CALIFORNIA ENERGY COMMISSION Carbon Management: A State Energy R&D Perspective Terry Surles California Energy Commission AAAS National Meeting Symposium on Carbon Management San Francisco, California February 17, 2001

CALIFORNIA ENERGY COMMISSION Carbon Management: An Approach for Integrated Energy Systems Management Carbon Management Efficiency - operational - DSM - end use Decarbonization - “clean energy” Sequestration

CALIFORNIA ENERGY COMMISSION Why Worry about Energy? (Circa 12/98)  Petroleum selling at < $11/barrel  Proven natural gas reserves at 175 Tcf and $2/MBtu  Abundant supply has depressed uranium prices (< $80/kg U)  There is a lot of cheap coal (~$26/ton)  Lots of generating capacity and reserve margin

CALIFORNIA ENERGY COMMISSION We’re Concerned Now  Oil is at $30/barrel  Natural gas price is at $18/Mbtu and demand (at least temporarily) is depleting reserves  Energy use impacts global commons (7.4 Gt C/yr. in 1997)  Deregulation has changed playing field  New regulations and international policies  Regional reserve margins are problematic

CALIFORNIA ENERGY COMMISSION California’s Concerns are Similar in Some Areas  Increased natural gas use  Continuing need for improvements in demand-side energy technologies  Aging fleet of generators  Financial constraints  Climate change uncertainties  NIMBY  “Needle peaks”

CALIFORNIA ENERGY COMMISSION California Context: Additional Factors  Demographics  High-technology industrial sectors  Social values  Air quality  Water availability and quality  Seismic  In-state R&D excellence

CALIFORNIA ENERGY COMMISSION CA Energy Use by Sector (1996) 46% 31% 13%

CALIFORNIA ENERGY COMMISSION Production of Electricity by Source Imports NG-15.5% Hydro- 32.6% Coal- 51.9% Wind/solar- 1.5% Biomass/waste- 2.3% Oil- 0.3% Natural Gas Hydro 17.9% 30.6% 18.9% Nuclear Coal 15.4% 8% 258,801 GWh3,111,441 GWh Coal 55.8% Nuclear 21.7% Hydro 10.6% Nat Gas8.4% Wind/solar % Geothermal- 0.2% Imports- 1.1% Oil- 2.2%

CALIFORNIA ENERGY COMMISSION Peak Demand is Increasing Faster than Newly Installed Capacity Megawatts

CALIFORNIA ENERGY COMMISSION Rising Peak Demand Threatens Reliability and Power Quality *During “no touch” periods, the ISO demands that generators refrain from downtime for maintenance Number of Power Emergencies in California

CALIFORNIA ENERGY COMMISSION Market Uncertainty- Price Volatility Impacts Energy Delivery and Use Market Clearing Price ($/Megawatt-hour)

CALIFORNIA ENERGY COMMISSION Contribution to ISO Peak Demand August 16, 2001 (MW) Commercial AC Commercial Lighting Residential AC Other MW ,509

CALIFORNIA ENERGY COMMISSION 2000/2001 Shocks Have Made Energy a Priority  AB 970 w Expedited Siting for Simple Peaking Facilities and Facilities that Pose No Significant Environmental Risk w Implementation of $50 M Energy Efficiency Grant Program  AB 995 w Extends Surcharge to Fund Public Purpose Efficiency, Renewables, and R&D Programs for 10 years  SB 1298: ARB to Establish Standards for DG Technologies  SB 1345: Grants to Purchasers of Solar and DG Systems  SB 1771: Establishes Greenhouse Gas Emissions Inventory  New Legislation and Executive Orders

CALIFORNIA ENERGY COMMISSION California has Established a $62M/yr Public Interest Energy Research Program (PIER) California’s Energy Future Economy: Affordable Solutions Quality: Reliable and Available Environment: Protect and Enhance

CALIFORNIA ENERGY COMMISSION Funded Program Areas to Date (in millions) Supply$26.4 Renewables, EPAG Demand$40.1 Buildings, Ind/Ag/Water $34.9 Strategic, Environmental

CALIFORNIA ENERGY COMMISSION Attributes for Addressing State Issues Program Integration Balanced Technology Portfolio - Temporal -Technology -Risk Technology Partnerships - Universities - Industry - Federal Focus on California - Specific to State needs

CALIFORNIA ENERGY COMMISSION Our R&D Program must Address Future Market Scenario Regulated De-regulated De-centralizedCentralized Status Quo New energy systems Same players Supermarket of Choices Same energy systems New players

CALIFORNIA ENERGY COMMISSION Given Our Limited Budget and California Characteristics, We’re Not Going to...  Build the next GCM or other large scale models  Work on Generation IV nuclear technologies  Work on most Vision 21 coal technologies  Duplicate other efforts well-funded by DOE, EPRI and others  Duplicate specific R&D already funded by industry

CALIFORNIA ENERGY COMMISSION We will Couple the California Context with Precepts of Carbon Management  End-use efficiency and demand-side technologies w buildings and appliance technologies w manufacturing, agriculture, water efficiency w storage and conversion technologies  Clean technologies w renewables and small-scale fossil w generation and control technologies that enhance environment w power conditioning w new technologies with collateral benefits  Enabling technology improvement and development w development of sensors, models, systems for real-time pricing w models, sensors, monitoring systems to improve T&D system operation and integration of DG w science base and model improvements to evaluate impacts of energy systems w development of new integrated systems and economic models to improve understanding of deregulated market structure

CALIFORNIA ENERGY COMMISSION Carbon Management and California: An Appropriate Paradigm for State R&D Program Environment Economy Reliability Couple state and external issues Long-term solutions couple to current events Integration with external R&D provides flexibility

CALIFORNIA ENERGY COMMISSION Carbon Management: An Umbrella for Global, National, State and Local Issues Global - Climate Change - Resource Competition Nation - Security - Environment - Economy State -Affordability - Environment - Reliability Local - End use - NIMBY