Comments on Best Practices Report and Multi-state Analysis NASUCA Mid-Year Meeting Philadelphia, PA | ©2015 Synapse Energy Economics

www.synapse-energy.com | ©2015 Synapse Energy Economics Inc. All rights reserved.

Comments on Best Practices Report and Multi-state Analysis

NASUCA Mid-Year Meeting

Philadelphia, PA

June 9, 2015

Pat KnightLiz StantonBruce Biewald

2www.synapse-energy.com | ©2015 Synapse Energy Economics Inc. All rights reserved.

Synapse Energy Economics

• Founded in 1996 by CEO Bruce Biewald

• Leader for public interest and government clients in providing rigorous analysis of the electric power sector

• Staff of 30 includes experts in energy and environmental economics and environmental compliance

Liz Stanton


The story so far…

• June 2014 – Santa Fe; Proposed CPP released

• November 2014 – Report “Implications of EPA’s Proposed Clean Power Plan” released

• Summer 2014 – Spring 2015 – Lots of meetings and webinars (Chicago, Cambridge, DC)

• March 18 – Webinar on CP3T

• April 8 – Meeting in Dallas, TX discussing “Best Practices” report and multi-state

methodology

• April 29 – Report “Best Practices in Planning for Clean Power Plan Compliance” released

• May 6 – Meeting in Portland, OR discussing initial findings of multi-state analysis

• June 7-9 – Meeting in Philadelphia, PA discussing findings of multi-state analysis

Liz Stanton


What is the Clean Power Plan?

• EPA issued a proposed “Clean Power Plan” in June 2014. Issued under section 111(d) of the Clean Air Act, this proposed rule aims to cut carbon emissions by 30 percent below 2005 levels by 2030.

• The Clean Power Plan sets emission rate targets for each state for the years 2020-2030.

• Emission rate targets are constructed using “building blocks” – reduced emissions from coal heat rate improvements, natural gas combined cycle redispatch, generation from new and “at-risk” nuclear units, renewable generation, and energy efficiency.

• Generation and emissions used in the Clean Power Plan emission rate formula include existing coal, existing and under construction NGCC, existing oil and gas steam units, under construction and “at-risk” nuclear generation, energy efficiency, and renewables.

Liz Stanton

Draft Report: Multi-State Compliance


Evaluating multi-state compliance

• Synapse is using CP3T (Clean Power Plan Planning Tool) to evaluate examples of multi-state compliance

• State combinations for use in our analysis are:• “Northwest”— Idaho, Montana, Oregon, Utah, Washington, and Wyoming• “Southwest” — Arizona, New Mexico, and the Navajo and Fort Mojave tribes • “Iowa and the Carolinas” — Iowa, North Carolina, and South Carolina1

• Issues examined include• Rate- versus mass-based compliance• Dissimilar RE technical potentials among cooperating states• Dissimilar existing resources in cooperating states• Double counting emissions credits• Different approaches to trading mechanisms• Ability of arrangements to apply CO2 prices to generators

[1] We also explored Kentucky as another state in this combination and found that Kentucky’s expected coal retirements make it unlikely that Kentucky will gain cost savings from multi-state compliance unless it engages in selling over-compliance credits to other states

Liz Stanton


Changes since the last draft

Thanks to NASUCA members for the feedback!

• Before we were assuming a CO2 price in every run• More detail given to RGGI-like initiatives• Re-examination of “high gas” scenarios in solo compliance

• New emphasis on the most important aspects of what makes a least-cost plan

• Less rigid application of methodology now allows for important state- and region-specific details to be made evident.

In this project we did not model every state, but the patterns in our findings may have relevance to states not modeled that have similar characteristics.

Liz Stanton


What could multi-state combination look like?

Pat Knight

www.synapse-energy.com | ©2015 Synapse Energy Economics Inc. All rights reserved. 9

Combinations vs. Strategies vs. Scenarios

Pat Knight

CombinationGrouping of states

• Northwest• Southwest• Iowa and the Carolinas

StrategySolo or multi-state

• Solo• Joint (multi-state)• Bilateral Trading (multi-state)• Integrated Market (multi-state)

ScenarioApproach to compliance

• High EE and high renewables• Expanded use of existing natural gas combined

cycles (NGCCs) and building new NGCCs• BAU (non-compliant, business-as-usual)• High CO2 price (what happens when your system

has a very high level of renewables?)


Overview of Clean Power Plan Planning Tool (CP3T)

• Synapse has developed a user-friendly Excel-based spreadsheet tool based on the unit-specific data assembled by EPA to create their 111(d) building blocks.

• You can adjust fossil unit capacity factors, renewable energy and energy efficiency projections, unit retirements, and 111(b) unit additions for each state. You can compare the differences in generation, capacity, emissions, emission rates, and costs between their created scenarios and the EPA base case.

• Users may analyze a single state or a combination of states.

• CP3T is a free, open-source model released under a Creative Commons “share and adapt” license. This allows anyone to obtain a copy of CP3T and use it within the framework and caveats Synapse provides.

• CP3T is available at www.synapse-energy.com/cp3t or www.cp3t.com.

Pat Knight

http://www.synapse-energy.com/cp3t

http://www.cp3t.com/


Modeling Inputs

Pat Knight

High EE/RE High Gas High CO2 Price Business-as-Usual

Displacement order

1. Oil and gas steam2. Existing NGCC3. Coal

1. Oil and gas steam2. Coal3. Existing NGCC



Coal Currently-announced retirements

Currently-announced retirements



EE 2.5% per year by 2025 State EERS (if one) or 2012 savings level

2.5% per year by 2025 State EERS (if one) or 2012 savings level

Renewables State RPS; RE added to meet generation and emission requirements

State RPS (if one) State RPS; RE added to fully displace coal by 2030

State RPS (if one)

Existing NGCCs

No change from 2012 Capacity factors increased up to 70%

No change from 2012 Increase capacity factors to meet load growth

New NGCCs No change from 2012 New NGCC capacity added to meet generation and emission requirements

No change from 2012 New NGCC capacity added to meet generation and emission requirements

Imports / Exports

Kept at 2012 levels* Kept at 2012 levels* Kept at 2012 levels* Kept at 2012 levels*


Modeling requirements

• Mass-based (including 111(b) NGCC units)

• Order for dispatch and displacement:• Must-take resources (non-111(d) units, EE, RE, nuclear etc.)• Displaceable resources are removed from operation in the following orders:

• System boundaries defined by strategy (solo state vs. combination)

Pat Knight

With no CO2 price With a CO2 price




Framing the results

Pat Knight

Changes in total system costs with respect to 2012

• Total system costs in CP3T are just one component of consumers’ electric rates – do not include sunk capital expenditures, transmission costs, etc.

• Business-as-Usual (BAU) changes reflect increases in fuel prices, increased capital expenditures to meet environmental rules beyond the CPP

• Depending on resource prices and avoidance of environmental retrofits, compliance scenarios could be cheaper or more expensive


Framing the results

Pat Knight






Framing the results

Pat Knight





Key Findings


Key findings

1. Almost universally, the cheapest Clean Power Plan compliance scenarios have the most energy efficiency and renewables.

2. Compliance saves money for states that heavily invest in EE and RE.

3. Joint compliance may result in savings, depending on the states involved.

4. States achieve savings from purchasing RECs when in-state renewable generation or energy efficiency is the most expensive compliance strategy.

5. States may participate in RGGI-like allowance trading initiatives either filing singly or jointly.

6. States using integrated markets (e.g., RGGI) to meet compliance will only see cost benefits if they continue to pursue least-cost resources.

Pat Knight


Key Finding #1

Almost universally, the cheapest Clean Power Plan compliance scenarios have the most energy efficiency and renewables.With or without the Clean Power Plan, states that pursue these lowest-cost resources will see smaller increases in total electric-system costs through 2030 than they would with any other investment strategy.

Pat Knight


Key Finding #1

Pat Knight


Key Finding #2

Clean Power Plan compliance saves money for states that heavily invest in energy efficiency and renewables.Our analysis suggests that Clean Power Plan compliance is not just inexpensive for the state combinations analyzed—it actually lowers their electric-system costs.

Pat Knight

Large investments in energy efficiency and renewables have the potential to reduce total electric-system costs in 2030 by 16 to 19 percent relative to a non-compliant BAU.

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Key Finding #3

Filing a Clean Power Plan compliance plan jointly may result in savings, depending on the states involved.Sources for potential cost savings:

• Advantageous renewable siting: In our analysis, only the Northwest had enough appreciable differences in potential RE to make an impact on costs.

• Capture of energy efficiency leakage: Depending on the states that are joining together, this can have limited impact.

Solo JointNC (85% self-generated) NC+SC (91% self-generated)SC (exporter)

• Administrative efficiencies: Includes shared modeling of possible compliance pathways, submitting a joint compliance plan to EPA, or creating unified systems for compliance review. However, policy-makers from multiple states would be required to find consensus on a number of potentially controversial issues.

Pat Knight


Key Finding #4

States achieve savings from purchasing RECs when in-state renewable generation or energy efficiency is the most expensive compliance strategy.Is it cheaper to (a) run existing resources and purchase credits, or (b) use zero-carbon resources to displace existing resources?

States benefit from purchasing compliance credits if any of the following three conditions apply:

1. The cost per credit is less than the cost difference between (1) building renewable generation or energy efficiency in state and (2) the next cheapest alternative. This is most likely to be the case if in-state renewables are very expensive or its technical potential is very limited;

2. The state is politically constrained from building renewable generation or energy efficiency; or

3. The state is politically constrained to develop types of renewables that are particularly costly, where other lower cost options exist.

Pat Knight


Key Finding #5

States may participate in RGGI-like allowance trading initiatives either with or without joint compliance.By participating in a RGGI-like trading initiative, states can set a CO2 price that changes dispatch (i.e., allows Building Block 2).

States can do this and file solo. However, if they do not file jointly, they may be leaving benefits of joint compliance on the table

• Preferential renewable siting• EE leakage avoidance

Pat Knight


Key Finding #6

States using integrated markets to meet compliance will only see cost benefits if they continue to pursue least-cost resources.By participating in a RGGI-like trading initiative, states can set a CO2 price that changes dispatch (i.e., allows Building Block 2). States can then use more existing resources for compliance, though they might not be least-cost.

Pat Knight

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Key findings

1. Almost universally, the cheapest Clean Power Plan compliance scenarios have the most energy efficiency and renewables.

2. Compliance saves money for states that heavily invest in EE and RE.

3. Joint compliance may result in savings, depending on the states involved.

4. States achieve savings from purchasing RECs when in-state renewable generation or energy efficiency is the most expensive compliance strategy.

5. States may participate in RGGI-like allowance trading initiatives either filing singly or jointly.

6. States using integrated markets (e.g., RGGI) to meet compliance will only see cost benefits if they continue to pursue least-cost resources.

To identify their least-cost compliance pathway, states must approach multi-state collaboration strategically. Benefits from working together with other states do exist—but not for every state.

Pat Knight


Next steps

June 17 Final Multi-State Compliance report delivered

July 12 Presentation of findings at NARUC meeting in NYC

Release of final Multi-State Compliance report

Summer 2015 Potential new CPP work with EF funding

Liz Stanton

www.synapse-energy.com | ©2015 Synapse Energy Economics Inc. All rights reserved. 27

Contact us:

Liz Stanton: [email protected]

Bruce Biewald: [email protected]

Pat Knight: [email protected]

Liz Stanton

Free CP3T tech support is available to consumer advocates thanks to generous funding from the Energy Foundation!

Please contact Pat or [email protected] for more information

mailto:[email protected]

Documents

Comments on Best Practices Report and Multi-state Analysis NASUCA Mid-Year Meeting Philadelphia, PA | ©2015 Synapse Energy Economics