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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. Energy Demand 2030. Energy Demand Today. 118 QBtu / Year 82% Fossil Energy. 101 QBtu / Year 85% Fossil Energy.

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coping with competing energy strategy directions

Coping with Competing Energy Strategy Directions

Washington Coal Club

May 14, 2008

Carl O. Bauer, Director

National Energy Technology Laboratory

Office of Fossil Energy

slide2

Energy Demand 2030

Energy Demand Today

118 QBtu / Year82% Fossil Energy

101 QBtu / Year85% Fossil Energy

+ 16%

United States

703 QBtu / Year

82% Fossil Energy

453 QBtu / Year

81% Fossil Energy

+ 55%

World

Fossil Energy Will Continue to Dominate

U.S. data from EIA, Annual Energy Outlook 2008 revision; world data from IEA, World Energy Outlook 2007

slide3

Energy Strategy Complexity

Aiming for Balanced Solutions

south african historical demand overview
South African Historical Demand Overview

Reserve margin 25%

Reserve margin 25%

Reserve margin 20%

Reserve margin 16%

Reserve margin 8–10%

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

2008

2007

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 Africa”Jacob Marolga, Chief Executive, Eskom, February 19, 2008

slide5

South African Grid Overwhelmed by Demand

The Wall Street Journal, April 17, 2008

nerc 2007 long term reliability assessment
NERC 2007 Long-Term Reliability Assessment

Require 135 GW by 2016

“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

slide7

+7 GW by 2016 (EIA)

U.S. Peak Summer Generation Capacity

NERC and AEO’08 Capacity Outlook

+128 GW additional required to maintain capacity margins (NERC)

979 GW

- 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

slide8

NERC growth

Declining Total Electricity Generation Growth Rate Assumptions

1.6%/yr

AEO’05 3.1%/yr GDP growth

1.5%/yr

1.9%/yr growth

AEO’08 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 (@ 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

total electricity generation growth rates
Total Electricity Generation Growth Rates

AEO’08

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

slide10

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)

coal fired development activity vs eia aeo 08
Coal-Fired Development Activity vs. EIA AEO’08

Trendline

≈ 20 GW through 2016

AEO’08 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 AEO’08 Reference Forecast Similar;

A Significant Surplus of Developments Exists Above EIA’s Forecast Demand

EIA, Annual Energy Outlook 2008 revision; Global Energy Decisions – Velocity Suite 12/31/07

can natural gas supply support a dash to gas
Can Natural Gas Supply Support a “Dash to Gas”?

Total generation AEO’05

Total generation AEO’08

2.3 Tcf

Renewable AEO’08

Nuclear AEO’08

Oil and Natural Gas AEO’08

1.4 Tcf

Generation from coal if no new plants are built

Coal AEO’08

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

slide13

AEO’01

AEO’03

AEO’02

AEO’04

AEO’05

Tcf / Year

AEO’06

AEO’07

AEO’08

Gradual Decline to 20 Tcf without LNG

AEO’08no LNG

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

slide14

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

30 t co 2 tax and 14 mmbtu natural gas effect on current average generating costs by region
$30/t CO2 Tax and $14/MMBtu Natural Gas(Effecton Current Average Generating Costs, by Region)

249% higher increase

31% higher price increase

13% average increase

61% average increase

$42.84 average increase

148% average increase

$13.15 average increase

148% average increase

$32.73 average increase

$32.73 average increase

Cost per MWh

Due to Natural Gas Price Impacts, Gas Intensive Regions Will See

Higher Real Electricity Cost Impact From Carbon Taxes

summary
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 Nation’s liquid fuel dependence on foreign resources continues to grow

Uncertainty of regulatory outcomes and rising costs impact industry’s willingness to commit capital investment, endangering near-term production capacity

The United States must foster new processes that address conflicting energy objectives simultaneously

for additional information
For Additional Information

Office of Fossil Energywww.fe.doe.gov

Carl Bauer

412-386-6122

[email protected]

NETLwww.netl.doe.gov

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