energy realities facing the united states
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Energy Realities Facing the United States. Frank Clemente Ph.D. Senior Professor of Social Science & Energy Policy Penn State University [email protected]. 1. 1. 2. Five Basic Premises. Worldwide growth in energy demand is unprecedented and will continue for decades - PowerPoint PPT PresentationTRANSCRIPT
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Energy Realities Facing the United States
Frank Clemente Ph.D.Senior Professor of Social Science & Energy PolicyPenn State [email protected]
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Access to Electricity and the Quality of LifeSurvive
ChildhoodLive
LongerDrink
Cleaner WaterEat
BetterAre BetterEducated
Under Five Death Rate/1000
Life Expectancy (years)
Access to Improved Sources
(%)
Under Nourished(%)
Literacy Rate (%)
People in Societies with Greater Access to Electricity:
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Five Basic Premises
• Worldwide growth in energy demand is unprecedented and will continue for decades
• Coal is the only energy source able to meet this demand in terms of scale, time, reliability, cost and versatility
• Coal conversion to electricity, liquid fuel and NG equivalents can greatly alleviate supply problems
• Carbon capture and storage (CCS) is the technological pathway to the full potential of coal
• The U.S. should rapidly develop CCS and make it available, affordable and deployable to the global community –this is the moral energy issue of our time
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Two Different Worlds
● “There is no such thing as clean coal” – National Resources Defense Council.
● When asked how China would ever meet the growing demand for electricity, liquid fuel and NG, Du Minghua, Director of the Beijing Research Institute replied: “Coal is the solution to all three”.
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Out of Poverty: Coal Based Energy has Propelled China Forward
0
1,094
534
Source: IEA, 2007; EIA, 2008Note: Poverty measure follows World Bank Definition of $1 per day income
“China is an example for the developing world” IEA, 2007
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India’s Rapidly Emerging Demand for Electricity
Millions of People in India Toil in An Bleak World
Removal of poverty is the greater immediate imperative than global warming” P. Ghosh, Secretary of the Environment, India
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77
17.1%
0.5% 0.6% 0.8%
10.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Population (1.15 Billion)
Oil NG Uranium Coal
% o
f Wor
lds
Pro
ved
Res
erve
sCoal is India’s only Energy Advantage
India’s Share of the World’s Energy Reserves
“Coal is expected to be the mainstay of power generation in the years to come” India’s 11th Five Year Plan (2007-2012)
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The Power of Coal: If India Did Not Use More Coal
To meet projected demand, and replace projected incremental coal based electricity generation, India would have to obtain more than 13 Tcf of NG, build 210 nuclear power plants or construct the equivalent of
400 Hoover Dams
1,770 1,736
1,509 1,586
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9999
Steady Drumbeat Of Electricity Demand Across the World
Note: Over 2 billion people do not have adequate access to electricity and 1.6 billion have none at all
0
5000
10000
15000
20000
25000
30000
35000
40000
Bill
ion
Kilo
wat
t Hou
rs
1980 1990 2005 2010 2020 2030
US ROW
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1010
243
151
8962 53 65
0
50
100
150
200
250
Gig
a w
atts
of N
ew C
oal
Base
d Ca
paci
ty
China India OtherAsia
Europe USA ROW
The World Is Turning to Coal
Source: Data Derived from Platt’s Proprietary Database, 2008
China built more coal generation in 2007 than Britain built in its history
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Modernization – The Rise of the Automobile
0
50
100
150
200
250
300
350
400
2002 2030
Tota
l Veh
icle
s (M
illio
ns)
U.S. China India Mexico Brazil
In 2002, there were 812 million vehicles. By 2030 there will be 2.1 billion.
Source (Dargay and Gately 2006)
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Everything, Everywhere, All the Time:Increases needed by 2030 to meet demand
● Nuclear power 38%
● Oil production 43%
● Renewable energy 61%
● NG production 64%
● Coal production 74%
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The Reality of Energy Supply : U.S. Oil and North American NG Production have both Peaked
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WHERE WILL THE ELECTRICITY COME FROM IN THE UNITED STATES?
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Rising Tide of Electricity Demand in U.S.
Any plan for new generation must account for the pressure of steadily growing demand for electricity
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The Danger of Relying on NG for Electricity
1. NG has 4 times the price and 20 times the price volatility of coal
2. Using NG for electricity drives up the price of both electricity and NG for families and businesses.
3. North American NG production may have peaked. Thus, LNG imports from risky sources (e.g. Russia, Iran) must balance supply.
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8%
21%
42%45%
50%53% 55%
67%
0%5%
10%15%20%25%30%35%40%45%50%55%60%65%70%
% o
f Ele
ctri
city
Gen
erat
ion
from
NG
PA U.S. OK FL TX MA CA NV
Some States Highly Dependent on NG for Power
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This Second “ Dash to Gas” is Real, Risky and Expensive
Source, Platts, 2007
*Note: The Platts survey is the most recent available but does not include many recently proposed NG Plants or many recently cancelled coal plants
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19191919
Depletion Sets the Context:Wanted: A New Texas Every Year (6 TCF)
Sources: EIA; EOG; CIBC World Markets
0
2
4
6
8
10
12
14
16
18
20
22
2007 2008 2009 2010 2011 2012 2013 2014 2015
TCF/
Y - D
ry P
rodu
ctio
n
EIA Projected Production Depletion at 32%
New NG
Needed
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20202020
The U.S. Bets On A Brave New World
Where new NG supply came from 1993 - 2006
Where new supply is projected to come from
2006-2019
•Source: EIA
“North America is setting itself to import LNG in large quantities” (IEA, 2007)
Canada, 60%Domestic
Production, 17%
LNG From Foreign Nations, 23%
Domestic Production, 26%
LNG From Foreign Nations, 74%
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More Global NG Consumption Means Competition: Billions of New Kids on the Block
Source: EIA, International Energy Outlook, 2008
Increases in NG Consumption 2005-2030
“The U.S. is the market of last resort for LNG… we will get the gas Europe and Asia don’t need”
-Goldman Sachs, 2008
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If Aubrey McClendon is Correct, The U. S. Faces Significantly Higher Electric Rates
● “U.S. natural gas producers can increase supplies by 5 percent a year…there is plenty of natural gas to burn to make electricity”
● “We think gas prices stay in the $9-$11 range…aggressive 35% to 40% first year declines are going to kick in” “An average of $10 is a pretty good price”
● But NG prices have averaged only $6.22 over the past 5 years and electric rates have still increased 27%.
● $10 NG will dramatically increase the cost of NG for electricity as well as the cost of NG for families and business.
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What $10 NG Would Mean to American Consumers? - $70 Billion Dollars More in Costs
“An average of $10 is a pretty good price” Aubrey McClendon, CEO, Chesapeake Energy, July, 2008
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Show Me The Gas: Failed Optimism has surrounded NG
● In 2000---U.S production would significantly increase and lead to $2.58 NG in 2008
● In 2004---LNG imports would significantly increase and lead to $ 3.67 NG in 2008
● In 2008---LNG and shale gas will increase and lead to low cost NG
● But NG prices are still twice as high as predicted just 4 years ago
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Systematic Bias: Since 2000, EIA has:
● Overestimated NG production in 23 of 28 forecasts
● Underestimated NG used for generation in 27 of 28 forecasts
● Underestimated price of NG to generators in 27 of 28 forecasts
See our article in Public Utilities Fortnightly, July, 2007
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If Boone Pickens is Correct and we are at Peak Oil –The long run price of NG/LNG
Source: "The Relationship Between Crude Oil and Natural Gas Prices," Hartley et. al, Rice University, 2007
Price of W TI Oil in Dollars per Barrel
“Natural gas prices are anchored in a long-term relationship with crude oil prices” Stephen Brown, Federal Reserve Bank of Dallas, 2007
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Coal Is the Cornerstone Of Electricity Generation In The U.S.
1% 2%
7%
19%20%
50%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
U.S
. Ele
ctri
c G
ener
atio
n
Oil Renewables Hydro Nuclear NG Coal
U.S. Electric Generation
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The Scale Needed to Replace Coal in the U.S.
● NUCLEAR: 250 more reactors ● NATURAL GAS: 17 more Trillion Cubic Feet
● HYDRO: 500 facilities size of Hoover Dam.
The reality of physics is that electricity cannot be stored in large quantities – an inevitable constraint on solar and wind generation.
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Nuclear Power: Four bottlenecks will significantly delay the construction of new nuclear power plants in the United States
1. High Level Waste management, transportation and storage
2. Entrenched Opposition at both national and local levels
3. Supply chain issues
(a) availability and cost of fuel,(b) scientific expertise and skilled labor(c) global competition for nuclear grade components
4. Societal inertia, litigation and bureaucratic creep –we have not built a nuclear plant for decades.
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Bottleneck: Competition with the rest of the world for nuclear grade components, fuel and expertise –we are behind the curve and falling
Source: World Nuclear AssociationNew Reactors which will come online by 2015
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“Will Weather Provide Reliable Electricity?”
Energy Policy journal, August,2008: Findings from UK wind analysis
1. Wind output can be very low at the moment of maximum demand.
2. Expect power swings of 70% within 12 hours
3. This volatility will cause backup NG plants to go on and offline frequently, reducing efficiency and reliability
4. These reductions will lead to increases in the cost of electricity and offset environmental benefits
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ERCOT: Electric Reliability Council of Texas: Cautions on Wind Generation
● Refers to self as “National Grid of Texas”
● “Wind intermittent and not dispatchable”
● “Wind output from West Texas does not correspond to peak demand”
“There was a substantial difference between what we were getting from wind generators and what was reported in our look ahead studies” ERCOT VP on voltage sag in February, 2008
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33333333
Wind Generation’s Performance During 2006 California Heat Wave
* Adapted and estimated from Dixon, U.S. DOE (2006)
250 32589 90 110 113
0
200400600800
1,0001,2001,4001,600
1,8002,0002,2002,400
2,600
Meg
awat
t Pro
duct
ion
7/13/2006 7/15/2006 7/17/2006 7/19/2006 7/21/2006 7/23/2006
Date of Heat Wave (2006)
Rated Wind Capacity (2500 MW) -- CA Independent System Operator
When California’s Daily Peak exceeded 45,000 MW, in no case did wind provide more than 325 MW despite rated capacity of 2500 MW.
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California map
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35353535
Lest We Forget : US Coal Reserves vs. Oil and NG Reserves
0
1000
2000
3000
4000
5000
6000
Qua
drill
ion
BTU
USACoal
Russia I ran Qatar SaudiArabia
Venezuela
Natural Gas Crude Oil Coal
Source: EIA, 2008
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12
3
4
67
11
18 18
0
2
4
6
8
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Billi
on B
arre
ls o
f Oil
ILMI
OHKYPAWV
MTSDND
COUTWY
CA AZFLMSLA
OKARKSNE
TX (e)TX (w)
TX (w)NM
The Location Of Stranded Oil Recoverable Through CO2 – EOR *
Bill
ion
Bar
rels
With State of the Art technologies, Texas has over 35 billion barrels of recoverable oil
* Excludes Alaska and Offshore