CCAP STUDY ON THE POTENTIAL FOR 111(d) COMPLIANCE VIA CHP. Midwestern Governors Association Industrial Energy Productivity Working Group

Transcription

1 STUDY ON THE POTENTIAL FOR 111(d) COMPLIANCE VIA CHP Midwestern Governors Association Industrial Energy Productivity Working Group July 11, 2014

2 OUR MISSION The Center for Clean Air Policy works with leaders around the globe to devise and advance - through education, analysis and dialoguetransformative, cost-effective policy solutions that sustain a healthy climate, improve air quality and drive economic growth. 1

3 KEY TAKE-AWAYS If CHP is included as a 111(d) compliance option: 111(d) will encourage CHP, especially in states likely to experience higher-than-average carbon prices. Note that s estimates were done before EPA proposed the Clean Power Plan. CHP can support achievement of the proposed standard at a lower cost. New investments in CHP create new winners and various co-benefits. Therefore, states should include CHP as a means of compliance alongside other clean energy sources. 2

4 STUDY OBJECTIVE Look at how new combined heat and power can support state compliance with EPA s forthcoming guidance on regulating existing power plants under Section 111(d) of the Clean Air Act. 3

5 METHODOLOGY Total economical and accepted CHP IPM CHPower Electricity prices Natural gas prices Carbon prices 4

6 ABOUT THE CHPOWER MODEL Includes a dataset of potential new CHP units across the United States (125.6 GW). Forecasts the industrial/commercial/institutional facilities most likely to install/expand CHP systems over time, considering: Economics. The model calculates payback on new CHP investments based on assumed technology characteristics and costs as well as energy prices. Rates of market acceptance. Forecasts acknowledge that end users may opt not to make investments that are economical. Rates of market penetration. 5

7 CHP TECHNICAL POTENTIAL BY STATE Source: ICF International CHP Technical Potential > 8,000 MW 3,000-8,000 MW 1, MW < 1,000 MW 6

8 ASSUMED COSTS OF CHP UNITS Market Size Bin 50-1,000 kw 1-5 MW 5-20 MW >20 MW Technology 500 kw RE 3000 kw RE 10 MW GT 40 MW GT Capacity, kw Capital Cost $/kw $2,217 $1,604 $1,802 $1,144 AT Cost, $/kw $552 $313 $174 $104 Total Capital Cost, $/kw $2,769 $1,917 $1,976 $1,248 Heat Rate, Btu/kWh 11,293 8,454 12,482 9,488 O&M Costs, $/kwh $ $ $ $ Economic Life, years Avoided Boiler Efficiency 80% 80% 80% 80% Source: EPA CHP Partnership Catalog of CHP Technologies 7

9 ACCEPTANCE CURVES 8

10 CONSERVATIVE ASSUMPTIONS (1) Assumptions were reviewed by a multistakeholder advisory group. Some key assumptions are as follows: CHP technical potential: no electricity exports CHP economic potential: assume all new facilities are fueled by natural gas CHP acceptance rates: based on survey data Secondary benefits of CHP (e.g., business resiliency, grid stability) not considered 9

11 CONSERVATIVE ASSUMPTIONS (2) Assume CHP units continue to pay utility providers (15% of earlier rates) Do not look at extra emissions reductions resulting from coal to gas fuel switching at the host site Assume expiration in 2016 of the federal investment tax credit Emissions crediting: credit against a state standard, not the marginal unit TITLE GOES HERE 10

12 SCENARIOS CHP Base Case builds from NRDC s updated reference case CHP 111(d) Policy Case -- builds from NRDC s Moderate, Constrained Efficiency scenario The main change in both cases is to add the availability of CHP as a new build as previously described. 11

13 BASE CASE RESULTS Base Case Increase in CHP Capacity,

14 BASE CASE AND POLICY CASE RESULTS: TOTAL CUMULATIVE CHP OVER TIME (MW) 13

15 BASE CASE AND POLICY CASE RESULTS: SIZE BIN Cumulative Total CHP Market Penetration by Size and Year (MW) 14

16 POLICY CASE RESULTS Net Increase in CHP Capacity,

17 KEY DRIVERS Carbon price All regions showing change in the policy case had carbon prices above the national average. Spark spread was NOT a key driver. 16

18 CHANGE IN ELECTRICITY PRICES 17

19 CHANGE IN NATURAL GAS PRICES 18

20 Figure 11. Cumulative unplanned builds (includes base case and policy case unplanned builds [1] ) (GW) IMPACT ON NEW BUILDS Note: We show both the base case and policy case so that CHP and energy efficiency are presented in a comparable way. 19

21 IMPACT ON ELECTRIC GENERATION STILL GET BIG SHIFTS TO LOWER CARBON ENERGY, MORE CHP 29% 27% 2% 20

22 CONCLUSIONS/DISCUSSION CHP offers a cost-effective solution towards 111(d) compliance while also improving efficiency at industrial, commercial and institutional facilities. Biggest impact in states with significant technical potential that are expected to have higher-than-average compliance costs. To take advantage of this opportunity, states will need to adopt a system-based approach that explicitly allows CHP to be used for compliance. 111(d) alone will not achieve the President s 40 GW goal, but it makes a meaningful contribution. 21

23 FULL REPORT AND FACTSHEET Expanding the Solution Set: How Combined Heat and Power Can Support Compliance with 111(d) Standards for Existing Power Plants Full report and factsheet available at ccap.org Scroll down to Recent Publications on the main page or visit combined-heat-and-power-can-support-compliance-with- 111d-standards-for-existing-power-plants/ 22

24 WHAT NEEDS TO HAPPEN TO ALLOW CHP TO COMPLY? States must indicate they want this as an option. Identify a fair way to quantify the electricity savings resulting from CHP facilities. Under a rate-based approach, include CHP alongside other clean energy technologies. Under a mass-based approach, consider a set-aside for clean energy technologies, including CHP. Under a portfolio approach, include CHP in the state s EERS. 23

25 THANK YOU For more information, please visit us at or contact Stacey Davis

26 NRDC PROPOSAL VS. EPA DRAFT CARBON INTENSITY TARGETS lbs/mwh NRDC Proposal, Moderate Case, 2025 EPA Draft Interim Goal ( Average) Illinois 1,191 1,366 1,271 Indiana 1,196 1,607 1,531 Iowa 1,194 1,341 1,301 Michigan 1,189 1,227 1,161 Minnesota 1, North Dakota 1,200 1,817 1,783 Ohio 1,193 1,452 1,338 South Dakota 1, Wisconsin 1,183 1,808 1,714 EPA Draft 2030 Goal 25 NRDC proposal data: Cleaner and Cheaper Technical appendices, assumptions: