1. US Climate Partnership Association June 24, 2010 Revis James Director Energy Technology Assessment Center Creating a Low-Carbon Future EPRI’s 2009 Prism- MERGE Study

2. © 2010 Electric Power Research Institute, Inc. All rights reserved. Converging Policy Drivers –CO 2 policy –Other potential issues Ash Environmental impact of renewables Water availability for power plant cooling –Existing environmental policies (e.g. SO x, NO x ) –Renewable Portfolio Standards (RPS)/ Renewable Energy Standards (RES)

3. © 2010 Electric Power Research Institute, Inc. All rights reserved. Ever-Present Technical Drivers Hedge technology risks Recognize long lead times for technology deployment. Meet demand Maintain reliability Minimize cost

4. © 2010 Electric Power Research Institute, Inc. All rights reserved. Capability to Reduce CO 2 Emissions Prism Technology Analysis  Bottoms-up performance and cost analysis of key technology options to reduce electric sector CO 2 emissions – Based on domain expert evaluation of feasible technology performance, deployment improvements – Performance and technology advancements  Presumes sustained, successful RD&D  Updated annually

5. © 2010 Electric Power Research Institute, Inc. All rights reserved. 2009 Prism Technologies Performance/ Deployment Assumptions TechnologyEIA Base CaseEPRI Prism Target Efficiency Load Growth ~ +0.95%/yr 8% Additional Consumption Reduction by 2030 T&D EfficiencyNone20% Reduction in T&D Losses by 2030 Renewables60 GWe by 2030135 GWe by 2030 (15% of generation) Nuclear 12.5 GWe New Build by 2030 No Retirements; 10 GWe New Build by 2020; 64 GWe New Build by 2030 Fossil Efficiency 40% New Coal, 54% New NGCCs by 2030 +3% Efficiency for 75 GWe Existing Fleet 49% New Coal; 70% New NGCCs by 2030 CCSNone 90% Capture for New Coal + NGCC After 2020 Retrofits for 60 GWe Existing Fleet Electric Transportation None PHEVs by 2010 40% New Vehicle Share by 2025 3x Current Non-Road Use by 2030 Electro- technologies NoneReplace ~4.5% Direct Fossil Use by 2030

6. © 2010 Electric Power Research Institute, Inc. All rights reserved. U.S. Electricity Sector Impact of 2009 Prism Assumptions 0 500 1000 1500 2000 2500 3000 3500 199019952000200520102015202020252030 U.S. Electric Sector CO 2 Emissions (million metric tons) Efficiency Renewabl es Nuclear CCS Fossil Efficiency Electro- Technologi es PEV 41% below 2005 58% below 2005 EIA 2009 baseline

7. © 2010 Electric Power Research Institute, Inc. All rights reserved. Assess Technology Development Strategies via Energy-Economic Analysis Look at electricity sector in context of overall U.S. and global economy Focus on economic output as the metric Integrate effect of expected CO 2 policy, technology costs and development for different future technology scenarios Models competition between options to investment in the electric sector with other opportunities in the rest of the economy. Provides a foundation to which additional assumptions/ models re: energy consumption behavior, public policy can be added.

8. © 2010 Electric Power Research Institute, Inc. All rights reserved. MERGE Energy-Economic Analysis Model  Optimization Model of Economic Activity and Energy Use through 2050 – Maximize Economic Wealth  Inputs – Energy Supply Technologies and Costs for Electric Generation and Non-Electric Energy  Constraints – Greenhouse Gas Control Scenarios – Energy Resources  Outputs – Economy-wide Impact of Technology and Carbon Constraints

9. © 2010 Electric Power Research Institute, Inc. All rights reserved. Assumed CO2 Emissions Limits Billion tons CO 2 Historical Emissions 0 1 2 3 4 5 6 7 8 1990200020102020203020402050 Remainder of U.S. Economy U.S. Electric Sector 83% Reduction in CO 2 emissions from 2005 Assumed Economy-wide CO 2 Reduction Target* 2005 = 5982 mmT CO 2 2012 = 3% below 2005 (5803 mmT CO 2 ) 2020 = 17% below 2005 (4965 mmT CO 2 ) 2030 = 42% below 2005 (3470 mmT CO 2 ) 2050 = 83% below 2005 (1017 mmT CO 2 ) *no international offsets

10. © 2010 Electric Power Research Institute, Inc. All rights reserved. Compare Impact of Contrasting Technology Scenarios Limited PortfolioFull Portfolio Supply-Side Carbon Capture and Storage (CCS) UnavailableAvailable New NuclearExisting Production LevelsProduction Can Expand RenewablesCosts DeclineCosts Decline Faster New Coal and GasImprovements Demand-Side Plug-in Electric Vehicles (PEVs) UnavailableAvailable End-Use EfficiencyImprovementsAccelerated Improvements

11. © 2010 Electric Power Research Institute, Inc. All rights reserved. Economic Deployment under Different Scenarios Limited PortfolioFull Portfolio Coal Gas Wind Demand Reduction New Coal + CCS Coal Gas Wind Nuclear Demand Reduction Nuclear Solar Biomass Hydro CCS Retrofit Biomass Hydro

12. © 2010 Electric Power Research Institute, Inc. All rights reserved. Key Technology Portfolio Insights Aggressive energy efficiency needed with either portfolio –52% Increase in Demand Reduction with Limited Portfolio Over 20% renewables generation share by 2030 with either portfolio –>50% renewables by 2050 with limited portfolio If availability of new nuclear and CCS post 2020 uncertain, natural gas power production expands rapidly –Limited Portfolio – Gas Consumption Increases 275% from 2010 to 2050

13. © 2010 Electric Power Research Institute, Inc. All rights reserved. Technology Transition followed by Transformation Full Portfolio Scenario 2010 – 2030 –Natural gas –Reduced demand via efficiency –Emergence of large-scale renewables –Retrofit/life-extension of existing plants Beyond 2030 –Even more energy management and efficiency. –Large-scale generation from renewables. –Nuclear and advanced coal + CO 2 capture/storage

14. © 2010 Electric Power Research Institute, Inc. All rights reserved. Impact on Busbar Electricity Production Costs 2007 U.S. Average Wholesale Electricity Cost Limited Portfolio Full Portfolio $/Mwh (2007$) 2020203020402050 Limited Portfolio Full Portfolio $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 160% 50% 2007 U.S. Average Wholesale Electricity Cost BAU U.S. Average Wholesale Electricity Cost * * Based on estimate of expected business as usual annual investment in generation expansion. Source: “Transforming America’s Power Industry: The Investment Challenge 2010-2030”, The Edison Foundation, 2008 (www.edisonfoundation.net) and U.S. DOE Energy Information Administration 2008 Annual Energy Outlook.

15. © 2010 Electric Power Research Institute, Inc. All rights reserved. U.S. CO 2 Emissions Allowance Costs Full Portfolio Limited Portfolio $/metric ton CO 2 (2007$)

16. © 2010 Electric Power Research Institute, Inc. All rights reserved. Impact of CO 2 Constraint on U.S. Economy Value of R&D Investment Change in Discounted GDP from 2020 Through 2050 ($Trillions) Cost of Policy Reduction in Policy Cost with Advanced Technology Limited Portfolio Full Portfolio Advanced technologies without CCS or new Nuclear

17. © 2010 Electric Power Research Institute, Inc. All rights reserved. Limited Portfolio Full Portfolio Busbar Electricity Cost (2007 cents/kWh) Emissions Intensity (metric tons CO 2 /MWh) Cost of Electricity De-Carbonization 2020 2030 2040 2050 2020 2030 2040 2050 Cost Trajectories for Decarbonization 0 2 4 6 8 10 12 14 16 18 20 22 0.000.100.200.300.400.500.600.70 2007 MERGE Projections 2020-2050 2020 2030 2040 2050 2020 2030 2040 2050 Limited Portfolio Full Portfolio

18. © 2010 Electric Power Research Institute, Inc. All rights reserved. Meeting the Research Challenge 2007 U.S. Average Wholesale Electricity Cost Limited Portfolio Full Portfolio $/Mwh (2007$) 2020203020402050 2007 U.S. Average Wholesale Electricity Cost Limited Portfolio Full Portfolio $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 Technology Actions Based on Meeting the Prism Technology Targets Technology Innovation to De-carbonize While Achieving a Cost of Electricity Near Today’s Level RD&D and Deployment Challenge Innovation Challenge

19. © 2010 Electric Power Research Institute, Inc. All rights reserved. Energy-Economic Analysis Results Key Technology R&D Insights Smart Grid technologies will be very important, because improved end-use efficiency is likely to play a major role under future policies. Energy storage, advanced grid management, and expanded transmission will be essential so that a large amount of electricity can be generation from variable output renewables. Reducing cost of nuclear plant construction and operations, and economic penalty for CO 2 capture and storage will be important, because the collective generation from coal and nuclear is likely to remain substantial.

20. © 2010 Electric Power Research Institute, Inc. All rights reserved. Transition, then Transformation Much of the technology needed to meet many of our concurrent demands and requirements is either not available or too expensive. Some technologies will be critical to “bridging” the gap between today and a very different electricity technology mix in the future. Disruption can come in different ways: –Substantially larger or smaller roles for certain technologies relative to the past –Unexpected technology barriers

21. © 2010 Electric Power Research Institute, Inc. All rights reserved. Critical Conclusions With achievement of aggressive but technically feasible levels of technology performance and deployment, U.S. electric sector has potential to reduce CO 2 emissions by 41% by 2030. An optimal technical and economic strategy is comprised of aggressive end-use efficiency and a diverse generation technology portfolio. –Ensures technological resiliency. –Lowers overall economic cost of emissions reductions by ~37%. All technologies are not yet ready - focused, sustained research, development and demonstration over the next 20 years is necessary. Decarbonized electricity will be critical in reducing costs of reducing CO 2 emissions from transportation and other economic sectors.

22. © 2010 Electric Power Research Institute, Inc. All rights reserved. For More Information EPRI Report #1020389 www.epri.com

23. © 2010 Electric Power Research Institute, Inc. All rights reserved. Image from NASA Visible Earth

24. © 2010 Electric Power Research Institute, Inc. All rights reserved. Wildcards High conversion efficiency, low cost, solar photovoltaic cells. Low-cost, high capacity, short-discharge time energy storage. Lower-cost modular nuclear reactors.

25. © 2010 Electric Power Research Institute, Inc. All rights reserved. Comparison of Current to Future U.S. Electricity Generation Based on 2009 Prism Coal Gas Nuclear Coal + CCS Renewables “TODAY” “FUTURE”

26. © 2010 Electric Power Research Institute, Inc. All rights reserved. Full Portfolio Scenario in 2050 – Transformation Biomass EE/Demand Reduction Coal / Gas + CCS

27. © 2010 Electric Power Research Institute, Inc. All rights reserved. U.S. Natural Gas Consumption based on 2009 MERGE Analysis Limited PortfolioFull Portfolio

28. © 2010 Electric Power Research Institute, Inc. All rights reserved. Electrification under an 80% below policy Electricity share of final energy demand (indexed to 2000) Limited Portfolio Full Portfolio

29. © 2010 Electric Power Research Institute, Inc. All rights reserved. TechnologyTransition – 2010-2020Transformation – 2020+ Energy Efficiency/ Demand Response Significant increase needed to achieve emissions constraint EE/demand response flattens load growth rate Wind Significant increase in generation share. Significant expansion of new transmission lines Generation share >20% Significant regional transfer of bulk wind power Natural Gas Total gas generation increasesGas generation share declines. Gas with CCS expands Biomass Initial market entry in generation mix Generation share remains relatively constant Nuclear Generation share increases ~10 GW Generation share increases further Coal Generation share declines CCS retrofit could apply to a few units New coal with CCS becomes the standard CCS Retrofit for ~20% of units Transition to Transformation