Friday Energy Panel
Climate Change & Clean Energy:
Business Opportunities
Andrew Paterson, EBI
Environmental Industry Summit 2007
San Diego, CA
619 – 807-3267
Environmental Business International
www.ebiusa.com
1
Environmental Business Summit 2007
Friday Panel: Climate Change & Clean Energy

Climate Change & Clean Energy: Overview
Andrew 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
2
Environmental Business Summit 2007
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.
3
Environmental Business Summit 2007
Global Primary Energy Needs Outstripping Supply
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.
World Energy
Scenarios,
IIASA-WEC, 2000
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Environmental Business Summit 2007
IEA: An Energy Investment Challenge
World Energy Outlook 2006 calls for $20T to invest globally by 2030.
“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
Oil sands, other
IEA forecasts
that roughly
$1,000 billion
needs to be
invested in
Oil Refining
North America
For U.S. & Canada
2001-2010
$-
$100
$200
2011-2020
$300
$Billions
$400
Oil - Explore & Develop
Gas - Explore & Develop
LNG terminals
Gas Transmission
Gas Distribution / Storage
Coal - Mining
Electricity - Generation
Elec- Transmission
Elec- Distribution
Investments in energy
efficiency offer options.
$500
each decade
to meet energy
demands, half
of it in the
electric sector.
World Energy
investment
Outlook, 2003
5
Environmental Business Summit 2007
U.S. Energy Expenditures as a % of GDP, 1970 – 2030
The economy can support higher expenditures on energy to cover carbon capture costs.
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.
http://www.eia.doe.gov/oiaf/
aeo/economic.html
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.
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Environmental Business Summit 2007
EIA: U.S. Oil Production Declining (AEO 2006)
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)
AEO 2006:
“Oil prices also determine whether unconventional oil
production (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.
7
“Fat, dumb, and happy” is not sustainable
Environmental Business Summit 2007
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 ]
Most Vulnerable
Some major oil
suppliers not shown
USA
Vulnerable
$40,000
U.K.
GNP per
per Capita
(PPP) - 2005
2005
Capita,
GNP
Measure of “what nations have to lose”
$50,000
France
Canada
Japan
$30,000
Germany
Italy
S.Korea
Spain
$20,000
S. Africa
Poland
Turkey
Mexico
Vulnerability rises
with imports and
“value at risk”
Russia
$10,000
China
Iran
India
Pakistan
Thailand
$0
-5.0
0.0
Brazil
5.0
10.0
15.0
20.0
25.0
30.0
Colombia
-$10,000
Per Capita Oil Use (BBls per year) - 2004
Source: ADPaterson
Consumption per capita (dimension of personal addiction)
8
Environmental Business Summit 2007
Situation Briefing: Vulnerable Oil Sources
Big Oil is National Oil: supply decisions can be politicized further.
Energy
Company
(green: state-owned)
AramCo
NIOC
INOC
KPC
PdVSA
Adnoc
Libya NOC
NNPC
Pemex
Lukoil
Gazprom
ExxonMobil
Yukos
PetroChina
Qatar Petro
Sonatrach
BP (Amoco)
Petrobras
ChevronTexaco
Totalfina
Imperial Oil
Subtotal
TOTAL
Saudi Arabia
Iran
Iraq
Kuwait
Venezuela
UAE
Libya
Nigeria
Mexico
Russia
Russia
U.S.
Russia
China
Qatar
Algeria
UK
Brazil
U.S.
France
Canada
Country
Biggest holders
Reserves
(Bil bbls) Hostile to U.S. ?
260.0
125.8
115.0
100.0
77.8
55.2
22.7
21.2
16.0
16.0
13.6
12.9
11.8
11.0
11.0
10.5
10.1
9.8
8.6
7.3
tar sands
916.3
~1,200.0
…Not right now
Whenever possible
Your call… (Saddam out)
Nope; we saved ‘em
“Yanqui, go home”
No; new Navy base
Playing nice, but iffy
Politically vulnerable
Mostly in soccer
Nyet; Cold War over
Depends on Putin’s mood
Not to shareholders
Under siege
Neutral
Nope; very friendly
Radical leanings
Still see us as a colony
Not exporting
Safe
They’re French !
During hockey season
Unstable Sources
U.S. imports ~ 60% of oil.
Vulnerable Transit
Tanker “Prestige” off coast of
Spain, Nov. 2002
Two-thirds held by OPEC
(not including tar sands)
Source: Economist
9
Environmental Business Summit 2007
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, hydrogenpowered automobiles.”
President Bush, Jan. 2003
FORD HYBRID
TOYOTA PRIUS
IPHE
International
Partnership for the
Hydrogen Economy
10
Environmental Business Summit 2007
Baseline: U.S. Carbon Emissions by Sector, 2000
Source: EIA,
AEO 2003
600
500
300
2000
200
100
0
NGas
Coal
Transport
Industrial
Petro
Commercial
Residential
Electricity
broken out
by end-use
sector.
400
Electricity
Tons of Carbon emitted
Power sector drew early attention, but transportation is crucial.
Coal
Petro
NGas
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Environmental Business Summit 2007
EIA: U.S. Carbon Emissions by Sector, 2010
Sources of GHG emissions change very slowly: power, transport.
Source: EIA,
AEO 2003
500
400
2010
300
200
100
NGas
Petro
Coal
Transport
Industrial
Commercial
Residential
0
Electricity
Tons of Carbon emitted
600
Coal
Petro
NGas
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Environmental Business Summit 2007
EIA Forecast: Carbon Emissions by Sector, 2010
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).
End-Use Sector - CO2
Electricity
Residential
Commercial
Industrial
Transport
Total CO2 (MMT-C)
Coal
580
3
56
639
Petro
10
28
13
100
615
766
NGas
100
80
55
150
10
395
Total
690
108
71
306
625
1800
Elec
243
247
200
690
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Environmental Business Summit 2007
Carbon Emissions from Coal-fired Electricity
Slow capital stock rotation in the buildings sector is a major hurdle.
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.
Source: EIA,
AEO 2003
300
Tons of Carbon emitted
250
247
243
200
215
210
195
200
2000
150
2010
100
50
0
Residential
Commercial
Industrial
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Environmental Business Summit 2007
U.S. Power Generation - 2005
EIA Baseline
2,000
1,800
Coal
1,600
U.S. Power Generation - 2005
Nuclear
Remains mostly "big" baseload (75%)
1,400
Hydro
1,200
1,000
N.Gas
800
Oil
600
Bio
400
MSW
200
0
Wind
Baseload
Solar
Geo
Wind
Geo
MSW
Seasonal
Bio
Solar
Oil
Peak
N.Gas
Hydro
Alternative
Nuclear
Coal
EIA: Based on AEO 2006
15
Environmental Business Summit 2007
U.S. Power Generation - 2010
EIA Baseline
2,000
1,800
Coal
1,600
U.S. Power Generation - 2010
Nuclear
Baseload still dominates (78%)
1,400
Hydro
1,200
1,000
N.Gas
800
Oil
600
Bio
400
MSW
200
0
Wind
Baseload
Solar
Geo
Wind
Geo
MSW
Seasonal
Bio
Solar
Oil
Peak
N.Gas
Hydro
Alternative
Nuclear
Coal
EIA: Based on AEO 2006
16
Environmental Business Summit 2007
U.S. Power Generation - 2015
EIA Baseline
2,000
1,800
Coal
U.S. Power Generation - 2015
1,600
N.gas provides the margin
(baseload at 80%)
1,400
Nuclear
Hydro
1,200
1,000
N.Gas
800
Oil
600
Bio
400
MSW
200
0
Wind
Baseload
Solar
Geo
Wind
Geo
MSW
Seasonal
Bio
Solar
Oil
Peak
N.Gas
Hydro
Alternative
Nuclear
Coal
EIA: Based on AEO 2006
17
Environmental Business Summit 2007
U.S. Power Generation – 2020, “Back to Baseload”
EIA Baseline
Not much real shift is forecast by 2020. Fossil
(coal and gas) still dominate power supply.
2,000
1,800
Coal
U.S. Power Generation - 2020
1,600
Back to Coal
(baseload at 83%)
1,400
Nuclear
Hydro
1,200
1,000
N.Gas
800
Oil
600
Bio
400
MSW
200
0
Wind
Baseload
Solar
Geo
Wind
Geo
MSW
Seasonal
Bio
Solar
Oil
Peak
N.Gas
Hydro
Alternative
Nuclear
Coal
EIA: Based on AEO 2006
18
Environmental Business Summit 2007
Baseline: U.S. Power Generation - 2005
Challenge: A MW of Wind or Solar does NOT equal a MW of coal…
Capacity (GWe) - 2005
0
50
100
150
200
Total Capacity
250
Used Capacity
300
350
Coal
Nuclear
Hydro
N.Gas
Oil / Dual
Bio
MSW
Geo
Lower capacity factors diminish contribution by
renewable sources (wind, bio, solar).
Wind
Solar
19
Environmental Business Summit 2007
Real Cost of Power Sources Affected by Capacity Factor
Fuel costs, weather affect downtime of some sources, which impacts investment.
$25,000
$8,000
$12,000
$7,000
$6,000
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.
$ per KWe
$5,000
$4,000
$3,000
$2,000
$1,000
80%
90%
30%
90%
75%
30%
43%
60%
25%
Fuel cells
Solarthermal
24%
$0
CoalIGCC
Nuclear
Gas
Geo
Biomass
$/KWe
Wind
Eff. $/KWe
Hydro
Cap Factor
PV
20
Data Source: NETL, EPRI
Environmental Business Summit 2007
Some GHG / Energy Policy Approaches
APPROACH
A. Enforced Mandates
Emission / Performance Stds.
Federal Cap & Trade
Regional Trading Agreements
Power / Fuel mandates (RPS/RFS)
Examples
Key Drawbacks?
Appliance efficiency
CAA: SOx, NOx
RGGI, PJM
State RPS, Biofuel RFS
Can become a ceiling
Arbitrary; can be gamed
Airshed is global
Uneven impact; big losers
B. Government Programs
RD&D on low carbon options
Resource Mgmt. (DOI, BLM)
Agency Purchasing Agreements
DOE
Nat'l Parks, Forest Srvc
FEMP
Slow, gaps in deployment
Federal mgmt. less efficient
None, unless fragmented
C. Fiscal / Investment Measures
Carbon Tax
Investment Tax Credit / Fast Depr.
Production Tax Credits
Credit Support (Loan Guarantees)
Price Guarantees
Feed-in Tariffs / Rate Boosts
Gasoline taxes
Sec. 48/49 ITCs
Ethanol tax credits
USDA / DOT LGs
Boucher Bill for CTL
EU RE incentives
Politically unpopular
Plagued by some fraud
Fails to deal with early risks
Creates contingent liabilities
Difficult to administer
Expensive to government
D. Voluntary Initiatives / Campaigns
Federal Performance Labeling
Industry Sector Commitments
Public - Private Partnerships
GHG Registries
Regional Initiatives
Energy Star
Climate VISION
Climate Leaders
EPAct '92 1605b
Western states
Industry lobbies to diminish
Lacks enforcement
Easy to let targets slip
Burdensome to administer
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.
21
Lack of Consensus on Power Options
Environmental Business Summit 2007
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.
Garnering a national
consensus is
extremely difficult,
especially on energy
sources.
GWe
Fuel
source
NERC region
ftp://www.nerc.com/pub/sys/all_updl/
docs/pubs/LTRA2005.pdf
22
Public sector “gaming”
Environmental Business Summit 2007
Turmoil in EU Carbon Market (May 2006)
Europe hopes to avert a false economy in carbon
By 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 midMay 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.”
http://www.ft.com/cms/s/b03dbc7a-06cf-11db-81d7-0000779e2340.html
23
Environmental Business Summit 2007
Robert Socolow (Princeton): Stabilization Wedges
All wedges will be needed to make progress
on curbing carbon emissions.
Billions of Tons of
Carbon Emitted per
Year
14
14 GtC/y
Seven “wedges”
Historical
emissions
7
Flat path
1.
2.
3.
4.
5.
6.
7.
1.9 
O
7 GtC/y
Aggressive end-use efficiencies
More biofuels, biomass
RE: more wind, solar, geo
Expand safe nuclear worldwide
Sequester carbon (coal use)
Better vehicles (PI hybrids)
Manage natural sinks
0
1955
2005
2055
24
2105
Environmental Business Summit 2007
Climate & Clean Energy Business Opportunities
Different opportunities emerge at varying paces with varying impact.
A.
1
2
3
B.
C.
CARBON MANAGEMENT APPROACHES
Energy & Sequestration
Energy Efficiency (Practices / Equip)
- Buildings: residential, commercial, community-scale
- Industrial efficiency and co-generation; on-site power
- Smart transmission and distributed generation
- Expanded demand side mgmt.; consumer campaigns
Low Carbon Power Generation
- Power from coal or gas with carbon capture - storage
- More nuclear power
- Renewable power: wind, biomass, solar, geothermal
Transportation
- Vehicles and motors
- Non-grain Biofuels
- Electrified transport (plug-in hybrids)
- Hydrogen fuels (from nuclear or renewables)
- Telecommuting, traffic flows
Sinks and Resource Management (CO2 + Methane)
Aggressive forestry
Agricultural soil management
Landfill gas capture
Livestock management
Adaptation
Coastal building and community measures
Community preparation & Emergency response systems
Now to 2010
2010 - 2020
2020 - 2030
M
M
L
L
M
M
M
L
H
M
H
M
L
L
L
M
L
L
M
H
M
L
L
L
L
L
M
M
L
L
L
H
H
H
M
L
L
L
L
L
L
L
L
L
M
L
L
L
25
Environmental Business Summit 2007
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.)
26
Environmental Business Summit 2007
N. America & EU share goals, but different paths…
“Bordeaux Energy Enterprise Framework” (2006)
“GREENHOUSE”
Fossil
Future
“GRAPES OF WRATH”
High Growth
Rising
Asia
New
World
N.Am /
Austr.
E.U./
Japan
Low Growth
“ENERGY ENTERPRISE”
“CLUB OF ROME”
Carbon Mgmt
(Energy Security)
27
Environmental Business Summit 2007
The way forward for N.America will be an Asia – Pacific Partnership
“Bordeaux Energy Enterprise Framework” (2006)
High Growth
“GREENHOUSE”
•
•
•
•
•
•
•
•
•
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
• Joint R&D
• Bi-lateral agreements
• Market mechanisms
Fossil
Future
•
•
•
•
•
•
•
•
•
“GRAPES OF WRATH”
“ENERGY ENTERPRISE”
•
•
•
•
Technology
Joint Venture •
•
Investment
•
incentives
•
•
Rising
Asia
New
World
N.Am /
Austr.
E.U./
Japan
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
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
• Guidelines / Regulations
• Multi-lateral agreements
• Public-private partnerships
“CLUB OF ROME”
•
•
•
•
•
•
•
•
•
Low Growth
Carbon Mgmt
(Energy Security)
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
28
Environmental Business Summit 2007
Finish
29
Environmental Business Summit 2007
Backup / Extras
30
Environmental Business Summit 2007
U.S. Power Capacity: 2005 - 2020 (AEO 2006)
Baseline: Fossil fuels still projected to provide most electricity.
AEO 2006
Coal
Nuclear
Hydro
N.Gas
Oil / Dual
Bio
MSW
Geo
Wind
Solar
Total
GWe
2005
313.0
100.0
78.0
224.0
206.0
6.0
3.5
2.2
9.7
0.7
943.0
2010
318.7
101.0
78.0
302.0
124.0
7.0
4.0
3.0
16.0
0.5
954.2
2015
329.3
104.0
78.0
318.9
110.0
8.0
4.0
3.5
18.0
1.0
974.7
2020
345.0
109.0
78.0
360.0
95.0
10.0
3.8
4.6
20.0
2.0
1027.4
EIA: Based on AEO 2006
31
Environmental Business Summit 2007
U.S. Power Consumed: 2005 - 2020 (AEO 2006)
Baseline: Fossil fuels still projected to provide most electricity.
AEO 2006
Coal
Nuclear
Hydro
N.Gas
Oil / Dual
Bio
MSW
Geo
Wind
Solar
Total
Renewables
RE, no hydro
RE, no hydro
Bil KWh
2005
2,041
774
270
711
161
45
25
14
23
1
4,066
2010
2,217
810
297
774
116
76
25
20
52
2
4,388
2015
2,272
829
303
1,030
103
80
28
23
57
2
4,727
2020
2,505
871
300
1,101
106
88
30
34
70
3
5,108
379
109
2.7%
471
174
4.0%
493
190
4.0%
525
225
4.4%
EIA: Based on AEO 2006
32
Environmental Business Summit 2007
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.
GWe
Coal
IGCC
Oil / Dual
N.Gas CC
CT/Diesel
CHP-NGas
Nuclear
Hydro
Geo
MSW
Wood / Bio
Wind
Solar Thm
Solar PV
Solar CSP
Fuel cell / DG
Totals
AEO 2001 (before 9/11)
2005
2010
Retire
Adds
309.8
315.0
-13.5
18.7
0.5
0.5
0.0
0.0
131.2
123.2
-17.7
9.7
49.5
126.0
0.0
76.5
130.6
164.1
-5.1
38.6
40.0
43.0
0.0
3.0
97.5
93.7
-3.8
0.0
79.6
79.7
0.0
0.1
3.2
4.3
0.0
1.2
3.8
4.2
0.0
0.4
6.9
8.0
0.0
1.1
4.4
12.3
0.0
7.9
0.4
0.4
0.0
0.1
0.2
0.5
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
857.5
974.9
-40.1 157.53
2005
313.6
0.5
124.4
139.3
135.8
48.4
100.1
78.3
2.2
3.5
6.3
9.7
0.4
0.2
0.0
0.0
962.6
AEO 2006
2010
Retire
322.8
-3.0
0.5
0.0
124.0
-2.0
151.5
-0.6
139.0
-1.4
50.0
0.0
100.9
0.0
78.3
0.0
2.6
0.0
3.8
0.0
7.2
0.0
16.3
0.0
0.5
0.0
0.7
0.0
0.0
0.0
0.2
0.0
998.2
-7.0
Adds
12.2
0.0
1.6
12.8
4.6
1.6
0.8
0.1
0.4
0.3
0.8
6.6
0.1
0.5
0.0
0.2
42.58
AEO'03 v. '06
Changes
-6.5
0.0
-8.1
-63.7
-34.0
-1.4
0.8
0.0
-0.7
-0.1
-0.3
-1.3
0.0
0.2
0.0
0.2
-115.0
33
Environmental Business Summit 2007
EIA: AEO 2007 Early Release
EIA has reduced projections of natural gas use and raised forecasts of coal use.
AEO 2007:
“World oil prices since 2000 have been substantially
higher than those of the 1990s, as have the prices of
natural gas and coal (although coal prices began to
rise somewhat later than oil and natural gas prices).
The sustained increase in world oil prices caused EIA
to reevaluate earlier oil price expectations in producing
AEO2006. The long-term path of world oil prices
in the AEO2007 reference case is similar to that in
the AEO2006 reference case, although near-term
prices in AEO2007 are somewhat higher than those
in AEO2006.
34
Environmental Business Summit 2007
Global Natural Gas Costs Differ Sharply
Unlike oil, natural gas is still priced regionally rather than globally.
This puts U.S. heavy industrial gas users at a distinct disadvantage.
UK
$5.15
Canada
$5.55
Belgium
$5.25
USA
$6.30
Trinidad
$1.60
Feb. 2005
Sources: Bloomberg,
Economic Times, EIA,
Fertecon, Financial
Times, Pace, Platts,
World Bank
North
Africa
$0.80
Bolivia
$1.60
Russia
$0.95
Belarus
$1.20
Ukraine
$1.70 Iran
Turkey $2.65
$1.25
Saudi
Arabia
$0.75
Kuwait
$1.25
Qatar
$0.65
Oman
$1.00
Argentina
$1.50
Japan
$4.50
South
Korea
$4.50
China
$4.50
India
$3.10
Singapore
$3.20
Taiwan
$4.65
Indonesia
$2.70
Australia
$3.75
($US per million BTUs)
American Chemical Council
35
Environmental Business Summit 2007
Planned Coal Plants Rising; near 100 GWe by 2030
2006
36
Environmental Business Summit 2007
Attributes Affecting Energy Choices
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.
Features
Capital Cost (per KWe)
Marginal Oper. Cost
Fuel Costs (per KWh)
Fuel Price
Air Emissions
Land Use
Grid Dependency
Weather Vulnerability
Baseload power
Coal
Nuclear
High
High
Med
Med
Low
Low
Stable
Stable
High
Med
High
Low
None
Low
High
None
Peaking
Nat'l Gas
Low
Low
High
Volatile
Wind
High
Low
None
None
Med
Low
Med
Low
Low
High
Med
High
Renewables
Biomass
Fuel Cell
High
High
Med
Low
Med
Med
Variable
Variable
Low
High
Med
High
Low
Low
Low
None
37
Environmental Business Summit 2007
Socolow: Carbon Stabilization Wedges
EFFICIENCY
Buildings, appliances, transport, industrial processing, lighting, electric power plants, upstream extraction.
DECARBONIZED ELECTRICITY
Natural gas for coal
Power from coal or gas with carbon capture and storage
Nuclear power
Power from renewables: wind, photovoltaics, solar concentrators (troughs and dishes), hydropower, geothermal.
DECARBONIZED FUELS
Synthetic fuel from coal, natural gas, and biomass, with carbon capture and storage
Biofuels
Hydrogen
from coal and natural gas, with carbon capture and storage
from nuclear energy
from renewable energy (hydro, wind, PV, etc.)
FUEL DISPLACEMENT BY LOW-CARBON ELECTRICITY
Grid-charged batteries (“plug-in hybrids”) for transport
Heat pumps for furnaces and boilers
NATURAL SINKS
Forestry (reduced deforestation, afforestation, new plantations)
Agricultural soils
METHANE MANAGEMENT
landfill gas, cattle, rice, natural gas
38
Environmental Business Summit 2007
AEO Forecasts for Nuclear Capacity: Rising Every Year
EIA raised its forecast for nuclear capacity in 2020 every year since 1998.
EIA AEO Annual Forecasts for U.S. Nuclear Capacity
New reactors forecast
for the first time due to
passage of EPAct 2005
120
110
Nuclear Capacity (GWe)
100
90
AEO2006
80
AEO2005
AEO2004
70
AEO2003
60
AEO2002
Retirements
forecast
through 2002
AEO2001
50
AEO2000
AEO1998
40
2000
2005
2010
2015
2020
39
Environmental Business Summit 2007
Energy Policy Options
40
Environmental Business Summit 2007
DOE Programs with Impact on Carbon Emissions
DOE Programs
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 - OETD
- Transmission Roadmap
- Policy initiatives for investment
How can Federal Credit help?
Lines of Credit;
Credit enhancement
Commissioning
Coverage
Leasing options,
Revolving Loans
Power purchase
agreements
Accelerated or Improved Results:
DOE – FE
- Better proposals from
industry, less budget
exposure for government
DOE - NE
- Federal finance focused on
key risks for new orders
DOE – EE/RE
-Wider variety of financing;
broader market adoption
- More repayment
DOE – OETD
- Incentives to cover longterm investment, upgrades
41