The Power to Reduce CO 2 Emissions The Full Portfolio WSPE Discovery Conference

1. The Power to Reduce CO2 EmissionsThe Full PortfolioWSPE Discovery Conference April 23, 2009 Dan Bartel, EPRI Senior Account Executive

2. About EPRI Together…Shaping the Future of Electricity • Founded in 1973 as an independent, nonprofit center for public interest energy and environmental research. • Objective, tax-exempt, collaborative electricity research organization • Science and technology focus--development, integration, demonstration and applications • Broad technology portfolio ranging from near-term solutions to long-term strategic research

3. Large and Successful R&D Collaboration • More than 450 participants in over 40 countries • Over 90% of North American electricity generated • 66 technical programs • Generation • Power Delivery and Utilization • Nuclear • Environment • Technology Innovation • 1600+ R&D projects annually • 10 to 1 average funding leverage • Research is directed to the public benefit • Limited regulatory, judicial and legislative participation

4. Basic Research & Development Collaborative Technology Development Integration Application Technology Commercialization National Laboratories Universities EPRI Suppliers Vendors EPRI’s Role Depends Upon The Specific Technology or Discipline

5. The Bottom Line – It’s Not a Silver Bullet, It’s Silver Buckshot: Using Technology to Reduce Carbon Emissions • There is substantial potential for reducing U.S. electricity sector CO2 emissions. • Decarbonizing the electricity sector will be expensive, but availability of a full portfolio of low-cost, low-carbon technologies can substantially reduce costs to the nation’s economy. • No one technology will be a silver bullet – a portfolio of technologies will be needed. • A low carbon-emitting electric sector is critical to decarbonizing the rest of the U.S. economy at a manageable cost. • Much of the needed technology isn’t available yet – substantial R&D, demonstration is required. • The economic and environmental benefits of a full portfolio of low-emitting technologies far outweigh the costs of RD&D investment.

6. Assess the Technical Potential for Reducing Electricity Sector Emissions • Aggressive, successful RD&D • 2030 horizon • Compare to EIA 2007-2008 • No economic, policy barriers to deployment PRISM • Compare limited and full technology portfolios • Full portfolio approximates PRISM assumptions • 2050 horizon • Generic CO2 emissions reductions policies • Lowest-cost technology portfolio that meets policy • Inflation adjusted, constant 2000 $ Economic Analysis (MERGE) Technology Pathways • 2030 horizon • Use existing technology roadmaps where possible • Focus on 4 major technology conclusions from PRISM • Timing and sequence of major RD&D activities • Preliminary estimate of RD&D funding needs

7. EPRI PRISM (2007)CO2 Reductions … Technical Potential* * Achieving all targets is very aggressive, but potentially feasible. EIA Base Case 2007

8. CO2 Reductions … Technical Potential from Electricity Sector Projected CO2 Emissions in 2030 (due to economic and population growth) CO2 Emissions Today Efficiency in Homes and Business Wind Power Nuclear Power Advanced Coal CO2 Capture & Storage Solar and PHEVs On a Path to De-carbonize the Electricity Sector

9. EPRI Prism – 2008 EIA with Energy Bill • Higher fuel prices • Lower GDP, load growth rate • More renewables, nuclear EIA Base Case 2008 EIA Base Case 2007 Achieving all targets is very aggressive, but potentially feasible

10. Generation Mix 2007 U.S. Electricity Generation Mix Non-Hydro Renewables, 2% Conventional Hydropower, 7% EPRI “Prism” Projected 2030 Generation Mix Nuclear, 21% Non-Hydro Renewables, 9% Conventional Hydropower 5% Coal w/o CCS 39% Natural Gas, 18% Petroleum, 1% Coal, 51% EIA 2008 with Energy Bill – Projection for 2030 Coal, 58% Non-Hydro Renewables, 5% Conventional Hydropower, 6% Nuclear 29% Nuclear, 19% Natural Gas 5% Advanced Coal w/CCS, 13% Natural Gas, 11% Petroleum, 1%

11. Key Technology Challenges • Smart grids and communications infrastructures to enable end-use efficiency and demand response, distributed generation, and PHEVs. • A grid infrastructure with the capacity and reliability to operate with 20-30% intermittent renewables in specific regions. • Significant expansion of nuclear energy enabled by continued safe and economic operation of existing nuclear fleet; and a viable strategy for managing spent fuel. • Commercial-scale coal-based generation units operating with 90+% CO2 capture and storage in a variety of geologies. Advanced Electricity Technologies needed to achieve “Prism” profile Achieving “Prism” profile will require aggressive public and private sector RD&D programs and accelerated commercial deployment

12. Evaluate the Economic Impact of Developing Advanced Technologies to Reduce Emissions • Aggressive, successful RD&D • 2030 horizon • Compare to EIA 2007 • No economic, policy barriers to deployment PRISM • Compare limited and full technology portfolios • Full portfolio approximates PRISM assumptions • 2050 horizon • Generic CO2 emissions reductions policies • Lowest-cost technology portfolio that meets policy • Inflation adjusted, constant 2000 $ Economic Analysis (MERGE) Technology Pathways • 2030 horizon • Use existing technology roadmaps where possible • Focus on 4 major technology conclusions from PRISM • Timing and sequence of major RD&D activities • Preliminary estimate of RD&D funding needs

13. MERGE Model Overview • A Model for Evaluating Regional and Global Effects of GHG reduction policies • Global intertemporal optimization model • Nine regions (USA, Western Europe, China, India, etc.) • Each country or group of countries maximizes its own welfare • Top-down model of economic growth and energy use • Process model of energy sector technology: • Electric Generation • Non-Electric Energy • Capable of representing a variety of greenhouse gas control scenarios • Captures economy-wide impact of carbon policy One of three models used by US Climate Change Science Program and in many other international and domestic studies

14. Assumed U.S. Economy-Wide CO2 Constraint 9 Starting Point is Current Intensity Target 8 7 2010 Cap to 2020 6 5 Billion Tons CO2 per year 4 3% decline 3 2 1 0 2000 2010 2020 2030 2040 2050 • PRISM electric sector CO2 profile most closely modeled by economy-wide constraint which: • Caps emissions at 2010 levels until 2020 • Requires 3% decline beginning in 2020

15. Electricity Technology Scenarios

16. U.S. Electric Generation – Full Portfolio The vast majority of electricity supply is CO2-free Wind Hydro Gas and non-captured coal are the only supply options paying a CO2 cost Nuclear Gas Public Policy (RPS) can modify this economic allocation Coal with CCS Coal

17. With a less de-carbonized supply, electricity load must decline to meet the CO2 emissions target Gas (with half the CO2 of coal) pays a significant CO2 cost U.S. Electric Generation – Limited Portfolio Biomass Wind Hydro Nuclear Gas Coal

18. CO2 Emission Cost – Economy Wide 350 300 250 200 150 100 50 0 2000 2010 2020 2030 2040 2050 With a de-carbonized electricity supply, other parts of the economy pay a CO2 cost… not the electricity sector $/ton CO2* Limited Full Year *Real (inflation-adjusted) 2000$

19. CO2 Emission Cost – Economy Wide 350 300 250 200 150 100 50 0 2000 2010 2020 2030 2040 2050 With a less de-carbonized supply, the electricity sector pays a significant CO2 cost…along with other sectors $/ton CO2* Limited Full Year *Real (inflation-adjusted) 2000$

20. Wholesale Electricity Price 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 In the Full Portfolio the price of electricity has a low CO2 cost component and increases less Limited Index Relative to Year 2000 $/MWh* Full Year *Real (inflation-adjusted) 2000$

21. Increase in Real Electricity Prices…2000 to 2050 +260% +45% Both Scenarios meet the same economy-wide CO2 Cap* *Economy-wide CO2 emissions capped at 2010 levels until 2020 and then reduced at 3%/yr

22. With a Limited Technology Portfolio, Major Increases in Natural Gas Consumption and Price

23. 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

24. $1,000B $30B Research, Development and Demonstration is a good investment!!! Avoided Cost to U.S. Economy (2000-2050, present value in 2000 $) RD&D Investment (2005-2030, present value in 2000 $)

25. Summary of Key Messages From MERGE • Very expensive without new technology • Much less expensive with new technology • Economic benefits much larger than cost of R&D • New technology accelerates electrification

26. What Has to be Done to Develop and Deploy the Needed Technologies? • Aggressive, successful RD&D • 2030 horizon • Compare to EIA 2007 • No economic, policy barriers to deployment PRISM • Compare limited and full technology portfolios • Full portfolio approximates PRISM assumptions • 2050 horizon • Generic CO2 emissions reductions policies • Lowest-cost technology portfolio that meets policy • Inflation adjusted, constant 2000 $ Economic Analysis (MERGE) Technology Pathways • 2030 horizon • Use existing technology roadmaps where possible • Focus on 4 major technology conclusions from PRISM • Timing and sequence of major RD&D activities • Preliminary estimate of RD&D funding needs

27. Transition to Low-Emissions Technologies • Enabling Efficiency, PHEVs, DER via the Smart Distribution Grid • Enabling Intermittent Renewables via Advanced Transmission Grids • Expanded Advanced Light Water Reactor Deployment • Advanced Coal Plants with CO2 Capture and Storage

28. Analysis to Action

29. Building for the FutureEnabling Efficiency, PHEVs, DER via the Smart Distribution Grid Intelligent devices and automatic energy management widespread. Major penetration of PHEVs into new light vehicle market. Deployment of Smart Distribution grids. Smart Distribution System Demonstrations

30. Building for the FutureEnabling Intermittent Renewables viaAdvanced Transmission Grids Intermittent renewables could provide as much as 20-30% of generation in some areas. Deployment ofadvanced transmission grid technologies. Concentrated Solar Power Plant (CSP) Advanced 350 MW CAES Demonstration

31. Building for the FutureExpanded Advanced Light Water Reactor Deployment Existing nuclear plant licenses extended to 80 years. First new nuclear plants deployed ALWR deployment. All existingnuclear plant licenses extended to 60 years.

32. Building for the FutureAdvanced Coal Plants withCO2 Capture and Storage Potential CO2 capture retrofits? All new coal plants capture 90% of CO2 PotentialCO2 capture forNatural Gas Combined Cycle plants? Commercial availability of CO2 storage. UltraGen I—Advanced Pulverized Coal Plant (with CO2 Capture) CO2 Storage Demonstrations CO2 Capture Demonstrations

33. The Full Portfolio: Lower CO2, Lower Prices +260% +45% *Economy-wide CO2 emissions capped at 2010 levels until 2020 and then reduced at 3%/yr

34. The Bottom Line - It’s Not a Silver Bullet, It’s Silver Buckshot: Using Technology to Reduce Carbon Emissions • There is substantial potential for reducing U.S. electricity sector CO2 emissions. • Decarbonizing the electricity sector will be expensive, but availability of a full portfolio of low-cost, low-carbon technologies can substantially reduce costs to the nation’s economy. • No one technology will be a silver bullet – a portfolio of technologies will be needed. • A low carbon-emitting electric sector is critical to decarbonizing the rest of the U.S. economy at a manageable cost. • Much of the needed technology isn’t available yet – substantial R&D, demonstration is required. • The economic and environmental benefits of a full portfolio of low-emitting technologies far outweigh the costs of RD&D investment.

35. Image courtesy of NASA Visible Earth