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A Green Midwest

A Green Midwest. Chicago Council on Global Affairs. November 9, 2009. CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited. Midwest mid-range GHG abatement curve – 2030. Abatement cost <$50/ton. Cost $2005/ton CO 2 e.

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A Green Midwest

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  1. A Green Midwest Chicago Council on Global Affairs November 9, 2009 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

  2. Midwest mid-range GHG abatement curve – 2030 • Abatement cost <$50/ton • Cost • $2005/ton CO2e • Afforestation - cropland • 150 • Commercial electronics • Residential HVAC equipment efficiency • Residential electronics • Coal mining - CH4 • Residential general use lighting • Distributed PV • Conservation tillage • Commercial LED • New build CCS • 100 • CCS rebuilds • Cars Fuel Economy Packages • CCS new builds • Manufacturing - HFCs • Commercial shell • High penonshore wind • Nuclear • Commercial T8 lighting • 50 • Light Trucks Fuel Economy Packages • Low penonshore wind • Commercial water heaters • Residential NB HVAC • 0 • 0 • 0.05 • 0.10 • 0.15 • 0.20 • 0.25 • 0.30 • 0.35 • 0.40 • 0.45 • 0.50 • 0.55 • 0.60 • 0.65 • 0.70 • 0.75 • 0.80 • Volume • Gt/year • Commercial HVACequipment efficiency • Conversion efficiency improvements • -50 • Biomass cofiring • Biofuels Cellulosic • Med pen onshore wind • Coal-to-gas existing plants • Process improve-ment/new process • Controlsystems • -100 • Winter cover crops • Cars Hybridization • Residentialwater heaters • Afforestation - pastureland • Forest mgmt. - reforestation • -200 • Residentialretrofit HVAC • NG & Petroleum systems - CH4 • Forest mgmt. - active mgmt. • Combinedheat and power • -250 Source: Team analysis

  3. 8 2030 Clusters of GHG Abatement Potential in the Midwest GT CO2e • 0.13 • 0.07 • 0.18 • -31% • 0.16 • 0.18 • 2030 reference case emissions • Buildings & appliances • Transport • Industry • Carbon sinks* • Power • 2030 emissions after abatement * Includes abatement from the agricultural sector Source: U.S. EIA, EPA, USDA, Team analysis

  4. Midwest building opportunity profile - 2030 • Buildings • Cost • $2005/ton CO2e • 150 • Commercial electronics • Residential electronics • Non-refrigerator appliances • 100 • Commercial shell • Residential HVAC equipment efficiency • Commercial T8 lighting • 50 • Commercial water heaters • Residential NB HVAC • 0 • 0 • 0.05 • 0.10 • 0.15 • 0.20 • 0.25 • 0.30 • 0.35 • 0.40 • 0.45 • 0.50 • 0.55 • 0.60 • 0.65 • 0.70 • 0.75 • 0.80 • Volume • Gt/year • Commercial HVAC equipment efficiency • -50 • 18% of total opportunity: 132 Mt of abatement potential <$50 per ton CO2e • 83% of the volume is available at negative cost • 23% of U.S. homes and 25% of commercial floor space is located in the Midwest • -100 • Combined heat and power • -200 • Refrigerators • Commercial LED • Residential retrofit HVAC • Residential general use lighting • Residential water heaters • -250 • Control systems Source: Team analysis

  5. Midwest transport sector opportunity profile – 2030 • Transport • Cars Plug-In Hybridization • Cost • $2005/ton CO2e • 150 • Cars Fuel Economy Packages • 100 • Medium Trucks Fuel Economy Packages • Air Conditioning MVAC • Light Trucks Fuel Economy Packages • 50 • 0 • 0 • 0.05 • 0.10 • 0.15 • 0.20 • 0.25 • 0.30 • 0.35 • 0.40 • 0.45 • 0.50 • 0.55 • 0.60 • 0.65 • 0.70 • 0.75 • 0.80 • Volume • Gt/year • Heavy Trucks Fuel Economy Packages • Heavy Trucks Hybridization • -50 • Light Trucks Hybridization • Medium Trucks Hybridization • Cars Hybridization • Biofuels Cellulosic • -100 • Light Trucks Plug-In Hybridization • 70 Mt of abatement potential at <$50 per ton CO2e • Midwest has 23% of U.S. vehicle miles traveled • -200 • Air Transport • Light Trucks Dieselization • Cars Dieselization • -250 Source: Team analysis

  6. Midwest low-carbon power opportunity profile – 2030 • Power • Cost • $2005/ton CO2e • CCS rebuilds • Dedicated biomass • 150 • Offshore wind • High pen onshore wind • CCS new builds • 100 • Distributed PV • Nuclear • Low pen onshore wind • 50 • 0 • 0 • 0.05 • 0.10 • 0.15 • 0.20 • 0.25 • 0.30 • 0.35 • 0.40 • 0.45 • 0.50 • 0.55 • 0.60 • 0.65 • 0.70 • 0.75 • 0.80 • Volume • Gt/year • Small hydroelectric • Conversion efficiency improvements • -50 • Biomass cofiring • Med pen onshore wind • -100 • 24% of Midwest abatement potential: 177 Mt at <$50 per ton CO2e • CCS accounts for 54% of the potential • T&D loss reduction • -200 • Coal-to-gas existing plants • CCS retrofits • -250 Source: Team analysis

  7. Midwest incremental GHG abatement capital investment Real 2005 $ billions, cumulative through 2020 • Power • Transportation • Industry* - Infrastructure • Agriculture and forestry • Buildings and appliances • Industry – Energy • efficiency • Total investment • above reference case * Including waste Industry Source: Team Analysis

  8. Capital cost • O&M and fuel • T&D • Carbon • Traditional generation Relative economics of available energy efficiency and renewable technologies in the Midwest 2009 Nominal LCOE c/kWh 2012 Nominal LCOE c/kWh • EE • 2-6 • 2-6 • Biomass cofiring • 8 • 8 • Centralized wind • 11-16 • 11-16 • Nuclear • 11-15 • 11-15 • Dedicated biomass • 14-17 • 14-17 • Waste-to-energy • 17-18 • 17-18 • Distributed wind • 28-38 • 26-34 • Centralized solar PV • 32-48 • 28-45 • Distributed solar PV • 40 • 32 • SCPC • 15 • 15 • CCGT • 15 • 16 • Retail energy price • 7 - 11 • 8 - 12 SOURCE: EIA.; NEMS; Tax Foundation; McKinsey analysis

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