Electricity Technology in a Carbon-Constrained Future

NARUC 2007 Summer Committee Meetings

New York City, New YorkJuly 16, 2007

Steven SpeckerPresident and CEO

2© 2007 Electric Power Research Institute, Inc. All rights reserved.

Presentation Objective

Answer the following two questions:

•What is the technical feasibility of slowing, stopping, and reversing the increase of CO2 emissions from the U.S. electric sector?

•What is the potential impact of the availability of advanced electricity technologies on the cost of electricity in a carbon-constrained future?

3© 2007 Electric Power Research Institute, Inc. All rights reserved.

U.S. Electricity Generation Forecast*

Nuclear Power 20.1%

Conventional Hydropower

6.7%

Non-Hydro Renewables

1.6%

Coal w/o CCS 51.3%

Other Fossil 3.0%

Natural Gas 17.4%

3826 TWh

Other Fossil1.7%

Natural Gas13.5%

Coal w/o CCS59.6%

Non-Hydro Renewables

3.0%

Conventional Hydropower

5.6%

Nuclear Power16.6%

5406 TWh

2005 2030

* Base case from EIA “Annual Energy Outlook 2007”

~40% Growth

4© 2007 Electric Power Research Institute, Inc. All rights reserved.

0

500

1000

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2000

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3500

1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

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c to

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• Base case from EIA “Annual Energy Outlook 2007”

– includes some efficiency, new renewables, new nuclear

– assumes no CO2 capture or storage due to high costs

Forecasted U.S. Electricity Sector CO2 Emissions

5© 2007 Electric Power Research Institute, Inc. All rights reserved.

0

500

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3500

1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

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O2 E

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(mill

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s)

EIA Base Case 2007

EPRI CO2 “Prism”

Technology EIA 2007 Reference Target

Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr

Renewables 30 GWe by 2030 70 GWe by 2030

Nuclear Generation 12.5 GWe by 2030 64 GWe by 2030

Advanced Coal GenerationNo Existing Plant Upgrades

40% New Plant Efficiency by 2020–2030

150 GWe Plant Upgrades

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Vehicle Sales by 2017;

+2%/yr Thereafter

DER < 0.1% of Base Load in 2030 5% of Base Load in 2030

Achieving all targets is very aggressive, but potentially feasible

6© 2007 Electric Power Research Institute, Inc. All rights reserved.

Presentation Objective

Answer the following two questions:

•What is the technical feasibility of slowing, stopping, and reversing the increase of CO2 emissions from the U.S. electric sector?

•What is the potential impact of the availability of advanced electricity technologies on the cost of electricity in a carbon-constrained future?

7© 2007 Electric Power Research Institute, Inc. All rights reserved.

Economic Model

EPRI Economic Analysis Model (MERGE)

• Designed to examine economy-wide impacts of climate policy

• Each country or group of countries maximizes its own welfare

• Prices of each GHG determined internally within model

• Top down model of economic growth

• Technological detail in energy sector

One of three models used by U.S. Climate Change Science Program and in many other international and domestic studies.

8© 2007 Electric Power Research Institute, Inc. All rights reserved.

0

500

1000

1500

2000

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1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

ctri

c S

ecto

rC

O2 E

mis

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ns

(mill

ion

met

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s)

Prism electric sector CO2 emission profile

Assumed Economy-wide CO2 Constraint

Prism profile closely approximated by an economy-wide CO2 emission constraint which is flat from 2010 to 2020

followed by a reduction of 3%/year

9© 2007 Electric Power Research Institute, Inc. All rights reserved.

Technology Cases

Full Portfolio Case

• Assumes all technologies from the Prism technology feasibility analysis are available to be deployed by the target dates

Limited Portfolio Case

• Assumes that Coal w/CCS and Nuclear ALWRs are not available for deployment

Modeled Two Technology Cases Using Economy-wide CO2 Constraint which results in the Prism

profile for the electric sector

10© 2007 Electric Power Research Institute, Inc. All rights reserved.

Economic Modeling Results (Prism CO2 Profile)

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

ye

ar

0

1

2

3

4

5

6

7

Solar

Wind

Hydro

Nuclear

Gas w/CCS

Gas

Oil

Coal w/CCS

Coal

Demand Reduction(price-induced)

0

1

2

3

4

5

6

7

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

ye

ar

Full Portfolio (with CCS and ALWR’s)

Limited Portfolio (no CCS or

ALWR’s)

11© 2007 Electric Power Research Institute, Inc. All rights reserved.

Economic Modeling Results

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

ye

ar

0

1

2

3

4

5

6

7

Solar

Wind

Hydro

Nuclear

Gas w/CCS

Gas

Oil

Coal w/CCS

Coal

Demand Reduction(price-induced)

0

1

2

3

4

5

6

7

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

ye

ar

Full Portfolio (with CCS and ALWR’s)

Limited Portfolio (no CCS or

ALWR’s)

$65 to $100/MWh*

*2050 wholesale generation cost 2007 $

$160 to $250/MWh*

(Prism CO2 Profile)

12© 2007 Electric Power Research Institute, Inc. All rights reserved.

Conclusions

• It is technically feasible to slow, stop, and eventually reduce the increase of CO2 emissions from the U.S. electric sector. But it requires:

– Commitment to aggressive public and private sector RD&D.

– Accelerated commercial deployment of advanced technologies.

• Meeting future CO2 constraints will increase the cost of electricity. The magnitude of the increase depends on:

– CO2 policy and it’s timing.

– The availability of advanced electricity technologies and the timing of their commercial deployment.

Technology is critical to managing the cost of CO2 policy

13

Global cost curve of GHG abatement opportunities beyond business as usual

2030

0 1 24 252 273 4 5 6 7 8 9

0

10

20

30

40

-10

-100

-110

-120

-130

-140

-150

-160

26

-30

-40

-50

-60

-70

-80

-90

19181716151413121110 20 21 22 23

-20

Cost of abatementEUR/tCO2e

Insulation improvements

Fuel efficient commercial vehicles

Lighting systems

Air Conditioning

Water heatingFuel efficient vehicles

Sugarcanebiofuel

Nuclear

Livestock/soils

Forestation

Industrialnon-CO2

CCS EOR;New coal

Industrial feedstock substitution

Wind;lowpen.

Forestation

Celluloseethanol CCS;

new coal

Soil

Avoided deforestation

America

Industrial motorsystems

Coal-to-gas shiftCCS;

coal retrofit

Waste

Industrial CCS

AbatementGtCO2e/year

AvoiddeforestationAsia

Stand-by losses

Co-firingbiomass

Smart transitSmall hydro

Industrial non-CO2

Airplane efficiency

Solar

• ~27 Gton of abatement below 40 EUR/ton (relative to 58 Gton under BAU)• ~7 Gton of negative and zero cost opportunities• Fragmentation of opportunities across sectors and geographies

CCS; early retirement

Minimizing Costs for Consumers

Under a Global Warming Pollution Cap

Dale S. Bryk

Natural Resources Defense Council

NARUC Summer Conference

July 16, 2007

Driving Investment in Least Cost Solutions

Price signal of cap or tax (does not overcome market barriers)

Allowance revenue

Essential complementary policies

– Energy efficiency procurement standards– Remove utility disincentives (revenue decoupling)– System benefit charge programs– Codes and standards

Allowance Distribution Objectives

Protect consumers

Reduce overall program costs

Advance program goals/ promote clean energy

Avoid windfall profits

Avoid perverse incentives

Transition assistance for workers

ElizabethA. Moler, Executive V.P. Exelon, Corp.