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University of Nebraska - Lincoln CLIMATE CHANGE CONFERENCE 2008

May 21, 2008

Climate Change Challenges Facing the Electric Industry

Ron Asche, President and CEONebraska Public Power District

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NPPD - 2007 Annual Overview Revenue - $781 Million Over 2,200 employees 3,132 MW of generation accredited

capability Primarily a wholesale power supplier to

municipalities, other public power districts and cooperatives

Provides almost half the electricity consumed in Nebraska

Nebraska has consistently been among the 10 lowest cost states for electricity

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2%Oil

20%Natural Gas

20%Nuclear

7%Hydro2%

Wind/Solar/ Geo Thermal

49%Coal

National 2006

9%Hydro*

6%Purchases

24%Nuclear 4%

Natural Gas & Oil

57%Coal

1%Wind

NPPD 2007

* Includes hydro purchases from the federal government

34% Non-CO2 Emitting

29% Non-CO2 Emitting

Fuel Mix for ElectricityPercent by Resource

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Carbon Dioxide Emissions by Sector(Million Metric Tons)

Reference: Nebraska Data from EIA 2004 State Emissions by Sector

US Data from EPA Inventory of US Greenhouse Gas Emissions and Sinks: 1990 - 2006 (April 2008)

Commercial 4%

ElectricPower48%

Transportation 28%

Industrial 14%

Residential 6%

Nebraska 44 Million Metric Tons

Commercial 4%

ElectricPower42%

Industrial 15%

Residential 6%

Transportation 33%

United States

5,934 Million Metric Tons

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Greenhouse Gas (GHG) Regulatory Proposals

4000

5000

6000

7000

8000

9000

10000

2005 2010 2015 2020 2025 2030

Mil

lio

n M

etr

ic T

on

s C

O2e

No Controls

Bingaman-SpecterMcCain-Lieberman

Sanders-Boxer

Kerry-Snowe

Lieberman-Warner

1990 emission levels

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NPPD’s Projected Coal Emissions vs. Allowances

NEBRASKA PUBLIC POWER DISTRICT

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Mill

ion

s

CO

2 (M

etri

c T

on

s)

NPPD Est. Allocation - Future Generation Resources NPPD Est. Allocation - Existing Generation Resources

Lieberman: Coal Emission vs. Allocation

Projected CO2 Emissions

Business As Usual CO2 Emissions

Allowance Allocation

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CO2 Allowance Price ProjectionsEPA Lieberman-Warner Forecast

(2012-2030)

0

20

40

60

80

100

120

140

160

180

2012 2014 2016 2018 2020 2022 2024 2026

Do

llar

per

Met

ric

To

n (

no

min

al)

EPA - Low EPA - High

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NPPD’s Estimated CO2 Costs

NEBRASKA PUBLIC POWER DISTRICT

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2012 2014 2016 2018 2020 2022 2024 2026

Mill

ions

(nom

inal

)

Total Carbon Cost - High EPA

Total Carbon Cost - Low EPA

Lieberman-Warner: Estimated Total Carbon

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How Can the Electric Sector Make Significant Reductions?

• EPRI (Electric Power Research Institute) is focusing on this issue

• EPRI PRISM Analysis –assesses the feasibility for future CO2 emissions, based on the potential of advanced technologies:

– End-use energy efficiency– Renewable energy– Advanced light water nuclear reactors– Advanced coal power plants– CO2 capture and storage– Plug-in hybrid electric vehicles– Distributed energy resources

100

500

1000

1500

2000

2500

3000

3500

1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

ctri

c S

ecto

rC

O2

Em

issi

ons

(mill

ion

met

ric

tons

)

EIA Base Case 2008

Technology EIA 2008 Reference Target

Efficiency Load Growth ~ +1.05%/yr Load Growth ~ +0.75%/yr

Renewables 55 GWe by 2030 100 GWe by 2030

Nuclear Generation 15 GWe by 2030 64 GWe by 2030

Advanced Coal Generation

No Heat Rate Improvement for Existing Plants

40% New Plant Efficiency by 2020–2030

1-3% Heat Rate Improvement for 130 GWe Existing Plants

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Light-Duty Vehicle

Sales by 2017; 33% by 2030

DER < 0.1% of Base Load in 2030 5% of Base Load in 2030

EPRI Prism – 2008 EIA with Energy Bill

Achieving all targets is very aggressive, but potentially feasible

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Challenges (Cont’d)

• Utility executives throughout the Nation are concerned about potential regional power supply challenges in the next 5-10 years

• Environmental requirements associated with Climate Change could triple the cost or greater of existing electric generating facilities in Nebraska, under certain scenarios

Energy Information Administration’s Annual Energy Outlook 2008 (Early Release)

US Electricity Demand

3,814

4,972

0

1,000

2,000

3,000

4,000

5,000

6,000

2006 2030

bill

ion

kilo

wat

tho

urs

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Challenges• Long-term challenge – slow, stop, reverse

greenhouse gas (GHG) emissions

• Current lack of technology to capture and sequester CO2 from fossil generation

– May require new national pipeline network for transportation to suitable storage areas

– Expected to add significant costs to coal based generation

– Will reduce up to 1/3 of plant electricity output

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Challenges: Will CO2 Storage Be Acceptable?

• Who owns the underground storage site? Who owns the injected CO2?

• Who is responsible if it escapes?

• What happens to the injected CO2?

• Will public accept it?

• What is right legal, policy framework?

EPRI’s role is to assess environmental impacts of potential mitigation

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Challenges (Cont’d)

Where will electricity come from, how much will it cost, and will it be reliable?

• COAL - proposed new plants being rejected or withdrawn throughout the nation

• NUCLEAR - considerable uncertainty over cost and regulatory process for new facilities

• NATURAL GAS – increased use will make the fuel even more expensive and put stress on gas supplies

• ENERGY EFFICIENCY and RENEWABLES – very important, but cannot completely offset growing needs for more electricity and replace retiring baseload capacity

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Challenges: Availability of Offsets• A greenhouse gas (GHG) offset is generated by

the reduction, avoidance, or sequestration of GHG emissions from a specific project (from a sector not covered by a mandatory program, such as agriculture or forestry)

• Offsets may be essential because they potentially can be implemented quickly and at a relatively low cost

1. Must be “additional” - would not otherwise occur without the funding provided by the offset purchaser

2. Must be rigorously quantified

• Will certified offsets be available?– Nebraska– United States– International Community

• NPPD focus is on potential Nebraska-based offsets

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NPPD’s Climate Policy• Recognizes the growing public concerns

about climate change

• NPPD is:– Engaged in voluntary actions to lower GHG

emission intensity (CO2/MWh) of electricity

– Developing a strategy to address the challenges of balancing customer’s competing concerns about climate change and cost of energy

– Basing the strategy on our core public power values:

• Being good stewards of the environment• Conserving natural resources• Providing reliable and low cost electricity

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NPPD Initiatives • Investigating repowering of Sheldon Station coal plant

(southwest of Lincoln) with cleaner, more efficient technology

• Board approved goal of meeting 10% of energy needs with renewable resources (primarily wind) by 2020

• NPPD will purchase 120-megawatts of wind generation from facilities to be constructed near Bloomfield

• Finalizing 20-year Integrated Resource Plan to optimize future generation and energy efficiency in a carbon constrained economy

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NPPD Initiatives (Cont’d)

• Develop and implement cost-effective energy efficiency and conservation programs

– Compact Fluorescent Lighting (CFL) Campaign - 30,000 CFL bulbs sold in Fall of 2007

• Exploring partnership with State Energy Office to offer low interest customer loans for energy efficiency and conservation applications

• Investigating pumped hydro storage generation

• Partnering with UNL – Nebraska Center for Energy Sciences Research to investigate alternative energy sources and potential carbon offsets utilizing Nebraska resources

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Summary• Making significant CO2 emission reductions,

while providing reliable and reasonably priced electricity to meet a growing need, will be one of the biggest challenges the electricity industry has ever faced

• Emission reduction policies must allow time for new technologies to develop

• NPPD is developing a strategy to take cost-effective actions to reduce CO2 emissions in a manner that enhances the environment and the economy of Nebraska