Future Generation Infrastructure
The generation industry is facing uncertainties around recent U.S. EPA regulations to reduce carbon dioxide emissions. Such uncertainties, surrounding the necessary remediation and implementation timing make long-range planning challenging, and could force further retirements in the future. At the same time, the electric grid is changing and becoming more and more integrated as a result of technologies and policies that support and promote distributed generation, energy efficiency, and greater customer engagement.
In order to maintain reliable, affordable service for our customers, we need to effectively maintain the performance and efficiency of our existing fleet, and incorporate new generation resources that are capable of satisfying demand, achieving regulatory compliance and adapting to the integrated grid.
The decision to construct new generating facilities is affected by a number of factors including construction and maintenance costs, fuel type and price, permitting and siting requirements, and transmission needs. Utilities perform rigorous resource planning activities to determine when and what type of facilities are needed to meet capacity obligations at a reasonable cost to ratepayers. In addition to these factors, decisions are also being impacted by customer preferences, state and federal standards for renewable energy and risk management.
Existing AEP units are fully controlled to achieve regulatory compliance through prudent investments in environmental controls technologies. In the future, decisions to maintain these units will be driven by their ability to operate and perform economically as market conditions and environmental regulations change. The focus will be around improving efficiency, reliability, flexibility and maintainability through new technology, enhanced monitoring and diagnostic capabilities and Lean operating principles.
New generation resources will be expected to achieve higher efficiencies and include advanced environmental control capabilities. For dispatch-able generation needs, simple- and combined-cycle natural gas units are the logical technology choice. Wind and solar generation will play a much larger role in our footprint as these technologies are becoming cost-competitive at grid-scale and align with regulatory compliance initiatives and customer preferences. Energy storage technologies will be explored and incorporated where cost-effective to reinforce renewables and/or provide necessary grid support to ensure customer reliability.
Customer-focused energy efficiency programs and technologies to support the "virtual power plant" will be further explored for opportunities to reduce demand for generation while enhancing the customer experience. We see opportunities in all of these technology areas to sustain AEP's position and reputation in the energy landscape.
Players and risks
Many factors play into a regulatory commission's decision to allow cost recovery for new technology, and commission staff are being influenced by many stakeholders. Without regulatory support, utilities cannot make the necessary investments to achieve our goals and adapt to the integrated grid. Such decisions cannot be made in a vacuum. Therefore, utilities, regulators, policy makers and stakeholders must work together to create a regulatory environment where resource planning decisions are executed with the reliability of the grid, environmental impacts and the customer experience in mind.
AEP's Deer Creek Solar Facility went online Dec. 31, 2015
AEP supports regulations that achieve long-term environmental benefits while considering the impacts on customers, the economy and system reliability.
Environmental regulations must provide appropriate flexibility to achieve the desired emission reductions while managing customer costs. A thoughtful phased-in approach will achieve similar environmental benefits with significantly less economic and reliability impact.
Since 2000, AEP has invested more than $8 billion for environmental controls to comply with various EPA requirements. AEP has already cut its carbon dioxide emissions 30 percent from 2005 levels, and we will continue to reduce carbon dioxide emissions from our generation fleet as we transition to more natural gas and renewable