The Future of Renewable Energy and Other Energy Sources By Peter Barth CH2M HILL Pittsburgh, PA
Agenda EIA and PJM Energy Forecasts Shale Gas A Game Changer Renewable Energy Challenges Do State Renewable Portfolio Standards Make a Difference? Summary
Energy Information Administration 2009 2035 Forecast For Energy Generation* Wind generation increases by about 27 gigawatts. Biomass electric generation will nearly triple from 7 gigawatts in 2009 to over 20 gigawatts in 2035. Solar electric generation will increase from 2 percent to 5 percent of US electric generation. Regional growth of electric generation is dependent on availability of energy resources and existence of state Renewable Portfolio Standards (RPS). Shale gas prices will grow from 16 percent of the natural gas supply in 2009 to about 47 percent in 2035. Prices will vary depending on economic growth. Coal generation drops from 45 to 43% of electric generation. *Source: US EIA, Annual Energy Outlook 2011
PJM ESTIMATES THAT UP TO 20,000 MW OF COAL-FIRED CAPACITY COULD BE AT RISK FOR RETIREMENT Total Coal Capacity in PJM without Pollution Controls* PJM RTO MAAC Rest of PJM Total Coal 78,613 18,761 59,852 No SO 2 Controls 30,069 4,281 25,788 No SCR for NO x Reduction 36,618 8,805 27,813 No Fabric Filter 69,115 13,020 56,095 No SO 2 and No SCR 22,866 2,723 20,143 No SO2 and No Fabric Filter 29,457 3,756 25,701 Small plants (less than 400 MW) account for slightly less than one third the total coal capacity in PJM* *Source: PJM Interconnection, 2011, Coal Capacity at Risk for Retirement in PJM, August 26, 2011
Reasons for Plant Retirement Most plants being closed are old (built in the 1950s to 1970s), under-utilized and are typically less than 400 MW in size. The 2011 Cross-State Air Pollution Rule and proposed Mercury and Air Toxics Standards (MATS) require significant investment in costly emission controls. Clean Water Act Section 316(b) regulations require studies of aquatic organisms and may require modification to intake structures. The availability and low cost for shale gas creates a lower cost scenario for new power developments. State renewable portfolio standards mandate a change in the mix of generating capacity.
Cross-State Air Pollution Rule Influences Future Power Developments This rule was finalized on July 6, 2011 Requires 27 states in the eastern United States to improve air quality by reducing power plant emissions that cross state lines. Compliance Schedule: January 1, 2012 for SO 2 and annual Nox reductions (Phase 1). May 1, 2012 for ozone and seasonal Nox reductions (Phase 1). January 1, 2014 the second phase of SO 2 regulations begin. The goal of the Cross-State Air Reduction Rule and other actions is to reduce SO 2 emissions by 73% (from 2005 levels) and Nox levels by 54%. Source: USEPA, 2011
Proposed Mercury and Air Toxic Standards (MATS) Rule * Will Influence Power Development On March 16, 2011 USEPA proposed MATS legislation for power plants. USEPA is currently taking public comments on the proposed standards until August 4, 2011. These standards propose to limit mercury, acid gases and toxic pollution from coal and oil fired electric generating units with a capacity of 25 MW or greater. There is no subcategory for coal refuse generation units. The proposed rule will establish numerical emission limits for, mercury, particulate matter (surrogate for non mercury metals), hydrogen chloride (surrogate for SO2). Major sources are EGUs that have the potential to emit 10 tpy of one air toxic or 25 tpy or more of any combination of toxics. The goal of the MATS is to limit mercury to 91% of 2005 levels. MATS replaces the court vacated Clean Air Mercury Rule *Source: USEPA, 2011
Clean Water Act (CWA) Section 316(b)* Regulations Impact Water Withdrawals Regulations focus on cooling water impacts at existing power and manufacturing facilities: Impacts 1,260 existing facilities (approximately 670 power) that withdraw at least 2 million gallons of cooling water per day. Proposed rules would require: An upper limit on how many fish can be killed through impingement. Site specific studies to help permitting agencies determine whether and what type of site-specific entrainment contracts would be required. New generating units at an existing facility would be required to reduce intake withdrawals to a level similar to a closed cycle recirculation system. Regulation focuses on reducing ecosystem impacts due to the impingement and entrainment of aquatic organisms. New units must comply at startup. Existing facilities must comply as soon as possible but within 8 years. *Source: USEPA, 2011
SHALE GAS CHANGES THE POWER DEVELOPMENT PARADIGM
The Marcellus Shale Gas Is Impacting Eastern Power Development The Marcellus Shale has estimated recoverable gas reserves of about 84.2 trillion cubic feet (TCF) of natural gas. (US. Geological Survey, 2011, Assessment of Undiscovered Oil and Gas Resources in the Devonian Marcellus Shale of the Appalachian Basin Province) Current Marcellus shale production is about 3 billion cubic feet per day and could increase to about 7 to 8 billion cubic feet per day in 5 years (Bloomberg Business week, 8/14/11). EIA predicts that total US demand for natural gas will be approximately 67.4 billion cubic feet per day (about 2.5 TCF) during 2011. In July 2011 the Henry Hub spot market price for natural gas was $4.24 per million BTU (MMBTU). (US EIA, 8/8/11, Short Term Energy Outlook) New interstate gas pipeline infrastructure is being constructed to transport the shale gas to eastern markets. Natural gas will be the fuel of choice for new fossil fuel power plants for the next several decades.
Will Natural Gas Reserves of the Utica Shale Be Greater Than the Marcellus Shale? Exploration in the Utica Shale-Lower Paleozoic geologic formations is ongoing.
What Type of Power Generation Replaces Up to 20,000 MW in PJM? Source: PJM Website, 2011
Gas and Renewable Energy Generation are Replacing Retired Coal Power Plants June 2011 AEP announces a plans to retire 6,000 MW of coalfired power generation in WV, KY, VA, OH, IN and TX by 2014 and build 1,220 MW of natural gas generation (AEP, June 9, 2011). In 2010 AEP purchases 99 MW of wind power from the Timber Road II Wind Farm (under construction). June 2011 Dominion to convert three coal-fired power plants to biomass-fired plants by 2013 (150 MW). (Dominion News, June 18, 2011) June 2011 - Robinson Power Company announces plans to build a 148 MW gas and steam plant and a smaller waste coal plant instead of a 272 MW waste coal plant. (Pittsburgh Business Times, June 2, 2011) April 2011 TVA to close 18 coal-fired power units (approximately 1,000 MW) by 2015 and look for renewable energy, natural gas, nuclear power and energy efficiency to replace the capacity. (New York Times, April 15, 2011)
Gas and Renewable Energy Generation are Replacing Retired Coal Power Plants (cont d) May 2010 - Consumers Energy defers development of the proposed 830 MW clean coal plant at Karn/Weadock Complex near Bay City, Michigan. The reasons for deferring development were reduced demand, forecasts of low gas prices due to shale gas and excess generating capacity in the midwest. (Consumers Energy, 2010) September 2010 Duke Energy considering closure of seven coal-fired power plants by 2015 (approximately 890 MW). (The Charlotte Observer, September 2, 2010) August 2010 First Energy announces closure of four coal-fired power plants in northern Ohio (1,620 MW). (Cleveland Plain Dealer, 2010) In February 2011 First Energy purchases 100 MW of wind power from the Blue Creek Wind Farm (under construction). December 2009 Progress Energy to deactivate 11 coal fired plants (1,500 MW) in North Carolina by 2017. Any new plants would be gas fired. (Progress Energy, December 8, 2009)
Renewable Energy Developments In Eastern States Range From a Few to 400 MW and Are Typically Smaller Than Gas-Fired Power Developments Renewable/Alternative Energy Wind: 50 MW 350 MW Solar: <1 to 20 MW in eastern United States Biomass: 25 MW 100 MW Hydroelectric: 5 MW 200 MW Waste coal: 80 MW 110 MW IGCC: 250 MW to 640 MW Natural Gas Plants: 250 MW 1250 MW
Key Policy and Environmental Issues Influencing Renewable Energy Developments Wind Solar Biomass Geothermal Key Commercial Issues - Natural gas prices - Project financing - Natural gas prices - Continued decline in manufacturing cost - Project finance - Natural gas prices - Decline in development costs - Project financing - Long term fuel source availability - Natural gas prices - Need for lower development costs - Project financing Key Regulatory/Policy Issues - Federal PTC 2012 expiration/renewal - State RPS policy and incentives - Carbon legislation - Federal PTC renewal - State RPS policy and incentives - Carbon legislation - Carbon legislation - State RPS policies and incentives - State RPS and policy and incentives - Carbon legislation Key Environmental Issues -Declines in bat population due to white noise syndrome - Noise -MGBTA - Land use - Threatened and endangered species for greenfield developments - Air emissions - Wastewater Hydroelectric - Natural gas prices - Limited number of new sites - Water availability - State RPS policy and incentives - Carbon legislation - Impacts on natural river ecology - Potential sediment build up
Estimated Levelized Cost for New Electric Generation in 2016 Source: US EIA, Annual Energy Outlook 2011
First Solar s Manufacturing Cost for Solar Modules Dropped from Over $3.00 per Watt in 2004 to Less Than $1.00 per Watt in 2009* Source: * First Solar News, February 24 2009 Photo -Google Website, 2011
What Role Will Biomass Generation Play? November 2010 - First Energy cancels plans to repower two units at the Burger Station (Ohio) due to a forecast that market prices would not support repowering. (First Energy, November 17, 2010) November 2010 - Xcel Energy cancels Bay Front Biomass Plant in Minnesota due to a significant increase in estimated costs and declining cost for other generation options. (Xcel Energy, November 28, 2010) May 2011 Massachusetts Governor Deval Patrick proposes revisions to the state RPS to restrict the eligibility of biomass electricity generators due to an increase in greenhouse gas emissions. (Massachusetts Executive Office of Energy and Environmental Affairs, May 3, 2011) The absence of carbon legislation and higher generation costs will likely limit biomass development.
Will Transmission Capacity Limit Renewable Energy Development? PSE&G increases transmission line investment by 15% to $5.2 billion over the next 3 years. (NJSpotlight, 2011) October 2010 XCEL and six other utilities complete SmarTransmission Study to evaluate transmission alternatives to integrate 57 gigawatts of wind to load center in the Upper Midwest. (Xcel Energy, 2010) Pacific Corp to invest $6 billion to upgrade 2,000 miles of transmission line in the Northwest. (PacificCorp 2011, Energy Gateway) Central Maine Power to invest $1.4 billion to build 500 miles of new or upgraded transmission lines by 2015. (Central Maine Power News, 2011) Solar and biomass power developments are less likely to be restricted by transmission issues.
What Role Do State Renewable Portfolio Standards Play? Source: US EIA Website, 2011
State Renewable Portfolio Standards (RPS) and Incentives Make a Difference: Ohio Wind Development May 1, 2008, Governor Strickland signed Senate Bill 221 into law and established the Ohio RPS. Requires that investor/owner utilities to obtain 25% of energy from alternative sources by 2025. 12.5 % must be from renewable sources wind, hydroelectric, biomass or solar. (Pew Center on Global Climate Change, 2011) In 2008, Ohio has approximately 10 MW of commercial wind in operation. OPSB has obtained applications for over 1,200 MW of wind development since establishment of the RPS. Proposed developments include: 850 MW in 2009, 99 MW in 2010, 375 MW 2011. At the end of 2011 Ohio will have over 400 MW of wind power in operation.
State Renewable Portfolio Standards and Incentives Make a Difference: New Jersey Solar Development* In April 2006 the New Jersey Board of Public Utilities issued new regulations requiring that by 2021 22.5% be generated by renewable sources. Prior to the 2006 regulatory changes, the New Jersey RPS only 4% was to be generated by renewables. Solar photovoltaic are to provide 2.12% of energy consumption. This represents about 1,500 to 2,300 MW of solar energy. In 2006, New Jersey had about 1,200 photovoltaic systems operating. New Jersey now has over 10,000 solar installations and over 380 MW of installed capacity. Currently, New Jersey is second to California in the amount of solar capacity installed. During this month of June 2011, over 520 projects having a total capacity of over 40 MW were installed. * NJ Board of Public Utilities, 2011
State Renewable Portfolio Standards and Incentives Make a Difference: Pennsylvania Solar and Wind Development In December 2004, Governor Rendell signed Pennsylvania s Alternative Energy Portfolio Standard into law. The law requires qualified sources to provide 18% of Pennsylvania electricity from renewable/alternative energy sources by 2020. The law established an renewable energy (Tier 1) goal of 8% which included wind, solar, coalmine methane, small hydropower, geothermal and biomass. Of the 8%, 0.5% must be from solar sources. (Pew Center on Global Climate Change, 2011) In September 2011, Pennsylvania exceeded 100 MW of installed solar power in the state. (PennFuture, 2011) Pennsylvania has 751 MW of wind power online and has another 177 MWs are under construction. Over 3,000 MW of new projects are in the queue. ( AWEA website, 2011)
State Renewable Portfolio Standards and Incentives Make a Difference: West Virginia Alternative Energy Standard In June 2009, Governor Manchin signed the Alternative and Renewable Energy Portfolio Act which mandates electric utilities to obtain 25% of electricity from alternative or renewable energy sources by 2025. Interim targets of 10% by 2015 and 20% by 2020 were established. (Pew Center on Global Climate Change, 2011) Eligible renewable energy sources include: wind, solar PV, solar thermal, run-of-river hydroelectric, geothermal, biomass, biologically-derived fuel and fuel cell technology. (Pew Center on Global Climate Change, 2011) West Virginia has 431 MW of wind power online and has another 147 MWs are under construction. This represents 1.2 percent of West Virginia s power. ( AWEA website, 2011)
Summary Shale gas availability from the Marcellus and other shale gas developments and low prices will continue to impact renewable and coal power developments for the foreseeable future. The lack of long range federal policy for carbon and renewable energy incentives will continue to impede renewable energy and clean coal developments. State Renewable Portfolio Standards are making a difference in the type and amount of renewable energy. Renewable energy developments must continue to reduce per megawatt costs. Economies of scale will be increasingly important for new developments. Developments that can provide power directly to the end user will be more attractive. Coal power generating capacity will continue to decline.
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