1. Generation Technologies in a Carbon-constrained World Steve Specker President & CEO October 2005

2. 2 © 2005 Electric Power Research Institute, Inc. All rights reserved. Objectives Provide an objective and factual framework for discussing generation technologies and investment decisions in a carbon-constrained world

3. 3 © 2005 Electric Power Research Institute, Inc. All rights reserved. Framework Overview Levelized cost of electricity –Standard EPRI methodology –2004 costs and $’s Two key uncertainties –Future “cost” of CO 2 –Future price of natural gas Two technology portfolios –2010 time-period –2020 time-period

4. 4 © 2005 Electric Power Research Institute, Inc. All rights reserved. Comparative Costs of Generating Options 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh

5. 5 © 2005 Electric Power Research Institute, Inc. All rights reserved. Pulverized Coal in 2010 Time Period 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh PC w/o cap

6. 6 © 2005 Electric Power Research Institute, Inc. All rights reserved. Natural Gas Combined Cycle in 2010 Time Period 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh NGCC@$8 NGCC@$4 NGCC@$6

7. 7 © 2005 Electric Power Research Institute, Inc. All rights reserved. Natural Gas Price Volatility…A Huge Issue

8. 8 © 2005 Electric Power Research Institute, Inc. All rights reserved. Future Natural Gas Prices…a Key Uncertainty Prices can range from the Ceiling Price (oil) to the Floor Price (coal) Gas prices between 2005 and 2007 will likely be set at the Ceiling Price Post-2007 the issue is debatable, and dependent upon outlook for LNG $/MMBTU 4 6 8 10 12 14 16 18 0 2 19992001200320052007200920112013201520172019202120232025 ActualProjected Ceiling Price Range Floor Price Potential Range in Henry Hub Gas Prices (Nominal $)

9. 9 © 2005 Electric Power Research Institute, Inc. All rights reserved. Comparative Costs of 2010 Generating Options 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh NGCC@$6 PC w/o cap $6/mmbtu will be used as floor price for natural gas

10. 10 © 2005 Electric Power Research Institute, Inc. All rights reserved. Integrated Gasification Combined Cycle in 2010 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh PC w/o cap IGCC w/o cap NGCC@$6

11. 11 © 2005 Electric Power Research Institute, Inc. All rights reserved. PC vs. IGCC with Improvements 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Base IGCC COE Gap between COE for IGCC and PC Base PC COE

12. 12 © 2005 Electric Power Research Institute, Inc. All rights reserved. PC vs. IGCC with Improvements 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Base IGCC COE Gap between COE for IGCC and PC Base PC COE 1.Use more efficient, but higher cost IGCC

13. 13 © 2005 Electric Power Research Institute, Inc. All rights reserved. PC vs. IGCC with Improvements 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Base IGCC COE Gap between COE for IGCC and PC Base PC COE 1.Use more efficient, but higher cost IGCC 2.Eliminate spare gasifier

14. 14 © 2005 Electric Power Research Institute, Inc. All rights reserved. PC vs. IGCC with Improvements 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Base IGCC COE Remaining gap between COE for IGCC and PC Base PC COE 1.More efficient, but higher cost IGCC 2.Eliminate spare gasifier 3.Larger, more efficient gas turbine

15. 15 © 2005 Electric Power Research Institute, Inc. All rights reserved. U.S. Wind Plant Capacity Factors, 2004 0 10 20 30 40 50 Sites Ranked by Increasing Capacity Factors Capacity Factor, % Source: EIA; EPRI Program 67 Newsletter, Energy Markets and Generation Response – Update on New Power Plants, September 2005

16. 16 © 2005 Electric Power Research Institute, Inc. All rights reserved. Wind Generation in 2010 Time Period 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Wind@42%CF Wind@29%CF Wind@20%CF 110

17. 17 © 2005 Electric Power Research Institute, Inc. All rights reserved. Wind Generation in 2010 Time Period 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Wind@29%CF 110

18. 18 © 2005 Electric Power Research Institute, Inc. All rights reserved. Cost Sensitivities of Future Nuclear Generation 30 40 50 60 70 80 90 100 1,7002,0002,500 Capital Cost, $/kW Cost of Electricity, $/MWh

19. 19 © 2005 Electric Power Research Institute, Inc. All rights reserved. 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Nuclear@$1700/kw Nuclear Generation

20. 20 © 2005 Electric Power Research Institute, Inc. All rights reserved. 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Wind Nuclear Biomass Non-CO 2 Emitting Technologies in 2010 Time Period

21. 21 © 2005 Electric Power Research Institute, Inc. All rights reserved. Comparative Costs of 2010 Generating Options 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 w/o cap IGCC w/o cap Biomass NGCC@$6

22. 22 © 2005 Electric Power Research Institute, Inc. All rights reserved. U. S. Capacity Additions… 2005 to 2010 Over 78 GW of New Capacity

23. 23 © 2005 Electric Power Research Institute, Inc. All rights reserved. U. S. Capacity Additions by Year and Technology, 1999 to 2014 1999200020012002200320042005200620072008200920102011201220132014 Capacity, MW

24. 24 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible in 2020 24 © 2005 Electric Power Research Institute, Inc. All rights reserved.

25. 25 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Pulverized Coal w/o Capture 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh PC w/o cap 2020 PC w/o cap 2010

26. 26 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: IGCC w/o Capture 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh IGCC w/o cap 2010 IGCC, w/o cap 2020

27. 27 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: PC with capture/transport/storage 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh PC w/o cap 2020 PC w/cap/t/s 2020

28. 28 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: IGCC with capture/transport/storage 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh IGCC, w/o cap 2020 IGCC w/cap/t/s 2020

29. 29 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Comparison of IGCC and PC 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh IGCC, w/o cap 2020 IGCC w/cap/t/s 2020 PC w/cap/t/s 2020 PC w/o cap 2020

30. 30 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Natural Gas Combined Cycle 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh NGCC@$6 (2010) NGCC@$6 (2020)

31. 31 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Wind Generation 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Wind@29% CF in 2020 Wind@29% CF in 2010

32. 32 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Biomass 30 40 50 60 70 80 90 100 020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Biomass 2010 10 Biomass 2020

33. 33 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Comparative Costs in 2020 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Nuclear Wind Biomass IGCC w/cap/t/s NGCC@$6 PC w/cap/t/s

34. 34 © 2005 Electric Power Research Institute, Inc. All rights reserved. Comparative Costs in 2010 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 w/o cap IGCC w/o cap Biomass NGCC@$6

35. 35 © 2005 Electric Power Research Institute, Inc. All rights reserved. What’s Possible: Comparative Costs in 2020 30 40 50 60 70 80 90 100 01020304050 Cost of CO 2, $/metric ton Levelized Cost of Electricity, $/MWh Nuclear Wind Biomass IGCC w/cap/t/s NGCC@$6 PC w/cap/t/s An Extraordinary Opportunity to Develop a Low-carbon Portfolio

36. 36 © 2005 Electric Power Research Institute, Inc. All rights reserved. Closing Thoughts Four key uncertainties impacting near-term decisions on new generation: –Future cost of CO 2 –Future price of natural gas –Spent nuclear fuel storage –CO 2 capture and storage Extraordinary opportunity to develop and demonstrate a very low emissions portfolio of generation technologies for operation by 2020. Together…Shaping the Future of Electricity