The Democratization of Energy

Jay MarhoeferCEO and Executive ManagerIntelligent Generation LLC

June 17, 2010

Tonight’s discussion Overview of the electricity sector The challenge of renewables Intelligent GenerationTM and the

democratization of energy

The obligatory plug Intelligent GenerationTM is an integrated hardware/

software platform that democratizes how clean energy is produced and distributed.› The optimizer is a smart box that acquires electricity for

a building when it is cheap or free and stores it in a battery for later use during peak times. It buys low and sells high.

› The network forms a virtual power plant from the optimizers. It provides immediate, reliable power to utilities when it is most valuable.

The optimizer and network, when combined, can triple the cost savings of solar energy and cut the payback time in half.

Questions I hear Why aren’t the wind turbines spinning

when it’s a windy day? Why can’t we run everything on

renewables and use fossil fuels or nuclear power for backup?

Will a smart national electricity grid solve our problems?

Will solar ever work without subsidies?

Electricity 101

It’s a little more complicated

Types of power companies› IOUs (investor owned utilities)› IPPs (independent power producers)› Wholesale power marketers (e.g. Exelon)› Munis and co-ops› Load generating vs. “wires and meters” › ARES (alternative retail electricity suppliers)

Regulators› FERC (Federal Energy Regulatory Commission› PUCs (state public utility commissions)› ISOs/RTOs (regional transmission organizations, e.g. PJM)

Other stuff› Baseload/load-following/peaker› RPS (renewable portfolio standards)› Deregulation

For starters…

Seasonal demand varies

Januar

y

Febru

ary

March

AprilMay

June

July

August

Septe

mber

October

Novem

ber

Decem

ber0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

All otherOther RenewablesHydroelectric ConventionalNuclearNatural GasCoalG

igaw

att-

hour

s

As does daily demand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 240

5000

10000

15000

20000

25000

30000

WinterSpringSummerFall

Hour

MW

h

Which leads to 3 challenges Availability/reliability

› Nukes, coal and natural gas are steady› Wind and solar are not

Resource management› Grid was built to be one-way› How to match demand with (variable) supply?

Inertia› Nuclear plant: 5-7 days from cold start› Coal plant: 3-5 days› Load following natural gas plant: 30-90 minutes› Pure peaker: 15 minutes› Wind: 10-30 minutes› Solar: instantaneous

Can wind do it all?

Maybe in winter

But not in summer

Wind’s effect on price (Texas)

Capacity doubled in 2008

…and so did price volatilityERCOT—Houston Hub 2006 2007 2008Average kWh price (cents) 5.2 5.4 7.2Average daily spread 18.7 22.0 41.2Lowest (95.0) (99.9) (153.6)HIghest 124.8 150.0 380.6

Moral• Wind blows most when you need it least (winter nights) and least

when you need it most (summer days)• Wind’s volatility necessitates more high value ancillary services

(storage, voltage regulation, spinning reserve)• Wind potential is greatest in areas far away from major cities

(other than offshore)

What about a national grid? Probably won’t happen

› Politics (see next slide)› Shifting demographics to Sun Belt

Low wind Not aligned with regional transmission

groups› Cost of new transmission (tens of $

billions)› Property rights

Retail electricity rates vary

What about solar? 92% of Americans think it’s important to

develop solar energy and incorporate it in the U.S. electricity system

Source: 2009 Schott Solar BarometerTM

But…long payback periods and high upfront costs› 15+ years even with 30% federal tax credit› 10+ years even with tax credit and $300/MWh

REC

19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

So what’s the answer?

Demand side management

Supply side management

Dem

and

20

Reshape electricity demand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Dem

and

Demand side management

21

Reshape electricity demand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

SolarDem

and

22

Reshape electricity demand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Purchased off-peak /wind power stored in battery

Dem

and

23

Reshape electricity demand

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Dem

and

Resulting purchased electricity

…by democratizing energy A managed network of distributed

renewable generation and storage 100,000 networked buildings is

equivalent to bringing a small nuclear plant online immediately

Enormous market power even at 5% of total generation (see Texas)

The “Holy Grail”: consumer participation in the wholesale electricity market

25

Solar with IG Optimizer

26

Intelligent Generation network

27

ComparisonSolar only Solar /battery/

timerSolar/ battery/

IGNet installed cost $10,000 $11,600 $12,000

Annual electric bill w/o solar $2,000 $2,000 $2,000Electricity cost savings $260 $500 $700Solar RECs $500 $500 $500Capacity reduction $0 $0 $200Ancillary services $0 $0 $200Peak demand credit $0 $0 $100TOTAL ANNUAL Savings $760 $1,000 $1,700Payback period—solar system 13 years 10 years 5.8 yearsPayback period—battery/timer N/A 1.6 years 1.2 yearsPayback period—battery/IG N/A N/A N/ATotal payback period 13 years 11.6 years 7.0 years

Other possibilities Smart grid Plug-in hybrids Fuel cells

Smart grid Focus has been on demand-side

management and investor-owned utilities

What consumers like› Real time pricing› Rewards for peak time reductions

What consumers don’t like› Utility control of “smart” appliances (HAN)

Plug-in hybrids Potential storage capacity is formidable

› 10 million PHEVs could store 100,000 MWh (enough to power California for 2 hours)

“Charging” side makes perfect sense› Excess capacity and cheap electricity

Discharge side is problematic› Peak times coincide with commute home› Higher and better use

Reducing greenhouse gas emissions? Getting US off foreign oil?

Fuel cells E.g., the “Bloom Box”

› Darling of the cleantech VC crowd› $400 million invested to date

Reliable on-site production of electricity But…

› Won’t be affordable for 5-10 years› Needs a hydrocarbon (e.g., natural gas)› What happens in winter when the cost of

natural gas is 6x?

Summary Hardware costs are coming down

› Solar› Batteries/storage

PHEVs are coming Legislation (RPS, PACE) is driving adoption

› Lack of integrated vision › Doing what’s cheap (wind) vs. what’s smart

Those who democratize energy will reap the major benefits

Thank youJay Marhoefer

Intelligent Generation LLCjay@intelgen.com