Key Challenges Facing the Electricity Sector

1. Key Challenges Facing the Electricity Sector National Association of Regulatory Utility Commissioners 2008 Summer Meeting Portland, OR Revis James Director, Energy Technology Assessment Center Electric Power Research Institute

2. Key Points • Technology trends and mix are driven by long-term growth in electricity demand and expected CO2 emissions constraints. • The scale of technology expansion and transformation will be huge. • Expansion of major technologies will be necessary. • A diverse, full technology portfolio • lowers GDP impact of CO2 emissions constraints • creates long-term, growing need for workforce to support deployment

3. The Scale of Electricity Demand • Now: 2007 U.S. electricity consumption ~ 3800 TWh • Future (EIA 2008 Annual Energy Outlook) • Final report projects 1046 TWh (29%) increase in U.S. electricity consumption from 2006 - 2030. • About same as addition of new load equivalent to 2006 consumption of Texas, California, Florida, Ohio, Pennsylvania

4. Total 2006 emissions for all U.S. electric utility companies ~ 2.3B MMt CO2 The Scale of Emissions Reductions Source: World Resources Institute, “COMPARISON OF LEGISLATIVE CLIMATE CHANGE TARGETS”, June 18, 2008, www.wri.org/usclimatetargets

5. Key …including uncommitted resources When resources drop below target Capacity Reserve Margins are Declining(2007 NERC Reliability Study) New England2009/2009 MRO2010/2010 New York2011/2016+ WECC Canada2007/2009(Winter) RFC2012/2013 Rocky Mtn.2009/2011 SPP2015/2016+ ERCOT2009/2016+ California2009/2011 AZ/NM/SNV2009/2011

6. Technical Potential for CO2 Reductions Achieving all targets is very aggressive, but potentially feasible. AEO2008*(Ref) *Energy Information Administration (EIA) Annual Energy Outlook (AEO)

7. The Cost of CO2 Emissions Constraints(2000 – 2050)

8. 2000 2010 2020 2030 2040 2050 Timeframes for Key Technologies Meet Demand via Natural Gas Emissions Reductions via Renewables and Efficiency Nuclear Expands Transformation of Coal Fleet: higher efficiency new plants + CCS, Possible CCS retrofits to existing plants Electric Transportation

9. Preliminary Construction Manpower Needs(EIA 2008 AEO Capacity Projections, EPRI 2007 TAG Data)

10. Conclusions • The scale of technology expansion and transformation will be huge. • Under a CO2 emissions reduction policy, electricity production costs will increase and Gross Domestic Product (GDP) will be less. • A diverse, full technology portfolio • lowers GDP impact of CO2 emissions constraints • long-term, growing need for workforce to support deployment • Decarbonized electricity will play a vital role • Major expansions in all of the major technology areas will be needed. • Considerable manpower will be needed to suppor these expansions.

11. Image courtesy of NASA Visible Earth

12. Back-up Slides

13. Contrasting Technology Strategies +260% +45% *Economy-wide CO2 emissions capped at 2010 levels until 2020 and then reduced at 3%/yr

14. Full Technology Portfolio Reduces Costs of a CO2 Emissions Reduction Policy by 60% 0.0 Cost of Policy Full Portfolio + PHEV Only Limited Portfolio + CCS Only + Nuclear Only + Renewables Only + Efficiency Only -0.5 Change in GDP Discounted Through 2050 ($Trillions) Reduction in Policy Cost with Advanced Technology $1 Trillion -1.0 -1.5 Value of R&D Investment

15. 180 4.0 160 3.5 140 3.0 120 2.5 100 2.0 80 1.5 60 1.0 40 0.5 20 0 0.0 2000 2010 2020 2030 2040 2050 Wholesale Electricity Price In the Full Portfolio the price of electricity has a low CO2 cost component and increases less Limited Index Relative to Year 2000 $/MWh* Full Year *Real (inflation-adjusted) 2000$