Resource Alternatives

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Energy Choices Resources for Arizonas Future
Brad Albert APS - Director of Resource
Planning August 20, 2008
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Outline

• Challenges We Face
• Near-Term Plans
• Energy Choices for the Long-Term

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The Challenges We Face

• Growth, increasing energy usage
• Climate change policies
• Natural gas price volatility
• Rising construction costs for infrastructure
  projects
• Technology solutions expensive or not ready

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Electricity is Key to a Growing Arizona Economy
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The Growth Challenge Number of APS Customers
Doubles Every 20 Years
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Natural Gas Prices and Volatility
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Raw Material Price Increases
358
369
154
4
120
3
90
JAN. 1, 2001 MAY 5, 2008
2
60
80
1
30
325
0
0
Steel (PER POUND)
Aluminum (PER POUND)
Copper (PER POUND)
Gas (PER GALLON)
Oil (PER BARREL)
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The Infrastructure Challenge Despite Growth, We
Must Provide Reliable, Affordable Power

• Were well positioned near-term, but will
  take effort to meet our need
• Load management
• Demand response
• Energy efficiency and conservation
• Distributed energy
• Renewable generation
• Gas resources
• Wholesale market
• New peaking resources

Total Resource Requirements
Total Existing Resources
Megawatts
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We Have an Effective Load Management Program

• Nations largest time-of-usage rate program
• Sponsor discounts on efficient lighting
• Rebates on high-efficiency air conditioning
  systems
• Rebates/ incentives purchasing solar and other
  renewable systems

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Were Off to a Great Start with Renewables
Landfill Gas
Wind
Solar
Geothermal
Biomass
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Were Adding Largest Solar Facility

• Solana Generating Station
• 280 megawatts, enough for 70,000 homes
• Concentrating solar project, can produce power
  when sun is not shining
• Largest in world
• Expected in 2011

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Gas Resources We Scour the Market for Good
Dealsand We Build New Units as Necessary

• Market purchase
• Example 560 MW combined-cycle natural gas plant
• Summer 2010

• APS addition
• Two 48 MW combustion turbines
• Serve Yuma area
• Summer 2008

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We are Well Positioned Through 2015, but What
About the Long-Term?

• Continue to promote conservation
• Continue energy efficiency programs
• Develop new ways to reduce demand
• Adopt new technologies, such as smart meters,
  to benefit customers

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We Need to Start Now to Prepare to Meet the
Energy Needs of Arizona Beyond 2015
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Theres a Lot to Consider . . .

• Costs
• Environmental impacts
• Risks
• Fuel prices
• Diversity of energy sources
• Construction cost
• Energy policy (climate, taxes, mandates)

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Consider These Four Sources, Each With Benefits
and Risks
Coal
Nuclear
Natural Gas
Renewables
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Coal

• Benefits
• Mature technology
• Less fuel price volatility
• Energy security Huge U.S. reserves
• Risks
• Climate change policy
• Development and construction
• Difficult to permit
• Long construction lead time
• Cost escalation pressure
• Need for new transmission lines
• Environmental
• Public opposition

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Nuclear

• Benefits
• No greenhouse gas emissions
• Existing technology
• Less fuel cost volatility
• Risks
• Development risk
• Nuclear licensing and approval
• Long construction period
• Cost escalation pressure
• Water use for cooling
• Spent fuel disposal
• Large initial investment

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Renewables

• Benefits
• No greenhouse gas emissions
• Less fuel price volatility
• Existing and emerging technology
• Risks
• Dependence on tax subsidies
• Cost still higher than conventional resources
• Land use
• Competition for resources
• Availability of resources

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Gas

• Benefits
• Investment
• Lower initial investment than coal or nuclear
• Fewer miles of transmission
• Wholesale market availability
• Mature technology
• Build in small increments
• Shorter lead time
• Risks
• Fuel price volatility
• Pipeline infrastructure
• Carbon tax potential

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Summary

• Growth requires major infrastructure
• Conservation / efficiency play a key role
• Near-term plan being implemented
• Evaluating long-term options
• Stakeholder Engagement
• Resource Plan Filing with ACC

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• Comments/Questions?
• For more information
• www.aps.com/resources
• Whywebuildit.com