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March 2012

CA REC Market Update FOR. March 2012. CONFIDENTIAL AND PROPRIETARY. ELEMENT MARKETS INTRODUCTION US Emissions House of the Year . Leading marketer of environmental commodities with a focus on Emissions, GHG, and Renewable Energy (Energy and Transportation Credits), and Biomethane

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March 2012

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  1. CA REC Market Update FOR March 2012 CONFIDENTIAL AND PROPRIETARY

  2. ELEMENT MARKETS INTRODUCTIONUS Emissions House of the Year • Leading marketer of environmental commodities with a focus on Emissions, GHG, and Renewable Energy (Energy and Transportation Credits), and Biomethane • Transacted over $800,000,000 in environmental commodities since inception in 2005 • Provides Environmental Asset Management Services for over 8,000 MW of generation • Customer base of over 700 companies within the environmental markets • EM is one of the largest developers of biomethane projects in the US and owns the largest Anaerobic Digestion Project in North America (Huckabay Ridge Anaerobic Digestion Project in Stephenville, TX) • Launched in 2005, Element Markets has become the leading producer and marketer of renewable natural gas and environmental commodities in the U.S. Greenhouse Gas (GHG) and Emissions Services Renewable Energy Group GHG Offset Projects Credit Marketing Credit Marketing Biogas Development Business Units

  3. CA RPS (BUCKETS) • Senate Bill X1-2 (SBX1-2), signed in April 2011, made several major changes to California's Renewables Portfolio Standard (RPS). • RPS Goals: • 20% by December 31, 2013 • 25% by December 31, 2016 • 33% by 2020 • Compliance now split into 3 Buckets: • Bucket 1: “Have a first point of interconnection with a California balancing authority, have a first point of interconnection with distribution facilities used to serve end users within a California balancing authority area, or are scheduled from the eligible renewable energy resource into a California balancing authority without substituting electricity from another source.” • Bucket 2: “Firmed and Shaped” • Bucket 3: Unbundled RECs

  4. CA RPS MARKET OVERVIEW • Source: PG&E

  5. CALIFORNIA • PG&E has estimated that 19.4 percent of electricity delivered to its customers in 2011 came from renewable sources, up from 15.9 percent in 2010 (March 5, 2012) • In 2012, SDG&E expects five new renewable projects to become operational • In January 2012 alone, California Public Utilities Commission approved five renewable energy contracts, which will result in the production of some 1,088-megawatts of clean, renewable power • RPS Capacity Installed Since 2003

  6. BIOMETHANE UPDATE • Biomethane has been used by many POUs to assist in meeting Bucket 1 requirements • Biomethane was imported to the state from landfills and digester projects and used in existing gas fired generators to generate RECs and GHG reductions • On March 28, the CEC passed a suspension of certification for additional Biomethane Sources • During the suspension the CEC will not accept any more application for certifications, but will continue to review and process existing complete applications • Biomethane is also used as a “Biomass Derived Fuel” in AB32, which means the fuel is GHG neutral and is not required to be offset when used

  7. California Allowance Prices Source: Intercontinental Exchange (3/29/2012)

  8. ELEMENT MARKETS Randall Lack, Chief Marketing Officer Element Markets, LLC 3555 Timmons Lane, Suite 900 Houston, TX 77027 Office: 281-207-7200 rlack@elementmarkets.com www.elementmarkets.com “US Emissions House of the Year - 2010” by Energy Risk Nominated as Rising Star in Platt’s Global Energy Awards “Best Carbon Trader - North America 2011” by World Finance #1 Mandatory GHG Credit Dealer (2009,2010) - Energy Risk #1 Voluntary GHG Credit Dealer (2008, 2009,2010) – Energy Risk Runner-Up, Best Trading Company, N.A. Mandatory GHG (2009) – Environmental Finance Top 5 Developer, North American Voluntary Greenhouse Gas Markets (2009) – Point Carbon #1 NOx & SO2 Dealer (2009,2010) – Energy Risk Best Trading Company, SO2 Emissions Credits (2008, 2009, 2010) – Environmental Finance

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