For more information, go to http://www.thinkdsi.com/grid/. With the current focus on building a smart grid and investments being made on the technology side as well as the infrastructure side, energy is certainly getting much press! Uncertainty has never been higher. This webinar aims to discuss this uncertainty. Based on field research and expert interviews, the recent comprehensive report "Future of the Energy Grid 2025" by Decision Strategies International presents views on everything from fuel mix to behind-the-meter innovation. What could the grid look like in 2025? How will different stakeholders be affected? Scott Snyder, President, and Stephan Hagelauer, Senior Consultant, will present the key findings of the report, and give you tools and tactics to help you develop resilient strategies and robust portfolio initiatives to succeed in the energy industry. Three executives representing stakeholders in the energy industry will present how they have used the report to help “future proof” their own organizations and discuss some of the factors they find critical to success: -Karl Pfirrman, Executive Vice President of PJM -Rear Admiral Phil Cullom in charge of the US Navy Energy Strategy -Govi Rao, CEO of Lighting Science

1. The Future of the US Energy Grid
2025 view of our National Power Infrastructure
One West Elm Street, Suite 150, Conshohocken, PA 19428 | 610.717.1000 | www.thinkdsi.com

2. INTRODUCTIONS
Presenter: Presenter:
Moderator: Scott Snyder Doug Paradis
Stephan Hagelauer
President & VP Products
Sr. Consultant
CEO DSI
DSI
DSI
Panelist: Panelist:
Clayton Mitchell Karl Pfirrmann
CAPT, CEC, USN PJM interconnection,
NAVFAC Executive Vice
Representative President
Navy Energy
Coordination Office
(NECO)
Slides and an audio recording of this webinar will be available.
Please email request to hagelauer@thinkdsi.com
Copyright 2009 2

3. Content Outline
Why this report?
1
Methodology Overview
2
Key Findings
3
Real World Examples
4
Going Forward
5
Copyright 2009

4. THE CURRENT ENVIRONMENT
• Approximately 60% of the electric power grid’s current assets
will need to be replaced within the next 10 years.
• The average age of power transformers is more than 42 years.
• Construction of high voltage transmission facilities is expected
to increase by only 6% (in line-miles) during the next 10 years.
• Demand is projected to increase 30%, this need will be met
using sources that have yet to be identified and developed.
• A reduction of the spare capacity margin is projected to
occur, reaching previously unexperienced levels.
Copyright 2009 4

5. CHALLENGING TIME FOR ENERGY EXECUTIVES
Explore what we can
Exploit what we discover and create
know and have
Survive the Thrive in the
Structural
Recession /
Short Term Near Future
Discontinuities
Financial Crisis
Focus on Operation Focus on Transformation
Reliability risk Reliability Risk
Missing the smart End up with an
grid transformation unbalanced portfolio
and stranded assets
Copyright 2009 5

6. RANGE OF ESTIMATES
New capacity
250
required: 214
GW’s cost $650
billion 200
Renewable
Efficiencies
150
could reduce Nuclear
GW
demand by 38% CT
100
to 48%
CC
coal
Reduced 50
capacity cost
would be $150
0
billion
Baseline Efficiency Potential
Realistic efficiency
Source EEI, The capital investment challenge, 11/16/2008
Copyright 2009 6

7. SOME PERSPECTIVE ON THE NUMBERS
700
600
500
$Billion
400
300
200
100
0
U.S. Electric TARP Program Grid investment U.S. Defense
Market (T& D (2010‐2020) budget (2010)
revenues)
Copyright 2009 7

8. Today’s Presentation
1 Why this Report?
2 Methodology Overview
Key Findings
3
Real World Examples
4
Going Forward
5
Copyright 2009

9. THANKS TO OUR SPONSORS
Copyright 2009 9

10. What Are Scenarios
Shaped by Multiple Forces
• Scenarios bound the realm of Technology Economy
future possibilities Customer
• Scenarios are shaped by multiple Environment
types of forces Scenarios
Industry
Political &
• Scenarios draw attention to Regulatory
Business Models
Google
possibilities we may otherwise
not have taken seriously
• Scenarios create “memories of
the future,” allowing us to
recognize “weak signals” as the
future unfolds
10
Copyright 2009 10

11. FORCES LIST
Collection Evaluation Generation
•Define key • Create forces
stakeholder survey with
groups 45 key forces
and evaluate Top Trends
•Develop based on 1. ~~~~~~~~~~~
2. ~~~~~~~~~~~
forces list from predictability 3. ~~~~~~~~~~~
interviews with & impact .
.
30 + experts .
(utility, • 10/08 Held
Top Uncertainties
transmission, forum at the 1. ~~~~~~~~~~~
dispatch, Mack Center 2. ~~~~~~~~~~~
3. ~~~~~~~~~~~
regulatory, and at Wharton .
technology,) to review .
.
surveys, & forces list
environmental and select
scan resulting scenarios
in 400
individual
forces
Copyright 2009 11

12. Today’s Presentation
1 Why this Report?
2 Highlights on the Methodology
3 Key Findings
Real World Examples
4
Going Forward
5
Copyright 2009

13. FORCES AT PLAY
Health of the
Workforce Attack on the grid
US Economy
availability
Who has
authority over the
grid?
Technology
Consumption
behavior
Commodities Level of
price levels infrastructure
Carbon regulation (coal, oil, NG)? investments
Copyright 2009 13

14. FUTURE U.S. ENERGY GRID: 2X2 MATRIX
OF THE
Driver of Change
Markets Government
THE NEW POWER
GREEN IS GREEN
DEAL
Technological Breakthrough
Multiple
BOILED FROGS D.H.E
Limited
Copyright 2009

15. SCENARIO A: SNAPSHOT – “I-GRID”
SCENARIO A SNAPSHOT – GREEN IS GREEN
Market drives change, high degree of technology breakthroughs
Initial decline in reliability leads consumers to seek
solutions to be less reliant on the grid
Renewable sources are heavily subsidized
Consumers are actively taking part in power
management and benefit from power sale back
opportunities
High level of investment in small scale generation
technologies
Heavily decentralized power generation
Multiple new players enter the market attracted by
2025 view of the the level of investment and robust margins
industry The industry is one of the key engines of the US
economy
Copyright 2009

16. STRATEGIC IMPLICATIONS- GREEN GREEN
IS
Situation- Incumbents displaced Strategic Implications
Regulatory Displacement Challenge
Regulatory uncertainty on how to Existing market shrinks
achieve the emission reduction goals Market perception impacting valuation,
ability to raise capital and message to
Technology public
No dominant technology, multiple Converting in a reactionary mode
solutions
Multiple solutions providing grid
parity energy Strategic Responses
Market/Customers
Must be part of the green evolution and
Increase in demand for higher control
not perceived as a barrier to progress
over power consumption, price
transparency and energy choice
Early funding of pilot projects leveraging
or combining various clean technologies
Industry/ Competition
New entrants capitalizing on the
early demand to stake position “Cannibalize yourself” before others can
New entrants solidifying their
technological lead and increasing
market share.
Copyright 2009

17. SCENARIO A: SNAPSHOT – “I-GRID”
SCENARIO B SNAPSHOT – THE NEW POWER DEAL
Government drives change, high degree of technology breakthroughs
Initial shock to the system due to climate event
Heavy involvement of the government due to the
crisis
Investment focused on zero carbon generation
Highly centralized grid relying on large scale
generation plants
Customers are participating but not feeling the price
impact due to the government control over price
The industry has consolidated, size and scale with a
set profit level is the dominant operating model
2025 view of the The federal government controls both the
industry investment direction and the major decisions over grid
development
Copyright 2009

18. STRATEGIC IMPLICATIONS- THE NEW POWER DEAL
Situation- The happy few Strategic Implications
Regulatory The scale challenge
Centralized decision making on Expertise and ability to manage very large
generation, transmission and price and complex infrastructure will define the
entities being selected to operate in this
Technology scenario
Carbon neutral and zero emission Ability to integrate and operate inside a
technologies most likely to be selected
large and complex system will be a
differentiating factor
Market Customers
Operational efficiencies will be the way to
Demanding clean energy solutions and
extract superior margin
actively managing individual footprint
Industry/ Competition Strategic Responses
Players with expertise in building and
managing complex infrastructure are
Must have experience with larger scale
selected
projects using green solutions
Government moves to integrated
Must have demonstrated ability to scale
resource planning solution
rapidly and efficiently
Margins are dictated by the government
Relationship with the government and
regulatory agencies will be keys
Copyright 2009

19. SCENARIO C: A: SNAPSHOT BOILED FROGS
SCENARIO SNAPSHOT – – “I-GRID”
Market drives limited change, limited breakthroughs in technology
There is no imperative for change
The lasting effects of the economic crisis of 2009
resulted in lower investment in technology
Investments are focused on existing technologies
and limiting the price increase
With demand increasing less due to weak economy
the reliability level is still acceptable
Carbon levels are high but consumers are not willing
to pay a premium to lower them
The industry is successfully sweating the assets with
2025 view of the appropriate level of capital available for maintenance
industry The climate is getting warmer but the impacts are
still manageable
Copyright 2009

20. STRATEGIC IMPLICATIONS- BOILED FROGS
Situation- The status quo Strategic Implications
Regulatory The cost challenge
Little or no new regulation on carbon Must be able to produce and distribute at a
emissions low cost
Policies focus on enabling low cost Low cost alternatives (competition or
productions technology) will be selected if available
Technology
Incremental improvements are made to
increase output and efficiencies, some
improvements are concentrating on
emission reduction
Market Customers Strategic Responses
Strong push on efficiencies resulting in The asset portfolio will have to be
a curtailed demand examined to reach the right balance
between capital cost and operational cost
Industry/ Competition
The fuel mix selection will be critical and
Price is a key differentiator
should favor low operational cost in the long
Strong focus on efficiencies and cost
run
control to insure competitive advantage
Copyright 2009

21. SCENARIO D: SNAPSHOT – DEPARTMENT OF
SCENARIO A: SNAPSHOT – “I-GRID”
HOMELAND ENERGY
Market drives limited change, limited breakthroughs in technology
Successful cyber attack on the CA smart grid
Government elevate the security of the grid
infrastructure to cabinet level position
Investments are focused on hardening the
infrastructure. The security lens is used to judge every
major investments
Highly centralized and secured grid delivers reliable
power to the US population
Carbon levels are high but consumers are not willing
to pay a premium to lower them
2025 view of the New players in cyber and physical security have
industry entered the market and either acquired or partnered
with incumbents
Copyright 2009

22. STRATEGIC IMPLICATIONS- DEPARTMENT OF
HOMELAND ENERGY
Situation- Incumbent on top Strategic Implications
Regulatory The Information security challenge
Centralized decision making Expertise and ability in deploying ad
Investment decision made by the protecting cyber infrastructure
incumbents Understanding of multiple security threats
and adapted responses
Technology Asset portfolio must contain
High level of investment on
assets/infrastructure with the appropriate
communication and security technology
security profile
Generation and transmission
technologies that demonstrate a high
level of security are favored
Market Customers Strategic Responses
Low demand for green technologies Partnership with security experts in physical
Customers are seeking solutions and cyber security
enhancing reliability
Develop a portfolio that includes robust
assets and infrastructure
Industry/ Competition
Smart grid projects should involve cyber
Security and communication players
security expert to test for vulnerabilities
have gained ground in this scenario
Copyright 2009

23. Today’s Presentation
1 Why this Report?
2 Methodology Overview
3 Key Findings
4 Real World Examples
Going Forward
5
Copyright 2009

24. CAPT CLAYTON MITCHELL
Naval Facilities Engineering Command (NAVFAC) Representative to
•
the Navy Energy Coordination Office (NECO)
NECO Ashore Working Group liaison responsible for overall
•
coordination of Navy ashore facilities/installations on energy
policy/guidance and related initiatives. Also act as Action Officer for
Navy/Marine Corps Research, Development, Test, and Evaluation
(RDT&E) program execution under the American Recovery and
Reinvestment Act. Oversight responsibilities include initiatives to:
Reduce lifecycle costs and environmental impacts,
–
Reduce consumption of resources,
–
Conserve energy and maximize use of renewable energy sources,
–
Reduce green house gas emissions,
–
Improve quality of life for our Sailors, Marines, and their families, and
–
Enhance partnerships with other agencies and communities.
–
Copyright 2009 24

25. US NAVY ENERGY CHALLENGES
Current Situation
Navy consumes a significant amount of energy on both Fleet and ashore operations – about
25% ashore/75% Fleet (includes Surface/Air/Expeditionary operations)
Highly dependent on fossil fuels:
Volatility in supply and price
Dependent upon the grid for shore operations
Significant capital investment in present inventory.
National Security interests driving quest for improved energy efficiency and conservation.
Environmental/climate challenges driving need to reduce carbon emissions.
Why use an adaptive strategic planning approach?
Identify alternative approaches to meeting Navy energy requirements
Develop investment strategy for enhancing Fleet and Ashore operations energy use.
Future Readiness – Evaluate options for future force structure with energy as a primary consideration
Current Readiness – Identify those energy investments for today which balance current operational
readiness against investments necessary to achieve Navy’s vision of energy efficient Fleet operations
tomorrow.
Navy has established Task Force Energy to develop near and long term energy strategy.
Expected Benefits
Greater security
Reduced carbon emissions
Enhanced flexibility to accommodate new energy
Lower costs/Increased reliability
technologies, including renewable, intermittent and distributed
sources
Copyright 2009 25

26. KARL PFIRRMANN
PJM INTERCONNECTION, EXECUTIVE VICE PRESIDENT
• PJM Interconnection is a regional
transmission organization (RTO) that
coordinates the movement of
wholesale electricity in all or part
of 13 states and the District of
Columbia.
Copyright 2009 26

27. ENERGY INDUSTRY CHALLENGES
Current Situation
PJM does not own any assets (transmission or generation) but must insure the reliability of the gird
and the flow of electricity between its members.
In doing so, PJM operates the largest market for wholesale electric power in the world.
Advising its members regarding the balance between forecasted demand and planned capacity
addition falls within the realm of PJM responsibilities.
Why use an adaptive strategic planning approach?
To gain an understanding of the potential risks and position PJM’s role is responding to these risks
To build consensus among the RTO members and identify the robust capabilities PJM must develop
to continue succeeding in its mission
Expected Benefits
A balanced portfolio of options to protect existing operations and potentially expand the scope of
services if opportunities materialize
A set of signposts to monitor in order to anticipate industry developments
Copyright 2009 27

28. Today’s Presentation
1 Why this Report?
2 Methodology Overview
3 Key Findings
4 Real World Examples
5 Going Forward
Copyright 2009

29. Visibility into the Developing Scenarios -
Dynamic Monitoring for the Grid Scenarios
Launching Monitoring Program for the Future Energy Grid Scenarios
•
Online program to establish energy uncertainty tracking and energy grid
•
expert community
Why?
•
– Track key environmental factors relating to the Future
Grid.
– Look for weak signals that could affect the industry as a
whole and help identify events that might surprise the
industry
– Examine implications of external factors on various
stakeholders in the industry
– Better understand which scenarios of the future are
gaining or losing weight.
Copyright 2009 29

30. Monitoring with Strategic Radar – A “GPS” to navigate the future
of the Energy Grid Scenarios
Scan for the Weak
Monitor the known forces
Signals
impacting market changes
What is monitoring?
•Monitoring is the process that is used to track changes in each of the forces/indicators that affect
our future and how those change the likely weight of future scenarios
•A parallel activity is called scanning which looks for weak signals from events, news, blogs, social
networking, and subscriptions that might “change the game”
Copyright 2009

31. KEY TAKEAWAYS
DSI research and significant expert input led to four scenarios that
bound the future of the US grid
Significant uncertainties surround the future of the US energy Grid –
Investment decisions will need to consider a range of environments
This tools should be used by energy stakeholder to stress test their
current strategy , investment plans and identify new opportunities
across scenarios
A dynamic monitoring process, Strategic Radar, is being used to track
early signals to see which scenario is emerging
We hope to build a community to participate in leveraging the Grid
Scenarios and provide on-going monitoring/scanning of the
environment
Copyright 2009 31

32. What is Next?
• Free extended summary available after this
webinar hagelauer@thinkdsi.com
• Report available immediately
• Monitoring Program immediate launch
– Results available in Q2
– Expert Network building effort currently ongoing
• Additional information available at:
– http://www.thinkdsi.com/grid/
Copyright 2009