Transcript PPT

Affordable Electricity
Stable Energy Pricing
Increasingly Clean
Coal Can Do That!
November 30, 2006
Illinois Regulatory
Policy Studies
Conference
Jacob Williams
Vice President
Generation Development
Peabody Energy
1
World’s Largest Coal Company:
Peabody’s Base Portfolio of Operations
2005
Market
Position Sales Reserves
Wyoming PRB
Midwest
Southwest
Colorado
Appalachia
Australia
Venezuela
#1
#1
#1
#1
#6
#5
#1
126
38
18
11
14
30*
7
3,327
4,174
980
252
584
817*
175
St. Louis
Dominion
Terminal
Port of
Santa Cruz
Millions of short tons
Queensland
New South Wales
Dalrymple
Bay Terminal
Port of
Gladstone
Port of
Brisbane
Venezuela
Port of
Newcastle
Port Kembla
• Pro forma including Excel (and operations in development).
2005 sales volume in millions of short tons. Venezuela sales volume for Paso Diablo Mine, of which Peabody owns a 25.5%
interest. Reserves based on 2005 proven and probable for areas shown. Source: Peabody analysis & industry reports.
2
Global Coal Use Soars 23%,
or 1 Billion Tons, in 4 Years
Four-Year Percent Change in Global Energy Consumption
2001 - 2005 Change
Nuclear
4%
8%
Oil
Hydro
12%
Natural Gas
12%
Coal
0
23%
5
10
Source: BP Statistical Review of World Energy, 2006 edition.
15
20
25
3
Developing Countries Will Greatly
Expand Per-Capita Energy Use
Electricity Usage per Capita
Passenger Vehicles per Capita
600
15,000
Italy
Passenger Vehicles per 1,000 People
USA
Kilowatt-hours per Capita
12,000
Australia
9,000
South Korea
Russia
6,000
UK
Italy
Malaysia
3,000
Mexico
Australia
South Korea
450
UK
USA
300
Malaysia
Russia
150
Mexico
China
India
0
0
India
China
0
10,000
20,000
30,000
40,000
0
GDP per Capita (in US$)
10,000
20,000
30,000
40,000
GDP per Capita (in US$)
Per-Capita Coal Use Just 1/3rd (China) and 1/9th (India) the U.S. Level
Source: United Nations’ Human Development Report 2005, World Energy Outlook & ConocoPhillips.
4
Developing Regions Drive Energy
Consumption Growth
Total Primary Energy Consumption by Region
Quadrillion Btu
700
600
122.5% Growth
from 2002
500
400
300
37.7% Growth
from 2002
200
100
0
2002
2010
2015
2020
2025
Western Europe
Japan/Australia/New Zealand
North America
Former USSR / Eastern Europe
Latin America
Rest of World
Emerging Asia
5
Like Oil, Natural Gas Supplies
Rely on High-Risk Regions
Most Gas Reserves Are in the Middle East and Asia
6
High Oil & Gas Prices
Magnify Coal’s Competitive Advantage
Prairie State Advantage
Significant Reduction of Delivered Fuel Cost Volatility
Electricity Generator Delivered Cost / mmBtu
$14
$12
NYMEX
Residual Fuel Oil (Conv.)
Natural Gas
$10
$8
NYMEX
Henry Hub Futures
$6
$4
Residual
Fuel Oil
Coal Deliveries
$2
$0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Delivered cost of fossil fuel at steam electric utility plants.
Source: Platts Fossil-Fuel Receipts at Steam-Electric Utility Plants through November 2005. EIA February 2006 Short-Term Energy Outlook,
December 2005 – December 2006. NYMEX HH Futures November 2007 – December 2011, ino.com on October 17, 2006.
2010
2011
7
Gas/Power Procurement:
Timing is Everything
Calendar 2007 Henry Hub Gas Price
13.000
Daily Average 2007
Henry Hub Price
Illinois Power
Procurement Date
12.000
Daily Maximum 2007
Henry Hub Price
11.000
10.000
9.000
8.000
Daily Minimum 2007
Henry Hub Price
7.000
Nov-06
Oct-06
Sep-06
Aug-06
Jul-06
Jun-06
May-06
Apr-06
Mar-06
Feb-06
Jan-06
6.000
2007 Gas Prices Drop Over $1.00/mmbtu ($7–8/MWh) after Auction
8
Gas/Oil Set Electric Market Price
Almost 50% of the Time
% Hours Gas/Oil Generation Marginal Fuel
Wood MacKenzie North American Power Outlook: 2006-2026, August 2006.
9
Over 51% of U.S. Electricity is from Coal
Source of Low Cost Electricity in U.S.
Retail Cost Per kWh & Percent of Coal Generation
6.0¢
10%
6.5¢
7%
5.0¢
1%
5.2¢
96%
9.5¢
46%
12.9¢
1%
¢ = average retail price
per kilowatt hour
through 8/06
12.11¢
2%
6.0¢
95%
6.7¢
65%
7.0¢
63%
8.2¢
39%
7.8¢
72%
7.4¢
89%
7.2¢
48%
7.0¢
75%
7.5¢
53%
10.4¢
38%
% = percent of total
generation from coal
for CY 2005
8.4¢
58%
7.1¢
78%
6.1¢
67%
6.1¢
96%
8.1¢
70%
6.7¢
46%
6.5¢
85%
6.5¢
94%
7.7¢
87%
8.7¢
56%
5.0¢
98% 6.9¢
45%
5.5¢ 91%
7.5¢
61%
7.0¢ 61%
6.9¢
49%
8.4¢
37%
7.1¢
57%
6.9¢
39%
7.8¢
65%
8.3¢
25%
10.4¢
28%
12.8¢
10%
Source: Energy Information Administration, November, 2006.
20.9¢
14%
< 6.5¢
> 6.5¢ - < 8.0¢
> 8.0¢ - < 9.5¢
> 9.5¢ - < 11.0¢
> 11.0¢
Hydro
NH
VT
MA
RI
CT
NY
NJ
DE
MD
14.0¢
11.4¢
15.6¢
14.1¢
14.5¢
13.8 ¢
12.0¢
9.2¢
9.8¢
17%
0%
25%
0%
12%
14%
19%
60%
56%
10
Coal-Based Electricity Increased 80%
Since 1980 While Emissions Improved
Reductions Continue with Existing Plants
actual
Source: U.S. Environmental Protection Agency, IEA Annual Energy Outlook 2005.
forecast
11
Prairie State
Low-Cost, Low Emissions Energy
Cleanest Coal plant in Illinois if On-line Today
1
0.93
Pounds Per Million Btu
0.9
0.8
0.7
Sulfur Dioxide
Nitrogen Oxide
0.63
0.6
0.5
0.4
0.39
0.32
0.3
0.26
0.26
0.2
0.16
0.182
0.13
0.1
0
U.S.
Average
2005
Illinois
Average
2005
Clean Air
Interstate
Rule
2010
Clean Air
Interstate
Rule
2015
0.07
Prairie State
Permit Limit
Source: EPA National Air Markets Program; EIA Annual Review 2005
12
Prairie State Energy Campus
New Low-Cost, Clean Coal Generation
Prairie State Energy Campus
Washington County, Illinois
− 40 miles Southeast of St. Louis in
Illinois
− 1,600 MW supercritical generating
plant fueled by 6+ million ton/year
adjacent mine
− Received all permits needed to
operate plant
− Cleanest coal plant in Illinois and
15% more CO2 efficient than
existing coal fleet
− 53% of project owned by a group
of Midwestern municipals and
cooperatives
− Additional 30% of ownership is
committed CMS and Peabody
− Average 2,000 construction jobs
over 4 years and 450 long-term
jobs
− Targeting generation in the
2011 timeframe
13
Prairie State Partners Serve
Nearly 2 Million People In 5 States
1. Wolverine Power Supply
Cooperative, Inc.
–
–
Abbreviation: WPSC
400,000 people served
2. Northern Illinois Municipal
Power Agency
1
–
–
Abbreviation: NIMPA
52,000 people served
3. Missouri Joint Municipal Electric
Utility Commission
2
–
–
4
5
Abbreviation: MJMEUC
800,000 people served
4. Soyland Power Cooperative, Inc.
–
–
Abbreviation: Soyland
156,000 people served
5. Indiana Municipal Power Agency
–
–
3
6
Abbreviation: IMPA
340,000 people served
6. Kentucky Municipal Power
Agency
–
–
Abbreviation: KMPA
54,000 people served
14
Transmission Enhancements Needed to
Access Broader Electricity Market
Legend:
Coal
Natural Gas
7
Only 1 HV
Transmission
Path Connecting
Northern to
Central/Southern
Illinois
2
10
1
3
5
8
Prairie
State
9
6
1
6
Nuclear
Existing HV
Transmission Lines
Potential HV
Transmission Lines
Existing HV
Transmission Path
Potential HV
Transmission Path
4
15
Potential Improvements in Illinois Electric
Procurement Process
● Enhance transmission into the State and within the State to allow:
– More out-of-state generation to bid in to Illinois auction
– More generation within Illinois to bid Intrastate (North to South and
South to North)
– Few bids from out-of-state low cost generators (AES IPL, Associated
Electric, Cinergy, EKPC, KCP&L, LGE, MidAmerican, NIPSCO &
Vectren)
● Portion of power could be purchased on much longer term (10 –
20 years) basis to foster new, very clean coal and renewable
resource competition
– Old coal and nuclear units could never had been built with 3 year
contracts
● Procure power at different times throughout the year to avoid
potentially buying all at an absolute or relative peak price period.
● Procure power in “natural” generation abilities, not just full
requirements. More generators able to compete.
16
Peabody Participating in Multiple
Btu Conversion Opportunities
Gasification
(Industrial or Pipeline)
● 30% ownership in
Econo-Power International
● PRB and Illinois Basin
coal transformed into lowBtu gas
● Cost effective at
$5 to $6/mmBtu
●
●
●
Liquefaction
Hydrogen
● Peabody part of
FutureGen Industrial
Alliance
● High gas prices point to
Agreement with Arclight
need for coal-to-liquids ● Goal: Generation and
to evaluate Illinois
hydrogen; near-zero
●
Coal-to-liquids
at
location for pipelineemissions; CO2
$35 – $40/barrel oil
quality gas
sequestration
ConocoPhillips and Fluor ● Peabody partnership
participating in
with Rentech for coal to ● Alliance includes
Southern Company,
technology and plant
liquids plant
design
AEP, Huaneng
Pipeline-quality natural
● $700 million from
gas competitive as low as
DOE; $250 million
$6 per mmBtu
17
from industry
Planned “Coal to Diesel” Plant
in Inner Mongolia, China
Steps to Achieve
Affordable Energy and Increasing Clean
● Coal-based generation and Btu conversion projects must
play a major role to provide affordable energy in the US
● Lead times on these projects from conception to
completion are 6 – 10 years and significant resources
($10 – 20 M during permitting)
– Require predictable permit and appeal timelines
● Capital intensive investment (multiple billions) with asset
life of 30 – 40 years
– Require implicit (ratebase) or explicit long term contracts to
finance
● Coal-based generation and Btu conversion projects are
part of the solution to an increasingly clean environment.
18