Coal/Lignite 69%

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November 5, 2009Louisiana Tech University Energy Systems Conference

Transformation to the Energy Transformation to the Energy Resource Mix of the Future Resource Mix of the Future

Nicholas AkinsExecutive Vice President – Generation

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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 statesIndustry-leading size and scale of

assets:Asset Size

IndustryRank

Domestic Generation ~38,300 MW # 2Transmission ~39,000 miles # 1Distribution ~213,000 miles # 1

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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

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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

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Electricity Generation: U.S. Government Forecast

3875 TWh 4777 TWh

2006 2030

Reference case from EIA “Annual Energy Outlook 2009”

23% Growth

Coal49%

Natural Gas20%

Nuclear 19%

Other1%Renewable

Sources9%

Petroleum2%

Coal46%

Natural Gas20%

Nuclear 18%

Other1%

Petroleum1%

Renewable Sources

14%

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Waxman-Markey emission reductions

Total US GHG Emissions vs. Legislative Caps

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

US

GH

G (

MM

met

ric to

ns)

1990 Levels

Lieberman-Warner-Boxer

Waxman-Markey

Dingell-Boucher

BAU_AEO 2009 Update

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7

2009 EPRI Prism

2007 EIA Base Case

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8

2009 Prism Technology Targets

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9

Generation Mix & Electricity Costs--2030

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10

Generation Mix & Electricity Costs--2050

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How can these reductions be achieved?

Technology developed and quickly deployed

Establishing enabling public policies

Financing through public/private partnerships

Investment recovery from ratepayers

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CO2 Capture Techniques

Post-Combustion Capture Conventional or Advanced Amines, Chilled Ammonia Key Points

Amine technologies commercially available in other industrial applications Relatively low CO2 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 CO2 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 H2-based fuel, which has not yet been proven at commercial scale Creates stream of very high CO2 concentration Parasitic demand (~20%) for CO2 capture - lower than amine or oxy-coal options

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Mountaineer CCS demonstration project

Project Validation 20 MWe scale

(Scale-up of Alstom/EPRI 1.7 MW field pilot at WE Energies)

~100,000 tons CO2 per year In operation 3Q 2009 Approximate total cost $80 – $100M Using Alstom “Chilled Ammonia” Technology Located at the AEP Mountaineer Plant in WV CO2 for geologic storage

Mountaineer Plant (WV)

2009 Commercial Operation

Chilled Ammonia

CO2 (Battelle)

Alstom

Will capture and sequester 100,000 metric tons of

CO2/year Photo courtesy of Astom and AEP

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Gas to StackChilled

Water

Gas Cooling

and Cleaning

Flue Gas from FGD

CO2

Cooled Flue Gas

CO2

CO2 Regenerator

CO2

AbsorberCO2

Clean CO2 to Storage

Reagent

Heat and Pressure

Reagent

CO2

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 ProcessPost-Combustion Capture

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Mountaineer Storage andMonitoring System Design

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Major issues

Storage issues: Property rights Liability Permit requirements USEPA designation of

CO2

State cooperative agreements/consistency

Capture issues: CO2 absorption Steam requirement for

liberation of CO2 Power plant integration

and optimization Parasitic load

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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.orgMidwest Governors Association Energy Stewardship Platform At

www.midwesterngovernors.org

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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….

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Efficiency of 765-kV Transmission

Advanced transmission enables energy savings through efficiency.

Advanced transmission enables energy savings through efficiency.

A US 765-kV transmission overlay would reduce peak load losses by more than 10 GW and CO2 emissions

by some 15 million metric tons annually.

A US 765-kV transmission overlay would reduce peak load losses by more than 10 GW and CO2 emissions

by some 15 million metric tons annually.