CHEAPER AND CLEANER:Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental and Economic BenefitsMarch 2014 Update

“We limit the amount of toxic chemicals like mercury and sulfur and arsenic in our air or our water, but power plants can still dump unlimited amounts of carbon pollution into the air for free. That’s not right, that’s not safe, and it needs to stop.”-President Obama, June 25th, 2013

CLOSING THE POWER PLANT CARBON POLLUTION LOOPHOLE:SMART WAYS THE CLEAN AIR ACT CAN CLEAN UP AMERICA’SBIGGEST CLIMATE POLLUTERS

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THE TIMELINE

January 20th End of President Obama's second term. 2017

January 20th Start of President Obama's second term.June 25th President Obama announces Climate Action Plan.September 20th EPA proposes carbon pollution standards for future power plants.

2013

May 9th End of public comment period for future power plant proposal. June 1st EPA to propose guideline for carbon pollution standards for existing

power plants. June-September Public comment period on existing power plant proposal.

2014

June 1st EPA to finalize power plant carbon pollution standards.2015

June 30th States to submit implementation plans for existing power plants to EPA.

July-December EPA reviews state plans for compliance with its guideline.2016

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EPA proposes “emission guideline” June 2014, final June 2015.

Guideline includes performance standard and compliance provisions.

States have until June 2016 to adopt and submit state plans. If a state submits no plan, or one EPA cannot approve, EPA must issue a federal plan.

EPA CO2 Emissions Guideline & State Plans

THE CLEAN AIR ACT AND EXISTING POWER PLANTSTHE “101” ON 111 (d)

“Source-based” approach limited to options plants can do “within the fenceline” (e.g. heat-rate improvements) – yields limited reductions, higher costs

“System-based” approach includes all options that reduce emissions –yields deeper reductions, lower costs

Heat-rate improvements Shifting generation from coal to gasIncreasing zero -emission power (renewables and nuclear) Increasing energy efficiency

“Best System of Emission Reduction”

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State-specific fossil-fleet average CO2 emission rates (lbs/MWh) for 2020 and 2025

Calculated by applying benchmark coal and gas rates to each state’s baseline (2008-2010) fossil generation mix

Averaging allowed among all fossil units in state (including new units subject to the 111(b) standard)

States may opt in to interstate averaging or credit trading

Credit for incremental renewables and energy efficiency (equivalent to adding MWhs to denominator in calculating emission rate for compliance purposes)

NRDC PROPOSALSYSTEM-BASED, STATE SPECIFIC STANDARDS

States may adopt alternative plans, including mass-based standards, provided they achieve equivalent emission reductions

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STATES ALLOWED FLEXIBLE COMPLIANCE OPTIONS

Heat rate reductions Cleaner power sources More renewables Investments in efficiency

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Reference Case

Moderate Case,Constrained Efficiency

Ambitious Case,Full Efficiency

Ambitious Case,Constrained Efficiency, PTC

Ambitious Case,Constrained Efficiency

Moderate Case,Full Efficiency

NRDC SPECIFICATIONSLIST OF SCENARIOS

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AEO 2013 demand projectionsOnshore wind costs: DOE/LBL 2012 Wind Technologies ReportNuclear units re-licensed

All Cases

NRDC SPECIFICATIONSLIST OF SCENARIOS

Full Efficiency Cases: 482 TWh available in 2020 (Synapse)Constrained Efficiency Cases: 241 TWh available in 2020

Efficiency Assumptions

Ambition Assumptions

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EE Program Costs (cents/kWh) 2013-2020 2021-2030

Low 2.3 2.6

Middle 2.6 2.9

High 3.2 3.5

Same energy efficiency potential (maximum MWhs saved) as in 2012 analysis

Divided evenly into three cost blocks in each region, 482 TWh in total

Energy Efficiency Quantity Assumptions

Costs apply nationwide, do not vary across regions

Derived based on utility program costs from Synapse and relative values from LBNL cost curve to estimate costs of each block

Middle cost block is equal to the Synapse utility program cost

Customer contribution at 45% of total cost is included in cost-benefit calculations

Energy Efficiency Cost Assumptions

NRDC SPECIFICATIONSSIMPLE ENERGY EFFICIENCY SUPPLY CURVE

2012 Actual 2020 Reference

NRDC POLICY CASES vs REFERENCE CASEGENERATION MIX: 2012 vs. 2020 REFERENCE CASE

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NRDC POLICY CASES vs REFERENCE CASEPROJECTED GENERATION MIX IN 2020

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NRDC POLICY CASES vs REFERENCE CASEEMISSIONS 2014-2025

Historical

Reference Case

Moderate, Constrained Efficiency

Moderate, Full Efficiency

Ambitious, Constrained Efficiency

Ambitious, Full Efficiency

Ambitious, Constrained Efficiency, PTC

-

500

1,000

1,500

2,000

2,500

3,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

CO2 E

mis

sion

s (s

hort

tons

)

NRDC POLICY CASES vs REFERENCE CASEEMISSIONS REDUCTIONS IN 2020: CO2 SO2 NOx

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NRDC POLICY CASES vs REFERENCE CASECOSTS AND BENEFITS FROM REDUCED EMISSIONS IN 2020

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STATE EMISSION RATE TRAJECTORIES UNDER NRDC POLICYAMBITIOUS CASES 2020 AND 2025

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 -

500

1,000

1,500

2,000

2,500

Oregon Washington Idaho Montana California Colorado

Lbs/

MW

h

WESTERN REGIONAL RESULTSGENERATION MIX IN 2020

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WESTERN REGIONAL RESULTSEMISSION REDUCTIONS IN 2020: CO2 SO2 NOx

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PNW AND CA+OTHERWEST REGIONAL RESULTSCO2 CREDIT PRICES ($/Ton)

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2020 2025

Moderate Full Efficiency

CA + OTHERWEST 8.42 9.59

PNW 10.48 11.58

Moderate Constrained

Efficiency

CA + OTHERWEST 12.97 14.32

PNW 16.59 18.43

Ambitious Full Efficiency

CA + OTHERWEST 11.19 11.56

PNW 10.48 11.58

Ambitious Constrained

Efficiency

CA + OTHERWEST 27.90 32.15

PNW 16.80 18.46

Ambitious Constrained

Efficiency, PTC

CA + OTHERWEST 15.05 17.40

PNW 13.42 15.09

Exporter states

Importer states

A multi-state compliance agreement would allow each state to plan around utility portfolios, whether or not they cross state lines

INTERSTATE ISSUES FOR CONSIDERATION

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Power leaves the state, emissions remainStates exporting to CA: emissions already counted under AB-32?

Ability to select compliance pathways potentially limited by decisions in exporting states

Changes in out of state purchases reflected?Out of state renewables and REC purchases?

The Northwest Power and Conservation Council analyze three pathways to ~35% emissions reductions by 2029 for the region, including imported power

All scenarios included 5900 MW of additional Energy Efficiency

HIGHER AND LOWER COST OPTIONS TO REACH THE SAME EMISSIONS LEVELS: NORTHWEST EXAMPLE

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$45/ton carbon tax: 14% revenue requirement increaseCap and trade with free allocation: 2% revenue requirement increasePhased coal retirement: 15% revenue requirement increase

nlong@nrdc.orgsyeh@nrdc.org