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Energy Realities Facing the United States. Frank Clemente Ph.D. Senior Professor of Social Science & Energy Policy Penn State University [email protected]. 1. 1. 2. Five Basic Premises. Worldwide growth in energy demand is unprecedented and will continue for decades - PowerPoint PPT Presentation
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111
Energy Realities Facing the United States
Frank Clemente Ph.D.Senior Professor of Social Science & Energy PolicyPenn State [email protected]
22
Access to Electricity and the Quality of Life
Survive Childhood
LiveLonger
DrinkCleaner Water
EatBetter
Are BetterEducated
Under Five Death Rate/1000
Life Expectancy (years)
Access to Improved Sources
(%)
Under Nourished(%)
Literacy Rate (%)
People in Societies with Greater Access to Electricity:
333
Five Basic Premises
• Worldwide growth in energy demand is unprecedented and will continue for decades
• Coal is the main energy source able to meet this demand in terms of scale, time, reliability, cost and versatility
• Coal conversion to electricity, liquid fuel and NG equivalents can greatly alleviate supply problems
• Carbon capture and storage (CCS) is the technological pathway to the full potential of coal
• The U.S. should rapidly develop CCS and make it available, affordable and deployable to the global community –this is the moral energy issue of our time
444
Two Different Worlds
● “There is no such thing as clean coal” – National Resources Defense Council.
● When asked how China would ever meet the growing demand for electricity, liquid fuel and NG, Du Minghua, Director of the Beijing Research Institute replied: “Coal is the solution to all three”.
55
Out of Poverty: Coal Based Energy has Propelled China Forward
0
1,094
534
Source: IEA, 2007; EIA, 2008
Note: Poverty measure follows World Bank Definition of $1 per day income
“China is an example for the developing world” IEA, 2007
66
India’s Rapidly Emerging Demand for Electricity
Millions of People in India Toil in An Bleak World
Removal of poverty is the greater immediate imperative than global warming” P. Ghosh, Secretary of the Environment, India
77
17.1%
0.5% 0.6% 0.8%
10.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Population (1.15 Billion)
Oil NG Uranium Coal
% o
f W
orl
ds
Pro
ved
Res
erve
sCoal is India’s only Energy Advantage
India’s Share of the World’s Energy Reserves
“Coal is expected to be the mainstay of power generation in the years to come” India’s 11th Five Year Plan (2007-2012)
8888
Steady Drumbeat Of Electricity Demand Across the World
Note: Over 2 billion people do not have adequate access to electricity and 1.6 billion have none at all
0
5000
10000
15000
20000
25000
30000
35000
40000
Bil
lio
n K
ilo
wat
t H
ou
rs
1980 1990 2005 2010 2020 2030
US ROW
99
243
151
8962 53 65
0
50
100
150
200
250
Gig
a w
atts
of
New
Co
al
Bas
ed C
apac
ity
China India OtherAsia
Europe USA ROW
The World Is Turning to Coal
Source: Data Derived from Platt’s Proprietary Database, 2008
China built more coal generation in 2007 than Britain built in its history
101010
Modernization – The Rise of the Automobile
0
50
100
150
200
250
300
350
400
2002 2030
To
tal V
eh
icle
s (M
illi
on
s)
U.S. China India Mexico Brazil
In 2002, there were 812 million vehicles. By 2030 there will be 2.1 billion.
Source (Dargay and Gately 2006)
1111
Everything, Everywhere, All the Time:Increases needed by 2030 to meet demand
● Nuclear power 38%
● Oil production 43%
● Renewable energy 61%
● NG production 64%
● Coal production 74%
12
0
5
10
15
20
25
0
1
2
3
4
5
6
7
8
9
10
1972 1977 1982 1987 1992 1997 2002 2007
dd
d
Cru
de
Oil
Pro
du
cti
on
(m
n/d
)
Oil Production NG
U.S. Oil and NG Production
NG
Pro
du
ctio
n (
Tcf
/y)
Cru
de
Oil
Pro
du
ctio
n (
mm
/d)
131313
WHERE WILL THE ELECTRICITY COME FROM IN THE UNITED STATES?
14
Rising Tide of Electricity Demand in U.S.
Any plan for new generation must account for the pressure of steadily growing demand for electricity
15
The Steady Erosion of Electric Reliability in the United States, 2003-2016
15Number of contiguous states in reliability regions where available
capacity margin meets minimal accepted level -- 15%
By 2016, only one in four states will be in a reliability region meeting
NERC’s minimum acceptable standards
2016
161616
The Danger of Relying on NG for Electricity
1. NG has 4 times the price and 20 times the price volatility of coal
2. Using NG for electricity drives up the price of both electricity and NG for families and businesses.
3. North American NG production may have peaked. If so, LNG imports from risky sources (e.g. Russia, Iran) must balance supply.
17
8%
21%
42%45%
50%53%
55%
67%
0%5%
10%15%20%25%30%35%40%45%50%55%60%65%70%
% o
f E
lect
rici
ty G
ener
atio
n f
rom
NG
PA U.S. OK FL TX MA CA NV
Some States Highly Dependent on NG for Power
1818
This Second “ Dash to Gas” is Real, Risky and Expensive
Source, Platts, 2007
*Note: The Platts survey is the most recent available but does not include many recently proposed NG Plants or many recently cancelled coal plants
19191919
Depletion Sets the Context:Wanted: A New Texas Every Year (6 TCF)
Sources: EIA; EOG; CIBC World Markets
0
2
4
6
8
10
12
14
16
18
20
22
2007 2008 2009 2010 2011 2012 2013 2014 2015
TC
F/Y
- D
ry P
rod
uct
ion
EIA Projected Production Depletion at 32%
New NG
Needed
20202020
The U.S. Bets On A Brave New World
Where new NG supply came from 1993 - 2006
Where new supply is projected to come from
2006-2019
•Source: EIA
“North America is setting itself to import LNG in large quantities” (IEA, 2007)
21
More Global NG Consumption Means Competition: Billions of New Kids on the Block
Source: EIA, International Energy Outlook, 2008
Increases in NG Consumption 2005-2030
“The U.S. is the market of last resort for LNG… we will get the gas Europe and Asia don’t need”-Goldman Sachs, 2008.
22
If Aubrey McClendon is Correct, The U. S. Faces Significantly Higher Electric Rates
● “U.S. natural gas producers can increase supplies by 5 percent a year…there is plenty of natural gas to burn to make electricity”
● “We think gas prices stay in the $9-$11 range…aggressive 35% to 40% first year declines are going to kick in” “An average of $10 is a pretty good price”
● But NG prices have averaged only $6.22 over the past 5 years and electric rates have still increased 27%.
● $10 NG will dramatically increase the cost of NG for electricity as well as the cost of NG for families and business.
23
What $10 NG Would Mean to American Consumers? - $70 Billion Dollars More in Costs
“An average of $10 is a pretty good price” Aubrey McClendon, CEO, Chesapeake Energy, July, 2008
2424
Show Me The Gas: Failed Optimism has surrounded NG
● In 2000---U.S production would significantly increase and lead to $2.58 NG in 2008
● In 2004---LNG imports would significantly increase and lead to $ 3.67 NG in 2008
● In 2008---LNG and shale gas will increase and lead to low cost NG
● But NG prices are still twice as high as predicted just 4 years ago
2525
Systematic Bias: Since 2000, EIA
has:
● Overestimated NG production in 23 of 28 forecasts
● Underestimated NG used for generation in 27 of 28 forecasts
● Underestimated price of NG to generators in 27 of 28 forecasts
See our article in Public Utilities Fortnightly, July, 2007
26
If Boone Pickens is Correct and we are at Peak Oil –The long run price of NG/LNG
Source: "The Relationship Between Crude Oil and Natural Gas Prices," Hartley et. al, Rice University, 2007
Price of W TI Oil in Dollars per Barrel
“Natural gas prices are anchored in a long-term relationship with crude oil prices” Stephen Brown, Federal Reserve Bank of Dallas, 2007
27272727
Coal Is the Cornerstone Of Electricity Generation In The U.S.
1% 2%
7%
19%20%
50%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
U.S
. E
lect
ric
Gen
erat
ion
Oil Renewables Hydro Nuclear NG Coal
U.S. Electric Generation
282828
The Scale Needed to Replace Coal in the U.S.
● NUCLEAR: 250 more reactors ● NATURAL GAS: 17 more Trillion Cubic Feet
● HYDRO: 500 facilities size of Hoover Dam.
The reality of physics is that electricity cannot be stored in large quantities – an inevitable constraint on solar and wind generation.
29
Nuclear Power: Four bottlenecks will significantly delay the construction of new nuclear power plants in the United States
1. High Level Waste management, transportation and
storage
2. Entrenched Opposition at both national and local levels
3. Supply chain issues
(a) availability and cost of fuel,(b) scientific expertise and skilled labor(c) global competition for nuclear grade components
4. Societal inertia, litigation and bureaucratic creep –we have not built a nuclear plant for decades.
30
Bottleneck: Competition with the rest of the world for nuclear grade components, fuel and expertise –we are behind the curve and falling
Source: World Nuclear AssociationNew Reactors which will come online by 2015
31
“Will Weather Provide Reliable Electricity?”
Energy Policy journal, August,2008: Findings from UK wind analysis
1. Wind output can be very low at the moment of
maximum demand.
2. Expect power swings of 70% within 12 hours
3. This volatility will cause backup NG plants to go on
and offline frequently, reducing efficiency and
reliability
4. These reductions will lead to increases in the cost of
electricity and offset environmental benefits
32323232
Wind Generation’s Performance During 2006 California Heat Wave
* Adapted and estimated from Dixon, U.S. DOE (2006)
250 325
89 90 110 113
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
Meg
awat
t P
rod
uct
ion
7/13/2006 7/15/2006 7/17/2006 7/19/2006 7/21/2006 7/23/2006
Date of Heat Wave (2006)
Rated Wind Capacity (2500 MW) -- CA Independent System Operator
When California’s Daily Peak exceeded 45,000 MW, in no case did wind provide more than 325 MW despite rated capacity of 2500 MW.
33
Distance Between Major Wind Farms(In Miles)
* Note: Distance between Altamont and San Gorgonio is 370 miles
0 25 40 45* 95 295 315 415* 425 436 505
Montezuma Hills
California
San Diego
Horse Hollow (TX) Elk River (KS)
350
34343434
Lest We Forget : US Coal Reserves vs. Oil and NG Reserves
0
1000
2000
3000
4000
5000
6000
Qu
ad
rill
ion
BT
U
USACoal
Russia I ran Qatar SaudiArabia
Venezuela
Natural Gas Crude Oil Coal
Source: EIA, 2008
35
Over 70 Billion Barrels of Stranded Oil Recoverable Through CO2 – EOR *
Bil
lio
n B
arre
ls
Texas has over 30 billion barrels of oil potentially recoverable with CO2 - EOR
* Excludes Alaska and Offshore