State-Level Modeling of
Clean Power Plan
Compliance Pathways
with EPRI’s US-REGEN
Model
Vic Niemeyer
Senior Technical Executive
Electric Power Research Institute
RFF-EPRI Seminar on Modeling the
Clean Power Plan
February 11, 2016
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
US-REGEN: A Full Energy-Economy Model
Electricity
Electric Model
Passenger
Transport
Crude Oil
Other
Transport
Residential
Refined
Petroleum
Economy Model
Coal
Commercial
Natural
Gas
Industrial
LNG
2
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
CPP Analyses Based on 48-State Electric Model
All lower 48 states represented separately. Economy model not used.
3
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Electric Model: Key Features
 Endogenously builds/retrofits/retires capacity in each model
time period according to the economics
– Coal (+ retrofit to gas, biomass, CCS, co-firing, heatrate
improvements), Gas NGCCs, Gas Combustion Turbines, Nuclear,
Hydro, Geothermal, Wind (Onshore, Offshore), Solar (CSP, PV,
Rooftop PV), Diesel/Oil, Coal/Gas with CCS, new biomass
 Endogenously builds inter-state transmission if needed and
economic
 We select representative hours to capture load-wind-solar
correlations across the year
– i.e. US-REGEN knows when load is high and there’s no wind!
 Based on a dataset of every unit in the country
– Last updated July 2015
4
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Renewable Resource Data
 Wind resource data from AWS Truepower
– Based on 2010 meteorology
 Solar resource data from AWS Truepower
– Separate resource for central station PV/CSP versus rooftop solar
– Based on 2010 meteorology
 Geothermal resource data based on NREL (2009) estimates
for the Western states
– New potential additions of ~40GW by 2050 (8GW in CA)
– Assume capacity factor improves from 50% to 80% due to technical
progress
5
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2016 Electric Power Research Institute, Inc. All rights reserved.
Location of Wind Resource by State
6
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2016 Electric Power Research Institute, Inc. All rights reserved.
Sample Wind Resource for 80/100m Hub Heights
IN Ref Wind Resource by Capacity Factor
45%
40%
35%
IN CF
30%
25%
20%
15%
10%
5%
0%
0
5,000
10,000
15,000
20,000
25,000
IN MW
30,000
7
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
35,000
40,000
45,000
Location of Central PV Resource by State
* Assumes the use of up to 1% of each state’s available land
8
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
US-REGEN vs IPM
 US-REGEN and IPM are both based on the same modeling
paradigm
– Full information, inter-temporal optimization
 Compared to IPM, US-REGEN
– Uses 48 state-based regions vs IPM’s 60+ regions across state lines
– Aggregates units more, but uses ~ 6 times as many representative
hours to capture renewable intermittency better
– Uses model years 2015, 2018, 2021, 2024, 2027, 2030, 2035, 2040,
2045, 2050; IPM uses 2016, 2018, 2020, 2025, 2030, 2040, 2050
 All models of this type have the same computational
limitations; modelers must make tradeoffs as to what
elements are important to represent the policy at hand
9
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
US-REGEN Models Four Main Compliance Pathways
Subcategory
Rates
Steam units target of 1305 lb/MWh,
NGCC units target of 771 lb/MWh (2030)
Rate
State
Rate
Steam and NGCC units target equal to the
state rate
Cap Existing
and New Units
Existing and New Steam and NGCC units
emit less than the state mass target + the
new source complement target
Cap Existing
Units Only
Existing and Steam and NGCC units emit
less than the state mass target
CPP
Path
Mass
10
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Specific Features for Modeling the Clean Power Plan
 Detailed representation of ERC sources by type
– Zero, Fossil, Gas-Shift
 Inclusion of output-based set-asides for Existing Mass path
 Endogenous energy efficiency
– US-REGEN can endogenously build energy efficiency (that counts
towards CPP compliance)
– Current using EPA CPP proposal costs, could revisit
 Detailed renewable representation
– US-REGEN was built from scratch to give a very detailed
representation of wind and solar, and their intermittency
 Other options for coal
– Co-firing, conversion to biomass or gas, CCS retrofits
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Compliance Pathway Determines Trading Partners
Subcategory
Rates
Can trade ERCs with any other
Subcategory Rate state
Rate
State
Rate
Can trade ERCs with another State Rate
state in the same compliance plan
CPP
Cap Existing
and New Units
Can trade allowances with any other
Mass-Based State
Mass
Cap Existing
Units Only
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Caveats for Following Model Results
 All analyses preliminary
– CPP highly complex, still testing our modeling
 Models are highly aggregated simulations but not reality
 No constraints on gas delivery
 Not forecasting
 Choices for states intended to show consequences of
alternative pathways in a heterogeneous world, not speaking
to what pathways states may choose
 Many uncertainties not explored here
– Cost of EE and RE
– Possible future additional CO2 policy/regulation
– Ability to deploy added transmission
13
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2016 Electric Power Research Institute, Inc. All rights reserved.
EEA Reference Case + 111(b)
6,000
EEA Reference Generation (US48)
EE + Price Response
New Solar
5,000
Ex Solar
New Wind
Ex Wind
4,000
Hydro
TWh
Gas Turbine
CCS Gas
3,000
New NGCC
Ex NGCC
CCS Coal
2,000
New Coal
Ex Coal
Other
1,000
Geothermal
New Nuclear
Ex Nuclear
0
2015
2020
2025
2030
2035
2040
2045
14
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2016 Electric Power Research Institute, Inc. All rights reserved.
2050
Scenario Load
Island Results
Each state must comply relying solely on resources within its own
boundary; power trading limited to that in reference case
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2016 Electric Power Research Institute, Inc. All rights reserved.
Natural Gas Price Uncertainty Represented with EIA’s
Annual Energy Outlook 2015 “High” and “Low” Paths
Average Power Producer's Gas Price (US)
9
8
Price ($/MMBtu)
7
High Price Path
(based on AEO2015 Ref)
6
5
4
Low Price Path
(based on AEO2015 HEUR)
3
2
1
0
2015
2020
2025
2030
2035
2040
Source: U.S. Energy Low
Information
High Administration’s
Annual Energy Outlook for 2015
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
2045
2050
Natural Gas Price Uncertainty Represented with EIA’s
Annual Energy Outlook 2015 “High” and “Low” Paths
Average Power Producer's Gas Price (US) + NYMEX Henry Hub
9
8
Price ($/MMBtu in 2010$)
7
High Price Path
(based on AEO2015 Ref)
6
5
4
Low Price Path
(based on AEO2015 HEUR)
3
2
NYMEX Henry Hub
1
0
2015
2020
2025
2030
2035
2040
Source: U.S.
Information
LowEnergy
High
NYMEXAdministration’s
Henry Hub
Annual Energy Outlook for 2015
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
2045
2050
Emission Rate Credit (ERC)/Allowance Prices for 2030
with Full Island Compliance (Low gas price path)
State rate/mass path based on minimum costs of island compliance
(based on present value of compliance cost through 2050)
$0
$16
$0
$14
$0
$0
VT
$0
$0
$0
$6
$17
$0
$12
$14
$18
$16
$63
$0
$15
$16
$17
$0
$16
$0
$14
$14
$14
$4
$16
$16
$29
$5
$18
$0
$0
$17
$29
$0
$24
$0
$0
$2
$13
$0
$10
Rate State
Rate Subcategory
Mass Full
Mass Existing
$12
$0
Note: for Rate states (green),
prices are for ERCs in $/MWh,
For Mass states (brown)
prices are
Min w Low GasP Price
for Allowances in $/metric ton
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
ERC/Allowance Prices for 2030 with Full Island
Compliance (High gas price path)
$0
$14
$0
$28
$0
$0
VT
$0
$0
$0
$13
$15
$0
$12
$28
$15
$30
$12
$12
$30
$35
$22
$0
$28
$16
$33
$13
$0
$0
$14
$41
$61
$29
$16
$0
$0
$22
$24
$0
$34
$0
$0
$18
$13
$0
$0
Rate State
Rate Subcategory
Mass Full
Mass Existing
$13
$0
Note: for Rate states (green),
prices are for ERCs in $/MWh,
For Mass states (brown)
prices are
Min w Hi GasP Price
for Allowances in $/metric ton
19
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Observations
 Simple economics of rate vs mass:
– rate compliance achieved with investment in renewables (wind) and
energy efficiency, gas redispatch
– mass compliance achieved with more gas generation
 Zero prices imply states are in compliance in 2030 (though
possible need some effort to comply in other time periods)
 Low prices driven by ease of compliance, in turn driven by
–
–
–
–
Low price of natural gas
Low incremental cost of wind (in high-wind states)
Energy efficiency credits from existing EE programs
Announced/expected post 2012 coal retirements
 Many states at/near compliance for both Rate and Mass
paths
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© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
National Uniform-Pathway Results
All states choose the same compliance pathway
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2016 Electric Power Research Institute, Inc. All rights reserved.
2030 Net ERC Exports if All States Choose Sub Category
Rate Path and Trade ERCs (ERC price = $10.96/MWh)
ERC exports in TWh
8.3
-6.6
4.4
-16.6
-2.7
VT
12.1
11.6
1.5
2.3
-18.0
39.0
0.6
-13.5
-11.0
0.3
-9.9
-10.8
130.6
-13.0
-5.9
-8.5
32.0
1.2
-15.2
-26.0
-13.5
8.5
-29.5
1.6
-43.9
-32.1
-28.4
-24.1
-5.6
-1.0
-4.8
-1.2
-7.6
4.3
9.8
12.2
4.5
-3.9
-7.7
92.7
Rate State
Rate Subcategory
Mass Full
Mass Existing
-9.6
-7.1
Low gas price
RUn path
Exports
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2016 Electric Power Research Institute, Inc. All rights reserved.
2030 Net Emission Allowance Exports if All States
Choose Existing Mass Path (EA price = $12.49/metric ton)
Allowance exports millions of metric tons
3.7
-0.8
0.3
-4.6
-0.3
VT
1.9
6.2
0.0
-0.2
-19.0
7.0
0.7
-7.4
-7.6
-5.4
-1.3
-10.0
-11.8
6.8
-13.1
-7.7
-7.5
10.2
-3.9
-3.4
-7.7
8.6
-1.0
5.2
1.8
-0.6
-0.1
10.0
1.3
-9.9
1.0
10.9
0.0
-6.4
1.6
6.6
-3.2
4.0
13.8
9.3
Rate State
Rate Subcategory
Mass Full
Mass Existing
5.6
16.8
Low gas price path
MXn Exports
23
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2016 Electric Power Research Institute, Inc. All rights reserved.
Trading Results Sensitive to National Mix
of Pathways
24
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
2030 Mix1 ERC/Allowance Pricing with Low Gas Prices
Allowance prices in $/metric ton
$12.2
$12.2
$6.5
$12.2
$12.2
VT
$12.2
$6.5
$12.2
$12.2
$12.2
$6.5
$12.2
$12.2
$12.2
$12.2
$12.2
$12.2
$12.2
$12.2
$12.2
$6.5
$12.2
$12.2
$12.2
$12.2
$12.2
$0
$12.2
$12.2
$12.2
$6.5
$12.2
$12.2
$6.5
$12.2
$6.5
$12.2
$4.2
$12.2
$4.2
$4.2
$12.2
$12.2
ERC prices in $/MWh
$12.2
Rate State
Rate Subcategory
Mass Full
Mass Existing
$6.5
$12.2
$12.2
Mix1 Price
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2016 Electric Power Research Institute, Inc. All rights reserved.
2030 Mix2 ERC/Allowance Pricing with Low Gas Prices
Allowance prices in $/metric ton
$11.2
$11.2
$6
$11.2
$11.2
VT
$11.2
$6
$11.2
$11.2
$10.5
$6
$11.2
$11.2
$11.2
$11.2
$11.2
$10.5
$11.2
$11.2
$6
$10.5
$11.2
$11.2
$11.2
$11.2
$10.5
$0
$11.2
$11.2
$11.2
$6
$11.2
$11.2
$6
$11.2
$6
$11.2
$10.5
$11.2
$10.5
$10.5
$11.2
$11.2
ERC prices in $/MWh
$11.2
Rate State
Rate Subcategory
Mass Full
Mass Existing
$6
$11.2
$11.2
Mix2 Price
26
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2016 Electric Power Research Institute, Inc. All rights reserved.
Observations
 Mix scenarios are illustrative samples of many possibilities
 Assume national markets for ERCs and Allowances
 ERC price if only new-nuclear states choose Rate is low, but
that price may invite other state to “go rate”
 Mix2 shows more realistic set of ERC/Allowance prices
 Many states nominally committed to mass path through
existing state polices, e.g., California and RGGI states,
would be in compliance with the CPP by choosing rate
pathway
 Reasonable variation in future natural gas prices has greater
impact on costs than the Clean Power Plan
27
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Strategic Insights
 Key decisions for states are Rate vs. Mass, but also reliance
on participation in the market
 Some states appear to have lower costs with Rate, some for
Mass, no single universal lowest-cost choice
 Some states may be net beneficiaries of the CPP
 Trading creates value on both sides of the transaction
 The future matters
– Natural gas prices
– Renewable and EE costs
– Market scope and depth
 Supply/demand for ERCs and Allowances depends on individual
state choices for Rate vs. Mass
28
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.
Together…Shaping the Future of Electricity
29
© 2015
2016 Electric Power Research Institute, Inc. All rights reserved.