1. Electric Utilities Response to Climate Change Environmental Federation of Oklahoma October 2, 2008 Michael Miller Director, Environment Electric Power Research Institute

2. 2 © 2007 Electric Power Research Institute, Inc. All rights reserved. About EPRI Founded in 1973 as an independent, nonprofit center for public interest energy and environmental research. Objective, tax-exempt, collaborative electricity research organization Science and technology focus--development, integration, demonstration and applications Broad technology portfolio ranging from near- term solutions to long-term strategic research Together…Shaping the Future of Electricity

3. 3 © 2007 Electric Power Research Institute, Inc. All rights reserved. EPRI’s Role Depends Upon The Specific Technology or Discipline National Laboratories Universities Suppliers Vendors EPRI Basic Research & Development Technology Commercialization Collaborative Technology Development Integration Application

4. 4 © 2007 Electric Power Research Institute, Inc. All rights reserved. The Bottom Line The technical potential exists for the U.S. electricity sector to significantly reduce its CO 2 emissions over the next several decades Much of the needed technology isn’t available yet – substantial R&D, demonstration is required No one technology will be a silver bullet – a portfolio of technologies will be needed A low-cost, low-carbon portfolio of electricity technologies can significantly reduce the costs of climate policy Flexible, market-based climate policies offer significant economic advantage over sector-specific approaches

5. 5 © 2007 Electric Power Research Institute, Inc. All rights reserved. 2100 75% of electricity non-fossil End-use efficiency increases 1%/yr 2050 Electric generation 67% efficient Passenger vehicles average 50mpg Stabilization pathway Technology is Key to Climate … Significant Advances Needed to Achieve Stabilization To stabilize at 550ppm, Carbon/$GDP must be <10% of today’s by 2100 1300 GT C 480 GT C Path we need to be on to stabilize atmospheric CO 2 Where more advanced versions of current technologies will take us Where today’s technology will take us

6. 6 © 2008 Electric Power Research Institute, Inc. All rights reserved. With accelerated electricity R&D, how quickly can the U.S. electric sector cut its future CO 2 emissions?

7. 7 © 2007 Electric Power Research Institute, Inc. All rights reserved. U.S. Electricity Sector CO 2 Emissions Base case from EIA “Annual Energy Outlook 2007” –includes some efficiency, new renewables, new nuclear –assumes no CO 2 capture or storage due to high costs  Using EPRI deployment assumptions, calculate change in CO 2 relative to EIA base case

8. 8 © 2007 Electric Power Research Institute, Inc. All rights reserved. Technology Deployment Targets TechnologyEIA 2007 Base CaseEPRI Analysis Target* EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 Carbon Capture and Storage (CCS) None Widely Available and Deployed After 2020 Plug-in Hybrid Electric Vehicles (PHEV) None 10% of New Vehicle Sales by 2017; +2%/yr Thereafter Distributed Energy Resources (DER) (including distributed solar) < 0.1% of Base Load in 20305% of Base Load in 2030 EPRI analysis targets do not reflect economic considerations, or potential regulatory and siting constraints.

9. 9 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 9% reduction in base load by 2030 Benefit of Achieving Efficiency Target TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

10. 10 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Benefit of Achieving Renewables Target 50 GWe new renewables by 2020; +2 GWe/yr thereafter TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

11. 11 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Benefit of Achieving Nuclear Generation Target 24 GWe new nuclear by 2020; +4 GWe/yr thereafter TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

12. 12 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Benefit of Achieving Advanced Coal Target 46% efficiency by 2020, 49% efficiency by 2030 TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

13. 13 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Benefit of Achieving CCS Target After 2020, all new coal plants capture and store 90% of their CO 2 emissions TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

14. 14 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Benefit of Achieving PHEV and DER Targets 5% shift to DER from base load in 2030 PHEV sales = 10% by 2017; 30% by 2027 TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030

15. 15 © 2007 Electric Power Research Institute, Inc. All rights reserved. EIA Base Case 2007 Electric Sector CO 2 Reduction Potential TechnologyEIA 2007 ReferenceTarget EfficiencyLoad Growth ~ +1.5%/yrLoad Growth ~ +1.1%/yr Renewables30 GWe by 203070 GWe by 2030 Nuclear Generation12.5 GWe by 203064 GWe by 2030 Advanced Coal Generation No Existing Plant Upgrades 40% New Plant Efficiency by 2020–2030 150 GWe Plant Upgrades 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Vehicle Sales by 2017; +2%/yr Thereafter DER< 0.1% of Base Load in 20305% of Base Load in 2030 * Achieving all targets is very aggressive, but potentially feasible.

16. 16 © 2007 Electric Power Research Institute, Inc. All rights reserved. TechnologyEIA 2008 ReferenceTarget EfficiencyLoad Growth ~ +1.05%/yrLoad Growth ~ +0.75%/yr Renewables55 GWe by 2030100 GWe by 2030 Nuclear Generation15 GWe by 203064 GWe by 2030 Advanced Coal Generation No Heat Rate Improvement for Existing Plants 40% New Plant Efficiency by 2020–2030 1-3% Heat Rate Improvement for 130 GWe Existing Plants 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Light-Duty Vehicle Sales by 2017; 33% by 2030 DER< 0.1% of Base Load in 20305% of Base Load in 2030 Achieving all targets is very aggressive, but potentially feasible AEO2007* AEO2008* *Energy Information Administration (EIA) Annual Energy Outlook (AEO) Impact of efficiency measures in Energy Independence and Security Act of 2007 (EISA2007) Updated EPRI “Prism” for 2008

17. 17 © 2008 Electric Power Research Institute, Inc. All rights reserved. What advanced electricity technologies will be needed in a carbon-constrained world?

18. 18 © 2007 Electric Power Research Institute, Inc. All rights reserved. Key Technology Challenges Expanded Advanced Light Water Reactor Deployment Enabling Efficiency, PHEVs, DER via the Smart Distribution Grid Enabling Intermittent Renewables via Advanced Transmission Grids Advanced Coal Plants with CO 2 Capture and Storage

19. 19 © 2007 Electric Power Research Institute, Inc. All rights reserved. Efficient Building Systems Utility Communications Dynamic Systems Control Data Management Distribution Operations Distributed Generation & Storage Plug-In Hybrids Smart End-Use Devices Advanced Metering Consumer Portal & Building EMS Internet Renewables PV “Smart Grid” for Efficiency and Renewables Control Interface

20. 20 © 2007 Electric Power Research Institute, Inc. All rights reserved. 2005201020152020 20072010201520252020 We Energies Chilled Ammonia Pilot Other Pilots (Post-Combustion and Oxy-Combustion) ● Pilots Demonstration Integration Other Demonstrations AEP Mountaineer Southern/SSEB Ph. III ● ● UltraGen Projects Other (e.g., Oxy-Combustion) ● IGCC + CCS Projects ● Ion Transport Membrane O 2 Scale-up ● AEP Northeastern ● 20MW chilled ammonia scaled-up demo Includes storage – injection into wells 20MW chilled ammonia scaled-up demo Includes storage – injection into wells Alternative CCS technology, geology 200MW chilled ammonia CO 2 for EOR 200MW chilled ammonia CO 2 for EOR 1.7 MW size Roadmap for CO 2 Capture and Storage

21. 21 © 2007 Electric Power Research Institute, Inc. All rights reserved. We-Energies / EPRI / Alstom CO 2 Capture Demonstration – Chilled Ammonia 1.7 MW field pilot testing at We-Energies’ Pleasant Prairie Plant Potential future projects ~20 MW pilot at AEP Mountaineer (with storage) (2009-2012) ~200 MW demo at AEP Northeastern (Oklahoma) (2011+)

22. 22 © 2007 Electric Power Research Institute, Inc. All rights reserved. CO 2 Storage Injection Into Geological Formations Saline reservoirs –100’s yrs capacity –Little experience Economical, but lesser capacity options –Depleted oil & gas reservoirs/enhanced oil recovery –Unmineable coal beds/enhanced coal- bed methane recovery Deep ocean injection not acceptable today Courtesy of Peter Cook, CO2CRC

23. 23 © 2007 Electric Power Research Institute, Inc. All rights reserved. Moving from Analysis to Action Creating the Electricity Network of the Future

24. 24 © 2007 Electric Power Research Institute, Inc. All rights reserved. Demonstration Projects Hyper-efficient electric end-use technologies Smart grids Compressed air energy storage Coal with partial CCS Two alternate capture technologies IGCC with partial CCS Lower-cost O 2 production Technology Challenges Enabling Efficiency, PHEVs, DER via the Smart Distribution Grid Enabling Intermittent Renewables via Advanced Transmission Grids Expanded Advanced Light Water Reactor Deployment Advanced Coal Plants with CO 2 Capture and Storage Next Steps: Demonstration Projects

25. 25 © 2007 Electric Power Research Institute, Inc. All rights reserved. What is the potential value of these advanced electricity technologies to the U.S. economy and to consumers?

26. 26 © 2007 Electric Power Research Institute, Inc. All rights reserved. Future CO 2 Emissions Scenarios A C B Policy Scenario A: -2%/yr decline beginning in 2010 Policy Scenario B: -Flat between 2010 - 2020 -3%/yr decline beginning in 2020 -Results in “prism”-like CO 2 constraint on electric sector Policy Scenario C: -Flat between 2010 - 2020 -2%/yr decline beginning in 2020 Suppose the U.S. and other industrialized nations adopt one of the following CO 2 emissions constraints: 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 200020102020203020402050 U.S. Economy CO 2 Emissions (million metric tons) ~50% below today’s emissions

27. 27 © 2007 Electric Power Research Institute, Inc. All rights reserved. Electricity Technology Scenarios Supply-Side Carbon Capture and Storage (CCS) UnavailableAvailable New Nuclear Existing Production Levels ~100 GW Production Can Expand Renewables Costs DeclineCosts Decline Further New Coal and Gas Improvements Plug-in Hybrid Electric Vehicles (PHEV) UnavailableAvailable End-Use Efficiency Improvements Accelerated Improvements Demand-Side Limited Portfolio Full Portfolio

28. 28 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B Full Portfolio 876543210876543210 200020102020203020402050 Trillion kWh per Year 876543210876543210 200020102020203020402050 Trillion kWh per Year Limited Portfolio Impact on Future U.S. Electricity Mix Coal w/CCS Gas w/CCSNuclear Hydro Wind SolarOil Demand Reduction Demand with No Policy Biomass Coal Coal with CCS Gas Nuclear Hydro Wind Biomass Wind

29. 29 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B U.S. Electric Generation in 2030 Limited Portfolio Total: 4,500 TWh Full Portfolio Total: 5,125 TWh 27% 43% 17% 22% 12% 28% 30% 13% 8% Coal w/CCS Gas w/CCS Hydro Other Renewables

30. 30 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B Full Limited $/ton CO 2 * *Real (inflation-adjusted) 2000$ Impact on Carbon Prices Year Low cost, low-carbon sources of electricity allow CO 2 emissions limits to be met at lower market price

31. 31 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B Impact on Wholesale Electricity Prices Full Limited $/MWh* Index Relative to Year 2000 *Real (inflation-adjusted) 2000$ Year A de-carbonized electricity sector is less susceptible to the CO 2 market price +260% +45%

32. 32 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B Impact on Natural Gas Markets Limited PortfolioFull Portfolio

33. 33 © 2007 Electric Power Research Institute, Inc. All rights reserved. Policy Scenario B -1.5 -0.5 0.0 Impact on U.S. Economy Change in GDP Discounted through 2050 ($Trillions) Avoided Policy Costs Due to Advanced Technology Cost of Policy Full Portfolio Limited Portfolio + PHEV Only + Renewables Only + Efficiency Only + Nuclear Only + CCS Only Value of R&D Investment $1 Trillion

34. 34 © 2007 Electric Power Research Institute, Inc. All rights reserved. Impact on U.S. Economy Change in GDP Discounted through 2050 ($Trillions) Policy Scenario A: 2010 – 2% Policy Scenario C: 2020 – 2% Policy Scenario B: 2020 – 3% Cost of Policy Technology investments reduce policy cost by 50-66% Full Limited Full Limited Full Limited Avoided Policy Costs Due to Advanced Technology

35. 35 © 2007 Electric Power Research Institute, Inc. All rights reserved. The Bottom Line (Again) The technical potential exists for the U.S. electricity sector to significantly reduce its CO 2 emissions over the next several decades Much of the needed technology isn’t available yet – substantial R&D, demonstration is required No one technology will be a silver bullet – a portfolio of technologies will be needed A low-cost, low-carbon portfolio of electricity technologies can significantly reduce the costs of climate policy Flexible, market-based climate policies offer significant economic advantage over sector-specific approaches