1 University of Nebraska - Lincoln CLIMATE CHANGE CONFERENCE 2008 May 21, 2008 Climate Change Challenges Facing the Electric Industry Ron Asche, President and CEO Nebraska Public Power District

2 NPPD Annual Overview Revenue - $781 Million Over 2,200 employees 3,132 MW of generation accredited capability Primarily a wholesale power supplier to municipalities, other public power districts and cooperatives Provides almost half the electricity consumed in Nebraska Nebraska has consistently been among the 10 lowest cost states for electricity

3 National 2006 NPPD 2007 * Includes hydro purchases from the federal government 34% Non-CO 2 Emitting 29% Non-CO 2 Emitting Fuel Mix for Electricity Percent by Resource

4 Carbon Dioxide Emissions by Sector (Million Metric Tons) Reference: Nebraska Data from EIA 2004 State Emissions by Sector US Data from EPA Inventory of US Greenhouse Gas Emissions and Sinks: (April 2008) Commercial 4% Electric Power 48% Transportation 28% Industrial 14% Residential 6% Nebraska 44 Million Metric Tons Commercial 4% Electric Power 42% Industrial 15% Residential 6% Transportation 33% United States 5,934 Million Metric Tons

5 Greenhouse Gas (GHG) Regulatory Proposals No Controls Bingaman-Specter McCain-Lieberman Sanders-Boxer Kerry-Snowe Lieberman-Warner 1990 emission levels

6 NPPD’s Projected Coal Emissions vs. Allowances Projected CO 2 Emissions Business As Usual CO 2 Emissions Allowance Allocation

7 CO 2 Allowance Price Projections

8 NPPD’s Estimated CO 2 Costs

9 How Can the Electric Sector Make Significant Reductions? EPRI (Electric Power Research Institute) is focusing on this issue EPRI PRISM Analysis –assesses the feasibility for future CO 2 emissions, based on the potential of advanced technologies: –End-use energy efficiency –Renewable energy –Advanced light water nuclear reactors –Advanced coal power plants –CO 2 capture and storage –Plug-in hybrid electric vehicles –Distributed energy resources

10 EIA Base Case 2008 TechnologyEIA 2008 ReferenceTarget EfficiencyLoad Growth ~ +1.05%/yrLoad Growth ~ +0.75%/yr Renewables55 GWe by GWe by 2030 Nuclear Generation15 GWe by GWe by 2030 Advanced Coal Generation No Heat Rate Improvement for Existing Plants 40% New Plant Efficiency by 2020– % Heat Rate Improvement for 130 GWe Existing Plants 46% New Plant Efficiency by 2020; 49% in 2030 CCSNoneWidely Deployed After 2020 PHEVNone 10% of New Light-Duty Vehicle Sales by 2017; 33% by 2030 DER< 0.1% of Base Load in 20305% of Base Load in 2030 EPRI Prism – 2008 EIA with Energy Bill Achieving all targets is very aggressive, but potentially feasible

11 Challenges (Cont’d) Utility executives throughout the Nation are concerned about potential regional power supply challenges in the next 5-10 years Environmental requirements associated with Climate Change could triple the cost or greater of existing electric generating facilities in Nebraska, under certain scenarios Energy Information Administration’s Annual Energy Outlook 2008 (Early Release)

12 Challenges Long-term challenge – slow, stop, reverse greenhouse gas (GHG) emissions Current lack of technology to capture and sequester CO 2 from fossil generation –May require new national pipeline network for transportation to suitable storage areas –Expected to add significant costs to coal based generation –Will reduce up to 1/3 of plant electricity output

13 Challenges: Will CO 2 Storage Be Acceptable? Who owns the underground storage site? Who owns the injected CO 2 ? Who is responsible if it escapes? What happens to the injected CO 2 ? Will public accept it? What is right legal, policy framework? EPRI’s role is to assess environmental impacts of potential mitigation

14 Challenges (Cont’d) Where will electricity come from, how much will it cost, and will it be reliable? COAL - proposed new plants being rejected or withdrawn throughout the nation NUCLEAR - considerable uncertainty over cost and regulatory process for new facilities NATURAL GAS – increased use will make the fuel even more expensive and put stress on gas supplies ENERGY EFFICIENCY and RENEWABLES – very important, but cannot completely offset growing needs for more electricity and replace retiring baseload capacity

15 Challenges: Availability of Offsets A greenhouse gas (GHG) offset is generated by the reduction, avoidance, or sequestration of GHG emissions from a specific project (from a sector not covered by a mandatory program, such as agriculture or forestry) Offsets may be essential because they potentially can be implemented quickly and at a relatively low cost 1.Must be “additional” - would not otherwise occur without the funding provided by the offset purchaser 2.Must be rigorously quantified Will certified offsets be available? –Nebraska –United States –International Community NPPD focus is on potential Nebraska-based offsets

16 NPPD’s Climate Policy Recognizes the growing public concerns about climate change NPPD is: –Engaged in voluntary actions to lower GHG emission intensity (CO 2 /MWh) of electricity –Developing a strategy to address the challenges of balancing customer’s competing concerns about climate change and cost of energy –Basing the strategy on our core public power values: Being good stewards of the environment Conserving natural resources Providing reliable and low cost electricity

17 NPPD Initiatives Investigating repowering of Sheldon Station coal plant (southwest of Lincoln) with cleaner, more efficient technology Board approved goal of meeting 10% of energy needs with renewable resources (primarily wind) by 2020 NPPD will purchase 120-megawatts of wind generation from facilities to be constructed near Bloomfield Finalizing 20-year Integrated Resource Plan to optimize future generation and energy efficiency in a carbon constrained economy

18 NPPD Initiatives (Cont’d) Develop and implement cost-effective energy efficiency and conservation programs –Compact Fluorescent Lighting (CFL) Campaign - 30,000 CFL bulbs sold in Fall of 2007 Exploring partnership with State Energy Office to offer low interest customer loans for energy efficiency and conservation applications Investigating pumped hydro storage generation Partnering with UNL – Nebraska Center for Energy Sciences Research to investigate alternative energy sources and potential carbon offsets utilizing Nebraska resources

19 Summary Making significant CO 2 emission reductions, while providing reliable and reasonably priced electricity to meet a growing need, will be one of the biggest challenges the electricity industry has ever faced Emission reduction policies must allow time for new technologies to develop NPPD is developing a strategy to take cost- effective actions to reduce CO 2 emissions in a manner that enhances the environment and the economy of Nebraska