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Ultra-supercritical coal with 90% CO2 capture, 650 MW 650 630 690 6,700 75 174.5.
Combustion turbine H class combined-cycle single shaft 370 370 390 1,400 75 94.1 with 90% CO2 capture, 430 MW.
Combustion turbine H class, 1,100 MW combined cycle 1,080 1,060 1,110 1,100 75 52.6.
Combustion turbine H class, combined-cycle 420 410 430 1,300 75 59.5 single shaft, 430 MW.
Peaking.
Combustion turbine F class 240 MW simple cycle 230 240 250 700 25 92.4.
Combustion turbine aeroderivative, 100 MW simple cycle 100 110 110 1,200 25 118.9 Internal combustion engines, 20 MW 20 20 20 2,000 25 167.3.
Intermittent.
Battery energy storage system, 50 MW/200 MWh 50 50 50 1,471 25 119.1.
Solar photovoltaic with battery energy storage system, 150 150 150 2,003 24 82.1 150 MW x 200 MWh.
Onshore wind, large plant footprint, 200 MW 200 200 200 1,370 35 38.8 Solar photovoltaic, 150 MWAC 150 150 150 1,420 25 56.8 1 Costs and performance data informed by EIA report Capital Cost and Performance Characteristic Estimates for Utility Scale Electric Power.
Generating Technologies (February 2020) 2 Installed cost, capability and heat rate numbers have been rounded 3 All costs in 2020 dollars, except as noted. Cost adjustments made based on EIA report Cost and Performance Characteristic Estimates for Utility Scale Electric Power Generating Technologies, Annual Energy Outlook 2020 — Region 11-(PJMW) 4 $/kw costs are based on a summer capability 5 All Capabilities adjusted by the Performance Adjusted Factors defined in the reference report 1 6 Total Plant Investment Costs w/AFUDC (AEP rate of 6.4%, site rating $/kw) 7 Levelized cost of energy based on capacity factors shown in table 31 AEP’s Climate Impact Analysis them generically as a Dispatchable Non-Emitting Resource, or DNER. For this technology, we used the operating and cost profile of a small module nuclear reactor as a proxy for a number of technologies that could potentially meet that need. Given current uncertainties in technology development, deployment, performance and cost, we do not have high confidence that using specific assumptions for a variety of future technologies would accurately predict the actual generation sources to be included. The DNER proxy could include modular nuclear, future.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
AEP CO2 Emissions 60 100% 50 95% 40 90% 30 85% 20 80% 10 75% 0 70% 2020 * 2030 2040 2050.
BAU Fast Transition Base % Fast Transition %
Emission projections are for AEP’s vertically integrated utilities only. Both scenarios arrived at >95% of historical emissions reduction by 2050. Under these scenarios, carbon offsets would likely be needed to achieve net-zero.
Note: 2020* data includes AEP’s competitive fossil generation, which will be fully retired by the end of 2030.
% Reduction from 2000.
Millions of Metric Tons 32 AEP’s Climate Impact Analysis natural gas with carbon capture and sequestration options, renewables coupled with advanced energy storage, various hydrogen-to-electric pathways, or new technologies that have not yet been developed.
SCENARIO RESULTS.
EMISSIONS.
The scenarios developed represented a unique approach to examining potential carbon emissions and generating fleet changes for AEP’s operations over time. With increased constraints on carbon emissions through carbon pricing and accelerated coal retirements, renewable energy dominated the future energy portfolio and emissions trended significantly lower. However, even in the BAU Case, emissions are projected to be only a small fraction of historic levels. This reflects AEP’s current strategy to transition to clean resources. In both scenarios, emissions are reduced more than 90% below 2000 levels enterprise-wide by the mid-2030s.
With varied assumptions on carbon pricing, it is very possible to get to less than 5% of our 2000 CO2 emission levels. However, we were not quite able to get to zero emissions given the assumptions. That is because the modeling required some level of natural gas-fueled capacity to provide energy, albeit in a very limited capacity. We will continue to seek a viable 100% clean energy scenario to model in future efforts, as we also look to advanced energy storage and green hydrogen to further reduce emissions.
The 100% Clean Energy option, although not completed in this exercise, provided important insights into what will be required and what still needs to be done to achieve net-zero carbon by 2050. The scenarios we developed and the outcomes of the BAU and Fast Transition scenarios are well-aligned with the Paris Agreement. Of course, this depends on assumptions around mitigation by other companies, sectors, and countries.
GENERATION MIX.
The changing assumptions regarding generating unit retirements and the stringency of carbon policy produced significant changes in the generating mix across scenarios. The following charts show the capacity and energy of the resulting generation mix. The capacity chart illustrates the share of total available resources to serve customers by fuel source. The generation chart represents how those resources are used to actually produce energy over the course of the year to serve customers.
Both scenarios show an increased build and utilization of wind and solar resources with a decreased reliance on coal and natural gas over time. The key distinction between the two scenarios is the pace of the transition. As expected, the Fast Transition scenario builds more renewable resources to displace fossil resources sooner.
While natural gas continues to be used throughout the forecast period, the units being built and utilized are combustion turbines, which are mainly used as a fast-ramping resource to provide power at times.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
33 AEP’s Climate Impact Analysis of peak demand to meet capacity obligations. Their intermittent operation is not a significant contributor to the emissions profile, but they still do emit some carbon dioxide. These natural gas units could also be future candidates for refueling with green hydrogen to convert them to non-emitting resources. In addition, as we move toward net-zero carbon, these generating units could be replaced with other more expensive solutions, such as energy storage and carbon offsets. Carbon offsets would be generated by enabling emission reductions in other sectors of the economy that on balance would have the same net effect on climate change as direct emissions reductions from the electric sector. Examples of potential offsets include terrestrial carbon sequestration through biomass (e.g., tree-planting or avoided forest clearing) and direct-air capture of carbon dioxide combined with geological sequestration.
An unexpected outcome, based on the assumptions we used, was that the model did not select large levels of energy storage or the DNER. We believe this is because the model assumes it was more economic to rely on grid energy than to build storage or higher-cost dispatchable non-emitting resources. This could be problematic if other entities build a similar resource profile as AEP as there will be a need for additions in both energy storage and dispatchable low-carbon emitting power. AEP intends to conduct additional analysis of this issue and work with our RTOs to further refine assumptions around renewable penetration and the need for alternative electricity sources. AEP also will refine our modeling efforts to examine additional scenarios where energy storage and the DNER resources might have a more prominent role in the transition.
POLICY AND REGULATORY IMPLICATIONS.
All of the pathways would require some level of regulatory or public policy changes. AEP cannot unilaterally make decisions about resources and emissions reductions without approval from regulators or legislative support. Decisions about the retirement of.
AEP Generation Mix 100% 80% 60% 40% 20% 0
2030 2040 2050 2030 2040 2050.
Base Fast Transition.
I Includes long-term PPAs; EE/DSM are factored into load forecast.
Coal Natural Gas Clean.
AEP Capacity Mix 100% 80% 60% 40% 20% 0
2030 2040 2050 2030 2040 2050.
Base Fast Transition.
Includes long-term PPAs; EE/DSM are factored into load forecast.
MWh.
MW Share.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
34 AEP’s Climate Impact Analysis aging coal-fueled assets and their replacement with clean energy require regulatory approval, particularly if their retirement is to be accelerated.
AEP has made substantial capital investments in its coalfueled generating units to comply with environmental regulations. These units continue to provide around-theclock reliable energy and capacity to serve customers. Early retirement of coal-fueled generation must ensure that customers are not unfairly burdened with additional costs and that AEP can recover its capital investments made on behalf of its customers, and approved by regulators, in an equitable manner.
TRANSITION OPPORTUNITIES.
The scenario analysis highlights opportunities for AEP as we transition to a clean energy economy. Tens of billions of dollars in capital investments will be needed for new, clean energy infrastructure. This represents a significant opportunity to reduce carbon emissions, provide stable energy costs, and grow corporate earnings while also helping to insulate customers from variable costs associated with fossil fuels.
As the country transitions from fossil fuels to nonemitting resources, there also is an opportunity for the electric sector to provide cleaner energy to meet the energy demands of other sectors. Electrification, particularly of the transportation sector, will drive additional electric sales. With a higher volume of sales, fixed costs can be spread over a larger number of MWh, which can reduce electricity rates. Additionally, AEP would be able to grow top-line revenue, which can have financing and shareholder benefits.
There also are opportunities to invest in new technologies and resources and develop new services that support the clean energy transition, optimize operations, and meet emerging customer demands. Massive amounts of renewable energy will require additional transmission investment to move the energy and manage its intermittent production. Customer-centric solutions that support clean and resilient energy including microgrids, small-scale storage, and advanced communication networks also will be a part of the grid of the future.
CARBON GOALS.
AEP is committed to an annual review of our carbon goals, as we learn more about developing technologies and resources, changing policies and regulations, and energy prices, among other factors. In 2020, AEP achieved a 74% reduction in carbon emissions (from a 2000 baseline) — exceeding our 2030 goal a decade ahead of schedule. Based on our most recent analysis, we are revising our carbon goals to cut more emissions sooner. This reflects the progress AEP is making toward a clean energy future, as we have accelerated our carbon emission reduction targets each of the past three years.
The decision to adopt a net-zero goal was made with the understanding that we don’t have every step of the way mapped out. No one does. We do know that additional technology development will be critical and that it will be more expensive than near-zero, based on today’s economics. We believe setting a net-zero goal is the right decision for AEP given the policy shifts related to climate change, and doing so will give us the opportunity to help shape our nation’s clean energy future.
We are clearly on a pathway to net-zero carbon emissions, but how quickly that occurs and how much it will cost remains uncertain. This analysis represents our first in depth evaluation about how we might transition to net-zero operations. We have been an industry leader in technology, efficiency, and ingenuity for 115 years, and we intend to continue leading the way while addressing the challenges and opportunities presented by climate change.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
TECHNOLOGY 35 AEP’s Climate Impact Analysis.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
ACHIEVING NET-ZERO CARBON: THE ROLE OF TECHNOLOGY.
The path to a low-carbon energy future relies heavily on technological advances, non-emitting fuel sources, increased end-use electrification and energy efficiency, continued growth of renewables and distributed resources, and innovative and enabling public policies. AEP is exploring all options as we visualize and plan for a new energy economy that is as diverse as it is clean, economically sustainable, resilient, reliable and secure.
AEP’S POSITION ON ENERGY TECHNOLOGY.
AEP believes it is important to fund basic technological research, and to support collaborative research development and deployment to further those technologies that show promise or are capable of being revolutionary. It is important to not pick winners prematurely and to allow a variety of technologies to mature or fail appropriately so we end up with wellproven solutions that balance environmental attributes, cost, and reliability considerations.
TECHNOLOGIES.
RENEWABLE ENERGY.
Mature renewable technologies include hydropower, wind and solar. For 140 years, hydropower has been widely used to generate electricity. In fact, it is one of the original sources of clean energy. However, a number of factors, including the lack of suitable locations and aging infrastructure, make substantial expansion of large-scale hydropower unlikely. Additionally, shifts in water availability if weather becomes more extreme (e.g., severe drought or flood/high water) would impact future hydropower generation. Alternative water-based technologies, such as tidal and wave-based energy 36 AEP’s Climate Impact Analysis.
Renewable energy plays a critical role in the transition to a clean energy future.
conversion, are not quite commercially mature at this point nor do they have a high probability of serving AEP’s needs, given the location of our service territory.
On the other hand, wind and solar are now commercially viable across the country. These technologies have advanced rapidly during the past several decades and now directly compete economically with fossilfueled energy sources. In many cases, wind and solar resources are more cost-effective.
AEP’s current resource development plan for 2020 through 2030 suggests that wind and solar will provide roughly 80% of new generation capacity to serve our customers. The greatest challenge with these technologies is the fact that they are highly dependent on backup resources in the absence of wind and sunlight. The shift to renewables is also highly dependent upon regulatory support. The intermittency of renewables also challenges the operation of the electric grid, which must constantly adjust to the ebbs and flows of renewables while meeting constant customer demand. Consequently, the need for 24/7 dispatchable energy and capacity resources will continue until cost-effective technologies such as energy storage can back up renewable energy sources.
In competitive markets where customers have a choice about their generation providers, AEP Energy’s customer base that is choosing green energy options is growing.
Technology Chairman’s Message Introduction and TCFD Framework Transition Analysis Just Transition.
Physical Risks and Opportunities
37 AEP’s Climate Impact Analysis.
Construction is underway on the 1,485 MW North Central Wind.
North Central Wind: Clean Energy, Energy Savings.
In 2020, AEP’s Southwestern Electric Power Company (SWEPCO) and Public Service Company of Oklahoma (PSO) subsidiaries received approvals needed to acquire 1,485 MW of new wind generation being built in Oklahoma. The approximately $2 billion investment will deliver clean, renewable energy to customers in Arkansas, Louisiana and Oklahoma and will save our customers in those states approximately $3 billion over the next 30 years. The project also will support local and regional economic and business development and help commercial and industrial customers meet their renewable energy goals.
The map shows the service territories of PSO (green) and SWEPCO (blue) that will be served by the North Central Wind in Oklahoma.
Shreveport.
Oklahoma City.
Baton Rouge.
Little Rock.
Tulsa.
Lawton McAlester.