energy transformation in the united states -- houston conference may 2011

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From Innovation to Deployment -- transformation of the U.S. Electric Sector and transformation in the US transporation sector


  • 1. 4th Annual Power & Alternative Energy LawConferenceHouston, TexasAchieving Energy Transformation in Electricity andTransportation: From Innovation to DeploymentPresented by:Robert H. Edwards, Jr.Deputy General Counselfor Energy PolicyUnited States Department of Energy12 May 20111

2. Overview The Energy Challenge U.S. Perspective Energy Transformation is Challenging and Complicated Private Sector Investment, Innovation and Recovery Act JumpStart Energy Transformation Economics of new technologies must eventually prevail without subsidy Business and finance models must provide for return of and on capital Challenges to Keep Energy Transformation Going Capital for infrastructure investments Managing risks and returns Cross industry solutions 2 3. Investment in Renewable Energy and Clean Technologies is NeededNow to Create 21st Century Energy Technology Industries and Jobs, Reduce Dependence on Foreign Oil and Reduce Greenhouse Gas Emissions The U.S. sends $1 Billion per day overseas to purchase foreign oil While the U.S. manufactured more than 40% of the worlds solar cells inthe mid-1990s, today we produce just 7% When the Recovery Act passed, there were only two small advancedbattery facilities in U.S., and 98% of production was based in Asia Long-term results of current deficiencies in our energy system include: Loss of leadership in energy innovation National security problems Oil-driven recessions Increasing CO2 emissions Environmental degradation Trade deficits 3 4. Events During the Recent Past Have Increased the Need for Accelerated Energy Transformationto Improve U.S. Energy Security and EconomicPerformance April 2010: The Deepwater Horizon Oil Spill Developments in the Middle East and North Africa March 2011: Earthquake and Tsunami in Japan4 5. Our Energy Challenge Electric Sector 100 year old architecture and technologies Relies heavily on old coal burning power plants Industry is fragmented Industry regulatory structure leads to slow adoption of newtechnologies Transportation Sector Relies almost exclusively on oil Dependence on foreign oil has increased over the decades Oil prices are volatile and trending upward Existing infrastructure makes transformation to alternative fuelsdifficult and slow 5 6. Prudent Development of the Full Range of UnitedStates Energy Resources Is Important The Administration has made clear that prudently increasingU.S. domestic oil production is an integral part of the solution Recent technology innovations have given us the opportunityto tap large reserves of shale gas Environmentally sound development of shale gas can assist inaccelerating energy transformation 6 7. ENERGY TRANSFORMATION ISCHALLENGING AND COMPLICATED7 8. Energy Change Is Slow US ENERGY SUPPLY SINCE 1850100%Renewables90%Nuclear80%Gas70%Oil60%Hydro50%Coal40%30%Wood20%10% 0% 1850 188019101940 1970 2000Source: EIA 1880 Edison Long Lasting Lightbulb 1908 Model T 1918 GE Starts Gas Turbine Division2008 Tesla EV Roadster 1950s Nuclear Power Plants Come Online 8 9. IT Moves Much Faster Than EnergySALES OF PERSONAL AUDIO/VIDEO SINCE 2000 MP3/MP4 Players Sales CAGR (2004-2009): 30.2% Google Sales CAGR (2004-2008): 61.7% Facebook Value CAGR (2005-2009): 182% 9 10. Why is Energy Change Slower than Information Technology Change? Infrastructure Existing energy delivery systems for oil (pipelines, gas stations) create barriers to entry for fuels unable to use the existing infrastructure Disruptive technologies may require major infrastructure investments (charging infrastructure for electric vehicles) Legacy Assets Fully depreciated old coal fired power plants make it challenging for renewables and clean coal to be cost competitive Utilities and Public Utility Commissions The Gordian Knot 50 State PUCs + Federal Energy Regulatory Commission (FERC) Historically regulation has properly focused on reliability and cost Fragmented and slow regulatory structure slows innovation Need regulatory innovation to allow for roll-out of Smart Grid Utility Scale Battery Storage New services and business models 10 11. How Can We Make Energy Transformation Faster? Pathways to Scale Technological Innovation/Acceptance/Adoption Financing Innovation/Infrastructure/Consumer Sector/Industry Organization Industry incumbents or new entrants to take on new roles Electric vehicles utilities and auto manufacturers share the same customers Smart Grid who will own customer? Government Policy Coherent and stable government policy Clean Energy Standard Consistent tax credit support for new technologies Public utility commissions 11 12. ENERGY TRANSFORMATION IN THE ELECTRIC SECTOR12 13. Our Current Electric System, Technologies, and Architecture are 100 Years Old Edison Would Recognize Most of the System Alternating Central CurrentDistributionEndPower High VoltageCompaniesUsersTransmission Stations Lines Solar,Geothermal, Transmission 3,100 Utilities 100% availabilityWind 2%>1%congestion andHydro6.6% constraints Southern Co. Lowest /kWhNuclear serves 4.4M 20% Need morecustomers Unaware of transmissionpotential of for renewables Altamaha EMC smart gridrural electric co-Natural op serves 19,648 Gas 21%customers in 13Liquids1%Lyons, GA 14. The Challenges are Further Complicated asDifferent Regions of the United States UseDifferent Fuel Mixes to Generate Electricity 14 15. In Addition, There Is Not a Single National Grid:Approximately 60% of the U.S. Electric Power Supply isManaged by ISO/RTOs While the Southeastern RegionRemains Regulated and Vertically IntegratedSource: ISO/RTO CouncilPublished by: U.S. Energy InformationAdministration15 16. A Green and Sustainable 21st Century ElectricSystem Will Have Many of the Following Features.Robust Electric & Transmission Utility ScalePlug-In HybridRenewableCapacity Storage VehiclesGenerationSmart GridSmartSmartSmart Transmission Storage Consumers16 17. How Fast Can Renewables be Integrated into the Electric Grid? Expert Projections Vary WidelyRenewables and Distributed GenerationPercent of Total Generation in 2030Charles River Associates 16%Environmental Protection Agency16%Union of Concerned Scientists24%National Renewable Energy Laboratory 67% Lets look at the electric grid on an end-to-end basis to understand how we can increase the rate of penetration of renewables. . .17 18. To Accelerate Transformation in the Electric Sectorthe Administration has Deployed Resources Through RenewableGenerationa Range of Tools Recovery Act Tax Credits and Other Incentives Extension of the production tax credit (PTC) through December 31, 2012, andthe innovation of the 1603 Cash Grant In-Lieu of Tax Credit, for electricityproduced from renewable energy sources The 1603 program, which allows clean energy producers to monetize taxcredits in the form of a cash grant which becomes available as soon as arenewable energy project is Placed In Service As of April 6, 2011: total number of projects funded = 7,957 total 1603 funding = $6.9 Billion total private and federal investment in 1603 projects = $23.2 Billion total installed capacity of funded projects = 10.4 GW (91% wind, 4% solar) total estimated electricity generation from funded projects = 27.5 TWh18 19. Selected 2010 & 2011 Loan Guarantee Projects Accelerate Deployment of Renewable GenerationRenewable Generation Solar Generation Abengoa Solar, Inc., $1.446 billion (250 MW) - Arizona Agua Caliente, $967 million (290 MW) - Arizona BrightSource Energy, Inc., $1.6 billion (392 MW) - California Solar Trust of America (Solar Millenium), $2.105 billion (484 MW) - California Wind Generation Caithness Shepherds Flat, $1.3 billion (845 MW) - Oregon Kahuku Wind Power, LLC, $117 million (30 MW) - Hawaii Record Hill Wind, $102 million (50 MW) - Maine19 20. US Solar Electric Installations: 2007-2010 2500 2000 1500 Cumulative MWCSP Cumulative 1000 PV Cumulative 50002007 20082009 2010YearSolar PV installations in 2011 are expected to be twice2010 levels. Data source: SEIA 20 21. US Wind Installations: 2007-201035000300002500020000Cumulative MW1500010000500002007 20082009 2010YearThe U.S. wind industry has contributed over 35% to all new powergenerating capacity created in the nation over the past fouryears.Data source: AWEA21 22. Robust and Reliable Transmission and Robust Distribution Networks Are Essential to the TransmissionCapacity Development, Integration, and Delivery of SmartTransmission Renewable Resources in the Electric Sector . . . Bonneville Power Authority (BPA) McNary-Day Transmission Line When energized in early 2012, loan guarantee project will allow BPA toprovide 625 MW of transmission service, including 575 MW of new windenergy Western Area Power Authority (WAPA) Montana-Alberta Tie Limited Project(MATL) WAPAs first Recovery Act project will bring new transmission capacity onlineto support 300 to 600 MW of wind energy, enough to power 150,000 to300,000 homes Southwest Intertie Project (SWIP) Loan Guarantee Program Transmission project that will carry approximately 2,000 MW of electricity andenable wind and solar resources in Wyoming, Idaho and Nevada to power theSouthwest and California markets 22 23. Robust and Reliable Transmission and Distribution Networks Are Essential to the Development,RobustTransmissionCapacityIntegration, and Delivery of Renewable Resources Smart in the Electric Sector (contd). . . Transmission Nine-Agency MOU October 2009 agreement will expedite the siting and construction of qualifiedelectric transmission infrastructure in the U.S. Office of Electricity Delivery and Energy Reliability (OE) Transmission Planning Six Recovery Act awards will promote collaborative long-term analysis and planning for the Eastern, Western and Texas electricity interconnections, representing the first-ever effort to take a collaborative, comprehensive look across each of the three transmission interco


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