1. Highlights from Recent EPRI Climate-Related Work CA Council on Science & Technology October 2006 Bryan Hannegan Director, Environment

2. 2 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 About EPRI EPRI is an independent non-profit collaborative research and development organization –Funded by 1000 energy companies in 40 countries –Includes IOUs, munis, co-ops –Also includes govt organizations that fund public benefit R&D (e.g. CEC) Climate research is a priority for EPRI –Inform climate policy discussions –Reduce costs through technology R&D –Support utility investment decisions

3. 3 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Topics for Today Generation Options in a Carbon Constrained World Impacts of CO 2 Prices on Existing & New Generation Advancing Energy Efficiency Plug-In Hybrid Vehicle Potential Analysis of CA Climate Legislation

4. Generation Options in a Carbon Constrained World

5. 5 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Generation Options Framework Levelized cost of electricity –Standard EPRI methodology –Constant 2006 $ costs –Lines are mean values from a range of studies Two key uncertainties –Future cost of CO 2 –Future price of natural gas Two timeframes –2010-2015 time-period –2020-2025 time-period

6. 6 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Comparative Costs in 2010-2015 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Wind@29% CF Nuclear PC IGCC Biomass NGCC@$6

7. 7 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Take-Aways for 2010-2015 Time Period Nuclear is clearly lowest-cost, but unlikely before 2015 due to significant licensing & construction time. Next most economic are fossil-fueled technologies (NGCC, PC, and IGCC) w/o CO 2 capture and storage –Will comprise dispatchable base-load generation prior to 2015 –Natural gas will re-emerge only if prices ~$4/MMBtu New advanced coal plants with CO 2 capture and storage will probably not occur until after 2015. Carbon prices must be > $30/tCO 2 for wind, biomass

8. 8 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 2 x 750 MW Advanced PC Plant……………….2009 600 MW Base Load IGCC Plant…………..……2010 First of TXUs 11 New Plants Online (PC).…....2010 Carson Project Pet Coke Gasification…….……2011 FutureGen Living Laboratory Operating….….2013 Advanced Coal with Capture Deployment....2018+ 20182010200920132006 Long Technology Development Cycle…With Uncertainty 2011 Advanced Coal Technology Time Line

9. 9 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Whats Possible: 2020-2025 Horizon Technology Advances in Efficiency Cost Reductions through Design Improvements CO 2 Capture and Storage - Development and Deployment Biomass Gasification Technology Energy Storage Capability

10. 10 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Comparative Costs in 2020-2025 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Nuclear Wind Biomass NGCC@$6 An Extraordinary Opportunity to Develop a Low-Carbon Portfolio IGCC w/cap PC w/cap

11. Impact of CO 2 Prices on Existing and New Generation

12. 12 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 CO 2 Value Impacts Market Price and Generator Net Revenue for Each Hour of Dispatch

13. 13 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Position in Stack Determines Each Generators Net Revenue for the Year – $/kW-year

14. 14 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Coal Land Represented by ECAR + MAIN

15. 15 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Coal Land – CO 2 @ $0/ton

16. 16 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Coal Land – CO 2 @ $50/ton

17. 17 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Net Revenues for Existing Units

18. 18 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Net Revenues for Advanced Generation Units

19. 19 © 2006 Electric Power Research Institute, Inc. All rights reserved. September 2006 Key Insights 1.Higher production costs from CO 2 value does not imply lower net revenues for some units due to feedback loop from plant costs to market prices 2.Risk exposure to coal generation highly dependent on Regional generation mix Gas price level 3. Older coal plants more exposed to CO 2 risk than newer plants, a factor for environmental retrofit decisions

20. Advancing Energy Efficiency

21. 21 © 2006 Electric Power Research Institute, Inc. All rights reserved. Strategies for Efficient Use of Electricity Three Interrelated Strategies Energy Efficiency (EE) Demand Response (DR) Dynamic Systems (DS) Implemented through an Electricity Efficiency Infrastructure that allows prices to devices EE DSDR

22. 22 © 2006 Electric Power Research Institute, Inc. All rights reserved. Dynamic Systems: A Critical Need Efficient Building Systems Utility Communications Dynamic Systems Control Data Management Distribution Operations Distributed Generation & Storage Plug-In Hybrids Smart End-Use Devices Control Interface Advanced Metering Consumer Portal & Building EMS Internet Renewables PV

23. 23 © 2006 Electric Power Research Institute, Inc. All rights reserved. Creating an Energy Efficiency Initiative Established Electricity Efficiency Technology Ad-Hoc Committee of EPRI Board Conducting Regional Workshops to obtain additional input from utilities and other stakeholders –Oct 31 – Southern California (Hosted by Lynda Ziegler of SCE; contact Ellen Petrill epetrill@epri.com for details) Identify and finalize new elements of EPRI Electricity Efficiency Technology Initiative by end of year Coordinate with the Edison Electric Institute and other industry organizations

24. Plug-In Hybrid Electric Vehicle Potential

25. 25 © 2006 Electric Power Research Institute, Inc. All rights reserved. Plug-In Hybrid Greenhouse Gas Emissions

26. 26 © 2006 Electric Power Research Institute, Inc. All rights reserved. Source: EPRI CO 2 Offsets Increase with Cleaner Electricity Electricity CO 2 emissions in g CO 2 kWh -` Total vehicle CO 2 emissions in g CO 2 mi -1

27. 27 © 2006 Electric Power Research Institute, Inc. All rights reserved. Plug-in Hybrid Electric Vehicle Progress EPRI/SCE Advanced Battery Test Program EPRI/DOE Product Development Johnson Control/Saft Alignment Technology Innovation - Nanotechnololgy Automotive Analysis in Process Argonne National Lab Environmental Value Analysis Environmental Base Program PHEV Sprinter Data Collection Eaton/EPRI Trouble Truck Batteries Auto Environment Data

28. 28 © 2006 Electric Power Research Institute, Inc. All rights reserved. HEV Technology Timeline 20002005201020152020 HEV Market Introduction HEV Sales Accelerate EPRI PHEV Sprinter with DaimlerChrysler Li Ion Batteries Enter HEV Market PHEV Sales Accelerate Widespread PHEV Adoption EPRI PHEV Utility Trouble Truck with Eaton/Ford Initial EPRI PHEV Study DOE Begins PHEV Program EPRI/Utility PHEV Fleet Demonstrations Costs Decrease Most OEMs Have PHEV in Lineup 30-mile EV range Customer Market Pull: Increased EV Range Greater EV Performance 40-mile EV Range Plug-in Night Time Charge24 Hr. Grid AccessAuto-Docking Time of Use Charge & Automatic Billing Infrastructure First PHEVs: 7 to 20-mile EV Range Li Ion Battery Initial PHEV Market Intro

29. Overview of California Climate Policy Activity

30. 30 © 2006 Electric Power Research Institute, Inc. All rights reserved. California Climate Policy Activity Government policy actions Governor's Executive Order sets GHG mitigation targets State Senate and Governor announce deal for comprehensive cap on GHG emissions (AB 32) New long term (> 5 years) base-load requires performance standard equal to a CCGT (SB 1368) 33% Renewable Portfolio Standard by 2020 (PUC) EPRI California climate policy research Analysis of CA GHG mitigation targets Analysis of 3 existing economic studies

31. 31 © 2006 Electric Power Research Institute, Inc. All rights reserved. California GHG LegislationKey Points Role of the Air Resources Board Rules, procedures, regulations, etc. unclear at present achieve maximum technologically feasible and cost- effective GHG reductions. Authorizes market-based compliance mechanism(s) Mandatory reporting of GHG emission sources Timing 6/30/2007 ARB to publish list of early actions… By 1/1/2011 ARB shall adopt regulations Become effective 1/1/2012

32. 32 © 2006 Electric Power Research Institute, Inc. All rights reserved. California GHG LegislationKey Points Economic impact unclear at present State has yet to work out details of implementation Supporters say it wont harm business Provision for safety valve Governor has authority to delay emission-cap by up to one year in an emergency New Energy Investments Face Uncertainty Any project will face undefined restrictions/costs as reductions, measures and limits not known until 2011 Financing these projects may be very difficult

33. 33 © 2006 Electric Power Research Institute, Inc. All rights reserved. EPRI Examining California GHG Policies Independent analysis of economic costs and benefits Funded by Southern California Edison Project duration-- January 2006--June 2007 EPRI has provided status reports to SCE and other interested organizations Project results will be provided to the public Advisory Committee provides peer-review Report will be released November 2006

34. 34 © 2006 Electric Power Research Institute, Inc. All rights reserved. EPRI Evaluation of Previous Economic Studies Previous research indicated benefits for economy Economic analysis by the Climate Action Team Independent economic analysis by Center for Clean Air Policy (CCAP) Third report by UC Berkeley Climate Change Center All three studies based on bottom-up analysis of many separate policy measures Bottom-up analyses displays systematic optimistic bias about the economic costs Undergoing peer-review and should be widely available in near future

35. 35 © 2006 Electric Power Research Institute, Inc. All rights reserved. California climate activities important for rest of country May lead to other state/regional/national proposals Getting rules right in California will be helpful for subsequent proposals in other states or nationally Remember deregulation … Issues are complex; unintended consequences costly Any proposed government actions (ARB) should be carefully examined prior to implementation: -What are the impacts on electric system? economy? -How do you constrain electricity imports? -Can technology meet the pace of regulations? Closing Thoughts

36. 36 © 2006 Electric Power Research Institute, Inc. All rights reserved. Carbon Prices DO Affect Electricity Rates!