Highlights from Recent EPRI Climate-Related Work

1. Highlights from Recent EPRI Climate-Related Work CA Council on Science & Technology October 2006 Bryan Hannegan Director, Environment

2. About EPRI • EPRI is an independent non-profit collaborative research and development organization • Funded by 1000 energy companies in 40 countries • Includes IOUs, munis, co-ops • Also includes gov’t organizations that fund public benefit R&D (e.g. CEC) • Climate research is a priority for EPRI • Inform climate policy discussions • Reduce costs through technology R&D • Support utility investment decisions

3. Topics for Today • Generation Options in a Carbon Constrained World • Impacts of CO2 Prices on Existing & New Generation • Advancing Energy Efficiency • Plug-In Hybrid Vehicle Potential • Analysis of CA Climate Legislation

4. Generation Options in a Carbon Constrained World

5. Generation Options Framework • Levelized cost of electricity • Standard EPRI methodology • Constant 2006 $ costs • Lines are mean values from a range of studies • Two key uncertainties • Future “cost” of CO2 • Future price of natural gas • Two timeframes • 2010-2015 time-period • 2020-2025 time-period

6. Comparative Costs in 2010-2015 Levelized Cost of Electricity, $/MWh 100 IGCC 90 Wind@29% CF 80 NGCC@$6 70 Biomass PC 60 50 Nuclear 40 30 0 10 20 30 40 50 Cost of CO2, $/metric ton

7. Take-Aways for 2010-2015 Time Period • Nuclear is clearly lowest-cost, but unlikely before 2015 due to significant licensing & construction time. • Next most economic arefossil-fueled technologies (NGCC, PC, and IGCC) w/o CO2 capture and storage • Will comprise dispatchable base-load generation prior to 2015 • Natural gas will re-emerge only if prices ~$4/MMBtu • New advanced coal plants with CO2 capture and storage will probably not occur until after 2015. • Carbon prices must be > $30/tCO2 for wind, biomass

8. Advanced Coal Technology Time Line 2006 2009 2010 2011 2013 2018 • 2 x 750 MW Advanced PC Plant……………….2009 • 600 MW Base Load IGCC Plant…………..……2010 • First of TXU’s 11 New Plants Online (PC).…....2010 • Carson Project Pet Coke Gasification…….……2011 • FutureGen “Living Laboratory” Operating….….2013 • Advanced Coal with Capture Deployment....2018+ Long Technology Development Cycle…With Uncertainty

9. What’s Possible: 2020-2025 Horizon Technology Advances in Efficiency Cost Reductions through Design Improvements CO2 Capture and Storage - Development and Deployment Biomass Gasification Technology Energy Storage Capability

10. Comparative Costs in 2020-2025 Levelized Cost of Electricity, $/MWh 100 An Extraordinary Opportunityto Develop a Low-Carbon Portfolio 90 80 70 NGCC@$6 60 PC w/cap IGCC w/cap Wind 50 Nuclear Biomass 40 30 0 10 20 30 40 50 Cost of CO2, $/metric ton

11. Impact of CO2 Prices on Existing and New Generation

12. CO2 Value Impacts Market Price and Generator Net Revenue for Each Hour of Dispatch

13. Position in Stack Determines Each Generator’s Net Revenue for the Year – $/kW-year

14. Coal Land Represented by ECAR + MAIN

15. Coal Land – CO2 @ $0/ton

16. Coal Land – CO2 @ $50/ton

17. Net Revenues for Existing Units

18. Net Revenues for Advanced Generation Units

19. Key Insights • Higher production costs from CO2 value does not imply lower net revenues for some units due to feedback loop from plant costs to market prices • Risk exposure to coal generation highly dependent on • Regional generation mix • Gas price level 3. Older coal plants more exposed to CO2 risk than newer plants, a factor for environmental retrofit decisions

20. Advancing Energy Efficiency

21. EE DR DS Strategies for Efficient Use of Electricity Three Interrelated Strategies • Energy Efficiency (EE) • Demand Response (DR) • Dynamic Systems (DS) Implemented through an Electricity Efficiency Infrastructure that allows “prices to devices”

22. Dynamic Systems: A Critical Need Efficient Building Systems Utility Communications Renewables Internet PV Consumer Portal & Building EMS Advanced Metering Control Interface Distribution Operations Dynamic Systems Control Plug-In Hybrids Smart End-Use Devices Distributed Generation & Storage Data Management

23. Creating an Energy Efficiency Initiative • Established Electricity Efficiency Technology Ad-Hoc Committee of EPRI Board • Conducting Regional Workshops to obtain additional input from utilities and other stakeholders • Oct 31 – Southern California (Hosted by Lynda Ziegler of SCE; contact Ellen Petrill epetrill@epri.com for details) • Identify and finalize new elements of EPRI Electricity Efficiency Technology Initiative by end of year • Coordinate with the Edison Electric Institute and other industry organizations

24. Plug-In Hybrid Electric Vehicle Potential

25. Plug-In Hybrid Greenhouse Gas Emissions

26. CO2 Offsets Increase with Cleaner Electricity Total vehicle CO2 emissions in g CO2 mi-1 Electricity CO2 emissions in g CO2 kWh-` Source: EPRI

27. Plug-in Hybrid Electric Vehicle Progress • EPRI/SCE Advanced Battery Test Program • EPRI/DOE Product Development • Johnson Control/Saft Alignment • Technology Innovation - Nanotechnololgy Batteries • Automotive Analysis in Process • Argonne National Lab Auto Environment • Environmental Value Analysis • Environmental Base Program • PHEV Sprinter Data Collection • Eaton/EPRI Trouble Truck Data

28. EPRI PHEV Sprinter with DaimlerChrysler EPRI/Utility PHEV Fleet Demonstrations Costs Decrease Most OEMs Have PHEV in Lineup 30-mile EV range EPRI PHEV Utility Trouble Truck with Eaton/Ford First PHEVs: 7 to 20-mile EV Range Li Ion Battery 40-mile EV Range DOE Begins PHEV Program Initial EPRI PHEV Study 2000 2005 2010 2015 2020 HEV Market Introduction HEV Sales Accelerate Initial PHEV Market Intro PHEV Sales Accelerate Widespread PHEV Adoption Customer Market Pull:Increased EV RangeGreater EV Performance Li Ion Batteries Enter HEV Market Plug-in Night Time Charge 24 Hr. Grid Access Auto-Docking Infrastructure Time of Use Charge & Automatic Billing HEV Technology Timeline

29. Overview of California Climate Policy Activity

30. California Climate Policy Activity Government policy actions • Governor's Executive Order sets GHG mitigation targets • State Senate and Governor announce deal for comprehensive cap on GHG emissions (AB 32) • New long term (> 5 years) base-load requires performance standard equal to a CCGT (SB 1368) • 33% Renewable Portfolio Standard by 2020 (PUC) EPRI California climate policy research • Analysis of CA GHG mitigation targets • Analysis of 3 existing economic studies

31. California GHG Legislation—Key Points Role of the Air Resources Board • Rules, procedures, regulations, etc. unclear at present • “achieve maximum technologically feasible and cost-effective GHG reductions.” • Authorizes “market-based compliance mechanism(s)” • Mandatory reporting of GHG emission sources Timing • 6/30/2007 ARB to publish list of “early actions…” • By 1/1/2011 ARB shall adopt regulations • Become effective 1/1/2012

32. California GHG Legislation—Key Points Economic impact unclear at present • State has yet to work out details of implementation • Supporters say it won’t harm business Provision for “safety valve” • Governor has authority to delay emission-cap by up to one year in an emergency New Energy Investments Face Uncertainty • Any project will face undefined restrictions/costs as reductions, measures and limits not known until 2011 • Financing these projects may be very difficult

33. EPRI Examining California GHG Policies Independent analysis of economic costs and benefits • Funded by Southern California Edison • Project duration-- January 2006--June 2007 • EPRI has provided status reports to SCE and other interested organizations • Project results will be provided to the public • Advisory Committee provides peer-review • Report will be released November 2006

34. EPRI Evaluation of Previous Economic Studies Previous research indicated “benefits” for economy • Economic analysis by the Climate Action Team • Independent economic analysis by Center for Clean Air Policy (CCAP) • Third report by UC Berkeley Climate Change Center All three studies based on “bottom-up” analysis of many separate policy measures • “Bottom-up” analyses displays systematic optimistic bias about the economic costs • Undergoing peer-review and should be widely available in near future

35. Closing Thoughts California climate activities important for rest of country • May lead to other state/regional/national proposals • “Getting rules right” in California will be helpful for subsequent proposals in other states or nationally Remember deregulation … • Issues are complex; unintended consequences costly • Any proposed government actions (ARB) should be carefully examined prior to implementation: - What are the impacts on electric system? economy? • How do you constrain electricity imports? • Can technology meet the pace of regulations?

36. Carbon Prices DO Affect Electricity Rates!