Creating The 21

st

Century Grid

Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006

Today’s Discussion Global electricity 21 st century power needs Grid technology advances Customer benefits of a smart grid

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20 th century’s greatest achievement Global electrification challenge

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Digitization of advanced economies Historic lack of investment Economic cost of outages

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Evolving technology opportunities Investment requirements TXU technology examples

 

Lifestyle improvement Innovative products and services

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Electrification Changed The World In The 20 th Faces Significant Challenges In The 21 st Century, But Century

The world’s population is expected to reach 9 billion by 2050; electricity’s global impact must be even greater in the 21 st century to meet the world’s growing energy needs

3

Universal Electrification Could Drive Step Changes In Productivity… Lights out: World population without power In demand: Cost required for universal 05; Percent (100%=6.5 billion) electrification 05; $ trillion 25 Without electricity 12.0

12.2

12.4

With electricity 75 Small price to pay: Cost to modernize grid vs. average electric bill 05; $/month per household 150 Cost to build 10TW EU GDP 05E U.S. GDP 05E Productivity pays: Est. annual GDP increase 25E-50E; $ trillions 11 3 5 Avg. bill Cost to modernize grid

Source: EPRI Electricity Technology Roadmap

U.S. in 2025 World in 2050

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…And Improve Quality Of Life Around The Globe Lower infant mortality… Average infant mortality rate 03; Mortalities per 1000 births 51 80% …and stronger economic output Average GDP per capita 03; $ per person 1,950 829% 10 < 4 MWh/person consumption > 4 MWh/person consumption 210 < 4 MWh/person consumption > 4 MWh/person consumption

Abundant power supply drives better health care and stronger economies

Source: EIA, CIA Factbook 5

Today’s Discussion Global electricity 21 st century power needs Grid technology advances Customer benefits of a smart grid

 

20 th century’s greatest achievement Global electrification challenge

  

Digitization of advanced economies Historic lack of investment Economic cost of outages

  

Evolving technology opportunities Investment requirements TXU technology examples

 

Lifestyle improvement Innovative products and services

6

The Emerging Digital Economy Is Testing The Limits Of The Current System… Growing demand: U.S. 40-03; % of total energy use Stressed system: Congestion 97-03; Number Need for technology: “Digital quality” electrical load 80-20; Percent 300% 40 1,500% 1,600 400% 50 25 10 10 40 70 03 50 97 03 0 80 00 20E

Without greater investment, the existing U.S. system will not reliably support the increasing demand for energy

7

…Compounded By A Historical Lack Of Investment In R&D And Infrastructure… U.S. investment in energy R&D 90-00; $ billions Private sector R&D investment 95; % of net sales 10.5

10.0

6 50% 7.5

4 6.0

4.5

90 00 0.5

Medi cine Comm.

equip.

Svcs.

Trans. Chem equip.

icals Energy

U.S. federal R&D support for energy is only about 4% of total federal energy R&D outlays

Source: EPRI 8

…Causing Outages That Cost Customers Billions Annually U.S. economic cost of outages $ billions/year 100 300 Current est. loss Future expected loss

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Today, outage costs represent 1% of GDP

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This loss represents a cost of $0.50 for every $1 spent on electricity

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Technology investments could reduce outage costs by 50-80%

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If no investment is made to transform the grid system, the annual cost of outages could reach $300 billion

Source: EPRI 9

Today’s Discussion Global electricity 21 st century power needs Grid technology advances Customer benefits of a smart grid

 

20 th century’s greatest achievement Global electrification challenge

  

Digitization of advanced economies Historic lack of investment Economic cost of outages

  

Evolving technology opportunities Investment requirements TXU technology examples

 

Lifestyle improvement Innovative products and services

10

A Slate Of Breakthrough Technologies Are On The Horizon… Stage 3: Potential future technology Stage 2: Near-term technology Stage 1: Current technology

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Automated switching

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Smart appliances

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Digital fault analysis

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Power quality monitoring services Broadband over Power Line

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Customized power service packages

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Advanced load management with smart appliances

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AC/DC microgrids

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Advanced distributed energy solutions

TXU Electric Delivery is investing in today’s leading-edge technology, but more will be required as new “game changers” become commercially available

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…Requiring Significant Investment To Realize The Full Benefits Transmission investment needs 05-25E; $ billions Distribution investment needs 05-25E; $ billions 330 260 100 110 50 5 Load growth Correcting deficiencies Transformed delivery system Load growth Correcting deficiencies Transformed delivery system

To achieve this grid transformation, annual transmission and distribution investment would have to increase by 65% and the 20-year total is over $850 billion

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“Self-Healing” Technologies Will Change The Way We Manage And Respond To Outages… 2 Customer calls outage in and Operations Center receives notification 3 Dispatcher notifies field technician who inspects entire feeder for outage source; average restoration time of 40 mins.

1 Tree limb falls on line causing a feeder outage 2 Automated switches reconfigure system to restore service to majority of customers within 1 min. 3 Disruption location pinpointed and service restored to remaining customers within 24 mins.

Where deployed, automation technology enhances customer service by eliminating sustained interruptions for 2/3 of the customers and reducing restoration time up to 40% for the remaining 1/3 of the customers

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…And Digital Fault Analysis Could Prevent Disruptions…

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A tree limb was hanging over a line, causing 17 poletop recloser operations over 23 hours There were no substation breaker trips, so Operations did not recognize a problem The tree limb burned down the line, locking out the recloser and interrupting 140 customers for 62 mins.

Source: TAMU/EPRI study 14

…Resulting In Industry-Leading Reliability Performance U.S. electric delivery company performance 05; SAIDI 1 300 Top quartile cost 225 150

TXU ED’s target

75 TXU Top quartile SAIDI 0 50 100 150 200 250 Distribution O&M and capital cost ($/customer)

TXU Electric Delivery has achieved top quartile cost and reliability

1 Excluding major events and planned outages 15

TXU Is Redefining Utility Service Enabled By BPL

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Today’s Discussion Global electricity 21 st century power needs Grid technology advances Customer benefits of a smart grid

 

20 th century’s greatest achievement Global electrification challenge

  

Digitization of advanced economies Historic lack of investment Economic cost of outages

  

Evolving technology opportunities Investment requirements TXU technology examples

 

Lifestyle improvement Innovative products and services

18

Advanced Grid Technologies Are Enhancing The Quality Of Life In The Communities We Serve… 1 2 3 4 5 Lifestyle Area

Basic needs Comfort Security Productivity Conservation/ Environment

Benefits of Electricity

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Lighting Medicine storage Food preparation and preservation

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Heating/Hot water Air conditioning Well maintained electric infrastructure Video surveillance

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Enabling digital devices, e.g. PCs Enhanced reliability Power quality

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Remote monitoring and meter reading Smart home applications

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…And Unleashing The Potential For Innovative New Products And Services For Customers Yesterday Today Tomorrow (06+)

One regulated price

On-site load mgmt Bundled svcs. (data, video)

PTB Discount Simple Savings Term savings Indexed Savings Renewable Rewards+ Surge Protection Freedom Plan Market Tracker+

Time of use Energy efficiency Power quality mgmt Smart homes

99 00 01 02 03 04 05 06 07 08 09 10

Future products will give customers greater choice and control over their energy consumption and costs

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Advancements And Investments In Technology Can Provide The Solution To The World’s Energy Needs

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The world is facing bigger energy challenges than ever before

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Digital economy

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World population will increase more than 33% by 2050

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25% of the world has little or no access to power (and growing)

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Investments in technology and infrastructure can provide universal electrification

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In the U.S. alone, GDP could increase by $3 trillion

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In the world, GDP could increase by $11 trillion

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Technology advances will drive benefits for society

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Better reliability and power quality

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Innovative products and services allowing customer choice and control over energy usage

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Improved safety and security of the system

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Creating The 21

st

Century Grid

Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006