August 22, 2014 FIRE ISLAND WIND

August 22, 2014 FIRE ISLAND WIND

Phase 1 Summary: Performance Project Performance: Benefits realized: 93,500 MWh LTD >875,000 MCF of NG burn avoided ~$6.5 MM in NG purchases avoided 55,000 tons of CO2 not emitted Total production 2013: 49,531 MWh vs. 51,180 budget Turbine Availability 98.5% - including planned maintenance outages Need photo here

Month MWh 2013 MWh 8,000 Fire Island Phase 1-2013 Production MWh 60,000 7,000 50,000 6,000 5,000 40,000 4,000 30,000 3,000 20,000 2,000 1,000 10,000 0 January February March April May June July August September October November December Actual Budget Cum. Actual Cum. Budget 0 Description Actual Budget Variance Production 49,530 51,180 (3.2)%

Actual curtailment vs. Expected CEA Curtailment of 25% 63% less curtailment than CEA anticipated Actual Expected DGE Actual 4,780 MWh 2013 Expected DGE 12,795 MWh

Phase 1 Summary: Energy Produced as Expected Integration Successful Curtailment well below expectations Impact on CEA frequency and reliability has been acceptable CEA Q4 2013 status report to the RCA: "Chugach is not aware of any electrical system operational issues as a result of Chugach receiving energy from the Project. CEA April 2013 Final RCA Report: Chugach's generation and transmission assets have not experienced any negative impacts as a result of energy generated by the Project, and Chugach is not aware of any such impacts on the generation or transmission assets of any interconnected Railbelt utility. Construction and Operation of Phase 1 is a Success

Fire Island Wind Project Proposed Phase 2

Fire Island Wind, Phase 2 20.4 MW project B String flanks the east ridgeline of island 11 General Electric 1.85 MW XLE wind turbines 29.7% Net Capacity Factor (NCF) P50 = 52,900 MWh Simplified transmission interconnection Shovel-ready project All material permits in-hand

Combined Production Phase 1 and Phase 2 14,000 12,000 Fire Island Wind Project Monthly Combined Production MWh 6,242 5,740 10,000 4,904 5,142 4,655 4,735 5,359 8,000 4,063 6,000 4,000 5,555 4,746 4,977 3,932 4,506 3,243 3,185 3,139 3,082 2,211 3,423 3,313 4,582 5,187 6,042 2,000 2,140 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MWh P50 - Phase I MWh P50 - Phase II

Phase 2 Project Timeline ASAP Oct Dec 14 2015 Negotiate PPA Approval of PPA by RCA Construction RFP TSA contract Construction contract Close Financing NTP for contractors May start construction September completion September commissioning October - COD Time is of the essence! Qualified for 30% ITC worth ~ $40/MWh on Price

So, Why Hasn t The Project Moved Forward??? Buyer Needed Economic Hurdle Operational Hurdle Overcoming the Status Quo

Advantages of Expansion Overcoming the Economics Reduced capital requirement for Phase 2: Utilizes existing roads Switchgear O & M Facility Project Labor and Equipment Optimize Transmission Assets Much simpler contracting: PPA template previously approved by RCA Revise Interconnection Turbine supply Financing Much Lower Pricing

Phase 2 Project Energy Expect 52,900 MWh/year Price Phase 1: $0.0970/kWh for 25 years Phase 2 Price: $.07988/kWh for PPA 25 years $.06270/kWh escalating 25 years Phase 2 price is 18% lower (utilizes significant existing infrastructure)

Elements for Phase 2 Success Present Now: Shovel Ready Achievable Schedule Power Off-take: GVEA, CEA, or MEA Pricing is comparable to low depending on buyer Future tax savings uncertain Optimizes state investment in transmission Helps AK comply with EPA Clean Power Plan Moves us closer to State s 50% renewable goal

EPA imposes new mandatory rules: 6.2.2014: EPA s proposed Clean Power Plan will regulate carbon emissions from existing fossilfueled power plants using the agency s authority under the Clean Air Act Overall goal of power sector - CO2 emission reduction of 30% of 2012 levels by 2030 Draft rules to be finalized in 2015 AKDEC craft approach to cut greenhouse-gas emissions State implementation plans due in 2016-2017 RPS, energy efficiency, and/or buy carbon credits

FIW Phase 2 Offsets CO2 Emissions - Helps with compliance, EPA rule 111.d CO2 emission offsets will have significant future value one projection is below: Source: The Brattle Group

FIW Phase 2 Compares Favorably to Avoided Costs Current average avoided cost along with estimate of incremental avoided power cost in 2016, with and without effect of CO2 offsets. Avoided costs are compared to Phase 2 power plus wheeling.

Avg. Cost/MWh Net MWh GVEA Average Cost of Energy by Facility $1,300 140,000 $1,200 $1,100 120,000 $1,000 $900 100,000 $800 $700 80,000 $600 $500 60,000 $400 $300 40,000 $200 $100 20,000 $0 0 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 North Pole Net MWh North Pole Exp. Net MWh CEA Net MWh FIW P2 Net MWh Avoided Cost Avg./MWh North Pole Avg. Cost/MWh North Pole Exp. Avg./MWh CEA Avg./MWh FIW P2 Avg./MWh

So, Why Doesn t The Project Move Forward??? Buyer Needed Economic Hurdle Operational Hurdle Changing the Status Quo Hurdle

Power Integration Typical Electric Utility Daily Load Shape 4 Balancing Areas System Operator: Supply = Demand, At lowest cost Source: U.S. DOE, 20% Wind Energy by 2030 (2008)

Megawatts Thermal plus Hydro Plenty of Capacity to Integration of Phase 2 700 Installed Thermal and Hydro Generation vs. Peak Load by Utility 600 500 400 300 520.14 504.4 220 200 100 0 234 200 150 196 324.8 170 90 59.4 44 15 19 15 CEA MLP GVEA MEA HEA hydro thermal peak load

Megawatts Integration with existing resources: There is capacity available to integrate FIWP Phase 2 2,500 Railbelt Installed Capacity vs. Peak Monthly Load Estimates 2,000 1,500 1,000 1,220 1,110 1,000 870 Installed Capacity excludes Units announced for retirement 930 910 890 880 950 1,030 1,130 1,130 500 - January February March April May June July August September October November December Railbelt 2016 peak estimate Installed Capacity

Integration - CAPACITY Railbelt Generation: Perfect for Integrating Wind 2012: Southcentral Power Plant: 3X1 CC LM 6000 2006: ML&P LM 2500 2016: ML&P Plant 2: 2X1 CC LM GE 6000 2015: MEA: 10 X 17.1 MW Wartsila 18V50DF Bradley Lake Hydro Cooper Lake Eklutna Hydro

Wartsila designed for flexibility

Source: Wartsila cycling flexibility

Integration ENERGY: Railbelt Energy Hydro-electric Natural gas Gas flexibility CINGSA - 2012 Generous Imbalance allowances with pipelines Wind farm control system parameters Inertia Ramp rate control Curtailment of wind

MW wind different from forecast Integration how much gas flex is needed: 20 18 16 14 12 10 8 6 4 2 0-2 -4-6 -8-10 -12-14 -16-18 -20 FIW Phase 2 - MW of Wind Unplanned vs. MMBtu Fuel worst case/24 hour imbalance @ 8,000 HR Short gas imbalance MMBtu/day worst case Long gas imbalance Conservative: assumes no intra-day gas nom changes. Imbalance quantity still acceptable

Gas System Flexibility is Proven: Can accommodate unplanned start or shut down of a thermal unit if needed for wind integration Hilcorp tariff provides for significant imbalance Imbalance tolerance will work as the spring to enable unplanned gas burn or storage as needed Will be fully implemented November 1, 2014 Enstar operations 2014: unplanned start or shut down of a Beluga or similar unit is noise would not cause gas system reliability or curtailment issues. Imbalance provision exists today

Elements for Phase 2 Success Present Now: Integration Generation Capacity Operational flexibility Future Optimization Expanding Balancing Area Economic dispatch Bi-lateral cross-utility agreements

So, Why Doesn t The Project Move Forward??? Buyer Needed Economic Hurdle Operational Hurdle Overcoming the Status Quo

Combined Production Fire Island Phase 1 and Phase 2 as compared to Railbelt total sales Where there is a will, there is a way! Phase 2 energy is not a material amount compared to total Railbelt sales. There are ways and means to integrate Phase 2 smoothly. FIW Phase 2 as part of the total Railbelt Railbelt Total Sales FIW Phase 1 FIW Phase 2 Fire Island Wind total phase 1 plus phase 2 is approx. 2% of Railbelt energy. This is a very modest amount of wind compared to other regions of the country. 1% 1% 98%

Renewable Integration in Hawaii: Hawaii is an electrically islanded grid, similar to Railbelt. In 2012 renewable energy was 13.7% of statewide total. Source: Hawaii Energy Facts and Figures June 2013 Hawaii State Energy Office

Wind Integration in ERCOT: ERCOT is an electrically islanded grid, similar to Railbelt. In 2013 renewable energy was 9.9 % of ERCOT total example day below: Source: ERCOT Grid Operations

Wind Integration in ERCOT: ERCOT is a less flexible system than Railbelt no hydro and less natural gas to flex but still able to 10% wind energy. Source: ERCOT Grid Operations May 2014

Renewable Integration in BPA: Total wind capacity in BPA system is over 4,500 MW. During last week of July 2014 wind was nearly 1/3 of all generation serving load in BPA. Wind is nearly 30% of load and nearly equal to thermal generation in some periods Source: http://transmission.bpa.gov/business/operations/wind/baltwg3.aspx

01/01/14 00:00 01/01/14 04:55 01/01/14 09:50 01/01/14 14:45 01/01/14 19:40 01/02/14 00:35 01/02/14 05:30 01/02/14 10:25 01/02/14 15:20 01/02/14 20:15 01/03/14 01:10 01/03/14 06:05 01/03/14 11:00 01/03/14 15:55 01/03/14 20:50 01/04/14 01:45 01/04/14 06:40 01/04/14 11:35 01/04/14 16:30 01/04/14 21:25 01/05/14 02:20 01/05/14 07:15 01/05/14 12:10 01/05/14 17:05 01/05/14 22:00 01/06/14 02:55 01/06/14 07:50 01/06/14 12:45 01/06/14 17:40 01/06/14 22:35 01/07/14 03:30 01/07/14 08:25 01/07/14 13:20 01/07/14 18:15 01/07/14 23:10 01/08/14 04:05 01/08/14 09:00 01/08/14 13:55 01/08/14 18:50 01/08/14 23:45 01/09/14 04:40 01/09/14 09:35 01/09/14 14:30 01/09/14 19:25 01/10/14 00:20 01/10/14 05:15 01/10/14 10:10 01/10/14 15:05 01/10/14 20:00 Renewable Integration in BPA: Total wind capacity in BPA system is over 4,500 MW. Significant wind integration issues have been dealt with the Railbelt can do this as well! 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 BPA wind generation vs total load January 1 through January 10, 2014 TOTAL WIND GENERATION IN BPA CONTROL AREA (MW) TOTAL BPA CONTROL AREA LOAD (MW) Source: http://transmission.bpa.gov/business/operations/wind/baltwg3.aspx

Development Options: Chugach, MEA or GVEA Diversifies supply portfolio Stabilizes prices for consumers Get ahead of the curve on new EPA rules Chugach wheels power in all cases MEA provides regulation to others Lot of daylight between $63 and $115/MWh to pay for integration and wheeling

Conclusion & Summary FIW P2 is a small but important project Clean, abundant, and economic Privately funded stimulates the economy Environmental benefits + avoided CO2 emissions penalty Moves toward AK State Energy Goal Much lower price than Phase 1 No significant impediment to successful construction Time to act is now Time is very short ITC value is $40/MWh. PTC is $ 23 $0.00

Contact Information Suzanne Gibson Cook Inlet Region, Inc. 907-263-5150 www.fireislandwind.com

Supporting Information

System Impacts EPS study results 8/27/10 Assumes larger 33 unit 53 MW project - integration solely by CEA. The addition of the FIWF does not have any effect on the stability of the Railbelt system due to transient disturbances. The transient analysis found no stability issues due to the addition of the FIWF to the Railbelt system. The addition of FIWF capacity to the Railbelt grid did not result in any negative impacts to the Railbelt grid within the scope of this study. Need photo here

Wind Farm Power Regulation Final Report 3/4/11 EPS Assumes larger project at 33 units = 53 MW This study was undertaken with the assumption that Chugach would provide all of the regulation required for FIWF in order to meet its control area obligation. Analyzing the wind data indicated that the Chugach thermal generation or its hydro resources have the technical capability of regulating the ramp rates predicted for the wind farm. Although both simple-cycle and combined cycle generation has the capability of providing regulation for the wind resources, the natural gas suppliers and transportation company do not have the ability to deliver resources to match the capability of the generation. No longer true!! Gas system not a constraint

Wind Farm Power Regulation Final Report cont d. Conclusions - among other things: The incorporation of the FIWF into the Railbelt system does not present overly difficult technical obstacles or issues. The technical issues can be overcome with revisions to the current utility practice and planning. In the future, the ability to provide accurate, reliable hourly forecasts of wind energy 24-36 hours in advance could lessen the integration costs and risk associated with the project. The constraining factor does not appear to be the electrical system, but the gas supply and delivery system. No longer true!! Gas system not a constraint

Fire Island Wind is Popular with Railbelt Consumers: Over 90% of consumers in Railbelt either support or are indifferent. Over 75% willing to pay more for Fire Island wind power Source: Cracium Research, Inc. 2010 Fire Island consumer survey update