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CPS Energy’s Generation Strategy

Todd HorsmanSr. Director, Strategy & Product Development

Kim R. Stoker Sr. Director, Environmental & Sustainability

January 17, 2017

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CPS ENERGY: BY THE NUMBERS

786K339K

AA+Largest municipally-owned electric and gas Utility in US

Electric and Gas Customers

Premier credit rating

$11B in assets $2.5B in annual revenue

Solar leader in Texas;Tenth in the nation.

Annual economic impact to San Antonio community

More than 1,000 new jobs have been committed to San Antonio by our NEE partners.

New Energy Economy Partnerships

#1 786K339K

AA+

$11B$2.5B #1

$1.4BEconomic Impact

>900Jobs

VISION 2020

Vision 2020 transitions CPS Energy from a company that is highly dependent on traditional generation power sources to a company that provides competitively priced power based

on a diverse generation portfolio.

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20% renewable energy capacity in power generation mix

65% of generation low-carbon

20% renewable energy capacity in power generation mix

Diversification

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Fuel and Technology Diversification - Installed Capacity

1970

Gas/steam

1980

Gas/steam Coal

1990

Gas/Steam Coal Nuc

2015

Gas Coal Nuc STEP Wind/Landfill Gas Solar

1648 MW

3338 MW

3930 MW 8056 MW

Gas-Steam 100%

Gas-Steam 75.1%

Coal 24.9%

Gas-Steam 61.1%

Nuclear 17.8%

Coal 21.1%

Gas-Steam 41%

Coal 27%

Nuclear 13%

STEP 3.7%

Wind/LandfillGas 13% Solar 1.7%

Generation Mix

2010

Coal & Nuclear Renewables & Gas

2015

Coal & Nuclear Renewables & Gas

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Nuclear 33.2%Coal 48.9%

Renewables and Gas

Nuclear 29.6%Coal 29.2%

Renewables and Gas

41.2%

82.1% 58.2%Gas 26.3%Wind 11.1%Solar 1.1%

17.9%

HOW WE GOT HERE

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Nuclear 33.2%Coal 48.9%

Nuclear 29.6%Coal 29.2%

82.1% 58.2%Gas 26.3%Wind 11.1%Solar 1.1%

17.9%

Innovative Strategic Approach

– Actively managing risk through diversification of generation sources

– Reducing carbon intensity / transitioning to a cleaner fleet

– Pursuing affordable renewables, supported by more flexible & dynamic traditional thermal fleet

– Leveraging clean energy development & energy efficiency initiatives to create economic opportunity in San Antonio

Our actions have included:

• Early deactivation of coal (Deely 1 & 2) & use of ultra-low sulfur coal

• Purchase of an 800MW Natural Gas Combined Cycle (Rio Nogales)

• Deployment of 500MW of Solar & 1059 MW of Wind

• Innovative & strong local rooftop solar market (~50 MW)

• STEP 771 MW - Demand Response & Energy Efficiency

“CPS Energy’s strategic goals and decisions are among the most progressive in the country. It is shooting for 20 percent renewable energy generation capacity by 2020 and has plans to mothball one of its 1970s-era coal plants in 2018, 15 years earlier than expected.” -Jim Marsten, Founding Director of the Texas office of Environmental Defense Fund (EDF)

CPS ENERGY IS #1 IN SOLAR FOR TEXAS

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Somerset Solar Farm - Southeast San Antonio

WIND IS A LARGE PART OF GENERATION MIX

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Desert Sky Wind Farm - Iraan, TX Pecos County

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Solara 110 MW

Pearl 50 MW (Under Construction)

Sirius 110 MW(In Testing)

Helios 95 MWEclipse 40 MW

DIVERSITY IN OUR RENEWABLES

Sinkin 1&2 20 MW

Somerset 11 MW

Alamo 1 40 MW

Alamo 24.4 MW

Alamo 3 5.5 MW

Blue Wing14 MWSweetwater 3 &4

341 MW

Desert Sky 1&2 161 MW

Cedro Hill 150 MW

Los Vientos 200 MW

Penascal 77 MW

Papalote Creek 130 MW-Wind Farms

-Solar Farms

Legend:

• Electric vehicle charging network

OPTIONS, CHOICES & CONVENIENCE FOR OUR CUSTOMERS

• Residential and commercial energy efficiency

• Home Manager

• Smart Thermostat

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• SolarHost SA

• Roofless Solar

• Weatherization Program

• Nest• Energy Hub• Honeywell• Weather Bug

DEMAND RESPONSEEQUIVALENT TO A SMALL POWER PLANT

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96105

137

172

201 196

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016

MW

14% of customers are on DR program

~125,000 customers on demand response programs

CPS ENERGY CO2 INTENSITY

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CO

2 In

ten

sit

y (

lbs/m

wh

)

To

tal G

en

era

tio

n (

millio

n m

wh

)

time

Historical CO2

Intensity for CPS Energy (lbs of CO2

emissions per net mwh of generation from all sources of

power including gas, coal, wind, and nuclear)

Total Generation CO2 Intensity

1988- STP 1 & 2 added to Generation mix

1993- STP shutdown for year

2005- Increase STP from 28% to 40% ownership

2009 - Increase due to Spruce 2

WE ARE CLOSE TO MEETING GOAL OF 65% LOWER CARBON EMISSIONS

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AA+

Sources: 2016 Annual Report & January 2016 Gen Mix Report, YTD – January, & M&V reports through CY 2016

Source: 2016 Annual Report, January 2016 Gen Mix Report, YTD – January, & M&V reports through CY 2016

Total Carbon-Free GenerationTotal Generation

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Nuclear25.8%

STEP2.7%

Wind9.9% Solar

1.0%

Landfill Gas0.3%

Gas23.3%

Purch Pwr12.0%

Coal25.1%

Nuclear65.4%

STEP6.9%

Wind 25.1%

Solar2.6%

INTELLIGENCE & AUTOMATION OF GRID

• Community Benefits:• Economic growth

• Enhanced reliability

• Maintain competitive rates

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STRONG VALUE PROPOSITION FOR GRID 2.0

FUTURE STATE

Automating processes

Better data and decision making

New products & services

Accelerated customer response & problem resolution

• 13M miles driven annually

• 103K miles walked annually

• 4.1M calls answered annually

• Old processes

CURRENT STATE

BATTERY STORAGE PROJECT

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Solar

5 MW Solar PV Facility

Battery Energy Storage System

10 MW-1hr Battery or

5 MW-2hr Battery

Will reduce the emissions of pollutants through Solar Shifting in addition to providing Ancillary Services in the ERCOT market.

TECHNOLOGY INNOVATION PILOTS

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CPS Energy Microgrid• Partners: JBSA, UTSA, Omnetric,

Duke Energy• Location: Fort Sam Houston Library• Purpose:

• Microgrid can isolate from the grid for resiliency and back-up purposes

• The lessons learned from this pilot will allow for future installations throughout the service territory increasing the robustness of the utility grid

Photovoltaic system paired with a 75kW battery system

CUMULATIVE HISTORICAL WATER SAVINGS

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Water saved

CPS STEP (2005-2015) 5,842

CPS Renewables (2015) 40,410

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

acre

-fee

t

CPS STEP (2005-2015)

CPS Renewables (2015)

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ANNUAL WATER SAVINGS

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

STEP (Energy Efficiency) - - - 1 41 91 216 385 496 595 770 917 1,09 1,23 1,08 1,26 1,42 1,62 1,75

Renewables 581 622 656 789 1,45 2,02 2,50 2,67 3,81 4,82 4,45 5,36 5,72 4,92 6,62 7,19 7,11 7,21 7,16

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1,000

2,000

3,000

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5,000

6,000

7,000

8,000

9,000

10,000

Wat

er

Save

d (

acre

-fe

et/

year

)

Water Saved Due to Renewables & Energy Efficiency

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COMBINED NOX + SO2 RATE RANKING

0

1

2

3

4

5

6

77

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75

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73

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71

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69

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94

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Com

bin

ed E

mis

sio

n R

ate

of N

Ox p

lus S

O2

(lb/M

MBTU

)

Numerical Ranking of Units - Worst to Best

Generating Unit Emission Rates - 2015Combined NOx plus SO2 (lb/MMBTU)

744 Operating Coal Units Reporting Emissions in

Deely 1 ranked #475 ( 64% in nation)Deely 2 ranked #453 ( 58% in nation)Spruce 1 ranked #144 ( 19% in nation)Spruce 2 ranked #1

U.S Average Emission Rate = 0.7517

Deely Unit 2 = 0.5908 lb/MMBTU

All CPS Energy Units Combined = 0.3589 lb/MMBTU (Top 35% in

Nation)

Spruce 1=0.1868 lb/MMBTU

Spruce 2=0.0518 lb/MMBTU

Deely Unit 1 = 0.6061 lb/MMBTU

NOX REDUCTION

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0

5,000

10,000

15,000

20,000

25,000

30,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CPS Energy Total Nitrogen Oxide

(NOx) Emissions (tons/year)

NOx total tons

CPS Energy has

reduced NOx

Emissions by over

78% since 1997

PARTICULATE MATTER REDUCTION

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0

500

1000

1500

2000

2500

1997 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

PM

em

iss

ion

s (

ton

s)

year

CPS Energy Coal Unit Particulate Matter

(PM) Emissions

JTD1&2 PM (tons) JKS1 PM (tons) JKS2 PM (tons)

Reduction due to replacing

JTD1&2 Electrostatic

Precipitators with more

SO2 REDUCTION

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0

5000

10000

15000

20000

25000

30000

35000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CPS Energy Total Sulfur Dioxide (SO2)

Emissions (tons/year)

SO2 total tons

2012 Reduction due to

use of ULS coal at Deely

QUESTIONS?

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Photo courtesy of OCI Solar