Coping with Competing Energy
Strategy Directions
Washington Coal Club
May 14, 2008
Carl O. Bauer, Director
National Energy Technology Laboratory
Office of Fossil Energy
Energy Demand 2030
Energy Demand Today
118 QBtu / Year
82% Fossil Energy
101 QBtu / Year
85% Fossil Energy
+ 16%
United States
703 QBtu / Year
82% Fossil Energy
453 QBtu / Year
81% Fossil Energy
+ 55%
World
Fossil Energy Will Continue to Dominate
2
U.S. data from EIA, Annual Energy Outlook 2008 revision; world data from IEA, World Energy Outlook 2007
C. Bauer, Washington Coal Club, 05/14/08
Energy Strategy Complexity
Economic
Sustainability
Energy
Supply
Security
Aiming for
Balanced Solutions
Climate
Change
3
C. Bauer, Washington Coal Club, 05/14/08
Reserv
e
margin
25%
Reserv
e
margin
20%
Reserv
e
margin
16%
Reserv
e
margin
8–10%
40,000
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
20,000
1989
30,000
1988
Peak Demand & Capacity (MW)
South African Historical Demand Overview
Year
Peak Demand
Expected Peak Demand
Installed Capacity (MW Sent-out)
Operational Capacity (MW Sent-out)
Reserve Margin Aspiration = 15%
4
“Update on State of Power Security in South Africa”Jacob Marolga, Chief Executive, Eskom, February 19, 2008
C. Bauer, Washington Coal Club, 05/14/08
South African Grid Overwhelmed by Demand
5
The Wall Street Journal, April 17, 2008
C. Bauer, Washington Coal Club, 05/14/08
NERC 2007 Long-Term Reliability Assessment
Require 135 GW by 2016
“Areas of the most concern include WECC-Canada, California, Rocky Mountain
States, New England, Texas, Southwest, and the Midwest . . .”
 NERC LTRA 2007
6
NERC 2007 Long-Term Reliability Assessment
C. Bauer, Washington Coal Club, 05/14/08
U.S. Peak Summer Generation Capacity
NERC and AEO’08 Capacity Outlook
1,400
1,200
+128 GW additional required to maintain
capacity margins (NERC)
979 GW
+7 GW by 2016 (EIA)
G Ws
1,000
800
600
- 41 GW oil and gas steam boilers
400
200
0
20
NE R C New S ummer C apac ity
C oal
O il and Natural G as S team
C ombined C yc le
C ombus tion T urbine/Dies el
Nuc lear P ower
R enewable S ourc es
O thers
05 006 007 008 009 010 011 012 013 014 015 016 017 018 019 020 021 022 023 024 025 026 027 028 029 030
2 2
2
2 2
2
2 2
2
2 2
2
2
2 2
2
2 2
2
2 2
2
2 2
2
Capacity Growth Forecasts Vary Substantially Due to Assumptions for
Annual Electricity Demand Growth Rates, GDP Growth, and Oil Price
7
EIA, Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment
C. Bauer, Washington Coal Club, 05/14/08
Declining Total Electricity Generation Growth
Rate Assumptions
6,000
AEO’05 3.1%/yr
GDP growth
5,800
AEO’07
1.5%/yr
5,600
Billion kWh/year
NERC
growth
AEO’06
1.6%/yr
5,400
1.9%/yr
growth
5,200
5,000
AEO’08 revision
2.4%/yr GDP
growth
4,800
1.1%/yr
growth
4,600
4,400
4,200
Reduced 2025 GDP
by $2.7 trillion (16%)
(2006 dollars)
Reduction of 36 BkWh /yr growth equates to reduced
need for 4,900 MW of new generation each year (@ 85% c.f.)
4,000
2005
2010
2015
2020
2025
2030
Declining Growth in Long-Term Electricity Demand and U.S. GDP;
NERC Estimates Tied to Higher Growth Rate
8
EIA Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment
C. Bauer, Washington Coal Club, 05/14/08
Total Electricity Generation Growth Rates
AEO’08
2.2%/yr
20 yr
1.7%/yr
1.5%/yr
6 yr
NERC
1.1%/yr
EIA
Forecast for Electricity Generation Growth Well Below Recent Averages
9
Electricity generation: EIA,19491994: Annual Energy Review 2006; 19952006: Electric Power Annual 2006; 20072030:
Annual Energy Outlook 2008 revision; NERC 2007 Long-Term Reliability Assessment
C. Bauer, Washington Coal Club, 05/14/08
Net Capacity Changes
Removed or Added Opportunities
1st Quarter 2008
95% of MWs removed represent
“Announced” projects
Removed
Capacity
Wygen II
90 MW
Now Operational
Total Net Reductions 614 MW (-0.9%) for 1th Quarter 2008
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Source: Global Energy Decisions – Velocity Suite (April 2, 2008)
C. Bauer, Washington Coal Club, 05/14/08
Coal-Fired Development Activity vs. EIA AEO’08
Trendline
≈ 20 GW through 2016
Low forecasts for new capacity may not
reflect sufficient market promise to attract
new skilled human resources to the industry
AEO’08 reference case
17.9 GW by 2016
Trendline 5-year actual
Actual Installation Trend and EIA AEO’08 Reference Forecast Similar;
A Significant Surplus of Developments Exists Above EIA’s Forecast Demand
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EIA, Annual Energy Outlook 2008 revision; Global Energy Decisions – Velocity Suite 12/31/07
C. Bauer, Washington Coal Club, 05/14/08
Can Natural Gas Supply Support a “Dash to Gas”?
Total generation AEO’05
Total generation AEO’08
2.3 Tcf
Renewable AEO’08
Nuclear AEO’08
Oil and Natural Gas AEO’08
1.4 Tcf
Generation from coal if no
new plants are built
Coal AEO’08
3.7 Tcf of Potential Natural Gas Demand Growth
with Declining North American Supply
12
EIA AEO 2008 (rev.) and AEO 2005; Assumes NG-fired combined cycle plants operating at 50% efficiency to fill generation gaps
C. Bauer, Washington Coal Club, 05/14/08
Total Natural Gas Supply to United States
(Including Liquid Natural Gas)
AEO’01
AEO’03
AEO’02
AEO’04
Tcf / Year
AEO’05
AEO’06
AEO’07
AEO’08
Gradual Decline to 20 Tcf without LNG
AEO’08
no LNG
Increased Use of Natural Gas in Electricity Will Require LNG;
North American Natural Gas Supply for U.S. Trending Down
13
Annual Energy Outlook 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008 March revision reference cases
C. Bauer, Washington Coal Club, 05/14/08
Wall Street Journal on LNG (April 18, 2008)
“Overall, U.S. imports of LNG have slid
over the past nine months to a five-year
low, and natural-gas inventories are
running relatively low . . . If the U.S. is
unable to attract LNG supply this summer,
prices could spike up sharply within a few
months if a hot summer were to reduce
the ability to build a cushion of gas going
into next winter.”
“Meantime, as Asian buyers grab more
LNG from the Atlantic basin, U.S.
prices, though at 27-month highs, still
look cheap.”
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Wall Street Journal, Surge in Natural-Gas Price Stoked by New Global Trade, Page1, April 18, 2008
C. Bauer, Washington Coal Club, 05/14/08
$30/t CO2 Tax and $14/MMBtu Natural Gas
(Effect on Current Average Generating Costs, by Region)
Cost per MWh
13% average$42.84 average
61% average
increaseincrease
increase
$13.15 average
increase
249% higher
31% higher
increase
price increase
148% average
increase
148% average $32.73 average
increase
increase
$32.73 average
increase
Due to Natural Gas Price Impacts, Gas Intensive Regions Will See
Higher Real Electricity Cost Impact From Carbon Taxes
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C. Bauer, Washington Coal Club, 05/14/08
Summary
 U.S. power generation industry is at a critical
juncture, with social pressures and pending
legislation demanding massive changes
 Competing demands for reliable, low-cost
energy and climate change mitigation appear
incongruent
 Our Nation’s liquid fuel dependence on
foreign resources continues to grow
 Uncertainty of regulatory outcomes and rising
costs impact industry’s willingness to commit
capital investment, endangering near-term
production capacity
 The United States must foster new processes
that address conflicting energy objectives
simultaneously
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C. Bauer, Washington Coal Club, 05/14/08
For Additional Information
Carl Bauer
412-386-6122
carl.bauer@netl.doe.gov
Office of Fossil Energy
www.fe.doe.gov
NETL
www.netl.doe.gov
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C. Bauer, Washington Coal Club, 05/14/08