This slide shows that nationally we not really increased green generation over the last 15 years. We’ve stayed roughly even. But virtually every day you read about new wind or solar development. And it’s true. American Energy Wind Association (AWEA) says that the U.S. added an impressive 5,244 MW of new wind capacity in 2007, more than double that added in 2006, also a record year. U.S installed wind now is ~17,000 MW But as a percentage of total generation, we barely moved the blades, so to speak. Wind to total U.S. generation was just 0.6% in 2006 and 0.8% in 2007. And, for all but wind generation, the growth of renewables has had a negligible impact on U.S. power supply over the past 15 years. Based on existing RPS through 2015, we think that about 6,000 MW of new renewable capacity come on line each year to meet the 2015 targets.
The cost of RPS comes down to the cost of conventional versus renewable generation—the wedge between the two over time. This slides show cost data for different types of generation costs from May 2008 (already arguably out of date) without: 1) PTC 2) transmission 3) carbon regulation Point is, that with nuclear 10 years out and coal on hold, you’re really looking at the cost of gas versus wind. And while at $7 gas you’re getting close, this does not factor in cost to get wind to load or integration (back up power) because wind is intermittent. On the other hand, also does not consider benefit of PTC. LBL said 2006 wind prices were only marginally competitive with wholesale power prices—and likely to be uncompetitive in 2007. And when you look at cost of conventional technologies versus solar there is clearly a gap. So we would think RPS will cost something to implement. Yet when you review studies, they predict little cost impact. LBL study of 26 studies for 18 states with RPS. 70% found that rate impacts of meeting standard in the last year are less than 1%.
EIA April 15, 2008 slide by Howard Gruenspecht (Deputy Administrator) EIA April 15, 2008 slide by Howard Gruenspecht (Deputy Administrator)
NARUC Staff Subcommittee On Accounting & Finance Fall 2008 Meeting Credit Implications in Renewable Portfolio Standards Compliance Richard W. Cortright, Jr. Managing Director Utilities and Infrastructure Group October 15, 2008
Construction Cost Growth Well Above General PPI Growth Source: The Associated General Contractors of America, July 2008 All= 100 in 12/01
Investor-Owned Utility Credit Ratings --- Then And Now
At The Beginning Of The Last Major Generation Construction Cycle In Which Utilities Were The Principal Participants (The 1970’s), The Senior Debt Ratings Of Most U.S. Investor-Owned Were In The ‘ A’ and ‘AA’ Category. They Were Well Positioned For What Was To Come. Today, In Advance of A Major Capital Expenditure Period, The Ratings of Companies Engaged in Power Generation Are Significantly Lower… In the ‘BBB’ Category, And Frequently Weaker.
U.S. Power Industry Ratings Distribution ***Includes merchant generation and independent power companies ( e.g. Constellation Energy, AES)
The Feasibility Challenge of Renewable Portfolio Standards
Pronouncement By International Electric Executives
"Climate Strategies Must Be Compatible With Market Economies, Deliver Timely And Economically Efficient Greenhouse Gas Reductions And Establish A Long-term Carbon Reduction Value That Is Moderate, Does Not Harm Local Economies And Stimulates Future Investments In Zero- And Low-Carbon Emission Technologies And Processes. It Is Vital That Effective Economic Safeguards Are Incorporated In These Strategies To Limit The Potential Impacts Of Carbon Policy On Jobs And Economic Growth.“
--- Statement By The 2008 International Electricity CEO Summit
A Big Upswing in Renewables Will Be Unprecedented
Placing A Value On GHG Through Either A Tax Or A Cap-and-trade Program Has A Relatively Large Impact On The Delivered Price Of Coal. This Reflects Both The Substantially Lower Price Of Coal Relative To Other Fossil Fuels Under Baseline Conditions And Its Higher Emission Of Co 2 Per Unit Of Energy
Yet, A $25/Ton Value On CO 2 Raises Gasoline Prices By Only About 23 Cents Per Gallon .
*April 2008 **.124 mmbtu/gallon of gasoline
22.5 2.65 4.5 0.53 11.75 0.053 Gas 13 3.70 2.6 0.74 28.05 0.074 Oil** 259 4.70 51.9 0.94 1.81* 0.094 Coal percent $ percent $ Impact of $50 per ton CO 2 value Impact of $10 per ton CO 2 value Delivered Price (June 2008*, all sectors, per million Btu) CO 2 content per million Btu Fuel
“ If The Current Financial Crisis Is Not Resolved Quickly, Financial Pressures On Utilities Will Intensify Sharply, Resulting In Higher Costs To Our Customers And, Ultimately Could Compromise Service Reliability.”
“ In light of the uncertain market environment, we made this proactive financial decision to increase our liquidity and cash position, and to bridge our access to the debt capital markets. This improves our flexibility as we continue to execute our business plans.”
David Hauser, CFO Of Duke Energy , referring to decision to draw down $1 billion on September 30 from its Bank Credit Agreement
AEP drew down $1.4 billion under its existing credit facilities on october 8 “to increase its cash position while there are disruptions in the debt markets. The borrowings provide AEP flexibility and will act as A bridge until the capital markets improve.”