Overview EPA s Proposed Clean Power Plan and Impacts for Louisiana Clean Cities Coalition Meeting November 5, 2014 David E. Dismukes, Ph.D. Center for Energy Studies Louisiana State University CAVEAT: The views and opinions provided in this presentation are those of the author and do not necessarily reflect the official position of the State of Louisiana or any Louisiana executive agency.
Overview Take Away Points New Natural Gas End Uses & Fuel Diversity Concerns EPA proposed the Clean Power Plan ( CPP ) in June 2014 with the goal of reducing carbon emissions by an average of 38 percent in 2020 (interim target) and 42 percent by 2030, both from 2012 levels. The CPP is primarily based upon a target rate (lbs/mwh), not a level; although there is a potential mass-based conversion. Rule differs from many past EPA approaches since it: a) is primarily based on a target rate (lbs/mwh), not emissions level reduction; b) Is not based on a market-based mechanism or a fixed technology method of emissions reductions; c) Defines a range of potential compliance options; and d) Has ambiguous non-compliance provisions (at this point). Final comments on the proposed rule are due on December 1, 2014. 2
Overview Proposed Louisiana CO2 State-wide Emission Rate Reduction New Natural Gas End Uses & Fuel Diversity Concerns Louisiana s 2012 baseline is set at 1,533 lbs/mwh and will be required to decrease to 948 lbs/mwh by 2020 and to 883 lbs/mwh by 2030. 1,800 1,600 lbs CO2/MWh 1,400 1,200 1,000 800 600 2020 Interim Goal: 948 lbs/mwh; a reduction of 585 lbs/mwh, or 38 percent. 2030 Final Goal: 883 lbs/mwh; a reduction of 650 lbs/mwh, or 42 percent. 400 200 0 2012 Baseline 2020 Interim Goal 2030 Final Goal Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 3
Overview Total Annual CO2 Emission Reductions Needed New Proposed Natural rule Gas will End require Uses Louisiana & Fuel Diversity to reduce Concerns its power sector annual CO 2 emissions by over 27 million short tons of CO2 by 2030. Over 27 million tons of CO 2 per year Big Cajun 2: Brame Energy Center: 11 mllion tons CO 2 5.9 million tons CO 2 Note: Plant emissions are for 2012. Source: 2012 EPA Clean Air Markets database. Dolet Hills: 5.7 million tons CO 2 RS Nelson: 6 million tons CO 2 4
Overview State Comparison of Emission Rate Reductions New Natural Gas End Uses & Fuel Diversity Concerns Louisiana s rate reduction of 650 lbs/mwh is close to the overall U.S. average of 649 lbs/mwh. 1,600 1,400 1,200 Louisiana s emission rate reduction: 650 lbs/mwh US average emission rate reduction: 649 lbs/mwh lbs CO2/MWh 1,000 800 600 400 200 0 AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VA WA WV WI WY Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 5
Overview State Comparison of Total Annual CO2 Emission Reductions New Louisiana Natural Gas requirement End Uses is & 22Fuel nd most Diversity stringent Concerns state goal under the proposed rule. Top five states account for five percent of the required reduction; top ten states account for 12 percent of the required reduction. 1,600 1,400 1,200 lbs/mwh 1,000 800 600 400 200 0 RI CT CA AK KY DE MA WV NV MS AL IN MO HI ME FL NJ NY UT OH PA ND WY VA TX ID NH LA MI OK MT NE OR NM GA NC WI AR KS MD AZ CO TN IA IL SC MN WA SD Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 6
Overview State Comparison of Total Annual CO2 Emission Reductions New On Natural a percentage Gas End basis, Uses Louisiana s & Fuel Diversity required Concerns reduction of 42 percent ranks 20 th overall. 90% 80% 70% 60% Percent 50% 40% 30% 20% 10% 0% RI KY WV IN MO ND WY AK HI MT OH UT AL NE DE PA KS MI CT MS WI FL CA NV IA MD NM IL TN LA MA OK CO VA NC TX AR GA NJ NY AZ NH MN ME SC OR SD ID WA Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 7
Myth: Louisiana Will Not be Impacted Much Since it is a Natural Gas State Overview New States Natural with large Gas End shares Uses of & coal-fired Fuel Diversity generation Concerns have reduction rates lower than the U.S. average, and lower than many states with larger shares of natural gas-fired generation. Percent 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% KY ND WY WV SD MT NE IA KS MO IL IN TN UT MD OH CO MN NC WI SC MI AR PA NM GA AZ AL OK TX LA VA WA HI FL OR DE MS NH NV NJ MA AK NY CA CT ID ME RI Coal Generation as Percent of Total Emissions Reduction U.S. Average Emissions Reduction Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 8
Overview Comparative Impacts: Emission Reductions Per-Capita New Louisiana Natural is Gas the End 8 th hardest Uses & impacted Fuel Diversity state Concerns requiring 4.04M short tons of CO2 reductions per capita person by 2030. Greater than 3.0M short tons per person 2.0M to 3.0M short tons per person Less than 2.0M short tons per person No Requirement Source: 2012 EPA Clean Air Markets database; National Electric Energy Data System ( NEEDS ); 40 C.F.R. Part 60, p. 34895; and 2014 Census Estimates. LSU Center for Energy Studies 9
Overview Comparative Impacts: Emission Reductions Per State GDP New Louisiana Natural is Gas the End 16 th Uses hardest & Fuel impacted Diversity state Concerns in terms of reduction of CO2 per state GDP. ` Greater than 100 M short tons per million $ 50M-100M short tons per million $ Less than 50M short tons per million $ No Requirement Source: 2012 EPA Clean Air Markets database; U.S Energy Information Administration, U.S. Department of Energy 10
New Natural Gas End Uses & Fuel Diversity Concerns BSER and EPA s Building Block Approach 11
EPA s Proposed Clean Power Rule Louisiana BSER Targets BSER and Building Blocks New Natural The EPA s Gas Proposed End Uses Clean & Fuel Power Diversity Rule Concerns is based on a Best System of Emissions Reductions ( BSER ) that includes four building blocks. Building Block 1: EPA reviewed the opportunity for coal-fired plants to improve their heat rates. BSER assumes all coal plants can increase their efficiency by 6 percent. 8% 15% Building Block 4: EPA estimated energy efficiency deployment in 12 leading states and assumes all states can increase their current annual savings rate to reach annual savings of 1.5 percent by 2030. Building Block 2: EPA found an average availability of 70 percent for natural gas CCs to be technically feasible. 58% Each building block accounts for a portion of the total goal. 16% 3% Building Block 3b: EPA developed targets for renewable energy penetration in six regions and calculated regional growth factors to achieve each target by 2030. Building Block 3a: EPA identified five nuclear units currently under construction and assumes that 5.8 percent of existing nuclear capacity is atrisk but can be retained. 12
BSER and Building Blocks Louisiana Average Fossil EGU CO2 Emissions Standard based on BSER New Natural Gas End Uses & Fuel Diversity Concerns Fossil EGU CO 2 Emissions Standards (lbs/mwh) 2,500 2,000 1,500 1,000 500 0 Louisiana Average Coal CO 2 Rate Louisiana Average NGCC CO 2 Rate 2012 Fossil Coal Heat Rate Emissions Rate Improvement Gas CC Re- Dispatch New and "At- Risk" Nuclear Existing and New Renewables CO 2 Rate Reduction: 42% New Energy Efficiency 2030 Proposed Emissions Standard Source: LA 111(d) EGU Computation.xlsx. 13
Building Block 1: Coal Plant Efficiency Improvements 14
Building Block 1: 4-6 Percent Lower Emissions from Existing Coal Generation New Natural Gas End Uses & Fuel Diversity Concerns Coal Plant Efficiencies EPA notes that several studies have examined the potential to improve heat rates as coal-fired power plants, noting specifically a 2009 study by the engineering firm Sargent & Lundy. Based on the 2009 Sargent & Lundy study, EPA estimated that potential heat rate improvements are in the order of approximately 4 to 12 percent. Furthermore, based on review of EPA and DOE EIA generation data, EPA estimates that historically EGUs have experienced heat rate improvements from 3 to 8 percent. Based on a review of prior studies and generation trends, EPA estimates the potential for improvements in heat rates of between 4 and 6 percent, which mirrors a reduction in CO2 emissions by the same. EPA notes that improvements in heat rates decrease fuel consumption and thus costs, and that a 6 percent improvement would be sufficient to cover costs associated with improvement. Source: 40 C.F.R. Part 60, pp. 34859-34861. 15
Coal Plant Efficiencies Building Block 1, Coal-Fired Heat Rate Efficiency New EPA Natural applies Gas a End six percent Uses & Fuel thermal Diversity efficiency Concerns improvement factor for each coal generation facility, setting a 139 lbs/mwh reduction target. Facility Generator ID 2012 Emissions Rate (lbs/mwh) Thermal Efficiency Improvement Factor (%) Adjusted Emissions Rate (lbs/mwh) 2012 Net Output (MWh) Dolet Hills 1 2,460 6.0% 2,312 4,616,823 R S Nelson 1 2,693 6.0% 2,531 821,331 R S Nelson 2 2,683 6.0% 2,522 802,645 R S Nelson 6 2,493 6.0% 2,344 3,118,384 Big Cajun 2 1 2,192 6.0% 2,061 3,273,725 Big Cajun 2 2 2,140 6.0% 2,012 3,408,652 Big Cajun 2 3 2,114 6.0% 1,987 3,594,632 Brame Energy Center 2 2,257 6.0% 2,121 2,677,857 Brame Energy Center 3 2,439 6.0% 2,292 1,992,364 Average Emissions Rate: 2,323 2,184 Source: EPA Clean Power Plan Proposed Rule Technical Documents, available at: http://www2.epa.gov/carbon-pollution-standards/cleanpower-plan-proposed-rule-technical-documents. 16
Coal Plant Efficiencies Building Block 1 Issues New Natural Gas End Uses & Fuel Diversity Concerns There are a number of incorrect and problematic assumptions included in the development of this building block: Use of gross rather than net heat rate reductions. Statistical modeling used for heat rate analysis is flawed. Fails to consider recent efficiency gains/new pit technologies. Fails to consider efficiency losses of control technologies from other EPA rules. Cannot be practically done given new source review standards. Fails to examine or consider stranded generator costs (rate impacts). 17
Building Block 2: Increased NGCC Utilization 18
NGCC Utilization Recent Trends in Louisiana Gas-Fired Generation New Louisiana s Natural Gas natural End Uses gas & heat Fuel rates Diversity have fallen Concerns 9.7 percent in the last 10 years (at an average annual rate of one percent); and natural gas-fired emissions have fallen 11.2 percent (at an average annual rate of 1.2 percent). 12,000 1,400 Heat Rate (Btu/kWh) 11,500 11,000 10,500 10,000 1,350 1,300 1,250 1,200 9,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Natural Gas Heat Rate Natural Gas Emissions 1,150 Source: 2012 EPA Clean Air Markets database. 19
NGCC Utilization Louisiana NGCC Efficiencies and Utilization New On Natural average, Gas Louisiana s End Uses & Fuel NGCC Diversity units operate Concernsat heat rates that are 29 percent lower than Louisiana s steam units and emit 30 percent less emissions. 14,000 1,800 12,000 1,600 Heat Rate (Btu/kWh) 10,000 8,000 6,000 4,000 2,000 1,400 1,200 1,000 800 600 400 200 Emissions (lbs/mwh) 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NGCC Heat Rate Steam Heat Rate NGCC Emissions Steam Emissions 0 20
NGCC Utilization Building Block 2, Natural Gas CC Dispatch New EPA Natural assumes Gas End all natural Uses & Fuel gas-fired Diversity combined Concerns cycle units can be re-dispatched at a rate of 70 percent. This increases the NGCC generation from 19.8 million MWh to over 40 million MWh, an increase of 102 percent. Capacity Factor EPA EPA Highest Highest Nameplate 2012 Estimated Assumed in Last in Last Capacity Generation Generation Increase 10 Years 5 Years (MW) ------ (MWh) ------ (%) Louisiana 1 406.3 2,949,067 2,498,257-12.6% 99.5% 99.3% Coughlin Power Station 922.8 1,434,842 5,674,113 52.3% 26.9% 26.3% Sterlington 226.3 4,610 1,391,473 69.8% 15.6% 1.4% Acadia Energy Center 1,376.0 4,785,503 8,460,749 30.4% 40.8% 40.8% Carville Energy LLC 570.0 2,899,630 3,504,816 12.1% 62.6% 62.6% Ouachita 903.9 1,658,025 5,557,900 49.1% 20.8% 20.8% Washington Parish Energy Center 655.0-4,027,464 70.0% 0.0% 0.0% Perryville Power Station 824.1 2,486,523 5,067,226 35.7% 29.4% 29.4% J Lamar Stall Unit 624.0 3,552,982 3,836,851 5.2% 43.0% 43.0% Total 6,508 19,771,182 40,018,850 34.7% Source: 2012 EPA Clean Air Markets database. 21
NGCC Utilization Building Block 2 Deficiencies New Natural Gas End Uses & Fuel Diversity Concerns There are a number of errors and problems with the EPA methodology: Incorrect data. For instance, the EPA includes Washington Parish Energy Center (655 MW) in Louisiana s NGCC capacity totals. Other items include Louisiana 1, Perryville s 2 CT unit and the omission of NGCCs under construction (Ninemile 6 and Morgan City 14-01). The EPA incorrectly uses nameplate capacity rather than net summer capacity to estimate the total NGCC potential. Fails to understand the gravity of the change on the use and operation of these units. Fails to examine ripple impacts to natural gas markets. The EPA does not consider the increased use of natural gas associated with a 102 percent increase in natural-gas fired capacity (in Louisiana alone). Does not adequately examine transmission constraints. Fails to examine or consider stranded generator costs (rate impacts). 22
Building Block 3a: At Risk Nuclear Power Generation 23
At-Risk Nuclear Building Block 3a, At Risk Nuclear Capacity New Natural Gas End Uses & Fuel Diversity Concerns In Building Block 3a, the EPA assumes 5.8 percent of the current nuclear fleet is at risk. This nuclear capacity is incorporated into state goals as zero emitting generation (at a 90 percent capacity factor). Nuclear is not considered a dispatchable resource as is NGCC capacity; and instead of redispatching from coal to nuclear like in Building Block 2, the expected generation is simply added to the state goal denominator lowering the state goal emission rate. For Louisiana, this amounts to 985,225 MWh being added to the denominator (generation) to calculate the emissions rate. 24
At-Risk Nuclear Historic Trends in Nuclear Generation, Operating Plants and Generation New The Natural number Gas End of operating Uses & Fuel nuclear Diversity plants Concerns in the U.S. remained constant until this year, when four plants were retired. Nuclear generation has been falling in the last five years. 120 850 100 840 830 Number of Plants 80 60 40 820 810 800 790 780 Million MWh 20 770 760 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Number of Operating Plants Generation 750 Source: Energy Information Administration, U.S. Department of Energy. 25
At-Risk Nuclear Historic Trends in Nuclear Generation, Average Annual Capacity Factor New The Natural average Gas annual End Uses capacity & Fuel Diversity factor of Concerns nuclear facilities has been between 86 percent and 92 percent. 100% 98% 96% Capacity Factor (%) 94% 92% 90% 88% 86% 84% 82% 80% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Energy Information Administration, U.S. Department of Energy. 26
At-Risk Nuclear Nuclear Power Plant Operating Challenges: Zero Dispatch New Natural Gas ERCOT End Uses & Fuel Diversity Concerns % Hours Market is At or Below Zero 6% 5% 12% 10% 4% 8% 3% 6% 2% 4% 1% 2% 0% 0% Dec-10 Jun-11 Dec-11 Wind Generation as a % of Total % Hours Market is At or Below Zero 4% 3% 2% 1% SPP 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 0% Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Wind Generation as a % of Total Wind Generation ERCOT Day Ahead ERCOT Real Time Wind Generation SPP Imbalance % Hours Market is At or Below Zero 7% MISO 6% 5% 4% 3% 2% 1% 0% Jan-09 Jan-10 Jan-11 Jan-12 Wind Generation Real Time Day Ahead 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Wind Generation as a % of Total % Hours Market is At or Below Zero 4% PJM 3% 2% 1% 0% Jan-09 Jan-10 Jan-11 Jan-12 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Wind Generation Real Time Market Wind Generation as a % of Total 27
At-Risk Nuclear Building Block 3a Deficiencies New Natural Gas End Uses & Fuel Diversity Concerns EPA s allowance for at risk nuclear capacity effectively subsidizes unprofitable generation The basis for EPA s at risk nuclear capacity estimates is weak and not well supported EPA s at risk nuclear proposals are ambiguous on how nuclear generation will be treated for compliance purposes Unintended consequences of EPA s Proposed Rule on nuclear generation. EPA should not expand its definition of at risk nuclear capacity. 28
New Natural Gas End Uses & Fuel Diversity Concerns Building Block 3b: Renewable Generation 29
Renewables Building Block 3b, RE Potential New EPA Natural assigns Gas End the Uses states & Fuel to one Diversity of six Concerns regions and sets a RE target for each, based on an average of all 2020 RPS requirements of the states in that region. 33% by 2020 West Average: 22% 15% by 2020 20% by 2020 22% by 2020 10% by 2020 15% by 2020 30% by 2020 20% by 2020 20% by 2020 North Central Average: 15% 30% by 2020 10% 10% by 2020by 2020 16% by 2020 10% by 2020 South Central Average: 20% Northeast Average: 25% 10% by 2020 East Central Average: 16% CT: 23% by 2020 ME: 40% by 2020 MA: 22% by 2020 NH: 20% by 2020 NY: 29% by 2020 RI: 16% by 2020 DE: 19% by 2020 DC: 20% by 2020 MD: 18% by 2020 NJ: 22% by 2020 PA: 8% by 2020 OH: 9% by 2020 South East Average: 10% 30
Renewables Louisiana s Existing Biomass Capacity New Natural Gas End Uses & Fuel Diversity Concerns Louisiana s biomass capacity totals 445 MW. However, almost 60 percent of this capacity (262 MW) is over 30 years old. Online Facility Company Name Generator Id Capacity Date Age Fuel (MW) (years) Agrilectric Power Partners Ltd GEN1 12.1 1984 30 Agricultural Byproduct Boise Packaging & Newsprint LLC TG 61.5 1969 45 Wood/Waste Wood Temple-Inland Corp NO10 37.0 1999 15 Wood/Waste Wood Temple-Inland Corp NO8 25.0 1981 33 Wood/Waste Wood Temple-Inland Corp NO9 37.5 1979 35 Wood/Waste Wood IPC-Mansfield Mill GEN1 40.0 1981 33 Black Liquor IPC-Mansfield Mill GEN2 40.0 1981 33 Black Liquor IPC-Mansfield Mill GEN3 30.0 1981 33 Black Liquor M A Patout & Sons Ltd 1000 1.0 1981 33 Agricultural Byproduct M A Patout & Sons Ltd 2000 2.0 1981 33 Agricultural Byproduct Georgia-Pacific Consr Ops LLC- Port Hudson GEN1 67.7 1986 28 Black Liquor KPAQ Industries LLC GEN2 12.5 1966 48 Black Liquor Red River Mill Intl Paper Company 3 T-G 78.8 2008 6 Black Liquor Total 445.1 Source: Energy Information Administration, U.S. Department of Energy. 31
Renewables NREL Estimated Technical Potential for Onshore Wind Power by State New Natural Gas End Uses & Fuel Diversity Concerns Louisiana is not likely to be installing much onshore wind power. Thousand GWh < 50 50 100 100 500 500 1,000 > 1,000 Source: National Renewable Energy Laboratory, U.S. Department of Energy. 32
Renewables NREL Estimated Technical Potential for Utility-Scale Solar PV by State New Natural Gas End Uses & Fuel Diversity Concerns Large amounts of solar is unlikely as well. Thousand GWh < 10 10 50 50 75 75 100 > 100 Source: National Renewable Energy Laboratory, U.S. Department of Energy. 33
Renewables NREL Estimated Technical Potential for Biopower by State New Natural Gas End Uses & Fuel Diversity Concerns Biomass is Louisiana s most likely option for increasing renewable generation. Thousand GWh < 1 1 5 5 10 10 15 > 15 Source: National Renewable Energy Laboratory, U.S. Department of Energy. 34
Renewables Building Block 3b, Louisiana Renewable Requirements New Natural Gas End Uses & Fuel Diversity Concerns Under Building Block 3, the EPA expects Louisiana to be able to increase current renewable generation to 7 percent of total generation by 2030, an increase of 184 percent from current levels. 8 7 6 Million MWh 5 4 3 2 1 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Target Baseline 35
Renewables Building Block 3: Renewable Energy Growth New Natural Gas End Uses & Fuel Diversity Concerns Under Building Block 3, the EPA expects Louisiana to be able to increase current renewable generation to 7 percent of total generation by 2030, an increase of 184 percent from current levels. Percent Change in Renewable Generation 30% 25% 20% 15% 10% 5% 0% AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VA WA WV WI WY 2012 Renewable Percentage 2030 Goal Percentage 36
Renewables Building Block 3b Deficiencies New Natural Gas End Uses & Fuel Diversity Concerns There are a number of problems with the EPA methodology: The EPA targets are based upon an erroneous method of averaging.. Louisiana s RE potential differs considerably from other states in this region. EPA s calculations are in error (capacity vs. generation). The Kansas RPS is a capacity based goal, and correcting for this will change generation based targets significantly. It is well documented the Louisiana has limited technical RE capabilities. The EPA s proposed rule is ambiguous on the degree to which states will be allowed to use biomass to meet RE generation targets. EPA fails to recognize the age of existing RE facilities in Louisiana. Most of the State s non-hydro RE generation was developed in the late 1970s and 1980s. EPA assumptions are inconsistent with the findings of the LPSC RPS proceeding. The LPSC has already analyzed the opportunities for RE in the State. The EPA fails to consider lost fixed cost recovery (lost revenues or rate impacts). 37
New Natural Gas End Uses & Fuel Diversity Concerns Building Block 4: Increased End-Use Energy Efficiency 38
Energy Efficiency Building Block 4, Energy Efficiency Deployment New EPA Natural determines Gas End the Uses total & Fuel MWh Diversity sales that Concerns could potentially be avoided through demand-side energy efficiency measures. 12% 1.5 percent increase per year Cumulative Savings as a Percent of Sales 10% 8% 6% 4% 2% 0% 0.2 percent increase per year 6.9% 5.9% 4.8% 3.7% 2.7% 1.9% 1.1% 0.6% 0.0% 0.2% 10.0% 9.3% 8.6% 7.8% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Incremental EE Savings Cumulative EE Savings 39
Energy Efficiency Building Block 4 Deficiencies There are a number of problems with the EPA methodology: Inappropriate method of determining technical potentials. Fails to examine cost-effectiveness. Fails to recognize that prior potentials arose in high-cost energy environment. Fails to consider rate impacts and lost base revenues. Fails to consider CHP potentials at industrial facilities. Fails to examine total rate and ratepayer impacts adequately (cumulative impacts). 40
Energy Efficiency Building Block 4, Energy Efficiency Under Building Block 4, the EPA assumes it is practical for all states to implement demand-side portfolios such that 1.5 percent of annual sales growth per year are reduced. The compounded effect results in a full 1.1 percent of total annual sales being avoided by Louisiana in 2020, and 9.3 percent of total annual sales being avoided by 2029. This is an increase 5000% 4500% The increase is actually greater than 5,000 percent Percent Increase in EE 4000% 3500% 3000% 2500% 2000% 1500% 1000% 500% 0% AL AZ AR CA CO CT DE FL GA ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VA WA WV WI WY Source: 40 C.F.R. Part 60, pp. 34873-34874. 41
New Natural Gas End Uses & Fuel Diversity Concerns Conclusions 42
Conclusions EPA Rulemaking Timeline States develop individual implementation plans EPA issues proposed Clean Power Plan Comments due on proposed plan Target date for EPA to issue Final Rule Target date for states to submit proposed Implementation plans June 2014 December 2014 June 2015 December 2015 June 2016 December 2016 43
Conclusions Conclusions Regardless of your opinion on carbon regulation, there are a number of problems and challenges with the EPA rule. Inefficient way to regulate carbon emissions: fails to examine cost-effectiveness, represents the worst in command and control regulation by (a) not utilizing market-based approaches and (b) forcing resource decisions on state regulators. This rule has very little to do with environmental regulation, and everything to do with utility regulatory resource planning. The costs to Louisiana ratepayers could be considerable. Some concerns this could create a significant near-term reliability challenge as well. 44
Conclusions Questions, Comments & Input Comments, Questions CAVEAT: The views and opinions provided in this presentation are those of the author and do not necessarily reflect the official position of the State of Louisiana nor any Louisiana executive agency. 45