The future of coal
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The Future of Coal. Karen R. Obenshain, Sc.D. Sheet Metal Workers International Association Power Generation Summit June 19, 2008. Edison Electric Institute.

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The Future of Coal

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The future of coal

The Future of Coal

Karen R. Obenshain, Sc.D.

Sheet Metal Workers International Association Power Generation Summit

June 19, 2008


Edison electric institute

Edison Electric Institute

EEI is the national association of shareholder owned electric utilities in the U.S. Our members represent about 70 percent of the U.S. electric power industry and serve 95 percent of the ultimate customers in the industry’s investor-owned segment.


Fuel diversity and innovative technologies are critical

Fuel Diversity and Innovative Technologies are Critical

  • Meet future energy demand

  • Provide affordable, reliable energy

  • Establish energy security

  • Generate energy efficiently with minimal environmental impact


Demand for electricity is increasing

Demand for Electricity Is Increasing

6,000

5,000

4,000

Billion kiloWatthours

3,000

2,000

1,000

0

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Historical

Projected

Sources: U.S. Department of Energy, Energy Information Administration, Annual Energy Review 2005 and Annual Energy Outlook 2007 Early Release


Margins projected to fall below minimum target levels

Margins Projected to Fall Below Minimum Target Levels

RFC (MISO)*

2008/2008

MRO

2009/2009 (US)

RFC (PJM)

2012/2014

NewYork

2011/2016+

Rocky Mtn

2008/2011

New England 2009/2009

California

2009/2012

AZ/NM/SNV

2009/2011

SPP

2015/2016+

*Excludes MISO resources outside the RFC boundary

TRE (ERCOT)

2009/2016+

5


The future of coal

Coal

  • Accounts for approximately half of all electricity generated in the United States

  • Sufficient domestic reserves for at least 150 years

  • Innovative technology development has made ‘clean coal’ power a reality

  • Future issues: CO2 emissions


Clean coal technologies

Clean Coal Technologies

  • Combustion

    • Supercritical

    • Ultra-supercritical

    • Circulating fluidized bed

  • Gasification

    • Integrated Gasification Combined Cycle


Industry capex continues to rise

Industry Capex Continues to Rise


Annual capex tops 70 billion through 2009

Annual Capex Tops $70 Billion through 2009

P = projected


Industry capital expenditures

Industry Capital Expenditures

  • Industry committed to reliability and making needed investments in generation, transmission,

    distribution and the environment

    • Increasing Capex to meet growing electricity demand already begun

    • Capex

      • 2005 totaled $48.4 billion

      • 2006 totaled $59.9 billion (+24%)

      • 2007 totaled $69.1 billion (+16%)

    • Environmental Capex

      • Fastest growing component

    • Increased spending is expected to continue for several years


Distribution

Distribution

  • Distribution systems deliver power to neighborhoods, businesses and consumers 

    • 2000-2006 – Real dollar annual spending increased 24% from $13.9B to $17.3B

    • Next 10 years - project

      ~$17-$18B / year

    • Investments replace aging infrastructure and modernizing system management and control


Transmission

Transmission

  • Reliable electric service and regional markets depend on strong transmission systems

    • 2000-2006 - Shareholder-owned segment invested more than $37.9B

    • 2006 - Shareholder-owned segment invested $6.9B in transmission (+9.7% over 2005)

    • 2007-2010 - Shareholder-owned segment planning to invest $37B (preliminary)

Planned

Actual


Generation

Generation

  • EIA forecasting 258 GW of new capacity to meet growing demand by 2030 –

    > $400 billion (Real 2005$)

    • Shareholder-owned segment added 5,204 MW in 2007

    • Shareholder-owned segment announced 24,949 MW of new capacity additions in 2007

Actual

Planned


Construction costs are soaring

Construction Costs are Soaring

  • Raw material prices (steel, cement) up significantly

    • Due to high global demand, higher production & shipping costs, and weakening US dollar

  • Higher labor costs having less of an impact on utilities, although that may rise.

  • Cost increases in all businesses (T, D & G)


Construction costs

Construction costs

Source: EEI with data from NYMEX and Bureau of Labor Statistics


Escalating cost to build coal plants

Escalating Cost to Build Coal Plants

  • Big Stone II – Milbank, SD

    • Otter Tail Power & 6 other utilities

    • 630 MW coal unit = $1B, high volt trans = $200M

    • Due to higher materials & labor, now $1.6 billion

  • Cliffside Steam Station – Duke Energy

    • May ’05 – two 800 MW coal units cost $2 billion

    • 5 months later, revised with 50% increase to $3B

    • NC Comm approved one unit, latest cost = $1.8B

  • Westar Energy – deferred 600MW coal unit

    • Est. cost rose to $1.4B from $1B


Increased cost to build transmission

Increased Cost to Build Transmission

  • NSTAR – two 345 kV lines in Mass.

    • Cost rose $58M or 25% to $292M

    • Due to construction & material increases

    • Copper +160%, steel +70%, concrete +45%

  • Southern Calif Edison – 500 kV line

    • Initial cost of $80.3M for Antelope-Pardee line

    • Due to higher land values (for right of way), revised to $92.5M, a 15% increase


State outlook

State Outlook

  • State-by-State implementation of RGGI (NY,ME,NJ)

  • Implementation of CA legislation

  • Western Regional Climate Action Initiative

  • The Climate Registry – 39 states


New coal generation cancelled or delayed across the country

Cancelled/Delayed coal generation

Source: Sierra Club’s “Stop the Coal Rush”

New Coal Generation – Cancelled or Delayed Across the Country


The future of coal

Capacity Additions

Historical and Under Construction

This chart includes historical capacity additions by fuel since 1945 as well as generation under construction as of the end of May 2008.


New capacity projects

New Capacity Projects


Any questions kobenshain@eei org

Any [email protected]


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