A ONCE-IN-A-LIFETIME TRANSFORMATION OF THE NATION’S POWER GENERATION FUEL MIX SCOTTMADDEN, INC. | 39 New natural gas, wind, and solar-powered generation represent the majority of capacity added since 2010 and projected through 2020. In the same time frame, coal and oil will have declined and will continue to decline at an historic pace. Historic and Future* Power Plant Capacity (All NERC Regions; 2010, 2015, 2020e) Growth by Type as Percentage of Capacity Additions 1,400 4% 1,200 GWs 1,000 800 600 9% 42% 7% 9% 42% 9% 8% 42% 100 9% 9% 8% 200 29% 25% 21% 2010 2015 2020e 0 4% 4% Wind Solar - Distributed** Solar - Utility Biomass Geothermal Hydro Gas Nuclear Coal Oil 2010 - 2015 2015 - 2020e Renewables (non-hydro) 73.6% 56.2% Gas 23.8% 37.7% Other 2.6% 6.2% NOTES: *Future capacity is based on actual planned/under construction projects, and not based on any projections of unreported new developments or retirements. **Distributed residential and non-residential data from GTM Research PV deployment estimates. Assumes distributed solar is additive to historical and projected capacity, not duplicative of other resources. Sources: SNL; GTM The Regions Speak: Emerging Operational and Reserve Issues in Some Areas with a Changing Fuel Mix Texas (ERCOT) • Between 2015 and 2020, will add 20 GWs of natural gas capacity and 21 GWs of wind • As wind capacity grows, system stability challenges are possible, especially in areas far from load centers like the Panhandle • “Sleeping giant” of solar is awakening: growing both utility and distributed solar (more than 2.2 GWs and 1.5 GWs, respectively) California (CAISO) With high distributed solar penetration: • Short, steep ramps of dispatchable resources and overgeneration risk (the “duck curve”) • Decreased frequency response with fewer flexible resources Midcontinent (MISO) • The combination of a 3-GW decrease in coal-fired capacity (replaced with gas), a 14-GW increase in wind from 2010 to 2020, and tightening reserve margins (below 15% in 2021 down to 11% in 2025) will require use of all available resources Southeast (SERC) • About 15% of coal capacity to be retired between 2010 and 2020 (more than 13 GWs), more than any other NERC region • New gas-fired plants and 6 GWs of nuclear capacity expected to offset retirements and support demand growth • A reliability task force is studying potential issues Northeast (NPCC) • Economic and political pressures forcing coal and nuclear units to retire, with potential resource deficiency and reduced fuel diversity • Combined-cycle, gas turbines may not be capable of extended baseload or load-following operation • Increasing variable resources as synchronous capacity is retired, replaced by wind (~3.5 GWs between 2015 and 2020), utility solar (0.6 GW), and distributed solar (1 GW) SOURCES: SNL Financial; GTM Research; California ISO; NYISO; NERC 2015 Long-Term Reliability Assessment (LTRA); ScottMadden analysis Projection: Non-hydro renewables and gas will account for 64% and 34% respectively of all capacity added from 2010 to 2020