Decision Making Under Risks of Climate Change

Transcription

1 Decision Making Under Risks of Climate Change Commissioner Lauren Azar Public Service Commission of Wisconsin Nelson Institute Community Environmental Forum November 10, 2009 UW-Madison

2 Risks of Climate Change How will utilities and regulators prepare themselves for a world where carbon emissions are restricted? When making infrastructure decisions today, how should we recognize carbon emission limits? When planning for tomorrow s infrastructure, should we use the same type of risk assessment that was used yesterday or do we need a new type of risk assessment? Currently: carbon costs = externality. What happens when they are internalized?

3 BASE ASSUMPTION At some point in the near future, legislation or administrative regulations will limit the amount of CO 2 that power plants (and other point sources) can emit. Limitations may begin as early as 2012.

4 What limitations? American Clean Energy and Security Act (ACES) Emissions cut starts in 2012, completely phased in by 2016 Emissions cuts from 2005 levels 3 % reduction by % reduction by % reduction by % reduction by 2050 Would have to have a permit or allowance. Initially, many allowances given away, but eventually they will be auctioned and traded.

5 What limitations? (Part 2) EPA Proposed Endangerment Finding Massachusetts v. EPA, 549 U.S. 497 (2007) directed EPA to determine whether green house gasses endanger public health under Clean Air Act. April, 2009: EPA released finding that green house gases (CO2, methane, nitrous oxide and others) do endanger public health. Proposed limitations on large emitters (initially). Final endangerment finding timeline unclear and specific limitations unknown UPDATE: Endangerment finding sent to WH yesterday (11/9) OMB has 90 days for review Copenhagen looming

6 HOW TO REACT? Should we be considering and planning for risks and challenges before final requirements are set? [Hold this thought more on this later!] What is Wisconsin s current situation?

7 Generation Capacity in Wisconsin as of July 2007

8 Actual Generation for 2006

9 Wisconsin Generation Portfolio NOT included here: Imported power approx. 17% of 2006 power came from out of state; large portion from fossil fuels 2008 Weston MW coal plant 2009 Elm Road MW coal plant 2010 Elm Road MW coal plant Wisconsin is very heavily reliant on fossil fuels for generation making our puzzle difficult.

10 The Carbon Reduction Puzzle Efficiency/Reduce Demand Sequestration Nuclear Renewable Generation

11 The Carbon Reduction Puzzle Efficiency/Reduce Demand Sequestration Nuclear Renewable Generation

12 Renewable Generation Wisconsin has some experience in renewable generation Current renewable portfolio standard requires 10% of generation to be from renewable sources by 2015 All utilities appear to be on track Proposal to increase percentage to 25% by 2025 with some of that generation required to be from within Wisconsin But

13 Wisconsin s Wind Profile

14 Wisconsin s Solar Profile

15 Renewable Generation Other Sources Geothermal: not great resources in Wisconsin. Hydro: there are a number of dams today, but it is unlikely that new hydro electric dams will be built.

16 Wisconsin Renewable Profile Not All Bad News Wisconsin has potential for significant biomass, landfill and methane digesters however, their availability is not uniform in the state. Off shore wind in Great Lakes may be an option cost and other issues may limit, but further investigation is warranted.

17 The Carbon Reduction Puzzle Efficiency/Reduce Demand Sequestration Nuclear Renewable Generation

18 Energy Efficiency /Demand Response Additional efforts to increase efficiency are critical. Efficiency alone, however is not going to meet our carbon reduction needs (at least not without significant adjustments in behavior) Demand response: useful tool for reducing peak demand. However, this doesn t necessarily help with the issue of base load needs.

19 Energy Efficiency /Demand Response: What happens if??? To achieve necessary carbon reductions the transportation sector may move to electric plug-in vehicles. This will actually require additional electric generation! Efficiency is not a silver bullet answer

20 The Carbon Reduction Puzzle Sequestration Efficiency/Reduce Demand Nuclear Renewable Generation

21 Carbon Capture and Sequestration CO 2 released as part of electricity generation captured and transported to an injection site. CO 2 injected into depleted coal mines or oil and gas wells (or other levels below the earth s surface) Injection currently used for enhanced oil recovery several DOE research sites operating WE Energies has demonstration site for capture technology (Pleasant Prairie)

22 Carbon Capture and Sequestration

23 Carbon Capture and Sequestration in Wisconsin?

24 The Carbon Reduction Puzzle Efficiency/Reduce Demand Sequestration Nuclear Renewable Generation

25 Nuclear Energy in Wisconsin Nuclear energy carbon free generation (that s not to say it doesn t have other issues, including fuel disposal) Wisconsin has 3 reactors at 2 sites (Kewaunee and Point Beach) with a total name plate capacity of 1,582 MW) Additional nuclear generation may not be possible. Costs and lead times may be prohibitive - and Wisconsin has a statutory limitation on new construction.

26 RISK ANALYSIS Should we worry? No specifics are known today. How do we prepare for an unknown future. QUERY: Assume that in the near future (6-18 months), you know that you are going to have between 5 and 30 children moving into your house. But, you don t know the specifics. Are you going to start making plans today?

27 The Puzzle Gets More Puzzling Sequestration Planning time Efficiency/Reduce Demand Legal limitations Nuclear Renewable Generation Geographic Construction /Retirement Scope

28 Time and Geography Planning time Sequestration Efficiency/Reduce Demand Legal limitations Renewable Generation Construction /Retirement Nuclear Geographic Scope

29 RISK ANALYSIS Time Horizon: it takes a long time to build new generation capacity. We need to start planning for future generation today, even if we don t know exactly what will be needed and when. The larger and faster the carbon reductions occur the more dramatic action will be necessary. Geographic Horizon: the entire eastern US is an interconnected grid of transmission. Central dispatch allows for generation in other states to be used here.

30 Time Horizon (Nuclear Example)

31 Time and Geographic Horizon Example 25 % Wind Option ($80 Billion)

32 Assessing Risks for Tomorrow Discount Rates: should our assumptions favor near-term or longterm impacts? Given the likelihood of fundamental changes, we need to consider discount rates with greater scrutiny. Lowest Cost : traditionally, this is a key input into Commission decision-making but lowest cost today, may not even be a low cost option tomorrow. Want to avoid sunk costs. Incremental v. Collective Decisions: Utilities often look only at their own service territories to determine future needs. We have examples of utilities working together in the past (Weston 4, Columbia Energy Center) this needs to be a model for current situation. EISPC is an example of how collective decision making may be better for the whole.

33 Other Risk Analysis Considerations Retirements: What should we expect and plan for with respect to plant retirements? Oldest plants? Least-efficient plants? What happens if plant needs emission controls to operate today?

34 Questions Questions? Contact info Commissioner Lauren Azar (608) questions or comments to