Energy Strategy for the C-Suite: Approaching Today’s Most Undermanaged Material Business Driver

EnergyStrategyfortheC-Suite:ApproachingToday’sMostUndermanagedMaterialBusiness

Driver

Micah Remley, EnerNOC @EnerNOCZeke Hart, PwC @PwC_LLPPaul Schuster, Edison Energy

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Agenda

9:00 – 9:30 a.m. Why – Megatrends driving the need for change

9:30 – 10:00 a.m. Maturity Assessment, interactive workshop

10:00 – 10:30 a.m. - Break -

10:30 – 11:00 a.m. What – Challenges facing corporations

11:00 – 11:30 a.m. Tools & Best Practices, supply side

11:30 – 12:00 p.m. Q&A


Why - Megatrends


Energy is one of the largest drivers of sustainability performance


$

$$$

Most businesses are just scratching the surface of waste


Operational

inefficiencies

Managing riskUnpredictable

budgets

Tracking

energy

costs

Decentralized

systems

Meeting

compliance

requirements

Finance Operations EnergyProcurement ProductionFacilities Sustainability

Energy touches many parts of the organization


60% of Fortune 100 companies have made publiccommitments to reduce energy


5% use software to track and analyze energy data


Why is that a problem?


Technological breakthroughs Radical transparency Climate change and

resource scarcity

Demographic shifts Evolution of energy markets

New and emerging energy technologies

New forces are changing the business landscape


of Internet-connected “things” by 2020

50B


Of investors have withdrawn from an investment orwithheld capital on ESG grounds

18%


The # of countries that participated in the2015 UN Climate Change Conference

195


Of CEOs put demographic shifts as a top 3 megatrendthat will transform businesses

60%


Growth in number of utilities offering customersdynamic pricing over past 5 years

227%

Summer Peak Hours: 1–6 p.m.

Winter Peak Hours: 5–7 p.m.


The proportion of new US electricity generationcapacity that was renewable

58%


Businesses who don’t adapt will lose their competitiors


More business value than ever is at stake

Direct Financial Value§ Profitability

§ Productivity

of Assets

Indirect Business Value§ Risk Mitigation

§ Reporting

Responsiveness

§ Talent Acquisition

and Retention

§ Brand Reinforcement

Longer-term Enterprise Value§ Resilience

§ Innovation

§ Environmental

and Social Impact


Built by the industry’s leading thinkers and practitioners


energy management into the fabric of your company Integrate

performance using data and analyticsElevate

on new options in the energy marketCapitalize

your efforts and celebrate successPromote

Corporate energy management needs to evolve across four focus areas


Integrate energy management into the fabric of your company• Develop a global energy strategy, with C-suite and cross-functional accountability,

to enable high-quality decision making

• Set ambitious, comprehensive, time-bound, science-based goals

• Connect consumption activities and procurement strategy to manage total energy cost

• Incorporate energy into your risk management, resilience, and capital strategy

• Use energy as a keystone metric (a primary business success indicator that aligns

your organization)


Elevate

Elevate business performance using energy intelligence

• Track energy data at the enterprise level leveraging new tools, capabilities,

and metrics to tie to overall business performance (COGS, etc.)

• Use energy signature data to ensure “in-spec” operation, identify opportunities to increase

productivity, and drive innovation beyond energy related initiatives

• Collaborate with and engage your value chain partners using energy data and practices

• Develop a reporting infrastructure that facilitates effective reporting and proactive compliance

with regulatory requirements


Capitalize on new technologies and market choices

• Evaluate and deploy advanced energy generation, storage, and control technologies where

they can have maximum impact

• Use advanced financing mechanisms to expand your energy project options

• Engage in policy discussions at all levels to influence energy market opportunities


Promote your efforts and celebrate success

§ Empower and motivate your workforce to contribute to your energy strategy and goals

§ Communicate energy and carbon commitments and accomplishments and your positive values as

an organization to drive intangible value

§ Point to your energy and carbon successes as an indicator of superior management



INTEGRATE energy management into

the fabric of your company

ELEVATE business performance

using energy intelligence

CAPITALIZE on new technologies and market choices

PROMOTEyour efforts and

celebrate success

§ Develop a global energy

strategy

§ Set ambitious goals

§ Connect consumption and

procurement

§ Incorporate energy into your

risk management, resilience

and capital strategy

§ Use energy as a keystone

metric

§ Track energy data at the

enterprise level

§ Use energy signature

data

§ Collaborate with and

engage your value chain

partners

§ Develop a reporting

infrastructure

§ Evaluate and deploy

advanced technologies

§ Use advanced financing

mechanisms

§ Engage in policy

discussions at all levels

§ Empower and motivate

your workforce to

contribute

§ Communicate

commitments and

accomplishments

§ Point to your successes

as an indicator of

superior management


Global energy strategy includes value chain

and customer stakeholders

Goals are ambitious, comprehensive, time-bound, science-based

Energy and carbon successes highlighted

as an indicator of superior management

Transformational

Global energy strategy includes C-suite and

cross-functional accountability

Dedicated team

Risk management and lifecycle costs approach

to energy

Appropriate information

and tools in place to manage to goals

Strategic

Enterprise-wide plan in place

Financial plan includes energy

projects

KPIs and deviations tracked with

accountability

Programmatic

Local/facility champion

Capital plans at key facilities

Energy rate components negotiated

KPIs in place

Developing

No clear energy goals, budget or

metrics

Reactive maintenance

Lack of information to make decisions

Limited stakeholder

discussion

Limited

Increasing Bottom Line Results

Maturity Model: Where are you today? Where do you want to be?

© EnerNOC, Inc. All rights reserved. www.enernoc.com

Thank you!


Maturity Assessment - Workshop


How effective is your energy strategy?

Energy Strategy Assessment Workshop: https://www.enernoc.com/esa

§ This survey will provide you a quick and comprehensive

picture of how your organization’s energy strategy is

delivering compared with 200 of the world’s leading

companies.

§ The survey is 15 questions long, divided into the four

strategic principles. It should take under 10 minutes to

complete.

§ After finishing the survey, you'll receive a shareable link to

your performance report.



INTEGRATE energy management into

the fabric of your company

ELEVATE business performance

using energy intelligence

CAPITALIZE on new technologies and market choices

PROMOTEyour efforts and

celebrate success

§ Develop a global energy

strategy

§ Set ambitious goals

§ Connect consumption and

procurement

§ Incorporate energy into your

risk management, resilience

and capital strategy

§ Use energy as a keystone

metric

§ Track energy data at the

enterprise level

§ Use energy signature

data

§ Collaborate with and

engage your value chain

partners

§ Develop a reporting

infrastructure

§ Evaluate and deploy

advanced technologies

§ Use advanced financing

mechanisms

§ Engage in policy

discussions at all levels

§ Empower and motivate

your workforce to

contribute

§ Communicate

commitments and

accomplishments

§ Point to your successes

as an indicator of

superior management


How to interpret your score?

• You are given a 1-5 score for each of the 15 questions you

answered. A score of 1 indicates your strategy is currently

limited in that area; a score of 5 suggests that you are well-

positioned to maximize business value.

• Each of your answers is mapped to the 15 emerging

practices—organized into four key principles.

• Rollover any point on the chart below to see the full question

and your answer.

• On the chart, the grey shaded area displayed behind your

score represents the industry benchmark, a performance

average based on survey responses from nearly 150 of the

world's leading companies.


Strategic Principle 1: Integrate



Strategic Principle 2: Elevate



Strategic Principle 3: Capitalize



Strategic Principle 4:


© 2016 EDISON ENERGY.® All rights reserved. Confidential.| New Metrics ‘1614 NOVEMBER 20161

ENERGY SUPPLY OPTIONS

MEETING RENEWABLE ENERGY GOALS THROUGHENERGY PROCUREMENT


WHAT RENEWABLE ENERGY OPTIONS EXIST FOR CORPORATIONS?

• Private institutions are typically looking for• SCALE - Big opportunities to meet renewable energy goals

• ADDITIONALITY - Delivers a meaningful impact on increased renewable generation

• ECONOMICS – Ensures that the investment makes financial sense for the company

• OPTICS - Visible signs of renewable energy investment


CORPORATE RENEWABLE ENERGY OPTIONSType of Transaction Type of Asset Sized to Smaller

Company NeedsOptimized

Sustainability ImpactCapital Commitment Term

Renewable Energy Certificates (RECs) FINANCIAL EXISTING YES NO YES SHORT

Build On-Site Generation PHYSICAL NEW BUILD YES NO NO LONG

Direct Investment Off-Site Generation FINANCIAL NEW BUILD NO NO YES SHORT

Off-Site Power Purchase Agreements (PPAs)

FINANCIAL NEW BUILD NO YES NO LONG

Revenue Swap FINANCIAL NEW BUILD YES YES NO LONG











• Widely adopted by companies in all industries• Does not provide “additionality” and grow renewable energy market• Requires a “pure cost” capital outlay• Size of purchase can be flexed depending on company needs











• Generally outside of a company’s core competencies• Requires available land and co-location with good renewable resources• May account for only a small portion of the company’s load• Locks a company into a specific location for the life of the renewable project











• Generally outside of a company’s core competencies• A potentially large capital investment that may not fit with corporate strategy• Difficult to find and source high quality options• While the project may be a long term investment, the equity is more liquid than some other options











• Renewable energy can be tied back to a specific project• Projects need not be at point of load and can be relocated in areas of greatest resource• Rapidly being adopted by leading companies & organizations• Locks in price of power, price for RECs / offsets


MAJORITY OF NEW WIND POWER IS FINANCED VIA THE NON-UTILITY PPAAltenex is the market leader in executing non-utility PPAs, which in 2015 became the primary mechanism for financing new wind projects

Utility Owned, 12.50%

Merchant or Quasi-

Merchant, 28.10%

Non-Utility PPAs, 52%

Utility PPAs, 48%

Long Term PPAs, 59.4%

Power Offtake Status for New US Wind Power (2015)

• 52% of all PPAs in 2015 were signed directly with a corporation, university, municipality or other non-utility off-taker

• 2,074 MWs of new wind power were financed with non-utility PPAs in 2015, up from only 500 MWs in 2013

• Altenex customers accounted for X MWs of new generation last year

Source: All date from AWEA’s 2015 US Wind Industry Annual Market Report


HOW DOES A FINANCIAL POWER PURCHASE AGREEMENT (PPA) WORK?

Dollars

Power You continue to buy power from the local utility or retail provider

Generated power is sent to the power pool

MWs MWs

$

You pay the market rate for the power you’ve purchased

3The project is paid for the power that it generated

$

4

21

When market prices are below the Fixed Price, you pay the project the difference

5

When market prices are above the Fixed Price, you get paid the difference

6

time

$ The result locks in a flat price for power• Protecting you from spiky power prices• Protecting you from rising power prices

in the future7

Electricity Markets


WHY LARGE CORPORATES ARE MOVING TO PPAs

Engaging in a PPA affords the customer the opportunity to secure power pricing in advance of increasing market rates. While the customer acknowledges that money may be forgone up front, forward curves drive confidence in a positive return in the future.

Historical Performance and Market Forecast

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

$/M

Wh

Range of 3rd Party Forecasts

Wind Price

Wind Price + Cost of Shape

Improve Profitability• Low cost renewables are driving additional profits for

large industrial energy users with no capital investment• Projects available in the market with substantial net

present value

Fix Long Term Energy Expense• Fix long term price at a discount to market• Hedge an existing short position

Environmental Hedge• Clean Power Plan (CPP) could have sweeping and costly

implications• Inherent value exists in the environmental attributes

from renewable transactions











• Projects need not be at point of load and can be relocated in areas of greatest resource• Can account for the company’s load regardless of size; opportunity for customization• Locks in price of power, price for RECs / offsets


WHAT IS A REVENUE SWAP POWER AGREEMENT?

» Altenex has partnered with Allianz to fundamentally change the way that renewable energy is purchased

• A renewable energy project insures against low wind or sun production and against power price volatility

• Allianz guarantees a fixed revenue stream to the project for 10 years

• The project is able to secure financing at up to 20% lower cost than with no insurance

• Allianz relies upon their expertise in weather related risks to understand and hold the exposure should wind or solar production dip

Corporate Buyers

• Corporate Buyers sign a 10 year PPA with Allianz ONLY to hedge against the power price volatility

• Wind and solar risk remain on Allianz• Corporate buyers are able to purchase lower cost

renewable energy power in more flexibly sized incrementsBuilding new renewable energy projects is expensive –

any opportunity to reduce those costs helps everyone


WHAT ARE THE BENEFITS TO REVENUE SWAP POWER AGREEMENTS?

Insurers act as a financial intermediary, agreeing to protect the project against weather related production risks

Developers benefit from:• Lowering the cost of financing by up to 20%• Interacting with only one credit-worthy counterparty

RENEWABLE ENERGY DEVELOPERS

Having the insurer as the intermediary opens up significant flexibility for corporations (large and small) to participate in renewable energy purchases

Corporations benefit from:• Receiving all the environmental attributes of the traditional REPA (RECs,

additionality, etc.)• Increasing the opportunities for smaller corporate players

• Blocks of power can be sold in much smaller increments• Enabling smaller consumers to participate• Enabling distributed consumers (such as retail stores) the

chance to more closely align load to generation• Significantly more timing flexibility in signing the contract as all

counter-parties don’t need to sign at once• Reducing credit risk by interacting with only one credit-worthy counterparty

CORPORATIONS

Lower cost wind projects, broader opportunities for corporate participation, more efficient renewable energy industry

The insurance industry has a long track record of managing weather related risks, and has viewed wind production as an uncorrelated risk to help diversify their portfolios

Insurers benefit from:• Diversifying potential losses in other risk asset classes • Passing the power price risk along to Corporations as in a PPA

INSURERS

© 2016 EDISON ENERGY.® All rights reserved. Confidential.| Edison Energy Strategy Refresh30 November 20161 ||

Energy as a Service

Sustainable Brands: New Metrics WorkshopMonday, November 14, 2016

© 2016 EDISON ENERGY.® All rights reserved. Confidential.| Edison Energy Strategy Refresh30 November 20162 |

WHAT IS PREVENTING COMPANIES FROM BECOMING MORE ACTIVE IN CONTROLLING THEIR ENERGY COSTS?

While companies recognize, and believe, savings opportunities in their energy spend, why are some slow to adopt?

»COMPLEXITY - Overwhelming variety of opportunities in the market

»ANALYTICS - Technology and financial models are new to internal groups and can be complex and complicated

»RISK - Unknown, or unidentified, areas of risk in new technologies, contract structures, and regulatory landscape

» INTERNAL - Companies may not have internal expertise or bandwidth to properly evaluate and analyze opportunities


COMPLEXITY

|© 2016 EDISON ENERGY.® All rights reserved. Confidential.

Edison Energy Strategy Refresh30 November 20164

ANALYTICS

»Power Price Forecasting

»Wind Resource Modeling

»Shape Correlations

»Basis Modeling

»Market Correlations

»Physical vs. Financial Delivery

»Renewable Generation Penetration

»Curtailment

»Credit Risk

|© 2016 EDISON ENERGY.® All rights reserved. Confidential.

Edison Energy Strategy Refresh30 November 20165

RISK

A deeper look at Shape – understanding the covariance between resource production and power prices can be extremely important in evaluating renewable energy options

Historical Performance and Market Forecast

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

$/M

Wh

Range of 3rd Party Forecasts

Wind Price

Wind Price + Cost of Shape


INTERNAL

»Internal stakeholders across the corporate spectrum have different issues and motivations

»A diligent process is required

• Executive Championship

• Technical Project Review

• Accrual vs. Hedge Accounting

• Treasury & Finance Buy-In

• Operations & Facilities

• Quantify Sustainability Impact

• Contract Negotiation

6