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Electricity Production and UsageOpportunities & Challenges
UNL Faculty Retreat PresentationMay 15, 2007
General Counsel &VP of Governmental Affairs
John C. McClure
(402) [email protected]
2
Who is NPPD?2006 Annual Overview
• Revenue - $752 Million
• 18.4 billion kWh sold
• 2,128 employees
• 3,134 MW of generation accredited capability
• Primarily a wholesale power supplier to municipalities, other public power districts and cooperatives
• Average Retail - 6.03¢
• Average Firm Wholesale - 3.74¢
• Generates 50% of electricity consumed in Nebraska• Nebraska has consistently been among the 10 lowest
cost states for electricity
3
Electric Industry Fundamentals• Electricity revolutionized the modern economy.
• Almost every activity and transaction ultimately relies on electricity.
• Electricity is unique – generally must be produced at the same time it is consumed.
• Electric industry has evolved for 100 years but has not experienced revolutionary changes that have affected other industries.
• Electric industry moves in cycles and has a herd mentality.
4
Electricity Timeline
20%20%
40%40%
60%60%
80%80%
100%100%
19501950 19601960 19701970 19901990 20002000 20102010 20202020 20252025
PetroleumPetroleum
Admiral Lewis L. Strauss“It is not too much to expect that our
children will enjoy electrical energy in their homes too cheap to meter.”
EPA is formed and Clean Air Act is Passed
Jimmy Carter“Resolving the Energy Crisis is ‘The Moral Equivalent of War.’”
Renewables/HydroRenewables/Hydro
Natural GasNatural Gas NuclearNuclear
CoalCoal
Atomic Energy ActAtomic Energy Act
Arab Oil EmbargoArab Oil Embargo
Utility Deregulation (PURPA)
Utility Deregulation (PURPA)
Natural Gas DeregulationNatural Gas Deregulation
Fuel Use Act 1974-78
19801980
National Energy Policy ActNational Energy Policy Act
Climate Change Convention Kyoto Protocol signed by 154 nations in Rio
September 11September 11
Enron Bankruptcy
Alan Greenspan“Congress should look at ways to increase energy supplies from nuclear and coal. The two sources together account for about 70 percent of U.S. supply.”
Three-Mile IslandThree-Mile Island
MW
H %
by F
uel Type
MW
H %
by F
uel Type
Source: Energy Information Administration
ChernobylChernobyl
NuStartFutureGenNuStartFutureGen
Source: R. W. Beck, Inc.
5
Fuel Mix for Electricity
3%
17%
20%
7%2%
51%
Nuclear
Natural Gas
Oil
Coal
Wind/Solar GeoThermal
Hydro
National 2005
NPPD 2006
9%6%
23%
2%
59%
1%
Nuclear
Gas & Oil
Coal
Wind/Solar GeoThermal
Hydro
Purchases
NPPD 2006
6
Electric Industry Resource Challenges
• Long-Term Planning Horizon– 20-30 years
• Capital Intensive
• Market & Fuel Price Volatility
• Regulatory Uncertainty– Utility Policy
• Monopolies
• Competition
– Environmental Policy• Air
• Water
• Technology Uncertainty
• Economic Uncertainty– How will local economy
fare?
7
Key Energy Issues in Nebraska
• Inter-Relationship of Agriculture, Energy & Water
– Substantial irrigation development
• Energy costs
• Electric load management
– Rapid expansion of ethanol industry
• Managing energy usage and impacts
8
2007 ProjectionsNPPD Ethanol and Irrigation Load, MWh at Bus A
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
MW
h a
t B
us
A
Ethanol Load Irrigation Load
Percent of Total Annual Energy
2006 MWh 2013 MWh
Irrigation 7.1% 8.1%
Ethanol 6.8% 19.8%
9
2007 ProjectionsNPPD Ethanol and Irrigation Demand, kW at Bus A
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
kW a
t B
us
A
Ethanol Load Irrigation Load
Percent of Total Summer Billable Peak
2006 kW 2013 kW
Irrigation 19% 22%
Ethanol 4% 14%
10
2007 Preliminary Rate TrackEthanol Load Growth in NPPD Service Territory
0
50
100
150
200
250
300
350
400
450
2006 2007 2008 2009 2010 2011 2012 2013
MW
MW
Hs
Number of Plants
- 3,500,000
- 3,000,000
- 2,500,000
- 2,000,000
- 1,500,000
- 500,000
- 0
- 1,000,000
10 19 23 24 24 26 26 29
2007 Projections
11
2007 Preliminary Rate TrackNPPD Historical Summer Billable Peak Forecasts
NPPD “Fan” Summer Peak Forecast
2,000
2,200
2,400
2,600
2,800
3,000
3,20019
95
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
MW 2004
2000
2002
2006
2007 Base
12
Challenges for the Future
• Water – How long will the regional drought last?
– Adverse impact on thermal plant cooling
– Adverse impact on hydro generation
– Increased pumping demand – especially for agriculture
• What level of irrigation is sustainable for Nebraska?
13
Challenges for the Future (Cont’d)
• Renewable Energy
– How do we assure sustainability of grain-based ethanol industry?
• Energy infrastructure costs• Demand for corn
– How much renewable electricity should be added?
• Demand for wind machines exceeds supply• Intermittency of wind• Lack of transmission• Solar is expensive
14
Challenges for the Future (Cont’d)
• Why are surrounding states adding more wind than Nebraska?
– Federal Product Tax Credit ($19.00 MWH) available to private entities and not public power or cooperatives
– Private entities allowed to earn a return on renewable investments – “green” is profitable
– Renewable Portfolio Standards
• Minnesota Law, the most aggressive in nation
• Colorado is increasing its requirement
– Transmission Availability
15
TOTAL INSTALLED U.S. WIND ENERGY CAPACITY: 11,603 MW as of Dec. 31, 2006 © 2006 by the American Wind Energy Association
Installed Wind Capacity - 2006
16
17
Significant Transmission Necessary to meet National 20% RPS
18
Challenges for the Future (Cont’d)
• Carbon Policy
– Not if, but how soon and how fast
• Major domestic issue on the Congressional agenda in 2007
– Global impacts, global issue
• China will outpace U.S. on CO2 emissions by end of year
• One new coal plant commissioned every week
– Economy-wide impacts
(see pie chart on next slide)
19
2,338
33.3%
1,955
27.9%
1,377
19.6%
491
7.0%
460
6.6%
391
5.6%
Electric PowerIndustry
Transportation
Industry
Agriculture
Commercial
Residential
2004 U.S. Greenhouse Gas EmissionsMillions Metric Tons of CO2 Equivalent
Total 7,012
Source: U.S. Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2004, EPA 430-R-06-002 (Washington, DC), p. ES-13
20
World Carbon Dioxide Emissions by Region, 2001-2025(Million Metric Tons of Carbon Equivalent)
21
Challenges for the Future (Cont’d)
• Long-term challenge – slow, stop, reduce emissions
• Lack of technology to capture and sequestor CO2
• Developing CO2 sequestration may require new national pipeline network for transportation to suitable storage areas
– Limited experience injecting CO2 to enhance oil recovery
• Capture and sequestration expected to add significant costs to coal based generation
22
NPPD Generation CO2 Projections(excluding LES)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2005 2010 2015 2020 2025 2030
Th
ou
sa
nd
s
Met
ric
To
ns
Projections Est 1990 2000 2005
NPPD Generation CO2 Projections
23
Challenges for the Future (Cont’d)
• Nation, Region and State will need new baseload generating technologies but no clear cut option
– Coal dominates today but future has uncertainty
– U.S. hasn’t ordered a new nuclear plant for several decades
– Hydro potential is small and controversial
– Natural gas is expensive
24
Technology Critical to COEC
en
ts p
er
kWh
r
Cost of Electricity(20 Year Levelized)
(Non-PTC for Renewables)Basis: $8.00/MMBtu NG
O&M
Fuel
Capital Costs
Gas Coal Nuclear Wind Biomass Solar
40
30
20
10
0
25
NPPD 2006 Load Duration Curve
-
500
1,000
1,500
2,000
2,500
3,000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Percent of Time
MW
26
NPPD System Busbar MW
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour Ending
MW
at
Bu
sbar
Billable Peak7/31/06 He 1700
27
Various Energy Prices Indices, Jan. 1991 = 1.00
Mar
-07
Various Energy Price Indices, Jan. 1991 = 1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Date
Pri
ce
Ind
ex (
Ja
n 1
99
1 =
1.0
0)
U3O8 Oil (wti) PRB Coal Nat Gas CPI
Source: Bloomberg, Proprietary and ConfidentialFor Internal NPPD use only
28
Challenges / Opportunities for the Future
• Technology
– Energy Efficiency
– Power Generation
• How do you get more energy output with equal or less energy input?
– Clean coal technologies are generally less efficient
• How can you reduce energy demand?
– Improving transmission / delivery efficiencies
• smart grids
29
Challenges / Opportunities for the Future (Cont’d)
• Technology (Cont’d)
– Energy Efficiency
• Improve efficiency of end use consumption
– Lighting opportunities
• Compact fluorescent lights
– Motor efficiencies
– HVAC
– Changing consumer behavior
30
Conclusions• In a carbon constrained world, we need significant
technology advances:
– Fundamental breakthroughs would be great, but many incremental improvements are essential
– R&D collaborations such as UNL and NPPD through Nebraska Center for Energy Sciences Research
– U.S. needs commitment on the scale of “Manhattan Project” to address energy needs through supply and demand side options
– More efficient electricity generation and delivery
– New generating technologies
31
Conclusions (Cont’d)
• In a carbon constrained world, we need significant technology advances to:
– More efficient consumer equipment:• Motors• HVAC• Lighting• Appliances• Electronics
– Reduce energy intensiveness of agriculture• Less energy input / higher yield
– Other fundamental changes may occur• Plug-in hybrid vehicles• Potential emergence of hydrogen economy
– We are competing globally for talent, energy equipment and fuel
32
Conclusions (Cont’d)
• Electric industry has aging workforce and needs influx of new workers
• Increase number of engineering and technology graduates -- essential to develop new solutions and support existing operations
• Cost of energy will likely be escalating for many years
• There is no silver bullet