Energy Diversification White Paper

7/29/2019 Energy Diversification White Paper

http://slidepdf.com/reader/full/energy-diversification-white-paper 1/9



Foreword. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . .4

Execuve Summary. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . .5

Snapshot of the Energy Landscape. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . .. .6

Preserving a Long-Term Energy Vision in the

Context of Short-Term Opportunity. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . .. .8

The Importance of Long-Term Investment in

America’s Energy Future. . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .13

Staying Focused on Long-Term Energy Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

TABLE OF CONTENTS

Clean and Safe Energy Coalion | V.2



The way we think about energy is changing. Americans understand that the

development of our country’s clean energy sources is crical to a sustainable

energy future. By invesng in a balanced energy porolio that priorizes the

reducon of harmful emissions, we can protect both our economy and our

environment for future generaons.

While American cizens and businesses will always be quick to take advantage

of electricity sources that provide us with aordable power in the near-term,we must also recognize that decisions we make about energy today will have an

impact on the availability and cost of energy tomorrow.

In the following white paper, the Clean and Safe Energy (CASEnergy) Coalion

examines the role that natural gas and nuclear energy play in a diverse energy

porolio, outlining the short- and long-term benets of each electricity source.

With electricity needs projected to increase steadily in the coming decades, now

is the me to take a closer look at the investments in infrastructure that will

provide reliable electricity at costs that will remain aordable and stable for years

to come. We hope that this paper inspires more conversaons about our energyopons and the importance of a diverse and balanced energy porolio.

Chrisne Todd Whitman

Former Governor of New Jersey and EPA Administrator

Co-Chair, Clean and Safe Energy Coalion

About the Clean and Safe Energy Coalion

CASEnergy Coalion is a naonal grassroots coalion that promotes the economic

and environmental benets of nuclear energy as part of a clean energy porolio.

Under the leadership of Founding Co-Chairs Chrisne Todd Whitman, formergovernor of New Jersey and former administrator of the Environmental Protecon

Agency, and Dr. Patrick Moore, co-founder and former leader of Greenpeace, the

coalion has advanced the naonal dialogue about America’s energy oponsand united unlikely allies in their support for nuclear energy. Today the coalion

comprises more than 3,000 members across the business, environmental,

academic, consumer, minority and labor communies. For more informaon

about CASEnergy Coalion visit: www.CleanSafeEnergy.org

FOREWORD

The United States historically has been quick to capitalize on cheap, plenful

electricity. The country has taken advantage of aordable and available coal, oil,

nuclear energy, natural gas and renewables. American businesses and cizens alike

have been the primary beneciaries, given access to abundant, cheap electricity.

But Americans aren’t just interested in cheap energy today. They also want energy

pricing that’s going to be stable over the long term. They want the security of

knowing energy costs won’t spike tomorrow because of the weather, and theywant assurances of no disrupons in the supply chain, no instability in energy

markets, or radical changes in resource availability. Ulmately, a diverse energy

porolio will ensure reliable, predictable and manageable costs for energy users.

Such diversity provides greater access to cost-stable energy sources and reduces

overreliance on energy sources that are vulnerable to unpredictable supply orcost uctuaons.

America must commit to the development of an e nergy porolio built with an eye

toward balancing the short-term advantages of plenful, low-cost energy sources

like natural gas alongside reliable, aordable sources like nuclear energy thatprovide long-term benets. These two energy sources are essenal components

in any discussion about building a secure, domesc energy porolio.

This paper explores the importance of long-term electricity planning in the context

of short- and long-term opportunity, taking into account the following:

• How shis in consumer demand for and consumpon of electricity, along

with a focus on cleaner energy, are changing the way the United States is

priorizing energy development.

• How immediate and long-term electricity costs are impacng crical energy

decisions.

• The arguments for and against taking advantage of short-term drops

in energy prices versus long-term investment in projects that deliver

predictable electricity at stable costs.

• The advantages of longer-term energy investments, taking into account

jobs, environmental impact and energy security.

• How exisng programs and strategies help communies manage the cost

of up-front investments in large energy infrastructure, allowing them to

accrue benets for the long term.

EXECUTIVE SUMMARY



The energy landscape is shiing before our eyes. The use of cleaner energy is

leading to real changes, both in the way consumers perceive energy and the

way they consume it. These changes, along with a sustained commitment to

energy research and development, have the potenal to signicantly impact the

development of America’s next-generaon energy porolio. Understanding these

changes is crical to appreciate why a diverse mix of energy soluons is vital to

developing a sustainable, more secure energy future.

Energy Producon is Geng Cleaner

• In recent years, non-eming or lower-eming sources of electricity have

replaced many of the large eming sources of greenhouse gases. Thesechanges in the country’s energy porolio have been instrumental in

reducing controlled air pollutants and greenhouse gas emissions to the

lowest levels seen in America since 1992, according to data from the U.S.

Energy Informaon Administraon. And consumers can expect an even

greater change moving forward, when proposed Environmental Protecon

Agency regulaons that would signicantly restrict the amount of emissions

from new power plants are nalized and begin to take eect.

• Consumer support is shiing away from fossil fuels: a March 2012 Gallup poll

shows that the majority of Americans want stricter emissions standards

and would like more emphasis on the development of alternave energy

over oil, gas, and coal.

Energy Demand and Consumpon are C hanging

• The naon is sll recovering from a recession, and nancial concerns have

led to relavely at electricity demand. Projecons into the near future

show the same general lack of g rowth (though demand for clean energy is

rising as demand for oil, coal and other tradional fuels declines).

• Over the long term, however, electricity demand is projected to increase

steadily, growing 28 percent by 2040, according to the U.S. Energy

Informaon Administraon.

• Changes in electricity demand have led to a reducon in capital investment,prevenng an excess of supply in some energy markets. The excepon has

been in the natural gas industry , where producon has boomed.

• The way Americans consume energy is changing. Electric vehicles

fundamentally shi the way we look at energy use in the transportaon

sector and provide an opportunity to displace foreign oil with domescallyproduced electricity. Similarly, the naon’s ports are moving to electried

machinery, shedding their dependence on oil.

Natural Gas is Cheap…for Now

The ood of natural gas in the marketplace has caused prices to drop. As a result,

electric companies are relying more heavily on natural gas resources, shiing

priories to take advantage of the cheapest energy source available. This shi has

had a noceable impact on power generaon across the United States.

• Coal-red power generaon, already on the decline, has taken a sharp

downward turn. Older coal plants are being rered in favor of new, cleaner

natural gas plants. It is oen cheaper to build new gas-red infrastructure

than it is to bring coal-red plants into compliance with new EPA emissions

standards, or to build new, compliant coal plants.

•

Nuclear energy, which is unique in its ability to provide 24/7 electricity withouteming greenhouse gases, is expanding, albeit at a limited pace. The up-

front cost of building nuclear energy facilies is high, but low fuel costs over

40 to 60 years of power producon and the absence of greenhouse gases

during generaon of electricity are overriding market factors.

• Renewables sll lack the capacity to meet the same level of demand as

nuclear energy or natural gas, and are struggling to be cost-compeve. In

fact, because of low capacity factor and intermient producon, renewables

must be backed up with gas-red generaon to ensure reliability.

SNAPSHOT OF THEENERGY LANDSCAPE

ELECTRICIT

HE MAJORITYAMERICANS WANT

TRICTERMISSIONSTANDARDS

28% INCREASIN DEMAND FO

U.S. ELECTRIC GENERATION BY FUEL TYPE2012

Source: U.S. Energy Informaon Adminis

e: Gallup

6.7%

Hydroelectric

6%

Renewableand Other

19%

Nuclear

37.4%

Coal

0.6%

Oil

30.4%

Natural Gas

Source: U.S. Energy Informaon Administraon



In a market focused on short-term benets, arguing for energy infrastructure

investment with long-term benets is challenging, given the allure of immediate

payo. But long-term energy soluons that provide predictable, stable costs are

prudent choices when taking into account the big impact that even small shis in

the market and supply chain can have on the cost and availability of energy.

Invesng in new infrastructure and upgrades to exisng infrastructure while

energy is plenful and aordable ensures that a broader range of electric opons

are available in the future, as electricity demand grows and as outside forces

impacng energy cost and availability come into play. If we work to expand and

diversify our technology porolio now, we will not be caught unprepared.

Investment in energy infrastructure that does not oer immediate payo, but

rather contributes to long-term availability, price stability and energy security, isintegral to a cleaner and more diversied energy economy and to providing the

most aordable energy soluons for consumers.

Balancing Reliable Sources of Aordable Energy

The goal of electricity diversicaon should be to ensure that reliable, low-

cost energy opons are available to consumers. The factors that aect cost andreliability are:

• Fuel prices. Fuel costs for nuclear energy account for only a small percentageof the yearly costs of energy produced – just 31 percent of the cost of

producon. In comparison, fuel costs for natural gas-red plants average

around 88 percent of power-producon costs; 78 percent for coal-red

electricity. When fuel prices rise, so do energy producon costs. For natural

gas or coal-red generaon, where the cost of fuel is a high percentage of

the overall cost of energy producon, uctuaons in fuel prices can have a

signicant impact on consumer energy costs.

• Fuel supply. Natural gas is readily available and cheap, making it a

parcularly aracve fuel source at present. However, unexpected factors

that impact the availability of fuel, such as supply disrupons due to

weather events, also signicantly impact fuel costs. Because fuel prices fornatural gas account for such a high percentage of power-generaon costs,

supply instability can have a marked impact on end-user energy prices. In

contrast, uranium – the fuel used to produce electricity at a nuclear energy

facility – is readily available and is easy to obtain at a stable, predictable

cost. What’s more, because the cost of uranium is such a low percentage

of overall nuclear power-generaon expenses, nuclear energy is insulated

from the impact of price uctuaons when they occur.

• Infrastructure costs. Compared to baseload coal and nuclear power

plants, natural gas-red power plants have lower capital costs to build

and are comparavely easy to site. Combined with their small footprint,

this makes natural gas-red power popular. Nuclear power plants, on

the other hand, require signicant up-front investment in construcon.

However, once, the plants are built, they operate at low producon costs

for decades. In fact, even factoring in the cost for uranium fuel, plant

operaon and maintenance, nuclear energy is the cheapest source of

large-scale electricity in the United States.

PRESERVING A LONGTERMENERGY VISION IN THE CONTEXTOF SHORTTERM OPPORTUNITY

FUEL COSTS BY ENERGY SOURCE

31%

NUCLEAR ENERGY

88%

NATURAL GAS

78%

COAL

Percentage of producon costs per k ilowa-hour

2011

ENERGY PRODUCTION

COSTS DRIVEN BY

FUEL PRICESARE SUBJECT TOGREATER VOLATILITY

Source: Ventyx Velocity Suite; Energy Resources Internaonal, Inc.



Moving Toward a Cleaner Energy Economy

Growing consumer demand for cleaner electricity, the need for increased use of

domesc energy resources and pressure to minimize and stabilize energy costs

should drive America to develop a more diverse electricity porolio. Energy

sources like natural gas and nuclear energy provide baseload electricity for oureconomy and standard of living. Moreover, natural gas is necessary to back up

renewable energy sources when the wind doesn’t blow or the sun doesn’t shine.

Nuclear energy is the naon’s largest producer of carbon-free electricity. It is

comparable in life-cycle environmental impact to renewable e nergy sources like

wind and solar – but it oers a much higher capacity factor (a measurement of

reliability) and low producon costs that renewables cannot achieve.

Ensuring a Secure Electricity Future

Fuel diversicaon for electricity producon also helps create energy security.

By increasing consumpon of domescally-produced fuel sources and prevenng

reliance on one or two primary sources of electricity, diversicaon enhances

reliability of electricity supply and decreases the likelihood of unexpected spikesin fuel cost and the impact on consumer energy costs.

Volality in supply and price can produce signicant changes in consumer

electricity costs. When Hurricane Katrina slammed into the Gulf Coast in 2005

and shut down natural gas exploraon and delivery, electricity prices spiked by

20 percent in Florida – cosng consumers $1.5 billion. Electricity prices also rose

in other southeast states that are highly dependent on natural gas for electricityproducon. Today, Florida uses four mes more natural gas for energy producon

than in 2005, according to the U.S. Energy Informaon Administraon. Other

factors, including the increased use of air condioning or heang and coal plantclosures, can send natural gas prices soaring—as they did in a three-month period

ending July 2012 when the price for natural gas at Henry Hub in Louisiana jumped

more than 70 percent.

Eorts to ensure the security of power-generaon facilies themselves are cri cal

to energy security. The U.S. nuclear energy industry in parcular is working in

cooperaon with an independent regulator and in tandem with global and U.S.-

based nuclear energy organizaons to ensure that commercial reactors are

designed to provide the utmost protecon to the people who maintain them andthe communies around them. American nuclear energy facilies are the most

highly regulated—and among the safest—in the world.

UCLEAR ENERGYTHE NATION’S

ARGESTRODUCER OFARBON-FREE

LECTRICITY

SOURCES OF EMISSION-FREE ELECTRICITY2011

63.3%

Nuclear

25.7%

Hydro

9.6%

Wind

0.1%

Solar

1.3%

Geothermal

NUCLEAR ENERGY PRODUCES

NEARLY TWO-THIRDS OF AMERICA’S

CARBON-FREE ELECTRICITY

Source: U.S. Energy Informaon Administraon



Creang Thousands of Jobs and Economic Growth

Energy diversicaon also creates a broad range of economic opportunies.

Nuclear energy facilies produce benets well beyond the electricity they generate.

They include economic benets like job creaon, taxes and procurement, grid

reliability benets in the form of voltage support and ancillary services, and the

environmental benet of prevented emissions and sanctuaries for endangered and

threatened species. In the construcon phase, a new nuclear facility representsup to 3,500 jobs, while the operaon of a 1,000 megawa (MW) facility requires

400-700 permanent jobs. Other segments of the energy sector oer jobs that

range from exploraon and producon to building and maintaining infrastructure

for operang plants. Creang opportunity across a greater number of industries

also diversies the types of opportunies available to workers.

Energy facilies don’t just power the homes, businesses and communies they

serve. They also power local and state economies, as well as the job market. On

average, each nuclear energy facility generates $470 million in sales of goods and

services in the local community, and nearly $40 million in total labor income.

Natural gas development has injected billions of dollars of state and federal taxrevenue into the economy, both directly and by spurring economic acvity in

areas where development occurs.

Moreover, as the energy sector grows, so do other industries that benet from the

opportunies created by new infrastructure development, by energy exploraon

and producon, and by ongoing plant operaon and maintenance. For example,

for every 100 permanent jobs created by nuclear energy facilies, local economies

indirectly produce 66 new jobs, and an addional 726 jobs are created indirectly

naonwide. What’s more, the reliable and aordable electricity produced at

these facilies provides an addional boost to the economy by keeping costs low

for American businesses.

The primary obstacle to a reliable, secure electric grid that benets from a diverse

energy technology porolio is clear. Signicant investment in the grid must be

made over the next two decades—in fact, more investment than has been made

in the exisng grid. These investments must include baseload power facilies.

Nuclear energy facilies cost between $6 billion and $8 billion and take about four

to ve years to build, but this “always-on” power producon is vital for industry

and consumers alike.

The up-front costs for infrastructure and the business ri sk involved in deregulated

energy markets are challenges to future i nvestment. Fortunately, companies and

investors have opons for reducing the impact of investment. The nuclear energy

industry, for example, typically relies on two primary opons for managing these

costs, so that communies and investors are not overburdened and nancialoutlays are recoverable over the long term.

• Cost recovery as construcon of major projects progresses is a pracce in

states and regions that operate under the tradional regulated ulity model.

This pracce allows ulies building new plants to recover their costs of nancing in real me during construcon through customer rate adjustments,

which are established and reviewed by state public service commissions. This

“pay-as-you-go” approach reduces the overall cost of building a new facility

and lowers electricity rates for consumers over the life cycle of a plant. The

approach also helps energy companies reduce the stress that a nuclear

energy facility investment puts on a company’s cash ow.

• Federal loan guarantee programs put in place as part of the Energy Policy

Act of 2005 allow consumers of electricity to benet because the loan

guarantee allows lower-cost nancing so the nuclear energy facility can

deliver lower-cost electricity. Nuclear energy projects pay the full cost of

accessing the loan guarantee program.

No maer how the program is nanced, the inial costs of nuclear energy

development are high, and in some markets, construcon must be completedbefore the facilies can generate revenue that enables recovery of these costs.

Given this fact, nuclear energy development today is limited to states where

the electricity market is regulated by state public service commissions. These

states recognize the long-term, levelized cost benets over the advantages of low-

capital, short-term energy projects.

THE IMPORTANCE OF

LONGTERM INVESTMENT INAMERICA’S ENERGY FUTURE

CH NUCLEAR ENERGY

CILITY GENERATES

470 MILLIONSALES OF GOODS

ND NEARLY40 MILLIONTOTAL LABOR INCOME

JOBS DURING OPERATION/1,000 MW CAPACITY

1200

1000

800

600

400

200

0Solar Nuclear Coal Natural

GasW in d H ydr o

470-

1,060

400-700

190

50 50

100-

200

Source: Navigant Consulng



We are at a crical juncture for America’s electricity infrastructure. Atudes

about energy and consumpon are evolving; consumers want to know how they

can use less energy and how the energy that they do use can be cleaner, yet

reliable. While overall demand for electricity has fallen below the 2007 peak,

demand for low-carbon energy is growing.

Cleaner, cheaper energy sources like nuclear energy, renewables and natural gas

are important parts of our ability to meet that need. In the current environment,where natural gas prices are low and supply is high, we must maintain the

exibility to take advantage of the benets to consumers of low-cost energy. This

exibility is supported by the creaon of a diverse energy porolio—one that

allows us to balance power-generaon sources based on the cost and availability

of fuel without negavely impacng consumers and business.

Diversicaon promotes healthy electricity markets that are good for consumers,

good for business and good for energy security. Diverse electricity markets are

less suscepble to supply interrupons, less dependent on unstable parts of the

world for fuel, and less vulnerable to uctuaons in market-based prices. Nuclearenergy—with its stable producon price and reliable output—has an important

role to play in a diverse energy porolio. So does natural gas, which oers an

abundant source of domesc fuel, as well as wind, solar and other renewables.

Our naon’s energy porolio should include all of these as well as emerging

technologies.

Diversicaon requires the commitment to long-term investments in infrastructure

that will support consistent, reliable, aordable electricity for future generaons.

Today, as some aging power plants are being closed, securing support for newtechnologies and making good on that long-term commitment to energy security

and diversicaon in the electricity sector becomes even more cri cal.

Energy is not an either/or choice. The boom line is that diversied investment

in a variety of energy sources has always been good for America—and it will

connue to be so.

STAYING FOCUSED ONLONGTERM ENERGY GOALS



16

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Energy Diversification White Paper