The Future of Coal. Nicholas Akins Executive Vice President Generation American Electric Power 2010 Summer Seminar August 2, 2010

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1 The Future of Coal Nicholas Akins Executive Vice President Generation American Electric Power 2010 Summer Seminar August 2, 2010

2 Company Overview AEP = Nat. Gas/Oil 22% AEP = Nuclear 6% AEP = Coal/Lignite 66% Midwest = 33% National = 47% Midwest = 11% National = 10% AEP = Pumped Storage / Hydro / Wind = 6% Midwest = 50% National = 30% AEP s Generation Fleet >38,000 MW Capacity Midwest = 7% National = 12% 5.2 million customers in 11 states Industry-leading size and scale of assets: Industry Asset Size Rank Domestic Generation ~38,300 MW #2 Transmission ~39,000 miles #1 Distribution ~213,000 miles #1 2

3 Average KW Price for Coal Generation The more coal used, the lower the consumers electric costs 3

4 2009 Prism U.S. Electricity Sector 4

5 Environmental Timeline For Coal Units 5

6 The Pressure on Coal Generation All Coal Fired Power Plants More, Tighter Rules Clean Air Transport Rule? Renewable Mandates Pure Fundamentals Climate Change Environmental Legislation EPA HAPS Survivors GOV The threshold level for coal is being defined 6

7 Continual Evaluation is Required of The Long Term Viability of a Coal Unit s Relative Exposure to Potential Environmental Restrictions Fully-Exposed Partially-Exposed Least-Exposed Probable retirement Evaluating potential retirement Not likely to be retired CCS Candidates Smaller, older, less-efficient coal units that will not be economic if retrofitted 64,000 MW 20% 86,000 MW 170,000 MW 27% 53% Newer and larger coal units that do not have SCR s and/or FGD s will be evaluated due to emerging environmental rulemaking and NSR requirements 5,000 MW 20% 9,000 MW 11,000 MW 36% 44% U.S. Coal Nearly 50% of U.S. coal plants are exposed AEP Coal 7

8 What s at Stake?..Cost of Electricity 8

9 What s at Stake?... Jobs! Work-years Per Gigawatt of New Generation Capacity Technology Salaried Construction Workforce Craft Hourly Total Work Years On-going Employees Nuclear 4,785 9,575 14, Supercritical PC coal with CCS 2,140 8,435 10, IGCC gasified coal with CCS 2,795 8,145 10, Natural gas combined cycle 495 1,270 1, Onshore wind 305 1,180 1, Source: National Commission on Energy Policy, Task Force Report on America s Future Energy Jobs (2009). Based on projects installed or under construction. +/- 25 percent level of accuracy. 9

10 Implications of Coal Unit Retirements The Replacement of Capacity Retrofit Repower Refuel Retire / Extended Start / Other Regulatory Ratemaking Effects Undepreciated Unit / Plant Balances Replacement Capacity Costs System Grid Requirements Voltage, Reactive, or Dynamic Load Support System Restoration Support Obligations Load Following Responsibility Shift Changing Fuel Availability / Fundamentals Will have a trickle-down effect on other industries Socio-Economic Factors Jobs Lost; Local Tax base impact; Local Community Presence 10

11 What s Next For Coal? All surviving coal units will be fully retrofitted for NOx, SOx, Hg, (CO 2 control?) New technologies for clean coal must be readily available Delivered coal cost must be competitive Regulatory support for long-term planning for baseload capacity Legislative / EPA mandates must be realistic in scope / scale / timing / and targets Operational excellence and integration of coal value chain must be aligned 11

12 Questions? When it comes to the future, there are three kinds of people: those who let it happen, those who make it happen, and those who wonder what happened. John M. Richardson, Jr. Mountaineer CCS Project 12