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IPED COAL POWER CONFERENCE. The Coal Rush Revisited:. An Economic Overview of the Continued Interest in the Power Industry’s ‘Old Stand-By ’. presented by. January 18-19, 2007 St. Petersburg, FL. Nicholas P. Guarriello. R. W. Beck, Inc. Coal Today. Total 2005 Generating Capacity

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  1. IPED COAL POWER CONFERENCE The Coal Rush Revisited: An Economic Overview of the Continued Interest in the Power Industry’s ‘Old Stand-By’ presented by January 18-19, 2007 St. Petersburg, FL Nicholas P. Guarriello R. W. Beck, Inc.

  2. Coal Today Total 2005 Generating Capacity • 988,000 MW • 32% Coal* • 10% Nuclear • 41% Gas • 13% Renewables • 4% Oil Natural Gas(41%) Coal (32%) Renewables(13%) Nuclear(10%) Oil(4%) * More than 50% of electricity consumed Source: Energy Information Administration

  3. The Aging Coal Fleet 100% 98% 88% 75% 71% 50% 52% 29% 25% 0% >10 Years Old >20 YearsOld >30 Years Old >40 Years Old >50 Years Old Source: Energy Information Administration

  4. Coal’s Future Nuclear(2%) Renewables(9%) Generating Capacity Additions 2005-2025 • Total: 246,000 MW • 42% Coal (102,000 MW) • 47% Natural Gas • 9% Renewables • 2% Nuclear Natural Gas(47%) Coal (42%) Source: Energy Information Administration

  5. Energy Needs Average Annual Percent Growth Rate 2004-2025: Commercial 2.2 Residential 1.6 Industrial 1.0 Total 1.6 Retail Electricity Sales by Sector1970 – 2025 (billion kilowatt hours) History Projections 2,500 Commercial 2,000 Residential 1,500 Industrial Electric Sales (TWh) 1,000 500 0 1970 2005 2025 Source: Energy Information Administration

  6. Coal’s Drivers • High Natural Gas Costs • Security • Abundant • “Made in the USA” • 2005 EPACT Conclusion: Coal will remain 50% of the energy mix

  7. Low Cost Electricity From CoalOver 50% of the Electricity Comes from Coal 10.57¢3% 5.87¢10% 5.92¢94% 6.72¢ 64% 13.95¢17% 6.61¢65% 6.34¢9% 7.48¢70% 5.12¢0% 6.60¢44% 7.23¢61% 5.16¢96% NH 12.53¢ 22% RI 11.97¢ 0% CT 12.06¢ 14% NJ 10.89¢ 16% MA 12.18¢ 23% VT 10.95¢ 0% DE 7.76¢ 54% MD 8.13¢ 56% 8.27¢56% 6.69¢85% 5.87¢69% 7.08¢92% 9.02¢51% 5.88¢94% 6.95¢47% 5.15¢98% 5.92¢94% 6.64¢50% 7.64¢ 78% 11.63¢1% 6.55¢75% 6.13¢85% 5.01¢ 92% 7.19¢58% 6.31¢ 60% 6.85¢61% 6.72¢ 40% 6.30¢50% 7.79¢42% 7.51¢88% 7.43¢63% 6.46¢56% 7.54¢44% 9.14¢39% 8.03¢ 26% 11.72¢8% 8.76¢ 31% 5.01-6.13 6.30-6.72 6.85-7.54 7.64-10.89 10.95-18.33 18.33¢15% ¢ = average retail price per kilowatt hour for 2005 % = percent of total generation from coal for 2000 Source: Energy Information Administration

  8. Fuel Prices to Electricity Generators Projection Actual 9 8 7 Natural Gas 6 5 2004 $/MMBtu* 4 3 Coal 2 Nuclear 1 1995 2000 2004 2010 2015 2020 2025 Source: Energy Information Administration * Includes average cost of transportation

  9. Levelized Cost for New Power Plants in 2012 Fixed Cost Variable Cost 70.00 56.39 60.00 55.78 50.75 50.00 17.03 20.49 40.00 42.76 2005$/MWh 30.00 20.00 39.36 30.25 10.00 13.01 Coal CC IGCC Based on projected capital costs reported by EIA increased by 20% and fuel prices and O&M costs reported by EIA Source: R. W. Beck, Inc.

  10. Levelized Cost for New Power Plants in 2012Including the Cost of CO2 Emissions* Potential CO2 Costs Fixed Cost Variable Cost 70.00 62.10 59.22 57.14 60.00 5.71 3.44 6.40 50.00 17.03 20.49 40.00 42.76 2005$/MWh 30.00 20.00 39.36 30.25 10.00 13.01 Coal CC IGCC Based on projected capital costs reported by EIA increased by 20% and fuel prices and O&M costs reported by EIA * Cost of CO2 emissions at $7 per ton in 2010 – Source: National Commission on Energy Policy Source: R. W. Beck, Inc.

  11. Risk ProfileReflects Fuel Price Volatility 160 Combined Cycle Range 140 Coal Unit Range 106.50 120 100 Combined Cycle Mean 80 Total Power Costs ($/MWh) 70.22 60 60.41 49.41 40 CoalUnitMean 20 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: R. W. Beck, Inc.

  12. Risk ProfileReflects Fuel Price and Emissions Volatility 160 Combined Cycle Range 140 Coal Unit Range 115.19 120 100 Combined Cycle Mean 86.34 80 Total Power Costs ($/MWh) 60 60.36 49.41 CoalUnitMean 40 20 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: R. W. Beck, Inc.

  13. U.S. Production vs. Consumption 125% Coal 100% Natural Gas 75% Prod. Btu (% of Cons. Btu) 50% Petroleum 25% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2004 Note: Natural gas statistics excludes natural gas plant liquids. Source: Energy Information Administration

  14. Total U.S. Coal Consumption for Power and U.S. Criteria Emissions, 1970-2001 250 200 Coal Consumption 1970 Level Equals 100 150 100 Criteria Emissions 50 1970 2003 Source: Energy Information Administration

  15. Global Fossil Fuels Outlook • 85% of incremental energy from fossil fuels • Carbon emissions to grow by 60% • India, China will account for 67% of the total increase in coal use worldwide

  16. Coal Challenges • Transmission • Transportation • Technology • Emissions

  17. Currently Proposed, Planned & Under Construction Coal Units New Entrants - Type Co-op Industry IOU Municipal Other Unit Type CFB IGCC PC Source: Global Energy Decisions

  18. Currently Proposed, Planned & Under Construction Coal Units by Municipals/Cooperatives New Entrants - Type Co-op Municipal Unit Type CFB PC Source: Global Energy Decisions

  19. IPED COAL POWER CONFERENCE Questions Nicholas P. Guarriello R. W. Beck, Inc. nguarriello@rwbeck.com (407) 422-4911

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