Modeling Proposed Clean Power Plan: Preliminary Results

Transcription

1 Modeling Proposed Clean Power Plan: Preliminary Results JENNIFER MACEDONIA NATIONAL GOVERNORS ASSOCIATION WORKSHOP READYING STATES FOR NEW GREENHOUSE GAS RULES IN THE ELECTRICITY SECTOR SEPTEMBER 22, 2014

2 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 2 About the Bipartisan Policy Center The Bipartisan Policy Center (BPC) is a non-profit organization that was established in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell to develop and promote solutions that can attract public support and political momentum in order to achieve real progress. BPC acts as an incubator for policy efforts that engage top political figures, advocates, academics and business leaders in the art of principled compromise.

3 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 3 BPC s Energy Project In April 2011, BPC launched its Energy Project led by former Senators Trent Lott, Byron Dorgan, former National Security Advisor General Jim Jones (ret.), and former EPA Administrator William Reilly. Project Goals Encourage substantive, bipartisan dialogue among key interest groups and decision makers on national energy goals and strategies; Engage and shape near-term energy policy agendas; Produce research products on a variety of energy issues; and Develop consensus recommendations to guide national energy policy.

4 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 4 Overview Economic modeling as a tool for decision-makers Analyze potential outcomes under a variety of circumstances Inform states developing implementation plans and juggling multiple objectives, including finding the least cost pathway to deliver energy services in compliance with 111d Key take-aways from preliminary modeling results Compare regional and state-level compliance with EPA s proposed goals under the Clean Power Plan 111(d): Section 111(d) of Clean Air Act

5 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 5 Questions to Explore through Modeling Analysis What efficiencies can be gained through multi-state collaboration as compared to state-specific compliance? How does implementation of EPA s proposed state goals compare with a business-as-usual projection? How do different policy choices affect key outcomes such as costs, capacity mix, or generation mix? How important are assumptions, such as natural gas prices, energy efficiency costs/availability, renewable costs, and nuclear power capacity? How does implementation of an emission rate plan compare to a massbased plan?

6 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 6 Key Take-Aways Magnitude of impacts from 111(d) is dependent on EPA & state interpretations & decisions, as well as market factors Predicting the least cost pathway to deliver energy services in compliance with 111(d) is challenging due to uncertainty over important variables, such as: the price of natural gas, the availability of demand-side energy efficiency, and the implementation/policy decisions of other states This uncertainty increases the value of policy designs (such as market-based trading systems) that inherently create the incentives for implementing least cost compliance and allow affected companies flexibility to adapt to changing circumstances, rather than rely on upfront decisions about the least cost path 111(d): Section 111(d) of Clean Air Act

7 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 7 Key Take-Aways (continued) Harmonizing policy design across states, particularly in the same power market, and Adopting policy designs that allow access to emission reduction opportunities in other states: Reduces costs Limits generation shifts and differences in compliance costs across states Regional collaboration reduces the cost of implementation The availability of demand-side energy efficiency is a key driver in determining the impacts of implementing 111(d) Coal is projected to remain key source of generation Energy efficiency may displace coal, but also free up room under the standard to enable continued fossil generation 111(d): Section 111(d) of Clean Air Act

8 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 8 Caveats and Limitations Forthcoming scenarios to test key assumptions Results should not be viewed as the answer but rather highlight directional trends and, as a series, bookend impacts The preliminary policy runs presented today are most reflective of the difference between state & regional implementation of a rate-based goal The specific shifts in generation -- between fuel types, between regions vary based on assumptions of a given run. Key caveats Limited cost/performance data and modeling limitations for HR upgrades Modeling does not assume that plant efficiency upgrades trigger NSR Reference case assumptions regarding EE and HR upgrades may impact incremental impacts of policy Analysis is based on economic modeling of the power sector Using the Integrated Planning Model (IPM) run by ICF International Using the commercial version of IPM, rather than the EPA version With assumptions and policy scenarios defined by BPC HR: heat rate NSR: New Source Review EE: energy efficiency BPC: Bipartisan Policy Center

9 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 9 Description of Modeling Scenarios in Today s Preliminary Results 1. Reference Case Represents business-as-usual in the absence of GHG policy 2. Emission rate standard, state compliance Imposes EPA s proposed state goals as rate-based CO 2 policy constraint Sensitivities on the crediting and availability of demand side energy efficiency 3. Emission rate standard, regional compliance Imposes a regional rate-based constraint calculated from state goals. States may engage in interstate trading within their region. * Both state and regional policy runs impose 111(b) standard for new coal builds (CCS) GHG: greenhouse gas CO 2 : carbon dioxde CCS: carbon capture and storage

10 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 10 Regional Scenario: Modeled Trading Regions

11 Preview of Preliminary Results: Impacts of Single State Implementation vs. Regional Coordination under Proposed Clean Power Plan 11

12 Million Short Tons 09/19/14 MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 12 U.S. CO 2 Emissions By 2030, Reference case CO 2 is roughly 14% below 2005 levels by 2030 In the 111(d) policy runs, national CO 2 emissions are 21% below reference case levels and 32% below 2005 levels 3,000 U.S. CO 2 Emissions 2,500 2,000 1,500 1, Year Historic Reference State Goals Regional Goals CO 2 : Carbon Dioxide

13 TWh MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 13 Proposed Clean Power Plan Impacts on Generation Mix In 111(d) policy scenarios, coal generation remains a key generation fuel but loses a share of generation to gas, EE, and renewables Regional scenario retains more coal generation and increases wind generation compared to the state-only scenario. 20,000 18,000 16,000 14,000 12,000 U.S. Generation Mix ( ) 10,000 8,000 6,000 4,000 2,000 0 Coal Gas Wind EE Hydro Other Renewables Nuclear Other Reference State Goal Regional Goal

14 GW MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 14 Impacts on retirements Fewer coal retirements under regional collaboration scenario compared with an in-state implementation plan Range of U.S. Coal Retirements ( ) Reference State Goals Regional Goals The hatched pattern in the bars shown above for State Goals and Regional Goals represent the range of outcomes in the scenarios, including sensitivity runs on crediting and availability of demand side energy efficiency.

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16 TWh MODELING PROPOSED CLEAN POWER PLAN: PRELIMINARY RESULTS 16 Reference case largely based on EIA Annual Energy Outlook 2014 No GHG 111(d) policy assumed Percent contribution from each generation type remains fairly consistent Modest growth in total generation to accommodate modest load growth Coal remains dominant generation fuel U.S. Generation Mix, % 8% 4% 29% 20% 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 U.S. Generation Mix (Reference) 12% 10% 6% 6% Other 18% 20% Other Renewables Wind Nuclear 36% 36% Coal Natural Gas 39% % 29% EIA: Energy Information Administration GHG: Greenhouse Gas

17 KEY REFERENCE CASE MODELING ASSUMPTIONS Assumption Sources Description Electric and Peak Demand Growth AEO 2014 Capacity Build Costs AEO 2014 & LBNL Costs for all technologies come from AEO 2014, except on-shore wind capacity costs come from Lawrence Berkeley National Laboratory s (LBNL) 2012 Wind Technologies Market Report. Natural Gas Price ICF Integrated Gas Model ICF estimate of the resource base serves as input to the model. Coal Supply/Prices AEO 2014 ICF coal supply is calibrated to AEO 2014 average minemouth prices. Air Pollution Control Costs EPA, EIA, AEO 2014, & AEO 2013 Early Release Nuclear Power Licensing/Operation Firm Builds and Retirements AEO 2014 & BPC Research by ICFl using NEEDS and other data sources, and state input. Retrofit costs for most pollution control technologies come from EPA. DSI costs come from EIA. CCS retrofit costs for coal and gas come from AEO 2014 and AEO 2013 Early Release. Reference case retirements come from AEO Plants are able to relicense at 60 years. EIA: Energy Information Administration AEO: Annual Energy Outlook CCS: Carbon Capture and Storage DSI: Dry Sorbent Injection

18 KEY POLICY SCENARIO MODELING ASSUMPTIONS 18 Assumption Sources Description Biomass Co-firing EIA, AEO 2014, & BPC Costs are based on EIA biomass cost curves and AEO 2014 co-firing cost assumptions. Coal units can co-fire up to 15%. Existing subcritical coal units that are 300MW or smaller can repower/retrofit to burn 100% biomass. Natural Gas Co-firing EPA & BPC Coal units that use gas on site can co-fire up to 15% without additional pipeline costs or efficiency degradation penalties. Units that are within 10 miles of a gas pipeline can fully convert to gas. These units incur a pipeline cost and a 5% heat rate penalty. Demand Side Energy Efficiency Heat Rate Improvement Synapse Energy Economics and BPC BPC Energy efficiency assumptions vary across scenarios from 1/8-1/2 of the supply estimates based on work by Synapse Energy Economics. EE is available to utilities based on a three step cost curve that ranges from cents/kwh. The cost at each step increases by 0.3 cents/kwh beginning in The utility portion is assumed to be 55% of the total cost; the remaining participant portion of the cost is included in the total cost, but not electricity cost impacts Coal units can select between two levels of efficiency upgrades based on the unit s capacity, fuel type, steam cycle, and boiler type to close 25% or 40% of the gap between the unit heat rate and the best in class heat rate. Coal with CCS BPC Assumes both the Kemper plant and the Texas Clean Energy Project will be built as coal-fired generation with CCS. Other CCS generation can come online if it is deemed economical. Coal without CCS EPA Under Section 111(b), CCS is required for any new coal builds

19 SCENARIO DESCRIPTIONS 19 Reference Scenario Emission rate standard, state compliance (State Goals) Emission rate standard, regional compliance (Regional Goals) Description Includes existing federal and state regulations. Each state must comply with the state rate-based goals included in EPA s proposed Clean Power Plan. Trading is permitted among sources within the state. Banking of credits is allowed. Under section 111(b), CCS is required for any new coal builds. Each designated region must comply with regional rate-based goal, calculated using a fossil generation-weighted average of EPA s proposed state goals. Fossil generation data is from 2012, from EPA s Goal Calculation TSD, Appendix 1. Trading is permitted within each region, and banking of credits is allowed. All EGUs in a state are grouped in the same region and states are grouped into regions for regional cooperation: MISO, RGGI, Rest of PJM, SPP, SERC, Texas, West. Under section 111(b), CCS is required for any new coal builds. CCS: Carbon Capture and Storage TSD: Technical Support Document EGU: electric generating unit