Briefing for. GHG Emissions Offsets & Regional Modeling. Adam Diamant Technical Executive EPRI Energy and Environmental Analysis Program

Transcription

1 Briefing for IETA Cross-Provincial & Industry Workshop: GHG Emissions Offsets & Regional Modeling Adam Diamant Technical Executive EPRI Energy and Environmental Analysis Program Calgary, Canada July 18, 2013

2 Today s Topics 1. EPRI research on climate change issues 2. CA offsets policy developments 3. Extending EPRI s REGEN model to Canada 2

3 Together Shaping g the Future of Electricity EPRI is a non-profit 501(c)(3) scientific research consortium founded in 1973 to perform objective research and development relating to the generation, delivery and use of electricity it for the benefit of the public. EPRI has 450+ participants in more than 40 countries around the world. In the U.S., EPRI participants generate more than 90% of electricity delivered. Principal locations Palo Alto, CA, Charlotte, NC and Knoxville, TN 3

4 Energy and Environmental Analysis Program Global Climate Policy Costs and Benefits (P102) Analyze Global Climate Policies Explore Offset Program Design and Economics Examine Role of Technology and Electrification Land use Change, Bioenergy, Water and Other Essential Elements of Climate Issue Goal: Inform decision making about energy and climate policy from a global, integrated perspective Energy and Environmental Policy Analysisand and Company Strategy (P103) Analyze US Energy and Environmental Policies and Regulations Track and Analyze Possible Policy Precedents Regional/International l Inform Company Compliance Strategies Goal: Inform decision making about energy and environmental policies from the US U.S. state/federal perspective Technology Assessment, Market Analysis and Generation Planning (P178) Technology Cost and Performance (TAG) Natural Gas, Coal and Power Markets Fleet Migration and Advances in Generation Planning Corporate Risk Management Goal: Inform utility planning, including technology cost and performance, and analysis of fuel markets and risk. 4

5 Our Perspective Energy industry faces unprecedented uncertainty Energy and environmental policies have a profound impact on development and operation of new and existing power generation facilities Fundamental shifts in fuel markets (e.g., natgas and coal) Integration of renewables into the existing electricity grid Technology cost and performance Load growth and dintegration ti of supply and ddemandd Carbon mitigation and adaptation Good analysis can: lead to more effective and efficient policy outcomes; and, when coupled with technology advances, can save companies and their customers $billions. 5

6 EPRI Staff are Engaged in Key Scientific and Economic Analysis Efforts Several IPCC authors and collaborators U.S. National Climate Assessment Committee U.S. National Academy of Science Committee on Climate Change Impacts of the US Tax Code US-EPA (SAB) Social Cost of Carbon Offset Protocol Working Groups ACR, CAR & VCS Stanford Energy Modeling Forum (EMF) 6

7 EPRI Collaborates Closely with IETA on Climate Research EPRI supported the initial creation of IETA Overlapping corporate memberships EPRI has provided financial support for IETA s annual conference (CFNA) and other events EPRI and IETA routinely co-sponsor international conferences, workshops and climate research 13 th Annual EPRI-IETA-IEA GHG Emissions Trading Workshop: September , 2013 in Paris, France EPRI-IETA Joint Symposium on Complementary Policies and Cap-and-Trade Programs (San Francisco, April 2013) 7

8 Key Areas of EPRI s Offsets R&D 1. Develop new offset technologies MSU-EPRI N 2O offsets protocol (ACR, CAR & VCS approved) Extensive research related to REDD Recent analysis of blue sky approaches to reduce GHG emissions 2. Quantitative analysis Extensive modeling of potential future offset supplies. Testing the MSU-EPRI N 2 O Offsets Protocol on farm fields in Michigan. 3. Policy Analysis Evaluate the design of existing and evolving offset programs. 4. Education and communications 14 multi-stakeholder GHG Policy Dialogue workshops since Documents and presentations ti available online at: 8

9 Recent Documents Exploring the Interaction Between California s Greenhouse Gas Cap-and-Trade Program and Complementary Emissions Reduction Policies. EPRI # (2013). Key Institutional Design Considerations and Resources Required to Develop a Federal Greenhouse Gas Offsets Program in the United States. EPRI # (2011). Aggregation of Greenhouse Gas Emissions Offsets: Benefits, Existing Methods, and Key Challenges. EPRI # (2011). Emissions Offsets: The Key Role of Greenhouse Gas Emissions Offsets in a U.S. Greenhouse Gas Cap-and- Trade Program. EPRI # (2010). Key Issues in Designing Mechanisms to Reduce Greenhouse Gas Emissions from Deforestation and Degradation (REDD). EPRI # (2009). 9

10 CA Offsets Policy Developments 10

11 Offsets: Allowed Quota & Protocols A covered entity can use offsets to meet up to 8% of its compliance obligation in each compliance period 218 MtCO 2 e of offsets allowed cumulatively No banking of 8% offset quota btwn compliance periods Only ARB offsets (ARBOCs) used for compliance* 1. U.S. Ozone Depleting Substances (ODS)Projects 2. Livestock Manure (Digester) Projects 3. U.S. Forest Projects 4. Urban Forest Projects (inactive) ARB has outsourced registration to Offset Project Registries (OPRs). ACR and CAR approved. * Current protocols apply to the US only. 11

12 ARB Offset Credit Issuance Process 1. Prospective offset projects are listed with an OPR 2. Offset projects are implemented 3. 3 rd -party verification is completed by an ARB accredited verification body 4. If appropriate, OPR issues ROCs. 5. ROCs are converted to ARBOCs and listed on CITSS by ARB, and are retired by the OPR. 6. ARBOCs can be used for compliance 12

13 New Offset Protocol Development in 2013 Two new protocols are being developed by ARB that focus on methane (CH 4 4) reductions Rice cultivation Coal mine methane destruction (CMM) Technical work ongoing in 2013 Expected effective date Spring 2014 In 2014, ARB is likely l to consider development of a nutrient t management protocol (i.e., N 2 O avoidance) that could be based on the EPRI-MSU N 2O offsets protocol. Ongoing work by the ROW that could lead to development of a compliance offsets program for sectoral REDD starting in 2015 or later with Acre, Brazil and/or Chiapas, Mexico. 13

14 International Offsets Includes a framework to include international offsets from sectoral programs within regions with an initial focus on REDD-based offsets that preserve tropical forests MOU signed with Chiapas, Mexico & Acre, Brazil International ti offsets anticipated i t to be included d around 2015 or later REDD Offsets Working group (ROW) Other project-based offset mechanisms, such as CDM, could be recognized in the future, but are not included now. The amount of sector-based offset credits allowed to be used by covered entities for compliance also is limited: 25% of offset limit during the 1 st & 2 nd compliance periods (2%); and, Increases to 50% for the 3 rd compliance period (4%). 14

15 Rice Cultivation Protocol First crop-based offsets protocol considered by ARB Quantifies GHGs associated with rice cultivation in the US Emissions reductions created by reducing CH 4 May be based on existing ACR and CAR rice protocols Minimal supply potential: MtCO 2 e cumulatively through

16 Coal Mine Methane Protocol Destruction of CH 4 emitted by active and abandoned coal mines Preexisting ACR and CAR protocols Large potential supply: MtCO 2e cumulatively through 2020 Source: ARB presentation, March 28,

17 One Perspective on Potential Cumulative Offset Supply Development Offset supply expected to be less than allowed 218 Mt. CA: 157 Mt through 2020, including ~10Mt from early action; WCI: 164 Mt. ODS and Forests are likely to be the largest sources; and, REDD is expected to enter supply in CP3. Source: Thomson Reuters Pointcarbon, 4/16/13 briefing for IETA. 17

18 Developing a Canadian Regional Economy, Greenhouse Gas, and Energy Model 18

19 U.S. REGEN Modeling the Future State-of-the-art computable general equilibrium (CGE) model of the U.S. economy with regional detail. 15 different regions. Captures regional variability in generation mix, resources, energy demand. Detailed focus on the energy sector and electricity system. Determines best mix of resources to power the economy. Developed and maintained by EPRI. Incorporates EPRI s in-house proprietary datasets related to expected costs and performance of existing and future electric generation technologies and environmental controls. 19

20 US-REGEN Model Description Pacific California Mountain N General Equilibrium Economy Model NW Central Energy Demand (Electric & Non-Electric) Aggregate Economic Representation Energy Markets for Oil, Natural Gas, Coal, & Bioenergy NE Central C Foreign Exchange Landuse (Ag and Forest) Energy Efficiency across Commercial, Industrial, & Residential Sectors NE Central R NY M Atlantic Transportation: Detailed model of vehicle technologies and intermodal choices S Atlantic NE Mountain S SW Central Electric Sector Module Texas SE Central CO 2 Mitigation Technologies Environmental Controls: Air, Water, Land Transmission Florida 20

21 Phase 1: Environmental Controls Analysis Electric Sector Policies Cross-State Air Pollution Rule (CSAPR) by 2015; new NAAQS and regional haze regulations by 2018 Mercury and Air Toxics Standard (MATs) by 2015 Clean Water Act (CWA) 316(b) controls by 2018 Coal Combustion Residuals (CCRs) controls by 2020 Economic Impacts Three scenarios reviewed GW of coal plant retirements $ B (NPV) in GDP impacts Sensitive to natural gas prices (~100 GW of coal plant retirements) EPRI Report

22 Analysis of Environmental Controls Regional Generation Mix: Reference Case Gas New Coal Wind Hydro+ Imports Solar Environmental Retrofit Nuclear (New) Geothermal Existing Coal Nuclear (Existing) Biomass WEST MIDWEST Total Energy for Load TWh 1600 EAST TW Wh TW Wh TWh SOUTH

23 Phase 1: Technical Economic Insights Potential Impact of Environmental Controls ty (GW) in 2020 Co oal Capaci The Value of Innovation and Optimization ~$100 Billion lower total cost (~1/3 less) in Flex Case vs. High Case Retrofit In Question Retire Flex Ref High 23

24 Different Natural Gas Price Paths Lead to Very Different Futures 7000 Reference 7000 Hi TRR Gas TWh Existing Coal Environmental Retrofit CCS Retrofit New Coal New Coal w/ccs Gas Gas w/ccs Nuclear (Existing) Nuclear (New) Hydro+ Wind Biomass Geothermal Solar EE + Price Response Baseline 24

25 Goals of Developing Canadian REGEN 1. Evaluate potential impacts of proposed Canadian energy and environmental policies on the Canadian economy and electricity sector. 2. Develop a robust, state-of-the-art economic model from the ground up. Including the most up-to-date data Explicit characterization of key assumptions Provide key modeling capability to provinces and industry 3. Use Integrated REGEN model to explicitly model policies that may impact cross border trade in electricity and energy U.S. Administration s Climate Action Plan (CAA NSPS) Proposed U.S. Clean Energy Standard (CES) 25

26 Using CAN REGEN to Evaluate Current Issues Evaluate potential changes to Alberta s SGER program to support post 2014 program design and evolution Evaluate proposed provincial equivalency rules related to the phase-out of coal-fired generation Evaluate potential future regulations governing GHG emissions from natural gas-fired power plants Evaluate future GHG regulations in the oil and gas sector Impact of proposed and pending U.S. EPA CAA regulations on power sector CO 2 emissions and linkage to Canada Impact of expansion of the Western Climate Initiative (WCI) beyond Quebec & potential linkages with California 26

27 Proposed Research Collaboration To work with a consortium of CAN companies and provincial authorities to develop a Canadian version of EPRI s REGEN model. Macro economic representation of key regions of Canada In-depth representation of the Canadian electric sector Representation of other energy trade flows, such as natural gas and oil Specific provinces / regions to be included based on funders interest Propose initially to focus on 2 key regions (e.g., Alberta + 1 other) Expand based on available resources and funder interest Alternative: develop an entire Canada REGEN model Use new model to evaluate two specific regional policy proposals Total cost = ~$600K depending on scope. (Alternative = ~$1.2M) 6-10 companies / provinces $30k-$50k annually for two years. Time required: 1-2 years 27

28 Thank You Adam Diamant Technical Executive Electric Power Research Institute Energy & Environmental Analysis Program Phone: Together Shaping the Future of Electricity 28