1. 1 © 2008 Electric Power Research Institute, Inc. All rights reserved. Key Challenges Facing the Electricity Sector National Association of Regulatory Utility Commissioners 2008 Summer Meeting Portland, OR Revis James Director, Energy Technology Assessment Center Electric Power Research Institute

2. 2 © 2008 Electric Power Research Institute, Inc. All rights reserved. Key Points Technology trends and mix are driven by long-term growth in electricity demand and expected CO 2 emissions constraints. The scale of technology expansion and transformation will be huge. Expansion of major technologies will be necessary. A diverse, full technology portfolio –lowers GDP impact of CO 2 emissions constraints –creates long-term, growing need for workforce to support deployment

3. 3 © 2008 Electric Power Research Institute, Inc. All rights reserved. The Scale of Electricity Demand Now: 2007 U.S. electricity consumption ~ 3800 TWh Future (EIA 2008 Annual Energy Outlook) –Final report projects 1046 TWh (29%) increase in U.S. electricity consumption from 2006 - 2030. –About same as addition of new load equivalent to 2006 consumption of Texas, California, Florida, Ohio, Pennsylvania

4. 4 © 2008 Electric Power Research Institute, Inc. All rights reserved. The Scale of Emissions Reductions Source: World Resources Institute, “COMPARISON OF LEGISLATIVE CLIMATE CHANGE TARGETS”, June 18, 2008, www.wri.org/usclimatetargets Total 2006 emissions for all U.S. electric utility companies ~ 2.3B MMt CO 2

5. 5 © 2008 Electric Power Research Institute, Inc. All rights reserved. MRO 2010/2010 WECC Canada 2007/2009 (Winter) Rocky Mtn. 2009/2011 California 2009/2011 AZ/NM/SNV 2009/2011 New England 2009/2009 New York 2011/2016+ RFC 2012/2013 SPP 2015/2016+ ERCOT 2009/2016+ When resources drop below target …including uncommitted resources Key Capacity Reserve Margins are Declining (2007 NERC Reliability Study)

6. 6 © 2008 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. AEO2008*(Ref) *Energy Information Administration (EIA) Annual Energy Outlook (AEO) Technical Potential for CO 2 Reductions

7. 7 © 2008 Electric Power Research Institute, Inc. All rights reserved. The Cost of CO 2 Emissions Constraints (2000 – 2050)

8. 8 © 2008 Electric Power Research Institute, Inc. All rights reserved. Meet Demand via Natural Gas Emissions Reductions via Renewables and Efficiency Nuclear Expands Transformation of Coal Fleet: higher efficiency new plants + CCS, Possible CCS retrofits to existing plants 200020302010202020502040 Timeframes for Key Technologies Electric Transportation

9. 9 © 2008 Electric Power Research Institute, Inc. All rights reserved. Preliminary Construction Manpower Needs (EIA 2008 AEO Capacity Projections, EPRI 2007 TAG Data)

10. 10 © 2008 Electric Power Research Institute, Inc. All rights reserved. Conclusions The scale of technology expansion and transformation will be huge. Under a CO 2 emissions reduction policy, electricity production costs will increase and Gross Domestic Product (GDP) will be less. A diverse, full technology portfolio –lowers GDP impact of CO 2 emissions constraints –long-term, growing need for workforce to support deployment –Decarbonized electricity will play a vital role Major expansions in all of the major technology areas will be needed. Considerable manpower will be needed to suppor these expansions.

11. Image courtesy of NASA Visible Earth

12. 12 © 2008 Electric Power Research Institute, Inc. All rights reserved. Back-up Slides

13. 13 © 2008 Electric Power Research Institute, Inc. All rights reserved. +45% *Economy-wide CO 2 emissions capped at 2010 levels until 2020 and then reduced at 3%/yr +260% Contrasting Technology Strategies

14. 14 © 2008 Electric Power Research Institute, Inc. All rights reserved. 0.0 -0.5 -1.5 Change in GDP Discounted Through 2050 ($Trillions) Cost of Policy Reduction in Policy Cost with Advanced Technology Value of R&D Investment Limited Portfolio + PHEV Only + Renewables Only + Efficiency Only + Nuclear Only + CCS Only Full Portfolio $1 Trillion Full Technology Portfolio Reduces Costs of a CO 2 Emissions Reduction Policy by 60%

15. 15 © 2008 Electric Power Research Institute, Inc. All rights reserved. Full Limited $/MWh* Index Relative to Year 2000 *Real (inflation-adjusted) 2000$ Year 0 20 40 60 80 100 120 140 160 180 200020102020203020402050 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 In the Full Portfolio the price of electricity has a low CO 2 cost component and increases less Wholesale Electricity Price