Power Sector Transition: GHG Policy and Other Key Drivers JENNIFER MACEDONIA ARKANSAS 111(D) STAKEHOLDER MEETING MAY 28, 214
5/23/14 POWER SECTOR TRANSITION: GHG POLICY AND OTHER KEY DRIVERS 2 Purpose of Analysis: Impacts of GHG Regulation of Power Plants Scoping/bounding analysis on power sector future w/ GHG regulation Not intended to predict/propose/endorse a level of stringency Examine and compare impacts under a range of assumptions Range of emission limitation levels Range of natural gas prices Range of cost estimates for demand side energy efficiency Range of potential future for existing nuclear fleet BPC analysis is based on economic modeling of the power sector Using the Integrated Planning Model (IPM) run by ICF International With assumptions and policy scenarios defined by BPC On-going analysis will adapt to proposal after EPA guidelines in June 214 GHG: Greenhouse Gas BPC: Bipartisan Policy Center
Key Take-Aways 5/23/14 3 Magnitude of impacts from 111(d) largely dependent on EPA & state interpretations, technical analysis & decisions, as well as market factors Significant power sector carbon reduction is already baked into system Few new coal builds expected, even in the absence of GHG policy 111(d) policy requiring only modest plant upgrades does little to reduce CO 2 Many of the least efficient units are already slated to retire Plant upgrades would likely increase coal generation Potential for natural gas prices to be as influential as GHG policy Low gas prices have potential to make 111(d) policy non-binding Demand-side energy efficiency may be an instrumental compliance strategy Highly dependent on price/availability Lack of flexibility to reduce CO 2 with demand side EE significantly increases cost Nuclear plant retirements beyond what is currently projected would raise costs and/or dampen CO 2 reductions achieved by 111(d) regulation Timing flexibility (e.g., emissions budget with banking) helps lower overall costs GHG: Greenhouse Gas 111(d): Section 111(d) of Clean Air Act CO 2 : Carbon Dioxide EE: Energy Efficiency
POWER SECTOR TRANSITION: GHG POLICY AND OTHER KEY DRIVERS 4 Caveats and Limitations Intention of scoping runs was bounding analysis Policy scenarios designed before EPA proposal and only intended to be rough bounding analysis of 111(d) impacts Magnitude of impacts from 111(d) will depend on many yet-to-bedetermined factors, including EPA & state interpretations & decisions Limited cost/performance data and modeling limitations for HR upgrades Modeling does not assume that plant efficiency upgrades trigger NSR Analysis could underestimate costs Most policy runs assume national market-based policy, but a 111(d) approach with state variation would likely be less economically efficient Analysis could overestimate costs Very little innovation assumed in model & could significantly impact results Policy is not optimized for lowest cost solution o CO 2 price runs don t allow compliance timing flexibility 5/23/14 111(d): Section 111(d) of Clean Air Act HR: Heat rate NSR: New Source Review CO 2 : Carbon Dioxide
POWER SECTOR TRANSITION: GHG POLICY AND OTHER KEY DRIVERS 5 Power sector transition driven by many factors 5/23/14 Flattening electric demand Expanding renewable power Projected low stable natural gas price 111 GHG Regulation Aging fleet of generators Power sector EPA regulation air, water, waste GHG: Greenhouse Gas 111(d): Section 111(d) of Clean Air Act
5/23/14 I. Reference Case: Projected power sector future with market and regulatory factors, but no GHG policy 6
TWh 212$/MMBtu 5/23/14 MODELING ASSUMPTIONS: REFERENCE CASE GENERATION MIX AND FUEL PRICES 7 Reference case largely based on EIA Annual Energy Outlook 213 No GHG policy assumed Percent contribution from each generation type remains fairly consistent Modest growth in total generation to accommodate modest load growth Coal remains dominant generation fuel 5, U.S. Generation Mix (Reference) U.S. Average Minemouth Coal Price & Henry Hub Gas Price (Reference) 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 1% 5% 19% 37% 29% 215 22 225 23 Year 1% 5% 18% 39% 27% Other Other Renewables Wind Nuclear Coal Natural Gas 6 5 4 3 2 1 215 22 225 23 Year Gas Price Coal Price EIA: Energy Information Administration GHG: Greenhouse Gas
Billion kwh 5/23/14 ELECTRICITY DEMAND FORECASTS IN PAST ANNUAL ENERGY OUTLOOKS FROM EIA 8 6, U.S. Electricity Demand Forcast (29-24) 5, 4, 3, 2, 1, AEO 27 AEO 28 AEO 29 AEO 21 AEO 211 AEO 212 AEO 213 AEO 214 Forecasts of the expected demand for electricity have continued to fall over recent years 29 214 219 224 229 234 239 Year
Gas Capacity (GW) Coal Capacity (GW) 5/23/14 REFERENCE CASE: BUSINESS AS USUAL IN THE ABSENCE OF GHG POLICY 9 U.S. Coal Capacity and Generation (Reference) 35 3 25 2 15 1 5 Historical Projections 2,5 2, 1,5 1, 5 Coal Generation (TWh) Reference (no GHG policy) Even with significant coal retirements by 216, coal generation holds steady Year 45 4 35 3 25 2 15 1 5 Coal Capacity (left axis) Coal Generation (right axis) U.S. Gas Capacity and Generation (Reference) Historical Projections 1,4 1,2 1, 8 6 4 2 Gas Generation (TWh) Low electricity demand growth helps to dampens need for new capacity investment, even with significant retirements underway Year Gas Capacity (left axis) Gas Generation (right axis) GHG: Greenhouse Gas
5/23/14 II. Modeled Policy Scenarios: GHG regulation 1
5/23/14 POLICY SCENARIOS AND SENSITIVITIES 11 No GHG Policy GHG Policy Sensitivities based on $12/ton Unit Retrofit Low Gas $ High Gas $ Reference $12/ton Low Nuclear $43/ton High $ EE
MODELED POLICY SCENARIOS 12 Unit Retrofit Limited flexibility Stringency from on-site unit retrofits Compliance options: plant efficiency investments modest natural gas co-firing modest biomass co-firing Other policy scenarios Full system-wide flexibility Stringency set by reductions up to $/ton Compliance options: plant efficiency, co-fire/conversions, plus shift to cleaner generation demand-side energy efficiency Nuclear power Averaging/ trading Renewable energy Demand-side EE
5/23/14 III. Results of Modeled Policy Scenarios 13
Million Short Tons 5/23/14 RANGE OF EMISSION LIMITATION IN MODELED POLICY SCENARIOS 14 3, 2,5 2, 1,5 U.S. CO 2 Emissions Historical Projections % Reduction in CO 2 in 225 Reference case 225 CO 2 is 1% below 25 without GHG policy Policy scenario requirements begin 22 Unit Retrofit scenario requires a one-time plant upgrade $12/ton and $43/ton scenarios apply an escalating price that grows in stringency 1, Reference Case 5 25 21 215 22 225 23 Year Unit Retrofit $12/ton $43/ton Historic CO2 Emissions CO 2 : Carbon Dioxide GHG: Greenhouse Gas
5/23/14 IV. Scenario 1: Unit Retrofit 15
TWh 5/23/14 MODELING RESULTS: UNIT RETROFIT 16 Unit Retrofit scenario: modest changes from Reference case By 225, 3% CO2 reduction compared reference (13% below 25 level) Between 22-23: 1% increase in cumulative generation from coal o Plant efficiency upgrades = more electricity generated per ton of coal 2% decrease in gas generation o Plant upgrades at coal units allow them to better compete with gas Slightly fewer coal retirements (2 GW fewer 215-23 ) 3 Difference in U.S. Cumulative 22-23 Generation vs. Reference (Unit Retrofit) 2 1 (1) Coal Natural Gas Energy Efficiency Nuclear Wind Biomass Co- Firing Gas Co-Firing Oil/Gas Steam Other Renewables Demand Response (2) (3)
5/23/14 V. Scenario 2: $12/ton 17
TWh 5/23/14 MODELING RESULTS: $12/TON 18 $12/ton scenario: significant changes from Reference case By 225, 3% CO 2 reduction from 25 level Between 22-23: 25% decrease in cumulative generation from coal Demand-side efficiency makes up for >¾ of the coal decrease Modest increase in natural gas generation and biomass co-firing 69 GW of additional coal retirements in 215-23 4, Difference in U.S. Cumulative 22-23 Generation vs. Reference ($12/ton) 3, 2, 1, (1,) (2,) Coal Natural Gas Energy Efficiency Nuclear Wind Biomass Co- Firing Gas Co-Firing Oil/Gas Steam Other Renewables Demand Response (3,) (4,) (5,) (6,)
5/23/14 VI. Relative influence of key drivers Natural gas prices Cost/availability of demand-side EE Fate of existing nuclear fleet 19
Million Short Tons SCENARIOS TO TEST INFLUENCE OF GAS PRICE, ENERGY EFFICIENCY, AND NUCLEAR 2 Sensitivity runs vary assumptions to understand relative impacts Implemented as an emissions cap set at 22-24 CO 2 trajectory from $12/ton policy scenario, with national emissions trading & banking Four sensitivity cases high and low natural gas price, high-cost energy efficiency, and additional retirement of existing nuclear plants 3, 2,5 2, Historical Projections U.S. CO 2 Emissions Reference Case $12/ton Low Gas $ 5/23/14 1,5 1, High Gas $ Low Nuclear 5 25 21 215 22 225 23 235 24 Year High $ EE Historic CO2 Emissions The cap is not binding in the low gas price case the low gas price drives CO 2 below the required level CO 2 : Carbon Dioxide
212$/MMBtu SCENARIOS TO TEST INFLUENCE OF GAS PRICE 21 Natural Gas Price Natural gas price is a key determinant of the generation mix and wholesale electricity prices High and low gas price sensitivities are based on EIA s AEO 213 gas supply cases 8 7 U.S. Henry Hub Gas Prices 5/23/14 6 5 4 3 2 Reference Case $12/ton Low Gas $ High Gas $ 1 215 22 225 23 Year EIA: Energy Information Administration AEO: Annual Energy Outlook
SCENARIOS TO TEST INFLUENCE OF ENERGY EFFICIENCY 22 Demand Side Energy Efficiency The cost & availability of demand side energy efficiency are critical in determining its influence as a 111(d) compliance option Estimates of the cost/availability of demand side energy efficiency vary* LBNL, March 214: 2.1 cents/kwh (range: <1 5 cents/kwh) ACEEE, April 214: 1.7-3.2 cents/kwh NRDC based on Synapse (211): 2.3-3.2 cents/kwh ACCCE based on Alcott and Greenstone (212): 11 cents/kwh Studies vary in methodology. Most estimates include only program costs. Some, such as ACCCE, include total resource costs, which are 182% of program cost. To test importance of demand-side EE cost, we varied the assumed cost $12/ton case: demand side EE is available to utility at 2.3-3.2 cents/kwh High $ EE case: demand side EE is available to utility at 11 cents/kwh If greater supply or lower cost (than 2.3-3.2 cents/kwh) EE is available, EE could play even stronger role in compliance and lower compliance cost 5/23/14 111(d): Section 111(d) of Clean Air Act NRDC: Natural Resources Defense Council LBNL: Lawrence Berkeley National Laboratory ACEEE: American Council for an Energy-Efficient Economy ACCCE: American Coalition for Clean Coal Electricity
SCENARIOS TO TEST INFLUENCE OF NUCLEAR POWER 23 Existing Nuclear Fleet Market conditions may threaten the economics of nuclear plants, particularly merchant plants operating in competitive markets Retirement of existing nuclear facilities implies a loss of zero-carbon baseload power & will increase the cost of compliance for a given CO 2 reduction level To test the relative influence, the low nuclear sensitivity case assumes: An additional 7 GW of vulnerable nuclear plants retire in 215-216 o In Reference case, 1 GW retire between 215-22 No existing nuclear plant is re-licensed at 6 years o Between 215-24, 51 GW nuclear capacity retires beyond the Reference case 5/23/14 CO 2 : Carbon Dioxide
TWh 5/23/14 MODELING RESULTS: IMPACT OF ASSUMPTIONS ON GENERATION 24 Relative impact of assumptions on generation choices Gas price is a key driver of generation mix Low gas price reduces both coal and nuclear generation High gas price replaces some gas use with coal, nuclear, wind, and biomass At reasonable $, demand-side EE is primary compliance strategy Use of demand-side EE was consistent across scenarios However, High $ EE (11 cents/kwh) resulted in no energy efficiency 8, Difference in U.S. Cumulative 22-23 Generation vs. Reference 6, 4, 2, (2,) Coal Natural Gas Energy Efficiency Nuclear Wind Biomass Co- Firing Gas Co-Firing Oil/Gas Steam Other Renewables Demand Response (4,) (6,) (8,) Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE (1,) GHG: Greenhouse Gas EE: Energy Efficiency
GW 5/23/14 MODELING RESULTS: COMPARISON OF IMPACTS ON COAL RETIREMENTS 25 Relative impact of assumptions on coal retirement Retirements vary significantly depending on gas price Low gas price results in highest coal retirements in 216 and later years High gas price retires less coal than $12/ton scenario Lack of demand side EE reductions delays some retirements Without the demand reductions achieved with demand side EE, the High $ EE case delays some coal retirements to later years U.S. Coal Retirements (216-23) 1 9 8 Reference Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE 7 6 5 4 3 2 1 216 218 22 225 23 Year GHG: Greenhouse Gas EE: Energy Efficiency
212$/MMBtu 5/23/14 MODELING RESULTS: IMPACT ON ELECTRICITY PRICES 26 Relative impact of assumptions on wholesale electricity prices Lack of demand side EE results in the highest cost Because no EE is adopted with the High $ EE assumption, it is representative of a policy without flexibility to chose demand side EE Wholesale price impacts of policy highly dependent on gas prices Low gas price results in lowest price and lowest CO 2 High gas price increases cost twice as much as GHG policy 8 U.S. Wholesale Electricity Prices 7 6 5 4 3 2 1 Reference Case Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE 215 22 225 23 Year EE: Energy Efficiency GHG: Greenhouse Gas CO 2 : Carbon Dioxide
212$/MMBtu MODELING RESULTS: COMPARISON OF IMPACTS ON NATURAL GAS PRICE 27 Relative impact of assumptions on natural gas prices Natural gas prices in High Gas $ and Low Gas $ are imposed as an input In all other runs, gas prices are projected as an output Lack of demand side EE as compliance option leads to highest gas prices 8 7 Because, w/out EE, natural gas generation is primary compliance strategy U.S. Henry Hub Gas Prices 5/23/14 6 5 4 3 2 1 Reference Case Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE 215 22 225 23 Year EE: Energy Efficiency
Reference Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE Reference Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE GW 5/23/14 MODELING RESULTS: PROJECTED NEW CAPACITY 28 Relative impact of assumptions on projected new capacity Without demand side EE, more new wind and gas generation gets built High gas prices limit construction of new gas generation Instead, rely more on new wind and existing coal Cumulative Projected New Capacity 2 18 16 14 12 1 8 6 4 2 Energy Efficiency Solar Coal (With CCS) Coal (Without CCS) Wind Gas Nuclear 216-22 216-23 Scenario *Firm planned new capacity is included in modeling assumptions and not projected new capacity EE: Energy Efficiency
Million Short Tons MODELING RESULTS: COMPARISON OF LOW NUCLEAR AND $12/TON CASES THROUGH 24 29 Impact of extra nuclear retirements on emissions and electricity prices Assumed 216 drop in nuclear capacity & retirements at age 6, leads to average 15% increase in wholesale electricity prices between 22-23 The timing flexibility of the emissions budget in the low nuclear case allows extra CO 2 reductions in the beginning to offset higher emissions later, when reductions are more expensive due to nuclear retirements 5/23/14 3, 2,5 Historical Projections U.S. CO 2 Emissions 2, Reference Case 1,5 1, 5 $12/ton Low Nuclear Historic CO2 Emissions 25 21 215 22 225 23 235 24 Year CO 2 : Carbon Dioxide
5/23/14 VIII. Regional Impacts of Modeled Scenarios 3
REFERENCE 31 North American Regional Transmission Organizations 5/27/14 Some Arkansas generating unit operations in Midcontinent Independent System Operator (MISO) Southwest Power Pool (SPP) Source: FERC
5/27/14 111(D) MODELING RESULTS 32 Illustrative Map of Key States in Modeling Reporting Regions New England Pacific Northwest MISO New York California + Other West ERCOT + SPP SERC- Gateway SERC- Central PJM SERC- Delta SERC-Southeast Covering 2 or more regions This map is illustrative and representative of the reporting regions as they align with state boundaries. Florida For purposes of reported regional results from this modeling exercise, electric generating units in Arkansas are included in SERC-Delta and SPP regional results.
Thousand Short Tons REGIONAL RESULTS FOR SERC-DELTA WHICH INCLUDES SOME ARKANSAS POWER PLANTS 33 Regional 225 Generation Mix and Cumulative CO 2 Emissions 5/27/14 SERCD (Reference) Hydro Wind Nuclear Natural Gas SERCD Cumulative CO2 Emissions, 22-23 2,5, 2,, 25% Reduction Coal 1,5, SERCD ($12/ton) 1,, Energy Efficiency 5, Nuclear Natural Gas Reference $12/ton Coal SERC-Delta reporting region includes part of Arkansas and LA, all of KS, & small parts of MO, OK, TX
5/23/14 CUMULATIVE CO 2 EMISSIONS IN REFERENCE, UNIT RETROFIT, AND $12/TON CASES (216-23) 34 7, 7, 7, 7, 7, 3,5 3,5 3,5 3,5 New England 3,5 Pacific Northwest MISO New York 7, Million Short Tons California + Other West ERCOT + SPP SERC- Gateway SERC- Central PJM 3,5 7, 7, SERC- Delta SERC-Southeast 3,5 3,5 7, Florida 7, 3,5 7, 3,5 3,5 7, Covering 2 or more regions 3,5 This map is illustrative and representative of the reporting regions as they align with state boundaries. SERC-Gateway covers a portion of Illinois, Iowa, and Missouri.
Technical Appendix 35
5/23/14 REGIONAL GENERATION MIX IN 225 REFERENCE CASE 36 New England Pacific Northwest MISO New York California + Other West ERCOT + SPP SERC- Gateway SERC- Central PJM SERC- Delta SERC-Southeast Florida Covering 2 or more regions This map is illustrative and representative of the reporting regions as they align with state boundaries. SERC-Gateway covers a portion of Illinois, Iowa, and Missouri.
5/23/14 $43/ton: Major impacts on coal 37
TWh 5/23/14 111(D) MODELING RESULTS 38 $43/ton scenario: major impacts Between 22-23: 64% decrease in cumulative generation from coal 33% increase in gas generation Significant demand side energy efficiency nearly maxes out the assumed supply Some additional demand reduction in response to higher electricity price Wholesale electricity price increases by 83% in 225 Additional 189 GW of coal retirement through 215-23 6, Difference in U.S. Cumulative 22-23 Generation vs. Reference ($43/ton) 4, 2, (2,) (4,) Coal Natural Gas Energy Efficiency Nuclear Wind Biomass Co- Firing Gas Co-Firing Oil/Gas Steam Other Renewables Demand Response (6,) (8,) (1,) (12,) (14,)
Coal Capacity (GW) GW RESULTS OF $43/TON SCENARIO: CAPACITY AND GENERATION 39 U.S. Coal Retirements (216-23) 5/23/14 8 7 6 5 4 3 2 1 Reference $43/ton 216 218 22 225 23 Year U.S. Coal Capacity and Generation ($43/ton) 35 3 25 2 15 1 5 Historical Projections 2,5 2, 1,5 1, 5 Coal Generation (TWh) Year HR Improvement (left axis) Coal Generation (right axis) No HR Improvement (left axis) Reference Coal Generation (right axis)
5/23/14 Comparison of Coal Retirement Impacts For various scenarios By heat rate and age at retirement 4
Heat Rtae (Btu/KWh) COMPARISON OF COAL RETIREMENT IMPACTS: REFERENCE 41 5/23/14 16, U.S. Coal Retirements (216-23) 14, 12, 1, 8, 6, 4, 2, 1 2 3 4 5 6 7 8 9 1 Age at Retirement (Years) Reference
Heat Rtae (Btu/KWh) 5/23/14 COMPARISON OF COAL RETIREMENT IMPACTS: REFERENCE + UNIT RETROFIT 42 U.S. Coal Retirements (216-23) 16, 14, 12, 1, 8, 6, 4, 2, 1 2 3 4 5 6 7 8 9 1 Age at Retirement (Years) Reference Unit Retrofit Unit Retrofit (do not retire) *Fewer retirements in Unit Retrofit compared with Reference
Heat Rtae (Btu/KWh) 5/23/14 COMPARISON OF COAL RETIREMENT IMPACTS: REFERENCE + UNIT RETROFIT + $12/TON 43 U.S. Coal Retirements (216-23) 16, 14, 12, 1, 8, 6, 4, 2, 1 2 3 4 5 6 7 8 9 1 Age at Retirement (Years) Reference Unit Retrofit $12/Ton
Heat Rtae (Btu/KWh) 5/23/14 COMPARISON OF COAL RETIREMENT IMPACTS: REFERENCE + UNIT RETROFIT + $12/TON + $43/TON 44 U.S. Coal Retirements (216-23) 16, 14, 12, 1, 8, 6, 4, 2, 1 2 3 4 5 6 7 8 9 1 Age at Retirement (Years) Reference Unit Retrofit $12/Ton $43/Ton
5/23/14 Generation Mix from Modeled Scenarios 45
TWh MODELING RESULTS: GENERATION MIX 46 5/23/14 5, U.S. Generation Mix (Unit Retrofit) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 47 5, U.S. Generation Mix ($12/ton) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 48 5, U.S. Generation Mix (Low Gas $) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 49 5, U.S. Generation Mix (High Gas $) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 5 5, U.S. Generation Mix (High $ EE) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 51 5, U.S. Generation Mix (Low Nuclear) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 *Incremental energy efficiency Year
TWh 5/23/14 MODELING RESULTS: GENERATION MIX 52 5, U.S. Generation Mix ($43/ton) 4,5 4, 3,5 3, 2,5 2, 1,5 1, Other Other Renewables Energy Efficiency* Wind Nuclear Oil/Gas Steam Coal with CCS Biomass Co-Firing Gas Co-Firing Coal Natural Gas 5 215 22 225 23 Year *Incremental energy efficiency
5/23/14 REGIONAL GENERATION MIX IN 225 $12/TON POLICY SCENARIO 53 New England Pacific Northwest MISO New York California + Other West ERCOT + SPP SERC- Gateway SERC- Central PJM SERC- Delta SERC-Southeast Florida Covering 2 or more regions This map is illustrative and representative of the reporting regions as they align with state boundaries. SERC-Gateway covers a portion of Illinois, Iowa, and Missouri.
5/23/14 Unit Retrofit: Impact on existing coal 54
Coal Capacity (GW) IMPACT OF UNIT RETROFIT SCENARIO ON COAL CAPACITY AND GENERATION 55 5/23/14 35 3 U.S. Coal Capacity and Generation (Unit Retrofit) Historical Projections 2,5 2, 25 2 15 1 5 1,5 1, 5 Coal Generation (TWh) Year HR Improvement (left axis) Coal Generation (right axis) No HR Improvement (left axis) Reference Coal Generation (right axis)
Thousand Short Tons 5/23/14 MODELING RESULTS: SO 2 AND NO X EMISSIONS 56 Unit Retrofit: could increase SO 2 emissions above Reference case Modest increase in national SO 2 emissions projected Significant increases in some regions Due to changes in dispatch of coal generators after plant upgrades EPA determinations on New Source Review could limit SO 2 increases CO 2 and NO X emissions are lower than Reference 3, U.S. SO 2 and NO x Emissions (215-23) 2,5 2, 1,5 1, 5 Reference Case SO2 Unit Retrofit SO2 Reference Case NOx Unit Retrofit NOx 215 22 225 23 Year SO 2 : Sulfur Dioxide CO 2 : Carbon Dioxide NO x : Nitrogen Dioxide
5/23/14 SO 2 and NO x Emissions 57
Thousand Short Tons 5/23/14 MODELING RESULTS: SO 2 EMISSIONS 58 3, U.S. SO 2 Emissions (215-23) 2,5 2, 1,5 1, 5 Reference Case Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE 215 22 225 23 Year SO 2 : Sulfur Dioxide
Thousand Short Tons 5/23/14 MODELING RESULTS: NO X EMISSIONS 59 U.S. NO x Emissions (215-23) 1,6 1,4 1,2 1, 8 6 4 Reference Case Unit Retrofit $12/ton Low Gas $ High Gas $ Low Nuclear High $ EE 2 215 22 225 23 Year NO x : Nitrogen Dioxide
Comparison of $12/ton and Low Nuclear 6
Million Short Tons GW 5/23/14 MODELING RESULTS: COMPARISON OF LOW NUCLEAR AND $12/TON CASES THROUGH 24 61 U.S. Projected New Capacity (22-24) 12 1 8 Nuclear Energy Efficiency 6 Solar 4 2 $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear Wind Gas 22 225 23 235 24 Year and Scenario U.S. CO 2 Emissions by Source (22-24) 2, 1,5 1, 5 Other Oil/Gas Steam Coal Gas $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear $12/ton Low Nuclear 22 225 23 235 24 Year and Scenario
5/23/14 Assumptions 62
POLICY SCENARIO DESCRIPTIONS 63 Unit Retrofit: On-Site Modest Unit Retrofits Policy: requires coal plants to invest in on-site reductions by 22 On-site efficiency (heat rate) retrofits and/or co-fire natural gas/biomass Unit-specific heat rate improvement & cost based on analysis of available data Coal units with on-site gas or nearby pipeline can co-fire 15% natural gas Coal units can co-fire up to 15% biomass (EIA biomass supply and cost) $12/ton: System-Wide Reductions up to $12/ton Policy: requires electric sector CO 2 reductions up to $12/ton in 22 Modeled as a national tax that rises at the rate of the social cost of carbon Representative of program with national trading $43/ton: System-Wide Reductions up to $43/ton Policy: requires electric sector CO 2 reductions up to $43/ton in 22 Same as $12/ton scenario, except at $43/ton All policy scenarios require 111(b) CCS for new coal capacity CO 2 : Carbon Dioxide 111(b): Section 111(b) of Clean Air Act CCS: Carbon Capture and Storage EIA: Energy Information Administration 5/23/14
5/23/14 POLICY SCENARIO MATRIX 64 Matrix of Policy Scenario Features 111(b) Policy Heat Rate Upgrades 111(d) Compliance Options Co-Fire Gas or Biomass Shift to Cleaner Generation Demand-Side Energy Efficiency Basis for CO 2 Limit Reference None Unit Retrofit X X X $12/ton X X X X X $43/ton X X X X X Modest Plant Upgrade Price on CO 2 Emissions Price on CO 2 Emissions 111(b): Section 111(b) of the Clean Air Act 111(d): Section 111(d) of the Clean Air Act CO 2 : Carbon Dioxide
KEY MODELING ASSUMPTIONS 65 5/23/14 Assumption Sources Description Electric and Peak Demand Growth AEO 213 Capacity Build Costs AEO 213 & LBNL Costs for all technologies come from AEO 213, except on-shore wind capacity costs come from Lawrence Berkeley National Laboratory s (LBNL) 212 Wind Technologies Market Report. Gas Supply/Prices AEO 213 Gas supply curves by year are based on AEO 213 scenarios. Coal Supply/Prices AEO 213 ICF coal supply is calibrated to AEO 213 average minemouth prices. Air Pollution Control Costs EPA, EIA, AEO 213, & AEO 213 Early Release Retrofit costs for most pollution control technologies come from EPA. DSI costs come from EIA. CCS retrofit costs for coal and gas come from AEO 213 & AEO 213 Early Release. Nuclear Power Licensing/Operation AEO 213 & BPC Reference case retirements come from AEO 213. In addition, Vermont Yankee nuclear power plant retires. Plants are able to relicense at 6 years. In the nuclear sensitivity case, all nuclear power plants must retire at 6 years, along with an additional 7 GW, which retires in 216. Biomass Co-firing EIA, AEO 213, & BPC Costs are based on EIA biomass cost curves and AEO 213 co-firing cost assumptions. Coal units can co-fire up to 15%. Existing subcritical coal units that are 3MW or smaller can repower/retrofit to burn 1% biomass. Natural Gas Co-firing EPA & BPC Coal units that use gas on site can co-fire up to 15% without additional pipeline costs or efficiency degradation penalties. Units that are within 1 miles of a gas pipeline can fully convert to gas. These units incur a pipeline cost and a 5% heat rate penalty. Demand Side Energy Efficiency BPC, NRDC, & ACCCE In policy runs only, energy efficiency is available up to one half of the supply assumed by NRDC in the core case of its March 214 111(d) analysis. Depending on the scenario, costs are either based on NRDC s March 214 or ACCCE s March 214 111(d) analyses. Heat Rate Improvement BPC In policy runs only, coal units can select between two levels of efficiency upgrades based on the unit s capacity, fuel type, steam cycle, and boiler type to close 25% or 4% of the gap between the unit heat rate and the best in class heat rate. Coal with CCS BPC BPC assumes both the Kemper plant and the Texas Clean Energy Project will be built as coal-fired generation with CCS. Other CCS generation can come online if it is deemed economical. EIA: Energy Information Administration AEO: Annual Energy Outlook CCS: Carbon Capture and Storage NRDC: Natural Resources Defense Council ACCCE: American Coalition of Clean Coal Electricity DSI: Dry Sorbent Injection
MODELING SCENARIO DESCRIPTIONS 66 5/23/14 Reference Unit Retrofit $12/ton $43/ton Low Gas $ High Gas $ Low Nuclear High $ EE Scenario Includes existing state and federal regulations. Description Identical to the Reference case, with the addition of a GHG emission rate standard modeled as a requirement for coal plants to either 1) invest in on-site efficiency improvements or 2) co-fire gas or biomass so CO 2 emissions are equivalent to the unit-specific rate achieved by requiring each coal unit to close 4% of the gap between its heat rate and the best in class heat rate based on the unit s capacity, fuel type, steam cycle, and boiler type. Any new coal capacity must include CCS. Identical to the Reference case except for the addition of a GHG policy that requires power sector emission reductions up to $12 per metric ton of CO 2 in 22 (rising at the rate of the social cost of carbon). The case is representative of national emissions trading under a 111(d)-like policy that allows for investment in demand side energy efficiency at a cost of 2.3-3.2 cents/kwh. Any new coal capacity must include CCS. Identical to the $12/ton case except the GHG policy requires power sector emission reductions up to $43 per metric ton of CO 2 in 22 (rising at the rate of the social cost of carbon). Any new coal capacity must include CCS. CO 2 emissions are capped at the level from the $12/ton case with banking of allowances permitted. Gas prices from AEO 213 s low gas price sensitivity are imposed. Any new coal capacity must include CCS. CO 2 emissions are capped at the level from the $12/ton case with banking of allowances permitted. Gas prices from AEO 213 s high gas price sensitivity are imposed. Any new coal capacity must include CCS. CO 2 emissions are capped at the level from the $12/ton case with banking of allowances permitted. In addition to Reference case nuclear retirements, 7 GW of nuclear power is retired in 216 and no 6-year relicensing agreements are allowed. Any new coal capacity must include CCS. CO 2 emissions are capped at the level from the $12/ton case with banking of allowances permitted. Demand side energy efficiency is priced at 11 cents/kwh. Any new coal capacity must include CCS. GHG: Greenhouse Gas CO 2 : Carbon Dioxide AEO: Annual Energy Outlook CCS: Carbon Capture and Storage
5/23/14 www.bipartisanpolicy.org For additional detail about modeling assumptions as well as additional results see the Technical Appendix