A Critical Review of Energy Markets: Where We ve Been and Where We re Going Citizens Energy Group Energy Conference Plan September 14, 2010

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Dwain Snow
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1 A Critical Review of Energy Markets: Where We ve Been and Where We re Going 2010 Citizens Energy Group Energy Conference Plan September 14, 2010

2 Message Where we ve been does not appear to be where we re going No roadmap (currently) exists Many conflicting/competing mandates Must look beyond short-term/narrow focus, or path forward will produce costly, unsustainable outcomes

3 Competing Challenges Fuel Price Fixed, Spot Fuel Supply/Delivery Infrastructure On-Site v. Purchased Energy Carbon-Intensity % Product Cost Energy Efficiency Demand Response, Smart Meters On-Site v. Purchased Energy Clean Air Act; CAIR; CAMR; MACT; NAAQS Greenhouse Gases (GHG) Water Quality/Supply Byproduct BTUs? Energy Environment Compliance Requirements Investment/O&M Cost Impacts on Environment Private v. Public Company National v. International Footprint Shareholder Resolutions (SOX) Economics Market Regulated or Competitive Market Domestic v. International State of Industry

4 Energy History, EIA Outlook

5 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

6 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

7 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

8 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

9 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

10 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

11 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

12 Source: J. Conti, 2010 Annual Energy Outlook (EIA).

13 Energy Price Trends and Factors

14 Source: FERC, Energy Market Snapshot (September 2010)

15 Source: FERC, Energy Market Snapshot (September 2010)

16 Source: FERC, Energy Market Snapshot (September 2010)

17 Source: FERC, Energy Market Snapshot (September 2010)

18 Source: FERC, Energy Market Snapshot (September 2010)

19 Source: FERC, Energy Market Snapshot (September 2010)

20 Source: FERC, Energy Market Snapshot (September 2010)

21 Source: FERC, Energy Market Snapshot (September 2010)

22 Source: FERC, Energy Market Snapshot (September 2010)

23 Environmental and Clean Energy Drivers

29 Why Energy Alternatives?

30 Energy Alternatives, Multiple Benefits Reduced/Avoided Emissions CAIR, CAMR, NAAQS. No GHG liability. RPS Avoid EU cost passthrough; revenue via REC sales. Facilitate Economic Growth Local, Business. Reduce/Eliminate Waste Disposal, Truck Hauling Tipping fee = revenue. Reduce T&D Load/Cost (Distributed Generation).

31 Not All Resources Equal

32 Energy Supply Risks & Costs Need: service provided by BTUs not fuel. What is least expensive, most reliable/sustainable? Lowest impact means? Energy Challenges: not limited to fuel price, but risk factors supply security, deliverable reliability, environmental impacts/cost adders Supply Chain (LCA) Energy Efficiency: avoided Energy Supply but also avoided Energy Delivery and Environmental Impacts Avoided effects cannot always be monetized societal benefits

33 What to Keep on Radar Screen

34 Factors Driving Path Forward Power Sector Coal, NG, Nuclear, Renewables Clean Air, Climate Change Regulations Central v. Distributed Generation T&D Infrastructure, Smart Grid Demand Response Industrial Sector Coal, NG, Renewables, Self-Generation, Resell/Purchase Efficiency Improvements Clean Air, Climate Change Regulations Shut-down/Relocation Transportation Sector Liquid v. Electricity v. NG Conventional v. Renewable? Clean Air, Climate Change Technological Innovation

35 Conclusion: Competing Challenges Fuel Price Fixed, Spot Fuel Supply/Delivery Infrastructure On-Site v. Purchased Energy Carbon-Intensity % Product Cost Energy Efficiency Demand Response, Smart Meters On-Site v. Purchased Energy Clean Air Act; CAIR; CAMR; MACT; NAAQS Greenhouse Gases (GHG) Water Quality/Supply Byproduct BTUs? Energy Environment Compliance Requirements Investment/O&M Cost Impacts on Environment Private v. Public Company National v. International Footprint Shareholder Resolutions (SOX) Economics Market Regulated or Competitive Market Domestic v. International State of Industry

36 Conclusion Where we ve been does not appear to be where we re going No roadmap (currently) exists Many conflicting/competing mandates Must look beyond short-term/narrow focus, or path forward will produce costly, unsustainable outcomes

37 David W. South President Technology & Market Solutions, LLC 452 Brownstone Dr. St. Charles, Il CP: EM:

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