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Transcript of 1 Are We Ready For The Future? 2005 NIPPC Annual Meeting September 8, 2005 Michael R. Niggli...
1
Are We Ready For The Future?
2005 NIPPC Annual MeetingSeptember 8, 2005
Michael R. NiggliPresident, Sempra Generation
2
U.S. Electric Market Evolution
Source: Global Energy Decisions
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
Cap
aci
ty I
nst
alla
tio
ns
(MW
)
Coal Hydro Renewables Uranium Fuel Oil Natural Gas
The Oil Embargo1973-4
PURPA1978
PURPAQF Era
EPACT1992
EWGs
CAA1970
Vertically Integrated Utilities
RTO NOPR1999
Rise of the Merchant
Credit Crash
CAA Amendments
1990
3
U.S. Natural Gas Prices (Henry Hub)
$12.36/MMBtu
18 Month Strip = $10.58/MMBtu
4
U.S. Gas Supply/Demand
Balance
0
5
10
15
20
25
30
1970 1980 1990 2000 2010 2020
Dry
Tc
f p
er
ye
ar
Low
High
US Govt
L48 Production
Consumption
Actual Forecast
Consultants
Basis: EIA natural gas statisticsConsultant demand forecastsUS Potential Gas Committee's Year 2002 resource estimates
Net Imports
5
U.S. LNG Imports
US LNG Imports
0
5
10
15
20
25
30
2000 2005 2010 2015
Bc
fd
0
50
100
150
200
mtp
a
High Resources
Low Resources
6
LNG Import Facilities
7
Sempra Energy Infrastructure Projects
Costa Azul (1.0 Bcf/day)
Port Arthur(3.0 Bcf/day)
Cameron(1.5 Bcf/day)
Northville
El Dorado(480 MW)
Copper Mountain
Elk Hills(275 MW)
Palomar(550 MW)
Mexicali(600 MW)
Mesquite I & II
(1250 MW)
MC Energy
Cedar PowerBonnet Carre
Catoctin
Crescent City
Twin Oaks I & II(305 MW)
Granite Fox
Idaho Valley
Coleto Creek(316 MW)
Texas Non-Coal(659 MW)
Twin Oaks III
Norton
South Shore Power
OPERATING
UNDER CONSTRUCTION
IN DEVELOPMENT
POWER PLANTS
LNG TERMINALS
PERMITTED
UNDER CONSTRUCTION
West-East Pipeline
8
Major U.S. Market Structure Issues
• Mandatory minimum capacity reserve requirements
• RTOs and independent transmission planning and operation
• Retail access• Open, liquid and competitive markets
for capacity and energy• Long-term contracts to support
generation development
9
Resource Adequacy Challenges
• Utility Procurement – Build vs. Buy • Competitive Bidding Challenges
– Debt Equivalency– Credit Requirements– Environmental Adders
• Transmission– Need Better Access, Fewer Constraints– Cost & Benefits of Major New Regional
Transmission Projects Should Be Weighed Against Alternative Strategic Siting of New Generation Projects
10
West-Wide Solutions Are Needed For The Future
• States & sub-regions within the WECC may have some unique attributes, but are not electrical “islands”
• Western sub-regions are interdependent
• We are best able to optimize and ensure the security of the system by working together
• The region has a history of working together to improve economics and reliability
• As a West-Wide Region, we should “go back to the future” and improve on past practices
• Strong political and regulatory leadership to foster West-Wide policies is needed
Source: WECC
11
Balanced, Responsible Options For Adding New Capacity
• Protecting Ratepayers & the Environment– Delivered Energy COSTS Are Very Important To
Consumers– Environmental Protections Must Be Affordable – If New Regulations Must Be Implemented, They
Should Be Standardized As Broadly As Possible (e.g., on a national level) Not On A State-By-State Basis Not On An Industry-By-Industry Basis Not On A Company-By-Company Basis
• Economics & Reliability– New Generation Is Needed to Ensure Future
Reliability and Price Stability– Capacity Markets Must Provide LONG-TERM
Incentives for Capital Investment
12
• Most Viable New Generation Options For Balanced, Responsible, Cost-Effective Capacity Portfolios– Coal Projects– Gas Plants
LNG
– Renewables
• Reliability, Deliverability & Cost Will Be Critical Factors
Balanced, Responsible Options For Adding New Capacity
13
Coal – A Responsible Resource
•Why Coal?– Energy Security &
Independence: Coal is an abundant domestic resource
– Proven & Reliable: Electricity production from coal is significant (~50% of nation’s energy) and will remain so for the foreseeable future
– Affordable: Coal provides a competitive base-load resource with low and stable fuel costs
Comparative Fuel Costs
14
• Why Coal? (contd.)– Commercially Practical:
Other generation types cannot replace pulverized coal plants in the next 10 – 20 years
– Clean & Efficient: New supercritical plants are even more environmentally responsible – better efficiency/lower emissions
– Relationship w/Renewables: Coal projects can facilitate, rather than compete with, renewable energy projects
Installed Capacity (MW) Nuclear, 9,397, 5%
Renew/Other, 6,061, 3%
Oil, 1,797, 1%
Coal, 37,284, 19%
Hydro, 62,799, 32%
Natural Gas, 77,559, 40%
Energy (TWh)
Nuclear, 75, 9%
Gas, 209, 25%
Renewable, 50, 6%
Coal, 268, 31%
Hydro, 242, 29%
Current WECC Installed Capacity & Generation Mix
Source: Global Energy Decisions, Fall 2004 Report
Coal – A Responsible Resource
15
Sempra Western Coal Fired Projects
Idaho/Oregon Market
Idaho/Utah Market
Southwest Market
Pacific Intertie DC Line
Idaho ValleyGranite Fox
Northern Nevada Market
Northwest Market
16
Macro Energy Issues
• Energy Independence? ORForeign Dependence?
• How reliable & costly are supply options?• How much will you pay for clean air & water?• Local supply OR regional supply? (Strength of the transmission grid & pipeline
system)
17
Conclusions
• Yes, We Are Ready For the Future, But . . . We Still Have Work To Do!– Need Strong Political & Regulatory Leadership for
West-Wide Policy Development– Provide Affordable, Environmentally Responsible
Resources Overcoming Impediments to Competitive Markets
Overzealous Use of Criteria Such As Debt Equivalency & Credit Can Choke Competition
Transmission Constraints & Seams Issues May Limit Future Access to Economic Resources & Seasonal Exchanges
Transmission Projects Should Be Weighed Vs. Strategic Generation Sites
Continued Emphasis In the Future On Affordable, Reliable Generation Resources:
Addressing Issues Such As Global Warming