Coping with Competing Energy Strategy Directions

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Coping with Competing Energy Strategy Directions

• Washington Coal Club
• May 14, 2008
• Carl O. Bauer, Director

National Energy Technology Laboratory
Office of Fossil Energy
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Fossil Energy Will Continue to Dominate
U.S. data from EIA, Annual Energy Outlook 2008
revision world data from IEA, World Energy
Outlook 2007
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Energy Strategy Complexity
Aiming for Balanced Solutions
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South African Historical Demand Overview
Reserve margin 25
Reserve margin 810
Reserve margin 25
Reserve margin 20
Reserve margin 16
40,000
Peak Demand Capacity (MW)
30,000
20,000
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2007
2008
1988
2004
2005
2006
Year
Peak Demand
Installed Capacity (MW Sent-out)
Expected Peak Demand
Operational Capacity (MW Sent-out)
Reserve Margin Aspiration 15
Update on State of Power Security in South
AfricaJacob Marolga, Chief Executive, Eskom,
February 19, 2008
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South African Grid Overwhelmed by Demand
The Wall Street Journal, April 17, 2008
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NERC 2007 Long-Term Reliability Assessment
Areas of the most concern include WECC-Canada,
California, Rocky Mountain States, New England,
Texas, Southwest, and the Midwest . . . ? NERC
LTRA 2007
NERC 2007 Long-Term Reliability Assessment
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U.S. Peak Summer Generation Capacity NERC and
AEO08 Capacity Outlook
128 GW additional required to maintain capacity
margins (NERC)
- 41 GW oil and gas steam boilers
Capacity Growth Forecasts Vary Substantially Due
to Assumptions for Annual Electricity Demand
Growth Rates, GDP Growth, and Oil Price
EIA, Annual Energy Outlook 2008 revision NERC
2007 Long-Term Reliability Assessment
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Declining Total Electricity Generation Growth
Rate Assumptions
1.6 / yr
AEO05 3.1 / yr GDP growth
1.5 / yr
1.9 / yr growth
AEO08 revision 2.4 / yr GDP growth
1.1 / yr growth
Reduced 2025 GDP by 2.7 trillion (16) (2006
dollars)
Reduction of 36 BkWh / yr growth equates to
reduced need for 4,900 MW of new generation each
year (_at_ 85 c.f.)
Declining Growth in Long-Term Electricity Demand
and U.S. GDP NERC Estimates Tied to Higher
Growth Rate
EIA Annual Energy Outlook 2008 revision NERC
2007 Long-Term Reliability Assessment
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Total Electricity Generation Growth Rates
2.2 / yr 20 yr
1.7 / yr 6 yr
1.5 / yr NERC
1.1 / yr EIA
Forecast for Electricity Generation Growth Well
Below Recent Averages
Electricity generation EIA,1949?1994 Annual
Energy Review 2006 1995?2006 Electric Power
Annual 2006 2007?2030 Annual Energy Outlook
2008 revision NERC 2007 Long-Term Reliability
Assessment
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Net Capacity Changes Removed or Added
Opportunities
1st Quarter 2008
95 of MWs removed represent Announced projects
Wygen II 90 MW Now Operational
Removed Capacity
Total Net Reductions 614 MW (-0.9) for 1th
Quarter 2008
Source Global Energy Decisions Velocity Suite
(April 2, 2008)
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Coal-Fired Development Activity vs. EIA AEO08
Trendline 20 GW through 2016 AEO08 reference
case 17.9 GW by 2016
Low forecasts for new capacity may not reflect
sufficient market promise to attract new skilled
human resources to the industry
Trendline 5-year actual
Actual Installation Trend and EIA AEO08
Reference Forecast Similar A Significant Surplus
of Developments Exists Above EIAs Forecast Demand
EIA, Annual Energy Outlook 2008 revision Global
Energy Decisions Velocity Suite 12/31/07
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Can Natural Gas Supply Support a Dash to Gas?
Total generation AEO05
Total generation AEO08
2.3 Tcf
Renewable AEO08
Nuclear AEO08
Oil and Natural Gas AEO08
1.4 Tcf
Generation from coal if no new plants are built
Coal AEO08
3.7 Tcf of Potential Natural Gas Demand Growth
with Declining North American Supply
EIA AEO 2008 (rev.) and AEO 2005 Assumes
NG-fired combined cycle plants operating at 50
efficiency to fill generation gaps
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Total Natural Gas Supply to United States
(Including Liquid Natural Gas)
Increased Use of Natural Gas in Electricity Will
Require LNG North American Natural Gas Supply
for U.S. Trending Down
Annual Energy Outlook 2001, 2002, 2003, 2004,
2005, 2006, 2007 and 2008 March revision
reference cases
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Wall Street Journal on LNG (April 18, 2008)
Overall, U.S. imports of LNG have slid over the
past nine months to a five-year low, and
natural-gas inventories are running relatively
low . . . If the U.S. is unable to attract LNG
supply this summer, prices could spike up sharply
within a few months if a hot summer were to
reduce the ability to build a cushion of gas
going into next winter.
Meantime, as Asian buyers grab more LNG from the
Atlantic basin, U.S. prices, though at 27-month
highs, still look cheap.
Wall Street Journal, Surge in Natural-Gas Price
Stoked by New Global Trade, Page1, April 18, 2008
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30/t CO2 Tax and 14/MMBtu Natural Gas
(Effect on Current Average Generating Costs, by
Region)
249 higher increase
31 higher price increase
Cost per MWh
Due to Natural Gas Price Impacts, Gas Intensive
Regions Will See Higher Real Electricity Cost
Impact From Carbon Taxes
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Summary

• U.S. power generation industry is at a critical
  juncture, with social pressures and pending
  legislation demanding massive changes
• Competing demands for reliable, low-cost energy
  and climate change mitigation appear incongruent
• Our Nations liquid fuel dependence on foreign
  resources continues to grow
• Uncertainty of regulatory outcomes and rising
  costs impact industrys willingness to commit
  capital investment, endangering near-term
  production capacity
• The United States must foster new processes that
  address conflicting energy objectives
  simultaneously

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For Additional Information
Carl Bauer 412-386-6122 carl.bauer_at_netl.doe.gov
NETLwww.netl.doe.gov