The Energy Crisis

1
The Energy Crisis

• Keith McCoy
• Vice President, Energy Resources Policy

April 2006
2
Prices Rise While Prices of Manufactured Goods
Fall (1987-2004)
150
Inflation Index
(1987 100)
GDP
140
130
120
Manufacturing prices
110
100
1987
1989
1991
1993
1995
1997
1999
2001
2003
Source U.S. Department of Commerce Bureau of
Economic Analysis
3
U.S. is Leader in Manufacturing
Net change 1982-2004
Source World Bank and Economy.com Value added
calculates the dollar vale created when materials
and labor are melded into finished products.
(The whole is worth more than the sum of its
parts)
4
Industrials Energy Usage
Industrial Energys Usage Industrial Sector
Energy Consumption, in percent of total energy
consumed (Btu)
Industry Uses 1/3 Energy Supply, End-Use Sectors
of Energy, in percent of total energy consumed
(Btu)
Source Department of Energy, Energy Information
Administration
5
U.S. Economy is More Energy Efficient (energy
intensity)
200
Primary Energy Use
Energy Use at Constant 1972 Energy/GDP
150
Quadrillion Btu
Actual Energy Use
100
50
0
1950
1960
1970
1980
1990
2000
Source Department of Energy, Energy Information
Administration
6
Electricity Generation Capacity Additions by Fuel
Type, 2001-2025 (gigawatts)
Natural gas
Coal
Giga- watts
Renewables
Source Department of Energy, Annual Energy
Outlook 2005
7
Total U.S. Electricity Demand Growth
Total (right axis)
Forecast
Percent change (left axis)
Source Short-term Energy Outlook, Dept. of
Energy 2006
8
ENERGY POLICY ACT OF 2005

• Biggest Winners
• Nuclear Industry
• Clean Coal Technology
• Infrastructure
• Innovative Technology

9
NUCLEAR

• Production tax credit of 1.8 cents per kWh for
  the first 6,000 MW.
• Price Anderson Act extends liability protection
  for NRC licensees and DOE contractors to 2025
• Standby support for delays beyond 180 days
  (support for up to 6 reactors)

10
U.S. electric generation from nuclear power
1973-2025
Billion KiloWatt hours
Source Department of Energy, Energy Information
Administration
11
CLEAN COAL

• Tax credits, loan guarantees and direct grants
  (existing, under development, and newly proposed)
• Incentives for clean coal, industrial
  gasification and Integrated Gasification Combined
  (IGCC) plants
• 200 million annually from 2006-2014
• Tax credits up to 1.3 billion

12
Top 10 Coal Reserve Countries
Source Department of Energy, Annual Energy
Outlook 2005
13
INFRASTRUCTURE

• Gives federal government primacy over siting of
  LNG facilities
• Expands qualified facilities for NEPA exclusion
• Financial incentives for the expansion and
  development of refineries
• Royalty relief for marginal wells (e.g. deep
  water, Alaskan and hydrates)
• OCS inventory

14
U.S. LNG Imports by Country, 1992-2003
Nigeria
Qatar
Trinidad and Tobago
Other
Australia
Algeria
Source Department of Energy, Energy Information
Administration
15
Current U.S. LNG Import Terminals
Source Department of Energy, Energy Information
Administration
16
Small number of small LNG facilities throughout
the US
Everett
Cove Point
Elba Island
Marine Terminal Import (4)
Stranded Utility (3)
Storage (with liquefaction) (57)
Vehicular Fuel (2)
Storage (without liquefaction) (39)
Nitrogen rejection unit or other special
processing (5)
Lake Charles
Stranded Utility A stranded local utility system
is typically very small and too far from the
pipeline grid to be economically
connected. Nitrogen Rejection Unit At NRU
facilities, the entire gas stream is liquefied to
remove impurities then regasified and sent on as
pipeline-quality gas.
Source Department of Energy, Energy Information
Administration
17
Natural Gas Reserves Long term World LNG supply
outlook robust

Global LNG Supply
Global LNG Supply Facilities
Existing Under Construction Proposed
Source Cedigaz, NPC
18
Natural Gas Net Imports, 2003 and 2025 (trillion
cubic feet)
Trillion Cubic feet
Source Department of Energy, Annual Energy
Outlook 2005
19
Natural Gas Production, Consumption, and
Imports, 1970-2025 (trillion cubic feet)
Consumption
28
Trillion Cubic feet
Net imports
15
Production
Source Department of Energy, Annual Energy
Outlook 2005
20
(No Transcript)
21
Natural Gas Henry Hub Spot Prices(Base Case and
95 Confidence Interval)
The confidence intervals show /- 2 standard
errors based on the properties of the model.
Source Short-term Energy Outlook, Dept. of
Energy 2006
22
U.S. Working Natural Gas in Storage(
Differences from Previous 5-Yr Average)
Forecast
Source Short-term Energy Outlook, Dept. of
Energy 2006
23
INNOVATIVE TECHNOLOGY

• Hybrids
• Hydrogen
• Biofuels
• Fuel Cells

24
U.S. Energy Consumption Energy 2004,as a percent
of quadrillion BTU
Source Dept. of Energy, Energy Information
Administration Biomass includes black liquor,
wood/wood waste liquids, wood/wood waste solids,
municipal solid waste (MSW), landfill gas,
agriculture byproducts/crops, sludge waste,
tires, alcohol fuels (primarily ethanol derived
from corn and blended into motor gasoline) and
other biomass solids, liquids and gases.
25
Renewable Energy Consumption by Energy Use Sector
2004,as a percent of total quadrillion BTU
Source Dept. of Energy, Energy Information
Administration Preliminary
26
Forecasted World Demand for Renewable Energy
Forecast
Rest of the world
India
China
Western Europe
USA
Source Dept. of Energy, Energy Information
Administration
27
Renewable Energy Generating Capacity and
Generation Forecasts
Giga- watts
Source Dept. of Energy, Energy Information
Administration
28
Ethanol Largely Comes from Corn Source
Forecast
29
Growing Number of Alternative-Fueled Vehicles in
the U.S., 1995-2004
Source Dept. of Energy, Energy Information
Administration
30
Number of Alternative Fuel and Hybrid Vehicles
2004, total and as a percent of total
Source Dept. of Energy, Energy Information
Administration
31
(No Transcript)
32
Natural Gas prices and production before after
Katrina
Natural gas price (right axis)
Natural Gas Production (left axis)
2050
11
Natural gas, Dollars per Thousand Cubic Feet
Natural Gas Withdrawals, Billion Cubic Feet
2000
10
1950
1900
9
1850
1800
8
1750
1700
7
1650
1600
6
Jun-05
Jul-05
August-05
September-05
October-05
November-05
Source Department of Energy , Energy
Information Administration
33
Natural Gas Wellhead Prices
12
10
Natural Gas Wellhead Closing Price
8
6
4
2
0
Jan-80
Jan-84
Jan-88
Jan-92
Jan-96
Jan-00
Jan-04
Source EcoWin
34
Total U.S. Natural Gas Demand Growth
Total (right axis)
Forecast
Percent change (left axis)
Source Short-term Energy Outlook, Dept. of
Energy 2006
35
U.S. LNG Imports, 1990-2025
New terminals
History
Projections
Trillion Cubic Feet
Existing terminals
Source Department of Energy, Annual Energy
Outlook 2005
36
Historic and Proposed Baseload Capacity at
Existing U.S. Receiving Terminals
Historic
Projected
Cove Point, MD
Billions Cubic Feet Per Year
Elba Island, GA
Lake Charles, LA
Everett, MA
Source Dept. of Energy, Energy Information
Administration
37
Chinas Energy Usage,as a percent of world
consumption
29.2
7
20.2
Coal
Oil
3.3
1985
2003
1985
2003
Source U.S. Department of Energys Energy
Information Agency
38
Chinas Energy Usage,as a percent of world
consumption
4.2
1.4
0.8
Natural Gas
Hydro
10.5
1985
2003
2003
1985
Source U.S. Department of Energys Energy
Information Agency
39
Campaign Approach

• Centralized campaign management and control
• Use outside the beltway focus as primary
  methodology
• Fusion of inside and outside the beltway
  strategies and tactics
• Capitalize on existing resources for direct
  lobbying and strategic communication
• Collect detailed intelligence to anticipate and
  counter opposition tactics
• Rapid response and information dissemination

40
Campaign Elements
Exec Com
ACC
NAM
Steering Com
Steering Com
AFPA
Steering Com
41
Surround Strategy
42
Field Operations 3/2/06
Baucus
Coleman
Smith
Salazar
Dole
Dole
Dole
Graham
43
Field Operations 3/15/06
Baucus
Coleman
Dayton
Sununu
Kohl
Smith
Levin
Stabenow
Lautenberg
Harkin
Menedez
Bayh
Byrd
Rockefeller
Salazar
Dole
Burr
Graham
44
Consumer Alliance for Energy Security Summary

• Campaign team in place
• Focus is outside the beltway
• Tailored plans for Members
• Environment is ripe for redefining the debate