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Utilities and Climate Change Regulation

Utilities and Climate Change Regulation. Frank Prager Xcel Energy Inc. Vice President, Environmental Policy June 19, 2008. Xcel Energy Overview. Gas Customers 1.8 M Electric Customers 3.3 M. Northern States Power Company Minnesota 44% .

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Utilities and Climate Change Regulation

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  1. Utilities and Climate Change Regulation Frank Prager Xcel Energy Inc. Vice President, Environmental Policy June 19, 2008

  2. Xcel Energy Overview Gas Customers 1.8 M Electric Customers 3.3 M Northern States Power Company Minnesota 44% Northern States Power Company Wisconsin 5% Public Service Company of Colorado 39% Southwestern Public Service 12% 5th Largest Combination Electric and Gas Utility (based on customers)

  3. Xcel Energy’s Environmental Leadership • #1 retail wind energy provider • Windsource – Largest green pricing program in US • Industry-leading voluntary emission reductions • Innovative clean technology development • Comprehensive CSR reporting

  4. Challenge of Climate Change • Climate change policy will require: • Significant emission reductions • Huge capital investments • Long-term technological transformation • Utilities will bear the lion’s share of the initial reductions

  5. Federal Climate Policy • Climate legislation dead this session • Lieberman Warner failed on cloture June 6 • Some form of regulation appears inevitable • Policy design has huge impact on cost • Targets and timing • Availability of offsets • Safety valve/cost containment • Auction vs. allocation

  6. Meeting the Challenge • Emission reductions require mix of diverse resources • Existing coal fleet must be addressed • Natural gas is a “bridge fuel” • Nuclear, coal with carbon capture will be critical future baseload technologies

  7. CO2 Emissions (million metric tons) U.S. Electric Sector Efficiency Renewables Nuclear Generation Advanced Coal Generation Carbon Capture & Sequestration Plug-in Hybrid Vehicles Distributed Generation EPRI: Value of Clean Technologies* 3500 * Achieving all targets is very aggressive, but potentially feasible 3000 EIA Base Case 2007 2500 2000 Technology 1500 1000 500 0 1990 1995 2000 2005 2010 2015 2020 2025 2030

  8. Xcel Energy’s Response: 2007 Colorado Resource Plan • Goal: meet customer energy needs cost effectively while reducing emissions • November 15 proposed plan: • Renewable energy (including wind and solar) • Energy efficiency and conservation • New gas fired generation • Coal plant retirement • Projected 10% reduction by 2017 • 2009 filing: evaluate 20% by 2020 scenarios • Smart Grid City Ponnequin

  9. Xcel Energy’s Response: 2007 Minnesota Resource Plan • “Compliance” based plan • Renewable energy (to meet 30% standard) • Energy efficiency and conservation • Emission reduction program • Sherco and Nuclear upgrades • Result: 22% reduction in CO2 by 2020 Sherco

  10. Strategies to Reduce Carbon Dioxide Today • Natural gas • Renewable energy • Customer energy efficiency • Tomorrow • New nuclear • Advanced renewable energy with storage • Smart Grid • PHEVs and DG • Clean coal

  11. Coal • Coal must remain part of energy mix • Low customer costs • Environmental challenge • Comanche 3 • 750 MW supercritical plant in Pueblo, CO • Comprehensive environmental settlement • NOx/SO2 emission reductions from existing units • Under construction • Avoided commodity price increases (Price today nearly doubled) • Labor challenges • On-line by 2010 • Future: clean coal

  12. Clean Coal • Coal with carbon dioxide capture and sequestration • Pulverized coal • IGCC • Maintains coal as viable resource option • Political interest and support on state/federal level • Significant cost challenges • 10-30% energy penalty • Trend toward cancelation of projects in 2007 • Xcel Energy experience: IGCC and geologic sequestration is viable • Obstacles: Cost, resource need and liability

  13. IGCC Process (Simplified) Waste Heat Boiler Gasifier Turbine Coal CO2 Sequestration Enhanced Oil Recovery

  14. Climate Policy, the Economy and Jobs • Climate change regulation is not free • Technology is key • Climate regulation has implications for energy security • Increased reliance on natural gas for electricity generation • Coal must remain in energy mix • Utility industry must be transformed • Increased costs could destroy demand • Good policy design is critical to control costs

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