Eric Gebhardt

A Global View of Sustainable Energy and Deregulation

GEEnergy

April 2008

2

Global trends …

Population Energy security EnvironmentConsumption

… Create big challenges

2008

2030

5

And the challenges … drive the technology

• High fuel prices … require higher efficiency

• Energy security … requires more diverse solutions

• More stringent environmental standards … require lower emissions, increased use of renewables and nuclear

6

Global energy drivers … diversity is keySouth East Asia• High economic growth driving power additions• Fuel supply security and environmental challenges driving

diversity and renewables

China• 2X increase in installed capacity by 2010 …

30%+ of world’s additions

India• Government committed … ‘power to all’ by 2009

Middle East• Massive oil & gas infrastructure investments• National companies will exercise more influenceEurope

• Gas and oil prices up 2X over two years• Import dependency forecast to rise to 70% by 2030

Overall• Environmental/security concerns everywhere• Forward fuel costs high and volatile• Core industry investments following low fuel costs

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emerging markets exploding

Electricity demand … 2X by 2030

Sources: EIA-DOE International Energy Annual 2004 & International Energy Outlook 2006

Billions of kW hours

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1980 1985 1990 2003 2010 2015 2020 2025 2030

AsiaAfricaMiddle EastEurope & EurAsiaCentral and S AmericaNorth America

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Power Gen industry forecast2007-2016

North AmericaChina

Asia

India

MidEast

Latin America

E. Europe

29 GW/yr

36 GW/yr

8 GW/yr

26 GW/yr

39 GW/yr

12 GW/yr

16 GW/yr14 GW/yr

Africa

3 GW/yr

Forecasting 184 GW/yr globally … 29 GW in North AmericaCapacity and supply chain management critical

10 yr avg annual cap adds (GW)Coal 52 Gas/Oil 68Hydro 25Wind 22Nuclear 10TOTAL 184

W. Europe

How do we grow, and still care for the planet?

10

0

20

40

60

80

100

120

140

'99 '01 '04 '07 '09 '12

Fuel prices … High and unpredictable

Source:EIA WTI Spot Prices; NYMEX Future Prices April 18, 2008

Source:PowerDat from Platts, a unit of the McGraw-Hill Companies; NYMEX Future Prices April 18, 2008

Sources: EIA Coal News and Markets Week of Apr 11, ‘08; Coal data from Platts, a unit of the McGraw-Hill Companies, Inc.

WTI SpotWTI NYMEX Futures

Henry HubHenry Hub NYMEX Futures

Oil prices Gas prices Coal prices

Average weeklycommodity spot prices

$/BBL $/MMBTU $/ton

$120

$40

$80

$20

$60

$100

Apr‘05

Apr‘06

Apr‘07

Apr‘080

2

4

6

8

10

12

14

16

'99 '01 '04 '07 '09 '12

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Growing demand for renewables …

Source: REN21, Renewables 2006 Global Status Report, Renewables 2007 Global Status Report, Excludes large hydro

• Renewable technology … only 5% of electrical capacity today

• Solid double digit growth expanding global footprint

World renewable installed capacity (GW)

160 182207

240 (est)

2004 2005 2006 2007

36%

35%

22%

5% 2%

WindSmall HydroBiomassGeothermalSolar PV (grid)

'06 Renewable installed capacity sources

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… Coal is still a primary energy source

Source: EIA

Recoverable coal reserves (million short tons)

0.521.9

55.5

279.5316.3 327.2

China126.2

India101.9

MiddleEast

S & Central America

Africa NorthAmerica

Europe &Eurasia

AsiaPacific

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… Sustainable ?

1950 2000 2050 2100

7

14

1.9

Billion of tons of carbon emitted per year

Projected path

Historical emissions

Source: S. Pacala and R. Socolow (13 August 2004)

14

… Sustainable ?

1950 2000 2050 2100

7

14

1.9

Billion of tons of carbon emitted per year

Projected path

Historical emissions

Flat

How do we get there

• Efficiency and installed base upgrades

• Renewable electricity & fuels

• Nuclear

• CO2 capture & storage

Source: S. Pacala and R. Socolow (13 August 2004)

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• Kyoto enters into force

• Germany sets targets for wind and leads in new solar

• Europe adopts first climate emissions trading law … and develops first ever pollution register

• China … quest to double nuclear by 2020

• US Energy Policy Act passes … States are making progress

Global environmental concerns … driving global policy

No single policy

No single fuel

No single technology

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Affordable, reliable & environmentally responsible

Meeting big challenges … with big solutions

Driving Cost of Electricity Down

Effic

ienc

y

Relia

bilit

y

Emissions

EfficientDiverseNuclearCoalGasWindOil GeothermalBiomassHydroSolar

NuclearCoalGasWindOil GeothermalBiomassHydroSolar

+

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteam

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteamGas technology focus• Efficiency• Emissions• Operating and fuel flexibility• Reliability and availability

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteam

Coal technology focus• CAPEX• Cycle time • Emissions • Competitive Ultra-super critical

and IGCC

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteam

Steam technology focus• Efficiency• Emissions• Reliability and availability

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteam

Nuclear technology focus• Safety• Reliability• Capital cost

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Technology diversity is critical

Gas Wind Biomass

Cleaner Coal

SolarSteam

T&D EnvironmentalServices

Nuclear Asset Optimization

Renewable technology focus• Capacity factors• Reliability• Scale• Logistics

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T&D

Technology diversity is critical

Gas

EnvironmentalServices

Nuclear

Wind

Asset Optimization

Biomass

Cleaner Coal

SolarSteam

Existing asset focus• Environmental performance• Plant optimization • Upgrades• O&M costs

Recent Renewable Integration Studies

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Client: (North East United States)

Study Objectives

• Reliability implications of increased wind generation, up to 3000+ MW

• Screening for project viability…Operation feasibility, forecasting, and regulation

Study Findings

• Feasibility of 3300 MW of new Wind capacity, without major infrastructure changes

• Requirements for wind farm performance needs & interconnection requirements

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Client: (Western United States)

Study Objectives

• Comprehensive assessment of high penetration of Renewables in the State

• Multi-scenario analysis over 2006-2020 period, (5% to 25% wind, based on peak load)

Study Findings

• Feasibility of 33% (energy) renewable integration, by 2020

• Feasibility of new capacity additions: 10GW of wind, 5GW solar, 3GW geothermal, and 2GW of biomass

• Changes to operating practices for compatibility with Wind & Solar additions

Deregulation

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Deregulation/Liberalization:

Increases relianceon market forces

Privatization:TransferringOwnership

Defining “Deregulation”

Market

Market

Market

MarketRestructuring:

IntroducingCompetition & Separating

IndustryFunctions

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Deregulation – Implications

DeregulationDrivers

Developed CountriesCapture value

of system inefficiencies

Developing Countries

Attract foreigninvestment

Power Prices

Power Prices

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Status of Deregulation World Wide

12345

No DataOpen Markets

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Status of Privatization World Wide

12345

No DataAssets in Private Sector

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• Accelerate diverse technology investment

• Actively participate in energy policy process

• Develop the next generation of Energy Engineers

• Educate key stakeholders about energy issues, cost and tradeoffs

• Anticipate and lead change, rather than just survive it

The road ahead