Stimulus bill energy opportunities

Stimulus-driven
Opportunities in
Energy and Power
CMAA Leadership Forum
Scottsdale, Arizona
May 18, 2009
Peter Maloney
Chief Editor, Platts Global Power Report
© 2009 The McGraw-Hill Companies

Stimulus-driven Opportunities in Energy and Power
 American Recovery and Reinvestment Act of 2009
 Signed into law: February 17, 2009
 Total allocations: $787 billion

Recovery Act categories
Education and
training, 53
Source: Recovery.gov
Energy, 43 Other , 8
Health care, 59 Tax relief, 288
Protecting the
vulnerable, 81
Infrastructure
and science,
111 State and local
fiscal relief, 144

Recovery Act categories, tax adjusted
Other , 8
Health care, 59
Energy, 65
Education and
training, 78
Protecting the
vulnerable, 142
Tax relief, 165
State and local
fiscal relief, 144
Infrastructure
and science,
126
Source: Recovery.gov

Recovery Act, energy-related allocations, all titles
Title Agency $ Mil
Title III - Department of Defense, Operation and Maintenance DOD 4,556
Title IV - Energy and Water Development DOE 51,025
Title V - Financial Services and General Government GSA 4,800
Title VII - Department of the Interior and Environmental Protection Agency DOI, EPA 8,384
Title VIII - Departments of Labor, H&HS, Ed, & related DOL, HHS, DOE 538
Title X - Military Construction and Veterans Affairs DOD/VA 1,270
Title XII - Transportation, Housing and Urban Development and related agencies DOT, HUD 1,605
Title XIV - State Fiscal Stabilization Fund DOE 8,790
Total 80,968

Title IV – Energy and Water Development
Agency $M Purpose
Dept of Defense 4800 construction, water related environmental infrastructure
Dept of the Interior 1,000 water and related resources
Dept. of Energy 16,800 Energy efficiency and renewable energy
4,500 electricity delivery and energy reliability
3,400 fossil energy research and development
483 non-defense environmental cleanup
390 uranium enrichment decontamination and decommissioning fund
1,600 science
400 advanced research projects agency
6,000 innovative technology loan guarantee program
15 inspector general
5,127 defense environmental cleanup
10 WAPA O&M
3,250 borrowing authority for BPA transmission
3,250 borrowing authority for WAPA transmission
Total 51,025

Title IV – Energy only
Agency $M Purpose
Dept. of Energy 16,800 Energy efficiency and renewable energy
4,500
electricity delivery and energy reliability
3,400
fossil energy research and development
1,600
science
400
advanced research projects agency
6,000
innovative technology loan guarantee program
15
inspector general
10
WAPA O&M
3,250
borrowing authority for BPA transmission
3,250
borrowing authority for WAPA transmission
Total 39,225

Congressional Research Service exclusions
Title Agency sub-sector $M Purpose
VII Interior Bureau of Land Management 180 may include energy-efficient retrofits
U.S. Fish and Wildlife Service 115 may include energy-efficient retrofits
National Park Service 589 may include energy-efficient retrofits
EPA state revolving loan funds 240 to address green infrastructure
clean water state revolving funds 800 to address green infrastructure
drinking water state revolving funds 400 to address green infrastructure
X Defense Navy and Marine Corps 100 energy conservation and alternative energy
defense-wide 120 Energy Conservation Investment Program
Veterans Affairs medical facilities 1,000 non-recurring maintenance including energy projects
National Cemetery Administration 50 non-recurring maintenance including energy projects
XII
HUD
Public Housing Capital Fund 1,000
investments that leverage private funding for conservation
retrofits
Native American Housing Block
Grants 255 including energy efficiency
Assisted Housing Stability 250 energy retrofit and green investments
XIV
Education
8,790
modernization, reno, repairs consistent with greenbuilding
ratings
Total 13,889

Recovery Act, specific energy-related allocations
Title Agency Sector $M
Title III Department of Defense energy efficiency 300
Title IV Department of Energy various 39,225
Title V General Services Admin. energy efficiency 4,800
Title VII Dept. of the Interior, EPA energy efficiency 300
Title VIII Dept. of Labor training 538
Title X DOD, Veterans Affairs construction/housing ns
Title XII Dept. of Transportation, HUD transportation 100
Title XIV Dept. of Educ. construction/housing ns
Total 45,263
Source: Congressional Research Service

Recovery Act energy outlays = $67 B
Tax incentives
$22 B
Energy-specific
direct spending
$45 B

Recovery Act, specific energy-related allocations
Title Agency Sector $M
Title III Department of Defense energy efficiency 300
Title IV Department of Energy various 39,225
Title V General Services Admin. energy efficiency 4,500
Title VII Dept. of the Interior, EPA energy efficiency 300
Title VIII Dept. of Labor training 538
Title X DOD, Veterans Affairs construction/housing ns
Title XII Dept. of Transportation, HUD transportation 100
Title XIV Dept. of Educ. construction/housing ns
Total 45,263
Source: Congressional Research Service
4,800
44,325

Dept. of Energy allocations, adjusted
$M sub $M Purpose
16,800 Energy efficiency and renewable energy
3,200 energy efficiency block grants
5,000 weatherization assistance
3,100 state energy programs
2,500 research and development
2,000 advanced batteries
300 Alternative Fueled Vehicles Pilot Grant Program
400 Transportation Electrification
300 Energy Efficient Appliance rebate program
4,500 electricity delivery and energy reliability
100 training
80 resource assessment, transmission demand requirements
10 section 1305 of Public law 110-140
1,600 science
400 advanced research projects agency
15 inspector general
10 WAPA O&M
borrowing authority 3,250 for WAPA transmission
39,225
70 uranium enrichment
35,940

$M sub $M Purpose
13,800 Energy efficiency and renewable energy
35,940
3,200 energy efficiency block grants
5,000 weatherization assistance
3,100 state energy programs
borrowing authority for WAPA transmission
3,250
borrowing authority for BPA transmission
3,250
innovative technology loan guarantee program
6,000
advanced research projects agency
400
science
1,600
fossil energy research and development
3,330
electricity delivery and energy reliability
4,310
research 2,500 and development
18,330
Dept. of Energy allocations, adjusted -- again

DOE allocations for capital projects
$M Purpose
2,500 research and development
3,250 borrowing authority for WAPA transmission
18,330

Office of Energy Efficiency
Office of Fossil Fuels $2.5 B
$3.4 B
FutureGen
$1 B
Clean Coal Power Initiative
$800 M
?
$1.6 B
?
$1.6 B
Biomass
$800 M
Geothermal
$400 M
DOE Recovery Act funding for R&D

FutureGen
December 2003: $1 B, zero-emissions coal project
 275-MW IGCC, originally budgeted at $900 million
 December 2007: Mattoon, Indiana, site chosen
Cost rises to $1.8 billion
 January 2008: program scrapped and restructured
 Current fate: old or new? TBA

DOE loan authority under the Recovery Act
Renewable energy and electric power transmission loan guarantee program $6 B
WAPA loan authority $3.25
BPA loan authority $3.25
Total $12.5 B

 WAPA transmission projects
• Solicitation results due in June
 BPA transmission projects ($802 M)
• McNary-Day: $246 M, 79 miles, 500-kV
• Big Eddy: $115 M, 28 miles, 500-kV
• I-5 Reinforcement: $342 M, 90 miles
• Little Goose: $99 M, 40 mile, 500-kV

DOE’s innovative loan guarantee program: a storied history
Solicitation for issued closed $B
Mixed technologies 2006 Nov 08 4
front-end nuclear facilities (uranium enrichment) June 08 Dec 08 2
Nuclear power plants June 08 Dec 08 18.5
Advanced renewables June 08 Feb 09 10
Advanced fossil technologies (CCS) Sept 08 March 09 8
Total 42.5

Recovery Act “new” loan guarantee program
Renewable energy and electric power transmission loan guarantee program
 Renewable energy (incremental hydropower, thermal energy, manufacturing)
 Transmission (upgrading and "reconductoring")
 "Leading edge" biofuel ($500 M cap)

DOE loan authority $B w/leverage
existing loan guarantee program 42.5
from the Recovery Act 6 60 - 120
Total 102 -165

Recovery Act tax incentives
Recovery Act Energy Incentives $M
extension of the Production Tax Credit 13,143
Investment Tax Credit in lieu of PTC 285
cash grant in lieu of ITC 5
repeal of limitations for small wind farms 604
Coordination with renewable energy grants 5
Increased limits for Clean Renewable Energy Bonds 578
new limit on CREBs ($1.6B) 803
Extension and modification of credit for non-business energy property 2,304
Modification of credit for residential energy efficient property 268
Temporary increase in credit for alternative fuel vehicle refueling property 54
various credits for plug-in electric vehicles 2,002
Increased exclusion amount for commuter transit benefits and transit passes 192
credit for investment in advanced energy property (manufacturing) 1600
Total 21,843

Recovery Act tax incentives, adjusted
Recovery Act energy incentives for capital projects $M
extension of the Production Tax Credit 13,143
Investment Tax Credit in lieu of PTC 285
cash grant in lieu of ITC 5
repeal of limitations for small wind farms 604
Coordination with renewable energy grants 5
Increased limits for Clean Renewable Energy Bonds 578
new limit on CREBs ($1.6B) 803
Total 15,423

Recovery Act tax incentive extensions
 Production Tax Credit extensions
 wind farms 2012
 geothermal, biomass, landfill gas, etc. 2013
 Investment Tax Credit in lieu of PTC
 Cash in lieu of ITC (30%, payable in 60 days)
 deadlines: in construction by 2010

Putting it all back together
Electric power-specific capital project allocations in the Recovery Act
DOE direct spending
$18.3 B - $6 B = $11.8 B
Tax incentives
$15.4 B = $15.4 B
DOE loan authority
$6 B - $500 M = $5.5 with leverage = $55 - $110 B
Total $32.7 B $82.2 - $137.4 B

EIA estimates
 Wind: 201 B kWh by 2012 vs. 86 B kWh w/o stimulus
 Geothermal: 3 GW by 2013 vs. 2.6 GW
 Biomass: 18% higher by 2030 with ARRA

ARRA’s impact
 Wind: 10 GW to 12 GW by
 IGCC: 3 GW to 5 GW by 2020
 Nuclear power: 11 GW to 12 GW by 2020
Source: GF Energy

Deadlines,
PTC: 2012/wind, 2013/geothermal, biomass, etc.
ITC: 2012/wind, 2013/geothermal, biomass, etc.
Cash grant: in service by Dec. 31, 2010
WAPA loan authority: Sept. 30, 2012
Temporary loan authority ($6B): Sept. 30, 2011
Goal: 50% spent 120 days from funding (June 17)!

Delays
 Use of the depreciation
 Treasury has not written cash in lieu rules
 Who takes the risk in public-private scheme?
 Loan grant rules not yet written

and Pledges
Secretary Chu’s initiatives
 Rolling appraisals
 Simplifying paperwork
 Outside partners (banks)
 Subsidy costs rolled into the loans

Canceled coal-fired projects
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1Q 2Q 3Q 4Q
MW
2007 cancellations
2008 cancellations
2009 (YTD) cancellations
Source: Platts

1,050,000
1,000,000
950,000
900,000
850,000
800,000
750,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Platts
Renewable
Nuclear
Natural Gas
Coal
Capacity
Summer
Demand
The Baseload Gap

Expected capacity additions by fuel types
Source: Platts
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
MW
COAL
NG
RENEW
URAN

ERCOT Reserve Margin
115,000
110,000
105,000
100,000
95,000
90,000
85,000
80,000
75,000
70,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
MRO Reserve Margin
80000
70000
60000
50000
40000
30000
20000
10000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
NPCC Reserve Margin
90000
85000
80000
75000
70000
65000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
Reserve margins by region
Source: Platts, NERC data as of year-end 2007

Reserve margins by region
RFC Reserve Margin
250000
245000
240000
235000
230000
225000
220000
215000
210000
205000
200000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
SERC Reserve Margin
320000
300000
280000
260000
240000
220000
200000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
SPP
70000
65000
60000
55000
50000
45000
40000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
WECC Reserve Margin
240000
230000
220000
210000
200000
190000
180000
170000
160000
150000
140000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Capacity (MW)
Reserve Margin
Uranium
Renew able
Oil
Natural Gas
Coal
Existing
Source: Platts, NERC data as of year-end 2007

Looking further out
 Demand destruction
 Perverse effect of ARRA energy efficiency measures
 Transmission bottlenecks
 R&D benefits (IGCC, nuclear)

Stimulus bill energy opportunities

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