1. CALIFORNIA ENERGY COMMISSION Carbon Management: A State Energy R&D Perspective Terry Surles California Energy Commission AAAS National Meeting Symposium on Carbon Management San Francisco, California February 17, 2001

2. CALIFORNIA ENERGY COMMISSION Carbon Management: An Approach for Integrated Energy Systems Management Carbon Management Efficiency - operational - DSM - end use Decarbonization - “clean energy” Sequestration

3. CALIFORNIA ENERGY COMMISSION Why Worry about Energy? (Circa 12/98)  Petroleum selling at < $11/barrel  Proven natural gas reserves at 175 Tcf and $2/MBtu  Abundant supply has depressed uranium prices (< $80/kg U)  There is a lot of cheap coal (~$26/ton)  Lots of generating capacity and reserve margin

4. CALIFORNIA ENERGY COMMISSION We’re Concerned Now  Oil is at $30/barrel  Natural gas price is at $18/Mbtu and demand (at least temporarily) is depleting reserves  Energy use impacts global commons (7.4 Gt C/yr. in 1997)  Deregulation has changed playing field  New regulations and international policies  Regional reserve margins are problematic

5. CALIFORNIA ENERGY COMMISSION California’s Concerns are Similar in Some Areas  Increased natural gas use  Continuing need for improvements in demand-side energy technologies  Aging fleet of generators  Financial constraints  Climate change uncertainties  NIMBY  “Needle peaks”

6. CALIFORNIA ENERGY COMMISSION California Context: Additional Factors  Demographics  High-technology industrial sectors  Social values  Air quality  Water availability and quality  Seismic  In-state R&D excellence

7. CALIFORNIA ENERGY COMMISSION CA Energy Use by Sector (1996) 46% 31% 13%

8. CALIFORNIA ENERGY COMMISSION Production of Electricity by Source - 1996 Imports NG-15.5% Hydro- 32.6% Coal- 51.9% Wind/solar- 1.5% Biomass/waste- 2.3% Oil- 0.3% Natural Gas Hydro 17.9% 30.6% 18.9% Nuclear Coal 15.4% 8% 258,801 GWh3,111,441 GWh Coal 55.8% Nuclear 21.7% Hydro 10.6% Nat Gas8.4% Wind/solar-0.0004% Geothermal- 0.2% Imports- 1.1% Oil- 2.2%

9. CALIFORNIA ENERGY COMMISSION Peak Demand is Increasing Faster than Newly Installed Capacity Megawatts

10. CALIFORNIA ENERGY COMMISSION Rising Peak Demand Threatens Reliability and Power Quality *During “no touch” periods, the ISO demands that generators refrain from downtime for maintenance Number of Power Emergencies in California

11. CALIFORNIA ENERGY COMMISSION Market Uncertainty- Price Volatility Impacts Energy Delivery and Use Market Clearing Price ($/Megawatt-hour)

12. CALIFORNIA ENERGY COMMISSION Contribution to ISO Peak Demand August 16, 2001 (MW) Commercial AC Commercial Lighting Residential AC Other MW 6000 5000 6000 26,509

13. CALIFORNIA ENERGY COMMISSION 2000/2001 Shocks Have Made Energy a Priority  AB 970 w Expedited Siting for Simple Peaking Facilities and Facilities that Pose No Significant Environmental Risk w Implementation of $50 M Energy Efficiency Grant Program  AB 995 w Extends Surcharge to Fund Public Purpose Efficiency, Renewables, and R&D Programs for 10 years  SB 1298: ARB to Establish Standards for DG Technologies  SB 1345: Grants to Purchasers of Solar and DG Systems  SB 1771: Establishes Greenhouse Gas Emissions Inventory  New Legislation and Executive Orders

14. CALIFORNIA ENERGY COMMISSION California has Established a $62M/yr Public Interest Energy Research Program (PIER) California’s Energy Future Economy: Affordable Solutions Quality: Reliable and Available Environment: Protect and Enhance

15. CALIFORNIA ENERGY COMMISSION Funded Program Areas to Date (in millions) Supply$26.4 Renewables, EPAG Demand$40.1 Buildings, Ind/Ag/Water $34.9 Strategic, Environmental

16. CALIFORNIA ENERGY COMMISSION Attributes for Addressing State Issues Program Integration Balanced Technology Portfolio - Temporal -Technology -Risk Technology Partnerships - Universities - Industry - Federal Focus on California - Specific to State needs

17. CALIFORNIA ENERGY COMMISSION Our R&D Program must Address Future Market Scenario Regulated De-regulated De-centralizedCentralized Status Quo New energy systems Same players Supermarket of Choices Same energy systems New players

18. CALIFORNIA ENERGY COMMISSION Given Our Limited Budget and California Characteristics, We’re Not Going to...  Build the next GCM or other large scale models  Work on Generation IV nuclear technologies  Work on most Vision 21 coal technologies  Duplicate other efforts well-funded by DOE, EPRI and others  Duplicate specific R&D already funded by industry

19. CALIFORNIA ENERGY COMMISSION We will Couple the California Context with Precepts of Carbon Management  End-use efficiency and demand-side technologies w buildings and appliance technologies w manufacturing, agriculture, water efficiency w storage and conversion technologies  Clean technologies w renewables and small-scale fossil w generation and control technologies that enhance environment w power conditioning w new technologies with collateral benefits  Enabling technology improvement and development w development of sensors, models, systems for real-time pricing w models, sensors, monitoring systems to improve T&D system operation and integration of DG w science base and model improvements to evaluate impacts of energy systems w development of new integrated systems and economic models to improve understanding of deregulated market structure

20. CALIFORNIA ENERGY COMMISSION Carbon Management and California: An Appropriate Paradigm for State R&D Program Environment Economy Reliability Couple state and external issues Long-term solutions couple to current events Integration with external R&D provides flexibility

21. CALIFORNIA ENERGY COMMISSION Carbon Management: An Umbrella for Global, National, State and Local Issues Global - Climate Change - Resource Competition Nation - Security - Environment - Economy State -Affordability - Environment - Reliability Local - End use - NIMBY