Atlantic Council

As the United States faces increasing concerns over environmental degradation and energy security, policy makers must be aware of the effect today’s energy portfolio will have on future generations.  This report provides recommendations as to how the United States can develop a realistic electricity generation portfolio over the next four decades in such a way as to protect its energy, national, economic and environmental interests.  This document concludes that, despite a number of challenges, the US must make a concerted effort to restructure its electric power generation portfolio.

Executive Summary 

The Atlantic Council Program on Energy and the Environment convened a one-day workshop on October 26, 2009,  “Perspectives on a Realistic United States Electric Power Generation Portfolio: 2010 to 2050, ” to address the challenge of transitioning the United States’ (US) energy industry into a more secure and sustainable structure and to better understand the wide variation in projections and outlooks regarding future domestic energy needs. The workshop tackled one of the major issues of our day-how a realistic electricity generation portfolio can evolve over the next four decades in such a way as to protect the US's energy, national, economic and environmental security.  In this Executive Summary, key electricity-related data are summarized, and the Atlantic Council's observations and recommendations are highlighted.

US Electricity Outlook

• According to the Energy Information Agency (EIA), by 2035 electricity demand is expected to grow 22% from current levels. Even though electricity demand in 2050 may be affected by greenhouse gas emission limits, the Environmental Protection Agency  (EPA) and the Massachusetts Institute of Technology (MIT) forecast electricity demand increases of 20% and 30%, respectively, between 2030 and 2050.
• The current energy debate focuses in part on how on to provide a balanced electricity portfolio with low CO2 emissions.  According to the EIA's most recent forecast, absent greenhouse gas emission restrictions, energy industry-related CO2 emissions are expected to grow by 8.7% (0.3% annually) through 2035.
• By 2030, even without CO2 emission restrictions, EIA projects that the US energy mix for electric power will change.  However, it is clear that none of the significant forecasts for likely electric power generation portfolios agree substantively.  While several agree there will be some growth in nuclear power capacity, MIT only foresees a slight increase of 3% and EPA believes there will be a moderate 12% growth. MIT predicts a large 24% growth in natural gas whereas EIA expects a more moderate increase of 15%. With regard to renewables, MIT signals a modest increase of over 17% while EIA predicts a rather large increase of 114%. While EIA and EPA believe fossil fuel use will increase, MIT makes the case that there will be an increase of 54%.
• A comparison of EIA, EPA and MIT generation portfolios under a Waxman-Markey scenario shows agreement that fossil fuel use predominates even under carbon cap constraints and all predict a large increase in the percentage of power provided by renewables by 2030. There will be reductions in electricity demand due to energy efficiency improvements and other conservation measures.  However, there is a wide discrepancy in the forecasts with regard to the future fuel mix. Five factors may radically alter such forecasts: rising raw material costs, increases in electricity prices, technological innovation, climate change assessments, and energy/ climate change policy responses.
• There are approximately 1450 coal fired generating units in the US with 83 potential new plants on the horizon, representing a total of over 47 GWe additional capacity.  A small number of new coal plants will be built with demonstration stage carbon capture and sequestration (CCS) technology.  There may then be some CCS retrofits on modern new coal plants.  Thereafter, new coal facilities could be built with CCS capacity and other plants could be retrofitted with CCS capability.  Older coal plants that could not be retrofitted would be closed.  From the industry perspective, clean coal technologies (CCT), and, in particular, CCS technologies are at hand. Large commercial-scale demonstrations must be done soon to have an impact.
• As of 2007, natural gas accounted for 22% of US energy consumption. While coal is the nation’s main fuel for electric power, natural gas is the fastest growing fuel. The potential for large increases in the production of domestic natural gas supplies from fracturing shale may allow for natural gas to play a significant role in the next few years in rebalancing the US electric generation portfolio. In addition to the positive reports on the potential availability of shale gas, there are technological improvements  that bear close scrutiny for the role they might allow natural gas to play in short-term efforts to  decarbonize the electricity supply.  While utilizing natural gas for electricity (or transportation fuels) does reduce CO2 emissions, they are not entirely eliminated as conventional gas-fired plants emit only 40% less CO2 than coal-fired plants. Hence, eventually CCS technologies will also be needed on gas power plants.
• There is a question as to the extent the nuclear renaissance happening around the world will become a reality in the US. EIA forecasts that by 2035 the US nuclear power capacity will slightly increase by 3% from 101 GWe today to reach 109 GWe. New nuclear plant capacity will be needed just to maintain the status quo.  EPA estimates that 187 new nuclear reactors might be needed by 2050 to meet CO2 emission reduction requirements as envisioned in the Waxman-Markey legislation.  One of the key issues impacting new nuclear plant construction is the lack of progress on the federal government’s promise to accept ownership of the spent fuel and provide for a permanent commercial waste repository.  Federal efforts to provide construction loan guarantees to get past the initial hurdle for new plants are underway.  For the future, well-designed carbon waste pricing policies could lead to adequate private sector investments in new nuclear power plants.   
• EIA forecasts that by 2035, the US will add 93 GWe of new renewable capacity (biomass, geothermal, hydro, solar, and wind) to the existing 139 GWe of installed renewable electric generating capacity.  In general, with the exception of hydropower, each of the renewable energy supply sources face similar obstacles, including the need for transmission/grid improvements, their intermittent nature and questions as to how much back up power or storage capacity is necessary or economical.

Observations

• Electricity Demand Growth Patterns are Changing, Forecasts Signal the US Requires Additional Baseload Electric Capacity, But Questions Linger Regarding the Impact of the Recession.  While electricity demand will grow in absolute terms, the rate of growth has been slowing for many years. Structural changes in the economy due to the recession, efficiency programs and higher electricity price are expected to slow electricity demand growth further and continue the downward trend.  However, the potential exists that the US may require more than the forecast electric power over the next 5 to 10 years to meet the needs of a growing population, a higher than anticipated uptick in the nation's economy, and/or a slower than anticipated implementation of energy efficiency and conservation measures.
• Electricity Supply Planning Requires Flexibility and Capability.  If the US wants to maintain the ability to preserve its options and have the flexibility to meet unexpected needs should the deployment of new technologies be slower than expected, then the capability to produce additional baseload capacity must be maintained.  This has obvious implications for US energy policy:  the US must continue to support the two main pillars of baseload capacity, coal (with ability to retrofit with CCS) and nuclear power.  Furthermore, to provide low-carbon electricity, aging US infrastructure will have to be replaced and new clean energy capacity expanded.  Failure to establish and maintain a technological lead and a robust domestic manufacturing and supply chain capacity would eventually cause the US to rely on foreign technology and imported plants with the attendant loss of US jobs.
• There is an Urgent Need to Comprehensively Reassess the US Electricity Strategy. Comprehensive, integrated planning, based on technical strategies, is needed to preserve all of our domestic energy options, equally focus on the short-term and long-term options, and provide an expanded commitment to RD&D.  Layered on top of this is the need to maintain flexibility to meet increased demand if it materializes, and to provide technologies in a diverse geographic environment.  A balanced portfolio with many (domestic) options is the way to deal with price volatility-the economic security part of the equation.  The energy mix will change but will hopefully never be too reliant on any one fuel source.
• Every Electric Generation Option Faces the Same Issues: Financing and Public Acceptance. Developing any form of new electricity generation and its supporting infrastructure, or expanding current ones, face public acceptance issues. Financing structures are a key barrier for all energy technology options.

Recommendations

The challenges to establishing a realistic electric power generation portfolio that transforms the power sector to meet the country’s requirements for electricity while addressing environmental concerns must not be underestimated. The economic realities associated with the need for new investments and the need to reduce emissions from fossil fuels can be met, but probably only at higher electricity prices. In a relatively orderly fashion, by identifying and prioritizing the key actions that can be taken, starting now, significant transformative efforts are indeed possible.  The highest priority should be given to these six recommendations:

1. The United States Should Move Forward Now to Rebalance its Portfolio, and all Agree that the Starting Place is Energy Efficiency. Energy efficiency and conservation measures are recognized as having significant near-term potential to reduce demand and, of course, reduce attendant CO2 emissions.
2. Uncertainty Regarding National and International Greenhouse Gas Emission Policies Dictates that Federal Financial Support be Provided Now for Critical Energy Technology Programs.  To this end, construction of coal-fired plants with CCS and new nuclear plants should be supported so that these projects can be initiated as soon as possible to assure the continuing viability of baseload capacity for the US electrical grid in the near term future.
3. Kick-start Decarbonization Efforts by Using Natural Gas as a Bridge Fuel.  It is recommended that the US use the expanding availability of natural gas from shale formations and other domestic deposits as a bridge fuel-as backup for renewables and as required pending the availability of CCTs with CCS and new nuclear baseload capacity.
4. Rebalance the Electricity Portfolio with Diverse, Broad-based Options. Start with low or no cost efficiency measures; build on commercially available technologies such as natural gas, some renewables, and nuclear power instead of relying on the eventual availability of very long-term technology silver bullets; undertake the necessary infrastructure improvements to allow for efficiency improvements and to bring renewable sources into the grid as quickly as possible; and, significantly ramp up RD&D on CCTs, next generation nuclear power plants and fuel cycles, and transportation fuel options.     
5. Leadership is Needed to Establish Public and Private Sector Support for US Energy Policies and their Attendant RD&D programs.  Public and private agencies need to merge their efforts to properly inform the public regarding the potential options available to an evolving electricity generation portfolio; their timing, availability and costs; and their impact on the environmental, economic and national security issues. The American public deserves frank talk on the timing and costs of its energy supply. 
6. The Federal Government Must Continue to Address the Siting of Transmission Lines, Grid Improvements and Incentives for More Renewables. In the "grace period" of reduced electricity demand growth the US now enjoys thanks to the recession, the US must focus its efforts immediately on the siting and building of transmission capacity and on ways to improve the grid to allow better integration of renewable power sources into the US electricity supply. Congress must provide the authority to the federal government to issue the permits to build the needed transmission lines and to give the Federal Energy Regulatory Commission the power to properly allocate costs of building needed lines.

The Atlantic Council concludes that success can be assured if the US uses all of its domestic energy supplies and leaders develop, today, the policies to bring forth the technologies needed to embark on a safe and secure low-carbon path.  Our leaders must educate the public regarding the time it will take, the new plants and infrastructure that must be built, and the costs that must be borne.