Electricity Technologies in a Carbon-Constrained World

Electricity Technologies in a Carbon-Constrained World

Rural Electric Statewide Managers’ Association

January 18, 2008

Bryan HanneganVice President, Environment

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


Large and Successful R&D Collaboration

• More than 450 participants in over 40 countries

– Over 90% of North American electricity generated

• 66 technical programs

– Generation

– Power Delivery and Markets

– Nuclear

– Environment

– Technology Innovation

• 1600+ R&D projects annually

• 10 to 1 average funding leverage

• Research is directed to the public benefit

• Limited regulatory, judicial and legislative participation


EPRI’s Role

Depends Upon The Specific Technology or Discipline

National Laboratories

Universities

Suppliers

Vendors

EPRI

BasicResearch

&Development

TechnologyCommercialization

CollaborativeTechnology

DevelopmentIntegrationApplication


Context

• Growing scientific and public opinion that CO2 emissions are contributing to climate change…

• Priority of 110th Congress …

• U.S. responsible for 1/4 of global CO2 emissions…

• Electricity sector responsible for 1/3 of U.S. CO2 emissions…

• General agreement that technology solutions are needed…

How can the electricity industry respond?


With accelerated deployment of advanced electricity technologies, how quickly could the U.S. electric

sector cut its CO2 emissions?


0

500

1000

1500

2000

2500

3000

3500

1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

ctri

c S

ecto

rC

O2

Em

issi

on

s (m

illio

n m

etri

c to

ns)

U.S. Electricity Sector CO2 Emissions

• Base case from EIA “Annual Energy Outlook 2007”

– includes some efficiency, new renewables, new nuclear

– assumes no CO2 capture or storage due to high costs

Using EPRI deployment assumptions, calculate change in CO2 relative to EIA base case


Technology Deployment Targets

Technology EIA 2007 Base Case EPRI Analysis Target*

Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr

Renewables 30 GWe by 2030 70 GWe by 2030

Nuclear Generation 12.5 GWe by 2030 64 GWe by 2030

Advanced Coal GenerationNo Existing Plant Upgrades

40% New Plant Efficiencyby 2020–2030

150 GWe Plant Upgrades

46% New Plant Efficiency by 2020; 49% in 2030

Carbon Capture and Storage (CCS)

NoneWidely Available and Deployed

After 2020

Plug-in Hybrid Electric Vehicles (PHEV)

None10% of New Vehicle Sales by

2017; +2%/yr Thereafter

Distributed Energy Resources (DER) (including distributed solar)

< 0.1% of Base Load in 2030 5% of Base Load in 2030

EPRI analysis targets do not reflect economic considerations, or potential regulatory and siting constraints.


0

500

1000

1500

2000

2500

3000

3500

1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

ctri

c S

ecto

rC

O2 E

mis

sio

ns

(mill

ion

met

ric

ton

s)

EIA Base Case 2007

Electric Sector CO2 Reduction Potential

Technology EIA 2007 Reference Target

Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr

Renewables 30 GWe by 2030 70 GWe by 2030

Nuclear Generation 12.5 GWe by 2030 64 GWe by 2030

Advanced Coal GenerationNo Existing Plant Upgrades

40% New Plant Efficiency by 2020–2030

150 GWe Plant Upgrades

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Vehicle Sales by 2017;

+2%/yr Thereafter

DER < 0.1% of Base Load in 2030 5% of Base Load in 2030

* Achieving all targets is very aggressive, but potentially feasible.


Key Technology Challenges

• Smart grids and communications infrastructures to enable end-use efficiency and demand response, distributed generation, and PHEVs.

• Transmission grids and associated energy storage infrastructures with the capacity and reliability to operate with 20–30% intermittent renewables in specific regions.

• New advanced light-water nuclear reactors combined with continued safe and economic operation of the existing nuclear fleet and a viable strategy for managing spent fuel.

• Coal-based generation units with CCS operating with 90+% CO2 capture and with the associated infrastructure to transport and permanently store CO2.


“Smart” Grid for Efficiency and Renewables

EfficientBuildingSystems

UtilityCommunications

DynamicSystemsControl

DataManagement

DistributionOperations

DistributedGenerationand Storage

Plug-In Hybrids

SmartEnd-UseDevices

ControlInterface

AdvancedMetering

Consumer Portaland Building EMS

Internet Renewables

PV


*Westinghouse AP1000 (1115 MWe)

GE ESBWR (1535 MWe)

AREVA US EPR (1600 MWe)

*ABWR (1371 MWe)

Near-Term Nuclear Plant Deployment

MHI APWR (1700 MWe)

* Design Certified

Current Status of Announced Intentions

Technology Units

AP1000 10

TBD 10

EPR 5

ESBWR 3

ABWR 2

APWR 2


Coal with CCS Development Timeline

2005 2010 2015 20202007 2010 2015 20252020

Chilled Ammonia Pilot

Other Pilots

●Pilots

Demonstration

Integration

Other Demonstrations

AEP Mountaineer

Southern/SSEB Ph 3Basin Electric

●●

●

UltraGen I

UltraGen II●

●

FutureGen●

Need Multiple Pilots and Demonstrations in Parallel


What is the potential value of these advanced electricity technologies to

the U.S. economy and to consumers?


Future CO2 Emissions Scenarios

A CB

Policy Scenario A:

- 2%/yr decline beginning in 2010

Policy Scenario B:

- Flat between 2010 - 2020


- Results in “prism”-like CO2 constraint on electric sector

Policy Scenario C:

- Flat between 2010 - 2020


Suppose the U.S. and other industrialized nations adopt one of the following CO2 emissions constraints:

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2000 2010 2020 2030 2040 2050

U.S

. E

co

no

my

C

O2

Em

iss

ion

s (

mil

lio

n m

etr

ic t

on

s)


Electricity Technology Scenarios

Supply-Side

Carbon Capture and Storage (CCS) Unavailable Available

New Nuclear Existing Production Levels

Production Can Expand

Renewables Costs Decline Costs Decline Further

New Coal and Gas Improvements Improvements

Plug-in Hybrid Electric Vehicles (PHEV) Unavailable Available

End-Use Efficiency ImprovementsAccelerated

Improvements

Demand-Side

Limited Portfolio

Full Portfolio


Policy Scenario B

0

1

2

3

4

5

6

7

8

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

yea

r

Emissions are reduced in two ways:

• Carbon penalty drives price up, demand down

• Supply shifts to less carbon-intensive technologies

U.S. Electric Generation: Limited Portfolio

Coal

w/CCS

Gas

w/CCS Nuclear

Hydro

Wind

SolarOil

Demand Reduction

Demand with No Policy

Biomass


Policy Scenario B

0

1

2

3

4

5

6

7

8

2000 2010 2020 2030 2040 2050

Tri

llio

n k

Wh

per

yea

r

U.S. Electric Generation: Full Portfolio

• Demand reduction is limited, preserving market and managing cost to economy

• Availability of CCS and expanded nuclear allow large-scale low-carbon generation

Coal

w/CCS

Gas

w/CCS Nuclear

Hydro

Wind

SolarOil

Demand Reduction

Demand with No Policy

Biomass


Policy Scenario B

2000 2010 2020 2030 2040 2050

0

50

100

150

200

250

300

350

Carbon Price Projections

Carbon PriceFull

Limited

$/to

n C

O2

($20

00)


Policy Scenario B

0

20

40

60

80

100

120

140

160

180

2000 2010 2020 2030 2040 2050

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Wholesale Electricity Price

Full

Limited

$/M

Wh*

Inde

x R

elat

ive

to Y

ear

2000

*Real (inflation-adjusted) 2000$

+250%

+50%


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


Policy Scenario B

Natural Gas Markets

0

5

10

15

20

25

30

2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050

Nat

ura

l G

as C

on

sum

pti

on

(T

CF

)

0

2

4

6

8

10

12

14

Nat

ura

l G

as W

ellh

ead

Pri

ce (

$/M

CF

)

Non-Electric Sector

Electric Sector

Price

Limited Portfolio Full Portfolio


Policy Scenario B

-1.5

-1.0

-0.5

0.0

Impact on U.S. EconomyC

han

ge

in G

DP

Dis

cou

nte

d t

hro

ug

h 2

050

($T

rilli

on

s)

Avoided Policy Costs Due to Advanced Technology

Cost of Policy

Fu

ll P

ort

folio

Lim

ited

Po

rtfo

lio

+ P

HE

V O

nly

+ R

enew

able

s O

nly

+ E

ffic

ien

cy O

nly

+ N

ucl

ear

On

ly

+ C

CS

On

ly

Value of R&D Investment

$1 T

rilli

on


-2.0

-1.5

-1.0

-0.5

0.0

Economic Cost SensitivityC

han

ge

in G

DP

Dis

cou

nte

d t

hro

ug

h 2

050

($T

rilli

on

s)

Policy Scenario A: 2010 – 2%

Policy Scenario C: 2020 – 2%

Policy Scenario B: 2020 – 3%

Cost of Policy

Loss of “when” flexibility increases policy cost, but increases technology value

Fu

ll

Lim

ited

Fu

ll

Lim

ited

Fu

ll

Lim

ited

Avoided Policy Costs Due to Advanced Technology


Summary of Economic Analysis

Absent advanced electricity technologies, CO2 constraints result in:

• Price-induced “demand reduction”

• Fuel switching to natural gas

• Higher electricity prices

• High cost to U.S. economy

With advanced electricity technologies, CO2 constraints result in:

• Growth in electrification

• Expanded use of coal (w/CCS) and nuclear

• Lower, more stable electricity prices

• Reduced cost to U.S. economy


How might the specific details of climate policy design make a

difference?

With a nod of thanks to Anne and CRA …


EPRI/CRA Analysis of CA Climate Policy

California has set ambitious climate policy goals

• Governor: GHG emission reductions of 80% below 1990 levels by 2050

• AB 32: 6 GHGs; 1990 levels by 2020; uncertain post-2020

Early economic studies show net benefit to state

• Climate Action Team Report – March 2006 +$4 billion and +83,000 jobs

• UC Berkeley Report – January 2006 +$60 billion and +20,000 jobs

• Center for Clean Air Policy – January 2006 no net cost to consumers

Later criticism of early studies:

• Omit key cost components of some GHG reduction options

• Overestimate savings of some GHG reduction options

• Ignore difficulty of enacting policies required for some GHG options


MS-MRTEPPA

Global Trade Models

MS-MRTEPPA

Global Trade Models

MRN

State-level macroeconomic

model

MRN

State-level macroeconomic

model

NEEM

National electricity

model

NEEM

National electricity

model

Scenario Definition

• Electricity prices• Coal prices• Electricity gas use

• Electricity demand• Carbon price• Industrial coal use

NEEM Output• Electricity prices• Allowance prices• Coal prices• Unit-level environmental

retrofits• New capacity

Models included in iterative process

Our Approach

Integrated Electricity Modeling System


Implementation Scenarios

• Total of 20 scenarios reviewed that represent the full range of implementation possibilities, e.g.

– Pure Trade – Comprehensive cap-and-trade program with standard assumptions about technology, except no new nuclear and renewables-only imports

– LCA –low-cost-assumptions: high end energy efficiency, lowest capital costs for renewables, rapid introduction rate of non-emitting transportation backstop, doubling DSM benefits of “DSM Benefit” case

– SV-LCA – Same as Pure Trade but with price safety-valve set at CO2 price in scenario with low-cost-assumptions (LCA)

– Trgt40 – In 2050, achieve 40% emissions reduction below 1990 levels, with no new nuclear and renewables-only imports

– Trgt80 – In 2050, achieve 80% emissions reduction below 1990 levels, with no new nuclear and renewables-only imports

– Nuclear80 – Same as Trgt80, but allow unrestricted imports of nuclear

– RPS 20 – Meet State Renewable Portfolio Standard (RPS) of 20% renewable energy by 2020, but don’t impose an overall emissions cap


Projected California CO2 Emissions

0

110

220

330

440

550

660

770

880

2010 2015 2020 2025 2030 2035 2040 2045 2050

(Mil

lio

n m

etri

c to

ns

of

CO

2)

Baseline

RPS_20

SV_LCA

Pure_Trade

Trgt40

Nuclear 80 &Trgt80

1990 Levels of Emission


California CO2 Permit Prices

0

100

200

300

400

500

2015 2020 2025 2030 2035 2040 2045 2050

($ p

er m

etri

c to

n o

f C

O2)

0.0

0.9

1.8

2.8

3.7

($ p

er g

allo

n o

f g

aso

lin

e eq

uiv

alen

t)

Pure_Trade Trgt40 Trgt80 Nuclear80 SV_LCA


Wholesale Electricity Prices Increase

0

10

20

30

40

50

60

70

80

90

100

2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

(200

3$/M

Wh

)

Baseline

Pure_Trade

Higher electricity prices are a direct result of carbon constraint: +62% by 2020 under Pure_Trade scenario


Higher Prices Reduce Electricity Demand …

0

100

200

300

400

500

600

2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

(MW

h)

Baseline

Pure_Trade


CC: 6.7

CC: -10.5

Coal: 0.9

Coal: -14.1

Geo: 3.4

PeakG: 1.3

STOG: -10.6

STOG: 1.5

WT: 20.1

-30

-20

-10

0

10

20

30

Instate Rest-WECC

De

lta

Ca

pa

cit

y (

GW

)

Other

WT

PV

STOG

PS

PeakG

Nuc

Hydro

Geo

CT

Coal

CC

Other: 2.0

… and Regional Generation Mix Changes

Wind and geothermal increase in-State…

Out-of-state coal capacity doesn’t get built

Gas-fired power plants move out of state


CA Electric Sector Response

Under the Pure_Trade scenario, electric-related CO2 cuts fall into 3 “buckets”:

• Reductions in short-term purchases of imported power

• Changes in longer-term contracts for imported power: coal contracts go to zero

• Changes in instate generation mix, including out of state plants wholly owned by CA LSEs


But Electricity Grows as Share of Total Energyk

Wh

/ To

tal F

ina

l En

erg

y

0

5

10

15

20

25

30

35

2010 2020 2030 2040 2050

Pure_Trade

Trgt40

Trgt80

California


New Investments … But Consumers Spend Less

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

2010 2015 2020 2025 2030 2035 2040

Year

Pec

ent

Ch

ang

e fr

om

Bas

elin

e

Consum

GSP

Invest

Pure_Trade Scenario


Cost to California Depends on Implementation

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 2000 4000 6000 8000 10000 12000 14000 16000 18000

Cumulative Emission Reduction (MMTCO2)

Wel

fare

Lo

ss t

hro

ug

h 2

050

(%

)

0

100

200

300

400

500

600

Wel

fare

Lo

ss t

hro

ug

h 2

050

($

Bil

lio

ns)Trgt80

Trgt40

SV_LCA

Pure_Trade

Nuclear80

DSMCost

Max_Imp

RPS33

RPS20

LCA

DSMBenefit

OffSets

SS_Cap

achieve 1990 emissions level

Comprehensive Cap-and-Trade:

Low Cost Assumptions: $104 billion OffSets: $196 billion Pure_Trade: $229 billion

Proxies for Command and Control : Sector Specific Caps : $297 billion (optimistic) DSMBenefit: $206 billion (pessimistic) DSMCost: $367 billion


Summary of Findings

All policies analyzed showed real economic costs to state• Costs ranged from -0.24% to -1.17% through 2050

Broad, market-based cap-and-trade policies are most cost-effective• Command-and-control or sector-specific caps are more costly• An allowance price “safety valve” would limit costs, but fewer CO2 reductions

Electric sector plays a pivotal role in achieving CO2 targets• Changes in power imports, in-state generation mix result• Electrification of other sectors enables them to meet their CO2 goals• Cost estimates do not include “system stability” costs

Offsets can play an important role in reducing the costs• CAT estimates of in-state forestry offsets $33 billion savings

Role of out-of-state electricity generation needs careful examination• Stronger rules to prevent “leakage” would drive up costs to California


EPRI Study Conclusions

• The technical potential exists for the U.S. electricity sector to significantly reduce its CO2 emissions over the next several decades.

• No one technology will be a silver bullet – a portfolio of technologies will be needed.

• Much of the needed technology isn’t available yet – substantial R&D, demonstration is required.

• 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

Electricity Technologies in a Carbon-Constrained World

Documents

electric sector

environmental research

gwe new renewables

new plant efficiency

future of electricity

electricity industry

base load

co2 capture