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Background – Coal Power Plants

CHALLENGES FOR COAL POWER PLANTS Kentucky Member Services Association Meeting October 14, 2009 Presented by Jacky Preslar General Manager, Fuel Supply Tennessee Valley Authority. Background – Coal Power Plants. Number of U.S. Coal Units 1,458 Units

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Background – Coal Power Plants

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  1. CHALLENGES FOR COAL POWER PLANTSKentucky Member Services Association MeetingOctober 14, 2009Presented by Jacky PreslarGeneral Manager, Fuel Supply Tennessee Valley Authority

  2. Background – Coal Power Plants • Number of U.S. Coal Units • 1,458 Units • (located at approximately 600 plant sites) Source: DOE – Energy Information Agency • Average Age of the U.S. Fleet • 36 Years (as of 2009) • U.S. Coal Plant Capacity • 312 Gig watts • 31% of Total U.S. Capacity • Percent of U.S. Electricity Supply • 49% of Total Supply • Number of KY Coal Units • 54 units • (@ 20 plant sites) • KY Coal Plant Capacity • 16.5 Gig watts

  3. The Big Picture The Reality: Coal Fired Electricity Generation Can Not and Will Not Be Displaced Near Term How Long Before It Gets Displaced? • It Depends: • Could be - in next 20 to 40 years • or • If managed properly - will not be in the foreseeable future Depends On What? It Depends, Upon How Long It Can Remain Economically Viable

  4. Challenges To Economic Viability Utility Regulatory Compliance Costs • Air Emissions • SO2 & NOx – Current understanding is good – Technology proven & available • Mercury – Original regulation rejected July 2008/pending – Technology available/not fully proven • CO2 - Legislation pending/expected in next 12 months – To scale technology not proven • Water Emissions • Hydro Thermal – Legislation possible forcing closed loop cooling system – Technology proven and available • Coal Combustion By-Products • Disposal – Legislation possible forcing by-products to be classified as hazardous/expect in next 2 to 3 months Coal Mining Industry • Regulatory Compliance Cost • Mine Safety (post Sago/Crandall Canyon) – Implementation underway – some technology still not proven – additional legislation expected • Mountain Top Removal -Legislation likely – impacting up to 40% of Central Appalachian production • Permitting –Regulatory environment uncertain – additional requirements expected • Financial Health - • Industry Consolidations – Driven by ability to find money and ability to make money • Remaining Competitive With Alternative Fuel Supply • Combined cycle combustion turbine plants will displace coal when natural gas drop to prices that are less than $5 to $6 per million btu.

  5. Other Challenges • Renewable Portfolio Standard (RPS) • Mandated Renewables – Legislation possible forcing a percent of utilities generation provided by renewable resources / expected in new 12 to 24 months - • Global Demand for U.S. Coal Supplies • Coal has become a global commodity – weak U.S. Dollar and quality of U.S. coal makes it attractive Public Perception

  6. Considerations – Things To Do Navigating The Uncertainties Will Require: Proactively engage the regulators Develop strategic relationships between generation companies and coal suppliers Coal generation companies must make strategic investments in order to create competitive leverage with coal and transportation suppliers Educate the public – communicate, communicate, communicate

  7. APPENDIX

  8. Appendix – Coal Units in Kentucky

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