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To forecast the future price of renewable purchases, MRW considered a number of factors: • Researchers from the National Renewable Energy Laboratory(NREL) and Lawrence Berkeley National Laboratory(LBNL)developed a set of forecasts of utility-scale solar costs based on market data and preliminary data from other research efforts.3 Their base case forecast predicts a 3.8% annual decline in utility-scale solar capital costs on a nominal basis, from$1,932/kW-DC in 2016 to $1,652/kW-DC in 2020, with costs then remaining roughly constant in nominal dollars through 2030.4 Additional scenarios predict even steeper price declines, with the most aggressive scenario predicting an 11% annual nominal decline through 2020, with increases at the rate of inflation after that. • The federal Investment Tax Credit(ITC), which is commonly used by solar developers, is scheduled to remain at its current level of 30%through 2019 and then to fall over three years to 10%, where it is to remain.5 The federal Production Tax Credit, which is commonly used by wind developers, is scheduled to be reduced for facilities commencing construction in 2017-2019 and eliminated for subsequent construction.6 The loss of these credits would put upward pressure on prices. • NREL and LBNL researchers predicted in 2015 that the cost increase associated with an ITC reduction would be roughly offset by other solar cost reductions even if the full reduction to 10% were to be implemented by 2018, rather than spread out through 2022 as is currently planned. • The production tax credit has been extended six times from 2000-2014,8 and the solar ITC has been extended three times since 2007.9 Further tax credit extensions are therefore plausible. • The major California investor-owned utilities have significantly slowed their renewable p rocurement because lower-than-expected customer sales and higher-than-expected contracting success rates have led to procurement in excess of the RPS requirements independent news service from Energy Newsdata,from January 2015-January 2016(see issues dated July 31, August 14,October 16,October 30,2015,and January 15,2016). 'National Renewable Energy Laboratory.Impact of Federal Tax Policy on Utility-Scale Solar Deployment Given Financing Interactions,September 28,2015,Slide 16.http://www.nrel.gov/docs/fyl6osti/65014.pdf 4 Ibid.Costs converted to nominal dollars using the inflation forecast used throughout the rate forecast model(U.S. EIA's forecast of the Gross Domestic Product Implicit Price Deflator). 5 U.S.Department of Energy.Business Energy Investment Tax Credit(ITC). http://energy.gov/savings/business- energy-investment-tax-credit-itc 6 U.S.Department of Energy.Electricity Production Tax Credit(PTC). http://energy.gov/savings/renewable- electricity-production-tax-credit-ptc National Renewable Energy Laboratory.Impact of Federal Tax Policy on Utility-Scale Solar Deployment Given Financing Interactions,September 28,2015,Slide 28. 8 Union of Concerned Scientists.Production Tax Credit for Renewable Energy. http://www.ucsusa.org/clean_energy/smart-energy-solutions/increase-renewables/production-tax-credit-for.html 9 Solar Energy Industries Association. Solar Investment Tax Credit. http://www.seia.org/policy/finance-tax/solar- investment-tax-credit;and U.S.Department of Energy.Business Energy Investment Tax Credit(ITC). http://energy.gov/savings/b usi ness-energy-i nvestment-tax-credit-itc July,2016 B-2 MRW&Associates,LLC