Investing in America’s Electric Future
Morry MarkowitzGroup Director, External Affairs
New Mexico Utility Shareholders AllianceOctober 7, 2009
Demand for Electricity Is Projected to Increase 27% by 2030
2
3
Annual Electricity Use in the Typical U.S.
Home Has Increased 60% Since 1970Average Annual Kilowatt-hour Sold Per Residential Customer
4
Electricity Growth Is LinkedTo U.S. Economic Growth
The Costs of Meeting Future Demand
6
Investments in Generation
Inefficient, older power plants will be retired; new plants built.
240 gigawatts (GW) of new capacity will be needed by 2030.*
New capacity costs likely will be in excess of $400 billion.
*Source: Energy Information Administration
7
Transmission Investments
Nearly $75 billion will have been invested between 2000 and 2010.
Customers will benefit from newer technologies and reliability.
Transmission InvestmentsBy Shareholder-Owned Electric Utilities
8
Environmental Compliance Costs
From 2002-2005, the electric power industry spent at least $21 billion on compliance with federal environmental laws; state and local rules drive costs even higher.
EPA estimates that two rulemakings—the Clean Air Interstate Rule and the Clean Air Mercury Rule—will cost electric utilities and their customers almost $50 billion from 2007 to 2025.*
The research, design, development and deployment of new technologies needed to reduce greenhouse gas (GHG) emissions will require additional investments.
* CAMR is currently being resolved in the courts; compliance costs could rise under alternative regulatory regimes
The Role of Energy Efficiency
10
Energy-Efficiency and DSM Programs
Are Making a Difference Between 1989 and 2007,
electric company demand-side management (DSM) programs saved 929 billion kilowatthours (kWh) of electricity—enough to power 83 million average U.S. homes for one year.
These savings are equal to the annual electricity output of 147 baseload power plants [rated at 800 megawatts (MW) each and operating at a 90% capacity factor].
Electric utilities have spent nearly $35 billion on DSM programs from 1989-2007.
11
The Role of Renewables
Benefits and Challenges
Benefits of Renewables
Help promote fuel diversity
Produce minimal environmental impact Largely free of carbon dioxide emissions
Low or no fuel costs
13
Challenges Facing Renewables
High initial capital costs
Geographic limitations
Variable nature
Transmission availability and cost
Frequent expiration of production tax credit
Environmental and aesthetic challenges (NIMBY)
14
What AboutClimate Change?
16
EEI supports legislative proposals in Congress to reduce GHG emissions that: Sets targets and timetables for greenhouse gas emissions
reductions that are reasonable and achievable to help prevent sharp increases in electricity prices;
Allocates emissions allowances to the electricity sector for a transitional period;
Includes a “price collar,” or upper and lower limits on the price of emissions allowances; and
Promotes energy efficiency, renewable energy, new nuclear generation, and new advanced coal generation technologies with carbon capture and storage.
* The full text of the EEI climate change principles is available at www.eei.org.
Industry Climate Change Principles
17
Addressing climate change requires an aggressive and sustained commitment to a full set of technologies, including: Efficiency Renewables Clean coal technologies Carbon capture and storage Nuclear Plug-in hybrid electric vehicles
What Will It Take?
0
500
1000
1500
2000
2500
3000
3500
1990 1995 2000 2005 2010 2015 2020 2025 2030
U.S
. Ele
ctri
c S
ecto
rC
O2 E
mis
sio
ns
(mill
ion
met
ric
ton
s)
EIA Base Case 2008
Technology EIA 2008 Reference Target
Efficiency Load Growth ~ +1.05%/yr Load Growth ~ +0.75%/yr
Renewables 55 GWe by 2030 100 GWe by 2030
Nuclear Generation 15 GWe by 2030 64 GWe by 2030
Advanced Coal Generation
No Heat Rate Improvement for Existing Plants
40% New Plant Efficiency by 2020–2030
1-3% Heat Rate Improvement for 130 GWe Existing Plants
46% New Plant Efficiency by 2020; 49% in 2030
CCS None Widely Deployed After 2020
PHEV None10% of New Light-Duty Vehicle
Sales by 2017; 33% by 2030
DER < 0.1% of Base Load in 2030 5% of Base Load in 2030
EIA Base Case 2007
CO2 Reductions…What’s Technically Feasible?*
*Achieving all *Achieving all targets is very targets is very aggressive, but aggressive, but potentially feasiblepotentially feasible
19
Auctioning Allowances Would Sharply Increase Costs to Customers
The Dividend Tax Rate Reduction
Dividend Tax Rate Reduction
Currently at 15%, set to expire at the end of 2010.
Vital to shareholders and the industry.
Proposals by President Obama and Senator Max Baucus (D-MT) would cap rate at 20%. ($200K for individuals, $250K for families)
Majority of shareholders would remain at 15%.
EEI and AGA coalition to support keeping dividend tax rate low. Visit www.defendmydividend.org .
Sign up today!
21