Integrating Renewables and Integrating Renewables and Electric VehiclesElectric Vehicles

David K. OwensExecutive Vice PresidentEdison Electric Institute

Aspen Institute Energy Policy Forum July 10, 2009

Planned Capacity Additions Reflect Planned Capacity Additions Reflect State RPS RequirementsState RPS Requirements

Non-hydro renewables make up 4% of US capacity today but 34% of planned capacity additions through 2020.

US Generation Capacity in 2008 (1,061 GW in Service)

Planned Capacity Additions to 2020(352 GW)

Source; Ventyx Global Energy and Bernstein Analysis

Hydro9%

Gas41%

Coal30%

Nuclear10%

Oil6%

Non-Hydro Renewable

4%

Hydro16%

Gas23%

Coal14%

Nuclear13%

Oil0%

Non-Hydro Renewable

34%

Source: Bernstein Research

Wind Dominates Proposed Renewable Wind Dominates Proposed Renewable Capacity Additions Thru 2020Capacity Additions Thru 2020

Wind is 78% of planned renewable additions, solar thermal 8%, solar photovoltaic 2%Wind’s off-peak capacity limits usefulness on power grids

Source; Ventyx Global Energy and Bernstein Analysis

Wind78%

Solar Thermal8%

Small Hydro6%

Wood2%

Solar PV2%Waste

2%

Geo2%

WaxmanWaxman--Markey CERES RequirementsMarkey CERES Requirements 20% by 202020% by 2020

Perc

enta

ge

WaxmanWaxman--Markey CERES RequirementsMarkey CERES Requirements

6

Year

Required Annual Percentage EE 5% EE 8%

2012 6.0 1.5 2.42013 6.0 1.5 2.42014 9.5 2.4 3.82015 9.5 2.4 3.82016 13.0 3.3 5.22017 13.0 3.3 5.22018 16.5 4.1 6.62019 16.5 4.1 6.62020 20.0 5.0 82021+ 20.0 5.0 8

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

CCGT Coal Nuclear IGCC Geothermal Wind Biomass Solar

Long Run Marginal Cost CO2@ $15/Mt Backup Capacity

Source: U. S. Dept. of Energy, Black & Veatch, PG&E, company reports & Bernstein analysis

Relative Cost of Conventional and Renewable Power Generation in $/MWh

• Assuming long run fossil fuel costs of $7 / MMBtu for gas and $65 / ton for Appalachian coal (equal to $2.60 / MMBtu), conventional resources cost roughly $60-$110 / MWh, excluding CO2, vs. $105-$135 for geothermal, wind and biomass.

• The increase in renewable generation required by state RPS is only 8% of supply.

$65 $77

$104 $112 $104 $114$134

$175

Renewables Are ExpensiveRenewables Are Expensive… …..But So Is Conventional PowerBut So Is Conventional Power

Long

Run

Mar

gina

l Cos

t in$

/MW

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U.S. Renewable ResourcesU.S. Renewable Resources

Source: National Renewable Energy LaboratorySource: National Renewable Energy Laboratory

Transmission Congestion Dramatically Increasing

US Transmission Lines & GridUS Transmission Lines & Grid

Source: Produced by Edison Electric Institute. Data Source: Ventyx,Inc., The Velocity Suite 2009.

Actual and Planned Transmission Investment

Note: Handy-Whitman Index of Public Utility Construction Costs used to adjust actual investment for inflation from year to year. Data represents both vertically integrated and stand-alone transmission companies. *Planned total industry expenditures are preliminary and estimated from 85% response rate to EEI’s Electric Transmission Capital Budget & Forecast Survey. Actual expenditures from EEI’s Annual Property & Plant Capital Investment Survey & Form 1s.

EEI Report: Transmission Projects EEI Report: Transmission Projects Supporting Renewable ResourcesSupporting Renewable Resources

Identifies 31 transmission projects

Represents $21 billion that will transmit solar, wind, geothermal, or bio-mass electricity

Projected to be completed by year-end 2015

Transmission Projects Supporting Renewable Resources available at: http://www.eei.org/ourissues/ElectricityTransmission/Documents/TransprojRenew_web.pdf

The Biggest Challenge for Interconnecting and The Biggest Challenge for Interconnecting and Integrating Renewables is Transmission Integrating Renewables is Transmission …………....

Planning

Siting

Cost Allocation

Renewables are Variable Resources!

Senate Transmission ProvisionsSenate Transmission ProvisionsPlanning

Develop national policy principlesRoll up regional plans to interconnection-wide planModify plans, if necessary, to achieve policy objectivesApplies to federal, state, municipal utilities, and cooperatives

SitingNo renewable energy zonesBackstop authority, with eminent domain, for high-priority national projects - 345 kV and above, renewable feeder lines 100 kV and aboveApplies if state fails to act in one year, denies, or imposes unreasonable conditions; must consult with states on state mitigation measures

Cost AllocationDue deference to methodologies broadly supported by affected statesFERC must develop methodologyInterconnection-wide cost allocation permissible; costs must be reasonably proportionate to measurable economic and reliability benefits

Lead AgencyDepartment of Interior

Key Differences in House Transmission Key Differences in House Transmission Provisions with SenateProvisions with Senate

Improves FERC backstop siting authority for Western Interconnection - but weakens it for the Eastern Interconnection

FERC’s backstop siting authority for National Interest Electric Transmission Corridors - but limited to interstate lines and intrastate segments that are integral to a proposed interstate line

FERC can only use its backstop authority for transmission neededin significant measure to access renewable energy

Does not address cost allocation

Operational Challenges For Operational Challenges For Integrating RenewablesIntegrating Renewables

Higher RPS levels can create significant surplus energyCan’t be used on grid or sold to othersEnergy storage / off-peak electric vehicle charging can mitigate problem At present these technologies can not significantly contribute to resource plans - smart grid will help enable these new technologies

Higher RPS levels will require higher planning reserve margins for system backup to maintain reliability

More ancillary services req’d to maintain frequency and voltage levelsGeneration and storage technologies required to meet system regulation, load following, and ramping requirementsQuick start and fast ramping technologies (peaking / storage) to manage generation variability and maintain reliability

FERC Renewable InitiativesFERC Renewable InitiativesFERC Technical Conference: Major Themes

Need transmission to facilitate renewables Need interconnection-wide transmission planningIntegration of renewable resources requires increased ancillary service Cost of integrated renewable resources (who pays and how much?)Interconnection congestion (queuing)

EEI ResponseUtilities have construction and financial capability to build transmission Need system flexibility to integrate variable renewable resourcesNeed to account for overall costs and benefits of integrating variable renewable resources

FERC Other Initiatives FERC Other Initiatives

Addressing congestion issues – interconnection queue

Order no. 890 regional technical conferencesEmerging challenges

Developing interregional facilitiesIntegrating large amounts of location-constrained generationInterconnection of distributed energy resources

Emerging New FERC FocusEmerging New FERC Focus ““GreenGreen”” Approach To Regulatory Mission Approach To Regulatory Mission

Regulation of Carbon MarketsClarify jurisdiction boundaries – FERC, CFTC, SECExpand regulatory goals

Regulation of Combined Efficiency and Renewable Electricity Standard (CERES)

FERC to prescribe standards / protocols for defining /measuring electricity savingsFERC will specify types of EE measuresFERC will receive and evaluate all state applications for eligible electricity savings

Smart Grid Investment and Cost Recovery

Distributed Resources

How do these areas fit together?

How do they impact FERC / State relationships?

Evolving Areas of Evolving Areas of Federal / State CollaborationFederal / State Collaboration