Transcript Climate_Policy_CA_E3_Hawai... - Energy + Environmental Economics

California’s Climate and
Energy Policies:
Implications for Utilities
Ren Orans, Managing Partner
Energy and Environmental Economics, Inc.
101 Montgomery Street, Suite 1600
San Francisco, CA 94104
415-391-5100
Energy and Environmental
Economics, Inc. (E3)

San Francisco-based firm established in 1993

Electric and natural gas utility sectors

Practice areas
 Energy
efficiency and building standards
 Distributed
 Integrated
generation, demand response and CHP
resource planning
 Transmission
 Retail
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planning and pricing
rate design
Topics

Quick CA-HI Comparison

Update on CA Climate & Energy Policy

Implementing CA’s GHG Law, AB32

Challenges and Opportunities for Utilities
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Greenhouse Gas Emissions by
Sector: Hawaii and California
1990 Greenhouse Gas Emissions by Sector (% of State total)
100%
7%
80%
5%
35%
Non-Energy Sector
57%
Transportation
60%
Electric Utilities and IPPs
24%
40%
20%
32%
34%
4%
0%
Hawaii
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California
Sources: Hawaii GHG Emissions Inventory, updated May 2007
California GHG Inventory, updated November 16th, 2007
Note: States’ accounting of GHG emissions are not identical.
Residential, Commercial,
Industrial
Ambitious Greenhouse Gas
Reduction Goals in Hawaii & CA

Hawaii House Bill 226

CA Assembly Bill 32

Approved by Governor June
2007

Approved by Governor Aug.
2006

State greenhouse gas
emissions must fall to 1990
levels by 2020

State greenhouse gas
emissions must fall to 1990
levels by 2020

Creates a ‘greenhouse gas
emissions reduction task force’
to oversee implementation

CA Air Resources Board oversees implementation of law

Provides for ‘market-based’
mechanisms starting in 2012 to
reduce emissions
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California Policies
Related to Climate
Change
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Key California Laws and Initiatives on
Climate Change and Clean Energy

AB1493: Vehicle GHG emissions standard (2002)

SB1078: Renewables Portfolio Standard (2002)

Exec Order S-03-05: GHG reduction goals (2005)

SB1368: GHG Emissions Performance Standard (2006)

AB2021: Statewide energy efficiency targets (2006)

AB32: Global Warming Solutions Act (2006)

Exec Order S-1-07: Low Carbon Fuel Standard (2007)

Western Climate Initiative (2007)
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And that’s not all…
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SB 1368: The Greenhouse Gas
Emission Performance Standard

All new IOU power
procurement contracts over
5 years long: emissions
must be less than or equal
to a combined-cycle natural
gas turbine (1,100 lbs
CO2/MWh)

CEC adopted a similar rule
for municipal-owned utilities

Coal-fired power plants
must have carbon capture
and sequestration to sign
new long-term contracts
with CA IOUs
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Combined-Cycle Natural Gas Plant
Renewable Portfolio Standard target
of 33% Renewable by 2020

SB 107: 20% RPS target by 2010

and the Governor has proposed 33% by 2020
IOU RPS Procurement (% retail sales)
2005
Pacific Gas & Electric
11.9%
Southern California Edison
17.2%
San Diego Gas & Electric
5.2%
Source: CEC, RENEWABLES PORTFOLIO STANDARD 2005
PROCUREMENT VERIFICATION, August 2007
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No New Nuclear without Nuclear
Waste Disposal Option
1976 California
state law:
No new nuclear
power in-state…
…Unless federal
govt. approves a
demonstrated
technology for the
permanent
disposal of spent
fuel from nuclear
facilities
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Diablo Canyon Nuclear Power Plant
Source: http://flickr.com/photos/35237093637@N01/11040625
EPA ruling against once-through
cooling affects California

20,000MW affected

Retrofits

are not always possible

are expensive

decrease efficiency and
capacity

take units off-line

Significant reliability
challenge for CA ISO

Incredible Fact

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17 billion gallons of water
used in once-through
cooling in the state per day
Generation Affected
State Energy Efficiency Targets

IOUs have strong financial incentives to achieve aggressive EE
targets (~70% economic EE potential)

CPUC adopted ‘Big, bold energy efficiency strategies’

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
All new residential construction in California will be zero net energy by
2020;

All new commercial construction in California will be zero net energy by
2030; and

Heating, Ventilation, and Air Conditioning industry will be reshaped to
ensure optimal equipment performance
AB 2021: requires POUs to identify all potentially achievable costeffective electric EE savings and to establish annual targets for EE
savings and demand reduction
Implementing the
Global Warming
Solutions Act
California Global Warming Solutions
Act (Assembly Bill 32)

State must reduce total GHG emissions to 1990 levels
by 2020 (= 427 million metric tons CO2-equivalent,
excludes interstate aviation and shipping)

Carbon regulation in CA will begin in 2012

Principal regulating agency is California Air Resources
Board (CARB), with input from sector regulators

GHG caps for individual sectors to be determined by
January 2009 - utility sector share still uncertain

Implementation architecture to be determined by
January 2009 - possible multi-sector cap and trade
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AB32: Global Warming Solutions Act
California Energy Commission Scenarios Analysis
Generation and GHG Projections
400,000
140
350,000
120
300,000

Case 1, Natural Gas
Build-out

~40MMT reduction
to meet sector target

Imported emissions
takes up a lot of the
cap
100
250,000
80
1990 emission level
GWh
60
150,000
100,000
GHG emissions from imports
20
50,000
0
1990
1995
2000
2005
2010
2015
Total Generation (left-hand axis)
Electricity Sector Emissions (CARB Baseline)
CEC Scenarios: Natural Gas Build-out, BAU Case 1
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CEC Scenarios: Existing Policy, BAU Case 1b
0
2020
MMTCO2
200,000

Case 1b, Existing
Policy Build-out

~18MMT reduction
to meet sector target

Emissions level
about flat
AB32 Implementation Issues


‘Energy Deliverer’ (First-seller) v. Load-based GHG cap

Energy Deliverer: Power plants are regulated for in-state power
production, the ‘deliverer’ of imported power is regulated for imported
power. Supported in CPUC’s interim opinion (Feb. 8th ,2008)

Load-based: Load-serving entities (utilities), not generators, are
regulated
Allocation of allowances


Trading


Will trade of GHG emission permits be allowed between sectors
‘Offsets’

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Proposals for free allocation, auctions or sales of GHG permits
Disagreement over whether and how GHG reductions from outside the
regulated arena may be used to meet CA GHG reduction goals
The Big Picture of California’s Climate
Policies and the Electricity Sector


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CA must bring CO2 emissions back to 1990 levels
(~25% reduction from BAU);

while adding 9,000 MW of generation;

new nuclear power not allowed until feds develop waste
repository;

while retrofitting 20,000 MW of capacity to eliminate oncethrough cooling.
Agencies want to know how much AB32 will cost the
electricity sector…
Preliminary Results
from Utility Sector
Analysis
Project Overview

Joint California PUC, Energy Commission, Air
Resources Board (ARB) effort to evaluate AB32
compliance options in California’s electricity and
natural gas sectors

Model estimates the cost and rate impact of a
variety of compliance strategies relative to two
reference cases

Main Deliverables
 Non-proprietary,
transparent, spreadsheet-based model
using publicly available data
 Report
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on results and sensitivities / scenarios
Example CO2 Reduction Portfolio
Reductions from BAU Reference Case
Electricity Sector CO2 Supply Curve
500
Solar PV
Net Cost $ per Tonne
400
Out of State
Geothermal
300
200
In-state Wind
Out of State
Wind
Biomass
CA CSP
100
CA Small Hydro
CA
Geothermal
Biogas
0
Energy Efficiency
-100
-200
0
5,000
10,000
15,000
20,000
25,000
Tonnes CO2 Reduction per Year (000)
(Reference Case - Target Case)
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30,000
35,000
Business-as-Usual Target Case

Summary of
resources
developed
 Energy
efficiency;
75% economic
potential
 3,000
MW PV and
5% DR
 Conventional
adjustment for L&R
balance
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New Renewable Resources
Resource Zone
CA - Distributed
CFE
Geysers/Lake
Imperial
Mono/Inyo
Northeast CA
Reno Area/Dixie Valley
Riverside
San Bernardino
San Diego
Tehachapi
TOTAL
BAU Reference Case
(MW)
2500
404
4500
7,404
BAU Target Case
(MW)
900
2163
719
4000
243
1000
2500
2000
2000
750
4369
20,644
Business-as-Usual Reference and
Target Case Preliminary Results
Summary Results
Targets:
85,000
53,120
138,120
CHP
Total Elec
Gas
Total
Elec Gen
77,705
25%
CO2 in 2020 (kTonnes):
Reduction from 2008 (%):
CO2 Intensity
CO2 Intensity
5,900
0%
120,000
PG&E
SCE PG&E
SCE
SDG&E
100,000
80,000
SMUD SDG&E
LADWP SMUD
60,000
NorCal LADWP
54,523
0%
CO2 Levels
CHP
CO2 Levels
SoCal
NorCal
120,000
LADWP
SMUD
100,000
SDG&E
80,000
SCE
PG&E
60,000
40,000
SoCal NorCal
20,000
Subtotal CA SoCal
Subtotal
CA 0.20
-
0.40
MWh)
- (tonnes / 0.20
2020
0.60
0.40
(tonnes / MWh)
2008
2020
24
83,605
24%
2008
-
0.60
40,000
20,000
2008
-
138,128
16%
Cost Increase (const
CHP
SoCal
NorCal
LADWP
SMUD
SDG&E
SCE
PG&E
PG&E
2%
SCE
3%
SDG&E
4%
SMUD
7%
LADWP
9%
NorCal
8%
SoCal
8%
Subtotal CA
2020 2020
Ref
User
2008Case
2020
Case
Ref
Case
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4%
0%
2020
User
Case
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Δ from 2008
20%
Δ from 2020
Business-as-Usual Reference and
Target Case Preliminary Results
Costs
Rates
Rate Impact (constant $2008)
Cost Increase (constant $2008)
37%
PG&E
2%
SCE
3%
SDG&E
4%
SMUD
SCE
11%
34%
SDG&E
11%
41%
LADWP
9%
NorCal
8%
SoCal
8%
20%
21%
19%
18%
NorCal
27%
SoCal
13%
Subtotal CA
12%
60%
32%
14%
27%
40%
34%
19%
LADWP
34%
4%
0%
SMUD
33%
30%
14%
34%
7%
Subtotal CA
PG&E
10%
0%
10%
22%
20%
25%
30%
40%
% Rate Increase in 2020
Δ from 2008
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Δ from 2020 reference case
Δ from 2008
Δ from 2020 reference case
Western Climate Initiative (WCI)

Members: Governors of Arizona, California, New Mexico,
Oregon, Utah and Washington, Premiers of British
Columbia and Manitoba

Bring emissions down to 15% below 2005 GHG levels by
2020

Aug 2008 Goal: Design of market trading mechanism in
place
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Opportunities Related
to Climate Change
Utility Business Opportunities
Large-scale regional projects
Grid modernization
Customer service options
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Contact Information
Energy and Environmental Economics, Inc. (E3)
101 Montgomery Street, Suite 1600
San Francisco, CA 94104
Phone: 415-391-5100
Fax: 415-391-6500
Web: www.ethree.com
Ren Orans, Managing Partner
([email protected])
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