Climate Vision, Power Partners SM , & GHG Activities for Public Power

1. Climate Vision, Power PartnersSM,& GHG Activities for Public Power Daniel E. Klein Twenty-First Strategies, LLC McLean, VA 22101 dklein@21st-strategies.com March 2005

2. What we’ll cover today • Background on U.S. GHG efforts • Climate Vision • Power PartnersSM • Company actions • GHG accounting & Upcoming activities • What’s a Power PartnerSM to do?

3. Improve Efficiency Reduce Carbon Intensity • Renewables • Nuclear • Fuel Switching • Demand Side • Supply Side Technological Carbon Management Options Carbon emissions = $GDP X Btu/$GDP X carbon/Btu – sequestration Sequester Carbon • Capture & Store • Enhance Natural Sinks • All options needed to: • Maintain economic growth • Affordably meet energy demand • Address environmental objectives

4.    emissions time Improving GHG intensity is a key component of the U.S. strategy Over time, improving GHG intensity will: • Slow the rate of GHG growth • Stabilize GHG emissions • Reduce absolute emissions

5. Addressing Climate and Energy Securityin the Global Climate Change Initiative • On February 14, 2002, President Bush set a goal to reduce U.S. GHG emissions intensity by 2012 • “My administration is committed to cutting our nation’s greenhouse gas intensity ... by 18 percent over the next 10 years.” • GHG “intensity” will be measured in terms of GHG per unit of GDP • This goal is equivalent to ~500 million metric tons of cumulative carbon equivalent reductions from 2002 - 2012

6. Administration Launched Several Initiatives • Multi-sector voluntary programs • Transformational technology RD&D efforts on renewables, clean energy • Expansion of global outreach and partnerships • Support for green trading • Exploration of innovative policy instruments

7. Advancing R&D via partnerships • Power and petroleum: participating in FutureGen, an emissions-free coal-fired powerplant • Power and petroleum: participating in carbon sequestration R&D projects • Forest & paper industry: working with DOE on biomass gasification; industry initiating pilot projects • Auto and petroleum: participating in FreedomCAR and Hydrogen Fuel Initiative • Iron & steel: issued R&D solicitation and selected 7 “post-Kyoto” R&D concepts (total value: $2.5 million). AISI member companies will cost share • Chemicals: initiated Vision2020 Innovative Energy Systems Challenge; partnering with DOE

8. Climate Vision Program Launch • Climate VISION – VoluntaryInnovative Sector Initiatives:Opportunities Now • A part of GCCI, launched February 12, 2003 • Part of a continuum of short- mid-, and long-term approaches to address climate change • Nature of problem requires development and use of transformational technologies

9. Alliance of Automobile Manufacturers Aluminum Association American Chemistry Council American Forest & Paper Association American Iron & Steel Institute American Petroleum Institute Association of American Railroads The Business Roundtable International Magnesium Association National Mining Association Portland Cement Association Power Partners Semiconductor Industry Association Climate VISION Private-Sector Partners Each partner has committed to contribute to President’s GHG intensity goal.

10. Elements of Voluntary Programs • Commitments: Industries make meaningful commitments toward 18% intensity reduction goal and to report emissions in §1605(b) • Inventory: Partners develop and use tools to calculate, inventory, and report GHG emission reductions, avoidance, & sequestration • Solutions:Partners (industry, government) identify cost-effective GHG reductions for implementation • Technology:Companies develop strategies to speed R&D and commercial adoption of advanced technologies • Recognition:Government recognizes voluntary mitigation actions • Further reductions: Partners develop strategies across the economy to further reduce GHG emissions

11. Climate VISION Website www.climatevision.gov • Announced during COP-9 in December 2003 & received very positive reception • Provides resource for partners and an avenue to communicate with public on progress • Averaging 10,000+ “hits” per month

12. So … how is the U.S. doing so far? • Goal: 18% reduction in GHG intensity, 2002-12 • 18% implies average annual rate of ~1.7%/year • But BAU forecasts show ~14% improvement (~1.3%/year) • From 1990-2003, GHG intensity fell ~1.9%/year • First year: 2003 relative to 2002 (EIA data) • GHG emissions increased 0.7 percent • But $GDP grew 3.0 percent • So, GHG intensity fell 2.3 percent • Second year: 2004 relative to 2003 (very prel.) • GHG emissions increased ~1.4 percent • But $GDP grew ~4.4 percent • So, GHG intensity fell ~3.0 percent

13. Power PartnersSM: Meeting the Challenge • U.S. electric power sector recognized early on as a world leader in voluntary approaches for reducing, avoiding or sequestering GHG emissions • Power industry came together in the 1990s • Successfully undertook voluntary climate initiatives through the Climate Challenge program • First major industry to do so • 281 MMT CO2 of reported reductions in 2002. • But … does this reputation for “early action” still hold?

14. Power PartnersSM: Meeting the Challenge • In 2002, electric power sector created Power PartnersSM • Voluntary partnership with Federal government • Address the President’s voluntary climate initiative • Designed to deliver results in short, medium and long term • Participating in Climate VISION & Climate Leaders • Industries/companies commit to reduce GHG intensity • Power sector: Equivalent of 3-5% reduction in emissions intensity (CO2/MWh) by 2012

15. Power PartnersSMParticipants • American Public Power Association (APPA) • Edison Electric Institute (EEI) • Electric Power Supply Association (EPSA) • Large Public Power Council (LPPC) • National Rural Electric Cooperative Association (NRECA) • Nuclear Energy Institute (NEI) • Tennessee Valley Authority (TVA)

16. Power SectorGoal • Achieve equivalent of 3-5% reduction in GHG intensity by 2012 through credible, verifiable reductions in GHG emissions or offsets • Collaborative, industry-wide initiatives • Individual actions that best suit company capabilities, resources and business strategies • Cross-sector programs and outreach • Signed Umbrella MOU with DOE • December 13, 2004 • Highlights roles of partners in achieving voluntary reductions

17. Power Industry Initiatives - Update • PowerTree Carbon Co. – New reforestation effort • Sponsored by 25 U.S. power generators • Committed over $3 million for up to six projects – will remove and store over 1.5 million tons of CO2 • Program formally announced last year • C2P2 – Coal Combustion Products Partnership • Increase CCP use from approx. 14 million tons to 20 million tons of CO2 annually by 2010 • Increase utilization rate from current 32% to 45% by 2008 • 40 utilities have become C2P2 “Champions”

18. Power Industry Initiatives - Update • IPP – International Power Partnerships program • Work with DOE and State Dept. to identify GHG reduction opportunities overseas • Promote use of renewable energy and clean coal technologies • Other Efforts • Pilot-Scale Test Centers for Engineering, Economic and Environmental Evaluation of CO2 Capture and Containment • Coal Fleet for Tomorrow

19. Cross-Sector Programs & Outreach • Clean Coal Technologies • IGCC – AEP, Cinergy, Southern, TECO, FirstEnergy • Clean Coal Technologies Conference • FutureGen • Geologic Carbon Sequestration: Regional Partnerships • Companies teaming up with federal government • Determine most suitable technologies, infrastructure needs

20. Cross-Sector Programs & Outreach • Utility Hybrid Truck Initiative • Initiative for New Homes • Publish articles on ways to reduce energy use, improve energy efficiency • Wise Use Website - help customers reduce energy use

21. So … how’s the Electric Power Sector doing so far? Data compiled by EOP Group.

22. So … how’s the Electric Power Sector doing so far? • Goal: 3-5% reduction in GHG intensity, 2002-2012 • First year: 2003 relative to 2002 (EIA data) • CO2 emissions increased ~1.0 percent • But generation grew only 0.6 percent • So, CO2 intensity increased (worsened) ~0.4 percent • But are EIA’s 2003 estimates off? • CO2 emissions increased ~1.8 percent, based on fuel consumption • So if generation grew only 0.6 percent • Then GHG intensity increased (worsened) ~1.2 percent • How does 2004 look? (very preliminary) • CO2 emissions increased ~1.0 percent, based on fuel consumption • Generation grew ~1.9 percent • Then CO2 intensity declined (improved) ~0.9 percent

23. Types of Actions for Electric Power Companies • Company-specific GHG Reduction Commitments • Renewable Energy & Green Power Programs • Sequestration Efforts • Other Efforts and Programs

24. Company Actions - Update • GHG Reduction Commitments • AEP • Cinergy • FPL Group • PSEG • TECO • Green Mt. Power • Entergy • Xcel Energy • Austin Energy • SMUD • Seattle City Light

25. Company Actions - Update • Renewable Energy & Green Power Programs • Solar • Arizona Public Service, Pugent Sound • Wind • FPL, Mid-American, Xcel Energy, Exelon • Biomass • AEP, Cinergy, Southern • Green Power/Pricing Programs • PacifiCorp • Public Power and Green Mountain Energy

26. Company Actions - Update • Sequestration Efforts • APPA TREE POWER Program • Southern Longleaf Legacy Program • Entergy’s Lower Mississippi River Valley Sequestration Project • PacifiCorp • AEP’s Geologic Sequestration Initiative with DOE

27. Company Actions - Update • Other Efforts & Programs • Energy efficiency programs • SF6 Programs • Chicago Climate Exchange

28. Upcoming Activities • Release of Revised §1605(b) Reporting Guidelines • May have impact on voluntary efforts • Complete Power PartnersSM Resource Guide • Help companies identify actions to reduce emissions • Continue and Expand GHG Reduction Efforts

29. Release of Revised §1605(b)GHG Reporting Guidelines • Status of §1605(b) revisions • Feb. 2002: GCCI to “Substantially Improve the Emission Reduction Registry” • November 26, 2003, DOE released proposed revised General Guidelines • Jan. 2004: DOE Public Workshop • “Early 2005”: (1) further revision of the General Guidelines and (2) proposed Technical Guidelines • Will §1605(b) help or hinder its purposes? • Feb. 2002: “These improvements will enhance measurement accuracy, reliability and verifiability, working with and taking into account emerging domestic and international approaches.” • But is the WRI/WBCSD GHG Protocol becoming the new standard?

30. Complete the Power PartnersSM Resource Guide http://carbonsequestration.us/PPRG/

31. Continue and Expand Power CompanyGHG Reduction Efforts • Understand your GHG footprint and risks • Identify GHG reductions already under way • Assess options for further GHG reductions • Costs • Effectiveness • Ancillary impacts • Set a GHG target? • Absolute level of emissions? • GHG emissions intensity? • Develop capabilities for GHG reporting

32. Questions? Dan Klein Twenty-First Strategies, LLC 6595 Terri Knoll Ct. McLean, VA 22101 703-893-8333 dklein@21st-strategies.com