Environmental Challenges in Electric Supply Planning

May 4, 2006

Overview Mike Wilder

Energy Supply Fundamentals Jeff Burleson

Environmental Challenges Steve Ewald Planning for the Future Jeff Burleson

Georgia Power

8,800 Employees Across Georgia

2 Million Customers in 153 of Georgia's 159 Counties

13,000 Miles of Transmission Lines

61,000 Miles of Distribution Lines

14,000 MW of Generating Capacity

#’s of Plants

19 Hydro 10 Oil/Gas 7 Coal 2 Nuclear

Power Generation

Capacity - 2006

Hydro5.8%

Nuclear10.8%

D S M2.7%

Gas & Oil35.0%

Coal45.7%

What are the potential technologies to fill Southern

Company’s needs?

Gas-Fired

Pulverized Coal

Coal Gasification

Nuclear

Renewables / Other Alternatives

Comparison of Coal, Oil and Gas PricingUpdated as of January 1, 2006

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

$12.00

$13.00

$14.00

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Fu

el P

ric

e (

$/m

mB

tu)

Historical Coal * Historical Gas ^West Texas Intermediate Crude Oil PRB 8,800 Btu/lb, 0.8#SO2, FOB MineColombian 11,300 Btu/Lb; <1%; FOB Port Bolivar

Current Long Range Gas ForecastsHenry Hub, $/MMBtu

Consultant #3 October ‘05

EIA Natural Gas Price ForecastElectric Power Sector

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

20

04

$ p

er

mill

ion

Btu

EIA 2005 gas price forecast (2004$/mmbtu) EIA 2006 Gas Price forecast (2004$/mmBtu)

Gas-Fired Generation – SummaryPros

• Multiple configurations allow flexible sizing

• Low SO2, NOx, and CO2 emissions; no mercury emissions

• Less capital intensive – Lower base rate impact

• Short construction period • Easier to site

– Low water usage– Needs smaller footprint

• Recent operational experience• Ability to add coal gasification

technology

Cons

• Uncertainty of gas supply• Concerns about gas price

volatility• Long-term performance is

unproven

US Appalachian Basin 55 billion tons

Interior US/ Illinois Basin 68 billion tons

Rocky Mtns and PRB Basins 150 billion Southern Appalachian (Ala.Basin)

.3 billion tons

US Coal Recoverable Reserves

Georgia Power purchased 34.6million

tons in 2004 for itself and

other plant co-owners

Coal Generation – Summary

Pros

• 250 years of known/reliable domestic reserves

• Experience in operating coal plants

• Low variable costs• Less fuel price volatility than

gas• Aftermarket ash sales

Cons

• High capital costs– Large rate base impacts

• Environmental concerns• Siting

– Proximity to rail, barge, or mine– Larger footprint– Water

• Longer development period– 5-6 years versus 3 for a CC– More risk from decision to in-

service• Coal and ash storage issues• Permitting

Coal Gasification Generation – Summary

Pros

• Low variable costs• Less fuel price volatility than

gas• Southern’s prior involvement• Potential for synfuel tax

credits• DOE support• 250 years of known/reliable

domestic reserves• Can be added to existing

combined cycles• Can burn gas as a secondary

fuel

Cons

• Technology risk• Must be located in close

proximity to rail or barge• Coal and ash storage issues• High capital costs

– Large rate base impacts– Unknown environmental

classification

Nuclear Generation – Summary

Pros• No emissions• Low fuel price volatility• Expected generic design pre-

approval (Westinghouse/GE)• Federal government support

Cons• Long development periods

– Site permitting license process takes about four years

• Public opinion / politics• Unresolved spent fuel storage

issues– Yucca Mountain

• Maturity of cost and schedule estimate

• Spent fuel transportation • High capital costs

– Large rate base impacts– Design is subject to regulatory

revisions/mandates after commercial operation

Renewable Generation

• Wind

• Solar

• Hydro

• Biomass

A Matter of Scale

Coal

Hydro

Solar Wind

Biomass

1 Plant ~ 1800 MW

1 Turbine ~ 3 MW 1 Installation ~ 45 kW

1 Dam ~ 45 MW

Georgia Power Peak Demand = 16,177 MW (7/26/05)

1 Unit ~ 125 MW

VS.

1 MW = Energy Needed To Power 250 Homes

Energy Efficiency and Demand Side Management

• Programs offered include:– Energy Audits– Energy Star New Home Program– Energy Star Appliances– Low Income Weatherization– Powercredit– Approximately 1,000 MW’s of demand reduction

through Pricing programs– Distribution Efficiency Program

• Additional programs will be proposed next year

Renewables – Summary

Wind Lack of sustained velocity

Solar Lack of sufficient intensity

Hydro Most Commercial sites developed

Biomass Combustion Process

Landfill Gas Combustion Process

Green Energy Program awaiting completion of Green Energy Generator construction

Environmental Challenges in Electric Supply Planning

May 4, 2006

Overview Mike Wilder

Energy Supply Fundamentals Jeff Burleson

Environmental Challenges Steve Ewald Planning for the Future Jeff Burleson

Federal Environmental Laws Affecting Electric Utilities

1862 1872 1882 1892 1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2001

YOSVA

RTCRHA

LA

NBRAAA

WA

IA FEATH

NPS

MBTA

OPA

MBCA

TAFWCABPA

AEPA

NLR AWPASCS

FAWRA

FIFRA

WPCA

AEA FWA

CAA-55PAA

FWCAA-58

WLDA

FHSANFMUA

NHPAPFWFOIA

WSRAEARCHSA

NEPAEQIACAAEPA

OSHAFAWRAA-70

CAAA-77CWA

SMCRASWRCA

SDWAA-77

ESATAPA

HMTA

ARPA

NWPAESAA-82

RCRAA-84WLDIMPRSAA-82

SDWAA-86SARA-86

NAWCA

AOA

AMFAARPAA-88

AIAASBCAA-88

ESAA-88FIRAA-88

TOSCAA-88NWPAA-88CPDRAA-88

NMSPAA-888FCRPA

MMPAA-88ODBASFA

FWLA-88ICPBD

WRPAAFCA

AQA

FCMHSAESCA

BLBAFWPCAMPRSACZMANCA

FEPCAFWSAMMPA

TOSCAFLPMARCRANFMA

CZMAA-76

APASWDA

CERCLACZMIA

COWLDAFWLCA

MPRSAA-80ANISCA

LLA-81

WQA

EDPOPARECA

CAA-90CCRA

CLFWRAHMTUSA

NEEAPPA

PPVAIEREAANTPAGLCPA

ASACZMAA-90

WRDA

FFCACERFA

CRAA-92

BLRAERDDAAEAWANOPPAPTSA

UMTRCAESAA-78

QCANCPA

0

No.

of

Law

s

150

100

50

2003 Status Report Shows U.S. Air Cleanest Ever Since 1970EPA Press Release - Washington, D.C.- September 22, 2004

• America's air is the cleanest ever in three decades

• Emissions have decrease even as our economy has increased nearly 200%

• Since 1970, the aggregate emissions for the six major pollutants have been cut 53%

CO - 55%

NOx - 30%

SO2 - 52%

VOC - 53%

Pb - 99%

Thursday, June 16, 2005

Metro Atlanta Air Quality Shows Dramatic Improvement Area in Attainment with the 1-Hour Ozone Standard for the First Time Since 1978

“Metro Atlanta has made significant progress in improving its air quality …” said Governor Sonny Perdue. 

Increased partnership with industry, including significant investment from Georgia Power to lower the emissions on their coal-fired power plants. # # # 

Press Release Governor Sonny Perdue

-80%

-60%

-40%

-20%

0%

20%

40%

60%

1990 1995 2000 2003

PopulationUp 28%

SO2 tonsDown 39%

NOx tonsDown 56%

Retail SalesUp 40%

Georgia Growth Emissions

Georgia Power Historical Emission Trends

SCRsSCRs

Plant Bowen

Controls installed to address 1-Hour Ozone Standard: Selective Catalytic Reduction (SCR) at Plants Bowen Units 1-4, Wansley Units 1-2, and Hammond Unit 4; combustion controls at Plants Hammond, McDonough, Yates, Branch, and Scherer.

Cooling Tower Retrofits

Plant Branch

Plant Yates

Environmental Issues Timeline2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

NOx 8-hour Ozone Nonattainment

Clean Air Mercury Rule

Regional Haze

PM2.5 Nonattainment

New Source Review

Clean Air Interstate Rule

NOx 1-hour Ozone

NOx SO2 Hg

8-hour Ozone Nonattainment Designations

Atlanta:• Attain by 2007 or • “Bump-up” SIP due 2007• Attain by 2010

Macon:• SIP due 2007• Attain by 2009

DADE

WALKER

CHATTOOGA

FLOYD

POLK

GORDON

WHITFIELD

MURRAY

GILMER

PICKENS

CRISP

WILKES

T ALIAFERRO

W ARREN

JEFFERSON

GLASCOCK

BURKE

COLUMBIA

LINCOLN

McDU

LAURENS

DODGE

PULASKI

WILCOX

TELFAIR

WHEELER

HOUSTON

PEACH

MONROE

JASPER

JONES

PUTNAM

HANCOCK

TWIGGS

BALDWINW ASHINGTON

JOHNSONWILKINSON

BLECKLEY

IRWIN COFFEE

ATKINSON

CLINCH

ECHOLS

LOWNDES

BROOKS

COLQUITT

COOK

LANIER

TIFT

TURNER

BERRIEN

BEN HILL

W ARE

CHARLTON

CAMDEN

GLYNN

McINTOSH

W AYNE

BRANTLEY

PIERCE

BACON

EFFINGHAM

CHA THAM

BUTTS

LONG

LIBERTY

BRYAN

BULLOCH

SCREVEN

JENKINS

EMANUEL

CANDLER

EV ANS

TATTNAL

APPLING

JEFFDAVIS

TOOMBS

MONT-GOMERY

TREUTLEN

FANNIN

UNION

TOWNS

COBB

PAULDING

HARALSON

HEARD

COWETA

DOUGLAS

FULTON

FAYETTE

CHEROKEE

CLAYTON

HENR Y

GWINNETT

DEKALBROCK-DALE

WORTH

LEETERRELL

RANDOLPH

QUITMAN

CLAY

CALHOUNDOUGHERTY

EARLYBAKER

MITCHELLMILLER

SEMINOLE

DECA TUR GRADY

THOMAS

SUMTER

DOOLY

STEWART

WEBSTER

CHA TTA-HOOCHEE

MARION

SCHLEY

TAYLOR

MACON

CRA WFORD

UPSON

TALBOT

HARRIS

TROUP

MERIWETHER

PIKE LAMAR

JACKSON

FORSYTH

LUMPKIN

RABUN

STEPHENS

BANKS FRANKLIN

HART

ELBERTMADISON

OGLETHORPE

CLARKE

OCONEE

MORGAN

GREENE

WHITE

HABERSHAM

HALL

WALTON

NEWTON

SPALDING

BARTOW

CARROLL

RICHMOND

BARROW

DAWSON

BIBB

MUSCOGEE

BARROW

BIBB

RICHMOND

CATOOSA

• Designations – Dec 17, 2004• SIPs due 2007• Attain ~ 2010 to 2012

WALKER

CHATTOOGA

FLOYD

POLK

GORDON

WHITFIELD

MURRAY

GILMER

PICKENS

CRISP

WILKES

T ALIAFERRO

WARREN

JEFFERSON

GLASCOCK

BURKE

COLUMBIA

LINCOLN

McDU

LAURENS

DODGE

PULASKI

WILCOX

TELFAIR

WHEELER

HOUSTON

PEACH

MONROE

JASPER

JONES

PUTNAM

HANCOCK

TWIGGS

BALDWINW ASHINGTON

JOHNSONWILKINSON

BLECKLEY

IRWIN COFFEE

A TKINSON

CLINCH

ECHOLS

LOWNDES

BROOKS

COLQUITT

COOK

LANIER

TIFT

TURNER

BERRIEN

BEN HILL

W ARE

CHARLTON

CAMDEN

GLYNN

McINTOSH

W AYNE

BRANTLEY

PIERCE

BACON

EFFINGHAM

CHA THAM

BUTTS

LONG

LIBERTY

BRYAN

BULLOCH

SCREVEN

JENKINS

EMANUEL

CANDLER

EV ANS

TATTNAL

APPLING

JEFFDAVIS

TOOMBS

MONT-GOMERY

TREUTLEN

FANNIN

UNION

TOWNS

PAULDING

HARALSON

HEARD

COWETA

DOUGLAS

FAYETTE

CHEROKEE

HENR Y

ROCK-DALE

WORTH

LEETERRELL

RANDOLPH

QUITMAN

CLAY

CALHOUNDOUGHERTY

EARLYBAKER

MITCHELLMILLER

SEMINOLE

DECA TUR GRADY

THOMAS

SUMTER

DOOLY

STEWART

WEBSTER

CHA TTA-HOOCHEE

MARION

SCHLEY

TAYLOR

MACON

CRA WFORD

UPSON

TALBOT

TROUP

MERIWETHER

PIKE LAMAR

JACKSON

FORSYTH

LUMPKIN

RABUN

STEPHENS

BANKS FRANKLIN

HART

ELBERT

OGLETHORPE

CLARKE

MORGAN

GREENE

WHITE

HABERSHAM

Fine Particulate Nonattainment Areas

HALL

WALTON

NEWTON

SPALDING

BARTOW

CARROLL

RICHMOND

BARROW

DAWSON

BIBB

AtlantaChattanoogaFloyd CountyMacon

BIBB

RICHMOND

CLARKE

MUSCOGEE

HARRIS

OCONEE

MADISON

DADECA TOOSA

COBB

FULTONCLAYTON

GWINNETT

DEKALB

Clean Air Interstate Rule (CAIR)• Rule Finalized in March 2005

• SO2 Emissions Reductions – 45% reductions from 2003 levels by 2010– 57% reductions from 2003 levels by 2015– Anticipated 73% reduction at full

implementation

• NOx Emissions Reductions– 53% reductions from 2003 levels by 2009– 61% reduction for 2003 levels by 2017

Clean Air Mercury Rule• Rule finalized March 2005

• 38 ton national cap on coal-fired power plants in 2010

• 15 ton national cap on coal-fired power plants in 2018

• Equivalent to a 70% reduction when fully implemented

Man-Made Mercury Sources Worldwide

United States140.6

South & Central America

176.2

Europe508.3

Africa246.1

Oceania48.3

North America-balance

64.4

Asia1,117.2

U.S. electric utilities emit ~ one percent of total global mercury emissionsU.S. electric utilities emit ~ one percent of total global mercury emissions

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Clean Air Interstate Rule

Clean Air Mercury Rule

PM2.5 & 8-Hr. Ozone

Nonattainment

'90 '95 '00 '03

Georgia Power’s Environmental Commitment Past & Projected

SO2

NOx

Low Sulfur Coal

Low NOx Burners on Larger Boilers

SCR’s @ Bowen, Wansley & Hammond 4

Fuel Switching @ Scherer

Low NOx Burners @ Branch

$1 Billion Spent $3 Billion Potentially

Bowen 3&4 Scrubbers

Wansley 1 & 2 Scrubbers

Bowen 1 & 2 Scrubbers

TBD

TBD

TBD

TBD

TBD

TBD

TBD

TBD

TBD

TBD

TBD

Mercury

Coal Fired Boiler

SCRAir

HeaterElectrostati

cPrecipitato

r

Scrubber

Dust & Hg

Control

SO2& Hg(acid

gases)NOx &

Hg Control

NewStac

k

BottomAsh

CoalMill Flyas

h

Gypsum

Low NOxBurners

Fan

Ozone

CAIR,Regional Haze,

& PM2.5

Bag

hou

se w

ith

A

cti

vate

d C

arb

on

Inje

cti

on

Emission Control Equipment for Coal-Fired Boilers

SO2 ScrubbersSO2 Scrubbers

Scrubber Concept

120 Feet

60 Feet

675 Feet

Scrubber Concept

Chiyoda Jet Bubbling Reactor

Bowen Scrubber Craft Projection

0

200

400

600

800

1000

1200

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

SHEET METAL

PAINTER

PIPE FITTER

OPERATOR

MILLWRIGHT

LABORER

IRONWORKER

INSULATOR

ELECTRICIAN

CARPENTER

BOILERMAKER

2005 2006 2007 2008 2009 2010

Bag F

ilter

Bag F

ilter

Flue Gas Inlet

Flue Gas Outlet

Ash

ACI

Baghouse with Activated

Carbon Injection

Flue Gas Outlet

Potential GPC Controls through 2012

***PRELIMINARY***

• 10 Scrubbers under construction

• Additional SCRs

• Baghouses w/ Sorbent Injection

Unknowns in Planning for the Future

…the Carbon Dioxide (CO2) Challenge

What options are available?• Shift to Gas (lower CO2 emissions)• Sequester CO2

- Forestry / Agriculture• Capture and Store• Purchase Credits/Allowances• Install Non-emitting Generation (nuclear,

wind, solar, biomass)• Coal Gasification

-- Long Term, Global Solutions --

A Matter of Scale

Coal

Hydro

Solar Wind

Biomass

1 Plant ~ 1800 MW

1 Turbine ~ 3 MW 1 Installation ~ 45 kW

1 Dam ~ 45 MW

Georgia Power Peak Demand = 16,177 MW (7/26/05)

1 Unit ~ 125 MW

VS.

1 MW = Energy Needed To Power 250 Homes

Environmental Challenges in Electric Supply Planning

May 4, 2006

Overview Mike Wilder

Energy Supply Fundamentals Jeff Burleson

Environmental Challenges Steve Ewald Planning for the Future Jeff Burleson

Integrated Resource Plan Overview

LOAD FORECAST

RELIABILITY

DEMAND SIDE OPTIONS

SUPPLY SIDE OPTIONS

RESERVE MARGIN STUDY

(15%)

IRP

EXISTING CAPACITY

RESOURCES

FUEL FORECAST

NEW TECHNOLOGIES

System Load

Why do we need a mix?M

W

Peaking(cf < 20%)

Intermediate

(20% < cf < 60%)

Because of the System Load Shape, a combination of resource types is the least cost solution

Base Generation(cf > 60%)

Relative Costs

Fixed Variable

Low High

Medium

LowHigh

Medium

time of day

New Capacity Additions – 1970s

Oil14%

Nuclear17%

Coal / Pet Coke37%

Gas20%

Hydro12%

Biomass0%

Green Power0%

Other0%

Green Power2%

Biomass3%

Other0%

Coal / Pet Coke45%

Nuclear31%

Oil2%

Gas11%

Hydro6%

New Capacity Additions – 1980s

Gas63%

Oil5%

Nuclear7%

Coal / Pet Coke14%

Other0%

Biomass4%

Green Power2%Hydro

5%

New Capacity Additions – 1990s

Gas98%

Coal / Pet Coke1%Nuclear

0%Oil0%

Other0%

Biomass0%

Green Power1%Hydro

0%

New Capacity Additions – 2000s

Analysis of Alternatives

CoalNatural Gas

Nuclear

Nuclear Summary

– New designs appear economic in 2015

– Gas and to some extent coal continued volatility,

nuclear offers stable fuel source

– Zero air emissions, including CO2

Observations & Conclusions• Gas Price Volatility• Renewables & Green

– Very Expensive– Lack of reliable supply in Georgia

• Demand Side Programs– Programs yielding rate indifference are currently

offered– Demand is small

• Nuclear– With current assumptions, nuclear is the

least cost base load option– Nuclear technology still carries many

political/regulatory and cost risks