Washington s Clean Air Rule WSPP 2016 Fall Operating Committee Meeting October 13, 2016

Transcription

1 Washington s Clean Air Rule WSPP 2016 Fall Operating Committee Meeting October 13, 2016 Robb Davis, Energy Policy Advisor robert.davis@chelanpud.org

2 The Five Ws Who is Covered? GHG emitters with annual emissions above threshold o 100,000 MT CO 2 e decreasing to 70,000 MT in 2035 Stationary sources, natural gas distributors, and petroleum product producers/importers What is Required? 1.7% annual decrease in emissions until 2035 o Baseline is average of 2012 to 2016 emissions o Energy-Intensive and Trade-Exposed entities (EITEs) can elect a performance-based target 2

3 The Five Ws, continued When Does Compliance Begin? 2017 for electric generators and natural gas distributors 2020 for EITEs and petroleum product producers/importers Where are Emissions Covered? Washington State only, BUT out-of-state GHG allowances can be used for compliance Why this Rule Now? Political pressures Court order to issue rule by the end of

4 Exemptions Electricity imports Centralia coal plant o Subject to separate shutdown agreement 1 st unit in 2020, 2 nd unit in 2025 o Agencies prohibited from imposing additional GHG emissions requirements Industrial combustion of woody biomass Agricultural practices 4

5 Compliance 3-year compliance period Covered parties must: o Reduce covered emissions to or below target, or o Acquire offsets from qualifying emission reduction activities or projects to account for overage Penalties of up to $10,000 per violation per day o Each MT of unaccounted for GHG emissions is one violation 5

6 Emission Reduction Units 3 ways to generate ERUs: 1) Emissions below target for compliance period 2) Allowances from external GHG markets 3) Emission reduction projects or programs: o Energy measures: surplus RECs, surplus conservation and energy efficiency 2.25 RECs or 2.25 MWhs EE/conservation = 1 ERU o Other measures: transportation, combined heat and power, livestock and agriculture, waste and wastewater, industrial sector 6

7 ERU Ownership and Transfer Accounting mechanism only, which covered parties may record and transfer o Covered parties to contract for emission reductions, then record ERUs Third-parties cannot hold ERUs, but can facilitate or broker transfers 10-year expiration with first-in, first-out requirement 7

8 Reduction Cost Estimates $23 $57 using onsite reductions $6 $11 using emission reduction projects $13 $14 using allowances $3 $11 using RECs o o $1.50 $5 per REC WA and OR RPS increases in 2020 Ranges from Ecology s final cost-benefit analyses report (2015 US dollars). 8

9 Coal versus Gas Image from Appendix U to Puget Sound Energy s comments on Clean Air Rule 9

10 GHG-Free versus Coal and Gas Percentages from EIA data on total MWhs per year by resource type 10

11 Legal Challenges Natural gas distributors filed lawsuit claiming federal Commerce Clause violation Trade groups filed lawsuit claiming: o Lack of statutory authority o Failure to issue Environmental Impact Statement o Arbitrariness under Administrative Procedures Act o WA Constitutional violation 11

12 Clean Power Plan and CAR Generators included in CPP will comply with CAR if: o EPA has approved Washington s implementation plan, and o Plan requires greater GHG reductions than CPP Emission reductions required by CPP can be used to generate ERUs o Exception to restriction on generating ERUs 12

13 CPP targets versus WA targets Image from Appendix to Public Generating Pool s comments on Clean Air Rule 13

14 Carbon Tax Ballot Initiative (I-732) $15/MT in 2017, $25/MT in 2018, increasing 3.5% plus inflation per year to $100/MT Consumer-side tax on electricity o WA seller must collect the tax from consumer o If any seller fails to collect, becomes liable for the tax Carbon content of electricity to be determined in future rulemaking o Must consider current fuel-mix disclosure reporting o Unspecified-source power taxed assuming 1 MT CO 2 /MWh o If tax is paid on fuel for generation, generated electricity is not taxed 14

15 Carbon Tax and CAR Risk of double regulation if I-732 passes: o CAR section 320: If another program establishes GHG reduction requirements... ecology may suspend, alter, or repeal some or all of the requirements if ecology determines the new program requires similar or greater GHG reductions[.] 15

16 Organized Electricity Markets and CAR EIM (or Regional ISO) interaction o How will generators recover CAR compliance costs? o How will CAR and CARB requirements interact? o How will double counting of emitting or clean resources be avoided? 16