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Coping with Competing Energy Strategy Directions

Coping with Competing Energy Strategy Directions. Washington Coal Club May 14, 2008 Carl O. Bauer, Director. National Energy Technology Laboratory. Office of Fossil Energy. Energy Demand 2030. Energy Demand Today. 118 QBtu / Year 82% Fossil Energy. 101 QBtu / Year 85% Fossil Energy.

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Coping with Competing Energy Strategy Directions

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  1. Coping with Competing Energy Strategy Directions Washington Coal Club May 14, 2008 Carl O. Bauer, Director National Energy Technology Laboratory Office of Fossil Energy

  2. Energy Demand 2030 Energy Demand Today 118 QBtu / Year82% Fossil Energy 101 QBtu / Year85% Fossil Energy + 16% United States 703 QBtu / Year 82% Fossil Energy 453 QBtu / Year 81% Fossil Energy + 55% World Fossil Energy Will Continue to Dominate U.S. data from EIA, Annual Energy Outlook 2008 revision; world data from IEA, World Energy Outlook 2007

  3. Energy Strategy Complexity Aiming for Balanced Solutions

  4. South African Historical Demand Overview Reserve margin 25% Reserve margin 25% Reserve margin 20% Reserve margin 16% Reserve margin 8–10% 40,000 Peak Demand & Capacity (MW) 30,000 20,000 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2008 2007 1988 2004 2005 2006 Year Peak Demand Installed Capacity (MW Sent-out) Expected Peak Demand Operational Capacity (MW Sent-out) Reserve Margin Aspiration = 15% “Update on State of Power Security in South Africa”Jacob Marolga, Chief Executive, Eskom, February 19, 2008

  5. South African Grid Overwhelmed by Demand The Wall Street Journal, April 17, 2008

  6. NERC 2007 Long-Term Reliability Assessment Require 135 GW by 2016 “Areas of the most concern include WECC-Canada, California, Rocky Mountain States, New England, Texas, Southwest, and the Midwest . . .”  NERC LTRA 2007 NERC 2007 Long-Term Reliability Assessment

  7. +7 GW by 2016 (EIA) U.S. Peak Summer Generation Capacity NERC and AEO’08 Capacity Outlook +128 GW additional required to maintain capacity margins (NERC) 979 GW - 41 GW oil and gas steam boilers Capacity Growth Forecasts Vary Substantially Due to Assumptions for Annual Electricity Demand Growth Rates, GDP Growth, and Oil Price EIA, Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment

  8. NERC growth Declining Total Electricity Generation Growth Rate Assumptions 1.6%/yr AEO’05 3.1%/yr GDP growth 1.5%/yr 1.9%/yr growth AEO’08 revision 2.4%/yr GDP growth 1.1%/yr growth Reduced 2025 GDP by $2.7 trillion (16%) (2006 dollars) Reduction of 36 BkWh/yr growth equates to reduced need for 4,900 MW of new generation each year (@ 85% c.f.) Declining Growth in Long-Term Electricity Demand and U.S. GDP; NERC Estimates Tied to Higher Growth Rate EIA Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment

  9. Total Electricity Generation Growth Rates AEO’08 2.2%/yr 20 yr 1.7%/yr 6 yr 1.5%/yr NERC 1.1%/yr EIA Forecast for Electricity Generation Growth Well Below Recent Averages Electricity generation: EIA,19491994: Annual Energy Review 2006; 19952006: Electric Power Annual 2006; 20072030: Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment

  10. Net Capacity Changes Removed or Added Opportunities 1st Quarter 2008 95% of MWs removed represent “Announced” projects Wygen II 90 MW Now Operational Removed Capacity Total Net Reductions 614 MW (-0.9%) for 1th Quarter 2008 Source: Global Energy Decisions – Velocity Suite (April 2, 2008)

  11. Coal-Fired Development Activity vs. EIA AEO’08 Trendline ≈ 20 GW through 2016 AEO’08 reference case 17.9 GW by 2016 Low forecasts for new capacity may not reflect sufficient market promise to attract new skilled human resources to the industry Trendline 5-year actual Actual Installation Trend and EIA AEO’08 Reference Forecast Similar; A Significant Surplus of Developments Exists Above EIA’s Forecast Demand EIA, Annual Energy Outlook 2008 revision; Global Energy Decisions – Velocity Suite 12/31/07

  12. Can Natural Gas Supply Support a “Dash to Gas”? Total generation AEO’05 Total generation AEO’08 2.3 Tcf Renewable AEO’08 Nuclear AEO’08 Oil and Natural Gas AEO’08 1.4 Tcf Generation from coal if no new plants are built Coal AEO’08 3.7 Tcf of Potential Natural Gas Demand Growth with Declining North American Supply EIA AEO 2008 (rev.) and AEO 2005; Assumes NG-fired combined cycle plants operating at 50% efficiency to fill generation gaps

  13. AEO’01 AEO’03 AEO’02 AEO’04 AEO’05 Tcf / Year AEO’06 AEO’07 AEO’08 Gradual Decline to 20 Tcf without LNG AEO’08no LNG Total Natural Gas Supply to United States (Including Liquid Natural Gas) Increased Use of Natural Gas in Electricity Will Require LNG; North American Natural Gas Supply for U.S. Trending Down Annual Energy Outlook 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008 March revision reference cases

  14. Wall Street Journal on LNG (April 18, 2008) “Overall, U.S. imports of LNG have slid over the past nine months to a five-year low, and natural-gas inventories are running relatively low . . . If the U.S. is unable to attract LNG supply this summer, prices could spike up sharply within a few months if a hot summer were to reduce the ability to build a cushion of gas going into next winter.” “Meantime, as Asian buyers grab more LNG from the Atlantic basin, U.S. prices, though at 27-month highs, still look cheap.” Wall Street Journal, Surge in Natural-Gas Price Stoked by New Global Trade, Page1, April 18, 2008

  15. $30/t CO2 Tax and $14/MMBtu Natural Gas(Effecton Current Average Generating Costs, by Region) 249% higher increase 31% higher price increase 13% average increase 61% average increase $42.84 average increase 148% average increase $13.15 average increase 148% average increase $32.73 average increase $32.73 average increase Cost per MWh Due to Natural Gas Price Impacts, Gas Intensive Regions Will See Higher Real Electricity Cost Impact From Carbon Taxes

  16. Summary U.S. power generation industry is at a critical juncture, with social pressures and pending legislation demanding massive changes Competing demands for reliable, low-cost energy and climate change mitigation appear incongruent Our Nation’s liquid fuel dependence on foreign resources continues to grow Uncertainty of regulatory outcomes and rising costs impact industry’s willingness to commit capital investment, endangering near-term production capacity The United States must foster new processes that address conflicting energy objectives simultaneously

  17. For Additional Information Office of Fossil Energywww.fe.doe.gov Carl Bauer 412-386-6122 carl.bauer@netl.doe.gov NETLwww.netl.doe.gov

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