william f. tyndall vice president, corporate development and strategy cinergy corp. william f....
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Cinergys Perspective on the Climate Challenge
William F. TyndallVice President, Corporate Development and StrategyCinergy Corp.
The Challenge Cinergy Faces Cinergy owns 32 coal-fired generation unitsCoal fuels vast majority of power we provide customers Cinergy consumes 30 million tons of coal per year2000 CO2 emissions were approximately 74 million tonsClimate Issue is but one facing coal as further SO2, NOx and mercury emissions reductions on horizonCoal is the fuel of choice for more than 50% of U.S. (and 80% of Midwest) power generation economic consequences if this fuel option is lost
PSICG&ERegulated PlatformCommercial Platform* Preliminary 2004Who is Cinergy?
Cinergys Generation Fleet
Total capacity Total PSI (Reg.)7,358.8 MWTotal CG&E (Reg.)5,498.6 MWMerchant (Non-Reg.)1,031.4 MWTotal 13,888.8 MW
Cinergys Generation Fuel Mix (13,331 MW)
Cinergy and the EnvironmentAbout 35% of generation is fitted with SO2 controls and 50% with NOx controlsIn the last five years, spent more than $1 billion on SCRs for NOx Between 1990 and 2004, total emissions of NOx and SO2 have declined despite a 47% increase in electric generation over the periodAdditional $1.8 billion construction program underway to add SO2 and NOx controls, as well as mercury and fine particulate controls, to more units Key reality: No bolt-on machine available to reduce CO2 emissions from existing coal-fired power plants
What is Cinergy Doing on Climate?Disclosure 2004 AIRS ReportGHG Reduction CommitmentBuilding the Generation Fleet of the 21st Century
Air Issues Report to Stakeholders (AIRS Report)Purpose: To describe the potential impact on Cinergy, the region it operates in, and the U.S. economy, if mandatory greenhouse gas (GHG) limits are imposed (along with tighter restrictions on NOx, SO2 and Mercury)Process: Prepared in-house with extensive collaboration with a major stakeholder (Presbyterian Church USA), as well Ceres, Environmental Groups and other independent expertsEndorsed by Cinergys Board of DirectorsReport available at: www.cinergy.com/sustain/environmental_improvement.asp
AIRS Report Key PointsLegislative and regulatory uncertainty is the major difficulty in planning capital expenditures to meet growing demand for electricityCinergy does not expect Congress to constrain GHGs before 2008Longer term, prudent to assume a carbon constrained world; therefore, we will assume CO2 limitations in making long-term investment decisionsMost existing coal plants will remain economically viable under any reasonable GHG programFocusing additional controls on largest and newest units that remain economic under a Kyoto scenario
In Cinergys View, Any U.S. GHG Program Must:Preserve coal as a major energy sourceInclude market-based cap and trade principles no mandated technology or restrictions on flexibilityGradually and predictably reduce GHG emissions Provide incentives to develop new technologiesMinimize distortions and irrational wealth transfersInvolve all sectors of the economy, not just the energy industryWork toward inclusion of China and India
Cinergys Voluntary GHG Reduction Commitment In 2003, Cinergy agreed to stabilize CO2 emissions at 5% below 2000 levels during the 2010- 2012 time periodBased on levels in pending federal legislationReview commitment and determine new target for period after 2012Spend at least $21 million from 2004- 2010 on GHG reduction projects and offsetsCommitment designed with Environmental Defense and subject to third party verification
GHG Expenditures To Achieve GoalCinergy will spend $21 million from 2004- 2010 on GHG reduction and offset projectsFund ensures progress towards 2010 goal without specific interim reduction targetsCinergy will spend 2/3 of the fund for on-system projectsCinergy can count BAU expenditures that meet criteria such as ongoing sequestration projects, natural gas distribution improvements, DSM, CHP, technology investments, etc.
Cinergy GHG Status ReportCinergy Corporate 2000 Baseline CalculationIncludes legacy units, merchant units, natural gas, vehicles, Cinergy Solutions, SF6Ownership and operation
How Will Cinergy Get There?Many reduction and offsetting initiatives already underway or plannedEfficiency improvements at plantsCHPEnd-User ConservationRenewable EnergySequestrationMaterials RecyclingAll reductions and offsets subject to independent 3rd party verification
Building 21st Century Generation FleetCinergy already invested in many next-generation power sourcesFuel cellsIndustrial combined heat and powerBiomassConsidering major expansion into wind due to new favorable wind maps for Indiana and Ohio
Coal Gasification The Best Hope for the Future? Many environmentalists and industry players have focused on coal gasification as the best central plant technology for the futureUtilizes abundant U.S. supply of coalCO2 separation and sequestration more feasibleCinergy signed a letter of intent in October 2004 with General Electric and Bechtel to start initial planning for building a commercial, Integrated Gasification Combined Cycle (IGCC) power plantIt was the first plant of its kind announced under the proposed GE-Bechtel alliance
How IGCC WorksCoal gasification system converts coal into a synthesis gas (syngas)The hot syngas is processed to remove sulfur compounds and particulate matter Syngas fuels a combustion turbine generatorThe heat in the exhaust gases from the combustion turbine is recovered to generate steam, which then drives a steam turbine generator
How IGCC Works
IGCC CostsCapital costs for IGCC are estimated to be 10 20% higher than for conventional PCBut IGCC may be more attractive due to permitting delays and opposition that conventional PC faces in some regionsFinancial incentives will play a key role in getting the next generation of commercial IGCC plants deployedIncentives need to create momentum in both States with regulated utilities and in States with deregulated systemsIncentives need to address long lead times, huge scale, operational risks