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Building a Resilient Coast is Vitally Building a Resilient Coast is Vitally Important Even in Today's Important Even in Today's ClimateClimate
The Future of the Gulf Coast – The Future of the Gulf Coast – Adapting to Environmental VulnerabilityAdapting to Environmental Vulnerability
October 20, 2010 October 20, 2010
Rod West Rod West Executive V.P. & Chief Administrative OfficerExecutive V.P. & Chief Administrative Officer
22
We have three choices: We have three choices: mitigationmitigation, , adaptationadaptation and and sufferingsuffering. We’re going to do some of each. . We’re going to do some of each.
The question is what the mix is going to be?The question is what the mix is going to be? Dr. John Holdren, Science Advisor to President ObamaDr. John Holdren, Science Advisor to President Obama
Adaptation is substantially more expensive than mitigation Adaptation is substantially more expensive than mitigation
Adaptation without mitigation is just a band aid not a solutionAdaptation without mitigation is just a band aid not a solution
Real adaptation by itself is so expensive (and endless) that it is Real adaptation by itself is so expensive (and endless) that it is almost impossible to imagine that the U.S. taxpayer would fund it.almost impossible to imagine that the U.S. taxpayer would fund it.
The goal should be to choose a mix that minimizes the sum of The goal should be to choose a mix that minimizes the sum of mitigation, adaptation and suffering costsmitigation, adaptation and suffering costs
Even with today’s climate we need to invest in a more resilient coastEven with today’s climate we need to invest in a more resilient coast
33
Coasts are already experiencing hazards Coasts are already experiencing hazards related to climate and sea level rise related to climate and sea level rise
(very high confidence)(very high confidence)
The Business Case
As a company serving the Gulf Coast, Global Climate Change effects put at risk:
• Our customer base
• Welfare of our employees, their families and our communities
• Billions of dollars of investment
18391839 18701870
19931993 20202020
Louisiana coast line loses 24 square miles a year.
44
Coasts will be exposed to increasing risks over Coasts will be exposed to increasing risks over coming decades due to many compounding coming decades due to many compounding
climate change factors (very high confidence)climate change factors (very high confidence)
Rise in sea level of 1.0 m Rise in sea level of 1.0 m by 2100;by 2100;
Rise in sea surface Rise in sea surface temperature 3temperature 3ooC;C;
Intensified stormsIntensified storms Storm Surge Storm Surge
(Cat 3 = 3-4m);(Cat 3 = 3-4m); Subsidence 1.0 m by 2100Subsidence 1.0 m by 2100
7/21/20067/21/2006 55
Recent Recent hurricanes put hurricanes put a face on what a face on what life will be like life will be like
if we fail to if we fail to address address Climate Climate ChangeChange
66
Areas Impacted by StormsAreas Impacted by StormsEntergyNuclear
Utility
Hurricane Rita Category 3
HurricaneKatrina Category 4
77
New Orleans Times PicayuneNew Orleans Times Picayune
88
Levees Broke and Floodwaters Levees Broke and Floodwaters Inundated New Orleans and VicinityInundated New Orleans and Vicinity
Katrina Storm Surge Approaches Entergy’s Michoud Plant
Post-Katrina Flooding in New Orleansand Surrounding Areas
Photo by Entergy’s Michoud plant manager Don McCroskey
99
ETR restoration costs ~ $1.5 billion for Katrina & Rita. ETR restoration costs ~ $1.5 billion for Katrina & Rita. Katrina – 1.1 million left without powerKatrina – 1.1 million left without power, ,
800,000 Louisiana outages
Over 300,000 Mississippi outages
1010
•1.87 million total electric customers
•145,000 gas customers
•28,900 Distribution Poles replaced
•522 Transmission lines out of service
•29 Fossil / 1 Nuclear units Shutdown
Scope of Restoration
1111
Katrina’sKatrina’s unique challenges…unique challenges… Corporate HQ evacuatedCorporate HQ evacuated
Employees’ homes destroyedEmployees’ homes destroyed
Resources pre-dedicated to FloridaResources pre-dedicated to Florida
Security threats in New OrleansSecurity threats in New Orleans
Flooded gas facilitiesFlooded gas facilities
Contractors’ bankruptcy fearsContractors’ bankruptcy fears
Inoculations for workforceInoculations for workforce
Severe substation floodingSevere substation flooding
Communications knocked outCommunications knocked out
Massive scale/logistics challengeMassive scale/logistics challenge
Gasoline/Diesel shortagesGasoline/Diesel shortages
InaccessibilityInaccessibility
DOE/DHS coordination & reportingDOE/DHS coordination & reporting
1212
……andand Rita’sRita’s challenges.challenges. Second worst storm in company’s Second worst storm in company’s
history - 800,000 outageshistory - 800,000 outages
Massive damage to transmission Massive damage to transmission system; generation plants damaged & system; generation plants damaged & isolatedisolated
Three days of rolling blackouts for Three days of rolling blackouts for 142,000 Texas customers142,000 Texas customers
Exhausted workforceExhausted workforce
Another huge logistical challengeAnother huge logistical challenge
Material shortages following KatrinaMaterial shortages following Katrina
Continued coordination with DOEContinued coordination with DOE
Texas PUC “Tiger Team”Texas PUC “Tiger Team”
1313
What is at StakeWhat is at Stake
1414
What are the Physical Risks?What are the Physical Risks? Damage to power plants, T&D system & Operation Centers Damage to power plants, T&D system & Operation Centers
from more frequent, intense storms & flooding;from more frequent, intense storms & flooding;
Where will the load be and how muchWhere will the load be and how much
Disruptions in supply chain from storm events;Disruptions in supply chain from storm events;
Availability of insurance & cost;Availability of insurance & cost;
Loss of customer base and employees from fear of future Loss of customer base and employees from fear of future storm damage;storm damage;
Reduced economic well being of the area from investments Reduced economic well being of the area from investments needed to adapt to climate change;needed to adapt to climate change;
1515
New Orleans skyline
Going forward, the risk we face is just going to increase, Going forward, the risk we face is just going to increase, given economic growth, subsidence and climate changegiven economic growth, subsidence and climate change
1 Represents cumulative of average expected losses between 2010 and 2030 2 Asset value (replacement cost) for New Orleans buildings are $60 bn
SOURCE: Swiss Re; Moody’s; FEMA; MMS; EIA; OGJ; Wood Mackenzie; Energy Velocity; team analysis; others
To place this in context, To place this in context, ~$370 bn could be used to ~$370 bn could be used to reconstruct New Orleans reconstruct New Orleans buildings six times overbuildings six times over22
2010 – 2030 cumulative losses
2010-20302010-2030
Extreme Extreme
changechange387387
2010-20302010-2030
Average Average
change change 370370
2010-20302010-2030
Today’s Today’s climateclimate 345345
Cumulative annual expected lossesCumulative annual expected losses
$ Billions; 2010 dollars$ Billions; 2010 dollars
1616
A set of resilience measures needs to be deployed, based on their A set of resilience measures needs to be deployed, based on their cost/benefit characteristicscost/benefit characteristics
Cost per unit of benefit(Dollars)
Loss averted, 2030
Cost-benefit ratios calculated based on discounted present value estimates—MERELY ILLUSTRATIVE- OF C/B
Actions below 1 $/$ line on the y axis provide net economic benefits (benefits refer to loss averted)
Reduction of the expected loss in 2030, by countering the effects of climate risk
1
0
1717
A large range in cost-benefit assessments exists for the potential portfolio A large range in cost-benefit assessments exists for the potential portfolio of measuresof measures
Note: Costs and benefits refer to net present values
Build all new residential Build all new residential buildings with 110-mph rated buildings with 110-mph rated shingles, applied with adhesive shingles, applied with adhesive strips strips
Improved roof cover, new builds C/B ratio: ~0.3 Cost: $340 M Benefit: $990 M Homes affected: 1.7 M
Increase vegetation Increase vegetation management cycle frequency management cycle frequency and remove hazard treesand remove hazard trees
Vegetation management, distribution
C/B ratio: ~1.0 Cost: $470 MM Benefit: $480 MM Miles affected: 51,000
All existing residential homes in All existing residential homes in the most flood-risk counties are the most flood-risk counties are elevated 10 ftelevated 10 ft
Home elevation, retrofits C/B ratio: ~5.5 Cost: $6.3 Bn Benefit: $1.2 Bn Homes affected: 123,000
1818
Residential/ Residential/ commercialcommercial
11 Building codesBuilding codes
Oil and gasOil and gas
66 Floating production Floating production systemssystems
77 Replacing semi-subs Replacing semi-subs with drill shipswith drill ships
88 Levees for refineries, Levees for refineries, petrochemical plantspetrochemical plants
Infra-Infra-structure/ structure/ Environ-Environ-mentalmental
33 Wetlands restorationWetlands restoration11
22 Beach nourishmentBeach nourishment
44 Levee systemsLevee systems11
Electric Electric utilityutility
99 Resilience of electric Resilience of electric utility systemsutility systems
0.40.4
0.10.1
1.41.4
7.57.5
1.31.3
0.70.7
0.50.5
1.11.1
1.71.7
0.30.3
Loss averted, 2030$ Billions
And there are some key near term actions to protect our region – that are And there are some key near term actions to protect our region – that are cost effective, and will help our economy and our environmentcost effective, and will help our economy and our environment
1 Included despite high C/B ratios due to strong co-benefits, risk aversion2 Total capital investment, non-discounted, across 20 years
55 Improved standards Improved standards offshore platformsoffshore platforms
TotalTotal
C/B ratioC/B ratioxx
0.70.7
1.31.3
1.61.6
0.70.7
0.50.5
3.33.3
0.70.7
3.83.8
0.90.9
CapEx required2
$ Billions
Public fundingPublic funding
Private fundingPrivate funding
1818
2525
11
1212
1211214444 7676
1515
55
1111
1818
1616
1919
Implementing these key measures will require leadership and Implementing these key measures will require leadership and coordination across stakeholderscoordination across stakeholders
Engagement that would need to occurEngagement that would need to occur
1.7 million new buildings1.7 million new buildings affected affected 3.2 million buildings retrofitted3.2 million buildings retrofitted Includes Includes stronger roof covers and roof wall connectionsstronger roof covers and roof wall connections
~230 miles~230 miles of beach nourishmentof beach nourishment ~1000 square miles of wetlands~1000 square miles of wetlands restored restored ~120 miles of levees~120 miles of levees
▪ 102 levees 102 levees to protect refineries and petrochemical plantsto protect refineries and petrochemical plants
▪ 19 FPSOs 19 FPSOs deployeddeployed
▪ 2.2 MM of boe in new offshore production 2.2 MM of boe in new offshore production capacity developed using capacity developed using higher specificationshigher specifications
~540,000 miles ~540,000 miles of new, rebuild or retrofitted resilience of new, rebuild or retrofitted resilience distribution linesdistribution lines
~1,600 miles ~1,600 miles of new, rebuild or retrofitted resilienceof new, rebuild or retrofitted resilience transmission lines transmission lines
Increasing vegetation management Increasing vegetation management
1 Total capital expenditure, non-discounted, across 20 years
FOR DISCUSSIONFOR DISCUSSION
Residential/Residential/
Commercial Commercial
$12 bn in CapEx$12 bn in CapEx11
Infrastructure/ Infrastructure/
Envionmental Envionmental
$44 bn CapEx$44 bn CapEx11
Oil and gas Oil and gas
$50 bn CapEx$50 bn CapEx11
Electric utility Electric utility
$15 bn CapEx$15 bn CapEx11
2020
In order to implement these measures, significant leadership In order to implement these measures, significant leadership and coordination will be required across stakeholdersand coordination will be required across stakeholders
Remove barriers and encourage adaptation measures (e.g., Remove barriers and encourage adaptation measures (e.g., building codes, streamlined permitting, expand jobs and economic building codes, streamlined permitting, expand jobs and economic productionproduction
Fund/accelerate key adaptation projects (e.g., wetlands restoration, Fund/accelerate key adaptation projects (e.g., wetlands restoration, beach nourishment)beach nourishment)
Identify and start putting in place key economic measures for Identify and start putting in place key economic measures for resilienceresilience
we have taken a leadership role on the mitigation issue -- congress, regulators
we plan to take a leadership role on resilience/adaptation.......
Overall coordination (e.g., multi-stakeholder working group to lead Overall coordination (e.g., multi-stakeholder working group to lead and encourage better coordination across stakeholders)and encourage better coordination across stakeholders)
THOUGHT THOUGHT
STARTERSSTARTERSPolicymakersPolicymakers
Private sectorPrivate sector
AllAll
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Resilience vs. Suffering?It’s our choice to make
The Clarion-Ledger, Jackson, MS