The Changing Landscape of Power

Generation

Tim Riordan, P.E. VP Engineering Services

aep.com

American Electric Power Company Overview

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38 GW Owned Generation

5.3 million customers in 11 states

$58B Total Assets

$28B Current Market

Capitalization

40,000+ Line Miles of

Transmission

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AEP Generating Portfolio

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7,000+ MW of generation retiring by mid-2016 Driven primarily by MATS

Some planned coal to natural gas conversions and/or repower considerations

No new fossil generation planned between now and 2020

Utility Scale Solar PV announced (3-5 sites, 1-5MW each, 16MW total by 2017)

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AEP Coal Plant Retirements

615 MW of Coal Retired in Past 2 Years

Another 6560 MW to Retire by 2016

~800 MW to Refuel with Gas in 2015

Total 7,900 MW Retire or Refuel with Gas Almost 1/3 of AEP’s Total Coal Capacity in 2010 will have retired or refueled

by 2016

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Market signals indicate relatively flat forecasted

demand due to slow load growth and increased

energy efficiency.

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When Do Regions Become Short?

Projected year by which new supply is needed to maintain target reserve margins

© 2015 IHS

Source: IHS

ERCOT

(2018)

Rockies

(2018)

Quebec

(≥ 2025) Ontario

(2021)

Alberta

(2019)

British

Columbia

(≥ 2025)

Maritimes

(≥2025)

Desert

Southwest

(2018)

Northwest

(2021)

PJM

(2021) SPP

(2019)

MAPP

(≥ 2025) MISO-North

(2016)

Manitoba

(≥ 2025)

SERC-SE

(2025)

SERC-N

(2019) SERC-E

(2017)

(Year that regional reserve margin

would drop below target levels

without new supply. Year is

based existing and under

construction generating capacity,

and IHS Energy’s projection of

peak demand, capacity

retirements, demand response

and firm imports.)

Basin

(>2025)

SK

(2019)

North American Power Market Outlook | March 2015 - IHS

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Revised SO2, PM2.5, and Ozone NAAQS Implementation

GHG New Source Performance

Standards (New Plants)

MATS

Environmental/Regulatory Signposts & Milestones

6 2015 2020 2025

New Taxes / Regulations on Drilling & Fracking

Steam Electric Effluent Guidelines

316(b) Cooling Water Intake Requirements

Coal Combustion Residuals

Production Tax Credit (PTC) for renewables

GHG New Source Performance

Standards (Existing Plants)

Renewable Portfolio Standards (RPS)

Light Duty Vehicle CAFE Standards (54.5 mpg)

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What Could The Future Look Like?

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• Ever-tightening environmental regulations for new & existing sources

• Increased shale gas recovery

• Renewable Portfolio Standards

• Reduced fossil energy R&D budgets

• Federal & state renewable subsidies

• Aging coal & nuclear fleet

Visible Trends

Today

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U.S. Generation Forecast

U.S. Energy Information Administration (EIA) projects coal will remain a significant

portion of the U.S. generating mix through 2040. However, EIA forecasts no new

build of coal-fueled generation.

In 2040, the average age of the existing AEP coal fleet will be 64 years old.

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U.S. Generation Transformation

As our centralized fossil fleet shrinks to meet tightening environmental regulations, increased renewable penetration, and older units are forced to retire, greater and greater emphasis in the following areas will be critically important to our business:

Reliability, flexibility & maintainability of the existing fleet is paramount

The need for equipment and components to support new centralized generation technology and transformational technology development to maintain fuel diversity (coal and natural gas)

Ability to sustain operation at higher temperatures & pressures

Meet demanding duty cycles (etc. startups, shutdowns, fast-ramping ability)

Heightened corrosion/erosion resistance

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Reliability, Flexibility & Maintainability

Power generating units must be flexible and responsive, especially in extreme situations. 2014 Polar Vortex served as a wake-up call

PJM new winter peak demand record on 1/7: 141,846 MW

The existing coal fleet is called upon most often to meet increasing demand.

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Traditional Integrated

Capability to provide reliability services Source: EPRI White Paper - Contributions of Supply and Demand Resources to

Required Power System Reliability Services June 4, 2015

Maintaining Grid Reliability

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New and Emerging Technologies

Advanced ultra-supercritical steam cycles Higher temperatures (> 1300 oF) and pressures (> 4,000 psi) to achieve higher steam

cycle efficiencies

Gas Turbine and Heat Recovery Steam Generator (HRSG) Improvements to increase efficiency

Chemical-looping processes Chemically reacting metal-oxides with fuel and air to produce heat/power and inherently

separate CO2

Oxy-combustion technologies Burning coal and/or gas in the presence of pure oxygen to improve emissions and

generate a pure CO2 stream

Supercritical CO2 power cycles Use of CO2 as the working fluid achieves higher thermal efficiencies with a smaller

equipment footprint

High operating temperatures and pressures (> 1300 oF and up to 4,500 psi)

Coal gasification and post-combustion carbon capture & storage/utilization technologies

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Opportunities for the Future The CURC-EPRI Technology Roadmap

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Conclusions

• The generation landscape is changing – Weak near-term economic signals for new centralized generating capacity

– Environmental regulations limiting options and forcing retirements

– Renewable and distributed generation penetration

• Technology offers solutions for maintaining the existing fleet in the near-term and for introducing innovative means of power generation in the future.

• Industry, OEMs and material suppliers need to communicate needs and objectives to ensure existing and new technologies can meet expectations

• Reliability

• Flexibility

• Maintainability

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Thank You

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