Eye on the Market | November 21, 2011 J.P Morgan Topic: The quixotic search for energy solutions Today’s US energy reality: electricity generation Before exploring why some of these ideas did not pan out, let’s look at where the US is right now in electricity generation. The table below shows each energy source; its installed capacity; the electricity this capacity generated in 2010 and percent of total generation; its capacity factor; and its long-term levelized cost for new construction, estimated by the Energy Information Agency. Capacity factors are important since they measure the intermittency of each source (capacity factor = actual generation relative to potential maximum generation). Baseload natural gas plants can run at higher factors than 28%; this number reflects the fact that many gas plants are used as “peaking” facilities to provide short-term energy during periods of elevated demand. As stated above, fossil fuels dominate, followed by nuclear. Hydroelectric is next (efficient and cheap, but most large-scale sites are already in use); followed by non-hydroelectric renewable energy, which across all categories makes up less than 5%, in part due to their low capacity factors. Non-hydroelectric renewable energy is a similarly small component of the country’s overall energy use, a broader category which includes transportation fuels”. Energy Installed Electricity %of Implied ElALevelized <--Levelized cost incorporates upfront and ongoing capital costs, cost of | information base genin 2010 total capacity | cost2016 capital, fuel and other operating costs, capacity factor and related power Agency 2010 MW mmMWh | gen. _ factor per MWh transmission investments (in 2009 dollars) for new construction Coal 316,800 1847 454% 67% $95-$110 Abundantand cheap, but with a substantial range of environmental problems Natural gas 407,028 988 243% 28% $60-$70 Capacity factors understate potential utilization Nuclear 101,167 807 19.8% 91% $114 Efficient once built: ver