November 5, 2009

Louisiana Tech University Energy Systems Conference

Transformation to the Energy Resource Mix of the Future

Nicholas Akins Executive Vice President – Generation 1

Company Overview

Coal/Lignite 69% Nat. Gas/Oil 20% Nuclear 6% Pumped Storage/ Hydro/Wind 5% AEP’s Generation Fleet >38,000 MW Capacity 5.2 million customers in 11 states Industry-leading size and scale of assets

:

Asset Domestic Generation Transmission Distribution Size ~38,300 MW ~39,000 miles ~213,000 miles Industry Rank # 2 # 1 # 1

2

U.S. Policymaker Goals

     Addressing rising electricity demand while reducing power plant emissions Ensuring electricity remains affordable, reliable and secure from domestic sources Moderating electricity price increases Sustaining the engine of economic growth Increasing environmental protection 3

Key Points



No silver bullet – Portfolio mix of resources will be required to satisfy future energy needs



Expected federal environmental policy will require further emissions reductions from existing and future coal and natural gas fired power plants



Carbon capture and storage and EOR are critically needed technologies for baseload generation to comply with anticipated federal CO2 emissions reduction requirements



Financial market recovery is necessary to enable the transformation of a decarbonized portfolio

4

Electricity Generation: U.S. Government Forecast

Renewable Sources 9%

2006 3875 TWh

Other 1%

23% Growth

Renewable Sources 14%

2030 4777 TWh

Other 1% Nuclear 19% Coal 49% Nuclear 18% Coal 46% Natural Gas 20% Petroleum 2%

Reference case from EIA “Annual Energy Outlook 2009”

Natural Gas 20% Petroleum 1% 5

Waxman-Markey emission reductions

Total US GHG Emissions vs. Legislative Caps 9,000 8,000 7,000 6,000 5,000 4,000 3,000 1990 Levels Lieberman-Warner-Boxer Waxman-Markey Dingell-Boucher BAU_AEO 2009 Update 2,000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 6

2009 EPRI Prism

7 7

2009 Prism Technology Targets

8 8

Generation Mix & Electricity Costs--2030

9 9

Generation Mix & Electricity Costs--2050

10 10

How can these reductions be achieved?

 Technology developed and quickly deployed  Establishing enabling public policies  Financing through public/private partnerships  Investment recovery from ratepayers 11

CO

2

Capture Techniques



Post-Combustion Capture

 

Conventional or Advanced Amines, Chilled Ammonia

Key Points

    Amine technologies commercially available in other industrial applications Relatively low CO 2 concentration in flue gas – More difficult to capture than other approaches High parasitic demand  Conventional Amine ~25-30%, Chilled Ammonia target ~10-15% Amines require

very

clean flue gas 

Modified-Combustion Capture

 

Oxy-coal

Key Points

   Technology not yet proven at commercial scale Creates stream of very high CO High parasitic demand, >25% 2 concentration 

Pre-Combustion Capture



IGCC with Water-Gas Shift – FutureGen



Key Points

    Most of the processes commercially available in other industrial applications Turbine modified for H 2 -based fuel, which has not yet been proven at commercial scale Creates stream of very high CO 2 concentration Parasitic demand (~20%) for CO 2 capture - lower than amine or oxy-coal options 12

Mountaineer CCS demonstration project

2009 Commercial Operation Mountaineer Plant (WV)

Alstom

Chilled Ammonia

CO 2 ( Battelle ) Project Validation  20 MW e scale  (Scale-up of Alstom/EPRI 1.7 MW field pilot at WE Energies)       ~100,000 tons CO 2 per year In operation 3Q 2009 Approximate total cost $80 – $100M Using Alstom “Chilled Ammonia” Technology Located at the AEP Mountaineer Plant in WV CO 2 for geologic storage

Will capture and sequester 100,000 metric tons of CO2/year

Photo courtesy of Astom and AEP 13

Alstom’s Chilled Ammonia Process

Post-Combustion Capture

Chilled Water

Gas to Stack

CO 2 Reagent CO 2

Flue Gas from FGD Gas Cooling and Cleaning

CO 2

Cooled Flue Gas

CO 2 Absorber CO 2 Regenerator CO 2 Clean CO 2 to Storage Reactions: CO2 (g)



==



CO2 (aq) (NH4)2CO3 (aq) + CO2 (aq) + H2O (NH4)HCO3 (aq)



===



(NH4)2CO3



===

 

==



(NH4)HCO3 (s) (NH4)NH2CO2 + H2O 2(NH4)HCO3 (aq)

Graphics curtsey of Alstom Power

Reagent Heat and Pressure

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Mountaineer Storage and Monitoring System Design

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Major issues

Capture issues

:     CO2 absorption Steam requirement for liberation of CO2 Power plant integration and optimization Parasitic load

Storage issues

:  Property rights     Liability Permit requirements USEPA designation of CO 2 State cooperative agreements/consistency 16

Complimentary Technologies Toward a Cleanly Powered Grid

 AEP is investing in these new technologies:     New advanced coal technologies to gasify coal and carbon capture to retrofit to existing and new coal and natural gas units with storage or for enhanced oil and natural gas recovery; Renewable energy (especially Wind, Biomass); Supply and demand side energy efficiency; New nuclear units;  New transmission infrastructure to make our system more efficient;  Offsets (Forestry, Methane)

Power to Change Deployment Plan at www.wbcsd.org

Midwest Governors Association Energy Stewardship Platform At www.midwesterngovernors.org

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Today’s Challenges….

Why change now?

 Generation profile is shifting and will continue to shift dramatically:  New large scale renewables need to be interconnected that are today largely electrically isolated  Environmental requirements may require retirement of large fossil units, potentially at a magnitude never before faced in this country  Generation needs to be deliverable to load not simply interconnected. Attention must be focused on the robustness of the grid.  The search for a “bright line” between reliability and economic projects is increasingly artificial.

What needs to change?

 A new energy supply paradigm requires a different type of transmission planning to enable greater capacity and flexibility.  Cost allocation principles must be broadened to encompass this strategic new build.

 Siting processes which are aligned with state, regional and national energy policy objectives.

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Efficiency of 765-kV Transmission

Advanced transmission enables energy savings through efficiency.

Losses for Power Flows (100 Miles)

180 160 140 120 100 80 60 40 20 0

A US 765-kV transmission overlay would reduce peak load losses by more than 10 GW and CO 2 emissions by some 15 million metric tons annually.

765 kV 500 kV 345 kV 500 1000 1500

Power (MW)

2000 19