Readying States for New Greenhouse Gas Rules in the Electricity Sector

Transcription

1 Readying States for New Greenhouse Gas Rules in the Electricity Sector Sue Tierney Analysis Group National Governors Association Workshop for Governors Energy Advisors September 22, 2014 BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON

2 The Context for EPA s Proposed Clean Power Plan Page 1

3 The big-picture: CO 2 emissions from U.S. power production = 1 out of every 15 tons of CO 2 produced anywhere in the globe World Bank data, Page 2

4 There is a lot going on in the U.S. power sector Relatively flat demand Low natural gas prices relative to coal Underutilized existing capacity Coal plant (and nuclear plant) retirements Tightening reserves Renewable additions (utility-scale; distributed) Fuel delivery challenges Sue Tierney, Greenhouse Gas Emission Reductions From Existing Power Plants: Options to Ensure Electric System Reliability, May Page 3

5 Planning is underway to address these changes Different states and regions are actively addressing these issues: Changing market rules in organized electric markets Reliability studies (e.g., Polar Vortex; plant retirements) Utility Integrated Resource Plans MATS compliance actions Energy efficiency investments New plant proposals (especially natural gas plants and renewables) Renewables integration Gas/electric harmonization Transmission plans and projects Page 4

6 Time to address these changes is now MATS compliance deadlines MATS deadlines for units needed for reliability EPA 111(d) Final rule State 111(d) Plans EPA 111(d) starts Cumulative retirements (GW) Cumulative planned additions (GW) Non-intermittent (e.g., fossil, nuclear) Plus renewables (wind, solar, etc.) Page 5

7 Reliability Considerations relative to the EPA proposed Clean Power Plan Page 6

8 Electric system reliability: The degree to which the performance of the elements of the electrical system results in power being delivered to consumers within accepted standards and in the amount desired. Reliability encompasses two concepts, adequacy and security. Adequacy implies that there are sufficient generation and transmission resources installed and available to meet projected electrical demand plus reserves for contingencies. Security implies that the system will remain intact operationally (i.e., will have sufficient available operating capacity) even after outages or other equipment failure. The degree of reliability may be measured by the frequency, duration, and magnitude of adverse effects on consumer service. Note: Reliability issues (and challenges) will change in the future, with the transition to a system with greater intermittency, more reliance on fuels that need to be delivered in real-time, and more generation on customers premises. Page 7

9 Reliability issues from 111(d): manageable, given that.. The Clean Power Plan is inherently different from the MATS rule in ways relevant to reliability Near-term reliability issues in regional & local systems will need to be addressed long before the timing of 111(d) compliance Early actions are important for addressing those other issues and to make a down-payment on CO 2 emission reductions The cooperative federalism approach affords states a wide range of tools including ones that directly address reliability issues States will have significant flexibility and time Page 8

10 Thoughts about what states might be doing now to address near-term and long-term electric system changes economically and reliably Page 9

11 Understand and respect the practical realities in your state* What does your electric system look like? What transitions in the electric industry are already underway? What state agencies have potentially relevant authorities Air agencies, utility regulatory, energy offices Also: public authorities? building-code agencies? water authorities? * This is in addition to understanding and respect the policy & legal & economic & political realities, of course Page 10

12 RTOs and reliance on IPPs Electric utilities Electric grid 11 Generating units affected by 111(d) Page 11

13 Recognize that the electric system in not static Understand where current plans/conditions are taking your state Natural Gas Plant Utilization Sue Tierney, Greenhouse Gas Emission Reductions From Existing Power Plants: Options to Ensure Electric System Reliability, May Page 12

14 Be creative with familiar tools Least-cost planning Demand-side tools (e.g., energy efficiency, load-management, demand-response, efficient building codes, appliance efficiency standards, energy savings performance contracting) Renewable standards and clean-energy standards Volt/var programs and other transmission remedies Reliability studies Market-based mechanisms: electricity pricing tools Financial incentives for regulated utilities (e.g., regulatory assets, revenue decoupling, depreciation rates, etc.) Water/electricity reduction programs (e.g., water system efficiency programs, water leaks, water pricing) Page 13

15 Be open to mass-based models of compliance Attributes that enable it to work well* A limit on total CO 2 emissions from power plants in a common area (e.g., state; multiple states; parts of states in an RTO). It incorporates a carbon cost (price) into the normal economic dispatch of power plants on the system and works seamlessly, allowing reliable operations of the system. It provides for economically efficient CO 2 reductions. It allows zero-carbon resources to offer their value to the system (e.g., energy efficiency ends up lowering the cost of CO 2 permits; renewables and nuclear generation offset overall emissions) It does not run afoul of the Federal Power Act. It allows for changing conditions in the industry. * Based on analyses of the Regional Greenhouse Gas Initiative (RGGI): Hibbard, Tierney, Okie (2011) Page 14

16 Bottom line: There is no reasonable basis to anticipate that EPA s guidance, the states SIPs and the electric industry s compliance with them will create reliability problems for the power system, as long as EPA and the states plan appropriately and take timely actions to assure electric-system reliability in their plans. Section 111(d) affords states considerable latitude to mitigate and otherwise resolve reliability concerns. And they will have time to put in place actions to assure reliable electricity supply as part of their tailored SIP. Page 15

17 Susan F Tierney, Ph.D. Senior Advisor Analysis Group 111 Huntington Ave, 10 th Floor Boston, MA stierney@analysisgroup.com Page 16