CLOSING THE POWER PLANT CARBON POLLUTION LOOPHOLE: SMART WAYS THE CLEAN AIR ACT CAN CLEAN UP AMERICA S BIGGEST CLIMATE POLLUTERS

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1 CLOSING THE POWER PLANT CARBON POLLUTION LOOPHOLE: SMART WAYS THE CLEAN AIR ACT CAN CLEAN UP AMERICA S BIGGEST CLIMATE POLLUTERS We limit the amount of toxic chemicals like mercury and sulfur and arsenic in our air or our water, but power plants can still dump unlimited amounts of carbon pollution into the air for free. That s not right, that s not safe, and it needs to stop. -President Obama, June 25th, 2013

2 THE CLEAN AIR ACT AND EXISTING POWER PLANTS THE 101 ON 111(d) EPA CO2 Emissions Guideline & State Plans EPA proposes emission guideline June 2014, final June Guideline includes performance standard and compliance provisions. States have til June 2016 to adopt and submit state plans. If a state submits no plan, or one EPA cannot approve, EPA must issue a federal plan. Best System of Emission Reduction Source-based approach limited to options plants can do within the fenceline (e.g. heat-rate improvements) yields limited reductions, higher costs System-based approach includes all options that reduce emissions yields deeper reductions, lower costs Heat-rate improvements Shifting generation from coal to gas Increasing zero -emission power (renewables and nuclear) Increasing energy efficiency

3 THE TIMELINE January 2013 Stakeholder engagement January 2014 January 2015 September 20, 2013 EPA reproposed the standard for new power plants June 1, 2014 EPA proposes a standard for existing power plants January 2016 January 2017 June 1, 2015 EPA issues the final existing power plant standard June 30, 2016 States submit implementation plans to EPA January 20, 2017 End of Obama Administration

4 NRDC PROPOSAL SYSTEM-BASED, STATE-SPECIFIC STANDARDS State-specific fossil-fleet average CO2 emission rates (lbs/mwh) for 2020 and 2025 Calculated by applying target coal and gas rates to each state s baseline ( ) fossil generation mix 2020 Target Rates 2025 Target Rates Coal: 1,500 lbs/mwh Gas: 1,000 lbs/mwh 1,200 lbs/mwh 1,000 lbs/mwh Averaging allowed among all fossil units in state (including new units subject to the 111(b) standard) Credit for incremental renewables and energy efficiency (equivalent to adding MWhs to denominator in calculating emission rate for compliance purposes) States may opt in to interstate averaging or credit trading States may adopt alternative plans, including mass-based standards, provided they achieve equivalent emission reductions

5 FLEXIBLE COMPLIANCE OPTIONS HEAT RATE REDUCTIONS CLEANER POWER SOURCES FLEXIBLE COMPLIANCE MORE RENEWABLES INVESTMENTS IN EFFICIENCY

6 FLEXIBLE COMPLIANCE OPTIONS 2,500 2,100 lbs/mwh 2,000 2,000 lbs/mwh 1,900 lbs/mwh 1,750 lbs/mwh lbs/mwh 1,500 1,600 lbs/mwh 1,500 lbs/mwh Example Target Rate 1,500 lbs/mwh 1, Starting Emissions Rate Heat Rate Improvements Dispatch Shift Renewable Generation End-Use Efficiency Combined Heat and Power 2020 Compliance Emission Rate

7 NRDC SPECIFICATIONS LIST OF SCENARIOS Reference Case AEO 2013 demand projections Onshore wind costs: DOE/LBL 2012 Wind Technologies Report Nuclear units re-licensed, 20-year extension NRDC Policy EE Utility Cost Test 2020 Nominal Targets: Coal = 1,500 lbs/mwh; Gas = 1,000 lbs/mwh EE cost-quantity function, Synapse EE available, selected based on utility cost NRDC Policy EE Total Resource Cost Test 2020 Nominal Targets: Coal = 1,500 lbs/mwh; Gas = 1,000 lbs/mwh EE cost-quantity function, Synapse EE available, selected based on total cost NRDC Stronger Standards 2020 Nominal Targets: Coal = 1,400 lbs/mwh; Gas = 700 lbs/mwh EE cost-quantity function, Synapse EE available, selected based on utility cost

8 NRDC SPECIFICATIONS SIMPLE ENERGY EFFICIENCY SUPPLY CURVE Energy Efficiency Quantity Assumptions Same energy efficiency potential (maximum MWhs saved) as in 2012 analysis Divided evenly into three cost blocks in each region, 482 TWh in total Energy Efficiency Cost Assumptions Costs apply nationwide, do not vary across regions Derived based on utility program costs from Synapse and relative values from LBNL cost curve to estimate costs of each block Middle cost block is equal to the Synapse utility program cost Customer contribution at 45% of total cost is included in cost-benefit calculations Levelized Cost (cents/kwh) EE Program Costs (cents/kwh) 161 TWh 161 TWh 161 TWh Low Middle High

9 STATE EMISSION RATES TRAJECTORIES UNDER NRDC POLICY ILLUSTRATIVE ,500 2,000 1,500 Lbs/MWh 1, West Virginia Virginia Florida

10 PRELIMINARY RESULTS NRDC POLICY CASES vs. REFERENCE CASE PROJECTED CAPACITY IN GW Reference Case Utility Cost Test TRC Test Stronger Standards Coal Coal with CCS Gas Nuclear Hydro Wind Other Efficiency

11 PRELIMINARY RESULTS NRDC POLICY CASES vs. REFERENCE CASE PROJECTED GENERATION MIX IN % 11% 10% 2020 Reference 19% 39% 5% 10% 19% 29% 1% Utility Cost Test 26% 26% 6% 6% 10% 29% 10% 10% 25% TRC Test 19% 2% 5% 19% 3% Stronger Standards 28% 28%

12 NRDC POLICY CASES vs. REFERENCE CASE EMISSIONS ,000 2,500 Million short tons CO 2 2,000 1,500 1, Historical Reference Case Utility Cost Test TRC Test Stronger Standards PRELIMINARY RESULTS

13 LARGE BENEFITS, LOW COSTS COSTS AND BENEFITS FROM REDUCED EMISSIONS IN ,000 60,000 50,000 Millions (2012$) 40,000 30,000 20,000 10,000 0 NRDC Utility Cost Test Policy Case NRDC - TRC TRC Test NRDC Stronger - Standards Alt Rates Compliance Cost Estimated SO2 and NOx Benefits Estimated CO2 Benefits NOTE: Carbon reduction benefit (low) calculated according to Administration s updated Social Cost of Carbon (SCC) of $43 (2012$) per short ton in 2020, reflecting the 3% discount rate case. Carbon reduction benefit (high) calculated according to an estimate for the SCC of $62 (2012$) per short ton, using a 2% discount rate case. Benefits for SO 2 and NOx reductions are preliminary estimates based on scaling previous estimates. PRELIMINARY RESULTS