Securing the Nation’s Energy Future: Securing the Nation’s Energy Future: A Southern PerspectiveA Southern Perspective

Presented to:Presented to:The Council of State GovernmentsThe Council of State Governments

November 13, 2009November 13, 2009

Presented by:Presented by:Kenneth J. NemethKenneth J. Nemeth

Secretary & Executive Director Secretary & Executive Director Southern States Energy BoardSouthern States Energy Board

Southern States Energy BoardSouthern States Energy Board

BackgroundBackground

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

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

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

SSEB Activities Related to Reliable Power Supply

Current Energy Supply ... at a CrossroadsCurrent 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 EventsSignificant Global Energy Events

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) World Oil Glut - $29 BBL Oil – U.S. Synfuels Shutdown (1983) 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)

1970

2001

1983Photo: Jerry Gay,

Seattle Times, 1974

Recent Global Energy EventsRecent Global Energy Events

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 Oil returns to $81/Barrel after fall to mid-30s

2004

2009

2005

ELECTRICITY:ELECTRICITY:Electricity Increasingly Important in the 21Electricity Increasingly Important in the 21stst Century Century

Examples of electricity’s potential this century to address:

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 ForecastElectricity Generation: U.S. Government Forecast

200720073903 TWh3903 TWh

203020304902 TWh4902 TWh

26% Growth26% Growth

*Base case from EIA “Annual Outlook 2009”*Base case from EIA “Annual Outlook 2009”

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

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

Capacity2009-18

+8.4%

Growth in U.S. Electricity

Demand2009-18

+14.8%

ELECTRICITY:ELECTRICITY:Electricity Demand is Outpacing Generation GrowthElectricity Demand is Outpacing Generation Growth

ELECTRICITY: ELECTRICITY: Situation More Critical in Certain RegionsSituation More Critical in Certain Regions

Supply margins become critical in:

SERC (Southeastern): 2013 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 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

All Energy Forms Needed for Diversity of Supply

ENERGY RESOURCES: ENERGY RESOURCES: Global Energy Forms Face Limits in Supply & Price Global Energy Forms Face Limits in Supply & Price

Meeting Future Electricity Needs - BarriersMeeting 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 DOE Recognition of CCS as Critical Technology Solutionas 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 – Clean Coal Technology Impacts – Historical Perspective Historical Perspective

COCO22 Reductions… Technical Reductions… Technical PotentialPotential

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500

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1500

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Technology EIA 2008 Reference Target

Efficiency 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

Advanced Coal Generation

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 None10% of New Light-Duty Vehicle

Sales by 2017; 33% by 2030

DER< 0.1% of Base Load in

20305% of Base Load in 2030

Achieving all targets is very aggressive, but potentially feasible.

CLIMATE: 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 COTwo million barrels/day CO22-EOR could…-EOR could…

Reducing Energy Demand:Reducing Energy Demand:The Low Hanging “Fruit”The Low Hanging “Fruit”

Renewable portfolio standards

Efficiency standards for boilers, appliances, electronics

Building code upgrades Tax incentives for “green”

buildings

Expedited permits Weatherization Improve energy performance

in government buildings Alternative fueled government

vehicles

Energy Efficiency and RenewablesEnergy 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

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

Combined Heat & Power ApplicationsCombined 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 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.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 StatesNuclear 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 Update on Electricity Issues in the 111in the 111thth Congress 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: Climate Change:

Impacts of Cap & Trade Provisions in Federal LegislationImpacts 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: Climate Change:

CRS Report: Impacts of Cap & Trade Provisions CRS Report: Impacts of Cap & Trade Provisions in Federal Legislation (HR 2454)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: Climate Change:

Impacts of Cap & Trade Provisions Impacts of Cap & Trade Provisions in Federal Legislationin 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 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 FutureSecuring a Sustainable Energy Future

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, SecretaryKenneth J. Nemeth, SecretarySouthern States Energy BoardSouthern States Energy Board

nemeth@sseb.orgnemeth@sseb.org(770) 242~7712(770) 242~7712

PLEASE VISIT:PLEASE VISIT:

www.sseb.orgwww.sseb.org

www.americanenergysecurity.orgwww.americanenergysecurity.org

www.sercarbon.orgwww.sercarbon.org