GenerationHub Quarterly Market Update February 19, 2015 Wayne Barber, Chief Analyst, GenerationHub Barry Cassell, Chief Analyst, GenerationHub Kent Knutson, Director Hub Services, PennWell Corporation

Sponsored by

Power Generation Drivers and Uncertainties

• EEI estimates record capital expenditure spend in 2014 at $103.3bn – 58% on non-T&D projects

• MATS compliance is in full swing – extensions, retirements and emission control projects in the news

• What changes are in store for EPA CPP emission standards now that the comment periods are over?

• Tax incentives for renewable energy are still up in the air • Eye on natural gas – little under construction so far

despite big build-out planned; are the economics there? • What do rock-bottom crude oil and natural gas prices

mean for power generation in terms of infrastructure development?

• How will distributed generation influence development?

• GenerationHub is tracking $128bn (127 GW) in planned and under-construction natural gas projects and growing . . .

• Utility scale solar and wind continue to expand

• Solar 16.0 GW in development next three years • Wind 28.9 GW from 2015 to 2018 alone, with

about 16.9 GW in 2015 alone – though some will likely be completed in 2016 and beyond

• Nuclear 14.8 GW planned between now and 2024 • RPS update . . .4 states set to comply in 2015 and

some repealing or delaying including OH and WV

Gas, Solar and Wind Dominate the Future

US Current Electric Capacity First Year Online by Fuel Type (MW)

• Gas, Wind and Solar Continue to Dominate the New Generation Landscape

Investment 2015-17 • Gas: 85.7 GW (63%) • Wind: 26.9 GW (20%) • Solar: 16.1 GW (12%) • GWS: 128.7 GW (95%) • All: 135.3 GW

Planned Generation by Fuel (MWs)

Planned Gas Power by NERC Region – MW

Nuclear in the News

Nuclear in the News

EPA’s Clean Power Plan

• More than 2 million comments on new power plant

rules (111b) and 3.5 million comments on existing power plant rules (111d) – with all this input what changes will the EPA suggest?

• January 7, 2015 the EPA announced a delay in rolling out the final rules covering new power plants

• Numerous states, companies and industry groups claim the interim goals (2020) are unobtainable citing double digit increases in electric rates

• Summer 2015 will reveal all . . .

Clean Power Plan in the News

Clean Power Plan in the News

MATS Compliance in the News

MATS Compliance in the News

Gas Repower/Refuel Projects in the News

• GenerationHub tracking

28 plants (53 units) accounting for 15.2 GW

• 14 Units expected online in 2015

Planned Gas Pipelines in the News

• GenerationHub tracking

42 pipeline projects – 32 last webcast

• Estimated investment of $21.6bn

• The majority planned to come online between 2016-18

• Virginia Southside, Florida Southeast Connection and Citrus County Line

Coal Plant Retirements by ISO/RTO 2010 to 2020 – MW

Near-Term Impact of Coal Plant Retirements on Energy Supply Curves (PJM, 2015)

US Wind Power Capacity – Annual and Cumulative (MW)

• Renewed 10 times since 1992 – 2.3 cents/kWh

• HR 5771 extends PTC another year

• January vote to extend 5 years voted down 47-51

• Requires construction start by end of 2014

• ITC set to expire in 2016 – could affect solar development

RPS (Renewable Portfolio Standards) and the PTC (Production Tax Credit)

2016 Budget Request

President’s 2016 Budget

Growth in Solar PV Power (MW) – 2008 to 2013

• WoodMac – “Solar could be the next shale”

• 2014 estimated at 2.5 X 2012 – 89% PV

• Costs continue to fall -- since 2010, module cost down from 40% to 20% of installation price

• CA, AZ, NC and NV leading the charge

• Nearly 17 GW Operating – 31 GW under construction or in development

• NC has 3.2 GW under development

• Apple – $860 in solar, Google – $1.5bn solar and wind

• Crude Oil Futures for March delivery around $50/barrel • Doesn’t reach $60 until February 2016 • Only gets to $71 for December 2023 deliveries

• HH Natural Gas spot prices $2.69/mmBtu – not above $4.00 until January 2020

• Iron Ore 62% Fe CFR China • November/2014: 84.0 • February/ 2015: 58.38

• Lower commodity prices will lower the cost of infrastructure construction

• The “Tale of Two Regions”: on February 10, 2015 • Northeast (gas $8.50 and power $83.70) • Northwest (gas $2.06 and power $13.50)

Low Sustained Fuel Prices . . .

RECENT TRENDS US Electric Utility Fuel Mix – Electric Generation

Most Recent 12 Months – Ending November 2014

Change Change Last 12 months Nov 13’to14’ Gas 1.0% 0.6% Coal 1.8% -1.6% Oil 42.9% 1.7% Nuclear 1.1% 0.3% Hydro -4.9% 5.2% Renew 9.6% 17.3%

Trends in Average Delivered Price of Coal and Natural Gas to US Electric Power Plants

Most Recent 12 months ending November, 2014 compared with same period in prior year: Electric Utilities • Coal flat at $2.38/mmBtu • Gas up 16.4% to $5.19 Independent Power Producers • Coal up 1.4% - $2.24/mmBtu • Gas up 18.9% to $4.96 Electric Rates • Residential up 2.9% to 12.5 c/kWh • All Customers up 3.6% to 10.4

Electricity and Gas Price Disconnect

What can we expect going forward?

• The EPA Clean Power Plan will change based on comment period feedback – 2020 goals will likely decline

• PTC/ITC extension will be extended but with phase out period over 5 years

• Growth in distributed generation will continue to grow • Gas power will be front and center stage over the near term • Lower oil and gas prices will result in infrastructure

construction benefits – lower commodity prices and lower electric fuel prices – but electric rates overall will continue to increase

• 2015 will be a year to remember . . . .

Questions and Answers

At this point we would like to field questions . . . .

Thank You for Attending . . . .

To find out more about GenerationHub and to schedule a demonstration of our online intelligence service call or email . . . Laura Kresse (918) 831-9731 laurak@pennwell.com And don’t forget GenForum at POWER-GEN Natural Gas . . .