Fuel Diversity: Cornerstone of Reliable, Affordable and Environmentally Responsible Power

Transcription

1 Fuel Diversity: Cornerstone of Reliable, Affordable and Environmentally Responsible Power Women In Government New Orleans, LA, September 24, 2014 Lola Infante Director Generation Fuels and Market Analysis Edison Electric Institute

2 Edison Electric Institute The Edison Electric Institute (EEI) is the association that represents all U.S. investor-owned electric companies. Our members provide electricity for 220 million Americans, operate in all 50 states and the District of Columbia, and directly employ more than 500,000 workers. With more than $90 billion in annual capital expenditures, the electric power industry is responsible for millions of additional jobs. Reliable, affordable, and sustainable electricity powers the economy and enhances the lives of all Americans. EEI has 70 international electric companies as Affiliate Members, and 250 industry suppliers and related organizations as Associate Members. Organized in 1933, EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums.

3 The Value of Electricity

4 Electricity and the Economy Most capital intensive industry Source: Fitch Ratings, Corporate Capex Study: Growth Stalls in 2013, October 25, 2012.

5 Electricity is a Great Value (Percent) % Gasoline (regular) 140% Health Care Natural Gas Increase in cost of selected consumer goods (nominal dollars) 77% 76% 73% 71% 70% 65% Transportation Food & Beverages Consumer Price Index Housing Electricity Sources: Sources: U.S. U.S. Department Department of Labor of, Bureau Labor, of Bureau Labor Statistics of Labor (BLS), Statistics and U.S. (BLS), Department and U.S. of Energy Department, Energy of Information Energy, Administration Energy Information (EIA). Administration (EIA). February by the Edison Electric Institute. All rights reserved. February by the Edison Electric Institute. All rights reserved.

6 Source: Bureau of Economic Analysis Gross Domestic Product Survey. Source: Bureau of Economic Analysis Gross Domestic Product Survey. Consumable Durable We Now Spend 4x More on Electric Apps Than on Electric Bills 20% Electric Bills Electric Apps (80%) Landline and cellular phone services 20% Internet access 10% Repair of household appliances, audio-visual, and computer equipment 2% 80% Electric Apps Cable and satellite television, radio services, video media rental Personal computers, software, and accessories 11% 12% Television, audio, and video equipment 13% Household appliances, therapeutic medical equipment, telephone and facsimile equipment, electric appliances for personal care 12%

7 Fuel Diversity is Key Fuel diversity and flexibility are critical Electric companies rely on many fuels to generate electricity coal, natural gas, nuclear energy, hydropower and other renewables, and other fuel sources. Fuel diversity is key to: Provide affordable electricity: Respond to fuel price fluctuations Maintain reliability and energy security: Respond to extreme events and/or supply constraints Improve resiliency: Respond to outages and security threats Integrate renewables: Respond to weather and resources variability Meet electricity demand: Respond to changing consumption level and patterns 2013 National Fuel Mix Source : DOE Energy Information Administration

8 The Evolving Generation Mix Share of electricity generation Coal + Hydro Oil Nuclear Natural Gas Source: DOE Energy Information Administration

9 Different Regions of the Country Use Different Fuel Electricity Mixes Nuclear 8% Hydro 8% PACIFIC CONTIGUOUS Other Renewables* Fuel Oil 14% <1% Hydro Other** 36% 1% Coal 3% Nuclear 7% Other Renewables* 7% MOUNTAIN Natural Gas 38% PACIFIC NONCONTIGUOUS Fuel Oil 48% Other Renewables* 7% Hydro 9% Natural Gas 22% Natural Gas 21% Fuel Oil <1% Other** 3% Coal 12% Other** <1% Coal 54% Nuclear 12% Natural Gas 5% Natural Gas 45% WEST NORTH CENTRAL Other Renewables* 14% Fuel Oil <1% Hydro 3% Other** <1% Coal 67% Coal 35% Nuclear 25% Natural Gas 9% Nuclear 22% Hydro 7% Natural Gas 23% EAST NORTH CENTRAL Other Renewables* 4% Fuel Oil Hydro 1% <1% Other** <1% Coal 60% Coal 46% Other Renewables* Hydro 7% 7% Nuclear 32% NEW ENGLAND Nuclear 37% Hydro 6% Natural Gas 33% Fuel Oil 1% Other** 3% Coal 5% Natural Gas 45% MIDDLE ATLANTIC Other Renewables* 3% WEST SOUTH CENTRAL SOUTH ATLANTIC Other Renewables* Other Renewables* Hydro 8% Fuel Oil EAST SOUTH CENTRAL 2% Fuel Oil 1% 1% 1% Other Renewables* Hydro Nuclear Other** 2% Fuel Oil 2% 10% 1% <1% Other** Nuclear <1% 26% Fuel Oil <1% Other** 1% Natural Gas 30% Other** 1% Coal 23% Coal 36% 2013 National Fuel Mix * Includes generation by agricultural waste, landfill gas recovery, municipal solid waste, wood, geothermal, non-wood waste, wind, and solar. ** Includes generation by tires, batteries, chemicals, hydrogen, pitch, purchased steam, sulfur, and miscellaneous technologies. Sum of components may not add to 100% due to independent rounding. Source: U.S. Department of Energy, Energy Information Administration, Power Plant Operations Report (EIA-923); 2013 preliminary generation data. August by the Edison Electric Institute. All rights reserved. * Includes generation by agricultural waste, landfill gas recovery, municipal solid waste, wood, geothermal, non-wood waste, wind, and solar.

10 Will the Mix be Dominated by Gas and Renewables? Capacity additions and retirements Announcements of New Generating Capacity (2013) Projected Source: Ventyx Inc; The Velocity Suite. Projected additions data is based on existing plans announced by companies and projected retirements include plants to retire based on their age.

11 The Value of US Power Supply Diversity

12 The Value of US Power Supply Diversity The study examines the risks to a diversified electricity portfolio and finds: [A] combination of factors tightening environmental regulations, depressed wholesale power prices, and unpopular opinions of coal, oil, nuclear, and hydroelectric power plants is currently moving the United States down a path toward a significant reduction in power supply diversity. The study quantifies the impact of a reduced fuel and technology diversity profile in America s electric sector, concluding: Electricity supply in the reduced diversity case increases average wholesale power prices by about 75 percent and retail power prices by 25 percent Electricity price impacts would reduce U.S. gross domestic product by nearly $200 billion Price impacts would also lead to roughly one million fewer jobs The typical household s annual disposable income would decline by about $2,100

13 Risks to Fuel Diversity Environmental regulations Depressed wholesale prices Public opinion - Awareness

14 Environmental Regulatory Challenges: 2014 and Beyond Air Climate Water Land & Natural Resources Mercury & Air Toxics (MATS) Interstate Transport (CAIR/CSAPR) NSPS- New Sources NSPS- Existing Sources 316(b) Effluent Guidelines Limitations Transmission Siting and Permitting Avian Protection Waste & Chemical Management Coal Ash PCBs in Electrical Equipment Regional Haze/Visibility BACT Permitting Waters of the United States Endangered Species HazMat Transport Multiple NAAQS International Negotiations Total Maximum Daily Loads Vegetation Management New Source Review (NSR) Waterbody- Specific Standards

15 Clean Power Plan (CPP) Clean Power Plan First attempt by EPA to regulate GHG emissions from existing power plants using CAA sec. 111(d) Projected to reduce national average power sector CO2 emissions approximately 30% below 2005 levels by 2030 State-specific emission rate goals (measured in lb CO 2 /MWh) calculated from 2012 baseline Interim final goal (10-year average, ). Final goal (annual compliance starting in 2030) State compliance plans set out how goals achieved Best System of Emissions Reductions (BSER) Potential Impacts Shift from coal to natural gas for baseload generation likely to accelerate EPA indicates that between GW of existing coal-fired power plants will retire by 2030 as result of rule, in addition to GW of expected coal plant retirements, primarily due to MATS Natural gas and renewables expected to gain market share Energy efficiency investments likely to play important role Uncertain role and future of nuclear power plants Impacts vary significantly across states A combination of measures from four building blocks to calculate state goals. First time EPA is looking at entire power system. In past, sec. 111 standards have been based only on reductions achievable at the regulated units Building block 1: Coal-based unit-specific efficiency improvements Building block 2: Increased utilization of natural gas-based units to reduce generation from coal-based units Building block 3: Expanded use of low- and zero-carbon generating capacity Building block 4: Expanded use of demand-side energy efficiency

16 Changing Natural Gas Markets Supply, Demand and Prices Source: DOE Energy Information Administration; SNL Financial

17 Non-hydro generation, Billion kwh The Promise of Renewable Power Non-Hydro Renewable Sources More than Double between 2012 and 2040 Growth of New Markets Installed PV capacity (MWdc) Source: DOE Energy Information Administration, Annual Energy Outlook 2014, Early Release, December 2013 Source: SEIA, U.S. Solar Market Insight, 2013; EEI

18 LMP, $/MWh Competitive Markets and the Missing Money Problem Supply Curve Using Resource Bids MWs Germany s Forward Peak prices Source: HIS, The Value of US Power Supply Diversity, 2014, p.28 Source: European Energy Exchange EEX and The Economist, 12 October 2012

19 Cost of Reduced Fuel Diversity Average wholesale power prices increase 75 % Average retail power prices increase 25 % GDP drops nearly $200 billion. Annual disposable income of a typical household declines about $2,100.

20 Cost of Reduced Fuel Diversity Source: HIS, The Value of US Power Supply Diversity, 2014, p.38-40

21 PV + wind capacity in Watts per capita Comparative Electricity Prices Comparison of the amount of wind and solar capacity and electricity prices Selected countries, Electricity price (euroct/kwh) Source: Max Planck Institute

22 Conclusion The U.S. electric grid delivers a valuable product essential to all Americans. It is vital for our nation to have a diverse supply of safe, reliable and cleaner electricity. The electric power industry is leading the transformation to make the grid more flexible and more resilient to meet the growing demands of our digital society Policies and regulations have sometimes adverse unintended consequences Several factors will shape US power supply diversity in the future: Energy policy development, market structure, energy policy discourse, planning alignment, risk assessment, flexibility, scope

23 Thank you! Lola Infante