Transcript Fossil Energy Futures in a Carbon Constrained World

Southern States Energy Board
Securing the Nation’s Energy Future:
A Southern Perspective
Presented to:
The Council of State Governments
November 13, 2009
Presented by:
Kenneth J. Nemeth
Secretary & Executive Director
Southern States Energy Board
Background
Through innovations in
energy and environmental
policies, programs and
technologies, the Southern
States Energy Board
enhances economic
development and the
quality of life in the South.
- SSEB Mission Statement
 Established 1960, expanded in 1978
 16 U.S. States and Two Territories
 Each jurisdiction represented by the governor, a legislator from
the House and Senate and a governor’s alternate
 Federal Representative Appointed by U.S. President
SSEB Activities Related
to Reliable Power Supply
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 Southeast Regional Carbon Sequestration Partnership
 Southern Governors’ Energy Sustainability & Climate Initiative
 American Energy Security Study (Phase Two)
 Water for Energy
 Southern States Biobased Alliance / National biomass Partnership
 Nuclear Energy/ Radioactive Materials Transportation Committees
 Clean Coal Technology and Advanced Power Systems
 CO2 Pipeline and Outer Continental Shelf Study
 Advanced Coal Technology Education and Outreach
 State Energy Planning
 Electric Utility Transmission Planning issues
Current Energy Supply ... at a Crossroads
 Price of Energy
– Increases
– Volatility
 Energy Dependency on
foreign sources
 Climate Change issues are
ratcheting up
 Administration’s
outlook for energy
 Energy Policy has become
Climate Policy
Significant Global Energy Events
1970
OPEC Sets 55 percent Minimum Tax Rate (1970)
U.S. Institutes Price Controls (1971)
Arab Oil Embargo Against U.S. (1973)
Kissinger Announces “Project Independence” (1974)
EPCA Authorizes Strategic Petroleum Reserve (1975)
Windfall Profits Tax (1980)
Iran/Iraq War – Oil Prices Doubled (1978-1980)
Photo: Jerry Gay,
1983
World Oil Glut - $29 BBL Oil – U.S. Synfuels Shutdown (1983)
Seattle Times, 1974
Chernobyl Nuclear Accident (1986)
Alaska’s Prudhoe Bay Production Peaks (1988)
Iraq Invades Kuwait – Prices Soar ($36 BBL) (1990)
Clean Air Act – Changes Gasoline & Diesel Fuels (1990)
U.S. Imports More Oil & Refined Product Than It Produces (1993)
Asian Financial Crisis – Oil Prices Plummet (1997-1998)
German Government/Utilities Agree to Phase Out of Nuclear Power (2000)
U.S. Petroleum Consumption – All Time High (19.7 Million BPD) (2001)
Terrorist Attacks on the U.S. (2001)
2001
Recent Global Energy Events
2004
2005
Foreign Oil Dependence Rises to 65 percent (2004)
Northeast Blackout Leaves 50 Million People in the Dark
Natural Gas Prices Triple from 1990 Levels
Oil Passes $50/Barrel
Gasoline Exceeds $3/Gallon
Hurricanes Damage Oil/Gas Rigs
Russia Halts Natural Gas to Ukraine
Venezuela Moves to Nationalize Resources
Oil Breaks $75/Barrel
Nigeria Kidnaps Oil Workers
Bolivia Secures Oil Fields
Experts State Oil Production May Have Peaked
Iran Threatens Nuclear Capabilities
Saudis Talk of Propping Up $55 Oil
Chad Orders Chevron to Leave
BP Forced to Repair Pipeline Leaks
China Extends Credit to Oil Nations
Iran, Russia, Others Discuss Gas OPEC
Texas Utilities Cancel 8 of 11 Coal Plants
Oil Breaks $144/Barrel
2009
Oil returns to $81/Barrel after fall to mid-30s
ELECTRICITY:
Electricity Increasingly Important in the 21st Century
Examples of electricity’s potential this century to address:
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Energy challenges, electricity use and energy conservation
Environmental, sustainability and climate change issues
Economic development
Transportation issues
Improving people’s standard of living
Health, medicine and bio-tech
Continuing developments in communications IT, etc.
The productivity challenge, electricity use and productivity growth
Others include: Emerging electro-technologies, new industries,
nanotechnology, robotics, superconductivity, space exploration
Electricity Generation: U.S. Government Forecast
26% Growth
2007
3903 TWh
2007
2030
4902 TWh
2030
Renewables
Renewables
14%
9%
Nuclear
Power
19%
Coal
49%
Natural
Gas
21%
Other
2%
Nuclear
Power
18%
Coal
47%
Natural Gas
20%
Other
1%
*Base case from EIA “Annual Outlook 2009”
ELECTRICITY:
Electricity Demand is Outpacing Generation Growth
+14.8%
 U.S. generation capacity reserve
margins have greatly declined
– 30-40% in early 1990s
– 16% in 2008
– Margins to fall below 13% reference minimum
in next 3-5 years in Southeast
+8.4%
 Generation capacity to grow 8.4% in
the next 10 years while demand grows
14.8%
Source: NERC 2009 Long Term Reliability Assessment, North American Electric
Reliability Corporation study
Growth in U.S.
Generating
Capacity
2009-18
Growth in
U.S. Electricity
Demand
2009-18
ELECTRICITY:
Situation More Critical in Certain Regions
Supply margins become critical in:
 SERC (Southeastern): 2013
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SPP: 2016
WECC (Rocky Mountain): 2012
ERCOT (Texas): 2016
California: 2018
NPCC (New England): 2016
Arizona, New Mexico, Nevada: 2018
MRO (Midwest): 2012
Source: NERC 2009 Long-Term Reliability Assessment, October 2009
ENERGY RESOURCES:
Global Energy Forms Face Limits in Supply & Price
All Energy Forms Needed for Diversity of Supply
 ENERGY EFFICIENCY/DEMAND-SIDE MANAGEMENT/CONSERVATION:
An important resource but insufficient to power the future
 OIL: Consistently above $50/barrel; declining reserves; risky sources
 NUCLEAR: Valuable but constrained due to safety and waste disposal concerns
 HYDRO: No growth in supply
 WIND: Limited availability; grid disruptions; erratic supply
 ETHANOL: Clean but energy inefficient; cellulosic key
 NATURAL GAS: Price volatility; declining reserves; risky sources
 COAL: Faces GHG, climate change, regulators, environmental organizations
challenges
 SOLAR: Cost of materials; regional effectiveness; intermittent
Meeting Future Electricity Needs - Barriers
 Impact of Environmental Initiatives
– Fuel switch - coal to gas
• Price volatility, Delivery mechanism, Access to LNG
– Need effective integration & verification of demand-side resources
(Demand response : offset ~80% peak growth in 2016)
– Uncertainty on environmental requirements
 Lack of Transmission infrastructure
– Getting renewables to market (750% growth in wind by 2017, eg)
• “Complex but surmountable” (Moeller, FERC)
– Transmission miles inadequate (9.5% increase from 2008-2017)
– Smart grid paradox
• Oversold in residential markets
• Key is in wholesale market (Phasors, substation technology)
 Financeability and Financing new infrastructure
– Cost & environmental regulatory uncertainty & risk
– Capability of Financial markets
DOE Recognition of CCS
as Critical Technology Solution
“We must make it our goal to advance Carbon
Capture and Storage Technology to...widespread,
affordable deployment in 8 – 10 years.” Secretary Chu
Federal investments of $4 Billion with $7 Billion from industry in US
- $1 Billion for FutureGen with CCS by 2016
- $1.4 Billion for five commercial scale demonstration projects at coal plants
- $1.3 Billion for additional five demos to retrofit industrial facilities with CCS
- $100 million demonstration for innovative use of CO2
- $20 million training grants for workforce training
- $400 million in 2010 for new capture and compression technologies
- $500 million, 10 year investment through regional partnerships
- US-China Clean Energy Research Center
Clean Coal Technology Impacts –
Historical Perspective
CO2 Reductions… Technical Potential
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3500
U.S. Electric Sector
CO2 Emissions (million metric tons)
3000
Achieving all targets is very aggressive, but
potentially feasible.
2500
Technology
2000
EIA 2008 Reference
Target
Load Growth ~ +1.05%/yr
Load Growth ~ +0.75%/yr
Renewables
55 GWe by 2030
100 GWe by 2030
Nuclear Generation
15 GWe by 2030
64 GWe by 2030
No Heat Rate Improvement
for Existing Plants
40% New Plant Efficiency
by 2020–2030
1-3% Heat Rate Improvement
for 130 GWe Existing Plants
46% New Plant Efficiency
by 2020; 49% in 2030
CCS
None
Widely Deployed After 2020
PHEV
None
10% of New Light-Duty Vehicle
Sales by 2017; 33% by 2030
< 0.1% of Base Load in
2030
5% of Base Load in 2030
Efficiency
1500
Advanced Coal
Generation
1000
500
0
1990
DER
1995
2000
2005
2010
2015
2020
2025
2030
CLIMATE:
SECARB Partnership Objectives
– Characterize the potential carbon sequestration sinks in the Southeast;
– Conduct field verification studies in the most promising geologic formations in
the region;
– Advance the state of the art in monitoring, measurement and verification
techniques and instrumentation; and
– Develop sequestration technologies and characterize geologic sinks for future
readiness.
Two million barrels/day CO2-EOR could…
Reducing Energy Demand:
The Low Hanging “Fruit”
 Renewable portfolio
 Expedited permits
standards
 Weatherization
 Efficiency standards for
 Improve energy performance
boilers, appliances,
in government buildings
electronics
 Alternative fueled government
 Building code upgrades
vehicles
 Tax incentives for “green”
buildings
Energy Efficiency and Renewables
 Efficiency in existing assets
 Transmission
 Generation
 States with Renewable Electricity Standards
 29 States (6 with goals)
 EPA – DOE Energy Star Program
 DOE Office of Energy Efficiency and Renewable
Energy
 National Energy Efficiency Action Plan
 Recognize Energy Efficiency as priority
resource
 Commitment to implement cost-effective
energy efficiency as resource
 Communicate benefits and opportunities
 Robust funding to deliver where cost-effective
 Align utility incentives with energy efficiency
through ratemaking practices
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Map shows potential for wind generation
Wind Speed is Key
Capacity Factor 25 – 35%
31,100 MW in US
Growth 32%/year past 5 yrs
8,400 MW added in 2008
5,600 MW under construction
Transmission issues “Complex, but Surmountable”
Largest wind states:
 Texas – 8,800 MW
 Iowa – 3,050 MW
 California – 2,800 MW
 7 more states > 1,000 MW
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Map shows potential for solar energy
 Cloud Cover and Darkness key
 Water use is challenge
 Southwest – 500 MW plants
 Southeast :
 FPL Group – 110 MW @ 3 sites and 75 MW
PV solar plant
 Duke Energy (NC)– 16 MW PV Solar farm
plus 10 MW solar energy system
 Sun Hours / Day sample cities, on peak:
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Phoenix, AZ
Lexington KY
Charleston, WV
Tampa, FL
Atlanta, GA
El Paso,TX
7.1
6.0
4.1
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5.2
7.4
Combined Heat & Power Applications
 CHP role in the national energy supply
 85 GW nationwide (9% of US Capacity)
 Texas 16.8 GW (7.5 past 10 yrs)
 Louisiana 7.0 GW (3.1 past 10 yrs)
 Alabama 3.4 GW (1.9 past 10 yrs)
 Large CHP Applications
 Chemicals
 Refining
 Pulp and Paper
 Food Processing
 Other opportunities
– Data Centers
– Utilities
– Municipalities (wastewater, schools)
 Barriers to reaching potential
– Few technology improvements needed
• Higher efficiency engines & turbines
– Low electricity prices and natural gas price volatility
– Uncertainty on carbon policy
– Credit and financing
– Awareness of potential
The Dash to Gas
 Natural Gas is replacing Coal as
base load generating option
– Short lead time
– Easier to site
– Lower carbon emissions
– Lower capital costs
– Small increments of capacity
 Issues
– Natural gas supply security
– Gas price volatility
– Stress of gas supply and
transportation infrastructure
– Switch to gas could change
transmission flow patterns
Status of Coal-Fired Power Plants in the U.S.
 84 coal-fired projects underway (38 progressing / 46 announced : 47,000 MW )
 Coal Plant construction lagging – Actual << Planned (2002 Report)
• Plan for 2007 = 36,000 MW
• Actual 2007 = 4,500 MW
 Delays, Cancellations
• Regulatory Uncertainty, Climate Change
• Economic conditions
• Escalating costs
 Recent completions
– Oak Grove (TX) – 817 MW lignite (Luminant)
 1990-2007 Averaged ~ 1000 MW/ year in U.S.
– Skilled resources reduced
– Scarcity of labor in power plant engineering, procurement, project
management, construction activities
 Impact of Coal Ash Spill at TVA plant (Kingston)
Nuclear Power Future in the United States
 Blueprint for 100 New Nuclear Plants – 20 Years*
– Low Cost Clean Energy Plan
• Build 100 nuclear power plants in 20 years
• Electric cars
• Offshore exploration for natural gas & oil
• Double energy R&D for renewable energy
– Why aren’t we building nuclear capacity?
• Nuclear is very clean & unique energy source
• Nuclear power plants are safe
• Nuclear plants can be insured
 Clean and Safe Energy Coalition (Christine Todd Whitman)
– Nuclear power Benefits: Base load, carbon free, low operating cost,
reduced water use
– Congressional appetite for Nuclear
• Included in Senate Energy and Climate Bill
*Lamar Alexander
Update on Electricity Issues
in the 111th Congress
 Stimulus Funding
– Energy Efficiency and Renewable Energy - $17 Billion
– Electricity Delivery, Reliability, Fossil Energy - $22 Billion
 Waxman-Markey Highlights- American Clean Energy & Security Act
– Title I. Clean Energy
• Energy Efficiency & Renewable Electricity Standard
• Promotes CCS
• Smart Grid, Transmission Planning
• Nuclear Guarantee programs
– Title II. Energy Efficiency Buildings
– Title III. Reducing Global Warming Pollution
• Cap and Trade
• Offsets
– Title IV. Transitioning (Competitiveness, Green jobs)
 Senate: Kerry-Boxer bill – Clean Energy Jobs and American Power Act
– $10 Billion over 10 years for CCS (includes carbon storage stewardship fund)
– Natural Gas investment incentives
– Nuclear incentives
– Renewable energy and energy efficiency
– Clean Energy workforce training
Climate Change:
Impacts of Cap & Trade Provisions in Federal Legislation
 Cap & Trade Provisions
– Similar in both House and Senate version – GHG Emission Reductions:
• House: 17% below 2005 by 2020; 83% by 2050
• Senate: 20% below 2005 by 2020; 83% by 2050
 Key Question:
– What does Cap & Trade cost?
 Forecasting Impacts on the economy
 Difficulty of forecasting beyond 2030*
– Regulatory standards could change
– Technological breakthroughs
– Other unforeseen events
 Key information from forecasts
– Sensitivity of program provisions to varying economic, technological and
behavioral assumptions
– Insights on costs and benefits, in general
*CRS Examination of 7 studies projecting costs of HR 2454
Climate Change:
CRS Report: Impacts of Cap & Trade Provisions
in Federal Legislation (HR 2454)
 Studies Reviewed by CRS Report
– EPA
– EIA
– National Black Chamber of Commerce
– Heritage Foundation
– Congressional Budget Office
– American Council for Capital Formation/ National Assoc of Manufacturers
– MIT
 Key Insights
– Cost determined by response of economy to technological challenges
– Allocation of allowance value determines who bears the cost of the program
– Availability of offsets is key in determining costs
– Interplay between nuclear, renewable, natural gas, coal plants with CCS
technology emphasize need for low-carbon source of electric generating
capacity in mid- to long-term
– Attempts to estimate household effects fraught with numerous difficulties
– Environmental benefits must take into account global context
Climate Change:
Impacts of Cap & Trade Provisions
in Federal Legislation
 Estimated cost impacts- Annual Household effects in 2020
– EPA
$69 - $86
– EIA
$110
– CBO
$156
– MIT
$262
– NBCC
$739
– Heritage Foundation
$808
– HF*
$1,262
 EPA forecast of Economic Impacts of S. 1733
– $0.23 – 0.29 $/day per household OR $84 - $106 in 2020
 Heritage Foundation Estimate of Gross State Product by geographic region
(GSP Loss in 2012- by district)
– West Virginia
-$179 to -$275 million
– Texas
-$216 to -$825 million
– Arizona
-$192 to -$470 million
Regulatory and Other Issues
 EPA’s Endangerment Determination
– 2007 Massachusetts v. EPA
 EPA Greenhouse Gas Reporting Rule
– March 2009 proposal for 2010 implementation
– Requires facilities emitting >25,000 tons GHG to file report
– Issued under statutory mandate from 2007 appropriations bill
– Public comment period closed in June- ruling imminent
 EPA Class VI Well designation for CO2 injection
– July 2008 requirements updated with new field data, August 31
– Rule expected late 2010/early 2011
 International Climate Change Issues- Copenhagen
– December 2009
 Pore Space Ownership
– Wyoming as example
– IOGCC model statutes and regulations
– Senator John Barrasso (WY) pore space ownership bill (S.1856) under federal
lands
Securing a Sustainable Energy Future
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Energy Efficiency
Building Codes
Combined Heat & Power
Natural Gas
Nuclear
Energy Star Programs
Carbon Capture & Storage
Infrastructure
 Low-Carbon Energy Source
Development
 Transmission Infrastructure
 Renewable Energy Zones
Kenneth J. Nemeth, Secretary
Southern States Energy Board
[email protected]
(770) 242~7712
PLEASE VISIT:
www.sseb.org
www.americanenergysecurity.org
www.sercarbon.org