Southern States Energy Board. Southern States Energy Board

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1 Southern States Energy Board Coal: Reliable Energy and Environmental Responsibility for the Future Presented at: Pittsburgh Coal Conference September 30, 2008 Presented by: Kenneth J. Nemeth Secretary & Executive Director Southern States Energy Board

2 Southern States Energy Board Through innovations in energy and environmental policies, programs and technologies, the Southern States Energy Board enhances economic development and the quality of life in the South. - SSEB Mission Statement Established 1960, expanded in U.S. States and Two Territories Each jurisdiction represented by the governor, a legislator from the House and Senate and a governor s alternate Federal Representative Appointed by U.S. President

3 World Outlook World Population = 6.8 billion in 2010; 8.2 billion in 2030 World GDP = $88 trillion in 2010; $154 trillion in 2030 World Electricity Demand = 9,000 billion KWH in 2010; 31,000 billion KWH in 2030 World number of Vehicles = 812 million in 2002; 2.1 billion in 2030 Energy Consumption will increase 50% in the next 25 years Energy Sources and Increases by 2030; Coal Production = 74% Oil Production = 43% Natural Gas Production = 64% Nuclear Power = 38% Renewables = 61% 1.6 Billion People without Access to Electricity!

4 Significant Global Energy Events OPEC Sets 55 percent Minimum Tax Rate (1970) U.S. Institutes Price Controls (1971) Arab Oil Embargo Against U.S. (1973) Kissinger Announces Project Independence (1974) EPCA Authorizes Strategic Petroleum Reserve (1975) Windfall Profits Tax (1980) Iran/Iraq War Oil Prices Doubled ( ) Photo: Jerry Gay, World Oil Glut - $29 BBL Oil U.S. Synfuels Shutdown (1983) Seattle Times, 1974 Chernobyl Nuclear Accident (1986) Alaska s Prudhoe Bay Production Peaks (1988) Iraq Invades Kuwait Prices Soar ($36 BBL) (1990) Clean Air Act Changes Gasoline & Diesel Fuels (1990) U.S. Imports More Oil & Refined Product Than It Produces (1993) Asian Financial Crisis Oil Prices Plummet ( ) German Government/Utilities Agree to Phase Out of Nuclear Power (2000) U.S. Petroleum Consumption All Time High (19.7 Million BPD) (2001) Terrorist Attacks on the U.S. (2001)

5 Recent Global Energy Events Foreign Oil Dependence Rises to 65 percent (2004) Northeast Blackout Leaves 50 Million People in the Dark Natural Gas Prices Triple from 1990 Levels Oil Passes $50/Barrel Gasoline Exceeds $3/Gallon Hurricanes Damage Oil/Gas Rigs Russia Halts Natural Gas to Ukraine Venezuela Moves to Nationalize Resources Oil Breaks $75/Barrel Nigeria Kidnaps Oil Workers Bolivia Secures Oil Fields Experts State Oil Production May Have Peaked Iran Threatens Nuclear Capabilities Saudis Talk of Propping Up $55 Oil Chad Orders Chevron to Leave BP Forced to Repair Pipeline Leaks China Extends Credit to Oil Nations Iran, Russia, Others Discuss Gas OPEC Texas Utilities Cancel 8 of 11 Coal Plants Oil Breaks $83/Barrel Oil Breaks $144/Barrel

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7 Fall Elections Could Bring New Outlook Both presidential candidates favor cap and trade program CO2 Emissions targets: Obama: By 2050, return emissions to 80% below 1990 levels McCain: By 2050, return emissions to 60% below1990 levels Both favor clean coal/ carbon capture and storage technology R&D United States Global position in a green world McCain: US as leader in new green economy, developing and deploying new technologies Obama: Re-engage UN Framework convention on climate change, bring major emitting nations together, create technology transfer

8 Reality of Current Electricity Production in the United States 51% of nation s electricity comes from coal 20% of nation s electricity comes from nuclear 17% comes from natural gas Gas is currently 6 times the cost of coal Most sources of new U.S. gas are off-limits for drilling (outer continental shelf moratoria) Substantial percentage of increased gas usage will have to come from LNG imports

9 North American Electric Reliability Corporation Finds More Power Is Needed Electricity Demand is Far Outpacing Generation Growth +18% U.S. baseload generation capacity reserve margins have greatly declined 30-40% in early 1990s 17% in 2007 Generation capacity to grow just 8% in the next 10 years while demand grows 18% 2007 North American Electric Reliability Corporation study +8% Growth in U.S. Generating Capacity Growth in U.S. Electricity Demand

10 Projected Electricity Needs in the U.S. EIA has forecast need for 135,000 MW of new generation over next 10 years Most of this new generation required is base-load capacity Base-load capacity = nuclear, coal or gas Base-load capacity does not = renewable Base-load capacity can only slightly be offset with energy efficiency programs

11 Prospects for Base-Load Where will 135,000 MW of new base-load capacity over next 10 years come from? Won t be nuclear --- next round of nuclear plants not likely to come on-line until 2017 or later May not be coal --- if environmental litigation and CO2 debates continue to stymie development Can t completely come from natural gas --- not enough U.S. production to fuel all base-load needs; not enough LNG imports to fill void Can t be renewables --- intermittent, not base-load Can t conserve our way out of all incremental needs

12 Global Energy Forms Face Limits in Supply & Price All Energy Forms Needed for Diversity of Supply ENERGY EFFICIENCY/DEMAND-SIDE MANAGEMENT/CONSERVATION: An important resource but insufficient to power the future OIL: Consistently above $50/barrel; declining reserves; risky sources NUCLEAR: Valuable but constrained due to safety and waste disposal concerns HYDRO: No growth in supply WIND: Limited availability; grid disruptions; erratic supply ETHANOL: Clean but energy inefficient; clean but energy inefficient; cellulosic key NATURAL GAS: Consistently above $6/mcf; declining reserves; risky sources COAL: Faces GHG, climate change, regulators, environmental organizations challenges

13 More than 400 Scientists Challenge IPCC Report In December, in a U.S. Senate minority report, more than 400 scientists from around the world challenged the methodologies used and conclusions reached by the United Nation s IPCC Many of these scientists are current or former members of the IPCC and have been recognized for their work on the IPCC panel These scientists include climatologists, oceanographers, geologists, physicists, paleo-climatologists, and others

14 What you may not know Canadian and Russian solar scientists are collecting data indicating that there may be a global cooling trend on the horizon A U.S. Fish & Wildlife Service study shows that the polar bear population has actually increased to thousand, up from as low as 5-10 thousand in the 1950s and 1960s

15 Alan Greenspan Warns Against CO2 Cap and Trade No effective way to meaningfully reduce emissions without negatively impacting a large part of an economy... Permits will become expensive and large numbers of companies will experience cost increases that make them less competitive. Jobs will be lost and real incomes of workers constrained. Cap and trade systems or carbon taxes are likely to be popular only until real people lose real jobs...

16 Follow Principles of 10 Senator Letter Contain costs: prevent economic harm Invest aggressively in new technologies Treat states equitably (no disparate impacts across regions and states) Protect working families (jobs, bills) Protect U.S. manufacturing jobs Recognize agriculture/ forestry s role Clarify federal / state authority Provide accountability for tax revenues

17 Better Alternatives than Lieberman-Warner Focus on development of carbon capture and storage technology (CCS); develop sequestration capabilities and necessary regulations Create national funding mechanism for ramped-up R,D&D for CCS (0.3 cents/kwh would yield $11 billion annually) Accelerate new nuclear plant deployment Accelerate research to store renewable energy Capture all cost-effective energy efficiency in the U.S. Develop all cost-effective renewable options

18 The American Energy Security Study: A Leadership Initiative Establish an ambitious goal for the Nation Frame a plan for success Model the benefits of achievement v. the greater costs of inaction Formulate legislative recommendations to support the plan

19 AES Study s Focus Oil market analysis and forecasts U.S. resource assessment of biomass, coal, oil shale and CO 2 enhanced oil recovery (EOR) Technology assessments and cost estimates for biomass, coal and oil shale-to-liquid fuel production plants and CO 2 EOR Forecasts and analysis of the U.S. economy Environmental challenges and benefits Policy recommendations to stimulate growth of the alternative liquid fuels

20 COAL CONTINUES AS KEY TO U.S. ENERGY SECURITY AND INDEPENDENCE Transportation Effiiency 16% Biomass 24% Enhanced Oil Recovery 15% Coal-to- Liquids 29% Oil Shale 16% Eliminating U.S. oil imports by 2030 Southern States Energy Board, 2006 MMbpd Import Gap Trans.Efficiency EOR Oil Shale Biomass CTL 5 Conventional Oil Production

21 Policy Recommendations From American Energy Security Study I Adopted Policies Extend the $.50 per gallon Alternative Liquid Fuels Excise Tax Credit Provide explicit DOE authority and appropriations for loan guarantees Fund the DoD Alternative Fuels Testing and Development Program Policy Recommendations for Congressional Consideration Provide accelerated cost recovery to alternative fuel plant owners Incentivize refining of alternative liquid fuels Authorize and fund military purchases of alternative fuels under long-term contract

22 AES Policy Recommendations (continued) Eliminate the $10 million cap for tax exempt Industrial Development Bonds Provide regulatory streamlining for the production of alternative liquid fuels and for mine permitting Establish a self-sustaining government corporation to provide market risk insurance Expand the Strategic Petroleum Reserve (SPR) program to include alternative liquid fuels products Provide incentives for existing ethanol plants to convert to coal Provide incentives for enhanced oil recovery (EOR), enhanced gas recovery (EGR) and enhanced coalbed methane recovery using CO 2 captured from alternative fuel plants

23 American Energy Security Study II Phase II Goal: Strategic Action Plan Energy Supply Blueprint Carbon Capture, Application and Sequestration Storage options Comprehensive U.S. Energy Resource Assessment Transportation Efficiency Options and Deployment Critical Role of Electricity in the U.S.

24 Challenging America s s Abundant Coal Resource Wall Street shows skepticism over Coal Environmental groups putting coal-fueled power plants on trial Government takes back its support for FutureGen Utility projects based on coal continue to be canceled Showdown in the Sunflower Corral

25 A Multi-Step Process to Near-Zero Emissions from Coal A Long-Term Approach to a Long-Term Challenge Building New, Efficient Supercritical & IGCC Coal Plants 15% Lower CO 2 Emissions Demonstrating IGCC and Carbon Capture/Sequestration Up to 90% Lower CO 2 Emissions The Goal: Near-Zero Emissions Retrofitting Existing Coal-Based Generation with Carbon Capture/Sequestration Up to 90% Lower CO 2 Emissions Courtesy: Peabody Energy, 2007

26 U.S. Has Ample Room for Carbon Sequestration DOE: Storage Potential of 3.5 Trillion Tons Courtesy: Energy Information Administration

27 SECARB Partnership Objectives Characterize the potential carbon sequestration sinks in the Southeast; Conduct field verification studies in the most promising geologic formations in the region; Advance the state of the art in monitoring, measurement and verification techniques and instrumentation; and Develop sequestration technologies and characterize geologic sinks for future readiness.

28 Coal: Feeding the Methanol and CTL Processes Methanol Converts to numerous uses including diesel or gasoline China has large program underway Worldwide Demand approaching 40 million tons (13.3 billion gallons) Coal to Liquids Proven technology Clean diesel fuels Enhance national security

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30 Positive Signs for Coal with Carbon Capture and Storage CCS Regional Partnerships Making Methanol from CO2 and Hydrogen Enhanced Oil Recovery Enhanced Coal Bed Methane Recovery CO2 Feedback for biofuels algae Making CTL from coal Regulatory Legislation modeled in Wyoming, Colorado (IOGCC) State and regional infrastructure development (CCS, CTL, Methanol)

31 A Path Forward for Indigenous Energy Resources Help fund R&D for clean coal & sequestration Advocate for renewable energy tax credit extension Consider funding renewables and other Carbon offset programs* Nuclear Generation with spent fuel storage Involvement in policy decisions at federal & state levels Promote Advanced Technologies Financing/Investment & Regulatory certainty Coal generation with 90%+ CO 2 capture/storage Indigenous liquid transportation fuels (coal, biomass, oil shale) with carbon sequestration to eliminate dependence on imported oil Modernized infrastructure (pipelines, expanded refineries, transmission, roads, bridges, etc.) Energy Efficiency in existing energy infrastructure and in end-use, including CHP Energy Prosperity Economic Development Environment

32 Coal: Reliable Energy and Environmental Responsibility for the Future Presented by: Kenneth J. Nemeth Secretary & Executive Director Southern States Energy Board 6325 Amherst Court Norcross, Georgia USA Phone: (770) Fax: (770)