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Power Supply Options for Connecticut’s Energy Future

Power Supply Options for Connecticut’s Energy Future. Connecticut Energy Advisory Board Scott Davido President, Northeast Region NRG Energy, Inc. December 2, 2004. Outline. Connecticut’s Energy Goals NRG Energy, Inc. Fuel Diversity Conclusion. CEAB’s Goal.

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Power Supply Options for Connecticut’s Energy Future

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  1. Power Supply OptionsforConnecticut’s Energy Future Connecticut Energy Advisory Board Scott Davido President, Northeast Region NRG Energy, Inc. December 2, 2004

  2. Outline • Connecticut’s Energy Goals • NRG Energy, Inc. • Fuel Diversity • Conclusion

  3. CEAB’s Goal The Board’s overarching policy goal is to provide the citizens of the state with a safe, affordable and reliable energy supply. Yet, it is equally important to recognize that the state’s citizens and policy makers are determined to preserve the environmental standards and quality of life, which they have all come to expect. Executive Summary CEAB Energy Plan March 2004

  4. 3 Goals of Energy Policy • Reliable power • Issue: SW CT Congestion, demand outpacing supply • Competitively priced power • Issue: TSO rate increases – ultimately, consumer rate caps coming off – consumers exposed to volatility in the market • Cleaner environment • Issue: Older generation continues to operate, new generation being turned over to lenders, new projects being mothballed or cancelled

  5. NRG Energy, Inc. Overview • A wholesale power generator engaged in the ownership and operation of power generation facilities, procurement of fuel and sale of energy, capacity and related services • Net worldwide generation capacity of 19,135 MW • Nearly 16,100 MW (net) in 18 states, primarily in the Northeast, Louisiana and California (remainder in seven countries around the world) • One of the largest power suppliers in Connecticut, Delaware and New York

  6. NRG in Connecticut CT Plants Net MW Norwalk 353 MW Devon 360 MW Cos Cob (jet) 54 MW Branford (jet) 16 MW Total Load Pocket 783 MW Middletown 786 MW Montville 497 MW Torrington (jet) 16 MW Franklin (jet) 15 MW Total 2,107 MW* *NRG Total installed capacity including deactivated units Franklin Drive (Jet) Middletown Torrington (Jet) Montville Branford (Jet) Devon Cos Cob (Jet) SW CT Load Pocket Norwalk Harbor

  7. NRG Overview Diverse Fuel Mix and Generation (North America) FuelCapacityGeneration Coal 26% 74% Natural Gas 48% 20% Oil 26% 7%

  8. CT Energy Consumption by Fuel Type (2000) • Petroleum 44% • Nuclear 20% • Natural Gas 15% • Interstate Elect. Flow 10% • Other 5% • Coal 4% • Hydro 2% Source: EIA 2001; CEAB 2004 Energy Plan

  9. Fuel DiversityThe Balanced Diet of Generation

  10. CT Electric Capacity Fuel Mix • [O]ver the next couple of years the state’s fuel mix will become less diverse. Most significant will be an increase in the use of natural gas from 24% in 2002 to 47% in 2011. This will make CT more susceptible to price spikes related to the fluctuations in the natural gas market. 2003 Source: CEAB March 2004 Energy Plan Source: Connecticut Siting Council, 2003

  11. Fuel Diversity • Reliance on only one type of generation can lead to excessive prices and threatened reliability (e.g., Winter 2004 in Northeast) • Natural gas alone is not the answer (e.g., “interruptible” gas supply contracts) • Henry Hub Calendar 2005 recently traded over $8.00, responding to production losses from Hurricane Ivan and overall strength in the petroleum complex, • Renewable power and demand response programs are only part of the solution (technology not yet competitive or commercially viable in most instances) • Markets will support lower cost and environmentally preferred technology, if markets are designed to reward investment in new technologies Fuel Diversity Serves Reliability Needs

  12. U.S. Electricity Generation • Existing U.S. coal units are at high capacity factors • New demand is met with gas-fired generation • Increased demand for gas has driven gas prices higher

  13. Commodity Price Comparison • The biggest differential in the cost of generation is the price of fuel • The $2.00 - $2.50 differential between forecasted gas and eastern coal prices more than offsets the cost of coal transportation and environmental compliance • The $3.50 differential between forecasted gas and western coal prices more than offsets the cost of coal transportation and any cost increases associated with conversion

  14. Fuel Diversity The Potential Value of Coal • At current consumption levels, there is enough domestic coal to provide all electric energy in the US for 250 years. • No other fuel source is as abundant as Coal in the United States • The U.S. has a larger percentage of the world’s coal reserves than Saudi Arabia has of the world’s oil reserves • No other source of fuel is as economical • New and emerging technologies can allow coal to be utilized in an environmentally manner • Markets and environmental policies can and should be designed to reward investment in these technologies, and to select an appropriate portfolio that meets our economic and environmental needs.

  15. Cost of Generation Comparison Includes scrubber and SCR technology

  16. Conclusion Connecticut needs greater FUEL DIVERSITY • Reliability • Competitive Power Prices • Improved Environment • How to attract investment in new competitive generation – If you get the price right and minimize regulatory uncertainty, they will invest and build.

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