1. 1 Transformation to the Energy Resource Mix of the Future November 5, 2009 Louisiana Tech University Energy Systems Conference Transformation to the Energy Resource Mix of the Future Nicholas Akins Executive Vice President – Generation

2. 2 Coal/Lignite 69% Nat. Gas/Oil 20% Nuclear 6% Pumped Storage/ Hydro/Wind 5% AEP’s Generation Fleet >38,000 MW Capacity Company Overview 5.2 million customers in 11 states Industry-leading size and scale of assets : AssetSize Industry Rank Domestic Generation~38,300 MW# 2 Transmission~39,000 miles# 1 Distribution~213,000 miles# 1

3. 3 U.S. Policymaker Goals  Addressing rising electricity demand while reducing power plant emissions  Ensuring electricity remains affordable, reliable and secure from domestic sources  Moderating electricity price increases  Sustaining the engine of economic growth  Increasing environmental protection

4. 4 Key Points No silver bullet – Portfolio mix of resources will be required to satisfy future energy needs Expected federal environmental policy will require further emissions reductions from existing and future coal and natural gas fired power plants Carbon capture and storage and EOR are critically needed technologies for baseload generation to comply with anticipated federal CO2 emissions reduction requirements Financial market recovery is necessary to enable the transformation of a decarbonized portfolio

5. 5 Electricity Generation: U.S. Government Forecast 3875 TWh 4777 TWh 20062030 Reference case from EIA “Annual Energy Outlook 2009” 23% Growth

6. 6 Waxman-Markey emission reductions

7. 7 7 2009 EPRI Prism 2007 EIA Base Case

8. 8 8 2009 Prism Technology Targets

9. 9 9 Generation Mix & Electricity Costs--2030

10. 10 Generation Mix & Electricity Costs--2050

11. 11 How can these reductions be achieved? Technology developed and quickly deployed Establishing enabling public policies Financing through public/private partnerships Investment recovery from ratepayers

12. 12 CO 2 Capture Techniques Post-Combustion Capture Conventional or Advanced Amines, Chilled Ammonia Key Points Amine technologies commercially available in other industrial applications Relatively low CO 2 concentration in flue gas – More difficult to capture than other approaches High parasitic demand Conventional Amine ~25-30%, Chilled Ammonia target ~10-15% Amines require very clean flue gas Modified-Combustion Capture Oxy-coal Key Points Technology not yet proven at commercial scale Creates stream of very high CO 2 concentration High parasitic demand, >25% Pre-Combustion Capture IGCC with Water-Gas Shift – FutureGen Key Points Most of the processes commercially available in other industrial applications Turbine modified for H 2 -based fuel, which has not yet been proven at commercial scale Creates stream of very high CO 2 concentration Parasitic demand (~20%) for CO 2 capture - lower than amine or oxy-coal options

13. 13 Mountaineer CCS demonstration project Project Validation 20 MW e scale (Scale-up of Alstom/EPRI 1.7 MW field pilot at WE Energies) ~100,000 tons CO 2 per year In operation 3Q 2009 Approximate total cost $80 – $100M Using Alstom “Chilled Ammonia” Technology Located at the AEP Mountaineer Plant in WV CO 2 for geologic storage Mountaineer Plant (WV) 2009 Commercial Operation Chilled Ammonia CO 2 ( Battelle ) Alstom Will capture and sequester 100,000 metric tons of CO2/year Photo courtesy of Astom and AEP

14. 14 Gas to Stack Chilled Water Gas Cooling and Cleaning Flue Gas from FGD CO 2 Cooled Flue Gas CO 2 CO 2 Regenerator CO 2 Absorber CO 2 Clean CO 2 to Storage Reagent Heat and Pressure Reagent CO 2 Reactions: CO2 (g)  ==  CO2 (aq) (NH4)2CO3 (aq) + CO2 (aq) + H2O  ==  2(NH4)HCO3 (aq) (NH4)HCO3 (aq)  ===  (NH4)HCO3 (s) (NH4)2CO3  ===  (NH4)NH2CO2 + H2O Graphics curtsey of Alstom Power Alstom’s Chilled Ammonia Process Post-Combustion Capture

15. 15 Mountaineer Storage and Monitoring System Design

16. 16 Major issues Storage issues: Property rights Liability Permit requirements USEPA designation of CO 2 State cooperative agreements/consistency Capture issues: CO2 absorption Steam requirement for liberation of CO2 Power plant integration and optimization Parasitic load

17. 17 Complimentary Technologies Toward a Cleanly Powered Grid AEP is investing in these new technologies: New advanced coal technologies to gasify coal and carbon capture to retrofit to existing and new coal and natural gas units with storage or for enhanced oil and natural gas recovery; Renewable energy (especially Wind, Biomass); Supply and demand side energy efficiency; New nuclear units; New transmission infrastructure to make our system more efficient; Offsets (Forestry, Methane) Power to Change Deployment Plan at www.wbcsd.orgwww.wbcsd.org Midwest Governors Association Energy Stewardship Platform At www.midwesterngovernors.org

18. 18 Why change now?  Generation profile is shifting and will continue to shift dramatically:  New large scale renewables need to be interconnected that are today largely electrically isolated  Environmental requirements may require retirement of large fossil units, potentially at a magnitude never before faced in this country  Generation needs to be deliverable to load not simply interconnected. Attention must be focused on the robustness of the grid.  The search for a “bright line” between reliability and economic projects is increasingly artificial. What needs to change?  A new energy supply paradigm requires a different type of transmission planning to enable greater capacity and flexibility.  Cost allocation principles must be broadened to encompass this strategic new build.  Siting processes which are aligned with state, regional and national energy policy objectives. Today’s Challenges….

19. 19 Efficiency of 765-kV Transmission Advanced transmission enables energy savings through efficiency. A US 765-kV transmission overlay would reduce peak load losses by more than 10 GW and CO 2 emissions by some 15 million metric tons annually.