cybersecurity risks Vulnerabilities of distribution and behind-the-meter assets which may provide an increasing number of potential entry points for access to utility control systems are threats that can adversely affect the operation of the transmission system for these vulnerabilities a careful review of protections is required To adequately address and support the security requirements of the FAST Act and DOE’s implementation of the FAST Act this review should be performed on an integrated basis rather than separating the review into bulk power system and other assets To ensure that there are no unnecessary vulnerabilities associated with state-to-state or utilityto-utility variations in protections integrated electricity security planning should be undertaken to cover the entire United States including Alaska Hawaii and U S territories FERC should consider having existing regional organizations undertake such planning as it deems appropriate FERC should evaluate whether the costs of implementing security measures identified in the integrated electricity security plan are appropriate for regional cost allocation where such measures are found to enhance the security of the regional transmission electric system To the extent necessary appropriate statutes should be amended to clearly authorize FERC to adopt such integrated electricity security planning requirements However FERC should immediately begin to advance this initiative to the maximum extent possible under its current authority by initiating a dialogue including discussions with DOE and state authorities and driving consensus on Integrated Electricity Security Plans 4 Assess natural gas electricity system infrastructure interdependencies for cybersecurity protections DOE pursuant to FAST Act authorities and in coordination with FERC should assess current cybersecurity protections for U S natural gas pipelines and associated infrastructure to determine whether additional or mandatory measures are needed to protect the electricity system If the assessment concludes that additional cybersecurity protections—including mandatory cybersecurity protocols—for natural gas pipelines and associated infrastructure are necessary to protect the electricity system such measures and protocols should be developed and implemented This work should build on existing assessments including those underway at the Transportation Security Administration Increase Financing Options for Grid Modernization Estimates of total investment requirements necessary for grid modernization range from a low of about $350 billion to a high of about $500 billion 1011 Grid modernization is the platform for the 21st-century electricity system bringing significant value associated with lower electricity bills due to fuel and efficiency savings more electricity choices and fewer and shorter outages The Federal Government currently plays a role in providing tax incentives for deployment of clean energy technologies discussed further in Chapter III Building a Clean Electricity Future as well as Federal credit assistance to facilitate early deployment of innovative technologies 5 Expand DOE’s loan guarantee program and make it more flexible to assist in the initial deployment of innovative grid technologies and systems The design of the current DOE loan guarantee program is focused primarily on financing deployment of innovative generation technologies Most DOE loan guarantee recipients for example are structured as special project entities that can raise equity outside of regulated business structures and can provide credit security in the form of power purchase agreements This financing model is not amenable to grid 7-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 modernization financing by regulated entities especially in cases of some technological uncertainty associated with initial commercial deployments In addition there will an ongoing need for innovation in grid technologies beyond the likely availability of current DOE loan guarantee authority Also the limitations of the loan program restrict the program to a very small and ever-changing portion of new transmission capacity more projects and innovation are necessary to transform the grid Modifications to the current DOE Title XVII loan guarantee program are needed to 1 reduce restrictions on numbers types of projects and timeframes e g in order to adequately address innovative transmission capacity needs and 2 provide clear statutory authority for lending to other public or public private entities that support transmission and other grid modernization projects e g state agencies regional power pools through on-lending or equity investing By their nature transmission projects especially big projects involve many entities and jurisdictions Statutory clarification is needed on indirect lending authorities to such entities for multijurisdictional projects Some of the benefits of grid modernization are realized over time as the electricity system itself is changed by technology and market innovations Additional funding resources would bridge the gap between investment costs and realization of benefits and would enable utilities to invest in grid modernization A relatively low-cost permanent Federal financing system could be established by setting up a revolving loan fund with one-time seed capital Increase Technology Demonstrations and Utility Investor Confidence The future electric grid will require that utilities deploy a wide range of new capital-intensive technologies Primary technologies are needed to support increased reliability security value creation consumer preferences and system optimization and integration at the distribution level Demonstrating the technical readiness and economic viability of advanced technologies is needed to inspire the confidence of utilities and investors 6 Significantly expand existing programs to demonstrate the integration and optimization of distribution-system technologies The complexity of the issues facing distribution systems— including new technologies the need for systems approaches and geographical differences in markets and regulatory structures—points to a significant need for multiple solution sets to enable two-way electricity flows on distribution systems enhance value maximize clean energy opportunities optimize grid operations and provide secure communications Building on existing demonstration programs and reflecting the Administration’s commitment to the doubling of Federal clean energy innovation over 5 years as part of its Mission Innovation initiative DOE should develop a focused cost-shared program for qualifying utilities to demonstrate advanced distribution system technologies at the community scale including advanced voltage control optimization systems dynamic protection schemes to manage reverse power flows communications sensors storage switching and smart-inverter networks and advanced distribution management systems including automated substations Demonstrations supported by the cost-shared cooperative agreement program would be specifically designed to inform standards and regulations and increase regulatory and utility confidence in key technologies or technology systems Under this program utilities would have to make a positive business case for projects and obtain regulatory approvals for their proposed demonstrations Preference would be given to multi-utility partnerships with diverse customer profiles and to projects that promote education and training in key academic disciplines that are Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-9 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations essential for distribution system transformation Cybersecurity plans for all projects would be required and supported by programmatic review of plans and deployments Existing DOE programs including advanced distribution management systems microgrids communications and sensors storage and cybersecurity should be leveraged to provide technical assistance regarding technological issues planning and performance evaluation and institutional needs A percentage of funding could be dedicated to small publicly-owned utilities The program should be of sufficient size to have a material impact it should start in fiscal year FY 2018 and be ramped up over the time period identified in the Mission Innovation initiative Build Capacity at the Federal State and Local Levels The 21st-century electricity system is becoming increasingly transactive and properly valuing attributes is key to an efficient system Application of lessons learned that pair economic and system analysis will lead to a power system that cost-effectively serves customers while providing nationally valued public goods e g reliability resilience and acceptable environmental performance Advances in electricity technologies i e smart grid processes and solutions require enhanced capabilities in human resources to ensure the cost-effective selection deployment and operations of key technologies 7 Provide funding assistance to enhance analytical capabilities in state public utility commissions and improve access to training and expertise for small rural electric cooperative and public power utilities Federal support should be provided to states and small utilities to enable them to better manage the increasing complexities in the electricity system such as integrating variable energy resources incorporating energy efficiency demand response DR and storage into planning developing competencies in various technologies and making investment and security decisions within uncertain parameters These issues are highly technical and require a new knowledge base and skillset often within the domain of computer sciences economics and cybernetics At the same time these entities are dealing with the workforce issues of outside recruitment or retirement across the electricity industry which are referenced in the QER DOE should build and cultivate much-needed analytical capacity at the state level over a limited period of time by allocating funding to state public utility commissions to allow them to hire new or train existing analysts with more sophisticated and advanced skills and build institutional knowledge Eligibility for state and local funding should be contingent upon demonstration of consideration for Integrated System Planning which is outlined in this chapter DOE should support these analysts through an online interactive education and training platform with access to nationally recognized experts This platform would also be available and tailored to the needs of small utilities On a national scale these actions will serve to sustain system reliability and security and bolster resilience 8 Create a Center for Advanced Electric Power System Economics DOE should provide 2 years of seed funding for the formation of a center designed to provide social science advice and economic analysis on an increasingly transactive and dynamic 21st-century electricity system The center should be modeled after the National Bureau of Economic Research and be managed by a university consortium The consortium will establish and maintain a network of experts in economics the social sciences and the electricity system these experts should be from academia industry nonprofit institutions and the National Laboratories The center will develop new methods where appropriate serve as advisor and consultant to stakeholders preparing germane analyses and foster the advancement of students and professionals who are developing expertise 7-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 in these disciplines The focus of the center will include power systems evaluation e g valuation benefit-cost and competition analysis Inform Electricity System Governance in a Rapidly Changing Environment The rapid rate of change in the electricity sector today often exceeds the ability of institutions and governance structures to respond in a manner sufficient to meet critical national goals and objectives This is particularly true in the resolution of jurisdictional disputes over responsible price formation and valuation Clarification and harmonization of roles and responsibilities for developing pricing can reduce market uncertainty facilitate the achievement of policy goals and reduce costs to ratepayers 9 Establish a Federal advisory committee on alignment of responsibilities for rates and resource adequacy DOE in collaboration with the National Association of Regulatory Utility Commissioners should convene a Federal advisory committee that reports to the Secretary or the Secretary’s designee to examine potential jurisdictional concerns and issues associated with harmonizing wholesale and retail rates and tariffs This advisory committee will evaluate and make recommendations where appropriate on the way in which the organized markets reflect state policy pricing mechanisms for maintaining resource adequacy state and Federal roles in pricing and operation of distributed energy resources DERs storage and microgrids the role of aggregators and mechanisms for implementing consumer protection across the various markets and jurisdictions The advisory committee will represent a broad cross-section of industry and stakeholders An annual report will be prepared by this advisory committee for the Secretary that identifies the impact of governance issues and recommends solutions 7 2 Maximizing Economic Value and Consumer Equity Consumer options for electricity services have grown dramatically enabled in part by the smart grid and the IoT and supported by significant consumer demand New consumer options range from building efficiency technologies that reduce consumer costs for high-quality electricity services to distributed generation DG technologies to technologies for dynamic energy management In addition to technology options different utility business models also have a significant impact on consumer value and compensation Utilities still provide a majority 84 percent of the electricity supplied nationwide 12 however in the 16 states and the District of Columbia where retail competition is allowed 58 percent of industrial load 44 percent of commercial load and 7 percent of residential load have switched to Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-11 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations competitive energy suppliers 13 These technologies can create value for both grid operators and consumers adequate and accurate valuation of these new services is essential for maximizing their value As noted in Chapter IV Ensuring Electricity System Reliability Security and Resilience these two-way flows are affecting both consumer demands for reliability as well as reliability requirements for grid operations The key components of both consumer and grid reliability are highlighted in Figure 7-6 Figure 7-5 Electric Service Reliability Increasingly Interactive between Grid and Consumer The development and adoption of new consumer technologies and services have dramatically outpaced those of the grid The electricity sector is adapting to the demands placed on the grid by the two-way flows with new market structures technological solutions interconnection and reliability standards and complex grid controls enabled by wide-spread operational data The evolution of technologies and services on both sides of the grid will likely continue at the same or an accelerated pace Maintaining—or increasing—grid reliability in the midst of these changes will require new approaches in both the public and private sectors Acronyms supervisory control and data acquisition SCADA distribution management system DMS outage management system OMS advanced metering infrastructure AMI heating ventilation and air conditioning HVAC The two-way flows and different expectations about reliability between consumers and grid operators can benefit both grid operators and consumers if flows are transactional and collaborative In the alternative two-way flows can significantly complicate grid operations Grid operators must adapt to increased consumer options that can both positively and negatively affect grid reliability by changing their systems processes and technologies Only when the depth of grid and consumer interdependencies are understood equally by each group can the 21st-century electricity sector be fully realized 7-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Tailor and Increase Tools and Resources for States and Utilities to Effectively Address Transitions Underway in the Electricity System States and electric utilities are responsible for making critical decisions regarding how to improve the reliability affordability and sustainability of the electric grid and officials from state agencies and utilities provided comments as part of the QER stakeholder process on the Federal role in informing these decisions Technical assistance improved regional consideration in program offerings and new analysis for decision making will allow the Federal Government to respond to the needs of states and utilities in ensuring consumer value and equity in the electricity system of the 21st century 10 Improve energy management and DR in buildings and industry Communication-capable and programmable energy management systems that monitor and control energy using appliances and equipment have demonstrated substantial potential to reduce both volumetric kilowatthours and peak kilowatt electricity demand delivering significant economic value and service benefits to both consumers and utilities This joint DOE–Environmental Protection Agency EPA initiative could further accelerate the deployment of communications-capable control systems that can deliver improved energy management and DR for residential buildings small to medium commercial buildings and comparable industrial facilities 11 Create a multi-sector initiative to improve efficiency of miscellaneous electric loads through research and development R D testing labeling targeted incentives and minimum standards Miscellaneous electric loads are a broad rapidly growing and poorly understood group of end users which can be addressed by building on existing DOE and EPA efforts Working with utilities states manufacturers and other key stakeholders this DOE Energy Information Administration EIA and EPA initiative could gather data set priorities and take action to increase R D improve testing and labeling and implement targeted incentives and minimum standards to improve the efficiency and management of miscellaneous electric loads in the residential commercial and industrial sectors 12 Increase Federal support for state efforts to quantitatively value and incorporate energy efficiency DR distributed storage and DG into resource planning DOE and EPA should leverage existing programs to provide targeted capacity building and related analytical support to states on the merits of incorporating the value of energy efficiency DR distributed storage and DG in resource planning meeting environmental goals and to extract additional value from advanced metering infrastructure networks and resulting data and digital services 13 Conduct an analysis of the potential for deployment of demand side energy efficiency DR DG storage technologies While numerous studies have indicated significant cost-effective potential from energy efficiency investments there is an incomplete patchwork of different energy efficiency potential studies and other distributed resources at the utility or state level that use a variety of different methodologies These studies which typically consider only energy efficiency do not take into account the potential to integrate energy efficiency investments with other consumer options such as DR DG and onsite storage—technologies to which consumers have growing access DOE with input from EPA should conduct a national demand-side resources potential study with sufficient geographic resolution to more effectively value and integrate DERs into state and national electricity policy while meeting environmental goals 14 Increase state-level clean energy financing DOE and the Department of the Treasury in coordination with other Federal agencies will identify promising practices in the types of statelevel policies mechanisms and incentives that support system evolution to a cleaner grid e g Property Assessed Clean Energy PACE financing These efforts will provide states with the tools Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-13 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations and potential solutions to better leverage state resources and deploy clean energy As part of sharing promising practices DOE and the Department of the Treasury would help standardize contracts financing structures for nontraditional project structures 15 Evaluate the potential to further increase energy savings and reduce costs to consumers and manufacturers through appliance efficiency standards DOE’s minimum appliance efficiency standards have resulted in significant energy savings for consumers and businesses across a wide range of products DOE working with the Department of the Treasury and EPA will evaluate approaches for further increasing or optimizing energy savings to consumers while reducing costs for manufacturers and consumers Expand Federal and State Financial Assistance to Ensure Electricity Access for Low-Income and Under-Served Americans Analysis indicates that electricity costs represent a disproportionate share of total income for low-income Americans Increased funding for proven state-administered programs and enhanced data and tools for targeting assistance can reduce this “electricity burden ” Ensuring that the costs of the rapid transition of the electricity system are not disproportionately borne by low-income Americans is a top priority lowincome Americans should also be able to share in the benefits from an electricity system transition 16 Increase Low Income Home Energy Assistance Program LIHEAP and Weatherization Assistance Program WAP funding Low-income Americans in areas across the country face disproportionate burdens from electricity costs Congress should increase Federal support for low-income home weatherization through DOE’s WAP over the next 5 years to weatherize 100 000 homes per year including support for training and improving auditing tools Congress should also create a mandatory contingency funding mechanism for LIHEAP as described in the President's FY 2017 budget 17 Evaluate incentives to cut electricity bills for low- and moderate-income households The Federal Government should improve the coordination between WAP and LIHEAP to ensure optimal use of resources and increased benefits to households served The Federal Government should encourage state and local governments to 1 take full advantage of the use of LIHEAP funds for weatherization 2 use the National Renewable Energy Laboratory’s solar savings-toinvestment ratio calculator to identify cost-effective areas for solar projects and 3 find other ways to make it easier for low-income households to access the long-term savings possible from energy efficiency and renewable energy In particular DOE should evaluate the impacts of utilizing WAP and LIHEAP to decrease energy bills i e from energy efficiency retrofits and installing renewable energy projects In addition state and local governments should ensure human services providers educate low-income clients receiving bill assistance about opportunities to save on their electricity bills through energy efficiency and renewable energy programs and should actively encourage participation in those programs 18 Strengthen incentives for public housing authorities to invest in renewable energy and energy efficiency Small- and medium-sized housing authorities are often unable to participate in existing energy performance contracting EPC options because of a lack of capital or interest from energy services companies This project would incentivize such public housing authorities to use existing resources to make energy upgrades by allowing them to retain energy cost savings outside of an EPC contract Congress should authorize a pilot program to allow public housing authorities to retain a greater portion of the savings realized from investments in energy efficiency and renewable energy The Office of Public and Indian Housing at the Department of Housing and Urban Development HUD would focus the pilot on strengthening incentives for housing 7-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 authorities especially smaller and medium-sized housing authorities to invest their Capital Fund dollars in energy efficiency or renewable energy The pilot would provide an alternative to the long-standing EPC program which has primarily served larger housing authorities 19 Improve HUD data and utility benchmarking In order to reduce taxpayer costs on tenant utility bill allowances Congress should enact legislation allowing HUD and property owners to access whole-building aggregated energy consumption and expenditure data for HUD-assisted properties i e whole-building utility data and appropriate funding for HUD to implement its utility benchmarking strategy including building out the information technology IT systems needed to link current systems with benchmarking software 20 Encourage public-private partnerships to underwrite and support clean energy access for lowand moderate-income households The Federal Government should align public funding programs and encourage private-sector investment to help make energy efficiency and renewable energy accessible to households that do not qualify or are unlikely to be served by WAP The bank regulatory agencies are encouraged to publicize recently-issued Community Reinvestment Act guidance concerning loans financing renewable energy or energy efficiency improvements which help reduce operational costs and maintain the affordability of single-family or multifamily housing 21 Provide assistance to address rural islanded and tribal community electricity needs The Tribal Indian Energy Loan Guarantee Program provides loan guarantees for renewable energy on Indian land and is authorized under the Energy Policy Act of 2005 Indian lands have over 9 000 000 megawatts MW of renewable energy potential Because of the lack of capital only 125–130 MW have been built Most tribes do not meet eligibility requirements for existing loan guarantee programs Existing rural and islanded electricity systems generally rely on imported nonlocal diesel fuel oil and consequently are high cost and produce significant emissions Renewable electricity generation and other electricity technologies have the potential to lower cost and reduce emissions on such systems yet may require new technology capabilities or significant technical expertise to successfully integrate into such systems The Federal Government should increase support for grants and technical assistance to allow isolated communities that rely on expensive diesel-generated electricity to install more renewable energy such as wind small-scale hydro or solar energy Increase Electricity Access and Improve Electricity-Related Economic Development for Tribal Lands The interdependencies of electricity access health economic wellbeing and quality of life underscore the importance of universal access to electricity While recent data on electricity access on tribal lands are limited there are still areas that lack adequate access to electricity despite the Nation’s commitment to full electrification which dates back to the Rural Electrification Act of 1936 More recent anecdotal evidence suggests that the problem broadly persists It is a moral imperative that the Federal Government support tribal leadership and utility authorities to provide basic electricity service for the tens of thousands of Native Americans who currently lack access to electricity and to foster the associated economic development on tribal lands Federal agencies should also support renewable energy acceleration and economic development opportunities through renewable energy incentives workforce development financing program improvements and improved consultation with tribes 22 Support the achievement of full tribal land electrification Over 10 years and building on existing programs DOE the Department of the Interior DOI and the Department of Agriculture USDA will provide technical assistance for distribution infrastructure with the goal of supporting tribal Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-15 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations communities’ efforts to achieve complete electrification Indian tribes including Alaskan Natives on Indian lands while respecting the sovereignty and culture of tribal and Alaska Native communities DOE DOI and USDA should support development of distribution infrastructure to provide access to household electricity and electricity distribution that enables productive economic activity and public services 23 Support advanced technology acceleration and economic development opportunities for tribal lands While wind energy and solar energy have grown exponentially in recent years tribes have not been able to fully take advantage of their wind or solar resources DOE and DOI could accelerate renewable energy development on tribal lands and economic development in tribal communities through new incentives and financing support workforce development resources and enhanced consultation with tribes Strengthen Rural Electricity and Broadband Infrastructure The Federal Government has historically supported the expansion of access to affordable electricity and communications service in rural America with major initiatives continuing today mainly through USDA The lack of access to broadband in rural areas means that these consumers lack access to DR technologies such as smart meters smart thermostats and other technologies which can reduce pollution help consumers save electricity improve overall grid resilience and reliability and enhance economic development Broadband expansion into these regions would significantly advance grid modernization goals while providing significant communications connectivity and educational benefits to numerous regions of the country Supporting broadband access in sparsely-populated rural areas many of which are low-income areas is not however profitable for the private sector Federal support would help enhance security environmental and economic development goals 24 Leverage utility broadband build-out to expand public broadband access in rural areas Many rural areas presently lack access to public broadband service required to take advantage of these consumer smart grid technologies The Federal Government should continue to modernize Federal programs to expand support for rural broadband smart grid and smart home technologies USDA should update guidance for the Rural Development Community Facility Program to make broadband projects eligible revise regulations to expand eligibility for the Rural Utilities Service RUS Telecommunications Program and expand financing for smart grid and communications improvements for energy management in the RUS Electric Program 25 Increase opportunities for small and rural utilities to utilize USDA’s electricity financing programs USDA should develop and implement a strategy to remove barriers to participation in its RUS financing program for energy efficiency and renewable energy investments which would support Congress’ intent to provide Federal financial support for ratepayers served by small and rural utilities DOE and USDA should strengthen collaboration on strategic priorities including developing a strategy to increase the use of USDA's financing programs by borrowers and supporting the technical needs of small and rural utilities in part through their industry stakeholders 26 Improve the competitiveness of USDA’s financing for small and rural utilities Congress should give USDA’s RUS the authority to refinance its loans to small and rural utilities to keep their competitiveness and reflect economic changes in the broader economy Congress should undertake legislative action to unlock USDA’s renewable energy financing under Section 317 c of the Rural Electrification Act 7-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7 3 Enable a Clean Electricity Future Achieving a clean affordable and reliable electricity sector for the 21st century is a key national objective The transition for accomplishing this objective is complicated and will require major changes in the generation resource mix in the valuation of key services and in the way the grid is operated Managing this complex set of changes while ensuring affordability reliability and security for electricity consumers will require focused investments incentives and policies in key areas including the following optimizing the management of many different types of generation enhancing the visibility integration and valuation of load-shaping and consumer technologies enabling the development and diffusion of distributed and utility-scale storage technologies managing the large-scale integration of variable energy resources and DERs into grid operations and supporting the ongoing need for dispatchable baseload generation This transition will also require a core investment in operational and predictive analytics including control algorithms and granular grid visualization tools Clean electricity options from generation to end use need to be advanced through a combination of additional research development and demonstration RD D across the portfolio of solutions and additional policy that encourages the most cost-effective options Transform the Electricity System through Leadership in National Clean Electricity Technology Innovation Private-sector investment in clean energy technology faces many barriers for example prices do not reflect the costs and benefits of clean energy investments are made in a highly regulated environment and there are high capital costs and lengthy time horizons for R D and capital stock turnover in comparison to many other sectors e g IT Increased investments in electricity technology innovation are essential for the transformation of the electricity system Federal investments have a history of success and have been leveraged by the private sector to create significant economic value case studies on nuclear energy shale gas and solar photovoltaic power among many other electricity-related technologies demonstrate the instrumental role of Federal investment in early-stage R D 27 Significantly Increase Federal investment in clean electricity RD D The current scale and speed of clean electricity innovation is well short of what is needed for meeting the Nation’s clean energy and climate goals yet there are a series of barriers to the private sector investing adequate Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-17 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations amounts on its own The American Energy Innovation Council in 2010 identified specific needs for government involvement in accelerating energy innovation and recommended that Federal clean energy funding be more than tripled as the minimum level required to maintain America’s competitive edge Pursuant to the Mission Innovation initiative the Federal Government should double clean energy R D funding across all relevant Federal agencies from $6 4 billion to $12 8 billion between FY 16 and FY 21 28 Implement regional clean energy innovation partnerships Create cost-shared technologyneutral innovation partnerships based in multi-state regions intended to accelerate clean energy R D including electricity by tailoring project portfolios to the needs opportunities innovative capabilities and intellectual and economic infrastructure of those regions The FY 17 DOE Mission Innovation request includes initial funding of $110 million for regional partnerships 29 Expand clean electricity innovation analysis and tools Improve the data metrics analysis and tools used to plan DOE’s investments in clean energy innovation Although there is substantial research on the value and impact of innovation for individual technologies there are few robust measures and quantitative assessments of energy innovation Enhanced energy innovation frameworks and models that include policy interactions are needed to characterize the relationship between inputs and outputs of energy innovation help inform investment and deploy scarce innovation dollars 30 Continue reducing barriers to deploy clean energy technologies Since 2008 the cost of solar wind storage and electric vehicle technologies has decreased more than 50 percent DOE should continue working to cut the costs of solar wind storage and electric vehicle technologies through their world class programs continuing to reduce the cost of solar more than 50 percent by 2030 making electric vehicles cost competitive with gasoline-powered cars by 2022 decreasing the price of energy storage and developing the next-generation wind technologies including offshore technologies and tall turbines to expand the geographic reach of cost-competitive wind 31 By 2030 reduce the electricity intensity of newly constructed residential and commercial buildings by at least 50 percent relative to typical new building construction today Buildings which last for decades account for significant portions of electricity demand and greenhouse gas emissions in the United States Ensuring highly efficient new construction will capture decades of energy savings for American families and businesses DOE in consultation with EPA should set a goal establish baselines and scale up activities to deploy energy efficient technologies and DERs in newly-constructed residential and commercial buildings Address Challenges to Large-Scale Centralized Clean Generation Regardless of the energy source there are a number of challenges to deploying large centralized power generation facilities Lower electricity prices largely related to low-cost natural gas are reducing the economic viability of other clean generation resources especially nuclear energy Nuclear power currently provides 60 percent of zero-carbon generation in the United States Hydropower is one of the oldest and most established forms of electricity generation contributing 6 percent of the electricity generated in the United States in 2015 and 19 percent of zero-carbon generation Non-hydropower renewables—including wind solar geothermal and biomass—accounted for about 7 percent of electricity generated in the United States in 2015 Each of these technologies faces a range of siting constraints licensing and permitting processes or environmental concerns which can be broad and extensive this can make new large-scale deployments difficult In some cases these deployments can take a decade or more to build A combination of Federal coordination licensing support analysis of financing opportunities and RD D can help address these barriers 7-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 32 Analyze financing for advanced large-scale generation Alternative financing and organizational structures should be explored for advanced large-scale generation including small modular reactors advanced reactors enhanced geothermal concentrated solar power offshore wind and advanced carbon capture and storage projects Many of these new larger systems require sponsors to make significant upfront capital investments and several also contain technology risk which creates barriers for lenders and regulators For example it is currently challenging for state public utility commissions to allow a regulated utility to begin construction on an advanced new nuclear or carbon capture and storage plant with guaranteed rate base recovery DOE should analyze potential opportunities to support the financing options for advanced large-scale generation by utilities and others building upon existing programs where applicable 33 Increase funding for the life-extension R D program to ensure maximum benefits from existing nuclear generation The existing DOE research program to resolve technical issues with regard to subsequent license renewals for existing nuclear plants should be significantly expanded to accommodate the expected increase in renewal applications and to enable the continued operation of existing plants through technology development as well as to improve performance and reduce costs and the use of high-performance computing to simulate reactor processes 34 Increase support for advanced nuclear technology licensing at the Nuclear Regulatory Commission Congress should provide funding to the Nuclear Regulatory Commission for the certification and licensing of advanced reactors including the development of advanced reactor certification and licensing criteria and processes and for general public outreach as reflected in the President's FY 17 budget proposal In addition Congress should authorize and fund a program at DOE to support advanced reactor license applicants especially in the development and submission of pre-applications 35 Develop environmental mitigation technologies for hydropower Increase funding for RD D to better understand and mitigate the environmental impacts of new and existing hydropower projects Continued operation of some existing facilities and deployment of new facilities depends upon demonstration and acceptance of environmental mitigation technologies and strategies for facilities of all sizes 36 Promote responsible operation optimization and development of non-Federal hydropower Organize a national dialogue to address potential licensing and re-licensing processes that would encourage the responsible operation optimization and development of non-Federal hydropower in a manner that maximizes opportunities for low-cost low-carbon renewable energy production economic stimulation and environmental stewardship to provide long-term benefits for the Nation Address Significant Energy-Water Nexus Issues Affecting—and Affected by—the Electricity System Electricity systems and water systems are in many cases interconnected Water is a critical requirement for many electricity generation technologies Two-thirds of total U S electricity generation—including many coal natural gas nuclear concentrated solar power and geothermal plants—requires water for cooling In addition carbon capture utilization and storage CCUS technologies have significant water demands Electricity is also required for water and wastewater conveyance treatment and distribution From a full-system perspective the joint reliance of electricity and water systems can create vulnerabilities e g drought impacts on thermoelectric generation and hydropower but it can also create opportunities for each system to benefit from well-designed integration Such challenges and Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-19 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations opportunities can be addressed through improved policy integration data collection modeling analysis research development demonstration and deployment RDD D and engagement with stakeholders 37 Launch an electricity-related energy-water nexus policy partnership with Federal state and local partners DOE should create an electricity-related energy-water nexus policy partnership with states related organizations local governments and other Federal agencies where appropriate this policy partnership would discuss ways to improve and better integrate existing energy and water policies with respect to goals data metrics and compliance dates Many energy and water policies are designed to address only energy or water but not both potentially leading to conflicting incentives and unintended consequences that could be avoided through more integrated policy design In support of the partnership DOE should develop an Integration Analysis Framework to map out broad system-wide benefits and potential vulnerabilities of energy-water systems integration at multiple temporal and spatial scales to inform relevant decision makers This analysis framework would serve to enable valuation of costs and benefits associated with energy-water systems 38 Support additional RDD D to reduce water requirements for carbon capture technologies Provide additional funding to complement existing efforts in technology RDD D to reduce water requirements of carbon capture systems including capture systems themselves solvents membranes materials as well as integration of the capture system with the generation plant or industrial facility Reduced water use at power plants and other industrial facilities outfitted with CCUS would lower water withdrawal and consumption out of natural water bodies and could make CCUS technology more attractive in water-scarce areas Provide Federal Incentives for a Range of Electricity-Related Technologies and Systems A package of tax incentives targeted at specific market segments can support an all-of-the-above energy strategy by helping to reduce the costs of deploying and using innovative commercially available energy technologies The economies of scale and “learning by doing” promoted by such deployments support continued technology cost reductions and greater market competition 39 Expand tax incentives for renewable electricity electric vehicles and energy efficiency Consistent with the current Administration’s Green Book proposal expand the list of technologies eligible for Federal tax incentives to include other sources of low-carbon generation beyond wind and solar extend the timeframe for the Production Tax Credit PTC and Investment Tax Credit ITC and make the PTC refundable available to otherwise eligible renewable electricity consumed directly by the producer and also available to individuals who install solar electric or solar water heating property on a dwelling In addition implement the proposed reform to the electric vehicle tax credits and extension of commercial building energy efficiency tax credits included in the President’s FY 17 budget 40 Extend the time frame and the total capacity allowed under the PTC for nuclear generation Current law provides a $0 018 kilowatt-hour production tax credit for new nuclear plants placed in service by 2020 and places a capacity cap of 6 000 MW Extend the eligibility date so that reactors placed in service after 2020 could qualify and increase the capacity cap 41 Provide tax credits for CCUS Provide a tax credit such as the proposal to create $2 billion in refundable ITCs for 30 percent of eligible CCUS equipment and infrastructure in the President’s FY 17 budget create a refundable sequestration tax credit $10 per metric ton for carbon dioxide that is stored and reused and $50 per metric ton for carbon dioxide that is stored and not reused 7-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 index to inflation or implement reforms to the existing 45Q tax credit that would achieve similar goals Expand eligibility to include industrial-sector applications of CCUS 42 Assess business model inequities associated with Federal electricity financial incentives and public-private partnerships DOE should assess the current utilization of energy tax credits by ownership type including the impact of proposed changes to the tax code on the ability of entities to utilize incentives DOE should also identify options to increase the impact of tax credits on the deployment of clean energy assets Relevant topics could include the usage of tax credits by taxexempt entities the exclusion of ITCs from normalization Federal financing for public power and rural electric cooperative utilities and the possibility for expanded use of public-private partnerships 43 Increase power purchasing authorities for the Federal Government from 10 to 20 years The Federal Government is currently subject to goals and mandates for the purchase of clean energy which if achieved can help to catalyze action in the private state and local sectors However widespread Federal Government clean energy purchases are constrained by generally applicable procurement rules that prohibit entering long-term contracts Congress should authorize all Federal agencies to negotiate 20-year power purchasing authorities for clean energy Address a Range of Power Plant Siting Issues The land-use requirements for different types of power generation reflect significant differences between the various types of infrastructure and their operational requirements 44 Evaluate and develop generation-siting best practices DOE and DOI should initiate a 2-year series of technical workshops to evaluate generation-siting best practices environmental impacts mitigation options and risk to inform decision making by developers and regulators The workshops will draw upon state and local permitting expertise and experience and will issue reports to provide developers and regulators tools and best practices for streamlining and potentially standardizing underlying requirements for environmental impact studies and siting analysis Permitting of projects should continue expeditiously during this process 45 Support improved regional and interregional transmission planning processes DOE should fund the development of a systematic monitoring program to enable valuation of new transmission facilities measure the outcomes of FERC Order Nos 890 and 1000 and develop methodologies to improve their effectiveness The objective of FERC Order No 1000 is to identify methods and approaches that enable the selection of the “best” set of transmission facilities i e the more efficient or cost-effective transmission facilities selected in a regional transmission plan for purposes of cost allocation it aims to accomplish this by 1 establishing requirements for regional transmission planning and interregional transmission coordination processes and 2 opening transmission investment to non-incumbent owners However because implementation of FERC Order No 1000 is in early stages and no systematic monitoring system is in place it is not possible to assess whether its requirements are having their intended effects Success would mean that transmission planning and cost allocation would be effectively supporting transmission while also reducing costs sustaining or improving reliability reducing congestion and or meeting transmission needs driven by public policy requirements 46 Modernize electricity transmission permitting procedures DOE should expand the domestic coverage of its Regulatory and Permitting Information Desktop RAPID Toolkit which contains information relating to critical state requirements to include the 36 states that currently have no transmission-related information in the Toolkit This would provide support for the Federal Permitting Improvement Steering Council which was tasked with modernizing Federal Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-21 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations infrastructure permitting to create efficient project delivery and improve outcomes One step in reducing complexity is providing developers government agencies tribes and other affected entities ready access to information relating to Federal and state policies and requirements that would expedite their involvement 7 4 Ensure Electricity System Reliability Security and Resilience System reliability has been an essential expectation of electricity consumers since the development of the modern electricity system Reliability is formally defined through metrics describing power availability or outage duration frequency and extent of the outage The utility industry is primarily responsible for ensuring system reliability through risk-management strategies to prevent disruptions from reasonably expected hazards Risk-management practices need to keep pace with the emerging threat environment particularly cybersecurity and severe weather associated with climate change The grid’s growing interconnectedness and incorporation of new energy resources also create new risks and vulnerabilities even as they create significant new value to all users of the electricity system For these reasons the traditional definitions of reliability alone may be insufficient to ensure future system integrity and available electricity services U S policies markets and institutional arrangements must evolve to reflect this new reality Actions and approaches are needed to integrate resilience concerns into system planning and reliability standards prioritize investments in reliability and resilience quantify the benefits of investments that address emerging or low-probability hazards broaden the range of risk-reduction options improve flexibility through activities both pre- and post-disruption and ultimately focus on maintaining and improving energy delivery outcomes for the customer under all conditions A focus on evolving hazards new metrics better analysis finer data granularity and strong interdependencies between grid operators and consumers frames the scale and scope of necessary sector transformation These challenges could be mitigated through a combination of standards risk- 7-22 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 management methods and processes and collaboration across industry state local and Federal stakeholders Support Industry State Local and Federal Efforts to Enhance Grid Security and Resilience Some types of extreme weather events are projected to increase in frequency and intensity Cyber threats to the electricity system are increasing in sophistication magnitude and frequency Physical threats remain a concern These challenges could be addressed through a combination of cost-benefit analyses standards and collaboration across industry state local and Federal stakeholders The following recommendations build upon and extend current initiatives such as DOE’s Grid Modernization Initiative and Partnership for Energy Sector Climate Resilience 47 Develop uniform methods for cost-benefit analysis of security and resilience investments for the electricity system DOE should develop methods for calculating the costs and benefits of investments in resilience solutions as well as methods for managing the risks associated with many types of high-impact low-frequency events or emerging and rapidly evolving threats related to climate change cyber or physical attacks or combined threats This could be implemented in part through the establishment of a “community of practice” for valuation of electricity-sector reliability and resilience providing a stakeholder forum for sharing current practices and developing uniform valuation methods 48 Provide incentives for energy storage Provide a financial incentive to reduce the cost and support deployment of non-emitting energy storage Qualified storage includes equipment that receives stores and delivers energy using batteries compressed air hydrogen storage including hydrolysis thermal energy storage regenerative fuel cells flywheels capacitors superconducting magnets technologies and systems that provide the verified services and benefits or technologies and systems 49 Improve and upgrade existing Federal hydropower operations Fifty percent of U S hydropower is federally owned DOE the Army Corps of Engineers and the Bureau of Reclamation should convene relevant stakeholders to identify and discuss opportunities to improve existing Federal hydropower Relevant topics to address include technology upgrades increasing generation capacity and essential reliability service capabilities operations and maintenance efficiency acquisition improvements funding flexibility and mitigating impacts from hydropower 50 Account for emerging threats in reliability planning Reliability standards and planning requirements should be updated to increase electricity-sector resilience to emerging and rapidly evolving hazards like climate change and cyber and physical threats The Federal Government should take formal steps to update reliability planning standards for the bulk power system States cooperatives and public power should update or establish new requirements for resource planning and other planning processes for distribution systems States should also update design standards for critical infrastructure and annually update Energy Assurance Plans accordingly Similarly standard making organizations e g the American National Standards Institute and the Institute of Electrical and Electronics Engineers IEEE should take steps to evaluate whether new performance standards and testing procedures are needed to ensure electrical equipment resilience to rapidly evolving hazards Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-23 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations 51 Support grants for small utilities facing cyber physical and climate threats Small utilities cover over 75 percent of the Nation’s landmass including sensitive and military installations a The combination of large service territories minimal staffing limited budgets lack of access to tax incentives and low customer density presents challenges to small utilities addressing such new and evolving threats DOE and USDA’s RUS should work together to develop risk-management tools provide grants for shared staff to implement solutions such as through joint action and or generation and transmission programs and host workshops to facilitate knowledge transfer to support small utilities as they address these challenges 52 Support mutual assistance for recovering from disruptions caused by cyber threats Utilities have a long history of providing mutual assistance in the event of traditional disruptions but as the grid becomes more reliant on digital technology cyber and cyber-physical threats present new and distinct challenges to system restoration DOE in coordination with interagency partners and industry should increase support for private-sector efforts to respond to significant cyber incidents on the electric system 53 Support the timely development of standards for grid-connected devices Common interoperability standards are critical to enabling the distribution system to accommodate the growth of grid-connected technologies at large scale and to potentially improve grid cybersecurity DOE should work with the National Institute of Standards and Technology to increase the pace of standards development so that it aligns with the rapid development and deployment of grid-connected devices 54 Support development of an enhanced reliability service class for commercial customers When there is a power failure a new and growing class of commercial customers loses significant economic value immediately The electricity demand of individual commercial customers is of insufficient scale however to support options similar to those of large industrial customers who can pay their utilities to install additional feeders to enhance service reliability This lack of scale and rate options has led some commercial customers to pursue third-party options e g storage back-up generators onsite generation to improve their electricity reliability Associated grid defections could affect the overall customer and rate base Analysis is needed to inform new rates for this class of customers DOE should encourage states to consider having utilities offer enhanced reliability through commercial service packages that provide reduced outages higher reliability and quicker recovery for interested customers 55 Improve system reliability through analysis of back-up generation best practices Many industrial commercial and residential customers utilize onsite back-up power generation during electricity disruptions There have however been several high-profile failures of back-up generation had significant impacts on consumers and businesses Also as load management grows in importance so too does the visibility of the level and reliability of back-up generation Finally key lifeline infrastructures and defense facilities depend on back-up generation DOE should conduct a nationwide study of back-up generation it should specifically identify related gaps and critical needs for consumers critical infrastructure and sensitive facilities This analysis should further consider interconnection approaches for back-up generation to improve overall system resilience and reliability through the update and adoption of IEEE 1547 interconnection standards This analysis should also take into account cost effectiveness and environmental performance DOE should consider the outcomes of this analysis and provide recommendations a Although such facilities frequently have back-up power capabilities the durability of such backups is typically limited to fuel supplies on hand 7-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 on best practices for back-up generation and how to maximize is value for grid operations lifeline networks and consumers 56 Develop guidance best practices and protocols for select categories of distribution equipment and consumer grid-interactive devices Distribution system-wide outages could be induced by disrupting interconnected DERs and their associated data feeds to the distribution grid especially during critical peak demand or by causing lasting damage to a distribution transformer DOE will do this in coordination with the National Institute of Standards and Technology and industry 57 Require states to consider the value of DERs funding for public purpose programs energy and efficiency resource standards and emerging risks in integrated resource or reliability planning under the Public Utility Regulatory Policies Act PURPA PURPA section 111 d establishes Federal standards for regulated electric utilities that State public utility commissioners must consider ” Because rates of distribution utilities are not directly regulated by the Federal Government PURPA amendments serve to preserve the legal authority of the states to amend or establish new standards Without statutorily dictating any final state decisions Congress should amend PURPA to require state public utility commissions and nonregulated utilities to consider the following 1 the costs and benefits of DERs and alternatives in rate design and integrated resource planning 2 stable funding for public purpose programs 3 energy efficiency resource standards and 4 emerging risks in integrated resource or reliability planning Improve Data for Grid Security and Resilience As the Nation increasingly relies on electricity to power the economy and support consumer options and choices the consequences of electricity outages are rising The United States currently lacks sufficient data on all-hazard events and losses Such data would help utility regulators planners and communities analyze and prioritize security and resilience investments 58 Establish Federal standards for maintaining and sharing common data on Presidentiallydeclared natural disasters and physical attacks affecting the electricity system DOE and DHS should improve the collection curation and accessibility of data related to the impacts of disasters along with detailed characterizations of the nature and cause of each disaster By improving the availability and quality of historical disaster impact data the government and its partners can develop improved risk models as well as gain the ability to more effectively locate and more clearly understand points of vulnerability within existing systems Defining data standards would increase the ability of Federal agencies to manage and share disaster impact data by making it possible to merge and query disparate data sets by common feature such as Presidential disaster declaration number Types of data that would be more readily available as a result of this effort include detailed characterization of the nature and cause of each disaster as well as the extent and degree of associated impacts such as power outages fatalities injuries property losses as well as other data to inform decision making that will help communities better prepare for and respond to future disasters 59 Enhance coordination between energy-sector information sharing and analysis centers and the intelligence communities to synthesize threat analysis and disseminate it to industry in a timely and useful manner The nature of cyberspace and its associated threats requires individuals organizations and the government to actively participate in incident response activities Increased coordination would provide deeper analysis of threats based on both classified and unclassified data available from the operational and enterprise environments Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-25 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations Encourage Cost-Effective Use of Advanced Technologies that Improve Transmission Operations Permitting and planning are necessary but complex processes that can slow transmission development and increase costs Other barriers restrain the use of new technologies that can increase transmission system capacity utilization and improve reliability and security as well as other planning priorities 60 Promote deployment of advanced technologies for new and existing transmission DOE should work with stakeholders to identify analyze and develop recommendations for removing barriers to the valuation and deployment of advanced technologies for new and existing transmission such as those that enhance reliability security and affordability through visibility and control DOE should explore a range of legislative and regulatory options and analytically test their potential effectiveness on both a stand-alone basis and a collective basis to enable deployment of technologies that cost-effectively increase existing transmission capacity utilization i e remove barriers to technology solutions that enable greater transmission utilization of existing transmission capacity In addition DOE should identify and mitigate barriers to technologies that can increase transmission capacity utilization and create a framework for future work based on the experiences of work in capacity utilization synchrophasors and storage Improve EIA's Electricity Data Modeling and Analysis Capabilities EIA provides all levels of stakeholders—government companies and customers—with data to inform the evaluation and development of policies that affect the electricity grid More timely and publicly accessible data on how system operations are changing and on how efficiency and renewable energy are specifically affecting them would facilitate the development of Federal and state policies and investments needed to ensure the reliability resilience and security of the grid Substantially improved electricity transmission data and related analyses by EIA would support significant improvements in the effectiveness of a broad range of government policies and programs including market design and transmission planning 61 Expand economic modeling capability for electricity EIA should be able to more accurately reflect the role of energy efficiency DR electricity storage and a variety of DG technologies in current and future energy consumption to better inform investments and modeled policy scenarios 62 Expand EIA data collection on energy end uses EIA should expand the scope and frequency of its data collection on energy end uses and services in the residential commercial and industrial sectors including the use of new data collection methods and tools in order to enable a more detailed representation by region income and other characteristics 63 Expand EIA hourly data collection on power system operations EIA should expand the scope of the current grid operations data collection to require 1 net generation by energy source e g coal solar wind natural gas nuclear and 2 sub-regional detail for large balancing authorities in order to inform investment decisions and provide higher-resolution and more quickly delivered data on how system operations are changing EIA should continue to evaluate new definitions for National Energy Modeling Systems Electricity Market Module 64 Expand EIA data collection on electricity transmission EIA should improve the scope frequency and resolution of transmission data collection by 1 developing an regional transmission organization independent system operator dashboard on the operation of centrally organized wholesale power markets 2 collecting and maintaining information on the utilization of the bulk transmission system that complements current data collection and 3 improving reporting on transmission investment and on the functioning and outcomes of transmission planning activities 7-26 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 to enable analysis on whether transmission policies and regulations are achieving their intended effects All proposed activities should be undertaken through processes that comply with existing data-collection protections 65 Support EIA’s collection of additional data on Electricity and water flow for water and wastewater utilities Electricity usage in delivering water services represents a significant portion of U S electricity consumption estimated at 3 to 4 percent of total electricity consumption and may present major opportunities for both efficiency and renewable generation however EIA does not currently collect this data in its surveys EIA should expand its data collection to include annual electricity and annual water flow millions of gallons by water and wastewater utilities in order to enable identification of new opportunities for electricity use and savings 7 5 The Electricity Workforce Changing Needs New Opportunities Support the Electricity-Sector Workforce The electricity sector is undergoing a number of significant shifts in structure energy sources and applications as the industry modernizes and evolves The full potential of these shifts will however only be realized if the electricity-sector workforce appropriately adapts and grows to meet the needs of the 21st-century electricity system The Federal Government has an interest in the development of this workforce 66 Support cyber-physical systems CPS curriculum training and education for grid modernization and cybersecurity The December 2010 report of the President's Council of Advisors on Science and Technology titled “Designing a Digital Future ” highlighted the unique importance and challenges of CPS such as the power grid One of the challenges with such systems is the lack of a dedicated and trained cross-disciplinary workforce skilled at comprehending designing and managing CPS This presents an acute challenge in the realm of power-sector cybersecurity where cyber and cyber-physical threats are presenting new and distinct challenges Prevention mitigation and response and recovery efforts require a workforce that understands the unique electric sector IT and operational technology systems and challenges however the industry currently faces a shortage of such workers The Federal Government—through the Department of Education DOE National Science Foundation and others—should sponsor development and deployment of CPS and cybersecurity educational curricula with community colleges universities and institutions of higher education to meet the grid-modernization needs of the 21st-century electricity system they can do this by offering grants and supporting programs for educational institutions to develop and deploy CPS and power-sector cybersecurity educational curricula 67 Enhance and align skills-based training and electricity-sector workforce development The Federal Government has multiple resources that help address the difficulty employers are experiencing in hiring skilled workers in the electricity sector To facilitate access to these Federal programs the following steps should be taken   DOE should with other Federal agencies e g the Department of Labor DOL National Science Foundation Department of Commerce Department of Education and Department of Defense coordinate Federal initiatives on electricity-sector education and training including programs to facilitate national training credentials in new electricity technologies DOL should expand its pre-apprenticeship programs Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-27 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations    DOE should expand its existing programs to increase the number of internships fellowships traineeships and apprenticeships DOE DOL and the Department of Defense should work together to create workforce opportunities for veterans to build a more inclusive workforce and to bring clean energy job training to low- and moderate-income communities DOL and DOE should develop a single resource web portal to inform industry and potential employees about the multiple Federal agency workforce development initiatives and resources 68 Support Federal and regional approaches to electricity workforce development and transition assistance Changes in the electricity sector are increasing the need for a diverse and specialized workforce To ensure electricity-sector workers maintain the capabilities required to provide for reliable and affordable electricity in a rapidly changing environment DOE in partnership with other agencies should facilitate programs and regional approaches for workforce development Federal funding and technical support should enhance existing programs on workforce diversity apprenticeship and apprenticeship-readiness programs skills-based training and education transition assistance and curriculum development Workforce assessment tools should be developed to complement training programs Federal agencies should coordinate their efforts through the interagency Energy and Advanced Manufacturing Workforce Initiative staffed by DOE Unemployed workers nearing but not yet eligible for retirement may have difficulty retraining after careers built on specialized skills that are no longer in demand in the modern electricity industry Retirement transition assistance should be provided to these workers Where possible Federal agencies should leverage existing government nongovernment labor and industry workforce consortia Meet Federal Commitments to Communities Affected by the Transformation of the Electricity Sector To achieve the transition to the electricity sector of the 21st century smoothly quickly and fairly the Federal Government should offer a synthesized package of incentives that address the needs of the most important stakeholders both within and outside of the electricity sector Many of these needs are addressed through other recommendations on this list including incentives to reduce the cost of flexible and clean assets encourage the deployment of new and improved technologies throughout the electricity supply chain and train workers for 21st-century electricity jobs Recognizing that the shift to the 21stcentury electricity system can impact communities dependent on 20th-century resources the following recommendations provide transition assistance for communities affected by the multi-decadal decline in coal production 69 Fulfill Federal commitment to fund coal miner retiree benefits Over the last 50 years coal miners have repeatedly foregone increases in wages in exchange for pension and healthcare benefits These benefits are now imperiled by 1 the recent bankruptcy of three of the largest public coal companies in America—allowing those companies to avoid fully funding their employees’ benefit funds—and 2 the declining ratio of active contributing workers relative to beneficiaries in the health and pension funds Recognizing the commitments to support coal miner retirement benefits made by the Federal Government in the 1946 Krug-Lewis Agreement the 1992 Coal Industry Retiree Health Benefit Act and the 2006 amendments to that act and also recognizing the contribution that coal miners have made to the U S economy the Administration strongly supports legislation that would transfer funds to the largest multi-employer health and pension fund serving retired coal miners and their families thereby ensuring that it can continue paying benefits 7-28 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 70 Meet the Federal commitment to appropriate sufficient funding to accomplish the mission of the Abandoned Mine Lands AML Fund DOI’s Office of Surface Mining Reclamation and Enforcement estimates that there are more than $4 billion worth of high-priority health- and safety-related abandoned coal mine lands in the United States At the same time the AML Fund has an unspent balance of $2 5 billion dedicated to reclaiming these sites The AML fees should be returned to their original 1977 levels to raise additional reclamation funds and disbursements from the AML Fund should be accelerated over the next 5 years enhancing economic development in distressed coal communities through reclamation employment 7 6 Targeted Opportunities to Enhance Electricity Integration in North America Increase North American Cooperation on Electric Grid and Clean Energy Issues Cooperation on electricity is needed to strengthen the security and resilience of an integrated crossborder electricity grid as well as to provide increasing amounts of clean energy and improve economic competitiveness across North America A clear understanding of the regulatory requirements at the Federal and state levels for the permitting of cross-border transmission facilities a sharing of best practices and an exploration of potential future cooperation on grid management issues will limit uncertainties and improve policy coordination at the multilateral and international levels This includes implementing the target established in the 2016 North American Leaders Summit to increase clean power to 50 percent of the electricity generated in North America by 2025 71 Increase U S and Mexican cooperation on reliability In 2005 the United States and Canada codified an international reliability framework based on an electricity reliability organization As Mexico moves ahead with electricity reform and looks to expand their electricity system including planning for international transmission an international commitment to reliability would signal good progress towards improved electricity system management across North America A commitment to working jointly on reliability was also included in the statement from the North American Leaders Summit in June 2016 where these leaders “committed to deepened electric reliability cooperation to strengthen the security and resilience of an increasingly integrated North American electricity grid ”14 The U S Government should increase cooperation on reliability between the United States and Mexico by establishing bilateral reliability principles between the United States and Mexico 72 Advance North American grid security In December 2016 the United States and Canada released a Joint United States–Canada Grid Security Strategy framing how these two countries plan to work together to strengthen the security and resilience of the electric grid including against the growing threat from cyber attacks and climate change impacts This recommendation aims to complete that objective through sharing of best practices and exploration of potential future cooperation on grid security issues with Mexico in parallel with implementation of the Joint United States–Canada Grid Security Strategy and domestic Action Plans 73 Promote North America clean energy infrastructure development by sharing best practices for community engagement Lessons learned from sharing across regional entities can be a challenge but the Federal Government can provide a forum for that engagement This recommendation proposes that the U S Government initiate a series of high-level meetings with Canada and Mexico to share best practices relating to community engagement for clean energy infrastructure development throughout North America Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-29 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations 74 Promote permitting of cross-border transmission facilities The “Regulatory Side-by-Side Governing Permitting of Cross-Border Electricity Transmission Facilities between the United States and Canada” summarizes existing regulations as of the time of publication The document has proved incredibly useful as a resource for other analytical efforts and in informing discussion about simplifying or harmonizing regulations Expanding this work to Mexico as the energy reforms move ahead would be very helpful to developers and governments In addition highlevel meetings to improve community engagement for infrastructure can be supported by an effort at the U S Department of Energy with partners in Canada and Mexico to complete and update the Regulatory Side-by-Side and expand the Regulatory and Permitting Information Desktop RAPID Toolkit to the North America cross-border context Consistent with the “North American Climate Clean Energy and Environment Partnership Action Plan ” DOE should promote permitting of cross-border transmission facilities by expanding the Regulatory and Permitting Information Desktop RAPID Toolkit Expansion of this toolkit will enable a clear understanding of the regulatory requirements at the Federal and state levels for the permitting of cross-border transmission facilities in addition to those for bulk transmission 75 Modernize international cross-border transmission permitting processes Building upon Executive Order 13604 “Improving Performance of Federal Permitting and Review of Infrastructure Projects ” a 2013 Presidential Memorandum titled “Transforming our Nation's Electric Grid through Improved Siting Permitting and Review” aims to modernize transmission permitting processes The Presidential Memorandum directed Federal agencies to create the integrated interagency pre-application process IIP across the Federal Government 1 to help identify and address issues before the formal permitting process begins and 2 to improve coordination of permitting across Federal state and tribal governments On September 21 2016 DOE’s Office of Electricity Delivery and Energy Reliability announced a final rule for the IIP The IIP process encourages robust early coordination prior to the submission of a formal transmission permit application That includes increased engagement with DOE as a coordinating agency as well as relevant state local and tribal stakeholders The principles of the IIP have already been successfully applied to two existing and recent Presidential permit applications for clean energy transmission Building on these activities DOE should modernize international cross-border transmission permitting processes by implementing a pre-application process and update the Presidential Permitting rules 76 Increase North American clean energy and technical coordination Technical discussions have the potential to support better coordination on clean energy and climate goals primarily through the creation of more robust North American modeling capabilities and wider accounting of clean energy and carbon emissions associated with cross-border trade Technical discussions can also continue and enhance cooperation on energy information exchange across North America In addition technical discussions should focus on increasing North America wholesale electricity markets cooperation by sharing best practices for market development As North America moves towards greater integration there should be continued engagement on the cross-border impacts of climate and clean energy policies in order to limit uncertainties and improve policy coordination at the multilateral and international levels There is a need for analytical tools and models that can estimate the value of technology deployment and summarize the impacts of policies in the clean energy and climate policy space Specifically models and studies are needed to examine 1 policy levers and incentives for clean energy and technologies to achieve climate goals 2 the emissions impacts of jointly planning climate action and policies for climate and clean energy 3 the impacts of cross-border trading on clean energy development emissions and the electricity system and 4 the impacts of market policies including cross-border trading schemes for carbon 7-30 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 and emissions With new modeling capabilities and through technical discussions DOE should explore the impact of enhanced cross-border trade on greenhouse gas emissions economic development in all countries and collectively as well as system reliability Specific analysis could model market structures and examine the interplay between short-term operational flexibility and long-term financial certainty examine the impact of enhanced U S imports of Canadian hydropower on carbon emissions and U S renewable energy development examine best practices for the development of wholesale electricity markets study Mexico's integration into the Western Climate Initiative and explore impacts on the U S renewable energy industry enduse costs for consumers and the impacts of adjustments in sub-national policies on clean energy consumption across the continent Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-31 Chapter VII A 21st-Century Electricity System Conclusions and Recommendations 7 7 Endnotes 1 Center for Naval Analyses CNA Military Advisory Board National Security and Assured U S Electrical Power CNA Military Advisory Board November 2015 1 https www cna org CNA_files PDF National-Security-Assured-Electrical-Power pdf 2 Scott Hilton “Dyn Analysis Summary of Friday October 21 Attack ” Dyn October 26 2016 http dyn com blog dyn-analysissummary-of-friday-october-21-attack 3 Cisco Cisco Global Cloud Index Forecast and Methodology 2015–2020 White Paper Cisco 2016 http www cisco com c en us solutions collateral service-provider global-cloud-indexgci Cloud_Index_White_Paper html#Trend1_Global_Data_Center_and_Cloud_IP 4 Botnet Tracker Mirai Malware Tech Website accessed October 21 2016 https intel malwaretech com botnet mirai h 24 5 Fixing America’s Surface Transportation Act Pub L No 114-94 2015 https www congress gov 114 bills hr22 BILLS114hr22enr pdf 6 Peter Behr and Blake Sobczak “Grid Hack Exposes Troubling Security Gaps for Local Utilities ” E E News July 20 2016 http www eenews net stories 1060040519 7 Federal Energy Regulatory Commission FERC v Electric Power Supply Association EPSA et al October Term 2015 No 14840 https www supremecourt gov opinions 15pdf 14-840_k537 pdf 8 Regulations Implementing FAST Act Section 61003 – Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information Availability of Certain North American Electric Reliability Corporation Databases to the Commission 81 Fed Reg 93732 December 21 2016 https www federalregister gov documents 2016 12 21 201628322 regulations-implementing-fast-act-section-61003-critical-electric-infrastructure-security-and 9 Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators 81 Fed Reg 86522 November 17 2016 https www federalregister gov documents 2016 11 30 201628194 electric-storage-participation-in-markets-operated-by-regional-transmission-organizations-and 10 C Gellings Gale Horst Mark McGranaghan Paul Myrda Brian Seal and Omar Siddiqui Estimating the Costs and Benefits of the Smart Grid A Preliminary Estimate of the Investment Requirements and the Resultant Benefits of a Fully Functioning Smart Grid Palo Alto CA Electric Power Research Institute March 2011 https www smartgrid gov files Estimating_Costs_Benefits_Smart_Grid_Preliminary_Estimate_In_201103 pdf 11 John McCue Andrew Slaughter Suzanna Sanborn Kartikay Sharma Deepak Vasantl Shah Negina Rood Rob Young and James Loo From Growth to Modernization The Changing Capital Focus of the US Utility Sector Deloitte 2016 https www2 deloitte com content dam Deloitte us Documents energy-resources us-er-from-growth-tomodernization pdf 12 Mathew J Morey and Laurence D Kirsch Retail Choice in Electricity What Have We Learned in 20 Years Madison WI Christensen Associates Energy Consulting and Electric Markets Research Foundation February 2016 https www hks harvard edu hepg Papers 2016 Retail%20Choice%20in%20Electricity%20for%20EMRF%20Final pdf 13 Mathew J Morey and Laurence D Kirsch Retail Choice in Electricity What Have We Learned in 20 Years Madison WI Christensen Associates Energy Consulting and Electric Markets Research Foundation February 2016 https www hks harvard edu hepg Papers 2016 Retail%20Choice%20in%20Electricity%20for%20EMRF%20Final pdf 14 White House Office of the Press Secretary “North American Climate Clean Energy and Environment Partnership Action Plan ” White House June 29 2016 https www whitehouse gov the-press-office 2016 06 29 north-american-climate-cleanenergy-and-environment-partnership-action 7-32 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 This page intentionally left blank Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 7-33 VIII Analytical and Stakeholder Process This chapter describes the analyses and stakeholder engagement process that provided the substantive basis for this second installment of the Quadrennial Energy Review QER 1 2 The first section describes the analytical work carried out for the QER 1 2 including baselines models topical reports and white papers The second section describes how the QER 1 2 process included engagement with a broad range of stakeholders across the Nation through technical workshops seven formal public stakeholder meetings and the collection and consideration of public comments This chapter is intended to document the process of developing the QER 1 2 and to provide transparency on the methods used to develop the material in the report Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-1 Chapter VIII Analytical and Stakeholder Process Figure 8-1 Inputs to QER 1 2 This figure shows the analytical stakeholder and interagency efforts underpinning the QER 1 2 8 1 Systems Analysis The Administration-wide Quadrennial Energy Review QER is intended to enable the Federal Government to translate policy goals into a set of analytically based integrated actions over a 4-year planning horizon The White House Domestic Policy Council and Office of Science and Technology Policy jointly chair the interagency QER Task Force while the Secretary of Energy provides an Executive Secretariat in the Department of Energy’s DOE’s Office of Energy Policy and Systems Analysis EPSA The QER involves a multi-agency review process and more than 20 executive departments and agenciesa play key roles in a The members of the Task Force include 1 the Department of State 2 the Department of the Treasury 3 the Department of Defense 4 the Department of the Interior 5 the Department of Agriculture 6 the Department of Commerce 7 the Department of Labor 8 the Department of Health and Human Services 9 the Department of Housing and Urban Development 10 the Department of Transportation 11 the Department of Energy 12 the Department of Veterans Affairs 13 the Department of Homeland Security 14 the Office of Management and Budget 15 the National Economic Council 16 the 8-2 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 developing and implementing policies proposed in the QER Unlike other Federal quadrennial review processes where analysis is done every 4 years the QER is conducted through installments to allow for granular analysis of key energy subsectors Serving as Secretariat EPSA is responsible for coordinating activities related to the preparation of the report including commissioning an extensive suite of policy analysis focused on the electricity system see Figure 8-1 QER 1 2’s analysis was completed over many months through the following methods      8 2 Commissioning five baseline reports to provide an overview of the current state of the electricity system Commissioning analyses modeling synthesis and white papers from U S National Laboratories energy consultants and analytics firms Convening technical workshops with relevant stakeholders and producing write-ups of findings and stakeholder viewpoints Performing analysis and modeling within EPSA in collaboration with partners across DOE and other Federal agencies to generate analysis policy working papers and reports Meeting with EPSA and staff-level agency representatives and experts on the findings and recommendations proposed in QER 1 2 Crosscutting Analysis This section provides examples of major external analyses commissioned by EPSA that support the findings and recommendations within QER 1 2 The descriptions below categorize the analyses with the caveat that most QER 1 2 analyses are crosscutting in nature and apply to more than one energy objective or sector 8 2 1 Baselines A series of EPSA baselines were developed to provide an overview of elements of the electricity system These baselines helped inform QER 1 2 and focused on the following issue areas generation distribution end use markets and climate and environment b These baseline analyses identify major historical trends in the electricity sector and reflect the workings characteristics and issues of the current electricity system These baselines provide a foundation for the analysis of systems and policy recommendations that form QER 1 2 8 2 2 Key Reports and Studies QER 1 2 drew from multiple studies of the electricity system including but not limited to the following National Security Staff 17 the Council on Environmental Quality 18 the Council of Economic Advisers 19 the Environmental Protection Agency 20 the Small Business Administration 21 the Army Corps of Engineers 22 the National Science Foundation and 23 such agencies and offices as the President may designate b The environmental baseline was divided into four volumes in the following categories Greenhouse Gas Emissions Solid Waste and Decommissioning Energy-Water Nexus and Environmental Quality Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-3 Chapter VIII Analytical and Stakeholder Process Table 8-1 c List of Chapter Specific Analyses for QER 1 2 Title Transforming the Nation’s Electricity Sector The Second Installment of the QER Accelerate Energy Productivity 2030 Principles for Creating and Evaluating Electric System Reliability Plans in the 21st Century Cyber Threat and Vulnerability Analysis of the U S Electric Sector Energy Supply Chain Vulnerabilities Framework and Case Study Modernizing the Electric Distribution Utility to Support the Clean Energy Economy Harmonizing the Electricity Sectors across North America Electricity Distribution System Baseline Report Electricity Generation Baseline Report Residential Electricity Bill Savings Opportunities from Distributed Electric Storage Establishing the Playing Field Surveying Clean Energy-Related Economic Development Policy across the States Ensuring Electricity System Reliability Security and Resilience Assessing Cost and Benefits of Investments in Climate Resilience Utility Risk-Mitigation Strategies Scoping Analytical Tools and Methods for Vulnerability Analysis of Linked Electricity Generation and River Basin Systems Guide to Cybersecurity Resilience and Reliability for Small and Under-Resourced Utilities Resilience of the U S Electricity System A Multi-Hazard Perspective Performer NREL NREL PNNL ORNL INL ANL ORNL INL EPSA RFF PNNL NREL INL NETL EPSA NREL ORNL Deloitte ORNL Front-Line Resilience Perspectives The Electric Grid State Energy Resilience Framework NREL ORNL LANL ANL SNL PNNL BNL ANL ANL Building a Clean Electricity Future Energy Efficiency under Alternative Carbon Policies Incentives Measurement and Interregional Effects Evaluating the CO2 Emissions-Reduction Potential and Cost of Power Sector Re-Dispatch Literature Review of Studies That Includes an 80% Reduction in GHGs by 2050 Characterizing Energy Efficiency in Low-Income Communities Environment Baseline Vol 4 Energy-Water Nexus Advanced Water Metering Infrastructure NREL NREL Energetics LBNL EPSA NREL INL NETL The Electricity Sector Maximizing Economic Value and Consumer Equity Energy Efficiency Financing Programs Characterization of Regional Electric Markets Review of the Economics Literature on U S Electricity Restructuring Distributed Energy Resources and Rate Financial Analysis Recovery of Utility Fixed Costs Utility Consumer Environmental and Economist Perspectives Fixed Cost Allocations and Rate-Making Instruments to Address Distributed Energy Resources LBNL Pace Global University of California Davis EPSA LBNL EPSA The QER commissioned multiple studies across the electricity system including but not limited to these reports for specific chapters c NREL – National Renewable Energy Laboratory PNNL – Pacific Northwest National Laboratory ORNL – Oak Ridge National Laboratory INL – Idaho National Laboratory ANL – Argonne National Laboratory RFF – Resources for the Future NETL – National Energy Technology Laboratory LANL – Los Alamos National Laboratory SNL – Sandia National Laboratories BNL – Brookhaven National Laboratory GHGs – greenhouse gases LBNL – Lawrence Berkeley National Laboratory 8-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8 2 3 Technical Workshops As part of the crosscutting analysis conducted for QER 1 2 the QER Task Force flagged some topics deemed particularly complex for technical workshops to discuss further with stakeholders and industry experts Technical workshops convened subject matter experts and relevant stakeholders to provide expert insights on various elements of the electricity system through the intensive analytical approach of these 1-day and 2-day symposia Each technical workshop featured a roster of subject matter experts from industry academia the National Laboratories and other relevant organizations Below are details about the topics dates and locations of the technical workshops that DOE held to inform QER 1 2 Technical Workshop on Electricity and Information and Communication Technologies Convergence June 15 2015 – Washington D C DOE hosted a technical workshop to understand stakeholder issues on electricity and information and communications technology ICT The workshop sought to inform the completion of the Pacific Northwest National Laboratory white paper commissioned by DOE The Emerging Interdependence of the Electric Power Grid and Information and Communication Technology The second focus of the workshop was to elicit additional electricity and ICT research and policy-analysis topics for potential examination within DOE The workshop included participants from utilities industry stakeholders energy associations and regulators The goal of this meeting was to leverage the inherent synergies between DOE’s research and policy functions and gather expert input Specifically this workshop concerned the current status of deployment of electricity and ICT infrastructure as well as trends and developments in market places technologies and regulations Electric Power in the United States and Canada Opportunities for Regulatory Harmonization October 20 2015 – Boise Idaho October 27 2015 – Albuquerque New Mexico DOE sponsored a workshop hosted by Resources for the Future—in concert with the International Institute for Sustainable Development and Boise State University—looking at the electricity sectors in the United States and Canada The workshop had several purposes 1 to identify gaps best practices and inconsistencies with regulations and electricity-system planning across the United States Canada and Mexico 2 to inform the creation of legal regulatory and policy roadmaps for harmonizing regulations and planning and 3 to bring together individuals who can help implement greater harmonization The two workshops examined policies regulations and planning associated with the electricity sector and within that sector environmental regulations for air pollution greenhouse gases GHGs and renewables They also examined the regulations and processes associated with the operation and planning of the electricity system—including generation and transmission DOE and Resources for the Future published a final paper summarizing the recommendations and observations of workshop participants in early 2016 Low-Carbon Futures of the U S Energy System January 14 2016 – Washington D C In 2009 and subsequently in 2014 the Administration set GHG-emissions reduction targets in the range of 17 percent below 2005 levels by 2020 and 26 to 28 percent below 2005 levels by 2025 Both of these goals are intended to put the United States on a path toward 80 percent decarbonization by 2050 DOE hosted a 1-day workshop to better understand possible pathways to achieving substantial economy-wide GHG-emissions reductions by 2050 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-5 Chapter VIII Analytical and Stakeholder Process Participants from academia DOE the National Laboratories and other interested stakeholder groups met to discuss two main topics 1 potential pathways for substantial GHG reductions in electricity generation and 2 how future end-use demand for electricity might shape the scale of required GHG-emissions reductions in the electric-power sector There were two primary goals for the workshop The first goal was to identify a set of representative pathways and elements of such pathways toward substantial economy-wide reductions in GHG emissions by 2050 The second goal was to identify the key characteristics challenges opportunities and requirements of different pathways The workshop informed analysis of the transition to a cleaner low-carbon electricity system for QER 1 2 Electricity Use in Rural and Islanded Communities February 8–9 2016 Washington D C The objective of this workshop was to help EPSA’s public outreach efforts by focusing on communities with unique electricity challenges The workshop explored challenges and opportunities for reducing electricity use and associated GHG emissions while improving electricity system reliability and resilience in rural and islanded communities Although the statement of task mentioned design of microgrids for hospitals universities military bases and other unified load centers presenters covering microgrids were encouraged to describe potential applications serving isolated communities and towns in keeping with the theme of the workshop The workshop assembled speakers from diverse locations that have rural or islanded energy issues including Hawaii Alaska North Carolina and Vermont and they held expertise in many facets of electricity-system design and operation Speakers were encouraged to do the following 1 identify and share best practices between rural and islanded electricity-system users and operators and 2 provide suggestions for Federal policies and research and development investments that could be implemented in both the near and long term The Future of Energy Efficiency February 10 2016 – Washington D C This session held at a meeting of the National Association of State Energy Offices provided a discussion of the role of energy efficiency in response to the emerging electric-system challenges and opportunities that DOE intends to address in QER 1 2 The purposes of this workshop were to focus on issues related to electricity end use and to explore the potential for energy efficiency moving forward barriers and opportunities to overcome system benefits and the costs of increased energy efficiency deployment and what policies or methods can be deployed to meet evolving consumer needs and how these needs can be met while creating a more efficient system Key themes and areas of interest from the discussion included evolving trends in electricity demand in benefits and costs for energy efficiency in a more integrated grid options for increasing consumer value equity access to services the potential for greater electrification and decarbonization of the economy data access and security issues improving methods for valuing energy efficiency and opportunities for new services and business models The Future of U S Bulk Power Markets March 4 2016 – Washington D C DOE in coordination with Boston University’s Institute for Sustainable Energy hosted a technical workshop to gather input from current industry stakeholders on the future of the Nation’s bulk power markets The workshop also included distinct discussions on the state of transmission-planning efforts essential reliability services also known as ancillary services and the potential for markets at the distribution-system level Participants from academia industry associations individual companies public power and state Federal regulatory agencies were encouraged to discuss these topics and outline the major issues in their respective areas of expertise The participants provided recommendations and feedback for ways in which DOE and the QER process could help alleviate those issues The workshop ultimately informed the 8-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 direction of subsequent analyses in support of QER 1 2 specifically with regard to transmission systems and resource adequacy constructs Workshop on Siting and Regulating Carbon Capture Utilization and Storage Infrastructure April 8 2016 – Washington D C DOE sponsored a workshop to identify and promote best practices for siting and regulating carbon dioxide CO2 infrastructureincluding pipelines enhanced oil recovery and saline CO2 storage sites The purposes of this workshop were to foster communication and coordination as well as to share lessons learned and best practices among states that are already involved in siting and regulating CO2 infrastructure or that may have proposed future CO2 infrastructure projects The workshop convened subject matter experts industry representatives Federal officials and state agencies with jurisdiction over energy-infrastructure planning siting and economic development The aim of the workshop was to facilitate a knowledge exchange regarding CO2 pipeline and storage-site infrastructure needs The workshop also informed issues being addressed in QER 1 2 including discussions around CO2-enhanced oil recovery and other storage sites which serve as infrastructure for entities capturing CO2 Technical Workshop on Electricity Valuation May 2–3 2016 – Washington D C DOE hosted a technical workshop to understand stakeholder issues relevant to the valuation of electricity system technologies products and services The workshop sought to examine four major topics 1 valuing electricity system components and attributes 2 valuing technologies for contributions to power quality and reliability 3 managing electricity risks and 4 valuation within the distribution system The workshop included stakeholders from state and Federal regulatory agencies electric utilities technology developers and manufacturers universities the National Laboratories industry associations for consumers and electricity-system operators The opening session began with a presentation on a proposed valuation methodology During the workshop participants provided their views on issues that must be adequately resolved to support higher penetration levels for advanced or distributed energy technologies Participants also discussed the challenges associated with methods to value and plan for their integration The workshop informed and improved analysis commissioned on valuation for QER 1 2 QER 1 2 Finance Workshop June 1 2016 – New York New York As input to the QER 1 2 EPSA hosted a technical workshop to gather stakeholder views on power-sector finance in the context of national energy objectives a changing resource mix and new technologies and business models The discussion focused on financing required to deploy proven or advanced clean electricity technologies Workshop participants included senior leaders from industry and investor communities who were encouraged to provide examples of existing barriers and ideas on effective public policies and programs for U S electricity-system modernization Participants emphasized that there is sufficient capital available for proven clean electricity projects with an identified revenue stream but there is a revenue model problem for many projects and technologies Some of the topics discussed included the potential role of grid-scale storage challenges with large-scale nuclear and the need for policy stability Participants also encouraged a systems approach to modernization They emphasized the need to provide assets with revenue streams via price signals for all services they provide to the grid so that asset valuations reflect their overall value to the system The discussion included near-term incremental changes to facilitate asset financing and deployment such as changes to the tax code as well as longer-term policy and market changes such as incentive-based Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-7 Chapter VIII Analytical and Stakeholder Process regulation a clean capacity incentive or pricing local reliability to provide an economic signal for customers to behave in ways that benefit the grid Technical Workshop on the Implications of Increasing Electric-Sector Natural Gas Demand June 7 2016 – Washington D C This workshop explored how medium- and long-term planning is evolving given the trend of increased use of natural gas in the electric-power sector While there are favorable economic and environmental benefits to increased use of natural gas in electricity potential challenges in infrastructure compatibility and reliability arise as well Stakeholders from both the natural gas and electric sectors from different regions of the country convened at this workshop Participants then shared the practices tools and metrics that they employ in order to understand the interdependency between the electric and natural gas industries as well as the approaches that stakeholders have implemented to resolve challenges and leverage opportunities Accelerate Energy Productivity 2030 Executive Review and Dialogue Session June 28 2016 – Washington D C The purpose of this session was not only to provide input to DOE from key industry representatives but also to build upon the work done under the Accelerate Energy Productivity 2030 partnership between DOE the Alliance to Save Energy and the Council on Competitiveness Through the partnership energy productivity has become an increasingly influential way to drive meaningful policy deployment in the United States and abroad This session followed the 2014 announcement of the initiative at the 2014 American Energy and Manufacturing Competitiveness AEMC Summit by Secretary of Energy Ernest Moniz and the release of Accelerate Energy Productivity 2030 A Strategic Roadmap for American Energy Innovation Economic Growth at the 2015 AEMC Representatives at the session provided input on several issues relevant to the QER 1 2 including increased deployment of electric vehicles electric utility rate design that supports deployment of new technologies regulatory consistency and certainty improving electric consumer equity ensuring a strong electric-sector workforce the role of states in driving energy productivity the role of incentives and consumer awareness in promoting clean energy technology the importance of public-private partnerships and improving access to financing for energy efficiency 8 3 QER Stakeholder Engagement In the Presidential Memorandum establishing the QER President Obama directed the QER Task Force to “gather ideas and advice from state and local governments tribes large and small businesses universities National Laboratories nongovernmental and labor organizations consumers and other stakeholders and interested parties ” The President also ordered the QER Task Force to “develop an integrated outreach strategy that relies on both traditional meetings and the use of information technology ” In its role as Secretariat for the QER Task Force EPSA undertook an open transparent process for informing stakeholders of the purposes and scope of the QER 1 2 This outreach process included the following   8-8 Informal meetings at DOE headquarters involving EPSA staff members and dozens of stakeholder groups from the electricity sector such as academic researchers local state and Federal governments and regulatory agencies Briefings on the QER process at meetings with industry associations groups of state officials the offices of environmental groups and with Members of Congress their staffs and the staffs of multiple relevant congressional committees Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017     8 3 1 A series of seven formal public stakeholder meetings beginning in Washington D C and extending to Boston Massachusetts Salt Lake City Utah Des Moines Iowa Austin Texas Los Angeles California and Atlanta Georgia Special dialogues with officials in Canada and Mexico to discuss cross-border integration and international collaboration given the extensive electricity integration that exists between the United States and Canada and opportunities present to increase integration between the United States and Mexico Speeches and briefings to interested groups in Washington D C and across the country by the Secretary of Energy the Director of the President’s Office of Science and Technology Policy other White House officials and various members of DOE leadership The creation of a public comments portal to allow interested stakeholders and the general public to provide comments on individual stakeholder meetings as well as outside experts to submit studies reports and data sets related to topics within the scope of the QER 1 2 Formal Public Stakeholder Meetings Some of the most visible effort to engage stakeholders during the QER 1 2 process was the series of seven public meetings held around the country from February 2016 to May 2016 These meetings provided opportunities for the Administration to fully consider the unique challenges and opportunities facing each of the many geographically diverse segments of our Nation’s electricity system The regions selected for QER 1 2 stakeholder meetings were based on wholesale market footprints as a convenient approach to capturing the Nation’s regional electricity diversity which is also characterized by differing resource mixes state policies and a host of other factors The mixture of panel discussions and a public comment period framed multi-stakeholder discourse around deliberative analytical questions in QER 1 2 relating to the intersection of electricity and its role in promoting economic competitiveness energy security and environmental responsibility The Administration sought public input on key questions relating to possible Federal actions that would address the challenges and take full advantage of the opportunities of this changing system to meet the Nation’s objectives of reliable affordable and clean electricity Each meeting began with opening statements by the hosting Administration representatives along with local state and national political leaders who participated at events in their parts of the country Each meeting with the exception of the kickoff meeting in Washington D C had three panel discussions The first two topics were the same for all regions Bulk Power Generation and Transmission Opportunities How Can We Plan Build and Operate the Appropriate Amount for Future Needs and Electricity Distribution and End-Use How Do We Manage Challenges and Opportunities although content varied as there are significant regional differences The third panel’s topics were different for each session to highlight issues of regional importance and these discussions are described in more detail below Each meeting concluded with an “open microphone” segment during which members of the general public could make statements for the QER 1 2 record and had the opportunity to offer prepared presentations studies reports and more for review by EPSA analysts and inclusion in the QER Library Federal Register notices announcing each formal public stakeholder meeting were published these notices also were made available via the DOE QER website http energy gov epsa quadrennial-energyreview-qer DOE publicized the meetings by sending advisories to local media using social media and emailing state local and tribal governments as well as representatives of energy stakeholders—both in the region of each meeting and in Washington D C Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-9 Chapter VIII Analytical and Stakeholder Process In the interests of transparency and open government court reporters produced a transcript for each meeting and EPSA produced a summary of each meeting’s presentations and discussions The transcripts and summaries along with links to the live-streamed recordings and panelists’ prepared remarks and presentations are available on the QER website Following are details about the dates topics locations and focus areas of the formal public stakeholder meetings organized by EPSA to inform QER 1 2 Table 8-2 Table 8-2 List of QER 1 2 Formal Public Stakeholder Meetings with Topic Location Date and Administration Officials Location Topic Third Panel Date Administration Chair s and Local State Congressional Officials Washington D C Not Applicable 2 4 16 Secretary of Energy Ernest Moniz Assistant to the President for Science and Technology Dr John Holdren Deputy Assistant to the President for Energy and Climate Change Dan Utech and Representative Earl Blumenauer D-OR Boston Massachusetts Resource adequacy 4 15 16 Secretary of Energy Ernest Moniz Assistant to the President for Science and Technology Dr John Holdren and Governor Charlie Baker Salt Lake City Utah Cyber- and physical security and resilience 4 25 16 Deputy Assistant to the President for Energy and Climate Change Dan Utech and Department of Agriculture Rural Utilities Service Deputy Administrator Joshua Cohen Des Moines Iowa Transmission development 5 6 16 Secretary of Energy Ernest Moniz Governor Terry Branstad Lieutenant Governor Kim Reynolds Mayor T M Franklin Cownie and Department of Agriculture Rural Development Rural Business-Cooperative Service Administrator Sam Rikkers Austin Texas New technologies and actors in the grid edge space 5 9 16 Secretary of Energy Ernest Moniz Department of Agriculture Deputy Under Secretary for Rural Development Lillian Salerno and Mayor Steve Adler Austin Los Angeles California Generating and delivering electricity to meet GHG targets 5 10 16 Deputy Secretary of Energy Elizabeth Sherwood-Randall Department of Agriculture Rural Development Rural BusinessCooperative Service Administrator Sam Rikkers and Deputy Mayor for City Services Barbara Romero Los Angeles Atlanta Georgia Financing new electricity infrastructure 5 24 16 Secretary of Energy Ernest Moniz and Department of Agriculture Rural Utilities Service Deputy Administrator Joshua Cohen Dates topics locations and focus areas for the formal QER 1 2 Stakeholder Meetings 1 Washington D C Kickoff Meeting February 4 2016 The Washington D C public stakeholder meeting served as the formal kickoff meeting for QER 1 2 an integrated study of the U S electricity system from generation through end use The meeting included two main panel discussions and a public comment period focused on the challenges and opportunities facing the electricity sector and its key role in promoting economic competitiveness energy security and environmental responsibility 2 Boston Massachusetts April 15 2016 The QER 1 2 public stakeholder meeting in Boston covered the footprint of the 21 states and the District of Columbia which are all or in part in the Regional Transmission Operator RTO PJM Interconnection Independent System Operator ISO -New England or New York ISO The third 8-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 panel for the Boston public stakeholder meeting covered “Ensuring Resource Adequacy ” highlighting the proper design and operation of the eastern RTO ISO markets with Federal and state policies and consumer demand creating momentum for low-carbon options as crucial 3 Salt Lake City Utah April 25 2016 The Salt Lake City meeting covered the footprint of 13 of the 14 states excluding California which are all or in part in the Western Interconnection and are represented by the Western Electricity Coordinating Council The third panel in the Salt Lake City public stakeholder meeting covered “Cyber Physical Security and Resilience ” 4 Des Moines Iowa May 6 2016 The Des Moines meeting covered the footprint of the 20 states which are all or in part in the Southwest Power Pool and the Midcontinent ISO The third panel in the Des Moines public stakeholder meeting covered “Transmission Development with an Evolving Generation Mix ” 5 Austin Texas May 9 2016 The Austin meeting covered the footprint of the state of Texas grid operations and the flow of energymost of which is managed by the Electric Reliability Council of Texas The third panel in the Austin public stakeholder meeting covered “New Technologies and Actors in the Grid Edge Space ” 6 Los Angeles California May 10 2016 The Los Angeles meeting covered the footprint of the State of California grid operations and the flow of energymost of which is managed by the California ISO The third panel for the Los Angeles public stakeholder meeting covered “Generating and Delivering Electricity in a High GHGReduction Environment ” 7 Atlanta Georgia May 24 2016 The Atlanta meeting covered the footprint of the 10 southeastern states that all or in part have bilateral wholesale electricity markets The third panel for the Atlanta public stakeholder meeting covered “Financing New Electricity Infrastructure ” 8 3 2 Comments Portal and QER Library From the beginning of the QER 1 2 process stakeholders and the general public were encouraged to offer suggestions comments insights and criticisms on issues surrounding the electricity system Public comments were collected through a web-based portal which allowed stakeholders to share comments as well as studies reports data sets and any additional materials from stakeholder organizations to help inform QER 1 2 All comments submitted to the portal will be made publically available at http energy gov epsa quadrennial-energy-review-stakeholder-engagement EPSA received 295 total commentsincluding 215 total attachments comprising detailed reports and studies on behalf of trade associations utilities and energy companies state and local governments nonprofit organizations and other stakeholders totaling over 2 600 pages EPSA reviewed each of the Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-11 Chapter VIII Analytical and Stakeholder Process comments received Insights and recommendations extracted from these comments and materials have been included in QER 1 2 Stakeholder comments were grouped into multiple themes namely issues with evolving generation mix increased attention to cyber and physical security reliability needs during transformation problems with organized wholesale markets evolving transmission planning and investment activity at distribution and end-use sector valuation and rate reform business models evolving state and Federal regulations and the Federal role 8 4 QER Interagency Engagement As outlined by the QER Presidential Memorandum the President identified more than 20 executive departments and agencies that play key roles in developing and implementing policies governing energy resources and consumption as well as associated environmental impacts The President directed the QER Secretariat 1 to develop a comprehensive and integrated review of energy policy based on interagency dialogue and active engagement of external stakeholders and 2 to make recommendations on what additional actions it believes would be appropriate The findings and recommendations in QER 1 2 are based on Task Force deliberations meetings with staff-level agency representatives and experts and information provided to the Secretariat and the Task Force by external stakeholders Throughout the development of QER 1 2 the White House has convened regular interagency meetings and worked closely with the agencies’ leadership and staff Member agencies have collaborated to develop QER 1 2 by providing information on topics within their statutory and regulatory jurisdiction or areas of particular expertise related to energy infrastructure transmission storage and distribution Agencies have delivered studies data and other information to be considered in policy analysis and modeling reviewed analysis and findings leveraged the work of other relevant Administration initiatives and led by the Office of Science and Technology Policy and the Domestic Policy Council collaboratively developed policy recommendations A series of roundtable discussions was held with representatives from key departments and agencies to ensure a transparent and inclusive process in the development of policy recommendations Interagency members also partnered with the Secretariat on the seven formal public stakeholder meetings and opened the events and set the focus for the expert panels that followed 8-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 This page intentionally left blank Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 8-13 A QER 1 2 Appendix A Electricity System Overview Elements of the Electricity System The U S electric power system is an immensely complex system-of-systems comprising generation transmission and distribution subsystems and myriad institutions involved in its planning operation and oversight Figure A-1 End use and distributed energy resources DERs are also important parts of the electric power system A 1 1 Generation Electricity generation accounts for the largest portion of U S primary energy use using 80 percent of the Nation’s domestically produced coal 1 one-third of its natural gas and nearly all of its nuclear and nonbiomass renewable resource production In 2014 39 percent of the Nation’s primary energy use was devoted to electricity generation and electricity accounted for 18 percent of U S delivered energy 2 In 2014 there were over 6 500 operational power plants of at least 1 megawatt in the U S electric power system a 3 4 These power plants delivered nearly 3 764 billion kilowatt-hours kWh of power in 2014 supplying electricity to over 147 million residential commercial and industrial customers at an average price of $0 104 kWh for a total revenue from electricity sales of more than $393 billion 5 6 7 8 The U S electricity generation portfolio is diverse and changes over time through the commercial market growth of specific generation technologies—often due to a confluence of policies historic events fuel cost and technology advancement Today coal and natural gas each provide roughly one-third of total U S generation nuclear provides 20 percent hydroelectric and wind provide roughly 5 percent each and other resources including solar and biomass contribute less than 2 percent each 9 However there are major generation mix differences between regions Figure A-2Error Reference source not found 10 The availability of primary energy resources like coal and natural gas and renewable energy resources like wind and solar differs widely across the country Figure A-3 This dispersed resource availability influences the regional generation mixes a A megawatt is a thousand kilowatts A kilowatt is a unit of power output commonly used in the electricity industry A kilowatthour kWh is a related unit of energy the amount of power provided times the number of hours that it is provided Electricity is usually billed by the kWh An average American home uses roughly 11 000 kWh per year Source “How Much Electricity Does an American Home Use ” Energy Information Administration Frequently Asked Questions last updated October 18 2016 https www eia gov tools faqs faq cfm id 97 t 3 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-1 QER 1 2 Appendix A Electricity System Overview Figure A-1 Schematic Representation of the U S Electric Power System The electric power system comprises the following broad sets of systems bulk generation transmission distribution and end use including DERs Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-2 Figure A-2 Electric Power Regional Fuel Mixes 201511 12 The U S electricity industry relies on a diverse set of generation resources with strong regional variations As of 2015 coal fuels the majority of electricity generation in the Mountain West North Central East North Central and East South Central regions Coal is also a significant resource for the South Atlantic and West South Central regions though both have sizable natural gas generation as well and the South Atlantic region includes substantial shares of nuclear The Pacific Contiguous and New England regions are predominately natural gas with significant contributions of hydroelectric and nuclear respectively The Middle Atlantic is the only region that is predominately nuclear and the Pacific Noncontiguous region is the only region in which fuel oil represents more than a few percentage points of total generation where it constitutes nearly half of all generation Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-3 QER 1 2 Appendix A Electricity System Overview Figure A-3 Wind and Solar Energy Resource Maps for the United States 13 14 Energy resource availability varies widely across the United States Wind and solar energy resources are concentrated in the Midwest and Southwest regions of the United States A-4 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A 1 2 Transmission The U S transmission network includes the power lines that link electric power generators to each other and to local electric companies The transmission network in the 48 contiguous states is composed of approximately 697 000 circuit-milesb of power lines and 21 500 substations operating at voltages of 100 kilovolts kV c and above 15 Of this 240 000 circuit-miles are considered high voltage operating at or above 230 kV Figure A-4Error Reference source not found 16 A substation is a critical node within the electric power system and is composed of transformers circuit breakers and other control equipment Distribution substations are located at the intersection of the bulk electric system and local distribution systems The vast majority of transmission lines operate with alternating current AC With commonly used technology system operators cannot specifically control the flow of electricity over the AC grid electricity flows from generation to demand through many paths simultaneously following the path of least electrical resistance A limited number of transmission lines are operated using direct current DC Unlike AC transmission lines the power flows on DC lines are controllable However their physical characteristics make them cost effective only for special purposes such as moving large amounts of power over very long distances 17 Figure A-4 High-Voltage Transmission Network and Substations of the 48 Contiguous States 201518 The transmission network comprises approximately 697 000 circuit-miles—of which roughly 240 000 miles operate at or above 230 kV—and 21 500 substations operating at voltages of 100 kV and above 19 20 21 b A circuit-mile is 1 mile of one circuit of transmission line Two individual 20-mile lines would be equivalent to 40 circuit-miles One 20-mile double-circuit section would also be equivalent to 40 circuit-miles c A kilovolt kV is a commonly used unit of electrical “force” in the electricity industry Electricity at higher voltages moves with less loss however system components able to manage high voltage are costly and high voltages can be dangerous Lower voltage is used in distribution systems to manage costs on system equipment and for safety Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-5 QER 1 2 Appendix A Electricity System Overview Electricity moved through transmission and distribution systems faces electrical resistance and other conversion losses Losses from resistance and conversion amount to 5 to 6 percent of the total electricity that enters the system at the power plant 22 Each transmission line has a physical limit to the amount of power that can be moved at any time which depends on the conditions of the power system Within one market or utility control area physical limits of system assets are the primary drivers of power price differences in different parts of the system A 1 3 Distribution System The role of the large generators and transmission lines that comprise the bulk electric system is to reliably provide sufficient power to distribution substations In turn the distribution system is responsible for delivering power when and where customers need it while meeting minimum standards for reliability and power quality 23 Power quality refers to the absence of perturbations in the voltage and flow of electricity that could damage end-use equipment or reduce the quality of end-use services 24 Before delivery to a customer electric power travels over the high-voltage transmission network at hundreds of kilovolts to a distribution substation where a transformer reduces the voltage before the electricity moves along the distribution system at tens of kilovolts Several primary distribution feeder circuits connected by an array of switches at the distribution bus emanate from the substation and pass through one or more additional transformers before reaching the secondary circuit that ultimately serves the customer One or more additional transformers reduce the voltage further to an appropriate level before arriving at the end-use customer’s meter d 25 An emerging role of the distribution system is to host a wide array of distributed energy generation storage and demand-management technologies Though some distributed energy technologies—like campus-sized combined heat and power—have existed for decades rapid cost declines in solar energy storage and power electronic technologies coupled with supportive policies have led to a rapid proliferation of new devices and at times new challenges and opportunities for the planning and operation of distribution systems A 1 4 Distributed Energy Resources DERs DERs constitute a broad range of technologies that can significantly impact how much and when electricity is demanded from the grid Though definitions of DERs vary widely the term is used in the Quadrennial Energy Review QER to refer to technologies including distributed generation distributed storage and demand-side management resources including energy efficiency Given the multiple definitions and understandings of the term DER the QER will use DER to refer to the full range of these technologies and will delineate specific technologies where only some are relevant Current and projected market penetration of distributed generation is shown in Table A-1 DER technologies can be located on a utility’s distribution system or at the premises of an end-use customer They differ with respect to several attributes though a key differentiator is their level of controllability from a grid management perspective Certain DERs such as energy efficiency or rooftop solar photovoltaic impact total load but may not be directly controlled by grid operators Other DERs such as demand response or controllable distributed energy storage can be more directly managed and called upon by grid operators when needed d Most residential and commercial customers in the United States receive two 120-volt V connections Most household plugs provide 120 V while large appliances like dryers and ovens often combine the two 120-V connections into a single 240-V supply A-6 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table A-1 Current and Projected Distributed Generation Market Penetration 2015 and 204026 Other distributed generation includes small-scale hydropower biomass combustion or co-firing in combustion systems solid waste incineration or waste-to-energy and fuel cells fired by natural gas biogas or biomass Backup generators for emergency power are not included here because generation data are limited and these generators are not used in normal grid operation Acronyms distributed generation DG gigawatt-hours GWh photovoltaic PV A 1 5 End Use Electricity end-use infrastructure includes physical components that use require or convert electricity to provide products or services to consumers Since the first time the electric light bulb lit up New York City nearly all parts of the United States have gained access to electricity e In that time the proliferation of novel and unanticipated uses of electricity has placed electricity at the center of everyday life and established it as the engine for the modern economy Today the residential and commercial sectors each consume about the same share of total electricity— 38 percent and 36 percent respectively—with the industrial sector accounting for an additional 26 percent of electricity demand 27 28 Cumulatively electricity sales to end-use customers in the United States generated approximately $393 billion in 2014 29 30 Moving forward new technologies from automated thermostats to electric vehicles are changing the way consumers use electricity Electricity is a high-quality energy source available at a relatively low price However many low-income Americans struggle to afford their monthly electricity bills 31 Nationally average monthly residential bills in 2015 were $114 32 Brief History of the U S Electricity Industry The U S electricity system represents one of the greatest technological achievements in the modern era The complexity of the modern electricity industry is the result of a complicated history A 2 1 The Beginning of the Electricity Industry The U S electricity industry began in 1882 when Thomas Edison developed the first electricity distribution system Edison designed Pearl Street Station to produce and distribute electricity to multiple customers in the New York Financial District and to sell lighting services provided by his newly invented light bulbs 33 e There are thousands of households in Indian lands that still do not have access to electricity Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-7 QER 1 2 Appendix A Electricity System Overview Early utilities distributed power over low-voltage DC lines These lines could not move electricity far from where it was produced which limited utility service to areas only about a mile from the generator Multiple generators and dedicated distribution lines were required to serve a larger area The limited reach of distribution lines and the lack of regulation of utilities resulted in the co-location of multiple independent utilities and competition for customers where multiple distribution lines overlapped 34 35 In 1896 AC generation emerged as a competitor to DC when Westinghouse Electric developed a hydropower generation station at Niagara Falls New York and transmitted power 20 miles to Buffalo New York 36 At the voltage levels used at that time AC has better electrical characteristics for moving power over long distances This technological development—and related business models—allowed a single utility to broaden the geographic extent of its customers and sources of revenue A wave of consolidation followed where small isolated DC systems were converted to AC and interconnected with larger systems Interconnecting with other systems and serving more customers allowed operators to take advantage of the diversity of customer demand deliver better economies of scale and provide lower prices than competitors 37 A move toward today’s system of regulatory oversight occurred around the turn of the century With the industry consolidation of the late 1890s came public concern over lack of competition and the potential for large utilities to exert a monopoly power over prices 38 In 1898 a prominent electricity industry leader and Thomas Edison’s former chief financial strategist Samuel Insull called for utility regulation that granted exclusive franchises in exchange for regulated rates and profits in order to create a stable financial environment that would foster increased investments and electricity access 39 Insull claimed that such regulation was needed because utilities are natural monopolies meaning that a single firm can deliver a service at a lower total cost than multiple firms through economies of scale and avoidance of wasteful duplication e g multiple distribution substations and circuits belonging to different companies serving a single area In 1907 Wisconsin became the first state to regulate electric utilities and by 1914 43 states had followed 40 41 The general form of utility regulation that was established by the Wisconsin legislature in 1907 endures today and is called the “state regulatory compact ” This compact allowed electric utilities to operate as distribution monopolies with the sole right to provide retail service to all customers within a given franchise area—as well as an obligation to do so Those monopolies were allowed an opportunity to earn a fair rate of return on their investments Some municipal governments across the country created their own utilities owned and governed by the local government as an alternative to investor-owned regulated utilities 42 f f Since municipal utilities were first formed they have been owned by several types of political subdivisions These include states public utility districts and irrigation districts The term “public power” is often used to refer to electricity utilities operated by any of these political subdivisions A-8 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 The State Regulatory Compact The “state regulatory compact” evolved as a concept “to characterize the set of mutual rights obligations and benefits that exist between the utility and society ” 43 It is not a binding agreement Under this “compact ” a utility typically is given exclusive access to a designated—or franchised—service territory and is allowed to recover its prudent costs as determined by the regulator plus a reasonable rate of return on its investments In return the utility must fulfill its service obligation of providing universal access within its territory The “regulatory compact” applies to for-profit monopoly investor-owned utilities that are regulated by the government The compact is less relevant to public power and cooperative utilities which are nonprofit entities governed by a locally elected or appointed governing body and are assumed to inherently have their customers’ best interests in mind Regulators strive to set rates such that the utility has the opportunity to be fully compensated for fulfilling its service obligation While not technically part of the “compact ” customers also have a role to play in this arrangement they give up their freedom of choice over service providers and agree to pay a rate that at times may be higher than the market rate in exchange for government protection from monopoly pricing In effect utilities have the opportunity to recover their costs and if successful their investors are provided a level of earnings customers are provided non-discriminatory affordable service and the regulator ensures that rates are adequately set such that the aforementioned benefits materialize In the early 1900s states regulated nearly all of the activities of electric utilities—generation transmission and distribution 44 However a 1927 Supreme Court case45 held that state regulation of wholesale power sales by a utility in one state to a utility in a neighboring state was precluded by the commerce clause of the U S Constitution 46 These transactions were left unregulated as Congress had the authority to regulate but no Federal agency existed to do so 47 The 1935 Federal Power Act FPA addressed the regulatory gap by providing the Federal Power Commission FPC eventually renamed the Federal Energy Regulatory Commission or FERC g with authority to regulate “the transmission of electric energy in interstate commerce” and “the sale of electric energy at wholesale in interstate commerce ”48 49 The FPA left regulation of generation distribution and intrastate commerce to states and localities 50 Federal regulation was to extend “only to those matters which are not subject to regulation by the States ”51 FERC was given jurisdiction over all facilities used for the transmission or wholesale trade of electricity in interstate commerce and was charged with ensuring that corresponding rates are “just and reasonable and not unduly discriminatory or preferential ”52 53 A 2 2 Federal Investments in Rural Electrification Urban areas were the first areas to attract utility investment The higher density of potential customers in urban areas made these areas more cost effective to serve By the 1930s most urban areas were electrified while sparsely populated rural areas generally lagged far behind The Great Depression and widespread floods and drought in the Great Plains during the 1930s led to a wave of significant Federal initiatives to develop the power potential of the Nation’s water resources One example of Federal efforts to capture the benefits of the Nation’s water resources is the Tennessee Valley Authority TVA TVA was created in 1933 as a Federally owned corporation to provide economic development through provision of electricity flood control and other programs to the rural Tennessee Valley area To this day TVA maintains a portfolio of generation and transmission assets to sell wholesale electricity to public power and cooperatives within its territory Federal law grants first preference for this electricity to public power and cooperative utilities Congress passed the Rural Electrification Act in 1936 which encouraged electrification of areas unserved by investor-owned utilities IOUs and public power utilities The act authorized rural electric cooperatives g The Federal Power Commission was created in 1920 by the Federal Water Power Act to encourage the development of hydroelectric generation facilities Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-9 QER 1 2 Appendix A Electricity System Overview to receive Federal financing support and preferential sales from Federally owned generation The Bonneville Power Administration was created in 1937 to deliver and sell electric power from Federally owned dams in the Pacific Northwest 54 Increased Federal investment in hydropower followed through the 1940s and by the 1960s rural electrification was largely complete 55 Federally Owned Utilities There are five Federal electric utilities Tennessee Valley Authority TVA Bonneville Power Administration BPA Southeastern Power Administration SEPA Southwestern Power Administration SWPA and Western Area Power Administration WAPA TVA is an independent government corporation while BPA SEPA SWPA and WAPA are separate and distinct entities within the Department of Energy Starting with BPA in 1937 followed by SEPA SWPA and WAPA Congress established the Power Marketing Administrations PMAs to distribute and sell electricity from a network of more than 130 Federally built hydroelectric dams The PMAs don’t own or manage the power they sell but in many cases maintain the transmission infrastructure to distribute the low-cost electricity to public power and rural cooperative utilities in addition to some direct sales to large industrial customers The electricity-generating facilities are primarily owned and operated by the Department of the Interior’s Bureau of Reclamation the Army Corps of Engineers and the International Boundary and Water Commission BPA WAPA and SWPA collectively own and operate 33 700 miles of transmission lines which are integrally linked with the transmission and distribution systems of utilities in 20 states Millions of consumers get electricity from the PMAs usually indirectly via their local utility but a much larger number of consumers benefit from—and have a stake in—the continued efficient effective operation of the PMAs and the transmission infrastructure they are building and maintaining TVA is a corporate agency of the United States that provides electricity for business customers and local power distributors serving 9 million people in parts of seven southeastern states TVA receives no taxpayer funding deriving virtually all of its revenues from sales of electricity In addition to operating and investing its revenues in its electric system TVA provides flood control navigation and land management for the Tennessee River system and assists local power companies and state and local governments with economic development and job creation A 2 3 Electricity Industry Restructuring and Markets As early as the 1920s utilities sought operational efficiencies by coordinating generation dispatch and transmission planning across multiple utility territories Coordination through cooperative power pools provided economies of scale and scope that ultimately lowered costs for all participant utilities The principles of coordination pioneered in power pools later became the basis for the centrally organized electricity markets that exist today 56 Over time economists and industry observers came to believe that the natural monopoly status that was the basis of so much of electricity industry regulation no longer applied to generation and instead only applied to the “wires” part of the system While it would be economically wasteful for multiple companies to install overlapping and competing distribution and transmission lines the generation and sale of electricity to retail customers could be organized as competitive activities 57 To encourage fair and open competition several states eventually restructured individual IOUs into separate companies that invested in either regulated or competitive parts of the industry Restructuring actions vary by region and by state but they are typically characterized by the “unbundling” of ownership and regulation of electricity generation transmission distribution and sales with large variations in how restructuring is implemented across regions and states Congress took an early step toward reintroducing market competition in the generation sector in 1978 when it enacted the Public Utilities Regulatory Policies Act PURPA 58 PURPA required utilities to purchase A-10 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 power from qualifying non-utility generators at the utility’s avoided cost This led to a wave of investment in generation by non-utility companies A major step toward creating electric markets was Congress’ enactment of the Energy Policy Act of 1992 EPAct 1992 which provided FERC with limited authority to order transmission access for wholesale buyers in procuring wholesale electric supplies 59 60 61 Subsequent FERC actions including Order No 888 and Order No 889 created greater transmission access and facilitated the creation of competitive wholesale electricity markets These FERC orders increased access to electricity supplies from other utilities for wholesale buyers including public power and rural cooperative utilities Also in the 1990s several states made regulatory changes introducing retail electric choice programs to allow some customers to choose an electricity provider other than their local utility and to have electricity delivered over the wires of their local utility 62 States that allow customer choice are sometimes called “deregulated states ” a misnomer as retail electricity providers and other parts of the industry remain highly regulated By 1996 at least 41 states including California New York and Texas had or were considering ending utility monopolies and providing electricity service through retail competition 63 Some states notably in the Southeast and in western states besides California did not embrace this wave of restructuring In 2000 and 2001 California and the Pacific Northwest experienced severe electricity shortages and price spikes This California electricity crisis left many states that had not yet implemented restructuring wary of pursuing such reforms Today 15 states allow retail electric choice for some or all customers while eight states have suspended it including California which suspended retail choice for residential customers after the energy crisis 64 The net result of these changes to jurisdictions industry structure and competitive markets is that the United States today has a patchwork of mechanisms governing the electricity industry and a diverse set of industry participants Regulation of the industry continues to evolve as new technologies policies and business realities emerge Laws and Jurisdictions Government oversight and regulation of the electricity industry centers on the concurrent needs to     A 3 1 Ensure that safe and adequate electricity service is provided at just and reasonable rates Protect the public interest Enable the financial health of the system such as ensuring that service providers can attract the investments needed to continue providing this essential public service Play a beneficial role in diminishing the impact of negative externalities such as ensuring that industry activities are not inadvertently causing hardship to neighboring communities or the environment Governmental Actors The responsibility for regulating and overseeing the numerous actors that encompass the electricity industry and the activities they carry out is vested in multiple government officials These authorities span Federal state local and tribal governments The jurisdictional relationship between the actors is shown in Figure A-5 and is explained further below Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-11 QER 1 2 Appendix A Electricity System Overview Figure A-5 Broad Overview of Jurisdictional Roles in the Electricity Industry65 Jurisdictional responsibility of the electricity industry is divided between Federal state local and tribal jurisdictions Several issues such as generation siting transmission siting and environmental planning span all of the four jurisdictions Federal and state jurisdictions overlap in planning resource adequacy and mergers and acquisitions for regulated utilities Other areas such as interstate transmission commerce and retail sale to end users are regulated by the Federal Government FERC or the states public utility A-12 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 commissions respectively Acronyms Department of Agriculture USDA Department of Energy DOE Department of the Interior DOI Department of Justice DOJ Environmental Protection Agency EPA Federal Trade Commission FTC independent system operator ISO North American Electric Reliability Corporation NERC Nuclear Regulatory Commission NRC Occupational Safety and Health Administration OSHA public utility commission PUC regional transmission organization RTO Securities and Exchange Commission SEC A 3 2 Federal Actors At the Federal level FERC carries out the vast majority of the economic Federal regulatory responsibilities pertaining to the electricity industry primarily regulating transmission and wholesale sales in interstate commerce In addition other Federal authorities are involved with various aspects of regulation or oversight their responsibilities are wide ranging and relate to environmental protection land use antitrust protection and transmission siting Federal Ratemaking The Federal Energy Regulatory Commission FERC is the Federal Government agency responsible for overseeing rates for wholesale sales of electricity and transmission in interstate commerce Sections 205 and 206 of the Federal Power Act FPA require FERC to assure that the rates charged for transmission and wholesale sales are “just and reasonable” and do not unduly discriminate against any customers or provide preferential treatment Initially all FERC rate regulation was based on the cost of service but that policy has evolved FERC continues to employ the cost-of-service approach for transmission service For wholesale power sales the primary means for setting “just and reasonable” wholesale electricity rates are through competitive mechanisms subject to market rules to address market power A 3 3 State Local and Tribal Actors At the state level the electricity industry is regulated by state public utility commissions PUCs state environmental agencies and other parts of state government such as governors legislatures and state energy offices State governors and legislatures establish laws or standards that impact the electricity industry such as Renewable Portfolio Standards and state environmental agencies implement state and some Federal environmental laws and regulations and thus have jurisdiction on electricity PUCs in the states territories and the District of Columbia regulate IOUs State laws in a handful of states also give PUCs jurisdiction over public power and cooperatives 66 PUCs regulate all matters of IOU distribution rates capital expenditures cyber security reliability demand-side resources and the wholesale purchase process and usually site transmission and generation projects they also oversee generation choices in non–regional transmission organization RTO independent system operator ISO states and oversee retail competition in those states that allow it Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-13 QER 1 2 Appendix A Electricity System Overview State Retail Rate Setting State public utility commissions PUCs review and set retail rates for investor-owned utilities IOUs In states with retail competition rates only include the costs of the distribution of electricity while prices for electricity generation are determined competitively In states that have not restructured their utility industry retail rates set by PUCs include the recovery of generation transmission and distribution costs that utilities incurred to serve their ratepayers The underlying mandate of the PUC rate-setting process is to provide affordable and reliable electricity to consumers while ensuring that IOUs are given the opportunity to recoup their costs and earn a reasonable return on their investment Under cost-of-service regulation PUCs calculate utility revenue requirements as the sum of 1 rate base times allowed rate of return plus 2 utility operating expenses The rate base consists of the depreciated cost of a utility’s assets Based on the revenue requirement rates for each consumer class are determined h A few states also grant PUCs the authority to regulate rates for public power utilities but in most cases rates for public power utilities are set by the utility’s governing body for example a city council or other local authority Rates for members of rural cooperatives are set by the cooperative’s governing board 67 A 3 4 Federal and State Jurisdictional Responsibilities The current jurisdictional division of regulatory authority in the electricity sector between the Federal Government and the states codified in the FPA and interpreted by subsequent Supreme Court and lower court decisions is the result of the evolution of a regulatory scheme that was originally governed predominantly by state and local agencies The FPA established an affirmative grant of authority to the Federal Government to regulate wholesale sales and transmissions of electricity in interstate commerce but the FPA also attempts to draw a “bright line” where that exclusive authority ends and the state’s authority to regulate other matters principally facilities used in the generation and distribution of electric power as well as retail sales of electricity begins The “bright line” in the FPA uses factors such as transaction and customer type wholesale v retail facility type generation v transmission v distribution geography interstate commerce v intrastate commerce and regulatory action e g rate regulation v facility permitting to divide exclusive regulatory responsibilities between Federal and state regulators Congress has chosen different approaches for defining Federal regulatory responsibilities and the role of the states in other energy and energy-related statutes however The principal differences in approach include the following 1 while the FPA contemplates exclusive authority for each regulator with implicit opportunities for cooperative federalism other Federal statutes explicitly provide for shared authority sometimes called “cooperative federalism” and 2 while the FPA provides the Federal Government with limited authority over energy facility siting or generation facilities in general FERC has jurisdiction over siting hydro leaving such matters mostly to the states other Federal statutes such as the Natural Gas Act provide for Federal authority over facility siting 68 However new and emerging technologies that are gaining an increasing presence throughout the electricity system today have significantly different operational characteristics and attributes than those that existed when the FPA and its jurisdictional “bright line” were written and different characteristics than those that existed as that jurisdictional line developed over the ensuing decades For distributed generation no clear delineation exists between wholesale and retail jurisdiction as power flows from generation through delivery to ultimate consumption Instead new DERs including energy storage can be interconnected to either the FERC-jurisdictional high-voltage transmission grid or the state- h A more detailed discussion on different charges for consumers is included in Chapter II The Electricity Sector Maximizing Economic Value and Consumer Equity A-14 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 jurisdictional low-voltage local distribution system or behind the customer’s meter In addition these resources along with the other new and advanced technologies noted above can provide or enable demand response that can provide several kinds of wholesale and retail grid services with benefits that extend across the traditional generation transmission and distribution classifications Tensions between Federal and state regulatory jurisdiction over the electricity system have played out in the courts recently From the October Term of 2014 to the October Term of 2015 the Supreme Court heard three cases involving FERC jurisdictional issues an atypical number for a single year The Court’s decisions to hear these cases reflect in part the growing complexity of regulating the electricity industry but also point to uncertainty about statutes that regulate services that are increasingly converging with the electricity industry like natural gas and telecommunications Two of these cases the recent FERC v Electric Power Supply Association69 and Hughes v Talen Energy Marketing70 decisions provide examples of the courts applying the FPA’s jurisdictional division to new sets of technology and market challenges In both of those cases the Court decided generally in favor of the broader view of the Federal role FERC v Electric Power Supply Association—relating to FERC’s Order No 745—confirmed FERC's authority under the FPA to determine compensation for demand response that is bid into the organized wholesale market A 3 5 Major Federal Laws Pertaining to the Electricity Industry While the FPA is the enabling legislation providing the FPC and now FERC its authority over portions of the electricity industry additional laws and rules have further defined the legal landscape governing the electricity system Overall these laws and regulations can be broken into two separate categories electricity industry–related and environmental The Federal Water Power Act enacted in 1920 created the FPC now FERC to encourage the development of hydroelectric generation facilities by non-Federal entities The 1935 FPA expanded the Commission’s regulatory jurisdiction to include rates terms and conditions of service for interstate electricity transmission and wholesale electricity sales but left regulation of generation distribution and intrastate commerce to state and local governments 71 This set up the “bright line”i between Federal authority over wholesale rates and state and local authority over retail rates The utility industry of the early 1900s often relied on holding companies—a financial structure where a parent company would hold the financial stocks and bonds of subsidiary utilities—to improve financial performance and seek economies of scale Though these companies provided cost savings that contributed to the growth of the utility industry their complex financial structures enabled companies to subsidize their unregulated business activities with earnings from regulated activities In response Congress passed the Public Utility Holding Company Act in 1935 which reduced the role of holding companies in the industry and allowed closer regulatory scrutiny of utilities 72 PURPA 1978 passed as part of the National Energy Act was one of the major reformations of the governance of the electricity industry Utilities were required to purchase power from qualifying facilities at the utilities’ incremental cost of producing or purchasing alternative electricity which is now known as “avoided cost ”73 The right to sell the power at avoided cost combined with the exemption from several state and Federal regulations “created a new and rapidly expanding nonutility generation sector of the electric power industry ”74 Qualifying facilities fall into two categories 1 cogeneration facilities without any size limitations and 2 small power production facilities which use biomass waste or renewable resources and which have a generating capacity of no more than 80 megawatts PURPA also required states and utilities not regulated by states such as public power and rural cooperative utilities to conduct proceedings to consider charging cost-of-service rates for different customer classes eliminating declining i The term “bright line” was coined by the Supreme Court in Federal Power Commission v Southern California Edison Co in 1964 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-15 QER 1 2 Appendix A Electricity System Overview block pricing j using time-of-day seasonal or interruptible rates and implementing other retail utility policies The Energy Policy Act of 1992 EPAct 1992 implements many of the provisions of the National Energy Strategy proposed by DOE in February 1991 75 EPAct 1992 authorized FERC to order transmission-owning utilities to provide transmission services to third parties on a case-by-case basis and adopted reforms to the Public Utility Holding Company Act of 1935 both of which supported increased competition in wholesale electricity markets EPAct 1992 also included a wide variety of energy efficiency measures such as requiring states to establish minimum commercial building energy codes and consider voluntary minimum residential codes and equipment standards for commercial heating and airconditioning equipment electric motors and lamps As a result of the incentives offered through EPAct 1992 several Native Nations developed alternative energy projects on their lands The Renewable Electricity Production Tax Credit for wind biomass landfill gas and other renewable sources was also first passed in EPAct 1992 and has been renewed several times since then 76 As of May 2016 the Production Tax Credit provided an inflation-adjusted tax credit worth $0 023 kWh to qualifying electricity production from wind closed-loop biomass and geothermal as well as a $0 012 kWh credit for open-loop biomass landfill gas municipal solid waste qualified hydro and marine and hydrokinetic 77 The Energy Policy Act of 2005 EPAct 2005 addressed several major areas of the electricity industry 78 EPAct 2005 pared back the must-purchase clause contained in PURPA by giving FERC the authority to allow utilities in regions with competition not to use the avoided-cost principle The legislation also gave FERC responsibility for mandatory reliability standards and allowed the agency to certify an electric reliability organization to develop and enforce those standards The North American Electric Reliability Corporation NERC is the designated electric reliability organization for North America and oversees eight regional reliability entities in the United States Canada and Baja California Mexico NERC is a not-for-profit corporation that through a stakeholder process develops and enforces mandatory electric reliability standards under FERC oversight in the United States EPAct 2005 also tasked DOE with issuing periodic studies of transmission congestion and following the appropriate evaluation of transmission congestion and alternatives authorizes DOE to designate National Interest Electric Transmission Corridors where there are electricity transmission capacity constraints or congestion For projects located in these corridors FERC has “backstop authority” to authorize transmission siting 79 FERC was also given responsibility to provide rate incentives to promote transmission investment EPAct 2005 also increased the Investment Tax Credit which has been renewed several times including in the Omnibus Appropriations Act of 2015 80 Currently the Investment Tax Credit is 30 percent for solar fuel cells and small wind and 10 percent for geothermal microturbines and combined heat and power 81 Additionally EPAct 2005 provided grants for nuclear energy research and development and also implemented a $0 018 kWh production credit for modern nuclear energy plants 1 whose design was approved by the Nuclear Regulatory Commission after December 1 1993 2 that started construction by January 2014 and 3 that are placed in commercial operation by 2021 EPAct 2005 also created the Title XVII Loan Program which allows DOE to provide “guarantee loans that support early commercial use of advanced technologies if there is reasonable prospect of repayment by the borrower ”82 Other key laws and orders in the electricity industry are included in Table A-2 and key electricity industryrelated environmental laws and regulations are included in Table A-3 j Effectively a bulk-purchase discount for large electricity consumers making marginal increments of electricity cheaper as consumption rises A-16 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Table A-2 Additional Key Electricity Industry Laws and Orders Name Year Major Provisions Atomic Energy Act 1954  Established Federal regulatory authority over civilian uses of nuclear materials and facilities exercised through the Nuclear Regulatory Commission  Delineated Federal state jurisdiction for nuclear material and facilities licensing of nuclear plant construction and operation as well as waste disposal are exclusively in the Federal domain States retain oversight of generation planning by vertically integrated utilities e g questions of whether or not to construct nuclear facilities in the first place Price-Anderson Act 1957  Facilitated the development of nuclear-powered generating capacity by establishing a program for covering claims of members of the public if a major accident occurred at a nuclear power plant and providing a ceiling on the total amount of liability for nuclear accidents National Energy Act 1978  Passed in response to oil shortages in the 1970s and the increased reliance on imported oil which was seen as a threat to national security 83 Included the Natural Gas Policy Act of 1978 Public Utilities Regulatory Policies Act the Energy Tax Act the Powerplant and Industrial Fuel Use Act and the National Energy Conservation Policy Act 84  Energy Independence and Security Act 2007  Strengthened lighting energy-efficiency standards  Added Section 1705 to the loan guarantee program allowing subsidized loans to commercial facilities  Called for coordination to develop a framework for smart grid interoperability standards National Institute of Standards and Technology American Recovery and Reinvestment Act 2009  FERC Order 1000 2011  Funded $31 billion in energy efficiency renewable energy and energy infrastructure and made other major investments in energy research and development programs administered by the Department of Energy 85 Requires regional transmission planning and interregional coordination mandates that the planning process consider transmission needs driven by public policy requirements  Requires regional and interregional cost allocation methods that satisfy six allocation principles  Eliminated the Federal right of first refusal in Federal Energy Regulatory Commission FERC jurisdictional tariffs and agreements 86 In addition to the FPA the Federal Water Power Act the Public Utility Holding Company Act of 1935 PURPA EPAct 1992 and EPAct 2005 which are discussed in the above section these laws and orders have played key roles in shaping the electricity industry Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-17 QER 1 2 Appendix A Electricity System Overview Table A-3 Key Electricity Industry-Related Environmental Laws and Regulations Name Year Major Provisions Clean Air Act 1970  Authorized comprehensive Federal and state regulation of stationary pollution sources including power plants 87  Provided for National Ambient Air Quality Standards State Implementation Plans New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants 88  Requires states to decide what pollution reductions will be required from particular sources to address National Ambient Air Quality Standards and requires states to submit State Implementation Plans 89 National Environmental Policy Act 1970  Requires Federal agencies to review the environmental consequences of a proposed project before granting approval 90 Agencies prepare statements on the environmental impact of a proposed project Environmental Impact Statement or Environmental Assessment considering the views of the public and of other Federal state and local agencies and make the report publicly available 91 Clean Water Act 1972 Resource Conservation and Recovery Act 1976  Established regulations for discharging pollutants into water 92 which includes wastewater discharges from the power sector such as cooling water wastewater from coal ash handling and wastewater from pollution control equipment  The Steam Electric Effluent Limitations Guidelines—promulgated under the Clean Water Act—were updated in 2015  Provides EPA with the authority to regulate hazardous waste 93 including management of power sector waste such as coal ash  The Coal Combustion Residuals rule—promulgated under the Resource Conservation and Recovery Act—was finalized in 2015 New Source Performance Standards 1979  EPA rule governing sulfur dioxide emissions from coal power plants 94  Effectively required flue gas desulfurization on all new coal plants Clean Air Act Amendments 1990  Encouraged market-based principles to pollution control such as emissions trading 95  Requires EPA to regulate more than 180 specified hazardous air pollutants96 and set up specific procedures to determine whether the air pollution regulations would apply to power plants that run on fossil fuels 97  Established the U S Acid Rain Program the world’s first large-scale emissions cap-and-trade system to reduce air pollution The program set a permanent cap on annual sulfur dioxide emissions from the power sector Cross-State Air Pollution Rule 2011  Replaced the Clean Air Interstate Rule starting on January 1 2015  Requires states to reduce power plant emissions that contribute to ozone and fine particle pollution in downwind states 98 Mercury and Air Toxics Standard 2011  EPA rule limiting mercury and other toxic pollution from power plants 99 Carbon Pollution Standards and Clean Power Plan 2015  In 2015 EPA finalized the Carbon Pollution Standards rule establishing carbon dioxide emission standards for new fossil fuel-fired generators under Clean Air Act section 111 b  Also in 2015 EPA finalized the Clean Power Plan a rule to reduce carbon dioxide emissions from existing fossil fuel-fired generators under Clean Air Act section 111 d 100 The rule establishes final emission A-18 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Name Year Major Provisions guidelines for states to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel–fired electric generating units leaving states with considerable discretion to choose the approach 101  As of January 2016 implementation of the Clean Power Plan has been stayed by the Supreme Court pending the outcome of litigation 102  EPA regulation of greenhouse gas emissions followed from the 2007 Supreme Court decision in Massachusetts v EPA that greenhouse gases are air pollutants under the Clean Air Act and the 2009 EPA finding that the current and projected concentrations of six key greenhouse gases in the atmosphere endanger the public health and welfare a prerequisite for implementing greenhouse gas emissions standards 103 Beginning with the Clean Air Act in 1970 major environmental laws and regulations have impacted the electric industry in key ways Federal Authorities Policies and Frameworks for Electric Grid Resilience and Security The Federal Government plays a key role in enhancing the resilience and security of the grid through diverse efforts including research and development information sharing the establishment and enforcement of utility performance standards and the coordination of response resources Presidential policy directives and congressional legislation have outlined specific authorities for the Federal Government in recognition of the importance of the electricity sector—and supporting energy sectors— for national and economic security This section describes select Federal policies and frameworks guiding national resilience and security efforts as well as selected challenges in fulfilling Federal roles to protect critical electricity infrastructure Selected Authorities for the Energy Sector Defense Production Act Ensures timely availability of resources for national defense and civil emergency preparedness and response including energy-related assets 1950 Energy Policy and Conservation Act Directs the Secretary of Energy to establish operate and maintain the Strategic Petroleum Reserve 1975 which includes the Northeast Gasoline Supply Reserve and provides for the Presidentially-directed drawdown of those reserves Also authorizes the Secretary to establish and manage the Northeast Home Heating Oil Reserve 2000 as amended Federal Energy Administration Act Grants the Department of Energy DOE the authority to collect evaluate and analyze energy information from facilities or businesses operating in any phase of energy supply or major energy consumption 1974 Federal Power Act Provides the Secretary of Energy authority in time of emergency to order temporary interconnections of facilities and the generation delivery interchange or transmission of electric energy necessary to meet an emergency 1935 2015 as amended by FAST Act as defined below The Federal Power Act also gives FERC the authority to order compliance with reliability standards 1935 2005 as amended by EPAct In addition the Fixing America’s Surface Transportation Act FAST Act amended the Federal Power Act empowering the President to declare a grid security emergency in the face of an electromagnetic pulse cyber or geomagnetic disturbances and physical threats and in doing so enabling the Secretary of Energy to 1 direct users and operators of electricity assets to undertake such actions as are necessary to ensure the reliability of critical electric infrastructure and 2 share classified information as necessary to mitigate effects of the grid security emergency It also allows the Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-19 QER 1 2 Appendix A Electricity System Overview Federal Energy Regulatory Commission to provide a mechanism for any affected entities to recover related costs 2015 Natural Gas Policy Act Authorizes DOE to allocate supplies of natural gas to help alleviate an existing or imminent Presidentially-declared severe natural gas shortage that would endanger the supply of gas for high-priority uses 1978 Stafford Disaster Relief and Emergency Assistance Act The Stafford Act104 gives the Federal Government its authority to provide response and recovery assistance in a major disaster 1988 The Stafford Act identifies and defines the types of occurrences and conditions under which disaster assistance may be provided Under the law the declaration process k remains a flexible tool for providing relief where it is needed Designates the Federal Emergency Management Agency FEMA as the lead for Federal emergency response FEMA may require other Federal agencies to provide resources and personnel to support emergency and disaster assistance efforts DOE is the sector-specific agency for energy under this framework Executive Order 12656—Assignment of Emergency Preparedness Responsibilities Assigns preparedness responsibilities to Federal agencies and requires agencies to be prepared to respond adequately to all national security emergencies including developing emergency plans 1988 Homeland Security Presidential Directive 5 HSPD-5 Establishes a single comprehensive National Incident Management System under the purview of the Department of Homeland Security under which all other Federal agencies provide their cooperation resources and support The directive also provides direction for Federal assistance to state and local authorities 2003 Presidential Policy Directive 8 PPD-8 —National Preparedness Replaces prior national planning directives and takes an “all-of-Nation” approach to prepare for a wide range of threats and emergencies National Planning Frameworks—coordinating structures of key Federal agencies and other stakeholders—have been established around five mission areas prevention protection mitigation response and recovery 2011 Presidential Policy Directive 21 PPD-21 —Critical Infrastructure Security and Resilience Establishes shared responsibility for strengthening critical infrastructure security across the Federal Government PPD-21 highlights the role of the national physical and cyber coordinating centers in enabling successful critical infrastructure security and resilience outcomes 105 Designates critical infrastructure sectors and sector-specific agencies notably DOE as the sector-specific agency for the energy sector 2013 A 4 1 Planning and Coordination Frameworks Federal policy directives and legislation address the evolving threats and institutional vulnerabilities of the Nation’s critical infrastructure by defining roles and responsibilities for national grid resilience and security Homeland Security Presidential Directive HSPD -7 Presidential Policy Directive PPD -8 and PPD-21 laid the groundwork for the key coordinating bodies and a national approach to plan for events k “The Robert T Stafford Disaster Relief and Emergency Assistance Act 42 U S C §§ 5121-5207 the Stafford Act §401 states in part that ‘All requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State ’ A State also includes the District of Columbia Puerto Rico the Virgin Islands Guam American Samoa and the Commonwealth of the Northern Mariana Islands The Republic of Marshall Islands and the Federated States of Micronesia are also eligible to request a declaration and receive assistance through the Compacts of Free Association ” See “The Disaster Declaration Process ” Federal Emergency Management Agency accessed September 23 2016 https www fema gov disasterdeclaration-process A-20 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 Joint United States–Canada Electric Grid Security and Resilience Strategy In December 2016 the Federal Governments of the United States and Canada released the “Joint United States-Canada Electric Grid Security and Resilience Strategy ” a collaborative effort between the two nations intended to strengthen the security and resilience of the U S and Canadian electric grids from all adversarial technological and natural hazards and threats The Strategy addresses the vulnerabilities of the two countries’ respective and shared electric grid infrastructure not only as an energy security concern but for reasons of national security Because the electric grid is complex vital to the functioning of modern society and dependent on other infrastructure for its function the United States and Canada developed the Strategy under the shared principle that security and resilience require increasingly collaborative efforts and shared approaches to risk management The Strategy organizes joint approaches to protect today’s grid manage contingencies by enhancing response and recovery capabilities and cultivate a more secure and resilient future grid As an expression of shared intent and approach the Strategy organizes joint efforts to manage current and future security challenges Three strategic goals underpin the effort to strengthen the security and resilience of the electric grid Protect Today’s Electric Grid and Enhance Preparedness A secure and resilient electric grid that protects system assets and critical functions and is able to withstand and recover rapidly from disruptions is a priority for the governments of both the United States and Canada Manage Contingencies and Enhance Response and Recovery Efforts The Strategy sets out a shared approach for enhancing continuity and response capabilities supporting mutual aid arrangements such as cyber mutual assistance across a diverse set of stakeholders understanding interdependencies and expanding available tools for recovery and rebuilding Build a More Secure and Resilient Future Electric Grid The United States and Canada are working to build a more secure and resilient electric grid that is responsive to a variety of threats hazards and vulnerabilities To achieve this the electric grid will need to be more flexible and agile with an architecture into which new technologies may be readily incorporated 106 The Strategy will be implemented through the U S and Canadian Action Plans which detail specific steps and milestones for achieving the Strategy's goals within their respective countries 107 These documents are intended to guide future activity within areas of Federal jurisdiction with full respect for the different jurisdictional authorities in both countries Under HSPD-7 and then PPD-21 the National Infrastructure Protection Plan set out a number of partnership structures for coordination and information sharing within and across sectors including electricity Some of the formal coordination and information-sharing councils available to the electricity subsector include the following   Electricity Subsector Coordinating Council Represents the interests of the industry and is composed of electric utility industry executives It is the principal mechanism for private-sector owners and operators to work collaboratively with the government under a structured and protected framework that allows open dialogue There is a counterpart subsector coordinating council for the oil and natural gas subsector Numerous task forces and subcommittees have worked on supply-chain concerns interdependencies and coordination with other sectors The Electricity Subsector Coordinating Council is also a critical coordination mechanism for information sharing during and after incidents Energy Government Coordinating Council This government counterpart to the Electricity Subsector Coordinating Council is jointly led by DOE and the Department of Homeland Security DHS with membership from all levels of government and international partners Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-21 QER 1 2 Appendix A Electricity System Overview These structures collectively serve as a means of sharing information best practices research needs and other critical infrastructure security information such as information about interdependencies across sectors Additionally PPD-8 calls for the development of a National Planning System to integrate planning across all levels of government and the private sector The intent is to provide a flexible approach to prevent protect mitigate respond and recover from an event The National Planning System includes the following 108 109     National planning frameworks describing the key roles and responsibilities to deliver the core capabilities required for the key mission areas prevent protect mitigate respond and recover Federal Interagency Operational Plans for each mission area to provide further details regarding roles and responsibilities specify critical tasks and identify requirements for delivering core capabilities Federal department and agency operational plans to implement the Federal Interagency Operational Plans Comprehensive planning guidance to support planning by local state tribal and territorial governments the private sector and others PPD-8 also outlines five frameworks to maintain proper support from the Federal Government by working through states to assist affected local jurisdictions or organizations The five frameworks divide efforts into rational disciplines of competence—prevention protection mitigation response and recovery The combined frameworks shape efforts to prepare our Nation for emergencies stemming from all hazards The National Response Framework and its Emergency Support Function ESF -12 Annex outline much of the joint Federal state and private-sector responsibility for response and recovery to energy service disruptions The ESF-12 Annex characterizes the Federal response as the facilitation of restoration of damaged energy systems and components For example DOE may exercise its emergency powers depending on the conditions of certain respective declarations and findings to facilitate restoration and to meet the needs of industry After an incident the National Disaster Recovery Framework110 provides guidance for an expeditious return to a normal way of life Like the National Response Framework’s ESFs the National Disaster Recovery Framework has Recovery Support Functions DOE is named as a primary agency in the Recovery Support Function–Infrastructure Systems A 4 2 Tools and Technical Assistance The Federal Government also provides numerous tools and technical assistance to enhance states’ and the electric industry’s capabilities to operate electricity systems in a secure and resilient manner Many of these resources help stakeholders understand risks assess their systems analyze vulnerabilities and prioritize mitigation strategies Below are a few examples    A-22 DOE’s Electricity Subsector Cybersecurity Capability Maturity Model helps entities evaluate prioritize and improve their cybersecurity capabilities and allows for a better overall assessment of the cybersecurity posture of the energy sector 111 DHS’s Cyber Security Evaluation Tool112 and the Cyber Resilience Review are complementary and voluntary tools for evaluating industrial control system ICS and information technology network practices and operational resilience and cybersecurity capabilities respectively 113 DHS’s ICS Cyber Emergency Response Team provides resources to critical infrastructure sectors to prevent and recover from cyber attacks This includes working onsite to help resolve spear phishing campaigns that seem to target ICS supervisory control and data acquisition or SCADA data including data that could facilitate remote access and control of systems 114 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017    DHS’s Regional Resiliency Assessment Program conducts regional assessments of the Nation’s critical infrastructure addressing a range of hazards that could have regionally and nationally significant consequences Argonne National Laboratory has completed 56 Regional Resiliency Assessment Program projects during 2009–2014 which addressed a variety of postulated hazards including tornadoes ice storms earthquakes hurricanes solar storms and other threats to the electric sector The National Oceanic and Atmospheric Administration supports Regional Climate Centers which are able to provide technical assistance and climate data to support risk assessment and decision making by utilities and governments 115 DOE's Office of Energy Policy and Systems Analysis convenes the Partnership for Energy Sector Climate Resilience through which DOE provides technical assistance for 18 electric utilities that are demonstrating leadership in developing vulnerability assessments and pursuing strategies for investing in climate resilience Continued support for tools development and expanding technical assistance resources is increasingly important as changing risks from human-induced actions and natural hazards make risk-based planning more challenging For example to credibly account for projected changes in climate utility planners and regulators need technical assistance in accessing and correctly interpreting climate data at the appropriate time and geographic scales A 4 3 Standards and Guidance As previously discussed FERC has regulatory authority over the reliability of the bulk power system overseeing the development and approval of standards set by NERC FERC can also proactively direct NERC to develop a new or modified reliability standard to address reliability issues identified by FERC While these standards cover the reliability and security of bulk power assets NERC has typically designed them with the benefit of the system as a whole in mind balancing the interests of its stakeholders In addition to standards the Federal Government works with stakeholders to develop additional guidance to support risk mitigation strategies across the electric sector It is worth noting that NERC’s planning standards for electric reliability e g TPL-001-4 and facility ratings standards e g FAC-008-3 require consideration of a broad range of risks to the system However assumptions within these standards regarding the frequency and intensity of extreme weather events for example do not account for projected changes in climate Furthermore transmission planning efforts routinely consider system-wide costs associated with average weather-related loads rather than accounting for extreme conditions 116 The practice of using historical data and average conditions undercuts efforts to plan and prepare for threats such as extreme weather cyber attacks or hostile actions that may have different characteristics in the future Within the Commerce Department the National Institute of Standards and Technology NIST develops frameworks voluntary standards and other guidance documents to assist electric sector efforts in reliability resiliency and security 117 NIST conveys unique technical requirements for authorizing monitoring and managing all methods of remote access to the smart grid information system 118 119 The NIST Framework and Roadmap for Smart Grid Interoperability Standards Release 3 0 is one example of these resources 120 121 In addition in 2014 the NIST released the Framework for Improving Critical Infrastructure Cybersecurity which includes a set of standards methodologies procedures and processes that align policy business and technological approaches to address cyber risks and incorporates voluntary consensus standards and industry best practices 122 In 2015 DOE released guidance to help the energy sector establish or align existing cybersecurity risk management programs to meet the objectives of the Framework released by NIST Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-23 QER 1 2 Appendix A Electricity System Overview Several organizations are also actively revising interconnection standards—the rules that prescribe capabilities that technologies like distributed generation must possesses as a precondition to connecting to the electricity system—to better support the reliability safety and cost effectiveness of the grid As technologies subject to interconnection standards increase in number and potential impact on the grid enhanced Federal support is critical to the timely and robust completion of these standards A 4 4 Information Sharing and Threat Analysis Federal agencies have institutions and programs in place to enhance information sharing and the dissemination of threat analysis to government and industry partners DHS is responsible for several key infrastructure security programs The National Infrastructure Coordinating Center and the National Cybersecurity and Communications Integration Center are the national focal points for industry partners to obtain 24 7 situational awareness and integrated actionable information to secure the Nation’s physical and cyber critical infrastructure respectively 123 During major incidents the National Infrastructure Coordinating Center and the National Cybersecurity and Communications Integration Center closely coordinate with the Federal Emergency Management Agency FEMA to ensure that overall critical infrastructure status and impacts on life and safety are understood throughout the Federal incident response community 124 Below are additional examples of government programs available to electric sector participants     DHS Fusion Centers are information-sharing hubs for Federal state local tribal and territorial agencies and industry to maintain situational awareness at the state and local levels Fusion centers receive analyze and disseminate threat information providing local perspectives to their partners 125 DHS Automated Indicator Sharing is a free program that facilitates the exchange of cyber threat indicators between the Federal Government and parties that opt in to the program through machine-to-machine sharing 126 DOE’s Cybersecurity Risk Information Sharing Program facilitates the exchange of detailed cybersecurity threat information among electric utilities the Electricity Information Sharing and Analysis Center DOE and several National Laboratories The program was designed to facilitate the timely bidirectional sharing of unclassified and classified threat information and to develop situational awareness tools to enhance the sector's ability to identify prioritize and coordinate the protection of their critical infrastructure and key resources Information Sharing and Analysis Organizations encourage exchange of information to protect critical infrastructure and are supported by sector-specific agencies and DHS in accordance with EO-13691 and PPD-63 Electricity System Operations Business Models and Markets A 5 1 System Operation The electricity system of the continental United States does not function as a single unified grid but rather is split into three interconnections that each function as independent power systems with limited power flows between them enabled by DC interconnections between the regional systems Hawaii and parts of Alaska also operate as independent systems The goal in operating each of these power systems is to deliver low-cost and reliable electricity A complex set of institutions defined by geographic boundaries accomplishes this goal A-24 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 One of the broadest geographic divisions is the regional reliability entity l which develops and enforces standards on behalf of NERC m 127 Figure A-6 shows the three interconnections of the continental United States and the NERC reliability regions Figure A-6 North American Interconnections and Reliability Regions 128 n This map shows four North American interconnections three of which include the United States and eight NERC reliability regions The four interconnections include Eastern Western Quebec and the Electric Reliability Council of Texas ERCOT The NERC regions include Florida Reliability Coordinating Council FRCC Midwest Reliability Organization MRO Northeast Power Coordinating Council NPCC ReliabilityFirst RF SERC Reliability Corporation SERC Southwest Power Pool Regional Entity SPP RE Texas Reliability Entity TRE and Western Electricity Coordinating Council WECC l Instead of entity the terms council and organization are sometimes used to refer to these entities as a group Individually their names include entities e g Texas Reliability Entity councils e g Florida Reliability Coordinating Council organizations e g Midwest Reliability Organization corporations e g SERC Reliability Corporation and pools e g Southwest Power Pool Inc m NERC sets standards for the reliability of the bulk power system The jurisdiction and authority of NERC is discussed in greater detail in Section A 3 2 Federal Actors n This figure is based on information from the North American Electric Reliability Corporation’s website which is the property of the North American Electric Reliability Corporation and is available at http www nerc com AboutNERC keyplayers PublishingImages NERC_Interconnections_Color_072512 jpg This content may not be reproduced in whole or any part without the prior express written permission of the North American Electric Reliability Corporation Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-25 QER 1 2 Appendix A Electricity System Overview Providing electricity when and where it is needed is an incredibly complicated engineering process Unlike most other consumer goods and energy sources electricity is not stored in large quantities and must be produced at the instant it is needed It is the job of power system planners and operators to ensure that electricity is produced when and delivered to where it is needed at every moment of every day The Nation is regionally subdivided into balancing areas shown in Figure A-7 where balancing authorities operate regions of the grid on a day-to-day basis Some of these regions overlap precisely with NERC reliability regions while many others are smaller in geographic extent On a daily basis balancing authorities forecast demand schedule generation supply and schedule exchanges with neighboring regions These decisions are generally guided by software optimization systems that minimize the total cost of meeting demand subject to operating constraints and reliability criteria Scheduling generation supply occurs on multiple time horizons the most important of which include unit commitment scheduling the availability of a generator days or hours ahead of time and economic dispatch providing operating instructions in near real time Figure A-7 Electricity System Interconnections and Balancing Areas129 The electricity industry includes the three continental United States electricity system interconnections Eastern Western and the Electric Reliability Council of Texas ERCOT and the 66 balancing authorities that are responsible for maintaining a balance between supply and demand within their areas The location of the balancing area bubbles is approximate and the size represents a rough indication of the size of the system managed in each area Different operating approaches are used throughout the country though all focus on minimizing costs and maintaining reliability In some areas utilities operate their own systems based on their costs for resource options and operating decisions Other regions operate based on organized markets where market participants place supply and demand bids into a centralized market and a market operator determines the least-cost mix of bids o Market participants then pay and earn money based on market o The operations of markets are discussed in greater detail in Section A 5 3 Electric Power Markets A-26 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 prices for electricity and ancillary services System operators in these areas are called ISOs or RTOs p and their markets—except for Electric Reliability Council of Texas ERCOT which covers most of Texas—are overseen by FERC q Figure A-8 Regional Transmission Organizations RTOs 2015130 FERC encouraged voluntary formation of ISOs and RTOs through a series of landmark orders that paved the way for open access to transmission and created large centrally organized power markets in the United States There are currently seven ISO RTOs in the United States and their geographic extent changes periodically Maintaining operational reliability of the power system requires focusing on a set of essential reliability services called ancillary services provided by generation and load that aid in maintaining frequency and voltage of the system within acceptable bounds during normal operations and immediately after minor system disturbances r Examples of these services include frequency response automatic generator p There are small distinctions between ISOs and RTOs though they are insignificant for the level of discussion in the QER Throughout the terms will be used synonymously q The jurisdiction and authority of FERC is discussed in greater detail in Section A 3 2 Federal Actors r The term Essential Reliability Services is used by NERC to describe a set of necessary operating characteristics of resources on the bulk power system required to reliably operate the bulk power system in North America For voltage support it includes reactive power power factor control voltage control and voltage disturbance performance For frequency management it includes inertia frequency disturbance performance operating reserves and active power control which includes frequency control and ramping capability Ancillary services are a subset of Essential Reliability Services Source North American Electric Reliability Corporation NERC Essential Reliability Services Task Force A Concept Paper on Essential Reliability Services that Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-27 QER 1 2 Appendix A Electricity System Overview response to grid frequency deviations and spinning reserves generators that remain running and able to increase or decrease their output when instructed Some ISO RTO market regions procure ancillary services through markets that mirror their energy markets Additional services are procured in these regions through cost-of-service payments In non-ISO RTO regions many ancillary services are provided under a cost-of-service basis The evolving composition of the electricity generation fleet has implications for long-term availability of these system-essential reliability services 131 Reliability and the Role of the North American Electric Reliability Corporation NERC Over the past 50 years Federal oversight of the reliability of the bulk power system has increased The 1965 Northeast power blackout precipitated the formation of NERC but bulk power system reliability standards were voluntary and subject only to industry oversight 132 A 2003 blackout that affected more than 50 million customers led to the inclusion in the Energy Policy Act of 2005 of requirements for mandatory bulk power reliability standards and enforcement including designation of an electric reliability organization 133 The Federal Energy Regulatory Commission oversees NERC in its development and enforcement of mandatory reliability standards for the bulk power system States retain oversight of local reliability which includes lower voltage transmission lines and distribution systems NERC mandatory reliability standards address weaknesses in the prior voluntary system that were identified in the 2003 blackout investigation A 5 2 Business Models Electricity in the United States is produced and delivered by a diverse set of actors using a range of business models Depending on the operating model in question these actors can be subject to regulation and oversight by different combinations of local state and Federal agencies A key factor for differentiating between actors is ownership companies can be investor-owned publicly owned or cooperatively owned Within each of these three ownership models there are significant variations in purpose regulatory oversight prevalence and size Table A-4 provides overview statistics for the most common types of utility ownership In addition to these primary ownership models there are a number of businesses that provide distributed resources like demand response aggregation and distributed solar Figure A-5 Broad Overview of Jurisdictional Roles in the Electricity Industry provides a taxonomy of utility business models by ownership and asset types Table A-4 Characteristics of Major Utility Types134 135 Municipal utilities are the most numerous of the various utility types though IOUs serve far more customers Rural electric cooperatives have a higher proportion of distribution miles per customer served than investorowned or municipal utilities Characterizes Bulk Power System Reliability Atlanta GA NERC http www nerc com comm Other essntlrlbltysrvcstskfrcDL ERSTF%20Concept%20Paper pdf A-28 October 2014 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 IOUs are privately owned for-profit utilities whose retail service is regulated by state PUCs that may be either vertically integrated or restructured to only own transmission and distribution IOUs earn a regulated rate of return based on investments made to serve their ratepayers Rural electric cooperatives include nonprofit member-owned distribution utilities and generation and transmission utilities The cooperative business model is predicated on providing its customers with reliable affordable energy that is locally owned and operated The model is unique in that customers are “members” of the cooperative and as such hold ownership and voting stakes Management is democratically elected by the membership and the prevailing methodology is one meter one vote 136 Cooperatives receive a significant portion of their financing both directly and indirectly from the Federal Government through both the Department of Agriculture’s Rural Utility Service and cooperative banks like the National Rural Utilities Cooperative Finance Corporation Electric cooperatives are not subject to Federal income tax and thus must collaborate with a third party to monetize tax credits available for utility and generation investments Public power utilities are owned by a governmental entity such as municipalities states public utility districts or irrigation districts and vary in size and scope from small distribution utilities to large vertically integrated utilities Public power also includes joint-action agencies that may own generation transmission and power purchasing services for their member utilities such as the Lower Colorado River Authority and Missouri River Energy Services Joint action agencies allow small distribution-only public power utilities to aggregate their demand and contract for and or build generation transmission and other common services Federally owned utilities operate in the generation and transmission segments of the power system in several parts of the country Four Power Marketing Administrations market hydropower generation at dams operated by the Bureau of Reclamation or the Army Corps of Engineers TVA has a portfolio of generation and transmission to sell wholesale electricity to public power and cooperatives in its footprint Federal law grants preference for electricity marketed by Federal utilities to public power and cooperative utilities s Federally owned generation resources produce approximately 7 percent of all power in the United States and they own approximately 14 percent of all transmission lines 137 138 Merchant independent power producers IPPs sell power through markets and bilateral contracts with utilities and other customers IPPs typically have market-based—rather than cost-based—rates and do not have captive customers They may or may not be affiliated with an IOU through a holding company In 2014 IPPs produced approximately 40 percent of the Nation’s electricity 139 IPPs are often subject to hard-to-predict market conditions and can experience volatile cash flows and returns Competitive retail energy suppliers are companies that sell power to end users in states with competitive retail markets As such they do not earn a regulated rate of return Although distribution utilities are the only entities that can deliver power directly to retail customers in certain states customers can choose the suppliers of that power In practice this “retail choice” means that a consumer can sign a contract with a qualified third-party electric service provider who could in turn contract with a generator on a bilateral basis self-generate or purchase power in the wholesale market and pay the necessary tariffs to the transmission owner and distribution utility Energy service companies ESCOs were traditionally providers of turnkey energy efficiency retrofits but ESCOs are now offering biomass geothermal wind and solar generation bill management energy s Preference clauses for Federal power sales originate from a series of congressional acts regarding Federal land reclamation and hydropower development beginning with the Reclamation Act of 1906 See GAO-01-373 for further details Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-29 QER 1 2 Appendix A Electricity System Overview monitoring and energy procurement 140 ESCOs explicitly guarantee energy savings for the consumer and charge a fee below that savings known as an energy savings performance contract 141 Demand-response aggregators contract with large groups of end users to curtail their load if called upon to do so by the local utility or balancing authority This flexibility is useful for reliability and economic reasons There are many different providers of demand-response aggregation including existing utilities and third-party providers 142 The terms and conditions of third-party access to wholesale markets differ between ISOs and RTOs but generally aggregators can participate in both energy and capacity markets to provide energy and ancillary services including synchronized reserves 143 Of 9 3 million participants registered in demand response in 2014 by count over 90 percent are residential customers However over 75 percent of actual peak-demand savings came from commercial and industrial customers in 2014 144 Table A-5 Taxonomy Ownership Scope of Utility Business Models with Representative Firms 145 Competitive retail energy suppliers are a special category of market participants that buy and sell electricity but do not own any generation or infrastructure Some ESCOs are retailers Vertically integrated entities integrate generation transmission and distribution All business model categories in this table may include retail sales in addition to other services Utilities in the U S electricity sector have a variety of ownership and asset structures A-30 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A 5 3 Electric Power Markets Rather than consisting of a single overarching market the U S electricity industry can instead be considered something of a patchwork with different regional markets pursuing different mechanisms to provide electricity service to end users The simplest characteristic differentiating these markets is whether resources are scheduled dispatched and compensated by a centrally organized RTO ISO or if they operate under the more traditional model wherein vertically integrated utilities operate within their franchise areas and receive revenues based on the cost of service From this bifurcation the organized markets can be further classified according to the types of resource adequacy constructs they use These two attributes form a useful framework for analyzing the degrees to which the various markets differ from one another and also underscore the diversity of approaches to electricity policy amongst the states Figure A-9 Spectrum of Electricity Markets146 This graphic illustrates the degree to which various U S regions have changed from the traditional market model The two primary characteristics measured here are resource adequacy constructs and whether the market is centrally organized Markets include ERCOT ISO New England ISO-NE New York ISO NYISO the PJM Interconnection PJM California ISO CAISO Midcontinent ISO MISO the Southwest Power Pool SPP and the Energy Imbalance Market EIM in the Western Electricity Coordinating Council WECC region The markets listed under “special case” and “traditional model” are classified by NERC region and are not standardized designations Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-31 QER 1 2 Appendix A Electricity System Overview Regions Address Resource Adequacy with a Variety of Mechanisms Resource adequacy is “the ability of the electric system to supply the aggregate electrical demand and energy requirements of the end-use customers at all times taking into account scheduled and reasonably expected unscheduled outages of system elements ”147 Planning for adequate investment in generation and transmission capacity to ensure resource adequacy is a critical component of ensuring a reliable electricity system Traditional vertically integrated regions and some utilities in hybrid markets conduct an integrated resource planning process to plan for necessary capacity investments Some centrally organized markets have implemented capacity markets as a mechanism for ensuring future resource adequacy In these markets the system operator conducts an auction process and retail service providers procure resources to meet the electricity demands of their customers These markets can be mandatory PJM Interconnection and Independent System Operator ISO –New England voluntary where utilities can choose to operate under an integrated resource planning process Midcontinent ISO or voluntary backstopped by a mandatory process New York ISO 148 Other regions California ISO and the Southwest Power Pool have capacity obligations where market operators require utilities to procure necessary generation reserves either through ownership or through contracts with third-party providers Another market-based approach used in the Electric Reliability Council of Texas relies on energy prices alone and does not have formal requirements or markets for capacity In this approach market scarcity pricing or relatively high energy prices during high-demand periods reflecting the lack of ample additional resources provides necessary financial incentives for investment in generation capacity “Traditional” markets the Southeast of the United States for example are dominated by vertically integrated IOUs that operate under a regulated cost-of-service model serving customers in a defined franchise area Public power and rural cooperative utilities also have a significant presence in some regions and their utility asset ownership models can vary from vertically integrated to distribution-only IPPs can also operate within these regions to some degree However the majority of power is produced and delivered by the integrated utilities Power purchases between these various entities are generally limited to bilateral trades These can be made to take advantage of price discrepancies or cover shortfalls in supply These bilateral transactions represent a small portion of the total generation in traditional markets and are typically in the form of long-term power purchase agreements instead of short-term trades For example in 2015 FERC estimated that short-term trades called spot transactions in the Southeast region accounted for less than 1 percent of overall supply 149 Centrally organized markets ERCOT and New York ISO for example are markets where utilities were required to sell their power generation assets and keep only the “wires” component of the business Generation assets were sold to IPPs who now operate these assets and build new generation based on expected market earnings These assets work in a competitive fashion with the IPP owners either 1 looking to sell power under bilateral contracts to utilities or other off-takers such as industrial users or 2 dispatching their power into wholesale energy markets In wholesale “energy-only” markets units bid in on a day-ahead basis what price they are willing to produce power at based on an assessment of their operating costs fuel costs and return expectations The system operator RTO ISO then pools these bids in a centralized fashion and determines a clearing price that matches supply demand and congestion forecasts for a given period Notably all units receive that marginal clearing price for that period even if their bid prices are significantly lower than the clearing price determined by the ISO In addition the typical markets maintain price caps that limit what can be charged in any particular hour in order to limit the potential for market manipulation “Hybrid” centrally organized markets for example California ISO and the Southwest Power Pool combine elements of centrally organized energy markets and traditional resource adequacy mechanisms A-32 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 In fact several of these markets had moved toward more of a pure restructured model before moving back to elements of the more traditional regulated approach A 5 4 Transmission Access Competition and Planning While Congress has found that generation can be provided through competitive mechanisms and therefore encouraged restructuring in that segment of the industry in the 1990s increasing competition among transmission owners and reducing barriers to using transmission have been more incremental processes Originally incumbent transmission owners largely controlled third-party access to transmission lines effectively precluding competition at the wholesale level Buyers and sellers of wholesale power that did not own the transmission connecting them had difficulty reaching each other over another’s transmission lines at reasonable cost EPAct 1992 resolves this issue by providing FERC with greater authority to provide transmission access for wholesale buyers in procuring wholesale electric supplies Since 1992 FERC has taken multiple actions to increase operational and economic efficiency and equity of transmission operations and pricing FERC adopted Order No 888 and Order No 889 which require electricity utilities that own transmission lines used in interstate commerce to offer transmission service on a nondiscriminatory basis to all eligible customers including non-jurisdictional entities such as public power rural cooperatives and Federal utilities Order No 2000 further encouraged utilities to join RTOs to improve the efficiency and equity of the transmission systems FERC Order No 890 built upon Order No 888 to encourage more transparent planning and use of the transmission system and to reduce opportunities for undue discrimination FERC Order No 1000 covers concepts such as 1 precluding in most circumstances incumbent transmission owners from having Federal rights of first refusal to build transmission within their service territories 2 the opportunity for entities not previously recognized as transmission owners in the region non-incumbents to compete to develop transmission facilities and allocate the costs of those facilities and 3 the requirement that project costs be allocated in a manner that is at least roughly commensurate with expected benefits from the projects Transmission owners operators and regional coordinators implement structured transmission planning processes to identify solutions that can more efficiently or cost-effectively maintain system reliability and accommodate changes in generation capacity and demand Meeting the transmission planning goal requires both technical engineering analysis of different power systems configurations and economic analysis of projects proposed to meet the identified needs In the United States the transmission planning process generally falls into three geographic categories local regional and interregional coordination Local transmission planning activities are carried out by incumbent transmission owners These transmission owners assess their system and implement local solutions within their own service territory Regional transmission planning includes assessment of solutions within a given planning region that spans several transmission owner service territories Regional transmission planning relies on extensive stakeholder engagement power system simulation modeling and long-term economic impact analysis of alternative transmission projects Interregional coordination is implemented for solutions that involve more than one ISO RTO or planning entity Interregional coordination activities are mostly guided by the principles outlined in FERC Order No 1000 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 A-33 QER 1 2 Appendix A Electricity System Overview Endnotes 1 “U S Coal Flow 2015 Energy Information Administration Monthly Energy Review April 2016 http www eia gov totalenergy data monthly pdf flow coal pdf 2 “Estimated U S Energy Use in 2014 98 3 Quads ” Lawrence Livermore National Laboratory 2015 https flowcharts llnl gov content assets docs 2014_United-States_Energy pdf 3 “How Many and What Kind of Power Plants Are There in the United States ” Energy Information Administration Frequently Asked Questions last updated December 1 2016 http www eia gov tools faqs faq cfm id 65 t 2 4 EPSA Analysis National Renewable Energy Laboratory “Electricity Generation Baseline Report ” forthcoming 5 EIA Energy Information Administration 2014 Electric Power Annual Washington DC EIA 2015 Tables 1 1–1 3 http www eia gov electricity annual 6 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming 7 “Table 2 4 Average Retail Price of Electricity to Ultimate Customers by End-Use Sectors 2004 through 2014 ” Energy Information Administration Electricity Data Browser accessed November 18 2016 http www eia gov electricity data cfm#sales 8 “Table 2 3 Revenue from Sales of Electricity to Ultimate Customers by Sector by Provider 2004 through 2014 ” Energy Information Administration Electricity Data accessed November 18 2016 http www eia gov electricity data cfm#sales 9 EIA Energy Information Administration September 2016 Monthly Energy Review Washington DC EIA September 2016 DOE EIA-0035 2016 9 Table 7 2a http www eia gov totalenergy data monthly #electricity 10 EPSA Analysis National Renewable Energy Laboratory “Electricity Generation Baseline Report ” forthcoming 11 “U S Energy Information Administration Form EIA-923 detailed data 2015 data October 12 2016 https www eia gov electricity data eia923 12 “Electric Companies Use a Diverse Mix of Fuels to Generate Electricity ” Edison Electric Institute April 2015 http www eei org issuesandpolicy generation fueldiversity Documents map_fuel_diversity pdf 13 “United States – Annual Average Wind Speed at 30 m ” National Renewable Energy Laboratory February 21 2012 http www nrel gov gis images 30m_US_Wind jpg 14 “Photovoltaic Solar Resource Flat Plate Tilted South at Latitude ” National Renewable Energy Laboratory November 2008 http www nrel gov gis images map_pv_us_annual10km_dec2008 jpg 15 Ellen Flynn Giles and Kathy L Brown eds UDI Directory of Electric Power Producers and Distributors 123rd Edition of the Electrical World Directory New York NY Platts 2014 vi https www platts com im platts content downloads udi eppd eppddir pdf 16 “Transmission Availability Data System TADS Element Inventory ” North American Electric Reliability Corporation 2015 data accessed October 19 2016 http www nerc com pa RAPA tads Pages ElementInventory aspx 17 FERC Federal Energy Regulatory Commission Energy Primer A Handbook of Energy Market Basics Washington DC FERC Office of Enforcement Division of Energy Market Oversight November 2015 52–53 http www ferc gov marketoversight guide energy-primer pdf 18 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming data from ABBVelocity Suite 19 Ellen Flynn Giles and Kathy L Brown eds UDI Directory of Electric Power Producers and Distributors 123rd Edition of the Electrical World Directory New York NY Platts 2014 vi https www platts com im platts content downloads udi eppd eppddir pdf 20 “Transmission Availability Data System TADS Element Inventory ” North American Electric Reliability Corporation 2015 data accessed October 19 2016 http www nerc com pa RAPA tads Pages ElementInventory aspx A-34 Transforming the Nation’s Electricity Sector The Second Installment of the QER January 2017 21 EPSA Analysis ICF International “Transmission Analysis Planning Operations and Policy ” forthcoming data from ABBVelocity Suite 22 Roderick Jackson Omer C Onar Harold Kirkham Emily Fisher Klaehn Burkes Michael Starke Olama Mohammed and George Weeks Opportunities for Energy Efficiency Improvements in the U S Electricity Transmission and Distribution System Oak Ridge TN Oak Ridge National Laboratory April 2015 http www energy gov sites prod files 2015 04 f22 QER%20Analysis%20%20Opportunities%20for%20Energy%20Efficiency%20Improvements%20in%20the%20US%20Electricity%20Transmission%20 and%20Distribution%20System_0 pdf 23 EPSA Analysis W M Warwick T D Hardy M G Hoffman and J S Homer Electricity Distribution System Baseline Report Pacific Northwest National Laboratory July 2016 PNNL-25178 24 DOE Department of Energy The Potential Benefits of Distributed Generation and Rate-Related Issues that May Impede their Expansion A Study Pursuant to Section 1817 of the Energy Policy Act of 2005 Washington DC DOE February 2007 5-1 https www ferc gov legal fed-sta exp-study pdf 25 EPSA Analysis W M Warwick T D Hardy M G Hoffman and J S Homer Electricity Distribution System Baseline Report Pacific Northwest National Laboratory July 2016 PNNL-25178 26 EPSA Analysis National Renewable Energy Laboratory “Electricity Generation Baseline Report ” forthcoming 27 “Table 7 6 Electricity End Use 2015 ” Energy Information Administration Monthly Energy Review September 2016 https www eia gov totalenergy data monthly pdf sec7_19 pdf 28 EPSA Analysis Lawrence Berkeley National Laboratory “Electricity End Uses Energy Efficiency and Distributed 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infrastructure AML Fund Abandoned Mine Lands Reclamation Fund ARC Appalachian Regional Commission ARRA American Recovery and Reinvestment Act of 2009 BTU British thermal unit CCUS Carbon capture utilization and storage CES Clean Energy Standard CHP combined heat and power DC direct current DER distributed energy resources DG distributed generation DOE U S Department of Energy DR Demand response EE Energy efficiency EERS Energy Efficiency Resource Standard ERCOT Electric Reliability Council of Texas ESCO energy service company EV electric vehicle FAST Act Fixing America’s Surface Transportation Act FERC Federal Energy Regulatory Commission GDP gross domestic product GHG Greenhouse gas GW Gigawatt HVAC heating ventilation and air conditioning ICT information and communications technology IEEE Institute of Electronics and Electrical Engineers IoT Internet of Things IOU investor-owned utility IPP independent power producer ISO independent system operator ITC Investment Tax Credit 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