Looking Towards the Future: Envisioning the NEW Electricity Industry

Transcription

1 UtiliPoint International, Inc. Fourth Annual North American Conference How Smart is Your Utility? Looking Towards the Future: Envisioning the NEW Electricity Industry Chairman Barry T. Smitherman Public Utility Commission of Texas

2 Energy consumption in the modern world means fossil fuel Distribution of Global Energy Consumption by Fuel Type (energy equivalent basis) 100% 90% hydroelectric nuclear 80% coal 70% 60% 50% natural gas 40% 30% 20% oil 10% 0% 2 2

3 The Most Important Plot for the 21 st Century Million Tonnes Oil Equivalent, Millions People World Population Fossil Fuel Consumption World GDP Per Capita $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Source: Bjørn Lomborg, The Skeptical Environmentalist, British Petroleum, Statistical Review of World Energy 2008, and CIA, The 2008 World Factbook. $0 World GDP per capita (1990 $) 3 3

4 Quality of life is strongly correlated with electricity consumption $60,000 $50,000 United States Germany GDP (per capita) $40,000 $30,000 $20,000 India Mexico United Kingdom Japan South Korea Australia Canada $10,000 $0 Russia China 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Electricity Consumption (kwh per capita) 4 Source: CIA, The 2008 World Factbook. 4

5 Population Growth from ,600,000 1,400,000 1,200,000 1,000,000 Population (000) 800, , , ,000 0 India China European Union United States Pakistan Indonesia Nigeria Bangladesh Brazil Dem. Rep. of Congo Ethiopia Year Source: CIA World Factbook,

6 Texas Population: ,000,000 50,000,000 40,000,000 Zero Net Migration Population 30,000,000 Net Migration is Half of ,000,000 Net Migration Equal to ,000, Source: Texas State Data Center and Office of the State Demographer, Texas Population Estimates and Projections Program,

7 Three Legs of Resource Adequacy Consumer tools Advanced meters allow for demand response Energy Efficiency New Generation Look at resource mix to meet anticipated load growth All options must remain on the table, including cleaner coal and nuclear More renewable generation: wind, solar, biomass, etc. Transmission and Market Design New transmission for CREZ ERCOT transmission study identifies $3 billion of non-crez needs Quocunque Jeceris Stabit 'Whichever way you throw me, I stand' 7 7

8 Within Texas, the ERCOT grid serves 85% of the load, and covers 75% of the state. ERCOT is connected to the Eastern Interconnect and Mexico by DC ties. SPP North Tie 200 MW ERCOT East Tie 600 MW SPP WECC SERC ERCOT Electric Reliability Council of Texas SERC - Southeastern Electric Reliability Council SPP Southwest Power Pool WECC Western Electricity Coordinating Council Eagle Pass 36 MVA Laredo 100 MW McAllen 150 MW 8 8

9 2008 Texas Generation Capacity by Fuel Type Hydro, 0.8% Other, 1.1% Wind, 0.7% 2008 Texas Electric Generation by Fuel Type Other, 1.5% Nuclear, 6.7% Natural Gas, 40.3% Hydro, 0.3% Wind, 5.7% Coal, 21.7% Nuclear, 14% Aggressive Natural Gas, 69.0% Coal, 38.3% 9 9

10 ERCOT Summer Day Load Shape with Fuel Mix Generation by Fuel - August 4, 2008 MW Coal DC Imports Other Hydro Nuclear Wind Gas 70,000 60,000 50,000 40,000 30,000 20,000 10, :00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:

11 ERCOT Reserve Margin Changes May % 10.1% 8.3% 6.7% 5.9% n/a December % 12.1% 14.0% 11.2% 10.5% 8.2% May % 16.5% 17.3% 15.0% 14.5% 12.3% Increases in the Reserve Margins for 2008 and 2009 can be attributed to the Sandow and Bosque expansion for 836 MW, South Houston Green Power Expansion for 244 MW, Laredo Peaking Units 4 and 5 for 193 MW, the Victoria Power Station for 332 MW, Cedar Bayou 4 for 544 MW and Winchester Power Park for 178 MW. For 2010 and beyond, the following units have completed interconnection agreements and/or air permits: JK Spruce for 750 MW, Oak Grove 1 and 2 for 1710 MW, and Sandy Creek for 925 MW

12 New Natural Gas Plants in Texas Panda Energy to build 500 MW power plant in Sherman, Texas and a 1,000 MW power plant in Temple, Texas. Exelon Energy developing 640 MW at its Mountain Creek facility in Dallas. NRG constructing Cedar Bayou Station 539 MW Expansion Power for more than 440,000 homes in time for 2009 summer season Calpine Advances Plans to Add 400 MW expansion to Houston Area Expected to be online by

13 New Coal Generation in Texas Oak Grove 1 and 2: Luminant s Oak Grove power plant is currently under construction in Robertson County and will consist of two, supercritical, lignite-fueled power generation units. When complete, the plant will deliver about 1,600 MW. Unit 1 should be operational in late 2009; unit 2 in Sandow 5: Luminant is constructing a 580 MW expansion of its facility in Rockdale, which is expected to come on-line in early Spruce 2: CPS Energy is adding a 750 MW unit to its J.K. Spruce Power Plant. The additional unit is expected to begin operation in Sandy Creek: 900 MW pulverized coal facility near Waco, Texas. Expected commercial operation in Spring Limestone 3: NRG Energy will add a 750 MW pulverized coal unit at its Limestone facility. NRG is currently seeking an air permit at the Texas Commission on Environmental Quality and expects that the facility will be operational by Coleto Creek: International Power plc and South Texas Electric Cooperative plans to expand the Coleto Creek facility in Fannin with a 650 MW coal unit

14 Resource Adequacy Must Be Examined in Light of Potential Carbon Legislation Different proposals at the federal level would have a large impact on sources of electric generation, electric prices, and regional economies. Renewable generation does not emit carbon, but will not be enough to meet future energy needs. In addition, the variable nature of renewable generation requires some firm power as a back-up and challenges grid operators. Nuclear energy also does not emit carbon, but has its own challenges and detractors. Carbon capture and sequestration (CCS) technology must be developed, and soon

15 CO2 Emissions from Fossil Fuel Combustion by State, TX Million Metric Tons CO CA PA OH FL IL IN NY LA MI GA NC KY MO AL NJ VA TN WV WI OK MN AZ CO SC WA MA MD IA KS UT MS WY AR NM NV ND AK CT NE OR MT HI ME NH DE ID SD RI VT 15 15

16 Projected CO2 Prices from Recent EIA and EPA Analyses $350 $300 EPA - McCain-Leiberman Core EIA - McCain-Lieberman EPA - Lieberman-Warner 2005$/TonCO2 $250 $200 $150 $100 EPA - Lieberman-Warner - Limited Technology EIA - Lieberman-Warner EIA - Lieberman-Warner - Limited technology $50 $

17 Federal Carbon Legislation Lieberman-Warner Bill (S. 2191/3036) set a cap and trade system for carbon emissions, with additional allowances for carbon capture and sequestration. While this bill is dead, Congress will most likely pass climate legislation, and the impact of this type of legislation should be evaluated. EPA Analysis: EPA estimates, under the base scenario, that nearly all new electric generation capacity by 2025 would be renewable, nuclear or coal with CCS. Only 3%, or 6 GW out of 191 GW of new generation, would be from natural gas, and 0% from conventional coal. Estimates in GDP change range from no difference to the reference model to a 10% decrease by 2050 compared to the reference model if no offsets are allowed. The largest GDP impact (negative) is in the Plains region, which includes Texas. EIA Analysis: EIA estimates that the electric industry will account for the majority of CO2 emission reductions, with approximately 85% of reductions through 2020 and 2030, achieved mainly through the deployment of new nuclear, renewable, and fossil plants with CCS. The estimated cumulative impact to GDP by 2030, in 2006 dollars, is a decrease that ranges from $444 billion to $1,422 billion. National Association of Manufacturers Analysis: Estimates of an increase in natural gas prices by 26% to 36% in 2020, and 108% to 146% in 2030, and an increase in electric prices by 28% to 33% in 2020, and 101% to 129% in In Texas, electric prices are estimated to increase by 32% to 35% by 2020, and 101% to 145% by 2030, and natural gas prices are estimated to increase by 25% to 36% by 2020, and 101% to 145% by The increase in prices would reduce gross state product by between $12 and $16.6 billion per year by 2020 and $44.2 and $52.2 billion by

18 Estimated Cost of New Generation Nuclear Conventional Coal IGCC Coal Combined Cycle Combustion Turbine Wind Geothermal Concentrated Solar $/kw $0 $1000 $2000 $3000 $4000 $5000 $6000 $7000 $8000, Source: FERC presentation Increasing Costs in Electric Markets, June 19, 2008, compiled by FERC Staff from various sources. Cost estimates exclude carbon capture and sequestration costs

19 Natural Gas Prices day moving average, $/MMBtu

20 MW 120, , ,000 ERCOT GENERATION CAPACITY AND DEMAND PROJECTIONS Total Requirement (Peak % Reserve Margin) Peak demand Capacity less units 50 years old or older Capacity less units 40 years old or older 99,093 Capacity less units 30 years old or older 93,177 90,000 80,000 80,386 76,686 87,290 77,591 82,824 88,082 70,000 60,000 71,454 62,287 71,699 62,287 50,000 40,000 43,183 50,184 43,183 38,054 31,639 50,797 38,667 30,000 29,535 20,

21 MW 80,000 70,000 60,000 POSSIBLE ERCOT GENERATION CAPACITY NEEDED Capacity needed less units 30 years old or older Capacity needed less units 40 years old or older Capacity needed less units 50 years old or older 61,538 69,557 60,426 50,000 49,237 49,994 48,296 40,000 37,107 30,000 37,203 30,890 20,000 18,099 15,592 10,000 3,

22 New Nuclear Power in Texas NRG Energy and CPS Energy filed and application with the nuclear Regulatory Commission on September 24, 2007 for licenses to build two new nuclear reactors at the South Texas Project, the first nuclear power application in nearly 30 years. Texas Energy Future Holdings (formerly TXU) subsidiary Luminant Power and Mitsubishi Heavy Industries filed an application on September 19, 2008 to expand the facility at Comanche Peak facility from two to four reactors. Exelon Nuclear filed an application on September 2, 2008 for a new two-reactor facility with two reactors in Victoria County. South Texas Nuclear Project Source: F. Carter Smith, Bloomberg News 22 22

23 Growth of Wind Generation in Texas In 2006, Texas moved ahead of California to lead the nation in wind generation. In ERCOT, there is currently 5,871 MW of installed wind generation capacity. ERCOT expects a total of 8,549 MW of wind generation operational by the end of The Commission s decision in the CREZ proceeding has the potential to allow more than 18,000 MW of wind capacity in ERCOT. Presently over 52,000 MW of wind generation is under review at ERCOT. Wind farm outside of McCamey, Texas 23 23

24 Competitive Renewable Energy Zones The Interim Order in Docket No designated areas of the state where transmission will be built to encourage development of wind generation. In the final order, the Commission identified Scenario 2 as the most beneficial and cost-effect for consumers, which will develop transmission to all the designated zones, allowing more than 18,000 MW of wind generation for use in ERCOT

25 Nationally, DR may offset 11% of peak demand Forecast of U.S. Achievable Potential for DR Peak Demand (GW) 1,200 1,100 1, Load forecast without DR Load forecast with DR 4% reduction from dynamic pricing 7% reduction from traditional DR Year Additional peak savings would be achieved through energy efficiency 25 Source: Ahmad Faruqui, Ph. D., Brattle Group 25

26 Energy Efficiency Programs Prior to 80 th Legislature, Texas utilities were required to offer programs to reduce annual growth in demand by 10% per year. During 2006, CenterPoint s goal was to achieve peak demand reduction of 20,440kW. CenterPoint exceeded this goal by reducing its peak demand by 41,448 kw. TXU Electric Delivery s goal for 2006 was peak demand reduction of 79,149 kw. TXU exceeded this goal with 91,486 kw of peak demand reduction. Texas Will See Greater Efficiency Gaines Going Forward HB 3693 requires utilities to offer energy efficiency programs to reduce annual growth in demand by 10% in 2007, 15% in 2008, and 20% in 2009 and requires the PUC to study whether an increase in the goal to 30% by December 31, 2010, and 50% by December 31, 2015 is achievable. HB 3693 requires, for example, that state facilities use energy efficient lights and equipment, and that any single or multifamily dwelling built with assistance from the Texas Department of Housing and Community Affairs be built to certain efficiency and conservation measures. PUCT and ERCOT must develop a method for including energy efficiency impacts into ERCOT s CDR

27 Impact on System Peak Demand of Various DSM Scenarios 120, ,000 80,000 GW Demand 60,000 40,000 20, Base Case Current DSM (HB 3693 Minimum) High DSM (HB 3693 with extension to 30% and 50% of growth)

28 Advanced Meters Increase Options for Market Participants Docket 35718: The Commission approved a settlement to deploy over 3 million meters in the Oncor service territory. The estimated surcharge for a residential customer will be about $2.21 a month. Docket 35620: The Commission approved a settlement to deploy 127,000 meters in the CenterPoint service territory. REPs will pay for this initial deployment. Docket 35639: Pending case for the deployment in the entire CenterPoint service territory. Benefits of Advanced Meters: Real-time pricing will allow consumers to monitor and adjust their use. Consumers can participate in demand response programs to reduce peak demand. Advanced meters can automate functions for utilities, such as meter reading and thermostat cycling programs. Recent pilot program in the Pacific NW garnered average 10% savings for customers

29 Forecasted U.S. Electricity Sector CO 2 Emissions U.S. Electric Sector CO 2 Emissions (million metric tons) Base case from EIA Annual Energy Outlook 2007 includes some efficiency, new renewables, new nuclear assumes no CO 2 capture or storage due to high costs

30 CO 2 Reductions Technical Potential* * Achieving all targets is very aggressive, but potentially feasible. U.S. Electric Sector CO 2 Emissions (million metric tons) EIA Base Case 2007 Technology EIA 2007 Reference Target Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr Renewables 30 GWe by GWe by 2030 Nuclear Generation 12.5 GWe by GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCS None Widely Deployed After PHEV None 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER < 0.1% of Base Load in % of Base Load in

31 Achieving the Full Portfolio ALL of the following technology advancements will be needed in order to have a full portfolio of technologies available for reducing CO 2 emissions over the coming decades: 1. Smart grids and communications infrastructures to enable end-use efficiency and demand response, distributed generation, and PHEVs. 2. A grid infrastructure with the capacity and reliability to operate with 20-30% intermittent renewables in specific regions. 3. Significant expansion of nuclear energy enabled by continued safe and economic operation of existing nuclear fleer; and a viable strategy for managing spent fuel. 4. Commercial-scale coal-based generation units operating with 90+% CO 2 capture and storage in a variety of geologies. 31 Source: Electric Power Research Institute Discussion Paper, August

32 Peak new vehicle market share in 2050 for the three PHEV adoption scenarios 2050 New Vehicle Market Share by Scenario PHEV Fleet Penetration Scenario Vehicle Type Conventional Hybrid Plug-In Hybrid Low 56% 24% 20% Medium 14% 24% 62% High 5% 15% 80% 32 32

33 Year 2010 comparison of PHEV 20 GHG emissions when charged entirely with electricity from specific power plant technologies (12,000 miles driven per year) 33 33

34 Year 2050 comparison of PHEV 20 GHG emissions charged entirely with electricity from specific power plant technologies (12,000 miles driven per year) 34 34

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