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Are We Ready For The Future? 2005 NIPPC Annual Meeting September 8, 2005. Michael R. Niggli President, Sempra Generation. 70,000. Coal. Hydro. Renewables. Uranium. Fuel Oil. Natural Gas. Credit. 60,000. Crash. The Oil Embargo. 50,000. 1973-4. CAA. RTO NOPR. 1970. 1999. 40,000. - PowerPoint PPT Presentation
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1
Are We Ready For The Future?
2005 NIPPC Annual MeetingSeptember 8, 2005
Michael R. NiggliPresident, Sempra Generation
2
U.S. Electric Market Evolution
Source: Global Energy Decisions
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
Cap
aci
ty I
nst
alla
tio
ns
(MW
)
Coal Hydro Renewables Uranium Fuel Oil Natural Gas
The Oil Embargo1973-4
PURPA1978
PURPAQF Era
EPACT1992
EWGs
CAA1970
Vertically Integrated Utilities
RTO NOPR1999
Rise of the Merchant
Credit Crash
CAA Amendments
1990
3
U.S. Natural Gas Prices (Henry Hub)
$12.36/MMBtu
18 Month Strip = $10.58/MMBtu
4
U.S. Gas Supply/Demand
Balance
0
5
10
15
20
25
30
1970 1980 1990 2000 2010 2020
Dry
Tc
f p
er
ye
ar
Low
High
US Govt
L48 Production
Consumption
Actual Forecast
Consultants
Basis: EIA natural gas statisticsConsultant demand forecastsUS Potential Gas Committee's Year 2002 resource estimates
Net Imports
5
U.S. LNG Imports
US LNG Imports
0
5
10
15
20
25
30
2000 2005 2010 2015
Bc
fd
0
50
100
150
200
mtp
a
High Resources
Low Resources
6
LNG Import Facilities
7
Sempra Energy Infrastructure Projects
Costa Azul (1.0 Bcf/day)
Port Arthur(3.0 Bcf/day)
Cameron(1.5 Bcf/day)
Northville
El Dorado(480 MW)
Copper Mountain
Elk Hills(275 MW)
Palomar(550 MW)
Mexicali(600 MW)
Mesquite I & II
(1250 MW)
MC Energy
Cedar PowerBonnet Carre
Catoctin
Crescent City
Twin Oaks I & II(305 MW)
Granite Fox
Idaho Valley
Coleto Creek(316 MW)
Texas Non-Coal(659 MW)
Twin Oaks III
Norton
South Shore Power
OPERATING
UNDER CONSTRUCTION
IN DEVELOPMENT
POWER PLANTS
LNG TERMINALS
PERMITTED
UNDER CONSTRUCTION
West-East Pipeline
8
Major U.S. Market Structure Issues
• Mandatory minimum capacity reserve requirements
• RTOs and independent transmission planning and operation
• Retail access• Open, liquid and competitive markets
for capacity and energy• Long-term contracts to support
generation development
9
Resource Adequacy Challenges
• Utility Procurement – Build vs. Buy • Competitive Bidding Challenges
– Debt Equivalency– Credit Requirements– Environmental Adders
• Transmission– Need Better Access, Fewer Constraints– Cost & Benefits of Major New Regional
Transmission Projects Should Be Weighed Against Alternative Strategic Siting of New Generation Projects
10
West-Wide Solutions Are Needed For The Future
• States & sub-regions within the WECC may have some unique attributes, but are not electrical “islands”
• Western sub-regions are interdependent
• We are best able to optimize and ensure the security of the system by working together
• The region has a history of working together to improve economics and reliability
• As a West-Wide Region, we should “go back to the future” and improve on past practices
• Strong political and regulatory leadership to foster West-Wide policies is needed
Source: WECC
11
Balanced, Responsible Options For Adding New Capacity
• Protecting Ratepayers & the Environment– Delivered Energy COSTS Are Very Important To
Consumers– Environmental Protections Must Be Affordable – If New Regulations Must Be Implemented, They
Should Be Standardized As Broadly As Possible (e.g., on a national level) Not On A State-By-State Basis Not On An Industry-By-Industry Basis Not On A Company-By-Company Basis
• Economics & Reliability– New Generation Is Needed to Ensure Future
Reliability and Price Stability– Capacity Markets Must Provide LONG-TERM
Incentives for Capital Investment
12
• Most Viable New Generation Options For Balanced, Responsible, Cost-Effective Capacity Portfolios– Coal Projects– Gas Plants
LNG
– Renewables
• Reliability, Deliverability & Cost Will Be Critical Factors
Balanced, Responsible Options For Adding New Capacity
13
Coal – A Responsible Resource
•Why Coal?– Energy Security &
Independence: Coal is an abundant domestic resource
– Proven & Reliable: Electricity production from coal is significant (~50% of nation’s energy) and will remain so for the foreseeable future
– Affordable: Coal provides a competitive base-load resource with low and stable fuel costs
Comparative Fuel Costs
14
• Why Coal? (contd.)– Commercially Practical:
Other generation types cannot replace pulverized coal plants in the next 10 – 20 years
– Clean & Efficient: New supercritical plants are even more environmentally responsible – better efficiency/lower emissions
– Relationship w/Renewables: Coal projects can facilitate, rather than compete with, renewable energy projects
Installed Capacity (MW) Nuclear, 9,397, 5%
Renew/Other, 6,061, 3%
Oil, 1,797, 1%
Coal, 37,284, 19%
Hydro, 62,799, 32%
Natural Gas, 77,559, 40%
Energy (TWh)
Nuclear, 75, 9%
Gas, 209, 25%
Renewable, 50, 6%
Coal, 268, 31%
Hydro, 242, 29%
Current WECC Installed Capacity & Generation Mix
Source: Global Energy Decisions, Fall 2004 Report
Coal – A Responsible Resource
15
Sempra Western Coal Fired Projects
Idaho/Oregon Market
Idaho/Utah Market
Southwest Market
Pacific Intertie DC Line
Idaho ValleyGranite Fox
Northern Nevada Market
Northwest Market
16
Macro Energy Issues
• Energy Independence? ORForeign Dependence?
• How reliable & costly are supply options?• How much will you pay for clean air & water?• Local supply OR regional supply? (Strength of the transmission grid & pipeline
system)
17
Conclusions
• Yes, We Are Ready For the Future, But . . . We Still Have Work To Do!– Need Strong Political & Regulatory Leadership for
West-Wide Policy Development– Provide Affordable, Environmentally Responsible
Resources Overcoming Impediments to Competitive Markets
Overzealous Use of Criteria Such As Debt Equivalency & Credit Can Choke Competition
Transmission Constraints & Seams Issues May Limit Future Access to Economic Resources & Seasonal Exchanges
Transmission Projects Should Be Weighed Vs. Strategic Generation Sites
Continued Emphasis In the Future On Affordable, Reliable Generation Resources:
Addressing Issues Such As Global Warming