Southern States Energy BoardSouthern States Energy Board

““Sustainable Energy Challenges and Climate Change Sustainable Energy Challenges and Climate Change in the South: The Road Ahead”in the South: The Road Ahead”

Presented to:Presented to:The EPA Region IV Clean and Sustainable Energy ConferenceThe EPA Region IV Clean and Sustainable Energy Conference

Embassy Suites Atlanta at Centennial Olympic ParkEmbassy Suites Atlanta at Centennial Olympic ParkDecember 11, 2007December 11, 2007

Presented by:Presented by:Kenneth J. NemethKenneth J. Nemeth

SecretarySecretarySouthern States Energy BoardSouthern States Energy Board

Southern States Energy BoardSouthern States Energy Board

Established 1960, expanded in 1978 16 U.S. States and Two Territories Each jurisdiction represented by the

governor, a legislator from the House and Senate and a governor’s alternate

Federal Representative Appointed by U.S. President

Through innovations in energy and environmental policies, programs and technologies, the Southern States Energy Board enhances economic development and the quality of life in the South.- SSEB Mission Statement

Significant Global Energy EventsSignificant Global Energy Events

OPEC Sets 55 percent Minimum Tax Rate (1970) U.S. Institutes Price Controls (1971) Arab Oil Embargo Against U.S. (1973) Kissinger Announces “Project Independence” (1974) EPCA Authorizes Strategic Petroleum Reserve (1975) Windfall Profits Tax (1980) Iran/Iraq War – Oil Prices Doubled (1978-1980) World Oil Glut - $29 BBL Oil – U.S. Synfuels Shutdown (1983) Chernobyl Nuclear Accident (1986) Alaska’s Prudhoe Bay Production Peaks (1988) Iraq Invades Kuwait – Prices Soar ($36 BBL) (1990) Clean Air Act – Changes Gasoline & Diesel Fuels (1990) U.S. Imports More Oil & Refined Product Than It Produces (1993) Asian Financial Crisis – Oil Prices Plummet (1997-1998) German Government/Utilities Agree to Phase Out of Nuclear Power (2000) U.S. Petroleum Consumption – All Time High (19.7 Million BPD)

(2001) Terrorist Attacks on the U.S. (2001)

1970

2001

1983Photo: Jerry Gay,

Seattle Times, 1974

Recent Global Energy EventsRecent Global Energy Events

Foreign Oil Dependence Rises to 65 percent (2004) Northeast Blackout Leaves 50 Million People in the Dark Natural Gas Prices Triple from 1990 Levels Oil Passes $50/Barrel Gasoline Exceeds $3/Gallon Hurricanes Damage Oil/Gas Rigs Russia Halts Natural Gas to Ukraine Venezuela Moves to Nationalize Resources Oil Breaks $75/Barrel Nigeria Kidnaps Oil Workers Bolivia Secures Oil Fields Experts State Oil Production May Have Peaked Iran Threatens Nuclear Capabilities Saudis Talk of Propping Up $55 Oil Chad Orders Chevron to Leave BP Forced to Repair Pipeline Leaks China Extends Credit to Oil Nations Iran, Russia, Others Discuss Gas OPEC Texas Utilities Cancel 8 of 11 Coal Plants Oil Breaks $83/Barrel

2004

2007

2005

Facts and FiguresFacts and Figures

• World Population = 6.8 billion in 2010; 8.2 billion in 2030• World GDP = $88 trillion in 2010; $154 trillion in 2030• World Electricity Demand = 9,000 billion KWH in 2010; 31,000 billion KWH in 2030• World number of Vehicles = 812 million in 2002; 2.1 billion in 2030• Energy Consumption – will increase 50% in the next 25 years• Energy Sources and Increases by 2030;

» Coal Production = 74%» Oil Production = 43%» NG Production = 64%» Nuclear Power = 38%» Renewables = 61%

Not Smoke and Mirrors!

Why the Concern About Sustainability and Why the Concern About Sustainability and American Energy Security?American Energy Security?

Crude Oil Production will “Peak” Growth and Use of Resources by Other

Nations Global Competition World Oil Demand Exceeds Supply…and

Growing Excessive Dependence on Imported Oil Supply Disruption by Natural Disasters,

Terrorism Global Warming Threats GHG Emissions Dictate Technologies and

Risk Natural Gas Price Volatility Liquid Transportation Fuels Crisis Social Injustice of High Priced Energy –

Elected Officials Will Pay the Price Congressional Inaction

American Energy SecurityAmerican Energy Security

Military expenditures tied to defending Persian Gulf oil ($100+ billion)

Lost employment/investment from diversion of financial resources ($160 billion)

Cost of periodic “oil shocks” ($85 billion)

Erosion of U.S. industrial base (830,000 jobs lost)

2006 U.S. Trade Deficit ($764 billion)

North American Electric Reliability Council North American Electric Reliability Council Finds More Power Is NeededFinds More Power Is Needed

U.S. baseload generation capacity Electricity Demand is Far Outpacing Generation Growth reserve margins have greatly declined– 30-40% in early 1990s– 17% in 2006

Generation capacity to grow just 6% in the next 10 years while demand grows 19%– 2006 North American Electric

Reliability Council studyGrowth in

U.S. ElectricityDemand2006-16

Growth in U.S.Generating

Capacity2006-16

+6%

+19%

Courtesy: Peabody Energy, 2007

Global Energy Forms Face Limits in Global Energy Forms Face Limits in Supply & PriceSupply & Price

ENERGY EFFICIENCY/DEMAND-SIDE MANAGEMENT/CONSERVATIONAn important resource but insufficient to power the future

OILConsistently above $50/barrel; declining reserves; risky sources

NUCLEARValuable but constrained due to safety and waste disposal concerns

HYDRONo growth in supply

WINDLimited availability; grid disruptions; erratic supply

ETHANOLClean but energy inefficient; strains food supplies; cellulosic key

NATURAL GASConsistently above $6/mcf; declining reserves; risky sources

COALFaces GHG, climate change, regulators,environmental organizations challenges

All Energy Forms Needed for Diversity of Supply

Is Coal a Low Cost Option?Is Coal a Low Cost Option?

Global warming emissions are attributed to coal, oil, gas 35% - deforestation, livestock, soils,

landfills, waste repositories 65% - electricity and heat, industrial

processes, transportation, other fuel combustion, fugitive emissions

NRDC– Coal – carbon intensive– Double amount of carbon in natural gas– 50% more than petroleum

CTL Plants produce two streams of CO2

– Production plant– Vehicle exhaust

Coal/biomass co-firing – carbon neutral event BUT requires mining and water resources

Is Coal a Low Cost Option?Is Coal a Low Cost Option?

• Carbon sequestration– Carbon capture and storage– Regional Carbon Sequestration Partnerships– Add 20-40% to cost of Plants– Add 25% to electricity costs (EPRI test)– Carbon “footprint” reduction

• Requiring coal plants to meet new standards will impact “dispatch” of plants in future

The Energy Technology “Train Wreck”The Energy Technology “Train Wreck”

• Electricity rates – 19% increase over past 3 years– Maryland – 72% increase– Delaware – 60% increase

• Cost of new power plants– Coal - $3-7 billion– Nuclear - $4-8 billion

• Rising costs = higher rates• Life cycle costs – CO2 and greenhouse gases• Rates will increase for new baseload plants• Congressional Inaction

State Regulators in the MistState Regulators in the Mist

• Carbon plan• Carbon capture ready• Carbon capture & sequestration• Escalating costs for materials and plants• Technology choices• Water supply/consumption• Regional Greenhouse Gas Initiatives• Cap & trade (carbon price)• Carbon registry

Selected State Actions in a Congressional Selected State Actions in a Congressional StalemateStalemate

Gov. Joe Manchin, WV: Declaration of Energy Independence Gov. Ernie Fletcher, KY: Comprehensive Energy Strategy Gov. Charlie Crist, FL: Greenhouse Gas Initiative Gov. Tim Pawlenty, MN: Biodiesel Portfolio Enhancements Gov. Arnold Schwarzenegger, CA: Regional Greenhouse Gas

Initiative Gov. Rick Perry, TX: Carbon Capture & Sequestration Governor Rod Blagojevich, IL: Carbon Capture & Sequestration Governor Mike Easley, NC: Renewable Energy and Energy

Efficiency Portfolio Standard

More than 500 energy and environmental bills

passed by legislatures in southern states in 2007

What about Energy Efficiency?What about Energy Efficiency?

Utilities

– How can utilities make money on energy efficiency? Duke Energy “Save a Watt” Plan – Make EE the 5th Fuel

– Verifiable load reductions– Audits of homes and businesses– Subsidize purchases of compact fluorescent light bulbs– Subsidize purchase of high efficiency heating and cooling

systems– Advanced metering systems– Interruptible service on air conditioning, heating, freezers– Retire coal plants as energy savings emerge– Customers pay for 90% of power plants not built

grow demand build supply sell power = profit

““Tweaking” Energy EfficiencyTweaking” Energy Efficiency

California – EE Program in 1980s “Decoupling” – Severs link between utility sales & profits

– Regulators smooth revenue (15 states) 2001 – The “loading order” =

– 1) EE– 2) Renewables– 3) Fossil Energy

2007 – Package of financial incentives – utilities earn profits on efficiency

Delaware/Vermont – “Sustainable Energy Utility”

Reducing Energy Demand:Reducing Energy Demand:The Low Hanging “Fruit”The Low Hanging “Fruit”

Renewable portfolio standards Efficiency standards for boilers,

appliances, electronics Building code upgrades Tax incentives for “green” buildings Expedited permits Weatherization Improve energy performance in

government buildings Alternative fueled government

vehicles

Path ForwardPath Forward

Policy decisions at federal and state levels

Advanced Technologies Financing/Investment Regulatory certainty Workforce revitalization Smart grids

– Communication infrastructure for end use efficiency, demand response

– Capacity to operate with 20-30% intermittent renewables

– Distributed generation– PHEV’s

Path ForwardPath Forward

Nuclear generation with viable spent fuel strategy

Coal generation with 90%+ CO2 capture/storage

Indigenous liquid transportation fuels (coal, biomass, oil shale) with carbon sequestration to eliminate dependence on imported oil

Modernized infrastructure (pipelines, expanded refineries, transmission, roads, bridges, etc.)

Energy

Economic Development

Environment

Prosperity

““Sustainable Energy Challenges and Climate Change Sustainable Energy Challenges and Climate Change in the South: The Road Ahead”in the South: The Road Ahead”

Presented by:Presented by:Kenneth J. NemethKenneth J. NemethSecretary & Executive DirectorSecretary & Executive DirectorSouthern States Energy BoardSouthern States Energy Board6325 Amherst Court6325 Amherst CourtNorcross, Georgia 30092 USANorcross, Georgia 30092 USAPhone: (770) 242-7712Phone: (770) 242-7712Fax: (770) 242-9956Fax: (770) 242-9956wwwsseb.orgwwwsseb.orgwww.americanenergysecurity.orgwww.americanenergysecurity.orgnemeth@sseb.orgnemeth@sseb.org