April 15, 2007

At CERA Week 2007, most life was carbon-based

Mark Axford

Daniel Yergin, founder and CEO of Cambridge Energy Associates (CERA), is among the best at connecting the dots of the energy industry's past and turning them into a coherent picture of its future. Dr. Yergin's accomplishments include a Pulitzer Prize for The Prize: The Epic Quest for Oil, Money & Power, a book that was made into an eight-hour PBS documentary. When Yergin talks, people listen.

The theme that Yergin chose for CERA Week 2007 in Houston this February—"Strategies for a High Stakes World: Innovation, Investment, and the Future of Energy"—correctly cast today's energy business as a game with big financial risks and rewards. High and volatile gas and gasoline prices, concerns about global warming and the long-term adequacy and security of energy supplies, and the behind-the-scenes geopolitical maneuverings that shape today global energy environment have become front-page news.

The first two days of the conference were devoted to worldwide oil and gas supply and demand. The third day—Power Day, the one of most interest to readers of this magazine—began with a panel of utility CEOs discussing "The Next Big Ideas" for the electricity industry.
 

Seven steps to heaven

Jeff Sterba—CEO of PNM Resources (the parent of Public Service Co. of New Mexico), and chairman of EPRI as well—kicked off the discussion with a presentation titled, "Technology Needs for a Carbon Constrained World." He reminded the audience that, as of the end of 2006, the U.S. electric utility sector was responsible for roughly one-third of America's emissions of carbon dioxide (CO₂), or about 2,400 million metric tons (mt) annually (Figure 1). If no action is taken to curb them, the sector's emissions are projected to increase to 3,300 million mt/year by 2030.

 

 

It will be challenging enough to hold CO₂ emissions at today's levels, much less reduce them. Assuming, as the projections do, that advanced carbon capture and sequestration technologies (see Special Reports) will not be ready or affordable enough to be part of a nationwide solution for many years, it's clear that the only near-term way to decelerate climate change is to deploy proven technologies.

Sterba described a step-by-step approach for halving the 3,300 million tons expected under the "do nothing" scenario to 1,700 million tons by 2030:

• Increase the efficiency of appliances and lighting to reduce annual demand growth from the current 1.5% to 1%. This step alone would reduce CO₂ emissions 9% by 2030.
• Build 50 GW of wind farms and solar power plants by 2020, and an additional 2 GW/year thereafter.
• Add 24 GW of nuclear capacity by 2020, and another 4 GW/year thereafter.
• Target raising the efficiency of new coal-fired plants to 46% by 2020 and to 49% by 2030.
• Make 90% of the new coal plants carbon capture ready by 2020.
• Strive to have electric cars constitute 10% of all U.S. vehicles by 2017, and 30% by 2027.
• Increase distributed generation's share of U.S. installed capacity from less than 0.1% today to 5% by 2030.

Sterba's concluding remarks were directed to the U.S. Congress. He urged the House and Senate to join forces and pass legislation that would impose a tax on electricity consumption and thereby curb demand and power plants' overall CO₂ emissions. The rate, said Sterba, should be high enough to provide $2 billion to $3 billion per year for research into carbon-constrained generation technologies.
 

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