Transcript 2005 Overview - Electric Power Supply Association

GETTING ENOUGH COAL: MORE THAN A THREE LEGGED STOOL
DAY ONE KEYNOTE: NOVEMBER 2, 2006
COAL NEEDS POWER COMPETITION TO SUCCEED
John E. Shelk
President and CEO
Electric Power Supply Association
www.epsa.org
What is EPSA?
• The national trade association of competitive power sector
• Advocacy programs in regulatory, legislative and public
affairs
• Emphasis on federal developments, team with state and
regional partners
• Focused on core mission of a successful competitive
power sector to better serve customers
• Bright outlook for the sector; strategies will vary by region
Role of Competitive Power Sector
• Nearly 40% of installed generating capacity
• One-third of net electricity generation
• Competitive sector built almost all new generation since
early 1990s – primarily natural gas
• New generation was largely at supplier’s risk, not at
ratepayer expense
• Improved operating results at plants acquired through
restructuring – coal and nuclear
Competitive Power’s Fuel Diversity
Coal
Natural Gas
Nuclear
Renewables
Other
36%
27%
27%
5%
5%
EIA Electric Power Annual (2005 data)
(Released October 2006)
Overview
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Next Wave of Power Generation
Buy v. Build Debate is Joined
FERC and Coal – Bypass Railroads?
Coal and the Environment
Coal and New Technologies
Public Policy Implications
Next Wave of Power Generation
• EIA Annual Outlooks: 40-50% increase in demand by 2030
(174 GW from coal out of 350 GW in the base case)
• GAO: 36% increase in demand by 2025
• GE Financial Energy Services: $250 billion to add 150,000
MW by 2025
• Crunch starts 2008-2012, not at end of the 20-year forecast
period
• How to meet demand is up for grabs - Fuels
• Who will meet demand is also up for grabs
Causes for Concern – February 2006
Reports Should Be Sobering
• FERC:
– 17,000 MW added in 2005, 25% below the 2004 level
– Additions in 2005 down 75% from peak of 2002
– 2005 still greater than in 14 out of the previous 20 years
– Additions likely in 2006 will be roughly half of the 2005
level
(Staff presentation, February 16, 2006)
Causes for Concern – February 2006
Reports Should be Sobering
• CERA:
“The U.S. power business is at the point where plans for
new supply need to be addressed. Assuming all power
plants currently under construction and half of those
under development are eventually completed, less than
half the new capacity needed over the next ten years
will come online.”
(Press Release, February 9, 2006)
NERC 2006 Long Term Assessment
• Demand up three times supply (2006-2015): 19 percent
(141 GW) v. 6 percent (57 GW)
• Importance of “uncommitted” resources: projected double
to over 100 GW
• Transmission miles increasing only 7 percent
• Fuel supply, delivery and electric generation
– gas-fired capacity half of new plants (2006-2015)
– coal delivery an issue 2005-06, but improving
– NERC/RROs review of fuel and reliability
(Released October 2006)
Buy vs. Build Debate is Joined
• Self-build: only rate-base can do new coal and nuclear
• Competitive suppliers are fuel diverse
• Case for competitive suppliers is compelling – risk transfer
• Importance of competitive procurement – debt equivalency
as key issue
• Clock is ticking – already late on next building phase
• Must make regulatory decisions to reduce uncertainty
FERC and Coal – Bypass Railroads?
• June 15, 2006 FERC Discussion/Conference
• Order 888 Open Access Reform
• Transmission Investment Incentives
• Transmission Siting – DOE corridors, FERC back
stop
Coal and the Environment
• CAIR and CAMR compliance costs
• New Source Review – Congress and courts
• Climate Change – Congress, courts and states
• Coal Production Issues
Coal and New Technologies
• New technologies are key to coal’s future
• New technologies are costlier and riskier
• Generally rising cost environment for all generation
• Backlash from cost overruns would hurt coal
Public Policy Implications
• Wholesale market design issues – new generation
• Competitive procurement issues – control costs
• Harmonize energy and environmental issues
• Building coalition partners on all issues