Transcript Employee Communications Network Meeting 10th – 13th October

Sustainable Support for Renewable Energy:
an alternative energy perspective
Tom Briggs, VP Policy & Communications, BP Alternative Energy
Alternative energy: the market today
Global new investment in clean energy
$148.4bn
150
125
$bn
100
$86.5bn
75
$54.6bn
50
$28.6bn
25
0
2004
2005
2006
2007
Grossed-up estimate based on disclosed deals.
New investment only.
Source: New Energy Finance
2
Principles for transitional incentives
• Goal: “accelerate the deployment of low-carbon power technologies”
• Policy understood to be ‘transitional’ – eventually phased down and
replaced with a carbon-based measure
• Policy based around a market mechanism, e.g. tradable certificate
system – to seek out lowest-cost solutions and to allow business to
optimise across a wider playing field
• Policy provides encouragement tailored to each technology without
‘picking winners’ for favored treatment
3
Priorities to stimulate investment
• Enduring carbon pricing policies eg continuance of CDM, cap
and trade in US and EU
• Stability and predictability in transitional incentives - long-term
policies – avoiding stop-go syndrome
• Further tailoring of incentives to technologies
• Regulatory support for Grid expansion and development,
including streamlined planning permission.
• Reduce barriers to global trade and investment
4
•
Historical cost development and learning
rates
Capital cost; 2004
USD/W
“By the year 2010 we'll be
able to halve generation
costs. By 2020 we expect a
further reduction – half of
2010 – and by 2030 we
expect half the 2020 level.”
Katsuhiko
Machida
− Historical
learning
President,
Corp
rates per Sharp
doubled
100
•
10
•
Solar Thermal
1985 – 1991
•
PV inverter
•
1995 – 2002
•
Ethanol
1978 – 1996
•
cumulative capacity
of
Solar PV
1975 – 2003
− 23% for Solar
PV*
− 13% for Wind
Power
Wind Power
1981 – 2001
− 15% for Ethanol
1
1
10
100
•
1,000
10,000
100,000
Cumulative capacity installed
•
Source: UC Berkeley Energy Resource Group; Navigant consulting
MW
− 6% for PV
inverters
− 3% for Solar
5
BP Alternative Energy
•
In 2008, BP AE will invest $1.5 billion in renewable energy technologies and
projects.
•
In BP Alternative Energy, ~$800 million has been invested in wind energy
projects to date. Two-thirds of the 2008 wind investment spend is in the US
•
By end of 2008, we expect to have 1000MW wind capacity installed
2008 investment spend ($m)
2008 Alternative Energy investment
spend by region
600
S America
US
Asia & M iddle East
Europe
500
400
300
200
100
0
Wind
Thermal
Solar
Biofuels
Venturing Hydrogen Distributed
Energy
6
BP Alternative Energy: where we operate
Solar PV facility /
market
Wind power
Hydrogen power
Biofuels facility /
market
Gas fired power
Investing $1.5bn in 2008
7
Overview of Texas electricity market
Texas electricity generation mix
•
Texas produces and consumes more
electricity than any other state:
− 9.8% share of US total net electricity
generation
0.6%
4.5%
7.3%
50.5%
38.0%
Petroleum-fired
Natural gas-fired
Coal-fired
Nuclear
Hydroelectric
Other renew able
− 11th in the world in terms of consumption
•
•
•
Approximately 50% of electricity produced
by gas-fired power plants
Texas is the largest wind energy producer in
the US
78.5% of Texas’ renewable generation is
from wind
47.2%
Texas renewable generation mix
2.6% 0.5%
7.8%
10.6%
Hydro conventional
Wind
Wood/w ood w aste
Landfill gas
Biomass
78.5%
Source: EIA August 2008
8
The growth of wind power in Texas
As a result of incentives and
competitive market forces, Texas has
seen an explosion in investment in
generation facilities, particularly wind.
•
As of 1Q 2008, Texas has installed
over 5,300 MW of wind capacity –
more than any other state.
•
ERCOT predicts that as much as
10,000 MW could be operating by
spring 2009.
•
Growth of renewable energy capacity in Texas
Capacity (MW)
•
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
est.
The growth surge has been driven by:
− high natural gas prices
− excellent wind resources
− relatively few planning permission issues
− viable retail and wholesale markets in which to sell energy
− favourable transmission policies
− Federal tax credits and Texas Renewable Portfolio Standards
9
Transmission plays a key role in promoting
the growth of renewable energy
•
Within ERCOT, there is no multistate licensing and permitting
that can often delay project
development
•
No limit to interconnection and a
standard interconnection
agreement – “plug and play”
•
Within ERCOT, all transmission
costs are spread among
customers within the region
•
The PUC is building transmission
to the windiest areas in Texas Competitive Renewable Energy
Zones (CREZ)
•
From the perspective of network upgrade needs,
there are generally 4 sets of potential CREZs:
PANHANDLE
ABILENE
AREA
MCCAMEY
AREA
The “Wild West of Open Access”
COASTAL
10
Transmission CREZs in Texas
•
TX PUC approved Competitive Renewable Energy Zones that will be able to
accommodate 18,456 MW of renewable energy by 2017
•
PUC selected the lowest cost scenario, estimating total transmission cost at
$4.93 bn. Does not include .8 billion in estimated generator connection costs.
•
PUC estimated savings of $38 per MWH relative to other scenarios.
•
Study found that 23% wind penetration could be managed reliably by ERCOT.
•
The impact of the decision is significant: Wind developers have confidence that
grid capacity and operations will not be a barrier to development.
11
Conclusion
• TX PUC decision on Grid development provides a useful example of
how regulators can support renewable energy.
• However, one reason this approach may work in Texas is due to the
relative ease of building transmission lines.
• Approach may not be possible in other jurisdictions.
12
Additional Slides
13
Texas electricity market structure
•
Texas spans four regional power grids
•
85% of usage occurring in the Electric
Reliability Council Of Texas (ERCOT) grid
•
ERCOT lies solely within the state so the
production and sale of electricity is not
subject to regulation by the FERC
•
Market and utility restructuring began in
2001, with implementation of Texas Senate
Bill 7
•
Transmission, generation and competitive
retailers were unbundled into separate
market segments
14
Electricity market structure in ERCOT
Generation
companies
Transmission
& distribution
utility
Retail
electricity
providers
End user
REP
REP
REP
• Market prices
subject to ERCOTISO and PUC rules
• Regulated by the PUC
• Open access
• Unregulated rates
15
Texas wholesale electricity pricing history
Average all-in price for electricity in ERCOT
2003-2007
$/MWh
Natural gas price ($/MMbtu)
Ancillary services
Uplift
Energy
Natural gas price
2003
2004
2005
2006
2007
Source:2007 State of the market report for the ERCOT wholesale electricity markets
16
The retail electricity market in Texas
•
Most Texas residents have a
choice in their Retail Electricity
Provider (REP)
•
There are a proliferation of
consumer offerings for all types of
customer (industrial, commercial
and residential)
•
Prior to restructuring, only a
fraction of such offerings existed
Some of the REPs serving Houston
17
Transition incentives are
needed for new technology
• Carbon price “funnel”
•
CO2 price
•
$/t
80
70
60
50
40
•
Where cost of
abatement
technology is
greater than the
carbon price, there
is a need for
transition incentives
to drive investment
30
•
•
Carbon price
•
Wind
Solar
Longer term CO2 price
driven by economics of
supply and demand, and
fiscal regime
20
10
0
2008
2012
2016
2020
2024
2028
•
Year
* Solar costs reflect combination of rooftop PV and CSP costs, weighted average across regions. Wind cost is
onshore weighted average across regions
18
Incentives can accelerate maturity
TRANSITIONAL INCENTIVES
CapitalProductionbased
based (MWh ) + trading
e.g. capital
grants, inv tax
credits
R&D
Solar
nano
CARBON PRICING (CO2 tonnes)
Cap-and-trade
programs,
carbon taxes
e.g. feed-ine.g. RO, RPS
tariffs, prod tax
credits
H2 power with CCS
Solar PV
Demo.
Offshore wind
Deployment
Onshore wind
Gas power
Commercialisation
Tech
Cost
Time
19
Transmission constraints in Texas
•
Large distances between wind resources and load centres
•
The grid is increasingly congested.
− The PUC is reviewing the move to a nodal marketplace from a zonal one
− New transmission infrastructure is being added
Nodal market
Zonal market
Northeast
North
West
South
Houston
Commercially
Significant
Constraint (CSC)
20