Investing in America's Electric Future - Forbes Special Sections

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Investing in America's Electric Future - Forbes Special Sections

A Special Advertising Section Created in Partnership With Electric Perspectives Magazine

INVESTING

IN

AMERICA’S

ELECTRIC FUTURE

Technology Is the Key

To Cleaner Generation

By Dennis Wamsted

For more than a century and a quarter, technological

innovation has kept the U.S. electric system strong.

Innovation has increased efficiency and reliability in

generation and delivery, and even has changed the ways

we use electricity. It has helped cut air emissions and

improve environmental quality. It has helped meet

soaring demand in an increasingly technological world.

For shareholder-owned electric companies, technological

innovation is where energy, climate and the

national economy meet.


The Price of Success

The industry keeps investing more in the system: Edison Electric

Institute (EEI) estimates that the industry invested approximately $69

billion in 2007 to meet the nation’s rising electricity needs.

Looking forward, EEI projects that environmental compliance costs just

for the federal sulfur dioxide (SO 2 ), nitrogen oxides (NO x ) and mercury reduction

rules currently in place will cost the industry roughly $48 billion

through 2025. In addition, says EEI, investments in the high-voltage transmission

system will top $37 billion from 2007 to 2010. Even more

significant, it also projects that spending on local distribution upgrades will

average at least $15 billion a year for the next decade. Rising construction

and commodity costs may push all of these figures higher.

The driving force behind these investment needs is simple: Electricity

use has skyrocketed. Indeed, it is arguably the most successful “product”

ever introduced. Consider that from 1950 to 2000, while the population

of the U.S. grew by about 90%, electricity use soared by some 1,315%.

And the growth shows no sign of slowing — in 2007, total electric output

hit 4.1 million gigawatt-hours (GWh), topping the 4 million GWh

mark for the first time.

Long-term forecasts by the U.S. Department of Energy’s analytical

branch, the Energy Information Administration (EIA), peg growth at

roughly 1.1% annually through 2030. While that may not sound like

much, it adds up quickly. At that rate, EIA says an additional 240

gigawatts of new generating capacity will be needed to supply the new

demand and replace older units that will be retired. If EIA is right, one

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400-megawatt (MW) generating plant will need to come on line somewhere

in the U.S. every two weeks for the next 22 years.

The Right Path for CO 2 Legislation

Mounting concerns about greenhouse gas emissions — particularly

the carbon dioxide (CO 2 ) emitted during the combustion of fossil fuels

— and the potential for long-term climate change have introduced a significant

degree of uncertainty into utility planning efforts.

The support of the presidential candidates for CO 2 reduction measures

will likely push legislation targeting greenhouse gases in the next

several years. Such carbon constraints would create even higher costs for

electric companies, which must install new (and as yet unproven) CO 2

emissions technologies while maintaining balanced fuel supply options

and meeting surging electricity demand.

One of the keys that will differentiate any CO 2 reduction legislation,

according to Tom Kuhn, president of EEI, is how it treats technology.

New technologies are going to play an absolutely essential role in meeting

future greenhouse gas reduction mandates, he says.

“Realistic carbon reduction targets that give industry the time to

develop and deploy a full suite of climate-friendly technologies to achieve

them” are going to be crucial, Kuhn told Wall Street analysts earlier this

year. “…[T]hese technologies include an expanded role for energy efficiency,

plug-in hybrid electric vehicles, renewable energy sources, greater

nuclear capacity and advanced nuclear designs, clean coal technologies

and carbon capture and storage.”


Tom Kuhn

President

Edison Electric Institute

America’s electric companies are transforming

the way we meet our customers’

demands for a reliable, affordable and

environmentally sensitive electricity supply.

Edison Electric Institute is expanding the

role of energy efficiency: We’re broadening

and intensifying our investments in

renewable energy sources; we’re developing

advanced coal and new nuclear

energy plants; we’re conducting research

and pilot projects on carbon capture and

storage technologies; and we’re working

with industry allies to develop the nextgeneration

hybrid vehicle — the plug-in

hybrid electric vehicle.

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“Some of these technologies are available —

although at a higher cost than conventional

generation sources — but many are not. All

have different time horizons, but all are critical

to reducing greenhouse gas emissions. The goals

for these emissions reductions must be harmonized

with the development and commercialization

of the technologies.

“This is a critical point,’’ he continued. “The

consequence of not harmonizing emissions

reduction goals with technology will be

massive fuel-switching that will result in

tremendous price pressures on natural gas,

higher consumer prices and heavy burdens on

the competitiveness of U.S. industries.’’

Advanced nuclear technology is one aspect

of that harmonization. Currently, nuclear

energy produces roughly 20% of the electricity

used in the U.S. — and it does so without

greenhouse gas emissions. Advanced nuclear

units are smaller, more efficient and more

standardized; and several companies already

have applied for licenses to build and operate

new units, the first of which could be on line

by 2016.

But nowhere will this harmonization be more

important than for coal, which currently supplies

about 50% of the electricity consumed

annually in the U.S. Enacting mandates that

effectively preclude the use of coal for electricity

generation simply doesn’t make any sense — it is

too important an energy source for that. The

truth is, canceling coal-based electric generating

plants likely would leave many of us in the dark.

What does make sense, however (in addition

to making any carbon legislation economywide),

is to harmonize reduction targets and

timetables with the development and deployment

of advanced coal technologies. It won’t be

easy or cheap, but companies in the utility

industry already are looking for cleaner ways to

use the nation’s abundant coal resources.

They’re intent on developing technologies

like highly efficient supercritical and ultrasupercritical

coal-based plants, integrated coal

Building this portfolio of technologies

is essential for meeting the electricity

demands of an increasing population, a

growing economy and a rising standard

of living, and it will be vital to do so in

a way that limits our carbon dioxide and

other greenhouse gas emissions.

Our goal is clear: We’re investing in America’s

electric future.

80

70

60

50

Annual Capex Tops $70 Billion Through 2009

Capital Expenditures

U.S. Shareholder-Owned Electric Utilities (in $ Billions)

40

30

www.getenergyactive.org

20

10

0

2003 2004 2005 2006 2007 2008p 2009p

p = projected


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“The consequence of not harmonizing emissions reduction

goals with technology will be massive fuel-switching that

will result in tremendous price pressures on natural gas,

higher consumer prices and heavy burdens on the

competitiveness of U.S. industries.’’

– Tom Kuhn, President, Edison Electric Institute

David Ratcliffe

Chairman, President and CEO

Southern Company

More and more people move to the South

each day. In fact, the U.S. Census Bureau

estimates that by the year 2030, 40% of

Americans will live in the region that

stretches from Texas to Virginia. Many of

these new neighbors will look to Southern

Company to serve their energy needs.

At Southern Company, we’re poised to

meet rising electricity demand by pursuing

a balanced approach to energy. We are

planning to build new nuclear power — a

clean, safe and economical form of generating

electricity. We’re developing new

technologies that will allow us to use coal,

our nation’s most abundant energy

resource, in a cleaner, more efficient

manner. Natural gas, the fuel of choice for

electric generation in recent years, remains

an important option for us, as does

renewable energy, like biomass and wind.

We continue to promote energy efficiency

by working with our customers to reduce

energy use in their homes and businesses.

Southern Company is implementing

the most effective solutions to keep up

with growing energy needs. The nation’s

economy, quality of life and ability to

compete in the world’s markets will

depend on a reliable and affordable

energy supply — and one that can meet

the commitments of ever-increasing

environmental standards.

southerncompany.com

gasification and combined-cycle plants, and

carbon capture and storage.

In an earlier era, concerns about SO 2 and

NO x dominated the environmental debate.

Since the 1970s, electric companies have produced

technological progress in systems to control

those emissions, with spectacular results. A

transformation similar to that is possible with

CO 2 , according to EEI’s Kuhn, but it will take

time, money and common sense.

Part of that common sense is to realize that

while some low- or zero-emissions technologies

are currently available, such as wind and solar,

they are not “baseload” generation. They also

have cost realities, in both production and siting.

For example, the best sites for both of these

technologies are frequently located far from traditional

load centers, requiring the construction

of new, or the upgrading of existing,

transmission lines to get the green power to

market. These lines are costly and often generate

strong local opposition, particularly when

the power is being shipped across state lines.

Easing those concerns and reducing construction

delays will help keep costs down, which in

turn benefits everyone.

Energy Efficiency, Smart Grid:

Keys to the Future

Energy efficiency is another area long supported

by the utility industry because it can at

once lessen strain on the system and play a

major role in meeting greenhouse gas reduction

targets. From 1989 to 2005, utility efficiency

and demand-side programs saved almost 860

billion kilowatt-hours of electricity, which is

roughly the amount of electricity it would take

to meet the power needs of 76 million households

in the U.S. for an entire year. As a result,

the industry was able to avoid building some

110 power plants (each rated at 800 MW).

This is just the beginning of what is

possible, however. Increasingly, industry

executives see energy efficiency and “smart

grid” technologies as means of generating

power for their customers without any

harmful emissions.

The smart grid clearly is an area of intense

utility activity, with programs under way — from

boosting transmission capacity to upgrading

customer meter technology across the country.

Two-way meters will enable utilities and

customers to transfer data in real time, and from

there a dizzying array of options is available.

Electric companies need all the technologies

— from plug-in hybrid vehicles to carbon capture

and storage to renewables — to meet climate

goals and rising demand. The industry

can make it happen. Exactly how these various

technologies and supply options will play out is

important, but so is getting the ground rules

right — and assuring we will have the technologies

and supply options we need. The

industry is set to transform itself, so that it can

continue to innovate and to produce the economical,

increasingly clean electricity on which

the nation has come to rely.

Web Directory

Edison Electric Institute

getenergyactive.org

Emerson Electric

emerson.com

Southern Company

southerncompany.com

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