Energy: Global, National and Vermont Contexts

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1 Energy: Global, National and Vermont Contexts Leadership Champlain Richard Sedano February 14, State Street, Suite 3 Montpelier, Vermont USA Tel: Fax: The Regulatory Assistance Project Website: Water St. Gardiner, Maine USA Tel: Fax:

2 Introduction Regulatory Assistance Project RAP is a non-profit organization, formed in 1992, that provides workshops and education assistance to state government officials on electric utility regulation. RAP is funded by the Energy Foundation and the US DOE. Richard Sedano was Commissioner of the Vermont Department of Public Service, , and presently serves on the Montpelier Planning Commission

3 The Vermont Perspective You Are Here

4 The Power System Pieces Put Together Add Customer Generation

5 Global Trends Third World Development Especially China and India Heavy Fossil Fuel Use Transportation, synthetics and power Supply lagging, leading to global contention among developed and developing countries, contention among uses and price hikes Pollution, Climate Change

6 Supply (What s Peak Oil?) Many ways to make energy But at given times there is a fuel of choice Wood Hydro (use the rivers, cleaner, near transportation) Coal (industrial revolution, cheap, available) Oil ( less polluting, easier to move around, findable) Nuclear (clean, big, stimulated power lines) Natural Gas (safer, less risky, ready supply, findable) Now? (no obvious answers, except efficiency)

7 Over 50% of US electricity from coal!

8 Traditional Fuel Blues Wood: inefficient, hard to move, smoky Hydro: higher environmental standards based on lessons learned means little new production Coal: high particulate, Hg and carbon Oil: Save it for cars, expensive Nuclear: expensive and risky, fuel disposal Natural Gas: expensive, need diversification

9 Be Careful of Trends

10 U.S. DOE Office of Fossil Energy

11 Where are new fuels coming from? Environmentally sensitive places Off shore Alaska (ANWR) The Rockies Geopolitical Hotspots Middle East? Nigeria Russia and former Republics More Expensive Forms Tar sands Synfuels Biofuels Renewable systems Nuclear LNG Requires major liquifaction and terminal siting

12 Gas Prices Have Increased Apr-90 Natural Gas Futures Price ($/MMBtu) Apr-91 Apr-92 Apr-93 Apr-94 Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Mar-05 Mar-06 Mar-07 Mar-08 Feb-09 Source: NYMEX x x Prices lately

13 Market prices likely to rise DPS Market Price Forecast X Power costs last week HI Base Lo DPS2001c Synapse

14 Electric Prices: Some Perspective

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16 $120 $100 $80 $60 $40 $20 $0 Average Monthly Residential Bills December, 2001 VT $/mo. ME LA FL SC NC VA DE MD CT AK NY MO NV KS NJ SD CA WV IL MA KY MN WY MI CO UT

17 Low Income Population Hit Hard Weatherization Program Addresses less than 100,000 US homes per year 5 million US homes over the life of the program LIHEAP Low income fuel assistance Stable budget, increasing burden Vermont Electric Rates contain no subsidies Utilities do collect donations (Warmth)

18 Technology to the Rescue? Gasified Coal (IGCC) Cleaner, but much more costly (+20%) C Sequestration possible, if there is a place for it (+$$?) Renewables (wind, solar, biomass) Varying stories, wind is most promising, units bigger Higher market prices enables more fuels and technologies to be cost-effective Some expect imported Liquified Natural Gas to be the silver bullet for the next decade. Siting??

19 Vermont is Generation Light Vermont only New England state with less generation than peak load Mostly due to better locations elsewhere Wind Siting is hard Biomass supplies are dispersed Does this mean more transmission?? Electric resources = Jobs

20 Transmission Dilemma Due to interdependence of New England states for reliability, we share costs of facilities So power lines always cost beneficiaries a fraction of total cost (Vermont fraction: <5%) And power lines look better than cheaper alternatives bearing 100% of cost Plus, engineers know T&D solutions Even though load control can solve T&D problems

21 Other important issues Electric Value compared with Electric Price Disconnect between price we pay and cost to produce Markets Disconnect about where energy comes from Or how it works Surburbs encroach on open space Growth in demand for energy Energy Growth = Economic Growth? Not So! Efficiency as a strategy and a resource get cheaper Supplies getting harder to produce Growing pollution & climate change concern

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24 Central Question Is current growth rate of electric use sustainable? With current prices, supplies and technologies: No. Changes will happen. With new supplies: Maybe, and there will be price and environmental penalties With new technologies: Maybe, the some penalties may be avoided Can current growth rate be reduced? Yes

25 VT electric supply mix 2001 Vermont Own Load Electric Energy Supply Comes from the fleet of New England Generation, which is 40% gas System 14.4% Nuclear 36.3% Hydro Quebec 34.9% Oil 1.6% Coal 0.0% Gas 1.0% Hydro 6.9% Renewable 4.9%

26 Slow growth in annual peak, summer peak rising faster VERMONT STATE PEAK LOAD - POWER PERIOD FOR YEAR ENDED DECEMBER 31, 1,100,000 1,000, , , ,000 KW 600, , , , , ,000 Calendar Year Peak Summer Peak Summer Minimum Data G Data I

27 Electricity sales- growth VERMONT STATE LOAD - POWER PERIOD FOR YEAR ENDED DECEMBER CALENDAR YEAR - MWH

28 Existing and New EE Strategies Can Offset ISO Forecasted Energy Requirements (GWH) and Beyond GWh 150, , , , , , , , , , ,000 ISO GWh Forecast (w/out DSM) 1.2% Avg. Annual Increase at Marginal Avoided Energy Supply Cost of 9.4 /kwh Actual Energy Requirement (2003) Total Achievable Energy Savings Potential -1.38% Avg. Annual Reduction New England EE potential Addt'l EE Can Offset Growth (at 3.1 /kwh) Existing EE Programs at 3.1 /kwh Building Codes at 2.9 /kwh Standards at 1.0 /kwh Addt'l Savings Opport. Beyond Offsetting Growth (at 3.1 /kwh) Total EE Potential in 2013 Can Reduce Energy Req. to 1993 Level

29 DPS: "MAXIMUM ACHIEVABLE SAVINGS" FROM ENERGY EFFICIENCY % (2175 GWh) 5000 GWh From 2002 study for DPS

30 Efficiency is cheaper Power Costs vs. Efficiency Vermont Costs for 2002 & 2003 NE-ISO Average Monthly Price Delivered Cost of Wholesale Power * Wholesale Spot Market Price Efficiency Vermont, Contract Commitment Cents per Killowatthour Efficiency Savings: 1 cent/kwh (Jan 2002), more than 6 cents/kwh (Mar 2003). Currently 3.6 cents/kwh 0.0 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03

31 Customer Generation is Very Efficient 85% efficient Will CHP become popular?

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33 Energy Security Is Still Important

34 60% of Oil Consumed in U.S. is imported.

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38 Thanks for your attention RAP Mission: RAP is committed to fostering regulatory policies for the electric industry that encourage economic efficiency, protect environmental quality, assure system reliability, and allocate system benefits fairly to all customers.