Addressing New
Environmental Regulations
John N. Voyles, Jr.
Vice President, Transmission & Generation Services
KIUC Annual Energy Conference, March 2014
Drivers from Recent EPA Regulations
National Ambient Air Quality Standards
(NAAQS)
Cross State Air Pollution Rule
(CSAPR)
Mercury & Air Toxics
Standards (MATS)
Page 2
LG&E and KU
Least-Cost Compliance Plans
Install additional clean coal technology at 4 largest stations
Trimble County
Ghent
Coal Capacity
Mill Creek
E.W. Brown
Page 3
LG&E and KU
Least-Cost Compliance Plans
Additional control technology construction progressing
Trimble County
Ghent
Coal Capacity
Mill Creek
E.W. Brown
Page 4
LG&E and KU
Least-Cost Compliance Plans
Retire 800 MW at 3 coal-fired stations
Coal Capacity
Cane Run
Green River
Tyrone
Page 5
Cane Run 7 Natural Gas Combined Cycle
Construction Progressing
Page 6
EPA Regulations Still to Come
with Significant Ramifications
• Coal Combustion Residuals (CCR)
CO2
SF6
CH4
N2O
HFCs
PFCs
Scope 1
Scope 2
Direct
Scope 3
Indirect
Indirect
Employee BusinessTravel
Production of
Purchased Materials
Purchased Electricity
for Own Use
Waste Disposal
Company-Owned
Vehicles
Fuel Combustion
Product
Use
Contractor-Owned
Vehicles
• Greenhouse Gas — New
& Existing Source
Performance Standards
Outsourced Activities
• National Ambient Air Quality
Standards (Ozone and PM2.5)
• Effluent Guidelines & 316 (b)
Page 7
Coal Combustion Residual (CCR)
Treatment Facilities & Dry Landfills
• Dewatering systems
• Beneficial reuse transfer
systems
• Conveying systems
•
•
•
•
Transport systems
Lined landfill
Leachate collection
Groundwater monitoring
Page 8
More Carbon Regulations?
• EPA has re-proposed
regulations for new
coal plants
• EPA must propose
in June 2014 regulations
for existing plants
• Impacts???
— Efficiency improvements?
— Renewable standards?
— Cost implications?
Page 9
29 States and D.C. Have RPS Mandates
Source: FERC
Page 10
NAAQS — Revised Ozone Standard?
•EPA re-evaluates standards
every 5 years
•2012 — The President
delayed the release of the
2008 proposed ozone
revision
•EPA expected to issue
ozone proposal this year
•Ozone Transport Region
(OTR) states petition to
expand original participants
Page 11
Effluent Limitation Guidelines
(Plant Waste Water Streams)
Coal Pile Runoff
Cooling Tower Blowdown
Metal Cleaning Wastes
Misc. Water Usage
Boiler
Blowdown
Bottom Ash
Transport
WFGD & WESP
Blowdown
Fly Ash Transport
Water & Ash Pond
Effluent
Page 12
Meeting Future
Capacity Needs in a World
of Uncertainty
Generation Supply is Changing
Due to Retirements
• Recent press clipping…
— “MISO will fall below [reserve margin] targets during the 2015 summer
season. If resources do not come on-line, an increased likelihood of
firm load shedding is possible.” (2013 Long-term Reliability
Assessment; NERC).
• 37 GWs of announced retirements by 2015 in Eastern
Interconnect
— PJM and MISO reserve margin forecasted to decline precipitously (PJM
– from 31% today to 21% in 2018; MISO – from 18% today to 12% in
2015).
• Problems were widespread during January cold temps
— TVA declared energy emergency alerts on 3 occasions in January 2014.
— PJM experienced non-firm natural gas curtailments and 20% EFOR.
— SCE&G had rolling blackouts from high load and outages.
Page 14
Announced Coal Retirements
Higher Than 2013
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
2013 2014
Plan Plan
39.0
39.3
39.4
45
Cumulative Coal Retirements
Eastern Interconnect (GW)
34.9
35
30
25.8
25
20
26.0
26.5
26.8
26.8
26.8
17.0
14.7
15
10
38.7
38.3
40
8.7
9.1
11.6
7.4
5
0
2012
2013
PJM
2014
SERC
2015
MISO
2016
SPP
2017
NYiso
Page 15
2018
isoNE
2019
FRCC
2020
Weather Impacts Can Result
in Higher-Than-Expected Loads
January 6-7, 2014 weather
• Temperatures up to 30° F
below normal with low of
-4 °F
• Winds of 10-25 mph with
gusts up to 33 mph
Page 16
Renewables Contribute Intermittently. . .
• Limited potential for renewable generation at peak
— No solar (new winter peak set after 8 p.m.)
— Strong but variable winds diminished quickly
— MISO wind gen. at peak hour dropped 86% from Jan. 6 to Jan. 7
Note: Wind speed does not correlate to load
Page 17
System Planners Consider Key
Uncertainties
• Key uncertainties for potential capacity additions
— Range of natural gas prices
— CO2 regulations
— Range of load forecast
(peak and energy)
• Using a probability for each
scenario, a plan with the
expected lowest reasonable
cost is identified
• Consider a range of outcomes
in combination to minimize
costs
Page 18
A Range of Economic Forecasts
are Considered…
40,000
GDP ($ Billions)
High
30,000
Base
Low
20,000
10,000
Base
Optimistic
Pessimistic
Source: IHS Global Insight
Page 19
$/ MMBtu
Also a Range of Natural Gas Prices…
20
18
16
14
12
10
8
6
4
2
-
High
Med
Low
EIA-AEO 2013 Base
EIA-AEO 2013 High
Source: Energy Information Administration
Page 20
EIA-AEO 2013 Low
And Potential CO2 Prices
160
High
140
$/ short ton
120
Med
100
80
Low
60
40
20
-
Low
Mid
High
Source: Synapse Energy Economics
Page 21
Comparative Levelized Costs of Electricity
of Dispatchable Technologies — 2015
Baseload technologies
Page 22
Comparative Levelized Costs of Electricity
of Non-Dispatchable Technologies* — 2015
Without integration costs
Page 23
Examine Alternatives
Across a Range of Scenarios
Alternative
Natural Gas Combined Cycle
Coal
Simple Cycle CT
Renewables
Gas Med Med Med Med High High High High Low Low Low Low
Load Base Base Low Low Base Base Low Low Base Base Low Low
Carbon Zero Med Zero Med Zero Med Zero Med Zero Med Zero Med
<-Better/Worse->
• Prefer NGCC in low-gas and carbon scenarios. Need NGCC for
base load in carbon scenarios.
• NGCC is not unfavorable in any scenario.
• Coal response only favorable in high gas, zero carbon scenarios.
• Simple Cycle CT not desirable in carbon scenarios.
• High capital cost and limited dispatch flexibility reduce value of
wind and solar.
Page 24
Green River Station
Page 25
Green River 5 — Natural Gas
Combined Cycle Unit
Similar to rendition of the Cane Run 7 NGCC
Page 26
Photovoltaic (PV) Solar Resources
PV Array in Spain
48 MW
380 acres
Page 27
Potential Solar Array Location
E.W. Brown Station
LG&E and KU
PV Array
~10 MW
~ 100 acres
Page 28
Total Capital Required Trends
(2009 versus 2012)
9,000
8,000
Total Capital Required ($/kW)
7,000
6,000
2009
5,000
2012
4,000
3,000
2,000
1,000
0
PC
NGCC
Nuclear
Onshore Wind
Page 29
CSP
PV
Levelized Cost of Electricity Trends
2009 versus 2012
500
Levelized Cost of Electricity ($/MWh)
450
400
350
300
2009
2012
250
200
150
100
50
0
PC
NGCC
Nuclear
Onshore
Wind
Page 30
CSP
PV
Portfolio in Transition: Combined Cycle
Gas Will Be 15% of Capacity by 2019
Page 31
Portfolio in Transition: 25% of Energy
From Two NGCC Units by 2019
1% non-fossil
Page 32
Non-Fossil Resources Increasing by 40%
Since 2005 (Nameplate Capacity)
MW
~ 40%
* Solar capacity addition only if approved by KPSC
Page 33
Non-Fossil Energy Increasing 50% Since 2005
(Intermittent Output Based on Resource)
GWh
~ 50%
* Solar energy addition only if approved by KPSC
Page 34
2014–2018 Capital Investments
No investments included for GHG regulations
Page 35
Electricity Generation by Fuel,
1990-2040 (Trillion kWh by Year)
Source: http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2013).pdf
Page 36
Regional Rate Comparison — Industrial
U.S. Industrial Average per kWh is 6.60 cents
5.15¢
6.52¢
6.02¢
6.30¢
5.35¢
LG&E and KU — 5.64¢
5.71¢
Source: Edison Electric Institute, Winter 2012, Typical Bills and Average Rates Report
Page 37
6.38¢
Closing Thoughts
• Current and future EPA regulations continue to impact
investments and energy costs.
• Supply side retirements during 2015 and 2016 will likely
present transitions issues for the grid.
• Key uncertainties impact near-term and long-term
alternative supply resource options.
• Renewable energy resources can be a part of a
portfolio.
• LG&E and KU continue to pursue least reasonable cost
options for these challenges.
of Electricity
Page 38