Becoming More Sustainable

The Role of Technology Innovation

“Our future is a shared one with our customers, shareholders, employees and the communities in which we live and do business.”

Jack E. DavisPresident Pinnacle West Capital Corporation

- PNW Corporate Responsibility Report

Pinnacle West Capital Corporation

• Member of Standard and Poor’s 500 Index and traded on the New York Stock Exchange under the symbol PNW

• Phoenix-based company with consolidated assets of about $11 billion and consolidated revenues of $3 billion

• Three principal business segments include regulated electricity, real estate, and energy services marketing and trading

• 7,300 employees

• Ranks number one industry-wide in dividend growth over the last decade

Arizona Public Service Company (APS)

• PNW’s largest subsidiary

• Serves over 1 million customers across Arizona

• 7th Largest service territory with growth 4 times U.S. average

• Owns combined generation capacity in excess of 6,400 megawatts (MW) and operates plants with a combined capacity in excess of 10,000 MW

• Ranked first among investor-owned electric utilities in the West and third among investor-owned utilities in the nation in J.D. Power and Associates' 2005 Electric Utility Residential Customer Satisfaction Study

APS – Part of Arizona for 120 Years

Arizona

• Growth 3 X U.S. Average

• 94 Years Old

• 52 People/Square Mile

APS

• Growth 4 X U.S. Average

• 120 Years Old

• 29 Customers/Square Mile

• 7th Largest Service Territory

Phoenix

APS Retail Service Territory

History of Leadership

• First EHS policy in 1973

• First utility to endorse Ceres Principles in 1994

• Published first EHS report for 1994

• Began incorporating Global Reporting Initiative (GRI) guidelines in 2000

• Published first Corporate Responsibility report in 2004

• Ni-Mo inter-pollutant trade agreement

• 1995 Climate Challenge

• Renewables

• Voluntary emission reductions

• Fossil Creek

Leadership / Innovation

We’re Building An Energy System That Is Newer, Better, Cleaner, and Faster

Diversity is the Key

Coal

Natural Gas

Nuclear

Demand Management

Renewables

Conservation

Renewables And Conservation: A Rapidly Growing Part of our Energy

FutureDiversity is the Key

Coal

Natural Gas

Nuclear

Demand Management

Renewables

Conservation

Energy Saving Tips and Rebates Helps Customers Keep Costs Down

Rebate of

$250 for 14SEER Unit

$400 for 16SEER Unit

Rebate of

$250 for 14SEER Unit

$400 for 16SEER Unit

Rebate of

Residents: $3 per watt

Solar Panels

Rebate of

Residents: $3 per watt

Solar Panels

SponsoredDiscount on

High-efficientLight Bulbs

Our Customers Save Money Everyday with the Nation’s Largest Time-of-Usage (TOU) Rate

ProgramTime-of-Usage Customers

Now New Program

400,000

450,000

Megawatts Avoided

Now New Program

200

225

But APS Faces Challenges Beyond Renewables and Efficiencies by 2025

Renewables

DSM / Conservation

317

1,281257

511

5,506

1,989

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2015 2025

Meg

awat

ts

Still needed

2,563 MW

7,298 MW

TechnologyA part of the solution

• Improved efficiencies

• Reduction of waste & recycling

• Powering our future

Single Axis Trackers

• Horizontal and Tilted Single Axis Trackers

• New “truss” design eliminates need for deep foundation construction

• Simplified mechanical design

• Updating tracking controls and software

• 3rd party interest

HCPV Development

• Boeing Spectrolab “Space” cells

• 38% conversion efficiency

• 1kW prototype running at STAR

• 2nd generation, 3kW unit assembled – waiting to test

Solar + Compressed Air Turbine

• Concept is to compress air separately from solar cycle– Off-peak electric compression– Full turbine output during the day

• SolarCAT development team– APS– Brayton Energy LLC– CEC– SMUD– SDG&E– Nyserda

Figure B. Compressed Air Energy Storage (CAES)

Air storage triples peak power, uses off peak power, andimproves compressor efficiency.

GENERATOR OUTPUT200KW ON PEAK

FLOWCONTROL AIR

OUTPUTexit

SOLAR/GASHEAT INPUT

AIR INLETAT NIGHT

MOTOR INPUT130KW OFF PEAK

COMPRESSEDAIR STORAGE

Figure A. Conventional Gas Turbine

Two thirds of the turbine output poweris used for air compression.

AIR INLET

COMPRESSOR

SOLAR/GASHEAT INPUT

GENERATOROUTPUT 84KW

RECUPERATOR

AIR OUTPUT

TURBINE

Standard Turbine – 60% of power is used in compression

Turbine + Storage – Off-peak electric compression & storage

Saguaro Trough• Completed in December 2005• First Trough project in the USA

for over 15 years• First to marry a solar trough solar

field to an Organic Rankine Cycle turbine power block

• 1 MW Capacity

Biomass Pilots

• Biomass–Eagar

• 3MW forest waste• On-line February 2004

–Snowflake• 3MW forest waste• Under construction

Pinal County CAFO Project

• Phase I – manure study• 36 feedlots in Casa Grande,

Florence, Maricopa, Red Rock, Stanfield areas

• 200,000 cattle within a 30 mile radius• 4.6 M Tons of manure annually• 70% pack, 30% slurry• Gasifier and digester technologies• Over 2,000,000 Chickens• Potential for over 30MW of

generation capacity• Phase II – financial study

150 W150 W

Renewable Energy - Electricity Generation

• Biogas– Butterfield landfill

• 70kW microturbine

– 91st Avenue WWTP• Renewable methane

purchase• 10MW generation at

Redhawk

Geothermal Energy

Geothermal Binary Power Plant

• 350ºF brine pumped out of production well

• Boils pentane in a heat exchanger

• Cooled brine re-injected into the earth

• Pentane vapor used to power a turbine/generator

Future Fuels - Demonstrations

• Hydrogen refueling station– 502 Complex– Dispense Hydrogen,

CNG and blends– All major credit cards

accepted

• Hydrogen Power Park– Industrial enclave

powered by Hydrogen

Hydrogasification

• Gasify carbon– Coal– Biomass– Manure

• Synthetic natural gas (un-natural gas?)

• $2.6M grant from DOE

C + 2H2 + H2O CO2 + CH4

Algae

• Use CO2 from Redhawk stack

• Grow algae strains

• Extract the lipid oil from the algae

• Produce bio-diesel, methanol or methane

• In one year a one acre algae farm can produce – 6,000gal biodiesel

– 5,000 gal ethanol

– 80,000 lb high protein animal feed

ALGAE HAS MULTIPLE ENERGY USES

Biodiesel

Ethanol, CH4 and Bioplastics

Animal Feed

Green Power

Biohydrogen

Co-Firing orCo-Firing or

GasificationGasification

DryingDrying

FermentationFermentation

Gasification & Gasification &

ReformingReforming

EsterificationEsterification

Future Fuels - Demonstrations

Sunlight

Flue gasin

Flue gasin

Algaeconsume

CO2 & NOX

Scrubbed flue gas

Algal biofuel out

Education and Outreach – Renewable Energy

• APS’ Road to Renewable Energy Program• R2Re is a compilation of graphic posters,

presentations and interactive worksheets for the classroom

• Primarily focused on AZ school grades 4 - 9 • Available in three different formats:

• CD

• APS website http://www.aps.com/my_community/renewable/energy_1.html.

• Book

Ruins of a civilization which disappeared in the Four Corners area of the USA. Only their empty dwellings tell us they ever

existed.

SUSTAINABILITY SUSTAINABILITY

OUR PATHWAY TO ENERGY SECURITYOUR PATHWAY TO ENERGY SECURITY