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"Building a Resilient Coast Is Vitally "Building a Resilient Coast Is Vitally Important Even in Today's Climate"Important Even in Today's Climate"
The Future of the Gulf Coast – The Future of the Gulf Coast – Adapting to Environmental VulnerabilityAdapting to Environmental Vulnerability
October 20, 2010 October 20, 2010
Rod West Rod West Executive V.P. & Chief Administrative OfficerExecutive V.P. & Chief Administrative Officer
““We have three choices: We have three choices: mitigationmitigation, , adaptationadaptation and and sufferingsuffering.” .” We’re going to do some of each. We’re going to do some of each.
The question is what the mix is going to be?The question is what the mix is going to be? Dr. John Holdren, Science Advisor to President ObamaDr. John Holdren, Science Advisor to President Obama
Real adaptation is substantially more expensive than mitigation Real adaptation is substantially more expensive than mitigation
Real adaptation without substantial mitigation is just a cruel Real adaptation without substantial mitigation is just a cruel euphemismeuphemism
Real adaptation by itself is so expensive (and endless) that it is Real adaptation by itself is so expensive (and endless) that it is essentially impossible to imagine how a real adaptation bill essentially impossible to imagine how a real adaptation bill could pass Congresscould pass Congress
The goal should be to choose a mix that minimizes the sum of mitigation, adaptation and suffering costs
Even with today’s climate we need to invest in a more resilient Even with today’s climate we need to invest in a more resilient coastcoast
22
33
Coasts are already experiencing hazards Coasts are already experiencing hazards related to climate and sea level rise related to climate and sea level rise
(very high confidence)(very high confidence)
The Business Case As a company serving the As a company serving the
Gulf Coast, Global Climate Gulf Coast, Global Climate Change effects put at risk:Change effects put at risk:
Our customer baseOur customer base
Welfare of our employees, Welfare of our employees, their families and our their families and our communitiescommunities
Billions of dollars of Billions of dollars of investmentinvestment
18391839 18701870
19931993 20202020
Louisiana coast line loses Louisiana coast line loses 24 square miles a year.24 square miles a year.
44
Coasts will be exposed to increasing risks over coming Coasts will be exposed to increasing risks over coming decades due to many compounding climate change decades due to many compounding climate change
factors (very high confidence)factors (very high confidence)
Rise in sea level of 1.0 m Rise in sea level of 1.0 m by 2100by 2100
Rise in sea surface Rise in sea surface temperature 3oCtemperature 3oC
Intensified stormsIntensified storms
Storm Surge Storm Surge (Cat 3 = 3-4m)(Cat 3 = 3-4m)
Subsidence 1.0 m by Subsidence 1.0 m by 21002100
7/21/20067/21/2006 55
Recent hurricanes Recent hurricanes put a face put a face
on what life on what life will be like will be like if we fail if we fail
to address to address Climate Change Climate Change
Areas impacted by stormsAreas impacted by storms
66
EntergyNuclear
Utility
Hurricane Rita Category 3
HurricaneKatrina Category 4
77
The Times PicayuneThe Times Picayune
Levees broke and floodwaters Levees broke and floodwaters inundated New Orleans and vicinityinundated New Orleans and vicinity
88
Katrina Storm Surge Approaches Katrina Storm Surge Approaches Entergy’s Michoud PlantEntergy’s Michoud Plant
Post-Katrina Flooding in New OrleansPost-Katrina Flooding in New Orleansand Surrounding Areasand Surrounding Areas
Photo by Entergy’s Michoud plant manager Don McCroskey
99
ETR restoration cost ~ $1.5 billion for Katrina & Rita ETR restoration cost ~ $1.5 billion for Katrina & Rita
800,000 800,000 Louisiana Louisiana outagesoutages
Over 300,000 Over 300,000 Mississippi Mississippi outagesoutages
Katrina – 1.1 million left without power Katrina – 1.1 million left without power
Scope of restoration Scope of restoration
1010
1.87 million total electric customers1.87 million total electric customers
145,000 gas customers145,000 gas customers
28,900 distribution poles replaced28,900 distribution poles replaced
522 transmission lines out of service522 transmission lines out of service
29 fossil / 1 nuclear units Shutdown29 fossil / 1 nuclear units Shutdown
Katrina’s unique challenges…Katrina’s unique challenges…
1111
Corporate HQ evacuatedCorporate HQ evacuated Employees’ homes destroyedEmployees’ homes destroyed Resources pre-dedicated to Resources pre-dedicated to
FloridaFlorida Security threats in New OrleansSecurity threats in New Orleans Flooded gas facilitiesFlooded gas facilities Contractors’ bankruptcy fearsContractors’ bankruptcy fears Inoculations for workforceInoculations for workforce Severe substation floodingSevere substation flooding Communications knocked outCommunications knocked out Massive scale / logistics Massive scale / logistics
challengechallenge Gasoline / diesel shortagesGasoline / diesel shortages InaccessibilityInaccessibility DOE / DHS coordination & DOE / DHS coordination &
reportingreporting
1212
……and Rita’s challengesand Rita’s challenges Second worst storm in Second worst storm in
company’s history – 800,000 company’s history – 800,000 outagesoutages
Massive damage to transmission Massive damage to transmission system; generation plants system; generation plants damaged & isolateddamaged & isolated
Three days of rolling blackouts Three days of rolling blackouts for 142,000 Texas customersfor 142,000 Texas customers
Exhausted workforceExhausted workforce Another huge logistical Another huge logistical
challengechallenge Material shortages following Material shortages following
KatrinaKatrina Continued coordination with Continued coordination with
DOEDOE Texas PUC “Tiger Team”Texas PUC “Tiger Team”
1313
What is at stakeWhat is at stake
1414
What are the physical risks?What are the physical risks?
Damage to power plants, T&D system & Operation Damage to power plants, T&D system & Operation Centers from more frequent, intense storms & floodingCenters from more frequent, intense storms & flooding
The load: where will it be and how muchThe load: where will it be and how much
Disruptions in supply chain from storm eventsDisruptions in supply chain from storm events
Availability of insurance & costAvailability of insurance & cost
Loss of customer base and employees from fear of Loss of customer base and employees from fear of future storm damagefuture storm damage
Reduced economic well being of the area from Reduced economic well being of the area from investments needed to adapt to climate changeinvestments needed to adapt to climate change
Going forward, the risk we face is just going to Going forward, the risk we face is just going to increase, given economic growth, subsidence and increase, given economic growth, subsidence and
climate changeclimate change
1515
New Orleans Skyline
1 Represents cumulative of average expected losses between 2010 and 2030 2 Asset value (replacement cost) for New Orleans buildings are $60 bnSOURCE: Swiss Re; Moody’s; FEMA; MMS; EIA; OGJ; Wood Mackenzie; Energy Velocity; team analysis; others
To place this in context, ~$370B could be used to reconstruct New Orleans buildings six times over2
2010 – 2030 Cumulative Losses
2010-20302010-2030
Extreme Extreme
changechange387387
2010-20302010-2030
Average Average
change change 370370
2010-20302010-2030
Today’s Today’s climateclimate 345345
Cumulative annual expected lossesCumulative annual expected losses
$ Billions; 2010 dollars$ Billions; 2010 dollars
1616
A set of resilience measures needs to be deployed, A set of resilience measures needs to be deployed, based on their cost / benefit characteristicsbased on their cost / benefit characteristics
Cost per unit of benefit$$
Loss Loss averted, averted, 20302030
Cost-benefit ratios calculated based on discounted present value estimates
Actions below 1 $/$ line on the Actions below 1 $/$ line on the y axis provide net economic y axis provide net economic benefits (benefits refer to loss benefits (benefits refer to loss avertedaverted))
Reduction of the expected loss in 2030, by countering the effects of climate risk
11
00
A large range in cost-benefit assessments existsA large range in cost-benefit assessments existsfor the potential portfolio of measuresfor the potential portfolio of measures
1717Note: Costs and benefits refer to net present values
Build all new Build all new residential buildings residential buildings with 110-mph rated with 110-mph rated shingles, applied with shingles, applied with adhesive strips adhesive strips
Improved roof cover, new buildsImproved roof cover, new builds C/B ratio: ~0.3 C/B ratio: ~0.3 Cost: $34MCost: $34M Benefit: $990MBenefit: $990M Homes affected: 1.7MHomes affected: 1.7M
Increase vegetation Increase vegetation management cycle management cycle frequency and remove frequency and remove hazard treeshazard trees
VegetationVegetation management, distribution C/B ratio: ~1.0C/B ratio: ~1.0
Cost: $470MM Cost: $470MM Benefit: $480MMBenefit: $480MM Miles affected: 51,000 Miles affected: 51,000
All existing residential All existing residential homes in the most homes in the most flood-risk counties are flood-risk counties are elevated 10 ftelevated 10 ft
Home elevation, retrofitsHome elevation, retrofits C/B ratio: ~5.5C/B ratio: ~5.5 Cost: $6.3BCost: $6.3B Benefit: $1.2BBenefit: $1.2B Homes affected: 123,000Homes affected: 123,000
And there are some key near term actions to protect our region And there are some key near term actions to protect our region that are cost effective, and that are cost effective, and
will help our economy and our environmentwill help our economy and our environment
1818
Residential/ Residential/ commercialcommercial
11 Building codesBuilding codes
Oil and gasOil and gas
66 Floating production Floating production systemssystems
77 Replacing semi-subs Replacing semi-subs with drill shipswith drill ships
88 Levees for refineries, Levees for refineries, petrochemical plantspetrochemical plants
Infra-Infra-structure/ structure/ Environ-Environ-mentalmental
33 Wetlands restorationWetlands restoration11
22 Beach nourishmentBeach nourishment
44 Levee systemsLevee systems11
Electric Electric utilityutility
99 Resilience of electric Resilience of electric utility systemsutility systems
0.4
0.1
1.4
7.5
1.3
0.7
0.5
1.1
1.7
0.3
Loss averted, Loss averted, 20302030$ Billions$ Billions
1 Included despite high C/B ratios due to strong co-benefits, risk aversion2 Total capital investment, non-discounted, across 20 years
55 Improved standards Improved standards offshore platformsoffshore platforms
TotalTotal
C/B ratioC/B ratioxx
0.70.7
1.31.3
1.61.6
0.70.7
0.50.5
3.33.3
0.70.7
3.83.8
0.90.9
CapEx requiredCapEx required22
$ Billions$ BillionsPublic fundingPublic funding
Private fundingPrivate funding
1818
2525
11
1212
1211214444 7676
1515
55
1111
1818
1616
1919
Implementing these key measures will require Implementing these key measures will require leadership and coordination across stakeholdersleadership and coordination across stakeholders
Engagement that would need to occurEngagement that would need to occur 1.7 million new buildings affected1.7 million new buildings affected 3.2 million buildings retrofitted3.2 million buildings retrofitted Includes stronger roof covers and roof wall connectionsIncludes stronger roof covers and roof wall connections
~230 miles of beach nourishment~230 miles of beach nourishment ~1000 square miles of wetlands restored~1000 square miles of wetlands restored ~120 miles of levees~120 miles of levees
102 levees to protect refineries and petrochemical plants102 levees to protect refineries and petrochemical plants 19 FPSOs deployed19 FPSOs deployed 2.2 MM of boe in new offshore production capacity 2.2 MM of boe in new offshore production capacity
developed using higher specificationsdeveloped using higher specifications
~540,000 miles of new, rebuild or retrofitted resilience ~540,000 miles of new, rebuild or retrofitted resilience distribution linesdistribution lines
~1,600 miles of new, rebuild or retrofitted resilience ~1,600 miles of new, rebuild or retrofitted resilience transmission linestransmission lines
Increasing vegetation management Increasing vegetation management
1 Total capital expenditure, non-discounted, across 20 years
FOR DISCUSSIONFOR DISCUSSION
Residential/Residential/
Commercial Commercial
$12B in CapEx$12B in CapEx11
Infrastructure/ Infrastructure/
Envionmental Envionmental
$44B CapEx$44B CapEx11
Oil and gas Oil and gas
$50B CapEx$50B CapEx11
Electric utility Electric utility
$15B CapEx$15B CapEx11
Resilience vs. Suffering?Resilience vs. Suffering?
It’s our choice to makeIt’s our choice to make
2020
The Clarion-Ledger, Jackson, MS
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