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
3© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
4© 2007 Electric Power Research Institute, Inc. All rights reserved.
EPRI’s Role
Depends Upon The Specific Technology or Discipline
National Laboratories
Universities
Suppliers
Vendors
EPRI
BasicResearch
&Development
TechnologyCommercialization
CollaborativeTechnology
DevelopmentIntegrationApplication
5© 2007 Electric Power Research Institute, Inc. All rights reserved.
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?
6© 2007 Electric Power Research Institute, Inc. All rights reserved.
With accelerated deployment of advanced electricity technologies, how quickly could the U.S. electric
sector cut its CO2 emissions?
7© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
8© 2007 Electric Power Research Institute, Inc. All rights reserved.
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.
15© 2007 Electric Power Research Institute, Inc. All rights reserved.
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.
16© 2007 Electric Power Research Institute, Inc. All rights reserved.
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.
17© 2007 Electric Power Research Institute, Inc. All rights reserved.
“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
18© 2007 Electric Power Research Institute, Inc. All rights reserved.
*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
19© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
20© 2007 Electric Power Research Institute, Inc. All rights reserved.
What is the potential value of these advanced electricity technologies to
the U.S. economy and to consumers?
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Future CO2 Emissions Scenarios
A CB
Policy Scenario A:
- 2%/yr decline beginning in 2010
Policy Scenario B:
- Flat between 2010 - 2020
- 3%/yr decline beginning in 2020
- Results in “prism”-like CO2 constraint on electric sector
Policy Scenario C:
- Flat between 2010 - 2020
- 2%/yr decline beginning in 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)
22© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
23© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
24© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
25© 2007 Electric Power Research Institute, Inc. All rights reserved.
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)
26© 2007 Electric Power Research Institute, Inc. All rights reserved.
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%
27© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
28© 2007 Electric Power Research Institute, Inc. All rights reserved.
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 (
$/M
CF
)
Non-Electric Sector
Electric Sector
Price
Limited Portfolio Full Portfolio
29© 2007 Electric Power Research Institute, Inc. All rights reserved.
Policy Scenario B
-1.5
-1.0
-0.5
0.0
Impact on U.S. EconomyC
han
ge
in G
DP
Dis
cou
nte
d t
hro
ug
h 2
050
($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
$1 T
rilli
on
30© 2007 Electric Power Research Institute, Inc. All rights reserved.
-2.0
-1.5
-1.0
-0.5
0.0
Economic Cost SensitivityC
han
ge
in G
DP
Dis
cou
nte
d t
hro
ug
h 2
050
($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
31© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
32© 2007 Electric Power Research Institute, Inc. All rights reserved.
How might the specific details of climate policy design make a
difference?
With a nod of thanks to Anne and CRA …
33© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
34© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
35© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
36© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
37© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
38© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
39© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
40© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
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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
42© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
43© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
44© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
45© 2007 Electric Power Research Institute, Inc. All rights reserved.
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
46© 2007 Electric Power Research Institute, Inc. All rights reserved.
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