Assessing State Goals & Challenges
Under EPA’s Clean Power Plan
Victor Niemeyer, Program Manager
Energy & Environmental Policy Analysis
RFF-EPRI 111(d) Workshop
October 14, 2014
Key Features of EPA’s Proposal
• States are responsible for compliance with EPA targets
• Lots of flexibility means lots of decisions to make
• Renewables, nuclear, and energy efficiency play key roles
in target-setting and compliance
• Proposed metric is an emission rate for covered resources
(not more familiar mass-based caps)
 State Target  Compliance
Interacting details a challenge for comments, for
planning, ultimately for compliance
© 2014 Electric Power Research Institute, Inc. All rights reserved.
2
EPA’s Proposal Creates Varying State-Level
Challenges
% CO2 Reductions by State in 2030 (from 2005)
WA 77%
MT 9%
ND 5%
MN 60%
VT
OR 42%
MA 65%
ID 55%
SD 10%
WI 45%
WY 26%
PA 34%
OH 29%
NJ 56%
IL 26%
MD
40%
IN 27% WV 22%
DE 51%
VA 55%
KY 4%
MO -2%
KS 8%
AZ 44%
NM 14%
≤ 0%
1% - 25%
RI -93%
IA 28%
CO 25%
CA -25%
NY 67%
MI 27%
NE -32%
NV 67%
UT 29%
ME 72%
NH 75%
AR 26%
OK 43%
TN 42%
CT 48%
NC 36%
SC 41%
GA 48%
MS 57%
AL 38%
TX 43%
LA 47%
FL 36%
26% - 50%
> 50%
State-by-State Required Reductions in 2030 from 2005
Levels Range from -93% to 77%
Source: EPA 2014 Opt 1 All Emissions (2030), EIA Total Electric Power (2005)
© 2014 Electric Power Research Institute, Inc. All rights reserved.
3
Share of Coal Assumed Re-dispatched by
NGCCs in Targets Varies from 0% to 100%
Percent Coal Redispatched by Gas in EPA 2030 Targets
WA 100%
MT 0%
ND 0%
ME 0%
MN 51%
VT
OR 100%
ID 0%
WY 1%
UT 24%
CO 34%
CA 100%
KS 0%
AZ 100%
NM 33%
Coal Redispatched < 50%
RI 0%
IA 19%
PA 10%
NJ 100%
OH 7%
IL 16%
MD 6%
IN 5%
WV 0%
DE 87%
VA 44%
MO 11%
KY 1%
NC 33%
TN 10%
OK 52%
AR 64%
SC 22%
MS 100%
GA 34%
AL 22%
TX 52%
LA 53%
Coal Redispatched > 50%
Source: EPA’s target calculation spreadsheet
© 2014 Electric Power Research Institute, Inc. All rights reserved.
NY 99%
MI 23%
NE 10%
NV 100%
MA 100%
WI 25%
SD 67%
4
NH 100%
FL 91%
CT 100%
Planning Models Do Not Capture Real-world
Dynamics
Non-stochastic planning models:
• Optimize compliance for no-surprise futures
• Have limited representation of lead times
• Assume Energy Efficiency happens
• Only partially represent renewable integration issues
• Make full use of interstate power trade
However, RE, EE and nuclear supply are uncertain
• What happens if “things don’t go as planned”?
“In theory, there is no difference between theory
and practice. But in practice, there is.”
― Yogi Berra
© 2014 Electric Power Research Institute, Inc. All rights reserved.
5
BSER Applies Four Building Blocks (BBs) to
Set a Target Covered-Emission Rate Goal
BB1: Coal Units
Heat Rate
Improvements
of 6%
BB2: Redispatch to
NGCC Units to
70% c.f.
BB3: Expansion
of Renewable
and Nuclear
Energy
∗
© 2014 Electric Power Research Institute, Inc. All rights reserved.
6
BB4: Use of
Energy
Efficiency of
1.5%+ per year
above baseline
BB3 and BB4 Determine Use of Fossil
Example – West Virginia in 2020
• Each resource creates 1,853 credits (the WV target rate)
for every MWh it produces
• But resources must cover any emissions for each MWh
– At 1,933 lbs/MWh WV coal demands 80 lb/MWh
(80 = 1,933 - 1,853) per MWh
– Zero-CO2 BB3/BB4 (wind or EE) supply 1,853 lb/MWh
• Compliance requires WV credit supply meets demand
• Each MWh of BB3/BB4 in WV creates enough credits to
cover 23.3 MWh of coal (23.3 = 1,853 / 80)
© 2014 Electric Power Research Institute, Inc. All rights reserved.
7
2020 State Fossil Output Leverage Factors
2020 Fossil Leverage Ratios by State
WA 0.68
MT 7.08
ND 4.96
MN 0.80
VT
OR 1.24
ID 0.45
SD 0.69
UT 2.89
CO 1.47
CA 2.13
KS 3.31
AZ 6.37
NM 1.19
≤1
1-5
5 - 10
> 10
NY 0.54
MI 1.62
NE 5.28
NV 5.86
MA 0.61
WI 1.63
WY 6.52
ME 0.96
NH 2.65
OK 0.85
RI 17.00
IA 1.95
PA 1.89
OH 3.66
NJ 5.85
IL 2.09
MD
3.18
IN 5.15 WV 23.35
DE 0.94
VA 0.87
KY 18.90
MO 6.71
AR 0.93
TN 1.79
NC 1.60
SC 0.83
GA
0.81
MS 12.07
AL 1.37
TX 0.79
LA 0.87
FL 0.67
Leverage Factors are fossil MWh lost (gained) for each 1 MWh change in BB3 or BB4
© 2014 Electric Power Research Institute, Inc. All rights reserved.
8
CT 4.44
Dynamics of BSER Compliance Could Create
Electricity Supply Challenges
• MWh from nuclear, RE and EE (BB3/4) in the denominator
of the BSER compliance calculation sets a cap on the
allowed amount of covered fossil generation
• Key implication is that under-delivery of BB3/4 generation
forces additional decreases in fossil generation – not what
you want for reliability
• Serious consequences
– Long-term: must add new NGCC generation at high cost
– Short-term: states may have to choose between
compliance and reliability
Will States have to choose between compliance and reliability?
© 2014 Electric Power Research Institute, Inc. All rights reserved.
9
Implications for West Virginia…
and its Neighbors
• Note: In 2012, West Virginia generated 73 TWh
of electricity and exported over half to other states
• A 1 TWh shortfall in BB3/4 output in 2020 means WV must
cut fossil gen by 23 TWh (a third)
• If reduction taken out of WV exports, who’s on the spot?
2012 imports as % of sales
Maryland
40%
© 2014 Electric Power Research Institute, Inc. All rights reserved.
Virginia
42%
New Jersey
24%
10
Ohio
15%
Interesting Incentives in Arizona (and 13 other
states with targets below NGCC CO2 rate)
• Arizona 2020 example (900 lbs/MWh = NGCC rate; 778
lbs/MWh = target rate, 6.4 = fossil leverage factor)
For every MWh
missed here in 2020
AZ requires 6.4 MWh reduced here
[ 6.4 = 778/(900-778) ]
• Must build new NGCCs to replace lost output from existing
NGCCs
• Compliance but no CO2 reduction
© 2014 Electric Power Research Institute, Inc. All rights reserved.
11
Implications of Including Nuclear Under
Construction – Georgia Example
• 2,500 MW of new nuclear expected by 2020
– 90% capacity factor assumed in BSER goals for state
• GA fossil leverage ratio is 0.8 for 2020
For every MWh
missed here in 2020
GA requires 0.8
MWh reduced here
• Over one year total shortage (nuclear + induced fossil)
would be 35 TWh, 29% of GA’s 2012 total generation
• South Carolina and Tennessee have similar issue
© 2014 Electric Power Research Institute, Inc. All rights reserved.
12
No Easy Fixes
• Three-year averaging for compliance no help unless EE or
RE shortfalls made up quickly by subsequent surpluses
– Not likely for nuclear outages or EE program failures
– Need luck to recover from weather-driven RE shortfalls
• If EE and RE goals in state targets are unrealistic the
consequences for utilization of covered fossil may be severe
1. Strong incentive to “over comply” on BB3/4
(leverage works both ways)
2. Converting to a mass target breaks the link to BB3/4
that forces curtailments of covered fossil
© 2014 Electric Power Research Institute, Inc. All rights reserved.
13
Summary Perspective
• EPA’s proposal seeks significant CO2 reductions from
existing sources within limits of the Clean Air Act
• BSER approach is novel, and complex
• Application of the BSER formula leads to:
– Widely different impacts across states (systematic ≠ fair)
– Compliance depends heavily on supply of zero-emitting
resources that may be uncertain
– Compliance dynamics negatively impact power supply
• EPA, states, generators, and other stakeholders will need
to work together to address these challenges
• EPA actively engaged with all stakeholder throughout the
regulatory process: expects 5 million comments
© 2014 Electric Power Research Institute, Inc. All rights reserved.
14
Together…Shaping the Future of Electricity
Victor Niemeyer
650-855-2262
niemeyer@epri.com