1 climate change & clean energy: business opportunities environmental industry summit 2007 san...

1

Climate Change & Clean Energy:Business Opportunities

Environmental Industry Summit 2007Environmental Industry Summit 2007

San Diego, CA San Diego, CA 619 – 807-3267619 – 807-3267

Environmental Business International

www.ebiusa.com

Friday Energy Panel

Andrew Paterson, EBI

2

Environmental Business Summit 2007

Friday Panel: Climate Change & Clean Energy

Climate Change & Clean Energy: OverviewAndrew Paterson, EBI – moderator

Campaign: “Climate Clean” (VERF)Stanley Field, Climate Clean, LLC

Carbon Offsets

David Shearer, California Environmental Associates

Case Study: Toyota’s Hybrid Vehicles Mary Nickerson, Toyota Motor

Capital Market Perspective(s)Walter Howes, EBI Capital Advisors

3


Controversial Overview / Overview of a Controversy

THE “CONSENSUS” VIEW Climate Change is real. There

is scientific consensus. Man-made emissions are the

leading cause. “With the Kyoto Protocol, at

least we have a path forward.” Lack of participation by the

USA is irresponsible. Not taking near term action

threatens the global economy. However, a new regime is

required for the post-2012 timeframe.

But, big developing economies need to grow to survive.

AN “ALTERNATIVE” VIEW Climate Change is real on many

fronts, but “scientific consensus” is an oxymoron, and proof the debate is political.

Man-made emissions are a key “trigger” and must be reduced.

- Plus, the same measures that reduce carbon emissions enhance OECD energy security

Mandates, like the Kyoto Protocol, are not the only way, and bureaucratize solutions.

The way forward must engage the big developing economies: China, India, Brazil, N.America

A cap creates regional losers.

4


Global Primary Energy Needs Outstripping Supply

World Energy Scenarios,IIASA-WEC, 2000

As climate change worsens, we might go to war on resources… are we?

“Gringo Mentality”:Telling big developing economies to curb their demand while we consume 5x-10x as much energy per capita will not work.

5


IEA: An Energy Investment Challenge

$- $100 $200 $300 $400 $500

Oil - Explore & Develop

Oil sands, other

Oil Refining

Gas - Explore & Develop

LNG terminals

Gas Transmission

Gas Distribution / Storage

Coal - Mining

Electricity - Generation

Elec- Transmission

Elec- Distribution

2001-2010 2011-2020

“We don’t have an energy crisis, we have an energy investment crisis. We will need billions invested… make that trillions.”

Skip Bowman, President - Nuclear Energy Institute, 2005

IEA forecasts that roughly $1,000 billion needs to be invested in North America each decade to meet energy demands, half of it in the electric sector.

World Energy investment

Outlook, 2003

For U.S. & Canada $Billions

Investments in energy efficiency offer options.

World Energy Outlook 2006 calls for $20T to invest globally by 2030.

6


U.S. Energy Expenditures as a % of GDP, 1970 – 2030

Before the oil embargo of 1973-74, total energy expenditures were equal to 8% of U.S. GDP, (5% on oil, and 1% on natural gas. Following the price shocks of the 1970s and early 1980s, those shares rose dramatically—to 14% overall (8% for oil and 2% for gas in 1981). Since then they have fallen consistently, to 2004 levels of about 7% for total energy expenditures, 4% for petroleum expenditures, and just over 1% for natural gas expenditures.

Although recent developments in the world oil market have pushed the shares upward, they are projected to decline from current levels: in 2030, total nominal energy expenditures are projected to equal 5% of nominal GDP (3% for oil, 1% for natural gas expenditures. Figure 28). The overall decline in energy expenditures relative to GDP has resulted in large part from a decline in world oil prices (in real dollar terms) from their peak in 1981, combined with enhanced efficiencies.

http://www.eia.doe.gov/oiaf/aeo/economic.html

The economy can support higher expenditures on energy to cover carbon capture costs.

7


EIA: U.S. Oil Production Declining (AEO 2006)

AEO 2006:“Oil prices also determine whether unconventional oilproduction (such as oil shale, CTL, and GTL) is economical, as illustrated in the alternative price cases. CTL production is projected in both the reference and high price cases; however, GTL production and syncrude production from oil shale, both of which require higher prices before they become economical, are projected only in the high price case.

American Energy Security speech (August 2006):In 1985, when I first came to Congress, we imported 4.3 MBD – about 27% of total consumption. Today, we import nearly three times that much and imported oil is now nearly 60 percent of our domestic appetite. It accounts for a third of our trade deficit. America spends $200,000 each minute on foreign oil imports.

Rep. Pete Visclosky (D-IN)

8


Vulnerability on Oil Imports: USA still #1 !Energy Vulnerability: Absolute Total Oil Imports (Size of Circle), plotted on GNP per Capita vs. Per Capita Oil Consumption (energy demand)[ Red circles denote volume of net exports of oil: Canada, U.K., Mexico, Russia, Iran, Colombia ]

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

-5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0

Per Capita Oil Use (BBls per year) - 2004

GN

P p

er C

apita

(PP

P) -

200

5

USA

Japan

S.Korea

France

Germany

Italy

Poland

China

India

Turkey

U.K.

Thailand

Brazil

Canada

S. Africa Mexico

Russia

Pakistan

Iran

Colombia

Spain

Vulnerable

Most Vulnerable

Some major oil suppliers not shown

Consumption per capita (dimension of personal addiction)

Mea

sure

of

“w

hat

na

tio

ns

hav

e t

o l

ose

”

Source: ADPaterson

Vulnerability rises with imports and “value at risk”

GN

P p

er C

apit

a, 2

005

Per Capita Oil Use (bbls/yr)

“Fat, dumb, and happy” is not sustainable

9


Situation Briefing: Vulnerable Oil Sources

(green: state-owned)

Country Hostile to U.S. ?AramCo Saudi Arabia 260.0 …Not right nowNIOC Iran 125.8 Whenever possibleINOC Iraq 115.0 Your call… (Saddam out)KPC Kuwait 100.0 Nope; we saved ‘emPdVSA Venezuela 77.8 “Yanqui, go home”Adnoc UAE 55.2 No; new Navy baseLibya NOC Libya 22.7 Playing nice, but iffy NNPC Nigeria 21.2 Politically vulnerablePemex Mexico 16.0 Mostly in soccer Lukoil Russia 16.0 Nyet; Cold War over Gazprom Russia 13.6 Depends on Putin’s moodExxonMobil U.S. 12.9 Not to shareholders Yukos Russia 11.8 Under siegePetroChina China 11.0 NeutralQatar Petro Qatar 11.0 Nope; very friendly Sonatrach Algeria 10.5 Radical leaningsBP (Amoco) UK 10.1 Still see us as a colonyPetrobras Brazil 9.8 Not exportingChevronTexaco U.S. 8.6 SafeTotalfina France 7.3 They’re French !Imperial Oil Canada tar sands During hockey seasonSubtotal Biggest holders 916.3 Two-thirds held by OPEC

TOTAL ~1,200.0 (not including tar sands)

Energy Company

Reserves (Bil bbls)

Tanker “Prestige” off coast of Spain, Nov. 2002

U.S. imports ~ 60% of oil.

Source: Economist

Unstable Sources

Vulnerable Transit

Big Oil is National Oil: supply decisions can be politicized further.

10


Transportation Sector Vital for Progress

“Tonight, I am proposing $1.2 billion in research funding so that America can lead the world in developing clean, hydrogen-powered automobiles.”

President Bush, Jan. 2003

FORD HYBRID

IPHEInternational

Partnership for the Hydrogen Economy

TOYOTA PRIUS

11


Baseline: U.S. Carbon Emissions by Sector, 2000

Ele

ctr

icit

y

Re

sid

en

tia

l

Co

mm

erc

ial

Ind

us

tria

l

Tra

ns

po

rtCoal

Petro

NGas0

100

200

300

400

500

600

Coal

Petro

NGas

2000

To

ns

of

Ca

rbo

n e

mit

ted

Source: EIA, AEO 2003

Electricity broken out by end-use sector.

Electricity broken out by end-use sector.

Power sector drew early attention, but transportation is crucial.Power sector drew early attention, but transportation is crucial.

12


EIA: U.S. Carbon Emissions by Sector, 2010

Ele

ctri

city

Re

sid

en

tial

Co

mm

erc

ial

Ind

ust

rial

Tra

nsp

ort

CoalPetro

NGas0

100

200

300

400

500

600

Coal

Petro

NGas

2010

To

ns

of

Car

bo

n e

mit

ted


Sources of GHG emissions change very slowly: power, transport.Sources of GHG emissions change very slowly: power, transport.

13


EIA Forecast: Carbon Emissions by Sector, 2010

End-Use Sector - CO2 Coal Petro NGas Total ElecElectricity 580 10 100 690Residential 28 80 108 243Commercial 3 13 55 71 247Industrial 56 100 150 306 200Transport 615 10 625Total CO2 (MMT-C) 639 766 395 1800 690

DOE’s Climate VISION Focus:Reductions in carbon emissions can be achieved through: 1) broader conservation and efficiency in transmission and end-use of electricity; 2) shifts in electricity generation toward high-efficiency “clean coal” gasification systems or to nuclear and low carbon generation (e.g., wind, biomass blending with coal); and 3) shifts in transportation away from fossil fuels (e.g., through biofuels, hybrid engines, ultimately hydrogen fuel cells).

14


Carbon Emissions from Coal-fired Electricity

215243

210

247

195 200

0

50

100

150

200

250

300

Residential Commercial Industrial

2000

2010

To

ns

of

Ca

rbo

n e

mit

ted

Electricity usage is spread fairly evenly across the three end-use consumer sectors. The industrial sector has instituted many conservation measures already in part through the efforts of the DOE “Industries of the Future” programs in EE/RE, therefore the best area for gain by focusing on the vast commercial building and residential sectors. The residential sector changes over time as the housing sector rotates gradually. Large apartment buildings in urban core areas could provide a focused target for CHP efficiency upgrades as a specific application area.


Slow capital stock rotation in the buildings sector is a major hurdle.Slow capital stock rotation in the buildings sector is a major hurdle.

15


U.S. Power Generation - 2005

EIA: Based on AEO 2006

Baseload

Seasonal

Peak

Alternative

Coal

Nuclear

HydroN.Gas

OilBio

MSWGeo

WindSolar

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Coal

Nuclear

Hydro

N.Gas

Oil

Bio

MSW

Geo

Wind

Solar

U.S. Power Generation - 2005Remains mostly "big" baseload (75%)

EIA Baseline

16



Baseload

Seasonal

Peak

Alternative

Coal

Nuclear

HydroN.Gas

OilBio

MSWGeo

WindSolar

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Coal

Nuclear

Hydro

N.Gas

Oil

Bio

MSW

Geo

Wind

Solar

U.S. Power Generation - 2010Baseload still dominates (78%)


EIA Baseline

17



Baseload

Seasonal

Peak

Alternative

Coal

Nuclear

HydroN.Gas

OilBio

MSWGeo

WindSolar

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Coal

Nuclear

Hydro

N.Gas

Oil

Bio

MSW

Geo

Wind

Solar

U.S. Power Generation - 2015N.gas provides the margin

(baseload at 80%)


EIA Baseline

18


U.S. Power Generation – 2020, “Back to Baseload”

Baseload

Seasonal

Peak

Alternative

Coal

Nuclear

HydroN.Gas

OilBio

MSWGeo

WindSolar

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Coal

Nuclear

Hydro

N.Gas

Oil

Bio

MSW

Geo

Wind

Solar

U.S. Power Generation - 2020Back to Coal

(baseload at 83%)


EIA Baseline Not much real shift is forecast by 2020. Fossil (coal and gas) still dominate power supply.

Not much real shift is forecast by 2020. Fossil (coal and gas) still dominate power supply.

19


Baseline: U.S. Power Generation - 2005

0 50 100 150 200 250 300 350

Coal

Nuclear

Hydro

N.Gas

Oil / Dual

Bio

MSW

Geo

Wind

Solar

Capacity (GWe) - 2005Total Capacity Used Capacity

Challenge: A MW of Wind or Solar does NOT equal a MW of coal…

Lower capacity factors diminish contribution by renewable sources (wind, bio, solar).

20


Real Cost of Power Sources Affected by Capacity Factor

80% 90% 30% 90% 75% 30% 43% 60% 25% 24%$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Coal-IGCC

Nuclear Gas Geo Biomass Wind Hydro Fuel cells Solar-thermal

PV

$ p

er

KW

e

$/KWe Eff. $/KWe Cap Factor

$12,000

$25,000

Fuel costs, weather affect downtime of some sources, which impacts investment.

Data Source: NETL, EPRI

Example: An installed KW of wind is not the same as in installed KW of baseload coal and nuclear, which run many more hours regardless of weather. So, the cost per KWe must be adjusted for average capacity factor: red bar is “Effective Capacity”, adjusted for downtime.

21


Some GHG / Energy Policy Approaches

APPROACH Examples Key Drawbacks?A. Enforced Mandates

Emission / Performance Stds. Appliance efficiency Can become a ceilingFederal Cap & Trade CAA: SOx, NOx Arbitrary; can be gamedRegional Trading Agreements RGGI, PJM Airshed is globalPower / Fuel mandates (RPS/RFS) State RPS, Biofuel RFS Uneven impact; big losers

B. Government ProgramsRD&D on low carbon options DOE Slow, gaps in deploymentResource Mgmt. (DOI, BLM) Nat'l Parks, Forest Srvc Federal mgmt. less efficientAgency Purchasing Agreements FEMP None, unless fragmented

C. Fiscal / Investment MeasuresCarbon Tax Gasoline taxes Politically unpopularInvestment Tax Credit / Fast Depr. Sec. 48/49 ITCs Plagued by some fraudProduction Tax Credits Ethanol tax credits Fails to deal with early risksCredit Support (Loan Guarantees) USDA / DOT LGs Creates contingent liabilitiesPrice Guarantees Boucher Bill for CTL Difficult to administerFeed-in Tariffs / Rate Boosts EU RE incentives Expensive to government

D. Voluntary Initiatives / CampaignsFederal Performance Labeling Energy Star Industry lobbies to diminishIndustry Sector Commitments Climate VISION Lacks enforcementPublic - Private Partnerships Climate Leaders Easy to let targets slipGHG Registries EPAct '92 1605b Burdensome to administerRegional Initiatives Western states Industry can move

A variety of tools are available… and needed.

Capital incentives may be superior to cap and trade by triggering innovative solutions and economic growth.

A cap with lower growth curbs agency budget resources.

22


Capacity by NERC Electricity Region (GWe)

Sharp regional differences remain in electricity sourcing and use, so regional policies are important in shaping options for North America.

ftp://www.nerc.com/pub/sys/all_updl/docs/pubs/LTRA2005.pdf

Garnering a national consensus is extremely difficult, especially on energy sources.

GWe

NERC region

Fuelsource

Lack of Consensus on Power Options

23


Turmoil in EU Carbon Market (May 2006)

http://www.ft.com/cms/s/b03dbc7a-06cf-11db-81d7-0000779e2340.html

Europe hopes to avert a false economy in carbonBy Fiona Harvey, June 28 2006 19:38 | Financial Times of London“What came close to putting the scheme on life support was data released between late April and mid-May which showed that last year – the first the scheme had been in operation – businesses covered by it had been given more permits than they needed because member states had overestimated demand.”

Public sector “gaming”

24


20552005

14

7

Billions of Tons of Carbon Emitted per Year

1955

0

Currently

projected path

Flat path

Historical emissions

1.9

2105

14 GtC/y

7 GtC/y

Seven “wedges”

Robert Socolow (Princeton): Stabilization Wedges

O1. Aggressive end-use efficiencies2. More biofuels, biomass3. RE: more wind, solar, geo4. Expand safe nuclear worldwide5. Sequester carbon (coal use)6. Better vehicles (PI hybrids)7. Manage natural sinks

All wedges will be needed to make progress on curbing carbon emissions.

25


Climate & Clean Energy Business Opportunities

CARBON MANAGEMENT APPROACHES Now to 2010 2010 - 2020 2020 - 2030A. Energy & Sequestration

1 Energy Efficiency (Practices / Equip)- Buildings: residential, commercial, community-scale M M H- Industrial efficiency and co-generation; on-site power M M M- Smart transmission and distributed generation L M H- Expanded demand side mgmt.; consumer campaigns L L M

2 Low Carbon Power Generation- Power from coal or gas with carbon capture - storage L M M- More nuclear power L L H- Renewable power: wind, biomass, solar, geothermal L L M

3 Transportation- Vehicles and motors L M H- Non-grain Biofuels L M H- Electrified transport (plug-in hybrids) L L H- Hydrogen fuels (from nuclear or renewables) L L M- Telecommuting, traffic flows L L L

B. Sinks and Resource Management (CO2 + Methane)Aggressive forestry L L MAgricultural soil management L L LLandfill gas capture L L LLivestock management L L L

C. AdaptationCoastal building and community measuresCommunity preparation & Emergency response systems

Different opportunities emerge at varying paces with varying impact.Different opportunities emerge at varying paces with varying impact.

26


Wrap-up: Capital Incentives >> Cap & Trade

The fundamental issue is accelerating the turnover of capital stock from carbon intensive assets to low-carbon, efficient ones:

Power generation (and sequestration) Fuel refineries, vehicles, and transport infrastructure End-use efficiency in buildings (design, use, equipment) Industrial manufacturing and energy production

Capital incentives do not impair economic growth, which is needed to fund innovation and regional infrastructure, and change demand

Capital incentives create demand for engineering / tech services. North American capital markets are the largest, most efficient Cap & trade creates bureaucratic inefficiencies and incentives for

“gaming” and fraud in both public and private sectors Economy-wide reporting and monitoring costs are extensive Uneven impact creates large scale winners and losers

Natural sources of carbon are immense and not “capped” Incentives engage big developing economies (China, India, etc.)

27


“Bordeaux Energy Enterprise Framework” (2006)

FossilFuture

Carbon Mgmt(Energy Security)

High Growth

E.U./Japan

Low Growth

N.Am / Austr.

RisingAsia

New World

“ENERGY ENTERPRISE”“GREENHOUSE”

“GRAPES OF WRATH” “CLUB OF ROME”

N. America & EU share goals, but different paths…

28


“Bordeaux Energy Enterprise Framework” (2006)

FossilFuture

Carbon Mgmt(Energy Security)

High Growth

E.U./Japan

Low Growth

N.Am / Austr.

RisingAsia

New World

• High demand + carbon intensity reduction• Less vulnerability to disruptions• Massive EE & DSM• Accelerated nuclear plant construction• Renewable power (wind, solar, bio); Biofuels• Clean coal with CCS• Plug-in hybrid vehicles + mass transit• Community scale EE and Co-gen• Reforestation / sequestration

“ENERGY ENTERPRISE”“GREENHOUSE”

“GRAPES OF WRATH” “CLUB OF ROME”

• Low demographic growth• Lower carbon intensity • Heavy mandates / regulations• Huge imports of natural gas (to replace coal)• CO2 limits / allocations / trading• Marked rise in biopower• Feed-in tariffs for renewable power• Urban electric mass transit • Co-generation for EE / DG

• High demographic growth• More vulnerability to disruptions• More Oil & Gas E&P• Gas turbines for power• Diesel engines for power • GTL + CTL for fossil fuels• LNG bonanza• Coal-fired power• Mass transit for urban growth

• Low relative demographic growth• Vulnerability to disruption • More Oil & Gas E&P (tax incentives)• Gas turbines for power / LNG growth• Higher mileage ICE (cars) • Extended coal plant life• Some mass transit growth• EE in new homes• Hybrid vehicles

• Technology • Joint Venture• Investment incentives

• Guidelines / Regulations • Multi-lateral agreements• Public-private partnerships

• Joint R&D • Bi-lateral agreements• Market mechanisms

The way forward for N.America will be an Asia – Pacific Partnership

29


Finish

30


Backup / Extras

31


U.S. Power Capacity: 2005 - 2020 (AEO 2006)

AEO 2006 GWe2005 2010 2015 2020

Coal 313.0 318.7 329.3 345.0Nuclear 100.0 101.0 104.0 109.0Hydro 78.0 78.0 78.0 78.0N.Gas 224.0 302.0 318.9 360.0Oil / Dual 206.0 124.0 110.0 95.0Bio 6.0 7.0 8.0 10.0MSW 3.5 4.0 4.0 3.8Geo 2.2 3.0 3.5 4.6Wind 9.7 16.0 18.0 20.0Solar 0.7 0.5 1.0 2.0Total 943.0 954.2 974.7 1027.4


Baseline: Fossil fuels still projected to provide most electricity.

32


U.S. Power Consumed: 2005 - 2020 (AEO 2006)

Baseline: Fossil fuels still projected to provide most electricity.


AEO 2006 Bil KWh2005 2010 2015 2020

Coal 2,041 2,217 2,272 2,505Nuclear 774 810 829 871Hydro 270 297 303 300N.Gas 711 774 1,030 1,101Oil / Dual 161 116 103 106Bio 45 76 80 88MSW 25 25 28 30Geo 14 20 23 34Wind 23 52 57 70Solar 1 2 2 3Total 4,066 4,388 4,727 5,108

Renewables 379 471 493 525RE, no hydro 109 174 190 225RE, no hydro 2.7% 4.0% 4.0% 4.4%

33


Change in Capacity Forecasts by EIA (AEO2001 v. 2006)

AEO2001 was issued in Dec. 2000, prior to 9/11, the recession of 2001, and the stock collapse of merchant power. Hence, the forecast for gas turbine capacity was substantially higher than current forecasts. In addition, the forecast for coal capacity was still higher than the updated forecast in AEO2006.

AEO'03 v. '06GWe 2005 2010 Retire Adds 2005 2010 Retire Adds Changes

Coal 309.8 315.0 -13.5 18.7 313.6 322.8 -3.0 12.2 -6.5IGCC 0.5 0.5 0.0 0.0 0.5 0.5 0.0 0.0 0.0Oil / Dual 131.2 123.2 -17.7 9.7 124.4 124.0 -2.0 1.6 -8.1N.Gas CC 49.5 126.0 0.0 76.5 139.3 151.5 -0.6 12.8 -63.7CT/Diesel 130.6 164.1 -5.1 38.6 135.8 139.0 -1.4 4.6 -34.0CHP-NGas 40.0 43.0 0.0 3.0 48.4 50.0 0.0 1.6 -1.4Nuclear 97.5 93.7 -3.8 0.0 100.1 100.9 0.0 0.8 0.8Hydro 79.6 79.7 0.0 0.1 78.3 78.3 0.0 0.1 0.0Geo 3.2 4.3 0.0 1.2 2.2 2.6 0.0 0.4 -0.7MSW 3.8 4.2 0.0 0.4 3.5 3.8 0.0 0.3 -0.1Wood / Bio 6.9 8.0 0.0 1.1 6.3 7.2 0.0 0.8 -0.3Wind 4.4 12.3 0.0 7.9 9.7 16.3 0.0 6.6 -1.3Solar Thm 0.4 0.4 0.0 0.1 0.4 0.5 0.0 0.1 0.0Solar PV 0.2 0.5 0.0 0.3 0.2 0.7 0.0 0.5 0.2Solar CSP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Fuel cell / DG 0.0 0.0 0.0 0 0.0 0.2 0.0 0.2 0.2Totals 857.5 974.9 -40.1 157.53 962.6 998.2 -7.0 42.58 -115.0

AEO 2001 (before 9/11) AEO 2006

34


EIA: AEO 2007 Early Release

AEO 2007:“World oil prices since 2000 have been substantiallyhigher than those of the 1990s, as have the prices ofnatural gas and coal (although coal prices began torise somewhat later than oil and natural gas prices).The sustained increase in world oil prices caused EIAto reevaluate earlier oil price expectations in producingAEO2006. The long-term path of world oil pricesin the AEO2007 reference case is similar to that inthe AEO2006 reference case, although near-termprices in AEO2007 are somewhat higher than thosein AEO2006.

EIA has reduced projections of natural gas use and raised forecasts of coal use.

35


Global Natural Gas Costs Differ Sharply

USA $6.30

Feb. 2005

Sources: Bloomberg, Economic Times, EIA, Fertecon, Financial Times, Pace, Platts, World Bank

Canada $5.55

UK $5.15

Belgium $5.25

Russia $0.95

Qatar $0.65

Trinidad $1.60

North Africa $0.80

Japan $4.50

South Korea $4.50

Taiwan $4.65

China $4.50

India $3.10

Bolivia $1.60

Argentina $1.50

Indonesia $2.70Singapore

$3.20

Australia $3.75

Kuwait$1.25

Iran $1.25

Saudi Arabia $0.75

Oman $1.00

Turkey $2.65

Ukraine $1.70

Belarus $1.20

($US per million BTUs)American Chemical Council

Unlike oil, natural gas is still priced regionally rather than globally.This puts U.S. heavy industrial gas users at a distinct disadvantage.

36


Planned Coal Plants Rising; near 100 GWe by 2030

2006

37


Attributes Affecting Energy Choices

PeakingFeatures Coal Nuclear Nat'l Gas Wind Biomass Fuel CellCapital Cost (per KWe) High High Low High High HighMarginal Oper. Cost Med Med Low Low Med LowFuel Costs (per KWh) Low Low High None Med MedFuel Price Stable Stable Volatile None Variable Variable

Air Emissions High None Med Low Low LowLand Use Med Low Low High High LowGrid Dependency High High Med Med Med LowWeather Vulnerability Low None Low High High None

Baseload power Renewables

High capital costs for coal and nuclear drive electricity rate structure toward a regulated outcome rather than competitive rates with market exposure because investors demand assured returns on capital. Plentiful capacity and natural gas would be more suited to competitive rate structures because most of the electricity cost is fuel instead of capital. A regional RPS is essentially a regulated rate approach by dictating fuel mix.

38


Socolow: Carbon Stabilization Wedges

EFFICIENCYBuildings, appliances, transport, industrial processing, lighting, electric power plants, upstream extraction.

DECARBONIZED ELECTRICITY Natural gas for coalPower from coal or gas with carbon capture and storageNuclear powerPower from renewables: wind, photovoltaics, solar concentrators (troughs and dishes), hydropower, geothermal.

DECARBONIZED FUELSSynthetic fuel from coal, natural gas, and biomass, with carbon capture and storageBiofuelsHydrogen

from coal and natural gas, with carbon capture and storagefrom nuclear energy from renewable energy (hydro, wind, PV, etc.)

FUEL DISPLACEMENT BY LOW-CARBON ELECTRICITYGrid-charged batteries (“plug-in hybrids”) for transportHeat pumps for furnaces and boilers

NATURAL SINKSForestry (reduced deforestation, afforestation, new plantations) Agricultural soils

METHANE MANAGEMENTlandfill gas, cattle, rice, natural gas

39


AEO Forecasts for Nuclear Capacity: Rising Every Year

EIA AEO Annual Forecasts for U.S. Nuclear Capacity

40

50

60

70

80

90

100

110

120

2000 2005 2010 2015 2020

Nu

clea

r C

apac

ity

(GW

e)

AEO2006

AEO2005

AEO2004

AEO2003

AEO2002

AEO2001

AEO2000

AEO1998

New reactors forecast for the first time due to passage of EPAct 2005

Retirements forecast

through 2002

EIA raised its forecast for nuclear capacity in 2020 every year since 1998.

40


Energy Policy Options

41


DOE Programs with Impact on Carbon Emissions

How can Federal Credit help?

DOE – FE-“FutureGen” (275 MWe advanced coal plant)- Carbon Sequestration Initiative

DOE - NE- “Nuclear Power 2010” to address licensing of Gen III plants

DOE – EE/RE- Buildings Program/Weatherize- Distributed Generation (DEER)- Biomass / Biofuels- Industrial Technologies (EE)- Fuel Cells / hydrogen

DOE – FE- Better proposals from industry, less budget exposure for government

DOE Programs Accelerated or Improved Results:

DOE - OETD- Transmission Roadmap- Policy initiatives for investment

DOE - NE- Federal finance focused on key risks for new orders

Lines of Credit; Credit enhancement

Commissioning Coverage

Leasing options, Revolving Loans

DOE – EE/RE-Wider variety of financing; broader market adoption- More repayment

Power purchase agreements

DOE – OETD- Incentives to cover long-term investment, upgrades

1 climate change & clean energy: business opportunities environmental industry summit 2007 san...

Documents